Appeal No.914/LB of 2001, decided on 12th December, 2001. Versus Appeal No.914/LB of 2001, decided on 12th December, 2001.
1. S. M. KAZIMI, MEMBER (TECHNICAL). --- This judgment disposes of the appeal filed by Messrs United Industries Ltd., Faisalabad, against the Central Excise/Sales Tax Order-in-Original No. 3 to 4/2001-FSD, dated 16-3-2001 passed by the Collector (Adjudication), Faisalabad. This judgment shall also dispose of the following 44 appeal cases which are identical in facts and on law, except for the amounts involved:
2. Taxes adjudged and penalty imposed
3. Appeal No.
4. Appellant's Name
5. Order Appealed against
6. C. E. Duty
7. C. E. Penalty
8. Sales Tax
9. S. T Penalty
10. 914/LB/2001
11. United industries Ltd.
12. 3-4/2001
13. 16929000
14. 25000
15. 2473583
16. --
17. 36/LB/01
18. M/s. Mahboob Industries Ltd.
19. 41-50/2000
20. 5613959
21. 11227918
22. --
23. --
24. 34/LB/01
25. -do-
26. 41-50/2000
27. 335556
28. 671112
29. 233866
30. 70160
31. 941/LB/01
32. -do-
33. 60/2001
34. 490591
35. 981182
36. 72589
37. 22077
38. 942/LB/01
39. -do-
40. 59/2001
41. 2196917
42. 4393834
43. 407580
44. 122274
45. 1941/LB/01
46. Kasur Ghee Milts Ltd.
47. 99/2001
48. 705774
49. 1411948
50. 105896
51. 31769
52. 1900/LB/01
53. -do-
54. 3066/ST/01
55. --
56. --
57. 274605
58. 5000
59. 2299/LB/01
60. -do-
61. 107/2001
62. 321906
63. 643804
64. 48285
65. 14485
66. 1295/LB/01
67. -do-
68. 65/2000
69. 1830695
70. 3661390
71. --
72. --
73. 1235/LB/01
74. Shaukat Soap & Ghee Inds.
75. 45/2001
76. 603354
77. 1206708
78. --
79. --
80. 109/LB/01
81. Sadiq Vegetable Ghee Mills
82. 41-50/2000
83. 1408350
84. 2816700
85. 596024
86. 178807
87. 110/LB/01
88. -do-
89. -do-
90. 6468281
91. 12936562
92. --
- -
93. 733/LB/01
94. -do-
95. 44/2001
96. 507665
97. 1015330
98. 163722
99. 49117
100. 940/I.B/01
101. -do-
102. 57/2001
103. 817184
104. 1634368
105. 263542
106. 79063
107. 38/LB/01
108. Hamza Veg. Oil & Ghee Mills
109. 41-50/2000
110. 5677044
111. 11354088
112. 851556
113. 255467
114. 939/LB/01
115. -do-
116. 52/2001
117. 1157600
118. 2315200
119. 373326
120. 111998
121. 2266/LB/01
122. Hunza Ghee Industries
123. 3065/ST/01
124. --
125. --
126. 164463
127. 5000
128. 253/LB/01
129. -do-
130. 06/2001
131. 513382
132. 1026764
133. --
- -
134. 2343/LB/01
135. -do-
136. 10612001
137. 420500
138. 841000
139. 63075
140. 18922
141. 2344/LB/01
142. -do-
143. 101/2001
144. 696000
145. 1392000
146. 104399
147. 31319
148. 214/LB/01
149. -do-
150. 41-50/2001
151. 1096104
152. 2192208
153. --
154. 264/LB/01
155. Ghazi Ghee Mills
156. -do-
157. 251400
158. 502800
159. --
- -
160. 429/LB/01
161. -do-
162. 2-4/2001
163. 154457
164. 308914
165. 23169
166. 6951
167. 2523/LB/01
168. -do-
169. 108/2001
170. 191270
171. 382540
172. 28690
173. 8607
174. 732/LB/01
175. Muridke Oil Mills
176. 32/2000
177. 631870
178. 1263740
179. 203778
180. 61133
181. 37/LB/01
182. -do-
183. 41-50/2001
184. 1845634
185. 3691268
186. 276845
187. 33053
188. 1294/LB/01
189. -do-
190. 71/2000
191. 290169
192. 580338
193. 43525
194. 13058
195. 731/LB/01
196. Madni Ghee Mills
197. 325/2001
198. 5071438
199. 25000
200. 739737
201. --
202. 35/LB/01
203. Tahir Oil & Ghee Mills
204. 41-50/2000
205. 556874
206. 1113748
207. 960607
208. 288182
209. 679/LB/01
210. -do-
211. 34/2001
212. 750065
213. 1500130
214. 279194
215. 83758
216. 614/LB/01
217. -do-
218. 26/2001
219. 250294
220. 500588
221. 80720
222. 215/LB/01
223. Batala Ghee Mills
224. 41-50/2001
225. 510545
226. 1021090
227. 76582
228. 22975
229. 337/LB/01
230. -do-
231. 53-60/01
232. 456930
233. 913860
234. 2186844
235. 656053
236. 186/LB/01
237. Salva Oil & Ghee Inds.
238. 2-4/2001
239. 532039
240. 1064078
241. 79806
242. 23942
243. 2219/LB/01
244. Hameeda Ghee Indis.
245. 100/2001
246. 692034
247. 1384068
248. 148115
249. 44434
250. 608/LB/01
251. Madina Ghee Mills
252. 1-2/2001
253. 7100531
254. 25000
255. 2429137
256. --
257. 713/LB/01
258. Malik Ghee & C. Oil Mills
259. 1-2/2001
260. 7100531
261. 25000
262. 2429137
263. --
264. 1058/LB/01
265. Nawaz Ghee Mills
266. 02/2001
267. 730162
268. 25000
269. 100531
270. --
271. 929/LB/01
272. Morning Enterprises
273. 47/2001
274. 171161
275. 342322
276. 55499
277. 16560
278. 428/LB/01
279. Mustafa Food Indus.
280. 2-4/2001
281. 154457
282. 308914
283. 23169
284. 6951
285. 959/LB/01
286. Rohi Ghee Inds.
287. 491/2001
288. 535834
289. 25000
- -
290. 851/LB/01
291. Aysha Ghee & Oil Mills
292. 53/2001
293. 300609
294. 601218
295. 45091
296. 13327
297. 1371/LB/01
298. Yaser Food Industries
299. 58/2001
300. 176375
301. 352750
302. 26456
303. 7937
2. Briefly, the facts are that the appellants are manufacturers of vegetable ghee (a vegetable product) and used metal containers for packing of such ghee in a marketable condition. Notification No. S.R.O. 455(1)/96, dated 13-6-1996 prescribed the following conditional exemption/concession of central excise duty on vegetable products and vegetable oil and on the metal containers used for packing of kerosene, vegetable products and vegetable non-essential oils:
304. Description of Goods and Services
305. Heading/sub-heading number
306. Conditions
307. Rate of duty
308. (1)
309. (2)
310. (3)
311. (4)
312. Vegetable non- essential edible oils (with melting or cloud point of 10 degree centigrade or above) and vegetable products
313. Respective headings of Chapter 15
314. If not manufactured out of such vegetable non-essential oils as are produced locally in Pakistan or as are subjected to customs duties on importa tion:--
(a) packing containing not more than 2.5 Kgs.
315. One rupee; and sixteen Paisa per Kg.
(b) packing containing more than 2.5 Kgs. but not more than 5 Kgs.
316. One rupee and twenty-five Paisa per Kg.
(c) packing containing more than 5 Kgs.
317. One rupee and thirty Paisa per Kg.
318. Metal containers.
319. Respective headings of Chapters 73 and 76
(ii) If manufactured by the manufacturer of kerosene, vegetable product and edible oil for packing within the same factory, of kerosene, vegetable products and edible oil of vegetable origin or mixures thereof having melting or cloud point below 10 degree centigrade;
320. Five per cent. ad val.
(iii) If used for packing kerosene, vegetable products and edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degree centigrade, provided that the provisions of Chapter X of the Central Excise Rules, 1944, are followed.
321. Five per cent. ad val.
3. Since the appellants product (vegetable ghee) had its melting point as above 10 degrees centigrade, the appellants. were found availing of the central excise duty concession (concessionary rate of 5%) instead of the leviable rate of 15% on metal containers in breach of the condition as specified in S.R.O. 455(1)/96, dated 13-6-1996 which' caused short payment of the central excise duty to the tune of 10% (difference between 15 % and 5 %) and also of the sales tax on, that element/amount of short-paid duty, the sales tax being assessable and payable on the duty paid-value. Accordingly show-cause notices were issued for recovery of the specified amounts of central excise duty and additional duty (as may be due) under rule 10 of the Central Excise Rules, 1944, and also for the recovery of the specified amounts of sales tax and additional tax (as may be due) under sections 34 and 36 of the Sales Tax Act, 1990, and for penal action under rule 210 of the Central Excise Rules, 1944, and section 33 of the Sales Tax Act, 1990. Vide the impugned orders, the Adjudicating Officer held that the charges were established and that the specified amounts of central excise duty and sales tax alongwith the additional duty and additional tax (as may be due on calculation with reference to the date of payment), were payable by the ghee mills and he also imposed penalties as mentioned in paragraph 1 above. Hence these appeals.
4. The learned counsel for the appellants have argued that the condition of cloud point and melting point applies to vegetable non essential oils only and its packing containers. They highlighted that this conditional concession on the containers is relatable to the conditional concession on vegetable products (irrespective of cloud point or melting point) and vegetable non-essential oils (with the condition of cloud point or melting) as specified in the said Notification No. S.R.O. 455(1)/96, dated 13-6-1996, kerosene being unconditionally exempt under S.R.O. 456 (1)/96, dated 13-6-1996. They stressed that these 3 items are sensitive essential commodities from consumers point of view and that is why the packing containers thereof were subjected to concessional rate of excise duty to maintain the market prices of these items. They also stressed that had the Government intended otherwise, they would not have corrected this instance in the budget 2000-01. They invited attention to paragraph. 5 titled "CORRECTIONS IN S.R.O.455(I)/96 , of C.B.R. Budget Day Instructions contained in C. No. 1(1)CEB/2001, dated 18-6-2001, sub-paragraph (b) of paragraph 5 of which states that:
(B) METAL CONTAINERS USED FOR PACKING OF VEGETABLE GHEE/COOKING OIL:
322. Cooking oil and ghee manufacturers are paying central excise duty on metal containers for packing of vegetable product/edible oil or mixture thereof on concessionary rate of duty @ 5 % ad val. The concessionary rate of duty is applicable to metal containers used for vegetable products and edible oil packing having melting and cloud point below 10C whereas the actual melting point of ghee is 36C (2C) instead of 10C. Necessary change has been made in S.R.O. 455 (1)/96 so as to grant concession of duty to metal containers used for packing of vegetable ghee/edible oil having cloud point below 1 and melting point between 34 to 38C.
5. The learned counsel stated that it is unfair to raise this issue after 4 years. They argued that facility under Chapter X of the Central Excise Rules, 1944, are supervised by the Central Excise Officer and had they raised this objection in 1996, the ghee manufacturers would have increased prices of vegetable ghee in proportion to the extra levy (difference between 5 % and 15 % and consequent sales tax thereon) and passed on the incidence to the consumers. They concluded that notwithstanding the merits of their case, the most major portion of the demand (relating to the period prior to the one year preceding the date of respective S.C.N.) is even otherwise time-barred under rule 10(1) of the Central Excise Rules, 1944. They also argued that no ghee mill in Pakistan paid central excise duty on containers @ 15 % ad Val. during the relevant period. They further argued that even otherwise, this case is fit for waiver of demand under section 12-B of the Central Excises Act, 1944 and under section 65 of the Sales Tax Act, 1990. They concluded that the impugned order may be set aside being inconsistent with the intent and purposes of the conditional exemption/concession under S.R.O. 455(1)/96, dated 13-6-1996, now clarified under Board's C. NO.1(1)CEB/2001, dated 18-6-2001.
6. The learned D.R. opposed the appeal on the ground that the, issue does not involve interpretation of fiscal/taxing statutes but rather involves interpretation of exemptions/concessions in tax and that it is the cardinal principle that exemption notifications should be interpreted as these are worded and the scope of exemption/concession should not be expanded by implication through interpretations. He argued that since their vegetable ghee, admittedly has melting point above 10 degrees centigrade, the metal containers used or its packing will not enjoy the concessions of S.R.O. 455 (1)/96, dated 13-6-1996. He also argued that since there is no exemption notification, from the appropriate authority under section 12-B of the Central Excises Act, 1944, or under section 65 of the Sales Tax Act, 1990, the claim of exemption under the, said provisions is not lawful. In reply to a query whether the D.R. or the Collectorate can bring a clarification from the Revenue Division/Central Board of Revenue about the intention of the conditional exemption on metal containers for packing of vegetable ghee having melting point above 10 degrees centigrade when no vegetable ghee can have melting point below 30 degrees centigrade in the atmosphere condition as in Pakistan, they showed their unwillingness to do so and stated that such a clarification could be obtained by the appellants as the D.R./Collectorate are of the view that in the presence of the S.R.O. 455 (1)/96, as it is worded, no further clarification was necessary from anyone. They prayed that the appeals may be dismissed as the appellants prayer is not covered by the letter of exemption/concession under S.R.O. 455(1)/96, dated 13-6-1996.
7. Having heard the parties and on perusal of the records, we find at the outset that the case basically involves the issue of central excise duty rate which is a matter under the Central Excises Act, 1944, and the rules made there-under. The issue of sales tax is only consequential in nature because sales tax is on the duty-paid value. Therefore, imposition of penalty under section 33 of the Sales Tax Act, 1990, is neither proper nor lawful as there was no violation of the provisions of the Sales Tax Act, 1990. The payment or otherwise of the sales tax that allegedly escaped assessment will entirely depend on the determination of the rate of central excise duty applicable in these cases. We also accept the D.R.'s view that this Appellate Tribunal is not the proper forum to discuss the admissibility of the benefit of section 12-B of the Central Excises Act, 1944, and/or of section 65 of the Sales Tax Act, 1990.
8. The history shows that excise duty at 5% ad Val. was first imposed on such containers through S.R.O. 476(1)/95, dated 14-6-1995 which amended S.R.O. 545(1)/94, dated 9-6-1994 and read as follows:
323. Vegetable non- essential edible oils (with melting or cloud point of 10 degree centigrade or above) and vegetable products
324. Respective headings of Chapter 15
325. If not manufactured out of such vegetable non-essential oils as are produced locally in Pakistan or as are subjected to customs duties on importa tion:--
(a) packing containing not more than 2.5 Kgs.
326. One rupee; and sixteen Paisa per Kg.
(b) packing containing more than 2.5 Kgs. but not more than 5 Kgs.
327. One rupee and twenty-five Paisa per Kg.
(c) packing containing more than 5 Kgs.
328. One rupee and thirty Paisa per Kg.
329. Metal containers.
330. Respective heading
(i) If manufactured by the manufacturer of kerosene, vegetable product and edible oil for packing within the factory.
331. 5% ad val.
(ii) If used for packing kerosene, vegetable products provided that the provisions of Chapter X of the Central Excise Rules, 1944, are followed.
332. 5% ad val.
(iii) If manufactured by manufacturers of edible oil for packing of edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degrees centigrade;
333. 5% ad val.
(iv) If used for packing of edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10, degrees centigrade; provided that the provisions of Chap ter X of the Central Excise Rules, 1944, are followed.
334. 5% ad val.
9. Paragraph 10 of budget day instructions issued by the C.B.R. vide its C. No. 1(5) C.E. Bud/95, dated 14-6-1995 relating to the. Central Excise Budget 1995-96, explained that the composite regime of central excise duty and sales tax on certain goods have been altered which also include that the said composite regime of taxation on locally manufactured (a) metal containers of heading 7310.000 for snaking of kerosene, ghee vegetable oil and vegetable product, which would now be 5% central excise duty + 10% sales tax instead of Nil central excise duty and 15% sales tax, and (b) for other metal containers of heading 7310.0000, it will be 15% central excise duty + 10 % Sales Tax instead of 10% central excise duty + 15 % sales tax. This shows that levy of central excise duty was increased by 5% in sympathy with reduction in sales tax by 5 % and that there was no other change in substance or in condition.
10. While substituting S.R.O. 545(1)/94, dated 9-6-1994, with the S.R.O. 455(1)/96, dated 13-6-1996, the Federal Government merged the provisions of concessions on metal containers for packing of vegetable products and kerosene (which did not have reference to cloud point or melting point) with those for packing of vegetable non-essential oils (which had reference to cloud-point or melting point) but, in doing so they worded it in a manner that the said melting point or cloud point also became relatable to vegetable product and kerosene. However, the budget duty instructions for 1996-97 issued by C.B.R. under its C. NO.1(11)CEB/96, dated 13-6-1996, explaining the budgetary changes of the Budget 1996-97 did not mention any change in duty rate on packing material (metal containers) of vegetable products or its new linkage to cloud point. Consequently the metal containers continued to be assessed to excise duty at 5% ad val. Even when the issue was brought to C.B.R.'s knowledge, the C.B.R. vide its C. No. 1(3)CEB/99, dated 23-4-1999, addressed to all collectorates stated that:
335. Sub: EXCISE DUTY AND RESULTANT SALES TAX ON TIN CONTAINERS USED AS PACKING OF VEGETABLE GHEE ABOVE 1OC CLOUD POINT/MELTING POINT.
336. This is to advise that the subject issue is under consideration of the Board, in the wake of reports representation from various quarters. Pending the study of the matter by the C.B.R. and decision thereon, the Collectorates are advised to maintain status quo and allow clearances as per past practice.
11. It is very important to note that C.B.R. advised the Collectorates to maintain status quo and to allow clearance as per past practice i.e. assessment of these containers at 5% ad val. Even later, when the C.B.R./Federal Government resolved this issue through the Budget 2000-01, they (the para. 5(b) of their budget day instructions C. No.1/1-CEB/2001, -dated 18-6-2001) listed it under the heading CORRECTIONS IN S.R.O. 455(1)/96", admitted that. these containers paid excise duty at 5 % ad val. In the past and legislated to continue that concession of excise duty assessment at 5 % for the future. This makes the intention of concession unambiguously clear. On this issue, the learned D.R. had argued that C.B.R.'s letter is not a legal instrument and the budget day instructions always say at the end that "the instructions contained in the letter are illustrative in nature and are not exhaustive". We agree that both the budget instructions have this sentence. But illustrations which are specific in nature have to be treated as such. Moreover, the C.B.R. also directs in all such budget day instructions that "in case of any doubt or lack of clarity, necessary clarification/ instruction may be sought from C.B.R. immediately". The Collectorate does not appear to have sought such a clarification from C.B.R. whether after the 1995-96 budget or after the 1996-97 budget or after the 2000-01 budget and is rather creating undue liabilities without reading the specific instructions/illustrations in the said 3 budget day instructions. Even now, the D. R. and representative from the Collectorate are not prepared to seek clarification from C.B.R. which shows the weakness in their cases.
12. For the reasons given above, coupled with the reason that vegetable ghee cannot have melting point below 10 degrees centigrade, we would hold that it was never intended to legislate impracticabilities or impossibilities by linking melting point of below 10 degree centigrade in case of vegetable ghee. Thus there was no levy of excise duty at 15 % on metal containers used for packing of vegetable ghee during the period from 13-6-1996 to 18-6-2001. This intention is also manifest from the C.B.R.'s letter C. No. 1(3)CEB/99; dated 23-4-1999 and C. No.1(1) CEB/2001, dated 18-6-2001. Therefore, the appellant's contention is accepted and the impugned orders are set aside to the extent that the assessment and payment of central excise at 5% ad val. on the metal containers use for packing of vegetable products (vegetable ghee, in these cases) during the period from 13-6-1996 to 18-6-2001 was correct irrespective of the language of the notification.
337. C.M.AJM.A.K./277/Tax (Trib.)
338. Order accordingly.