COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE VS COCA COLA EXPORT CORPORATION, LAHORE
2006 P T D 319
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE
Versus
COCA COLA EXPORT CORPORATION, LAHORE
Customs Appeal No.153 of 2001, heard on 24/10/2005.
Central Excise Act (I of 1944)---
----S.4(1)---Central Excise Rules, 1944, Rr.7 & 9---Central Excise General Order No.53 of 1967, para. 3---Determination of value for purposes of duty---Supply of beverage concentrate by manufacturer to franchised bottlers in same vicinity---Addition of incidental charges while determining value of concentrate---Scope---General body of retail traders was situated only next door---Due to proximity of location of both manufacturer and franchised bottlers, no octroi post was involved, thus, no duty or toll tax would be payable by franchise holder---Only handling and transportation charges could be added to value of concentrate as sundry charges for purpose of fixation of excise duty.
PLD 1995 SC 659; Pakistan through Secretary Finance and another v. Kohat Cement Company and others PLD 1995 SC 659; Atlas Battery Limited Karachi v. Superintendent Central Excise and Land Customs Circle `C' Karachi PLD 1984 SC 86 and Central Board of Revenue, Government of Pakistan v. Messrs Maple Leaf Cement Factory Ltd. 2002 PTD 1989 ref.
Aftab Hassan for Appellant.
Imtiaz Rashid Siddiqui for Respondent.
Date of hearing: 24th October, 2005.
JUDGMENT
NASIM SIKANDAR, J.---In this further appeal under section 36-C (Appeal to High Court) of the Central Excise and Salt Act, 1944 the Revenue through Collector of Sales Tax and Central Excise, Lahore claims that following questions of law arise out of the impugned order of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore dated 31-1-2001:---
"(1) Whether the learned Tribunal was right in disallowing the addition of incidental charges in determining the value for purposes of duty?
(2) Whether the learned Tribunal was right and had any justification to depart from the law prescribed in section 4(1) of Central Excise and Sale. Act, 1944 and disallowed the inclusion of incidental charges in the calculation of value for purposes of levy of excise duty?
(3) Whether the learned Tribunal was right in denying the inclusion of charge in determination of value for purposes of levy of excise duty when the language of section 4(1) of Central Excise Act is very clear and the word "whatsoever" has been used which means charges of all types, transportation, packing, repacking handling loading, unloading and advertising etc.?
(4) Whether the learned Tribunal had any ground and justification to ignore the, law laid down in the PLD 1995 SC 659?
(5) Whether the learned Tribunal was right in not following the principle of notional expenses or average expenses as worked out by the Department and accepting the version of the respondent that they are selling at the factory gate, which is concept foreign to section 4(1) of Central Excise Duty by twisting and misusing the law applicable?"
2. This appeal was admitted for regular hearing on 16-4-2001 to examine if the following operative part of the impugned order of the Tribunal as contained in para. 5 was violative of the ratio settled by the Hon'ble Supreme Court of Pakistan in re: Pakistan through Secretary Finance and another v. Kohat Cement Company and others PLD 1995 SC 658:---
"5. We have heard both the parties represented by their legal experts. It is almost an admitted position that the appellant is the sole manufacturer-cum-supplier of Coca Cola concentrates in the country, having their business premises at Gulberg, Lahore, and they market this product at their factory gate, from where their franchised customers take supplies and they themselves take them to their factories situated in different parts of the country. For the transport of the concentrates to their business premises, they themselves make arrangement and themselves pay sundry expenses such as handling octroi, tolls etc. when the appellants do not pay such charges, why they should include them in the assessable value of their goods for the purpose of central excise duty. During the hearing we have asked the official representing the department as to why he had chosen Peshawar as the destination for calculating the average expenses of sundry charges at the rate of Rs.50 per consignment of concentrate taken or dispatched from Lahore and his answer was that they had taken the average of the fartherest and the nearest destination of the consignments and had worked out their average expenses. In our opinion, the entire exercise undertaken by the Detecting Staff was misconceived. There was no violation or contravention of the provisions of section 4(1) of the Central Excise Act, 1944, and the demand raised by the respondents was without lawful authority."
3. The facts in appeal are not disputed between the parties. The officials of the Intelligence Wing of the Department visited the premises of the respondent, Messrs Coca Cola Corporation, Gulberg, Lahore, and on scrutiny of their record found that the company had supplied beverage concentrates to the franchised bottlers at their factory gate at a uniform rate. It was also noted that the assessable value of the concentrate on which the duty was being paid did not include transportation, octori and handling charges etc. which in view of the departmental officials resulted in short payment of Central Excise duty amounting to Rs.77,03,300 for the period May, 1995 to May, 1998. Accordingly the respondent was charged to have contravened the provisions of section 4(1) (Determination of value for the purposes of duty) of the Central Excise Act, 1944 read with Rules 7 (Recovery of Duty) and 9 (Time and Manner of Payment of Duty) of the Central Excise Rules, 1944. In reply the present respondent took up the defence that their franchised bottlers received delivery of the concentrate at the factory gate. Therefore, neither the appellant as manufacturer nor the franchise holder bottlers any sum of money as octroi. As a matter of fact, it was claim paid that only one transaction was made during this period and the delivery was received by the franchised bottler whose bottling plant was situated in the same locality i.e. Gulberg, Lahore. The inclusion of any transportation, octroi or other charges in the assessable value of the concentrate for the purposes of calculation of excise duty was therefore, opposed. The Revenue, however, did not agree and by way of an order-in-original dated 21-10-1999 found the respondent liable to pay excise duty to the tune of the amount confronted by way of a show-cause notice. The order-in-original was maintained by the Collector (Appeals) on 11-11-1999. By way of the impugned order, the operative part whereof has been reproduced above, the learned Members of the Tribunal, however, disagreed and accordingly set aside the two orders before them. Hence this further appeal by the department proposing the questions stated in the opening part of this order.
4. Heard the learned counsel for the parties. Interestingly both of them have referred and relied upon three judgments of the Hon'ble Supreme Court of Pakistan in which the issue in hand was earlier considered and decided by the Apex Court. Obviously both the parties interpret the judgments of the Hon'ble Supreme Court in different manner. These judgments are, re: Atlas Battery Limited Karachi v. Superintendent Central Excise and Land Customs Circle `C' Karachi PLD 1984 SC 86, re: Pakistan through Secretary Finance and another v. Kohat Cement Company and others PLD 1996 SC 659 and re: Central Board of Revenue, Government of Pakistan v. Messrs Maple Leaf Cement Factory Ltd. 2002 PTD 1889.
5. In the first judgment re: Atlas Battery Ltd. (Supra) the Hon'ble Supreme Court interpreted the insertion of a new provision in sub-section (2) of section 4 of the Central and Salt Act, 1944. In the view of their Lordships the plain reading of the newly inserted subsection showed that the retail price of the article chargeable with duty was to be fixed by the manufacturer himself. However, if he did so the law required him to include all charges and taxes while fixing such retail price at which the article was intended by the manufacturer, to be sold to the general body of the consumers. In the next judgment, re: Pakistan through Secretary Finance v. Kohat Cement Company (Supra), the Hon'ble Apex Court by majority finally concluded that octori and transportation charges beyond the factory premises upto nearest wholesale market were to be included for computation of wholesale cash price, whether or not borne by the manufacturer. In the third and last cited case re: Central Board of Revenue, Government of Pakistan v. Messrs Maple Leaf Cement Factory Ltd. (Supra) the Hon'ble Supreme Court on consideration of the earlier two judgments concluded that octroi and transportation charges could both be included while determining the wholesale cash price of the cement manufactured by the respondents. Accordingly the appeals of the Revenue were allowed and the judgment passed by the High Court was set aside.
6. In the case in hand the facts as rightly pointed out by the learned counsel for the respondent are slightly different. It is that the franchise holders of the respondent are located in the same vicinity i.e. Gulberg, Lahore and during the period under report only one bottler was supplied with the concentrate in question. Admittedly no octroi post being involved, no such duty or toll tax was payable by the purchaser franchise holder. Learned counsel for the respondent has also made a reference to para. 3 of Central Excise General Order No.53 of 1967 expressing the interpretation of the Revenue of the expression "General Body of Retail Traders". In that para it was, inter alia stated that the expression "General Body of Retail Traders" should be deemed reference to "General Body of Retail Traders" in the wholesale market nearest to the factory or the warehouse concerned where "General Body of Retail Traders" did exist.
7. As the operative part of the order of Tribunal, which has been reproduced above, indicates the Revenue picked up Peshawar as destination for computation of the average expenses of sundry charges at the rate of Rs.50 per consignment of concentrate taken or dispatched from Lahore. Obviously that destination was picked up from the judgment of the Hon'ble Supreme Court of Pakistan in re: Pakistan through Secretary Finance v. Kohat Cement Company (Supra). The departmental representative before the Tribunal and the learned counsel representing them before us has not been able to justify the adoption of a particular destination. When admittedly the nearest wholesale market existed at a stone's throw of the factory location of the respondent/' manufacturer. Learned counsel for the respondent has also admitted that if at all an amount could be added to the value of the concentrate as sundry charges it could only be to the extent of handling and transportation charges. These charges as he has explained are so nominal in view of the proximity of location of the both, the manufacturer as well as the consumer that an exact calculation of such expense would be an exercise hardly worth anything in terms of money.
8. Be that as it may, there appears absolutely no doubt that the formula adopted by the Revenue and its fixation of destination for the purpose of inclusion of octroi and transportation/handling charges etc. was not applicable in the case in hand. The Revenue has not seriously disputed the proposition that in the present case the general body of retail traders being situated only next door, the formula adopted c in respect of the manufacturers in re: Pakistan through Secretary Finance v. Kohat Cement Company (Supra), C.B.R. v. Maple Leaf Cement Factory (Supra) was not applicable. The respondent having agreed to the inclusion of transportation and handling charges as sundry expenses to be, included in the price of the concentrate for the purpose of fixation of excise duty, the Revenue may undertake such exercise if considered feasible in terms of the duty involved.
9. This departmental appeal is dismissed with the above observations.
S.A.K./C-135/LOrder accordingly.