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Petitioner: Collector Of Customs & Other VS Respondent: Ravi Spinning Ltd. &Other
Court Name: Supreme Court of Pakistan Judge(s): Saeeduzzaman Siddiqui, Nasir Aslam Zahid, Munawar Ahmed Mirza Title: Collector Of Customs & Other vs Ravi Spinning Ltd. &Other Case No.:Civil Appeals No. 1089 to 1108 of 1995 and others (548 cases) Civil Appeals
JUDGMENT
Reported As: PTCL 1999 CL. 553 Result: Order accordingly. Judgment JUDGMENT SAIDUZZAMAN SIDDIQUI J.--(1). The above appeals arise from the judgments delivered by the High Courts of Lahore, Sindh, Baluchistan and Peshawar in number of Constitutional Petitions filed by various industrial concerns/commercial houses under Article 199 of the Constitution of Islamic Republic of Pakistan (hereinafter to be referred as 'the Constitution') to challenge the imposition of regulatory duty by the Federal Government (hereinafter to be referred as 'the Government') under Section 18(2) of the Customs Act 1969 (hereinafter to be referred as 'the Act') on imported goods/items, which were exempted either partially or wholly from payment of customs duty leviable under Section 18(1) of the Act, as well as withdrawal of exemptions from payment of customs duty and sales tax on the imports of some of the items. 2. The High Courts of Sindh, Lahore and Peshawar declared the imposition of regulatory duty under Section 18(2) of the Act by the Government on goods/items, which were exempted from payment of customs duty either wholly or partially under Section 19 of the Act, as ineffective on the ground that regulatory duty being a kind of customs duty would be covered by the exemption notification issued by the Government under Section 19 of the Act if the exemption notifications were holding the field and were not withdrawn by the Government on the date the notification imposing regulatory duty was issued. On the question of withdrawal of exemption from payment of customs
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duty and sales tax, the learned High Courts of Lahore and Peshawar, held that in so far withdrawal of exemption from payment of customs duty was concerned, it was effective in view of Section 31-A of the Act, if the withdrawal took place before the clearance of the consignment from customs but such withdrawal of exemption from payment of sales tax would not apply to cases where contracts for import of goods were finalised before withdrawal of exemption, as the Sales Tax Act had no provision similar to Section 31-A of the Act. In majority of the above appeals, the Government has challenged the judgments of Lahore, Sindh, and Peshawar High Court but in about 26 appeals, the private parties/importers have also challenged the judgments of Lahore High Court. 3. The High Court of Baluchistan at Quetta, however, took a different view. It came to the conclusion that regulatory duty imposed by the Government under Section 18(2) of the Act though a species of customs duty, is different from the customs duty levied under Section 18(1) of the Act, as the object of imposing regulatory duty is different and distinct from the duty levied under Section 18(1) of the Act. The Baluchistan High Court accordingly, held that the notification issued by the Government under Section 19 of the Act exempting certain imported goods/items from payment of customs duty levied under Section 18(1) of the Act. Could not cover the regulatory duty subsequently imposed under Section 18(2) of the Act. The judgments of Baluchistan High Court being in favour of Government, have been challenged by private parties/importers in some of the above appeals. 4. The Government has filed Civil Appeals No. 1783/96, 102/97, 126 to 140/97, 142 to 161/97, 165 to 188/97, 193 to 317/97, 319 to 356/97, 470 to 479/97, 480 to 507/97, 508 to 531/97, 545 to 560/97, 1545 to 1547/97, 16 to 37/98, 60 to 113/98 against the judgments of Lahore High Court dated 28.8.1996, 3.10.1996, 14.10.1996 and 12.10.1996, Civil Appeals No. 1089 to 1108/95 against the judgment of High Court of Sindh dated 4.5.1994 and Civil Appeals No. 869/97 to 963/97 against the judgment of Peshawar High Court, dated 23.2.1997. 5. The private parties/importers have filed Civil Appeals No. 1237 to 1241/97, 849/97 to 868/97, and 197/98 against the judgments of High Court of Baluchistan, Quetta, dated 8.5.1997 and 1.7.1997 and Civil Appeals No. 1548 to 1554/97, 1763/96, 1784/96 to 1787/96, 162/97 to 164/97, 189/97 to 192/97, 318, 357/97 and 44, 54, 55, 246, 247/98 against the judgments of Lahore High Court dated 28.8.1996 and 22.7.1997. 6. The common background of the above cases is as follows. The Government, from time to time, issued notifications under Section 19 of the Act and Section 13 of Sales Tax Act 1990 respectively, exempting various items imported for use and utilization in manufacturing units located in specified industrial zones from payment of customs duty leviable under Section 18(1) of the Act either as a whole or partially, as well as Sales Tax leviable under the Sales Tax Act. Similarly, some of the items of commercial use were also allowed partial exemption from payment of customs duty leviable under Section 18(1) of the Act through notification issued by the Government under Section 19 of the Act. 7. While the exemption notifications issued under Section 19 of the Act were in force, the Government through notification dated 29.10.1995 issued under Section 18(2) of the Act, imposed regulatory duty which applied to those items as well which were either partial or wholly exempted from payment of customs duty leviable under Section 18(1) of the Act. The Government also withdrew the exemptions of sales tax and customs duty on various imported items through notifications issued under the relevant provisions of the Act and the Sales Tax Act, from time to time. 8. The imposition of regulatory duty and withdrawal of exemption from payment of customs duty and sales tax were challenged in large number of constitutional petitions, filed in the four High Courts of the Provinces, which were decided as aforesaid. Leave was granted in all the above appeals to consider, whether imposition of regulatory duty by the Government under Section 18(2)
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of the Act on goods/items exempted from payment of customs duty leviable under Section 18(1) of the Act, was valid and recoverable. Leave was also granted to consider, whether withdrawal of exemptions from payment of customs duty and sales tax was applicable to the cases where contracts for import of goods were entered into before the withdrawal of exemptions. We have heard Mr. K.M.A. Samdani, Sh. Izharul Haq, Mr. Tanvir Bashir Ansari and Raja Muhammad Bashir, learned counsel in support of the appeals filed on behalf of the Government. They have raised the following contentions: (i) That the regulatory duty imposed by the Government under Section 18(2) of the Act, though a kind of customs duty, is distinct and separate from the customs duty levied/imposed under Section 18(1) of the Act, and therefore, exemptions granted by the Government from payment of customs duty leviable under Section 18(1) of the Act, either partially or wholly would not cover the regulatory duty imposed under Section 18(2) of the Act. (ii) That customs duty levied under Section 18(1) of the Act is of permanent nature, prescribed in the schedule to the Act while regulatory duty is incidental, imposed to achieve certain specified objects and is temporary in nature. (iii) That exemption from payment of customs duty leviable under Section 18(1) of the Act granted by the Government under Section 19 of the Act cannot automatically extend to regulatory duty, unless the exemption notification so expressly provides. (iv) That the regulatory duty being in addition to the customs duty leviable under Section 18(1) of the Act, is regulated in terms of Section 18(3) and 18(4) of the Act. (v) That withdrawal of exemptions from payment of customs duty and sales tax is effective from the date of such withdrawal irrespective of the dates of import of the goods. 9. The learned counsel appearing for the respondents in appeals filed by the Government as well as learned counsel for appellants in appeals filed by private parties while supporting the judgments of Lahore, Sindh and Peshawar High Courts contended that on the dates, the consignments entered into the territorial waters of Pakistan, regulatory duty was not imposed and therefore, subsequent notification issued by the Government imposing regulatory duty was not applicable to such consignments. It is further contended by them that imposition of regulatory duty would also not apply to the consignments which after clearance from customs were kept in bonded warehouses as on the dates of their storage in bonded warehouses, the notification imposing regulatory duty was not in the field. Some of the respondents' counsel also argued that the notification imposing regulatory duty having been issued after opening of L.Cs for import of goods was not applicable. It was additionally contended by the learned counsel for the respondents that in view of the provisions contained in protection of Economic Reforms Act 1992 (Act XII of 1992), the respondents could not be deprived of the fiscal incentives extended to them by the Government in the form of exemption from payment of customs duty and sales tax. It is argued that imposition of regulatory duty negated the exemption from payment of customs duty granted by the Government earlier, which were protected under Section 6 of Act XII of 1992. The learned counsel for respondents and appellants in private appeals in support of their contentions relied on the cases reported in PLD 1988 Lahore 156, PLD 1992 Peshawar 191 - PTCL 1993 CL. 677 and 1994 SCMR 712 = PTCL 1999 CL. 546. Some of the learned counsel for the respondents additionally contended that the goods imported by their clients being chargeable to 65% statutory customs duty, were not liable to pay the regulatory duty in terms of the notification dated 29.10.1995 imposing regulatory duty. 10. Mr. Abdul Hafiz Pirzada, the learned counsel for the appellants in Civil Appeals No. 1237 to 1241/97, 197/98 and 849 to 868 of 1997, contended as follows:- (i) That exemption from payment of customs duty was granted by the Government under the notifications issued on 14.6.1995 and 19.6.1995. The exemption notifications applied equally to
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customs duty levied under Section 18(1) and the regulatory duty imposed under Section 18(2) of the Act. (ii) That the power to levy regulatory duty being a delegated authority, could only be exercised by the Government subject to the limitations and the conditions mentioned by this Court in the case of Abdul Rahim Vs. Federation of Pakistan (PLD 1988 SC 670 = PTCL 1999 CL. 493). Imposition of regulatory duty, therefore, by the Government across the board was not valid. (iii) That the power to levy regulatory duty under the Act being subject to limitation, was justiciable and as such a nexus must be shown to exist between the levy and the object of the tax, and; (iv) That imposition of regulatory duty because of its nature, is subject to power of judicial review by the superior Courts on the grounds of being illegal, irrational and lacking prudential propriety besides being tested on the ground of reasonableness. 11. Mr. Akhtar Ali Mahmood, the learned counsel, who also appeared for the appellants in Civil Appeals No. 1237 to 1241 of 1997 along with Mr. A.H. Pirzada, besides adopting the above contentions of Mr. A.H. Pirzada further argued that SRO 560 (l)/96 dated 1.7.1996, issued by the Government was a mere roll over of the earlier notification dated 29.10.1995 which expired on 30.6.1996 in terms of Section 18(4) of the Act. This action of the Government, according to learned counsel, amounted to violation of the provisions of Section 18(4) of the Act. 12. Item No. 43 of the Federal Legislative List in the 4th Schedule to the Constitution authorises the Government to impose duties of customs, including export duties through legislation passed in terms of Article 70 of the Constitution. It is not denied that customs duties are levied not only under the Act but also under other legislation. For instance, under Section 2 of the Finance Ordinance of 1982, surcharge was imposed on the importation of the goods as additional customs duty as follows: - "2. Surcharge on imported goods.-(1) There shall be levied and collected an additional customs duty as surcharge on the importation of the goods specified in the First Schedule to the Customs Act, 1969 (IV of 1969), at the rate of five per cent of the value of the said goods as determined under section 25 of the said Act: Provided that for the purposes of the Sales Tax Act, 1951 (III of 1951), an additional customs duty shall not constitute a part of the duty-paid value". (2) The Federal Government, subject to such conditions, limitations or restrictions, if any, as it thinks fit to impose, may, by notification in the official Gazette, exempt any . Goods imported into Pakistan, from the whole or any part of the additional customs duty leviable under sub-section (1)." Similarly, under Section 5 of the Finance Act of 1985 (Act I of 1985), Iqra Surcharge was also imposed on the importation of goods by way of additional customs duty as follows "5. Iqra Surcharge on imported goods. (1) There shall be levied and collected an additional customs duty as Iqra surcharge on the importation of the goods specified in the First Schedule to the Customs Act, 1969 (IV of 1969), at the rate of five per cent of the value of the said goods as determined under section 25 of the said Act: Provided that, for the purposes of the Sales Tax Act, 1951 (III of 1951), the additional customs duty shall not constitute a part of the duty paid value. (2) The Federal Government, subject to such conditions, limitations or restrictions, if any, as it thinks fit to impose, may, by notification in the official Gazette, exempt any goods imported into Pakistan from the whole or any part of the additional customs duty leviable under sub-section (1), and no exemption from payment of customs duty under the Customs Act, 1969, or any other law for the time being in force shall apply to the additional customs duty leviable under the said subsection." Section 18 of the Act which deals with the levy and exemption of customs duties, reads as follows:- "18 - (1) Except as hereinafter provided, customs duties shall be levied at such rates as are prescribed in the First Schedule and the Second Schedule or under any other law for the time being
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in force on-- (a) goods imported into or exported from Pakistan; (b) goods brought from any foreign country to any customs-station, and without payment of duty, there transhipped or transported for, or thence carried to, and imported at any other customs- station; and (c) goods brought in bond from one customs-station to another. (2) The Federal Government may, by notification in the official Gazette, levy, subject to such conditions, limitations or restrictions as it may deem fit to impose, a regulatory duty on all or any of the goods specified in the First Schedule at a rate not exceeding one hundred per cent of the value of such goods, as determined under section 25 or section 25B and may, by a like notification, levy a regulatory duty on all or any of the goods, exported from Pakistan,- (i) at a rate not exceeding one hundred per cent of the value of the goods as determined under section 25 or section 25B, if such goods are specified in the Second Schedule; and (ii) at a rate not exceeding fifty per cent of the amount which represents the value of the goods as determined under section 25 or section 25B, if such goods are not specified in the Second Schedule. (3) The regulatory duty levied under sub-section (2) shall- (a) be in addition to any duty imposed under sub-section (1) or under any other law for the time being in force; and (b) be leviable on and from the day specified in the notification issued under that sub-section, notwithstanding the fact that the issue of the official Gazette in which such notification appears is published at any time after that day. (4) Any notification issued under sub-section (2) shall, if not earlier rescinded, stand rescinded on the expiry of the financial year in which it was issued." 13. In accordance with clause (1) of Section 18 ibid, customs duties are levied on goods imported in Pakistan, goods brought from a foreign country to a customs station in Pakistan and without payment of customs duty there taken to another customs station and on goods brought in bond from one station to another, according to rates prescribed in the 1st or 2nd Schedule to the Act or as may be prescribed by or under any other law for the time being enforced. The customs duty under Section 18(1) ibid, is therefore, a statutory duty charged at a fixed or pre-determined rate specified in 1st or 2nd Schedule to the Act or by or under any other law for the time being enforced. 14. Regulatory duty, on the other hand, is neither fixed nor pre-determined. It is imposed in exercise of the delegated authority, by the Government subject to limitations mentioned in clauses (2) to (4) of Section 18, ibid, in the following manner:- (i) the Government while levying regulatory duty may impose such conditions as it may deems fit; (ii) regulatory duty may be imposed by the Government on all or any of the items mentioned in the 1st Schedule to the Act; (iii) the rate of regulatory duty cannot exceed one hundred per cent of the value of the goods, determined in accordance with Sections 25 or 25B of the Act; (iv) the regulatory duty is in addition to any duty levied under Section 18(1) of the Act or levied by or under any other law for the time being enforced; (v) the regulatory duty imposed under Section 18(2) ibid, is effective from the date specified in the notification notwithstanding the date of publication of such notification in official Gazette; and (vi) the notification imposing regulatory duty, unless rescinded earlier, remains effective only until expiry of the financial year in which it is issued. In the like manner and subject to limitations mentioned above, regulatory duty may also be imposed by the Government under Section 18(2) on all or any of the goods exported from Pakistan, at the rate not exceeding one hundred per cent of the value of goods, determined under Section 25
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or 25B of the Act, if such goods are mentioned in the 2nd Schedule to the Act, and in respect of goods not mentioned in the 2nd Schedule at the rate not exceeding 50% of the value determined under Section 25 and 25B of the Act. The regulatory duty, therefore, by its very nature is a transitory measure intended to cover and meet a situation or condition not covered by the statutory duty prescribed under Section 18(1) of the Act. The scope and vires of the authority of the Government, to levy regulatory under Section 18(2) of the Act was examined in detail by this Court in the case of Abdur Rahim Vs. Federation of Pakistan (PLD 1988 SC 670 = PTCL 1999 CL. 493) which related to the import of iron and steel scrap and some other iron and steel items. The relevant discussion dealing with the point in issue, reads as under:-- "By sub-section (2) of section 18, the Legislature has delegated to the Federal Government the discretion to levy "regulatory duty" on all or any of the items specified in the First Schedule at a rate not exceeding fifty per cent of the rate, if any, specified therein or at a rate not exceeding hundred per cent of the value of such articles, as determined under section 25 and may, by a like notification, levy a regulatory duty on all or any of the articles exported from Pakistan in respect of the articles mentioned in the Second Schedule at a rate not exceeding thirty per cent of the rate specified in the Second Schedule or of the amount which would represent the value of such articles as determined under section 25; and in the case of articles not specified in the Second Schedule, at a rate not exceeding thirty per cent of the amount which represents the value of such articles as determined under section 25. Here what is to be noticed is the exercise of a discretion within a legislative framework, i.e., firstly, that the discretion to levy is subject to such conditions, limitations or restrictions as the Federal Government may deem fit to impose: secondly, the specification of the articles by reference to the Schedule and the maximum of the rate of duty to be imposed: and thirdly, that the imposition of the levy was for a limited period of a financial year unless the levy was earlier withdrawn. The levy was described as "regulatory duty" as it was imposed to maintain a proper balance in a fluctuating market as a result of sharp fall in the international prices of iron and steel scrap and certain other iron and steel items with the result that the importers imported these materials at a much lower cost but regardless of it the prices did not fall to any substantial extent in the domestic market, and it were the importers only who were the beneficiaries and were earning windfall profits. Therefore, the discretion to levy "regulatory duty" was a device to enhance the rate of duty at any time during the course of the year so as to achieve a balance. The Legislature, in the circumstances could not know as to the details of the fluctuating international prices from time to time during the course of the year and for that matter could not also be in a position to enhance the levy to obtain a balance of the prices in the domestic market nor was it in a position to speculate the details of the conditions, limitations or restrictions which were necessary to be imposed for the levy of "regulatory duty". It was in these circumstances that it provided the framework for the levy of "regulatory duty" to be imposed and gave the discretion to the Federal Government to make a levy so as to achieve a balance in the prices in the local market. In this view of the matter, what has to be seen is the nature of the power delegated which determines whether the delegation is proper or invalid. If the Legislature delegates its power to make the law, that is, its own legislative function then it would be invalid but if what is delegated is the authority to exercise the discretion in respect of matters which had been finally determined by the Legislature itself, the delegated authority does not exercise a legislative function. In this context, the law itself provided the framework and left it to the Federal Government to exercise the discretion in the manner laid down within the framework It cannot, therefore, be regarded as an abdication of its function by the Legislature but by law a valid delegation of a discretion to achieve the purpose of the law." (The underlining is by us).
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15. Mr. A.H. Pirzada, the learned counsel for appellants in Civil Appeals No. 1237 to 1241/97, 849 to 868/97 and 197/98, however, contended that in view of the observations of this Court in Abdur Rehim's case (supra) the notification imposing regulatory duty cannot be held valid as it disclosed no basis or reasons for such levy. It is contended that the Government has no power under Section 18(2) of the Act to impose regulatory duty across the board. The delegated exercise of power by the Government to levy regulatory duty, it is contended by the learned counsel, is subject to scrutiny and review by the superior Courts in exercise of their power of judicial review vested under the Constitution. The learned counsel further contended that a cursory glance on the notification dated 29.10.1995, would show that it disclosed no reason for imposition of regulatory duty. The learned counsel very vehemently argued that in so far the cases of his clients were concerned, there was no justification for levy of regulatory duty at all as on account of devaluation of Pak Rupee, the international prices of iron scrap had enhanced and therefore, in terms of the ratio laid down in Abdur Rahim's case, supra, the rate of customs duty should have been reduced on ships imported for scrapping instead of imposing further burden of customs duty by imposing regulatory duty. The learned counsel further contended that this point was specifically raised in the petitions filed by his clients before the Baluchistan High Court but the learned Judges declined to go into this question. Mr. Akhtar Ali Mahmood, the learned counsel for some of the appellants, argued that the SRO dated 1.7.1996 is just a roll over of the earlier notification issued on 29.10.1995 imposing regulatory duty which stood expired on 30.6.1996 and therefore, the issuance of the notification dated 1.7.1996, seeking to continue the imposition of regulatory duty was in contravention of Section 18(4) of the Act. 16. In the case of Abdur Rahim (supra), this Court while upholding the delegation of the power to the Government to levy…
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