FECTO BELARUS TRACTORS LIMITED through Chief Executive VS GOVERNMENT OF PAKISTAN through Ministry of Finance, Economic Affairs, 2009 PTD-ISLAMABAD 390 (2009)

(a) Mala fide---

----Mala fide cannot be attributed to a legislature.

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

----S.19(3) [as added by Customs (Amendment) Ordinance (XXXVI of 2002)]---Constitution of Pakistan (1973), Arts. 199 & 187(2)---Effect of Customs (Amendment) Ordinance, 2002 adding subsection (3) in S.19, Customs Act, 1969---Subsection (3) as added in S.19, Customs Act, 1969 by Customs (Amendment) Ordinance, 2002 has removed the defect and adequate provisions in the validating law for a valid imposition of tax have been made by the Amending Ordinance---Amending Ordinance was to take effect retrospectively and had not taken away vested rights.

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

----S.6(1-A) [as added by Sales Tax (Amendment) Ordinance, 2002]---Constitution of Pakistan 1973), Arts. 199 & 187(2)---Constitutional petition---Effect of Sales Tax (Amendment) Ordinance, 2002 adding subsection (1-A) in S.6, Sales Tax Act, 1990---Subsection (1-A) as added in S.6, Sales Tax Act, 1990 removed the defect and adequate provision in the validating law for a valid imposition of tax has been made by the Amending Ordinance---Amending Ordinance was to take effect retrospectively and had not taken away vested rights.

Muhammad Salman Aslam Butt and Muhammad Waqar Rana, for Petitioner.

Nasir Saeed Sheikh for Respondents Nos.3 and 4.

Date of hearing: 22nd December, 2008.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---This is a petition under Articles 187(2) and 199 of the Constitution of Islamic Republic of Pakistan for the enforcement of the judgment of the Honourable Supreme Court of Pakistan dated 19-2-2001 passed in Civil Review Petition No.80 of 1999.

2. Background of the litigation between the parties is that in, 1994, the Government of Pakistan launched the Awami Tractor Scheme under which tractors were to be imported into Pakistan for being supplied to the local farmers and a Notification was accordingly issued to the effect that import of tractors under the said scheme would be exempted from the payment of customs duty and sales tax etc., and initially the Agricultural Development Bank of Pakistan (ADBP) on behalf of the Government of Pakistan entered into agreements with the foreign tractor manufacturers including Minsk Tractor Worksfor the purchase of the tractors by directly opening letters of Credit imported 20,000 tractors and supplied the same amongst the local farmers on credit basis though the Government had received over 120,000 applications/bookings for the purchase of the said imported tractors.

3. After the completion of the first phase of the Awami Tractor Scheme, the Federal Government proposed a second phase in 1996. The petitioner which is a public limited company engaged in the manufacturing, assembling and sale of Belarus Model Tractors being one of the interested parties made proposals for the second phase of the Awami Tractor Scheme. On 16th of June, 1996 a meeting was held chaired by the Secretary, Ministry of Food, Agricultural and Livestock at Islamabad wherein the petitioner besides others also participated. Petitioner was intimated that the Government had approved the second phase of Awami Tractor Scheme which was to be processed on the terms and conditions noted below:--

(a) A base price of Rs.2,30,000 ex-Karachi was fixed for the petitioner. Different phase prices were fixed for different parties. The petitioner price was one of the lowest offered.

(b) If Letter of Credits were opened by 30th of June, 1996, sales tax at 18% would be exempted on the import of tractors, and

(c) All concessions provided under the first phase of the scheme would be available.

4. As stated above, the concession provided in the first phase of the scheme included complete exemption from the payment of customs duty and sales tax in terms of S.R.O. No.921(I)/94, dated 22-9-1994 and S.R.O. 1189(I)/94, dated 11-12-1994 which was modified by Ministry of Finance, Revenue and Economic Affairs, Pakistan vide Notification No.S.R.O. 388(I)/96 and S.R.O. 414(I)/96, dated 13th of June, 1996 imposing 10% customs duty and 18% sales tax on the import of tractor generally.

5. Pursuant to the decision taken in the meeting, dated 16th of June, 1996 (ibid) specifying the conditions for the import of tractors under the second phase, the petitioner was issued letter of authorization on 26th of June, 1996 by Ministry of Food Agricultural and Livestock, Pakistan and was permitted to import 11000 Belarus Tractors Model MTZ-50 providing expressly that all concessions provided under the first phase of the scheme would be available to the petitioner as well. The petitioner, however, was bound down to sell the tractors at the rate of Rs.2,30,000 and had to open the Letter of Credit before 30th of June, 1996.

6. Subsequently, on 27th of June, 1996, Ministry of Food, Agricultural and Livestock Pakistan issued a corrigendum directing that the authorization letter issued in favour of the petitioner qua the second phase of Awami Tractor Scheme was subject to amendment to the extent that the fixed price of the tractor would be enhanced in the event of any fluctuation in the exchange rate of US dollar over Rs.35.72. Furthermore, it was also clarified that price of Rs.2,30,000 as agreed upon by the petitioner was on the assumption that no sales tax had been imposed and that concession provided under S.R.O. No.921(I)/94, dated 22-9-1994 would continue in favour of the petitioner for the import of the said tractors.

7. With the averments that on the basis of the aforesaid letter of authorization grating concession for the import of these tractors in terms of Notification S.R.O. 921(I)/94 and S.R.O. 1189(I)/94 having the effect of grant of concession through statutory order on behalf of the Federal Government, it opened the Letter of Credits, entered into agreements for the import of tractors to Pakistan and spent huge amount of money, yet the Ministry of Finance Pakistan was bent upon to impose sales Tax @ 18% on the import of the said tractors, customs duty @ 10% and service charges @ 2% respectively, the petitioner invoked the constitutional jurisdiction of the High Court of Lahore through writ petitioner No.21972/96. The prayer in the writ petition was:--

"Respondents Nos. 1 and 2 may be restrained from attempting to withdraw or amend the concessions granted under the second phase of the Awami Tractor Scheme in so far as they relate to the import of 10,000 tractors by the petitioner as per authorization granted to the petitioner under S.R.O. No.921(I)/94. It is further prayed that respondents Nos. 1 and 2 may be directed not to impose any further customs duty, sales tax, regulatory duty, service charges and any other tax or duty on the 10,000 tractors being imported by the petitioner in the public interest.

Any other relief which this Honourable Court may find just and necessary may also be granted."

8. A learned Single Judge of the Lahore High Court disposed of the aforesaid writ petition as having become infructuous as the learned Deputy Attorney-General representing the Federation of Pakistan had apprised the Court that the matter in issue was examined by the Economic Coordination Committee and the attention of the Court was drawn to the approval granted by the competent Authority whereby certain adjustments had taken place for the Awami Tractor Scheme, therefore, it was left open for the petitioner to file fresh petition to cell in question the aforesaid adjustments.

9. The order of the learned Single Judge of the Lahore High Court, dated 24th of February, 1997 in Writ petition No.21972 of 1996 was assailed in an Intra-Court appeal, which was accepted by learned Judges of the Lahore High Court in terms of their order, dated 4-8-1997, whereby order of the learned Single Judge was set aside and it was declared that petitioner was entitled to avail all concessions as regards exemption from the payment of-the Customs Duty, Sales Tax, Service Charges and other taxes in the same manner and to the same extent which were made available under the original Awami Tractor Scheme qua the import of 10000 tractors by it under the authorization, dated 26-6-1996. As a consequence of the aforesaid direction, respondents No.1 and 2 (in the I.C.A.) were restrained from withdrawing of amending the same to the disadvantage of the petitioner.

10. The respondents called in question the aforesaid order of the learned Judges of the Lahore High Court and vide order, dated 9th of October, 1997 the Honourable Supreme Court granted leave to appeal against the aforesaid judgment of a Division Bench of the Lahore High Court passed in I.C.A. No.84 of 1997 to consider as to whether keeping in view inter alia the above Notifications, respondent No.1 viz. Fecto Belarus Tractors Limited is liable to pay any Customs Duty and Sales Tax.

11. Later the appeal was allowed by the Honourable Supreme Court of Pakistan vide judgment dated 1-9-1999.

12. The petitioner sought review of judgment dated 1-9-1999 through Civil Review Petition No.80/99. The Honourable Supreme Court allowed the Review Petition filed by the petitioner on 19-2-2001 and resorted the judgment of the Division Bench of the Lahore High Court dated 4-8-1997.

13. It is to be noted here that during pendency of the civil petition for leave to appeal, a request was made by the respondent that the operation of the judgment dated 4-8-1997 passed by the learned Division Bench of the Lahore High Court be suspended. The Supreme Court directed the petitioner to furnish Bank guarantee or the Bank guarantees of the scheduled Bank to the satisfaction of the Collector Customs concerned. The guarantees were furnished by the petitioner. On the acceptance of the appeal by the Honourable Supreme Court of Pakistan, the Bank guarantees were got encashed by the respondents. However, when the review petition was allowed by the Honourable Supreme Court the petitioner approached the Central Board of Revenue for refund of the , amount paid towards the customs duty as well as sales tax and service charges. The refund was not made to the petitioner. The petitioner, therefore, filed the Contempt Petition against the functionaries of the Central Board of Revenue. The Contempt petition was registered as Criminal Original No.15/02. The Honourable Supreme Court vide judgment dated 11-5-2005 dismissed the Contempt Application holding that no contempt is made out. The petitioner filed review of the judgment dated 11-5-2005. The Review Petition was dismissed by the Honourable Supreme Court vide judgment dated 4-6-2008.

14 In this background, the petitioner has approached this Court through the present Constitutional petition for enforcement of the judgment of the Honourable Supreme Court of Pakistan dated 19-2-2001 passed in Review Petition No.80/99.

15. In response to a notice issued by this Court, Mr. Nasir Saeed Sheikh, Advocate appeared on behalf of the respondents.

16. I have heard the learned counsel for the petitioner as well as Mr. Nasir Saeed Sheikh, Advocate and have gone through the record.

17. Mr. Nasir Saeed Sheikh Advocate raised a preliminary objection that this petition cannot proceed in view of the judgment of the Honourable Supreme Court passed in Criminal Original No.15/02. Learned counsel contends that in the said judgment, the Honourable Supreme Court not only held that no contempt is made out but it also declared that the petitioner is not entitled to refund of the customs duty and sales tax. Only service charges are refundable.

18. Contrarily, the submissions of the learned counsel for the petitioner are:--

(a) The judgment dated 11-5-2005 passed in Criminal Original No.15/02 only be considered to have held that no contempt of the Court is made out. Rest of the observations made in the judgment by the Honourable Supreme Court are reasons for reaching the conclusion. The judgment passed in Review Petition still hold the field and is to be enforced.

(b) The effect of the judgment passed in Criminal Original No.15/02 was diluted by judgment dated 4-6-2008 while disposing of Review Petition No.22/05.

(c) The judgment of the Honourable Supreme Court in Criminal Original No.15/02 is based on subsection (3) of section 19 of Customs Act added by the Customs (Amendment) Ordinance, 2002 and subsection (1-A) of section 6 of the Sales Tax Act, 1990 added by Sales Tax (Amendment) Ordinance, 2002. Both the Ordinance are ultra vires on the grounds:

(i) The above-mentioned amendment Ordinances have been promulgated mala-fidely.

(ii) Have been promulgated without the advise of the Cabinet.

(iii) It have taken away the vested rights.

19. In the judgment passed by the Honourable Supreme Court in Criminal Original No.15/02, it was not only held that the respondents in the contempt application have not committed any Contempt of Court but the question whether the petitioner is entitled to refund has also been examined. In paragraphs 64,65,67 and 68, it has been held by the Honourable Court.

"64. It is to be noted that the contents of the Ordinance No. XXV of 2002 are identical to that of Ordinance XXIV of 2002 reproduced herein above, except incorporation of the provisions of section 31-A(1) of the Customs Act 1969 with retrospective effect in the Sales Tax Act, 1990.

65. A careful perusal of the judgment, dated 19th February, 2001 indicates that petitioner got relief on the following basis:--

(1) Protection of Economic Reforms Act, 1992.

(2) Authorization letter, dated 26th June, 1996 issued by `MINFAL'.

(3) Promissory Estoppel against Federal Government as its Ministry of Food and Agriculture had issued authorization letter.

67. At this very juncture it is considered appropriate to dispose of contention of learned, counsel that authorization letter, dated 26th June, 1996 had been issued on the basis of decision of Cabinet, dated 24th June, 1996, therefore, it may be held that this letter was issued by the Federal Government but actually no notification in terms of section 19 of the Customs Act, 1969 and section 6 of the Sales Tax Act, 1990, has been issued. So far MINFAL is concerned it had no jurisdiction under the law to issue such notification. Therefore, argument raised by the learned counsel in this behalf has no substance.

68. The second reason for not granting relief to the petitioner is lack of publication of authorization letter, dated 26th June, 1996 in official Gazette as held in Province of East Pakistan v. Hassan, Askary (PLD 1971 SC 82) and Moosa and Co. v. Collector of Customs Karachi (PLD 1977 Karachi 710). Thus it can be conveniently held that authorization letter, dated 26th June, 1996 was not issued by the relevant executive authorities of the Federal Government in accordance with the provisions of Article 90 of the Constitution of Islamic Republic of Pakistan read with Rule 12 of the Rules of Business 1973, coupled with the reasons that authorization letter was not gazetted in order to make it public in light of the judgments noted hereinabove therefore, it could have not furnished basis of granting relief to the petitioner vide judgment dated 19th February, 2001. Besides it, learned counsel himself conceded that the petitioner is not claiming relief on the basis of promissory estoppal but in view of the judgment of this Court. Suffice it to observe, in this behalf that if the basis of the judgment i.e. authorization letter has been successfully removed, how can the petitioner be entitled to the relief on the basis thereof. So far as Protection of Economic Reforms Act, 1992 is concerned, it would not provide any relief to petitioner in the face of non obstante clause therein."

20. Learned counsel for the petitioner relying on the judgments of the Indian Supreme Court in cases reported as "Prithawi Nath Ram v. State of Jharkhand and others (AIR 2004 Supreme Court 4277)" and "State of Bihar and others v. Rajendra Singh and another (AIR 2004 Supreme Court 4419)" submits that the Court while dealing with the application for contempt of Court cannot traverse beyond the order and that it cannot test correctness of the order on the basis whereof the contempt application has been filed. He submits that in view of these judgments, the judgment passed in Criminal Original petition only be considered to have held that no contempt of the Court is made out. The arguments raised by the learned counsel might have required some consideration, had not the legislature intervened. After the announcement of the judgment in the review petition on 19-2-2001, through Customs (Amendment) Ordinance, 2002 promulgated on 7-6-2002, subsection (3) was added in section 19 of the Customs Act, 1969, which reads as under:--

"Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 (XII of 1992), and notwithstanding any decision or judgment, of any forum, authority or Court, no person shall, in the absence of a notification by the Federal Government published in the 'official gazette expressly granting and affirming exemption from customs duty, be entitled to or have any right to any such exemption from or refund of customs duty on the basis of the doctrine of. promissory estoppel or on account of any correspondence or admission or promise of commitment or concessionary order made or understanding given whether in writing or otherwise, by any Government department or authority."

21. This amendment was to take effect retrospectively as if subsection (3) has always been so added. Similarly, subsection (1-A) was added in section 6 of the Sales Tax Act, 1990 through Sales Tax (Amendment) Ordinance 2002-promulgated on 6th June, 2002. This amendment too was to take effect retrospectively as if subsection (1-A) has always been so added. Subsection (1-A) of section 6 reads as under: --

"Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 (XII of 1992), and notwithstanding any decision or judgment of any forum, authority or Court whether passed, before or after the promulgation of the Finance Act, 1998 (III of 1998), the provisions of section 31-A of the Customs Act, 1969 (IV of 1969), referred to in subsection (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled *to any exemption from or adjustment of or refund of tax on account of the absence of such a provision in this Act, or in consequence of any decision or judgment of any forum, authority or Court passed on that ground or on the basis of the doctrine of promissory estoppel or on account of any promise or commitment made or understanding given whether in writing or otherwise, by any government department or authority."

22. The Honourable Supreme Court considered the effect of the amendments mentioned above in the law and recorded a finding that the petitioner was liable to pay the sales tax and the customs duty.

23. The second arguments of the learned counsel for the petitioner that judgment dated 4-6-2008 passed in Criminal Review Petition No.22/05 has diluted the effect of the judgment passed in Criminal Original Petition No.15/02 has not impressed me.

24. Learned counsel for the petitioner then submitted that the Customs (Amendment) Ordinance, 2002 and Sales Tax (Amendment) Ordinance, 2002 are ultra vires. He submits that the above said amendment Ordinance have been promulgated mala fidely. According to the learned counsel, Mr. Mansoor Ahmad Khan, appeared as Deputy Attorney-General before the Supreme Court in the review petition and later he became the Secretary Law. According to the learned counsel, he was instrumental in promulgating the above mentioned two Ordinances. I am afraid this argument of the learned counsel is not worth consideration. Mala fide cannot be attributed to a legislature. He then urged that the two Amendment Ordinances were promulgated by the President without the advice of the Cabinet or the Prime Minister in terms of Articles 48 of the Constitution. However, learned counsel for the petitioner lost sight of the fact that at the relevant time, President was also Chief Executive. Even otherwise, Sub-Article (4) of the Article 48 of the Constitution provides complete answer to the contention raised by the learned counsel, which provides:--

"The question whether any, and if so what, advice was tendered to the President by the Cabinet, the Prime Minister, a Minister or Minister of State shall not be inquired into in, or by, any Court, Tribunal or other authority."

25. This third objection to the amending Ordinances that the Ordinances have taken away vested rights is equally untenable. In this respect, learned counsel for the petitioner relied on "Molasses Trading and Export (Pvt) Limited v. Federation of Pakistan and others (1993 SCMR 1905). At page 1920 of the report, the Honourable Supreme Court held as under:--

"Before considering this question it would be appropriate to make certain general observations with regard to the power of validation possessed by the legislature in the domain of taxing statutes. It has been held that when a legislature intends to validate a tax declared by a Court to be illegally collected under an invalid law, the cause for ineffectiveness or invalidity must be removed before the validation can be said to take place effectively. It will not be sufficient merely to pronounce in the statute by means of a non obstante clause that the decision of the Court shall not bind the authorities, because that will amount to reversing a judicial decision rendered in exercise of the judicial power which is not within the domain of the legislature. It is therefore necessary that the conditions on which the decision of the Court intended to be avoided is based, must be altered so fundamentally, that the decision would not any longer be applicable to the altered circumstances. One of the accepted modes of achieving this object by the legislature is to re-enact retrospectively a valid and legal taxing provision, and adopting the fiction to make the tax already collected to stand under the re-enacted law. The legislature can even give its own meaning and interpretation of the law under which the tax was collected and by "legislative fiat" make the new meaning binding upon Courts. It is in one of these ways that the legislature can neutralise the effect of the earlier decision of the Court. The legislature has within the bounds of the Constitutional limitations, the power to make such a law and give it retrospective effect so as to bind even past transactions. In ultimate analysis therefore the primary test of validating piece of legislation is whether the new provision removes the defect which the Court had found in the existing law and whether adequate provisions in the validating law for a valid imposition of tax were made."

26. Testing the provisions of the amendment Ordinances subject of discussion, it can be said with certainty that the new provisions removed the defect and adequate provision in the validating law for a valid imposition of tax has been made by the amending Ordinances.

27. In view of what has been said above, there is no force in the petition filed by the petitioner and the petition is dismissed with no order as to costs.

M.B.A./F-4/Isl.Petition dismissed.