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Petitioner: Haji IHSAN ULLAH VS Respondent: FEDERATION OF PAKISTAN through Secretary and 4 others
Court Name: Sindh High Court Judge(s): Omar Sial, Munib Akhtar Title:Haji IHSAN ULLAH vs FEDERATION OF PAKISTAN through Secretary and 4
others Case No.: C. Ps. Nos. D-3485, 3293 of 2013, 1126 and 1162 of 2016 Date of Judgment:2018-02-06 Reported As: 2018 PTD 1419 Result: Order accordingly Judgment ORDER MUNIB AKHTAR, J.---By this judgment, we intend disposing off the four petitions identified above. The petitions arise under the Customs Act, 1969 read with the Import Policy Order, 2013 ("IPO"), which is framed under the Imports and Exports (Control) Act, 1950. In brief, the dispute is as to whether certain vehicles sought to be imported by the petitioners (which can be categorized into various types) are importable or not and as to the valuation thereof. In C.P. D-3485/2013 an interim order was made on 25.06.2015 in which some of the issues were set out. A reference to this order will give some flavor of the issues involved in these petitions. In material part, this order stated as follows: ".... According to the department's report, [the] vehicles have been put into two categories... [In one category are] "Concrete Transit Mixers" and the case of the department is that they are in fact "Old and Used Dump Trucks" and their importation is prohibited in terms of the various provisions of the Import Policy Order, 2013, that have been set out in the report and which are also referred to in the order of previous date.... Prima-facie,... it appears that the vehicles do have shape commonly expected of a concrete mixer. However, learned counsel for the department as well as Mr. Rashid Khanzada, (Machine Shed Appraiser) submit that the requirement of the Chapter 87 with regard to concrete mixer lorries (trucks) is that it should, inter alia, have the concrete mixer as permanently mounted. The Machine Shed Appraiser has explained the stance of the department, which is that in the vehicles as imported, the concrete mixers are not permanently fixed and therefore they cannot be regarded as falling under the relevant heading of Chapter 87. As opposed to this, learned counsel for the petitioner states that [the] vehicles now under consideration in fact ought to be
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cleared as declared. But in any case and without prejudice to the principal submission of the petitioner, it is submitted that adaptations are permissible as per the relevant explanatory note, contained in the explanatory notes that are issued from time to time by the World Customs Organization. In relation to heading 87.05, the explanatory notes provide that this heading covers motor vehicles of various sorts, including those that are specially constructed or adapted. We may note that the import tariff, which is the First Schedule to the Customs Act, 1969, is prefaced by certain "rules", which provide, inter alia, that the explanatory notes shall be "considered authentic source of interpretation". Learned counsel on such basis states that the explanatory note being relied upon has the force of law and has to be applied accordingly. Learned counsel for the petitioner also relies on a Division Bench Judgment of this Court given in Special Customs Reference Applications Nos.88 to 102 of 2014 dated 22.12.2014. Learned counsel places reliance on the observations made by the learned Division Bench at para 10 of the said Judgment. In view of this position, it appears to us that the legal issue involved with regard to [these] trucks has narrowed down to the question whether the word "permanently" being relied upon by the department as noted above is to have precedence or whether it is to be read subject to the explanatory note being relied upon by learned counsel for the petitioner. In addition, the effect of the judgment of the learned Division Bench being relied upon by learned counsel for the petitioner with regard to the position of the vehicles as declared has also to be considered. That of course is also in itself a question of law. We are now come to the second category as per the department's report... These units were declared as "Old and Used Dump Trucks (Off Highway)". Learned counsel for the department states that these are in fact only "Old and Used Trucks". Explaining the difference learned counsel states that off highway trucks are those that may be used off track i.e., on those routes which are dirt or earth tracks and not metalled roads, whereas the trucks as imported are intended for use on the highway and other metalled roads. Learned counsel for the petitioner on the other hand, has relied on a judgment of the Supreme Court in C.Ps. Nos .774-K to 784-K/2001 dated 06.12.2001, on such basis learned counsel contends that the... units currently under consideration ought to be allowed to be cleared as declared. The legal issues involved have been narrowed down to some considerable extent on the basis of the case sought to be put forward by the department relying on the report filed today. However it is not possible to consider these matters without finally disposing of these petitions. At the ame time, the factual aspect/controversy that the department has sought to raise, which is strongly contested by the petitioner (i.e., it is contended that there is in fact no such factual controversy at all) also need to be kept in mind..............." 2. Before proceeding further, we may note that a number of vehicles were involved in these petitions. Some of them were released under various interim orders while others apparently have not been released. However, the exact number of vehicles in respect of each category, and the status (i.e., released or not) is not, strictly speaking, germane to the legal issues involved (although of course, this is a matter of practical importance to the importers and the Department). Therefore, although the numbers involved were touched upon in the submissions made by learned counsel for both the sides (and by the petitioner who appeared in person in one petition), no detailed reference will, as such, be made to this aspect herein below. We may also note that in three petitions where learned counsel appeared, C.Ps. Nos. D-3485/2013, 1126/2016 and 1162/2016 the same party is the named petitioner, while in the fourth petition, where the petitioner appeared in person the party was different. However, the issues involved were the same. 3. Learned counsel appearing for the petitioner in the three petitions as noted above referred to the aforementioned interim order of 25.06.2015 made in C.P. D-3485/2013 and to the specific number of vehicles that had been released and were pending release as on that date. Learned counsel
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submitted that the case sought to be made by the Department, both as to valuation and importability, was mala fide, both in fact and law. The matter of importability already stood resolved and it was submitted that there was no issue as such on this ground at all. As regards the dispute on valuation learned counsel submitted that that also was contrived, and took a number of objections in this regard, including that the provisional assessment under which some vehicles had been released had been finalized without hearing, that there had been a. violation of section 81, including in particular the timeframe provided for in that section, and that section 168 had been violated. Referring to the mala fides of the Department, learned counsel submitted that these were established both by the conduct of the departmental officers as regards the petitioners and also by reason of their contumacious failure and refusal to give effect to interim orders made by the Court. 4. Referring to the vehicles imported, learned counsel submitted that the basic objection with regard to the "concrete transit mixers" was as set out in the aforementioned interim order of 25.06.2015. The same was the position with regard to the objection taken to the "old and used dump trucks (off highway)". In addition, there were three other categories involved, "cement bulkers", "prime mover with trailer" and "mounted tunneling equipment", Elaborating his case, learned counsel submitted, the petitioner entered into a contract on or about 11.03.2013 to import around 900 vehicles in the different categories. Initially, when the first batches arrived, only an issue of valuation was raised and there was no issue at all as regard maintainability. The vehicles were provisionally released. The collectorate (the Model Customs Collectorate Hyderabad) wrote to the Directorate General of Customs Valuation seeking guidance as to the valuation of the vehicles since they were all used and second hand imports. The Directorate, by reply dated 31.05.2013 expressed its inability to issue any valuation advice as the imports were "old and used vehicles of various make, models, specifications and physical condition". The Collectorate was asked to check the "importability", classification, valuation and all other aspect as per law at its own end". The Collectorate replied vide its letter dated 06.06.2013 and learned counsel emphasized that importability was not an issue raised by it The only issue was valuation. The Collectorate took issue with the Directorate's stated inability to give a valuation advice, and asked the latter to "again review the cases and finalize the value of the vehicles" (emphasis in original). Reference was specifically made to the time period under section 81. The Directorate replied vide its letter dated 17.06.2013 and learned counsel drew attention to the last para thereof, where the Collecorate was, in effect, again asked to finalize the valuation on its own. 5. Learned counsel then referred to the order dated 06.08.2013 made by the Collector finalizing the provisional assessm ents in terms of which the vehicles had been released. The Collector finalized the values of the various vehicles in a manner that were not accepted by the petitioner, and learned counsel submitted that it was in such terms that C.P. D-3485/2013 came to be filed, on 30.08.2013. Referring to the prayer clause learned counsel submitted that since the only dispute raised was as to valuation, that was the relief sought by the petitioner. No mention was made to importability since such issue was never raised by the Collectorate. Such was the position taken also by the Collectorate in the para-wise comments. Learned counsel bolstered this submission by referring to various orders made in the petition (prior to the aforementioned order of 25.06.2015) referring in particular to the order dated 12.03.2015. Learned counsel submitted that it was only at this stage that the issue of importability was belatedly raised by the Collectorate/Department in order to unlawfully frustrate the import of the vehicles. It had been realized that there was no case on the valuation dispute. Reference was made to "contravention" reports dated 28.05.2015 and 15.06.2015, where the issue of importability was raised. Learned counsel also referred to certain correspondence issued by the Collectorate/Department to various local car manufacturers and their trade body seeking expert advice and assistance as to the vehicles and submitted that even
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before such advice was received the contravention reports were issued. A notice/intimation under section 171 was also issued to the petitioner on 12.06.2015 regarding the detention of the vehicles. Learned counsel emphasized that there was no expert report or advice and even the Department's own officers empowered to inspect imported goods had not made any such report. Nonetheless, the vehicles were detained on the made up issue of importability. 6. Learned counsel then referred to the "final" contravention report in respect of the vehicles in terms of which a large number of the vehicles were declared by the Department to be not importable by reason of violation of certain provisions of the IPO. Learned counsel submitted that the objection was wholly contrived. More specifically, as regards the "concrete transit mixers" reliance was placed on a decision of a learned Division Bench of this Court in which the matter, according to learned counsel, stood resolved and settled. Reference was also made to certain orders-in-original and an appellate order, on statutory appeal filed by the Department, which dismissed the Department's appeal. Reliance was also placed on orders made on 25.08.2015 and 11.09.2015 in C.P. D-3485/2013, and also to certain subsequent orders made therein. 7. Learned counsel submitted that the bulk of the vehicles involved in the dispute were "concrete transit mixers". All the vehicles were identical in all, material respects. Some were initially released but subsequently the objection as to importability was taken. Relying on the material/record referred to above and certain other documents, learned counsel submitted that the issue was without any substance. Reliance was placed on two Division Bench decisions of this Court, Baig Enterprises and Engineering v. Federation of Pakistan and others 2015 PTD 181 and Collector of Customs v. Eastern Construction Company 2015 PTD 963. As regards the "old and used dump trucks (off highway)" learned counsel made similar submissions, i.e., that initially some vehicles were released and thereafter the issue of importability was raised mala fide. The same was the position, according to learned counsel, as regards the three remaining categories. Elaborating on the objection of importability, learned counsel submitted that objections had been taken to the certificates issued by the "pre-shipment inspection" companies, as required in terms of the IPO. Learned counsel submitted that after the issue was raised, the other two petitions (C.Ps. Nos. D-1126 and 1162, both of 2016) came to be filed. As to the valuation dispute, learned counsel submitted that no hearing was given and the final order in this regard was made after the lapse of the statutory period. It was submitted that no "exceptional circumstances" existed as would allow for an extension of time. Reliance was placed on a decision of the Supreme Court reported as Collector of Customs and others v. Shafiq Traders and another 2011 PTD 1185. It was also submitted that there had been a failure to abide by the law as laid down in relation to section 25 by a Division Bench of this Court in the case of Sadia Jabbar PTCL 2014 CL 537 8. The petitioner who appeared in person in C.P. D-3293/2013 submitted that the petition was maintainable since there was no provision for statutory appeal against an order finalizing a provisional assessm ent under section 81. The petitioner relied on the transaction value of the imported vehicles to submit that this was the true and correct value and ought to be enforced and given effect to. The petitioner submitted that this value had not been challenged by the Department and it had straightaway sought to take the matter to section 25A, which could not be done. It was submitted that the Directorate General of Valuation had been giving valuation advice in respect of used/second hand imported vehicles; it could not therefore turn around and claim that such valuation was not possible. Referring to the order dated 26.07.2013 finalizing the assessm ent (and impugned by the petitioner) it was submitted that although a large number of vehicles were involved, no specific vehicles were referred to or mentioned in the impugned order. Reliance was also placed for certain aspects on the Customs Rules, 2001 and the Explanatory Notes issued in relation to the First Schedule. It was submitted that the impugned order was without jurisdiction.
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9. The learned Additional Attorney General submitted that although the issue as regards the vehicles had first emerged as a valuation dispute, the primary dispute was as to importability. The Department's case was that the vehicles could not be imported as that would be in violation of para 9(ii)(5) of the IPO read with Appendix H thereof. It was only if the vehicles were at all importable that the question of their valuation would become relevant. It was submitted that the issue of importability had been raised from the beginning and had been very much alive throughout. All submissions to the contrary were strongly denied. Referring to the aforesaid provisions of the IPO, the learned AAG submitted that for an importer to bring his vehicles in terms thereof, two things had to be satisfied: the vehicle had to be compliant with the Euro II emission standards and it had to have a life of five years. Referring to the PSI certificates produced by the petitioner in C.P. D-1162/2016 and. CP D-1126/2016 for illustrative purposes, the learned AAG submitted that on the face of it, it was clear that the issuing agency had not been asked whether the vehicle was Euro II compliant. So, it was submitted, any such certificate could not be regarded as meeting the requirements of the IPO. It was submitted that there being no certification as to compliance with Euro II emission standards one of the mandatory requirements under the IPO had not been met. It was also pointed out that the Euro II emission requirements had undergone several changes over the years. Referring to the age of the vehicles, the learned A.A.G. submitted that the oldest vehicle was already around 25 years old at the time of import and therefore it was seriously in doubt as to whether the other condition, namely that the vehicles had a life of years was being met. It was also submitted that none of the certificates showed that the vehicles had actually been switched on during testing, which would be required if the emissions from the engine were to be properly investigated. The certificates showed that only a visual inspection had been carried out. In such circumstances, the learned AAG questioned whether there was any proper certification at all that there had been compliance with the emission requirements. The learned AAG also relied on a Division Bench decision of this Court in C.P. D-7925/2015 dated 26.04.2016 (Burki & Co. and others v. Federation of Pakistan and others) to submit that the correct interpretation and application of the WO as presently relevant required that the vehicles be imported for some specific purpose. This also had not been shown. Therefore, it was submitted, the vehicles were simply not importable at all, as that would be in violation of the IPO. The petitions had necessarily to be dismissed. 10.Learned counsel appearing for the Department, referring to the valuation dispute, submitted that the final order had been made by the Collector after due and full correspondence with the Directorate General of Valuation and in the presence of the parties. The order made was in accordance with law and an appropriate statutory remedy against the same was available. The case of Sadia Jabbar, sought to be relied upon, was not applicable in the facts and circumstances of the case. 11.Exercising the right of reply, learned counsel submitted that the objections as to the certificates produced not showing compliance with the Euro II requirements were incorrect. The certificates had been earlier accepted and the objection now taken was merely an afterthought. It was again emphasized that import of the vehicles had started in 2013 and the objection as to importability was taken for the first time as late as 10.05.2015. Referring to the certificates, learned counsel strongly denied that they did not comply with the requirements of the IPO. It was submitted that a bare perusal of the certificates showed that the appropriate laboratory tests had indeed been carried out on the vehicles and it was only then that the certificates were issued. Even issuance of post-shipment certificates had been approved by the Ministry of Commerce. As regards the Division Bench decision relied upon by the learned AAG, it was submitted that the facts and circumstances there were completely different. Finally, it was submitted that since the valuation orders had been made under section 81(2), the same could not be appealed against and hence the petitions were maintainable. The petitioner who appeared in person also exercised the right of
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reply. 12.We have heard learned counsel and the petitioner who appears in person as above, examined the record and material relied upon and the case-law to which we were referred. Since much the greater emphasis was placed for the respondents on the issue of importability, we take up that aspect first. The relevant provision of the IPO was as follows: "9. Import of used plant, machinery and equipment.- ... (ii). Import of Secondhand Plant, Machinery and Equipment and Specialized Machinery by Construction, Mining and Petroleum Sector. -.... (5) Construction companies, mining, oil, gas and petroleum sector companies are also allowed to import specialized vehicle-mounted machinery and transport equipment such as mobile transit mixture, concrete pumps, crane lorries, concrete placing trucks, dumpers designed for off highway use, cement bulkers and prime movers 380 HP and above, etc. specified in Appendix-I. However, import of such items will be subject to certification by the competent authority of exporting country or a recognized pre-shipment inspection company listed in Appendix-H to the effect that the said machinery or transport equipment (a) is compliant with Euro-II emission standards (b) is in good working condition and has a remaining productive life of five years." 13. It is convenient to begin with the two issues identified in the order of 25.06.2015 made in C.P. D- 3485/2013, mentioned above. As regards the first issue, the question is whether the word "permanently" is to be read into the aforesaid provision of the IPO at least insofar as concrete transit mixers are concerned.' This, in effect, is the Department's case, relying inter alia on certain Explanatory Notes in relation to the relevant tariff heading in the Import Tariff. It is to be noted that the Department's objection is premised on the factual assertion that the concrete mixers are not permanently fastened or mounted on the trucks, a proposition not accepted by the petitioners. We put to one side this factual aspect and consider the Department's objection as a matter of law. In our view, the answer to the question posed ought to be against the Department. Learned counsel for the petitioner has relied on two decisions of the same learned Division Bench of this Court, Baig Enterprises and Engineering v. Federation of Pakistan and others 2015 PTD 181 and Collector of Customs v. Eastern Construction Company 2015 PTD 963. In the second mentioned case the vehicles involved were concrete transit mixers and the objection taken to their importation related to para 9(ii)(5) of the IPO. The learned Division Bench was, inter alia, pleased to observe as follows (pg. 976): "We may observed that the Customs Authorities without any factual or legal basis, have disallowed the release of the subject vehicles merely on the presumption that the respondent will not use the imported Concrete Transit Mixer for mixing and transportation of liquid cement, and may subsequently use such vehicles as normal loading trucks for transportation of other goods, by removing the welded, adopted and fabricated Concrete Transit Mixer. We may observe that Customs Authorities under the law are required to conduct examination process the O,Ds, and to make assessm ent of the consignment imported "as presented" on the date of import, presentation of O.D. examination and assessm ent, and not on assumption or suspicion that subsequent to clearance of such consignment, the goods may be used for some other purpose by altering and changing Its structure, particularly, when no such eventuality has surfaced. Such authority, if allowed to be exercised by the Customs Authorities, would result in multiplicity of unnecessary litigation and is likely to defeat the purpose and implementation of Import Policy as formulated by the Federal Government, keeping in view the economic conditions and financial implications, which may be involved while formulating such policy." It will be seen that the objection taken here is essentially of a similar nature: that since the concrete mixers were not "permanently" affixed to the trucks, they could be dismantled and the trucks could then be used for some other purpose, presumably unrelated to that of construction. In our view, the
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foregoing observations of the learned Division Bench apply to .the objection at hand. "As presented", the concrete transit mixers were precisely that. Therefore, respectfully following what has already been held, we are of the view that this objection must be overruled. As regards the second objection, taken with regard to the "old and used dump trucks (off highway)", it also cannot, and essentially for the same reasons, be sustained. 14. We now come to the principal objection…
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