Sitting Panel: Sh. Riaz Ahmed, Rana Bhagwan Das and Mian Muhammad Ajmal, JJ

Summary:

This case involves a review petition filed by Fecto Belarus Tractors Limited against a Supreme Court judgment that had set aside a Lahore High Court order, thereby making the company liable to pay customs duty and sales tax on imported tractors under the “Awami Tractor Scheme.” The original scheme and its first phase exempted tractors from these taxes. For the second phase, Fecto Belarus was authorized to import tractors under similar concessions, with a fixed selling price and a deadline for opening Letters of Credit, which they complied with. However, the government later sought to impose customs duty and sales tax, arguing a prior notification had withdrawn the exemption and citing Section 31-A of the Customs Act. Fecto Belarus contended that the doctrine of promissory estoppel and the Economic Reforms Act, 1992, protected them from these levies.

The Supreme Court, in its review, found errors apparent on the face of the record in its earlier judgment. It emphasized that while Section 31-A of the Customs Act generally nullifies the effect of prior exemptions upon withdrawal, it does not apply to sales tax, as there is no pari materia provision in the Sales Tax Act. Crucially, the Court held that the doctrine of promissory estoppel was fully applicable. Given that the government had consciously decided to grant exemptions for the second phase of the scheme, fixed a selling price for the tractors, and induced the petitioner to act upon this representation by opening Letters of Credit and incurring significant expenses, it would be inequitable to allow the government to withdraw the concessions. The Court ruled that the petitioner was protected under both the doctrine of estoppel and the Economic Reforms Act, 1992, and therefore, customs duty and sales tax could not be levied. The Lahore High Court’s judgment, which favored Fecto Belarus, was restored, and the Supreme Court’s earlier judgment was recalled.

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