IN THE SUPREME COURT OF PAKISTAN 
(Appellate Jurisdiction) 
 
 
 
 
 
 
PRESENT: 
 
 
 
 
MR. JUSTICE MIAN SAQIB NISAR 
 
 
 
 
MR. JUSTICE GULAR AHMED 
 
 
 
 
MR. JUSTICE MAQBOOL BAQAR 
 
 
CIVIL APPEAL NO.1125 OF 2007 
(On 
appeal 
against 
the 
judgment 
dated 
18.1.2005 of the High Court of Sindh, Karachi 
passed in CP No.D-516 of 2004) 
 
 
The Federation of Pakistan and others  
… 
Appellants 
 
 
 
 
 
Versus 
M/s Delta Innovations Ltd.  
 
 
… 
Respondent 
 
For the appellants: 
Dr. Farhat Zaffar, ASC. 
 
 
 
 
Raja M.Iqbal, ASC 
 
 
 
 
Mr.Asaf Fasihuddin Verdak, ASC 
 
 
 
 
Raja Abdul Ghafoor, AOR. 
 
For the respondent: 
Mr.Tariq Javed, ASC.  
 
Date of hearing:  
21.4.2015 
 
 
 
 
JUDGMENT 
 
 
MAQBOOL BAQAR, J.- Through the above appeal the 
appellants have assailed the judgment dated 18.1.2006 of a 
learned Division Bench of the High Court of Sindh, Karachi 
whereby Constitution Petition No.D-516 of 2004, filed by the 
respondent, was allowed.  
2. 
 
The respondent is engaged in the business of 
manufacture and assembly of motorcycles in Pakistan. For the 
said purpose, he imports parts/components of motorcycles. The 
controversy in the matter is, as to whether the parts/ components 
imported by the respondent for manufacture and assembly of his 
motorcycles are amenable to custom duty @ 25% ad-voleram 
under PCT heading 87.14, as claimed by the respondent, or @ 
90% as prescribed under PCT heading 87.11, as contended by the 
appellants. 
3. 
 
The respondent has contended that since he imported 
parts/components of motorcycles that fall within PCT heading 
87.14 which provides for duty @ 25% ad-voleram and do not fall 
within the description of PCT heading 87.11 which provides for 
duty @ 90% ad-voleram, his consignments are chargeable to duty 
@ 25% ad-voleram only. 
4. 
 
It is indeed true that parts/accessories of vehicles, 
including that of motorcycles are chargeable to duty as prescribed 
under PCT heading 87.14, but at the same time PCT heading 
87.11, which provides for duty on motorcycles @ 90% ad-voleram, 
also provides for 30% exemption on such duty in respect of 
components for manufacturing of motorcycles in terms of SRO 
No.436(1)/2001 dated 18.6.2001, as follows:- 
 
 
“Assessable rates on account of Exemption or Regulatory Duty etc. 
Exemption: (a) Components for the manufacture of motorcycles 
falling under heading 87.11 [See S.R.O.No.436(1)/2001, reported 
as PCTL 2001 St.950]  
 
30% ad.val” 
 
And therefore, it can clearly be seen that prescription under PCT 
heading 87.14 is not available to parts/components imported for 
the manufacture/assembly of motorcycles and such consignments 
are amenable to duty under heading 87.11, however, with partial 
exemption, where the same is available in terms of SRO 
436(1)/2001, whereas the duty provided under heading 87.14 is 
for commercial imports only. The above arrangement/scheme as 
shall be discussed herein later has been designed to encourage 
indigenization of the local automotive industry. 
5. 
 
The respondent, in view of the foregoing, cannot 
successfully claim to be falling under PCT heading 87.14 and his 
subject imports are clearly chargeable to duty under heading 
87.11. He may, however, avail exemption under the aforesaid SRO 
upon meeting the pre-requisite therefor and if he qualifies for the 
same.  
6. 
 
We have noted that contrary to his present stance, that 
duty on his imports is leviable under heading 87.14, the 
respondent, way back in the January 2003, has himself applied 
for availing the concession/partial exemption under the aforesaid 
SRO, and was in fact so keen to avail the same that he obtained 
an order from the learned Lahore High Court for issuance of the 
requisite survey certificate to enable him to avail the SRO, 
through writ petition No.307 of 2004, and in pursuance of the 
said order, a provisional survey certificate was issued to the 
respondent.  
7. 
 
Since, as noted above, the respondent has been issued 
requisite survey certificate and has also obtained a deletion 
programme in terms of the aforesaid SRO, and since the 
appellants have alleged violation and non-adherence to the terms 
of the SRO. We first need to examine the relevant aspects of the 
SRO and note the allegations, before issuing any directive in the 
matter. 
8. 
 
According to the appellants, the Government of 
Pakistan in order to promote indigenization of automotive 
industry, 
introduced 
concessionary 
regime 
through 
SRO 
No.436(1)/2001 dated 18.6.2001. In terms of the said SRO, and 
subject to certain conditions prescribed thereby, the automotive 
industry has been granted partial exemption in customs duty on 
their import of components for the vehicles manufactured by 
them. To avail the above concession, the recognized assemblers 
has to obtain an approved deletion programme from Engineering 
Development Board (EDB), which programme is devised after a 
survey of the manufacturing facility by the Federal Board of 
Revenue, whereupon a survey certificate is issued. The exemption 
is granted in respect only of such components which are not 
manufactured locally and are imported for the manufacture of 
vehicles falling under PCT heading 87.11, including motorcycles. 
Amongst the various conditions prescribed under the SRO is the 
condition that manufacturer shall chalk out an indigenization 
programme spreading over a maximum period of five years, within 
which period, he shall achieve such minimum indigenization of 
the manufacture of vehicle as approved by the indigenization 
committee of the EDB and that in case of any default in the 
indigenization programme, the components imported in violation 
of the indigenization programme shall attract statutory duty 
chargeable on the relevant CBU vehicles.  
9. 
 
The appellants, have alleged that the respondent 
imported parts/components as an exempted importer and got 
them cleared as spare parts @ 25% duty, and it was only after 
they realized that the customs authorities are no more oblivious of 
his clandestine import of CKD kits, the respondent approached 
EDB and the FBR and applied for provision of deletion programme 
and the survey certificate. The respondent was issued provisional 
survey certificate along deletion programme on 13.3.2004. 
However, instead of observing the said deletion programme, the 
respondent again attempted to clear his goods on lower rate of 
duty of 25% instead of 30% as provided under the aforesaid SRO. 
It is further alleged that through the consignment in question, the 
respondent has imported Main switch assembly R/L Chain, and 
Handle Bar Pipe upper/lower, to be used in the assembly of 
motorcycles and claimed assessment thereof under tariff head 
87.14 which according to the appellants is prescribed for 
commercial import and not for the industrial import, and that the 
said consignment, if not covered under the aforesaid SRO is 
chargeable to duty @ 90%.  
10. 
 
In the circumstances, and having already held that the 
parts/components 
being 
imported 
by 
the 
respondent 
are 
chargeable to duty under PCT heading 87.11 and that the 
concession under the SRO 436(1)/2001 shall only be applicable to 
the respondent in case he fully adhere to the terms and conditions 
thereof. We, feel it appropriate to remand the matter to the 
concerned adjudication office of the FBR to decide the same 
accordingly.      
 
 
 
 
 
 
 
 
 
 
 
Judge 
 
 
 
 
 
 
 
 
 
 
 
Judge 
 
 
 
 
 
 
 
 
 
 
 
Judge 
Islamabad the 
21st April 2015 
(Aamir Sh.) 
 
‘NOT APPROVED FOR REPORTING’ 
