' SALAHUDDIN MIRZA, J.--This judgment shall dispose of the following eight petitions in which similar point of law arises and which are based on similar facts:-
(1) Constitutional Petition No,D-728 of 1990.
(2) Constitutional Petition No,D-729 of 1990.
(3) Constitutional Petition No,D-730 of 1990.
(4) Constitutional Petition No,D-731 of 1990.
(5) Constitutional Petition No,D-732 of 1990.
(6) Constitutional Petition No,D-733 of 1990.
(7) Constitutional Petition No,D-734 of 1990.
(8) Constitutional Petition No,D-735 of 1990.
2. The facts are that the petitioners imported some textile machinery for installation in their factory premises at Kotri (in the case of C.P. No,734/90 at Dhabeji) which was duly installed. Under S.R.O.
No,500 (1)/84 dated 14th June, 1984, a rebate -of 50% is allowed on machinery which is not manufactured in Pakistan and which is installed in the areas shown in the Table appended thereto which includes Kotri Industrial Esate/Dhabeji Industrial Estate, and thus the petitioners' machinery was assessed at 50% of the actual Customs duty which was paid between 21-10-1984 and 27-5- 1985 in all the above-noted eight cases and this payment was endorsed on the Bills of Entry. The petitioners also executed the requisite indemnity bonds in each case in favour of respondent No,1 and on the completion of the installation of the machinery, respondent No,2 issued the requisite "Installation Certificates". According to the petitioners no other bond or certificate is required under the said Notification. On 15-9-1985 and 16-9-1985 respondent No,1 served upon the petitioners show-cause notices under section 32 of the Customs Act for an explanation as to why they should not pay the balance of the Customs duty because, in contravention of an oral promise to that effect, that petitioners had not submitted certificates from the Textile Commissioner certifying that the imported machinery was not manufactured in Pakistan. The stand of the petitioners is that neither such certificate is required under the exemption Notification S.R.O. 500(1)/84, dated 14th June 1984 nor they had made any oral promise to submit such certificate. The petitioners vide their reply dated 24-9-1985 (Annexure 'D') denied that they had made any verbal promise, claimed that the onus to prove that machinery, similar to the one imported, was manufactured in Pakistan lay on respondent No,1 and asserted that the demand raised through the show-cause notice (Annexure 'D') was barred by time under section 32(3) of Customs Act. Subsequently, vide judgment dated 5-1-1987, which was passed without giving the petitioners any opportunity to be heard and was thus an ex parte order, communicated vide No,8(87) Cus/85/433 dated 19-1-1987 (Annexure 'F.), respondent No,1 decided that the petitioners had made untrue declaration on the bill of entry and were liable to pay the balance of the duty under section 32(2) of the Customs Act, 1969. The petitioners preferred an Appeal before Board of Revenue under section 193 of Customs Act (Annexure 'H') which was accepted vide order dated 16-3-1989 to the extent that the case was remanded with a direction to respondent No,1 to decide it afresh after giving opportunity to the appellants to be heard. After the remand, respondent No,1 again heard the matter on various dates between 206-1989 and 20-2-1990 and vide judgment dated 20-2-1990 conveyed vide No,8(84)- Cus/Tech/85/2423 dated 11-4-1990 again came to the same conclusion. Petitioners again filed an appeal before Board of Revenue on 13-5-1990 which was still pending when respondent No,2 (Asstt.
Collector (Bonds) vide letter No,6(52)Misc./DP/90/1193 dated 18-6-1990 demanded payment of the balance of the the Customs duty in all the eight cases and has threatened action under section 202, Customs Act. Hence these petitions.
3. The contentions raised by the appellants are, firstly that they had given no verbal promise, when the goods in question were exbonded, that they would produce a certificate from Textile Commissioner to the effect that the goods were not locally manufactured; secondly, that S.R.O.
No,500(I)/84 dated 14-6-1984 does not contemplate the production of such certificate on the part of the importers; and, thirdly that in the case of Five of the petitioners the show-cause notices were also barred by time under section 32(3) of the Customs Act. The respondents have filed a detailed counter-affidavit of Mr. Abdul Malik Khan, Superintendent (Bond), Central Excise & Land Customs, Headquarters Office, Hyderabad, in which the claim of the petitioners is denied and it is claimed that the mention of S.R.O.-500(I)/84 on the Bill of Entry amounts to making a declaration and brings the case within the ambit of section 32(2) of the Customs Act and it was also claimed that the Constitutional Petitions had been filed at a premature stage.
4. We have heard learned counsel for the parties at great length.
5. We would first take up plea of limitation raised in respect of five of these petitions. In these five cases pertaining to (1) C.Ps. No,728/90, (2) 729/90, (3) 730/90, (4) 731/90 and (5) 732/90, show- cause notices were issued a good deal after the expiry of six months of the payment of Customs duty. For example in C.P. No,D-728/90 the payment was made or 24.41-1984 whereas show-cause notice was issued on 15-9-1985. According to. Learned Counsel of the petitioners the case falls under section 32(3) of the Customs Act and therefore the show-rause notice should have been served within six months of' the payment of Customs duty and therefore the demand raised is barred by time. On the other hand, learned Standing Counsel is of the view that the case falls under section 32(2) of the Act which provides a period of three years during which such notice can be given. Since this notice refers only to section 32 and does not mention the subsection under which it was sent, it is worthwhile to reproduce section 32 of the Act as well as the Demand-cumshow- cause Notice both of which are reproduced below:- "32. "Untrue statement, error, etc.--(1) If any person, in connection with any matter of customs,-
(a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of Customs any declaration, notice, certificate or other document whatsoever, or
(b) makes any statement in answer to any question put to him by an officer of Customs which he is required by or under this Act to answer, (knowing or having reason to believe that such document or statement is false) in any material particular, he shall be guilty of an offence under this section.
(2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with notice within three years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice.
(3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has been levied or has been short-levied or has been erroneously refunded, the person liable to pay amount on that account shall be served with a notice within (six months) of the relevant date' requiring him to show cause why he should not pay the amount specified in the notice.
(4) The appropriate officer, after considering the representation, if any, of such person as is referred to in subsection (2) or subsection (3) shall determine the amount of duty payable by him which shall in no case exceed the amount specified in the notice, and such person shall pay the amount so determined.
(5) For the purpose of this section, the expression "relevant date" means:-
(a) in any case where duty is not levied, the date on which an order for the clearance of goods is made;
(b) in case where duty is provisionally assessed under section 81, the date of adjustment of duty after its final assessm ent;
(c) in a case where duty has been erroneously refunded, the date of its refund;
(d) in any other case, the date of payment of duty or charge. DEMAND-CUM-SHOW-CAUSE NOTICE.
"It has been reported to the undersigned that M/s. Central Cotton Mills Ltd, Kotri imported A513W RING SPINNING FRAME (448 SPINDLES 8" LIFT valued at Rs,18,93,143 for bond at Kotri vide I.G.M.
No,1652/84 dated 29-8-1984 Index No,29. The same were exbonded vide Bill of Entry No,78/84-85 dated 14-11-1984 availing concession of area rebate under S.R.O.500(I)/84 dated 14-6-1984 on verbal promise that a certificate to the effect that the said machinery is. Not locally manufactured will be produced from the Textile Commissioner. Since they have failed to produce the requisite certificate and the import substitute of this item is manufactured in Pakistan, the concession availed under the said S.R.(is not available for this item). They are, therefore, required to pay the taxes as detailed in the attached sheet of calculation, as this item shall be exempted from duty in excess of aggregate of 1/2% of duty leviable and 20% ad. Val. As per proviso of the S.R.O. 500(1)/84 dated 14-61984 M/s. Central Cotton Mills Ltd., Kotri are, therefore, required to pay differential amount of duty Rs,3,78,629 (Rupees three lac, seventy eight thousand six hundred twenty-nine) only.
' M/s. Central Cotton Mills Ltd., Kotri are, therefore, called upon to show cause within ten days of the receipt of this notice as to why the sum specified above should not be paid by them as required under section 32 of the Customs Act, 1969.
' The date of hearing in the case is fixed for 30-9-1985 at 10.30 hours on which date M/s. Central Cotton Mills Ltd., Kotri or their duly briefed representative or lawyer may appear before the undersigned to defend the case. If no one appears on the date and time specified above, the case will be decided ex parte on merit. Sd/-* (M.ZAINUDDIN) COLLECTOR"
6. Learned Standing Counsel argues the' the petitioners had made a verbal promise, at the time of exbonding the machinery, to produce a certificate from the Textile Commissioner testifying that the said machinery was not manufactured in Pakistan and it was on the basis of this oral promise that the full duty had not been levied and therefore the notice falls under sub-clause (2) of Section 32 which provides a period of three years and therefore the demand is within time. We do not agree with the view of learned Standing Counsel. The petitioners have denied having made such a 'verbal promise' and the respondents simply could not prove their claim. Besides, a perusal of S.R.O. 500 (1)184 shows that an importer is under no obligation to produce such a certificate from Textile Commissioner. What is required in the said S.R.O. Is clear from its contents. The S.R.O. Is reproduced below- .
"SRO 500(I)/84.---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), and in supersession of this Ministry's Notification No,S.R.0.700(I)/80, dated the 26th June, 1980, the Federal Government '5 pleased to direct that the 'plant and machinery which is not manufactured locally shall, if imported for initial installation or for balancing, nodernization, replacement or extension of the projects approved by the Government for the areas specified in column (2) of the table below, be exempt from so much of the Customs Duties leviable thereon under the First Schedule to the said Act as are in excess of the extent specified in the corresponding' entries of column (3) of the table and the whole of sales tax subject to the following conditions, namely:-
(1) The plant and machinery shall be those as defined hereunder: "Machinery means:-
(i) Machinery, operated by power of any description, such as is used in any industrial process, including the generation, transmission and distribution of power, or used in process directly connected with the extraction of minerals and timber, construction of building, roads, dams, bridges and similar structures and the manufacture of goods.
(ii) Apparatus and appliances, including metering and testing apparatus and appliances specially adapted for us in conjunction with machinery specified in item (i) above.
(iii) Mechanical and electrical control and transmission gear adapted for use in item (i) above.
(iv) Component parts of machinery as specified in terms (i), (ii) and (iii) above, identifiable as for use in or with such machinery.
(2) the importer shall, at the time of importation, by documents in his possession, satisfy the Collector of Customs that the plant and machinery have been imported for projects located in the areas specified in the Table and shall furnish an indemnity bond in the form set out below to the extent of Customs duties and sales tax exempted under this Notification. The said indemnity bond will be discharged subsequently on production of a certificate from the Assistant Collector, Customs and Central Excise, the Secretary, Kashmir Affairs Division, or an officer authorised by him in this behalf or the Resident Commissioner for Northern Areas, as the case may be, to the effect that plant and machinery as declared to the Customs have been imported for an approved project for initial installation for balancing, modernization, replacement or extension of the existing unit and have been duly installed in an area specified in the table and such other evidence as the Collector of Customs may require and after such enquiry as he deems fit, in order to establish such installation;
(3) the importer shall, at the time of importation of the plant and machinery, furnish a bond to the Collector of Customs to abide by the conditions laid down in this Notification failing which he would pay the amount of Customs duties and sales tax due and make payment of any penalties that may be imposed in this behalf;
(4) the certificate of installation referred to in sub-paragraph (2) shall be submitted to the Collector of Customs not later than one year from the date of importation of such plant and machinery; and
(5) if the plant and machinery are removed to an area other than that for which they have been imported within a period of ten years from the date of installation, the amount of Customs duties and sales tax exempted under this Notification and any penalties that may be imposed in this behalf shall be recovered under section 202 of the Customs Act, 1969 (IV of 1969): ' Provided that import-substitutes of the plant and machinery as are manufactured locally shall be exempt from so much of the Customs duties leviable thereon as are in excess of the aggregate of the sum specified in column 3 oI the table to this Notification and 20% ad valorem."
It would thus appear that the requirements are that (a) the importer shall satisfy the Collector that the import is for project located in the areas specified in the Table appended to the SRO, (b) that he shall execute an indemnity bond to the extent of Customs duties and sales tax exempted which bond shall be discharged on production of a certificate from Assistant Collector concerned, within one year of import, to the effect that the imported machinery was meant for an approved project and has been duly installed in the area specified in the table and on production of such other evidence which the Collector may require to establish the installation of the imported machinery in the specified area. It is thus clear that a certificate from Textile Commissioner is not one of the requirements for which the "verbal promise" was allegedly made by the appellants.
7. Moreover, the appellants are not shown to have made any positive assertion of fact which could bring the present case within the mischief of subsection (2) of section 32 nor the Demand-cum- show-cause notice refers to such positive assertion of fact apart from referring to the so-called 'verbal promise' the making of which could not be substantiated even from the record of Customs Department. According to learned Standing Counsel the mention of SRO 500(I)/84 on the Bill of Entry was such a declaration which brought the case within the mischief of section 32(2) but this argument was repelled by a Division Bench of this Court in the case of Quetta Textile Mills v.
Government of Pakistan decided on 14th May 1990 in C.P. No,D-1741/1987. A copy of the judgment is on record as Annexure 'F'. We are in respectful agreement with this view. We are therefore, of the view that these cases do not fall within the ambit of section 32(2) of the Act and at best they are cases wherein, either due to inadvertence or omission on the part of the Customs, Department, any duty or charge has not been levied or has been short-levied and therefore these cases fall within the ambit of section 32(3) of the Customs Act and as the limitation prescribed under section 32(3) of the Act for the issuance of a Demand-cum-show-cause notice is six months from the relevant date which is the date of payment of Customs duty and of ex-bonding the machinery (which is 24- 11-1984), the impugned Demand-cum-show-cause notice dated 15/16-9-1985 are barred by time and therefore without jurisdiction. The impugned orders passed by the Collector on 11-4-1990 (Annexure 'J) in all the petitions are based on the assumption that these cases fall under section 32(2) of the Act and therefore they are illegal.
8. In short, in the case of the above-noted five petitions it is held that the `Demand-cum-show- cause notices were barred by time and they were all 'past and closed transactions'. These petitions are therefore allowed on the point of limitation.
9. We would now take up all the petitions on merits, including (i) C.P.No, D-733/90, (ii) C.P.No,D- 734/90, C.P.No,D-735/90 in which the Demand-cum-show-cause notices were given within the stipulated period of six months as provided under section 32(3) of the Act.
10. As would appear from the Demand-cum-show-cause notices, the case of the Customs Department is that the petitioners at the time of the ex-bonding' the imported machinery, had given a 'verbal promise' to produce a certificate from the Textile Commissioner showing that the imported machinery was not locally Manufactured but they did not produce the certificate from the Textile Commissioner. We have already held above that an importer is under no obligation to produce such certificate from the Textile Commissioner. It is also difficult to believe that the Customs authorities would allow the clearance of the machinery on payment of Customs duty at the reduced rate merely on a verbal promise. It was incumbent upon the Customs authorities to ensure that the machinery in question was not manufactured locally before allowing the benefit of SRO 500(1)/84 or to obtain a written declaration from the importers to that effect. Be that as it may, it is clear from the Demand-cum-show-cause notices that respondent No,1 had doubts that the machinery similar to the imported one was not also locally manufactured and a full hearing was given to the petitioners to establish that similar machinery was not locally manufactured. The impugned order of respondent No,1 shows that the petitioners could not produce any evidence whatsoever to substantiate their claim that the machinery imported by them was not locally manufactured. On the contrary, the Department was able to establish on the basis of documentary evidence that such machinery was locally manufactured. We reject the argument of learned counsel of the petitioners that onus to show that such machinery is locally manufactured lies on the Customs Department. We are of the considered view that the onus lies on the petitioners to prove that such machinery is not locally manufactured. Even so, the question of onus has become irrelevant in the present context as the Department has shown that such machinery is manufactured. locally. It is an accepted principle of law that when a party claims exemption or preferential treatment, the onus lies upon the said party to show that it fulfils the conditions on the basis of which such exemption or preferential treatment is allowed.
11. As a result, no exception can be taken to the impugned orders dated 11-4-1990 passed by respondent No,1 which do not require any interference on our part under the Constitutional jurisdiction of this Court.
12. We would, accordingly, allow CPs No,D-728 to 732 of 1990 on the point of limitation as the Demand-cum-show-cause notice is held to be given under section 32(3) of the Customs Act and it was given after the expiry of the period of six months as provided under subsection (3) of section 32 of the Act. The rest of the petitions C.Ps. Nos.D-733, 734 and 735 of 1990 arc held to be without merit and are dismissed.
13. On the date of hearing learned counsel of the petitioners had placed on record notice dated 4- 6-1991 under section 202(1) of the Customs Act, 1969 threatening recovery proceedings if the outstanding amount is not paid by 10-6-1991, which date has since expired. We would, in the interest of justice, stay action on this notice for a period of one month from today to enable the petitioners to pay the outstanding amount. The parties are left to bear their own costs.