Messrs RIAZ BOTTLERS (PVT.) LTD., LAHORE VS FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 4 others, 2007 PTD-KARACHI-HIGH-COURT-SINDH 800 (2006)

Customs Act (IV of 1969)---

---Ss. 18, 18-A & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Assessment of imported machine and apparatus as one complete unit---Liability to pay customs duty--- Petitioner sought assessment of imported machines and apparatus as one composite unit under Heading 8422.3000 by describing those as "machinery for aerating beverages" liable to 5% customs duty---On disagreeing with petitioner's claim, petitioner sought their assessment under Heading 8438.8000 which was a residuary heading meant for "other machinery"---Customs Authorities having not agreed with that classification also, matter was referred to the concerned group of Customs Appraisement which came to the conclusion that imported machines and apparatus did not constitute a `single unit'--Validity---Commercial invoice relied upon by petitioner appeared to describe the machinery as a "complete continuous sugar dissolving system" and spoke nothing of the process of aerating beverages---Whenever a set of machines consisting of individual components was intended to constitute to a defined function under a heading, duty was to be charged at the rate prescribed for such defined function irrespective of separate rates of duties provided under distinct headings for each machine according to its individual function---When collective function of a set of machines was not clearly defined under any heading, then in terms of Note No.4 of Chapter XVI of Harmonized Customs Tariff and Trade Control, each machine of set, was to be assessed under the heading appropriate to its functions---As function of the entire set of machine working collectively was not clearly defined under any of the headings, each machine, had to be assessed under the heading, which was appropriate to its function---In absence of any reason to interfere with the classification placed by concerned Group of Customs Appraisement, constitutional petition was dismissed.

Ali Sibtain Fazli for Petitioner.

Haider Iqbal Wahniwal for Respondent No. 5.

Date of hearing: 23^rd November, 2006.

JUDGMENT

FAISAL ARAB, J.---The petitioner holds franchise from Pepsi Co. Inc. USA for producing and marketing its various brands of beverages in Pakistan. For its existing plant, the petitioner imported several machines and apparatus from Germany.

Initially the petitioner sought assessment of the imported machines and apparatus as one composite unit under Heading 8422.3000 by describing them as "machinery for aerating beverages" liable to 5% customs duty. When the Customs Authorities disagreed with the petitioner's claim that the imported machinery perform the function of aerating beverages, the petitioner sought their assessment under heading 8438.8000 which is a residuary heading meant for "Other machinery". The Customs Authorities did not agree with such classification either and referred the matter to the concerned group of Customs Appraisement. After physical examination of the machines, the group came to the conclusion that the imported machines and apparatus did not constitute a single unit but were meant to be added to petitioner's already existing plant. The Customs Authorities also found that the function of each machine or apparatus is identifiable with separate headings i.e. 8419.5000, 8419.8900, 8418.6900, 7309.0000 and 8479.8900 which are appropriate to their respective functions and liable to higher rates of customs duty. Aggrieved by classification of each machine and apparatus separately, the petitioner has invoked the jurisdiction of this Court.

Mr. Ali Sibtain Fazli, learned counsel for the petitioner argued that the imported machines and apparatus are part of "Complete Continuous Sugar Dissolving System" and relying upon Section Note No.4 of Chapter XVI of the Harmonized Customs Tariff and Trade Controls he submitted that the imported machines and apparatus ought to have been classified under the Heading 8422.3000 as they were meant for aerating beverages or in the alternative he submitted that the imported machines and apparatus in any case are classifiable under the Heading 8438.8000 which is residuary heading for all machines failing under the description of "other machinery".

Section Note No.4 of Chapter XVI of the Harmonized Customs Tariff and Trade Controls contemplates that where a machine or combination of machines consists of individual components intended to cotribute together a clearly defined function described under one of the headings of Chapter 84 or 85, then the entire set of imported machines is to be classified under the heading appropriate to that function. It would, therefore, mean that whenever a set of machines consisting of individual components is intended to contribute to a defined function under a heading, duty is to be charged at the rate prescribed for such defined function irrespective of separate rates of duties provided under distinct headings for each machine, according to its individual function.

The petitioner has defined the collective function of the imported machines under Heading 84.22. Examining Heading 84.22 it clearly appears that it refers to four types of machines, i.e. (i) Dish washing machine, (ii) Machinery for cleaning or drying bottles or other containers, (iii) Machinery for filling, closing, sealing or labelling bottles, or other containers, and (iv) Machinery for aerating beverages. Obviously, the machinery in question does not fall under any of the first three categories and what needs to be considered is whether the imported machinery could be classified as one for aerating beverages. The commercial invoice relied upon by the petitioner appears to describe the machinery as a "complete continuous sugar dissolving system" and speak nothing of the process of aerating beverages. As observed in the impugned notice by the concerned authorities, carbon dioxide is to be filled simultaneously with the liquid into bottles in order to aerate beverages. This particular process being absent, the imported machinery could not be said to be for aerating beverages.

The alternative argument of Mr. Ali Sibtain Fazli that as the imported machines are one composite unit meant to function as "One Complete Continuous Sugar Dissolving System" they are to be assessed under Heading 84.38 if not under 84.22 is also not tenable. When the collective function of a set of machines is not clearly defined under any heading then in terms of Section Note No.4 of Chapter XVI each machine of the set is to be assessed under the heading appropriate to its function. It is only when neither the function of a set of machines working collectively is clearly defined under any heading nor the individual function of each of such machines is clearly defined under a separate heading that a machine could be assessed under the residuary heading "Other machinery" i.e. Heading No.84.38 otherwise not.

In the present case Customs Authorities have identified individual functions of the imported machines and apparatus to fall under five different clearly defined headings i.e. Headings 8419.5000, 8419.8900, 8418.6900', 7309.0000 and 8479.8900. As function of the entire set of machine working collectively is not clearly defined under any of the headings, each machine has to he assessed under the heading, which is appropriate to its function.

In the circumstances we find no reason to interfere with the classification placed by the concerned group of Customs Appraisement. The petition is therefore dismissed.

H.B.T./R-2/KPetition dismissed.