1989 PLP 857 (CLC)

SALEEM AKHTAR, J.‑‑This judgment will dispose of these petitions as they arise from common facts and questions of law. Constitutional Petition No.40 of 1977 has been filed by Mirpurkhas Sugar Mills Limited. The petitioners commenced manufacturing sugar from 1‑3‑1966. The respondent No.l in exercise of power under section 3 subsection (4) of the Central Excise and Salt Act 1944 framed the Excise Duty on Production Capacity (Sugar) Rules 1966 and fixed annual production capacity of the petitioners at 19,200 tons with effect from 1‑7‑1966. By another notification dated 2‑1‑1967 the respondent No.l without any notice to the petitioners increased their production capacity from 19,200 tons to 23,500 tons. The petitioners, filed objections and the Review Board by its order dated 18‑3‑1967 fixed the production capacity of the petitioners at 21,700 tons for the financial year 1966‑67 and 23,500 tons for the succeeding financial years. The petitioners challenged this order in Writ Petition No.17 of 1968 which was allowed and the re-fixation was held to be without lawful authority and of no consequence. The demand notices were accordingly revised. During the year 1971‑72 petitioners paid duty on actual production basis as provided by the rules of 1971. The respondent No.l notified the Rule of 1972 again reverting hack to levy the excise duty on production capacity basis. On representation being made, the respondent No.l stated that the judgment of the High Court relating to the duty on production capacity was under the Rules of 1966 whereas the demands for the years 1972‑73 1973‑74 and 1974‑75 were raised under the Excise Duty and Production Capacity (Sugar) Rules 72 and refused to revise the demand. The petitioners then filed Constitution Petition No.1303/75 before this Court challenging the validity of the production capacity fixed at 23,500 tons. During hearing a technical objection was raised that alternate remedy by way of review application had not been availed before the Standing tribunal against the fixation of the production capacity at 23,500 tons. However, by consent the petition was disposed of and the petitioners were allowed to file review application within one month which was to be considered and decided by the Standing Tribunal. The petitioners accordingly filed the review application which was dismissed by respondent No.2 but the production capacity was fixed at 22,800 tons instead of 23,500 tons. This order has been challenged by the petitioners in this petition. In the counter‑affidavit it has been stated that notification dated 11‑6‑1966 fixing production capacity at 19,200 tons was found to be incorrect due to miscalculation of the figures and this was rectified by a second notification dated 2‑1‑1967 fixing the production capacity of the petitioners at 23,500 tons. But the High Court in its Judgment held the earlier capacity fixed to be valid. On that basis the petitioners paid excise duty up to the year 1970‑

71. It further paid excise duty on the sugar produced by remelting Gur and Khandsari on actual production under section 3 (1) of the Central Excises and Salt Act 1944 as such production was outside the scope of Production Capacity Rules 1966. In 1971 new Production Capacity (Sugar) Rule 1971 was issued pnder which the petitioners had the option to pay excise duty on the basis of production capacity or on basis of actual production. The petitioners exercised option to pay duty on actual production basis. In the years 1969‑70, 1970‑71 the petitioners produced 32,923 tons and 39,664 tons of sugar from sugar cane, although the capacity under the notification of 1966 was fixed at 19,200 tons. The petitioner's capacity to produce was much more than what was fixed under the Rules of 1966. Under the Rules of 1972 Excise Duty on Production Capacity was enforced which provided that the production of sugar from Gur and Khandsari be also included while determining the production capacity. The production capacity was fixed at 23,500 tons. During 1972‑73 the petitioners produced 16,922.81 tons of sugar from sugar‑cane. 32,54,0.87 tons 13,660.48 tons and 23,015.60 tons of sugar were produced from sugar‑cane and Gur during the years 1973‑74, 1974‑75 and 1975‑76 respectively. It has been stated that the production capacity fixed at 22,800 tons under the Rules of 1972 is for sugar produced from sugar‑cane and Gur and Khandsari etc. The order therefore passed by the Tribunal is just and proper. In Constitution Petition No.216/77 the facts are identical. Under the Rules of 1966 the production capacity was fixed at 19,200 tons but it was raised to 21,700 by an order dated 24‑9‑1966. The Review Board fixed the production capacity for the year 1966‑67 at 21,700 tons and for the succeeding years it was raised to 23,500 tons. The order was challenged in Writ Petition and similar order as in petition No.40 of 1977 was passed. All other facts are identical. Petition No.163/78 has been filed by West Pakistan Development Corporation. The respondent No.l exercising power under section 3 (4) of the Central Excises are Salt Act 1944 framed Excise Duty and Production Capacity (Sugar) Rules 1966 and fixed the petitioner's annual production capacity at 16,200 tons. The review application filed by the petitioner was rejected and by order dated 5‑1‑1967 the annual production capacity of the mill for the year 1966‑67 was fixed at 16,200 tons and 18,000 tons for the succeeding years. On petitioner's representation the respondent No.l suspended the realisation of the excise duty by 20 $ for the year 1966‑

67. In the year 1972 when the new rules were published, the petitioners made an application for review before the respondent No.2. who recommended the case of the petitioners to the respondent No.l to fix the production capacity of the mill at a lower level or grant full abatement without making any reduction. The respondent No.l did not accede to the request. The petitioner, then addressed a letter to the Secretary General to the Government of Pakistan on 20‑9‑1975 to direct the respondent No.l to re‑consider its earlier decision and to fix the annual production capacity at 12,000 tons and save them from the losses. The respondent No.1 served a notice on the petitioners under section 11 (b) of Central Excise and Salt Act, threatening to take action in case they failed to pay the duty as demanded. The petitioners made representation to the Vice Chairman, Board of Industrial Management, Islamabad and the recovery of excise duty outstanding against the petitioners for the years 1973‑74 and 1974‑75 was stayed until further order. As the stay order did not pertain to 1975‑76 and 1976‑77 the Excise Authorities pressed their demand for these years. The respondent No.1 issued notification dated 1‑7‑1977 fixing the annual production capacity of the petitioner at 18,.290 long tons. The application for review was rejected by order dated 23‑10‑1977 which has been challenged as illegal, ultra vires and without jurisdiction. The respondents have filed their counter‑affidavit in which it has been stated that the production capacity was fixed in accordance with the Rules and when the petitioners made an application for relief abatement to the extent of 20 $ of the tax liability for the year 1976‑77 relief was given not on the ground that the petitioners did not have the capacity to produce 18,290 long tons but as due to other circumstances they could not achieve the target. During the pendency of the case the respondent No.2 came to know that the Provincial Government had extended sugar‑cane zone of the petitioners and they were in a position to achieve the target. All other facts regarding representation and grant of stay have been admitted and it has been further submitted that in the year 1974 substantial relief was granted to the petitioners. It has been denied that the impugned order ,was passed without jurisdiction. The learned counsel for the petitioners have contended that once production capacity is fixed then unless additional machinery is installed, the capacity cannot be revised. In this regard reference has been made to the proviso to rule 3 of the Rules of 1966 and 1972. The learned counsel have also referred to the judgment in Petition No.17/68 (Mirpur Khas Sugar Mills Ltd. v. The Central Board of Revenue and others) in which it was observed as follows:‑ "No doubt, sub‑rule (1) of rule 3 gives power to determine the annual production capacity of the mill and that having been determined and provided in the schedule, it is clear from the language of the proviso to sub‑rule (2) that no further refixation can take place unless the case is covered by what is provided in the proviso, which is not tic case here. An instance of fixation of annual production capacity is also provided by sub‑rule (3) but that is also not applicable. Finality is, therefore, achieved once the annual production capacity of the mill is determined in the aforestated case. Thus, we do not see how section 21 of the General Clauses Act can be invoked when the power to refix is limited by the proviso itself.' This judgment was passed when the annual production capacity was determined under the rules of 1966 in which the production capacity of the plant and machinery was to be fixed with reference to the following considerations: Rule 3 (1) (a) The manufacturer's declarations about the production capacity of his factory made to the Government in any connection; (b) the daily rated capacity of the factory in crushing of sugar‑cane and beet; (c) the percentage of the yield of sugar‑cane and beet; and (d) the actual production of sugar in the preceding years.' If any additional plant or machinery is installed after the annual production capacity has been fixed under the Rules of 1966 the additional production capacity shall be fixed according to sub‑rule (1) quoted above. In the present case the situation is somewhat different. The Rules 1966 continued till 30‑6‑1971. On 1st July, 1971 the Excise Duty on Production Capacity (Sugar) Rules 1971 were enforced superseding the Excise Duty on Production Capacity (Sugar) Rules 1966. These rules had given an option to the Sugar Mills to choose levy of duty on annual production capacity basis or on actual production. The petitioners opted for actual production basis. Therefore, whatever had been determined under the Rules of 1966 was completely obliterated and the petitioners started paying duty on the basis of a completely new formula. In 1972 Excise Duty on Production Capacity (Sugar) Rules 1972 were enforced and the Rules of 1971 were repealed. By this Rule of 1972 the respondent No.l reverted back to the system of levy of excise duty on the basis of annual production capacity. Under rule 3 the production capacity was to be determined with reference to (a) the manufacturer's declarations about the production capacity made to the Government in any connection; (b) daily rated capacity of the factory for the crushing of sugar cane and beet, (c) the percentage of the yield of sugar from sugar‑cane and beet; (d) the quantity of sugar produced by re‑melting gun, khandsari or jagri powder; and (e) the actual production of sugar in the preceding years." Therefore, the consideration and grounds for fixing the production capacity .under the Rules of 1972 were somewhat different from the Rules of 1966. It takes into consideration the quantity of sugar produced by remelting gun, khandsari or jagri powder. Besides, this the actual production of sugar in the preceding. years was also to be taken into consideration. Therefore, the annual production capacity fixed under the Rules of 1972 was bound to differ from the one which was fixed under the Rules of 1966. The production capacity under the Rules of 1966 continued till June 1971. From 1‑7‑1971 the petitioners opted for payment of duty on the basis of actual production. Therefore, . the contention that once production capacity has been fixed cannot be changed does not seem to be correct as the one fixed in 1966 had ceased to exist on supersession of the Rules of 1966 and could not revive even or, promulgation of another Rule reintroducing the annual production capacity system with somewhat varied rules fen its determination. Mr. Akhund has contended that the basis for fixing the production capacity as described in the counter affidavit is different from what has been stated in the impugned order. In the order the annual capacity has been worked out on the basis of 160 working days with a daily crushing of 1,500 tons and an extraction percentage of 9.5. In our view the respondent No.l has not deviated from the rules as the number of working days can be ascertained from the declarations of the manufacturers and the remaining two factors are same as required by Rule 3 (1) (b) and (c). The respondent No.l as not taken into consideration factors not required by the Rules. It has been pointed out that according to respondent No.l the 'production capacity fixed at 22,800 is for sugar produced from sugar cane, and Khandsari etc' which is different from contrary to the basis fixed by the impugned order. The impugned order spelt cut a mathematical basis drawn from the Rules itself to justify the fixation of production capacity. However, in the counter‑affidavit justification has been provided within the ambit of rules by taking into consideration the sugar prepared by remelting Gun, Khandsari and jagri powder. This additional factor can raise the production. capacity and will not reduce it. Therefore, if it has been ignored by the Tribunal, the petitioners have not been adversely affected. Mr. Rashid Akhund has contended that the Tribunal did not take into consideration the guidelines of rule 3 and fix the production capacity on the basis of a formula without properly applying the mind. As discussed above the method which has been adopted by respondent . No.l for determining the production capacity is not different from the guidelines laid down by rule

3. According to Mr. Rashid Akhund the extraction percentage of 9.5 could not be fixed as it varies from place to place. The petitioners have not stated that they had supplied the extraction percentage which was much less than 9.5 $. If the petitioners had not supplied the extraction percentage then it could have been fixed on average basis drawn from experience and expert knowledge. If the percentage of yield of sugar‑cane is so low that it has adversely affected actual production which has gone below the production capacity fixed under the Rules then rule 4 looks after that contingency where the Central Board of Revenue can with the prior approval of the Federal Government grant abatement of duty livable under Rule 3 as it may consider proper and appropriate on the facts and circumstances of the case. Mr. Akhund then contended that as vested ‑ right has been created the annual production capacity fixed in 1966 cannot be changed. We are unable to understand how in the facts and circumstances of the case a vested right has been created in favour of the petitioners particularly when the petitioners themselves had said go‑bye to the annual production capacity fixed in 1966 and had adopted actual production basis. The right if any ceased to exist the moment the petitioners opted for actual production basis. Mr. Khalid Anwar has contended that if a notification has once been issued and it is cancelled then by virtue of section 3(7) of the Act no fresh notification can be issued and the respondents have to revert back to section 3(1) of the Central Excises and Salt Act. According to the learned counsel as the notification of 1971 has been cancelled the respondent could have levied duty as provided by section 3(1) and not on the basis of a fresh notification issued subsequently. To appreciate the contention it would be proper to reproduce relevant part of section 3 as follows:‑ 'Section 3: Duties specified in the First Schedule to be levied. (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods, produced or manufactured, and on all excisable services provided or rendered, in Pakistan, as, and at the rates, set forth in the First Schedule. (2) . (3) .............................. (4) With the prior approval of the Federal Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the Official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods; and such notification shall specify‑‑ (a) the guiding principles for the determination of production capacity, (b) the production capacity, as determined in accordance with such guiding principles, of the plants, machinery, undertakings establishments or installations affected by it, (c) the duty or the rate of duty on production capacity, and (d) the manner of collection of such duty. (5) (6) .. (7) The Central Board of Revenue may, by notification in the official Gazette, at any time, cancel a notification under sub section (4); and where a notification is so cancelled or, for any reason whatsoever, cannot be given effect to, the duty under subsection (1) in lieu whereof the duty under subsection (4) was levied by such notification, shall be levied and with necessary adjustment, collected for the financial year during which such notification is cancelled or for the period for which it cannot be given effect to. Explanation.‑For the purpose of this subsection, an order of a Court suspending or staying the collection of the whole or any part of the duty under subsection (4) shall be deemed to be a reason for which a notification under subsection (4) cannot be given effect to Section 3(1) is the charging section which inter alia provides that excise duty shall be levied and collected on all excisable goods produced or manufactured in Pakistan. The rate of such duty are mentioned in the First Schedule of the‑Act. Subsections (2) and (3) of section 3 empower the Central Board of Revenue to fix and vary tariff values of any articles enumerated in the First Schedule. All excisable goods are subject to the duty as specified in the First Schedule. However, a different mode for levy and collection of duty in lieu of this mode has been provided as contemplated by subsection (4) under which excise duty is levied and collected on the basis of annual production capacity fixed by the Central Board of Revenue. Therefore, this is another method of assessment of duty and collection which has been made applicable in place of duty levied and collected under subsection (1). The effect of levying duty on production capacity is that it retains the character of excise duty but the mode of assessment has been changed. Subsection (7) contemplates a situation where the alternative method as provided by sub rule 4, for any reason, is unable to be implemented or worked out. In order to avoid any gap or interruption in the collection of excise duty it further provides that in such contingency the duty shall be charged on the basis of levy imposed under subsection (1). While reverting to this procedure necessary adjustment has to be made during financial year in which such notification is cancelled or cannot be given effect to. Therefore, the reversion to subsection (1) for the purposes of levy and collection is only for the financial year in which the notification is cancelled or for the period for which it cannot be implemented. This provision does not contemplate that if notification is cancelled then for all time to come the excise duty shall be levied and collected on the basis of sub‑rule (1). The reversion to sub‑rule (1) is for a temporary period during the financial year in which the notification has been cancelled. In the present case no such situation has arisen. The notification for the year 1966 was repealed on 30‑6‑1971 and from first July, 1971 the Excise Duty on Production Capacity (Sugar) Rule 1971 was enforced. Therefore, there was no gap in the financial year up to June 1971. Under the Rule of 1971 the Sugar Mill had been given the option and the petitioners exercised their option to be assessed on the basis of actual production. The Rule of 1971 was repealed by Excise Duty of Production Capacity (Sugar) Rules 1972 which were enforced on 14‑10‑1972 and no option was given to the manufacturers of sugar to adopt any other method of levy and collection of excise duty. At the time of enforcement of the Rules of 1972 none of the petitioners had opted out for levy and collection of taxes on the basis of annual production capacity. They were charged under section 3(1) and the Rules of 1971 fixing the annual production capacity were not applicable to them. Therefore, the repeal of the Rules of 1971 did not entitle the petitioner to claim benefit of subsection (7) of section 3 to revert back to section 3(1). Subsection (7) can be enforced only where the notification under subsection (4) is cancelled or is not capable of being implemented. In the present case on 14‑10‑1972 the respondent No.l by enforcing the Rules of 1972 switched from the method provided in section 3(1) to the alternate method contained in ‑section 3(4) of the Act. In the circumstances section 3(7) could not be made applicable. We, therefore, dismiss the petitions with no order as to costs. A.A./M‑690/K Petitions dismissed.