2004 PLP 2204 (PTD)

6. The alleged demand by the customs authorities for the payment of taxes, duties and penalty was an afterthought and unlawful. The customs authorities had even failed to identify the relevant provisions of the law for the charging of such taxes and duties. However, it appeared from the oral understanding given by the customs authorities to the petitioner that the customs authorities are relying on S.R.O. No.687(I)/97 and S.R.O. 562(I)/92 for charging the duties and taxes.

7. We have heard arguments advanced before us by Mr. Abdul Hafeez Pirzada, Advocate for the petitioner No.1, Mr. Akhtar Hussain, on behalf of the petitioner No.2 and Raja Muhammad Iqbal; learned Standing Counsel, on behalf of all the respondents.

8. It has been contended by Mr. Abdul Hafeez Pirzada, learned counsel for the petitioner No. 1 that the customs authorities duly accepted the declaration made by the petitioner in the bill of entry, dated 8‑2‑1995 and granted the requisite Port Clearance to the petitioner for the said ship. Even otherwise the said ship was exempted from the payment of the duties and taxes under the Exemption Notification as the exemptions granted under the said exemption notifications were applicable till 31‑12‑1995. On the basis of the said exemption and relying upon the same the petitioner purchased the said ship on 18‑2‑1994 which was permanently registered as a Pakistani Flag Vessel. The S.R.O. No. 487(I)/94, and S.R.O. No.562(I)/94 are not applicable in this case since the same tantamounts to giving retrospective effect to a notification anti it is trite principle of law that a notification cannot be operative retrospectively so as to defeat vested rights. The S.R.O. bearing No.482(I)/92 read with S.R.O. 299(I)/93 is still valid and in force and therefore, the demand of the customs authorities was illegal and in particular S.R.O. 487(1)/94 has not in any manner affected or eroded or nullified the exemptions and concessions granted thereby.

9. It has further been contended by him that the exemption notifications were protected under the Protection of Economic Reforms Act of 1992 and any action of the respondent No.1 to change the effect of such notifications .was in violation of the provisions of the Act of 1992 and, therefore, have no value in the eye of law. He has also submitted that the petitioner having changed its position to its detriment while relying upon the representations by the respondent No.5 was entitled to the benefit of the referred representation in accordance with the Doctrine of Legitimate Expectation. The customs authorities had miserably failed to follow the procedure laid down by the Customs Act, 1969 and are dealing on a hit and trial basis. The case of the petitioner falls with the ambit of section 79(3) of the Customs Act, 1969, furthermore, the act of the respondents is ultra vires of Article 25 of the Constitution of Pakistan and amounts to unequal treatment of the petitioner. Lastly, it was contended that as the ship after calling upon the Pakistan Port had not traded as a cargo carrying vessel and the petitioner immediately decided to break up the said ship, therefore, the said ship should be treated as imported for breaking up and, therefore, any levy of duty or taxes or charges other than leviable for the purpose of breaking‑up will amount to double jeopardy.

10. Mr. Akhtar Hussain, learned counsel for the petitioner No.2, during the course to arguments, had adopted the arguments raised by Mr. Abdul Hafeez Pirzada, learned counsel for the petitioner No. 1, as narrated above. ‑

11. Raja Muhammad Iqbal, learned Standing Counsel, in defence of all the respondents, had contended that the ship had been fraudulently imported as it was registered with the Marine Mercantile Department on 18‑2‑1994 but the ship at the time of registration neither called at the Port of Karachi nor presented itself for rummaging and inspection to verify the tonnage year of manufacture including the seaworthiness of the ship, it was done intentionally to defeat the effect of S.R.O. 487(I)/94, dated 9‑6‑1994 and thus to deprive the Government of the revenue amounting to approximate Rs.2,66,56,

168. The petitioner obtained the port clearance for high seas which proved that the ship was seaworthy but without seeking the permission or, filing any relevant documents clocked the ship illegally at Gadani Beach for the purpose of ship breaking the petitioners have violated provision of section 32 of the Customs Act, 1969 by misdeclaration the price as well as material facts; the petitioners neither filed any appeal against the assessment nor had exhausted the remedy available to them under the law. Huge amount of Government exchequer was involved and in order to misappropriate a sum of Rs.2,66,56,168 which the petitioners were liable to pay by way of customs duty and sales tax the petitioners have filed this petition. Under the provisions of S.R.O. 487(I)/94, dated 9‑6‑1994 the duty leviable on seaworthiship in classifiable under heading 8901.9000 at 10% customs duty on a serviceable ship. The main S.R.O. 482(I)/92, dated 14‑5‑1992 was rescinded by S.R.O. 445(I)/94, dated 9‑6‑1994. Under budgetary measures 1994‑95; that under the provisions of S.R.O. 487(I)/94, dated 9‑6‑1994 ten percent duty is leviable and the claim of the importers for the free assessment was inadmissible in law. Once bill of entry was filed for home consumption it could not be cancelled, amended or revoke except as per requisite section of Customs Act, 1969. The petitioner had filed the bill of entry under section 83 read with section 30 of the Customs Act, 1969 under the rate of customs duty and taxes, the value and rate of customs duty was applicable at the time of filing of bill of entry and he has lastly contended that on 8‑2‑1995 the petitioners had presented a bill of entry for the purpose of determination of duty and taxes under the provisions of S.R.O. 487(I)/94, dated 9‑6‑1994. He vehemently urged this Court to dismiss the petition of the petitioner being in admission in law.

12. The learned Standing Counsel has placed on record photo‑copies of certain Ordinances and authorities in support of his contentions and stated that the plaint and appeal is barred by time. Following is the list of the agitations:‑‑ (a) Ordinance XIX of 1973 Hydrogenated Vegetable Oil Industry (Control and Development) Ordinance, 1973. (b) President's Order 12 of 1979 Transfer of Managed Establishments Order, 1978. (c) Act III of 1992, Sindh Civil Courts (Amendment) Act, 1991. (d) 1992 CLC 2282 (Asghar Ali v. P.K. Shahani and 2 others). (e) PLD 1966 Dacca 231 (Amin and Co. v. Province of East Pakistan). (f) 1983 CLC 1685 (M.A. Jalil v. Group Capt. (Retd.) Salah‑ud‑Din Khan). (g) PLD 1986 Quetta 321 (Province of Balochistan v. Tribal Friends Company).

13. We have given due consideration to the arguments raised before us.

14. From the documents on record, it is clear that petitioner No. 1 had purchased the vessel i.e. MV Enterprise Sky. This particular vessel was purchased in the year 1993. The Ministry of Communications, Ports and Shipping, addressed a letter No.3(2)‑040 SH‑11/91, dated 13‑12‑1993 wherein they approved the acquisition and the placing of the vessel under Pakistani Flag. The approval was subject to certain conditions. Amongst the various conditions there was one condition which stated clearly that if the vessel is to be scrapped at any time then such information shall be conveyed to the Customs whereafter, import duties etc. shall be paid before the ship is scrapped. By virtue of this letter and looking at the Indemnity Bond, given by the Chief Executive of the petitioner No.1, it is clear that the conditions attached by the Ministry were agreed to.

15. The fact that the vessel was acquired and permission was granted for the vessel to ply with the Pakistani Flag is settled and accepted. It is also acknowledged that after the vessel arrived at the Port of Karachi it was put up for the purpose of repairs. Considering the fact that the cost of repairs was exorbitant the petitioner No.1 in their wisdom decided to sell the ship for the purposes of scrapping. The transaction for the sale of the ship was done between the petitioners Nos.1 and 2 and the petitioner No.2 took the vessel to Gadani Ship Breaking Yard for the purpose of scrapping. From the record it is clear that this petition was filed to obtain an order from this Court to the effect that the demand made by the respondents Nos. 1 and 2 be declared as null and void and that the ship should be allowed to be cleared by virtue of the exemption notification. Directions were also sought from the respondent No.3, who is Director General. Ports and Shipping, to provide a Deletion Certificate. An alternative plea has also been taken as to the effect that respondents Nos. 1 and 2 be directed to allow the petitioner No.1 to cancel the bill of entry for the import of the vessel for trading and it be substituted for the import of vessel for the purpose of breaking. Once again a Deletion Certificate has been requested to be issued by respondent No.3. Another alternative prayer has been made to the effect that Notifications Nos. 498 of 1994 and 562 of 1994, under which duties and taxes are to be charged, the same should be cleared as ultra vires.

16. In order to get the ship released an application was made by petitioner No.2 and by order, dated 13‑6‑1995 the petitioner No.2 was directed to deposit customs duties amounting to Rs.96,90,950 with the Nazir of this Court. The petitioners were also directed to furnish bank guarantee for the disputed amount including sales tax and surcharge amounting to Rs.1,69,65,

218. On fulfilling these conditions the respondent No.3 was directed to issue a Deletion Certificate. This order was an interim order and was subject to a final order. The petitioner No.1 complied with the order by depositing the amount with the Nazir of this Court and also getting a bank guarantee issued which was again deposited with the Nazir of this Court.

17. Parawise comments have been filed by the respondents, who have denied the allegations of the petitioners. The only contention raised in the comments is to the effect that the permission indeed was granted but there was a conditional permission. Even the Deletion Certificate has been issued on the directions of this Court.

18. An application under Order I, rule 10, C.P.C was filed by the purchaser of the vessel for the purpose of breaking. This application was eventually granted and the applicant was allowed to be made petitioner No.2. The contention of petitioner No.2 was that the ship was purchased by them and thereafter taken to Gadani. Half way through the work was stopped on the breaking and a dispute occurred whether the vessel was to be assessed and duty paid under S.R.O. 245(I)/93 or under S.R.O. 487(I)/1995.

19. In this case the bill of entry was presented on 8‑2‑1995, when petitioners claimed exemption of customs duty and sales tax in terms of S.R.O. 482(I)/92, dated 14‑2‑1992. It is the case of the respondents that A if imported and subsequently broken up the ship it shall be liable to, customs duty @ 10% and sales tax in the same manner and at the same rate as is applicable at that time to ship imported for breaking up. This exemption shall be valid up to 31‑12‑1995.

20. For the forgoing 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.

21. With these observations the petition stands disposed of. The Misc. Applications Nos. 3810 of the 1998, 5320 of the 1999 and 1345 of the 1996 have become infructuous. S.A.K./R‑9/K. Petition accepted.