MOHAMMAD ATHER SAEED, J. ~ These two petitions have been filed by the petitioner who is engaged in the import and supply of Air-Conditioners and other electronic items. The petitioner had imported two consignments of different models of Mitsubishi Branch Room Air-Conditioners from Thailand at the declared-value of US $ 573,500/- vide CRN l-HC-671770 100608 and of declared value of US $ 108225 vide CRN l-HC-1079069-200709. The respondent No. 3 did not accept the petitioners' declared value and determined the value of the subject consignment at the higher side on the basis of letter issued by respondent No. 2 under Section 25-A of the Customs Act, 1969.
2. Being aggrieved, the petitioner filed review application before the respondent No. 1 under Section 25-D of the Customs Act, 1969. However, according to him, the respondents No, 1 failed to take any action for the revision of the impugned valuation fixed by respondent No. 2 and therefore the petitioner filed Constitutional Petition No. 1290 of 2008 before this Court which was disposed of vide order dated 12.02.2009 with directions to the respondent No. 1 to dispose of the review application filed under Section 25-D of the Act after providing opportunity of hearing to the petitioners' counsel. However, according to the learned counsel, during the course of the hearing it was observed by the respondent No. 1 that the matter was already decided by his predecessor upholding the valuation ruling fixed in terms of valuation latter dated 12.03.2008 and he refused to interfere in the said order despite the fact that it was pointed out to him that such order was not served on the petitioner nor received by him and was not even brought to the notice of this Court and therefore the petitioners filed a second petition bearing No. 669/2000 this Court against the order passed by the predecessor of respondent No. 1 dated 15.12.2008 and the petition was disposed of by this Court whereby the said order dated 15.12.2000 passed by the predecessor of respondent No. 1 was set aside with directions to decide the said review application after providing opportunity of hearing to the petitioner.
3. After compliance of the directions given by this Court vide its above order, the respondent No. 1 again issued hearing notices but according to the petitioner he failed to consider the valid law point involved in the case and vide his impugned Order-in- Review dated 06.01.2010 dismissed the review application.
4. Being aggrieved by the above order the present petition was filed seeking the following reliefs:-
(a) Under the circumstances, it is most respectfully prayed that by accepting this petition, this Honourable Court may be gracious enough to declare that the value fixed by the respondent No. 2 in terms of impugned letter bearing No. Misc./40/2007-VA/1709, dated 12.03.2008 upheld by respondent No. 1 vide its impugned Review Order bearing No. DG(V) Val.
Rev/89/2008/61, dated 12.01.2010 on the basis of so-called market enquiry is illegal and violative of provisions contained in Section 25 of the Customs Act, 1969 read with Customs Rules, 2001.
(b) Set aside the impugned Order bearing No. DG(V) Val. Rev/89/2008/61, dated 12.01.2010 and transaction value may very graciously be directed to be. Accepted under Section 25(1) of the Customs Act, 1969.
(c) It is prayed that respondents may be directed to return the Bank Guarantee bearing No. LG#SBL-2008-4561, dated 27.06.2008 till the decision of the case.
(d) Direct the respondents not to encash the Bank Guarantee bearing No. LG#S.BL-2008-4561, dated 27.06.2008 till the decision of the case.
(e) It is prayed to restrain the respondents and any person acting for, under or on behalf of the respondent from taking any action in terms of or on the basis of the impugned bearing No. DG(V)Val. Rev/89/2008/61, dated 12.01.2010.
(f) Declare that the act of invoking Section 25A of the Customs Act, 1969 without first exhausting the methods provided under Section 25 of the Customs Act, 1969 is also illegal, void and without lawful authority.
(g) Grant any other relief, which is deemed appropriate in these circumstances of the case.
(h) Grant cost of petition.
5. We have heard Mr. Ziaul Hasan the learned counsel for the petitioner.
6. Mr. Ziaul Hassan submitted that he does not have any remedy available under the Customs Act against the above order as the appeal which has been provided against the review application was provided by Finance Act, 2010 and therefore he has filed this fresh petition.
7. Before Mr. Ziaul Hassar could start his arguments on the merits the case we asked him to first satisfy this Court whether his case did not fall under Section 19-A of the Customs Act, 1969 and he had not passed the burden of the impugned custom duties to the end consumer. The learned counsel argued that he had not passed the burden of the custom duties and the sales tax to the end consumer and therefore he was entitled for the release of his bank guarantees. He read out the provisions of Section 19-A and point out that this section does n6t apply to him as in his case he had not paid the custom duty but had only furnished a bank guarantee in respect of the disputed duties and therefore this section only applies to those persons who had actually levies. We asked the learned counsel to furnish before us a comparative statement of the cost of the Air- Conditioners after the payment of the duties and the sale price of such items so the Court can ascertain whether the custom duties had been or had not been passed on to the end consumer. The learned counsel filed such statement after being repeatedly asked to do so on three or four hearings of the case. After examining such statements we asked the learned counsel to satisfy us that his case is not covered by the judgment of the Honourable Supreme Court in the case of Facto Belarus Tractor Ltd. v. Government of Pakistan (2005 PTD 2286). The learned counsel submitted that the facts of his case are completely different from the facts of the case of Facto Belarus quoted supra because in that case before the Honourable Supreme Court the assessee had neither deposited indirect tax i.e. Sales tax and customs duties nor had sold the goods at the agreed rate but had been selling the goods at a much higher rate than the fixed rates of such tractors and in this manner they had been earning profit whereas in this case according to the learned counsel the petitioners had initially claimed that tax duly demanded from them were arbitrary, illegal and invalid and the valuation ruling on the basis of which these duties were being demanded had not been issued after completing the formalities prescribed and was illegal and invalid. He further submitted that he had not actually deposited the duty but had only furnished the bank guarantee to get his goods cleared under the provisions of Section 81 of the Customs Act, 1969 and according to him Section 19-A does not apply to the cases covered Section 81. However, the learned counsel was not able to produce any judgment of the Superior Courts on the arguments he was canvassing.
8. We have examined the case in the light of the arguments of the learned counsel and examined the records of the case and the judgment of the Honourable Supreme Court in the case of Facto Belarus case quoted supra in the light of the statement of the cost and selling price submitted by the learned counsel.
9. We are of the view that before we examine the merits of the case as to whether the valuation ruling and the order of review on the valuation ruling has been legally passed we have to first examine whether the petitioner has complied with the provisions of Section 19-A of the Customs Act, 1969 and has discharged his onus of proving that the burden of custom duty has not been passed over to the end consumer and only if we arrive at the conclusion that the burden has not been passed over to the end consumer then we should examine the merits of the case and decide whether these valuation rulings are in order and whether respondent No. 3 was justified in rejecting the value of the consignment declared by the petitioner and estimating the value in accordance with valuation ruling and whether under the provisions of Section 81 any right had accrued to the petitioner, In the light of the above observation it will be pertinent to first reproduce the statements furnished by the petitioner which reads thus:- COST OF MITSUBISHI AIR CONDITIONERS AS PER DECLARED VALUE S# Model Amount US$Ex- RateAmount Rs.C/Duty (25%)Srrax (15%)Iffax (5%)RD (1%)L/Cost (10%)Adv/Cost (10%)Total S/Price 1 MSIMU- A18VD235 67.4515,850.75 3,962.682,972.011,139.27 239.242,416.39 2,658.03 29,238.4051000 2 MSIMU- A24VD330 67.4522,258.505,564.624,173.46 1,599.82335.963,393.233,732.56 41,058.18 60000 3 MSIMU- AJOVD340 67.4522,933.005,733.254,299" 1,648.30346.143,496.063,845.67 42,302.3782000 4 MSIMU- A13VD200 67.4513,490.003,372.502,529.37969.59 203.612,056.502,262.15 24,883.7540000 COST OF MITSUBISHI AIR CONDITIONERS AS PER DECLARED VALUE S.#Model Amount US$Ex- RateAmount Rs.C/Duty (25%)Srrax (15%)Iffax (5%)RD (1%)L/Cost (10%)Adv/Cost (10%)Total S/Price 1 MSIMU- A18VD310 67.4520,909.505,227.373,920.531,502.87315.063,187.58 3,506.34 38,569.8151000 2 MSIMU- A24VD350 67.4523,607.505,901.874,426.401,696.78356.323,598.883,958.77 43,546.5660000 3 MSIMU- AJOVD350 67.4523,607.505,901.874,426.401,696.78356.323,598.883,958.77 43,546.5682000 4 MSIMU- A13VD230 67.4515,513.50 3,878.372,908.781,115.30 234.15 2,364.982,601.48 28,616.34 40000
10. A perusal of the above statements reveals that in the total cost of various items custom duty, sales tax and income tax deducted at source and landing cost and advance cost which have been estimated at ten percent have been included and the total cost has been computed by making the above additions. Now when we compare the sale price with this total cost we find that the rate of profit even after inclusion of all the taxes i.e. Custom duty, sales tax and income tax ranges approximately between thirty-five percent to ninety-five percent and if we compare it without inclusion of the custom duties and taxes we find that the profit will range from almost fifty percent to more than hundred percent.
11. In the light of these observations and compensation we have examined whether the present petitioners are covered by the judgment of the Honourable Supreme Court in the Facto Belarus case quoted supra, In that case the facts were also that initially vide various SROs the payment of custom duties and sales tax was exempted to facilities the scheme for providing tractors to agriculturists/farmers under Awami Tractor Scheme through Agricultural Development Bank of Pakistan at subsidized rates. However, when the scheme was completed again vide various SROs ten percent custom duty and eighty percent sales tax on the import of tractors were imposed. However, subsequent to that the Government of Pakistan launched another Awami Tractor Scheme No. II for importing 10,000 tractors and since the petitioner in that case has succeeded in fulfilling the specified conditions for import of tractors including the one to sell a Tractor at a subsidized rate therefore Letter of Authorization was issued to it. The petitioner on the assumption that no sales tax had imposed and that concession providing earlier continued in favour of the petitioner for import of tractors but despite clear directions sales tax at the rate of eighteen percent and custom duty at the rate of 10% and services charges at 2 percent were charged from the petitioner therefore the petitioner invoked the jurisdiction of the Lahore High Court by filing a Constitutional petition which was later on disposed of as infructuous. The petitioner later filed an Intra-Court Appeal which was allowed declaring that the petitioner was entitled to avail all concessions like exemption from the payment of Customs duty and Sales Tax in the same manner and to the same extent, which were made available under the original Awami Tractor Scheme. Against the order of the learned Appellate Court the respondent went to Honourable Supreme Court by filing a Civil Petition for Leave to Appeal which was granted and the appeal was allowed and the order of the Lahore High Court was set aside. The petitioner therefore filed a review application before that Court and the review application was allowed and the judgment of the Lahore High Court was restored and the earlier judgment of the Court by which the appeal was allowed was recalled and appeal dismissed with costs. Subsequently, the petitioner approached the Central Board of Revenue for refund of amount paid as customs duty and sales tax and services charges and when the needful was not done the petitioner filed a fresh petition for initiating the action for contempt of Court against the respondents, In this case the Honourable Supreme Court examined the query raised by the Central Board of Revenue at the time of processing of a refund that whether burden of sales tax and custom duty has been passed on to the end consumer or not and held that such query was legitimate and then the Honourable Supreme Court disposed off the petition holding as under:-
32. In view of the above provisions of law, it may also be noted that the petitioner had no right to claim refund of Customs Duty and Sales Tax which it had recovered from the end user as an agent of the Government, if its burden had been passed on by it, being the property owing purchasers, otherwise it will remain with Government, who would spend it on the welfare of general public. Reference in this behalf may be made to the case of Orient Paper Mills v. State of Orissa (AIR 1961 SC 1438). Relevant para therefrom its reproduced hereinbelow for convenience:-
(7) Article 19(1 )(f) of the Constitution prescribes the right of freedom of citizens to acquire, hold and dispose of property; but the right is by Cl. (5) subject to the operation of any law, existing or prospective insofar as it imposes reasonable restrictions on the exercise of that right in the interest of the general public. Assuming that by enacting that refund of tax shall only be made to the purchasers from whom the tax has been collected by the dealers and not to the dealers who have paid the tax the fundamental right under Art. 19(1 )(f) is restricted, we are unable to hold that the restriction imposed by Section 14-A of the Act is not in the interest of the. General public. The legislature by Section 9-B(1) of the Act authorized registered dealers to collect tax from the purchasers which they may have to pay on their turnover. The amounts collected by the assessee therefore primarily belongs not to the assessee but to the purchasers. On an erroneous assumption that tax was payable, tax was collected by the assesses and was paid over to the State. Under Section 9-B Cl. (3) of the Act as it stood at the material time, the amounts realized by any person as tax on sale of any goods shall notwithstanding anything contained in any other provision of the Act, be deposited by him in a Government treasury within such period as may be prescribed if the amount so realized exceeded the amount payable as tax in respect of that sale or if no tax is payable in respect thereof. As the tax collected by the assessee was not exigible in respect of the sales from the purchasers, a statutory obligation arose to deposit it with the State and by paying the tax under the assessment, the assessee must be deemed to have complied with this requirement. But the amount of tax remained under Section 9-B of the Act with the Government of Orissa as a deposit. If with a view to prevent the assessee who had no beneficial interest in those amounts from making a profit out the tax collected, the Legislature enacted that the amount so deposited shall be claimable only by the persons who had paid the amount to the dealer and not by the dealer, it must be held that the restriction on the right of the assesses to obtain refund was lawfully circumscribed in the interest of the general public."
33. The above principle has been reiterated in Amar Nath Om Prakash v. State of Punjab (AIR 1985 SC 218).
34. Thus entitlement of the vendor to claim refund of Customs Duty and Sales Tax, depends upon producing evidence that burden of the same had not been passed on. In addition to it, Section 3-B of the Sales Tax Act casts a duty upon the vendor to return such amount to thd Federal Government. Although under the Customs Act, 1969, there is no identical provision but on the principle of Fairplay and equity, vendor having received indirect tax, cannot pocket the same. To elaborate this viewpoint, reliance is placed on Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536). Relevant portion therefrom is reproduced hereinbelow for convenience:-
(iv) A claim for refund, whether made under the provisions of the Act as contemplated in proposition (i) above or in a suit or writ petition in the situations contemplated by proposition (ii) above, can succeed only if the Petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the, extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as Constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only at person who can legitimately claim its refund. But when such person he does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e. By the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends, In other words, he cannot collect the duty from his purchaser at one end and also collected the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak off the people being unnecessarily enriched.
12. After examining the case of the petitioner before it the Honourable Supreme Court applied the principle of unjust enrichment and held that the petitioners had not been able to prove that the burden of custom duty and sales tax had been passed over to the end consumer and could not discharge their onus that such burden had not been passed they were not entitled to refund of custom duty and sales tax and their application for contempt of Court was dismissed and the office was directed to refund the amount which had been collected by them to the Collector of Customs concerned.
13. When we examine the statement filed by the petitioner in the light of this judgment we are of the view that the case of the petitioner falls within the four corners of this judgment and if principle of unjust enrichment is applied, then it can safely be assumed that the petitioner has passed on the burden of custom duties and sales tax to the end consumer and has not been able to discharge its onus that it has not passed on the burden.
14. However, before we finally dispose of these petitions it will be in the interest of justice to consider the arguments of the learned counsel that Section 19-A does not apply to him as in that section the word "paid" has been used and he has not paid the custom duty and sales tax but had only furnished a bank guarantee for the disputed amount. At this juncture it will be pertinent to reproduce Section 19-A.
"19A. Presumption that incidence of duty has been passed on to the buyer.- Every person who has paid the customs duty and other levies on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such customs duty and other levies to the buyer as a part of the price of such goods.
15. A perusal of the above section leads to the conclusion that wherever the custom duties and sales tax have been paid by a person and he cannot prove otherwise it will be deemed that he has passed full incidence of such customs duties and sales tax to the buyer as a part of the price of such goods. The learned counsel submits that he has not paid the custom duties but has only furnished a bank guarantee for the release of the goods and therefore he is not covered by the judgment of this Court. We regret we cannot agree with this contention of the learned counsel, In this connection reference may be made from the following extract of the judgment of the Honourable Supreme Court in the case of Shipyard K. Damen International v.
Karachi Shipyard and Engineering Works Ltd. (2003 CLD 1).
7. After having gone through the precedented law as mentioned hereinabove the judicial consensus seems to be as follows:-
(a) The performance of guarantee stands on the footing similar to an irrevocable letter Of credit of Bank, which gives performance guarantee must honour that guarantee according to its terms, It is not concerned in the least with the relations between the supplier has performed his contracted obligation or not, nor with the question whether the supplier is in default or not. The Bank must pay according to its guarantee all demand if so stipulated without proof or conditions. Only exception is when there is a clear fraud of which Bank has notice.
(ii) There is an absolute obligation upon the banker to comply with the terms and conditions as enumerated in the guarantee and, to pay the amount stipulated therein irrespective of any disputes there may be between buyer and seller as to whether goods are upto contract or not.
(iii) The bank guarantee should be enforced on its own terms and realization against the bank guarantee would not affect or prejudice the case of contractor, if ultimately the dispute is referred to arbitration for the reason, one the terms and conditions of the guarantee were fulfilled, the bank's liability under the guarantee was absolute and it was wholly independent of the dispute proposed to be raised.
(iv) The contract of bank guarantee is an independent contract between the bank and the independently concerned and is to be worked out independently of the dispute arising out of the work agreement between the parties concerned to such work agreement and, therefore, the extent of the dispute and claims or counter-claims were matters extraneous to the consideration of the question of enforcement of the bank and were to be investigated by the arbitrator.
(v) Where the bank had undertaken to pay the stipulated sum to respondent, at any time, without demur, reservation, recourse, contest or protest, and without any reference to the contractor, no interim injunction restraining payment under the guarantee could be granted.
(vi) The Bank guarantee is an autonomous contract and imposes and absolute obligation on the bank to fulfill the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable.
(vii) When one bank guarantee is discharged, the obligation of the bank ends and there is no question of going behind such discharge bank guarantee. Courts should refrain from probing into the nature of the transactions between the bank and customer, which led to the furnishing of the bank guarantee.
(viii) In the absence of any special equities and the absence of any clear fraud, the bank must pay on demand, if so stipulated and whether the terms are such must be have to found out from the performance guarantee as such.
(ix) The unqualified terms of guarantee could not be interfered with by Courts irrespective of the existence of dispute.
16. A perusal of the above leads to the conclusion that the bank guarantee has to be payable on demand to the person in favour of whom it has been issued on its encashment. At this stage we may also point out that the goods were allowed to be cleared on furnishing of bank guarantee and not on actual payment of duties, which was a benefit/facility provided to him and he cannot take undue advantage of this facility. Therefore in our opinion the word "paid" will also include deferred payment by furnishing bank guarantee and therefore we are of the considered opinion that the applicant falls under Section 19-A.
17. The learned counsel for the petitioner had also argued that Section 19-A does not apply to Section 81 of the Customs Act, 1969. However as pointed out earlier he has not been able to produce any judgment in support of his above arguments. We have perused the two sections and our conclusion is that both sections are not in conflict with each other and the harmonious interpretation will be that if the department has not fulfilled the formalities prescribed under Section 81 of the Act; the tax- payer will be entitled to be assessed at the declared value but this concession will not absolve him of his liability under Section 19-A, if during the pendency of the matter before the department or Appellate Courts he had passed on the burden of the custom duty to the end consumer. Since we have already held that the petitioner has not been able to discharge his onus of proving that he has not passed the burden of customs duty and sales tax paid, to the end consumer and since on the basis of the statement filed by him we have reached the conclusion that the custom duty and sales tax had not been passed on to the end consumer, therefore the petitioners prayers No. 'C' and 'D' cannot be allowed and the respondents are entitled to en-cash the subject bank guarantees. Since we have already held that the petitioners' prayer for return of bank guarantee and non- encashment of bank guarantees cannot be allowed therefore we refrain from dilating upon adjudicating on the merits of the case as this has now become an academic question only.
18. The above are the reasons in support of our short order passed in Court on 08.04.2011 after hearing the learned counsel by which we had dismissed these petitions in limine.
19. The office is directed to immediately send a copy of this judgment to the respondents specially the respondent No. 3 so that he may take action on the basis of this judgment and en-cash the bank guarantee.