TASSADUQ HUSSAIN JILANl, J.- Through this Constitutional petition, the petitioner has challenged the action v of the Customs Authorities whereby inbounding facility as refused qua the goods imported by the petitioner for a period of 27 days and the order dated 20.7.1993 whereby the petitioner was > directed to pay Rs.6,06,048 as custom duty on the 174 reels which were damaged during the afore- referred period when the goods remained at the Dry Port and exposed to the heat and moisture.
The prayer being made is that the duties charged and recovered be remitted as the same were paid under protest during the pendency of this petition.
2. Brief facts leading to the filing of this petition are that petitioner is a Private Limited Company and is involved in the manufacture of Food items such as Potato Chips, Nimko, Dal Moong, Fried Peanuts/Almonds etc. For wrapping the afore referred items, the petitioner imported a "Polyester Metalised Laminated Coated Film, It was a consignment of 590 Reels of (Polyester Metalised Laminated Coated Film) which arrived at Lahore Dry Port on 24-6-1990; In bond bill of entry was filed the same day; the Custom Authorities initially denied inbounding ^ without any speaking order and the goods remained at the Port for 27 days whereafter on the intervention of Collector Customs, inbounding was allowed. The consignment remained at the Port in open from 24-6-1990 to 21-7-1990, was exposed to sun heat, rain and moisture in consequence of which 174 Reels were damaged; the Inspector of Customs Bonds Section Dry Port, Lahore, vide his report dated 21-7-1990 which is Annexure-C with the petition, confirmed the afore-referred loss. This was further endorsed by the report of M/S Hamid Mukhtar & Company which report was prepared after associating the Deputy Superintendent of Customs. The said report is Annexure-D with this petition. A sample of the damaged reels was sent to the P.C.S.I.R. Laboratories at Lahore which vide its report dated 25-8- 1990, Annexure-E with the petition, opined, "Polyester Laminated Coated Film is not suitable for the packing of Food products." The petitioner filed a representation before the Chairman Central Board of Revenue praying for remission of the custom duty on the damaged 174 reels of the afore referred Coated Films. His case was recommended by the Collector of Customs, Lahore, vide letter, dated 20th of December, 1990 ( a copy of which has been placed on record by the petitioner and is not denied by the Deputy Superintendent of Customs, appearing in Court, today). The Collector of Customs Lahore recommended petitioner's case to the Board and observed as sunder": "The requests were considered exhaustively for possible provision of relief but had to be denied as the case fell outside the purview of both sections 27 and 115. The case, however, highlights a situation where the importers appeared to have, a valid claim and yet relief is not available under the existing law."
Notwithstanding the afore-referred recommendation, the Board rejected petitioner's representation and the order was conveyed to the petitioner vide letter, dated 14th of September, 1993 which is Annexure-J with this petition. The only reason given was that: "The Central Board of Revenue is of the view that the case has no merits and relief in duty and taxes cannot be afforded."
3. Mr. Mushtaq Ahmad Chaudhry, Advocate, learned counsel for the petitioner has made following submissions in support of this petition:-
(i) that the respondents could not refuse inbounding facility on the ground that the earlier goods imported by the, petitioner had stayed in the warehouse beyond the permissible period as the Custom Department can proceed against the petitioner under section 111 of the Customs Act and the same cannot be a valid ground to refuse inbound of the fresh consignment;
(ii) that the Central Board of Revenue, has dismissed petitioner's representation without hearing him;
(iii) that proceedings under section 202 of the Customs Act and the impugned direction issued by Assistant Collector (Bonds) Customs Dry Port, Lahore, are not tenable in law as no prior show cause notice was issued to the petitioner.
4. Mr. A. Karim Malik, Advocate, learned counsel for the customs department while opposing the prayer made in the petition, submitted as under:-
(i) that the bill of entry filed by the petitioner is dealt with at the executive side and the competent Authority having examined the matter, passed an appropriate order which could be challenged by the petitioner in appeal which remedy, the petitioner did not avail and, therefore, the action of the respondent Authorities cannot be challenged through the Constitutional petition;
(ii) that the inbounding facility was initially refused to the petitioner under section 84 of the Customs Act which empowers the Collector to disallow warehousing and a valid reason of refusal has been given by the Custom Department in the report submitted before this Court i. e. the petitioner had not ex-bonded the earlier consignment within the period stipulated under section 98 of the Customs Act;
(iii) that the petitioner has not come to the Court with clean hands inasmuch as he misused the concession by not having the goods ex-bonded within the stipulated period;
(iv) that admittedly, the goods were damaged before inbounding and there is no provision in law for remission in duties in such an eventuality.
5. I have heard learned counsel for the parties and have given anxious thoughts to the arguments addressed at the bar.
6. In view of the conflicting pleas of the parties, following questions crop up for consideration before this Court:-
(i) Whether the manner in which the respondent Authorities denied the inbounding facility to the goods imported was warranted in law?
(ii) Whether the damage to 174 reels was on account of the inbounding facilities having been withheld for a period of 27 days?
(iii) Whether the petitioner had an alternate remedy under the Customs Act to disentitle him to invoke Article 199 of the Constitution? and
(iv) Whether the remission of duties being claimed through this petition is permissible under the law?
7. For a better appreciation of the points involved, it is necessary to refer to certain provisions of the Customs Act, 1969 pertaining to the establishment of warehouse, Section 11 of the Customs Act, authorises the Central Board of Revenue to declare warehouse stations as public warehouse.
Sections 12 and 13 authorise the Collector of Customs to establish public and private warehouses.
Subsection (3) of section 13 stipulates that a licence granted under this section may be cancelled by the Collector of Customs," for infringement of any condition laid down in the licence or for any violation of any of the provisions of this Act or any rules made thereunder after the licensee has been given proper opportunity of showing cause against the proposed cancellation. " Chapter 11 of the Customs Act, deals with warehousing i.e. from section 84 to section 119. It starts from the application to be made; bond to be executed; the manner in which the goods are forwarded to the warehouse; the power of the competent Authority to open a package in the warehouse; provision relating to owners access to the goods lying in a warehouse; provisions for manufacture and other operations in relation to goods in a warehouse; payment of rent of the warehouse; procedure to be followed for checking the goods out of the warehouse; the manner in which accounts are to be maintained there; provision for clearance of bonded goods for home consumption and for expert; reassessm ent of dues in certain situations; duties and charges to be paid if the goods are removed from a warehouse or allowed to remain there beyond fixed time or lost or destroyed or taken as sample; procedure to be followed if the duty is not. paid under section 112; power to remit duties on warehoused goods; lost or destroyed; the responsibility of the warehouse keeper and the power to decide whether the goods may be deposited in public warehouse or private warehouse and on what terms etc.
8. Under section 84 of the Customs Act, an Importer has to apply for deposit of the goods in a warehouse and it authorises the Collector to disallow warehousing of the goods for reasons to be recorded in writing, It reads as under:- "When any dutiable goods have been entered for warehousing and assessed under section 80, the owner of such goods may apply for leave to deposit the same in any warehouse appointed or licensed under this Act.
Provided that the Collector of Customs, for reasons to be recorded in writing, may disallow the warehousing of goods or any class of goods or goods belonging to a particular importer."
The provision for warehousing was primarily introduced in the law of customs for the benefit of the Finance Act (Act VII 1990).
Importer as inbounding of goods without payment of custom duty allowed the importer to avoid blocking up of capital (through payment of custom duty) till such time he intends to market the goods; it facilitates greater stocks of goods to be sent to the market as (money is not held up on account of payment of duty) which has the healthy effect on supplies and. prices; it introduces creation of sufficient reserved stocks for use in hours of immediate general scarcity qua those goods; the provision of remission for natural waste on certain types of goods who are subject to decay in a warehouse, prevents a loss in duty which the Importer would have to otherwise pay; the provision for operations in the warehouse, avoids loss of duty, damage to goods in operations and it provides security of goods to the Importer and to the State of the duty to be charged and collected. The practice has all along been to allow inbounding facility after the Importer fulfills the conditions enshrined in various clauses of chapter 11 and if there was any violation of the bond to be executed by the importer or any provision relating to the warehousing, the law stipulates suspension of the licence for warehousing and payment of duty in terms of section 111 of the Customs Act. Prior to the promulgation of Act VII of. 1990 whereby the Collector was authorised to disallow warehousing for reasons to be recorded in writing; there was no provision in the Customs Act whereby a Custom Officer could refuse inbounding facility particularly to an Importer who had a licensed warehouse of his own. In Pakistan Rubber Scrap Traders Group General Tyres & Rubber Company, and other v. The Custom Department (NLR 1988 TD 497), learned Ombudsman while discussing various provisions relating to warehouse in the Customs Act, observed at page 507 as under:- "We have been unable to find any provision in these sections which confers any power or discretion with the Customs Authorities to disallow warehousing facilities to the owner of any goods."
The newly added provision in section 84 of the Customs Act to which reference has been made above, does not prescribe any guidelines to be followed while exercising this power. Such an arbitrary power in the Executive Authority is prima facie harsh and can lead to injustice. Even otherwise when the Importer has been granted licence to open warehouse and to enforce the terms and conditions attached thereto, the Act has made elaborate arrangements in various sections of the Customs Act, the power to refuse inbounding it could be argued, is inconsistent with the Act and, therefore, ultra vires of the same. However, since the vires of the newly added provisions has not been challenged in this petition I would not like to comment, lest it may prejudice the case of either side and leave the matter open for decision in some appropriate proceedings. For the purpose of the instant case, if the law has provided disallowing warehousing and an order could be passed, it is to be passed in the manner prescribed and in absence of 'recorded' reasons, it would not be an order under the said provision, and therefore, not an order in the eyes of law. In Abdul Zahir and another v. Director-General Pakistan Coast Guards and 4 others (PLD 1990 Karachi 412) at page 418. it was held as under:- "Where the law requires that reasons shall be recorded for the passing of an order, such reasons, if the order be judicial, must necessarily be found in the order itself and the order has to be a speaking order. If not, the same would suffer from an error apparent on the face of the record and. thus, fall short of satisfying the requirement of law."
The afore-referred view was followed by a Division Bench of this Court in Writ Petition No. 4293 of 1990.
9. Coming to the facts of the present case, not to speak of recorded reasons", no order in writing was passed refusing inbond facility for 27 days, In the comments submitted, it is not denied that no order was passed, the explanation given is that inbounding was refused as two earlier consignments of the petitioner were lying in their private warehouse for a longer period than provided under section 98 of the Customs Act which resulted in backage of the Government Revenue. The course adopted by the Customs Authorities was not tenable in law for two reasons:-
(i) inbounding could be refused only after reasons to be recorded in writing and if no reasons are recorded, the action is bad in law: and
(ii) if the earlier consignment had overstayed in the appointed warehouse beyond the period stipulated in section 98 of the Act, the action could be taken against the Importer under section 111 of the Customs Act which mandates the Appropriate Officer to demand from the owner of the goods, "the full amount of duty chargeable on such goods together with all rent, penalties, interest and other charges payable in respect of them, if the goods which have not been removed from the warehouse within the time allowed for such removal under section 98".
Thus, the act of the respondent Authorities in refusing to inbond the goods was arbitrary and not an act warranted in law.
10. Coming to the question of damage to 174 reels to which reference has been made 'in para.2 is concerned, the admitted position is that the reels were damaged and were not fit for consumption but the department shifted the entire responsibility to the petitioner, It was stated as under:- "The petitioners are themselves to be blamed for it. The goods kept on lying at the Dry Port for their failure to comply with the provisions of section 98 ibid."
The damage accrued to the afore-referred articles was on account of the act of the respondent Authorities and as the act has been found to be untenable in law, the respondent Authorities are not entitled to charge any duty and tax on the damaged reels in question. Section 115 of the Customs Act empowers the Collector to remit duties on warehouse goods which have been lost or destroyed, It would be anomalous if the same concession is not extended to the goods which have been damaged or destroyed on account of the act of the respondent Authorities particularly when the Collector Customs Lahore had in his letter dated 20-12-1990 to which reference has been made in para. No. 2 at page 3 of this judgement, strongly recommended for remission of duties and taxes and had described the claim of the petitioner to be "valid". The petitioner, therefore, is entitled to refund of the duty and taxes charged on these goods".
11. Learned counsel for the respondent Mr. A. Karim Malik. Advocate dwelt at length on the point that petitioner had an alternate remedy of filing appeal under section 193 of the Customs Act, thereafter, had a remedy to challenge the said order passed in appeal before the Board of Revenue, and this petition under Article 199 of the Constitution is not maintainable, I am afraid, this argument of the learned counsel may not be available to the Department as admittedly no order in writing was passed refusing inbounding of the goods in question and the goods remained at the port for 27 days whereafter inbounding was allowed. When petitioner applied for remission under section 115 of the Customs Act, the same was refused by the Collector but his case was recommended to the Central Board of Revenue with the observation that, "the importer appears to have a valid claim and yet no relief is available under the existing law". If this was the view of the Collector, appeal would have been an exercise in futility. Petitioner's representation was also dismissed by the Board without affording him an opportunity of being heard and that too without any speaking order, In such state of affairs, both the Collector and Central Board of Revenue having expressed their opinion on the merits of the claim of the petitioner, appeal or revision before the Board would not have been an adequate remedy to disentitle the petitioner to invoke Article 199 of the Constitution.
12. For afore-referred reasons, this petition is allowed and it is directed that the duty and taxes charged on the 174 reels of Polyester Metaiized Laminated Coated Film which were damaged on account of refusal of inbounding facility be refunded to the petitioner, forthwith. There shall be no order as to costs as the same has not been claimed in the petition.