Lahore High Court has granted interim relief to an importer of Chinese items against the levy of regulatory duty that was imposed by the Federal Board of Revenue (FBR) through SRO No. 1035(I)/2017, on goods imported from China. Sources told Business Recorder that LHC gave interim relief in respect of levy of regulatory duty through SRO 1035(I)/2017 dated 16.10.2017, for goods imported from China and covered under the highest rate of customs duty under SRO 497(I)/2009. The LHC has held that the petitioner shall be entitled to import the goods subject to deposit of post-dated cheque for the amount of regulatory duty imposed through SRO 1035(i)/2017.
The background facts had it that there is a bilateral trade agreement between China and Pakistan and in pursuance of that agreement the federal government had issued SRO 497(I)/2009, dated 13.06.2009, in exercise of its power under section 19 of the Customs Act and specified the goods importable from China to whom exemption from whole of the customs duty in excess of rate specified in Column 4 of the Table, were exempted.
For example: in respect of Ceramic Tiles, the table provided that customs duties in excess of 37.5% shall be exempted. At that time, the rate of customs duty on the said product was 20% and the rate of regulatory duty was 25% under SRO 568(I)/2014 as amended by SRO 505(I)/2017 and as a result, in respect of imports from China the regulatory duty was collected at the rate of 17.5% and the overall customs duties in excess of 37.5% were exempted under SRO 497(I)/2009.
Lately, the federal government in suppression of SRO 568(I)/2014 issued SRO 1035(I)/2017 and enhanced the rate of regulatory duty on tiles to 45% from the earlier rate of 25% with the result that overall duties on tiles stood at 65% including 20% customs duty and 45% regulatory duty. Though the concession provided to goods imported from China of overall sealing of 37.5% provided in SRO 497(I)/2009 was still available yet the customs authorities in the WEBOC removed the option of clicking SRO 497(I)/2009 to avail the benefit of above ceiling without any announcement and reason thereof. On that, some of the importers of goods of China filed writ petition before the Lahore High Court.
The interim order of the court said that the counsel for the petitioners, states that the petitioner's goods were exempted in terms of SRO 497(I)/2009, from the whole of customs duties. This in fact means that the petitioner's goods were also exempted to the extent of 37.5% from not only the customs duties but also regulatory duties under section 18(2) of the Customs Act, 1969. However, by the impugned notification dated 16.10.2017 in SRO 1035(I)/2017, regulatory duty has been imposed to the extent of 45% and the petitioners are required to pay that regulatory duty over and above the customs duty which were sought to be paid by the petitioner in terms of SRO 497(I)/2009.
This impinges upon the right of the petitioner in terms of section 18 of the Act as also the determination made by the Supreme Court of Pakistan in Assistant Collector Customs vs. Gadoon Textile Mills (1994 SCMR 712) which effectively declared that the regulatory duties is a part of customs duty and is included therein.
The LHC has issued notices and in the meantime, the petitioner shall be entitled to import the goods at the rate specified in SRO 497(I)/2009 subject to deposit of post-dated cheques for the amount of the regulatory duty imposed through SRO 1035(I)/2017.
When contacted Shahid Jami, a tax lawyer, explained that since SRO No. 497(I)/2009 had not been withdrawn hence its removal from WEBOC by the customs authorities was nothing but misuse of their power to change software without any change in the concessionary regime of SRO No. 497(I)/2009 to honour bilateral trade agreement with China. He said that WEBOC also does not cater for clearance of goods on account of any interim or final order of the court and importers are made to run from pillar to post to get the court order implemented by WEBOC, according to Jami.
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