' WAJIHUDDIN AHMED, J.---The petitioner is said to be a partnership concern having its office at New Jersey and files this petition through its Attorney one Syed Tahir Hussain Mahmoodi. It has been 'permitted per letter dated 13-5-1989 from the Export Processing Zones Authority (E.P.ZA.) to establish a warehousing/Trading Unit in the Karachi Export Processing Zone (K.E.P.Z.). The petitioner's investment proposal, in terms of such letter, has been allowed in the following items:- "Electronics, Engineering, Parts, Medicinal herbs, Crude drugs and Chemicals, Basic raw material for Industries, Household consumer goods, Spices, Cigarettes, Foodstuff, Carpets, Rugs (woollen, silk, synthetic) Perfumes and Toiletories."
2. The dispute pertaining to the filing of the present petition arose when the petitioner was permitted by the E.P.Z.A., under a certificate of import dated 9-6-1989, to import new pneumatic tyres of rubber into the Karachi Export Processing Zone (K.E.P.Z.) and, pursuant thereto, importing such tyres, and the same arriving in August, 1989, was granted necessary N.O.C. Dated 29-8-1989 for export to Qandhar, Afghanistan, by the E.P.Z.A. But the respondent No,1, allegedly without passing any formal orders, disallowed such export. However, on 10-10-1989, the Principal Appraiser is said to have made an endorsement on the Shipping Bill that the respondent No,1 had sent a letter, dated 7-10-1989, to the Chairman E.P.ZA. Awaiting response to which the shipment could not be allowed.
3. Now the relationship between the parties is essentially governed by the Export Processing Zones Authority Ordinance, IV of 1980 (herein referred to as the Ordinance) and the Rules and Regulations framed thereunder as well as the notifications issued and exemptions granted under the various legislations, already occupying the field on the subject. The Ordinance is a Special law, creating specific new rights and corresponding obligations thereby excising away from the scope and incidents of the general legislation the acts, transactions and pursuits in the context of areas demarcated and segregated, following upon the provisions of such Ordinance. Nonetheless, to such extent as the General law remains uneffected from the operation of the Ordinance the same, where relevant, would still be applicable. An examination, therefore, of the exact impact of this dispensation shall have to be made in order to see whether or not any of the rights of the petitioner have been impinged upon on account of the acts of commission or omission, on the part of the respondent No,1 or his subordinates in the Customs.
4. Ordinance IV of 1980 contemplates the creation of an Authority under section 4 thereof to be known as the Export Processing Zones Authority, which is to be a body corporate, having perpetual succession and a Common seal, with powers to hold property and competence to sue and to be sued in that name. In terms of section 9 of the Ordinance the Authority is to prepare a Master Plan and a phased Master programme for the development of the Zones (Export Processing Zones) and is to devise schemes pursuant to such Master Plan, inter alia, in respect of Industrial Warehousing and Buildings. Section 11 of the Ordinance envisages that the Authority may, with the approval of the Federal Government, frame schemes and lay down procedure in respect of sanctioning the establishment and operation of Industries in the Zones, and an Industry, thus sanctioned, is to operate subject to such terms and conditions, as may be enunciated in the letter of sanction issued by the Authority. The materials and manufactured goods are not to be exported from the Zones into the Tariff Area except to the extent and in the manner to be specified by the Authority in each case, with the prior approval of the Federal Government. This is the effect of section 11 of the Ordinance. The powers of the Authority, under section 12 of the Ordinance, subject to the other provisions in the Ordinance and the rules, include the taking of such measures and exercise of such powers as may be necessary for carrying out the purpose of the Ordinance. The preamble to the Ordinance, spelling out purposes for the creation of the Authority, speaks of making all arrangements for the Planning, Development andl Management of the Export Processing Zones and to provide for matters connected therewith or ancillary thereto, whereas section 1 (2) makes the Ordinance applicable to all Industrial undertakings set up or operating in the Export Processing Zones. The essential object, therefore of the Ordinance seems to be to establish Export-oriented Industries in the Export Processing Zones with a view to boost foreign exchange earnings of the Nation, through the incentives incidental upon the creation of Export Processing Zones under the Ordinance. The Ordinance, albeit expressly, providing for launching schemes for Industrial Warehousing makes no provisions for establishing mere warehousing facilities for the exclusive purpose of importing and then exporting of goods and material, without any processing whatever, in the nature of a transit bond; and warehousing which, if at all, as will be seen under the Rules framed pursuant to the Ordinance, may impliedly be permissible if directed, primarily, as a supportive activity for Industrial projects run by Industrial undertakings and not otherwise.
5. In the Rules which have been framed under section 26 of the Ordinance and which are known as the Export Processing Zones Authority Rules, 1981, rule 2, namely, the definition clause, defines an "Application" to mean an application to the Authority for setting up an industrial undertaking in the Zones' in such form as may be specified from time to time by the Authority and a "Joint Venture" means an Industrial enterprise set up with participation between a foreign investor and a non- resident citizen of Pakistan with non-repatriable investment. In such Rules, rule 3 envisages eligibility for establishing Industrial undertakings in a Zone and rule 5, providing for types of industries to be set up, conceives principally, export-oriented Industries requiring sophisticated technology and advance marketing arrangements, using local raw material and labour preferably, and excluding, normally, industries which compete with similar export industries in the Tariff Area.
The rule last mentioned also postulates supporting enterprises to provide essential services to Industrial undertakings in the Zone and consignment and distribution services for receiving and storing foreign goods meant for re-export. While this last category in rule 5, aforesaid, does not seem to have express sanction of the Ordinance, the same contemplating only Industrial Warehousing, such rule may not be entirely inconsistent with the statute provided that the consignment and distribution services are of such a nature that the same in essence, are incapable of conversion into bonded warehousing units calculated to operate as throw-back devices for the Tariff Area, in circumvention of the Tariff restrictions, thereby generating covert smuggling. Warehousing meant for rendering supportive services in the Zones, subject to necessary protective restrictions, should likewise be allowable. Accordingly "Household consumer goods, Spices, Cigarettes, foodstuff, Carpets, Rugs (woollen, silk, synthetic) Perfumes and Toiletories" sanctioned to the petitioners would to be permissible subject to the indicated norms.
Still pneumatic rubber tyres neither fall within any of the items sanctioned to the petitioner nor would seem to be re-exportable though the same may be used as parts for Industrial products, duly permitted to the petitioner. Reverting to the Rules, rules 16 and 17 of these Rules provide for a development surcharge of 1% on the F.O.B. Value of all goods imported or exported from any Zone as payable to the Authority and entry into and exit from a Zone of persons and goods is to be in accordance with the Regulations framed by the Authority, which under section 26 of the Ordinance are to be framed with the approval of the Federal Government and are not to be inconsistent either with the provisions of the Ordinance or the Rules and are to be restricted for the purposes of the Ordinance alone. All the contestants in this petition subscribe to a common assertion that no such Regulations had been framed by the Authority.
6. With a view to further the objectives of the Ordinance, S.R.O. 582 (1)/80, dated 2-64980, as amended, exempts the Karachi Export Processing Zone from the provisions of the Registration (Imports & Exports) Order 1952, the Import Policy Orders, issued from time to time, and Schedules 1 to IV and VI annexed to S.R.O. 685 (1)/79, dated 31-7-1979, save in so far as they relate to supplies from Karachi Export Processing Zone to the Tariff Areas in Pakistan. Similarly, S.R.O. 1332 (1)/81, dated 13-12-1981, exempts the Export Processing Zones from the provisions of the Foreign Exchange Regulations Act VII of 1947. Likewise, under S.R.O. 1248 (1)/81, dated 23-11-1981 the Export Processing Zones have been exempted from all the provisions of the State Bank of Pakistan Act, XXXIII of 1956, and the Banking Companies Ordinance, 1962.
7. In exercise of powers under section 219 of the Customs Act, IV of 1969, the Central Board of Revenue has also framed Rules, regulating and controlling Imports & Exports of goods into and from the Export Processing Zones, which are termed as the Customs Export Processing Zones Rules, 1981. Such Rules define "Import" in relation to a Zone to mean import from abroad and includes goods introduced into a Zone from the Tariff Area whereas "Tariff Area" means any area in Pakistan outside the limits of Zones. Rule 3 of these Rules, which pertains to Import of goods into the Zones, inter alia, expressly provides that the exemption granted under notification No, S.R.O. 881 (1)/80 dated 23-8-1980, is restricted only to machinery, equipment and materials to be used solely within the limits of a Zone. Rule 5 of such Rules pertains to Export of goods from the Zones and amongst others, envisages that goods cleared for Export shall be secured and forwarded to the exporting station under Customs supervision and under a pass containing necessary particulars. The following rule 6 provides for removal of goods from the Zones to the Tariff Area in which context restrictions may be imposed not only by the Authority for Home consumption but whatever goods are so permitted would be liable for fulfilment of all the requirements prescribed under the Customs Act and the Rules framed thereunder for direct Imports from abroad into the Tariff Area. In rule 10 it is envisaged that no goods shall be taken out from any Zone except as provided in rules 6 and 7 (relating to destruction) or for transfer to another Zone or for sub-contracting in the Tariff Area save and subject to the prior permission of the Collector of Customs on such conditions, restrictions and limitations as may be prescribed by him or as otherwise provided in the Act or the Rules made thereunder.
8. It will thus be seen that all possible precautions have been taken in the Ordinance, in the Rules framed thereunder and in the Rules promulgated by the Board of Revenue to ensure that the goods manufactured in or otherwise to be found in an Export Processing Zone do not easily find their way in the Tariff Area. Even before that can happen it is to be ensured that only such goods and' material can be imported into an Export Processing Zone as are intended for and calculated to be of use or requisite for the purposes of an Industrial undertaking or enterprise engaged in an Industrial pursuit or activity. Such use would as observed above, include a supportive, incidental or ancillary purpose and may also entail a facility of re-export, subject to the foregoing restrictions but in the context last mentioned the consignment, distribution or re-export facilities should involve dealing within specific items, since use as "parts" would not confer a right to induct the material in the Tariff Area, though re-export thereof elsewhere may be allowed subject to such precautions and conditions as seem to be in-built in the relevant legislation. Unless these requirements are satisfied a free import/export in or from an Export Processing Zone is not permissible. It is conceded at the Bar by all concerned that the Customs Act and the Rules framed thereunder, relevantly, are not excluded from application to an Export Processing Zone altogether but that their application is restricted. Such restriction, obviously, is limited to the exemptions allowed and the exclusions expressly made. Beyond this the facility does not extend.
9. Applying these principles to the instant case, we are of the view that the import of pneumatic rubber tyres etc. If the same was not calculated to serve by way of parts of machinery, being manufactured or to be manufactured in the Export Processing Zone or for purposes incidental of ancillary thereto, was, strictly not permissible free of duty or alongwith facilities available to goods or materials serving or calculated to serve such objective. We also, in such context, find from the list of permissible items to the petitioner that items such as "Household consumer goods, Spices, Cigarettes, Foodstuff, Carpets, Rugs (woollen, silk, synthetic) Perfumes and Toiletories", unless for use exclusively for the purposes of the of Industries or Industrial undertakings as are or are to be functioning in the Export Processing Zone or for purposes incidental or ancillary thereto do not qualify for import and, at any rate, are not entitled to be taken out for Home consumption or otherwise to or through the Tariff Area, except on compliance of all legal requirements. As regards pneumatic rubber tyres, such item is not specifically in the list of items permitted to the petitioner.
The same could only be imported as "parts" for machinery for use in KEPZ and cannot be treated or meant for distribution etc. There is no right, therefore, vesting in the petitioner, to take the same into or through the Tariff Area. Their purpose and use is patently limited. Extreme care, it would seem, has to be taken in respect of such items, as these are ex facie calculated to be inducted into the Tariff Area and thus defeat the Revenue. Even so, though one cannot help noting that a somewhat strained interpretation is being put in the matter, we would be inclined to hold, in consonance with the inherent freedoms involved in these situations, that the petitioner can still be allowed to re- export the item of tyres to any part of the Globe except and Tariff Area.
10. As far as the petitioner's projected Export to Afghanistan is concerned, to be precise to Qandhar in Afghanistan, the contention of the respondent No,1 is that such an Export is governed by the Afghan Transit Trade Agreement, 1965, and that even in relation to such Agreement the Central Board of Revenue, through its letter dated 144-1989, has opined that due to mounting complaints of smuggling back into Pakistan of Tyres and Tubes going to Afghanistan in transit, the Government of Pakistan has decided to ban the import of tyres by the Kabul regime under the Transit Trade Agreement with effect from 15-12-1988 and such intimation has been given to the Kabul Embassy in Islamabad. However, L.Cs opened on or before 15-12-1988 would not be covered by such ban. It is the case of the respondent No,1 that in view of such ban re-export from the K.E.P.Z. To Qandhar is not permissible. On the other hand, it is contended by the petitioner that under Rule 24-A of the Export Processing Zones Authority Rules, 1981, no change in the incentive package under which an investment has been sanctioned in a Zone shall be made except where such change is more advantageous to the investor and is also accepted by him. In our view, the question poses no problems whatever. All that is guaranteed under the Ordinance and the Rules is that free export would be permitted from an Export Processing Zone. The assurance and guarantee extends to taking out of the goods and material from an Export Processing Zone only. Such exit is free but no guarantee is superadded that the rest of the Trading world would throw open its frontiers merely because the goods are emanating from an Export Processing Zone in Pakistan. Trading nations have their own Tariff laws and those would continue to apply, as and when they become relevant.
The Tariff Area in Pakistan is part of the rest of the world in this situation. This country can keep developing and even changing its laws, in so far as the Tariff Area is concerned. No nation of the Trading world, and that includes the State of Pakistan, has abdicated its sovereign rights in lieu of free trade in the Zones. All that has been permitted is absolute freedom of trade, subject to rules, within and outside the Export Processing Zones but not so vis-a-vis the Tariff Area, which has and shall always have its own independent I dispensation. Thus while there is a right, subject to law, for taking the goods and I material outside the Zones, there is no corresponding obligation to allow the goods into the Tariff Area either for home consumption or for transit. As and when such an undertaking is launched, it is for the exporter in the Zone to comply with the Rules. If the intention is to take the goods out for home consumption firstly, the approval of the Authority is a prerequisite and then normal duties and taxes have to be paid before the induction of the same in the Tariff Area. Likewise, if the object is to take out any goods from a Processing Zone on transit through the Tariff Area, Law and Rules must be complied with and those comprise of the Customs Act, 1969, Ordinance IV of 1980 aforesaid the applicable Rules and the Protocol covered by the Afghan Transit Trade Agreement 1965 etc. An exporter from the Export Processing Zones in the context of such exports to the Tariff Area is in no better position than any other exporter from the rest of the world and is liable to the formalities of the applicable law and rules, as and when he wishes to forward the goods in or through the Tariff Area. No privileged treatment is provided for such an exporter 1 in these situations and none whatever is guaranteed except that all that is provided for in the Ordinance shall be honoured as and when occasion arises and no change in the ordinary laws applicable in the Zones would be given effect to so as to make the existing procedures unduly onerous. No more than this is or can be the effect of Rule 24-A of the Export Processing Zones Authority Rules, 1981.
11. Indeed, if we may say so, the petitioner's freedom to take out the goods, if otherwise available, still remains unchecked. The petitioner would be free to take out its goods to Oandhar from any other route but not overland through the Tariff Area "except on compliance with the relevant Pakistan Law and the Rules. The Customs were required to pass such order. They have not done so.
To this extent the petitioner is entitled to relief and to this extent alone the petition is allowed but with no order as to costs.