GOVERNMENT OF PAKISTAN through Additional Secretary Ministry of Finance

' M. JAVED BUTTAR, J.--- The appellants through this appeal, by leave, have assailed the judgment, dated 30-10-1999 passed by Division Bench of High Court of Sindh, Karachi, whereby Constitutional Petition No,D-514 of 1995, instituted by the respondent, was allowed. The concluding paragraph of the same reads as under:-- "(11) Consequently, in view of the above reasoning the petition is allowed and it is declared that `Leucophor' is not classifiable under Entry No,04.03 of the First Schedule to the Central Excise and Salt Act, 1944, therefore, the orders passed by the respondents, impugned in this petition are contrary to law and have no legal effect, and no adverse action shall be taken against the petitioner on the basis of the impugned orders. The amounts, if any, recovered in pursuance of the impugned orders be refunded to the petitioner. While allowing the petition as above the parties are left to bear their own costs. The above order was pronounced on 6-10-1999 by a short order, these are reasons for the same."

2. The respondent-Mills are manufacturer of a product called "Leucophor". The said product was being cleared by the Excise Department, without any demand of excise duty. On an information received by the intelligence staff of Headquarters of Collectorate of Customs and Central Excise Department, Hyderabad that respondent-Mills were manufacturing an Optical Bleaching Agent, namely "Leucophor", and the same was being cleared as exempt from the levy of Central Excise duty, three samples of the above said product were obtained from the respondents which were sent to the Customs House, Karachi for chemical analysis and test report. The laboratory vide its report dated 22-12-1992 reported that the sample "Leucophor" was an Optical Bleaching Agent (Fluorescent Brightening Agent). The Deputy Collector, Central Excise, Hyderabad classified the said product under Entry No,04.03 of the First Schedule to the Central Excises Act, 1944. On 9-5-1992, the Collectorate of Customs and Central Excise Department, Hyderabad issued a show-cause notice to the respondent-Mills, along with the copy of the test report, stating that they were getting cleared their above said product, an Optical Bleaching Agent, by misdeclaring it as a Chemical without the payment of Central Excise Duty by declaring it as an exempted item for' the period from 7-6-1990 to 13-4-1993, whereas analysis showed that "Leucophor" was an Optical Bleaching Agent (Flourescent Brightening Agent), hence it was classifiable under Item No,04.03 of the First Schedule to the Central Excise and Salt Act, 1944 and chargeable to excise duty and the amount of duty chargeable on the product cleared from the factory during this period was Rs,1,34,60,396 and that the respondents contravened the Rules 7, 9, 52, 236 and 238 of the Central Excise Rules, 1944 and they were also called upon to show cause within 10 days of the receipt of the notice that why penal action be not taken against them for the contravention of the above said rules. The respondents responded to the show-cause notice. The Deputy Collectorate Central Excise and Sales Tax, Hyderabad, vide his order, dated 7-12-1993, rejected the plea of the respondents that the product was not classifiable as "dye" and did not fall under above Item No,04.03 and directed the respondents to pay the above mentioned amount as excise duty. However, no penalty was imposed as it was held that their failure to pay the excise duty was the result of a bona fide misunderstanding about the item "Leucophor". The respondent's appeal was dismissed by the Collector (Appeals), vide his order, dated 24-3-1994. Their revision application was dismissed by the Government of Pakistan, vide order, dated 8-3-1995. However, as mentioned above, their Constitutional Petition No,D-514 of 1995, was allowed by the Honourable Judges of the High Court, vide their impugned judgment, dated 30-10-1999.

3. Leave to appeal was granted by this Court on 25-7-2000 to consider the following:-- "(i) As per Entry No,04.03 glazes, lusterers, lacquers and polishes and their ancillaries in any form fall within the ambit of said entry and such are chargeable to excise duty and whether leucophor being of this category also falls within the scope of said entry.

(ii) Whether the respondent contravened rules 7, 9, 52, 236 and 238 of Central Excise Rules, 1994.

(iii) Whether `Leucophor' and `Tinopal CBS-X' are comparable commodities and are to be treated alike."

4. It is submitted by learned counsel for the appellants that High Court, in exercise of its constitutional jurisdiction, illegally upset the finding of fact recorded by the three forums below, merely on the ground that the said forums had relied on some previous orders/ judgment, whereas the test report accompanying the show-cause notice, clearly demonstrated that the product in question was found to be "Optical Bleaching Agent" and that the compound was a Fluorescent Brightening Agent, therefore, the product was a "dye" classifiable under above the said Item No,04.03, hence chargeable .To excise duty, that it was a mistaken impression that the forums below had formed their opinion merely on the basis of some previous orders/judgments, whereas perusal of the said order, specially the orders passed at the original and revisional stages, show that the concerned authorities had applied their mind, independently of the previous decisions, to the facts and circumstances of the present case and had come to the conclusion that the product being manufactured by the respondent was a "dye". The learned ,counsel for the respondents, on the other hand while opposing the appeal, has submitted that since the findings recorded by the forums below were patently contrary to the available record, the Honourable Judges. Of the High Court, correctly and lawfully undertook the excise to determine the true nature of the product "Leucophor", which is a (Fluorescent Brightening Agent), which does not impart colour to any substance and as such it is not a "dye".

5. On perusal of impugned judgment, we have found that the Honourable Judges of the High Court mainly relied on a previous decision rendered by the Sindh High Court in C.P. No,D-865 of 1992 which was upheld by this Court in C.P. No,402-K of 1995, in which the issue was whether the product known as "Tinopal" was classifiable under Item No,04.03 or to. The test results in the said case showed that the "Tinopal" was an "Optical Bleaching Agent", "Fluorescent Brightening Agent" and since in the said case it was held that it was not a "dye", therefore, "Leucophor" cannot be held to be a "dye". Interestingly the test reports (reproduced in para.7 of the impugned judgment), in the said case of Tinopal, further showed that the product "Tinopal" was not capable of dyeing whereas in the present case no such finding has been recorded by the Laboratory in the test reports which accompanied the show-cause notice. Section 3 of the Central Excises Act, 1944 is the charging section under which duties of excise are levied and collected, on all goods and services set forth in the First Schedule. Item No,04.03 of the First Schedule, reads as under:-- "0.4.03 Paints, Pigments, Varnishes and Polishes. All sort of paints (including products known as or used as cement paints) pigments, distempers, colours, dyes, enamels, varnishes, glazes, lusters, thinners, blacks, cellulose lacquers and polishes (except creams and polishes falling under Items No,04.01) and their ancillaries, in any form, liquid, solid, semi-solid, paste, power or granules:--

(i) if retail price and quantity 22 per cent. Of are legibly, prominently and the retail indelibly printed on each price container or package.

(ii) if not covered by clause (i) 200 per cent. Ad valoruem."

' Thus, all kinds of dyes are chargeable to excise duty. The order-inoriginal passed by the Deputy Collector Customs, Central Excise and Sales Tax, Hyderabad shows (para.8 of the order) that the same was passed after taking into consideration the view points of both the sides and after scrutiny of the evidence furnished by them. Although, at appeal stage, the Collector passed the judgment, dated 24-3-1994 by merely following a previous order, dated 25-2-1992 passed by a Member (Judicial), in a revision, in the case of Messrs Ciba Geigy (Pakistan) Ltd., but the Revisional Authority, vide detailed judgment after scrutinizing the entire record/evidence and after hearing the learned counsel for the parties at great length, concluded that the product "Leucophor" was a "dye". In any case, the learned Judge of the High Court, mistakenly relied upon the above said earlier decision rendered by the High Court in regard to the product known as "Tinopal", in which the test report was that the said product was not capable of dyeing, (para.7 of the impugned judgment) whereas in the present case, in the test report, which accompanied the show-cause notice, which has not been considered by the learned Judges of the High Court, no such report has been given that "Leucophor" is not capable of dyeing. In these circumstances, the Honourable Judges ought to have relied on the findings recorded by the Tribunals below and may not have undertaken the inquiry and investigation into the nature of the product. The findings of fact recorded by three forums below were based on the evidence and the available record and did not suffer from any misreading or non-reading of evidence, hence the Honourable Judges of the High Court in passing the impugned judgment, travelled beyond their jurisdiction conferred on them under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973.

' In view of the above mentioned, the appeal is allowed with costs and the impugned judgment, dated 30-10-1999 of the High Court of Sindh, Karachi passed in C.P. No,D-514 is set aside.