L D 1989 Supreme Court 232 (PLP)

THE COLLECTOR OF CUSTOMS and another‑‑ Appellants versus GOLDEN INDUSTRIES LTD. ‑‑Respondent civil Appeal No‑151-K Of 1984 Messrs STERLING ENGINEERING CORPORATION ‑‑'Appellant versus THE COLLECTOR OF CUSTOMS and another‑‑Respondents (on appeal from the judgment and order dated 14‑6‑1983 of the High Court of Sind at Karachi in Constitutional Petition No.D‑689 of 1977) ‑ civil Appeal No‑15‑K of 1986 Messrs STERLING ENGINEERING CORPORATION‑‑‑ Appellant verses THE COLLECTOR OF CUSTOMS and other Respondent (On appeal from the judgment and order dated 14‑2‑1984 01 the High Court of Sind at Karachi in Constitutional Petitions Nos 690 of 1977,756 of 1977, D‑867 of 1977, D‑690 of 1977 and D‑1185 of 1978). Civil Appeal No.16‑K of 1986 Messrs Haji YOUSUF ISMAIL MALA AND COMPANY‑‑ Appellant versus THE COLLECTOR OF CUSTOMS And other respondent Civil Appeal No.17‑K of 1986 S.A.SATTAR-Appellant versus THE COLLECTOR OF CUSTOMS and another‑‑Respondents Civil Appeal No.18‑K of 1986 Messrs GHULAM MUHAMMAD BROTH ERS‑‑Appellant versus THE COLLECTOR OF CUSTOMS and another‑‑Respondents Civil Appeal No.19‑K of 1986 S.A.SATTAR‑‑Appellant versus THE COLLECTOR OF CUSTOMS and another‑‑Respondents Civil Appeals Nos. 244‑K to 251‑K of 1977, K‑12, K‑78 of 1978, 95‑K to 102‑K of 1979, 134‑K to 137‑K of 1980, 151‑K of 1984 and 15‑K to 19‑K of 1986, decided on 13th February, 1989. (a) Customs Act (IV of 1969)‑‑ ‑‑‑ S. 18(2)‑‑Section 18(2) is divided in two parts and word "or" is used as an alternative between the two parts‑‑ Alternative does not give a free choice but only where the first part is not applicable and it is in that context that the word "or" has to be understood. (b) Customs Act (IV of 1969)‑‑ ‑‑‑ Ss. 18, 25 & First Sheds.‑‑Levy of customs duty‑‑Basis‑ ‑Discretion of Federal Govern men t‑‑ Extent‑‑Levy of regulatory duty‑‑ Restraints on Federal Government‑‑Levy of charge in excess of fifty per cent. under the notifications, in regard to articles whose rate of duty was specified in the First Schedule, was Illegal and beyond the mandate of the delegated authority. Customs duty is not levied on all the articles mentioned therein on a uniform basis. The duty levied Is on four different basis. The first group comprises articles in respect of which no customs duty is legible such as coal under item No.27.01 of Chapter

27. The second group comprises articles which are the subject‑matter of these appeals in respect of which the rates of duty are prescribed at certain per cent. on the valuation of the articles imported and described as ad values. The third group comprises those articles on which the levy of customs duty is per unit basis, that is, as per gallon, per pound, per foot or per piece. In such a group fall items such as cinematograph film under the heading 37.02 of Chapter 37 in regard to which the levy is 5 paisas per linear foot. The fourth group comprises articles on which customs duty is not only payable on per unit basis but in addition to it there is also an ad valorem charge. In this category fall articles such as beer made from malt under item 22.03 of Chapter

22. The customs duty payable in respect of it is Rs.7.5 per cent. per liquid gallon plus 25 per cent. ad valorem charge. While enacting subsection (2) of section 18 of the Customs Act, the Legislature was presumed to know the state of affairs in regard to the articles falling in these categories, and therefore, it gave discretion to the Federal Government by enacting the two alternatives to suit the situation, and while in the first part it restricted the levy at a rate not exceeding fifty Percent. of the rate, if any, specified in the First Schedule and in the second, it allowed the rate not to exceed hundred per cent. of the value of such articles as determined under section

25. The distinction is accordingly maintained in the two parts by reference to the maximum regulatory duty livable on the basis of the rates specified in the Schedule and the value of articles as determined under Section

25. Each part of subsection (2), therefore, has restricted application. If the rate of duty of the articles is specified in the 'First Schedule then no, discretion is left to the Federal Government to exceed the limit prescribed namely fifty per cent. But if no rate is prescribed in the First Schedule such as in the case of those articles which are imported free of customs duty, it is only then that the maximum of the second part can be levied on the value of the articles determined under section

25. The restriction to levy regulatory duty is accordingly explicit in case the articles imported fall under the first part in regard to which the rate of duty is prescribed in the First Schedule and while imposing the levy of regulatory duty the Federal Government is under this restraint. It has no discretion to levy the maximum of the second part as that part was intended to apply to articles in respect of which no rate was prescribed and it was, therefore, on the valuation of the articles that the maximum hundred per cent. was intended to apply as it was the only duty payable. The discretion given in subsection (2) of section 18 of the Act had to be exercised within the legislative framework. Here what is to be noticed in the‑subsection is the exercise of the discretion within the legislative framework, that is, firstly, that the discretion to levy is subject to such conditions, limitations or restrictions as the Federal Government may deem fit to impose; secondly, the specification of the articles by reference to the Schedule and the maximum of the rate of duty to be imposed and in the alternative the maximum of the regulatory duty payable on the valuation of the articles as determined under section 25; and thirdly, that the imposition of the levy was for a limited period of a financial year unless the levy was earlier withdrawn. Accordingly, the discretion to be exercised by the Federal Government is not untrammelled, but with a restraint as according to the language of the subsection. It cannot, therefore, be argued that the Federal Government was free to exercise it, as according to its choice unless there was violation of both the parts. . There are two negative imperatives which control the maximum of the duty livable as according to the rate or the value of the articles as' determined. One part cannot overlap the other so as to give unfettered discretion to the Federal Government to levy the charge. Held, the levy of charge in excess of fifty per cent. under the notifications, In regard to articles whose rate of duty was specified in the First Schedule, was illegal and beyond the mandate of the delegated authority. Maxwell's Interpretation of Statutes, Twelfth Edn., p.187; Pat field v. Ministry of Agriculture, Fisheries and Food 1968 AC 997 and Halsbury's Laws of England Second Edn., Vol. 31,. (c) Interpretation of statutes‑‑ ‑‑‑ Taxing statute‑‑While construing taxing statute the language used is not to be either stretched in favor of the State or narrowed in favors of the tax‑payer‑‑ Collision in the language of section is to be avoided. Maxwell's Interpretation of Statutes, Twelfth Edn., p.181; Patfield v. Ministry of Agriculture, Fisheries and Food 1968 AC 997 and Halsbury's Laws of England, Second Edn.,_ Vol. 31, p. 574 ref. (d) Customs Act, (IV of 1969)‑‑ ‑‑‑ Ss. 18(2) & 25‑‑Words "such articles" have no reference, to the articles specified in the first part of 6.18(2) in regard to which the rate of duty was specified‑‑Said words have reference to those articles whose rate of duty is not specified in the First Schedule in respect of which the duty is leviable beyond a rate not exceeding hundred per cent. of the value as determined under S.26. Zia Parvez, Advocate Supreme Court and M. Afzal Siddiqi, Advocate‑on‑Record for Appellants (in Civil Appeals Nos. 244‑K to 251‑K of 1977). M.Bilal, Deputy Attorney‑General and Muzaffar Ali, Advocate on‑Record for Respondents (in Civil Appeals Nos. 244‑K to 251‑K of 1977). Nemo for Appellants (in Civil Appeal No.K‑12 of 1978). M. Bilal, Deputy Attorney‑General and M.A.Siddiql, Advocate- on‑Record (absent) for Respondents Nos. 1 and 3 (in Civil,Appeal No.12‑K of 1978). Khurshid Anwar Shaikh, Advocate Supreme Court and M. Shabbir Ghaury, Advocate‑on‑Record (absent) for Appellants (in Civil Appeal No.78‑K of 1978). M.Bilal, Deputy Attorney‑General and Yousuf Rafi, Advocate- on‑Record (absent) for Respondents (in Civil Petition No.78‑K of 1978). M. Bilal Deputy Attorney‑General, and Muzaffar Hassan Advocate‑o n‑ Record for Appellants (in Civil Appeals Nos. 95‑K to 102‑K of 1979). A.A.Dastgir, Advocate‑on‑Record (absent) for Respondents (in Civil Appeals Nos. 95‑K to 102‑K of 1979). M. Bilal, Deputy Attorney‑General and Muzaffar Hassan, Advocate‑on ‑Record for Appellants (in Civil Appeals Nos. 134‑K to 137‑K of 1980). Zia Parvez, Advocate Supreme Court the R.A.Qureshi, Advocate‑on‑Record (absent) for Respondents (in Civil Appeals Nos. 134‑K to 137‑K of 1980). Zia Parvez, Advocate Supreme Court and S.M.Abbas, Advocate‑on‑Record (absent) for Appellants (in Civil Appeal No.151‑K of 1984). M.Bilal, Deputy Attorney‑General for Respondents (in Civil Appeal No.151‑K of 1984). Zia Parvez, Advocate Supreme Court and S.M.Abbas, Advocate‑on ‑Record (absent) for Appellants (in Civil Appeals Nos. 15‑K to 19‑K of 1986). Muzaffar Hassan, Advocate‑on ‑Record for Respondents (in Civil Appeals Nos. 15‑K to 19‑K of 1986). Date of hearing: 13th February, 1989. MUHAMMAD HALEEM, C.J.‑‑Civil Appeals Nos. 244‑K to 251‑K of 1977 and Civil Appeals Nos. 95‑K to 102‑K of 1979 arise from the common judgment of the High Court of Sind, dated 28‑6‑1977. Civil Appeal No.78 of 1978 arises from the judgment of the High Court, dated 30‑6‑1977 and Civil Appeal No.12‑K of 1978 arises from the judgment of the High Court, dated 8‑8‑1977. Civil Appeal No.151‑K of 1984 arises from the judgment of the High Court, dated 14‑6‑1983 while Civil Appeals Nos. 15‑K to 19‑K of 1986 arise from the common judgment of the High Court, dated 14‑2‑1984. Civil Appeals Nos. 134‑K to 137‑K of 1980 arise from the common judgment of the High Court, dated 9‑5‑1979. In Civil Appeals Nos. 244‑K to 251‑K of 1977 and Civil Appeals No. 78‑K of 1977, the challenge is to the levy of regulatory duty on iron and steel scrap for re‑rolling under the respective heading of Chapter 73 of the First Schedule to the Customs Act, 1969 (hereinafter referred to as "the Act") at the rate of 62 % ad valorem in pursuance of the notification No.SRO 910(1)/75, dated 21‑8‑1975 issued under section 18(2) of the Act as amended by the Finance Act, 1975. Civil Appeals Nos. 95‑K to 102‑K of 1977 also relate to the same issue. In Civil Appeals Nos. 15‑K to 19‑K of 1986, the appellants imported iron and steel scrap for re‑rolling and, the duty levied was at the rate of 720 on the basis of the notification No. SRO 6350), dated 1‑7‑1976. The items imported related to the respective items of Chapter 73 of the First Schedule to the Act. In Civil Appeal No. 151‑K of 1984, iron and steel scrap for re‑rolling was imported which is classified under the respective heading of Chapter 73 of the First Schedule to the Act on which a regulatory duty at the rate of Its. 72 % was levied in accordance with notification No. SRO 635(1)/76, dated 1‑7‑1976. In Civil Appeal No.12‑K of 1978, the appellant imported cast iron pipe and tube and cast iron classified under the respective heading of Chapter 73 'of the First Schedule to the Act on which duty was levied in accordance with notification No.SRO 1191(1)/76, dated 15‑12‑1976 at the rate of 87 % ad valorem as specified against item No.73.17 in addition to the duty at the rate of 72 %. In Civil Appeals Nos. 134‑K to 137‑K of 1980 the respondents imported plastic moulding compound (Polypropylene) classified under item No.39.02A (111) of the First Schedule to the Act. The duty levied was 50% in addition to 70% ad valorem customs duty specified against the item, in accordance with notification No.SRO 20(1)/78, dated 1‑1‑1978, and according to the appellants the amount of duty collected amounted to 120% of the import value of the goods Respondents accordingly claimed refund of the excess duty paid namely 50% as according to them the duty livable was 105% and not 120% under the first part of section 18(2) of the Act which claim was not entertained by the Assistant Collector of Customs. In each of these appeals the duty levied was not in accordance with the first part of section 18(2) but in accordance with the second part, namely at a rate not exceeding hundred per cent of the value of such articles, as determined under section

25. The word "or" is used as an alternative between the two parts. The appellants except the Collector of Customs in these appeals not only challenged the levy of regulatory duty in excess of fifty per cent of the rate specified in the First Schedule of the items imported under the respective heading of Chapter 73 but also the vires of subsection (2) of section

18. However, as this Court had upheld the vires of subsection (2) of section 18 of the Act in Abdur Rahim v. Federation of Pakistan, P L D 1988 S C 670, the appellant‑, only attacked the levy of regulatory duty under the impugned notifications at the rate exceeding fifty per cent. It was‑contended that the words "if any" in the first part of subsection (2) of section 18 imposed a limitation on the Federal Government not to levy regulatory duty exceeding fifty per cent If the rate of duty of the article imported was specified in the First Schedule. On the other hand it was contended by Mr. M. Bilal, Deputy Attorney‑General, that unless the regulatory duty levied under the notifications violated the maximum prescribed in both the parts, there was no violation if the duty was levied in accordance with the second part. A reference to the first Schedule of the Act' makes it clear that customs duty is not levied on all the articles mentioned therein on a uniform basis. The duty levied is on four different basis. The first group comprises articles in respect of which no customs duty is livable such as coal under item No.27.01 of Chapter

27. The second group comprises articles which are the subject‑matter of these appeals in respect of which the rates of duty are prescribed at certain per cent on the valuation of the articles imported and described as ad valorem. The third group comprises those articles on which the levy of customs duty is per unit basis, that is, as per gallon, per pound, per foot or per piece. In such a group fall items such as cinematograph film under the heading 37.02 of Chapter 37 in regard to which‑, the levy is 5 pauses per linear foot. The fourth group comprises articles on which customs duty is not only payable on per unit basis but in addition to it there is also an ad valorem in this category fill articles such as beer made from malt . under item 22.03 of Chapter

22. The customs duty payable in respect of it is Rs. 7.5 per cent per liquid gallon plus 2‑5 per cent ad valorem charge. While enacting subsection (2) of section IS of the Customs Act, the Legislature was presumed to know the state of affairs in regard to the articles falling in these categories, and, therefore, it gave discretion to the Federal Government by enacting the two ,alternatives to suit the situation, and while, in the first, part it restricted the levy at a rate I not exceeding fifty per‑ cent of the rate, if any, specified in the First‑, Schedule and_ in the second, it allowed the rate not to exceed hundred. per cent of the value of such articles as determined under section

25. The, distinction is accordingly maintained in the two parts by reference ' e to, the maximum regulatory duty leviable on the basis of the rates specified, in the Schedule and the value of articles list determined under section

25. Each part of subsection (2), therefore, has restricted application. If 'the rate of duty of the articles is specified in' the First Schedule then no discretion is , left ‑to the Federal Government to exceed the limit prescribed namely fifty per cent'. But if no' rate, is prescribed in the First Schedule such I as in the case ‑of those articles which are imported free of customs duty, it is only then that, the maximum of the second part can be levied on the value of the articles determined under section,

25. The restriction to levy regulatory duty, is Accordingly explicit in ‑case the articles imported fall under the first part, in regard to which the rate, of duty 4s prescribed in the First Schedule and while imposing the levy of regulatory ‑duty the Federal Government is under this restraint. It has no.‑, discretion to levy the‑maximum, of the second part As that part was intended to ‑apply to articles in respect of which no rate was prescribed And it was I therefore, on the valuation of the articles that 'the maximum hundred percent was Intended to apply as it was the only duty payable. The discretion given in, subsection (2) of section 18 of the Act had to be exercised within the legislative framework I as observed by ‑this Court in, Abdur Rahim v. Federation of Pakistan (supra), at page,

670. Here what is to be noticed in the subsection is the exercise ,of the discretion within, the legislative framework, that is, firstly, that the discretion to levy is subject to such conditions, limitations or restrictions as the Federal Government may deem fit to impose; secondly, f he specification of theatrical by reference ‑to the Schedule and the maximum of the rate of duty to be Imposed and in, the alternative the maximum of the regulatory duty payable on the valuation of the articles as determined under‑ section 25; and thirdly, that the imposition of the Ivey 'was for a limited period of a financial year unless the levy was earlier withdrawn. The rule of interpretation is that while construing taxing statutes the language used is not to be either stretched in favour of the State or narrowed in favors of the tax‑payer. In this background it is a settled rule that collision in the language of the section is to be avoided. In Maxwell on the Interpretation of Statutes, Twelfth Edition, at page 187, it is said: "But, on the general principle that an author must be supposed not to have intended to contradict himself, the Court will endeavour to construe the language of the legislature in suet, a way as to avoid having to apply the rule legs posteriors,‑ Priores contrarias abrogrant ...................... One way in which repugnancy can be avoided is by regarding two apparently conflicting provisions as dealing with distinct matters or situations." And again in the realm of exercise of delegated legislation the modern tendency seems to be against, construing statutes so as to leave‑ the person or body upon whom a power is conferred absolutely untrammeled in the exercise of it. (See Patfield v. Ministry of Agriculture, Fisheries and Food (1968) A.C. 997). The same rule is stated in Halsbury,s Laws of England, Second Edition, Volume 31, at para.

574. It is said: "Delegated authority of the kind above referred to must be exercised strictly ‑in accordance with the powers, creating it, and in the spirit of the e‑nabbing statute. Statutes of a subordinate legislature, and also rules, ordinances, orders, and bye‑laws, Which have fulfilled all the conditions precede to their validity, have the force of statutes, and must be construed as such." Accordingly the discretion to be exercised by the Federal Government is not untrammeled, but with a restraint as according to the languages, of the subsection. It cannot, therefore, be argued that the Federal Government was free to exercise it as according to its choice unless there Was violation of both the parts. In the High Court there was a conflict of decision between the two Division Benches in the cases entitled as Mts. Hashim Tanvir Traders v. Ministry ‑of Finance and Central Board of Revenue (Constitutional Petition No.D‑404 of 107) and M/s. Yousuf Re‑rolling Mills Karachi v. Collector of Customs and another (Constitutional Petition No.1178 of 1975). The conflict was subsequently resolved by the Full Bench in the case entitled M/s. Sterling Engineering Corporation v. Collector of Customs (Constitutional Petition NO.689 of 1977). The Decisions in all these cases are under challenge in the appeal in this Court. The Full Bench case is reported as Sterling Engineering Corporation v. Collector of Customs 9 P L D 1986 Kar.

211. While construing subsection (2) of section 18, B.G.N. Kazi, J.., differed from the view taken by the Division Bench in the case of M/s. Yousuf Re‑rolling Mills, Karachi and agreed with the decision of the Division Bench in Constitution Petition No.D‑404, M/s. Hashim Tanvir Traderb v. Ministry Of Finance and Collateral Board of Revenue and others, and held. "With respect, in the observation quoted above the power of the Federal Government to impose protective, duty by issue of notifications, has been overlooked and the rate not exceeding 50% of the rate specified in the Schedule, under subsection (2) of section. 18 aforesaid is to be read with notification to protective duty an the Federal issued with regard Government has been given the discretion to act under part I or part 2 of the aforesaid subsection. The discretion to act 'either in accordance with part 1 or in accordance with part 2 is apparent from the very use of the word "or" in the subsection as already stated. His emphasis was on the word or according to him gave a discretion to levy the maximum of regulator duty in the second part. Again the learned Judge noticed the words "such articles" in both the parts of subsection (2) of section' 18 of the Act which is factually incorrect, and, therefore, he construed these words to mean as to cover all articles mentioned in the Schedule irrespective of whether any rate of duty was specified in the First Schedule or not. "Such articles" can have no reference to the articles specified in the first part in regard to which the rate of duty was specified but these words must have reference to those article" whose rate of duty is not specified in the First Schedule in respect of which the duty is leviable beyond a rate not exceeding hundred per cent of the value as determined under section

25. There are two negative imperatives which control the maximum of the duty leviable as according to the rate or the value of the articles as determined. one part can‑not overlap the other so, as to give unfettered discretion to the Federal Government to levy the charge. The learned Single Judge failed to notice the restrictions in either of the two parts, and, accordingly, we do not agree with his interpretation. K.A. Ghani, J., with whom Ajmal Mian, J. agreed, in his opinion held that the word "such" should be construed to refer to even those articles whose rates of duty are specified in the First Schedule, and thus concluded:‑ "Considered in the light of the above principles and on giving due significance to the word "such" it would be observed that there is no conflict in the earlier and subsequent parts of subsection (2) of section 18 of the Act. It was also be pointed out that in the First Schedule rates of duties specified are; "Neither uniform nor imposed on all articles. The words used in the second part of subsection (2) of the 'section 18 "or at a rate not exceeding hundred per cent of the value of such' articles would include not only articles on which rate of duty imposed is specified but also other articles mentioned in 'the schedule. it would be noted that under the bundles, customs duty imposes, at places is ad valorem, and at others on quantity, unit, measurements, etc. and a number of articles are even free from payment of any customs duty whatever. The letter of law and‑the words used in subsection (2) therefore cannot be so interpreted as to restrict the powers of the Federal Government, to impose regulatory duty under second part of subsection (2) only in respect of the items importable free of any duty or on which ad valorem duty cannot be imposed. Such an interpretation obviously is not warranted by the clear language used in the statute under consideration, and the Court as already noted above, is to look to the words of the statute ‑ and interpret it in the light of what is clearly expressed and it cannot import provisions In the statute so as to support assumed deficiency." Again he construed the word "or" as giving an alternative discretion to the Federal Government but without noticing that the alternative does not give a free choice but only where the first part is not G applicable. It is in that context that the word ‑or‑ has to be understood. Accordingly, we do not approve the interpretation of the word "such" and the unfettered discretion construed from the language of subsection (2) of section 18 of the Act in the context of what has been observed earlier while disagreeing with the opinion of B.G.N. Kazi, J. In the result, we would uphold the view expressed by‑ the. learned Single Judge in Messrs Yousuf Re‑rolling Mills, Karachi, as in that judgment the learned Judge noticed the restraint in either alternatives which restricts the exercise of discretion by the Federal Government. In this view of the matter, we would allow the appeals to the extent that the levy of charge in excess of fifty per cent under the notifications, in regard to articles whose rate of duty was specified in the First Schedule, was illegal and beyond the mandate of the delegated authority. In the result, Civil Appeals Nos. 244‑H to 251‑K of 1977, Civil Appeals Nos. 15‑K to 19‑K of 1986, Civil Appeal No. 78‑K of 1978, Civil Appeal No.12‑K of 1978 and Civil Appeal No. 151‑K of 1984 are allowed with costs. Civil Appeals Nos. 95‑K to '102‑K of 1979 and Civil Appeals Nos. 134‑K to 137‑K of 1980 are dismissed with costs. M.B.A./Y‑15/S Order accordingly.