PAKISTAN JUTE MILLS ASSOCIATION Versus COLLECTOR OF CENTRAL EXCISE AND LAND CUSTOMS, EAST ZONE, CHITTAGONG AND 6 OTHERS
SALAHCIDDIN AHMED, J. ---‑All these seven Rules were heard together as common questions of facts and law were involved and they are now being disposed of under one judgment.
The petitioners are all Jute Manufacturing Companies incorporated under the Companies Act manufacturing jute products at their mills and they are also members of Pakistan Jute Mills Association hereinafter called P. J. M. A. which is an officially recognised trade organisation of the jute mills in Pakistan. Among other jute products and jute Fabrics they manufactured (a) "Hessian" and (b) "Sacking" including Heavy Cess, Cement Bags made of Heavy Cess cloth, B Twill and other varieties of "Sacking" both of twill and plain weave.
It is the case of the petitioners that until the passing of the Finance Act, 1965 excise duty was payable under the Central Excises and Salt Act, I of 1944, hereinafter referred to as the Act, under item 18 of the First Schedule thereto on "Jute Manufactures made in a factory ordinarily using power in the course of production of such manufactures" at the rate of Rs. 70 per ton. By the Finance Act, 1965 the said item 18 of the First Schedule to the Act was amended so as to provide for payment of duty on jute manufactures as follows :‑
"Jute manufactures made in a factory ordinarily using power in the course of production of such manufactures.
Rs.
(i) Hessian 200 per ton
(ii) All other manufactures 125 per ton."
In accordance with this amendment the petitioners paid duty on their product "Sacking" including Heavy Cess, Cement Bags of both twill and plain weave at the rate of Rs. 125 per ton as they claimed that "Sacking" fell under the second category "all other jute manufactures" and such payments were accepted by the authorities concerned. In February 1966, for the first time an Assistant Collector of Central Excises and Land Customs, Hyderabad, objected to the classification under the second category "all other manufactures" of "Heavy Cess" sacking cement bags despatched by Amin Fabrics Ltd. (another member of the P. J. M. A.). He was of opinion that all kinds of cloth made of jute were to be treated as "Hessian" and would be charged excise duty at the rate of Rs. 200 per ton and accordingly he assessed excise duty on all jute goods except "Twine" and "Yarn" at the said rate. This opinion and action of the Assistant Collector of Central Excise and Land Customs appears to have been followed by the Excise and Customs Authorities of other places in Pakistan including Chittagong and Dacca. From this point onward began a series of representations, firstly from some individual members of P. J. M. A. and subsequently by the P. J. M. A. acting collectively on behalf of its members, to the different authorities ranging from the Collector of Central Excise and Land Customs, Chittagong to the Central Board of Revenue, Islamabad endeavouring to impress on them that "Hessian" and "Sacking" were two universally accepted classifications of jute manufactures, and that "Sacking" and its kindred manufactures, namely, "Heavy Cess", Cement Bags etc. had never been regarded as included under the head "Hessian". It appears that in course of these persistent representations they succeeded in persuading the authorities to come down from the position they had originally taken up, namely, that all jute fabrics irrespective of their quality and purpose for which they were used were assessable as "Hessian" under item `I' of the said amended item 18 of the First Schedule of the Act and as such was chargeable to duty at the rate of Rs. 200 per ton (vide Annexure `A‑14' to the petition) (Central Ruling No. 3 of 1966). The authorities conceded that twill weave sacking should be treated as separate from "Hessian" (vide Annexures `A‑11', `A‑12', `A‑13' and 'A‑14'). The last‑named Annexure `A‑14' is a letter from the Second Secretary, Central Board of Revenue, Pakistan to the Collector of Central Excise and Land Customs, Lahore, Karachi, East Zone, Chittagong/West Zone, Chittagong stating inter alia that only such fabrics as are of plain weave as defined in the letter should be assessed to custom duty as "Hessian".
The Jute Board constituted under the Jute Ordinance of 1962 was sympathetic towards the demand of the P. J. M. A. that "Sacking" and its kindred products did not fall under the heading "Hessian" and that they should be regarded as falling under the second head, namely, "all other manufactures" and the Board accordingly recommended to the authorities that the said demand should be considered sympathetically (vide Annexure `A‑23' to the petition). All the representations made by the P. J. M. A., however, failed to bring any further concession from the authorities and the petitioners were, therefore, confronted with a number of demand notices asking them to pay up the difference between the amount they paid on "Sacking" and its kindred products and the duty required to be paid on "Hessian" under item No. 1 of the said item 18 of the First Schedule of the Act, and they were further asked to pay duty on "Sacking" and kindered products at the rate of Rs. 200 per ton as payable on "Hessian".
Petitioners having thus been aggrieved by the action of the authorities in treating "Sacking", "Heavy Cess" and "Cement Bags" as "Hessian" under the head `1' of the said item No. 18 of the First Schedule to the said Act and as such chargeable to excise duty at the rate of Rs. 200 per ton and the consequence demand notices asking the petitioners to pay duty on "Sacking", "Heavy Cess" and "Cement Bags" at the rate of Rs. 200 per ton and to pay up the difference between this rate and the rate which the petitioners had paid treating the said jute products as falling under head `II' of the said item 18, namely, "all other manu factures" which are chargeable at the rate of Rs. 125 per ton approached this Court and obtained the present Rules nisi.
In the Petitions huge materials have been annexed in support of the petitioners' point of view that "Sacking" and its kindred variety of products have always been regarded as a category of jute product quite distinct and separate from the category of "Hessian" by the Government and other authorities, by various official bodies, and by the trade both inside and outside Pakistan. The various assertions made by the petitioners in this respect as well as the documents and material exhibits annexed to the petitions in support of these assertions have gone unchallenged by the respondents.
On behalf of the respondents far from disputing the relevant assertions in regard to the "Sacking" and "Hessian" having boon always regarded as two distinct categories of ,jute manufactures recognised by all concerned it has been merely asserted that ` Hessian" and "Sacking" both being of "Plain weave" as defined in "Chamber's Technical Dictionary", too is "Hessian" and as such "Sacking" falls under the head `I' in item 18 of the First Schedule to the Act. "Plain weave" has been defined in the said dictionary as "the simplest interlacing of warp and weft threads each thread is alternatively over and under the weft, while adjacent warp threads work opposite to each other".
Upon the averments made by, the two parties the only question that arises for consideration is whether under the Finance Act, 1965, item 18 of the First Schedule "Sacking" and its kindred variety are chargeable with duty at the rate of Rs. 200 per ton as "Hessian" or whether they are chargeable with duty at the rate of Rs. 125 per ton as falling under the head "all other manufactures". It is desirable to mention here that the said item 18 of Finance Act, 1965 which had amended the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) was further amended by the Finance Act, 1967 (Act No. XII of 1967) published in the Gazette of Pakistan, Extraordinary, on 30‑6‑67 in the following manner
"In item 18, in column (2), in clause (i), 'Hessian' including sacking and bagging materials and fabrics of all sorts."
It is, therefore, evident that on and from the 30‑6‑67 "Sacking" and its kindred variety are included under the head "Hessian" in accordance with the Finance Act of 1967. The question of classification and distinction, however, still retains its importance because of the fact that the aforesaid amendment has not been made retrospective in operation, and therefore, we are required to decide whether the authorities treating "Sacking" and its kindred variety as falling under the head "Hessian" in the unamended item 18 of the First Schedule to the Act, and the consequent demand made upon the petitioners to pay the difference between the duty paid by them on "Sacking" and its kindred variety and the duty which they should have paid under the said item, namely, under the head "Hessian" were lawful at the time such action was taken and the demand made.
It should be mentioned at the outset that "Hessian" has not been defined either under the Central Excises and Salt Act or under the Finance Act, 1965. We are, therefore, left to enquire as to what it means and what it includes.
Materal Exhibits of B. TWILL (TWILL WEAVE SACKING, CORNSACK (TWILL WEAVE SACKING), HEAVY CESS (PLAIN WEAVE SACKING) and HESSIAN have been annexed to the petitions as Annexure "G" and they have not been challenged by the respondents. Prima facie "Hessian" compar ably appears to be of finer and lighter texture.
Mr. Kamal Hossain, learned Advocate appearing for the petitioners, has argued ably and convincingly that "Hessian" and "Sacking" are two well‑known and well‑established jute manu factures recognised by Government, by the various statutory bodies as well as by the trade both inside and outside the country. In support of this contention Mr. Kamal Hossain has placed before us the following unchallenged facts : (1) Notification of the Government of Pakistan, Ministry of Finance (Revenue Division), Karachi, dated 13‑6‑58 issued under rule 8 (1) of the Central Excise Rules, 1944 granting certain exemptions to jute manufacturers in respect of the duty leviable under the Central Excises and Salt Act, 1944. The Schedule contained in the Notification mentions the following manufactures and the extent of exemption on them :‑
"(a) `Hessian' . . . . . . 2% of the weight of the goods ;
(b) `Sacking' . . . . . . . 3 Y. of the weight of the goods (vide Annexure `B' to the petition."
2. Jute Ordinance, 1962 (Ordinance LXXIV of 1962), Clause (h) (i) of section 2 whereof reads as follows :‑
(5-a) Jute Mill means a machine by which jute goods of any description such as twine, sacking, Hessian, ropes, gunny cloth and the like can be manufactured ;"
3. East Bengal Jute Dealers Registration Act, 1949 (East Bengal Act XVIII of 1949) (now repealed), clause (5) (a) of section 2 whereof reads as follows :‑
(5‑a) " `jute mill' means a machine by which the goods of any description such as twine, sacking, Hessian, ropes, gunny cloth and the like can be manufactured."
4. The Second Schedule Export Tariff, item 2 which appears in Pakistan Customs Tariff published by the Government of Pakistan, Ministry of Commerce on the 1‑2‑65 reads as follows :‑
" `Jute Manufactures', when not in actual use as coverings receptacles or binding for other goods‑
(1) Sacking (cloth) bags twist, yar, . . . . Rs. 50 per ton rope and twine.
(2) Hessain and all other description, Rs. 80 per ton of Jute Manufacture not otherwise specified."
5. Manual of Imports and Exports Control published by the Office of the Chief Controller of Imports and Exports, Govern ment of Pakistan (1964) at pages 322 and 323 maintained the distinction between the "Gunny Bags" and "Hessian Cloth".
6. Central Excise Manu‑‑1 published under the Authority of the Central Board of Revenue, Government of Pakistan which is corrected up to 30‑6‑63 at pages 227 and 22 8 whereof appear the following items 17 and 18 in Appendix V (Exemptions) ;
Description of
Goods
Limitations of
Conditions
Extent of Exemption
"17. Jute manu‑ factures.
If they are pack sheets (used in pack ing of jute Manu facture, names :
(a) . . . . . . .
(b) . . . . . . .
As is in excess of the duty leviable on
2 % weight of good
As is in excess of the duty leviable on 3 % weight of goods.
18. Hessian, Sack‑ ings, and Jute canvas.
If they are cut and damaged pieces and if they do not exceed one and a half yards in length.
The whole.
7. Comprehensive Industrial Investment Schedule for Third Five‑year Plan Period (1965‑70) issued by the Government of Pakistan, at page 27 similarly maintains the two distinct categories of Jute Manufactures, namely, "Hessian" and "Sacking".
8. Report of the Jute Enquiry Commission published by the Government of Pakistan, Ministry of Commerce, 1960, also maintains the two distinct categories of Jute manufactures, namely, "Hessian" and "Sacking" (vide, page 13, Table I).
(9) At page 132 of the Report of the Jute Enquiry Commission appears the following
"371. In the early twentieth century there were six recognis ed clauses of jute as follows :‑
(I) Hessian‑warp ;
(II) Hessian‑weft ;
(III) Sacking‑warp ;
(IV) Sacking‑weft ;
(V) Rejections ;
(VI) Cuttings.
(I) Hessian‑warp is a strong, long, healthy and fine Jute of good gloss and silvery white colour, without any defects such as barky, mossy, sticky or specky. It is used for spinning thread, which is suitable as warp for weaving Hessian cloth or other finer fabrics.
(II) Hessian‑weft is inferior to Hessian‑warp in length and gloss, but similar to it in other respects. This jute is used for weft in the hessian cloth referred to above.
(III) Sacking‑warp is strong, long and healthy jute, irrespective of any particular colour. It is coarser than I and 11. The thread spun out of this jute is used as warp for weaving sacks.
(IV) Sacking‑wept is a dull‑coloured short or weak jute used for weft in sacks.
(V) Rejections are the worst stuff. They are either damaged, barky or knotty, and are used in spinning thread for sacking weft. Barky Jute is used in spinning after it is soaked with oil and water and passed through softness.
VI. Cuttings are the barky or hard portions of jute cut off from the bottom or the top. Cuttings are used eight in spinning sacks as weft, after being softened with oil and water as referred to above, or in paper‑making.
372. Various grades of jute prevalent at that time, e.g. 1, 2, 3, 4 and R's. were defined in terms of percentages of Hessian‑warp. Hessian‑weft, etc. contained in the jute. However, in course of time various changes occurred and confusing marks such as red 2's, green 2's, x 3's and x 4's etc. were introduced."
At pages 145 and 147 while giving the average cost of produc tion of jute goods in Pakistan, two distinct categories of jute Manufactures are maintained. Again at pages 150, 152, 153, 156 and 157 of the Report, the same distinction is maintained. At page 223 under the heading "Targets for jute goods" item 104 mentioned separately targets of production of Hessian, sacking and other jute manufactures.
10. Similarly in the Foreign Trade Statistics of Pakistan for October 1966 at page 25 Jute Hessian Cloth and Jute Sacking Cloth have been separately classed as two distinct commodities bearing separate Pakistan standard trade classification code numbers.
11. Certificate issued by the United Kingdom Jute Goods Association Limited dated 6‑6‑66 (Annexure `B‑I' to the petition at page 133) has, inter alia stated as follows :‑
"One would define a Hessian cloth as being a plain weave material with a single warp, while Sacking can be either twill weave or plain weave. Both the twill weave and the plain weave Sackings are constructed with double warp threads and the weft consists of a common sacking yarn."
12. A booklet issued by one of the leading companies of jute in the United States, Bemis Company Limited which the petitioners have alleged as its own mills and enjoys a world‑wide reputation in its standing instructions mentions the different specifi cations of sacking and Hessian bags (vide Annexure 'C‑I' to the petition at page 142).
13. A booklet containing the Indian Customs specification of jute sacking entitled "Customs List‑Sacking Qualities" where under D. W. Heavy Cess, Cement Bags as well as Bags are classified under sacking (vide Annexure `C' to the petition at page 135).
The provisions of these Statutes and the contents of the said Reports and documents have not been disputed by the respon dents. In our opinion it has been demonstrably shown by the petitioners that "Hessian" and "Sacking" are two well‑established world‑wide specifications of jute manufactures universally accepted and recognised by all concerned including the relevant authorities of the Government of Pakistan. We, therefore, find no hesitation in holding that until the amendment of the said item 18 of the First Schedule to the Act was made by the Finance Act of 1967 "Hessian" and "Sacking" including its kindred variety were always treated as two different categories of jute manufactures and they were well recognised and well under stood as such and consequently under the said unamended item 18 of the First Schedule to the Act, "Sacking", "heavy cess" and "dement bags", whether of plain weave or twill weave, fell under A the second category, namely, "all other manufactures" and they were not included under the head "Hessian". Besides it being a fiscal statute the rule of strict interpretation applies and unless "Sacking" fell clearly under the head "Hessian" it could not be charged at a higher rate applicable to "Hessian" only. From the foregoing it is patent that in every sphere, official or otherwise, "Hessian" and "Sacking" were maintained under two distinct categories, and therefore, even if it could be held that it was possible for "Sacking" to come under the heading "Hessian", both being plain weave fabric, a construction of the statute that is favourable to the tax‑payer should be preferred, vide The Com missioner of Income‑tax, East Pakistan v. Messrs Hossen Kasam Dada, Karachi (P L D 1961 S C 375). Again in the case of Muhammad Younus v. Central Board of Revenue, Government of Pakistan and others (P L D 1964 S C 113) at page 119 it has been observed that any reasonable doubt about such matter is to be resolved in favour of the tax‑payer. It is also clear from the facts and circumstances mentioned above that at least in trade circles "Hessian" and "Sacking" were always understood as two distinct categories and specifications of jute manufactures and consequently unless B these two expressions have been statutorily defined, they must be understood in the same sense in which the people manu facturing and dealing in them understood. Our view finds support from Crawford on Interpretation of Statutes, 1940 Edition, page 321 ; Craies on Interpretation of Statutes, Sixth Edition. page 614, Maxwell on Interpretation of Statutes, Eleventh Edition. pages 53 and 57 and Bindra, Third Edition, page 145. This principle has been accepted by the Court of Appeal in Unwin v. Hanson (2 QBD 115) at page 119 where Lord Eshar, Master of the Rolls has observed thus
"If the Act is one passed with reference to a particular trade, business, or transaction and words are used which everybody conversant with that trade, business, or transaction, knows and understands to have a particular meaning in it, then the words are to be construed as having that particular meaning though it may differ from the common or ordinary meaning of the words. For instance, the `waist' or the `skin' are well -known terms as applied to a ship, and no body would think of their meaning the waist or the skin of a person when they are used in an Act of Parliament dealing with ships."
The same principle has been accepted by a Division Bench of this Court of which one of us was a party in the case of Messrs Usmania Glass‑Sheet Factory Ltd. v. Sales Tax Officer, Companies Circle IV, Chittagong (1966 PTD 461).
The respondents' contention that "Hessian" is a Jute fabric of plain weave and therefore, all jute fabrics of plain weave should be treated as "Hessian" is obviously fallacious and untenable. The respondents have failed to place before us any material in support of this untenable contention. Apparently having been compelled by the obvious difference between "Hessian" and "Sacking" they conceded that twill weave "Sacking" was not classifiable as "Hessian". It has been rightly contended by Mr. Kamal Hossain that except for the difference in the manner of weaving, namely, twill or plain, one moving in straight and parallel manner and the other diagonally, there is hardly any difference whatsoever in the materials of warp and weft used in the weaving of "Sacking' ' whether of plain or twill weave. This contention contained in paragraph 56 of the petition has not been disputed by the respondents except that the respondents have kept on reiterating that all jute fabrics whether intended for use as "Sacking" or bagging material or for any other purpose which are of plain weave are classified as "Hessian".
The petitioners have asserted that they had to pay certain amount of duty in excess of the duty legally chargeable on "Sacking" in accordance with the said item 18 that of First Schedule to the Act under protest. These assertions, have not been disputed by the respondents. A Division Bench of this Court to which one of us is a party has in the case of Azizuddin Industries Ltd. v. The Controller of Central Excise and Land Customs, Chittagong and others (PLD 1967 Dacca 58) has held that this Court can pass an order for refunding the excess amount realised by the authorities.
We accordingly make he Rule issued in each one of the seven petitions absolute and declare that action of the respondents treating "Sacking", "Heavy Cess" and "Cement Bags" as falling under the head "Hessian" in the said item 18 of the Schedule to the Act during the period prior to the coming into force of the Finance Act of 1967 was without lawful autho rity and of no legal effect. We further declare that in Petition No. 32b of 1967 the two demand notices dated 3‑3‑67 and one notice dated 4‑3‑67, in Petition No. 340 of 1967 demand notice dated 27‑5‑67, in Petition No. 360 of 1967 demand notice dated 22‑2‑67 and in Petition 372 of 1967 two demand notices both dated 3‑3‑67 have been made without lawful authority and of no legal effect. We also declare that the excess amount paid by the petitioners amounting to Rs. 68,206.72 paisa in Petition No. 326 of 1967, excess amount of Rs. 6,930 paid by the petitioners in Petition No. 340 of 1967, the excess amount of Rs. 13,417.95 paisa. paid by the petitioner in Petition No. 342 of 1967, the excess amount of Rs. 32,324.25 paisa paid by the petitioner in Petition No. 358 of 1967, the excess amount of Rs. 200.85 paisa paid by the petitioner in Petition No. 360 of 1967, the excess amount of Rs. 20,198.33 paisa paid by the petitioner in Petition No. 372 of 1967, and the excess amount of Rs. 58,810.50 paisa paid by the petitioner in Petition No. 373 of 1967 were paid by the petitioners under protest, and were received by the Collector of Central. Excise and Land Customs, East Zone (respondent No. 1 in all the petitions) without lawful authority, and we accordingly direct the said respondent to refund to each of the petitioners the said excess amount of., duty realised from him.
Having regard to the facts and circumstances of the case we: make no order as to costs.
MAHMUD HUSAIN, J. ---‑I agree.
A. E. Rule made absolute.