SALEEM RAZA VS FEDERATION OF PAKISTAN through Chairman, Federal Board of Revenue, Islamabad, 2012 PTD-KARACHI-HIGH-COURT-SINDH 302 (2010)

Customs Act (IV of 1969)---

----S. 79(1), proviso [as amended by Finance Act, 2010]---Constitution of Pakistan, Arts.25 & 199---Constitutional petition---Declaration and assessment for home consumption or ware-housing---Petitioner had impugned vires of the amended Proviso to S.79(1) of Customs Act, 1969, which existed in the Act before amendment/ substitution---Unamended Proviso had provided that if before filing a goods declaration, the owner would make a request to the officer of customs, not below the rank of Assistant Collector that he was unable for want of full information,tomakeacorrectandcompletedeclarationofthe goods, then such officer could permit the owner to examinethegoods; and thereafter make entry of goods for filing a goods declaration---Said proviso had been amended to restrict the option of applying for the first examination to importers of used goods only---Proviso had further provided that the discretion for allowing such action would be with the officer not below the rank of an Additional Collector---Main contention of the petitioner was that such restrictions had violated the provisions of equality as provided under Art.25 of the Constitution, as no rational basis had been given for differentiating between the importers of new goods and used goods---No basis for the amendment had been given, except that amendment was made to restrictthefacilitiesof filing the goods declaration afterexaminingthegoodsbytheimporteronlyincaseofused goods---Validity---Held,thatamendment,theviresofwhichhadbeenchallengedwasdiscretionarytotheextentthatithadrestrictedtheoptiontoapply forthefirstexaminationtotheimportersofusedgoodsonly and was not sustainable---High Court directed that words "in case ofusedgoods"appearinginthefirstlineofthesubstitutedprovisoto clause 'b' of S.79(1) of Customs Act, 1969, be deleted and that the deletion would be deemed to be always there---Order accordingly.

I.A. Sharwani and others v. Government of Pakistan 1991 SCMR 1041 rel.

Saleem Raza and 31 others v. The State PLD 2007 Kar. 139; Saleem Haji Rehmatullah Dada, Karachi v. Commissioner of Income-Tax Companies-V. Karachi 2003 PTD 593 and Akhtar Hussain through Attorney v. Collector of Customs (Appraisement), Customs House, Karachi and 3 others 2003 PTD 2090 ref.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 distinguished.

Junaid Ghaffar for Petitioner.

Zain A. Jatoi for Respondents Nos. 2 and 3.

Rizwan Ali Dodani Standing Counsel for the Federation of Pakistan.

Muhammad Ilyas Ehsan, Appraising Officer.

ORDER

MUHAMMAD ATHAR SAEED, J.---This petition has been filed impugning the vires of the amended proviso to section 79(1) of the Customs Act, 1969 which was substituted for the proviso which was existing in the Customs Act before the substitution. The proviso which existed in the Customs Act before substitution read as under:--

"79. Declaration and assessment for home consumption or warehousing.---(1) The owner of any imported goods shall make entry of such goods for home consumption or warehousing or for any other approved purposes, within fifteen days of the arrival of the goods, by,-

(a)filing a true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other document required for clearance of such goods in such form and manner as the Board may prescribe; and

(b)assessing and paying his liability of duty, taxes and other charges thereon, in case of a registered user of the Customs Computerized System:

Provided that if, before filing a goods declaration, the owner makes a request to an officer of customs not below the rank of an Assistant Collector that he is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods byfiling a goods declaration after having assessed and paid his liabilities of duties, taxes and other charges:

Provided further that no goods declaration shall be filed prior to ten days of the expected time of arrival of the vessel and the amended proviso reads as under:--

"(8)in section 79, in subsection (1), for the first proviso, the following shall be substituted, namely:--

"Provided that, if, in case of used goods, before filing of goods declaration, the owner makes a request to an officer of customs not below the rank of an additional Collector that he is unable, for want of full information, to make a correct and complete declaration of the goods, then such officer subject to such conditions as he may deem fit, may permit the owner to examine the goods and thereafter make entry of such goods by filing a goods declaration after having assessed and paid his liabilities of duties, taxes and other charges."

2.From a perusal and comparison of the two provisos it is seen that basically the proviso has been amended to restrict the option of applying for first examination to importers of used goods only and providing the discretion for allowing such action to an officer not below the rank of an Additional Collector whereas previously the Officer of the rank not below a Assistant Collector could have allowed such optionfor first examination. The Central Board of Revenue while giving budget instructions for the year 2010-2011 vide its Letter C.No.6(1)/2010-CB dated 5th June 2010 explained the said amendment in the following words:--

"(j) Proviso to subsection (1) of section 79 is amended in order to restrict the facility of filing of goods declaration after examining the goods by the importer only in case of used goods. Besides, the permission for filing of goods declaration after examination of goods can now only be granted by the Additional Collector."

3.We have heard Mr. Junaid Ghaffar the learned counsel for the petitioner and Mr. Rizwan Ahmed Dawodani the learned Standing Counsel and Mr. Zain A. Jatoi the learned counsel for respondents Nos.2 and 3 assisted by Mr. Ilyas Ahsan the representative of the Custom Department.

4.The main contention of the learned counsel for the petitioner is that by restricting the option toapplyforfirstexaminationofgoods,the legislature has violated the provisions of equality provided under Article 25 of the Constitution of Islamic Republic of Pakistan as no rational basis has been given for differentiating between the importers of new goods and used goods. He further submitted that this differentiation without any rational or logical basis a flagrant discrimination and on the basis of the judgments of the Superior Courts, this Court cannot allow such discrimination and has to declare the amendment as ultra vires the powers of the legislature readwith Article 25 of the Constitution of the Islamic Republic of Pakistan. He submitted that as an importer he is presently facing difficulty in filing a correct declaration because due to the lack of the complete information regarding theimported goods which may occur in certain cases, he is an aggrieved, person. He further submits that even otherwise the option which was provided by the proviso which has been substituted was not absolute but on the discretion of the customs authorities who could after examining the reasons given for exercise of such option decide whether to allow the first examination or not and therefore there is no basis for restricting the option to the import of used goods only. In support of his contention the learned counsel relied on the following judgments of the honourable Supreme Court and this Court:--

(1)I.A. SHARWANI AND OTHERS V. GOVERNMENT OF PAKISTAN (1991 SCMR 1041)

(2)SALEEM RAZA AND 31 OTHERS V. THE STATE (PLD 2007 KARACHI 139)

(3)SALEEM HAJI REHMATULLAH DADA, KARACHI V.COMMISSIONER OF INCOME-TAX COMPANIES-V. KARACHI (2003 PTD 593)

(4)AKHTAR HUSSAIN THROUGH ATTORNEY V. COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI AND 3 OTHERS (2003 PTD 2090)

5.Mr. Rizwan Ahmed Dawodani the learned standing counsel submitted that the powers of this Court to declare any law passed by the legislature, as ultra vires are very restrictive and such powers can only be exercised if there is no rational or logical reasoning for incorporation of such statute and the amended law has no nexus with the other provisions of theparent statute. Explaining the reason for such amendment being made he submitted that as far as used goods are concerned the used goods are usually purchased in lot or at auction and the chances that the importers of such goods does not possessesdetailed information about the composition, quality and the classification of such goods, exists. However, so far the new goods are concerned he was of the opinion that all the information about such goods are expected to be in the possession of the importer and the chances that he does not possesses such information are very remote and therefore to avoid the delay in clearance of the good which can result from such an application for exercise of option being moved by the importers of new goods, this restriction has been made and the amendment made accordingly. He therefore, submits that the amendment fulfils all the requirements of a valid amendment which the legislature is empowered to make and there is no discrimination as the category of used goods and new goods are different categories and the discrimination can only be made in respect of the same categories of persons or goods which are on equal footing before the law. He therefore prayed that the petitioner may be dismissed.

6.Mr. Zain A. Jatoi the learned counsel for the respondent opposed the petition not only on the legal claim but also on the factual claim as he was of the opinion that this petition has been filed with mala fide intentionas according to the documents filed with the petition certain classification of the goods has been made and certain quality of goods has been declared and he was of the opinion that now the petitioner has come before this court because of the apprehension that the custom authorities may have found that the goods have not been declared properly and he wants to avoid the stigma and the penalty of misdeclaratoin by resorting to the option of the first examination. So far as the legal plane is concerned he submitted that the honourable Supreme Court has held that the powers of the court to strike down financial legislation is very restrictive. In this connection he relied upon the judgment of the honourable Supreme Court in the case of Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan (PLD 1997 Supreme Court 582) wherein the honourable Supreme Court has held that the legislature enjoys widelatitude in the matter of selection of persons, subject matter, events, etc. for taxation. He therefore also prayed that this petition may be dismissed.

7.We have examined the case in the light of the arguments of the learned counsel and will deliver a detailed judgment on the point which is subject matter of controversy in this case. However, presently, we are disposing of this petition by a short order. While disposing of this petition by a short order we would like to examine the judgment of the honourable Supreme, Court in the case of I.A. Sharwani v. Government of Pakistan (quoted supra) specially sub-para (v) of para 26 of the judgment read with sub-paras (vi) and(vii) of the said judgment which read as under:--

"26 (v) that a law applying to one person or one class of persons may be constitutionally valid if there is sufficient basis or reason for it, but a classification which is arbitrary and is not founded on any rational basis is no classification as to warrant its exclusion from the mischief of Article 25;

(vi)that equal protection of law means that all persons equally placed be treated alike both in privileges conferred and liabilities imposed;

(vii)that in order to make a classification reasonable, it should be based-

(a)on an intelligible differentia which distinguishes persons or things that re grouped together from those who have been left out;

(b)that the differentia must have rational nexus to the object sought to be achieved by such classification.

8.From a perusal of sub-para (v) it is seen that that the honourable Supreme Court has deduced the principle that a law applying to one person or class of personscan be constitutionally valid only if there is sufficient basis or reason for it but classification which is arbitrary and not founded on any rational basis is no classification and sub-para (vii) provides that to make classification reasonable it should be based on intelligible differentia of persons or things that are grouped together from those who have been left out. When we examine the reasons given by Central Board of Revenue in the instructions in the Budget 2010-2011 we see that no basis whatsoever has been given for making this amendment except stating that the amendment has been made to restrict the facilities of filing the goods declaration after examining the goods by the importer only in case of used goods. Even the reason which has been given by the learned Standing Counsel has not been given by the Central Board of Revenue in these instructions. We are therefore of the considered opinion that the amendment made and the reason given do not fulfil the test laid down by the honourable Supreme Court in the case of I.A. Sharwani case (quoted supra) given in sub-para (v) to (vii) in paragraph 26 of that judgment reproduced above.

9.A perusal of the amendment made also reveals that not only this restriction has been made but the discretion of the custom authorities to allow or disallow the exercise of such action still exits and in fact it has been made more restrictive as now instead of an officer below the rank of Assistant Commissioner such option can only be allowed by an officer not below the rank of Additional Collector.

10.We have also reviewed the judgment relied on by Mr. Zain Jatoi the learned counsel for the respondent and sub-para (i), of para 31 which has been relied on by the learned counsel in which it has been held that legislature enjoy a wide latitude in the matter of selection of persons, subject-matter, events, etc. for taxation. However, in the same para it has also been held that despite all such latitude certain irreducible desiderata of equality shall govern classification for differential treatment in taxation laws as well.

11.Therefore by this short order we would hold that amendment, the vires of which has been challenged is discriminatory to the extent that it has restricted the option to apply for first examination to the importers of used goods only and cannot be sustained. We would therefore direct that words "in case of used goods" appearing in the first line of the substituted proviso to clause 'b' of section 79(1) be deleted and this deletion will be deemed to be always there.

12.The petition is disposed of in the above manner.

H.B.T./S-105/KOrder accordingly.