FLYING KRAFT PAPER MILLS (PVT.) LTD., CHARSADDA VS CENTRAL BOARD OF REVENUE, ISLAMABAD
1997 P T D 2303
[Supreme Court of Pakistan]
Present: Saiduzzaman Siddiqui, Mukhtar Ahmad Junejo and Raja Afrasiab Khan, JJ
FLYING KRAFT PAPER MILLS (PVT.) LTD., CHARSADDA
Versus
CENTRAL BOARD OF REVENUE, ISLAMABAD and 2 others
Civil Appeal No. 1019 of 1996, decided on 21/07/1997.
(On appeal from the judgment of Lahore High Court, Rawalpindi Bench, dated 29-2-1996, passed in W.P. 1571 of 1995).
(a) Sales Tax Act (VII of 1990)---
----S. 13---S.R.O. 580(1)/91 dated 27-6-1991---Constitution of Pakistan (1973), Art. 185(3)---Manufacture of "extensible sack kraft paper"---Sales tax--- Exemption--- Contention was that after liquidation of the company, it lost its legal entity and having been purchased by the petitioner under the Court order, it was a new owner and not successor of the liquidated company and that for qualifying for the exemption under S.R.O. 580(1)/91, dated 27-6-1991, the goods should have been produced and manufactured by such industries between 1-7-1991 and 30-6-1996 and if a party after purchasing factory and machinery also invests huge amount to convert into a factory to produce a completely new product same would be covered by the term "set up" as given in the notification---Further contention was that it was not necessary that an "industry" to be "set up" should be completely a new one having no connection or relation with the machinery purchased---Contention raised being of first impression and requiring interpretation of notification, leave to appeal to Supreme Court was granted.
Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd. AIR 1967 SC 509 ref.
(b) Constitution of Pakistan (1973)---
----Art. 199---Constitutional petition---Territorial jurisdiction---Not only the order of Collector of Customs and Central Excise, Peshawar was in question in the petition but _ relief was also claimed against the Central Board Revenue which functions at Islamabad---High Court at Peshawar and Rawalpindi Bench of Lahore High Court had the concurrent jurisdiction in the matter.
Sandalbar Enterprises v. C.B.R. PLD 1997 SC 334 distinguished.
(c) Constitution of Pakistan (1973)---
----Art. 185---Appeal to Supreme Court---Objection as to territorial jurisdiction of High Court in a Constitutional petition was not raised before High Court being the Court of first instance---No prejudice was caused to the respondents by filing the petition in the Court of which the territorial jurisdiction was objected to---Supreme Court refused to entertain such objection for the first time at appellate stage.
(d) Companies Ordinance (XLVII of 1984)---
----S. 305---Winding up of company by Court---Auction by Court---As soon as the order to wind up the company was passed by the Court, such company ceased to function except for the purposes of winding up affairs---Sale certificate in respect of assets of company granted to the auction-purchaser by the Court clearly showed that only the building, machinery, plant and other assets belonging to the company were sold to the auction--purchaser---No indication in the said certificate was found to the effect that running business was transferred to the auction-purchaser as a result of Court sale---Auction ?purchaser having established their factory with the building, machinery and plant of the company, purchased by them at the public auction, had for all practical purposes brought into existence a totally new company different from the company sold to him in all respects---Neither in law nor in fact auction-purchasers stepped into the shoes of the company sold in auction in circumstances---Commencement of the production in the factory established by the auction-purchasers after purchase of building, machinery and plant of the auctioned company was not a continuation of the old business of the wound up company but that was a new establishment.
(e) Sales Tax Act (VII of 1992)---
----S. 13---S.R.O. 580(1)/91, dated 27-6-1991---Exemption from sales tax--?Extensible sack kraft paper---New machinery was installed in the factory between the period 17-7-1994 to 13-11-1994---Manufacturers, prior to addition of such machinery, were producing all the products in their factory with the help of old machinery and never claimed the exemption under S.R.O. 580(1)/91, dated 27-6-1991---Contention of manufacturers that manufacture of extensible sack kraft paper was only possible - with the installation of new machinery :was negated by documents on record---Fact that production of extensible sack kraft paper was accelerated or increased as a result of new machinery in at. existing factory, in circumstances, would not amount to "setting up" of "an industry" covered by S.R.O. 580(1)/91, dated 27-6-1991.
Syed Sharifuddin Pirzada, Senior Advocate Supreme Court, Irfan Qadir, Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Appellant.
Mian Tariq Mahmood, Deputy Attorney-General of Pakistan and K.G. Sabir, Advocate-on-Record for Respondents.
Date of hearing: 10th June, 1997.
JUDGMENT
SAIDUZZAMAN SIDDIQUI, J.---The above appeal with the leave of this Court is directed against the judgment of a learned Judge in Chambers of Rawalpindi Bench of Lahore High Court dated 29-2-1996. Leave was granted in the above appeal to consider the following contentions of the appellant:
"3. The learned counsel for the petitioner contended that after liquidation of Pakistan Paper Corporation (Pvt) Limited, it lost its legal entity and having been purchased by the petitioners under the Court order, it was a new owner and not successor of the liquidated company. It was contended that for qualifying for the exemption under the notification, the goods should have been produced or manufactured by such industries, which are set up in the given area between 1-7-1991 and 30-6-1996. 'The teamed counsel further contended that the words 'industries' and 'set up' are key words. The word ' industry' has a definite meaning distinct from the words machinery and factory' and further that if a party after purchasing factory and machinery also invests huge amount to convert it into a factory to produce a completely new product will be covered by the term ' set up'. According to the learned counsel it is not necessary that the industry should be set up completely a new one having no connection or relation with the machinery purchased earlier. The learned counsel has relied on Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd (AIR 1967 SC 509). The contentions raised seem to be questions of first impression which require interpretation of the notification. Leave is granted.
4. The learned counsel for the petitioner has applied for stay of the recovery of sales tax. However, Mr. K.G. Sabir, Advocate-on? Record for respondents Nos.2 and 3 has filed documents to show that the petitioner has been charging sales tax from the customers. In these circumstances, stay is refused."
2. The relevant facts of the case are that in the year 1960 Pakistan Paper Corporation (Pvt) Limited (hereinafter to be referred as 'the Corporation' only), established an integrated Pulp and Paper Mill at Charsadda (hereinafter to be called as 'the Mill' only) for producing white writing paper. The Mill continued production untill 1971 but, thereafter, it ran into financial difficulties. The Mill stopped production in the year 1987 and finally went into liquidation under the orders of learned Company Judge of the Peshawar High Court dated 8-9-1990. The assets belonging to the Mill were sold under the orders of the learned Company Judge which were purchased by the appellant. The Sale Certificate, dated 29-2-1992 issued by the Court in respect of the assets of the Mill purchased by the appellant, reads as follows:
"IN THE PESHAWAR HIGH COURT, PESHAWAR
C.C.2/90
Pakistan Industrial Credit & Investment Corporation Ltd v Pakistan Paper Corporation Ltd.
SALE CERTIFICATE
This is to certify that the assets of M/s. Pakistan Paper Corporation Ltd., Charsadda have been purchased by M/s. Flying Kraft Paper Mills (Pvt.) Ltd. having its registered office at Charsadda and Head office at Lahore and the sale has been confirmed by this Court.
The assets sold to the said purchaser include land, building, machinery, spare parts and other facilities fully described in the schedule of property annexed herewith.
It is declared that M/s. Flying Kraft Paper Mills Ltd. will be full owners of the said properties and are vested with absolute title in the said properties.
The purchaser has paid Rs.35,000,000 in cash out of the total sale consideration and has furnished Bank Guarantee for the balance amount of Rs.90,000,000 payable within a period of 345 days after taking over possession of the entire assets.
(Sd.)
Jamaluddin Khattak/Masood Ahmed
Iftikhar uddin Official Liquidators
(Sd.)
Countersigned Judge Peshawar
High Court, Peshawar dated 29-2-1992."
SCHEDULE OF PROPERTY
(1) Land
Measuring 160 acres 5 Kanals 2 Marlas, situated in Mera Prang, Nowshera Road, Tehsil and District Charsadda.
(2) Building
Factory building, halls, boiler's establishment godown, out houses, residential colonies, junior colony, and senior officers colony, Chowkidar barracks, bachelors' hostels, four walls and all other buildings constructed on the land mentioned above.
Machinery
(a) Bagasse Preparation/Store
(b) Pulp Mills
(c) Stock Preparation Unit
(d) Chemical Preparation Unit
(e) Two Paper Machines
(f) Finishing Unit
(f) Chemical Recovery Plant
(g) Water Supply System
(h) Water Supply System
(i) Electrical Installations
(j) Steam Generation System
(k) Compressed Air Supply System and Instrumentation.
(l) Tools and other equipment, furniture, fixture and office equipments present in the factory building, offices and residential accommodation.
(Sd. )
Jamaluddin Khattak/Masood
Ahmed, Iftikhar Uddin Official
Liquidators. "
The appellants were put in possession of all the properties mentioned in the above sale certificate on 29-2-1992. After taking over possession of the properties mentioned in the sale certificate, the appellants approached the Excise Department for issuance of licence to re-start the Mill which was granted. The appellants informed the Excise Department by letter dated 24-9-1992 that they intend to go into trial production shortly which was likely to commence in October 1992. The initial production programme of appellants as intimated by them to Excise Department through their letter addressed to Superintendent, Central Exercise and Sales Nowshera Circle, Nowshera, between the period from 21-11-1992 to- 22-8-1993, included manufacturing of Wood Free White Writing Paper (S.H.F. 55 GSM) W.F. White Writing Paper (S.H.F. 60 GSM), W.F. White Writing Paper (S.H.F. 50 GSM) and Kraft Paper 80 GSM. It is worth mentioning here that production of Kraft Paper (80 GSM) in the Mill was the result of balancing, modernisation and replacement of existing machinery of the plant as intimated by the appellants to the Superintendent of Central Excise and Sales Tax, Nowshera Circle, Nowshera, through their letter dated 22-8-1993 which reads as follows:---
"Flying Kraft Paper Mills (Pvt.) Limited, Nowshera Road Charsadda, Tel: 2530,2529,2629.
Ref: Excise/Corns/10/92?????????????????????????????????????????????????????????? Dated: 22nd August, 1993.
The Superintendent,
Central Excise & Sales Tax,
Nowshera Cirle, Nowshera.
Subject: Production of Kraft Paper
Dear Sir,
We have to inform you that, after B.M.R. of the plant, we have resumed production of Kraft Paper 80 GSM with effect from today, on trial basis.
The price for the paper produced during the trial will be Rs.l8 per k.g. excluding excise duty and sales tax.
This is for your information.
Yours faithfully,
For Flying Kraft Paper Mills (Pvt.) Ltd.
(Sd.)
(Muhammad Yunas)
General Manager"
The production of Extensible Sack Kraft Paper (Clu Pak) 80 GSM also started in the Mill of appellants with the help of existing facilities of the plant on trial basis as would appear from the letter of appellants dated 21-10-1993 addressed to the Superintendent Central Excise and Sales Tax, Nowshera Circle, Nowshera, which reads as follows:-
Flying?? Kraft Paper Mills (Pvt.) Limited Nowshera Road,
Charsadda. Tel: 2529,2530,2629.
Ref: Excise/Corns/09/44/92????????????????????????????????????????? Dated: 21st October 1993.
The Superintendent Central Excise & Sales Tax, Nowshera Circle, Nowshera.
Subject: Production of Kraft/Sack Paper
Dear Sir,
With reference to our Letter No.Exise/09/43/92, dated 18th Oct. 1993, we are pleased to inform you, that after maintenance of the plant, we have resumed production of Kraft Paper/Extensible Sack Kraft Paper (Clu Pak) 80 GSM with effect from today, on trial basis.
The price for the Sack Kraft Paper 80 GSM, produced during the trial will be Rs.25 per k.g., excluding-excise duty and sales tax.
This is for your information.
Yours faithfully,
For Flying Kraft Paper Mills (Pvt.) Ltd.
(Sd.)
(Muhammad Yunas)
General Manager"
The appellants appear to have applied for the first time for grant of exemption from sales-tax on the production of Extensible Sack Kraft Paper under S.R.O. 580(1)/91, dated 27-6-1991 on 14-9-1993 on the plea that they have set up a new plant for producing a totally new product. The above request of appellants for grant of exemption was turned down by the Collector of Customs, Central Excise and Sales Tax, Customs House. Peshawar, vide its letter dated 26-4-1994 as under:--
"Government of Pakistan Collectorate of Customs Central Excise and Sales Tax. Customs House Peshawar.
C.No. IV-ST (Notification) 41/93/5007, dated: 26-4.-1994
To
The Management of?
M/s. Flying Kraft Paper
Mills (Pvt.) Ltd.,? Charsadda.
Subject:- Sales Tax Exemption Under SR0.580(1)/91 of 27-6-1991.
Please refer to your application for grant of exemption from sales tax under S.R.O. No.580(I)/91, dated 27-6-1991.
Since your factory was set up in 1970 and change of name style or alteration, addition or modernisation of machinery does not qualify the said factory to be treated as new industries in terms of SR0.580(1)/91, dated 27-6-1991 and amended S.R.0.281(I)/94? dated 3-4-1994.
(Sd.)
(Hafiz Matiullah)
for Collector"
The appellants thereafter, approached the Central Board of Revenue for grant of sales tax exemption under SRO 580(1)/91, dated 27-6-1991 which too was declined on 18-10-1994, as follows:-
"Government of Pakistan Central Board of Revenue (Sales Tax Wing)
U.O.No.I/100-STT/1994, Islamabad the 18th October, 1994
From
Javed Iqbal Mirza,
Secretary (Tariff)?????????
To
Messrs Flying Kraft Paper Mills (Pvt.) Ltd.
Head Office, 15 Bridge Colony, Lahore Cantt.
Subject: Registration Under SR0.580(I)/91, Dated 27-5-1991.
I am directed to refer to Messrs Flying Kraft Paper Mills (Pvt.) Limited, Letter No.FKPMPL/11051/94, dated 12th October, 1994 on the above subject and to say that your request regarding exemption under SRO.580(1)/91, dated 27-6-1991 has been considered in the Central Board of Revenue but it is regretted that cannot be accorded to.?
The appellants then filed Writ Petition No. l of 1995 before the Lahore High Court, Rawalpindi Bench, challenging the order of Collector of Customs dated 26-4-1994 and that of Central Board of Revenue dated 18-10-1994 respectively, refusing to grant exemption to appellants in respect of their new produce "Extensible Sack Kraft Paper (Clu Pak) " under S. R. O. No.580(I)/91, dated 27-6-1991. The petition was contested on behalf of Collector of Customs and C.B.R. but a learned Judge in Chambers after hearing the counsel for the parties allowed the petition as follows:-
"Resultantly the matter is remanded to the Collector, Central Excise and Sales Tax, Collectorate of Customs Peshawar who shall, after giving an adequate opportunity of being heard to the petitioner company and a proper field enquiry, determine the following matters:-
(i)???????? The legal effect of liquidation of Pakistan Paper Corporation (Pvt.) Limited and the question whether the petitioner Company would be deemed to be the successor of the previous establishment;
(ii)??????? Whether the petitioner Company had set up a 'New Industry' as claimed by it or by merely buying of premises of an older set up it would disqualify itself to lay claim to be a new Industry."
The Collector after determining the above factors shall pass an appropriate and reasoned order regarding the petitioner Company's request for grant of exemption under the aforementioned S.R.O.
Writ Petition stands disposed of."
It appears that the matter did not proceed further before the Collector of Excise and Sales Tax in terms of the above order of High Court and sales tax continued to be recovered from the appellants as before. This led to the filing of another Writ Petition No.580 of 1995 by the appellants before the Lahore High Court, Rawalpindi Bench, which was dismissed summarily on 8-5-1995 as follows:--
"3. Learned counsel for the petitioner has been heard. Recovery of sales tax pending enquiry was not restrained while disposing of Writ Petition No. l of 1995 for the reasons that the amount paid by the petitioners as sales tax can be determined in real terms which can be refunded in case the same is found to be not recoverable. As far as the second limb of the argument is concerned, it is hoped that the Collector, Customs, Peshawar and other functionaries who had to undertake the enquiry will not sit on the same indefinitely. The petitioners may approach the Collector, Customs and Sales Tax at Peshawar for initiation and conclusion of enquiry by an early date.
4. With the above observation the writ petition is disposed of in limine. "
The appellants then approached this Court through Civil Petition for Special Leave to Appeal No. 227 of 1995 which was disposed of on 21-5-1995 after notice to Attorney-General of Pakistan as follows:-
"Raja Muhammad Bashir, Deputy Attorney-General.
Mr. Irfan Qadir, Advocate Supreme Court.
Mr. Muhammad Munir Peracha.
Mr. Ejaz Muhammad Khan, Advocate-on-Record.
1. After hearing learned counsel for petitioner as well as learned Deputy Attorney-General, it has transpired that the petitioner has already paid, the customs duty for the current month and the next payment falls due on 20-6-1995. Learned Deputy Attorney-General, on instruction from an officer of the department, present in Court, states that the Collector Customs can conclude the inquiry within a fortnight.
2. With the consent of the parties, I direct that Collector Customs concerned shall conclude the inquiry within 15 days from the date of the order without fail.
3. As the inquiry proceedings are to conclude before the next payment falls due, order of stay of recovery proceedings is, therefore, recalled. "
Thereafter, the matter was taken up by the Collector of Customs and Central Excise, Peshawar, in terms of the order of this Court dated 21-5-1995, and by order dated 12-6-1995, the claim of exemption in respect of "Extensible Sack Kraft Paper (Clu Pak)" put forth by the appellants was rejected. The Collector of Customs and Central Excise, in its final analysis reached the conclusion that the appellants are the same old industry which was run by Pakistan Paper Corporation, with only a change in the name; that after taking over possession of the building and machinery belonging to M/s Pakistan Paper Corporation, the appellants started producing paper including the alleged new product, and that installation of new machinery by the appellants was two years after the Mill had gone into production. On these considerations, the claim of the appellants for exemption under S.R.O. No.580(1)/91, dated 27-6-1991 was found untenable. The above order of the Collector was not challenged any further in the hierarchy of the Department but a petition under Article 199 of the Constitution being Writ Petition 1571 of 1995 was filed before the Lahore High Court, Rawalpindi Bench, which was dismissed by the impugned judgment, against which leave to appeal was granted as aforesaid.
3. Mr. S.S. Pirzada, the learned Senior Advocate Supreme Court for the appellants raised the following contentions in support of the appeal:
(i) That the effect of winding up order was that the old company (M/s. Pakistan Paper Corporation) legally came to an end and ceased to do any business and, therefore, purchase of the assets of M/s Pakistan Paper Corporation by the appellants in a Court sale did not have the effect of transferring the business of the wound up company to the appellants;
(ii) That the establishment of the appellants' company with the help of building, machinery and plant of the wound up company, gave birth to a totally new legal entity which could not be considered as a continuation of the liquidated company;
(iii) That the exemption granted under S. R. O. 580(1)/91, dated 27-6-1991 was in the nature of incentive to the investors to set up industries for the development of backward areas of the country. The appellants having acted upon the incentive by investing huge amount for setting up an industry could not be denied the benefit of exemption by the Government on the principle of promissory estopple, and;
(iv) That the provisions relating to exemption from taxes in respect of backward areas were enforced for promotion of social justice and eradication of social evils as contemplated by Article 37 of the Constitution and, therefore, such measures are to receive a liberal construction from the Courts.
Elaborating the above formulations, Mr. Pirzada, the learned counsel for the appellants contended that the appellants acting on the incentives contained in S.R.O. 580(1)/91, dated 27-6-1991 invested huge amount for import of new plant and machinery as well in acquiring locally made new machinery, to facilitate production of "Extensible Sack Kraft Paper (Clu Pak)" in their Mill on the strength of a new technology acquired from foreign manufacturers under an agreement of royalty entered into between the appellants and the foreign manufacturers. The learned counsel, accordingly, argued that the new unit thus set up in the existing Mill for producing a totally new item was an 'industry', 'set up', within the contemplation of S.R.O. 580(1)/91, dated 27-6-1991, as not only the new product but the new unit also were identifiable from the old product and the Mill. The appellants, therefore, according to Mr. Pirzada could not be denied the benefit of exemption arising under the above S.R.O. to respect of the new product "Extensible Sack Kraft Paper (Clu Pak)."
4. The learned Deputy Attorney-General opposing the above contentions of the learned counsel for the appellants argued that the writ petition filed by the appellants before the Rawalpindi Bench of Lahore High Court was incompetent as the dispute related to an order passed by, the functionary located at Peshawar and, therefore, Rawalpindi Bench of Lahore High Court, had no territorial jurisdiction in the matter. The next contention of the learned Deputy Attorney-General (D.A.-G.) is that the order passed by the Collector of` Customs and Central Excise was appealable in the hierarchy of the department, therefore, without exhausting the departmental remedies the order could not be challenged by way of petition under Article 199 of the Constitution. The third contention of the learned Deputy Attorney-General is that the controversy raised in the petition before the High Court by the appellants related primarily to a question of fact which was found against the appellant by the Collector and the funding of Collector was accepted by the High Court in the writ petition, therefore, this Court will not interfere with such findings of the Tribunal below. The learned Deputy Attorney-General accordingly, contended that neither on facts nor in law the appellants were successful in making out a case for grant of exemption under the above S. R. O.
5. We will first deal with the contention of learned Deputy Attorney ?General relating to maintainability of the above proceedings. The first objection of ill, learned Deputy Attorney-General is that the Rawalpindi Bench of Lahore High Court, had no territorial jurisdiction in the case as the order impugned in the writ petition was passed by the Collector of Customs and Central Excise Functioning at Peshawar. In support of his contention the learned counsel relied on the case of Sandal bar Enterprises v. C.B.R. (PLD 1997 SC 334). In reply to the above contention of learned Deputy Attorney? General Mr. Pirzada argued that no objection regarding territorial jurisdiction of the Rawalpindi Bench of Lahore High Court was raised by the respondent either in the first round of the litigation or in the second round, though in the second round the matter came up before this Court also. It is, accordingly, argued by Mr. Pirzada that the subject matter of the present litigation having arisen from the two previous rounds of litigation, the respondents are not entitled now to raise the objection regarding territorial jurisdiction of the Court for the first time before this Court. Mr. Pirzada in support of his contention referred to section 21, C.P.C. which requires that objection as to the place of suing must be raised at the earliest opportunity and unless such objection has been raised before the Court of first instance, the revisional or appellate Court will not entertain such objection except in cases where it resulted in the failure of justice. Mr. Pirzada further' contended that in the present case not only the order of Collector of Customs and Central Excise was in question but relief is also claimed against the Central Board of Revenue, which functions at Islamabad and, therefore, the High Court at Peshawar and Rawalpindi Bench of Lahore High Court had concurrent jurisdiction in the matter. The contention of Mr. Pirzada, the learned counsel for the appellants is not without force.
6. In Writ Petition No. l of 1995 filed before the Rawalpindi Bench of Lahore High Court the appellants had not only challenged the order of Collector of Customs and Central Excise, Peshawar, dated 26-4-1996 but also challenged the order of C.B.R. dated 18-10-1994. The respondents appeared in the above petition and contested the case but no objection regarding territorial jurisdiction of Rawalpindi Bench of Lahore High Court was raised. The petition was accepted and case was remitted to the Collector of Customs and Central Excise, Peshawar, for decision on two points framed in the remand order of the High Court. The order of High Court remanding the case to Collector was not challenged any further by the respondents. Again when the above order of remand was not implemented, the appellants filed another writ Petition No.580 of 1995 before the Rawalpindi Bench of Lahore High Court which was dismissed summarily on 8-5-1995 and against the above order of Rawalpindi Bench of Lahore High Court a petition for leave to appeal was preferred before this Court which was disposed of after notice to respondents but no objection as to the territorial jurisdiction of Rawalpindi Bench of Lahore High Court was raised even then. Even in the final round of litigation no objection to the territorial jurisdiction.. Rawalpindi Bench of Lahore High Court was raised when the Writ Petition No. 1571 of 1995 was heard and decided as would appear from the impugned order. Apart from it, Mr. Pirzada rightly pointed out that right front the beginning not only the order of Collector of Customs and Central Excise, Peshawar, was challenged but the order of C.B.R. Islamabad, was also questioned before the High Court and as such the High Court at Peshawar and Rawalpindi had concurrent jurisdiction in the matter. Since the respondents failed to raise objection as to the territorial jurisdiction of Rawalpindi Bench of the Lahore High Court which was the Court of first instance in this case, and there was no allegation that any prejudice was caused to the respondents by filing the petition before the High Court at Rawalpindi, we are not inclined to allow the respondents to raise the objection as to the territorial jurisdiction of Lahore High Court, Rawalpindi Bench, for the first time before this Court Apart from it we find that besides the order of Collector of Customs and Central Excise, in the first petition filed before the High Court at Rawalpindi, the order of C.B.R. which functions at Islamabad, was also questioned? In the writ petition filed after post-remand proceedings, not only the order of Collector was challenged but relief was also claimed against C.B.R. and as such it could not he argued that in the circumstances, the Rawalpindi Bench of Lahore High Court had no territorial jurisdiction in the matter. We have examined the facts of Sandalbar Enterprises (Pvt.) Ltd. v. C.B.R., (supra), cited by the learned Deputy Attorney-General and are of the view that the facts of that case were quite distinguishable from the facts of the present case.
7. The second objection of the learned Deputy Attorney-General with regard to the maintainability of the above proceedings is that the appellants without exhausting the departmental remedy filed a writ petition before the Lahore High Court, Rawalpindi Bench. Mr. Pirzada, the learned counsel for the appellants in reply to the above second objection of the learned Deputy Attorney-General contended that in Writ Petition No. l of 1995 filed by the appellants the order dated 20-4-1994 passed by the Collector Customs, Peshawar, and the order dated 15-10-1994 passed by the C.B.R. were challenged. However, the learned Judge in Chambers while disposing of the above writ petition without specifically setting aside the two orders impugned in the writ petition remanded the case to the Collector Central Excise and Sales Tax, Peshawar, to determine the two points mentioned in the judgment dated 15-3-1995. The learned counsel, accordingly, contended that as the Collector's order dated 12-6-1995 was passed in pursuance of the remand of the case by the High Court, it was not necessary for the appellants to have challenged that order again in the hierarchy of the department specially when the C.B.R. which functions as the apex authority in the department had already expressed its view. The contention of Mr. Pirzada appears to be correct. The Collector in his order dated 20-6-1995 gave findings on the two points referred to it by the High Court in its remand order dated 15-3-1995 while disposing of Writ Petition No. l of 1995. The C.B.R. had already expressed its view on the controversy earlier and the order of C.B.R. was not expressly set aside by the High Court while remanding the case to the Collector on 15-3-1995. In these circumstances the omission on the part of appellants to challenge the order of Collector dated 15-3-1995, first in the hierarchy of department did not render the writ petition before the High Court filed by the appellants not maintainable. We, accordingly, over rule both the preliminary objections raised by the learned Deputy Attorney-General.
8. On merits, Mr. S.S. Pirzada, the learned counsel for the appellants contended that as a result of the winding up order passed by-the Company Judge, the Corporation legally ceased- to exist and therefore, the said company could not continue its business any further: The learned- counsel, accordingly, contended that when the assets belonging , to the Corporation were put to auction and purchased by the appellants, it did not have the effect of either transferring the business of the Corporation to the appellants or confer a continuity of the business of the Corporation by the appellants. The above proposition canvassed by Mr. Pirzada was not seriously controverted by the learned Deputy Attorney-General or the counsel for respondents. There cannot be any cavil with the proposition that as soon as the order to wind up the company was passed in the case of the Corporation by the Company Judge, the said company ceased to function except for the purposes of winding up its affairs. We have already reproduced the sale certificate granted to the appellants in respect of the assets of the Corporation purchased by them in the public auction conducted under the orders of the company Judge. It clearly shows that only the building, machinery, plant and other assets belonging to the Corporation were sold to the appellants. There is no indication in any of the documents before us to establish that the running business of the Corporation was transferred to the appellants as a result of purchase of the assets of the Corporation by the appellants in the Court sale The appellants having established their factory with the building, machinery and plant of the Corporation, purchased by them at the public auction, had for all practical purposes brought into existence a totally new company different from the Corporation in all respects, and therefore, neither in law nor in fact it stepped into the shoes of the Corporation. We are, accordingly, of the view that the commencement of the production in the factory established by the appellants after purchase of building, machinery and plant of the Corporation was not a continuation of the old business of the wound up company but it was a new establishment. The learned Deputy Attorney? General and the learned counsel for the respondents are unable to point out any law under which the establishment of the factory by the appellants after having acquired the assets of the wound up company, would be deemed to be the continuation of the wound up company. We, therefore, do not agree with the contention of the learned Deputy Attorney-General and the counsel for the respondents that the factory raised by the appellants after acquiring building, machinery and plant of the Corporation should be considered as the continuation of the wound up company.
9. The next contention of the learned counsel for the appellants in support of the appeal is that under S.R.O. (I)/91, dated 27-6-1991 the concession and incentive offered, were available to all the industries which were established between the period from 1-7-1991 to 30-6-1996. The learned counsel for the appellants, however, made a categorical statement before us that the exemption from sales tax under S.R.O. 580(1)/91, dated 27-6-1991, is claimed by the appellants only in respect of "Extensible Sack Kraft Paper (Clu Pak)" which was being produced with the help of newly acquired technology and installation of new indent able unit in the factory, and that in respect of goods already produced in the factory with the help of old machinery, no exemption from sales tax was claimed by the under S.R.O. 580(1)/91, dated 27-6-1991. The learned counsel, accordingly, contended that where after establishment of a factory a new identifiable unit is added to it subsequently, which produces a different item, such addition is to be treated as setting, up of 'an industry' within the contemplation of Notification No. SRO 580(1)/91, dated 27-6-1991. In support of the above contention Mr. Pirzada, the learned counsel for the appellants drew our attention to the agreement entered into between the appellants and a foreign company whereby technology for producing Clu Pak was transferred by the foreign manufacturer to the appellants for production of Extensible Sack Kraft Paper in their factory, various letters of credit established by the appellants in favour of the foreign suppliers for import of new machinery between the period from 23-2-1993 to 6-7-1993 and correspondence between the appellants and the foreign supplier in connection with the production of Clu Pak in the factory of appellants. On the basis of above documentary evidence, the learned counsel for the appellants contended that there was overwhelmingly evidence to show that the appellants had imported new machinery for the purposes of producing 'Extensible Sack Kraft Paper (Clu Pak)' in their factory which was absolutely a new item different from the products already manufactured or produced in the factory of the appellants with the help of old machinery and plant. The learned counsel argued that as the new product and the new unit established by the appellants was identifiable from the old product and the machinery and plant, it fell within the meaning of "an industry set up within the scope of S.R.O. dated 27-6-1991 ". In support of his contention that where a new identifiable unit is added in an existing industry the addition, of such new unit will fall within the definition of "industry set up. " The learned counsel referred to the following cases:---
(1) ?????? Pakistan Tabacco Co. Ltd. v. Pakistan through Secretary, M/Finance (1991 PTD 359);
(2)??????? Husein Ind. Ltd. v. Central Board of Revenue (1973 PTD 312);
(3)??????? Additional C.I.T. v. Hutti Gold Mines Co. Ltd. (1981 (128) I.T.R. 476);
(4)??????? Commissioner of Income-tax v. Gaekwar Foam & Rubber Co. (1959 (35) I.T.R. 662);
(5)??????? Commissioner of Income-Tax v. Ganga Sugar Corporation Ltd. (1973 (92) I.T.R. 173);
(6)??????? Commissioner of Wealth Tax v. Dalmia Dadri Cement Ltd. (1967 (63) I.T.R. 158);
(7)??????? C.I.T. v. Rama Raju Surgical Cotton Mills Ltd. (1967 (63) I.T.R 478);
(8) ?????? C.I.T. v. Textile Machinery Corporation (1971 (80) I.T.R. 428);
(9)??????? Textile Machinery Corporation v. C.I.T. (1977 (107) I.T.R. 195); and
(10) ???? Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills, Ltd. (AIR 1967 SC 509).
10. The abovementioned cases cited by Mr. S.S. Pirzada, the learned counsel for the appellants, though arose either under the Income-tax Act or the Wealth Tax Act, but in most of these cases the expressions ' industry' and set up' came for interpretation and the ratio of these cases do support the contention of Mr. Pirzada, that where in an existing mill, factory or a manufacturing concern, some new addition is made which is not by way of replacement or reconstruction of old machinery, and that such new installation or addition is itself an integrated unit capable of producing a new item different from those already produced by it, such additional unit is deemed to be a new ' industry set up'. However, this aspect of the case need not be followed any further as even on the basis of above submission of Mr. Pirzada, it has first to be established that in fact a new unit was installed in the existing factory of appellants within the period mentioned in the above S.R.O. and that this new unit was not by way of reconstruction or replacement of the old unit but was a new integrated identifiable unit which produced a totally new product. The appellants have filed large number of documents in support of their plea that they have set up a new industry by importing machinery and installing it in the existing factory for producing a new product which was not produced previously by the appellants.
11. After going through the documents filed by the appellants in the above case, we are of the view that the contention of the appellants that they started producing the new product "Extensible Sack Kraft Paper (Clu Pak)" only after installation of new machinery imported by them in their factory does not appear to be correct. The new product which the appellants claim they started producing after installation of new machinery was Kraft Paper 80 GSM (Clu Pak).' The details of the letters of credit opened by the appellants for import of new machinery and the dates of installation of new machinery are given at page 38 of Volume V of the paper book of the appellants, which are as follows:-----
"List of Imported Machinery A/C Flying Kraft Parser Mills (Pvt.) Ltd.
| ?S.No. | L/C No. & Date | B/E No. & Date | Value Foreign Currency (in US $) | Import Value Rs. | Installation Certificate No. & Date |
| 1. | 5066/93 23-02-93 | 00244 14-7-93 | 390,000 | 10890245 | 162/94/690 17-7-94 |
| 2. | 5070/93 10-3-93 | 00483 16-6-93 | 372,760 | 10343426 | -do- |
| 3. | 5073/93 13-3-93 | 00700 21-8-93 | 67533? | 2068724 | 1250 8-11-94 |
| 4. | -do- | 13781 20-6-93 | 33,767 | 929,796 | 1247 8-11-94 |
| 5. | 5074/93 13-3-93 | 01300 12-10-93 | J.Yen 2939388 | 872185 | 1251 8-11-94 |
| 6. | 5080/93 8-4-93 | 00534 3-8-93 | U.K. L17230??????????? | 783,874 | 1246 8-11-94 |
| 7. | 5083/93 15-4-93 | 00328 21-7-93 | US$ 139,320 | 4024705 | 1253 8-11-94 |
| 8. | 5090/93 5-5-93 | 00704? 28-5-93 | 70881 | 2171282 | 1252 8-11-94 |
| 9. | -do- 12-10-93 | 01301 | 23536 | 725.803 32,8100,40 | 1249 8-11-94 |
| 10. | 5090/93 5-5-93 | 02039 29-11-93 | 42266 | 1303400 | 1268 13-11-94 |
| 11. | -do- | 2470 C.N.250 22-1-94 | 88089 | 2722808 | 951800 13-8-95 |
| 12. | -do- | 001960 18-9-93 | 13000 | 394283 | 1256 8-11-94 |
| 13. | 5091/93 11-5-93 | 00590 16-8-93 | ? 2921.16 | 134807 | 1257 8-11-9 |
| 14. | 5092/93 17-5-93 | 00659 16-8-93 | US$ 18620 | 570382 | 1254 8-11-94 |
| 15. | -do- | 808 4-9-93 | 18620 | 570,382 | 1255 8-11-94 |
| 16. | 5102/93 29-6-93 | 01770? 8-11-93 | 10,894 | 340,939 | 1258 8-11-94 |
| 17. | 51051/93 6-7-93 | 02528 3-1-94 | 40,074 | 1,239,916 | 1259 8-11-94 |
TOTAL IMPORT VALUE?????????????????????????????????????????????????????? Rs.40,086,957.00 |
???????????????????????????????????????????????????????????
????? 12. It is quite clear that new machinery imported by the appellants was installed in the factory between the period from 17-7-1994 to 13-11-1994. This is also established by 10 certificates filed at pages 39 to 48 of Volume (IV of the paper book of the above appeal) issued by Muhammad Iqbal, Assistant Collector on 8-11-1994 certifying installation of new machinery on the dates of issuance of the certificates. It is, therefore, quite clear that prior to 17-7-1994, the appellants were producing all the products in their factory with the help of old machinery acquired by them through purchase of the assets of the Corporation on which they did not claim exemption under S.R.O. (1)/91, dated 27-6-1991. Although the appellants claimed before us that the production of Extensible Sack Kraft Paper (Clu Pak 80 GSM) became possible only as a result of installation of new unit but this is negated by their letter written to the Superintendent, Central Excise and Sales Tax, Nowshera Circle, Nowshera, on 27-8-1993 wherein they informed the authorities that as a result of B.M.R. of the plant, which meant 'Balancing, Modernisation and Replacement', the appellants have been able to resume production of Kraft Paper 80 GSM w.e.f. 22-8-1993. They again re?confirmed this position in their letter dated 21-10-1993 addressed to the Superintendent, Central Excise and Sales Tax, Nowshera Circle, Nowshera, wherein they stated that after maintenance of plant, they have resumed production of Kraft Paper (Extensible Sack Kraft Paper (Clu Pak) 80 GSM) w.e.f. the date of the letter on trial basis. After reading these letters, there is F no doubt left that the production of the Extensible Sack Kraft Paper(Clu Pak) was not at all dependent on any new process or new plant or machinery. The production of the aforesaid product was made possible as a result of balancing, modernisation and replacement of the existing plant. The contention of the learned counsel for the appellants, therefore, to the extent that the appellants produced Extensible Sack Kraft Paper (Clu Pak 80 GSM) only through installation of new machinery which was an identifiable unit from the old one, does not appear to be factually correct. As is evidenced from the correspondence placed before us in part IV of the file of the above civil appeal, the above product was being produced by the appellants even on 22-8-1993 when the new machinery was not at all installed in their factory. The fact that the production of the above item was accelerated or increased as a result of import or installation of new machinery, would not amount to setting up' of ' an industry' as argued by the learned counsel for the appellants, in the light of above-referred case-law. It may be mentioned here that in their letters dated 22-8-1993 and 21-10-1993, the appellants quoted the price of Kraft Paper/Extensible Sack Kraft Paper (Clu Pak) which was exclusive of Excise Duty and Sales Tax and as such the appellants were aware that Excise Duty and Sales Tax is to be added to the price quoted by them. It is also on the record that the sales tax was being recovered all along by the appellants from the purchasers of Extensible Sack Kraft Paper and was being credited to the Government. In the above-stated facts and circumstances, the finding of the Collector that the appellants were not entitled to grant of exemption under Notification dated 27-6-1991 does not appear to be erroneous or contrary to the terms of the said notification. We, accordingly, find no reason to interfere with the order of the High Court. The appeal is, accordingly, dismissed but in the circumstances of the case, we will make no order as to costs.
M.B.A./F-9/L????????????????????????????????????????????????????????????????????????? ?????????? Appeal dismissed.