1. IFTIKHAR MUHAMMAD CH. J.---By this judgment, we intend to dispose of Constitutional Petitions 401 and 412 of 1996, as well as 12, 23, 24 and 88 of 1997, as in all these matters, vires of section 18-B of the Customs Act. As well as Notification, dated 22nd October, 1996, have been challenged.
2. Precisely, the history of impugned section 18-B of the Customs Act, is that on 22nd October, 1996, vide an Ordinance called 'Tax Adjustments Ordinance, 1996 (hereinafter referred to as 'Ordinance of 1996') while amending Act IV of 1969, i.e. The Customs Act., after section 18-A, impugned section 18-B was inserted. It would be appropriate to reproduce hereinbelow its text in extenso:-- "18-B.--Levy of service charge.--The Federal Government may, by Notification in the official Gazette, levy a service charge equivalent to two per cent ad valorem on all such goods specified in the First Schedule to this Act as are subject to pre-shipment inspection: Provided that for the purpose of Sales Tax Act, 1990, such service charge shall not constitute a part of the value of supply."
3. "S.R.O.-----(1)/96.--In exercise of the powers conferred by section 18--B of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to levy a service charge equivalent to two per cent.
4. Ad valorem on all such goods as are specified in the First Schedule to the said Act and are subject to inspection under the Inspection, Valuation and Assessment of Imported Goods Rules,, 1994. "
5. It is very important to note that various provisions, discussed hereinabove of the Inspection, Valuation and Assessm ent of Imported Goods Rules, 1994, have not been questioned in instant petitions and it is nobody's case that the Import Licences have been issued to them, without endorsement of the competent Authority, that the goods being imported shall not be subject to 'pre-shipment, as it has been provided in .The scheme of Rules nor their banker's have issued letter of credit to them for import of goods, without specifying that goods are subject to pre-shipment inspection.
6. With the above background; it is the grievance of petitioners that section 18-B inserted in Chapter V of the Customs Act. By means of Ordinance of 1996, deals with the levy of, exemption from and re- payment of custom duties, treat in service charges as if it is customs duty. Whereas under Item 43 of the Fourth Schedule to the Constitution of Islamic Republic of Pakistan, it does not fall within the definition of 'Duties of Customs'. Therefore, it was not within the legislative competence of the President of Pakistan to incorporate section 18-B in the Customs Act; because President, in absence of Parliament, under Article 89 of the Constitution, cannot legislate such laws, which are not within the jurisdiction, of Parliament. Since the Parliament itself was not competent 'to recover Service Charges as Custom Duty, therefore, to this extent, the provisions of Ordinance of 1996, are ultra vires to the Constitution of Islamic Republic of Pakistan as well as the Customs Act. Consequently, Notification issued in pursuance of impugned section 18-B of the Customs Act is nullity in law and is of no legal effect. If section. 18-B of the Customs Act as well as Notification, are declared Constitutionally non-existent, the respondents shall have no authority to recover the service charges from petitioners.
7. On the other hand, the case of official respondents including the Federal Government, is that petitioners have got their offices at Karachi whereas the Head office ox P.S.I. Company ,i.e. Cotecna is also not situated within Province of Baluchistan, therefore, this Court has no territorial jurisdiction to exercise jurisdiction under Article 199 of the Constitution. The Sellers and Buyers have entered into Agreements, subject to Inspection, valuation and Assessment of Imported Goods Rules; 1994, therefore, admittedly pre-shipment "has been carried out, as such, they are bound to pay service charges at the rate of two per cent. Ad valorem, being the expenditure incurred on pre-shipment inspection of the goods. Thus petitioners-Importers being the, beneficiaries are bound to pay these charges and merely for any technical reason, judicially no exemption can be granted to them from making payment of service charges. It is also their case, that in fact two per cent. Ad valorem service charges is a custom duty and merely on account of its name, as Service Charges, the provisions of section 18-B of the Customs Act cannot be struck down, because it is intra vires the Constitution and have been enacted with legislative competence, by the President of Pakistan.
8. Mr. Shahenshah Hussain, Advocate appeared in support of Constitutional Petitions 401 of 1996 and 88 of 1997. Messrs Zahid Alvi and Akhtar A.I Mehmood, Advocates, appeared on behalf of petitioners in Constitutional Petitions 412 of 1996, 12 of 1997, 23 of 1997 and 24 of 1997. Messrs M.S. Rukhshani, learned Deputy Attorney-General and Raja Rab Nawaz, Advocate, represented to respondents in all the matters.
9. There is no cavil with the proposition that under Article 89 of the Constitution, the President is empowered to promulgate Ordinances, when the National Assembly is not in session. It is also an uncontroverted Constitutional position that the President can legislate such laws, which fall within the ambit of Federal Legislative list as well as Concurrent Legislative List, as per fourth Schedule, attached to the Constitution. Thus the question for examination would be; whether section 18-B of the Customs Act has been enacted with legislative competence or not? It may be noted that this section has been added in Chapter V of the Customs Act, which deals with levy of exemption from and re-payment of customs duties. Therefore, it can also be termed as Custom Duties charging Chapter. Thus, it is to be seen; whether levy of service charge can be considered as a Customs duty, or not? It is an admitted position that Item 43 of Federal Legislative List (part-I) as well as the Customs Act,. 1969, have not defined 'Duties of Customs', therefore, we have to fall back on its dictionary meaning. According to Ballentine's Law Dictionary, Third Edition, Page-301, expression 'Customs duties', has been defined as under:-- "Customs duties.--The tariff payable on imported merchandise, the levy or tax applied by the Government on the importation of commodities into the country. 21 Am J2d Cust D 1. Not merely a duty on the act of importation, but a duty on the thing imported; not confined to a duty levied while the article is entering the country, but extending to a duty levied after it has entered the country.
10. Brown v. Maryland (US) 12 Wheat 419, -- Led 678."
11. "Customs duties.--Taxes on the importation and exportation of commodities. The Tariff or tax assessed upon merchandise imported from, or exported to a foreign country.
12. Tax levied by Federal Government on goods shipped into U.S. Though in other countries it may include export taxes as well. See also customs."
13. Since in above definition, reference to 'Customs' has also been made therefore it is deemed proper to reproduce its meaning as well:-- "Customs.--This tern' is usually applied to those taxes which are payable upon goods and merchandise imported of exported. Pollock v. Trust Co. 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed 1108. The duties, toll, tribute or tariff payable upon merchandise exported or imported. See also Custom duties; Custom-house; Custom Service."
14. "Duties of customs, or customs duties, in the strict sense are pecuniary charges or tools payable upon goods exported from, or imported into the country, as contrasted with excise duties which are payable upon goods produced and consumed within the country."
15. Before proceeding ahead, we feel it necessary to observe that while interpreting a fiscal statute, Court is not required to see the form of law under examination, but its substance and will fix the status of such law on looking its real nature, in order to determine that in which category, it will fall.
16. At this stage, reference to the case of Sohail Jute Mills Ltd. And others v. Federation of Pakistan through Secretary Ministry of Finance and others (PLD 1991 SC 329), would be very beneficial, to answer the proposition. It may be noted that in this judgment, question for determination before Hon'ble Supreme Court was; whether levy of Iqra Surcharge on imported goods at the rate of five per cent. Of the value of said goods, as determined under section 25 of the said Act, can be recovered. The Hon'ble Mr. Justice Shafiur Rehman, as then he was, on having been satisfied with the definition of 'Duties of Customs' opined that levy under examination satisfies in name and substance the strictest legal definition of 'Custom duty'. Similarly in instant case levy of service charges also satisfied the test of definition of 'Customs Duty', because it is being charged as pre- shipment expenditure incurred by the Government on the goods, benefit of which, is being derived by the petitioners and before obtaining import documents as well as letter of credit, competent authorities have endorsed that the import of goods shall to subject to pre-shipment inspection.
17. The petitioners have accepted the condition so imposed upon them, that's why, while entering into Agreement to sell with the sellers outside the Country, they got incorporated the clause of pre-- shipment inspection. The law givers actually had provided a legal sanction to the amount, which is to be recovered from petitioners by, levying of service, charges, equivalent to two per cent. Ad valorem on all such goods, specified in First schedule to this Act, as are subject to pre-shipment inspection. There is nothing in impugned section, which negates any provision of the Constitution.
18. Had the Parliament been in session on 22nd October, 1996, when impugned section 18-B was inserted in Customs Act, it was also competent to enact the law of same nature and consequence thereof, impugned Notification has been issued with lawful authority. Thus, the impugned section is intra vires the Constitution of Islamic Republic of Pakistan and notification being legally issued cannot be struck down.
19. As for as the question of territorial jurisdiction of this Court is concerned, we are not persuaded with the argument put-forth by learned counsel for respondents, because, essentially, the goods have been brought in the territory of Baluchistan Province at Gadani Beach and service charges are also being demanded from them in the Province, therefore, this .Court has the jurisdiction to adjudicate upon the matter.
20. For the foregoing reasons, we see no force in the petitions, which are accordingly dismissed, with costs.