' MRS. KHALIDA RACHID, J.---This order will dispose of Writ Petitions Nos.794/95, 795/95, 958/95 and 960/95 since all of them arise in similar circumstances.
' These petitions under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973, call in question Notice dated 25-7-1995 wherein demand has been made against the petitioners- companies to pay up the deficient amount and also advance income-tax.
2. The brief facts leading to these petitions are that the petitioners are public limited companies, manufacturers of Electric Bulbs and import the raw material from abroad. The Federal Government vide Notification SRO 504(1)/94, dated 9-6-1994 exempted raw materials, components and subcomponents for manufacturing of the goods specified in Table-I from so much customs duties as are in excess of the rates specified in Table-II. To avail of the exemptions, the petitioners- companies applied on the prescribed Form-S to the Chief, Survey and Rebate, Central Board of Revenue, who after issuance of a provisional certificate on 2-4-1994, verified and surveyed the units of the petitioners and worked out the quantities of raw material required to manufacture the bulbs and issued the final certificate on 6-12-1994. The petitioners-companies have been regularly paying the assessed duty on the imported goods at the rate of 10% as specified in aforesaid S.R.O., when on 25-7-1995 they received Demand Notices under section 32 of the Customs Act, 1969 (hereinafter to be referred to as the ' Act') from the Assistant Collector, Customs Dry Port (respondent No, 1) requiring them to pay alleged short levied duty within the period specified therein.
3. Comments of the respondents were called for which have been accordingly filed.
4. We have heard Mr. M. Sardar Khan, Advocate, for the petitioners and Mr. Saadat Hussain, Deputy Attorney-General for Federation of Pakistan and Mr. Abdul Rauf Rohaila, Advocate, for respondents/Customs Department at a considerable length.
' The learned counsel for the petitioners very vehemently contended that respondent, Chief, Survey and Rebate, after consultation with Customs Staff surveyed their units, physically verified their claim, worked out quantities of the raw materials required for manufacturing of the product, issued the final certificate after accepting and categorising aluminum caps as raw materials assessable at the rate of 10% in terms of Serial No, 1 of Table II of the S.R.O.504(1)/94, dated 9th June, 1994, and hence respondent No, 1 has no authority to hold them as components and further assess them at the rate of 30% for tax purposes. It is further contended that impugned Notification cannot be termed as show-cause notice as stipulated in subsection (3) of section 32 of the Act and since no notice as required under the above provisions of law has been served on the petitioners, therefore, the respondents have no authority to raise the demand of short assessed amount, if any, from the petitioners. He insistea that issuance of Show-Cause Notice is a condition precedent to the demand of any tax. He further maintained that if any duty is short levied, the show-cause notice being not within time, no demand for the payment of short assessed amount can be made. The learned counsel sought for the declaration of the impugned Notification as illegal, without lawful authority and of no legal effect. 'Mr. Abdul' Rauf Rohaila, Advocate, appearing for the respondents, at the very outset, raised a preliminary objection as to the maintainability of the writ petitions. He maintained that the Act provides a relief against the impugned notice and Without exhausting the alternate remedy of filing appeal or revision before the forum provided thereunder, the petitioners cannot invoke the Constitutional jurisdiction of this Court under Article 199 of the Constitution.
' Arguing the case on merits, the learned counsel for the respondents submitted that the petitioners have made misdeclaration in the import document/Bill of Entry by clearing the aluminum caps of the bulbs as raw material, therefore, they were rightly issued the impugned Notice under subsection (2) of section 32 of the Act, demanding the payment of short assessed duty. He argued that Central Board of Revenue through Customs General Order No, 81, dated 14-6-1995 has defined 90 terms used in the various concessionary Notifications. He further argued that final certificate was issued subject to the condition that petitioners would abide by the final decision of the Central Board of Revenue with regard to the definition of raw material, component and subcomponent.
5. It will be convenient that before dealing with the main contentions, first to resolve the preliminary objection of the respondents regarding the maintainability of the writ petitions. We find ourselves in full agreement with the learned counsel for the petitioners that the forum provided in the Act for a relief against the impugned notice is not different from the authority which determines the fiscal policy in these matters following which policy and its implementation the impugned notice has been served upon the petitioners, therefore, it would be an effort in futility to approach the same authority which formulated the policy. Furthermore, it has been held in host of the authorities of the superior Courts that in fiscal matters, despite alternate remedy, the aggrieved party can directly approach the High Court under the Constitutional jurisdiction. This Court in W.P. No 494/94 F.S.'
Tobacco Co. (Pvt.) Limited v. Superintendent Central Excise and Sales Tax and others' has turned down the similar objection raised by the learned counsel for the respondents, in view of observations made in (1) Usmania Glass Sheets Factory v. Sales Tax Officer (PLD 1971 SC 205)', (2) '
Nagina Silk Mills v. Income Tax Officer (PLD 1963 SC 322)', (3) ' Edulji Dinshaw v. Income Tax Officer (PLD 1990 SC 399)', (4) Fecto Cement Ltd. v. Collector of Customs Appraisement (1994 M LD 1136 (Karachi)' and (5) 'Hussain Sugar Mills Ltd. v. Pakistan (1991 PTD 169)'. Thus, in fiscal matters the exhaustion of alternate remedy is not a condition precedent and mandatory for invoking the Constitutional jurisdiction of the High Court.
6. Having dealt with the maintainability of the writ petitions we now turn to the merit of the case.
The main contention that requires to be determined is as to whether subsection (2) or subsection
(3) of section 32 of the Act is applicable in this case and within which period of limitation a notice as conceived under this section of law is to be served on the petitioners. In order to decide this issue the entire section 32 of the Act is reproduced as under:-- "32. Untrue statement, error. Etc.--(1) If any person, in connection with any matter of customs, --
(a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever, or
(b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer, (knowing or having reason to believe that such document or statement is false) in any material particular, he shall be guilty of an offence under this section.
(2) Where, by reason of any document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice.
(3) Where, by reason of any inadvertence error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within six months of the relevant date requiring him to show cause why he should not pay the amount specified in the notice.
(4) The appropriate officer, after considering the representation, if any, of such person as is referred to in subsection (2) or subsection (3) shall determine the amount of duty payable by him which shall in no case exceed the amount specified in the notice, and such person shall pay the amount so determined.
(5) For the purposes of this section, the expression "relevant date" means:-
(a) in any case where duty is not levied, the date on which an order for the clearance of goods is made;
(b) in case where duty is provisionally assessed under section 81, the date of adjustment of duty after its final assessm ent;
(c) in a case where duty has been erroneously refunded, the date of its refund;
(d) in any other case, the date of payment of duty or charge."
It clearly emerges from the bare reading of the above provisions that subsection (1) provides a situation where the petitioner has submitted false declaration knowing that document submitted by him is incorrect and false to benefit the company by reducing the rate of tax. To check such happenings the subsection provides a procedure against the false deponent who can be penalized under section 156(1) of the Act. Subsection (2) of section 32 of the Act provides ' such document'. Such document definitely refers to the document referred to in subsection (1) which document is false and the petitioner has reason to believe that it was intentional, therefore, he was to be served with a notice within 3 years of the 'relevant date as explained in subsection (5) of section 32 of the Act'. It must be noted that period of limitation fixed for service of notice is three years. The reason for giving such a large frame of time is to give respondents/department enough time for proper investigation and also to proceed against the culprit and such proceedings may conclude into punishment for misguiding the department.
' Subsection (3) also refers to such document but here the mens rea is not available and assessm ent is caused by error or inadvertence of the respondents/department in which the petitioner does not happen to play a criminal role and period of notice is only six months. There is a rationale behind provision of short period for notice in subsection (3). If the petitioner paid the assessed taxes at the reduced rate due to respondents/department these savings were transferred to the consumer by readjustment of ex-factory prices so as to have upper hand in the competition. The industrialists always use such savings by passing on to the consumers to have an edge over the competitors. The process of manufacturing and distribution of goods in the market is estimated to be of six months, therefore, lesser period is provided for the notice so that before the finished goods are supplied to the market the industrialists could pass on readjusted indirect tax to the consumer.
7. Reverting to next question as to what type of notice under subsections (2) and (3) is conceived and whether the impugned notice meets the requirements of notice under section 32(2) and (3) of the Act. The plain reading of above provision of law suggests that by issuance of show-cause notice, an opportunity is given to the petitioner to explain why he should not pay the charges or duty specified therein which may necessitate the petitioner to file the representation and the officer concerned may after considering application of the petitioner determine the claim by reducing the amount given in the notice. Show-cause notice as contemplated by section 32(2)(3) in essence provides an opportunity to explain any wrongdoing in filing/paying the taxes. In the show-cause notice proper allegations are framed, pointing the false declarations which were wilfully made to cheat the tax department whereas through the impugned notices the petitioners were straightaway called upon to pay the deficient amount failing which the petitioners were threatened to be proceeded against. Until and unless proper hearing is granted to the importers to explain as to why they would not pay the short levied customs duty, the demand for payment of such amount cannot be made. The impugned notice thus does not comply with the requirements of subsections (2) and (3) of section 32 of the Act.
8. This brings us to the last issue which requires to be resolved is whether the petitioners have misdeclared the aluminium caps of bulbs as raw material in the import document which in fact was a component liable to be taxed at the rate of 30%. The petitioners on the basis of SRO 504(1)/94, dated 9-6-1994 applied to the C.B.Rs'. Chief, Survey and Rebate, on the prescribed Form- S for the survey of the claim. The petitioners' units were accordingly visited by the Chief, Survey and Rebate alongwith the staff of Collector, Central Excise and Customs, Peshawar, who verified the claim, certified the annual capacity of the units and quantity of various types of raw materials whereafter final certificate dated 6-12-1994 was issued in supersession of provisional certificate dated 2-10-1994. The goods in question (aluminium caps) have been described as raw materials by the authority in the schedule statement by visiting the units and physically verifying the claim.
Theoretically you can give all sorts of definitions but no definition can beat the reality. After this final certificate there has not been any other circular changing the abovementioned items to be brought under definition of components except the general customs order issued after six months of the issuance of final certificate. As discussed earlier that manufacturer passes additional cost in the form of price to the consumers, we have established earlier that manufactured goods are sold to the consumers within six months by fixing the price based on its expenses, the manufacturer collects the additional cost from the consumers by way of adjusted prices. Industries in Pakistan have a very poor industrial base and any unjustified claim or tax which cannot be passed on to the consumers will be a set-back to the industries which will result in higher unemployment and uncertainty in business group and irrecoverable loss to the community as a whole.
' For what has been discussed above, the impugned notice is declared to be without lawful authority and of no legal effect. The petitions are accordingly allowed leaving the parties to bear their own costs.