KARACHI, March 24: A division bench of the Sindh High Court has ordered refund of excess duty recovered from a local manufacturer.

Justice Ataur Rahman and Justice Mujeebullah Siddiqui held this in a constitutional petition of Union Industries (Private) Ltd against the government and the CBR.

The grievance of the petitioner, who is a importer of paraffin-waxed printed paper for wrapping of toffees and confectionery, was that initially in August 1989 the goods were specified under a wrong head.

According to counsel, the respondents did not agree with the petitioner’s specification and the petitioner had to make payment of dues as demanded by the respondents. The petitioner subsequently made representation to the CBR on August 22, 1989, which was accepted in June 1991 and the subject consignment was declared to be falling under PCT-481.000.

After this the petitioner moved an application for refund of the excess amount paid by him under wrong specification, but the same was rejected by an order dated February 17, 1994, by an Assistant Collector Customs Appraisement (refund cell), maintaining that it had been submitted beyond the period prescribed in section 33 of the Customs Act of 1969.

The appeal and revision filed before the Collector Customs and the CBR were also rejected vide orders December 5, 1994, respectively.

Justice Rahman, in his judgment, noted that the main objection raised by Raja M. Iqbal, counsel for the respondents, was that under section 33 a period of six months was provided for refund of the amount paid in excess to the respondents by a party.

Zahid F. Ibrahim, counsel for the petitioner, submitted that although the respondents 3, and 4, under section 223, were bound to comply with the orders passed by the CBR communicated to the Collector of Customs dated June 27, 1992, there was no need for the petitioner to move an application. Yet they moved an application after coming to know about the communication of the above-mentioned order of the CBR. Therefore they could not be said to have been barred by limitation.

He held that section 33 would not come into play as none of its ingredients were attracted in the instant case. However, the court found that the letter dated 27th June, 1992 was very clear in terms; specific directions were given to the respondents 2 and 3 for refund of the amount as observed above with which they were bound to comply. Therefore there was no need for the petitioner to move any application.

Justice Rahman held that section 223 also supported the case of the petitioner that subordinate functionaries of the Customs had to follow the orders of the CBR, which had not been done in the instant case.

The court therefore allowed the petition with direction that the petitioner should approach the respondent No 4 along with all relevant documents for verification and scrutiny, so that the amount of refund payable to the petitioner might be determined within three months from the date the petitioner approached the respondent No 4.

Agreeing with Justice Rahman, Justice Siddiqui gave detailed reasons since important questions of far-reaching effects were involved in the petition.

Justice Siddiqui observed that the contentions that the view taken by the respondent No 4 and 3 would amount to negation of the CBR ruling, giving retrospective effect to the correction of classification was not an authority in itself for refunds.

Justice Siddiqui examined at length the scope and effect of sections 223 and 33 of the Customs Act and agreed with the contentions of the counsel for the petitioner that the CBR had realized that the excess payment was made due to erroneous classification ruling given by it, which was subsequently rectified and therefore all such persons who were made to pay excess amount should be repaid. The petitioner had applied for refund and had thereby requested for mere compliance with the CBR direction, therefore the respondent No 4 ought to have refunded the amount in compliance with the binding direction of the CBR. He was not justified in taking up cudgels with the petitioner on the basis of technicalities.

In this case, he observed that there was no mistake on the part of the petitioner and therefore article 181 of the Limitation Act should apply which provided a period of limitation for three years in respect of an application for which no period of limitation was provided in the Limitation Act, and the period of limitation should begin to run from the time when the right to apply accrued.

In the present case, the right to apply accrued to the petitioner when the CBR rectified its mistake and gave retrospective effect to its Classification Ruling No 5 of 1991, vide instructions contained in the letter dated 27. 6. 1992. Thus the refund application was within the period of limitation, he observed.