2002 PLP (Trib (PTD)

3. Briefly, the facts of-the case are that the Superintendent, Sales Tax and Central Excise, Harpiur issued a letter C. No.CE(P. Ver) 1/99/1031-34, dated 28-9-1999 addressed to the 3 composite vegetable ghee/oil mills (including the 2 appellants) advising that the survey of different metal containers manufacturing units has revealed that there is difference in the assessable value of metal containers of the same kind and quality and, therefore, the assessable value of such metal containers for packing of ghee oil should be enhanced to Rs.35 for 16 Kgs. tin; Rs.13 per 5 Kgs. tin; and RS.D per 2.5 Kgs. tin. Finding inaction on the part of the some of the manufacturers (including the appellants), the Collector of Sales Tax (Adjudication), Peshawar, issued a notice No.ST & CE (Adj) C/42/2001/553, dated 10-5-2001, requiring such manufacturers to show cause why the amounts (C.E.D Rs. 553,090 + Rs.1,742;236 in the case of Messrs Hafeez Iqbal Oil and Ghee Ltd. and C.E.D Rs.387,015 + S.T. Rs. 1,219,102 in the case of Messrs Chiniot Enterprises Ltd.) short-paid by them should riot be recovered alongwith the additional duty and additional tax, from them and also why penalties should not be imposed upon them under rule 210 of the Central Excise Rules, 1944, and section 33 of the. Sales Tax Act, 1990. After hearing the parties, the Collector (Adjudication) decided the cases and passed the consolidated impugned order confirming that the aforesaid amounts of duty and sales tax, alongwith the additional duty and additional tax, are payable by respective persons and he also impugned penalties equal to 3% of the amount of the sale tax involved. Hence these appeals.

3. During the course of hearing before us, the learned counsel for the appellants argued that the valuation of metal containers manufactured by composite ghee mills. is done as per the individual costing done by each such manufacturer. He stated that the case relates to a period during which the import price of tin sheet had declined. He claimed that the report of the market survey, as stated in the Superintendent of Sales Tax and Central Excise, Haripur's aforesaid letter of 28-9-1999, has not been divulged to the appellants. He further claimed that these metal containers are made and printed for specific industrial users (ghee/oil mills) and therefore, no market survey is possible. He offered that they are prepared to Live costing of manufacturing of such metal container to prove the correctness of their declared assessable value and the Department may verify this costing, if they so desire. He finally claimed that their declared assessable price (Rs.33 per 16 Kgs. tin, Rs.11.50 per 5 Kgs. tin and Rs.9.40 per 2.5 Kgs. tin in the case of Messrs Chiniot Enterprises Ltd. and Rs.34 per 16 Kgs. tin, Rs.12 per 5 Kgs. tin and Rs.8 per 2.5 Kgs. tin in the case of Messrs Hafeez Iqbal Oil & Ghee Industries Ltd.) was still higher than or equal to many other of their competitors. He prayed for setting aside the impugned order as it was neither lawful nor proper.

4. The learned Law Officer of the Collectorate stated that in the last sentence of paragraph 6 of the impugned order, it is written that "Mr. Qayyum Khattak, Superintendent for prosecution stated that value was fixed in a meeting with the manufacturers on 28-9-1999 and is being followed by all tin manufacturers except these three and almost all the units of ghee manufacturers have their own tin manufacturing facility and all followed the fixed price except three who are under show-cause notice." In reply, to a query, he stated that he will look for the survey report, as stated in the Haripur Superintendent's aforesaid letter, dated 28-9-1999 for production before us but it appears that the price was rather fixed in meeting between tin manufacturers and the Department. In reply to another query, he stated that the aforesaid statement of Mr. Qayyum Khattak, as recorded in paragraph 6 of the impugned order in-original, shows that this fixed price was accepted and acted upon by all except appellants. In reply to yet another query, both the learned Law Officer and the learned counsel stated that they do not remember as to how so many colours were used for printing of containers of each individual unit and also what (how much) space of the container was printed although both agreed that it could not be the same for, every manufacturer. The learned Law Officer relied upon the provisions of section 4(1) of the Central Excises Act, 1944, and stated that the 2 appellants could not be allowed to have a lower price while all other competitors were having an identical price, as fixed and determined: He prayed for the rejection of the appeal. The learned Law Officer was asked to present before us statement showing (i) how many of. such manufacturer units are located in the Collectorate?; (ii) how many of them were having prices lower than the fixed ones and asked to pay duty and sales tax on the fixed price?; (iii) how many of them were having prices higher than the fixed ones and what happened to them in relation to payment of duty and sales tax on equalized fixed price?; and (iv) how many of them complied with the decision to pay Central Excise Duty and Sales Tax on the equalized fixed prices, as determined-on 28-9-1999. On the next hearing date i.e. 1-4-2001, the learned Law Officer stated that he has received the requisite report from two Circles i.e. Peshawar Circle and Kohat Circle only. Peshawar Circle vide their Letter C. No-55, dated 28-3-2002, has stated-that there were 7 such manufacturing units in that Circle, all of them had the assessable price of Rs.30 per 16 Kgs. container, Rs.11 per 5 Kgs. container and Rs.8 per 2 Kgs container during 1998-99 and 1999-2000 and that neither anyone of them was asked to revise the assessable price nor did anyone of them do so voluntarily; and Kohat Circle, vide their reply C. No. CE/Chashma Ghee/2001/150, dated 28-3-2002 reported that they have only one such unit i.e. Messrs Chashma Ghee, D. I. Khan which commenced production in January, 2001 and it has assessed price of Rs.30, Rs.12.50 and Rs.9.50 respectively. In reply to a query, the learned Law Officer admitted that the appellant's assessable prices are even higher than the comparable prices of the 7 units of Peshawar Circle. Again while the period involved is not the same, even the unit assessable price of 16 Kgs. container of Messrs Chasma Ghee is lower than those of the appellants while it was higher than the comparable prices of the appellants in case of 5 Kgs. and 2 Kgs. containers but still lower than equalized price for 1998-99 in case of 16 Kgs. container as communicated under Superintendent, Haripur Circle's letter, dated 28-9-1999 which forms the basis' of the case. The Law Officer concluded that in any case, the valuation directions contained in the Superintendent, Haripur's letter, dated 28-9-1999 were based on an agreed decision with the manufacturers and should, therefore, apply because it is in accordance with the provisions of section 4(1) of the Central Excises Act, 1944.

5. Having heard the parties and on perusal of the record of the case, we find that the prices determined by the Superintendent of Haripur Circle is stated to be based on some survey. However, no such survey report has been produced before us by the Collectorate despite being asked to do so. Instead, pointation is made to the last sentence of paragraph 6 of the impugned order to show that the then Superintendent of Haripur Circle stated that the said prices (value) were fixed in a meeting with the manufacturers on 28-9-1999. Neither the minutes of the meeting have been exhibited before us nor has it been shown to us that such an agreement was got approved from the Collectorate for non discriminate and uniform application on, collectorate basis. Whether agreed prices or not, the provisions of section 4(1) of the Central Excises Act, 1944, are very clear which state that:--

4. Determination of value for the purposes of duty.

(1) Where under this Act any article, is chargeable with duty at a rate dependent on the value of the articles, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold to the general body of retail traders or, if there is no general body of retail traders, the general body of consumers) on the day on which the article which is assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable)."

6. The metal containers in this case are printed with brand name, trade mark and manufacturer's name in each case separately. These are sold neither to any general body of wholesalers, nor to any general body of retailers nor to any general body of consumers, as such. Rather these are self-consumed or sold to the individual ghee/oil mills for use in packing of ghee of respective brands and trade marks. Even if we presume all the ghee/oil mills as general body of consumers, the metal in each case differs in design, lid, printing (e.g. number of colours used, area of surface covered with colours, etc.), Besides the fact that price will mainly depend upon the price of metal sheets used as inputs, the economy of scale of production (quantity of each size coupled with respective brand name, trade mark and manufacturer's name) will also have a bearing on price because a printed container can be used by only a particular ghee/oil mill and cannot be used by all as they have different trade marks, brand name and design, colour and surface of printing. This renders the containers to be of non-uniform marketable commodity and thus cannot be treated as of like kind and quality. By not keeping a record about the design, lid and printing of containers of each mill, the Central Excise Officer has ignored the evidence of comparability for terming these as of like kind and quality. The method of determination of agreed prices cannot sustain the test of law when the manufacturer(s) disagree to any such agreement or when they do not consent to such an agreement. Moreover, fixation of a uniform price sounds like determination of "tariff value" or "fixed value" such a determination of "tariff value" and for "fixed value" by the Superintendent or the Collector will not be lawful because only C.B.R. can do so under subsections (2) and (3) of section 3 of the Central Excises Act, 1944 and/or under the proviso to section 2(46) of the Sales Tax Act, 1990. No such notification of C.B.R. has been produced before us by the Collectorate. Even otherwise application of the Superintendent of A Hairpur Circle's letter, dated 28-9-1999 is discriminatory as it proposes an agreed uniform value of such containers in Haripur Circle only. Reports from Peshawar Circle (located under the very nose of the Collectorate's Headquarters) shows that it has not implemented that agreed uniform value in that Circle and, on the contrary, accepted assessments (from all the 7 of manufacturers under its control) at prices even lower than those in the case of the appellants. The other example of Kohat Circle is also a case of discrimination against the appellants.

7. For the reasons aforesaid, we hold that the Superintendent of Haripur Circle's C. No. Ce (P. Ver) 01/99/1031-34, dated 28-9-1999 is not based on any verifiable survey or on such a general consensus as could include the appellant's consent. Being neither a "tariff value" nor a "fixed value" notified by the C.B.R. under subsections (2) and (3) of section 3 of the Central Excises Act, 1944 and/or under the proviso to section 2(46) of the Sales Tax Act, 1990, the said letter, dated 28-9-1999 issued by the Superintendent, Haripur, also lacks legal validity. Evidences of discrimination against the appellants during the relevant period favour the appellant's case. No proper determination of value, in A terms of kind and quality, has been done by the Proper Officer or the Circle Officer of Central Excise to validate his aforesaid letter, dated 28-9-1999 in terms of section 4(1) of the Central Excises Act, 1944. We; therefore, set aside the impugned order to the extent it applies to these 2 cases of the appellants and we, accordingly, dispose of these 2 appeals as accented.

8. Inform all concerned.

9. Announced. C.M.A/M.A.K/319/Tax(Trib.) Appeals accepted.