Collector Of Customs vs Messrs Byco Petroleum Pakistan and others
This matter concerns an appeal against a High Court judgment regarding the customs duty exemption status of three imported Tug boats. The core legal question was whether Tug boats, imported by the respondents for pushing oil vessels to the shore, fell within the scope of 'drilling and seismic (on shore or off shore) vessels' entitled to duty exemption under SRO 678(I)/2004, issued pursuant to Section 19 of the Customs Act, 1969. The Supreme Court held that the Tug boats did not qualify for the claimed exemption. The Court reasoned that the specific category in the SRO was limited to drilling and seismic vessels, which possess distinct functions, purposes, and Pakistan Customs Tariff (PCT) classifications compared to Tug boats, which are classified under PCT Code 8904.0000. Consequently, the Court established the principle that tax exemption notifications must be strictly construed according to the specific descriptions provided therein, and that goods falling under distinct tariff headings cannot be conflated with exempted categories based on broad or generalized interpretations of vessel types. The impugned judgment was set aside, and the appeals were allowed.
- Do Tug boats fall within the category of 'drilling and seismic (on shore or off shore) vessels' for the purpose of customs duty exemption under SRO 678(I)/2004?
- Can goods classified under a distinct Pakistan Customs Tariff heading be included in an exemption category intended for a different type of vessel?
- Must tax exemption notifications be strictly construed according to the specific descriptions provided therein?
- Section 32(3), Customs Act 1969
- Section 79(1), Customs Act 1969
- Section 19, Customs Act 1969
ORDER
MAQBOOL BAQAR, J.---The respondents who are engaged, inter alia, in the business of importing and selling oil in Pakistan, imported three Tug boats for offloading oil tankers and submitted goods declaration in respect thereof.
These boats were purportedly imported on temporary basis for a period of three years, without payment of duties and taxes, amounts whereof were secured through corporate guarantees. It was contended that the imports were exempted from taxes as the same were to be re-exported. The Collector Customs Adjudication on 17.04.2015 issued a show cause notice to the respondents. It was claimed that the responden ts have violated the provision of section 32(3) and section 79(1) of the Customs Act, 1969. Replying the notice, the respondents denied the allegations and contended that the Colle ctor Customs has no jurisdiction to adjudicate the matter . The Collector Customs Adjudication withdrew his notice. Aggrieved by the withdrawal, the Collector Customs MCC Gawadar filed an appeal before the Customs Appellate Tribunal. The appeal was dismissed and the Reference filed by the Customs was dismissed through the impugned judgment.
2. The controversy before the High Court was as to whether the Tug boats importe d by the respondents fall within the category of various machinery , equip ment, vessels etc which were allowed to be imported temporary without payment of customs duty etc, as enumerated in SRO 678(I)/2004 issued by the Government of Pakistan, under section 19 of the Customs Act, 1969. Raja Muhammad Iqbal, learned ASC for the appellant submits that the Tug boats imported by the respondents do not fall within the category of machinery , equipment, vessels etc. as enumerated in the above SRO for the purposes of exemption. However , the learned counsel for the respondents refers to and relies upon sub-clause (vii) of Clause (5) of the SRO which provides that all petroleum sector companies, corporations and organizatio ns etc. shall be entitled to import certa in machinery , vessels, etc. on temporary basis without payment of customs duties and submitted that the Tug boats imported by the 'respondents being of a kind of vessels mentioned therein, was/is entitled to exemption of certain duties as provided thereby .
However , we have noted that the vessels mentioned in the said sub-clause is a "drilling and seismic (on shore or off shore) vessels" and not a Tug boat. As rightly submitted by Raja Muhammad Iqbal, learned counsel for the appellant the description of the specific vessel mentioned A in the SRO do not embrace all kinds of vessels and certainly not the Tug boats. Learned counsel for the appellant submits that by definition these vessels are drilling and seismic vessels and are used by the oil exploration companies for off shore drilling, whereas admittedly the Tug boats were imported by the respondents to push their oil vessels to the shore only. Learned counsel submits that that the Tug boats are distinct kind of boats and have been assigned a distinct and separate code heading in the Pakistan Customs Tariff, being PCT Code No. 8904.0000, which exclusively relates to tugs and pusher craft, and therefore cannot, by any stretch of imagination, fall within the category of "drilling and seismic (on shore and off shore) vessels" as wrongly claimed by the learned counsel for the respondents.
3. Indeed, the category , purpose, function and classification of Tug boats, or a pusher craft, that are used to push the deep sea vessels to the port, are altogether different from "drilling and seismic (on shore and off shore) vessels", which as manifest from their description, are used for the purpose of the drilling and for functions relating to seismology . The PCT heading pertaining to the Tug boats and pusher craft do not cover "drilling and seismic (on shore and off shore) vessels, and therefore there can be absolutely no confusion that the Tug boats and "drilling and seismic (on shore and off shore) vessels", are two different things, with different codes, purposes and functions. The Tug boats admittedly are used, and are being used by the respon dents, for pushing their oil/bulk carriers to the shore, and not for the purposes of any drilling or any function related to seismology . The learned counsel for the respondents has not even claimed that the Tug boats fall under any of the remaining categories of different machinery , equipment, transport and/or vehicle, enumerated in the said SRO, which may attract exemption as provided through it. No other Policy , SRO or provision has been referred to by the learned counsel for the respondents to enable them to re-export the imported Tug boats without payment of the customs duties, and taxes that were payable by them at the relevant time. We would therefore hold that the three Tug boats imported by the respondents were/ are not entitled to any exemption as claimed by the respondents which claim has been wrongly upheld by the High Court through the impugned judgment. The impugned judgment is therefore set aside.
The appeals are accordingly allowed.