BURMA OIL MILLS LIMITED Versus FEDERAL GOVERNMENT OF PAKISTAN

1. 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 as follows:‑

2. Constitutional Petition No. D‑1056 of 1981.

3. The petitioner is a State‑owned unit of the Ghee Corporation and a limited company. It is engaged in the manufacture of the Vegetable Ghee after refining different vegetable non‑essential oils with the help of caustic soda and its residue is called Mel or Ladi, hereinafter referred to as the Ladi. ‑It appears that the petitioner treated the Ladi as non‑excisable. However, it seems that they were served with show‑cause notice, dated 24‑5‑1978 stating therein that on investigation it was found that petitioners were removing clandestinely Laundry Soap from the Ghee manufacturing units in the shape of blocks commonly known as Ladis without any brand name, trade mark and weight on the block. It was also alleged that during the period from 1‑7‑1973 to 30‑10‑1977, it was found that the excisable goods were manufactured to the extent of 47,246 maunds, 28 seers, 7 chhitaks and cleared by the said mills and. of which value comes to Rs.59,41,338.66 on which Central Excise duty involved is Rs.1,18,82,677.32 at the rate of 200% as no retail prices were printed on the aforesaid goods as required under item 29 (a) of the First Schedule to the Central Excises and Salt Act, 1944 hereinafter referred to as the Act. The above show‑cause notice was contested by the petitioner. However, the Respondent No.3 by his order dated 3‑1‑1979 directed the petitioner to pay Rs.1,18,82,677.32 as the excise duty and a penalty in the sum of rupees one crore. The petitioner went in appeal against the above order. The Collector of Central Excise and Land Customs, Respondent No. 2 by order dated 18‑12‑1979 modified the above order of respondent No.3 inasmuch as her waived the penalty and ordered the imposition of the excise duty under item 29 at the standard rate. The petitioner went in revision which was dismissed by respondent No.l. The petitioner being aggrieved by the above orders, has filed the present petition.

4. Constitutional Petition D‑1057 of 1981.

5. The petitioner is a State owned unit of Ghee Corporation and is a limited company under the Companies Act. The petitioner is engaged in the manufacture of Vegetable Ghee produced after refining different vegetable non‑essential oils with the help of caustic soda and its residue is called Ladis. It appears that the petitioner treated the Ladi as non‑excisable. However, they were served with a show cause notice, dated 5‑1‑1978 by respondent No.3 stating therein, that the Excise Staff had discovered that the petitioners were manufacturing and clearing Laundry Soap without entry in the Central Excise records and without payment of central excise duty leviable thereon. It was also stated that on enquiry it was found that the petitioner between the periods from 1‑7‑1973 to 30‑8‑1977 cleared the laundry soap valuing Rs.2,23,12,036.23. The petitioners were called upon to show cause as to why action should not be taken against them under the Act and the Rules. The above notice was resisted by the petitioner. However, respondent No. 3 by order dated 17‑10‑1978 imposed a sum of Rs.4, 46, 24, 072.42 as central excise duty and a fine of as. five crores. The petitioners filed an appeal against the above order before the respondent No.2 who by his order dated 18‑12‑1979 waived the amount of penalty and ordered that the duty under item No.l9 of the First Schedule be charged at the standard rate as there was confusion as to the liability of excise duty on the Ladis, The petitioners went in Revision, which was dismissed by Respondent No.l by its order dated 16‑8‑1981, whereby the order of the Respondent No.l was maintained. The petitioner being aggrieved by the above orders has filed the present petition.

6. Constitutional Petition D‑1058 of 1981.

7. The petitioner is a State owned unit of the Ghee Corporation and a limited company incorporated under the Companies Act and is engaged in the manufacture of Vegetable Ghee which it produces after refining different vegetable non‑essential oils with the help of caustic soda and its residue is called Ladis. It seems that the petitioners cleared Ladis from their factory without payment of any excise duty. Respondent No.3 served a show‑cause notice, dated 2‑1‑1978, stating therein that laundry soap in the shape of blocks, which is locally known as Ladis and which did not qualify for exemption under Notification laid down S.R.O.(I)73, dated 1‑12‑1973 read with Notification No.492(I)/77, dated 11‑6‑1977, was detected which was in the process of unloading in M/s Mumtaz Soap Factory, Usmanabad, Karachi and which was purchased from the petitioners. The petitioners were asked to appear on 12‑1‑1978, as the above date of hearing of the above case was fixed. The above notice was resisted by the petitioners. However, the respondent No. 3 by his order dated 12‑1‑1978 ordered the levy of excise duty in the sum of Rs.1,00,70,816.'04 and imposed a penalty pf Rs.10,00,000 on 39635 maunds and 20 seers of Ladis which were allegedly cleared between the periods from 1‑7‑1973 to 30‑10‑1977. The petitioners went in appeal against the above order. The respondent No.2 by his order dated 18‑12‑1979 waived the penalty amount and ordered that the petitioner be charged at the standard rate of duty under item No.29 of the First Schedule. Against the above two orders the petitioner filed revision which was dismissed by respondent No.l by order dated 16‑8‑1981 maintaining the order of respondent No.2. The petitioner being aggrieved by toe above orders has filed the present petition.

2. We have heard the learned counsel for the parties. The main contention of Mr. Samiuddin Sami, learned counsel for the petitioners was that since Ladis is not a finished product and cannot be called as laundry soap, no excise duty is payable under item No.29. His further submission was that the figures of sale adopted by respondent No.2 are not supported by the record.

3. As regards the first submission of Mr. Samiuddin Sami, learned counsel for the petitioners, it may be observed that section 3‑B which was added by Finance Act, 1968 with effect from 8‑6‑1968 provides as follows:

8. '3‑B. Goods partially composed articles.‑‑ woods whereof any article liable to duty under this Act forms a part or ingredient shall be chargeable with the full duty which would be payable on goods if they were entirely composed of such article, or, if composed of more than one article liable to duty, then with able on such goods if they the full duty which would be pay were entirely composed of the article on which the highest amount of duty would be payable."

9. It may be observed that under the above section 3‑B even a he excisable goods are chargeable with the full part of ingredient of duty and, therefore, if Ladis is an ingredient for manufacturing of, the laundry soap it will be covered by the above quoted section 3‑B.I Then it was submitted by the learned counsel for the petitioners that) the respondents have not dilated upon this aspect and there is no material on record to indicate that in fact Ladis can be treated as an ingredient for the purpose of manufacturing Laundry Soap or any other excisable items.

10. In our view it will be just and proper to remand the case to respondent No.3 with the direction to examine the question in issue with reference to the above quoted section 3‑B and in case it is necessary to refer Ladi for chemical analysing, the same may be done and the petitioners may also be provided the opportunity to produce the analyser's report on the above point.

11. We may also observe that the quantum of Ladis allegedly cleared by the three petitioners during the alleged periods mentioned hereinabove in pars 1 may also be checked on the basis of the records to be produced by the petitioners. The petitioners will have the opportunity to point out that the quantities relied upon by the respondent No.3 are not the correct quantities reflected in the record maintained by them. The petitions stand disposed of in the above terms with no order as to costs.

12. H.B.T./B-63 Order accordingly.