GOVERNMENT OF PAKISTAN vs SHAHI BOTTLERS LTD.

ABDUL KADIR SHAIKHJ--Respondent Company, Shahi Bottlers Limited, holds a franchise agreement with Messrs Coca Cola Export Corporation for preparing and bottling Coca Cola Beverages. During calendar year 1970, respondent declared the manufacture of 6,12,736 crates, each of 24 bottles of king size (8-1/2 ounces), and 3,75,182 crates, each of 24 bottles of standard size (6-1/2 ounces), and paid excise duty accordingly.

The Deputy Collector, Central Excise and Land Customs, Lahore however by notice, dated 15-7-1971 called upon respondent to explain the short-declaration of the manufacture made on the ground that respondent imported and utilised 3225 units of Coca Cola concentrate obtained through Messrs Coca Cola Export Corporation Lahore, and according to the formula adopted there was huge quantity of concentrate) units utilized but was not reflected in the declaration of manufacture. In reply respondent explained that the formula applied by the Department bears no mathematical relation to the actual yield, for, the actual yield depends upon the working conditions of each individual plant, and many other factors are to be taken into account before the practical or actual yield could be arrived at from any formula based on theoretical yield.

2. The Department then appointed the Deputy Superintendent, Headquarters, Central Excise Lahore to examine the working conditions of such establishments, who on the basis of survey, reported that uniformly and generally 6% of an average should be allowed for wastages and not more. The Deputy Collector thereafter, on 7-10-1972 allowing 6$ wastage at 3, 13, 63 crates, making 1,16, 203 crates as dutiable additionally and also imposed personal penalty amounting to Rs.50,000.

3. Respondent challenged this order in an appeal to the Collector of Customs, Lahore which was however dismissed on 25-4-1973, Respondent's Revision Application to the Federal Government was also dismissed. Respondent then challenged these orders in a Constitution Petition in Lahore High Court which was allowed by the judgment, dated 20-2-1976. It is in these circumstances that petitioner now seeks leave to appeal.

4. We find that the judgment of the High Court is based on the interpretation of the provisions of sub-rule (2) of Rule 226 of the Central Excise Rules, 1944 which reads as follows:

(2) If the manufacturer of any excisable goods liable to duty under the Act fails to render proper accounts regarding the manufacture, storage, of disposal of such goods or of the receipt, storage, utilisation or disposal of raw materials (including manufactured and semi-manufactured components) used in the manufacture of such good, as prescribed by these Rules, to the satisfaction of the Officer empowered by the Central Board of Revenue in this behalf, the Officer shall determine the amount of duty payable in respect of such goods in his discretion.

Provided that, if the officer is satisfied that the accounts maintained by a manufacture show a lesser quantity of excisable goods manufactured and accounted for then should have been shown on the basis of the quantities of raw materials (including the manufactured and semi- manufactured components) received by the manufacturer, he may demand from the manufacturer such amount of duty as is, in his judgment payable by the manufacturer."

5.In this regard the High Court has observed as under: "An analysis of sub-rule (2) shows that there must be a rule prescribing maintenance of accounts regarding manufacture, storage or disposal of excisable goods. In the case of raw materials, there must be a rule prescribing the maintenance of accounts of the receipts of raw material, its storage, its utilization or its disposal. The existence of a rule requiring the maintenance of accounts in the manner indicated in first part of Rule 226 is a sine qua non for invoking sub-rule (2) or its proviso, Secondly, before invoking sub-rule (2) or its proviso it must be held as a fact in each case that the rule prescribing the maintenance of accounts has been violated. It is only when these two pre- conditions are satisfied that the officer concerned can exercise his authority to demand from the manufacture on the basis of raw material such excise duty as it is in his judgment payable by him on goods. That should have been produced from such raw material. "

6. It was conceded by both the parties before the High Court that at the relevant time only Crown Corks used in the bottling of Beverages had been specified by the Central Board of Revenue as raw material whose account had to be maintained. The High Court, therefore, rightly held that "it is, therefore, clear in respect of any other raw material such an account as finds mention in Rule 226 was not required by law to be maintained nor could the stock of it or register pertaining to it maintained by the manufacturer of his own be utilised for exercising powers reserved under sub- rule (2) of Rule 226." Learned counsel appearing for the petitioner was unable to satisfy how this petition can succeed in the absence of any rule requiring the maintenance of account in the manner indicated in the first part of Rule 226 and also that the violation of the rule prescribing the maintenance of accounts. The view that has prevailed in the High Court admits of no exception.

There is, therefore, no merit in this petition and it is dismissed.