(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19, 202, 223 & 224 [as inserted by Finance Act (L of 1975)]‑‑ S.R.O. 1147(I)/89, dated 27‑11‑1989‑‑‑C.G.O. No.11 of 1986 [as amended by C.G.O. No. 11 of 1992, dated 8‑10‑1992]‑‑‑C.G.O. No.6 of 1987 [as amended by C.G.O., dated 29‑6‑1995]‑ ‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Bank guarantee, discharge of‑‑‑Import of raw material to be used in manufacture of exempted drugs‑‑‑Petitioner furnished Bank guarantee in lieu of payment of customs duty‑‑‑Petitioner after utilizing raw materials obtained consumption certificate and submitted for release of Bank guarantee‑‑ Authority did not cancel Bank guarantee, but issued notice to Bank for encashment of guarantee, and threatened to initiate proceedings in terms of S.202 of the Customs Act, 1969‑‑‑Validity‑‑Petitioner had applied for issuance of consumption certificates well in time, but same had been issued by authority with delay .of few days ‑‑‑C.B.R. had stated in C.G.O. No.6 of 1987 that once consumption certificate was issued in prescribed period, limitation period stipulated in S.R.O. 1187(I)/89 would stand complied with from such date‑‑‑Delay caused in submission of consumption certificate before Customs Authority was on account of delay in receiving the same‑‑‑Stipulation stood complied with by virtue of such directions, and customs officials ought to have discharged Bank guarantees as directed by C.B.R.‑‑‑High Court accepted Constitutional petition, declared impugned notices to be without lawful authority and Bank guarantees submitted by petitioner were ordered to be cancelled forthwith.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 223‑‑‑Orders, instructions and directions issued by Central Board of Revenue‑‑Binding on all Customs Officers by virtue of S.223 of Customs Act: 1969‑‑‑Attitude of tax officials should always be assessed friendly‑‑‑Such attitude on their part would be conducive in creating better environment for investment/industrialization in the country, thereby boosting economy resulting in tremendous increase in tax collection‑‑‑Customs Officer's attitude to the contrary was bound to affect adversely, tending to erode confidence of taxpayers in tax administration, destroying environment of investment/industrialization creating problems for Central Board of Revenue and increasing unnecessary litigation‑‑‑High Court emphasised on Central Board of Revenue to take appropriate action against delinquent and unscrupulous tax officials.

Abid S. Zuberi for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 13th September, 2002.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.‑‑‑The petitioner is a Company engaged, inter alia, in the business of manufacturing pharmaceutical products and imported raw material used in the manufacture of pharmaceutical products by availing the benefit of concessions granted by the Federal Government to importers of raw/packing materials in terms of S.R.O. 1147(I)/89, dated 27‑11‑1989. Under this notification, the Federal Government exempted so much of the materials specified in the Annexure to the above notification, as are imported for the manufacture of the drugs registered under the Drugs Act, 1976, from the customs duties and sales tax chargeable thereon. The conditions specified in the said notification for availing exemption are as follows:‑‑‑

"(1) The manufacturer shall furnish to the Health Division the quantities of the raw/packing materials alongwith details of the drugs to be manufactured there from, and the Director‑General, Health or any other officer authorized in this behalf will certify for each consignment requirements of raw/packing materials alongwith the names of the drugs to be manufactured there from in the Form I set out below.

(2) At the time of import of raw/packing materials, the manufacturer shall make a written declaration on each copy of the bill of entry to the effect that the raw/packing materials have been imported in accordance with his entitlement in terms of condition (1).

(3) The Collector shall allow the release of the raw/packing material against a bank guarantee or insurance guarantee equivalent to the customs duties and sales tax leviable on each consignment or a standing bank guarantee/insurance guarantee for covering multiple consignments to be furnished to the satisfaction of the Collector of Customs.

(4) The manufacturer shall maintain records of the materials imported and drugs manufactured there from and shall produce the same whenever so required by the appropriate officer of Customs or the Health Division.

(5) The manufacturer shall within 15 months of the importation of the raw/packing materials, apply to the Collector of Customs for discharging the bank guarantee or insurance guarantee, the application being supported by a certificate in the From II set out below, issued by the Director‑General, Health or any other officer authorized in this behalf."

2. The petitioner imported raw/packing material vide Bills of Entry, dated 19‑4‑1992, 25‑4‑1992 and 23‑5‑1992. The petitioner submitted the guarantees as required under the above notification in lieu of payments of the sales tax and customs duties to the satisfaction of respondent No. 1.

3. After the utilization of the raw/packing material in the manufacturing of pharmaceutical products the petitioner applied to the respondent No.3 on 20‑6‑1993 for issuance of consumption certificate, for producing the same before the Customs Authority for the release of their bank guarantees. The respondent No. 1 was duly informed vide letters, dated 26‑6‑1993 that respondent No.3 vas requested for issuance of consumption certificate and the same would be submitted immediately on receipt thereof from the respondent No.3. The respondent No.3 issued consumption certificates which were submitted to the respondents Nos. 1 and 2 but the respondents 1 and 2 did not cancel the bank guarantees as required in terms of the Notification No.1147(I)/89. On the contrary the respondent No. 1 asked the respondent No.4 for immediate encashment of the guarantees submitted by the petitioner with the threat to initiate proceedings in terms of section 202 of the Customs Act. The respondent No.4 intimated that they shall encash the bank guarantees as demanded by the respondent No. 1 and hence this petition, praying as follows:‑‑‑

"(a) declare the impugned notices, dated 7‑9‑1993 issued by the respondent No.1 and 28‑9‑1993 issued by the respondent No.4 and/or any subsequent directions for the encashment of the petitioner's Bank Guarantees in violation of S.R.O. 1147(I)/89, dated 27‑11‑1989 as unlawful, without lawful authority, unreasonable arbitrary, violative of the rules of natural justice, mala fide and violative of the Constitutional rights of the petitioner;

(b) direct the respondents to act in accordance with law and forthwith cancel the petitioner's guarantees Nos.0530, 0562 and 0673, dated 15‑4‑1992, 21‑4‑1992 and 20‑5‑1992; and further restrain the respondents Nos.1, 2 and 4 from encashing the petitioner's bank Guarantees mentioned in para. 6 of the petition. "

3. The respondent No.3, in their para‑wise comments have stated that, they have issued consumption certificates within the specified period of 15 months.

4. The Respondents Nos. 1 and 2 have stated in their counter affidavit that, the petitioner failed to fulfil Condition No.5 of the S.R.O. 1147(I)/89 as the consumption certificates were received by them after the expiry of 15 months from the date of importation and hence the action of non‑release of the bank guarantees was legal and within the jurisdiction.

5. We have heard Mr. Abid S. Zuberi, Advocate for the petitioner and Mr. Raja Muhammad Iqbal, learned counsel for the respondents Nos. 1, 2 and 3.

After hearing the learned Advocates for the parties and perusal of the material placed on record, the following facts have been gleaned in respect of three imports made by the petitioner.

(1) Date of expiry of period of 15 months from the importation specified in Condition No.5 of S.R.O. No.1147(I)/89, dated 17‑11‑1989.

(1) 19‑7‑1993

(2) 25‑7‑1993

(3) 23‑8‑1993

(2) Date of application to respondent No.3 for issuance of consumption certificates.

(1) 20‑6‑1993

(2) 20‑6‑1993

(3) 20‑6‑1993

(3) Dates of preparation of consumption corticated.

(1) 7‑7‑1993

(2) 21‑7‑1993

(3) 22‑8‑1993

(4) Dates of receiving consumption certificates by the petitioner.

(1) 19‑7‑1993

(2)

27‑7‑1993

(3) 23‑8‑1993

(5) Dates of submission of consumption certificates before Respondent Nos. 1 and 2.

(1) 20‑7‑1993

(2) 28‑7‑1993

(3) 24‑8‑1993

7. A perusal of the above chart shows that, in all the three cases petitioner applied to the respondent No.3 well in advance for issuance of consumption certificates. The consumption certificates were received by the petitioner after few days of the expiry of the period of 15 months from the date of importation. In the case of the first import, there was a delay of one day, in the case of second import, there was a delay of three days and in the third case, there was a delay of one day in filing the consumption certificates with the Respondents Nos.1 and 2. The respondents Nos. 1 and 2 issued notice to the respondent No.4 for encashment of bank guarantees on 7‑9‑1993 to wit, after several weeks of the submission of the consumption certificates.

8. The contention of the learned counsel for the petitioner is that, the issuance of notice by the respondent Nos.1 and 2 for encashment of bank guarantees on the ground that the consumption certificates were furnished after the delay of few days is uncalled for, unreasonable, mala fide, arbitrary and amounts to an attempt on the part of the respondent Nos. 1 and 2, to defeat the benefit provided to the importers/ manufacturers under the Notification No. S.R.O. 1147(I)/89. He has maintained that, the period of 15 months prescribed in Condition No.5 of the above notification for submission of the consumption certificates is not mandatory but is directory in nature. The purpose of obtaining consumption certificates is to ensure that the raw/packing material imported by a manufacturer by availing exemption from payment of customs duties of sales tax was fully consumed by the manufacture himself and that the raw material imported for manufacture was not utilized for commercial purposes. The submission of consumption certificates issued by the respondent No.3 to the petitioner confirms the said utilization thereby fulfilling the requirements of notification.

9. He has further submitted that the Central Board of Revenue in its direction/order to the respondent No.1, dated 6‑8‑1986 has clearly intimated, that, it has been decided by the C.B.R. that, once the consumption certificate was issued by the appropriate officer under the notification, the limitation period envisaged in the notification stood fulfilled and the guarantees should be discharged and the repayment of the duties be allowed in accordance with the notification without raising any further objection with regard to the limitation period. The learned counsel for the petitioner has further urged that, the direction issued by the C.B.R. is binding on the respondents Nos.1 and 2, in view of section 223 of the Customs Act, 1969. Mr. Abid S. Zuberi has further argued that, the same position has been reiterated in C. G. O. No. 11/86 as amended, stating that the period of limitation specified under various notifications granting exemptions were not mandatory.

10. Concluding his arguments Mr. Abid S. Zuberi has vehemently argued that, the respondents Nos. 1 and 2 have acted in arbitrary manner with mala fide intention and in violation of the binding directions of the C.B.R., therefore, the impugned notice issued by the respondents Nos. 1 and 2, calling upon the respondent No.4 for encashment of bank guarantees is liable to be quashed.

11. Mr. Raja Muhammad Iqbal, learned counsel for the respondents Nos. 1, 2 and 3 has supported the impugned action on the part of respondents Nos. 1 and 2 contending that, the consumption certificates were not produced within the specified period of 15 months as required vide Condition No.5 in S.R.O. 1147(I)/89, therefore, the petitioner was disentitled from claiming the concession/exemption under S.R.O. 1147(I)/89. However, Mr. Raja Muhammad Iqbal was not able to deny that, the C.B.R. has Issued instructions to the Custom officials directing that once the consumption certificate is issued, the guarantees should be discharged without raising any further objections with regard to the limitation period and that, the directions, orders, and instructions issued by the C.B.R. are binding on all officers of the customs and other persons employed in the execution of the Customs Act, by virtue of the provisions contained in section 223 of the Customs Act, 1969.

12. We have carefully considered the contentions raised by the learned Advocates for the parties and the material placed before us. A perusal of the chart in the earlier part of this judgment shows that, the petitioner applied for issuance of consumption certificates well in time and the consumption certificates have been issued by respondent No.3 with the delay of few days, which have been fully highlighted in the chart.

13. There is no cavil to the proposition that the orders, instructions and directions issued by the C.B.R. are binding on all the officers of the Customs by virtue of the provisions contained in section 223 of the Customs Act, 1969 which reads as follows:--

"Section 223. Officers of Customs to follow Board's orders, etc.‑‑‑All officers of customs and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the appropriate officers of customs in the excise of their quasi judicial functions. "

14. The instructions issued by the C.B.R. to respondent No. 1 vide letter, dated 6‑8‑1986 are reproduced below:

"From 6th August, 1986

Mr. Muhammad Sulaiman

Chief Customs

To(1)The Collector of Customs

(Appraisement/Preventive)

Customs House,

Karachi.

(2)The Collector of Customs,

Lahore.

Subject:‑‑‑Discharge of Guarantees and repayment of Customs Duty Under Different Notifications

Compliance have been received in the C.B.R. from various quarters and manufacturers, importing raw materials etc., under different concessionary notifications that objections are being raised by the offices in the Customs House against applications filed for discharge of guarantees and repayment of duties in terms of the relevant notification, filed alongwith consumption certificate issued by the appropriate authority viz. Assistant Collectors of the area in which the project is located. The flatter has beets examined in the Board and it has been decided that once the consumption certificate is issued by the, appropriate officer under the notification, the limitation period envisaged in the notification stands fulfilled and the guarantees should be discharged and repayment of duties allowed in accordance with the notifications without raising any further objections with regard to the limitation period.

(Sd.)

(Muhammad Sulaiman)

Chief Customs,

Tele: 521594

Copy of the Collector of Customs and Central Excise, Rawalpindi/Lahore/Quetta /Hyderabad/Peshawar/Karachi for information and necessary action.

(Sd.)

(Muhammad Sulaiman)

Chief Customs"

15. The issue under consideration has been haunting the assessee since long due to persistent tendency on the part of Custom officials to reject the claims of refund exemption by resort to hyper technicality, thereby causing harassment to the assessees and some times resorting to the arbitrariness, therefore, the Federal Government/C.B.R. have been constrained to intervene from time to time, to ameliorate the difficulties of the assessee. In order to specifically empower the Federal Government, the Board or the appropriate officials of the Customs, to grant extension of time limits, the Legislature inserted section 224 in the Customs Act, 1969 through Finance Act, 1975. The C.B.R. issued various C.G.Os. regarding extension of time limit stipulated under various concessionary notifications. In C.G.O. No.11 of 1986, the C.B.R. observed that, importers‑cum‑manufacturers have been allowed import of raw materials, subcomponents and components for local manufacture of the goods under various concessionary notifications. One of the conditions of these notifications is that the importers‑cum- manufacturers shall, within one year, after the import of raw materials, sub‑components and components apply to the Collector of Customs for discharging the bank guarantees/indemnity bonds and/or export or supply of goods, the application being supported by an appropriate consumption certificate.

16. It was further stated by the C.B.R. that, "it has been observed that quite often, due to unavoidable circumstances beyond the control of importers‑cum‑manufacturers, the consumption of raw materials takes time beyond the specified period, consequently, the time limit of one year creates hardship for them. Therefore, in order to relieve them from this hardship the Central Board of Revenue has decided to extend the aforesaid time limit of one year to one and half year."

17. This C.G.O. was amended by C.G.O. No. 11 of 1992, dated 8‑10‑1992 and the C.B.R. issued instructions as follows:‑‑‑

"It has also been decided, that in case, where the consumption certificates cannot be produced within a period of one and a half year, the Collector may allow extension any time for another six months after having satisfied himself, that the delay in consumption of raw materials or production of consumption certificate was beyond the control of the importers‑cum‑manufactures under intimation to the Central Board of Revenue."

18. The C.B.R. issued C.G.O. No.6 of 1987 as well in this behalf which reads as follows:‑‑‑

"Complaints have been received in the C.B.R. from various quarters that objections with reference to the limitation period stipulated under exemption/concessionary notifications are being raised by the officers in Customs Houses against applications filed alongwith installation/consumption certificates issued by the appropriate authority for discharge of indemnity bonds/guarantees or for repayment of duties.

(2) The matter has been examined in the Board. It has been decided that once installation/consumption certificate is issued by the appropriate officer in the prescribed period, the limitation period stipulated in the Notification stands complied with, from that date. In all such cases indemnity bonds/guarantees should be discharged and repayment of duties allowed, as admissible under the utilizations, without raising any objection with regards to the limitation period.

(3) However, in case Custom House/Collectorates have reasons to suspect the bona fide or any other aspect of such certificates, it may then take actions on the basis of facts of the specific case as under the law."

19. Para. 2 of the above C.G.O. specifically deals with the issue under consideration and is applicable to the facts of the present case on all fours. The C. B. R. has clearly stated in para. 2 of the above C.G.O. that, once consumption certificate is issued by the appropriate officer in the prescribed period, the limitation period stipulated in the Notification stands complied with, from that date. A perusal of the chart prepared with the assistance of learned Advocates for the parties and reproduce in the earlier part of this judgment shows that all the three consumption certificates were issued by the appropriate officers within the limitation period stipulated in S.R.O. 1147 (I)/89 and the delay was caused in submission of the certificates before the Customs Authority on account of delay in receiving the same. Thus by virtue of the directions contained in C.G.O. No.6 of 1987 the stipulation stands complied with. The Custom officials ought to have discharged the bank guarantees as directed by the C.B.R. The refusal to do so is violative of the directions of C.B.R. We would like to impress that, the C.B.R. in addition to the issuance of necessary directions from time to time should take appropriate action against the delinquent officers. The C.B.R. should impress upon all the officers of the customs that the orders, instructions, and directions of the Board have binding effect on all the officers of the customs by virtue of the provisions contained in section 223 of the Customs Act.

20. The above observations have been made by us, because we have found that in spite of repeated instructions issued by the C.B.R. the tax officials working under the administrative control of C.B.R. are not adhering to the instructions and are adamant to create impediments and cause harassment to the assessees, for the reasons best known to them. The attitude of the tax officials should always be assessee friendly. Such attitude on their part shall be conducive in creating better environment for the investment/industrialization in the country, thereby boosting the economy, resulting in tremendous increase in tax collection. Their attitude/conduct to the contrary, which is unfortunately rampant, is bound to affect adversely, tending to erode the confidence of the tax payer in the tax administration, destroying the environment of investment/industrialization, creating problems for the C.B.R. and increasing unnecessary litigation thereby increasing the work load of the various appellate forums/Courts including this Court. While appreciating the steps taken by C.B.R. from time to time to ameliorate the difficulties of the taxpayers, we expect that it is high time to take strict, measures against the unscrupulous tax officials, because we have found that the series of instructions issued in this behalf by the C.B.R. have received deaf ear on the part of the tax officials. The C.B.R. has amended the C.G.O. No.6 of 1987 vide C.G.O., dated 29‑6‑1995 further clarifying as follows:‑‑

"In cases/action where the issuance of installation/consumption certificate was applied to the Central Excise Authorities, before the expiry of prescribed period, but the certificate was issued after expiry of the prescribed period, the delay in the submission of installation certificate/consumption certificates will be condoned by the Collector, with whom indemnity bond/bank guarantees were deposited at the time of clearance of the goods."

21. In view of the instructions/directions issued by the C.B.R. from time to time, in pursuance of the authority vested in it under section 224 of the Customs Act, 1969, and the binding nature thereof on all the Customs officials working under the C.B.R. by virtue of the provisions contained in section 223 of the Customs Act, 1969, it is held that the impugned notices issued by the respondent No.1, dated 7‑9‑1993 and 28‑9‑1993 to the respondent No.4 asking for the encashment of the petitioner's bank guarantees are violative of the instructions issued by the C.B.R and are consequently not sustainable in law. Both the notices containing directions for the encashment of the petitioner's bank guarantees are declared to be without lawful authority and. the bank guarantees submitted by the petitioner's in respect of consignments in question are ordered to be cancelled forthwith.

22. The petition is allowed as above.

23. After hearing the learned Advocates for the parties on 13‑9‑2002, the petition was allowed by short order. These are the detailed reasons for the same.

S.A.K./C‑59/K Petition allowed.