1999 PLP 755 (CLC)

3. In reply to this notice, petitioner through its letter, dated 21‑4‑1992 asked the respondent No.3 to supply a copy of the decision determining the final assessment but despite nine reminders, the said respondent instead of responding to the petitioner or supplying a copy of the decision with regard to final assessment in respect of the consignments went on pressurizing the respondent Bank for encashment of the Bank guarantees.

4. In the parawise comments filed under the signatures of Assistant Collector of Custom‑Appraisement (Law) on behalf of respondents Nos. l to 3, it is averred that respondent No.4 on behalf of the petitioner is bound to pay on demand by the Collector of Customs or such officer as may be required by him a sum not exceeding Rs.1, 40,508 and Rs.1,29,054 with penalty, if any. It is urged that submission of Bank guarantees was a contract between the Bank and Collector of Customs (Appraisement) and not between the importer and the Collector of Customs. Impugned notice was issued to the Bank in terms of section 81(2) of the Customs Act which provides that the Bank guarantee shall become automatically encashable after expiry of six months. According to the respondents, the Bank has not objected to the encashment notice after expiry of Bank guarantees because the contract between the Bank and Collector of Customs is still valid and remains uncalled as per conditions therein. Accordingly the action taken for demand notice is with lawful authority, within jurisdiction and under the recovery rules made under section 202 of the Customs Act. It is conceded that so far. as the assessment is concerned, the goods were provisionally assessed under section 81 of the Customs Act which still stands undecided under the law prevailing at the time of import in 1976. Surprisingly respondents asserted that it was the responsibility of the importer to approach the Assessing Group for early disposal of the case as the goods were provisionally assessed under section 81 of the Customs Act, 1969 which they failed with the result that the case remained undisposed of for so many years with the further consequence that the relevant record of the valuation department became untraceable rendering the department unable to offer any advice regarding its valuation.

5. No comments were filed on behalf of the Bank and it appears that the Bank is inclined to abide by the orders that may be passed in this petition.,

6. At the hearing learned counsel appearing in support of the petition raised the following contentions:‑‑ (i) That the Bank guarantees furnished on behalf of the petitioner were valid for a period of one year which period having lapsed, no demand could be raised for encashment of such guarantees and the respondent Bank stood released of all its liabilities; (ii) that the consignments having been provisionally assessed under section 81 and no other assessment having taken place within the period prescribed by statute, the same became final by operation of law; (iii) that the impugned notice issued to the respondent Bank enforcing liability of the petitioner is bad in law, invalid, void ab initio and mala fide.

7. Conversely learned Standing Counsel referred to Chapter XIX of the Customs Act providing for remedy by way of appeal, revision, an appeal before the Customs Appellate Tribunal and a reference to Division Bench of the High Court on a point of law. Learned counsel is of the view that adequate and alternate remedy being available, to the petitioner, present petition, could not be maintained more particularly when the respondent Bank has not made any grievance. Lastly learned counsel submitted that the notice was issued in exercise of the authority conferred on the Customs Authorities by virtue of section 202, Customs Act and that the petitioner has no locus standi to call into question the validity of the notice.

8. Adverting to the first contention raised by the learned counsel for the petitioner,, a reference may be made to the terms and conditions of two identical guarantees furnished by respondent Bank on behalf of the petitioner importers. Relevant terms of the guarantee, dated 28‑4‑1976 may be reproduced hereunder for the sake of convenience and proper appreciation of controversy between the parties:‑‑ "Whereas the Collector of Customs has allowed release of the goods scheduled above under section 81 of Customs Act. Whereas the matter is being referred to the Valuation Branch to do determine the normal value of the goods. Whereas the importers Messrs Quetta Textile Mills Limited are agreeable to abide by the decision of the Valuation Branch and the Collector of Customs. We United Bank Ltd., Corporate Branch, I.I. Chundrigar Road, Karachi, irrevocably and unconditionally do hereby undertake and bind ourselves on behalf of Messrs Quetta Textile Mills Ltd. to pay on demand by the Collector of Customs or such officer as may be required by him, a sum not exceeding Rs.1,40,508 with fine and penalty if any. But if the value declared has been determined fair by the Valuation Branch and the Collector of Customs, this guarantee shall become void. This guarantee shall be binding on us, our heirs, successors and is valid up to 27‑4‑1977. Our liability is restricted to Rs.1,40,508 and shall not exceed beyond Rs.1,40,

508. All claims under this guarantee must be presented to United Bank Ltd., Corporate Branch, I.I. Chundrigar Road, Karachi on or before 27‑4‑1977. Unless claims are so presented all rights and benefits under this guarantee shall be forfeited and the United Bank Ltd. shall be released of all claims, demands or liabilities of any kind or character whatsoever."

9. It is common ground that the Collector of Customs had allowed release of imported goods under section 81 of the Customs Act where under the goods were provisionally assessed. It further appears that the question of final assessment was to be referred to the Valuation Branch of Customs to determine the normal value of the goods and the Bank guarantee was furnished on behalf of the importers payable on demand by the Collector of Customs or such officer as may be required by him to pay the sum mentioned in the guarantee with fine and penalty if any. In case the value declared had been determined fair by the Valuation Branch of the Collector of Customs, the guarantee was to become void. It is further stipulated that the liability of the Bank shall be restricted to the amount of guarantee which must be presented before the expiry of one year whereafter all rights and benefits under the guarantee shall stand forfeited and the respondent Bank shall be released of all claims, demands or liabilities of any kind or character whatsoever. Admittedly validity period of two guarantees furnished by the respondent Bank on behalf of the petitioner expired on 27‑4‑1997 and 31‑5‑1977 respectively while no demand for encashment of the guarantees was raised during this period. Heavy onus lay upon the respondents to explain as to how and under what authority could they enforce the encashment of guarantee after a lapse of more than 14 years. Contention that the respondents are authorized to recover the Government dues by virtue of section 202 of the Customs Act would be relevant only when the dues are determined within a period prescribed by law and as such demand is made on the importers of the goods. This provision of law may not be available and in fact does not enable the Customs Authorities to seek enforcement of a Bank guarantee beyond the period of its validity as by reason of expiry of the prescribed period Bank stood relieved of its liability to pay for the Bank guarantee furnished by it on behalf of a customer. Learned counsel for the respondents has not been able to cite any provision of law or legal authority justifying the enforcement of a Bank guarantee beyond the period of its validity. A reference may be made to Sargodha Central Cooperative Bank Ltd. v. New Hampshire Insurance Company PLD 1982 Kar. 627 which is a D.B. decision of this Court authored by Ajmal Mian, J. (as his Lordship then was). It was ruled in this case that if a clause imposes an embargo on the filing of an action after expiry of a lesser period than what has been provided for in the Limitation Act, it would be hit by section 28 of the Contract Act, but if a clause provides a limit within which the plaintiff would have any right to enforce, it would not be hit by section 28 of the Contract Act. Their Lordships went to the extent of holding that since the High Courts in India have for about 70 years constantly taken the view that a clause in the insurance policy limiting liability of the insurance company for a certain period is not hit by section 23 of the Contract Act, it will not be just and proper to upset the above view after the expiry of such a long period. We are, therefore, of the considered view that the demand for payment of the amount of Bank guarantees raised by respondent No.3 was neither valid nor justified by p law and the respondent Bank stood relieved of its liability arising under the Bank guarantees. Indeed the contract between the Bank and the Collector of Customs unequivocally provided that all claims under the guarantees must be presented to U.B.L. on or before the crucial date expiring at the end of one year period. It was expressly covenanted that unless claims are so presented all rights and benefits under the guarantees shall be forfeited and the Bank shall be released of all claims, demands or liabilities of any kind whatsoever. It is well‑settled that contracts between the parties must be honoured and adhered to. Moreso contracts entered into on behalf of private citizens and the State functionaries.

10. Reverting to the second limb of argument advanced on behalf of the petitioner, a reference may be made to the provisions contained in section 81 of the Customs Act which provides for provisional assessment of duty payable on any imported goods where it may not be possible immediately to assess the custom dirty. A provision is made for payment of additional amount as security or furnishing of Bank guarantee by and on behalf of an importer for the payment thereof as the appropriate officer deems sufficient to meet the excess of the final assessment of duty over the provisional assessment. This provision further stipulates that the amount of duty actually payable on such goods shall be finally assessed within one hundred eight days of the date of provisional assessment. An exception to the rule has been laid down namely that the Collector of Customs may under exceptional circumstances extend the period for final assessment by not more than ninety days after recording such circumstances. On completion of such assessment, appropriate officer has been empowered to adjust the amount already paid or guarantees against the amount payable on the basis of final assessment and such dues shall be paid forthwith to or by the importer or exporter as the case may be. Subsection (4) categorically provides that if the final assessment is not completed within the period referred to above, the provisional assessment shall become final. It is common ground that in the present case provisional assessment made before the furnishing of the Bank guarantees was not finalised within the period stipulated by law. It would, thus, follow that by operation of law, provisional assessment made earlier became final with the necessary corollary that there may be no occasion for payment of g dues of amount between the two assessments. Since the provisional assessment was deemed to be final by fiction of law, there is considerable force and substance in the contention that the respondents could not reopen the case after a lapse of nearly 15 years without any lawful reason. Learned counsel for the respondents maintained silence and could not satisfactorily rebut the submissions advanced in support of the contention except a general statement that the respondents are empowered to recover all Government dues.

11. Having held above, impugned notice would not be sustainable at law as on the face of it, the same was issued without any lawful authority and insistence on encashment of Bank guarantee could not be justified by any stretch of reasoning or canon of law.

12. Reverting to the point raised by learned counsel for the respondents, suffice it to say, despite repeated written requests to furnish a copy of the final assessment made by Customs Authorities; the petitioner did not receive any response from the respondents. It could not, therefore, be said that he should have invoked the appellate jurisdiction of Collector of Customs or on its failure to submit a revision application before the relevant forum. Since no demand was raised against the importers directly, it is doubtful whether the petitioner could resort to the statutory remedies in the form of appeal, revision etc. We are also in doubt whether such remedy would have been adequate and effective as ordinarily with the filing of an appeal, deposit of the amount demanded is insisted upon by the appellate forum under the law. It would thus, appear that the petitioner was left with no other alternate and adequate remedy under the law. Reference to cases reported as Adamjee Insurance Company Ltd. v. Pakistan 1993 SCMR 1798 and Chief Administrator of Auqaf v. Muhammad Ramzan PLD 1991 SC 102 is, therefore, completely out of context and misconceived. There appears to be no merit in the submission that the respondent Bank being not aggrieved from the impugned notice, the petitioner has no locus standi. We feel, respondent Bank if compelled to make payment of the amount of Bank guarantees would not pay such amount from its own resources but only on account of the petitioner who may have different accounts with some of the branches of the United Bank Limited. In fact and indeed, it was the petitioner‑company who was affected by the impugned notice, therefore, in law the petitioner is considered to be an aggrieved person and entitled to invoke the Constitutional jurisdiction of this Court. We feel that this was the only recourse available to the petitioner in the circumstances of the case.

12. For the aforesaid facts and reasons, this petition is allowed with costs against the respondents Nos. l to

3. Impugned notice is declared to be bad inn law, invalid and issued without any lawful authority which cannot be acted upon in the eyes of law and direct the respondents not to act upon the same. Q.M.H./M.A.K./Q‑19/K Petition allowed.