ISLAMABAD: The Sup­reme Court on Wednesday upheld the Dec 1, 2021 Pesh­awar High Court (PHC) judgement authorising customs rebate for hybrid electric cars imported up to 2017 on the grounds that any notification that disturbs a vested right or creates a new liability cannot be applied retrospectively.

Headed by Chief Justice of Pakistan (CJP) Umar Ata Bandial, a three-judge Sup­reme Court bench rejected a set of appeals moved by the customs collector at the Model Customs Collectorate in Peshawar with an observation that there were no reasons requiring the intervention of the apex court and, therefore, the high court order stayed. The customs department was represented by Advocate Abdul Rauf Rohaila.

On June 12, 2013, the government had promulgated a statutory regulatory order (SRO) granting a rebate of 50 per cent in customs duties, sales tax and withholding tax on the import of hybrid cars to the country. Later, through an Aug 22, 2019 circular, the Peshawar customs dry port principal appraiser came out with an audit report of the 2017-18 financial year disclosing that the hybrid Suzuki Hustler/Wagon R (660cc), used hybrid Mazda Flair Crossover (660cc) and used Suzuki Ignis (1,248cc) had been cleared for the 50pc customs duty and taxes under the 2013 SRO when the regulation was applicable to fully hybrid vehicles having larger batteries and enough power to drive the vehicle for a certain period of time. The audit was conducted by the office of the deputy customs collector (imports) at the Peshawar dry port.

According to the customs department counsel, the 50pc rebate facility was not applicable to hybrid vehicles that did not have larger batteries under a 2018 circular by the Karachi Model Customs Collectorate Appraisement that denied the facility under the 2013 SRO to importers, rather it was related only to vehicles with an engine capacity up to 1,800cc.

The customs authorities, however, ignored the 2018 circular and released the used imported semi-hybrid vehicle and granted the benefit of the SRO to the importers of the cars. While instituting references against the importers, the customs collectorate accused them of violating Section 32(3)(a) of the Customs Act 1969 read with Section 3(1) of Import and Export Control Act 1950, Section 3(1)(b) of the Sales Tax Act 1990 and Section 148 of the Import Tax Ordinance 2001.

Consequently, one of the importers was directed to deposit the short-paid amount of Rs161,830 to the government treasury, as pointed out by the audit team, which he did not and subsequently faced a penalty on different heads. Later, the customs collector (appeal) also rejected their appeals against the references with an observation that the phrase hybrid electric vehicles (HEVs) as mentioned in the 2013 SRO should be read as “fully hybrid” and not semi hybrid.

The importers approached the Peshawar Customs Appellate Tribunal, which accepted their plea through a consolidated judgement of Aug 27, 2020 and set aside the references.

In its judgement, Justice Muhammad Naeem Anwar of the PHC had held that the notification that conferred a benefit or right to a person could be applied with retrospective effect, but the notification that disturbed or impaired a vested right of a person or created a new liability could not in the absence of a legal sanction to that effect.

In its order, the PHC had stated that since the 2013 SRO was a beneficial notification where it allowed exemption from leviable duty and taxes to the tune of 50pc on the import of HEVs, it could not be interpreted for addition of classes like old, new, fully or semi-hybrid. Thus, the Peshawar tribunal had rightly set at naught the findings of the forum by allowing the appeals, the high court had explained.

The PHC judgement had also stated that the issuance of the 2018 circular by the Karachi Model Customs Collectorate Appraisement would amount to classify hybrid vehicles and the extension of the SRO to any specific class of vehicle -- fully hybrid -- was not within the authority’s domain rather it could be done through a direct legislation and, in case of any ambiguity, be interpreted by the courts.

Likewise, the contention that the SRO related only to new vehicles and could not be extended or applied for exemption of tax or customs levy was misconceived, the PHC judgement had said, adding the 2018 circular of defining the class of the vehicles could not have retrospective effect since the vehicles were imported up to 2017.

Published in Dawn, July 7th, 2022

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