MARINE SERVICES (PRIVATE) LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 903 KARACHI-HIGH-COURT-SINDH

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MARINE SERVICES (PRIVATE) LIMITED VS FEDERAL BOARD OF REVENUE Ss.26-a & 207---Customs Rules, 2001, R. 657---Income Tax Ordinance (XLIX of 2001), S. 177---audit notice, issuance of---Jurisdiction---Directorate of Post Clearance audit---Powers---Shipping agents, role of---Scope---Petitioners (shipping agents) assailed legality of audit notices issued by the assistant Director-Directorate of Post Clearance audit seeking information from them---Validity---In international trade, the role of a shipping agent in the transportation of cargo is well defined; as is well understood the carrier simply carries the goods on board a vessel on behalf of the Shipper and for the benefit of the Consignee and broadly speaking the role of the carrier is limited to the release the goods into the hands of the person nominated as the Consignee in the Bill of Lading or the House Bill of Lading---a Shipping agent, acting as an agent of the carrier, therefore, simply assists the Master of the Vessel in terms of services such as port and terminal liaison, port entry and clearance, berth arrangements and crew services, limiting his role in terms of the cargo to the submissions of bills of lading, port documentation and paper work and occasionally to cargo surveys---Thus, summarily, the shipping agent has no responsibility or liability whatsoever in respect of the payment of customs duties---There being no liability to any customs authorities regarding the payment of customs duties, the regulation of Shipping agents by the Director-Directorate of Post Clearance audit (Respondent/ Director) would, therefore, not be in terms of ascertaining any duties paid by the shipping agent but rather in the performance of its duties and obligations to the carrier, the release of the goods to the consignee and its statutory obligations to port authorities---Undisputedly, under S. 207 of the Customs act, 1969 read with R. 657 of the Customs Rules, 2001, the Director / respondent has the power to license each of the petitioners and such regulatory power is limited to "the transaction of any business relating to the entrance or departure of any conveyance or any customs clearance related activity or the import or export of goods or baggage at any customs-station" ('the regulatory powers')---In the present case, notices issued by the assistant Director-Directorate of Post Clearance audit (assistant Director (respondent) clarified that the information being demanded was in respect of the amount of freight charges collected, charges other than freight that were being collected, the gross income of the shipping agent and the amount of money remitted abroad by the shipping agent---Thus, the amount of money being remitted by the shipping agent abroad had no connection with any the regulatory powers and was, therefore, information that went well beyond the regulatory powers of the Director / respondent and the assistant-Director / respondent and was actually within the regulatory domain of the State Bank of Pakistan---Regarding all the other information demanded, the information being requested, while connected with the regulatory powers did not involve the payment of any duty to the respondent / Director or the respondent / assistant-Director and rather would be related to the income earned by the shipping agent bringing it within the purview of S. 177 of the Income Tax Ordinance, 2001 and not under S. 26a of the Customs act, 1969 as such an audit would not be to verify "the correctness of any declaration or document or statement, for determining the liability of any person for duty, taxes, fees, surcharge, fines and penalties"---assistant -Director (respondent) had, in each of the notices, failed to mention as to how the information sought was required to ensure compliance of "laws administered by customs" inasmuch as the Director (respondent) had failed to mention the nexus as between the information being requested and the laws which they were purportedly ensuring compliance of by the issuance of each of the notices---Thus, for the Director (respondent) to be able to demand such information under the provisions of S. 26a of the Customs act, 1969 would mandatorily require the respondent / assistant Director to mention in the audit notice the law of which compliance the respondent /assistant Director was attempting to ensure and the nexus as between that law and the information being sought---Each of the audit notices failed to state this and, therefore, it was an act in excess of the jurisdiction of the respondent / Director under S. 26a of the Customs act, 1969 and hence rendered each of the audit notices nothing more than a roving inquiry which was obviously premised in mala fide and could not be sustained---High Court set-aside impugned audit notices being arbitrary, illegal and void---Constitutional petitions, filed by shipping agents, were allowed.

MARINE SERVICES (PRIVATE) LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 903 KARACHI-HIGH-COURT-SINDH

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