1988 PLP 2070 (CLC)

MAMOON KAZI, J.‑‑The petitioner in ail these petitions except (in C.P.No.D‑1039/1986 and C.P.No.D‑666/1986) had imported a large consignment of Soyabean Oil into Pakistan after obtaining an import licence for the same. There was no customs duty leviable on Soyabean Oil at the time, according to Heading No.15.07 of the Pakistan Custom Tariff 1985‑

86. However, subsequent to the opening of the letter of credit by the petitioner and shipment of the imported goods by the foreign suppliers, by means of a Notification, dated 7‑4‑1986, purportedly issued under section 18(2) of the Customs Act, 1969, the Notification No. SRO/645(1)/85, dated the first July, 1985 was amended and in the table a new Heading, namely 15.07 A was inserted, according to which a duty of Rs.3,000 per ton was imposed on Soyabean oil. Subsequently by another Notification, dated 17‑4‑1986, the rate of the custom duty was reduced to Rs.2,350 per metric ton. The petitioner, consequently, is aggrieved as the new liability imposed by the subsequent notifications has exposed the petitioner to a tremendous monetary loss and has rendered the importation of the goods wholly uneconomical and hence these petitions.

2. According to the case of the petitioners in C.P. No. D‑1039 of 1986, they had imported palm oil into Pakistan. At the time of placing of the order in respect of the goods with the foreign suppliers and subsequent opening of the letters of credit for the same, the goods were subject to the payment of customs duty of Rs.2,350 per metric ton. However, before the arrival of the goods in Pakistan, the Government of Pakistan revised the rate of import duty on palm oil enhancing the same from Rs.2,350 to‑Rs 5,350 per metric ton with effect from 22‑81986 and Rs.6,000 per metric ton with effect from 20‑9‑1956 thro4h a Notification, dated 22‑8‑1986. The case of. the petitioners, in C‑P No. D‑666 of 1986, namely Ghee Corporation of Pakistan Ltd., is also more or less the same, as according to them they had also imported palm oil into Pakistan. However, on arrival of the goods, the petitioners were asked to pay enhanced duty of custom as the concessions earlier allowed on the imports of palm oil were not available to them under the subsequent notifications issued by the Federal Government. Consequently, the petitioners have filed the petition, raising the same grounds.

3. All these petitions have been heard by us together and we proposed to dispose them by this Judgment as the facts of these petitions are mote or less similar and the questions of law raised are also common.

4. Although the petitions have not resisted by the. respondents on the factual plank, but it has been denied that any vested right had been created in favour of the petitioners. as claimed by them. Consequently, affording to the respondents they were competent to levy and collect customs duty on the imported goods in accordance with the impugned notifications. Reference in this respect has also been made by them to section 30 of the Customs Act, 1969. according to which the rate of duty applicable to any imported goods shall be the rate of duty in force, in the case of goods cleared for home consumption under section 79, on the date on which the bill of entry is presented under that section.

5. We have hard Mr. Jan Mohammad Dawood, Mr. Nasim Ahmed Farooqui, Mr. Khlid Anwar. Mr. Abdul Satter Memon, Mr. Abdul Munim Khan and or. Samiuddin Sami on behalf of the petitioners and Mr. Qadir Sayeedo the learned Standing Counsel, on behalf of the respondents.

6. The learned counsel for the petitioners have argued that since the impugned notifications have been issued after contracts between the foreign suppliers and the petitioners had respectively been concluded, the notifications could not be given retrospective effect. According to them, since binding contracts had been concluded and steps in furtherance of the same had been taken by the petitioners consequently, vested rights had been created in their favour to import the goods free from payment of the customs duty, or as the case may be, at the original rate of duty. Consequently, the counsel have argued that it will be unjust and inequitable to suddenly withdraw the concessions and expose the petitioners to unforeseen monetary loss. The argument of Mr. Qadir Sayeed, on the other hand, has been that since the goods in question are consumer goods which can be sold in the market at a price which may include the element of the duty payable thereon the petitioners can easily transfer the burden to the consumer and hence there is no question of any unforseen loss which may be incurred by the petitioners. It has been further contended that since the Government has the lawful authority to issue the relevant notifications under section 18(2) of the Customs Act, 1969, the action of the respondents was within the ambit of law. As to the question whether the petitioners in view of the aforesaid circumstances have acquired vested right to enjoy the concessions earlier given in respect of the concluded contracts, the learned counsel for the petitioners have sought support from the case of Al‑Samrez Enterprise v. The Federation of Pakistan 1986 S C M R 1917. In this case, A1‑Samrez Enterprise, had imported copper wires on a commercial licence. When the goods arrived in Pakistan, under a notification issued by the Federal Government the customs duty on the goods was enhanced which rendered the transaction burdensome for the petitioners which had already taken steps for the import of the goods on the basis of concession earlier attached to such imports. On such action being challenged, it was held by the Supreme Court as under:‑ "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 a statutory construction are attracted to the interpretation and determination of its legal effect. It is well‑settled that an enactment which prejudicially affected vested rights or the legality of past transactions, or impairs contracts cannot be given retrospective operation." It was further held that:‑ "In pursuance of this contract the appellants instructed their bankers, Messrs Habib Bank Limited, Foreign Exchange, Karachi, on 8th June, 1977, as evidenced by document on page 43 of the printed record. The fees for import of goods and opening of Letter of Credit were deposited with the Chief Controller of Imports and Exports on 10th June, 1977 (page 41 of the printed record). This document shows that the item under which the goods were being imported was on the Free List. All these facts which occurred period to the date of the amended notification issued on 11th June, 1977, clearly established that the appellants had acquired a vested right to the exemptions under the prior notification applicable at that time. These acts including the contractual commitments made by them were done on the assurance contained in the prior notification extending the exemption from the payment of duty. Indeed it is well‑settled that tax exemptions are founded on public policy such as the encouragement of manufacturing and other industries or trades. They are granted on the theory that they will benefit the public generally or are awarded as compensation for services rendered in the performance of some function deemed socially desirable. Therefore, the exemption notification is basically addressed to public at large or in any case to prospective importers. It will be inequitable and unjust to. deprive a person who acts upon such assurance of the right to exemption and expose him to unforseen loss in the business transaction 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 with drawal of exemption cannot be given retrospective operation by an executive act to destroy this right." In another case reported as Collector of Central Excise and Land Customs v. Azizuddin Industries Ltd. Chittagong P L D 1970 S C 439, also decided by the Supreme Court, the question was whether an executive authority in the exercise of its rule‑making power or power to amend, vary or rescind an earlier order, take away rights vested in citizens by law and here also the question was answered by the Supreme Court in the negative. In this case it was held as follows:‑ "It is a settled rule that an Executive authority cannot in exercise of the rule‑making power or' the power to amend vary or rescind an earlier order, take away rights‑vested in the citizens by law

The respondent had acquired a vested right of exemption from the levy of excise duty on all the goods produced or manufactured by it for a period of four years under the notification of the Central Government referred to above. That vested right could not therefore be taken away by an executive action. The notification dated 28‑2‑1964, being completely destructive of the right vested in the respondent‑company was in this view without lawful authority and of no legal effect." Another case has been cited before us by the learned counsel for the petitioners the case of Al‑Samrez Enterprise has been followed by a Division Bench of this Court. The case has been reported as Associated Trading Co. Ltd. v . The Central Board of Revenue Government of Pakistan and two others P L D 1987 Kar.

63. In this case the petitioners had imported two consignments of powdered milk. They opened irrevocable letters of credit in favour of the foreign exporter and when the goods arrived in Karachi, the Customs Authorities cleared the goods on payment of sales tax only but no customs duty was assessed apparently on the ground that at that time, according to Customs Authorities, no such duty was payable in respect of the imported goods. However, after sometime a notice of demand was issued by the Customs Department stating that due to oversight the goods were cleared without payment of customs duty as subsequently a notification had been issued by the Government whereby the exemption granted by an earlier notification had been withdrawn. Such demand was resisted by the petitioners and when the matter came before the Division Bench of this Court, it was held that the withdrawal of earlier notification by the Government could not affect the vested rights created in favour of the importers to import the powdered milk free customs duty as the withdrawal of exemption from such duty was effected not through an enactment but through a notification which could not adversely affect the rights already created in favour of the importer to import the goods without payment of customs duty. Reference may also be made in this respect to the case of Nishat Mills Ltd. v. Central Board of Revenue 1985 C L C 2754 which also has been decided by another Division Bench of this Court. The following observations made in para. 4 of the judgment may be reproduced as follows:‑ "

4. In the instant case when the contract was made by the, petitioners with the foreign suppliers and the irrevocable letter of credit had been opened by the petitioners in favour of the foreign suppliers, the type of machinery imported by the petitioners was entitled to exemption and this created a vested right in the petitioners that when the machinery arrives, customs duty will not by payable by the petitioners in respect of the said machinery. Issuance of the Customs General Order No.11 dated 4‑9‑1980 cannot be given effect retrospective so as to take away such vested right of the petitioners."

8. Reference to the above case law makes it abundantly clear that when any exemption of concession in respect of payment of any tax or duty is granted a subsequent notification cannot operate with retrospective effect so as to destroy any vested rights already created by virtue of such concession, when the effect of the subsequent notification is to expose a person to an unforseen loss in a business transaction. Hardly any doubt can be expressed as far as the proposition is concerned. However, the learned Standing Counsel still supports the action of the respondents, it is, therefore, necessary to advert to his contentions now.

9. Turning to the contentions, the first one is based on section 30 of the Customs Act, 1969. According to the section. "The value of the rate of duty applicable to, any imported goods shall be the value and the rate of duty in force‑‑ (a) in the case of goods cleared for home consumption under section 79, on the date on which a bill of entry is presented under that section; and (b) in the case of goods cleared from a werehouse under section 104, on the date on which a bill of entry for clearance of such goods is presented under that section:‑ Provided that .............. Provided " The argument, accordingly, is that the section empowers the respondents to charge customs duty in pursuance of the subsequent notifications because that would be the rate of duty payable on the imported goods as envisaged by section

30. It may be pointed out that a similar argument has also been advanced on behalf of the petitioners in the case of A1‑Samrez Enterprise but the same was repelled by the Supreme Court in view of the observations made by it in the judgment which have already been reproduced above. Consequently, we need not dwell further on this issue. The next argument of Mr. Qadir Sayeed, however, appears to be more attractive. The argument to which we have already referred, is that, the duty or enhanced .duty if paid by the petitioners, can be transferred to the consumers. According to the learned counsel, the question of the petitioners having acquired by vested right in the concessions earlier enjoyed by them under the law is directly linked with the unforseen loss to which the petitioners might be exposed on account of the impugned notifications and in the absence of any unforeseen loss, the question of infringement of any vested right of the petitioners, prima facie, does not arise. We are no doubt, impressed by the above argument as it is not the power of the Federal Government to issue the impugned notifications which is under challenge, but it is only the authority of the respondents to charge duty from the petitioners under such notifications which has been questioned and the incidence of duty could be transferred by the petitioners to the consumers. We may also point out here that recently in some cases (C.P. No. D‑943 of 1987 and five other connected petitions) relief to the petitioners on account of sudden imposition of export tax by the Federal Government was declined by this bench as it was held that either under the terms of the contracts of sales or by virtue of section 64‑A of the Sale of Goods Act, the petitioners were entitled to recover the export duty from the buyers of the goods, and consequently, there was no question of the petitioners being exposed to any unforeseen loss in terms of the judgment given by the Supreme Court in the case of Al‑Samrez Enterprises. However, the present 'cases are distinguishable as there is neither any similar condition in the contracts nor the sale of goods Act is applicable and the fact whether the petitioners would be able to pass on the entire burden of Customs duty to the consumers is a question of fact, depending upon the condition of the market at the relevant time and supply and demand. We would, consequently, have examined the contention of the learned Standing Counsel more in detail; but for the judgment of the Supreme Court in the case of AL‑Samrez Enterprise by which we are bound. Nothing substantial has been pointed out to show that the facts of that case are distinguishable. We have already referred to the facts of that case and we can hardly refer to any aspect thereof which can distinguish it from the present petitions. Under such circumstances, there cannot be any doubt, that we are bound by the decision of the Supreme Court and cannot take a different view if we agree with Mr. Qadir Sayeed' contention. The views expressed in the two Division Benches judgments of this Court in the cases of Associated Trading Co. Ltd. P L D 1987 Kar. 63 and Nishat Mills Ltd. 1985 C L C 2754 also have binding force on us.

10. For the aforesaid reasons, we allow these petitions by declaring that any duty charged in pursuance of the impugned notifications would be without lawful authority and of no legal effect in view of the opening of the letters of credit by the petitioners already on the basis of the concessions earlier enjoyed by them. In case of C.P. No. D‑1039 of 1987 and D‑666 of 1987, it may be further clarified that any duty charged in excess of the already imposed on the palm oil would be without lawful authority. There will be no order as to costs. M. Y. H/ G‑51 ‑‑‑‑‑ Petitions allowed