Justice Muhammad Junaid Ghaffar of Sindh High Court directed the Engro Elengy Terminal to pay 5 per cent customs duty on the import of floating storage re-gasification unit (FSRU).
Dismissing the suit filed by Engro Elengy Terminal against the decision of imposing customs duty on FSRU, SHC directed the company to discuss the issue of advance income tax etc with the relevant department.
Barrister Makhdoom Ali Khan appearing for the plaintiff maintained that it imported an FSRU unit to handle LNG and re-gasified liquefied natural gas (RLNG) against which the customs is demanding customs duty at a rate of 5 per cent and 5.5 per cent advance tax.
The plaintiff sought exemption under SRO 678, clause 2 and 2-a. The plaintiff also sought exemption from advance income tax on the basis of SRO 947 and contended that after Finance Bill 2015, concession under the said SRO is academic as the Finance Bill provides a five year Income Tax holiday exempting the profit gained by LNG terminal operators from any tax.
Sohail Muzaffar Advocate assisted by Masooda Siraj representing the Customs along with their team questioned the maintainability of the suit and said it was barred under section 217 of the Customs Act 1969. They submitted that the petitioner has the alternate remedy as provided for under Sections 193 and 194 (A) of the Customs Act 1969.
The counsel also maintained that FSRU is in fact a vessel classifiable under HS Code 8901.2000 attracting statutory customs duty at the rate of 10 per cent, sales tax at the rate of 17 per cent and income tax at the rate of 5.5 per cent. Sohail Muzaffar, however, said that the sales tax is not attracted in this case.
The bench after hearing the sides in detail reserved the judgment on February 26, which was announced in open court on Thursday. The bench rejected the challenge to the jurisdiction of the court and said the suit is maintainable. The bench however dismissed the suit holding that the plaintiff is liable to pay customs duty as demanded by the Customs authorities.
The bench in respect of advance income tax noted that the plaintiff attempted to apply and obtain an exemption certificate but the Inland Revenue commissioner regretted from extending such a concession. A revision plea was also rejected by the chief commissioner, Inland Revenue.
The bench, however, in view of recent concessions given to the LNG industry noted that since the plaintiff has been recognised as a petroleum company in terms of SRO 678 for which exemption is available under SRO 947, section 148 of the Income Tax Ordinance 2001 becomes irrelevant and in-applicable.
The bench remanded the matter back to the Inland Revenue authorities for deciding the exemption or otherwise in respect of advance income tax.
After the announcement of judgment, Barrister Makhdoom Ali Khan, counsel for plaintiff prayed to the court to suspend the order as he intended to file an appeal.
The bench, allowing the request, ordered suspension of its order to the extent of payment of customs duty for a period of two weeks.
