1997 PLP 2189 (MLD)

QAZI MUHAMMAD FAROOQ, J.‑‑‑This common judgment will dispose of the following four identical writ petitions:‑‑‑ (i) W.P. No.742 of 1995 Adil Polypropylene Products Limited, Gadoon Amazai v. The Federation of Pakistan etc. (ii) W.P. No.743 of 1995 Kashmir Polytex Limited, Gadoon Amazai v. The Federation of Pakistan etc. (iii) W.P. No.744 of 1995 Syntron Limited, Gadoon Amazai v. The Federation of Pakistan etc. (iv) W.P. No. 1067 of 1995 M/s. Abson Industries Public Limited, Gadoon Amazai v. Government of Pakistan etc.

2. The dispute involved in these petitions relates to payment of central excise duty on Polypropylene strips from which polypropylene bags are made. It arises in the circumstances that the petitioners manufacture polypropylene strips as well as polypropylene bags in their Industrial units located in Gadoon Industrial Estate, Gadoon Amazai, Swabi. Sometime in the year 1995 a report was made by the Superintendent, Intelligence and Investigation (Customs, Central Excise and Sales Tax) to the Deputy Collector of Customs and Central Excise, Peshawar to the effect that they had not paid central excise duty levied vide S.R.O. 546(1)94, dated 9‑6‑1994 as amended vide S.R.O. 710(1)/94, dated 13‑7‑1994 on polypropylene strips. The ball was accordingly set rolling against them and ultimately show‑cause notices were issued on 12‑3‑1995. In response they, inter alia, took the stance that the strips were not excisable as they did not qualify to be a "good", no clearance of the alleged excisable goods had been made and the item did not fall under heading 54.04 but their view‑point did not prevail before the Deputy Collector of Customs and Central Excise, Peshawar who decided the contravention case against them on 13‑6‑1995 and also indicated the forum of appeal. However, instead of taking the matter in appeal before the Collector, Customs, Central Excise and Sales Tax (Appeals), Northern Zone, Rawalpindi the petitioners filed the writ petitions in hand wherein they have prayed that Notifications S.R.O. 710(1)/94, dated 13‑7‑1994 imposing duty on the basis of weight, S.R.O. No.592(1)/95, dated 28‑6‑1995 incorporating rule 96‑ZZL, Letter C.No. 1/5/CEB/88 Vol‑iii, dated 23‑4‑1995 containing the ruling of the C.B.R. and the orders passed by the Deputy Collector of Customs and Central Excise, Peshawar be declared as without lawful authority and of no legal effect and it may also be ordered that the strips do not qualify to be goods and as such they can neither be subjected to the duty of Central Excise under the Central Excises Act, 1944 nor any demand can be raised thereon and in any event the petitioners are not liable to pay central excise duty and other ancillary demand for the period from 9‑6‑1994 to 14‑6‑1995 on strips manufactured by them.

3. Mr. Imtiaz Rashid Siddiqui, learned counsel for the petitioners in Writ Petitions Nos.742, 743 and 744 of 1995 raised the following points in Support of the petitions:‑‑‑ (i) In terms of S.O.R. No.546(1)/94 dated 9‑6‑1994 the strips did not fall within the ambit of Chapter 54 heading No.54.04 of the First Schedule to the Central Excises Act, 1944, which pertained to synthetic textile material, but being a plastic product were covered by Chapter 39 (ibid) which had given a blanket exemption to plastic products. (ii) The strips were a plastic product simpliciter and not an end‑product or a good and. as such were neither vendible nor excisable. Had they been vendible items they would have found mention in Chapter 39 heading 3920.5990. (iii) The classification made by the department was fallacious as it overlooked two basic principles governing the determination of classification. The first principle visualised the primary use of the item and the second that if a product does not qualify to be a good it is not excisable. Reliance was placed on Messrs Santex Products v. Deputy Collector‑I, Central Excise and Land Customs and 2 others 1990 CLC 103 wherein it was observed that normally it is not for the Court to determine classifications but where the departmental approach is based on patently fallacious consideration the Court would be free to draw its own conclusions, and Civil and Military Press Ltd. and 3 others v. Pakistan through Secretary, Finance and others 1985 CLC 1021 wherein it was held that the word 'manufacture' is generally understood to mean bringing into existence a vendible product known in the market. (iv) The demand was raised without making a factual enquiry as to whether the strips were marketable or not. Had a factual enquiry been held it would have transpired that neither the product was known to market nor the petitioners had sold it to anyone. (v) Even if the strips are presumed to be covered by Chapter 54 heading No.54.04 the ad valorem mechanism highlighted therein is not attracted as the strips have no value. (vi) The petitioners were not liable to pay excise duty on strips from the period 9th June, 1994 to the 15th June, 1995 in view of the condonation of past liabilities extended by S.R.O. 497(1)/95, dated 14‑6‑1995, which they had enforced under protest, inasmuch as there was no proof that they had recovered the duty from the purchasers of the polypropylene bags and not paid the same to the Government. (vii) The petitioners had challenged the vires of Rule 96‑ZZL, therefore, the writ petitions were maintainable. (viii) Rule 96‑ZZL was ultra vires the provisions of sections 3, 3‑C and 4 of the Central Excises Act, 1944 as under the said provisions excise duty can only be levied and calculated with reference to excisable goods on the basis of tariff value whereas it had changed the mechanism of taxation by imposing duty on strips which neither qualified as a 'good' nor had any tariff value.

4. Mian Mohibullah Kakakhel, learned counsel for the petitioner in Writ Petition No.1067/95, adopted the arguments advanced by Mr. Imtiaz Rashid Siddiqui and additionally cited Orient Straw Board and Paper Mills Limited v. Assistant Collector of Central Excise and Land Customs, Division No. 11, Karachi and 2 others PLD 1985 Kar. 126 ‑wherein it was held that if the goods manufactured remain the same duty for the second time is not leviable.

5. On the other hand, Mr. K.G. Saber, learned counsel for respondent No.7, Mr. Abdur Rauf Rohail, learned counsel for respondents Nos.2 to 6, and the learned Deputy Attorney‑General argued with vehemence that the writ petitions were not maintainable as before invoking the jurisdiction of this Court the petitioners had fully participated in the adjudication proceedings and as such were obliged to exhaust the remedy of appeal before the Collector, Customs, Central Excise and Sale's Tax (Appeals), that the petitions were hit by laches as the duty was imposed through S.R.O. 546(1)/94, dated 9‑6‑1994 but the petitioners had not assailed the same within a reasonable time, that the vires of rule 96‑ZZL had not been clearly challenged and in any case it was intra vires, the petitioners had not filed appeals against the impugned orders of the Deputy Collector, therefore, it was too late to clamour for a factual enquiry, that the strips whether extruded or cut from sheets are fully covered under heading 54.04 and that the strips are vendible and are not only woven into chairs brut are also used for manufacturing plastic mats and binding parcels etc.

6. Mr. Moinuddin Hamayun, learned counsel for respondents Nos.3 to 5 in Writ Petition No. 1067 of 1995 adopted the arguments addressed by the other counsel for the respondents. However, he added that the petition was liable to be dismissed on this ground alone that the person who had filed it was not authorised to do so by a resolution passed by Company's Board of Directors. Reliance was placed on Khan Iftikhar Hussain Khan of Mamdot . Messrs Ghulam Nabi Corporation Ltd , Lahore PLD 1971 SC 550.

7. We would first take up the question whether these petitions are maintainable or not. It is true that the petitioners have not availed the remedy of appeal, which in view of the technical nature of the case would have been more appropriate, but their failure to exhaust the alternate remedy cannot disentitle them from invoking the writ jurisdiction of this Court for the simple reason that they have challenged the vires of rule 96‑ZZL of the Central Excise Rules, 1944 which was inserted by Notification No.SRO 592(1)/95, dated 28th June, 1995. The petitions are certainly maintainable.

8. With this preface, we would reproduce rule 96‑ZZL the vires whereof have been challenged:‑‑‑ "Special procedure for collection of central excise duty on polymopylene strips (heading 5404.0000).‑‑‑(1) A manufacturer may remove polypropylene strips within the factory, without immediate payment of duty, for consumption, within the same factory, in the manufacture of woven fabrics or for the manufacture of polypropylene bags subjected to duties of excise. ' (2) Central excise duty involved on the polypropylene strips so removed, shall be assessed and paid on the net weight of such woven fabric plus five per cent. In case the manufacturer removes such woven fabric from the factory and does not consume the same within the same premises for manufacture of bags. (3) If woven fabric is used within the same premises for manufacture of bags, the duty leviable on polypropylene strips shall be assessed and paid on the net weight of bags plus seven per cent. of the weight thereof. (4) The aforesaid duty on polypropylene strips shall be paid at the time or removal of woven fabric or polypropylene bags out of the factory, as the case may be, and necessary particulars about net weight thereof and assessable weight of the polypropylene strips shall be duly declared in the Form A.R. l at the time of removal. (5) If a manufacturer removes polypropylene strips for use or consumption outside his factory, he shall 'pay duty on such strips in the prescribed manner at the time of such removal. (6) For accountable purposes, the duty on polypropylene strips woven fabrics and bags shall be paid under the respective. Proper "Head of `Account", as determined by the Collector. (7) Procedure prescribed in this rule shall be optional. Manufacturers electing to pay duty under this rule shall submit declaration of such option to the respective Assistant Collector and Superintendent so as to reach them not later than 29th June, 1995. P. manufacturer who commences production after the said date may make the declaration within thirty days before the commencement of production. (8) In this rule, 'polypropylene strips' means the strip classifiable under heading '5404.0000' , ' woven fabrics' means the fabrics classifiable under heading ' 5407.2000' and, 'bags' means the bags classifiable under the heading ' 6305.3100' . . (9) The provisions of the Central Excise Rules, 1944, in so far as they are not inconsistent with this rule, shall mutates mutandis apply to the manufacturers opting to pay duty under this rule."

9. The contention advanced on behalf of the petitioners that the above rule is ultra vires the provisions of sections 3, 3‑C and 4 of the Central Excises Act, 1944 is wholly untenable. Section 3 is the charging section and states the excisable goods and services which are liable to duty. Section 3‑C highlights various stages in regard to determination of tariff value and rate of duty applicable to excisable goods or services and section 4 provides the manner of valuation of excisable good and excisable services. According to section 2(19) the expression "excisable goods" means goods specified in the First Schedule and includes goods manufactured or produced in non‑tariff area and brought for consumption to tariff area. Plastic Yarn and strips of less than 5 mm were held liable to Central Excise duty under the old C.E. No.08.03 B of the First Schedule vide Central Excise General Order No.3 of 1988, dated 8‑5‑1988 which is worded thus:‑‑‑ "Classification of Plastic Yarns and Strips‑‑‑The width of which does ‑ not exceed 5 mm, used for weaving of fabrics. A question has arisen whether plastic yarns and strips of a width not exceeding 5 mm manufactured by slitting the extruded plastic flat film are liable to central excise duty.

2. It is clarified that such plastic yarns and strips of a width (up to) 5 mm are classifiable under Item No.08.03 B of the First Schedule to the Central Excises and Salt Act, 1944 and are liable to central excise duty.'' According to the comparative Chart of new heading and old item of First Schedule old C.E. Item No.08.03 B has been substituted by heading 54.04. The strips are thus specified in the First Schedule and as such are excisable. Besides, they indubitably have a value and are capable of being sold within the contemplation of section 4 as they are not only prepared from the raw material having a value but also have a distinct entity and serve as structural unit by which the bags are fabricated and plastic mats can be woven, therefore, the question of their vendibility cannot be overplayed. Subsection (10) of section 3 also makes it manifest that excise duty can be charged on any class or classes of goods at the rates specified by a notification and determined on the basis of weight. The assessment and payment of the excise duty on the net weight of woven fabric under rule 96‑ZZL, which has laid down special procedure and streamlined the methodology for collection of central excise duty on polypropylene strips, is thus in line with subsection (10) of section

3. In this backdrop there can be no dispute with the proposition that the rule in question is neither outside the scope of the Central Excises Act, 1944 or in conflict with it nor transgresses the limits circumscribed by it.

10. The polypropylene strips are capable of being sold, therefore, the mere fact that they are not an end‑product is not enough to save them from the excise duty. Besides, there is no prohibition in Excise law against levying duty on the same material at more than one stage during the course of its manufacture as observed in Sh. Fazal Ellahi v. Federation of Pakistan and 3 others 1988 MLD 524.

11. Adverting to the question of classification we find that apart from the expression "woven fabrics" used in rule 96‑ZZL it is evident from the heading 5407.2000 that woven fabrics, from which bags are manufactured, are obtained from polypropylene strips also. This would mean that polypropylene strips are a kind of synthetic textile material. There is thus no difficulty in holding that they squarely fall under the heading 54.04 and their classification made by the department is unexceptionable.

12. This brings us to the contention that the demand was raised without making a factual enquiry as to whether the strips in question were marketable or not and whether the same were sold by the petitioners. The contention is peripheral because as mentioned earlier the strips are dutiable irrespective of their actual sale and had the petitioners been keen about the issue they would have definitely preferred an appeal instead of filing these petitions.

13. The contention in respect of S.R.O. No.497(1)/95, dated 14‑6‑1995 also involves a question of fact which cannot be determined in these petitions.

14. The contention in regard to laches is indeed misconceived as it overlooks the law laid down by Burmah Oil Co. v. Trustees of the Port of Chittagong PLD 1962 SC 113 that starting point of time for purpose of laches is not to be reckoned from the date of threat. In the present case the starting point for the estimation of time is provided by the date of demand and the date of completion of the adjudication proceedings namely 13‑6‑1995 and not the date of issuance of SRO No.546(1)/94.

15. As regards the resolution‑related contention raised by Mr. Moinuddin Humayun it would be enough to say that it cannot be considered for want of written statement. If the contesting respondent had cared to file a written statement appropriate orders would have been passed at the outset. Be that as it may, the petition is not sustainable on merits, therefore, there is no need to examine its maintainability on a technical ground. For the foregoing reasons all the writ petitions are dismissed. Parties to bear their own costs. A.A./2096/P Petition dismissed.