MESSRS ASBESTOS CEMENT INDUSTRIES LTD.V VS THE SUPERINTENDENT, CENTRAL EXCISE AND LAND CUSTOMS,
FACTORY CIRCLE
1991 P T D 506
[Karachi High Court]
Before Syed Haider Ali Pirzada and Haziqul Khairi, JJ
Messrs ASBESTOS CEMENT INDUSTRIES Ltd.
versus
THE SUPERINTENDENT, CENTRAL EXCISE AND LAND CUSTOMS,
FACTORY CIRCLE and 3 others
Constitutional Petition No.D-863 of 1989, decided on 10/12/1990.
(a) Sales Tax Act (III of 1951)---
----S. 3---Constitution of Pakistan (1973), Art.199---Reduction of sales tax rate-- Benefit of reduced rate whether extendable to those products also which were lying in factories and warehouses when notification for reduction of sales tax rate came into force or was it available only in respect of such products as were manufactured or produced subsequently---Rate at which sales tax was to be levied was the day on which goods left the factory or warehouse---Rate of sales tax having been reduced while goods were still lying in the factory or the warehouse of petitioner, they were to be charged at the reduced rate.
1984 MLD 475 and Muhammad Younus v. Central Board of Revenue, Government of Pakistan and others PLD 1964 SC 113 fol.
(b) Sales Tax Act (III of 1951)---
----S. 27---Central Excise Rules, 1944, R.11---Constitution of Pakistan (1973), Art.199---Refund claim of excess amount paid as sales tax ---Limitation-- Petitioner having paid excess amount under protest and not due to inadvertence, error or misconstruction, provisions of R.11, Central Excise Rules. 1944 were not attracted---Petitioner being entitled to refund of excess amount having been paid by him under protest, orders passed by Authorities refusing to order refund of such amount, were declared to be illegal, without jurisdiction and without lawful authority---Application for refund having been filed within time, High Court directed respondents to refund the specified amount.
Orient Straw Board and Paper Mills Limited v. Assistant Collector of Central Excise and Land Customs Division No.II, Karachi and 2 others PLD 1985 Kar. 126 ref.
Sirajul Haq for Petitioner.
Zahiruddin Khan for Respondents.
Date of hearing: 21st June, 1990.
JUDGMENT
SYED HAIDER ALI PIRZADA, J.---The petitioner has through this petition claimed the following reliefs:--
(i) declare that the impugned orders passed by the Respondents 1, 2, 3 and 4 are arbitrary, illegal, without jurisdiction or in excess of jurisdiction, null and void and without lawful authority;
(ii) declare that the application of the petitioner for refund of Rs.6,04,898.84 was within the period of limitation provided by the law and that the petitioner is entitled to the refund of the same amount;
(iii) give any other relief this Hon'ble Court may deem fit and proper; and
(iv) award costs of this petition to the petitioner.
The facts leading to the filing of the above petition are that the petitioner is a public limited company, engaged in the business of manufacture of asbestos cement pipes, sheets etc. at its two factories, one at Karachi and the other at Hyderabad. It is the case of the petitioner that the finished products of the petitioner were liable to sales tax at the standard rate of 20 per cent upto the financial year 1980-81. By Finance Ordinance, the standard rate of sales tax was reduced from 20% to 12-1/2%. It is the further case of the petitioner that with effect from 25-4-1981, the collection of sales tax was transferred from Income Tax Authorities to Central Excise Authorities after promulgation of Sales Tax (Amendment) Ordinance, 1981 through which a second proviso was added to subsection (4) of section 3 of the Sales Tax Act. For the smooth transaction of collection of sales tax from Income Tax Authorities to Central Excise Authorities, the Central Board of Revenue issued letter C.No.667-C (CE)/81 dated 25-4-1981. Copy of the letter is annexed to the petition as Annexure A. The Finance Ordinance, 1981 brought in further amendment in the Sales Tax Act, 1951 and the existing two provisos to subsection (4) of section 3 of the Sales Tax Act were substituted by a single proviso. On the basis of the above amendment, the Central Board of Revenue issued Circular No.6 of 1981 dated 25-6-1981 declaring that the sales tax leviable on all goods produced or manufactured in Pakistan shall be paid at the same time and in the same manner as the duty of excise. A copy of said circular dated 25-6-1981 is annexed to the petition as Annexure `B'.
It is the further case of the petitioner that following the procedure for collection of Central Excise duty on the budget day, the respondent No.1 asked the petitioner to declare the stock of finished goods as on 24-6-1981 and issued an order that goods manufactured prior to the budget day i.e. 25-6-1981 should be cleared at the rate of 20% o and not at the reduced rate of 12-1/2%. The petitioner protested strongly against the treatment but the respondent No.1 did not allow the clearance of goods at the new rate of 12-1/2%. The petitioner thereupon sent telegrams to various authorities including the Minister of Finance, the Secretary, Ministry of Finance, the Chairman, Central Board of Revenue and the Member (Sales Tax), Board of Revenue against this illegal demand but to no avail. Upon the protests lodged by the petitioner and other manufacturers, the respondent No.1 issued an order C.No.2-New Sales Tax/1981/3117 dated 5-7-1981 directing the petitioner that the stocks of goods held by the manufacturers at 00.00 hours of 25-6-1981 will be subject to, the rate of sales tax as applicable upto that time and that the production after that time and dale will be changed at the new rates.
It is the further case of the petitioner that the petitioner, in order to avoid penal provisions, seizure of goods and closure of factory for non-payment of the sales tax demanded by the respondent No.1, started clearing the goods from the stock as on 25-6-1981 by paying under protest sales tax at the enhanced rate of 20% instead of 12-1/2% the new standard rate. In response to telegrams and representations from the manufacturers including the petitioner, the Central Board of Revenue, vide their letter C.No.14/2-C/CE/81 dated 7-7-1981 also ruled that "the goods produced before 00.00 hours on 25-6-1981 will be charged at the pre-budget rate regardless of their clearance on a subsequent date". It is the further case of the petitioner that it kept on agitating against this ruling through telegrams and representations to Minister of Finance, the Secretary, Ministry of Finance, the Chairman, Central Board of Revenue, the Member (Sales Tax), Central Board of Revenue and the Collector of Central Excise & Land Customs. It is its further case that no reply to these representations was received from the Central Board of Revenue or the Ministry of Finance.
It is the further case of the petitioner that some manufacturers challenged the action of charging sales tax on the stock as on 00.00.hours on 25-6-1981 at the pre-budget rate of 20% before the Lahore High Court in constitutional petitions. These petitions were allowed by the Lahore High Court.
It is the further case of the petitioner that it filed refund application dated 30-4-1985 on prescribed form under section 27 of the Sales Tax Act, 1981 requesting for refund of the excess amount so paid. The respondent No.2 rejected the claim of refund for Rs.6,04,898.84 as being time-barred. The petitioner went in appeal against the order of respondent No.2 which was rejected by respondent No.3 vide order in Appeal No.480 of 1986 dated 30-10-1986. The petitioner filed revision before respondent No.4 which also met the same fate. Hence the petitioner filed the above petition.
Mr. Sirajul Haque, learned counsel for the petitioner raised the following two contentions:--
(1) Whether the benefit of the reduced rate is extendable to those products also which were lying in the factories and warehouses of the petitioner when the Ordinance, 1981 came into force or was it available only in respect of such products as were manufactured or produced subsequently.
(2) The refund application was within time or it was barred by time.
It may be observed that the above first point was also the subject-matter of the constitutional petition Writ Petition No.3359 of .1981, Daroon Rubber Works Industries Ltd., Wazirabad through Managing Director v. Government of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others. A learned single Judge of Lahore High Court allowed the above petition (1984 M L D 475). It may be advantageous to reproduce the operating portion of the above judgment which reads as under:--
"By parity of reasoning, the sales tax even though it may also be a tax on the manufacture and production of goods has to relate, as its name suggests, to some stage of their disposal, may be, by way of sale, self-consumption or otherwise. This view rinds support from the fact that in Sales Tax Act the value of goods has been given a restricted meaning and by section 3(3)(i) thereof it has been equated with the sale price. Further, the definition of `the sale price' as given in section 2(16) of the Sales Tax Act, read with section 4 of the Central Excises and Salt Act, has two elements, firstly, the wholesale cash price and secondly, point of time with reference to which the said price is to be determined. To me there appears to be no reason why the levy of sales tax be anterior to the day relevant for the purpose of determining the value of goods under the Act. I should, therefore, think that the rate at which the sales tax is to be levied is the day on which the goods leave the factory or warehouse. Since in these petitions the rate of sales tax was reduced while the goods were still lying in the factory or the warehouse of the petitioners, they were to be charged with the tax at the reduced rate."
Mr. Saad Saood, J. (as he then was) has come to the conclusion, after giving cogent reasons, which are fully supported by the various authorities discussed by him in the said judgment, that "the proviso to section 3(4) is of any assistance in determining the point of time when the duty becomes leviable. This proviso is an enabling provision to facilitate the Board of Revenue in recovering the sales tax. It can hardly be pressed into service to recover sales tax even before the value of the goods stands determined in accordance with the provisions of the Act or to obliterate the distinction that exists between the excise duty and the sales tax". In that view of the matter, the petition was accepted and it was declared that the actions of the respondents in demanding duty at the old rate is illegal.
We have given careful thought to all the aspects raised before us in the light of the judicial pronouncement on the point in issue. We have independently applied our mind to all the aspects of the case and to the relevant provisions of the Statute and have come to the conclusion that the aforesaid view finds full support from the judgment of the Hon'ble Supreme Court in the case of Muhammad Younus v. Central Board of Revenue, Government of Pakistan and others P L D 1964 SC 113. The point in issue has been dealt with in full detail. As we are in full agreement with the reasons given in the judgment of Lahore High Court, we do not propose to rewrite the same here and adopt it. We see no reason to take a different view from the above case. Consequently, it is held that the action of the respondents in demanding duty at the old rate is illegal.
As regards the second point that the refund application was barred by time or not, the petitioner filed a refund claim of excess amount paid as sales tax from 26-6-1981 to 26-6-1984 amounting to Rs.6,04,898.84 vide refund application dated 30-4-1985 on prescribed form under section 27 of the Sales Tax Act, 1951 requesting for refund of the excess amount so paid. The respondents rejected the application on the sole ground that it 1vas barred by time. According to the respondents, rule 11 of Central Excise Rules, 1944 is applicable.
This point was considered by a Division Bench of this Court in Orient Straw Board and Paper Mills Limited v. Assistant Collector of Central Excise and Land Customs Division No.II, Karachi and 2 others P L D 1985 Kar. 126 in which it came to the conclusion, after giving cogent reasons, that "no duty which has been paid or has been adjusted in an account current maintained with the Collector of which repayment wholly or in part is claimed on the ground that the same has been paid through inadvertence or error or misconstruction, shall be refunded and no abatement in duty shall be allowed unless a written claim is lodged with the proper officer within one year from the date of such payment or adjustment as the same may be. In the present case the petitioner had paid the amount under protest and not due to inadvertence, or error or misconstruction and, therefore, the above rule 11 is not attracted to the present case". We see no reason to take a different view in the above-case.
In the present case, the petitioner had paid the amount under protest and not due to inadvertence, or error, or misconstruction and therefore, the above rule 11 is not attracted to the present case.
We, therefore, allow the above petition and declare that the impugned orders passed by the respondents 1, 2, 3 and 4 are illegal, without jurisdiction and without lawful authority. We further declare that the application of the petitioner for refund was filed within time. We direct the respondents to refund the sum of Rs.6,04,898.84 to the petitioner. In the circumstances of the case, the parties are directed to bear their own costs.
AA./A-1011/KPetition accepted.