INDUS MOTORS COMPANY LTD VS FEDERATION OF PAKISTAN, 2008 PTD-KARACHI-HIGH-COURT-SINDH 373 (2004)

Customs Act (IV of 1969)---

----Ss. 18 & 31-A---Sales Tax Act (VII of 1990), S. 6(1)(1-A)---S.R.O. 882(I)/92, dated 12-9-1992---Import of goods in terms of S.R.O. 882(I)/92, dated 12-9-1992 exempting same from payment of customs duty and sales tax leviable thereon---Arrival of imported goods in year, 1992 after insertion of S.31-A in Customs Act, 1969 in year, 1988---Effect---Doctrine of promissory estoppel stood effectively eclipsed after insertion of S.31-A in Customs Act, 1969---Benefit of exemption from customs duty, thus, could not be claimed---Importer could not claim---Importer could not claim benefit of exemption from sales tax on yardstick of "past and closed transaction" as there was nothing to show that bill of entry was filed prior to withdrawal of relevant exemption vide S.R.O. 882(I)/92, dated 12-9-1992.

Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917; Molasses Trading and Export v. Federation of Pakistan 1993 SCMR 1905 and M.Y. Electronics Industries v. Government of Pakistan 1998 SCMR 1404 ref.

I.H. Zaidi for Petitioner.

Nadeem Azhar, Deputy Attorney-General for Respondents.

Date of hearing: 18th August, 2004.

JUDGMENT

SABIHUDDIN AHMAD, J.---The petitioners have called in question concurrent orders passed by the respondents Nos. 1, 3 and 4 imposing Customs duty and Sales Tax by way of customs duty and Sales Tax short-levied on goods imported by the petitioner, by order of the respondent No.4 dated 2-3-1993 and the subsequent orders passed by the respondents Nos. 1 and 3 in the exercise of revisional and appellate jurisdiction respectively. The basic facts appears to be that the petitioner imported certain Toyota Hilux Double Cabin Pick-Ups pursuant to tender awarded by the respondent No.5 (Government of Punjab). The goods arrived in Karachi on 20-9-1992 and exemption from payment of customs duty was claimed on the basis of an exemption certificate from the respondent No.5, the operative part whereof read as follows:--

"It is certified that 22 Nos. Toyota Pick-Ups (Double Cabin) 4 x 2 being purchased by Home Department Govt. of the Punjab from Messrs Toyota Ravi Motors, Lahore through their Principal Messrs Indus Motor Company Limited Karachi against Contract No. P (HOME) POL-226/91-92(21), dated 21-5-1992 are exempted from the payment of whole of Customs duty and Sales Tax leviable thereon vide S.R.O. No.536(I)/84, dated 14-6-1984 issued by the Govt. of Pakistan Ministry of Finance and Economic Co-ordination, Islamabad."

2. It may be mentioned that the above quoted notification provided that vehicles imported for official use of the Government would be exempt from the whole of customs duty and sales tax leviable thereon. However, before the arrival of the goods the aforesaid notification was replaced by S.R.O. No. 882(I)/92, dated 12th September, 1992 whereby exemption to the extent of 10% customs duty was withdrawn and a further condition was imposed to the effect that the benefit of exemption will apply only if the goods were imported against foreign allocations of the concerned agency.

3. Somehow the above notification escaped the attention of Custom authorities and petitioners were allowed to be cleared without payment of custom duty or sales tax. However, subsequently it was found that the vehicles had not been imported against the foreign exchange allocation of the respondent No.5 and the exemption under the notification was not applicable. Accordingly they were required to make payment of the amount short levied through show-cause notice, dated 19-12-1992. The petitioners responded to the notice contesting its term but their plea were rejected by the respondent No.4 in the orders in-original, dated 2-3-1993. Their appeals and revisions against said orders were also dismissed by respondents Nos. 3 and 1 respectively and against the aforesaid orders they have approached this Court under Article 199 of the Constitution.

4. Mr. I.H. Zaidi, learned counsel for the petitioner raised the following contentions:---

(i) that the time of the conclusion of the contract between the petitioner and the respondent No.5 exemption from custom duties and sales tax in terms of the Notification, dated 14-6-1984 was operative and Notification, dated 12-9-1992 had not come into existence, therefore, the petitioner was entitled to the benefit of exemption in terms of the principle of liability laid down by the Honourable Supreme Court in Al-Samrez Enterprises v. Federation of Pakistan (1986 SCMR 1917);

(ii) in any event even if the exemption from custom duty had ceased to have effect after the insertion of section 31-A in the Custom Act in 1988, it continued to apply in respect of Sales Tax;

(iii) that the imported vehicles were the property of the respondent No.5 and the petitioner were acting merely as their agents. The property of respondent No.5 was exempt from all Federal levies under Article 165 of the Constitution;

(iv) that in any event even if the additional amount of custom duty or sales tax was payable, the burden was to pass upon the respondent No.5 in terms of section 64-A of the Sales of Goods Act and the respondents Nos.1 to 4 had no lawful authority to demand the same from the petitioner.

5. We have carefully considered each of the above contentions. In so far as exemption from the custom duty is concerned it might suffice to mention that with the insertion of section 31-A in the Customs Act in 1988 the doctrine of Promissory Estoppel relied upon in Al-Samrez case (1986 SCMR 1917), stood effectively eclipsed as recognized by the Honourable Supreme Court in, inter alia, Molasses Trading and Export v. Federation of Pakistan (1993 SCMR 1905). The insertion having been made long before the goods imported by the petitioner, no benefit of exemption from custom duty could be claimed.

6. With respect to sales tax, it needs to be noticed that in Al-Samrez case itself their Lordships drew a distinction between the concepts of liability and payability in fiscal statute and held that while liability under section 18 of the Customs Act would arise from the dates specified in section 30, an exemption under section 19 operated independently of section 30, and therefore, its benefits under the doctrine of promissory estoppel could also apply to binding contracts made on the strength of such exemption. In the Sales Tax Act the liability to pay (in case of a change of rate of Tax) appears to have been determined under section 5 (which seems to be similar to section 30 of the Customs Act in respect of the imported goods). Whereas section 6 states that such tax shall be charged and paid in the same manner and at the same time as if it were duty of customs payable under the Customs Act.

7. Indeed we are conscious of tire pronouncement of the Honourable Supreme Court in M.Y. Electronics Industries v. Government of Pakistan (1998 SCMR 1404), where their Lordships drew a distinction to the effect that whereas the withdrawal of exemption would also affect concluded contracts in view of section 31-A of the Customs Act, but the doctrine of Promissory Estoppel would operate upon exemption from payment of sales tax. It seems that pursuant to the aforesaid judgment the legislature clarified the legal position by inserting the words "including section 31-A before the word Customs Act" in section 6(1) of the Sales Tax Act through the Finance Act, 1998 and 5 subsequently incorporated section 6(1-A) stipulating that the aforesaid incorporation shall always be deemed to have been made and no person could claim any exemption, adjustment or refund in the absence of such provision or as a consequence of any judgment of a Court or authority or grounds of promissory estoppel.

8. In view of the above legal position it appears that the provision of section 31-A of the Customs Act, the incorporated section 6 of the Sales Tax Act for the purpose of payability of the tax are equally applicable to sales tax except to the extent that past and closed transactions could to be reopened. The petitioner could not even claim the benefit of the exemption on the yardstick of `past and closed transaction laid down by the Supreme Court in Molasses Trading Company v. Federation of Pakistan (1993 SCMR 1905) inasmuch as there is nothing to show that bills of entry, (the date of filing whereof, determines the liability rate of tax payable under sections (5 and 6) were filed prior to the withdrawal of certain exemption vide notification, dated 12-9-1992. The petitioner's contention with respect to the sales tax therefore, is also untenable.

9. As regards the plea that the imported goods in fact belonged to the respondent No.5 the petitioners were acting merely as their agents, we regret there is nothing on record to support this contention. The documents placed on record only show Toyota Ravi Motors stated to be the authorized dealers of the petitioner had entered into contract for sale 250 vehicles at an agreed price required to be supplied upto a particular date. In fulfillment of such contractual obligation the petitioner imported some vehicles from Japan against an import licence issued to them. The vehicles were apparently cleared through bill of entry filed by the petitioners in their own name. As such there is nothing to show that the petitioners were acting as agents of the respondent No.5 and section 3(3)(b) of the Sales Tax Act, mandates that the persons importing the goods shall be liable to pay Sales Tax irrespective of who the eventual consumer/beneficiary is.

10. Even otherwise the contention founded upon Article 165 of the Constitution is untenable. In the first place it is inconsistent with petitioner the reliance upon the Notification, dated 14-6-1984. Indeed if the property of a Provincial Government is immune from all taxes under an act of Parliament under the mandate of Constitution, the need for issuance of notification exemption could never arise. It is obvious that exemption through notification like those issued on 14-6-1984 and 12-9-1992 will only cover those cases where imports are made by third parties (like the petitioner) though, the ultimate user is the Government.

11. The last contention of learned counsel to the extent that the burden of tax ought to be borne by the respondent No.5 in view of section 64-A of the Sale of Goods Act, prima facie seems to carry some weight. Indeed the partial withdrawal of the exemption on 12-9-1992 added to the burden to the amount of tax to be paid and since the contract documents do not appear to contain any provision relating thereto to the petitioner could add the amounts to the sale price under section 64-A of the Sale of Goods Act. Nevertheless so far as the respondents Nos.1 to 4 are concerned they are only entitled to recover the tax from the petitioner under section 3(3) of the Sales Tax Act. The petitioner indeed might be entitled to sue the respondent No.5 for recovery of such amount. This however, could be done only through appropriate proceedings before a competent Court and even the territorial jurisdiction of this Court does not extend over the respondent No.5.

These are our reasons for dismissing these petitions vide short order, dated 18-8-2004.

S.A.K./I-27/KPetitions dismissed.