MEHRAN METAL CONTAINERS (PVT.) LTD. KARACHI, through Director VS COLLECTOR OF SALES TAX AND CENTRAL EXCISE (EAST) GOVERNMENT OF PAKISTAN, KARACHI and 2 others, 2006 PTD-KARACHI-HIGH-COURT-SINDH 2194 (2003)

Central Excises Act (I of 1944)---

----S. 4(1)(3)---Central Excise Rules, 1944, R.10(2)(3)---Manufacturing of drums by contractor (assessee) for its owner on supply of steel sheets and payment of manufacturing charges---Agreement between contractor and owner provided for reimbursement by owner to contractor excise duty and all taxes paid on manufactured drums after producing documentary evidence thereof---Show-cause notice after three years demanding duty from contractor, issuance of---Validity---Intention to obtain any gain or advantage on account of any misstatement, misdeclaration, under valuation, under assessment or suppression of any tax was totally missing---Such case could be termed as a case of misdeclaration or short levy of tax attracting R.10(2) of Central Excise Rules, 1944---Loss of revenue, if any, could be retrieved within a period of three years---Case of fraud was neither made out nor established against contractor---Show-cause notice was barred by time and all proceedings in pursuance thereof were void and inoperative.

Aziz A. Shaikh for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 22nd January, 2003.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---This appeal under section 36-C of the Central Excise Act, 1944 is directed against the order dated 12-2-2002, passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench (hereinafter referred to as the "Tribunal"), in Appeal No. K-457 of 2000.

The appeal has been admitted to regular hearing, to consider the following question of law, proposed by the appellant:---

"1. Whether learned CESAT, Karachi Bench has misapplied provision of section 4(1) of CE Act, 1944 versus 4(3,) ibid in the circumstances of this case?

2. Whether the allegation of fraud and connivance was baseless and only made to stretch the time period stipulated under rule 10(3) of C. E. Rules, 1944 as against rule 10(2) ibid?"

The relevant facts giving rise to this appeal are that, appellant is .a private limited company, engaged in the manufacture and supply of metal containers. The appellant in pursuance of the contract dated 23-12-1993, with National Refinery Limited manufactured drums of steel sheet. The drums manufactured by the appellant were cleared on payment of sales tax from the year 1997 up to the year 2000.

On 7-8-2000, the appellant received a show-cause notice issued by respondent No.3, which reads as follows:

"Whereas it has been reported by the Deputy Superintendent, Directorate General of Inspection and Internal Audit (Customs, Central Excise and Sales Tax) Customs House, Karachi that an information was received by this Directorate General that Messrs Mehran Metal Containers (Pvt.) Ltd., Karachi were clearing the drums manufactured by them for Messrs National Refinery Limited on lower values for the purpose of payment of central excise duty. The audit team of this Directorate General initiated the audit of central excise record of Messrs Mehran Metal Containers Ltd. for the year 1995-96 and found that they had manufactured asphalt drums from steel sheets imported by Messrs National Refinery Limited, Karachi under a contract. Scrutiny of the record transpired that the cost of 39,81,144 Kgs. and 39,86,275 Kgs. of steel sheet imported by Messrs National Refinery Limited, vide bill of Entry No.4864 dated 23-2-1995 and bill of Entry No. 6835 dated 28-12-1995 and consumed by Messrs Mehran Metal Containers Ltd. was Rs.15,46,83,442 and Rs.17,62,36,141 respectively (as assessed in the above mentioned bills of entry). The cost of 10,2041 Kg. steel sheet used in the manufacturing of a drum thus was worked out to be Rs.396,470 and Rs.451.130 respectively. This cost was without the overhead expenses, fabrication and transportation charges, etc. The assessable value for the purpose of payment of central excise duty and sales tax as declared by Messrs Mehran Metal Containers was Rs.276.145, Rs.262.00, Rs.317.43 in the period from February 1995 to December, 1995 which are even less than the cost of imported steel sheet used in the manufacturing of a drum.

2. During the course of audit, it was observed that while computing the assessable value of drums, the manufacturer suppressed the import value of steel sheet and did not include the amount of sales tax and income tax paid at import stage. He also did not include the manufacturing and transportation charges of the drums, as required under section 4(1) of Central Excise Act, 1944. This has been done in violation of the provisions of section 4(1) of the Central Excise Act, 1944 which resulted in huge loss of revenue to the national exchequer.

3. Messrs Mehran Metal Containers Ltd., Karachi were, therefore, asked to furnish the records relating to import of raw material and the method of ascertaining the assessable value of manufactured drums for the purpose of payment of central excise duty, to enable the audit team to determine the correct amount of central excise duty payable by them. Messrs Mehran Metal Containers Ltd. stated that they were manufacturing asphalt drums for Messrs National Refinery Limited, Karachi under a contract. As per the contract Messrs N.R.L., Karachi imported steel sheets and supplied the same for manufacturing of drums. The assessable value for the purpose of payment of central excise duty was also given by Messrs N.L.R., Karachi to them. According to them, they have no role to play in the working of the price of drums. They, however, furnished the records relating to steel drums cleared during February 1994 to June 1997 duly signed by both the parties, but failed to furnish the record relating to cost of the raw material and details of overhead charges for manufacturing of drums.

4. In order to ascertain the point of view of Messrs N.R.L., Karachi, they were requested to furnish the record relating to import of steel sheets and offer their comments on under-valuation of a drum for the purpose of payment of central excise duty. They furnished the record relating to the year 1995 and working of cost of steel drums. However, they did not offer their comments on the aspect of under-valuation of drums for the purpose of payment of central excise duty.

5. On perusal of the document supplied by Messrs National Refinery Limited, Karachi it was observed that while computing the assessable value of steel drums they did not took the value of steel sheets as declared in the bill of entry. They also did not include the amount of sales tax, income tax and overhead charges in it, which resulted in the less assessable value for the purpose of payment of central excise duty on steel drums.

6. In the absence of complete records showing cost of raw material and overhead charges on manufacturing of drums, the audit team had no alternate except to rely on whatever records were available. Therefore, the value of drums declared by Messrs Mehran Metal Containers Ltd. was examined in the light of bills of Entry No.4864 dated 23-2-1995 and No.6835 dated 28-12-1995, cost declaration sheet of raw 'material imported through the vessel M.V. Rejaka Multan dated 9-7-1995 (as the bill of entry relating to this consignment was not provided by Messrs National Refinery Limited and RT-1 returns filed by Messrs Mehran Metal Containers Ltd. with Collectorate of Central excise, Karachi. A cost sheet was prepared in the light of above facts and taking into account all the expenses accrued on the import of steel sheet. The minimum assessable value was accordingly determined, a summary of which is as under:

As per the above mentioned working the cost of a drum was worked out to be Rs.470.813, Rs.481.409 and Rs.501.470 in the period from February 1995 to December 1995 instead of Rs.276.145, Rs.262.00, Rs.327.89 and Rs.367.43, as declared by Messrs Mehran Metal Containers Ltd. This cost includes import value, sales tax, income tax paid at import stage and other overhead expenses.

(8) Since neither the copy of bill of entry relating to steel sheet imported before February, 1995 nor cost sheet pertaining to the period from February, 1994 to January 1995 was supplied by Messrs Mehran Metal Containers Ltd.' or Messrs National Refinery Limited to the audit party to ascertain the correct value of the drums manufactured in the said period, therefore, the audit team took the value of February 1995 as worked out above to ascertain the extent of central excise duty evaded by Messrs Mehran Metal Containers Ltd. in the period from February 1994 to January 1995.

(9) A month-wise comprehensive statement was prepared showing the amount of central excise duty evaded by Messrs Mehran Metal Containers Ltd. by under-valuation (copies enclosed). Scrutiny of RT-01 returns in respect of drums manufactured during the period from February 1994 to June 1997 revealed that Messrs Mehran Metal Containers Ltd. cleared a total of 22,60,425 drums during the said period at value lower than the cost of steel sheets. The above mentioned statement also shows the details in respect of quantity of drums, assessable value declared, amount of duty paid, differential amount of central excise duty to paid from February, 1994 to June, 1997.

(10) Messrs Mehran Metal Containers Ltd. Korangi, Karachi have thus evaded central excise duty to the tune of Rs.3,56,21,743 fraudulently in connivance with Messrs NRL, Karachi. The said amount is recoverable from them along with additional duty at the rate of 2% per month under rules 7, and 10(3) of the Central Excise Rules, 1944. The amount of additional central excise duty shall be worked out at the time of payment of principal amount of central excise duty. They have also contravened the provisions of rules 7, 10(3), 1997 and 226(2) of the Central Excise Rules, 1944, punishable under rules 210, 226, and 241 of the aforesaid Rules.

(11) Messrs Mehran Metal Containers Ltd. Karachi are therefore called upon to show cause within 10 days of issuance of this notice as to why the above mentioned amount of Rs.3,56,21,743 should not be recovered from them along with additional tax under section 3-B of Central Excise Act, 1944, (to be calculated till the date of payment of principal amount) and why penal action should not be taken against them under Rules 210,226 and 241 of Central Excise Rules, 1944.

(12) Hearing in the case has been fixed on 18-8-2000 at 11 A. M. in the office of the undersigned at ST-18/a, Block VI, Gulshan-e-Iqbal, Karachi, when they or their authorized representative should appear before the undersigned to attend the hearing. If no reply to the show cause notice is received and no one appeared in the hearing on the stipulated date and time, it will be presumed that they have nothing to say in the defence and matter will be decided ex parte on its merits.

The appellant replied the show cause notice in the following terms: --

"The above show-cause notice has been placed in our hands by Messrs Mehran Metal Containers Ltd., Karachi with the instruction to file the reply to the show-cause notice and contest the case on their behalf.

In the show-cause notice it has been alleged that the respondents have fraudulently evaded the central excise duty amounting to Rs.5,56,21,745 in connivance with Messrs National Refinery Limited Karachi on the charges that the drums manufactured by the respondents for Messrs National Refinery Limited were cleared/supplied on payment of central excise duty at lower value during the period February, 1994 to June, 1997 as mentioned in para 6 of the show-cause notice and alleged for violation of the provisions of section 4(1) of Central Excise Act, 1944. It has also been alleged that the respondents have also contravened the provisions of Rules 7, 10(3), 1197 and 226(2) of Central Excise Rules,, 1944.

(1) That in the first instance we submit that the demand raised vide show-cause notice, dated the 7th August, 2000 is Time Barred under the provision of sub-rule (2) of Rule 10 of Central Excise Rules, 1944 as the period of demand mentioned in the show-cause notice pertains to ' February, 1994 to June, 1997. In para. 10 of show cause notice it has been alleged that Messrs Mehran Metal containers Ltd. Korangi, Karachi (i.e. respondents) have evaded central excise duty to the tune of Rs.5,56,21,745 fraudulently in connivance with Messrs National Refinery Limited, Karachi and that the said amount is recoverable under Rules 7 and 10(5) of Central Excise Rules, 1944. It may be stated here 'that these rules are not appropriate applicable in demanding central excise duty specially sub-

rule (3) of Rule 10 is quite irrelevant. This rule says that whereby reason of any false document, counterfeit seal of impression, fraud or any other heinous offence any duty or charge has not been levied or has been short levied etc., the person liable to pay any amount shall be served with a notice within ten years. The instant case does not come within the scope of the sub-rule (3) as mentioned in the notice because there was no any such false document, counterfeit seal of impression, fraud or any other heinous offence on the part of the respondents, therefore sub-rule (3) cannot be applied in question. There are different periods within which short levied amount can be demanded/recovered in the following categories:--

(1) Inadvertence/error?? within one year

(2) Mis-declaration / collusion?? within three years

(3) Forgery/Fraud???????? within ten years

The Allegations as mentioned in the show cause notice can be categorized in category of mis-declaration or short levied as provided in sub rule (2) of Rule 10 ibid. The purpose of Rule 10 appears to be to provide limitation for the levy and recovery of the Excise Duty. Under Rule 10 of the recovery beyond the period of limitation from the date of the notice is Barred by Time and could not be enforced (PTCL 1984 CL. 24).

(2) That the respondents were/are engaged in the manufacture of steel drums and removing the same on payment of due amount of central excise duty and sales tax and maintaining proper account.

(3) That the respondents' agreement with Messrs National Refinery Limited Korangi Industrial Area, Karachi for a period of 10 years commencing from 1st January, 1994 and ending on 31st December, 2000 for the manufacture of 750000 drums per year from cold rolled steel sheet of prime quality to be supplied by the owner i.e. Messrs National Refinery Limited Karachi for containing 35-56 imperial gallon Asphalt at 60/60 F. AS per contract the cost of imported steel sheet was to be duties paid on sheet cleared from Customs and also the Octroi and Zila tax or any other tax levied by the authorities was to be borne by Messrs National Refinery Limited while the sheet purchased by Messrs National Refinery Limited from Messrs Pakistan Steel Mills was to be taken delivery by the contractor Ex-PSM and all handling and transportation charges were to be borne by the, contractor i.e. by Messrs Mehran Metal Containers Ltd. Korangi Karachi. Accordingly Messrs National Refinery Limited were paying to the contractor the manufacturing/fabrication charges per drum for delivering the manufactured drums at the premises of Messrs National Refinery Limited.

(4) That the respondents manufactured the drums for packing of Asphalt strictly according to the terms and conditions of the contract executed in between and supplied the same to Messrs National Refinery Limited on payment of central excise duty do the assessable values evidently so determined and advised by the Refinery from time to time vide their letters, copies of which are enclosed. They charged from Refinery only fabrication charges as mentioned above. Enterprise, running under the protection of Ministry of Petroleum and National Resources, therefore under the provisions of Central Excise General Order No.4 of 1959, dated 7-4-1959 the actual sale price of the goods should be accepted for the purpose of central excise duty (copy of General Order No.4 of 1959 enclosed). Therefore, the charges of under-assessment or the assessment on lower values with the connivance of Messrs National Refinery Limited as framed through the show-cause notice are misconceived not based on facts and are not maintainable and are denied on the grounds that there was no mala fide intention to evade the taxes fraudulently as alleged.

(5) That with reference to the above submissions the significant point of argument is that the respondents have been show caused for violation of subsection (1) of section 4 of Central Excise Act, 1944 which means that the case of short payment of central excise duty has been initiated against the respondents but for the recovery of central excise duty short levied. The respondents have been charged under sub-rule (3) of rule 10 of Central Excise Rules, 1944. In this respect it is emphasized that the matter of short assessment of central excise duty is appropriately fall within the meaning of sub-rule (2) of rule 10 ibid.

(6) That the recovery of central excise duty amounting to . Rs.5,56,21,745 has been created in the show-cause notice on the basis of costing of imported raw material i.e. metal sheets in para 6, is not correct rather under the conception for the purpose of ascertaining the assessable values of the drums of the charges of short payment of central excise duty by clearing the drums at the' value lower than the cost of steel sheets (i.e. raw material) are not based on facts and not maintainable under section 4(1) of Central Excise Act, 1944 for the reasons that the determination of values for the purpose of assessment of central excise duty under the said Act can only be done after gathering correct materials or evidences upon which alone the calculation can be based whereas in the instant case correct material or evidence have not been made the basis for Inspection and Internal Audit instead reliance has been made on the bill of entries under which the steel sheets were imported. It is submitted here that this is not the document which bears the correct valuation of the imported sheets. In the bill of entry the value was mentioned on the basis of I.T.P. as required for the purpose of payment of Customs Duty and other taxes whereas the fact is that the documents under which the sheets were imported/purchased from foreign supplier/ seller were the commercial invoices supported by debit note, rank advice, bill of exchange. L.C., bill of lading etc. The Customs Department for the purpose of assessment of Customs Duty has taken into account the I.T.P. of 7 Dollars per M. Ton as against the actual purchase value Dollar per M. Ton which the purchaser of metal sheets i.e. Messrs National Refinery Limited evidently paid to their foreign supplier. As such the price structure assessable value of total drums given by Messrs National Refinery Limited (Principal) to their Vendor (Messrs Mehran Metal Containers Ltd.) from time to time was appropriately correct and was in accordance with the section 4(1) of Central Excise Act, 1944. In the summary of determination of assessable value provided in para 6 of show-cause notice the value of imported sheets including Sales Tax and Income Tax has been shown as Rs. 15,46,85,442 in respect of bill of entry No.4864, dated 25-2-1995 whereas in fact the metal sheets were purchased at a value of Rs.5,02,44,714 as is evident from the commercial invoices and other related documents. It will be pertinent to mention here that the payment of this consignment was made by the purchaser/importer (i.e. Messrs National Refinery Limited) much before the arrival of the consignment at Karachi port i.e. Payment was made as soon as the ship left the Port of Origin. Secondly, the sales tax and income tax shall not be made the basis of computing the assessable value for the reasons that the input of sales tax paid at source is claimed and adjusted under section 10 of Sales Tax Act, 1990 whereas the Income. Tax is the Advance Income Tax paid at source and thus the incidence of these two taxes cannot be formed the basis for determination of value under section 4(1) of Central Excise Act, 1944. Likewise, the charges agency commission and Financial Expenses were not made the basis of computing the assessable value as these expenses were not incurred particularly against this consignment. Accordingly, the chart prepared for the purpose of costing the actual assessable value under section 4(1) of Central Excise Act, 1944 along with the supporting documents in respect of all the three consignment imported vide Bill of Entries No. 4864, dated 23-2-1995. Raju Multan, dated 9-6-1995 and 6855, dated 5-12-1995 and thus the assessable values as Rs.517.89 per drum, Rs.567.45 per drum and Rs.456.45 per drum communicated to the Vendor is quite appropriate and under the spirit of section (1) ibid. That it is also relevant to submit here that during the period under show-cause notice the respondents purchased raw material (steel sheets) weighing 2520 M. Tons at the landed cost from the local market and out of which the respondents have supplied 2,00,000 steel drums to Messrs National Refinery Limited under contract at value of Rs.52,40,000 at the assessable value of Rs.626.00 per drum which is quite appropriate and within the purview of section 4(1) of Central Excise Act, 1944 read with Central Excise General Order No. 4 of 1959, dated 7-4-1959 but from the study of the chart (Annexure-A) showing the details of recoverable amount of duty it is evident that the detecting agency have also worked out the differential amount of duty without ascertaining the value of locally purchased steel sheets which is against the spirit of section 4(1) of Central Excise Act, 1944 and thus it is not maintainable under the Law.

That in view of the above fact it is submitted that the show-cause notice may be withdrawn and oblige."

The respondent No.3 heard the appellant but did not accept the contentions raised by the appellant. The respondent No.3 observed that the appellant has committed a fraud by deliberately undervaluing the drums for the purpose of levy of the central excise duty and consequently held that the period of limitation provided under Rule 10(3) of Central Excise Rules, 1944 was applicable, therefore, show-cause notice was issued within time. The respondent No.3 accepted one contention of the appellant only, to the effect, that assessable value of the drums manufactured by the appellant was to be calculated for the levy of central excise duty on actual import price instead of ITP. He therefore, directed for recalculation of the outstanding amount and to recover the same under rule 10(3) of Central Excise Rule, 1944 along with an additional duty chargeable under section 30 Central Excise Act, 1944. He also imposed penalty of two and half million under rule 210 of Central Excise Rules, 1944.

Being aggrieved with the above findings, the appellant preferred First Appeal before the learned Tribunal reiterating the contentions raised before respondent No.3.

The learned Tribunal heard the advocates for the parties, reproduced all the contentions raised by the appellant and dismissed the appeal. The appellant still dissatisfied has preferred this second appeal before us to consider the points of law, which have been reproduced in the earlier part of this judgment.

We have heard Mr. Aziz A. Shaikh, learned counsel for the appellant and Mr. Raja Muhammad Iqbal, learned counsel for the respondents.

The main contention of Mr. Aziz A. Shaikh, is that the show-cause notice issued by respondent No.3 is barred by time and consequently, the show-cause notice and subsequent proceedings in pursuance thereof are void, and inoperative.

Learned counsel for the appellant has contended that the appellant is merely a manufacturer of drums under the agreement, dated 23-12-1993, which was produced before the respondent No.3 and learned Tribunal. According to the terms of agreement, the cost of the sheet required for manufacturing of the drums was to be borne by the owner (Messrs National Refinery Limited) including all taxes and duties paid on such sheets to be cleared from the customs. In terms of the agreement, the appellant as a contractor was entitled to manufacturing charges of drums at the rate of Rs.8.50 per drums and transportation charges from the premises of contractor to the delivery point, at the premises of the owner, at the rate of Rs.2.50 per drum. It was further agreed between the appellant and the owner (Messrs National Refinery Limited) that supply of manufactured drums to the owner will be made after payment of central excise duty and sales .tax etc. on manufactured drums, which will be reimbursed by the owner to the contractor (appellant), on production of documentary evidence for payment of central excise duty and sales tax. Thus the payment of central excise duty was the liability of Messrs National Refinery Limited and the assessable value was calculated by the appellant on the basis of data provided by Messrs National Refinery Limited, which fact has not been denied by respondent No.3. Mr. Aziz A. Shaikh has vehemently argued that looking to the entire issue in the above prospective it is abundantly clear that appellant was not a beneficiary of any alleged fraud. Whatever excise duty was paid it was to be reimbursed by Messrs National Refinery Limited and, therefore, the appellant had no reason at all to commit any tax fraud for which he was not beneficiary at all and the benefit if any was to go to Messrs National Refinery Limited. He has submitted that in view of the above circumstances, the respondent No.3 as well as learned Tribunal have misdirected in not appreciating the facts and applying the correct provisions of law. He has submitted that if the respondent No.3 and learned Tribunal had considered the facts in the right perspective, they could not have arrived at the conclusion that the appellant has committed any fraud and the provision contained in Rule 10(3) of Central Excise Rules, 1944 was attracted. Mr. Aziz Shaikh has submitted that primarily, this can be assumed as a case of error and mis-construction thereby attracting the provision contained in Rule 10(1) of Central Excise Rule, 1944, which prescribes a period of one year only to raise demand of escaped duty, or at the most it can be held the case of mis-declaration or short levy attracting provisions contained in Rule 10(2) of Central Excise Rules, 1944 which prescribes a period of three years. Mr. Aziz A. Shaikh has vehemently assailed the findings of respondent No.3 and the learned Tribunal that it is a c? se of tax fraud, which attracts provision contained in Rule 10(3) of Central Excise Rules, 1944, providing limitation of 10 years. He has maintained that respondent No.3 and the learned Tribunal have seriously erred in not considering the facts in their right perspective and have thereby fallen in serious error. He has pointed out that respondent No.3 and learned Tribunal have placed reliance on the dictionary meanings of the expression "fraud". He has further pointed out that respondent No.3 has referred to the meaning of term "fraud" in Black's Law Dictionary as "any kind of artifice to deceive another is fraud". It is further contained in the order of respondent No.3 that according to Chambers Dictionary "Impersonation with intent to deceive, criminal deception done with the intention of gaining an advantage, a deceptive trick, a fraudulent item" amounts to fraud. The respondent No.3 has further held that word "fraud" in Legal Phrases is defined as, "using of false representation to obtain an unjust advantage or to injure the right or interest of another, a dishonest trick, an act or instance of deception".

Mr. Aziz A. Shaikh, learned counsel has submitted that even according to definition on which the respondent No.3 has placed reliance, an intention of gaining an advantage or to obtain an unjust advantage is one of ingredients for constituting fraud. He has submitted that in present case the payment of central excise duty was the liability of Messrs National Refinery Limited which fact has not been denied by respondent No.3 but has been conveniently ignored and the learned Tribunal has failed to notice this very important factual aspect. According to Mr. Aziz A. Shaikh, admittedly the appellant was not the beneficiary of any under-valuation or mis?declaration and consequently, the necessary ingredient constituting fraud was lacking, with the result that the provision contained in Rule 10(3) of Central Excise Rules, 1944, was not attracted. According to Mr. Aziz A. Shaikh the result is that the show-cause notice is barred by limitation and thus all proceedings in pursuance thereof are void and inoperative.

On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the respondents has fully supported the impugned orders passed by respondent No.3 and learned Tribunal.

We have very carefully considered the contentions raised by learned advocates for the parties and the material placed on record.

We find force in the contention of Mr. Aziz A. Shaikh that in the present case, the appellant was not beneficiary of any under-valuation or mis-declaration and thus, the case of fraud on the part of appellant is not made out. Under the terms of agreement between the appellant and Messrs National Refinery Limited, the payment of excise duty was the liability of Messrs National Refinery Limited. The drums manufactured by the appellant were cleared after payment of central excise duty by the appellant and on production of documentary evidence, entire amount paid by the appellant on account of central excise duty was to be reimbursed by Messrs National Refinery Limited. Thus no case of fraud is made out on the part of appellant in terms of the findings by respondent No.3 and learned Tribunal because the intention to obtain any gain or advantage on account of any mis-statement, mis-declaration, under-valuation, under assessment or suppression of any tax is totally missing. The result is that it can be termed as a case of mis-declaration or short levy of tax, attracting Rule 10(2) of Central Excise Rules, 1944.

Under these circumstances, the loss of revenue, if any, could be retrieved within a period of three years and not beyond the said period. It is therefore, held that the allegation of fraud on the part of appellant has not been established and consequently the provision contained in Rule 10(3) of Central Excise Rules, 1944 is not attracted. In the facts and circumstances of the case, the provision contained, in Rule 10(2) of Central Excise Rules, 1944 is applicable. The show-cause notice has admittedly been issued beyond the period of three years, prescribed in Rule 10(2)of Central Excise Rules, 1944, with the result that show-cause notice is held to be barred by time and all the proceedings in pursuance thereof are held to be void and inoperative.

The question No.2 is replied in the above terms.

Since the appeal is being decided on the basis of decision on question No.2, therefore, the question No. 1 is not answered.

The Appeal is allowed as above. Copy of this judgment shall be sent under the seal of the Court and signature of Registrar to the Customs, Excise and Sales Tax Appellate Tribunal Karachi Bench, which shall pass such orders in conformity with this judgment to dispose of Appeal before it.

S. A . K. /M-74/K?????????????????????????????????????????????????????????????????????????????? Order accordingly.