1995 PLP 413 (CLC)

Ijaz Ahmad, Dy. Attorney‑General for Pakistan for Respondents. Date of hearing: 17th April, 1994. This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, assails the demand of the respondents for the payment of custom duty/sales tax on the textile machinery imported by the petitioner vide bill of entry No.00709, dated 13‑12‑1992.

2. Briefly stated the facts necessary for the disposal of this petition are that the petitioner company has set up a textile mills in the rural area of District Jhang. There is no dispute that by notification dated 14‑5‑1992, the Federal Government has exempted the machinery specified in the aforesaid notification imported for setting up new units and for expansion or balancing, modernization and replacement of existing/textile units in the rural areas from the payment of custom duty and 'sales tax. The petitioner opened a letter of credit for the import of textile machinery, which arrived at the Karachi Port, where it was unloaded. However, before the machinery could be cleared from custom, a fire broke out at the Karachi Port on the night between 28th and 29th November, 1990 as a result of which 71 cases of the machinery were gutted and destroyed. Later on, the machinery including that which was burnt was removed to the warehouse at the factory premises of the petitioner under an in‑bond Bill of Entry No. P.W. 446 dated 13‑12‑1990, in which special declaration about the loss to the machinery was made. Under the orders of Assistant Collector, Faisalabad, on 10‑7‑1992, a Custom Inspector visited the warehouse and found that 71 cases of the textile machinery were in the shape of scrape and in totally burnt form. This fact is evident from the report of the Inspector, copy of which has been filed as Annexure B to this petition.

3. In order to replace the machinery which had been burnt, the petitioner again opened a letter of credit burnt, the same goods. On the arrival of the machinery, the petitioner claimed exemption from the payment of custom duty/sales tax under Notification No. S.R.O. 484(1)/92, dated 14‑5‑1992. However, this concession was denied to the petitioner with the result that he was obliged to file this petition.

4. Learned counsel for the petitioner has contended that as the machinery earlier imported had been burnt while lying at the Karachi Port before it crossed from customs barrier, there was no import of the goods into Pakistan and the petitioner was entitled to claim the benefit of the notification dated 14‑5‑1992. It is further contended by the learned counsel that in any case, as the machinery was being imported for setting up a new unit or for replacement of the burnt machinery, the respondents have no lawful authority to deny the benefit of the notification of exemption to the petitioner.

5. Learned counsel for the respondents has, however, opposed this petition, contending that the case of the petitioner is not covered either by section 27 or by section 108 of the Customs Act, 1969, under which alone abatement in custom duty could be granted.

6. There is no dispute as regards facts. Admittedly, as the textile unit has been set up by the petitioner within the rural area, the machinery imported for it qualifies for exemption from payment of custom duty and sales tax under Notification dated 14‑5‑1992 issued by the Federal Government under section 19 of the Customs Act, 1969, and section 13 of the Sales Tax Act, 1990. It is also common ground between the parties that the original machinery was destroyed before it had crossed the customs barrier. Consequently, there is no reason as to why the machinery subsequently imported should not be considered to be the first import. Be that as it may, according to the notification dated 14‑5‑1992, no custom duty and sales tax is payable not only in respect of the machinery meant for setting up new units but also for replacement and as such, there was no justification for depriving the petitioner of the benefit of notification dated 14‑5‑1992.

7. It is also to be seen that the Controller of Imports and Exports, vide its letter dated 3‑11‑1992 addressed to the petitioner, had waived the requirement of import licence in respect of the import of the machinery treating it to be a new unit and also advised the petitioner to approach the Customs Authorities to whom necessary instructions were issued. It is not understandable as to how in presence' of this clear direction, any demand of payment of custom duty/sales tax could be made. In view of what has been stated above, this petition is allowed with no order as to costs. A.A./S‑527/L Petition accepted.