Arrived before SRO 806: Motor spirit cargoes not liable to pay 10pc RD: LHC

LAHORE: The Lahore High Court (LHC) has held that motor spirit cargoes that arrived in Pakistan before the enactment of SRO 806(I)/2022 are not liable to pay a 10 per cent regulatory duty.

A division bench comprising Justice Abid Aziz Sheikh and Justice Munawar Iqbal Duggal dismissed two intra-court appeals filed by the Customs Collectorates in Lahore and Faisalabad against a single judge’s judgment dated April 27, 2023, which had ruled in favour of Shell Pakistan Limited. The bench directed the Customs authorities to release the bank guarantees furnished by the company against the disputed regulatory duty.

SRO 806 imposed a regulatory duty of 10 per cent on motor spirit but excluded cargoes for which letters of credit (LCs) had already been opened or which were on the high seas. The notification remained in force until June 30, 2022, after which SRO 966(I)/2022 imposed a fresh levy. Rana Muhammad Mehtab and Sultan Mehmood, representing Customs, argued that SRO 806 had expired before the cargoes were cleared and that no LCs had been opened. They relied on the Sindh High Court’s judgment in Hascol Petroleum Limited v. Federation of Pakistan, which declined to extend the benefit of SRO 806.

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Khwaja Aizaz Ahsan, representing the company, argued that the notification provided two alternative grounds for exemption and that the cargoes qualified under the second condition, as they had not only arrived in Pakistani waters but had also berthed well before June 20, 2022.

He further argued that Customs had not disputed the berthing dates and that the Hascol case involved different facts.

The court held that the word “or” was disjunctive and that the two conditions constituted alternative grounds for exemption. It observed that it would be unduly literal to exempt a cargo that was still at sea on June 20, 2022, while denying the exemption to an identical cargo that had already berthed, as this would penalise earlier arrival.

The court distinguished the Hascol case and also noted that the Supreme Court, in Euro Oil (Private) Limited v. Federation of Pakistan, had not affirmed the Sindh High Court’s judgment on merits.

Copyright Business Recorder, 2026