SHABBIR TILES AND CERAMICS LIMITED VS MEMBER (JUDICIAL), CENTRAL BOARD OF REVENUE, KARACHI
1991 P T D 527
[Karachi high Court]
Before Syed Haider Ali Pirzada and Kamal Mansoor Alam, JJ
SHABBIR TILES AND CERAMICS LIMITED through Managing Director
versus
MEMBER (JUDICIAL), CENTRAL BOARD OF REVENUE, KARACHI and 2
others
Constitutional Petition No.D-115 of 1990, decided on 29/11/1990.
Sales Tax Act (III of 1951)---
----S. 3(4)---Central Excise Rules, 1944, Rr.53, 226, 237, 238 & 246---Constitution of Pakistan (1973), Art.199---Confiscation of goods---Constitutional jurisdiction, exercise of---Allegations against company were that production, clearance and counsel for the petitioners is that the respondents were not paying any heed even to this clarification on the point. In proof of their statement that they were being charged sales tax on both kinds of the cotton waste, the petitioners filed on record a table in respect of such payments. This is Annexure. "D-1" and is attested by the Inspector, Central Excise and Land Customs posted at the premises of the petitioner mill. Learned counsel for the petitioners then brought to our notice three letters sent by the petitioners to Respondent No.1 (Collector, Central Excise and Land Customs, Hyderabad) balance of goods, manufactured and cleared by company within one month, were not entered in R.G-1. registered, prescribed for the purpose and huge quantity of finished goods were found to have been .removed from factory without payment of sales tax and further large quantity was found unaccounted---Authorities on presumption that excess quantity of goods produced by company were removed by it without payment of sales tax leviable thereon, ordered confiscation of alleged excess quantity, allowing petitioner to exercise option to redeem goods on payment of fine alongwith sales tax---Authorities while deciding case, completely ignored and omitted to consider documents annexed by petitioner to the reply to show-cause notice issued to petitioner by Authorities below---Orders of Authorities based on no evidence and passed without applying their mind to facts of case, held, could not be sustained---Nigh Court in exercise of Constitutional jurisdiction set aside orders of Authorities below and remanded case to be decided afresh after giving parties opportunity to lead evidence in support of their respective contentions.
Talib H. Rizvi for Petitioner.
Naimur Rehman, Standing Counsel for Respondents.
Date of hearing: 22nd November, 1990.
JUDGMENT
SYED HAIDER ALI PIRZADA, J.---The petitioners have challenged in this petition the order dated 22-1-1990 passed by the respondent No.1 in the revision petition filed by the petitioners whereby he remitted redemption fine imposed in lieu of confiscation of the excess stocks, reduced the penalty to Rs.2 lacs and maintained the order demanding sales tax on the stocks found short.
The facts leading to the filing of the above petition are that the petitioners in their factory manufacture glossy and matt tiles, of different designs and different colours, in various sizes. These tiles after the manufacture are packed and stacked, except the rejected /defective tiles which are kept in bundles in loose form in the factory. These stored tiles are several lacs in number, both in packed cartons and in bundles. It is the case of the petitioners that they went into operation in 1980 and since then the tiles (all varieties) about 33,44,605 square metres, were soldin the market until December, 1988. It is the further case of the petitioners that in normal course of business, they keep an upto date account of the finished goods in COMPUTER under a finished goods stock system, The daily production is also recorded in Daily Packing List/Production Reports and the clearances are recorded in AR-I/ACL.
It is the further case of the petitioners that the tiles which are defective and are not normally marketable, are stored in the open yard and are left under the name of "Awami Tiles", It is their further case that it is an established practice that from the factory from this stock, if some tiles are picked for sale, then these are recorded in the R.G-I register and cleared under excise documents.
It is the further case of the petitioners that their management changed and they decided in January, 1989 that the physical stock checking be done so that all the wastage or broken tiles are accounted for. In the midest of this operation, a team of Directorate of Vigilance Wing (Customs Central Excise and Sales Tax) raided the petitioner's factory. They started the physical verification of the stocks. The staff created a panicy situation and started counting the tiles. If any proper checking would have been done, it would have taken them at least 7-10 days but they within two days with 'an undue haste and not in the proper and regular method prepared the lists. The petitioners' staff, in this harassed state of affairs and under good faith and as desired by them, signed those lists.
On 25-3-1989 the respondent No.3 issued a show-cause notice to the petitioners wherein it was alleged that the production, clearance and balance of ceramics tiles, manufactured and cleared by the petitioners from 1-1-1989 to 1-2-1989 were not entered in the R.G.-I register. It was also alleged that huge quantity of finished tiles of different varieties were found to have been removed from the factory without payment of sales tax and huge quantity of different varieties were found unaccounted. The excess was presumed to be removed clandestinely without payment of sales tax leviable thereon. On these allegations, it was alleged that the petitioners had committed the violation of Rules 53, 53(2), 226, 237, 238 and 246 of Central Excise Rules, 1944 read with section 3(4) Sales Tax Act, 1951.
The petitioners sent a reply whereby they denied all the allegations. The petitioners pleaded in para. II of the reply as under:--
"That it is also denied that the finished goods were unaccounted for. All the productions and clearances were properly recorded in the computer. What happened is that the respondents did not make production/clearance entries in the R.G: I register because they had intended to get their accounts thoroughly audited their stocks properly counted and the shortages, wastes and losses due to handling and shortage over long years accounted for:
It was also stated that "the account of the finished goods was beings daily recorded in the computer in the normal course of business, where it was retained in memory. A run of the Finished Goods Stock System was made which depicted the Stock Report as on 31-1-1989, contained in 15 pages." The petitioners also annexed the summary of stock as detailed in the Computer Print Out. The petitioners also pleaded that the defective/broken tiles (Awami) should not have been counted.
The respondent No.3 on receipt of reply called for the comments of the Department and the petitioners also filed a reply to those comments. The petitioners again mentioned about the entries of production and clearances in the various records which was an admitted position. The petitioners at the time of hearing also showed samples of Awami tiles which showed that they were damaged.
The objections of petitioners were overruled by the respondent No.3. He ordered that the goods found in excess quantity be confiscated. However, the petitioners were allowed to exercise option to redeem goods on payment of fine of Rs.25 lacs and also on paying sales tax amounting to Rs.9,36,873 leviable thereon. The petitioners were directed to immediately pay sales tax of Rs.11,68,075 (on the goods allegedly found short) and a penalty of Rs. one crore was also imposed.. Against the said order the petitioners filed an appeal before the respondent No. 2. Respondent No. 2 vide his order dated 16-7-1989 reduced the redemption fine to Rs.10 lacs, in addition to the tax leviable thereon. He reduced the penalty to Rs.20 lacs but maintained the levy of sales tax amounting to Rs.11,68,075. Thereafter the petitioners moved the respondent No.l in revision. The respondent No.l by his order dated 22-1-1990 remitted the fine, the goods which were found in excess were taken in R.G.-I register and ordered that the sales tax be paid as and when the goods are cleared. He also imposed a penalty of Rs. two lacs. The petitioners were directed to pay the sales tax on these goods amounting to Rs.11,68,075. Thereafter the petitioners have approached this Court praying that the order of respondent No. 1 be declared to be illegal, void. without lawful authority and be quashed. The respondents though served have not filed any counter-affidavit in this case.
Mr. Talib Rizvi, learned counsel appearing for the petitioners has raised the following two contentions:--
(1) The orders of the respondents by failure to consider the evidence before them, are illegal.
(2) The imposition of fine of rupees two lacs is illegal.
The contention of Mr. Talib Rizvi that the impugned orders are perverse and they are liable to be set aside, finds support not only from the fact that the original impugned order is based solely on the allegation that the production and clearance for the period 1-1-1989 to 1-2-1989 were not entered in R.G.-I register but also from the fact that the respondents had decided the matter upon no evidence whatsoever.
We have given anxious thought to this aspect. We find that while deciding the case, neither the appellate authority nor the re6sional authority have referred to any of the documents produced by the petitioners. These authorities, in fact, completely ignored and omitted to consider the documents annexed to the reply to the show-cause notice. Mr. Rizvi has submitted that the impugned order and indeed the orders of the other respondents too being whimsical and based on no evidence is liable to be set aside and the case remanded to be decided afresh on proper material.
Mr. M. Naimur Rehman, learned Standing Counsel appearing for the respondents has fairly conceded that the Customs authorities have not applied their mind to the facts of the instant case. He agrees that this is a fit case for remand to the respondent No.3.
In these circumstances, we are of the opinion that the impugned orders are based on no evidence and cannot be sustained. In view of this finding, it is not necessary to go into the other contention raised by the learned counsel for the petitioners on the question of imposition of fine of rupees two lass.
For the reasons stated above, the petition is allowed and the impugned order passed by the respondent No.3 on 24-5-1989, the order dated 16-7-1989, passed by the respondent No.2 and the order dated 22-1-1990 passed by the respondent No.l (Member Judicial, Central Board of Revenue) are declared to have been passed without lawful authority and are held to have no legal effect. Consequently the case is remanded to the respondent No. 3 for hearing the case afresh after giving opportunity to the parties to lead evidence in support of their respective contentions if they so desire. In the circumstances of the case, the parties are directed to bear their own costs.
M.B.A./S-701/K Petition allowed.