COLLECTOR OF CUSTOMS VS RAVI SPINNING LTD.
1999 P T D 1078
[Supreme Court of Pakistan]
Present: Saiduzzaman Siddiqui, Nasir Aslam Zahid and Munawar Ahmed Mirza, JJ
COLLECTOR OF CUSTOMS and others
Versus
RAVI SPINNING LTD. and others
Civil Appeals Nos. 1089 to 1108 of 1995 and others (548 cases), decided on 12/01/1999.
(On appeal from the judgments of Lahore High Court dated 19-9-1996, 25-9-1996, 28-8-1996, 29-9-1996, 3-10-1996, 14-10-1996, 21-10-1996, 22-7-1997; Peshawar High Court dated 23-2-1997; High Court of Sindh dated 4-5-1994 and High Court of Balochistan, dated 1-7-1996 and 8-5-1997).
Civil Appeals Nos. 1089 to 1108 of 1995 (20 cases)
(On appeal from the judgments of High Court of Sindh, Karachi 4-5-1994 passed in Constitution Petitions Nos.2383 of 1992, 550, 153, 702, 1725, 1208, 1500, 982, 388, 785, 789, 787, 3113, 3114 of 1993, 3136, 3134, 3116, 2988, 2989 and 7960 of 1992 respectively).
Civil Appeals Nos. 1763 of 1996 and others (334 cases)
(On appeal from judgments of Lahore High Court, dated 19-9-996, 22-7-1996, 28-8-1996, 3-10-1996, 14-10-1996 and 21-10-1996, passed in Writ Petitions Nos. 18678, 17231/95, 14072, 706, 705, 701, 9038/96, 16810/95, 3446, 18386, 9238/96, 18440/95, 9791/96, 3442/96, 17995/95, 18387/95, 18137%95, 95,`825/96, 3444, 9064, 9927, 8727, 5644, 8126, 9962, 5983, 1464, 5178, 9489, 1399, 73, 190, 4700, 760/96, 9366/97, 2166/96, 18385/95, 9545/96, 1462, 2347, 2758, 1203, 6396, 7243, 73, 7991, 2560, 8512, 3430, 1534, 5017, 1577, 7914, 623, 6065, 319, 4596, 6047, 2435, 8060/96, 18403/95, 6224/96 604. 097, 1485, 8381, 3167, 6043, 6178, 5780/96, 18400/95,'18401/95, 9783/96, 3445, 8528, 8530, 8823, 72, 4238, 54, 86, 634, 8931, 2854, 829, 824, 12, 4212, 4595, 4214, 1737, 4116, 9592, 8792, 8933, 4154, 176, 63, 8765, 4550, 55, 1205, 8585, 2175, 3799, 5784, 1517, 8216, 3974, 5958, 5646, 3806, 3868, 3894, 5839, 5756, 2160, 5183, 1197, 3823, 158, 488, 1788, 1751, 1713, 1736, 6123, 8258, 2210, 45, 4515, 1253, 8529, 2177/96, 18357/95, 8671/96, 1613, 1559, 10544, 2710, 3111, 10475, 14249, 3302, 3297, 14251, 3271, 3584, 10120, 260, 10121, 3552,.10201, 227, 1541, 10203, 12441, 2929, 1673, 2699, 10852, 2577, 12710, 1562, 2697, 265, 1577, 1502, 5684, 261, 774, 5406, 1024, 1914, 8253, 1834, 457, 4014, 365, 850, 767, 5362, 1007, 2209, 1132, 1835, 1128, 1836, 8215, 315, 5123, 1896, 4323, 775, 10873, 827, 5675, 5262/96, 18642/95, 943/96, 17940/95, 930/96, 17922, 929, 1109, 17214, 17985, 17997, 633, 4359, 18491, 4538, 4537, 8361, 8366, 8385, 6288, 3726, 4881, 8071, 8362, 8494, 8033, 7860/96, 17941/95, 4697/96, 1117/96, 17233/95, 10731/96, 7883, 6512, 4616, 4850/96, 17791/95, 6234/96, 8031, 8369, 261, 17664, 17666, 17667, 17668, 17669, 17670, 17964, 17965, 17966, 17535, 204/96, 1531/95, 1528, 1512, 1529, 1535, 1566, 1530, 1731/95, 95/96, 1614/95, 1532, 1715, 1591/95, 35/96, 1509/95, 1511, 1734, 1730, 1758, 1533, 1651, 1507, 1536/95, 1526/96, 1545/95; 203/96, 213/96, 1759/95, 1590/95, 16100/97, 16101/97, 17534/96, 17665, 17639/96, 18031/95, 18526, 18091, 17938, 18093, ' 18122, 18120, 18626, 18090, 18029, 18121, 18284, 18305, 18540, 18694, 18563,18437,18158/95,6310/96,18486/95,18190, 18537,18579, 18493, 18571/95, 18668, 18616, 18191, 17922, 17939/95, 6602/96, 18601/95, 4876/96, 18283/95, 4878/96, 18364/95, 18645, 18030,.18642, 18693, 17912, 18551, 18029, 18476, 18494/95, 6342/96, 18613/95, 18288, 18611/95, 7975/96 and 18451/95 respectively).
Civil Appeals Nos. 480 of 1997 to 517 of 1997 1545 to 1554 of 1997 16 to 37 of 1998, 44, 246 and 247 of 1998 (73 cases)
(On appeal from the judgments of Lahore High Court, Rawalpindi Bench, dated 28-8-1996, 25-9-1996 and 29-9-1996 in Writ Petitions Nos. 157/96, 212/96, 1588/95, 1670/95, 1586/95, 1589/95, 1693/95, 1596/95, 1597/95, 1646/95,1652/95, 1653/95,1696/95, 1654/95,1585/95, 1584/95,1583/95,1687/95,1582/95,1543/95,1540/95, 1542/95, 1427/95, 1508/95, 1510/95, 1537/95, 1587/95, 1541/95, 37/96, 5/96, 36/96, 39/96, 160/96, 612/96, 1525/95, 1534/95, 202/96, 1527/95, -1732/95, 17/96, 1650/95, 3662/96, 9956/96, 5172/96, 3661/96, 2377/96, 18542/95, 3369/96, 1704/95, 1648/95, 1756/95, 1747/95, 1042/95, 1748/95, 228/96, 139/96, 1745/95, 1733/95, 1449/95, 224/96, 1158/95, 519/96, 205/96,, 209/96, 244/96, 1448/95, 38/96, 138/96, 1626/95, 1679/95, 612/96,
1621/95 and 1105/95).
Civil Appeals Nos.869 to 963 of 1997 (95 cases)
(On appeal from the judgments of Peshawar High Court dated 23-2-1997 in Writ Petitions Nos.1110/95, 1248/95, 1238/96, 47/96, 50/96, 1271/95, 1202/95, 164/96, 1238/95, 637/96, 400/96, 1317/95, 1117/95, 1265/96, 464/96, 1108/96, 462/96, 632/96, 1165/95, 35/96, 78/96, 180/96, 1235/95, 1223/95, 527/96, 310/96, 71/96, 1111/96, 152/96, 34/96, 1129/96, 531/97, 487/96, 203/96, 1175/96, 107/96, 296/96, 1222/95, 155/96, 1108/95, 1312/95, 160/96, 1278/95, 1315/95, 1098/95, 1240/95, 1294/95, 16/96, 1208/96, 685/96, 1269/95, 407/96, 153/96, 547/96, 407/96, 1096/96, 65/96, 1118/96, 540/96, 103/96, 929/97, 1292/95, 1246/95, 528/96, 1212/95, 31/97, 1139/95, 167/96, 94/96, 1262/95, 1029/96, 1322/95, 1199/95, 134/96, 228/96, 1196/96, 1176/96, 151/96, 1259/95, 93/96, 1109/95, 176/96, 9266/95, 1185/95, 538/96, 1239/95, 1263/95, 371/96, 1289/95, 1254/95, 1272/95, 996/95, 28/96, 1022/96 and 1161/95).
Civil Appeals Nos. 197 of 1998 1237 to 1241. 849 to 868 of 1997 (26 cases)
(On appeal from the judgments of High Court of Balochistan, dated 1-7-1996 and 8-5-1997 in Constitutional Petitions Nos.51/96, 409/96, 410/96, 411/96, 428/96, 429/96, 85/96, 49/96, 5/96, 50/96, 84/96, 48/96, 139/96, 95/96, 47/96, 182/96, 52/96, 94/96, 87/96, 12/96, 53/96, 54/96, 55/96, 129/96, 88/96 and 116/96). .
(a) Customs Act (IV of 1969)---
----S. 18(1)(2)---Constitution of Pakistan (1973), Art. 185(3)---Leave to appeal was granted to consider, whether imposition of regulatory duty by the Government under S.18(2), Customs Act, 1969 on goods/items exempted from payment of customs duty leviable under S.18(1) of the said Act, was valid and recoverable and whether withdrawal of exemption 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.
(b) Customs Act (IV of 1969)---
----S. 18(1)---Goods dutiable---Customs duty under S.18(1), Customs Act, 1969 is a statutory duty charged at a fixed or predetermined rate specified in First or Second Sched. to Customs Act, 1969 or by or under any other law for the time being enforced.
(c) Customs Act (IV of 1969)---
----S. 18(1)(2)(3)(4)---Imposition of regulatory duty---Regulatory duty is neither fixed nor pre-determined and is imposed in exercise of the delegated authority, by the Government subject to limitations mentioned in S.18(2)(3)(4), Customs Act, 1969---Regulatory duty, by its very nature, therefore, is a transitory measure intended to cover and meet a situation or condition not covered by the statutory duty prescribed under S.18(1), Customs Act, 1969---Manner of, limitations and conditions for imposition of regulatory duty enumerated.
Regulatory duty 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, Customs Act, 1969 in the following manner:--
(i) The Government while levying regulatory duty may impose such conditions as it may deem fit;
(ii) Regulatory duty may be imposed by the Government on all or any of 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 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) 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 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 Second Schedule at the rate not exceeding 50% of the value determined under sections 25 and 25B of the Customs 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.
(d) Customs Act (IV of 1969)---
----S.18(2)(3)(4)---Regulatory duty---Imposition of regulatory duty by the Government under S.18(2), Customs Act, 1969 is subject to only those limitations and conditions which are mentioned in S.18(2)(3) & (4) of the Act---Said limitations and conditions do not cast any obligation on the Federal Government to state the reasons for imposing regulatory duty.
The imposition of regulatory duty by the Government under section 18(2) is subject to only those limitations and conditions, which are mentioned in subsections (2) to (4) of section 18 of the Act. These limitations and conditions do not cast any obligation on the part of Federal Government to state the reasons for imposing regulatory duty. To hold that the Government could not impose regulatory duty unless it disclosed the reasons in justification of its imposition, would amount to curtailing the discretion given to the Government to impose the regulatory duty by reading something in the provision of the statute not provided for by the Legislature. Such interpretation is not justified on any known cannon of interpretation.
Abdul Rahim v. Federation of Pakistan PLD 1988 SC 670; Yousuf Re-rolling Mills v. Collector of Customs and another PLD 1989 SC 232 and Messrs Qaiser Brother (Pvt.) Ltd. v. Government of Pakistan and others PLD 1991 SC 884 ref.
(e) Customs Act (IV of 1969)---
----S.18(2)(3)(4)---Imposition of regulatory duty---Discretion of Federal Government---Scope---Fact that Government was entitled to exercise the discretion to levy regulatory duty only if certain circumstances existed, would not, necessarily, mean that the Government could not exercise that power/discretion without first mentioning those circumstances in justification in the notification imposing regulatory duty---Absence of reasons/ justification in the notification imposing regulatory duty, would not render the exercise of power/discretion by the Government, under S.18(2), Customs Act, 1969, defective or invalid.
The fact that the Government is entitled to exercise the discretion to levy regulatory duty only if certain circumstances existed, would not, necessarily, mean that the Government cannot exercise that power/discretion without first mentioning those circumstances in justification of the notification imposing regulatory duty. The power to levy regulatory duty by the Government is subject, only, to those conditions and limitations which are mentioned in section 18(2), (3) and (4) of the Customs Act, 1969 and, therefore, no other condition or limitation, not mentioned in the section, could control the exercise of power by the Government in this behalf. The absence of the reasons/justification in the notification imposing regulatory duty did not render the exercise of power/discretion of the Government, under section 18(2) of the Act defective or invalid.
(f) Customs Act (IV of 1969)---
----S.18(4) & (2)---Imposition of regulatory duty---If conditions justifying imposition of regulatory duty continue to exist on the expiry of the notification as provided in S.18(4), Customs Act, 1969, Government can continue imposition of regulatory duty by issuing a fresh notification in exercise of its power under S.18(2) of the Act.
Section 18(4) of the Customs Act nowhere provides that if the Government once exercises the power under section 18(2) of the Act and levy regulatory duty, the power stands exhausted and it cannot exercise this power a second time. No such limitation can be read in the language of section 18(4) of the Act. If the conditions justifying imposition of regulatory duty continue to exist on the expiry of the notification as provided in section 18(4), there seems to be no reason why the Government cannot continue imposition of regulatory duty by issuing a fresh notification in exercise of its power under S.18(2) of the Act.
(g) Customs Act (IV of 1969)---
----S. 31-A---Effective rate of duties---Withdrawal of exemption--?Enforceability---Withdrawal of exemptions from payment of Customs duty being valid, withdrawals were effective notwithstanding the facts that the contracts for imports of the goods or Letters of Credits in favour of the foreign suppliers were finalised before issuance of notifications withdrawing such exemptions, in view of the provisions of S.31-A, Customs Act, 1969.
M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan 1998 SCMR 1404 fol.
(h) Sales Tax Act (VII of 1990)--
----S.13---Exemption from payment of sales tax---Withdrawal of such exemption---Notification withdrawing exemption from payment of sales tax would not apply to import of goods, contracts whereof with the foreign suppliers were finalised and Letters of Credit were duly established before the date of issuance of withdrawal notification.
M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan 1998 SCMR 1404 fol.
(i) Customs Act (IV of 1969)---
----Ss.19 & 18(2)---General power to exempt from customs duties ---Scope--?Issuance of exemption notification under S.19, Customs, Act, 1969 presupposes that goods exempted are already subject to an existing charge of the customs duty---Exemption notification, therefore, ordinarily will not have within its purview the duty or tax not in force or in existence, on the date of issuance of the exemption notification---Exemption notification, while exempting the goods from the existing charge of customs duty, may, however, also provide that any future levy of customs duty will also be exempted on the goods exempted from the current and existing charge of customs duty---Conclusion that the exemption notification not only applied to the existing charge of customs duty but also covered the future levy of the customs duties, will depend on the language used in the notification to be examined with that point in mind.
Customs duties are not levied only under section 18(1) of the Customs Act but they are also levied though under different nomenclature, under section 18(2) of the Act and the Finance Act. The issuance of an exemption notification under section 19 of the Act, therefore, presupposes that the goods exempted are already subject to an existing charge of the customs duty. The exemption notification, therefore, ordinarily will not have within its purview a duty or tax not in force or in existence, on the date of issuance of the exemption notification. The exemption notification, while exempting the goods from the existing charge of customs duty, may, however, also provide that any future levy of customs duty will also be exempted on the goods exempted from the current and existing charge of customs duty. Therefore, the conclusion that the exemption notification not only applied to the existing charge of customs duty but also covered the future levy of the customs duties will depend on the language used in the notification. It is, therefore, necessary to examine the language of exemption notifications which were subject-matter of consideration in order to determine whether the exemption granted by the Government from payment of customs duty applied to the existing charge of customs duty only, or it extended to the future levy of the additional customs duty as well though under a different name.
Gadoon Textile Mills Ltd. v. Assistant Collector and others PLD 1992 Pesh. 191; The Assistant Collector, Customs v. Gadoon Textile Mills Ltd. Civil Petition No.99-P of 1992; The Assistant Collector, Customs, Central Excise and Sales Tax, Mardan Division, Mardan and 2 others v. Messrs Gadoon Textile Mills Ltd 1994 SCMR 712; Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad and 3 others PLD 1996 Lah. 718 and The Lahore Textile and General Mills Ltd. v. The Collector of Customs, Lahore and 2 others PLD 1988 Lah. 563 ref.
(j) Customs Act (IV of 1969)-
----S.18(1)(2) & First Sched.---Exemption from payment of customs duty--?Government, while granting exemption to the goods from payment of customs duty, specifically referred to the customs duty prescribed under the First Sched. to Customs Act, 1969 in the notification---Effect---Statutory duty prescribed under the First Sched. to Customs Act, 1969 has nexus only with the duty levied under S.18(1) of the Act, therefore, on the language of exemption notification it was not possible to conclude that exemption granted under the notification also applied to the customs duty levied in addition to the statutory duty under S.18(2) of the Act or under other laws for the time being in force.
(k) Customs Act (IV of 1969)---
----Ss.18(2), 19 & First Sched.---Imposition of regulatory duty---Notification under S.19, Customs Act, 1969 granting exemption---Effect---Regulatory duty though a species of customs duty, is a duty in addition to the duty prescribed udder the First Sched. to the Customs Act, 1969 to meet a particular situation, not covered by the statutory duty---Notification issued under S.19, Customs Act, 1969 granting exemption wholly or partially from payment of customs duty prescribed under the First Sched. to the Act, could not cover the customs duty to meet or cover a situation arising subsequent to the issue of the exemption notification---Principles.
In contradiction to the customs duty levied under section 18 (1) of the Customs Act, 1969, which is prescribed and predetermined, the regulatory duty is neither prescribed nor pre-determined but is levied at a rate which may vary according to the circumstances. Therefore, regulatory duty imposed by the Government under section 18(2) of the Customs Act though a species of customs duty, is a duty in addition to the duty prescribed under the First Schedule to the Act to meet a particular situation, not covered by the statutory duty. The notification issued by the Government under section 19 of the Act granting exemption wholly or partially from payment of customs duty prescribed under the First Schedule to the Act, could not therefore, cover the customs duty subsequently levied by the Government by way of additional customs duty to meet or cover a situation arising subsequent to the issue of the exemption notification. If the Government intended to exempt any future levy of the customs duty as well while granting exemption from the existing prescribed customs duty, it could provide so in the exemption notification. As the exemption notifications did not exempt the goods, which were exempted from statutory customs duty, also from the payment of regulatory duty, the exemption did not apply to the regulatory duty imposed by the Government subsequently although the regulatory duty may be a species of the customs duty.
Assistant Collector v. Gadoon Textile Mills 1994 SCMR 712 distinguished.
(l) Customs Act (IV of 1969)---
----Ss.18, 30 & 79-'--Goods dutiable---Date for determination of value and rate of import duty---Entry for home consumption or warehousing--?Chargeability of the duty having arisen, any change in the rate of the customs duty or imposition of additional duty of customs, is to be determined with reference to the dates of filing of bill of entry for home consumption or taking out the goods from bonded warehouses as provided in S.30, Customs Act, 1969---Rate of duty applicable to any imported goods under S.30 of the Act is the duty which is applicable on the date of filing of bill of entry for home consumption under S.79 of the Act and in the case of goods cleared from bonded warehouse on the date the goods are ex-bonded from the warehouse.
Abdul Wahid-Abdul Majid v. Government of Pakistan 1993 SCMR 17 fol.
Lahore Textile & General Mills v. Collector of Customs PLD 1988 Lah. 563 and East and West Steamship Co. v. Collector of Customs PLD 1976 SC 618 ref.
(m) Customs Act (IV of 1969)---
----Ss. 18(1)(2), 19, 30 & 31-A---Imposition of regulatory duty---Under S.31-A, Customs Act, 1969 the duties whether they are levied under S.18(1) or 18(2) of the Act, are to be paid as provided under S.30 of the Act notwithstanding any other' law or judgment of the Court---Imposition of regulatory duty under S.18(2) of the Act otherwise could not be objected to in view of the provisions contained in S.31-A of the Act and same was recoverable on ;the goods imported into Pakistan in accordance with the provisions of S.30 of the Act, notwithstanding the tact that the notification issued under S.19 of the Act exempting such goods either wholly or partially from payment of customs duty leviable under S.18(l) of the Act yeas holding the field.
Section 31-A, Customs Act, 1969, provides that for the purposes of sections 30 and 31 of the Act, the rate of duty applicable to the goods includes the amount of duty imposed under section 18 of the Act, section 2 of Finance Ordinance, 1982 and section 5 of the Finance Act, 1985, in addition to the amount of customs duty that may become payable as a consequence of withdrawal of whole or any part of exemption or concession from duty whether before or after conclusion of the contract or agreement for sale of the goods or opening of letters of credit in respect of the contract notwithstanding anything contained in any other law for the time being enforced or judgment of any Court. It is, therefore, quite clear that under this section the duties whether they are levied under section 18(1) or 18(2) of the Act are to be paid as provided under section 30 notwithstanding any other law or judgment of the Court. The imposition of regulatory duty under section 18(2) of the Act, otherwise could not be objected to in view of the provisions contained in section 31-A of the Act and same was recoverable on the goods imported into Pakistan in accordance with the provisions of section 30 of the Act notwithstanding the fact that the notification issued under section 19 of the Act exempting such goods either wholly or partially from payment of customs duty leviable under section 18(1) of the Act, was holding the field.
(n) Customs Act (IV of 1969)---
----S. 18(2)---S.R.O. N3.1050(1)/95, dated 29-10-1995---Imposition of regulatory duty---Exemption---Extent---If on the goods imported the customs duty was already chargeable at the rate of 65%, such goods were exempted under S.R:O. No.1050(1)/95 dated 29-10-1995 from payment of regulatory duty---Government, however, was left to examine the individual cases in the light of the observation by Supreme Court in the judgment.
(o) Customs Act (IV of 1969)---
----Ss. 18(2) & 30---Imposition of regulatory duty---Date of determination of value and rate of import duty---If on the date, the importer had submitted his bill of entry, the notification issued by the Government under S.18(2) of the Act imposing regulatory duty had not come into effect, the regulatory duty could not be recovered on such goods---Government, however, could determine the individual cases in the light of observation by the Supreme Court.
Under section 30, Customs Act, 1969, the rate of duty for the goods cleared for home consumption, is the rate applicable on the date the bill of entry is presented under this section. Therefore, if on` the date the importer had submitted his bill of entry, the notification issued by the Government under section 18(2) of the Act, had not come into effect, the regulatory duty could not be recovered on such goods. However, on facts the concerned authorities will determine the individual cases in the light of the observations by the Supreme Court.
(p) Customs Act (IV of 1969)---
----S.18(2)---Protection of Economic Reforms Act (XII of 1992), Ss. 3 & 6--?S.R.0.1284(1)/90, dated .13-12-1990---Protection of fiscal incentives--?Provision of S.6, Protection of Economic Reforms Act, 1992 had placed no embargo ' on the exercise of delegated powers by the Government under S.18(2) of the Customs Act, 1969 and had- not curtailed or taken away the power of Federal Government vested under S.18(2) of the Customs Act, 1969---Fact that the Government could not withdraw the concession allowed under S.R.0.1284(1)/90, dated 13-12-1990 during the period specified in the notification, did not mean that the Government was precluded from exercising the power under other laws which allowed discretion to the Government to impose additional duties of customs---In respect of the goods which were exempted from payment of customs duty specified in the First Schedule to Customs Act, 1969, either wholly or partially, under various notifications except S.R.O. No.108(1)/95, dated 12-12-1995, the imposition of regulatory duty by the Government under S.18(2) of the Customs Act, 1969 was effective and the same could be recovered from the importers at the time of filing of bill of entry for consumption or on the date of ex-bonding of the goods from the bonded wharehouse, if the notification imposing regulatory duty had come into effect on the date of presentation of the bill of entry or ex-bonding of the consignment from the bonded warehouse.
Section 6, Protection of Economic Reforms Act, 1992 is to be read with Schedule to said Act XII of 1992, which mentions Notification No.S.R.O. 1284(1)/90, dated 13-12-1990 issued under section 19 of the Customs Act. It is true that Protection of Economic Reforms Act was given overriding effect over all other existing laws including Customs Act and section 6 thereof, provided that fiscal incentives given to the investors by way of Notification No.S.R.O. 1284(1)/90, dated 13-12-1990 could not be withdrawn or altered to the disadvantage of the investors during the period specified therein. However, this provision did not curtail or take away the power of Federal Government vested under section 18(2) of the Customs Act. The fact that the Government could not withdraw the concession allowed by it under the S.R.O., dated 13-12-1990 during the period specified in the notification, did not mean that the Government was precluded from exercising the power under other laws which allowed discretion to the Government to impose additional duties of customs. The provisions of section 6 of Economic Reforms Act 1992 places no embargo on the exercise of delegated powers by the Government under section 18(2) of the Customs Act. In respect of the goods which were exempted from payment of customs duty specified in the 1st Schedule to the Act, either wholly or partially under all S. R. Os. except S. R. O. No.108(I)/95, dated 12-2-1995, the imposition of regulatory duty by the Government under section 18(2) of the Customs Act, was effective and the same could be recovered from the importers at the time of filing of the bill of entry for consumption or on the date of ex-bonding of the goods from the bonded warehouse, if the notification imposing regulatory duty had come into effect on the date of presentation of the bill of entry or ex-bonding of the consignment from the bonded warehouse.
(q) Customs Act (IV of 1969)---
----S.18(2) & First Sched.---S.R.O. No.108(1)/95, dated 12-2-1995--?S.R.O. 1050(1)/95, dated 29-10-1995---Imposition of regulatory duty--?Notification No.S.R.0.108(1)/95, dated 12-2-1995 allowing exemption covered the future levy of additional customs duty as well---Regulatory duty imposed by S.R.0.1050(1)/95, dated 29-10-1995 was not recoverable on the goods covered by S.R.0.108(1)/95, dated 12-2-1995.
S.R.0.108(I)/95, dated 12-2-1995 is valid for a period of 5 years from the date of its issue. The Government while granting exemption from payment of customs duty to the industrialists under this notification firstly, made no reference to the duty of customs prescribed in the 1st Schedule to the Customs Act, 1969 as was done in other S.R.Os. Secondly, the expression used in this notification is "from whole of the customs duties".
Therefore, keeping in view the tenor of the language of the notification and the fact that the notification was valid for a period of 5 years from the date of its issue and the fact that the language used in the exemption notification covered the future levy of additional customs duty as well in respect of the goods covered by S. R. O. No.108(1)/95, dated 12-2-1995, the regulatory duty imposed by S.R.O. No.1050(1)/95, dated 29-10-1995, was not recoverable.
Raja M. Bashir, Advocate Supreme Court and S.M. Abbas, Advocate-on-Record (absent) for Appellants (in Civil Appeal Nos. 1089 to 1108 of 1995).
A. Aziz Khan, Advocate-on-Record (absent) for Respondents (in Civil Appeals No. 1089 to 1108 of 1995).
Hamid Khan, Advocate Supreme Court and Ejaz Ahmed Khan, Advocate-on-Record for Appellant (in C.A. No. 1763 of 1996).
K.M.A. Samdani, Advocate Supreme Court with Saleem Sehgal, Advocate Supreme Court and Ch. Muhammad Aslam, Advocate-on-Record (in C. A. Nos.1783/96, 127/97, 128/97, 129 to 140/97, 142 to 161/97, 165 to 188/97, 193 to 317/97, 319 to 356/97, 518 to 560/97, 61/98 and 113 of 1998).
Tanvir Bashir Ansari, Dy .A.-G. on behalf of Federation of Pakistan.
Sh. Izhar-ul-Haq, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record (in C.A. No. 470 to 479/97 and 480 to 507 of 1997).
Tariq Javed, Advocate Supreme Court and M.A. Qureshi, Advocate-on-Record for Respondents (in C.As.Nos. 476, 483, 487, 488, 502, 503, 505, 515, 516, 516to 529, 531, 546 to 548, 549, 550 to 553, 555 to 557 and 560 of 1997).
Sh. Izhar-ul-Haq, Advocate Supreme Court and Tanvir Ahmad; Advocate-on-Record (absent) (in C. A. No. 102 of 1997).
Sh. Salah-ud-Din, Advocate-on-Record (in C. As. Nos. l62, 163 and 318 of 1997).
Ijaz Ahmed Khan, Advocate-on-Record (in C. A. No. 164 of 1997).
Raja M. Akram, Senior Advocate Supreme Court and Mahmood-ul-?Islam, Advocate-on-Record (in C.As. Nos. 180, 212, 276, 171, 129, 160, 336, 286, 1763, 1785 to 1787/96, 823, 1549, 189 to 192/97, 18, 31, 37, 113, 246 and 247 of 1998).
Mahmood-ul-Islam, Advocate-on-Record and Jawhar A. Naqvi, Advocate Supreme Court for Respondents (in C.As No. 126, 195, 294, 297/97 in C.As. Nos. 274, 325, 311, 333, 340 and 207 of 1997).
Mian Munawar Hussain, Advocate Supreme Court and A.K. Dogar, Advocate Supreme Court and Abul Aasim Jafari, Advocate-on-Record for Respondents (in C.As. Nos.96, 9854 and 9855 of 1998).
K.M.A. Samdani, Advocate Supreme Court and Saleem Sehgal, Advocate Supreme Court for Respondents (in C.As. Nos.1763/96, 1784 to 1787/96, 162 to 164/97, 189 to 192/57., 318, 97, 357/97, 54 and 55 of 1998).
M.A. Zafar, Advocate Supreme Court and Mehmood-ul-Islam for Respondents (in C.A. No. 126 of 1997).
Syed Ali War, Advocate Supreme Court for Respondents (in C. As. Nos.330 of 1997 and 32 of 1998).
Walayat Umar Ch., Advocate-on-Record for Respondents (in C.As. Nos. 149, 177, 206, 490, 491, 493 and 499 of 1997).
Jawad Khawaja, Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Respondent (in C.A. 150 of 1997).
M. Aslam Chatta, Advocate-on-Record for Respondents (in C.As. Nos. 154, 158, 265?270, 282, 312, 314, 324 and 335 of 1997).
Ejaz Ahmed Khan, Advocate-on-Record for Respondents (in C.As. Nos. 156, 157, 168, 209, 225, 231, 237, 256, 326, 328, 349 and 350 of 1997).
Mian Atta-ur-Rehman, Advocate-on-Record for Respondent (in C. A. No. 159 of 1997).
Sh. Slah-ud-Din, Advocate-on-Record for Respondents (in C.As. Nos. 160, 166, 194, 196, 199, 220, 227, 252, 255, 291, 308 and 317 of 1997).
Sohial Akhtar, Advocate Supreme Court and Mettr tinan maim, Advocate-on-Record for Respondents (in C. As. Nos. 127, 132, 137.; 193, 210/97 225 to 235/98, 1212, 1213, 1215, 245 and 251 of 1997).
Irfan Qadir, Advocate Supreme Court for Respondents (in C.As. Nos.1784/96, 237, 225, 201, 326, 249, 262, 209, 133, 128, 156, 136 and 243 of 1997).
Muhammad Akram Shaikh, Senior Advocate Supreme Court and M.A. Zaidi, Advocate-on-Record for Respondents (in C.As. Nos.17/98, 19/98, 20 to 24/98, 27/98, 29/98, 34 to 36/98 and 559 of 1997).
M. Bilal, Senior Advocate Supreme Court for Respondents (in C.As. Nos.479, 483, 485, 487, 490 to 493, 502 to 505, 1545 to 1547/97 and 60 of 1998).
K.M.A. Samdani, Advocate Supreme Court and Saleem Sehgal, Advocate Supreme Court for Appellants (in all above 95 Cases).
Abdul Latif Yousafzai, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos. 869, 870, 871, 873, 879, 880, 883 to 885, 887, 892, 893, 896, 898, 901, 903, 906 to 908, 910, 920 to 921, 924, 932, 934, 935, 937, 944 to 946, 949, 954, 956, 880 and 906 of 1997).
S. Safdar Hussain, Advocate-on-Record for Respondents (in C.As. Nos.874 and 1930 of 1997).
M. Zahoor Qureshi, Advocate-on-Record for Respondents (in C.As. Nos.912, 929, 940 and 941 of 1997).
Abdul Aziz Kundi, Advocate-on-Record for Respondents (in C.As. Nos.882, 917 and 951 of 1997).
Abdul Hafeez Pirzada, Senior Advocate Supreme Court and Akhtar Ali Mehmood, Advocate Supreme Court and- K.A. Wahab, Advocate-on-?Record for Appellants (in C.As. 849 to 868/97 and 1237 to 1241/97 and 197 .of 1998).
Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos.849 to 886/97 and 197 of 1998).
Dates of hearing: 19th to 23rd and 26th October, 1998.
JUDGMENT
SAIDUZZAMAN SIDDIQUI, J.---The above appeals arise from the judgments delivered by the High Courts of Lahore, Sindh, Balochistan 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 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 custom 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 Courts but in about 26 appeals, the private parties/importers have also challenged the judgments of Lahore High Court.
3. The High Court of Balochistan 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 Balochistan 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 Balochistan 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 Nos.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, 1996, 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 Nos. 1089 to 1108/95 against the judgment of High Court of Sindh dated 4-5-1994 and Civil Appeals Nos.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 Nos. 1237 to 1241/97, 849/97 to 886/97, and 197/98 against the judgments of High Court of Balochistan, Quetta, dated 8-5-1997 and 1-7-1997 and Civil Appeals Nos. 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 Sale 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 partially or wholly exempted from payment of customs duty leviable under section 18(1) of the Act. The Government also withdrew the exemptions of sale's tax And customs duty on various imported items through notification 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) of the Act on goods/items exempted from payment of customs duty leviable under section 18(1) of the Act, was valid and recoverable. A 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 199 (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 and 1994 SCMR 712. 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 Hafeez 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 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 v. Federation of Pakistan (PLD 1988 SC 670). 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 justiceable 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 alongwith Mr. A.H. Pirzada, besides adopting the above contentions of Mr. A.H. Pirzada further argued that S.R.O. 560(1)/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, amount 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 percent 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 subsection (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 subsection (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 law for the time being 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 percent 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 percent 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 percent 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 subsection (2) shall--
(a) be in addition 'to any duty imposed under subsection (1) or under any other law for the time being in force; and
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 percent of the value of the goods, determined in accordance with section 25 or 258 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 percent 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 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 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 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 percent of the, rate, if any, specified therein or at a rate not exceeding hundred percent 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 percent 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 percent 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 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 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 framewormk 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 by us).
15. Mr. A.H. Pirzada, the learned counsel for appellants in Civil Appeals Nos. 1237 to 1241 of 1997, 849 to 868 of 1997 and 197 of 1998, 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 Balochistan 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 S.R.O., 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 regulatory duty observed that this power is to be exercised within the legislative framework, meaning -hereby that the power is to be exercised within the limitations mentioned in section 18(2), (3) and (4) of the Act. We have already mentioned earlier in this judgment specifically the conditions and limitations mentioned in section 18(2) to (4) of the Act, within which the power is to be exercised by the Government to levy regulatory duty.
17. The extent of the power of Federal Government to levy regulatory duty under section 18(2) of the Act once again came up for consideration before this Court in the case of Yousuf Re-rolling Mills v. Collector of customs and another (PLD 1989 SC 232) and case of Abdur Rahim v. Federation of Pakistan (supra) was quoted with approval. The following observations were made by this Court:--
"While enacting subsection (2) of section 18 of the Customs Act, the Legislature was presumed to know the state of affairs in regard to the articles falling in these categories, and, therefore, it gave discretion to the Federal Government by enacting the two alternatives to suit the situation, and while in the first part it restricted the levy at a rate not exceeding fifty percent of the rate, if any, specified in-the First Schedule and in the second, it allowed the rate not to exceed hundred percent of the value of such articles as determined under, section 25. The distinction is accordingly maintained in the two parts by reference to the maximum regulatory duty leviable on the basis of the rates specified in the Schedule and the value of articles as determined under section 25. Each part of subsection (2), therefore, has restricted application. If the rate of duty of the articles is specified in the First Schedule then no discretion is left to the Federal Government to exceed the limit prescribed namely fifty per cent. But if no rate is prescribed in the First Schedule such as in the case of those articles which are imported free of customs duty, it is only then that the maximum of the second part can be levied on the value of the articles determined under section 25. The restriction to levy regulatory duty is accordingly explicit in case the articles imported fall under the first part in regard to which the rate of duty is prescribed in the First Schedule and while imposing the levy of regulatory duty the Federal Government is under this restraint. It has no discretion to levy the maximum of the second part as that part was intended to apply to articles in respect of which no rate was prescribed and it was, therefore, on the valuation of the articles that the maximum hundred percent was intended to apply as it was the only duty payable.
The discretion given in subsection (2) of section 18 of the Act had to be exercised within the legislative framework as observed by this Court in Abdur Rahim v. Federation of Pakistan (supra), at page 670. Here what is to be noticed in the subsection is the exercise of the discretion within the legislative framework, that is, 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 in the alternative the maximum of the regulatory duty payable on the valuation of the articles as determined under section 25; and thirdly, that the imposition of the levy was for a limited period of a financial year sinless the levy was earlier withdrawn.
The rule of interpretation is that while construing taxing statutes the language used is not to be either stretched in favour of the State or narrowed in favour of the tax-payer. In this background it is a settled rule that collision in the language of the section is to be avoid. "
(The underlining is by us).
Similarly, in the case of Messrs Qaiser Brother (Pvt.) Ltd. v. Government of Pakistan and others (PLD 1991 SC 884), this Court while considering the scope of the authority of the Federal Government to impose regulatory duty under section 18(2) of the Act made the following observations:--
"7. It may further be observed that levy of Regulatory duty not only regulates the price structure of the item concerned, but it also generates additional fund for the public purpose. The put constraint upon the exercise of the power contained in subsection (2) of section 18 of the Act of the nature sought to be pressed into service by the petitioner will not be in the interest of the public. This Court already in the case of Messrs Sh. Abdur Rahim Allah Ditta, v. Federation of Pakistan and others (supra) has examined the vires of the Regulatory duty and has held that 'what is prohibited by the Legislature is the delegation of its function to make the law but not the authority exercised under and in pursuance of the law itself to another agency". It was also held that levy of the Regulatory duty in terms of subsection (2) of section 18 of the Act was intra vires. It may be observed that the Legislature has provided the framework for the levy of the Regulatory duty, the extent, the period for which it can be levied and the authority which can levy. The levy of the Regulatory duty in question is within the above framework and, therefore, no exception can be taken to it, the impugned judgment of the High Court seems to be in consonance with law."
The preceding discussion leaves no room for any doubt that the imposition of regulatory duty by the Government under section 18(2) is subject to only those limitations and conditions, which are mentioned in subsections (2) to (4) of section 18 of the Act. These limitations and conditions do not cast any obligation on the part of Federal Government to state the reasons for imposing regulatory duty. To hold that the Government could not impose regulatory duty unless it disclosed the reasons in justification of its imposition, would amount to curtailing the discretion given to the-Government to impose the regulatory duty by reading something in the provision of the statute not provided for by the Legislature. Such interpretation in our view is not justified on any known cannon of interpretation.
Mr. Pirzada contended that in Abdur Rahim's case (supra) this Court while validating the delegated exercise of power by the Government to levy 'regulatory duty' had itself mentioned the reason in justification of imposition of regulatory duty which necessarily implied that such reasons and justifications must always be there for exercise of power by the Government to levy regulatory duty. Firstly, the reasons stated by this Court for imposition of regulatory duty in Abdur Rahim's case (supra) are not exhaustive. There may be variety of other reasons depending on the facts and circumstances of each case which may persuade the Government to exercise its discretion to levy regulatory duty within the framework of section 18(2)(3) and (4) of the Act. Mr. K.M.A. Samdani rightly pointed out that apart from the reasons mentioned by this Court in Abdur Rehman's case, there could be several other reasons to justify the imposition of regulatory duty by the Government. The learned counsel as illustration, mentioned that Government may decide to impose regulatory duty in the event of fluctuation of prices in the international market, to cater for recession in the international market, to impose curb on import of luxury items, to provide protection to local industries or to maintain a balance of trade with other countries etc.
We are, accordingly, of the view that the fact that the Government is entitled to exercise the discretion to levy regulatory duty only if certain circumstances existed, would not, necessarily, mean that the Government cannot exercise that power/discretion without first mentioning those circumstances in justification in the notification imposing regulatory duty. As earlier pointed out by us, the power to levy regulatory duty by the Government is subject, only, to those conditions and limitations which are mentioned in section 18(2), (3) and (4) of the Act and, therefore, no other condition or limitation, not mentioned in the section, could control the exercise of power by the Government in this behalf. Therefore, in our view, the absence of the reasons/justification in the notification imposing regulatory duty did not render the exercise of power/discretion by the Government, under section 18(2) of the Act defective or invalid.
17. Mr. Akhtar Ali Mahmood has further contended that issuance of S.R.O., dated 1-7-1996 was a mere roll over of the earlier notification, dated 29-10-1995 which expired on 30-6-1996 as provided in section 18(4) of the Act. Therefore, according to learned counsel issuance of the notification, dated 1-7-1996 was a contravention of the provisions of section 18(4) of the Act We are unable to accept the contention of the learned counsel. Section 18(4) of the Act nowhere provides that if the Government once exercises the power under section 18(2) ibid and levy regulatory duty, the power stands exhausted and it cannot exercise this power a second time. No such limitation can be read in the language of section 18(4) of the Act. If the conditions justifying imposition of regulatory duty continue to exist on the expiry of the notification as provided in section 18(4) ibid, we see no reason why the Government cannot continue imposition of regulatory duty by issuing a fresh notification in exercise of its power under section 18(2) of the Act.
The main controversy in these cases, relates to the validity and effectiveness of regulatory duty imposed by the Government under section 18(2) of the Act in respect of goods/items, which were exempted from payment of customs duty under section 19 of the Act. However, before considering the arguments advanced by the parties on this main controversy in these cases, we would like to dispose of some other contentions raised by the parties.
18. We first take up the contention relating to withdrawal of exemption from payment of customs duty on the imported consignments. The learned Judges of the High Courts held that withdrawal of exemptions from payment, of customs duty was valid and as such withdrawals were effective notwithstanding the facts that the contracts for imports of the goods or letters of credits in favour of the foreign suppliers, were finalised before issuance of the notifications withdrawing such exemptions, in view of the provisions of section 31-A of the Act. The above view taken by the High Court appears to be in consonance with the decision of this Court in the case of M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan (1998 SCMR 1404). 'The relevant observation of this Court in M.Y. Electronic's case reads as follows:--
"17. The effect of insertion of section 31-A, in the Act is that when exemption from payment of customs duty granted by the Government under section 19 of the Act is withdrawn, then notwithstanding the fact that while exemption was enforced, the party had opened a letter of credit or concluded the contract with the foreign suppliers the amount of customs duty payable on the goods will be that which may have become payable as a result of withdrawal of the exemption. It is therefore, quite clear that the right to claim exemption from customs duty under a notification issued under section 19 of the Act remains available to a party only as long as the exemption notification holds the field. However, as soon as the exemption notification is withdrawn, the payment of customs duty on the imported articles is to be determined m accordance with the provisions of section 30 of the Act. The contention of the appellants that section 31-A was inserted in the Act with the sole object of doing away with the effect of the judgment of this Court in Al-Samrez's case and therefore, the exemptions granted by the Government after insertion of section 31-A a-re not controlled by section 31-A does not appear to I be correct. Section 31-A was inserted in the Act by section 5(2) of Finance Ordinance II of 1988 which provided that section 31-A shall be deemed always to have been so inserted in the Act, meaning thereby that it was given retrospective effect from the date the Customs Act, 1969 came into effect. There is nothing in the language of section 31-A (ibid), to justify the interpretation that this section applied only to the cases covered by the judgment of this Court in Al-Samrez's case or to those cases only, which did not acquire the character of past and closed transaction on the date of insertion of section 31-A of the Act. The language of section 31-A (ibid) is wide enough to include within its ambit all those cases where exemptions have been withdrawn after the insertion of l section 31-A in the Act, as well."
19. The next contention relates to withdrawal of exemption from payment of sales tax. The learned counsel for the Government jointly contended that the withdrawal of exemption from payment of sales tax was effective from the date of issuance of withdrawal notification, notwithstanding the fact that the contracts for imports of goods were entered into or the goods had arrived at the port before the issuance of the notification withdrawing the exemption from payment of sales tax. This controversy. also stands settled by the decision of this Court in the case of M.Y. Electronics (Pvt.) Ltd. (supra). The, relevant observations read as follows:--
"20. The next contention of the appellants in the above appeals is that total exemption from payment of sales tax in respect of raw material and components which were imported for the exclusive use by the manufacturer of goods of recognized industrial units located in G.A. I.E. was also allowed by the Government under its Notification No. S.R.O., 517(1)/89, dated 3-6-1989. The exemption from payment of sales tax was withdrawn by notification issued on 5-5-1991, It is vehemently contended by the appellants that in so far the withdrawal of exemption from payment of sales tax is concerned, it was only through the executive order, namely, the S.R.O., dated 5-5-1991 and therefore, withdrawal of exemption from payment of sale tax could not be defended on the basis of insertion of section 31-A in the Act. The learned counsel for the respondents, on the other hand, contended that in view of section 3, subsection (5) of the Sales Tax Act, 1951, the tax levied under section 3 of the Sales Tax Act, 1951 shall be deemed to be a customs duty for the purposes of the Act and therefore, withdrawal of exemption from payment of sales tax would also be saved by insertion of section 31-A in the Act.
Section 3(5) of the Sales Tax Act, 1951 relied by Mr. S.M. Zafar is as follows:--
"The tax in respect of goods mentioned in clauses (a) and (b) of subsection (1) shall be payable at the same time and in the same manner as the customs duties under the Customs Act, 1969 (IV of 1969), and the provisions of the said Act and the rules made thereunder shall so far as may be and with the necessary modifications, apply for the purposes of this Act as they apply for the purposes of the said Act."
In the case of Crescent Pak. Industries (Ltd.) v. Government of Pakistan (1990 PTD 29) a learned Division Bench of the High Court of Sindh considered the effect of section 3(5) bf the Sales Tax Act, with reference to the argument that the withdrawal of the exemption of sales tax could be given effect to retrospectively, in view of insertion of section 31-A, in the Act, as follows:--
"4. There is little to argue on the point that the Sales Tax Act of 1951 and the Customs Act of 1969, though taxing statutes, operate in different fields. To our minds what section 3(5) of the Sales Tax Act, 1951, achieves is the introduction of machinery operating under the Customs Act to realizations under the Sales Tax Act, as well. There is a clear distinction between charging provisions of a statute and the machinery part thereof. It is axiomatic that mode and manner of recovery does not alter the nature of a tax nor can a tax be introduced, or imposed by implication. We are clear in our minds that it is only payability which is covered by section 3(5) of the Sales Tax Act, and not the imposition or levy of sales tax, which is provided for elsewhere in the Sales Tax Act itself. Merely, because of the invocation of section 3(5) of the Sales Tax Act and the application of the Customs Act, 1969, pursuant thereto sales tax is not divested of its inherent attributes and does not become customs duty and, therefore, the introduction of section 31-A in the Customs Act, cannot take away vested rights under the Sales Tax Actand does not make any difference whatever on that score.
5. The above conclusion is strengthened on the language of section 31-A of the Customs Act itself. Nowhere in that provisions the word 'tax' is found to be employed and throughout the tenor of the provision the Legislature has and obviously on purpose, chosen to use expression duty or duties by which nomenclature is underscored a limitation to specified duties only and not to any tax going by that name, such as sales tax. This also stands to reason as the protection against vested rights, if otherwise lawful, was considered in the context of Customs Act only which deals with specific duties alone. For this reason, cover was not intended to be extended to any other rights falling under a different statute not mentioned in section 31-A ibid. It is manifest therefore, that section 31-A has no nexus with sales tax levied under the Sales Tax Act, 1951.
6. On the above rationale, the dictum of the Supreme Court of Pakistan, in Al-Samrez Enterprise's case and the principle underlying the same escapably applies to this case, since the application of the doctrine invoked thereunder was not limited to customs duty alone. No vested rights of exemption in relation to the levy of sales tax can, accordingly, be affected adversely once the same have matured and come to occupy the field. The withdrawal of exemption, therefore, under section 7 of the Sales Tax Act, with effect from 26-6-1988 could not be given effect to retrospectively so as to infringe petitioner's rights, which on payment and opening of Letters of Credit, on 18-6-1988, had duly been established. Even otherwise, it is well settled that a notification operates only prospectively and not retrospectively. The imposition of sales tax, by withdrawal of exemption through Notification, dated 26-6-1988, thus, can only be prospective and not retroactive."
A similar argument, that the withdrawal of sales tax would be applicable even to the contracts entered into before the withdrawal of the exemption in view of insertion of section 31-A in the Act, was repelled in the case of Ahmed Investment (Pvt.) Ltd. v. Federation of Pakistan (1994 PTD 575) by another Division Bench of the High Court of Sindh as follows:--
"3. Mr. Amanullah Khan has contended that withdrawal of exemption through a notification can only be prospective but retrospective effect cannot be given to a notification withdrawing exemption so as to infringe rights already accrued. Reference has been made to the case of Al-Samrez reported in 1986 SCMR 1917. Further, contention made by the learned counsel is that although section 31-A was introduced in the Customs Act to meet such a situation but no corresponding amendment has been introduced in the Sales Tax Act. Reliance has been placed by the learned counsel on the cases of Punjab Steel Limited v. Deputy Collector of Customs, Dry Port, Lahore PLD 1989 Lah. 237, Crescent Pak. Industries (Pvt.) Limited v. Central Board of Revenue 1990 PTD 29 and Rachna Chemical Industries v. Government of Pakistan 1991 PTD 1 which clearly support the petitioner's case so far as the withdrawal of exemption from sales tax is concerned.
(4) It may be pointed out that following the decision in the case of Al?-Samrez 1986 SCMR 1917 several petitions were decided by this Court as it had been held that once a vested right was created in favour of the petitioners, the same could not be subsequently taken away by withdrawal of a notification. Thereafter section 31-A was introduced in the Customs Act to meet such a situation but admittedly no such corresponding amendment has been made in respect of the sales tax. Since the goods imported by the petitioner had already arrived at the Karachi Port and Bills of Entry had also been presented to the Customs Authorities in respect thereof, therefore, in view of the principle laid down in Al-Samrez's case, the petitioner had acquired a vested right which could not be taken away by subsequent withdrawal. We are consequently of the view that the cases cited by Mr. Amanullah Khan are fully attracted to the present case, so far as withdrawal of exemption from sales tax is concerned. However, the petitioner would be liable to pay customs duty at the enhanced rate i.e. at the rate of Rs.1,500 per metric ton in view of section 31-A of the Customs Act."
We are inclined to agree with the view expressed in the above two cases decided by two different Division Benches of the High Court of Sindh with regard to the applicability of section 31-A of the Act to the withdrawal of the exemption of sales tax by the Government. We, accordingly, hold that the withdrawal of exemption from payment of sales tax granted by the Government under Notification No.S.R.O. 517 (1)/1989 dated 3-6-1989 through notification, dated 9-5-1991 was only prospective in operation and could not take away or interfere; with any of the vested right of appellants."
In view of the above-stated legal position, the notification withdrawing exemption from payment of sales tax did not apply to import of goods, contracts whereof with the foreign supplier were finalized and Letters of Credit were duly established before the date of issuance of withdrawal notification.
We now turn to the main controversy in these appeals, which relates to the imposition of regulatory duty on the import of goods which were exempted, either partially or as a whole, from payment of customs duty leviable under section 18(1) of the Act. The regulatory duty was imposed by the Government under section 18(2) of the Act through a notification, dated 29-10-1995, which reads as follows:
"MINISTRY OF FINANCE AND ECONOMIC AFFAIRS NOTIFICATION
Islamabad, the 29th October 1995
CUSTOMS
S.R.O. 1050 (1)/95.---In exercise of the powers conferred by subsection (2) of section 18 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to levy a further regulatory duty on imports of goods appearing in the First Schedule to the said Act, as detailed below:--
(i) the goods chargeable to a statutory or concessionary rate of zero per cent. or sixty percent statutory duty shall be charged a regulatory duty Q 5 per cent. ad valorem on import into Pakistan except the following, namely:--
(a) Wheat;
(b) Fertilizers;
(c) Power generation plants for which letters of support have been issued by the Government, up to 3,000 MW;
(d) Import of accompanied and unaccompanied baggage;
(e) Goods imported under diplomatic concessions; and
(f) Newsprint imported by publishers of newspapers and periodicals subject to production of a certificate from Ministry of Information and Broadcasting; and
(ii) the goods chargeable to a statutory or concessionary rate other than zero percent on the import into Pakistan shall be charged to a regulatory duty at the rate of ten percent? ad valorem except the following:--
(a) defence imports;
(b) goods chargeable to duty at the rate of sixty five percent ad valorem; and
(c) the following P.O. products:--
(i)? Motor spirit----?????????????????? regular super and premium class;
(ii) H. O. B. C.;
(iii) M.T.B.E.;
(iv) S.K.O.;
(v) H. S. D.;
(vi) L. D. O.;
(vii)? J.P.1.;
(viii) J. P.4. ;
(ix) Furnace Oil, and????????????????????????????
(x) Asphalt.
2. This Notification shall have effect from the 29th day of October, 1995."
In terms of the above notification the Government imposed regulatory duty on two categories of imported goods mentioned in the First Schedule to the Act at the rate of 5 % and 10 % respectively, with effect from 29-10-1995. The goods falling in the first category were subject to payment of regulatory duty at 5 % ad valorem if the goods were chargeable to statutory or concessionary rate of zero percent or sixty percent statutory rate of customs duty, except wheat, fertilizer, power generating plant for which letters of support were issued by the Government up to 3000 MW, accompanied or unaccompanied baggage, goods imported under diplomatic concession and newsprint imported by publishers of newspapers and periodicals subject to production of a certificate from Ministry of Information and Broadcasting.
In the second category regulatory duty Q 10 % ad valorem was imposed on the goods, which were chargeable to statutory or concessionary rate other than zero per cent. except defence imports, goods chargeable to duty at the rate of sixty-five percent ad valorem and P.O.L. products, namely, Motor spirit (regular, super and premium class), H.O.B.C., M.T.B.E., H.K.O., IJ.S.D., L,D.O., J.P.1, J.P.4, FurnaceOil and Asphalt.
The above notification clearly shows that the regulatory duty was 1 not imposed by the Government across the board, as several items were kept outside the net of the regulatory duty. Again regulatory duty on items falling under the first category was imposed 5% ad valorem while regulatory duty on goods falling under the 2nd category was imposed at the date of 10% ad valorem. The Government, it appears wanted to bring the customs duty on the goods in the 1st category at par with the customs duty levied on the goods in the 2nd category.
The learned Judges of the High Court of Lahore, Sindh and Peshawar, came to the conclusion that regulatory duty being a kind of customs duty, the notification issued under section 19 of the Act granting exemption from payment of customs duty leviable under section 18(1) of the Act also covered any regulatory duty imposed under section 18(2) of the Act. The learned counsel for the private parties supported the view taken by the High Courts of Lahore, Karachi and Peshawar in this behalf and relied on the following cases:--
(i) Gadoon Textile Mills Ltd. v. Assistant Collector and others (PLD 1992 Peshawar 191).
(ii) Civil Petition No.99-P of 1992 (The Assistant Collector, Customs v. Gadoon Textile Mills Ltd.), decided on 28-11-1992.
(iii) The Assistant Collector, Customs,. Central Excise and Sales Tax, Mardan Division, Mardan and 2 others v. Messrs Gadoon Textile Mills Ltd. (1994 SCMR 712).
(iv) Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad and 3 others (PLD 1996 Lahore 718).
(v) The Lahore Textile and General Mills Ltd. v. The Collector of Customs, Lahore and 2 others (PLD 1988 Lahore 563).
The main thrust of the argument of the learned counsel for the respondents/private parties in the above cases is, that the regulatory duty being a kind of customs duty, the exemption notification issued by the Government under section 19 of the Act, also covered all subsequent levy of customs duties under whatever nomenclature it might be. The contention does not appear to be correct. It is not disputed that customs duties are not levied only under section 18(1) of the Act but they are also levied though under different nomenclature, under section 18(2) of the Act and the Finance Act. The issuance of an exemption notification under section 19 of the Act, therefore, presupposes that the goods exempted are already subject to an existing charge of the customs duty. The exemption notification, therefore, ordinarily will not have within its purview a duty or tax not in force or in existence, on the date of issuance of the exemption notification. The exemption notification, while exempting the goods from the existing charge of customs duty, may, however, also provide that any future levy of customs duty will also be exempted on to goods exempted from the current and existing charge of customs duty. Therefore, the conclusion that the exemption notification not only applied to the existing charge of customs duty but also covered the future levy of the customs duties will depend on the language used in the notification. It is, therefore, necessary to examine the language of various exemption notifications, which were subject-matter of consideration in the cases before the High Courts, in order to determine whether the exemption granted by the Government from payment of customs duty applied to the existing charge of customs duty only, or it extended to the future levy of the additional customs duty as well though under a different name. The main judgment of the learned Division Bench of the High Court of Lahore, dated 28-8-1996, from which majority of the above appeals arise does not mention the numbers and dates of notifications issued under section 19 of the Act by the Government exempting the goods from payment of customs duty which were under consideration of the Court but from the arguments addressed at the bar, it appeared that notifications under section 19 of the Act considered in the impugned judgment of Lahore High Court, dated 28-8-1996, were the same which came up for consideration in the impugned judgments of the Lahore High Court and the High Court of Sindh. However, the other impugned judgments in the above appeals do mention some of the S.R.Os. and their dates whereunder exemption from payment of customs duty was allowed by the Government under section 19 of the Act.
As the S.R.Os issued by the Government under section 19 of the Act, which came up for consideration in the impugned judgments in the above cases, are not identically worded but are couched in different language, it is necessary to examine the text of each of the S.R.Os. in order to determine their true import and scope.
The S.R.Os. issued by the Government under section 19 of the Act, considered in the impugned judgments of Lahore, Sindh, Quetta and Peshawar High Courts respectively, read as follows:--
S.R.Os. mentioned in the judgment of the Lahore High Court, dated 22-7-1997, 28-8-1996,3-10-1996 and 14-10-1996.
1. "GENERAL EXEMPTION FROM CUSTOMS DUTY ON IMPORT OF CERTAIN GOODS
Notification NO.S.R.0.490(I)/95, dated 14th June, 1995.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and in suppression of this Ministry's Notification No.S.R.O. 490(1)/94, dated the 9th June, 1994, the Federal Government is pleased to direct that the goods specified in column (3) of the table below, falling under the heading or subheading numbers of the First Schedule to the said Act and specified in column (2) of the said table, shall be exempt from so much of the customs duty specified in the First Schedule to the said Act as is in excess of the rates specified in column (4) of the table namely:---
Other General and Conditional Exemptions
TABLE
| S. No. | H. heading/sub-heading Nos. | Description of? goods | Rate of duty. |
| 1. | ? | ? | ? |
| ? | ? | ? | ? |
| 16. | 17.1.1100 1701.1200 1701.9100 1701.9900 | Sugar | 10 %ad val |
| 17. | ... | ... | ... |
2.???????????????????? "GOVERNMENT OF PAKISTAN
??? MINISTRY OF FINANCE AND ECONOMIC ???
AFFAIRS
??????????????????????????????????? ?????? (Central Board of Revenue)
??????????????????????????????????? ??????????????? NOTIFICATIONS
???? Islamabad, the 8th January, 1996
??????????????????????????????????????????????? ?????????CUSTOMS
S.R.0.24 (I)/96.---Inexercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsection (1) of section 13 of the Sales Tax Act, 1990, and in supersession of its Notification No. S.R.O.(I)/94, dated the 9th June, 1994, the Federal Government is pleased to exempt raw materials, sub?components and components, if imported for the manufacture of components and sub-assemblies of automotive vehicles meant for sale or in house use, from so much of customs duty as is in excess of rates specified in column (3) of the table below and whole of the sales tax subject to the following conditions, namely:--
(i) the manufacturer has suitable in house facilities for progressive manufacture of components and sub-assemblies of automotive vehicles in respect of which he claims exemption under this notification;
(ii) the manufacturer shall furnish to the Chief Survey and Rebate, Central Board of Revenue, or any other officer authorised in this behalf in the prescribed form the list of components and sub?assemblies of automotive vehicles he is manufacturing or intends to manufacture alongwith the details of inputs required and the Chief of such authorized officer, as the case may be, in consultation with the Collector of Customs, Collector of Central Excise and Collector of Sales Tax shall certify the annual capacity of the unit for the manufacture of such components and sub-assemblies of authomotive vehicles and total requirement of inputs alongwith the quantity required per unit;
(iii) the manufacturer shall chalk out a deletion programme spreading over a maximum period of five years within which he shall achieve a minimum deletion in the manufacture of inputs other than raw materials to the extent of 75 percent of the C & F value of the inputs of the manufactured items. Continued availability of the exemption under this notification shall be contingent upon--
(a) the achievement of progressive annual deletion as approved by the Central Board of Revenue, or as the case may be, the Ministry of Industries; and
(b) the use of locally manufactured deleted items;
(iv) the manufacturer shall, at the time of import of inputs make a written declaration on the bill of, entry to the effect that the inputs have been imported in accordance with his entitlement in terms of conditions (ii) and (iii);
(v) at the time of import, the manufacturer shall furnish to the Collector of Customs an indemnity bond and a post-dated cheque of the amount equivalent to the customs-duties and sales tax exempted and to abide by the conditions laid down in this notification failing which he shall pay the customs duties and taxes leviable on each consignment in addition any other penalties that may be imposed by the Collector of Customs in this behalf;
(vi) the manufacturer shall maintain record of inputs and the goods manufactured out of them in such form as may be prescribed by the Central Board of Revenue;
(vii) the manufacturer shall, within one year of the date of filing of bill of entry for home-consumption or ex-bond bill of entry relating to inputs, apply to the Collector of Customs for discharging the bond, the application being supported by a certificate in the Form I set out below, issued by the Assistant Collector Customs and Central Excise within whose jurisdiction the manufacturing unit is located;
(viii) in case the Assistant Collector, Central Excise and Customs, is not satisfied regarding the consumption of imported inputs or use of locally produced deleted inputs, he shall report his findings to the Collector of Customs concerned who shall initiate proceedings for encashment of post-dated cheque and penal action for giving false declaration; and ,
(ix) the manufacturer shall maintain a record of - the sale of the manufactured goods in Form-II set out below and shall produce, on demand, such record and other evidence of sales as may be required for inspection by an officer of Customs not below the rank of Assistant Collector of Customs in whose jurisdiction the manufacturing unit is located or any other officer authorized by the Central Board of Revenue in this behalf.
TABLE
| S.No. | Description of -goods | Rate of customs-duty |
| 1. | Raw material | 10 % |
| 2. | .. | |
| 3. | .. | |
FORM I
????????????????????????????????????????????????????????????????????????
FORM II
????????????????????????????????????????????????????????????????????????
KHALID AKBAR
???????????????????????????????????
Deputy Secretary."
??????????????????????????????????????????????????????????? --------------------?????
3,???????? "Islambad, the 9th June, 1994
CUSTOMS
S.R.O.501(I)/94.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969) and subsection (1) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to exempt raw materials, sub-components and components for the manufacture of machinery and agricultural equipments specified in Table I below from so much of the customs-duties, as are in excess of the rates specified in Table II below and whole of sales tax, subject to the following conditions, namely:--
(i)???????? The components are in such knocked down condition as is approved by the Government in case of each specified machinery and equipment;
(ii)??????? the manufacturer has suitable inhouse facilities for progressive manufacture of machinery and agricultural equipments in respect of which he claims exemption under this notification;
(iii)?????? the manufacturer shall furnish to Chief, Survey and Rebate, Central Board of Revenue, or any officer authorized in this behalf, in prescribed form, the list of machinery and equipments that he is manufacturing or intends to manufacture alongwith the details of raw materials and sub-components and components required and the Chief or such authorized officer, in consultation with the Collector of Customs or Collector of Central Excise and Sales Tax will certify the annual capacity of the unit for the manufacture of such machinery and equipments and total requirements of various raw materials, sub-components and components alongwith the quantity required for the manufacture of each machinery or equipment;
(iv)?????? the manufacturer shall chalk out deletion programme spreading over a maximum period of five years within which period he shall achieve a minimum deletion in the manufacture of components to the extent of 75 % of the C&F value of the inputs of the manufactured items. Continued availability of the exemption under this notification shall be contingent upon---
(a)??????? the achievement of progressive annual deletion as approved by the Central Board of Revenue or Ministry of Industries as the case may be; and
(b)??????? the use of locally manufactured deleted items;
(v)??????? at the time of import of raw materials, sub-components and components, the manufacturer shall make a written declaration on the bill of entry to the effect that raw materials, sub-components and components have been imported in accordance with his entitlement in terms of condition (iii) and that he has achieved deletion level as per condition (iv) above;
(vi)?????? at the time of import the manufacturer shall furnish to the Collector of Customs bank guarantee or an indemnity bond alongwith post?-dated cheque of the amount equivalent to the customs duties exempted to abide by the conditions laid down in the notification failing which he shall pay the customs duties and taxes leviable on each consignment in addition to any other penalties that may be imposed by the Collector of Customs in this behalf;
(vii) ???? the manufacturer shall maintain record of the inputs and goods manufactured out of them in such form as may be prescribed by the Central Board of Revenue;
(viii)????? the manufacturer shall, within one year of the date of filing of bill of entry for home consumption relating to raw materials, sub?components and components, apply to the Collector of Customs for discharging the bond, the application being supported by a certificate in the Form I set out below, issued by the Assistant Collector of Central Excise within whose jurisdiction the manufacturing unit is located; and
(ix)?????? in case the Assistant Collector of Central Excise is not satisfied regarding the consumption of imported raw materials, sub?components and components or use of locally produced deleted sub?components he shall report his findings to the Collector of Customs concerned who shall initiate proceedings for encashment of bank guarantee or post-dated cheque and penal action for making false declaration.
TABLE I
| S.No. | Description of machinery and agricultural equipments |
| (1) | (2) |
| 1. | Bal roller and taper bearings. |
| 2. | ?? |
| 3. | ?? |
| 4. | ?? |
| 5. | ?? |
| 6. | ?? |
| 7. | ?? |
| 8. | ?? |
| ????? | ????? |
| ????? | ????? |
| 92. | |
??????????????????????????????????????????????????????????? TABLE II
| S.No. | Description of inputs | Rate of duty |
| 1. | Raw materials | 10% |
| 2. | ?.. | |
| 3. | ?.. | |
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
??????????????????????????????????????????????? FORM-I
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------???
???????????
??????????????????????????????????????????????????????????? FORM-II
??????????????????????????????????????????????????????????????????????????????????? ??????????????????????? Assistant Collector
??????????????????????????????????????????????????????????????????????????????????????????????? Name and official stamp."
?? --------------
4.???????????????????? "GOVERNMENT OF PAKISTAN
?? MINISTRY OF FINANCE AND ECONOMIC ?
????? AFFAIRS
??????????????????????????????????????????????? ??????? --------------------------
Islamabad, the 1st July, 1995.
NOTIFICATION
??? (CUSTOMS)
S.R.O. 585 (I)/95.---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 machinery and equipment, including coal mining equipment, not manufactured locally, shall be exempt from customs duty in excess of 10% leviable under the First Schedule to the same Act, if imported for setting up or for balancing, modernisation, and extension of power generation through oil, gas, coal, wind and wave energy project, including under construction projects, subject to following conditions, namely:--
(1) The importer shall, at the time of import submit a detailed packing list of machinery and equipment specified below in Explanation (i), (ii), (iii), (iv) and (v) and shall also make a written declaration on the bill of entry to the effect that the machinery and equipment and spares have been imported for the aforesaid project;
(2) the importer shall furnish an indemnity bond in the form set out hereinbelow to the extent of customs duty exempted under his Notification. The said bond shall not be discharged till the production of installation certificate from the Assistant Collector which shall be produced within one year from the date of importation of plant and machinery and after due verification by the Assistant Collector of Customs and Central Excise in whose jurisdiction the project is located. Such certificate of verification would clearly state that machinery and equipment imported for the purposes specified in the bills of entry have been duly installed or the machinery and equipment imported temporarily has been duly re-exported;
(3) in the event of non-production of such certificate by the importer the Collector of Customs shall enforce the Indemnity bond and proceed to recover Government dues under section 202 of the Customs Act, 1969 and the rules made thereunder; and
(4) spares and maintenance parts not locally manufactured required for the project after its commissioning would be subject to customs duty at the rate of twenty percent ad valorem.
Explanation
For the purpose of the Notification, 'machinery and equipment' shall mean?
(i) machinery and equipment operated by power of any description, such as is used in the generation of power; -
(ii) apparatus and appliances, including metering and testing apparatus and appliances specially adapted for use in conjunction with machinery and equipment specified in Explanation (i) above;
(iii) mechanical and electrical controls land transmission gear adapted for
use in or with Explanation (i) above;
(iv) all machinery and equipment imported temporarily for the construction, erection. installation and end-completion of the project including specific equipments for thermal power and specialized vehicles (4 x 4 non-luxury), but excluding passenger vehicles; and
(v) component parts of machinery and equipment as specified in Explanation (i), (ii),? (iii) and (iv) above, identifiable as for use, in or with such machinery imported for the project and equipment, including spares for purposes of the project.
?????????????????????????????????????????????????????????????????"
MINISTRY OF FINANCE,
REVENUE AND ECONOMIC AFFAIRS
???????? (Revenue Division)
??????????? Islamabad, the 9th June, 1994
???????????? SALES TAX
S.R.O. 554(I)/94.---In exercise of the powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, and in supersession of this Ministry's Notification No. S.R.0.500 (I)/88, dated the 26th June, 1988, the Federal Government is pleased to direct that the goods falling under heading or sub-heading numbers of the First Schedule to the Customs Act, 1969 (IV of 1969), specified in the table below shall, on import into Pakistan, be exempt from whole of the sales tax leviable thereon.
?????? TABLE
| Heading/sub-heading numbers |
| breading cattle falling under sub-heading Nos.0102.1000, 0104.1010 and 0104.2010; |
| ---------------------- |
| --------------------- |
| 9019.2000; |
| 90.20 and 90.21 " |
S.R.Os. considered in judgment of the High Court of Sindh, dated 4-5-1994:
1.???????? "EXEMPTION FROM CUSTOMS DUTY AND SALES TAX ON ???????? IMPORT OF PLANT AND MACHINERY
Notification No.S.R.O. 484(1)/92, dated 14th May, 1992.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and section 13 of the Sales Tax Act, 1990, and in supersession of this Ministry's Notification No. S.R.O. 50(1)/92, sated the 28th January, 1992, the Federal Government is pleased to exempt such plant and machinery as is not manufactured locally and is imported during the period commencing on the 1st December, 1990, and ending on the 30th June, 1995, for setting up new units and for expansion or balancing modernization and replacement of existing units--
(a) an areas other than specified in Table I, from whole of the customs duty and sales tax leviable or chargeable thereon under the First Schedule to the Customs Act, 1969, or, as the case may be, the Sales Tax Act, 1990; and
(b) in the industrial estates specified in Table II from so much of the customs duty and sales tax levaible or chargeable thereon under the First Schedule to the Customs Act, 1969, or as the case may be, the Sales Tax Act, 1990, as is specified m columns 3 of the said table, subject to the conditions set out below, namely:
(1) The importer shall, at the time of import of machinery, make a written declaration on the bill of entry to the effect that the machinery has been imported for a project located in areas other than those specified in Table I or, as the case may be, for the areas specified in Table II.
(2) The importer shall furnish an indemnity bond in the Form set out below to the extent of customs duty and sales tax exempted under this Notification. The said indemnity bond shall be discharged subsequently on production of a certificate from the Assistant Collector, Customs and Central Excise, to the effect that the plant and machinery imported for setting up new units or expansion or balancing, modernization and replacement of existing units located in the areas enjoying benefit of concession under this notification, have been duly installed in the aforesaid areas.
(3) The certificate of installation referred to in condition (2) shall be submitted to the Collector of Customs not later than one year from the date of importation of the plant and machinery to which it relates.
(4) The plant and machinery released under this notification shall not, within a period of eight years from its importation, be used in any area, which is not eligible for the same concession. In case this condition is violated the amount of customs duty, surcharge and sales tax exempted under this notification and penalties that may be imported in this behalf shall be recovered under section 202 of the Customs Act, 1969 (IV of 1969).
For the purposes of its notification machinery shall mean---
(i) machinery operated by power of any description, such as is used in any industrial process including mining and extraction' of timber;
(ii) 'apparatus and appliances, including metering and testing apparatus and appliances specially adapted for use in conjunction with machinery specified in item (I) above;
(iii) power generating plant for operating item (i) above;
(iv) mechanical and electoral control and transmission gear adapted for use in item (i) above; and
(v)? component parts of machinery and specified in items (i) and (ii), identifiable as for use in or with such machinery."
??????????????????????????????????? -----------------------------------------------------
2. ??????? ??????"GOVERNMENT OF PAKISTAN
MINISTRY OF FINANCE & ECONOMIC
AFFAIRS
(REVENUE DIVISION)
??? Islamabad, the 13th September, 1992.
?????? NOTIFICATION
??????????????????????????????????????????????? ????????? (CUSTOMS)
3. S.R.O. 869(I)/92.---In exercise of the powers conferred by subsection (2) of section 18 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that regulatory duty at the rate of 1 % ad valorem shall be levied on all goods, excluding wheat and fertilizers, specified in the First Schedule to the Customs Act, 1969, with effect from 14th September, 1992, till 13th March, 1993.
The proceeds of the said regulatory duty shall be credited to the 'Prime Minister's Flood Relief Fund, 1992'."
??????????.
4. "GOVERNMENT OF PAKISTAN
???? MINISTRY OF FINANCE AND ECONOMIC
AFFAIRS
(REVENUE DIVISION)
?????? NOTIFICATION
Islamabad, the 3rd July, 1993.
(CUSTOMS)
S.R.0.546(I)/93.---In exercise of the powers conferred by subsection (2) of section 18 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that a regulatory duty at the rate of 1 % ad valorem shall be levied on all goods specified in the First Schedule to the Customs Act, 1969, except the goods specified in the table below:--
???????????????????????????????????????????????????????????????????????."
S.R.Os. issued under section 19 of the Act, considered in judgment of the High Court of Balochistan dated 8-5-1997 and 1-7-1996.
1."GENERAL EXEMPTION FROM CUSTOMS DUTY ON IMPORT OF CERTAIN GOODS
NOTIFICATION
?? (CUSTOMS)
S.R.0.490(I)/95.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and in supersession o1 this Ministry's Notification NO.S.R.0.490(1) of 1994, dated the 9th June, 1994, the Federal Government is pleased to direct that the goods specified in column (3) of the table below, falling under the heading of sub-heading numbers of the Firs Schedule to , the said Act and specified in column (2) of the said table, shall be exempt from so much of the customs duty specified it the First Schedule to the said Act as is in excess of the rate; specified in column (4) of the table, namely:--
| S.No. | Heading/s sub-heading Nos. | Description of goods | Rate of duty. |
| (1) | (2) | (3) | (4) |
| 1. | ? | ? | ? |
| ? | ? | ? | ? |
| 16. | 1701.1100 | | |
| | 1701.1200 | Sugar | 10 % ad |
| | 1701.9100 | | Val |
| | 1701.9900 | | |
| ? | ? | ? | ? |
| ? | ? | ? | ? |
| 155 | ? | ? | ? |
??????????????????????????????????????????????? (Sd.)
??????????????????????????????????? (Riaz Hussain Naqvi),
??????????????????????????????????? Additional Secretary."
? ?????????????
2. "GOVERNMENT OF PAKISTAN
???? MINISTRY OF FINANCE AND ECONOMIC
AFFAIRS
??? Islamabad the 19th June, 1995.
????? NOTIFICATION
???????? ?????????????????????????????????????? ?????????(CUSTOMS)
S.R.0.542(I)/95.---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 this Ministry's Notification NO.$.R.0.4901(1)/95, dated the 14th June, 1995, namely:--
In the aforesaid Notification, in the Table, in column (I), against S.No.145, in column (4), for the letters, figures and words 'Rs.1,375.00 per LDT', the letters, figures and words, 'Rs.1,375.00 per LDT plus 25% ad val", shall be substituted."
S.R.Os. issued under section 19 of the Act, considered in judgment of the Peshawar High Court, dated 23-2-1997.
"EXEMPTION FROM CUSTOMS DUTIES AND SALES TAX ON IMPORT OF RAW MATERIALS AND COMPONENTS AS ARE IM'i =,JRTED FOR THE EXCLUSIVE MANUFACTURE OF GOODS BY RECOGNIZED INDUSTRIAL UNITS LOCATED IN THE APPROVED INDUSTRIAL ESTATE OF GADOON AMAZAI, N.-W.F.P. SUBJECT TO CERTAIN CONDITIONS.
Notification NO.S.R.0.108(1)/95, dated 12th February, 1995:---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsection (1) of section 18 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that a quantity equal to one-fourth of imported consignment of such raw materials and components as are imported for the exclusive manufacture of goods by recognized industrial unit located in the approved industrial estate of Gadoon Amazai in the Province of North-West Frontier; except the industries manufacturing goods specified in Schedule 'A' to this Notification shall be exempt from whole of the customs duties and sales tax leviable thereon for a period of five years from the date of issuance of this Notification subject to the following conditions namely:--
(i) the manufacturer shall have suitable in-house facilities to manufacture the goods in respect of which he claims exemption under this Notification and have commenced production before the 31st December, 1995;
(ii) the manufacturer shall furnish, to the Chief, Survey and Rebate or any other officer authorized by the Central Board of Revenue in this behalf, in the prescribed form the list of items that he is manufacturing alongwith the details of raw materials and components required and the Chief of Survey and Rebate or, as the case may be, authorized officer shall in consultation with the Collector of Customs or the concerned Government Department, certify the annual capacity of the industrial units for the manufacture of goods determined on the basis of machinery physically installed and labour employed and operative up to the 31st December, 1995 and total annual requirements of various types of raw material and components alongwith the quantity required for manufacture of each item;
(iii) in case when exemption is claimed on components, the manufacturer shall prepare a deletion programme spreading over a maximum period of five years within which period he shall achieve a minimum deletion target to the extent of 75 per cent of the C&F value of the inputs of the manufactured items;
(2) The continued availability of the exemption under this notification shall be contingent upon---
(a) the achievement of progressive annual deletion as approved by the Central Board of Revenue or the Ministry of Industries as the case may be; and
(b) use of locally manufactured deleted items:
Provided that the level of deletion will not be lower in level which has already been achieved by any industry involved in the manufacture of the same item irrespective of minor differences in make, models or origin of technology;
(iv) at the time of import of raw materials and components; the manufacturer shall make a written declaration on each copy of the bill of entry to the effect that the raw materials and components have been imported in accordance with his entitlement in terms of condition (ii) above;
(v) the manufacturer shall furnish to the Collector of Customs a bank guarantee equivalent to the customs duty and sales tax in respect of which exemption is sought subject to the satisfaction of Collector of Customs;
(vi) the manufacturer shall maintain the record of the raw materials and components and the items manufactured out of them in such form as may be prescribed by the Central Board of Revenue;
(vii) the manufacturer shall, within one year of the date of importation of the raw materials, and components, apply to the Collector of Customs for discharging the bank guarantee the application being supported by a certificate in Form I set out below issued by the Assistant Collector, Customs, and Central Excise, within whose jurisdiction the manufacturing unit is located;
(viii) the manufacturer shall maintain in Form II set out below a record of the sales of the items manufactured under this Notification and shall produce, on demand, such record and other evidence of sale, as may be required for inspection by an officer of Customs not below the rank of Assistant Collector of Customs in whose jurisdiction the manufacturing unit is located or any other officer authorized by the Central Board of Revenue in this behalf."
(The underlining in the notifications is by us, to supply emphasis).
In all the abovementioned S.R.Os. except S.R.O. No.108 (1)195, dated 12-2-1995 which was the subject-matter of consideration before the Peshawar High Court, the Government while granting exemption to the goods from payment of customs duty, specifically referred to the customs duty prescribed under the First Schedule to the Act. The statutory dutyprescribed under the First Schedule to the Act has nexus only with the duty levied under section 18(1) of the Act. Therefore, on the language of theseS.R.Os., it is not possible to hold that the exemption granted under thesenotifications also applied to the customs duty levied in addition to the statutory duty under section 18(2) of the Act or under other laws for the time being enforced. We have already pointed out earlier in this judgment that in contradiction to the customs duty levied under section 18 (1) of the Act, which is prescribed and predetermined, the regulatory duty is neither prescribed nor pre-determined but is levied at a rate which may vary according to the circumstances. Therefore, regulatory duty imposed by the Government under section 18(2) of the Act though a species of customs duty, is a duty in addition to the duty prescribed under the First Schedule to the Act to meet a particular situation, not covered by the statutory duty. The notification issued by the government under section 19 of the Act granting exemption wholly or partially from payment of customs duty prescribed under the First Schedule to the Act, could not therefore, in our view, cover the customs duty subsequently levied by the Government by way of additional customs duty to meet or cover a situation arising subsequent to the issue of the exemption notification. If the Government intended to exempt any future levy of the customs duty as well while granting exemption from the existing prescribed customs duty, it could provide so in the exemption notification as has been done on a number of occasions. As the exemption notifications referred to above, did not exempt the goods, which were exempted from statutory customs duty, also from the payment of regulatory duty, the exemption did not apply to the regulatory duty imposed by the Government subsequently although the regulatory duty may be a species of the customs duty. The learned counsel for private parties referred to the caseof Assistant Collector v. Gadoon Textile Mills (1994 SCMR 712) which is also referred in the impugned judgments, in support of their conclusion that the notification issued by the Federal Government exempting the' goods from payment of customs duty under section 19 of the Act would also cover any future levy of customs duty so long the exemption notification holds the field. The learned counsel specifically relied on the following observations in the case of Assistant Collector v. Gadoon Textile Mills Ltd. (supra):--
"As already mentioned in the judgment under review the estate of Gadoon Amazai was established in merged area of Gadoon Amazai which previously was tribal territory and was governed by customary laws where poppy cultivation was the main source of income of the inhabitants. In order to persuade them to desist from poppy cultivation and to provide them alternative job opportunities the industrial estate of Gadoon Amazai was established and to give incentive to the industrialists for installing various industries there, the Federal Government through the notification in question exempted the raw material and components as are imported for the exclusive manufacture of goods by a recognised industrial unit located in the said estate from whole of the customs duties and sales tax leviable thereon 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 section 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 section 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."
(The underlining is by us).
The above-cited case is distinguishable on facts as well as on the language of the notification. The exemption granted under section 19 of the Act through Notification NO.S.R.0.517(I)/89, dated 3-6-1989, which was the subject of consideration in the above-cited case, was in these terms:--
"In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969) and subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to direct that such raw materials and components as are imported for the exclusive manufacture of goods by recognised Industrial Units located in the approved industrial estate of Gadoon Amazai in the Province of N.W.F.P. shall be exempted from whole of the customs duties and sales tax leviable thereon subject to the following conditions, namely:--
(The underlining is by us).
A careful reading of the above notification would show that while granting exemption under section 19 of the Act from payment of the customs duties, no reference was made to the customs duties on goods prescribed under the First Schedule to the Act. The use of expression "whole of the customs duties" in, the notification without making any reference to customs duty prescribed in the Schedule to the Act is significant and distinguishes this case from those covered under the notifications, which granted exemption only from the customs duty prescribed under the 1st Schedule to the Act. The case of Gadoon Textile Mills Ltd. (supra), therefore, in our view is of no assistance to the learned counsel in cases covered by the exemption notification which granted exemption from payment of whole or part of the customs duties prescribed under the 1st Schedule to the Act.
The second contention of the learned 'counsel for the private parties/respondents in the above cases is that the regulatory duty imposed by the Federal Government under section 18(2) of the Act, was not enforceable against the respondents as chargeability to the customs, duty under section 18 of the Act arises as soon as the goods enter the territorial waters of Pakistan. It is contended that the ships carrying the goods in the above cases entered the territorial waters of Pakistan before the issuance of the notifications imposing regulatory duty and therefore, on the date the goods became chargeable to customs duty, there was no regulatory duty on these goods. It is, accordingly, argued that the issuance of the notification imposing regulatory duty subsequently could not affect the chargeability of the goods to the customs duty as they arrived within the territorial waters of Pakistan before the issuance of the notification imposing regulatory duty. On these premises, it is contended that the regulatory duty imposed by the Government did not apply to these goods. In support of the contention, reliance has been placed by the learned counsel on the following paragraphs from the case of Lahore Textile & General Mills v. Collector of Customs (PLD 1988 Lahore 563) decided by a learned Single Judge of Lahore High Court:
9. Under subsections (1) and (2) of section 18 of the Customs Act customs duties and regulatory duties become leviable no sooner the goods inter alia are imported into Pakistan or exported therefrom. The only question that arises is when can it be said that goods are 'imported' into Pakistan. The Supreme Court of Pakistan in East and West Steamship Company v. The Collector of Customs (PLD 1976 SC 618) held that the word 'import' carried the meaning of 'bringing in' or, 'to bear or carry into' and an imported article was one which was brought or carried into a country from abroad and it did not necessarily entail the entire process of filing bill of entry, discharging the goods from the vessel at a wharf, the assessment of the value of the goods and the duty payable on them. No sooner, therefore, the vessel touches a Pakistan Port, the goods can be stated to have been imported. Under section 9 of the Customs Act, the Central Board of Revenue, by a notification, can declare places, which can be treated as customs ports or customs airports or land customs stations for the clearance of goods imported. Under section 10 of the Act, the Central Board of Revenue, by notification, can specify the limits of any customs port or station. Under Central Board of Revenue Notification S.R.O. No.108 (1)/83, dated 12-2-1983, the limits of the customs port of Karachi are laid, which extends some miles outside the Karachi harbour. In these circumstances, no sooner a ship enters the territorial waters of the customs port of Karachi, goods can be stated to be imported into Pakistan, irrespective of the fact whether the vessel touches of the land mass of Pakistan or discharges its cargo at a wharf. Thus, no sooner the goods have entered the territorial waters of the Pakistani customs ports of Karachi, Pasni, Muhammad Bin Qasim, as specified by the Central Board of Revenue under section 10 of the Customs Act, 1969, the goods become chargeable.
10. Section 18 of the Customs Act does not state how and in what manner the value of the goods imported is to be assessed and at what point of time the chargeability or leviability of the duty arises. What it only says is that the customs duties and regulatory duties, at rates prescribed in the Act, are to be levied on inter alia goods imported into or exported from Pakistan. Under the Customs Act, charge?ability is under section 18, valuation of goods is under section 25 and rate at which the duty is to be assessed is under section 30. These different events may occur at different epochs of time, but unless the goods are chargeable to duty and the taxable event occurs under section 18, the question of valuation of goods under section 25 and calculation of duty payable at any particular rate under section 30 does not arise. The chargeability is dependent upon the import of goods. Chargeability is not postponed, but what is postponed is valuation and collection at particular rate at a later date. (See Apar Private Limited v. Union of India 1986 Tax L.R. 2022). Thus, imported goods become chargeable to duty under section 18 when they enter the territorial waters of the customs ports of Pakistan, but their value for the purposes of determining the amount of duty payable under section 25 and the rate at which duty is payable has to be determined under section 30 of the Customs Act. The reason why chargeability impinges on one day and valuation land rate of duty payable is left to another later date, is because a mass of goods come into the country in bulk and have to be off-loaded from vessles, then checked and temporarily stored and delivered to the importers, after further checking, at an early date, if the importer desires home clearance, or at some appreciably later date, if the importer desires in-bonding and clearance later from the warehouse. Since it is easy to check the goods at the final state of delivery, their valuation for the purposes of determining duty payable and the rate of duty applicable is made counterminous with the date the bill of entry is presented for home clearance or ex?-bonding from warehouse. Thus, if on the date the goods reach the territorial waters of the customs ports of Pakistan no customs dues or surcharge is leviable or if any duty or surcharge is leviable but the same stands total, exempted, the goods would not be chargeable to duty or surcharge. If, therefore at a later date the importer submits his bill of entry for home clearance or ex-bonding from warehouse and by this date some customs or regulatory duty imposed, or the total exemption is partially or totally withdrawn the importer would not be liable for the payment of any customs or regulatory duty, as the goods initially were not chargeable. See Shawhney v. Sylvania & Laxman 1975-77 Bom. L.R. 380 and Synthetics & Chemicals v. S C Countinho, 1981 ELT 414. If, however, on the date of import, some customs or regulatory duty is leviable, the goods are chargeable under section 18 and if, therefore, at a later date the importer submits his bill of entry for home consumption or ex-bonding from warehouse and by this date the customs or regulatory duty is enhanced, the importer would be liable for the higher customs or regulatory duty as was prevalent on the date when he submitted the bill of entry for home delivery or ex?-bonding from warehouse. (See Apar Private Limited and another v. Union of India 1986 Tax, L.R. 2022)."
(The underlining is by us).
The above judgment rendered by the learned Single Judge on 14-6-1988, holding that if the goods were exempted wholly from payment of customs duty and surcharge on the date they entered the territorial waters of Pakistan, the withdrawal of exemption before the presentation of the bill of entry for home consumption, for warehousing the goods in a bonded warehouse, would not make such goods liable to customs duty or surcharge, is no more a good law after insertion of section 31-A in the Act. Apart from it the learned single Judge in Lahore Textile & General Mills v. Collector of Customs (supra) has referred to the case of East and West Steamship Co. v. Collector of Customs (PLD 1976 Sc 618) in support of his conclusions that import of the goods is complete as soon as the goods enter the territorial water of Pakistan and therefore, any levy of customs duty or surcharge after the date the goods entered the territorial waters though it may be before the submission of bill of entry for home consumption, or warehousing of the goods in the bonded warehouse, would not be applicable to such goods, does not find support from the following observations of this Court in East and West Steamship Company (supra):--
"The learned Judges in the High Court got over the argument by expressing the opinion that import duty becomes leviable under section 2 of the Tariff Act. Mr. A.K. Brohi contested this proposition and maintained that the Tariff Act prescribes only the rate of duty whereas the dutiability is fixed by the charging section 20 of the Sea Customs Act. Assuming it for the sake of argument but without holding it specifically that duty is leviable under section 20 of the Sea Customs Act and that the Tariff Act only prescribes the rate of duty, how can one get over clause (9) of section 20 which lays down in categorical terms that customs duties shall be levied at such rates as may be prescribed by or under any law for the time being in force on goods imported by sea into any customs port. A 'vessel' is a 'goods' and in both cases 'vessels' were imported from foreign ports to the customs port of Karachi. In the First Schedule to the Tariff Act, Chapter 89.01, a duty of 15 % is imposed on vessels exceeding 250 gross tonnage. The two vessels thus became dutiable the moment they were imported from foreign ports to the customs port of Karachi. "
Even if it is assumed that chargeability to the customs duty arises under section 18 of the Act as soon as the goods enter the territorial waters of Pakistan, the rates of customs duty of all items are prescribed in the 1st and 2nd Schedules to the Act, and therefore, if the imported goods are one of those mentioned in the 1st or the 2nd Schedule, the chargeability arises immediately the goods enter the territorial waters of Pakistan according to the rates prescribed in the Schedule to the Act. The chargeability to the dutyhaving arisen any change in the rate of the customs duty or imposition of any additional duty of customs is to be determined with reference to the dates of filing of bill of entry for home consumption or taking out of the goods from bonded warehouses as provided in section 30 of the Act. Under section 30 of the Act, the rate of duty applicable to any imported goods is the duty which is applicable on the date of filing of bill of entry for home consumption under section 79 of the Act and in the case of goods cleared from bonded warehouse on the date the goods are ex-bonded from the warehouse (See Abdul Wahid Abdul Majid v. Government of Pakistan (1993 SCMR 17). Section 31-A of the Act, which was inserted by Finance Act, 1988, reads as follows:--
"31-A. Effective rate of duty.---(1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30 and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 18, section 2 of the Finance Ordinance, 1982 (XII of 1982), and section 5 of the Finance Act, 1985 (1 of 1985), and the anti-dumping or countervailing duty imposed under the Import of Goods Anti-dumping and Countervailing Duties) Ordinance, 1983 (III of 1983), and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the same of such goods or opening of a letter of credit in respect thereof.
(2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign exchange is to be converted into Pakistan currency shall be the rate of exchange in force,-- '
(a) in the case of goods referred to in clause (a) of section 30, on the date preceding the date referred to in that clause;
(b) in the case of goods referred to in clause (b) of the aforesaid section, on the date preceding the date referred to in that clause; and
(c) in the case of goods referred to in section 31, on the dates referred to in that section. "
The above section 31-A, provides that for the purposes of sections 30 and 31 of the Act, the rate of duty applicable to the goods includes the amount of duty imposed under section 18 of the Act, section 2 of Finance Ordinance, 1982 and section 5 of the Finance Act, 1985, in addition to the amount of customs duty that tray become payable as a consequence of withdrawal of whole or any part of exemption or concession from duty whether before or after conclusion of the contract or agreement for sale of the goods or opening of letters of credit in respect of the contract notwithstanding anything contained in any other law for the time being enforced or judgment of any Court. It is, therefore, quite clear that under this section the duties whether they are levied under section 18(1) or 18(2) of the Act are to be paid as provided under section 30 notwithstanding any other law or judgment of the Court. We are, therefore, of the view that the imposition of regulatory duty under section 18(2) of the Act, otherwise could not be objected to in view of the provisions contained in section 31-A of the Act and same was recoverable on the goods imported into Pakistan in accordance with the provisions of section 30 of the Act notwithstanding the fact that the notification issued under section 19 of the Act exempting such goods either wholly or partially from payment of customs duty leviable under section 18(1) of the Act, was holding the field.
At this stage, we may mention here that in some cases it was contended by the learned counsel for the respondents/private parties that the goods imported by them were already subject to statutory duty of 65 and therefore, in terms of the notification issued by the Government on 29-10-1995 under section 18(2) of the Act, the regulatory duty could not be enforced against import of such of goods. We have already reproduced above, the notification issued under section 18(2) of the Act by the Government on 29-10-1995 imposing regulatory duty which provides that the goods which are already subject to the payment of 65 % statutory duty, are exempted from the operation of the notification. We therefore, hold that if on the goods imported by any of the respondents the customs duty was already chargeable at the rate of 65 %, such goods were exempted under the, notification, dated 29-10-1995 from payment of regulatory duty. However, we leave it to the Government to examine the individual cases in the light of the above observations.
In some cases, the respondents/private parties also argued that they had already filed the bill of entry for home consumption and even deposited the required customs duty before the date of the notification, whereunder regulatory duty was imposed but the customs authorities are insisting for recovery of regulatory duty even in these cases. Under section 30 ibid, the rate of duty for the goods cleared for home consumption, is the rate applicable on the date the bill of entry is presented under this section. Therefore, if on the date the importer had submitted his bill of entry, the notification issued by the Government under section 18(2) of the Act, had not come into effect, the regulatory duty could not be recovered on such goods. However, on facts the concerned authorities will determine the individual cases in the light of the above observations.
The learned counsel for the respondents/private parties further argued that in view of the provisions of Economic Reforms Act, 1992 (Act XII of 1992), the fiscal incentives granted to them in the shape of exemptions from payment of customs duty could not be taken away by asking them to pay the customs duty in the shape of regulatory duty. Act XII of 1992 was promulgated on 28-7-1992 and section 3 thereof which gave overriding effect to the provisions of the Act, over all other laws reads as follows:--
"3.??????? Act to override other laws.---The provisions of this Act shall have effect notwithstanding anything contained in the Foreign Exchange Regulation Act, 1947 (VII of 1947), the Customs Act, 1969 (IV of 1969), the Income Tax Ordinance, 1979 (XXXI of 1979), or any other law for the time being in force."
Section 6 of Act XII of 1992 provided protection for fiscal incentives for setting up industries, in these terms:--
"6.??????? Protection of fiscal incentive for setting up of industries. ---The fiscal incentives for investment provided by the Government through the statutory orders listed in the Schedule or otherwise notified shall continue in force for the term specified therein and shall not be altered to the disadvantage of the investors."
Section 6, ibid, is to be read with Schedule to Act XII of 1992, which mentions Notification No.S.R.O. 1284(1)/90, dated 13-12-1990 issued under section 19 of the Act. It is true that Act XII of 1992 was given overriding effect over all other existing laws including Customs Act and section 6 ibid, provided that fiscal incentives given to the investors by way of Notification No.S.R.O. 1284(1)/90, dated 13-12-1990 could not be withdrawn or altered to the disadvantage of the investors during the period p specified therein. However, this provision did not curtail or take away the power of Federal Government vested under section 18(2) of the Act. The fact that the Government could not withdraw the concession allowed by it under the abovementioned S.R.O., dated 13-12-1990 during the period specified in the notification, did not mean that the Government was precluded from exercising the power under other laws, which allowed discretion to the Government to impose additional duties of customs. In our view, the provision of section 6 of Act XII of 1992 places no embargo on the exercise of delegated powers by the Government under section 18(2) of the Act, We, accordingly, hold that in respect of the goods which were exempted from payment of customs duty specified in the 1st Schedule to the Act, either wholly or partially, under all S.R.Os. mentioned above, except S.R.O. No.108(I)/95, dated 12-2-1995, the imposition of regulatory duty by the Government under section 18(2) of the Act was effective and the same could be recovered from the importers at the time of filing of the bill of entry for consumption or on the date of ex-bonding of the goods from the bonded warehouse, if the notification imposing regulatory duty had come into effect on the date of presentation of the bill of entry or ex-bonding of the consignment from the bonded warehouses.
We now take up the cases covered by S.R.O. No.108(I)/95, dated 12-2-1995. These cases/appeals arise from the judgment of Peshawar High Court, dated 23-2-1997. We have already reproduced earlier in this judgment the text of S.R.O.108(I)/95, dated 12-2-1995. This S.R.O. is valid for a period of 5 years from the date of its issue. The Government while granting exemption from payment of customs duty to the industrialists under this notification firstly, made no reference to the duty of customs prescribed in the 1st Schedule to the Act as was done in other S.R.Os. Secondly, the expression used in this notification is "from whole of the customs duties" which is identical to the language used in the notification which came up for consideration before this Court in the case of Assistant Collector of Customs v. Gadoon Textile Mills (supra). Therefore, keeping in view the tenor of the language of the notification and the fact that the notification was valid for a period of 5 years from the date of its issue, the conclusion arrived at by the learned Judges of Peshawar High Court that the language used in the exemption notification covered the future levy of additional customs duty as well appears to be correct. We, accordingly, hold that in respect of the goods covered by S.R.O. No.108(I)/95, dated 12-2-1995, the regulatory duty imposed by S.R.O. No.1050(I)/95, dated 29-10-1995, was not recoverable.
As a consequence of the above discussion, Civil Appeals Nos. 1783 of 1996, 102 of 1997, 126 to 140 of 1997, 142 to 161 of 1997, 165 to 188 of 1997, 193 to 317 of 1997, 319 to 356 of 1997, 470 to 479 of 1997, 480 to 507 of 1997, 508 to 531 of 1997, 545 to 560 of 1997, 1545 to 1547 of 1997, 16 to 37 of 1998, 60 to 113 of 1998, against the judgments of Lahore High Court, dated 28-8-1996, 3-10-1996, 14-10-1996 and 12-10-1996 and Civil Appeals Nos. 1089 to 1108 of 1995 against the judgment of High Court of Sindh, dated 4-5-1994 are allowed in the terms stated above. Appeals Nos. 357 of 1997, 44 of 1998, 246 and 247 of 1997, 1548 to 1554 of 1997, 1763 of 1996, 1784 to 1787 of 1996, 162 of 1997 to 164 of 1997, 189 to 192 of 1997, 318 of 1997, 54 and 55 of 1998 arising from the judgments of Lahore High Court, dated 28-8-1996 and 22-7-1997, Civil Appeals Nos.849 to 868 of 1997, 1237 to 1241 of 1997 and 197 of 1998 arising from the judgments of High Court of Balochistan at Quetta, dated 1-7-1996 and 8-5-1997, and Civil Appeals Nos.869 of 1997 to 963 of 1997 arising from the judgments of the Peshawar High Court, dated 23-2-1997, are dismissed. However, in the circumstances of the cases, we will make no order as to costs.
M.B.A./C-28/S ?????????????????????????????????????????????????????????????????????????????????? Order accordingly.