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Petitioner: Dewan Motors (Pvt) Ltd. and another VS Respondent: Federation of Pakistan & others
Court Name: Sindh High Court Judge(s): Aqeel Ahmed Abbasi, Abdul Maalik Gaddi Title: Dewan Motors (Pvt) Ltd. and another vs Federation of Pakistan & others Case No.:(1) C.P.No.D-4658/2018 (2) C.P.No.D-1894/2017 (3) C.P.No.D-4660/2018 (4)
JUDGMENT
Reported As: 2021 P C T L R 101, PTCL 2021 CL. 178, 2021 PTD 232, 2020 SHC 430 Result: Petition disposed off Judgment JUDGMENT Aqeel Ahmed Abbasi, J. The above petitions have been filed to challenge the vires of sub-section (2) of Section 221-A of the Customs Act, 1969 added vide Finance Act, 2018, as according to petitioners that no Regulatory Duty was or could be levied, charged or collected on imports under the Customs Act, 1969, nor any validation thereof, is constitutionally permissible during the period from the date of commencement of the Finance Act, 2017 till date of commencement of Finance Act, 2018. Whereas, in all the aforesaid petitions, similar relief has been sought in the following terms: I. Declare that sub-section (2) of Section 221A of the Customs Act, 1969, as inser ted by the Finance Act 2018, is ultra vires of the Constitution of Pakistan, 1973, void ab initio and a nullity in the eyes of the law . II. Declare that no regulatory duty was or could be levied, charged or collected on imports under the Customs Act, 1969, nor any validation thereof is permissible for the period starting from the date of commencement of the Finance Act, 2017 till the date of commencement of the Finance Act, 2018. III. Direct the respondents to immediately refund the amount collected by them from the petitioners in the name of regulatory duty under Section 18(3) of the Customs Act, 1969, as it stood till the date of commencement of the Finance Act, 2018. IV. Direct the respondents to immediately return the security or to refund the amount equivalent thereof collected by them from the petitioners under the orders passed by this Honourable Court in the earlier round of litigation challenging the levy and collection of regulatory duty . V. Direct the Nazir to immediately return the security or refund the amount equivalent thereof deposited or secured by the petitioners under the orders passed by this Honourable Court in the earlier round of litigation challenging the levy and collection of regulatory duty .
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VI. Restrain the respondents and their officers from taking any action for encashing the securities furnished by the petitioners with the customs or Nazir of the Court or from taking any action for recovery of regulatory duty and/or assessment of consignments of the petitioners on the basis thereof for the relevant period. VII. Grant any other relief deemed fit in the circumstances of the case. VIII. Grant order as to costs. 2. It will be advantageous to examine the provisions of Section 221-A of the Customs Act, 1969, particularly , the impugned provisions of sub-section (2) of Section 221-A added by Finance Act, 2018, which is subject matter of challenge through instant petitions. The same reads as follows: [221-A. Validation.-47[(1)] All notifications and orders issued and notified in exercis e of the powers conferred upon the Federal Government, before the commencement of Finance Act, 2017 shall be deemed to have been validly issued and notified in exercise of those powers.] 47[(2) Notwithstanding any order or judgment of any court, a High Court and the Supreme Court, the regulatory duty already levied, collected and realize d in exercise of any powers under this Act, before the commencement of the Finance Act, 2018 and after the commencement of the Finance Act, 2017, shall be deemed to have been validly levied, collected and realized under this Act, in exercise of the powers conferred on the commencement of the Finance Act, 2018, and where any such regulatory duty has not been levied, collected or realized, the same shall be recoverable in accordance with the provisions of this Act.]" 3. From perusal of sub-section (2) of Section 221-A added through Finance Act, 2018, it appears that the legislature has made an attempt to validate the collection of regulatory duty made after commencement of Finance Act, 2017, Notwithstanding any order or judgment of any Court, High Court or Supreme Court relating to validity of imposition and collection of Regulatory Duty through SRO 1035(I)/2017 dated 16.10.2017, which was under challenge before a Divisional Bench of this Court in number of Constitutional Petitions, whereas, such petitions were decided vide judgment reported as 2018 PTD 861 in the case of Premier Systems v. Federation of Pakistan & others, wherein, it was held that Section 18(3) of the Customs Act, 1969, as well as the SRO 1035(I)/2017 dated 16.10.2017, whereb y, Regulatory Duty was imposed on the imports is ultra vires to the Constitution. The above judgment of the Divisional Bench of Sindh High Court was challenged by the FBR before the Hon'ble Supreme Court by filing CPLA (Civil Appeal No.321/2018), however , before the matter could be decided on merits, by the Hon'ble Supreme Court, the FBR moved an application under Order XXXIII Rules 5 & 6 of the Supreme Court Rules, 1980 being CMA No.1623 of 2018 [C.A. # 321 of 2018], contents of which, are reproduced as under , for the sake of brevity , and also to examine the effect and implications of the order passed by the Hon'ble Supreme court on such application as learned counsel for the petitioners and respondents, have drawn different conclusions from the said order . 4. "APPLICA TION UNDER ORDER XXXIII RULES 5&6 OF THE SUPREME COURT RULES 1980 It is respectfully submitted as under:- (1) The titled appeal is pending before this August Court. Leave to appeal against the judgment of the Sindh High Court was granted on 06.03.2018 in earlier CPLA # 706/2018. (2) The Parliament has since passed the Finance Act # XXX of 2018 ("Finance Act") which received the assent of the President of Pakistan on 22.05.2018 and was notified on 23.05.2018. (3) As per sub-section 92) of section 3 of the Finance Act section 18 of the Customs Act 1969 has been further amended and it has been provided that in sub-section (3) of section 18 ibid the words "Federal Government" shall be substituted for the expression Board, with the approval of the Federal Minister Incharge." (4) Further , through sub-section (18) of section 3 of the Finance Act section 221A of the Customs Act 1969 has been renumbered as sub-section 91) and a new sub-section 92) has been added as under:- "(2) Notwithstanding any order or judgment of any court, a High Court and the Supreme Court, the regulatory duty already levied, collected and realized in exercise of any powers under this Act, before the commencement of the Finance Act, 2018 and after the commencement of the Finance Act, 2017, shall be deemed to have been validly levied, collected and realized under this Act, in exercise of the powers conferred on the commencement of the
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Finance Act, 2018, and where any such regulatory duty has not been levied, collected or realized, the same shall be recoverable in accordance with the provisions of this Act." (5) In view of what has been stated above it appears to have become unnecessary for this August Court to adjudicate on the issues raised in the leaving granted order dated 06.03.2018 because:- (i) Parliament has restored the words ?Federal Government" for the expression ?Board, with the approval of the Federal Minister Incharge" in section 18(3) of the Customs Act, 1969. (ii) The regulatory duty levied, collected and realized, and to be levied, collected and realized, under the notification's) issued after commencemen t of the Finance Act, 2017 and before commencement of the Finance Act 2018, have been fully validated/protected. (iii) The appellant FBR and its Collect orates will now continue to levy, collect and realize the afore-mentioned regulatory duties including any arrears not so far collected/realized in accordance with the provisions of section 18 and 221A(2) of the Customs Act, 1969. It is, therefore, respectfully prayed that the titled appeal may graciously be disposed of in terms of para 5 as there is no longer any live issue that remains to be adjudicated.? 5. The aforesaid application has been disposed of by the Hon'ble Supreme Court vide order dated 11.06.2018 in the following terms:- "Federal Board of Revenue through the Secretary , Revenue Division/Chairman, FBR House, Constitution Avenue, Islamabad and others .............Applicants Versus M/s. Premier Systems (Pvt) Ltd. and others. ........Respondents "ORDER "MIAN SAQIB NISAR, CJ. The contents of C.M.A. No. 1623-L/2018 disclose the latest developments which have taken place after filing of these appeals with regard to amendment in law and consequent issuance of certain SROs. The learned ASCs for the Appellants state that on account of subsequent developments and amendments in the relevant provisions of law, the present matters have been rendered infructuous. In this view of the matter , these appeals are disposed of. 2. It is however clarified that any observat ion made or finding given in the impugned judgment(s) on the basis of the erstwhile law shall not cause any prejudice to the appellants/petitions. Further , in case at any point in time, the question of validation of the amended law or SRO(s) is raised before any Court of competent jurisdiction, the same shall be independently decided on merits. 6. Keeping in view the above of factual and legal position, as well as Court regarding invalidity of provisions of Section 18(3) of the Customs Act, 1969, and the SRO 1035(I)/2017 dated 16.10.2017, we may now examine the submissions of learned counsel for the petitioners, whereas, to avoid the repetition of arguments advanced by number of counsel for the petitioners in these cases, we would summarize their verbal and written arguments, mainly advanced by M/s. Khalid Jawaid Khan and Ms. Amber Lakhani, and Mr. Abdul Moiz Jafri, Advocates in the following terms:- A. Outline of submissions: * Section 221A, sub-section (2) of the Customs Act, 1969 [hereinafter referred to as the `impugned provision'] as inserted by the Finance, 2018 [the `2018 Act'], is unlawful and ultra vires the Constitution, and consequently liable to be declared void. * The impugned provision unlawfully seeks to validate the regulatory duty imposed and collected pursuant to SRO 1035(I)/2017 [`SRO 1035'] which was issued in exercise of powers that had previously been conferred -- through the Finance Act, 2017 [the `2017 Act'] - upon the Federal Board of Revenue [the `Board'] acting with the approval of the Federal Minister-in-Charge under Section 18(3) of the Customs Act, 1969 [the `Customs Act']. The said conferment of power of inter alia the Board by the 2017 Act - as well as SRO 1035 and the regulatory duty imposed and collected in pursuance thereof - had been declared unconstitutional by a learned Divisional Bench of this Hon'ble Court in Premier Systems (Pvt.) Ltd & others vs. Federation of Pakistan & others , reported in 2018 PTD 861 [`Premier System'], as fully described herein below . Subsequently , the 2018 Act - while restoring
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Section 18(3) to its original position prior to the 2017 Act (i.e. whereby the Federal Government was empowered to impose regulatory duty) with prospective effect - attempted to subvert Premier Systems through the impugned provision by purporting to validate the regulatory duty that was declared unconstitutional by this Hon'ble Court in the said judgment. * The impugned provision is unlawful inasmuch as, inter alia, it seeks to validate actions that were inherently unconstitutional and void (as declared in Premier Systems), and were therefore incapable of being cured through any act of parliament. It is a settled principle that while Parliament -in certain circumstances - may have the power to retrospectively validate actions taken in violation of a pre-existing statutory requirement by enacting curative legislation and thereby removing the statutory defect, it does not have the power to validate any acts that violated the Constitution. * The judgment in Premier Systems is premised on the seminal judgment of the Hon'ble Supreme Court in Mustafa Impex, Karachi & others vs. The Government of Pakistan & others , reported in PLD 2016 SC 808 ['Mustafa Impex'] wherein it was held inter alia {as fully described herein below) that the Federal Government is a collective entity described as the Cabinet constituted by the Prime Minister and Federal Minister; and the purported exercise of a statutory power exercisable by the Federal Government by a Secretary , a Minister or the Prime Minister acting on their own, especially in relation to fiscal matters, is constitutionally invalid and a nullity in law. It was also held that fiscal notifications enhancing the levy of tax issued by the Secretary , Revenue Division or the Minister are ultra vires. * Although the Federal Government had filed an appeal against the judgment in Premier Systems before the Hon'ble Supreme Court, it later decided not to pursue the appeal in light of the subsequent enactment of the 2018 Act, and through the order dated 11.06.2018, the Hon'ble Supreme Court disposed of the appeal as having become infructuous. The judgment of this Hon'ble Court in Premier Systems was not disturbed or modified in any way, and the same therefore attained finality . B. Background: * Mustafa Impex: The issues forming the subject matter of the instant petition (and the various connected matters) essentially originate from the Hon'ble Supreme Court's judgment in Mustafa Impex, wherein the legality of various statutory notifications purporting to withdraw of modify various sales tax exemptions was challenged. The primary ground for such challenge was that the said notifications had been issued not by the Federal Government, as was required by law, but by the Additional Secretary , Revenue Division, who was not competent to do so. * In order to elucidate the meaning of the term `Federal Government' as well as the concept of `executive powers', the apex court conducted a detailed exposition of Pakistan's constitutional and political history , beginning with the Government of India Act, 1935 and leading up to the 18 the Amendment and its implications for the nation's government structure. In light of this exhaustive analysis, the Supreme Court identified numerous principles emanating from the Constitution, including but not limited to the following: i. The Federal Government no longer has the power to delegate any of its functions to officers or authorities, and the exercise of any power by the Federal Government has to be strictly in accordance with the Rules of Business (Para 40, Placitum B) ii. Powers relating to fiscal matters - such as those delegated to the Federal Gove rnment under the Sales Tax Act and exercise whereof by the Secretary was under challenge in Mustafa Impex - can only be delegated to the Federal Government, and the conferment of the same to any other authority would be unconstitutional (Para 63, Placitum T) iii. Neither Article 98 nor any other provision of the Constitution permits the transfer of legislative powers to officials subordinate to the Federal Government, and any such transfer would violate the structure of the Constitution (Para 66, Placitum W) iv. The regulation and issuance of fiscal notifications is in the nature of subordinate legislation, and the conferment of such powers on the Executive per se would be violate of the doctrine of separation of powers and parliamentary sovereignty (Para 67)
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v. The Federal Government means the Cabinet comprising the Federal Ministers and the Prime Minister (Para 54 & 79), and any statute that purports to provide a different definition of the Federal Government (such as the Pakistan Telecommunication (Re-organization) Act, 1996) is ultra vires to such extent (Para 68) vi. It is not the Prime Minister acting singly , but the entire Cabinet that is collectively responsible to Parliament, and this applies with special force in relation to fiscal and budgetary matters. In all such matters, the prior decision of the Cabinet is required since it is that body alone which constitutes the Federal Government (Para 81, Placitum KK) vii. The purported exercise of a statutory power exercisable by the Federal Government - especially in relation to fiscal matters - by a Secretary , Minister or the Prime Minister , are constitutionally invalid; and fiscal notifications enhancing the levy of tax issued by inter alia the Minister are ultra vires (Para 84, Placitum OO, UU) * Premier Systems: Thereafter , the 2017 Act was enacted, ostensibly in response to the judgment in Mustafa Impex, insofar as various amendments were made to, inter alia, the Sales Tax Act, 1990 (including the provision at issue in Mustafa Impex) and the Customs Act, One such amendment was made to Section 18(3) of the Customs Act. Prior to the 2017 Act, Section 18(3) read as follows: "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 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. Pursuant to Section 2(6) of the 2017 Act, the words Board, acting with the approva l of the Minister-in-Charge were substituted for the words "Federal Government" in Section 18(3) of the Customs Act. Thus, the power to impose regulatory duty was taken away from the Federal Government and instead conferred on the Board acting with the approval of the concerned Minister . This amendment - along with SRO 1035 issued in pursuance thereof - was challenged by the Petitions in the instant matter before this Hon'ble Court in Premier Systems, wherein a learned Divisional Bench - relying upon Mustafa Impex - declared the said amendment to be unconstitutional and void, on inter alia the following grounds: i. Article 77 does not confer untrammeled power upon Parliament to delegate taxing powers on any person (other than the Federal Government) and is intended to limit Parliament's powers instead of expanding them. As such, Article 77 could not be invoked to protect the amendment made by the 2017 Act to Section 18(3) of the Customs Act (Para 17); ii. The power to impose regulatory duty is a species of delegated legislation, and as such, it cannot be conferred under Article 98 on any authority subordinate to the Federal Government. If at all such power of delegated legislation is delegated upon the Executive, it can only be a function of the Federal Government as constitutionally constituted and understood being the Federal Cabinet (Para 23, 24) iii. Since the whole purpose of the amendment was to take the Federal Governm ent out of the loop, the fact that SRO 1035 had in fact been approved by the ECC of the Cabinet notwithstanding the amendment was of no consequence. The law had been altered and for the Cabinet to be brought back into the picture via the ECC was itself contrary to the law as amended, SRO 1035 could not there be saved on such basis (Para 27) In view of the foregoing, Section 18(3) of the Customs Act as amended by the 2017 Act and SRO 1035 were struck down as unconstitutional and of no legal effect, and all sums paid by the Petition ers by way of regulatory duty in pursuance thereof - as well as the security submitted in court/to customs officials pursuant to the Hon'ble Court's interim orders - were directed to be refun ded in full. The operation of the judgme nt was, however , suspended for 30 days so as to enable aggrieved parties to appeal, and the operation of the Court's interim orders continued. * Appeal before the Supreme Court The Federal Government appealed against the judgment in Premier Systems, and the Hon'ble Supreme Court was pleased to grant an interim order suspending the operation thereof. However , shortly thereafter , the 2018 Act (containing the impugned provision) was enacted, and in view of the same, the Federal Government submitted before the Hon'ble Supreme Court that in light of the 2018 Act, the matter has become "infructuous" and that it no
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longer wished to pursue the appeal. Accordingly , the Hon'ble Supreme Court through the order dated 11.06.2018 disposed of the appeal as having become infructuous. It is vital to note that the judgment in Premier Systems was not modified or disturbed in any way and the same has therefore, attained finality . Moreover , the Supreme Court also clarified that any question pertaining to the legality of the validation clause in the 2018 Act - i.e. the impugned provision - would be determined independently . * Present controversy The 2018 Act has - with prospective effect - restored Section 18(3) of the Custom s Act to its original form i.e. the Federal Government has been reinstated with authority to impose regulatory duty. However , the impugned provision as inserted by the 2018 Act, provides as follows: "Notwithstanding any order or judgment of any court, a High Court and the Supreme Court, the regulatory duty already levied, collected and realized in exercise of any powers under this Act, before the commencement of the Finance Act, 2018 and after the commencement of the Finance Act, 2017, shall be deemed to have been validly levied, collected and realized under this Act, in exercise of the powers conferred on the commencement of the Finance Act, 2018, and where any such regulatory duty has not been levied, collected or realized, the same shall be recoverable in accordance with the provisions of this Act." It is therefore clear that the impugned provision is a response - and an attemp t to sidestep - the judgment in Premier Systems in the same way that the 2017 Act had been (unsuccessfully) enacted in response to Mustafa Impex. In pursuance of the impugned provision, the Federal Government/FBR issued various notices to the petitioners seeking encashment of the security deposited with the court/customs officials in pursuance of the Hon'ble High Court's interim orders passed during the pendency of Premier Systems. The petitioner , being aggrieved by the same as well as by the impugned provision, therefore, preferred the instant petitions. * Legal propositions i. The impugned provision is unlawful and ultra vires the Constitution, and consequently liable to be declared void. ii. The impugned provision unlawfully seeks to validate the regulatory duty imposed and collected pursuant to SRO 1035 that was issued in exercise of powers that had previously been conferred by the 2017 Act upon the Board, acting with the approval of the Federal Minister-in-Charge, under Section 18(3) of the Customs Act. The said conferment of power on inter alia the Board by the 2017 Act - as well as SRO 1035 and the regulatory duty imposed and collected in pursuance thereof - have already been declared unconstitutional and void by the Hon'ble High Court of Sindh in Premier Systems, ,which judgment has attained finality . The impugned provision is therefore unlawful inasmuch as, inter alia, it seeks to validate actions that were inherently unconstitutional and void (as declared in Premier Systems), and were therefore incapable of being cured through any act of Parliament. iii. While Parliament may - in certain circumstances - have the power to retrospectively validate actions taken in violation of a pre-existing statutory require ment by enacting curative legislation and thereby removing the statutory defect, it does not have the power to validate any acts that violated the Constitution, since all such acts are void (and not voidable) by their very nature and incapable of being cured. iv. The acts sought to be validated by the impugned provision are unconstitutional not only by virtue of the judgment in Premier Systems, but also because they violate inter alia Articles 90, 91 and 98 of the Constitution, as held in Mustafa Impex. The Federal Government is a collective entity described as the Cabinet constituted by the Prime Minister and Federal Ministers; and the purported exercise of a statutory power exercisable by the Federal Government by a Secretary , a Minister or the Prime Minister acting on their own, especially in relation to fiscal matters, is constitutionally invalid and a nullity in law. it was also held that fiscal notifications enhancing the levy of tax issued by the Secretary , Revenue Division or the Minister are ultra vires. As such, the imposition and collection of regulatory duty by the Board acting with the Minister-in-Charge - which is not sought to be validated by the impugned provision - was squarely unco nstitutional and a nullity in law in terms of Mustafa Impex, and cannot therefore be validated through any act of Parliament. 7. In…
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