' SAJJAD ALI SHAH, J.---In this appeal with leave is called in question judgment dated 30-1-1991 of Division Bench of High Court of Sindh, Karachi, whereby C.P. No, D-998 of 1988 is dismissed. Briefly stated the relevant facts giving rise to this appeal are as under:--
2. Show-cause notice dated 22-10-1984 under Rule 10 of the Central Excise Rules, 1944 issued by Assistant Collector (respondent No, 3) was served upon appellants herein for payment of duty and the relevant paragraph from the said notice (at page 57 of paper book) is reproduced as under:- "Whereas it has been reported to the undersigned that M/s. Zaman Textile Mills Limited, Kotri held a stock of 3,76,490 Lbs. Of Cotton Yarn of various counts on 30-10-1974 (Chart enclosed) liable to Central Excise duty at the stage of production as held by the Honourable High Court of Punjab and cleared the same free/reduced rate of duty on or after 1-11-1974 in view of exemption of duty granted vide Notification No, S.R.O. No, 1362(1)/74, dated 30-10-1974. They have thus failed to pay a sum of Rs,3,48,472.20 due on 5,76,490 Lbs. Of Cotton Yarn (Chart enclosed)."
3. In reply to the show-cause notice, stand was taken that duty was paid strictly according to the Rule 9-A of the Central Excise Rules, 1944, which was in force at the relevant time and remained operative even after Punjab High Court's judgment. The said rule was omitted in June, 1983. Rule 10 under which show-cause notice was issued was not applicable. After hearing the parties and noting their contentions, Assistant Collector (respondent No, 3) passed order dated 30-12-1985 (at page 61 of the paper book), relevant paragraph from which is reproduced as under:-- "I have examined the case carefully in the light of replies dated 3-11-1984 and 18-2-1985 to show- cause notice and the arguments of the Consultant. The plea that the payment of CE duty was made in accordance with law in force then is correct. The necessity of demand of duty is the result of the Hon'ble High Court of Punjab's ruling awarded in Colony Thal Textile Mills Ltd., Bhukkar in which it was held that the rate of duty liable should be the rate applicable on the date of production/manufacture. This ruling is certainly applicable in the case of goods, which were cleared on free/reduced rate in 1974. As regards applicability of rule 10 of the C.E. Rules, 1944, the contention that Rule 10 is not applicable for cases pertaining to period prior to amendment in Rule in 1976 is not correct, in view of the fact that the time limit for recovery of amount which is ten years remained unchanged and only procedure of demand was changed. Hence the demand in the form of show-cause notice has been issued so that the party may have full opportunity to defend his case before liability determined is enforced by issuing an adjudication order. All goods manufactured on or before 10-2-1980 have been exempted by the Board vide its orders dated 27- 12-1984 referred to above, provided the manufacturers have not received in relation to such goods any sum as refund of duty over paid. M/s. Zaman Textile Mills Ltd., Kotri have already taken a refund of Rs,59,816.38 vide this office order C.No,IV-D/5(4)-CE/81/739-47, dated 24-6-1982 on stock of yarn held by them on 29-6-1979 in view of the decision of the Hon'ble High Court. Thus this case does not qualify for having any exemption under the Board order dated 27-12-1984. M/s. Zaman Textile Mills Ltd., Kotri are, therefore, required to pay Rs,3,48,472.20 as demanded by this office vide C.No, A/8(11)-CE/84/2614-18, dated 22-10-1985 which should be paid immediately."
4. Against the order of Assistant Collector in adjudication proceedings mentioned above, appeal was filed before the Collector (respondent No, 2), who dismissed the same vide his order dated 7- 1-1988. Appellants herein then filed revision application before the Central Board of Revenue (respondent No, 1) which was dismissed vide order dated 12-6-1988. Feeling aggrieved, appellants filed Constitutional petition in the High Court, where contention was raised on behalf of appellants herein that in this case Rule 9-A of Central Excise Rules, 1944 applied and duty was paid at the rate prevalent at the time of clearance of goods and not the date of manufacture of the goods and, therefore, demand of respondents was illegal as the appellants had paid excise duty applicable on the date of clearance of the goods. It was further submitted that appellants cleared goods after 30th October, 1974 on various dates and paid duty at the rate prevalent on the date of clearance as provided by the exemption notification dated 30-10-1974. In the year 1978, the Federal Government, vide Notification No, S.R.O. 810(1)/78, dated 29-6-1978 granted total exemption from payment of excise duty on cotton yarn on certain categories. In the year 1979, Federal Government by Notification No,555(1)/79, dated 28-6-1979 withdrew the exemption. After withdrawal of exemption, Excise Authorities claimed duty at the rate applicable from the date of withdrawal on the stock of yarn and goods manufactured during the period of exemption. Action was challenged in the High Court by several other manufacturers and declared illegal. Appeal was dismissed by the Supreme Court as reported in the case titled as Central Board of Revenue etc. v. Colon Thal Textile Mills Ltd. (1981 SCM R 303), holding that liability in respect o goods would be regulated by second Notification (S.R.O. 810(1)/78, date 29-6-1978) providing total exemption, which was in force at the time o manufacture of goods in question. It was submitted in the High Court in th Constitutional petition arising from present proceedings that judgment of thi Court in the case of Colony Thal Textile Mills Ltd. (supra) is not attracted t the facts of this case, which is governed by Rule 9-A and not Rule 9 and the High Court in the impugned judgment has dealt with this contention in the paragraph which is reproduced as under:-- "The learned counsel for the petitioner has pointed out that in the judgments of the Lahore High Court as well as of the Supreme Court reference has been made to rule 9 and not to rule 9-A which was the relevant Rule for the purposes of determining the controversy. We cannot presume that both the Hon'ble Courts were not aware of the existence of Rule 9-A. According to Rule 9-A the rate of duty applicable to any goods shall be the rate of duty in force on the date on which the goods are cleared for home consumption. But as held by the Supreme Court in terms of section 3 duty is payable at the rate in force on the date of manufacture. A rule cannot override the statutory provision. The law laid down by the Supreme Court is binding which we respectfully follow. It is pertinent to note that in 1983 Rule 9-A was deleted and the same provision has been enacted as section 3-C, but it is not applicable to this case."
5. In this case leave has been granted to consider contention of learned counsel for the appellants that Rule 9-A of the Central Excise Rules, 1944 is not inconsistent with subsection (1) of section 3 of the Central Excises and Salt Act, 1944, as the latter itself provides that excise duty would be collected in such manner as may be prescribed and Rule 9-A precribes the manner of levy and collection.
6. Now dealing with legal aspect of the matter, it can be said without any hesitation that. Central Excises and Salt Act and Rules framed thereunder were enforced in the year 1944 and Rule 9-A was inserted in the year 1944 or 1945. Section 3(1) of the Act envisages that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods, produced or manufactured and on all excisable services provided or rendered, in Pakistan, as, and at the rates, set forth in the First Schedule. Another section in the said Act is 12-A, which was added by the Tax Laws (Amendment) Ordinance, 1962, empowering Federal Government to exempt any goods or class of goods from the whole or any part of the duty leviable under this Act. Section 12-B in the said Act provides for exemption of duty of excise not levied or short-levied as a result of general practice and was added by Act No, V of 1989 on 1-7-1989. The above dates are important to be noted as they are to be considered in view of several S.R.Os/Notifications issued by the Federal Government in connection with exemption or withdrawal of exemption from payment of excise duty.
7. In the show-cause notice, it is alleged that appellants held a stock of 5,76,490 Lbs. Of cotton yarn of various counts on 30-10-1974 liable to Central Excise duty at the stage of production and cleared the same free/reduced rate of duty on or after 1-11-1974 in view of exemption of duty granted vide Notification No, S.R.O.-1362(1)/74, dated 30-10-1974. It would be pertinent to mention here that S.R.O.
No, 557(1)/72, dated 3-8-1972 (at page 37 of paper book) was issued exempting goods of cotton yarn, twist and thread at S.No, 31 imposing duty on items of yarn of counts 21 or more but less than 35, yarn of counts 35 or more but less than 48 and yarn of counts 48 or more. This S.R.O. Was further amended by S.R.O. No, 1362(1)/74, dated 30-10-1974 (at page 39 of paper book). The rate of duty on this item was increased vide S.R.O. No,492(1)/77, dated 11-6-1977 (at page 41 of paper book with relevant portion at page 49), relating to S.No, 34 covering cotton yarn, twist and thread.
8. Fourth S.R.O. 810(1)/78 was issued on 29-6-1978 (at page 53 of paper book) providing total exemption from payment of excise duty on items mentioned above effective from 1-7-1978. This exemption was withdrawn vide S.R.O. 555(1)/79 issued on 28th June, 1979 (at page 54 of paper book) and at S.No, 08.01 duty was imposed on certain items exceeding two and a half per cent. Of the total production of cotton yarn in a factory in a financial year and cotton yarn, twist and thread at the rate of one rupee per KG (page 55 of the paper book). After withdrawal of exemption, excise duty was demanded at the rate applicable from 28-6-1979 on the stock of yarn and goods manufactured earlier during the period of exemption. This action was challenged in the High Court and was declared illegal and decision was upheld by Supreme Court in the case of Colony that Textile Mills Ltd. (supra) and in consequence vide S.R.O. 571(1)/83 issued on 11-6-1983 (page 56 of paper book) Rule 9-A in the said Rules was omitted.
9. Case of the appellants is that they cleared 3,92,282 Lbs. Of cotton yarn of less than 21 counts on various dates and by virtue of this exemption Notification (S.R.O. 1362(1)/74, dated 30.10-1974) read with Rule 9-A of the Central Excise Rules, 1944 did not pay any excise duty or paid less excise duty at lower rate as allowed under the same S.R.O. Which had statutory force. Further total exemption was granted vide S.R.O. 810(1)/78, dated 29.6-1978 and further stocks were cleared in terms of Rule 9-A of the said Rules. On 11.6-1983 vide S.R.O. 571(1)/83, Rule 9-A in the said Rules was omitted and on the same day section 3C was added in the Central Excises and Salt Act, 1944 by Finance Ordinance of 1983. At this stage it would be relevant to reproduce contents of Rule 9-A and section 3C, which is being done as under:- "Rule 9-A, Alteration of duty or tariff valuation.The rate of duty and the tariff valuation (if any) applicable to goods cleared on payment of duty shall be the rate and valuation (If any) in force on the date on which duty is paid, or, if the goods are cleared from a factory or a warehouse, on the date of the actual removal of such goods from such factory or warehouse: ' Provided that if the goods have previously been removed from warehouse under bond to be rewarehoused and the duty is paid on such goods without their being rewarehoused, the rate and valuation (if any) applicable thereto shall be the rate and valuation (if any) in force on the date on which duty is paid, or, if duty is paid through an account-current maintained with the Collector under Rule 9, on the date on which an application in the proper form is delivered to the officer-in- charge of the warehouse from which the goods were removed.
' Section 3C. Determination of tariff value and rate of duty.--The tariff value of, and the rate of duty applicable to, any goods or services shall be the tariff value and the rate of duty in force:--
(a) in the case of goods, on the date on which the goods are cleared for home consumption; and
(b) in the case of services, on the date on which the services are provided or rendered."
10. The effect of both the amendments regarding omission of Rule 9-A and addition of section 3C is that tariff value and rate of duty would be applicable when goods are cleared from the place of manufacturing or when services are rendered. Simultaneous amendments in the Act and Rules as mentioned above, clearly manifests the intention of the Government to revive the old practice which was prevalent before the announcement of judgment in the case of Colony Thal Textile Mills Ltd. (supra). We agree with the contention of the learned counsel for the appellants that in both the judgments of this Court rendered in cases of Colony Sarhad Textile Mills Ltd., Nowshera v.
Superintendent, Central Excise and Land Customs (1979 SCM R 640) and Central Board of Revenue etc. v. Colony that Textile Mills Ltd. (1981 SCM R 303), Rule 9-A was not adverted to and taken into consideration and, therefore, these decisions are not applicable to the facts of the present case.
11. For the facts and reasons mentioned above, we set aside the impugned judgment and allow this appeal with no order as to costs.