19911 PLP 1797 (CLC)

"Waste and Scrap Metal of Iron or Steel" connotes an item "fit only for the recovery of metal or for use in the manufacture of chemicals." Waste and Scrap metal of Iron or Steel connotes of a miscellaneous nature and usually resulting from cutting, shaping or other working on iron and steel or taking the form of unusable, worn out or broken articles of iron or steel, frequently crushed or compressed together. Words and phrases... ‑‑‑‑`Scrap iron'‑‑‑`Waste and scrap metal of iron or steel‑‑‑Meaning. Constitutional Petition D‑543 of 1988; Beco Agencies Ltd. v. Karachi Municipal Corporation 1987 S C M R 16.12; Radaka Corporation v. Collector of Customs 1989 S C M R 353 and Waseem Traders v. Government of Pakistan 1985 C L C 2796 ref Muhannmad Ali Sayeed for Petitioner. Muhammad Saleem for Respondents.. Dates of hearing: 19th and 20th February, 1990. WAJIHUDDIN AHMED, J.‑‑Grievance in these petitions is that, after the petitioners in each of these cases had imported consignments of Iron Scrap, the then prevailing exemption under S.R.O. 505 (1)/86, dated 29‑5‑1986, was withdrawn and substituted by another notification, purportedly again under section 19 of the Customs Act namely, S.R.O. 1015 (1)/87, dated 30‑12‑1987. It is urged that in consonance with the rule laid down by the Supreme Court in the case of Al‑Samrez Enterprise v. Federation of Pakistan (1986 S C M R 1917) such exemption resulted in creation of rights, which could not be taken away on withdrawal of exemption, if such rights had come to mature before the date of withdrawal of the exemption. However, subsequent to the Supreme Court dicta in the case of Al‑Samrez Enterprise ibid, the legislature inserted section 31‑A in the Customs Act, 1969, thereby, retrospectively, taking away all such rights as allowed from the decision in the case of Al‑Samrez Enterprise. There can be no doubt that such retrospective legislation can competently be passed by a legislature A provided that it does not violate any constitutional provision, right or mandate. This view has been adopted in the case of Yasin Sons v: Federation of Pakistan (P 1, D 1989 Kar. 361) by a Division Bench of this Court and has, respectfully, been re‑affirmed by us in another case namely that of Crescent Pak Industries Ltd. v. Government of Pakistan covered by Constitutional Petition No.D‑1135/88.

2. The above, however; does not dispose of the controversies in these petitions fully. Thus as regards exemption from sales tax such exemption by the Federal Government, under section 7 of the Sales Tax Act, 1951, being grantable in a similar way as exemptions from the duties of Customs under section 19 of the Customs Act, withdrawal of the exemption, 'in a manner identical to that contemplated in the case of Al‑Samrez Enterprise, above, would equally attract the rule laid down in that case. There is no legislative follow‑up similar to the promulgation of section 31‑A in the context of the withdrawal of exemptions in the Sales Tax Act, 1951. No such protection or condonation, as is envisaged in section 31‑A of the Customs Act is, therefore, available under the Sales Tax Act, 1951. Exemption from sales tax was allowed under Notification No. S.R.O.5.30 (1)/86, dated 29‑5‑1986, but stands withdrawn pursuant to Notification No.1014 (1)/87 dated 30‑12‑1987. Since letters of credit had been established and firm S contracts had been struck prior to the withdrawal of exemption of sales tax, rights such as those recognized in the case of Al‑Samrez Enterprise accrued. Relevant assessment and recovery/attempted recovery of sales‑tax is, therefore, clearly without lawful authority and it is so held.

3. The next question for consideration is as to in what manner the disputed goods are to be assessed following upon the withdrawal of Notification S.R.O. 505 L (1)/86, dated 29‑5‑1986, and substitution thereof by S.R.O. 1015 (1)/87 on 30‑12-1987, each notification operating under section 19 of the Customs Act, 1969. It would be in order to reproduce here the original exemption side by side with the substituted one: Exemption under Notification dated 29‑5‑1986 P.C.T. Hcadine. Description. Dues 73.06 to 73.40. Re‑rollable scrap Rs.2,500 PMT 51% ad val Exemption under Notification dated 30‑12‑1987 73.03 Waste and Scrap metal of iron or steel 20/ad vat (Shredded and bundled scrap only). It is to be observed that under the referred notification dated 29‑5‑1986 there was no exemption for waste and scrap of Iron falling under Pakistan Customs Tariff (P.C.T.) heading 73.03 Goods falling under P.C.T. Headings 73.06 to 73.40, which qualified as "Re‑rollahle scrap", however, were entitled to exemption in terms of that notification. The ensuing Customs notification dated 30‑12‑1987 operated to introduce an exemption pertaining to "Waste and Scrap metal of Iron or Steel" under P.C.T. Heading 73.03 and lifted the benefit from the goods covered by P.C.T headings 73.06 to 73.40. The necessary consequence, thus, appears to be that unless the various items, prima facie, falling under these headings have lost identity of their own and qualify under P.C.T. heading 73.03 as "Waste or Scrap" such could, arguably and appropriately, fall under those very headings, which confirm to their description. Discretion with the Customs, in such a matter, would appear to be extremely limited and should operate within a very narrow compass.

4. Taking up these questions in due detail, it would seem that in so far as Notification dated 30‑12‑1987 is concerned, the exempted goods therein mentioned would be exempted from so much of Customs duties chargeable thereon as are in excess of the rates of duty in column 3 thereof, but, if as Mr. Muhammad Ali Sayeed says, the original duty as per schedule in the Customs Act was Rs. 418 per ton and such duty happens to be less than 20% ad valorem, as in the exemption notification, the former alone would be chargeable as an exemption notification under section 19 cannot result in a higher levy than is already provided for in the existing schedule. In these circumstances, it can well be that the exemption may become meaningful if at all, at a later point of time when normal price of the imported item in the country of purchaser, in terms of section 25 of the Customs Act, suffers adequeate pruning, if and when that happens, and thereby makes such 20% ad valorem to be less than the already prescribed duty of Rs.418 per ton in the schedule. Such view is supported, in some measure, by the judgment of our learned brothers Saeeduzzaman Siddiqui and Abdul Rahim Oazi,JJ, in Constitutional Petition D‑543/88.

5. Another aspect of the matter, already adverted to in passing, is as to whether, following upon the subsequent notification of 30‑12‑1987, it would be open for the Customs to assess the disputed goods under the heads of various items as indicated in P C T headings 73.06 to 73.40, exemption in regard to the same having been withdrawn. The stand of the respondents is to that effect. We have given some thought to this matter. It would appear that during the pendency of these proceedings the disputed goods have been allowed to be cleared pursuant to interim orders of this Court and for the difference in the two versions of liability bank guarantees have been taken. The question as to what is signified by the expression "waste and scrap metal of iron or steel", incidentally in relation to a claim for Octroi, came up for consideration in the Supreme Court of Pakistan in the case of Beco Agencies Ltd. v. Karachi Municipal Corporation (1987 S C M R 1642). Respondents' case in the High Court was that the words "scrap iron" referred to completely worn out iron which had no utility otherwise p than for melting purposes and did not include usable items such as plates, girders bars etc. which were separately classified, whether these were new or old. Taking note of this contention, re‑agitated in the Supreme Court, Mohammad Haleem, C.J. disposed it of in these words"‑‑ "This submission appears to us to be of no value as in the absence of a finding of fact it could not be pressed into service." In the subsequent case of Radaka Corporation v. Collector of Customs (1989 S C M R 353) such question directly arose under the Customs Act. On examination of Brussels Tariff Nomenclature, and the Explanatory Notes (the precursor of CCCN introduced by the Customs Co‑operation Council w.e.f. 1‑1‑1978) the conclusion drawn, on the basis of Note 6 therein, was that "Waste and Scrap Metal of Iron or Steel" connoted an item "fit only for the recovery of metal or for use in the manufacture of chemicals". Mention, with approval, was also made to its connotations as detailed in the corresponding heading 73.03 in Brussels Nomenclature i.e. generally of a miscellaneous nature and usually resulting from cutting shaping or other working of iron and steel or taking the form of unusable, worn out or broken articles of iron or steel, frequently crushed of compressed together. In this context reliance is also placed on a Division Bench case of this Court reported as Waseem Traders v. Government of Pakistan 1985 C L C 2796 which decision can be considered only in the light of the foregoing Supreme court views.

6. Be that as it may, in Constitutional Petition No.341/88, which involves substantial quantities, the controversy seems to have been greatly curtailed in that bulk of the disputed items have been provisionally found to consist of re‑meltable scrap and shredded scrap, 25% of the consignment alone providing some hurdle. What is the precise position in relation to Constitutional Petition No.D-203/88 we have no bill of entry before us to make any firm observation about but have no doubt that the two cases, on remand, which we propose to make, shall be dealt with similarly.

7. Turning directly now to the effect of the current exemption on the classification of disputed items which could, arguable, be covered by P.C.T, Headings 73.06 to 73.40, as the Customs would like us to accept, we have, on the foregoing analysis this to say: there can be no doubt whatsoever that a particular commodity or class of goods which falls under a particular heading would continue to fall under the same heading even though imported in a second hand or used condition. However, if such commodity is imported in a worn out, broken or shredded state and is incapable of being used, for a purpose other than that described under an heading such as 73.03 and also otherwise qualifies within such heading, it is in such P.C.T. heading that it should, plausibly be assessed. Thus if the various items ostensibly falling under P.C.T Headings 73.06 to 73.40 cannot be used for any purpose other than "Waste and Scrap metal of Iron or Steel" the same may fall under the later heading and this conforms to the opinions expressed in the dicta cited above. However, as said elsewhere, the discretion o1 the Customs in such matters is a very limited one and they must in this behalf be guided by well‑established principles duly documented in Brussels Nomenclature of CCCN, etc as the case may be.

8. These, obviously, are questions in the details of which we cannot go in the Constitutional jurisdiction of this Court. As such, while allowing the petitions, to the extent indicated above and remanding these matters, we would require the respondents to apply the rules deduced herein and, referring to the provisional assessments, make final determinations within a period of 60 days from the date of communication of these orders. In the event the orders are adverse to the petitioners the bank guarantees rendered in these petitions would become encashable after a further period of one month of the recording of final assessments by the officers of Customs, relevant to these matters. On appeal at the department level, if preferred within time, suitable orders, including variations in the bank guarantees, in accordance with the attendant circumstances, may be passed and similar can be the situation, at the discretion of the relevant authority, in revision. 9: The petitions are accordingly allowed but there will be no order as to costs. M.B.A./Y‑44/K Petition allowed.