The present appeal filed by the Registered Person against the Order-in-Original No. 10 of 2000, dated 25.1.2000 has been taken up in pursuance of the order of the Lahore High Court, Camp at Rawalpindi passed in Tax Appeal No. 11 of 2003 on 13.5.2009.
2. Facts of the case, in brief, are that the Messrs Askari Cement Limited, hereinafter called the appellant entered into an agreement with Messrs Ghazi Brotha Contractors for the supply of loose cement in bulk quantity which was to be used for the construction of Ghazi Brotha Dam. Total supply of 28712.45 tons of cement was made between May, 1997 to June, 1998, under the contracted price which was allegedly less than the retail price of an ordinary bag of 50 Kg Portland cement sold to the general body of consumers. Having noted the discrepancy, Officials of the Intelligence and Investigation (Customs and Central Excise, Rawalpindi) prepared a report wherein it was pointed out that the company was not paying central excise duty on the basis of retail price charged from the general body of consumers, lt was, suggested in the report that the company be directed to make payment, of short paid central excise duty, being the differential amount between the retail price paid by the general body of consumers and the contracted price in terms of Sections 3, 4(2) of the Central Excise Act, 1944 read with S.R.O. 456(l)/96, dated 13.6.1996. .Lt was also asserted that the supplier company was also liable to pay additional duty at the specified rate under Section 3-B of the Central Excise Act, 1944.
3. Based upon the facts discussed above, a show-cause notice dated 15.7.1999 was issued by the Additional Collector Central Excise whereby the appellant company was confronted with shot payment of duty to the tune of Rs. 83,60,553 in contravention of Sections 3 and 4(2) of the Central Excise Act, 1944 read with S.R.O. 456(l)/96, dated 13.6.1996. Reply submitted by the appellant did not, however, find favour with the adjudicating officer who proceeded to pass the Order-in-Original on 25.1.2000 holding that the company was liable to pay differential excise duty of Rs. 83,60,553 alongwith. Additional duty @ 2% per month under Section 3-B of the Central Excise Act, 1944. A penalty of Rs. 100,000 was also imposed for non-observation of the provisions of Central Excise laws.
4. Being aggrieved, the company preferred an appeal before the Tribunal which upheld the Order- in-Original passed by the Additional Collector. Against the order of the Tribunal reference was filed under Section 36-C of the Central Excise Act, 1944 in the High Court which vide its order dated 13.5.2009 remanded the case to this Tribunal with the following observations:- "The issue still remains as to how a retail price of ordinary Portland cement, at the relevant time, which was used by general body of consumer, could become the basis for calculation of alleged short payment of excise duty on bulk loose supply of cement having a certain specification. To us, this aspect required to be investigated further, similarly the issue that whether this was or was not wilful evasion of duty in the stated circumstances requires much deeper analyses as well in the context of declared case-law by the Superior Courts.
Ln the afore-referred circumstances, in our view the matter requires to be decided afresh by the learned Tribunal. Accordingly the impugned order is set aside, the proceedings are remanded back to the learned Customs, Central Excise and Sales Tax Appellate Tribunal. The Appellate Tribunal will take up the proceedings, analyze the record and decide the appeal afresh in the context of the observation made herein above in this regard the official correspondence existing between the parties hereof will be analyzed sq as to decide whether the applicant company had indulged in violation of provision of Section 4(2) of the Central Excise Act, 1944 and or it was liable for any short paid duty as well as additional duly/penalty."
In pursuance of the order of the High Court appeal was taken up for hearing.
5. Initiating the arguments on appeal, the learned AR explained that logically retail price for the supply of loose cement in bulk quantity with certain specifications could not be the same as retail price of Portland cement sold to general public in 50 Kg paper bags because variation in specifications and packing were important factors which had vital bearing on the fixation of price.
He stated that the pertinent facts affecting the retail price of the bulk supply of cement were brought to the notice of the concerned authorities and it was after long deliberation that the Assistant Collector Central Excise Islamabad communicated approval of the competent authority in respect of the retail price of Rs. 2,538.48 per M.T. Vide his letter C. No. IV- CE/Wah- Cement/74/96/368, dated 8.12.1996. The learned AR pointed out that before accepting the declared retail price of Rs. 2,538.48 per M.T. For the purpose of charging excise duty, the competent authority had taken into account the entire pertinent data/facts/explanations which the appellant had produced. The learned AR vehemently assailed the show-cause notice as well as the order in original whereby the declared retail price of Rs. 2,538.48 per M.T, which had earlier been accepted by the competent authority, was rejected and the appellant was burdened with illegal additional duty of Rs. 83,60,553 alongwith additional tax and penalty. The learned AR emphasized that the retail price fixed for the sale of 50 Kg Portland cement sold in paper bags to the general body of consumers could not be considered as a valid basis for charging excise duty on cement of different specification sold in bulk quantity because the two types of sales are not identical either in terms of content or packing. To reinforce his submissions, the learned AR also drew the attention of the bench to a number of cases decided by the hierarchy of Courts of this country which are briefly discussed hereunder:- In the case of Crescent Textile Limited Lyallpur v. C.B.R, reported as 1980 SCM R 773, the Supreme Court of Pakistan adjudicated upon the levy of excise duty of two consignments of cloth purchased by the Government of Pakistan and Government of West Pakistan which were described as TC-2 No. 1 and TC-2 No. 2, respectively, there was some variation in both the consignments in terms of weight per yard, weave, count of yarn and width. Although the supplier had declared the price of both the consignments at Rs. 1.37 per yard, the Supreme Court held that both the consignments were to be priced differently keeping in view the above elements of variation for the purpose of levy of excise duty.
In the second judgment of Premier Tobacco Industries v. Deputy Collector of Central Excise reported as 1989 CLC 2045, Pesh. High Court considered the question of fixation of retail price of different varieties of the K-2 brand cigarettes. Although quality of cigarettes packed in economy plain 20's and K-2 Plain 10's was the same, .Yet there was variation in the price of both the packings due to variation in the cost of packing material. The department, on the plea of same brand charged excise duty at uniform retail price repelling the stance of the manufacturer regarding the difference in retail price because of variation in the packing material. The High Court, however, did not concur with the findings of the department and held asunder:- "In the case in hand it also appears that retail price of "Economy" cigarettes fixed by the petitioner was rejected by the Department not for the reason that the packing material was not of inferior quality but on the ground that the quality of cigarettes in both the cases was the same. There is sufficient material on the record to show that the petitioners have been selling the same brand of cigarettes in different types of packing which had the effect of changing the variety of the cigarettes sold to the consumers. The petitioners were, therefore, competent to fix lesser retail price for "Economy" cigarettes on account of the inferior packing material for it constituted a different variety and the Department was not justified in demanding the excise duty from the petitioner on the basis of higher retail price of the same brand of cigarettes."
In the third judgment viz. Souvenir Tobacco Company Limited reported as 1989 CLC 1134, Karachi High Court recorded similar findings as in the case of Premier Tobacco Industries Limited and held as under:- "In the case before us the petitioner has offered for sale the same brand of cigarette in different type of packing which has the effect of changing the variety of goods. We are, therefore, of the view that 'Melburn' cigarettes offered for sale by the petitioner to the general body of consumers in "crush proof packing" and '.Soft packing' were of different varieties though the brand of the cigarette was the same, and as such the petitioner was entitled under Section 4(2) of the Act to fix different retail prices for each variety. Accordingly the action of respondents in demanding excise duty from the petitioner on the basis of higher retail price of the same brand of cigarette was illegal and without lawful authority. We accordingly declare the impugned order without lawful authority and of no legal effect.
In the case of Hashwani Hotel Limited v. Government of Pakistan, management of the hotel charged different rates from different customers on account of room rentals depending upon the magnitude of business with each type of customer/client. The officers of the Central Excise Department, however, sought to charge excise duty at the highest rate from all the customers against which hotel management vehemently agitated. The dispute ultimately reached the High Court which resolved the controversy in favour of the appellant and held as under:-- "I respectfully agree with the learned Judges of the Sindh High Court that the management of a hotel can prescribe different rate for the different categories of customers and that if the rates fixed for any category is less than that of the other the former cannot be treated as confessional rate within the meaning of clause (a) of sub-section (3) of Section 4 of the said Act."
"While subscribing to the conclusion reached by the Sindh High Court, I will like to add that according to sub-section (3) of Section 4 of the said Act, undoubtedly, the charges for services, facilities and utilities are to be fixed by the management of the hotel and not by the law or the excise authorities, lt is only the rate of the duty which is to be prescribed by law. Fixation of different charges for different categories of customers is not forbidden by law. Perhaps, such fixation has got to be done by the management for operational considerations. The law also does not insist that a single uniform charge shall be fixed for all categories of customers. Further, there is nothing in the law to suggest that if different charges are prescribed for different categories of customers, the duty shall be paid according to the charge which happens to be the highest. I, therefore, find nothing wrong with different charges prescribed by the petitioners for different categories of its customers."
Aggrieved by the judgment of the High Court the department filed appeal before the Supreme Court of Pakistan which was dismissed by the apex Court vide its judgment dated 11.2.1989 reported as PLD 1990 SC 68.
6. Last but not the least is the judgment of Customs, Central Excise and Sales Tax Appellate Tribunal Islamabad Bench, dated 20.2.2006 in the petitioner's own case wherein the principle of variation in retail price because of difference in the cost of packing was upheld.
7. The learned DR in his turn supported the Order-in-Original and contended that the retail price was fixed by the department on the basis of price charged for Portland cement sold in the packing of 50 Kg. He, however, had no explanation to offer when confronted with the contents of the letter of the Assistant Collector dated 8.12.1996 whereby acceptance of the declared retail price of Rs.
2,538.48 per M.T. On in respect of bulk supply of cement in loose form was communicated to the appellant.
8. We have given due consideration to the arguments of both the sides and are of the view that the Order-in-Original passed by the Additional Collector of Central Excise is not sustainable because of a number of reasons as discussed below.
9. The appellant disclosed all the material facts to the department regarding the bulk supply of cement to the contractor of Ghazi Brotha Dam in order, to ascertain its excise duty liability well in advance. Correspondence between the department and appellant makes it abundantly clear that the issue of declared retail price was considered by the .Hierarchy of the officers of the Central Excise department and it was after a long process of deliberation that the Assistant Collector communicated approval and acceptance of the declared retail price by the Competent Authority.
This communication of acceptance to the appellant by itself constitutes an order which could not be reviewed or revoked unless the department was in possession of some definite information regarding the evasion of excise duty through concealment/suppression of facts. We do not find even a semblance of such allegation either in the show-cause notice or in the Order-in-Original.
We are of the view that as soon as acceptance of declared retail price was communicated to the appellant, the transaction regarding the bulk supply of cement became past and closed transaction from the end of the department, which could not be interfered with by the departmental officers on flimsy grounds. As a matter of fact the Order-in- Original seeks to nullify a past and closed transaction which, if allowed to go unchecked will shake the confidence of the taxpayers in the tax administration of the country.
10. The judgments of the Supreme Court of Pakistan, High Courts and Tribunal quoted supra also support the case of the appellant. Variation in the peculiar facts and circumstances of each case, which motivate and compel a businessman to conduct his business in a manner different from other business concerns of the same line cannot be brushed aside casually. We have noted that the differential in price of cigarettes and room rentals was an irrefutable fact attributable to the peculiar circumstances of the respective cases which the honourable High Court and Supreme Court of Pakistan also recognized. The learned Collector, however, seems to have casually ignored all the pertinent aspects of the transactions i.e. Bulk supply and sale of cement in loose form rather than in packing of 50 Kg which resulted in substantial savings in cost. These factors were bound to effect the retail price of cement to be consumed in the construction of Ghazi Brotha Dam.
11. For reasons discussed above we accept the appeal of the appellant and hold that the retail price earlier accepted by the department vide letter dated 8.12.1996 could not be discarded for the purpose of changing excise duty. We, therefore, direct the department to charge excise duty on the retail price of Rs. 2,538.46 per M.Ton.
12. The appeal of the Registered Person succeeds.