RAY SHIPPING ENTERPRISE LTD. VS ASSISTANT COLLECTOR OF CUSTOMS
2016 P T D 2760
[Sindh High Court]
Before Irfan Saadat Khan and Zafar Ahmed Rajput, JJ
RAY SHIPPING ENTERPRISE LTD.
Versus
ASSISTANT COLLECTOR OF CUSTOMS and others
C.P. No.D-979 of 1995, decided on 19/04/2016.
Customs Act (IV of 1969)---
----Ss.19(3) & 82---Notification S.R.O. No.487(I)/94, dated 9-6-1994---Recovery of customs duty---Doctrine of promissory estoppel ---Applicability---Notice for recovery of customs duty was given to petitioner company who imported ships but subsequently, the same was broken-up---Validity---Concession was subject to condition that if ship was subsequently to be broken by importer, concession/exemption would stand withdrawn and person importing ship would be liable to pay duties and taxes at the rate as applicable at the time at which ship in question was imported---Petitioner did not have any vested right created in its favour and principle of promissory estoppel was also not available to petitioner in view of S. 19(3) of Customs Act, 1969 which provided that no benefit/vested right/exemption could be claimed by a person on basis of doctrine of promissory estoppel ---Concession granted by government functionaries ceased to take effect as imported ship was subsequently broken-up---Provisions of Notification S.R.O. No.487(1)/94 was squarely applicable to petitioner who was liable to pay due duties and taxes---Constitutional petition was dismissed accordingly.
Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; Collector of Central Excise and Land Customs and 3 others v. Azizuddin Industries Ltd., Chittagong PLD 1970 SC 439; Raja Industries (Pvt.) Ltd. through General Manager v. Central Board of Revenue, Government of Pakistan, Islamabad through Chairman and 4 others 1996 MLD 980; Messrs M. Afzal and Sons and 2 others v. Federal Government of Pakistan, Islamabad through Secretary, Finance and another PLD 1978 Lah. 468 distinguished.
Muhammad Afzal Siddiqui and Rana Ikramullah for Petitioner No.1.
Nemo for Petitioner No.2.
Kashif Nazeer for Respondents Nos. 1, 2, 6 and 7.
Captain Rashid Anwer, Chief Nautical Survey Officer along with Fazal Abbas Dealing Assistant for Respondent No.3.
Asim Mansoor Khan, Deputy Attorney General for Respondents Nos.4 and 5.
Dates of hearing: 25th, Feb, 10th and 17th March, 2016.
JUDGMENT
IRFAN SAADAT KHAN, J.---The instant petition has been filed with the following prayers:--
1.That the demand made by Respondents Nos. 1 and 2 be declared null and void ab initio and the respondents Nos. 1 and 2 be directed to clear the said ship in accordance with the Exemption Notifications (as defined above) and the Respondent No.3 directed to issue a Deletion Certificate to the Petitioner accordingly.
2.In the alternative, the Respondents Nos.1 and 2 be directed to allow the Petitioner to cancel the Bill of Entry for import of ship for trading filed by the Petitioner and the said ship be considered to have been imported for breaking-up and the Respondent No.3 be directed to issue a Deletion Certificate accordingly.
3.If the effect of the Notifications Nos. 487(I) of 1994 and 562(I) of 1994 is to make the said ship chargeable with the duties and taxes as provided under these notifications then the same may kindly be declared ultra vires and null and void.
4.Without prejudice to the above and without admitting or cancelling any other liability, the petitioner is not in any case liable to payment of sales tax.
5.The petitioner seeks enforcement of its fundamental rights of equal treatment under and equal protection of law as per Article 25 of the Constitution of the Islamic Republic of Pakistan.
Any other relief that this Hon'ble Court may deem fit and necessary in the circumstances of the case may also graciously be granted.
2.Briefly stated the facts of the case are that the petitioner No.1 (the petitioner) is a Public Limited Company and is engaged in the business of merchant shipping. That the respondent No.3, vide notification dated 25.04.1992, granted certain trade incentives and concessions for private investment in the shipping industry. That the Economic Coordination Committee (ECC) also, vide its decision dated February 24, 1993 granted exemption and trade incentives to encourage investment in shipping industry in private sector thereby granting exemption from import fees, duties and taxes on the import of ships upto the period of December 31, 1995. That the said decision of the ECC was enforced and implemented through various notifications issued from time to time by the concerned authorities. That in the said notifications though on one hand it is mentioned that ships imported under the said scheme would be exempted from all taxes and duties however if the ship so imported is subsequently broken up, the same shall be chargeable with the duties at the rates applicable to a ship imported for breaking up purposes. That the petitioner in order to avail the incentive applied to the Director General of Ports and Shipping for a licence to own and operate ships under the national flag, which was granted by the respondent No.3, vide licence dated 10.11.1993.
3.The petitioner also applied on 08.12.1993 to the Technical Committee of the Ports and Shipping to approve the purchase of a ship, namely, MV Enterprise Sky, which also was granted, vide letter dated December 13, 1993. The petitioner then applied to the respondent No.3 for the customs clearance in order to bring the ship in Pakistan, which permission was granted vide letter dated 19.12.1993, subject to the condition that the petitioner should first submit indemnity bond which was also furnished and thereafter the ship was registered under the Pakistani flag on 18.02.1994. Thereafter the said ship carrying a cargo of iron ore for Pakistan Steel Mills called at Bin Qasim Port on February 2, 1995. The ship was then given port clearance after fulfillment of legal formalities on 11.02.1995. In the meantime the respondent No.1 issued a notice dated 28.03.1995 under Section 82 of the Customs Act, 1969 (the Act) mentioning therein that since the ship has not been cleared, the same may be cleared within 14 days.
4.The petitioner then approached the customs authorities with the request that no customs duties are payable on the import of ship by them hence the notice issued by the customs authorities is uncalled for. In the meanwhile the petitioner carried out an extensive survey of the ship and it revealed that the ship requires major repairs and thereafter as per the petitioner they decided that rather than spending a huge amount on the repairs the ship may be broken up and for that purpose the petitioner applied to the Collector of Customs under Section 79(3) of the Act for substitution of the bill of entry. In the meantime the petitioner entered into an agreement with the petitioner No.2 for the sale of ship and thereafter the ship was beached at Gadani, for breaking up purposes. The customs authorities however did not accept the stance taken by the petitioner and asked them to pay the import duty on the ship as per the notification No.S.R.O. 487(I)/94 and the Bill of Entry furnished by the petitioner was returned without assessment and the petitioner was asked to pay an amount of Rs.26,656,168/- being chargeable on the import of the said ship. It is against the impugned demand that the present petition has been filed.
5.Previously, vide order dated 25.06.2002, the instant petition was disposed of by this Court by observing as under:--
20. For the foregoing reasons we would accept this petition to the extent that the petitioner No.1, who had imported the vessel, would be liable to pay 10% customs duty and sales tax. The petitioner No.2, who was subsequent purchaser of the vessel, would not be liable to pay any customs duty and other taxes. The bank guarantee furnished by the petitioner No.2 before this Court stands discharged. The scrap, if any, lying at Gadani would be released in favour of petitioner No.2.
6.Thereafter the petitioner filed leave to appeal before the Hon'ble Supreme Court of Pakistan and the Hon'ble Supreme Court, vide order dated 28.10.2009, remanded the matter for fresh decision by observing as under:--
"After advancing their respective arguments at some length, learned counsel for the parties present in Court candidly conceded that one of the crucial controversy involved in the petition before the High Court, as to whether the petitioner No.1 was not liable to pay customs duty and sales tax claimed by the respondents Nos.1 and 2 (Port Bin Qasim) or it was not recoverable from him, has been left undecided. Further, they did not dispute that passing of impugned judgment by the Division Bench of the High Court of Sindh after more than eight months to the hearing of the petition has resulted in overlooking many material aspects of the case.
2.In view of the above and by consent, the impugned judgment dated 04.10.2001 passed by the Division Bench of the High Court of Sindh, Karachi in Const. Petition No.D-979 of 1995 is set aside and the case is remanded for fresh decision in accordance with law. Interim arrangement, if any, made earlier shall remain operative till the final disposal of the petition. It is expected that on remand the petition will be heard and disposed of within three months from the date of communication of this order.
7.Messrs Muhammad Afzal Siddiqui and Rana Ikramullah Advocates have appeared on behalf of the petitioner and submitted that it was only the ships imported for breaking up purposes that the customs duties and taxes were leviable and the respondents were not justified in imposing customs duties and taxes on the ship imported by the petitioner, as per the incentive granted by the Federation. While elaborating their viewpoint, they submitted that a complete package of time based exemption and trade incentive was announced by the Government of Pakistan (GoP) to encourage investment in shipping industry in private sector and in this regard several notifications were issued by the GoP. They submitted that in order to avail the said incentive the petitioner also imported a ship, however due to the circumstances beyond their control they had to sell out the ship for breaking up purposes since the same required major repairs which they could not afford.
8.As per the learned counsel, it was never the intention of the petitioner to import the ship for breaking up purposes but the sole object for importing the ship was to carry on business. They further submitted that all the legal formalities with regard to import of the ship were duly fulfilled by the petitioner, which is evident from the various annexures annexed with the instant petition. They submit that no doubt it has clearly been mentioned in the notification that if a ship is imported and subsequently broken up the tax exemption granted would not be available to it but equal true is the fact that the petitioner never imported the ship for breaking up purposes, as is evident from the correspondence made between the petitioner and the respondents wherein, according to the learned counsel, the stance of the petitioner that the said ship was imported for business purposes impliedly has been endorsed and accepted by the respondents.
9.The learned counsel further submit that it is the Port Qasim Authorities who kept the ship under arrest for three months due to which the ship had to undergo major repairs. They further state that due to those unavoidable circumstances the petitioner had to sell out the ship for breaking up purposes, since the circumstances went beyond their control. They further submit that the respondents erred in not accepting the revised Bill of Entry furnished by the petitioner. The learned counsel in the alternative submit that since the petitioner have sold out the ship to Messrs Irfan Trading Company, who are petitioner No.2 in the instant petition, hence, the demand of customs duty and taxes raised by the respondents could not be demanded from the petitioner (No.1) and the demand if any raised by the respondents should be recovered from the petitioner No.2.
10.The learned counsel further state that rights of the petitioner is protected by the principle of promissory estoppel also, as a benefit given earlier could not be taken away subsequently. In the end they submit that since the imposition of the customs duties and charges on the petitioner are illegal and uncalled for the same may be deleted. In support of their above contentions, the learned counsel have placed reliance on the following decisions:
1.Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641.
2.Collector of Central Excise and Land Customs and 3 others v. Azizuddin Industries Ltd., Chittagong (PLD 1970 Supreme Court 439)
3.Raja Industries (Pvt.) Ltd. through General Manager v. Central Board of Revenue, Government of Pakistan, Islamabad through Chairman and 4 others (1996 MLD 980)
4.Messrs M. Afzal and Sons and 2 others v. Federal Government of Pakistan, Islamabad through Secretary, Finance and another (PLD 1978 Lahore 468)
11.Nobody has appeared on behalf of the petitioner No.2 despite service.
12.Mr. Kashif Nazeer Advocate has appeared for respondents Nos.1, 2, 6 and 7 and vehemently refuted the arguments of the learned counsel for the petitioner and stated that the petitioner has played fraud with the incentive given by the GoP as they have fraudulently imported the ship for breaking up purposes by terming the same as an import for business purposes. He stated that no doubt legal formalities for import of the ship were fulfilled by the petitioner but equal true is the fact that the said ship has not conducted even a single business voyage for the said purpose as they have not brought out any item for their so called business purposes from any port of Pakistan. As per the learned counsel the sole intention of the petitioner was to import a ship for breaking up purposes and to take undue advantage of the incentive given to the importers of the ships which is evident from the facts obtaining in the instant petition.
13.According to the learned counsel when the customs authorities unearthed the fraud played by the petitioner by not accepting their revised Bill of Entry only thereafter the petitioner started raising hue and cry in the instant matter and has now tried to shift the burden of payment of duties/taxes etc. on the petitioner No.2, with mala fide intention. As per the learned counsel the parameters provided under S.R.O. 482/92 and S.R.O. 487/94 are quite clear and no lease in this behalf could be granted to the petitioner since they have imported the ship for breaking up purposes, hence, they are liable to pay the customs duties and taxes in accordance with law. The learned counsel further submitted that the said ship was imported just to defeat the incentive granted by the GoP and to deprive the exchequer to the extent of Rs.26,656,168/-, which is a huge amount. He further submitted that the petitioner without obtaining permission and by filing relevant documents to the respondents entered into a contract with petitioner No.2 who docked the ship at Gadani Beach for breaking up purposes, which also proves their mala fide intention.
14.The learned counsel further submitted that the petitioner have violated the provisions of Section 32 of the Act by way of misdeclaration and thereafter approaching this Court by filing the instant petition with unclean hands. He submitted that mala fide on the part of the petitioner is evident from the fact that instead of availing departmental remedies they have filed the instant petition. Hence, as per the learned counsel, this petition is premature and is liable to be dismissed. The learned counsel then read out the relevant portion of SRO 487/94 and various other notifications to prove that the petitioner is liable to pay the demand raised by the customs authorities. The learned counsel, in the end, has prayed that since the petitioner is liable to pay the amount of the customs duty and the taxes raised by the department, the instant petition may be dismissed with heavy cost.
15.Mr. Asim Mansoor Khan, Deputy Attorney General has appeared for respondents Nos.4 and 5 and has adopted the arguments of Mr. Kashif Nazeer and has stated that this petition is liable to be dismissed.
16.Captain Rasheed Anwar, Chief Nautical Survey Officer of respondent No.3 along with Mr. Fazal Abbas, Dealing Assistant for Registration of Ships, have appeared on behalf of respondent No.3 and stated that they are only a proforma party and whatever orders are passed by this Court would be complied with by them in letter and spirit.
17.We have heard all the learned counsel at considerable length and have also perused the record and the decisions relied upon by the learned counsel for the petitioner (No.1).
18.Before proceeding any further we would like to reproduce hereinbelow the relevant notifications and various concessionary orders issued from time to time:--
GOVERNMENT OF PAKISTAN
MINISTRY OF COMMUNICATIONS
(PORTS AND SHIPPING WING)
**** **** ****
Karachi, the 25th April, 1992.
NOTIFICATION
SUBJECT: concessions/incentives for private sector investment in shipping.
F.No.3(2)/91/II-Sh.(Vol-II). In order to encourage private sector investment in shipping, the Government has taken the following decisions which shall be applicable with immediate effect:--
(a)There would be no restriction on the age of ships which the licensees can import. This permission would, however, be subject to the condition that the ships possess sea worthiness certificates issued by recognised classification societies. Secondly, the licensees/importers will provide indemnity bonds to the effect that if such a ship is to be scrapped at any time they will report it to the Customs and pay all the import duties etc., before the ship is condemned for scrapping. (Underline ours)
- - - -
Incentives for the Shipping Industry.
Decision
The Economic Coordination Committee of the Cabinet (ECC) took note of the Summary dated 14-1-1993 submitted by the Communications Division and decided as under:
i).. .. .. .. .. .. .. ..
ii)
iii)Duties and Levies
Import of ships would be exempted from all fees and duties for the period upto December, 1995.
GOVERNMENT OF PAKISTAN
MINISTRY OF FINANCE AND ECONOMIC AFFAIRS
(REVENUE DIVISION)
******
Islamabad, the 18th April, 1993.
NOTIFICATION
(CUSTOMS)
S.R.O.(sic) (I)/93.- In exercise of the powers conferred by subsection (2) of section 5 of the Finance Act, 1985 (I of 1985), the Federal Government is pleased to direct that the following further amendment shall be made in this Ministry's Notification No. S.R.O. 481(I)/88, dated the 26th June, 1988, namely:-
In the aforesaid Notification, in the Table, after S. No. 54 in the first column and the entry relating thereto in the second column, the following new serial number and the entry relating thereto shall be added, namely:--
"55. Ships falling under heading Nos. 89.01, 89.02, 8903.9900, 8906.0010 and 8906.0900, if imported and subsequently broken up, it shall be leviable to Iqra surcharge in the same manner and at the same rate as is applicable at that time, to ships imported for breaking up. This exemption shall be valid up to 31st December, 1995." (Underline ours).
- - -
GOVERNMENT OF PAKISTAN
MINISTRY OF FINANCE AND ECONOMIC AFFAIRS
(Revenue Division)
NOTIFICATIONS
Islamabad, the 18th April, 1993
CUSTOMS
S.R.O. 299(I)/93.- In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsection (1) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the following further amendment shall be made in this Ministry's Notification No. S.R.O. 482(I)/92, dated the 14th May, 1992, namely:-
In the aforesaid Notification, in the Table, against sub-heading number, 89.01, 89.02. 8903.9900, 8906.0010 and 8906.0090 in column (2) for the entries relating thereto in columns (3) and (4) following shall be substituted namely:-
"Free If imported and subsequently broken up, it shall be leviable to customs duty and sales tax in the same manner and at the same rate as is applicable at that time to ships imported for breaking up. This exemption shall be valid up to 31st December, 1995". (Underline ours)
S.R.O. 482(I)/92:--
TABLE
| Description of goods | Heading sub-Heading Nos. | Rate of duty | Conditions |
| 1 | 2 | 3 | 4 |
| Ships | 89.01, 89.02 | 10% ad val. | If imported and subsequently broken up it shall be leviable to sales tax in the same manner and at the same rate as is applicable at that time to ships imported for breaking up (Underline ours) |
- - - -
S.R.O. 440(I)/93.-
"(28) for import of ships for the period upto the 31st December, 1995".
GOVERNMENT OF PAKISTAN
MINISTRY OF COMMUNICATIONS
(PORTS AND SHIPPING WING)
----------------
No.3(2)040-Sh. II/91.Karachi, the 13th Dec., 1993.
From:Ishrat Ahmed,
Section Officer.
To:The Chairman and Chief Executive,
Ray Shipping Enterprises Ltd.,
1st Floor, Hakimsons Building,
19-West Wharf Road,
Karachi.
Subject:ACQUISITION OF ONE SECOND HAND VESSEL M V. ENTERPRISE BY M/S. RAY SHIPPING ENTERPRISES LTD.
Dear Sir,
I am directed to refer to your letter dated 8th December, 1993 regarding the subject noted above and to convey that the Technical Committee in the Ports and Shipping Wing had examined the particulars submitted for the above vessel and has technically cleared the vessel for acquisition and subsequently placing under Pakistani flag subject to the conditions appended below:--
(a)Installation of the mandatory carriage requirements of the NAVTEX, EPIRB, and Radio-Communications for compliance with the provision of SOLAS-74 and GMDSS.
(b)No guarantee or foreign exchange facilities will be
provided by the Government of Pakistan or State Bank of Pakistan.
(c)Attention is also invited to the condition that if the vessel is to be scrapped at any time they will report it to the Customs and pay all the import duties etc. before the ship is condomned for scrapping.
2.This permission to acquire vessel is without prejudice and subject to full-filment of other necessary requirements for import into Pakistan as determined by other Government agencies.
Yours truly,
Sd/-
(ISHRAT AHMED )
SECTION OFFICER
(Underline ours)
- - - -
Government of Pakistan
Ministry of Communications
*******
Subject:REGISTRATION OF VESSELS UNDER PAKISTAN FLAG.
.. .. .. .. .. .. .. ..
2... .. .. .. .. .. .. ..
3.The procedure for registration of ships was infact changed with a view to facilitate private sector shipping companies as bringing of ship in Pakistan Ports for meeting the formality was costing them heavily. The Exemption for importing ships will expire on 31.12.1995. In view of CBR's view point, all ships registered under Pakistan Flag shall have to call on Pakistani Port before 11.12.1995 for filling up the bill of entry failing which their claim for exemption of duties may not be entertained.
- - - -
M/s. Ray Shipping Enterprises Ltd.,
First Floor, Hakim Sons Building,
19-West Wharf Road,
Karachi. Pakistan.
NOTICE UNDER SECTION 82 OF THE CUSTOM ACT, 1969.
Subject:-IMPORT OF SHIP AGAINST J.C.M NO.48/95 DATED 6.2.95 INDEX NO.2.
The above noted consignment has not been cleared nor the taxes have been paid even after the expiry of one month's time at Port Qasim.
You are required to clear the above mentioned consignment within 14 days of the issuance of this notice failing which the same shall be sold through public auction.
(Underline ours)
S.R.O. 487(I)/94
TABLE
| Sr.No. | Description of goods | Heading/ Sub-heading Nos. | Conditions | Rate of duty |
| (1) | (2) | (3) | (4) | (5) |
| 100. | Ships | 89.01,89.02 8903, 9900 8906,0010 and 8906.0090 | If imported and subsequent broken up, it shall be liable to customs duty and Sales tax in the same manner and at the same rate as is applicable at that time, to ships imported for breaking up. This exemption shall be valid upto 31st December 1995. (Underline ours) | 10% ad val |
- - - -
GOVERNMENT OF PAKISTAN
CENTRAL BOARD OF REVENUE
(CUSTOMS WING)
* * * * *
C.No. 1 (24)Tar.II/92. Islamabad the, 31st July, 1998.
SPECIAL EXEMPTION ORDER NO.90 OF 1998
SUBJECT:EXEMPTION OF CUSTOMS DUTY ON SHIPS REGISTERED BETWEEN 24.2.1993 AND 30.6.1996.
2. Now, therefore, in exercise of the powers conferred by section 20 of the Customs Act, 1969 (IV of 1969), subsection (1) of section 13 of the Sales Tax Act, 1990, and subsection (2) of section 5 of the Finance Act, 1985 (I of 1985), the Central Board of Revenue is pleased to exempt, as a special case, eleven ships listed in column 3 of the table below imported by Messrs Milwa Shipping Co. (Pvt.) Ltd., Messrs Ray Shipping Enterprises Ltd., Messrs Pakistan National Shipping Corporation and Messrs Tristar Shipping Lines Ltd., from whole of customs duty, regulatory duty, leviable under the First Schedule to the Customs Act, 1969, sales tax, and iqra surcharge:-
| S. No. | Name of Company | Name of Ship | Date of registration | GRT | NRT |
| (1) | (2) | (3) | (4) | (5) | (6) |
| 1. | . | . | . | | |
| 2. | Ray Shipping Enterprises Ltd. | 1. Enterprises-R | 18-02-94 | 35486 | 22550 |
| 3. | . | . | . | | |
| | . | . | . | | |
3. The above exemption is subject to the condition that if subsequently the ship is broken, it shall be liable to customs duty in the same manner and at the same rate as applicable at the time of its breaking, to ships imported for breaking up.
4. This order, however, shall not entitle anyone to claim or to get refund of duty already paid.
(MUHAMMAD ZAHID)
Secretary (CT-II)
- - - -
Mr. Muhammad Zahid
Secretary (CT-II),
Central Board of Revenue,
Islamabad.
SUBJECT:EXEMPTION OF CUSTOMS DUTY ON SHIPS REGISTERED BETWEEN 24.2.93 AND 30.6.96
Board's letter C.No. 1(24)Tar.II/92 dated 31.7.98 on the subject cited above refers.
2. The Board's vide order No.90 of 1998 dated 31.7.98, (copy enclosed) allowed exemption of customs duty and other taxes on the import of ships purchased by Pakistani companies between 24.2.93 to 30.6.96, provided that duties already paid would not be refunded and if subsequently the ship is broken, it shall be liable to customs duty in the same manner and at the same rate as applicable at the time of its breaking, to ships imported for breaking up.
3. The case of Messrs Rays Shipping Enterprises (Pvt.) Ltd. listed at serial number 2 of the Special Exemption Order was scrutinized which revealed that the ship did not qualify for exemption as it was broken/scrapped on 19.5.95 and was no more operational.
4. Considering the above facts this Collectorate is of the view that the name of Messrs Ray Shipping Enterprises (Pvt.) Ltd., erroneously appears amongst the names of the ships which qualify for such exemption.
5. Board is accordingly, requested that the above named ship may be deleted from the list of the Special Exemption Order.
Sd/-
for COLLECTOR
(Underline ours)
19.The only controversy requiring deliberation of this Court is whether the petitioner (No.1) was not liable to pay customs duty and sales tax claimed by the respondents Nos.1 and 2 (Port Bin Qasim) or it was recoverable from them. From the pleadings of the petitioner (No.1) it is seen that the petitioner has admitted that they will fulfill all the customs formalities if the ship is called at any Pakistani Port for the first time, for which purpose they have also furnished an indemnity bond. It is also an admitted position that a ship if imported and is subsequently broken up then the person importing it is liable to pay the duty and the taxes prevalent at the time of its import. It is the claim of the petitioner that the taxes /duties are to be paid by the petitioner No.2, who have purchased the ship from the petitioner (No.1) for breaking up purposes. Hence according to the petitioner since it was the petitioner No.2 who had assumed the liability, if any, hence the petitioner No.2 is liable to pay the duties, as they have stepped into the shoes of the petitioner (No.1). The petitioner on one hand states that the liability raised by the respondents has to be paid by the petitioner No.2, however on the other hand states that the demand raised by the respondents amounts to double claim from the petitioner as well as the petitioner No.2 simultaneously.
20.From the perusal of various notifications reproduced above it is evident that whenever concession/exemption has been provided by the GoP on the import of ship in each notification/SRO it has categorically been mentioned that such exemption is subject to the condition that if such a ship is scrapped/broken subsequently not only the person getting the said concession was bound to report the matter to the Customs Authorities but also to pay the import duty etc. before the said ship is condemned for scrap. Meaning thereby it was incumbent upon an importer of a ship that if the said ship is condemned for scrapping not only the said person has to inform the Customs Authorities but also has to pay the duties and taxes before the said ship is condemned for scrapping. It is also an admitted position that an indemnity bond, before importing the ship, was furnished by the petitioner which proves their acceptance that they would abide by all the relevant terms and conditions, as issued by the GoP. It is observed that the moment the petitioner decided that the ship is to be scrapped, in our view, not only they were liable to report the matter to the Customs Authority but also for payment of duties and taxes since they themselves have indemnified in this behalf by executing a bond. Hence, in our view, the petitioner could not now turn around by denying the payment of the duty and the taxes imposed by the respondents or by shifting the burden of these duties /taxes upon the petitioner No.2 by stating that since they have stepped into the shoes of the petitioner, therefore, they are contractually and legally bound to pay the due liabilities.
21.It is further seen that in the agreement entered between the petitioner (No.1) and the petitioner No.2, the petitioner No.1 has categorically agreed that they will provide a counter indemnity to the seller i.e. petitioner No.2 and they will take over all obligations and liabilities of customs duty, sales tax and all other duties chargeable on the vessel. It is thus evident that the petitioner has assumed all the liabilities arising out in respect of the breaking up of the vessel and the petitioner No.2 has been indemnified from the payment of the duty and the taxes. Hence how could the petitioner now shift the liability of payment of duties/taxes on the petitioner No.2 which is not understandable.
22.It is also evident from the record that the ground taken by the petitioner with regard to the promissory estoppel is not available to them since there is no subsequent withdrawal of any concession by the GoP as in all the notifications/SROs, referred to above, it has categorically been mentioned that exemption/concession would only be available on the import of the ship, if the same is not subsequently broken up/scrapped. Hence, we are afraid that the assertion made by the learned counsel for the petitioner with regard to promissory estoppel is not available to them. The decisions relied by the learned counsel in this regard are thus found to be distinguishable as in all these judgments; concession granted to certain persons was subsequently withdrawn wherein it was observed that a vested right once created could not be subsequently withdrawn. Whereas in the present case it has categorically been provided that the concession is subject to the condition that if the ship is subsequently broken up by the importer, the said concession/exemption would stand withdrawn and the person importing the ship would be liable to pay duties and taxes at the rate as applicable at the time at which the said ship was imported. Hence on this score also, we disagree with the contention raised by the learned counsel for the petitioner that a vested right is created in favour of the petitioner. In the alternative also the principle of promissory estoppel is not available to the petitioner in view of Section 19(3) of the Customs Act, 1969 which specifically provides that no benefit/vested right/exemption could be claimed by a person on the basis of doctrine of promissory estoppel.
23.It is further noted that after the ship was got registered by the petitioner the same did not call at any of the port at Karachi nor the petitioner presented the same for rummaging and inspection etc. for the verification of the tonnage/year of manufacture etc. It is also a matter of record that the petitioner filed a bill of entry under Section 83 read with Section 30 of the Customs Act, 1969, by claiming exemption from the duties on the basis of exemption notifications referred to above, which was accepted by the customs authorities. However when the petitioner decided to scrap the ship, a letter was written by the Customs Authorities to them that since the ship is now to be scrapped by them they are liable to pay the duties and taxes on the said ship at the rate of duties and taxes as applicable on the date of its import as provided under the provisions of S.R.O. 487(I)/94 dated 09.06.1994. There is no denial to the fact that the ship imported by the petitioner was subsequently broken up hence, in our view the provisions of S.R.O. No.487(I)/94 are squarely applicable and they are liable to pay the duties/taxes in the same manner and at the same rate as was applicable at the time ship was imported.
24.It is seen that the main thrust of the arguments of the petitioner was in fact shifting of the burden of duties and taxes upon the petitioner No.2, on the ground that they had expressly undertook to pay the liabilities and since it is the petitioner No.2 who had scrapped the ship and not the petitioner No.1 hence the said amount should be recovered from them. In our view this assertion taken by the petitioner appears to be fallacious and afterthought as how could they shift burden of payment of duties and taxes upon the petitioner No.2. It is also an admitted fact that it is the petitioner who after finding the ship not seaworthy decided to dismantle/scrap the same and thereafter entered into an agreement with the petitioner Not for sale; meaning thereby it was a conscious decision taken by the petitioner to dismantle/scrap the ship after finding the same not feasible for investment of huge amount. As per S.R.O. No.487(I)/94 in column (4) i.e. "Condition" it has been mentioned that a ship if imported and subsequently broken up, it shall be liable to customs duty and sales tax which means that concession granted by the Government Functionaries seizes to take effect if the imported ship is subsequently broken up. Therefore the provisions of S.R.O. 487(I)/94 in our view would squarely apply to the petitioner and they are liable to pay due duties and taxes.
25.The respondent No.3 in their comments have categorically stated that licence to operate-ship was granted to the petitioner on 01.11.1993 and subsequently permission to purchase the ship was also granted on 13.12.1993, which was subject to fulfillment of legal formalities which include customs duties etc. also. It is also noted that when the petitioner decided to break/scrap the ship they requested the Customs Authorities for the substitution of their bill of entry filed earlier to treat their ship as imported for breaking purposes. It is noted that in the reply to application under Order I Rule 10, C.P.C. filed by the petitioner No.2 it has been stated by the petitioner No.1 that "Irfan undertook to pay all or any taxes becoming due against the ship, which did become payable on breaking up", meaning thereby the petitioner admitted that duty did become payable upon breaking up of the ship however shifted the burden upon the petitioner No.2. It has further been mentioned in the said reply as under:--
"Its subsequent breaking up would entail liability to pay duties on ship-breaking, (which would be liability of Irfan). Respondents were claiming double duty i.e. both as trading ship as not being exempt and for ship breaking".
26.In view of what has been discussed above, we have come to the conclusion that it is the petitioner (No.1) who is liable to pay the customs duties and taxes and the petitioner No.2 who has purchased the ship from the petitioner are not liable to pay the duties and taxes as demanded from them by the respondents. Petition stands disposed of in the above terms, along with the listed applications.
MH/R-10/Sindh Order accordingly.