Messrs ASSOCIATED INDUSTRIES (GARMENTS) PAKISTAN (PVT.) LTD VS ISLAMIC REPUBLIC OF PAKISTAN, 2005 PTD-KARACHI-HIGH-COURT-SINDH 1799 (2005)

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 37‑‑‑Drawback of customs duty on imported goods used in manufacture of exported goods‑‑‑Scope‑‑‑Such drawback could be allowed only in respect of goods of any class or description as notified by Central Board of Revenue in official Gazette.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 21 (c)‑‑‑S.R.O. No.187(I)/91, dated 10‑3‑1991‑‑-Customs Standing Order No.5/92, dated 19‑3‑1992‑‑‑Re‑payment of customs duty on imported goods used in manufacture of exported goods to the extent of specified ratio of FOB value of exported goods‑‑‑Validity‑‑‑C&F value of imported goods used in manufacture of exported goods would have no nexus with provisions regarding re‑payment‑‑‑Repayment by its very nature indicated that only a certain payment of customs duty paid by importer would be refunded, which could not be claimed more than what had been paid.

Sohail Muzaffar for Petitioner.

Messrs Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Date of hearing: 25th January, 2005.

JUDGMENT

SABIHUDDIN AHMED, J.‑‑‑The admitted factual position appear to be that the petitioner had imported certain chemical and dyes which were used as a raw material for manufacture of garments and were exported aboard. The petitioner claims drawback/rebate on customs duty in terms of S.R.O. No.187(I)/91, dated 10th March, 1991. Their claim however, came to be rejected by the respondent No.2 on the ground that para. 2‑B of the Standing Order No.5 of 1992, dated 19th March, 1992 require that C&F value of the temporarily imported items should not be more than 10% of the FOB value of the finished export product.

2. Mr. Sohail Muzaffar, learned counsel for the petitioner contended that the aforesaid condition imposed through a Standing Order was invalid and entirely unwarranted inasmuch as it would deprive several importers of duty drawback or rebate otherwise permissible merely on account of the fact that the imported goods constituted a substantial part of the exported product and their value exceeded 10% of the value of the exported goods. Learned counsel further argued that such an arbitrary condition could not be imposed through a Standing Order without even notifying the same in the Gazette.

3. Learned Standing Counsel, on the other hand, urged that such a condition had been placed to ensure that an importer is not allowed drawback or rebate in excess of the customs duty earlier paid by him.

4. We have carefully considered the relevant statutory provisions relating to drawback and repayment of duty drawback are generally dealt with in sections 35 to 37 of the Customs Act. Section 35 deals with goods temporarily imported into Pakistan for a period of two years (extendable up to 3 years by the Collector of Customs for sufficient cause) and re‑exported without being used and in such cases the importer is entitled to drawback at the rate of seven‑eighths of the duty paid. Under section 36 drawback is permissible upon re‑export of imported goods in the sate state after having been put to temporary use in Pakistan and the rate of drawback is prescribed by the statutory rules. Admittedly the petitioner's case is not covered by any of the two above mentioned provisions but reliance was placed upon section 37, which speaks of drawback on goods consumed in the manufacture in Pakistan which are subsequently exported and reads as under:‑

"Section 37. Where it appears to the Board that in respect of goods of any class or description manufactured in Pakistan and exported to any place outside Pakistan, a drawback of customs duties should be allowed on any imported goods of a class or description used in the manufacture of such exported goods, the Board may, by notification in the official Gazette, direct that drawback shall be allowed in respect of such imported goods to such extent and subject to such condition as may be provided in the rules."

5. As is evident from the above quoted provision drawback could be allowed only in respect with goods of any class or description as may be notified by the respondent No.2 in the official Gazette. No such notification under section 37 was placed on record by the learned counsel for the petitioner and therefore, we are of the view that section 37 would not apply either.

6. Nevertheless apart from the above provisions section 21(c) of the Act which speaks of delivery of certain goods also appears to be relevant and may be reproduced, as stood at the relevant time, as under:‑

"Section 21.‑‑‑Subject to such condition, limitations or restrictions as it thinks fit to impose, the Board may, in such general cases as may be prescribed by rules or in particular cases by special order, authorize‑‑‑

(a) ‑‑‑‑‑‑‑‑‑‑‑---‑‑‑‑‑‑‑‑

(b) ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑

(c)the repayment in whole or in part of the customs‑duties paid on the importation of any goods of such classes or descriptions as it may prescribe, which have been used in the production, manufacture, processing, repair or refitting in Pakistan goods of such classes or descriptions as it may prescribe, provided such repayment shall not be made in respect of the class or description of goods for which drawback can be claimed under section 37. "

7. Indeed the notification, dated 10‑3‑1991 provides that customs duties, on dyes. and chemical used in the manufacture of readymade garments, is to be repaid to the extent of 16.22% of the FOB value of the exported goods. We agree with Mr. Sohail Muzaffar that the C&F value of the imported goods used in the manufacture of the exported products appears to have no nexus with the provisions regarding repayment. Nevertheless to allay the respondent's apprehension it must be clarified as conceded by Mr. Sohail Muzaffar that repayment by its very nature indicates that only a certain payment of the Customs duty paid by the petitioner is liable to be refunded and under no circumstances can he claim more than what he had paid. The petition is allowed to the above extent.

S.A.K./A‑190/KPetition accepted