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The Courts should not interfere with Administrative Decisions unless they are Arbitrary or Unlawful --- Supreme Court of Pakistan

Islamabad 20-09-2024: In a significant ruling, the Supreme Court of Pakistan, comprising Mr. Justice Syed Mansoor Ali Shah, Mr. Justice Jamal Khan Mandokhail, and Mr. Justice Athar Minallah, has upheld the classification of imported goods determined by the Federal Board of Revenue’s (FBR) Classification Committee. The Court set aside the decisions of both the Sindh High Court and the Customs, Excise, and Sales Tax Appellate Tribunal, reaffirming the technical authority of the Classification Committee in customs matters.

The case, [Civil Appeal Nos. 799 to 824 of 2015], arose from a dispute between the Additional Collector of Customs, Model Customs Collectorate, Karachi, and M/s K.S. Sulemanji Esmailji & Sons Pvt. Ltd. The respondent company had imported 26 consignments of “BOPP Printed Laminated Packaging Film (Metalized)” and initially paid customs duty at the rate of 25%, based on their own declarations. Later, the company filed for a refund under Section 33 of the Customs Act, 1969, claiming that the goods were wrongly classified, leading to overpayment of customs duty.

The controversy centered around the proper classification of the imported goods, with the respondent arguing that the goods should have been taxed under a different heading, attracting a lower duty rate of 20%.

The matter was referred to the FBR’s Classification Committee, which classified the goods under PCT Heading 3920.2040, confirming a 25% customs duty rate.

Both the Customs Tribunal and the Sindh High Court ruled in favor of the respondent company, reclassifying the goods under lower tariff headings. However, the Supreme Court of Pakistan overturned these decisions, emphasizing the expertise and authority of the Classification Committee.

The Supreme Court of Pakistan reiterated that the Federal Board of Revenue (FBR), through its Classification Committee, holds the final authority on the classification of goods, as mandated by the Customs Act, 1969 and Pakistan’s international obligations under the Harmonised Commodity Description and Coding System. The Court emphasized that such technical determinations should not be lightly disregarded by Courts or tribunals unless proven arbitrary or in violation of the law.

The ruling clarified that the Classification Committee had correctly applied Rule 3(c) of the General Rules for Interpretation, classifying the goods under PCT Heading 3920.2040, which appears last in numerical order among the possible headings. This interpretation was based on detailed analysis, including lab reports and the Explanatory Notes to the Harmonised System.

The Supreme Court of Pakistan found that the Tribunal and High Court misinterpreted the Rules of Interpretation and the Explanatory Notes, leading to erroneous reclassification. The High Court’s reliance on the general “Others” category was deemed incorrect, as the goods were more specifically covered under the headings for Biaxially Oriented Polypropylene (BOPP) film.

The Court affirmed the presumption of regularity attached to administrative decisions, particularly those made by specialized bodies like the Classification Committee. It stated that such decisions should not be overturned unless they are shown to be arbitrary, fanciful, or in violation of the rules.

The Court emphasized that the burden of proof lies with the claimant when seeking a refund based on an alleged misclassification. In this case, the respondent failed to prove that the original classification was incorrect.

This ruling reinforces the finality and authority of FBR’s Classification Committee in customs matters, limiting the scope of judicial interference in technical decisions. It highlights the need for Courts and tribunals to defer to administrative expertise in complex matters of classification unless there is clear evidence of arbitrary decision-making.

The case sets a precedent for future disputes over customs classifications, signaling that the Courts will uphold the decisions of specialized bodies unless there are compelling reasons to do otherwise. This decision is also a strong reminder of Pakistan’s commitments under international agreements like the Harmonised System, which forms the backbone of global trade classifications.

The judgment has been hailed as a victory for administrative efficiency and the rule of law, ensuring that technical bodies like the FBR’s Classification Committee are given due respect in their areas of expertise.