AMTEX LIMITED VS CUSTOMS EXCISE AND SALES TAX APPELLATE TRIBUNAL, 2011 PTD-KARACHI-HIGH-COURT-SINDH 602 (2010)

Customs Act (IV of 1969)---

---Ss. 19, 30, 31-A & 196---Customs General Order 10 of 2003, dated 7-10-2003---Notification S.R.O. 554(I)/98, dated 12-6-1998---Locally manufactured goods' list---Exemption on import of machinery--Importer sought exemption of customs duty on import of gas generator sets as the generators were not included in list of locally manufactured go.:, is available at the time of import of goods--Validity---Customs, Excise and Sales Tax Appellate Tribunal neither considered effect of gas generators being included for first time in list of locally manufactured goods vide Customs General Order 10 of 2003, dated 7-10-2003, nor they considered effect as to whether applicable list of locally manufactured goods would be the one which was specified at the time of placing order and opening of letter of credit or whether it would be one specified at the time of arrival of consignment---If at the time of placing order and opening letter of credit, the item for which order was placed and letter of credit was opened was not mentioned in the list of locally manufactured goods prevalent at that time, then importer would acquire a vested right if he fulfilled other conditions specified in the S.R.O. granting exemption to be entitled to exemption and subsequent modification in Customs General Order, could not take away the vested right---Order passed by Customs, Excise and Sales Tax Appellate Tribunal could not be sustained and the same was set aside---Reference was disposed of accordingly.

Maple Leaf Cement Factory Limited v. Collector of Customs, Customs House, Faisalabad 2000 MLD 1989 fol.

Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 and Collector of Customs v. Ravi Spinning Mills 1999 SCMR 412 1999 PTD 1078 distinguished.

Pervez Iqbal Kansi, Jatoi for Applicant.

Shakeel Ahmed for Respondents Nos. 1 and 2.

Roshan Lal Haseja, Deputy Manager, and K.B. Ali, DGM (Tech and Tariff-II) Engineering Development Board, Karachi.

Muhammad Ilyas Ehsan Khan Appraising Officer.

ORDER

MUHAMMAD ATHER SAEED J.---This Special Custom Reference Application has been filed against the order of the Customs Excise and Sales Tax Appellate Tribunal Karachi Bench-I, Karachi dated 10-12-2009 in Customs Appeal No.K-204 of 2006 and the following questions said to be arising out of the impugned order have been proposed for the opinion of this Court:--

(I)Whether the Honourable Tribunal did not err by deciding the appeal without asking for any evidence of production of the subject generating set, as specifically directed by the Honourable High Court of Sindh in the applicant's case vide its order passed in C.P. No.D-357 of 2004 on 14-2-2006 and 20-3-2006?

(II)Whether the capability to manufacture would amount to the actual production of goods after the applicants placed orders for import of the subject generating set?

(III)Whether the Honourable Appellate Tribunal did not err by placing reliance on the CGO issued by the Federal Board of Revenue which was issued subsequent to the applicant's imports?

(IV)Whether reliance could be placed on the CGO of F.B.R. which did not contain the subject generating sets nor does it mention the name of its manufacturers?

(V)Whether the Honourable Appellate Tribunal did not err by not considering that Messrs Siemens Limited or any other manufacturer in Pakistan neither sold nor manufactured generating sets 625 KW capacity?

2. We have heard Mr. Pervez Iqbal Kansi, learned counsel for applicant and Mr. Shakil Ahmed, counsel for respondents Nos. 1 and 2.

3. Mr. Pervez Iqbal Kansi, has tried to satisfy us that he had made efforts to find out if the said goods could be locally manufactured and had decided to import the said goods after failing in such efforts and not receiving positive response from any manufacturer but unfortunately he has not been able to satisfy us on this point. He then argued that the Gas Generating Set of 625 KVA was mentioned in C.G.O. 10 dated 7-10-2003, for the first time and before that the Gas Generating Set did not find mention in the list of locally manufactured goods. He also submitted that there was no mention of any local manufacturers against the Gas Generating Set and it could not be assumed that the local manufacturers who have been listed as manufacturer of Diesel Generating Sets were also in fact manufacturing Gas Generating Sets. He submitted that he placed order for the manufacture and import of the subject generator on 24-6-2003 and opened the L/C on 15-7-2003, and the goods reached the port on 24-12-2003, when the C.G.O. 10 had already come into operation. He however submitted that at the time of placing of order and opening of L/C he acquired a vested right as at that time Gas Generators were not mentioned in the C.G.O. as locally manufactured goods. In support of his contention he relied on the judgment of a Single Judge of Lahore High Court in the case of Maple Leaf Cement Factory Limited v. Collector of Customs, Customs House, Faisalabad (2000 MLD 1989).

4. Mr. Shakil Ahmed, the learned counsel for the respondents Nos. 1 and 2 conceded under the instructions from the representatives of the Engineering Development Board that before CGO 10, dated 7-10-2003, Gas Generator Sets were not mentioned in the list of locally manufactured goods. He however read before us the provisions of sections 19, 30 and 31(A) to point out that the rate of duty which is applicable is the rate at the time when the. GD is filed for clearance. In support of his contention he relied upon two judgments of the Hon'ble Supreme Court in the case of Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 and Collector of Customs v. Ravi Spinning Mills 1999 SCMR 412 1999 PTD 1078.

5. We have examined the case in the light of the arguments of the learned counsel and have perused the relevant provisions of the Customs Act relied on by the learned counsel for the respondent, the Notification under which exemption had been claimed, CGO 10 of 2003 and the judgments relied on by the learned counsel.

6. A perusal of the relevant Notification i.e. S.R.0.554(I)/98 dated 12th June, 1998 under which exemption has been claimed by the present applicant, shows that the exemption was allowable on import of such machinery for which Letter of Credits are opened up to 12th June, 2004 and import. is made up to 30th June, 2005, from customs duty and sales tax chargeable thereon under the said Acts as are not manufactured locally, which is being imported for setting up a 'manufacturing unit or for the expansion, balancing, modernization and replacement of existing units in bond subject to conditions thereunder.

7. Vide clause 3 of the explanation to this Notification the expression "not manufactured locally" has been defined to mean the goods which are not included in the list of locally manufactured goods specified in the Customs General Order issued by the Central Board of Revenue.

8. In their comments the Engineering Development Board has submitted that gas generating sets have been included in the Customs General Order (CGO) 10 of 2003 dated 7th October, 2003 issued by Federal Board of Revenue and therefore their import did not qualify for exemption.

9. We have perused the provisions of C.G.O. 10 and have seen that in serial No.127, single phase diesel generating sets of output ranging from SKVA to 5000 KVA and three phase diesel generating sets of an output ranging from 5KVA to 1100 KVA falling under PCT Headings 8502.1190 and 8502.1310 respectively and gas generating sets of an output ranging from 100+H368 KVA to 1100 KVA falling under PCT Heading 8502.3900 and the name of four local manufacturers have been shown against those serials. The representative of the Engineering Development Board have admitted that gas generating sets were not mentioned in the earlier CGO listing the goods which are being locally manufactured and they have been included for the first time in the CGO 10 which was issued on 7th October, 2003. In the light of this admission/ concession the perusal of the relevant dates attains great importance. The admitted factual position is that order for manufacture for import of the subject generators were placed on 24-6-2003, the LC for import of the subject generators was opened on 15-7-2003 which dates as can be seen are before coming in force of the CGO 10 whereas goods reached the port on 24-12-2003 when C.G.O. 10 had come into the operation. It is now to be seen as to which is the relevant date for determining as to whether the subject goods were being manufactured locally. This aspect of the case has been considered by a learned Single Judge of the Lahore High Court in the case of Maple Leaf. Cement Factory Ltd. quoted supra. The learned High Court decided the issue as under: ---

"16. Be that as it may, the rights which vested in the petitioner on having entered into a firm contract with the foreign supplier could not be taken away by issuing a Notification or Customs General Order. The petitioner had entered into firm contract with the seller before C.G.O. No.17 of 1994 was issued and the vested rights which had accrued to the petitioner could not have been taken away by an executive fiat. It was so held by the Supreme Court of Pakistan in Al-Samrez Enterprises v. The Federation of Pakistan (1986 SCMR 1917), Messrs M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan and others (1998 SCMR 1404) and Collector of Customs and others v. Ravi Spinning Ltd. and others (1999 SCMR 412). It may be mentioned that the provisions of section 31-A have rightly not been relied upon by the learned counsel for the respondents as the dispute in the present case is not with respect to the withdrawal of exemption but only as to whether or not the goods were being locally manufactured."

10. Although the above case is not binding on us but we find ourselves in complete agreement with the observations of the learned Lahore High Court but before we finally decide the case it will be in the interest of justice to examine the arguments of the learned counsel for respondent. The learned counsel for respondent as mentioned above has read before us sections 19, 30 and 31A and on the basis of these provisions had argued that the rate of duty which has to be levied on the import, is the rate of duty prevailing at the time when the G.D. is tiled for clearance. Since the learned counsel has relied on these provisions therefore it will be relevant to reproduce the above sections of the Customs Act, 1969:--

Section 19. General power to exempt from customs-duties.---(1) The Federal Government subject to such conditions, limitations or restrictions, if any, as it thinks fit to impose, may, by notification in the official Gazette, exempt any goods imported into, or exported from, Pakistan or into or from any specified port or station or area therein, from the whole or any part of the customs- duties chargeable thereon and may remit fine, penalty, charge or any other amount recoverable under this Act.

(2) A notification issued under subsection (1) shall be effective from the day specified therein, notwithstanding the fact that the issue of the official Gazette in which such notification appears is published at any time after that day.

(3) Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms 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 or commitment or concessionary order made or understanding given whether in writing or otherwise, by any government department or authority.

Section 30

Date of determination of rate of import duty.---The rate of duty applicable to any imported goods shall be the rate of duty in force;

(a)in the case of goods cleared for home consumption under section 79, on the date on which a goods declaration is manifested under that section; and

(b)in the case of goods cleared from a warehouse under section 104, on the date on which a goods declaration for clearance of such goods is manifested under that section;

Provided that, where as goods declaration has been manifested in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purpose of this section shall be the date on which the manifest of the conveyance is delivered at the port of first entry.

Section 31-A. Effective rate of duty (1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30, 30A and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under sections 18, 18A and 18C. Omitted and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof. .

(2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign currency is to be converted into Pakistan currency shall be the rate of exchange in force on the date immediately preceding the relevant date referred to in section 30, 30A or 31.

11. A perusal of the above sections reveals that section 19 deals with the general power of the Federal Government to grant exemption from customs duty. According to the learned counsel subsection (2) provides that a notification issued under subsection (1) shall be effective from the day specified therein.

12. Referring to section 30 the learned counsel referred to Clause (a) which provides that the rate of duty applicable to any imported goods shall be the rate of duty in force on the date on which the goods declaration is manifested and the proviso specifies that whereas goods declaration has been manifested in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purposes of this section shall be the date on which the manifest of the conveyance is delivered.

13. So far as section 31-A is concerned the learned counsel submitted that the rate of duty which has to be paid under section 30 includes any amount of duty which may become payable in consequence of withdrawal of whole or any part of exemption or concession from duty whether before or after the conclusion of contract or agreement of sale of goods or opening of Letter of Credit in respect thereof.

14. As far section 19 is concerned we are of the view that said section does not have any nexus with the facts of the case and in fact may go against the respondent himself as in accordance with this section the provisions of C.G.O. 10 of 2003 will apply prospectively. There is no cavil to the arguments of the learned counsel concerning the provisions of sections 30 and 31-A but as rightly held by the learned Single Judge of the Lahore High Court these sections relate to effective rate of duty that includes the duties which may become payable in consequence of the withdrawal of whole or any part of the exemption or concession from duty and in this case the exemption or concession has not been withdrawn but a modification has been made in the list of locally manufactured goods. Therefore we are of the considered view that these sections will not damage the right of any of the petitioner to claim exemption.

15. We have also examined the two judgments relied on by the learned counsel for the respondent. In the case of Amjad Hussain Dilawari quoted supra the Honourable Supreme Court held that where a particular article was exempted from custom duty under section 19 which exemption was later on withdrawn the benefit of exemption was available only in respect of those goods which were imported between the date the exemption was granted and the date it was withdrawn, provided the Bit; of Entry had been filed with the Customs before the date the exemption was withdrawn. This case is distinguishable as in the present case the exemption was not withdrawn and only modification has been made at a date after execution of contract and opening of LCs.

16. In the case of Ravi Spinning Mills Ltd. quoted supra the Honourable Supreme Court has held as under:--

"If the goods were exempted wholly from payment of customs duty and surcharge on the date they entered the territorial waters of Pakistan, the withdrawal of exemption before the presentation of the bill of entry for home consumption, for warehousing the goods in a bonded warehouse, would not make such goods liable to customs duty or surcharge, is no more a good law after insertion of section 31-A, See section 19 of the Customs Act, 1969."

This case is also distinguishable as in the present case the exemption was not withdrawn.

17. A perusal of the impugned order of the Tribunal reveals that the Tribunal has neither considered the effect of gas generators being included for the first time in the list of locally manufactured goods vide C.G.O. 10 of 2003 dated 7th October, 2003 nor they had considered the effect as to whether the applicable list of locally manufactured goods will be the one which was specified at the time of placing the order and opening of the LC or whether it will be the 'one specified at the time of arrival of consignment. We are of the considered opinion that if at the time of placing the order and the opening of L.C. the item for which order was placed and L.C. opened was not mentioned in the list of locally manufactured goods prevalent at that time then the importer would acquire a vested right if he fulfilled the other conditions specified in S.R.O. granting exemption to be entitled. to exemption and the subsequent modification in the CGO cannot take away this vested right and this is what precisely has been held by the learned Lahore High Court in the case of Maple Leaf Cement Factory Ltd. quoted supra. Since we have already observed that we fully agree with the Lahore High Court we are of the view that the order of the Tribunal cannot be sustained.

18. The above are the reasons in support .of our short order announced in Court on 7-12-2010 after hearing the learned counsel by which we had reframed the question No.2 to read as under:

Whether the inclusion of local manufacturers in C.G.O. issued after the applicant had placed the order for import of goods and opened the L.C. thereof but before the arrival of goods at the port would be a bar for allowing the exemption under the subject notification.

and answered the above reframed question in negative in favour of the applicant and against the respondents.

19. This Special Customs Reference Application is disposed of in the above manner.

20. A copy of this order under the signature of the Registrar and seal of this Court be remitted to the Income Tax Appellate Tribunal to pass an order in conformity with this order.

M.H./A-139/KReference answered negative.