MCC Lahore’s lethargy causes colossal loss to national exchequer

KARACHI:-An inordinate delay by Model Customs Collectorate, Lahore in filing an intra court appeal challenging the order of Lahore High Court (LHC) single bench that declared collection of Regulatory Duty (RD) as illegal being in violation of Section 18 (5) of the Customs Act 1969, caused huge loss to the national exchequer.

According to an order, LHC bench hearing a petition challenging the imposition of RD on mobile phones and various iron products held that “ Free Trade Agreement (FTA) being an off shoot of GATT is covered by the provision to Section 18( 5) of the Act of 1965 and hence imposition of RD is unlawful.

The RD was imposed at a rate of rupees 200 per set on Cellular Mobile Phones and at a rate of 15 per cent on billets, bars, wire rods and at a rate of 5 per cent on flat rolled iron or non alloy galvanized plates and cold rolled coils. The judgment resulted in shifting of imports to Lahore Dry Port as billions of rupees to be paid as RD were saved and pocketed by the importers. MCC Lahore did file an intra court appeal but after a considerable delay and according to rough estimates, the loss to national coffers was in billions.

A number of identical petitions were also filed before High Court of Sindh (SHC). The petitioners contended that in view of FTA between Pakistan and China the imposition of the regulatory duty is in contravention of Section 18 (5) of the 1969 Act. One of the counsel for petitioners also raised the ground of discrimination maintaining that impugned notification/ SRO was discriminatory as it provides an unfair advantage to the local industry who were producing goods of lower quality and in any event were unable to cater to the nationwide demands of such goods.

The SHC bench however rejected the disagreeing with the judgment of LHC and ordered release of Regulatory Duty deposited with SHC released in favor of Pakistan Customs. The SHC bench acknowledging the Pakistan’s obligations under the FTA with China held that “such obligations cannot be enforced domestically unless such bilateral agreement is incorporated into the domestic law “.

The bench held importers/ petitioner could avail the benefit of the Section 18(5) of Customs Act 1965 only “if it is extended to the mutual agreements FTA) through appropriate legislation“.

The petitioners/ importer moved the court as federal government in order to implement Article 8 of the FTA issued a notification SRO 659 (I) / 2007 allowing gradual reduction of tariff over certain imported goods originating in China. They contended that FTA has been enforced domestically by introducing proviso to Section 18 (5) through the Finance Act 2007 and hence the reduction to tariff mentioned in Category IV must result in a cumulative reduction of all duties imposable under section 18 (1), (3) and (5).The diversion of exports to Lahore Dry Port was halted after the decision by the SHC and also resulted in realization of Regulatory Duty to the tune of billions of rupees at different ports of Karachi, Pakistan.

The SHC judgment also saved the local rerolling industry from extinction as if the LHC decision was enforced/followed, the imported items from China were destined to capture the local market in terms of rates as well as quality.

The petition before the Sindh High Court was filed by M/s. Shanghai Industries, M/s. Majeed & Son Steel (PVT) Ltd, M/s. Razzaque Steel (PVT) Ltd, M/s. Nawab Brothers Steel Mill (PVT) Ltd & another, M/s. Dewan Steel Mill (PVT) Limited, M/s. Union Steel (PVT) Ltd, M/s. Dewan Steel Mills, M/s Ittehad Steel Industries, M/s. Haider Industries and others, M/s. Galaxy Construction, M/s I. International Industries, Mohammad Noor Ali and others, Muhammad Irshad, M/s. Modern Wire & Cable Industries Shahid Majeed, Muhammad Ashfaq, Khurram aslam Shaikh, M/s. Supreme Tube Industries, M/s. Lucky Star Steel, Khurram Shahzad Zubair, M/s. Inayat Pipe Industries, M/s. M.P. Industries (PVT) Limited, Arshad Sharif and others, M/s. Victory Pipe Industries (PVT) LTD and others, M/s. Sheikh Pipe Mills (PVT) Ltd and others, BBJ Pipe Industries, M/s. Ruby Steel Corporation (PVT) Ltd, M/s. International Industries Limited, M/s. Smart Steel Industries, M/s. Sun Tube (PVT) Ltd and others, Imran Bashir, , M/s. Modern Pipe (PVT) LTD, M/s. Karachi Tube Mills (PVT) Ltd, M/s. Pak Pipe Steel Industries, M/s. Shaheen Pipe Industries, M/s. Tayyaba Industries International, M/s. Pakistan Welding Electrodes, M/s. Izhar Steel (PVT) Ltd, M/s. Bismillah Industries, M/s. Hamza Industries, M/s. A.N. Industries, M/s. H.H. Industries, M/s. Khalid Pipe Mills (PVT) Ltd, M/s. Haider Industries, M/s. H.H. Cold Rolling & Tube Mills, M/s. Shaikh Tube Mills, M/s. Mehboob Tube Mills, M/s. Nation Tube (PVT) Ltd, M/s. Crystal Steel Corporation, M/s. Bilal Steel, M/s. Wasif Steel Industries,Fateemi Wires (PVT) Limited and other,Mittho Brothers (PVT) Ltd, M/s. Aisha Steel, ,M/s. United Mobile, M/s. New Allied Electronic Industries, M/s. Digicom Trading (Pvt) Ltd, M/s. Advance Telecom, , M/s. Naveed Gaba, ,M/s. Data Steel Pipe Industries (Pvt) Limited and others, M/s. Pakistan Pipe Industries, M/s. Bashir Pipe Industries, , ,M/s. Mohsin Metal Works, M/s. Gogan Steel Trader & others, M/s. Galaxy Energy Pakistan (Pvt) Ltd, M/s. Steel Re Rolling Mills & others, M/s. Hashim Trader & others, , Tariq Chobdar, Muhammad Ahmed Chobdar, ,M/s. Siddiq Sons Tin Plate Limited, , Mohammad Mansoor, M/s. Steel Zone, M/s. Raja Steel, , M/s. Kamran Steel, M/s. AKK Enterprises & others, M/s. Steel International, M/s. Bashir Pipe Industries (Pvt) Ltd, M/s. Steel Win, M/s. Bismillah Industries, M/s. Pyramid Gas (Pvt) Ltd, M/s. Muhammad Ali Iron Merchant, M/s. Hero Motors, M/s. Uma Traders & others, M/s. Aslam Traders & others, M/s. Jamil Brothers, M/s. Deenar Steel Mills & others, M/s. Global Steel Crop. & others, M/s. Pearl Apple & others.
Federation of Pakistan was represented by Zia-ul-Haq Makhdoom, Deputy Attorney General Model Customs Collectorate through Kashif Nazeer Advocate along with Ali Waheed Khan Deputy Collector and Ilyas Ahsan Khan, Appraising Officer (Legal) from Custom Depatment.

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