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

‑‑‑‑S.3‑B‑‑‑"Shall pay" and "shall be liable to pay" ‑‑‑Distinction and connotation‑‑‑Clear distinction exists between the phrase 'shall pay' and `shall be liable to pay'‑‑‑Use of the phrase `shall pay' makes it mandatory on the person to pay the amount while the use of the words 'he shall be liable to pay' gives a discretion to the concerned functionary of the Department to impose additional tax or waive the same totally if in his opinion, the circumstances so required‑‑‑Use of the words `he shall be liable to pay' in S.3‑B of the Act also vests in the Adjudicating Officer, the discretion to levy or forego the additional sales tax in case of failure of person to pay the sales tax keeping in view the facts and circumstances of the case and the reason for non‑payment.

Shamroze Khan and another v. Muhammad Ameen PLD 1978 SC 89 ref.

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

‑‑‑‑Ss.36‑C & 3‑B‑‑‑Central Excise Rules, 1944, Rr.53, 10 & 210‑‑ S.R.O. 546(I)/94, dated 9‑6‑1994‑‑‑S.R.O. 552(I)/89 dated 3‑6‑1989‑‑ Levy of additional duty‑‑‑Claim of the Department was that if a person who under Central Excises Act, 1944 was liable to pay tax but failed to pay the same for any reason, he was duty bound to pay additional tax at the rate stated in S.3‑B of the Act and no officer of the Excise Department had any discretion to waive or reduce the additional tax stated in the said section‑‑‑Validity‑‑‑Fact of late payment was conceded by the assessee but the enforcement of Central Excise duty under S.3(b) was contested by it on the ground that the late payment made due to circumstances beyond its control as out of the 100% of the total income of the assessee, it was paying 93% to Government of Pakistan in shape of development surcharge and excise duty thus leaving a balance of only 7% for the assessee and it was not at all possible for the assessee to pay the excise duty from this 7% as the major buyer (WAPDA) of the respondent had defaulted to make payment to the assessee‑Considering that delay was beyond the control of the assessee and was not due to any wilful act of the assessee, Tribunal had rightly remitted the penalty and the additional duty which was punitive in nature‑‑‑Finding of the Tribunal did not suffer from any legal infirmity and was consequently maintained.

Arif Moton for Appellant.

Syed Mohsin Imam for Respondent.

Date of hearing: 24th October, 2002.

JUDGMENT

S. AHMED SARWANA, J.‑‑‑Assistant Collector, Customs and Central Excise Division III, Sukkur has filed this appeal under section 36‑C of the Central Excises Act, 1944, proposing the following questions of law for opinion by this Court:

(1) Whether the learned Appellate Tribunal Customs, Central Excise and Sales Tax is misdirected in remitting the amount of additional duty and penalty adjudged against the respondents in the Order‑in‑original for contravention and violation of provisions of S.R.O. 546 (I)/94, dated 9‑6‑1994 and S.R.O. 552(I)/89 dated 3‑6‑1989 read with section 3‑B of Central Excises Act, 1944 and rules 53 and 210 of Central Excise Rules, 1944?

(2) Whether Government owned companies and private, business houses are equal before law?

However, at the time of Katcha Peshi, Mr. Arif Moton, learned counsel for the appellant argued Question No. 1 only.

The brief facts relevant for the purpose of this appeal as stated in the order dated 8‑1‑2002 passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench in Appeal No.803 of 1998 are that pursuant to the Budget of 1994‑1995, the Government of Pakistan vide S.R.O. 546(I)/94 dated 9‑6‑1994 enhanced the rate of Central Excise Duty on Natural Gas from Rs.8.60 to Rs.17.18 per one hundred cubic meters with effect from 9‑6‑1994. Mari Gas Company, Dharki (respondent herein) continued to pay the duty at the old rate from 9‑6‑1994 to 31‑7‑1994 thereby making short payment of duty in the tune of Rs.2,50,95,323.45. In addition, respondent also did not pay the full amount of Central Excise Duty leviable on clearance made during the period 1st April, 1994 to 31st July, 1994 which short payment totalled Rs.13,58,08,662. The Assistant Collector issued a notice to the respondent to show cause why additional duty under section 3‑B of the Central Excises Act, 1944 read with rules 10 and 210 of the Central Excises Rules, 1944 be not recovered from them. The case was decided against the respondent. After their appeal before the Collector (Appeal) was rejected, respondent filed Appeal No.803 of 1998 before the Customs, Excise and Sales Tax Appellate Tribunal, who by order dated 8‑1‑2002 allowed the appeal, set aside the impugned order and directed that the additional duty, if paid, may be refunded. Being aggrieved by the order of the Tribunal, the Assistant Collector (Central Excise) has filed the present Special Excise Appeal referring the above question of law for opinion by this Court.

Mr. Arif Moton, learned counsel for the appellant vehemently urged that if a person, who under Central Excises Act, 1944 ("The Act") is liable to pay tax, fails to pay the same for any reason, he is duty bound to pay additional tax at the rate stated in section 3‑B of the Act and no officer of the Excise Department has any discretion to waive or reduce the additional tax stated in the said section. He added that the use of the verb "shall" in section 3‑B does not grant any concession and obligates the person to perform his duty to pay the tax. To comprehend the arguments of Mr. Moton, it would be advantageous to refer to section 3‑B of the Central Excises Act, 1944 which reads as follows:

"3‑B. Levy of additional duty.‑‑‑If a person fails to pay the duty within the prescribed time, he shall, in addition to the duty payable under section 3, be liable to pay additional duty at the rate of two per cent per month." (underlining added)

In view of the wordings of the provision, according to Mr. Moton, if a person fails to pay the duty within the time prescribed by law, he is bound to pay additional duty at the rate specified in the provision. We are afraid we cannot agree with the arguments advanced by Mr. Moton because there is a clear distinction between the phrase "shall pay" and "shall be liable to pay". The use of the phrase "shall pay" makes it mandatory on the person to pay the amount while the use of the words "he shall be liable to pay" gives a discretion to the concerned officer of the Excise Department to impose additional tax or waive it totally if, in his opinion, the circumstances so require. In the case of Shamroze Khan and another v. Muhammad Ameen PLD 1978 SC 89, the Honourable Supreme Court after an exhaustive discussion about the meaning of the phrase "he shall be liable" used in Order VII, rule 21 and Order VIII, rule 12, Civil Procedure Code concluded that the words "shall be liable" does not bind the Court to impose a penalty on a defaulter in every case but vests a discretion in the Court to impose the stated penalty or excuse the defaulter, if the circumstances of the case so require. In the present case, the use of the words "he shall be liable to pay" in section 3‑B of the Act also vests in the Adjudicating Officer, the discretion to levy or forego the Additional Sales Tax in case of failure of a person to pay the sales tax keeping in view the facts and circumstances of the case and the reason for non‑payment. In the instant case the learned Tribunal while deciding the appeal observed as follows:

"7. The case relates to the imposition of additional duty on account of late payment of central excise duty by the appellant. The fact of late payment is conceded by the appellant, however, the enforcement of central excise duty under section 3(b) is contested by them on the grounds that the late payment was because of circumstances beyond their control. The case records shows that WAPDA is a major buyer of the appellant. This fact also stands confirmed that WAPDA defaulted in making the payment to the appellant. It is also observed that out of 100% of the total income, the appellant was paying 93% to Government of Pakistan (GOP) in the shape of development surcharge and excise duty thus leaving a balance of only 7% for the appellant. Thus, it was not possible for the appellant to pay the excise duty from this 7% received by the appellant. It is also observed that the appellants were also not allowed to stop the supply of gas to WAPDA by the Government of Pakistan (GOP). The Director (Gas) Ministry of Petroleum and Natural Resources directed the appellant to continue the supply of gas to WAPDA.

Considering that delay was beyond the control of the appellant and delay in payment was not' due to any wilful act of the appellant, we remit the penalty and the additional duty, which is punitive in nature."

The learned Tribunal has given a clear finding that the delay in making payment of the duty was beyond the control of the respondents and consequently exercised the discretion vested in it by setting aside the order of imposition of penalty and additional tax.

Mr. Arif Moton was unable to satisfy us that the Tribunal exercised its discretion contrary to the general principles of law or the principles laid down by the Supreme Court of Pakistan in the case of Shamroze Khan referred to above. In the circumstances, we are of the view that no question of law arises from the impugned order of the Tribunal for consideration by this Court. The appeal is, accordingly, dismissed in limine.

S.M.A.H./A‑293/K Appeal dismissed.