P L D 2002 Karachi 343 (PLP)

Collector of Customs (Appraisement), Custom House, Karachi. Sub: Classification of Printed Toffee Wrapping Paper. The undersigned is directed to refer to Custom House Letter No.82/459/91‑III Refund dated 15th April, 1992 on the above‑noted subject. Board ruling issued vide letter No. 1(28) Tar. 1/88 Vol. 11 22‑8‑1989 was withdrawn while issuing classification dated 19th June, 1991. The classification ruling had become effective from 22‑8‑1989 when the earlier ruling was issued. Any excess payment made during the intervening period needs to be refunded if otherwise in order. (Sd.) (Dr.Muhammad Saeed), Second Secretary. On the basis of above classification the petitioner filed claim for refund on 6‑8‑1992 before respondent No.4. The respondent No.4 rejected the claim for the reason that refund application was barred by time as it was submitted beyond the period prescribed in section 33 of the Customs Act, 1969. The appeal and the revision were also dismissed for the similar. reason. The contentions that, the view taken by respondent No.4 and 3 would amount to negation of C.B.R. ruling giving retrospective effect to the correction of classification and that section 33 of the Customs Act. 1969 is not an authority in itself for refunds and it merely prescribes a time limit for consideration and claims of refund on account of an error, inadvertence or misconstruction and the actual right to refund is derived not under any specific provisions of the Customs Act but under the general principle of common law that the Government cannot retain any amount erroneously collected to which it had no entitlement, were not considered. Being still dissatisfied the petitioner has invoked Constitutional jurisdiction of this Court. It is averred in the petition that the admitted position is that excess amount of duty was recovered from the petitioner on account of erroneous classification by the C.B.R. and the error was rectified entitling the petitioner to the refund of excess amount recovered from it. It is further contended that the excess duty was not paid due to inadvertence, error or misconstruction on the part of petitioner and therefore, the provision contained in section 33 of the Customs Act, is not applicable therefore, the respondents 2 to 4 have fell in serious error, in exercise of their jurisdiction, which is liable to be rectified by this Court. It is further submitted that the petitioner has been discriminated as other importer similarly placed, have been refunded the excess duty. Parawise comments have been filed on behalf of respondents wherein all the facts stated' in the Memo. of petition have been accepted and the sole plea taken on behalf of the respondents is that, the refund application was submitted beyond the period prescribed in section 33 of the Customs Act, 1969 and therefore, the claim was rightly rejected. Heard Mr. Zahid F. Ibrahim, learned counsel for the petitioner and Mr. Raja Muhammad lqbal, learned counsel for the respondents. Mr. Zahid F. Ibrahim, has reiterated the contentions raised in the memo of appeal and reproduced above. In addition to the said contentions he has submitted that the C.B.R. vide its letter dated 27‑6‑1992, clearly intimated to custom authorities that the earlier ruling of C.B.R. dated 22‑8‑1989 was withdrawn while issuing classification dated 19th June, 1991 and that the classification ruling had become effective from 22‑8‑1989 and had further directed. in very clear terms that any excess payment made during the intervening period needs to be refunded if otherwise in order. The learned counsel for the petitioner has vehemently argued that after above direction of C.B.R. the custom officials were obliged to refund the excess payment by virtue of the provisions contained in section 223 of the Customs Act. He has submitted that after the direction of C.B.R. dated 27‑6‑1992 the controversy ought to have been laid to rest and the refusal of refund by re‑course to the technicalities is unwarranted and without jurisdiction, more particularly, when the provisions contained in section 33 of the Customs Act, are not attracted at all. On the other hand, Mr. Raja Muhammad lqbal learned counsel for the respondents has supported the view taken by the respondents Nos.2 to 4 that the refund application was barred by time, by.virtue of the provisions contained in section 33 of the Customs Act. . We have carefully considered the contentions raised by the learned advocates for the parties. There is no factual controversy as entire facts alleged in the memo of petition have been accepted in the comments and counter‑affidavit filed on behalf of respondents. The issue under consideration shall be clinched by examining the scope and effect. of sections 223 and 33 of the Customs Act, which read as follows:

223. Officers of Customs to follow Board's order etc.‑‑All officers of customs and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be given so as to‑interfere with the direction of the appropriate officers of customs in the exercise of their quasi judicial function.

33. Refund to be claimed within four months.‑‑(1) No refund of any customs‑duties or charges claimed to have been paid or over‑paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within six months of the date of payment. (2) In the case of provisional payments made under section 31, the said period of six months shall be reckoned from the date of the adjustment of duty after its final assessment. A perusal of the above sections shows that under section 223, all officers of customs and other persons employed in the execution of the Customs Act, shall observe and follow the orders, instructions and directions of the Board. We are therefore, persuaded to agree with the contention of Mr.Zahid F. Ibrahim, learned counsel for the petitioner that the C.B.R. had realized that excess payment was made due to erroneous classification ruling given by it, which was subsequently rectified and therefore all such persons who were made to pay excess amount shall be re‑paid such excess amount and the directions in this behalf were purely administrative in nature which were required to be followed by respondent No.4. The petitioner had applied for refund and had thereby requested for mere compliance of the C.B.R. direction, therefore, the respondent No.4 ought to have refunded the amount in compliance of the binding direction of C.B.R and was not justified in taking cudgel with the petitioner on the basis of technicalities. Coming to the provisions contained in section 33, we find, sufficient force in the contention of Mr. Zahid F. Ibrahim that the provisions contained in section 33 are confined to the refund of any custom duties or charges claimed to have been paid or over‑paid through inadvertence, error or misconstruction. The language of section 33 is very clear and does,not admit of any ambiguity. The golden principle of the interpretation of statute is that the plain language of law is to be applied and nothing is to be added or deducted from the clear language of law. The principle is applicable with greater force to the fiscal legislation. On a plain reading of section 33, we are of the considered view that, it pertains to the refund of any custom duties or charges paid or over‑paid on account of any act of inadvertence, error or misconstruction on the part of an assessee. It is not applicable to the refund on account of an arbitrary or unwarranted assessment made by the custom authorities or on account of wrong classification by the custom authorities including C.B.R. as has been done in this case. It is not applicable to such refund also which becomes due on account of any order' in revision, appeal or a Constitution petition. It is established principle of the interpretation of statute that, in order to ascertain the true intern of Legislature and the purpose and purport of a legislation the entire statute is to be considered in totality. Any E particular provision in a statute is not to be considered in isolation: Adhering to this principle, when we examine the Customs Act, 1969 we find that the l Legislature has enacted two provisions which deal with the inadvertence, error or misconstruction. One provision is contained in section 33 and the other one is contained in section 32(3) of the Customs Act, For the purpose of comparison, both these sections are reproduced below: Section 32(3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short‑levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date requiring him to show cause why he should not pay the amount specified in the notice. Refund ‑to be claimed within six months.‑‑(1) No refund of any customs duties or charges claimed to have been paid or over‑paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within six months of the date of payment. (2) In' the case of provisional payments made under section 31 , the said period of six months shall be reckoned from the date of the adjustment of duty after its final assessment. A comparison of the above provisions shows that they deal with situation where there is no element of unfair act on the part of assessee or the custom officials. The provision contained in section 33 deals with the refund of any customs duties or charges which have been paid or over‑paid through inadvertence, error or misconstruction by the assessee himself and not on account of any order, instructions or directions of the custom authorities whether mistaken or otherwise. Since the act is initiated on account of an inadvertence, error or misconstruction on the part of an assessee therefore, on one hand the assessee has been given an opportunity to rectify and recoup the loss caused to him on account of his own act and on the other hand, a very important principle of taxation i.e. principle of finality, has been kept in view and therefore a period of limitation has been provided in order to finalise the transaction and to avoid any adverse financial implication. Like wise if there is any non‑levy or short‑levy of tax or any erroneous refund by reason of any inadvertence, error or misconstruction on the part of tax officials and not on account of any misdeclaration or collusion, the Custom Department has been empowered to initiate proceedings for making loss good to the public exchequer. For this purpose section 32(3) has been enacted. Previously the period of limitation provided in section 33 was four months which was enhanced to six months by Ordinance 12 of 1982 and the same period of six months was provided in subsection (3) of section 32 as well, which has been now enhanced to three years by Finance Ordinance 2000. Thus an assessee and the Government are placed at par, so far any payment or overpayment of tax on account of inadvertence, error or misconstruction on the part of assessee and non‑levy or short‑levy of tax for the same reasons on the part of tax official is concerned. So far, non charging of any duty or levy of tax or short‑levy or erroneous refund on account of any misstatement, misdeclaration or misrepresentation of an assessee is concerned, it is dealt with under section 32 (1) and (2) of the Customs Act. As regards the refund of an excess amount on account of an act I on the part of tax officials including C.B.R., the Legislature‑has neither made any specific provision in this regard nor has provided a period or limitation in this behalf. The reason is obvious, i.e., it is not possible to specify a period of limitation for refund on account any erroneous, mistaken, incorrect, illegal or arbitrary orders of the tax officials with reference to the date of excess payment as no specific period can be visualized when a refund shall become due after an error is rectified by the assessing authorities or C.B.R. or in quasi‑judicial appellate proceedings under the Customs Act or by the superior Courts in exercise of Appellate or Constitutional jurisdiction. The Legislature has therefore, left issue, in its own wisdom, to be dealt with in accordance with the general and common principles of law and justice. A similar question came for consideration before the Lahore High Court in the case of Kohinoor Industries Ltd. v Government of Pakistan, 1994 CLC 994, with reference to Rule 11 of the Central Excise Rules, 1994, which reads as follows:

11. No refund of charges erroneously levied or paid, unless claimed within one year.‑‑No duty which has been paid, or has been adjusted in an account‑current maintained with the Collector under Rule 9, and of which re‑payment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or misconstruction, shall be refunded and no abatement in duty shall be allowed, unless a written claim is lodged with the proper officer within one year from the date of such payment or adjustment as the case may be. In the cited case, refund of central excise duty for the period from May, 1968 to January, 1977 was claimed through applications submitted in May, 1977 and afterwards. The refund applications remained undisposed of and therefore, the petitioner instituted the writ petition, seeking declaration that rile excise duty charged was in excess of the duty chargeable and further declaration that it was without lawful authority. A direction was sought for refund of the excess amount of duty. The Lahore High Court held that the duty was not legally chargeable. A question arose, whether the claim of refund was barred by time as the period prescribed in Rule 11 of the Central Excise Rules 1944, had expired. It was contended by the Deputy Attorney -General that, the petitioner can claim refund for one year only in accordance with the provisions contained in Rule 11 of the Central Excise Rules 1944. On the other hand, it was submitted on behalf of the petitioner, that the central excise duty was paid under compulsion and therefore, it was not on account of any inadvertence, error or misconstruction, therefore, Rule 11 of the Central Excise Rules, 1944, was not, attracted. The Lahore High Court after examining the contentions raised at the bar and the rulings cited before the Court held that, Rule 11 of the Central Excise Rules does not apply to a case where the amount of tax is paid under a mistake of law or fact or under compulsion; that the claim of refund of any amount realized without any authority of law, if is not barred by any specific statutory provision enforceable in law; that the order rejecting claim of refund was a quasi judicial order and its validity can be challenged in writ jurisdiction and that where the Authorities retained the money illegally realized, the petitioner can in a writ petition ask for refund of the money so collected by way of duty or otherwise without any authority of law when there is no triable issue and that the claim of refund of the amount or duty or tax received without authority of law can be made within three years computable from the date on which the mistake was discovered. A perusal of the cited judgment further shows that it was held, that it was not a case of error, misconstruction or inadvertence. The duty was charged and recovered under mistake of law and as such it, was recoverable under section 72 of the Contract Act, but provision of Article 96 of the Limitation Act, shall apply to the claim of refund. It was therefore, declared that the claim of refund of excess duty was enforceable in law for the period of three years only prior to the date of demand. In the facts and circumstances of the cited case, Article 96 of the Limitation Act, was held to be applicable which deals with the relief on the ground of mistake and provides that the time shall begin to run when the mistake becomes known to the plaintiff. In the present case, there is no mistake on the part of the petitioner and therefore, we are, of the opinion that, Article 181 of the Limitation Act, shall apply which provides a period of limitation for three years in respect of an application for which no period of limitation is provided in the Limitation Act, and the period of limitation shall begin to run from the time when the right to apply accrues. In the present case, right to apply accrued to the petitioner when the C.B.R. rectified its mistake and gave retrospective effect to its Classification Ruling No.5 of 1991, vide instructions contained in the letter dated 27‑6‑1992. Thus the refund application is within the period of limitation. The scope and applicability of section 33, Customs Act, came for consideration before a Division‑Bench of this Court in the case of Ghulam Abbas v. Member (Judicial), C.B.R., 1994 CLC 1612. In the cited case, sales tax was charged on import of betel‑nuts as a result of inadvertence on the part of custom officials. The importer, subsequently, came to know about the illegal charge and claimed the refund. The refund was refused for the reason that, it was lodged after expiry of six months. The question arose, if the importer was entitled to refund after expiry of six months in respect of sales tax recovered without lawful authority. Mr. Justice, Saleem Akhtar, in his judgment dated 9th March, 1989, held that the imposition and levy was not sanctioned under the law, and therefore, claim for refund of such amount would not be governed by section

33. It was further held that, the levy which was not sanctioned in law and was without jurisdiction should be refunded because, it was not backed by any legal sanction. It was further held that no person can be allowed to retain and appropriate the amount illegally realised under the garb of a legal authority which never existed. The question of limitation with reference to the provisions contained in section 33 of the Customs Act, came for consideration before the Hon'ble Supreme Court, in the case of Messrs Pfizer Laboratories v. Federation of Pakistan, PLD 1998 SC

64. His Lordship Mr. Justice Ajmal Mian examined the issue in great detail and after resume of the entire case‑law in Pakistan and India deduced the following principles: "

13. From the case‑law and the treatise, the following principles are deducible:‑‑ (i) That if one party under mistake, whether of fact or law, pays some money to another party (which includes a Government department), which is not due by law or contract or otherwise, that must be repaid in view of section 72 of the Contract Act, 1872. (ii) That the Customs duties and charges, referred to in section 33 of the Act should be chargeable and payable by an importer or exporter and that due to inadvertence, error or misconstruction, more amount was paid or recovered than what was due and payable, the claim for the refund of such an excess amount should be made within six months as envisaged in above section 33, but where the duty or tax charged and recovered was not payable at all, above section 33 has no application. (iii)That if the customs duty or any other levy was realised and its realization was outside the statutory authority the provisions of section 27(1) of the Indian Customs Act, 1951, providing limitation of six months was riot attracted. (iv) That when any excise duty is recovered which was not leviable; limitation of one year provided in Rule 11 of the Central Excises and Salt Rules, 1944 is not applicable nor an alternate remedy by way of a suit will be a bar to Constitutional petition. (v) That payment of excise duty or any other tax without knowledge that the same is exempted under ‑a notification is refundable on the same footing as if there was no lawful imposition. (vi) To return what has been taken wrongly is as much a duty and grace of Government to levy relentlessly and fully what is due as remarked by V.R. Krishna L e~. (vii) That where some money is received by the Government hot lawfully due, the plea of limitation by its departments is one which the Court always looks upon with disfavour as it is violative of the principles of morality and justice. (viii) That when moneys are paid to the State which the State has no legal right to receive, it is ordinarily the duty of the State, subject to special provisions, of any particular statute or special facts and circumstances of the case, to refund the amount so received and in case of failure, a superior Court in exercise of its Constitutional jurisdiction can direct the refund of the same if no disputed questions of facts are involved. (ix) That there may not be legal liability on the part of a Government functionary to refund any amount received by it as a tax or other levy by virtue of certain special provisions under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every Government, which claims to have ethical and moral values, must do what is fair and just to the citizens regardless of legal technicalities. (x) That as per Indo‑Pak laws the fact that the amount of tax of which refund is claimed was voluntarily paid, does not preclude the right to claim refund, if it was not lawfully payable. (xi) That the money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vines dented by the authority is prima facie recoverable by a citizen as of tight. Lord Bridge of Harwich of the House of Lords in the case of Tower Hamlets Borough Council (supra) remarked that the retention of moneys known to have been paid under a mistake at law, although it is a course permitted to an ordinary litigant is not regarded by the Courts as a 'high‑minded thing' to do but rather as a 'shabby thing' or a 'dirty trick'.

14. The above resume of the case‑law of Indian, England and Pakistani jurisdictions indicates that the latest judicial trend is to deprecate and to discourage withholding of a citizen's money by a public functionary on the plea of limitation or, on any other technical plea if it was not legally payable by him. It is also evident that claims for the refund of the amount paid as a tax or other levy on account of mistake as to want of Constitutional/legal backing or because of exemption are at par. It is also apparent that such payments are held to be not covered by Rule 11 of the Central Excise Rules, 1994, or section 27(1) of the Indian Customs Act, 1951, or section 33 of the Act etc. The refunds of such amounts are allowed by the superior Courts inter alia in India on the basis of section 72 of the Contract Act which provides that a person to whom money has been paid or anything delivered by mistake or under coercion must re‑pay or return it. Such refunds can be claimed either by filing a suit for the recovery of the amount for which the period of limitation applicable would be three years under Article 96 of the First Schedule to the Limitation Act (which provides period of three years from the date mistake becomes known to the plaintiff) or the same can be recovered through a Constitutional petition if no disputed fact is involved. The Indian Supreme Court and the various Indian High Courts referred to in the cited case‑law hereinabove had ordered the refund of the amounts involved in excise of their Constitutional jurisdiction under Article 226 of the Indian Constitution. In Pakistan, Sindh and Lahore High Courts have also allowed the refund of such amounts under Article 199 of the Constitution in exercise of their Constitutional jurisdiction in the cases of Ghulam Abbas v. Member (Judicial), Central Board of Revenue (supra) and Kohinoor Industries Ltd., Faisalabad v. Ministry of Finance (supra) respectively. However, we may clarify that the object of providing limitation inter alia, in sections 32 and 33 of the Act is to finalise the transactions within the period specified therein so that there may not be any adverse financial implication after the expiry of the period mentioned therein, for which provisions for contingency are made in a yearly budget. Though we have held that the instant case is not covered by section 33 of the Act by approving the view taken by a Division Bench of the High Court of Sindh in the above case of Ghulam Abbas v. Member (Judicial), Central Board of Revenue referred to hereinabove, but it may not be understood that we are laying down that a party is free to claim refund of a tax or any other levy paid under a mistake of fact or law at his sweet‑will at any time even after the expiry of 20 years. If a suit is to be filed for the refund, it should be within the statutory period provided under the relevant Article of the First Schedule to the Limitation Act, or if the refund of the same is to be claimed by invoking in aid the Constitutional jurisdiction of a High Court, the petitioner should approach the Court promptly. The petition should not suffer from laches which may defeat the claim. We cannot approve the view that a party can claim the refund of an amount paid to a Government functionary under a mistake without any constraint of limitation as it would adversely affect the good governance in financial matters. Respectfully following the principles laid down by the Hon'ble Supreme Court, it is held that the respondents No.2 to 4 were not justified in refusing the refund. The impugned orders passed by them are not warranted in law and are hereby set aside. The respondent No.4, is directed to refund the excess duties recovered from the petitioner on account of erroneous classification which have been rectified by C.B.R. itself with retrospective effect. The petitioner shall approach the respondent No.1, alongwith all relevant documents for verification and scrutiny. The respondent No.4, shall conclude the entire exercise and shall refund the excess amount after determination thereof, within a period of three months from the date, on which the petitioner approaches the respondent No.4. The petition is allowed as above. Q.M.H./M.A.K./U‑21/K Petition allowed.