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Order with signature of Judges
1. For orders on CMA No.1211/2011. Exemption. (Certified copy of annexure not file).
2. For Katcha Peshi.
3. For orders on CMA No.1212/2011 (Stay).
12.08.2011
Mr. Pervez Iqbal Kasi, advocate for the applicant.
Mr. Ilyas, Collector of Customs.
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Through instant common order we intend to dispose of the above Spl. Custom Reference Applications filed by the applicants against the impugned order dated 31.01.2011 passed by the learned Custom Central Excise and Sales Tax Appellate Tribunal Bench-III, Karachi, in Custom Appeal No.K-193 to 198/2010 whereby appeals filed by the appellants against the order-in-appeal Nos.3297 to 3303/2010 dated 06.03.2010 passed by the Collector of Custom (Appeals) Karachi, was dismissed.
2. Following common question of law are said to arise from the impugned order passed by the learned Tribunal:-
1. Whether the Honorable Tribunal did not err by not allowing zero-rating of sales tax to all ‘Sodium Sulphites’ which includes meta-bisulphite under PCT Heading 2832.1090.
II. Whether the Honorable Tribunal did not err by not allowing the benefit of past practice to the impugned imports as the product in question was treated as a zero rated item as an established practice.
III. Whether the Honorable Tribunal did not err by treating this case as a case of collusion, covered under the provisions of section 32(1) (2) of the Customs Act, 1969 and section 36(1) and 33 (1) C of the Sales Tax 1990.
IV. Whether the Honorable Tribunal did not err by not treating this case as a past and closed transaction where an assessment finalized under section 80 of the Customs Act, 1969, could be re-opened only under the provisions of section 195 of the Act, ibid.
V. Whether the honorable Tribunal did not err by maintaining the penalty imposed in the case, despite the fact that no mensrea/deliberate act on part of applicants was involved.
3. Brief facts as noted by the learned Tribunal in its impugned order are that the appellants imported a number consignments of sodium meta bisulphate through various goods Declaration and got those cleared by availing the undue benefit of sales tax zero rating under notification SRO 509(I)2007 and exemption of income tax under notification SRO 638(I)/05. The zero rating of sales tax was admissible only to the goods specified in the column (2), falling under the PCT heading Nos. mentioned in column (3) of the table of notification SRO 509(I)2007 whereas sodium meta bisulphate had not been mentioned in column (2) therein. The above stated misuse of the notification by the appellants resulted in non-payment of sales tax and short payment of income tax on these imports as well. The appellants were accordingly charged under the relevant provisions of law for intentionally depriving the Exchequer of its legitimate revenue amounting to Rs.2,907,650/- and the adjudicating officers held that the charges against the appellants had been established.
4. The Deputy Collector of Customs, MCC, PACCS issued a Show Cause Notice to the appellants, which was replied, however being dis-satisfied with the reply, the Deputy Collector of Customs, passed order-in-original bearing No.06/2010 dated 11.01.2010, wherein it has been held that the consignments imported by the appellants were in fact Sodium Meta Bisulphate, which did not fall under the PCT Heading 2832.1090, hence such consignment did not qualify for exemption in terms of SRO 638(i)/2005 and SRO 509(1). Due tax and the penalty was imposed for mis-declaration. That order was impugned by the appellants before the Collector of Custom (Appeals), Karachi, who after hearing both the parties and examining the facts and record of the case upheld the order-in-original. The appellants filed appeal against order passed by the Collector (Appeals) before the learned Custom, Central Excise and Sales Tax Appellate Tribunal, who vide its impugned order dated 31.01.2011, concurred with the finding of both the authorities below, and upheld the order of Collector (Appeals) tax levied and penalty imposed upon the appellants has been maintained.
5. Learned counsel for the appellant has mainly argued that since the applicants claimed such exemption for the earlier similar consignments as well, whereas no objection was raised by the department in this regard, therefore, in view of the past practice, the appellant ought to have been given the similar treatment. It has been further argued that since it was a past and closed transaction, hence the same could not be re-opened under the provision of Section 32 of the Custom Act, 1969, 33 and 36 of the Sales Tax Act, 1990.
6. However, when confronted with the plain reading of the relevant provision as mentioned at Sr. No.19 of SRO No.509(I)/2007, under which the appellant claimed exemption from income tax and zero rating of sale tax, the counsel for applicants could not controvert the fact that such exemption was available only in respect of Sodium Sulphite falling under PCT Heading 2832:1010, and Sodium Hydrogen Sulphite falling under PCT Heading 2832.1090 and not to Sodium Meta Bisulphite imported by the appellants.
7. From the perusal of the impugned order, it is clear that the learned Tribunal having examined the facts, relevant provision of SRO and after minutely examining the properties and scientific formulas of both the items i.e. Sodium Meta Bisulphite, Sodium Hydrogen Sulphite and Sodium Sulphite, has in para 11 of the impugned order held that there is a clear distinction between the consignment imported by the appellant and the items as mentioned in Sr. No.19 of SRO 509(I)/2007. The learned Tribunal has further held that by availing undue benefit of exemption the appellants caused substantial loss to the exchequer.
8. As regards the proposed question No.2 wherein the ground of alleged past practice has been raised, it may be noted that the learned Collector (Appeals) has in its order already dealt with the said issue which has been reproduced by the learned Tribunal in para 4 which reads as follows:
“The applicant’s contention regarding established practice is untenable in view of the fact that under the PaCCS the importer self-clears the goods after payment of duty/taxes on the basis of his own declaration and except in very few cases consignments are not physically examined and it is through post clearance scrutiny that correctness of the declarations and the amount of duty/taxes made by the importers is determined. Such scrutiny is carried out within five (05) years of such transactions. Thus, clearance of goods from MCC PaCCS on the basis of self-assessment is subject to post clearance scrutiny and such transactions do not attain finality until the period of scrutiny lapses. It is, therefore, clear that clearance of consignments by few importers of a particular class of goods over a certain period of time by unlawfully availing the benefit of an exemption notification does not mean that a practice has been established which cannot be discontinued without issuing a public notice. The precedents quoted by the learned counsel clearly state that if the Customs authorities keep doing a thing over a long period of time in a particular manner that becomes an established practice which needs to be honoured unless the same is discontinued through a public notice whereas in the present situation it is the importers themselves (and the appellants in particular) who unlawfully caused substantial loss of revenue to the Exchequer by way of unlawfully self-availing benefit of notifications SRO 638(I)/2005, I, therefore, hold that the precedents relied upon by the appellants counsel are not relevant to the facts and circumstances of the instant case. It is apparent that the appellants had intentionally, and against the explicit provisions of law, and self-availed benefit of the above-mentioned notifications which was not admissible to the impugned goods.”
When confronted with the above finding of fact and the legal position emerging there-from, learned counsel for the applicants neither could produce any material to establish his contention regarding alleged departmental past practice nor could controvert the legal position emerging there-from. The argument regarding alleged departmental past practice is otherwise misconceived as any departmental practice, being contrary to law, cannot have the force of law.
9. As regards question No.3 and 4, though the learned counsel for the applicants has not argued these questions with vehemence, however, from perusal of the impugned order as well as the orders passed by the two forums below the deliberate mis-declaration of the applicants is established by claiming the benefit of SRO 638(1)/2005 and 509(I)/2007 and seeking exemption of zero rating of sales tax and reduced income tax by submitting their G.D under PaCCS system on the basis of self-declaration, without offering the consignment to be physically examined. The provisions of the Customs Act and Sales Tax as quoted herein are very much attracted. The legitimate amount of duty and taxes evaded by the applicants can be recovered by invoking the provisions of Sales Tax and Customs Act as referred to hereinabove, hence the impugned order in this regard is correct and does not require any interference by this Court.
10. As Regards the proposed question No.5 relating to imposition of penalty, learned counsel for the applicants has submitted that the levy of penalty under the circumstances was not justified as there was no mensrea available while such G.D. was filed by the applicants. It is further argued that in the absence of any mensrea penalty could not be imposed. It has been argued that since earlier also in the case of the applicants and other importers similar consignments were granted exemption from levy of duty and taxes, therefore, the declarations were filed in good faith and in view of the past practice.
11. As already reflected in the order of the learned Collector (Appeals) as reproduced in the impugned order passed by the learned Tribunal it has emerged that neither there was any alleged past departmental practice or finding by Customs Authorities regarding taxability or otherwise of the consignments under consideration nor the applicants could justify claiming exemption of the consignment containing Sodium Meta-Bisulphite, which clearly falls within a different PTC Heading with distinguishable chemical properties, under self-declaration in PaCCS system where no physical examination is made. In the absence of any good faith or plausible explanation having been offered by the applicants either before the forums below or even before this Court we do not find any error in the orders passed by the learned Tribunal in this regard under the facts and circumstances of this case, which is otherwise based on concurrent finding of facts.
12. Accordingly, we answer all the above proposed questions in negative against the applicants.
13. In view of hereinabove, we are of the opinion that the impugned order is based on concurrent finding of facts, whereas no question of law arises from the impugned order, which may require any interpretation by this Court. Accordingly, instant Special Custom Reference Applications being devoid of any merits are hereby dismissed in limine alongwith listed application.
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