Supreme court dismisses appeal by Collector Customs Appraisement Holds proviso is to be strictly construed to the provision it is appended to

KARACHI: A full bench of Supreme Court of Pakistan comprising Chief Justice Mian Saqib Nisar, Justice Faisal Arab and Justice Ijaz ul Ahsan dismissed an appeal filed by the Collector Customs, Appraisement against Gul Rehman proprietor G.Kin Enterprises, Sialkot.

According to details leave to appeal was granted by the apex court to consider that  whether the respondent is entitled to the refund of customs duty paid (along with the penalty), when, as per the case of the appellant the respondent was required to prove that the incidence of customs duty had not been passed onto the consumer in terms of the provisions of Section 19A of the Customs Act, 1969 (the Act), which it failed to do so.

As per facts the respondent is an importer of fabrics and it made a declaration in the bill of entry that the imported goods were covered by heading 5407.5200, attracting 14% customs duty. The department controverted this declaration and claimed that instead the correct PCT heading would be 5903.1000, on which 25% customs duty was payable. Pursuant to a show-cause notice, an order-in-original dated 3.7.2006 was passed in which the latter heading was held to be applicable.

Later the imported consignments were confiscated, an additional penalty was imposed and the respondent was given the option under Section 181 of the Act to redeem the confiscated goods on payment of a fine. In order to get the consignments released the respondent made the requisite payments but simultaneously assailed the order-in-original before the Collector of Customs, Sales Tax & Federal Excise (Appeal) Collector (Appeals) who, vide order dated 8.12.2006, accepted the plea of the respondent and determined that the appropriate heading was indeed 5407.5200 and there was no mis-declaration by the respondent. The department has admitted before us today that they did not challenge this order and thus for all intents and purposes it attained finality. Be that as it may, on account of the favourable order of the Collector (Appeals) the respondent sought refund of the amount paid by it on the basis of the order-in-original dated 3.7.2006. The department declined to refund the said amount. Instead, vide another order-in-original dated 5.3.2008 the department held that as the incidence of the duty had been passed onto the consumer by the respondent therefore it was not entitled to any refund in terms of Section 33 and 19A of the Act. This order was successfully assailed by the respondents through a constitutional petition filed before the learned High Court of Sindh, resulting in the impugned judgment. Leave in this case was granted vide order dated 30.6.2010, however it is important to note that in the same order an admission on behalf of the learned counsel for the appellant was recorded in the following terms:- “Raja Muhammad Iqbal, learned ASC for the petitioner contends that the petitioner department has no cavil to the classification of PCT heading made by appellate court of Collector of Customs in its order dated 8.12.2006.”

The only plea taken at the time of granting leave and which prevailed with this Court was whether the amount paid by the respondent could be refunded according to the mandatory provisions of Section 19A of the Act when the incidence of the duty had been passed onto the end consumer. 3. Learned counsel for the appellant, referring to Section 33 of the Act, argued that the proviso contained therein is clear, which states that, “Provided that no refund shall be allowed under this section if the sanctioning authority is satisfied that incidence of customs duty and other levies has been passed on to the buyer or consumer”. In this context he stated that according to Section 19A of the Act, it was for the importer to prove that the incidence of duty had not been passed onto the consumer, thus, by virtue of this strict liability, the burden was on the respondent to prove the same, in the absence of which it would be presumed that the incidence of duty had been passed onto the consumer. Hence refund was impermissible under the law.

We find that Section 33 of the Act has to be read as a whole in order to appreciate the letter and spirit of its proviso. The said section reads as under 33. Refund to be claimed within one year. (1) No refund of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within one year of the date of payment:

Thus it is clear from the language of Section 33 (1) that refund in terms thereof is to be allowed only where/if customs duty has been paid as a result of some inadvertence, error or misconstruction, which is not the position in the present matter. Right from the beginning the respondent has agitated that the declaration made by it under PTC heading 5407.5200 was correct. There was no inadvertence, error or misconstruction involved in such declaration whereas it has been the stance of the department that this heading was incorrectly attributed to the goods. This issue was conclusively resolved by the Collector (Appeals) vide its order dated 8.12.2006 in favour of the respondent, which, as mentioned earlier, has attained finality. 6. Before proceeding further, we find it pertinent to discuss the purpose and scope of a proviso; in relation to the arguments submitted before us in respect of the proviso to Section 33 (1) of the Act. Generally a proviso is an exception to or qualifies the main provision of law to which it is attached. 1 Its purpose is to qualify or modify the scope or ambit of the matter dealt with in the main provision, and its effect is restricted to the particular situation specified in the proviso itself.

The Chief Justice of Pakistan who authored the judgment held that it is a settled canon of interpretation that a proviso is to be strictly construed3 and that it applies only to the particular provision to which it is appended.

A holistic reading of Section 33 of the Act, particularly the provisions of sub-section (3), clarifies that where a refund becomes due as a result of any decision or judgment passed by a customs officer, Appellate Tribunal etc., the proviso to sub-section (1) would not be applicable because no such proviso is attached to sub-section (3), meaning thereby that the refund has to be made notwithstanding the fact that the incidence of customs duty had been passed onto the customer and therefore Section 19A of the Act would not be attracted. Resultantly we do not find any merit in this appeal which is accordingly dismissed, the judgment said.

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