IN THE HIGH COURT OF SINDH AT KARACHI

 

Special Custom Appeal No.04/2006

 

 

Present: Mohammad Ather Saeed and 

                          Syed Mahmood Alam, JJ.

 

 

JUDGEMENT

 

 

Date of hearing:            19.3.2009

 

Applicant:                     Through Mr. Farhat Nawaz Lodhi, Advocate.

 

Respondents:                Through Raja Muhammad Iqbal, Advocate.

 

-----------------

 

 

Syed Mahmood Alam-J. -  This Special Custom Appeal under section 196 of the Customs Act 1969 read with section 47 of the Sales Tax Act, 1990, is directed against the judgment of the Tribunal dated 22.10.2005, whereby the Customs Appeal No.772/2001(Karachi-2) prepared by the appellants before the Customs & Excise Sales Tax Appellate Tribunal Karachi Bench-II, against the order in Original No.SI/MISC/IB/2385/98-IX dated 28.2.2001 was dismissed.

 

            The appeal was admitted for regular hearing on 17.8.2006, to consider the following question of law:-

i)                    Whether Customs, Excise and Sales Tax Appellate Tribunal was justified in holding that the goods imported by the appellant were not entitled to the benefit of SRO 25(I)/98 dated 11.10.1998?

 

ii)                   Whether facts and circumstances of the case the Customs Excise and Sales Tax Appellate Tribunal has correctly applied the provisions of section 30 and 31 of the Customs Act, 1990?

 

The brief facts of the case are that the appellant imported a consignment of heat exchangers-II valued at Rs.5,67,90,651/= from Japan filed bill of entry dated 5.7.1998, through Clearing Agent for the release thereof under SRO 25(I)/98 dated 11.10.1998 for free of customs duty and under SRO 582(I)/98 Dated 12.6.1998, for exemption of sales tax.

 

Since the goods were hit by Custom General Order  No.7/98, the benefits of exemption were not extendable as the goods were released against corporate guarantee pending clarification from the C.B.R. That C.B.R. confirmed through its letter dated 22.7.1998, on the recommendation of Engineering Development Board contained its letter dated 4.6.1998, that the heat exchangers were manufactured locally at the time of import and, therefore, benefit of SRO 25(I)/98 and SRO 582(I)/98 could not be extended to appellant, as such a Show Cause Notice dated 22.8.1998, was issued to the appellant.

 

Accordingly after confirmation of legal formalities the demand of Rs.1,34,87,780/= on account of customs duty and sales tax was enforced and the appellant was directed to make the payment of the same within seven days and in case of failure, action under section 202 of he Customs Act, 1969 read with relevant recovery rules would be initiated (demand for Rs.16,66,330/=) as customs duty and sales tax was also enforced in other case bearing file No. No.SI/MISC/IB/2386/98-IX, being identical in nature, thus, the total recovery collected Rs.1,51,54,110/= [Rs.8,91,54,110/=.] The appeal No.K-767/2001 with regard to case file No. No.SI/MISC/IB/2386/98-IX, was dealt with another bench of the Tribunal and the case was remanded to the Adjudication Officer for fresh decision, as in the said case it was not confirmed that the consignment could be manufactured locally.

 

Earlier this appeal was dismissed by the Appellate Tribunal consisting of M/s. Ali Saeen Dino Metlo, Member, Judiciary and S.M. Kazmi, Member, Technical, vide judgment dated 4.12.2004, the same was impugned before this Court through Special Custom Appeal No.45/2005, whereupon the case was remanded back to the Tribunal and the operative part is reproduced hereinbelow:

 

“In the above circumstances, agreeing with the arguments advanced by the learned counsel for the appellants, we deem it appropriate to set aside the impugned order dated 04.12.2004 passed by Customs, Excise and Sales Tax Appellate Tribunal, Karachi and remanded the appeal for fresh adjudication, with the observation that while hearing the appeal the tribunal will take notice of the earlier order of another Bench of the Tribunal dated 22.5.2003 passed in Custom appeal No.K-767/01, and in case any material has been brought on record by the Tribunal by way of holding enquiry at its own level, as observed in the impugned order, the appellant will be put to notice of all such material and opportunity of rebuttal and hearing will be allowed to them before final disposal of the appeal.”

Page 47 at case file tow paras

 

Thereafter in compliance of the order of this Court, Tribunal fixed the case for hearing and held that the CBR and Engineering Development Board in their letter had clarified that the benefit of the SRO is not admissible as the impugned goods are locally manufactured and the appellant has failed to produce any evidence stating that he placed demand with the local manufacturers but they showed their inability to provide the consignments of the required specification, therefore, the benefit of said SRO is not admissible of the appeal being devoid of merits and not sustainable in the eyes of law.

 

Learned counsel for the appellant has contended that the impugned judgement is illegal without jurisdiction and against the direction passed by this court on 1.6.2005 passed in Special Customs Appeal No.45/2005. He has further contended that the SRO 25(I)/98 and SRO 582(I)/98 are not applicable in the case of appellant as the above SROs cannot read retrospectively because the agreement between appellant and the exporter was executed on 23.4.1997 and L/C was opened on 30.10.1997 though bill of entry was placed on 28.7.1998.

 

He has further contended that as per CGO No.12/2002 dated 15.6.2002, it further clarified the position of the plant and machinery when imported in assembled form either collectively or separately shall be classified in the heading pertaining to that machinery and the same cannot be classified individually and separately. It is, therefore, advisable that the components of machinery whether presented together or separately be classified no one heading appropriate to the machinery unless specifically executed under chapter rules. He further argued that as per Six Schedule Entry No.44 of the Sales Tax it is mentioned that such plant and machinery as is notified by the Federal Government in the official gazette (but if imported, these shall be entitled to exemption from sales tax on importation if these are not manufactured in Pakistan would be placed in respective heading). He has further contended that through various partial consignments the machinery has been imported and it has been declared on the respective bill of entries that it is meant for __ all the project of ARL and the benefit of SRO 25(I)/98 was claimed under the items plant which term is clearly mentioned in the SRO 25(I)/98. He has further contended that against a common show cause notice and the same O-n-O the another bench of the Tribunal remanded the case to the Assessing Officer and the same order was binding on the bench, therefore, the other bench of the Tribunal was not justified in passing another order in conflict to earlier one, therefore, the judgment passed in this appeal on 4.12.2004 was set-aside and this Court has specifically directed the Tribunal for fresh adjudication while hearing the appeal the Tribunal will take notice of the earlier order of another bench of the Tribunal dated 22.5.2003 passed in Custom Appeal No.K-767/2001, but the learned Tribunal failed to comply the order of this Court and passed the impugned judgement which is not sustainable in law.

 

Conversely, the learned counsel for the respondents vehemently opposed grant of appeal and has contended that SRO 25(I)/98 and SRO 582(I)/98 are very much applicable in this case as the bill of entry was filed on 28.7.1998, hence department rightly acted upon prospectively and has further contended that in the SROs it is specifically mentioned that the locally manufactured items, articles or machinery are not exempted for customs duty and sales tax. He has further contended that the Engineering Development Board to provide all opportunities to appellant to produce full information regarding the imported equipments and as well as to CBR/Board but the finding was clear that the consignment can be manufactured locally and the appellant has failed to show any evidence before the Assessing Authority for the learned Appellate Tribunal that he had contacted to any local manufacturer regarding the said consignment. He has further contended that this bills itself were not maintainable as relates the question of fact and not the question of law and even otherwise after the remand of this case the learned Tribunal has given so many opportunities to appellant to show any proof in his defense but all the time the appellant had sought time and pleaded that their case pending before the board and the case is distinguished to the case decided by the another bench for the other consignment and imposition of sales tax and duty to appellant as in that case no concrete rule was available that the consignment was manufactured locally or not, but in this case as mentioned above there was no denial the same cannot be locally manufactured instead they tried to manipulate the SRO argued on the wrong footings though the case is on the fact of it very clear, hence the impugned order is well elaborated and cannot be set-aside. He has relied upon the cases reported as in ______________________ v/s ________________________ (2004 PTD 621) _________________________ v/s _______________________________ (2004 PTD 21).

 

We have heard the learned counsel and the respondent and examined the record very carefully.

 

The whole case rest upon the interpretation of CGO No.7/98, SRO 25(I)/98 and SRO 582(I)/98. For the ready reference, Custom General Order No.7/98 dated 24.3.1998, is reproduced as under:

 

CUSTOMS GENERAL ORDER No.07/98

 

SUBJECT:       LIST OF LOCALLY MANUFACTURED GOODS/ITEMS FOR THE PURPOSE OF CONCESSIONARY NOTIFICATIONS ETC.

 

In order to promote the use of locally manufactured goods against imports, CBR had notified list of locally manufactured goods/items previously provide by Ministry of Industries through Customs General Order No.17/94, dated the 30th October, 19994. It was often realized that the aforesaid CGO did not fully cover many items now being produced locally. Accordingly various exercises were initiated by the Engineering Development Board during which list of items locally produced for sugar plants, cement plants, thermal power plants and hydel power plants were finalized by representative of leading engineering industries.

 

2.         In view of the enhanced potential of local engineering industry since the issuance of CGO 17/94, it had become imperative that the aforesaid CGO may be revised/amended to reflect the capability of potential of local manufacturing sector. The Cabinet also directed the Engineering Development Board to compile a list of locally manufactured goods. The list so compiled by the EDB has been deliberated at length among the representatives of Board of Investment, Central Board of Revenue, National Tariff Commission and some representatives of the private sector. Copy of the list is enclosed.

 

3.         All the Collectors of Customs and the staff responsible for allowing concessions under different notifications/orders/deletion programmes ___ advised to follow this list for the purposes of allowing concessions from customs duties and sales tax etc. The information if any alongwith evidence regarding the local manufacture of goods, not indicated in the list, may be forwarded in the CBR forthwith so that the list of locally manufactured goods/items is up-dated in consultation with the Engineering Development Board.

 

4.         The Collectors are, however, authorized to allow release of goods/items indicated in the list of locally manufactured goods/items against bank guarantee for a period of three months if the importer produces a certificate issued by the renowned local manufacturers of the disputed items or from Engineering Development Board stating that the imported item is not being manufactured locally and the importer shall produce a clarification from CBR to this effect within the above stated period of three months.

 

5.         This Custom General Order supersedes Customs General Order No.17/94 dated the 30th October, 1994 and all other instructions on the subject.

 

 

                                                                                    Raja M. Akhtar Tahir

                                                                                    Chief (Custom Tarrif)

 

 

LIST OF LOCALLY MANUFACTURED MACHINERY’S

INTERMEDIATE GOODS AND RAW MATERIALS

 

S.No.

PCT heading No.

Description of Goods.

Specification

Name of some prominent local Manufacturers.

66.

8424.1000

Fire extinguisher of water, foam, AFFF, dry powder

15-18 litr capacity portable and wheeled models

i) Anwar Industries Ltd., Gujranwala.

 

Case file page 127 annexure 6

 

 

List of locally ……………… Anwar and four others

 

 

As per above CGO, it is manifest that the four extinguisher having capacity of 15 to 18 Liters either portable or wheeled model being manufactured in Pakistan and not be imported while SRO 25(I)/98 is reproduced as under:

 

“S.R.O. 25(1)/98. In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and clause (a) of sub-section (2) of section 13 of the Sales Tax, 1990, the Federal Government is pleased to direct that the plant, machinery and equipment, not manufactured locally, if imported by Hi-tech industries as specified in column (2) of the Table below, from whole of the customs duty and sales tax, subject to the following conditions, namely:-

 

(1)   The importer shall, at the time of import of plant, machinery and equipment, make a written declaration on the bill of entry to the effect that the plant, machinery and equipment has been imported in accordance with the S.R.O. and will be used for manufacturing in the industry;

(2)   The importer shall furnish an indemnity bond in the form set out below to the extent of customs duty and sales tax exempted under this notification and the said bond shall not be discharged till production of installation certificate and shall be produced within one year from the date of importation of plant, machinery and equipment from Assistant Collector, Customs and Central Excise, in whose jurisdiction the industry is located  and such certificate of verification shall clearly state that plant, machinery and equipment imported for the purposes specified in the bills of entry have been duly installed; and

(3)   In the event of non-production of suh certificate by the importer the Collector of Customs shall enforce the indemnity bond and proceed to recover Government, dues under section 202 of the Customs Act, 1969 (IV of 1969) and the rules made thereunder

 

TABLE

            __________________________________________________________

            S.No.               Type of Industry

            --------------------------------------------------------------------------------------

(1)                                                  (2)

-------------------------------------------------------------------------------------

1.            ……………………………

2.            ……………………………

3.            ……………………………

4.            ……………………………

5.            ……………………………

6.            ……………………………

7.            ……………………………

8.            Oil refining (mineral Oil/Hydrocracking and other value added petroleum products.

 

While SRO 582(I)/98 is reproduced as under:

 

“S.R.O. 582(1)/98. In exercise of the powers conferred by clause(a) of sub-section (2) of section 13 of the Sales Tax, 1990, read with item No.44 in the Sixth Schedule to the said Act and in supersession of Ministry of Finance & Economic Affairs Notification No.S.R.O.230(i)/97, dated the 29th March, 1997, the Federal Government is pleased to notify the following plant and machinery, other than generators, generating sets, wires and cables, for the purposes of exemption of sales tax, namely:-

 

(a)    ……………………………………

 

(b)   Plant and machinery to be used for manufacture of POL products, LPG, drugs and medicines, edible oils, fertilizers, insecticides, pesticides, fungicides, herbicides, weedicides, cement; for exploration and extraction of crude petroleum oil & natural gas; for generation of electrical energy.”

 

As per invoice dated 24.6.1988 in the description of goods the appellant mentioned as equipments and materials for Attock Refinery Up-Gradation Project i.e. Centrifugal Pumps etc. as per detailed list attached herewith and in the detailed list the appellant has mentioned Fire Fighting Equipments with PTC Heading 8424.9000 and PTC Heading 8705.0000 one set total price Japanese Yen 12,200,000, while per bill of entry the four categories have been mentioned i.e. Fire Fighting Equipments e.g. Water Hydrants with Monitor, Hose Portable, Fire Extinguisher with Cabinets, Fire Hoses, Water Nozzles, Anchors Belt for both Cabinets with PTC Heading 8424.0000, 232 pieces import value of Rs.41,19,098/= and claim SRO 25(I)/98 and SRO 582(I)/98, besides the other items i.e. at serial No.2 High Speed Pumps etc, 3 Centrifugal Pumps with Motor etc. and Hose Connection Males/Females.

 

The appellant also filed Master List of all the articles in which as required No.003P.R.1001 No.B-1 in description mentioned Fire Fighting Equipments with accessories in specification mentioned as Carbon Steel, Water Hydrants, Water Hoses, Fire Boxes, Portable Fire Extinguisher

REQ.NO.

No.

DESCRIPTION

COUNTRY OF ORIGINAL

WEIGHT

(MT)

SPECIFICATION

 

FUNCTION OF MACHINERY

H.S.CODE.

003PR1001

B1

FIRE FIGHTING EQUIPMENT WITH ACCESSORIES

JAPAN

10.00

Material      Carbon Steel

                    Sater Hydrants, Water Hoses

                    Fire Boxes,

                    Portable Fire Extinguisher                      

 

 

For Fire Fighting

8424.0000

8705.0000

 

While letter dated 13.10.1998 of Engineering Development Board is reproduced as under:

Subject:-          IMPORT OF N.A.P.T.H.A. HYDROTREATER/CATALYTIC

                        REFORMER UNIT AND 10,000 BPSD HEDY CRUDE UNIT

 

Kindly refer to your letter 2/5March/95-D dated August 24, 1998 on the above mentioned subject.

A meeting to hear M/s Attock Refinery Limited (ARL) regarding the import of the subject equipment was hled under the Chairmanship of Dr. M. Akram Sheikh, Secretary M/s Communication/Vice Chairman/Chief Executive, EDB and was attended by the Refinery Equipment manufacturers on October 06, 1998.

In the light of the discussion, it is concluded that the following items are declared locally manufactured. This supersedes our previous letter of even number dated June 4, 1998.

 

S.NO.

Description

Item No.

 

1.

Columns exclusing High Court-V-001 (Heavy Crude Ffactionator with Acessories) and High Court-V-005 (Vacuum Tower with Accessories).

A3

 

2.

Tamplates & F.Bolts for Columns

A4

 

3.

Vessels with Accessories

A5

 

4.

Anchor Bolt & Nuts

A6

 

5.

Heat exchanger with accessories

A7,8

 

6.

Snubber for A 15

A16

 

7.

Template & Anchor Bolt for A 15

A18

 

8.

Template & Anchor Bolt for A 26

A27

 

9.

Fire Fighting equipment

B1

 

10.

Platoform Stage & Ladder.

 

 

 

 

 

 

It is therefore recommended that the import of above mentioned items may not be permitted under concessionary imports.

                                 Page 183 marked

The drawing for Fire Fighting Equipments also prepared the exporter Nippon Drawing Chemical Company is also annexed with the documents filed by the learned counsel for the appellant shows a big machinery at page-1, which is called a Fire Fighting Equipment when different classification of different parts and besides separate drawings of two different Fire Extinguishers with capacity of 2.3 Kg and 6 Kg also shown separately.

 

After going through the invoice attached list bill of entry Master List and drawing for Fire Fighting Equipments, it is crystal clear that the Fire Fighting Equipment is a different machinery imported in NKD condition and Fire Extinguisher are absolutely different and the appellant in bill of entry has mentioned the PCT Code of all the fire fighting unit with fire extinguisher in PTC Heading 8424.9000, while per SRO 25(I)/98, is applicable for the plant machinery and equipment not manufactured locally with the above mentioned machinery the fire fighting extinguishers also imported by the appellant and pet CGO No.7/98 are within a ban list with the PTC Heading 8428.9000, as the specification and capacity of the fire extinguishers imported by the appellant are same and the same are being manufactured in Pakistan by different companies as mentioned in the above CGO and further as per master list the fire extinguisher are mentioned in Item No.B-1 and as per letter of Engineering Development Board, the said also mentioned in B-1 and declared locally manufactured.

 

It is apparent that the Notification SRO 25(I)/98 and SRO 582(I)/98 only exempted such plant and machinery, which was manufactured locally while in the extent case there is definite finding of fact recorded by the Adjudicating Officer as well as the Tribunal to the effect that the appellant were not entitled for exemption regarding the fire extinguisher imported by them which are being manufactured locally.

 

In view of the above, we are constraint to observe that only a question of fact being involved in respect of which there is concurrent findings of appropriate Tribunal, it is not possible to interfere under section 196 of the Customs Act, therefore, we hold that question No.1 in affirmative, while the learned counsel for the appellant did not press the second question, therefore, the appeal is dismissed.

 

JUDGE

 

JUDGE

Rzk