Smuggled goods to be confiscated out rightly, no option of fine available holds SCP

ISLAMABAD: A full bench of Supreme Court of Pakistan comprising Chief Justice Mian Saqib Nisar, Justice Umar Ata Bandial and Justice Maqbool Baqar allowed an appeal filed by Collector of Customs, Peshawar in an appeal against Wali Khan and others holding that  under SRO 574 (1) of 2005 no option of payment of redemption fine could be given against smuggled goods.

According to details the customs authorities seized certain goods, i.e. cloth and black tea both of foreign origin, belonging to respondents No.3 and 4 (the owners) along with the transportation vehicles belonging to respondents No.1 and 2, under Sections 2(s), 16 and 157 of the Customs Act, 1969 (the Customs Act) read with Section 3(1) of the Imports and Exports (Control) Act, 1950 (the Imports and Exports Act) punishable under Sections 156(1), (8), (89) and 164 of the Customs Act.

After investigation and issuance of show cause notices to the respondents, the Additional Collector Customs passed an order-in original (ONO) dated 14.2.2007 according to which the goods and vehicles Civil Appeal No.1050 of 2009 were out rightly confiscated.

Aggrieved by the ONO, the respondents filed an appeal which was allowed by the Collector Customs (Appeals) vide order dated 12.3.2007 and the order-in-original was modified to the extent that the confiscated goods were allowed to be redeemed upon payment of a redemption fine of 30% of the customs value of the goods in addition to payment of the duties/taxes leviable subject to production of an NOC from the concerned Trial Court where the criminal proceedings were taking place and imposition of a personal penalty of Rs.100,000/- each upon the owners of the goods.

This order was challenged by both the sides and the Customs, Federal Excise & Sales Tax Appellate Tribunal (the Tribunal) while dismissing the appeal of the appellant-department and accepting that of the respondents, through an order dated 27.6.2007, reduced the redemption fine on cloth from 30% to 15% and remitted in full the personal penalty upon the owners of the goods

The appellant’s reference before the learned High Court was dismissed against which the Leave to Appeal was filed  in this case which was granted on 21.7.2009 to consider the following questions that “ Whether provision of Section 2(s) of the Customs Act, 1969, was correctly interpreted and applied by the Tribunal and the High Court “

The counsel for the appellant ( Collector Customs) submitted that the goods could only have been out rightly confiscated, as the option of redemption of goods upon payment of fine under Section 181 of the Customs Act was not available to the respondents in view of SRO No.574(I)/2005 dated 6.6.2005 (SRO No.574). He further argued that assuming that this Civil Appeal No.1050 of 2009,  option was available to the respondents, then the redemption fine could not be less than 30% as provided by Column 3 of the Table of the said SRO.

The counsel for respondent No.1 argued that the goods were freely importable as there was no law that prohibits or restricts them from being brought into Pakistan and therefore they did not fall within the purview of smuggling.

“In order to resolve the controversy, we first have to ascertain the meaning of the phrase “smuggled goods” as provided in the Customs Act. The definition of “smuggle” provided in Section 2(s) of the Customs Act can be broken down as follows:- (a) to bring into or take out of Pakistan, in breach of any prohibition or restriction for the time being in force; OR (b) en route pilferage of transit goods; OR (c) evading payment of customs-duties or taxes leviable thereon; OF (i) gold bullion, silver bullion, platinum, palladium, radium, precious stones, antiques, currency, narcotics and narcotic and psychotropic substances; OR (ii) manufactures of gold or silver or platinum or palladium or radium or precious stones, and any other goods notified by the Federal Government in the official Gazette, which, in each case, exceed one hundred and fifty thousand rupees in value; OR (iii) any goods by any route other than a route declared under section 9 or 10 or from any place other than a customs-station and includes an attempt, abetment or connivance of so bringing in or taking out of such goods. Some restricted goods are mentioned in Section 2(s) of the Customs Act [see Clauses (i) and (ii) thereof], the bench wrote in its order.

Section 3 of the Imports and Exports Act also authorizes the Government to “prohibit, restrict or otherwise control the import and export of goods of any specified description.” In this context, the Federal Government, in exercise of the powers conferred by Sections 2(s)(ii) and 156(2) of the Customs Act vide SRO No.566, notified certain goods to be prohibited/restricted for the purpose of the said sections. This notification held the field when the goods in question Civil Appeal No.1050 of 2009 -: 8 :- i.e. cloth and black tea, were recovered from the respondents on 06.01.2007. Item No.35 of SRO No.566 is “Black Tea (except Op-Pekoe)”, thus black tea is a restricted/prohibited item and falls within the meaning of smuggled goods in terms of Section 2(s) of the Customs Act. With regard to cloth, Item No.28 of SRO No.566 is “man-made fiber, manmade yarn and fabric”. According to the learned counsel for the appellant, the cloth recovered from the respondents squarely falls within this item, whereas the learned counsel for the respondents contended that the same applies only to man-made cloth and not to the cloth confiscated in this case, the bench noted.

The cloth in question has been referred to A/S cloth in the orders of the forums below, which stands for artificial silk cloth and is undoubtedly a man-made fabric as it comprises of synthetic fiber and thus is squarely covered by Item No.28 of SRO No.566. Hence the cloth from foreign origin is a restricted/prohibited item as per Item No.28 of SRO No.566 and falls within the meaning of smuggled goods in terms of Section 2(s) of the Customs Act, the order said.

The confiscated goods were admittedly of foreign origin and there was no proof that they were lawfully imported into Pakistan (by an authorized importer under a valid license and through an authorized route), the burden of which, according to Clause 89 as mentioned above, was on the respondents. When confronted, learned counsel for the respondents failed to provide any concrete evidence except contending that these goods are easily available in the market and can be purchased from anywhere. Thus, the respondent has failed to prove that the confiscated goods were not smuggled goods. Therefore the forums below have erred in holding that the confiscated goods were not notified and thus do not fall within the purview of Section 2(s) of the Customs Act.

We would now like to discuss the question as to whether the option to pay a fine in lieu of confiscation of goods, in addition to any other penalty, could be given or not. Section 181 of the Customs Act allows an officer passing an order for confiscation of goods to give the owner of the goods an option to pay a fine in lieu of such confiscation. However, according to the first proviso to Section 181 ibid, the Board may by an order specify the goods or class of goods where such option shall not be given. The Board in exercise of the powers conferred by Section 181 has issued SRO No.574 which provides, inter  alia, that “no option shall be given to pay fine in lieu of confiscation in respect of… (i) smuggled goods falling under clause (s) of section 2 of the Customs Act, 1969 (IV of 1969) or (ii) conveyance including packages and containers found carrying offending goods of section 2(s) of the Customs Act, 1969…” Thus, the imposition of redemption fine at 30% by the Collector Customs (Appeals) and 15% by the learned Tribunal is in violation of Section 181 of the Customs Act and SRO No.574 issued thereunder. 9. In the light of the above, this appeal is allowed and the impugned judgments of the learned High Court, the Tribunal and the Collector Customs (Appeals) are set aside, the bench said parting with the judgment.

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