1992 PLP 159 (CLC)

2. The petitioner has assailed the validity of regulatory duty levied by the Federal Government at the rate of Rs.5 per K.G. on the imported goods. In the alternative, it has been prayed that the duty imposed has been exempted by virtue of S.R.O. No.505(1)/88 as amended subsequently.

3. The petitioner is a public limited company duly registered under the law and is engaged in the business of manufacturing and processing of goods made by artificial fibre (man‑made fibre) which is imported from different countries. The petitioner imported Viscose Staple Fibre and filed bill of entry before the Collector Customs. The functionaries working under the Collector raised demands of different Customs duties as well as regulatory duty at the rate of Rs.5 per K.G. The petitioner is said to have paid the Customs duty but challenged the levy of the regulatory duty through the present petition.

4. The learned counsel for the petitioner as well as the learned counsel in the connected petitions have raised the following points:‑‑ (i) The imposition of the regulatory duty is illegal, unjust and unreasonable because on the one hand the Federal Government has granted exemption in respect of Customs duties and on the other imposed additional duty in the shape of regulatory duty. Reliance was placed in case of Ittfaq Foundry v. Federation of Pakistan (PLD 19917 Lah.121). (ii) The regulatory duty is a Customs duty and the exemption granted by virtue of SRO 505(1)/88, dated 26‑6‑1988 as amended by SRO No.639(1)/89, dated 17‑6‑1989 is applicable to it as well. Originally 40% ad valorem Customs duty was specified in respect of imported goods included in the First Schedule of the Customs Act. However, subsequently a fixed amount of Rs.15 per K.G. was prescribed by the above referred SROs. and the Customs duty in excess of Rs.15 per K.G. stood exempted. In this connection they placed reliance on Nawab Brothers v. Collector of Customs Karachi and another (P L D 1977 Kar. 947). (iii) The subsequent amendment made in SRO 505(1)/88, dated 26‑6‑1968 itself shows that originally the exemption granted was not relatable to the levies under subsection (1) of section 18 only. (iv) The exemption granted under section 18 of the Customs Act is equally applicable to the duties levied under subsection (1) of section 18 and regulatory duty imposed under subsection (2) of the said section. 1n similar circumstances, the Central Board of Revenue had issued Letter No.1(97)/Original/83, dated 16‑1‑1984 and since then the department has been consistently following the practice of allowing exemptions in respect of amounts of levies under section

18. Hence the departmental practice even if erroneous, should not be disturbed. In this connection reliance is placed on Nazir Ahmad v. Pakistan and 11 others (P L D 1970 SC 453) and Messrs Radaka Corporation and others v. Collector of Customs and another (1989 S C M R 353). (v) There is no notification holding the field in respect of the year 1991‑92, hence the goods imported during the said period cannot be subjected to payment of regulatory duty. On the other hand Mr. Mumtaz Ali Mirza learned Standing Counsel urged that the regulatory duty was validly levied by the Federal Government by virtue of provisions of subsection (2) of section 18 of the Customs Act and was not unreasonable. As regards the exemption claimed by the petitioner, he submits that the exemption granted by virtue of SRO 505(1)/88 as amended by SRO 639(I) of 1989 is purely relatable to the Customs duties levied under subsection (1) of section 18 of the Act and has no nexus with the regulatory duty imposed under section 18(2) of the Act. In this connection, he has referred to the precise language used in the above‑referred SROs. which speak of Customs duties and the First Schedule to the Act which has relevancy to the Customs duties imposed under section 18(1) of the Act. He further submits that there was no departmental practice to allow exemptions in respect of regulatory duty because the Government has been imposing the regulatory duty and the department consistently demanding the said duty from the petitioner. As regards the letter of Central Board of Revenue (CBR CI (97) Machinery/83 dated 16‑1‑1984, he submits that it might have been issued rightly or wrongly in respect of the exemptions granted earlier but it has no bearing in respect of the recent exemptions which are clearly relatable to Customs duties imposed under subsection (1) of section 18 of the Act. Meeting the objection that there was no notification holding the field levying regulatory duty for the year 1991‑92, he has placed on the record Notification C.N.6/1991?C.B., dated 1st July, 1991 and urged with reference to provisions of subsection (3) of section 18 that the duty could be recovered from the date of the issue of the notification. He was not sure whether the notification was actually published in the official Gazette or not. He undertook that he would verify the correct position and inform the Court accordingly. After the judgment was reserved, the learned Standing Counsel placed on the record Notification NO.S.R.O.(1)/91, dated 1st July, 1991, published in the Gazette on 3rd July, 1991.

5. By virtue of the provisions of subsection (1) of section 18 of the Act, the Legislature is competent to levy Customs duties at such rates as are prescribed in the First Schedule and the Second Schedule or under any other law for the time being in force. The Federal Government is empowered by virtue of subsection (2) of section 18 of the Act to levy a regulatory duty on all or any of the articles specified in the First Schedule at a rate not exceeding hundred per cent. of the rate, if any, specified therein. Subsection (3) of the Act makes it clear that the regulatory duty levied under subsection (2) shall be in addition to any duty imposed under subsection (1) or under any other law for the time being in force and be leviable on and from the day specified in the Notification issued under that subsection, notwithstanding the fact that the issue of the official Gazette in which such Notification appears is published at any time after the day. A bare reading of subsection (2) of section 18 of the Act makes it clear that the regulatory duty is distinct from and in addition to the Customs duties leviable under subsection (1) of section 18 of the Act. Regulatory duty can be imposed by the Federal Government annually subject to such conditions, limitations or restrictions as it deems fit. Thus, the law had given a vast discretion to the Government in the matter. The regulatory duty cannot exceed 100 per cent. of the rate specified in respect of the Customs duties levied under the First Schedule. The Government appears to have acted justly and fairly in exercising the discretion by imposing regulatory duty to the extent of only one‑third of the maximum permissible limit. The mere fact that the Government had granted partial or total exemption in respect of Customs duties levied under subsection (1) of section 18 of the Act on different goods, was hardly sufficient to dub the imposition of regulatory duty as unjust or unreasonable. The matter entirely rested on the discretion of the Government and there is nothing to show that the discretion was exercised in an arbitrary or perverse manner. Hence,, the judgment in the case of Ittfaq Foundry, relied upon by the petitioners' learned counsel is of no help to them.

6. Coming to the question as to whether the exemptions granted by virtue of SRO No.505(1)/88, dated 26‑8‑1988 as amended by SRO No.639(1)/89, dated 17‑6‑1989, cover the regulatory duty as well, the contents of the said Notifications should be seen first. The said SRO reads as und6r:‑ "In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and in supersession of this Ministry's Notification No.SRO 505(1)/86, dated the 29th May, 1986, the Federal Government is pleased to direct that the goods specified in column (2) of the table below and falling within the heading/sub‑heading numbers of the First Schedule to the said Act specified in column (1) of the said table shall be exempt from so much of the Customs duties chargeable thereon as are in excess of the rate of duty specified in column (3) of that table." It may be mentioned that the regulatory duty pertaining to the year 1989‑90 was imposed by virtue of SRO No.679(1)/89, dated 29‑6‑1989. A number of Customs duties on various goods were already holding the filed. The authority allowing exemptions was fully conscious of the fact that two kinds of levies, one, the Customs deities under subsection (1) of section 18 and the other, regulatory duty under subsection (2) of the section 18 of the Act were holding the field. Therefore, if the authority intended to grant exemptions in respect of the Customs duties, a s well as the regulatory duty, it could have conveniently said so in SRO 505(1),/88 as amended subsequently. However, the said SRO had merely granted exemption in respect of the Customs duties levied on goods falling within the heading/sub‑heading numbers of the First Schedule to the Customs Act (and specified in column No.2 of the table of the SRO). It makes a pointed reference to the "Customs duties" chargeable on the said goods. Admittedly the First Schedule to the Act embodied the Customs duties imposed under subsection (1) of section 18 of the Act and had nothing to do with the regulatory duty imposed under subsection (2) of section 18.

7. In the case of Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others (P L D 1991 SC 329) an argument was raised that the exemption granted under section 19 of the Customs Act was so general and extensive that it would be available, subject to the notified conditions, limitations and/or restrictions, to the Customs duties of both categories, the one leviable under the Customs Act and the other under the law for the time being in force. The said contention was repelled for three reasons, one of which was that the very words of the notification allowed exemption by a reference to goods and the duties mentioned in the First Schedule to the Customs Act. It was emphasized: "Nothing more could be read into it and the levies made under other laws could not be got affected by such a notification." On a parity of reasoning, the exemption Notification (SRO‑505(1)/88 is purely relatable to the Customs duties imposed under subsection (1) of section 18 and has no nexus with the levy of regulatory duty under section 18(2) of the Act, which stands unaffected. Had the exemption been couched in general words to the effect that Customs duties levied under section 18 of the Act were wholly or partly exempted, then perhaps the petitioner could have claimed exemption in respect of the regulatory duty on the ground that it was also a kind of Customs duty (as held in the case of Nawab Brothers v. Collector Customs (P L D 1977 Kar. 947). However, the wording of SRO 505(1)/88 not being general in character, the exemption claimed by the petitioner cannot be allowed.

8. The exemption Notification SRO 505(1)/88, grants exemptions in respect of Customs duties chargeable on goods falling within the First Schedule of the Act. The subsequent amendment made (through SRO 639(1)/89 dated?17‑6‑1989) in SRO 505(1)/88, brings in some new subheading numbers i.e. 55.01 to 55.07 which relate to man‑made fibres. The rate of duty for the man?made fibre is shown as Rs.15 per K.G. meaning thereby that the Customs duty chargeable on man‑made fibre under the First Schedule of the Act could be Rs.15 per KG. only and the duty beyond the said amount was exempted. It may be mentioned that originally 40 per cent. ad valorem Customs duty was prescribed in the First Schedule for the man‑made fibre and the same held the field till SRO 639(1)/89 was issued on 17‑6‑1989. Apparently the object was to grant exemption of Customs duty if on calculation made at the rate of Rs.40% ad valorem it was found to be in excess of duty calculated at the rate of Rs.15 per K.G. The Legislature appears to have amended the provision relating to 40% ad valorem customs duty and provided Customs duty at the rate of Rs.15 per K.G. through Finance Act of 1989. After the above-referred amendment brought about through Finance Act of 1989, now the Customs duty is Rs.15 per K.G. and the same rate has been specified in SRO 639(1)/89, dated 17-6-1989. The two rates being the same, the question of exemption in respect of the man-made fibre does not arise. It is entirely for the Government to re-consider the matter and allow some benefit in the shape of exemption to the petitioner and other traders.

9. As regards the so-called departmental practice, there does not appear to be any consistent practice of construing exemption notification issued under section 19 of the Act to cover Customs duties as well as the regulatory duty levied under section 18 of the Act. The earlier letter No.CBR-C. No.1(97) Machinery/83, dated 16-1-1984 was relatable to the exemptions granted through some Notifications which have not been placed before this Court. Hence, it cannot be said whether the Central Board of Revenue had correctly construed the exemption Notification or not. In the present case, we are concerned with the exemption Notification, S.R.O. 505(1)/88, dated 26-6-1988 as amended subsequently which does not admit of the construction placed on it by the petitioners' learned counsel that it covers all kinds of levies made by the Legislature under subsection (1) of section 18 or by the Federal Government under subsection (2) of section 18 of the Act. Conversely, the said notification is clearly relatable to "the Customs duties" in respect of the goods failing within the heading and sub-heading numbers of "the First Schedule" of the Act. Therefore, the petitioner cannot take advantage of the letter issued by the CBR in the year 1984, particularly when the factum of the so-called consistent practice is otherwise falsified by the consistent and persistent demand of regulatory duty by the Customs Authorities. The judgments in the cases of Nazir Ahmad and Raddq Corporation referred to by the petitioner's learned counsel proceed on distinguishable facts and are not relevant in the present case.

10. The argument that no notification holds the field in respect of the period pertaining to the year 1991-92 has no force either. The notification was duly issued on 1-7-1991 and then published in the official Gazette on 3-7-1991. Therefore, the Customs Authorities can lawfully recover the Regulatory Duty for the period 1991-92 as well.????????? ?

11. For the foregoing discussion, I find no merit in the present petition and the other connected petitions which are dismissed with costs. The petitioners were allowed interim relief for release of the imported goods subject to furnishing of bank guarantee (or insurance guarantee in some cases). It is clarified that the Customs Authorities shall be at liberty to recover the regulatory duty due from the petitioners through encashment of the bank insurance guarantees furnished by them. AA./M-108/L????????????????????????????????????????????????????????????????????????????????????? Petitions dismissed.