The Supreme Court has ruled that proceedings under Section 32 of the Customs Act, 1969 cannot be initiated unless the Customs Department establishes deliberate misdeclaration, false documentation or fraud. The Court further held that where a dispute relates merely to the interpretation of law, a show-cause notice issued after the prescribed limitation period is legally ineffective.
According to detailed written judgments, a three-member bench comprising Chief Justice Yahya Afridi, Justice Muhammad Shafi Siddiqui and Justice Mian Gul Hassan Aurangzeb decided two separate customs-related cases.
In the first case, the Directorate of Post Clearance Audit, Customs House Lahore, had challenged a Lahore High Court judgment. The Customs Department alleged that duty and tax had been evaded through the import of silk fabric between 2010 and 2012. The Supreme Court, however, held that merely establishing that the declared value of imported goods was lower than that of other consignments was insufficient to invoke Section 32 of the Customs Act. The Court observed that the department had failed to prove that the importer had intentionally made a false declaration, submitted false statements or relied on forged documents.
The Court held that the findings of the Customs Appellate Tribunal and the Lahore High Court were based on evidence and were in accordance with law. As no legal or judicial error had been identified in those findings, the Court dismissed the Customs Department’s appeal.
In the second case, Pakistan State Oil (PSO) challenged a judgment of the Sindh High Court relating to customs duty exemption on the supply of high-speed diesel to Pakistan Navy vessels and the limitation period for issuing a show-cause notice.
The Supreme Court observed that the show-cause notice issued to PSO contained no allegation of fraud, forgery, concealment of facts or deliberate misrepresentation. Instead, the dispute related solely to the legal interpretation of Section 106 of the Customs Act and was therefore governed by Section 32(3) of the Act. The Court held that under the law applicable in 1999, a show-cause notice in such cases had to be issued within six months. However, the notice served on PSO was issued approximately two and a half years later, rendering it time-barred and legally ineffective.
Allowing PSO’s appeal, the Supreme Court set aside the judgments of the Sindh High Court, the Customs Appellate Tribunal and the original adjudication order. It also declared the show-cause notice dated June 26, 2002, to be without legal effect and struck it down.