KARACHI: The Sindh High Court (SHC) has announced a detailed judgment on regularity duty and set aside the impugned SRO 1035(I)/2017 dated 16.10.2017 and restrained the Customs Department from demanding any duty in terms of SRO 1035 or from enforcing the same in any manner whatsoever, whether by way of detaining or refusing the release of imported goods or otherwise.
On Tuesday, a two-member bench, headed by Justice Munib Akhtar announced the detailed judgment which was reserved on 15.12.2017. The petition was filed by dozens of importers.
“Section 18(3) of the Customs Act, 1969 as and to the extent as amended by the Finance Act, 2017 is declared to be ultra vires of the Constitution, and of no legal effect; SRO 1035(I)/2017 dated 16.10.2017, issued in terms of, and in purported exercise of the powers conferred by, the amended as 18(3) is declared to be ultra vires, of no legal effect and is hereby quashed,” the SHC order said.
Court further declared that “the respondents or any authority or officer thereof are restrained from demanding any duty in terms of SRO 1035 or from enforcing the same in any manner whatsoever, whether by way of detaining or refusing release of imported goods or otherwise and the security given by the petitioners under interim orders is directed to be released forthwith and any sums paid by the petitioners by way of regulatory duty under or in terms of SRO 1035 must be refunded in full.
Such refund may be made by way of direct repayment or adjustment (against any tax or duty) and in one lump sum or in installments, as the FBR may determine (but the same policy must be adopted in all cases). However, the entire amount that is refundable must in each case be settled in full not later than 31.10.2018”.
Judgment was suspended for 30 days in order to enable any aggrieved person/party so desirous to avail the remedy of appeal. During this period the interim order dated 26.10.2017 made in CP D-7159/2017 (and also as made applicable in other petitions) shall continue to remain operative.
Court observed in its order that “the issue raised in these petitions is the vires of an amendment made by the Finance Act, 2017 in s. 18(3) of the Customs Act, 1969, in light of the seminal judgment of the Supreme Court in Mustafa Impex and others v. Government of Pakistan and others PLD 2016 SC 808 (“Mustafa Impex”). As is well known, s. 18(3) allows for the imposition of regulatory duty on goods imported or exported. Prior to the amendment, this power vested in the Federal Government. By the Finance Act, 2017, s. 18(3) was amended such that for “Federal Government” the words “Board, with approval of Federal Minister-in-charge” were substituted. (Board of course means the Federal Board of Revenue or “FBR”.)
This amendment was clearly a response to the judgment of the Supreme Court. The question is whether it is constitutionally valid in light of the law enunciated in Mustafa Impex. The immediate context in which the issue arises is that on 16.10.2017 regulatory duty was imposed by FBR, with the approval of the Federal Minister-in-charge (being the Finance Minister) by means of notification SRO 1035(I)/2017 (“SRO 1035”). The regulatory duty was imposed on a wide range of imports. T
The petitioners are importers of some of those goods and hence aggrieved by the imposition. Their case is that the amendment cannot survive constitutional scrutiny when tested on the anvil of Mustafa Impex. The respondents of course strongly contest this claim, submitting that the amendment is intra vires and does not violate any constitutional provision or principle, including the law laid down in Mustafa Impex. During the course of the hearing a company, the Organization for Advancement and Safeguard of Industrial Sector (being an entity registered under s. 42 of the Companies Ordinance, 1984) sought permission to intervene on the side of the respondents. The intervener is a trade body whose objectives are to safeguard the interests of local industry. The intervener fully supported the imposition of the regulatory duty and pleaded in favor of the vires of the amendment. Learned counsel for the intervener was also heard.
Court also observed that “with respect, we are unable to agree. The respondents cannot have it both ways. It cannot be correct that although in response to Mustafa Impex the law was altered to, as it were, remove the Federal Government (i.e., Cabinet) from the equation it can nonetheless step back in at any time, either on its own or at the request of those on whom the statutory power has been conferred by the change in law.
If at all the FBR, with the approval of the Minister-incharge, could have lawfully and validly exercised the powers conferred on them by s. 18(3) then the said powers had to be so exercised. Seeking the approval of, or acting on the behest of, anyone else including the federal cabinet would be contrary to well known and well established principles of administrative law.
And it matters not that the ECC is invariably chaired by the very Minister-in-charge empowered by the statute, i.e., the Finance Minister. The whole purpose of the amendment was, as it were, to take the Federal Government out of the loop. After all, that is what the Federal Cabinet itself recommended since, as correctly pointed out by the learned AAG, the Finance Act, 2017 was only tabled as a Bill with its approval. If Parliament acceded to the request and changed the law, then the amendment (if of course, otherwise constitutionally valid) would have to be read literally and applied strictly and rigidly. For the Federal Government/Cabinet to be brought back into the picture via the ECC was itself contrary to the law as amended. SRO 1035 cannot therefore be “saved” on such basis.