The Federal Tax Ombudsman, former Justice Munir A Sheikh has ruled that Customs Department cannot auction confiscated goods during the pendency of appeal.
He gave this ruling while deciding a complaint of Khyber Tea & Food Co, Peshawar, a copy of which was made available to Business Recorder here on Wednesday.
The facts of the case are that the Khyber Tea Company filed a complaint with the FTO against the alleged unlawful seizure of 1800-kg black tea and the FTO in his order dated January 28, 2003 recommended that the order of the Deputy Collector (Adjudication) which confirmed the seizure of the said goods be cancelled and consequential order be passed.
The case was once again adjudicated by the DC and he again ordered the confiscation of the goods and the complainant filed an appeal before the Collector (Appeal), Peshawar, who accepted the appeal and ordered "unconditional release of the confiscated tea to its rightful owner."
The Customs department went into appeal before the Tribunal which was rejected and the department went before the Peshawar High Court and the Court dismissed the department's appeal, as no point of law was involved in the appeal.
According to the findings of the FTO, while the legality of the confiscation of the goods was being agitated by the complainant, the Customs department auctioned the said goods on 29-10-02. 28.5 percent below the reserved price and a refund amounting to Rs 153,153 was paid to the complainant on 28.4.2005.
The complainant was not satisfied with the amount paid to him and contended that the actual worth of the goods was Rs 330,476 and accused that Customs department auctioned the goods with ulterior motives and mala fide intentions at a price which was much less than their actual worth. It was prayed that the Customs authorities be directed to pay the difference between the amount refunded and the actual worth of the goods.
In his written reply, the DC Customs submitted that since the goods could not fetch the reserved price fixed at Rs 199 per kilogram in the open public auction, therefore the highest bid which was 28.5 percent below the reserved price was accepted by the competent authority.
During the hearing, the complainant stated that the entire proceedings of auction were done with the ulterior motive of providing benefit to some favoured person since he had filed an application before DC Adjudication on 15-07-2002 requesting the release of the seized tea on supurdari basis against furnishing of a bank guarantee which remained unanswered.
The complainant further argued that the Custom department auctioned his seized tea on 29.10.2002 without informing him under the law, knowing that he had already filed an appeal before the Collector, and the case was still subjudice.
Explaining the position of the Customs department, the respondent stated that all the procedures prescribed under the law were followed faithfully and furthermore, there was no choice but to auction the tea because it was a perishable item.
He further submitted that notice of auction was duly published in the newspapers, though no specific notice was given to the complainant and that the price fetched in auction was the real market value at that point of time, which had been duly refunded to the complainant.
In his ruling the FTO said that there was no doubt that the claim of the Customs department that the tea was smuggled had been rejected by all forums but the Customs authorities neither paid any heed to the recommendations by FTO office and did not implement the orders of the Collector (Appeals) and the Customs Tribunal and took 7 months after the decision of the honourable Peshawar High Court to refund the amount.
The FTO observed that what was most disturbing was that the auction was conducted when the matter was still subjudice while following dictates of natural justice, the Customs authorities ought to have given due notice to the complainant before undertaking the public auction since publication of advertisement in the newspapers was not sufficient.
The FTO did not accept argument of the Customs department that no notice was legally required to be served on the complainant in the case of auction of confiscated goods for ownership in them had vested in the federal government with the passing of order of confiscation as such it could deal with the goods in any manner as any other owner could do.
The ruling said that the argument as presented though appears to be attractive but was found to have no force on close scrutiny of law and circumstances of the case discussed earlier. Since the order of Adjudication Officer can be appealed against therefore the vesting of ownership in the goods was neither absolute nor final, but was dependent on the order to be passed in appeal," the FTO observed.
He said that in this case the auction was made when appeal was pending and the concerned persons were aware of its pendency.
"Even if under Section 201 technically speaking notice was not required to be served on the owner regarding auction of confiscated goods but the fact remains that the applicability of the principle of natural justice having not been excluded by law as held by the Superior Courts therefore the same required that the person whose rights were likely to be adversely affected must be given notice of intended action so that he could defend his rights" he stated.
The FTO pointed out that in this case not only that the goods were auctioned during the pendency of appeal before the appellate forum against the order of adjudication officer of confiscation of goods but it ultimately succeeded and the department failed even up to the level of High Court. "Further the application filed by the Importer/Complainant initially before the adjudication officer that the goods may be released on Spurdari to him on furnishing of bank guarantee was not attended to and decided, as no decision thereon was conveyed," he added.
The ruling said that the goods were put to auction hastily and the conduct of the departmental authorities in this regard was also not above board as it lacked bona fide intention, whereas the effect of order in appeal as upheld by the High Court was that the complainant was held and treated to continue to be the owner of goods.
The FTO said that the department could not claim premium over its illegal act of auction of goods, during pendency of appeal and as consequence of appellate order the complainant legally became entitled to the restitution of goods or its full value in terms of money. After examining the relevant sales vouchers on the date of seizure of goods, the FTO found it a fit case for award of compensation and fixed the value of 1800-kg tea at Rs 3,20,850 and after deducting the amount already refunded, ordered Customs Department to pay a compensation of Rs 167,697 due to the complainant.
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