Messrs GENERAL TYRE AND RUBBER CO. OF PAKISTAN LIMITED, KARACHI VS DEPUTY COLLECTOR OF CUSTOMS APPRAISEMENT COLLECTORATE, KARACHI and 2 others
2005 P T D 1687
[Karachi High Court]
Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ
Messrs GENERAL TYRE AND RUBBER CO. OF PAKISTAN LIMITED, KARACHI
Versus
DEPUTY COLLECTOR OF CUSTOMS APPRAISEMENT COLLECTORATE, KARACHI and 2 others
Constitution Petition No.726 of 2001, heard on /01/.
nd
March, 2005. (a) Customs Act (IV of 1969)‑‑‑
‑‑‑‑S. 18‑‑‑Islamic Development Bank Ordinance (VI of 1978), S.5(1) & Sched. Art.. 59‑‑‑Import of goods by Islamic Development Bank 'for subsequent sale‑‑‑Scope‑‑‑Islamic Development Bank Ordinance, 1978 had no overriding effect over the Customs Act, 1969‑‑‑Such import would not be exempt from payment of duty under Ordinance, 1978‑‑ Principle illustrated.
(b) Customs Act (IV of 1969)‑‑‑--
‑‑‑S. 18‑‑‑Islamic Development Bank Ordinance (VI of 1978), S.5(1)---Qanun‑e‑Shahadat (10 of 1984), Art. 114‑‑‑Import of goods by Islamic Development Bank under lease‑purchase agreement with petitioner‑‑‑Furnishing of indemnity bond by petitioner undertaking to pay customs duty and other charges with interest after transfer of goods in his favour by Islamic Development Bank‑‑‑Payment of customs duty and other charges by petitioner, but his refusal to pay interest on deferred payment of duty for period for which goods remained with him as property of Islamic Development Bank on the ground that such indemnity bond was executed under coercion‑‑‑Validity‑‑‑Such claim for interest, on basis of a valid agreement, would not be inconsistent with any law in force‑‑‑Customs authorities had power to collect customs duty at the time of import of goods; but they had agreed to delay payment till transfer of goods in favour of petitioner‑‑‑Petitioner through such undertaking had persuaded customs authorities to act to their detriment, thus, rule of estoppel would apply‑‑‑Petitioner had not questioned such indemnity bond for more than 16 years till he was required to pay customs duty‑‑‑High Court dismissed Constitutional petition.
Treasurer of Charitable Endowments v. Central Board of Revenue PLD 1981 Kar. 357 rel.
Iqbal Salman Pasha for Petitioner.
Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.
Date of hearing: 2nd March, 2005.
JUDGMENT
SABIHUDDIN AHMED, J.‑‑‑The Islamic Development Bank, Jeddah ("IDB") had entered into a lease‑purchase agreement with the petitioner on 22‑12‑1981. According to the aforesaid agreement the IDB was required to purchase a plant and machinery. for the benefit of the petitioner and advanced the same to the petitioner on a lease‑finance basis. Upon payment of the entire amount under the, agreement, however, the plant and machinery was required to be transferred to the petitioner and before such date the title vested in the IDB. Admittedly the entire payment was made on 4‑11‑1999 whereupon title to the imported goods came to be vested in the petitioner.
At the time of arrival of the goods at Karachi, the petitioner was authorized by IDB to clear the same upon payment of necessary duties. The petitioner claimed that the goods were the property of IDB which were exempted from payment of customs duty under rule 59 read with section 5 of Islamic Development Bank Ordinance, 1978. The petitioner approached the respondent No.2 and a Second Secretary of the said respondent vide his letter, dated 13‑2‑1983 addressed to the Collector of Customs (Appraisement), Karachi in the following terms:‑‑
"General Tyre and Rubber Company of Pakistan (GTR) with the approval of Government of Pakistan, has entered into a Lease purchase Agreement with the Islamic Development Bank (IDB). Jeddah. Under this Agreement, the Federal Government has agreed inter alia, to defer the payment of customs duty, sales tax and surcharge, chargeable on the plant, machinery and equipment to be imported by Islamic Development Bank for GTR subject to the condition that GTR shall undertake that as soon as the ownership of plant, machinery etc., is transferred from IDB to GTR in terms of Agreement referred to above, the latter shall pay the customs duty, sales tax and surcharge chargeable thereon at the value and date rate as applicable at the time of importation alongwith the interest at the prevailing bank rate for the period for which the goods remained with the GTR as property of IDB. The period for which the concession of deferred payment of duty shall remain available shall be the period provided for in the Agreement for transfer of machinery from IDB to GTR. "
It appears that after the transfer of the assets in favour of the petitioner, the respondent started claiming customs duty, surcharge and mark‑up on the bank rate from the petitioner while the petitioner paid the duty and other charges but have called in question the respondents right to claim interest through this petition.
Mr. Iqbal Salman Pasha, learned counsel for the petitioner, emphatically asserted that goods in question were imported by the IDB and not the petitioner and such goods were exempted from payment of customs duty under section 5(1) of the 1978 Ordinance and the Schedule thereto. It may be pertinent at this stage to reproduce section 5(1), which reads as follows:‑‑
"(5) Certain provisions of the Agreement to have force of law.‑‑‑(1) Notwithstanding anything to the contrary contained in any other law, the provisions of the Agreement set out in the Schedule shall have the force of laws in Pakistan:
Provided that nothing in Article 59 of the Agreement shall be construed as‑
(a)entitling the Bank to import into Pakistan goods free of any duty of customs without any restriction on their subsequent sale therein, or
(b)conferring on the Bank an exemption from duties or taxes which form part of the prices of goods sold or which are in fact no more than charges for services rendered."
Article 59 of the schedule read as follows:---
ARTICLE 59
Exemption from Taxation.‑‑‑1. The Bank, its assets, property, income and its operations and transactions shall be exempt from all taxation and from all customs duties. The Bank shall also be exempt from any obligation for the payment, withholding or collection of any tax or duty."
Mr. Faisal Arab, Standing Counsel, and Mr. Raja Muhammad Iqbal, learned counsel for respondent No.2, on the other hand, argued that though at the time of import no customs duty was recovered either from the petitioner or from the IDB, it was explicitly undertaken that such duty would be payable by the petitioner the moment title to goods is transferred to them. In lieu of the facility to make deferred payment, the petitioner had explicitly undertaken to pay mark‑up at the bank rate. This is evident from the letter of the respondent No.2, quoted above, as well as an indemnity bond executed by the petitioner, dated 14‑6‑1983. Though according to the petitioner such bond was executed on 17‑7‑1983, the difference of dates is inconsequential. Admittedly the duly executed bond contained a clear stipulation to the effect that the petitioner shall pay "sales tax and surcharge payable at the time of import plus interest on prevailing bank, rate for the period for, which the machinery remains with the importers. The General Tyre and Rubber Company of Pakistan Limited on Lease as a property of the Islamic Development Bank. "
Mr. Faisal Arab, Standing Counsel, contended that the concept of interest on deferred payment of customs duty was not altogether alien to the requirements of the Customs Act and in this context referred to section 83(2) of the Act by way of .illustration as admittedly this provision was not applicable to the present transaction. Learned counsel, therefore, argued that in lieu of the facility of deferred payment and the burden that the exchequer might suffer on account of late recovery of customs duty, a lawful agreement had been entered into between the petitioner and the respondents, the contents whereof have been clearly stated in the indemnity bond. Therefore, any attempt on the part of the respondents to enforce such an agreement is free from any taint of illegality.
Mr. Iqbal Salman Pasha, learned counsel for the petitioner, on the other hand attempted to refute the contention by urging that there was no question of deferred payment on the import of the goods was altogether exempt from payment of duty under the 1978 Ordinance which had an overriding effect over the Customs Act. We are afraid we find this contention to be entirely untenable. Indeed if it were so the petitioner could not even be required to pay customs duty which he has already paid and had not questioned. Moreover, the proviso to section 5 of 1978 Ordinance expressly provides that nothing in Article 59 of the Schedule could be construed as entitling the IDB to import goods free from customs duty without restriction on their subsequent sale. Obviously the goods in question were not merely sold to the petitioner after their import, but in fact had been imported with the specific object of being sold to the petitioner. We are, therefore, quite clear in our mind that Article 59 of the Schedule would not be applicable.
Indeed Mr. Pasha argued that the indemnity bond had been executed because of the conditions imposed by the respondent No.2 and that in any event any admission or consent not in conformity with the requirements of law would not constitute estoppal. He referred to a Division Bench judgment of this Court in Treasurer of Charitable Endowments v. Central Board of Revenue (PLD 1981 Karachi 357) and indeed we have no cavil with the proposition of law laid down thereunder. Nevertheless we have found considerable force in the contention of the learned counsel that interest is being claimed on the basis of a valid agreement which is not inconsistent with any law in force.
It may also be of interest to note that in the pronouncements, quoted above, their Lordships have also held that in order to press the plea of estoppel it must be shown that the other party made a representation resulting in inducing him to act to his detriment. In the above case it is evident that the respondents, who were otherwise empowered to collect customs duty at the moment of import of the goods, agree to delay payment till the transfer of goods in favour of the petitioner. In these circumstances, it is evident that by enforcing the undertaking the petitioner persuaded the respondent to act to their detriment and as such the rule of estoppel is clearly applicable. It may also be noticed that though the petitioner has claimed that the indemnity bond was executed under some form of coercion, they conveniently chose not to question it for more than 16 years till they were required to pay customs duty.
For the foregoing reasons we find no substance in this petition and dismiss the same.
S.A.K./G‑50/KPetition dismissed.