SHC allows SCRA against demand of bonded ware house establishment charges

KARACHI: A divisional bench of High Court of Sindh (SHC) comprising Justice Munib Akhtar and Justice Zulfiqar Ahmad Khan allowed a Special Customs Reference Application (SCRA) filed by Messers Ally Brothers and CO (Pakistan) Limited, a private Bonded Warehouse licensed under section 13 (3) of the Customs Act 1969 challenging demand of  “establishment charges”.

According to the facts of the appeal/application applicant obtained a license for private bonded warehouse in the year 1977 which functioned up-to 1990. Thereafter licensee did not apply for the renewal and conveyed the intimation on 01-07-1990 According to an official Circular 8/98 dated 08-10-1998 applicant/appellants name was included amongst 112 bonded warehouses whose license expired and they become nonfunctional. Mazhar Jafri advocate, counsel for applicant further maintained that after a lapse of 15 years on 01-03-2005 respondents served show cause notice stating that the applicant has neither applied for renewal of the license nor paid establishment charges of rupees 142,000. The department later proceeded ex-parte and passed an order cancelling the license and directing recovery of establishment charges of rupees 142,000. The applicant filed an appeal before the Custom tribunal which dismissed the same and against which instant SCRA moved.

Muhammad Sarfraz Metlo advocate, counsel for respondent Collector Customs submitted during course of the arguments that factum of non-operation of the ware house was not supported by documents. He also admitted that after 1993 no effort was made by the applicant for renewal of the license nor there is any record of goods having been in-bonded after 1993. He, however contended that non utilization of the facility of the bonded warehouse did not absolve the applicant from payment of establishment charges.

The bench discussing the process of issuance of of license, term and revival of a license in case of a bonded warehouse under custom laws and regulations noted that such charges are recoverable on annual basis as per rule 348 of Custom Rules 2001. The court further noted that there is no perpetuity licensing fee, it can only be charged in respect of services performed and not otherwise. If a person chooses not to revive or renew the license, establishment charges are not payable as no services of Custom Authorities are to be enjoyed by the defunct licensee, the court said in it order while granting the application in favor of the applicant/appellant.

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