1. IFTIKHAR MUHAMMAD CHAUDHRY, J --In this Constitutional Petition following relief has been claimed:- "(i) Declare that the demand of Excise Duty can only be made on the scrap of the vessel and on the delivery of the scrap.
(ii) Declare that the demand of Excise Duty by the Respondents is illegal, arbitrary and unjustified as the vessel has still not been converted into scrap.
(iii) Declare that as per Finance Act 1996 the Excise Duty on scrap has been removed and as such no Excise Duty is payable the demand is ab initio illegal and fit to strike down as without lawful authority.
(iv) Cost of the proceedings
(v) Any other relief."
2. Petitioner imported a vessel for scrapping. Bill of entry was presented to Assistant collector at Customs House Gaddani on 9-6-1996 vide IGM No.22 of 1996. In the meanwhile on 13-6-1996, Budget was announced whereby vide SRO No.457(1) of 1996 of the even date i.e. 13-6-1996 scrap, ship plates, waste, rods, obtained through any process of dismantling or bringing of vessel or other floating structure were exempted from Central Excise Duty. The SRO was to take effect from 7-1- 1996.
3. On 1-9-1996 vide letter C.No.SI/Misc/116/96(G)/2828 issued by respondent Assistant Collector Customs House Gaddani petitioners were called upon to pay Central Excise duty. Relevant para of the order reads as under:- You are finally directed to submit pay order of Rs.19,28,42,886 + C.E. Duty Rs.1,24,21,318 (as per D.V.
4. Without U.N.T.) within two days failing which the same will be recovered under section 202 of the Customs Act, 1969 apart from the other action. "
5. On receipt of above letter petitioners filed instant Constitutional petition on 17-9-1996 claiming relief in terms of the prayer clause which has been re--produced herienabove.
6. Alongwith the petition a Civil Miscellaneous Application was also submitted for interim relief requesting that pending petition they be allowed to remove scrap subject to furnishing bank guarantee equal to the ;amount of Central Excise Duty. As such vide order dated 18-9-1996 permission was accorded to petitioner to furnish bank guarantee equal to the tune of demand made by Assistant Collector concerning the Central Excise Duty with the Habib Bank Limited, High Court Branch Quetta.
7. Surprisingly Deputy Collector (Law) Customs Quetta while filing objections to the Civil Miscellaneous Application pointed out that petitioner has already deposited the Central Excise Duty vide Challan No.6 dated 30-9-1996, therefore, request so made to dispose of the application as there remains no cause of action. It is noteworthy that Deputy Collector (Law) is not respondent before this Court. However, matter was postponed with understanding that this issue will also be decided at the final hearing of the petition.
8. It would be appropriate to first of all deal with the question whether C.E.D. Outstanding against petitioner stands deposited vide challan dated 30th September, 1996 or otherwise. Learned counsel for the petitioner contended that petitioner had been depositing import duty and other taxes except the central excise duty on availing the facility provided by Department to Importers under deferment of Import Duty (on Ships for Scrapping) Rules, 1993 and they never paid excise duty because after exemption announced by the Government vide SRO dated 13-6-1996 Department had no authority to recover the same nor it was obligation of the petitioner to pay the same to them. Learned counsel explained that official respondents with a view to frustrate the instant proceedings had themselves deposited the Central Excise Duty by a separate Challan dated 30th September, 1996 after deducting this amount which was deposited in the Account of Respondent No. l towards import duty. As per his contention though never such request was made but this act has been done illegally by the Assistant Collector.
9. On the other hand Mr. M.S. Rakhshani learned Deputy Attorney General had shown a note portion from the official file according to which break up of an amount equal to Rs.56,571,701 has been shown which includes Rs.1,16,27,698 payment towards the excise duty. We enquired from the learned counsel as to whether he had in his possession the instructions in writing from Importer to deposit this much amount in the Head of Central Excise Duty out of the total amount noted hereinabove, Pay Order whereof being No.871294 dated 24th September, 1996 of Muslim Commercial Bank was received. His answer was in negative nor. He could show any document from the file to support his contention. In this behalf it is noteworthy that on 24th September, 1996 the Pay Order equal to Rs.56,571,701 was submitted by the Importer in favour of Assistant Collector Customs with a covering letter of the even date being first instalment of 34 % of total duty and taxes on the Vessel. In the letter the break up was given as under:- Customs dutiesRs.34,223,512.00 Sales TaxRs.16,527,593.00 F. R. FRs.752,084.00 Income TaxRs.05,068;462.00 C.E.DRs.50.00 TotalRs.56,571,701.00 What had happened that the Assistant Collector had encashed the above Pay Order and out of it deposited Rs.11,627,698 on 30th September, 1996 under his own signatures as it is indicative from the challan copy whereof has been annexed with the petition by the Department itself. Column No. l of the Challan is meant for particulars of the person who has tendered the amount. In this column designation of the Assistant Collector Gaddani with his Seal and signature has been affixed. We failed to understand that what was object to commit such forgery by the concerned Officer because apparently petitioner had not done so as it is indicative from the facts particularly when no such instructions were ever given to the Assistant Collector. Even otherwise if the Importer had agreed to pay the Excise Duty then what was the occasion for instituting instant Constitutional Petition before this Court on 17th September, 1996 and also of obtaining interim stay order on 18th September, 1996.
10. It is quite surprising to note that the Assistant Collector Gaddani despite of service had not appeared nor he has filed a counter affidavit to explain his position. We are anxious to know whether he was competent to encash the Pay Order and thereafter withdraw some amount from it for the purpose of depositing in the different Head. However, in absence of any explanation either by him or the Deputy Attorney General we are inclined to hold that this exercise has been done by the Assistant Collector Gaddani with mala fide intentions, therefore, we direct that copy of the judgment be sent to Central Board of Revenue for the purpose of taking action against him as far as possible within the period of six weeks after receipt of the order and if on the expiry of stipulated period compliance report is not submitted, Registrar shall put up the file in Chambers for further orders.
11. So in view of above discussion we are inclined to conclude that vide Challan No.6 dated 30th September, 1996 petitioner has not paid the Central Excise. Duty, therefore, Department is directed to treat this amount towards the payment of other dues, if outstanding against the importer.
12. On merits it is contended by learned counsel that petitioner is not liable to pay C.E.D. Because Government has granted exemption on Excise Duty on the scrap of ships vide SRO No.457(1) of 1996 dated 30-6-1996 which was to take effect from 1-7-1996 and as the clearance to commence dismentlling the ship was allowed on. 31-10-1996, therefore, not withstanding the fact that Bill of Entry was deposited on 9-6-1996 petitioner would also be entitled to enjoy the benefit of the SRO referred to hereinabove.
13. He further contended that under section 3-C(a) the determination of tariff value and rate of duty shall be on the date on which the goods are cleared for export or for home consumption. Since the scrap is meant for home consumption, therefore, date for determination of the Excise Duty would be the date of clearance. In this behalf he placed reliance on 'Federation of Pakistan, through Ministry of Finance and others v. M/s Noorie Trading Corporation (Pvt.) Limited and 14 others' (1992 SCM R 710).
14. Mr. M. S. Rakhshani learned Deputy Attorney-General, however, argued that Importer/petitioner is not entitled for the benefit of SRO referred to hereinabove because it was given effect from 1-7- 1996; whereas admittedly Bill of Entry with IGM . No.22 of 1996 was filed by petitioner on 9-6-1996, therefore, under section 30 of Customs Act date for determination of value and rate of Import Duty would be when Bill of Entry is filed. In this behalf he made reference to 1993 SCM R 17.
15. We have considered the arguments put forth by parties' counsel and also perused relevant provisions of law. At the very outset we would like to observe that for determination of tariff value and rate of duty the crucial date would pot be when Bill of Entry is filed, but would be the date on which goods are cleared for export or for home consumption as it is clear from unambiguous language applied in section 3(C) of the Central Excises and Salt Act, 1944. For convenience relevant clause referred to hereinabove is re-produced below:- "(3-C)" Determination of Value, retail price, tariff value and rate of duty.---
(1) The value, retail price, tariff value of and the rate of duty applicable to goods or services shall be the value, retail price, tariff value and the rate of duty in force.
(a) in the case of goods, on the date on which goods are cleared (for export or) for home consumption;
(b) in the case of services, on the date on which the services are provided or rendered (and)
(c) in the case of excisable goods produced or manufactured outside the areas to which this Act has been applied and brought for consumption to those areas, the date on which the goods are brought to those areas). The issue of a Notification under subsection (4) or subsection (8) of section 3 shall not affect the liability of any excisable goods produced or manufactured in a factory or brought into such factory for any purpose and not cleared therefrom or from bonded warehouse on payment of excise duty before the date of coming into force of such Notification and the provisions of such Notification shall not apply in respect thereof.
16. The honourable Supreme Court has attended to above question in the judgment of 'Federation of Pakistan, through Ministry of Finance and others v. Noorie Trading Corporation (Pvt.) Limited and others (1992 SCM R 710). Relevant paras. For guidance are re-produced hereinbelow:-- "As regards the contention that the ship-breaking had already taken place and the plates were recovered before Ordinance No.III of 1988 came into the field, on the plain language of the added provision it is untenable. What has been made liable to tax is not the ship-breaking activity itself but certain items-recovered as a result of ship-breaking and not all items. With regard to the stage, section 3-C of the Act (reproduced in paragraph 4) makes the liability as "on the date on which the goods are cleared for export or- for home consumption". This statutory provision (section 3-C) was earlier a part of Rule 9-A of the Central Excise Rules. It came up for interpretation before Indian Supreme Court in Orient Paper Mills Ltd. v. Union of India (AIR 1967 SC 1564) and it was interpreted as hereunder:--- "It will thus be seen that in the case of manufactured goods the payment of duty and the clearance of goods may be synchronous or the payment may be postponed although the goods may be removed (provisos to R.9). This immediately sets up two kinds of cases in respect of manufactured goods. The critical time thus becomes the removal from the factory or warehouse but if the payment of duty is made before the removal then the critical time is the payment of duty.
17. In the present case, the payment of duty was synchronous with the clearance of the goods because the gate pass can only be issued when the goods have actually been cleared for removal. The above construction of the Rules agrees with the construction placed by the Board of Revenue in the ruling of 1957 where the effect of the sealing of the wagons by the Railway after loading and the issuance of railway receipts was considered. The Board ruled that such goods would not be considered as lying in the stock in the factory premises.
18. Hence, as substantively excise duty was leviable on the specified product obtained by ship- breaking and that the levy had to take place at the stage of clearance as provided under section 3-C of the Act, these appeals are allowed. The judgments of the High Court are set aside and the Constitutional Petitions filed challenging the levy are dismissed."
19. Thus in view of above legal position it is held that the date of filing Bill of Entry would not be crucial for determination of tariff value and rate of duty, but the important date would be when the goods are cleared for export or for home consumption. As in the instant case admittedly permission was accorded to petitioner to commence the process of dismentalling the ship on 31-10-1996 vide letter C. No. SI/MISC/116/96(G)/2939 as such this would be treated as the date of clearance and from this date he considered the Excise Duty will be calculated. Since by the time SRO No.4-57(1) of 1996 has come into operation, therefore, petitioner was not liable to pay Excise Duty and the arguments put forth by learned counsel that the date of filing of the Bill of Entry would be the relevant date to determine the value and rate of Import Duty for the purpose of Central Excise Duty would not be relevant and in such view of the matter the judgment cited by the learned counsel is also inapt.
20. Learned Deputy Attorney General also made an attempt to convince that since special procedure has to be followed for collection of Central Excise Duty on iron and steel plates recovered through dismantlling or breaking of ships and vessels etc. Under rule of 1996 (zz) of the Central Excise Rules, 1944 is to be followed, therefore, date of clearance of the goods under section 340 of the Act. 1944 would not be relevant.
21. We think this argument is also not available to him; firstly Rule-96 (zz) being subordinate legislation cannot supercede to the provisions of section 3-C of the Act; secondly it mainly deals with special procedure in respect of certain manufactured goods as provided under Chapter-XV of the Central Excise Rules, 1944. This Chapter deals with regard to filing of the application and the revised procedure, maintenance of current account, deposit of goods in the store room, clearance of goods on payment of duty, clearance of goods exempted from duty etc., but does not deal in respect of the event when determination of tariff value and of rate of duty will be worked out, therefore, the argument put forth by the learned counsel has no substance.
22. Thus for the foregoing reasons petition is allowed declaring that in pursuance of SRO No.457(1) of 1996 dated 13-6-1996 demand of Excise Duty by the respondents from the petitioner on the scrap of the Vessel namely, "Vloo Odyssea," vide IGM No. 22 dated 9-6-1996 vide letter dated 1-9-1996 issued by Assistant Collector Customs House Gaddani is illegal and without lawful authority.
23. Petitioner is also held entitled for the cost.