' AJMAL MIAN, J.--The petitioners through this petition has prayed for the following reliefs:- ' It is, therefore, prayed that this Honorable Court may be pleased to call for the record of the petitioner's case as also the record of the proceedings of Constitutional Petitions Nos.277 and 278 of 1971 and be further pleased:-
(i) to issue writ or writs, pass order or orders whereby the inter pretation put forward on the second proviso to rule 4(1) by the respondent No,2
(a) be treld to be illegal and without force and on the basis of the proper interpretation of the said proviso direct the respondents to allow in full the abatement claim of the petitioners and pay the same.
(b) if held to be proper to strike down the proviso as being ultra vires the Act, the constitution unreasonable and in excess of the powers of the rule-making authority and thereby direct the respondents to consider the statement claim without taking the second proviso into consideration and to pay the petitioners the abatement thus allowed.
(ii) In the Alternative.--To issue necessary direction to the respondent No,2 that the abatement claimed by the petitioners be considered by observing to the following interpretation of the said second proviso:-
(a) that for the comparison of total actual production and production capacity, the actual production be converted to same picks or count as to the same may be;
(b) if held to be proper to strike down the proviso as being ultra vires the Act, the constitution unreasonable and in excess of the powers of the rule-making authority and thereby direct the respondents to consider the statement claim without taking the second proviso into consideration and to pay the petitioners the abatement thus allowed.
(ii) In the Alternative.--To issue necessary direction to the respondent No,2 that the abatement claimed by the petitioners be considered by observing to the following interpretation of the said second proviso:-
(a) that for the comparison of total actual production and production capacity, the actual production be converted to same picks or count as to the same may be;
(b) the re-calculated actual production and the production capacity be compared:-
(a) for the purpose of comparing the total production and to see if the actual production has or has not exceeded the production capacity;
(b) for the purpose of calculating the basic duty and comparing as to whether the difference is such as to disentitle the abatement claim;
(iii) the Honorable Court may be pleased to grant 12 per cent interest with monthly rests from the date of refusal back of the abatement by the respondent No,2;
(iv) exemplary costs may be awarded in addition to the normal cost of the petition;
(v) any other/further/additional relief or reliefs by appropriate writs or orders may also be granted as may be deemed fit and proper in or about the circumstances of the petition."
2. The brief facts leading to the filing of the above Petition are that the petitioners have their factory at Manghopir Road, Karachi, wherein they have Spinning and Weaving Sections. It may be observed that at the relevant time, the petitioners, installed capacity of the weaving section was 240 automatic looms and 250 non-automatic looms and that of spinning comprises of 25,200 ring spindles. It seems that from 1-5-1968 the petitioner's installed capacity, both in spinning and weaving, was brought under duty on production capacity under sub section (4) of section 3 of the Central Excise and Salt Act, 1944 (hereinafter referred to as the Act) read with the Excise Duty on Production Capacity (Cotton Yarn) Rules, 1968 and the Excise Duty on Production Capacity (Cotton Fabrics) Rules, 1968, respectively. It has been averred that during the financial year 1969-70 due to strikes and causes beyond the control and power of the petitioners, the Mill remained continuously closed for total 291 shifts in the weaving section and for 295 shifts in the spinning section. It has been further averred that on account of the above closures, respondent No,3 granted provisional abatement to the petitioners as under: "7.- That out of the aforesaid closure the respondent No,3 granted provisional abatement to the petitioners as under:- Respondent No. referenceDate For Per ShiftAmount C.No.3(26)-CAP/69-70 Pt.5-6-70nYarn Rs. 5,83,618-70 -do- 5-6-70Cloth Rs. 3,56,166-40 -do- 18-6-70Yarn Rs. 5,02,962-27 -do- 18-6-70Cloth Rs.2,12,122-38"
3. It has been also averred that at the close of the financial year 1969-70, the petitioners filed their formal claim of abatement dated 6-19)-1970 separately for yarn and fabrics amounting to Rs,13,29,787.80 and Rs,6,64,035.84, in response to which respondent No,3 rejected the claim of the petitioners in regard to the cotton yarn to its entirety and granted abatement of Rs,2,31,482 in respect of the cotton fabrics. After that the petitioners filed two Constitutional Petitions, namely C.P.
Nos.277 and 278 of 1971 in order to impugn the above action. It has been averred that the above petitions were withdrawn as the learned Attorney-General offered to have the matter examined by the technical experts of respondent No,2, It has also been averred that after the withdrawal of the Petitions, the petitioners filed review Petitions, which were heard by respondent No,2, but the same were rejected by an order, dated 136-1974, on the basis of the interpretation of second proviso to rule 4(1) of the Excise Duty on Production Capacity (Cotton Fabrics) Rules, 1968 calculating shortfall in production of a factory on the basis provided therein and not on the basis of derived average count/pick claimed by the petitioners. The petitioners being aggrieved by the above order have filed the present Petition.
4.(a) In support of the above Petition. Mr.Mansoor Ahmed Khan, learned counsel for the petitioners has urged as follows:-
(i) That the second part of the proviso to rule 4 purports to destroy the substantive part of the rule, and therefore, the petitioners were entitled to pro rata abatement.
(ii) That no comparison of different kind of goods can be made for the purpose of computing the amount of abatement under record part of the proviso to rule 4 of the (Cotton Fabrics) Rules, 1968.
(iii) That rule 4--is in violation of section 3 of the Act and, therefore, is ultra vires of the Act.
(b) On the other hand Mr.Mehmoodul Hasan, learned coonsel for the respondents has contended as follows:-
(i) That the judgment of a Division Bench of this Court reported in PLD 1976 Kar. 1078 on all fours is applicable to the instant case.
(ii) That rule 4 is not in violation of section of the Act and, therefore, is intra vires.
5.(a) At the outset, it may be observed that vires of subsection (4) of section 3 of the Act and the Rules framed in pursuance thereof, were the subject-matter before the Hon'ble Supreme Court in the case of Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others, decided by the Supreme Court recently, reported in PLD 1983 SC 358 (July 1983 issue), in which it has been held that the above amendment of the Act and the rules are intra vires. In this view of the matter, the scope of the present Petition seems to be limited to the question, whether the respondents have violated any provision of the Act or the rules.
' It may be advantageous to reproduce herein below rule (4) of the Excise Duty on Production Capacity (Cotton Fabrics) Rules, 1968, which reads as follows:- "4.--(1) If, in a financial year, a factory--
(i) situated in East Pakistan Works for less than seven hundred and sixty-six shifts, or
(ii) situated in West Pakistan Works for less than eight hundred and ninety-seven shifts: and the Central Board of Revenue is satisfied that any shifts short of the number specific in clause
(i) or clause (ii), as the case may be, could not be worked for reasons which were beyond the control of the manufacturer, then for each shift in respect of which it is so satisfied, the Central Board of Revenue may allow an abatement from the duty livable under rule 3, the rate of abatement for each such shift being arrived at by dividing the total amount of duty livable for that financial year by the number of shifts stipulated in clause (i) or clause (ii), as the case may be: ' Provided that, in the calculations for the purpose of allowing abatement under this rule, the following events shall not be taken into account, namely':-
(i) any closure of the factory for a period of less than six days at a time, or
(ii) any closure of the factory for more than a period of six days at a time about which advance notice was not given in writing to the proper officer, or
(iii) any closure of the factory for normal cleaning repair or main-tenancies purposes: ' Provided further that no abatement of duty shall be allowed for any reason whatever if the total production of cotton fabrics of a factory, in a financial year does not fall short of the production capacity of such factory; and, if such total production falls short of the production capacity, the abatement shall not exceed the difference of the duty livable on the production capacity and The excise duty which would have been livable on the cotton fabrics produced in the year had the duty on production capacity not.: been levied: ' Provided further that:-
(i) for the purpose of claiming an abatement of duty under this sub-rule, the manufacturer shall --
(a) make a declaration, in writing, to the Collector of Central Excise, by the seventh day of July each year, or in cases where in relation to a manufacture these rules come into force in the course of a financial year, within seven days of such coming into force, stating the hours of each shift to be observed in the factory, and
(b) maintain a register yin such form as may be specified in this behalf wherein the commencement of each shift shall be entered within thirty minutes of such commencement; and
(ii) if no such declaration or entry is made within the time specified, no abatement of duty shall be allowed under this sub-rule. Explanation.--For the purpose abatement of duty under this sub-rule, 'day' shall mean a continuous period of twenty-four hours from the commencement of the first shift.
(2) In respect of the period commencing on the 1st day of May, 1968, and ending on the 30th day of June, 1968, sub-rule (1) shall have effect as if the respective number of shifts stipulated therein were only one-sixth of that number.
(3) For the purposes of this rule, the duration of a shift shall be reckoned as eight hours, regardless of the actual duration of any shift, and the maximum of only three shifts in twenty-four hours shall be taken into account: Provided that, if the total duration of two shifts worked in twenty-four hours exceeds sixteen hours, then such two shifts shall be reckoned as three shifts.
(4) In the case of a factory wherein cotton yarn is also manufactured, the working or closure of the spinning sections of the factory shall not be taken into account for the purposes of this rule.
(5) The abatement of duty provided for in this rule may be allowed by the Central Board of Revenue, in accordance with such procedure as may be approved by the Central Government in this behalf, at the end of each quarter on a provisional basis and subject to the final determination by the Board at the end of the financial year."
(b) It may be observed that the relevant proviso to the above-quoted rule provides that no abatement of duty shall be allowed for any reason whatsoever, if the total production of the cotton fabrics of a factory in a financial year does not fall short of the production capacity of such factory, the second part of this proviso provides that if such total production falls short of the production capacity, the abatement shall not exceed the difference of duty leviable on the production capacity and the Excise Duty, which would have been loveable on the cotton fabrics produced in the year, had the duty of production capacity not been levied. ,It may also be pointed out that there is an identical proviso to rule 4 of the Excise Duty on Production Capacity (Cotton Yarn) Rules, 1968, and, therefore, it is not necessary to the-produce the same or to deal with it separately.
' It is an admitted position that the petitioners have been granted abatement on the basis of the second part of the above provision and there is no dispute as to the amount calculated on the %Love basis.
' However, the petitioner's main grievance is that they should have been allowed abatement on the basis of derived average count/pick and not on the basis of the aforesaid second part of the second proviso to rule 4. Mr.Mansoor Ahmad Khan, learned counsel for the petitioners has vehemently urged that the respondents cannot adopt one basis for assessing capacity tax for the purpose of payment of the Excise Duty and some other basis for the purpose of granting abatement.
(c) It may be observed that somewhat similar argument was advanced in the case of Dost Muhammad Cotton Mills Ltd., Karachi v. Pakistan and 3 others PLD 1976 Kar. 1078, relied upon by Mr.Mehmoodul Hasan, in which a D.B of this Court repelled the above contention in the following words:- "(10) The main submission of Mr.Mansoor Ahmed Khan, learned counsel for the petitioners, is that the Central Board of Revenue misread the second part of the second proviso of rule 4(1) of the said Rules above-quoted. According to counsel, the figure of actual production of the cotton Aries viz. 68, 23, 417 square yards should have been cony. on the basis of 57.3 picks to an inch and not on 54- 7:, pick to an inch, which was actually employed in the production of the cotton fabrics and that, there after, the figure so arrived at, should have been allocated separately to each of the three categories of the fabrics in the percentages adopted for fixing the notified production capacity, i.e, Coarse 56-87$, Medium 41.91$ and Fine 1.21$ and the excise duty calculated separately thereon.
That unless a common denominator of 57.3 p;,:k to an inch is adopted the comparison between the figures of actual total production with the figure of notified capacity would be meaningless, against law and unjust. According to counsel, if this approach is adopted, the figure of total production of 68,23,417 square yards, would be reduced to 65,19,285 square yards, and then there would be a difference between the capacity duty and the excise duty on this reduced figure which would come to Rs,4,12,592, And, as this difference far exceeds the amount of Rs,65,637.26 granted as abatement, the abatement should not have been withdrawn.
(11) It is true that in the date regarding basis of assessment of the capacity tax relating to the weaving section of the petitioner's Mill, vide letter of the Central Board of Revenue No,1/22-CX (R.B.II)/68, dated 12-10-1970 "the average pick" is shown-57.3. Incidentally, "pick" is a textile term used to describe the fineness of a fabric by reference to the number of weft threads to an inch. In calculating the production capacity per total shifts in square yards per loom, a certain working formula was employed, in which "the average pick" is shown in the denominator. If the denominator in a fraction is increased from 54.75 to 57.3, the resultant figure would naturally be reduced. We have considered this submission of counsel and, in our opinion, it is ingenious, to say the least. But there is nothing in the second proviso of rule 4(1) of the Rules even to suggest that the total production of the cotton fabrics produced is to be calculated with reference to any pick. The petitioner was free to manufacture more of any category of the fabrics and it appears that it produced a much larger quantity of medium "category fabrics, the excise duty on which would alone have been more than Rupees twelve lakhs. If the petitioner's figure of total production of the fabrics is more, because of a larger production of a particular category of fabrics, by employing the lower pick of 54.75, then would have been the case had it employed the higher pick to 57.3, the petitioner has to thank itself for it. The expression "total production" of cotton fabrics produced in the Mill, means the actual production and not a notional production, such as is suggested by Mr.Mansoor Ahmed Khan. The expression "cotton fabrics production in the year" at the end of the second proviso, clearly means the fabrics actually produced. Again, the difference, of duty mentioned in that proviso is to be calculated with reference to the duty leviable on production capacity and the excise duty on the cotton fabrics "produced" in the year had the duty on production capacity not been levied. The Excise Duty is levied under section 3(1) of the said Act on goods" produced or manufactured". Thus, it is clear that the total production means the goods actually produced or manufactured. There is, therefore, no warrant for the contention that the Central 1B,a1.d of Revenue misread the proviso. In our opinion, the submission of counsel is misconceived and must be rejected."
(d) The above judgment was followed by another D.B. of this Court in C.P.No,26/75 by a short order, dated 4-9-1976. In our view, the reasoning's recorded in the above reported D.B. judgment on all, fours are applicable to the instant case. After the above recent judgment of the Hon'ble Supreme Court reported in PLD 1983 SC 358 on the vires of the amendment of section 3 of the Act relating to the capacity tax and the rules framed in pursuance thereof, in the petitioner's case stands on a weaker footing.
6.(a) It may be observed that under subsection (1) of section 3, the excise duty is leviable on all goods produced or manufactured and on all excisable services provided or rendered, in Pakistan at the rates set forth in the First Schedule whereas subsection (4) of section 3 of the Act provides that with the prior approval of the Federal Government, the Central Board of Revenue may, in lieu of levying and collecting under such subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of parts, machinery, undertakings establishments or installations, producing or manufacturing goods. It further provides that such notifications shall specify (a) the guiding principles for the determination of production capacity, (b) the production capacity as determined in accordance with guiding principles, (c) the duty or the rate of duty on production capacity and (d) the manner of collection. It may be mentioned that the above subsection (41 does not provide any abatement for the shortfall in the assessed production. However, the provision for abatement was made while framing of the rules. In our view, the above abatement is in the nature of a concession, which can be claimed on the basis provided for in rule 4 and not on any other basis, which the parties may fell just and proper.
(b) We are inclined to hold that there is nothing in the second part of the proviso to rule 4 referred to hereinabove, which can be construed as destroying substantive part of the above rule. Nor the above rule or its above provision is in conflict with subsection (1) or subsection (4) of section 3 of the Act as to render it ultra vires of the Act. However, it was vehemently urged by Mr.Mansoor Ali Khan, learned counsel for the petitioners that the respondents after having opted to press into service the capacity tax in lieu of the excise duty on the actual production under subsection (1) of section (3) of the Act cannot re-import the basis contained in subsection (1) of section (3) for the purpose of granting abatement and that the petitioners are entitled to abatement on the same basis on which the capacity of the mill was assessed. In our view, in the absence of any provision in subsection (4) of section (3) of the Act providing statement or the basis for determining the amount of abatement, the petitioners cannot claim amount of abatement on a basis other than the basis provided for in rule 4.
' Similarly, we are not impressed by Mr,Mansoor Ahmed Khan's contention that there cannot be any comparison for the purpose of computing abatement on the basis of different type of manufactured goods. It is not the case of comparison of different types of manufactured goods it is a question of calculating the amount of abatement on the basis provided for in rule 4.
7. For the aforesaid reasons, the Petition is dismissed with no order as to costs.