The Peshawar High Court (PHC) ruling that authorised a customs rebate for hybrid electric cars imported up to 2017 was upheld by the Supreme Court on Wednesday on the basis that no notification that disrupts a vested right or creates a new responsibility can be implemented retroactively.
A three-judge Supreme Court bench, presided over by Chief Justice of Pakistan (CJP) Umar Ata Bandial, rejected a series of appeals brought by the customs collector at the Model Customs Collectorate in Peshawar, stating that there were no justifications for the apex court’s involvement and that the high court order should therefore be upheld. Advocate Abdul Rauf Rohaila defended the customs division.
A statutory regulatory order (SRO) offering a 50% rebate on customs charges, sales tax, and withholding tax on the import of hybrid vehicles into the nation was released by the government on June 12, 2013.
The Peshawar customs dry port principal appraiser later released an audit report for the 2017–2018 fiscal year through an Aug. 22, 2019, circular, revealing 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 2013 SRO’s 50% customs duty and taxes even though those vehicles did not have larger batteries or enough power to operate the vehicle. According to the customs department’s legal counsel, a 2018 circular by the Karachi Model Customs Collectorate Appraisement that denied importers the facility under the 2013 SRO only applied to vehicles with an engine capacity up to 1,800cc and did not apply to hybrid vehicles without larger batteries.
However, the customs officials disregarded the 2018 circular and released the used imported semi-hybrid automobile, giving the importers of the cars the benefit of the SRO. The customs collectorate accused the importers of breaking Section 32(3)(a) of the Customs Act 1969 read with Section 3(1) of the 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 when it instituted references against them. As a result, one of the importers was instructed to deposit the Rs161,830 short-paid sum to the government treasury, which he failed to do and was consequently assessed penalties under various headings. Later, the customs collector (appeal) also dismissed their arguments against the references, noting that the phrase “hybrid electric vehicles (HEVs)” mentioned in the 2013 SRO should be understood as “completely hybrid” and not “partial hybrid.”
The importers went to the Peshawar Customs Appellate Tribunal, which supported their argument and annulled the referrals in a consolidated judgement issued August 27, 2020.
According to Justice Muhammad Naeem Anwar of the PHC, in his ruling, notifications that confer benefits or rights on individuals may be applied retroactively; however, notifications that disturb or impair an individual’s vested rights or create new liabilities cannot be applied retroactively in the absence of a legal sanction.
The PHC decision had stated that the issuance of the 2018 circular by the Karachi Model Customs Collectorate Appraisement would amount to classifying hybrid vehicles and that the extension of the SRO to any specific class of vehicle — fully hybrid — was not within the authority’s purview but could be accomplished through direct legislation, with the courts interpreting any ambiguities.
The PHC decision had also stated that the argument that the SRO only applied to new vehicles and could not be expanded or used to request a tax or customs levy exemption was mistaken, and that the 2018 circular defining the class of the vehicles could not have retrospective effect because the vehicles had been imported up until 2017.
