P L D 1999 Karachi 238 (PLP)

SABIHUDDIN AHMED, J.

Both these petitions preferred by the same petitioner involving common questions of fact and law and are being disposed of by this Judgment. The admitted facts are that the petitioner owned an Industrial Plant for manufacture of Polyester Filament Yarn the Industrial Estate at Hub, District Lasbella. Through various schemes and policies the Federal Government has been providing incentives for promoting industrialisation in rural areas and one such scheme was circulated through the Ministry of Industries Circular dated 2-5-1992 whereby some incentives in the form of exemption from customs duty etc. were intended to be extended to Industrial Units located within Industrial Estates set-up at some distance from large towns and cities. The areas to which such incentives would apply were defined in the aforesaid Circular as under:-- "Definition of Rural Areas.

(i) Rural areas in the context of Rural Industrial Development Incentives shall mean all Rules Areas excluding: (a) Area of Industrial Estate Chunnian covered under Municipal Committee limits of Pattoki and Hub Industrial Estate which falls inside the prescribed distance from the concerned Municipal Corporation/Committee Limit. (b) The Municipal/Cantonment Board Limits of Karachi and Lahore and 30 Kilometer area around these limits. (c) The existing limits of Municipal Corporation and their Cantonment Boards and 10 Kilometer areas around these limits. ' (d) Areas falling within the limits of all Municipal Committees and Cantonment Boards and Islamabad Capital Territory."

2. The details of incentives and concession approved by the Government were also laid down in the aforesaid circular and provisions relevant for the purpose of these petitions are reproduced as follows:- "(i) ... ... ... ... ... ... ... ... ... ... ... ..... ... ... ... ... ... ... ... ... (ii) Imported machinery for Rural Industries would be totally exempted from the payment of customs duty, sales tax and import surcharge provided such machinery is not manufactured locally. ,Import licence fee has also been reduced from 6 per cent. to 2 per cent. for all such industries established in the rural areas. (iii) Imported machinery,' not manufactured locally, for rural industries for the purpose of expansion and B.M.R. would also be exempted from the payment of customs duty, sales tax and import surcharge. Import licence fee for such machinery would be 2 % . (iv) ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... .. "

3. Pursuant to the aforesaid policy decision Federal Government through Ministry of Finance and Economic Affairs (Revenue Division) issued S.R.O. No.484(I)/92, the relevant provision whereof may be reproduced as under "S.R.n 484(1)/92.--in exercise of the powers conferred by section 19 of the Customs Act, 1969 (1v of 1969). and section 13 of the Sales Tax Act, 1990, and in super session of this Ministry's Notification No.SRO 50(1)/92, dated the 28th January, 1992. the Federal Government is pleased to exempt such plant and machinery as is not manufactured locally and is imported during the period commencing on the 1st December, 1990. and ending on the 30th June. 1995, for setting up new units and for expansion or balancing, modernization and replacement of existing units:- (a) in areas other than specified in Table-I, from whole of the customs duty and sales tax leviable or chargeable thereon under the First Schedule to the Customs Act, 1969, or, as the case may be, the Sales Tax Act, 1990, and (b) in the industrial estates specified in Table Il from so much of the customs duty and sales tax leviable or chargeable thereon under the .First Schedule to the Customs Act, 1969, or as the case may be, the Sales Tax Act, 1990, as is specified in column (3) of the said Table." TABLE I .............. - - - - - S.No. Areas ' (1) (2) ................................

1. The Municipal or Cantonment Boards limits of Karachi and Lahore and 30 Kilometers area around these limits. `

2. The existing limits of Municipal Corporations, Municipal Committees and their Cantonment Boards and 10 Kilometers areas around Municipal Corporations and their Cantonment Boards, in the province of Sindh and Punjab excluding Bahawalpur, D.G. Khan, Sukkur and Larkana Divisions.

3. Area falling within the limits of Islamabad Capital Territory and Hub Tehsil in the Province of Balochistan.. TABLE II S. No. Industrial Estates Extent of Exemption

1. All industrial estates Whole of customs - in areas not covered by duty and sales tax . Table I (including industrial estates of Gadoon, Hattar, Chunnian and Nooriabad. 2. - (i) Hub Industrial Customs-duty in excess of Trading Estate 10 % ad valorem and whole of sales tax. . (ii) Industrial Estate, Bhakkar. (iii) Industrial Park, Sehwan (iv) Small Industries (v) Industrial Estate, Jauharabad. 3. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

4. Since according to the Circular dated 6-5-1992 incentives were to be provided to Industrial Estates located outside the prescribed instance from Municipal Limits in different areas information was sought from Provincial Governments as to the location of various Industrial Estates and the Government of Balochistan vide letter dated 17-5-1992 (Annexure 'B') certified that Huh Industrial Estate fell outside such limits. This was acknowledged by the Federal Government through Office Memorandum dated 3-6-1992 (Annexure -'C'). There is no dispute as to this aspect of the matter.

5. Apparently, the petitioners attempting to take advantage of the aforesaid concession decided to import a large quantity of machinery for their Industrial Plant from foreign suppliers in different consignments which are the subject matter of these petitions. Import Licences were obtained between 1-7-1992 and 17-9-1992 and the petitioners were required to pay Import Licence, fee at the rate of 2 % in terms of the incentive instead of the normal fee of 6 Nevertheless when the goods covered by C.P. No.2838 of 1992 were arrived at Karachi on 7-11-1992 the Customs Authority did not treat the same as being wholly exempt from customs duties in terms of the Ministry of Industries Circular dated 2-5-1992 and granted the petitioner the limited concession of 10% customs duties in terms of the Notification dated 14-5-1992. Similarly when the goods forming subject-matter of C. P. No. 1400 of 1993 arrived in April, 1993 they were also assessed to 10% Customs duty. Both the assessment orders were impugned by the petitioner in the above petitions and in terms of interim order passed by this Court they were allowed - the release of goods upon furnishing bank guarantees to the.-extent of the amount of customs duty assessed. , 6_ It appears that apart from filing these petitions, the petitioners and other manufacturers similarly placed also kept on approaching various Government authorities seeking total exemptions from customs duty over the machinery, imported by them. On 1-11-1993 the Federal Government through a Notification No.SRO 1056 (1/93) amended the earlier Notification dated 14-5-1992 to the extent of deleting "Hub Tehsil in the Province of Balochistan" from Table I and Hub Industrial Trading Estate from Table II of the later Notification.

7. Raja Haq Nawaz Khan, learned counsel for the petitioner in the first place, contended that the Circular dated 2-5-1992 clearly envisaged that the incentive of total exemption from the customs duty and sales tax would apply to Industrial Units located in Industrial Estates outside the prescribed distance from Municipal limits and once it was found that the Hub Industrial Trading Estate was outside such limit there was no justification whatsoever for denying the benefits of total exemption to the petitioners. He emphasised that when the Government itself had charged only 2% Import Licence fee from the petitioner in accordance with such circular the assessment and levy of 10% customs duty by the Custom Authority was patently unlawful. With due deference to learned counsel we are not persuaded to subscribe to this view. The circular in question was only a declaration of policy and had to be given effect only through an appropriate order or notification issued under statutory powers. The mere: fact and that the petitioners were required to pay Import Licence fee at reduced rate under the provision of another statute could not per se require the Custom authorities to exempt the petitioner from payment of custom duty in the absence of an appropriate notification under section 19 of the Customs Act. The Notification dated 14-5-1992 in unmistakable terms stipulated, vide Table I, that the total exemption from customs duties would not apply to industries located within Hub Tehsil in the Province of Balochistan. Furthermore, column 2 of Table II stipulated that Industrial Units in the Hub Industrial Trading Estate would only be entitled to the limited concession of 10 % customs duties. Indeed the learned counsel is correct to the extent that the aforesaid notification was inconsistent with the declaration of policy contained in the circular, but in such event the Court can only give effect to a notification having force of law as compared to a mere declaration of policy.

7. Learned counsel next contended that acting on the faith of the Circular dated 2-5-1992, the petitioner had, in fact, placed order and entered into binding contract with foreign suppliers of machinery prior to issuance of Notification dated 14-5-1992, and therefore, had acquired vested rights which could not be taken away by the Federal Government through imposing 10% customs duty on such imported machinery. Learned counsel relied upon the doctrine of promissory estoppel enunciated by the Honourable Supreme Court of Pakistan in Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917 and Pakistan v. Salahuddin PLD 1991 SC

546. We are unable to accept this contention for more than one reason. In the first place we are extremely doubtful whether the vested. right can be claimed on the basis of mere declaration of policy. Secondly as rightly pointed out by Syed Tariq Ali, learned Standing Counsel, that section 31-A of the Customs Act expressly provides that no such rights founded out upon the doctrine of estoppel can be claimed on the basis of contractual commitments made by importers in respect of levy of customs duty and the cases cited by learned counsel were decided prior to the insertion of section 31-A in the Customs Act.

8. Thirdly, Raja Haq Nawaz Khan argued that in any event, after the amendment of the Notification dated 14-5-1992 by the Notification dated 1-11-1993 the benefit of total exemption from payment of customs duty had become available -to the petitioners. Learned Standing Counsel did not dispute that the later Notification indeed had the effect of granting such benefits to industries located in the Hub Industrial Trading Estate. He, nevertheless contended that it was settled law that a Notification cannot have retrospective effect anti, therefore, such benefits could not be availed by the petitioner who admittedly imported the machinery in question prior to 1-11-1993. Learned counsel for the petitioner however, argued that there was a distinction between Notifications taking away rights and those conferring benefits and though the former could only be given effect prospectively the latter could be given retrospective effect. In support of his contention he relied upon the recent judgments of the Honourable Supreme Court in Army Welfare Sugar Mills v. Federation of Pakistan 1992 SCMR 1652 and Ellahi Cotton Mills v. .Federation of Pakistan PLD 1997 SC

582. In the first case the Federal Government by a Notification No. SRO 560(1)/82, dated 14-8-1982 under section 12-A of the Central Excise and Salt Act had exempted Sugar, manufactured in a factory, exceeding the average production for the factory in the preceding two years from levy of excise duty with effect from 1-7-1982. However, through a ,subsequent Notification No.SRO 814(1)/85, dated 29-8-1985, new Sugar Mills commencing operation during 1982-83 crushing season were further exempted from 5(1 % of the excise duty leviable on their entire production of the first two years since the commencement of their production and it was stipulated that those who had already paid such duties for the first two years would be entitled to refund/adjustment iii a specified manner. Though the latter Notification covered a period prior to its issuance and duty which had already been levied and collected, the Honourable Supreme Court speaking through Ajmal Mian. J. (as His Lordship then was) held the same to be valid observing:- "It seems to be well-settled proposition of law that a notification which purports to impair an existing or vested right or imposes a new liability or obligation, cannot operate retrospectively in the absence of legal sanction, but, the converse i.e. a notification which confers benefit cannot operate retrospectively, does not seem to be correct proposition of law. It may be observed that para. 2 of the above SRO 814(1)/85 was a beneficial provision and, therefore, in the absence of any prohibition in the Act or any other law. it was valid."

9. The same view has been reiterated by the Honourable Supreme Court in the recent case of Ellahi Cotton Mills, wherein it has been observed that "though an executive order/notification which is detrimental or prejudicial to the interest of a person cannot operate retrospectively, a beneficial executive order/notification issued by an executive functionary can be given retrospective effect". ,

10. In view of the above authoritative pronouncement of the Honourable Supreme Court, we find considerable force in the last contention of Raja Haq Nawaz Khan. Incidentally the earlier Notification was not consistent with the declared policy of the Government and it appears that for this reason it was amended to bring it in consonance with such policy and learned counsel appears to be correct in asserting that with this object an amendment rather than super session of the earlier Notification :vas brought about. Learned Standing E Counsel has not been able to effectively rebut this contention. In view of the above both these petitions are allowed and it is declared that the petitioners are not liable to pay any customs duty on the machinery imported by them during the relevant period. The goods have already been -released and the bank guarantees furnished shall stand discharged. However, there shall be no order as to costs. Q.M.H./M.A.K./P-62/K Petitions allowed.