P L D 1988 Karachi 1 (PLP)

AJMAL MIAN, J.--By this common order, we intend to dispose of the following six C.M.As. filed in the under--mentioned Constitutional Petitions for the stay of the recovery of export duty at the rate of Rs.5 per kilo under S.R.O. 486(1)187, dated 12‑6‑1987'. (i) C.M.A. No. 2178/87, C.P. No. D‑868/1987, Nagina Cotton Mills Ltd. v. Government of Pakistan and others (ii) C.M.A. No. 2190/87, C.P. No. D‑873 of 1987, Gulistan Textiles Mills Ltd. V The Government of Pakistan and another. (iii) C.M.A. No. 2204/87, C.P. No. D‑878/1987, Gulshan Spinning Mills Ltd. v. The Government of Pakistan and other. iv) C.M.A. No. 2257/87, C.P. No. D‑906 of 1987, Shaheen Cotton Mills Ltd. v. Collector of Customs, Customs house Karachi. (v) C.M.A. No.2259/87, in C.P. No D-907 of 1987, Shahzad Cotton Mills Ltd. v. Collector of Customs, Customs House, Karachi. (vi) C.M.A. No. 2262/87, C.P. No. D‑910 of 1987, Indus Dyeing and Manufacturing Co. Ltd. v. The Government of Pakistan and another.

2. The brief facts leading to the filing of the above petitions are that the petitioners have textile mills and inter Alia, manufacture cotton yarn, which they export to foreign countries. The Government of Pakistan under S.R.O. No. 486(1)/87, dated 12‑6‑1987, in exercise of the powers conferred by section 19 of the Customs Act, 1969 (Act IV of 1969), hereinafter referred to as the Notification, was pleased to direct that further amendment shall be made in the Ministry's Notification No. SRO.674(1)/80, dated 26‑6‑1980, providing in the Table of the said Notification against item No. 14 in column 1 and in column 3, for the entry 'Free' the entry Rupee 5 per kg. shall be substituted and thereby imposed export duty at the above rate. The petitioners have impugned the above Notification in the above petitions. It has been averred by the petitioners that the above Notification cannot be made applicable to the cotton yarn which are the subject-matter of the contracts for sale with foreign buyers concluded prior to 12‑6‑1987 and in respect of some of which L.Cs. were opened by the foreign buyers. Along with the above petitions the petitioners have filed the aforesaid C.M.As. for seeking an ad interim injunction, restraining the respondents, their servants and subordinates from claiming or collecting export duty on the cotton yarn being exported by the petitioners pursuant to the contracts listed in the petitions. It may be observed that in some of the petitions, which were admitted earlier, stay was granted by the Court on furnishing of the bank guarantee or a guarantee from the approved Insurance Policy of the amounts involved, mostly by consent of the learned counsel for the respondents. However, the present stay applications have been vehemently opposed by the respondents' counsel on the ground that in the earlier cases the relevant terms of the Contracts and section 64‑A of the Sales of Goods Act, hereinafter referred to as the Act, were not brought to the notice of the Court and that the petitioners have no case for the stay. It has been also submitted that the Government has been deprived of its legitimate revenue which runs into crores of rupees without any plausible reason.

3. We have heard M/s. Khalid Anwar, Muhammad Ali Saeed and Anwar Mansoor Khan learned counsel for the petitioners in support of the above applications. Their main contention was that if we were to apply the notification to the transactions which were already concluded prior to the above notification, it would affect the petitioners' vested right inasmuch as they entered into the above contracts on the assumption that there would be no export duty on cotton yarn which was the factual position obtaining at the time when the contracts were concluded. It was further submitted by them that neither a clause in the contract providing that in case of imposition of export duty the buyer would pay, nor section 64-A of the Act, alter the above position. Whereas the learned counsel for the respondents M/s. Rasheed Akhund, Abul Khair Ansari and Syed Iftikhar Hassan have contended that the notification has not affected any vested right of the petitioners as the petitioners are entitled to recover the amount of export duty from the buyers, either under the terms of the contract and/or under section 64‑A of the Act.

4. Before taking up the above submission of the learned counsel for the parties, it may be observed that in Constitutional Petition No. D‑868 of 1987, it has been provided that any increase in duties and/or charges, taxes, enforced by the Government and any variation in the existing refunds or variation in exchange rate and/or increase in freight after the date of the contract or any other change adversely affecting sale proceeds of the Sellers shall be on Buyers' account and shall be paid for by the Buyers; whereas in Constitutional Petitions No. D‑906 of 1987 and D‑907 of 1987 the contract documents contain 2 clauses providing that any increase or decrease in freight, insurance or imposition of any export duty hereafter shall be in Buyers' account and that any change in Government of Pakistan Policy will be in Buyers' account. It may also be observed that Mr. Khalid Anwar learned counsel .for the petitioner in Constitutional Petition No. D‑873 of 1987 has submitted that out of the 100 contracts which are the subject‑matter of Constitutional Petition No. D‑873 of 1987, in 21 contract there are clauses providing for the payment of export duty by the buyers in case of imposition of the same after entering into contract. Copies of all the above contracts documents are not on record. It may further be observed that in Constitutional Petition No. 910 of 1987 there is a clause in the contract that if there is any change in the Pakistan Government Policy the contract will be re‑negotiated. It may further be stated that according to Mr. Khalid Anwar there is no clause in the contract documents which are the subject‑matter of Constitutional Petition No. D‑878 of 1987.

5. Having stated the above factual position, we may revert back to the above contentions of the learned counsel for the parties. In order to appreciate the respective contentions of the learned counsel for the parties, it may be advantageous to reproduce section 64‑A of the Act, which reads as follows:‑‑ 64‑A. in contracts of sale amount of increased or decreased duty to be added of deducted.‑‑ In the event of any duty of customs or excise or tax on any goods being imposed, increased, decreased, or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty or tax where duty or tax was not chargeable at the time of the making of the contract, or for the sale of such, goods duty paid or tax paid where duty or tax was chargeable at that time‑‑ (a) if such imposition or increase so takes effect that the duty or tax or increased duty or tax as increased may be, or any part thereof, is paid, the seller may add so much to the contract price as will be equivalent to the amount paid in respect of such duty or tax or increase of duty or tax and he shall, be entitled to be paid and to sue for aria recover such Addition, and (b) if such decrease or remission so takes effect that the decreased duty or tax only or no duty or tax, as the case may be, is paid, the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or tax or remitted duty for tax, and he shall not be liable to pay, or be sued for or in respect of, such deduction. Explanation .‑‑ The word 'tax' in this section means the tax payable under the Sales Tax Act, 1951.11 A perusal of the above section indicates that it has been enacted for the benefit of a seller as‑ well as of a buyer inasmuch as it has provided that in the event of any duty of customs or excise duty or tax on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty or tax where duty or tax was not chargeable at the time of the making of the contract or for the sale of such goods duty paid or tax paid where duty or tax was chargeable at that time, a seller would be entitled to recover from a purchaser the amount of customs duty or excise duty or tax paid by him in respect of such a contract or the increased amount in respect of the above items, whereas a buyer is entitled to claim the refund of the full amount of duty of customs or excise or tax from the seller in case of abolition of the same after the making of the contract or to claim the refund of the difference amount in case the rate is decreased. It is, therefore, evident that in the instant cases the petitioners are entitled to claim the amount of above export duty from their buyers either by virtue of an express clause in the relevant contracts or by virtue of above Section 64‑A of the Act as according to their own averments in the petitions, the above export duty have been imposed after the making of the contracts covered by the above constitutional petitions and, therefore, prima facie we are tentatively of the view that no vested right of the petitioners has been infringed or prejudiced because of the above imposition. However, learned counsel for the petitioners have relied upon the case of AI‑Samrez Enterprise v. The Federation of Pakistan, reported in 1986 S C M R 1917, in which the facts were that the Federal Government in exercise of the powers conferred by Section 19 of the Customs Act, 1969 exempted certain items of machinery or articles for use with machinery or as component parts or spare I parts of the machinery as defined in the notification and set out in the table given thereunder from "so much of the customs duties leviable thereupon as is in excess of 20% ad valorem". Exemption from sales tax was earlier granted under notification dated 29‑6‑1970 issued under section 7 of the Sales Tax Act, 1951. It was the case of the appellant before the Supreme Court, (whose constitutional petition was dismissed by the High Court) that on the basis of the said notification he purchased 100 metric tons of strained copper wire on 3‑6‑1977 from a Company of Japan which were duly booked on the London Metal Exchange. The contract was confirmed in writing on 7‑6‑1977 whereas on 9‑6‑1977 the appellant deposited a sum of Rs.35,000 in the State Bank of Pakistan towards the fee of the commercial import licence for the import of the said goods, which licence was duly issued on 10‑6‑1977. It was also averred by the appellant that they had instructed Habib Bank Limited on 8‑6‑1977 to open an irrevocable letter of credit for the payment of the goods, which was actually opened on 15‑6‑1977. However, on 11‑6‑1977 Federation of Pakistan issued a Notification No. SRO 499 (1)/77 which purported to amend the earlier Notification in two respects; firstly, the figure prescribing the ceiling for customs duty as 20% was raised to 25% and secondly, a condition was imposed that the exemption would only be available to goods imported against an industrial licence. The Federation of Pakistan by another Notification dated 4‑8‑1977 withdrew exemption from sales tax. On the basis of the above facts it was urged by the appellant that the above exemption could not have been withdrawn retrospectively in relation to the contracts which were already concluded as it would amount to depriving him of the vested right. In that context the Hon' able Supreme Court which allowing the appeal observed as follows: We are, therefore, clearly of the opinion that if a binding contract was concluded between the appellants and the foreign exporter or steps were taken by the appellants creating a vested right to the then existing notification granting exemption, the same could not be taken away and destroyed in modification of the earlier one on the ground that under section 21 of the General Clauses Act, the Government could exercise the power of modification. The question before us is not whether the second notification was ultra vires the powers of the Government but whether the second notification would be applicable to the case of the appellants resulting in taking away the exemption already granted." . . . . . . . Therefore, the exempted 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 unforeseen 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 withdrawal of exemption cannot be given retrospective operation by an executive act to destroy this right. We are tentatively of the view that the above case is distinguishable for the instant cases, inasmuch as in the above case the appellant could not have claimed the recovery of the amount involved from any party under the contract or under any law whereas in the present case the petitioners are not exposed to any unforeseen loss but by virtue of the terms in the contracts and/or because of section 64‑A of the Act the petitioners are entitled to recover the amount from their buyers after making the payment of the same to the respondent. However, it was submitted by the learned counsel for the petitioners that practically it would be impossible for the petitioners to recover any amount as the buyers are foreigners and even if the petitioners succeed in obtaining decrees in their favour from Pakistani Courts, it would not be possible to execute the same as they would have to go to the foreign country concerned for execution. It was also submitted by them that factually the buyers are not willing to pay any amount on account of export duty and on the other hand Federal Government is insisting that the petitioners should fulfil their commitments with the foreign buyers even without charging the export duty. In support of the former submission reference has been made by Mr. Muhammad Ali Saeed to a few telexes which his client has allegedly sent; whereas in support of the latter submission reference has been made to some Press cuttings of Daily English Dawn and Business Recorder. On the other hand learned counsel for the respondents have submitted that factually the petitioners are making big profits in the export of cotton yarn as they had purchased the cotton at a very cheap rate and they will make profit even if they were to pay the export duty from their pocket.

6. In our view, the above submissions are not germane to the point in issue. In order to decide whether the petitioners are entitled to an ad interim injunction, the Court has to see whether the petitioners have a prima facie case and whether they would suffer any irreparable injury if the injunction prayed for is withheld and the balance of convenience. In view of the terms of the contracts and/or by virtue of section 64‑A of the Act the petitioners are entitled to recover the amount of export duty from their buyers and, therefore, prima facie we are of the view that no vested right of the petitioners is affected by the notification and hence they have no prima facie case. Furthermore, no irreparable injury will be caused to the petitioners if they could make the payment of the export duty to the Government, as they are entitled to recover the same from their buyers. The balance of convenience is also in favour of the Government inasmuch as the respondent will be deprived of considerable amount of public revenue, which runs into crores of rupees not only in respect of the contracts, covered by the above six constitutional petitions (which are about 200 contracts), but for all the other contracts which are concluded prior to 12‑6‑1987 as lately more or less on every day new writ petitions are being filed in this Court. Furthermore, the rate of export duty has been raised from Rs.5 per kg to Rs.10 per kg by a notification dated 20‑9‑1987. If we were to accept the contention of the learned counsel for the petitioners, it must follow that the above new notification cannot be applied to the contracts of sales concluded prior to 20‑9‑1987. This process will go on unendingly which will adversely affect the public revenue.

7. Before parting with the above discussions, we may also observe that M/s. Mohammad Ali Sayeed and Anwar Mansoor Khan have also referred to section 30 of the Sea Customs Act and section 25 of the Customs Act, 1969. Clause (c) of subsection (2) of the former provides that the buyer will bear any duties or taxes applicable in Pakistan, whereas clause (b) of subsection (5) of the latter provides that the seller will bear all packing, commission, transport, leading and all other costs, charges and expenses (including any export duty which may be chargeable) incidental to the sale and to the delivery of the goods on board the vessel in which they are to be exported. It was contended by them that under the old Act the liability to pay export duty was of the buyer whereas under the new Act the liability to pay is of the seller and, therefore, the petitioners would not be able to recover any export duty from their buyers because of the above provision under the Customs Act, 1969.

8. Without expressing ourselves definitely on the point, we may mention that the above provisions are not relevant for the purpose of deciding the rights and obligations of the two contracting parties to a contract, which are to be decided with reference to the terms of the contract or the relevant law which in the instant cases is the Act, i.e.. Sale of Goods Act, whereas the Customs Act only fixes the responsibility for the purpose of recovery of the customs duty which does not affect in any way the rights and obligations inter se between the contracting parties. The reference to the above provisions is Out of context, to the controversy in issue.

9. For the aforesaid reasons, we dismiss the above applications with no order as to costs. I The office is directed to fix the above Constitutional Petitions and also the other petitions relating to export duty for regular hearing on 10‑11‑1987 at Serial No.1 on the List. A. A. IN ‑57/ K Applications dismissed.