2025 P T D 1562
[Balochistan High Court]
Before Muhammad Najam -ud-Din Mengal and Muhammad Kamran Khan Mulakhail,
JJ
COLLECTOR OF CUSTOMS, through Additional Collector of Customs, MCC
Gawadar, Custom, Gaddani
Versus
Messrs MEHBOOB STEEL PIPE INDUSTRY and another
Special Custom Reference Application No.50 of 2018, decided on 23rd June, 2025.
Customs Act (IV of 1969) ---
----Ss.194- C(4), 98 & 196---Customs Rules, 2001, Rr. 350(4), 350(7), 352(6) & 352(10) ---
Special Custom Reference Application ---Pecuniary jurisdiction of Chairman or other
Member of the Tribunal, authorized by the Chairman, sitting singly and deciding a case ---
Scope ---Dispute over failure of the respondent firm to dispose of or export or pay duties and
taxes of goods within the prescribed 02 years of their in- bonding in contravention of Rr.
350(4) & 352(6) of Customs Rules, 2001(Rules) ---Respondent -firm preferred an appeal
challenging the orders for recovery of surcharge under S. 98 of the Customs Act, 1969, (Act)
read with Rr. 350(7) and 352(6) of Rules for the defaulted warehouse period and for payment
of leviable sales tax on disposal/sale of wastage if not paid already in terms of R. 352(10) of Rules ---Such appeal was disposed of by the Member (Technical -III) sitting singly ---
Contention of the appellant was that in any matter involving customs duties and taxes exceeding five millions rupees a Member of the Appellate Tribunal while sitting singly had no pecuniary jurisdiction to adjudicate upon such matter ---Validity ---Section 194- C(4) of the
Customs Act, 1969 clearly vests jurisdiction in a Single Member only where the amount in dispute is within the limit of Rs.5 million, which is jurisdiction condition precedent and its non- observance renders the proceedings coram non judice ---When a statutory Tribunal acts
in breach of jurisdictional limits prescribed by law, its orders are void and liable to be set aside--- Single Member of the Appellate Tribunal had travelled beyond its access, while
deciding a matter, which exceeded the limit of Rs.5 million, thus, the impugned judgment passed by the Single Member of the Customs Appellate Tribunal was declared to be without lawful authority and of no legal effect and the same was set aside---Special Custom Reference Application was allowed, in circumstances.
Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed 2017 SCMR
152 rel.
Raja Jawad Mehmood for Appellant.
Tariq Asad, Assistant Attorney General.
Imran Iqbal Khan for Respondents.
Date of hearing: 19th May, 2025.
JUDGMENT
MUHAMMAD NAJAM -UD-DIN MENGAL, J: - This judgment disposes of the
Custom Reference No.50 of 2018 filed by the appellant (Collector Customs) under Section 196 of the Customs Act, 1969 against the judgment dated 10th April 2018 ("the impugned judgment") passed by the learned Member (Technical -III), Customs Appellate Tribunal
Bench -III, Karachi ("the Appellate Tribunal") whereby the appeal filed by the respondent
was disposed off with the following observations:
"10 Keeping in view of above it is pertinent that the appellant has exported major
quantity (claimed to have been exported 78% of the input goods) which proves the
bona fide and seriousness of the appellant to export the input goods under the manufacturing bond scheme The appellants have claimed to produce record for wastage. As for penal surcharge I am inclined to hold that the applicant has made all his efforts to export the input goods within the stipulated period allowed under the
manufacturing bond scheme. However on account of exceptional circumstances and
reason beyond their control the appellants could not export 139527 kgs raw material
within the stipulated time. It would therefore be appropriate that the issue of extension of time limit under section 224 of the Customs Act 1969 is remanded back to Federal Board of Revenue for sympathetic consideration. The sales tax on wastage may be verified by the department. Meanwhile no coercive action shall be taken against the appellant till the application under section 224 of the Customs Act, 1969 is finally decided by the Federal Board of Revenue. The appeal is disposed off in these terms with no order as to cost."
2. The relevant facts as narrated in the instant Customs Reference are that the case as
reported by the Superintendent (Bonds), Model Customs Collectorate Gwadar that respondent firm (M/s. Mehboob Steel Pipe Industries, Hub, Balochistan) imported a
consignment, vide ST No. KAPR -ST-2744 dated 23rd June 2012 having description of Prime
Quality Rolled Steel Sheets in Coils Pickled and Oiled with net weight of 461470- kg 136
Coils under Manufacturing Bond Rules notified, vide SRO 450(I)/2001 dated 18th June
2001. The importer submitted postdated cheque amounting to Rs.9,560,000/ - for the amount
of Customs Duty, Sales Tax and Income Tax involved on the goods. As per Sub- Rule (4) of
Rule No.350 of the Warehousing Rules, M/s. Mehboob Steel Pipe Industries were required to
dispose of the goods within two years of their in- bonding. However, respondents company
has failed to either export or pay duty and taxes in time and thus contravened Sub- rule 4 of
Rule 350 and Sub- rule (6) of Rule 352 of Customs Rules, 2001 Notified, vide SRO
450(I)/2001 dated 8th June 2001 as amended, vide SRO 601(I)/2000 dated 28th June 2010, thus, the respondent company was liable to pay duty and taxes of Rs.9,506,552/ - along with
duty and taxes involved on value addition, fine, penalty and surcharge applicable thereon.
3. Besides, it has also been reported that the Federal Board of Revenue (FBR), vide
letter No. 5(4)EP/2015 -35916- R dated March, 2016 regretted request of the importer for
extension of utilization period of imported goods in Manufacturing Bond under SRO 450(I)/2001 dated 18th June 2001 in respect of the goods imported vide GD No. KAPR -ST-
2744. Subsequently, M/s. Mehboob Steel Pipe Industry was directed to ex- bond the under
reference goods, vide letters of even number dated 4th April 2016 and 6th May 2016, but they failed to do so and pay the government duty and taxes. Messrs Mehboob Steel Pipe Industries were required to produce records for audit under Rule 361 of SRO 601 (I)/2010 dated 28th June 2010, vide letter dated 18th February 2016, but they did not produce the record for audit which is the violation of said Rule and Section 26 of the Customs Act, 1969 This act is punishable under subsection (12) of Section 156 of Custom Act, 1969 wherein such person shall be liable to a penalty not exceeding one million rupees and on conviction by a Special Judge shall be liable to imprisonment for a term not exceeding one year or with both. Messrs Mehboob Steel Pipe Industries were required vide Collectorate letter C.No. S1/06/Audit/MFG/Bond/G/2016/8157 dated 25th January 2016 to provide record to Internal Audit, but they did not produce record to Internal Audit. Messrs Mehboob Steel Pipe Industries also did not provide record to Customs Revenue Audit for audit purpose. These acts are punishable under the relevant law and rules.
4. Subsequently, the Collector of Customs (Adjudication), Quetta at Gaddani, vide
Order -in-Original No.60 of 2017 dated 11th May 2017 ordered for recovery of surcharge
under Section 98 of the Customs Act, 1969 read with Rules 350(7) and 352(6) of Customs Rules, 2001 for the defaulted warehousing period of 1405 days. It was also ordered for
payment of leviable sales tax on disposal/sale of 31,872 Kgs of wastage if not paid already,
in terms of Rule 352(10) of the Customs Rules, 2001, vide Notified SRO 450(I)/2001 dated 8th June 2001. Being aggrieved, the respondent No.1 filed appeal before the learned Appellate Tribunal, which was disposed of with the observations mentioned hereinabove in the Para No.1, vide impugned judgment dated 10th April 2018. Whereafter, the instant Custom Reference has been filed.
5. Learned counsel for the petitioner, at the very outset, contended that the Single
Member of the learned appellate tribunal has passed the impugned judgment has travelled
beyond his excess and powers; that the learned counsel mainly relied upon the provisions of Section 194 -C (4) of the Customs Act, 1969 and argued that learned Member (Technical -III),
sitting singularly, has no jurisdiction to proceed with the matter above then five million; he finally urged for setting aside the impugned judgment dated 10th April 2018 by remanding
the case to the learned Divisional Bench of appellate tribunal for decision afresh strictly in
accordance with prevailing law.
6. Learned counsel for the respondent vehemently controverted the arguments so
advanced by the learned counsel for the petitioner and contented that the impugned judgment
passed by the learned appellate tribunal is well reasoning and does not open for interference by this Court.
7. We have heard learned counsel for the parties and have gone through the record. The
principal contention raised by learned counsel for the petitioner is that the learned Single Member of the Tribunal lacked pecuniary jurisdiction to decide the matter, in view of Section 194 -C(4) of the Customs Act, 1969, which explicitly bars a Single Member from
adjudicating upon any matter involving customs duties and taxes exceeding Rs. 5,000,000. It is not disputed that the amount of duty and taxes involved in the instant matter exceeds five million rupees, which is above the statutory threshold prescribed for jurisdiction of a Single Member Bench. The provisions of the Section 194- C(4) of the Customs Act, 1969 provides
as under:
"194 -C(4) the Chairman or any other member of the Tribunal authorized in this behalf
by the Chairman may, sitting singly, dispose of any case which has been allotted to
the Bench of which he is a member, where, --
(a) the value of the goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of confiscation under section 181; or
(b) in any disputed case, the difference in duty or tax involved, or the amount of fine or penalty involved does not exceed five million rupees."
8. The bare perusal of the above provision of the Section 194 -(C) 4 clearly vests
jurisdiction in a Single Member only where the amount in dispute is within the limit of Rs. 5 million. It is a jurisdictional condition precedent, and its non- observance renders the
proceedings coram non judice. Admittedly, the Hon'ble Supreme Court of Pakistan has consistently held that when a statutory tribunal acts in breach of jurisdictional limits prescribed by law, its orders are void and liable to be set aside. Reliance in this regard is placed on the case titled as "Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed" (2017 SCMR 152), for facilitation the relevant portion whereof is reproduced as under:
"Adverting to section 194- C of the Act, it is pertinent to mention at the very outset
that subsection (3) thereof was amended by the Finance Act, 2009 (which received the Presidential assent on 30.6.2009) after the impugned order was passed. Therefore, the instant case will be decided on the basis of the relevant law in force at that point in time which reads as follows: -
"194 -C Procedure of Appellate Tribunal.---(1) The powers and functions of the
Appellate Tribunal may be exercised and discharged by Benches constituted by the Chairman from amongst the members thereof.
(2) Subject to the provisions contained in subsections (3) and (4), a Bench shall consist of one judicial member and one technical member.
(3) Every appeal against a decision or order deciding a case involving duty, tax, penalty or fine exceeding five million rupees shall be heard by a Special Bench constituted by the Chairman for hearing such appeals and such Bench shall consist of not less than two members and shall include at least one judicial member and one technical member:
Provided that the Chairman may, for reasons to be recorded in writing, constitute
Benches including special Benches consisting of
(a) two or more technical members; or
(b) two or more judicial members:
Provided further that any Bench referred to in clause (a) shall not hear the matters
involving questions of law.1 (sic)
(3A) Notwithstanding anything contained in subsections (2) and (3), the Chairman may constitute as many Benches consisting of a single member as he may deem necessary to hear such cases or class of cases as e Federal Government may, by order in writing, specify.
(4) The Chairman or any other member of the Appellate Tribunal authorised, in this behalf by the Chairman may, sitting singly, dispose of any case which has been allotted to the bench of which he is a member where -
(a) the value of the goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of confiscation under section 181; or
(b) [* * *]
(c) in any disputed case, the difference in duty or tax involved or the duty or tax
involved, or the amount of fine or penalty involved does not exceed five million
rupees.
(5) .......................................................
(6) .......................................................
(7) .......................................................
Section 194 -C(1) of the Act empowers the Chairman to constitute, from amongst the
judicial and technical members, Benches which are to exercise and discharge the functions of the Tribunal. Section 194- C(2) of the Act provides that the Benches
constituted by the Chairman are to consist of one judicial and one technical member, subject to subsections (3) and (4) of section 194- C. According to section 194- C(3) a
Special Bench, consisting of at least two members of which one must be a judicial and the other a technical member, shall hear appeals against decisions or orders involving duty, tax, penalty or fine exceeding five million rupees. However the proviso to subsection (3) stipulates that such Special Benches may consist of two or more technical or judicial members, the constitution of which (Bench) must be done by the Chairman with written reasons for doing so. Further, the second proviso to subsection (3) (which existed at the time of the impugned judgment) states that if a Special Bench constituted under such subsection consists of at least two technical members it shall not decide matters involving questions of law. Section 194- C(3A)
then provides that in spite of subsections (2) and (3), the Chairman may constitute Benches consisting of a single member to hear such cases or class of cases as the Federal Government may, by order in writing, specify. Finally, as per section 194-C(4) the Chairman or any other member of the Tribunal authorized by the Chairman may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a member, where the value of the goods confiscated without an option having been given to the owner of the goods to pay a fine in lieu of confiscation under section 181 does not exceed five million rupees or in any disputed case, the difference in duty or tax, the duty or tax, or the amount of fine or penalty involved does not exceed five million rupees. In light of the above, there appears to be three types of Benches of the Tribunal that can decide appeals under Section 194- A of the Act: -
(a) A Bench of two members, one judicial and one technical, constituted under section 194- C(2) of the Act;
(b) A Special Bench of at least two members constituted under section 194- C(3) of
the Act to decide every appeal against decisions or orders involving duty, tax, penalty or fine exceeding five million rupees. Such Benches may however consist of two more technical or judicial members if the Chairman so orders in writing [clauses (a) and (b) respectively of section 194- C(2) of the Act];
(c) A Single Member Bench constituted under section 194- C(3A) of the Act to hear
cases or a class of cases as specified by the Federal Government in writing.
Section 194- C(4) provides for an exception, where the Chairman or any other member
of the Tribunal authorized by the Chairman, may sit singly and decide a case which
has been allotted to the Bench of which he is a member. The pre -requisite for this is
that such member (or Chairman) must already be a member of a Bench constituted by the Chairman under subsection (2) and the case must have been allotted to such Bench. But such member (or Chairman) can only decide such cases sitting singly where: (a) the value of the goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of confiscation under section 181 does not exceed five million rupees; or (b) in any disputed case, the difference in duty or tax or the duty or tax involved or the amount of fine or penalty involved does not exceed five million rupees.
6. We would like to observe at this stage that the phrase "any case which has been allotted to the bench of which he is a member" appearing in section 194- C(4) of the
Act is of immense importance which clearly suggests that there must have existed a Bench constituted under section 194- C(2) of the Act consisting of two members (or
Chairman and a member), out of which the Chairman or a member authorised by the Chairman, may sit singly and dispose of a case already allotted to such Bench. To hold otherwise would be to render the aforesaid phrase redundant and superfluous. This is precisely why subsection (2) of section 194- C has been made subject to
subsection (4), the latter of which purports to create an exception to the former. Further, such decision by the Chairman to allow himself or any other member of a Bench to sit singly to dispose of cases falling within the ambit of section 194- C(4)
should not be as a matter of course or right, rather should be done upon proper
application of mind by the Chairman who shall himself make such decision, and not delegate it to any other officer to undertake as an administrative action. The Chairman is obliged to examine the circumstances warranting the decision of letting him or another member of a Bench to dispose of a matter sitting singly before taking such step. This is precisely what has been held by the learned Lahore High Court in the case of Bagh Ali (supra) as relied upon by the learned counsel which to our mind is good law."
9. In view of the above dictum laid down by the Hon'ble apex Court and the above
proviso made it crystal clear that the Single Member of the appellate tribunal has travelled beyond its access, while deciding a matter, which exceeds the limit of Rs.5 million, as such, the impugned judgment suffers from mis -reading, non- reading and misappreciation of law,
and in our view the impugned findings of the appellate tribunal are also suffering from legal defect.
For the foregoing reasons, the impugned judgment dated 10th April 2018 passed by
the learned Single Member Technical -III, Karachi of the Customs Appellate Tribunal is
declared to be without lawful authority and of no legal effect, the same is accordingly set aside and the matter is remanded to the Tribunal with direction to place it before a Division Bench, constituted in accordance with law, for decision afresh.
The Tribunal is expected to decide the matter expeditiously and preferably within
sixty (60) days from the date of receipt of this judgment.
SA/78/Bal. Case remanded.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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