MERCURY GARMENT INDUSTRIES VS CENTRAL BOARD OF REVENUE, 2003 PTD-KARACHI-HIGH-COURT-SINDH 1387 (2003)

Customs Act (IV of 1969)---

----S. 19---Pakistan Customs Tariff Classification (PTC) No.4011 Fol(a)(i) & 4011.9910---C.B.R. Letter dated 15-3-1993---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption---Import of tyres for tractors for agricultural purposes---Refusal to grant exemption by the Department on account of erroneous description of the imported item by C.B.R. functionaries---Department seeking clarification from the C.B.R. and obtained Bank guarantees from the imported meanwhile---Petitioner (importer) seeking the relief of declaration that the proposed action of the Department calling for the encashment of the Bank guarantees was illegal and restraining the Department from initiating proceedings for encashment of the Bank guarantees- Contention of the importer was that Department had refused to allow the concession to the importer for the reason that they wanted classification from C.B.R. if the description under the PTC Hdg. 4011.9910 word used was "stripped" or `striped'---Description by C.B.R. under the relevant PTC Hdg. admittedly used the word "stripped" and not "striped" but confusion had been confounded by the Second Secretary, C.B.R., because of an intentional incorrect spelling of the word in the Letter dated 15-3-1993---Validity---High Court deprecated such attitude on the part of Tax Official who were supposed to be assessee friendly and were not supposed to adopt such attitude which smack of arbitrariness, mala fide and resulting in causing harassment to the assessees---Citizens were entitled to better treatment at the hands of Tax Officials to promote the tax culture in the country---Goods imported by the importer conformed to the description made under PTC Hdg. No.4011-9910 as the same stood at the time of import and in accordance with the C.B.R. decision contained in the letter dated 15-3-1993 importers were thus entitled to the concession and were not liable to pay any customs duty, regulatory duty or sales tax, as it was a duty free import in the relevant period---Department, in circumstances, was directed to release the Bank guarantee furnished by the importer and issue necessary instruction to the functionaries to extend friendly attitude to assessees.

Abid Hameed Puri for Petitioner.

Raja M. Iqbal and Sajjad Ali Shah, Standing, Counsel for Respondents.

Date of hearing: 5th March, 2003.

JUDGMENT

MUHAMMAD MUJIBULLAH SIDDIQUI, J.-The relevant facts alleged by the petitioners are that, the petitioners were importing tyres and tubes for Agricultural Tractors from the U.S.S.R. since 1984, which was duty free and sales tax free, classified under Pakistan Customs Tariff Classification (PTC) No. 4011. FO1 (a)(i) upto 25-6-1988. The Tariff description read as under:--

"4011. Fol (a)(i): "Vertically Striped Tyres used on front Wheel.

That with effect from 26-6-1988 the Tariff description was changed to PTC Heading No.4011, 9910 which read as under:--

"4011. 9910 "Continuously vertically stripped. Tryes used on front wheel on agricultural Tractors."

The petitioners imported tyres of size 7.50 x 20/6 PR from U.S.S.R. vide IGM No.925 of 1990, dated 5-5-1990. According to petitioners it was undisputedly used exclusively for front wheel of tractors. The Customs Authorities assessed these tyres falling under PTC Classification No.4011.9990 at 105% Customs Duty and 12.5 % Sales Tax. They further sought to assess value at a 31.82 per set against declared value of $ 23.21 per set. The petitioner has alleged that the Customs Authorities refused assessment in Classification No.4011.9910 for the reason that the tyres were not continuously vertically stripped so as, to qualify under such amended Classification. It is alleged that apart from being factually incorrect and erroneous as the imported consignment of Agricultural Tractors Tyres contained a thick stripe about 2-3 inches in width in the centre with incomplete incisions/ indenture on it, which did not completely break the stripe, it was not permissible in the wake of clear text of the description under amended Classification No.4011.9910 as the words used therein were continuously vertically stripped tyres as against the words "striped" which was earlier used and which was being erroneously applied by the Customs Authorities to the imported consignments of the petitioners. The matter was placed before Respondent No.3. Deputy Collector of Customs (Appraisement). During the pendency of the proceedings, the petitioners requested for release of their consignments upon submission of Bank Guarantees which was acceded to by the Respondent No.3. The consignments were consequently, released on furnishing of four Bank Guarantees in the sum of Rs.5,00,000 each, of the Habib Bank Ltd., Cloth Market Branch, Karachi.

Substantial time was consumed but the issue was not resolved therefore, the petitioners requested to Respondent No.3 for release of Bank Guarantees. The material was placed before respondent No.3 to show that the Tyres imported by the petitioners, were meant for use on the front wheel of the tractors. Prior to the release of tyres the respondents Nos.2 and 3 had sought expert opinion from the Pakistan Tyres Importers and Tyres Association who opined that the tyres were agricultural tyres and had no other use. Thereafter the respondent No.2 made a reference to the respondent No.1 C.B.R. on 4-12-1991, seeking classification whether the correct word is to be taken as stripped or "striped". It was further stated in the letter addressed to C.B.R. that in case it is "stripped" as pointed out-by the petitioners, the continuous groove in the tyres fulfils this condition, otherwise necessary correction be incorporated in the Tariff and Clarification be issued. Thereafter lengthy correspondence consumed ensued the respondent No.1 C.B.R. and respondent No.2 Collector of Customs (Appraisement). Finally, the respondent No.2 in its letter, dated 6-5-1992, on the basis of opinion of Messrs General Tyres and Rubber Company declared that the tyres were essentially meant for use in agricultural tractors and were not fit for use in commercial vehicles. Ultimately C.B.R. in its letter, dated 15th of March, 1993 addressed to the respondent No.2 communicated the decision as follows:--

"The issue has been examined in the Board and it has been decided that benefit of concessionary duty shall only be extended to the consignment of tyres which conform the tariff description i.e. continuously vertically striped tyres. The assessment of the subject consignment may please be finalised accordingly."

Thereafter the petitioners bankers informed that they have received final encashment notice, dated 4-4-1993 from Custom Authorities for immediate encashment of the Bank Guarantee. The petitioners wrote a letter to the respondent No.2 intimating that the C.B.R. in its letter, dated 15-3-1993 has stated that the benefit of concessionary duty shall be extended to the consignment of tyres which conforms to the tariff description. It was further intimated that in the C.B.R. letter the tariff description under PTC Classification No.4011.9910 has been incorrectly stated as in the C.B.R. letter word striped tyres has been written while in the tariff description under PTC Heading No.4011.991 the words "stripped tyres" are written. It was requested that according to the C.B.R. letter, dated 15-3-1993 the concession is to be allowed to the consignment of tyres which conforms to tariff description, therefore, the description given in the PTC Heading is to be adhered to and not the incorrect version contained in C.B.R. letter dated 15th of March, 1993. No decision was taken by the respondents Nos. 2 and 3 till 19-4-1993 and the attempts were being made for the encashment of Bank Guarantees, contrary to the advise of the respondent No.1, therefore, the petitioners approached this Court invoking Constitutional jurisdiction under Article 199 of the Constitution of Islamic Republic of Pakistan, seeking the relief that the proposed action of respondent No.2 calling for the encashment of the Bank Guarantees was illegal and restraining the respondents from initiating proceedings for encashment of the Bank Guarantees, with further direction to release the Bank Guarantees held by the respondent.

The respondents in their para-wise comments contended that the imported goods were not assessed under PTC heading 4011.9910 at the declared price of U.S. $ 23.21 per set because the tyres under reference were found not to be continuously vertically stripped agricultural tractor tyres to be used on the front wheel and were accordingly assessed under PTC heading 4011.9990 at the rate of 80% advolerum Custom Duty + 25 % Regulatory Duty and 12 Sales Tax. It was not denied that the C.B.R. decided the matter vide its letter, dated 15-3-1993. However, it was denied that the C.B.R. has mis-spelt either through over-sight or under deliberate and mala fide intent word "stripped" as "striped".

The petitioners filed rejoinder to the Para-wise comments on behalf of respondents and contended that the C.B.R. in their Customs Budgetary measures for the year 1993-94 under the head of rationalization proposal, at serial No.26 proposed as follows:--

"Rectification of spelling mistake in the First Schedule to the Customs Act, 1969, pertaining to agricultural tractor tyres by substituting the word stripped tyres" with the word "striped tyres".

A similar correction/entry was proposed in the PTC heading 4011.9910, where the word "stripped" was sought to be replaced with "striped". The petitioners produced copies of pages 7 and 82 of the Customs Budgetary Measures 1993-94, issued by the Printing and Publishing Department, Customs House, Common Pool Trust Karachi.

It was contended that these proposals established that, in the PTC heading the word stripped tyres were continuing till the year 1993-94 and shows that, the respondents were wrongly denying the concession to the petitioners with mala fide intention. The petitioners further contended that, the proposal of the Customs Department was not accepted and in the Finance Act, 1993-94, published in the Gazette of Pakistan Extraordinary on 29th of June, 1993, the original description of PTC Heading No.4011.9910 has been written and the Legislature has continued to use the word stripped tyres against the suggested/proposed word "striped". The petitioner has produced the relevant pages of the Finance Act, 1993-94. They have further highlighted that the respondent No.2 in its letter, dated 4-12-1991 addressed to the respondent No.1 had stated that if under the PTC heading 4011.9910 it was "stripped continuous groove on the tyres imported by the petitioners would fulfil such condition.

We have heard the learned Advocates for the parties, who have mainly reiterated their contentions available on record. Mr. Abid Hameed Puri, learned counsel for the petitioners has submitted that the C.B.R. in its letter, dated 15-3-1993 has conveyed the decision, that the benefit of concessionary duty shall be extended to the consignments of tyres which conform to the tariff description. He has further submitted that, admittedly the tyres imported by the petitioners' conform to the tariff description under the PTC Heading No.4011.9910 as conceded by the respondent No.2 in its letter addressed to the C.B.R. He has contended that, the entire controversy has taken place because of intentional mis-statement made by the Dr. Muhammad Saeed, Second Secretary, C.B.R. in the letter, dated 15th of March, 1993 in which he has spelt word "stripped" used in the description of PTC Heading No.4011.9910, as "stripped".

Mr. Raja M. Iqbal, learned counsel for the respondents has conceded that, in the PTC Heading No.4011.9910, as existing in the year 1999 the words "stripped tyres" were used. However, he has vehemently opposed the petition and the grant of relief to the petitioners for the reason that, there was dispute on the size of the tyre.

We are not persuaded to agree with the submission of Mr. Raja M. Iqbal, learned counsel for the respondents, as after going through the entire record placed before us and the para-wise comments filed by the respondents, very carefully, we do not find any such controversy. We fully agree with the contentions of the learned counsel for the petitioners that the respondents No.1 and 2 had refused to allow the concession to the petitioners for the reason that they wanted clarification from C.B.R. if the description under the PTC Heading 4011.9910 word used is "stripped" or "striped". Admittedly, in the description under the relevant PTC heading word used is `stripped" and not "striped" but confusion has been confounded by the Second Secretary, C.B.R. because of an intentional incorrect spelling of the word in the letter dated 15-3-1993. We deprecate such attitude on the part of Tax Officials. The Tax Officials and the C.B.R. are supposed to be assessee friendly and are not supposed to adopt such attitude which smacks of arbitrariness. Mala fide and resulting in causing harassment to the assessees. The citizens are entitled for better treatment at the hands of Tax Officials, to promote the tax culture in the country which is a dire necessity of the day.

A copy of this judgment be sent to the Chairman C.B.R. to take necessary corrective measures and issue necessary directions to all his subordinates in the C.B.R. and to the Field Officers in the hierarchy at tax administration to extend better treatment to the citizens and act strictly in accordance with law, whether they like it or not. We would like to emphasise that the attitude of the tax officials towards the citizens should always be objective, friendly and based on justice and fair-play. It would enhance respect and credibility of the tax officials and C.B.R. and shall promote mutual confidence. It shall be conducive in creating a better tax culture in the country.

Consequent to our considered opinion that the goods imported by the petitioners conform to the description under PTC Heading No.4011.9910 as it stood at the time of imports, it is held that in accordance with the C.B.R. decision contained in the letter, dated 15-3-1993, the petitioners are entitled to the concession and consequently, the petitioners are not liable to pay any custom duty regulatory duty or sale tax, as it was a duty free import in the relevant period. Resultantly, respondents are directed to release the Bank Guarantees furnished by the petitioners.

The petition is a allowed as above.

M.B.A./M-471/KPetition allowed.