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Petitioner: Messrs LEVER BROTHERS PAKISTAN LTD. VS Respondent: CUSTOMS, SALES TAX AND CENTRAL
Court Name: Sindh High Court Judge(s): Anwar Zaheer Jamali, Muhammad Mujeebullah Siddiqui Title:Messrs LEVER BROTHERS PAKISTAN LTD. vs CUSTOMS, SALES TAX AND CENTRAL
JUDGMENT
Reported As: 2005 PTD 2462 Result: Order accordingly Judgment JUDGMENT MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---Common questions of law are involved in the above appeals under section 196 of the Customs Act, 1969. All the appeals have been heard together and are disposed of by this single judgment. 2. The common questions of law raised in the above appeals are as follows:-- (i) Whether the plant and machinery imported by the appellant was exempt from the whole of customs duty and sales tax? (ii) Whether CESAT erred in interpreting the provisions of the Protection of Economic Reforms Act, 1992, and the judgments of the superior Courts relating thereto? (i.e) Whether the show-cause notice served on the appellant was time-barred? (iv) Whether the CESAT erred in law by enforcing the demand under subsection (2) of the section 32 of the Customs Act, 1969, when the show-cause notice was clearly issued and the Appellant was only called upon to answer the charge under subsection (3) of section 32 of the Customs Act, 1969? 3. The common facts giving rise to the above questions are that the appellant is a limited company, engaged, inter alia in the manufacture of Ice-cream by the brand name of 'WALLS'. The appellant's Ice-cream unit for 'Walls' is located in Mouza Nathey Jagir, Tehsil Pattoki, District Kasur, Province of Punjab. The appellants imported machinery for installation at the above location vide four Bills of Entry, dated 22-8-1994. 22-9-1994, 8-10-1994 and 12-10-1994. 4. In all the four Bills of Entry the following declarations were made:-- "(1) The goods imported will be installed at 37.7 KM Multan Road Mouza Nathcy Jagir Tehsil Pattoki.
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(2) Location Certificate No.DDI/LCF/9/36/85, dated 26-2-1994, issued by Director of Industries, Lahore Division (enclosed). (3) C.B.R.'s Order No.1(90)MACH/84, dated 25 July, 1994 (enclosed). 5. The exemption from payment of customs duty and sales-tax was claimed in the following terms:-- "Exemption of duty and sales-tax free as per S.R.O. 484(1)/92, dated 14-5-1992." 6. The exemption as claimed above, was allowed. The appellant furnished an Indemnity Bond as per the requirement of notification. It was to be discharged after submission of installation certificate issued by the Assistant Collector of Customs and Excise, within a period of one year. The installation certificates were submitted within specified period. 7. However, show-cause notices under section 32 of the Customs Act, 1969 were received by the appellant on 5-4-1995, 13-5-1995 and 14-5-1995 in respect of all the four Bills of Entry, dates whereof have been given in the earlier part of this judgment respectfully. 8. In one notice, dated 14-5-1995, the reason for issuance of show-cause notice is shown as follows:-- "The import duties in respect of the above consignments are found to have been short-levied because of the following reasons:-- "Industrial unit located at Industrial Estate Chunian which is charged to duty at 10% instead of whole exemption from customs duty under S.R.O. 484(1)/92, dated 14-5-1992. 9. In the second notice, dated 14-5-1995 the reason for short levy was shown as follows:-- "Machinery imported are not covered under S.R.O. 484(1)/92." 10. In the notice, dated 5-4-1995 it was stated that the customs duty and other taxes in respect of the above consignment are found to have been short levied because of the following reasons:- "The goods were released without charges, customs duty and sales-tax in terms of S.R.O. 484(1)/92, the machinery have been imported for installation in Chunian Industrial Estate and such customs duty at 10% was leviable in terms of the above referred S.R.O. The incorrect application of S.R.O. 484(1)/92, resulting loss of revenue of Rs.1.10,999. Hence this demand." 11. In the notice, dated 13-5-1995 it was stated that the import duties were short-levied because of the following reasons:- "Machinery imported and installed in Industrial Estate Chunian have been exempted incorrectly." 12. It would be appropriate to observe here that all the four show-cause notices were issued through stereotyped pro formas by filling in the blanks. All the proformas were in respect of the notices to be issued under subsection (3) of section 32 of the Customs Act, 1969. However, two notices, dated 14-5-1995 and one notice, dated 13-5-1995 were issued by the Assistant Collector of Customs (Appraisement) Mr. Jawaid Ovais Agha and he was vigilant enough to score of subsection (3) and insert subsections (1) and (2) in its place. But, in the notice, dated 5-4-1995 no such vigilance has been shown and the notice has been issued under subsection (3) of section 32 of the Customs Act, 1969. The effect of this negligence on the part of officer issuing the notice, dated 5-4-1995 whose name is not legible shall be considered at later stage. 13. A very lengthy common reply to the show-cause notices was filed by the learned counsel for the appellant wherein the issuance of show-cause notices was assailed on the following grounds:-- (1) The show-cause notices were void and without lawful authority. (2) The information on the basis whereof, show-cause notices were issued were not disclosed. (3) The show-cause notice, dated 5-4-1995 was issued under section 32(3) of the Customs Act, 1969, while remaining three notices were issued in exercise of powers under section 32(1) and (2) of the Customs Act. According to appellant the provisions of subsections (1) and (2) of section 32 can be invoked where the importer has made a declaration and submitted a document which is false to his knowledge. Mens rea is an essential ingredient of the charge under section 32(1) and (2) of
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the Customs Act, 1969. These provisions cannot be invoked where the Authorities have incorrectly applied a notification. (4) There was no misdeclaration on the part of appellant. There was no collusion between appellant and officers of Customs Department and no document filed by the appellant was found to be false to their knowledge. (5) The three show-cause notices under section 32(1) and (2) fall out-side the ambit of relevant provisions as is evident from show -cause notice, dated 5-4-1995. The period of limitation provided for issuance of notice under section 32(3) is six months from the relevant' date. At the best, it is a case of error or inadvertence or misconstruction in application of S.R.O. 484(1)/92 and therefore, the case shall fall within the scope of section 32(3) of the Customs Act, 1969 and not under subsections (1) and (2) of section 32. (6) All the show-cause notices have been issued after expiry of relevant period of six months stipulated under section 32(3) and thus, no action could be taken in furtherance thereof. (7) The appellant was required to describe the goods only in the Bill of Entry for the purpose of determining the correct PTC Heading for the purpose of determination of value. The decision whether the goods were entitled to exemption under any notification issued by the Government of Pakistan was the duty of Customs Authorities. Even if, the appellant filled various columns in the Bills of Entry they were not for the purpose of any declaration of fact but for the facility of the Customs Authorities. A fine distinction was attempted to be made to the effect that the claim of appellant for exemption in respect of imported goods from duties and taxes was not a declaration under section 32(2) of the Customs Act, but was merely a claim that the S.R.O. 484(1)/92 was applicable to the case and they were entitled to the benefit of exemption. The competent officer of the Customs was of the view that the said notification was applicable and granted benefit of exemption. This argument was also directed in support of plea that the case fell within the purview of section 32(3) and not under section 32(2) of the Customs Act. 14. In support of above contentions, reliance was placed on the ratio of judgments in the following cases:-- (1) Central Cotton Mills Ltd. v. Collector of Central Excise and Land Customs, 1992 CLC 84L (2) Ibrahim Textile Mills Ltd. v. Federal Government PLD 1989 Lahore 47. (3) Federal Government v. Ibrahim Textile Mills 1992 SCMR 1898. (4) Muhammad Hussain v. Collector of Customs, 1991 MLD 1456. (5) Pakistan International Airlines Corporation v. Central Board of Revenue 1990 CLC 868. (8) A charge under section 32(2) of the Customs Act, 1969, cannot be made out unless the importer is found guilty of having deliberately and consciously 'made a false statement as held in the following cases:-- (6) Eastern Rice Syndicate v. Central Board of Revenue PLD 1959 SC 364. (7) Hardcastle Waud (Pakistan) Limited v. Pakistan PLD 1962 Karachi 895. (9) The Customs Authorities examined the location certificate and notification. Thereafter the benefit of exemption was allowed, therefore, the matter is in the nature of interpretation and application of notification which could not by any stretch of imagination be said to fall under section 32(1) and (2). (10) The show-cause notices do not mention as to which statement was false. The onus to prove such act is on the Customs Authorities. Reliance in this behalf was placed on the judgment of Supreme Court in the case of (i), Collector of Central Excise v. Imdad Ali 1969 SCMR 708 and (ii). Latif Brother v. Deputy Collector 1992 SCMR 1083. (11) Objection was raised to the pecuniary jurisdiction of the Adjudicating Officer, but there is no question of law on this point therefore, this issue requires no consideration.
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(12) It was contended that on merits the assertion that the Industrial Estate of the appellant is located in Chunian Industrial Estate is incorrect. The unit is located at about 37.7 KM from Octroi Post on Multan Road Lahore and thus, it is included in rural area as specified in S.R.O. 484(1)/92. (13) Although, the stand of appellant is that the industrial unit is not located in Chunian Industrial Estate, however, if without prejudice to their stand, it is assumed that their unit falls within Chunian Industrial Estate, this fact alone is not sufficient to disentitle them from complete exemption claimed by them. Elaborate arguments were propounded which are reproduced here for the sake of convenience:-- "The exemption covers units located in:-- (a) Areas other than specified in Table-I from the whole of the customs duty and sales tax leviable or chargeable thereon under the First Schedule to the Customs Act, 1969, or, as the case may be, the Sales Tax Act, 1990; and (b) The Industrial Estates specified in Table-II from so much of the customs duty and sales tax leviable or chargeable thereon under First Schedule to the Customs Act, 1969 or as the case may be, the Sales Tax Act, 1990 as is specified in column (3) of the said Table, subject to the condition set out therein. 19.1 We now turn to the contents of Table-I and Table-II: (i) Table-I lists three (3) areas namely, the Municipal or Cantonment Board limits of Karachi and Lahore and thirty (30) Kilometers area around these limits. (ii). The existing limits of various Municipal Corporations etc., in the Provinces of Sindh and Punjab excluding certain areas, and (i.e) Areas falling within the limits of Islamabad Capital Territory. 19.2 Table-II sets out the lists of different Industrial Estates which are grouped into four (4) sets. The first set relates to all Industrial Estates in areas not covered by Table-I, including the Industrial Estate of Chunian. In relation to this customs duty is limited to ten per cent (10%) whereas under clause (a) in the case of an industrial unit located in an area other than Table-I there is a complete exemption from customs duty. The whole of Punjab which is more than 30 kilometers outside the Cantonment and Municipal limits of Lahore, and outside the various Municipal Corporations is excluded from Table-I, thus, on the face of it any industrial unit located in any area beyond these limits is entitled to a complete exemption. An industrial unit which is more than 30 kilometers from the limits of Cantonment Board and Municipal Corporation Lahore and is outside all other Municipal Corporation limits, irrespective of wherever else it may be located in the Province of Punjab will -be entitled to the benefits to total exemption as it will be located in an area other than Table-I. 19.3 Now that the contents of the exemption notification have been set out in brief we can revert to clauses (a) and (b) thereof for the purpose of considering their scope and ambit. The first point to be noted is that clause (a) grants a categorical and unambiguous exemption from the whole of the customs duty and sales tax leviable on the plant and machinery imported by the units located therein. Our clients' unit is admittedly located in an area covered by clause (a) which does not fall within Table-I and, thus, on the face of it, the plant and machinery imported by them is entitled to complete exemption. 19.4 The only question is whether this complete exemption has been taken away by clause (b) or not. It must be understood that clause (b) is not a charging clause. It does not levy a duty or tax. It, too, is an exemption clause. It should be noted that the intent underlying clause (b) is not to take away a benefit conferred on the importer but to grant him the benefit of an exemption. It does not take away what is given under clause (a) but, on the contrary, confers a further benefit, albeit, a more restricted one, on areas falling within Table-II. 19.5 The point made above may be further elucidated. If the intention of the exemption notification was to restrict the benefit conferred under clause (a) in relation to units falling under clause (b)
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then, it is obvious, that clauses (a) and (b) would not have been drafted in the present form but would have read as follows:-- (a) In areas other than specified in Table-I, from the whole of the customs duty and sales tax leviable or chargeable thereon under the First Schedule to the Customs Act, 1969, or as the case may be, to Sales Tax Act, 1990: Provided that in the case of units located in the Industrial Estates specified in Table-II the exemption shall be from so much of the customs duty and sales tax leviable or chargeable thereon under the First Schedule to the Customs Act, 1969, or as the case may be, the Sales Tax Act, 4990 as is specified in column 3 of the said Table, subject to the conditions set out below. 19.6 In other words, clause (b) would then have been placed in the form of a proviso to clause (a), thereby making it clear that the exemption which was granted in full under clause (a) was available in a restricted shape only for units located in an Industrial Estate specified in Table-II. This is the function of a proviso... Clause (b) is not a proviso to clause (a) and both of them provide exemptions independently. In case of clause (a) the exemption is complete and in case of clause (b) exemption is limited. Both the clauses are for the benefit of industrial unit and if an industrial unit does not get any benefit under clause (a) as it may be an act specified in Table-I of the notification, it can still receive a benefit under clause (b) read with Table-II. Clause (b) has not been subordinate to clause (a)." 15. Reliance was placed on the law laid down by Hon'ble Supreme Court in the case of Abdul Hadi v. Ali Haider PLD 1983 SC 342 as follows:-- "It is a cardinal rule of interpretation that all parts of an enactment are to be read together and all parts thereof given due effect and that an effort must be made to harmonise the seemingly inconsistent provisions." 16. It was contended that the question of availability of exemption already stood resolved by the Central Board of Revenue, while interpreting similar provisions in S.R.O. 1284(1)/90 in the following words:-- "Central Board of Revenue has also been receiving individual references from the prospective investors regarding the status of industrial estates whether plant and machinery imported for areas which fall beyond the limits of areas specified in Table-I of the above mentioned Notification. This is to clarify that plant and machinery imported for the units located in industrial estates in areas beyond the limits specified in Table-I shall be eligible for exemption of customs duty, sales tax and import surcharge in terms of para. (a) of the impugned Notification. However, industrial estates located within the limits of areas appearing in Table-1 shall be eligible only for concessions as indicated in Table-II of the aforesaid Notification." 17. It was alleged that the denial of exemption already allowed to the appellant would be against the consistent departmental practice which has not been approved by the Hon'ble Supreme Court in various cases. 18. It was further urged that the controversy pertaining to the payment of 10% customs duty has arisen after issuance of S.R.O. 512(I)/94, dated 9-6-1994. Prior to the amendment inserted through this notification in S.R.O. 484(1)/92, the industrial units situated in rural areas other than those specified in Table-I as well as Chunian Industrial Estate listed in Table-II of the said notification were entitled to complete exemption from duties and taxes. Prior to the amendment inserted by S.R.O. 512(1)/94, it was irrelevant whether the area in which the appellant's unit located fell outside Table-I of the notification or Table-II whereof. In both the cases, complete exemption was available. In this regard protection was available under section 6 of the Protection of Economic, Reforms Act, 1992 which stipulates that a benefit of a concession or an exemption or a fiscal incentive given to an investor cannot be withdrawn during the period of for which it was granted. S.R.O. 484(1)/92 is a time bound notification and the benefit once extended cannot be abridged or withdrawn or taken
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away before June, ' )95. S.R.O. 512(1)/94 insofar, it seeks to effect the right of appellant under S.R.O. 484(1)/92 is repugnant to section 6 of the Economic Reforms Act, 1992 and is void. 19. The learned Collector of Customs heard the learned Advocates for the appellant and vide order in-original, dated 14-2-2000 decided all the four cases by a common judgment. The learned Collector held as follows:-- (1) The Ice-cream unit of the appellant is situated in Mouza Nathey Jagir which is situated within the boundaries of Industrial Estate Chunian and consequently, the industrial unit falls inside the boundary of Chunian Industrial Estate and consequently, it falls in Table (II) to S.R.O. 484(1)/92, dated 14-5-1992. (2) The contention that the case fell within the purview of section 32(3) of the Customs Act, was repelled and it was held to be falling under section 32(2) for the following reasons:-- "The learned counsel's second argument that the notices are hit by time limitation in terms of section 32 of the Customs Act, 1969, has also been examined. The provisions of subsection (3) of section 32 covers those cases where less duties and taxes have been collected by reason of any inadvertence, error or misconstruction. The said case revolves around the misstatement of the importers in respect of the fact that their unit is located outside the Chunian Industrial Estate and falls under Table-I of the S.R.O. 484(1)/92, dated 14-5-1992. In support of this statement they had also produced disguising location certification without making any reference to Chunian Industrial Estate with clear intent to get their machinery cleared in terms of Table-1 of S.R.O. 484(1)/92 with the clear intent to hoodwink the Customs official not to collect 10% customs duty as mentioned in Table-II of the said S.R.O. The importers were well aware with the fact that their unit is located inside Chunian Industrial Estate, thus, in terms of Table-II of the S.R.O. 484(1)/92 they have to pay 10% customs duty. It was for this reason that they made the statement that their unit is located outside Chunian Industrial Estate and produced Location Certificate which was nothing but to evade customs duty. Therefore, it is clearly a case of sections 32(1) and 32(2) of the Customs Act, 1969, because it is not a case of inadvertence; error or misconstruction. Without prejudice to above even otherwise in view of the Supreme Court's judgment in the case of Messrs Pfizer Pakistan Ltd. v. Federation of Pakistan PLD 1998. SC 64 an amount (tax) which is due against a party cannot be withheld." (3) The plea pertaining to protection under section 6 of the Protection of Economic Reforms Act, 1992, was rejected for the following reasons:-- "The respondents' main contention is that in terms of section 6 of Protection of Economic Reforms Act, 1992, and in view of the judgment of the Supreme Court in the case of Messrs Gatron Industries v. Government of Pakistan 1999 SCMR 1072 they were entitled for the exemption of the whole customs duty and sales tax has also been examined. The facts of Messrs Lever Brothers' case are not identical with the case of Messrs Gatron Industries. The area of Hub Tehsil was specifically mentioned in the Table-II of S.R.O. 1284(1)/90 whereas there is no such thing in that S.R.O. For the area of Chunnia. They have established their letter of credits for import of machinery much after the promulgation of S.R.O. 484(1)/92, dated 14-5-1992 and from the outset they stressed for the exemption in terms of S.R.O. 484(1)/92. Therefore, the question of law in this case is that whether or not the importers were entitled for the whole exemption of customs duty in terms of Table-I or chargeable to concessionary rate of 10% customs duty in terms of Table-II of S.R.O. 484(1)/92. The provisions of section 21 of the General Clauses Act, 1897 and section 30 read with section 31-A of the Customs Act, 1969, are also equally matters in the case Messrs Lever Brothers Pakistan. Ltd. In the recent judgment of Honourable Supreme Court, which has been announced on 1-9-1999 in the case of Government of Pakistan v. Fecto Belarus Tractors Ltd. (Civil Appeal No.1174 of 1997) the Honourable Supreme Court has allowed the Government's appeal on the following grounds:-
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"The learned Attorney General has referred to a number of cases wherein effect of section 31-A of the Customs Act has been examined by this Court and it has been held that, even if a contract has been entered into by a party upon exemption granted under section 19 of the Customs Act, 1969, no vested right would be created so as to deprive the Competent Authority from rescinding such exemption as section 31-A now clearly stipulates that any amount of duty which becomes payable in consequence of withdrawal of a concession or exemption from duty, even though such withdrawal of tax takes place after conclusion of a contract for sale of goods or opening of a letter of credit, would now be payable in terms of section 30 of the Customs Act. The said section provides that the rate and amount of duty applicable to any imported goods shall be the rate and amount chargeable on the date of the presentation of the bill of entry." 20. In the aforesaid judgment the Honourable Supreme Court while allowing the appeal of the Government has further held that:--- "It is pertinent to point out that in the case Collector of Customs v. Ravi Spinning Ltd., (1999 SCMR 412) the question as to power of the Government to impose regulatory duty under section 18(2) of the Customs Act was examined by this Court in the light of section 6 of Act XII of 1992 and the contention that the Government could not withdraw concessions or exemptions earlier allowed to the importer of goods in view of the provisions of section 6 was emphatically repelled by this Court. Consequently, in our view reference to the provisions of Act XII of 1992 appears to be completely misplaced. Equally misconceived is invocation of the doctrine of legitimate expectation by the learned Judges of the High Court as the doctrine cannot be involved to nullify effect of a legislative provision. 21. In the case of Messrs Gatron Industries 1999 SCMR 1072 also the Honourable Court has held that:-- "We are however, inclined to agree with the learned counsel for the respondents that the right to claim exemption under a notification issued under section 19 of the Customs Act, remains available to a party as long as the exemption notification holds the field, as held in the case of Messrs M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan 1998 SCMR 1404." 22. It was ultimately held that in the were of provisions of section 30 read with section 31-A of the Customs Act, 1969 and in view of Table-II of S.R.O. 484(1)/92, dated 14-5-1992 R/W amending S.R.O. 512(1)/94, dated 9-6-1994,…
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