GLOBAL PHARMACEUTICAL (PVT.) LTD. Versus CUSTOMS APPELLATE TRIBUNAL

SARDAR EJAZ ISHAQ KHAN, J.--- The question of law posited for our consideration, as formulated in the memo. of this application and reproduced in this order sheet dated 15.12.2025, is whether the long-standing and internationally accepted classification of the subject products as Active Pharmaceutical Ingredients under PCT heading 2941.9090 duly recognized by DRAP and reflected in the Integrated Tariff could lawfully be varied by the Customs authorities without obtaining or considering DRAP's statutory determination under Section 500 of Part II of the Fifth Schedule to the Customs Act, 1969?

2.Rephrased in simpler terms, the question is whether the four antibiotics imported by the taxpayer were to be charged to customs duty under Chapter 29 or Chapter 30 of the Pakistan Customs Tariff (PCT). The taxpayer cleared them under Chapter 29, sub-heading 2941.9090. The post-clearance audit team of the customs countered that the antibiotics fell under Chapter 30, sub-heading 3003.2000. If Chapter 30 were the correct one, a higher rate of customs duty applied, with knock-on impact on the advance tax deductible at the import stage at 2% of the import value inclusive of the customs duty.

3.The show-cause notice dated 24.05.2025 was then issued on the premise that the imported antibiotics were "two constituents mixed together" , for which Chapter 30 was applicable, in contradistinction to Chapter 29 that, per the SCN, applied to Separate chemically defined organic compounds only.

4.All the three forums below agreed with the latter view (expressed in the SCN) through a process of reasoning which, on deeper examination, turns out to be rather perfunctory. It is disconcerting to see that, despite the plea in the taxpayer s reply before the Commissioner (Appeals) that three out of the four antibiotics were specifically mentioned qua mixtures in the Fifth Schedule to the Customs Act, the plea found no mention in the reasoning of the Commissioner (Appeals) nor in that of the learned Appellate Tribunal. Their reasoning and analysis remained confined to a rather superficial reading of Chapters 29 and 30 of the PCT headings in the First Schedule only.

5.The PCT headings are in fact the HS Code (Harmonized System Codes), labelled. for Pakistan, as the PCT Codes (Pakistan Customs Tariff Codes) for the classification of goods. The HS Codes are prescribed by the World Customs Organization, enabling a globally accepted classification and identification system of goods, which stands adopted by Pakistan. The PCT headings and sub-headings are reproduced in the First Schedule to the Customs Act that, in common parlance, is referred to as the Pakistan Customs Tariff Schedule. The First Schedule becomes the reference schedule for levy of customs duties under the main charging section of the Customs Act, namely, Section 18(1), as follows:

Section 18(1A) immediately follows, catering for reductions in or exemptions from the customs duties, and reads as follows:

6.Three out of the four antibiotics are specifically mentioned in rows 46, 151 and 186 of Table A of Part II of the Fifth Schedule to the Customs Act as mixtures of the primary antibiotics with additional chemicals, but the additional chemicals were considered by the department as robbing those antibiotics of the character of being "separate chemicals" for the purposes of Note 1(a) of Chapter 29 of the POT. The table below illustrates the point.

As stated in SCN

As stated in Table A of the Fifth Schedule to the Customs Act

Pharmaceutical product as declared in GD

Item

Description

PCT Code

Customs Duty%

Imipenem and Cilastatin Sodium Sterile Usp 1

151

Imipenem Cilastatin Sodium (Sterile mixture Sod Bicarbonate)

2941.9090

0

Cefoperazone Sodium+Sulbactam Sodium

46

Cefoperazone and Sulbactarn Sodium

2941.9090

0

Meropenem Sodium Carbonate Usp 40

186

Meropenem Sodium Carbonate

2941.9090

0

The three antibiotics, qua mixtures, are unambiguously listed in the Fifth Schedule as falling under PCT 2941.9090 (the sub-heading under which the taxpayer cleared the consignments) with the corresponding customs duty at 0%. The learned counsel for the Customs department was at a loss to explain how the forums below remained oblivious to that the Fifth Schedule not only categorized the said three antibiotics, as mixed, as falling under Chapter 29, but also that it provided for reduced customs duty at zero percent on the said compounds by virtue of the statutory command under section 18(1A) of the Customs Act. Section 18(1 A) begins with the non-obstante clause, overriding the general charging section 18(1) that operates to the extent of the First Schedule; the Fifth Schedule is to prevail to the extent of any conflict, for the reason of being an extension of the non-obstante intent expressed in section 18(1A), it being a Canon of construction that a schedule is only an extension of the section to which it pertains and is used, inter alia, to hive off provisions which are too long 2 .

7.In view of the unequivocal listing of three of the imported antibiotics at items Nos. 46, 151 and 186 of Table A of Part II of the Fifth Schedule under Chapter 29 of PCT headings, inclusive of the additional chemicals, with customs duty stated at zero percent, there can be little argument that the sophistry of the forums below in restricting themselves to reading and applying the First Schedule only was legally incorrect.

8.We are now left to consider the treatment to be accorded to the fourth antibiotic imported by the applicant that does not find mention in the Fifth Schedule, namely, Ceftazidime with Avibactam Sodium . We would refrain from stepping beyond our expertise by attempting to assert any determinative pharmacology knowledge in the manner the learned Appellate Tribunal did, which, insofar as we are aware, did not possess any pharmacology qualification to deduce, as it did in paragraph 8, that the mixture resulted in a pharmaceutical drug other than the one that existed in the primary ingredient's ( Ceftazidime ) singular unmixed form. The proper placement of a product under one or the other Chapter headings or sub-headings of the PCT is a question of law, as will become evident later in this judgment. The aforesaid conclusion of law was arrived at by the learned Tribunal on the major premise that Ceftazidime with Avibactam Sodium followed the same therapeutic rationale", namely, that "they enhance[d] therapeutic efficacy and prevent renal degradation of the antibiotic . No expert evidence for the conclusion of law as to the proper PCT Code based on this pharmacological deduction forms part of the record, and we wonder how the learned Tribunal drew this definitive conclusion necessitating either an accredited qualification in pharmacology or the expert opinion of a qualified pharmacist. Adjudications with potential for deleterious financial impact on a business, with knock-on effect by way of increase in the prices of medicines for the public, ought not be left to a casual search on the internet carried out with a pre-determined outcome in mind. In the absence of expert evidence, the correct approach was to find the solution in the rules of interpretation stipulated in the Customs Act and in the judgments of the superior Courts.

9.The First Schedule itself lists the rules of interpretation of the PCT Codes therein, by adopting the General Rules of Interpretation of the Harmonised System prescribed by the World Customs Organisation. The Finance Act, 1994, amended the Customs Act, 1969, to add the said General Rules of Interpretation in the First Schedule of PCT headings to the Customs Act, which, under the sub-heading "Pakistan Rules", reads as follows:

In Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal) LTU, Islamabad (2019 SCMR 282) , the Supreme Court posited for itself the question, namely, "...what was the correct method of interpreting the headings and sub-headings of the First Schedule to the Customs Act, 1969 - commonly known as the Pakistan Customs Tariff (PCT)... 3 . It proceeded to answer this question 4 by citing the passage in Messrs Citibank NA v. Commissioner Inland Revenue (2014 PTD 284) , that, in so far as relevant to this judgment, read that:

Reaching the same conclusion, the Supreme Court held in Additional Collector of Customs, Model Customs Collectorate of Appraisement (West), Custom House, Karachi v. Messrs K.S. Sulemanji Esmailji and Sons (Pvt.) Ltd. Karachi (2025 SCMR 121), as follows:

The Rules of Interpretation have statutory backing because they form part of the First Schedule to the Act of 1969. Likewise, the Explanatory Notes issued by the World Customs Organisation are declared in the First Schedule to be the most authentic interpretation of its Chapters and sections based on the Harmonised System. 5

10.The obfuscation operative in the SCN and in all the orders of the forums below was a partial reading of the Notes to Chapter 29. While claiming that Chapter 29 applied only to 'separate chemicals' and not to a mixture, all the forums below were confining themselves to five words appearing in Note 1(a) of Chapter 29 of the PCT while ignoring the rest of the language in Note 1. Note 1, in material part, is reproduced below:

11.It can be seen that the condition of separate chemically defined organic compounds is expressed subject to the context otherwise requiring, or where such additions are necessary for the preservation of the chemical, it being held by the Tribunal itself that the addition of Avibactam Sodium preserved Ceftazidime from renal degradation. We see no reason why, given the nature of the product in question, the aimed preservation is to be confined to outside the human body only and should not extend equally, if not more, to preservation inside.- the human body if it is to deliver its intended purpose at its target destination with maximum efficacy. It needs to be remembered that antibiotics are specifically listed in Chapter 29 under the heading "Antibiotics" under the sub-code 29.41.

12.With reference to the context otherwise requiring, Note 3 of Chapter 30, insofar as relevant, reads as follows:

(emphasis supplied)

The heading 30.03 pertains to "Medicaments", a more general title than "Antibiotics" under Chapter 29, and, per the department, it was this sub heading 30.03 that applied to the antibiotics in question. But Note 3(a)(2) above provides categorically that a mixture of products is to be treated as an unmixed product if it falls under Chapter 29. While this may appear somewhat circuitous at first sight, the General Rules of Interpretation cater for the answer, whose Rule 2(b) states that "the classification of goods consisting of more than one material or substance shall be according to the principles of rule 3" . Rule 3(b) introduces the concept of "essential character", and lays down the authentic rule of interpretation that mixtures are to be classified on the basis of their essential character. It is to be remembered that the rule of interpretation in Rule 3 has statutory force by virtue of the Customs Act, as reinforced by the judgments of the superior Courts aforementioned. It is not in contention by the department that the essential character of Ceftazidime with Avibactam Sodiutn 6 remained that of an antibiotic notwithstanding the mixture, nor was this contended by the ATIR in its impugned order. Rather, the reasoning of ATIR can be understood as nothing else but that the mixed substances had the net effect of enhancing the essential character of the antibiotic itself, when it observed that the mixture "enhanced their therapeutic efficacy and prevented renal degradation of the antibiotic" . The department's counsel remained singularly unable to persuade us to read anything in Chapters 29 and 30 compelling that a mixture be classified as of necessity under Chapter 30 where, admittedly, the additional chemicals served only to preserve or enhance the essential character of the primary drug in terms of its therapeutic efficacy. For the foregoing reasons, we find ourselves unable to agree with the reasoning and conclusion of the learned ATIR on the question of law concerning the correct classification of the drugs in question under Chapter 30, for we agree with the taxpayer (as does the Fifth Schedule for 3 out of the 4 antibiotics) that they fail under Chapter 29 of the PCT. We conclude that the fourth one does too.

13 Resultantly, this application is allowed, and the question of law framed above is answered in the positive, that is, for the applicant and against the customs department.

MH/50/Isl Reference allowed.

1 Usp stands for US Phannacopia a standardized compendium of nomenclature, and is not a chemical name per se.

2 Understanding Statutes, Cannons of Construction, SM Zafar, Revised Edition 2016, Chapter 3, Paragraph 13, citing Bennion on Statutory Interpretation and several judicial precedents.

3 Para 2

4 Para 12

5 Para 5

6 in fact, for all the four antibiotic mixtures