ZAFFAR HUSSAIN MIRZA, J.---These are four appeals by leave from a common judgment of a Division Bench of the Sindh High Court, dated 5th December, 1989, whereby four separate Constitutional petitions filed by the appellant were dismissed.
It will be convenient to refer to the facts in Civil Appeal No, 915-K of 1990, in order to bring out the controversy beween the parties, because except for minor details the facts of all the four aforesaid appeals are identical. The first mentioned two appeals relate to the import of two separate consignments of Palm Oil and the last mentioned two appeals relate to the import of two consignments of Soyabean Oil by the appellant. The appellant M/s. Molasses Trading and Export Company Limited in Civil Appeal No, 915-K of 1990 obtained an import licence on 28th July, 1986 for the purpose of importing 500 mertric tons of RBD Palm Oil. It opened a letter of Credit on 29th July, 1986. The consignment was imported under different bills of lading on board the same vessel which reached Karachi on 10th August, 1986.
The case of the appellant is that originally duty on Palm Oil was leviable at the rate of Rs,3,000 per metric ton, but by means of Notification dated 17th April, 1986 issued under section 19 of the Customs Act, 1%9 (hereinafter referred to as the Act) the Federal Government modified the previous relevant notification on the subject dated 25th June, 1981, whereby the amount of exemption was further increased so that the duty was payable only at the rate of Rs,2,350 per metric ton. However, on 29th May, 1986 the same rate of exemption was maintained by the notification of the said date issued under section 19 of the Act.
In the events that happened, however, after opening of the Letter of Credit by the appellant, by means of notification dated 22nd August, 1986 issued under section 19 of the Act, the exemption earlier granted under the last mentioned two notifications was modified with the result that the duty was increased from Rs,2,350 to Rs,5,350 per metric ton, with the result that under the said notification the appellant would be required to pay Rs,3,000 per metric ton towards duty over the earlier rate of duty payable. The last-mentioned notification may with advantage be reproduced as under:-- "NOTIFICATION (Customs)
S.R.O... (86). In exercise of the power conferred by section 19 of the Customs Act (IV of 1969), the Federal Government is pleased to direct that the goods specified in column 2 of the Table below and falling within the heading number of the First Schedule to the said Act specified in column 1 of the said Table shall be exempt from so much of the customs duties chargeable thereon as are in excess of the rates of duty specified in column 3 of the Table with dates and duties specified in column 4 of the Tables against each.
Heading No, In the First Schedule to the Customs Act, 1969 (IV of 1969)Description of goodsRate of duty Date 1 2 3 4
(1) Soyabean cottonseed ground-nut sunflower seed rape, colza mustard oil.oil, oil, oil, Oil, Or(a) Rs,2,350 metric ton
(b) Rs,3,000 metric ton
(c) Rs,5,350 metric ton
(d) Rs,6,000 metric ton22nd August, 1986 20th September, 1986.
22nd August, 1986 20th September, 1986.
(a) Palm Oil.
2. This notification shall take effect on the 22nd August, 1986."
The appellant presented the bill of entry on 26th August, 1986 claiming that the duty was leviable at the rate of Rs,2,350, but the Customs Authorities rejected the claim of the appellant and insisted on payment of duty at the rate of Rs,5,350 per metric ton, as leviable by virtue of the last mentioned notification dated 22nd August, 1986 and refused to release the goods. The appellant therefore filed Constitution petition in the High Court of Sindh challenging the validity of the notification dated 22nd August, 1986 and seeking a direction to the Customs Authorities to release the Consignment on payment of the Customs Duty prevalent previously.
The plea taken by the appellant in their Constitutional petition was that although the impugned notification purported to have been issued under section 19 of the Act relating to the grant of exemption, in substance the said notification levied higher Customs Duty. In reply, the respondents, without controverting the facts pleaded by the appellant, submitted that the rate of duty on Palm Oil with effect from 17th April, 1986 to 21st August, 1986 was 70% ad valorem. However, the Federal Government in exercise of its power under section 19 of the Act exempted the duty in excess of Rs,2,350 per mertic ton. Further with effect from 22nd August, 1986 a regulatory duty of hundred per cent. Ad valorem was levied on Palm Oil under section 18(2) of the Act. However, simultaneously exemption under section 19 was granted with effect from 22nd August, 1986 by exempting the payment of Custom Duties chargeable thereon, as are in excess of Rs,5,350 the net effect of which was that a duty at the said rate was payable with effect from that date and with effect from 20th September, 1986, the duty in excess of Rs,6,000 was exempted, with the result that duty at the said rate was payable with effect from the said date.
In Civil Appeal No, 916-K of 1990, the contract was entered into on 23rd July, 1986, the import licence was obtained on 27th July, 1986, shipment was made on 15th August, 1986 and the bill of entry was presented at Karachi Port on 7th September, 1986.
In Civil Appeal No,917-K of 1990, the contract entered into and the L.C. Opened were on or about 5th August, 1986, shipment of the goods was made on 4th September, 1986, the goods arrived at Karachi on 6th October, 1986 and the impugned notification was issued on 24th September, 1986 under section 19 of the Act whereby exemption was modified and duty payable on Soyabean Oil was increased to Rs,3,000 per metric ton. The bill of entry in this case was presented on 7th October, 1986, whereas the import licence and the Letter of Credit were opened prior to 24th September, 1986, the date of the impugned notification.
In Civil Appeal No, 918-K of 1990 the Letter of Credit was established on 5th August, 1986, goods were shipped on 4th September, 1986 and arrived at Karachi on 6th October, 1986, whereafter the bill of entry was presented on 9th October, 1986. The impugned notification in this case is also dated 24th September, 1986, the same as was challenged in the abovementioned Civil Appeal No,917-K of 1990.
So far as the modification of the notification under section 19 of the Act resulting in reducing the quantum of exemption per metric ton and proportionate increase of the Customs Duty by the impugned notification, are concerned the appellant relied upon the decision of this Court in Al- Samrez Enterprise v. Federation of Pakistan (1986 SCMR 1917), in which it was held that where the contract between the importer of goods and the foreign supplier had been concluded and all other steps for the import of goods had been taken before the modification in the exemption notification, so that vested right to the then existing notification granting exemption was created, the modified notification cannot be given retrospective effect and enhanced Customs Duty could not be legally demanded, even if the goods reached the country after the date of such modified notification under section 19 of the Act and the Bill of Entry is submitted thereafter. In resisting this contention it was urged on behalf of the Government that by insertion of the new section 31-A in the Act by the Finance Act of 1988, the effect of the said decision was nullified retrospectively in view of the non obstane clause in the opening part of the said section. The learned Judges repelled the contention of the appellant and held that section 31-A did nullify the effect of the decision of this Court in the case of Al-Samrez Enterprise and the principles enunciated therein, in view of the clear intention expressed in section 31-A, with the result that duties and charges leviable under section 18 can be legally recovered even if the contract was concluded and other steps were taken for the import of goods before the modification or amendment of the exemption notification and even the duties chargeable under section 18(2) have become recoverable by virtue of the said section having retrospective effect. In taking this view the learned Judges of the Division Bench relied upon an earlier decision of the Sindh High Court in Constitutional Petition No, 841/1986 (Gul Ahmed Textile Mills v. The Collector of Customs), in which the relevant reasoning with regard to the effect of section 31-A was as under:-- The main intention of section 31-A is to provide a legal cover for recovery of duty at the specified rate including the amount of duty imposed under section 18 of Customs Ordinance, section 2 of the Finance Ordinance, 1982 and section 5 of the Finance Act, 1985 and the anti-dumping or countervailing duty imposed under Ordinance III of 1983 and such amount of duty which may have become payable due to withdrawal of exemption notification. The closing part of section 31-A, subsection (1) clearly indicates that if any body claims any vested right by virtue of any agreement for sale or opening of letter of credit then it shall not prevail over this provision of law. Protection to vested right is claimed on general principle of law as enunciated in Al-Samrez's case. Section 31-A specifically refers to this decision without mentioning it and also covers rights arising from the contract, agreement of sale or opening of letter of credit. This clearly indicates that the Legislature intended to completely obliterate such rights."
As already observed by the common judgment impugned in these appeals the learned Judges of the Division Bench dismissed the Constitutional petitions.
Leave to appeal was granted in order to examine the vires of A section 31-A of the Act raised in other petitions in which leave had already been granted.
It may be observed that all the connected appeals numbering 88 were heard together because some points of law and fact were common in several sets of appeals.
Mr. Khalid Anwar, Advocate addressed the leading argument on the side of the importers and the other learned counsel appearing in some appeals for the importers added to his argument or adopted the same. In the present four appeals, Mr. Khalid Anwar is the learned counsel for the appellant.
It will now be convenient to set out the provisions of section 31-A which was inserted in the Act by subsection (2) of section 5 of the Finance Act VI of 1988 which reads as under: "5. Amendment of Act IV of 1969.--The following amendments shall be made in Customs Act, 1969 (IV of 1969), namely:- (1)
(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. --(1) 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 consequnce 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) ................
(3) ................
(4) ................
On section 31-A, Mr. Khalid Anwar, learned counsel, submitted that a careful reading of the provisions of the said section would reveal that the purpose of the Legislature was to include certain duties and the amount of duty which may have become payable in consequence of withdrawal of the whole or any part of the exemption from duty, within the rate of duty applicable to any goods under section 18. He put a great deal of emphasis upon the words "for the purposes of section 30 and section 31" and vehemently contended that whataver be the effect achieved by section 31-A, the same was expressly confined to the purposes of sections 30 and 31 of the Customs Act. Proceeding on this premise, learned counsel strongly urged that therefore the legal position enunciated in Al-Samrez Enterprise v. Federation of Pakistan (1986 SCMR 1917) has not been in any way affected, because in the final analysis the effort of the draftsman of section 31-A is reduced to a redundancy. In this connection, learned counsel referred to para. 5 of the judgment in the case of Al-Samrez which has discussed the significance and scope of section 30, in so far as it gives fixity and crystallises the liability created by section 18, which is the charging section, as regards the rate of duty by providing that the duty shall be paid at the rate applicable to the imported goods on the date when the bill of entry is presented for clearance of the goods. It was pointed out that in the aforesaid judgment this Court has also dealt with the scope of section 19 of the Customs Act, under which the Federal Government possesses the general power to exempt from customs duty any goods, which are otherwise charged to duty at the rates prescribed in the First and the Second Schedules to the Act or any other law for the time being in force. Therefore, it was held that any exercise of power under section 19 does not indeed have the effect of changing the rates chargeable but only exempts the payment thereof, although the charge is created by virtue of the material acts creating charge, namely, import of goods. Learned counsel then referred to the following passage from the judgment comparing sections 18 and 19 of the Customs Act: "The two sections, therefore, clearly operate independently and the exercise of power under section 19, is distinct in character and scope, so that it cannot have the effect of nullifying the statutory provisions contained in section 18 whereby the charge is created by the statute itself. In this context it is not difficult to understand that section 30 has no material bearing on the controversy before us and its provisions would not be violated either way on the determination of question whether the exemption from the payment of duty earlier granted was applicable to the case of the appellants or not."
(Emphasis provided).
Referring to the underlined portion from the extract reproduced above from the judgments, learned counsel elaborated his submission that according to the pronouncement of the Supreme Court, section 30 is not relevant to the question as to the quantification of the duty payable on a certain consignment of the imported goods, in relation to the question whether exemption from the payment of duty was available or not. That being so,learned counsel urged, if the effect of section 31-A is confined to section 30, without touching the provisions of section 19, then as held in the case of AlSamrez, the amount of duty exempted, in any case even before the amendment of law, was that the exempted duty or any portion thereof in fact formed part of the duty leviable under section 18 by virtue of section 30. Therefore, the Legislature was re-stating in other words the position that already stood, under the unamended law as explained in the said judgment. In the light of these submissions, learned counsel argued that the non obstante clause with regard to any decision of any Court, does not really change the legal position as propounded and interpreted in the aforesaid judgment of Al-Samrez. In other words, if there was nothing repugnant between the enunciation of law in the aforesaid judgment and the provisions of section 31-A, then the non obstante clause does not advance any intended object sought to be achieved.
Learned counsel submitted that the two obvious intentions which were sought to be achieved by the enactment of section 31-A were: (1) to defeat the consequence of exemption granted under section 19, beyond the date on which any notification of modification or withdrawal of exemption is issued and (2) to override the judgment in the case of Al-Samrez. But according to the learned counsel both these objects are not achievable by the language employed is section 31-A.
The next argument of learned counsel was that as retrospective effect has been given to section 31 from the date of enforcement of the Customs Act. 1969, by necessary implication, the said section has to be treated by fiction of law to be a part and parcel of the Act in 1969. It is not difficult to see therefore that, the non obstante clause exempting the section from the operation of any decision of any Court, relates to decisions prior in time to 1969. It therefore follows that since the judgment in the case of Al-Samrez came in 1986. It is not within the ambit or purview of the non obstante clause and would therefore rule the field. It is, of course, obvious that no statute can nullify the effect of judgments to be rendered by the superior Courts in the future.
Finally, learned counsel submitted that in any event at the highest section 31-A having been enacted on 1st July, 1988, by virtue of section 30 of the Customs Act, the crucial date for crystallising the duty payable on goods imported in Pakistan would be the date of the presentation of the bill of entry. According to the learned counsel since in all his cases the bill of entry was presented before 1st July, 1988, the Customs Officers were bound under the law to give effect to the existing law for assessm ent of duty in terms of AlSamrez's case and cannot justify any higher amount of duty on the basis of non-existing law on that date.
Learned counsel additionally submitted that section 31-A does not contain validation clause and in any case does not have the effect of re-opening past and closed transactions in which the liability stood crystallised and quantified already, because there is no express provision to that effect or a provision creating that effect by necessary intendment in the language of the said section.
Mr. Fakhruddin G. Ebrahim, learned counsel who also appeared for the importes in connected appeals also urged that a general retrospective provision will not have the effect of valaditing an illegal act, unless validation is conferred expressly.
Mr. Khalid Anwar further urged that where vested rights are affected by any retrospective provision of law, the rule of strict construction of the statute is to be adopted. Likewise, this being a fiscal statute, the provisions in question have to be given a strict construction. In support of the last- mentioned argument, learned counsel relied on Inland Revenue Commissioners v. Ayrshire Employees Mutual Insurance Association Limited (1946 All England Reports 637), Sultan Mawajee v.
Federation of Pakistan, Chamber of Commerce and Industry (PLD 1982 SC 174) and Chief Land Commissioner, Sindh v. Ghulam Hyder Shah (1988 SCMR 715).
On the question of regulatory duty imposed under section 18 (2) of the Act, learned counsel submitted that it was obviously illegal in view of the clear provisions of that section, which provides that regulatory duty can be imposed at a rate not exceeding 50% of the rate, if any, specified in the First Schedule to the Act. Reliance, in this behalf, was placed on Yousuf Re-Rolling Mills v. The Collector of Customs (PLD 1989 SC 232).
On behalf of the respondent-Government, Mr. Ijaz Ahmad, learned Deputy Attorney-General argued that section 31-A has effectively taken away even the vested rights which may have accrued to the appellant and the legislature was competent to do so, as it is well-settled that under our Constitution Parliament is competent to frame law with retrospective effect, as well as to remove the effect of the judgment of a Court of law. He has brought to our notice judgment reported as Nizam Impex v. Government of Pakistan (1990 SCMR 1187) holding that the effect of the law laid down in the case of Al-Samrez Enterprise has been undone by the enactment of section 31-A. He also relied on the view taken in Hajera Rashid Gardee v. The Deputy Collector, Customs, Lahore (PLD 1989 Lahore 58) and Nizam Impex v. Government of Pakistan (PLD 1991 Karachi 208).
So far as the first limb of the argument advanced by Mr. Khalid Anwar is concerned, it may be pointed out that the fundamental basis of the case of Al-Samrez Enterprise was the concept of exemption as applied to taxation, which presupposes a liability, and is applicable to the grant of immunity from the liability to be assessed to the tax imposed by the statute. This is expounded as the distinction between the leviability or taxability and the payability in regard to a tax. The grant of exemption, it was explained, only wipes out the liability for payment of the tax which is presupposed to exist by virtue of charging section. Therefore, the exemption or immunity from payment of a tax is distinguishable from immunity from taxation. It was in this context that reference was made to section 18, which is a charging section, section 19 which relates to grant of exemption and section 30 which fixes the point of time with reference to which the rate payable has to be applied to the quantification of the liability for the payment of tax. Under the then existing law which was construed in the case of Al-Samrez Enterprise. Section 30 was indeed designed to achieve the result that the rate of duty payable on the date of presentation of the bill of entry was made applicable, with reference to which the duty payable had to be assessed. At that time section 19 dealt with the question of payability, so that if any exemption was granted the tax to that extent was not payable, although the charging section did create the liability to pay. However, the question is whether the provisions of section 31-A have changed this concept separating the leviability or chargeability and payability of the tax, and destroyed the basis on which the aforesaid judgment in Al-Sarmrez Enterprise preceded.
Before considering this question it would be appropriate to make certain general observations with regard to the power of validation possessed by the legislature in the domain of taming statutes. It has been held that when a legislature intends to validate a tax declared by a Court to be illegally collected under an invalid law, the cause for ineffectiveness or invalidity must be removed before the validation can be said to take place effectively. It will not be sufficient merely to pronounce in the statute by means of a non obstante clause that the decision of the Court shall not bind the authorities, because that will amount to reversing a judicial decision rendered in exercise of the judicial power which is not within the domain of the legislature. It is therefore necessary that the conditions on which the decision of the Court intended to be avoided is based, must be altered so fundamentally, that the decison would not any longer be applicable to the altered circumstances.
One of the accepted modes of achieving this object by the legislature is to re-enact retrospectively a valid and legal taxing provision, and adopting the fiction to make the tax already collected to stand under the re-enacted law. The legislature can even give its own meaning and interpretation of the law under which the tax was collected and by "legislative fiat" make the new meaning binding upon Courts. It is in one of these ways that the legislature can neutralise the effect of the earlier decision of the Court. The legislature has within the bounds of the Constitutional limitations, the power to make such a law and give it retrospective effect so as to bind even past transactions.
In ultimate analysis therefore the primary test of validating piece of legislation is whether the new provision removes the defect which the Court had found in the existing law and whether adequate provisions in the validating law for a valid imposition of tax were made.
With these preliminary observations I would now analyse the I provisions of section 31-A. A plain reading of the said section would show that, it opens with non obstante clause excluding the application of any other law for the time being in force or any decision of any Court. It then lays down that for purposes of sections 30 and 31 (the last-mentioned section is not relevant here), the rate of duty applicable to any goods shipped is inclusive of two components, namely, any "amount" of duty imposed under section 18 and certain other specified taxing statutes and then comes the most relevant clause which comprises the second component included in the rate of duty, which reads as follows: "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'. In order to bring out the true import and meaning of this part of the section I have rearranged the various phrases thereof and added a few words thereto placed in the brackets the text of which would then read as follows:
(1) 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...The amount that may have become payable in consequence of withdrawal of exemption from duty, whether (the withdrawal is) before or after the coclusion of a contract or agreement for the sale of C such goods or opening of a letter of credit thereof.
A plain reading of this text would show that by a mandate of law the rate of duty, which was a matter pertaining to the taxability or leviability of the duty, has now to include the amount not only of the duty imposed under section 18, but also the amount that would notionally become payable if the exemption is withdrawn, irrespective of whether the withdrawal takes place before or after the conclusion of a contract for the sale of goods or opening of a letter of credit. It is easy now to see that the distinction between chargeability and playability of a duty under the Act has been effectively destroyed because the rate would now include the quantified amount of duty that would be payable as a result of withdrawal of exemption from duty. The direction that this will be the position whether the withdrawal is before or after the conclusion of a contract or opening of a letter of credit, has the effect of destroying the doctrine of vested rights on the basis of which the decision in the case of Al-Samrez Enterprise was given. In ordinary concept the rate does not include the quantum or the total amount payable, but the legislature, has mandated that it shall be included within the rate of duty by the fiction created in law. Therefore the argument of the learned counsel that the position has remained unchanged in spite of section 31-A, because its provisions have been confined to operate only for the purposes of sections 30 and 31, is not tenable, because under the changed law section 30 now not only deals with rate of duty, but the amount payable under section 18 of the Act as well as in consequence of withdrawal of exemption, destroying the vested rights that may have accrued on account of the conclusion of contract for the sale of goods or opening of a letter of credit.
In the light of the foregoing it would appear that while section 30 was not relevant to resolve the question whether the withdrawal of exemption would relieve a party from the payment of duty under the existing law before the amendment, section 31-A has now radically changed the effect of section 30 by including the quantified amount of duty which becomes payable by virtue of the withdrawal notification. Therefore, in the new dispensation section 30 has become relevant even for purposes of exemption. The mere fact that section 19 has not been mentioned in the new section, does not mean that the legal effect of the exercise of power under section 19 read with section 21 of the General Clauses Act, is not within the purview of section 31-A. The language employed clearly refers to the withdrawal of exemption or concession which evidently has reference to the provisions of section 19. Accordingly there is no substance in the contention of the learned counsel that the newly-inserted section has restated in different words the position that already stood under the unamended law. For the same reasons it cannot be held that the non obstante clause does not have the effect of setting at naught the effect of the judgment of this Court in the case of Al-Samrez Enterprise, because as discussed above the new law is a departure from and is in conflict with the position expounded in Al-Samrez Enterprise. For the same reasons the argument of the learned counsel for the appellants is without substance that section 31 has not achieved the obesect of defeating the consequences of exemption granted under section 19 beyond the date on which any notification of modification of withdrawal of exemption is issued, or to nullify the judgment in the case of Al-Samrez Enterprise. The language of section 31-A, as discussed above, clearly envisages and stipulates that the consequences that flow from the act of withdrawal or modification of an exemption notification, shall take effect with reference to the date of its issue, irrespective of the fact that the contract for the import of goods and the L.C. Had come into existence prior to such date. This effect has been now prescribed by a mandatory provision of law by legislative fiat, to use the phrase earlier mentioned. The Courts would therefore have to give effect to it notwithstanding the decision in the case of Al-Samrez Enterprise.
There is another aspect of the matter which may also be mentioned. The exposition of law made in the case of Al-Samrez Enterprise took into consideration the law as it stood on the date when that decision was rendered. As shown hereinabove, the law has changed by the insertion of the new section 31-A materially affecting the enunciation of the law made therein. Therefore the changed state of law that has come into effect was not contemplated in that decision and it cannot therefore be urged with any justification, that the principles laid down therein would still apply to the interpretation of the provisions of law discussed therein. In this view of the matter the argument that the deeming clause takes back the insertion of section 31-A to the time of enforcement of the Act in 1969 and therefore the D non obstante clause will not eclipse the decision in the case of Al- Samrez Enterprise, loses all force.
My conclusion therefore is that section 31-A has effectively achieved the purposes for which it was enacted as explained above. The only other question that remains to be consideredis, that notwithstanding the altered position produced by section 31-A depriving an importer of the right to be protected against any change in the quantum of exemption, on the basis of which he has entered into a contract for the sale of goods to be imported and opened a letter of credit or performed other acts, to what extent this section can be given retrospective effect and whether such retrospective effect can be given so as to affect past and closed transactions.
It is clear from the provisions of section 5 of the Finance Act, 1988 E that by the device of the deeming clause the newly-inserted section 31-A is to be treated as part and parcel of the Act since its enforcement in 1969. Undoubtedly, therefore, the section is retrospective in operation. It is agreed on all hands that the well-settled principles of interpretation of statutes are that F vested rights cannot be taken away save by express words or necessary intendment. It also cannot be disputed that the legislature, which is competent to make a law, has full plenary powers within its sphere of operation to legislate retrospectively or retroactively. Therefore vested rights can be taken H away by such a legislation and it cannot be struck down on that ground. However, it has also been laid down (Province of East Pakistan v. Sharafatullah PLD 1970 SC 514) that a statute cannot be read in such a way as to change accrued rights, the title to which consists in transactions past and closed or any facts or events that have already occurred. In that case the following postulation has been made: "In other words liabilities that are fixed or rights that have been obtained by the operation of law upon facts or events for or perhaps it should be said against which the existing law provided are not to be disturbed by a general law governing future rights and liabilities unless the law so intends."
This is an important principle which has to be kept in mind in the context of the present cases.
Reference may also be made to another principle which has been followed in several decisions but to quote from Mehreen Zaibun Nisa v. Land Commissioner; Multan (PLD 1975 SC 397) where it was observed: "When a statute contemplates that a state of affairs should be deemed to have existed, it clearly proceeds on the assumption that in fact it did not exist at the relevant time but by a legal fiction we are to assume as if it did exist. The classic statement as to the effect of a deeming clause is to be found in the observations of Lord Asquith in East End Dwelling Company Ltd. v. Finsbury Borough Council (1952) AC 109) namely: Where the statute says that you must imagine the state of affairs, it does not say that having done so you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs'."
However, in that case the aforesaid principle was subjected in its application to a given case to a condition that the Court has to determine the limits within which and the purposes for which the legislature has created the fiction. It has been quoted from an English decision that "when a statute enacts that something shall be deemed to have been done which in fact and in truth L was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to".
In the light of the aforesaid principles it cannot straightaway be held that the mere fact that section 31-A has been given retrospective effect, it will affect even the past and closed transactions or all the vested rights that have accrued. It is in this context that the remaining contentions of the learned counsel for the appellants are to be examined.
It has been urged on behalf of the appellants that as the bill of entry was presented in all these cases before 1st July, 1988, when section 31-A was enacted and enforced, their cases are past and closed transactions.
There seems to be a great deal of force in this submission. Before the insertion of section 31-A the position was that upon the presentation of a bill of entry, by virtue of section 30 of the Act the levy of duty was crystallised. As explained in the case of Al-Samrez Enterprise, the liability to tax was created under section 18 with reference to this date, because it is the rate of duty by application of which the tax liability can be quantified or assessed. Simultaneously, any benefit of exemption also takes effect on the same date because in the very nature of things, the liability is wiped off by virtue of the exemption at the same time. Therefore, this is the crucial point of time at which, by operation of law the liability is discharged. In other words, the rights and liabilities of the importers attained fixity on the said crucial date. Inevitably therefore a vested right has been created and the transaction is closed by the quantification of the tax, if any, or by the discharge of liability on that date. The mere fact that any proceedings remained pending for assessment of the tax by a statutory functionary for the purpose of recovery of the dues, will not prevent the law from operating and producing the result of closing the transaction. This is on the simple principle that every functionary is bound by the provisions of law and has to pass a lawful order which alone is protected. Besides on this date the liability to pay tax and the exemption from payment are matters of mere calculation in terms of section 30 read with sections 18 and 19 of the Act, because the rate and value of the goods become fixed with reference to this date. Indeed no adjudicative process is involved in such a matter. Viewed in this perspective, if effect is given to the provisions of section 31-A so as to undo the discharge of the liability which had already taken effect, it will amount to re-opening a past and closed transaction. The simple reason is that under the existing law there was no further liability to pay the tax and by giving retrospective operation to the new dispensation a liability is being created for the payment of the tax. I cannot see anything in the language of section 31-A, expressly or by necessary intendment, to that effect. Such result is therefore not a necessary corollary of the fiction created by the deeming provisions of section 5 of the Finance Act, 1988. Otherwise also it will be contrary to the principle, mentioned above, namely, that liabilities once fixed or rights created by operation of law upon facts or events, must not be disturbed by a general provision given retrospective effect unless such intention is clearly manifested by the language employed. In the case of Mehreen Zaibun Nisa (supra) retrospective effect was not given to the changed law so as to invalidate certain acts of legislature, although the entry in the relevant legislative list had been changed with retrospective effect.
Learned Deputy Attorney-General has referred us to Nizam Impex v. Government of Pakistan (1990 SCMR 1187) which is the judgment of this Court in appeal from a judgment of the Sindh High Court reported in Nizam Impex v. The Government of Pakistan (PLD 1991 Karachi 208). These judgments are of no assistance because before the High Court the point with regard to non-applicability of section 31-A to consignments in respect of which contracts were entered into or letters of credit were opened prior to the enactment of the said section was not pressed, in view of the fact that in an earlier decision reported in Yaseen Sons v. Federation of Pakistan (PLD 1989 Karachi 361) this point had been decided. This Court also did not go into the question of the retrospectivity of section 31-A so as to re-open past and closed transactions in the case of Nizam Impex v. Government of Pakistan. I have also perused the case of Yaseen Sons (supra) but in view of the foregoing discussion, it is not possible for me to hold that the insertion of section 31-A retroactively would destroy rights flowing from past and closed transactions.
In this view of the matter I have reached the conclusion that the insertion of section 31-A so as to operate retroactively does not have the effect of destroying or re-opening the past and closed transactions in the manner discussed above. As the bills of entry in all these cases were presented on dates prior to 1st July, 1988, all these cases are cases which were past and closed transactions and were not therefore affected by the provisions of section 31-A. The act of refusal on the part of the Customs Authorities to release the goods on the basis of the notifications prior to the impugned notifications and the demand of duty in accordance with the said notifications in the Constitutional petitions was therefore without lawful authority and of no legal effect.
So far as the regulatory duty is concerned nothing was argued on behalf of the Government to justify 100% duty contrary to the provisions of section 18 (2) of the Act, which as submitted on behalf of the appellants authorised only the imposition of the said duty to the extent of 50% and not 100% as was done in the impugned notifications. This matter is now concluded by the decision of this Court in Yousuf Re-Rolling Mills v. The Collector of Customs (PLD 1989 SC 232). Therefore, imposition of regulatory duty in excess of 50% of the duty specified in the First Schedule of the Act is void and without lawful authority.
At this stage, it may be clarified that the vires of imposing regulatory duty at the rate of 100% of the one prescribed in Schedule I to the Act, has been considered, because arguments were addressed at the Bar on this point and while narrating the facts the learned Judges of the Division Bench in the judgments under appeal before us had mentioned the imposition of regulartory duty on Palm Oil with effect from 22nd August, 1986 at the rate of 100% ad valorem. Learned counsel for the appellants has submitted before us that due to certain confusion the matter could not be raised in the Constitutional petitions but it was argued before the High Court. As no objection was specifically taken on behalf of the respondents to the raising of the question of the vires of imposition of the regulatory duty, the question has been considered and decided. However, since no relief was specifically claimed and the final assessment of the duty or at any rate recovery thereof is still to take place, we leave the matter by declaring that the duty in excess of 50% of the rate mentioned in the First Schedule on this product is ultra vires as held in the case of Yousuf Re- Rolling Mills (supra) and re-affirmed in an unreported judgment in Civil Appeal No, 187-K/1990 (Federation of Pakistan v. M/s. Mahmood (Pvt.) Limited and connected appeals dated 7th February, 1991.
The Constitutional petitions filed by the appellants are, therefore, allowed in the manner and to the extent mentioned above. All the appeals are accordingly allowed with no order as to costs.
(Sd.)
Nasim Hasan Shah, J (Sd.)
Zaffar Hussain Mirza, J (Sd.)
Sajjad Ali Shah, J NAIMUDDIN, J.---I have written separate opinion and passed separate order whereby I have dismissed all these four appeals.
(Sd.)
Naimuddin, J NAIMUDDIN, J---I have had the advantage of reading the draft opinion and the judgment of my learned brother, Zaffar Hussain Mirza, J.
2. I agree with my learned brother that the newly-inserted section 31-A in the Customs Act, 1969 has now radically changed the effect of section 30 by including the quantified amount of duty which becomes payable by virtue of the withdrawal of notification. I further agree that the language of section 31-A, for the reasons discussed by my learned brother, clearly envisages and stipulates that the consequences that follow from the Act of withdrawal or modification of an exemption notification, shall take effect with reference to the date of its issue irrespective of the fact that the contract for the import of goods was entered into or the Letter of Credit was opened prior to the date of such withdrawal. I also agree that the insertion of section 31-A materially affected the enunciation of law made in the case of Al-Samrez Enterprises and that the insertion takes back to the time of enforcement of the Customs Act, 1969. However, with utmost respect and humility, I do not agree to the answer proposed to be given in the judgment to the questions as to what extent this section can be given retrospective effect and whether such retrospective effect can be given so as to affect past and closed transaction.
3. Now, so far as the first question is concerned, the answer is given by my learned brother himself in these words:-- "It is clear from the provisions of section 5 of the Finance Act, 1988 that by the devise of the deeming clause the newly-inserted section 31-A is to be treated as part and parcel of the Act since its enforcement in 1969."
3. As to the question whether the four transactions involved in the four appeals were past and closed, it may be stated that by the notification dated 22nd August, 1986 issued under section 19 of the Act, the exemption earlier granted under the two earlier notifications was modified with the result that the duty was increased from Rs,2,350 to Rs,5,350 per metric ton.
4. It may be of advantageous if this notification is reproduced in its entirety which mentioned various dates on which the duty was increased in respect of various commodities:-- "NOTIFICATION (Customs)
S.R.O....(86)---In exercise of the power conferred by section 19 of the Customs Act (IV of 1969), the Federal Government is pleased to direct that the goods specified in column 2 of the Table below and falling within the heading number of the First Schedule to the said Act specified in column 1 of the said Table shall be exempt from so much of the customs duties chargeable thereon as are in excess of the rates of duty specified in column 3 of the Table with dates and duties specified in column 4 of the Tables against each.
Heading No, In the First Schedule to the Customs Act, 1969 (IV of 1969)Description of goodsRate of duty Date 15.07 (1) Soyabean cotton seed oil groundnut sunflower seed rape colza mustard oil.Oil, Oil, Oil, Oil, Oil, ora. Rs,2,350 metric ton b. Rs, 3,000 metric ton c. Rs, 5,350 metric ton d. Rs,6,000 metric ton22 August 1986 20 September 1986 22 August 1986 20 September 1986. (2) Palm oil.
2. This notification shall take effect on the 22nd August, 1986."
5. In Civil Appeal No,915-K, the appellant presented the Bill of Entry on 26th August, 1986 while it may be noticed that the notification enhancing the duty is dated 22nd August, 1986. Therefore, the Customs Authorities were within their right to demand duty at the rate of Rs,5,350 prevailing on the date when the bill of entry was presented in accordance with the provisions of section 30 read with section 79 of Customs Act. The appellant questioned the validity of the notification in Constitution petition filed in the High Court seeking a direction to the Customs Authorities to release the consignment on payment of the customs duty prevalent previously. Therefore, it cannot be said that the transaction in this case was past and closed.
6. In Civil Appeal No,916-K of 1990, the bill of entry was presented at Karachi Port on 7th December, 1986.
7. In Civil Appeal No,917-K of 1990, the impugned notification was issued on 24th September, 1986 whereby exemption was modified and duty payable on Soyabean Oil was increased to Rs,3,000 per metric ton. The bill of entry was presented on 7th October, 1986.nd th nd th
8. In Civil Appeal No,918-K of 1990, the bill of entry was presented on 9th October, 1986 while the notification which was challenged is dated 24th September, 1986.
9. I understand that the goods were released under the orders of the High Court on furnishing bank/insurance guarantees. Therefore,it cannot be said that in any of these cases the transactions were past and closed.
10. It will be seen for the above that in all these cases the notifications are of earlier dates and the bills of entry were filed later on. If we take the date of insertion of section 31-A in the Act as the date on which the liability to pay the import duty matured then we will be doing violence to the provisions of the Finance Act, 1988 whereby this section has been inserted with retrospective effect from the date of enforcement of Customs Act, 1969.
11. I may add that a mere grant of licence or entering into a contract prior or after the grant of licence or opening of a Letter of Credit pursuant to that, would not create any vested right in a party to pay the duty at the rate R prevalent on the date of import licence or on the date of the contract or on the date of the opening of a Letter of Credit. Relevant date in such a case would be the date when the bill of entry was presented under section 79 of the Act if the goods are not warehoused. Further, in all these cases, the exemptions granted by the notifications in question were not for any fixed time or period and as such exemptions could be withdrawn or could be varied at any time and there is no representation by the Government or any authority under them that the notifications and exemptions would not be withdrawn or varied for certain time. On the contrary, all the parties importing goods have notice that they would be liable to pay duty as leviable on the date of presentation of bill of entry in accordance with section 30 read with section 79 of the Customs Act, 1969. Further, in such a case, no one has any vested right in a concession granted by way of exemption in exercise of delegated powers unless such an exemption is coupled with a representation by the Government that such an exemption or reducation in duty will not be withdrawn or varied for a certain time or period. No such representation has been pleaded in these cases."
12. As regards the point of regulatory duty, it may be stated that this point was not taken at all before the High Court nor has it been taken in the petition for leave to appeal nor it was urged at the time of granting leave to appeal. S Moreover, the respondents had no opportunity to meet this point. However, I would leave it to be determined by the Customs Authorities in accordance with law. Subject to above remarks I would dismiss these appeals with no order as to costs.
SAAD SAOD JAN, J---I am in respectful agreement with my learned brother that section 31-A as inserted in the Customs Act, 1969, by the Finance Act No,VI of 1988 has eclipsed the rule laid down by this Court in the case of Al-Samrez Enterprise so far as the effect of notification of withdrawal of exemptions is concerned. I am also of the view that in the absence of express provisions or necessary intendment retrospective legislation will not be construed in a manner that will lead to reopening of a past and closed transaction. However, on facts I regret I am unable to agree that the matters before us fall in that exceptional category.
2. Admittedly, in the appeals before us the bills of entry were presented by the appellants after the Federal Government had, by another notification, hereinafter referred to as notification of modification, had modified the earlier notification of exemption to the disadvantage of the importers. Now, under section 30, Customs Act, the customs duty is regulated by the rate which is in force on the date when the bill of entry is presented by the importer. In accordance with the provisions of this section, the Customs Authorities required the appellants to pay the customs duty at the rate mentioned in the notification of modification. The appellants declined to do so on the ground that the notification of exemption had created vested rights in their favour. The dispute was taken to the High Court which, on the basis of the judgment of this Court in the case of Al-Samraz Enterprise (1986 SCMR 1917), upheld the position adopted by the appellants. Being dissatisfied with the judgments of the High Court the Federal Government came in appeal to this Court. In all these appeals the main question for consideration related to the quantum of customs duty payable by the importers. During the pendency of the appeals, the Federal Legislature intervened and inserted section 31-A in the Customs Act. The new section was to operate retrospectively with the consequence that it applied also to the pending disputes and the vested right which the appellants claimed on the basis of the earlier notification of exemption stood destroyed completely. In the circumstances I find it difficult to hold that the matters relating to the customs duty payable by the importers were past and closed transaction by mere reason of the fact that the liability of the appellants stood crystalized on the day they presented the bills of entry. It is not in dispute that the legislature can give retrospective effect to the laws its makes even though they may impair vested rights. This is exactly what section 31-A has done in this case. As the parties are still engaged in litigation on the question of customs duty payable by the appellants it would be defeating the legislative intent by declaring to apply the provisions of this section to the present cases, particularly when we consider the circumstances in which it has been enacted. I should, therefore, think that the new section governs the case of the appellants as well and they are liable to pay duty at the rate prescribed in the notification of modication even though it was issued after they had entered into contract for the import of the goods.
3. As regards the question of regulatory duty I am in respectful agreement with the judgment proposed to be delivered by my learned brother.
ORDER OF THE COURT In view of the opinion of the majority all these appeals are allowed in the manner and to the extent mentioned in the opinion of the majority with no order as to costs.
…and 86 more citing cases