SUFI STEEL INDUSTRIES (PVT.) LTD. VS FEDERATION OF PAKISTAN, 2018 PTD-LAHORE-HIGH-COURT-LAHORE 378 (2017)

(a) Interpretation of statutes---

----Rules and administrative orders---Scope---Government or Authority issuing provision under rule making power conferred on it by a statutory provision or some specific Constitutional provision, was generally characterized as a rule---Directions are issued under government's/Authority's administrative and not legislative power---Scope for issuance of directions under administrative authority is extremely broad however, government can issue directions on any matter falling within range of its administrative power so long as field is not occupied by any statutory provision or a rule---Statutory rules are on higher pedestal and administrative instructions/circulars/orders could neither change principle contained in statutory rules nor rules can be amended through administrative jurisdiction.

D.D.A. and others v. Joginder S. Monga and others AIR 2004 SC 3291; State of Punjab v. Dalbir Kaur Kalyan (2000) 6 SCC 516; M. Ramachandran v. Govind Ballabh and others AIR 1999 SC 3601; Sitaram v. Ramjibhai AIR 1987 SC 1293 and Shree Ganesh Steel Rolling Mills v. U.O.I. AIR 1989 Cal 230 rel.

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

----Ss. 13, 95, 219, 223 & Schedule-III---Customs Rules, 2001, Rr. 237 to 263---Subordinate legislation---Scope---Petitioners were owners of licensed bonded warehouses---Grievance of petitioners was that only customs officials of Manufacturing Bond Control Office were vested with powers for verification, examination and assessment of goods which were to be exported as per terms and conditions of license---Validity---Matter related to exports, warehousing and examination etc. of exported goods was governed under Schedule-III of Customs Act, 1969---Policy regarding such matters could only be framed through rules under S.219 of Customs Act, 1969 and not through S.223 of Customs Act, 1969---High Court declared letter in question to be without lawful authority and of no legal effect---Constitutional petition was allowed in circumstances.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan and others PLD 2016 SC 808 = 2016 PTD 2269 distinguished.

Messrs Al Khair Traders through Sole Proprietor v. Collector Customs and 2 others 2015 PTD 2114; M.A. Rahman v. Federation of Pakistan and others 1998 SCMR 691; Collectors of Customs v. Askari Cement Ltd. 2016 PTD 1886; Punjab Healthcare Commission v. Mushtaq Ahmed Ch. and others PLD 2016 Lah. 237; Muhammad Asghar v. Mst. Safia Begum and another PLD 1976 SC 435; Burhauddin Shaikh and 9 others v. National Bank of Pakistan and 58 others 1985 CLC 2003; Aziz Ahmad v. Provincial Police Officer (I.G.P.) Punjab Lahore and 6 others PLD 2005 Lah. 185 and Zarai Taraqiati Bank Ltd. and others v. Said Rehman and others 2013 PLC (C.S.) 1223 ref.

(c) Administration of justice---

----Where a matter is to be done in a particular manner prescribed under law, it must be done in that way and not otherwise.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.

Hashim Aslam Butt for Petitioner.

Izhar ul Haq Sheikh for Respondent.

Hafiz Muhammad Azhar Ali for Respondent No.5.

Date of hearing: 13th December, 2017.

JUDGMENT

ABID AZIZ SHEIKH, J.---This single judgment will also decide W.P. No.52443/2017, and W.P. No.52449/2017, as common questions of law and facts are involved in all these petitions. Through these constitutional writ petitions, the petitioners have challenged the impugned letter dated 08.06.2017, issued by respondent No.2 (FBR).

2.Brief facts are that petitioners are engaged in the business of manufacturing of steel products and also duly registered with the tax department. Respondent No.3 issued manufacturing bonded warehouse license (license) to the petitioners under sections 13 and 95 the provisions of Customs Act, 1969 (Act), read with Rules 237 to 263 of the Customs Rules, 2001 (Rules). The claim of the petitioners is that under the Act and the Rules, only the Custom officials of Manufacturing Bond, Control Office (MBCO) are vested with the powers for verification, examination and assessment of the goods which are to be exported as per terms and conditions of the license. The grievance of the petitioners is that respondent No.2 issued letter dated 08.06.2017 (impugned letter), addressed to all regulatory Collectors and directed them to ensure that the licensee of steel unit availing the benefits of manufacturing facility, will obtain the certificate from Pakistan Steel Metals Association (Association) offices located at Lahore and Karachi with respect to export of iron and steel products to Afghanistan. The petitioners being aggrieved of said impugned letter have filed these Constitutional petitions.

3.Learned counsel for the petitioners argued that under the Rules, it is the jurisdiction of Custom officials to verify and clear the consignments ready for export to Afghanistan and such jurisdiction could not be delegated to the Association. Further submits that if at all, the Association was to be involved in verification and clearance process of exported goods, the same could only be done through amendment in the Rules and not through impugned letter issued by respondent No.2, on the request of the Association. Further submits that being no approval of the Cabinet, obtained the impugned letter, is also hit by law laid down in Messrs Mustafa Impex Karachi and others v. The Government of Pakistan and others PLD 2016 SC 808 = 2016 PTD 2269.

4.On the other hand, learned counsel for the respondent department submits that the impugned letter was issued under section 223 of the Act on the representation of the Association. He further submits that subsequently another letter dated 19.07.2017, has been issued by the FBR where it is clarified that certificate from Association is not required for export for which duty taxes already paid against raw material. Adds that impugned letter was issued on the request of the Association and petitioners' being Member of the Association cannot file these constitutional petitions.

5.Learned counsel for the Association supported the arguments of the respondent department and further submits that impugned letter was lawfully issued on the request of Association to curb fictitious exports of iron and steel to Afghanistan. He submits that similarly in sales tax matters, Rule 58(L) has been issued under the Sales Tax Special Procedure Rules, 2007 (Sales Tax Rules), where the Association was authorized to authenticate the paid electricity bills of steel melters and steel re-rollers paying sales tax under the sales tax rules. Learned counsel in the circumstances submits that the impugned letter being reasonable and justified, these petitions are liable to be dismissed.

6.I have heard the learned counsel for the parties and perused the record. The facts are not disputed that petitioners are engaged in the business of manufacturing of steel products and also licensees of manufacturing bonded warehouse under the Act and the Rules. Perusal of Rules shows that its Chapter No.15 relates to warehousing. Rules 343 to 346 under the said Chapter 15 pertain to the issuance of license, its cancellation, suspension and revalidation. Rules 347 to 350 relate to the premises of warehouse and warehousing period, whereas Rules 351 to 357 are about procurement, manufacturing, export and removal of goods by licensee. In these Rules neither any role is assigned to Association nor any condition prescribed that licensee will obtain a certificate from the Association with respect to export of iron and steel products to Afghanistan.

7.Now the moot question is whether on request of Association, respondent No.2 through impugned letter could prescribe such conditions on exports, which are not provided in the rules, without amending the Rules. To examine this legal question, it is necessary to reproduce below section 219 of the Act, which relates to the rule making power of the Board:-

"Power to make rules.---(1) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this Act [including for charging of fees for processing the customs documents and preparation for copies thereof].

(2) Without prejudice to the generality of the foregoing provision, rules may be made on matter enumerated in the [Third Schedule].

(3) No rules relating to matters enumerated at items 19 and 22 of the [Third Schedule] shall be made without previous approval of the [Federal Government] in writing.

(4) All rules under this section shall, as soon as may be, laid at the table of the National Assembly.

(5) All such rules for the time being in force shall be collected, arranged, and published at intervals not exceeding two years and shall be sold to the public at a reasonable price."

8.Plain reading of section 219 of the Act shows that Board may, by notification in the Official Gazette make rules on matters enumerated in third schedule of the Act. Relevant Items Nos.2, 11 and 18 of third schedule of the Act pertain to exports and warehousing are reproduced hereunder:--

(2). Cases in which the goods or material imported with a view to subsequent exportation or to be used in the production, manufacture, processing, repair or refitting of goods specified in the rules may be delivered without payment of the whole or part of the duty; and repayment of duty on such goods and material.

(11). Matters pertaining to the manufacturing and other operations carried on in the warehouse.

(18). Matters pertaining to the import or export of goods by post; examination, assessment, clearance, transit or transshipment of the goods so imported or to be exported.

9.The perusal of Items Nos.2, 11 and 18 of third Schedule read with section 219 shows that matters pertaining to material imported with a view to subsequent export, manufacturing and other operation on warehouse and examination, assessment or clearance of the goods, so imported or to be exported, could only be prescribed through Rules by the Board duly notified in the Official Gazette. The impugned letter issued by respondent No.2, whereby licensees (who are using manufacturing bond facility), are directed to obtain certificate from Association with respect to export of iron and steel products to Afghanistan, is essentially a matter falls within the purview of section 219 read with Items Nos.2, 11 and 18 of the third schedule of the Act.

10.The learned counsel for the respondents argued that there was no need to frame rules as impugned letter was lawfully issued by Board under section 223 of the Act. To examine this argument, it is expedient to reproduce section 223 of the Act as under:--

"Section 223 Officers of Customs to follow Board's orders, etc.-- All officers of customs and other persons employed in the execution of this Act shall observed and follow the orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the appropriate officer of customs in the exercise of their quasi-judicial functions]."

11.Bare reading of section 223 of the Act postulates that the orders, instructions and directions given by the Board shall be binding on all officers of Customs Department. The learned Division Bench of Peshawar High Court in Messrs Al-Khair Traders through Sole Proprietor v. Collector Customs and 2 others (2015 PTD 2114) while interpreting the provision of section 223 of the Act held that powers of FBR under section 223 are that administrative policy decisions which are generally expressed as Customs General Orders (CGOs) which are binding on the Custom officials, however, this power of the Board is different from quasi-judicial adjudicatory power of the authorities under the Act. In said case reliance is also placed on judgment passed by august Supreme Court in M.A. Rahman v. Federation of Pakistan and others (1998 SCMR 691), where it is held that while exercising quasi-judicial functions, the appropriate officers are not subject to administrative control of the Board by means of orders, instructions or directions issued under section 223 of the Act. Similarly, Islamabad High Court in Collectors of Customs v. Askari Cement Ltd. (2016 PTD 1886) also held that under section 223 of the Act, the Board on the administrative side, would be the final authority, however, if there is dispute, then the order of the Board will not be binding on the adjudicating authority. Though in all these cases distinction is made between administrative and quasi-judicial powers exercised under the Act, however, the law is settled therein that power under section 223 of the Act are of administrative nature only.

12.In law, there is difference between administrative and delegated legislative rule making power of the Board. This Court in case titled as Punjab Healthcare Commission v. Mushtaq Ahmed Ch. and others reported in (PLD 2016 Lahore 237), explained the difference between delegated legislation (Rules) and administrative instrument as under:--

"There is a difference between administrative direction and delegated legislation. Delegated legislation is binding on both the administration and the individual and is enforceable through a court of law but a direction is not so binding and enforceable on an individual or third party. The foundational feature of subordinate legislation is that its source of power is the legislature itself, while the source of any administrative direction is the statutory authority or agency, established by the same legislature. Parent statute must clearly delegate the power of legislation to the authority in order to carry out the purposes of the Act."

13.The Court in above judgment further held that absence of requisite statutory provision or Rules and regulations cannot be filled through administrative Standing Order. The above distinction between rule making delegated legislative power and administrative instruments were also highlighted in following judgments:--

(i)In case titled as Muhammad Asghar v. Mst. Safia Begum and another reported in (PLD 1976 Supreme Court 435), the apex Court held that:--

"A rule requires to be expressed with precision and yet to possess generality so as to be capable of application to a large number of cases. If it leaves scope for discretion, that should be expressly provided for. Ordinarily, it is necessary also that the making and promulgation of a rule should be attended by certain formalities e.g., publication in a Government Gazette. It is not enough that there is no express rule relating to appoint to confer upon any existing office instruction that there may be the status and validity of a statutory rule."

(ii)In case titled as Burhanuddin Shaikh and 9 others v. National Bank of Pakistan and 58 others reported in (1985 CLC 2003) the Division Bench of Sindh High Court held that:--

"The distinction between rules, regulations and bye-laws on the one hand and administrative instructions on the other is that rules, regulations and bye-laws can be made only after reciting the source of Power whereas administrative instructions are not issued after reciting source of power."

(iii)In case titled as Aziz Ahmad v. Provincial Police Officer (I.G.P.), Punjab Lahore and 6 others reported in (PLD 2005 Lahore 185) this Court held that:--

"The Departmental circular are good enough for the internal management and control but they cannot confer a right or deprive a person of a right, which is only possible on the basis of a statutory provisions or a rule made by a competent authority under the concept of delegated legislation, as held in Sub. Muhammad Asghar v. Safia Begum and others (PLD 1976 SC 435)."

(iv)In case titled as Zarai Taraqiati Bank Limited and others v. Said Rehman and others reported in (2013 PLC (C.S.) 1223) the apex Court held that;-

"The "rules" and "regulations" framed under any Act are meant to regulate limit the statutory authority. All statutory authorities or bodies derive their powers from statutes which create them and from the rules or regulations framed thereunder. Any order passed or action taken which is in derogation or in excess of their powers can be assailed as ultra vires. Rules and regulations being forms of subordinate legislation do not have substantial difference as power to frame them is rooted in the statute. Statutory bodies are invariably authorized under the Act to make or adopt rules and regulations not inconsistent with the Act, with respect to such matters which fall within their lawful domain to carry out the purposes of the Act. This rule making power of such bodies, called 'delegated legislation' has assumed importance in the contemporary age. "The justification for delegated legislation is threefold. First, there is pressure on parliamentary time. Second, the technicality of subject matter necessitates prior consultation and expert advice on interests concerned. Third, the need for flexibility is established because it is not possible to foresee every administrative difficulty that may arise to make adjustment that may be called for after the statute has begun to operate. Delegated legislation fills those needs."

14.The crux of the law settled in above judgments is that what the government or the authority issues under the rule-making power conferred on it by a statutory provision or some specific constitutional provision will generally be characterized as a rule. On the other hand, directions are issued under the government's/authority's administrative and not legislative power. No doubt the scope for issuance of directions by the Administration is extremely broad, however, as a general proposition, it may be stated that the government can issue directions on any matter falling within the range of its administrative power, so long as the field is not occupied by any statutory provision or a rule. The statutory rules are on higher pedestal and administrative instructions/circulars/ orders can neither change the principle contained in the statutory rules nor rules can be amended through administrative jurisdiction.

15.In the above context, the Indian Supreme Court in D.D.A. and others v. Joginder S. Monga and others (AIR 2004 SC 3291), State of Punjab v. Dalbir Kaur Kalyan, (2000) 6 SCC 516 and in M. Ramachandran v. Govind Ballabh and others (AIR 1999 SC 3601) held that a memorandum issued by the government being an administrative instruction, cannot override a scheme which is published under a statutory provision and is itself a law and can be duly and legally modified only under the provisions of the statute and in case of inconsistency or conflict, the statutory provisions will prevail over the executive instructions, in spite of their prior existence. Further held that specific instructions prevail over general instructions and an office memorandum (OM) would not apply in the face of specific provision in the rules. Similarly, in case titled as Sitaram v. Ramjibhai reported in (AIR 1987 SC 1293) Court held that when rules are silent on any particular point, government can fill up the gaps and supplement the rules by issuing instructions not inconsistent with the rules already framed. In case titled as Shree Ganesh Steel Rolling Mills v. U.O.I., reported in (AIR 1989 Cal 230) Court held that directions cannot impose any liability on any one; only rules can do so. Further held that the government cannot interfere with the rights of the people without a specific rule of law authorizing the administrative act in question. As directions are administrative in nature, the state cannot adversely affect the fundamental rights of a person merely by issuing directions.

16.Following the above well-entrenched scope of administrative and delegated legislative powers of the Board, it can safely be concluded that the administrative power of the Board under section 223 of the Act is to issue directives to Custom officials to enforce the provision of the Act, whereas rule making powers of the Board is delegated legislative power binding on all including third parties, inter alia, in respect of matters specified under third schedule of the Act. The said rule making power could only be exercised in the manner prescribed under section 219 of the Act and not through administrative orders under section 223 of the Act. Though at time matters to be governed through administrative orders and rule making power of the Board may overlap but where subject matter of rules are clearly specified in third schedule, then decisions regarding those subject matters, must only be formulated through rules and not through ministerial administrative orders. In the present case, the matters relating to exports, warehousing and examination etc. of exported goods being governed under third schedule of the Act, the policy regarding these matters could only be framed through rules under section 219 of the Act and not through administrative orders under section 223 of the Act.

17.I have also noted that identical provision as of section 223 of the Act, is prescribed under section 72 of the Sales Tax Act, 1990. However, regarding sales tax, the Board assigned the role to Association through Rule 58-L of the Sales Tax Rules and not through administrative directions under section 72 of the Sales Tax Act, 1990. This proves the Board's own practice (at least in sales tax) that matters which are to be dealt under rules, cannot be governed through administrative orders. It is also settled law that where a matter is to be done in a particular manner prescribed under the law, that it must be done in that way and not otherwise. Reliance is placed on Khalid Saeed v. Shamim Rizwan and others (2003 SCMR 1505).

18.Therefore, once law contemplates that in certain matters, rules are to be framed, then the Board is bound to frame the rules and not to deal with such matters through administrative orders. The status of administrative directions of the Board being different from delegated legislative powers or quasi-judicial power has been recognized by the Act itself, where to protect and safeguard the impartiality and independence of quasi-judicial bodies, the provision of section 223 of the Act provides that these administrative directions shall not be binding on the authorities exercising quasi-judicial powers.

19.Regarding preliminary objection of the respondents that petitioners being members of Association are estopped to file this petition, suffice it to note that these petitions are filed by the petitioners in their independent capacity being aggrieved of impugned letter and not as member of Association. Therefore, they are within their right to challenge the impugned letter. Even otherwise there is no estoppel against law. So far as the argument of petitioners that impugned letter is hit by Mustafa Impex case supra, the same is also misconceived, because rules relating to items Nos.2, 11 and 18 of the third schedule of the Act are to be framed by Board and not by Federal Government.

20.In view of above discussion, these writ petitions are allowed and impugned letter dated 08.06.2017, issued by respondent No.2, is declared to be without lawful authority and of no legal effect. However, this judgment will not preclude the Board to frame rules in accordance with law for giving role to Association in export of iron and steel products to Afghanistan.

MH/S-85/L Petition allowed.