PAK COSMETIC PRODUCTS, KARACHI Versus PAKISTAN

AJMAL MIAN, J. ‑‑ By this common judgment, we intend to dispose of the above petitions. The brief facts leading to the filing of the above petitions are that the petitioners entered into two contracts or, 28‑7‑1970 and 29‑12‑1975 respectively, with the Deputy Director of Defence Purchases III Ministry of Defence, Government of Pakistan for the supply of "Talcum Purified BP 68", which according to the petitioners is a chemical known as magnesium silicate, hereinafter referred to as the powder, in British Pharmocopia. It may be observed that as per condition No.9 of the contracts, petitioners were to supply the powder in 1 lb. containers. It appears that respondent No.4 seized certain quantity of the powder contained in 1 lb. containers, belonging to the petitioners from the factory premises of Messrs Pak cosmetic Products, Karachi, who are the petitioners in the other petition. The petitioners were issued a show‑cause notice dated 4 8‑197E calling upon them to show cause as to why central excise duty amounting to Rs.38,192 at 200% ad valorem as the goods do not carry printed retail prices thereon, should not be recovered from them under Rule 226(2) C.R. Rules, 1944, hereinafter referred to as the Rules. The above show‑cause notice was replied to by the petitioners. However, respondent No.4. by his order dated 25‑9‑1976 held that the powder is known to be effective as anti‑perspirant for human body in hot climatic regions and acts by absorbing the perspirant fluids as well as to plug the pores of sweat glands of human skin. He accordingly held that the same falls under item No.28 of the first schedule to the central Excises and Salt Act, 1944. At the same time he took lenient view in the matter by ordering that the seized goods were confiscated but can be redeemed on payment of a fine of Rs.5,000 in addition to duty leviable. It also appears that the petitioners were also issued another show‑cause notice dated 25‑9‑1976 in respect of some other quantity of the seized powder. The above show‑cause notice was also replied to, but the respondent No.4 by his order dated 13‑3‑1977 took the same view which found favour with him earlier and ordered the petitioner to pay a sum of Rs.34,720 as the excise duty on 25,000 lbs purified talcum powder. It may be observed that this is a common order in the above petition as well as in the second petition, as the petitioners in Constitutional Petition No. D‑1315 of 1979 were also issued a show‑cause notice dated 4‑8‑1976. The petitioners in the above two petitions filed 2 appeals before the Collector, Respondent No.3, which were disposed of by a common order dated 23‑8‑1978, whereby he maintained the above two orders. Against the above orders the petitioners went in Revisions by filing two separate Revision Applications but the same were dismissed by a common order dated 5‑6‑1979. The petitioners being aggrieved by the above orders have filed the above 2 petitions.

3. In support of the above petition Mr. Maroof Ali Khan, learned counsel for the petitioners has urged as follows:‑

(i) That since the petitioners in the first case had purchased a large quantity of the powder from the market and had not carried out any manufacturing process by mixing any ingredient, the petitioners are not liable to pay any excise duty in terms of section 3 of the Central Excises and Salt Act, 1944, hereinafter referred to as the Act.

(ii) That the finding of the three forums that the powder falls under item 29 of the First Schedule to the Act is not warranted as the powder is not marketed as a perfumery in the market.

On the other hand Syed Inayat Ali learned counsel appearing for the respondents has contended as follows:‑

(i) That .in view of the definition bf the word 'manufacture' given in section 2(f) of the Act, even the act of packing or re‑packing will constitute manufacturing in terms of the above clause of section 2 of the Act.

(ii) That there is a finding of fact recorded by three competent forums that the powder falls within the category of perfumery and thus comes under item 29 of the First Schedule to the Act, therefore this Court in exercise of constitutional juris diction will not interfere with the above finding of fact, particularly in view of the concession made by the petitioners before the respondent No.2 in the Revisions.

4. Adverting to the first submission of the learned counsel for the parties, it may be pertinent to reproduce clause (f) of section 2 of the Act, which reads as follows:‑

"(f) 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product (and any process of re‑manufacture, remaking, reconditioning or repair) (and the processes of packing or re‑packing such product); and

(i) in relation to tobacco includes the preparation of cigarettes, cigars, charoots, Biris, cigarette or pipe or Hookah tobacco, chewing tobacco or snuff; and

(ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling, or any one or more of these processes, the separation or purification of salt obtained in the manufacture of saltpetre, the separation of salt from 'earth or other substance so as to produce alimentary salt and the excavation or removal of natural saline deposits or efflorescense; and the word 'manufacturer' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account if those goods are intended for sale (and, in respect of gold and silver and products thereof, also any person dealing in gold and silver and products thereof who, whether or not he carries out any process of manufacture himself or through his employees or relatives, gets any process of manufacture carried out on his behalf by any person who is not in his employ, and any person so dealing in gold and silver and products thereof shall be deemed to have manufactured for all purposes of this Act, all products of gold or silver in which he deals in any capacity whatever)."

A perusal of the above quoted definition of the word "manufacture" indicates that by fiction of law even the proceeds of packing or re‑packing of the products referred to had been included in the process of manufacture and therefore in the instant case even if we were to accept the contention of the petitioners that they were only packing the powder into 1 lb containers contracts in terms of the contracts with the Defence Department, this process of packing will come within the ambit of the above quoted clause (f)

5. As regards the second submission, it may be observed that Mr. Maroof Ali Khan, learned counsel for the petitioners in‑furtherance of his above submission has referred to an order dated 26‑12‑1979 passed by the Collector of Excise in the case of Medicure Laboratories, wherein he has taken a contrary view and in fact has accepted the contention which has been canvassed before us by Mr. Maroof Ali Khan. In our view, this fact alone will not take away the powder Lour the ambit of first Schedule to the Act if it is otherwise, falls under the above item.

Mr. Maroof Ali Khan has also referred to the case of Sultan Ahmad Bari v. Collector of Central Excise and Land Customs Karachi and others, reported in 1983 C L C 1538 in which a Division Bench of the erstwhile High Court of Sind and Baluchistan held that the essences and synthetic essential oils were not primarily used or even understood as perfumes though capable of being used as perfumes or utilised as perfumes, would not fall within item 29.

6. Since the' department has 'taken a different view in another case subsequent to the passing of the impugned orders, in our view it will be just and proper that the cases are remanded to respondent No.3 for re‑hearing, the appeals for reconsideration 'of the matter in the light of the subsequent order arid to examine whether the first view was correct or the subsequent view was correct.

The petitions stand disposed of in the above terms with no order as to costs.

A.A./P‑49/K Cases remanded.