SALAHUDDIN MIRZA, J.--1. The petitioner-company is engaged in manufacturing pharmaceutical products. In 1979, when generic names of the drugs were in vogue, it commenced manufacturing "Sodium Acid Citrate-' but later on when brand names were allowed, the medicine was named "SYKOL". This medicine is produced through inter-action of 'Citric Acid' with sodium bicarbonate and the former has to be imported. Import of certain materials used in the manufacturing of drugs is exempt from customs duty and sales tax under SRO No. 1147(I)/89 dated 27-11-1989 (Annexure 'E').
List of such materials is given in the annexure to the SRO and this list contains the name of "Citric Acid". The petitioner was thus enjoying exemption from customs duty and sales tax in respect of the imports of Citric Acid. SRO 1147(I)/89 is reproduced below:- "SRO 1147(I)/89.--In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and sub-section (1) of the section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to exempt so much of the materials specified in the Annexure to this Notification as are imported for the manufacture of the drugs registered under the Drugs Act, 1976 (XXXI of . 1976), from the Customs duty specified in the First Schedule to the Customs Act, 1969 (IV of 1969), and sales tax chargeable thereon, subject to the following conditions, namely:
(1) The manufacturer shall furnish to the Health Division the quantities of the raw/packing materials alongwith the details of the drugs to be manufactured therefrom, and the Director-General Health or any other officer authorised in this behalf will certify for each consignment requirements of Raw/packing materials alongwith the names of the drugs to be manufactured therefrom in the Form I set out below;
(2) At the the of import of raw/packing materials, the manufacturer shall make a written declaration on each copy of the bill of entry to the effect that the raw/packing materials have been imported in accordance with his entitlement in terms of condition (1).
(3) The Collector shall allow the release of the raw/ packing materials against a bank guarantee or insurance guarantee equivalent to the customs duties and sales tax leviable on each consignment or a standing bank guarantee/insurance guarantee for covering multiple consignments to be furnished to the satisfaction of the Collector of Customs.
(4) The manufacturer shall maintain records of the materials imported and drugs manufactured therefrom, and shall produce the same whenever so required by the appropriate officer of Customs or the Health Divisions.
(5) The manufacturer shall within 15 months of the importation of the raw/packing materials, apply to the Collector of Customs for disregarding the bank guarantee or insurance guarantee, the application being supported by a certificate in the Form-II set out below, issued by the Director- General Health or any other officer authorized in this behalf.
So far the consignments of Citric acid were being regularly cleared and bank/Insurance guarantees were discharged in terms of the above SRO but the Insurance guarantees and indemnity bonds pertaining to the 12 consignments imported between July 1991 and February 1993 were not discharged nor the petitioner was allowed to take delivery of consignments.
Details of these consignments are as follows:- S.No. Bill of Entry C. No. and DateNo. Of issuance of Form II and date ofDate of Show Cause Notices
1. 4343/9-7-91 1969 dated 19-7-92 SI/MISC/132/93-AIB-A dated 12-9-93
2. 7392/13-8-91 1970 dated 19-7-92 SI/M1SC/132/93-AIB-B dated 19-7-1992
3. 12896/26-4-92 3121 dated 19-7-93 SI/MISC/312/93-AIB-C dated 12-9-1993.
4. 1460/6-8-92 2143 dated 2-1 1-93 SI/MISC/132/93-AIB-E dated 12-9-1993.
5. 4467/22-8-92 2139 dated 2-1 1-93 SI/MISC/132/93-AIB-E dated 12-9-93
6. 1223/7-9-92 2365 dated 5-12-93 SI/MISC/132/93-AIB-F dated 12-9-93
7. 3152/16-9-92 2524 dated 28-12-93 SI/MISC/132/93-AIB-G dated 12-9-93
8. 3698/19-9-92 2442 dated 19-12-93 SI/MISC/132/93-AIB-H dated 12-9-93
9. 6351/21-12-92 271 dated 13-2-94 SI/MISC/132/93-AIB-I dated 12-9-93
10. 7470/28-12-92 376 dated 6-3-94 S1/MISC/132/93-AIB-J dated 5-9-93
11. 933/61-93 446 dated 22-3-94 SI/MISC/132/93-AIB-K dated 5-9-93
12. 3271/10-2-93 680 dated 5-4-94 SI/MISC/132/93-AIB-L dated 5-9-1993 Instead of discharging the Insurance guarantees and indemnity bonds, respondent No. 2 issued show-cause notices on 5-9-1993, 12-9-1993 and 19-9-1993 as shown in the above table. All the show-cause notices are in the same language and copy of one such notice, which pertains to item 6 in the above table is Annexure 'H'. The notices indicated that SYKOL was subjected to chemical analysis in three different laboratories and Citric Acid was not detected in the medicine SYKOL and an enquiry was ordered and the petitioners were directed to send a representative on 17-10-1993 before Deputy Collector (Appraisement) for taking part in the enquiry. According to the petitioner, to of the three laboratories to whom the samples of the drug were sent certified that Citric Acid was found in the drug and the third laboratory had not conducted the test for determining the existence of Citric Acid in the drug. In spite of this, Deputy Collector (Appraisement-I) held (vide Order dated 31-3-1994 Annexures K-l to K-10) petitioner guilty of violating sections 19 and 32 of the Customs Act by not using Citric Acid in the manufacture of SYKOL and directed the petitioner to pay the customs duty and other taxes and also levied penalty. Appeals before respondent of 2 Collector (Appeals) were also dismissed on 14-4-1994 and 5-5-1994 (Annexures 'L' and 'L-1') and the revisions were also dismissed on 1-9-1994 and 5-12-1994 (Annexure 'M' and 'M-l') after which this Constitutional petition was filed on 11-4-1995 in which the petitioners seek a declaration that Citric was used in the manufacture of SYKOL and all the three impugned orders are without lawful authority and are of no legal effect. The petitioners also seek other ancillary reliefs.
2. Respondents Nos. 1 to 4 have filed parawise comments in which they maintain that the reports of all the three laboratories establish non-existence of Citric Acid in SYKOL and they insisted that the action taken by them was correct. They conceded that a team of their own Chemical Examiners, which had visited the factory of the petitioners on 3-3-1994 and had witnessed the manufacturing process, had confirmed the existence of Citric Acid in the medicine but stated that the report of this team could not be preferred to the findings of the three laboratories. (Para 14 of the comments).
3. We have heard learned counsel of the parties and gone through the record.
4. At the outset learned D A.-G. Had raised objection that the Appellate Tribunal, as envisaged under section 194 of the Customs Act (as substituted by Act V of 1989) had been constituted in March 1995 and had since commenced functioning and therefore this Constitutional petition was not maintainable and the petitioner should first approach the said Tribunal. He placed on record copy of Letter No. 3(45) Customs. Judicial/94 dated 27-3-1995 from the Central Board of Revenue to the various officers of the Customs Department in which it was notified that the Federal Government issued SRO dated 22nd March, 1995 and had appointed 30th day of March, 1995 to be the day on which the provisions of subsections (4), (5), (6) and (7) of section 3 and sub-sections (1), (2), (6) and (10) of section 5 of the Finance Act would come into force. He has also placed on record copy of the said SRO. We are, however, of the view that the objection raised cannot be sustained. As would appear from section 194-A of the Customs Act, only four types of orders are appealable before the Tribunal which are (a) a decision or order passed by the Collector of Customs as an adjudicating authority; (b) an Order passed by Collector (Appeals) under section 193; (c) an order passed under section 193, as it stood immediately before the appointed date (which is now determined to be 30th March, 1995); and (d) an order passed by the Central Board of Revenue or the Collector of Customs under section 195 as it stood immediately before the appointed date. Now, the order passed by the Central Board of Revenue under its Revisional jurisdiction and at the instance of the petitioner is not covered by any of the provisions of section 194-A and therefore the impugned order of the Central Board of Revenue cannot be challenged before the Tribunal. Later on, learned D.A.-G., after consulting the departmental representative, conceded that the petitioner could not approach the Tribunal after the decision of the Central Board of Revenue.
5. The product of the petitioner was registered with the Ministry of Health under the generic name of "Sodium Acid Citrate Syrup" vide Health Division Letter dated 26th July, 1978 (Annexure 'A-l') and vide letter dated 29th June, 1982 (Annexure 'A') of the same Division the petitioners were allowed to use brand name "SYKOL" in place of the generic name. We are referred to the "British Pharmaceutical Codex (1963)", published by Council of Pharmaceutical Society of Great Britain (Annexure 'C-T to the petition) which shows that Sodium Acid Citrate (the generic name of Sykol) is prepared by the inter-action of Citric Acid and Sodium Carbonate. Deputy Collector of Customs (Appraisement I) had referred the samples of the product to three laboratories. The reports of the said laboratories have not been placed on record by the respondents but their gist is reproduced in the show-cause notices. A perusal of the gist of these reports shows that according to the Customs House Laboratory the presence of the Citric Acid to the extent of 6% w/v was detected in the sample but it was opined that it was due to one of the molecules of Sodium Acid Citrate whereas according to the P.C.S.I.R. Laboratories, contents of Citric Acid were traced in the sample whereas the Central Drugs Laboratory did not determine the contents of Citric Acid in the sample but nevertheless reported that the sample contained Sodium Acid Citrate. It may also be noted that a team of the experts of the Customs Department itself had visited the factory of the petitioner on 3-3-1994 and a copy of its report is on record as Annexure 'J' to the petition. The respondents have admitted this report vide para. 14 of their counter-affidavit but stated that it could not be preferred over the report of the laboratories. In this report the team of Experts reported that on visiting the factory they saw that some material was being compounded in the re-action kettle. A list of 10 items being so compounded is given and at No. 1 of the list is Citric Acid. The team concluded that the Citric Acid used in the manufacture of SYKOL Syrup lost its original identity in the end-product and would not be available for detection in its original acid form and would become an integral part of Sodium Acid Citrate, generic name of SYKOL Syrup. We note that the respondents did not take into account this report Annexure 'J' in any of the impugned orders. They may not have preferred it over any other piece of evidence before them but we feel that it was incumbent upon them to take it into consideration. We have also perused the certificates of consumption issued by the Director-General Health, Government of Pakistan, Health Division, Karachi (Annexures 'G-T to 'G-12') certifying that the Citric Acid imported by the petitioner has been used in the manufacture of SYKOL syrup.
6. The action taken by the Deputy Collector of Customs (Appraisement-I) vide order in original dated 31-3-1994 is based on his observation that the product "SYKOL" can be produced easily by dissolving the required amount of Sodium Acid Citrate and water and he implied that Citric Acid was not required nor was used in its manufacture. It appears to us that this observation is a result of misreading of evidence before him. There can be no question of producing SYKOL by dissolving Sodium Acid Citrate and water because Sodium Acid Citrate is nothing but generic name of Citric and there is no difference between the to. A reference may be made to Annexure 'A' whereby the Health Division had permitted the petitioner to change the generic name of their product "Sodium Acid Citrate Syrup" to the brand name of "SYKOL". As such, it is the Sodium Acid Citrate which is being manufactured by the petitioner and is sold under the brand name of SYKOL and as we have seen in British Pharmaceutical Codex (1963) (Annexure C-1), Sodium Acid Citrate is prepared by the inter-action of Citric Acid and Sodium carbonate. The respondents have not brought anything on record to show that Sodium Acid Citrate could be prepared without the aid of Citric Acid. Learned Appellate and Revisional Authorities seem to have over-looked this aspect. The cumulative effect of the record placed before us is that we are inclined to hold that the respondents misinterpreted the evidence before them in reaching the conclusion that Citric Acid was not being used by the petitioner-company in the manufacture of SYKOL Syrup, Barring the test report of Central Drugs Laboratory, the other to test reports of Customs House Laboratory and of P.C.S.I.R do not rule out the presence of Citric Acid in the end-product. It is an admitted position that the petitioner is manufacturing Sodium Acid Citrate and there is nothing to rebut the contents of British Pharmaceutical Codex (1963) that Sodium Acid Citrate can only be prepared by the inter-action of Citric Acid and Sodium Carbonate. It therefore follows that if the petitioner is manufacturing Sodium Acid Citrate it must of necessity be using, in the process, Citric Acid. This conclusion also finds support from the report of the team of Experts of the Customs Department itself (Annexure 'J') and from the certificates of consumption of Health Division. We would therefore set aside the impugned orders and declare that they are based on misreading of evidence and therefore are of without lawful authority and of no legal effect. All the consequences of this declaration shall follow.
The petition stands allowed in the above terms. There shall be no order as to costs.
7. In this petition the consignments had been cleared by the petitioner. However, some consignments are still lying in the Port area and pursuant to the action taken by the respondents in respect of the consignments which are the subject-matter of C.P. No. D-713/1995, those other consignments were not released by the respondents and they are still lying in the Port area and in respect thereof C.P. No. D-714/1995 had been filed by the petitioners. This C.P. No. D-714/1995, in which the same questions of fact and law are involved is also disposed of by this judgment. The Karachi Port Trust which was not party in C.P. No. D-713/1995 is, however, a party in this petition because the consignments are lying in its area and the petitioner had sought an interim injunction till the decision of the petition against KPT from auctioning the consignments for the failure of the petitioner to lift it from the Port area. Obviously, the petitioners could not lift it because it was prevented by the Customs Department from doing so. This application (M.A. No. 1559 of 1995) has however now become infructuous. As a result of the decision of the petitions, the petitioners are entitled to lift the consignments which are subject matter of C.P. No. D-714/1995 subject to the payment of dues of KPT, if any.