Messrs PUNJAB BEVERAGES (PVT.) LTD., FAISALABAD VS CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, 2004 PTD-LAHORE-HIGH-COURT-LAHORE 1460 (2003)

(a) Excise Duty on Production Capacity (Aerated Waters) Rules, 1990‑‑‑

‑‑‑‑Rr. 7‑A(3) & 10(2)‑‑‑Demand of excise duty and additional tax for period prior to actual installation of permitted spouts‑‑‑Central Board of Revenue through letter, dated 27‑2‑1993 allowed assessee to install additional spouts w.e.f. 1‑1‑1993‑‑‑Such spouts were actually installed w.e.f. 1‑4‑1993‑‑‑Revenue raised demand of excise duty and additional tax w.e.f. 1‑1‑1993 to 31‑3‑1993‑‑‑Validity‑‑‑Board having granted permission on 27‑2‑1993 could not demand duty two months prior to grant of such permission ‑‑‑Assessee could not be required to pay tax even before a taxable activity had come into being‑‑‑Tax‑payer, irrespective of his consent, could not be burdened with payment of duty before machinery to be used in taxable activity was actually installed‑‑‑Machinery had actually been installed only after such permission‑‑‑High Court accepted appeal and set aside demand of excise duty for impugned period alongwith additional tax and penalty.  

(b) Taxation‑‑‑

‑‑‑‑ Assessee could not be required to pay tax even before a taxable activity had come into being.

(c) Taxation‑‑‑

‑‑‑‑Tax‑payer, irrespective of his consent, could not be burdened with payment of duty before machinery to be used in taxable activity was actually installed.

(d) Interpretation of statutes‑‑-

--‑Fiscal statute‑‑‑Where two equally acceptable interpretations of a provision were possible, then the one favourable to tax‑payer should be adopted.  

Ali Sibtain Fazli for Appellant.

Ch. Muhammad Hussain for Revenue.

ORDER

NASIM SIKANDAR, J.‑‑‑Through this single order we intend to dispose of Customs Appeals Nos. 380 and 381 of 2001.

2. These cross appeals assail the impugned order recorded by the Customs, Excise and Sales Tax Appellate Tribunal, Lahore on 13‑11‑2001.

3. The assessee‑appellant is a private limited company and is engaged in, bottling and sale of Aerated water. It appears that on 18‑11‑1992 they approached the Central Board of Revenue for their permission to add 10 spouts alongwith franchise to be purchased from Messrs Jamrud Industries (Pvt.) Limited. The relevant part of their letter reads as under:‑‑

"Bottling operations at Peshawar may not be feasible. Therefore, we shall start production of 7UP beverages for Peshawar territory at our existing plants at Faisalabad and Multan from 1st of January, 1993, Marketing operations for Peshawar territory shall also start from the same date i.e. 1‑1‑1993. The Peshawar plant consists of 20 filling valves and for the purpose of Capacity Taxation Rules we shall divide these valves in equal shares (e.g. 10 valves each). Thus each one of us shall be liable for payment of duty under Rules 10(1) and (2) of Excise Duty on Production Capacity (Aerated Waters) Rules, 1990 for 10 additional valves with effect from 1‑1‑1993."

4. The Central Board of Revenue granted them the permission on 27‑2‑1993 under rule 7A(3) of Excise Duty on Production Capacity (Aerated Waters) Rules, 1990. The relevant part of that letter reads as under:

"The Board is pleased to allow Messrs Punjab Beverages Co. (Pvt.) Ltd., Faisalabad and Messrs Shamim and Co. (Pvt.) Ltd. Multan, to add 10 spouts each w.e.f. 1st January, 1993 subject to the condition that they discharge the duty liability of Messrs Jamrud Industries (Pvt.) Limited with effect from the same date on 50:50 basis for the purpose of depositing central excise duty under sub‑rule (3) of rule 7A of "Excise Duty on Production Capacity (Aerated Waters) Rules, 1990. As was explained by the representatives of the two companies who had met the Member (Central Excise) in November, 1992, this liability shall be in addition to the amount of duty assessed and being paid by them on the basis of operational spouts presently installed in these units.

5. Subsequently on 2‑6‑1994 the appellant was served with a show‑cause notice requiring payment of central excise duty to the tune of Rs.65,00,000 alongwith additional duty amounting to Rs. 16,25,000 on the ground that permission for installation of 10 spouts was sought for and granted and the appellant as registered person was required to pay duty w.e.f. 1‑1‑1993. In reply the appellant challenged the liability to pay excise duty even before the date of installation of the spouts. According to the appellant the franchise as also the installation of spouts having taken place after the receipt of the approval of the Board, dated 27‑2‑1993 and finalized in April, 1993 no demand could be raised and worked out w.e.f. 1‑1‑1993.

6. The department however, did not agree and by way of the order -in‑original on 4‑9‑2000 the appellant was found liable to pay Central Excise Duty w.e.f. 1‑1‑1993 to 31‑3‑1993 along with additional duty. The learned Tribunal on further appeal maintained that order on the ground that addition of spouts having been conditional to payment of duty w.e.f. 1‑1‑1993, the appellant was bound to pay duty as found against him in the order‑in‑original. However, the additional duty imposed under the rule 8(4) of the aforesaid rules and the penalty of Rs.11500000 was found to be unjustified and accordingly waived. That part of the order of the Tribunal has brought the department in appeal before us.

7. Heard the learned counsel for the parties. Learned counsel for the appellant contends that the appellant had opted for levy of excise duty under the aforesaid rules. Also that in the facts in hand the amended sub‑rule (2) of rule.10 of the said Rules was applicable and that the provisions of rule 7A(3) were not attracted to the facts in hand. We will agree.

8. At the outset it needs to be pointed out that seeking permission and its grant in terms of the aforesaid letters is not disputed by any of the parties. Secondly it is also not disputed by the Revenue that 10 spouts were actually added w.e.f. 1‑4‑1993. Therefore, in the given situation, sub‑rule (2) of Rule 10 amended on 17‑3‑1992 was attracted to the facts in hand. Even otherwise it appears unacceptable to any judicious mind that an assessee should be required to pay tax even before a taxable activity had come into being. The claim of the present appellant that negotiations for removal of 10 spouts from Messrs Jamrud Industries (Pvt.) Limited were finalized only after receipt of the said approval/letter of Board on 27‑2‑1993 is certainly relevant and pertinent. The Board itself having granted permission on 27‑2‑1993 could not demand payment of duty as well as additional tax even before the date of their permission to install the additional spouts.

9. Irrespective of the application/consent of the tax payer, he could not be burdened with payment of duty before the machinery to be used in taxable activity was actually installed. Secondly, as to the application of the provisions of section 7A(3) or amended sub‑rule (2) of Rules 10 of the said Rules, the golden principle of interpretation of fiscal statutes ought to have been applied. The principle being that if two equally acceptable interpretations of a provision are possible, then the one favourable to the tax payer should be adopted. The opinion expressed by, the Tribunal therefore, in the given situation cannot be accepted. The permission or approval for installation of spouts though being subject to the aforesaid condition it could not be pressed into service for the simple reason that the Board demands payment of excise duty two months prior to the grant of permission while the machinery was actually installed one month after grant of that permission. The interpretation of Revenue as maintained by the learned Tribunal is too narrow ands unreasonable to be accepted.

10. Therefore, the appeal (C.A. No. 380 of 2001) of the appellant is allowed and the demand raised for levy of excise duty from 1‑1‑1993 to 31‑3‑1993 is set aside. As a natural consequence additional duty and G penalty shall also be set at naught. The Customs Appeal No. 389 of 2001 by the Revenue against deletion of that additional tax and penalty shall, therefore, be dismissed as having been rendered infructuous.

S.A.K./P‑174/L Order accordingly.