COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE VS Messrs PATTOKI SUGAR MILLS LTD. and others, 2006 PTD-SUPREME-COURT 2889 (2006)

(On appeal from the order, dated 7-3-2005 passed by the Lahore High Court, Lahore in C.A. Nos.162 to 170 of 2001).

Central Excise Rules, 1944---

----Rr. 10(1)(2)(3), 12 & 13---S.R.O. 547(1)/96 dated 1-6-1996---Customs Act (IV of 1969), S.32---Constitution of Pakistan (1973), Art. 185(3)---Evasion of excise duty---Show-cause notice under Rule 10 of Central Excise Rules, 1944---Question of limitation prescribed in Central Excise Rules, 1944---Department issued show-cause notice to Sugar Mills under Rule 10 of Central Excise Rules, 1944, on ground that the latter while exporting sugar had evaded excise duty---Sugar Mills contended; that show-cause notices issued by Department were illegal and beyond limitation; that there was no specific allegation in respect of tax evasion falling under Rule 10(1) of Central Excise Rules, 1944; that Department had knowledge about export of sugar by Mills but no action was taken against them, knowing well that there was no violation of ally provision but subsequently vague notices were issued by Department to cover limitation provided in Rule 10 (1)(2)(3) of Central Excise Rules, 1944 and that provision of S.32 of Customs Act, 1969 was similar to that of Rule 10 of Central Excise Rules, 1944---High Court while sustaining contentions of Mills allowed appeals of Mills---Leave to appeal was granted to Department to examine provisions of Rule 10 of Central Excise Rules, 1944 and S.32 of Customs Act, 1969 and ratio of judgments pronounced in Assistant Collector of Customs and others v. Khyber Electric Lamps and others 2001 SCMR 838 and Collector of' Sales Tax and Central Excise Lahore v. Zarnindara Paper and Board Mills C.P. No. 702-L of 2003.

Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 and Collector of Sales Tax and C.E. Lahore v. Zamindara Paper and Board Mills and others C.P. 702-L of 2003 rel.

Izhar ul Haq, Advocate Supreme Court, Tanvir Ahmad, Advocate-on-Record, Nazim Saleem, Collector Sale, Tax and Muhammad Saeed Watto, Deputy Collector Sales Tax for Petitioners.

Syed Mansoor Ali Shah, Mian Abdul Ghaffar, Advocates, Muzamal Akhtar Shabbir, Advocates Supreme Court, M.A. Qureshi, Ch. M. Anwar Khan and Mahmudul Islam, Advocates-on-Record for Respondents.

ORDER

IFTIKHAR MUHAMMAD CHAUDHRY, C.J.---These petitions have been filed for leave to appeal against the judgment, dated 7-3-2005. It is to be noted that matter relates to alleged evasion of excise duty falling within the mischief of Rule 10 of Central Excise Rules, 1944. The Department issued show-cause notices to the petitioners calling upon them to show as to why proposed action for non-payment of the central excise duty, be not taken. Case-wise detail of the same is reproduced herein below from the chart which has been submitted under the direction of the Court by the learned counsel for the petitioners:---

2. Learned High Court by having relied mainly upon the judgment of this Court in the case of Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others (2001 SCMR 838), declared that show-cause notices served upon the respondents by the petitioner were patently illegal and beyond the period of limitation. Learned counsel for the petitioner, inter alia, contended that;

(i) The show-cause notice in substance contains the details in respect of violation of the provision of Rules 10, 12, 13 and S.R.O. 547(I)/96, dated 1-6-1996, therefore, according to him non-mentioning in the notices subsequent provision of the rule is not fatal.

(ii) The question for determination before Adjudicating Authority as well as the High Court was as to whether excise duty has been evaded. According to him the show-cause notice contains sufficient material to hold that the respondents have evaded the duty and are liable for action under rule 10(2) of the Central Excise Rules, 1944.

(iii) The judgment which has been relied upon is distinguishable on the facts of the case.

3. On the other hand learned counsel appearing for the respondent vehemently opposed the petition and stated;

(a) Learned High Court had rightly applied the principle laid down by this Court in Khyber Electric Lamps' case (ibid). As according to them the provision of section 32 of the Customs Act, 1969 is similar to that of Rule 10 of the Central Excise Rules, 1944, therefore, the show-cause notices issued by the department were rightly found illegal and beyond the limitation.

(b) After announcement of judgment in the case of Khyber Electric Lamps' case (ibid) no ambiguity is left to determine as to whether under which clause of Rule 10 the case of the Department will fall but as there was no specific allegation in respect of evasion falling under sub-rule (1) of rule 10 of the Central Excise Rules, 1944, therefore, the High Court had rightly held that these notices were beyond the limitation as sub-rules (1), (2) and (3) of rule 10, have provided different periods of limitation for the purpose of re-opening of the case and unless the case is covered any specific allegation no action can be taken.

(c) Department had knowledge about the export of sugar by the respondents' but no action was taken knowing well that there is no violation of any of the provision but subsequently vague notices were issued with a view to cover limitation, therefore, High Court had rightly granted relief to the respondents.

4. After hearing the learned counsel for the parties at considerable length and having gone through the relevant provisions of law, Rule 10 of Central Excise Rule, 1944, section 32 of the Customs Act, 1969 and ratio in the case of Khyber Electric Lamps as well as the judgment pronounced by this Court in case of Collector of Sales Tax and CE Lahore v. Zamindara Paper and Board Mills etc. (C.P. No. 702-L of 2003) leave to appeal is granted, inter alia, to examine the contentions put forward by the learned counsel for the parties.

S.M.B./C-19/SCLeave granted.