SAIFUDDIN VS FEDERATION OF PAKISTAN through Secretary Revenue Division, Ministry of Finance, Islamabad, 2011 PTD-KARACHI-HIGH-COURT-SINDH 2760 (2011)

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

---Ss. 18(2)(3), 31 & 131---Constitution of Pakistan Art. 199---Constitutional petition---Copper and aluminum scrap, export of--Imposition of regulatory duty on such goods after filing of amended declaration of goods---Demand of such duty by authority on ground of change in vessel for shipment of such goods in amended declaration--Validity---Section 31 of Customs Act, 1969 for purposes of determining rate of duty on goods exported had adopted only one element of S.131 thereof i.e. goods declaration, thus, all other remaining elements of S.131 would not apply to S. 31 thereof---Amended goods declaration not having any material change in goods was necessitated due to subsequent change in vessel on which such goods were to be exported---For purposes of S. 31 of Customs Act, 1969, except correct and complete particulars of goods to be exported, a substitution/amendment/revision of any other information in goods declaration would not be material and relevant---Good declaration had been filed prior to imposition of such duty, thus, petitioner was not liable to such duty---High Court quashed impugned demand in circumstances.

Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 ref.

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

----S. 18 [as substituted by Finance Act, 2005]---Regulatory duty on exported goods, imposition of---Conflict between provisions of S.18(2) & (3) of Customs Act, 1969---Effect;--Provision of S. 18(2) of Customs Act, 1969 for being primary legislation would have primacy over provision of S. 18(3) thereof for being subordinate legislation---Provision of S. 18(2) of Customs Act, 1969 would act as a limitation on power of Federal Government to impose such duty under S.18(3) thereof---If exporter altered his position to his detriment prior to imposition of such duty or filed goods declaration after imposition of such duty, then such duty could not be imposed on him---Principles.

(c) Interpretation of statutes---

----Fiscal statute---Liability of a. taxpayer to pay any tax must come with ambit of charging section clearly and unambiguously---When such liability was not so included and especially when same was omitted, then there could be no levy of and no liability to pay tax.

(d) Interpretation of statutes---

----Redundancy of a statutory provision---Not imputable to legislature---Principles.

Redundancy is not to be lightly imputed to the legislature. If at all a meaning can be reasonably assigned to a statutory provision that would otherwise be rendered purposeless, such meaning should be adopted.

(e) Interpretation of statutes---

----Statutory provisions should be harmoniously interpreted so that any conflict is minimized or eliminated.

(f) Estoppel---

----Promissory estoppel, doctrine of---Scope---Such doctrine is judicially evolved subject to its own limitation and exceptions i.e. there can be no estoppel against statue.

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

----Ss. 18, 31 & 131---Constitution of Pakistan, Art. 199---Constitutional petition---Copper and aluminum scrap, export of---Contract for supply of such goods concluded prior to imposition of regulatory duty thereon---Demand of regulatory duty by authority on basis of amended goods declaration filed due to change in vessel for its shipment---Validity---Petitioner's contract could not be made liable to such duty regardless of fact whether goods declaration was filed on or after date of imposition of such duty---High Court quashed impugned demand in circumstances.

Amer Raza Naqvi for Petitioner.

Haider Iqbal Wahniwal for Respondent.

Dates of hearing: 19th August, 2010 and 9th May, 2011.

ORDER

MUNIB AKHTAR, J.---This petition arises out of the Customs Act, 1969 ("the Act"), and challenges the imposition of regulatory duty on exports pursuant to section 18(3) of the Act. The relevant facts can be stated briefly. The petitioner, as seller, entered into a contract on or about 7-7-2009 with a British buyer to export copper scrap totaling 1500 Metric tons for a price of US$ 1500 per Metric ton. The petitioner also entered into another contract, of the same date and with the same buyer, to export 300 Metric tons of aluminum scrap for a price of US$ 650 per Metric ton. Copper scrap falls in PCT heading 74.04, while aluminum scrap comes under heading 76.02. At the time of the contracts, there was no regulatory duty on the export of either type of scrap. Each contract permitted shipment of the scrap from Pakistan in different consignments, with the condition that the final shipment had to be made by the last week of June, 2010. By means of a notification issued on 13-3-2010 under section 18(3) of the Act, regulatory duty was imposed on the export of both copper and aluminum scrap. The regulatory duty was to remain in force till 30-6-2010. The petitioner shipped his consignments during the period when, according to the Customs authorities, the regulatory duty was in force, and hence the Department claimed payment of the duty. The petitioner resists this claim, and has filed the present petition seeking appropriate declaratory and injunctive relief.

2. Learned counsel for the petitioner submitted that the shipments made by the petitioner fell into two categories. In the first category were those shipments in respect of which the goods declaration(s) had been filed before 13-3-2010, i.e., before the date on which the regulatory duty was imposed. The second category comprised of those shipments for which the goods declaration(s) had been filed on or after 13-3-2010. Learned counsel contended that no regulatory duty was payable in respect of either category. The shipments were made under concluded contracts entered into before the regulatory duty was imposed. He submitted that section 31 of the Act, which provides for the date of determination of duty on exported goods, referred only to the filing of the goods declaration and not to its processing or acceptance. He relied in part on the well-known principle laid down in Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917, to contend that once concluded contracts had been entered into, a subsequent imposition of regulatory duty could not interfere with the rights that had thereby been created. He submitted further that the petitioner could not conceivably recover the subsequently imposed regulatory duty from the foreign buyer. Learned counsel also filed a written synopsis of his submissions, and prayed that the petition be allowed.

3. Learned counsel for the Customs Department opposed the petition. He submitted that section 31-A of the Act, as interpreted and applied by the Supreme Court in a number of decisions to which he referred, had overturned the principle laid down in the Al-Samrez case, and therefore, the petitioner could not rely on the same. Learned counsel further submitted that even in respect of the goods declaration(s) filed on date(s) before the regulatory duty was imposed the petitioner had thereafter submitted revised/amended or substituted declarations, on which the goods were ultimately exported. Thus, the goods declarations as actually relevant were all filed after the imposition of the duty. Learned counsel submitted that section 31 expressly referred to section 131, and the combined effect of both the sections was to make the regulatory duty applicable in respect of all the shipments. He also submitted in this context that the scrap being exported was actually brought into the port area after the regulatory duty was imposed and thus, in terms of section 131, the duty was payable in respect of all the shipments. Learned counsel also filed written submissions, and prayed that the petition be dismissed.

4. Exercising his right of reply, learned counsel for the petitioner submitted that the amendments or revisions to the goods declaration(s) had been necessitated on account of the change in the vessel on which the scrap was to be exported. This was only a ministerial act, which made no substantive change in the goods declaration(s).

5. We have heard learned counsel for the parties, examined the record with their assistance, and considered the case law relied upon by them. The petitioner's case can be conveniently divided into the two categories suggested by learned counsel, i.e., those shipments where the goods declaration(s) were filed before the date of imposition of the regulatory duty (13-3-2010), and those shipments where the goods declaration(s) were filed on or after the said date. In our view, insofar as the first category is concerned, it presents no special problems, and simply requires a straightforward application oft section 31. This provides in material part as follows:.--

31. Date for determination of rate of duty on goods exported.---The rate and amount of duty applicable to any goods exported shall be the rate and amount chargeable at the time of the delivery of the goods declaration under section 131:.

Reference must also be made to section 131, on which learned counsel for the Department strongly relied. Only subsection (1) is relevant for present purposes, and is follows:--

131. Clearance for exportation.---(1) No goods shall be loaded for exportation until-

(a) the owner any goods to be exported has made a declaration in such form and manner as prescribed by the Board, by filing a goods declaration to Customs containing correct and complete particulars of his goods, and assessed and paid his liability of duty, taxes and other charges, if any;

(b) the claim of duty drawback, if any, has been calculated and reflected in the declaration filed for export through Customs Computerized System;

(c) Customs has, on the receipt of goods declaration under clause (a), satisfied itself regarding the correctness of the particulars of export, including declaration, assessment, and payment of duty, taxes and- qther charges and verified the admissibility of the duty drawback claimed as specified in clause (b); and

(d) the appropriate officer has permitted passenger's baggage or mail bags, to be exported notwithstanding clauses (a)., (b) and (c).

It will be seen that section 31 only refers to the "delivery' of the goods declaration, whereas, section 131 deals with "clearance for exportation" of the goods. As is clear from a bare perusal of section 131(1), the delivery of a goods declaration is one of the elements or steps that lead to clearance being given for the export of goods. However, it is not the only such element. Section 31 has, in effect, taken one of the elements of section 131, namely the goods declaration, and declared that the date on which it is delivered is determinative of the rate and amount of duty. But simply because one of the elements of section 131 has been so adopted, does not mean that the entire section, inclusive of all of its other elements or steps, must also apply to section 31. In our view, learned counsel for the Department has conflated the two provisions, simply on the basis that the one refers to the other. However, this is not, with respect, a proper interpretation and application of either section. It is only the goods declaration, and the date on which it is delivered, that are relevant for section 31.

6. Insofar as the amendment or revision to or of the goods declaration, or the filing of a substituted declaration, is concerned, we note that the explanation given by learned counsel for the petitioner has not, as such, been challenged by the Customs Department. The change was apparently necessitated because the vessel on which the scrap was to be exported was subsequently changed. We accept that this was merely a ministerial act, which brought about no substantive change in the, goods declaration. In our view, unless the goods declaration is so altered/amended or substituted that it must be regarded as materially or substantively a different goods declaration altogether, any change or amendment ought not to be regarded as relevant for purposes of section 31. This approach is in fact, also borne out by the language of clause (a) of section 131(1), which speaks of the exporter "filing a goods declaration to Customs containing correct and complete particulars of his goods". No doubt these words are preceded by language that provides that "the declaration [shall be] in such form and manner as prescribed by the Board". However, in our view, it is clear that while the Board may prescribe for such information to be given in the declaration as it deems appropriate (while remaining of course, within the four corners of the statute), what is of the essence is that the "particulars" of the goods must be "correct and complete". If these are correct, and continue to remain the same (and there is no challenge to the petitioner's case on this point by the Department), then a substitution, amendment or revision in respect of any other information to be contained in the declaration is not material for purposes of section 31.

7. It follows from the foregoing that, in our view, the first category of shipments, i.e., those in which the goods declarations were filed prior to 13-3-2010 were not liable to the imposition of regulatory duty, and the petitioner is entitled to appropriate declaratory and injunctive relief in this regard. We turn now to consider the second category of cases, i.e., those in respect of which the goods declarations were filed on or after 13-3-2010.

8. As noted above, learned counsel for the petitioner relied on the Al-Samrez principle to contend that the petitioner was entitled to relief even in respect of the second category, and learned counsel for the Department countered by relying on section 31A of the Act. In our view, the Al-Samrez principle has no application to the facts and circumstances of the present case. That principle would apply in a case where there was' a liability to pay duty but for an exemption from such duty also being in the field. If the taxpayer, relying on such exemption, changed or altered his position (by, e.g., entering into a contract) then the subsequent withdrawal of the exemption could not affect him; he would be regarded as continuing to remain entitled to the exemption. The present case is of course, the converse situation at the time that the petitioner altered his position by entering into the two contracts, there was no regulatory duty. That only came later. This situation is therefore not that which was envisaged in the Al-Samrez case. It also follows that section 31A, which was incorporated into the Act only to overturn the Al-Samrez principle, also has no application to the facts and circumstances of the present case. It is therefore not necessary to consider in detail the case-law relied on by either of the learned counsel in this context.

9. If the matter were simply limited to an application of section 31 of the Act, the only conclusion possible would be that regulatory duty is payable in respect of the second category. However, there is another aspect to the matter, which must also be considered. This is section 18 itself, which is of course the charging section of the Act. For present purposes, it is pertinent to note that section 18 was substituted in its entirety in 2005. To the extent presently relevant, the section as it stood prior to, and after, its substitution, was as follows:--

10. When section 18, as it stood prior to the Finance Act, 2005 is considered, it will be seen that customs duty was imposed on imported goods, as specified and included in the First Schedule, and also on exported goods, as specified and included in the Second Schedule. Subsection (2) allowed the Federal Government to impose a regulatory duty on either the import or export (or' both) of any of the goods specified in the First Schedule. The substituted section 18 was, and is, materially different. All references to exported goods have been removed from subsection (1). Customs duty can now only be levied on imported goods, as specified and included in the First Schedule. Subsection (3) allows the Federal Government to impose regulatory duty on either the export or import (or both) of any of the goods specified in the First Schedule. Thus, this subsection is identical, in all material respects, to the previous subsection (2). But what is completely new in the substituted section is what is now subsection (2). This expressly and categorically declares: "No export duty shall be levied on the goods exported from Pakistan". It is the proper meaning, scope and application of this subsection that requires attention.

11. On one view of the matter, the new subsection (2) may simply be regarded as otiose. The reason is that, on one possible reading, it appears to serve no purpose. This is so because once references to exports had been removed from subsection (1), it automatically and necessarily followed that no customs' duty was leviable in respect of exported goods. It is fundamental to the interpretation of fiscal statutes that a matter must clearly and unambiguously come within the charging section for there to be any liability to pay the tax. If the matter is not so included, and especially when it has been omitted, then there can be no levy of, and hence no liability to pay, the tax. There was thus no need, as such, for the new subsection (2). But of course, it is also well established that redundancy is not to be lightly imputed to the legislature. If at all a meaning can be reasonably assigned to a statutory provision that would otherwise be rendered purposeless, such meaning should be adopted. On another view of the matter on the other hand, the new subsection (2) appears to create an anomaly or inconsistency. The reason is that notwithstanding the resounding declaration made in it, that no export duty shall be levied on exported goods, the next following subsection immediately confers a power on the Federal Government to impose precisely such a duty, namely, the regulatory duty on exported goods. There is, on this reading, an apparent conflict between the two subsections of section 18. However, it is also a well-established principle of interpretation that statutory provisions, especially those contained in the same section of the same Act, should be harmoniously interpreted so that any conflict is minimized or eliminated. The puzzle is how to interpret and 'apply the new subsection. (2) so that the foregoing issues are resolved.

12. In our view, the correct interpretation of the new subsection (2) is that it acts as a limitation or fetter on the power of the Federal Government to impose regulatory duty on exported goods. This interpretation avoids the pitfalls of interpreting subsection (2) literally, which would bring it in conflict with the power conferred-by sub-section (3), and interpreting the latter subsection literally, which would make subsection (2) redundant. It is to be noted that the only duty now imposed on exported goods under the Act is the regulatory duty in terms of subsection (3). Thus, there is, and must be, a nexus between what subsection (2) declares, and what subsection (3) permits or enables. Furthermore, it is also to be kept in mind that subsection (2) is part of the statute itself, i.e., is primary legislation, whereas the power conferred by subsection (3) is secondary or subordinate legislation. It is well established that primary legislation has primacy over subordinate legislation (as is indeed, obvious from the very terminology used to describe these two types of legislation). In our view, when the proper scope of a provision conferring a statutory power is to be interpreted in a manner that harmonizes it with another statutory provision, it is the former that must be regarded as giving way to the latter. The exercise of the statutory power, must be regarded as being controlled by the other provision, at least to the extent that ensures that the other provision is not deprived of all meaning and reduced to a mere redundancy it is for these reasons why, in our view, the proper interpretation of subsection (2) is that which is stated in the first sentence of this paragraph.

13. In what sense, then, does subsection (2) act as a limitation or fetter on the power of the Federal Government to impose a regulatory duty on exported goods under subsection (3)? In our view, one reasonable answer to this question can be that if the exporter (or, the putative exporter) has altered his position, vis-a-vis the goods to be exported, to his detriment prior to the imposition of the regulatory duty, then such imposition cannot affect his position. In other words, the regulatory duty cannot be imposed on him, and this would be so even if the relevant goods declaration is delivered after the imposition of the regulatory duty. It will be noted that this conclusion appears to be similar to the result that would be obtained from an application of the principle of promissory estoppel, which were also relied on by learned counsel for the petitioner. However, such similarity is more apparent than real. The principle of promissory estoppel is a judicially evolved doctrine, subject to its own limitations and exceptions, not the least of which is that there can be no estoppel against the statute. The conclusion that we have 'reached in the present .case, on the other hand, results directly, and only, from a proper interpretation and interplay of the relevant statutory provisions, i.e., the various subsections of the charging section itself.

14. In the present 'case of course, the petitioner had entered into the contracts before the imposition of the regulatory duty, rind thereby altered his position to his detriment in respect of the goods to be exported. On the proper interpretation and application of subsections (2) and (3), the export of goods under the petitioner's contracts could not be made liable to regulatory duty, and this would be so regardless of whether the goods declaration(s) were delivered on or after the date of the imposition of the duty. It follows that even in respect of the second category of shipments the petitioner is entitled to appropriate declaratory end injunctive relief.

15. In view of the foregoing, we would allow this petition, and declare that the goods shipped by the petitioner under the two contracts identified above are not liable to the payment of the impugned regulatory duty. Any such demand is quashed and all proceedings in relation thereto set aside. Any payment made by the petitioner on account of such duty must be refunded forthwith and/or any security given for the same stands discharged. There will however, be no order as to costs.

S.A.K./S-87/K??????????????????????????????????????????????? ??????????????????????????????????????????????? Petition accepted.