MUHAMMAD AFZAL LONE, J---This judgment shall dispose of these eight appeals by leave to appeal, as common questions of law and facts have been raised therein.
2. The first seven appeals are 'directed against the dismissal of the writ petitions by a learned Single Judge of the Lahore High Court by a common judgment dated 18-3- 1989. The eighth appeal (No,723-K/90), in which there are 15 appellants, has also been filed by leave of this Court and arises out of the judgment dated 26-7-1989 rendered by a learned Division Bench of the Sindh High Court, in exercise of the constitutional jurisdiction, dismissing the writ petition. The appellants are manufacturers of diaries of various descriptions and amongst them those who invoked the writ jurisdiction of the Lahore High Court, were served with notices by the Deputy Collector, Central Excise Department, calling upon them to show cause as to why penal action should not be taken against them under Rules 7, 210 and 226 of the Central Excise Rules, 1944 read with section 3 (4) of the Sales Tax Act, 1951, for contravention of Rules 7, 9, 174 and 226 of the said rules, as on an investigation it was found that they produced and sold diaries without payment of sales tax. The amount of the sales tax recoverable from each of the appellants and the periods to which it related, were specified in the notices served on them. The appellants submitted replies to the notices which were rejected, as the Deputy Collector took the view that they produced and sold diaries which fell under the Pakistan Customs Tariff Heading 48.18 and were not exempt from sales tax under SRO 661 (1)/81 dated 25-6-1981 issued by the Federal Government in exercise of the powers vesting in it under subsections (1) and 2 of section 7 of the Sales Tax Act, 1951.
In super session of its SRO 659(1)/80 dated 28-6-1980. He thus passed the orders requiring these appellants to pay sales tax alongwith penalty for the periods as shown below:-- S.No,Case No, Name of petitioners Sales tax imposedPeriod for which tax was duePenalty imposed
1. CA 209/90 Friends Sons 568,206 1-7-82 30-4- 8794,700
2. CA. 210/90 Time Publishers 337,500 Do 56,000
3. CA. 211/90 National Sales Agency. 23,750 1-1-83 to 30- 40-874,000
4. CA. 212/90 Kohi Noor 180,875 Printing Press1-2-82 31-12-198630,000
5. C.A.213/90 Rizwan 19,600 1-1-82, 31-12-32,00
6. CA. 214/90 Paper Products Islamic Pub. Ltd.30,721 to 30- 6-871-7-82 5,000
7. CA. 215/90 Barques Diary and Calendar Co.357,944 1-7-82 to 30-4-8759,000
3. These appellants preferred appeals against the orders of the Deputy Collector. The appeals in CAs. 209 to 212 and CA. 215 were rejected. This rejection was challenged through revisions. The departmental appeals filed by the appellants in C.As. 213/90 & 214/90 were yet to be decided; that they as well as the other appellants, operating in the Punjab Province, without awaiting the result of the remedies sought by them before the departmental forums invoked the Constitutional jurisdiction of the Lahore High Court. The reason put forth by them for bypassing these remedies was that the Central Board of Revenue vide its Letter C.N. 16 (52)-ST/87 dated 25-11-1987 had given direction to all the Collectors of the Central Excise and Sales Tax that locally produced diaries fell under PCT Heading 48.18, to which SRO 666 (1)/81 dated 25-6-1981 did not provide for exemption. A direction was given to the functionaries of the department to follow a uniform policy and realize sales tax from all the manufacturers of the diaries. In view of this directive of the C.B.R. The appellants felt, as contended by them, that pursuing of the remedies provided by the Statute any further was merely an exercise in futility. Similar justification was sought by the appellants in CA.
723-K/1990, for approaching the High Court, without exhausting the remedies provided by the Statute. In the writ petition the appellants prayed for declaration that there was no sales tax on the diaries printed and manufactured by them, and that in this behalf all the proceedings taken, orders passed and penalties imposed on them under the provisions of the Sales Tax Act, Central Excise Act and the rules framed thereunder were void and without jurisdiction.
4. In rejecting the appellants claim for exemption, the Lahore High Court took the view that the diaries manufactured by them fell under heading 48.18 of the Pakistan Customs Tariff and thus could be subjected to sales tax. Their assertion that the diaries were covered by the description "printed books" listed under heading 49.01 of Chapter 49 and thus exempt from levy was turned down. Likewise in the opinion of the Sindh High Court, as the diaries have a meaning separate and distinct from that of the printed books in the trade circles, these could not be included in the category of printed books which were exempt from taxability.
5. Leave to appeal was granted to examine as to whether or not the diaries were exempt from sales tax and the Central Board of Revenue Circular No,9 (15) ST/56 dated 25-7-1956, granting exemption to printing jobs such as forms, calendars, diaries, posters, invitation and visiting cards etc. Could be applied to Chapter-49 of the Pakistan Customs Tariff, which covered the products of printing industry, and according to the appellants, by necessary implication included the diaries within the ambit thereof.
6. Before adverting to the merits of the appellants claim, it appears appropriate to refer to the provisions relating to imposition and collection of the sales tax and notifications issued from time to time to grant exemption from taxability. Section 3 of the Sales Tax Act, 1951, which creates a charge, provides:-- "3. Charge of tax.- There shall be levied and collected a tax on the value of--
(a) all goods produced or manufactured in (Pakistan) payable by the manufacturer or producer;
(aa) ..................................................................................................................................
(b) ................................................................................................................................
(c) ................................................................................................................................
(d) ................................................................................................................................
(e) ................................................................................................................................
(0 .....................................................................................................................................
(2) The tax shall be at the rate of 12-1/2 per cent on the value of the goods as aforesaid.
By the Finance Ordinance XXIV of 1981, the following proviso was added to subsection (4) of section 3 of the Sales Tax Act:-- "Provided that, in case of goods mentioned in clause (a) of subsection (1), the tax shall, where the Board so directs, be levied and collected as if it were a duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 (I of 1944), and all the provisions of the said Act and the rules made thereunder, shall, so far as may be and with the necessary modifications, apply notwithstanding the provisions of this Act."
7. Section 3 (1) thus creates a liability for payment of sales tax. Subsection (1) of section 7 empowers the Federal Government to exempt by notification from the tax payable under the Act any goods or class of goods, or any person or class of 'persons, and further to make a reduction in the rate of tax. Under subsection (2) of section 7, the grant of exemption can be subjected to such conditions as specified in the notification. In exercise of powers under section 7 (1) the first notification issued by the Federal Government exempting several goods from payment of sales tax is No,7 dated 27-6-1951; its item 15 runs as under:-- "Printed books, maps, charts, periodicals and newspapers."
It appears that under this notification the diaries were not considered exempt from the sales tax.
However, on the representation of Pakistan Association of Printing and Graphic Arts Industry, the Federal Government issued C.No,9- 15-ST/56 dated 25-7-1956, treating forms, diaries, calendars, posters, invitation and visiting cards etc. As covered by Item. 15 of the notification aforesaid and thus exempt from the levy under the Sales Tax Act. This circular is reproduced below:- "C No, 9 (15)-ST/56 Government of Pakistan Ministry of Finance (Revenue Division)
Karachi the 25th July, 1956 From: The Officer on Special Duty To: All Commissioners of Sales Tax.
Sub: Sales tax as Printers Printed books, maps, charts, periodicals and newspapers are exempted from sales tax vide item
(15) of the Sales Tax Notification No,7 dated the 27th June, 1951. The Government of Pakistan have decided that other printing jobs, such as forms, calendars, diaries, posters, invitation and visiting cards, etc., etc., should also be exempted from sales tax. Consequently, no attempt should be made to realise sales tax in respect of these jobs except to the extent the tax has been recovered by the manufacturers or producers from their customers of the amount deposited by them in the Treasury, whichever is the greater. The assessments that have already been made may please be revised accordingly under section 16 of the Sales Tax Act, 1951 and the assessments, which have not been made should be made on the above basis.
(Sd.) Muhammad Hussain, Officer on Special Duty."
8. The notification dated 27-6-1951 was superseded by Notification No,659(1)/80 dated 26-6-1980.
Item No,11.11 of this notification; to which exemption was granted provides:-- "11.11. Printed Books, Maps, Charts, Periodical Newspapers."
It will be seen that the description of the goods shown under Item 11.11 is exactly the same as mentioned against Item No,15 of the notification dated 27-6-1951. Presumably for this reason the enlargement of scope of exemption under CBR's Letter No,16(52)-ST/87 dated 25-11-1956 was applied to Item 11.11 as well and no sales tax was levied on the diaries. Notification dated 26th June, 1980, was further superseded by Sales Tax Notification No,SRO 666(1)181 dated 25th June, 1981. Item Nos. 30 & 37 of this notification, which are based on the First Schedule to the Customs Act, are reproduced below:-- "36. Account books, exercise books and registers falling under heading 48. 18; newsprint falling under heading 48.01; paper books falling under heading 48.10 (including envelops, cartons) vax paper and gum tape paper and filter paper cut to size, falling under heading 48.15; wood free writing paper of 55 to 70 gms, falling under Chapter 48". (as amended by SRO 962 (1)/82 dated 26- 9-1982).
37. Printing process all sorts falling under Chapter 49" (as amended by SRO 620 (1)/83 dated 7-6- 1983).
Thereafter, Notification No,566 (1)/89 dated 3rd June, 1989, was issued which superseded Notification No,666 (1)/81, dated 25-6-1981. The goods exempt from sales tax were described in it, by heading numbers of the First Schedule to the Customs Act, 1969, as in force immediately before 26th June, 1983. But, this notification is not relevant as the cases in hand relate to the periods prior to its issuance.
9. It is noteworthy that heading 48.18 is fairly comprehensive and includes:-- "48.18. Registers, exercise books, note books, memorandum blocks, order books, receipt books, diaries, blotting pads, binders (loose-leaf or other), file covers and other stationery of paper or paperboard, sample and other albums and book covers, of paper or paperboard."
But, out of this lengthy list only "account books, exercise books, and registers falling under heading Nos.48.18 have been allowed exemption, and it is not extended to diaries. Reference to heading No,49.01 of Chapter 49 of the Ist Schedule to the Customs Act is also relevant, which lays down: "Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets."
"A Printed books and booklets."
"B Others."
10. The case of the appellants is that the diaries manufactured by them constitute a printed matter of sufficient informative and educative value covered by the expression "printed process all sorts falling under Chapter 49" envisaged by item 37 of the notification dated 25th June, 1981 and is thus exempt from taxability particularly when the CBR's circular dated 25-7-1956 has not been withdrawn. It will be pertinent to point out that each chapter of the P.C.T. Embodies "notes" highlighting the scope of the heading numbers included therein. Note 1 of Chapter 49 provides:-- "This Chapter does not cover:
(a) Paper, paperboard, or cellulose wadding, or articles thereof, in which printing is merely incidental to their primary use (Chapter 48).
(b) .............................................
(c) ..............................................
On the strength of this Note it is contended that the heading 48.18 under which diaries have been listed specifically is intended to cover only such diaries as have minimal printing, merely casual and not substantive to the principal use of the commodity, and since the diaries manufactured by the appellants contain fairly extensive information on a host of subjects educative in character, they would fall under heading 49.01 and not 48.18. The contention raised at the leave grant stage that the C.B.R.'s Circular dated 25th July, 1956, continues to be valid for extension of exemption to the products of the printing industry, including diaries mentioned under Chapter 49 of the Pakistan Customs Tariff has also been emphasised in support of these appeals.
11. Both the High Courts did not accept these conventions for good reasons. We are not persuaded to differ with them. It may be observed that when notification dated 25th June, 1981, was issued, the First Schedule to the Customs Act, 1969, was founded on Pakistan Customs Tariff, which on its turn was based on Brussles Tariff Nomenclature. However, in the year 1986 Pakistan became signatory to the International Convention on the Harmonized Commodity Description and Coding System.
The Customs Tariff then came to be rested on the Harmonized Description and Coding System. The explanatory note to the Brussles Nomenclature relating to P.C.T. Heading 48.18 in respect of diaries, as quoted in the impugned judgment of the Lahore High Court, is:-- "These articles (e.g. Diaries) sometimes contain a considerable amount of printed matter but remain in this heading (and not in Chapter 49) provided that the articles are essentially for completion in manuscript or typescript. Similarly exercise books may have handwriting copy printed on each page. The goods of this heading may be bound with materials other than paper (e.g. Leather, plastic or textile) and have reinforcements or fittings of metal, plastic etc."
12. This explanatory note squarely covers the diaries manufactured by the appellants. Irrespective of the fact that some information is printed therein which is of educative value, these are primarily meant for recording one's personal engagements and events. It is not possible to treat such diaries as outside the purview of the heading 48.18 and categorized them as "printed books" classified under Chapter 49. This conclusion is further strengthened by the rules For the Interpretation of the Ist Schedule to the Customs Act". Rule 3 (a) of these rules ordains:-- "3. When for any reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:-
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description."
Obviously, according to this rule, even if the diaries under consideration are covered by the nomenclature (printed books) which is a generalized description, these having been specifically listed under heading 48.18, cannot be excluded from this heading. Rule 3 (a) is seemingly founded on the line of the well-settled rule of construction of legal instruments that when a special provision has been made on a subject and there is also a general provision susceptible of covering the same field and the matter is covered .By both the provisions, the presumption would be that the general provision is not intended to interfere with the operation of the special provision and the case shall have to be dealt with under the latter provision.
13. As regards the applicability of the C.B.R.'s circular/letter dated 25th July, 1956, we are of the view that after the linkage of the exemption notification with the heading numbers and the description of the goods enumerated in the First Schedule to the Customs Act, it ceased to be relevant to the issue of grant of exemption, for such exemption could be granted only if the goods in question were covered by particular nomenclature of the goods classified under specific heading, listed in the exemption notification. In this view of the matter there was no room for allowing exemption to the diaries, on the authority of C.B.R.'s letter aforesaid.
14. During the course of their submissions, the learned counsel for the appellant vainly endeavoured to take the benefit of SRO.7 (1)/83, dated 5-1-1983, which is as under:-- "In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to exempt goods manufactured or produced on or after 1st July, 1980, from whole of the sales tax leviable thereon subject to the following conditions namely:--
(i) the manufacturer or producer did not recover sales tax chargeable on the goods prior to the date on which the goods as held to be liable to sales tax,
(ii) no action to recover sales tax on the goods had been initiated against the manufacturer or producer to collect sales tax up to the said date;
(iii) no other manufacturer of the same goods was paying sales tax up to the said date; and
(iv) the manufacturer or producer has been discharging his tax liability regularly as from the said date."
According to the CBR's Letter C. No, 2 (4)-ST/81, the date referred to in clauses (ii), (iii), (iv) of the notification is the date of the "discovery of manufacture's liability". The Lahore High Court in the impugned judgment has recorded a clear-cut finding that the appellants fulfilled the first three requirements of the notification but did not comply with the 4th one, as they failed to discharge their tax liability from the date of its detection. As maintained by the High Court, compliance with all the requirements is the condition precedent, for earning the benefit of the notification. The appellants have not succeeded in establishing that all the terms of the notification were satisfied by them. The argument founded on this notification thus also fails. The view expressed by the High Court is not open to exception.
15. It is apparent from the record that despite the issuance of Notification No, SRO-666(1)/81 dated 25-6-1981, under which the exemption from taxability was not extended to the diaries, the departmental authorities did not commence any steps against the appellants to impose the levy, until July 1987, or so when show-cause notices were served on some of them or otherwise action was initiated to levy sales tax. With this background of the case it has been argued that right from the year 1956 when Government's Circular C.No,9 (15)-ST/56 dated 27-5-1956 was forced till the year 1987, the department never claimed that the appellants were required to obtain central excise manufacturing licence or that the tax was short levied or escaped assessment, and all along both the sides considered the diaries as exempt from the sales tax. It was urged that uniform and long- standing practice followed by the department and acted upon by the appellants in treating the diaries exempt from sales tax created a vested right in them and should not be disregarded by the Court. It is correct that a regard has to be paid to a consistent departmental practice arising out of construction put over the years, on legal instrument of doubtful meaning, particularly when it relates to some fiscal measures. Such practice may be taken as an aid in interpreting the instrument, and unless there are cogent reasons, the Court ought to be ordinarily reluctant to interfere therewith. We however, feel that such reasons are not missing in this case. We have already maintained that Notification SRO 666(1)/81 dated 25th June, 1981 is based on the 1st Schedule to the Pakistan Customs Act and the diaries have clearly been listed under heading 48.18 and not included in the goods exempt from sales tax. We entirely agree with the High Court that the circular aforesaid does not apply to the notification. It is to be remembered that even a long- standing practice if unsupported by any legal basis may well be overruled by the Court.
16. The case may also be examined from another angle. By virtue of section 3 (a) of the Sales Tax Act there was a notional charge on all the goods manufactured in Pakistan. Such charge however, materialized and tax became payable when any of the events contemplated by subsection (4) of section 3 symoblic of sale took place. The production of the diaries by the appellants ipso facto brought the goods under charge. The exemption allowed under section 7 of the Sales Tax Act was only from payability. For perusal of the rule laid down by this Court on the question of exemption, reference may be made to Muhammadi Steamship Co. Ltd. v. Commissioner of Income-tax (PLD 1966 SC 828) and Bisvil Spinners Ltd. v. Superintendent Central Excise and Land, Customs Circle, Sheikhupura. (PLD 1988 SC 370). It proceeds on the course of reasoning that since exemption from incidence of tax in favour of a few, increases the burden on other members of the community, it should be given a rigid interpretation against claim of tax-payer and in favour of the revenue. Thus, where a taxing power has clearly selected a particular class of goods for taxation, as in the case of the diaries, the Court should be loath to allow exemption much less to broaden it unless warranted by plain words of the notification, which is not the case here.
For all these reasons, we uphold the impugned judgment and dismiss these appeals leaving the parties to bear their own costs.