COLLECTOR OF CUSTOMS VS WATER AND POWER DEVELOPMENT AUTHORITY (WAPDA), 2014 PTD-KARACHI-HIGH-COURT-SINDH 535 (2013)

Customs Act (IV of 1969)---

----Ss.33 & 196---Notification S.R.O. 462(I)/1995, dated 4-6-1995---Refund---Customs Reference---Customs Authorities assailed order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereby appeal filed by importer was allowed---Validity---Provisions of S. 33 of Customs Act, 1969, were only applicable when duty and charges were paid through inadvertence, error or misconstruction---Importer claimed exemption from duty and taxes at the very outset at the time of filing of goods declaration and the same was denied by authorities, thus no inadvertence, error or misconstruction was involved---Owing to persistent efforts on the part of importer, certain refund claims were settled in its favour, which also included three time barred claims---Case of authorities was not governed by the provisions of S. 33 of Customs Act, 1969, as neither there was any inadvertence nor error or misconstruction on the part of importer in claiming refunds from authorities---Importer had claimed exemption under S.R.O. 462(I)/ 1995, dated 4-6-1995, from the day one and the same had been denied by authorities but subsequently it was granted by sanctioning 12 claims including 3 time barred claims vide letter dated 12-11-1998---Question ofgrantofexemptiononmeritsofthecasewasneverindispute,once Central Board of Revenue had categorically decided issue in favour of importer---Reference was dismissed in circumstances.

Pakistan Telecommunications Corporation v. Federation of Pakistan 2011 PTD 2175; Ghulam Abbas v. C.B.R. 1994 CLC 1612; Messrs Century Insurance Co. v. CBR and others 1993 SCMR 1232 and Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 1998 SC 64 ref.

Muhammad Sarfaraz Ali Metlo for Applicant.

Badar Alam for Respondent.

Date of hearing: 21st November, 2013.

JUDGMENT

MUHAMMAD JUNAID GHAFFAR, J.---The instant Special Customs Reference Application ("SCRA") has been filed under section 196 of the Customs Act, 1969 ("the Act") against the Order dated 17-2-2010, passed by the Customs, Excise and Sales Tax Appellate Tribunal,Bench-I,Karachi("theTribunal")inCustomAppealNo. K-10/ 2006..

2.The applicant has proposed the following questions of law purportedly arising out of the Order of the Tribunal:--

(A)Whether on the facts and circumstances of the case, the learned Tribunal has misinterpreted the conditionally exempted Notification No. S.R.O.462(I)/1995 dated 4-6-1995 for extending the benefit at belated stage to grant the refund?

(B)Whether on the facts and circumstances of the case, the learned Tribunal erred in law by failing to appreciate the overriding effect of the statutory provisions of Customs Act, 1969 for the purposes of levying custom duty and taxes on import of goods particularly referring to section 18 with 1st schedule to the Customs Act, 1969?

(C)Whether on facts and circumstances of the case, the learned Tribunal erred in law to grant exemption at belated stage and such exemption was not claimed under the statutory provisions, which grant exemption only the plant and machinery not manufactured locally?

(D)Whether on the facts and circumstances of the case, the learned Tribunal erred in law that out of charge goods can be granted exemption at belated stage to not applied the statutory provision of section 29 of the Customs Act, 1969?

(E)Whether on the facts and circumstances of the case, the learned Tribunal granted refund which was claimed after 4 years after release of the goods and hopelessly barred under provision of the special statute and also fall under laches?

3.Briefly the facts as per the statement of the case are that the respondent had imported various consignments for their Hub Jamshoro TransmissionLineprojectduringtheperiodbetween23-7-1995to13-12-1995. At the time of import, the respondent apparently had claimed exemption from customs duty and sales tax under S.R.O. 462(I)/1995 dated 4-6-1995. However, such claim of exemptions was not granted and the respondent had to pay duty and taxes at the statutory rates.Subsequently, the respondent had filed refund claims in respectof 12 consignments on or about 5-9-1996 out of the total of 27 consignments. The applicants vide their letter dated 12-11-1998 confirmed to the respondents that out of these 12 claims 9 have been sanctioned and have been adjusted against the arrears pending as on June, 1998, whereas 3 other time barred claims were also sanctioned in September, 1998 after submission of clarification by the respondents.It is further stated that the remaining 15 claims which were filed on or about 18-5-1999 were rejected on the basis of a letter dated 25-10-2000 addressed by the then Central Board of Revenue (now "FBR") to the applicant as the said claims were time barred and the condonation of the same was regretted. The applicants had rejected such claims through an Order-in-Original No.10 of 2005 dated 19-11-2005, against which the respondent had filed an appeal under section 194-A of the Act before the Tribunal, which has been allowed by the Tribunal vide the impugned order.

4.Mr. Sarfaraz Ahmed Metlo, learned counsel for the applicant contended that the said refund claims were hopelessly time barred and as such in view of the provisions of section 33 of the Act were rightly rejected through a proper and reasoned order-in-original. It was further contended that all duties and taxes were initially paid by the respondents without any reservation and infacttheinstallationcertificatedated21-12-1999 was issued to the respondents after four years. Per learned counsel, the respondents had failed to fulfil the requisite conditions for grant of such exemption at the time of importation of the consignments; therefore, the respondent was not entitled for refund of the duties and taxes at such a belated stage. Learned counsel relied upon the case reported as 2011 PTD 2175 (Pakistan Telecommunications Corporation v. Federation of Pakistan).In view of these submissions, learned counsel prayed that the questions proposed in the instant SCRA be answered in favour of the applicant and consequently the order passed by the Tribunal be set aside.

5.Conversely, Mr. Badar Alam, learned counsel appearing on behalf of the respondent contended that the applicant had itself condoned the limitation in 3 out of first 12 claims filed by the respondent and as such there was no justification for the applicant to reject the subsequent claims on the issue of limitation as it already stood resolved in favour of the respondent.Learned counsel further contended that the matter was even referred to the Alternate Dispute Resolution Committee ("ADRC") and the committee, vide its recommendations dated 18-6-2007 had also decided the issue in favour of the respondent.Learned counsel also contended that the respondent had, at the very first instance, at the time of filing of Goods Declaration ("GD") had claimed exemption of duty and taxes under the S.R.O., which was declined by the applicant on the ground that the certificate, which was required to be issued by the Board of Investment (BOI) was not produced.Learned counsel further contended that in so far as the objection regarding fulfillment of certain conditions of the S.R.O. is concerned, the respondent had subsequently fulfilled all such conditions and if the exemption would not have been refused at the time of import, the respondent could have fulfilled them at the relevant time. Per learned counsel, the applicant was estopped by its own conduct as the first 12 claims were granted by the applicant without raising any objection as to the fulfillment of conditions at a belated stage. It was further contended that the instant SCRA is not maintainable as no supporting affidavit has been filed and even otherwise the proposed questions of law do not arise out of the Order of the Tribunal. The learned counsel relied upon 1994 CLC 1612 (Ghulam Abbas v. C.Board of Revenue).

6.We have heard both the learned counsel and have perused the record with their assistance.By consent of both the learned counsel the matter is being decided at Katcha Peshi stage for final disposal.It appears that the respondent had imported various consignments for Hub-Jamshoro 2 x 500 KV Transmission Line and had claimed exemption of duty and sales tax under the S.R.O. The applicant had refused to grant exemption from duty and taxes under the S.R.O. at the time of import, as is evident from the perusal of copies of GD. The case of the applicant is that such refusal was due to the fact that the respondent was unable to fulfil certain conditions of the S.R.O. at the time of import of the consignments. However, admittedly thereafter the certificate issued by BOI confirmed that the goods imported by the respondent were not being manufactured locally. It is also pertinent to note that the Assistant Collector, Customs and Excise Division-II, Hyderabad at Kotri vide its certificate of Installation No. 111 dated 21-12-1999 confirmed that the imported material covered vide 15 GD's have been duly installedat 2 x 500 KV Hub-Jamshoro Transmission Line project. It is also an admitted position that thereafter when the respondent was in possession of the said certificate and other relevant documents, proper refund claims for 27 consignments cleared by them were filed in two parts and out of these 27 claims 12 claims were settled in their favour, which also included 3 claims which were time barred.It appears that pending finalization of the refund claims of the first part i.e. the 12 claims, the matter was referred to CBR and vide letter dated 12-12-1995 it was clarified by CBR that the items specified therein were integral parts of the transmission line and the same stands covered under Para (b) of the Explanation given in S.R.O. 462(I)/1995 dated 4-6-1995 as it covered apparatus and appliances specially adapted for use in conjunction with machinery and equipment specified in clause (a) of the said S.R.O.It further appears from the record that the issue, whether or not the items imported by the respondent, were entitled for exemption under the S.R.O. was settled through the aforesaid letter.It is also an admitted position that out of a total of 27 claims, the first 12 claims were sanctioned in 1998 and out of these 12 claims, the 3 time barred claims were also sanctioned in favour of the respondent.However, the matter of remaining 15 cases was referred to CBR by the applicant vide its letter dated 24-7-2000 and CBR vide its letter dated 25-10-2000 had rejected the request for condonation of delay and on the basis of such letter the applicant had rejected the said refund claims without any independent application of mind and without considering the fact that it had already sanctioned 3 time barred claims after condonation. The applicant had acted in a mechanical manner by following the directions of CBR, while acting as a Quasi-Judicial officer, and such practice has already been deprecated by this Court and the Honorable Supreme Court in a number of cases wherein it has been held that the CBR has only an administrative control over its officers in discharge of their functions, but it does not figure in the hierarchy of the forums provided for adjudication while performing Judicial or Quasi-Judicial functions. If any authority is needed, then one may refer to the case of Messrs Century Insurance Co. v. CBR and others reported as 1993 SCMR 1232.

7.The only reason assigned by the applicant in the order-in-original for rejection of the claim is based on the ground that these were time barred under section 33 of the Act.It would be advantageous to reproduce the provision of section 33 of the Act which is as under:

"33. Refund to be claimed within [one year].---(1) No refund of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within [one year] of the date of payment.

[Provided that no refund shall be allowed under this section if the sanctioning authority is satisfied that incidence of customs duty and other levies has been passed on to the buyer or consumer.]

(2)In the case of provisional payments made under section 81, the said period of [one year] shall be reckoned from the date of the adjustment of duty after its final assessment.

(3)In the case where refund has become due in consequence of any decision or judgment by any appropriate officer of Customs or the Board or the Appellate Tribunal or the Court, the said period of one year shall be reckoned from the date of such decision or judgment, as the case may be."

From the perusal of the above provision, it is clear that no refund of any customs duties or charges claimed to have been over paid through inadvertence, error or misconstruction shall be allowed unless such claim is made within one year (previously it was six months) of the date of payment of such duty and charges.It can be seen from the above, that the provisions of section 33 of the Act are only applicable when duty and charges are paid through inadvertence, error or misconstruction, whereas in the instant matter no inadvertence, error or misconstruction is involved as the respondent had claimed exemption from duty and taxes at the very outset at the time of filing of GD, which was denied by the applicant. Thereafter, owing to the persistent efforts on the part of the respondent, certain refund claims were settled in their favour, which also included 3 time barred claims. Therefore, under no circumstances, the present case can be governed by the provisions of section 33 of the Act, as neither there is any inadvertence, nor error or misconstruction on the part of the respondent in claiming the refunds from the applicant. The respondent had claimed the exemption under the SRO from day one which was denied by the applicant, but subsequently it was granted by sanctioning 12 claims including 3 time barred claims vide its letter dated 12-11-1998. The question of grant of exemption on merits of the case was never in dispute once CBR had categorically decided the issue in favour of the respondent vide its letter dated 12-12-1995, except the belated objection taken by the applicant regarding limitation in respectofthebalance 15 claims. The applicant in its order-in-originaldated19-11-2005 has observed in Para 5 that "Therefore, the issue whether or not the items imported by the (sic) WAPDA [were] covered under S.R.O. 462(I)/95 dated 4-6-1995 was settled through the aforesaid two correspondences". Therefore, after such a categorical finding by the applicant itself, the objection for refusal of refund claims on merits of the case is irrelevant and uncalled for and the case of the respondent cannot be termed as time barred in terms of section 33 of the Act. A Division Bench of this Court while discussing the provisions of section 33 of the Act in the case of Ghulam Abbas v. CBR (1994 CLC 1612)(supra) has held that the limitation period provided under section 33 was not applicable for refund of such a claim. There relevant observations read as under:--

"This section provides for refund of customs duty or charges, which are paid or overpaid due to inadvertence, error or misconstruction.The customs duty and charges referred to section 33 should be chargeable and payable by the importer or exporter, and where such duties and charges are charged due to inadvertence, error or misconstructions, the claim of refund should be made within six months, but where the amount recovered by the customs authorities is not customs duty or charge, as its imposition and levy has not been sanctioned under law, the claim for refund of such amount would not be governed by section 33."

Similarly, the Honorable Supreme Court in the case of Pfizer Laboratories Limited v. Federation of Pakistan reported in PLD 1998 SC 64 has approved the above view while dealing with the provisions of section 33 of the Act and has laid down certain principles in this regard, which are as under:--

"13. From the above case-law and the treatise, the following principles are deducible:

(i)That if one party under a mistake, whether of fact or law, pays some money to another party (which includes a Government department), which is not due by law or contract or otherwise, that must be repaid in view of section 72 of the Contract Act, 1872.

(ii)That the Customs duties and charges referred to in section 33 of the Act should be chargeable and payable by an importer or exporter and that due to inadvertence, error on misconstruction, more amount was paid or recovered than what was due and payable, the claim for the refund of such an excess amount should be made within six months as envisaged in above section 33, but where the duty or tax charged and recovered was not payable at all, above section 33 has no application.

(iii)That if the customs duty or any other levy was realized and its realization was outside the statutory authority, the provisions of section 27(I) of the Indian Customs Act, 1982, providing limitation of six months was not attracted.

(iv)That when any excise duty is recovered which was not leviable limitation of one year provided in Rule 11 of the Central Excise and Salt Rules, 1944 is not applicable nor an alternate remedy by way of a suit will be a bar to a Constitutional petition.

(v)That payment of excise duty or any other tax without knowledge that the same is exempted under a notification is refundable on the same footing as if there was no lawful imposition.

(vi)To return what has been taken wrongly is as much a duty and grace of Government to levy relentlessly and fully what is due as remarked by V.R.Krishna Iyer, J.

(vii)That where some money is received by the Government not lawfully due, the plea of limitation by its departments is one which the Court always looks upon with disfavor as it is violative of the principles of morality and justice.

(viii) That when moneys are paid to the State which the State has no legal right to receive, it is ordinary the duty of the State, subject to special provisions of any particular statute or special facts and circumstances of the case, to refund the amount so received and in case of failure, a superior Court in exercise of its constitutional jurisdiction can direct the refund of the same if no disputed questions of facts are involved.

(ix)That there may not be legal liability on the part of a Government functionary to refund any amount received by it as a tax or other levy by virtue of certain special provisions under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every Government, which claims to have ethical and moral values, must do what is fair and just to the citizens regardless of legal technicalities.

(x)That as per Indo-Pak laws the fact that the amount of tax of which refund is claimed was voluntarily paid, does not precludetherighttoclaimrefund,itwasnotlawfullypayable.

(xi)That the money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by a citizen as of right.Lord Bridge of Harwich of the House of Lords in the case of Tower Hamlets Borough Council (supra) remarked "that the retention of moneys known to have been paid undera mistake at law, although it is a course permitted to an ordinary litigant is not regarded by the Courts as a high-minded thing' to do but rather as a 'shabby thing' or a 'dirty trick'".

8.In the above judgment, the Honorable Supreme Court was pleased to hold that the claim of the appellant (Pfizer) could not have been declined on the ground of limitation provided under section 33 of the Act and it was further held that if the appellant had fulfilled the requisite conditions of the S.R.O., the denial of refund of the amount involved would be violative of Article 24(1) of the Constitution, 1973, which lays down that "no person shall be deprived of his property save in accordance with law".The facts of the instant case are more or less identical to the case before the Honorable Supreme Court as referred above and since in the instant matter the respondent has already fulfilled all the requisite conditions of the S.R.O., though subsequently, and the applicant has already allowed refund in respect of other consignments, as such the objection as to the fulfillment of the conditions of the S.R.O. at a belated stage is no more valid or relevant.The only question left is, as to whether the limitation provided for claiming a refund under section 33 of the Act is applicable or not and as discussed above we hold that in the instant matter, the provision of section 33 of the Act is not attracted; therefore, the question of limitation does not apply, coupled with the fact that the applicant had already condoned such delay in respect of the other 3 claims of the same respondent. Consequently, we are of theview that firstly the question of limitation is not relevant in the instant matter, and alternatively, even otherwise, the applicant was required to condone the same, in the same manner, as it had done in respect ofother such claims. Therefore, the Tribunal has correctly held that the claims of the respondent were unjustifiably rejected on the issue of limitation.

9.The judgment in the case of Messrs Pakistan Telecommunication Corporation (Supra) relied upon by the learned counsel for the applicant is not applicable and relevant in the instant matter, as in that case firstly the contention of the petitioner was that it had inadvertently paid higher duties than what was actually due from him and this Court after examining the facts of the case came to the conclusion that the duty and taxes were recovered from the petitioner on the basis of the declaration made by it, where after the goods were cleared and consumed. It was further held that the claim of refund in that respect could not have been examined by the department, except by re-examination of goods, which were never presented, and could not have been presented, as such the department had rightly rejected the claim. It was further held that it required amendment of description and value of the goods on the GD which is not permissible in terms of section 29 of the Act after the goods have been removed from the Customs Area, therefore the refund could not have been granted and the petition was dismissed. Since no such issue of fact is involved in the instant matter as such the ratio of this judgment is not applicable.

10.The proposed questions A & C are answered in the negative, in favour of the respondent and against the applicant. Similarly question E is also answered in the negative against the applicant and in favour of the respondent. The other proposed questions B & D are not required to be answered, as firstly they do not arise out of the order of the Tribunal and moreover for the reasons as discussed above are not relevant for deciding the controversy in hand.

11.In view of the above discussion and findings, the instant SCRA is dismissed and the order of the Tribunal is upheld and maintained. The Registrar of this Court is directed to send the copy of this judgment under the seal of the Court to the Tribunal for information.

MH/C-15/SindhReference dismissed.