MR. JAVID IQBAL, JUDICIAL MEMBER.-(1). This appeal has instituted against Order-in-Original No. 02/2001 dated 20.10.2001 with the contentions:-
1. That the order passed by the adjudicating officer is against law and facts;
2. That the incidence of federal excise duty on account of chilling charges has not passed on to the consumer;
3. That once to prove that the incidence has passed on to consumer lies on department, whereas collectorate has failed to prove the same.
2. Precisely the facts of the case are, that appellant is manufacturer of aerated water under the brand of Pepsi Cola, tens etc. As per CBR circular on chilling charges Federal Excise Duty was levied for the period August, 1999 to May, 2000. Same was recovered from the appellant, which was paid by the appellant under protest, subsequently asked for refund of the same, whereas the same was refused vide O.N.O No. 2 of 2001 dated 25.10.2010 by additional Collector of Customs, Sales Tax & Federal Excise, Peshawar, the present appeal is result of the aforementioned treatment.
3. After having heard the arguments of both sides, it reveals that the amount of refund has been claimed on account of federal excise duty amounting to Rs. 41,13,855/-, for the period August, 1999 to May, 2000 on account of chilling charges component of Retail Price of aerated waters of Pepsi brand under CBR's circular of 12.06.1999, whereby it has been declared, that Retail Price of aerated waters assessm ent means the price at which retailer sells chilled bottles to consumers. The Supreme Court of Pakistan declared that FBR has no power/right to fix retail price and that admittedly, chilling activity is done by retailer and not by the manufacturer. Hence excise duty is to be levied and collected on the retail price fixed by the manufacturer under section 4(2) of the Central Excises Act, 1944 (now rescinded). Additional Collector rejected the refund claim on the ground that incidence of duty has been passed on by this appellant to the consumer/customer "the clearance has been made through adjustment against ACL duly indicated in ARI under the Excise Rules as and when clearance was made. The claimant could also not substantiate its plea of claiming the refund of excise duty passed on to the consumer...". However the additional Collector allowed the refund of Rs. 1,357,187/- which amount the Collectorate had recovered from the appellant relating to goods cleared from the factory between 12th June, 1999 and 31st July, 1999 without complying with FBR's circular of 12.06.1999. This part of refund was allowed as the appellant had not paid the duty when goods were sold. So incidence was considered not to have been passed on to the consumer. Relevant provision invoked by Additional Collector is section 3D of the Central Excise Act, 1944 (now rescinded) which begins thus: (1) "Every person who has collected or collects any duty..." As such if this section is to be invoked, the prosecution must show with reasonable evidence that the incidence of duty has been passed on to the consumer. Here the additional Collector for this action relied upon only the ACL and ARI taking these as relevant and sufficient evidence to prove that incidence stands passed to the consumer. ACL means Account Current Ledger which is a register entry of "excise duty" paying manufacturer was required to maintain in his premises. He was required to pay the lump sum amount of excise duty in advance of taking any production of excisable goods out of the factory and to enter the said payment in this register and when any goods were to be removed from the factory, he was required to first make assessment of excise duty on such quantity of goods, get the assessm ent approved/endorsed by resident Inspector of Central Excise and then adjust that assessed amount of excise duty against the amount of deposit already entered in the ACL. Seen in this scheme, the two documents show record of duty assessment and payment on the goods which are intended to be taken out of the factory. None of these two documents is the proof that appellant has actually sold goods to any customer charging the full amount of excise duty which appears in the assessm ent document. This fact indicates that adjudication is based on mere presumption of fact. It is not sustainable under Article 117 of Qanoon-e-Shahadat read with Article 118 ibid.
4. The then Tribunal Sales Tax, Federal Excise and Customs appointed a committee (in 2005) for this purpose to examine the record and to submit the comments. It was stated by the L/AR of appellant, that committee visited the premises of appellant as per the direction of tribunal as to whether incidence has been passed to consumer, inspected the relevant record and prepared a written report. That report was written in January, 2006 by Mr. Phool Badshah (Late) and its finding was that incidence has not been passed on to the consumers. As per the narration of L/DR that no report was prepared by the Phool Badshah (Late), but it has been prepared by senior auditor. On this point, L/AR stated that the Tribunal has not appointed him as committee member. The report therefore has no validity. Appellant has not participated in its enquiry, if it has done any, while further it has only relied upon RTI and ARI. We in the above narrated conflicting narration of the representative in the absence of complete departmental record could not be able to arrive at correct conclusion. However as per the report of senior auditor as read out by the L/DR through this report only the view of adjudicating officer has been separated nothing new has been reported in it, whereas, the veracity of ARI as evidence of passing on of incidence of duty to consumer has been commented supra. It is not evidence at all. RTI is a monthly report which appellant was required to make to Collector/CBR (every month) summarizing total productions, total removal of product from factory, its value, duty amount paid.
It does not show what amount of excise duty has been collected from customers in D the reporting month or what quantity has been sold to customers and what sale value has been invoiced and received from the customer. Therefore RTI is also no evidence to prove that appellant has passed on incidence of excise duty which it has paid into the exchequer under FBR's illegal circular of the chilling component of retail price. Later on Superior Courts held that excise duty should not be constituent part of retail price but be charged on a retail price to be fixed by manufacturer without indicating therein the element of excise duty. Appellant continued selling its product in accordance with the scheme of retail price fixed by it but it was paying the duty on the retail price of a chilled bottle that was charged by retailer from customers. It was thus paying marginally a higher amount as excise duty into the exchequer but collecting a lower amount from customer. So it was not passing on incidence. Reliance has been placed on Supreme Court's judgment in case of Collector of Customs & Central Excise Hyderabad vs. Bawany Sugar Mills in which it has been held that incidence of duty will be proved to have been passed to the consumer, if after the rate of duty is increased or exemption withdrawn, the manufacturer increases its price of product by the incremental duty amount. In appellant's case price was declared on 31st July, 1999 and the department did not accept it saying that retail price should be that at which retailer sells chilled bottle. He was even required to pay arrears for 12.06.1999-31.07.1999 period. He had to pay duty at the higher price (of chilled bottle) because his factory was under control of an excise Inspector who did not allow any goods to be removed from the factory until the appellant prepared assessm ent of duty on ARI and made entries in ACL and other registers. Appellant could not do any business unless he prepared ARI etc. As department (and FBR) wanted it. But it went into a Writ to Peshawar High Court challenging the FBR's definition or retail price. The said court granted it stay in May, 2000 ordering that it (the case) shall be kept pending till decision of Supreme Court in departmental appeals against orders of Lahore High Court to which had declared FBR's circular (supra) as illegal ab initio.
5. It was contended by the L/AR that appellant has paid excise duty on chilling charges but not collected duty on chilling charges from customers and department has failed to prove that it has passed the incidence of this duty to customers.
On Retail Price of chilled bottle (1)Supreme Court's decision reported as Collector vs. Riaz Bottles NLR 2001 Tax 99 On Incidence of duty (2)Collector of Customs & Federal Excise vs. Bawany Sugar Mills 2000 SCMR 1266 Burden of proof (3)M. Yaqoob vs. The State 1992 SCMR 1983 (4)Abdul Aziz vs. Assistant Collector PLD 1990 Kar 378 (5)Shoukat Ali vs. The State PLD 1968 Lah. 1183 Mere Allegation (6)SA Haroon vs. Collector RLD 1959 SC (Pak) 177 On Fariness (7)(On Fariness in deciding Revenue cases) Eastern syndicate vs. CBR PLD 1959 SC (Pak) 364 Admn of justice (8)Sadaqat vs. Collector PLD 2010 SC 878 Interpretation 3D- ''Collets" (9)Ghulam Mohammad Lah. Vs. Imtiaz PLD 2006 Lah.
661 Burden of Proof (10)The State vs. Umar Hayat PLD 1992 SC 393 Customs, Central Excise & Sales Tax Appellate Tribunal's Decisions allowing appeals on chilling charges(11)Nambahar vs. Collector, Lahore STA No. 1644/LB/2004 dated 16.06.2004 (12)Coca Cola vs. Collector Lahore. App: Nos. 757, 758/LB/2006 dated 02.06.2007 (13)Haideri Beverages vs. Addl. Collector Rawalpindi Appeal No. 584/2001 dated 20.11.2001 On speaking orders (14)General Clauses Act - Section 24A and commentary (15)National Bottles vs. GOP/FBR PTCL 1995 CL. 123 On leniency in refunds (16)Pfizer Labs vs. Federation. PLD 1999 SC 64 (17)Nishat Mills vs. Subdtt. PLD 1989 SC 222
6. In identical circumstances and facts of the matter Customs, Federal Excise & Sales Tax Appellate Tribunal Bench-I, Lahore in sales tax appeal No. 1644/LB/2004 has concluded the matter as follows:- "From the above it is evidence that passing of incidence to the consumers is with reference to that tax which has been collected due to misapprehension of any provision of the Sales Tax Act or otherwise but the tax was otherwise not payable or which was paid in excess than actually payable. It is evident that this situation is not relevant to the appellant's case"
Irrespective of the opposing contentions of both the sides regarding passing on or not passing on incidence of tax to the consumers, we hold that this issue is not relevant to the present case. When the respondent department collected central excise duty, and also sales tax on retail price inclusive of chilling charges in terms of CBR's aforesaid directives dated 12.6.99 and the appellant paid the same, it was not due to mis-apprehension of any of the provisions of Sales Tax Act or otherwise. At the time of payment of central excise duty, and it dependent thereon sales tax, on retail price inclusive of chilling charges this was the requirement of law as interpreted/directed by CBR vide its directive dated 12.6.99. As held in earlier judgment dated 13.2.2002 of Lahore Beneh-1 of this Tribunal in the aforesaid appeal, "criteria of incidence of tax having passed on to the consumers applies only to that tax/charge which was collected, due to misapprehension of any provisions of the Sales Tax Act or otherwise, but the tax/charge was otherwise not payable or which was paid in excess than actually payable............ That being so, the criteria of the incidence of tax having been passed on to the consumer does not apply here"
The collection of central excise duty and dependent thereon the sales tax on the retail price inclusive of chilling charges was perfectly legal w.e.f. 12.6.99 till the time it was declared unlawful by the Honorable Lahore High Court. Vide its judgment in writ petition No. 15188, 18769, 14794, 10607 and 10969 all of 1999 and others read with dismissal of appeals of the respondent department by the Honorable Supreme court of Pakistan vide its judgment dated 31.1.2001 in Civil Appeal No. 1512, 1686 of 1999 and Civil Petition No. 1916-L of 1999 and others reported as NLR 2001-Tax. Therefore, the provisions of section 3B of Sales Tax Act, 1990 do not get invoked here. Resultantly both the orders in original No. 17, dated 18.6.2002 passed by Deputy Collector Sales Tax Refund Gujranwala and order in appeal No. 1208/2002, dated 30.8.2002 passed by Collector of Customs Sales Tax and Central Excise (Appeals), Lahore are set aside and the appeal is accepted. Collector Sales Tax and Central Excise Gujranwala is directed to finalize the refund claim of the appellant within forty five days from the date of issuance of this judgment, if complete refund documents have already been submitted by the appellant. In case any document relating to the refund claim in question is still wanted the Collector shall ask for the same from the appellant within fifteen days from the issuance of this judgment and the appellant shall supply the said document immediately to enable the Collector to decide the case within the aforementioned given time.
7. The L/DR appearing on behalf of department failed to rebut the above case law, hence we have no option except one to give alike treatment that had been given in the aforementioned judgment and we order it accordingly.
8. Appeal on behest of appellant stands accepted.