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Petitioner: Messrs ARMY WELFARE SUGAR MILLS LTD. and others VS Respondent: FEDERATION OF JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Ajmal Mian, Abdul Qadeer Chaudhry, Shafi-ur-Rehman Title:Messrs ARMY WELFARE SUGAR MILLS LTD. and others vs FEDERATION OF
JUDGMENT
Reported As: 1992 SCMR 1652 Result: Order accordingly Judgment JUDGMENT AJMAL WAN, J.---By this common judgment, we intend to dispose of the above 20 civil appeals, which have been filed with the leave of this Court, against a common judgment dated 29-11-1990 passed by a Division Bench of the High Court of Sindh in Constitution Petitions Nos.D-668/89, D- 686/89,D 687/89,D-693/89, D-706/89,D-713/89,D-739/82,D-754/89,D-760/89,D-669/89, D-676/89, D-468/89,D-437/89,D-741/89,D-742/89,D-821/89,D-822/89,D-743/89, D-846/89 and D-51/90, filed inter alia by 17 appellants in the above appeals, challenging SROs Nos.555(1)/89 and 556(1)/89 both dated 3-6-1989, hereinafter referred to as 'the 2 impugned SROs.The former SRO omitted entries in Clause (e) in Columns 2 and 3 of SRO No,555(1)/79, dated 28-6-1979. Whereas, by the latter SRO, earlier SRO No,815(1)/85, dated 29-8-1985 was rescinded. The effect of the above two impugned SROs was that the concessions as to the payment of excise duty on the production of sugar, enjoyed by the sugar mills till the issuance of the above two impugned SROs, were withdrawn. 2. Out of the above 20 Constitution petitions, 17 petitions were dismissed and 3 Constitution petitions were allowed. The operative portion of the judgment reads as follows:- "As the result of above discussion we find no merit in the petitions filed by the old Sugar Mills being C.P. No,D-686/89, CP No,D-687/.89, CP No, D-693/89, CP No, D-706/89, CP No,D-713/89, CP No,D- 739/89, CP No, D-759, CP No, D-760/89, CP No,D-846/89, CP No,D-669/89, CP No,D-767/89, CP No, D-742/89, CP No,D-821/89, CP No,D-322/89 and CP No,D-51/91 and the two petitions being CP No,D- 437/89 and CP No,D-468/89 mentioned in the preceding paragraph, and dismiss the same with costs while in case of petitions CP No:D-668/89, CP No,D-741/89 and CP No,D-743/89 we declare
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that the notification No, SRO 556(1)/89, dated 3rd June, 1989, so far as it applies to withdrawal of 50% exemption from payment of Central Excise Duty before the expiry of period of two years calculated from the date of their production of sugar is without lawful authority and of no legal effect and allow these petitions only to this extent." 3. Petitions for leave to appeals Nos, 547-K of 1990, 548-K of 1990, 551-K/90 to 560-K of 1990, 562- K/90 to 564-K/90, 572-K/90 and 22-K/91 were filed by the appellants, whose above 17 Constitution petitions were dismissed, hereinafter referred to as 'the Private Appellants', whereas, petitions for leave. To appeal Nos.18-K of 1991 to 20-K of 1991 were filed by the Federation of Pakistan, hereinafter referred to as 'the Federation of Pakistan', against allowing of the three Constitution Petitions mentioned hereinabove in para. 2. 4. Leave to appeal was granted to consider the following questions:-- "(i) Whether the High Court is justified in holding that under section 12-A read with section 21 of the General Clauses Act, 1897, the Federal Government enjoys unfettered power to rescind the notifications of the nature in issue; (ii) Whether the rescission of the earlier notifications through the notification dated 3-6-1989 infringes any vested right of the old and new sugar mills? Reliance was placed on the case of Al- Samrez Enterprises v. The Federation of Pakistan 1986 SCMR 1917. (iii) Whether the private appellants were entitled to press into service the doctrine of promissory estoppel against the official petitioners in the present case? Reliance was placed on the case of Federation of Pakistan and others v. Salahuddin and 3 others PLD 1991 SC 546. (iv) If the doctrine of estoppel could be pressed into service in the present case, it was to operate for how long period? (v) Whether the official respondents could levy Central Excise Duty on the sugar which was already produced by the private petitioner, prior to the date of above notification, namely, 3-6-1989? Reliancewas placed on the case of Colony Sarhad Textile Mills Ltd. v. Superintendent, Central Excise and Land Customs 1979 SCMR 640 and the case of Central Board of Revenue etc. v. Colony Thal Textile Mills Ltd. 1981 SCMR 303. (vi) From what date, the notification dated 3-6-1989 became operative, if it was legal?" 5. The facts to be noted are, that the private appellants are engagedin manufacture of sugar and their sugar mills are situated in various places in the Province of Sindh. It may be observed that manufactured sugar is subject to levy of excise duty at the rate of Rs,2.50 per kilogram under item No,02.02 of the First Schedule appended to the Central Excises and Salt Act, 1944, hereinafter referred to as 'the Act'. The Federal Government pursuant to the powers conferred under section 12- A of the Act, issued Notification No,SRO 555(1)/79, dated 28-6-1979 exempting certain goods from the payment of Central Excise Duty including sugar which was covered under Item No,02.02. The relevant entry in the above notification dated 28-6-1979 reads as follows:-- Item No,Description of goods Rate of duty 02.02 (a) Sugar manufactured in .a factory which is operated without the aid of power, steam or natural gas.Nil (b) Confectionery, icing, dererara and candy sugar manufactured in a factory from sugaron which duties of excise have already been paid, provided that the procedure prescribed under the Act or the rules made thereunder is followed.Nil (c) Sugar produced for demonstration and experimental purposes in the--- (i) Agricultural Station, Faisalabad. Nil (ii) Agricultural Farm, Tarnab, and (iii) Agricultural Farm at Mastankilli in Mardan District. Nil (d) Khandsari sugar Nil
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(e) Sugar manufactured in a factory in a financial year which exceeds the annual average production of the preceding two financial years in that factory:Sixty eight paisa per kg. Provided further that in the case of a factory which is in production for less than seven years, this exemption shall apply if, in a financial year its production exceeds the annual national average, as determined by the Central Board of Revenue, for that year, on the basis of total production of Sugar during the last five years in the sugar factories which are in production for at least seven years." 6. It seems that the Federal Government, from time to time, amended the above quoted clause (e) in column 2 of the aforesaid SRO inasmuch as by SRO No,263(1)/82, dated 21-3-1982, it was provided that the quantity of sugar manufactured in a financial year which exceeded production from the preceding four years in a mill was partly exempted from the payment of duty. The above amendment was to operate with effect from 1-7-1981. This was followed by a notification bearing SRO No,560(1)/82, dated 14-6-1982 whereby the above clause (e) of column 2 to the First Schedule was substituted and it was provided that the quantity of sugar that was produced by sugar mills in a financial year which exceeded average production for the preceding two years was exempted from payment of Central Excise Duty. The above amendment was to take effect from first day of July, 1982. It appears that the above notification was followed by a notification bearing SRO No,132(1)/86, dated 6-2-1986, which is not relevant for the controversy in issue. After that, notification bearing SRO No,814(1)/85, dated 29-8-1985 was issued under above section 12-A of the Act, granting 50% exemption from the payment of Central Excise Duty on sugar produced by new sugar mills on their production for the first two years commencing from the date of production. The sugar mills which had commenced production in the years 1982-83 and 1983-84 or thereafter, were also allowed the above exemption. It was also provided that the latter sugar mills, if they had already paid Central Excise Duty on their production of sugar, were entitled to refund/adjustment against such payment to the extent of 50%, which was to be adjusted towards the payment of excise duty on their production for the years 1985-86 and 1986-87. However, by a subsequent SRO No,509(1)/87, dated 21-6-1987 the aforesaid 1986-87 years was substituted by the year 1988-89 for the above adjustment. Five of the private appellants, who were petitioners in the constitution petitions, fell within the category of new sugar mills, the detail of which is as follows:-- S. No,Name of the Mill Date of commencement of production 1. Messrs Army Welfare Sugar Mills (CP No,D-437/89) C.A. No,100-K/1991 28-2-1984 2. Messrs Faran Sugar Mills (CP No,D-468/89) C.A. No,103-K/1991 1983-84 3. Messrs Sanghar Mills (C.P. No,D-668/89) C.A. No,119-K/1991). 18-1-1988 4. Messrs Dewan Sugar Mills (CP No,D-741/89) C.A. 108-K/1991). 28-11-1987 5. Messrs Al-Asif Sugar Mills (CP No,D-743/89) C.A. No,115-K/1991) 27-10-1987 7. After the issuance of the above two SROs Nos. 814(1)/85 and 509(1)/87, dated 29-8-1985 and 21- 6-1987 respectively, under section 12-A of the Act, entry No,02.02 read as follows:-- "02.02Exemptions (a) Sugar manufactured in a factory which is operated without the aid of power, steam or natural gas.Free (b) Confectionery, icing, demerara and candy sugar manufactured in a factory from sugar on which duties of excise have already been paid, provided that the procedure prescribed under the Act or the rules made thereunder is followed:Free (c) Sugar produced for demonstration and experimental purposes in the--- (i) Agricultural Station Faisalabad; (ii) Agricultural Farm, Tarnab; and (iii) Agricultural Farm at Mastankilli in Mardan District Free (d) Khandsari sugar
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(e) Sugar, other than sugar manufactured from beet by the factories in the North-West Frontier *Province, manufactured by a factory in a financial year which exceeds the average production of sugar, other than sugar manufactured from beet by the factories in the N.-W.F.P. For the preceding two financial years.Free (f) Sugar produced from beet during the financial years 1985-86 to 1989-90 by the sugar mills located in N.-W.F.P.Free (g) New sugar mills, which commenced operation during 1982-83 crushing season or thereafter or which may commence operation hereafter from payment of fifty per cent of central excise duty leviable on their production of first two years commencing from the date of operation. The new sugar mills which commenced production during 1982-83 and 1983-84 and which have already paid excise duty on the first two years of their production of sugar will be entitled to refund/adjustment of the duty in such a manner that fifty per cent of the total amount of such refund/adjustment will be made against the duty payable by them during 1985-86 and fifty per cent against the duty due from them during 1988-89." 8. That the old and new sugar mills continued to enjoy the concessions under above SROs till the issuance of the two impugned SROs followed by a letter issued by the Customs and Central Excise Department informing the private appellants that according to the Budget Speech for the year 1989-90, exemption of Central Excise Duty on cane sugar for the older as well as for the new mills had been withdrawn with immediate effect and, therefore, the entire stock of sugar available in the factories was subject to Central Excise Duty at the rate of Rs,2.15 per kilogram. Some of the private appellants were directed to refund the amounts allegedly wrongly adjusted on the basis of notification, dated 29-8-1985 granting exemption from payment of Central Excise Duty on sugar retrospectively for the years 1982-83 and 1983-84. Thereupon, the above 20 constitution petitions were filed, which were heard together and disposed of by the aforesaid common judgment in the above terms. The private appellants and the Federation of Pakistan filed the above petitions, for leave to appeal. Leave to appeal was granted to consider the above questions. 9. Before proceeding with the contentions raised by the learned counsel for the appellants, it may be pertinent to observe that SRO No,560(1)/82 dated 14-6-1982 and SRO No,814(1)/85, dated 29-8- 1985, referred to hereinabove, are the two SROs which are in issue. It may be advantageous to reproduce the same, which read as follows:-- S.R.O. No,560(10/82 "SRO No, 560(I)/82.--In exercise of the powers conferred by . Subsection (1) of section 12-A of the Central Excises and Salt Act, 1944 (I of 1944), the Federal Government is pleased to direct that the following further amendment shall be made in its Notification SRO 555(1)/79, dated 28th June, 1979 namely:-- In the aforesaid Notification in Table I, in item 02.02 for clause (3), Column (2) and the entry relating thereto in column (3) the following shall be substituted, namely:- "(e) Sugar manufactured in a factory in a financial year Nil which exceeds the average production for the preceding two years in that factory (2) The amendment shall take effect on the first day of July, 1982." S.R.O. No,814(1 )/85 "Notification SRO 814(1)/85, dated 29th August, 1985.--- In exercise of the powers conferred under subsection (1) of section 12-A of Central Excises and Salt Act, 1944 (I of 1944), the Federal Government is pleased to exempt new sugar mills, which commenced operation during 1982-83 crushing season or thereafter or which may commence operation hereafter, from payment of fifty per cent of central excise duty leviable on their production of first two years commencing from the date of operation.
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(2) The new sugar mills which commenced production during 1982-83 and 1983-84 and which have already paid excise duty on the first two years of their production of sugar will be entitled to refund/adjustment of duty in such a manner that fifty per cent, of the total amount of such refund/adjustment will be made against the duty payable by them during 1985-86 and fifty per cent against the duty due from them during 1988-89." 10. A perusal of the abovequoted SROs indicates that the effect of SRO 560(1)/82 was that the sugar manufactured in a mill in a financial year which exceeded the average production for the preceding two years in that mill was exempt from payment of the central excise duty to the extent of excess. The above SRO was to be effective from 1-7-1982. It may further be noticed that the effect of above SRO 814(1)/85 was two-fold, namely: (a) The sugar mills which commenced operation during 1982-83 crushing season or thereafter or which might have commenced operation after the issuance of the SRO, were exempted from payment of 50 per cent of central excise duty leviable on their production of the first two years from the date of operation. (b) That the new, mills which had commenced production during 1982-83 and 1983-84 and which had already paid central excise duty on the first two years of their production of sugar, were entitled to refund/adjustment of duty in such a manner that 50 per cent of the total amount of such refund/adjustment was to be made against the duty payable by them during 1985-86 and 50 per cent against the duty due from them during 1986-87, which was substituted by SRO 509(1)/87, dated 21-6-1987, by the year 1988-89. The above quoted SRO 814(1)/85 contained the substituted year. 11. (a) It may be pertinent to observe that Civil Appeals Nos.102-K, 103-K, 104-K, 105-K, 106-K, 107-K, 109-K, 110-K, 112-K, 113-K and 114-K, all of 1991, relate to above SRO No,560(1)/85, dated 29-8-1985, hereinafter referred to as 'Category I appeals'. The case of the private appellants therein is that notwithstanding the issuance of the impugned SRO 555(1)/89, dated 3-6-1989, referred to hereinabove, they are entitled to exemption from the payment of central excise duty on the quantity of sugar manufactured in excess of the average production of the preceding two years by the time of issuance of SRO dated 3-6-1989. (b) It may also be mentioned that Civil Appeals Nos.108-K/1991 and 115K/1991 also relate to SR() 560(1)/85, dated 29-8-1985, hereinafter referred to as 'Category H appeals'. The case of the private appellants is that they are entitled to exemption from the payment of central excise duty on the excess quantity manufactured by them even in the following financial year after the issuance of the above SRO dated 3-6-1989. (c) It may further be observed that Civil Appeals Nos.100-K/91, 101-K/91 and 116-K/91 pertain to para. 2 of the above SRO No,814(L)/85, dated 29-8-1985, hereinafter referred to as 'Category III appeals'. The case of the private appellants therein is that the official respondents are not entitled to claim refund of the 50 per cent central excise duty refunded/adjusted during the years 1985-86 and 1988-89 against the excise duty payable on the sugar manufactured during 1982-83 and 1983-84. (d) It may further be stated that Civil Appeals Nos.117-K/91, 118-K/91 and 119-K/91, filed by the Federation of Pakistan, also relate to above para. 1 of SRO 814(1)/85, dated 29-8-1985, hereinafter referred to as the 'Category IV appeals'. The grievance of the Federal Government is that the High Court was not justified in allowing 50 per cent concession on two yearsproduction in terms of above para. 1 of the above SRO to the respondents/petitioners mentioned hereinabove in para. 5. 12. Since most of the above appeals fall under Category-I appeals, and as the thrust of the arguments of the learned counsel for the parties centered around the above appeals, we intend to take up the same after dealing with the above other categories of appeals.
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13. There are two appeals which fall under Category-II appeals. The appellants in these appeals want to avail exemption on the excess quantity manufactured by them in the financial year subsequent to the issuance of the two impugned SROs. The relevant SRO, namely, SRO 560(1)/82, dated 14-6-1984 has already been reproduced hereinabove in para. 9. Clause (e), which was substituted in Table-1 in item 02.02 of the SRO No,555(1)/79, dated 28-6- 1979, speaks of sugar manufactured in a factory in a financial year which exceeds the average production for the preceding two years and, therefore, after the rescission of the above notification by one of the above two impugned SROs, the appellants in the aforesaid two appeals have no legal basis to act upon the rescinded SRO. Neither Mr. Mansoor Ahmed Khan nor Mr. Khalid Anwar, learned counsel, appearing in the above two appeals was able to point out any rationale for the above claim of the appellants. Therefore, the above two, appeals have no merits. 14. Adverting to Category-IV appeals, it may be observed that the three appeals referred to in para. 11(d) have been filed by the Federation of Pakistan against allowing of the three constitution petitions filed by the new mill owners, claiming exemption, in terms of SRO No,814(1)/85, dated 29- 8-1985, reproduced hereinabove in para.9, from the payment of 50 per cent central excise duty leviable on their production of the first two years, commencing from the date of operation. The High Court has sustained the above claim of the respondents on the basis of the judgments of this Court in the case of Pakistan, through the Secretary, Ministry of Finance v. Muhammad Himayatullah Farukhi PLD 1969 SC 407 and the case of Collector of Central Excise and Land Customs and 3 others v. Azizuddin Industries, Chittagong PLD 1970 SC 439. Chaudhry Ijaz Ahmed, learned Deputy Attorney-General, has not been able to point out any infirmity in the judgment of the High Court on the above question. However, he has contended that the grant of exemption being discretionary, it would not result in creation of any vested right. Reliance was placed by him on the cases of Messrs Amin Soap Factory and others v. Government of Pakistan and others PLD 1976 SC 277, Khyber Electric Lamps Manufacturing Co. Ltd. v. Federation of Pakistan through Ministry of Finance, Islamabad and another PLD 1983 Pesh. 112 and Bannu Sugar Mills (Pvt.) Ltd. v. Inspector, Customs and Central Excise, Bannu Sugar Mills Ltd., Bannu and 2 others 1990 CLC 569. There is no doubt that nobody can claim exemption from the payment of central excise duty or, for that matter, from the payment of any tax. Indeed, grant of exemption, if any, is a discretionary matter. However, it is subject to what has been held by this Court in the case of Collector, Central Excises and Land Customs and 3 others v. Azizuddin Industries (Supra), the relevant portion of which reads as follows:-- "It was argued by Mr. Brohi that the Notification dated the 28th February, 1964, was without lawful authority, as the reasons on which it was based, namely, the exclusion of the District of Chittagong Hill Tracts was not relatable to the grant of, exemption. The exercise of power under section 12-A to grant exemption as well as the power to withdraw the exemption under section 21 of the General Clauses Act is unconditional. It is, therefore, not open to Courts to go behind the Notification of the 28th February, 1964 on the ground that the exercise of the power by the Central Government was improper. However, if the grant of exemption was subject to the existence of certain conditions and the withdrawal of exemption was also made conditional on the happening of certain eventuality, then the Government could not withdraw the exemption unless the requirement of law was fulfilled. As no such conditions are provided in section 12-A in the instant case, the High Court had no authority to make its own surmises as to the propriety of reasons which had motivated the issue of the Notification dated the 28th February, 1964." 15. The judgment of this Court in the case of Messrs Amin Soap Factory (supra) relied upon by Chaudhry ljaz Ahmed, has no relevance to the controversy in issue, as in the above case, the question of withdrawal of an exemption notification was not involved. But, the question was,
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whether grant of exemption from payment of excise duty was a discretionary matter of the Government and in that context it has been held that the Government may, or may not, exempt any goods or any class of goods from the levy of excise duty and likewise it could grant exemption on any terms and conditions, according to its own view of public policy and expediency. The other cases referred to by Ch. Ijaz Ahmed also have no bearing on the point in issue. No case has been cited by him in which a contrary view might have been taken by this Court to the view taken in the case of Collector of Central Excise and Land Customs and 3 others (supra). Reference may also be made to the case of Pakistan through Ministry of Finance (supra) relied upon by the High Court, in which this Court, while considering section 21 of the General Clauses Act, 1897, has held that the authority competent to make order has power to undo it but, the order cannot be withdrawn or rescinded once it has taken legal effect and certain rights are created in favour of any individual and that the principle of locus poenitentiae (the power of rescinding till a decisive step Is taken) would be available. 16. We are, therefore, of the view that the above appeals also have no merits. 17. 'We may now revert to Category-III appeals, which are three in number, referred to in para. 11(c) hereinabove. The appellants in the above three appeals were given adjustment of the 50 per cent excise duty paid by them during 1982-83 and 1983-84 against their liability of excise duty for the years 1985-86 and 1988-89 in terms of para.2 of SRO 814(1)/85, dated 29-8-1985. Upon the issuance of the two impugned SROs., the appellants in C.As. Nos.100-K of 1991 and 101-K of 1991, namely, Messrs Army Welfare Sugar Mills, were called upon by respondent No,3 through his notice dated 18- 4-1989, to refund Rs,3,89,15,645. Whereas, the appellants in C.A. No,116-K of 1991, namely, Messrs Faran Sugar Mills, were also called upon by respondent No,3, through his identical notice dated 18- 4-1989, to refund Rs,7,16,39,075. It will he advantageous to, reproduce one of the above notices, which reads as follows:-- "To, Messrs Faran Sugar Mills, Shaikh Phirkio, District Hyderabad. Under the Ministry of Finance Notification No,SRO 814(1)/85, dated the 29th August, 1985, issued under section 12-A of the Central Excise and Salt Act, 1944, you were granted refund or of excise duty amounting to Rs,7,16,39,075 (Rupees seven crore sixteen lac thirty-nine thousand seventy- five) only according to the statement attached. (2) In view of the settled law that a notification cannot have retrospective effect, Notification No, SRO 814(I)/85, dated the 29th (sic) 1985, was void ab initio in so far as it purported to grant exemption retrospectively. (3) In view of the legal position stated above, the refund/adjustment granted to you was without legal authority and it has, therefore, been decided to call upon under Rule 10 of…
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