SHC dismiss suit of Engro Elengy Terminal, holds liable to pay Customs duty

KARACHI: Justice Muhammad Junaid Ghaffar of High Court of Sindh (SHC) on Thursday dismissed a suit filed by Engro Elengy Terminal against demand of Pakistan Customs for payment of Customs Duty while issue of advance income tax etc was referred back to relevant department.

Barrister Makhdoom Ali khan appearing for the plaintiff maintained that it imported a Floating Storage Re-gasification Unit (FSRU) to handle LNG and Regasified  Liquefied Natural Gas (RLNG) against which the customs is demanding customs duty at a rate of 5 per cent and 5/5 per cent advance tax.

The plaintiff sought exemption under SRO 678, clause 2 and 2-a. The plaintif also sought exemption from advance income tax on the basis of SRO 947 and contended that after Finance Bill 2015, concession under the said SRO is academic  as the Finance Bill provides a five year Income Tax holiday exempting the profit gained by LNG Terminal Operators from any tax.

Sohail Muzaffar Advocate assisted by Masooda Siraj representing the Customs including Nayyar Shafique Additional Collectors Adnan Qadoos Shaikh, Assistant Collector, Tariq Aziz Principal Appraiser,  Asad Aleem Principal Appraiser Law and Liaquat Ali Principal Appraiser, Port Muhammad Bin Qasim Model Custom Collectorate questioned the maintainability of the suit and said it was barred under section 217 of the Customs Act 1969. They submitted that petitioner has the alternate remedy as contemplated under  Section 193 and 194 (A) of the Customs Act 1969.

The counsel also maintained that FSRU is in fact a vessel classifiable under HS Code 8901.2000 attracting statutory custom duty at the rate of 10 per cent, Sales Tax at the rate of 17 per cent and Income Tax at the rate of 5.5 per cent. Sohail Muzaffar however said that sales tax is not attracted in this case.

The bench after hearing the sides in detail reserved the judgment on 26.2-2016 which was announced in open court here Thursday. The bench rejected the challenge to jurisdiction of the court and said suit is maintainable. The bench however dismissed the suit holding that  plaintiff is liable to pay custom duty as demanded by the Custom authorities.

The bench in respect of advance income tax noted that plaintiff attempted to apply and obtain an exemption certificate but Commissioner Inland Revenue regretted from extending such a concession. A revision plea was also rejected by Chief Commissioner, Inland revenue.

The bench however in view of recent concessions given to the LNG industry noted that since plaintiff  has been recognized as a petroleum company in terms of SRO 678 for which exemption is available under SRO 947, section 148 of the Income Tax Ordinance 2001 becomes irrelevant and in-applicable.

The bench said that as Commissioner Inland revenue order is not speaking one, the matter is remanded back to the Inland revenue authorities for deciding the  exemption or other wise in respect of advance income tax.

After the announcement of judgment, Barrister Makhdoom Ali Khan, counsel for plaintiff prayed to the court to suspend the order as he intend to file an appeal.

The bench allowing the request, ordered suspension of its order to the extent of payment of custom duty for a period of two weeks.

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