KARACHI: The Sindh High Court has granted relief to the importers of used auto parts who challenged the imposition of a penalty equal to the value of the imported goods by the Customs authorities. The petitioners had imported used auto parts from various countries under the Customs General Order 11 of 2006, SRO 499(I)/2009, and the Valuation Ruling 1714 of 2022, which allowed them to pay import duties, redemption fine of 20% of the Customs Value, and a token penalty of a few thousand Rupees. However, after the Finance Act 2023 amended section 156(1) of the Customs Act to increase the penalty to ‘not less than the value of the goods’, the respondents refused to release the imported goods unless the full penalty was paid.
The petitioners argued that the amendment was meant to curb smuggling and not to kill the trade of import and sale of used auto parts, which was still permitted by the Customs officials as long as the full penalty was paid. They also contended that the amendment could not have retrospective effect, as they had opened letters of credit and entered into contracts for import well before the Finance Act 2023. They relied on various judgments of the superior Courts and the principle that the interpretation that saves rather than destroys the fundamental right to trade and business is to be preferred.
The Court accepted the petitioners’ arguments and held that the amendment could not be applied retrospectively to their imports. It also observed that there was a conflict between the Import Policy Order 2016, which prohibited the import of used auto parts, and the Customs law, which allowed it on payment of redemption fine and a token penalty. The Court resolved this conflict by applying the principle of harmonious construction and giving effect to both laws. The Court ordered that the imported goods be released on payment of the applicable import duties, plus the redemption fine, plus penalty within the range that was prevalent before the Finance Act 2023, and in any case not more than Rs. 20,000/-. The Court also directed the petitioners to submit security in the form of post-dated cheques for the balance amount of penalty with its Deputy Registrar before approaching the Customs for release of their goods.