MR. JUSTICE NAZIM HUSSAIN SIDDIQUI.-(l). This order will govern Civil Petitions Nos. 185-K and 186-K of 2001, as common questions of facts and law are involved in these matters.
2. The petitioner in both these matters is a registered partnership concern and is engaged in the business of purchase of vessels, their breaking and selling the scrap recovered therefrom.
3. In September, 1997 vessel M.V. Salaj (in Petition No. 185-K-2001) entered in Pakistan and was berthed at Port Qasim and became the subject-matter of the proceedings in rem in Admiralty Suit No. 1254 of 1997 and some other suits relating to said vessel in Admiralty Jurisdiction of High Court.
Vide order dated 24.8.1999 passed on C.M.A. No. 1063 of 1998, High Court directed the Official Assignee to take over its possession and to sell it by auction. Accordingly, art advertisement appeared in Jang Karachi dated 29.9.1999 and the petitioner purchased said vessel on "as is where is" basis and its total price of Rs.1,77,00, 786 was paid. Thereafter, its possession was delivered to it by Port Qasim Authorities. Necessary permission was also accorded to bring said vessel at Gaddani Ship Breaking Yard and it was beached at Gaddani on 3.2.2000. Thereafter, the respondent No. 3, Collector of Customs, Custom House, Quetta, required the petitioner to make payment of custom duty and other taxes as per assessment made by him in terms of letter dated 8.2.2000 demanding the sum of Rs. 70,95,156 as custom duty, besides sales tax and income-tax. It is the case of the petitioner that demand raised by the respondent No. 3 is illegal and without lawful authority, for the reason that neither the petitioner had imported said vessel nor any custom duty was payable by it, as at the time of purchase, it was Pakistani goods under the control of High Court.
4. In Petition No. 186-K of 2001 the vessel is M.V. Emin and became the subject-matter of proceedings in rem in Admiralty Suit No. 39 of 1999. In respect of this ship also, the Official Assignee of High Court was directed to take over its possession and sell it by auction. The petitioner purchased this vessel also by auction and total consideration of Rs. 491.1 million was paid. In this case also, the customs duty of Rs. 1,46,52,740 besides the sales tax and income-tax was demanded.
5. Leave to appeal is granted to consider the followings:-
(a) Whether the petitioner having purchased the aforesaid two vehicles through auction proceedings is liable to pay custom duty as demanded by the respondents?
(b) Whether having purchased said ships through auction conducted on the basis of directions issued by High Court, the proceedings in rem operated to extinguish all claims attached to the res and conveyed a valid title to the purchaser free from all encumbrances?
(c) Whether the notices published in the newspapers regarding auction of those vessels mentioned that they were subject to encumbrances or not, if not then what is its effect on the purchases made by the petitioner?
(d) Whether the vessels were purchased by the petitioner as Pakistani goods under the control of High Court?
(Sd.)
Nazim Hussain Siddiqui, J.
I have appended my separate note.
(Sd.)
Rana Bhagwandas, J.
(Sd.)
Abdul Hameed Dogar, J.
MR. JUSTICE RANA BHAGWANDAS.-(l). I have had the privilege of perusing the order granting leave to appeal in this petition, authored by my learned brother Nazim Hussain Siddiqui, J., whom I hold in high esteem. However, in view of some reservations that I have with regard to the leave granting order, I would like to record my own reasons.
2. Obviously the two vessels purchased by the petitioner through a public auction conducted by the Official Assignee of Karachi were Cargo Vessels and barged at Port Qasim Authority for discharging of goods. After arrival at Karachi Port in view of certain claims against such vessels the same were arrested in the exercise of admiralty jurisdiction by the High Court of Sindh.
Subsequently, on failure of the owners/agents of the vessels they were put to sale through a public auction on "as is where is" basis. Petitioner offered the highest bid for purchase of the vessels and after acceptance the goods were handed over to him.
3. Incidence of demand of customs duty on goods arose when the petitioner removed the vessels from the Port of Karachi to Gaddani Ship Breaking Yard. It was only when he applied to the Collector, Customs, Quetta for permission to break the ships that he was called upon to pay the customs duty payable thereon. The petitioner claimed before the High Court in the writ petition filed by him that he being an innocent purchaser for value without notice of any encumbrance against the goods was not liable to pay any duty. His submission that he is neither importer nor the agent of the vessels and that he acted in good faith of offering highest bid or the purchase of vessels and thus, exempt from payment of duty was dismissed by the High Court hence this petition.
4. I am not persuaded to agree with the submission of the learned counsel for the petitioner that simply because the advertisement published by the Official Assignee had offered the goods for sale on "as is where is" basis, or that petitioner being a bona fide purchaser had acquired valid title to the goods free from encumbrances. I am also unable to subscribe to the view that after takeover of the vessels by the High Court in the exercise of its admiralty jurisdiction the goods became Pakistani goods, therefore, the demand for payment of duty by Customs Authorities was illegal and without lawful authority. There can be no cavil with the proposition that generally vessels registered in foreign countries come to Pakistan Ports for discharge of goods and/or passengers and the very moment they sail away from the territorial waters of Pakistan for some other destination no duty is payable on such vessels. It is also obvious that a vessel falls within the purview of expression "goods". A vessel arrives in a foreign territory for the approved purpose of carrying goods and persons from one port to another but if the vessel after discharging the goods does not leave for any other port or it is disposed of by way of sale for breakage it may be treated as goods imported from a foreign country. Incidence of duty is always attached to such vessels and after transfer of their ownership, the purchaser can hardly be permitted to say that he is not liable to pay any duty.
In my view, in the absence of any S.R.O, exempting the vessels from the payment of duty in terms of section 19 of the Customs Act, 1969 the owner of a vessel is not entitled to seek a writ against the Customs Authorities denying his liability to pay the duty payable thereon.
5. Reference to the terms of the sale by public auction on "as is where is" basis would only reflect the condition and nature of the goods and not the rights, liabilities and encumberances attached thereto. In any event Customs Authorities cannot be prevented from discharging their statutory function of collection of duty on such goods under the provisions of the Customs Act or any other law. Admittedly the petitioner is ready and willing to pay the sales tax and income-tax payable on the goods but he is wrongly and unjustifiably denying his liability to pay the customs duty which is otherwise due and payable. I am fortified in taking this view of East and West Steamship Co. v. The Collector of Customs (PLD 1976 SC 618), Tufail Muhammad v. Deputy Collector of Customs (1980 P.
Cr. U 721), East and West Steamship Co. v. Collector of Customs, Karachi (PLD 1971 Karachi 14), Chowgule & Co. (Pvt.) Ltd. v. Union of India and others (PTCL 1988 FC 232), Vulcan Company Ltd. v.
Government of Pakistan 1983 SCMR 522 and Amir Ali Automobiles Ltd. v. Assistant Collector of Customs (PTCL 1983(CL) 141).
6. For the aforesaid facts and reasons I am of the view that no case for grant of leave to appeal is made out and the petition is liable to be dismissed.
ORDER OF THE COURT After hearing learned counsel for the parties and Mr. Muhammad Ali Saeed, Senior Advocate Supreme Court, who happened to be present in other cases and assisted the Court as amicus curiae by consent of all the Members of the Bench, leave to appeal was granted in these petitions.
Mr. Justice Rana Bhagwandas, at that time did not inform the remaining Members of the Bench that he wanted to pass an order otherwise than announced in open Court. His separate note is surprising. Be that as it may, leave to appeal is granted by majority of two as against one in these petitions in terms of questions formulated above.
2. These matters be fixed for regular hearing as early as possible.