EJAZ AFZAL KHAN, J.---Messrs Universal Insurance Company Ltd. Petitioner therein, issued 4 Insurance Guarantees to the Collector Customs, Central Excise and Sales Tax, respondent No.1 herein, on behalf of Messrs Capero Industries (Pvt.) Ltd. Respondent No.6 herein, pursuant to an order, dated 21-8-1991 of Lahore High Court in a writ filed by the latter for the release of raw materials in terms of S.R.O. No.517(I)/89, dated 3-6-1989. The detail of the said guarantees is as under:-- Sr.
No.Guarantee No.Date of Issue.Letter of CreditAmount of Guarantee.
1. Pes-BB- 2010222-8-1991 0017-LC- 859/911193077
2. Pes-BB- 201169-9-1991 0017-LC- 858/91806736
3. Pes-BB- 201382-12-1991 0017-LC- 858/913102509
4. Pes-BB- 2013924-12-19910017-LC- 858/914452699
2. On 12-2-1999 respondent No.3 served a notice on the petitioner for encashment of the aforesaid insurance guarantees which was duly replied by the latter. When in spite, of reply the respondents 1 and 3 insisted on the encashment of the guarantees, the petitioner filed the instant petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973.
3. It was argued by the learned counsel for the petitioner that respondent No,1 could not encash insurance guarantees furnished by the petitioner on behalf of respondent No.6 as the raw material and other components imported by the latter under S.R.O.
No.517(I)/89 were exempt from all the customs duties and other taxes levied thereon. Though, he next urged, the S.R.O. Mentioned above was rescinded vide S.R.O. 419(1)/91, dated 9th May, 1991 nonetheless it would not affect the exemption when the raw material and other components have admittedly been imported against the irrevocable letters of credit opened on 14-3-1991 much before the crucial date. He further urged that where the raw materials and other components imported by respondent No.6 are exempt from all the duties and taxes, encashment of the insurance guarantees furnished by the petitioner on behalf of the said respondent cannot be justified by any canons of law and equity. The learned counsel by referring of the cases of Quetta Textile Mills Ltd. V.
Federation of Pakistan and 2 others (1999 CLC 755) and Emirate Bank International v. Messrs United Group of Companies (1998 CLC 743), submitted that where the insurance guarantees were not encashed within the time stipulated therein they could not be enchased thereafter. If by any means, the learned counsel, urged in the alternative, this Court links the applicability of the S.R.O.
No.517(I)/89 with the fulfilment of the conditions mentioned therein, in that case, the relief asked for can be granted subject to the proof of their fulfilment. The learned counsel to support his arguments relied on the judgment rendered in Writ Petition No. 1068 of 1996 decided on 16-9-1999 in the case of Messrs Gadoon Polyester v. Collector Customs and others.
4. As against that the learned Deputy Attorney-General appearing on behalf of the respondents argued that exemptions under S.R.O. No.517(I)/89 can only be claimed when all the conditions mentioned therein are fulfilled. But where, he elaborated his argument, the said conditions are not fulfilled no exemption thereunder can be claimed either by the importer or the person furnishing guarantees. The learned Deputy Attorney-General by referring to the relevant clauses of the guarantees submitted that where it was specifically stipulated therein that their amount shall be recoverable as arrears of land revenue under section 202 of the Customs Act, 1969 it can be encashed notwithstanding the expiry of period mentioned therein.
5. We have gone through the record carefully and have considered submissions of the learned counsel for the parties.
6. Before we comment on the argument of the learned counsel for the parties it would be germane to refer to the relevant S.R.Os.
Which are reproduced as under:-- "Notification No. S.R.O. 517(I)/89, dated 3rd June, 1989.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to direct that such raw materials and components as are imported for the exclusive manufacture of goods by recognized industrial units located in the approved industrial estate of Gadoon Amazai in the Province of N.-W.F.P., shall be exempt from whole of the customs- duties and sales tax leviable thereon subject to the following conditions, namely:-
(i) the manufacture shall have suitable in-house facilities to manufacture the items in respect of which he claims exemption under this notification:
(ii) the manufacturer shall furnish to the Chief, Survey and Rebate or any other officer authorized by the Central. Board of Revenue in this behalf in the prescribed form the list of items that he is manufacturing along with the details of raw materials and components required and the Chief or such authorized officer in consultation with the Collector of Customs or the concerned Government Department will certify the, annual capacity of the industrial unit for the manufacture of goods and total annual requirements of various types of raw materials and components along with the quantity required for the manufacture of each item; (i.e) in case when concession is claimed on components the manufacturer shall chalk out deletion programme spreading over a maximum period of five years within which period he shall achieve-a minimum deletion to the extent. Of 75% of the C&F value of the inputs of the manufactured items, and the continued availability of the exemption under this notification shall be contingent upon
(a) the achievement of progressive annual deletion as approved by the. Central Board of Revenue or the Ministry of Industries as the case may be and (b) use of locally manufactured deleted items;
(iv) at the time of import of raw materials and components the manufacturers shall make a written declaration on each copy of the bill of entry to the effect that the raw materials and components have been imported in accordance with his entitlement in terms of condition (ii) above;
(v) the manufacturer shall furnish to the Collector of Customs bank guarantee equivalent to the customs-duty and sales tax leviable on each consignment subject to the satisfaction of the Collector of Customs;
(vi) the manufacturer shall maintain record of the raw materials and components and the items manufactured out of them in such form as may be prescribed by the Central Board of Revenue;
(vii) the manufacturer shall, within one year of the date of. importation of the raw materials and components, apply to the Collector of Customs for discharging the bank guarantee, the application being supported by a certificate in Form-I set out below issued by the Assistant Collector, Customs and Central Excise, within whose jurisdiction the manufacturing unit is located; and
(viii) the manufacturer shall maintain in Form-II set out below a record of the sale of the items manufactured under this notification and shall produce, on demand, such record and other evidence of sale, as may be required for inspection by an officer of Customs not below the rank of Assistant Collector of Customs, in whose jurisdiction the manufacturing unit is located or any other officer authorized by the Central Board of Revenue in this behalf.
FORM-I Certificate No.------------------------ dated I (name of the officer) Assistant Collector, Customs and Central Excise (place of posting) is satisfied that the raw materials and components imported by Messrs (name of the company) under the provisions of S.R.0._____ against indemnity bond vide bill of entry No. Dated the have been used for the manufacture of (Items to be mentioned) in accordance with the scale laid down by the Chief, Survey and Rebate, vide certificate No.----------------- Dated---------------- ----- File No. ----------------------Stamp and Signature FORM-II Register of sale of goods manufactured from raw materials and components imported under Notification (Give No. And date of S.R.O.)
S. No. Name and address of the party to whom soldQuantity sold Date of sale No. and date of the consumption certificate relating to the item sold Notification No. S.R.O. 419(1)/91, dated 9th May, 1991.---In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsection (1) of section 13 of the Sales Tax (Amendment) Act, 1990, the Federal Government is pleased to rescind its Notification No.517(I)/89, dated the 3rd June, 1989.
This Notification shall, however, not affect the raw materials and components imported against irrevocable letters of credit opened on or before 8th May, 1991.
7. There is no doubt that the irrevocable letter of credit for the import of raw material and other components was opened on 14-3- 1991 much before the rescindment of S.R.O. No. 517(1)/89 but this alone would not entitle respondent No.6 to exemption and relieve the petitioner of its liabilities under the insurance guarantees unless the requirements listed and laid down in the said S.R.O. Are proved to have been fulfilled. Where no documents and the certificates provided by Forms I and II of the S.R.O. Have been annexed with the petition or brought to the notice of the Court during the course of arguments as could suggest that the requirements attracting the applicability of the S.R.O. Have been fulfilled, all the arguments relating to the exemption will collapse like a house of sand notwithstanding the fact that the letter of credit was opened before the rescindment of the S R 0 .
8. Before we discuss the argument addressed on the strength of the judgment rendered in the cases of Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others (1999 CLC 755) and Emirate Bank International v. Messrs United Group of Companies (1998 CLC 743), it will not be out of place to know as to what an insurance guarantee is and how and when can it be enforced. It, as a matter of fact, is a contract of guarantee in terms of section 126 of the Contract Act and as such is subject to all the incidents a contract can possibly be under the Act. As it is not open to the parties to any agreement, to contract themselves out of a provision of law under section 28 of the Act so would it be for the parties to a guarantee. As any such clause in a contract would be void so B would it be in a guarantee. When an insurance guarantee is a contract to all intents and purposes, the stipulation in the guarantees that the petitioner shall be discharged of all the liabilities created thereunder if not encashed or enforced within one week after their expiry would be void within the terms of section 28 of the Contract Act in as much as it restricts or rules out the application of section 202 of the Customs Act, 1969. The more so when it is also stipulated in the guarantees that their amount shall be recoverable as arrears of land revenue.
Therefore, neither the argument nor the judgments cited in its support will have any relevance. Though section 28 itself of the Contract Act is quite clear on the proposition, all the same the cases of Nathu Mal-Ram Das v. D.B. Ram Sarup and Co. And others (AIR 1932' Lahore 169) and Islamic Republic of Pakistan through Defence Secretary, Government of Pakistan, Karachi v. Nazar Din Khattak and Sons (PLD 1969 Peshawar 313) may well be referred as precedents in this behalf.
9. The last argument of the learned counsel for the petitioner addressed on the strength of the judgment rendered in the case of Messrs Gadoon Polyester v. Collector Customs and others is also without force when the petitioner could not bring anything in black- and white on the record to prove that the requirements of the said S.R.O. Are fulfilled in spite of the fact that the writ petition remained pending for more than five years.
For the reasons discussed above, this petition being without merit is dismissed. However, the petitioner would be at liberty to produce the relevant documents before the concerned forum to bring its case within the mischief of the above mentioned S.R.O.
And claim exemption thereunder.