Leviable Custom Duties and Agreed Rates under Multilateral Trade Agreements

Leviable Custom Duties and Agreed Rates under Multilateral Trade Agreements Additional Duty Bilateral Agreements Case Laws Civil Law Constitutional Law Customs Free Trade Agreement GATT Government Duties International Convention & Treaty Knowledge - Civil Law Knowledge - Constitutional Law Legislation - Lacunas Litigation & Arbitration Multilateral Trade Agreements Regulatory Duty Solutions - Civil Law Solutions - Constitutional Law Statutory Duty Supreme Court Mr. Justice Ejaz Afzal Khan in his judgment has decided the issue regarding leviable custom duties and agreed rates under multilateral trade agreements in Civil Petitions No. 2532 of 2015 etc.

1. These petitions for leave to appeal have arisen out of the judgment dated 28.08.2015 of a Division Bench of Sindh High Court whereby it dismissed the petitions filed by the petitioners.

2. The issue urged by the petitioners before the High Court through a Constitution Petition and now before this Court through a petition for leave to appeal is that the cumulative incidence of customs-duties leviable under sub-sections (1), (3) and (5) of section 18 of the Customs Act shall not exceed the rates agreed to by the Government of Pakistan under multilateral trade agreements. The learned ASC by referring to clause 5 (b) of Article XXIV of the General Agreement on Tariffs and Trade contended that duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of free trade area or the adoption of such interim agreement to the trade of contracting parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the freetrade area, or interim agreement as the case may be.

The learned ASC by referring to proviso to sub-section 5 of section 18 of the Customs Act contended that the cumulative incidence of customs duties leviable under sub-sections (1), (3) and (5) shall not exceed the rates agreed to by the Government of Pakistan under multilateral trade agreements. Any duty, the learned ASC maintained, levied in derogation of clause 5(b) of Article XXIV and proviso to sub-section 5 of section 18 of the Customs Act shall not have any effect. Bilateral agreement, the learned ASC added, doesn’t find mention in proviso to sub-section 5 of section 18 of the Customs Act but this will not have much significance as every agreement even if bilateral in nature becomes multilateral when it passes through the mechanism provided by clauses 7 and 8 of Article XXIV of the General Agreement on Tariffs and Trade. The learned ASC by winding up his arguments contended that where the duty at the time of conclusion of the General Agreement on Tariffs and Trade was 5% it could not exceed that thereafter. When asked what does the expression “rates agreed to” used in the proviso mean, the learned ASC by answering the question again referred to clause 5(b) of Article XXIV of the Customs Act.

3. The learned ASC appearing on behalf of the respondents contended that the question posed by the bench is answered by Part-A-2 of the table. He, by referring to the relevant table of tariffs and import by product groups contended that the maximum duty agreed to is 75% while for the most favoured nations the maximum is 35%. If this aspect of the case, the learned ASC contended, is taken into account, then the duties in any form do not exceed what was agreed to by the Government of Pakistan under the multilateral trade agreement. The impugned judgment, the learned ASC maintained, having been rendered after considering all the conceivable aspects of the proposition is unassailable from whatever angle it is looked at.

4. We have gone through the record, the relevant provisions and considered the arguments addressed at the bar.

5. Before we appreciate the controversy stirred before us at the bar, it is worthwhile to refer to section 18 of the Customs Act which reads as under:

“18. Goods dutiable: (1) Except as hereinafter provided, customs duties shall be levied at such rates as are prescribed in the First Schedule or under any other law for the time being in force on:
a) goods imported into Pakistan.
b) goods brought from any foreign country to any customs station, and without payment of duty there, transshipped or transported for, or thence carried to, and imported at any other customs station; and
c) goods brought in bond from one customs station to another.

2) No export duty shall be levied on the goods exported from Pakistan.

3) The Federal Government may, by notification in the official Gazette, levy, subject to such conditions, limitations or restrictions as it may deem fit to impose, a regulatory duty on all or any of the goods to be imported or exported, as specified in the First Schedule at a rate not exceeding one hundred per cent of the value of such goods as determined under section 25, or as the case may be, section 25-A;

4) The regulatory duty levied under sub-section (3) shall,
a) be in addition to any duty imposed under subsection (1) or under any other law for time being in force; and
b) be leviable on and from the day specified in the notification issued under that sub-section, notwithstanding the fact that the issue of the official Gazette in which such notification appears is published at any time after that day.

5) The Federal Government may, by notification in the official Gazette, levy an additional customs-duty on such imported goods as are specified in the First Schedule, at a rate not exceeding thirty-five per cent of value of such goods as determined under section 25, or as the case may be, section 25-A: Provided that the cumulative incidence of customs-duties leviable under sub-sections (1), (3) and (5) shall not exceed the rates agreed to by the Government of Pakistan under multilateral trade agreements.

6. The additional customs-duty levied under sub-section (5) shall be
a) in addition to any duty imposed under sub-sections (1) and (3) or under any other law for the time being in force; and
b) leviable on and from the day specified in the notification issued under that sub-section, notwithstanding the fact that the official Gazette in which such notification appears is published at any time after that day.”

6. How far clause 5 of Article XXIV of the General Agreement on Tariffs and Trade is restrictive of the duties to be imposed on the goods imported in Pakistan also merits a careful look which reads as under:

“Accordingly, the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free-trade area; provided that:

a) with respect to a customs union, or an interim agreement leading to a formation of a customs union, the duties and other regulations of commerce imposed at the institution of any such union or interim agreement in respect of trade with contracting parties not parties to such union or agreement shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable in the constituent territories prior to the formation of such union or the adoption of such interim agreement, as the case may be;

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