OCCIDENTAL OF PAKISTAN, ISLAMABAD VS COLLECTOR (APPRAISEMENT), CUSTOM HOUSE, KARACHI
2005 P T D 981
[Karachi High Court]
Before Zahid Kurban Alavi and Sarmad Jalal Osmani, JJ
OCCIDENTAL OF PAKISTAN, ISLAMABAD
versus
COLLECTOR (APPRAISEMENT), CUSTOM HOUSE, KARACHI and 2 others
Constitutional Petition No.874 of 1993, decided on /01/.
8th February, 2002. Customs Act (IV of 1969)---
----Ss. 16 & 20---Regulations of Mines, Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), S. 2---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Contract for exploration of oilfields between foreign company and Federal Government---Duty free import of Rig by contractor for exploration and drilling operations in terms of such contract---Completion of contracted project---Subsequent use of such Rig by contractor in other fields with approval of concernedMinistry of Government---Show-cause notice demanding customs duty from contractor for not re-exporting such Rig on completion of contracted project---Validity---Such Rig, if not re-exported after completion of contracted project, but used locally on commercial basis, would be deemed to have been imported without payment of customs duty and other taxes---Drilling for oil and gas, in the present case, was done officially at Government level and no private sector was involved therein---Original contract would be assumed to be in force as such Rig was still being used officially in exploration of oil and gas---High Court accepted Constitutional petition and declared impugned show-cause notice to be without lawful authority.
Zahid F. Ebrahim for Petitioner.
Raja M. Iqbal for Respondents.
Date of hearing: 24th January, 2002.
JUDGMENT
ZAHID KURBAN ALAVI, J.---The petitioner namely, Occidental of Pakistan, Inc., which is a foreign company, based in Pakistan with its registered office at Islamabad, has prayed for the following relief against the respondents:--
(a)That the notice Reg. Si/Misc/386/92-AIB, dated 26-12-1992, issued by respondent No.1 is without lawful authority and the same be struck down accordingly.
(b)That the action of the respondent No.1 is mala fide, oppressive and unjust; the same be declared to be without lawful authority, void ab initio and of no legal effect.
(c)That during the pendency of this petition, this Honourable Court be pleased to direct respondent No.1 not to proceed further with the hearing of the impugned notice.
2.Briefly the facts of the case, according to the petitioner, are that the Government of Pakistan, as per its declared policy, had consistently provided incentives for the exploration and production of Petroleum in Pakistan. In order to attract and secure international participation various facilities and preferential treatments had been assured and granted to foreign companies. On 28-11-1982 the North Potwar Petroleum Concession Agreement was entered into between the President of Pakistan and OGDC, Pakistan Oil Fields Limited, Attock Oil Company, and the Petitioner. As per the above Agreement the petitioner was the Operator of the Project and the Government of Pakistan, represented by the President of Pakistan, was a Working Interest Owner. The respondent No.3 has only been impleaded as a pro forma respondent for effective adjudication of the case. No relief has been sought against the respondent No.3. It is further stated in the petition that in order to facilitate the implementation of the Agreement certain machinery were required to be imported. Exemptions from payment of custom duties and taxes were provided by the respondent No.3 under the Regulations of Mines and Oilfields and Mineral Development (Government Control) Act, 1948. In terms of the Agreement entered into betweenthe petitioner and the respondents it was agreed under Article 11 that prior to commercial discovery, operator and its contractors and sub-contractor engaged in carrying on operations shall be permitted to import and, when no longer required, export the machinery, ancillary equipment, specialized vehicle, materials and supplies which is either owned or contracted for and described inAnnex V, thereto and made a part thereof, when certified by a responsible representative of the Operator that such item is to be used for the purposes of exploration and drilling operations. As stated earlier the said items were to be duty free. In October, 1985, the petitioner was allowed to import relevant machinery and equipment vide Import Permits Nos. 501054 and 501055 both, dated 6-3-1983. The said importation was allowed free of duties and taxes subject to the condition that the imported consignment would be re-exported after the same was no longer required or on completion of the contract/job.
3.It is the case of the petitioner that the machinery and related equipment were to be used continuously by the petitioner for effecting its contractual obligations under the Agreement which is still subsisting and the job thereunder is in progress but for reasons best known to the respondents the petitioner was served with the impugned show-cause notice. The petitioner instead of challenging the said show-cause notice appeared before respondent No.1 and took up various pleas by giving written replies to them. It is further alleged in the petition that the respondent No.1 declined to consider the pleas raised by the petitioner and without considering the merits of the case expressed his intentions from the very inception to recover the amount from the petitioner. It is claimed that the assumption of jurisdiction and the very initiation of the proceedings by the respondent No.1 is unjust, oppressive, mala fide and without lawful authority.
4.We have heard Mr. Zahid F. Ebrahim, learned counsel appearing on behalf of the petitioner and Raja Muhammad Iqbal, learned advocate on behalf of the respondents and have gone through the material available on record.
5.It was contended by Mr. Zahid F. Ebrahim, Advocate, that the impugned show-cause notice patently shows that no allegation has been made therein to the effect that the imported machinery is no longer required or that the contract/job of the petitioner has been completed. It is an admitted fact that the petitioner, in terms of Article XI of the Petroleum Concession Agreement, was allowed to import in October, 1985bytheGovernmentofPakistan,aconsignmentconsistingofRig, 23, free of duties and taxes. Such import was subject to the condition that the imported consignment must be re-imported after the same was no longer required or on completion of the contract/job.
6.Mr. Zahid F. Ebrahim, Advocate, has stated that a short point is involved in this petition and that is whether in view of the concession from payment of duties allowed to the petitioner by the Government of Pakistan (respondent No.3) under Article XI of the Petroleum Concession Agreement and also the unequivocal letter, dated 10-1-1993 of the respondent No.3, was there any justification for Respondent No.1 to issue and maintain the show-cause notice impugned in this petition . He had argued that the issuance of the said show-cause notice was in complete violation of statutory safeguards provided under the Customs Act, 1969. A scrutiny would show that no grounds have been mentioned therein to prima facie establish as to the presence of any contravention committed by the petitioner. The comments filed by the respondent No.1 merely reiterate the contents of the show-cause notice , dated 26-12-1992 and in fact none of the respondents has cast any doubt on the validity of the letter, dated 10-1-1993. The respondent No.3 letter, dated 10-1-1993 shows that Rig 23 was imported with permission of the Government of Pakistan. The retention of this Rig in Pakistan was necessitated by practical exigencies. It is impractical to require an importer to export a Rig upon completion of the drilling of a well and re-import it for a new assignment. Such a requirement could also result in immense expenses which the President of the Islamic Republic of Pakistan will also have to share in his capacity as a working interest owner in the respective petroleum ventures. He further stated that in line with the decision of the meeting chaired by the Secretary General Finance and Revenue on 9th December, 1992 the Rig No.23 would be allowed to be retained in Pakistan without consequence from the customs authorities at least until advice to the contrary is given by this Directorate. LASMO Oil in their K-36 would now use the said rig. Lastly, he argued that the show-cause notice dated 26-12-1992 was without legal justification and therefore is liable to be set aside.
7.On the other hand, Raja Muhammad Iqbal, learned counsel representing the respondents, has argued by admitting that the petitioner imported a consignment consisting of rig with equipment and camps valued at Rs.12,15,76,781 and got them released against import Permit Nos.501054 and 501055, issued by the Chief Controller of Import and Exports conditionally that the goods would be re-exported aftercompletion of the job. Accordingly, the subject goods were released by the Customs free of customs duty and sales tax in terms of the said Agreement. It was further contended that the petitioner was asked to disclose whether the rigs in question had been re-exported and if not whether duty and taxes were paid thereon against valid authorization for its retention from competent authority. In reply the petitioner stated that the Rig No.23 with equipment andcamp imported for Sedco Forex International was being currently used to drill on exploratory well at Occidental s Ratna No.2 location vide their letter, dated 26-11-1992. He stressed that since Rig No.23 was not exported nor duty and taxes paid thereon the impugned show-cause notice was issued for the recovery of the sums under the provisions of section 16 of the Customs Act, 1969. He urged the Court to dismiss the petition as the petitioner had not come to this Court with clean hands and intended to damage the national exchequer by not paying the amounts so claimed by the respondents.
8.The only point in dispute is that the petitioner after having imported the rig for the benefit of and consumption of the Government of Pakistan did not re-export it as agreed upon by virtue of the agreement that was executed at the time when the rig was imported. Since he did not re-export the rig, therefore, it would be construed to have been imported without payment of customs duty and other taxes. The point agitated by the respondents would have a lot of weight only in those circumstances where after completing the task of drilling as envisaged in the agreement entered into the petitioner failed to re-export the said item and instead used it locally on commercial basis. However, that is not the case as drilling for oil and gas is officially done at the Government level in Pakistan and no way is the private sector involved. The subsequent drilling in other fields has also been done with the approval of the concerned Ministry which is incharge for exploration of oil and gas, therefore, we can safely assume that the original agreement which was entered by the petitioner with the President of Pakistan, being respondent No.3, continues to be in force as the rig is still being used in the exploration of oil and gas. The concession of exemption from payment of customs duty and other taxes was given to encourage foreign investment for getting involved in Pakistan in the field of exploration of oil andgas.
9.Therespondentsareawareofthedocumentsproducedbythe petitioner which are official Government documents and therefore, the issuance of notices and the demand ofduty and taxes is unwarranted andunjustifiedasitisevidentthattherigisstillbeingusedofficially.
10.We are of the view and hold that the action of the respondent No.1 by issuing show-cause notice bearing No. Si/Misc/386/92-AIB, dated 26-12-1992 is without lawful authority and is accordingly setaside.
11.By a short order, dated 24-1-2002, we had allowed this petition and above are the detailed reasons for the same.
S.A.K./O-8/KPetition accepted.