2006 PLP (Trib (PTD)

PIR AKHTAR HUSSAIN BODLA, MEMBER (JUDICIAL)

This judgment shall dispose of two appeals as mentioned in the title. One against the levy of central excise duty and the other against the levy of sales tax. These appeals have been directed against. Order-in-Original No.34 of 2002 passed by the learned Collector of Customs, Sales Tax & Central Excise (Adjudication), Lahore on 29-6-2002 whereby the appellant was directed to pay central excise duty amounting to Rs.940,023 along with additional duty amounting to Rs.133,105 and sales tax amounting to Rs.654,294 along with additional tax amounting to Rs.949,970.

2. The facts leading to this appeal are that on scrutiny of record of Messrs Adil Beverage Company (Pvt.) limited by the staff of Intelligence and Investigation (Customs, Central Excise), it was found that the assessment of central excise duty and the sales tax had not been made in accordance with provisions of Central Excise Act, 1944 and Sales Tax Act, 1990. During the period from 7/94 to 6/95 and 7/95 to 12/95, the appellant deducted the Octroi charges from the retail price of their products against the supplies made within the Municipal limits which was contrary to the provisions of the law and Central Board of Revenue's instructions contained in letter C. No.1 (20)CEB/94, dated 9-1-1994 and of even numberl-2-1995 as an Octroi, such was 'paid or incurred by them on the subject goods. Therefore, the appellants were called upon to show cause as .to why central excise duty of Rs.940,023 along with additional duty of Rs. 133,105 and sales tax amounting to Rs.654,294 along with additional tax amounting to Rs.949,970 may not be recovered from them. The learned Adjudicating Officer, after due process, ordered the appellant vide Order-in-Original No. 13/6, dated 18-12-1996 to pay Central 'Excise Duty amounting to Rs. 940,023 along with additional duty of Rs. 133,105 and sales tax amounting to Rs. 654,294 along with additional tax amounting to Rs.949,970.

3. Aggrieved by the above-said order, the appellants filed an appeal before the learned Collector of Customs, Sales Tax & Central Excise (Appeals), Northern Zone. Rawalpindi, who vide his Order-in-Appeal No. CE/ST-91 of 1997, dated 21-10-1997, remanded the case back to the. learned Adjudicating Officer with the directions to re-adjudicate the case, after giving proper opportunity of hearing to the appellants.

4. In remand proceedings, the learned Collector of Customs, Sales Tax & Central Excise (Adjudication), Lahore, vide his Order-in-Original No.34/2002, dated 29-6-2002 ordered the appellants to pay Central Excise Duty amounting to Rs. 940,023 along with additional tax duty (to be calculated at the time of deposit) and sales tax amounting to Rs.654,294 along with additional tax (to be calculated at the time of deposit). Hence, this appeal.

5. The main contentions of the learned counsel for the appellants are as under: (a) That the impugned order passed by the learned Collector (Adjudication) is without jurisdiction. The learned Collector decided this case on remand from the Collector of Customs & Central Excise (Appeals), Northern Zone, Rawalpindi. The appellate authority remanded the case to the original Adjudicating Officer, who was the Deputy Collector/Additional Collector. The jurisdiction was, therefore, revived in the Deputy/Additional Collector and the Collector (Adjudication) could not adjudicate the matter. This fact was urged before the learned Collector (Adjudicating) orally and also in writing, but the learned Collector (Adjudication) has not properly appreciated the submissions. (b) That, without prejudice to the submission about jurisdiction made above, the impugned orders passed by the learned Collector (Adjudication) are also illegal because the learned Collector has not appreciated the provisions of un-amended section 4(2) of the Central Excise Act, 1944. The period covered by the case is from July, 1994 to December, 1995. By the Finance Act, 1994, the provisions of section 4(2) stood substituted. The learned Collector (Adjudication) has not appreciated the effect of amended section 4(2) of Central Excise Act, 1944, nor has appreciated the definition of the Assessable Retail Price as contained in amended as well as un-amended section 4(2) of the Central Excise Act, 1944. (c) That the learned Collector (Adjudication) has not appreciated that the Deputy/Additional Collector had no jurisdiction to issue show-cause notice under the Sales Tax Act, 1990. In this respect provisions of S.R.O. 232(I)/1991, dated 10-3-1991 were not helpful for the Department as this Notification did not lay down the powers of the Sales Tax officers mentioned therein. (d) That in the impugned order, the learned Collector (Adjudication) has not referred to the direction contained in the appellate order. The impugned order is, therefore, illegal on that ground also. (e) That the learned Collector (Adjudication) has also not referred to the submission that according to the document provided by the prosecution itself, Octori was not deducted but was added to the assessable value. (f) That the learned Collector (Adjudication) has also not recalculated the amount of duty and sales tax after deducting the chilling charges from the retail price as directed by the Appellate Authority. (g) That the learned Collector (Adjudication) has also ignored in this respect of the calculations of the allegedly avoided duty as mentioned in para 18 of the impugned order.

6. On the basis of above submissions the learned counsel for the appellant requested that the appeal be accepted and the impugned Order ?in-Original may kindly be set aside and the show-cause notice be vacated.

7. The learned D.R. who was assisted by Mr. Mushtaq Ahmad Khan, S.I.O., contended as under: (1) That though the case was remanded to the Deputy/Additional Collector of Customs, Sales Tax & Central Excise (Adjudication) was competent to adjudicate the case in that under sub-Rule (2) of Rule 6 of the Central Excise Rules, 1944 read with section 31 of the Sales Tax Act, 1990, a Superior Officer of Central Excise and Sales Tax was competent to exercise the powers of an officer subordinate to him. Moreover, after the creation of a separate Collectorate of Adjudication vide S.R.O. 448(I)/2000, dated 1-7-2000 all cases pending before various Adjudicating Officers stood transferred to the Collectorate of Adjudication, therefore, the Collector was fully competent to adjudicate the case though it was remanded to the Deputy Collector of the Additional Collector. (2) That the relevant S.R.O. 232(I)/91, dated 10-3-1991 has been issued under sections 30 and 31 of the Sales Tax Act, 1990 whereunder a parallel jurisdiction equal to the offices of Customs competent to adjudicate the cases was conferred upon the officers of the Sales Tax. However, this issue involved in the present case directly relates to short levy of Central Excise Duty and recovery of Sates Tax, consequential in nature, i.e. as a result of short levy of Central Excise Duty. The show-cause notice in this case initially has been issued in terms of Rule 10 of the Central Excise Rules, 1944. Since, the Deputy Collector was competent to issue such notice for recovery of Central Excise Duty or any charge as such the show cause notice was correctly and legally issued. (3) That section 4(2) of the Central Excise Act, 1944 which deals with the fixing of retail price of the excisable goods at the relevant time i.e. 30-6-1994 was as under: "Where under this Act any article is chargeable with duty at a rate dependent on the retail price of the article, the retail price shall be the price fixed by the manufacturer, inclusive of all charges and taxes, other than sales tax levied and collected under section 3 of the Sales Tax Act, 1990 and Octroi, at which any particular brand or variety of such article should be sold to the general body of consumer or if more than one such price is so fixed for the same brand or variety, the highest of such price." (4) That the aforesaid Section 4(2) of the Central Excise Act. 1944 was again amended on 1-7-1994, but substantially crux of the matter remained the same as reported above. However, w.e.f. 1-7-1995 to onwards the deduction of Octroi was disallowed. In view of the legal background, of the matter as mentioned above, the manufacturers of Beverages started to pay the central excise duty by excluding the amounts of the sales tax and Octroi charges paid by them from the retail price. A new position emerged at this stage which was brought in the notice of the C.B.R., by the Pakistan Beverages Manufacturers Association that supplies made within the Municipal limits of a city are exempt from payment of Octroi, therefore. certain manufac?turers on the one side are charging Octroi charges from the consumers by adding in the retail price despite these were. not paid by them and on the other hand are paying less central excise duty and sales tax by excluding the Octroi charges from the retail price. In simple the Octroi charges which are not payable are being extracted from the consumer by the manufacturer and instead of paying the leviable tax, the said amount is being pocketed by misinterpreting the provisions of section 4(2) of the Central Excise Act, 1944. The C.B.R. after having gone through all the pros and cons of the case vide its letter No. 1(2)CEB/94, dated 1-2-1995 ruled out that the octori charges which have not been paid cannot be allowed to be deducted from the retail prices being illegal. (5) That the appellant themselves plead that Octroi charges were not paid on the supplies made within the Municipal limits of Sialkot. There was thus no justification for this appellant to add such charges in the retail price and if they have done so they cannot claim deduction of these charges not been paid by them. This is itself a violation of Section 4(2) of the Central Excise Act, 1944 which provides that retail price shall be the price fixed by the manufacturers inclusive of all taxes and charges. This position goes on to say that despite, the Octroi charges were not paid/ payable on the local supplies even then these were included in the retail price by the appellant and were charged from the consumer. On demand of central excise duty and sales tax, the appellant have nothing to pay from their own pocket, rather they would pay a part of the amount in the form of taxes, which they have charged from the consumer wrongly or otherwise by adding Octori charges which were never paid on the local supplies. (6) That the contention of the appellant that Board's letter No.1(2)/CEB/94, dated 1-2-1995 created taxability which cannot be applied retrospectively is a distortion of facts. The aforesaid Board's letter if read in conjunction with section 3-D of the Central Excise Act, 1944, the matter becomes crystal clear in that the Octori was not part of the retail price upto 30-6-1995 and could not be included in the retail price even then it was made a part of the retail price by the appellant and was charged from the consumer in disregard to the explicit provisions of the Central Excise Act, 1944. All such illegal realization of money is required to be deposited with the Federal Government under section 3-D ibid and are required to be recovered as arrears of duty. There is no question of taxability and retrospective application as contended by the appellant.

8. In view of above submissions, the learned DR requested that the appeal may be dismissed and the impugned order be upheld.

9. We have heard both the parties and perused the appeal file before us. So far as the contention of the learned counsel for the appellant regarding jurisdiction of the learned Collector (Adjudication), is concerned, we are of the view that the learned Collector (Adjudication) has rightly exercised his power to adjudicate upon the present case as per sub-rule (2) of Rule 6 of the Central Excise Rules, 1944 and section 31 of the Sales Tax Act, 1990, which read as under.- "(6) Exercise of powers and discharge of duties.

(1)??????? ???.. (2) A Central Excise Officer shall be competent to exercise all powers and discharge all duties conferred or imposed on any officer lower in rank to him. (31) Powers.

An officer of sales tax appointed under section 30 shall exercise such powers and discharge such duties as are conferred or imposed on him under this act, and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him."

10. Moreover, after the creation of a separate Collectorate of Adjudication vide S.R.O. 448(I)/2000, dated 1-7-2000, all cases pending before various Adjudicating Officers stood transferred to the Collectorate of adjudication. The Collector (Adjudication) was, therefore, fully competent to adjudicate the case though it was remanded to the Deputy Collector or the Additional Collector.

11. As far as the other point regard levy of central excise duty and sales tax is concerned, the departmental view carries weight because the Octroi charges which are not payable are being extracted from the consumer by the manufacturer and instead of paying the leviable tax, the said amount is being pocketed by misinterpreting the provisions of section 4(2) of the Central Excise Act, 1944. The CBR after having gone through all the pros and cons of the case vide its letter No. 1(2)CEB/94, dated 1-2-1995 ruled out that the Octori charges which have not been paid cannot be allowed to be deducted from the retail prices being illegal. The appellant themselves plead that Octroi charges were not paid on the supplies made within the Municipal limits of Sialkot. There was thus no justification for the appellant to add such charges in the retail price and if they have done so they cannot claim deduction of these charges not been paid by them. This is itself a violation of section 4(2) of the Central Excise Act, 1944 which provides that retail price shall be the price fixed by the manufacturers inclusive of all taxes and charges.

12. In view of what has been discussed above, both the appeals are dismissed being without merit. C.M.A./492/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeals dismissed.