2005 P T D 90

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

JAHANZEB KHAN BURKI and another

Versus

PAKISTAN through Secretary Revenue Division/Chairman, Central Board of Revenue, Islamabad and another

Constitutional Petition No.D-934 of 2004, decided on 09/10/2004.

Customs Act (IV of 1969)---

----S.26---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Power to require information to be furnished---Conditions of production of original registration certificate or auctioneer's receipt as prescribed by the Central Board of Revenue for import of second hand Dump Trucks in CBU condition having pay load capacity exceeding 5 tons under the Import Policy Order from Karachi Export Processing, Zone into the Tariff Area--Validity---Such conditions were neither mandatory nor compulsory- --Such documents were being asked just to as certain the legally of the import and the description of the vehicle-- Seeking of such information was within the competence of the tax officials under the provisions of S.26, Customs Act, 1969---Such requirement, however was not mandatory or condition precedent for starting the process of examination of goods---High Court disposed of the Constitutional petition with the consent of the counsel of the parties in the terms that the 'department will allow, the clearance in consonance with the parameters fixed by the Supreme Court in C.P. 774 to 784 of 2001 decided on 6-12-2001, the parameters laid down in explanatory notes under H.S. Code No.8704.1000 and the conditions specified in Letter from Collectorate of Customs dated 13-8-2003 read with office order No.37/2004 dated 13-3-2004---Customs officials may require for production of original registration certificate or the auctioneer's receipt containing particulars about the purchase and in case, registration receipt or catalogue were not produced the importer must furnish satisfactory explanation with regard to the non-production of the said documents and may prove by any other cogent evidence, acceptable to the customs to show that the actual imports pertain to dumper designed for off highway.

Civil Petition Nos. 774-K & 784-K of 2001 fol.

Super Industries (Pvt.) Ltd. v. Central Board of Revenue 2002 PTD 955 and Messrs Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516 ref.

Khalid Jawed Khan for Petitioners. .

Khalid Anwer and Bilal Shaukat for Respondents.

Date of hearing: 6th October, 2004.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The petitioners have sought the following declaration and direction:

(a) Declare that the Central Board of Revenue has no lawful authority or jurisdiction to impose conditions with respect to the importability of any goods into Pakistan.

(b) Declare that the condition of production of original registration certificate or auctioneer's receipt as prescribed by the Central Board of Revenue vide order, dated 12-2-2004 (Annex F) and conveyed vide Office order, dated 13-3-2004 (Annex G) for import of second hand Dump Trucks in CBU condition having pay load capacity exceeding 5 tons under the Import Policy Order from Karachi' Export Processing Zone into the Tariff Area is arbitrary, illegal, discriminatory and. without any legal effect whatsoever.

(c) Direct the Respondents to allow the export of Petitioners Dump Trucks in CBU condition from Karachi Export Processing Zone to the Tariff Area without the requirement/condition of original registration certificate or auctioneer's certificate, and in the same manner as was done prior to 12-2-2004."

2. Briefly stated the relevant facts are that the petitioners have set up engineering fabrication, reconditioning and upgrading units for assembly, re-conditioning, repairing and upgrading of construction equipment, earthmoving machinery and generators in the Karachi Export Processing Zone (hereinafter referred to as the Zone). It is averred in the petition that under the provisions of Processing Zones Authority Ordinance, 1980, Tariff Area means any area in Pakistan outside the limits of a Zone. It is provided in the Zone Authority Rules, 1981, that the imports into Tariff Area from the Zones shall be deemed to be imports from abroad and shall be subjected to the same conditions and restrictions as are applicable to similar imports from abroad. The petitioners are mainly engaged in re-conditioning/assembly/fabrication of Dump Truck's (commonly called as Dumpers) for off highway use having pay load capacity exceeding 5 tons (PCT Heading 8704.1000). The used/second hand Dump Trucks are imported into the Zone in CKD/SKD condition from Singapore, Japan and U.A.E. After re-assembly/re-fabrication in the Zone the Dump Trucks are exported to the Tariff Area in completely built unit condition (CBU). Under the Import Policy issued under the Imports and Exports (Control) Act, 1950, by the Federal Government, through Ministry of Commerce, second hand Dumpers designed for off highway use in CKD/SKD condition having pay load capacity exceeding 5 tons are allowed to be imported into the country. The respondent No. 2, Collector of Customs (Exports) Karachi, has constituted a Committee to decide the issues pertaining to examination value, assessment of Customs Duty/taxes. On 13-8-2003, the Additional Collector/Chairman of the Committee for examination of Dump Trucks, issued an Office Order indicating the parameters for examination of the dump trucks, which are as follows:--

"Government of Pakistan

Collectorate of Customs (Exports)

Custom House Karachi.

No. SI/MISC/958/2003-CUS/EPZDated: 13th August, 2003

OFFICE ORDER

In order to regulate a policy for clearance of Off Highway Dump Trucks from Export Processing Zone, the following parameters may be checked at the time of examination in the presence of committee members in addition to parameters laid down in explanatory notes under H.S. Code No.8704.1000, and as per orders of the Hon'ble Supreme Court of Pakistan.

2. At the time of examination catalogue of each model shall be produced by the Importers/investors.

10. Wheeler Dumpers-Capacity 10 tons

(a) Distance between front axle to rear axle should be 130 (approx.)

(b) Space between body and-dump cabin 16" (approx.)

(c) Chassis 16'.6" to 17' (approx.)

(d) Dump body length 16' to 16'. 3"'(approx.)

(e) Dump body width 8' (approx.)

(f) Height of body 2'. 6" (approx.)

(g) Width of chassis 10" to 11" (approx.) '

(h) Width of body chassis 6" to 7" (U-angle)

(i) Wood packing 2" to 3" (approx.).

(j) Bracket each side 4 Nos. both side 8 Nos.

(k) Bracket mounted for up and down, mounted on body chassis.

(l) Body should be extended more than 6" to 12" (approx.)

(m) Rim size not less than 20".

(6) Wheeler Dumpers-Capacity 8 tons.

(a) Chassis length 14' (approx.)

(b) Space between body and dump cabin 16". (approx.)

(c) Dump body length 15' (approx.)

(d) Dump body width 8' (approx.)

(e) Height 2' (approx.)

(f) Dump body Chassis width 9" to 10" (approx.)

(g) Body chassis width 7" (approx.)

(h) Wood packing 2" to 3" (approx.)

(i) Bracket each side 4 Nos. both side 8 Nos.

(j) Bracket mounted for up and down, mounted on body-chassis

(k) Rim size not less than 20".

(l) Dump body should be extended more than 6" to 12".

All the assemblers of the Off Highway Dump Truck in KEPZ shall have to strictly follow the above parameters.

(Islahuddin Sidduqui)

Additional Collector/Chairman

Committee for examination of Dump Truck"

3. The petitioners have alleged that in accordance with the parameters laid down in the above Office order, the petitioners and other units imported and exported about 3000 Dumpers from Zone to the Tariff Area. On 12-2-2004 the respondent No. 1, C.B.R. issued a letter to the respondent No.2, inter alia containing the following direction:--

"Importer shall also be asked to produce original registration certificate in the country of first registration or the receipt issued by auctioneer showing the make, model, size, accessories and value etc."

However, on 13-3-2004 the respondent No.2 issued another Office order which reads as follows:--

"OFFICE ORDER

SUBJECT:IMPORT AND EXPORTS FROM KARACHI EXPORT PROCESSING ZONES

Please refer to this office letter of even number, dated 13-2-2004 on the subject noted above.

2. The Board has been pleased to provisionally relax the condition of production of original registration certificate in the country of first registration or the receipt issued by the auctioneer showing the make, model, size, accessories and value etc. for the Dump Trucks imported in CKD/SKD condition prior to 12-2-2004. All imports made after the said cut off date will however be subject to production of original registration certificate in the country of first registration or the receipt issued by the auctioneer showing the make, model, size, accessories and value etc.

3. All KEPZ Dump Trucks assemblers are accordingly directed to ensure compliance of the above condition for the imports beyond 12th February, 2004".

4. According to petitioners the direction contained in the letter dated 12-2-2004 issued by C.B.R. is arbitrary, practically impossible and illegal as the Central Board of Revenue has no jurisdiction or lawful authority to impose any condition on the imports/exports of goods other then specified by the, Ministry of Commerce. It is alleged that it is discriminatory as the condition imposed has been made applicable against the imports into the country from Zone only and not to the imports made directly from abroad. A delegation of the assemblers held a meeting with the respondent No.1 and appraised practical difficulties in the compliance of the direction. It is further alleged that the C.B.R. agreed that the assemblers would provide copies of customs receipt known as Cargo Clearance Permit" issued by the Customs authorities of Singapore. The respondent No. 2, thereafter addressed letter, dated 26-3-2004 asking the petitioners to provide copies of Customs Clearance permit issued by Singapore Customs in respect of various models of used Dumper Trucks imported in CKD/SKD condition into the Zone. The certificates were furnished as required. However, the commitment was not honoured. On the representation of the petitioners and other assemblers, the respondent No.2 apprised the respondent No.1 of the facts pertaining to the issue, clearly stating that about 3000 Dumper Trucks were cleared from the Zone without original registration documents: The C.B.R. was further apprised by the respondent No.2 that although the information sought through the production of original registration documents or receipt issued by the auctioneer is vital but the assemblers have shown their inability to furnish the documents on the ground that the vehicles are 10-12 years old and have been purchased from various owners and different sources in different countries. It was further informed that in the Finance Act, 2004-2005, the customs duty on Dump Trucks was increased from 40% to 60% and the condition was imposed for 20% clearance for Tariff Area and 80% export abroad. It was further informed that the vehicles imported after February, 2004, were stuck-up in the Zone, although in most of the goods the Bills of entry were filed before the presentation of Finance Bill for 2004-2005 on 12-6-2004. The guidance was sought on the point whether the vehicles can be allowed to be cleared without pressing for registration documents and auction receipts. In reply to the above letter, the respondent No.1 sought suggestion from respondent No.2, as to what documents other than the original registration and auctioneer's receipt can adequately confirm the make, model, size and value etc. of dumpers and how it can be confirmed, that the vehicles claimed to be dumpers were actually dumpers and not trucks. The respondent No.2 replied vide letter, dated 14-7-2004 that the make and model of the dumpers is determined from the yearly chassis series book, issued by the manufacturers and the seat belts besides physical examination of the vehicles. It was reiterated that about 3000 Dump Trucks were cleared from, the Zone during the last three years. It was further apprised that the condition was imposed for the first time by the C.B.R. vide order, dated 12-2-2004. Yet this condition was relaxed by the Board and about 450 dumpers imported up to 12-2-2004, were allowed to be 'cleared without production of original registration certificate or auctioneer's receipt. It was again informed that the issue of dumpers and trucks stand settled by the Customs Tribunal and the Hon'ble Supreme Court of Pakistan, in Civil Petition Nos.774-K and 784-K of 2001. The Appraisement and Export Collectorate were following the parameters fixed in the matter. It was informed that the import of CKD/SKD condition vehicles are used in assembly/production of dumpers in the Zone. Although there was a difference of 20% of Customs Duty on the dumpers and trucks; yet the overall amount of duties and taxes-paid on the dumpers were substantially higher than the trucks owing to their higher value. It was further clearly stated that respondent No.2 constituted a Committee of senior officers headed by Additional Collector to conduct proper examination of each vehicle with further direction to look into all the vital details. It was accordingly not possible that trucks could be cleared in the garb of dumpers (emphasis provided. by us). It was further informed that the dumpers were cleared in CBU condition and - registered as such with the Provincial Excise Department. Respondent No.2 observed that two manufacturing companies Ghandhara Nissan and Hino Pak, complained about conversion of vehicles from dumpers to cargo trucks, which was possible; however, no authentic figures to determine percentage of this conversion was available. He further clearly stated that the process of subsequent conversion was outside the ambit and beyond the jurisdiction of the Collectorate of Customs Export, particularly after securing leviable duties and taxes at the time of clearance of the dump trucks. It appears that the entire issue was raised on the report of Directorate General of Customs Intelligence. It was therefore, observed by the respondent No.2 that the staff of Directorate General of Customs Intelligence, have frequently visited the dumper assembly units in the Zone and not a single Truck in CBU was ever found cleared other than dumpers. It was pointed out that the dispute was invoked by the two Auto Manufacturing Companies on account of difference of rate of customs duty which according to respondent No.2 stood settled with increase in the fate of customs duty on dump trucks. The respondent No.2 requested that in view of the above clear position, the Board may take appropriate decision as the issue of clearance of the held-up dumpers in the Zone was required to be resolved on merits. However, the respondent No. 1 took no positive steps with 'the result that about 400 dumpers (97 units belonging to the petitioners) remained stuck-up and hence this petition.

5. In the para-wise Comments filed on behalf of respondents the facts narrated were not denied. It was contended that the information sought was in consonance with the provisions contained in section 26 of the Customs Act, 1969, which empowers an appropriate officer for requisition of information relating to the import or export of the goods for the purpose of determining the maters pertaining to export and import as well as the valuation.

6. In the counter-affidavit filed by Assistant Collector of Customs, it has been reiterated that the documents were sought in pursuance of the powers vested under section 26 of the Customs Act. It was further explained that the C.B.R. imposed this condition on account of complaints that some importers/investors in the Zone were importing dump trucks in partially knocked down condition (PKD) for converting into CBU condition. Investigation was conducted by Director, General Intelligence and Investigation (Customs and Excise) confirming that the trucks declared/cleared as dump trucks were mostly six wheelers which were subsequently modified and re-registered as trucks of ten wheelers leading to the evidence of massive tax avoidance. It was stated that the import of trucks under the garb of dump trucks was adversely affecting the interest of local industry. It was stated that the condition of extra information is imposed only for the purpose of examination, valuation and 'assessment, which cannot be classified as a restriction on imports and exports.

7. The petitioners filed rejoinder contending that the respondents have raised questions of fact which are not required to be considered for the disposal of the present petition. It was stated that the sole grievance of the petitioners in this petition is to the imposition of extraneous condition for production of original registration certificate or auction receipt. It was alleged that the Customs officials are required to examine the goods at the time of import (export of the goods from Zone to Tariff Area) and anything taking place subsequent to the import in the Tariff Area from the Zone, was not within the jurisdiction of customs officials as rightly pointed out by the respondent No.2 to the C.B.R. It was alleged that the misuse or illegal conversion, if any after the clearance of dump trucks can be checked by proper mechanism available to the authorities concerned. It was further alleged that the plea taken in the counter-affidavit indicated that at the time of export of the dumper from the Zone to the tariff area it is actually a dump truck. Any misuse after import in the tariff area was not within the, domain of the customs officials. It was averred that prior to the imposition of impugned condition the respondents have themselves clearly laid down definite parameters to regulate the policy of import of dump trucks in the light of the judgment of the Hon'ble Supreme Court and. the dump trucks are checked and examined at the time of import in the presence of committee consisting of senior officers of customs. If any unit being exported from the Zone of the Tariff Area does not fulfil, the prescribed criteria/parameters, the respondents would be well within their right to point out the discrepancy. It was further stated that the petitioners were always ready and are still prepared to satisfy the customs officials that the units being exported out of the zone fulfil the prescribed parameters. It is alleged that it is impossible to fulfil the requirement of producing the original registration certificate in the country of first registration for the reason that the used dump trucks change hand at number of times before import into the zone. It is stated that, had it been possible to obtain these documents, the petitioners would have no reservation by procuring and producing the same. It has been reiterated that the respondent No.2 in its Office Order No.37 of 2004, dated 13-3-2004 has considered the problem and the Additional Collector while appreciating the difficulties has passed order which reads as follows:--

"Government of Pakistan

Collectorate of Customs (Exports)

Custom House Karachi.

No. SI/MISC/958/2003-CUS/EPZDated: 13th March, 2003

Office Order No. 37/2004-EXP. HQ

During physical examination of Dump Trucks it has been observed that assembler of Dump Trucks in KEPZ are unable to produce the original catalogue of the Dump Trucks being exported to the Tariff Area as per parameters laid down vide office order, dated 13-8-2003. The reason put forward by the Assemblers is that they import old and used dump trucks in SKD/CKD condition purchased from various sources as such they are unable to obtain catalogue of original manufacturers. Moreover the parameters given in the said office order regarding chassis length and width varies from Model to Model and as per chassis series of the Dump Trucks. Six Wheeler dump trucks with payload capacity of 8 tons require same strength and power of the chassis and engine as been required by 10 wheeler dump truck with loading capacity of 10 tons. Considering afore-stated facts, it is directed that:--

(i) Where assembler is unable to produce the original catalogue assessment of dump trucks will be finalized as per physical verification of the vehicle considering parameters given in the office order, dated 13-8-2003, judgment of the Honourable Supreme Court of Pakistan and guidelines provided in explanatory Notes to H.S. Code 87.04.

(ii) In case of 8 tons loading capacity six wheeler dump trucks if the length and width of the dump truck chassis exceeds by one foot and one inch respectively than the parameters fixed vide office order, dated 13-8-2003, will be accepted for assessment of six wheeler dump truck having 8 tons loading capacity provided that all other parameters laid down for 6 wheeler dump truck are fulfilled.

(Islahuddin Siddiqui)

Additional Collector-I"

8. We have heard Mr. Khalid Jawed Khan, learned counsel for the petitioners and Mr. Khalid Anwer, Advocate assisted by Mr. Bilal Shatikat, Advocate for the Respondents.

9. Mr. Khalid Jawed Khan, learned counsel for the petitioners has mainly reiterated the contentions raised in the petition and the rejoinder. In addition he has submitted that the admitted fact is that the respondents cleared about 3000 dump trucks without production of the original certificate of registration or auction receipt and 400 further dump trucks after the imposition of condition by way of relaxation. He has submitted that the deviation from the consistent practice is not permissible. In support of his contention he has placed reliance on the following Division Bench Judgments of this Court:--

(1) Super Industries (Pvt.) Ltd. v. Central Board of Revenue, 2002 PTD 955 and;

(2) Messrs Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004, PTD 2516.

He has submitted that the impugned condition is unreasonable as the parameters have already been laid down by the Hon'ble Supreme Court as well as in the explanatory notes to the Harmonized Commodity Description and Coding System complied by World Customs Organization, Brussels, which is being acted upon internationally, as well as in the Office Order/letter, dated 13-8-2003. He has further submitted that the respondent No. 2 has informed the respondent No. 1 in very clear terms in the letter, dated 14-7-2004 that it was not possible that the trucks could be cleared in the garb of dumpers as a Committee comprising senior Officers of the Customs Department examines the dump trucks before clearance. Mr. Khalid Jawed has further submitted that vide Officer Order No.37 of 2004, dated 13-3-2004 the respondent No.2 has waived the condition and thereafter withholding of the process of release just for non-production of the original certificate of registration or auction receipt is unjustified. He has reiterated that if at the time of assessment any vehicle does not conform to the parameters referred to above, the customs officials are fully competent to reject the clearance for the reasons to be recorded in writing.

10. Mr. Khalid Anwer, learned counsel for the respondents has though defended the imposition of condition impugned in this petition contending that the appropriate officer is empowered to seek information under section 26 of the Customs Act, 1169, for the purpose of assessment, valuation and ascertaining if the vehicle alleged to be Off Highway Dump Truck was actually so, but has stated that in the C.B.R. letter, dated 12-2-2004, it is merely stated that the importer shall also be asked to produce original registration certificate in the country of first registration or the receipt issued by the auctioneer showing the make, model, size, accessories and the value etc. but there is no direction that if these documents are not produced the release shall be refused. He has contended that the production of these documents is sought because, it is the duty of the Customs officials to determine whether the goods being imported or exported can-be legally imported/exported and to ascertain the description of the goods and assess the value thereof as well as the duty and taxes payable. He has frankly stated that mere non-production of original certificate of registration or auction receipt shall not result in withholding the process of examination of the goods: The petitioners are always at liberty to satisfy the customs officials that it is not possible for them to produce the documents. He has submitted that importers/exporters should not be unwilling to comply with the direction but they can always contend that they are unable to make the compliance, which shall be considered on merits. He has further stated that if the petitioners cannot produce the original certificate of registration or auction receipt they can always produce any other documents/material or evidence other than these two documents to establish that the vehicle is Off Highway Dumper and the respondents shall have no objection to the release of vehicle if this fact is established. He has frankly conceded that this position is reflected in the Office Order No.37 of 2004, dated 13-3-2004 and the respondents are still prepared to act upon it

11. After hearing the learned advocates for the parties, we are of the considered opinion that the impugned conditions are neither mandatory nor compulsory. These documents are being asked just to ascertain the legality of the import and the description of the vehicle. Seeking of such information is within the competence of the tax officials under the provisions contained in section 26 of the Customs Act, 1969. However, this requirement is not mandatory or condition precedent for starting the process of examination of good. In view of the clear and unambiguous statement made by Mr. Khalid Anwer, we need not to dilate any further on the issue

12. After hearing the learned Advocate for the parties on 6-10-2004, the petition was disposed with the consent of learned advocates for the parties in the following terms:--

"(1) The Respondents will allow the clearance in consonance with:

(i) The parameters fixed by the Hon'ble Supreme Court in order, dated 6th December, 2001, in C. Ps. Nos. 774 to 784 of 2001.

(ii) The parameters laid down in explanatory notes under H.S. Code No.8704.1000.

(iii) The conditions specified in letter, dated 13-8-2003, read with Office Order No.37 of 2004, dated 13-3-2004.

(iv) The customs officials may require for production of original registration certificate or the auctioneer's receipt containing particulars about the purchase. In case registration receipt or catalogue are not produced the importer must furnish satisfactory explanation with regard to the non-production of the above documents and may prove by any other cogent evidence, acceptable to the customs to show that the actual imports pertain to dumper designed for off highway."

13. These are the detailed reasons in support of the short order, dated 6-10-2004.

The petition is allowed accordingly.

M.B.A./J-10/K Order accordingly.