M.B. DYES CHEMICAL & SILK INDUSTRY (PVT.) LTD., SWABI VS SECRETARY, REVENUE DIVISION ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 919 (2002)

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 202‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑S.R.O.108(I)/95, dated 12‑2‑1995‑‑ Regulatory duty‑‑‑Recovery of Government dues‑‑‑Disputed demand‑‑ Detention of consignment‑‑‑Such goods would become ‑ useless, if consignment was not immediately released ‑‑‑Complainant/assessee accepted the offer of Department that consignment will be released on an undertaking by the complainant that duty shall be paid, if subsequently, it was found that the Regulatory Duty was payable on such consignment‑‑‑Interim recommendation was made by the Federal Tax Ombudsman that consignment detained at the Airport for the demand of Rs.8,04,652 be released immediately on submitting an undertaking by the complainant that if it was found that the Regulatory Duty as demanded was payable, the complainant would pay the same, as regard the demurrage charges Department would advise the Airline not to charge the same as the matter was under litigation‑‑‑Complaint, the intervening action of detention of goods, its bona fides and liability to pay demurrage will be considered and decided after the case was finally heard on a date to be intimated to the parties.

Dr. Maqbool Islam for the Complainant.

Dr. Sadiqullah Khan, D.C. Customs, Peshawar for Respondent.

DECISION/RECOMMENDATION

The case has been considered but Dr. Sadiquallh Khan states that as the department has sought, legal opinion on the legal issues involved in it some time may be granted to the department to enable, it to present the case properly. However, Dr. Maqbool Islam pointed out that the complainant had imported chemical in September 2002 whose life will expire by the end of this month. The Customs Department did not allow to file the bill of entry earlier as a notice under section 202 making a demand of Rs.8,04,652 was issued and placed with the department but not served on the complainant. He further pointed out that the bill of entry was filed on 8‑10‑2002 and no sooner duty and tax were assessed they were paid on 23‑10‑2002 and now 'notice has been served on clearing agent. In these circumstances he requested that the goods may be released as the demand and detention of the goods are illegal. This is anew phenomenon in the case as such action has been taken after the complaint had been filed and the case is under consideration. It will be considered later whether this action was bona fide.

2. On query Dr. Sadiqullah Khan stated that the demand for Rs.8,04,652 has been raised in respect of Regulatory Duty under S.R.O. 108(I)/95, dated 12‑2‑1995. In this regard a copy of the letter of Deputy Collector, dated 29‑10‑2002 has been placed on record addressed to the Assistant Collector (Recovery) stating that examination of the record reveals that the complainants have cleared their raw material on 25% compensation quota granted by C.B.R., Islamabad and request has been made that the case be re‑examined in the light of Hon'ble Supreme Court of Pakistan Judgment, dated 16‑10‑2002 in consultation with Assistant Collector (Legal Division) Custom House, Peshawar.

3. Dr. Maqbool Islam has contended that in view of the Judgment of the Supreme Court of Pakistan in Ravi Spinning Mills and others and the High Court of Peshawar in Petition No. 1223 of 1995 filed by the complainant, which has been upheld by Supreme Court, it is clear that Regulatory Duty cannot be charged under S.R.O. 108 nor can it be imposed on 25% compensation on one time granted by ECC. His contention is that the judgments of both the Courts are clear and require no further clarification. In these circumstances he has requested that the consignment detained at the airport may immediately be released otherwise it will become completely useless and further that the demurrage charges should be waived as it has accrued due to illegal act of the Customs Department for which the complainant is not responsible.

4. During the hearing Dr. Sadiqullah Khan offered that the consignment will immediately be released on an undertaking by the complainant that if it is held that the Regulatory Duty is payable as demanded the complainant will pay the same. He has further offered that he would advise PIA the authority, which will charge the demurrage not to charge and release the consignment as the matter, is under litigation. The representative of the complainant accepts this offer. The following interim order and. recommendation is made with the consent of the parties that:‑‑‑

(i) The consignment detained at the Peshawar Airport for the demand of Rs.8,04,652 be released immediately on submitting an undertaking by the complainant that if it is held that the Regulatory Duty as demanded is payable, the complainant would pay the same. As regards demurrage charges the respondent would advise PIA not to charge as the matter is under litigation.

(ii) The request for adjournment by the learned representative for the department is granted.

(iii) Compliance be reported within 5 days.

5. The complaint, the intervening action of detention of goods, its bona fides and liability to pay demurrage will be considered and decided after the case is finally heard on a date which will be intimated to the parties.

This order has been dictated in the presence of the parties.

C.M.A./583/FTO Order accordingly.

2003 P T D (Trib.) 922

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technial) and Abdur Rashid A. Shaikh, Member (Judicial)

Custom Appeal No. K‑985 of 2001, decided on 6th June, 2002.

(a) Sales Tax Act (III of 1951)‑‑‑

‑‑‑‑S. 3(5)‑‑‑Central Excise Rules, 1944, R.9, fifth proviso‑‑‑Customs Act (IV of 1969)‑‑‑Time and manner of payment‑‑‑Difference between S.3(5) of the Sales Tax Act, 1951 and the fifth proviso to R.9 of the Central Excise Rules, 1944 is that the former had only prescribed the machinery of the Customs Act, 1969 to sales tax by employing the expression, `payable' whereas the latter had purported to prescribe both the charging and machinery provisions of the Customs Act, 1969 to central excise duty by using the words 'charged and collected'.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 37‑‑‑Central Excise Rules, 1944, R.9, fifth proviso‑‑‑Power of Central Government to make rules‑‑‑Delegation of power‑‑‑Creation of charge‑‑‑Power delegated under S.37 of the Central Excises Act, 1944 could not be extended to creation of a charge‑‑‑Even if S.37 of the Central Excises Act, 1944, hypothetically speaking had delegated to the Central Board of Revenue the power to introduce a charge or a levy, the said delegation would be bad because the power to impose or introduce a tax, levy or a fee is only legislative function which could not be delegated‑‑‑Term "charged" used in the fifth proviso to R.9 of the Central Excise Rules, 1944 is read down and was unenforceable.

M. Afzal & Sons v. Federation of Pakistan PLD 1977 Lah. 1327 and Abdul Rahim v. U.B.L. PLD 1997 Kar. 62 rel.

(c) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 3‑‑‑Customs Act (IV of 1969), Ss.30 & 31‑A ‑‑‑ S.R.O.995(I)/99, dated 31‑8‑1999‑‑‑Duties specified in the First Sched. of the Customs Act to be levied‑‑‑Imported goods‑‑‑Rate of duty‑‑‑Central excise duty was collected at import stage by extension of provisions of S.31‑A of the Customs Act, 1969 in the light of S.R.O.995(I)/99, dated 31‑8‑1999‑‑ Validity‑‑‑Sections 30 & 31‑A of the Customs Act, 1969 could not be extended to central excise duty since there was no comparable provision in the Central Excises Act, 1944‑‑‑Principle of promissory estoppel and vested rights in respect of central excise duty especially at import stage is applicable while S.31‑A of the Customs Act, 1969 does not‑alter the position with regard to central excise duty‑‑‑Fifth proviso to R.9 of the Central Excise Rules, 1944 also did not alter such position‑‑‑Central excise duty was not chargeable in the light of S.R.O.995(I)/99, dated 31‑8‑1999‑‑‑Order of Collector of Customs (Adjudication) was set aside by the Appellate Tribunal.

M.Y. Electronics case 1998 SCMR 1404; Crescent Pak Industries (Pvt.) Ltd. v. Government of Pakistan 1990 PTD 29; Al- Samrez's case 1986 SCMR 1917; Collector Customs v. Ravi Spinning Ltd. 1999 SCMR 412; Yaseen Sons v. Collector of Customs 1990 CLC 797; Muhammad Abdullah v. Government of Pakistan PLD 1992 Kar. 266; Federation of Pakistan v. Mahmood Sons (Pvt.) Ltd., Civil Appeals Nos.187‑K to 191‑K of 1990; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Punjab Cables v. Government of Pakistan PLD 1989 Lah. 121 ; Friends Sons v. Deputy Collector PLD 1989 Lah. 337; Malik Muhammad Din v. Trustees of the Port of Karachi PLD 1966 Kar. 518 and Chariman, Railway Board v. Wahabuddin Sons PLD 1990 SC 1034 rel.

Jahangir Khan, Consultant for Appellant.

Muhammad Moosa, D.R. for Respondent.

Date of hearing: 6th June, 2002.

ORDER

ZAFAR IQBAL MEMBER (TECHNICAL). ‑‑‑This appeal has been filed against the order, dated 9‑6‑2001, passed by the Collector of Customs Adjudication, Karachi‑1.

2. The issue in this case is whether or not a notification levying central excise duty on rapeseed will have retrospective effect, thereby affecting the transactions completed through contracts already signed and in consequence thereof letter of credit opened.

3. The department has relied upon the provisions of sections 30 and 31‑A of the Customs Act, and has argued that it is the date of filing of the bill of entry which will determine the rate of duty.

4. The appellant on the other hand contended that provisions of section 31‑A cannot be extended to the collection of central excise duty, hence the action of the department was ab initio wrong.

5. After having heard both the parties, we are of the opinion that the root cause of the issue is the application and of effect of S.R.O. 995(I)/99, dated 31‑8‑1999, on the contracts signed by the appellant.

6. In M.Y. Electronics (1998 SCMR 1404) the aspect with regard to applicability of section 31‑A of the Customs Act, 1969 to sales tax has been dealt at paras. 20 and 21 appearing from pages 1438 to 1442 the judgment. On this issue the Honourable Supreme Court has cited with approved and followed Crescent Pak Industries (Pvt.) Ltd. v. Government of Pakistan (1990 PTD 29), wherein a Division Bench of Sindh High Court interpreted section 3(5) of the erstwhile Sales Tax Act, 1951 whereby it was specifically provided that the sales tax in the given context, shall be payable at the same time and in the same manner as customs duties under the Customs Act, 1969. The Sindh High Court was of the considered opinion that the said section 3(5) by employing the word `payable' only introduced the machinery of the Customs Act to the payment of sales tax at import stage and did not impose the charge introduced by section 31‑A of the Customs Act to Sales Tax. It was for this reason that the Sindh High Court came to the conclusion that in relation to sales tax at import stage Al‑Samrez (1986 SCMR 1917) still held the field (i.e. with regard to the principles of promissory estoppel and vested rights), since there was no amendment in the Sales Tax Act comparable to section 31‑A of the Customs Act. On this aspect M.Y. Electronics has been followed in Collector Customs v. Ravi Spinning Ltd. (1999 SCMR 412), Crescent Pak Industries (Pvt.) Ltd. (cited supra) was also followed in Yaseen Sons v. Collector of Customs (1990 CLC 797) and Muhammad Abdullah v. Government of Pakistan (PLD 1992 Kar. 266). Both the latter judgments were delivered by two learned Division Benches of the Sindh High Court. It is pertinent to point out that in Muhammad Abdullah the Sindh High Court placed reliance on Federation of Pakistan v. Mahmood Sons (Pvt.) Ltd., Civil Appeals Nos.187‑K to 191‑K of 1990 (unreported) wherein the Honourable Supreme Court refused to invoke section 31‑A of the Customs Act to the recovery of sales tax: In Muhammad Abdullah the reliance of learned Deputy Attorney General on section 3(5) of the Sales Tax Act, 1951 was also repelled. It would be advantageous to reproduce the pertinent observations in paras. 6 and 8 in Muhammad Abdullah's case.

"6. As, in the present Constitutional petition, the challenge is to the demand of sales tax and not to customs duty. In view of the aforesaid law declared by the Supreme Court, section 31‑A of the Customs Act cannot be pressed into service by the department for protecting the levy of sales tax by the second Notification, dated 26‑6‑1988 as contracts had already been concluded between the petitioner and the suppliers in respect of the seven consignments in question evidenced by the opening of the irrevocable confirmed letter of credit by the petitioner in favour of the suppliers. The aforesaid, two reported decisions of this Court relied upon by Mr. Muhammad Nasim also supported the case of the petitioner that .the levy of sales tax on the consignments in question is illegal."

"8. We find no merit in the contention raised by the learned Deputy Attorney‑General. As observed the law has been declared by the Supreme Court in its judgment; dated 7‑2‑1991 in the case of Federation of Pakistan v. Messrs Mehmood Sons (Pvt.) Ltd., where it has been held that section 31‑A of the Customs Act cannot be invoked for protecting levy of the sales tax because that relates to customs duty and not to sales tax. We may also refer to the observations of this Court in the case of Crescent Pak Industries (Pvt.) Ltd. v. Central Board of Revenue (1990 PTD 29) which fully answers the contention raised by Deputy Attorney‑General."

7. This brings us to the controversy at hand. The question, which requires determination is whether there is any provision in the central excise law which would be comparable to section 31‑A of the Customs Act or which would make the later applicable to central excise duty. The learned departmental representative has invited reference to the fifth proviso to rule 9 of the Central Excise Rules, 1944 which prescribes the time and manner of payment of central excise duty at import stage as follows:

"Provided further that the duty in respect of goods imported into Pakistan shall be charged and collected in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 (IV of 1969)."

8. It is correct that the key difference between section 3(5) of the Sales Tax Act, 1951 and the fifth proviso to rule 9 of the Central Excise Rules, 1944 is that the former had only prescribed the machinery of the Customs Act to sales tax by employing the expression, `payable' whereas the latter has purported to prescribe both the charging and machinery provisions of the Customs Act to central excise duty by using the word charged and collected'. As already stated above, in Crescent Pak Industries (Pvt.) Ltd: as approved by M.Y. Electronics the reason for not extending section 31‑A of the Customs Act to sales tax was that section 3(5) of the Sales Tax did not contain a charging provision, if the same reasoning is applied here to central excise the result may prima facie, appear to be different since in terms of the fifth proviso to rule 9 of the Central Excise Rules not only the 'collection' but also the 'charge' of the Customs Act has been made applicable. This being so, the real question would then be as to whether a charge could be created by delegated legislation through the rule making process. The more fundamental question would also be as to whether the power to create a charge can at all be delegated as in the present case.

9. This issue has been settled in the case of Kohinoor Textile v. Federation of Pakistan 2002 PTD 121, wherein their lordships have observed as under:‑‑

"...Section 37 of the Central Excises Act empowers the Central Board of Revenue to make rules so as to carry out the purpose of the Act. Section 37(2) in turn prescribes a number of items for which the rules could be made, without of course limiting, the general rule making power for those items which are not so mentioned therein. The delegation thus, is only for assessment or collection, but not for the creation or imposition of a charge. The terms 'assessment' points out to the process of ascertaining, adjusting or determining the amount of tax payable (see Punjab, Cables v. Government of Pakistan PLD 1989 Lah. 121); whereas the term 'charge' denotes the very imposition or levy of the tax (see Friends Sons v. Deputy Collector PLD 1989 Lah. 337). Similarly 'collection' means the very process of recovery of the tax. In other words for any tax or in any taxing statute there are three stages; firstly, the imposition or creation of the very tax or levy known as the 'charge'. The provisions which deal with the latter are called the charging sections. Secondly, the quantification of the tax of levy which is called `assessment' and thirdly, the recovery of the levy or tax is called 'collection'. The latter two are the machinery provisions, which are contained in the machinery sections of the statute.

In the present case the delegation conferred through section 37(2)(i) of the Central Excises Act on the Central Board of Revenue it only with regard to 'assessment and collection' and not imposition or 'charge' of the duty. In striking contrast, the Central Board of Revenue in notifying the fifth proviso to rule 9 of the Central Excise Rules has travelled for beyond the delegation conferred upon it since the said proviso has been extended to the creation of a 'charge' along-with 'collection'. In other words, the C.B.R. under section 37 has not been given the power to introduce the charge. The fact that section 21‑A of the Customs Act introduces a new charge and is not merely a machinery provision seems settled from Crescent Pak Industries (Pvt.) Ltd. and M.Y. Electronics. It is equally settled law that rules made under delegation of powers cannot go beyond the mandate conferred by the parent statute (see Malik Muhammad Din v. Trustees of the Port of Karachi PLD 1966 Kar. 518 and Chairman Railway Board v. Wahabuddin Sons PLD 1990 SC 1034). The use of word 'charge' in the fifth proviso to rule 9 of the Central Excise Rules is thus ultra vires the power conferred on the C.B.R. under section 37(2)(i) of the Central Excises Act, the departmental representative has contended that section 37(2) of the Central Excises Act only lists out the items recommended for rule making and such items are not exhaustive since the said section 37(2) expressly provides that the rules could be made in respect of the items mentioned without prejudice to the generality of the foregoing power i.e., to make rules generally. On the strength of this argument the departmental representative has contended that even if the delegation to introduce the 'charge' cannot be spelt out from section 37(2)(i), such power is implicit from the general rule‑making power conferred through section 37(2) and the opening words of section 37(2). A short answer to this argument is that even if the subject or item of rule‑making mentioned in section 37(2) are not exhaustive, the general rule‑making power has to be read as ejusdem generis with the items or subject listed in section 37(2). As already pointed out 'assessment and collection' on one hand are completely opposed to 'charge'. The two are not ejusdem generis by any stretch of imagination. Thus the general rule‑making power delegated under section 37 cannot be extended to creation of a charge. We would in fact go a step further. Even if section 37, hypothetically speaking had delegated to the C.B.R. the power to introduce a charge or a levy, the said delegation would be bad since it is now pretty much settled that the power to impose or introduce a tax, levy or a fee is only legislative F functions which cannot be delegated (see M. Afzal & Sons v. Federation of Pakistan PLD 1977 Lah. 1327). In this mariner: the term 'charge' used in the fifth proviso of rule 9 of the Central Excise Rules is read down and found to be unenforceable (for the powers of the Court to read in and read down provisions of a statute (see Abdul Rahim v. U.B.L. PLD 1997 Kar. 62)..."

10. Thus the, contention raised by the department is not tenable;

11. The upshot of the above discussion is summarized as follows:‑‑‑

(a) Sections 30 and 31‑A of the Customs Act, 1969 cannot be extended to central excise duty since there is no comparable provision in the Central Excises Act, 1944.

(b) Al‑Samrez (1986 SCMR 1917), wherein the principles of promissory estoppel and vested rights have been established, still holds the field in respect of central excise duty especially at import stage; while section 31‑A of the Customs Act, 1969 does not alter the position with regard to central excise duty.

(c) The fifth proviso to rule 9 of the Central Excise Rules, 1944 does not alter the position as underscored in sub‑paras (b) and (c) above.

(d) Thus in the light of S.R.O. 995(I)/99, dated 31‑8‑1909, central excise duty was not chargeable on the disputed goods.

12. This appeal is accordingly allowed as prayed and impugned order is set aside.

C.M.A./599/Tax (Trib.) Accordingly allowed.