RECKITT & COLMAN OF PAKISTAN LTD., KARACHI vs PAKISTAN through Secretary to Government of Pakistan, Ministry of Finance, Islamabad and 3 others
This constitutional petition before the Sindh High Court challenges the denial of customs duty and sales tax exemptions on raw materials imported for the manufacture of Dettol. The core legal question concerns whether raw materials imported for manufacturing pharmaceutical products that are registered as drugs are entitled to exemption under S.R.O. 349(I)/85, regardless of the classification chapter under the First Schedule to the Customs Act, 1969. The court noted the conditions for exemption under the notification, which require the goods to be specified in the annex, imported by a manufacturer approved by the Director-General Health under the Drugs Act, 1976, and imported for manufacturing pharmaceutical products falling under Chapter 30 of the First Schedule to the Customs Act, 1969. Due to the contentions raised regarding whether Dettol falls under Chapter 30 or Chapter 38 of the Customs Act, the court found it unnecessary to examine the contentions in depth, leaving the matter open.
- Whether raw materials imported for the manufacture of pharmaceutical products are entitled to customs duty and sales tax exemption under S.R.O. 349(I)/85 if classified under Chapter 38 rather than Chapter 30 of the First Schedule to the Customs Act, 1969?
- What are the mandatory conditions prescribed under S.R.O. 349(I)/85 for claiming exemptions on imported goods by an approved manufacturer of drugs?
- Section 19, Customs Act, 1969
- Section 7(1), Sales Tax Act, 1951
- Drugs Act, 1976
1. SABIHUDDIN AHMED,J.-The facts of this case appear to be very simple. The petitioner have been importing raw material for manufacture of Dettol and such material has been subjected to Customs duty subject to exemptions available under section 19 of the Customs Act from time to time. Under S.R.O. 117(I)/84, dated 12-1-1984 goods specified in the annex through the notification imported by an approved manufacturer of drugs and falling in the category .Of "pharmaceutical prOducts" under Chapter 30 of the First Schedule to the Customs Act were exempted from payment of customs duty and sales tax. This notification was replaced by S.R.O.349(I)/85, dated 15- 4-1985 and it may be proper to reproduce the operative part thereof:-- "In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and subsection (1) of section 7 of the Sales Tax Act, 1951 (III of 1951), and in supersession of its Notification No. S.R.O. 117(1)/84, dated the 12th January, 1984 the Federal Government is pleased to exempt the goods specified in the Annex to this notification imported by a manufacturer, approved by the.
2. Director-General, Health, Government of Pakistan under the Drugs Act, 1976 (XXXI of 1976), for manufacture of pharmaceutical products falling under Chapter 30 of the First Schedule to the Customs Act, 1969 (IV of 1969), from the Customs duties chargeable thereon and the sales tax leviable thereon, subject to the following conditions, namely:-"
3. It may be added that the benefits under this notification were given retrospective effect from the date of registration of the drugs as has been acknowledged by the Hon'ble Supreme Court in Pfizer Laboratories v. Federation of Pakistan (Civil Appeals Nos.350 and 351 of 1993), decided on 23-4- 1994.
4. It is evident from the terms of the above quoted notification that the benefit of exemption from duties and taxes were available when:--
(i) the goods were specified in the annex to the notification;
(ii) they were imported by a manufacturer approved by the Director-General Health under the Drugs Act; and (i.e) they were imported for manufacturer of pharmaceutical products falling under Chapter 30 of the First Schedule to the Customs Act.
5. Messrs Jawed Farooqui and Raja Muhammad Iqbal, learned counsel for the respondents, on the other hand, argued that the raw material imported by the petitioner was admittedly meant for manufacture of Dettol, which was an antiseptic classifiable under Chapter 38 of the First Schedule to the Customs Act. Mr. Zaidi, however, contended that as long as the goods were registered as drugs, it was inconsequential under which particular chapter of the aforesaid Schedule they fall. We do not think it is necessary to examine the two contentions in depth..