2001 PLP (Trib (PTD)

Red Lead Litharge Lead, Tetraoxide Chemical name Lead Monoxide Orange Colour Yellow or red As pigment in paints Usage in manufacture of and in particular anti‑ storage batteries, corrosive paints. rubber and in manufacture of other pigments.

9. In view of our desire, the representative of respondent placed before us chemical reports of different laboratories from where samples of seized goods were tested and also copies of over 90 delivery orders recovered from seized vehicle depicting supplies to various buyers. We have carefully scrutinised these.

10. PCSIR Laboratory Report signed by Director‑General, dated 3‑8‑1991 without describing whether or not a test was undertaken states that 'lead oxide' is an oxide which is basically a chemical. It finds use both as chemical and a pigment. It has also been classified as a pigment in the colour indese as CI pigment yellow 46 bearing CI No. 77577.

11. HEJ Research Institute of Chemistry Report, dated 20‑1‑1991 confirmed zinc oxide and lead tetraoxide to be chemicals.

12. Customs house Chemical Laboratory report, dated 23‑3‑1990 found samples on test to be lead oxide in the form of bright red colour fine powder. Another earlier report from Customs Laboratory found it as Lead Oxide Red in the form of bright red colour fine powder classifiable under PCT heading 28.27.

13. We have also glanced through the delivery orders which except in one or two isolated cases depict sales to rubber industry or storage battery manufacturing industry in which manufacturers have been describing the product as litharge, red oxide or Red Lead in the same breath without realising that different descriptions could mean different things. However, regardless of this one primary characteristic is evident in chemical test of samples in Customs Laboratory Le found to be bright red colour fine powder. This is the chemical characteristic of lead Monoxide (Pbo) or in ether words litharge. What is chemically read lead is in fact is lead tetraoxide PbG) which is orange in colour.

14. In view of these chemical tests findings as well as usages we have come to the conclusion that lead oxide in this case had not reached such stage f manufacture through a chemical process of classification at a temperature of over 350 c based on which it could be categorised as pigment. Hence it fell outside the preview of item No.04.03 of the Central Excises and Salt Act 1st Schedule and thus, was not liable to Central Excise Duty sought to be imposed as a result of a ruling from C.B.R. In fact, Central Board of Revenue should have resisted the temptation of issuing a ruling at the point f time when it was issued and that too in a vacuum. Classification of goods 8 id in particular that of chemicals, their derivatives or preparations can only given on the basis of very clear determination of chemical attributes which possible only through chemical test and not on the basis of authority or wisdom.

15. After having conclusively settled the foremost question in this case r holding that Lead oxide seized in this case had not reached a stage of manufacture as could categorise it as pigment in which state alone it could come liable to excise duty, we take up another crucial question in this case which was agitated all along in, the proceedings and also before us after issue ruling by C.B.R. This question is whether all those officers who dealt with this case were able to apply their minds in the face of ruling. While giving the ruling, C.B.R. observed as follows:‑‑‑ However, the adjudicating officer may very clearly be informed C that he should not get prejudiced by the Board's classification. The above ruling is not, repeat not, binding on the adjudicating officer to whom Collector Appeals has remanded the case vide order‑in appeal cited above. The adjudicating officer should examine the issue independently as if no ruling has been, apply his rind and decide the case purely on merits. He is at liberty to exercise his discretion and to defer with Board's ruling. It was very laudible to create such semblance of, fairness but as the subsequent treatment demonstrated it was more a fiction than reality. Apprehending that in the face of this ruling none of the officers adjudicating this case will have the will and the courage to decide this against ruling. The appellant approached Sindh High Court as well as Supreme Court but both superior Courts believed that despite ruling of. C.B.R. the adjudicating officers exercising judicial powers would be able to decide the case purely on merits. However, subsequent events demonstrated that all adjudicating officers like a chorus decided against the appellant as perhaps none had the courage to decide the case keeping in view its merits and incur the wrath of C.B.R. Even the consideration at appellate forum five times resulted in remanding of the case rather than conclusive decision on the grounds of lack of application of mind. Interestingly, one appellate officer dealt with the case twice and on both occasions remanded the case on same grounds without realizing that he himself was altogether not applying the mind but was expecting from officers much junior to him to do so. And finally when as a result of a legal change the officers at the appellate forums were restrained from remanding the cases to arrest the tendency of purposeless exercise of judicial function, the Collector (Appeals) against whose orders this appeal has been tiled before us felt it prudent to reject this by refusing to apply his mind by expressing confidence that all adjudicating officers have given proper attention to the primary issue.

16. This state of affairs, which we have noticed in this case further confirms our view. C.B.R. should have resisted the temptation of giving ruling in this case despite the decision of Collector (Appeals) as no one would have known better theft the Central Board of Revenue itself that no officer could afford to go against the dictates of C.B.R. which the categorical ruling represented.

17. Another very crucial question raised in the course of hearing was about the levy of 200% excise dirty in the absence of printing of retail sale price which if printed would have resulted in duty @10%. This question now is of purely academic interest and, therefore, to serve this interest we take it up lest it remains unanswered. There is a philosophy' behind this concept of excise duty on retail sales price which was originally introduced by the legislature while passing the Finance Bill, 1969‑70 in an effort to arrest unbridled price spiral to protect ordinary consumers. While presenting the budget, Finance Minister in his budget speech observed as follows:‑‑‑ "Central Excise duties have so far been largely used as a device for producing revenue. Time has now come when their potential as an instrument of economic control should equally be exploited particularly with the object of holding the price line. To this end, a scheme has been devised to link excise duties with retail price of excisable goods. For the time being, the scheme is being applied to goods of every day use having a direct bearing on the cost of living. The broad features of the scheme are: (i) Printing of retail price, fixed by the manufacturer, on the article itself or its package. (ii) Levy of excise duty‑ as a part of the printed retail price. (iii) Conversion of separate levies of excise duty, sales tax, defence surcharge and rehabilitation tax into one single consolidated excise duty. (iv) Progressive incidence of duty in step with printed retail price, keeping the rate low for cheaper varieties. (v) Prohibitive rate of duty for not printing retail price. The scheme is designed mainly to achieve the following objectives (a) To stablise prices by making unwarranted price hikes uneconomical for the manufacturer. (b) To ensure that the consumer pays the price fixed by the manufacturer and no more. (c) To eliminate under‑declaration of value for assessment of taxes and stop evasion of revenue. (d) To dispense with the discretion of excise staff in the matter of valuation and obviate a major cause of friction or collusion between the tax collector and the taxpayer. The articles of common demand which will be subject to the scheme are:‑‑‑ (1) Tea. (2) Electric bulbs and fluorescent tubes. (3) Dry Cells and electric batteries. (4) Soap, (5) Vegetable product (Vanaspati). (6) Cotton Fabrics. (7) Art Silk Fabrics. (8) Woollen Fabrics. (9) Knitting Wool. (10) Toilet Preparations and Cosmetics. (11) M. S. Product. Thus, will of the legislature which passed the Finance Bill was achieved by reflecting this concept .in many commodities of daily use and 200% duty in the absence of retail prices was a punitive duty to ensure that the will of the legislature was not flouted in respect of goods of every day use having a direct bearing on the cost of living. Even if disputed goods would have been pigments; levy @200% would have been inconsistent with the spirit and philosophy of the introduced concept as unlike cement the pigments are not goods of daily use but industrial raw materials.

18. It is a pity this case has lasted for over fourteen years. In the absence of bloated ego and vanity, this case could have settled long ago without feelings of animosity and rancour which has been caused between the taxpayers and tax collector. When there is a realization that both are making a very valuable contribution in promoting national interest the rancour and animosity is replaced by mutual respect.

19. We have comprehensively dealt with all the crucial questions involved in this case which have led us to conclude that the disputed produces i.e. lead oxide and alongwith it zinc oxide which the appellant were producing were not liable to excise duty as being chemicals when this case, was made against them. We, therefore, set aside the impugned order and allow the appeal. C.M.A./M.A.K./70/Tax(Trib.) Appeal allowed.