PAKISTAN BEVERAGES LTD. VS FEDERATION OF PAKISTAN
2005 P T D 1928
[Karachi High Court]
Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ
PAKISTAN BEVERAGES LTD.
Versus
FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others
Constitutional Petition No.D-1926 of 2002, decided on /01/.
th
January, 2005. Central Excise Act (I of 1944)---
----S. 4(2)---Central Excise General Order (14 of 1969)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Retail price determined under S.4(2) of the Central Excise Act, 1944 would be as fixed by the assessee which would include all charges/taxes (less sales tax) and upon such retail price the central excise duty would be determined---Principles.
Section 4 of the Central Excise Act, provides the mechanism for determining the value of any product upon which Central Excise Duty is levied. Per section 4(1) such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders [or, if there is no general body of retail traders, the general body of consumers] on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable. Per 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 sales 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 prices.
Under section 4(2) of the Act excise duty is to be levied on the price fixed by the Manufacturer and such price should include all charges and taxes (excluding sales tax). Any other interpretation would amount to double taxation as the object of the Act is only to recover excise duty once on the value of the goods/services concerned. This conclusion is further fortified by the fact that nowhere in section 4(2) the word "duty" has been used to include an ingredient of retail price, whereas the word "duty" has been defined under section 2(17) of the Act to include additional duty, regulatory duty and any other sum payable under any of the provisions of this Act or the rules made thereunder.
The retail price to be determined under section 4(2) of the Central Excise Act, 1944 would be as fixed by the Assessee which would include all charges/taxes (less sales tax) and upon such retail price the central excise duty is to be determined.
Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs PLD 1984 SC 86 and Messrs Lucky Cement v. C.B.R. 2003 PTD 1002 quoted.
Hirjina and Co. v. Islamic Republic of Pakistan 1993 SCMR 1342 distinguished.
C.Ps. Nos.1527-L to 1530-L and 1576-L to 1579-L of 2000 and Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs PLD 1979 Kar. 545 ref.
Ali Sibtain Fazli for Petitioner.
Javed Ahmed Farooqui for Respondents Nos.3 and 4.
Dates of hearing: 7th and 18th May, 2004.
JUDGMENT
SARMAD JALAL OSMANY, J.---The issue which arises for consideration and decision in this matter is the interpretation placed by the Collectorate of Sales Tax and Central Excise, Karachi, on section 4(2) of the Central Excise Act, 1944 read with Central Excise General Order No. XIV. of 1969 and the demand of the central excise duty payable thereon upon the goods manufactured by the petitioner viz. Beverages.
2. According to the petitioner in terms of the aforesaid section, the duty payable is on the retail price fixed by the petitioner inclusive of all charges and taxes (other than sales tax levied and collected under section 3 of the Sales Tax Act). However, according to the Department, the duty payable is on the retail price inclusive of all charges and taxes which includes central excise duty as per Central Excise General Order No.XIV of 1969.
3. Mr. Ali Sibtain Fazli has firstly submitted that in section 42 of the Act three distinct words namely, `duties', `charges' and `taxes' have been used and each of these words has a different connotation. He referred to Article 260 of the Constitution to contend that the term `taxation' has been defined therein to include the imposition of any tax or duty, whether general, local or special, and it further states that "tax" shall be construed accordingly. His precise submission was that "tax" and "duty" are two separate and distinct words each having its own meaning and "tax" does not include "duty". It was contended that in the facts and circumstances of the case, the department was trying to define the word "tax" inclusive of "duty" by incorrectly construing the provisions of section 4(2) of the Act. Elaborating his submission about the amount fixed by the manufacturer as retail price on which the excise duty is to be charged he argued that the cost of the product including the profit margin and charges of all sorts which also includes taxes and duties etc. put together, is to be declared as retail price and on that retail price excise duty is to be charged. In support of his submission learned counsel has relied upon Messrs Lucky Cement v. C.B.R. 2003 PTD 1002 and the decision of the Hon'ble Supreme Court of Pakistan in C.Ps. Nos.1527-L to 1530-L and 1576-L to 1579-L of 2000.
4. On the other hand, Mr. Javed Farooqui has submitted that the word "tax" appearing in section 4(2) of the Act includes duty. For this submission learned counsel has relied upon Hirjina and Co. v. Islamic Republic of Pakistan (1993 SCMR 1342), Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs (PLD 1984 SC 86) and Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs (PLD 1979 Kar. 545). Consequently, per learned Counsel, the Department has correctly computed the excise duty to be levied on the retail price which should include all other taxes/charges and excise duty itself.
5. We have heard both the learned counsel and our conclusions are as follows.
6. It would be seen that section 4 of the Act, provides the mechanism for determining the value of any product upon which Central Excise Duty is levied. Per section 4(1) such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders [or, if there is no general body of retail traders, the general body of consumers] on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable. Per 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 sales 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 prices.
7. The import of section 4(1) and (2) were considered by the Hon'ble Supreme Court in the case of Atlas Batteries (supra) and it was observed that "The concept of retail price as the basis for determination of the excise duty as against the original basis of "value" as incorporated in section 4 of the Central Excise and Salt Act, 1944 was introduced under a scheme, by means of the insertion of a new provision to subsection (2) in the original section 4 of the said Act, by the Finance Ordinance, 1969, which also substituted the Schedule making consequential changes, whereby the scheme was applied to goods of every day use having a direct bearing on the cost of living, such as tea, cigarettes, vegetable products, beverages, petroleum, lubricating oils, paints, soaps, fabricated yarn, batteries and bulbs etc. The object under-lying the scheme was no doubt to stabilize prices and to do away with unwarranted price hike and to simplify the matter of the payment of excise duty so as to obviate the cumbersome procedure for the determination of the value for the purpose of duty. The two concepts are apparently distinct and operate entirely on different basis: "Where such duty is levied at ad valorem basis, the basis of assessment would be value as defined in subsection (1) of section 4, where such duty is levied on retail price, the basis of assessment would be the retail price as defined in subsection (2) of section 4". The plain reading of the subsection shows that the retail price of the Article chargeable with duty at a rate dependent on the retail price of the same is to be fixed by the manufacturer himself if he wishes to take advantage of the same. But if he does so the equally plain requirement of law for him is to include all charges and taxes while fixing such retail price and further such retail price should be the one at which the Article is intended by the Manufacturer to be sold to the general body of consumers". Hence the Hon'ble Supreme Court came to conclusion that the following elements constitute the retail price per section 4(2) of the Act.
(a) it shall be the price fixed by the Manufacturer;
(b) it shall be inclusive of all charges and taxes;
(c) it shall be price at which the particular brand or variety of such article should be sold to the general body of the consumers; and
(d) if more than one price is fixed for the same brand or variety it shall be the higher of such price.
8. In view of the aforegoing observations of the Hon'ble Supreme Court, we are of the opinion that under section 4(2) of the Act excise duty is to be levied on the price fixed by the Manufacturer and such price should include all charges and taxes (excluding sales tax). Any other interpretation i.e. as proposed by the learned counsel for the respondents would amount to double taxation as the object of the Act is only to recover excise duty once on the value of the goods/services concerned. This conclusion is further fortified by the fact that nowhere in section 4(2) is the word "duty" used to include an ingredient of retail price, whereas the word "duty" has been defined under section 2(17) of the Act to include additional duty, regulatory duty and any other sum payable under any of the provisions of this Act or the rules made thereunder. Reference in this regard can also be made to the case of Lucky Cement (supra) wherein a learned Division Bench of the Peshawar High Court while construing section 4(2) of the Act came to the conclusion that excise duty itself can never form an ingredient of the retail price since no excise duty can be levied or collected on excise duty.
9. As to the cases cited by the learned counsel for Respondent Nos.2 and 3, it would be seen that the case of Atlas Battery (supra) as already adverted to above goes in favour of the petitioner whereas the, case of Hirjina and Co. (supra) is not relevant to the facts of this matter as there the controversy was with regard to section 4(3) of the Act which concerns excisable services.
10. For all the foregoing reasons, we would, therefore, allow this petition and declare that the retail price to be determined under section 4(2) of the Central Excise Act, 1944 would be as fixed by the Assessee which would include all charges/taxes (less sales tax) and upon such retail price the central excise duty is to be determined. Order accordingly.
M.B.A./P-37/K??????????????????????????????????????????????????????????????????????????????????? Order accordingly.