Messrs VITA (PAKISTAN LIMITED), LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2005 P T D 1415
[Federal Tax Ombudsman)
Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman
Messrs VITA (PAKISTAN LIMITED), LAHORE and others
versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaints Nos. 846-L, 817-L and 825-L of 2004, decided on 19/01/2005.
(a) Central Excises Act (I of 1944)---
----S. 4(2)---Sales Tax Act (VII of 1990), S.2(27)---Establishment of OfficeofFederalTaxOmbudsmanOrdinance(XXXVof2000),S.2(3)---Central Excise General Order No.1 of 1990, dated 11-1-1999---Central Excise General Order No.10 of 1975, dated 15-8-1975---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax declaring and printing retail prices on juice packs less than the actual retail prices prevailing in the market in contravention of the provisions of S.4(2) of the Central Excises Act, 1944 and S.2(27) of the Sales Tax Act, 1990 on the presumption that subject goods must necessarily be available in the open market at retail prices fixed by the manufacturers and printed on packs/containers---Validity---Department tried to make out a case that the retailers could not charge prices higher than declared prices except with the approval of manufacturers whose products they were selling and that the complainants to evade central excise duty and sales tax had not included the due portion of profit margin of the retailers/others allowing the retailers to sell their products at a higher rate to cover up their profit margin---Contravention reports or the adjudication orders could not make it clear as to whether the detecting agency had examined both the purchase and sale documents through which the goods reached the retailers and other records to determine whether or not the manufacturers had indeed not left any margin of profit to the wholesaler/retailers or to determine whether or not the manufacturers had under declared/printed the retail prices by not including retailer's margin in the prices---Prosecuting agency did obtain a few sale invoices issued by the retailers but what about the purchase documents and other records that were required to be properly examined and analyzed in terms of the provisions ofGeneral Order No.10 of 1975 dated 15-8-1975 to determine the fact of inclusion or exclusion of retailers or wholesaler's margin in the declared/printed prices---In addition to considering the retailer's cash memos the adjudicationauthority should have inquired of the prosecution to disclose their definitive findings based on examination of both purchase/sales documents andother records---Complainants were also not supplied all the documents asked for toenable them to prepare their defence, their point of view was not properly considered; they were also not shown as to how various judgments cited by them were not relevant nor, for thatmatter, it was shown on the basis of examination of purchases and sales and other records whether or not the manufacturers had passed the retailers margin---Adjudication authority did not pass speaking orders distinguishing them from FederalTax Ombudsman's decisions---Maladministration was established---Federal Tax Ombudsman recommended that Central Board of Revenue to reopen the Order-in-Original in all the three cases under the provisions of S.35E of the Central Excises Act, 1944 read with S.45A of the Sales Tax Act, 1990 and set aside the impugnedorders and to direct the competent adjudication authority to revisit the cases for de novo consideration and fresh adjudicationonmeritinaccordancewiththeprovisionsof law bytakingintoconsiderationallthepleasofthecomplainantsafter providing them with all thenecessarydocumentstoenablethemto enter their defence and extending them the opportunity of hearings.
2000 PTD 353 and PLD 1984 SC 86 rel.
Complaint No.1044-L of 2002 and 431-L of 2003 distinguished.
Complainant No.877-L of 2003; Complaint No.591 of 2002; Complaint No.846-L of 2004 and Complaints Nos. 817 and 825-L of 2004 ref.
(b) Central Excises Act (I of 1944)---
----S.4(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax---Non-supply of certified copies documents relied upon by the Department---Validity---Department should have supplied certified copies of the relevant documents to enable the complainant to prepare their defence---Complainantasked, in addition to various documents for the copies of surveys/inquiry reports---Even if no formal survey reports were issued, the Department could have supplied certified copies of the market inquiry reports or of the contravention reports containing the findings to enable the complainants to enter their reaction to the findings---It appeared that while some documents may have been supplied by way of unattested, uncertified and unauthenticated copies, the other documents were supplied incompleteand a few more were not at all supplied---Adjudication Authoritywas to ensure before deciding the cases that requisite documents/information asked for by the complainants were supplied to them, especially when the complainants had pointedly requested the Authority to direct the detecting agency to supply the same.
(c) Central Excises Act (I of 1944)---
----S. 4(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax---Non-consideration of complainant's view point, departmental orders and Court's judgments during the proceedings---Validity---Departmental orders and Court'sjudgments were not dealt with by the Adjudicating Authority during the proceedings todetermine whether any of those decisions/judgments had any bearing on the caseand it was not enough to say that the decisions/judgments were not relevant---Impact/bearing or otherwise of such orders/ judgments on complainants cases should have been discussed in detail with by the Adjudicating Authority in the order-in-original---Ifthe orders/judgments cited by the complainants involved issues other than the issues in hand, it should have been shown as to how the decisions/Court's judgments were different by discussing their relevancy or irrelevancy---Failure to provide necessary documents to enable the complainant to prepare their defence, non-consideration of complainants viewpoint/evidence, the failure to discuss and deal with departmental orders/Courts judgments were arbitrary and unjust acts militating against the principles of natural justice amounting to 'maladministration' within the meaning of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.
(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---
----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Where the omissions andcommissions on the part of department militated against the interest of the complainant and the department resorted to questionable processes (omissions and commissions) to the detriment of the complainant, the provisions of S.9(2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 did not stand in the way of investigation of complaints by the Federal Tax Ombudsman---Appeals were filed subsequent tofilingthecomplaintsintheFederalTaxOmbudsmanSecretariat.
Umar Arshad Hakeem and Akhtar Javed for the Complainant.
Rukhsana Yasmeen, Additional Collector (Adjudication) and Zulifqar Ali Choudhry, Additional Director, Customs Intelligence for Respondents.
DECISION/FINDINGS
The above-captioned complaints involving similar points of law and fact are being disposed of by this consolidated order.
2.Facts of the complaints are that the complainants (manufacturers of fruit juices) have been paying excise duty and sales tax at 10% and 15% of the retail prices of their products. Based on market inquiries conducted by the Directorate of Intelligence and Investigation (Customs, Excise and Sales Tax), Lahore that the complainants' fruit juices were being sold in the market to general body of consumers at prices higher than the retail prices fixed and printed on packages/containers by the manufacturers the Additional Collector (Adjudication) issued them three separate show-cause notices alleging evasion of central excise duty and sales tax during certain periods mentioned therein by declaring and printing retail prices on juice packs less than the actual retail prices (see show-cause notices) prevailing in the market in contravention of the provisionsofsection4(2)oftheCentralExcisesAct, 1944andsection 2(27) of the Sales Tax Act, 1990. The detecting agency presumed that the subject goods must necessarily beavailable in the open market at retail prices fixed by the manufacturers and printed on packs/ containers. The agency also compared complainants' productswith fruit juices and foreign brand aerated waters sold by other companies for Rs.8.00 per bottle. In their replies to the show-cause notices the complainants explained to the Adjudicating Authority that the issue involved in the subject caseshad already been settled by various judicial/quasi-judicial forums yet the Adjudicating Authority decided the cases by upholding charges framed against the complainants. The cases were decided without (i)going into their merits, (ii) giving proper opportunity of personal hearings and (iii) without providing evidences anddocuments which the complainants had asked for vide replies to the show-cause notices and during the adjudication proceedings. The respondents had failed to appreciate the provisions of section 4(2) of the Central Excises Act, 1944 according to which duty was to be charged on the retail price fixed by the manufacturers, inclusive of all charges and taxes other than sales tax at which any particular brand or variety of brands or such article was sold to the general body of the consumers provided the retail price was legibly, prominently and indelibly printed on each container. It was for the manufacturers to determine the retail prices and print the same on each bottle/container. Once they had discharged that functions it was to be presumed that the products would be available to the consumers at the declared/printed prices. The department was not competent to fix any other price. In the case of Messrs Riaz Bottlers (Pvt.) Limited v. C.B.R. reported at 2000 PTD 353 the Honourable Lahore High Court observed that if some persons sold bottles at prices higher than those printed on the bottles, the manufacturers could not be saddled with that responsibility. The superior Courts had also held that manufacturers had no control over retailers operating in the open market. The manufacturers could not control the retailers if they did not sell the products atdeclared/printed retail prices. Thus the complainants who have been printing retail prices on bottles/packs of their products and also advertising the same in the newspapers in accordance with the provisions of General Order No.1/90, dated 11-1-1999 could not be held responsible if the retailers charged prices higher than the declared/printed prices. The complainants had made the consumers aware of the retail prices that they were to pay. A number of similar cases instituted by the Directorate against various parties were dropped by the Adjudicating Assistant Collectors, Deputy Collectors, Additional Collectors, Collector (Appeals), Appellate Tribunal and even by the High Court who accepted plea of the manufacturers charged with sale of goods at prices higher than the declared/printed retail prices. Disposing Appeal No.46 of 1998 it was held by the High Court that the law only empowered the Customs Authority to recover excise duty on retail price and they were not competent to charge excise duty on market rate or price. The Directorate Staff could not compel the complainants to fix the retail price. The respondents committed 'maladministration' by passing illegal adjudication orders without (i) supplying evidences/documents to the complainants enabling them to submit comprehensive replies to the charges framed against them despite the fact that the Adjudication Authority was requested to furnish the same, and (ii) affording opportunity of hearings to the complainants. The respondents had created fictitious duty/tax liability on the basis of few chits/pieces of paper which could not stand the test of judicial scrutiny as these did not constitute sufficient evidence to prove the charges. The complainants, on the other hand, were in possession of sufficient evidence to show that their products were being sold in the market at declared/printed retail prices. The orders-in-original being unlawful may be reopened and set aside. The respondents may be restrained from recovering the amounts adjudged in the impugned orders. Suitable action may also be recommended against the Additional Collector (Adjudication) for violating the principles of natural justice and for saddling the complainants with the fictitious duty and tax liabilities.
3.In reply, the Directorate of Intelligence and Investigation (Customs, Excise and Sales Tax), Lahore have submitted that its staff had conducted the exercise as per the provisions of section 4(2) of the Central Excises Act, 1944 read with section 2(27) of the Sales Tax Act, 1990. The charges framed against the complainants were based on facts and material evidence gathered through a comprehensive exercise. The Honourable Supreme Court, in Civil Appeal No.274/79 (Messrs Atlas Battery Limited Karachi versus Superintendent Central Excise and Land Customs, Karachi and others, reported in PLD 1984 SC 86) heldthat the products which were subject to payment of central excise duty should be available to the generalbody of the consumers at the declared retail price. The products of the complainants were being sold to the general body of the consumers at a higher rate than the declared/printed retail prices in violation of the provisions of section 4(2) of the Central Excises Act, 1944 according to which the goods should have been available to the general body of consumers at the printed retail prices. The prices worked out by the Directorate were correct. The complainants were asked to nominate their representatives to conduct joint market survey to verify the correct retail prices but they did not join the survey contending that they were paying excised duty as per the provisions of law. The Pakistan Food Processors Association also tried to justify their illegal acts by citing irrelevant judgments of superior Courts. The association could not satisfythe Directorate on the issue. Other companies were paying central excise duty and sales tax in conformity with the provisions of law. The orders were passed lawfully on the basis of facts and material evidence after affording opportunity of defence. The retail prices of the products to be fixed inclusive of all charges and taxes excluding sales tax. The manufacturers should have checked whether their products were being sold to thegeneral body of the consumers at declared retail prices. The superior Court's judgment referred to by the complainants was not relevant. Similar products likeFrost and Tropico brand juices and all brands of beverages were available to the general body of the consumers at the declared retail prices. As to the judicial and quasi-judicial decisions referred to by the complainants, no doubt show-cause notices in some cases were vacated due to certain lacuna or for non-availability of sufficient evidence but in the present complaints sufficient evidence was available to establish the charges. If the retailer's profit margin had been included in the declared retail prices then why would they charge prices higher than the declared ones, especially when similar products were selling at printed retail prices?The retailers could not overcharge without complainants' connivance. The complainants had, therefore,evaded excise duty and sales tax. While in some cases the superior Courts had given decisions against the department, some other cases were still pending in the Supreme Court. Copies of documents asked for were provided to the complainants, Samples (of products) were also submitted before the Adjudicating Authority. In an identical case (Complaint No.1044-L of 2002) the Honourable FTO held that the staff of Directorate could probe the matter under section 4(2) of the Central Excises Act, 1944. The Honourable FTO has no jurisdiction in terms of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 because the issue related to valuation of products and the remedies of appeal/review/revision against the impugned orders were available to the complainants. The complaints may be dismissed and the complainants may be directed to avail the remedy of appeal to seek redress of their grievances.
4.The Additional Collector (Adjudication), Collectorate of Sales Tax and Central Excise (Adjudication), Lahore has submitted that the Directorate of Intelligence had conducted a lawful exercise. The Supreme Court of Pakistan in Civil AppealNo.274 of 1979 (Atlas Battery Limited v. Superintendent Central Excise and others) held that the products which were subjected to payment of excise duty be available to general body of consumers at the declared retail prices. Theadjudication orders were passed on the basis of facts/material evidence. Other parties were paying excise duty and sales tax as per the provisions of law. As to the complainants' plea that in some cases made out by the Directorateshow-cause notices were vacated it is submitted that those were vacated due to lacuna andnon-availability of sufficient evidence. In the present cases the Intelligence Staff worked out the correct retail prices. The Adjudicating Authority also verified the availability of complainant's products in the market at rates higher than the declared retail prices. The complainants were provided opportunities of hearing. The complainants advanced irrelevant arguments and cited irrelevant judgments ofsuperior Courts. The manufacturers had to include in the price all the charges up to the stage of retail, including taxes, excluding sales tax. No doubt, the complainantshad the right to fix and declare the retail prices but the Supreme Court in its judgment recorded in PLD 1984 SC 86 held that the manufacturers could not fix the prices arbitrarily at their own discretion. It was for the manufacturers to checkwhether their products were being sold to the general body of the consumers atdeclared/retail prices. The products of some other units i.e. fruit juices or aeratedwater were being sold to the general body of the consumers at declared prices. The issuehad not been settled by the superior Courts as contended. While some judicial and quasi-judicial forums had decided against the department due to certain lacuna and non-availability of sufficient evidence, in certain other cases the department had filed appeals before Honourable Supreme Court of Pakistan. The retailers could not charge prices higher than the declared retail prices as their profit margin was to be included in the retail prices. They were in collusion withthe manufacturers. No maladministration was involved. The complainants were provided the necessary documents asked for. Identical complaints were dismissed by the Honourable FTO as lacking merit vide decisions in Complaints Nos.1044-L/02 and 431-L/03. Complainants' contention that they were in possession ofsufficient evidence that their products were being sold at the declared/printed prices was not tenable because they had managed the so-called evidence afterwards with mala fide intentions. The complainants evaded central excise dutyand sales tax by not including the due portion of profit margin of the retailers/others and allowed retailers to sell their products at higher rate to cover up their profit margin. The Honourable FTO lacked jurisdiction in the matter in terms of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.
5.During the hearing, the complainants' AR reiterated the arguments advanced in the written complaints. Asked as to whether the complainantshadfiledappealsagainsttheimpugnedordersbeforethe Appellate TribunaltheARsubmittedthatappealswerefiledon1-10-2004 after filing the complaints in FTO Secretariat on 23-9-2004. In addition to the written arguments, the AR added thatshow-cause notices issued by the respondents were vague in that the notices didnot show brand-wise quantity of packages involved and their retail prices nor didthe notices disclose the basis on which the retail prices, duty and taxes werecalculated. He emphasized that by refusing to supply the documents listed out in the complaints and asked for in replies to the show-cause notices the respondents acted against the principles of natural justice. They also did not supply any calculation sheet/evidence of prices at which the goods of Messrs Nestle Pak were being sold. The Adjudicating Authority failed to discuss and deal in the orders-in-original with various departmental orders passed by the Adjudication Officers and with decisions given by the Courts, which were cited by the complainants. The AR submitted that Court in its judgment (2000 PTD 353, Messrs Riaz Bottlers (Pvt.) Ltd., v. Central Board of Revenue and others) had ruled that if some other persons sold the bottles at prices higher than the ones printed on the bottles the petitioners could not be saddled with that responsibility. He also added that according to FTO'sdecision in Complaint No.877-L/03 ignoring superior Court's judgments wasan act of maladministration.
6.The Additional Director (Intelligence) submitted that before undertaking surveys the Directorate had issued noticesto the complainants asking them to join the surveys but they did not respond positively. The inquiries conducted by the Directorate's Staff reveals that the prices at which the complainants' goods were being sold in the open market were higher than those declared/printed on containers. The AR rebutted that while the complainants were selling their goods through retail outlets spread all over Pakistan---from Karachi to Lahore---the respondents relied only on couple of invoices obtained by them from some retailers. He added that in some cases (for example in the case of Messrs VitaPakistan Limited) the respondents relied upon two invoices, dated 22-1-2003 whereas the period involved in that case was January to December, 2002, hence the invoices were not relevant. He further submitted that the respondents had notconducted proper surveys nor issued any survey reports and had based their findings on arbitrary market inquiries.
7.The Additional Collector (Adjudication) submitted that the show-cause notices were not vague, as alleged, because each of the three notices mentioned the number of packages cleared, the quantity involved and the duty and taxes evaded. She contended that the complainants did not challenge the vagueness of show-cause notices either in their replies to the show-cause notices or during adjudication proceedings. A number of documents asked for were supplied to the complainants from time to time during adjudication proceedings. Asked as to why the judicial and quas-judicial judgments cited by the complainants before the Adjudicating Authority during the proceedings were not considered the Additional Collector stated that those judgments were not considered relevant and she, while deciding the cases, had placed reliance on Supreme Court's judgment (in the case of Messrs Atlas Battery Limited v. Superintendent Central Excise, Land Customs and others) ruling that "while it is correct to say that it is for the manufacture todetermine the retail price in order to print the same on this goods, it will not be entirely correct to contend that he can do so arbitrarily at his discretion .". She stated that during the proceedings the complainants did not argue so much aboutthe implication of section 4(2) of the Central Excises Act, 1944 as they did about other matters. The AR argued that the cases were decided without appreciating the provisions of section 4(2) of the Central Excises Act, 1944, without supplying therelevant documents asked for and without considering complainant's point of view, which amounted to maladministration as decided by the Honourable FTO inComplaint No.591 of 2002. The Additional Director (Intelligence) submitted that he would list out the documents already supplied to the complainants during the proceedings and would submit the same in a couple of days for record. Later, heplaced on record a list of documents claimed to have been supplied to the complainants in each of the three cases but without producing any receipt or evidence to establish that the documents asked for were supplied to the complainants.
8.The arguments of the parties and the record of the cases have been considered and examined. The complainants have alleged maladministration on the grounds that (i) the impugned orders were illegal inasmuch as the Adjudication Authority had failed to appreciate the provisions of section 4(2) of the Central Excises Act, 1944 read with section 2(27) of the Sales Tax Act, 1990, (ii) orders were passed without furnishing relevant evidences/documents asked for rendering them unable to prepare proper defence, (iii) the evidences presented by them indicating that their goods were selling in the market at declared/printed retailprices were not taken into consideration and (iv) judicial and quasi-judicial decisions cited by the complainants in support of their contentions were also not considered. It was also alleged that (i) the so-called surveys conducted by the Directorate of Intelligence were not 'representative' as the department relied on a few cash memos issued by the retailers whereas the complainants' goods werebeing sold at innumerable retail outlets throughout Pakistan, (ii) show-cause notices were vague in thatthese did not disclose the brand-wise quantity of packages involved, their retail prices nor did these disclose the basis on which retailprices, duty taxes were calculated. The respondents, on the other hand, contended that they had acted legally in terms of the provisions of section 4(2) of the Central Excises Act, 1944 read with section 2(27) of the Sales Tax Act, 1990 as the goods of the complainants were selling in the market at retail prices higherthan those declared or printed on the packages. They had placed reliance on relevant invoices obtained from the market. The manufacturers could fix and declare the retail price but they could not fix the retail prices arbitrarily because the law provided that the products should be selling at the fixed/declared/printed prices to the general body of consumers. The invoices obtained from the market showed that the goods were selling at retail prices more than the declared/printed retail prices. The documents asked for were provided. Show-cause were not vagueinasmuch as they disclosed the quantity of packages and the amount of duty and tax involved. The complainants had not challenged the vagueness of show-causes notices during adjudications. The judicial/ quasi-judicial decisions cited by the complainants were not relevant to the cases under consideration. A number of hearings were given in each of the three cases and the complainants were provided opportunities of defence.
9.A perusal of arguments of the two sides and the relevant records shows that in their replies to the show-cause notices the complainants had requested the Adjudication Authority to direct the detecting agency to provide them various documents/evidence listed therein to enable them to prepare their defence before deciding the cases but it appears that all the documents asked for were not supplied. For example, para. 5 of the adjudication order passed in the case of Messrs Vita Pakistan Limited (Complaint No.846-L/04) shows that the complainant had been supplied photocopies of some of the documents without supplying in some cases the detailed calculation sheets asked for, but the rest of the documents asked for (para. 6 of the adjudication order passed in the aforesaid case) were not supplied, as contended by the complainant. The adjudication ordersdo not make it clear whether the documents asked for in the other two cases (C. Nos.817 & 825-L/04) were provided to the complainants or not. The complainants in their replies to the show-cause notices had agitated before the Adjudication Authority that the documents were not being provided but the Authority did not give any finding onthat account in the adjudication orders passed in the cases. As a result, the complainants are complaining to this day that the documents were not provided. Although the Directorateof Intelligence has placed on record a list of documents claimed to have been provided to the complainants during adjudication proceedings but they have not placed on record any receipts obtained from thecomplainants in token of having delivered the same to them nor have they shown whether the documents so supplied covered all the information/documents asked for by the complainants or not. The respondents could have supplied certifiedcopies of the relevant documents (against proper receipts) to enable the complainants to prepare their defence. It is observed that the complainants had asked, in addition to various documents, copies of surveys/inquiry reports. Even ifno formal survey reports were issued, the respondents could have suppliedcertified copies of the market inquiry reports or of the contravention reportscontaining the findings to enable the complainants to enter their reaction to the findings. As it is, it appears that while some documents may have been supplied byway of unattested, uncertified and unauthenticated copies, the other documents were supplied incomplete (without calculation sheets) and a few more were not at all supplied. In fact, it was for the Adjudication Authority to ensure before deciding the cases that the requisite documents/information asked for by the complainants were supplied to them, especially when the complainants had pointedly requested the Authority to direct the detecting agency to supply the same.
10.Both respondents Nos.2 and 3,in parawise comments submitted by them, have tried to make out a case that the retailers could notcharge prices higher than declared prices except with the approval of manufacturers whose products they were selling and that the complainants to evade central excise duty and sales tax had not included the due portion of profit margin of the retailers/others allowing the retailers to sell their products at a higher rate to cover up their profit margin. If that was the inference then how is it that the detecting agency did not keep in view the provisions of Central Excise General Order No.10 of 1975, dated 15-8-1975, especially when at one point in time the Deputy Director, Customs Intelligence addressing the complainants vide letter, dated 18-1-2003 drew their attentions to theprovisions of General Order No.10 of 1975 attracting investigation? Did the Adjudication Authority inquire of the prosecuting agency whether they hadconducted the inquiries on the lines as indicated in C.B.R.'s General Order No.10 of 1975, dated 15-8-1975, the relevant portion of which is reproduced below:--
"Hence whenever it comes to the notice of the Excise Officer that an article subject to duty on the basis of retail price is actually selling at a price higherthan the manufacturers declared retail price, the matter would call for investigation. In such a case if the examination of purchase and sale documents, through which the goods reach the retailers, and other records reveal that it left them hardly any margin of profit to the wholesalers or retailers and the article could not possibly be sold at the printed price, then the obvious inference would be that the manufacturer had under-declared theretail price and action by the Excise Officer for violation of law would be in order, where the retail price of an article is required under the law to beprinted legibly and indelibly and it is not so printed or the printed price hasbeen obliterated, the case should be examined for the levy of duty at the penal rates as prescribed for the relevant item in the First Schedule to the Central Excises Act, 1944.
Collectors are therefore requested to keep an eye on the actual prices at which articles which are charged to duty on the basis of retail price are actually being sold. If any such article is being sold at prices higher than those printedon the article, the case would call for investigation on the lines indicated in this General Order."
It is not clear from the contravention reports or from the adjudication orders whether the detecting agency had examined both the purchase and sale documents through which the goods reached the retailers and other records to determine whether or not the manufacturers had indeed not left any margin of profit to the wholesaler/retailers or to determine whether or not the manufactures had under-declared/printed the retail prices by not including retailers' margin in the prices. The prosecuting agency did obtain a few sale invoices (cash memos) issued by the retailers but what about the purchase documents and other records that were required to be properly examined and analyzed in terms of the provisions of General Order No.10 of 1975 to determinethe fact of inclusion or exclusion of retailers or wholesalers' margin in the declared/printed prices. In addition to considering the retailer's cash memos the Adjudication Authority should have inquired of the prosecution to disclose their definitive findings based on examination of both purchase/sale documents and other records. It is further observed that in some cases the cash memos obtained from the retailers did not relate to the period for which the charges were framed. For example, in the case of Messrs Vita Pakistan Limited the complainant had argued that the period under scrutiny was January, 2002 to December, 2002 whereas the two invoices relied upon by the prosecution had indicated prices charged by the retailers from the consumers pertaining to the period January, 2003 only---both invoices, dated 22-1-2003---whereas the so-called survey pertained to the period from January, 2002 to December, 2002, as alleged in the show-cause notice. The complainants had, therefore, a valid point that invoices collected in January, 2003 could not be applied retrospectively to the whole of the year, 2002. The Adjudication Authority did not analyze this aspect of the case nor did it consider complainant's plea thatduring the period in question the unit was shut down and there was no supply or availability of its products in the market. The complainants contend that althoughthey possessed evidence showing that the goods during the period in question were being sold to the general body of consumers at the printed and declared prices yet their point of view was not considered. While adjudicating the cases the Authorityrelied upon the judgment of the Supreme Court, according to which arbitrary prices could not be fixed but the Adjudication Authority failed to deal with and discuss the implications of various departmental and Court's judgments cited by the complainants to dispel the complainants' impression that they have been discriminated against, if that was so, and whether the complainants had really fixed artificial retail prices leaving no margin of profit to the retailers/wholesalers. The Adjudication Authority disposed of the decisions/judgments of judicial/ quasi-judicial forums by merely declaring them as irrelevant without discussing as to how these were irrelevant.
11.Thus while the show-cause notices were not vague, as alleged by the complainants, and were properly framed confronting the complainants with facts of the cases and invoking therein the relevant provisions of law, the fact remains that while deciding the cases the Adjudicating Authority (i) didnot consider the complainants' pleas, (ii) did not ensure whether all documents asked for by the complainants had really been furnished to them, especially when the complainants brought it to the notice of the Authority to direct the detecting agencyto supply the documents to enable them to prepare their defence, (iii) did not confront the detecting agency with whether or not they had conducted the surveys along the lines as laid down by the C.B.R. in its General Order No.10 of 1975, dated 15-8-1975, (iv) did not deal with departmental orders and Courts' judgments cited by the complainants in support of their contentions during the proceedings to determine whether any of those decisions/judgments had any bearing on the complainants' cases. It was not enough to say that the decisions/judgments were not relevant. The impact/bearing or otherwise of such orders/judgments on complainant's cases should have been discussed in and dealt with by the Adjudicating Authority in the impugned order-in-original. If the orders/ judgments cited by the complainantsinvolved issues other than the issues at hand, as contended by the respondents, it should have been shown as to how the decisions/Courts' judgments were differentby discussing out their relevance or irrelevance, as the case may be. The failure,therefore, of the respondents, to provide to the complainants all the necessary documents to enable them to prepare their defence, non-consideration of the complainants' viewpoint/evidence produced in support of their contentions, the failure to discuss and deal with departmental orders/ Courts judgments cited by the complainants were arbitrary and unjust acts militating against the principles of natural justiceamountingto'maladministration'withinthemeaningofsection 2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. As respects objection by the Revenue to the jurisdiction of the FTO in terms of the provisions of section 9(2) of the FTO Ordinance this is to point out that the FTO is fully competent to take cognizance of 'maladministration' as defined in section 2(3) of the FTO Ordinance, 2000. The omissions and commissions on the part of the respondents militated against the interest of the complainants. The respondents resorted to questionable processes (omissions and commissions) to the detriment of the complainants. The provisions of section 9(2) of the FTO Ordinance did not, therefore, stand in the way of investigation of complaints by the FTO. The appeals in these cases were filed by the complainants subsequent to filing the complaints in the FTOSecretariat.
12.As for respondents' contention that the FTO had already dismissed similar complaints vide decisions in Complaints No.1044-L of 2002 and Complaint No.431-L/03 this is to point out that issues involved in each of the two judgments were different from those involved in the current complaints: for example, Complaint No.431-L of 2003 the matter related to determination of value under section 4(1) (wholesale cash price) and not to section 4(2) (retail price) of the Central Excises Act, 1944 as in the present complaints and it was observed in the decision cited by the respondents that the Adjudication Authority had passed a speaking order against which both parties had filed appeals before the Appellate Authority which could decide the legal and factual issues. In Complaint No.1044-L of 2002again involving section 4(1) of the Central Excises Act, 1944, it was observed that the Adjudication Authority had passed a comprehensive order with reference to market inquires, input/output ratios with finding by the Adjudicating Officer that the cost of production of the complainant was higher than the declared assessable value. Even the show-cause notice in that case was not found vague, as alleged, because the Authority had modified/amended it to meet the legal requirements. In the present complaints, however, not only, that the complainants were not supplied all the documents asked for to enable them to prepare their defence, their point of view was not properly considered. They were also not shown as to how various judgments cited by them were not relevant nor, for that matter, it was shown on the basis of examination of purchases and sales and other records whether or not the manufacturers had passed the retailers' margin. Thus in the present complaints the Adjudication Authority did not pass speaking orders distinguishing them from FTO's decisions cited by the respondents. In the present cases 'maladministration' is established as indicated above. Accordingly, it is recommended that the C.B.R.:
(i)Reopen the orders-in-original in all the three cases under the provisions of section 35E of the Central Excises Act, 1944 read with section 45A of the Sales Tax Act, 1990 and set aside the impugned orders.
(ii)Direct the competent Adjudication Authority to revisit the cases for de novo consideration and fresh adjudication on merit in accordance with the provisions of law by taking into consideration all the pleas of the complainants after (i) providing them with all the necessary documents to enable them to enter their defence and (ii) extending them the opportunity of hearings.
(iii)Compliancebe reported within 30 days.
C.M.A./368/FTO(L)Order accordingly.