MR. S.M. KAZIMI, MEMBER (TECHNICAL).-(1). This judgment disposes of the appeal filed by M/s. United Industries Ltd., Faisalabad, against the Central Excise/Sales Tax Order-in-Original No. 3 to 4/2001-FSD, dated 16.03.2001 passed by the Collector (Adjudication), Faisalabad. This judgment shall also disposes of the following 44 appeal cases which are identical in facts and on law, except for the amounts involved:- Appeal No. Appellants Name Order appealed againstTaxes adjudged and penalty imposed C.E. Duty C.E.
PenaltySales Tax S.T.
Penalty 914/LB/2001 United Industries Ltd. 3-4/2001 16929000 25000 2473583 -- 36/LB/01 M/s. Mahboob Industries Ltd.41-50/2000 5613959 11227918 -- -- 34/LB/01 -do- 41-50/2000 335556 671112 233866 70160 941/LB/01 -do- 60/2001 490591 981182 72589 22077 942/LB/01 -do- 59/2201 2196917 4393834 407580 122274 941/LB/01 Kasur Ghee Mills Ltd. 99/2001 705774 1411948 105896 31769 1900/LB/01 -do- 3066/ST/01 -- -- 274605 5000 2299/LB/01 -do- 107/2001 321906 643804 48285 14485 1295/LB/01 -do- 65/2000 1830695 3661390 -- -- 1235/LB/01 Shaukat Soap & Ghee Inds.45/2001 603354 1206708 -- -- 109/LB/01 Sadiq V egetable Ghee Mills41-50/2000 1408350 2816700 596024 178807 110/LB/01 -do- -do- 6468281 12936562 -- -- 733/LB/01 -do- 44/2001 507665 1015330 163722 49117 940/LB/01 -do- 57/2001 817184 1634368 263542 79063 38/LB/01 Hamza V eg. Oil & Ghee Mills41-50/2000 5677044 11354088 851556 255467 939/LB/01 -do- 52/2001 1157600 2315200 373326 111998 2266/LB/01 Hunza Ghee Industries 3065/ST/01 -- -- 164463 5000 253/LB/01 -do- 06/2001 513382 1026764 -- -- 2343/LB/01 -do- 106/2001 420500 841000 63075 18922 2344/LB/01 -do- 101/2001 696000 1392000 104399 31319 214/LB/01 -do- 41-50/2001 1096104 2192208 -- -- 264/LB/01 Ghazi Ghee Mills -do- 251400 502800 -- -- 429/LB/01 -do- 2-4/2001 154457 308914 23169 6951 2523/LB/01 -do- 108/2001 191270 382540 28690 8607 732/LB/01 Muridke Oil Mills 32/2000 631870 1263740 203778 61133 37/LB/01 -do- 41-50/2001 1845634 3691268 276845 33053 1294/LB/01 -do- 71/2000 290169 580338 43525 13058 731/LB/01 Madni Ghee Mills 325/2001 5071438 25000 739737 -- 35/LB/01 Tahir Oil & Ghee Mills 41-50/2000 556874 1113748 960607 288182 679/LB/01 -do- 34/2001 750065 1500130 279194 83758 614/LB/01 -do- 26/2001 250294 500588 80720 24210 215/LB/01 Batala Ghee Mills 41-50/2001 510545 1021090 76582 22975 337/LB/01 -do- 53-60/01 456930 913860 2186844 656053 186/LB/01 Salva Oil & Ghee Inds 2-4/2001 532039 1064078 79806 23942 2219/LB/01 Hameeda Ghee Inds. 100/2001 692034 1384068 1481 15 44434 608/LB/01 Madina Ghee Mills 1-2/2001 7100531 25000 2429137 -- 713/LB/01 Malik Ghee & C. Oil Mills 1-2/2001 7100531 25000 2429137 -- 1058/LB/01 Nawaz Ghee Mills 02/2001 730162 25000 100531 -- 929/LB/01 Morning Enterprises 47/2001 171161 342322 55499 16560 428/LB/01 Mustafa Food Inds, 2-4/2001 154457 308914 23169 6951 959/LB/01 Rohi Ghee Inds 491/2001 535834 25000 -- -- 851/LB/01 Aysha Ghee & Oil Mills 53/2001 300609 601218 45091 13527 1371/LB/01 Yaser Food Industries 58/2001 176375 352750 26456 7937
2. Briefly, the facts are that the appellants are manufacturers of vegetable ghee (a vegetable product) and used metal containers for packing of such ghee in a marketable condition.
Notification No. S.R.O. 455(I)/96, dated 13-6-1996 prescribed the following conditional exemption/concession of central excise duty on vegetable products and vegetable oil and on the metal containers used for packing of kerosene, vegetable products and vegetable non-essential oils;- Description of Goods and ServicesHeading/ sub-heading numberConditions Rate of duty
(1) (2) (3) (4)
"Vegetable non- essential edible oils (with melting or cloud point of 10 degree centigrade or above) and vegetable products.
"Metal containersRespective headings of Chapter 15 Respective headings of Chapters 73 and 76.If not manufactured out of such vegetable non- essential oils as are produced locally in Pakistan or as are subjected to customs .duties on importation:-
(a) packing containing not more than 2.5 Kgs. One rupee and sixteen paisa per Kg.
(b) packing containing more than 2.5 Kgs. but not more than 5 Kgs. One rupee and twenty five paisa per Kg.
(c) packing containing more than 5 Kgs. One rupee and thirty paisa per Kg.";
(ii) If manufactured by the manufacturer of kerosene, vegetable product and edible oil for packing within the same Five per cent ad val. factory , of kerosene, vegetable products and edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degree centigrade;
(iii) If used for packing kerosene. Five per cent vegetable products and edible ad ml." oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degree centigrade, provided that the provisions of Chapter X of the Central Excise Rules, 1944, are followed.
One rupee and sixteen paisa per Kg.
One rupee and twenty five paisa per Kg.
One rupee and thirty paisa per Kg Five percent ad val.
Five percent ad val.
3. Since the appellants product (vegetable ghee) had its melting point as above 10 degrees centigrade, the appellant were found be availing of the central excise duty concession (concessionery rate of 5%) instead of the leviable rate of 15% on metal containers in breach of the condition as specified in S.R.O. 455(I)/96, dated 13-6-1996 which caused short payment of the central excise duty to the tune of 10% (difference between 15% and 5%) and also of the sales tax on that element/amount of short-paid duty, the sales tax being assessable and payable on the duty paid-value. Accordingly show cause notices were issued for recovery of the specified amounts of central excise duty and additional duty (as may be due) under rule 10 of the Central Excise Rules, 1944, and also for the recovery of the specified amounts of sales tax and additional tax (as may be due) under sections 34 and 36 of the Sales Tax Act, 1990, and for penal action under rule 210 of the Central Excise Rules, 1944, and section 33 of the Sales Tax Act, 1990. Vide the impugned orders, the adjudicating officer held that the charges were established and that the specified amounts of central excise duty and sales tax alongwith the additional duty and additional tax (as may be due on calculation with reference to the date of payment), were payable by the Ghee mills and he also imposed penalties as mentioned in paragraph 1 above. Hence these appeals.
4. The learned Counsels for the appellants have argued that the condition of cloud point and melting point applies to vegetable non-essential oils only and its packing containers. They highlighted that this conditional concession on the containers is relatable to the conditional concession on vegetable products (irrespective of cloud point or melting point) and vegetable non- essential oils.(with the condition of cloud point or melting) as specified in the said notification No. S.R.O. 455(I)/96, dated 13.06.1996, kerosene being un-conditionally exempt under S. R.O.
456(I)/96, dated 13-6-1996. They stressed that these 3 items are sensitive essential commodities from consumers' point of view and that is why the packing containers thereof were subjected to concessional rate of excise duty to maintain the market prices of these items. They also stressed that had the Government intended otherwise, they would not have corrected this instance in the budget 2000-01. They invited attention to paragraph 5 titled "CORRECTIONS IN S.R.O. 455(I)/96", of C.B.R. Budget Day Instructions contained in C. No. 1(1)CEB/2001, dated 18.06.2001, sub-paragraph (b) of paragraph 5 of which states that:- "(B) METAL CONTAINERS USED FOR PACKING OF VEGETABLE GHEE/COOKING OIL:~ Cooking oil and ghee manufacturers are paying central excise duty on metal containers for packing of vegetable product/ edible oil or mixture thereof on concessionary rate of duty' @5 % ad val. The concessionary rate of duty is applicable to metal containers used for vegetable products and edible oil packing having-melting and cloud point below 10C whereas the actual melting point of ghee is 36C (2C) instead of 10C. Necessary change has been made in SR0.455(I)/96 so as to grant concession of duty to metal containers used for packing of vegetable ghee/edible oil having cloud point below 10 and melting point between 34 to 38C."
5. The learned Counsel stated that it is unfair to raise this issue after 4 years. They argued that facility under Chapter X of the Central Excise Rules, 1944, are supervised by the Central Excise Officer and had they raised this objection in 1996, the ghee manufacturers would have increased prices of vegetable ghee in proportion to the extra levy (difference between 5 % and 15% and consequent sales tax thereon) and passed on the incidence to the consumers. They concluded that notwithstanding the merits of their case, the most major portion of the demand (relating to the period prior to the one year preceding the date of respective S.C.N.) is even otherwise time- barred under rule 10(1) of the Central Excise Rules, 1944. They also argued that no ghee mill in Pakistan paid central excise duty on containers @ 15% ad ml. During the relevant period. They further argued that even otherwise, this case is fit for waiver of demand under section 12-B of the Central Excises Act, 1944 and under section 65 of the Sales Tax Act, 1990. They concluded that the impugned order may be set aside being inconsistent with the intent and proposes of the conditional exemption/concession under S.R.O. 455(I)/96, dated 13.06.1996, now clarified under Board's C. No. 1(1)CEB/2001, dated 18.06.2001.
6. The learned D.R. Opposed the appeal on the ground that the issue does not involve interpretation of fiscal/taxing status but rather involves interpretation of exemptions/concessions in tax and that it is the cardinal principle that exemption notifications should be interpreted as these are worded and the scope of exemption/concession should not be expanded by implication through interpretations. He argued that since their vegetable ghee, admittedly has melting point above 10 degrees centigrade, the metal containers used or its packing will not enjoy the concessions of S.R.O. 455(I)/96, dated 13.06.1996. He also- argued that since there is no exemption notification from the appropriate authority under section 12-B of the Central Excises Act, 1944, or under section 65 of the Sales Tax Act, 1990, the claim of exemption under the said provisions is not lawful. In reply to a query whether the D.R. Or the Collectorate can bring a clarification from the Revenue Division/Central Board of Revenue about the intention of the conditional exemption on metal containers for packing of vegetable ghee having melting point above 10 degrees centigrade when no vegetable ghee can have melting point below 30 degrees centigrade in the atmosphere condition as in Pakistan, they showed their unwillingness to do so and stated that such a clarification could be obtained by the appellants as the DR-/Collectorate are of the view that in the presence of the S.R.O. 455(I)/96, as it is worded, no further clarification was necessary from any one. They prayed that the appeals may be dismissed as the appellants' prayer is not covered by the letter of exemption/concession under S.R.O. 455(I)/96, dated 13.06.1996.
7. Having heard the parties and on perusal of the records, we find at the outset that the case basically involves the issue of central excise duty rate which is a matter under the Central Excises Act, 1944, and the rules made thereunder. The issue of sales tax is Only consequential in nature because sales tax is on the duty-paid value. Therefore, imposition of penalty under section 33 of the Sales Tax Act, 1990, is neither proper nor lawful as there was no violation of the provisions of the Sales Tax Act, 1990. The payment or otherwise of the sales tax that allegedly escaped assessment will entirely depend on the determination of the rate of central excise duty applicable in these cases. We also accept the D.R's view that this Appellate Tribunal is not the proper forum to discuss the admissibility of the benefit C of section 12-B of the Central Excises Act, 1944, and/or of section 65 of-the Sales Tax Act, 1990.
8. The history shows that excise duty at 5 % ad val. Was first imposed on such containers through S.R.O. 476(I)/95, dated 14.06.1995 which amended S.R.O. 545(I)/94, dated 09.06.1994 and read as follows:- "Vegetable non- essential edible oils (with melting or cloud point of 10 degree centigrade or above) and vegetable products "Metal Containers.Respective headings of Chapter 15. If not manufactured out of such non- essential oils as are produced in Pakistan or as are subjected to customs duties, 'on importation provided if packed in containers on which retail price and quantity are legibly , prominently and indelibly printed:- (a) Packing containing not more than 2.5 Kgs. One rupee sixteen paisa per Kg-
(b) Packing confining more than 2.5 Kgs but not more than 5 Kgs.
One rupee and twenty five paisa per Kg.
(c) Packing containing- more than '
5 Kgs. One rupee thirty four paisa per Kg."
(i) If manufactured by the manufacturer of kerosene and vegetable product for packing One rupee and sixteen paisa per Kg.
One rupee and twenty five paisa per Kg.
One rupee and thirty paisa per Kg 5% ad val.
Respective headingskerosene or vegetable product within the factory;
(ii) If used for packing kerosene and vegetable product, provided that the provisions of Chapter X of the Central Excise Rules, 1944, are followed;
(iii) If manufactured by the manufacturers of edible oil for packing of edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degrees centigrade;
(iv) If used for packing of edible oil of vegetable origin or mixtures thereof having melting or cloud point below 10 degrees centigrade; provided that , the provisions of Chapter X of the Central Excise Rules, 1944, are followed.
5% ad val.
5% ad val.
5% ad val.
9. Paragraph 10 of budget day instructions issued by the C.B.R, vide its C. No. 1(5) C.E.Bud/95, dated 14.06.1995 relating to the Central Excise Budget 1995-96, explained that the composite regime of central excise duty and sales tax on cen in goods have been altered which also include that the said composite regime of taxation on locally-manufactured (a) metal containers of heading 7310.000-for making of kerosene, ghee vegetable oil and vegetable product, which would now be 5% central excise duty + 10% sales tax instead of Nil central excise duty and 15% sales tax, and (b) for other .Metal containers of heading 7310.0000, it will be 15% central excise duty + 10% Sales Tax instead of 10% central excise duty + 15% sales tax. This shows that levy of central excise duty was increased by 5 % in sympathy with reduction in sales tax -by 5 % and that there was no other change in substance or in condition.
10. While substituting S.R.O. 545(I)/94, dated 09.06.1994, with the S.R.O. 455(I)/96, dated 13.06.1996, the Federal Government merged the provisions of concessions on metal containers for packing of vegetable products and kerosene (which did not have reference to cloud point or melting point) with those for packing of vegetable non-essential oils (which had reference to cloud point or melting point) but, in doing so, they worded It in a manner that the said melting point or cloud point also became relatable to vegetable product and kerosene. However, the budget duty instructions for 1996-97 issued by C.B.R, under its C. No. 1(II)CEB/96, dated 13.06.1996 explaining the budgetary changes of the Budget 1996-97 did not mention any change in duty rate on packing material (metal containers) of vegetable products or its new linkage to cloud point. Consequently the metal containers continued to be assessed to excise duty at 5% ad val. Even when the issue was brought to C.B.R's knowledge, the C.B.R, vide its C. No. 1(3)CEB/99, dated 23.04.1999 addressed to all collectorates stated that:- Sub:- EXCISE DUTY AND RESULTANT SALES TAX ON TIN CONTAINERS USED AS PACKING OF VEGETABLE GHEE ABOVE 10C CLOUD POINT/MELTING POINT.
"This is to advise that the subject issue is under consideration of the Board, in the wake of reports/ representation from various quarters. Pending the study of the matter by the CBR and decision thereon, the Collectorates are advised to maintain status quo and allow clearances as per past practice".
11. It is very important to note that C.B.R, advised the Collectorates to maintain status quo and to allow clearances as per past practice i. e. Assessment of these containers at 5 % ad val. Even later, when the C.B.R./Federal Government resolved this issue through the Budget 2000-01, they (the para 5(b) of their budget day instructions C. No. 1/l-CEB/2001, dated 18.06.2001) listed it under the heading "CORRECTIONS IN S.R.O. 455(I)/96", admitted that these containers paid excise duty at 5% ad val. In the past and legislated to continue that concession of excise duty assessment at 5% for the future. This makes the intention of concession un-ambiguously clear. On this issue, the learned D.R. Had argued that C.B.R's letter is not a legal instrument and the budget day instructions always say at the end that "the instructions contained in the letter are illustrative in nature and are not exhaustive". We agree that both the budget instructions have this sentence. But illustrations which are specific in nature have to be treated as such. Moreover, the C.B.R, also directs in all such budget day instructions that "in case of any doubt or lack of clarity, necessary clarification/ instruction may be sought from C.B.R, immediately". The Collectorate does not appear to have sought such a clarification from C.B.R, whether after the 1995-96 budget or after the 1996- 97 budget or after the 2000-01 budget and is rather creating undue liabilities without reading the specific instructions/ illustrations in the said 3 budget day instructions. Even now, the .D.R. And representative from the Collectorate are not prepared to seek clarification from C.B.R, which shows the weakness in their cases.
12. For the reasons given above, coupled with the reason that vegetable ghee\ cannot have melting point below 10 degrees centigrade, we would hold that it was never intended to legislate impracticabilities or impossibilities by linking melting point of below 10 degree centigrade in case of vegetable ghee. Thus, there was no levy of excise duty at 15% on metal containers used for packing of vegetable ghee during the period from 13.06.1996 to 18.06.2001. This intention is also manifest from the C.B.R's letter C. No. 1(3)CEB/99, dated 23.04.1999 and C. No. 1(1)CEB/2001, dated 18.06.2001.
Therefore, the appellants contention is accepted and the impugned orders are set aside to the extent that the assessm ent and payment of central excise at 5% ad val. On the metal containers use for packing of vegetable products (vegetable ghee, in these cases) during the period from 13.06.1996 to 18.06.2001 was correct irrespective of the language of the notification.