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Petition No. 534 of 1969, decided on 12th December 1974.

S. 3(5) read with Finance Act (XI of 1966), S. 4 and Notification No. S. R. 0.‑229/(R)/68 dated 31‑12‑1968‑Review‑Power to pass order in review‑Contemplated by Rules at instance of owner of plant Review Board cannot, of its own motion and to tax‑payers prejudice review its earlier order.

‑ S. 3(5) read with Finance Act (XI of 1966), S. 4 and Notification No. S. R. 0‑229/(R)/68 dated 31‑12.1968‑Review‑Earlier order reviewed by Review Board without hearing owner of plant‑Expert appointed after application for review and his report taken into con sideration but a copy of such report not shown to plant owner despite request‑Such circumstances by themselves, held, vitiate order Order on review, in circumstances, without authority and nullity in law.

Kamal Mansoor Alam for Petitioner.

Shah Jamil Alam, Deputy Attorney‑General for Respondents.

Dates of hearing : 3rd and 4th December 1974.

‑This petition asks for a declaration that the order of respondent 1 which is the Review Board, Central Board of Revenue, whereby it fixed the production capacity of the petitioner's plant at 35,425 tons per annum is without lawful authority and of no legal effect in that respondents 2 and 3, who are the Collector of Central Excise & Land Customs and the Central Board of Revenue respectively, are entitled to realize Excise Duty from the petitioner company on the basis of annual capacity of 18,000 tons only, arises in these circumstances.

2. The petitioner‑Company is the owner of a plant for the manufacture of soda ash which went into actual production in 1968. Soda ash is, admittedly, a species of goods which comes under the category "exciseable goods" within the meaning of the Central Excises and Salt Act, 1944 and is, therefore. by reason of section 3 of that Act liable to the prescribed duty of excise. By reason of amendments made in the Act by the Finance Act of 1966 the Central Board of Revenue may, in lieu of levying and collecting duties of excise on the goods actually manufactured, in respect of, amongst others, plants in respect of which a notification is issued, levy the duty on the basis of the production capacity instead of the actual production, subject to some rebates when the actual production falls short of the production capacity which are not, for our present purposes, material. The Act prescribes a procedure for the calculation of this production capacity and since. among other matters, the validity of the impugned orders was. challenged on the basis also that these had not been followed, a consideration of these is relevant but because, as will presently be seen, I think it possible to dispose of this petition on other grounds, I do not propose to set oat that procedure now or to consider it in the course of this judgment.

3. Although in the original notification the petitioner's plant was not among those to which the production capacity basis for collecting excise duty was to be applied, by a subsequent notification their name was added to the schedule and it is common ground now that at all material times they were liable to pay excise duty upon a production capacity basis. By the same notification that capacity was fixed at 40,000 tons that is per annum. The petitioner's claiming that their annual production capacity did not exceed 18,000 tons they applied, as the rules entitled them to do, to respondent No. 1 for a review of this order. Before this application for review could be decided, respondent No. 2 demanded duty from the petitioners and they, therefore, on the 25th March 1969 filed a petition in this Court being Constitution Petition No. 177 of 1969 challenging the legality of the notifica tion whereby their annual production capacity had been fixed at 4'),000 tons. .

4. On the 1st April 1969 the Review Board heard the application for review and, it is asserted, passed orders orally reducing the annual production capacity of the petitioner's plant to 20,000 tons. Even so the Petitioners. were unwilling to withdraw the petition and asked that the petition should at least be kept over until a copy of the order was supplied but the Court held, relying upon the statement of the learned Deputy Attorney‑General and also a statement made in the counter‑affidavit, that the petition bad become infructuous inasmuch as the impugned notification no longer was in force. These two statements are incorporated in the following passage of the order of the Court whereby they proceeded to treat the petition as infructuous:

"Report called from the department has been received and Mr. Shah Jamil Alam, the learned Deputy Attorney‑General also appeared on behalf of the department and filed counter‑affidavit which has been replied to by the petitioner in the form of rejoinder‑affidavit. The case of the department now is that the impugned notification challenged in the petition is no longer in force for it has been modified after the Managing Director of the petitioner‑Company appeared before the Review Board, Central Board of Revenue, Government of Pakistan and pointed out that the production capacity had been determined without any reference to the actual production. figures in the preceding years. According to the statement made at the Bar by the learned Deputy Attorney General and also so, asserted in the counter‑affidavit, the production capacity has now been. determined at the reduced figure of 2000 tons."

5. In regard to the supply of a copy of the order it was noted that the, Deputy Attorney‑General stated that he would see that, a copy was supplied but that it. might take 7 to 10 days.

6. It would have been noticed that the order stated to have been passed by the Review Board is not limited to any particular period but merely reduced the annual production capacity. However, on the 7th July 1969 the Review Board passed an order in writing ; this is the order now challenged before us and reads thus :‑

"The Review Board, after considering the application for review under subsection (5) of section 3 of the Central Excises and Salt Act, 1944 and the oral submission made by the representative of the manufacturer, decides that as against the production ca achy of 40,000 tons specified in the Notification No. S. R. 0.‑229/(R)/68 dated the 31st December 1968, the annual production capacity of Messrs Indus Chemical & Alkalis Ltd., Karachi, shall be 35,425 long tons. However in consideration of the fact that some of the defective and under capacity parts of the plant and machinery are in the process of replacement which is likely to be completed by the 30th June 1969, the annual production capacity shall stand reduced for the following periods as under :‑

(a) For the period from the 1st January 1969 to

the 30th September 1969. 20,000 long tons

per annum.

(b) For the period from the 1st October 1969 to

the 30th June 1970 28,340 long tons

per annum."

Two things are worth noticing about this order. In the first place it makes 0o reference whatever to any previous oral order : it does not purport in terms at least to be merely a record now made of an order already passed orally. Secondly it reduces the annual production capacity to 35,425 tons but in respect of two periods it reduces it further : in regard to one of these periods the new figure is 20,000 tons while for the other period it is 28,340 tons. The earlier order is only modified to that extent. It is not in effect at all the same order as was stated to have been orally made.

7. This order is now challenged before us on a variety of grounds. The first and most obvious contention that was advanced before us is that this Its not an order in law at all, the real order being the one which was passed earlier orally. Not only is it the assertion of the petitioner that such an oral order was made but that assertion is amply borne out by the statements made in the previous petition to which I have already referred. Even now before us the learned Deputy Attorney‑General, quite freely and fairly, admitted that all those statements had been made and I have no manner of doubt at all that that is the correct position. If then an order upon the review application had already been made then that review application stood disposed of. There is no power that I can see (nor has it been canvassed before us that there is any) whereby the Review Board may, of its own motion and to the prejudice of the tax‑payer, review its earlier order. The power to pass the earlier order in reviews is cane clearly contemplated by the rules and at the instance of the owner of the plant in question. I am not to be understood as saying that by reason of changed circumstances the authorities have no power to fix an enhanced production capacity but that is a wholly different matter and is not at all analogous to the case before us. Upon the basis that there was an order of the 1st April 1969 there is in the present case nothing more than this that that order has been nullified by a second order which does not even acknowledge the existence of the first. d cannot possibly agree that in these circumstances the written order is of any legal effect.

8. The learned Deputy Attorney‑General while candidly admitting the position and making no attempt whatever to gloss‑over it, said that there could be two possible explanations of the manner in which the written order came into existence. The first was that the earlier order did in fact exist although given orally and that it had subsequently been changed. That is the manner in which I have understood it and it is on that basis that I have said that the written order is a nullity.

9. The other explanation which, according to the learned Deputy Attorney‑General, could be offered was that the officer of the department who swore the counter‑affidavit did not know and that the Department did not know, anything more than teat the original order, that is the one fixing the annual production capacity at 40,000 tons had been revoked. For that reason he expressed himself in the affidavit as he did. This might be a good explanation if we were considering such a matter as the prosecution of the deponent for contempt or perjury and it is as well for him that we are not doing so. If this explanation was to be persisted I would be driven to the necessity of having to hold that not only the petitioner but this Court also was deceived and, as a result of the deception practised, an order dismissing the petition was obtained.

10. Even assuming that, while acknowledging the existence of the oral order, for some good and bona fide reason, the Review Board thought it necessary to pass a fresh order largely taking away the effect of the oral order, the written order is still open to grave objection. It is an admitted position that the petitioners were not heard after the oral order was passed and before the written order was passed. The Review Board on the contrary expressly says that it is considering the application for review made to it and the oral submission made in that behalf.

11. It is moreover asserted by the petitioners and admitted by the respondents that an expert was appointed after the application for review and that his report was taken into consideration. Despite a request a copy of that C report was never shown to the petitioners. The learned Deputy Attorney- General had to concede that by itself these two facts, namely. the failure to bear the petitioners and to supply them a copy of the report, vitiated the order.

12. Either of the two contentions that I have discussed suffice for .holding that the impugned order is without authority and a nullity in law. Several other arguments were also addressed to us which were entirely relevant but which I do not think necessary to consider inasmuch as in any view of the matter this petition must, I think, be allowed. The prayer that a declaration be granted to the effect that the annual production capacity of the petitioner's plant is 18000 was not pressed or argued before us.

13. I would, therefore, allow this petition and declare that the order dated 7‑7‑1969 is ineffective and that the Review Board has by an earlier order which remains in force reduced the annual production capacity of the petitioner's plant to 20000 tons. I would grant costs of this petition to the petitioner.

S A. H Petition allowed:

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