AL-HAMZA SHIP BREAKING CO. VS GOVERNMENT OF PAKISTAN through Secretary Revenue Division, Ministry of Finance, Islamabad, 2015 PTD-SUPREME-COURT 1010 (2015)

(Against the judgment dated 5-10-1999 of the High Court of Balochistan, Quetta passed in Constitution Petitions Nos.632, 665, 807, 808, 68, 70, 101, 102, 72, 103, 70, 257, 242, 69 and 328 of 1999)

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

----S. 25-B [since repealed]---S.R.O. (K.E.)/98 dated 31-10-1998---Fixation of value of imports---"Import Trade Price"---Authority and discretion of customs department to fix the "Import Trade Price"---Scope---Valuation of vessels---Appellant-companies were importers engaged in the business of importing vessels for the purposes of breaking up and scrapping---Appellant-companies entered into different agreements on various dates for the importation of vessels for scrapping---Sale prices of the ships were declared per the invoices and the bills of entry, however such prices were less than the "Import Trade Price" fixed by the customs authorities---Subsequently appellant-companies presented certain invoices to customs authorities as evidence requesting them to decrease the "Import Trade Price" of vessels as their prices had declined in the international market, but such request was rejected---Validity---After appellant-companies had presented invoices/evidence to customs authorities about the decline of prices of vessels, a decision by the Controller Valuation was required as per parameters of S. 25B of Customs Act, 1969---Import Trade Price was generally valid for a period of three months, but in cases of abnormal fluctuation of plus or minus 10%, Import Trade Prices were to be revised upward or downward forthwith as and when such fluctuation took place---Controller Valuation had been delegated the authority to decide matters on the basis of the parameters provided under S. 25B of the Customs Act, 1969---Said parameters made it mandatory for the Controller to revise the Import Trade Price as soon as at least two invoices had been filed showing a fluctuation of more than 10% of the Import Trade Price---Controller, in the present case, received as many as 10 different invoices by appellant-companies showing that prices had fallen by an average of about 15%, but he still failed to revise the Import Trade Price, which was clear violation of the parameters under S. 25B of the Customs Act, 1969---Instead of revising the Import Trade Price to a reasonable figure between the minimum and the maximum prices, Controller demanded Bank Certificates and Bills of Entry from appellant-companies as evidence which were not requirements as per parameters provided under S. 25B of the Customs Act, 1969---Appellant-companies did provide Bank certificates and Bills of Entry but the Controller still did not revise the Import Trade Price---Life of an Import Trade Price notification was 3 months generally---Customs authorities did revise/reduce the Import Trade Price of vessels through a notification after a delay of about 8 months, but by such time the previous Import Trade Price notification had outlived its utility---Such (belated) decrease in Import Trade Price also did not commensurate with the price decline (in the market)---Furthermore, the appellant-companies were denied even such partial relief of revised Import Trade Prices since their Bills of Entry had been filed prior to the date of notification---Supreme Court remanded the cases to the customs authorities for fresh determination, not on a case by case approach, but by a generalized approach which was in line with the spirit of S. 25-B of the Customs Act, 1969, [since repealed] as it was in place at the relevant time---Appeals were disposed of accordingly.

(b) Statutory functionary---

----Decision by a statutory functionary on the basis of a direction by a superior officer was a nullity.

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

----S. 25-B [since repealed]---Fixation of value of imports---Legislative intent behind introduction of S. 25-B of the Customs Act, 1969 [since repealed]---Enactment of S. 25-B of the Customs Act, 1969 was an attempt to curtail arbitrary or mala fide decision making by individual customs officers in a wide range of cases---Customs officers, in some cases, did exercise their powers for the attainment of collateral objectives unknown to the law---Such objectives may be personal financial gain or enhancement of career prospects by collecting extra revenue for the Government in violation of the law---Neither was permissible---Presumably with a view to overcoming such problem the (erstwhile) Central Board of Revenue (CBR) transferred the power to fix values of goods from individual customs officers to the Board itself, or someone nominated by it, so as to obtain uniformity and consistency---Underlying idea, quite clearly, was to restrain arbitrariness and not to encourage it.

(d) Tax---

----Collection of tax---Tax had to be collected in accordance and only in accordance with law.

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

----S. 25-B [since repealed]---Fixation of value of imports---Parameters provided under S. 25-B of the Customs Act, 1969---Scope and purpose.

Following procedural safeguards were introduced into the system by the parameters provided under S. 25-B of the Customs Act, 1969 in order to ensure transparency:--

(i)The criteria for decision making were laid down. This was a rational approach which contemplated the provision of a specific justification for the revision of prices. The time period for the life of a notification was specified, both originally as well as from time to time. The general life of a notification was stated to be about three months but in cases of sharp fluctuations of plus or minus 10% the revision was to take place forthwith.

(ii)The basis for revision was specified. A minimum of two invoices was required to trigger off the price revision mechanism to deal with international price fluctuation. Commodity prices fluctuated not merely on a month to month, week to week, day to day, but even on an hourly basis. Obviously it was not possible to track prices with absolute precision but a reasonable endeavour had to be made and this was sought to be achieved by the parameters.

(iii)In order to ensure transparency it was made mandatory that Import Trade Prices would not be fixed without consultation with the concerned registered trade bodies. This was a sensible and pragmatic approach. Since a general fixation of prices was being made it was not practicable to give a hearing to each and every individual importer. Accordingly, the registered trade body representing importers of those items was conferred the right of consultation. Thus the principles of natural justice were adhered to.

(iv)It was made clear that the jurisdiction conferred under S. 25B of the Customs Act, 1969, was not meant to be exercised once and for all and thereafter set aside. It was mandatory to exercise it "from time to time" so as to ensure and grant protection both to importers as well as the exchequer. In the event that prices had risen it was mandatory to increase the Import Trade Prices and in the event that they had declined a corresponding reduction had to be made. Failure to do so would invalidate the notification.

(f) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of the High Court---Scope---Questions of disputed fact---Generally the High Court in the exercise of its constitutional jurisdiction did not decide questions of disputed facts, but this did not mean that decisions which were manifestly arbitrary, based on no evidence, or contrary to the record and not justified by law would be upheld.

Khalid Anwar, Senior Advocate Supreme Court for Appellants (in all appeals).

M. S. Khattak, Advocate-on-Record for Appellants (in C.As. 1780 to 1790 of 2002).

Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.1 (in all appeals).

Syed Arshad Hussain Shah, Advocate Supreme Court for Respondent No.2 (in all appeals).

Raja Muhammad Iqbal, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record and Tausif Aman, Assistant Collector, Gadani for Respondents Nos.3 to 5 (in all appeals).

Anwar Kamal, Senior Advocate Supreme Court as Amicus curiae.

Date of hearing: 27th November, 2014.

JUDGMENT

MIAN SAQIB NISAR, J.---These are two sets of appeals which we propose to dispose of by means of a common judgment. The first set of appeals consists of C.A. No.1780 of 2002 to C.A. No.1790 of 2002. These matters were heard and decided by the Balochistan High Court on 21st April, 1999. The second set of appeals was similarly decided by a judgment dated 5-10-1999 which dealt with C.A. No.2535 of 2001 to C.A. No.2538 of 2001. The difference between the two sets of appeals is that the first relates to an earlier period and the second to a subsequent period but the essential questions of law are the same.

2.The appellants are importers engaged in the business of importing vessels for the purposes of breaking up and scrapping. The scrapping takes place at Gadani. Pursuant to the above objective the appellants entered into different agreements on various dates for the importation of vessels for scrapping. The sale prices of the ships were declared per the Invoices and the Bills of Entry filed with the Customs authorities.

3.Mr. Khalid Anwar, learned Senior Advocate Supreme Court who appeared on behalf of the appellants in both sets of cases, based his submissions on the factual narration of events in relation to some of the cases in order to save time. In the first set of cases he mainly relied on the facts as stated in C.A. 1784 of 2012 (Al-Hamza Ship Breaking Company) and in the second set of cases on C.A. 2535 of 2001.

4.The central question of law which arises relates to the price at which the vessels were to be valued for purposes of payment of customs duty. For this purpose reference has to be made to section 25B of the Customs Act, 1969 which authorizes the department to fix the Import Trade Price (ITP). It is this section which forms the subject matter of the controversy between the parties.

5.The ITP for various goods was fixed and varied from time to time per the following table set out in his para wise comments filed by the Controller Valuation:

In terms thereof it was fixed at US $ 132/LDT in relation to tankers and US $ 122/LDT for other vessels under S.R.O. (K.E.)/98 dated 31-10-1998 (the first S.R.O.). What is significant, for reasons which are elucidated infra, is that it was not re-fixed thereafter until approximately 8 months later on 5-7-1999.

6.Very soon after the fixation of price by the first S.R.O. a number of vessels were imported in November 1998 by different ship breakers at prices which were apparently substantially lower (i.e. more than 10%) than the above mentioned prices. This led the Pakistan Ship Breakers Association (PSBA) to write to the Controller Valuation on 11-11-1998 requesting a review of the said ITP. At this stage it would be convenient to set out the role of the PSBA and the legal provisions in relation to which this role was to be exercised.

7.Section 25B, which, as pointed out above, is the section which is the subject matter of the present dispute, was given effect to by the Central Board of Revenue by issuing guidelines described as Parameters in order to regulate the exercise of power thereunder so as to restrict arbitrariness and promote transparency.

8.Section 25B, as it was then in place, is reproduced below:--

"25B Fixation of value for import and exports.---(1) Not-withstanding anything contained in section 25, the Board or such officer as is authorized by the Board in this behalf may, from time to time, by notification in the official Gazette, for the purposes of levying customs duties under this Act or any other law for the time being in force, fix the value of the goods specified in the First Schedule and the Second Schedule at such rates as it may deem fit and subject to such conditions or limitations as it may impose.

(2)Different values may be fixed for different clauses or descriptions of the same type of goods.

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

9.The important clauses of the Parameters are also reproduced below:--

(6)ITPs of commodities not covered under Para 5 above will be fixed on the basis of evidence of actual invoices of previous two months lodged with the customs.

(7)Minimum of two invoices, in consultation with concerned registered trade associations will form the basis for revision of ITP, either upward or downward.

(10)Except for situations explained in para 5 above, ITPs will be generally valid for a period of three months.

(11)Notwithstanding sub-para (10) above, in case of abnormal fluctuations of plus-minus 10% ITPs will be revised upward or downward accordingly as and when such fluctuation takes place.

(14)Fixation of ITPs will not be done without consultation with concerned registered trade bodies.

10.After the initial letter dated 11-11-1998 seeking a downward revision in the prices of vessels, PSBA addressed another letter to the Controller Valuation on 28-11-1998 informing him that prices of vessels had declined further. Pursuant to these intimations, a decision by the Controller was required per the Parameters including, in particular clause 11 thereof under which, notwithstanding the contents of clause 10 under which ITPs were generally valid for a period of three months, in cases of abnormal fluctuation of plus or minus 10% ITPs were to be revised upward or downward forthwith "as and when such fluctuation takes place". Accordingly, the Controller Valuation scheduled a meeting for 30-11-1998 and at this meeting PSBA presented invoices of live vessels which met the condition of 10% i.e. prices had fallen lower than that figure. (In fact, only two were required for a revaluation to take place). The Controller however, declined to consider these invoices as evidence since they had not been presented to the Customs Department and accordingly rejected the request. This led some of the ship breakers (not the present appellants) to challenge the Customs Department's refusal to revise the ITP in the meeting held on 30-11-1998 by way of writ petitions filed before the Balochistan High Court which were promptly dismissed on 17-12-1998 on the ground that they related to a factual controversy which was not suitable for adjudication by the High Court in the exercise of its constitutional jurisdiction. It is relevant to point out that these petitions are not the subject matter of the present case and it appears that although those petitioners filed C.P.L.As. in the Supreme Court they seem to have lost interest in the litigation. The relevance of this set of petitions is however that the Customs Department referred to it at a subsequent stage of the dispute between the present petitioners and itself.

11.PSBA on 5-12-1998 once again took up the matter after the meeting of 30-11-1998 and brought to the attention of the Controller the fact that two more ships had since been imported, both at prices well below the ITP. It appears that as a result of the PSBA continuing to press its demands the Controller Valuation was intimated by the Member Customs that he should hold a meeting in order to consider their representation. Accordingly on 17-12-1998 a further meeting was held in which the Controller Valuation spelt out his demand quite precisely, which was that the evidence pertaining to eight vessels which had been presented by PSBA in terms of the invoices was not sufficient since they had not been verified. He pointed out that only bank certified invoices would be acceptable and that PSBA should accordingly submit duly certified invoices to the Collectorate Customs Quetta. On the same date the Controller Valuation wrote to the Quetta Collectorate asking for a report to confirm that duly certified invoices had been submitted. The Controller Valuation then informed the Member (Customs) on 22-12-1998 that the importers had duly complied and he had received a report from the Quetta Collectorate together with the bank certified invoices and had scheduled a meeting with PSBA on 23-12-1998 to resolve the dispute.

12.The grievance of the appellants is that after they had admittedly complied with the demand for duly certified invoices there was no justification for not implementing the same in terms of the Parameters. To their surprise at the meeting held on 23-12-1998 the Controller Valuation changed his stance radically and raised an additional demand to the effect that the invoices, although duly certified, would not be considered by him unless and until the Bills of Entry were also filed.

13.PSBA then complained to the Controller by means of a letter of the same date about this change of stance. It was pointed out that the requirement of filing of Bill of Entry was not contained in the Parameters which were quite explicitly limited to the filing of invoices, and invoices alone. Thus this demand apparently was violative of the Parameters which were binding on the Controller Valuation. The filing of the Bills of Enquiry obviously entailed further consequences since that then becomes the relevant date on the basis of which Customs duty would be levied. The rate of customs duty is of course a different matter from the valuation of goods. The view of the appellants was that they were entitled to file a bill of entry on such date as they deemed appropriate and they should not be compelled to file them. The Controller did not agree and ultimately his view prevailed. But surprisingly a decision was still not forthcoming.

14.On 5-1-1999 PSBA again took up the matter with the Controller and pointed out that additional evidence was now available. Furthermore, the objection that Bills of Entry must be filed had also been complied with since they were now available for the period between 21-12-1998 and 4-1-1999. A summary of the evidential invoices and B/Es has been filed which indicates that bills of entry were filed on various dates in December 1998 and January 1999 and is reproduced below:--

VESSELS ALREADY BEACHED

(1)

(2)

Another summary has also been filed which indicates the fall in prices and the same is also reproduced below. Both summaries relate to the same set of vessels except that in one there are two additional vessels shown.

SUMMARY

15.In light of the above it appears that all of the demands of the Controller had by now been met. PSBA therefore sought a decision. Unfortunately, the Controller then once again changed his stance radically. On 27-1-1999 he addressed a letter to the Member (Customs) purportedly seeking advice on whether the ITP should be revised.

In this he requested that "Board may advise this office whether or not the ITP already fixed may be revised in the light of evidence, as this office is of the view that the matter is sub judice and status quo has to be maintained."

The contents of this letter raise two important questions of law. Firstly, the Controller had been delegated the authority to decide matters on the basis of the Parameters. Clause I of the Parameters made it mandatory for him as soon as at least two invoices had been filed showing a fluctuation of more than 10% to revise the ITP. His failure to do so was a clear violation since by now as many as 10 invoices had been filed. It appears from the Chart that prices had fallen by an average of about 15%. It was open to the Controller to have fixed the ITP at any reasonable figure between the minimum and the maximum price as shown in this chart and this is what he should have done. He failed to do so. In addition to the above he had also first demanded bank certificates and even though that condition (also not mentioned in the Parameters) had been fulfilled, moved on to raise an additional demand for the filing of Bills of Entry which was also not a requirement under the Parameters. That too had been met. Now he had changed his position yet again and although purportedly seeking advice, was clearly indicating that he wanted that the status quo should be maintained on the ground that the matter was sub judice before the Court. This was misleading in two respects; firstly, he did not disclose that the cases of the present appellants were not sub judice. Secondly, he also did not disclose that no status quo order had been passed preventing him from proceeding further in the matter. An even more important question was whether at all it was appropriate for him, after having been duly delegated authority, to decline to exercise jurisdiction unless and until CBR decided the matter. Prima facie, it appears to us that the Controller was seeking pretexts to justify his intention of not re-fixing the ITP although this was a clear violation of the Parameters. He received a reply three days later on 31-1-1999 from CBR informing him to maintain the status quo, which is what he clearly wanted to do and accordingly he decided not to re-fix the prices despite the clear mandate of the Parameters. It is trite law that a decision by a statutory functionary on the basis of a direction by a superior officer is a nullity.

16.The next development took place in February 1999 when the Customs Department was preparing a fifth Valuation Manual. For this purpose the Department was interested in making changes in the ITPs of some goods. It is to be borne in mind that the Valuation Manual is not confined only to ships or vessels but also extends to numerous other types of goods. In this connection, the Department addressed a letter to the Chamber of Commerce to ask for its views, The Chamber of Commerce forwarded the request to PSBA. Thereafter what transpired, per the record produced before us by the Customs Department is that a "notification" dated 20-2-1999 was issued (although when it was duly notified in the official gazette is a matter of controversy). The opening paragraph of this notification is important and is reproduced below:--

S.R.O. (KE)/99: In exercise of the powers conferred by clause (1) of section 25-B of the Customs Act, 1969 (IV of 1969), read with Central Board of Revenue Notification No.S.R.O.336(I)/93, dated 27th April, 1993 and in supersession of this department Notification No. S.R.O. 23(KE)/98 and S.R.O. 24(KE)/98 both dated 14-2-1998, the Controller of Customs Valuation is pleased to fix the C&F value of the goods specified in column (5) of the table below (Part A & B), described in columns (2), (3) and (4) of the said table for the purpose of the following conditions, namely;"

It will be seen from a perusal of the above that this notification purports to supersede two previous notifications both dated 14-2-1998. What is significant however is that it does not purport to supersede the notification in dispute in the present case, namely, that which was issued on 30-10-1998 which fixed the ITP of tankers and other vessels at $ 132 and $ 122. This was left intact. This is of course consistent with the decision of the CBR and the Controller of Valuation to maintain the status quo. (It is pointed out by Mr. Anwar Kamal, appearing as amicus curiae, that this notification, or a similar notification, was actually gazetted on 30th April, 1999). However, the table of notifications for the period from 11-4-1997 to 5-7-1999 filed by the Controller before the Court does not show any notification regarding vessels having been issued on 20-2-1999 or in April 1999. Thus obviously this notification related to other goods and the entries about vessels contained therein are simply a repetition of the 31-10-1998 notification.

17.To continue with the narration of events, the Ship Breakers wanted the ITP to be revised per the Parameters and, failing that, they wanted to be assessed on the basis of the actual price i.e. the normal price under section 25 of the Customs Act, 1969. The Department, however, was not prepared to accept this. A letter from the Customs Department dated 8-2-1999 in this connection is on the record.

18.In the above circumstances in February, 1999 as many as 12 importers filed writ petitions before the Balochistan High Court (the first set) challenging the decision taken by the Customs Authorities. The prayer sought for in these petitions was that the refusal to revise the ITP in relation to the imported vessels by the Controller was illegal and hence the ITP fixed by means of S.R.O. dated October 31, 1998 was inapplicable. A direction was also sought to the effect that the Controller should be directed to revise the ITP in accordance with law and to accept the Bills of Entry on the basis of the declared value and finalize the assessments accordingly. This first set of petitions was swiftly dismissed by a division bench of the Balochistan High Court after hearing the same on 19th April, 1999 by means of the first judgment dated 21-4-1999. The High Court was of the view that these petitions raised disputed questions of fact.

19.Having been denied relief by the Balochistan High Court the appellants then reverted to the Customs Department. During May and June 1999 some more vessels were imported and beached at Gadani at reduced prices in accordance with the trend of declining prices. The appellants decided to make one more endeavour to have the ITP, which had now been fixed as far back as 31-10-1998 and was completely out of date, revised to make it conform to the current level of prices in accordance with the Parameters. Once again they did not succeed before the Customs Department which obviously was encouraged by the fact that the earlier sets of petitions had been dismissed by the Balochistan High Court.

20.Thereafter, some of the importers decided to once again try their luck with the High Court since an additional ground was now available to them, namely, that many months had expired since the original fixation of the ITP on 31-10-1998. The life of an ITP notification was, as stated earlier, 3 months generally speaking and this time had by now been greatly exceeded. Thus even if the fall in price by more than 10% was disregarded the notification dated 31-10-1998 had by now outlived its utility. The second set of petitions was accordingly filed but unfortunately met the same fate as the first set. By means of a common judgment dated 5-10-1999 (this is the second set of cases in which the judgment was delivered in C.As. 2535 to 2538/01) all these petitions were also dismissed.

21.In the meanwhile by means of a notification issued on 5-7-1999 the ITP was revised after a delay of about 8 months. The ITP for tankers was reduced from US $ 132 to US $ 125 and the ITP for other vessels was reduced from US $ 122 to US $ 115. This was however partial relief since the ITP was not reduced by a figure commensurate with the price decline which appears to be of the order of 15% per the chart filed in court. Furthermore, since the revised notification was issued on 5-7-1999 the appellants were denied even this partial relief since their Bills of Entry had been filed prior to the said date.

22.Leave to appeal was granted in the second set of cases on 31-10-2001 and subsequently in the first set of cases as well on 28-10-2002.

23.The above being the facts we now turn to the merits of the case. The case has been argued on behalf of the appellants by Mr. Khalid Anwar, learned Senior Advocate Supreme Court.

24.The question which immediately arises on a consideration of section 25B is whether any executive authority can be authorized to over rule a substantive provision of law such as section 25? Is the non obstante clause in section 25B valid? We have very recently examined this point in the case of Muhammad Amin Muhammad Bashir Ltd. v. Government of Pakistan (Civil Appeal No.214 of 2005) and came to the following conclusion:--

"On the face of it, it is not possible for us to uphold the granting or delegation of authority to any executive or other body which entitles it to overrule a substantive provision of law. The principles of delegated legislation are very clear and hardly require any reiteration by us at this late stage. In brief, they entitle the delegate to carry out the mandate of the legislature, either by framing rules, or regulations, which translate and apply the substantive principles of law set out in the parent legislation or by recourse to detailed administrative directions and instructions for the implementation of the law. They are intended to enforce the law, not override it. They can fill in details but not vary the underlying statutory principles. In case of conflict they must yield to the legislative will. They are below not above the law. The minutiae can be filled in but the basic law can neither be added to or subtracted from".

In Phassco Hardware Company v. The Government of Pakistan (PLD 1989 Kar. 621) the vires of section 25B was discussed by the Sindh High Court which gave a highly restricted interpretation of section 25B which ensured that it was not in conflict with section 25, rather was subordinate to it, however, quite clearly section 25B purports to overrule section 25. The crucial finding is to be found in paragraph 9 of the judgment and is reproduced herein below:

"9. In our view the power conferred by above section 25-B is not legislative power, but is more akin to an executive power. In any case it is not peculiarly and distinctly legislative, executive or judicial and, therefore, it lies within the authority of the legislature to determine where its exercise shall be vested. We are inclined to hold that the above sections 25 and 25-B are to be read in conjunction as the former section contains guideline, though in section 25-B it has been provided that "notwithstanding anything contained in section 25" but it does not mean that the C.B.R. or any other officer authorized by it can fix any arbitrary valuation without having any nexus with the real valuation of the goods. It may be pointed out that section 25 contemplates that the value of each consignment is to be assessed on the basis of the criteria contained therein, whereas section 25-B dispenses with the assessment of value of each consignment but envisages fixation of valuation of the goods concerned till a notification remains in force. But such a notification cannot be static but is revisable from time to time on account of change in the international market as to the prices of the goods to be imported or exported."

It will be seen that what the Sindh High Court did was to attempt to save the validity of section 25B by construing it consistently with the language of section 25. This is an illustration of what is sometimes termed the principle of "reading down" a statute in order to save it. So construed the section can escape being declared ultra vires and struck down. We agree with this approach of the High Court and approve it. There can be little doubt that on a literal interpretation section 25B is ultra vires. It follows therefore that notwithstanding the very wide language used in section 25B the powers exercisable by the CBR thereunder are to be limited and constrained by section 25 which is the substantive section of law for the fixation of prices. The CBR does not have, and cannot be allowed to have, unfettered discretion. The exercise of any discretionary power must be rational and have a nexus with the objective of the underlying legislation. Arbitrariness is the antithesis of the rule of law. The legislature, when it confers a wide ranging power, must be deemed to have assumed that the power will be, firstly, exercised in good faith, secondly, for the advancement of the objects of the legislation, and, thirdly in a reasonable manner. Section 24A of the General Clauses Act, 1897, reiterates the principle that statutory power is to be exercised "reasonably, fairly, justly and for the advancement of the purposes of the enactment" and further clarifies that an executive authority must give reasons for its decision. Any action by an executive authority which is violative of these principles is liable to be struck down. No other view is permissible."

25.The question arises as to what was the legislative intent in introducing section 25-B. It appears to us that the enactment of this section was, in fact, an attempt to curtail arbitrary or mala fide decision making by individual Customs officers in a wide range of cases. Instances are not lacking in which Customs officers have exercised their powers for the attainment of collateral objectives unknown to the law. These may be personal financial gain or enhancement of career prospects by collecting extra revenue for the Government in violation of the law. Neither is permissible. Tax has to be collected in accordance and only in accordance with law. Presumably with a view to overcoming this problem the CBR transferred the power to fix values of goods from individual Customs officers to the CBR itself, or someone nominated by it, so as to obtain uniformity and consistency. The underlying idea, quite clearly, was to restrain arbitrariness and not to encourage it. Unfortunately the facts of this case reveal that instead of this objective coming to fruition arbitrariness still remained but was now used by the Controller Valuation in a generalized manner. The cure was as bad as the disease. The Parameters which had been laid down had been carefully considered and drafted in order to ensure transparency. Taken in totality, what they indicate is that the following procedural safeguards were introduced into the system:--

(a)The criteria for decision making were laid down. This was a rational approach which contemplated the provision of a specific justification for the revision of prices. The time period for the life of a notification was specified, both originally as well as from time to time. The general life of a notification was stated to be about three months but in cases of sharp fluctuations of plus or minus 10% the revision was to take place forthwith.

(b)The basis for revision was specified. A minimum of two invoices was required to trigger off the price revision mechanism to deal with international price fluctuation. It is a well known fact that commodity prices fluctuate not merely on a month to month, week to week, day to day, but even on an hourly basis. Obviously it is not possible to track prices with absolute precision but a reasonable endeavour has to be made and this was sought to be achieved by the Parameters.

(c)In order to ensure transparency it was made mandatory that ITPs would not be fixed without consultation with the concerned registered trade bodies. This again was a sensible and pragmatic approach. Since a general fixation of prices was being made it was not practicable to give a hearing to each and every individual importer. Accordingly, the registered trade body representing importers of those items was conferred the right of consultation. Thus the principles of natural justice were adhered to.

(d)It was made clear that the jurisdiction conferred under section 25B was not meant to be exercised once and for all and thereafter set aside. It was mandatory to exercise it "from time to time" so as to ensure and grant protection both to importers as well as the Exchequer. In the event that prices had risen it was mandatory to increase the ITP and in the event that they had declined a corresponding reduction had to be made. Failure to do so would invalidate the notification.

It should be borne in mind that the power of general fixation of import prices is akin to delegated legislation with far reaching ramifications. An arbitrary fixation of a price higher than or lower than the prevalent international price implies that the effective rate of duty has been modified. This is obvious since a rate of duty say of 10% on the import of vessels would effectively increase to 20% if the price is arbitrarily fixed at double and similarly it would decline to 5% if the price is artificially reduced to half. This cannot be permissible because it would be not merely a violation of the statute but also of the constitutional mandate that taxes can only be imposed under law.

26.The parameters, in fact, are an application of the principles of structured discretion. These principles were elucidated in the well known case of Amanullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance and others (PLD 1990 SC 1092) in which the following passage appears:--

"Wherever wide-worded powers conferring discretion exist, there remains always the need to structure the discretion and it has been pointed out in the Administrative Law Tax by Kenneth Gulp Davis (page 94) that the structuring of discretion only means regularizing it, organizing it, producing order in it so that decision will achieve the high quality of justice. The seven instruments that are most useful in the structuring of discretionary power are open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair informal procedure. Somehow, in our context, the wide worded conferment of discretionary powers or reservation of discretion, without framing rules to regulate its exercise, has been taken to be an enhancement of the power and it gives that impression in the first instance but where the authorities fail to rationalize it and regulate it and regulate it by Rules, or Policy statements or precedents, the Courts have to intervene more often, than is necessary, apart from the exercise of such power appearing arbitrary and capricious at times."

The above passage was cited with approval in Abid Hasan v. PIAC (2005 SCMR 25) and further reliance was placed on a related passage at p.35 which reads as under:--

"14. In his Treatise 'Discretionary Powers' which is Legal Study of Official Discretion D.J. Galligan has acknowledged that "the general principles that discretionary decisions should be made according to rational reasons means; (a) that there be findings of primary facts based on good evidence, and (b) that decisions about the facts be made for reasons which serve purposes of the statute in an intelligible and reasonable manner". According to the celebrated author, the actions which do not meet these threshold requirements are arbitrary, and may be considered a misuse of power. (Emphasis provided)."

27.We now turn to examine the two judgments delivered in these cases. The first judgment is invalidated by an obvious error as is evident from the table reproduced therein (see page 33 of C.A. 1780 of 2002) which contains the dates of filing of various Bills of Entry as given by the Customs Department. This table purportedly shows that Bills of Entry had been filed from 28-12-1998 upto 16-12-1999 i.e. a period of about 1 year. Since the judgment of the Court was delivered in April 1999, it is obviously inconceivable that it could discuss Bills of Entry filed in December 1999. Furthermore, if we compare the Entries in the case of Imran Ship Breakers, Ahmed Steel and Abdul Sattar Noor Muhammad it will be seen that instead of writing 16-2-1999 as the date of filing of Bills of Entry, in two of these cases it has been erroneously shown as 16-12-1999. In the case of Abdul Sattar Noor Muhammad the number given is 32/1999 and the date shown is 16-2-1999. However, in the immediately preceding case of Ahmed Steel the number given is 31/1999 i.e. one number earlier) but the date is 16-12-1999. Perhaps having been misled by this factual error the contention of the appellants that Bills of Entry were filed in December and January 1999 was rejected although admittedly in the case of Dewan Scrap the date of filing of Bill of Entry is correctly shown as 28-12-1998 but this seems to have been disregarded by the court). Furthermore, for purposes of rejection of the petitions reliance was placed on the following extract from the judgment in the case of the Collector of Customs Karachi and others v. New Electronic (Pvt.) Limited and 59 others (see PLD 1994 SC 363) which is reproduced below:--

"Adverting to the last submission of Mr. Sharaf Faridi that in case this Court holds that there was no infirmity in the above Ordinances and the notifications, the cases should be remanded to the High Court to examine the question, whether the valuations of the various items of goods were fixed reasonably or the same were arbitrary."

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I have given my serious thoughts to the above submission and I am of the view that reasonableness of the various valuations fixed for various items of goods cannot be subject-matter of an enquiry in exercise of Constitutional jurisdiction by the High Court. The above controversy requires thorough factual probe into the matter on the basis of materials to be brought on record by the parties."

However, unfortunately no notice was taken of the earlier judgment authored by the same learned Judge in the Phassco case (the relevant passage has been reproduced in para 24 above). Furthermore, it was also not noticed that in the New Electronics case the principal issue was a challenge to the Finance Ordinance, 1988 on the ground that the Ordinance had been re-promulgated by the President which it was stated was unconstitutional. What had transpired in that case was that because the Assembly had been dissolved it was not possible to have a Finance Act passed and accordingly the President re-promulgated the Finance Ordinance which was then impugned before the Court. The finding was that although, generally speaking, an Ordinance cannot be re-promulgated in the special circumstances of the case this could be considered justifiable. The paragraph reproduced above appears at the tail end of the judgment and rejects the contention which was raised, which was apparently a completely generalized one, to the effect that all the prices fixed for all the items of goods in the notification under section 25B should be rejected by one stroke of the pen. This would have entailed a detailed ab initio examination right across the board which the court declined to do. Apparently in this case no attempt was made to establish that some particular price had been fixed in violation of the evidence which was made available but instead the challenge was based on the constitutional ground that since the Finance Ordinance had to go as a whole hence all prices fixed thereunder were also to be struck down across the board irrespective of the merits. This view was rejected by the court which held that fixation of prices related to factual matters, but that does not, by any stretch of law, mean that prices fixed in violation of criteria determined by the Customs Department itself under section 25B could be disregarded.

28.We now turn to the judgment in the second set of cases in which the argument advanced on behalf of the department was that it was not mandatory for the Controller of Customs to revise the ITPs after three months. We have already held supra that this view is not valid. Further, the contention that the petitioners did not submit any evidence before the department and hence the Collector of Customs had no option but to assess the value per the ITP earlier fixed is equally incorrect per the record. Reliance was also placed by the department on the case of Messrs Madina Traders v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 4 others (1999 SCMR 63) in support of the contention that question of facts cannot be agitated in constitutional jurisdiction. While it is clear that, generally speaking, the High Court in the exercise of its constitutional jurisdiction does not decide questions of disputed facts, this does not mean that decisions which are manifestly arbitrary, based on no evidence, or contrary to the record and not justified by law will he upheld. In this case of course there is a direct violation of the Parameters which itself distinguishes the case. In the circumstances the findings in the second judgment also cannot be maintained.

29.We now turn to the limit point. The question is what would be the appropriate order to be passed in the present set of cases. It seems to us that there are two possible options. Firstly, we could direct the Department to decide the case of each importer individually under section 25. The second option is to remand the case for the exercise of the power under section 25B as it was then in place. It may be clarified that section 25B was subsequently repealed. The rationale for this would be that cases have to be decided on the basis of the law as it stood at the relevant time. Hence, it would follow that any decision now made would relate back to that point of time. We have been informed that the designation of the dealing officer is no longer that of Controller Valuation but the Director General Valuation. On the whole we have come to the conclusion that the second option would be the better one. In either case the original decision would be struck down but the question of a fresh determination will now take place not on a case by case approach, but by a generalized approach which is in line with the spirit of the law as was then in place. The cases are accordingly remanded to be decided in the light of the criteria set out herein. In case of an adverse decision, the appellants will of course be entitled to challenge the same in accordance with law. Since a great deal of time has already elapsed, the respondents are directed to dispose of these cases expeditiously, after giving a hearing to the appellants, within 60 days on the basis of the evidence which was then available and brought on record and as referred to in the earlier paragraphs of this judgment. We would like to place on record our appreciation of Mr. Anwar Kamal, learned Senior Advocate Supreme Court for having taken out the time to appear in the matter as an amicus curiae. All the cases are disposed of accordingly.

MWA/A-5/SCOrder accordingly.