G. SAFDAR SHAH, C. J.----This petition under Article 98 of the late Constitution of 1962 of the Islamic Republic of Pakistan calls in question the order of the Superintendent, Excise and Land Customs dated 26-7-1969, by which Colony Sarhad Textile Mills Limited (hereinafter called the Mill) was directed to pay by way of excise duty Rs. 26,99,901/5 on account of the manufacture of Cotton Yarn and Cotton Fabrics in three equal monthly instal--ments. The impugned order has been assailed by Mr. Fazal Ghani Khan, the learned counsel for the mill on the following grounds :-
(1) That excise Rule 12 (as originally framed tinder the Central Excise and Salt Act, 1944) is still in force and, therefore, resort to rule 8 of Excise Duty on Production Capacity (Cotton Fabrics and Cotton Yarn) Rules of 1968, underwhich the impugned order seems to have been passed by the respondent, was not permis--sible ; for all that rule 8 provides is the guiding principles for the deduction of duty on exports and the rates thereof.
(2) That both these rules have to be read together.
(3) That the intention of the Legislature, as manifested in these rules, is to refund to the manufacturer the entire excise duty paid by him on the export of his goods.
(4) That by adding three provisos to rule 8 (two by Notifica--petition dated 21-6-68 and third by Notification dated 31-12-68) the Central Board of Revenue has defeated the said Legislative intent and the provisos in question are, therefore, ultra vires.
(5) That the three provisos were added by the Central Board of Revenue long before the amendment of section 37(xvi) of the Act by Ordinance XVI of 1969 and, therefore, these were not within the competency of its rule-making authority.
(6) That the impugned order was passed in violation of the principles of audi alteram partem and wag, therefore, without jurisdiction.
(7) That by adding the three provisos to rule 8 the entire rules have become questionable ; for they are likely to bring about discrimination in regard to the liability of various tax--payers.
(8) That rule 8, when read with the three provisos, is ambi--guous, unintelligible and does not provide any workable formula for the refund of the full rebate to a manufacturer, which in fact was the avowed Intention of rule 12 (as originally framed) and unamended rule 8 of the Excise Duty on Production Capacity (Cotton Fabrics and Cotton Yarn) Rules, 1968.
2. Before dealing with these contentions, it would be per--tinent to briefly recall the history of Legislation regarding the levy of excise duty on excitable goods produced or manufactured in Pakistan. Prior to 1966, excise duty on such goods was leviable under subsection (1) of section 3 of the Central Excise and Salt Act, 1944 (hereinafter called the Act), but by Act 11 of 1966 (the Sixth Constitutional Amendment Act, 1966) a complete change was brought about in this position. By this Act, Entry 43 of the 3rd Schedule of the Constitution was amended authorising the levy of production capacity tax on any plant, machinery, undertaking, establishment or installation. After this amendment section 3(4) of the Act was amended by Finance Act (XI of 1966), which in relevant parts reads as under :-- "(4) With the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods ; and such notification shall specify--
(a) the guiding principles for the determination of production capacity.
(b) the production capacity as determined in accordance with such guiding principles, of the plants, machinery under-- takings, establishments or installations affected by it,
(c) the duty or the rate of duty on production capacity, and
(d) the manner of collection of such duty.
(5) The production capacity of any plant or machinery or part thereof specified In a notification under subsection (4) shall, upon an application made to the Central Government within thirty days of the notification by any aggrieved person, be re--viewed by a Review Board constituted under subsection (6) to which the application shall be referred ; and the decision of the Review Board shall be final."
3. The Government of Pakistan, with a view to implementing this new policy, appointed a high- powered committee, as notified by it in the Gazette of Pakistan, Extraordinary, dated 12-8-1967, to determine the production capacity of each mill within the frame--work of what was called guiding principles, out of which the following appear to be relevant for the present discussion :-- "(4) (i) The national average annual production of each statutory category of Cotton Fabrics/Cotton Yarn in a per Loom/Spindle basis taking production of the past three years Into account.
(ii) Category-wise annual production of the individual units for the past three years or such lesser period as may be available.
(iii) Category-wise annual production of comparable units for the same period.
(iv) production capacity of an individual unit calculated on the basis of the technically possible maximum production potential of the plant and machinery installed in the unit, if it were to aim at maximising its profits before tax.
(v) Growth factor, keeping in view the past rate of improvement in production and likely to increase in efficiency relating to improvement in technical, managerial, labour and financial factors of individual mills.
(5) The annual production capacity of individual factories shall be express for each statutory category Cotton Fabrics in terms of square yards, and for each category of cotton yarn in terms of pounds.
(6) For the purpose of determining the liability to duty of a factory, the production capacity of the factory for each excise category of fabrics/yarn, determined on the basis of the above principles, will be multiplied by the statutory rate of excise duty for that category."
4. It is not disputed that the production capacity of the mill was determined by the high-powered committee on these bases and duty notified as such in the Gazette of Pakistan, Extraordinary, dated 22-4-68. On 22-4-68, the Central Board of Revenue in order to provide the requisite machinery to levy duty on produc--petition capacity framed Excise Duty on Production Capacity (Cotton Yarn) and (Cotton Fabrics) Rules, 1968 (hereinafter called the rules) in exercise of powers conferred on it by subsection (4) of section 3 read with section 37 of the Act, and in there prescribed the rates of rebate of duty on all goods exported from the country. The case of the respondent is that the duty demanded from the mill and the rebate given to it is strictly according to these rules. But the mill has challenged the legality of this action, contending that these rules have to be read with rule 12 (as originally framed) and when so read, it would be entitled by way of rebate to the refund of entire duty paid by it on all goods exported out of the country.
5. The contention of the mill, as is evident from the various grounds urged by its learned counsel, is seemingly based on the assumption as if rule 12 (as originally framed) would be attracted to a case in which a manufacturer claims rebate on the goods exported by him out of the country, or alternately rule 12 and rule 8 of the Rules will have to be read together ; for the object of rule 8 is just to furnish the guiding principles as to how deduction of rebate would be made when the goods are removed from the factory for export. It is clear to us, however that this assumption is wholly incorrect. The original rules framed under the Act, of which rule 12 is a part, were framed at a time (about three decades ago, to be precise) when no one could contemplate with certainty that a new country Pakistan) would come into existence and that within a period of about two decades it would reach a stage of industrialization which would bring about the need for so radical a legislation as to subject the mills to duty on production capacity basis. To contend, therefore, that notwithstanding the amendment of subsection (4) of section 3 of the Act, by Finance Act XI of 1966, by which duty was made leviable on production capacity basis, and the consequent framing of the rules thereunder, rule 12 (as originally framed) would still apply to the fats of this case would be a fallacy and moreso in view of the maxim generalis specialibus non derogant.
6. It is also fallacious to contend that the object of rule 8 is simply to provide the guiding principles as to how a manufacturer may deduct, from the duty paid by him, the amount of rebate. The rules are not only designed to perpetuate the policy of the Legislature, as manifested is the amended sub--section (4) of section 3, but are comprehensive enough and self sufficient. Sub-rule (2) of rule 3 of these rules provides the rate of duty which a manufacturer has to pay on (a) superfino fabrics, (b) fine fabrics, (c) medium fabrics and (d) coarse fabrics, whereas sub-rule (3) of rule 8 allows manufacturer to deduct from the duty already paid by him on goods rebate on the prescribed rate. This being the scheme of the rules, we do not see as to how rule 12 (as originally framed) could be invoked in a case of the present type.
7. Rule 9 of the rules would also appear to support this conclusion. This rule reads as under : - "The provisions of the Central Excise Rules, 1944, except the rules contained in Chapter XV of the said Ru!e3 shall, in so far as they arc not inconsistent with these rules, apply to cotton fabrics and the manufacturers governed by these rules as they apply to excisable goods and manufacturers of excisable goods on which duties of excise are levied under subsection (1) of section 3 of the Act."
8. It would be seen that by this rule the original rules of 1944, of which rule 12 is a part, have been made applicable to all cases of the present type provided they are not inconsistent witi3 the rules.
In order to see if rule 12 would apply, it may be reproduced :-
12. Rebate of Duty on Goods Exporled.---Rebate of the duty paid on the goods specified in the following table shall be made to the extent and subject to the limitations or conditions, if any, set out in the corresponding entry in columns 4 and 5 of the table, if they are exported to the destinations and in the manner specified in the table and in accordance with the procedure set out in the relevant provisions of Chapter IX of' these rules, and if the amount of duty paid on the goods --exported, and the date of payment thereof, are established to the satisfaction of the Collector.
9. Now by looking at the relevant entry in columns 4 and 5 of the table, to which rule 12 has desired reference, a manufacturer would be entitled to the refund of entire duty, as rebate, on all goods exported by him out of the country and. Consequently, the mill in this case would be justified to claim, provided rule 12 is not inconsistent with the rules as mentioned! In rule 9 thereof, that it should be treated accordingly. We have already mentioned that the rules are comprehensive, self --sufficient and provide the rate of duty and rebate both in regard to all the excisable goods exported out of the country, and this would show that rule 12 would be inconsistent with these rules ; for unlike under the rules, a manufacturer under rule 12 would be entitled to claim refund of the entire duty by way of rebate on all goods exported by him. The principles embodied in generalis specialibus non-derogant would be another reason to exclude the application of rule 12 0 the facts of this case ; for it is not only Inconsistent with the' rules, but the rules being special in nature and covering the same field would exclusively apply.
10. The learned counsel also relied on sub-rule (4) of rule 185 of the original rules and form A. R. 4 prescribed by rule 158 and contended that since the mill in this case had exported its goods on form A. R. 4, duly verified and authenticat--ed by an official of the Central Excise Department, the mill would be entitled to the rebate of the entire duty. We do not agree. All that sub-rule (4) of rule 185 says is that when goods --are exported out of the country, the excise official would verify their particulars as entered in form A. R. 4 by the exporter and after he is satisfied that the goods were those on which duty had been paid, he shall seal each package with the Central Excise seal and after endorsing all copies of the application shall return the duplicate to the owner. It is true that in one of the columns of Form A. R. 4, the exporter is required to mention the amount of rebate which he claims, but this would not mean that just because this form has been authenticated by the excise official, the exporter would be allowed the said amount of rebate ; for this would tend to obliterate the very scheme of paying duty on the production capacity basis. It seems to us that form A. R. 4 has been retained for the purposes of the rules as a measure o expediency and to say that an exporter would be allowed under it to the refund of entire duty, which he claimed in it in his own hand, would tantamount to disregarding the very policy of the Legislature as manifested in the amended subsection (4) of section 3 of the Act.
11. By this discussion we have endeavoured to show that the assumption of the learned counsel that rule 12 (as originally framed) would apply to the facts of the present case is wholly misconceived, and once that conclusion has been reached, then the rest of his contentions embodied in grounds 5, 7 and 8 would appear to have lost their force. However, since these contentions have raised constitutional points of some Importance, we would like to answer them.
12. The contention raised in ground 5 is that the three provisos added to rule 8 by the Central Board of Revenue were ultra vires of its rule-making power ; for they were added long before the amendment of section 37(xvi) of the Act by Ordinance XVI of 1969. In order to see the force of this contention, we would like to reproduce section 37(xvi) (both in its unamended and amended form), rule 8 and the three provisos added to it. These respectively read :- "37(1) The Central Board of Revenue may make rules to carry Into effect the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may-
(xvi) provide for the grant of a rebate of the duty paid on excisable goods or on excisable goods used in the manufacture of any other goods which are exported out of Pakistan or shipped for consumption on a voyage to any port outside Pakistan.
(xvi) provide for permission to export goods on payment of duty or otherwise, and for the grant of rebate, on any basis, of the whole or any part of the duty paid on or In respect of any excisable goods which are exported or which are used in the manufacture of any other goods which are exported out of Pakistan or shipped as provisions or stores for consumption on board a ship or aircraft proceeding to any destination outside Pakistan.
Rule 8.---(1) A manufacturer may send any unprocessed cotton fabrics from his factory to another licensed factory in accordance with the procedure prescribed in rule 96-DD of the Central Excise Rules, 1944, for processing and return from the latter factory to his factory.
(2) Duty in respect of cotton fabrics which are removed from a factory to another licensed factory in accordance with the procedure prescribed in rule 96-DD of the Central Excise Rules, 1944, for clearance on payment of duty from the latter factory may be deducted, at the appropriate rate specified in sub-rule (2) (or (2-A) as the case may be) of rule 3 from the monthly instalment of duty payable for that month under rule 6.
(3) Duty in respect of cotton fabrics which are removed from a factory for export in accordance with the procedure prescribed in Chapter IX of the Central Excise Flutes, 1944, or to a licensed warehouse in accordance with the procedure prescribed in Chapter VII of the said rules, may be deducted froth the monthly instalment of duty payable for that month under rule 6, at the following rates, namely :-
(i) Super fine cotton fabrics.
Seventy paisa per sq. Yard plus two rupees eighty paisa per lb.
(ii) Fine cotton fabrics.
Forty paisa per sq. Yard plus one rupee and seventy-five paisa per lb.
(iii) Medium cotton fabrics.
Twenty paisa per sq. Yard plus one rupee and ten paisa per lb.
(iv) Coarse cotton fabrics.
Ten paisa per sq. Yard plus fifty-five paisa per lb.
Provided that such deduction of duty shall be admissible separately in respect of each category of cotton fabrics up to the maximum of the production capacity of that category on which duty is leviable under rule 3: Provided further that if the quantity of any category of cotton fabrics removed from the factory during a financial year in accordance with this sub-rule exceeds the production capacity of that category on which duty is leviable under rule 3, then in respect of the excess quantity deductions of duty may be allowed against the production capacity of any other category of cotton fabrics on which duty is leviable under rule 3 at a higher rate but such deduction shall be allowed at the rate of duty prescribed in rule 3 for the category of cotton fabrics which is removed from the factory, subject to the condition that the total of such quantity and of the quantity of that other category of cotton fabrics removed under this sub-rule does not exceed the production capacity of that other category; and where deduction of duty in respect of any excess quantity or any part thereof cannot be so allowed, deduction of duty in respect of such excess quantity or part may be allowed against the production capacity of any other category of cotton fabrics on which duty is leviable under rule 3 at a lower rate and such deduction shall be allowed at the rate of duty prescribed in rule 3 for that lower category: Provided further that in the case of such fabrics manufactured from two or more categories of cotton yarn as may be determined and notified by the Central Board of Revenue from time to time, deduction of duty may be allowed for the weight of each category at appropriate rates of duty, when export of such fabrics takes place in accordance with the procedure laid down by the Contra] Board of Revenue.
Explanation.-The weight of each count of cotton yarn. Will be obtained by applying the following formula, namely :-
(i) Weight of warp yarn in lb. Per square yard= No. Of warp X 846- inch x 36/count of warp x 840
(ii) Weight of weft in lb. Per square yard =No. Of picks per inch x 36/count of warp x 840 (4) first two provisos, it may be mentioned, were added to rule 8 on 21st June 1953, and the third proviso on 31st December 1968.
13. Now it is not in dispute that for the purpose of assessment of excise duty, tae production capacity of the mill has been fixed for each category of cotton fabrics and cotton yarn. So far as cotton fabrics are concerned, they have been divided into four categories, (1) superfine, (2) fine, (3) medium and (4) coarse, and it is evident that the total excise duty levied on the mill has beets calculated on the basis of its production capacity fixed for each category of the manufactured fabrics, multiplied at the prescribed rate of duty specified in sub-rule (2) of rule 3 of the Rules. By this process which appears to be wholly in accord with the policy enunciated in the amended subsection (4) of section 3 of the Act, the excise duty levied on the mill would clearly represent the notional duty which it would be required to pay, if it were to actually manufacture the maximum of goods in each category, as specified in the notification dated 22-4-1968. From this would follow that if a manufacturer would exceed these specified limits, he would not be subjected to any further duty and likewise he would not be entitled to claim refund of any duty in case he falls short of producting goods in the specified categories.
14. Sub-rule (3) of rule 8 of the rules, before the three pro--visos were added to it, was seemingly inconsistent with the policy contained in the amended subsection (4) of section 3 of the Act; for an exporter could claim under it, as rebate, not only the duty already paid by him on the basis of the production capacity of his mill, but also additional rebate on goods exported by him in excess of one or more of the categories in which its capacity had been determined. This position would be patently untenable; for if in a given case in which the Department had deter--mined the maximum capacity of a mill and it had paid duty on that basis, then how could the mill claim rebate on the excess quantity exported by it when no duty had been paid on this excess. The amendment of subsection (4) of section 3 of the Act was, indeed, meant to secure the evasion of duty by the manufacturer and if the contention of the learned-counsel is accepted, It would evidently frustrate that policy.
15. The three provisos added to rule 8, when seen in this background would appear to be unexceptional; for the object which they intend to achieve is no more than what has been laid down in the amended subsection (4) of section 3 of the Act. In other words, the provisos in question would appear to have amplified what was already there in that section and, therefore these could E well be framed and notified by the Central Board of Revenue even before the amendment of section 37 (xvi) of the Act by Ordinance XVI of 1969. It appears to us that the subsequent amendment of this clause was made by the Legislatures a measure of abundant caution and, therefore, the competency of the Central Board of Revenue to add the three provisos to rule 8 is not open to question.
16. The unamended clause (xvi) of section 37(2) of the Act provided for rebate to which an exporter would be entitled. But it is not the intention of this clause that an exporter would Am be entitled to the refund of entire duty paid by him as rebate on the exported goods. Assuming, however, that the language of this clause is susceptible to any such construction, even then this clause will have to be read with the amended subsection (4) of andsection 3 of the Act, and when so read, it will leave no room for doubt:---(1) that rebate would be payable only on the duty already paid by a manufacturer, and (2) that in no case would a manufacturer be entitled to claim any rebate on the good which he has exported in excess of the quantity in which its P production capacity had been determined by the Department for each category. The object of the three provisos, from the plain language in which they are couched, clearly is to implement the row policy contained in the amended subsection (4) of section 3 of the Act and it is obviously for this reason that they direct that if the export of any category exceeds the maximum specified limits, then the excess quantity shall be debited towards the lower category and the rebate allowed on it will have to be calculated at the lower rate applicable to the other category. Similar appears to be the object of the third proviso which says that when the excess goods cannot be debited towards the lower category, then they may be counted towards cotton fabrics of the high category, but so far as rebate is concerned, it will be allowed at the rate applicable to the goods which have been actually exported.
17. The contention of the learned counsel, as regards grounds 7 and 8, has also not impressed us.
We have sufficiently dealt with the scope of rule 8 and the three provisos added to it later by notifications of the Central Board of Revenue, and we do not see as to how they are likely to bring about any discrimination among the various classes of tax-payers. The formula contained therein appears to be precise, wholly intelligible and would apply to any conceivable case with precision and certainty. It is true that while dealing with the cases of different mills, the liability of one to pay duty may be found to be higher than that of the other, but this would be possible only if the maximum capacity of each mill has been determined differently. However, in a case in which two or more mills have their capacity at par with each other, their liability to pay duty would obviously be the same and, therefore, to say that by adding the three provisos to rule 8, it would tend to discriminate between the various tax-payers is not convincing. We have already come to the conclusion that this case would be covered exclusively by the rules, especially made under the amended subsection (4) of section 3 of the Act, and that rule 12 (as originally framed) would have no application to it. It would, therefore, follow that the contention of the learned counsel contained in ground 8, based as it is, on the erroneous assumption that just because it does not provide for the refund of full rebate, the rule in question would be ambiguous is clearly misconceived. Rule 8 is comprehensive, intelligible and provides a workable formula to be applied in all cases in which rebate has to be allowed on the duty paid on production capacity basis and it is incorrect to contend that the case would be covered by rule 12 and a manufacturer would be entitled to full rebate on the goods exported by him out of the country.
18. The grievance that the impugned order was passed on back of the mill and was, therefore, without jurisdiction to also without force. It is not disputed that when the production capacity of the mill was determined by the high-powered committee, appointed by the Central Board of Revenue, its representative bad been heard. Thereafter, it was heard in revisional and review proceedings filed by it against the original findings of the committee and in these proceedings it was granted some relief. So far as the impugned order is concerned, it has been passed on the basis of the production capacity of the mill and consequently, we do not see as to how the mill could complain that it should have been heard before the respondent passed that order. After all, once the liability of the mill was determined in the light of the maximum production capacity, then to assess its liability towards duty would be a matter of calculation in the Department in which the mill could not claim to be present. However, in case there is any error in the impugned order of the Department, it would be open to the mill to point it out which would be rectified, provided it was able to substantiate its contention. This position has been accepted by the Department's representative who was present in Court and he stated that in quite a few cases mistakes of accounting have been proved to the satisfaction of the Department and they have been rectified.
19. The learned counsel then urged that the Department has changed the basis from time to time in assessing its liability towards duty and in support of his contention, he referred to the various figures supplied to it on different occasions. The learned counsel for the Department did not dispute the factual position, but he offered clarification saying that the original demand made by the Department was on the basis of the production capacity fixed by the high-powered committee the second demand was made when the mill was given relief by the Standing Tribunal and the last demand was based on the findings of the Review Board. This contention of the learned counsel seems to be convincing ; for the mill did appear before the Standing Tribunal and Review Board and in these proceedings, some relief was granted to it.
20. S. Ghanzanfar A.I Shah Bokhari, the learned counsel also met the objection of Mr. Fazal Ghani Khan, the learned coun--sel for the mill, that in regard to the accounting period, the very basis on which duty was levied by the Department had been changed. Mr. Bokhari pointed out that in the original demand notice duty was demanded for the entire period of 14 months which was against Rule 6 of the Rules. He, therefore, argued that the subsequent demand notice sent to the mill was bifurcated, so that the duty for two months of 1968 (for the accounting period of 1967-68) was mentioned separately and the duty for the rest of twelve months was mentioned separately ; for this ;period was covered by the accounting year 1968-69.
21. In view of this discussion, we are satisfied that the impugned order was passed by the respondent in his proper jurisdiction and according to law and the various contentions raised against it have no substance. This petition is, therefore, dismissed with costs.