Compliance may be adequately defined as conformity of behaviour with legal norms. In fact concept of “compliance” depends upon understandings of the relations of law, behaviour, objectives, and justice. These relations are of central importance to the real-world problems with which lawyers are habitually concerned.
A reasonable degree of conformity between the rules and actual behaviour is necessary to an efficacious legal system, so that recurrent and widespread non-conformity with rules would usually call into question the existence of law.
Where a monitoring or supervisory body exists or where the decisions confer particular benefits on other actors who perform monitoring functions, the dearth of good empirical studies of correspondence between state behaviour and legal rules and decisions is a serious obstacle to adequate understanding and evaluation of the legal system. In this background this write up examines the role of audit and investigations under the Customs Regulations.
In the customs department, a post-clearance audit organisation (PCA) has been created pursuant to the provision of the Customs Act, 1969.1 The officers of the said organisation have been conferred powers under specified sections of the Customs Act, 1969.2 The purpose is to oversee compliance of Customs regulations through audit and investigations.
An authorised officer of the said organization can accordingly carry out audit or investigations and can call for relevant documents from the concerned importer or other related persons, as the case may be where he feels that norms of customs have not been properly applied.
The officers of the PCA have accordingly been conferred powers to re-open the decided cases where they found non-compliance of regulations. For example, a Director of PCA has been given powers under section 195 of the Customs Act, meaning thereby that an assessment order already made can be re-opened by him on the charge of illegality and impropriety, that is, where the provision of law have been flouted or untrue statement with regard to an affairs of customs have been made. The officers of PCA can take appropriate action within the framework of law.3
A good example of such a situation can be where an assessing officer did assess duties on the basis of untrue statement, false declaration, inadvertence or error or where the due duty had either escaped attention or had been short levied; in such a case a Director of PCA can exercise the powers conferred on the Collector to re-open the matters of assessment where necessary,4 meaning thereby that an existing assessment of goods can be re-opened in order to make correct assessment and to recover the short levied or escaped amount of duties and taxes but that too if the proceedings are initiated within the prescribed limits.5
It may be noted that where such powers have been given under the law, checks and balances have also been provided under the law which become ipso faclo applicable, that is, all the actions are to be initiated within the time frame given under the law and all the limitations and restrictions provided in the legal provisions are to be followed.6
In order to comprehend the restrictions and limitations, obviously one has to study the relevant provisions of law to find out the nature of authority and its limits. The general principles applicable to adjudications and decision making however do apply in such proceedings. An officer thus while exercising the conferred or delegated powers under the Customs Act, 1969 has to consider whether or not contemplated action is
i. Within the time frame prescribed for such action;
ii. Falls within the parameters of contravening section, that is, if section 32 is being applied, does there exist any untrue statement, falsified documents, or a refusal to provide required information?7
iii. While issuing a cause notice, the authority must specify the exact nature of contravening act and the relevant provisions of law under which the contravening act constitutes an offence.8
iv. The limitation period has to be applied and followed strictly since where an action has become barred by time; no penal action can be initiated.
One has to be careful as the provisions relating to audit and investigation cannot be invoked to initiate a roving inquiry.9
The superior courts have time and again emphasised that the authorities must determine whether or not an illegality or impropriety exists along with legal authority to seize the matter that is the authorities have the necessary jurisdiction to take cognisance of the matter.
It has often been noticed that the exercise of powers to investigate are abused to coerce the tax payers to make payment of taxes which are not due, such exercise of power is not warranted by law as the juris principles say that what is not due to the crown must not be recovered from the subject. It may be remembered that a state is a noble litigant, therefore; it must adhere to the principles of equity and justice.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi)
1. See the provisions of Section 3 DDD of the Customs Act, 1969.
2. See the provisions of Section 3 E of the Customs Act, 1969 read with SRO 500(I)/2009 dated 13-06-2009.
3. See the provisions of Section 32 of the Customs Act, 1969.
4. See the provisions of Section 195 of the Customs Act, 1969.
5. As per law cases can be re-opened within a period of 2 years.
6. As per the existing provisions of law an appropriate officer can re-open the case for the purpose of satisfying itself as to the legality and propriety of the decision or order.
8. See the Khyber Lamp case 2001 SCMR 838
9. AD Customs Intelligence v. AB Harman PLD 1995 SC 485Zafar Azeem, "Reopening of cases by customs post-clearance audit system," Business Recorder. 2016-03-03.
Keywords: Economics , Legal ethics , Customs administration , Tax evasion , Tax auditing , Customs Act , PLD , SCMR , SRO , DDD , PCA