GOVERNMENT OF PAKISTAN and others vs KOHINOOR INDUSTRIES LIMITED
This matter concerns four appeals filed by the Government of Pakistan against a Lahore High Court judgment that granted relief to manufacturers of cotton fabrics. The respondents, who were assessed for excise duty based on production capacity under the Excise Duty on Production Capacity (Cotton Fabrics) Rules, 1968, had manufactured synthetic fabrics instead of cotton fabrics on the same machinery. The Central Excise Authorities charged separate excise duty on these synthetic fabrics under the Central Excises and Salt Act, 1944. The High Court held that the levy of excise duty without granting corresponding abatement for duties paid on synthetic fabrics was unlawful and struck down the formula prescribed by the Central Board of Revenue for relief. The core legal question was whether the High Court was justified in allowing such rebate when it was difficult to determine if the substituted items were manufactured within the assessed capacity. Following the precedent established in a previous Supreme Court judgment involving similar issues, the Supreme Court dismissed the appeals, thereby upholding the respondents' entitlement to the abatement and refund of excess excise duties paid.
- Are manufacturers entitled to abatement of excise duties paid on cotton fabrics when they have paid separate excise duties on synthetic fabrics manufactured on the same plant and machinery?
- Is the formula prescribed by the Central Board of Revenue for granting relief in respect of excise duty subject to judicial review for reasonableness?
- Can excise duty be levied on production capacity without providing adjustments for duties paid on substitute goods manufactured within that same capacity?
- Section 3(1), Central Excises and Salt Act 1944
- Section 3(4), Central Excises and Salt Act 1944
- Item No. 51, First Schedule, Excise Duty on Production Capacity (Cotton Fabrics) Rules 1968
' AJMAL MIAN, J. ---By this common judgment, we intend to dispose of the above four appeals which have been filed with the leave of this Court against the common judgment dated 8-11-1988 passed by a learned Single Judge of the Lahore High Court in Writ Petitions Nos. 2635 of 1975, 172 of 1977,2554 of 1978 and 2066 of 1986, filed by the private respondents, allowing the same and granting the following reliefs:- "11. For the foregoing reasons, all the four Writ Petitions W.P. No, 2635 of 1975, W.P. No, 172 of 1977, W.P.
No, 2554 of 1978 and W.P. No, 2066 of 1986 are accepted and it is hereby declared:-
(1) That the levy and demand of central excise duty by the Central Excise Authorities from the petitioners, without correspondingly granting the benefit stated in para 2 below, are without lawful authority,
(2) That the petitioners are entitled to the abatement of excise duties paid by them under section 3
(4) of the Central Excises and Salt Act, 1944, on the cotton yarn and/or fabrics manufactured by them on the same plant and machinery already assessed and utilized for the manufacture of man-made (synthetic) yarn and/or fabrics and that such part of the excise duties as have been received in excess shall be refunded to the petitioners.
(3) That the formula prescribed by the Central Board of Revenue under the Central Excise General Order No,8 of 1968 dated 29-4-1968 for giving relief in respect of the duty is unreasonable and is struck down.
(4) That the Central Excise Authorities shall now work out the abatement of duties that are available to the petitioners and refund the same to the petitioners within a month from the date of this judgment." .
Leave to appeal was granted to consider, whether the High Court was justified in allowing the rebate of excise duty though it was not possible to determine whether the items which were manufactured in place of the items which were subject to capacity excise duty, were manufactured within the capacity assessed.
2. The brief facts are that the respondents were manufacturers of cotton fabrics during the period from 1968 to 1977 which was chargeable to duty on the basis of production capacity in accordance with the excise duty on Production Capacity (Cotton Fabrics) Rules, 1968. According to Item No, 51 of the First Schedule to the said Rules, the production capacity of the respondents was assessed as the quantity mentioned in the judgment under appeal. It seems that in place of cotton fabrics, respondents manufactured same quantity of synthetic fabric (which are also called man-made fabrics), on which separate central excise duty was charged by the Central Excise Authorities under Section 3 (1) of the Cental Excises and Salt Act, 1944, hereinafter referred to as the Act. The respondents claimed that they should be given adjustments of the excise duty recovered from them on synthetic fabrics against the excise duty recovered on the basis of the capacity.
Eventually, they filed the above Writ Petitions, which were allowed by the learned Judge in chamber through the impugned judgment. The reliance was placed by the learned Judge in chamber on a judgment of the High Court of Sindh in the case of Messrs Divan Textile Mills Limited, Karachi v.
Pakistan through Ministry of Finance (1984 CLC 1740). The above judgment was subject-matter of an appeal before this Court, namely, Civil Appeal No,K-86 of 1978 filed by the Federation and the Central Board of Revenue (Pakistan through Secretary, Central Board of Revenue and two others v.
Messrs Dewan Textile Mills Ltd.). The above appeal has been dismissed by this Court through a detailed judgment dated 23-6-1991.
3. Mr. Muhammad Aslam Chatha, learned A.O.R. Appearing for the appellants, has candidly submitted that in view of the above recent judgment rendered by this Court, the above appeals cannot succeed.
4. We would, therefore, dismiss the above appeals with no order as to costs for the reasons recorded in the above judgment.