PLJ 2000 SC 171
[Appellate Jurisdiction] Present: saiduzzaman
siddiqui, sh. ijaznisar and mamoon kazi, JJ.
GOVERNMENT
OF
versus
FACTO
BELARUS TRACTORS LJMITED-Respondent Civil Appeal No. 1176 of 1997, decided on
1999.
(On appeal from the judgment of the Lahore
High Court, dated 1.9.1999. passed in I.C.A. No. 84/1997)
<i)
Administrative Order--
—No executive action can
operate retrospectively so as to impair vested rights or impose new obligations-Such
principle, however, could not apply in case of legislative provision. [P. 175] A
(ii)
Customs Act, 1969 (IV of 1969)--
—S. 31-A—Exemption granted
by Government from Customs duty in respect of tractors imported after specified
date-Withdrawal of such exemption
after contract had already been entered into by a party or letter of credit had
been opened by it-Earlier notification granting exemption from custom duty ceased to be
operative and customs duty and sales tax on said tractors after subsequent
notification came into force became payable in
accordance with rates applicable in terms of S.
31-A Customs Act, 1969-Promissory estoppel
can not be invoked against provisions of any legislation even if they authorise
Government to impose new obligations
or to withdraw existing concession. [P. 176] B
(iii)
Customs Act, 1969 (IV of 1969)--
—S. 31-A-Constitution of
(iv)
Protection of Economic Reforms Act, 1992 (XII of 1922)--
—Preamble-Object
of-Preamble of protection of Econcomic Reforms Act 1992 indicates that object
for which the act came into force was to provide legal protection to economic reforms
introduced by Government and to create liberal environment for savings and investments and other
matters related thereto. [P. 177] C
(v) Protection
of Economic Reforms Act, 1992 (XII of 1992)--
—S. 6--Customs Act (IV of
1969), S. 31-A-Notificaiton for exemption of Customs duty-High Court while declaring such
notification to be of no legal
effect had relied on S. 6, Protection of Economic Reforms Act 1992-- High Courts reference to
provisions of Act XII of 1992, appeared to be misplaced as also invocation of doctrine of
legitimate expectation by it was such doctrine could not be invoked to nullify effect
of legislative provision. [P. 178] D
PLD 1971 SC 846; (1948) 2
All ER 766; AIR 1979 SC 621; 1986 SCMR 1917;
1990 SCMR 1187; 1992 SCMR
883; 1993 SCMR 1905; 1992 SCMR 1652;
1998 SCMR 1404; 1999 SCMR
41; PLD 1997 SC 582; PLD 1993 Lah. 914;
1999 SCMR 412; PLD 1991 SC
691; PLD 1992 SC 369 ref.
Ch. Muhammad
Farooq, Attorney
General and Ch. Akhiar Ali, AOR
for Appellants.
Mr. S. Sharifuddin
Pirzada, Sr. ASC with Mr. M.A.
Zaidi, AOR for Respondent
Date
of hearing: 25.3.1999.
judgment
Mamoon Kazi, J.-Brief facts of the case are that, in 1994 the
Government of Pakistan initiated "Awami
Tractor Scheme", which allowed import
of tractors into the country without levy of customs duty and other charges. In furtherance of the said Scheme, vide SRO 92KD/94, dated 22.9.1994, the Federal Government exempted
tractors and their parts from whole of customs duty and sales tax if imported
by the importer authorised by the
Ministry of Food, Agriculture and Livestock. Further, on 11.12.1994, vide SRO 1189(I)/94 CKD components of tractors were
exempted from whole of customs duty
and sales tax if imported by local manufactures.
2.
On
13.6.1996 SRO 92KD/94 and SRO 1189(I)/94 were amended by SRO 388(I)/96 and SRO
414(I)/96 respectively and customs duty upto 10 per cent was levied and further exemption of
the whole sales tax was withdrawn.
However, it was decided by the Federal Government that import of tractors under the
Awami Tractor Scheme shall not be governed by the said decision.
3.
In
pursuance of the said scheme, the respondent, which had an assembly plant of
4. It may be pointed out that in the meanwhile when
the Caretaker Government was in power ib
5.
On
24.2.1997 when the matter came up for hearing before a learned Single Judge of the High Court, the
Deputy Attorney General for Pakistan made a
statement before the Court indicating that a decision had already been taken by the Government to discontinue
the said scheme whereupon the petitioner
was disposed of as infructuous.
6.
The said order was,
however, assailed by the respondent in an Intra-Court
Appeal before a Division Bench of the same Court which accepted the appeal, holding that the respondent's
rights were protected under Section 6
of the Protection of Economic Reforms (Act XII of 1992), which had overriding effect over other laws. The
case of the respondent was also held
to be governed by the principle of promissory estoppel which, according to the learned Judges, bound the Federal
Government to honour the letter of
authorization, dated 26.6.1996, which had extended benefit of the same concessions as were earlier applicable
under the said scheme. The contention
raised on behalf of the petitioners that Section 31-A of the Customs Act empowered the Federal Government to
withdraw exemptions
or concessions granted under the
said Act was also repelled. On the other hand, doctrine of legitimate expectation was applied.
7.
Leave
was granted to examine the effect of the different notifications issued by the Federal Government,
referred to earlier in this judgment.
8.
We
have heard Ch. Muhammad Farooq, learned Attorney General for
9. The learned Attorney General has argued that, vide the said notifications, dated 13.6.1996, the respondent
was liable to pay customs duty and
sales tax on the imported tractors at the rate of 10 per cent and 18 per cent respectively. The learned Judges in the High
Court were therefore, clearly in
error while allowing the appeal on the strength of the said letter of authorization,
dated 26.6.1996, which having been issued by the Ministry of Food, Agriculture and livestock, against the
provisions of Section 31A of the Customs
Act, could not authorise waiver of any levy legally imposed on the said goods. It has been further argued that,
after insertion of Section 31A in the Customs Act, the doctrine of
pr&missory estoppel could not be invoked by the respondent, as it was liable to pay custom duty and other
charges at the rate obtaining at the time of import of the tractors in terms of
Sections 30 and 31 of the said Act,
notwithstanding the earlier concessions granted in pursuance of the said
scheme.
10.
Challenging
the aforesaid contentions, Mr. Sharifuddin Pirzada has, on the other hand,
argued that, vide authorization letter,
dated 26.6.1996,
the respondent was allowed similar concession as had been allowed under the
first phase of Awami Tractor Scheme, therefore, the tractors imported by
the respondent under the said
scheme enjoyed complete exemption from
payment of customs duty and sales tax, vide
SRO 92KD/94
and SRO 1189(l)/96, respectively, which continued to remain in force after the said letter
of authorization. It has been further contended that, having induced the respondent to place
order with foreign suppliers for import of the said tractors, the Federal
Government could not be permitted to repudiate its own undertaking to the
detriment of the respondent. Support for the said contentions has been sought to be
obtained by Mr. Sharifuddin Pirzada
from the equitable
doctrine of estoppel which is embodied
in Section 114 of Qanun-e-Shahadat Order, 1994.
11.
Reference
in this regard has been made by the learned counsel first to the
observations made by this Court in Mukhtar Ahmad v. Government
of West Pakistan (PLD
1971 SC 846). In this case, the Government of West Pakistan had luanched a
scheme for training of Assistant
Agricultural Engineers whereunder candidates were first to be selected for appointment. Candidates
selected by the Public Service Commission although, satisfied all the
conditions but when they were about to complete their training, they were
informed by the Government that they would have to appear again before the said
Commission for their final selection. The candidates asserted that after completion
of their training the condition
subsequently imposed by the Government was unjustified. This Court in this case
observed:-
"The offer of the Government and its
acceptance by the appellants constituted a valid agreement and the Governor's order
dated, the 1st July, 1965 provided the authority for such an agreement. This agreement is capable of
being enforced I law. The Government was
both
competent and obliged to implement that agreement."
Reliance has also been placed by Mr. Pirzada
on the case of Robertson v. Minister
of Pensions (1948)
2 All E.R. 766. In this case, decided by the King's Bench Division, the claimant was
injured in an accident while on military service. After he had been examined
by a medical board and found unfit for general service, he wrote to the War Office
which, without consulting
the Minister of Pensions, replied to the claimant that his disability had been
accepted as attributable to military service. On the faith of such assurance, the
claimant took no further steps to obtain independent medical opinion. The
question, therefore, arose, whether the assurance contained in the letter of
the War Office was binding on the Minister of Pensions. It was held that the letter from
the War Office was on the face of it an authoritative decision intended to be
binding and to be acted on the fact that the claimant had, as a result of that
letter, forborne from getting a medical opinion was sufficient to have made
the letter binding. Reliance has further been placed by Mr. Sharifuddin
Pirzada on the case of M/s. Motilal Padampat
Sugar Mills Co. Ltd. u. The State of
"It is only if the Court is satisfied,
on proper and adequate material placed by the Government, that overriding
public interest requires that the Government should not be held bound by the
promise but should
be free to act unfettered by it, that the Court would refuse to enforce the promise
against the Government."
12. It may be pointed out that the principle
of estoppel invoked by Mr.
Sharifuddin Pirzada, which is no referred to by the Courts as the doctrine of promissory estoppel, has been
examined by this Court in a number of
judgments and it has been held in these cases that although, the said doctrine is available in this country
against the Government or its functionaries,
but it has been further held that the said doctrine is not available against the Legislature. Although, no
executive action can operate retrospectively
so as to impair vested rights or impose new obligations but the same principle cannot apply in case of a
legislative provision. The learned Attorney
General has referred to a number of cases wherein effect of Section 31-A of the Customs Act has been examined by this
Court and it has been held that,
even if a contract has been
entered into by a party upon exemption granted
under Section 19 of the Customs Act, no vested right would be created so as to
deprive the competent authority from rescinding such exemption as Section 31-A now clearly stipulates
that any amount of duty which becomes
payable in consequence of withdrawal of a concession or exemption from
duty, even though such withdrawal takes place after conclusion of a contract for sale of goods or opening of a letter of
credit, would now be payable in
terms of Section 30 of the Customs Act. The said section provides that, the rate and amount of duty applicable to any imported goods shall be the rate and amount
chargeable on the date of the presentation
of the bill of entry. The rule of promissory estoppel earlier laid down by this Court in the case of Al-Samrez Enterprise v. Federation of Pakistan (1996 SCMR 1917) putting an embargo on the power
of the Government to withdraw an exemption after a contract had already been
entered into by a party or letter of credit had been opened by it, has been further held to be no longer applicable. Section
31-A of the Customs Act is reincorporated
here for convenience of reference as under:-
"31-A. Effective rate of duty.-Notwithstanding anything contained in any other law for the
time being in force or any decision of any Court, for the purposes of Sections 30 and
31, the rate of duty applicable
to any goods shall include any amount of duty imposed ift Rwtinn 9. nf the
Finance Ordinance, 1982 (XII of
1982), and Section 5 of the Finance Act, 1985
(I of 1985), and the antidumping
or countervailing duly imposed under the Import of Goods (Anti-dumping and
Countervailing Duties) Ordinance, 1983 (III of 1983), and the amount of duty that
may have become payable in
consequence of the withdrawal of the whole or any part of the exemption or concession
from duty whether before or after the conclusion of contract or agreement for the
sale of such goods or opening
of letter of credit in respect thereof.
(2) For the purpose of determining the value
of any imported or exported
goods, the rate of exchange of which any foreign exchange is to be converted
into Pakistan currency shall be rate of exchange in force,--
(a) in
the case of goods referred to in clause of Section 30, on the date referred to in that clauses;"
Cases referred to by the learned Attorney General in this regard
are reported as Messrs Nizam Impex and another v. Government of Pakistan (1990
SCMR 1187), Mian Nazir Sons Industries Ltd. v. Government of Pakistan (1992 SCMR 883), Molasses
Trading & Export Ltd. v. Federation of Pakistan (1993 SCMR 1905), M/s Army Welfare Sugar Mills Limited v. Federation of Pakistan (1992 SCMR 1652), Messrs M.Y. Electronics Industries Ltd. v. Government of Pakistan (1998 SCMR 1404) and Collector of Customs v. Ravi Spinning Ltd. (1999 SCMR 412).
13.
Consequently,
when SRO 92KD/94 and SRO 1189(I)/94 which were applicable earlier, were amended vide SRO 388(I)/96 and SRO 414(I)/96, dated 13.6.1996,
the earlier notifications ceased to be operative and customs duty and sales tax on the said
tractors after the subsequent notifications came into force became payable in
accordance with the rates applicable in terms of Section 31A of the Customs Act.
Although, he letter dated
26.6.1996, issued by the Ministry of Food, Agriculture and Livestock had authorised the
respondent to avail benefit of exemption under the earlier notifications
which were applicable during the first phase of the said scheme and on the faith of
the said letter, the respondent claims to have entered into an agreement with the foreign supplier for import of
the said tractors, but promissory estoppel
cannot be invoked against provisions of any legislation even if they authorise the government to impose new
obligations or to
withdraw existing concessions. Consequently, the
doctrine of promissory estoppel
appear to have been erroneously invoked by the High Court to defeat the provisions of Section 31-A of
the Customs Act.
14.
Mr.
Sharifuddin Prizada has further argued that the provisions of Section 31-A of
the Customs Act are liable to yield to the provisions of Sections 6 and 10 of the
Protection of Economic Reforms (Act XII of 1992) as the provisions of the said
Act have been given overriding effect over those of the former. Reliance has
been placed by him on Messrs Ellahi
Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582), M/s Zasha Ltd. v. Agricultural
Development Bank of Pakistan (PLD 1993 Lah. 914) and an unreported judgment of this
Court in Civil Appeal No. 223 of 1994 (Gudoon
Industries Limited v. Government of Pakistan) decided on 16.12.1998. In these cases, no doubt, the
provisions of Act XII of 1992, which is a special statute, have been held to
prevail over those of the general statutes on account of their overriding character. The
learned Attorney General has however
argued that Section 6 has been erroneously invoked by the learned Judges of the High Court as they have failed to
take into consideration the purpose
and object of "economic reforms" as defined by Section 2(l)(b) of Act
XII of 1992. The said definition is
as under-
"(b) "economic reforms" means
economic policies and programmes, kws and regulations announced, promulgated or
implemented by the
Government on and after the seventh day of November, 1990, relating to privatization
of public sector enterprises, and nationalised banks, promotion of savings and investments, introduction of
fiscal incentives for industrialization and
deregulation of investment, banking, finance, exchange and payments systems,
holding and transfer of currencies;
and
(c) all other expressions used in this
Ordinance shall have the meanings respectively
assigned to them under the relevant laws."
15. Section 6 of
Act XII of 1992 upon which Mr. Pirzada has relied provides
for protection of fiscal incentives for setting up of industries. It lays down that
"Protection
of fiscal incentives for setting up of industries.--The fiscal incentives for investment
provided by the Government through the statutory orders listed in the Schedule
or otherwise notified shall continue in force for the term specified therein and
shall not be altered to the disadvantage
of the investors."
Section 10 which is the other section relied
upon by the learned counsel, further
provides:
"10. Protection of financial obligations.-^ financial obligations incurred including those
under any instrument, or any financial and contractual commitment made by or on
behalf of the Government shall
continue to remain in force, and shall not be altered to the disadvantage of the
beneficiaries."
16. Preamble
of the said Act indicates that object for which the said Act came into force was to provide legal protection
to economic reforms introduced by the
Government to and create a liberal environment for savings and investments and other matters related
thereto. As has been pointed out by
the learned Attorney General, Section 6 is intended only to provide
protection to fiscal incentives for investment and industrialisation in the country.
Therefore, it cannot be extended to matters, where such object is not intended to be achieved. The section
also provides protection to Notifications
No. SRO 1283(I)/90
and SRO 1284(I)/90, both dated 13.12.1990,
which have been referred to in the Schedule to the said Act. So far as
Section 10 is concerned, no doubt it provides that all financial obligations including those under any instrument
incurred on behalf of the Government
shall continue to remain in force and shall not be altered to the disadvantage of the beneficiaries, but the
provisions of Sections 6 and 10 cannot
be interpreted in isolation without taking into account the purpose and object
of the statute. Therefore, as was pointed out earlier, the object behind Act XII of 1992 only appears to be to
provide fiscal incentives for economic
reforms as defined by Section 2 of the Act and industrialisation in the
country as part of the economic policies and programmes of the Government Therefore, no general protection appears
to have been intended to be provided
to any importer of finished industrial products by the said section. It is pertinent to point out
that, in Collector of Customs v. Ravi Spinning Ltd. (1999 SCMR 412), the question as to power of the Government to impose regulatory duty under
Section 18(2) of the Customs Act was
examined by this Court in the light of Section 6 of Act XII of 1992 and the contention that the Government could not
withdrawn concessions or exemptions
earlier allowed to the importer of goods in view of the provisions of Section 6 was emphatically repelled by this
Court. Consequently, in our view,
reference to the provisions of Act XII of 1992 appears to be completely misplaced. Equally misconceived is invocation of
the doctrine of legitimate expectation
by the learned Judges of the High Court as the doctrine cannot be invoked to nullify effect of a legislative
provision. The judgments relied upon
by the learned Judges in this regard are also not applicable to the facts of the present case.
17. Lastly, Mr, Pirzada while relying upon Muhammad Baran v. Member (Settlement and
Rehabilitation Board of Punjab) (PLD
1991 SC 691) and Muhammad Saleem v. Superintendent of Police,
Sialkot (PLD 1992 SC 369) has
argued that even if the order impugned in the case is found to be technically defective, but if it is otherwise
justifiable, the order must be sustained.
According to the learned counsel, heavy loss would be suffered by the respondent on account of breach of undertaking
by the petitioners. Therefore, the
judgment of the High Court can be sustained on moral grounds. The contention, however, equally appears
to be unsustainable as the question
involved in the present case relates to recovery of public revenue. If claim of the Government to recover duty
or tax is otherwise
sustainable under the law, relief
cannot be granted to a party at the cost of public revenue even if its claim to the same is founded on high moral grounds. Therefore, the cases referred to by Mr.
Pirzada are distinguishable as in
none of them any question of recovery of duty or tax was involved.
18. In the result, there appears to be force in the
contentions raised by the learned
Attorney General. Resultantiy, the appeal is allowed and the judgment of the High Court is set aside. There
will, however, be no order as to costs in view of the questions raised by the
parties.
(A.P.) Appeal accepted.