(a) Central Excises Act (I of 1944)---

---S.4(2)--Constitution of (1973), Art. 199--C.B.R. Letter No. 1(20)-DEB-94, dated 9-10-1999---Constitutional petition---Maintainability ---Determination of value for purposes of excise duty---Petitioners were manufacturers of beverages which were supplied in un-chilled form to the general body of consumers---Assessing Authority directed the manufacturers that chilling charges be included in the retail price for the purpose of levy of Central Excise duty---Validity---Dispute in the Constitutional petition was limited to the question as to whether chilling charges should be included in the retail price of the beverages and answer to such question depended upon interpretation of S.4(2), Central Excises Act, 1944---Central Board of Revenue while issuing letter dated 12-6-1999 and by rejecting manufacturers representation had opined that chilling charges should be included while determining the retail price---Constitutional petition against such decision of the Central Board of Revenue was maintainable in circumstances.

Attock Cement Pakistan Ltd. v.- Collector of Customs, Collectorate of Customs and Central Excise, Quetta and others 1999 PTO 1892; Edulji Dinshaw Ltd. v. Income-tax Officer 1990 PTD 155 and Messrs Julian Hoshang Dinshaw Trust and others v. Income-tax Officer, Circle XVIII, South Zone, Karachi and others 1992 SCMR 250 rel.

(b) Central Excises Act (I of 1944)---

----S.4(2)---Constitution of Pakistan (1973), Art.199---C.B.R. Letter No. 1(20)-DEB-94, dated 9-10-1999---Letter dated 12-6-1999-- Determination of value for payment of excise duty---Petitioners were manufacturers of beverages which were supplied in unchilled form to the general body of consumers---Assessing Authority directed the petitioner that chilling charges be included in the retail price of the beverages for the purpose of levy of Central Excise Duty---Validity---Retail price fixed by the manufacturers was embossed and printed on the bottles on which the goods were required to be sold to the consumers---Manufacturers manufactured the beverages in an unchilled form while these were sold in chilled form and the retailer or middle man incurred some additional charges, which could not be considered to be charges fixed by the manufacturers and could not be added to the retail price fixed by the manufacturers---Provisions of S.4(2) entitled a manufacturer to fix the retail price on which the goods were to be supplied to the general body of consumers while manufacturers could not therefore be forced to add chilling charges not incurred by them in the retail price-- Authorities, in circumstances, were not justified to force the manufacturers to include the chilling charges in the retail price of aerated beverages-- Letters, dated 12-6-1999 and 4-8-1999 issued by the Central Board of Revenue, therefore, were declared to be without lawful authority and of no legal effect.

Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs Circle 'C', Karachi and others PLD 1984 SC 86 and Deputy Collector of Central Excise and Land Customs, Peshawar and 2 others v. Premier Tobacco Industries Limited, Peshawar 1993 SCMR 447 rel.

Ali Sibtain Fazli for Petitioner.

A. Karim Malik for Respondent.

Date of hearing: 2nd September, 1999.

JUDGMENT

This judgment shall dispose of W.P.No. 15188/99 and W.P.No. 14794/99, both of which involve the same controversy.

2. In these two petitions, the petitioners are manufacturing beverages. In W. P. No. 15188 of 1999, the petitioner manufactures beverage under the brand name of Pepsi Cola, Mirinda and Teem while in the other petition, the petitioner is manufacturing aerated water under the brand name of 7-up and Pepsi Cola.

3. There is no dispute that the goods manufactured by the petitioners are subject to levy and payment of excise duty under the Central Excises Act; 1944 at 'the rate of 12-5% of the retail price and further that these goods fell under the headings 22.1 and 22.2 of the Harmonized Customs Tariff. The dispute is, however, limited to the question as to whether the respondents are within their right to require the petitioners to add chilling charges in the retail price on which aerated water is sold.

4. It is a common ground between the parties that the -case of the petitioner is covered by section 4(2) of the Central Excises Act, 1944. Earlier, the Central Board of Revenue issued a letter bearing No. 1(2)DEB-94 dated 9-10-1994 to the effect that chilling charges will not be included in the retail price of the aerated water and the same shall be excluded. However, after about 5 years thereafter another letter was issued by the Central Board of Revenue, whereby the earlier letter has been withdrawn and a direction has been issued to all Collectorates that the chilling charges shall now be included while calculating retail price of the product. The petitioners represented to the respondents against this 'decision but the representation was rejected by the respondents on 4-8-1999. Hence these petitions. ,

5. Mr. Ali Sibtain Fazli, Advocate and Raja Muhammad Akram, Advocate, learned counsel for the petitioners in these two petitions have vehemently argued that under section 4(2) of the Central Excises Act, the manufacturer is entitled to fix the retail price on the basis of which the Central Excise duty is to be charged and as the petitioner was supplying beverages in unchilled form to the general body of consumers the respondents are not competent to direct that the chilling charges be included in the retail price.

6. Mr. A. Karim Malik, learned counsel for the respondents has objected to the maintainability of these petitions by arguing that the petitioners should have availed of departmental remedies before filing these petitions. It has also been argued that the dispute between the parties also involves determination of the question of facts and that 'the petitioner in W.P. No. 15188/99 has already filed an appeal before the Collector (Appeals) in respect of part of dispute where the matter is still pending and as such this petition cannot be maintained.

7. The objection raised by the learned counsel for the respondents is not well founded. The dispute in the present petitions is limited to the question as to whether the chilling charges should be included in the retail price. The answer to this question depends upon the interpretation of section 4(2) of the Central Excises Act, 1944. The Central Board of Revenue has while issuing letter dated 12-6-1994 and by rejecting the petitioners' representation opined that the chilling charges should be included while determining the retail price. Against this decision of the Central Board of Revenue, the petitioner has no remedy except to invoke the Constitutional jurisdiction of this Court. It is idle on the part of the respondents to contend that the petitioners should have invoked remedies before the Department when the highest forum in the departmental hierarchy has already taken a decision. In support of the maintainability of these petitions, the learned counsel for the petitioners has relied upon Attock Cement Pakistan Ltd. v. Collector of Customs and Central Excise, Quetta and others (1999 PTD 1892), Edulji Dinshaw Ltd. v. Income-tax Officer (1990 PTD 155), and M/s. Julian Hoshang Dinshaw Trust and others v. Income-tax Officer, Circle XVIII, South Zone, Karachi and others (1992 SCMR 250). These authorities support the petitioners' contention that the Constitutional petition under the circumstances is maintainable before this Court.

8. Coming now to the merits, the learned counsel for the petitioners have argued that under section 4(2) of the Central Excises Act, 1944, it is for the manufacturer to fix the retail price which has to be printed or embossed on the goods being sold, although retail price should include all the charges incurred by the manufacturer in respect of such goods. According to the petitioners, as the beverages are supplied in an unchilled form by .the petitioners, the respondents cannot compel the petitioners to include the chilling charges. In this respect, the learned counsel for the petitioner emphasised that the Central Board of Revenue has itself issued a notification on 9-10-1994 that the chilling charges could not be included in the retail price and the aforesaid notification could not have been rescinded by the Central Board of Revenue after 5 years on 12-6-1999.

9. Mr. A. Karim Malik, learned counsel for the respondents has,' however, maintained that the clarification issued by the Central Board of Revenue on 9-10-1994 was not a notification but was merely a letter and the same was withdrawn and rescinded when the Central Board of Revenue found that the earlier clarification was in violation of section 4(2) of the Central Excises Act. 1944.

10. As already noted, this controversy between the parties revolves around the interpretation of section 4(2) of the Central Excises Act. It will be noted that though under section 4(1) of the Central Excises Act, excise duty is payable on the value of the goods which can be determined by the Central Excise Authorities but under section 4(2), the duty is to be paid on the retail price fixed by the manufacturer which however, must include all the charges incurred by it. This subsection was added to the Central Excises Act by Finance Ordinance, 1969, w.e.f. 28-6-1969. It was amended by the Finance Act, 1993 and was substituted by Finance Act, 1994 in the present form. This provision reads as under:--

"Section 4(2).--Notwithstanding the provisions of subsection (1) the Federal Government may, by notification in the official Gazette, declare that in respect of any goods or class of goods the duty shall be charged on the retail price fixed by the manufacturer, inclusive of all charges and taxes, other than tax levied and collected under section 3 of the Sales Tax Act, 1990, at which any particular brand or variety of such article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price:

Provided that the retail price shall be legibly, prominently and indelibly printed or embossed on each article, packet, container, package, cover or label, as the case may be."

11. It is interesting to state that both the parties in support of their respective contentions have relied upon the pronouncement of the Supreme Court in the case of Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs Circle 'C', Karachi and others (PLD 1984 SC 86). The learned counsel for the petitioners has also cited another judgment of the Supreme Court in support of their contention which is reported as Deputy Collector of Central Excise and Land Customs, Peshawar and 2 others v. Premier Tobacco Industries Limited, Peshawar. 1993 SCMR 447). According to Mr. A. Karim Malik, however, the latter precedent is not relevant in the present case and is distinguishable.

12. In the case of Atlas Battery cited above the dispute between the parties was in respect of retail price of batteries sold by the petitioner in that case. Apart from the general body of consumers, M/s. Atlas Battery Ltd. was supplying batteries to Ministry of Defence of Government of Pakistan and Ghandhara Industries Ltd. under special terms and conditions on a lesser price. It was held by the Supreme Court that for the purpose of section 4(2) of the Central Excises Act, the retail price would be the price on which the goods were being supplied to the general body of consumers and not the concessionary price on which the goods were being sold to the Government of Pakistan and Ghandhara Industries. The Supreme Court while interpreting section 4(2) observed that upon a proper analysis of the provisions of subsection, it would appear that for the levy of excise duty, the retail price should- constitute the following ingredients:---

(i) It shall be the price fixed by the manufacturer.

(ii) It shall be inclusive of all charges and taxes.

(iii) It shall be the price at which the particular brand or variety of such article should be sold to the general body of consumers.

(iv) If more than one such price is so fixed for the same brand or variety, it shall be the highest of such price.

It was further observed that while it was correct that it was for the manufacturer to determine the retail price in order to print the same on goods, it will not be entirely correct to contend that he can do so arbitrarily as its discretion is not without any fetters of law.

13. In the present case, it is clear that the retail price fixed by the petitioners is embossed and printed on the bottles. It is that price on which the goods are required to be sold to the consumers. The petitioners manufactured the bottles in an unchilled form. However, the bottles are sold in chilled form and the retailer or middle man incurs some additional charges those cannot be considered to be the charges incurred by the petitioners and cannot be added to the retail price fixed by the manufacturer in respect of the bottles being manufactured by it.

14. As noted earlier, section 4(2) entitles a manufacturer to fix the retail price on which the goods are to be supplied to general body of consumers. While it is true that this price cannot be fixed arbitrarily as held by the Supreme Court in Atlas Batteries' case supra, it is not the case of the respondents that the chilling charges are incurred by the petitioners or that the petitioners supplied bottles ' in chilled form after incurring some extra. expenditure. The petitioners cannot, therefore, be forced to add chilling] charges not incurred by them in the retail price. According to the learned counsel for the petitioners, it is common knowledge that the bottles are being supplied in crates by the petitioners in unchilled form and are available for purchase by the general body of consumers at the rates printed on the bottles. If some other person sells the bottles at higher price than the one printed on the bottles, the petitioners cannot be saddled with that responsibility. It is not the case of the respondents that it is the petitioners, who are incurring an extra expenditure and supply the goods in chilled form.

15. The other case relied upon by the learned counsel for the petitioners is also helpful to them. In that case K-2 cigarettes were being manufactured and sold in two different packing at different prices. The department contended before the Supreme Court that as the goods were the same, it was entitled to charge excise duty at the higher price. This contention was repelled by the Supreme Court by observing that the Company in that case was justified in fixing two different prices for the same goods in view of difference in packing.

16. It is also to be noticed that the respondents themselves had been accepting this interpretation for a period of more than 5 years. The aforesaid letter may not be in the nature of notification but still it was the interpretation which was followed by the Department for a period of 4/5 years. While rescinding the aforesaid clarification, it was stated by the Central Board of Revenue that the earlier clarification was at variance with the definition of retail price provided in section 4(2) of the Central Excises Acct, 1944. The reason for coming to that conclusion was, however, not mentioned.

17. It follows from the above that the respondents are not justified to force the petitioners

to include the chilling charges in the retail price of aerated beverages as the clarification issued in the letter dated 12-6-1999.

In view of above, both these petitions succeed and letters dated 12-6-1999 and 4-8-1999 issued by the respondents are declared to be without any lawful authority and of no legal effect.

No order as to costs.

C. M. A./R-113/L Petitions allowed.