1. ' SAEEDUZZAMAN SIDDIQUI, J.---The petitioner has challenged in the above petition the demand of central excise duty amounting to Rs,66,47,041.03 which is alleged to be due against the petitioner as well as their predecessor M/s. Valika Textile Mills Limited since 1969. In order to understand the present controversy it is necessary to state here the background of the dispute.
2. ' The predecessor of the petitioner M/s. Valika Textile Mills Limited (hereinafter to be referred as "Valika Textile" only) were assessed to excise duty on the basis of production capacity in the year 1969. Valika Textile challenged the assessment of excise duty on them on the basis of production capacity as well as vires of Production Capacity Rules, 1969 in Writ Petition No, 446/69. On 26-11- 1969 an interim order was passed in the above petition whereby Valika Textile was allowed one month's time to pay 75% of the arrears of excise duty upto date demanded by the Government and future clearance of goods was allowed upon payment of excise duty under the first Schedule to Act until disposal of petition. Petition No, 446/69 alongwith several other similar petitions were dismissed by the High Court of Sindh and Balochistan, Karachi on 6-5-1971. Leave to appeal against the above order of High Court of Sindh and Balochistan was granted by the Supreme Court on 17- 8-1971 but as an interim measure during pendency of their appeal, Valika Textile and other petitioners were directed to comply with the direction of High Court dated 26-11-1969 until disposal of their appeals. The appeal before the Supreme Court was ultimately dismissed in May, 1983. The present petitioner in the meantime took over the assets and liabilities of Valika Textile and a change over took place on 25-10-1973 as stated -in paragraph 1 of the Petition. Accordingly, after dismissal of the appeal of Valika Textile by the Supreme Court, a demand notice dated 26th August, 1983, was issued by the Superintendent, Central Excise and Land Customs, Karachi, against the petitioner calling upon them to pay a sum of Rs, 73,99,977.49 as outstanding dues of central excise duty against Valika Textile. The petitioner in reply denied their liability to pay the above amount on the ground that assessm ent of excise duty on the basis of production capacity was not applicable to them in view of Explanation to subsection (7) of section 3 of the Central Excises and Salt Tax Act (hereinafter to be referred as the Act only) which was inserted with effect from 28th June, 1969. No proper reply was apparently given to the above representation of the petitioner by the Superintendent, Central Excise and Land Customs, whereupon the petitioner approached the Collector, Central Excise and Land Customs. The latter by his letter dated 30th June, 1987, conveyed to the petitioner that their representation was being examined by the authorities concerned but at the same time advised the petitioner to deposit a sum of Rs, 5 lacs on 4th July, 1987, and a further sum of Rs, 2 lacs every month beginning from August, 1987 in order to avoid action being taken by the Department under section 11 of the Act. It appears that the above direction of respondent No, 2 was partly complied by the petitioner as they deposited the sum of Rs, 5 lacs and some instalments of tax. In the meantime, by letter dated 3rd November, 1987, Respondent No, 1 informed the petitioner that respondent No,3 has not accepted the contentions of petitioner and accordingly called upon the petitioner to deposit the balance of the excise duty amounting to Rs, 66,47,041.03 in the Government treasury within seven days of the receipt of the letter. Some further correspondence on the subject took place between the petitioner and respondents and finally the above petition was filed on 28-12-1987 challenging the aforesaid demand by the respondents. To complete narration of facts, it may also be mentioned here that the petitioner in 1981 filed two petitions in this Court being Petitions No, 411 and 549 of 1981. In Petition No, 411 of 1981, the petitioner has challenged the action of respondents in imposing a penalty of Rs,2,00,000 and Rs,2,000 under rules 226 and 57 respectively of the Central Excises and Salt Tax Rules, 1944. In the other Petition No, 549/81 the petitioner had challenged the rejection of their claim for abatement of Excise duty which the petitioner had claimed on account of closure of Mill from 4-2-1971 to 1-4-1971. Both the above petitions were remitted back to Central Board of Revenue by this Court by orders dated 2-9-1985 and 4-9-1985 respectively, with the direction that the matter be redetermined in the light of the observations made in the above orders.
3. ' At the hearing of above petition Mr. Zaheer Ahmed Khan, the learned counsel for the petitioner raised following contentions in support of the petition. It is, firstly, contended by the learned counsel that in view of the Explanation to subsection (7) of section 3 of the Act and on account of grant of stay order by the High Court in the case of Valika Mills, the petitioner's Mill was liable to be assessed to excise duty on the basis of actual production under subsection (1) of section 3 of the Act and as such the demand of the Respondents on the basis of production capacity of Mill under subsection
(4) of section 3 ibid was wholly without jurisdiction. The second contention of the learned counsel is that no notice as required under rule 10 of the Central Excises and Salt Rules, 1944, was served on the petitioner which was a condition precedent to enforce the demand of tax against the petitioner under the Act. The last and the alternate contention of learned counsel for the petitioner is that their predeccessor Valika Textile had submitted a claim for abatement of excise duty on account of closure of Mill from 4-2-1971 to 1-4-1971 which was rejected by the Department but in Petition No,549/81 filed by the petitioner the case was remitted back to Central Board of Revenue for a fresh decision on 4-9-1985, but till today the case has not been decided by the Central Board of Revenue in spite of several reminders by the petitioner. It is urged by the learned counsel that the claim of petitioner for abatement of duty is substantial and in case the petitioner succeeded in establishing the same, they will be entitled to adjust it from the demand of excise duty made by the Respondent as the period for which petitioner have claimed abatement of excise duty is included in the demand of excise duty raised by the Respondents. It is, accordingly, contended by the learned counsel that the demand of excise duty, challenged in the above petition, may be linked with the decision of the case relating to abatement of excise duty pending before Central Board of Revenue on remand by this Court. Learned counsel for the petitioner also very fairly offered that the Bank guarantee furnished by the petitioner in the case in the sum of Rs, 65 lacs may be directed to be extended until such time the Central Board of Revenue is able to decide the case remanded in petitions No,411 and 549 of 1981 and in case the Central Board of Revenue does not accept the plea of petitioner in the above cases they may encash the bank guarantee to the extent of amount found due and payable against the petitioner.
4. ' In reply to the above contentions of the learned counsel for the petitioner Mr. S.M. Noorul Hassan, firstly contended that the plea of the petitioner that their Mill is liable to be assessed from 26-11- 1969 on the basis of actual production, in view of the Explanation to subsection (7) of section 3 of the Act, cannot be allowed to be raised as the prodecessor of petitioner Valika Textile on more than one occasion admitted their liability to pay the sum of Rs,73,99,977.49 by way of Excise duty which was mentioned in the impugned notice dated 20th August, 1983, and related to the period when Valika Textile were owners of the Mill. For the same reason it is contended by Mr. S.M. Noorul Hassan that the petitioner also cannot claim notice under rule 10 of the Central Excises and Salt Rules, 1944, as the amount of Excise duty demanded by respondents pertains to the period when Valika Textile were the owners of the Mill and that they had accepted their liability to the above amount. With regard to alternate contention of Mr. Zaheer Ahmed that the Central Board of Revenue has failed to decide the case relating to abatement of Excise duty for the period from 4-2-1971 to 1-4-1971 remanded by this Court and, therefore, the recovery of Excise duty may be linked with the decision of Central Board of Revenue in that case, Mr. Noorul Hassan contended that though the period for which abatement is claimed is covered in the demand of Excise duty challenged in the above petition, the issues in the two cases are separate and, therefore, the decision of one may not be made dependent on the other. The learned counsel further contended that in any case the claim of abatement could not be more than a few lacs of rupees, and, therefore, for that reason the recovery of huge demand of Rs,66,47,04.03 could not be withheld. We have heard the learned counsel for the parties at length and our decision is as follows.
5. ' The first contention of the learned counsel for the petitioner is that the petitioner's Mill is liable to be assessed on the basis of actual production of the Mill from the date of the passing of the interim order by the High Court i,e, 26-11-1969, in view of the Explanation to subsection (7) of section 3 of the Act. It is an admitted position in the case that the demand of Excise duty by the Respondents related to the period when Valika Textile were owners of the Mills. The Respondent have placed on record the letter dated 24th July, 1973 written by Valika Textile after dismissal of their writ petition by the High Court in which they admitted their liability to the amount of Excise duty amounting to Rs,73,88,978.66 subject only to the condition of acceptance of their claim of export rebate amounting to Rs, 4,05,120. In view of this clear admission of liability by Valika Textile we agree with the learned counsel for the Department that the present petitioner, who are successor of Valika Textile, are not entitled to dispute the validity of demand of Rs, 73,99,978.60 on the ground of wrong basis of assessm ent. We therefore, do not feel it necessary in this case to decide the first contention of learned counsel for the petitioner. For the same reason we all also agree with the learned counsel for the Department that the petitioner were not entitled to the issuance of notice under Rule 10 of the Central Excise Rules, 1944 in respect of an admitted liability of their predecessor. We are, however, of the view that as the claim of abatement of Excise duty by the petitioner related to the same period for which excise duty is demanded by the Respondents and it is not denied that in case any abatement of duty is allowed the same could be adjusted from the above demand of Excise duty. We are of the view that the enforcement of the demands of Excise duty challenged in the above petition could be validly linked with the decision of the case of abatement of Excise duty remanded by this Court to Central Board of Revenue in Petition No, 549 of 1981 on 4-9-1985. The petitioner in paragraphs 15 and 15-A of their amended petitions have set out in detail the circumstances under which Petitions No, 411 and 549 of 1981 were filed in this Court and the decision given thereon by this Court. In the counter-affidavit filed on behalf of Respondents these facts are not denied and the assertion made by the petitioner that after remand of the case the Central Board of Revenue has not decided their cases in spite of reminder is also not disputed.
6. We, accordingly, direct that the demand of Excise duty against the petitioner amounting to Rs, 66,47,041.03 will not be enforced until decision of the claim of the petitioner regarding abatement of Excise duty for the period from 4-2-1971 to 1-4-1971, remanded for consideration to Central Board of Revenue by this Court in Petition No, 549 of 1981. The petitioner shall extend the period of Bank Guarantee furnished in this Court in the above case upto the date of decision of their claim for abatement of Excise duty by the Central Board of Revenue and subject to the decision in that case the Respondents may encash the Bank guarantee furnished by the petitioner in the above case.
7. There will be no order as to costs.