' This order will dispose of Writ Petitions Nos.964 of 1998 and 1311 of 1998.
2. Messrs United Refrigeration Industries (Pvt.) the petitioner herein being manufacturer of the refrigerators namely "Dawlance" imports the compressors for the use in the said refrigerators on concessionary rate of customs duty under S.R.O.No,504(1)/94, dated 9-6-1994 issued by the Government of Pakistan, Ministry of Finance under section 19 of the Customs Act, 1969, through which the earlier S.R.O. No,504(1)/90, dated 7-6-1990, and S.R.O. 469(1) and 479 (1) of 1992 were rescinded. However, the Central Board of Revenue, all of a sudden on a reference of Hyderabad Collectorate of Customs through letter dated 21-4-1998 raising the question of applicability of above said S.R.O. To the petitioner sought advise from the Ministry of Industries, Government of Pakistan and withdrew the concession on duty available to the petitioner under the said S.R.O.
Through the Customs General Order No,'7 of 1998. The petitioner being aggrieved of the withdrawal of statutory concession has filed this Constitution Petition before this Court.
3. According to the stance taken by the respondents in the comments filed to this petition compressors only in knocked down condition' could be imported on concessionary customs duty under S.R.O. No,504(1)/94, dated 7-6-1990, which is read as under:- "S.R.O.
504. In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969) and in supersession of the Ministry's Notification No, S.R.O. 479(1)/92, dated the 14th May, 1992, the Federal Government is pleased to exempt raw materials, sub-components and components imported for the manufacture of -goods specified in Table-I below, subject to the following conditions:-
(i) the components should be in such kicked down conditions as is approved by the Government for each item appearing in Table-I;
(ii) the manufacturer has suitable in-house facilities for progressive manufacturing of the goods in respect of which he claims exemption under this Notification;
(iii) the manufacturer shall furnish to Chief, Survey and Rebate, Board of Revenue, or any officer authorized in this behalf, in the prescribed form, the list of goods that he is manufacturing or intends to manufacture alongwith the details of raw materials, subcomponents and components required. The Chief for such Authorized Officer in consultation with the Collector of Customs, Central Excise and or Sales Tax shall certify the annual capacity of the unit for the manufacture of such goods and total requirements of various types of raw materials, sub-components and components alongwith the quantity required for the manufacture of each item;
(iv) the manufacturer shall chalk out deletion programme spreading over a maximum period of five years within which period he shall achieve a minimum deletion in the manufacture of items to the extent of 75% of the C & F value of the inputs of the manufactured items. Continued availability of the exemption under this Notification shall be contingent upon.
(a) the achievement of progressive annual deletion as approved by the Central Board of Revenue or Ministry of Industries, as the case may be; and
(b) the use of locally manufactured deleted goods.
(v) at the time of import of raw materials, sub-components and components, the manufacturer shall make a written declaration on the bill of entry to the effect that the raw materials, sub- components and components have been imported in accordance with his entitlement in terms of condition (iii) and that he has achieved deletion level in accordance with condition (iii);
(vi) at the time of import the manufacturer shall furnish to the Collector of Customs an indemnity bond alongwith post-dated cheque of he amount equivalent to the customs duties and sales tax exempted, to abide by the conditions laid down in the notification failing which he shall pay customs duties and sales tax leviable on each consignment in any other penalties that may be imposed by the Collector of Customs in this behalf;
(vii) the manufacturer shall maintain record of the inputs and goods manufactured out of them in such form as may be prescribed by the Central Board of Revenue; viii) the manufacturer shall within one year of the date of filing of bill of entry for home- consumption relating to raw materials, subcomponents and components shall apply to the Collector of Customs for discharging the indemnity bond and post-dated cheque, the application being supported by a certificate in the From set out below, issued by the Assistant Collector of Customs and Central Excise within whose jurisdiction the manufacturing unit is located; and
(ix) in case Assistant Collector of Customs and Central Excise is not satisfied regarding the consumption of imported inputs or use of locally produced deleted inputs, he shall report his findings to the Collector of Customs concerned who shall initiate proceedings for encashment of bank guarantee or post-dated cheque and penal action for making false declaration."
' The refrigerator is included in Table-1 to the above said S.R.O., therefore, the customs duty on the import of compressors to be used in the refrigerator is chargeable on the concessionary rate of 10% of the value. In nutshell, according to the respondents, the benefit of the S.R.O. In question could only be extended under the import policy of the Government to the petitioner in case of import of compressors in knocked down condition and not in built-up condition and that since the petitioner Company was importing compressors in complete built-up condition, therefore, it was not entitled to this special concession. The advice tendered by the Ministry of Industries was to the following effect:- "Deletion programme for progressive manufacture of refrigerators issued in favour of Messrs United Refrigeration Industries Limited on 9-9-1990 allowed import of compressors with overload relay and accessories in C.B.U. Condition .... Under concessionary rate of duty. Subsequently on the request made by PEL for inclusion of compressors assembled by them for manufacture of refrigerators and deep freezers and after having views and representation from the different refrigerators/Deep Freezer manufacturers, the matter was considered by this Ministry and following decision was taken/issued to Central Board of Revenue vide this Ministry's O.M. No,3(62)/93-D.M., dated 22-12-1994 fro taking necessary action- ' In view of position stated above and keeping into account the market situation in which the locally manufactured refrigerators/Deep Freezers have to compete with the imported ones, some incentives are required to be given to Messrs PEL for assembling 100% parts/components of compressors in order to make the locally assembled compressors cheaper than the imported. This Ministry is, therefore, of the view that option may then be left to the manufacturer of refrigerators and deep freezers to use either low costs locally assembled compressor or high cost imported compressor'.
(2)It is further stated that taking the above decision into account, the deletion program for progressive manufacturer of No Frost Refrigerators issued in favour of said Firm (Messrs United Refrigeration Industry Limited) vide this Ministry's O.M. Of even number dated 20-3.1997, it was made quite clear that against the component compressor in Performa 'C' that all the manufacturers of refrigerators and deep freezers have been given option to use either low cost locally assembled compressor or high cost imported compressor at commercial (statutory) rate of duty. The compressor was, therefore, also allowed to be imported in C.K.D. Form to enable PEL to locally assemble the same."
4. In the light of the policy of the Government to give incentives to the local Industry, it was decided that the locally made compressors with low cost if being manufactured inside the country shall be used and that the high cost compressors would be allowed to be used with payment of customs duty at commercial rate.
5. The learned counsel for the parties having argued the matter at full length have requested for the disposal of this petition as a notice case. Order accordingly.
6. Raja Tahir Majeed, Secretary (Machinery Division), C.B.R., Islamabad, explained that the benefit of the S.R.O. Under discussion for import of compressors on concessionary rate was withdrawn under Customs General Order No,7 of 1998, dated 24-3-1998 with the inclusion of compressors in the list of locally manufactured item on the request of PEL on its setting up a project of manufacturing the compressors which remained operational till 30-3-1999. He added that under the policy an incentive was to be given to the local Industry, therefore, on setting up the project of manufacturing the compressors by PEL, the concession in customs duty on import of compressor was withdrawn. He, however, has conceded that there was no proof of availability of locally made compressors in the market with the Central Board of Revenue and the S.R.O. In question under which the petitioner was availing the concession in customs duty on the import of the compressors remained enforced without any modification.
7. Learned counsel representing the Department with reference to the letter, dated 17th of November, 1998 written by PEL to Central Board of Revenue contended that locally manufactured compressors would be available in the market but due to less demand in the market, the project was closed. He, however, has not been able to give a satisfactory answer to the question as to whether without modifying or rescinding the notification in question, the statutory concession made available on the import of compressors could be withdrawn or taken away through an administrative order in suppression to the notification issued under the Statutes.
8. Learned counsel for the petitioner on the other hand while placing reliance on the above said letter, dated 17th of November. 1998 of PEL argued that the PEL in unequivocal words had made a request that since the compressor manufacturing plant was closed down with effect from 10th of November 1998, therefore, the item should be excluded from C.G.O.No,7 of 1998, dated 24th March, 1998. According to him, the compressors manufacturing plant set up by the PEL remained operative only for a short period and that, too, was set up by PEL for self-consumption in the refrigerators being manufactured by PEL and that the same were never introduced in the market for sale. The learned counsel contended that the manufacturing of compressors by the PEL for self-consumption without sale in the market on commercial basis would not undo the policy of the Government of providing the facility of import of compressors on concessionary rate of customs duty for the use of refrigerators under the S.R.Os. In question.
9. With a view to pro vide a better living to a common person, it was essential to reduce the price of the item of general use and therefore, a special concession in customs duty was made available to the manufacturers of refrigerators under S.R.O. No,504(1)/94 dated 9-6-1994 issued under section 19 of the Customs Act, 1969 with the result that the refrigerators would be available in the market within the reach of purchasing power of a common person. The components of a few items of the general use were not being produced and manufactured in the country and were being imported for the manufacturing of items such as specified in Table-1 to the S.R.O. No,504(1)/94, dated 9-6- 1994, therefore, the same were exempted from the customs duty chargeable under First Schedule to the Customs Act, 1969. This is admitted that the compressors being manufactured in the country were not available in the market and that the permission was given for the import of compressors under the above said S.R.O. On a concessionary rate of customs duty and the petitioner had been availing the benefit of S.R.O. In question on the import of compressors before 24th March, 1998 and again was made available to him after 30th March, 1999 and this special concession was only withheld during the period from 24th of March, 1998 to 30th of March, 1999. Thus, the pivotal question for determination would be, whether the manufacturing of compressors by PEL an industrial unit in the country without commercial production would take away the statutory concession on customs duty available to all the manufacturers of refrigerators and whether for the said reason such concession could be withdrawn through a Customs General Order for the benefit of an individual Unit. It is understandable that the concession on the import of compressors was given for the reason that the same were not being manufactured in the country were not available in the market, therefore, without ensuring availability of compressors being manufactured by PEL in the market and its capacity of commercial production, the withdrawal of concession on the presumption of locally made compressors were available in the market was not justified.
Undoubtedly, PEL while manufacturing compressors for self-consumption would not be entitled to the concession of customs duty available under the S.R.O. In question and in case of commercial production would also make the S.R.O. Ineffective for other manufacturers of refrigerators but the respondents without collecting any evidence direct or circumstantial about the commercial production of compressors by PEL and the supply the same in the market withdrew the concession on customs duty. In absence of any evidence of the sale of compressors by PEL in the market, the mere establishment of a Plant of compressors by the PEL for the use of the same in the refrigerators being manufactured in its industrial unit would not permit the respondents to take away the concession of customs duty on the import of compressors under the S.R.O. In question, which would amount to restrict the market to the refrigerators being manufactured by the PEL and allow the said Unit to create monopoly in the business at the cost of healthy and free competition in violation of Constitution for providing fair opportunity of lawful business under Article 18 of the Constitution of Islamic Republic of Pakistan, 1973.
10. The refusal of the legitimate statutory concession made available by the Government through the departmental instructions in the from of Customs General Order would amount to undo the effect of notification issued under section 19 of the Customs Act, 1969. The departmental instructions such as Customs General Order is issued for guidance of the field staff to achieve the purpose of the Statute, and if such departmental instructions are issued in conflict to Statutory law or to undo any such law, the same would not have any legal effect. Undoubtedly, the import of compressors under the S.R.O. In question and the chargeability of customs duty on concessional rate was subject to the non-availability of local made compressors and for the denial of benefit of the S.R.O. In question, there would be the following essential pre-requisites:- (a) that the manufacturer has suitable in-home facilities to manufacture the components of an individual item as mentioned in Table-1 to the S.R.O. In question for which exemption in the customs duty is being claimed; (b) that such components are in such knocked down condition as is approved by the Government. The Collectorate of Customs Hyderabad on the basis of a certificate given by the petitioner to his eligibility prepared a survey report and found the petitioner entitled to the exemption. Therefore, so far as first condition is concerned, the Department while giving exemption of customs duty before and after the issuance of Customs General Order No,7 has conceded that the compressors were not being manufactured in the country and the petitioner under the certificate already accepted by the Collectorate was entitled to the exemption given under the earlier S.R.O. Issued in 1996 and subsequent S.R.O. Which is still in field. However, the knocked down condition of compressors can better be defined by the manufacturers and unless the technical distinction between the knocked down and built-up condition is notified by the Government, in the light of technical distinction to be made by the original manufacturer, the general definition of the two being made by the functionaries of the Government in their discretion through artificial manner would not take away the concession in the customs duty given under the S.R.O. In question.
The withdrawal of exemption in customs duty only compressors under the S.R.O. In question through Customs General Order without technical interpretation of the term "knocked down condition" and issue of notification by the Government accordingly was not legal and the Customs General Order being violative of the S.R.O. Under discussion would be of no consequence. This is noticeable that even Customs General Order in question was not specifically made applicable in case of import of compressors and again the functionaries through a misconception was withholding the legitimate benefits available to the petitioner. Thus, neither the certificate given by the petitioner and approved by the Customs authorities lost its validity and legal status nor Customs General Order was made applicable to the in-port of compressors as such. Therefore, the interpretation of notification by the concerned department under which the compressors are being imported on concessionary duty through Customs General Order in question was against the spirit of the scheme and policy of law.
11. For the foregoing discussion it is held that the petitioner being entitled to the concession of customs duty under S.R.O. No,504(1)/90, dated 7-6-1990 was illegally refused on the basis of Customs General Order No,7, dated 24-3-1998 and it is declared that the benefit of the said S.R.O.
Shall be available to the petitioner and notwithstanding the Customs General Order No,7, dated 24- 3-1998, it would be deemed to have always been available to him. The Customs General Order should have no effect on the right of the petitioner relating to the claim of exemption on customs duty S.R.O. No,504(1)/94, dated 9-6-1994, the refusal of the same by the respondent would, therefore, be without lawful authority. These writ petitions are allowed with no order as to costs.