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Petitioner: BESTWAY CEMENT (PVT.) LTD. VS Respondent: FEDERATION OF PAKISTAN
Court Name: Lahore High Court Judge(s): Muhammad Nawaz Abbasi Title: BESTWAY CEMENT (PVT.) LTD. vs FEDERATION OF PAKISTAN Case No.: Writ Petition No. 2139 of 1996 Date of Judgment:2001-08-16 Reported As: 2002 PTD 2478 Result: Order accordingly
JUDGMENT
JUDGMENT The petitioner with a view to instal Cement Plant established in irrevocable Letter of Credit on 29th of June, 1995, for the import of machinery and claim the benefit of S.R.O. No. 484(1)1992 dated 14-5- 1992 read with S.R.O. No. 569(I)/95 dated 26-6-1995 for exemption on the payment of customs duty and sales tax. The notifications in question provided that the customs duty and sales tax leviable on the machinery and plants which were not being manufactured locally and were imported during the period from 1st of December, 1990 to 30th of June, 1995, for setting up new Units or for expansion or balancing, modernization and replacement of existing Units situated in the rural areas would be exempted from the payment of customs duty and sales tax. The first consignment of the machinery and equipment imported by the petitioner reached at Karachi Port on 17th of December, 1996, under Bill of Lading, dated 22nd November, 1996, and the remaining shipments of the machinery and equipments established under the Letter of Credit in question arrived at Sea Port at Karachi on 19th, 22nd December, 1996, and 1st of January, 1997. The petitioner on arrival of goods filed Bill of Entry for clearance of consignments at the Dry Port at Rawalpindi, for release of the goods. 2. The grievance of the petitioner is that the respondents without extending the benefit of S.R.O. No.484(I)/92 and S.R.O. No.569(I)/95 directed the petitioner to pay sales tax under S.R.O. No.978(1)95 with 10% regulatory duty and 2% service charges in addition to the payment of 25% import duty and sales tax. The petitioner has challenged the demand of payment of customs duty inter alia on the ground that he having established Letter of Credit within the target date was entitled to the benefit of S.R.O.No.484(l)/92 and S.R.O. No.596(I)/95 and that S.R.O. No.978(I)/95 was not applicable to the goods imported by the petitioner.
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3. Learned Federal Counsel/Standing Counsel has submitted that the comments filed on behalf of respondent No.3 may be treated as combined comments on behalf of all the respondents. It has been pleaded in the comments that the S.R.O.No.484(I)/92 dated 14-5-1992 was effective only up till 30th of June, 1995, and that the benefit of said notification was not available to the goods imported after the said date. The importer also did not claim the benefit of said S.R.O. At the time of pre-shipment/inspection/opening of Letter of Credit. In nutshell, the respondents denied the benefit of the S.R.O. To the petitioner on the ground that the exemption was available on the goods imported into Pakistan till 30th of June, 1995, and that the import of the goods subsequent to the said date would not be entitled to the exemption in question. 4. Pending disposal of this petition, Karamat Hussain, Deputy Superintendent, Customs while appearing before this Court on 4-1-2001 stated that the petitioner has discharged his liability to the extent of customs duty and there was nothing outstanding against him in connection with the customs duty and that the dispute was only confined to the extent of regulatory duty payable by the petitioner. He submitted that the petitioner has paid an amount of Rs.18.05 millions in connection with the regulatory duty and the outstanding amount of Rs.55.84 million in that behalf was still recoverable and that the Department issued notice under section 202 of the Customs Act, 1969, to the petitioner for the recovery of the remaining amount of regulatory duty through encashment of bank guarantee furnished by him for the payment of customs duty. Learned counsel for the petitioner has argued that the customs duty having been paid by the petitioner in cash, the bank guarantee furnished by him for the payment of the said duty would not be encashable for the payment of regulatory duty. Learned counsel next contended that the respondents without properly determining the liability of the petitioner for the payment of regulatory duty demanded the payment of Rs.66.84 million out of which 25% i.e. 18.05 million was paid by the petitioner as a result of the undertaking given. By the respondents that the remaining regulatory duty would not be charged and he would not be asked to make any further payment in this behalf. Learned counsel while placing reliance on 1999 SCM R 1072 and on an unreported judgment in C.P. No.1485 of 2000 raised the following contentions in support of the present petition:-- (a) That the protection made available under Economic Reforms Act, 1992, cannot be taken away through a notification issued under Customs Act, 1969, and Sales Tax Act, 1990. (b) That since the regulatory duty was imposed much after the issuance of S.R.O. No.978(I)/95 dated 14-10-1995 and the petitioner opened Letter of Credit within the date specified in S.R.O.No.484(I)/92, dated 14-5-1992, therefore, he was not liable to pay the regulatory duty and that still with a view not to enter into any controversy, the petitioner on the demand of respondents made payment of 25% regulatory duty on the assurance given to him by the concerned official that no further amount in connection with the regulatory duty would be payable by him. The learned counsel contended that since the petitioner has paid the customs duty in full with 25% regulatory duty, therefore, the respondents were not authorized either to proceed against the petitioner for the recovery of the remaining regulatory duty or encash the bank guarantee furnished by him for the payment of the customs duty. 5. The issue relating to the legality of the imposition of regulatory duty has been settled by the apex Court in Collector of Customs and others v. Ravi Spinning Ltd. And others (1999 SCM R 412) whereas the payment of service charges were declared illegal and not payable, therefore, the same need no discussion. The exemption of customs duty sought under S.R.O. No.484(I)/92 dated 14-5-1992, the payment of regulatory duty under S.R.O. No.978(I)95 dated 14-10-1995 and the question relating to the encashment of bank guarantee provided for the payment of customs duty for realization of the amounts of regulatory duty under section 202 of the Customs Act, 1969, would need consideration. Section 202 of the Customs Act, 1969, which is read as under:--
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"S.202 Recovery of Government Dues.---(1) When under this Act or under any other law for the time being in force, which provides for any tax, duty or other levy being collected in the same manner as customs duties are collected, a penalty is adjudged against, or notice or demand is served upon, any person calling for the payment of any amount unpaid which may be payable by way of penalty or by way of duty, tax or other levy or under any bond (guarantee) or other instrument executed under this Act or such other law or the Rules made thereunder, the appropriate officer- (a) may deduct or require any other officer or Customs, Central Excise and. Sales Tax to deduct such amount from any money, owing to such person which may be under the control of the Customs, Central Excise and Sales Tax Authorities; or (b) if it cannot be so recovered, may recover or may require any other officer of Customs Central Excise or Sales Tax to recover, such amount by detaining and selling any goods belonging to such person which are under the control of the Customs, Central Excise or Sales Tax Authorities. (2) If the amount cannot be recovered from such person in the manner provided in subsection (1), the appropriate officer may serve upon the defaulter a notice in the prescribed form requiring him to pay the amount specified in the notice within such time as may be so specified. (3) If the amount referred to in the notice under subsection (2) is not paid within the time specified therein or within further time if any allowed by the appropriate officer, the appropriate ,officer may proceed to recover from the defaulter the said amount by one or more of the following modes namely:-- (a) attached and sale of any movable or immovable property of the defaulter; and (b) may recover, or may require any other officer of Customs Central Excise or Sales Tax to recover, if it cannot be so recovered, such amount by detaining and selling any goods belonging to such persons which are under the control of the Customs, Central Excise or Sales Tax Authorities; or (c) may recover such amount by attachment and sales of any movable and immovable property of the guarantor, person, company, Bank or financial Institution, where a guarantor or any other person, company, Bank of financial Institution, failsto make payment under such guarantee, bond or instrument. (4) For the purpose of recovery of duty, or other levy unde [subsections (1) and (3)1, the appropriate officer shall have th same powers which, under the Code of Civil Procedure, 190 (V of 1908), a Civil Court has for the purpose of the recovery of an amount due under the decree. (5) The Central Board of Revenue may make Rules regulating the procedure for recovery of duty, tax or other levy under this section and any other matter connected with or incidental to the operation of this section." 6. The above provisions of law empowers the authorities in the Customs Department, for recovery of any amount payable by way of customs duty to adjust any amount owing to a person under the control of Customs Authorities in the manner provided in the said section. Therefore, the contention of the learned counsel for the petitioner that the Bank-guarantee would not be encashable for the adjustment of its amount towards the regulatory duty was without any substance. The following two points need determination for disposal of this petition:-- (a) Whether the petitioner was not liable to pay regulatory duty under S.R.O. No.978(I)/95 and was entitled to the exemption of customs and regulatory duty under S.R.O.No.484(I)/92, dated 14-5- 1992. (b) Which would be the target date of import under the notification in question, whether opening of irrevocable Letter of Credit or the date of filing of Bill of Entry? 7. For the purpose of availing the exemption in the customs duty under First Schedule to the Customs Act, 1969, as well as the Sales Tax Act, 1990, under the notification in question the import of goods was to be made during the period commencing from 1st December, 1990, and ending on 30th of June, 1995, subject to the fulfilment of the conditions contained in the notification of import
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of the machinery for a Project specified therein. The importer would also furnish indemnity bond to discharge his liability under the notification. 8. S.R.O. No.569(I)/95 dated 26th June, 1995, relating to the exemption on the sales tax, being not under dispute would need no comments. 9. S.R.O. No.978(I)/95, dated 14th of October, 1995, issued under section 19 of the Customs Act, 1969, and section 13(i) of the Sales Tax Act, 1990, contained concession of customs duty and sales tax in excess of 25% of said duty and tax leviable on the Plant and the machinery which were not being manufactured locally and were used for expansion or balancing, modernization and replacement of existing units, and the concession was made available only to the import of these goods in which the Letter of Credit was opened prior to 30th of June, 1995, and the Bill of Entry was filed under Notification S.R.O. No.484(I)/92, dated 4-5-1992, with fulfilment of the conditions contained therein before the target date. 10. The customs duty is leviable under section 18(1) of the Customs Act, 1969, whereas the regulatory duty which is also a customs duty is charged under section 18(2) of the said Act. The apex Court in Collector of Customs and others v. Ravi Spinning Ltd. And others (1999 SCM R 412) held that generally speaking the regulatory duty is also a sort of customs duty which is leviable under section 18(1) of the Customs Act, 1969, independently to the customs duty leviable under section 18(2) of the said Act. Both the customs duty and the re-ulatory duty are similar nature in the Customs Act, 1969, still the same being leviable independently under sections 18(1) and 18(2) of the Customs Act, 1969, would not be mixed together for the purpose of S.R.O. Under discussion and the exemption to the extent of customs duty was made available without any reference to the regulatory duty, therefore, without specific mention of regulatory duty in the notification, it would not be automatically covered by the notifications of exemption of customs duty. The exemption of the regulatory duty is not specifically given cannot be claimed in the general terms. 11. The precise contention of the learned counsel for the petitioner was that since the petitioner established the Unit without getting the benefit of foreign exchange from the Government, therefore, he would be entitled to the benefits available under the Economic Reforms Act, 1992, and that the notifications either under the Customs Act, 1969, or the Sales Tax Act, 1990, would not take away the said benefit and thus the demand of the payment of regulatory duty under Customs Act, 1969, was in violation of the Economic Reforms Act, 1992. 12. The petitioner has claimed the benefit of the exemption of customs duty and regulatory duty on the import of goods under the notification issued under the Customs Act, 1969, therefore, notwithstanding the arrangement of the foreign exchange through his own source, the exemption on payment -of duties under the above said notification would only be available subject to the fulfilment of the conditions contained therein. This is noticeable that none of the notifications referred to above provided that in case of arrangement, of foreign exchange by a person through his own source, the provisions of Customs Act, 1969, would not be applicable to such person. The exemption in question having been made under the Customs Act, 1969, and Sales Tax Act, 1990, would be regulated by the terms of the notifications issued under said Acts and consequently the Economic Reforms Act, 1992, would not affect the Customs Act, 1969, and Sales Tax Act, 1990: Thus only point for determination would be whether the date of opening of Letter of Credit would be deemed to be the date of import of goods or the date of filing of Bill of Entry of the goods would be the date of import of goods. 13. Similar question was raised in the Power Project Cases which were decided by this Court vide judgment, dated 31-7-2000 in Writ Petition No.505 of 1997. The conclusion drawn in the above said case was as under:-- "Since the condition of execution of power purchase agreement by the importers of equipment and machinery for power generation projects was not made part of the Notification S.R.O. No:279(I)/94
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dated 2-4-1994, therefore, the exemption from payment of customs duty, sales tax, regulatory duty and Iqra charges subject to the fulfilment of the conditions contained in the above notification would be available to all those importers of machinery and equipment for power Plant under the power policy of Government, who have.Filed bill of entry or opened the letter of credit before 1-7- 1995 on which date an amendment in S.R.O. No.279(I)/94, dated 2-4-1994 was made through Notification S.R.O. No.584(I)95 dated 1-7-1995 without any discrimination as the amending notification would not be operated retrospectively. Thus, the exemptions allowed under Notification S.R.O. No.279(I)/94, dated 2-4-1994 would be available to all such importers till 1-7-1995 without any discrimination and after the amendment the said notification in its amended form would take effect from the date of its amendment. The apex Court in M.Y. Electronics Industries (Pvt.), Ltd. Through Manager and others v. Government of Pakistan through Secretary Finance, Islamabad and others (1998 SCM R 1404)- held as under:- `The effect of insertion of section 31-A of the Act is that when exemption from payment of customs duty granted by the Government under section 19 of the Act is withdrawn, then notwithstanding the fact that while exemption was enforced. The party had opened a Letter of Credit or concluded the contract with the foreign suppliers, the amount of customs duty payable on the goods will be that which may have become payable as a result of withdrawal of the exemption. It is, therefore, quite clear that the right to claim exemption from customs duty under a notification issued under section 19 of the Act remains available to a party only as long as the exemption notification holds the field. However, as soon as the exemption notification is withdrawn, the payment of customs duty on the imported articles is to be determined in accordance with the provisions of section 30 of the Act. The contention of the appellants that section 31 was inserted in the Act with the sole object of doing away with the effect of the judgment of this Court in AlSamrez's case and, therefore, the exemptions granted by the Government after insertion of section 31-A are not controlled by the section 31-A does not appear to be correct. Section 31-A was inserted in the Act by section 5(2) of Finance Ordinance II of 1988 which provided that section 31-A shall be deemed always to have been so inserted in the Act, meaning thereby that it was given retrospective effect from the date of Customs Act, 1969, came to effect. There is nothing in the language of section 31-A (ibid), to justify the interpretation that this section applied only to the cases covered by the judgment of this Court in AlSamrez's case or to those cases only, which did not acquire the character of past and closed transactions on the date of insertion of section 31-A in the Act. The language of section 31-A (ibid) is wide enough to include within its ambit all those cases where exemptions have been withdrawn after the insertion of section 31-A in the Act as well. At this stage, we may also dispose of another connected argument of Mr. Aitzaz Ahsan relating to interpretation of section 31-A. Mr. Aitzaz Ahsan contended 'surcharge' and 'Iqra surcharge' were levied under section 2 of the Finance Ordinance, 1982, and section '5' of the Finance Act, 1985, respectively. Section 31-A as originally enacted amongst other provided that the rate of duty applicable to any goods shall also include the amount of duty imposed under section 2 of the Finance Ordinance, 1982, and section 5 of Finance Act, 1985. However, by section 2(4) of the Finance Act, 1991, the word `section 2 of Finance Ordinance (XI of 1982) and section 5 of the Finance Act, 1985 (1 of 1985) and the anti-dumpting or countervailing duty imposed under the Import of Goods (Antidumpting and Countervailing Duties Ordinance, 1983, (III of 1983)' appearing in section 31-A were omitted, with the result the withdrawal of Surcharge and Iqra Surcharge through the impugned notifications could not be defended on the strength of section 31-A of the Act. In reply to the above arguments of Mr. Aitzaz Ahsan, Mr. S.M. Zafar, the learned counsel for the respondents contended that on the date, the two notifications withdrawing the exemptions from payment of Surcharge and Iqra Surcharge were issued by the Government. The words "Section 2 of the Finance Ordinance, 1982, and section 5 of the Finance Act, 1985' were very much part of section 31-A of the
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Act and as such the withdrawal of 'Surcharge and Iqra Surcharge' were fully covered and protected by section 31-A of the Act. The contention of Mr. S.M. Zafar appears to be well founded. The notifications withdrawing the exemption of Surcharge and lqra Surcharge were issued by the Government on 9th of May, 1991, while the Finance Act, 1991, received the assent of the President of Pakistan on 20-6-1991 and it was published in the Gazette of Pakistan, Extraordinary, Part I of 27-6- 1991. Therefore, on the date the notifications withdrawing the exemptions from payment of 'Surcharge' and `Iqra Surcharge' were issued, section 31-A also covered the cases of withdrawal of exemptions from payment of Surcharge and in lqra Surcharge. We, therefore, find no force in the above submissions of learned counsel for the appellants. The next contention of the appellants in these appeals is that the observations of the High Court in the impugned judgment fully established the allegations of the appellants that the Government held out promises and 'inducements to the Industrialist by offering them exemptions from payment of various duties and taxes in case they established Industries in the under-developed area of GAIE. The appellants having acted on the inducements offered by the Government invested huge amounts in establishing various Industrial Units in GAIE. It is accordingly contended that in these circumstances, the Government could not be allowed to withdraw these exemptions on the principle of promissory estoppel. The doctrine of promissory estoppel is founded on equity. It arises when a person acting on the representation by the Government or a person competent to represent on behalf of the Government changes his position to, his detriment, takes a decisive step, enters into a binding contract or incur a liability. In such case, the Government will not be allowed to withdraw from its promise or representation. However, a general promise without any time limitation cannot bind the Government for all times to come. The enforcement of doctrine of promissory estoppel against the Government or a Government functionary competent to represent on behalf of the Government is, however, subject to the following limitations as held by this Court in the case of Army Welfare Sugar Mills Limited v. Federation of Pakistan (1992 SCM R 1652):-- `(i) The doctrine of promissory estoppel cannot be invoked against the legislature or the laws framed by it because the legislature cannot make a representation; (ii) promissory estoppel cannot be invoked for directing the doing of thing which was against the law when the representation was made or the promise held out; (iii) no agency or authority can be held bound by a promise or representation not lawfully extended or given; (iv) the doctrine of promissory estoppel will not apply where no steps have been taken consequent to the representation or inducements so as to irrevocably commit the property or the reputation of the party invoking it; and (v) the party which has indulged in fraud or collusion for obtaining some benefits under the representation cannot be rewarded by the enforcement of the promise.' In the cases before us, the appellants are invoking the doctrine of promissory estoppel against the Government on the basis of alleged inducements and representations contained in the exemption Notification No.517(I)/89 dated 3-6-1989, No.480(I)/88 dated 26-6-1988 and 481(1)/88 dated 26-6- 1988. These notifications do not contain any time limitation during which these exemptions were to remain operative. The appellants have failed to bring on record any material to establish that the Government either before or after issuance of these notifications made any representation to the Industries in GAIE that these exemptions will remain operative for any specified period. In the absence of period having been specified in these notifications regarding their validity, the exemptions under these notifications could be availed by the appellants only during the period these notifications were operative. These exemptions ceased to be available from the date the above notifications were superceded or withdrawn. The learned counsel for the appellants have,
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however, argued that as no time limit was mentioned in the above notifications, they were entitled to reasonable notice by the Government before withdrawal of these exemptions. In support of their contention, they have relied on the case of Gadoon Textile Mills v. WAPDA (1997 SCM R 641)." In addition to the grievance of the petitioners relating to the changes made in the exemption of customs and sales tax, they have also challenged the levy of regulatory duty under section 18(2) of the Customs Act, 1969, as well as constitutionality of sections 31-A and 18-B of the Customs Act, 1969, and section 3(1)(a)(b) of the Sales Tax Act, 1990. The apex Court subject to the limitations contained in section 18(3) and (4) of the Customs Act, 1969, declared the provision of section 18(2) of the ibid. Act valid and held that the regulatory duty would remain enforce from the date of publication of notification till the end of financial year in which it is issued. The regulatory duty being transitory in nature is always imposed subject to the limitations contained in section 18(2)(3)(4) of the Customs…
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