SARMAD JALAL OSMANY, J.---As the facts in all the above mentioned petitions as well as the impugned notification are common we propose to dispose of the same through this consolidated order.
Briefly stated the facts of the matters are that the petitioners in all seven petitions relying upon the exemptions in Excise Duty provided under S.R.O. 454(1)/96, dated June 13, 1996 had imported Raw Cotton into the country. Accordingly upon the arrival of the goods at Karachi on various dates in the current year the petitioners claimed exemptions on the excise duty at import stage on said goods. However, the same was denied to them by respondent No.2 on the basis that the abovementioned S.R.O. Was superseded vide S.R.O. No.Nil(I)/99, dated 16th September, 1999 and hence the petitions praying for a declaration, that no excise duty is payable by the petitioners on their goods imported into Pakistan on the basis of the exemptions granted to them under S.R.O.
454(1)/96, dated 13-6-1996.
Based on the above facts Mr. Makhdoom Ali Khan has argued that the principle of promissory estoppel and vested rights is squarely applicable as the letters of credit in all the seven petitions were opened before the impugned S.R.O. No. Nil (1)/99, dated 16-9-1999 rescinded the exemptions granted to the petitioners under the earlier S.R.O., dated 13-6-1999. In this regard learned counsel has relied upon .The case of M.Y. Electronic Industries (Pvt.) Ltd. v. Government of Pakistan (1998 SCMR 1404) for the proposition that although vested rights acquired from the date of opening of a letter of credit may have been affected by the insertion of section 31-A in the Customs Act, 1969, as far as Customs duty is concerned, the said section 31-A cannot be made applicable to the Central Excises Act so as to destroy vested rights claimed on the basis of exemptions granted under such letters of credit in relation to central excise duty at import stage. Learned counsel further submits that it is common ground between the parties that all the letters of credit which are the subject- matter of the instant petitions were opened before the impugned S.R.O. Was issued on 16th September, 1999 and hence prays that the petitions be granted and the petitioners be allowed all the concessions available to them under S.R.O. 454(1)/96 dated 13-6-1996.
On the other hand Raja Muhammad Iqbal for respondent No.2 has argued that as section 31-A of the Customs Act has been made applicable to the Central Excises Act by virtue of the fifth proviso to rule 9 of the Central Excises Rules, the exemptions available to the petitioners under the earlier S.R.O. Are no more available after 16th September, 1999 when the same were withdrawn and consequently he prays that as the goods in all the four petitions arrived in Karachi after 16-9-1999, the petitioners' case is fully covered by the decision in M.Y. Electronics (supra). Learned counsel has hence prayed that the petitioners should be dismissed. Mr.Jawaid Farooqui, learned counsel for respondent No.1 has adopted the arguments of Raja Muhammad Iqbal.
I have heard both the learned counsel and my conclusions are as follows:--- It would be seen that in fact the letters of credit for the import of goods hi question were established before the exemptions earlier accorded to the petitioners were rescinded on 16-9-1999, although the goods arrived at Karachi on various dates between May to October 1999. In Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan (1993 SCMR 1905), The Hon'ble Supreme Court was seized of the effect of section 31-A to the Customs Act, 1969 and came to the conclusion that the same effectively changed the law laid down in Al-Samrez Enterprises v. Federation of Pakistan (1986 SCMR 1917) wherein the A Hon'ble Supreme Court was pleased to hold that the principle of promissory estoppel and vested rights could be claimed by a,petitioner relying upon an earlier exemption and the same could not be destroyed by a subsequent notification when letters of credit etc. Had been established by the petitioner prior to the subsequent notification. Thus in the Molasses' case it was postulated that section 31-A of the Customs Act achieved the purpose for which it was enacted viz. That notwithstanding the opening of a letter of credit or entering into a contract for sale of goods, customs duty would be payable as per section 30 of the Customs Act which provides for the rate of duty as well as the amount payable under section 18 of the said Act viz. The duty payable would be relatable to the date of the Bill of Entry when the goods landed to the country. Molasses Trading and Export (Pvt.) Ltd. v. The Federation of Pakistan was followed by the Hon'ble Supreme Court in the case of Federation of Pakistan v. Punjab Steel (1993 SCMR 2267).
However, the Hon'ble Supreme Court in M.Y. Electronics went on to hold that as far as the applicability of section 31-A to the Sales Tax Act is concerned, this could not be pressed into service to destroy vested rights acquired before the notification withdrawing the benefits granted earlier came into effect. In this respect the Hon'ble Supreme Court cited with approval two decisions of a Division Bench of this Court. In Crescent Pak Industries (Ltd.) v. Government of Pakistan (1990 PTD 29) and Ahmed Investment (Pvt.) Limited v. The Federation (1994 PTD 575), wherein it was held that section 31-A of the Customs Act would not be made applicable to the Sales Tax Act by incorporation and reference by virtue of section 3(5) of the Sales Tax Act. In Crescent Pak Industries (Ltd.) v. Government of Pakistan (supra), the reasoning which prevailed upon the learned Bench was that the Sales Tax Act and the Customs Act, though Taxing Statutes operated in two different fields. Section 3(5) of the Sales Tax Act introduces a machinery operating under the Customs Act for realization under the former, however, there was a difference between the charging section of a Statute and the machinery part thereof. Consequently, the learned Bench concluded that section 3(5) of the Sales Tax Act did not in any manner involve the imposition or levy of tax but only mode or manner of its collection. Thus merely because of the applicability of the Customs Act to the Sales Tax Act by virtue of section 3(5) of the latter does not convert Sales Tax into Customs duty and thus vested rights acquired under the Sales Tax Act remain unaffected by section 31-A of the Customs Act. Further, the learned Bench also held that section 31-A of the Customs Act only applies to the said Act itself and consequently vested rights available under the Sales Tax Act could not be eroded and accordingly it was held that section 31-A has no nexus with sales tax levied under the Sales Tax Act. Applying the above reasoning to the fifth proviso to rule 9 of the Central Excise Rules which provides that the Excise Duty in respect of goods imported into Pakistan shall be charged and collected in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969, I am of the opinion that reference to and incorporation of section 31-A of the Customs Act in the fifth proviso to rule 9 of the Central Excise Rules cannot be read so as to take away vested rights acquired before the withdrawal of exemption granted earlier for central excise duty. Consequently I hold that the impugned S.R.O. No.Nil (1)/99, dated 16-9-1999As only prospective in nature and cannot affect the vested rights of the petitioners acquired before this date. For all the forgoing reasons these petitions are allowed as prayed.
(Sd.)
Sarmad J. Osmani, JUDGE.
DR. GHOUS MUHAMMAD, J.---I have gone through the judgment proposed to be delivered by my learned brother Sarmad, J. Osmany J., I concur both with his reasoning and conclusion. However, there are certain aspects which I wish to underscore through this note.
2. The facts have been detailed in the judgment of my learned brother. I do not wish to repeat them. In M.Y. Electronics 1998 SCMR 1404 the aspect with regard to applicability of section 31-A of the Customs Act, 1969 to sales tax has been dealt at paras. 20 and 21 appearing from pages 1438 to 1442 of the judgment. On this issue the Hon'ble Supreme Court has cited with approved and followed Crescent Pak Industries Ltd. v. Government of Pakistan 1990 PTD 29, wherein a Division Bench of this Court was pleased to interpret section 3(5) of the erstwhile Sales Tax Act, 1951 whereby it was specifically provided that the sales tax in the given context, 'shall be payable at the same time and in the same manner as customs duties under the Customs Act, 1969. (Underlined the word 'payable' for emphasis). The Court was of the considered opinion that the said section 3(5) by employing the word `payable' only introduced the machinery of the Customs Act to the payment of sales tax at import stage and did not impose the charge introduced by section 31-A of the Customs Act to Sales Tax. It was for this reason that the Court came to the conclusion that in relation to sales tax at import stage Al-Samrez (1986 SCMR 1917) still held the field (i.e. With regard to the principles of promissory. Estoppel and vested rights) since there was no amendment in the Sales Tax Act comparable to section 31-A of the Customs Act. On this aspect M.Y. Electronics has been followed in Collector of Customs v. Ravi Spinning Ltd. 1999 SCMR 412), Crescent Pak Industries Ltd. (cited supra) was also followed in Yaseen Sons v. Collector of Customs (1990 CLC 797) and Muhammad Abdullah v. Government of Pakistan (PLD 1992 Kar. 266). Both the latter judgments were delivered by two learned Division Benches of this Court. It is pertinent to point out that in Muhammad Abdullah the Court placed reliance on Federation of Pakistan v. Mahmood Sons (Pvt.)
Ltd. Civil Appeals Nos187-K to 191-K of 1990 (unreported) wherein the Hon'ble Supreme Court refused to invoke section 31-A of the Customs Act to the recovery of sales tax. In Muhammad Abdullah the reliance of learned Deputy Attorney-General on section 3(5) of the Sales Tax Act, 1951 was also repelled. It would be advantageous to reproduce the pertinent observations in paras. 6 and 8 in Muhammad Abdullah:-- "6. As, in the present Constitutional petition, the challenge is to the demand of sales tax and not to customs duty. In view of the aforesaid law declared by the Supreme Court, section 31-A of the Customs Act cannot be pressed into service by the Department for protecting the levy of sales tax by the second Notification, dated 26-6-1988 as contracts had already been concluded between the petitioner and the suppliers in respect of the seven consignments in question evidenced by the opening of the irrevocable Confirmed Letter of credit by the petitioner in favour of the suppliers. The aforesaid two reported decisions of this Court relied upon by Mr. Muhammad Nasim also support the case of the petitioner that the levy of sales tax on the consignments in question is illegal."
"8. We find no merit in the contention raised by the learned Deputy Attorney-General. As observed the law has been declared by the Supreme Court in its judgment, dated 7-2-1991 in the case of Federation of Pakistan v. Messrs Mehmood Sons (Pvt.) Ltd., where it has been held that section 31-A of the Customs Act cannot be invoked for protecting levy of the sales tax because that relates to customs duty and not to sales tax. We may also refer to the following observations of this Court in the case of Crescent Pak. Industries (Pvt.) Ltd. v. Central Board of Revenue (1990 PTD 29) which fully answers the contention raised by Deputy Attorney-General."
3. This brings us to the controversy at hand. The question, which requires determination is whether there is any provision in the central excise law which would be comparable to section 31-A of the Customs Act or which would make the latter applicable to central excise duty. Raja M. Iqbal, the learned counsel appearing for the respondent No.2 has invited reference to the fifth proviso to rule 9 of the Central Excise Rules, 1944 which prescribes the time and manner of payment of central excise duty at import stage as follows:-- "Provided further that the duty in respect of goods imported into Pakistan shall be charged and collected in the same manner and at the. Same time as if it were a duty of customs payable under the Customs Act, 1969 (IV of 1969)."
It is correct that the key difference between section 3(5) of the Sales Tax Act, 1951 and the fifth proviso to rule 98 of the Central Excise Rules, 1944 is that the former had only prescribed the machinery of the Customs Act to sales tax by employing the expression, 'payable' whereas the latter has purported to prescribe both the charging and machinery provisions of the Customs Act to central excise duty by using the words "charged and collected". As already stated above, in Crescent Pak Industries as approved by M.Y. Electronics the reason for not extending section 31-A of the Customs Act to sales tax was that section 3(5) of Sales Tax Act did not contain a charging provision, if the same reasoning is applied here to central excise the result may prima facie, appear to be different since in terms of the fifth proviso to rule 9 of the Central Excise Rules not only the 'collection' but also the 'charge' of the Customs Act has been made applicable. This being so, the real question would then be as to whether a charge could be created by delegated legislation through the rule-making process. The more fundamental question would also be as to whether the power to create a charge can at all be delegated as in the present case.
4. Section 37 of the Central Excises Act empowers the Central Board of Revenue to make rules so as to carry out the purpose of the Act. Section 37 (2) in turn prescribes a number of items for which the rules could be made, without of course limiting the general rule making power for those items which are not so mentioned therein. The delegation thus, is only for assessment or collection, but no for the creation or imposition of a charge. The terms 'assessment' points out to the process of ascertaining, adjusting or determining the amount of tax payable (see Punjab Cables v.
Government of Pakistan PLD 1989 Lah. 121); whereas the term 'charge denotes the very imposition or levy of the tax (see Friends Sons v. Deputy Collector PLD 1989 Lah. 337). Similarly 'collection'.
Means the very process of recovery of the tax. In other words for any tax or in any taxing statute there are three stages; firstly, the imposition or creation of the very tax or levy known as the `charge'. The provisions which deal with the latter are called the charging sections. Secondly, the quantification of the tax of levy which is called 'assessment' and thirdly, the recovery' of the levy or tax is called 'collection'. The latter two...Are the machinery provisions, which are contained in the machinery sections of the statute.
5. In the present case the delegation conferred through section 37(2)(i) of the Central Excises Act on the Central Board of Revenue is only with regard to 'assessment' and collection and not imposition or 'charge' of the duty. In striking contrast, the Central Board of Revenue in notifying the fifth proviso to rule 9 of the Central Excise Rules has travelled for beyond the delegation conferred upon it since the said proviso has been extended to the creation of a charge' alongwith `collection'.
In other words, the C.B.R. Under section 37 has not been given the power to introduce the charge.
The fact that section 21-A of the Customs Act introduces a new charge and is not merely a machinery provision seems settled from Crescent Industries and M.Y. Electronics.
It is equally settled law that rules made under delegation of powers cannot go beyond the mandate conferred by the parent statute see Malik Muhammad Din v. Trustees of the Port of Karachi (PLD 1966 Kar. 518) and Chairman, Railway Board v. Wahabuddin sons (PLD 1990 SC 1034).
The use of the word 'charge' in the fifth proviso to Rule 9 of the Central Excise Rules is thus ultra vires the power conferred on the C.B.R. Under section 37(2)(1) of the Central Excises Act, Raja Muhammad Iqbal has contended that section 37(2) of the Central Excises Act only lists out the items recommended for rule making and such items are not exhaustive since the said section 37(2) expressly provides that the rules could be made in respect of the items mentioned without prejudice to the generality of the foregoing power i.e., to make rules generally. On the strength of this argument the learned counsel for the respondent has contended that even if the delegation to introduce the 'charge' cannot be spelt out from section 37(2)(1), such power is implicit from the general rule-making power conferred through section 37(2) and the opening words of section 37(2). A short answer to this argument is that even if the subject or items of rule-making mentioned in section 37(2) are not exhaustive, the general rule-making power has to be read as ejusdem generis with the items or subject listed in section 37(2). As already pointed out 'assessm ent and collection' on one hand are completely opposed to 'charge'. The two are not ejusdem generis by any stretch of imagination. Thus the general rule-making power delegated under section 37 cannot be extended to creation of a charge. I would in fact go a step further. Even if section 37, hypothetically speaking had delegated to the FC.B.R. The power to introduce a charge or a levy, the said delegation would be bad since it is now pretty much settled that the power to impose or introduce a tax, levy or a fee is only legislative functions which cannot be delegated (see M. Afzal & Sons v. Federation of Pakistan PLD 1977 Lah. 1327). In this manner the term 'charge' used in the fifth proviso of rule 9 of the Central Excise Rules is read down and found to be unenforceable (for the powers of the Court to read in and read down provisions of a statute, see Abdul Rahim v.
U.B.L. PLD 1997 Kar. 62.
6. The upshot of the above discussion is summarized as follows:---
(a) Section 31A of the Customs Act, 1969 introduces a charging section.
(b) Section 31A of the Customs Act, 1969 cannot be extended to central excise duty since there is no comparable provision in the Central Excises Act, 1944.
(c) Al-Samrez (1986 SCMR 1917), wherein the principles of promissory estoppel and vested rights have been established, still holds the field in respect of central excise duty especially at import stage; while section 31A of the Customs Act, 1969 does not alter the position with regard to Central Excise Duty.
(d) The fifth proviso to rule 9 of the Central Excise Rules, 1944 does not alter the position as underscored in sub-paras. (b) and (c) above.
(e) The term 'charge' employed in the fifth proviso to rule 9 of the Central Excise Rules, 1944 is to be ignored as unenforceable.
7. The petitions are accordingly allowed as prayed with no order as to costs. ,