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Before Nasir Aslam Zahid and Ally Madad Shah, JJ
ASSOCIATED TRADING Co. LTD.-Petitioner
versus
THE CENTRAL BOARD OF REVENUE GOVERNMENT OF PAKISTAN AND 2 OTHERS -Respondents
Constitutional Petition No. D-943 of 1983, decided on 11th November, 1986.
(a) Customs Act (IV of 1969)-----
-- S. 19-Notifications S. R. O. No. 526(1).76 dated 5-6-1976 & S. R. O. 532(1)79-Import of consignment of concentrated and powdered milk-Exemption from payment of customs duty at time of shipment of goods subsequently withdrawn-Effect-At the time importer had placed orders for consignment of concentrated and powdered milk and when gods were shipped, liability for payment, of customs duty was there-Government, however, through Notification of 1976, had granted exemption from payment of such customs duty on imported concentrated and powdered milk-At the time when letters of credit were opened in respect of both the consignments and at the time the goods were shipped these were exempted from payment of customs duty-Subsequently Notification of 1976 granting exemption was withdrawn by another Notification of 1979-With drawal of Notification of 1976, by Notification of 1979, whereby exemption on payment of customs duty was withdrawn, held, could not affect, the vested rights created earlier in favour of importer to import such milk free from payment of customs duty-Withdrawal of such exemption from customs duty was effected not through enactment but through notification which could not adversely affect the rights already created in importer to import said consignment without payment of customs duty.
Al Samrez Enterprise v. Federation of Pakistan 1986 S C .vI R 1917 rel.
(b) Customs Act (IV of 1969)-----
--- S. 19-Constitution of Pakistan (1973), Art. 199-Constitutional jurisdiction, exercise of-Withdrawal of notification granting exemp tion from customs duty of imported goods by another notification-- Importer ordering import of goods during subsistence of previous notification whereby such goods were exempted from payment of customs duty-Vested right having been created in favour of importer to import such consignment free from duty, withdrawal of such exemption could not affect right of such importer-Imposi tion of customs duty on goods imported when exemption was in force was set aside by High Court in exercise of constitutional jurisdiction.
Khurshid Anwer Sherikh for Petitioner.
Syed Nazir Haider for Respondents.
Date of hearing : 11th November, 1986.
NASIR ASLAM ZAHID, J.-This judgment will dispose of C. P. No. D-943 of 1983 and C. P. No. D-971 of 1983. The parties are the same and identical question is also involved in both these petitions. We have heard Mr. Khurshid Anwer Sheikh, learned counsel for the petitioner and Mr. S. Nazir Haider, learned counsel for the respondents.
2. The petitioner had imported two consignments of concentrated and powdered milk. In respect of both the consignments the import licences were obtained prior to I2-4-1979. The petitioner opened irrevocable letters of credit in favour of the foreign exporter on 12-4-1979. The bill of lading in both the cases is dated 30-5-1979. The goods arrived in Karachi on 25-7-1979. The bills-of-entry were filed on 26-7-1979. The Customs Authorities, in case of both the consignments, cleared the goods on payment of sales tax. No customs duty was assessed, apparently on the ground that at that time, according to the Customs Authorities, no customs duty was payable in respect of concentrated and powdered milk. It may be observed here that according to the petitioner, sales tax was also not payable in respect of these two consignments but the question of sales tax is not the subject-matter of the present two petitions.
However, after sometime, a notice of demand was issued by the Customs Department stating that due to oversight these goods were cleared without payment of customs duty. The petitioner resisted the demand and replied that under the relevant provisions of law and notifications, the Customs Authorities had correctly come to the conclusion that no customs duty was payable by the petitioner and the goods were properly cleared. However, by orders dated 4-5-1980, the Assistant Collector of Customs came to the conclusion that customs duty was payable at the rate of 50 per cent ad valorem. Being aggrieved, the petitioner filed appeals before the Collector of Customs. In the matter of consignment covered by C. P. No. D-943 of 1983, Collector of Customs, by order dated 30-7-1981, dismissed the appeal and in the case of consignment covered by C P. No. D-971 of 1983 the Collector of Customs by order dated 30-5-1981 dismissed that appeal also. The petitioner filed revisions before the Central Board of Revenue but the Central Board of Revenue by orders dated 19-11-1983 and 20-10-1982 dismissed the revision applications. In the circumstances, the petitioner has come to this Court in both these constitutional petitions challenging the orders of the Central Board of Revenue and the Customs Authorities.
3. At the time, when the L. Cs. were opened by the petitioner to respect of import of the two consignments of concentrated and powdered milk, under the Pakistan Customs Tariff, 40 per cent customs duty a valorem had been levied on concentrated and powdered milk but under S. R. O. No. 526 (I) 76 dated 5-6-1976 the Federal Government exempted concentrated and powdered milk completely from payment of customs duty. The relevant heading in the First Schedule to the Customs Act, 1969, is 04.02. We may repeat here that the admitted position on record is that at the time the L. Cs. were opened in respect of both the consign ments and at the time the goods had been shipped, this notification dated 5-6-1976 was in operation and as observed earlier, it totally exempted the importers from payment of customs duty on concentrated and powdered milk. By the Finance Ordinance of 1979, rate of customs duty on concentrated and powdered milk was increased from 40 per cent ad valorem to 50 per cent ad valorem. This became effective on 28-6-1979. On the same day a notification was also issued by the Federal Government in exercise of powers conferred by section 19 of the Customs Act, 1969, bearing No. S. R. O. 532 (1)79 and it had the effect of deleting those provisions in the Customs Tariff, which exempted concentrated and powdered milk from payment of customs duty. The effect was that the exemption previously granted in respect of payment of customs duty on imported concentrated and powdered milk was withdrawn.
The Customs Authorities including the Central Board of Revenue have taken the view in their impugned orders that as the goods bad arrived in Karachi and the bill of entry was filed after 28-6-1979, the customs duty was payable at the rate of 50 per cent ad valorem and the exemption previously available to the importers was not available. It may also be observed here that by another notification S. R. O. No. 674(1)/79 issued by the Federal Government in exercise of the powers conferred by section 19 of the Customs Act, 1969, exemption against payment of customs duty in respect of imported concentrated and powdered milk was again granted. The notification dated 28-7-1979 specified that on and from 28-7-1979 concentrated and powdered milk be exempt from whole of the customs duty chargeable thereon.
Mr. Khursbid Anwar Sheikh, learned counsel for the petitioner, has submitted that while the 1976 notification was in force, the petitioner had taken certain steps, which created a vested right in the petitioner's favour and such right cannot be taken away by withdrawal of the notification of 1976 by notification dated 28-6-1979. According to the learned counsel, the aforesaid steps are the grant of import licences in respect of import of the aforesaid goods, opening of irrevocable letters-of-credit on 12-4-1979 in favour of the foreign exporters/suppliers and the shipment of the aforesaid goods on 30-5-1979 as evident from the dates of bills of lading in respect of both consignments. According to the learned counsel, the mere fact that the goods had 4rrived after 2 -6-1979 cannot deprive the petitioner of the vested right in respect of exemption from payment of customs duty in respect of the consignments in question.
On the other hand, Mr. S. Nazir Hyder, learned counsel for the depart ment, has contended that previously the customs duty was 40 per cent ad valorem and by the Finance Ordinance this customs duty was increased from 40 per cent. to 50 per cent. ad valorem w e.f. 28-6-1979 and this had the effect of revoking the previous exemption granted by notification of 1976. On a question from the Court, learned counsel for the department conceded that there is a notification of 28-6-1979, whereby the previous notification of 1976 was withdrawn. Learned counsel for the department further submitted that as the duty of 50 per cent had been levied by the Finance Ordinance, 1979, in the instant cases, as the consignments had arrived after 28-6-1979, customs duty was payable at the rate of 50 per cent ad valorem.
It may be made clear here that even at the time when the petitioner had placed orders for the consignments in April, 1979 and when the goods were shipped in May, 1979 according to law, the liability for payment of customs duty was there at the rate of 40 per cent ad valorem on the con centrated and powdered milk. However, the Federal Government, under the authority vested in it by section 19 of the Customs Act, 1969, granted exemption from payment of such customs duty on imported concentrated and powdered milk to the full extent. This duty of 40 per cent ad valorem was increased by the Finance Ordinance, 1979, to 50 per cent ad valorem. The Finance Ordinance, 1979, by itself did not have the effect of nullifying the notification of 1976, which had granted exemption. The notification of 1976 granting exemption had to be withdrawn by another notification and this was done on 28-6-1979. The law has been very clearly laid down by the Supreme Court in a recent decision in the case of Al-Samrez Enterprise v. Federation of Pakistan (1986SCM'R1917). In this judgment of the Supreme Court also a notification granting exemption from payment of certain customs duty was under consideration. The Supreme Court made the following observations :------
"The concept of exemption presupposes a liability and is a grant of immunity from the payment of duty which would otherwise be attracted in respect of the goods. "Non-liability" and "exemption" are different concepts, the first connotes that the subject was never in the tax net, while the latter connotes that it was, but has been permitted to escape. The mere grant of exemption under section 19 does not have the effect of modifying or altering the levy of duty under section 18 which continues to be in force. But the only legal effect is that the liability for the payment of duty that accrues under section 18 on the importion of dutiable goods is wiped off to the extent exempted. The two sections, therefore, clearly operate independently and the exercise of power under section 19, is distinct in character and scope, so that it cannot have the effect of nullifying the statutory provisions contained in section 18 whereby the charge is created by the statute itself . . . . . The subsequent notification impugned in this case was issued in exercise of statutory power and, has the force of a statutory instrument. Accordingly the Rules of statutory construction are attracted to the interpretation and determination of its legal effect. An enact ment which prejudicially affected vested rights or the legality of past transactions, or impaired contracts cannot be given retrospective operation . . . . . . . If a binding contract was concluded between the appellants and the Exporter or stamps were taken by the appellants creating a vested right to the then existing notification granting exemption, the same could not be taken away and destroyed in modification of the earlier one, on the ground that under section 21 of the General Clauses Act, the Government could exercise the power of modification . . . . . . . It will be inequitable and unjust to deprive a person who acts upon such assurance of the right to exemption and expose him to unforeseen loss in the business tran saction by suddenly withdrawing the exemption after he has made legal commitments. It is in this perspective that a right is created in his favour and a subsequent withdrawal of exemption cannot be given retrospective operation by an executive act to destroy this right."
In view of the aforesaid judgment of the Supreme Court, it is clear that the withdrawal of the notification of 1976 by notification dated 28-6 1979 could not affect the vested right created earlier in favour of the peti tioner to import the aforesaid consignments free from payment of customs duty. We may reiterate here that the Finance Ordinance, 1979, by itself did not have the effect of nullifying the notification of 1976 granting exemption from payment of entire customs duty on concentrated and powdered milk. It was the notification dated 28-6-1979 of the Federal Government, by which the previous notification of 1976 had been with drawn and in view of the law laid down by the Supreme Court in the aforesaid decision, such withdrawal notification cannot adversely affect the right already created in the petitioner to import the aforesaid consignment without payment of customs duty. In our view, therefore, the Custom Authorities and the Central Board of Revenue have taken a wrong view in these two cases by holding that customs duty was payable on the import of consignments of concentrated and powdered milk. The impugned orders of the Central Board of Revenue, Collector of Customs and Assistant) Collector of Customs (Appraisement) are declared to have been passed without lawful authority and to be of no legal effect.
There will be no order as to costs.
A. A. Petition accepted.
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