JUDGMENT: SAIDUZZAMAN SIDDIQUI, J.-- 1. The above appeal with the leave of this Court is filed against the judgment of a learned Division Bench of the High Court of Lahore, whereby the Intra Court Appeal filed by the appellants to call in question the judgment of a learned Judge in Chambers allowing Writ Petition No. 245 of 1992 filed by respondent Company was dismissed in limine. Leave was granted in the case to consider the following legal questions:-- "Leave to appeal is granted as authoritative pronouncement on the vires of the Excise Duty on Production Capacity (Aerated Waters) Rules, 1990 which issued under section 3(4) and Section 37 of the Central Excises and SaIt Act, 1944 (I of 1944) is called for, the High Court by the impugned judgment/order having declared that the levy made and the recoveries effected from the petitioner in accordance with it was without lawful authority and an Intra Court Appeal against the order was not competent."
2. Mr. A. Karim Malik, the leamed counsel for the appellants mainly contended that respondents having themselves elected to pay excise duty on their product under the Excise Duty on Production Capacity (Aerated Water) Rules, 1990 (hereinafter to be called as 'the rules' only), which were framed by the appellants with the consent of the Association of which the respondents were also members, could not be allowed to challenge the validity of the Rules. The second contention of learned counsel for the appellants is, that the classification of manufacturers of foreign brand of aerated water for the. Purposes of recovery of excise duty under the proviso to rule 7 of the Rules could not be treated as discriminatory as the said classification was definite, reasonable and bore nexus to the objects of the classification. The learned counsel for the appellants has raised an additional contention in the memo, of appeal before this Court to the effect that the learned Judge in Chambers failed to take notice that rule 7 ibid was substituted by new rule 7 under S.R.O.
701(I)/90 dated 2-7-1990 and this newly substituted rule 7 was further amended by S.R.O. 559 (I)/91 dated 16-6-1991 and as such on the dates the writ petition was filed by the respondents and decided by the learned Judge in Chambers, the proviso to rule 7 ibid was non-existent on the statute book.
3. Mr. Khalid Anwar, the learned counsel for the respondents on the other hand supported the judgment of High Court. The learned counsel contended that firstly, the option exercised by the respondents to be taxed under the Rules could not be described as voluntary as the scheme for taxation on the basis of actual production was so framed by the appellants that it left no option for the manufacturers of foreign brand of aerated water but to agree to pay the duty under the Rules.
AIternatively, the learned counsel contended that principle of waiver cannot be pressed into service in a case where the party is seeking enforcement of its fundamental right guaranteed by the Constitution. Mr. Khalid Anwar further contended that the respondents in their writ petition before the High Court had only sought a declaration that the proviso to rule 7 ibid was invalid both for the reason of being discriminately in nature as well as on the ground that it was enacted beyond the scope of section 3(4) of Central Excises and SaIt Act, 1944. It is contended by the learned counsel that the appellants having elected to recover duty on the basis of production capacity of the plant or machinery, could not ask for recovery of duty on the basis of actual production of goods.
4. The respondents under a franchise agreement executed in their favour by the Foreign Manufacturers of '7-Up' are bottling aerated water under the brand name 7-Up at Lahore. The fact that the product by the respondents is subject to payment of excise duty under section 3 of the Central Excises and SaIt Act, 1944 (hereafter to be called as 'the Act' only) is not disputed by respondents. The respondents also do not dispute the right of appellants to recover excise duty on their produce either on the basis of actual production of the product or on the basis of production capacity of plant determined under the Rules. The respondents, however, challenged the validity of the demand of excise duty under the Rules on the basis of the duty last paid by them on the actual production of the goods produced by them in the preceding year.
5. The authority to levy excise duty by the Federal Government (hereinafter to be called as 'the Government') on goods is derived under Entry No. 44 of the Federal Legislative List of the Fourth Schedule (hereinafter to be called as 'the List') to the Constitution of Islamic Republic of Pakistan (hereinafter to be referred as 'the Constitution' only). The Government is further authorised to levy taxes and duties under Entry No. 52 of the list on the basis of production capacity of any plant, machinery, undertaking, establishment or installation, in lieu of taxes and duties leviable under Entries Nos. 44, 47, 48 and 49 of the List. The to different modes of levy of excise duty by the Government under the Constitution are, therefore, mutually exclusive. The Government, may, accordingly, elect to impose excise duty on any one of the to modes mentioned above. As a necessary corollary, therefore, it follows that where the Government decided to recover excise duty on the basis of production capacity of plant, machinery etc. It could not demand the excise duty on the basis of actual production of goods. Section 3(1) and 3(4) of the Act enact these to aIternative principles for levy of excise duty on goods envisaged by -Entries Nos. 44 and 52 of the List of the Constitution. The rationale behind these to mutually exclusive modes of levy of excise duty on goods is quite obvious; when the excise duty is recovered on the basis of actual production of goods under section 3 (1) of the Act, the production capacity of the plant, machinery etc., has no relevancy at all. Similarly, when excise duty is sought to be imposed on the basis of production capacity of plant, machinery etc., the actual production of goods becomes irrelevant.
6. The Rules promulgated on 7th of June 1990 provided that a manufacturer of aerated water who elected to pay duty under the Rules had to apply in writing to the Collector by 15th of June 1990, whereupon for the following financial year commencing from 1st of July, he could pay the excise duty under the Rules. The manufacturer in his application had to state the number of filling machines, number of filling valves or Spout per filling machine and the brand name of aerated water he intended to manufacture in the factory. Rule 6 of the Rules prescribed the procedure for determination of tax liability of manufacturer on the basis of production capacity fixed in the table appended to the said rule. Rule 7 of the Rules which is subject of controversy here, reads as follows:- "7. All the filling valves or spouts installed in all the filling machines in a factory shall be taken into account for the purposes of this notification regardless of whether or not all or any of the filling machines or valves or spouts thereof are in working condition and the duty shall be levied on all such filling valves or spouts: Provided, that in the case of manufacturers who have paid a higher amount of excise duty and sales tax on the aerated waters during the financial year 1989-90 than that worked out under rule 6, such higher amount shall be levied."
7. The main part of rule 7 ibid, provided that in assessing the tax liability of the manufacturers under the Rules, all the filling valves or spouts installed in all the filling machines were to be taken into consideration, irrespective of the fact whether some of these machines or valves or spouts were not in working condition, and tax was to be recovered on the basis of the rates fixed in the table appended to rule 6 of the Rules. However, the proviso to rule 7 ibid, provided that where the manufacturer had paid amount of excise duty in the preceding year which was higher than the duty calculated under rule 6, then in that case the duty payable under the Rules will be that which the manufacturer paid on the basis of actual production in the preceding year.
8. The respondents did not dispute the basis of assessment of excise duty contemplated by the main enacting part of rule 7 ibid. They, however, challenged the proviso as being discriminatory and against the spirit of capacity rules.
9. The rules have been framed by the appellants in exercise of their power under section 3 (4) of the Act which reads as follows:-- "(4) With the prior approval of the (Federal Government), the Central Board of Revenue, may, in lieu of levying and collecting under sub-section (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 notifications 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, undertakings, 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."
10. As earlier pointed out by us, the above sub-section enacts the principle embodied in entry No. 52 of the List of Constitution which provides for levy of tax in lieu of tax leviable under entry No. 44 ibid. The tax on the basis of production capacity of plant, machinery, undertaking, establishment or installation contemplates a tax or duty which has been fixed or pre-determined on the basis of capacity of plant, machinery etc. Rule 6 ibid contains a table which has fixed the rate of duty in respect of each spout or filling valve of all filling machines installed in the manufacturing unit of aerated water. The main enacting part of rule 7 ibid, provides that tax is to be levied on the basis of rate fixed in the table appended to rule 6 ibid, irrespective of the fact whether any filling valve or spout or filling machine is not in working order. The respondents did not challenge the validity of rule 6 whereunder rate of excise duty on production capacity has been fixed. They also did not call in question the validity of main enacting part, of rule 7 which provided for levy of excise duty on all filling valves or spouts in a filling machine installed in the manufacturing unit of aerated water, irrespective of the fact whether all or'any of these spouts or valves or the filling machines were working or not. The respondents only objectecf to the validity of the proviso to rule 7 which provided that where tax was paid by the manufacturer on actual production of aerated water in preceding year was more than that calculated on the basis of formula given in rule 6, then the duty will be recovered on the basis of tax paid under section 3 (1) of the Act. The validity of this proviso is challenged on the ground of being repugnant to section 3 (4) of the Act and also on the ground that it violated the principle of equality before law granted under the Constitution. At this stage it will be advantageous to reproduce here rule 6 ibid, which not only fixed the rate of excise duty on the basis of production capacity of manufacturing units of aerated water, but it also categorised the manufacturers of aerated water into different categories for the purposes of levy of excise duty at different rates. It reads as follows:-- "6. Subject to the provisions hereinafter appearing, tax liability of each factory shall be determined on the basis of annual production capacity per filling valve or spout at the rates specified in column (2) of the table given below:-- Category of factories Rate of duty per filling valve or spout per financial year a. Factories manufacturing aerated waters marketed under foreign brand name.Six hundred and fifty thousand rupees per filling valve or Spout. a. Factories manufacturing aerated waters marketed under local brand names.One hundred and fifty thousand rupees per filling valve or Spout. i. Factories manufacturing both foreign as well as local brand aerated water .Six hundred and fifty thousand rupees per filling valve or Spout. i. Factories manufacturing aerated waters and having filling machines with valves or spouts or less.Thirty thousand rupees per machine. a. Post-mix dispensers. Thirty thousand rupees per dispensers."
11. The classification of manufacturers of aerated water in different categories on the basis of the numbers of filling spouts/valves and machines installed in the factory and on the basis of the brands of aerated water manufactured by them is based on an intelligible differentia having a direct nexus with the object o classification contemplated by section 3 (4) of the Act and the Rules framed thereunder.
12. Section 3 (4) of the Act lays down that excise duty will be levied in lieu of the levy under section 3(1) ibid on the basis of production capacity of plant, machinery, undertaking, establishment or installation, to be determined on the basis of guiding principles laid down under a notification with the approval of Government, prescribing the duty or rate of duty on production capacity and the manner of collection of such duty. Rule 6 of the Rules accordingly, classifies the manufacturers of foreign brand of aerated water into one category and fixes their liability to pay excise duty at a predetermined rate on the basis of the capacity of plant and machinery installed by them. This classification under Rule 6 ibid of manufacturers of aerated water in different categories and fixation of their tax liability on the basis of production capacity of their plant and machinery is based on an intelligible differentia having full nexus with object of classification. The respondents, who were the manufacturers of a foreign brand of aerated water according to the classification of manufacturers and rate of excise duty given under Rule 6 ibid, fell under category (a) of the table appended to the said rule and were thus liable to pay excise duty at the rate specified in column 2 of the said table. However, the proviso to rule 7 ibid, created a sub-category of manufacturers of foreign brand of aerated water within the category of manufacturers of foreign brand of aerated water and fixed their tax liability on the basis of tax paid by them in the preceding year. This sub- classification under the proviso to rule 7 ibid, clearly bears no nexus with the object of classification envisaged by section 3 (4) of the Act. As earlier pointed out by us, the criteria for levy of excise duty on production under section 3 (4) of the Act has reference only to the production capacity of plant, machinery, undertaking, establishment or installation and it bears no nexus with the actual production of the goods by the manufacturers. The creation of sub-class out of a well defined and intelligible classification of manufacturers of foreign brand of aerated water, on the basis of payment of excise duty by them on actual production of goods in the preceding year and determining their tax liability, on that basis, bears no nexus to the object of classification envisaged by section 3 (4) of the Act and thus amounted to discrimination within a well defined category of manufacturers. The learned Judges of the High Court were, therefore, justified in declaring the rule as discriminatory and striking it down on the ground of inequality under Article 25 of the Constitution. We may also mention here that the Rules having been framed by the appellants under section 3(4) of the Act the proviso to rule 7 ibid, was enacted beyond the mandate of that section and therefore, for this reason also it was invalid.
13. The learned counsel for the appellants, however, contended that the respondents being a member of the Association with whose consent the rules were framed, they should not be allowed to challenge the validity of the Rules. Apart from the fact that the respondents claimed in their writ .Petition that the scheme of taxation framed by the appellants left no option for them but to opt for payment of excise duty under the Rules, they also challenged the validity of the proviso to rule 7 on the ground that it infringed their fundamental right guaranteed under Article 25 of the Constitution.
Article 25 of the Constitution guarantees for equality of all citizens before law and their entitlement to get equal protection of law. This provision casts a duty on the Government to ensure enactment of laws which provide equal protection to all citizens. Such rights of citizens- cannot be defeated on the ground of waiver.
14. The learned counsel for the appellants raised an additional argument before this Court that at the the the writ petition was filed before the High Court and the decision was given thereon, proviso to rule 7 ibid, was not in existence as the old rule 7 was first substituted by a new rule 7 which was further amended and a new rule 7-A was added, and therefore, the decision given by the learned Judge in chambers regarding validity of the proviso to rule 7 is of no consequence. We are not inclined to go into this question as all the parties proceeded before the learned Judge in chambers on an assumption that the proviso to rule 7 ibid, was in existence. No doubt a new rule 7 was substituted on 2-7-1990 by S.R.O. 701(I)/90 and this substituted rule was further amended by S.R.O.
No. 559 (I)/91 on 16-6-1991 but neither before the learned Judge in chambers nor in the memo of appeal filed by the appellants before the Division Bench this ground was agitated. As this point was not agitated before the High Court and consequently the High Court did not record any finding in this regard, we are not inclined to go into this question. There is no merit in this appeal which is, accordingly, dismissed with no order as to costs.