2002 PLP 3498 (YLR)

(i) The Honourable Supreme Court of Pakistan vide its orders dated 29‑10‑1998 in Civil Review Petition No.19 of 1996, in Civil Appeal No.20 of 1994 ordered as under:‑‑ "The learned counsel for the petitioner has vehemently contended that as a result of insertion of section 3‑D in the Act, any amount of excise duty, received by the manufacturers, burden whereof has been passed on to the consumers, cannot be refunded or adjusted. Since this contention was neither noticed in the judgment of the learned single Judge nor in the decision of the Intra‑Court Appeal. Bench and this Court also gave no decision in the impugned judgment, we would not like to express any opinion on this judgment. The parties are free to take such steps as are open to them under the law in this behalf. No ground for review is made out. This review petition stands dismissed accordingly." Since the implication of the section 3‑D of the Central Excises Act, 1944 had not been taken into consideration either at the level of the Honourable High Court or at the level of Honourable Supreme Court's the Honourable Supreme Court observed that it "would not like to express any opinion on this controversy" and let the parties "to take such steps as are open to them under the law in this behalf.". This means that the respondents were not barred from recovering from the appellants the amount which was not due to them w.e.f., 1‑7‑1993 due to operation of section 3‑D of the Central Excises Act, 1944. (ii) 'The Superintendent Central Excise Gulberg Circle vide his letter dated 5‑11‑1994 informed the appellants that the adjustment allowed vide their earlier letter dated 27‑11‑1994 was provisional and would be subject to final decision of the Honourable Supreme Court of Pakistan. The adjustment being provisional the time limitation of Rule 10(1) of the Central Excise Rules, 1944 would not apply. The final decision of the Honourable Supreme Court of Pakistan with regard to the operation of section 3‑D of the Central Excises Act, 1944 was that the parties were "free to take such steps as are open to them under the law in this behalf.". That being so neither the show‑cause notice was time barred and nor the respondents orders for recovery of the amount in question were in violation of the orders of the Honourable Supreme Court of Pakistan, which had not passed any orders with reference to section 3‑D (ibid). (iii) Central excise duty was an indirect tax and whether collected on he production capacity basis or on actual clearance basis, its nature remains the same and it is always included in the price of the product and thus gets passed on to the consumers. Collection of central excise duty either on Production Capacity basis or actual clearance basis just reflected the mode of collection and payment but its nature as central excise duty remained the same under either of the prescribed modes. (iv) The impugned order has been correctly passed and therefore, the appeal may be rejected.

5. We have considered contentions of both the sides and perused the appeal files before us. The Adjudicating Officer in the operative part of her Order‑in‑Original No.72 of 1999 dated 17‑3‑1999 ordered the appellants to pay Rs.53,28,750 "which was not admissible as refund in view of the provisions of section 3‑D of the Central Excises Act, 1944 and which is liable to be recovered" from the appellants. The Collector Appeals Lahore also rejected the appeal of the appellants vide Order‑in‑Appeal No.895 of 1999 dated 6‑11‑1999 on the ground that the refund was not admissible in view of the coming into force of section 3‑D of the Central Excises Act, 1944 w.e.f. 1‑11‑1993. It is evident that the core issue in the case is the interpretation of section 3‑D of the Central Excises Act, 1944 and its applicability to the appellant's case. The said section 3‑D (ibid) is reproduced below:‑ "3‑D. Collection of excess duty, etc.‑‑ (1) Every person who has collected or collects any duty, whether under misapprehension of any provision of this Act or otherwise, which is not payable as duty or which is in excess of the duty actually payable and the incidence of which has been passed on to the consumer, shall pay the amount so collected to the Federal Government. (2) Any amount payable to the Federal Government under subsection (1) shall be deemed to be an arrears of duty payable under this Act and shall be recoverable accordingly and no claim for refund in respect of such amount shall be admissible. (3) The burden of the proof that the incidence of such duty has not been, or is not, passed on to the consumer shall be on the person collecting the duty."

6. Subsection (1) of section 3‑D encompasses the following situation:‑ (a) Every person who has collected or collects any duty whether under:‑ (i) Misapprehension of any provision of the Central Excises Act: or (ii) Otherwise; (b) The central excise duty is not payable or which is paid in excess than actually payable; (c) And the incidence of such duty has been passed on to the consumers: and (d) Such collected amount of duty shall be payable to the Federal Government. From the above it is evident that passing of incidence to the consumers is only with reference to that duty which, has been collected due to misapprehension of any provision of the Central Excises Act or otherwise (due to any other reason) but that duty was otherwise not actually payable or was paid in excess than actually payable. The Scenario in the present case is that when the appellants collected and paid central excise duty in the light of the Proviso to Rule 7 of the Excise Duty on Production Capacity (Aerated Waters) Rules. 1990, that was the legal position operative at that point of time. There was no misapprehension of any provision of the Central Excises Act or any other reason and it would be incorrect to presume that duty was actually not payable at that point of time. The appellants collected and paid the duty in compliance with the Proviso to Rule 7 of the said Capacity Rules. Here it is deemed fit to clarify that levy and collection of central excise duty either on actual production/clearance basis (in terms of subsection (1) of section 3 (ibid) or on the basis of production capacity of the plant/machinery installed by the producer/manufacturer (in terms of subsection (4) of section 3 (ibid) just refer to the alternate modes of collection and payment of central excise duty without changing its nature as a levy. Central excise duty being an indirect tax always gets passed on to the final consumer and it is a futile attempt to enter into any controversy, argumentation or disputation on this account. Before the Honourable Lahore High Court passed its judgment in Writ Petition No.245 of 1992 by declaring the proviso to rule 7 of the said Capacity Rules ultra vires and which orders were ultimately confirmed by the Honourable Supreme Court of Pakistan on 4‑2‑1996 in Civil Appeal No.20 of 1994, the collection and payment of central excise duty was the requirement of the said legal provision at that point of time. The criteria of the incidence of duty having been passed on to the consumers would apply only to that duty which was collected due to misapprehension of any provision of the Central Excises Act, 1944 or otherwise (due to any other reason) but that duty was not payable or it was paid in excess than actually payable. This is abundantly clear from the explicit provisions of subsection (1) of section 3‑D (ibid) that the central excise duty in question collected by the appellants and paid to the Government exchequer did not fall in the category of the central excise duty having been collected due to misapprehension of any provision of the Central Excises Act or otherwise (due to any other reason) and the same was actually not due/not payable. That being so, the criteria of the incidence of the duty having been passed on to the consumers does not apply here and the appellants case falls out of scope of section 3‑D (ibid). Resultantly the findings of the Adjudicating Officer in Order‑in- Original No.72 of 1999, dated 17‑3‑1999 and that of the Collector (Appeals), Lahore Order‑in‑Appeal No.895 of 1999, dated 6‑11‑1999 for ordering the appellants to pay the amount already received by them as refund/adjustment by pressing into service the provisions of section 3‑D of the Central Excises Act, 1944 w.e.f. 1993 onwards are found incorrect and a result of misreading/misinterpretation of the provisions of section 3‑D (ibid). Resultantly the impugned orders are set aside and the appeal is accepted. C.M.A./278/Tax (Trib) Appeal accepted.