Messrs FAUJI SUGAR MILLS VS SUPERINTENDENT, CENTRAL EXCISE, SHEIKHUPURA, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 2175 (2005)

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

---Ss. 3-B & 12-A---S.R.O. 455(I)/96, dated 13-6-1996---S.R.O. 456(I)/96, dated 13-6-1996---Unexported quantity of sugar---Demand of excise duty under S.R.O. 455(I)/96 prescribing compulsory export of sugar and higher rate of duty on unexported quantity of sugar---Payment of duty by manufacturer under S.R.O. 456(I)/96 prescribing lower rate of duty without such compulsory condition---Tribunal upheld order-in original---Validity---Provisions of both S.R.Os. were contradictory and could not be reconciled---Manufacturer was justified in seeking application and protection of S.R.O. 456(I)/96 issued later in time on same day as evident from its number---Where two equally reasonable interpretations of a provision were possible, then the one favourable to tax-payer would be adopted---Tribunal in an identical appeal found for tax-payer by observing that tax-payer having elected to follow later S.R.O. 456(I)/96 and paid duty nothing was due to Department---High Court accepted appeal set aside impugned order of Tribunal as well as order-in-original.

(b) Interpretation of statutes---

----Fiscal statutes---When two equally reasonable interpretations of a provision are possible, then the one favourable to tax-payer needs to be adopted.

M. M. Akram for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 10th March, 2005.

JUDGMENT

NASIM SIKANDAR, J.---This further appeal under section 36-C of the Central Excise Act, 1944 seeks to assail, an order of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore, dated 20-12-2001. Through that order the learned Members of the Tribunal maintained Order-in-Original No.28 of 2000, dated 31-5-2000 passed by the Addl. Collector (Adjudication), Lahore wherein it was found that the present appellant had short paid a sum of, Rs.38,20,019 on account of Central Excise Duty payable on manufacture of sugar.

2. On examination of central excise records of the appellant, a public company limited by shares and engaged in manufacture of sugar, the officials of the department found that the factory had manufactured 41,297.500 M. Tons sugar during the year, 1998-99 and that having failed to export 5% of their production. They were liable to pay central excise duty at the rate of Rs.1.85 per Kg. on unexported quantity as required vide Notification S.R.O. 455(I)/96, dated 13-6-1996. The case was adjudicated upon by the said authority which found the appellant liable to pay the aforesaid amount of Rs.38,20,019 along with additional duty in terms of section 3-B of Central Excise Act, 1944 besides penalty of Rs.5,000.

3. Before the learned Tribunal it was contended that two Notifications, S.R.O. 455(I)/96, dated 13-6-1996 and S.R.O. 456(I)/96, dated 13-6-1996, relating to levy of central excise duty on production of sugar provided different rates of duty during the relevant period. Further,' while the former notification provided for compulsory export of sugar and a higher rate of duty in case of the failure of the manufacturer to export it, the latter prescribed lower rate of duty with no such condition. The appellant claimed that they opted to follow the latter S.R.O. 456(I)/96, dated 13-6-1996 and paid duty according to the rate prescribed therein without exporting any quantity of sugar. Accordingly, it was alleged that since they did not opt to be governed by the earlier S.R.O. 455(I)/96 the condition of export or payment of higher rate of duty on the exported quantity was not applicable in their case.

4. Learned Tribunal, however, disagreed with the following observations:--

"(5) We have heard both sides and carefully considered the contentions raised by the appellants. The emergent legal position in our considered view is that both the Notifications, S.R.O. 455(I)/96 and S.R.O. 456(I)/96 though. issued on the same date; i.e. 13-6-1996 are two separate exemption notifications issued under section 12-A of the Central Excise Act, 1944, but not independent of each other, S.R.O. 455(I)/96, grants exemption to various commodities listed in Column 1 of the table appended therewith beyond the rate of duty specified in Column 4 subject to conditions prescribed in Column 3. According to this notification, if a manufacturer of sugar does not export 5% of the total sugar produced in the financial year, the remaining balance of the unexported quantity of . that 5% is chargeable to duty @ Rs.1.85 per Kg. S.R.O. 456(I)/96 on the other hand grants exemption to various items listed in Column 2 of the table appended therewith beyond the rate of duty indicated in Column 3 without any condition but according to clause (ii) of the preamble of this notification, goods specified by S.R.O. 455(I)/96 are excluded from its purview. It is thus clear from the foregoing discussion that the general rate of duty on sugar prescribed under S.R.O. 456(I)/96 is not applicable on the unexported quantity of sugar, which was 5% of the total production of 1998-99 and that the appellants are liable to pay the duty chargeable on the unexported quantity of sugar in terms of S.R.O. 455(I)/96, dated 13-6-1996 "

This has brought the petitioner in appeal before us.

5. After hearing the learned counsel for the parties we will agree with the learned counsel for the appellant that the latter Notification S.R.O. 456(I)/96 was beneficial to the tax-payer as manufacturer and since apparently the provisions of two S.R.Os., detailed above, were contradictory which could not he reconciled, the appellant was justified in seeking application and protection of the latter S.R.O. The view adopted by the Tribunal, as reproduced above, the general rate of duty on the sugar prescribed under latter S.R.O. was not applicable on the unexported quantity of sugar which was 5% of the total production in the year 1998-99 does not appear correct in the case of the appellant as tax-payer. All the moreso when the appellant sought application and protection of the S.R.O. which though issued on the same day was obviously issued latter in time, which is evident from its number. It is also an established principle of interpretation of fiscal statutes that when two equally reasonable interpretations of a provision are possible then the one favourable to the tax-payer needs to be adopted. The attempt on the part of the learned Members of the Tribunal to reconcile the two S..R.Os. only to find against the tax-payer was therefore unjustified. We are also informed that in a subsequent judgment, dated 30-1-2001 the Tribunal in an identical situation in two appeals filed by Messrs Humza Sugar Mills and Layyah Sugar Mills found for the tax-payer observing that the appellants having elected to follow S.R.O. 456(I)/96, dated 13-6-1996 and without exporting any quantity of sugar paid the central excise duty accordingly nothing was due to the Department from either of them.

6. That being so, this appeal is allowed and the impugned order of the Tribunal as well as Order-in-Original which was maintained thereby are set aside.

S.A.K./F-95/LAppeal Accepted.