1. ' NASIM HASAN SHAH, J--This judgment will dispose of all the above-noted matters as the question of law involved in all of them is the same, namely whether "waste and scrap metal of iron and steel" should be classified and treated as "waste and scrap metal of iron and steel" under heading No, 73.03 of P.C.T. Schedule for purposes of levy of customs duty or under headings 73.13 and 73-10-B of the said Schedule, whercunder duty is imposed at a higher rate?
2. Some of these appeals arise from the orders of the Customs authorities which were challenged- straightaway by Constitutional Petitions in t High Court without exhausting the remedies of appeal and revision and the High Court, therefore, dismissed these petitions as premature while in others the High Court has disposed of the matters on the merits. However, to avoid inconsistency and in the interest of justice we propose to dispose of all these matters on the merits.
3. Briefly stated the relevant facts are that the appellants are importers, who had imported goods as re-rollable iron and steel scrap as defined in the Department Investment Promotion and Supplies Notification Nil PISC (2)/861/66, dated 3rd June, 1986 and claimed that their goods were classifiable as waste and scrap metal of iron and steel under Item 9303 of the Pakistan Customs Tariff Schedule and should be assessed to duty accordingly.
4. The appellants' case is that scrap and waste of iron and steel imported for re-rolling purposes has always been classified under the general classification of "waste and scrap metal of iron and steel" both for the purposes of the Import and Export Control Act, 1950 as also for the purposes of levy of customs duty under the Schedule attached to the Tariff Act (XXXII of 1934). These Schedules have now been made Schedules to the Pakistan Customs Act, 1969 (vide Section 220 of Customs Act, 1969, read with Item No, 4 of the Fourth Schedule) in so far as the description of this item in both the Schedules is identical and indeed that the two Acts are complementary. This is apparent from the following:-- {{TABLE}} "I.T.C. Schedule (Import Trade Control Schedule).
2. Heading Description No, in HCT Schedule 73.1 Scrap and Waste metal of Iron and Steel 73.03 P.C.T. Schedule (Pakistan Customs Tariff Schedule).
3. Heading Descrition Duty 73.03 Waste and Scrap metal of Iron and 10% Steel ' Since, according to the appellants, the two Schedules, namely, the I.T.C. Schedule and the P.0 T Schedule are complementary and the description of the items identical, the goods which fall within the description under heading 73.1 of the I.T.C. Schedules had also to be classified for the purposes of levy of import duty under the corresponding heading 73.03 of the P.C.T. Schedule. It is further submitted that this assertion is supported by the long-standing practice of the Customs Department which has always classified iron and steel scraps imported for re-rolling purposes under the heading "waste and scrap metal of iron and steel". But this long-standing practice was suddenly reversed by the Central Board of Revenue vide Circular Letter No, 5 (73)-SS (RAR)-II/68, dated 21st March, 1969, wherein it was ruled that the articles imported for rerolling mentioned in the notification of the Department of Investment, Promotion and Supplies (Iron and Steel Control)
4. Karachi, dated 3rd June, 1968, which are not remelted or forged as a whole for the recovery of the metal will not be classifiable under heading 73.03 of the .C.T. But will be classified seperately in their appropriate headings Mr. S.K. R im, Collector Customs raised this question in a Letter (No, SI.Misc/205/68-VII d ted 13th November, 1968), addressed to the Central Board of Revenue, Islamabad and sought its ruling thereon. Since the ruling of the Central Board of Revenue, dated 21st March, 1969 is with reference to Mr. S.K. Rahim's letter dated 13th November, 1968, it would be helpful to set out the terms of both, hereunder.
5. ' The letter of Mr. S.K. Rahim, dated 13th November, 1968, stated: "Lately doubt has arisen in this Custom House in respect of the correct P.C.T. Classification of the goods imported as 're-rollable iron and steel scrap' and defined in D.I.P. Notification No, PISC (2)/861/66, dated 3rd June, 1968.
6. The importe s claim that the goods should be classified as waste and scrap metal f iron and steel, under Item 73.03 of the P.C.T. This Custom Hou e has taken the stand that the imported goods cannot be treated as scrap for the purpose of P.C.T. Because of the fact that they do not satisfy the condition of scraps as enumerated in the explanatory notes to the Brussels Nomenclature and should therefore be classified under 73.07, 73.11, 73.13 or any other heading depending on whether these are billet ends, old girders or old plates.
7. ' A study of explanatory notes of item 73.03 reveals that only those scraps and waste metal which are fit only for the recovery of metal or for use in the manufacture of chemicals will fall under this item. The notes further go to explain the two processes of revcovering metal. These are remelting and forging.
8. ' The importers, mostly owners of re-rolling mills, base their claim on the second process mentioned above that is forging. "Forging is the method applied for recovering iron and steel in bulk forms, without fusion, by hammering or hot, rolling packets of scrap metal'. They contend that by re-rolling the imported girders, sheets and billet ends etc. They recover metal through forging.
9. ' A further study of the exclusions mentioned under this heading will clarify the matter. Articles capable of being re-used with or without any repair or renovation for their former purposes or adopted for other uses are excluded. Strictly speaking the imported old girders, sheets and plates are capable of other uses with repair and renovation. This heading also excludes articles which can be re-fashioned into other goods without first being recoverd as metal. Thus, structural steel work usable after removal of worn out parts, worn railway lines which are usable as pitprops or may be converted into other articles by re-rolling are not covered by this item. The imported goods are covered into rolls and bars by re-rolling. If worn railway lines which can be converted into other articles by means of re-rolling are not covered under this item it would only he girders, sheets and plates which can be converted into other articles by means of re-rolling are also excluded from this heading. This Custom House is therefore of the opinion that these goods should be assessed under respective heading of the P.C.T. Instead of Item 73.03. However, during the past such consignments were being released under Item 73.03. As such approval of the Central Board of Revenue is solicited to change the long-standing practice of the Customs House. Pending approval of Central Board of Revenue, goods are being assessed under 73.33 followed by a provisional demand to cover the difference of amount involved in assessment under the respective heading and heading 73.03.
10. ' An early reply is solicited." (underlining is ours).
11. ' In response to this letter, the Central Board of Revenue gave the following rulings on 21st March, 1969:-- "The 're-rolling iron and steel scrap' defined in the Department of Investment Promotion and Supplies (Iron and Steel Control) Karachi's Notification No, PISC (2)/861/66, dated the 3rd June, 1968 consists mainly of steel mill rejects like ingots, blooms, slabs and billets, crop-ends, deformed rejects from reheating furnaces, scrap from continuous rolling mills, and cuttings of sheets and plates; rejected, misrolled and old fitted shaftings in pieces, old girders and plate pieces, scrap from ships etc. ' Under legal note 6 to Section XV of the First Schedule to the Tariff Act, 1934, the expression 'waste and scrap' means waste and scrap metal fit only for the recovery of metal or for use in the manufacture of chemicals. The articles mentioned in the Notification are imported to be used like steel billets for further hot-rolling or forging for their conversion into a rolled product without passing the stage of first being recovered as metal. As these articles are not remelted or forged for the recovery as a whore, of the metal, they are not classifiable under Heading No, 73.03 of the Tariff but are classifiable separately in their appropriate headings.
12. ' Only those articles which are fit for the recovery of metal by remelting or forging will be classifiable under Heading 73.03. The word forging in this context means the process to recover the iron and steel metal in bulk forms, without fusion by hammering or hot-rolling packets of the waste and scrap metal."
13. ' The Customs Authorities acting on the above ruling assessed the article imported by the appellants under their appropriate heading and the High Court agreed with the view of the Collector Customs and that of the Central Board of Revenue expressed in their ruling dated 21-3- 1969 and held that the goods imported by the appellants being fit for use after re-rolling and not requiring remelting for recovering the material did not fall under the Heading 73.03 of P.C.T.
14. Schedule. It further expressed the view that the test for classifying the scrap actually imported by the appellants would depend on the purpose for which the goods are really imported by the appellants. In the instant case as the goods were found to be cuttings of sheets, plates, joists, channels, angles etc. Which were fit for being re-rolled after cutting them to the required sizes and specifications without having to remit them first in order to recover the metal they did not fall under the head of 'waste and scrap metal of iron and steel" under head 73.03. The High Court also referred, in this connection, to the Explanatory Notes in the Brussels' Nomenclature Section XV (Second Edition 1966) under head 73.03 wherein iron and steel scrap has been defined to mean scrap metal fit only for the recovery of metal or for use in the manufacturing of chemicals and it observed that remelting is the normal method of recovering the metal and excludes articles which can be re-fashioned into other goods without first recovering metal by remelting or which, with or without renovation, can be adopted for other uses. As regards the contention that the articles imported were fit for the recovery by the method of "forging" it was observed that as explained by the Central Board of Revenue the meaning of "forging" in the relevant regard meant the process of recovering the iron and steel metal in bulk forms without fusion by hammering or hot-rolling packets of the waste and scrap metal thereby meaning recovery in its bulk form or liquid form. In other words, according to the High Court, only such a kind of forging wherein the metal is re- melted in a liquid form is only to be regarded as a metal fit for the recovery but nowhere it can be utilized by re-rolling merely by suitably modifying it, as was the case here. Hence the goods were rightly classified under head other than 73.03 of the P.C.T. Schedule.
5. In support of these appeals we have heard Mr. Khalid Anwar and Mr. Nizam Ahmad for the appellants while Mr. Imam Ali Qazi, Deputy Attorney-General has been hard on behalf of the respondents.
15. ' The Pakistan Customs Tariff consists of two Schedules: the First Schedule pertains to the rates of customs duties leviable on goods imported from abroad while the Second Schedule relates to export duties leviable on goods imported from Pakistan to foreign countries. These Schedules, which formerly were appended as Schedules to the Tariff Act, 1934, have now become Schedules to the Customs Act, 1969 and Section 18 of this Act lays down that the rates at which custom duties shall be levied as per the First and Second Schedules to the Act.
16. ' The First Schedule, aforementioned, is commonly called the Import Tariff and it consists of XXI Sections divided into 99 Chapters. Each Chapter consists of a number of articles grouped together.
17. The scheme of the Import Tariff is that the name of the dutiable articles is arranged in serial number, on the lines of the Brussels Tariff Nomenclature and against each article the general rate of duty based is specified. Although by the Finance Ordinance, 1980, the `Customs Tariff' has now been revised on the lines of revised CCCN (which was introduced by the Customs Co-operation Council with effect from 1st January, 1978) but the cases before us are governed by the earlier Import Tariff which was based on the Brussels Tariff Nomenclature.
18. ' Reverting to the controversy raging in these cases, we note that Section XV of the First Schedlue deals with "Base Metals and Articles of Base Metals". In addition, there are explanatory notes given herein, which explain the scope and meaning of the various expressions used in this Section.
19. Explanatory Note 6 is relevant in the present cases and it is in the following terms:-- "6. For the purpose of this Section the expression 'waste and scrap' means waste and scrap metal fit only for the recovery of metal or for use in the manufacture of chemicals."
20. ' Now Chapter 73 is concerned with Iron and Steel and Articles thereof and herein Scrap Iron and Steel are specified under heading 73.03. Since this is based on the lines of the Brussels Tariff Nomenclature it would be helpful to see how this heading is understood therein: "73.03--WASTE AND SCRAP METAL OF IRON OR STEEL.
21. ' In accordance with Note 6 to Section XV, waste and scrap of iron or steel means waste and scrap metal kit only the recovery of metal or for use in the manufacture of chemicals.
22. ' Such waste and scrap of iron and steel is generally of a misceallaneous nature and usually takes the form of:
(1) Waste and scrap resulting from the cutting, shaping, or other working of iron and steel (e.g., crop ends, filings and turnings).
(2) Unusable, worn-out and broken articles of iron or steel, frequently crushed or compressed together.
23. ' The processes normally used for the recovery of metal are re-melting and forging packets of scrap metal.
24. ' Re-melting is the normal method of recovering the metal when scrap is used in the manufacture of pig iron or steel. The scrap is re-melted, ususally with new pig iron, to produce a metal of known composition.
25. ' Forging is the method applied for recovering iron and steel in bulk forms, without fusion, by hammering or hot-rolling packets of scrap metal."
26. It is thus apparent that the articles which can be classified as waste and scrap are only those articles which consist of waste and scrap metal fit for the recovery of metal only. Normally the word "recovery" implies recovering something which has been lost. However, for technical purposes, the word "recovery" refers to the process by means of which a metal which has lost its original strength regains it by being subjected to the process of heating. The High Court has found that in order to recover the metal the waste or scrap must be so intensely heated that it is actually melted and it is converted in liquid form or bulk form and that simply heating of the steel or scrap with a view to getting it into the desired shape would not constitute the 'recovery of metal' as this expression is visualized by Explanatory Note 6. The High Court further explaining its view has observed that re- melting is the normal method of recovering the metal and excludes articles which can be refashioned into other goods without first recovering metal by remelting or which can be adopte for other uses with or without renovation.
6. We are not inclined to agree. In our opinion the above view of the High Court is a somewhat narrow view of the meaning and intendment of Explanatory Note 6.
27. The expression "waste and scrap" according to the said Note means waste and scrap metal only for the recovery of metal or for use in the manufacture of chemical. It is clear from the above Note that only such waste or scrap metal which is fit for recovery falls within its scope. Now the recovery of the metal can be secured either by melting or forging (as clarified in quotation cited from the Brussels Tariff Nomenclature above). There is nothing said therein to the effect that the recovery of the metal is to be secured by so melting it that it first is converted into liquid form. The requirement merely is to secure the recovery of the metal and since it is possible to recover it also by the process of re-rolling or heating i.e, by the process of forging without actually melting the scrap or waste into liquid form, the resort to this process can also be utilized for "recovery of the metal" because resort to either process can result in the recovery of the metal within the meaning of the Explanatory Note 6. Indeed, the letter of the Director of Industries and Commerce, West Pakistan, to the Central Board of Revenue dated 22-11-1968 on the subject of "re-rollable iron and steel scrap" fully bears this out. The following extract from this letter is relevant:-- "It is a fact that when scrap iron and steel is heated and re-rolled, the first few passes in the rolling mill do the work of recovery of metal, before the actual finished shape is made. This recovery permits fatigued metal to be re-used again like new. The hot metal is passed though a number of rolls in the rolling mill to give it a final shape. The metal is fully recovered in the first two or three passes and the actual shape of rounds, flats etc. Is given in the final passes after the metal is recovered. As such, hot rolling of scrap, as done in this country, first recovers the metal and after that it gives a final shape to the recovered metal as may be required." (Underlining is ours)
28. Thus, the recovery of the metal can be secured even by heating it and it is not necessary to melt the scrap or waste in liquid form to give it the final shape.
7. The above interpretation of the recovery was always acted upon by the Department and Mr. S.K.
29. Rahim, Collector of Customs, in his letter described it as its "long-standing practice". Now it is settled law that where the departmental practice has followed a particular course in the implementation of some rule, whether right or wrong, it will be extremely unfair to make a departure from I after a lapse of many years and thereby disturb rights that have been settled by a long and consistent course of practice; see Nazir Ahmad v. Pakistan and others (PLD 1970 SC 453).
30. It is not denied that the appellants in all these cases had imported the goods under the "Export Bouns Scheme" notified under the Ministry of Commerce, Government of Pakistan Notice No, 326/102/29-EP-III, dated 15th January, 1969. It is also not denied that earlier thereto in consonance with the consistent departmental interpretation of Explanatory Note 6 the same description was given, in the Import Trade Control Schedule to "Scrap and waste metal or iron and steel" in Item No, 73/1 as was contained in the corresponding entry 73.03 of the Pakistan Customs Tariff. This practice was based on the interpretation that 'recovery of the metal' was possible not only by the process of melting but also by the process of forging. The process of re-rolling is really one of forging and not of melting. But in so far as forging is also one of the two recognised methods for "recovery of the metal", accordingly scrap and iron which was imported for re-rolling purposses was consistently classified under Item No, 73.03 of the P.C.T.
8. This interpretation having been consistently followed by the department and it having become a long-standing practice had almost acquired the force of law. The practice could not, therfore, be lightly departed from moreso because on its faith the appellants and other manufacturers of the re-rolling material had imported goods under specific licences granted by the Government of Pakistan for that purpose. The directive of the Central Board of Revenue in its Circular letter, dated 21st March, 1969, had the effect of making the purpose for which the goods were imported rather than the nature of goods as the basis for classification for the goods. This was not the practice when the goods were imported. Until then such imported goods came within the heading 73.03. No sufficient grounds existed for not treating the goods which were imported in these cases according to the past practice.
9. It may be mentioned that the matter has now been placed beyond any dispute by issuance of the Circular of the Central Board of Revenue on the subject of "Nationalization of duty structure on various items iron and steels" dated 1st February, 1988, whereby it has been clarified that the Government has decided that such re-rollable scrap will now be assessed in the respective P.C.T.
31. Heading and not on average values as was the practice in the past. Accordingly in future, such disputes will arise. However, the imports made in these cases are liable to be decided in accordance with the past practice.
32. The upshot is that in so far the goods involved in these appeals were entitled to be assessed under head 73.03 of the P.C.T., the findings to the contrary are liable to be set aside.
33. In the result, all these appeals succeed and are accepted. The Bank guarantee furnished by the appellants shall be released. The parties, however, will be left to bear their own costs.
…and 9 more citing cases