ORDER SHEET
Suit No.352 of 2000
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DATE ORDER WITH SIGNATURE OF JUDGE
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1. For hearing of CMA No. 598/2008
2. For hearing of CMA No. 989/2008
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Date of Hearing: |
31.10.2013 |
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Plaintiff: |
Through Mr. Khawaja Shamsul Islam Advocate |
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Defendant No.1: |
Through Mr. Shaiq Usmani, Advocate |
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Defendant No.3: |
Through Mr. I.H. Zaidi Advocate. |
Muhammad Shafi Siddiqui, J.- The brief facts of the case are that during the period from 1981 to 1984 plaintiff supplied tents to the International Trade Committee by participating in the International Tenders for Afghan Refugees. During the period the tents were supplied the plaintiff was not aware that the export of tents will entail them rebate from defendants specially compensatory rebate from State Bank of Pakistan. Such fact came to their knowledge subsequently. The rebate was provided in pursuance of letter dated 09.2.1980 which was neither circulated nor published in any gazette notification. When plaintiff learnt about such rebate they lodged their claim before the relevant Collectorate and such claim was declined as being time barred whereafter the plaintiff preferred a petition bearing C.P. No. D-1209/1988 for grant of rebate. The Division Bench of this Court was pleased to grant the petition and directed the defendants to pass fresh orders on the application of the plaintiff. Pursuant to that the defendant No.1’s predecessor submitted advice to Chief Survey and rebate, Central Board of Revenue on 25.10.1993 and advice that 31 duty/rebate draw back claims of the plaintiff be settled. Vide letter dated 13.11.1999 Central Board of Revenue condoned delay in filing of 31 rebate claims and finally the export rebates were paid to the plaintiff in the year 1999. However the compensatory rebate to the tune of Rs.26,00,000/- still stand unpaid. The plaintiff is still pursuing his remedy. Learned Counsel for the plaintiff submits that the plaintiff has numerous competitors and with connivance of the defendants, they managed to lodge anonymous complaint with the defendant that such rebates were obtained on bogus and fabricated documents which resulted in blocking the shipments and export of consignments of the plaintiff and retaining amount equivalent to amount of rebate paid earlier. The plaintiff has received a notice under section 26 of the Customs Act dated 28th and 29th of February 2000 wherein the defendant No.2 asked for the availability of employee Mr. Nasir in respect of the aforesaid consignments.
2. Learned Counsel submits that the alleged inquiry is sham and bogus and issued at the behest of competitors and in connivance of the Customs officials. Learned Counsel submits that the entire inquiry and scrutiny was conducted during time the aforesaid petition bearing C.P. No. D-1209/1988 was filed which was allowed and no objections as claimed in the notice under section 26 of the Customs Act were taken. The only objection that was taken at the time of hearing of petition was that the claim was time barred. Learned Counsel submits that after filing of this suit, this Court passed orders on 29.8.2000 whereby the defendants No.1 & 2 were directed to dispose of the inquiry under section 26 of the Customs Act within one month. Learned Counsel submits that despite the fact that they were given specific time, no inquiry was conducted and on 20.11.2000 this Court directed that the amount withheld shall be paid to the plaintiff forthwith without further waste of time unless the defendant provide reasons in writing for not paying the same.
3. Learned Counsel for the plaintiff further relied upon the order dated 10.5.2001 in terms whereof it is observed by this Court and conceded by the Learned Counsel for the defendant that the investigation has been carried and that the result of the inquiry was to be filed within two weeks from 10.5.2001. Consequently in view of this statement the contempt application was dismissed. Subsequently on 29.4.2005 it is reported that the inquiry was not concluded and still going on and it was prayed by the defendants No.1&2 that the inquiry be discontinued till the finality of the criminal case/FIR mentioned in the application bearing CMA No.998/2001. However said request was turned down on the ground that there was no nexus in between inquiry and the criminal case. On 24.5.2005 the issues were framed and subsequently on 17.4.2007 the Court directed the defendants to deposit the withheld amount and contempt notices were issued to the delinquent officers. It was also observed by this Court that no sooner the defendants had requested for discontinuing the inquiry against the plaintiff under section 26 of the Customs Act, they tacitly agreed that no material could be found against the plaintiff to prove that their rebate claim for the period 1981 to 1984 was illegal. It was also observed by this Court that the plaintiff is entitled to retain the amount forthwith. It may however be clarified that the amount was retained on the anonymous complaint with regard to the export of the consignments in the year 1999-2000 which consignments have no link or connection with the claim of rebate for the period from 1981 to 1984, which was already paid.
4. Learned Counsel for the plaintiff submits that while the inquiry was being conducted, the defendant also lodged an FIR under section 156 of the Customs Act, 1969 as mentioned above. The case set-forth in the FIR was that the customs authorities received information from Special Monitoring Team Headquarters, Karachi that in the year 1986 M/s. Zahra Industries (Pvt.) Limited with active convince of Customs staff of Export Collectorate, Karachi got rebate of amount of Rs.36,54,731/- against the claims filed in the year 1986. It is further stated that the claim in question was rejected by the Customs Authorities as the same were not permissible to the exporter in terms of the conditions laid down in CBR letter dated 09.2.1980. In pursuance of the said information the Customs Authorities conducted usual inquiry and on 03.03.2000 Abdul Sammad Siddiqui, the Principal Appraiser, registered the present case. The case proceeded in the Special Court (Custom & Taxation) Karachi as Case No. 206/2000 and the learned Special Court (Custom & Taxation), Karachi was pleased to acquit the Plaintiff’s director Muhammad Afzal & others. It is observed by the learned Judge that the prosecution has lost to successfully prove the charge against any of the accused beyond shadow of doubt. The question that came up before the Special Court includes the claim made on duplicate documents beside other points. The learned trial Court in the aforesaid case was pleased to frame the points for determination which are as under:-
i. Whether M/s. Zahra made illegal claims in connivance with the other co-accused and o0btained the rebate amounting to Rs.36,54,731/-?
ii. What offence, if any, the present accused had committed?
5. Thus despite the orders of the Division Bench passed in C.P. No. D-1209/1988, the second round of litigation as criminal prosecution was conducted which also culminated in the dismissal involving the same question as disclosed in above C.P and additional question. Learned Counsel for the plaintiff further submitted that the matter does not end there, after dismissal of the criminal case as aforesaid, the defendant in pursuit of their malafide desire have then filed an inquiry report pursuant to section 26 of the Customs Act, 1969 before this Court. Learned Counsel further submitted that a futile effort was made by attempting to show that the repatriation of foreign exchange was made at International Trade Committee and not exporters. It was also held in the inquiry that neither they filed claim within time nor they took care of condition laid down in letter dated 09.2.1980. Thus the defendant started third round of battle by placing the inquiry report of 31.1.2008 i.e. after decision of the Special Court (Customs & Taxation), Karachi on 20.9.2006. Learned Counsel submitted that after the decision of the Division Bench it does not lie in the mouth of the defendants to have re-agitated the grounds in the criminal case referred above and thus after its dismissal even to pursue inquiry since they have failed in two attempts i.e. before a Division Bench of this court as well as before the Special Court.. Learned Counsel submitted that in view of above facts and circumstances issues No.1 and 2 as framed by this Court stands decided and no controversy is left and defendant left with no defence to deny the plaintiff from withdrawing the amount lying with the Nazir on the pretext that an inquiry has now been conducted after decision of two competent Couts, one of which is Hon’ble Division Bench of this Court. Learned Counsel submitted that no purpose would be served in trying the issue at serial No.1 & 2 as all material questions have been answered by the Division Bench as well as by the Special Court (Customs & Taxation) Karachi.
6. On the other hand learned Counsel for the defendant has objected that the decision of the criminal case cannot be equated with the inquiry report as both are independent and that since the issues have been framed by this court, the releasing of the amount to the plaintiff would amount decreeing the suit of the plaintiff before the issues are decided after recording evidence.
7. I have heard the learned counsel and perused the record. In order to dilate upon the validity and strength of inquiry under Section 26 of the Customs Act, 1969 in view of the above facts, it is better to reproduce it, which is as under:-
[“26. Obligation to produce documents and provide information:---(1)Any person, as and when required, in writing, by an officer of customs not below the rank of an Assistant Collector shall:-
(a) Furnish information relating to importation, exportation, purchase, sales, transportation, storage or handling of any goods imported or exported.
(b) Produce for examination, documents or records that the appropriate officer considers necessary or relevant to the audit, inquiry or investigation under the Act;
(c) Appear before an officer of Customs and answer any question put to him concerning goods, documents, records and transactions relating to the audit or inquiry or investigation.----“
8. Admittedly the plaintiff has filed a petition before the Division Bench of this Court bearing CP No.1209 of 1988 for declaration and direction with the following prayer:-
“i) Declaring that the orders passed by the respondents including the orders passed by the C.B.R. dated 3.11.1986 and the earlier orders passed by the Collector of Customs Karachi and the Assistant Collector of Customs, Karachi to be not in accordance with law.
ii) Directing that the respondent shall pay the rebate on goods supplied for Afghan Refugees against the international tenders, as directed by the Central Board of Revenue in their memo dated 9.2.1980.”
9. The said petition was contested by the defendants and only point that was agitated by defendants on the basis of which claim was denied to the plaintiff was that the same was time barred. The question raised was accordingly considered and the learned Division Bench held as under:-
“In the hierarchy of customs authorities, no exception was taken to the fact that copy of the CBR letter dated 9.2.1980 was endorsed only to M/s Siddiq Sons Industries Ltd. Karachi and to no other private party. No reasons were given anywhere for such discriminatory treatment. This would weigh in favour of the petitioners being allowed condonation of period of limitation if such period was fixed.----.”
“----For the foregoing reasons we accept this constitution petition and declare the impugned orders to have been passed without lawful authority and to be of no legal effect. Consequently we call upon the Assistant Collector of Customs (Expert Rebate) Karachi to pass a fresh order on application of the petitioners in accordance with law, in light of the observations made above. There shall be no order as to costs.”
10. Thus, the Division Bench concluded that the impugned order dated 03.11.1986, in terms whereof the claim of the plaintiffs was denied, was set aside and the Assistant Collector Customs (Export Rebate) was ordered to pass fresh order on the application of the petitioners in accordance with law in the light of the observations made in the aforesaid order. It is pertinent to point out that no such controversy, as raised in the inquiry notice dated 28.2.2000/29.2.2000 under section 26 of the Customs Act, was raised at the relevant time. Subsequently this suit was filed in the year 2000 and during the pendency a criminal case was registered bearing No.206 of 2000 in the Special Court (Custom & Taxation) Karachi. The defendants sought enough time in this suit for the conclusion of the inquiry and once they prayed before this Court that the inquiry is almost concluded and would be filed within a short period. Such observation was made vide order dated 10.05.2001. The inquiry report was however not filed and again on 29.04.2005 they requested that this Court may allow the defendants to discontinue the inquiry proceedings under section 26 of the Customs Act, 1969 till completion and final decision of the trial under FIR No.SR 2/12923/86 which was tried as case No.206 of 2000. However, such request was declined and the application was dismissed. Be that as it may, under the garb of the said inquiry the amount was withheld by the defendants and vide order dated 17.04.2007 this Court was pleased to direct the defendants to deposit the amount withheld by them and also issued show-cause notice for contempt proceedings. It was observed by this Court vide order dated 17.04.2007 that the contention of the defendants appears to be solely for the purpose of hoodwinking the process of this Court. It was further observed that the defendants despite lapse of almost seven years have not filed the inquiry report and their request of discontinuation of inquiry was rejected on 29.04.2005. It was further observed that no sooner the defendants have requested for discontinuation of the proceedings against the plaintiff under section 26 of the Customs Act, they tacitly admitted that no material could be found against the plaintiff to prove that rebate claim availed in the year 1998 for the period from 1981 to 1984 was illegal hence the plaintiff was entitled to retain the amount forthwith. Under these circumstances, the defendants were directed to deposit the amount with the Nazir of this Court.
11. During the pendency of these proceedings in the suit the fate of the criminal case initiated by the defendants to prosecute the plaintiff’s directors also came wherein the plaintiff’s director was along with others were acquitted as the defendants failed in their attempt to establish that the claim of the plaintiff was malafide and unlawful and that it was given to the plaintiff in connivance with other co-accused including custom officials and they have also failed in their attempt to prove that any offence by the plaintiff or its directors had been committed. The Special Court was pleased to frame two points for determination which are as under:-
“i) Whether M/s Zahra made illegal claims in connivance with the other co-accused and obtained the rebate amounting to Rs.36,54,731/-?
ii) What offence if any, the present accused had committed?”
12. The substantial part of the order is available at page-13 of the judgment passed by the Special Court in above Case no. 206/2000 which reads as under:-
“---Taking up the case of the main accused Muhammad Afzal first, it may be observed that the crux of the charge against him was that m/S. Zahra the firm owned by him, had made illegal claims of the rebate as according to the prosecution the claims in question were time barred and the same also did not meet the other stipulations contained in the letter dated 09-2-1980. The said stipulations were:
i) The embassy of concerned country in Pakistan awarding the contract issues a certificate, duly attested by Ministry of Foreign Affairs, stating the full particulars of the consignment of relief goods for Afghan refugees.
ii) Payment in made in foreign currency and a certificate from any authorized dealer in foreign exchange is submitted to the fact that the foreign currency so recovered has been surrendered to the State Bank of Pakistan.
As regards the above stipulations are concerned, the letter issued by M/s. Inter Aid Committee fairly clarified that it was associated among others with the Catholic Relief Services and that it was recognized by the UMHCR United Nations. Further that the proceed certificates of the foreign exchange were also submitted to the customs department. In addition to above, it was also claimed that the letter dated 13-3-1980 issued by the C.B.R itself indicated that accused had satisfied the said requirement by submitting all payments receipts in foreign currency coupled with the certificates from the authorized dealers. Most of the concerned Banks, when approached, reported that the matter being an old one, the record had not been preserved/kept. In view of such situation, it could not be positively said that no foreign exchange was brought to the country. More over, similar claims of other parties said to have been allowed. Over and above this, it would be noticed that while rejecting the claims of the accused the heirachy7 of the customs authorities in their respective orders they had only mentioned about the lapse of time as the (sole) bar to the grant of the claims. In the petition before the Hon’ble High Court the same ground of delay was agitated. That being so, in my considered view, besides other aspects the raising of the objections of non-fulfillment of the stipulations in the present case would be simply untenable. As regards the bar of time itself is concerned, it would be noticed that firstly in the letter dated 09-2-1980 no such period of time was mentioned; and the claim of M/s. Zahra that it was kept unaware and further that the similar claims of other exporters had been quietly allowed, have not been satisfactorily rebutted. In fact, as pointed out by the learned Advocate, the Hon’ble High Court also noticed the discriminatory treatment meted out to the accused, and dilated upon it in sufficient words and on the thorough examination of the entire back ground of the case indicated that the delay if any was condonable and it was in such back ground that it directed the customs authorities to pass fresh orders on the application of M/s. Zahra. The decision of the Hon’ble High Court had not reported been challenged further and thus it attained finality. ---“
13. It appears from the letter of Collector of Customs dated 25.10.1993 that on scrutiny of the documents, it was found that the claims were time barred as these were not filed within the stipulated period of 120 days. These claims were rejected by the Assistant Collector of Customs and then appeal against the order was dismissed by the Collector of Customs and the review application was rejected by the Additional Secretary, Government of Pakistan, Central Board of Revenue, Islamabad. It was then when the plaintiff preferred the Constitution Petition referred above wherein the sole objection that was taken by defendants, after the above departmental exercise that the claim was time barred. It was in this background that the Collector of Customs (Exports) was pleased to issue letter dated 25.10.1993 to the Board with a request to grant necessary condonation of delay so that the orders of the High Court can be complied within letter and spirit. Pursuant to this letter, the Secretary, Central Board of Revenue was pleased to condone the delay in respect of 31 consignments of the plaintiffs. Thus, it appears that the only objection since beginning and until the entire legal remedy was exhausted by the plaintiffs and the defendants was that the claim was time barred and nothing else. Even the letter dated 25.10.1993 issued by the Collector of Customs (Exports) suggests that on scrutiny of documents the only objection found that the claim was time barred. There is no reply to the contents of para-6 of the plaint that the claims were filed before the relevant Collectorate duly supported by the documents which were required to be filed in view of the Central Board of Revenue’s letter dated 09.2.1980.
14. Thus, the defendants failed to establish their case and the plaintiff’s directors were acquitted from the alleged charge. It was at this point of time that the inquiry report was filed along with a statement dated 30.01.2008 which appears to be based on conjectures and surmises. Para 18 of the report is as under:-
“From the foregoing letter, it is clear that repatriations of foreign exchange were made in the account of M/s. Inter Aid Committee and not the exporters. The exporters at the time of supply of consignments were unaware of the benefit of claims of duty drawback (as indicated in the judgment dated 16.11.1992 passed by the Honorable High Court in CP No.1209/1988). Neither they filed the duty drawback claims within time nor did they take care of the conditions laid down in Board’s letter 09.02.1980. It can therefore be inferred that the exporters did not pass on the benefit of duty drawback claim as a part of costing of the subject consignments and hence the crucial condition for treatment of these supplies as exports could not be met.”
15. Thus, the enquiry report under section 26 of the Customs Act is based on three points i.e. repatriation of foreign exchange were made in the account of M/s Inter Aid Committee and not the exporter; and that they filed the duty drawback claims beyond time and thirdly that they did not take care of the conditions laid down in Board letter dated 09.02.1980. The answers and the clarification of the points raised in para-18 of the inquiry report made under section 26 of the Customs Act are already available in the judgment passed in C.P. No. D-1209/1988 and Special Case no. 206/2000. The first point that the repatriation of foreign exchange were made in the International Trade Committee and not exporters is also available in the letter itself. Relevant portion of the judgment passed in C.P. No. D-1209/1988 is reproduced below:
“----As per the CBR letter dated 09.2.1980 CBR had decided to grant repayment of custom duty and sales tax, paid on import of raw material used in manufacture of goods supplied for use of Afghan refugees against international tenders, and for this purpose such supply of manufactured goods was to be treated as export. The CBR did not issue a separate notification allowing rebate on import of raw material used for manufacture of goods supplied for use of Afghan refugees, but extended benefit of existing notification to the import of such raw material. In either words CBA letter dated 09.2.1980 by itself does not authorise rebate or refund in terms of clause (c) of Section 21 of the Customs Act.----”
16. Letter dated 09.2.1980 itself provides that supplies to International Traders may be treated as export and the clarification is made by the Division Bench in the order dated 16.11.1992 passed in C.P. No. D-1209/1988. Beside this observation, numerous letters are available along with affidavit-in-rejoinder filed by the plaintiff‘s director in response to application bearing CMA No. 1579/2000 and provides certificate for the supply of goods, proceeds certificates and numerous banks including American Express International, Bank of Netherland, Habib Bank Limited, The Chartered Bank, ABN Bank and numerous certificates issued by International Trade Committee for placement of orders and receipt of the goods. This voluminous record is available as annexures R-1 to R-221. Thus when the record provides that the repatriation of the foreign exchange was made at International Trade Committee not exporters, the point raised in notice is misleading and contemptuous.
17. As regards the second point that the rebate claim of the plaintiff is time barred is apparently contumacious in view of the following observation of Hon’ble Division Bench:-
“----Rebate claimed by the plaintiff in pursuant of CBR’s letter dated 09.2.1980 was disallowed by the Assistant Collector of Customs (Expert Rebate) under the order dated 10.8.1986 on the only ground that the rebate was claimed after expiry of 120 days of the date of shipment of the raw material imported by the plaintiffs.----“
“----Copy of the notification SRO No.113(I)/82 dated 11.2.1982 has amended notification No. SRO 120(I)/81 dated 12.2.1981 with the result that some categories of goods were substituted for the original goods on production, manufacture and expert of which repayment of custom duty and sales tax was allowed. No period of limitation within which the reimbursement of custom duty or sales tax is to be claimed, is provided in the body or at end of the notification. ---“
“---For the foregoing reasons we accept this constitution petition and declare the impugned orders to have been passed without lawful authority and to be of no legal effect. Consequently we call upon the Assistant Collector of Customs (Expert Rebate) Karachi to pass a fresh order on application of the petitioners in accordance with law, in light of the observations made above. There shall be no order as to costs.”
18. It is also clarified that M/s Inter Aid Committee was associated amongst others, with the Catholic Relief Services and that it was recommended by the UNHCR United Nations and that the documents regarding proceeds of foreign exchange were also submitted to the customs department. Such observation is available at page 13 of the Division Bench judgment passed in CP No.1209 of 1988.
19. Further the conditions specified in the letter dated 09.2.1980 regarding payment made in the foreign currency and awarding of contract is also substantiated in terms of this voluminous record. It is not the case of the defendant that such record is forged and fabricated. It is the case that the letter dated 09.2.1980 has not been complied with. Thus in view of the facts and circumstances, it is apparent and clear from any doubt that the defendant in pursuit of their malafide desire are shooting in dark not even with the hope that something would come out from it.
20. Undoubtedly the judicial inquiry and scrutiny always rests on higher pedestal as compare to the departmental inquiry.
21. The Hon’ble Supreme Court in the case of Assistant Director, Intelligence & Investigation v. M/s B.R. Herman reported in PLD 1992 SC 485 laid down the following principles for exercising powers conferred under section 26 of the Customs Act:
“----The object of section 26 of the Customs Act is to empower the authority to ask for such information or require the production of documents or inspect the same in order to determine the legality or illegality of importation or exportation of goods which have been imported or exported, the value of such goods, the nature, amount and source of the funds or the assets with which goods were acquired and the customs duty chargeable therein or for deciding anything incidental thereto. The authority can only for specific purposes of determining the legality or illegality call for such information as required by section 26. The authorized officer can call upon any importer or exporter to furnish information in case where such determination is required. It cannot make a roving inquiry or issue a notice by merely shooting in the dark in the hope that it will be able to find out some material out of those documents and then charge the party of irregularity or illegality. The authority has to state and disclose in the notice, the purpose for which the party is required to produce those documents or supply information. Unless such purpose is specified in the notice, it will be a matter of anybody’s guess and the accused party will be put to inquiry without any specific allegation or fact disclosed to him. It does not permit any authority to employ the provision of section 26 to make indiscriminate, roving and fishing inquiry irrespective of the fact whether any determination of legality or illegality in import, export or funds with which the goods were acquired is to be determined.----”
22. Thus, in the light of the judgment of the Division Bench of this Court as well as findings arrived at by the Judge Special Court prima facie it appears to be a roving inquiry as they have failed in two attempts. It may, however, be clarified that these alleged questions as raised in the notice under section 26 of Customs Act were available for defendants to raise but were never raised or agitated before the Division Bench and more importantly when on internal inquiry matter was referred to Special Court, the application of waiver and acquiesces squarely applies as after lapse of considerable period and after obtaining the decision of Division Bench and Special Court they have initiated the purported inquiry on the strength of a plea which they never took earlier. Although as stated above the answer to the allegations raised in notice under section 26 are available in terms of judgments. Be that as it may, even subsequently pursuant to such enquiry they could not prove such allegations, in a subsequently initiated criminal case.
23. In the aforesaid case reported in PLD 1992 SC 485 it was held that the authority can only for specific purpose of determining the legality or illegality call for such information from the plaintiff however it cannot make a roving inquiry or issue notice by merely shooting in the dark in the hope that it will able to find out some material out of those documents and then charge the party of irregularity or illegality.
24. In my opinion the inquiry report appears to be a futile attempt to involve the plaintiff and/or its directors in such controversies and to proceed and try the issues at Sr. No.1 and 2 framed with regard to section 26 of the Customs Act. Inquiry report is self-proclaimed announcement which is nothing but contumacious observation which runs contrary to the observations of the Division Bench as well as of Special Court. In view of the facts and circumstances I allow the plaintiff to withdraw the amount deposited by the defendants as the plaintiffs are entitled for rebate claim which amount they have already received and also entitled for amount which was retained by the defendants and now lying with the Nazir of this Court.
25. Accordingly the application at Sr. No.1 is allowed and the application at Sr. No.2 is granted subject to all just legal exceptions.
Judge