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Civil Petition for Special Leave to Appeal No. 468 of 1980. decided on 2nd November, 1980.

(On appeal from the judgment and order of the Lahore High Court, dated 23-2-1980, in I.-C. A. 73/80).

---- S. 12-A(1) read with Ss. 2(d), 2(f ) & 3--Excise duty, levy of-- First notification levying excise duty on certain articles, second notification exempting cotton yarn and yarn made of man-made fibres from excise duty and third withdrawing exemption granted earlier and levying excise duty at a certain rate-Liability in respect of goods manufactured prior to issuance of third notification, held to be regulated by second notification, such being in force at time of manufacture of goods in question.

Colony Sarhad Textile Mills Ltd., Nowshera v. Superintendent, Central Excise and Land Custom 1979 S C M R 640 ref.

Syed Iftikhar Ahmad, Deputy Attorney-General and Taufiq A. kureishy, Advocate-on-Record for Petitioners.

Mumtaz Hussain, Senior Advocate Supreme Court and Aslam Chaudhary, Advocate-on-Record for Respondent.

Date of hearing : 2nd November, 1980.

-By means of a notification dated 11-6-1977 (hereinafter called the first notification) excise duty was levied on certain articles. This notification was amended by a second notification on 29-6-1978, whereby (a) cotton yarn and (b) yarn of man-made fibres, were exempted from excise duty. On 28-6-1979 was then issued a third notification under section 12-A(1) of Central Excises and Salt Act (I of 1944), whereby the exemption granted earlier was withdrawn and excise duty of Re. 1 per kilogram was levied The Colony Thal Textile Mills Ltd. bad at that time a stock which had been manufactured before the aforesaid date viz. 28-6-1979 and as that stock was not being exempted under the second notification, therefore, they filed a constitutional petition being W. P. 4246/79 for a declaration that the third notification dated j8-6-1979 was not applicable to the stock -which had been manufactured prior to its promulgation.

2. The contention found favour and the High Court accepted the aforesaid writ petition and granted the relief prayed for to the respondent herein on 2-2-1980.

3. The Central Board of Revenue filed an I.-C. A. No. 73/80 but without any success as the same was dismissed by the High Court on 23-2-1980.

4. The petitioner has come up in a petition for special leave to appeal against the same to this Court.

5. After hearing the learned Deputy Attorney-General, we are of the opinion that the view expressed by the High Court is quite in accordance with law on the subject as declared by this Court in Colony Sarhad Textile Mills Ltd., Nowshera v. Superintendent, Central Excise and Land Custom (1979 S C M R 640), where it was held that excise duty is levied at the time of the manufacture and production of the goods, under section 3 of the Act. The relevant paragraph in that judgment at pages 662-663 reads as follows :-

"The phrase 'excisable goods' is defined in section 2(d) of the Act which states that 'in this Act, unless there is anything repugnant in the subject or context, excisable goods specified in Part I of the First Schedule as being subject to a duty of excise and includes salt'. The word 'manufacture' is defined in section 2(f) of the Act (and so far as relevant to be reproduced for this case) states that manufacture' includes any process incidental or ancillary to the completion of a manufactured product and any processes of re manufacture, remaking, reconditioning or repair and the process of packing or re-packing such product and. " In the instant case, it is not disputed that the goods on which duty has been levied are specified in Part I of the First Schedule of the Act. It is also not disputed that the aforesaid goods were produced or manufactured by the petitioner in Pakistan. If these two conditions are fulfilled, then these goods come within the ambit of the charging section 3 above reproduced and the authorities concerned were justified, the moment these goods were produced or manufactured, in Pakistan, to levy and recover excise duty on them. The charging section talks of levying duty on production or manufacture and is not concerned with their sale, or what happens to those goods after they are produced or manufactured. For instance, if a manufacturer or producer, after he has produced or manufactured the goods, just stocks them, or to be more precise, hoards them without disclosing whether he intends to sell them in the country or to export them then can it be said that as there is no certainty that the goods were intended for home consumption, therefore, no duty should be levied on them. The answer is in the negative, because, the duty under the Act is livable on their production and manufacture and is not dependent on their sale or other manner of disposal. Take another case. Suppose the goods produced or manufactured are sold by the producer manufac turer to A, who sells them to B and B sells them to C and, in this way, after passing 100 hands, they ultimately reach Z who exports them. Now can it be said that as in this case the goods have been ultimately exported out of Pakistan and were not consumed in the country itself, therefore, they were not liable to duty on their production or manufacture. The answer, in accordance with the apparent tenor of the section above reproduced, is, again, in the negative. The duty, it is thus clear, is only at the stage of production and manufacture of the goods and is not dependent on their sub sequent disposal, for example, by sale (wholesale or retail) in the country and nor will its contemplated export be relevant at that stage. The Legislature has used the words 'goods produced or manufactured in Pakistan' and there is no string of the kind 'intended or meant to be consumed in Pakistan' or 'except those which are exported or are intended to be exported out of Pakistan'. If the Legislature stopped short after saying that the excise duty will be levied on goods produced or manufactured in Pakistan' we should neither add to nor diminish anything from these words, so as to extend or curtail their import. The Legislature was well aware that goods produced in the country can be exported and if it intended to exclude such category of goods which were exported, it could have provided for their exclusion from the charging section, but as there exists no such thing or exception, we cannot add these exceptions ourselves in the Statute."

6. It was further held at page 668 that :-

"In the face of the aforesaid clarification, there remains no ambiguity on the subject that excise duty is essentially a duty on production and manufacture. If the produce manufacturer himself makes the first sale he still remains liable to pay excise duty and if the law so imposes, a sales tax also. Merely because he has paid the sales tax it will not absolve him from paying the excise duty and vice versa if he had paid an excise duty he will not be absolved from paying the sales tax. On the same reasoning, if he exports or to be more precise makes the first sale by export, that too will not absolve him from paying duty on production and manufacture of goods. The Federal Court cases read in this way, it would thus appear, go against the learned counsel and not in his favour. The dictum of Madras Province v. Boddu Paidanna A I R 1942 F C 33 was then followed and approved in Governor-General-in Council v. Province of Madras A I R 1945 P C 98 which, in its own turn, maintained in appeal the similar view reiterated in Governor General-in-Council v. Madras Province A I R 1943 F C 11. I may mention that I felt the necessity of explaining the above position of the case-law, because, the learned counsel cited simply A I R 1939 F C 1 without reading it with its supplementary case of A I R 1942 F C 33 which clarified the confusion, if any, which may have existed in the earlier case as hinted by Gwyer, C',. J., himself, who was the leading author of both the aforesaid cases and who this time expressed the law in more precise terms particularly omitting to use the phrase 'for home consumption' as being an ingredient of the goods liable to excise duty and confined the liability only to their production and manufacture held to excuse repetition, that 'there is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away' and if I may humbly add exported or sold by export'."

7. In the face of the above declaration of law, the contention of the learned Deputy Attorney-General that the goods involved in this case went to be governed by the third notification is not correct because the good having been manufactured prior to the issuance of the third notification their liability to be taxed was to be regulated by the (second) notification which was in force at the time of their manufacture. Learned counsel tried to refer to rule 9 of the relevant rules but there is nothing in the said rule to override the statutory position explained above. The view of the High which is in accord with the aforesaid legal position therefore suffer from no illegality and calls for no interference by this Court.

8. The result is that this petition has no merit and is dismissed.

Petition dismissed.

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