Messrs PAKISTAN CABLES LTD. through Finance Director and Company Secretary VS FEDERATION OF PAKISTAN through Chairman, C.B.R. and 2 others, 2006 PTD-KARACHI-HIGH-COURT-SINDH 1930 (2006)

Customs Act (IV of 1969)---

----Ss.19 & 223---Notification S.R.O. 357(1) / 2002, dated 15-6-2002---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption from payment of duties---Declining benefit on the basis of letter issued by official of Central Board of Revenue---Petitioner imported polypropylene filler falling under PCT Heading 5607.4900 and claimed benefit of notification S.R.O. 357(I)/2002, dated 15-6-2002, as the material was not locally manufactured---Authorities, on the basis of letter issued by an official of Central Board of Revenue, refused benefit of the notification to the petitioner---Plea raised by the petitioner was that Customs General Order issued by Central Board of Revenue under S.223 of Customs Act, 1969, could not be overruled through a letter issued by Engineering Development Board---Petitioner also contended that the material imported by him was not included in the list of locally manufactured items in Indigenization Programme approved by Indigenization Committee---Validity---For the purpose of S.R.O. 357(I)/2002, dated 15-6-2002, such goods were to be treated as not manufactured locally which were not included in the list of locally manufactured items prepared by Central Board of Revenue in consultation with Ministry of Industries---Letter written by Engineering Development Board, until and unless duly concurred by Central Board of Revenue and item was included in the list of locally manufactured items, was not to be acted upon for declining the concession available under S.R.O. 357(I)/2002, dated 15-6-2002---Polypropylene filler (PCT Heading 5607.4900) was not being manufactured locally and authorities were not empowered to refuse the concession---Petitioner was entitled to the benefit of S.R.O. 357(I)/2002, dated 15-6-2002---High Court directed the authorities to extend the benefit of the notification to petitioner---Petition was allowed accordingly.

Abdul Ghaffar Khan for Petitioner.

Ahmed Khan Bugti for Respondent No.2.

Nemo for Respondents Nos. 1 and 3.

Dates of hearing: 31st March and 7th April, 2006.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The petitioner has sought the following reliefs.

"It is, therefore, prayed in the interests of justice that this Hon'ble Court may be pleased to:

(i) Declare that the Polypropylene Filler under PCT Heading 5607.4900 is not being manufactured locally and the letter Annex "N" dated 9th February, 2004 has been issued without lawful authority and is of no legal effect.

(ii) Declare that the petitioner was entitled to the benefit of S.R.O. 357(I)/2002, dated 15th June, 2002.

(iii) Direct the Respondents and their subordinate officers to grant the benefit of the Notification S.R.O. 357(I)/2002, dated 15th June, 2002 to the Petitioner.

(iv) Prohibit the Respondents from encashing the bank guarantees submitted by the petitioner and suspend the operation of their notice of encashment, dated 27th April, 2004 (Annex "Q") and discharge the guarantees.

(v) Grant costs of the petition.

(vi) Grant any other relief which this Hon'ble Court deems just and proper in the circumstances of the case."

The relevant facts as stated in the petition are that the petitioner is a public limited company engaged in the manufacture and sale of cables. It is alleged that in exercise of powers conferred by section 19 of the Customs Act, 1969, the Federal Government by Notification S.R.O. 357(I)/2002, dated 15th June, 2002, exempted raw material, sub-components and components as are not locally manufactured, imported for the manufacture of goods, specified in Table-I and Table-II of the Notification from so much of duty leviable under the Ist Schedule to the Income Tax Act, 1969 as in excess of duties specified in the schedule to the Notification. It is further alleged that the goods being manufactured by the petitioner are mentioned at serial No.2 of Table-I of the above Notification and are, therefore, exempt from payment of the duty in excess of 10%. It is further averred that in Explanation-I to the above Notification it is specified that for the purpose of the said Notification, the expression "not manufactured locally" means the goods, which are not included in the list of locally manufactured items in the Indigenization Programme approved by the Indigenization Committee comprising members from Central Board of Revenue and the Ministry of Industries. The petitioner has submitted that the list of locally manufactured goods has been published in Chapter XI of Customs General Order 12 of 2002.

According to the learned counsel for the petitioner, in normal course of its business, it entered into a contract for the import of 16 metric tonnes of polypropylene filler (PCT Heading 5607.4900) and established a letter of credit for the import of goods in favour of the foreign seller on 15-10-2003. The goods reached Karachi and the petitioner filed bill of entry for clearance by extending benefit of Notification S.R.O. 357(I)/2002.

The petitioner further entered into a contract for the import of 8 metric tonnes of polypropylene filler (PCT Heading 5607.4900) and established a letter of credit for import of goods. The said goods also reached Karachi and similar bill of entry was filed. Two other consignments falling under the same category were also imported in the similar circumstances.

The concerned officer of the Customs refused to extend the benefit of Notification S.R.O. 357(I)/2002 on the ground that in terms of the Board's Letter C. No. 2(13)SUR-1/82, dated 4-3-2004, read with Engineering Development Board's Letters, dated 9-1-2003 and 28-1-2003 issued in the case of Pioneer Cables Limited the goods imported by the petitioner were locally manufactured and, therefore, the petitioner is not entitled for the concession under the Notification referred above.

The petitioner has alleged that S.R.O. 357(I)/2002 itself excludes only those goods which are not mentioned in the list of locally manufactured issued by the C.B.R. Several representations made to the customs officials were not accepted and hence this petition.

The respondent No.2 in its parawise comments has contended that the concession was allowed under S.R.O. 357(1)/2002 in respect of the goods which are not locally manufactured and since the C.B.R. has stated in its letter referred to in the petition that the? goods imported are locally manufactured, therefore, the concession is not available.

Learned counsel for the petitioner has contended that the controversy boils down to the point whether the polypropylene filler imported by the petitioner is locally manufactured or not. He has submitted that the Explanation-I to the S.R.O. 357(I)/2002, dated 15-2-2002 is very clear to the effect that for the purpose of the Notification the explanation `not manufactured locally' means the goods which are not included in the list of locally manufactured items in the Indigenization Programme approved by the Indigenization Committee comprising members from C.B.R. and the Ministry of Industries. He has further submitted that in Chapter XI of CGO 12 of 2002, para 40, lists of locally manufactured goods/items for the purpose of concessionary Notifications has been published.. The first sentence of this Chapter says that the Cabinet directed the Engineering Development Board to compile a list of locally manufactured goods. The list so compiled by Engineering Development Board has been deliberated at length amongst the representatives of Board of Investigation, C.B.R., National Tariff Commission and representatives of the private sector. It is further provided that all the Collector of Customs and the staff responsible for allowing concession under different Notifications/Orders/Deletion Programmes are advised to follow this list for the purpose of allowing concessions from customs duties and sales tax etc. It is further stated that the information, if any, along with evidence regarding the local manufacture of goods, not indicated in the list, may be forwarded to the C.B.R. forthwith so that the list of locally manufactured items is updated in consultation with the Engineering Development Board.

Learned counsel for the petitioner has further submitted that it is a very long list but it does not include the polypropylene (PCT Heading 5607.4900). He has further submitted that the respondent No.2 has refused to extend the concession under S.R.O. 357(I)/2002 on the basis of letter issued by the Secretary (Survey-II), C.B.R., stating therein that in case of Pioneer Cables Limited it was directed by the C.B.R. on 21-11-2002 that the material imported by them is being locally manufactured and, therefore, concession was not available. He has argued that the CGO-12/2002 has been issued in exercise of the powers vested in C.B.R. under section 223, which provides that all officers of customs and other persons employed in the execution of the Customs Act shall observe and follow the orders, instructions and direction of the Board. He has further contended that the CGO issued by the C.B.R., under section 223 of the Customs Act, 1969 cannot be overruled through a Letter issued by an official of C.B.R. and that too without any basis. He has further submitted that since the polypropylene filler imported by the petitioner is not included in the list of goods manufactured locally in Chapter XI of the CGO-12/2002, therefore, the letter issued by the G.B.R. forming basis for refusal of concession is of not to be acted upon. He has further pointed out that Chapter XI of CGO-12/2002 has been amended from time to time and several entries have been made in the years, 2004 and 2005, meaning thereby that the' list of locally manufactured goods and machinery is being updated from time to time, but polypropylene filler imported by the petitioner has not been included so far, in the list of locally manufactured goods and machinery and therefore an inference can be drawn that there is no material available with the C.B.R. for including this item in the list of locally manufactured goods.

Learned counsel for the respondent No.2 sought several adjournments for seeking instructions from the customs officials if polypropylene filler (PCT Heading 5607.4900) is being locally manufactured and if so the evidence be furnished. However, learned counsel for the respondent No.2 has stated that in spite of his best efforts and personal contacts with the Deputy Collector and other customs officials no instructions have been given to him in this behalf and the customs officials are not cooperating at all. He has stated that he has gone through the list of locally manufactured goods contained in Chapter XI of CGO-12/2002 and the polypropylene filler imported by the petitioner is not included in the list. He has submitted that that due to total non-cooperation on the part of the customs officials he has no other option but to place reliance on the documents annexed with the comments filed by the respondent No.2. He has pointed out that in the letter written by Engineering Development Board, dated January 9, 2003 with reference to Pioneer Cables Limited the polypropylene twine/ polypropylene filler has been shown as goods manufactured locally. However, he has expressed his total inability in producing any evidence on the basis whereof the Engineering Development Board has given this information.

We have carefully considered the contentions raised by the learned counsel for the parties and have gone through the material placed on record.

We are persuaded to agree with the submissions of the learned counsel for the petitioner that the Explanation-I in S.R.O. 357(I)/2002 provides that the expression "not manufactured locally" would mean that the goods which are not included in the list of locally manufactured items in the Indigenization Programme approved by the Indigenization Committee comprising members of C.B.R. and Ministry of Industries. We further agree to the proposition that in Chapter XI of CGO-12 of 2002 the C.B.R. has given a clear direction that all the Collector of Customs and the staff responsible for allowing concession under different Notifications/Orders/Deletion Programmes are required to follow the list for the purpose of allowing concessions from custom duties and sales tax. We further find that the C.B.R. has instructed all the tax officials to forward the information, if any, along with evidence regarding the local manufacture of goods not indicated in the list so that the list of locally manufactured goods/items is updated in consultation with Engineering Development Board. There is nothing on record to suggest that any information was given to the C.B.R. on the basis whereof the polypropylene filler imported by the petitioner has been included in the list of locally manufactured goods in consultation with the Board of Investment, National Tariff Commission as well as Engineering Development Board, under the administrative control of the Ministry of Industries, Production and Special Initiatives.

We are further of the opinion that for the purpose of S.R.U. 357(I)/2002 such goods are to be treated as not manufactured locally which are not included in the list of locally manufactured items prepared by C.B.R. in consultation with the Ministry of Industries. A letter written by the Engineering Development Board until and unless duly concurred by the C.B.R. and included in the list of locally, manufactured items is not to be acted upon for declining the concession available under S.R.O. 357(I)/2002.

In the above circumstances, it is held that the polypropylene filler (PCT Heading 5607.4900) is not being manufactured locally and the respondent No.2 is not empowered to refuse the concession. The petitioner is entitled to the benefit of S.R.O.357(I)/2002, dated 15th June, 2002, and the respondent No.2 and its subordinate officials are directed to extend the benefit of this Notification to the petitioner forthwith. The respondent No.2 is further directed to release the bank guarantees furnished by the petitioner for the release of goods. The petition is allowed as above.

M.H./P-18/K?????????????????????????????????????????????????????????????????????????????????????? Petition allowed.