2013 PLP (Trib (PTD)

This order shall dispose of the titled appeals STA No.2217/LB of 2009 and C.E.A. No.47 of 2009 filed by the appellant calling in question Order-in-Appeal No.4-5 of 2006, dated 28-2-2006 dispatched on 4-4-2006 passed by the Collector of Customs, Sales Tax and Federal Excise (Appeals), Gujranwala.

2. Brief facts as recorded in the show cause notice dated 20-12-2004 were that the Superintendent Customs, Intelligence Gujranwala received an information that certain manufacturers of Cigarettes are not paying leviable Central, Excise Duty and Sales Tax on clearance of the Cigarettes produced and manufactured by them thereby causing loss to the National Exchequer. On 27-11-2004 acting upon the said information, the staff of Intelligence and Investigation (Customs, Excise and Sales Tax), Gujranwala held Nakabandi near Rahwali, G. T. Road, Gujranwala. At about 0200 hours, suspected Truck bearing Registration No. QAB-7435 coming from Gujrat side was intercepted while it was on its way to down country. Checking of Truck led to recovery of Cigarettes (i) Marry Max Brand Cigarettes (manufactured by Messrs Bilal Tobacco Bhimber (AJ&K)), quantity 30 packrites, (ii) Time Square Brand Cigarettes (manufactured by M/s. Bilal Tobacco Bhimber (AJ&K)), quantity 92 packrites, (iii) Richman's Brand Cigarettes, quantity 107 packrites, total 229 packrites. On demand, the driver namely Muhammad Anwar could not produce any document of payment of duty and taxes leviable on cigarettes loaded on the Truck. The Truck along with cigarettes was brought to Range Office of Intelligence, Gujranwala which was seized for violation of sections 3 & 3-B of Central Excise Act, 1944 and Rules 7, 9, 49, 51, 52-A, 52-C and 226 of the Central Excise Rules, 1944 punishable under Rule 210 ibid and sections 3(1), 6, 14, 22, 23 and 26 of the Sales Tax Act, 1990 read with sections 34 and 36 ibid and sections 157 and 168 of the Customs Act, 1969. The show cause notice was issued under section 36 (1) of the Sales Tax Act, 1990 on the allegation that the cigarettes were produced and cleared without payment of leviable duty and taxes and were, therefore, liable to confiscation for violation of sections and rules referred above. The appellant replied the show cause notice and the adjudication proceedings culminated in passing of Order-in-Original No. 112 of 2005 dated 16-4-2005 by the Deputy Collector Customs, Excise and Sales Tax (Adjudication), Gujranwala where-under the cigarettes were confiscated and a penalty equal to five times of duty/taxes involved was also imposed on the appellant in term of Rule-210 of Central Excise Act, 1944. The appeal filed before the Collector of Customs, Sales Tax and Central Excise (Appeals), Gujranwala was failed vide impugned Order-in-Appeal No.4-5/2006 dated 28-2-2006 dispatched on 4-4-2006. Hence, the instant appeals.

3. The learned counsel for the appellant at the very out set raised legal issues (i) the original order was passed beyond the scope of show cause notice. The grounds taken in the order were not mentioned in the show cause notice (ii) the penalty was imposed upon the appellant under Rule 210 of the Central Excise Rules, 1944 whereas show cause notice was issued under section 36 (2) of the Sales Tax Act, 1990 without invoking the penal section 33 applicable at the relevant time and (iii) the original order was barred by limitation prescribed under section 36(3) of the Sales Tax Act, 1990. The learned counsel while arguing the legal issue (i) stated that it was alleged in the show cause that the "seized cigarettes have been produced and cleared without payment of leviable duty and taxes and are therefore liable to confiscation" whereas while passing the original order the Adjudicating Officer confiscated the cigarettes on the ground mentioned at Para-19 that "The seized cigarettes are fake one and manufactured without having a Central Excise licence as required under section 6 of the Central Excise Act, 1944". He contended that the charge on the basis of which the cigarettes were confiscated, subsequently auctioned and penalty was imposed on the appellant was not incorporated in the show cause notice and as such the original as well as subsequent appellate orders was illegal. He relied on a judgment of Hon'ble Supreme Court of Pakistan delivered in case "Collector of Central Excise and Land Customs and others v. Rahm Din" (1987 SCMR 1840). He further contended that as per Section 34 of the Central Excise Act, 1944, no outright confiscation was provided and adjudicating officer was under legal obligation to give option to the owner of the goods to pay fine in lieu of confiscation as the officer thinks fit in addition to any duty and other charges due in respect of the goods, whereas no such option was given to the appellant and the cigarettes were confiscated outrightly which were subsequently auctioned. He further contended that the penalty can only be imposed if the goods were found counterfeit in term of Rule-210 of the Central Excise Rules, 1944. The charge of fake /counterfeit cigarettes was never mentioned in the show cause notice and as such the original order passed on such allegation was not sustainable at law.

4. As regards issue No. II, learned counsel for the appellant contended that in the present case the penalty was imposed upon the appellant by the original adjudicating authority under Rule-210 of the Central Excise Rules, 1944 whereas the show cause notice was issued under section 36 of the Sales Tax Act, 1990 and not under Rule-10 of the Central Excise Rules, 1944 and that too without invoking the penal provision of section 33 of the Sales Tax Act, 1990 which authorizes the Adjudicating Officer to impose penalty under the Sale Tax Act, 1990, thus, the penalty imposed upon the appellant without invoking Section 33 of the Sales Tax Act, 1990 was illegal, void and without jurisdiction.

5. As regards issue No.III relating to limitation, the learned counsel for the appellant contended that the show cause notice was issued under section 36 of the Sales Tax Act, 1990 which is the charging section and not under Rule 10 of the Central Excise Rules, 1944 which is charging rule relating to recovery and passing of order under Central Excise Act, 1944. He contended that since the show cause notice was issued only under section 36 of the Sales Tax Act, 1990 and according to Proviso of section 36(3), the original order was to be passed within a period of ninety days and in exceptional circumstances such period can be extended by the Collector for further ninety days after recording reasons in writing. He contended that in the instant case the show cause notice was issued on 20-12-2004 whereas the original order was passed on 16-4-2005 after 117 days from the date of issuance of show cause notice. The limitation prescribed under section 36(3) of the Sales Tax Act, 1990 was 90 days at the relevant time and no extension was sought by the adjudicating officer and as such the original order has, no legal sanctity in the eyes of law. He relied on judgment delivered by the High Court as well as by this Tribunal in cases "Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd., v. The Collector of Sales Tax Gujranwala and another" 2008 PTD 60 "Messrs Hanif Straw Board Factory v. Additional Collector (Adjudication), Customs Central Excise and Sales Tax, Gujranwala and 2 others"(2008 PTD 578), "Messrs Miraj Din v. Collector of Customs, Excise and Sales Tax (Appeals), Lahore and 2 others" 2009 PTD 2004 "Messrs Tanveer Weaving Mills vs. Deputy Collector Sales Tax and 4 other" 2009 PTD 762 and order of this Tribunal passed in STA No. 509/LB of 2009 decided on 4th August, 2010 (2010 PTD (Trib.) 2259).

6. The learned DR was unable to controvert the legal objections raised by the counsel for the appellant.

7. We have heard the learned counsel for the appellant as well as Departmental Representative and have also considered the relevant record, case-law cited at the bar by the learned counsel for the appellant. It is abundantly cleared from the perusal of show cause notice that no charge/allegation of counterfeit or fake cigarettes was incorporated in it whereas while passing the original order adjudicating officer confiscated the cigarettes and imposed penalty on the appellant on the charges which were not confronted through show cause notice. The contention of the learned counsel for registered person carries weight and also supported by the judgment of Hon'ble Supreme Court of Pakistan (1987 SCMR 1840), wherein the Hon'ble Judges have held as under:-- "We are of the opinion that it is not necessary to determine this question of law in the facts of the present case as this petition can be disposed of on the short ground that the order of adjudication being ultimately based on a ground which was not mentioned in the show cause notice, the order was palpably illegal and void of fact of it." According to section 34 of the Central Excise Act, 1944, the adjudicating officer was under legal obligation to give option to pay fine in lieu of confiscation in addition to leviable duty and taxes whereas in the present case the cigarettes were confiscated outrightly and subsequently auctioned by the department. Section 34 reads as under:--

34. Option to pay fine in lieu of confiscation.

Wherever confiscation is adjudged under this Act or the Rules made thereunder, the officer adjudging it shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit in addition to any duty and other charges due in respect of the goods. The goods can only be confiscated outrightly and penalty imposed if the same were found counterfeit / fake in term of Rule-210 (1) of the Central Excise Rules, 1944. The Proviso of the said Rule imposed another condition that the machinery used for manufacturing of counterfeit goods or in manufacturing of cigarettes on which duty of excise has been evaded also liable to seizure and confiscation. In the present case neither it was established through evidence that counterfeit / fake cigarettes were manufactured by such and such unit nor any machinery were seized by the respondent department. Rule-210(1) reads as under:--

210. Penalty.

(1) Any contravention of violation of these rules of any provision of the Act shall be liable to a penalty which may extend to five times the amount of duty (principal amount) involved, and with confiscation of the goods in respect of which the contravention of violation is made: Provided that the machinery, used for the manufacture of counterfeit goods or in manufacturing of cigarettes, on which duty of excise has been evaded, may also be liable to seizure and confiscation.

8. Bare reading of Rule 210 reproduced above makes it clear that only counterfeit/fake goods can be confiscated outrightly along with the machinery used in manufacturing thereof which was not the case of the respondent department. Since it is apparent from the perusal of show cause notice that no allegation of counterfeit/fake was mentioned therein and as such the original order and subsequent appellate order passed on the ground which was not mentioned in the show cause notice is illegal and void. Consequently, confiscation, auction of cigarettes and imposition of penalty under Rule-210 of the Central Excise Rules, 1944 are also illegal, void and without lawful authority. Furthermore, the penalty was imposed under Rule-210 of the Central Rules, 1944 whereas show cause notice was issued under section 36(1) of the Sales Tax Act, 1990 without invoking penal section 33 applicable at the relevant time of the Act ibid. Since no penal provision of Sales Tax Act, 1990 was mentioned in the show cause notice, the penalty imposed under Rule-210 of the Central Excise Rules, 1944 without issuing show cause notice under Rule-10 of the Rules ibid was beyond the jurisdiction of the Adjudicating Officer, therefore, the penalty imposed upon the appellant was without jurisdiction and the same is illegal, void and without lawful authority. On perusal of available record file, it is observed that the show cause notice was issued under section 36 of the Sales Tax Act, 1990 and not under Rule-10 of Central Excise Rules, 1944. The original order was passed after the limitation of 90 days prescribed under section 36(3) of the Sales Tax Act, 1990. In the present case, the show cause notice was issued on 20-12-2004 whereas the Order-in-Original No. 111 of 2005 was passed on 16-4-2005 after one hundred and seventeen days from the date of issuance of show cause notice. The original order was to be passed on or before 20-3-2005 whereas it has been passed on 16-4-2005 after lapse of 27 days from the limitation prescribed under Proviso to subsection (3) of section 36 of the Sales Tax Act, 1990. The limitation of 90 days was never extended by the concerned Collector and as such admittedly the limitation of 90 days was expired much prior to 16-4-2005. Furthermore, the case-laws relied on by the learned counsel for the appellant adequately supported his contention. The Honourable High Court in the case of "Super Asia Din Muhammad Din and Company v Collector Sales Tax" reported as (2008 PTD 60), has once for all settled the issue that the limitation specified in sections 11(4) and 36(3) is mandatory if any liability is created. Moreover, the Honourable High Court in series of judgments has declared the orders-in-original passed after the statutory time limitation as nullity in the eyes law. Extracts from some of the judgments are reproduced for the sake of reference:-- (i) Super Asia Muhammad Din and Sons v. Collector of Sales Tax 2008 PTD 60 "The claim of the Revenue that the prescribed limitation of 45 days for completion of adjudication proceedings as provided through Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2003 is merely directory cannot be accepted. It is settled law that where inaction on the part of the public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deeded directory. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory. The acceptance of contention of the Revenue in that regard will make a provision of law redundant and nugatory. Redundancy or superfluity of an Act of Parliament and a provision of law cannot be readily accepted. All the moreso, when the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a taxpayer thereby creating certainty that after its expiry if there was a good case for creation of liability he will not be dragged in.", (ii) Messrs Tanvir Weaving Mills v. Deputy Collector Sales Tax 2009 PTD 762 (H.C. Lah.) As is clear from the language of the above proviso, it has limited the scope of exercising of the jurisdiction after issuance of notice to basically 90 days or such extended period as the Collector after duly recording proper reasons in writing has fixed. However, it is again subject to the limitation in the manner that the said extension also cannot be for more than 90 days. The period for deciding the order-in-original after issuance of a notice under section 36(1) and (3) thus is maximum 180 days including earlier 90 and extended 90 days. Obviously if the extension has been given by the Collector before the expiry of the earlier 90 days.

9. For what has been discussed above, particularly in the light of record, facts and judgments cited supra, we have no hesitation to hold that confiscation order, auction of cigarettes and imposition of penalty were in violation of mandatory provisions of law and the dictum laid down by the hon'able Supreme Court of Pakistan. Similarly the order-in-original was passed after the prescribed time limit as provided under section 36(3) of the Sales Tax Act, 1990, therefore, both the appeals are accepted, Order-in-Original No.111 of 2005 dated 16-4-2005 as well as order-in-appeals are set aside.

10. Since we have decided the case purely on legal plane, hence there is no need to dilate upon the other grounds raised by the appellant.

11. As a result, both the appeals by the appellant-registered person are accepted. CMA/14/Tax(Trib.) Appeal accepted.