JUDGMENT: MR. MUHAMMAD ASLAM, TECHNICAL MEMBER.--1. This order shall dispose the following appeals as merit in all is same. All the appeals are filed against order-in-appeal Nos, as mentioned in column No, 5 of para 1, passed by Collector Appeals, Central Zone, Lahore.
S.No. Name of party.No. of case Name of Advocate. O.I.A No. Tribunal Appeal No. 1 2 3 4 5 6 1-7 M/s. Rehman Steel.7 cases M. Hafeez 223 to 243/97444 to 450/97 8-14 M/s. Siddique 7 cases do do 451 to 457/97 15-18 M/s. Nazir Sons steel4 cases do 244 to 251/97440 to 443/97 19-22 M/s. Javid Nazir4 do do 436 to 439/97 23-25 M/s. Soofi Steel3 Afzal Hassan 305 to 311/97 485,490,491/97 26-28 M/s. Friend 3 do do 486 to 488/97 29 M/s. Awan 1 do do 489/97 30-31 M/s. Crown 2 Muhammad Akram Gondal252 to 304 345, 346/97 32-33 M/s. Liaqat 2 do do 347, 348/97 34-37 M/s. Arfan 4 do do 349 to 352/97 38-41 M/s. United 4 do do 353 to 356/97 42-45 M/s. Punjab Concost4 do do 357 to 360/97 46-49 M/s. Data Steel4 do do 361 to 364/97 50-53 M/s. Wandat "4 do do 365 to 368/97 54-61 Nabi 3 do do 369 to 371/97 57-61 T.A.
Corporation5 do do 372 to 376/97 62-63 Aziz Steel 2 do do 377 to 378/97 64-65 Allah Wala 6 do do 379 to 380/97 66-71 Capital Steel 4 do do 388 to 393/97 72-75 Nasim 4 do do 499 to 502/97 76-79 City 4 do do 509 to 512/97 80-83 S.A 4 Habib Ullah Khan203 to 206/9667 to 70/97 84-89 T.I. 6 Kh. Adnan Ahmad5 to 10/97 75 to 80/97 90 Rafi 1 Jaffar Hasan Jaffari91 to 145/95 90/97
2. The issues entailed in the aforesaid appeals are being agitated before the Tribunal 2nd time.
Previously all these cases were remanded not to the Appellate but Original Authorities as the appellants then contended before the Tribunal on 18.3.1996 and 15.4.1096 that they had not been heard properly and that the orders at both stages had been passed in a mechanical and not objective and fair manner.
3. Background of the issues involved is that the Central Board of Revenue levied fixed sales tax vide its Notification No, SRO 148(1)/92 dated 2.3.1992 in respect of Arc type furnaces below five tonnes which was to be calculated as under for the financial year 1991-92; - Total number of units of electricity consumed during the month --------------------------------- ---------------------------------X Rs, '375 1795 4.The figure of 1795 given in the denominator vide the aforesaid notification was to be as under for each subsequent year:-- 1992-93 1993-94 1994-95 1645 1495 1400
5. To give effect to the aforesaid notification, the Central Board of Revenue also issued detailed rules vide its Notification No, SRO 149(I)/92 dated 2.3.1992 whereby the Steel Melters Association was actively associated, with the verification of the declaration which was to be submitted by each unit to the Sales Tax Authorities.
6. The rate of Rs, 375/- per tonne was increased to Rs, 500 per tonne vide SRO 451(1)/92 dated 14.5.1992.
7. On 11.3.1993, the Government exempted ingots and billets from levy of sales tax. As a consequence thereof, these two items remained exempt from both central excise duty and sales tax upto 31.8.1994.
8. On 1.9.1994, the Government levied excise duty on these items at the rate of 15% ad valorem but no formula was laid therein ,for the calculation of production with reference to the consumption of electricity units.
9. The aforesaid rate of 15% was substituted with the statutory rate of 50% ad valorem vide SRO 484(1)/95 dated 14.6.1995. However, exemption rate of 10% ad valorem was also provided in the conditional exemption notification dated 14.6.1995, which was applicable to such units whose recorded production was in accordance with the specified formula of one tonne against 1200 units of electricity consumed.
10.In the budget of 1996-97, the excise duty on these items was withdrawn and these .were again subjected to sales tax at the rate of 18% of the value of sales which was subsequently reduced to 12.5%.
11. In consultation with the Pakistan Steel Melters Association, the Central Board of Revenue specified vide its letter dated 18.6.1997 that the net minimum benchmark for counterchecking the performance of a manufacturing unit would be 1550 units of electricity for the production of one tonne. Of late, the figure of 1550 has been substituted with the figure of 1330 vide the latest communication dated 21.10.1997 of the Central Board of Revenue.
12. From the background contained in the preceding paras, it is clear that prior to March, 1993 ingots and billets were chargeable to sales tax under Notification No, SRO. 148(1)/92 dated 2.3.1992 wherein production of furnaces was worked out with reference to the consumption of electricity.
The formula laid down in this notification was precise and scientific as it correlated input - output ratios which had been worked out by the Central Board of Revenue in consultation with the Steel Melters Association after detailed deliberations. The formula so evolved was duly accepted by the appellants as well who continued making payment of sales tax upto 11.3.1993 as per the criterion laid therein when it was rescinded as the Government then decided to completely exempt this product from sales tax.
13.The problem arose when the Government subjected steel ingots/billets to excise duty at the rate of 15% ad valorem with effect from 1st September, 1994. During subsequent months, it was observed that the manufacturers in this line were declaring far less production in their excise records although their consumption of electricity was quite substantial. For example, M/s. Lucky Steel, Lahore, during the month of October, 1994 consumed 321200 units of electricity but mentioned the production of 15.400 M.tons of steel ingots only in their official record while actual production as per the previously agreed formula (production of one tonne ingot by consuming 1400 electricity units) should have been 229.429 M.Tons. Strange to note that these manufacturers were now utilizing 20857.142 units of electricity to produce one ton of steel ingots while previously this figure varied from 1400 to 1795 units.
14.As the appellants could furnish no convincing and logical ground for sudden downward swing in the production mentioned in their official record, the authorities of Excise at Lahore, adopted electricity consumption ratios previously incorporated in the rescinded notification No, SRO 148(1)/92 to work out the quantum of actual production and, thereafter, resorted to the computation of evaded amounts of duty by invoking the provisions of rule 226 of the Central Excise Rules, 1944 and instituted contravention cases against them.
15.After analysing the pros and cons of the issues involved, the Adjudicating Authorities concluded that the version of the Department was correct and, therefore, determined liabilities in each and every case which were also confirmed by the Collector Appeals. As already indicated in para 2, the Tribunal remanded these cases to the Adjudicating Officers who have once again confirmed their earlier findings and so has the learned Collector Appeals, Lahore, whose orders have now been assailed by the appellants.
16.The stand of the appellants is once again the same which was previously adopted by them before the Tribunal as detailed in para 4 of the remand order No, 306 of 1996 dated 15.4.1996, gist of which is as under:- (i)Application of notification No, SRO 148(1)/92 dated 2.3.1992 meant for levy of the sales tax to the domain of Excise Law is not only irrelevant and mala fide but even otherwise without any legal backing. Being a discarded notification, it can not be used for any purpose.
(ii)Consumption of electricity as a basis for working out production is a slippery criterion, completely divorced from ground realities. Even the Central Board of Revenue was at cross-roads when it attempted to work out an accurate and uniform formula based on electricity to levy fixed amount of sales tax on furnaces producing ingots and billets vide the aforesaid notification No, SRO 148(1)/92. The Central Board of Revenue first fixed 1795 electric units for production of one ton of ingots/billets for the year 1991-92, then 1645 units for the year 1992-93, then 1495 units for the year 1993-94 and then 1400 units for the year 1994-95 which amply proves that this was never deemed to be a sound and logical basis for computing the actual production at any given point of time.
(iii)The actual production is what they have already reflected in their Excise Records and not the one which has been imaginatively worked out by the lower Forums on the basis of Presumptions/ assumptions and irrelevant considerations.
(iv)Electricity is neither raw-material in terms of Rule 53-B nor a sole determining factor of production in terms of Rule 53-BB of the Central Excise Rules, 1944 and, therefore, recourse to Rule 226(2) ibid was neither warranted nor justified under the law.
(v) As production is a multi-dimensional phenomenon, varying from unit to unit, making consumption of electricity as the sole determining factor and, that too, on the basis of a formula which had died its natural death rather sounds ridiculous.
(vi)The authorities concerned not only exhibited high-handedness in working out production in a hypothetical and illegal manner but also most unreasonably saddled the appellants with additional duty and crippling penalties of 200% which speaks volumes about the way the Trade and Industry is being treated by the "All powerful Bureaucracy" in our beloved Pakistan.
17.The Departmental Representative strongly refutes the stand adopted by the appellants and submits that instead of tendering any plausible and convincing explanation for nose-dive fall in their production after the levy of excise duty in the budget of 1994-95, the appellants have merely tried to play with words and adopted an un-reasonable and illogical attitude which has made their position further dubious in the eye of law. His contention is that as the appellants had grossly understated and suppressed their production in the period under dispute and the application of pragmatically worked out criterion laid down in the rescinded Sales Tax notification of 2nd March, 1992 leaves them totally exposed, they are hell-bent to create fuss and do not even want its mention. Interesting to note that the appellants had been paying sales tax on the basis of the input-output ratios laid down in the aforesaid notification of 2nd March, 1992 and then excise duty on the basis of the revised input-output ratios, contained in notification dated 14.6.1995, determining factor in which again is nothing but the consumption of electricity units. However, when it comes to the intervening period when things were left purely to the appellants, they start raising hue and cry the moment reference is made to any criterion such as consumption of electricity which can enable one to determine actual production and work out liabilities accordingly. This twisted logic of the appellants is not comprehensible and the obvious conclusion is that they never missed an opportunity to grab what was otherwise due to the national exchequer. The Departmental Representative maintains that as the appellants had flouted the law of the land in a wild manner and done everything possible to deprive the national exchequer of its legitimate share, the Adjudicating Officer was fully justified in determining the evaded amounts of duty by invoking the provisions of Rule 226(2) read with Rule 53 BB of the Central Excise Rules, 1944 and imposing penalties etc. His request is that the orders already passed in the matter be confirmed so that the tax-evaders think many times before going for such ventures in future.
18. We have examined the case-records very carefully, given due consideration to the diametrically opposite stands of both sides and studied the relevant provisions of law and rules etc. The least we can say is that the stand of the appellants in this case is simple horrible and so is the extent to which they have gone in depriving the national exchequer of its legitimate share of revenue. They speak volumes about such and such notification having been rescinded' but say nothing as to why the recorded production was 15.400 M.tons and not 229.429 M.tons when the consumption of electricity as per WAPDA records was 321200 units (reference the case of M/s. Lucky Steel, Lahore). This phenomenon was not confined to M/s. Lucky Steel alone but was witnessed in the case of each and every appellant without .exception. The issue at stake is the deplorably low level of production reflected in official records and not the applicability or otherwise of notification of March 1992. As the appellants had, as a class, indulged in the evasion of excise duty in an unbridled manner, some pragmatic and reasonable criterion had to be adopted to determine the magnitude of production and the extent to which the interest of the State had been jeopardised. We feel convinced that, in such a situation, the only sensible way was to determine production on the basis of the formula which had previously been mutually agreed and acted upon for a considerable period of time when steel ingots/billets were chargeable to sales tax. To say that this action was illegal or that the criterion of linking production with electricity consumption was factually impracticable is making mockery of the State interest and attempting to justify deplorably depressed production figures for which there can hardly be any tangible explanation.
19. During the course of hearing it was suggested by one representative of the appellants that production should actually have been worked out on the basis of 1795 units of electricity and not 1400 as the figure of 1795 units had remained in vogue throughout and not otherwise. We have checked up the actual position and feel that the production should have been computed by taking the figure of 1795 units of electricity. We now .order it to be done accordingly in every case under appeal.
20. Another point raised pertains to additional duty and the imposition of penalty of twice the amount of duty involved. The plea of the appellants is that both these charges are un-warranted besides being illegal and extremely harsh. As the appellants had knowingly and wilfully indulged in the evasion of excise duty, it is mandatory that they pay additional duty as well as penalties which would be computed afresh in each case on the basis of the revised production which is to be worked out by taking 1795 units of electricity consumption as the criterion for the said purpose.
21.Up-shot of the aforesaid discussion is that:--
(a) The appellants did indulge in large scale evasion of duty which, if not detected, would have caused colossal loss of revenue to the national exchequer, running into crones of rupees.
(b)The authorities concerned were fully justified in quantifying actual production on the basis of the criterion of electricity consumption previously followed vide notification No, SRO 148(1)/92 dated 2.3.1992. However, in this respect, the actual production and the resultant duty, additional duty be calculated afresh by adopting the figure of 1795 units of electricity instead of 1400 units contained in the impuged order.
(c)As the production and excise duty figures in each case would get slashed, the penalty too is to be recomputed keeping in mind the basis that it is to be twice the amount of excise duty so arrived at.
(d)The officers of Excise who un-earthed this fraud deserve full appreciation and recognition. We can only wish and pray that all concerned start paying their due to the exchequer willingly and avoid jeopardising State interest as has been so blatantly done in the instant case.
22.As the liabilities have now finally been determined at the level of the Tribunal, the authorities of the Collectorate of Excise, Lahore and all others who are directly or indirectly concerned with the matter must enforce demands, realize the dues promptly so that the national exchequer is not un- necessarily kept deprived.
23.The appeals are disposed of as above.