COLLECTOR OF CUSTOMS (EXPORTS), KARACHI VS Messrs QAISER, L.G. PETROCHEMICAL (PVT.) LIMITED, KARACHI, 2007 PTD-KARACHI-HIGH-COURT-SINDH 1848 (2007)

Customs Act (IV of 1969)---

----S.21---S.R.O. 415(I)/2001, dated 18-2-2001---Duty drawback---Entitlement---S.R.O. 415(I)/2001, dated 18-6-2001 had made the exporter entitled to claim the duty draw-back at 16% of the FOB value, but only subject to the fulfilment of all the conditions envisaged therein---Such conditions having not been met, exporter was not entitled to claim duty drawback---Principles---Free on board (FOB) value in its technical term being inclusive of packing charges and all after charges incurred by the exporter till the delivery of goods to the shipper, the question of deduction of packing material charges etc. would not arise.

Raja Muhammad Iqbal for Applicant.

Qaiser Ahmed Shaikh for Respondent.

ORDER

ANWAR ZAHEER JAMALI, J.---Following arc the reasons for our short order passed today i.e. 27-4-2007, whereby the two questions referred for the opinion of this Court in this reference application under section 196 of the Customs Act, 1969, vide statement dated 1-2-2007, were answered in the affirmative.

2. The respondent-Company had exported a consignment of Di- octyle-Phthalate, (DOP) weighing 304 metric ton to Syria under claim of duty drawback vide goods declaration No.82045 dated 17-3-2004, declaring the value of the consignment at US$ 990 per metric ton, and subsequently they had submitted their claim of duty drawback, under S.R.O. 415(1) of 2001, dated 18-6-2001, for Rs.2,608,115. Vide order in original passed by the Collector of Customs (Exports), such claim of the respondent was rejected after due consideration of the pleas raised by the respondent, for the following reasons:---

"The notification authorizing duty drawback explicitly debars repayment, if FOB export price exceeds US$ 675 + 20% PMT. The goods in the instant case were exported at the unit price of US$ 990 PMT. The FOB export value exceeds 31.82% of the maximum threshold price of US$ 810 OMT (675+20%). The difference beyond 20% of benchmark price renders the duty drawback claim inadmissible in the light of Schedule XLIX of S.R.O. 415(1) of 2001 dated 18-6-2001. I therefore, order rejection of the claim being inadmissible."

3. The respondent being aggrieved by the above conclusion recorded by the Collector of Customs (Export), preferred Customs Appeal No.K-437/2005 before the Customs, Excise and Sales Tax

Appellate Tribunal, Karachi (hereinafter referred to as the Tribunal). The Tribunal vide its order dated 9-9-2006, duly rectified by its subsequent order dated 17-10-2006, accepted the plea of the respondent and consequently granted them the requisite relief under S.R.O. 415(I) of 2001. The only reason assigned by the Tribunal for grant of such relief was that the said S.R.O. has created a vested right in favour of the respondent to claim duty drawback at 16% of FOB value, which cannot be taken away.

4. Mr. Raja Muhammad Iqbal learned counsel for the applicant, in the context of the controversy involved in this matter, has made reference to the language of S.R.O. 415(I)/2001 dated 18-6-2001, and contended that such S.R.O. issued by the Central Board of Revenue in exercise of its powers conferred by clause (c) of section 21 of the Customs Act, 1969 has made the respondent entitled to claim the duty drawback at 16% of the FOB value, but only subject to the fulfillment of all the conditions envisaged therein. While in the present case, on the basis or admitted facts, such conditions were not met by the respondent, particularly with reference to the note provided at the bottom of Schedule XLIX of the S.R.O. which reads as under:---

"Note.---The repayment of customs duties authorized by this notification is based on the F.O.B. value of US $ 675 PMT. If F.O.B. value of the above finished product exceeds by more than 20% or C&F value of the raw materials (i.e. 2--Ethyl Hexanol US $ 490 PMT and Phthalic Anhydride US $ 570 PMT is decreased by more than 20%, the duty drawback under this notification shall not be admissible."

5.Reverting to the facts of this case he argued that in the order-in- original dated 20-4-2005 all the pleas raised by the respondent were explicitly recorded in para. 3 of the order, whereafter in terms of the reasons assigned in para. 4 of the order respondent were not found entitled for the benefit of S.R.O. 415(I)/2001 dated 18-6-2001, and consequently such relief of duty drawback was declined to them. But in contrast to it the Tribunal has proceeded on entirely misconceived presumption of vested right of the claim of duty drawback in favour of the respondent on the basis of said S.R.O. 415(I)/2001, though at no point in time and such vested right was created in favour of the respondent, based on such S.R.O. He urged that the concept of vested right, visualized by the Tribunal in its order is wholly misconceived and based on misreading of the said S.R.O., which has remained unchanged from the date of its issue.

6. The authorized person on behalf of the respondent disputing the submissions of Mr. Raja Muhammad Iqbal, has strongly contended that once the respondent have exported his goods at a higher price then the limit prescribed under the said Notification/S.R.O. vested right was created in their favour to claim duty drawback over such exports at the rate of 16% of the F.O.B. value. He, however, did not dispute that in the documents submitted by the respondent before the concerned authority to claim the duty drawback over their exported consignment they themselves have declared F.O.B. value at US$ 990 per metric ton, which was much beyond the maximum prescribed limits of US$ 675+20% per metric ton i.e. 810 metric ton. Faced with this clear factual position, at this belated stage he wanted to improve his case by making submission that the F.O.B. value of the whole exported consignment shown in the sum of Rs. 16,389,624 (equivalent to US$ 285285) also included the cost of drum/packing material which was US $ 120 per metric ton, and in such circumstances, after deduction of such costs, in all fairness the respondent was entitled to avail the benefit of duty drawback as provided under S.R.O. 415(I)/2001 dated 18-6-2001.

7. We have carefully considered the rival contention of the parties and perused the case record, particularly the Notification No.S.R.O. 415(I)/2001, which shows that the goods in respect of which respondent had claimed export rebate in terms of the said S.R.O. were covered by Schedule XLIX thereof entitling the respondent to claim duty drawback at 16% of the F.O.B. value, however, such benefit of duty drawback was made available only subject to the fulfillment of all the conditions provided in the said S.R.O The note at the bottom of said Schedule, as reproduced in the earlier part of this judgment, goes to show that the repayment of customs duty authorized by this notification was based on the F.O.B. value or US$ 675 PMT with maximum exceeding margin of 20% or such F.O.B. value i.e. US$ 675+20% = US 810 PMT and not otherwise. To put it in more simple words in case such F.O.B. value of the finished products exceeding by more than 20%, as in the instant case, then such duty drawback was not admissible to the exporter.

8. In the instant case the Collector of Customs (Export) in its order-in-original dated 20-4-2005 has judiciously examined and applied the ratio of said S.R.O. to the facts and circumstances of the present case and rightly concluded against the claim of the respondent in the manner as reproduced above. The authorized persons on behalf of the respondent did not dispute the contents of rebate claim filed by the respondent before the Customs Authorities, which in one column shows the F.O.B. value of the whole consignment of D.O.P. (Di-octyle Phthalate) i.e. 304 M.Ts. at Rs.16,300, 721.05 i.e. US$ 933.347 PMT at the conversion rate of one US$ = Rs.57.45 and in the other column the F.O.B. value declared in the shipping documents shows the figure of Rs.16,389,624.00 i.e. US$ 938.44 PMT. Thus, as per these admitted figures given by the respondent/exporter the per metric ton value of the exported consignment had exceeded either by US$ 123.347 or US$ 128.44 per metric ton to the maximum value at which the benefit of said S.R.O. could have been availed by the respondent. Not only this, but even if for the arguments sake the belated plea of the respondent regarding the claim of deduction of charges of packing material/drum at US$ 120 PMT is taken into account, though such plea neither finds place in the reply of the respondent to show-cause notice dated 9-5-2005 nor in the order-in-original dated 20-4-2005, still it will not bring the F.O.B. value of the exported goods of the respondent within the maximum threshold or US$ 810 PMT, worked out on the applicable principle of US$ 675 + 20%, provided in the S.R.O. Faced with this situation the representative of the respondent has attempted to further improve his case by raising the plea of deduction of payment of insurance expenses from the F.O.B. value. It is yet another fallacious plea raised on behalf of the respondent, firstly for the reason that the amount of Rs.74,195 has already been shown deducted in the rebate claim submitted by the respondent before the declaration of F.O.B. value, and even second time deduction of such claim after its conversion into US$ at the rate of 57.45 will not bring the claim of the respondent qualified for rebate/duty drawback in terms of the S.R.O. in question.

9. Besides, we may also clarify that F.O.B. (free on board) value in its technical term is inclusive of packing charges and all other charges incurred by the exporter till the delivery of goods to the shipper, therefore, the question of deduction of packing material charges etc., as claimed by the respondent in the present case, does not arise. This being the position, in our view, the Tribunal, in its order has completely misinterpreted the said S.R.O., therefore, the conclusion recorded by it in favour of the respondent that some vested right had accrued in favour of the respondent cannot be sustained.

10. The upshot of the above discussion is that legally as well as on facts claim of duty drawback made by the respondent was not sustainable in law and it was for these reasons that both the questions were answered in the affirmative.

11. A copy of this judgment under the seal of this Court be sent to the Tribunal.

M.B.A./C-13/KOrder accordingly.