CLOVER PAKISTAN LIMITED, KARACHI VS COLLECTOR OF CUSTOMS, KARACHI, 2018 PTD-CUSTOMS-APPELLATE-TRIBUNAL-LAHORE 954 (2016)

2018 P T D (Trib.) 954

[Customs Appellate Tribunal]

Before Tahir Zia, Judicial Member-II and Muhammad Nazim Saleem, Member Technical-II

Messrs CLOVER PAKISTAN LIMITED, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No. K-1222 of 2016 (Old No. K-525 of 2009), decided on 17/06/2016.

Customs Act (IV of 1969)---

----Ss. 19, 19-A, 20, 79 & 80---S.R.O. No. 567(I)/2006, dated 5.6.2006, (as amended through S.R.O. No. 787(I)/2008, dated 26.7.2008)---Exemption of customs duty---Claim of refund---Appellant imported extra fine crystal sugar, and filed goods declaration under self-assessment and after release of consignment on payment of customs duty and taxes, filed claim for refund of customs duty amounting to Rs.17.01 million---Scrutiny audit revealed that at the time of import, the importer had not claimed exemption of Customs duty in terms of item serial No.2A of S.R.O. No. 567(I)/2006, dated 5.6.2006 (as amended through S.R.O. No. 787(I)/2008, dated 26-7-2008) and the goods were released on payment of customs duty and taxes; that the refund claims were not admissible because under S.R.O. No. 787(I)/2008, dated 26.7.2008 the exemption could be claimed only at the time of import; that the importer had failed to prove that the incidence of duty and taxes in terms of S.19-A of the Customs Act, 1969 had not been passed on the consumers; that the importer did not provide the details of amount/audit accounts at the time of filing of refund claims---Validity---Refund was claimed by the importer on the ground that the import of sugar was exempted from customs duty vide S.R.O. No. 567(I)/2006, dated 5.6.2006 (as amended vide S.R.O. 787(I)/2008, dated 26-7-2008)---Importer had failed to avail exemption on his consignments due to the reason that he was not aware of the same---Adjudicating authority had acknowledged that importer was entitled for such exemption had he claimed so at the time of filing of goods declarations---Said authority had also appreciated/ acknowledged that importer was not aware of the amending notification---Said authority, however, had rejected the refund claim of the importer on the ground that he had failed to address the core issue of passing of incidence of duty to the consumer---Authority was to dilate upon said core issue seriously and cite relevant documents/ information which should have unambiguously reflected and convinced that the incidence of duty had been passed on to the consumer and not absorbed by the company---Findings of the adjudicating authority, were arbitrary, whimsical and baseless---Importer had rightly contended that in view of the fact that the landed cost of sugar had substantially increased, which called for increase in his finished product---Appellate Tribunal observed that it would be unfair and irrelevant to conclude that incidence of customs duty had been passed on the consumer as the price of product was not decreased---Importer did not increase price of its end-product, despite substantial increase in landed cost of sugar due to serge of price in international market and was still to get benefit of exemption of customs duty in the form of refund---Importer was entitled to refund of Rs.17.01 million as the incidence of customs duty had not been passed on to the consumer and the case of the importer did not fall in the category of undue enrichment---Importer had lodged lawful claim for the refund---Impugned orders passed by the adjudicating authority and appellate authority below, were set aside---Department was directed to sanction the refund to the importer without any delay.

Tata Engineering and Locomotive Company Ltd. v. Union of India 1994 (69) E.L.T. 460 (Bom.); Pfizer Laboratories v. Federation of Pakistan PLD 1998 SC 64; Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072; Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 and Messrs Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072 ref.

Abdul Qudus Moughal for Appellant.

Syed Masoom Raza, Appraising Officer for Respondent.

Date of hearing 12th May, 2016.

ORDER

MUHAMMAD NAZIM SALEEM, MEMBER TECHNICAL-II---This Order will dispose off Customs Appeal No.K-1222/ 2016 (Old No. K-525/2009) filed by the Appellant against the Order-in-Appeal No.1877/2009 passed on 23.05.2009 and issued on 15.07.2009 by the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Karachi passed on the back of Order-in-Original No.1/2009 (Manual) dated 04.05.2009 issued by the Additional Collector, Model Customs Collectorate of PaCCS, Custom House, Karachi. Earlier the Customs Appellate Tribunal, Bench-III, Karachi decided the matter against the Appellant in Customs Appeal No.K-525/2009 vide Order dated 01.11.2010. The Appellant against aforementioned order, filed S.C.R.A. No.164 of 2011 dated 28.05.2015 before the Hon'ble High Court of Sindh, Karachi, who passed following order:--

"In view of the hereinabove facts and circumstances of the case, and for the reason that the Appellate Tribunal, while passing the impugned order, has not recorded any finding with regard to the legal controversy as referred to hereinabove, we would set aside the impugned order passed by the Customs Appellate Tribunal and remand the matter back to the Tribunal to decide the case afresh and has an appropriate order by recording finding on peculiar facts of the case application of section 19-A of the Customs Act, 1969. The applicant will be at liberty to file relevant documents in support of their claim which shall be examined in accordance with law and, thereafter, appropriate order may be passed after providing opportunity of being heard to both the parties. The appeal will be decided preferably within three months from the date of receipt of this order.

Instant reference application stands disposed of in above terms."

2.Briefly, facts of the case as reported are that the Appellant imported the consignments of Extra Fine Crystal Cane Sugar (HS Code 1701.9910) and filed Goods Declaration (GDs) bearing Nos. (i) I-HC-729774-050808, (ii) 1-HC-763055-090908, (iii) 1-HC-796449-151008, (iv) 1-HC-741004-160808, (v) 1-HC-742527-180808, (vi) 1-HC-765482-110908 and (vii) 1-HC-719898-260708 as per self assessment in terms of section 79(I)(b) of the Customs Act, 1969. Subsequently, after release of the consignments, the Appellant filed claim for refund of customs duty amounting to Rs.17.01 million vide following refund claim Nos:-

(i)R-240782 dated 02.01.2009 Rs. 11,63,834/-

(ii)R-240787 dated 02.01.2009 Rs. 20,27,300/-

(iii)R-240788 dated 02.01.2009 Rs. 39,93,760/-

(iv)R-240789 dated 02.01.2009 Rs. 35,22,350/-

(v)R-240790 dated 02.01.2009 Rs. 19,73,035/-

(vi)R-240791 dated 02.01.2009 Rs. 36,41,940/-

(vii)R-240792 dated 02.01.2009 Rs. 6,89,370/-

Total Rs.1,70,11,589/-

On scrutiny/audit of the aforesaid claims, it was observed that at the time of import, the appellant had not claimed exemption of customs duty in terms of serial number 2A of S.R.O. 567(I)/2006 dated 5th June, 2006 as amended through S.R.O. 787(I)/2008 dated 26.07.2008 and the goods were released on payment of customs duty and taxes. It was further observed that the refund claims were not admissible because as per relevant S.R.O. 787(I)/2008 dated 26.07.2008, the exemption was required to be claimed at the time of import. Moreover, the appellant had failed to prove that the incidence of duty and taxes, in terms of section 19A of the Customs Act, 1969, had not been passed on to the consumers. The appellant also did not provide the details of annual audit accounts at the time of filing of the refund claims to prove that the burden of duty paid was not made part of cost and end product.

3.The Additional Collector, Model Customs Collectorate of PaCCS, Custom House, Karachi decided to case vide Order-in-Original No.01/2009 (Manual) dated 04.05.2009 and passed the following order:--

"I have examined the case record and heard arguments of both sides. the moot point in this case is not whether exemption from payment of customs duty in terms of S.R.O. 787(I)/2008 dated July 26, 2008 was available to the respondent importer or not. Admittedly at the time of import of consignments in question of extra fine crystal cane sugar (HS Code 1701.9910, the above S.R.O. was in field and if the importer had claimed exemption under the S.R.O. it would have been allowed by the assessing officers as a matter of course (except perhaps Goods Declaration CRN 1-HC-719898-260708 which was filed on the same day the SRO in question was issued). However, the fact of the matter is that the importer did not claim exemption while filing the relevant Goods Declarations and indeed they were unaware of issuance of aforesaid SRO as evident from para (3) of their reply dated February 20, 2009 to the show-cause notice in which inter-alia it has been stated that they filed refund claims for excess customs duty paid under section 33 of Customs Act, 1969 as soon as they found out about the change in rate of customs duty on import of crystal cane sugar. There is not denying the fact that under section 33 of Customs Act, 1969 refund of customs duty over-paid can be claimed within one year of the date of payment and the present importer has lodged claim within the due date so it is not a case which is hit by limitation of time as in case of Supreme Court judgment in Pfizer Laboratories case.

It may be mentioned here that the importer has produced a lot of material in support of his plea that the incidence of duty in terms of section 19A of Customs Act, 196 was not passed on to the consumers including Financial Statements for the Half Year ended December 31, 2008 duly reviewed by the Chartered Accounting Firm, Ford Rhodes Sidat Hyder and Co., showing at serial number 8.1 of other receivables that it includes duty refund claim in respect of import of sugar amounting to Rs.17.01 million filed with the customs authorities. The importer has also produced another letter from the same Chartered Accountant Firm dated February 13, 2009 certifying that they have checked the books and records of the Company and ascertained that the Company has not taken into account custom duty paid in excess, amounting to Rs.17,011,589/- as part of its cost of product and that the incidence of the same has not been passed on to the consumers. Moreover, in their written replies submitted on February 20, 2009 and March 16, 2009 the respondent importer has argued that their financial statements for the half year ending December 31, 2008 clearly show that they have been suffering continuous losses owing to unprecedented increase in the price of raw materials, impact of increase in world fuel prices during the time, devaluation of Pak rupee, inflation and worldwide economic slow down and its effects on Pakistan economy. According to them before issuance of notification they were incurring heavy losses but they did not increase selling price of their product due to intense competition in the market. They have acknowledged the fact that on issuance of notification the additional cost being borne by them was reduced. However, landed cost with duty exemption was still higher as compared to landed cost in the past before issuance of SRO hence price reduction was not possible.

Another argument advanced by the respondent is that since the refund claims have been approved by the Deputy Collector after due verification of the relevant invoices for the six months period showing that incidence of duty and taxes in terms of section 19A of Customs Act, 1969 was not passed on to the consumer, they are entitled for payment of refund amount.

I have pondered over the case long and hard and also given due weightage to the arguments of the respondent claimant and come to the conclusion that the refund claimant has failed to address the core issue at the heart of the show-cause notice as to whether incidence of duty and taxes involved on the consignments which were cleared without availing customs duty exemption of 25 percent was passed on to the consumers or not. From the study of material provided by the respondent it is obvious that this incidence was made part of the cost by the Company and passed on to the consumers and not absorbed by the Company itself. As regards the other question that since the Deputy Collector had on the basis of invoices produced by the importer satisfied himself that the incidence of duty and taxes was not passed on to the consumers therefore, the refunds should be paid, it would suffice to say that the process of sanction and payment of refund is well defined in the Collectorate and no refund is issued without pre-audit of refund claim. For pre-audit a separate section has been created in the Collectorate which is headed by a senior officer of the level of Additional Collector or Deputy/Assistant Collector. In this instance the refund files were sent for pre-audit before payment and it was observed by the Assistant Collector Incharge Pre-Audit Section that all the requisite formalities have not been fulfilled by the refund claimant especially with reference to determination of the fact whether the incidence of duty and taxes has been passed on to the consumers or not, hence the show-cause notice.

In view of above facts and admission of the importer that there was not change in selling price of their end product after release of consignments under discussion it is established that they have passed on the incidence of duty to the consumers by incorporating it in the cost of their product, and payment of claimed amount to them at this belated stage is tantamount to undue enrichment of importer; therefore the refund claims being devoid of merit are rejected accordingly."

4.On an appeal filed by the Appellant, the Collector of Customs, Sales and Federal Excise (Appeals), Karachi vide Order-in-Appeal No.1877/2009 dated 15.07.2009, passed the following order:--

"I have examined the entire case record and given due consideration to the arguments made before me. Clearly, in terms of the provisions of section 19-A of the Customs Act, 1969 read with the judgment of the Hon'ble Supreme Court of Pakistan in the Fecto Belarus case (reported as PLD 2005 SC page 605) refund of any amount under the Act can be paid only when the refund claimant establishes that he incidence of tax had not been passed to the consumer. The extracts of the authorities quoted by the learned consultant from the Indian jurisdiction are not relevant to the facts and circumstances of the instant case. Besides, copies of the aforesaid authorities/judgments have not been produced. Therefore, the argument that the provisions of section 19-A of the Act are not attracted in this case is not tenable. Consequently, the only issue left in this case is whether the appellants had passed on the incidence of tax to the consumer. The evidence on record does not support the appellants' stance that the incidence of tax with respect to the consignments under reference had not been passed to the consumer. It is an admitted position that the price of the furnished product (i.e. Tang drink) had remained the same even after exemption from payment customs duty (previously 25%) on the principal raw material (i.e. Sugar) had been granted by the Government vide Notification S.R.O. 567(I)/2006 dated 5th June, 2006 as amended through S.R.O. 787(I)/2008 dated 26.07.2008. It is also an established fact that sugar is the major raw material of Tang drink. Therefore, a substantial reduction in tax incidence on sugar should have affected price of the end-product to the advantage of the consumer. Obviously, that did not happen at all; the price of Tank drink continued to be the same as previously. Thus, no benefit of the reduction in tax accrued to the consumer, meaning thereby that the incidence of tax had been passed on to the consumer. Under the circumstances, payment of refund to the appellants would tantamount to undue enrichment in violation of the principle set by the apex court in the Fecto Belarus case referred to above. Moreover, the appellants had themselves admitted in writing that the amount saved through the exemption of customs duty had been used by them for off setting accumulated losses of the company. In view of the position explained above, the certificate of the appellants -- paid Chartered Accountant and the entry in the purported Quarterly Financial Statement are after thoughts and hold no legal value. Therefore, I conclude that the appellants have not been able to fulfill the mandatory requirements of law laid down under section 19-A of the Act and, as such, the refund of Rs. 17.01 million claimed by them is not admissible to them. As for the plea of sanctioning of the refund claims by the Deputy Collector, the same is also untenable. From the record, I observe that the Deputy Collector had only attempted to pay the huge amount of Rs.17.01 million by ignoring the explicit provisions of law; he neither passed a proper order nor complied with the provisions of section 19-A of the Act. He just passed a message for refund of the aforesaid amount through the system. Therefore, the same has no legal value. It has to be said that the conduct of the Deputy Collector in this matter should be looked into seriously; why he attempted to pay the huge sum of Rs.17.01 million without even bothering to see whether the provisions of section 19-A of the Act had been complied. None of the arguments advanced by the appellants' consultant finds and support from the evidence on record. The precedents quoted by him are also not relevant to the facts and circumstances of the instant case. I, therefore, hold that the impugned order is correct in law and on facts and there is no reason to interfere with the same. The appeal, being absolutely devoid of any merit, is rejected."

5.That the appellant has filed this appeal on the basis of the following grounds:--

(A)That the impugned order-in-original as well as order-in-appeal are opposed to the facts of the case and are contrary to law. The relevant and material considerations have been ignored and the same are based on irrelevant and extraneous considerations.

(B)That the impugned orders are not based on any evidence and are non-speaking orders. These are based on conjectures and surmises.

(C)That the impugned orders have been passed against the appellant without taking into consideration the evidence and documents produced on record by the appellant. It is obvious from the impugned orders that the department could not come up with any evidence to reject the refund claims of the appellant.

(D)The impugned orders are non-speaking orders which are not based on any reasons at all and lacks any rational, logical or legal basis.

(E)That in order to meet the requirements of section 19-A of Customs Act, 1969, and allow a refund claim the department normally accept the certificate of the Chartered Accountants with the statement of accounts of the claimant showing therein that the burden of duty has not been passed on to the consumer. In spite of the fact that a certificate of Chartered Accountants has been furnished with the half yearly published, statement of accounts which have been rejected by the Additional Collector and the Collector (Appeals) without any reason and justification in all illegal and mala fide manner. Reliance is placed on 2005 (188) E.L.T. 301 (Tri.-Del.); Beekay Hosiery Industries v. Commissioner of Customs, New Delhi, the relevant portion read as follows:

"4. Passing on of duty is a matter of fact. In the present case, two certificates from Cost Accountants and Chartered Accountants clearly show that the duty on the machines "had not been passed on". Thus, the requirement under the law that refund is permissible only in a case where duty already paid had not been passed on stand satisfied ."

Reliance is also placed on 2003 (156) E.L.T. 270 (Trib-Mumbai): Commissioner of Customs and C.E. Mumbai v. Resham Sindh and Co. P. Ltd. In which the CEGAT, West Zonal Bench, Mumbai, held as follows:

" The appellants have also produced a Chartered Accountants certificate dated 22.05.2001 certifying that the appellants have borne the burden of extra duty paid which has been reflected in their balance shee and has not been passed on to any other person."

(F)That an examination of the half yearly financial statements of accounts ending 30th December, 2008, it appears that there was a loss of Rs.50.162 million. It was only for the reason that the landed cost of the raw materials were abnormally increased and, therefore, it reduced the profit earning despite the fact that in the year, 2007 in the same period the appellant was also paying duties and taxes to the Government but its profit was Rs.23,528 million. The appellant suffered losses in the first half year ending 30th December, 2008, on account of the fact that the landed cost (without customs duty) of sugar and other raw material was abnormally increased. In the case of Turakhia Ferromet Pvt. Ltd. 2003 (157) E.L.T. (Commr. Appl.), it was held that:

" .. Since, the price had been contracted and determined before the import itself it cannot be presumed that the same included the excess duty paid by the appellants at the time of import. No evidence in support of this presumption has been brought on record. On the other hand the appellants have produced the cost sheet which actually shows loss and again there is no evidence or finding to contradict this evidence.

5.The appellants have thus discharged the burden cost upon them under section 28D of the Customs Act."

(G) That the appellant has furnished sufficient evidence in order to establish that the burden of duty has not been passed on to the consumer. It was for this reason that the concerned officer of customs has rightly approved the refund claims of the appellant and informed it on-line. The Additional Collector has no power or authority under the Customs Act, 1969, to recall the orders of approval of the refund claims of the appellant. The order passed by the Additional Collector is illegal and without jurisdiction and is not maintainable in law.

(H) That the learned respondent as well as the Collector (Appeals) have failed to appreciate that there was lesser sowing of sugar in Pakistan with estimates of 28% less crop in 2008 leading to current expected sugar crisis in the country; also 20% less crop in India, being 2nd largest exporter of raw sugar in international market; and less production of sugar in European countries, were too expected to create sugar shortage in International market with ultimate results of abnormal hike in the sugar price in international market. The Government of Pakistan in order to keep the price of sugar and its allied products in the local market within the reach of the common men decided to exempt the import of sugar from payment customs duty. The learned respondent as well as the Collector (Appeals) has failed to appreciate that the landed cost of the sugar for 1 kg in the month of January, 2008 was approximately Rs.34.42 (vide Bill of Entry Cash No.3066 dated 10.01.2008) and it was Rs.45.10 in the month of June, 2008 (vide Bill of Entry Cash No.2405 dated 11.06.2008), after the payment of duties and taxes. That the learned ADC and the Collector has failed to appreciate that with the exemption the landed cost of the sugar was Rs.45.55 in the month of July, 2008 and without exemption it was Rs.54.75 (vide Cash No.Bl-7-26-371 dated 26.07.2008). It is an admitted position that the appellant in spite of increase in the landed cost of the sugar has not increased the price of its products meaning thereby that the burden of duty has been borne by the appellant itself.

(I)That the learned ADC and the Collector (Appeals) have failed to appreciate that the purpose of the notification was to control the increases of price of sugar and its alljed products in the open market. It is an admitted position that prior to the issuance of the notification and thereafter the prices of the products of the appellant were the same. It was observed by the Collector (Appeals) that "The evidence on record does not support the appellants' stance that the incidence of tax with respect to the consignments under reference had not been passed to the consumer. It is an admitted position that the price of the finished product (i.e. Tang drink) had remained the same even after exemption from payment customs duty (previously 25%) on the principal raw material (i.e. Sugar)." The learned Collector (Appeals) as well as ADC failed to appreciate that the landed cost of Sugar after payment of duties and taxes was Rs.45.10 per kg in the month of June, 2008, while it was Rs.45.55 per kg with the exemption, therefore, the question of decrease in the price of the products does not arise.

(J)That the learned respondent as well as the Collector of (Appeals) have failed to appreciate that the increase in international sugar prices and devaluation of Pak rupee were the main factors in the increase of landed cost of import sugar. The landed cost of the sugar prior to the issuance of the exemption notification was less than the landed cost after the grant of exemption. This fact itself establishes that the appellant has not passed on the burden of duty to the consumer as it has not increased the price of its product.

(K)That the learned Additional Collector and the Collector (Appeals) have failed to appreciate that the moto of the government was to protect the consumers of sugar i.e. Home Consumers and Industrial Consumers from abnormal hike in the international price of sugar and the devaluation of Pak currency so that home consumers (public in general) can have easy access to sugar for home consumptions and Industrial Consumers should also have access to sugar at a reasonable landed cost in order to bear the frequent price increases to keep their products in the access of general public.

(L)That it is fact of common knowledge that product manufactured, by the appellant is produced with the use of approximately 93% of sugar which is the principal raw-material and other raw-material about 7%. The retail price of Tang sachet in the month on May, 2008, was Rs.6.00 each when the landed cost of the sugar was Rs.42.58 per kg (vide cash No.391 dated 03.05.2008). Even with the exemption under the notification the landed cost of sugar imported by the appellant in the month of July, 2008, was Rs.45.55 (vide cash No.Bl-7-26-371 dated 26.07.2008). The price of Schacht in the month of July, 2008 and even at the present is Rs.6.00 per pack. It can only be stated in these circumstances that if the appellant had increased the price of its products in the month of July, 2008, then it will be a case where the burden of tax has been passed on to the consumer. As is apparent from the above there was no increase in the price, therefore, it is proved that the burden of tax has not been passed on to the consumer.

(M)That the learned ADC as well as the Collector (Appeals) has failed to appreciate that there was no condition in the exemption notification that in order to get the benefit of the notification the appellant was required to reduce the price of its products to the extent of the duty exempted under the notification. the price reduction was impossible in the facts and circumstances of the case as the landed cost of principal raw material even after the grant of exemption was much more than the landed cost prior to the exemption notification.

N)That the provisions of section 19A of the Customs Act, 1969, deals with the doctrine of double/undue and unjust enrichment and its avoidance whereby an importer who has paid any excess amount of duty will not be eligible for refund if he has recovered the same amount from his customer. If he tries to do so it will be double benefit i.e. recovering the cost from customer on one side and recovering it from Government as refund on other side, thus, getting double benefit which is envisaged in laws an unjust enrichment which is not allowed under the law rather is an illegal act. The importer will only be eligible for refund if he proves that he did not recover the customs duty from his customer i.e. recovery through price increase. It is an admitted position that prior to the issuance of the exemption notification and thereafter the price of products of the Appellant was same meaning thereby that the burden of tax has not been passed on to the consumer as prior to the exemption the landed cost after payment of duties and taxes was Rs.45,00 per kg. After the grant of exemption on the goods its landed cost was in between Rs.46.00 per kg to Rs.52.24 per kg. This fact prima facie establishes that the burden of duty has not been passed on to the consumer.

O)That sugar is the main raw material in the manufacture of products by the appellant, therefore, the provisions of section 19-A of the Customs Act, 1969, and the law of unjust enrichment is not applicable in the present case. Reliance is placed on 1994 (69) E.L.T. 360 (Bom.); Tata Engineering and Locomotive Company Ltd. v. Union of India, in which the High Court of Judicature at Bombay was pleased to hold as follows:

"9. It is however, made clear that on the basis of the averments in the affidavit of Shri Ramesh Girijya Kulal, dated 7th September 1992, it is concluded that the petitioners have imported the goods for their own use and in fact they have used the same in their factory for manufacturing end-products. They have not sold the goods to any outsider and, therefore, the question of passing incidence of duty on the consumer does not arise."

(P)That the department is not the Price Controlling Authority to dictate pricing strategies for the businesses. They are authority to check compliance to customs provisions only. Pricing strategy is a right of an organization in free or mixed economy where it considers so many factors while deciding for any price increase or decrease. In price setting (increase/decrease) an organization considers cost of product impacted through prices of ingredients, materials, duty structures, exchange rates, labour and manufacturing overheads, media and marketing, selling and distribution cost, taxation and financing and finally impact of inflation on overall cost. Market conditions, competitor activities, demand and supply situation and image of the brand and its position are other factors driving the pricing strategies. The learned ADC and the Collector (Appeals) have completely failed and ignored this aspect of the case and wrongly observed that since the price of the product was admittedly not reduced after the exemption notification, therefore, the appellant is not entitled to the refund. The learned ADC and the Collector (Appeals) have completely failed to appreciate the facts and circumstances of the case.

(Q)That the learned ADC and the Collector (Appeals) have failed to appreciate that the burden of the duty after the increase in the international prices of the sugar was borne by the appellant itself which is established from the fact that after payment of duties and taxes the landed cost of the sugar in the month of May - June, 2008 was Rs.45.00 per kg and even after the grant of exemption on the consignment imported in the month of July, 2008, the landed cost of sugar was Rs.46.00 per kg and it is matter of common knowledge that all other companies who produces their products with the principal raw-material (sugar) like fruit juices, powder drinks, beverages and confectioneries etc. have not reduced their retail prices after the issuance of the exemption notification as the purpose of the exemption was to grant the benefit of the notification to the manufacturers and producers so that they may be in a position to keep their prices at the same level.

(R)That after the issuance of the exemption notification there are other number of manufacturers who produces their products with the main use of sugar. Even after the grant of exemption none of them have decreased their prices only for the reason that the landed cost of the sugar was much higher than the price at which they were clearing the goods with the payment of customs duty. No action whatsoever has been taken against them for the purpose of decreasing their prices, therefore, contention of the Department that the appellant has not decreased the price of their products is, therefore, not admissible in law and contrary to the facts and circumstances of the case.

(S)That the learned ADC and the Collector (Appeals) have failed to appreciate that the Hon'ble Supreme Court in the case of Pfizer Laboratories v. Federation of Pakistan (PLD 1998 SC 64) has been pleased to hold that "where one party under a mistake whether of fact, or, law pays some money to another party (which includes a government department), which is not due by law or contract or otherwise, that must be repaid in view of section 72 of the Contract Act, 1872". They have completely ignored the decision of the Hon'ble Supreme Court while deciding the present case.

(T)That in the case of Gatron (Industries) Ltd. v. Govt. of Pakistan 1999 SCMR 1072, the Hon'ble Supreme Court of Pakistan was pleased to hold that "the mention of a wrong notification in the Bill of Entry presented by the Appellant would not deprive the Court of the power and jurisdiction if otherwise Appellant is found entitled to the benefit under notification." It is an admitted position that the Appellant was entitled to the benefit of the exemption notification, therefore, the rejection of its claim by the ADC and the Collector (Appeals) is illegal, arbitrary and unlawful.

6.The respondent department filed their counter-objections, which are reproduced as under:--

1)It is respectfully submitted that on 23.02.2010 the learned counsel of the Appellant had submitted six citations in support of his contention that their refund claims are admissible on the basis of those law citations.

2)Firstly it is respectfully submitted that all six citations, 04 Indians and 02 of Pakistani judiciary, are related to period prior to the promulgation of section 19A of the Customs Act, 1969, thus, due to change of law and circumstances the said citations are not applicable on the Appellant's case.

3)Secondly, the Indian citations are related to the Tribunal cases which cannot override the Hon'ble Supreme Court's decision in the case of M/s. Fecto Belarus, Pakistan. The citations related to the M/s. Pfizer and M/s. Gatron cases are also older than the M/s. Fecto Belarus cases, thus, as per principle of "later in time" M/s. Fecto Belarus case shall prevail over the cases of M/s. Pfizer and M/s. Gatron's cases.

4)Thirdly, without prejudice to above, in the case of the Appellant, neither before the adjudication authority nor before the Collector (Appeals) and before this Tribunal, the Appellant has substantiated their contention with any calculation/ corroborative documents that the duty paid against the connected G.Ds. has not been passed on to the end consumer. The statements/certificates produced by the Appellant are not proving this aspect.

5)Fourthly, in the presence of sections 194A and 19(3) read with amended provisions of section 33 of the Customs Act, 1969, there is no question of considering the refund applications unless an importer provides sufficient proof that the amount paid in excess in any particular consignment has not been passed on to the end consumer. The Appellant has failed to provide any corroborative documents to show the particulars of the G.Ds. under consideration.

6)In the light of submissions made above and the counter submissions already submitted it is once again prayed to dismiss the subject appeal.

7.We have heard arguments of both the contesting parties as well as perused the relevant record. The central issue involved in this appeal is whether the respondent department has lawfully rejected Appellant' refund claim of Rs.17.1 million on the ground that the same is hit by section 19-A of the Customs Act, 1969 as they (Appellant) have failed to establish that the incidence of duly had not been passed on to the end consumer. Briefly speaking, the refund was claimed on the ground that the import of sugar was exempted from customs duty by the Federal Government vide S.R.O. 567(I)/2006 dated 05.06.2006 as amended vide S.R.O. 787(I)/2008 dated 26.07.2008. Earlier, it was charged to customs duty @ 25% ad val. However, the Appellant could not avail the said exemption on their consignments imported during 26.07.2008 to 15.10.2008, due to the reason that they were not aware of such exemption. The Appellant agitated that amending notification should have been posted in the system of PaCCS for the convenience of importers and also because the system also required such posting of relevant information. They also contended that the concerned Assessing Officer could have allowed such benefit as their Goods Declarations were also assessed under section 80 of the Customs Act, 1969. The study of operative part of the impugned Order-in-Original as reproduced at para 3 supra shows that the learned Adjudicating Authority has acknowledged that they (the Appellant) were entitled for such exemption had they claimed so at the time of filing of Goods Declarations. The said Authority has also appreciated/acknowledged that they (Appellant) were not aware of the amending Notification S.R.O. 787(I)/2008 dated 26.07.2008. He has, however, rejected the refund claim of the Appellant on the ground that they have failed to address the core issue of passing of incidence of duty to the consumer. The Adjudicating Authority has observed that "from the study of material provided by the respondent, it is obvious that this incidence was made part of the cost by the company and passed on to the consumers and not absorbed by the company itself" Here, the learned Adjudicating Authority has not specified the "material" which led him to conclude as aforestated. Being a core issue, he should have dilated upon it seriously and cited relevant documents/information which should have unambiguously reflected and convinced him that the incidence of duty had been passed on to the consumer and not absorbed by the company, therefore, they (Appellant) were not eligible to claim/ obtain refund in the light of section 19-A of section 19-A of the Customs Act, 1969. We, therefore, conclude that the said findings of the learned Adjudicating Authority are arbitrary, whimsical, and absolutely baseless. Infact, this amounts to violation of section 24-A of the General Clauses Act, 1897.

8.Now coming to the impugned Order-in-Appeal, the study of its operative part as reproduced at para 4 supra, reflects that the learned Collector, Customs (Appeals), Karachi has upheld the impugned Order-in-Original on the ground that "Therefore, a substantial reduction in tax incidence on sugar should have affected price of the end-product to the advantage of the consumer. Obviously, that did not happen at all; the price of Tang drink continued to be the same as previously. Thus, no benefit of the reduction in tax accrued to the consumer, meaning thereby that the incidence of tax had been passed on to the consumer." The learned Collector, Customs (Appeals) Karachi has further observed/ concluded that "under the circumstances, payment of refund to the Appellant would tantamount to undue enrichment in violation of the principle set by the apex court in the Fecto Belarus case referred to above. Moreover, the Appellant had themselves admitted in writing that the amount saved through the exemption of customs duty had been used by them for off-setting accumulated losses of the company. In view of the position explained, above, the certificate of the Appellant -- paid Chartered Accountant and the entry in the purported Quarterly Financial Statement are after thoughts and hold no legal value." We have minutely studied the impugned Order-in-Appeal and could not find any statement by the Appellant to the effect that the amount saved through the exemption of customs duty had been used by them for offsetting accumulated losses of the company. The fact of the matter is that the said statement was given by the Departmental Representative which the learned Collector, Customs (Appeals), Karachi has wrongly attributed to the Appellant. Para 4 of the impugned Order-in-Appeal confirms the aforesaid position. The perusal of Financial Statement of first half of F.Y. 2008-09 (up to December, 2008) pertaining to the Appellant company reflects that the amount of Rs.17.01 million claimed as refund before the respondent department has been shown as "Receivable". It would not be fair, by any stretch of imagination, to call such entry an after-thought or of no legal value. Similarly, rejecting certificate issued by the external auditors of the company which certified that the incidence of duty had not been passed on to the consumers, merely by saying "Appellant-paid Chartered Accountant" is nothing but indecency. These auditors are appointed under section 252 of the Companies Ordinance, 1984 and are tied to certain discipline maintained and ensured by the Security Exchange Commission of Pakistan (SECP) as well as under Chartered Accountants Ordinance, 1961. Regarding the issue whether incidence of duty was passed on to the consumer or not, we would like to attend this issue at a later stage.

9.Now, we switch over to stance-taken by the Appellant in support of their refund claim. During hearing on 12.05.2016, the Appellant presented following working:-

Our statement shows that during the year 2008, the international price of sugar increased from:

In January 2008=US $ 381 per ton

In September 2008= - US $ 524 per ton

Further the Pak Rupee also depreciate in relation to the US$.

In January 2008=US $ 1= Rs.61.95

In September 2008=US $ I = Rs.76.20

The landed cost per ton of sugar with customs duty increased from:

In January 2008=US $ 32,053

On September 2008=US $ 54,671

Despite this increase of 70.56% in the price of sugar which is the main ingredient of our product Tang, we did not increase the price of our product.

The Appellant' principal argument is that during the calendar year of 2008, the prices of sugar, main ingredient of their product TANG sharply increased in international market. Resultantly, the landed cost of sugar per K.G. shoot up from Rs.34.42/K.G in January, 2008 to Rs.45.10/K.G in June, 2008. Even after exemption of customs duty at the end of July, 2008, the landed cost was Rs.45.55/K.G while the same was Rs.54.75/K.G without exemption. Therefore, surge of price of sugar in international market, affected the landed cost of sugar in the country. In order to Maintain stability in price of sugar and its allied products, the Federal Government abolished customs duty on sugar which was Rs.25/K.G by amending S.R.O. 567(I)/2006 dated 05.06.2006 vide S.R.O. 787(I)/2008 dated 26.07.2008. Here, interesting point is that the landed cost per K.G was slightly higher (Rs.45.55 per K.G.) even after exemption of duty in July, 2008 compared to the same (Rs.45.10 per K.G.) in June, 2008. The net impact as contended by the Appellant was that they suffered a loss of Rs.50.4 million by December, 2008 as per half-yearly Financial Statement till 31.12.2008 compared to profit of Rs.38.1 million for the same period in previous year. With this background, the Appellant asserted as under:-

"Therefore, the implementation of SRO only reduces the additional cost. Landed cost with duty exemption was still higher as compared to landed cost in the past before issuance of S.R.O. hence price reduction was not possible."

The upshot of Appellant's plea is that due to steep increase in landed cost of sugar in the year 2008, they suffered loss through such loss was reduced after exemption of customs duty nevertheless landed cost per K.G. was still slightly higher than the same was before exemption. In the wake of above position, they should have increased consumer price of their product TANG, however, they maintained the same as Rs.6 per sachet. They emphasized that they absorbed the additional burden of landed cost and suffered loss, as is reflected in their Half-Yearly Financial Statement. They added that in such a situation, there is no question of passing of incidence of customs duty to the consumer. According to them, the question could be raised only if they had increased the price of their product.

10.We have examined the Half-Yearly Financial Statement (till 31.12.2008) of the Appellant company. Page 3 of the said Statement states as under:--

"Due to the current economic condition, the company was not able to revive its selling prices. This has effected our margin and profitability."

In terms of figures, the above page confirms loss of Rs.50.416 million before taxation till 31.12.2008 as compared to profit of Rs.38.1 million in the same period of 2007. Following reasons have been attributed for the aforestated position:--

Unprecedented increase in the price of raw materials.

Impact of increase in world fuel prices.

Devaluation of the Pakistani rupee versus the US $.

General inflation brought about by the above two factors and rise in the price of essential food items.

World wide economic slow down and its effect on our economy.

Finally milder weather conditions dominated the entire period under report. This factor played a major role in the demand and sale of beverages in the country.

Page 10 of the Financial Statement reflects total amount of "Receiveables" the year, 2008 as Rs.28.84 million which also includes Rs.17.01 million as customs duty refund claim filed with customs authorities. The relevant para 8.1 is reproduced hereunder:-

"Includes duty refund claim in respect of import of sugar amounting to Rs.17.01 million filed with the customs authorities."

After going through position taken by both the contesting parties, it is not difficult to ascertain that each side is looking at the issue of passing of incidence to the consumers, from diametrically opposite direction. The respondent department is asserting that the incidence of duty has been passed on to the consumer as the Appellant failed to reduce price of their finished products which admittedly remained intact, as also acknowledged by the Appellant. Conversely, the Appellant are emphasizing that the issue did not involve reduction in price rather increase in price of their finished product in view of the fact that the landed cost of sugar had tremendously gone high. We have examined counter-objections filed by the respondent department on the memo. of appeal which show that the department has not challenged the facts and figures of the Appellant including those mentioned the Half-Yearly Financial Statement.

11.It may be mentioned here that being conscious of the fact that the above Financial Statement was Half-Yearly and that too un-audited, therefore, we called Yearly Report of the company for 2009. The Appellant has provided a copy of Annual Report, 2009 of the company. We have noticed that the issue under reference has been highlighted at para 14 of the said Report which is reproduced hereunder:-

"14. DUTY REFUNDS DUE FROM GOVERNMENT

During the year, the Federal Government issued S.R.O. 787(I)/2008 dated 26-07-2008 under Section 19 of Customs Act, 1969 (the Act) whereby Customs duly on import of crystalline sugar was made zero as against 25% given in First Schedule to the Act. The Company imported crystalline sugar from July 26, 2008 to October 15, 2008 and paid duty of Rs. 17.011 million and Rs.3.986 million at the rate of 25% without availing the benefit of subject SRO removing the duty on sugar to zero. Subsequently, the Company filed refund claims with the custom authorities. The refund claims were rejected by the Additional Collectorate on the ground that the incidence of duty and taxes has been passed on to end consumers by incorporating it in the cost of the products.

The Company filed an appeal before the Collector of Customs, Sales Tax and Federal Excise, Appeals, Karachi, against the orders passed by the Additional Collectorate of Customs. Subsequent to year end, the Collector (Appeals), vide order dated July 15, 2009 upheld the decision of the Additional Collectorate and rejected the refund claims of the Company on the same grounds. The Company intends to pursue this case in the Appellate Tribunal. The management believes, on the merit of the case and as advised by its consultant, that the issue raised by the Customs authorities is without any basis and the ultimate decision of refund will be in favour of the Company. Accordingly, it has decided to account for this refund claims in the books of account of the Company for the year ended June 30, 2009."

The figure of Rs.20,997,742/- (Rs.17.011 + 3.986 = Rs.20.997 million) has been highlighted in the Balance Sheet of the company as "Duty refunds due from government" under the heading "Current Assets." The Auditor's Report to the Members at Page 15 of the Report also mentions about the said amount as under:--

"Without qualifying our opinion, we draw attention to note 14 to the financial statements in respect of customs duty refundable amounting to Rs.29,997 million recognized in the financial statements, which is subject to the decision of the Appellate Tribunal. The ultimate outcome of this matter cannot presently be determined and hence, no provision for any impairment loss that may result therefrom has been made in these financial statements."

12.We are inclined to subscribe to argument of the Appellant that in view of the fact that the landed cost of sugar had substantially increased, which called for increase in their finished product TANG because sugar constituted 93% of its total inputs, however, they maintained its price and the additional burden was absorbed by the Appellant in the form of loss as certified in the Half-Yearly Financial Statement. Therefore, the incidence of duty was not passed on to the consumer. Above all, the Financial Statement indicates the amount of refund claim Rs.17.01 million as "Receiveable". Therefore, it would be absolutely unfair and irrelevant to conclude that the incidence of customs duty had been passed on to the consumer as the price of their product was not decreased. In view of aforementioned facts, there is no reason as to why the certificate of Appellant' External Auditors Ford Rhodes Sidat Hyder dated 13.02.2009 certifying to the effect that the incidence of customs duty has not been passed to the end consumer, should not be accepted. The relevant portion of the said letter is reproduced hereunder:--

"As required, we have checked the books and records of the company and ascertained that the company has not taken into account custom duty paid in excess amounting to Rs.17,011,589/- as part of its cost of product and that the incidence of the same has not been passed on to the end consumer."

13In view of above-detailed position, we are of considered opinion that the instant case is not that of undue enrichment as ruled by the Hon'ble Supreme Court of Pakistan in the case of M/s. Fecto Belarus Tractor Ltd. v. Government of Pakistan (PLD 2005 Supreme Court 605). The Appellant did not increase price of their end product despite substantial increase in landed cost of sugar due to surge of price in international market. Most importantly, they have still to get benefit of exemption of customs duty in the form of refund and presently, the said amount (Rs.17.01 million) is being reflected as "Receiveable" in their accounts hence there is no point of either passing of incidence to consumer or undue enrichment in this case.

14On the issue of citations given by the Appellant in support of their case, the respondent department has taken stance that out of six judgments of superior courts, four relate to Indian judiciary while two judgments pertain to Pakistan's judiciary. It has been further argued that since all these judgments date before the insertion of section 19-A in the Customs Act, 1969, therefore, the same are not applicable to Appellant's case. Regarding two judgments relating to M/s. Pfizer Laboratories Limited v. Federation of Pakistan and others (PLD 1998 SC 64) and M/s. Gatron (Industries) Limited v. Government of Pakistan and others (1999 SCMR 1072), the department's position is that as both these judgments are older than the judgment in the case M/s. Fecto Belarus, therefore, keeping in view the principle of "later in time", the judgment of Fecto Belarus would prevail. We consider aforestated comments of the respondent department quite as naive and childdish. The ruling/ judgments of superior courts are like beacon light as they provide guidelines on certain legal matters which were hitherto unclear and leading to multiple interpretations. The interpretation of Articles of Constitution/ Statute is exclusive prerogative of the superior judiciary under their Extra-Ordinary jurisdiction. As per Article 189 of the Constitution of Pakistan, 1973, any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciate a principle of law, is binding on all other Courts in Pakistan. Infact, the Legislature has to amend/ legislate laws in the light of interpretation of law done by Apex Court. The judgments under-reference are landmark judgments of Apex Court of Pakistan. Each judgment has ruled on different subject matter. While in the case of M/s. Pfizer, the Hon'ble Apex Court ruled that anybody including the government who has got undue money has to return to its lawful owner in view of section 72 of the Contract Act, 1872, in the case of M/s. Gatron, the Apex Court held that "the mention of a wrong notification in the Bill of Entry presented by the appellant would not deprive the Court of the power and jurisdiction if otherwise appellant is found entitled to the benefit under the notification." In Fecto Belarus case, the Apex Court observed and held as under:-

"It is to be noted that respondents have placed on record sufficient material which indicates that the petitioner had neither deposited indirect tax i.e. Sales Tax and Customs Duty nor had sold the Tractors at the agreed rate of Rs.2,30,000. They had been selling the same at a much higher rate, ranging between Rs.3,99,000 to Rs.4,35,000 and in this manner, they had been earning profit of more than Rs.200,000 per unit. This fact has not been denied by the petitioner as no reply of Civil Miscellaneous Application No.168 of 2000 was filed, as such applying the principle of unjust enrichment, the petitioner is not found entitled for the same as well. However, if upon furnishing documentary evidence, petitioner satisfies the concerned authorities of the CBR that the Tractors were sold by it at the agreed rate of Rs.2,30,000 per unit, inclusive of Customs Duty and Sales Tax, then it could be entitled to the refund of Service Charges, otherwise it would also be liable to pay the balance of the amount acquired by it by selling the Tractors at a price higher than Rs.2,30,000 contrary to commitment made by it with the Government."

It is thus clear that the Hon'ble Supreme Court of Pakistan through above judgments has ruled on different legal matters in each case. It is absolutely incorrect rather contemptuous to comment that being prior to insertion of section 19-A in Customs Act, 1969, the judgments/ rulings of the Apex Court in the cases of M/s. Pfizer and M/s. Gatron are not applicable to Appellant's case. Similarly, comment of the respondent department that the aforesaid judgments are older than that of M/s. Fecto Belarus hence based on the principle of "later in time", the judgment of M/s. Fecto Belarus would prevail upon them, is again demonstration of na ve attitude on the part of the department. The principle of "later in time" would apply where there are different laws on the same issue or different judgments/ orders on the same matter.

15.In view of above, we are led to conclude that the Appellant are entitled to refund of Rs.17.01 million as the incidence of customs duty has not been passed on to the consumer and the case of Appellant does not fall in the category of undue enrichment. They have lodged lawful claim for the refund of aforementioned amount. We are, therefore, not reluctant to set aside the impugned order-in-original as well as order-in-appeal. The respondent department is directed to sanction the refund to the Appellant without any delay. The instant appeal is allowed on aforestated terms.

16.Announced.

HBT/99/Tax(Trib.) Appeal allowed.