The COLLECTOR OF CUSTOMS, MCC (APPRAISEMENT), LAHORE VS ADVANCE ENERGIES, GULBERG, LAHORE, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 1925 (2017)

(a) Customs Act (IV of 1969)---

----Ss. 19 & 20, Vth Schedule, Item No.24---SRO No.568(I)/2014, dated 26-6-2014---Exemption of customs duty---Consignment comprised of "Complete SMD/LED Lights in Parts" at the transactional value at US$ 1,746.92 and importer sought clearance under PCT Heading 9405.1090 vide goods declaration---Importer claimed exemption of customs duty vide Sr. No.24 of the Vth schedule of the Customs Act, 1969 and under SRO No.568(I)/2014, dated 26-6-2014---Goods were found in accordance with description, quantity, weight and import origin as declared in the invoice, packing list enclosed with the goods declaration---Appraising Officer assessed the impugned 'LED Lights' under HS Code extending exemption under provisions of Vth Schedule of Customs Act, 1969 and VIth Schedule of Sales Tax Act, 1990 and SRO No.568(I)/2014, dated 26-6-2014---Adjudicating Officer assessed the imported goods in accordance with law and the benefit of SRO No.568(I)/2014, dated 26-6-2014 and Vth Schedule of Customs Act, 1969 had been refuted---Collector of Customs (Appeals)/Appellate Authority, on appeal set aside order of Adjudicating Officer holding that impugned items were entitled for exemption as per Sr. No.24 of the Vth Schedule of the Customs Act, 1969---Validity---Purpose for which Item No.24 of Vth Schedule of the Customs Act, 1969 had been embodied, was that of promotion of 'renewable emergency technologies' as used in Item No.24 of the Schedule, had much wider connotation than what had been projected by Departmental Representative---Departmental interpretation of restricting tariff concession under the Schedule solely to the extent of electric current extracted through use of solar energy, was based upon a misconception of fact and law and mere a conjecture---Type of output electrical current, could not be equated with ascertainment of the type of source energy used to run the electrical power generating system---Departmental stance of associating renewable energy technologies with direct current being cryptic in nature, could not sustain the test of judicial scrutiny---Serial No.24 of Vth Schedule, revealed that the impugned tariff entry was bereft of any precondition with regard to restricting the scope of concession to the extent of type of source energy or the current used in illuminating the specified 'LED Lights'---Pivotal legislative intent behind Item No.24 of the Schedule was that of inclusion of articles carrying the most energy efficient technologies---In absence of any wording in the statute supporting restriction on the scope of concession granted thereunder to the extent of 'LEDs' based unilaterally on direct current, the interpretation rendered by Federal Board of Revenue tantamounted to subversion or recasting of legislation through manufactured interpretation, which could not be sustained---Impugned 'LED Lights' merited exemption of customs duty, sales tax and regulatory duty under Sr. No.24 of the Vth Schedule of the Customs Act, 1969---Appeal of the department being devoid of merits, was dismissed in circumstances.

(b) Words and phrases---

----'Renewable energy'---Meaning explained.

According to encylopedia Britannica ref.

Moazzam Sultan Appraiser for Appellant.

Sakhi Muhammad for Respondent.

JUDGMENT

OMAR ARSHAD HAKEEM, MEMBER (JUDICIAL).----This judgment shall dispose of an appeal filed against Order-in-Appeal No.240/2015 dated 16.11.201,5 passed by the learned Collector of Customs, (Appeals) Lahore.

2.Precise facts of the core controversy involved in the instant appeal are that M/s. Advance Energies, Lahore imported a consignment comprised of "Complete SMD/LED Lights in parts" from China at the transactional value @ US$ 1,746.92, total quantity 28127 Kgs and sought clearance thereof under PCT Heading 0405.1090 vide GD No.LTNB-HC-37 dated 07.07.2015. Moreover the importer claimed exemption of customs duty vide Sr. No.24 of the 5th Schedule of the Customs Act, 1969, Sales tax exemption vide Sr. No. 15(2) of Table III laid down under 6th Schedule to the Sales Tax Act, 1990 and exemption of Regulatory Duty vide Sr. No. 2C of Table 1 under S.R.O. 568(I)/ 2014 dated 26.06.2014. During the course of 100% examination by the Customs authorities the goods were found in accordance with description, quantity, weight and import origin as declared in the invoice, packing list, B/L etc. enclosed with the GD. Moreover, during the process of appraisement the concerned Appraising Officer assessed the impugned LED Lights under claimed HS Code extending exemptions under the above stated provisions of 5th Schedule of the Customs Act, 1969 and 6th Schedule of the Sales Tax Act, 1990 and S.R.O. 568(I)/2014 dated 26.06.2014. The Adjudicating Officer assessed the imported goods in accordance with law and the benefit of SRO and 5th Schedule has been refuted.

3.Being aggrieved of the above said assessment order, the importer filed an appeal before the learned Collector of Customs (Appeals), Lahore, who vide impugned order modified it as under:-

"I have examined the case record, considered the grounds of appeal and verbal arguments advanced by the authorized representative of the appellant as well as departmental representative during hearing proceedings and have found that M/s Advance Energies a regular importer of LED Lights, imported a consignment comprising of "Complete SMD/LED Lights in parts" from China and claimed exemption of Customs Duty vide Sr. No. 24 of the 5th Schedule of the Customs Act, 1969, Sales Tax exemption vide Sr. No. 15(2) of Table III laid down under 6th Schedule to the Sales Tax Act, 1990 and exemption of Regulatory Duty vide Sr. No. 2C of Table 1 under SRO 568(I)/2014 dated 26.06.2014. The Board has already issued clarification on the subject-matter vide letter C. No. 1 (56) March/95 dated 15th April 2015. According to which it has clearly been stated that Lights Emitting Diodes (Light emitting in different colours) falling under PCT Heading 8514.5000 mentioned at Sr. No. 23(e) of the 5th Schedule of the Customs Act, 1969 are meant for dedicated user of renewable source of energy like solar, wind, geothermal etc. While on the other hand the items mentioned at Sr. No. 24 of the 5th Schedule of the Customs Act, 1969 i.e. SMD/LED Light classifiable under PCT 9405.1090 meant for promotion of renewable energy technologies are also eligible for exemptions under the above stated express provisions. The Sr. Nos.23 and 24 are mutually exclusive in respect of the description and HS Code meaning thereby that these are not inter-related rather separated from each other. Therefore the impugned items falling under Sr. No.24 are also eligible for exemption as they have been imported for the promotion of renewable energy technology as their use and installation will definitely promote the use of renewable energy as per Sr. No. 24 of the 5th Schedule of the Customs Act, 1969, Sales Tax exemption vide Sr. No. 15(2) of Table III laid down under 6th Schedule to the Sales Tax Act, 1990 and exemption of Regulatory Duty vide Sr. No. 2C of Table 1 under SRO 568(I)/2014 dated 26.06.2014. In view of the above the instant appeal is accepted and the assessment order on GD No. LTNB HC-37 dated 04.07.2015 is set aside as the imported items are entitled for exemption as per Sr. No. 24 of the 5th Schedule of the Customs Act, 1969, Sales Tax exemption vide Sr. No. 15(2) of Table III laid down under 6th Schedule to the Sales Tax Act, 1990 and exemption of Regulatory Duty vide Sr. No. 2C of Table 1 under S.R.O. 568(I)/2014 dated 26.06.2014."

4.Being aggrieved from the aforesaid order of the Collector of Customs (Appeals), Lahore the appellant/department has filed the instant appeal before this Tribunal on the following grounds:--

(a)That the impugned order has been passed in haphazard manner without application of judicial mind and non speaking order is totally against the Article 24-A of the General Clauses Act, 1897.

(b)That the impugned "Complete SMD/LED Lights in parts" falling under PCT Heading 9405.1090 being not exclusively meant for promotional energy technologies are not covered under claimed exemption of Customs Duty vide Sr. No. 24 of the 5th Schedule of the Customs Act, 1969, Sales Tax exemption vide Sr.No. 15(2) of Table III laid down under 6th Schedule to the Sales Tax Act, 1990 and exemption of Regulatory Duty vide Sr. No. 2C of Table 1 under SRO 568(I)/2014 dated 26.06.2014.

(c)That on 100% physical examination by the concerned staff the impugned goods have been found "Complete SMD/LED Lights in unassembled condition" without any indication/exclusive functions in respect of solar or promotion of renewable energy technologies. Moreover during appraisement it transpired that the claimed provisions for exemption of customs duty are subject to the conditions of promotional activity against renewable energy. Whereas the impugned LED Lights are not dedicated with solar energy rather can be also used on the alternative electric source of energy thus the above stated exemptions were denied as per customs law, rules and regulations.

(d)That the respondent No.2 has relied upon Boards clarification on the subject matter whereas according to the forestated clarification the Collectorates are advised to dispose of such cases in the light of provisions of S. Nos. 23(1c) and 24 ibid. Thus the impugned goods not being exclusively meant for the promotional activity as envisaged under the forestated provisions of 5th Schedule ibid were not eligible for the claimed exemption.

(e)That it is pertinent to mention here that the exemptions are admissible to SMD/LED Light falling under PCT 9405.1090 meant exclusively for promotion of renewable energy technologies. Moreover as clarified by the FBR the impugned SMD/LED Lights falling under PCT Heading 9405.1090 eventually are not exclusively meant for promotion of renewable energy technologies hence not eligible for exemptions under the above stated provisions of law. Moreover the benefit of above mentioned exemptions is not being allowed by the MCC Karachi.

(f)That the Collector of Customs MCC Karachi has issued Assessment Alert according to which the scope of the exemptions under the above stated provisions is restricted to only SMD/LEDs which are classifiable under HS Code 9405.1090 i.e. indoor LEDs and which promotion renewable energy technologies rather than conventional energy sources/technologies.

(g)That the clause 77 of the 2nd Schedule to the Income Tax Ordinance, 2001 clearly restricts the benefit of exemption to those items which are to be used dedicatedly with renewable sources of energy i.e. solar, wind etc. The precise point is that these items are not unconditionally entitled to the claimed exemptions.

(h)That most of the imported LED lights and fittings claiming exemption operate on AC/Grid Power which generates power through non-renewable sources of energy like fossil fuels etc. whereas LEDs for use with renewable sources of energy operate on direct current. In accordance with afore-stated legal positions the exemptions under the above stated claimed provisions is not admissible to AC based LEDs that operate on conventional Grid Power.

5.We have given our anxious considerations to the contentions of both the parties and perused the records.

6.While arguing his case before us, the DR representing the appellant department was of the opinion that the term renewable energy technologies refers only to solar energy, as the solar PV modules produce Direct Current therefore LEDs having ability to be dedicatedly illuminated on direct current are eligible to attract concessions under the 5th Schedule of the Pakistan Customs Tariff; Thus he concluded that the impugned parts constituting LEDs being operable on both alternating and direct current stood ousted from the statutory concessions of duty and tax free imports as a result of falling under the normal import tariff duty/tax regime. Conversely while defending the impugned order the learned counsel for respondent states that the argued concessionary tariff restriction is an invention of the appellant department which does not find any origins within the mandates of the said concessionary Schedule, therefore in light of the terms of said Schedule the impugned LEDs fell squarely within bounds of statutory exemptions of duties and taxes.

7.We begin by referring to serial number 24 to Part I of 5th Schedule to the Pakistan Customs Tariff which is relevant to the instant case the same reads thus;

24.Following items for promotion of renewable energy technologies:-

1.LVD induction lamps 8539.3990 0%

2.SMD, LEDs with or without ballast with fittings and fixtures 9405.1090 0%.

3.Wind turbines including alternators and mast. 8502.3100 0%

4.Solar torches. 8513.1040 0%

5.Lanterns and related instruments. 8513.1090 0%

6.PV module, with or without, the related components including invertors, charge controllers and batteries 8541.4000, 8504.4090, 9032.8990, 8507.0000 0%

8.A bare reading of above reveals that the purpose for which the impugned item 24 has been embedded under the concessions of 5th Schedule to the Customs Tariff is that of promotion of renewable energy, technologies; It is seen that manifestly the LEDs along with their relevant PCT Code are mentioned at its sub-clause (2) ibid.

9.The adversarial matrix of the case therefore sprouts the following two offshoots;

What is the purport of the term "renewable energy technology"? Whether "renewable energy technologies" solely consist of solar energy?

Whether the renewable sources of energy can solely produce direct current and whether conversely alternative current can only be obtained from non-renewable sources?

10.Apropos primary question proposed in para supra, preliminarily, we have alluded to the meaning of the term renewable energy however, in absence of its statutory definition we have referred to its dictionary meaning;

According to encyclopedia Britannica;

Renewable energy, also called alternative energy, is a usable energy derived from replenishable sources such as the Sun (Solar Energy), Wind (wind power), rivers (hydroelectric power), hot springs (geothermal energy), tides (tidal power), and biomass (biofuels).

11.We have perused the aforementioned definition and it is quite evident that renewable energy is the type of force obtained from sources which are unending, it can therefore be derived that renewable energy technologies are those which can harness energy from not only the solar energy but also kinetic forces of nature, presently, such technologies include Photo Volatic Cell technology, wind turbine technology, hydroelectric turbine technology, geothermal turbine technology, tidal wave turbine technology and biomass technology; It is thus undeniable that the term 'renewable energy technologies' as used in item 24 to 5th Schedule to the Pakistan Customs Tariff has much wider connotations than what has been projected by the appellant's representative; We thus are of the considered opinion that the departmental interpretation of restricting tariff concessions under the said Schedule solely to the extent of electric current extracted through use of solar energy is based upon a misconception of fact and law thus stands derided to mere conjecture.

12.Apropos the second question proposed in para supra; As the departmental conception is based on the premise that the renewable energy technologies can only produce direct current we therefore have referred to the technological meanings of Direct Current and Alternating Current and our disseminations and distinctions with respect to the two types of currents are inked as follows.

13.It is seen that the sole distinction between the two types of currents i.e. DC and AC is that in direct current (DC), the electric charge (current) only flows in one direction, while on the other hand an electrical charge in alternating current (AC), changes direction periodically. The voltage in AC circuits also periodically reverses because the current changes direction. As far as production of both types of currents is concerned both direct current and alternating current can directly be produced by renewable (i.e. hydroelectric energy) or non renewable energies (i.e. fossil fuels, coal etc) the only technological difference is that in an AC generator, current flows through fixed coils, there is a magnet that moves, and both ends of the magnet cause the flow of current to remain in an opposite direction. While in DC generators, there are no fixed coils; However, the current flows as the coil moves in a fixed field.

14.Summing up in light of above it is manifest that the type of electrical current produced does not in any way ascertain the source of energy used, both the forces of energy (i.e. renewable or non-renewable) can produce DC or AC current, therefore in light of what has been discussed, the type of output electrical current cannot be equated with ascertainment of the type of source energy used to run the electrical power generating system, consequently we are of the considered opinion that the departmental stance of associating renewable energy technologies with direct current being cryptic in nature cannot sustain the test of judicial scrutiny.

15.Even a bare perusal of impugned Sr. No. 24 to 5th Schedule reveals that the impugned tariff entry is bereft of any preconditions with regards to restricting the scope of concessions to the extent of type of source energy or the current used in illuminating the specified LED lights; We are of the considered opinion that the pivotal legislative intent behind said Sr. No.24 is that of inclusion of articles carrying the most energy efficient technologies. Undeniably, the term "renewable energy technology" as used in the concessionary Schedule refers solely to the type of force used to run the mechanical operation for generation of electricity and not the type of electrical output, we therefore hold that in absence of any wordings in the statute supporting restriction on the scope of concessions granted thereunder to the extent of LEDs based unilaterally on direct current the interpretations rendered by the FBR vide Letter C. No. SI/MISC/110/2015-VII dated 30.10.2015 tantamount to sub-version or recasting of legislation through manufactured interpretations, thus cannot be sustained. In this context we may also refer to the settled proposition of law that intention of legislature is reflected through its language and nothing can be added or subtracted therefrom.

16.In view of what has been discussed we hold that the impugned LED lights merit exemption of Customs Duty, Sales Tax and Regulatory Duty under Part I, Sr. No. 24 to the 5th Schedule of Pakistan Customs Tariff ibid Sr. No. 15(2), Table III, 6th Schedule to the Sales Tax Act, 1990 further readwith Sr. No.2C, Table I S.R.O. 568(I)/2014 dated 26.06.2014 we thus do not find any infirmity in the impugned appellate order and the same is upheld.

17.Upshot of the above discussion is that this customs appeal being devoid of merits is dismissed with no orders as to costs.

18.Parties be informed through registered post A.D. or by UMS.

19.File be consigned to record after completion.

HBT/102/Tax (Trib.) Appeal dismissed.