' SYED ABDUR REHMAN, J.---This is a petition under Article 199 of the Constitution of Islamic Republic of Pakistan.
2. The petitioners had entered into a contract for purchase of 310 metric tons of welding electrodes with M/s.China National on 5-12-1987. On being applied for the same an Import Licence was issued in their favour of the free list for import of these goods on 7-3-1988. A confirmed irrevocable letter of credit was established in favour of the foreign seller by the petitioners on 10-3-1988. The above quantity of welding electrodes was shipped and the cargo reached Karachi. The petitioners placed their goods in bonded warehouse on 6-6-1988. On 15-6-1988 the petitioners filed eight bills of entry for clearance of the goods from the bond. After the petitioners had entered into contracts for the import of these goods and had established the aforesaid letter of credit, but before the arrival of the goods respondent No.2 by a notification imposed 40 % regulatory duty under subsection (2) of section 18 of the Customs Act, 1969 on welding electrodes on 13-3-1988. Hence the Assistant Collector of Customs (Appraisement) insisted that the goods will be cleared only after the petitioners pay this duty. It is asserted by the petitioners that the notification imposing the said duty would not apply to the above goods of the petitioners. Hence the petition with the following prayers:--- "It is, therefore, prayed that this Hon'ble Court may be pleased to:---
(a) declare that the 40 % regulatory duty imposed through the impugned notification of March 13, 1988 is illegal, unconstitutional and void.
(b) Declare that the respondents are not entitled to levy any regulatory duty on the consignment against the above letter of credit.
(c) Direct the respondents to release the aforestated consignment of 310 metric tons imported against the aforestated letter of credit without assessment and collection of regulatory duty.
(d) Direct the respondents not to take any action against the petitioners or demand any regulatory duty from the petitioners.
(e) Grant such other relief as may be deemed appropriate by this Honourable Court.
(f) Award the costs of the petition."
3. We have heard Mr. Makhdoom All Khan, learned counsel for the petitioners and Mr. Akram Zuberi, learned counsel for the respondents, who was assisted by Aftab Azam, Law Officer of the Respondents.
4. It was contended by Mr.Makhdoom All Khan that section 31-A of the Customs Act cannot be applied to the consignments in respect of which the contracts were made or letters of credit were opened etc. Before the enactment of the above section. He then referred to a decision reported in P.L.D 1989 Karachi 361 (M/s. Yaseen Sons v. Federation of Pakistan and another), which was a case identical to the present case, where a Division Bench, consisting of Ajmal Mian, C.J. (as he then was) and Abdul Rahim Kazi, J., repelled the contentions of the petitioners. He, therefore, submitted that he was not pressing these grounds in this Court and was reserving the same to be raised in the Supreme Court.
5. We are, therefore, of the view that section 31-A has the effect of taking away the vested right of the petitioners to pay customs duty at concessional rate under an exemption notification which was in force at the time they entered into contract for import of such goods. Section 31-A was introduced in the Customs Act by section 5(2) of the Finance Ordinance, 1988 which reads as follows:- "(2) After section 31, the following new section shall be inserted and shall be deemed always to have been so inserted, namely:--- 31-A. Effective rate of duty.--Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30 and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 18, section 2 of the Finance Ordinance, 1982 (XII of 1982), and section 5 of the Finance Act, 1985 (I of 1985), and the anti-dumping or countervailing duty imposed under the Import of Goods (Anti-dumping and Countervailing Duties) Ordinance, 1983 (III of 1983), and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof.
(2) For the purpose of determining the value of any imported or exported goods, the rate of exchange of which any foreign exchange is to be converted into Pakistan currency shall be rate of exchange in force:-
(a) In the case of goods referred to in clause (a) of section 30, on the date referred to in that clause;
(b) in the case of goods referred to in clause (b) of the aforesaid section, on the date referred to in that clause; and
(c) in the case of goods referred to in section 31, on the dates referred to in that section.
(3) in section 156, in subsection (1) in the table, in column 1, in serial 8, in column 2, for the words 'ten years' the words 'fourteen years' shall be substituted.
(4) For the first Schedule, Schedule set out in the First Schedule to this Ordinance shall be substituted."
6. The second contention of Mr.Makhdoom Ali Khan, learned counsel for the petitioners, was that the respoondents had issued the notification on 13th March, 1988 in exercise of powers conferred by subsection (2) of section 18 of the Customs Act, whereby it had inserted heading No.83.15-A in Column No.1 and entries 'welding electrodes' in Column No.2 and '40 % ad-val.' in Column No.3 of the notification dated 1-7-1987. This notification had to take effect on 13-3-1988.
7. By Finance Act, 1989, subsection (2) of Section 18 of the Customs Act, 1969 was repealed and substituted as follows:-- "(3) In section 18, for subsection(2) the following shall be substituted, namely:-- "(2) the Federal Government may, by notification in the official Gazette, levy, subject to such conditions, limitations or restrictions as it may deem fit to impose, a regulatory duty on all Or any of the articles specified in the First Schedule at a rate not exceeding hundred per cent of the value of such articles as determined under section 25 or, as the case may be, fixed under section 25B, and may, by a like notification, levy a regulatory duty on all or any of the articles exported from Pakistan at a rate not exceeding hundred per cent of the amount which represents the value of such articles as determined or fixed as aforesaid."
It was contended by Mr.Makhdeom Ali Khan and rightly so that since this amendment was enacted after the issuance of the impugned notification, therefore, it could not save the said notification, specially because the amendment was not given retrospective effect as was done in the case of section 31-A referred to above.
' This notification was to be governed by subsection (2) of section 18 of the Customs Act, 1969 as it was before the amendment of 1989 referred to above. It reads as follows:- "(2) The Federal Government may, by notification in the Official Gazette, levy, subject to such conditions, limitations or restrictions as it may deem fit to impose, a regulatory duty on all or any of the articles specified in the First Schedule at a rate not exceeding fifty per cent of the rate, if any, specified therein read with any notification issued under subsection (1) of section 2 or subsection
(1) of section 3 of the Protective Duties Act, 1950 (LXI of 1950), or at a rate not exceeding hundred per cent of the value of such articles, as determined under section 25.
Mr. Makhdoom All Khan contended and rightly so that with reference to the Ist Schedule of the Customs Act, it is clear that customs duty is not levied on all articles mentioned therein on uniform basis, but it was levied on more than one basis. Hence while imposing regulatory duty by the notification, the Government had to take care that for those articles on which the rate of regulatory duty was to be levied on per unit basis, these should be same articles on which customs duty was levied in Ist Schedule on per unit basis and where regulatory duty was to be imposed on an article on ad valorem basis, it should be such article on which customs duty was imposed on ad valorem basis . Since in this case in Ist Schedule in heading No.83.15-A 'welding electrodes' were liable to customs duty on per unit basis, i.c. Rs.5,000 per metric ton, therefore, regulatory duty on ad valorem basis of 40 % could not have been imposed. In this connection reliance was rightly placed in the case of M/s.Yousaf Re-Rolling Mills v. The Collector of Customs reported in PLD 1989 SC 232. The reported decision relates to number of appeals challenging the levy of regulatory duty on imported goods under the respective headings of the Ist Schedule to the Customs Act, 1969 at the rate of ad valorem when there was no mention of such basis therein and vice versa. It was held as follows:-- "A reference to the First Schedule of the Customs Act makes it clear that customs duty is not levied on all the articles mentioned therein on a uniform basis. The duty levied is on four different bases.
The first group comprises articles in respect of which no customs duty is leviable such as coal under item No. 27.01 of Chapter 27. The second group comprises articles which are the subject-matter of these appeals in respect of which the rates of duty are prescribed at certain per cent on the valuation of the articles imported and described as ad valorem. The third group comprises those articles on which the levy of customs duty is per unit basis, that is, as per gallon, per pound, per foot or per piece. In such a group fall items such as cinematograph film under the heading 37.02 of Chapter 37 in regard to which, the levy is 5 paisas per linear foot. The fourth group comprises articles on which customs duty is not only payable on per unit basis, but in addition to it there is also an ad valorem charge: In this category fall articles such as beer made from malt under item 22.03 of Chapter -22. The customs duty payable in respect of it is Rs.7.5 per cent per liquid gallon plus 25 per cent ad valorem charge.
' While enacting subsection (2) of section 18 of the Customs Act, the legislature was presumed to know the state of affairs in regard to the articles falling in these categories, and, therefore, it gave discretion to the Federal Government by enacting the two alternatives to suit the situation, and while in the first part it restricted the levy at a rate not exceeding fifty per cent of the rate, if any, specified in the First Schedule and in the second, it allowed the rate not to exceed hundred per cent of the value of such articles as determined under section 25. The distinction is accordingly maintained in the two parts by reference to the maximum regulatory duty leviable on the basis of the rates specified in the schedule and the value of articles as determined under section 25. Each part of subsection (2), therefore, has restricted application. If the rate per unit of duty of the articles is specified in the First Schedule, then no discretion is left to the Federal Government to exceed the limit prescribed, namely fifty per cent. But if no such rate is prescribed in the First Schedule, such as in the case of those articles which are imported free of customs duty, it is only then that the maximum of the second part can be levied on 'the value of the articles determined under section
25. The restriction to levy regulatory duty is accordingly explicit in case the articles imported fall under the first part in regard to which tht rate of duty is prescribed in the First Schedule and while imrosing the levy of regulatory duty the Federal Government is under this restraint. It has no discretion to levy the maximum of the second part as that part was intended to apply to articles in respect of which no rate was prescribed and it was, therefore, on the valuation of the articles that the maximum hundred per cent was intended to apply as it was the only duty payable.
' Accordingly, the discretion to be exercised by the Federal Government is not utrammelled, but with a restraint as according to the language of the subsection. It cannot, therefore, be argued that the Federal Government was free to exercise it as according to its choice unless there was violation of both the parts."
9. This was further elucidated in the unreported decision in Civil Appeals Nos. 187-K of 1990 to 191-K of 1990. It will be useful to reproduce the following extract from the latter decision of the Supreme Court which reads as under:- "4. It goes to the credit of Mr.Lkram Ahmad Ansari, the learned Standing Counsel for the Federal Government to have brought to our notice for the first time-in the proceedings the exact notification by which the regulatory duty was sought to be realised at 20 % ad valorem. This, as we have already mentioned, is the notification S.R.O. 1016(1)/87. It was pointed out to the learned Standing Counsel that recourse to this notification imposing regulatory duty is not possible in view of our decision in Messrs Yousuf Re-Rolling Mills v. The Collector of Customs and another (PLD 1989 SC 232) because the regulatory duty ad valorem was sought to be imposed on an item which had a fixed duty under the First Schedule. The law laid down by us in the case of M/s.Yousaf Re-Rolling Mills was that where fixed duty was provided in the First Schedule, recourse to section 18(2) of the Customs Act could be had by the Federal Government for imposition of regulatory duty upto 50% of the fixed duty thereon. Where the rate of customs duty was not fixed, only there it was permissible to resort to ad valorem levy of regulatory duty as authorised by the latter part of section 18(2). Therefore, the manner in which the regulatory duty was imposed and the rates at which it was imposed was ultra vires the powers of the Federal Government under subsection (2) of section 18 of the Customs Act on account of our decision in M/s. Yousaf-Re-Rolling Mills case."
10. We are in respectful agreement with the above view of the Supreme Court and therefore, uphold the contentions of Mr. Makhdoom Ali Khan.
11. These are the reasons for our short order dated 5-3-1991 whereby we had allowed the petition as prayed.