Collector of Customs, Model Customs Collectorate, Multan v. Aman Ullah Khan

Lahore High Court

Before: Jawad Hassan and Muzamil Akhtar Shabir, JJ.

Collector of Customs, Model Customs Collectorate, Multan — Applicant

Versus

Aman Ullah Khan — Respondent

Customs Reference No. 47412 of 2021
Decided on: 27th September, 2021

Customs Act, 1969 — Sections 2(k), 17, 187 and 196

Qanun-e-Shahadat Order, 1984 — Articles 117 and 120

Smuggled Goods — Proof — Onus to Prove

Customs authorities seized bitumen of foreign origin from the warehouse of the respondent on the allegation that the goods were smuggled and non-duty paid.

The Customs Appellate Tribunal allowed the appeal filed by the respondent and ordered restoration of the goods.

The documents produced by the respondent regarding local purchase and the corresponding Sales Tax Returns were official documents and were relied upon by the Customs Appellate Tribunal.

The production of these documents shifted the burden upon the Customs authorities to establish that the documents were not genuine.

However, the Customs authorities did not get the documents verified from the relevant quarters to determine whether they were genuine or whether they related to the goods in question.

Consequently, the burden which had shifted upon the Customs authorities under section 187 of the Customs Act, 1969, to substantiate that the goods were non-duty paid had not been properly discharged.

The findings of fact regarding the genuineness of the documents and lawful possession of the goods were not shown to be contrary to the record.

The High Court could not interfere with findings of fact regarding the genuineness of receipts relied upon by the Customs Appellate Tribunal, as no question of law requiring determination by the High Court had arisen.

The High Court therefore answered the relevant question in the negative, holding that the Customs authorities had failed to establish that the respondent had produced bogus record.

Reference dismissed.

Case Law Relied Upon

• Muhammad Gul v. Member Judicial, Customs Appellate Tribunal, Karachi and another (2013 PTD 765)
• Messrs Ittehad Textile Industries (Pvt.) Ltd. v. Collector of Sales Tax and Central Excise, Faisalabad and 2 others (2007 PTD 663)
• Pakistan Match Industries (Pvt.) Ltd. v. Assistant Collector, Sales Tax and Central Excise Mardan (2019 SCMR 906)
• Army Welfare Trust (Nizampur Cement Project), Rawalpindi and another v. Collector of Sales Tax (Now Commissioner Inland Revenue, Peshawar) (2017 SCMR 9)
• Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax and another (2014 SCMR 907)

Representation

Ms. Saba Saeed Sheikh appeared for the Applicant.

Raza Ahmed Cheema appeared for the Respondent.

Order

MUZAMIL AKHTAR SHABIR, J.

Customs Reference

Through this Customs Reference under section 196 of the Customs Act, 1969, the applicant challenged the judgment dated 03.05.2021 passed by the Customs Appellate Tribunal, Bench-II, Lahore, in Customs Appeal No. 155/LB/2020.

The applicant raised the following questions for the opinion of the High Court:

a. Whether the learned Customs Appellate Tribunal had jurisdiction to pass an order against the record available with it?

b. Whether the learned Customs Appellate Tribunal had erred in law by verifying the bogus record produced by the owner?

Facts of the Case

The staff of the detecting agency recovered foreign-origin, allegedly smuggled and non-duty paid bitumen from a warehouse/godown located near Khear Chowk, Kot Rab Nawaz, Southern Bypass, Multan.

The goods were detained under section 2(k) read with section 17 of the Customs Act, 1969, and were seized on 26.11.2020 under section 168 of the Act.

The adjudication proceedings culminated in Order-in-Original No. 162/2021 dated 19.03.2020, whereby the foreign-origin goods were confiscated.

The respondent challenged the order before the Customs Appellate Tribunal. The Tribunal allowed the appeal on 03.05.2021 and ordered that the goods be released unconditionally to their owner or owners.

Arguments on Behalf of the Applicant

Learned counsel for the applicant department submitted that the Customs Appellate Tribunal had failed to appreciate that the respondent had produced fake receipts and Sales Tax invoices in support of his claim.

It was argued that such documents could not legally be relied upon by the Tribunal for allowing the appeal and ordering release of the seized bitumen.

Arguments on Behalf of the Respondent

Learned counsel for the respondent defended the impugned judgment of the Customs Appellate Tribunal.

The respondent maintained that the receipts and Sales Tax invoices were genuine and had rightly been relied upon by the Tribunal.

It was further argued that the findings of fact recorded by the Tribunal could not be interfered with by the High Court in its reference jurisdiction.

Claim of Lawful Possession

Before the Customs authorities and the Appellate Tribunal, the respondent claimed that the bitumen had been supplied to him locally by the importer of the goods in furtherance of business.

The respondent relied upon Sales Tax invoices which were duly reflected in his Sales Tax Returns and were also available in the Federal Board of Revenue’s system relating to the filing of Sales Tax Returns.

The Collector of Customs, however, observed that the documents had been prepared as an afterthought and that the seized bitumen was not covered by the documents produced.

On this basis, the Collector ordered outright confiscation of the goods and imposed a personal penalty of Rs.500,000/- upon the owner or tenant of the godown.

Findings of the Customs Appellate Tribunal

The High Court examined the order passed by the Collector and observed that the order did not sufficiently explain how the conclusion regarding the alleged falsity of the documents had been reached.

It appeared that minor discrepancies in the documents had been made the basis for reaching the conclusion against the respondent.

The Customs Appellate Tribunal, after considering the documents produced by the respondent, concluded that the matter involved local supplies.

The Tribunal found that the respondent had produced proper documentation and had reasonably discharged the burden of proof under section 187 of the Customs Act, 1969, showing that the recovered bitumen was in his lawful possession.

The Tribunal therefore set aside the order of confiscation.

Tribunal’s Finding Regarding Documentary Trail

The Customs Appellate Tribunal observed that the department had initially failed to substantiate its contention that the goods were non-duty paid.

The supplies had been made by the importer in furtherance of business through proper Sales Tax invoices.

The Tribunal considered the matter to be one of local supplies and found documentary evidence establishing a proper trail regarding the supplies and their connection with the imports.

The evidence included Sales Tax invoices dated 20.02.2021, 19.03.2021 and 20.04.2021 of M/s Amanullah, which were duly reflected in the Sales Tax Returns available in the FBR system.

On this basis, the Tribunal concluded that the respondent had reasonably discharged the burden of proof under section 187 of the Customs Act.

The Tribunal consequently held that confiscation of the goods and imposition of penalty were unlawful and unfair.

The Order-in-Original was set aside and the appeal was accepted.

The goods were ordered to be released unconditionally to their owner or owners.

Genuineness of Documents

Burden Shifting Under Section 187

The High Court considered the issue of the genuineness of the receipts and Sales Tax invoices relied upon by the respondent.

The respondent relied upon receipts and Sales Tax invoices as evidence of ownership and lawful possession of the bitumen, whereas the Customs authorities disputed their genuineness and relevance.

The Court referred to Muhammad Gul v. Member Judicial, Customs Appellate Tribunal, Karachi and another (2013 PTD 765), where a similar issue had arisen concerning a vehicle alleged to be smuggled.

In that case, the owner had produced registration documents which were verified by the Motor Vehicle Registration Authority. The Customs authorities had failed to establish that the import documents were fake or irrelevant or that the registration had been made contrary to law.

The Sindh High Court consequently held that the Customs authorities had failed to discharge the burden which had shifted to them under section 187 of the Customs Act upon production of the relevant documents by the owner.

Application to the Present Case

The High Court found that the documents produced by the respondent regarding local purchase, together with the corresponding Sales Tax Returns, were official documents.

These documents had also been relied upon by the Customs Appellate Tribunal.

Their production therefore shifted the burden upon the Customs authorities to establish that they were not genuine.

However, the Customs authorities had not obtained verification of the documents from the relevant quarters.

They had not properly determined whether the documents were genuine or whether they related to the particular bitumen recovered from the respondent.

Consequently, the burden which had shifted to the Customs authorities under section 187 of the Customs Act, 1969, to establish that the bitumen was non-duty paid had not been properly discharged.

The findings of fact regarding the genuineness of the documents and the lawful possession of the bitumen were therefore not shown to be contrary to the record.

Findings of Fact and Reference Jurisdiction

The High Court emphasized that the genuineness of receipts and documents is essentially a question of fact.

The Court referred to Messrs Ittehad Textile Industries (Pvt.) Ltd. v. Collector of Sales Tax and Central Excise, Faisalabad and 2 others (2007 PTD 663), wherein it was held that whether a disputed invoice is genuine or fake is a question of fact.

Unless a legal issue arises, the High Court does not ordinarily determine such factual controversies in its reference jurisdiction.

The question of genuineness of receipts or documents produced before the Appellate Tribunal can therefore be determined by the Tribunal.

Unless it is apparent from the record that the documents or receipts were not genuine, the High Court would not enter into an inquiry to determine their genuineness.

Such an exercise would amount to recording findings of fact, which is normally beyond the advisory jurisdiction of the High Court.

The Appellate Tribunal is the final forum for recording findings of fact in such matters, and its determination of factual aspects is final unless a question of law arises.

Question Regarding Jurisdiction of the Tribunal

The applicant had questioned whether the Appellate Tribunal had passed an order against the record available before it.

The High Court observed that the applicant had failed to demonstrate that the Tribunal’s order was contrary to the record.

Accordingly, the proposed question at paragraph (a) did not arise from the impugned judgment and was not required to be answered.

Scope of High Court’s Reference Jurisdiction

The High Court reiterated that, while exercising reference jurisdiction, it is required to confine itself to questions of law.

It does not decide factual controversies or interfere with factual findings recorded by the Appellate Tribunal.

Reliance was placed upon:

• Pakistan Match Industries (Pvt.) Ltd. v. Assistant Collector, Sales Tax and Central Excise Mardan (2019 SCMR 906);
• Army Welfare Trust (Nizampur Cement Project), Rawalpindi and another v. Collector of Sales Tax (Now Commissioner Inland Revenue, Peshawar) (2017 SCMR 9); and
• Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax and another (2014 SCMR 907).

In the present case, the Appellate Tribunal had recorded findings of fact after examining the record and concluded that an attempt to smuggle the goods had not been established.

The applicant department had also failed to establish that the respondent had produced bogus record.

Therefore, the proposed question at paragraph (b) was answered in the negative.

Final Decision

For the reasons discussed above, the Customs Reference was found to be devoid of merit.

The High Court decided the Reference against the applicant department and in favour of the respondent.

Reference dismissed.

The Office was directed to send a copy of the order under the seal of the Court to the learned Tribunal in accordance with section 196(5) of the Customs Act, 1969.

Result

Reference dismissed.