FAR EASTERN IMPEX (PVT.) LTD., KARACHI VS FEDERATION OF PAKISTAN, 2005 PTD-KARACHI-HIGH-COURT-SINDH 955 (2005)

2005 P T D 955

[Karachi High Court]

Before Zahid Kurban Alavi and Muhammad Mujeebullah Siddiqui, JJ

FAR EASTERN IMPEX (PVT.) LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance & Economic Affairs (Revenue Division) Central Board of Revenue,
Islamabad and 4 others

Constitutional Petition No.D-22 of 2000, decided 28th December, 2001.

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

----S.4 & First Sched., Item 04.03---Food colours---Taxability---All items mentioned in Item 04.03 of First Schedule of Central Excises Act, 1944 were for use in painting of buildings etc., and were never to be used for any edible purpose---Food colours were not mentioned in list of such items---Any ambiguous provision had to be resolved in favour of assessee and against taxing authority---Food colours held were not to fall within category of Item 04.03 of Schedule I.

Collector of Central Excise v. Azizuddin PLD 1970 SC 439; Data Steel Mills v. Government of Balochistan 1983 CLC 571; Sethisthan Board v. Collector of Excise PLD 1988 Lahore 282 and the case of Searle Pakistan v. Government of Pakistan PLD 1993 Kar. 799 ref.

Muhammad Aamir v. Controller of Duties PLD 1981 SC 119 and Commissioner of Sales Tax U.P. v. S.N. Brothers Kanpur PTCL 1989 FC 201 rel.

(b) Interpretation of statutes---

----Fiscal statute---Ambiguity in law---Ambiguous provision would be resolved in favour of assessee and against taxing authority.

Muhammad Aamir v. Controller of Duties PLD 1981 SC 119 rel.

Syed Mamnoon Hasan for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 23rd November, 2001.

JUDGMENT

ZAHID KURBAN ALAVI, J.---Briefly the facts of the case are that the petitioner is a private limited company, having its registered office in Karachi. Messrs Far Eastern Impex (hereinafter referred to FEI ) at all relevant times was a partnership firm, having itsoffice at Karachi and wasengaged since 1985 in the business of packing, re-packing and selling completely manufactured synthetic organic Dye Stuff commonly known as Food Colours. Food colours are edible and areused for food preparation. FEI has been acquired and taken over a going concern together with all itsassets and liabilities by the petitioner on its incorporation under its Memorandum of Association.

2.Almost all the manufacturers of Food Colours have been allowed clearance without payment of Excise Duty since 1974, whilst since1985 FEI has been clearingFood Colours by filing Form A.R.1., which is required, inter alia, by Rule 238 of the Central Excise Rules, 1944. This Form A.R.1. records clearance document for removal upon payment of excise duty, if applicable, and payment of sales tax, if applicable. The form is duly stamped by Superintendent Central Excise and Land Customs,

The impugned goods are colours and have been correctly held to fall under item 04.03 of the first Schedule to the Central Excise and Salt Act, 1944. As such, the impugned goods are excisable and the demand of duty raised by the department is correct. The Federal Government after taking into consideration all the aspects of the case, finds that the impugned order is correct in law and in fact and needs no interference .

3.The respondent No.2 had suggested that FEI may, however, approach the competent authority for the exemption of past liability in terms of section 12-B of the Central Excise and Salt Act, 1944. The FEI vide its letter, dated 16-11-1992 applied/requested to the respondent No.1 for issuance of notification for exemption for excise duty on Food colours under section 12-B of Central Excise and Salt Act, 1944 and also for stay of recovery of excise duty. The respondent No.1 on FEI s above letter/request, dated 16-11-1992 for issuance of Notification for Exemption under section 12-B, was pleased to grant stay till the issue is decided by it. Despite FEI s various reminders, the respondent No.1 had not conveyed its decision. The respondent No.5 vide his letter/notice, dated 15-12-1999informedthattherespondentNo. 1haswithdrawnstayordervideletterNo. 6(60)CEJ/99, dated 3-12-1999observingthat the case of FEI does not fall underthe provision of section 12-B of the Central Excise Act, 1944. The petitioner was directed to pay the CentralExciseDutyamountingtoRs. 12,65,173.39within 15daysfrom the receipt of notice, dated 15-12-1999. They threatened to initiate action under the provisions of section 11 of the Central Excise Act, 1944.

4.The counsel for the petitioner in his arguments has urged that the food colours are not subject to excise duty as the food colours are edible and are used for food preparation. The word colours under in item 4-03 of the first schedule of the Central Excise and Salt Act, 1944 does not include food colours. Foodcolours do not belong to the family of paints and varnishes. Items 04.03 states that all sorts of paints (including products known as or used as cement paint, pigments, distempers, colours, dyes, enamels, varnishes, glazes, luster s, thinners, Blacks, cellulose lacquers and polishes except creams and polishes falling under items No.04.01 and their ancillaries, in any form, liquid, solid, semisolid, paste, powder or granules.

5.From the above classification of item 04.03, it should be evident that food colours are not covered under item 04.03, as such, excise duty is not payable on Food Colours at all. Further, since there wascontinuous and uninterrupted prevalent practice since 1974, and no excise duty was charged on Food Colours, the respondents are now precluded to demand excise duty.

6.The main thrust of the argument of the counsel for the petitioner has been to emphasis that a plain reading of Item 04.03 of section 4 First Schedule of the Central Excise and Salt Act, 1944, shows very clearly that the details given therein relate to all types of items that are used for the purposes of colours and paints. The items mentioned therein are directly or indirectly used for painting of houses, bungalows, buildings, furnitures, fixtures, etc. but they would never be used for any purpose edible. It could be argued that food colours are not mentioned in the list of items and, therefore, they would have to be brought within the ambit of Item 04.03. An answer, accordingto the counsel for the petitioners, is that where there is an ambiguity in law then it is a settled and established rule that the ambiguous provision is to be resolved in favour of the assessee and against the Taxing Authority. It has been consistently observed by the superior Courts and the High Courts on the basis of the dicta laid down in the case of Muhammad Aamir v. Controller of Duties (PLD 1981 SC 119). In fact the counsel has gone further to point out that in the case of Commissioner of SalesTax, U.P. v. S.N. Brothers, Kanpur, the

Expression dyes and colours andcompositions thereof , and scents and perfumes do not take within their fold food colours and syrup essences . The words dyes and colours used in entry No.10 and the words scents and perfumes used in entry No.37 have to be construed in their own context and in the sense, as ordinarily understood and attributed to these words by people usually conversant with and dealing in such goods. Similarly the words food colours and syrup essences which are descriptive of the class of goods the sales of which are to be taxed under the Act have to be construed in the sense in which they are popularly understood by those who deal in them and who purchase and used them.

Foods colours and syrup essences are ediblegoodswhereas dyes and colours and compositions thereof and scents and perfumes asspecifiedinentriesNos. 10and37oftheListdo not seem to connote that they are edible goods. These entries are not intended to extend to edible colours like foods and to edible essences like syrup essences. It would indeed be straining the meanings of the words and expressions in those entries as understood in popular commercial sense to include edible colours and essences. If the intention of the StateGovernment was to include food colours in entry No.10 and syrupessencesinentryNo. 37thenthesegoodscouldeasily have beenspecified by their own popularly known description.

7.From the aboveitisveryclearthatthegoodssoimportedare food colours which would not fall within the category of ItemNo.04.03. Under these circumstances and on the facts stated above by our short order, dated 23-11-2001 this petition was allowed. The order passed by the respondents is set aside and the amounts so recovered are to be refunded back to the petitioner.

8.We have also gone through the case law reported in the cases of Collector of Central Excise v. Azizuddin (PLD 1970 SC 439), Data Steel Mills v. Government of Balochistan (1983) CLC 571), Sethisthan Board v. Collector of Excise (PLD 1988 Lahore 282) and the case of Searle Pakistan v. Government of Pakistan (PLD 1993 Karachi 799). In these reported cases the Courts had observed that refund can be ordered if a Petition was allowed even where no refund was claimed. In this case refund has been claimed in one of the prayers.

The petition stands disposed of.

S.A.K./F-18/KOrder accordingly.