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Petitioner: Messrs SHAHEEN PAPER AND BOARD INDUSTRIES (PVT) LTD KASUR VS Respondent: ADDITIONAL COMMISSIONER INLAND REVENUE (ADJUDICATION), LAHORE
Court Name: Appellate Tribunal Inland Revenue Judge(s): Jawaid Masood Tahir Bhatti, Sohail Afzal Title:Messrs SHAHEEN PAPER AND BOARD INDUSTRIES (PVT) LTD KASUR vs
ADDITIONAL COMMISSIONER INLAND REVENUE (ADJUDICATION), LAHORE Case No.: M.A. (AG) No,95/LB and. F.E.A. No,16/LB of 2009 Date of Judgment:2012-12-12 Reported As: 2013 PTD (Trib.) 755 Result: Order accordingly Judgment ORDER ' This appeal has been directed against Order-in-Original No,35 of 2005 dated 20-5-2005, through which the learned Additional Collector (Adjudication), Lahore has upheld the respondent. The appellant also preferred a miscellaneous application, seeking permission to raise additional grounds of appeal. Since, the additional grounds are purely legal and govern root of the case, the same are admitted for adjudication. 2, The following grounds have been agitated by the appellant:-- (a) That concerning suppression of sales value (under valuation) it is respectfully submitted controversy involved in the titled appeal is that the appellants were charged for under valuing the product i,e, "Economic Grade", "Economic Grade-B", "Low Grade Paper' and "C-Grade" @ Rs,18, Rs,20.50, Rs,22 and Rs,23.25 instead of actual assessable value i,e, Rs,30.46 per kg for the period December, 2002. It is pertinent to mention here that case of the appellants has not been treated in its true perspective and the entire charge revolves around pre-assumptions and suppositions based without fulfilling the legal requirements as laid down under the statutory provisions of law. (b) That price is controlled by market economic forces. The valuation inquiry conducted illegally is not sustainable under law nor does the document collected in the absence of the appellants have also no relation with the goods cleared from the Appellant's factory. Thus the same cannot be relied upon for determining the value of appellant's products. No concrete documentary evidence was produced by the staff of respondent No,1 that the appellants had received more consideration than declared in the Sales Tax invoices and proof of it was not confronted to the appellants. The
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staff of respondent No,1 was not competent to fix the value of taxable supply as decided and held by the Hon'ble Lahore High Court, Lahore. (c) That product of the appellants is writing paper, for which he has been unnecessarily harassed and the case of under valuation has been made maliciously against the appellants. It is pertinent to mention here that unit of the appellants is small in size with old machinery as well as capacity. The product is made out by recycling of the waste paper. Therefore, neither the quality nor the price can be determined contrary to factual position obtaining at site. (d) That evidence brought on record without cross-examination of the parties under the Qanun-e- Shahadat Order of 1984 is not admissible and is totally discarded being false and frivolous in the eyes of law. The department had sufficient time to conduct "quasi judicial proceedings", which failing, amount to malice on the part of the Department. (e) That the staff of Directorate of-Intelligence and Investigation (Customs Sales Tax and Central- Excise) has not been vested with the powers regarding assessing of assessable value of excisable goods on the basis, of roving inquiries conducted on the back of the appellants. The adjudicating authority as well as first appellate forum have ignored this vital legal point and have illegally upheld the unlawful working out of assessable values of the Appellant's products. (f) That the appellants are unaware of the illegal, so-called inquiries conducted by the Customs Intelligence Staff on the basis of which hypothetical assessable value has been worked out. This so-called exercise/inquiry is totally alien to the legal provisions contained in section 4(1) of the Central Excise Act, 1944. (g) That the appellants have not been provided an opportunity of rebutting/cross-examining the alleged documents/persons who said to have issued the so-called receipts/quotations etc. Which is against the provisions of Chapter-V of Qanun-e-Shahadat Order 1984. (h) That no test OR exercise has been conducted to confirm whether the goods cleared from appellants unit and the so-called goods obtained/purchased by the Customs Intelligence Staff were the same OR of like kind and quality OR not. This is against the provisions of section 4(1) of the Central Excise Act, 1944. At the relevant point of time, the appellant's product has been correctly assessed at the wholesale cash price i,e, "Economic Grade", "Economic Grade-B", "Low Grade Paper' and "C-Grade" @ Rs,18, Rs,20.50, Rs,22 and Rs,23.25 instead of actual assessable value i,e, Rs,30.46 per Kg. (i) That if the illegal and unlawful exercise conducted by the Customs Intelligence Staff is made the basis of working out such assessable value of excisable goods, then no excisable goods available in the market will be considered as cleared on correct assessable value. The work back method for arriving at assessable value (wholesale each price) is neither available in the provisions of section 4(1) of Central Excise Act, 1944 nor is permitted legally to be applied for arriving at whole sale case price. (j) That the product of the appellant is not fine quality as machinery of the appellant unit is sub- standard/old machinery as compared to other units. Therefore, the products of appellants' cannot be matched with other unit's products of the same nature for arriving at assessable value (wholesale cash price). Neither representative samples have been shown nor the same tested from any laboratory to confirm whether the so-called products obtained by the Customs Intelligence Staff from the market is of like kind and quality of the appellant's product. The appellants have never been associated with the alleged so called exercise of purchasing/obtaining product from the market. This establishes that the whole, exercise is nullity in the eyes of law and have no evidentiary legal value. (k) That as per Notification No,S.R.O. 543(I)/75 dated 8-5-1975 the staff of Directorate General of Customs Intelligence and Investigation, not below the rank of Deputy Superintendent has only been vested with the powers of a Central Excise Officer under sections 13, 14, 19 and 26 of the Central
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Excise Act, 1944 and Rules 197, 199, 200 and 201 of the Central Excise Rules, 1944, therefore, the Customs Intelligence Staff in this case, has acted beyond their jurisdiction competence. The enquiry/exercise conducted for arriving at assessable value (whole sales cash prices) under section 4(1) of the Central Excise Act, 1944 is illegal being without jurisdiction and competence. Therefore, no violation of Central Excise Law, mentioned in the show because notice is warranted for which appellants cannot be penalized. (1) That the price in the market is always determined by the market economic forces of demand and supply. Every time when demand increases, the price of a product goes up. Thus post clearance valuation inquiry in this case and conducted in the said manner not sustainable in the eyes of law. (m) That alleged so-called evidence collected from Messrs G.H. Traders, Ganpat Road, Lahore and Messrs Amritsar Paper Stores, 8-Ganpat Road, Lahore on the back of the Appellant has no nexus with the goods cleared from the appellants unit. These so-called documents have not been collected by fulfilling the conditions, which make the same acceptable as valid documentary evident. Hence the same cannot be relied upon for determining assessable value of appellant's product. (n) That the Chairman Pulp Paper and Board Mills Association letter addressed to Assistant Collector, Sales Tax and Central Excise, Sheikhupura is not concerned with the appellant's product. The appellants are not the member of the said Association. Rather the appellants are member of Pakistan Paper and Paper Board Recycled Association which is in contact with Sales Tax and Federal Excise Department. Any information, relevant to the appellant's unit is to be rooted through this Association. Hence information given by the earlier Association does not represent true facts of appellant's unit's products. (o) That the determination of value under section 4 of the Central Excise Act, 1944 is the value which shall be deemed to be the 'wholesale case price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders or consumers on the day on which the article is being assessed to duty is removed from the factory or warehouse from the above narrated section of the Central Excise Act, 1944. The study of said provisions of law reveals that no value can be fixed upon for a product. The product in question supplied by the appellant and the other products of like, kind and quality were assessed at the relevant point of time and no undervaluation has been committed by the appellant. (p) That during 1/2002 to 1/2003, there was survived clearance system under the Central Excise Act, 1944 read with Rule 235 of Central Excise Act 1944, Under this s stem application for removal of excisable goods was to be presented before the Central Excise Officer posted in the appellant's factory premises and the said officer would make assessment of Central Excise Duty thereon. On whole sale cash price declared by the appellants at the relevant point of time, central excise duty was assessed as such accepting the same ar correctly and truly declared. That after the clearance of goods, which were cleared through assessment by the appropriate Central Excise Officer, such roving inquiries cannot re-open OR negate the said assessment which had attained finality in the eyes of law. (q) That sales tax is payable on the money actually received by the supplier and not on any other basis. Nowhere in the impugned Show Cause Notice dated 13-11-2004 has been mentioned with sold documentary evidence that the appellants has received any actual price which is higher than the one declared by the appellants. The adjudicating as well as first appellate forum have ignored the very basis on which Sales Tax in paid on the value at which the product is actually sold. Instead of this the department is calculating a fictional price of the product on the basis of conjectures and a fictional formula.
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(r) That the respondent No,1 has not taken into account the submissions advanced by the appellants. Legally each argument / contention OR issue advanced by the appellants had to be discussed which has not been done. Thus the order-in-original dated 20-5-2005 has been passed by the without observing principles of natural justice. (s) That it is specifically pointed out that case reported PLD 1961 Supreme Court 66, 2003 PTD (Trib) 1751, relevant para 111 of 8 at Page No,1756 very clearly define the stance of the appellants and is admissible to the case in hand. Further, reliance on case-law 2007 PTD (Trib.) 339 relevant para 15 at pages 343 & 344 and 2004 PTD 868 is made out. In all the above referred judgments the enhanced / revised value of the product was set aside by the worthy superior courts as well Tribunal. (r) Moreover, in furtherance of our submission as set out in para supra, it is respectfully brought to the knowledge of this Hon'ble Court that in Writ Petition No,544 of 1995 titled "Messrs Rupali Polyester Ltd. v. Collector Customs etc." it has been clearly stated and held that the act of Deputy Director (Investigation and Intelligence) is totally illegal for determination of assumed value and charging the sales tax and Central Excise Duty on notional basis. It is also brought to the knowledge of this Hon'ble Court that the Department filed appeal against the same order before the August Supreme Court of Pakistan, which has been dismissed. (i) That the additional duty and additional tax OR default surcharge imposed under the provisions of Central Excise Act, 1944 and Sales Tax Act, 1990 is not only injudicious, harsh and mala fide but also vexatious as it counter to the very provisions of the said law. It is also submitted that the penalty imposed under Excise and Sales Tax Law is also unlawful. 3. Brief facts of the case are that it was reported by the Superintendent, Intelligence and Investigation (Customs and Excise), Central Region, Lahore that under the directions of the Director Intelligence and Investigation (Customs and Excise) Central Region, Lahore in the month of December, 2002, a drive against evasion of Central Excise Duty and Sales Tax by way of under valuation by various Paper and Paper Board manufacturing units falling in the jurisdiction of Range Officer, Lahore was launched by the staff of this Directorate. The Investigation in the matter revealed that product of this unit i,e, Paper and Paper Board are being sold at the higher rates than declared in the Central Excise Record. In order to ascertain the factual position, the staff visited the wholesale market of Paper and Paper Board, Lahore and obtained documentary evidence pertaining to the wholesale cash price of various Paper and Paper Board items. Cash receipt pertaining to selling of writing paper being produced and cleared by Messrs Shaheen Paper and Board Industries (Pvt.) Ltd., Raiwind Manga Road, Lahore, so issued by a wholesaler namely Messrs G.H. Traders, Ganpat Road, Lahore revealed the consumer price (including profit margin of wholesaler/retailer, Central Excise Duty and Sales Tax) of writing paper as Rs,41.52 per kg: After deducting the elements of profit margin of wholesaler retailer, Central Excise Duty and Sales Tax the assessable value of their writing paper comes to Rs,30.46 per kg. 4. That another wholesaler retail trader namely Messrs Amritsar Paper Stores, 8-Ganpat Road, Lahore has also given quotation of writing paper of Messrs Shaheen Paper and Board Industries (Pvt..) Ltd. Raiwind Manga Road, Lahore and after deducting the elements of profit margin of wholesaler/retailer, Central Excise Duty and Sales Tax, the assessable value of their writing paper comes to Rs,30.36 to 30.46 per kg. Moreover, Messrs Pakistan Pulp Paper and Board Mills Association vide letter dated 3-1-2003 duly signed by its Chairman, addressed to the Assistant Collector, Sales Tax and Central Excise, Sheikhupura has categorically confirmed that assessable value of recycled writing paper is not less than Rs,26.00 to 28.00 per kg. After this confirmation there remains no doubt of ambiguity being documentary evidence on record. This practice of under violation is continuing of regular basis since long.
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4. Learned counsel of the appellant has argued the case on the strength of the above-referred grounds of appeal and has requested to allow the appeal. 5. On the other hand the learned DR defended the impugned orders and stated that the levy of Central Excise Duty, has correctly been upheld by the Adjudicating Officer who confronted the cash receipt obtained by the staff of the Directorate of Intelligence from a wholesaler The said cash receipt and the quotation is not the enough evidence to valueate the exact price of paper. Therefore, the case of the department carries weight. 6. Rival arguments have been heard and relevant record available on file carefully perused. This appeal filed by the appellants, raises a question relating to the basis on which excise duty is to be assessed on paper manufactured by the appellants. According to section 3 of the Central Excise Act, 1944, Excise Duty is to be paid on all excisable goods and paper are included among excisable goods. In accordance with the law excise duty is to be assessed on the value of the paper and this value has to be calculated in accordance with section 4 of the Central Excise Act which reads as under:- "Where under this Act any article is chargeable with duty at a rate dependent on the value of the articles, such value shall be demand to the wholesale cash price for which an article of the like kind and quality is sold are is capable of being sold for delivery at the place of manufacturer and at the time of its removal therefrom, without any abatement of deduction whatever except trade discount and the amount of duty then payable". ' From the bare perusal of the above, it is observed that in accordance with this section, the value for the purpose of assessm ent is the wholesale cash Price for which the goods are sold for delivery at the place of manufacturer and at the time of their removal therefrom less any trade discount. In order to appreciate the point of dispute it is necessary to state the procedure adopted by the taxpayer for the sale of A their goods to the consumer. The tax payer sells their paper for a cash price to distributors. Distributors in their turn sell them to wholesale dealers and wholesale dealers pass them on the market. From the cash price which the distributor is to pay when he received goods from the factory they deduct a discount, part of which the distributor retains for himself, the other part being intended for the wholesale dealer to whom he sells the goods. It is the taxpayer's contention that the appellants had since the time they were manufacturing paper of different kind and quality been assessed on the basis of the amount which they actually receive from the distributors, that is the price fixed by them less the discount allowed and since the appellant refused to comply with the demand that is why the show cause notice issued by the respondent to the appellant. 7. Prima facie, the original basis of assessment i,e,, the price paid by the distributor less the discount was found correct by the department, therefore, the appellant was called upon to state the reasons why a demand was made to include the discount in the amount on which duty was to be assessed. It is the appellant's contention that the distributor was a privileged person and an agent of the taxpayer and therefore, the B discount allowed to him was not the trade discount contemplated by section 4 of the Central Excise Act, 1944. In the alternative, it was contended that only that part of the discount should be deducted which was intended for the wholesale dealer. 8. In the argument before us, it was the contention' of the taxpayer that the distributor was a privileged person or an agent has been not convincing as the expression 'privileged person' appears neither in the Central Excise Act, 1944, nor in any other relevant legislation or commentary, and it is not understood why it was employed. There are no materials on the record to justify the finding that the distributors were the agents of the taxpayers. 9. The first contention put forwarded by the leaned counsel for appellant is that the distributor is not a wholesale dealer and the deduction permitted by section 4 is only the trade discount intended of such dealer. Now, in the first place, section 4 does not speak of the dealer but only of
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the wholesale case price, and it cannot be denied that the distributor purchases goods on wholesale basis and pays a cash price. It is in fact provided in the agreement between the appellant and distributors which has been placed on the record by the respondent that the distributor received delivery of goods only on the payment of the full cash price less the trade discount, but it is not even correct to say that the distributor is not a wholesale dealer. He purchases the goods on wholesale basis and in accordance with the allegations of the appellant itself sells goods wholesale to the wholesale dealers. The mere fact that he is called distributor cannot exclude him from the category of wholesale dealers. At the same time, if section 4 were to apply only to the sale made to the wholesale dealer and the distributor be not a wholesale dealer the result would be that the excise duty would not be payable in this case at all, because it is only at the point when the goods leave the factory that the tax is to be assessed. Any subsequent transaction is not a liable to excise duty, and therefore, it would not be possible to levy duty on the basis of the transaction between the distributor and the wholesale dealer. 10. The alternative contention put forwarded by the AR is that only that part of the discount should be allowed which is intended for the wholesale dealer, but his contention too is not supported by any solid argument. There is no good ground of a distinction between that part of the discount which is retained by the distributor himself and the part which is to go to the wholesale dealer. It is obvious that the whole discount is a trade discount. All that is urged is that the trade discount which is intended or the wholesale dealer alone should be deducted, but this point is really included in the contention dealt with the preceding paragraph. The last contention of the learned counsel is that the sale to the distributor is only colourable transaction. Now if this contention was true on facts the appellant would have a case. If the apparent sale in favour of the distributor was only a fraud so that the property in the goods never passed to the distributor and the intention of this fictitious transaction, was only the partial evasion of excise duty, the transaction would have to partial evasion of excise duty, the transaction would have to be ignored. But there are no materials at all on the record of holding that the transaction is only colourable. All that the learned counsel is able to say is that some of the distributor is related to those who are in charge of the business of the appellant. That fact is by itself too slender a foundation on which any argument may be based. The distributors do pay money in cash to the appellant before they take delivery of the goods and it is only on the basis of some strong evidence that the transaction could be held to be fraudulent and the record lacks any such evidence. 11. In our considered view, the real reason for the action taken by the excise authorities appears to be that they regard the introduction of Registration Authority, Civic Center, Karachi on 29-6-1996 and whose Motor Vehicle tax is paying accordingly is liable for confiscation which was seized from the possession of third purchaser? (3) Whether Vehicle Registration No,BC-4745 registered with Motor Registration Authority, Civic Center, Karachi, in 1996 is liable to out-right confiscation in terms of clauses (8), (77), (89) and (90) of subsection (1) of section 156 of the Customs Act, 1969 in which seizing agency could not prove charge of smuggling? (4) Whether the Learned Member Judicial Customs Appellate Tribunal Bench-1 has failed to properly read the evidence available on record provided by the appellant under section 187 of the Customs Act, 1969 and shift burden of proof on the respondent No,2? 2. Brief facts as recorded by the Appellate Tribunal are that the officials of the respondent No,1 received some credible information that the impugned vehicle Toyota Land Cruiser Jeep bearing Registration No,BC-4745 has been registered with Motor Registration Authority,, Karachi on the basis of irrelevant import documents and was plying in violation of the law, therefore, on 31-8-2005 it was intercepted when it was being driven by one Muhammad Ibrahim son of N.K. Muhammad. He produced Registration Book No, NC-457239 at the time of its impounding and undertook to
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produce import documents later on. When the respondent No,1 approached the Excise and Taxation Officer for supply of the copies of the import documents it was informed vide letter dated 26-11-2005 that as per record one Muhammad Aslam Sheikh son of Sheikh Muhammad Younus was the registered owner of the vehicle, however, no import documents were supplied by the Excise and Taxation Officer. Then Muhammad Ibrahim approached the Directorate and submitted original registration book, photocopy of the Bill of entry, IGM No,965/91 dated 3-6-1991, Index No,69, Cash No,4010 dated 8-6-1991 along with Bill of Lading No, NYKS-173024339 dated 14-5-1991. Photocopy of import authorization dated 4-6-1991, photocopy of miscellaneous other documents regarding clearance of the Jeep from port and authority letter dated 21-12-2004 issued by Muhammad Aslam Sheikh, the owner in favour of Muhammad Gul, the applicant. Respondent No,1 sent the import documents to the concerned, department of customs for verification on 24-9- 2005, in response whereof the Principal Appraiser (Appraisement) Collectorate informed that the Toyota Land Cruiser Parado bearing Chassis No,LJ78-0008007 was not cleared from Customs House and the said Bill of Entry was fake/fabricated. On the basis of said report it was prima-facie clear that the impugned vehicle was smuggled in the country and thereafter registered with Motor Registration Authority on the basis of fake import documents, therefore, the same was seized…
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