Ship-breaking industry: Incentive granted does not amount to discrimination: SHC

KARACHI: The Sindh High Court (SHC) has declared that any incentive granted to the ship-breaking industry under amendment in Rule 58H(4) of the Special Procedure Rules, 2007, vide SRO 583/2017 dated 01.07.2017 does not amount to discrimination against the importers of re-rollable and re-meltable scrap.

A division bench of the SHC comprising Justice Aqeel Ahmed Abbasi and Justice Mahmood Khan declared this in the judgment on the petitions of Ghulam Ali Bhatia and others, the manufacturers of steel products and importers of its raw material such as re-rollable and re-meltable iron and steel scrap from various countries for their own consumption.

The written judgment was issued here on Tuesday. According to the petitioners, re-rollable and re-meltable steel are classifiable under PCT Heading 7204.4910 and 7204.4990 and are primarily used in manufacturing of mild steel products.

The judgment in the case stated that the petitioners expressed their grievance and challenged the alleged discriminatory treatment accorded to the importers of re-rollable and re-meltable scrap vis-a-vis the ship-breakers.

The court stated that it examined the relevant provisions of SRO 583(I)/2017, dated 01.07.2017, whereby, sub-rule (4) of Rule 58(H) of the Sales Tax Special Procedures Rules, 2007, was amended and have also taken note of the submissions and have also gone through the case laws relied upon by the counsel for the parties in support of their contentions.

The court order stated that the petitioners alleged that through amendment in Sales Tax Special Procedures Rules 2007, sub-rule (4) of Rule 58(H) has been substituted, and the ship-breakers have been granted substantial relief and concession in respect of payment of duty and taxes and, therefore, the petitioners are not in a position to carry on their business through fair market competition with the ship breakers.

The court noted that there has been no imposition of any new tax or duty upon the petitioners nor is it a case of imposition of additional duty and taxes or creating any additional liability. On the contrary, reduction of liability towards payment of duty and taxes granted to the ship-breaking industry through impugned amendment vide SRO 583(I)/2017 dated 01.07.2017 has been challenged for being discriminatory, whereas, the petitioners have sought a declaration to the effect that importers of re-rollable and re-meltable scrap used in the manufacturing process of steel products may be treated at par with the ship-breaking industry so that the reduction/concession extended in respect of duty and taxes to the ship-breaking industry may also be extended in similar terms to the petitioners, the importers of re-rollable and re-meltable scrap.

Admittedly, the court stated that re-rollable and re-meltable scrap imported by the petitioners is classifiable under PCT Heading 7204.4910 whereas the ship (vessel) is classifiable under PCT Heading 8909.0000, therefore, prima facie it appears that both the imported entities in their original form and stage of import are not of the same class, hence not comparable.

Therefore, the element of discrimination among the same class as alleged by the petitioners is not attracted in this case. Moreover, while challenging the vires of any Law, Rule, Regulation or Notification on the grounds of discrimination, particularly in tax matters, the court observed an aggrieved party has to establish that any tax, duty or levy imposed by the legislature or the government is unjust and creates discrimination amongst the same class of persons, hence violative of Article 25 of the Constitution.

The petitioners, the court observed, challenged the alleged discrimination for the concession granted to the ship-breaking industry through amendment vide SRO 583(I)/2017 dated 01.07.2017, which according to the counsel for the petitioners, should have also been extended to the importers of re-rollable and re-meltable scrap to keep the petitioners' business competitive with the ship-breaking industry, as the petitioners are in the same business and belong to the same class.

The court rejected the submissions of the counsel for the petitioners to the effect that the importers of re-rollable and re-meltable scrap, who use the same for manufacturing of steel products, belong to the same class of the ship-breaking industry, for the reason that the petitioners are importers of scrap which are covered under a different PCT Heading 7204.4910, whereas, the ship (vessel) is classifiable under PCT Heading 8909.0000.

The court declared that the petitioners had not been able to establish that their business activity is similar to the business activity of the ship-breaking industry, hence cannot be classifiable under the same PCT Heading nor the same can be treated as the same class. Therefore, any incentive granted to the ship-breaking industry, as in the said case, does not amount to any discrimination amongst the same class of persons.

Copyright Business Recorder, 2020