P L D 2000 Lahore 302 (PLP)

Date of hearing: 29th June, 1999. This judgment shall dispose of Writ Petitions Nos. 11264/95, 8039/95, 18452/95, 3706/96, 2375/96, 2376/96, 2507/96, 2508/96, 4273/96, 4274/96, 6340'/96, 4024/96, 4028/96, 4033/96, 6942/96, 13443/96, 18453/95, 14139/96, 22255/96 and 22274/96 in which common questions arise for determination.

2. The petitioner‑company is engaged in the manufacture of polypropylene bags which are made through a manufacturing process wherein polypropylene granules or chips are extruded in a continuous process resulting in polypropylene sheets which are then cut into tapes or strips. These strips are woven to make polypropylene fabrics and then the same is used for making polypropylene bags.

3. Polypropylene granules are classified as plastics and are mentioned in Chapter 39, Heading 3902.1000 and 3902.2000 of the First Schedule to the Customs Act, 1969 while polypropylene bags fell under the Heading 6503.3100 of Chapter 63 of the First Schedule to the Act, 1969.

4. In 1994, by the Finance Act, 1994 the entire Schedule to the Customs Act, 1969 replaced the old Schedule to the Central Excises and the Salt Act, 1944. At the same time, the Federal Government issued two Notifications bearing SRO 710(1)/94, dated' 13‑7‑1994 and SRO 546(1)/94, dated 9‑6‑1995 by virtue of which the excise duty on all items not mentioned in notifications were exempt from tax and on some other items a reduced rate of duty was levied.

5. In September, 1974, the officials of the Central Board of Revenue initiated an inquiry against the petitioner and others on the ground that the central excise was leviable on strips which had not been paid in terms of S,R.O. 546(1)/94 read with the Schedule to the Central Excises and Salt Act, 1944. The petitioner represented to the Central Board of Revenue through an application under section 35‑A of the Act, 1944 contending that the strips were not goods but a mere product which were neither saleable nor in fact sold in the market and as such not liable to pay central excise. It was also stated that the department was classifying the strips under heading 5404 of the Schedule relating to textiles but these strips have nothing to do with the textiles but on the other hand are covered by heading 'plastic'. It was also stated that according to the Department practice itself the strips have always been treated as plastic strips falling under Chapter 39 of the above Schedule.

6. The Central Board of Revenue vide its order dated 13‑4‑1995 rejected the representation of the petitioner holding that the strips prior to 1994 fell as continuous fibre yarn under the heading 08.03 of the old Schedule and thereafter under heading#.54.04 of the new Schedule. The other issues raised by the petitioners were also rejected It was stated that the question of marketability of strips was not relevant. In June. 1995 the Federal Government framed Rule 96‑ZZL of the Central Excise Rules, 1944 providing for payment of excise duty not on the actual weight of strips but on the weight of bags plus 7 % extra weight. The rejection of the representation of the petitioner has been challenged by filing this petition.

7. The learned counsel for the petitioners has contended that under section 3(1) of the Central Excises Act, 1944, excise duty was leviable on the goods produced or manufactured, besides import and services in Pakistan. According to the learned counsel, polypropylene strips are not the products and are not bought or sold in the market and has no determinable value and as such cannot qualify as goods and do not fall within the excise net. Reliance was placed‑on Orient Straw Board and Paper Mills Ltd., Karachi v. The Assistant Collector of Central Excise etc. PLD 1985 Kar. 126; Trust Ceramic Industries, Landhi v. Deputy Collector‑II, Central Excise and Land Customs, Karachi etc. 1991 CLC 1923; Union of India and another v. Delhi Cloth and General Mills Co. Ltd. AIR 1998 SC 791; Civil and Military Press Ltd. etc. v. Pakistan through Secretary etc. 1985 CLC 1021.

8. The learned counsel went on to urge that whenever a dispute arises whether a product is a good or not the department is bound by law to hold a factual inquiry before raising any demand as to whether the product was such that it could be bought or sold in the market and has an independent use. It was emphasised that in the absence of any such inquiry the demand for the payment of such duty is bad in law. Reference was made to Trust Ceramic Industries' case (supra) and Sohail Jute Mills Ltd. etc. v. Federation of Pakistan etc. PLD 1991 SC

329. The validity of rule 96‑ZZL of the Central Excise Rules, 1944 was also challenged as being violative of section 3(10) of the Act, 1944 as according to the learned counsel the duty could not be charged on the weight of the bags plus 7 % extra weight instead on actual weight of strips.

9. It goes to the credit of the learned counsel for the petitioners that he fairly drew the attention of this Court to the case of Adil Polypropylene Products v. The Federation of Pakistan etc. 1997 MLD 2189 decided by a Division Bench of 1,hawar High Court.

10. Having heard the learned counsel for the petitioners at length and perused various precedents relied upon by him, I am not persuaded to take a view different from the one taken in the cited judgment wherein almost all aspects of the matter were dealt with and decided by the Peshawar High Court.

11. A perusal of that judgment shows that the same arguments as had been raised before this Court were put forward before the Peshawar High Court. The plea that rule 96‑ZZL was violative of sections 3‑CC and 4 of the Central Excises and Salt Act, 1944 was rejected as being untenable. On a comparison of the new Schedule with the old Schedule, it was found that Item No.08.03 in the old Schedule has been substituted by heading 54.04 in the new Schedule. It was observed that the poly proplyene strips were capable of being sold, therefore, the mere fact that they are not an end product is not A enough to save them from the excise duty. The learned Judges relying upon Sh. Fazal Elahi v. Federation of Pakistan and 3 others 1988 MLD 524 went on to hold that there was no prohibition of law against the levy of excise duty on the same material at more than one stage during the course of its manufacture.

12. The other contention regarding classification of the goods as textile rather than plastic was rejected on the ground that the polypropylene strips were synthetic textile material which fell under heading 54.04. It was further held that the demand without holding a factual inquiry as to whether strips were marketable was valid; the strips were dutiable irrespective of the actual 8 weight and in any case it was a question of fact which should have been raised by filing an appeal. With due deference, I adopt the same reasoning in repelling the arguments of the petitioner's learned counsel. In view of above, all these petitions fail and are hereby dismissed with no order as to costs. Q.M.H./N‑192/L Petition dismissed.