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Petitioner: (1) M/s. Marosh & 24 others (2) M/s. N.S. Brothers & 26 others (3) M/s. Nutshell Traders & 12 others (4) M/s. Tribune & 16 others VS Respondent: Federation of Pakistan & 3 others
Court Name: Sindh High Court Judge(s): Agha Faisal, Munib Akhtar Title:(1) M/s. Marosh & 24 others (2) M/s. N.S. Brothers & 26 others (3) M/s.
Nutshell Traders & 12 others (4) M/s. Tribune & 16 others vs Federation of Pakistan & 3 others Case No.:(1) C.P. D-7357 of 2017 (2) C.P. D-7418 of 2017 (3) C.P. D-7515 of 2017 (4) C.P. D-7769 of 2017 Date of Judgment:2018-04-23 Reported As: PTCL 2018 CL. 603, 2018 PTD 1787, 2018 SHC 647 Result: Petition allowed Judgment Agha Faisal, J: These connected petitions pertain to a common question of law and shall be decided through the instant judgment. 2. The facts pertaining to C.P. D-7357 of 2017 ("Lead Petition ") are representative of the facts pertaining to the rest of the petitions, listed supra, and therefore it may suffice to confine the factual discussion to the controversy cited in the Lead Petition. 3. The specifics in brief are that the petitioners are importers of tiles and sanitary fixtures and fittings ("Goods ") from the People' s Republic of China ("PRC"). The Goods are being imported from the PRC under PCT headings covered by S.R.O. 497(I)/2009, dated 13.06.2009 as amended from time to time ("SRO 497"). The said statutory regulatory order ("SRO") provides exemption from customs duties in excess of Thirty Seven point Five percent (37.5%). The Respondent No. 1, through SRO 1035(I)/2017 dated 16.10.2017 ("SRO 1035") imposed duties upon various items, including the Goods. The position taken by the revenue authorities is that SRO 1035 supersedes / repeals earlier SROs, including SRO 497, and hence the benefit of SRO 497 is no longer available to the Petitioners. The issue of whether the benefit of SRO 497 remains in the field post issuance of SRO 1035 or otherwise is the main controversy herein and hence the common subject matter of the listed petitions. 4. Mr. Kashif Nazeer, learned counsel for Petitioners in the Lead Petition, has submitted that the Respondents are misinterpreting SRO 1035 and have unlawfully revoked the rightful benefits accruing pursuant to SRO 497. The arguments advanced by the learned counsel in regard hereof are encapsulated herein below: i. It was contended that by virtue of the SRO 497, Goods sought to be imported by the Petitioners were exempted from the custom duties in excess of the rate specified in the aforesaid SRO,
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being 37.5% in the present case. It may be pertinent to reproduce the relevant portion of SRO 497 herein below: S.R.O. 497 In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to exempt on import into Pakistan from Peoples Republic of China the goods specified in column (3) of the Table below , falling under the Heading and sub-Heading numbers of the First Schedule to the said Act as specified in column (2) of the said table, from the whole of customs duties in excess of the rates specified in column (4) of the T able;....(Underline added for emphasis) ii. It was contended that the aforesaid Notification was amended from time to time vide SRO 595(I)/2009 issued in June 2009, SRO 104(I)/2010, dated 22.02.2010 and SRO 573(I)/2017, dated 01.07.2017. iii. It may be relevant to reproduce the contents of the aforementioned SROs herein below: S.R.O. 595(I)/2009 In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that in its Notification SRO No.497(I)/2009 dated the 13 June, 2009, the following amendment shall be made and shall be deemed always to have been made, namely: In the aforesaid Notification, in the Table, against Serial Nos 1 to 21 and 24 to 30 in column (1), in column (4) for the figure "35" the figure "37.5" shall respectively be substituted. S.R.O. 104(I)/2009 In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that the following further amendment shall be made in its Notification SRO No.497(I)/2009 dated the 13 June, 2009, namely: In the aforesaid Notification, after S. No.34 in column (1) and the entries relating thereto in columns (2), (3) and (4), the following new S. Nos. and the entries relating thereto shall be added, namely: 356910.1020 Bath tubs ceramic 37.5 366910.1030 Bidets ceramic 37.5 376910.1040 Cisterns ceramic 37.5 386910.1050 Sink ceramic 37.5 396910.1060 Toilet ceramic 37.5 406910.1070 Urinals ceramic 37.5 416910.1080 Water closet pans 37.5 S.R.O. 573(I)/2017 In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Board, with approval of the Federal Minister-in-charge, is pleased to direct that the following further amendments shall be made from the 1st July, 2017 in its Notification No. SRO 497(I)/2009 dated the 13 June, 2009, namely: In the aforesaid Notification, - (a) in the preamble, for the words "First Schedule", the word "Schedules" shall be substituted and shall be deemed always to have been so substituted; and (b) for the existing T able, the following T able shall be substituted, namely: ... iv. It was the contention of the learned counsel that the import of items mentioned in SRO 497, as amended from time to time, enjoyed exemption from duties in excess of 37.5% and further that such exemption subsisted till date. v. Learned counsel drew the Court' s attention to the SRO 1035 and stated that the same was being misinterpreted by the Respondents and in unfounded reliance thereupon duties in excess of 37.5% were being demanded from the Petitioners in respect of the Goods. vi. It was submitted that the Petitioners' grievance is that SRO 1035 does not apply to the Goods, as exemption granted in respect thereof vide SRO 497 remains in the field. vii. Learned counsel for the Petitioners placed reliance on the judgments reported as The Assistant Collector , Customs, Central Excise and Sales Tax, Mardan Division and 2 Others vs. M/s. Gadoon Textile Mills Limited , 1994th th th
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SCMR 712 ("Gadoon Textile "), Collector of Customs and Others vs. Ravi Spinning Limited and Others , 1999 SCMR 412 ("Ravi Spinning ") and Government of Pakistan and Others vs. Messrs Saif Textile Mills Limited and Others , 2003 PTD 335 ("Saif T extile ") in order to bulwark his submissions made herein. viii. In view of the foregoing, the learned counsel for the Petitioners pleaded that the Goods be declared as being exempted under SRO 497 and further that any duty in excess of 37.5% be declared to be inapplicable thereto in view of the exemption so enjoyed. 5. Learned counsel for the Petitioners in the other connected petitions, as listed in the title hereof, adopted the arguments of the learned counsel for the Petitioners in the Lead Petition. 6. Mr. Kafeel Ahmed Abbasi set out the Respondents' case and submitted that SRO 497 was no longer in the field as it stood superseded by SRO 1035. The submissions of the learned counsel for Respondents may be summated as follows: i. It was submitted by the learned counsel that the listed petitions had been filed with the intention to deprive the Government from its legitimate revenue through misrepresentation and misinterpretation of law . ii. Learned counsel for Respondents read out paragraph 2(iii) of the counter affidavit of the Respondent No. 4 to the Court in support of his contentions. The assage referred to stipulated as follows: "The crux of the subject application as well as the petition is that as per SRO 497(I)/2009 dated 13.06.2009, the regulatory duty (R.D) or any other additional customs duty can be imposed on the goods mentioned in the aforesaid SRO. It is respectfully submitted that as held by this Honourable Court in the case of the RD petitions, including the petition D-344/2015, the Government can levy the RD even if there is any exemption or concession through any SRO under Section 19 of the Act. Without prejudiced to the above, it is respectfully submitted that there were eight notifications which had been issued to levy RD on import of different items including two main notifications i.e. SRO 482(I)/2000 dated 13.06.2009 and SRO 568(I)/2014 dated 26.06.2014. Now all these eight RD notifications of import related have been merged and a sign notification has been issued. This SRO supersedes Notifications Nos. SRO 482(I)/2009 dated 13 June, 2009, SRO 808(I)/2009 dated 19 September 2009, SRO 214(I)/2010 dated 29 March 2010, SRO 568(I)/2014 dated 26 June 2014, SRO 1043(I)/2014 dated 25 November 2014, SRO 254(I)/2015 dated 30 March 2015, SRO 393(I)/2015 dated 30 April 2015 and SRO 1248(I)/2015 dated 17 December 2015. SRO 482(I)/2009 had excluded imports against FTA and PTA, whereas SRO 568(I)/2014 did not provide such exclusion on the ground that scope of FTA / PTA is restricted to CD, which RD is outside the ambit of such trade agreements, which was letter upheld by the superior courts. Accordingly , SRO 1035(I)/2017 does not provide exemption / concession from RD to goods earlier covered under SRO 482(I)/2009 and SRO 497(I)/2009. In view of the above, it is clear that the provisions of SRO 497(I)/2009 cannot over-ride the provision of SRO 1035(I)/20 17, thus, the subject application as well as the petition is devoid of merits, hence, liable to be dismissed in limine. iii. It was contended that levy of customs duties was undertaken by virtue of section 18(1) of the Customs Act, 1969 ("Customs Act") and that it was the said duty which was subject to the exemption granted vide SRO 497. iv. It was contended that imposition of regulatory duty and additional custom duties was undertaken by virtue of sections 18(3) and 18(5) of the Customs Act and, hence the said duties were outside the purview of SRO 497 in any event. v. Learned counsel further submitted that SRO 497 was finally amended by SRO 505(I)/2017, dated 21st June, 2017, and that pursuant to entry 299 therein the Petitioners were required to pay 25% regulatory duty in addition to the other duties being paid thereupon. The relevant portion of the stated SRO is reproduced herein below: S.R.O. 505(I)/2017 In exercise of the powers conferred by sub-section (3) of section 18 of the Custo ms Act, 1969 (IV of 1969), the Federal Government is pleased to direct that the following further amendments shall be made in its Notification No.SRO 568(I)/2014 dated the 26 June, 2014, namely: 2. In the aforesaid Notification, - (a) for the T able, the following shall be substituted, namely: "TABLEth th th th th th th th th
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S.NO. PCT Code Description Rate of Regulatory Duty (%)
299 6907.1000 Tiles, cubes and similar articles, whether or not rectangular, the largest surface area of which is capable of being enclosed in a square the side of which is less than 7 cm25
vi. In support of his contentions, the learned counsel placed reliance on the judgment reported as Messrs Advance Telecom and Others vs. Federation of Pakistan and Others, 2018 SCMR 1 ("Advance Telecom"). vii. It was the contention of the learned counsel that SRO 497 stood duly repealed / rescinded and that no benefit could be availed there from by the Petitioners or any other person(s) whatsoever . 7. Learned Assistant Advocate General adopted the arguments made by Mr. Kafeel Ahmed Abbasi and also supported the contention that SRO 497 stood repealed / rescinded and was no longer operative in the field. 8. Learned counsel for the Petitioner in the Lead Petition, having considered the arguments of the learned counsel for the Respondents, exercised his right of rebuttal and the submissions made are particularized herein below: i. It was contended that the Petitioner does not rely on the Proviso but places reliance upon SRO 497, which was duly issued under s.19. ii. It was also contended that SRO 659 pertained to a bilateral arrangement betwe en Pakistan and China and that the same inter alia was discussed in Advance Telecom . It was contended that the scope of SRO 497 was entirely distinct from that of SRO 659, and hence the ratio of Advance T elecom was distinguishable herein. 9. We have heard the parties with the able assistance of the learned counsel and have examined the point involved in these connected petitions: Whether the SRO 497 remains in the field or whether the same stood repealed / rescinded by SRO 1035. 10. It may be proper to approach this issue by referring first to the applicable law in this regard. 11. The levy of duties pursuant to the Customs Act are imposed by virtue of section 18 thereof ("s.18"), which reads as follows: 18. Goods dutiable .- (1) Except as hereinafter provided, customs duties shall be levied at such rates as are prescribed in the First Schedule or under any other law for the time being in force on,-- (a) goods imported into Pakistan; (b) goods brought from any foreign country to any customs station, and without payment of duty there, transshipped 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. (1A) Notwithstanding anything contained in sub-section (1), customs duties shall be levied at such rates on import of goods or class of goods as are prescribed in the Fifth Schedule, subject to such conditions, imitations and restrictions as prescribed therein. (2) No export duty shall be levied on the goods exported from Pakistan. (3) 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 imported or exported, as
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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 , as the case may be, section 25A. (4) The regulatory duty levied under sub-section (3) 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 of ficial Gazette in which such notification appears is published at any time after that day . (5) The Federal Government may, by notification in the official Gazette, levy an additional customs-duty on such imported goods as are specified in the First Schedule, at a rate not exceeding thirty-five per cent of value of such goods as determined under section 25 or , as the case may be, section 25A : Provided that the cumulative incidence of customs-duties leviable under sub-sections (1), (3) and (5) shall not exceed the rates agreed to by the Government of Pakistan under multilateral trade agreements. (6) The additional customs-duty levied under sub-section (5) shall be,-- (a) in addition to any duty imposed under sub-sections (1) and (3) or under any other law for the time being in force; and (b) leviable on and from the day specified in the notification issued under that sub-section, notwithstanding the fact that the of ficial Gazette in which such notification appears is published at any time after that day . 12. On the other hand, exemptions granted in respect of the aforesaid levies are undertaken by virtue of section 19 of the Customs Act ("s.19"), which is reproduced herein below: 19. General power to exempt from customs-duties .-- (1) The Board, with approval of the Federal Minister-in-charge, and pursuant to the approval of the Economic Coordination Committee of Cabinet, wherever circumstances exist to take immediate action for the purposes of national security, natural disaster, national food security in the emergency situations, protection of national economic interests in situations arising out of abnormal fluctuation in international commodity prices, removal of anomalies in duties, development of backward areas , implementation of bilateral and multilateral agreements and to any International Financial Institution or foreign government owned Financial Institution operating under a memorandum of understanding, an agreement or any other arrangement with the Government of Pakistan, subject to such conditions, limitations or restrictions, if any, as it deems fit to impose, may, by notification in the official Gazette, exempt any goods imported into, or exported from, Pakistan or into or from any specified port of station or area therein, from the whole or any part of the customs-duties chargeable thereon and may remit fine, penalty, charge or any other amount recoverable under this Act. 13. A perusal of s.18 shows that the said provision provides for the imposition of customs duties, regulatory duties and additional customs duties. S.19 confers wide powers to exempt any goods from duties chargeable thereupon, by virtue of s.18, either in whole or in part. 14. It would follow that the exemption provided for under s.19 would apply to all the levies chargeable under s.18 and not merely be restricted to the levy of customs duties. 15. The primary argument of the learned counsel for the respondent was that the exemption issued pertained to customs duty only and was not applicable to regulatory duty or any other levy pursuant to the Customs Act. It was argued that regulatory duty was imposed pursuant to section 18(3) of the Customs Act, vide SRO 1035, and that the exemption relied upon, arising out of SRO 497, pertained to customs duty only, which was levied vide section 18(1) of the Customs Act. It was thus submitted that since the relevant SROs pertained to independent provisions of the Customs Act therefore the exemption issued could not be applied to a levy imposed under s.18(3) of the Customs Act. 16. The first issue to consider is whether the exemption granted under s.19 pertained to customs duty only, leviable under section 18(1) of the Customs Act, or whether such an exemption could be construed to encompass all types of levies delineated in s.18. 17. This issue came under deliberation before the Supreme Court of Pakistan in the case of Gadoon Textile, wherein it was maintained as follows:
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"In this background of the situation, the only interpretation which can be put on the notification is the total exemption from the whole of customs duties and sales tax and not only those mentioned in s.18(1) of the Customs Act. As held by this Court in the cited judgment referred to above, the regulatory duty is an additional customs charge leviable under the various sections of the Customs Act and it may look unreasonable if customs duty leviable under subsection (1) of s.18 is declared exempted whereas the additional customs charge in the form of regulatory duty is held recoverable. The words used in the notification "whole" and "leviable" suggested that the said industrial estate was exempted from all customs duties leviable in past or in future." 18. The distinction between customs duty and regulatory duty was deliberated upon in detail by the Supreme Court of Pakistan in the case of Ravi Spinning , wherein it was articulated as follows: "12. In accordance with clause (1) of s.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 s.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. 13. 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 s.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 section 25 or 25B of the Act; (iv) the regulatory duty is in addition to any duty levied under s.18(1) of the Act or levied by or under any other law for the time being enforced; (v) the regulatory duty imposed under s.18(2) ibid is effective from the date specified in the notification notwithstanding the date of publication of such notification in of ficial 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 limita tions mentioned above, regulatory duty may also be imposed by the Government under s.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 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 sections 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 s.18(1) of the Act. The scope and vires of the authority of the Government, to levy regulatory under s.18(2) of the Act was examined in detail by this Court in the case of Abdur Rahim v. Federation of Pakistan (PLD 1988 SC 670) 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 subsection (2) of s.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
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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 costs 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…
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