MIAN NAZIR AKHTAR, J.- This judgment will dispose of writ petition No.309 of 1990 and writ petition Nos.331, 356, 379, 380, 381, 421, 423, 454, 455, 457, 458, 459, 460, 461, 473, 484, 488, 528, 577, 598, 599, 600, 601, 620, 625, 626,656, 667, 668, 669, 670, 671, 719, 749, 751, 752, 753, 756, 757, 802, 816, 830, 831,833, 844, 846, 877, 884, 888, 891, 908, 909, 910, 923, 925, 926, 927, 945, 953, 954, 958,959, 964,966,1000,1001,1004,1005,1033,1034,1038,1047,1061,1063,1096,1097,1164,1189,1237 of 1990,36,38,41,44,46,47,76,99,101,128,182,183,210, 2U, 254, 293, 294, 295, 321, 357, 361, 367, 368, 383, 433, 434, 477, 495,496, 518, 573,575,609,617,630,662,686, 78l, 782, 783, 784, 785, 796,798,800,801,802 of 1991, 860, 861, 865, 939, 941, 859, 879, 977, 1004, 1030, 972/1991, 822, 971, 911, 976,1044,1045 of 1991 as common questions of law and facts are involved in the same.
2. The petitioner has assailed the validity of regulatory duty levied by the Federal Government at the rate of Rs3/-per K.G on the imported goods. In the alternative, it has been prayed that the duty imposed has been exempted by virtue of S.R.O. No.505(I)/88 as amended subsequently.
3. The petitioner is a public limited company duly registered under the law and is engaged in the business of manufacturing and processing of goods made by artificial fibre (man-made fibre) which is imported from different countries. The petitioner imported Viscose Staple Fibre and filed bill of entry before the Collector Customs. The functionaries working under the Collector raised demands of different customs duties as well as regulatory duty at the rate of Rs.5/-per K.G. The petitioner is said to have paid the customs duty but challenged the levy of the regulatory duty through the present petition.
The learned counsel for the petitioner as well as the learned counsel in the connected petitions have raised the following points:-
(i) The imposition of the regulatory duty illegal unjust and unreasonable because on the one hand the Federal Government has granted exemption in respect of customs duties and on the other imposed additional duty in the shape of regulatory duty. Reliance was placed in case of Ittefaq Foundry vs. Federation of Pakistan (PLD 1990 Lahore, 121).
(ii) The regulatory duty is a customs duty and the exemption granted by virtue of SRO 505(I) /88, dated 26.6.1988 as amended by SRO No.639(I)/89, dated 17A1989 is applicable to it as well.
Originally 40% advalorrem customs duty was specified in respect of imported goods included in the First Schedule of the Customs Act However, subsequently a fixed amount of Rs.15/-per K.G. Was prescribed by the above referred SROs and the Customs duty in excess of Rs.15 per K.G stood exempted. In this connection they placed reliance on Nawab Brothers vs. Collector of Customs Karachi and another (PLD 1977 Karachi 947).
(iii) The subsequent amendment made in SRO 505(I) /88 dated 26.6.1968 itself shows that originally the exemption granted was not relatable to the levies under Sub-Section (1 of Section 18 only.
(iv) The exemption granted under section 18 of the Customs Act is equally applicable to the duties levied under sub-section (1) of section 18 and regulatory duty imposed under sub-section (2) of the said section. In similar circumstances, the Central Board of Revenue had issued letter No.(I)
(97)/Original/83, dated 16.1.1984 and since then th department has been consistently following the practice of allowing exemptions in respect of amounts of levies under section 18. Hence the departmental practice even if erroneous, should not be disturbed. In this connection reliance is placed on Noor Ahmed Vs. Pakistan and 11 others (PLD 1970 SC 453)& Messrs Radaka Corporation and others vs. Collector of Customs and another (1989 SCMR 353)
(v) There is no notification holding the field in respect of the years 1991- 92, hence the goods imported during the said period cannot be subjected to payment of regulatory duty.
On the other hand Mr. Mumtaz Ali Mirza learned Standing Counsel urged that the regulatory duty was validly levied by the Federal Government by virtue of provisions of sub-section (2) of Section 18 of the Customs Act and was not unreasonable. As regards the exemption claimed by the petitioner, he submits that the exemption granted by virtue of SRO 505(I)/88 as amended by SRO 639(1) of 1989 is purely relatable to the customs duties levied under sub-section (1) of section 18 of the Act and has no nexus with the regulatory duty imposed under section 18(2) of the Act. In this connection, he has referred to the precise language used in the above referred SROs which speak of customs duties and the first schedule to the Act which has relevancy to the customs duties imposed under section 18(1) of the Act. He further submits that there was no departmental practice to allow exemptions in respect of regulatory duty because the Government has been imposing the regulatory duty and the department consistently demanding the said duty from the petitioner. As regard the letter of Central Board of Revenue (CBR C 1(97) Machinery/83 dated 16.1.1984, he submits that it might have been issued rightly or wrongly in respect of the exemptions granted earlier but it has no bearing in respect of the recent exemptions which are clearly relatable to customs duties imposed under Sub-Section (1) of section 18 of the Act. Meeting the objection that there was no notification holding the field levying regulatory duty for the year 1991-92, he has placed on the record notification C. No.6/1991-C.B, dated 1st July, 1991 and urged with reference to provisions of sub-section (3) of section 18 that the duty could be recovered from the date of-the issue of the notification. He was not sure whether the notification was actually published in the official Gazette or not. He undertook that he would verify the correct position and inform the court accordingly.
After the judgment was reserved, the learned Standing Counsel placed on the record Notification No.SRO(I)/91, dated 1st July, 1991, published in the Gazette on 3rd July, 1991.
5. By virtue of the provisions of Sub-section (1) of Section 18 of the Act, the Legislature is competent to levy customs duties at such rates as are prescribed in the first schedule and the second schedule or under any other law for the time being in force. The Federal Government is empowered by virtue of Sub Section (2) of Section 18 of the Act to levy a regulatory duty on all or any of the Articles specified in the first Schedule at a rate not exceeding hundred percent of the rate, if any, specified therein. Sub-Section (3) of the Act makes it clear that the regulatory duty levied under the Sub-section (2) shall be in addition to any duty imposed under Sab-section (1) or under any other law for the time being in force and be leviable on and from the day specified in the Notification issued under that Sub-section notwithstanding the fact that the issue of the official Gazette in which such Notification appears is published at any time after that day. A bare reading of sub- section (2) of Section 18 of the Act makes it clear that the regulatory duty is leviable under sub- section (1) of section 18, of the Act. Regulatory duty can be imposed by the Federal Government annually subject to such conditions, limitations or restrictions as it deems fit. Thus, the law has given a vast discretion to the Government in the matter. The regulatory duty cannot exceed I0O percent of the rate specified in respect of the customs duties levied under the first Schedule. The Government appears to have acted justly and fairly in exercising the discretion by imposing regulatory duty to the extent of only one third of the maximum permissible limit. The mere fact that the Government had granted partial or total exemption in respect of customs duties levied under sub-section (1) of section 18 of the Act on different goods, was hardly sufficient to dub the imposition of regulatory duty as unjust or unreasonable. The matter entirely rests in the discretion.
Of the Government and there is nothing to show that the discretion was exercised in an arbitrary or pervorse manner. Hence, the judgment in the case of Ittefaq Foundry, relied upon by the petitioner's learned counsel is of no help to them.
6. Coming to the question as to whether the exemptions granted by virtue of SRO No.505(I)/88 dated 26.8.1988 as amended by SRO No.639(I)/89 dated 17.6.1989, cover the regulatory duty as well, the contents of the said Notifications should be seen first. The said SRO reads as under;- In exercise of the powers conferred by section 19 of the Customs Act, 1969(IV of 1969), and in supersession of this Ministry's Notification No.SRO.505(I)/86, dated the 29th May, 1986, the Federal Government is pleased to direct that the goods specified in Column(2) of the table below and falling within the heading/sub- heading numbers in column(I) of the said table shall be exempt from so much of the customs duties chargeable thereon as are in excess of the rate of duty specified in column (3) of that table."
It may be mentioned that the regulatory duty pertaining to the year 1989/90 was imposed by virtue of SRO No.679(I)/89 dated, 29.6.1989. A number of customs duties on various goods were already holding the field. The authority allowing exemptions was fully conscious of the fact that two kinds of levies, one, the customs duties under sub-section (1) of section 18 and the other, regulatory duty under sub-section (2) of section 18 of the Act were holding the field. Therefore, if the authority intended to grant examptions in respect of the customs duties, as well as the regulatory duty, it could have conveniently said so in SRO .505(1)/88 as amended subsequently. However, the said SRO has merely granted exemption in respect of the customs duties levied on goods falling within the heading/sub-heading numbers of the First Schedule to the customs Act (and specified in column No.2 of the table of the SRO). It makes a pointed reference to the "customs duties" chargeable on the said goods. Admittedly the First Schedule to the Act embodies the customs duties imposed under sub-section (1) of section 18 of the Act and has nothing to do with the regulatory duty imposed under subsection 2 of section 18.
7. In the case of Sohuil Jute Mills Ltd. And others vs. Federation of Pakistan through Secretary Ministry of Finance and others (PLD 1991 Supreme Court, 329) an argument was raised that the exemption granted under section 19 of the Customs Act was so general and extensive that it would be available, subject to the notified conditions, limitations and/or restrictions, to the customs duties of both categories, the one leviable under the Customs Act and the other under the law for the time being in force The said contention was repelled for three reasons, one of which was that the very words of the notification allowed exemption by a reference to goods and the duties mentioned in the First Schedule to the Customs Act. It was emphasized: "Nothing more could be read into it and the levies made under other laws could not be got affected by such a notification."
On a parity of reasoning, the exemption-Notification (SRO-505(I)/88 is purely relatable to the Customs duties imposed under sub-section (1) of section 18 and has no nexus with the levy of regulatory duty under section 18(2) of the Act, which stands unaffected. Had the exemption been couched in general words to the effect that customs duties levied under section 18 of the Act were wholly or partly exempted, then perhaps the petitioner could have claimed exemption in respect of the regulatory duty on the ground that it was also a kind of customs duty(as held in the case of Nawab Brothers Vs. Collector Customs (PLD 1977 Karachi 947). However, the wording of SRO 505(I)/88 not being general in character, the exemption claimed by the petitioner cannot be allowed.
8. The exemption notification SRO 505(I)/88, grants exemptions in respect of customs duties chargeable on goods falling within the First Schedule of the Act. The subsequent amendment made (through SRO 639(I)/89 dated 17.6.1989) in SRO 505(I)/88, brings in some new sub-heading numbers i.e. 55.01 to 55.07 which relate to man-made fibres. The rate of duty for the man-made fibre is shown as Rs.15/- per K.G. Meaning thereby that the customs duty chargeable on man- made fibre under the First Schedule of the Act could be Rs.15/-per K.G. Only and the duty beyond the said amount was exempted. It may be mentioned that originally 40 percent advalorem customs duty was prescribed in the First Schedule for the man-made fibre and the same held the field till SRO 639(I)/89 was issued on 17.6.1989. Apparently the object was to grant exemption of customs duty, if on calculation made at the rate of Rs.40% advalorem it was found to be in excess of duty calculated at the rate of Rs.15/-per K.G. The Legislature appears to have amended the provision relating to 40% advalorem customs duty and provided customs duty at the rate of Rs.15/- per K.G. Through Finance Act of 1989. After the above referred amendment brought about through Finance Act of 1989, now the Customs Duty is Rs.15/- per K.G. And the same rate has been specified in SRO 639(I)/89 dated 17.6.1989. The two rates being the same, the question of exemption in respect of the man-made fibre does not arise. It is entirely for the Government to re-consider the matter and allow some benefit in the shape of exemption to the petitioner and other traders.
9. As regards the So-called departmental practice, there does not appear to be any consistent practice of construing exemption notification issued under section 19 of the Act to cover customs duties as well as the regulatory duty levied under section 18 of the Act. The earlier letter No.CBR- C.No.(I)(97)-Machinery/83, dated 16.1.1984 was relatable to the exemptions granted through some Notifications which have not been placed before this court. Hence, it cannot be said whether the Central Board of Revenue had correctly construed the exemption Notification or not. In the present case, we are concerned with the exemption Notification, SRO 5Q5(I)/88, "dated 26.6.1988 as amended subsequently which does not admit of the construction placed on it by the petitioner's learned counsel that it covers all kinds of levies made by the Legislature under sub-section (1) of section 18 or by the Federal Government under sub-section (2) of section 18 of the Act. Conversely, the said notification is clearly relatable to the customs duties" in respect of the goods falling within the heading and sub-heading number of "the First Schedule" of the Act. Therefore, the petitioner cannot take advantage of the letter issued by the CBR in the year 1984, particularly when the factum of the so called consistent practice is otherwise falsified by the consistent and persistent demand of regulatory duty by the Customs Authorities. The judgment in the case& of Nazir Ahmad and Raddaq Corporation referred (p by. The petitioner's learned counsel proceed on distinguishable facts and are not relevant in the present case.
10. The argument that no notification holds the field in respect of the period pertaining to the year 1991-92 has no force either. The notification was duly issued on 1.7.1991 and then published in the official Gazette on 3.7.1991. Therefore, the Customs Authorities can lawfuly recover the Regulatory Duty for the period 1991-92 as well.
11. For the foregoing discussion, I find no merit in the present petition and the other connected petitions which are dismissed with costs. The petitioners were allowed interim relief for release of the imported goods subject to furnishing of bank guarantee (or insurance gurantee in some cases). It is clarified that the Customs Authorities shall be at liberty to recover the regulatory duty due from the petitioners through encashment , of the bank insurance gurantees furnished by them.