TARIQ BROTHERS Versus GOVERNMENT OF PAKISTAN

ORDER

1. SALEEM AKHTAR, J .‑‑The petitioners entered into a contract on 1‑12‑1987 for purchase of 500 metric tons of welding electrodes from a South Korean Company. They obtained import licence on 17‑2‑1988 and opened a letter of credit in favour of the sellers on 21‑3‑1988 for 250 metric tons. It has been alleged that after the contract and issuance of import licence, the respondent No.2 in exercise of powers under section 18 (2) of the Customs Act by a notification dated 13‑3‑1988 imposed 40$ Regulatory Duty in addition to the statutory duty on welding electrodes. The goods were shipped on board TAEPING under bill of lading dated 31‑3‑1988 and the cargo was discharged at Karachi on 12‑5‑1988. The petitioners filed the bill of entry for placing the goods in the bonded warehouse. According to the petitioners, the respondent 4 has informed them that the goods will be cleared and Customs duty assessed after adding 40% Regulatory Duty. The petitioners have challenged the notification imposing Regulatory duty as illegal unconstitutional and void.

2. Mr. Makhdoon Ali Khan has contended that as the petitioners had entered into a contract to purchase the goods and obtained import licence before 13‑3‑1988, they had acquired a vested right and by the impugned notification Regulatory Duty cannot be imposed and recovered from them. The learned counsel has entirely relied on Samrez's case 1986 S C M R 1917. The present case on facts seems to be distinguishable. The petitioners had entered into a contract on 1‑12‑1987 for purchasing welding electrodes for shipment in March 1988 and May 1988. The letter of credit was opened on 21‑3‑1988 and goods were shipped on 31‑3‑1988. We inquired from the learned counsel the date on which the petitioners had issued instructions to their bankers for opening the letter of credit and the answer was that such instructions were issued before 13‑3‑1988. In the petition also similar vague averment has been made and no specific date has been given. No document has been produced to prove this date. In these circumstances it cannot be presumed that the instruction to issue letter of credit was issued before 13‑3‑1988 when notification for imposing Regulatory Duty was issued. The petitioners had obtained import licence on 17‑2‑1988 valid for one year and paid the fee. From this licence it is not clear whether at that time the petitioners had entered into a contract for purchase of the goods or that such a contract was a condition precedent for issuing a licence. A vested right will be created when instruction for issuing letter of credit is issued by the importer or payment in any legally recognised form is made. Usually in commercial transactions payment is made through letter of credit. According to the observations of the Honourable Supreme Court in Samrez's case, the contract, instructions to the banker for issuing letter of credit or opening of letter of credit and obtaining import licence create a vested right. Therefore, all these three factors combined together create a vested right. Mere entering into a contract with a foreign supplier by itself will not be sufficient to claim a vested right. Such contracts if backed by a firm and irrevocable financial c9mmitment made before the date of the impugned notification make the importer entitled to claim vested right. If instruction for issuing letter of credit has not been issued or letter of credit has not been opened then till such date it is issued or opened no vested right can be claimed. The issuance of such instruction leads to opening a letter of credit whereby the importer is irrevocably financially committed to the extent of the value of the goods which the exporter can obtain on retiring the documents. The letter of credit is in fact an authentic document issued by a third party (banker) proving firm financial obligation whereby the opener ceases to have control over the funds and it is paid when the seller retires the documents. Therefore, such firm commitment should be made before the notification withdrawing exemption or enhancing or importing duty or tax is issued.

3. The petitioner opened letter of credit on 21‑3‑1988 and no proof of issuing instructions for opening the same before 13‑3‑1988 has been produced. Even allegations in this regard in Para 7 of the petition are vague, uncertain and unspecific. Therefore, on facts this case is distinguishable from Samrez's case. .

4. As no vested right in importing without payment of 40% Regulatory duty had been created in favour of the petitioner, we dismiss the petition in limine.

5. A . A . /T‑32/ K ?????????????????????????????????????????????????????????????????????? ??????????? Petition dismissed.