Messrs GHULAM MUHAMMAD DOSSUL & CO. VS C.B.R. and others
2004 P T D 1769
[Karachi High Court]
Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ
Messrs GHULAM MUHAMMAD DOSSUL & CO.
Versus
C.B.R. and others
C. Ps. Nos.D‑1672, 2134 of 1994, D‑30, 31 and 152 of 1995, decided on /01/.
th
August, 2003. (a) Customs Act (IV of 1969)‑‑‑--
‑‑‑‑Ss. 25‑B & 30‑‑‑Notification, S.R.O. No. 114 (KE)/94, dated 29‑5‑1994‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Notional price‑‑‑Object‑‑‑Confiscation of excess consignment‑ Issuance of Delay and Detention Certificates‑‑‑Condition‑‑‑Grievance of importers was that the goods imported by them were wrongly, detained by Customs Authorities by evaluating the price under S.25‑B of Customs Act, 1969‑‑‑Validity‑‑‑Price fixed under S.25‑B of Customs Act, 1969, was the notional value of the goods independent of its actual value in the country of its origin from where it was exported‑‑‑Such value was determined only for the purpose of levy of import duty under Customs Act, 1969‑‑‑Both Trade Discounts and Quantity Discounts were common in international and domestic trade and were mentioned in the Explanatory Notes to, the Brussels Definition of Value‑‑No substantial difference existed between the notional price and the normal price of goods which could be fetched on sales in open market in the country of origin where the buyer and the seller were not in any way related with each other‑‑‑Similarly there could be a difference between the normal price or the invoice vice and the pace determined under S.25‑B of Customs Act, 1969, after taking into account the various discounts given by the seller to the customer‑‑Notional value which was determined trader S.‑25-B of Customs Act, 1969, was exclusively for the purpose of levy of customs duty arid could not be used for any other purpose as the law did not indicate such application‑‑‑‑High Court directed the Customs Authorities to release the detained goods after charging the customs duty and taxes at the rate applicable under S.30 of Customs Act, 1969‑‑As the Customs Authorities had detained the goods on unlawful grounds, High Court further directed them to issue Delay and Detention Certificates to the importers to enable them to claim exemption from payment of demurrage and storage charges in accordance with the relevant law‑‑‑Petition was allowed accordingly.
Eastern Rice Syndicate PLD 1959 SC 364 rel.
1992 SCMR 1652; 1999 SCMR 95; PLD 1986 Kar. 373 and PLD 2000 SC 825 ref.
(b) Customs Act (IV of 1969)‑‑‑--
‑‑‑‑S. 25‑B Public Notice 70/93 (A), dated 30‑12‑1993, policy instruction No. 2(ii)‑‑‑Constitution of Pakistan (1973), Art.199‑‑ constitutional jurisdiction of High Court‑‑‑Vires of Policy Instruction No.2(ii) of Public Notice 70/93 (A), dated 30‑12‑‑1993‑‑‑In the policy instruction, Central Board of Revenue instructed the Customs Authorities to release the present consignments in excess of value of import licence against redemption price equivalent to 100% of the ascertained value and in future such consignment be confiscated‑‑‑Validity‑‑‑Central Board of ‑‑‑‑ ‑‑empowered to issue such instructions under any provision of Customs Act, 1969‑‑‑Instructions were ultra vires to the Customs Act, 1969.
Raja Iraq Nawaz Khan for Petitioner.
Raja Muhammad Iqbal and Shakeel Ahmed for Respondents Nos. 2 & 3.
S. Tariq Ali, Federal Counsel.
Date of hearing: 7th November, 2002.
JUDGMENT
S. AHMED SARWANA, J.----The above five petitions are being disposed of by one consolidated order as the substantive facts and points of law are common and the prayers are identical in each of them.
2. For the sake of brevity, we shall refer to the facts stated in C. P. No. D‑152 of 1995 only. The petitioner is a partnership firm engaged to the import of arms and ammunition from different countries of the‑world and onward sale thereof to the general public, law enforcing agencies and military stores. It is stated that their goods are being released by the Customs Authorities including the Collector of Customs (Appraisement) and Assistant Collector of Customs (Appraisement) (Respondent Nos. 2 and 3 respectively) according to the ITP by debiting the value of the Import Licence according to the declared price in the invoice. The Ministry of Commerce, Government of Pakistan (Respondent No.4) issued Import Licence No. B‑548792, dated 24‑6‑1993 (valid up to 23‑6‑1994) to the Petitioner pursuant to which the Petitioner finalized a contract with the seller who issued a Pro forma Invoice No. 93/609, dated 6‑12‑1993 for 340 pieces (bulk quantity) of Winchester Defender Shotguns Cal. 12, Model 1300 (50 % with wooden‑ stock and 50 % with synthetic stock) at the rate of US $ 150 per piece. However, the seller Messrs Winamex of Austria allowed quantity discount as well as trade discount on the imported consignment and issued 'a Pro forma Invoice accordingly. After finalization of binding contract, the petitioner opened an Irrevocable Letter of Credit, dated 21‑12‑1993 for the import of the said .goods and accordingly imported in bulk quantity 337 pieces (Pro forma Invoice was for 340 pieces) as per Commercial Invoice No.94/692, dated 4‑5‑1994 (inadvertently typed as 4‑5‑1993) at the rate of US $ 150 per piece with quantity discount of 10% and trade discount of 10 %. On arrival of the goods, the petitioner filed a Bill of Entry for Consumption. The staff of respondents Nos. 2 and 3 opened and checked the consignment/boxes and found them in accordance with the Invoice but instead of releasing the consignment according to the prevailing value fixed under the latest ITP (i.e. US $150 per piece) after debiting the value in the Import Licence according to the invoice value as per existing practice, in order to harass the petitioner, arbitrarily, capriciously, unreasonably, unjustifiably and deviating from past/existing practice added the following note on the Bill of Entry:
"Discussed Assessable, value exceeds to licence value of Rs.12,39,844. The licence falls short by Rs.315,238. File may be opened for further action."
(Sd.) Appraiser
11/7"
3. The respondent No.3 informed the petitioner that on the basis of Public Notice No. 70 of 1993 (A), dated 30‑12‑1993 issued by the Collector of Customs pursuant to C.B.R. Letter C. No. 2(10)T.II./89, dated 9‑12‑1993; the goods could not be released as the said Public Notice was being applied retrospectively from 9‑12‑1993. Petitioner requested respondents Nos. 2 and 3 to release the consignment in according with the past practice as there had not been any change in the Government policy on licensing for arms and ammunition and that there had never been any linkage with the Import Trade Price with the licence value. The Petitioner contended that it had neither under‑invoiced nor mis declared the goods but having contracted to purchase shotguns at US $150 per piece availed concession and due to the quantity and uniformity in the items the foreign seller had given quantity discount as well as trade discount which was mentioned in the Bill of Entry but in spite of all efforts respondent Nos.2 and 3 refused to release the, goods. Consequently, the petitioner filed this Constitutional petition praying inter alia, for the following relief:
(i)to declare that the impugned Public Notice 70/93(A) issued by the respondent No.2 as well as letter, dated 9‑12‑1993 from respondent No. 1 are mala fide, without lawful authority, discriminatory, unreasonable, unjust, in excess of jurisdiction, and ultra vires of Articles 2‑A, 4, 12, 18 & 25 of the Constitution;
(ii)to declare that the subsequent acts of the respondents Nos. 2 and 3 in view of impugned Public Notice 70/93(A) and letter, dated 9‑12‑1993 are also without lawful authority and of no legal effect;
(iii)In the alternative, without prejudice to above prayers, declare that the impugned Public Notice 70/93(A), dated 30‑12‑1993 cannot be enforced with retrospective effect from 9‑12‑1993;
(iv)to direct the respondents not to deviate from past practice and not to discriminate between the importers;
(v)to quash the impugned actions/orders of the respondents and to order for release of the goods of the petitioner on ITP and debit the value from the Import Licence according to the declared discounted price (actual import price) in invoice;
(vi)to order the respondents Nos.2 and 3 to issue delay and detention certificate in order to save the petitioner from payment of demurrage and other storage charges."
4. On 19‑7‑1994 the petition was admitted for Regular Hearing. The petitioner had also filed an application under Order 39 Rules 1 and 2 C.P.C. read with Article 199 of the Constitution for release of the entire consignment consisting of 337 shotguns while according to the Customs Authorities the petitioner could only import 272 pieces under the law as against the actual import of 337 pieces. On 2‑8‑1994 after hearing the Advocate of both parties, the Court ordered release of 272 pieces subject to payment of customs duty according to the Import Trade Price with the direction that the remaining pieces would remain in safe custody with the Customs Authority till the final decision of the petition. In the other four petitions also similar orders were passed and the petitioners were permitted to get that number of the imported weapons released which could be imported within the import licence limit at the invoice value without taking into account the trade discount and bulk quantity discount and leave the remaining weapons with the Customs Authority until final decision.
5. Mr. Raja Haq Nawaz; learned counsel for the petitioner contended that:
(i)That letter, dated 9‑12‑1993 written by Secretary, C.B.R. to respondent No. 2 and Public Notice No. 70/94(A), dated 30‑12‑1993 are contrary to sections 25 and. 30 of the Customs Act, 1969, discriminatory, harsh unjust, without jurisdiction and violative of Articles 2A, 4, 18 and 25 of the Constitution.
(ii)That the sole object of ITP is to fix import value for the levy of Customs Duty and Sales Tax etc. only and according to the past practice the value of the licence is always debited according to the value declared on the Invoice and not on the basis of ITP. The respondents cannot depart from past practice as the petitioner has acquired a vested right in it and referred to 1992 SCMR 1652 in support of his contention.
(iii)That respondent No.1 cannot change their past and prevailing practice and procedure by issuing a letter and a Public Notice with retrospective effect which is contrary to the clarification, dated 11‑8‑1993 issues by Deputy Secretary, Ministry of Commerce to respondent No.2.
(iv)The petitioner having entered into a binding contract with a foreign supplier and opened letter of credit keeping in view the monetary limit of import licence acquired a vested right which could not be taken away or destroyed by Public Notice issued by' respondent No.2.
(v)That the normal price determined under section 25 or 25‑B of the Customs Act is totally irrelevant to determine the true export price paid by the importer to the exporter in the country of origin and referred to the case of Eastern Rice Syndicate, reported in PLD 1959 SC 364 in support of his contention.
(vi)As the goods have been detained unlawfully by the Customs, they should be directed to issue delay and detention certificate.
6. Mr. Raja M. Iqbal, learned, counsel for respondents Nos. 2 and 3, controverted the avow arguments advanced of behalf of the petitioners in the following terms.
(i)Secretary C.B.R's Letter, dated 9‑12‑1993 to respondent No.2 and the consequent Public Notice 70193(A) are in accordance with law and within the limits prescribed by sections 25 and 30 of the Customs Act, 1999 and are not discriminatory Without lawful authority or vioiate Articles 2A. 4, 18 and 25 of the Constitution.
(ii)The Import value of the goods has been notified in the ITP Manual vide S.R.O. 114 (KE)/94, dated 29‑5‑1994 wherein the price of imported goods have been determined at US$ 150.00 per piece which cannot be challenged and the alleged quantity discount and trade discount cannot be taker into account for the purpose of deduction from the import licence and as these factors do not find mention in the sections 25 or 25B and referred to 1999 SCMR 95 in support of his argument.
(iii)That C.B.R. Instructions, dated 9‑12‑1993 and the Public Notice 70/93(A), dated 30‑12‑1993 are prospective in nature and have not been applied retrospectively.
(iv)That the petitioners contention that the value of the licence is always debited according to their declared value was wrong and the actual law and practice was that the declared ITP or the vague determined by the Customs is deducted from the value of the licence to ascertain whether there has been any violation of the Imports and Exports (Control) Act, 1950. The Additional 65 shot guns imported in excess of the amount stated in the Import Licence are liable to confiscation under section 156 of " the Customs Act read with section 3(3) of the Imports and Exports (Control) Act, 1950 and referred to PLD 1986 Karachi 373, and PLD 2000 SC 825 in this behalf.
(v)That tire alleged Ministry of Commerce letter, dated 11‑8‑1993 addressed to respondent No.2 is not general in nature but is restricted to the case of Messrs Illahi Bux and Co. Rawalpindi as indicated in the communication itself.
(vi)Without prejudice to, the above, any practice contrary to the provisions of law does not Create any vested right in favour of the petitioner or anyone else.
We have heard Mr. Raja Haq Nawaz Khan, learned counsel for the petitioners and Mr. Raja M. Iqbal, learned counsel for respondents Nos. 2 and 3 and have considered the same in light of the relevant law.
After going through the pleadings arid considering the arguments advanced by the learned counsel for the contesting parties, it transpires that the whole controversy revolve. around the validity of the impugned Public Notice 70/93(A), dated 30‑12‑1593 issued by the Controller of Customs (Appraisement)/respondent No.2 pursuant to C.B.R.'s letter, dated 9‑12‑1993 written by the Secretary (Tariff) to all the Collectorates of Customs regarding the value of the goods. to be deducted from the import licence of the importer. The letter requires the customs officers to deduct from the import licence the amount equal to the value of the ITP of the goods determined under section 25‑B of the Customs Act, 1969 to ascertain whether there has been any violation of the Imports and Exports (Control) Act, 1950. The relevant portion of the C.B.R letter which forms part of the impugned Public Notice 70/93(A), dated 30‑12‑1993 reads as follows:‑‑
"PUBLIC NOTICE 70/93(A)
SUBJECT:TRANSSHIPMENT OF IMPORT ARMS AND
AMMUNITION VIA KARACHI TO UPCOUNTRY
DRYPORTS.
The Central Board' of Revenue vide its letter C. No.2(10) T.II/89, dated 9‑12‑1993 has streamlined the procedure of import/Transshipment of impart of arms and ammunition. Import licences of arms and ammunition are issued in terms of value and without any quantity restrictions which tempt importers to indulge in under invoicing so that in addition to evasion of duty and taxes; larger quantities of arms and ammunition could be imported. Such manipulation creates problems in assessment of value. As a result of correct assessment of value, usually the total value of consignments exceeds the limit of import licence. The prevailing practice to tackle, this issue varies in different Collectorates. Moreover values appraised by Collectorate are invariably disputed by the importers which results in delayed clearance of arms and ammunition.
To curb the persistent practice to manipulate import of excess quantities of arms and ammunition by way of under invoicing and to create uniformity regarding disposal of cases in all Collectorates, the Board has decided the following:‑‑
(i)Controller of Valuation in consultation with the importers/ associations will ascertain the value and fix the ITP of arms and ammunition in terms of section 25B of Customs Act, 1969.
(ii)Consignments presently held up due to excess import of arms and ammunition as compared to values shown in import licences may be released against redemption fine equivalent to 100%, of ascertained value. To eradicate the practice of under invoicing in future the excess quantities of arms and ammunition not covered under import licence as a result of assessment of value will be confiscated outright. For purpose all the Collectorates will issue public notice under intimation to the Board.
(iii)Transshipment of consignments arms and ammunition destined for upcountry dry ports may be allowed subject to the allowed subject to the following conditions:‑‑
(a)Consignments shall be inspected 100 % at Karachi Port.
(b)Each package shall be sealed by the agency engaged for the purpose of reaching containers bound to dry ports.
(c)Transshipment shall be allowed through Pakistan railways only.
It may be recalled here that the ITP of the shotguns in question has been determined at US $150.00 per piece under S.R.O. 114(KE)/94, dated 29‑5‑1994 which amount is riot disputed by the petitioner and is also shown to be the same in the invoice filed with the Bill of Entry on which they have paid the Customs Duty and Sales Tax on the guns which have been released by the Customs Collectorate for consumption. Under section 25 of the Customs Act, 1969 (as it stood in 1994) the value of the imported goods shall be taken to be the normal price, that is to say, the price which they would fetch, on a sale in open market between a buyer and a seller independent of each other on the date the bill of entry is filed as explained in section 30 of the Customs Act, 1969. A reading of section 25‑B clearly shows that the price fixed under this section is the notional value of the goods independent of its actual value in the country of its origin from where it is exported and is determined only for the purpose of levy of import duty under the Customs Act. Both Trade Discounts and Quantity Discounts are common in the international and domestic trade and find specific mention in the Explanatory Notes to the Brussels Definition of Value. Therefore, it cannot be disputed that there can be a substantial difference between the normal price of the goods which they would fetch on sale in an open market in the country of origin where the buyer and the seller are not in any way related with each other and the notional price. Similarly, there can be a difference between the normal price or the invoice price and the price determined under section 25‑B after taking into account the various discounts given by the seller to the customer. (See Eastern Rice Syndicate v. C.B.R., PLD 1959 SC 364). The notional value which is an artificial price determined under section 25B of the Customs Act, 1969, as stated above, is exclusively for the purpose of levy of customs duty and cannot be used A for any other purpose as the law does not indicate such application. Consequently, there is force in the petitioner's argument that the respondents cannot deduct the notional price determined by C.B.R under section 25‑B from the value of the import licence to allege any violation of Imports and Exports (Control) Act, 1950. This position is also confirmed by the Ministry of Commerce in their clarification letter, dated 11‑8‑1993 addressed to respondent No.2 which reads as follows:
"From:Mukhtar Haider Shah
Deputy Secretary.
Ministry of Commerce
Islamabad
For:Mr. Jehangir Khan
Collector of Customs
(Appraisement) Customs
House, Karachi (Fax
No. 200492 201288)
No:20(B)/93‑Import‑II ;
Dated :11‑8‑1993
Subject :Debiting of Import Licences/Annexure
"B" ETC.
Reference Appraisement Collectorate of Customs Fax Message, dated 10th August, 1993. It may be pointed out that Office of the CCI and E had not sought prior approval of this Ministry while responding to Custom's Letter No. SI/Misc/447/92‑VII, dated 12th December, 1992, on the above subject: Customs Division are advised to follow the past practice as there has been no change in Government Policy on licensing for Arms and Ammunitions and that there has never been an" linkage with Import Trade Price with the value of licence. Regard." (Emphasis added).
Mr. Raja Iqbal, learned counsel for the respondents, has not been able to show that the distinction between the normal price paid by the importer in Pakistan and the notional price fixed under section 25‑B as highlighted by the Hon'ble Supreme Court in the Eastern Rice Sydicate case been overruled or modified. He has also not been able to cite any judgment or principle of law in support of his argument that the amount of the notional price fixed under section 25‑B is required to be deducted from the total value of the import licence to ascertain whether there has been any violation of the Imports and Exports (Control) Act, 1950 or that the policy of the Ministry of Commerce regarding import of arms and ammunition reproduced above had changed at the time the petitioner imported the consignments in question.
As regards the Policy Instruction No.2(ii) of the impugned Public Notice that the present consignments in excess of the value of the import licence may be released against redemption price equivalent to 100% of the ascertained value and in future be confiscated outright. Mr. Raja Iqbal could not point out any provision of the Customs Act, 1969 which empowers the C.B.R. to issue such instructions. It may be mentioned here that in a similar situation, in' a case before the Lahore High Court the counsel for the Collector Customs conceded that a similar Circular was beyond the powers of C.B.R. because it is for the adjudicating authority in the proceedings before it under section 181 of the Customs Act to take any decision for levy of penalty, release or confiscation of the goods etc. The impugned Policy Instruction to this effect is therefore, prima facie bad in law.
Having reached to the above conclusion, it is not necessary to discuss the other arguments advanced or the case‑law cited by the learned counsel.
In view of the above discussion, all the five petitions are allowed and disposed of in the following terms:‑‑
(1)Clause 2(ii) of the Public Notice 70/93(A), dated 30‑12‑1993 issued by the Collector of Customs (Appraisement) respondent No. 2 is hereby declared to be illegal, without lawful authority and in excess of jurisdiction.
(2)The valuation of the goods determined by C.B.R. under section 25‑B Customs Act, 1969 under S.R.O. 114 (KE)/94, dated 29‑5‑1994 shall be applicable for the purpose of levy/recovery of customs duty and taxes only and shall not be used for the purpose of deduction from the Import Licence for import of arms and ammunitions issued by the Ministry of Commerce in favour of the petitioner.
(3)The Customs Department shall release the detained shotguns after charging the customs duty and taxes at the rate applicable under section 30 Customs Act, 1960 as stated above.
(4)As the Customs Collectorate detained the goods on unlawful grounds, they shall issue Delay and Detention Certificates to all the Petitioners to enable their to claim exemption from payment of demurrage and storage charges in accordance with the relevant law.
(5)The petitioners shall be entitled to costs.
M.H./G‑8/KPetitions allowed