Fecto Belarus, a tractor assembler and importer firm, has been told by Supreme Court that it is not entitled to nearly Rs 500 million it had paid on import of tractors as it is not entitled to tax amnesty under Awami Tractors Scheme of 1994 and 1996. The Court ordered its office to refund the amount, deposited by the CBR with it, to the Collector of Customs, but according to the Supreme Court Rules, along with "accrued mark up, if any". The Rules, however, allow a deduction of small percentage from such refunds as a service charge.
However, the Court agreed to refund the two percent service charges already paid by Fecto, provided it could prove that it had not made "unjust profit of nearly Rs 200,000" on each unit it had sold. The charge, the Court said, was not refuted by the company in its replications earlier.
This ruling is the base of a 56-page judgement, authored by Justice Iftikhar Muhammad Chaudhary and concurred by Justice Rana Baghwandas and Justice Shakirullah Jan.
The judgement announced here on Wednesday put the exact amount returnable to the Collectorate of Customs at Rs 493,467,838, and said that a mark-up "accrued" would also be due.
In another case of similar nature, initiated by Khyber Tractors Limited, the appeal met with the same fate. The exact amount in that case could not be ascertained immediately.
In a long run of litigation with the Central Board of Revenue, the Fecto Belarus had won its case in a civil review visit paid by the Supreme Court under Chief Justice Riaz Ahmed Shaikh, restoring a Lahore High Court decision of August 97 that favoured Fecto Belarus, saying that the importer was entitled to all "concessions like exemption from the customs duty and sales tax as were made available under original Awami Tractor Scheme". The order also restrained the CBR and other Government agencies from "withdrawing or amending the rules to the disadvantage of the petitioner".
In the civil review judgement, the Supreme Court found it "crystal clear" that withdrawal of Statutory Regulatory Order SRO exempting the payment of customs duties and the sales tax would not be applicable to the second phase of the import scheme as the government itself had resealed from it to the extent of the import to be undertaken by the company.
While Fecto went to Court questioning the demands made by the CBR for payment of duties, it obtained release of imported tractors against bank guarantees. Following the failure of the petition at one stage, the CBR recalled the guarantees that totalled to the above amount.
Soon after the acceptance of the Civil Review by the Supreme Court, the firm wrote to the CBR seeking return of the monies but drew a blank on the ground that there was no "clear direction to refund the amount" issued by the Supreme Court.
Once again, the tractor company returned to the Court seeking initiation of contempt proceedings against the Government, the Central Board of Revenue and its Members for Customs and Sales Tax, M Ramzan Bhatti and Shahid Ahmed.
In their conclusions the Judges upheld two ordinances that were issued by the President and later protected by the 17th Amendment that removed the "basis on which civil review" was accepted by the Supreme Court in February, 2001" and also noted that the same had remained silent on the request for refund. Hence, the Central Board of Revenue, by their refusal to refund the amounts, had not committed contempt of court. On the contrary rather, the Board had complied with the order of the Court by depositing the amounts by means of cheques with it.
In that situation, the Second Bench said, the Board officials and the Government could not be charged with contempt of the court.
The Judges also quoted from the data provided by the CBR that the Fecto stood in violation of the rules of the Awami Tractors' Scheme by overcharging. Instead of the agreed rate of Rs 230,000 the importer had sold the machines at Rs 399,000 to Rs 435,000, thus "earning a profit of 200,000 per unit. This fact, the judgement noted, had not been denied by Fecto.
However, it concluded that if upon furnishing documentary evidence, the importer satisfied the CBR that the tractors were sold by it at the agreed rate of Rs 230,000 per unit, inclusive of Customs Duty and Sales Tax, then it would be entitled to the refund of Service Charges, otherwise it would also be liable to pay the balance of amount acquired from the higher prices charged by it.
Khalid Anwer instructed by M A Zaidi, Advocate on Record, appeared for Fecto Belarus while the Federal Government was represented by Attorney General Makhdoom Ali Khan. He was assisted by Faisal Hussain Naqvi and Suleman Afridi.
Abdul Hafeez Pirzada represented Central Board of Revenue and was assisted by Afzal Siddiqui, Miangul Hassan Aurangzeb and Hameed Ahmed. They were instructed by Meher Khan Malik, Advocate on Record.
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