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Petitioner: Messrs FRIENDS SONS AND PARTNERSHIP CONCERN VS Respondent: THE DEPUTY JUDGMENT
Court Name: Lahore High Court Judge(s): Rustam S. Sidhwa Title:Messrs FRIENDS SONS AND PARTNERSHIP CONCERN vs THE DEPUTY
JUDGMENT
Reported As: PLD 1989 Lahore 337 Result: Petitions dismissed Judgment JUDGMENT ' This judgment will dispose of seven Constitutional petitions W.P. No,5319 of 1988, W.P. No,522 of 1989, W.P. No,524 of 1989, W.P. No,523 of 1989, W.P. No,528 of 1989, W.P. No,526 of 1989 and W.P. No,527 of 1989, filed by M/s. Friends Sons, Time Publishers, Koh-i-Noor Printing Press, National Sales Agency, Barques Diary and Calendar Company, Rizwan Paper Products, and Islamic Publications Ltd., petitioners, against the hierarchy of Officers of the Central Excise and Sales Tax, for a declaration that no sales tax is payable on the diaries printed and manufactured by the petitioners and to declare that all proceedings taken and orders passed by them are null and void and without jurisdiction and to restrain the respondents and their subordinate staff from recovering any sales tax from the petitioners or from taking any action against them under the Sales Tax Act or the Central Excises & Salt Act. 2. The brief facts of the case are that the petitioners are makers of diaries of various descriptions, which contain a variety of information having considerable informative and educative value. All the petitioners belong to the printing industry and some of them are members of the Pakistan Association of Printing and Graphic Arts Industry, briefly also known as PAPAGAI. 3. The petitioners are not manufacturers of paper and paper board, or mere cutters of paper and paper board to different sizes or shapes. They buy paper, cut it to size, print material thereon and bind them into books called diaries. These diaries not only contain information as to the dates of the different months of the year in question, but a wealth of other information and data, both educative and informative.
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4. It is the case of the petitioners that initially in 1951 the diaries manufactured by them were not treated as exempt from liability to sales tax, whereupon in 1956 the Pakistan Association of Printing and Graphic Art Industries made a representation to the Federal Government, which issued Circular C.No, 9-15-ST/56 dated 25-7-1956, whereby it treated printing jobs, such as forms, diaries, calendars, posters, invitations and visiting cards, etc., etc., as falling within Item No,15 of the Sales Tax Notification No,7, dated 27-6-1951, as a result of which diaries and other articles were exempted from sales tax. It is the case of the petitioners that by the said Circular C.No, 9(15)-ST/56, dated 25- 7-1956 the Central Government extended the scope of goods contained in item No,15 of the Sales Tax Notification No,7, dated 27-6-1951 which covered "printed books, maps, charts, periodicals and newspapers" to include also diaries, calendars, etc., with the result that even when the said sales tax notification was superseded by Sales Tax Notification SRO 569(1)/80 dated 26-6-1980, which also in turn was superseded by Sales Tax Notification SRO 666(1)/81, dated 25-6-1981, the scope of goods enumerated in item No,11.11 of the Notification dated 26-6-1988 and that in item No,37 of the notification dated 25-6-1981, stood extended to also cover diaries, calendars, etc. 5. The petitioners contend that in 1987 the Deputy Collector, Central Excise, Lahore, issued notices Annexures "F" to the petitions of the petitioners alleging that they were printing diaries falling under PCT Heading No,48.18 without obtaining central excise manufacturing licence and without payment of sales tax chargeable thereon in contravention of rules 7-, 9, 174 and 226 of the Central Excise Rules, 1944, read with section 3(4) of the Sales Tax Act, 1951, that during the period 1-7-1982 to 1986/1987 they had produced a large number of diaries valuing large amounts which they had cleared without payment of sales tax amounting to lacs of rupees and that they should show cause within ten. Days as to why penal action should not be taken against them under Rules 7, 210 and 226 of the Central Excise Rules, 1944, read with section 3(4) of the Sales Tax Act, 1951, besides recoveries of the stated sums (running into lacs of rupees) by way of sales tax under Rules 7 and 10 of the Central Excise Rules, 1944, read with section 3(4) of the Sales Tax Act, 1951. The petitioners submitted their replies to the said show-cause notices. However, the learned Deputy Collector of Central Excise, Lahore, by his orders Annexure 'G' to the writ petitions rejected the submissions of the petitioners, and ordered them to pay the under-noted amounts as arrears of sales tax and penalty for the periods shown next to their names:-- {{TABLE}} Name of the petitioner Sales tax Period for which Penalty imposed , tax was due . Imposed Rs,5,68,206 1-7-82 to 30-4-87 Rs,94,700 Rs,3,37,500 1-7-82 to 30-4-87 Rs,56,000 Rs,1,80,875 1-1-82 to 31-12-86 Rs,30,000 Friends Sons Time Publishers Koh-i-Noor Printing Press Sales Agency Rs, 23,750 1-1-83 to 30-4-87 Rs, 4,000 Barques Diary and Calendar Company Rs,3,57,944 1-7-82 to 30-4-87 Rs,59,500 Rizwan Paper Products Rs, 19,600 1-1-82 to 31-12-86 Rs, 3,200 Islamic Publications Limited Rs, 30,721 1-7-82 to 30-6-87 Rs, 5,000 6. All the petitioners preferred appeals against the above orders to the Collector, Central Excise and Sales Tax (Appeals), Northern Zone, Lahore, who rejected the appeals of petitioners Nos. 1 to 5, whereas the appeals of petitioners Nos. 6 and 7 are still pending. Petitioners Nos. 1 to 5 preferred
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revision petitions against the appellate orders before the Central Board of Revenue, which are still pending. 7. It is the case of the petitioners that they would have completed the full circle of the remedies right upto the Central Board of Revenue, but in view of the Central Board of Revenue's letter C.NO.16(52)/ ST/87, dated 25-11-1987 addressed to all the Collectors of Central Excise and Sales Tax and other officials which stated that SRO 666(1)/81, dated 25-6-1981 did not provide for sales tax exemption on locally produced diaries which fell under PCT heading 48.18 and that the Excise officer should ensure that a uniform policy was followed and sales tax was realised from all manufacturers of diaries, it is contended that no useful purpose can be served by pursuing the matter any further in the legal forums provided,, as the Central Board of Revenue having expressed its mind about the interpretation of the law on the subject, any attempt before the Central Board of Revenue would only be an exercise in futility. Faced with this prospect, the petitioners preferred a joint writ petition W.P. No,5319 of 1988, which came up before me for disposal. 8. On 5-10-1988, pre-admission notices were issued to respondents Nos. 1 to 4 for the next date of hearing, on which date they were directed to file, their written statements and to also appear through their legal counsel, who were directed to be prepared to argue the main case, in case the petition was admitted on the said date. On 12-1-1989 the learned counsel for the respondents filed the report and parawise comments on behalf of the Collectorate of Central Excise and Sales Tax, Lahore. The case was argued at length on 16-1-1989 and 17-1-1989. On 16-1-1989, Writ Petition W.P. No,5319 of 1988 was admitted and the 'case was adjourned to 17-1-1989 for the balance arguments. On the next date, arguments were heard. Due to an objection raised on behalf of the respondents, all the petitioners were directed to file separate writ petitions. The case was then adjourned to 1-2- 1989 for the filing of the fresh petitions and for the remaining arguments. On 1-2-1989 fresh petitions were filed. The learned Standing Counsel for the Federal Government accepted notices on behalf of the respondents and waived his right to file fresh written statements, on the ground that report and parawise comments had already been filed earlier. Both the learned counsel for the petitioners and the learned. Standing Counsel for the Federal Government appearing for the respondents, waived their rights to address any further arguments, on the ground that the case had been fully argued at the last hearing. Accordingly, the cases were reserved for judgment. 9. On behalf of the petitioners a number of submissions have been made. First, that the scope of the goods referred to as "printed books, maps, charts, periodicals and newspapers" as appearing in item No,11 of the Sales Tax Exemption Notification No,7 dated 27-6-1951 and in item No,11.11 of the Sales Tax Exemption Notification No,SRO 659(1)/80 dated 26-6-1980 stood enlarged by the Central Government's Circular C.No,9(15)/ST/56 to also include diaries and that the scope of the goods referred to as "printing process all sorts falling under Chapter 49", as appearing in item No,37 of Sales Tax Exemption Notification No,SRO 666(1)/81 dated 25-6-1981, also stood extended by the same Central Government's Circular C.No,9(15)ST/56 dated 25-7-1956 to include diaries and that since the said Circular has not been withdrawn, the petitioners were not liable for the payment of any sales tax. Second, that the goods covered under PCT heading 48.18, which includes diaries, only covers diaries which have some minimal printing, which is merely casual or incidental to the primary use of the article as a diary. In this connection Note 8 under Chapter 48 of section X of the Pakistan Customs Tariff, which states "Paper, paper-board and cellulose wadding, and articles thereof, printed with characters or pictures, which are not merely incidental to the primary use of the goods, are regarded as printed matter falling withinChapter 49", is referred. It is thus contended that where a small note book with blank or lined pages is prepared or made, it would fall under PCT heading 48.18, as it would constitute an article of paper, printed with some minimal words which are merely casual or incidental to the primary use of the note-book as a diary. But where a diary is printed, which contains a host of information and material, both informative and educative, the
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same would fall under PCT heading 49.01 and the same would, therefore, not be liable to any sales tax. Third, that since 1956, the scope of the goods referred to as printed books, maps, charts, periodicals and newspapers, which were entitled to exemption from sales tax, was extended to include diaries, so that the same was also exempt and since printed books, maps, charts, periodicals, and newspapers all stand included in PCT headings 49.01, 49.05, 49.11, 49.02 and 49.02 respectively, by virtue of the Federal Government's Circular, C. No,9(15)-ST/56 dated 25-7-1956, the said goods should get the extended scope so as to cover diaries as well. In this connection, it is submitted .That an interpretation given by the Department on a particular subject over a period of years should not be permitted to be departed from, as it creates a vested right in favour of the person who is entitled thereto. In this connection Nazir Ahmad v. Pakistan PLD 1970 SC 453, Commissioner of Sales Tax, Karachi (East), Karachi v. Chaudhary Farzand All 1983 PTD 271 and Commissioner of Sales Tax, Karachi (Central), Karachi v. Pakistan Fisheries Ltd., Karachi 1985 PTD 282 are referred. Fourth, it is submitted that the assessment orders Annexure 'G' to the petitions were passed by the Deputy Collector of Central Excise and Sales Tax, instead of by the Assistant Collector of Central Excise and Sales Tax, and since powers of the first were equivalent to that of the Inspecting Assistant Commissioner of Sales Tax and that of the second were that of a Sales Tax Officer, the Deputy Collector of Central Excise and Sales Tax, Lahore, had no jurisdiction to pass the assessm ent orders. In this connection the Federal Government's Sales Tax Circular C.No,7 of 1981, dated 1-7-1981 is referred. Fifth, it is submitted that all the seven assessment orders Annexure 'G' to the petitions relate to past assessme nts, which could not have been made without statutory notices issued to the petitioners in Form SS.T.15 under section 28 of the Sales Tax Act, in which a clear period of thirty-five days should have been given to answer the notices, and since the assessm ents were made without issue of the said notices, the assessments are illegal and deserve to be set aside. In this connection, Commissioner of Sales Tax, Karachi v. Pakistan Fisheries Ltd. 1985 PTD 282 and Commissioner of Sales Tax, Karachi v. Chaudhary Farzand Ali 1983 PTD 271 are referred. Sixth, it is urged that since under section 28(1) of the Sales Tax Act no assessment can be made after the expiry of the periods of limitation therein specifically stated, whereas in most of the assessm ent orders assessm ents beyond the periods of limitation have been made, the same to that extent are illegal. 10. On behalf of the Central Excise and Sales Tax Authorities, the following submissions have been made. First, that since "diaries" are specifically referred to in PCT heading 48.18, which states that sales tax is leviable thereon 121% ad valorem, diaries are liable to the payment of sales tax. As regards the Central Government's Circular C.No,9(15)-ST/56 dated 25-7-1956, it is submitted that the same was only applicable to Sales Tax Exemption Notification No,7 dated 27-6-1951 and Sales Tax Exemption Notification No,SRO 659(1)/89 dated 26-6-1980, but not to the last Sales Tax Exemption Notification No,SRO 666(1)/81 dated 25-6-1981, as the same is based on the Pakistan Customs Tariff, whilst the earlier two sales tax exemption notifications were not so based. Second, that the word "diaries" appearing under PCT heading 48.18 is intended to cover all types of diaries, irrespective of the fact whether they have some minimal printing, or detailed printing containing a host of information and material of an informative or educative nature. It is submitted that the object of including the word "diaries" in PCT heading 48.18 was to make diaries liable to sales tax. Third, that Central Government's Circular C.No,9(15)-ST/56 dated 25-7-1956 does not apply to Sales Tax Exemption Notification No,SRO 666(1)/81 dated 25-6-1981 and, therefore, the extension of the scope of the goods "printed books", "maps", "charts", "periodicals" or "newspapers", does not arise. Fourth, that the show-cause notices issued by the Deputy Collector of Central Excise and Sales Tax on the petitioners and the assessment orders passed by him are legal and valid. In this connection it is submitted that under the first proviso to subsection (4) of section 3 of the Sales Tax Act, the sales tax, where the Central Board of Revenue so directs, can be levied and collected as if it
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is a duty of Central Excise leviable under section 3 of the Central Excises and Salt Act, 1944, 'and all the privisions of the said Central Excises and Salt Act and the Rules made thereunder, so far as may be and with the necessary modifications, apply notwithstanding the provisions of the Sales Tax Act. In this connection it is submitted that under the Sales Tax Circular No,2 of 1982 dated 14-6-1982, the Central Board of Revenue, in exercise of the powers conferred by the proviso to subsection (4) of section 3 of the Sales Tax Act, has directed that sales tax leviable on all goods produced or manufactured in Pakistan shall be collected as if it were a duty of excise leviable under section 3 of the Central Excises and Salt Act and all the provisions of the said Act and the rules made thereunder shall, so far as may be and with the necessary modifications, apply, notwithstanding the provisions of the Sales Tax Act. It is further submitted that since action was to be taken for breach of rules 7, 9, 74 and 226 of the Central Excise Rules, which attracted penalties under rules 7, 210 and 226 of the said Rules, and since the value of the goods on which sales tax was due exceeded Rs,50,000, action was validly taken under section 33(b) of the Central Excises and Salt Act by the Deputy Collector of Central Excise and Sales Tax, who under SRO 18(1)/79 dated 6-1-1979 could deal with cases where the value of the goods was above Rs,50,000. Fifth, that show-cause notices were not required to be issued to the petitioners in Form SST.15 and that it was not necessary to give thirty-five days' notice to the petitioners to submit their replies, as required by section 28 of the Sales Tax Act. In this connection it is submitted that the collection of sales tax is undertaken as collection of excise duty under section 3(4) proviso of the Sale Tax Act and all the provisions of the Central Excises and Salt Act and the rules made thereunder apply to the exclusion .Of the provisions of the Sales Tax Act. In this connection pare 3 of Central Board of Revenue's Circular C.No,2(20)ST/81 dated 14-6-1982 is also referred. In the light of these provisions, it is submitted that show-cause notices in form SS.T.15 under section 28 of the Sales Tax Act did not have to be given to the petitioners and show-cause notices under rule 10 of the Central Excises Rules, which were given to the petitioners, were sufficient. Sixth, it is submitted that rule 10 of the Central Excise Rules permits the Excise authorities to recover duties not paid upto a period of five years and, therefore, the recovery of duties by the Department upto a period of five years was legal and valid. Seventh and last, that the petitioners having themselves resorted to appeals and revisions, cannot be permitted to seek constitutional remedy through the present writ petitions without first securing final orders from the appellate and/or revisional Court and since the present petitions are premature, they should be dismissed. 11. I have given my anxious consideration to this case. The first question that arise is whether PCT heading 48.18 has any relevancy to this case. This heading appears in the Pakistan Customs Tariff, which was in force prior to 26-6-1988, as presently the Pakistan Customs Tariff is based on the Harmonized Commodity Description and Coding System. Thus all references in this para and the judgment should, therefore, be treated as references to the old Pakistan Customs Tariff. PCT heading 48.18 appears in sub-chapter II of Chapter 48 in Section X of the said Tariff. Chapter 48 deals with "Paper and paperboard; articles of paper pulp, of paper or of paperboard". Under this Chapter appear Notes 1 to 8. Note 8 reads as follows: - "Paper, paperboard and cellulose wadding, and articles thereof, printed with characters or pictures, which are not merely incidental to the primary use of the goods, are regarded as printed matter falling within Chapter 49." ' Sub-chapter I of Chapter 48 deals with "paper and paperboard, in rolls or in sheets" and sub- chapter II deals with "Paper and paperboard cut to size or shape and articles of paper or paperboard". PCT heading 48.18 which falls in sub-chapter II of Chapter 48 reads as follows: - "Registers, exercise books, note books, memorandum blocks, order books, receipt books, diaries, blotting-pads, binders (loose-leaf or other), file covers and other stationery of paper or paperboard; sample and other albums and book covers, of paper or paperboard."
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' Chapter 49 deals with "printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans". Under this chapter appear Notes 1 to 7. Note 1(a) reads:- "This chapter does not cover: ' Paper, paperboard, or cellulose wadding or articles thereof, in which printing is merely incidental to their primary use (Chapter 48);" ' PCT heading 49.01 falls under this Chapter, which reads: "Printed books, brochures, leaflets and similar printed m whether or not in single sheets. A. Printed books and booklets. B. Other." ' Note 8 under Chapter 48 gives the impression that where the printing on articles or paper or paperboard are not merely casual to the primary use of the goods, such goods would be treated as printed matter falling within Chapter 49. Likewise, Note 1(a) under Chapter 49 gives the impression that where the printing on articles of paper or paperboard are merely casual to their primary use, they would be treated as printed matter falling within Chapter 48. In short, if the printing is minimal and merely casual and not substantive to the primary use of the goods, it falls under Chapter 48; otherwise it should fall under PCT heading 49. It is the case of the petitioners that as "diaries" fall under PCT heading 48.18, only such diaries as have minimal printing, which is merely casual to the primary use of the goods, would fall under this sub-heading and since the diaries being produced/manufactured by the petitioners contain a wealth of information, both educative and informative, their diaries fall under Chapter 49, particularly under PCT heading 49.01. On behalf of the Customs, it is submitted that once "diaries" fall under PCT heading 48.18, the case would be covered by this sub-heading, irrespective of the fact whether the printing is minimal or casual or otherwise. In this respect it is submitted that the object of framing a tariff is to make it easy for the Customs to classify goods on their import and where in the classification all goods stand clearly identified, its position does not shift by the notes contained under the Chapter in which they fall, unless the goods cannot be properly identified, in which case resort can be had to the notes. Now what does the word "diary" mean? It means a book or register, whether small or large, in which daily events, transactions or engagements are recorded. It includes a book for personal notes or memoranda or for details of experience or observations of the writer. A calendar diary is very much a "diary" if it has blank spaces next to the dates of each month where a person can record his engagements, transactions or personal events. ' However, books containing the printed account of travellers, scientists, social figures, etc, from the diaries maintained by them, would not fall within the category of "diaries" as mentioned in PCT heading 48.18, but would fall in Chapter 49. The word "diaries" in PCT heading 48.18 is used in the plural. It is thus intended to cover all sorts of diaries, not only little books with blank or ruled pages with a modicum of printing thereon, but also calendar diaries containing dates and months of a particular year, with a wealth of other information, both educative and informative, provided that they contain blank pages or spaces wherein events, transactions, engagements, etc., can be recorded. Rule 3(a) of the Rules for the Interpretation of the First Schedule printed in the Pakistan Customs Tariff clearly provides that the heading which provides the most specific description shall be preferred to headings providing a more general description. PCT heading 48.18 therefore, clearly applies to diaries. Under Explanatory Notes to Brussel's Nomenclature relating to PCT heading 48.18, the following explanation regarding "diaries" appears:- "These articles (e.g. Diaries) sometimes contain a considerable amount of printed matter but remain in this heading (and not in Chapter 49) provided that the articles are essentially for completion in manuscript or typescript. Similarly exercise books may have handwriting copy printed on each page.
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' The goods of this heading may be bound with materials other than paper ' (e.g. Leather, plastic or textile) and have reinforcements or fittings of metal, plastic etc." ' It is, therefore, clear that calendar diaries of the nature manufactured or produced by the petitioners fall under PCT heading 48.18 and not under Chapter 49. By necessary implication Chapter 49 must, therefore, be taken as completely excluding diaries. "Printed books" falling under PCT heading 49.01 cannot, therefore, be treated as covering diaries. 12. The next question that arises is what are the goods which are chargeable under the Sales Tax Act, 1951, and what are the goods which stand exempted therefrom. Under section 3(1) of the Sales Tax Act, 1951, the under-noted goods are liable to sales tax:-- (a) all goods produced or manufactured in Pakistan, payable by the manufacturer or producer; (b) all goods imported into Pakistan, payable by the importer; (c) all goods sold by a licensed wholesaler, payable by the licensed wholesaler; (d) such goods or classes of goods as the Board may, by notification in the official Gazette, specify in this behalf which are exported from Pakistan, payable by the exporter; (e) ... And . (f) such goods or classes of goods purchased without payment of sales tax by a licensed exporter as are not exported outside Pakistan payable by such exporter. ' It is, therefore, clear that the goods listed under any of the chapters of the Pakistan Customs Tariff are not ipso facto chargeable to…
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