2008 P T D 406

[Karachi High Court]

Before Mrs. Yasmeen Abbasey and Syed Mehmood Alam Rizvi, JJ

Messrs PAKLAND CEMENT LIMITED

Versus

COLLECTOR CUSTOMS AND CENTRAL EXCISE (ADJUDICATION)-III, KARACHI and another

Spl. C.E.A. Nos. 29 of 2002 and 10 of 2006, decided on 16/01/2008.

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

----Ss.2(27), 3 & 4(2)---Customs General Order 23 of 1969, dated 29-8-1969---Supply of ordinary cement on contracted price to Director-General Procurement Army---Authority permitted manufacturer to pay excise duty on contracted price subject to fulfilling conditions of Customs General Order 23 of 1969---Printing of contracted price on packages by manufacturer instead of normal retail price---Withdrawal of such permission and demand of differential amount of duty by Authority---Validity---Cement supplied to Army was of ordinary nature meant to be supplied in open market---Contractual formalities observed by manufacturer had no nexus with Customs. General Order 23 of 1969, which spoke of printing of normal price on packages regardless of contracted price---Manufacturer had not proved that any long-standing practice was being followed by Army for considering contracted price as retail price for levy of excise duty---Manufacturer could not be allowed to obviate from mandatory condition given by Authority for availing benefit of concessionary rate of duty---Manufacturer had not followed instructions contained in Customs General Order 23 of 1969, thus, Authority had rightly cancelled such permission---Price fixed for supply of cement to general public in such case would be considered as retail price being the highest one---Authority had rightly asked manufacturer to pay differential amount.

Messrs Radaka Corporation and others v. Collector of Customs and another 1989 SCMR 353 ref.

(b) Interpretation of statutes---

----Subsidiary legislation and Statute, conflict between---When no reconciliation was possible in case of such conflict, then subsidiary legislation must give way to statutory provision.

(c) Taxation---

----Mandatory direction given by department for availing benefit of concessionary rate of tax---Effect---Assessee, in order to avail such benefit could not obviate from such direction.

(d) Waiver---

----Statutory provision enacted in public interest relating to form of contract between company and public bodies created by or under a statute---Validity---Compliance with such provision could not be waived.

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

----S.36-C---Appeal to High Court---Plea of show-cause notice being time-barred not raised before Tribunal---Effect---Such plea would be deemed to have been waived.

Messrs Thatta Cement Company, Thatta v. Customs, Central Excise and Sales Tax Appellate Tribunal Karachi Bench, Karachi and 2 others 2003 PTD 1899; 2006 SCMR 425 and 2007 PTD 1618 rel.

Dr. Muhammad Farough Naseem and Sardar Ejaz Khan for Appellants.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 3rd December, 2007.

JUDGMENT

MRS. YASMEEN ABBASEY, J.---By this judgment we intend to dispose of two appeals as both have the same question of law.

Facts leading to these cases are that before entering into a contract for supply of cement to Directorate-General Procurement Army on contractual price with intent to fix Central Excise Duty as per contractual price, appellants made a request on 5-8-1997 to Deputy Collector, Central Excise, Landhi Division, Karachi to accept their proposal of clearance of goods on contractual price and levy of central Excise Duty as per that contractual price. To differentiate the normal supplies to general public than to Directorate-General Procurement Army it was proposed that it will be in 3 ply paper sack with special mark of Defence Suppliers. This request was accepted by letter dated 18-8-1997 issued by Deputy Collector, Central Excise, Landhi Division, Karachi subject to the condition that procedure and instructions contained in General Order 23 of 1969 should be followed and that it be declared that the above goods will not be meant for sale in open market. After receiving this permission appellants entered into contract with Pakistan Army on 27-8-1997. On 26-5-1998 this permission was withdrawn alleging that the appellants had not fulfilled the conditions of General Order No.23 of 1969 as the goods were neither supplied in special specification in material terms nor its packing was different from the one supply to general consumer.

After withdrawal of this permission according to appellants nothing was supplied yet, by letter dated 26-5-1997 clarification was sought from the department. Finally permission was restored on 6-8-1998 but again on 19-3-1999 it was withdrawn and by show-cause notice dated 30-5-2001 appellant was called upon to pay the differential amount of Central Excise duty for the supply of goods during the period 8-8-1997 to date, in terms of section 4(2) of Central Excise Act, 1944.

Point for consideration in the above matter is that whether where more than one retail price is fixed for the same brand and variety of goods on what rate excise duty is chargeable?

For the proper adjudication of the case the term retail price as defined in section 2 of sub-clause 27 of Sales Tax Act, would be material, which provide that retail price means the price fixed by the manufacturer, inclusive of all duties charges and taxes other than sales tax, at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price will be deemed as retail price.

At the same time Clause (IV) of Customs General Order 23 of 1969 issued on 29-8-1969 make it known that:--

"(iv) If the goods supplied to Government organizations and industrial concerns are packed in containers/packages and are of the same specifications as goods sold to general consumers, then the normal retail price per unit/container should be printed on the containers/packages regardless of the contracted price."

As per term of contract placed, the cement supplied to appellant was of ordinary nature meant to be supplied in open market. Then irrespective of fact that what had been entered into between the parties, following up the instruction contained in Customs General Order 23 of 1969 issued much prior to the contract entered on 27-8-1997 appellant had to print the normal retail price per unit. As the demand of levy of tax on contractual price was already protected vide letter dated 24-9-1997 and any Reference to Customs General Order 4 of 1959 after clarification of Customs General Order 23 of 1969 would be immaterial. It is settled principle that if there in any conflict between statute, and subsidiary legislation and no reconciliation is possible, then the subsidiary legislation must be given away. Even otherwise, Customs General Order 4 of 1959 was superseded by Customs General Order 23 of 1969 compliance of which was a pre-condition while entering into contract and giving relaxation in levying Central` Excise duty, which was not complied with in strict sense. The formalities observed by appellant, which have been reproduced in Order-in-Original No. 128 of 2000 dated 30-9-2000 that:--

"I. The bags for the supplies to D.G.P. Army were 5 ply bags as against the normal 3 ply bags. The construction of the paper sack/bags was .materially different from the supplies made to general consumers.

II. A red arrow was printed on the bags boldly stating "Defence Supply"

III. All bags were stamped as follows: "Not for sale in the market"

have no nexus to Customs General Order 23/1969 which speaks of print of normal retail price on containers/packages regardless of the contractual price and undisputedly that was not complied with.

To support his argument that it is normal practice of department to accept the contractual price for the goods supplied to Government department for the purpose of levy Central Excise Duty as a force of law, learned counsel has referred 1989 SCMR 353 (Messrs Radaka Corporation and others v. Collector of Customs and another) whereby with reference to long-standing practice adopted in Customs Department, different to issue involved in the matter it was observed that "Now it is settled law that where departmental practice had followed a particular course in implementation of same rule, whether right or wrong, it would be extremely unfair to make a departure from it after lapse of many years and thereby disturb rights that have been settled by a long and consistent course of practice Nazir Ahmad v. Pakistan and others PLD 1970 SC 453 rel".

With due respect to the observation of Honourable Apex Court in the present case appellant has failed to prove that any such long-standing practice is being followed by the Department for considering the contractual price as retail price for levy of Central Excise Duty. If for the sake of argument, it is assumed so, even then when a mandatory direction was given to avail a benefit, appellant cannot be allowed to obviate from it. As there can be no waiver of compliance with statutory provision enacted in public interest, when the provision relates to the form of contract between company and public bodies created by or under a statute.

Section 3 of Central Excise Act, specifically says that the duties shall be levied and collected in such manner as the Federal Government may, by notification in the official Gazette, specify. Proviso to section 3 further provides that where any goods are chargeable to duty on the basis of retail price or terms of subsection (2) of section 4 and the retail price is not printed or embossed in a manner specified in the proviso thereof, the duty shall be charged at the rate specified in the section. Thus in presence of this specific provision and clarification, with relaxation in special circumstances, through Customs General Order 23/1969 any violation of them was bound to cancel the permission granted to the appellant and thus department has rightly asked him to pay the differential amount.

Next ground urged by learned counsel for appellant that show-cause notice issued on 30-5-2001 for the supplies made during 24-9-19971to 20-5-1998 is time-barred and therefore, demand cannot be enforced. Observation made in 2003 PTD 1899 (Messrs Thatta Cement Company, Thatta v. Customs, Central Excise and Sales Tax Appellate Tribunal Karachi Bench, Karachi and 2 others) are clear on the point that only question of law raised before Tribunal and arising out of order passed by Tribunal could be raised in appeal before High Court. Admittedly no such ground of limitation was ever raised by appellant before Tribunal, therefore, it amounts to waiver. Further arguments of learned counsel for respondent that the show-cause notice is based on question of fact and not on law therefore, it is within time, do find support from 2006 SCMR 425 and 2007 PTD 1618.

In view of the above reasoning, we are of the view that as the appellant has not followed the instructions contained in Customs General Order 23 of 1969 on the basis of which permission was granted to him therefore, out of two prices the price fixed for supply of goods to general public will be considered as retail price being the highest one.

So far levy of penalty in Special Central Excise Appeal No.10 of 2006 is concerned, no element of misstatement is appearing on the record. All that is the misinterpretation and misconception of law and. concession granted, therefore case will fall under Rule 10(1) of Central Excise Rules and appellant is not liable to pay any penalty.

In view of the foregoing reasons appeals stand dispose off as dismissed.

S.A.K./P-28/KAppeals dismissed.