COLLECTOR OF CUSTOMS through Additional Collector of Customs VS MUHAMMAD SHAFIQUE, 2016 PTD-KARACHI-HIGH-COURT-SINDH 1175 (2016)

Customs Act (IV of 1969)---

----Ss. 32, 33 & 196---Reference---Refund of excess customs duty---Classification of goods---Determination---Importer sought refund of excess custom duty on the ground that motor vehicle imported by him had seating capacity of ten persons falling under PCT HS Classification 8702.9090 whereas, duty was charged by him under PCT HS Classification 8703.2490 declaring the vehicle as limousine motorcar---Validity---Motorcars were smaller objects as compared to motor vehicles, therefore, as soon as a motor became capable of transporting 10 or more persons, it had traveled from the nomenclature of 'car' into a 'vehicle' and at the same time it shifted from PCT HS Code 8703 to PCT HS Code 8702---Vehicle in question was meant to transport 10 or more persons (including driver) and qualified to fall under PCT HS Code 8702 as the explanatory notes provided that PCT HS Code 8702 covered all motor vehicles designed for transport of 10 or more persons without any use of the same as public transport vehicle or private and without making any conditionality to vehicle's interior configuration being luxury or otherwise---Vehicle in question correctly fell under PCT HS Classification 8702.9090---High Court directed the authorities to comply with refund process---Reference was dismissed in circumstances.

2011 PTD 2175 rel.

Mrs. Masooda Siraj for Applicant.

Muhammad Azfal Awan for Respondent.

Date of hearing: 3rd December, 2015.

JUDGMENT

ZULFIQAR AHMAD KHAN, J.---This order will dispose of the reference arising from the Customs Appellate Tribunal dated 09.02.2015. The substantial question urged by the Applicant is whether a refund claim of Rs.5,337,202 filed on behalf of the importer in respect of a vehicle imported under PCT HS Classification 8702.9090 (however, due to typographical error it has been typed as 8703.2490) could be made out or not. The key question arising therefrom is whether the vehicle in question should be classified under HS 87.02 or HS 87.03, since both the classifications attract different duties.

2.The brief facts are that the Respondent imported a used vehicle from USA and filed goods declaration on 16.08.2012. The GD was filed under PCT HS Classification 8703.2490 and the vehicle was released after payment of duty and taxes amounting to Rs.6,322,899. However, on 26.07.2013 the importer filed a claim for refund amounting to Rs.5,337,202 on the ground that since the vehicle is meant for transport of ten or more persons (including the driver) thereby appropriately falling under HS classification 8702.9090 in respect whereof the customs duty is charged @20%, instead of 100% customs duty paid by him erroneously declaring the vehicle falling in classification 8703.2490. The matter reached the Collector of Customs, who vide his order refused the refund claim relying inter alia on the CGO No. 12/2002 which, as per his interpretation, provides that in order to qualify under HS 87.02, a vehicle has to be a bus or coach designed for transport of ten or more persons (including the driver), whereas, the vehicle in question is a limousine falling under PCT Heading 8703.2490. The Respondent felt aggrieved and approached the Tribunal by way of appeal where the impugned order was passed in favour of the Respondent.

3.Heard both the learned counsel. The counsel for the Applicant asserted that once (i) an importer has filed a goods declaration, (ii) made the payment and (iii) goods are released, the assessment attains finality and by making the refund claim, the Respondent is guilty of making a false statement which is cognizable under Section 32 of the Customs Act, 1969. But when the learned counsel's attention was drawn towards Section 33 ibid which provides that a refund claim could be made within one year if an importer has over-paid through inadvertence, error or mis-construction, the learned counsel consented to this observation of the Hon'ble Court. The learned counsel also agreed that the refund claim as made within one year is not hit by the said statutory deadline. In the later part, thrust of the counsel's argument was towards the interpretation of the HS Code. The learned counsel was of the view that since the vehicle is a luxury limousine, it cannot be classified under HS 87.02 and rightly falls under HS 87.03, therefore the claim of refund is unfounded. In support of her contentions, reliance was made on the case reported as 2011 PTD 2175.

4.The learned counsel for the Respondent vehemently argued and put forward a case that there is no bar under HS 87.02 to include luxury vehicles having capacity of ten or more persons (including the deriver). He stated that the vehicle in question passes this criteria of 87.02 as per the physical configuration of the vehicle, as well as, as per the certificate provided by the importer from the supplier of the said vehicle from USA, wherein the vehicle is certified to have seating capacity of total 18 persons with 2 passengers in front and 16 in the rear. Challenging the said averment, the learned counsel for the Applicant drew court's attention to the product brochure of the vehicle in question submitted by the importer himself along with his goods declaration which states that standard seating capacity of the vehicle is for five passengers. The learned counsel for the Applicant argued that the certificate submitted by the Respondent in support of his refund claim is back-dated and it is an afterthought.

5.As stated in the opening paragraph, the entire controversy could be resolved if the question about the appropriate classification and applicable HS Codes for the said vehicle is answered. To understand the differences between HS Codes 87.02 and 87.03, we seek guidance from HS Codes' explanatory notes published in the Customs Tariff, which forms Schedule to the Customs Act, 1969. Codes and their respective explanatory notes are reproduced hereunder:--

6.A plain reading of the above explanatory notes reveals that HS 87.02 uses words "Motor vehicles" whereas HS 87.03 uses words 'Motor cars'. Common sense dictates that motor cars are smaller objects as compared to motor vehicles, therefore as soon as a motor (defined to mean 'a machine powered by electricity or internal combustion engine that supplies motive power') becomes capable of transporting ten or more persons it travels from the nomenclature of a 'car' into a 'vehicle' and at the same time it shifts from HS Code 87.03 to 87.02. Speaking in terms of transportability, it could also be said that HS 87.02 means a motor vehicle designed for the transportation of ten or more persons (including the driver), whereas HS 87.03 deals with either cars or other motor vehicles principally designed for the transportation of less than ten persons.

7.Now we draw our attention to the CGO No. 12/2002 which lists distinguishing features in order to classify vehicles under applicable HS Codes. The CGO is titled "Classification of Transport Vehicles" and the relevant guidelines provided by the said CGO are reproduced as under:

a.To classify a vehicle under HS Code 87.02, the vehicle has to have following characteristics:

i.Fitted with 10 or more seats, by the manufacture, including the driver's seat and jump seat;

ii.Fitted with driver and front seat with empty rear portion/compartment.

iii.For this category, the manufacturer or the recognized sole agent or the sole distributor on behalf of the principal i.e. manufacturer shall certify that the vehicle is originally designed by the manufacturer for transport of ten or more persons.

8.A combined reading of the HS explanatory notes and the above referred CGO reveals that HS 87.02 refers to transportability (i.e. "seating capacity" whereas CGO refers to "seats" for ten or more persons. Using this barometer, we can now look at the vehicle in question, which as per the Applicant, has 5 seats but as per the Respondent, as well as, as per the certificate provided for the satisfaction of condition (a)(iii) of the above referred CGO, the vehicle has transportability (seating capacity) of 2 passengers in the front and 16 passengers in the rear i.e. capability of transporting 18 persons in total. This fact is not disputed by the Applicant. Since HS Code forms part of the Customs Act, 1969 in terms of a Schedule thereof, we would consider the requirement of having more than ten seating capacity over the requirement of having more than ten seats statutorily superior and desirable to sail through the scheme of the Customs Act, 1969. We tend to think that as soon as a vehicle by its internal configuration attains seating capacity of more than ten persons (irrespective of the number of seats), it would correctly depart from HS 87.03 and would fall in HS 87.02. Therefore for all the purposes of the Act, as soon as the said requirement of ten or more persons, seating capacity is met, HS 87.02 is in compliance, and unless the seating capacity is found to be less than ten persons, there are no other conditions or stipulations to keep a vehicle away from HS 87.02 keeping in mind that HS 87.03 specifically excludes motor vehicles covered under HS 87.02, which makes 87.03 a residual entry in nature.

9.Since departure from HS 87.02 to HS 87.03 is resulting in severe financial implications to the importer on account of payment of excessive duties, a very careful consideration should be given to proper classification of the imported goods in order to place them in appropriate HS Codes keeping in mind that there is no room for any intendment and there is no presumption as to a fiscal imposition. As it is a well settled principle that fiscal statute demands strict construction and it must never be stretched against a tax payer, so long natural meaning of the explanatory note of HS classification are adhered to then a strange meaning thereto should not be given. It is also well-settled rule that before taxing a person it must be shown that he falls within the ambit thereof by clear words used in the statute as no one can be taxed by mere implications. Therefore while interpreting valuation or classification, one cannot lose sight of the legal text contained in the notes explaining the HS codes. Hence in complete fairness no undue advantage should be taken and no extra duties should be charged from the Respondent who because of an inadvertent error wrongly classified his import to fall in PCT classification 8703.2490 (instead of 8702.9090) and made timely application for correction of the said error and applied for a refund in time.

10.With regards to the case law cited by the learned counsel of the Applicant being PTCL v. Federation of Pakistan reported as 2011 PTD 2175, wherein the Hon'ble High Court of Sindh has held that under Section 29 of the Customs Act, 1969 no amendment in the Bill of Entry can be allowed once the goods have been cleared and with regards Section 33, the Hon'ble High Court held that since, in that case, the goods were already consumed in large quantities, the refund claim was an afterthought and the petitioners were not entitled to any relief. Facts and controversies of the matter in hand are quite different as in the instant case there is no dispute as to the value of the goods. The dispute is about proper classification. Goods though have been released by customs, but due to their nature, goods are not consumable and once a decision as to the appropriate classification is made and claim of the refund is held to be just and proper, there is no estoppel and a refund can be made.

11.For the reasons detailed above, inasmuch as there is no dispute that the vehicle in question is meant for transport of ten or more persons (including the driver), it qualifies to fall under HS 87.02 as the explanatory notes clearly provide that HS 87.02 covers all motor vehicles designed for the transport of ten or more persons without making any distinction about the use of the same as public transport vehicle or private; and without making any conditionality to the vehicle's interior configuration being luxury or otherwise. We therefore are of the opinion that the vehicle in question correctly falls under PCT HS Classification 8702.9090.

12.The question of law framed in the present reference therefore is answered in favour of the Respondent.

13.The reference application is consequently dismissed and the Department is directed to comply with the refund process accordingly.

14.The office is directed to send copies of this judgment under seal of this Court to the Tribunal in respect of the above reference application pursuant to section 196(5) of the Customs Act, 1969.

MH/C-2/SindhReference dismissed.