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Constitutional Petition No: 335 of 1970, decided on 5th December, 1979.

---S.3 First Sched., Item 24 as amended by Finance Act (XI of 1968) S. 5(9)-Excise duty-Stock of clinker produced or manufactured prior to 30th June 1968-Not covered by Explanation' added to Item 24 of First. Sched. to Act I of 1944 given retrospective effect from 1-7-1965-Petitioner, held, not liable to pay duty on clinker produced or manufactured before 30th June 1968.

Muhammad Yunus v. Central Board of Revenue P L D 1964 S C 113 ref.

Khalid Anwar for' Petitioner.

K. A. Ghani for Respondents.

Date of hearing : 27th November, 1979.

.-In this undefended petition the short question for our determination is whether 36,028 tons of clinker in stock with the petitioner cement factory as on 30-6-1966, was liable to excise duty. As on 30-6-1966, the petitioner had in stock 41,489 tons of clinker, out of which 5,416 torts were consumed in the, production of cement, leaving a balance of 36,628 tons as on 30-6-1966. By the impugned demand dated 28-8-1967, the petitioner was directed to pay excise duty and surcharge on this stock of clinker held by them on 30th June, 1966. Upto 30-6-1966, the petitioner was liable to pay excise duty on cement on actual production. On coming into force of Excise Duty on "Production Capacity (Cement) Rules, 1966, the petitioner, with effect from 1-7-1966, became liable to pay excise duty on production capacity basis. As on 30-6-1966, clinker was not an excisable item. The Finance Act, 1966 amended Item 24 of the First Schedule to the Central Excises and Salt Act, 1944 and added under the word "cement" an explanation that cement will include clinkers and that this explanation shall be deemed to have been so inserted on the 1st day of July 1965.

2. Mr. Khalid Anwar, the learned counsel for the petitioner contended that this amendment at best enabled the Excise Authorities to claim excise duty on clinker produced and manufactured after 1-7-1965 and not on any stock of clinker produced and /or manufactured prior thereto for excise duty under section 3 of the Act is payable on production or manufacture of excisable goods, though it may be collected at the time of its removal from the factory or at any other subsequent time. The argument of the learned counsel finds support not only in the language of said section 3 but in its interpretation by the Supreme Court of Pakistan in the case reported in Muhammad Yunus v. Central Board of Revenue (P L D 1964 S C 113). The view that prevailed with the Supreme Court is that the expression "duty of excise" in its primary and fundamental sense signifies a tax on goods produced or manufactured in the taxing country and intended for home consumption. Admittedly, in the present case the stock of 36,028 tons of clinker on which excise duty was demanded was not produced or manufactured after 1-7-1965 for it was a carried over stock from the year ending 30-6-1965. Under the Finance Act, 1968 the liability of the petitioner to pay excise duty would be on clinker produced or manufactured subsequent to 30th June, 1965. The demand in this case was on stock of clinker produced or manufactured prior to 30-6-1965 and, therefore, not covered by the explanation added to Item 24 of the First Schedule to the Central Excises and Salt Act, 1944, which was given retrospec tive effect from 1-7-1965.

3. This petition is, therefore, allowed. Since the respondents are absent there will be no order as to costs.

M. Y. M. Petition allowed.

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