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Petitioner: IBRAHIM FIBRES LTD. through General Manager (Imports) VS Respondent: COLLECTOR OF JUDGMENT
Court Name: Sindh High Court Judge(s): Muharram G. Baloch Title:IBRAHIM FIBRES LTD. through General Manager (Imports) vs COLLECTOR OF
JUDGMENT
Reported As: 2009 PTD 1902 Result: Suit decreed Judgment JUDGMENT ' MUHARREM G. BALOCH, J.---Plaintiff above named has filed this suit for declaration, mandatory and permanent injunction with following prayers:- (I) Declare that the impugned S.R.O. 439(1)/2001, dated 18-6-2001 and Chapter 99(VII) under H.S.C. Code 9907.0060 containing rate of duty 10% ad valorem in respect of plaintiff's consignment being imported under L.C. No.101/912236/786/2000 are unconstitutional, illegal, void ab initio, in complete violation of section 6 of Protection of Economic Reforms Act (XII of 1991), and contrary to law and of no legal effect and issued in complete violation of Article 77 of the Constitution of Islamic Republic of Pakistan. (II) Declare that the plaintiff acquired vested' rights in terms of S.R.0.369(I)/2000, dated 17-6-2000 as amended vide S.R.O. (sic)(I)/2001, dated 29-1-2001 read with section 6 of the Protection of Economic Reforms Act (XII of 1992). (III) Mandatory injunction suspended the operation of impugned notification S. R. 0. 439(I)/2001, dated 18-6-2001 and Chapter 99(VII) of Finance Ordinance, 2001 in respect of plaintiff's letter of Credit No. 101/912236/786/2000. (IV) Permanent injunction restraining the defendants, specially defendant No.1 or their employees, agents, servants, or any other person(s) acting for and on their behalf from making any demand enforcement of the impugned notification S.R.O. 439(1)/2001, dated 18-6-2001 and Chapter 99(VII) of Protection of Economic Reforms Act (XII of 1992) by way of Finance Ordinance, 2001 and/or from taking any adverse action or action direct or indirect for recovery of the said amount.
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(V) Declare that the plaintiff's remaining consignments in respect of contract, dated 16-3-2000 and made effective on 8-8-2000 shall be liable to be cleared in terms of its first shipment bearing Bill of Entry-Cash No.F-344, dated 15-5-2001. IGM No.804/2001, dated 15-5-2001 be cleared for the same terms and conditions. ' Without Prejudice to the foregoing in addition and/or in the alternative. (VI) Direct the defendant No.1 to immediately release the plaintiff's consignment strictly in terms of section 6 of the Protection of Economic Reforms Act (XII of 1992) read with S.R.O.369(I)/ 2000, dated 17-6-2000 as amended by S.R.0.(sic)(I)/2001, dated 29-1-2001 in line with Letter of Credit No.101/ 912236/786/ 2000 all the consignment be cleared. (VII) Grant such other relief(s) which this Hon'ble Court may deem fit and proper in the circumstances of the case. (VIII) Cost of the suit. 2. Precisely, the facts of the present suit are that the plaintiff is a fibre manufacturing unit located at Shah Kot Tehseel Jarranwala, District Faisalabad engaged in the business of manufacturing textile products. It is pleaded by the plaintiff that the plaintiff has earned a good reputation in the polyester fibre manufacturing sector and in this regard earned various meritorious certificates and the unit of the plaintiff is working 24 hours a day and providing jobs to the hundreds of workers resulting contribution to its drive against unemployment. He further pleaded that the plaintiff being a taxpayer is entitled for natural justice. It is the case of the plaintiff that the plaintiff company was established to set up polyester staple fibre unit with estimated cost of the project was Rs.3 billions with 57% foreign investment. The daily production capacity of the project is 200 tons with the result the plaintiff's project saved foreign exchange of Pakistan in the imports of polyester fibre. To achieve this object, certain reliefs by way of concessions and exemptions from the duties are granted from time to time by the Federal Government i.e. Defendant No.2. 3. The plaintiff in order to avail the said incentives took major steps such as purchasing land, erecting building and importing the requisite machinery and mill works for production of polyester staple fibre the said plant and machinery was imported for installation in rural areas which is exempted from all duties and taxes in terms of S.R.O.484(I)/92 issued on 14-5-1992. The said S.R.O. Is in furtherance of economic policies announced by the Government of Pakistan for promotion of industrialization in the country. It is the case of the plaintiff that since S.R.O.484(I)/92 was issued after 7-2-1990, it could not have been altered or changed to the manifest, disadvantage and vested rights and specially in the case of the plaintiff under Protection of Economic Reforms Act, 1992 (Act XII of 1992). 4. In terms of S.R.O.484(I)/92 the plaintiff's mill being admittedly in rural area is exempted from all custom duties on import of machinery for installation in the industry. The plaintiff in this regard has imported complete polyester staple fibre manufacturing plant in the year, 1995 under L/C No.FSD/07/94. The plant was imported in several shipments, the plaintiff claimed the benefit of S.R.O.484(I)/92 read with Customs General Order No.12 of 1981 read with S.R.0.569(0/95 and accordingly the exemption from customs duty and sales tax was granted under S.R.0.978(0/95 and S.R.0.569(0/95. The defendants treated the plant and machinery as a unit locally manufactured. As mentioned above the plaintiff filed Bill of Entry for the import of complete polyester staple fibre plant on 21:6-1995 and claimed exemption. 5. The plaintiff's plant is installed in rural area, therefore, the defendant No.2 by its various industrial policies, introduced number' of rural industrial scheme by their industrial policy Circular No.6(12)/90-P, dated 4-6-1990, 31-7-1990, 17-12-1990 and 5-1-1991 whereby the industrialists were offered various tax holidays. ' The plaintiff's plant comprises of complete polymerization unit spinning, drawing, utilities air conditioning, chilling etc., along with other polyester manufacturing line and the plaintiff in
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continuation to their earlier import in the year 1995 are importing for the purpose of expansion a complete plant in CKD condition. The plant is of origin of German technology which is fully computerized not at all being manufactured locally .As admitted1y the plant is being controlled by computer. The plaintiff has imported the parts of the plant given in the Bill of entry", dated 10-5- 2001 under IGM No.804/2001, dated 15-5-2001 for expansion of the above mentioned unit. The plaintiff further pleaded that complete plant will be shipped in part shipments along with all accessories and parts. However, for the present controversy first shipment has already arrived on 15-5-2001 accordingly bill of entry filed vide Machine No.KAPR HC-102468, dated 10-5-2001, the plaintiff in continuation to their original plant based in 1995 claiming benefit of S.R.0.369(0/2000, dated 17-6-2000 as amended, S.R.O. (sic)(I)/2001, dated 29-1-2001, S.R.O. 987(I)/99, dated 30-8- 1999 and Customs General Order No. 12 of 1981, Customs General Order No. 12 of 1981 has not been rescinded and is still operative S.R.O.'s 369(0/2000. S.R.O. (sic)(I)/2001 and S.R.0.987(1) all are under the scope and ambit of this Customs General Order and its concessionary terms apply in toto at all plant expansion being undertaken. Accordingly partial consignment was cleared, duty was exempted on 15-5-2001 and the benefit of S.R.0.369(1)/2000, dated 17-6-2000 as amended by S.R.O. (sic)(I)/ 2001, dated 29-1-2001 was given. The defendant No. l's officers very minutely and thoroughly examined and physically verified the consignment in this regard different appraisers appraised the consignment and put on their own different notings on the reverse side of the bill of entry. It is the case of the plaintiff that all of a sudden the defendant No. 2 through Finance Ordinance,.2001 for the year beginning from the first day of July, 2001 amended through section 4 of the said Ordinance, Customs Act, 1969 and by way of subsection (9) of section 4 of the Finance Ordinance, 2001, the First Schedule has been substituted and additional chapter 99 has been introduced. Initially the plaintiff's consignment was cleared/assessed in terms of S.R.O.369(I)/2000, dated 17-6-2000 as amended by S.R.O.(sic)(I)/2001. In the said Chapter 99 sub-chapter (VII) under heading project imports the consignment of the plaintiff shall also fall in new H.S. Code i.e. 9907.0060 as well as P.C.T. Heading i.e. 8444.000 which are subject to 10% ad valorem. Not only this, on 18-6-2001 defendant No.1 also issued an S.R.O.439(I)/2001 and suppressed its earlier notificationS.R.0.369(1)/2000, dated 17-6- 2000 by way of which value added industries specified in column (2) of table (II) shall be exempted from so much of the customs duties leviable under the First Schedule to the said Act as are in excess of 5% ad-valorem, the cumulative effect of both the said laws definitely affects the plaintiffs vested rights which have already accrued to them in view of S.R.O. 369(I)/2000, dated 17-6-2000 as amended by S.R.0.(sic)(I)/2001, dated 29-1-2001. It is the case of the plaintiff that in sub-chapter (VII) of Finance Ordinance, 2001 under the heading project imports read with note 2 clearly supported the case of the plaintiff that neither sub-Chapter VII of Chapter 99 nor new S.R.O.439(I)/2001 affected the plaintiff's vested rights. The said notes 1 and 2 are reproduced as under:-- (1) Goods covered by this sub-chapter include the machinery and equipment meant for setting up of a complete plant. Any machine meant for balancing modernization, replacement or expansion of existing plant is excluded. (2) At the time of arrival of first partial shipment of the plant, the importer shall furnish complete details of the whole machinery, equipment and component parts required for the plant, duly supported by the contract and layout plan and drawings. (7) According to the plaintiff bare perusal of the above said notings clearly stipulates that the plaintiff's remaining partial shipments which are in continuation with their earlier consignment/ machinery are clearly excluded from the operation of chapter 99 by way of Finance Ordinance, 2001 as well as S.R.O. 439(1)/ 2001 both, dated 18-6-2001.
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(8) The plaintiff in order to avail the abovesaid benefit in continuation of their first Bill of Entry bearing IGM No.804/ 2001, dated 15-5-2001, filed in advance, Bill of Entry in terms of section 79(2) and claimed exemption as guaranteed in S.R.0.369(1)/2000, dated 17-6-2000 as amended by S.R.0. (sic)(1)/2001, dated 29-1-2001 read with C.G.O. 12/81 and further read with Chapter 99(VII) under the heading project imports notes 1 and 2. But to the surprise of the plaintiff, the officers of the defendant No.1 refused to extend benefit and refused to clear the consignment.In terms of first bill of Entry No. KAPRH-H.C. 102468, dated 10-5-2001. 9. The plaintiff further pleaded that as mentioned above all of sudden in pursuance of Proclamation of Emergency of 14-10-1999 and the Provisional Constitution Order No.1/99 read with Provisional Constitution (Amendment) Order No.9 of 1999 and in exercise of power's enabling him in that behalf of the President of the Islamic Republic of Pakistan promulgated the Finance Ordinance which shall come into force at once except the provision of sections 3 and 5, which shall come into force on 1-7-2001 and by notification respectively amended certain laws which have already been 'mentioned. Along with said Ordinance is already mentioned by merely an executive act further notification S.R.O. No.439(I)/2001, dated 18-6-2001 carrying the same date was introduced which superseded S.R.O.No.369(I)/2001, dated 17-6-2000 as amended by S.R.O. (sic)(I)/2001, dated 29-1- 2001. It is the case of the plaintiff that being well-settled principle by the superior Courts that a tax or duty can only be imposed under the authority of an Act of Parliament in view of Article 77 of the 1973 Constitution. This being an essentially legislative power cannot be delegated to a subordinate authority empowering it to levy the tax or duty. There is, however, no objection in delegating exemption. There is much difference in "taxability" or `Liability" and its payability. The taxability or liability is created by the legislator .While payability follows to be enforced by the executive authority after quantification. The exemption concerned not the liability but only the payability which means that though an assessee is liable to pay, he can be excused payment on account of a power conferred on the subordinate legislature authority. In the present case, it is a settled rule that an executive authority cannot in exercise of the rule making power or the power to amend, to vary or rescind an earlier order, take away the rights vested in the citizen by law. If a person had acquired a vested right of non-taxability, hence the vested right could not therefore be taken away by an executive action. It is further pleaded by the plaintiff that while issuing Finance Ordinance, 2001 and S.R.O. 439(1)/2001 the defendants completely ignored section 6 of the Protection of Economic Reforms Act (XII of 1992). Section 6 clearly shows that fiscal incentives for investment provided by the Government to the statutory orders listed for the schedule or otherwise notified shall continue in force for the terms specified therein and shall not be altered to the disadvantages of the investors. Notification No. S.R.O.369(I)/ 2000, dated 17-6-2000 as amended by S.R.O. (sic) (I)/2001, dated 29-1-2001 clearly proves the fact that the defendant No.2 extended statutory commitment/promises to the plaintiff of the said notification. The effect of the aforesaid notification that on satisfaction of certain conditions laid down therein the exemption from whole of customs duty; taxes, charges was to be enjoyed by a certain category approved industrial categories mentioned in the schedule appended thereto. The Executive Authority of the Federation in the exercise of its delegated power under section 19 of the Customs Act, 1969 could not withdraw, suppress and rescind the exemption to the disadvantage of the beneficiaries. The plaintiff thus pleads that in this context and the impact of section 6 of the Protection of Economic Reforms Act, (XII of 1992) clear enough and suffered from no ambiguity, therefore, exemption granted under notification No. S.R.O. 369(I)/2000, dated 17-6-2000 further amended by S.R.O. (sic)(I)/2001, dated 29-1-2001 read with C.G.O. No.12/81 could not be altered, rescinded, suppressed to the disadvantage of the beneficiary/plaintiff as admittedly the plaintiff already fulfilled all the conditions under the said notification which can be borne opt from the fact that there is first consignment cleared' without any objection. The plaintiff further pleaded that in terms of section 21
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of the General Clauses Act vested rights created by statutes cannot be taken away arbitrarily and unilaterally, the issuance of new Ordinance, 2001 and the 439(1)/2001, dated 18-6-2001 is also violative of Article 77 of the Constitution. Thus the plaintiff has prayed for declaration that the impugned S.R.O.439(I)/2001, dated 18-6-2001 and Chapter 99 under H.S.C. Code 9907.0060 containing rate of duty 10% ad valorem in, respect of plaintiff's consignment being imported under L.C. No.101/912236/786/2000 are illegal and other reliefs. 10. The defendants filed their written statement to the above suit and taised preliminary objections and so also controverted the factual and legal pleas. According to the defendants the suit is not maintainable under section 217 of the Customs Act, 1969; the suit is barred under section 9 of C.P.C.; and that the suit may not be filed without prior notice under section 80 of C.P.C., therefore, the suit on above legal pleas is liable to be dismissed. 11. The defendants while refuting the allegations of the plaintiff have explained that the plaintiff claims the exemption of duty on import of partial consignment of polyester staple fibre plant vide Bill of Entry No.118542, dated 28-6-2001 and claimed S.R.O.369(I)/2000, dated 17-6-2000 and S.R.0.439(1)/2001, dated 18-6-2001 for exemption of duty and S.R.O.987(1)/99, dated 30-8-1999 for exemption of sales tax against indemnity bond. According to the defendants at the time of import of the above in terms of S.R.O.439(I)/2001 was prevailing which allows exemption from duty in excess of 5% as such customs duty @ 5% is chargeable in terms of section 30 read with section 31- A of the Customs Act, 1969, but the plaintiff claimed total exemption from duty under S. R.0.369(1)/2000 which was valid upto 17-6-2001, therefore, the said consignment is subject to the terms and . Conditions of S.R.O. No.439(I)/2001 in terms of the aforesaid sections of the Customs Act, 1969 and 5% concessionary customs duty is leviable. It is further pleaded by the defendants that the notification S.R.O.369(I)/ 2001, dated 17-6-2000 was superceded by S.R.0.439(I)/2001, dated 18-6-2001 in which concessionary customs duty @ 5% was levied. The plaintiff imported a consignment of machinery (partial shipment of polyester fibre plant) and filed bill of entry under section 79(2) of the Customs Act, 1969 (Machine No. 118426, dated 28-6-2001) when the said S.R.O. 439(1)2001, dated 18-6-2001 was prevailing. As such concessionary customs duty @ 5% was chargeable in terms of section 30 read with 31(A) of the Customs Act, 1969, which is reproduced as under:-- Section 30. Date of determination of rate of import duty. The rate of duty applicable to, any imported goods shall be the rate of duty in force: (a) in the case of goods cleared for home consumption under section 79, on the date on which a bill .Of entry is manifested under that section; and (b) in the case of goods cleared from a warehouse under section 104, on the date on which a bill of entry for clearance of such goods is manifested under that section: ' Provided that, where a bill of entry has been filed in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purpose of this section shall be the date on which the manifest of the conveyance is delivered: ' Provided further that, in respect of goods for the clearance of which a bill of entry for clearance has been manifested under section 104, and the duty is not paid within seven days of the bill of entry being manifested, the rate of duty applicable shall be the rate of duty on the date on which the duty is actually paid: ' Provided further that the Federal Government may, by notification in the official Gazette, for any goods or class of goods, specify any other date for the determination of rate of duty. ' Explanation.---For the purpose of this section "manifested" means that when a machine number is allocated to bill of entry and is registered in customs record. Section 31-A, Effective rate of duty.---(1) Notwithstanding, anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30 and 31, the rate
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of duty applicable to any goods shall include any amount of duty imposed under section 18, 2(***) and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof. (2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign exchange is to be converted into Pakistan currency shall be the rate of exchange in force-- (a) in the case of goods referred to in clause (a) of section 30, 3 (immediately preceding the date), referred to in that clause. (b) in the case of goods referred to in clause (b) of the aforesaid section, 4(immediately preceding the date) referred to in that clause; and (c) in the case of goods referred to in. Section 31, on the date referred to in that section. 12. According to the defendants the customs duty etc. Is chargeable which is leviable on the date of manifest or Import General Manifest (IGM) date of bill of entry, as the case may be, and the customs duty at 5% is correctly chargeable as explained under section 30 read with 31-A. The defendants further pleaded that the President of Islamic Republic of Pakistan through Finance Ordinance, 2001 has superseded the S.R.O. 369(1)/2000 by S.R.O.439(I)/2001, dated 18-6-2001 which levied concessionary customs duty @ 5%. The issuance of S.R.O.439(I)/2001, dated 18-6-2001 is as per law in terms of sections 18(2) & 19 of the Customs Act, 1969. According to the defendants in terms of section 30 read with 31-A of the Customs Act, 1969, customs duty etc. Is chargeable prevailing on the date of filing of bill of entry. The filing date of the plaintiff's consignment was 28- 6-2001 when S.R.0.439(1)/2001 prevaild as such 5% customs duty was chargeable. The contention of the plaintiff is incorrect and not as per law and the same is misleading as well. It is further pleaded by the defendants that section 6 of Economic Reforms Act, 1992 was for the protection of policies envisaged under 'S.R.0.1284(1)/90, dated 13-12-1990 as is clearly mentioned in the schedule thereof. S.R.0.1284(1)/90 superceded by S:R.O. 484(1)/92, dated 14-5-1992 'which was valid upto 30-6-1995. The Economic Reforms Act was to protect the policies of rural industrialization envisaged under S.R.0.1284(1)/90, dated 13-12-1990 superseded by S.R.O. 484(1)/92, dated 14-5-1992 read with Ministry of Industries Circular No.6(100)/90-Policy, dated 2-6-1991. The scheme was valid upto 30- 6.-1995. On the contrary the S.R.0.369(I)/2000 superceded by S.R.0.439(1)/2001 are for manufacturing of value added category products and export oriented category industry. This envisages entirely different schemes and have nothing to do with Circular 1284(1)/90 accordingly nor such any end date was specified in S.R.O.369(I)/2000. The protection of Economic Reforms Act, 1992 does not relate to S.R.O.439(1)/2901. Thus, the plaintiff's contention is entirely misleading. The defendants further refuted the contents of the plaint and prayed that in the light of above submission the suit of the plaintiff be dismissed which lacks merits and total amount of duty and taxes Rs.1,67,21,979 up-till now is involved in two consignments released as per orders of this Court, dated 3-7-2001, therefore, the defendants requested that the suit may be dismissed and the plaintiff be directed to pay the duty and taxes accordingly. 13. On the pleadings Of the parties, the Court vide order, dated 15-6-2006 framed the following issues:-- (1) Whether the suit is not maintainable? (2) Whether the plaintiff has acquired vested right to clear the suit consignment in terms of S.R.O.369(I)/2000, dated 17-6-2000 as amended vide S.R.O. (sic)(I)/2001, dated 29-1-2001 read with section 6 of the Protection of Economic Reforms Act, 1992 read with Customs General Order No. 12 of 1981? (3) Whether S.R.O. 439(1)/2001, dated 18-6-2001 is not in accordance with law?
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(4) What should the decree be? 14. Since all the three issues pertain to the interpretation of S.R.Os. And the claim of the parties through Customs Act, therefore, learned counsel for the parties did not lead any evidence but opted to argue the matter straightaway. 15. I have heard Mr. Khawaja Shamsul Islam, learned counsel for the plaintiff, and Mr. Raja Muhammad Iqbal, learned counsel for the defendants, and with their assistance perused the material available on record. 16. My findings on the above issues with reasons are as under:-- Issue No.1: Negative Issue No.2: Affirmative Issue No.3: Affirmative Issue No.4: as prayed. ISSUE NO.1 This issue is framed from the pleadings of the defendant whereby it was pleaded by the defendants that the suit is not maintainable and barred under section 217 read with section 216 of the Customs Act, 1969 whereby the protection of action taken under the Act by the customs officials was provided in the provisions of section 217 which is reproduced hereunder:-- "(1) No suit, prosecution or other legal proceeding shall lie against the Federal Government or any public servant for anything which is done or intended to be done in good faith in pursuance of this Act or the Rules and notwithstanding anything in any other law for the time being in force no investigation or enquiry shall be undertaken or initiated by any governmental agency against any officer or official for anything done in his official capacity under this Act, rules, instructions or directions made or issued thereunder without the prior approval of the Board. (2) No suit shall be brought in any civil Court to set aside or…
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