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Petitioner: AISHA STEEL MILLS LTD. through Director, Karachi and others VS Respondent: FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman Federal Board of Revenue, Islamabad and others
Court Name: Sindh High Court Judge(s): Munib Akhtar, Muhammad Ather Saeed Title:AISHA STEEL MILLS LTD. through Director, Karachi and others vs FEDERATION
OF PAKISTAN through Secretary, Revenue Division/Chairman Federal Board of Revenue, Islamabad and others Case No.: C.Ps. Nos.D-2330 of 2008 and 308 of 2009 Date of Judgment:2010-11-16 Reported As: 2011 PTD 569 Result: Petition accepted Judgment ORDER ' MUHAMMAD ATHER SAEED, J.---These two petitions have been filed impugning the action of the respondents in not granting the exemption/concession under S.R.O. 575(D/2006 dated 5-6-2006 as amended by S.R.O. 554(1)/2008 dated 11-6-2008 and S.R.O.1226(1)/ 2008 dated 27-11-2008 in respect of the goods imported by them. 2. Brief facts of the first petition are that the petitioner initiated the process of installing an industrial unit for setting up a state of the art cold rolling mills in Downstream Industrial Estate of Pakistan Steel Bin Qasim. In this connection the petitioner stated that he imported plant and machinery/capital goods including prefabricated building for its project and claimed exemption under the provisions of S.R.O. 575(1)/2006 dated 5-6-2006 vide which the Federal Government was pleased to exempt the plant, equipment, machinery and apparatus including capital goods specified in column 21 of the table given in the S.R.O. Falling under the scope specified in the column 4 of that table from so much of the customs duty as specified in the 1st schedule to the said Act and the whole of sales tax levied under the Sales Tax Act, 1990 subject to certain conditions. It was further stated that initially since one of the conditions stipulated in the above mentioned S.R.O. For the availability of the concessionary rate of duty and taxes was that the imported goods were not listed in the locally manufactured items notified through Customs General Order issued by respondent No,1 or certified as such by the respondent No,2 therefore the petitioner addressed letters to respondent No,2 in order to reconfirm the fact that prefabricated buildings were not included in locally manufactured item. However, the correspondence between
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the petitioner and respondent No,1 culminated with the letter C.No,I(369)Mach/2001 Islamabad, dated 2nd September, 2008 wherein respondent No,1 finally informed the petitioner that the prefabricated building do not constitute plant, machinery, equipment or capital goods as envisaged in Serial No,21 of the table of S.R.O. Mentioned above under which the petitioner was claiming exemption and therefore does not qualify for exemption under the said S.R.O. Aggrieved by this order this petition was filed. 3. The facts in C.P. No,D-308 of 2009 are that the petitioner is a public limited company engaged in manufacturing of Seamless Pipes, Tubes and machinery components and the petitioner company imported consignment of pre-engineered/prefabricated steel structure employing crane system for installation at factory premises at Nooriabad and claimed exemption in the terms of Serial No,21 of S.R.O. 575(I)/2006 dated 5-6-2006. 4. The goods of the petitioner were released provisionally under section 81 of the Customs Act, 1969 subject to the condition that availability of exemption under the above mentioned S.R.O. Was approved by respondent No,4 that is the Federal Board of Revenue and for the release of the goods provisionally the petitioner furnished various postdated cheques amounting to Rs, 19,724,733.00. However, the matter was kept pending by respondent No,4 and during this period the respondent No,1 the Collector of Customs vide his letter No,SI/MISC/ OFFICE-143/2008-VI dated 23-1-2009 while making a request to respondent No,4 to clarify whether the goods imported by the petitioner qualify as plant, machinery and capital goods which entitles the petitioner to exemption under the S.R.O. Mentioned above, opined that exemption under Serial No,21 of the SRO is not available in respect of prefabricated buildings imported by the petitioners and informed the Board accordingly and as a follow up held that prefabricated buildings do not fall within the definition of capital goods. Earlier the respondent No,2 had tried to cash the postdated cheques deposited by the petitioner on the plea that necessary approval from respondent No,4 had not been provided. Being aggrieved by the above letters this petition has been filed. 5. Since in both the petitions the interpretation of the provisions of S.R.O.575(I)/2006 dated 5-6- 2006 is involved we directed the office to tag the two petitions together and decided to hear them together and dispose them by a common order. 6. We have heard Mr. Khalid Jawaid Khan the learned counsel for the first petitioner and Mr. Manioorul Arfeen learned counsel for the second petitioner and Mr. Zain A. Jatoi the learned counsel for respondent No,3 in C.P. No,D.2330 of 2008, Mr. Ghulam Haider Shaikh the learned counsel for respondent No,3 in C.P. No,D-2330 of 2008 and Mr. Mohsin Imam the learned counsel for respondent No,3 in C.P. No,D-308 of 2009 instructed by Mr. Ilyas Ahsan representative of the Collector of Customs. 7. Mr.. Khalid Jawaid Khan learned counsel for the petitioner in C.P. No,D-2330 of 2008 took us through the provisions of S.R.O. 575(I)/2006 dated 5th June, 2006 and pointed out that by this S.R.O. Certain exemptions and concessions were granted on import of plant, machinery, equipment and apparatus including capital goods specified in column 2 of the table attached to this S.R.O. Subject to certain conditions. He took us to clause 21 of the said table which provides for exemption in respect of machinery equipment and other capital goods' imported by industrial concerns and submitted that it fell within the ambit of the above clause. The learned counsel further drew our attention to the definition of capital goods given in the explanation to sub-clause (iii) of the S.R.O. Whereby capital goods were defined as plant, machinery, equipment, spares and accessories classified in chapters. 84, 85 or any other chapter of the Pakistan Customs Tarrif, required for manufacture or production of any goods. The learned counsel then took us through entry 34 of the schedule to S.R.O. 575 which is titled prefabricated buildings and sheds and has been made applicable to the imports of prefabricated buildings made by Medical Sector, Hotel, tourism, sporting and other recreation sectors and wholesale and, retail chain stores. He submitted that by
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including prefabricated buildings in this schedule it is implied that prefabricated buildings fall within the definition of either plant, machinery or capital good because in the preamble of the Notification the exemption has been extended only to plant, machinery, equipment and apparatus including capital goods specified in column 2 of the table and the goods specified in the Table. It can therefore be assumed to be falling in any or all of these categories. In view of the existence of this clause he argued that the Board cannot blow hot and cold at the same time and discriminate between various sectors by holding that prefabricated buildings fall in the category of exempt items for certain 'sectors but do not fall under the category of exempt items if used by other sectors. He submitted that although his exemption .Was refused on the basis that prefabricated buildings do not constitute machinery, equipment or capital goods as envisaged in Serial No,21 of the table of the above S.R.O. But it is now also being claimed by the respondents in their counter affidavit/objections that such prefabricated buildings are also being manufactured locally and exemption is not available as it falls within the ambit of condition (i) of the above S.R.O. Which requires that the imported goods not be listed as locally manufactured items. He however submitted that till today he has not been provided any evidence either by Engineering Development Board or by any manufacturer that prefabricated buildings imported by him could be manufactured by any local manufacturer. 8. The learned counsel further submitted that S.R.O. 554(I)/2008 dated 11th June, 2008 has been issued by the Federal Government by which S.R.O. 575 has been amended and Condition No,1 of the said S.R.O. Has been substituted as under:-- "(b) For condition (i), the following shall be substituted, namely:-- "(i) the imported goods as are not listed in the locally manufactured items, notified through a Customs General Order issued by the Federal Board of Revenue (Federal Board of Revenue) from time to time or, as the case may be, certified as such by the Engineering Development Board.. This condition shall, however, not be applicable in respect of Serial Nos.1, 2, 6, 15, 20, 28, 29 and 31 of the Table; and for such machinery equipment and other capital goods imported as plant for setting up of a new industrial units provided the import is made against a valid contract or an irrevocable letter of credit for a minimum C&F value of US $ 50 million;" (c) the condition is and the entry relating thereto shall be omitted." 9. The learned counsel went on to submit that this condition (i) has been further amended by S.R.O. 1226(I)/2008 dated 27th November, 2008 by which in the last lines of the condition reproduced above the words "import", "valid contract" and "or letter of credit" have been substituted by their plural versions which according to the learned counsel specifies that now the limit of US $50.00 million is not restricted to one import against one valid contract or L.C. But against total imports of the project. The learned counsel submitted that his total imports for which L.C./L.Cs. Was/were opened on 26th March, 2008 and the goods reached the port somewhere in November, 2008, exceeded US $ 50.00 million and he therefore qualified for the exemption/concession on this ground also. 10. In support of his contention that plant machinery and capital goods will include all sorts of equipment required for the manufacture and production facilities including prefabricated buildings he relied on the following judgments:-- (1) D.G. Khan Cement Company Ltd. v. Deputy Collector of Customs (2003 PTD 986). (2) Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. And others (PLD 2005 SC 577 = 2005 PTD 2178) (3) Messrs Moro Textile Mills Limited v. Central Board of Revenue (2007 PTD 60). 11. On the basis of the above arguments he prayed that the order impugned by him may be set aside and the respondents may be directed to provide him the exemption/concession which is
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provided by S.R.O. 575 in respect of, machinery, plant, equipment and apparatus including capital goods to the prefabricated buildings imported by him. 12. Mr. Mansoorul Arfin the learned counsel for the petitioner in C.P. No,D-308 of 2009 adopted the arguments of Mr. Khalid Jawaid Khan. The learned counsel submitted that he is a manufacturer of seamless pipes and he imported from Saudi Arabia a consignment of pre- engineered/prefabricated steel structure employing crane system equipped with top running crane system being integral component for installation at their factory premises and availed the concession available in terms of the S.R.O. 575 read with Serial No,21 of the said S.R.O. He submitted that after various correspondences the respondent No,3 vide his letter No,SI/Misc./Office-143/2008- VI dated 23-1-2009 acting on the information provided by the respondent No,4 refused the exemption in respect of pre fabricated buildings allegedly for the following reasons:-- "The case has been examined in detail. The case of the importer is that the pre- engineered building imported by them basically is an integral part of the plant and machinery being installed. The catalogue presented by the Company confirms that pre-engineered building is designed with crane bridge and crane runway beams. However, for the purpose of classification, the same will remain in the HS Code 9406.0000. On the other hand, footnote of the S.R.O. 575(1)/2006 explains the word 'capital goods' as under:-- ' Explanation.---Capital Goods mean any Plant, Machinery, Equipment, spares and accessories, classified in chapters 84, 85 or any other chapter of the Pakistan Customs Tariff, required for- (a) the manufacture or production of any goods, and includes refractory bricks and materials required for setting up a furnace, catalysts, machine tools, packaging machinery and equipment, refrigeration equipment, power generating etc. And equipment, instruments for testing, research and development, quality control, pollution control and the like; (b) use in mining, agriculture, fisheries, animal husbandry floriculture, horticulture, livestock, dairy and poultry industry; or (c) service sectors listed at S. No,16 of the table below, and includes the items mentioned in clause (a) above. ' Moreover, the Board has, vide letter C.No,1(369)Mach/2001. Dated 6-12-2006." 13. He further submitted that after issuing the above letter the respondents tried to en-cash the postdated cheques which were furnished by him at the time of clearance of the goods for the disputed portion of the, demand. The learned counsel submitted that his pre-engineered/ prefabricated steel structure employing crane system is integral component of the industrial plant and is necessary for the process of production and manufacture of seamless pipes and therefore falls within the ambit of plant, machinery, equipment and apparatus including capital goods for the import of which the exemption/concession specified in the S.R.O. 575 has been provided. 14. In support of his contention that the above pre-fabricated/pre-engineered steel structure falls within the above definition lie relied on the following judgments:- (1) Messrs Premier Machinery Works, Karachi and others v. Commissioner of Income Tax (PLD 1993 SC 233) (2) 19 Queen Bench 647 (3) Scientific Engineering House (Pvt.) Ltd., v. Commissioner of Income Tax (AIR 1986 SC 338) 15. On the basis of the above arguments he prayed that the petition may be, allowed and the respondents may be directed to provide him the exemption/concession available under S.R.O. 575 and return the postdated cheques back to him. 16. Mr. Zain Jatoi read clause (i) of S.R.O. 575 and the definition of capital goods and submitted that so far as the capital goods are concerned the exemption/concession is limited to the specific sectors and that is why the prefabricated buildings have been mentioned in serial No,34 and exemption has been provided for the prefabricated buildings only being utilized by the medical
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Sector, the hotel and tourism industries and supermarkets and chain stores. He therefore submitted that the intention of the law making authority is to be given effect to and by restricting the exemption/ concession on account of pre-fabricated buildings to certain .Sectors the authority has revealed its intention that this exemption/concession is not intended to be provided to the prefabricated buildings being used by other sectors. 17. Mr. Ghulam Haider Shaikh submitted that in the C.G.O. It has been provided that the prefabricated buildings are being locally manufactured and the petitioners have not been able to satisfy the requirement that the prefabricated buildings which they have imported are not manufactured in Pakistan and therefore exemption could not have been allowed to them. He further submitted that S. R.O.554(I)/2008 dated 11-6-2008 and the amending S.R.O. 1226(I)/2008, dated 27-11-2008 were issued in June and November, 2008 whereas the LCs were issued and the contracts made somewhere in March, 2008 before coming in force of these S.R.Os and since these S.R.Os have prospective force only therefore they will not be applicable to the. Case of the petitioner in C.P. No,2330 of 2008. . 18. Mr. Mohsin Imam the learned counsel appearing for one of the respondents adopted the arguments of the other learned counsel appearing for the respondents. And submitted that the petitions were not maintainable. In this connection he relied on the following judgments:-- (1) The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited (1999 PTD 2174) (2) M.A. Kareem Iqbal v. Presiding Officer Banking Court No,III, and 4 others (2003 CLD 1447) 19. Mr. Raja Muhammad Iqbal arguing on the pretext that he is the general counsel of the Customs Department relied on previous S.R.Os issued in the years 1982 and 1984 i,e, S.R.Os. 600/1982 and 533/1994 in which capital goods were defined, and relied on the following. Judgments of the Honourable Supreme Court of Pakistan:-- (1) Messrs Huffaz Seamless Pipe Ind. Ltd. v. Collector of Sales Tax, Hyderabad (2010 SCM R 707) (2) Noor Elahi and others v. Member, Board of Revenue and others (2003 SCM R 1045) (3) Muhammad Tufail v. The State (1999 SCM R 1981) (4) Sohail Jute Mills Ltd. And others v. Federation of Pakistan (PLD 1991 SC 329) 20. Exercising his right of reply Mr. Khalid Jawaid Khan the learned counsel for petitioner rebutted the arguments of the learned counsel for respondents that the petitions were not maintainable and in support of his contentions relied on the judgment of this Court in the case of Messrs Gul Ahmed Textile Mills Ltd. v. The Collector of Customs (Appraisement), Custom House, Karachi and 2 others 1990 M LD 126 and also on the judgment of the Honourable Supreme Court in the case of Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (2009 SCM R 1279 = 2009 PTD 1392). 21. We have examined the case in the light of the arguments of the learned counsel and have carefully perused the records of the case and the judgments relied on by the learned counsel. Although the point of maintainability was taken up last by Mr. Mohsin Imam and Mr. Raja Muhammad Iqbal but since without first deciding, the issue, of maintainability the petition cannot be adjudicated on merits therefore we will take this matter first. 22. As stated earlier in C.P. No,2330 of 2008 the letter impugned before us is the letter of respondent No,1 dated 2nd September, 2008 by which the exemption/concession on import of prefabricated buildings was refused whereas the letter impugned in Constitutional Petition No, 308 of 2009 is the letter dated 23-1-2009 sent by respondent No,2 written to the Second Secretary of respondent No,4 by which the respondent No,4 was informed that the respondent No,2 is of the view that exemption under Serial No,21 of the S.R.O. 575(1)/2006 dated 5-6-2006 is not available in respect of prefabricated buildings imported by the present petitioner. A perusal of section 193 of the Customs Act and section 195 of the Customs Act reveals that none, of the above letters by which the exemption was disallowed,. Fall under the categories of orders/decisions appealable .Before the
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Collector (Appeals) or appealable before the Appellate Tribunal. In the comments filed by the respondents in C.P. No,2330 of 2008 in para. 23 it has been submitted that the petitioners have approached the Court without exhausting the remedies of appeal which have been provided to them under sections 193, 194(A) and 196 of the Customs Act but it has not been clarified as to how these remedies are available. 23. The same objection has been taken in the comments filed in C.P. No,2330 of 2008 whereas in the Petition No,308 of 2009 the maintainability has been challenged being filed in utter violation of the petitioner's undertaking dated 9-6-2006 whereby he had undertaken that if the C.B.R's clarification in respect of S.R.O. 575(1)/2006, dated 5-6-2006 is against him the postdated cheques may be en-cashed. The learned counsel Mr. Mohsin Imam and Mr. Raja Muhammad Iqbal have relied on the following judgments in support of their contention that the petitions are not maintainable:-- (1) The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited, Lahore and others (1999 PTD 2174) (2) M.A. Kareem Iqbal v. Presiding Officer, Banking Court No,III and 4 others (2003 CLD 1447) (3) Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another (2005 SCM R 37) (4) Talib Hussain and others v. Member, Board of Revenue and others (2003 SCM R 549) (5) Noor Blahi and others v. Members, Board of Revenue and others (2003 SCM R 1045) (6) Khalid Mahmood v. Collector of Customs, Customs House Lahore (1999 SCM R 1881) 24. Whereas Mr. Khalid Jawaid Khan the learned 'counsel for the petitioner in support of his contention that the petition is maintainable relied on the following judgment of the Honourable Supreme Court in the case of Messrs Gul Ahmed Textile Mills v. Collector of Customs (Appraisement), Custom House, Karachi and 2 others (1990 M LD 126) and The Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 SCM R 1279 = 2009 PTD 1392). 25. Before discussing these judgments we would like to reiterate that it has not been clarified to us as to how the remedy of appeal under sections 193 and 194-A before the Collector of Customs (Appeals) and the Customs Appellate Tribunal are available to the petitioner in respect of the orders, passed by the Federal Board of Revenue or by the Collectorate of Customs as they do not fall within the categories of the 13 orders and decisions which are appealable before the Collector of Customs (Appeals) under section 193 of the Act or under 194-A of the Act as we had already expressed our view that these orders do not fall in category of the appealable orders. We have however still decided to examine the judgments relied on by the learned counsel for the respondents. 26. In the case of Sheikh Spinning Mills (quoted supra) the Honourable Supreme Court while setting aside a judgment of the Lahore High Court held that the learned Judge of the Lahore High Court was not justified in granting a general clarification in respect of Notification in absence of any specific instance of denial by the Department to the respondents to reclaim or deduct the input tax paid and therefore the Honourable Supreme Court held that it would have been appropriate to have asked the respondents to approach the forum provided under the Act by providing guidelines. This case is distinguishable as in the petition before us the petitioner has approached the relevant authority for seeking clarification and exemption but in the first petition the Federal Board of Revenue itself and in the second petition the Collectorate of Customs under intimation to the Federal Board of Revenue had refused the exemption and therefore in our view the petitioners did not have any other remedy available to them. 27, In the case of M.A. Kareem Iqbal quoted supra the Honourable Supreme Court observed that provisions of section 22(3) of the Ordinance. Of 2001 were not as stringent and harsh as were those in the earlier statutes relating to recovery of loans/advances of financial .Institutions therefore it
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cannot be said that pre-condition of furnishing of security, for which a reasoned order will have to be made by High Court in its Capacity as. Appellate Authority, would automatically render remedy of appeal as nugatory, inefficacious and inadequate. The Court was also of the opinion that where a statute provided a self-contained machinery for determination of questions arising under the statute and it also provides remedy by way of appeal or revision to another Tribunal or Court fully competent to give any relief, then the High Courts should not show indulgence by accepting constitutional petitions assailing the impugned orders passed by the Tribunal or Court in contravention of the provisions made in the statute. This case is also distinguishable as in this case no remedy is provided against the orders of rejection passed what to say of the remedy being imaginary, inadequate or being subjected to arbitrary condition. 28. In the case of Khalid Mahmood quoted supra it was held that where alternate remedies are available or where this Court is itself repository of ultimate appellate, revisional or referral powers, conferred by relevant statute, it is in the rarest of cases that the High Court may be persuaded to entertain a constitutional petition and to enforce the constitutional remedy. This case is also distinguishable as neither it has been pointed out to us as to how the remedies are available nor it has been claimed that the ultimate appeal/reference will lie to this Court. 29. In the case of Noor Elahi quoted supra the facts were that the matter relating to title and possession of land had finally been settled by the judgment of the Honourable Supreme Court and the petitioners through constitutional petition had sought demarcation of land with the intervention of the High Court to avoid any threat to their title and possession without raising any objection to the settlement and the petitioners had conceded that matter…
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