PAK SUZUKI MOTOR COMPANY LTD. through Sr. General Manager (I&LP), Karachi VS SECRETARY REVENUE DIVISION, GOVERNMENT OF PAKISTAN through Member Customs, Islamabad, 2007 PTD-KARACHI-HIGH-COURT-SINDH 501 (2006)

Customs Act (IV of 1969)---

----S.33---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Refund of service charges---Claim for---Petitioner submitted 128 refund claims, which remained pending without any progress, petitioner filed constitutional petition and High Court directed authorities to dispose of claims of petitioner within two months---Claims of petitioner having not been decided within period of two months, petitioner filed application for contempt of the Court---Authorities, in the meanwhile, having rejected all claims of petitioner, appeal was filed by petitioner before Customs, Excise and Sales Tax Appellate Tribunal which after allowing three appeals, directed the Authority to decide case of petitioner within thirty days on merits---Even after direction of Tribunal claims having remained pending, petitioner filed complaint with Federal Tax Ombudsman in respect of remaining undecided claims not covered by appellate order of the Tribunal---Finally after dismissal of review application, petitioner had filed present constitutional petition---Maintainability of the constitutional petition was challenged on the ground that petitioner had not availed statutory remedy before filing of constitutional petition---Validity---Reference application on the point of law could be submitted before the High Court against order of the Appellate Tribunal---Independent and impartial dispensation of justice by the Appellate' Tribunal in the case was evident from the fact that in earlier rounds of litigation, Appellate Tribunal set aside the orders passed by Additional Collector Customs---Contention of petitioner was that petition could be filed challenging the order of Additional Collector on merits after rejection of complaint by Federal Tax Ombudsman---Held, remedy provided in the statute was not illusory as Appellate Tribunal was not under administrative control of Central Board of Revenue, but was performing quasi-judicial functions under the administrative control of Ministry of Law and Justice---Even on merits, petitioner had no case, because refund on account of service charge was not to be made automatically---Sufficient opportunity was provided to petitioner to establish by producing documentary evidence that burden of service charges was not passed on to the end consumer, but petitioner had failed to do so---Order of Additional Collector was not open to any exception as same was neither in excess of jurisdiction vested in him nor suffered from any illegality---Constitutional petition by petitioner, which was not maintainable in law and on facts, was dismissed by the High Court.

Collector of Customs v. Shaikh Spinning Mills 1999 SCMR 1402; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Collector of Customs v. Messrs S.M. Ahmed & Co. 1999 SCMR 138; Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 and Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286 ref.

Aziz A. Shaikh for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 12th October, 2006.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The relevant facts giving rise to this petition are that 2% (Preshipment Inspection) charge was levied under section 18-B of Customs Act, 1969. The vires and legality of this provision was challenged and the Hon'ble Supreme Court declared the levy as ultra vires and struck down the provision in the case of Collector of Customs v. Shaikh Spinning Mills 1999 SCMR 1402. Subsequently, the provision was omitted from the Customs Act.

2. In pursuance of the judgment of the Hon'ble apex Court, the petitioner submitted 128 refund claims. The claims were kept pending without any progress, therefore, the petitioner filed C. P. No. D-1586 of 2001 in this Court. The respondents were directed vide order dated 25-1-2001 to dispose of the claims within two months. The claims still remained pending and the petitioner again approached this Court with A an application for taking action for Contempt of Court. In the meanwhile, the respondents rejected all the claims vide three orders on the ground that the petitioner did not sufficiently prove that the incidence of service charges was not passed on to the end users. In view of the order-in-original passed by the respondent No.2, the. petitioner preferred appeal before the learned Customs, Excise and Sales Tax Appellate Tribunal. The three appeals were allowed by the learned Tribunal vide consolidated judgment dated 22-5-2003. The Tribunal directed the respondent No. 2 to decide the cases within thirty days on merits and in accordance with law. Even after the direction of learned Tribunal, the claims remained pending and the petitioner filed a complaint with learned Federal Tax Ombudsman in respect of remaining 52 undecided claims not covered by the appellate order of Tribunal. The complaint was decided on 20-2-2003. In compliance whereof 14 claims were allowed while remaining 38 claims were again rejected vide order dated 27-3-2003. After one year, the Additional Collector Customs-II A again rejected 29 claims falling under his jurisdiction on the same plea of non-passing of the incidence to end users. It is contended that a certificate from the Chartered Accountant to the effect that the incidence of service charges was not passed on to the end user was not accepted. The petitioner again approached the Tribunal through Customs Appeal No.K-300/2004. The Tribunal again set aside the order-in-original holding as follows:

"(i) Admissibility & non-admissibility of Certificate of Chartered Accountant is misconceived. As Adjudicating Officer he could have conducted facts finding inquiry and examine the records but no efforts were made at any stage. The rejection of claim was not based on legal prudence;

(ii) The rejection is discriminatory as number of claims of the petitioner were allowed on the basis of same certificate of its Chartered Accountant."

3. After setting aside the order-in-original, the Tribunal directed to decide the petitioner's claims in accordance with law.

4. In pursuance of the Tribunal's direction, the Additional Collector Customs (Appraisement IV) issued fresh notice to the petitioner. The petitioner submitted written arguments reiterating that the refund is to be allowed on the basis of certificate issued by the Chartered Accountant to the effect that the incidence of service charges has not been passed on to the end user. The levy of 2% service charges declared by the Hon'ble Supreme Court as ultra vires was to be refunded subject to the dictum laid down by the Hon'ble Supreme Court in the case of Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and in the case of Messrs Facto Belarus Tractor Limited v. Government of Pakistan, in the judgment dated 11-5-2003 wherein it has been held that, only those persons are entitled to the refund of any Government levy paid by them who have not passed on the incidence of said levy to the end consumers/public.

5. The Additional Collector further observed that at the time of original adjudication, the petitioner was called upon to furnish proof regarding non-passing of incidence of 2% service charges to the end of consumers. In response, the petitioner submitted several sales tax invoices. The sales tax invoices were picked randomly. One was dated 16-9-1996 showing the price of Suzuki Mehran Car excluding sales tax at Rs.2,17,796 and other indicating the price at Rs.2,27,556 dated 20-4-1997. The petitioner asked to justify the price hike and to prove as to why the enhancement in the price may not be treated as increase due to levy of 2% PSI service charges. The petitioner did not furnish any proof inspite of taking considerable time.

6. During the second round of litigation, the petitioner submitted letter dated 5-9-2002 from the Chartered Accountant certifying that the incidence of 2% service charge's were not passed on to the end consumers. The then adjudicating authority called upon the representatives of Chartered Accountant's for cross-examination. Mr. Bashir Juma, Mr. Riaz A. Rahman and Mr. Zubair Sheikh from the Chartered Accountant's Firm appeared before the adjudicating authority on 15-12-2003. Mr. Juma stated that the function of the Chartered Accountant is to check the account books of the company and clarification sought was in the nature of management function and business decision, which was not part of the statutory audit done by the auditors. The representative of the Chartered Accountant Firm agreed that there could be many ways to pass on the incidence of 2% PSI charges without showing it on the face of invoice, but it was a matter of pricing policy of the company and it was not open to the Chartered Accountant to verify or comment upon it. He was then asked as to why the certificate did not clarify this fact. According to him their clients asked to give opinion on passing on or not of the 2% service charges and after reading the exact words, "passing on", they had all concluded that by definition it simply meant taking something from one and handing over it to another. They therefore, interpreted to the effect that the company deposited the charges with the exchequer after collecting the same from their buyer through invoice. According to Additional Collector, he further stated that it was basically a "comfort letter" and does not mean or imply anything else. The Additional Collector further observed that the representative of the Chartered Accountant's Firm agreed that the letter/certificate issued by them does not satisfy the query raised by the customs. Mr. Abdul Majeed Sheikh, representative of the petitioner stated that he would get the necessary documents from their record, as to how the company catered for the additional expense of 2% surcharge on the import (input) side of their production and the management decision to absorb it within a week's time. He subsequently stated that the petitioner was unable to provide the required documents. The Additional Collector concluded that the petitioner failed for both the times to prove that the incidences of 2% service charges paid at the import stage was not passed on to the end consumers. The claim was finally rejected by respondent No.2 vide order dated 28-1 1-2005.

7. This time the petitioner did not prefer any appeal against the order passed by the respondent No.2. It has been explained by Mr. Aziz A. Shaikh that since the Tribunal's orders were not being complied with, therefore, instead of filing appeal before the Tribunal a complaint was made to the Federal Tax Ombudsman. The complaint was however dismissed vide order dated 15-2-2006, a copy whereof is available on record. A perusal of this order by the Hon'ble Tax Ombudsman shows that the complaint was filed alleging maladministration seeking reprimand to the tax officials as well as recommendation for grant of refund which was rejected by the respondent No.2 vide order-in-original dated 3-3-2004. It was noted that on remand the claim was again rejected vide order dated 28-11-2005. It was also noted that the claim was rejected by the respondent No.2 for the reason that the Chartered Accountant confirmed that they did not audit pricing policy, which was a management function. The clement of maladministration was considered and it was noted that after remand of the case by Appellate Tribunal the Additional Collector rejected the claim vide order dated 28-1--2005. It was observed by the Hon'ble Federal Tax Ombudsman that the claim was rejected by the Additional Collector because he was not satisfied with the Certificate of Chartered Accountant because the Chartered Accountant did not probe into the pricing methodology of the company. The Federal Tax Ombudsman observed that there was an element of maladministration on account of considerable delay on the part of the Customs Department. It was held that, however, the customs authorities were not satisfied with the evidence submitted to them that PSI charges had not been passed on to the consumers and, therefore, there is no case of maladministration. The complaint was therefore, dismissed.

8. A review application 'was filed, which was also dismissed on 5-4-2006. After dismissal of review application the present petition has been filed before this Court.

9. Mr. Aziz A. Shaikh while arguing on the point of maintainability of the petition without availing statutory remedy available to the petitioner has submitted that the Hon'ble Supreme Court has held in the case of Collector of Customs v. Messrs S.M. Ahmed & Co. 1999 SCMR 138 that where alternative remedy was illusory in nature, existence of such remedy was no bar to maintainability of constitutional petition.

10. We are of the considered opinion that the law laid down by the Hon'ble Supreme Court in the above judgment is not applicable to the present case for the reason that in the cited case Lahore High Court entertained the petition in the year 1993 when the forum of Appellate Tribunal was not available and there was no provision for filing Appeal/Reference Application before the High Court. At that time the only remedy available under the law was appeal before the customs officials and thereafter revision before Member C.B.R. In the cited case the petitioner had already failed to satisfy C.B.R. about the availability of relief, and therefore, it was held by the Lahore High Court and was upheld by the Hon'ble Supreme Court, that in the peculiar circumstances the remedy available was illusory and thus petition could be entertained by the High Court without exhausthig remedy available in the statute. With the establishment of Appellate Tribunal and provision for Appeal/Reference before the High Court, the situation has totally changed. The remedy available before the Appellate Tribunal and then before the High Court in Reference Application cannot be termed as illusory.

11. Mr. Aziz A. Shaikh has further placed reliance on the judgment of Hon'ble Supreme Court in the case of Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072. In this case it has been held by the Hon'ble Supreme Court that constitutional petition is competent if an order is passed by a Court or Authority by exceeding its jurisdiction even if the remedy of appeal/revision against such order is available, depending upon the facts and circumstances of each case. In the present case, the Additional Collector Customs decided the case after remand by Appellate Tribunal and there is nothing to show that the order was passed by the respondent No.2, exceeding its jurisdiction. The law laid down in the second judgment is also of no help to Mr. Aziz A. Shaikh.

12. On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the respondents has submitted that in addition to the non-maintainability of petition on account of non-filing of appeal before the Appellate Tribunal and then Reference Application before this Court, the petition is not maintainable, as no illegality or jurisdictional error has been committed by the respondent No.2, the Additional Collector. He has submitted that the Appellate Tribunal remanded the case to the respondent No.2 for deciding the question of refund in accordance with the law. The parameters in this regard have been laid down by the Hon'ble Supreme Court in a recent judgment in the case of Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 = 2005 PTD 2286. In the cited case it was contended before the Hon'ble Supreme Court that the petitioner was entitled for the refund of customs duty, sales tax and service charges which were illegally recovered from it. It was stated that the Customs Department asked the petitioner to submit a certificate from the Chartered Accountant confirming whether the incidence of sales tax has not been passed on to the consumers. The petitioner obtained a certificate from their Chartered Accountant and submitted the same. The C.B.R. however, informed that a Committee has been constituted to examine whether the burden of sales tax has been passed on or not by the petitioner. It was contended by the learned Attorney General that the principle of unjust enrichment is fully invoked in the judicial system of this country, notwithstanding, the fact whether adjustment of the tax has got the statutory backing or not, because if it is established that incidence of Customs Duty and Sales Tax have been passed on to the consumers by the importer, then latter is not entitled to the refund of the same.

13. The Hon'ble Supreme Court, formulated the point, "if C.B.R. could legally ask the petitioner to explain as to whether the incidence of Sales Tax had been passed on to the end user or not." The Hon'ble Supreme Court held that the petitioner had no right to claim refund of Customs Duty and Sales Tax, which it had recovered from the end user as an agent of the Government. The Hon'ble Supreme Court further agreed that the principle of passing on burden of indirect tax has nexus with the doctrine of unjust enrichment, according to which windfalls are prohibited to a person in respect of amount which is not owned by him nor it had sustained any loss in respect thereof. The Hon'ble Supreme Court further held that the petitioner in its own right had no legal authority to retain customs duty and sales tax with it and it was its duty to have transferred the same to the C.B.R. It was further held that the C.B.R. could constitute a Committee, calling upon the petitioner to substantiate as to whether burden of sales tax had been passed on to the end user or not, and in such situation, petitioner ought to have established to the satisfaction of the Committee that the burden was not passed on but the petitioner failed to do so, with the result that an adverse presumption may he drawn to the effect that the incidence of sales tax and customs duty had been passed on to the purchaser. The Hon'ble Supreme Court further held that in similar situation, Supreme Court in a large number of cases declined to refund the tax, burden whereof had been passed on to the consumer.

14. The Hon'ble Supreme Court further considered if the petitioner was entitled to refund of the service charges on account of the judgment of Hon'ble Supreme Court in the case of Collector of Customs v. Sheikh Spinning Mills, whereby the imposition of service charges as imposed under section 18-B of the Customs Act, 1969, towards the pre-shipment inspection was held ultra vires. The Hon'ble Supreme Court ultimately held that if upon furnishing documentary evidence, the petitioner satisfies the concerned authorities of the C.B.R. that the tractors were sold by it at the agreed rate inclusive of customs duty and sales tax then it would be entitled to the refund of service charges.

15. Mr. Raja Muhammad Iqbal has submitted that the Hon'ble Supreme Court has laid the controversy to rest to the effect that the refund of service charges can be claimed if it is established that the burden was not passed on to the end consumer and if the person claiming refund fails to establish this fact, it shall not be entitled to claim the refund.

16. Mr. Raja Muhammad Iqbal has urged that the question whether burden has been passed on to the end consumer or not is a question of fact. The Customs, Excise and Sales Tax Appellate Tribunal is final fact finding authority and if the petitioner would have filed appeal against the rejection of claim by the respondent No.2, vide order, dated 28-11-2005, the Appellate Tribunal would have examined the question of fact. The petitioner instead of filing appeal approached the Federal Tax Ombudsman and the complaint was dismissed for the reason that there was no maladministration and that the burden to prove the fact that the burden was not passed on to the end consumer was on the petitioner. The Federal Tax Ombudsman further observed that the Certificate of Chartered Accountant was not sufficient proof of fact as it was conceded by Chartered Accountant that the matter pertains to pricing policy of the petitioner which was a management issue and was not within the competence of the Chartered-Accountant to examine it and the certificate issued by them was merely a `comfort letter'. Mr. Raja Muhammad Iqbal has finally argued that the petition is not maintainable in law as well as on merits.

17. We have carefully considered the contentions raised by the learned Advocates. We are not persuaded to agree with the submission of Mr. Aziz A. Shaikh, learned counsel for the petitioner that the petition can be filed challenging the order of Additional Collector on merits after rejection of complaint by the F.T.O. The remedy provided in the statute is not illusory as the Appellate Tribunal is not under the administrative control of C.B.R. and is performing quasi-judicial function under the administrative control of the Ministry of Law and Justice. A Reference Application on the point of law can be submitted before the High Court against the order of the Appellate Tribunal. The independent and impartial dispensation of justice by the Appellate Tribunal is evident from the fact that in earlier rounds of litigation the Appellate Tribunal set aside the orders passed by the Additional Collector Customs. However, the petitioner finally gave-up the remedy before the appellate forum and opted to file a complaint with the Federal Tax Ombudsman. The complaint was dismissed and no Reference Application was submitted to the President of Pakistan assailing the order of the Federal Tax Ombudsman.

18. Even on merits, the petitioner has no case because the refund on account of service charges is not to be made automatically. The Hon'ble Supreme Court has held that in all indirect taxes the burden is passed on to the end consumer and if any levy is imposed illegally then the refund can he claimed by the seller/supplier if the burden has not been passed on to the end consumer and onus of proof is on the seller/supplier. Production of Certificate in this behalf by the Chartered Accountant was not found sufficient by the Hon'ble Supreme Court in the case of Fecto Belarus referred to above. In the present case, sufficient opportunity was provided to the petitioner to establish by producing the documentary evidence that the burden of service charges were not passed on to the end consumer. However, the petitioner failed to do so and therefore, ,the order passed by the Additional Collector being inconsonance with the c law laid down by the Hon'ble Supreme Court in the case of Fecto Belarus, is not open to any exception. The order of Additional Collector is neither in excess of jurisdiction vested in him nor suffers from any illegality.

19. For the foregoing reasons, the petition is not maintainable in law and on facts which is hereby dismissed in limine along with listed application.

20. After hearing the learned Advocates for the parties on 12-10-2006, the petition was dismissed by a short order. These are the detailed reasons in support thereof.

H.B.T./P.31/K???????????????????????????????????????????????????????????????????????????????????? Petition dismissed.