TaxHelpline 2014/106...through their clearing agent namely Messrs Javaid Umar Enterprises, Clearing Agent (CHAL 18), statute at 205, 212, 2nd Floor, Commerce Centre, Hasrat Mohani

THLN No. 2014/106 APPELLATE TRIBUNAL-CUSTOMS

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TaxHelpline 2014/106

CUSTOMS APPELLATE TRIBUNAL, KARACHI

Customs Appeal No. K-1306 of 2011, decided on 19th July, 2013.

Junaid Ghaffar for Appellant.Ghulam Yasin for the Respondents Nos. 1 and 2. Fiaz

Modassar for Respondent No.3

Before Adnan Ahmed Member (Judicial-II) and Ghulam Ahmed Member (Technical-II)

Messrs DEWAN SALMAN FIBER LTD.

Vs.

The COLLECTOR (APPEALS) and 2 others

ORDER

GHULAM AHMED, MEMBER (TECHNICAL-II).---By this order, we will dispose of

Customs Appeal No.K-1306/2011 filed by the appellant against Order-in-Appeal No.5794/2011

dated 9-9-2011, passed by the Collector of Customs (Appeals), Karachi.

2. Brief facts of the case as reported that Directorate of Post Clearance Audit, 5th floor, State

Life Building, 1.1 Chundrigar Road Karachi has reported vide its Contravention Report C.No.

PCA/958/2009/782 dated 25-5-2010, Messrs Dewan Salman Fiber Limited, Dewan Center, 3-A,

Lalazar Beach Hotel Road, Karachi have imported thirty nine (39) consignments of Methyl

Acrylate vide Goods Declaration (GD) CRN Nos.(1)l902, (2) 2051, (3) 2186, (4) 6148,(5)

10800, (6) 33500, (7) 33520, (8) 34137, (9) 36137, (10) 37316, (11) 38802, (12) 52750, (13)

55424, (14) 60505, (15) 71667, (16) 79753, (17) 89107, (18) 93721, (19) 107529, (20) 112425,

(21) 123864, (22) 129411, (23) 146038, (24) 133,143, (25) 175685, (26) 227405, (27) 232209,

(28) 282766, (29) 297660, (30) 325400, (31) 336757 (32) 442659 (33) 398762, (34) 3532201,

(35) (36) 617175, (37) 631959, (38) 631972 and (39) 749092 and filed the Goods Declarations

through their clearing agent namely Messrs Javaid Umar Enterprises, Clearing Agent (CHAL-

18), statute at 205, 212, 2nd Floor, Commerce Centre, Hasrat Mohani Road, Karachi mis-

declaring the tariff classification of the goods under HS Code 2916,1400 for availing the

inadmissible benefits of zero percent I exemption from Customs Duty under S.R.Os. e.g.

567(I)/2005 dated 6-6-2005 etc as well as zero sales tax, under different S.R.Os. e. g S.R.O.

536(l)/2005, S.R.O. 621(I)/2005, S.R.O. 525(1)/2006 and S.R.O. 509(I)/2007 etc. The item

Methyl Acrylate is appropriately classifiable under HS Code 2916.1200 as ester of Acrylic Acid

attracting Customs duty @ 5% and sales tax @ 15%. The items falling under PCT head 2916,

1400, liable to zero percent / exempted Customs Duty and zero rated sales tax are esters of

Methacrylic Acid whereas the imported item is ester of Acrylic Acid of HS Code 2916.l200,


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Because of wrong classification of the referred goods, an amount of Rs.5,59,21,363 is found to

have been short paid in respect of duties and taxes pertaining to these consignments. Details of

the said consignments and calculation of short levied amount are given in the contravention

report enclosed herewith.

3. The Additional Collector of Customs, MCC PaCCs Karachi, did not agree with replies of

respondent and passed the Order-in-Original No. 13 of 2011 dated 14-2-2011 reproduced as

under:--

“I have gone through facts of the case and submissions made by both the sides,The respondents

in the initial stages did not contest the classification determined by the department. Instead they

maintained that there was a governmental decision to grant exemption to methyl acrylate and

requested to get a confirmation from the Federal Board of Revenue. However, the Boards letter

does not confirm that the exemption from customs duty and other taxes was available to methyl -

acrylate. It simply says that exemption is available to “esters of methacrylic acid” falling under

PCT heading 2916.1400. The question then to be examined is whether or not methyl acrylate is

classified under 2916.1400. Since this heading relates to esters of methacrylic acid, methyl

acrylate shall be entitled to claimed benefit if it is established that it is ester of methacrylic acid.

At the final hearing, the respondents argued that the departmental determination that methyl

acrylate is ester of acrylic acid is not correct. Their only contention is that laboratory tests

established that imported itemgwas ester of methacrylic acid. However, when asked to produce

such report they stated that the same can be seen from the departmental record, The record

relating to five of the Goods Declarations involved 1-HC-146038-l 11206, 1-HC-325400-

130707, I-HC-123864-301006, l=HC-617175- 190408 and 1-HC-63 1972-050508 was seen on

the computerized system and all of these Goods Declarations were not subjected to any

examination. Therefore, no question of a laboratory test arises for these Goods Declarations. In

any case, the burden lies on the respondents to proof that a lab report confirmed that imported

goods were esters of methacrylic aide. However, on the request of the respondents, the opinion

of Mr. Naseer Siddique, Deputy Chemical Examiner, of Custom House laboratory was

requested, who attended the hearing and confirmed that methyl acrylate is ester of acrylic and not

that of methacrylic acid. He also submitted his view in writing as under: “As per declaration the

product is Methyl Acrylate, which comply to the description of ester of acrylic acid and attracts

PCT 2916.1200”. The question of classification of methyl acrylate has been further examined.

Following are some findings: (i) The departmental case is based on the classification of methyl

acrylate as provided in European Customs Inventory of Chemicals which is a guide to the tariff

classification of chemicals. A copy of this document has been provided by the department which

confirms that methyl acrylate ism classified in PCT heading 2916,1200. This is further

confirmed by website of European Customs Inventory of Chemicals Substances (ECICS) of

European Commission which identifies the H-S code of Methyl Acrylate (CAS 96-33-3) as

2916.1200 (source.http://ec.europa eu/taxationcustoms /dd52/ecic5/chemise ubstancc.jsp?

Langen and redirection Date 110214. (ii) The web page at http://www.chemicalland


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21.com/industrialchem/functional%20Monomer!METHYL%2OACR YLATE.htm suggest the

HS code of Methyl Acrylate as 291612. It further states that “Acrylic acid undergoes the typical

reactions of a carboxylic acid and forms acrylic esters basic alkyl esters are methyl, butyl, ethyl

acrylate, and 2-ethylhexyl acrylate” This confirms that methyl acrylate is formed from acrylic

acid and thus is an ester of acrylic acid and falls under heading 2916.1200. (iii) An entry relating

to “Acrylates” was seen on the Wikipedia, the online encyclopedia, at

http://en;wikipeclia.orglwiki/Acrylate. This pages states as under. “The acrylate ion (C

H2=CHCOO-) is the ion of acrylic acid, Acrylates are the salts and esters of acrylic acid,” The

above statement clearly confirms that methyl acrylate, being an acrylate, is ester of acrylic acid

and thus is classified under HS code 2916.1200. Above findings along with the opinion of Mr.

Naseer Siddiqui of Customs Laboratory clearly lead to the conclusion that methyl acrylate is an

ester of acrylic acid and is classified under PCT heading 2916.1200. Since this PCT heading is

not ,specified in any of the notifications, the benefit of which was claimed by the respondents,

therefore, it is held that methyl acryalte falling in PCT heading 2916.1200 is not entitled to

benefit of the exemption of customs duty, zero-rating of sales tax and exemption of income tax

as claimed and availed under various notifications referred to above. The question relating to

demand being time barred in respect of Goods Declarations older; than three years has been

examined. Under section 32(2) of the Customs Act, 1969 and 36(1) of the Sales Tax Act, 1990,

the demand of short-paid or unpaid duties and taxes can be raised within five years. The

respondents maintain that mis-declaration was result of inadvertence and therefore the demand

can be raised only in relation to Goods filed within three year period, However, it is observed

that the respondents being an established manufacturing unit and importer and user of various

chemicals should have been aware of the fact that methyl acrylate is ester of acrylic acid and

should have taken due care in declaring its classification. They have failed to provide any

reasonable ground or justification for inadvertently considering Methyl Acrylate as ester of

methacrylic acid. This leads to the conclusion that they deliberately chose to mis-declare the

description of the imported item so that they could avail the benefit of S.R.Os. referred to above.

In view of findings and conclusion above, it is established that the exemption claimed by the

respondents was not in order and thus the demand of Rs.55,921,363 (Rs.13,273,657 as customs

duty, Its. 41,943,169 as sales tax and Rs.667,542 as income tax) is upheld and ordered to be

recovered from the respondents along with surcharge under section 202A of the Customs Act,

1969” and section 34 of the Sales Tax Act, 1990, to be calculated till the time of payment.

Further, a penalty of Rs,2,097,158 is imposed on the importer under clauses 110A and 14 of

section 156(l) of the Customs Act, 1969 and clause II(c) of section 33 of the Sales Tax Act,

1990,”

4. The appellant being aggrieved with Order-in-Original No. 13 of 2011, dated 14-2-2001, filed

an appeal before the Collector of Customs, (Appeals) Karachi. The Collector of Customs

(Appeals) rejected the appeals as under:--


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I have thoroughly examined the entire case record and given very careful consideration to the

arguments advanced before me.

The learned counsel has pleaded for keeping the instant proceedings pending till receipt of

Hon’ble Presidents decision on the representation filed by the department against findings dated

7-5-2011 of the Hon’ble Federal Tax Ombudsman in Complaint No. 110/KHI/CUSTOMS

(42)/261/2011: the learned counsel neither presented a copy of Hon’ble FTOs findings nor a

copy of the representation filed against the same. The afore stated plea is untenable because no

such directive has been received from any quarter and even the extended time limit stipulated

under first proviso to subsection (3) of section 193 of the Act, is close to expiry. l, therefore, take

up the case for decision on the basis of the evidence on record. The goods imported in this case,

as per the appellants own declaration, were methyl acrylate which, being ester of acrylic acid,

was correctly classifiable under PCT heading 2916.1200 whereas under customs Notification

S.R.O. 567(l)/2005 and sales tax Notification S.R.Os. 536(l)/2005 (as amended), the exemption

from payment of customs duty and zero rating of sales tax were available to esters of methyl

acrylic acid classifiable under ICT heading 2916,1400. The above -stated position was clarified

by the PBR as well vide letter No. 3(20)/Ta-I/90-Fiber dated 10-2-2011. Therefore, there is no

doubt that the exemption from payment of Customs duty and zero rating of sales tax was not

available to the goods imported in this case. It is apparent from the record that the appellant

deliberately mis-declared classification of the goods and on the basis of mis-declared

classification unlawfully availing benefit of the above-referred concessionary notifications: it

also stands established from record that neither the goods were examined by Customs nor any

laboratory test of the same was conducted. Thus, the appellant deliberately, and with mala fide

intent, kept on cheating the system of self-assessment and automated clearance of goods

operative under PaCCS over an extended period of time. I observe that the extent of penal action

taken in this case is not harsh in view of the gravity of the offence committed by the appellant. I,

therefore, rule that the arguments advanced as grounds of appeal, reproduced at para 3 above, do

not find any support from the evidence on record. Consequently, l hold that the impugned order

is correct in law and on facts and there is no reason to interfere with the same. The appeal, being

absolutely devoid of any merit, is rejected accordingly.

5. Being aggrieved and dissatisfied with the Order-in-Appeal, the appellant filed the Instant

appeal before this Tribunal on the grounds as under:--

(A) That firstly the learned respondent No.1 has failed to consider the orders of the Honorable

Federal Tax Ombudsman in Complaint No.110/KHI/ CUSTOMS(42)/261/2011 wherein the

Order-in 0riginal No.13 of 2011 dated 14-7-7.011 issued by respondent No.2 has been reopened

under section 195 of the Customs Act, 1969 hence the impugned Order-in-Appeal No.5794 dated

9-9-2011 passed by respondent No.1 became infractuous under the law and is liable to be set

aside on this ground alone.


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(B) That secondly the learned adjudicating officer has seriously erred to invoke such liability

which is hit by limitation under the Customs Act, 1969. There is no deliberate or mala tide nor

any false statement given by the Appellants Company hence invoke of sections 32(1) and (2) is

illegal, What has been imported has been declared on Goods Declaration. The goods were

released after proper laboratory test and after application of mind by customs officials hence the

impugned order is liable to be set aside.

(C) That the respondents have failed to implement the decision of the Federal Government

wherein it was decided that following raw materials shall be exempted for the manufacture of

“Acrylic Fiber”

(i) ACN Acrylonitrile Monomer.

(ii) MA Methyl Acrylate.

(iii) Malic Acid.

(iv) Dyes.

(v) Amps Acrylamido Methyl Porpone Sulphonic Acid.

(D) That the respondents are subservient to Federal Government and is under huge legal

obligation under Federal Board of Revenue Act, 1924 and Federal Board of Revenue Act, 2007

to implement the decision of the Federal Government. In this case the decision of the Federal

Government is to allow exemption of customs duties and taxes not only to “Methyl Acrylate” but

also to a number of other raw materials as mentioned above.

(E) That the impugned order is liable to be set aside on the ground that the goods have been

release after proper test by the Customs l-louse Laboratory which confirmed that the goods are of

“easters of meth acrylic acid”. Therefore, without any documentary evidence or basis on the

alleged classification of HS Code 2916.1200 instead of 2916.1400 is liable to be set aside.

(F) That per the long departmental practice the exemption of customs duties and taxes have

invariably been allowed in all the 39 impugned Goods Declarations by respondents and a sudden

change in practice by invoking the liability against the appellants is liable to be set aside.

(G) That a penalty of Rs.2, 097, 158 has been imposed on the appellant under clauses 110A and

14 of section 156(l) of the Customs Act, 1969 and clause 11(c) of section 33 of the Sales Tax

Act, 1990, which is unjust and liable to be set aside on the ground that there is no mala fide on

part of the appellants nor there is any false statement given by the appellant. It is well settled law

that where there is no willful, deliberate or mala fide intention of the tax payer the penal action

cannot be taken against him. What has been imported by the appellant has been declared on the

Goods Declarations. The goods were released after proper laboratory test and after application of

mind by customs officials therefore such penalty imposed in the instant case is without

jurisdiction, harsh, unjust and liable to be set aside.


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6. The respondent department has submitted Para-wise comments which are reproduced as

under:-

(i) That in the light of submissions made above the contents of para (A) of the Grounds of appeal

are incorrect, hence, denied. It is, however, respectfully submitted that the Order-in-Original was

not re-opened and in fact only a recommendation was made by the Honourable F.T.O. which was

not accepted by the relevant authorities considering the relevant provisions of law, therefore, the

appellant/importers statement in this regard is totally incorrect.

(ii) That in terms of Chapter-XVI-A of the Act, read with amended provisions of law i.e. sections

79 and 80 of the Act, particularly with reference to self-assessment and declaration under

PaCCS, the deliberate less payment of revenue through self-assessment is also an offence and

mis-statement within the meaning of section 32 of the Act, which covers all sorts of cases “in a

matter of customs” Where duties and taxes have been short paid. Therefore, the appellants

contention, with reference to section 32 of the Act, in para (B) of Grounds of appeal are totally

incorrect, hence, vehemently denied.

(iii) That considering the provisions of section 19 of the Act, and section 13 of the Sales Tax Act,

1990, the respondent authorities are required to follow the restrictions, limitations and conditions

embodied in the relevant notification, therefore, the appellants contention that the five items

mentioned in Grounds (C) of the appeal also exempted from payment of customs duty and sales

tax is totally incorrect. According to the relevant notifications the item i.e. “Methyl Acrylate”,

correctly classifiable under PCT Heading 2916. 1200, is not qualify for exemption. ,

(iv) That in terms of sections 4(1)(k), 4(2) & 4(3) of the F.B.R. Act, 2007, the F.B.R. is

empowered to implement and clarify the fiscal laws, therefore, the appellants contention that the

Board has not implemented the Federal Governments instructions is totally incorrect, hence,

denied. Without prejudice to above, even if the Federal Government decision, if any has not been

implemented in that case too as per “doctrine of laches. Of limitations” the appellant has no case

because the Notification

S.R.O. 567(I)/2005 was. issued on 6-6-2005 and the appellant has made no

representation/objection, whatsoever, for non inclusion of the items so mentioned in the para (c)

of Grounds of appeal, at the relevant point of time, therefore, taking into consideration aforesaid

provisions of law and the F.B.Rs clarifications issued vide letter dated 10-2-2011, as reproduced

in para. 8 of the order-in-original, the appellant / importer has no case on merits of the case.

(v) That in the light of submissions made above and considering the paragraph 2 of the Order-in-

Appeal (annexed at pages 12 and 13 of the appeal) and Paragraphs 11 to 13 of the order-in-

original (annexed at pages 26 and 27 of the appeal) the contents of para (E) of Grounds of appeal

are incorrect, hence, denied.


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(vi) That in the light of submissions made above the contents of para (F) of Grounds of appeal

are incorrect, hence, denied. Without prejudice to above, it is, however, respectfully submitted

that considering the Honourable High Court of Sindh’s reported judgments in the cases of

Messrs P&G International, Lahore v. Assistant Collector of Customs, Appraisement, Gr-11,

Karachi and 3 others, (2010 PTD 870) and Collector Customs v. Shaikh Shakeel Ahmad (2011

PTD 495) the appellant importers contention about past evidences is not tenable. In the aforesaid

latest judgments on the issue of “past practice” the Honourable Court has held that an unlawful

practice cannot over ride the law, therefore, considering the relevant provisions of. The Pakistan

Customs Tariff (First Schedule of the Customs Act, 1969) the appellant importers are liable to

make payment of short paid revenue.

(vii) That in the light of submissions made above the contents of para (G) of Grounds of appeal

are incorrect, hence, denied.

7. The Advocate for appellant has submitted written arguments, which are reproduced as under:--

(a) That at the outset, it is submitted, that the case of the department as narrated in the

Show-Cause Notice is of Post Clearance Audit (PCA), hence the Show-Cause Notice

in this case ought to have been issued under section 32(3A) of the Customs Act,

1969, wherein at the relevant time, the Limitation to issue such Show-Cause Notice

was 3 years. Since, the show-cause notice was not issued within time, out of 39

Goods Declarations (GDs) as referred to in the show-cause* notice, 30 GDs are hit by

Limitation as the period of 3 years has admittedly expired in all these transactions.

Therefore the case made out by the department is time barred and cannot be

proceeded against the appellant and hence the impugned orders are liable to be set

aside. (A statement GDS is filed as “A”).

(b) That even otherwise, and in the alternative, and without prejudice to the above,

admittedly this is a case wherein these consignments were cleared by various officers

of the department over a period of more than 3 years and further there is no allegation

against the appellant in so far as the description, quantity etc. of the goods is

concerned. Therefore this cannot be a case of section 32(1) or (2) of the Act ibid,

because, neither there is any submission of any false statement or document, nor there

is allegation of any collusion, hence and without prejudice this case appropriately

falls under subsection (3) of section 32 of the Act. Wherein, again the limitation

provided is 3 years. Therefore as submitted above out of 39 Goods Declarations

(GDS), 30 GDs are beyond the period of limitation and hence the Show-Cause Notice

cannot be acted upon. This issue of issuing notices in terms of subsections (1), (2) and

(3) have been dealt with in various judgments of the Honab1e Supreme Court as well

as the Honable High Courts. In the case reported as (2001 SCMR 838) ASSISTANT

COLLECTOR OF CUSTOMS V. KHYBER ELECTRIC LAMPS (Annexure “B”)

the Honorable Supreme Court has held as under;


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Show-cause notice under subsections (2) and (3) of section 32 of the Act are two

distinct and separate types of notices as different grounds and .different period for

service of notice in each subsection has been prescribed under subsection (2) for non-

levy short levy or erroneous refund specific allegations of any collusion between the

assessee and the customs staff has to be levelled with proper particulars in the show-

cause notice which has to be served within three years of the relevant date whereas

under subsection (3) if non-levy short levy or erroneous refund is done due to

inadvertence error or misconstruction then show cause notice to the importer has to

be served within six months of the non-short levy specific particulars are not stated in

the notice the notice would be vague and should not be in consonance with the

requirement of subsections (2) and (3) of section 32 the Act show cause notice.

It has not been alleged in the show-cause notice that the respondents knowingly or

having reason to believe that documents which were false in any material particular

were filed it is necessary under subsection (1) of section 32 of the Act to show that

the declarant had the knowledge or had the reason to believe that declaration or

statement made by him was untrue/false and in absence of such allegation notice

would he vague and would not be in accordance with law similarly notice under

subsection (2) of section 32 of the Act must contain the allegation of collusiveness

and notice under subsection (3) of section 32 of the Act should speak of inadvertence

error or misconstruction and without such allegations the notice would be defective

and against law;

In the case of reported as (2002 MLD 130) UNION SPORT PLAYING CARDS COMPANY V.

COLLECTOR OF CUSTOMS (Annexure “C”) The Honorable High -Court of Sindh while

dilating upon the following question of Law, has held as under;

Whether in the given circumstances of the case and the facts and grounds stated hereinafter case

of the appellant falls within section 32(2) of the Customs Act, 1969 or within the preview of

section 32(3) of the Customs Act, 1969?

“Here the discussion is only for the purpose of ascertaining the period of limitation

and determining whether the show-cause notice falls under subsection (3), subsection

(2) or subsection (I) of the Customs Act, 1969 the facts discussed elaborately clearly

establish that neither is any case of false statement-or mis-declaration or filing of

false certificate or any other documents on the part of appellant nor the department

has alleged any collusion by reason of any document referred to in subsection (1) of

section 32 and consequently, the show-cause notice could be issued by the respondent

No. 1 under subsection (3) of section 32 of the Customs Act, within a period of six

months from the relevant date which is defined subsection (S)(a) of section 32, to be

the date on which the order for clearance of the goods is made. The show-cause

notice has admittedly been issued after six months of the relevant date and


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consequently it was barred by time. We are, fortified in our views by an earlier

judgment of the court in the case of PIA v. CBR, 1990 CLC 868, in which his

lordship Mr. Justice Saeed-uz-zaman Siddiqui, .J (as his lordship then was) held that

when there is no allegation made by the customs department against the petitioner

about any fraud misrepresentation or false declaration at the time of obtaining of

clearance wit/taut payment of customs duty or sales-tax, it was a case of error or

inadvertence on the part of customs authorities and therefore, the show-cause notice

issued after expiry of period prescribed in section 32(3) of the Customs Act, was

beyond time, void and of no legal effect and all orders passed sub-sequently in

pursuance thereto were without lawful authority. “

This judgment has been recently followed by the Honorable Sindh Court in another reported case

(2013 PTD 813) Messrs SARWAR INTERNATIONAL V. ADDL COLLECTOR OF

CUSTOMS (Annexure “D”) in the following terms;

“In view of hereinabove facts and circumstances of this case, we are of the opinion

that since no allegation of fraud collusion or deliberate mis-declaration was raised in

the cause notice, the case of the application was not covered under the provisions of

subsections (1) and (2) of the Customs Act, 1969, whereas at best, the provisions of

subsection (3) of section 32 of the Customs Act, 1962 could have been invoked

however, since admittedly, the show-cause notice has been issued after a lapse of

about of about four years i. e. beyond the period of limitation of three years as

provided under subsection (3) of section 32 of the Customs Act, the said provisions

could not be invoked in the case of present application we are of the view that the

show-cause notice issued by the respondent in the instant case falls within subsection

(3) of section 32 of the Customs Act, 1969. The notice has been issued after a period

of more than four years and as such the show-cause notice is barred by limitation. The

said notice is held to be void and of subsequent proceeding in pursuance thereto are

also held to be void and without any legal authority. Accordingly, the proposed

question (A) is answered in affirmative, whereas the proposed questions (B), (C) and

(D) are answered in negative, all in favour of the applicant and against the

respondent. “

© That it is an admitted fact that even prior to grant of exemption on the said product in terms of

the relevant S.R.O., the department was assessing the said product under HS Code 2916.1400

and was charging statutory rate of duty and taxes. Therefore, when an exemption of duty and

taxes granted on the said item, the appellant was fully justified and legally bound in claiming the

assessment of the same item under HS Code 2916.1400. Hence no mis-declaration on the part of

the appellant can be attributed as the appellant had acted in good faith and as per the HS Code

already determined by the department. In a more or less identical situation the Honable High


10

Court in the case reported as (2002 PTD 955) Messrs Super Industries (Pvt.) Limited v. Central

Board of Revenue and others (Annexure “E”) has held as fol1ows:--

“We are persuaded to agree with the contentions of Mr. Muhammad Ali Sayeed that the revenue

cannot be allowed the shifting of versions in respect of the same product with mere change in the

law pertaining to the taxability of a product one of the cardinal principle of tax law is that the

revenue should be consistent in its practice and version if an assessee or a product is given a

particular treatment over course of a long period then the revenue should continue the same even

if the asscssee or the products is allowed any exemption/benefit or there is any enhancement or

reduction in the rate of tax there is another cardinal principle of the law of taxation that an

assessee should know his status or the character and status of his product viz-a-viz, the

chargeability of the tax the revenue should not be allowed to take inconsistent and changing

version as such indiscipline in realm of taxation is always injurious and hazardous to the health

of economy industry and business. We are therefore persuaded to agree with the contentions of

Mr. Muharrunad Ali Sayeed that the revenue cannot be allowed to resort to inconsistent practices

merely with the change in the chargeability or exemption of a tax “Therefore in view of the

above the department has to maintain consistency and the appellant cannot be penalized due to

the acts of the department. This judgment was subsequently followed by the Honable High Court

of Sindh in the case reported as (2004 PTD 2516) Messrs Colgate Palmolive Pakistan Limited v.

Federation of Pakistan (Annexure “F”) and has held as follows:--

However it is an admitted fact that prior to this the sodium sulphate imported by the petitioners

was being assessed under PCT sub-heading 2833.1900 but in the budget for the year, 1997-98

the government changed the rates of duties and taxes and relative code for sodium sulphate from

PCT sub-headings 2833.1900 and 2833.1100 before the above change the rates/tariff of duty

under both the sub-headings 2833.1100 and 2833.1900 used to be the same but in the budget of

1997-98 rate of customs duty under PCT sub-heading 2833.1100 was fixed at 45% ad valorem

while under sub-heading 2833.1900 for “Other” it was fixed at 15% ad valorem. Mr. Fariduddin,

learned advocate for respondents Nos,2, 3 and 4 as well as Mr. Mehmood Alam Rizvi, learned

Standing Counsel appearing on behalf of respondent No. 1 were not able to give any satisfactory

and plausible reason for assessing the sodium sulphate for levy of customs duty under sub-

heading 2833.1100 instead of 2833.1900 which had been the practice in the past in the

circumstances, the contention raised on behalf of the petitioners that the change was made

illegally with male tide intention and ulterior motive to unnecessarily harass and burden the

petitioners by subjecting them to heavy customs duty after the rates of customs duty under the

two sub-headings were changed in the financial year, 1997-1998 is not without any substance.

Prior to the change of the rates of customs duty in respect of above two sub-headings, the rates of

customs duty under both the sub-headings were same, which fact has not been denied either by

Mr. Fariduddin or Mr. Mehmood Alam Rizvi. In the budget for the year, 1997-1998 the rates of

customs duty under sub-heading 2833.1100 was fixed at 45% whereas the rate of customs duty

under sub-heading 2833.1900 was fixed at 15%.


11

However in view of the past practice of the customs department in assessing the

sodium sulphate under sub-heading 2833.1900 some support is lent to the contention

of Mr. Junaid Ghaffar it is not known as to why subsequently the Code for sodium

sulphate was changed from 2833.1900 to 2833.1100 and in view of any plausible and

satisfactory explanation for such change. it is to be assumed that the same was done

as under sub-heading 2833.1900 as the rate of customs duty was much lower as

compared to the rate of customs duty under the sub-heading 2833.1100 in other words

the change of sub-heading by the customs department was with a view to subject the

petitioners to higher rate of customs duty under the sub-heading 2833.1100 which

was made effective from the financial year 1997-98 prior to this the rates of customs

duty under both the sub-headings 2833.1100 and 28331900 were the same and

therefore the department never raised the issue that sodium sulphate ought to be

assessed under sub-heading 28331100 and not under sub-heading 28311900 as it

would not have made any difference to the revenue earned by the government it is an

established principle that a long standing departmental practice cannot be ignored or

discarded without plausible satisfactory and cogent reasons the customs department

could not be allowed shifting of versions in respect of same product with mere change

in law pertaining to taxability thereof.

(c) That the case of the appellant is that both the PCT Headings in consideration are in

fact sub-headings of 2916 and at the most and without prejudice they can be mis-

interpreted and on the basis of such mis-interpretation the goods under question can

be declared under any of these sub-headings and in such a situation it cannot be said

that the alleged mis-declaration was intentional and deliberate. Therefore,

appropriately the case falls under section 32 subsection (3), wherein it would again be

hit by limitation, The Honorable High Court of Sindh while placing reliance on

earlier judgment of the High Court (2002 MLD 180) in a reported case (2011 PTD

2837) COLLECTOR OF CUSTOMS V. POWER ELECTRONIC PAKISTAN

(Annexure ..G..)

A comparison of two PCT headings which are in dispute show that they can be

misinterpreted and on the basis of such misinterpretation the goods in question can be

declared under any of these PCT headings and therefore we are of the opinion that it

has been proved that the alleged mis-declaration was not intentional and deliberate as

far as the claim of exemption is concerned we are of the opinion that they may fall

within the ambit of such exemption and it is a settled law that claim of exemption in

good faith if it is dis-allowed then penal action cannot be taken for the lesser payment

of taxes due to the claim of such exemption the learned tribunal has relied on a

judgment of this court in State Cement Corporation of Pakistan v. Collector of


12

Customs and others (2002 MLD 180) and has reproduced the following extract from

that judgment:-

“The above decision therefore seems to be of no help to the respondents as in the

instant case no mis-declaration of facts has been alleged in fact Raja Muhammad

Iqbal placed before us a copy of bill of entry filed by the appellant wherein the rate of

duty of 30% was declared but concessionary rate in terms of S.R.0 No.286 was

claimed in the circumstances we are clearly of the opinion that no conscious mis-

declaration of fact can be attributed to the appellant and no conclusion having been

alleged the short payment can only be attributed to a misconstruction or error in the

interpretation of the relevant notification the provision a of section 32(3) of the

Customs Act would therefore be clearly attracted in shortfall in the duty could have

only been recovered within time specified in section 32(3) of the Customs Act.”

(d) We are in respectful agreement with the above judgment and once again observe that

the judgment is on the basis of a settled law as to the proposal that penalty cannot he

levied when exemption is claimed in good faith we are therefore of the opinion that

the decision of the tribunal on this point is unexceptionable and no interference is

called from this court. We therefore answer the reframed question in affirmative in

favour of the respondents and against the applicant.

(e) That it is also an admitted fact that all the Collectorates in the whole of Pakistan

except the present respondent accepted the HS Code as being claimed by the

appellant i.e. 2916.1400 and in fact even the Appraisement Collectorate has not taken

any action against the appellant although the Post Clearance Audit (PCA) had also

forwarded a contravention report to them in the same manner as has been forwarded

to the present respondent, who have initiated this case. Therefore the case is of pick

and chooses and the appellant has been single out by the present respondent which

cannot be justified or sustained.

(f) That without prejudice to the above it is further submitted that in the Order-in-

Original there is some reference to a statement given by the chemical examiner, to

which it is submitted that neither the appellant was confronted with any such

statement nor the chemical examiner was put to any cross-examination. Therefore any

such statement cannot be made basis to initiate action against the appellant.

(g) That the observation by the learned Adjudicating Authority to the effect that the

appellant being an established manufacturing unit should have been aware of or taken

due care in declaring the classification of the subject goods. The learned Adjudicating

Authority has failed to appreciate that in fact it was the responsibility of the


13

respondent department to thoroughly check and accept the classification so claimed

by the appellant and in fact if there was any such error on the part of the department

in determining the correct classification of the goods the benefit of the doubt should

go to the appellant and not to the respondent. Therefore.such an observation of the

learned Adjudicating Authority ought to have been interpreted in favour of appellant

and not against it.

8. Rival parties heard and case records perused and the following issues are framed for

consideration by this forum:--

(i) Whether the appellant indulged in the act of mis-declaration in material particular

under section 32(1) or (2) of the Customs Act, 1969 while transmitting good

declaration under section 79(1)/ibid and Rule 433 of Sub-Chapter III of Chapter XXI

of Customs Rules, 2001?

(ii) Whether show-cause notice issued under sections (1) and (2) of section 32 of the

Customs Act, 1969 can be adjudicated upon by the respondent No. 2 despite not

applicable by virtue of a case of post clearance audit attracting section 32(3A) ibid

not mentioned in the show-cause notice in terms of section 180(a) of the Customs

Act, 1969?

Whether show-cause notice in 30 cases is time barred under the provision of section

32(3A) of the Customs Act, 1969 and as such not enforceable under law?

(iii) Whether the Order-in-Appeal is barred by time and without powers/jurisdiction in

terms of subsection (3) of section 193-A of the Customs Act, 1969 being issued after

57 days of the initial period of 120 days and extension granted on 9-9-2011 in Para; 5

of the Order by respondent No. 2 on 9-9-2011, after the expiry of initial period of 120

days is illegal, ab initio and void?

(iv) Whether the MCC of PaCCS has given a differential and discriminatory treatment to

the appellant in nullity to the Articles 4 and 25 of the Constitution of Pakistan read

with number of judgments of the Superior Judicial for a as evident from the fact that

neither the Collectorate of MCC of V Appraisement nor PMBQ opted to issue show-

cause notice for initiating adjudication proceeding, despite receipt of contravention

report on the same issue from the respondent No. 3?

That as regard to issue No. (i), the appellant transmitted Goods declaration under section 79(1) of

Customs Act, 1969 and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001

with the MCC of PaCCS containing description “Methyl Acryalate” on the basis of commodity

name in letter of credit, invoice , BIL , Certificate of Origin and he incorporated the said

information in the column of financial information of the GD, falling under PCT heading

2916.1400 with the exemption of Customs duty under Notification No. 567(I)/2005 dated 6-6-


14

2005, Sales Tax on the basis of infield notifications and Income Tax against Certificate No. 103-

XXXIII dated 12-7-2006 issued by the Commissioner of Income Tax. The software of the

PaCCS has been designed by the agility in such a manner that upon receipt of the goods

declaration the system co-relates each declaration with the corresponding PCT heading, the

claimed notifications and the exemption certificate, which are fed therein either by the

FBR/Project Director or Commissioner of Income Tax at their own and after finding those in

accordance with the declaration the system pass assessment/clearance order in exercise of its

inbuilt vested authority under sections 80 and 83 of Customs Act, 1969 and Rules 438 and 442 of

Customs Rules 2001 and this fact stood validated from examination of the import documents and

goods declaration. Resultantly the appellant has made no mis-declaration in material particular in

terms of section 32(1) of the Customs Act, 1969, hence, invoking of the said is erroneous.

Similarly, invoking of subsection (2) by the respondent No. 2 is not relevant in the subject case

by virtue of the wording of show-cause notice, which did not remotely. hint the submission of

any false documents or statement while transmitting goods declaration with the MCC of PaCCS

or with the respondent No, 3 or about the “collusion” with the Project Official of PaCCS, or

MCC of PaCCS, rendering the show-cause notice and the subsequent proceeding void and ab-

initio as held in the reported judgments Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275,

D G Khan .Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector 2003 PTD 1593,

Union Playing Card Company v. Collector of Customs 2002,MLD 130, Atlas Tyres v. Addl.

Collector 2002 MLD 180, State Cement v. Collector PTCL 2001 CL 558, Kashmir Sugar v.

Collector 1992 SCMR 1898, Rose Color v. Chairman, CBR & 2013 PTD 813 Sarwar

International v. Addl. Collector of Customs. The issue No. (i) is answered in negative.

As regards issue No. (ii), evidently in this case show-cause notice has been issued under

subsections (1) and (2) of the Customs Act, 1969. Whereas, the applicable provision of the Act

in the instant case is section 32(3A), being based on section.26A ibid. No charge has been

levelled in the show-cause notice on the basis of the said provision rendering the show-cause

notice manifestly defective and without lawful authority, hence ab-initio void, on the basis of

such show-cause notice no order can he passed for creating demand under altogether different

subsections namely (1) and (2) of section 32 ibid. were relied upon by the officer of original

jurisdiction. Section 180(a) of the Customs Act, 1969 laid down the mandatory requirement for

mentioning the grounds on which the competent authority proposes to take action against the

incumbent. It is a condition precedent that all the legal and factual material particulars and

applicable provision of the Customs Act, 1969 must be brought to the notice of the importer.

This is also one of the conditions of the-famous dictum and principle of natural justice audi

alterm partem. The contravention report/ show-cause notice and order-in-original in this case are

patently beyond the expression of section 32 (3A) of the Customs Act, 1969. The appellants

advocate has therefore, rightly claimed the ratio decidendi determined vide judgment Asst.

Collector v. Khyber Elec. Lamps 2003 PTD 1275, D G Khan Cement v. Collector of Customs

2005 PTD 480, Caltex v. Collector 2003 PTD 1593, Union Playing Card Company v. Collector


15

of Customs 2002 MLD 130, Atlas Tyres V. Addl. Collector 2002 MLD 180, State Cement v.

Collector PTCL 2001 CL 558, Kashmir Sugar v. Collector 1992 SCMR 1898, Rose Color v.

Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs]

Wherein, it has been held in unequivocal terms deprecated the adjudication on the basis of entire

section instead of the applicable subsection of the provision of the Act render the show-cause

notice and subsequent passed order-in-original as defective and against the law, hence without

lawful authority rendering those as ab-inito void because it is not a case of commission of a

technical discrepancy or procedural lapse which is a curable lacuna. It is a substantive illegality

for want of non-observance of a mandatory statutory requirement and emphasized upon for

complete compliance by the adjudicating authorities since it would vitiate all the case

proceedings on which the superstructure is built by different Quasi-judicial and judicial

authorities. As such issue No. (ii) is answered in negative.

That as regard to issue No.(iii), .as discussed in issue No. (i) the subject case squarely falls under

the ambit of subsection (3) or (3A) of section 32 of the Customs Act, 1969. Under which show-

cause notice should had to be given within three years of the date given in sub-section (5) ibid.

Whereas, show-cause notice available on record dated 20-7-20l0 encompassing the 39 GDs of

dated 7-6-2005 to 27-8-2005, confirming with clarity that it was issued after the expiry of

stipulated period of three years against 30 GDs of the period 17-6-2005 to 13-7-2007, rendering

it time barred to the extent of these GDs and as such not enforceable. For reference, reliance is

placed on the following judgments. S.T.A. 274/05 in Sattar Brothers v. Collector of Customs

(Appeals), Hyderabad and others.S.T.A. 179/06 in Dadabuoy Sack Ltd. v. The Collector of

Customs, Sales Tax and Federal Excise (Appeals) Hyderabad and others 2009 PTD (Trib.) 500

in Shalt Murad Sugar Mills and others 2007 PTD 117, Messrs Ghandhara Nissan Diesel Ltd., v.

The Collector of Customs, Karachi 2005 PTD 2453, PSIC Cutlery, Wazirabad v. Collector of

Sales Tax and Central Excise, Gujranwala and others 2008 PTD 981, Joyla Sadat Cotton

Industries v. Collector of Customs 1992 SCMR 1898, Federation of Pakistan v. Messrs Ebrahim

Textile Mills Ltd. and others 2006 PTD 537, Collector of Customs, Sales Tax (West) Karachi v.

K&A Industries, Karachi. The issue No. (iii) is answered in affirmative.

As regard issue No.(iv) relating to time barred of the order of the respondent No. 1, upon perusal

of the copy of tiled appeal by the appellant with him shows the date of filing as 16-3-2011 and an

order under the proviso of subsection (3) of section 193-A of the Customs Act, 1969 should had

been passed within 120 days from the date of filing appeal i.e. by 14-7-2011 or within further

extended period of 60 days prior to expiry of initial period of 120 days with reason to be

recorded for extension in writing. No extension was granted by him prior to expiry of initial

period of 120 days instead was granted on 9-9-2011 as evident from para 5 of order-in-appeal,

rendering the order barred by time by 57 days hence without power/jurisdiction as such void and

ab-initio. The order of extension granted by the respondent No. l in para. 5 of order-ln-appeal

with the reasoning that the proceeding in this case could not be finalized within the stipulated


16

time limit due to adjournment obtained by the appellant counsel. This is completely erroneous

and without any substance as the counsel of the appellant sought no adjournment instead

attended the hearing fixed for 7-7-2011 and 21-7-2011 and 8-8-2011. Hence, the extension

granted by the respondent No. 1 is without any lawful authority because he could not extend the

time, unless a notice to the appellant had been served as held by the Supreme Court of Pakistan

in its reported judgment 1999 SCMR 1881 Khalid Mehmood v. Collector of Customs, Customs

House, Lahore.

That in the instant case no extension was given by the respondent No. 1 prior to expiry of initial

period of 120 days. Rendering the extension granted on 9-9-2011 as unlawful and without

jurisdiction, by virtue of the fact that the said extension was given without answering the

condition prescribed for exercising such powers i.e. he has to apply his mind and after making an

objective assessment, if he comes to the conclusion that the extension of time is to be granted, he

has to grant the same prior to expiry of the initial period and not merely on the basis of his

personal opinion that the proceeding in this case could not be finalized within the stipulated time

limit due to adjournment obtained by the appellant,” which were in fact never applied by the

appellant or his counsel as departmental representative failed to corroborate the stance of

respondent No. l through incriminating evidences; and ironically after expiry of the initial period

of 120 days. It is settled principle that where exercise of jurisdiction by any authority or Court or

Tribunal is made subject to existence of a specific condition, then such power cannot be

exercised in the absence of that condition. In words of Superior Judicial For a time extension

given in such cases is akin to giving a new lease of life into dead entity. It is tantamount to

flogging a dead horse. If an; event or documents has become dead on account of non timely

extension of time period. It is legally considered dead and new spirit cannot be infused into it by

any means or on account of any reason whatsoever as held in reported judgments 2007 PTD 117,

2008 PTD 60, 2007 PTD 2092, 2010 PTD (Trib.) 1636, 2010 PTD (Trib.) 2117, 2009 SCMR

1126, 2002 MLD 180, 2003 PTD 1354, 2003 PTD 1797, 2008 PTD 578, 2009 PTD 762, 2009

PTD Trib. 107, 2010 PTD 465, 2011 PTD (Trib.) 79, 2011 PTD .(Trib.) 987, 2011 PTD (Trib.)

1010, 2011 PTD (Trib.)1146 and 2012 PTD (Trib.) 1650. As such issue No. (iv) is answered in

affirmative.

That as regard issue No. (v), the counsel for the appellant placed on record of the Tribunal copies

of goods declaration filed by them under the regime of one custom with the MCC of

Appraisement and PMBQ for the import of same goods (Methyl Acrylate) under PCT

2916.1400, which was accepted by the official of the Collectorates as correct and allowed release

of those through assessment/clearance orders passed under sections 80 and 83 of the Customs

Act, 1969. It is noted with concern that the said Collectorate has not initiated any adjudication

proceeding for recovery of the impugned short paid amount of duty and taxes, despite receipt of

contravention report from the respondent No.3 with the exception of MCC of PaCCS, this is

against the norms-of consistency and nullity to the existing practice adopted by the rest of the


17

Collectorate of Custom of the country, this act of the MCC of PaCCS amounts to single out the

appellant for giving him differential treatment in comparison to the treatment given by the other

Collectorate of the country specifically Karachi, this attitude amounts to discrimination by virtue

of the fact that “facility allowed by the other Collectorate and denied by the MCC of PaCCS” as

held by Houble Apex Court in their judgment 2005 SCMR 492 and in reported 2010 SCMR 431

and 1990 G SCMR 1059, 2002 SCMR 312, 2002 PTD 976, 2007 PTD 361 and 2009 PTD 1507,

therefore the treatment given to the appellant is against the principle enshrined in Article 25 of

the Constitution of Pakistan and violates the Principle of law settled by the Superior Court. As

such issue No, (v) is answered in affirmative.

9. In view of the foregoing the order of the respondent No.1 and respondent No.2 are based

upon proceeding which are infested with patent illegalities, which are held to be null and void.

This being so, the impugned orders of the respondents are set aside. The subject appeal is

accordingly allowed as no order to cost.

10. Order passed accordingly.

Note: The reader must study original text or certified true copy of the

case/judgment or visit official website of the courts.

However citations are as follow 2014 PTD 52.

Documents

TaxHelpline 2014/106...through their clearing agent namely Messrs Javaid Umar Enterprises, Clearing Agent (CHAL 18), statute at 205, 212, 2nd Floor, Commerce Centre, Hasrat Mohani