' SYED ABDUR REHMAN, J.--This is a petition under Article 199 of the Constitution.
2. The brief facts leadings to the filing of the above petition are that the petitioner are manufacturers of paints and its ancilliaries and further claim that their products are classifiable under item 04.03 of the First Schedule of the Central Excises and Salt Act, 1944 (hereinafter to be referred as the said Act) for the purpose of payment of excise duty at the rate mentioned therein.
On 28th June, 1979, respondent No,1 namely Ministry of Finance, Government of Pakistan issued Notification S R 0 555 (1)/79 granting exemption as contemplated under section 12-A of said Act from payment of excise duty in respect of goods classified under item 04-03 which are described in detail including 'thinners'. According to the petitioners, exemption was allowed to be availed subject to observance of procedure in rule 96-T.T of the Central and Excise Rules, 1944 (herinafter to be referred at the said rules). Rule 96-TT requires manufacturer to execute a bond for removal of goods without duty. Petitioners claim exemption from payment of duty in respect of white spirit, xylene and toluene, which are according to them 'thinners' as they are liquids to be added to paints and varnishes to facilitate application. It is admitted by the petitioners that they procured aforementioned three items from Pakistan State Oil Company, in respect of which they had applied to respondent No,3 Assistant Collector in Form AR-3 through their letter, dated 2nd May, 1983 for receipt of the said duty free 'thinners'.
3. In the process petitioners were required to produce approved caliberation charts for the storage tanks, which they did and executed bond. Subsequently they were allowed to receive white spirit (solvent 30/40), xylene and toluene on Form AR-3 in terms of Notification, dated 29th June, 1979 without payment of duty. On 15th December, 1983 petitioners were served with show-cause notice by respondent No,3 Assistant Collector, in which it was alleged that three items mentioned above were not ancillaries of goods falling under heading 04.03, hence there was evasion of excise duty amounting to Rs,9,88,547.88. It is stated that this notice was not acted upon and subsequently on 9th February, 1984 another similar notice was issued. Hearing took place before respondent No,2 (Deputy Collector-II) and in order dated 22nd March, 1984 it was hold by him that subject goods mentioned above were not covered by the exemption sought through procedure under rule 96-TT for the reason that these goods are classified in the excise schedule under headings 03.14 and 03- 16 and are being claimed by manufacturers as petroleum products. Amount of duty mentioned in the show-cause notice was ordered to be recovered alongwith penalty of Rs,10,000.
4. Petitioners filed appeal, which was dismissed by respondent No,5 (Collector Appeals) vide order, dated 26th May, 1984. Against decision in appeal, petitioners filed Revision before respondent No,1 (Ministry of Finance, Government of Pakistan), which was dismissed vide order, dated 9th January, 1986. Having lost in all the forums provided in the frame work of the said Act, petitioners have invoked Constitutional jurisdiction of the High Court by this petition is which orders passed by respondents mentioned above, have been impugned.
5. On the other hand, stand taken by the respondents' counsel as reflected in the impugned orders as well as counter-affidavit of Mr. S.M. Younis Wasti, Superintendent (Law) of the Central Excise and Land Customs, filed in this petition, is that the three subject items mentioned above do not constitute as ancillaries of paint and as such do not fall under heading 04.03 of the Central Excise Tariff but are classified in the Excise Schedule under headings 03.14 and 03.16 respectively. Reliance is placed on general rule of interpretation that heading providing specific description would take precedence over heading providing general description. In other words it is admitted by respondents that word 'thinners' used in headings 04.03 is of general description and is open to many meanings. It was contended before us by Mr. Shahudul Haq on behalf of respondents that subject items are petroleum products and that is why they are mentioned in headings 03.14 and 03.16 which are included in the chapter relating to petroleum products. It was further contended by him that subject items, as such having been purchased from Oil Company are not 'thinners' as contemplated by heading 04.03 unless some other ingredients are mixed with subject items to make them 'thinners'.
6. A Division Bench consisting of Sajjad Ali Shah, J. (as he then was) and Saleem Akhter, J., set aside the impugned order and allowed the petition, and remanded the case to respondent No,1 for deciding the question of fact as to what is the meaning of 'thinners' as described under heading 04.03 of the First Schedule to the Central Excises and Slat Act, 1944, and exemption notification dated 28-6-1979. It was further directed that this question of fact was to be decided after given full opportunity to both the parties to produce evidence in the revision application pending before the respondent No,1.
7. Against this judgment an application for leave to appeal was filed in the Supreme Court which was converted into an appeal and the judgment of Division Bench of this Court was set aside, and the case has been remanded to this Court for fresh decision of the case in accordance with law.
8. It will be useful to reproduce the observations of the Supreme Court made in the above judgment as under:- "Mr. Khalid M. Ishaque, learned counsel for the appellant submitted that white spirit (solvent 30/40), Xylene and toluene are thinners within the meaning of that terms and are thus classifiable under Item 04.03 and are thus exempt from excise duty under the terms of the Notification, dated 28th June, 1979. In support of the above assertion, learned counsel submitted that in taxation matters, it is the ordinary use of the item, and not the technical definition that has to be considered, and in, any case High Court in remanding the case to the respondent has failed to appreciate the true import of the well-established proposition that if a finding of fact or of law goes to the root of the jurisdiction, and such finding is erroneous on the face of it, the High Court in its Constitutional jurisdiction can go into the question of finding of fact and such errors of law which go to the root of the jurisdiction. In this behalf, learned counsel argued that the finding by the respondents that the white spirit, xylene and toluene are classifiable in Items 0314 and 03.16 instead of under 04.03 is a finding which goes to the root of jurisdiction and is ex facie erroneous.
' Learned counsel then referred to the definition of 'thinners' is 'Glossary of Terms' used in the paint, varnish and allied trades complied by H.W. Chatfield (London, Scott Greenwood & Son Ltd.) a 'thinner' is defined as: ' Any volatile liquid used for reducing the viscosit of coating compositions. They may consist of a simple solvent, a mixture of solvents, a mixture of solvent, or they may be a very dilute solution of the same or similar medium as that used in the composition to be thinned.'
' In the 'Dictionary of Painting and Decorating' by J.H. Goodier (Griffin, London) hinners are volatile liquids added to paints in order to make them more fluid and bring them to a workable consistency. The essential features of a thinner are that it should be colourless so as not to affect the colour of the paint to which it is added, that it should be completely miscibe with the paint at a normal working temperature, that it should completely evaporate and form no part of the dried paint film but should not evaporate so quickly so as to make application difficult, and that it should act only upon the medium and not react with the pigment to cause precipitation... The thinner most widely used by the painter and decorator is white spirit.'
' In 'Paint Film Defects' (2nd Edition) by Manfred Hess thinners are defined as:- ' Volatile liquids added to paints and varnishes to facilitate application and to aid penetration by lowering the viscosity. They should be completely miscible with the paint and varnishes at ordinary temperatures and should not cause precipitation of the non-volatile portion either in the containers in the film during drying.'
' According to learned counsel even in common parlance thinners are understood as liquids added to paints and varnishes to facilitate their application. Thinners also qualifies as 'ancillaries' of paints under item 04.03.
' White spirit, (solvent 30/40), Xylene and Toluene and thinners and, clearly fall within the definition of the term.
' After having gone through the record of the case, we find that the points raised in support of the appeal are quite weighty and worth examination, but, instead of this Court undertaking this exercise, we feel that it is only appropriate that we should remand the case to the High Court for fresh consideration. We are tempted to refer to the decision of this Court in Messrs Usmania Glass Sheet Factory Ltd., Chittagong v. Sales Tax Officer, Chittagong (PLD 1971 SC 205) in which this Court observed that the first rule is that general statutes will prima facie be presumed to use words in popular sense and that the second rule is that if the statute is one passed with reference to a particular trade, business or transaction, and words are used therein which everybody conversant with the trade, business or transaction knows and understands to have a particular meaning in it, then the words are to be construed as having that particular meaning which may differ from the ordinary or popular meaning. In this connection the following observations in the reported case of Two Hundred Chess of Tea (under section 6 Lawyer's Edn.430) are to the point and quite instructive:- ' The object of the duty laws is to raise revenue, and for this purpose to class substances according to the general usage and known determination of trade. Whether a particular article were designated by one name or another, in the country of its origin, or whether it were a simple or mixed substance, was of no importance in the view of the Legislature. It did not suppose our merchants to be naturalists or geologists, or botanists. It applied its attention to the description of articles as they derived their appellations in our own markets, in our domestic as well as our foreign traffic. And it would have been as dangerous as useless, to attempt any other classification than that derived from the actual business of human life."
9. We are in respectful agreement with the observations of the Supreme Court and we also place reliance on the decision of the Supreme Court in M/s. Usmania Glass Sheet Factory Ltd., Chittagong v. Sales Tax Officer, Chittagon, reported in PLD 1971 SC 205 where it was held that the first rule is that general A statutes Will prima facie be presumed to use words in popular sense and that the second rule is that if the statute is one passed with reference to a particular trade, business or transaction and words are used therein which everybody conversant with the trade, business or transaction knows or understands to have any particular meaning in it, then the words are to be construed as having that particular meaning which may differ from the ordinary or popular meaning.
10. There can be no doubt about the fact that the 'thinners' as understood in common sense are liquids added to paints and varnishes to facilitate application, and are amongst the goods mentioned in item No,04.03 of First Schedule of the Central Excises and Salt Act, 1944. The 'thinners' are even otherwise ancillaries of paints and receive treatment with the paints and varnishes. White spirit, xylene and toluene are thinners within its common meaning and definition. Petitioners had entered into an agreement of procurement of 'thinners' namely white spirit (solvent 30/40), xylene and toluene from Pakistan State Oil Company Limited and were therefore entitled to receive the said thinners duty free in terms of notification dated 29-6-1979. In fact they had made such an application to respondent No,3 on Form AR-III through their letter dated 9-5-1983. The request of the petitioners was provisionally granted by the respondent No,3 after seeking orders from the Collector, Central Excise and Land Customs, Karachi, with regard to white spirit, xylene and toluene qualifying as ancillaries of paints (thinners) subject to the only condition that the petitioners had to produce approved caliberation charts for the storage tanks. The petitioners had also C complied with the conditions so imposed and were allowed to receive white spirit (solvent 30/40) xylene and toluene and had received the said thinners at its storage tanks without payment of duty. Hence the notice dated 9-2-1984, and all the proceedings taken thereon culminating into the impugned order dated 3-1-1986, are without lawful authority, void and of no legal effect, the respondents are not entitled to recover the excise duty on these times which are thinners and fall under heading 04.03 of First Schedule of the Act. If any amount has been recovered on that account they are liable to refund the same. Hence we allow the petition as prayed and grant the declaration and injunction sought for therein and also direct the respondents to refund the amount recovered from the petitioners in respect of thinners.