PUNJAB BEVERAGES CO. (PVT.) LTD. VS FEDERATION OF PAKISTAN through Ministry of Finance, 2016 PTD-LAHORE-HIGH-COURT-LAHORE 1736 (2016)

(a) Interpretation of statutes---

----"Statute" and "administrative instructions"---Conflict---Scope---In case of conflict between a statute and instructions of Department, instructions/orders of the department are to be ignored and statute law has to be followed.

The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited, Lahore and others 1999 SCMR 1442 rel.

(b) Federal Excise Act (VII of 2005)---

----S.2(12a)---Federal Excise Rules, 2005, R.43-A(1)---S.R.O. No.561(I)/2006, dated 5-6-2006---Franchise services---Proof---Federal Excise Duty, recovery of---Show cause notice---Alternate remedy---Petitioner company assailed show cause notice issued for recovery of Federal Excise Duty on the ground of franchiser and franchisee relationship---Plea raised by authorities was that alternate remedy was available to petitioner---Validity---In order to attract levy of Federal Excise Duty for services rendered, which included franchise services within the contemplation of law, authorities were under a legal duty to establish an identifiable link between franchiser and franchisee of services rendered against a fee or consideration---Authorities proceeded on ill-founded assumptions as there was nothing on record to prove that petitioner had paid for services either to franchiser---In absence of such payments there was no question of any amount to be payable by way of Federal Excise Duty for 'services' rendered---Authorities failed to bring on record any franchise agreement or any proof of payments for services rendered by alleged franchiser against a fee or consideration---Show cause notice issued by authorities was without any lawful basis and was declared to be illegal and of no legal effect---High Court observed that no purpose would be served in requiring petitioner to pursue alternate remedies---Constitutional Petition was allowed in circumstances.

Messrs Northern Bottling Company (Pvt.) Ltd.'s case (Sales Tax Reference No.5 of 2003; Iqbal Hussain through authorized attorney v. Federation of Pakistan through The Secretary, Revenue Division and 2 others 2010 PTD 2338 and Commissioner Inland Revenue, Peshawar v. Messrs Northern Bottling Company (Pvt.) Ltd. and another C.Ps. Nos. 1742 and 1743 of 2014 fol.

Nagina Silk Mill, Lyallpur v. The Income-Tax Officer, A-Ward Lyallpur and another PLD 1963 SC 322; Edulji Dinshaw Limited v. Income-Tax Officer PLD 1990 SC 399; Messrs Ulian Hoshang Dinshaw Trust and others v. Income-Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250; Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29; Messrs Chenab Cement Product (Pvt.) Ltd. and others v, Banking Tribunal, Lahore and others PLD 1996 Lah. 672; United Business Lines, S.I.E. Gujranwala and another v. Government of Punjab through Secretary, Local Government, Lahore and 5 others PLD 1997 Lah. 456; Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892; Messrs Shamim & Co. v. Tehsil Municipal Administration, Multan City through Nazim and 2 others 2004 YLR 366; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392; Abbas Corporation v. Appellate Tribunal and another 2005 PTD 803; Deputy Commissioner of Income Tax/ Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company (Pvt.) Ltd. 2007 PTD 1347; Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others 2011 PTD 2260; Lone Cold Storage Lahore v. Revenue Officers, Lahore Electric Power Co. and others 2010 PTD 2502; Messrs Riaz Bottlers v. Federation of Pakistan W. P. No.1812 of 2010 and Commissioner Inland Revenue Zone-III v. Messrs Northern Bottling Company (Pvt.) Ltd. and others S.T.R. No.5 of 2013 ref.

Ali Sibtain Fazli for Petitioner.

Sarfraz Ahmad Cheema, Sultan Mehmood, Izhar-ul-Haque Sheikh, Agha Muhammad Akmal Khan and Tariq Manzoor Sial for Respondents.

Date of hearing: 11th December, 2015.

JUDGMENT

MUHAMMAD SAJID MEHMOOD SETHI, J.---This consolidated judgment shall dispose of instant writ petition along with following connected writ petitions as common questions of law and facts are involved in these cases:--

1.W. P. No.18125 of 2010 titled Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan, etc.

2.W. P. No.766 of 2008 titled Messrs Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan, etc.

3.W. P. No.3717 of 2008 titled Messrs Punjab Beverages Co. (Pvt.) Ltd. v. Federation of Pakistan, etc.

4.W. P. No.4754 of 2008 titled Messrs Shamim and Company v. Federation of Pakistan, etc.

2.Brief facts, as narrated in this writ petition, are that the petitioner is a private limited company, engaged in the business of manufacturing and marketing of beverages, namely, Pepsi, Teem, Mirinda, 7 Up and Mountain Dew, under an exclusive bottling agreement from M/s. Pepsico, Inc. U.S.A. ("Pepsico"). In the year 2006, through Finance Act, 2006, Item No.11 was added to the First Schedule of the Federal Excise Act, 2005 ("Act"), whereby Federal Excise Duty ("FED") at the rate of 5% of the charges is levied on the franchise services. On 05.06.2006, through S.R.O. 561 (I)/2006, Rule 43A was added to the Federal Excise Rules, 2005 ("Rules"), providing the detailed mechanism and procedure regarding payment of the FED on franchise fee. In this regard, Central Board of Revenue, as it then was, also issued a Federal Excise General Order ("FEGO") No. 5/2006 after FEGO No. 4/2005 and FEGO No. 5/2005, however, petitioner and other beverage manufacturers did not pay the FED on franchise fee for the year 2007-08. Petitioner received a Show Cause Notice ("SCN") dated 06.05.2010, containing certain allegations. Through instant writ petition, the aforesaid Item No.11 of the First Schedule of Federal Excise Act, 2005, Rule 43A of the Federal Excise Rules, 2005, FEGO No. 5/2006, and SCN dated 06.05.2010, have been challenged, with the following prayer:-

"In view of the above, it is, therefore, most respectfully prayed that Item No.11 of the First Schedule of the Federal Excise Act, 2005, Rule 43-A of the Federal Excise Rules, 2005, the amendments made through the Finance Act, 2008, FEGO No.5/2006 and Show Cause Notice dated 06.05.2010 may kindly be declared to be illegal, without lawful authority and of no legal effect.

Any other relief that this honourable Court deems fit and appropriate, in the facts and circumstances of the case, may also kindly be granted."

3.Learned counsel for petitioner submits that the respondents have filed Exclusive Bottling Agreement along with parawise comments in one of the connected writ petitions, perusal of which shows that there is no element of any franchise, fee, royalty etc., and there is no relationship of franchiser and franchisee between the petitioner and Pepsico. While relying on the judgment dated 09.06.2014, passed by the learned Division Bench of Hon'ble Peshawar High Court in the case of M/s. Northern Bottling Company (Pvt.) Ltd. (Sales Tax Reference No. 5/2003), learned counsel for the petitioner submits that in the said reference one of the respondents had a bottling agreement, like the petitioner, with Pepsico, and the Hon'ble Peshawar High Court was pleased to hold that there is no identifiable link between them for any services rendered by Pepsico against a fee or consideration. Learned counsel further submits that the department went in appeal before the august Supreme Court of Pakistan against the said judgment of Hon'ble Peshawar High Court by filing Civil Petitions Nos. 1742 and 1743 of 2014, and the Supreme Court of Pakistan dismissed the leave applications by holding that the mere fact that respondent in the said Civil Petitions buys concentrate from Pepsi Cola International (Pvt.) Limited, Hattar ("PCI") and then bottle the same under a formula provided by Pepsico does not attract the charging provision of the Act, 2005. He further contends that item No. 11 of the Table-II of the First Schedule was added through Finance Act, 2006, whereby FED at the rate of 5% was levied on the charges of franchise services. In the present case, as there is no franchise fee or charges, hence, no Federal Excise can be demanded on the same, and the FEGO No. 5/2006 has illegally levied excise duty on a criteria that is not provided in the law. Adds that FEGO No.5/2006 is even violative of Rule 43A of the Federal Excise Rules, 2005, and the same being in conflict with the Rules, is liable to be ignored. Learned counsel for petitioner has relied upon Nagina Silk Mill, Lyallpur v. The Income-Tax Officer, A-Ward Lyallpur and another (PLD 1963 Supreme Court 322), Edulji Dinshaw Limited v. Income-Tax Officer (PLD 1990 Supreme Court 399), Messrs Ulian Hoshang Dinshaw Trust and others v. Income-Tax Officer, Circle XVIII South Zone, Karachi and others (1992 SCMR 250), Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal (1993 SCMR 29), Messrs Chenab Cement Product (Pvt.) Ltd. and others v, Banking Tribunal, Lahore and others (PLD 1996 Lahore 672), United Business Lines, S.I.E. Gujranwala and another v. Government of Punjab through Secretary, Local Government, Lahore and 5 others (PLD 1997 Lahore 456), Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others (1999 PTD 1892), Messrs Shamim & Co. v. Tehsil Municipal Administration, Multan City through Nazim and 2 others (2004 YLR 366), Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 PTD 1392), and Iqbal Hussain through authorized attorney v. Federation of Pakistan through The Secretary, Revenue Division and 2 others (2010 PTD 2338).

4.On the other hand, learned counsel for respondents contend that the procedure for collection of duty on such services has been laid down vide Rule 43A of the Federal Excise Rules, 2005, with certain clarifications with special reference to local beverage companies vide FEGO No. 5/2006 dated 05.08.2006. They further contend that the FED is recoverable from the Franchisee i.e. the local beverage company, who claims to have no franchise agreement, because Rule 43A and FEGO No. 5/2006 is covered in the manner as provided in section 3 of the Federal Excise Act, 2005, therefore, the taxpayer is clearly liable to pay the duty. Learned counsel for respondents further submit that the Directorate of Intelligence and Investigation is a necessary party and instant writ petition is not maintainable without impleading the said Directorate as party to the petition. They have placed reliance upon Abbas Corporation v. Appellate Tribunal and another (2005 PTD 803). They further submit that factual controversy is involved and alternate remedy is available to the petitioner, therefore, writ petition is not maintainable. In this regard, they have placed reliance upon Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company (Pvt.) Ltd. (2007 PTD 1347) and Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others (2011 PTD 2260). Regarding the judgment delivered by the Hon'ble Supreme Court in Civil Petitions Nos. 1742 and 1743 of 2014, they submit that the august Court was not properly assisted and the main legal questions have not been raised deliberately, thus, the same does not constitute a binding precedent. In this regard, they have placed reliance upon Lone Cold Storage, Lahore v. Revenue Officers, Lahore Electric Power Co. and others (2010 PTD 2502). Learned counsel contend that perusal of business agreement between M/s Pepsico, Inc. U.S.A. and the petitioner determines the relationship of franchiser and franchisee on the basis of definition as provided in section 2(12a) of Federal Excise Act, 2005 read with sub-rule (1) of Rule 43A of the Federal Excise Rules, 2005.

5.Arguments heard. Available record perused.

6.Through Finance Act, 2006, item No.11 was added to the First Schedule of the Act, 2005, whereby Federal Excise Duty at the rate of 5% was levied on the charges of franchise services. On 05.06.2006, through S.R.O. 561(I)/2006, Rule 43(A) was added to the Federal Excise Rules, 2005, wherein mechanism and procedure to pay the excise duty on franchise fee, was provided.

7.The Central Board of Revenue issued Federal Excise General Order 4/2005 which was later replaced by FEGO No.5/2005, wherein it has been mentioned that in case where franchises are foreign or local beverage companies and there is no formal agreement between the franchiser and the franchisee, the assessable value for the purpose of levy of excise duty shall be 5 % of the value of concentrate supplied by the franchiser to the franchisee and, in case where remittance/royalty is being made by the franchisee beverages company to the local or foreign franchiser under a proper agreement, the assessable value shall be the gross amount of fee or royalty remitted/paid to the franchiser on the amount laid down in the agreement and, in cases where the franchiser and franchisee are both locally based, then liability to deposit franchise fee or royalty shall be upon the franchiser. In order to better appreciate the arguments of learned counsel for the parties, it would be beneficial to reproduce the relevant provisions of the Federal Excise Act, 2005, Federal Excise Rules, 2005 and FEGO No. 5/2006 dated 05.08.2006, which are as under:--

FEDERAL EXCISE ACT, 2005.

"2 (23) "services" means services, facilities and utilities leviable to excise duty under this Act or as specified in the First Schedule read with Chapter 98 of the Pakistan Customs Tariff, including the services, facilities and utilities originating from Pakistan or its tariff area or terminating in Pakistan or its tariff area;

2 (12a) "franchise" means an authority given by a franchiser under which the franchisee is contractually or otherwise granted any right to produce, manufacture, sell or trade in or do any other business activity in respect of goods or to provide service or to undertake any process identified with franchiser against a fee or consideration including royalty or technical fee, whether or not a trade mark, service mark, trade name, logo, brand name or any such representation or symbol, as the case may be, is involved;"

FEDERAL EXCISE RULES, 2005.

"43A (2) The duty shall be paid by the franchisee or as the case may be, the head office of the franchisee at the rate of [ten] per cent of the value of taxable service, which shall be the gross amount or the franchise fee or the deemed franchise fee or technical fee or royalty charged by the franchiser from the franchisee for using the right to deal with the goods or services of the franchiser."

FEDERAL EXCISE GENERAL ORDER NO.5/2006.

"In supersession of the Federal Excise General Order No.04/ 2006, the Central Board of Revenue, in order to streamline the levy and collection of excise duty on franchise services, is pleased to issue the following instructions:

(i) ;

(ii)in case where franchisers are foreign or local beverage companies, if there is no formal agreement between the franchiser or franchisee, the assessable value for the purpose of levy of excise duty shall be 5 % of the value of concentrate supplied by the franchiser to the franchisee. However, in such cases where proper remittance/payment of fee or royalty is being made by the franchisee beverage company to the local or foreign franchiser under a proper agreement, the assessable value shall be the gross amount of fee or royalty remitted/paid to the franchiser or the amount laid down in the agreement.

(iii) ;

(iv)in case where the franchiser and franchisee are both locally based, the liability to deposit the franchise fee or royalty shall be upon the franchiser."

8.Federal Excise Act, 2005, is applicable on manufacturing of goods as specified in Table I of First Schedule to the Act, 2005, and services as provided in Table II of First Schedule to the Act, 2005. Under Section 3 (5), the liability to pay Federal Excise Duty is on the person manufacturing goods or providing services and not on the recipient of services. Section 3 (5), whereby liability to pay duty on services was on the person providing such service, was only amended by proviso clause added in the Act, 2005, through Finance Act, 2008, wherein liability to pay duty was shifted upon the recipient in case where services have been rendered by a person outside Pakistan. Therefore, in any case, no liability can be imposed on the petitioners before June, 2008. In this background, different SCNs were issued to the petitioners to show as to why Federal Excise Duty on franchise services, royalty or technical fee falling under heading 9823.0000 of Table II to First Schedule as levied at the rate of 5 % to Finance Act, 2006, and enhanced at the rate of 10 % through Finance Act, 2008, may not be recovered from the petitioners.

9.In W. P. No.1812/2010 titled Messrs Riaz Bottlers v. Federation of Pakistan, one of the connected writ petitions, the Federation has filed Exclusive bottling agreement along with parawise comments. In the said bottling agreement, there is no element of any franchise fee, royalty etc. Learned counsel for respondents have referred to the following extracts of the business agreement between the parties to contend that the agreement clearly reveals the relationship of franchiser and franchisee between the petitioners and M/s Pepsico, Inc. U.S.A., within the contemplation of Federal Excise Act read with the rules framed thereunder:--

"a.The company will sell or cause to be sold by one of its subsidiaries (Company and/or such subsidiary hereinafter both called the "Seller") to the Bottler, and the Bottler will buy only from the Seller, all Units of Pepsi-Cola concentrate (hereinafter called "Units) required for manufacture of the Beverage by the Bottler, at a price established by the Seller to be invoiced in United States Dollars, for collection from the Seller's plant, with freight, insurance, and handling charges to be provided and paid for by the Bottler. Title to all Units shipped by the Seller to the Bottler shall remain in the Seller until collection from the Seller's plant. Payment in full for each order shall be made by the Bottler immediately upon collection, in cash, demand draft or sight letter of credit. The Seller may change the price of the Unit at any time in its sole and absolute discretion. In the event of any such change, the Seller shall notify the Bottler in writing thereof.

b.The decision of the Company on all matters concerning its Trademarks shall be final and conclusive on, and not subject to question by, the Bottler. The company will protect and defend the Trademarks at its sole cost and expense, but the Company shall not be liable to the Bottler for any loss or damage suffered by the Bottler by the Bottler's use of the Trademarks or as a result of any litigation or proceeding involving the Trademarks. The Bottler will cooperate fully with the Company in the defense and protection of the Trademarks and will promptly and fully advise the Company of any use in the Territory of any mark infringing the Trademarks. The Bottler will at the request and cost of the Company join with the Company in making application to the Registrar of Trade Marks for registration of the Bottler as a Registered User of the Trademarks.

The Bottler recognizes the Company's ownership of the Trademarks and will not take any action which will prejudice or harm said Trademarks, or the Company's ownership thereof, in any way. Nothing herein contained shall be construed as conferring upon the Bottler any right or interest in the Trademarks, or in their registrations or in any designs, copyrights, patents, trade names, signs, emblems, insignia, symbols and slogans, or other marks, used in connection with the Beverages.

c.The Bottler, in preparing, bottling, selling and distributing the Beverage will use only the Units purchased from the Seller, and all other materials, including bottles, cartons, cases and containers, specified by the Company from time to time. The Bottler will not use the said Units, bottles, cartons, cases, containers and other labeled materials, so purchased from the Seller or specified by the Company in any manner, directly or indirectly, for any purpose other than the bottling selling and distributing of the Beverage.

d.The bottler will maintain and operate in the Territory one or more bottling plants, properly and adequately equipped and staffed to bottle, sell and distribute sufficient Beverage for complete and thorough coverage of the Territory. The Beverage will be bottled in the Territory only by the Bottler and only in plants operated by the Bottler and approved in writing by the Company. The Bottler will not authorize anyone else to bottle the Beverages in the Territory.

e.The bottler will sell and distribute the Beverage under the Trademarks, and strictly on its own merits, and will make only such representations concerning the Beverage as shall have been previously authorized in writing by the Company. The Bottler will not bottle, distribute or sell, directly or indirectly (including through an affiliated or related entity or one under common ownership or control or one in which the Bottler has an interest or participation), any other cola beverage, any other beverage similar to a cola beverage, any other beverage having the word "cola" or "kola" as part of its name, or any other beverage which imitates or can be confused with the Beverage, nor will the Bottler use in connection with any beverage any trademark, designation or trade dress which imitates or is likely to be confused with the Company's Trademarks, designations or trade dress."

10.From perusal of the clauses of bottling agreement referred by learned counsel for respondents, it becomes an admitted position that there is no element of Franchise or relationship of Franchiser or Franchisee between that petitioner and Pepsico. Therefore, at the very outset, petitioners have relied upon Commissioner Inland Revenue Zone-III v. M/s. Northern Bottling Company (Pvt.) Ltd. and others, (STR No.5 of 2013), decided on 09.06.2014 by the Hon'ble Division Bench of Peshawar High Court, Peshawar, the operative part of which reads as under:--

"9. No doubt, the charging section 3 of the Act provides for payment of excise duty for "services" rendered, which includes the "franchise services" as provided in Item No.11 of the First Schedule of the Act. However, the condition precedent for a franchise to be established as provided in the definition of the said term under subsection (12a) of Section 2 of the Act is that there has to be a identifiable link between franchise and the subject company "against a fee or consideration". Admittedly, there is no identifiable link between M/s Pepsico, Inc. USA and the Company for any services to be rendered by the Company against a fee or consideration.

10. Even if, we review Rule-43A of the Rules, it is noted that company is not availing any right under a franchise of M/s. Pepsico Inc. USA, as defined under the Act.

11. The crucial and essential fact remains that there is no agreement between the Company and the "Franchiser" and thus, the issue of payment of any fee or consideration would not arise. Having said that, this court is not inconsonance with the finding of the Tribunal that there exists a relationship of a "franchise" and the "franchisee" between the Company and M/s. Pepsico Inc. USA ("Franchiser"). The finding appears to be speculative being devoid of any factual basis. Under the prevalent federal excise tax regime, the term "franchise" has a specific meaning its scope and cannot be extended or widen just because a foreign trademark is being used by local company to impose and charge the excise duties. The charging provisions of the Act have to be strictly construed in favour of the taxpayer.

12. Whereas, the conclusion drawn by the worthy Tribunal that there being no franchise agreement or consideration or fee received by the Company from the franchiser, the levy of excise duty was rightly declined.

13. Before parting with this opinion, it would be important to note that the judgment of apex Court in Messrs C.M. Pak Ltd's case (C.P.No.834/2011) decided on 26.9.2012, referred to by the Revenue is distinguishable from the facts of the present case. In the said case, the record clearly provided that the Company paid Rs.166.479 million as "technical fee" to the "franchiser" which clearly established the identifiable link between the local company and with the foreign franchiser. It was this fact which prevailed and brought the local company to come within the purview of the enabling charging provisions of the Act and Rules and thereby liable to payment of excise duty. In the present case, facts are otherwise. Neither is there any admitted evidence to suggest that there is a "franchise agreement" or that the Company is making any payment to the "franchiser" for the services so rendered.

14. Accordingly, for the reasons stated hereinabove, the decision of the worthy Tribunal is maintained and the present Sale Tax References are answered in Negative."

11.The department went in appeal before the august Supreme Court, and the Apex Court vide order dated 26.11.2014 passed in C. Ps. Nos. 1742 and 1743 of 2014, dismissed the leave application and upheld the said judgment passed by the Hon'ble Division Bench of Peshawar High Court, Peshawar, by holding the mere fact that respondent/ purchaser buys concentrate from Pepsi Cola International and then bottle the same under a formula provided by Pepsi Co. Inc. USA does not attract the charging provision of the Act, 2005. The Hon'ble Apex Court, in C. Ps. Nos.1742 and 1743 of 2014 titled Commissioner Inland Revenue, Peshawar v. Messrs Northern Bottling Company (Pvt.) Ltd. and another, observed as under:--

"We have heard this case for almost half an hour. Upon repeated questioning we have not been informed by learned counsel for the Commissioner Inland Revenue-petitioner as what services are rendered by the respondent on which excise duty is chargeable under section (1)(d) of the Federal Excise Act, 2005.

2. On the other hand, we have gone through the impugned judgment of the High Court and the judgment of the Tribunal which are well reasoned and do not require interference. We note that the Excise Act in section 2(12a) defines the term 'Franchise' and the section 2(23) defines the term 'franchiser'. The charging section however, refers to services while the liability to pay excise duty is mentioned in section 5 which, to the extent relevant, is reproduced as under:-

"5. The liability to pay duty shall be

(c) in case of services provided or rendered in Pakistan, of the person providing or rendering such service provided where services are rendered by the person out of Pakistan, the recipient of such service in Pakistan shall be liable to pay duty; and

(d) in case of goods produced or manufactured in non-tariff areas and brought to tariff areas for sale or consumption therein, of the person bringing or causing to bring such goods to tariff are;"

3. After hearing the learned counsel for the parties and going through the impugned judgments, it is clear to us that the Commissioner Inland Revenue has proceeded on some assumptions and those too, not well founded. There is nothing on record to show that the respondent pays for services either to Pepsi Cola International (Pvt.) Ltd., Hattar which is a Pakistani incorporated company or to Pepsico, Inc. USA which is a company incorporated in America. In the absence of such payments, there is no question of any amount being payable by way of excise duty for 'services' rendered.

3. The mere fact that the respondent purchases concentrate from PCI, Hattar and then bottles the same under a formula provided by Pepsico, Inc. USA does not attract the charging provisions of the Excise Act. It is also important to bear in mind that the respondent is obliged to label the bottled water with the trademark/logo of Pepsi Cola because if this is not done there will be a misdescription of the product under the Trademarks Act. It is also relevant that the respondent pays excise duty on the concentrate which it purchases from PCI, Hattar and it also pays excise duty on each bottle of bottled drink produced by it. We fail to understand how, after such duty has been paid at the point of purchase from PCI, Hattar and the point of manufacture, the respondent is still obliged to make payment of some excise duty for any imaginary services provided or rendered by the respondent.

4. In view of the foregoing discussion, we find no merit in these petitions. The same are, therefore, dismissed with costs and leave to appeal is declined."

12.The above mentioned judgments of Peshawar High Court and august Supreme Court are squarely and fully applicable to the case of present petitioners as the facts of these cases are identical for the reason that Northern Bottlers, like present petitioners, are bottlers under a bottling agreement with Messrs Pepsico. Inc., USA and are purchasing concentrate from Messrs Pepsi Cola International, Hattar, and in such circumstances, the Hon'ble Peshawar High Court and the august Supreme Court have laid down that bottling agreement is not covered under the term "franchise services" as given under the Act, 2005, and there is no element of fee, royalty etc. Needless to say that decisions rendered by the Apex Court are binding on this Court under Article 189 of the Constitution of the Islamic Republic of Pakistan, 1973. The facts of the present cases are not distinguishable.

13.It is an established principle of law that in case of conflict between a statute and instructions of Board of Revenue, the instructions/ orders of the Board are to be ignored and statute law has to be followed. Reliance in this regard is placed on the esteemed judgment delivered by the Hon'ble Supreme Court in The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited, Lahore and others (1999 SCMR 1442), the relevant part of which reads as under:-

"For the reasons to be recorded later on, the above petitions are converted into appeals and are disposed of in terms that it will be open to the respondents to file appeals even now before the forum provided under the Sales Tax Act to agitate the question that they are entitled to the deduction of input tax in terms of section 7 of the Sales Tax Act, 1990 in respect of the goods which have been used for manufacturing of taxable goods but they have not become integral part of the same. The forums provided under the Act will decide the controversy at issue with reference to the substantive provisions of the Act and SRO No.1307(I)/97, dated 20.12.1997 and in case of any conflict between the two, the substantive provisions of the Act will prevail."

14.In terms of section 3(5)(c) of the Act, the liability to pay the tax in case of services is on the person providing or rendering the services, which in this case would be, as per department's stand, the franchiser who is rendering the franchise services.

15.In order to attract the levy of FED for services rendered, which include franchise services within the contemplation of law reproduced above, respondents are under a legal duty to establish an identifiable link between petitioner and Pepsico or PCI of services rendered against a fee or consideration. It appears that the respondents have proceeded on ill-founded assumptions as there is nothing on record to prove that the petitioner pays for services either to PCI, Hattar or to Pepsico, Inc. USA. In the absence of such payments, as held by the Hon'ble Supreme Court of Pakistan, there is no question of any amount being payable by way of FED for 'services' rendered. Respondents have failed to bring on record any franchise agreement or any proof of payments for services rendered by Pepsico or PCI against a fee or consideration. Therefore, relying on the judgment passed by the Hon'ble Supreme Court of Pakistan in Civil Petitions Nos. 1742 and 1743 of 2014 and judgment passed by the Hon'ble Peshawar High Court in S.T.R. No. 05 of 2013, it can safely be held that the impugned Show Cause Notice dated 06.05.2010, has been issued by the respondent No. 3 without any lawful basis, hence, liable to be declared illegal and of no legal effect.

16.So far as the question of maintainability of the writ petition is concerned, the Hon'ble Apex Court has already settled this issue that no purpose, thus, would be served in requiring the petitioner to pursue alternate remedies. Reliance in this regard is placed upon the case of Iqbal Hussain supra.

17.In view of the above discussion, instant writ petition is allowed to the extent that the impugned Show Cause Notice dated 06.05.2010 is declared to be illegal and without lawful authority, following the ratio settled in the case of M/s Northern Bottling Company (Pvt.) Ltd., supra.

MH/P-8/LPetition allowed.