JUDGMENT: MR. S.M. KAZIMI, MEMBER (TECHNICAL).-(l). This judgment disposes of the appeal filed by M/s. Paramount Paperboard (Pvt.) Ltd., Hattar, against Order-in-Original No. 57/2001 dated 09.05.2001 (despatched on 11.05.2001) passed by the Collector (Adjudication), Rawalpindi, having Camp Office at Peshawar.
2. Briefly, the facts of the case are that the officers of the Directorate General of Intelligence and Investigations (Customs, Excise & Sales Tax), Haripur, reported that during the period from January, 1998 to October, 2000, M/s. Paramount Paperboard (Pvt.) Ltd., Hattar, had been clearing their excisable product i.e. 8,933,493 Kgs of Box Board, Liner Board, etc., at a lower assessable value (i.e. Ex-factory price) by not including the element of incidental charges (i.e. Charges on account of transportation, octroi, loading, etc.) in value of the goods paying duty in terms of the provisions of section 4(1) of the Central Excises Act, 1944. This had also been confirmed by the mill attorney in his statement dated 13.12.2000 and it was attributed that the said incidental charges were paid by the buyers. The non-inclusion of the said incidental charges (calculated at Re. 1/- per Kg from 01/98 to 06/99 and Re. 0.75 per Kg from 07/99 to 10/2000) in the assessable value (ex-factory price) which paid duty and sales tax caused short-payment of Rs. 384,953/- as central excise duty and of Rs.
1,212,605/- as sales tax and breach of the provisions of sections 3, 3-B and 4(1) of the Central Excises Act, 1944, and rales 7, 9 & 10 of the Central Excise Rules, 1944 read with SRO 456(I)/96 dated 13.06.1996 punishable under rale 210 of the Central Excise Rules, 1944 and also of sections 3, 6, 7, 11, 34 and 36 of the Sales Tax Act, 1990, punishable under section 33 thereof. The leamed Collector(Adjudication) issued a notice C. No. ST (Adj )C/24/2001/389 dated 24.02.2001 requiring M/s. Paramount Paperboard (Pvt.) Ltd., to show cause why the aforesaid amounts of duty and sales tax, short-paid, should not be recovered and also why penal actions as aforesaid shouldn't be taken against them. After hearing Mr. Mubarak Ahmad Qureshi, Advocate, on behalf of M/s. Paramount Paperboard (Pvt.) Ltd. And Mr. Arif Hussain, I.O., on behalf of the detecting agency, the leamed Collector (Adjudication) passed the impugned order holding that the short-paid amounts of Rs. 384,953/- of central excise duty, alongwith additional duty leviable thereon under section 3-B of the Central Excises Act, 1944, and of Rs. 1,212,605/- of sales tax, alongwith the additional tax leviable thereon under section 34 of the Sales Tax Act, 1990, were payable by M/s. Paramount Paperboard (Pvt.) Ltd., Hattar. He also imposed penalty equivalent to 3% of the Sales Tax involved under section 33 of the Sales Tax Act, 1990. Hence this appeal.
3. During the course of hearing before us, the leamed counsel for the appellant furnished a statement, gate-pass wise, showing the names of persons to whom their goods were consigned during the period from 01/98 to 10/2000 and argued that all these supplies were made directly to industrial consumers and packing companies and were not consigned to the wholesale market. He stated that the appellant sold the goods on ex-factory price and the buyers paid the incidental charges {e.g. Those on transportation, octroi, loading or un-loading). He further argued that under section 4(1) of the Central Excises Act, 1944, ex-factory price is to be deemed to be the wholesale cash price when goods are supplied to various industrial consumers without receiving any amount on account of such incidental charges. He also invited attention to paragraphs 5, 6 and 8 of the C.E.G.O. No. 53/67 and stated that there is no middleman in these transactions and also no amount has been charged to the buyers on account of transport, octroi, etc. He cited Tribunal, Peshawar Bench's Judgment dated 03.01.2002 in Appeal Case No. 52/2000 in Pepsi Cola case and the Lahore Bench's Judgment dated 31.01.2001 in Appeal No. 651/LB/1999 (Coca Cola Case). He also cited the judgment in Pakistan Versus Popular Tobacco Co., Karachi (PLD 1961 S.C. 66) where the Honourable Supreme Court had held that "the intention of the law is that excise duty should be paid by the manufacturers on the amount which they actually receive and it is on such amount that excise duty was being originally levied." He also cited the judgment dated 31.01.2001 passed by the Honourable Supreme Court of Pakistan in C.A. No. 1512/99, etc., holding that "admittedly, the retail price is to be fixed by the manufacturer but while fixing such prices he has to include all charges and taxes incurred and payable by the manufacturer. It is only the charges incurred by the manufacturer/producer and the tax payable by him which are to be taken into account while fixing retail price of the goods.". He, therefore, prayed that the impugned order demanding central excise duty on the elements of incidental charges (e.g. Transportation, octroi, loading/unloading, etc.) may be set aside. As regards sales tax, the leamed counsel invited attention to the provisions of section 2(46) of the Sales Tax Act, 1990, which defines "value of supply" to be the value actually transacted, charged and received. He stated that even otherwise, they had remained exempt from sales tax for a period upto 31.07.1999 in terms of notification No. SRO 561(I)/94 dated 09.06.1994. He prayed that their appeal may be accepted and the impugned order may be set aside.
4. The leamed Departmental Representative, Law Officer of the Collectorate and representatives from the Detecting Agency stated that they do not dispute the consignees' names and addresses as given in the respective gate passes. However, the appellant's, themselves, admit that the goods sold/supplied by them were assessed at the ex-factory prices and did not include the elements of incidental charges (e.g. Transportation charges, octroi, loading/unloading charges, etc.) on the plea that such charges, though incurred, were incurred and paid directly by the buyers and not by the appellants. They stated that this is in breach of the provisions of section 4(1) of the Central Excises Act, 1944, which provides for an equalized notional assessable price in a manner that all charges (including those on transportation, octroi, loading/unloading but not including elements of central excise duty and sales tax thereon) are included and reflected in such an assessable value.
They also cited the Honourable Supreme Court of Pakistan's judgment in Pakistan Versus Kohat Cement Company & Others (PTCL 1995 CL 366) where the issue of assessable value under section 4(1) of the Central Excises Act, 1944, has been decide by the apex Court. As regards sales tax and appellant's claim of exemption under SRO 561(I)/94 dated 09.06.1994 on their supplies upto 31.07.1999, they stated that this claim is disputed by the Department and is a subject matter independent of this appeal case involving valuation aspect only. They prayed that the appeal has no merit and may be rejected accordingly.
5. Having heard the parties and on perusal of record of the case, we find that before we decide this case, it shall be appropriate to reproduce the provisions of section 4(1) of the Central Excises Act, 1944, and paragraphs 5, 6 and 8 of the CBR's C.E.G.O. No. 53/67 and also section 2(46)(a) of the Sales Tax Act, 1990, which read as hereunder:- I. SECTION 4(1) OF THE CENTRAL EXCISES ACT, 1944:- "4. Determination of value for the purposes of duty.-(1) where under this Act any article is chargeable with duty at a rate dependent on the value of the articles, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders (or, if there is no general body of retail traders, the general body of consumers) on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable.".
II. CBR'SC.E.G.O. No. 53/67 DATED 29.09.1967.
5. In this context it should be carefully noted that section 4 provides for the wholesale cash price at which goods "are capable of being sold". If the manufacturer himself sells part of his product to some retail traders and the rest of his product is sold to retail traders through middlemen, like distributors, sub-distributors and/or wholesale traders, then the prevalent price at which such middlemen sell the product to the retail traders should be reckoned as the wholesale cash price for the purpose'of section 4.
6. The requirement of "capable of being sold" can be considered as satisfied if the wholesale cash price for the general body of retail traders is periodically advertised in Newspapers, Market Bulletins or Trade Journals. The advertisement should clearly indicate that the advertised prices are wholesale cash prices for sale to the general body of the retail traders. Any advertisement referring to ex-mill or ex-factory prices should be ignored, as such prices are not relevant to section 4. The advertisement of wholesale cash prices for sale to the general body of retail traders should be issued at least once in every two months, or whenever the prices are charged.
8. It should also be noted that section 4 provides for deduction of only the amounts of Excise duty and Sales-Tax (including Defence Surcharge and Rehabilitation tax) from the wholesale cash price for determination of the assessable value. The assessment value, therefore, is to include all charges upto the stage of sale to the general body of retail traders, whether the wholesale cash price is an equalized price, or whether the wholesale cash price of the nearest wholesale market is taken into account for determining the assessable value. In other words, if in addition to the advertised price, or otherwise declared price, certain amounts are being charged to the retail traders on account of transport, octroi, etc., all such amounts should be included in the first for the purpose of section 4.
III SECTION 2(46)(a) OF THE SALES TAX ACT, 1990:- "2.(46) "value of supply" means-
(a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax.".
6. The provisions of section 4(1) of the Central Excises Act, 1944, show that it is based on the notional concept of equalized wholesale cash price at which an article of like kind and quality is sold is or is capable of being sold to the general body of retail traders or the general body of consumers if there does not exist any general body of retail traders. The words "wholesale cash price" and the words "articles of like kind and quality" and the words "capable of being sold" and also the words "without any abatement or deduction except the amounts of duty and sales tax" are very important directions for the determination of the notional assessable price under section 4(1) of the Central Excises Act, 1944. By making it "wholesale cash price", it excludes cash discounts and it includes all expenses, even post-clearance or ex- factory, upto the wholesale stage or the wholesale market. If there is no wholesale market, it shall further extend to the consumer's stage or the consumers market. Likewise, "articles or like kind and quality" will not only mean identical goods but shall also include similar goods of that kind and quality e.g. In this case, the Boxboard and Liner Board manufactured by other manufacturers and sold to the general body of the retailers in the wholesaler's market or to the general body of consumers in the retailers' market shall also constitute basis for determination of the value under section 4(1). The words "capable of being sold" bring the notional equalized concept of assessable value in disregard of the transaction price.
Again, the words "without any abatement or deduction except the amounts of duty and sales tax" clearly mean that the charges (e.g. On account of loading, transportation, octroi, unloading, and duties and taxes other than central excise duty and sales tax) incurred or to be incurred post ex- factory upto the stage of wholesale market (or the consumers stage/market, if there is no wholesale market for such products) shall be included in the assessable value under section 4(1) irrespective of the fact as to whether these are borne by the buyers or by the sellers. In other words, the notional concept of assessm ent value under section 4(1) of the Central Excises Act, 1944, implies the general wholesale price, as if it was transacted as on-the-spot cash, where the seller's price ought to include all costs, duties, taxes and charges upto the wholesale market (or upto the consumers stage if there is no such wholesale cash market) except the amounts of central excise duty and sales tax involved. CBR's CEGO No. 53/67 dated 29.09.1967 is an administrative instruction and has to be read as being subordinate to the dictates of section 4(1) of the Central Excises Act, 1944. Appellant's products are not specialized tailor-made products. Such Box Board and Liner Board are freely available in any wholesale market of such products. Appellant's option to restrict their supplies only to the industrial/commercial consumers does not mean that these products do not have any wholesale market. Moreover, the appellants have not shown any document that they advertised the wholesale cash price of their products, in terms of paragraph 6 of CEGO No. 53/67, if they transacted directly with the consumers without any middleman or actual wholesale market operations/transaction. However, even such a situation will not negate the provisions of section 4(1) of the 1944- Act and will not entitle the appellant to avail of the concession of assessment on the basis of ex-factory value. The assessment has to be made on the basis of the notional value calculated by adding post-clearance incidental charges to the ex-factory price. As regards the Tribunal's judgments dated 03.01.2002 in Appeal Case No. 52/2000 and dated 31.01.2001 in Appeal Case No. 651/LB/99, those cases relate to Coca-Cola concentrates and Pepsi Cola concentrates which are strictly and essentially transacted between the concentrate manufacturers and their selected few franchise holders. Those are not the value at arms length and/or between buyers and sellers independent of each other. The goods (concentrates) are sold under specific franchise agreements, containing various peculiar conditions and limitations, concluded between the concentrate manufacturers and the bottlers. Those cases are not comparable with the appellant's case which is a general commodity abundantly available in its wholesale market for the prospective buyers. As regards the Honourable Supreme. Court of Pakistan's decision in PLD 1961 SC 66, as cited by the appellant, the case related to a period when the provisions of the then Section 4 were quite different from the provisions of section 4(1), as involved in the appellant's case. The leamed Justice B.Z. Kaikaus, in the first paragraph of that judgment, has reproduced the then section 4 as "where under this Act any article is chargeable with duty at a rate dependent on the value of the articles, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold for delivery at the place of manufacture and at the time of its removal therefrom, without any abatement or deduction whatever except trade discount and the amount of duty then payable.". The aforesaid provisions of the then section 4 are relatable to the stage of sale/transaction "fop delivery at the place of manufacture and at the time of its removal therefrom" and this crucial stage or determinant does not find mention in the existing provisions of section 4(1), as applicable to the appellant's case and cited in paragraph 5 above. The said specific distinctions between the then provisions of section 4 and the existing provisions of section 4(1) are, by themselves, exponent of the legislative intent that the assessable value which was previously upto the stage of sale for delivery at the place of manufacture is now, under the existing provisions of section 4(1) of the Act, to be calculated as inclusive of the charges, post-clearance or post-delivery ex-factory, upto the wholesale market or upto the consumers stage if there is no wholesale market of goods of like kind and quality. The Honourable Supreme Court of Pakistan's Judgment dated 31.01.2001 in C.A. No. 1512/99 & others is also not relevant to the appellant's case as the said judgment deals with situations under section 4(2) of the Central Excises Act, 1944, while the appellant's case is confined to the provisions of section 4(1) thereof and the said 2 provisions are independent of one another. Reference to the Honourable Supreme Court of Pakistan Judgment dated 12.04.1995 in Civil Appeal No. 97/93 Pakistan Versus Kohat Cement Co. & Others (PTCL 1995 CL 366) is relevant to this case where it is held that octroi and transportation charges beyond the factory premises upto the nearest wholesale market are to be included for computation of wholesale cash price, whether or not borne by the manufacturer. The said judgment while allowing the Government's appeal held that "the amendments made in section 4(1) clearly signify an intention on the part of the Legislature to include the element of post-manufacture charges for the purpose of computation of wholesale cash price, barring only what has been expressly provided for by the legislation itself, notwithstanding the fact that by some understanding between the manufacturer of articles and their retail traders octroi or transportation and any other such charges are to be borne by the latter. Therefore, even if the contention raised on behalf of respondent No. 1 that the octroi or transportation charges were not borne by it but the same were borne by its stockists is believed, the same would be of little consequence to it. Consequently, we are of the opinion that the view taken by the leamed Judges of the High Court is not correct as octroi and transportation charges could be included by the respondent No. 3 while determining wholesale cash price of cement manufactured by respondent No. 1 since the same was permissible under section 4(1) of the Central Excises and Salt Act, 1944.". Accordingly, we have no hesitation in confirming the impugned order to the extent that central excise duty is payable by the appellant on the elements of post- clearance incidental charges (on account of loading, transportation, octroi, unloading, etc.) incurred or liable to be incurred ex-factory and these should be included in the assessable value under section 4(1) of the Central Excises Act, 1944. As regards demand for sales tax on such elements of incidental charges, this is to be looked into from the angle of the provisions of section 2(46) of the Sales Tax Act, 1990, which levies sales tax on supplies made under section 3. As compared to the notional concept of assessable value for central excise purposes under section 4(1) of the Central Excises Act, 1944, we find that section 2(46) of the Sales Tax Act, 1990, provides for the duty-paid transaction concept of value by stating that it means "the consideration in money, including all federal and provincial duties and taxes if any which the supplier receives from the recipient for that supply but excluding the amount of tax.". This distinction has to be borne by in mind by the department which is assessing the excise duty and sales tax simultaneously. In this case, we find that the department does not charge the appellant to have actually received or charged any charges on account of post-clearance transportation, octroi, etc. There is also no allegation of any fraud or wilful misdeclaration of value of supply. In fact there is no allegation that the value of supply (except for element of central excise duty on the aforesaid incidental charges) is not correct, whether factually or actually. Under these circumstances, we set-aside the impugned order to the extent of determination of sales tax on the element of charges for loading, unloading, transportation, octroi, etc. However, the appellant shall be liable to pay sales tax on the element of central excise duty being confirmed in this order under the formula that the duty-paid value of supply in this case (i.e. Assessable value for sales tax purpose) shall equal to the excise duty-free and sales tax-free transaction value in terms of section 2(46) of the Sales Tax Act, 1990 plus the central excise duty paid and payable under section 4(1) of the Central Excises Act, 1944.
This amount of consequential sales tax should be calculated accordingly and paid urgently in addition to the amount of central excise duty already demanded in the impugned order and confirmed by this judgment. As regards the penalty imposed under section 33 of the Sales Tax Act, 1990, in the impugned order, the same is remitted, as the element of sales tax determined by us as aforesaid, is only consequential in nature i.e. Consequent to the revision of the amount of central excise duty payable. As regards the amounts of additional tax, under section 3-B of the Central Excises Act, 1944 and section 34 of the Sales Tax Act, 1990, we direct that same shall stand remitted if the appellant pays the amounts of central excise duty and sales tax, as confirmed in this judgment by the 30th day of October, 2002, to the satisfaction of the Collector of Sales Tax & Central Excise, Peshawar. The impugned order is modified to the extent stated in this paragraph and the appeal stands disposed of accordingly.
7. Inform all concerned accordingly.
8. Announced.