P L D 1988 Lahore 526 (PLP)

This is a Constitutional petition filed by M/s. Aswan Tentage and Canvas Mills Limited, petitioner, calling in question the decision of the Customs Authority in calling upon it to furnish debentures, duly guaranteed by a Scheduled Bank, in form 'A' under the Deferment of Import Duty Rules, 1985.

2. The brief facts of the case are that the petitioner Mills is setting up a new canvas and tents manufacturing plant at Lahore Jaranwala Road, Tehsil Nankanasahib, District Sheikhupura. The project has been approved by the Bankers' Equity (B.E.) and the Asian Development Bank, who are also financing the project. the petitioner Company imported machinery valuing about Rs.130 million against import licences issued and letters of credit established during the period 5‑5‑1986 to 7‑5‑1987. The machinery on arrival in Pakistan was cleared from the Customs at Karachi and has been lying in a bonded warehouse, i.e. petitioner's premises. Under the Deferment of Import Duty Rules, 1985, the petitioner claimed facility of deferred payment i.e. payment of half of the duty in cash and the remaining half after a grace period of two years in six half‑yearly instalments of equal amounts, the first of such installment being payable on the date after six months from the date of expiry of the two years grace period; subject to the payment of surcharge at the rate of 11% per annum on the deferred amount, six months commencing from the initial payment. Under rule 7(5)(i)(a) of the said Rules, the petitioner Company was directed to furnish debentures duly guaranteed by a Scheduled Bank by the Customs Authority.

3. On behalf of the petitioner‑ Company it is submitted that originally under the said Rules, simple debentures in form 'A' had to be submitted and not debentures duly guaranteed by a scheduled Bank in form 'A', which amendment came into effect on 4‑6‑1987, and since the petitioner Company had contracted to import the goods before the amendment, petitioner Company was not legally required to furnish the debentures duly guaranteed by a scheduled Bank. In this connection learned counsel for the petitioner relies upon AI‑Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917.

4. On behalf of the Customs Department it is submitted that the contention Of the petitioner that the amendment of Import Duty Rules, 1985, cannot interfere with the vested right of the petitioners which they had acquired under the said initially framed rules regarding mode of payment of duty, or that they cannot be called upon to submit debentures duly secured by a scheduled Bank, is misconceived. It is further submitted that the contention of the petitioner that the amendment can only operate prospectively and not retrospectively is also erroneous and against law. It is contended that according to the established rules of interpretation of statutes, the amendment, which ‑was procedural, operates retrospectively, unless there was a prohibition in the statute itself. In this connection Adnan Afzal v. Sher Afzal PLD 1969 SC 187, Alifdin v. Shaukat Ali PLD 1969 Pesh. 62 and State v. Muhammad Jamil PLD 1965 SC 681 is referred.

5. I have heard the arguments of the learned counsel for the petitioner Company and the Customs Authority. Before dealing with the arguments, it is necessary to set out some of the important provisions of the Deferment of Import Duty Rules, 1985, which are relevant to the present case. Under rule 2 of the Deferment of Import Duty Rules, 1985, machinery or spare parts of any machinery meant for initial installation, balancing, modernising, replacement or extension of any approved project, is eligible for deferment of import duty under the said Rules. Under rule 4, half of the duty payable on the consignment of goods referred to in rule 3 has to be paid in cash and payment 'of the remaining half can be deferred, on the condition and in the manner laid down in the said Rules. Under rule 5, a grace period of two years from the date of initial payment is allowed, within which the importer is not required to pay the deferred amount, but the importer has to pay the deferred amount ‑within a period of three years in six half‑yearly instalments of equal amounts, the first of such instalments being payable on the date after six months from the date of expiry of the grace period. Under rule 6, surcharge at the rate of 11% per annum is payable on the deferred amount, commencing six months from the date of initial payment. Under rule 7 (1), request for deferment of duty has to be "made by an importer on the Bill of Entry", which has to be submitted to the Import section alongwith necessary certificates from the Provincial Industries Department or the Pakistan Industrial Credit and Investment Corporation or the Industrial Development Bank of Pakistan regarding the project being an approved project. Under rule 7(3), the Assistant Collector of Customs, if he is satisfied about the genuineness of the request, can pass order for allowing the concession of deferred payment under rule 7 (5). Where the request for deferment of duty has been accepted by the Assistant Collector or the Collector, the. importer is required to furnish to the Assistant Collector concerned certain documents, one of which, under sub‑clause (a) of clause (i) of sub‑rule (5) of rule 7 is:‑ "Six surcharge bearing debentures in form 'A', for the deferred amount and surcharge payable thereon.‑ If the importer is unable to produce debentures immediately, he may produce a Bank guarantee to the effect that the required debentures will be produced within one month from the date of importation. In such cases demand for the deferred payment shall be issued at the time of completion of the Bill of Entry and it will be the duty of the Assistant Collector concerned to ensure that the required debentures are produced within the specified period shown in t)e bank guarantee." The Federal Government by Notification SRO No.432(1)/87 dated 4‑6‑1987. amended the Deferment of Import Duty Rules, 1985, by adding the words "duly guaranteed by a Scheduled Bank" after the words "debentures", wherever occurring in the said Rules. In view of this amendment, the Customs Authority has called upon the petitioner Company to furnish six surcharge bearing debentures, duly guaranteed by a Scheduled Bank, in form 'A', in respect of duties payable in respect of all bills of entry for ex‑bonding presented by them, as required by Rule 7(5)(i)(a) of the said Rules.

6. Goods are cleared from the Customs under two methods. One is under home clearance, which means that the importer desires the delivery of his goods immediately. Under this process, the delivery is given by the Customs within thirty days from the date the goods are off loaded at Karachi, or where the goods are required to be delivered at an internal Customs Dry Port, within thirty days of the receipt of the said goods at the said internal Customs Dry Port. Before the delivery is taken, import and other duties are paid. The second method is where the importer desires his goods to be warehoused and to receive the same any time within a year, or thereafter within such extended period as may be allowed by the Collector or the Central Board of Revenue. Under this process; a bill of entry for 'in‑bonding is filed at Karachi, where it is stated that the goods will be warehoused at Karachi, or at any inland station where there is an internal Customs Dry Port. In such cases, the goods are either, warehoused at Karachi or at some inland station where an Internal Customs Dry Port exists. When the importer desires clearance of the goods, he files a bill of entry for ex‑bonding and takes' delivery of the goods after payment of import and other duties.

7. It is apparent from rule 2 of the Deferment of Import Duty Rules, 1985 that machinery and spare parts imported under the B. M. R. Scheme (balancing, modernisation and replacement scheme, such as is framed under the Government's Notification S.R.O.500(1)/84 dated 14‑6‑1984 and others, if any) are eligible for deferment of import duty under these Rules. Though the said rule does not refer to the fact that the eligibility attaches no sooner the said goods are imported, it is apparent from the notification enforcing the B.M.R. Scheme that they relate to the plant and machinery which are imported for initial installation or balancing, modernising, replacement or extension of the projects approved by the Government. Eligibility under rule 2 attaches to the machinery and the. spare parts, which are meant for initial installation, ' balancing, modernising, replacement or extension of any approved project, the very day they are imported. Just like charge ability attaches to the goods under section 18, of the Customs Act,. 1969, the very day the goods ‑are imported, under rule 2 of the Deferment of Import Duty Rules, 1985, eligibility for deferment attaches the very day the goods are imported into the country. Under rule 7(l), a request for deferment of duty has to be made by an importer on every bill of entry, supported by documents, and the Assistant Collector of Customs, after he is satisfied regarding the genuineness of the request, can pass orders for allowing the concession. Since a large number of bills of entry for home consumption or in‑bonding would be filed one after the other, covering all the machinery relatable to an approved project, which are received, one would assume that after the first bill of entry for home consumption or ex‑bonding has been submitted, ‑with the necessary certificates in respect of the approved project, and approval is granted by the Assistant Collector of Customs for deferred payment, the same certificates would not be required over and over again, when further bills of entry for home consumption or ex‑bonding are filed later relating to the same approved project. However, no sooner a bill of entry for home consumption or in‑bonding has been filed, with the request for deferment of import duties under rule 7(2), same is passed to the Appraising Section, where the Collector of Customs can pass an order allowing the concession, after he is satisfied regarding the genuineness of the request. Now the Appraising Section only comes in when the goods are to be 'cleared, for it is this section which appraises the value of the goods under section 25 and the rate of duty applicable to the goods under section 30 of the Customs Act. In short, the Appraising Section does not come into the picture till the goods, are desired to be cleared. Thus, in the case of a bill of entry submitted for home consumption, the Appraisement Section would come into operation within thirty days the goods are off loaded at Karachi or within thirty days that the goods are received at the internal Customs Dry Port, and in the case of goods which have been in‑bonded initially, no sooner bill of entry for ex‑bonding is filed either at Karachi or at the internal Customs Dry Port when the goods are to be released. It is at this stage that the Assistant Collector of Customs passes order allowing concession of deferred payment, for by now the valuation of the goods and the rate of duty applicable thereto have been worked out and it is determined what the total duties payable on the consignment are, half of which have to be paid immediately, under rule 4, and the remaining half, within the grace period provided in rule 5, subject to the necessary documentation being furnished, including the surcharge bearing debentures. The definition of the words "initial payment" in rule 2(iv) of the Rules, mean "import duties paid in cash at the time of clearance of goods". Deferred payment under rule 5 is after "a grace period of two years from the date of initial payment". The debentures are to clear the deferred payment of duties. Thus, everything ties up with the time that delivery of goods is sought from the Customs. At is now clear that though eligibility straightaway attaches when the goods are received in the country, paper work regarding the consideration of the said request by the Assistant Collector of Customs is left to a later date when delivery of the goods is sought, which in the case of the bill of entry for home consumption, would be dealt with within thirty days and in the case of bill of entry for in‑bonding, when the bill of entry of ex‑bonding is filed to secure the release of the goods.

8. The petitioner Mill, through its Director Maqbool Ahmad Nasir, has submitted two lists giving particulars of the goods imported under twenty two bills of entry, as annexures to his affidavit dated 24‑11‑1987. Later, the learned counsel for the petitioner also filed a. comprehensive list giving full particulars of the said 22 bills of entry. The Customs Authorities were asked to check the said two lists in order to intimate when the bills of entry were filed for home consumption or in‑bonding or ex‑bonding. Pursuant to this request, the representative of the Customs Department has filed two lists. The particulars of these two lists may be summarised as under:‑ No. & date of No. & date of Date of order B/Entry for B/Entry for of, Assistant in‑bonding at ex‑bonding, Collector Karachi. at Lahore allowing deferment . of duty. 1. 4787 dated 15‑ 5‑1987 00517 dated 28‑7‑1987 11‑1‑1988' 2. 3348 dated 1‑ 2‑1987 00514 dated 28‑7‑1987 11‑1‑1988 3. 4097 dated 1‑ 4‑1987 00515 dated 28‑7‑1987. 11‑1‑1988 4. 4358 dated 14‑ 4‑1987 00516 dated 28‑7‑1987 11‑1‑1988 5. 4828 dated 12‑ 5‑1987 00512 dated 28‑7‑1987 11‑1‑1988 6. 3366 dated 3‑ 2‑1987 Delivery not taken 7. 3348 One case pending ‑do‑ 8. 3478 dated 12‑2‑1987 ‑do- 9. 3747 dated 8‑ 3‑1987 ‑do- 10. 3786 dated 9‑ 3‑1987 ‑do- 11. 5079 dated 1‑ 6‑1987 ‑do- 12. 29 dated 8‑ 6‑1987 ‑do- 13. 30 dated 8‑ 6‑1987 ‑do- 14. 604 dated 13‑ 7‑1987 ‑do‑ 15. 825 dated 26‑ 7‑1987 ‑do 16. 824 dated 26‑ 7‑1987 ‑do 17. 919 dated 30‑ 7‑1987 ‑do 18. 1216 dated 20‑ 8‑1987 ‑do 19. 1217 dated 20‑ 8‑1987 ‑do 20. 1473 dated 5‑ 5‑1987 ‑do 21.2167 dated 18‑ 1‑1987 22. ‑do 22 2239 dated 21‑10‑1987 ‑do 23. 2573 dated 12‑11‑1987 ‑do 24. 3029 dated 8‑12‑1987 ‑do 25. 3030 dated 8‑12‑1987 ‑do

9. With regard to goods received at Karachi Port before the amendment came into the effect on 4‑6‑1987, since the eligibility attached to them before the amendment, the petitioner is not liable for submitting surcharge 'bearing debentures, duly guaranteed by Scheduled Bank. The plea of the Customs Authority that the amendment being procedural, applies retrospectively, cannot be accepted. The Supreme Court of Pakistan in Adnan Afzal v. Sher Afzal P L D 1969 S C 187 has already held that even in the case of procedural matters, if any existing right is affected or the giving of retrospective operation causes inconvenience or injustice, then the Court would not favour an interpretation giving retrospective effect to a statute. In the instance case, the giving of retrospective effect to the amendment would embarrass the petitioner Company by placing it in a heavy debt, which otherwise would not be the case, if retrospectively is not given. Under the Rules as initially framed, the petitioner would only furnish the debentures, as in form 'A'. The said form 'A' only shows that the debenture is a simple one, whereby two directors of a company under their writing and certificate create evidence of the debt and the right of the Customs Authority to demand and receive that money. The wording of form 'A' does not show that the debt is to be secured by a mortgage or other charge upon any specific property or by any floating charge on any specific property. It is nothing but a naked debenture. If the debenture is to be guaranteed by a Scheduled Bank, the petitioner company would have to place liquid funds of equivalent amount with the Bank, or create a mortgage or charge over specific property in their favour, before being able to get their guarantee to secure the debenture. This would place al heavy financial burden on the petitioner. In these circumstances, the' amendment cannot be applied retrospectively, even though it may be claimed as procedural, as alleged by the learned counsel for the Customs Authorities. 9‑A. With regard to goods which were received at Karachi Port on or after 4‑6‑1987 i.e. after the amendment came into force, the petitioner will be liable to furnish surcharge bearing debentures, duly guaranted by a scheduled Bank, in form 'A'.

10. At this stage it may be stated that irrespective of the fact whether eligibility for deferment of duty arises before or after the amendment that came into force on 4‑6‑1987, the value of the goods and the rate of duty payable thereon, would, under section 30 of the Customs Act, 1969, be the value and the rate of duty in force when the actual delivery is sought from the Customs. See Prakash Cotton Mills (Pvt.) Ltd. v. B. Sen A I R 1979 S C 675 and The Lahore Textile and General Mills Ltd. v. The Collector of Customs, Lahore (Writ Petition No. 1972 of 1986 decided by the Lahore High Court on 14‑6‑1988). Thus, eligibility attaches no sooner the goods stand imported, even though request for deferment is taken up later, when delivery is sought to be taken from the Customs and the papers have come to the Appraisement Section.

11. For the foregoing reasons, this petition is partly accepted and the order of the Assistant Collector of Customs dated 11‑1‑1988 passed on the five bills of entry for ex‑bonding dated 28‑7‑1987, as shown in items I to 6 of para. 6, to the extent that they call upon the petitioner to furnish surcharge bearing debentures, duly guaranteed by a scheduled Bank, in form 'A', are declared to have been passed without lawful authority and are hereby set aside. The petitioner in these cases shall only furnish surcharge bearing debentures in form 'A', not guaranteed by a scheduled Bank. The same shall be the position with regard to all bills of entry for in‑bonding filed at Karachi before 4‑6‑1987. However, as regards bills of entry for in‑bonding filed at Karachi on or after 4‑6‑1987, the petitioner shall furnish surcharge bearing debentures, duly guaranteed by a scheduled Bank, in form 'A', as required by the amended notification.

12. Since the success is divided in 'this case, there shall be no order as to costs. M.B.A./A‑379/L Order accordingly.