1. ' WAJIHUDDIN AHMED, J.--It would appear that this is a third round of litigation involving more or less similar issues. In the first place, for the period January, 1982 to August, 1982, on allegations that the petitioner has manufactured "Synthetic Clear Varnish" and cleared a substantial quantity of the same as "Synthetice Clear Resin', which was found to have contained 52% solvent, the petitioner was ordered to pay central excise duty amounting to Rs,810,744. Losing out up to the level of appeal before the Collector, Central Excise and Land Customs (Appeals), Karachi, the petitioner filed a Constitutional petition, which was dismissed as withdrawn on a statement made before the Court that the petitioner's pending revision would be decided within six months' time. Such order in Revision No, 64 of 1984 was passed on 3-9-1984, whereby the orders-in-original and in-appeal were set aside on the ground that whereas several samples were drawn reliance was placed on a single report, which too was not found to be authentic.
2. ' As for period following, a fresh show-cause notice dated 14-4-1985 was issued by the Deputy Collector II, Collectorate of Central Excise and Land Customs, to the petitioner. Such notice proceeded on the ground that the petitioner was manufacturing an excisable item viz. ' Varnish' but the same had been cleared in the name of Syntholic Synthetic Clear Resin Solution bearing printed retail price on the tin containers. Such notice, this time, inter alia, postulated as under:-- "M/s. Imperial Paint & Varnish Works, D/11, S.I.T.E., Karachi had applied for licence to manufacture Resin on 22-8-1981 which was received in the Divisional Office on 19-12-1981 and licence was issued to the party bearing L. No, 1/Plastic resin material/81 dated 31-12-1981. The party was previously clearing the said product as Varnish but after resin was exempted from Sales Tax vide S.R.O 666(1)/81 dated 25-6-1981, the party changed the word on their product Synthetic Clear Varnish to 'Syntholic Synthetic Clear Resin Solution' and evaded payment of Central Exise Duty. They have also not given intimation to the concerned Central Excise Department for stoppage of production of Varnish. Resin by itself cannot be used as a coating material hence solvent is added to it, if the purpose is to apply as a coating composition it constitutes ' Varnish'. The directions on the tin container of the product clearly indicate its use as a coating material. Independent market enquiries conducted revealed that the said item Syntholic Synthetic Clear Resin Solution' is sold/known/marketed as ' Synthetice Imperial Varnish' . "
3. ' At the outset, we asked the learned counsel for the petitioner as to what was the reply of the petitioner before the Deputy Collector II regarding the portion of the notice above reproduced. The learned counsel pointed out the following paragraph in the reply dated 5-5-1985, to the show- cause notice, where, however, no repudiation occurs of change of nomenclature of the product from varnish to resin, after resin was exempted from sales tax as afore-quoted:-- "2.03. The particular product, Syntholic Synthetic Clear Resin Solution (hereinafter referred to as 'Resin Solution'), was in a similar manner and following the Rules and its requirements, was manufactured and cleared in accordance with the provisions of the Rules. The clearance of the Resin Solution in fact, was on the prescribed Form AR.I, specimen whereof is annexed hereto marked ' A', showing that it was always, ever and constantly in the check, notice and supervision of the Central Excise Staff and Authorities that the said product was being manufactured, the excise records in respect whereof were maintained and clearance of it was intently supervised and granted by Central Excise Staff posted at the Factory. The fact is that this was being regularly, constantly and every day performed without any break or let up. Where did we, at any time, fail, muchless contravene any provision of the Act or the Rules."
4. ' Reverting, the foregoing was followed by the Central Excise order-inoriginal No, 41 of 1985 of the Deputy Collector II, whereby it was held that the petitioner had contravened Rules 9, 7, 43 and 226 of the Central Excise Rules, 1944: As a result, the petitioner was required to pay central excise duty amounting to Rs,2,505,248.48 for the period 9-8-1982 to 20-4-1983, 19-6-1983 to 4-12-1983 and 18- 9-1984 to 3-4-1985. Besides, a personal penalty of Rs,500,000 was imposed under Rule 210 of the Central Excise Rules, 1944. In such order, as to merits of the dispute, relying on Explanatory Notes to Brussels and Encyclopaedia Britannica, the findings highlighted below occurred:-- "13. Various chemical tests were carried out in the Custom House Laboratory and the test reports have categorically mentioned that so far as the classification in the Central Excise Tariff is concerned it may be determined by a ruling from the competent authorities vide test report No,KCEX/Misc/84/5949 dated 27-10-1984, KCEX/6/84, dated 10-2-1985. The latest Test Report No, CE/R/85 CE-4 (Retest) dated 29-5-1985 specifically mentions that the goods on chemical test have been found to contain mineral volatile hydrocarbon drier (zinc organic complex) which constitutes varnish. The synthetic resin does not contain any mineral or drier and cannot be used as a coating material unless it is mixed with drier.
14. The goods in question also fully qualify within the definition of varnish as given in the Explanatory Notes of Brussel definition of Varnish under heading 32.09 which read as follows: Varnishes and lacquer are liquid preparations for protecting or decorating surface. Usually they consist essentially of a film producing substance (the binder) with added solvent and thinner. They form a dry water soluble relatively hard, more or less transparent or translucent smooth, continuous film which may be glossy, matt or satiny. The present heading i,e, 32.09 also includes but as varnishes within part
(A) of the Explanatory Note solution of this kind whatever weight of the solvent containing added substances other than those necessary for manufacture or product specific in heading 39.01 to 39.06 such as anti-skinning agents and certain thioxtropic or dying agent which makes them suitable for use solely as varnishes". It is, therefore, evident that once the goods are categorised as varnish, the weight of the solvent does not count even when its weight is less than 50% as in the instant case but the goods shall remain classified as varnish. This observation is further supported by the definition of varnish as given on page 899 of Encyclopaedia Britannica. Volume 22, 1970 which reads as follows: "15. Varnish is a transparent homeogeneous heat treated blend of drying oil, resin and nolatile solvent. When varnish dries, its solvent portion evaporates and the remaining material oxidizes or polymerises to form a hard continuous transparent film. Generally a high proportion of resin will produce far harder, faster, drying more brilliant but less durable varnishes, whereas a high proportion of oil will provide more elastic, more durable, more water proof but softer varnishes. The oil and resin are blended in proportion designed to give the proportion desired for specific application". This definition also does not speak of any percentage of solvent contained in the varnish. As such, the products 'Synthetic resin Solvent' of M/s. Imperial Paint fully qualify for definition as varnish and the claim of the party that the offending goods are synthetic resin has no substance."
5. ' Per order in Appeal No, 261 of 1986 dated 19-5-1986, the Collector (Appeals) concluded:-- "The product in question chemically contains driers and mineral hydrocarbons and synthetic alkyds,. It is used as coating material. Resin solution has no reason to contain driers. Varnish is a resin solution and addition of driers makes the difference."
6. ' The Collector also found that the product was "known, marketed and used as varnish". He observed that comparison with varnish produced by M/s. Kohinoor Paints revealed that directions for use were more or less the same. He, in view of several precedents of the superior Courts, in detail examined the primary use of the substance and concluded that such could not only be treated as varnish and not mere resin. In the result, he remitted the fine but maintained the duty levied.
7. ' A revision was taken and decided under section 36 of the Central Excises and Salt Act, 1944, per order dated 30-1-1988, whereby the order-in-appeal was maintained and wherefrom the passage at para. 4 may be noted: -- "4. In taxing statutes which have to be construed strictly, it is natural meaning of the word which must be adhered to. In the absence of any indication in the statute itself, it will not be reasonable to restrict that meaning only because a commodity clearly falling within its ambit is, for certain purposes given another name in commerce. The last criteria for interpreting the goods prescribed in the First Schedule to the Central Excises and Salt Act, 1944, is to keep in mind the common commercial parlance in which an article is known or the sense in which traders or persons dealing with the item understand it. The synthetic resin solution or the synthetic clear resin solution in this case will have to be regarded as one of species of the varnishes as it is being used for the purpose of giving a polish or gloss to surface or article of furniture or things of the like nature."
8. ' As against the foregoing, Constitutional Petitions Nos. 150 and 200 of 1988 were preferred in this Court and at a time when no contest was entered from the side of the respondents such was disposed of by an order of remand dated 7-2-1994, in which the under-noted material observations occurred:-- "3. Be that as it may, but the various orders passed by the respondents in the two petitions indicate that the case has been decided mainly on the interpretation of the term 'varnish' appearing in different dictionaries and encyclopaedia. The order passed by the Deputy Collector dated 30-6- 1985, which was subsequently upheld in the appeal and revision respectively filed against the same, further indicates that the opinion of the said respondent was based upon various chemical tests held in this regard beside reference to the dictionary meaning as pointed out earlier but the contention of Mr. Anwar Mansoor, learned counsel for the petitioner is that neither the petitioners were ever confronted with such test reports nor the samples were taken from them by the respondents before subjecting them to test by such laboratories. This has not been controverted in the counter-affidavit filed on behalf of the respondents but it has only been averred that it was not necessary to carry out such tests in the presence of the party. It has further been contended that the report was received from the Government laboratory and, therefore, the same was not open to exception.
4. We would like to emphasise in this regard that although the question which requires determination is a pure question of fact which is only to be determined by the respondents themselves but what requires to be considered is whether the inquiry into the matter has been conducted by the respondents fairly while taking into consideration the principles of natural justice.
9. In our opinion, the respondents before taking a final decision in the matter were obliged to confront the petitioners or their representative with the reports of the laboratories before the same were relied upon by them. It would also have been more appropriate if samples for testing had been obtained from the petitioners. From the counter-affidavit filed on behalf of the respondents, nothing can be spelt out to indicate that such procedure had been adopted by the respondents before arriving at any conclusions in regard to the petitioners' product. This method, in our opinion, was not warranted because the petitioners evidently were not associated in any manner with the said enquiry as the entire inquiry appears to have taken place behind their back."
10. ' Upon remand, Deputy Collector III took up the matter and decided the case against the petitioner through the order-in-original No, 17 of 1994, passed on 11-12-1994. In such order, as to the nature of the excisable goods,inter alia, the following reference occurs:-- "7. The term varnish has been defined in Chemical Process Industries by R.N.S. Here as under:-- ' Varnish is an unpigmented collidal disperation or solution of synthetic and/or natural resins in oils and/or thinner used as a protective and or decorative coating for various surfaces and which dries by evaporation, oxidation and polymerization of portions of its constituents. Varnishes are principally oleoresionous, of one or more natural or synthetic resins in a drying oil and a volatile solvent. The oil reduces the natural brittleness of the pure-resin film. Spirit varnishes are likewise solution of resins but the solvent is completely volatile and non-film forming. Oleoresionous varnishes are much the more important of the oil varnishes. They may be classified according to oil length as short, medium or long. The number of gallons of oil used per 100 lbs. Of resin. This largely controls the properties of the varnish. A short varnish will possess faster drying properties to a harder a more brittle film, whereas the long varnishes possess more weather resistant, pliable films. The properties of the varnish will vary greatly, depending upon the cooking procedure, the type or types of drying oil used, and the types of resins employed."
11. ' The Deputy Collector during the course of hearing before him also significantly recorded as below:-- "During the hearing the General Manager disclosed the ingredients of their product are resin, linseed oil, white spirit, thelic hydride and glycerin. He further admitted that they procure resin in bulk from M/s. R.R.P. & M/s. Indus Resin. He also disclosed that they had not sold it to consumer by printing retail price on containers."
12. ' The Deputy Collector further noted that a number of paint factories were manufacturing a similar product, declaring it as varnish and paying central excise duty accordingly. He in the context cited instances of M/s. Buxly Paints, Evershine Paints, Kohinoor Paints and Well Deal Enterprises. The Deputy Collector, an earlier market enquiry notwithstanding, initiated a fresh market enquiry pertaining to the sales effected at the level of the petitioner's dealer themselves and came up with the following data indicating the bills Nos. And details of sale outlets:-- (i)Bill No. 122 dated 30-11-1994 showing the item 'syntholic clear varnish 200 gm ofM/s. Qasim Hardware & Paint, Shop No. 25, Gulshan- e-lqbal. Allama Shabbir Ahmed Usmani Road, Block Imperial Paint'.
13. (ii)Bill No.631 dated 1-12-1994, showing the item 'Syntholic synthetic clear varnish' of Imperial paint in 750 gins packing.
14. (iii)Bill dated 1-12-1994 showing the item namely 'Syntholic Imperial clear varnish'.3, near Disco Bakery, Karachi.
15. M/s. Arab Hardware, Sanitary and Paint House, Shop No.1, Gul Centre, Block 3, near Post Office, Gulshan-e- Iqbal, Karachi.
16. M/s. Muhammad Suhail Hardware Sanitary Mart, Shop No. 14, Momin Square, Rashid Minhas Road, Gulshan-e-Iqbal, Karachi.
17. ' He, thereupon, recorded his findings in these words:-- "As discussed above, the General Manager disclosed the ingredients of the said product i,e, resin, linseed oil, white spirit , thelic hydride and glycerine. Resin is one of the ingredient of the subject product, as after mixing the raw material with resin a new product has synthesized which according to the definition given in the technical literature is classifiable under the term varnish.
18. Market enquiry revealed that the primary use of the product under reference is varnish which is also known as varnish in the trade parlance. The product under reference is, therefore, classified as varnish in accordance with the principles laid down by the various Courts."
19. ' In the result, an order for recovery of central excise duty amounting to Rs,2,505,248.48 for manufacture and clearances from 9-8-1982 to 24-9-1983, 19-6-1983 to 4-12-1983 and 18-9-1984 to 3-4-1985 was passed. Penalty of Rs,200,000 was also imposed.
20. ' Before us the sole question, which has been agitated is that upon remand, as required by this Court, per judgment dated 7-2-1994, the petitioner was again not associated with the laboratory tests of the samples and, therefore, the impugned order, against which the petitioner has directly approached this Court, without pursuing the alternative remedies of appeal and revision, is not sustainable.
21. ' We have, elaborately, discussed the various orders, which have been passed in the petitioner's case from time to time. Without doubt the above order of remand was passed for proper scrutiny of samples and due determination according to law. But then other aspects of the matter, as highlighted above, could not be placed before the Court because the matter remained unrepresented from the side of the respondents. This apart, on actual remand, the petitioner itself admitted the ingredients, which constituted the product and that in law left no room whatever for going into the outcome of the laboratory tests, which even during the earlier course of proceedings were, we are constrained to think, more or less peripheral to the determination, the sole ground then finding favour with this Court being disregard of the principles of natural justice, incidental to the denial of the participation of the petitioner in the conduct of the laboratory tests.
22. In view of the admitted constituents of the product, the adjudicating officer has endeavoured to apply the necessary yardstick and has consequentially found the product to be varnish and not mere resin solution. In doing so, adequate attention has been riveted to the connotations in the concepts of resins and varnishes. The various definitions of varnishes, reproduced above, applied by the adjudicating officers, leave no manner of doubt that resins are an essential ingredient of all forms of varnishes and the substances admittedly added by the petitioner to resins necessarily result in the emergence of quite another product namely varnish, attracting the levy. Resins can be natural as well as synthetic, the first being obtainable from the sap of certain plants and trees and the latter by polymerization or condensation, both being substances of considerable importance in plastic industry. The petitioner, as the record reveals, is also a purchaser of resins and at its own end, apparently, adds, mixes or treats the same with other material, bringing forth an end product, which is marketed, recognised and used as varnish. At the level of the Deputy Collector, quite correctly, the primary use of the product, its treatment in the market and its similarity to other products subjected to similar levy, have all been appropriately considered. Significantly, the petitioner has never come out with any other use of the substance it manufactures other than as alleged. It is not, ordinarily, the practice of this Court to determine the nature of a product and that usually lies within the departmental domain. The grounds for interference here are limited. None, however, seem to subsist in the instant case.
23. ' We have also noted with no small concern that the petitioner was somewhat indecently quick to change the nomenclature of the product, as claimed in the first show-cause notice, dated 14-4- 1985, from varnish to resin, as soon as resin was exempted from sales tax vide SRO No,666(1)/81, dated 25-6-1981. Thus "Synthetic Clear Varnish", almost over-night, became "Syntholic Synthetic Clear Resin Solution". The petitioner, therefore, has hardly been entitled to relief.
24. Even otherwise, if a factual controversy regarding sampling of the product was involved, as exclusively was argued before us, surely, proper course for the petitioner would have been to assail the findings of the Deputy Collector, recorded in the order-in-original, through an appeal, etc. Where the needful, if any, could have been attended to and the matter dealt with in full measure.
25. The petition for such reason also seems to be barred by law, being a deviation from the ordinary remedies prescribed by law.
26. ' While we had dismissed this petition for reasons to be recorded separately and while reasons as above have been recorded, we have, on our own, noted that in the impugned order a penalty has been imposed to the extent of Rs,200,000. A similar penalty for the same deviation in the tune of Rs,500,000 was remitted through the order-in-appeal passed by the Collector (Appeals) on 19-5- 1986 and such remission was upheld in revision as well as this Court in the earlier round of litigation.
27. In this background, we see no reason why the penalty, now imposed, should not be considered as re-opening a past and closed transaction, thus non-suscepitble to re-imposition. Accordingly, the aforesaid penalty is remitted, while the petition stands dismissed for reasons detailed above.