2006 PLP 1906 (PTD)

Rs. 9,20,495 (iv) Fourth instalment: 5-11-1999 Rs. 8,44,364 (v) Fifth instalment: 5-11-2000 Rs. 7,68,230 Total: Rs.46,02,474 The complainant did not make any payment from 5-11-1996 to 5-11-1998. The complainant had asked the Collector for rescheduling the payment in 12-instalments. The Collector, however, allowed payment in six instalments but the complainant did not even then pay as per the revised schedule. The char provided by the respondents further discloses details of payment made by the complainant as under:-- , Date of payment Amount 12-7-1999 Rs.539,840 (Principal amount) 25-9-1999 Rs.539,840 (Principal amount) 11-11-1999???? Rs.539,840????? (Principal amount) 30-11-1999???? Rs.884,884????? (Principal amount) 14-12-1999???? Rs.539,840????? (Principal amount) 16-8-2000?????? Rs.539,840????? (Principal amount & part surcharge) Total??? Rs.3584084 The chart/statement submitted by the respondents also reveals the breakup of demand raised by them in compliance of High Court's order, dated 25-10-2002 as under: Principal amount?????????? Rs.3502662???? (paid) Surcharge @ 11%??????? Rs.1603356 Minus surcharge already paid??? Rs.123577 Balance surcharge payable:?????? Rs.1479779 Surcharge payable due to belated period?????????? Rs.416576 Total balance surcharge payable:?????????? Rs.1896355 According to the respondents surcharge on surcharge would keep on increasing for the period from 17-8-2000 to 25-6-2005, in addition to demand already raised, which would be separately recoverable. 7. para 4 of the bank guarantee provided for payment of deferred amount and surcharge @ 11% per annum for the whole period of deferred amount or any part thereof that remained unpaid in the event of default of payment of deferred amount. The bank guarantee was filed on 31-10-1996, it was valid up to 5-11-2000 for an amount of Rs.4,602,474 inclusive of surcharge. A perusal of the actual bank guarantee put up by the bank shows that whereas it had covered 11% surcharge vide clause 5 of S.R.O. 490(I)/91 but the bank did not bind itself to pay surcharge on surcharge in case of party's failure to pay the deferred amount and surcharge referred to above although a provision to that effect did exist at condition 5(4) of the prescribed format of bank guarantee vide S.R.O. 490(I)/91. The respondents could have enchased the bank guarantee before its expiry on 5-11-2000. They failed to encash it. Asked why the bank guarantee could not be encashed the DR submitted that it was because the complainant had, vide letter, dated 28-6-1999, requested for rescheduling of instalments and was allowed to pay six yearly instalments instead of five. He clarified that the complainant had, however, paid instalments of principal amount within the validity of guarantee but had not paid the surcharges for which a demand had been raised.

8. The arguments of the parties and record of the case have been considered and examined. Insofar as the question of interpretation of the Constitution of Pakistan and law is concerned or the question whether or not the Government was legally competent to levy surcharges, it is a matter to be decided by Courts of competent jurisdiction. The complainant may, therefore, raise such questions of law before a competent Court for findings answers thereto. As regards respondents objection that the complaint was barred by time, it is observed that against High Court's judgment, dated 25-10-2002 the complainant had filed civil petition in the Supreme Court of Pakistan, which was subsequently withdrawn by it on 25-3-2005 as the complainant wanted to avail remedy under the Customs Act, 1969. The Supreme Court accordingly dismissed the petition as withdrawn. The complainant filed its complaint before this forum on 13-4-2005 just after 18 days of withdrawal of its petition from the Supreme Court. Strictly speaking, the matter was alive before withdrawal petition on 25-3-2005. The complaint cannot be termed as time-barred in terms of the provisions of FTO Ordinance, 2000 because the complainant had lodged its complaint before this forum almost immediately after withdrawing its petition from the Supreme Court. The FTO is, therefore., competent to investigate the complaint. Respondents' objection that since transactions were made in Karachi the complaint fell outside the territorial jurisdiction of Regional Office, Lahore is misplaced because Messrs Akram Industries Limited have its registered office at Lahore: The complaint could, therefore, be heard at Regional Office, Lahore.

9. So far as complainant's contention that it be exempted from payment of import and Iqra surcharges in view of Notification No. S.R.O. 476(1)/05, dated 19-5-2005 (on record) it is observed that this contention is neither relevant to this case nor tenable because the basic question involved here is not the levy of import and Iqra surcharges but, as argued by the complainant both in its written complaint and during the hearing, the payment and recovery of surcharges payable in terms of S.R.O. 490(I)/91, dated 30-5-1991 for which the respondents had raised demand in consequence of Honourable Lahore High Court's judgment, dated 25-10-2002.

10. The Honourable Lahore High Court vide its judgment, dated 25-10-2002 decided the writ petition filed by the complainant as under: "(5) I have gone through the copies of several documents placed on record. Learned counsel has placed on record a copy of the bank guarantee filed by it 'on 31-10-1996. Para-4 of this guarantee assures the respondents that deferred amount of surcharge thereon at the rate of Rs. l 1% per annum for the whole period the deferred amount or any part thereof remain un-paid shall be paid. Timely payment has also been assured. Now it has not been denied that the entire amount due in terms of the said agreement was not paid within time agreed under the said arrangement made or deferred payment of amount due. Since the surcharge was agreed to be paid as term of said deferred payment arrangement, delay in the payment of entire amount so due could also be surcharged by the respondents in terms of section 219 of the Customs Act, 1969. (6) In view of the above discussion, this writ petition is disposed of with observations that the respondents shall work out the amount so due on the basis of rate of 11% and not 14% and serve demand notice on the petitioner accordingly for payment. No order as to costs".

11. No doubt, the bank guarantee, covering an amount of Rs.4,602,474, inclusive of surcharge, furnished by the complainant, was valid up to 5-11-2000. Had the respondents encashed the bank guarantee prior to its expiry on 5-11-2000 they would have realized duty, taxes and surcharge covered by the bank guarantee without having to raise any subsequent demand. If the complainant was not paying yearly instalments regularly or was not paying the surcharge that it was required to pay in default, the respondents could have recovered both by encashing the bank guarantee. Clearly, the respondents had failed to encash it before its expiry. Respondents' contention that they could not encash the bank guarantee because the complainant had asked for fixation of more instalments than five, which were originally fixed, is not tenable. Even if the complainant was allowed to make payment of taxes/ surcharges in more instalment than originally fixed for payment the respondents. could have asked the complainant to extend the period of validity of bank guarantee in question which they did not. The AR cited FTO's findings, dated 3-1-2002 in a case reported as 2002 PTD 2245, C.No. 1373-K/01 (Messrs Siddique Weaving Mills (Pvt.) Limited, Karachi) requesting that it be given the same dispensation as allowed in the aforesaid complaint. In the cited case, the FTO had given findings that surcharges as demanded by the department had no legal validity and that notice issued to the complainant and the bank be withdrawn/ cancelled. A perusal of FTO's findings in the aforesaid complaint would reveal that the department had not encashed the guarantees in time and it was observed that no justification existed to demand surcharge on the deferred amount and surcharge on surcharge from the assessee for the bank for department's failure to encash the guarantees in time. In this case also the department had failed to encash the bank guarantee in time to recover the principal amount as well as surcharge @ 11%, as guaranteed. Again the guarantee put up by the guarantor bank in this F case shows that the department had not asked the complainant to get condition 5(4) of the prescribed guarantee incorporated in the actual guarantee put up by the guarantor bank in order to secure surcharge on surcharge from the guarantor bank. Yet the respondents were demanding, apart from 11% surcharge, which was covered by the actual bank guarantee, surcharge upon surcharge also amounting to F Rs.4,16,576, which was not covered by the guarantee, dated 31-10-1996 put by the guarantor bank.

12. Learned counsel for the department contended that the High Court in the judgment, dated 25-10-2002 passed in Constitutional Petition No.652 of 2002 has held that in addition to deferred/principal amount, the department was entitled to recover an amount as surcharge and on the total amount so becoming due further surcharge also. His contention was that in view of this judgment, the complainant could not approach this forum, for no modification in the terms of the said judgment can be made by this forum as such, the complaint is not maintainable which should be thrown out on this short ground.

13. The argument though appears to be ingenious but was found to be not tenable on close scrutiny of the said judgment of the High Court. The learned Judge of the High Court while discussing the facts of the case in paragraph-5 though observed that on the deferred/principal amount, surcharge could also be recovered and further surcharge on the total amount so becoming due but in the operative part of the judgment in paragraph-6 thereof, it was directed that the department should calculate the amount of surcharge at the rate of 11% and not 14% and recover the amount so found due as surcharge. In the earlier paragraph, it was not held that the department was entitled to recover further surcharge on surcharge whereas an observation was made as mentioned above. The relief given to the department in the said judgment was only to the extent of recovery of surcharge on the deferred amount at the rate of 11%. The mention of figure-11 is very much relevant for arriving at this interpretation of the judgment, for the said figure in the guarantee furnished by the complainant is relatable to the rates at which the surcharge on the deferred amount was to be recovered and not to the amount recoverable as further surcharge over surcharge. This interpretation also finds support from the fact as discussed earlier that in the guarantee obtained from the complaint, no provision was made to secure payment of any amount as surcharge over surcharge and if so at what rate.

14. The demand raised by the department about an amount chargeable as surcharge over surcharge, therefore, is not valid and also not in consonance with the correct interpretation of the terms of the judgment of the High Court to which the department is not entitled, as such, it amounts to "maladministration".

15. For the foregoing reasons, it is recommended that the Central Board of Revenue (C.B.R.) direct the competent Customs Authorities to exclude from the notice through which demand has been raised, the amount of surcharge over surcharge.

16. The compliance shall be made within thirty days of the- receipt of this order. C.M.A./487/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingly.