HASHWANI HOTELS LIMITED VS GOVERNMENT OF PAKISTAN through Secretary Ministry of Finance and others, 2007 PTD-SUPREME-COURT 1473 (2007)

(On appeal from the judgment, dated 12-12-2003 passed by High Court of Sindh, Karachi in Constitutional Petition No.615 of 1996).

(a) Customs Act (IV of 1969)---

----Ss. 31-A, 79 & 104---Sales Tax Act (VII of 1990), Ss.5 & 6(1)---Rate of customs duty and sales tax, determination of---Date of filing of Bill of Entry (goods declaration), relevancy of---Provisions of S.31-A of Customs Act, 1969 and S.6(1) of Sales Tax Act, 1990 would govern only rate of duty and tax payable on a particular goods on the date of filing of Bill of Entry (goods declaration)---Provision of Customs Act, 1969 relating to calculation, payment and enforcement of sales tax would not apply in presence of similar provisions contained in S.5 of Sales Tax Act, 1990---Requirement of second proviso to S.5 of Sales Tax Act, 1990 would be attracted only when goods imported were liable to be charged to sales tax at the time of filing of Bill of Entry (goods declaration)---Principles.

(b) Sales Tax Act (VII of 1990)---

----S. 5---S.R.O.212(I)/91, dated 14-3-1991---Customs Act (IV of 1969), S.18---Motorboat, import of---Exemption notification, subsequent withdrawal of---Pre-condition for claiming exemption from payment of sales tax and customs .duty was obtaining of certificate from concerned authority prior to import of motorboat that same could not be manufactured locally---Failure of importer to provide such certificate before withdrawal of exemption notification---Validity---Duty of importer was to have complied with all conditions enumerated in such notification for availing its benefit---Importer for such failure had deprived itself of benefit of exemption notification, thus, could not claim exemption from payment of sales tax and concessional customs duty on motorboat---Principles.

(c) Taxation---

----Exemption---Grants or concessions in the nature of exemption from payment of duties/tax would be given a rigid interpretation against tax-payer and in favour of taxing power.

Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 and .Pakistan Machine Toll Factory (Pvt.) Ltd. v. Commissioner of Sales, Central Zone "B", Karachi 2006 SCMR 1577 rel.

(d) Constitution of Pakistan (1973)---

----Arts. 185(3) & 199---Impugned judgment silent regarding ground raised before Supreme Court and in constitutional petition before High Court---Presumption---Nothing on record to show that such ground was agitated before High Court---Held: presumption would be that such ground was not raised and agitated before High Court at the time of arguments---Supreme Court refused to allow to argue such ground.

Fakhruddin G. Ebrahim, Advocate Supreme Court and K.A. Wahab, Advocate-on-Record (absent) for Appellant.

Ms. Naheeda Mehboob Ellahi, D.A.-G., Malik Ittaat Hussain, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record, M.S. Khattak, Advocate-on-Record and Mumtaz Ahmed, Member Legal, C.B.R. for Respondents.

Date of hearing: 8th November, 2006.

JUDGMENT

SAIYED SAEED ASHHAD, J.--- This appeal by leave of the Court has been filed to challenge the judgment of Sindh High Court, Karachi dated 12-12-2003 whereby Constitutional Petition No.615 of 1996 has been dismissed.

2. The facts in brief are that the appellant a Public Limited Company engaged in the business of running residential hotels in the name and style of Marriot Hotel, imported a Motorboat as specialized equipment for water sport for tourism adventure in the year 1996 on which the appellant claimed concession in the customs duty and total exemption from payment of sales tax under Notification S.R.O.212(I)/9t, dated 14-3-1991 (hereinafter referred to as the "exemption notification"). The imported motorboat arrived in Pakistan on 15-2-1996 and on the same day Bill of Entry was filed. The appellant vide letter dated 12th November, 1995 along with its enclosures addressed to the Board of Investment, Government of Pakistan? (hereinafter referred to as the "BOI") had requested for grant of permission for import of water boat in pursuance of the exemption notification. The BOI vide their letter dated 19th March, 1996 advised the Ministry of Sports and Tourism that the motorboat of the specification imported by the appellant was not manufactured locally. The BOI has conveyed such advice on the presumption that their letter addressed to Karachi Shipyard and Engineering Works (KS&EW) was not replied to their inaction to respond to the letter was because the imported boat could not be manufactured locally. The BOI, therefore, requested the Tourism Division to consider the case of the appellant for exemption from payment of sales tax as was done in the case of Messrs PSL under the exemption notification. On receipt of this letter Ministry of Tourism vide their office memorandum dated 4-4-1996 addressed to the Collector of Custom, Customs House Karachi with copy to the appellant conveyed their no objection for exemption of sales tax under exemption notification on fulfilment of the following three conditions:--

"(1)????? The importer shall submit a request duly forwarded by the Tourism Divisions, Government of Pakistan to the Collector of Customs to the effect that the kitchen and other hotel equipment. (Kitchen equipment for restaurants) and specialized equipment for adventure tourism including equipment for mountaineering and water sports have been imported for use in the projects duly approved by the Tourism Division, Government of Pakistan and shall not be disposed of within a period of ten years of its import without prior permission of the Central Board of Revenue;

(ii)??????? the importer shall furnish to Collector of Customs an indemnity bond in the form set out below to the extent of customs duty and sales tax exempted under this Notification;

(iii)?????? the importer shall, within one year of the (date of filing of Bill of Entry for home-consumption relating to) the kitchen and other hotel equipment, (kitchen equipment for restaurants) and manufactured within the country, specialized equipment for adventure tourism, including equipment for mountaineering and water sports apply to the Collector of Customs for discharging the Indemnity bond. The application being supported with a certificate from Assistant Collector of 'Customs and Central Excise in whose jurisdiction the project is located, in the form set out below confirming that the kitchen and other hotel equipment, (kitchen equipment for restaurant) and specialized equipment for adventure tourism including equipment for mountaineering and water sports have been installed used at the approved projects of tourism for which these were imported; and;

(iv)?????? the importer shall maintain a proper account of articles goods imported for use by the tourists and get the same verified periodically from the Tourism Division. The Tourism Division will prescribe a register for the purpose, which shall be made available by the importer for audit purposes."

3. Before the matter could be finalized, Ministry of Finance, Government of Pakistan amended the exemption notification vide Notification S.R.O. 367(I)/91 (hereinafter referred to as the "amending notification" withdrawing exemption from payment of sales tax on the motorboat imported by the appellant and requiring payment thereof at the rate of 15%. It may also be pointed out that the Customs Department also rejected the declared value of the motorboat of US Dollars 200,274.83 and assessed the same at US Dollars 360,274.83 on the report of Societe Generale do Surveillance S.A. (SGS), respondent No.6 under the Inspection, Valuation and Assessment of Imported Goods Rules, 1994 (hereinafter referred to as the "Rules") which according to the appellant was not in accordance with law resulting in causing heavy monetary burden as instead of payment of Rs.2,853,670 towards customs duty it was required to pay a sum of Rs.5,026,780 and was also burdened illegally with payment of sale tax amounting to Rs.2,911,534. Therefore, the said order of the Collector of Customs (Appraisement) Customs House, Karachi respondent No.5 was assailed before the High Court of Sindh at Karachi by way of Constitutional Petition No.615 of 1996. The High Court dismissed the constitutional petition and upheld the impugned order of respondent No.5. Hence this appeal by leave of the Court.

4. We have heard the arguments of Mr. Fakhruddin G. Ebrahim, learned Advocate Supreme Court on behalf of the appellant and Ms. Naheeda Mehboob Ellahi, learned D.A.-G. along with Messrs Ittaat Hussain Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record and M.S. Khattak, Advocate-on-Record on behalf of the respondents.

5. Mr. Fakhruddin G. Ebrahim, Advocate Supreme Court vehemently assailed the judgment of the High Court on the following grounds:

(i)???????? that the High Court committed a grave illegality in applying the 2nd proviso to section 5 of the Sales Tax Act, 1990 and erred in holding that the appellant was required to pay sales tax within seven (7) days of the submission of Bill of Entry/goods declaration and in so holding completely lost sight of the fact hat in view of the provisions of exemption notification the appellant was not required to pay sales tax on the import of motorboat; and

(ii)??????? that the High Court also committed grave and serious illegality in holding that the delay in scrutiny and finalization of the claim for grant of exemption from payment of sales tax was due to the inaction or lethargy on the part of the appellant inasmuch as the appellant vide its letter dated 12th November, 1995 requested the relevant authorities for grant of permission/no objection to import motorboat under the exemption notification and such permission was granted by the concerned, authorities vide letter dated 19-3-1996 which was forwarded to the Customs Department vide letter, dated 4-4-1996.

6. Ms. Naheeda Mehboob Ellahi, learned D.A.-G. on the other hand supported the impugned judgment of Sindh High Court and submitted that in the facts and circumstances 15-2-1996 would not be considered to be the relevant date for determination of the rates of duty/sales tax inasmuch as appellant had failed to enclose necessary papers/documents to satisfy that all the necessary conditions and ingredients of the exemption notification on the basis of which it could claim exemption from payment of sales tax at the of filing of goods declaration and the same were complied with at a belated stage which resulted in finalization and processing of the case when the exemption notification had been withdrawn. She further submitted that the delay in finalization/proceedings of the case by the Customs Department was on account of the delay conduct of the appellant in complying the necessary condition and not on the part of the official respondents as such the appellant had to suffer for it. Her further submissions was that the Customs Department as well as the High Court had rightly concluded that as the case of the appellant had not been finalized, decided/ processed and was pending before the .Customs Authorities even after the withdrawal of the exemption from payment of sales tax as on 6-4-1996 when the exemption notification was withdrawn/modified by Notification No.S.R.O.367(I)/91 dated 6-4-1996 the petitioner had not obtained and submitted any material to establish that the motorboat imported could not be manufactured locally, therefore, the 2nd proviso to section 5 of the Sales Tax Act was attracted and the appellant was required to pay sales tax at the rate provided by the withdrawal/ amending notification.

7. We have considered the respective arguments advanced by the learned counsel for the parties and have perused the material on record as well as relevant provisions of the Customs Act and the Sales Tax Act, which are applicable to the facts and circumstances of the case.

8. From a bare perusal of the impugned judgment it is observed that the High Court rightly held that provisions of section 31-A of the Customs Act would be attracted and the date of filing of the Bill of Entry either under section 79 or section 104 of the Customs Act, as the case may be, would be the relevant date for the purpose of determining the rate of customs duty. The High Court was also justified in holding that the date of tiling of Bill of Entry would also be relevant for the purpose of determining the rate of sales tax in view of the provisions of section 6(1) of the Sales Tax Act, as substituted by Finance Act, 1996, which is in pari materia with section 31-A of the Customs Act. It is also to be noted that the High Court did not commit any error in holding that provisions of section 6(1) of the Sales Tax Act and section 31-A of the Customs Act would govern only the rate of sales tax which would be payable on a particular commodity and the provisions contained in the Customs Act relating to calculation, payment and enforcement of sales tax would be applicable only if no specific provisions were provided for calculation, payment and enforcement in the Sales Tax Act but as such provisions are contained in section 5 of the Sales tax Act, therefore, the provisions of the Customs Act relating to date, time and manner of payment would not be attracted. However, the High Court erred in holding that in view of the requirements of the 2nd proviso to section 5 of the Sales Tax Act the appellant was required to pay the sales tax within seven (7) days of the presentation of the Bill of Entry which was subsequently substituted by the words "goods declaration" under section 104 of the Customs Act by Finance Act, 1996. The requirement of the second proviso to section 5 of the Sales Tax Act, would be attracted only when the motorboat/goods imported was liable to be charged to sales tax at the time of filing of "goods declaration" which was not so in the present case.

9. One of the essential conditions for claiming exemption from payment of sales tax on the motorboat of the classification imported by the appellant was that it was not being manufactured locally. It was, thus, necessary for the appellant to have taken steps for obtaining information from the concerned authorities that the motorboat sought to be imported could not be manufactured locally and such certificate/information should have been obtained preferably prior to the import of the motorboat locally. However, such was not done. No doubt that before arrival of the boat in Pakistan the appellant had written to the authorities to confirm that the motorboat in question could not be manufactured locally but no such information/decision was obtained by them till the time of filing the Bill of Entry nor conveyed to the Customs Authority dealing with the question of allowing exemption till such time when the exemption notification remained in force. In view of their inability to produce information to the above effect before the Customs Authorities till 5-4-1996 which was the last date of the exemption notification, the appellant deprived itself of the benefit of the exemption notification and became liable to pay sales tax in pursuance of the withdrawal notification. At the same time 2nd proviso to section 5 of the Sales Tax Act got attracted requiring the appellant to pay the sales tax within seven days from the date of withdrawal of exemption at the rate mentioned therein.

10. Apart from the above shortcomings, the appellant would not be able to succeed on another ground. The claim of the appellant that the concerned authorities had certified that the boat in question could not be manufactured locally and had no objection for clearance of the boat in question in terms of the exemption notification. It is to be observed that the decision of the concerned authorities that the boat in question could not be manufactured locally was based on conjectures and presumption. KS&ES is the establishment which was to decide whether boat in question could be manufactured locally or not but according to the Tourism Department no reply was received from the KS&EW on which c they presumed that their refusal or failure to give reply was due to the fact that they (Messrs KS&EW) could not manufacture the specific motorboat locally. Such inference was based on conjecture and presumption which could not in any manner be said to be a valid and proper view/inference. It is, therefore, held that the appellant failed to establish that the boat in question could not be manufactured locally. It is also pertinent to note that subsequently KS&EW conveyed the information that the boat of the specification imported by the appellant could be manufactured locally as a result of which the appellant was not entitled to claim exemption from payment of sales tax and concessional customs duty on the motorboat.

11. It is settled law that grants or concessions in the nature of exemption from payment of duties/tax or to be given a rigid interpretation against the tax-payer and in favour of the taxing power as held by this Court in the cases of (i) Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs Circle Sheikhupura and another PLD 1988 SC 370 and (ii) Pakistan Machine Toll Factory (Pvt.) Ltd. v. Commissioner of Sales, Central Zone "B", Karachi 2006 SCMR 1577. It was thus, imperative for the appellant to have complied with all the conditions enumerated in the exemption notification for availing the benefit of exemption from payment of sales tax and payment of concessional customs duty.

12. With regard to the contention of rejection of declared value by the Customs Department without disclosing any material on the basis of which it could be said that the declared value of the motorboat was not the correct value or that it was undervalued and estimating the same at a much higher price had acted in disregard of the provisions of section 25 of the Customs Act, it is to be noted that though this ground was raised in the constitutional petition filed by the appellant before the High Court of Sindh but from a perusal of the judgment of the High Court it is found that it is absolutely silent with regard to this contention. There is nothing on the record, to indicate that this contention was agitated before the High Court during the arguments but not considered and ignored by the High Court. Absence of any discussion by the High Court relative to this contention/ground leads to a presumption that it was not raised and agitated at the time of arguments. In the circumstances, the same cannot be allowed to be argued at this stage.

13. For the foregoing facts, reasons and discussion, the High Court did not commit any illegality or irregularity in holding that the imported motorboat was not liable to exemption from payment of sales tax under the exemption notification. Accordingly, this appeal is found to be without merit and is dismissed. No order as to costs.

S.A.K./H-7/SC??????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.