A & B FOOD INDUSTRIES LIMITED. VS COMMISSIONER OF INCOME-TAX/SALES, KARACHI

1992 P T D 545

[Supreme Court of Pakistan]

Present: Zaffar Hussain Mira, Ajmal Mian and Saleem Akhtar, JJ

A & B FOOD INDUSTRIES LIMITED.

versus

COMMISSIONER OF INCOME-TAX/SALES, KARACHI

Civil Appeals No.112-K to 114-K of 1985, decided on 15/05/1991.

(From the judgment dated 2b-4-1984 of the High Court of Sindh, Karachi, passed in S.T.R.Nos.105,106 and 108 of 1973)

(a) Sales Tax Act (III of 1951)---

----S. 27---Constitution of Pakistan (1973), Art. 185(3)---Leave to appeal was granted to consider the question, whether the assessee was entitled to the refund of the Sales Tax on the consumption of vegetable ghee in the manufacture of biscuits after the sales tax payable on vegetable ghee was merged with excise duty and the sales tax was exempted through a notification.

(b) Interpretation of statutes---

---- Reference to proceedings of the legislature ---Reference to proceedings of the legislature can be resorted to, when the words of a provision of a statute are ambiguous with the object to discover the real intention of the law makers---Where there is no ambiguity in the language employed in the relevant provisions of the statute, recourse to the proceedings of the legislature cannot be made in order to construe the same in violation of the language employed therein.

Government of West Pakistan v. Wali Muhammad Habib PLD 1961 SC 215; Commissioner of Income-tax, Karachi v. Khatija Begum, Partner, Shakil Impex, Karachi 1965 PTD 540; Messrs Abbasi Textile Mills Ltd. v. The Federation of Pakistan and others PLD 1958 SC (Pak.) 187; S. Muhammad Din & Sons Ltd., Lahore v. Sales Tax Officer, Special Circul Lahore etc. PLD 1977 Lah. 1225; Miss Benazir Bhutto v. Federation of Pakistan and another PLD 1988 SC 416; Bindra's Interpretation of Statutes (8th Edn. p.381 and United States of America v. America Trucking Associations (1940) 310 US 534 ref.

(c) Central Excises and Salt Act (I of 1944)---

----First Sched., item 11 [as amended by Finance Act, (XII of 1967)]-- Language of item 11, First Schedule is not ambiguous as to warrant the recourse to the speech of the Finance Minister which he made while piloting the Bill of Finance Act, 1967.

(d) Taxation---

----While determining whether or not a particular matter comes within a taxing statute, it is only the letter of the law which must be looked to---If a person sought to be taxed comes within the letter of law, he must be taxed, however great a hardship may thereby be involved---If the State cannot bring the subject within the letter of the law he is free, however apparent it may be that his case is within what might be called the spirit of the law.

The Commissioner of Agricultural Income-tax, East Bengal v. B.W.M. Abdur Rahman, Manager, Taki Bara Taraf Wards Estate 1973 SCMR 445 ref.

(e) Words and phrases---

----"Merge" and "merger"---Meanings.

The primary meaning of the words "merge" & "merger" seems to be to sink or disappear in something else, to be lost to view or absorbed into something else, to become absorbed or extinguished, though at the same time, the word "merge" also carries the meaning of joining together, an addition, a combination of the qualities of one with another not a death but rather a marriage.

Corpus Juris Secundum, Vol. 57, pp. 1067-1068 and Black's Law Dictionary, Fifth Edn., p. 891 ref.

(f) Central Excises and Salt Act (I of 1944)---

----First Sched., item 11 [as amended by Finance Act, (XII of 1967)]----Sales Tax Act (III of 1951), Ss. 3 & 17---Exemption of vegetable ghee from levy of sales tax by Notification under S. 7 of the Sales Tax Act, 1951---Language of item 11, First Schedule does not show that it includes the amount of sales tax-- Levy of sales tax is made on all goods produced or manufactured in Pakistan and on all goods imported into Pakistan etc. under S. 3 of the Sales Tax Act, 1951, which provision remained intact.

(g) Sales Tax Act (III of 1951)---

----S. 8(2)---Grant of licence under S. 8 to the manufacturers of the vegetable ghee does not amount to an admission on the part of Federal Government that factually the amount of excise duty includes the amount of sales tax.

In order to reduce the burden of taxes on the manufacturers, licences were ordered to be issued under section 8(2) of the Sales Tax Act to the manufacturers of Vanaspati ghee as a special case for limited purpose in order to enable them not to pay sales tax on the raw materials mentioned therein, namely, imported edible oil, chemicals, packing materials etc. and on the conditions contained therein. The very factum that the Federal Government by the notification dated 11-6-1967 issued under S. 7 of the Act granted exemption from payment of sales tax on the vegetable ghee does not mean that amount of excise duty includes the amount of sales tax.

(h) Sales Tax Act (III of 1951)---

----Exemption---Once the exemption is granted from the payment of sales tax, the goods so exempted go out of the net of the taxing statute.

The Commissioner of Income-tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) Ltd. PLD 1970 SC 93 ref.

(i) Interpretation of statutes---

---- Fiscal statute---Court is competent to determine the real nature of a particular levy with reference to relevant statute---Court, however, is not empowered to read something into a clear provision of a taxing statute.

Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329 ref.

(j) Sales Tax Act (III of 1951)--

.

----First Sched., item 11---Central Excises and Salt Act (I of 1944), S.37-- Excise duty was levied on the vegetable ghee on the weightage whereas sales tax was on the value of the goods---Power to determine the real character of a particular levy enjoyed by a Court would not include the power to hold that though the tax had been levied under the Central Excises and Salts Act, 1944 but it should be considered to have been partly levied under the Sales Tax Act, 1951 nor the doctrine of lifting of the veil which was more aptly applicable in case of a corporation could be pressed into service in violation of the provisions of the statute.

(k) Interpretation of statutes--

.... If the language of a statute is clear and unambiguous, the Court is bound to construe and to give its effect without taking into consideration anything extraneous to the same.

(l) Sales Tax Act (III of 1951)--

----S. 27(1)---Refund of sales tax---When admissible.

Under subsection (1) of section 27 of the Sales Tax Act, refund of the sales tax is admissible where, partly manufactured goods (i.e. the goods which are to be incorporated into and form the constituents or component parts of an article which is subject to the tax as per definition given in clause 12 of S. 2 of, the Act) are purchased by a manufacturer and sales tax has been paid on these goods on importation or on any previous sale. In the present case no sales tax was payable on the vegetable ghee in view of the notification dated 11-6-1967 issued under S. 7 of the Sales Tax Act, 1951 during the relevant period and admittedly no amount as a sales tax had been paid by the assessee while purchasing the vegetable ghee for using the same in the manufacture of biscuits. What was paid by them was the price of vegetable ghee which included excise duty. The assesses, therefore, was not entitled to refund sales tax under S. 27(1) of the Act in circumstances.

Messrs Noorani Cotton ,Corporation v. The Sales Tax Officer "A" Ward, Lyallpur PLD 1965 SC 161; The Commissioner of Income-tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) Ltd. PLD 1970 SC 93 and Messrs Tribal Textile Mills Ltd. v. Commissioner of Sales Tax 1980 PTD 373 ref.

(m) Interpretation of statutes---

----Statute involving exemption from payment of a tax---Basic principles for interpretation of such a statute explained.

There are two basic principles of inerpretation of a provision of a statute involving exemption from payment of a tax, namely; the first rule is that the burden of-proof of exemption is on the person who claims the same. And the second rule is, that a provision relating to grant of tax exemption is to be construed strictly against the person asserting such exemption and in favour of taxing officer.

Madras Provincial Cooperative Bank Ltd. v. Commissioner of Income-tax, Madras AIR 1903 Mad. 489; Commissioner of Income-tax, Madras v. S.L. Mathias AIR 1939 PC 1; Muhammadi Steamship Co. Ltd. v. The Commissioner of Income-tax (Central), Karachi PLD 1966 SC 828; Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs, Circle Sheikhupura and another PLD 1988 SC 370; Sutherland on Statutory Construction, Vo1.3, Edn., 3, p. 296, Craies on Statute Law, 7th Edn., p.431, Crawford on Statutory Construction 506 and N.S. Bindra on the Interpretation of Statutes, 3rd Edn. p. 488 ref.

Iqbal Naim Pasha, Advocate Supreme Court and Nizam Ahmad, Advocate-on-Record for Appellants.

Shaikh Haider, Advocate Supreme Court and Muzaffar Hassan, Advocate-on-Record for Respondent.

Date of hearing: 15th May, 1991.

JUDGMENT

AJMAL MIAN, J.---The above three appeals -are with the leave of this Court and by this common judgment, we intend to dispose of the same, which are directed against the judgment dated 26-4-1984 passed by a Division Bench of the High Court of Sindh in S.T.R.No.105 of 1973 (which was followed in S.T.R.Nos.106 and 108 of 1973 and which were disposed of by short separate judgments) upon the respondent's applications made under section 17(1) of the Sales Tax Act, 1951, hereinafter referred to as the Act, whereby the opinion of the High Court was sought on the following question:-

"Whether on the facts and in the circumstances, the Tribunal was justified in directing the sales tax officer to allow refund of sales tax on the amount of vegetable ghee consumed when vegetable ghee had suffered no sales tax at all?"

By the above judgments, the High Court recorded its answer to the above question in the negative. Leave to appeal was granted to consider the question, whether the appellants were entitled to the refund of the sales tax on the consumption of vegetable ghee in the manufacture of biscuits after the sales tax payable on vegetable ghee was merged with excise duty and the sales tax was exempted through a notification.

2. The facts to be noted are that the appellants are the manufacturers of biscuits which are subject to levy of sales tax. One of the ingredients for manufacturing of biscuits used is vegetable ghee. It seems that prior to the Finance Act, 1967, the vegetable ghee was subject to the levy of excise duty, sales tax, defence surcharge and rehabilitation tax etc. Instead of levying the above taxes, the excise duty at. an enhanced rate of Rs.45 per hundred weight on vegetable ghee on the basis of the assessed annual production capacity of the factories manufacturing the same was levied under the Finance Act, 1967, with effect from 11-6-1967 (It may be observed that originally excise duty at Rs.45 per hundred weight was imposed but subsequently its rate was reduced to Rs.40 per hundred weight). It further seems that the Central Board of Revenue, hereinafter referred to as the C.B.R., through a notification dated 16-6-1967 under section 7 of the Ad exempted the vegetable ghee from the payment of sales tax with effect from 11-6-1967 (i.e. from the date on which the Finance Act, 1967, was enforced). The appellants made claim for the refund of sales tax on the quantity of vegetable ghee consumed by them in the manufacture of the biscuits for the financial years 1968-69,1969-70 and 1970-71 on the ground that the vegetable ghee purchased by them was subject to the payment of excise duty at the rate of Rs.40 per hundred weight, which included 12-1/2% sales tax on the value of the goods, and as the C.B.R. exempted vegetable ghee from the payment of sales tax and as the same is partly manufactured, goods for the purpose of manufacturing of biscuits, they were' entitled to the refund of the sales tax at the rate of 12-1/2% on the value of the vegetable ghee out of the excise duty recovered from the manufacturers of vegetable ghee on the basis of their annual production capacity. The sales tax officer rejected the appellants' claim by his order dated 17-6-1972. However, upon three appeals filed by the appellants, the Income-tax Appellate Tribunal, hereinafter referred to as the Tribunal, by a common order dated 27-2-1973 upheld the claim of the appellants, inter alia, for the following reasons:-

"The apparent state of affairs in this case was not reflecting the true state of affairs and even in the so emergent capacity excise duty, the share of the Provincial Government to the extent of the allocable sales tax etc. was in fact admittedly retained. If sales tax was totally abolished on vegetable products and only Excise duty was to be levied, the Provinces were to lose their right to it automatically and were not entitled to any by way of compensation. The real desire was to maintain intact the entire super scheme including the incidence of the Sales Tax and allied levies but as this levy was to be under the veil of Excise Capacity duty for the sake of administrative convenience, therefore, the Provinces could not be deprived of their share in these duties. If this cloak or veil of "Capacity Duty" is, therefore, to be torn as under the stark reality of the correct composition of these various levies would stale naked, glaring at us and sales tax levy would be one of its identifiable elements though interwoven inextricably alongwith other duties into one consolidated "Capacity Duty". The issue of the Notification under section 7 exempting the vegetable ghee from the second levy in these circumstances had become all the more imperative as, but for this exemption, the Sales Tax Officer was obliged under section 3 of the Sales Tax Act to charge the sales tax once again. Thus the Notification itself exempting the vegetable ghee from the levy of sales tax under the Sales Tax Act, 1951, clearly envisages the existence or the reality of a double levy once through the' medium of excise duty and a second time through the medium of the Sales Tax Act. If, therefore, we have to follow the sequence of our findings above logically, the non-exclusion of the value of the vegetable ghee consumed in the manufacture of biscuits, would again result in a second levy of the sales tax on the vegetable ghee once on its subjection through the consolidated duty under the Central Excise Acts and a second time under the Sales Tax Act, 1951. In our view, therefore, while levying the sales tax on the biscuits the Sales Tax Officer was under an obligation to exclude the value of the vegetable ghee included therein, as otherwise the very exemption granted to it under section 7 would be rendered nugatory since, as we have explained above, this exemption was granted only to save a double taxation. The interpretation would also fit in the scheme of the Sales Tax Act as so heavily pronounced by their Lordships of the Supreme Court in the famous case of Noorani Cotton Corporation (reported as 1965-11 Tax 184) by observing that `the various provisions of the Act show the intention was to levy only one tax on manufactured or produced goods which are offered for sale to the consumer' (page 190) "

3. For arriving at the above conclusion, the Tribunal referred to and relied upon the speech of the Finance Minister made by him at the time of presentation of the Finance Bill for the year in question. Thereupon, the respondent filed the aforesaid Sales Tax References for soliciting the opinion of the High Court on the above question, which were disposed of in the above terms. Against the above judgments of the High Court, the appellants filed three petitions for leave to appeal which were granted to consider the above question.

4. In support of the above appeals, Mr. Iqbal Naim Pasha, learned A.S.C. appearing for the appellants, has vehemently urged that the High Court was not justified in recording its opinion on the above question in the negative as by merger of inter alia sales tax into the excise duty, the identity of the sales tax was not lost and the Court was entitled to lift the veil of excise capacity duty recovered on the vegetable ghee by referring to the speech of the Finance Minister and taking into consideration the conditions obtaining at the time of passing of Finance Act, 1967.

On the other hand, Mr. Shaikh Haider, learned A.S.C. appearing for the respondent, has contended that the appellants' claim for refund of the sales tax on the quantity of vegetable ghee consumed in the manufacture' of biscuits was misconceived as admittedly no sales tax was payable on the vegetable ghee during the financial years in question and admittedly the appellants had not paid any amount as the sales tax while purchasing vegetable ghee. His further submission was that the effect of the merger of the excise duty, sales tax, defence surcharge and rehabilitation tax etc. and the levy of the excise duty alone on the basis of the annual capacity was that inter alia sales tax had lost its identity.

5. Before dilating upon the other submissions, it may be pertinent to deal with the question, that, how far a speech made in a Parliament while piloting the relevant bill for the relevant Act, can be pressed into service or used for, interpreting a provision of the statute. The Tribunal has relied upon the following observations made by this Court in the case of Government of West Pakistan v. Wali Muhammad Habib (PLD 1961 SC 215) quoted by this Court in a subsequent decision, namely, in the case of Commissioner of Income-tax, Karachi v. Khatija Begum, Partner, Shakil Impex, Karachi reported in 1965 P T D 540:--

"The main purpose of interpretation is to ascertain the mind of the Legislature from the words used by it, and in doing so it is a well-accepted rule that we must read the words in the context in which they are used, for, .the meaning of a word read out of its context may well be totally different and in different context or in different association of words may equally well have a sense which has the effect of limiting or restricting its ordinary or popular sense. The rule of noscitur a sociis is too well-established to be doubted now. Construction of words with reference to the company in which they are found, is not a method unkown to law. Thus words, which precede or succeed the word to be interpreted, may legitimately be looked at to ascertain its true meaning, for, we are likely to know it better from the associate terms in the company of which the word has been used."

6. Whereas, the High Court has relied upon the judgment of this Court in the case of Messrs Abbasi Textile Mills Ltd. v. The Federation of Pakistan and others (P L D 1958 SC (Pak.) 187), wherein this Court made the following. observations:-.

"Mr. Chundrigar in this respect drew our attention to some of the speeches in the British House of Commons when the Bill which became the Constitution Act was being debated, and his contention was that those speeches indicated that there was anxiety on the part of the British Government to avoid a multiplicity of Constitutions within the Federation. He, therefore, argued that it could never have been the intention to enable the Princes to deviate from the pattern of Government in British India. But speeches delivered in those debates are hardly relevant when the language of the enactment is clear and there is no ambiguity."

7. Mr. Shaikh Haider, learned counsel for the respondent, in addition to the above decision of this Court in the case of Messrs Abbasi Textile Mills Limited (Supra), has relied upon the case of S. Muhammad Din & Sons Ltd., Lahore v. Sales Tax Officer, Special Circle 1, Lahore etc. PLD 1977 Lah. 1225, wherein K.MA. Samdani, J. (as he then was), while repelling the contention, somewhat, similar to what has been urged before us by Mr. Iqbal Naim Pasha, has observed as follows:-

"The second contention of the learned counsel for the petitioner is that although the electric fans were exempted from sales tax by the Notification dated 14th of June 1905, the sales tax, continues nevertheless to be levied in the garb of the excise duty. According to him the Finance Minister while piloting the relevant finance bill, made it clear in his speech that the intention was in fact to merge the sales tax and the rehabilitation tax with the excise duty. In the light of this speech, he contends that the sales tax has not been abolished but it is still being recovered in the form of excise duty.

In my opinion, however, such speeches arc meant for the consumption of the lay public but cannot have any effect on the legal consequences of the relevant enactments, the rules made thereunder or the notifications issued in pursuance thereof. Excise duty is levied under a different Act altogether. The Sales Tax is independent of it. If sales tax is abolished under the Sales Tax Act, then it will react on all the relevant provisions of that Act even though the excise duty may have been enhanced, under relevant Act, by exactly the same amount as the tax previously recoverable under the Sales Tax Act. So, in the present case due effect will have to be given to the fact that electric fans have been exempted from the sales tax under Sales Tax Act, therefore, under the provisions of that Act, the petitioner is not entitled to a licence under section 8 thereof and as such to the exemption from payment of tax on the raw material or the partly manufactured goods.".

8. Reference may also be made to a recent decision of this Court in the case of Miss Benazir Bhutto v. Federation of Pakistan and another (PLD 1988 SC 416), wherein Nasim Hasan Shah, J. in his opinion with reference to the interpretation of the provisions of Article 270-A of the Constitution while examining the vires of certain provisions of Political Parties Act, 1962, has made following observations on the question, whether the proceedings of the Parliament can be referred to while interpreting a provision of a statute:-

"In the United Kingdom, reference to the proceedings of the Parliament for interpreting the provision of an Act passed by it is not favoured, though examples exist of resort to the proceedings as an aid to the construction while examining the "surrounding circumstances" in which the legislation came to be passed; see Macmillan v. Dent (1907) Ch. 107 at p. 120; and River Wear Commissioner v. Adamson (1877) 2 A C 743 wherein at p. 763 the following observations by Lord Blackburn are instructive:-

"But from the imperfection of language it is impossible to know what that intention is without inquiring further and seeing what the circumstances were with reference to which the words were used and what was the object appearing from those circumstances which the person using them had in view. For the meaning of words varies according to the circumstances with respect to which they are used."

However, Courts in Pakistan, India and the United States have taken a broader view and have often referred to the proceedings of the legislature when the words of the statute were ambiguous as an aid to construction of a statute for discovering the real intention of the law- makers.

The Federal Court of Pakistan in Federation of Pakistan v. Moulvi Tamizuddin Khan (PLD 1954 F.C.240) referred to the replies given by the Attorney-General to the queries raised by Members of the Parliament, for explaining the purport of the provisions of sections 6 and 8 of the Indian Independence Act, 1947 (see pages 287 and 288 of the Report wherein the replies given by the Attorney-General occurring at p.440 H.C".Deb, 5th series 1946-47, Column 122 and Column 118, are reproduced Similarly, the learned Judges of the Dacca High Court in A.K.M. Fazlul Quader Chowdhury v.. Government of Pakistan and another (PLD 1957 Dacca 342) while examining and continuing Article 145 of the 1956-Constitution observed, at p.361 of the Report:-

"In some instances the Courts have referred to debates of the members of Legislatures particularly where such debates are available when the law is being construed. Reference may be made to Tamizuddin Khan's case (PLD 1955 F.C.240). In that case, the Hon'ble the Chief Justice of Pakistan referred to the debates in the House of Commons on the Indian Independence Act. Thus, in the interpretation of Article 145, it is permissible to refer to the opinions and motives of the legislators before the Electorate Bill was passed by the Legislature.

9. Nasim Hasan Shah, J. in his above opinion also pointed out that the view of the Indian Courts is more or less in line with the view obtaining in Pakistan. Reference was made to Bindra's "Interpretation of Statutes" (8th Edition) at page 381, wherein the author has commented upon the above subject as follows:-

"Whether or not it is permissible to have recourse to the debates in the Legislature for the purpose of understanding a statute, it is certainly permissible to look into the legislative history of the enactment. Mathew, J. observed in Kesvananda Bharati v. State of Kerala (AIR 1973 S.C. 1461): "If the purpose of construction is the ascertainment of meaning, nothing that is logically relevant should, as a matter of theory, be excluded. The rigidity of English Courts in interpreting language merely by reading it, disregards the fact that enactments are, as it were organisms which exist in their environment. It is, of course, difficult to say that Judges who profess to exclude from their consideration all extrinsic sources are confined psychologically as they purport to be legally. A Judge who deems himself limited to reading the provisions of the Constitution without the awareness of the history of their adoption in it would be taking a mechanical view of the task of construction."

It was further pointed out by Nasim Hasan Shah, J. in his aforesaid opinion that the view of the Courts in United States is also not as strict as obtains in the United Kingdom. Reliance was placed on the decision of the Supreme Court of United States in the case of United States of America v. America Trucking Associations ((1940) 310 U.S. 534), wherein the following observations were made:--

"Legislative debates have been frequently asserted to be of little worth in the interpretative process. This conclusion finds some support in the reasoning that the view expressed by a few members of the Legislature may or may not have been entertained by others who gave no expression. It would appear that the force of this conclusion is lessened and the value of such an aid increased in instances where statements in debate are made by chairmen of standing committees by which the Bill in question had been considered, or by the floor leaders of either House in matters of party legislation. To one who understands the legislative process, the statement in debate of the Chairman of the Committee that had charge of the Bill may be highly significant in understanding the law enacted. Legislative bodies place great reliance upon the work and judgment of their committee; a very high percentage of all Bills enacted into law are passed in the identical form in which they are reported out of Committee. The Courts have excepted from the operation of the general rule with respect of statements of the members of the Committee that had charge of the Bill."

10. We are inclined to hold that reference to the proceedings of the, Legislature can be resorted to when the words of a provision of a statute are ambiguous with the object to discover the real intention of the law-makers but when there is no ambiguity in the language employed in the relevant provisions of the statute, recourse to the proceedings of the Legislature cannot be made in order to construe the same in violation of the language employed therein.

It may be observed that by the Finance Act, 1967, the Item No. 11 of the First Schedule to the Central Excises and Salt Act, 1944, was amended as follows:-

In item No.11 in column (3) for the word "seven", the word "forty-five" shall be substituted."

The above Item No.11 of the above First Schedule after the amendment read as under:-

"Item No.

Description of goods

Rate of duty

(1)

(2)

(3).

VEGETABLE PRODUCT--

Vegetableproduct" means Forty-five per cent. anyvegetable oil or fatwhich,whetherby itself or inmixturewith any other substance, has by hydrogenation or byanyother processbeenhardenedfor human consumption."

Forty-five per cwt.

11. The above-quoted Item No.11 of the First Schedule to the Central Excises and Salt Act is not ambiguous as to warrant the recourse to the speech of the Finance Minister which he made while piloting the Bill of Finance Act, 1967.

If we were to accept the contentions of Mr. Iqbal Naim Pasha, we would have to construe the above unambiguous provision of Item No.11 of the First Schedule to the Central Excises and Salt Act, 1944, in violation of the language used in it by holding that though Rs.45 per hundred weight excise duty on the vegetable products has been imposed by it but at it should be read is to include 12-1/2 % of the sales tax on the value of the goods, which is not permissible under the well-settled principles of interpretation of statutes. In this behalf, reference may be made to the case of The Commissioner of agricultural Income-tax, East Bengal v. B.W.M. Abdur Rahman, Manager, Taki Bara Taraf Wards Estate (1973 S.C.M.R. 445), wherein Cornelius, J. (as his Lordship then was) made the following observations:-

"But indeed, in determining whether or not a particular matter comes within a taxing statute, it is only the letter of the law which must be looked to. There is ample authority for the proposition that in a fiscal case, form is of primary importance, the principle being that if the person sought to be taxed comes within the letter of law, he must be taxed, however great a hardship may thereby be involved but on the other hand if the Crown cannot bring the subject within the letter of the law he is free, however apparent it may be that his case is within what might be called the spirit of the Law. As was said by Rowlatt, J., in Cap Brandy Syndicate v. Inland Revenue Commissioner ((1921) 1 K. B.64):

"In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

In Tenant v. Smith-(1892 A.C. 150) Lord Halsbury said:

"In a Taxing Act it is impossible, I believe to assume any intention, any governing purpose in the Act, to do more than take such tax as the statute imposes ..cases, therefore, under the Taxing Acts always resolve themselves into the question whether or not the words of the Act have reached the alleged subject of Taxation."

In the light of these pronouncements with which I hereby express my respectful agreement, it is clear that it is not possible to look either to the amending statute of 1951 or to the alleged collection allowance said to be included in the scheme of the case, in order to determine whether the words in clause (7) of section 6 provide for an allowance to be made in respect of the amount of cess received by the assessee. That question must be decided solely on a consideration of the very words of the clause, although in interpreting those words it is permissible to look generally at the rest of the statute, and in. particular to consider whether the words in question have been used elsewhere and if so in what sense. Before proceeding to consider the wording of clause (7) in this manner, however, it will be convenient to deal briefly with the Patna authority mentioned above."

12. Having held that in the present case resort cannot be made to the speech of the Finance Minister which he made while piloting the Finance Bill, we may now revert to the first submission of Mr. Iqbal Naim Pasha, namely, that merger of the sales tax into the excise duty does not amount to extinction of the former, but in fact it amounts to combining of the two taxes and it would not result into a death of the sales tax but would rather result into a marriage. Reliance has been placed by him on the definitions of the words "merge" and "merger' given in Corpus Juris Secundum, Vol.57, pages 1067 and 1068, which read as follows:-

"Merge." The verb "to merge" has been defined as meaning to sink or disappear in something else; to be lost to view or absorbed into something else; to become absorbed or extinguished; to be combined or be swallowed up; to lose identity or individuality. It has also been defined as meaning to sink the identity or individuality of; to cause to disappear; to make to disappear in something else; to cause to be absorbed or engrossed; to swallow up. It is frequently used with the words "in" or "into".

Nowhere in the various definitions of the word is an extinction suggested, but, rather a joining together, an addition, a combining of the qualities of one with another; not a death but rather a marriage.

"Merge" has been held to be synonymous with, or belonging to the same class as, "combine" see 15 U.S. p. 241 Note 64, and "incorporate" see 42 C.J.S. p. 543 Note 51.2."

"Merger" is defined generally as the absorption of a thing of lesser importance by a greater, whereby the lesser ceases to exist, but the greater is not increased; an absorption or swallowing up so as to involve a loss of identity and individuality.

In law it is the absorption or extinguishment of one estate or contract in another. It is said that merger is an operation of law not depending on the intention of the parties. However, it has also been stated that it is the law that merger is largely a question of intention to a great extent depending on the circumstances surrounding each particular case, and it is said that the Courts will always presume against it whenever it will operate to the disadvantage of a party. In merger there is a carrying on of the substance of the thing, except that the substance is merged into, and becomes a part of a separate thing with a new identity ........................................................................................ ...

13. On the other hand Mr. Shaikh Haider learned counsel for the respondent, has relied upon the definition of the words merger given in Black s Law Dictionary, Fifth Edition, page 891, which reads as follows.

"Merger. The fusion or absorption of one thing or right into another; generally spoken of a case where one of the subjects is of less dignity or g importance than the other. Here the less important ceases to have an independent existence..........

14. From the above-quoted definitions of the above words, it is evident that the primary meaning of the above words seems to be to sink or disappearin something else, to be lost to view or absorbed into something else to 'become absorbed or extinguished, though at the same time, the word "merge" also carries the meaning of joining together, an addition, a combination of the qualities of one with another not a death but rather a marriage. We will have to construe the above words with reference to the context of the present case.

It may be pertinent to point out that neither the word "merger" nor the word "merge" has been used in any provision of the Central Excises and Salt Act or in item No.11 of the First Schedule thereof and, therefore, the present case does not involve the interpretation of the above words with reference to the particular provision of the relevant statute. However, the above words have been considered with reference to the effect of providing Rs.40 per hundred weight as the excise duty on the vegetable ghee instead of levying of excise duty, sales tax and other taxes separately. We are inclined to hold that on the basis of the language employed in above-quoted item No.11 of the First Schedule to the Central Excises and Salt Act, it cannot be spelt out that it includes the amount of sales tax. The levy of the sales tax is made on all goods produced or manufactured in Pakistan and on all goods imported into Pakistan etc. under Section 3 of the Act (i.e. Sales Tax Act, 1951), which provision remained intact. However, under Section 7 of the Act, the Federal Government had issued a notification for granting exemption with effect from 11-6-1967 i.e. from the date on which the above Finance Act, 1967, was, enforced from the payment of sales tax on vegetable ghee.

15. Adverting to Mr. Iqbal Naim Pasha's submission that the issuance of the instructions by the C.B.R. for the grant of licences under Section 8 of the Act to the manufacturers of the vegetable ghee, amounts to an admission on the part of the Federal Government that factually the above amount of excise duty includes the amount of sales tax, it may be observed that the above contention is untenable, which is evident from the relevant instructions issued by the C.B.R., which read as follows:-

"Sales Tax on Vanaspati Ghee

Sales-tax on Vanaspati ghee has been merged with the duty of central excise with effect from the 11th June, 1967. In fixing the new rate of excise duty on Vanaspati ghee, the incidence of sales-tax on its raw materials has not been taken into account. The raw materials of Vanaspati ghee liable to sales-tax are-.-

(1) Imported edible oil except under P.L.480.

(2) Chemicals.

(3) Packing materials, namely, tin containers, paints, printing ink etc.

2. Previously, the manufacturers of Vanaspati ghee could purchase the above raw materials free of sales tax on the basis of licence issued to them by the Sales-tax Officers. The incidence of sales-tax on the raw materials has become an additional burden on the manufacturers of Vanaspati ghee as a result of the merger of sales-tax with the central excise duty. To mitigate the hardship arising out of the above situation, it has been decided to grant licence under the proviso to Section 8(2) of the Sales-tax Act to the manufacturers of Vanaspati ghee, as a special case, allowing them to purchase the raw materials free of sales-tax.

3. The Sales-tax Officers at the time of renewal of licence to the manufacturers of Vanaspati ghee should obtain from them a return showing the total production of ghee by each factory during the preceding year and its sales in tin containers of different sizes. By checking these details, it should be possible for the Sales-tax Officers to be satisfied that the opening stocks of the raw materials with purchases less closing stocks have been accounted for in the manufacture of Vansapati ghee produced during the year. The Sales-tax Officers are no doubt aware of the approximate production capacity of each factory and the raw materials it had been annually purchasing in the past. If at the time of renewal of licence they find that some factory have actually purchased more raw materials than it has ever consumed previously, it should arouse their suspicion and they should then pursue the matter for further scrutiny.

4. The licence should not be renewed by the Sales-tax Officers unless they are satisfied that the raw materials purchased tax-free have been correctly accounted for by the manufacturers of Vanaspati ghee. (C.B.R.'s Circular No.4-ST/67 dated 4th July, 1967)."

16. From the above-quoted instructions of the C.B.R., it is evident that in order to reduce the burden of taxes on the manufacturers, licences were ordered to be issued under section 8(2) of the Act to the manufacturers of Vanaspati ghee as a special case for limited purpose in order to enable them G not to pay sales tax on the raw materials mentioned therein, namely, imported edible oil, chemicals, packing materials etc. and on the conditions contained therein. The very factum that the Federal Government by the aforesaid notification dated 11-6-1967 issued under S. 7 of the Act for granting exemption from payment of sales tax on the vegetable ghee negates the above G contention. Mr. Shaikh Haider's submission in this behalf that once the exemption is granted from the payment of sales tax, the goods so exempted go out of the net of the taxing statute, seems to be correct in view of the pronouncement by this Court in the case of The Commissioner of Income-tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) Ltd. (PLD 1970 SC 93), wherein the following observations were made in this regard:--

"Mr. Afzanul Haq has laid stress on the words "turnover" means the gross takings from the sale of the goods manufactured" in support of, his argument that the Notification itself clearly points to the conclusion that the gross takings of all the items of manufacture notwithstanding the fact that some of them have been exempted from payment of tax under section 7 are to be taken into account. It is difficult to accept this contention. In our view these words have no reference to exempted goods. Once some goods have been exempted under section 7, they go out of the purview of the Act and their gross takings cannot be taken into account for any of the purposes of the Act in the absence of express words permitting the same. Section 3(1) of the Sales Tax Act is the charging section. It provides:

"(1) There shall be levied and collected a tax on the value of :-

(a) all goods produced or manufactured in the Provinces of Pakistan or the Capital of the Federation, payable by the manufacturer or producer;

(b) all goods imported into the Provinces or the Capital of the Federation, 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 Central Government may, by. Notification in the official Gazette, specify in this behalf which are exported from the Provinces or the Capital of the Federation, payable by the exporter."

The words "all goods produced or manufactured" obviously refer to all goods which have not been exempted from payment of tax. It follows therefore, that in order to determine the turnover for the purposes of the notification under' section 8 gross takings of goods which have not been exempted only are to be considered.

In the case of Commissioner of Income-tax v. Agha Textile Mills PLD 1962 Lah. 816, a Division Bench of the West Pakistan High Court took the view that if goods are exempted from sales tax under section 7(1) of the Act it follows that they cease to be chargeable to sales tax, are excluded from the operation of section 3 of the Act and cannot be considered for charging purposes'. We agree with this view."

17. Reverting to Mr. Iqbal Naim Pasha's submission that this court has to determine the real character of the above levy of the excise duty at the rate of Rs.40 per hundred weight and is to lift the veil, it may be observed that he has referred to the following passage from the Corpus Juris Secundum Vol. page 246;

"Determination of character of tax-- In determining whether or not a particular statute imposes an excise or privilege tax, the Courts look to the real nature of the tax, which is determined by its operation rather than by any particular descriptive language which may have been applied to it, so that the mere fact that the statute characterizes the tax as an excise or privilege tax does not constitute it such a tax. Although the legislative declaration that a tax thereby imposed is an excise tax is not conclusive, such designation is entitled to considerable weight in ascertaining the nature of the tax, and win be aces tea unless the declaration is incompatible with the effect of the statute,"

18. There is no doubt that the Court is competent to determine the real nature of a particular levy with reference to the relevant statute. In this regard, reference may be made to a recent decision of this Court in the case of Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329, where the question in issue was, what was the nature of levy of Iqra Surcharge and Surcharge, wherein the following observations were made:-

9. The second objection on the Constitutional plane raised by numerous learned counsel, is to the competence of the Federal Government to levy any such tax as is under consideration. In the Finance Act of 1985 the disputed tax is specified as lqra Surcharge. `Iqra' has the dictionary, meaning of learning, reading, reciting and going by the pith and substance of the tax it amounts to education tax. According to the learned counsel, Education does not find a place either in the Federal Legislative List or in the Concurrent Legislative List and has necessarily to the treated as exclusively a provincial subject. For that reason neither the Federal Legislature could legislate nor could the President pass an Ordinance levying such a duty. Hence, the levy is ultra vires the Constitution.

10. It is correct that `Iqra' has the dictionary meaning as suggested. It is also correct that Education as such is not mentioned either directly or indirectly in the Federal Legislative List or the Concurrent Legislative List. What is contained in the Federal Legislative List at serial No.l6 is "Federal agencies and institutes for the following purposes, that is to say, for research, for professional or technical training, or for promotion of special studies". At serial No.17 in the Same List is mentioned "Education as respects Pakistani students in foreign countries and foreign students in Pakistan." In the Concurrent Legislative List at serial No.38 exists the entry "Curriculum, syllabus, planning, policy, centres of excellence and standards of education". These entries do not cover the field of adult literacy which was suggested by the use of the word `Iqra'. This argument fails on two points. Firstly, the charging sections consistently me Jon it as additional customs duty. Not only in name but in substance too it is customs duty because it has been levied on the import of goods, has reference to goods specified in the First Schedule to the Customs Act, 1969 and the value of the goods is to be determined under section 25 of the Customs Act, 1969. At serial No.43 of the Federal Legislative List is mentioned "duties of customs, including export duties". In Halsbury's Laws of England, Volume 12, 4th edition, para 501, page 65, contains the following recital of law:-

Duties of customs, or customs duties, in the strict sense are pecuniary charges or tolls payable upon goods exported from, or imported into the country, as contrasted with excise duties which are payable upon goods produced and consumed within the country.

The Corpus Juris Secundum, Volume 25 at page 140 it is mentioned that "customs, duties are taxes assessed on merchandise imported from or exported to a foreign country".

11. The levy under examination satisfies in name and substance the strictest legal definition of customs duties."

19. However, the above rule does not empower a Court to reed something into a clear provision of a taxing statute. In the present case, excise duty is leviable under the Central Excises and Salt Act and payable when the goods leave the factory premises, whereas the sales tax is leviable under the Act and is payable at the time of the delivery of the goods to the purchaser or when the property in the goods passes to the purchaser or when the goods are sent, consigned or exported to any place outside Pakistan or when the goods are actually used by manufacturers or purchasers by virtue of subsection (4) of section 3 of the Act. The basis of the levy is also different, whereas excise duty on the item in question is levied at the rate of Rs.40 per hundered weight but under subsection (2) of section 3 of the Act, the sales tax is payable at the rate of 12-1/2% on the value of the goods. In other words, the excise duty is on the weightage, whereas the sales tax is on the value of the goods, the power to determine the real character of a particular levy enjoyed by a Court does not include the power to hold that though the tax has been levied under the Central Excises and Salt Act but it should be considered to hale been partly levied under the Act (i.e. Sales Tax Act, 1951) nor the doctrine of lifting of the veil which is more aptly applicable in case of a corporation can be pressed into service in violation of a provision of the statute. In our view, if the language of a statute is clear and unambiguous, the Court is bound to construe and to give it effect without taking into consideration anything extraneous to the same.

20. Mr. Iqbal Naim Pasha has also relied upon the following observations from the case of Messrs Noorani Cotton Corporation v. The Sales Tax Officer "A" Ward, Lyallpur PLD 1965 SC 161 in order to contend that if this Court would place construction other than what has been urged by him and what has been held by the Tribunal, the appellants would be made to pay the sales tax twice, which would be contrary to the above judgment of this Court:-

"It will be proper to explain here the scheme of the Act. As the various provisions of the Act show the intention was to levy only one tax on manufactured or produced goods which are offered for sale to the consumer. A process of manufacture may involve different stages or goods manufactured by one person may be purchased by another not for the purpose of consumption, but for being incorporated into another article on which sales tax is to be paid. A stage of manufacture or the manufacture of goods which are to be incorporated in another article is not liable to sales tax. To explain the point we may take as an illustration the very case with which we are dealing. Cottonseed is at first extracted from cotton. This is a manufacturing process and if this cottonseed is sold to the consumer sales tax will have to be paid on the manufacture of cottonseed. However, the manufacturer may use this' cottonseed himself for the production of cottonseed oil. In its turn the cottonseed oil which is again a manufactured article may be sold to one who manufacturers vegetable ghee for the purpose of being incorporated in the vegetable ghee. In a case where the cottonseed oil manufactured by a person from cottonseed extracted by himself from cotton goes into the vegetable ghee the intention of the law is that sales tax may be paid only on the manufacture of vegetable ghee and should not be paid either on the production of cottonseed or on the production of cottonseed oil which productions become in such a case only steps in the manufacture of vegetable ghee. Now what is the device adopted for ensuring that sales tax is paid only at one stage in spite of what is contained in the charging section making all manufactured goods when they go to the purchaser liable to the payment of tax? The device adopted, as will appear from section 4 is, that the sale of "partly manufactured goods" to a manufacturer is not liable to the charge of tax."

21. On the other hand, Mr. Shaikh Haider has pointed out that factually the appellants had not paid any sales tax on the vegetable ghee consumed by them in the manufacture of biscuits as admittedly during the three financial years in question, no sales tax was payable on vegetable ghee on account of the aforesaid notification dated 11-6-1967 issued under section 7 of the Act exempting the vegetable ghee from the payment of the sales tax and, therefore, the vegetable ghee was out of the net of the sales tax as has been' held by this Court in the case of The Commissioner of Income-tax, East Pakistan (Supra). Reliance has also been placed by him on the case of Messrs Tribal Textile Mills Ltd. v. Commissioner of Sales Tax (1980 PTD 373), wherein a Division Bench of the Lahore High Court has dilated upon the above aspect as follows:-

"5. It is not disputed that sales tax is a single point tax. To give effect to this feature of the tax, section 27(1) of the Act inter alia provides that where a manufacturer has purchased partly manufactured goods and tax has been paid on those goods on any previous sale, a refund of the amount of the tax so paid shall be made to him. It will be noticed that a condition prerequisite for the grant of refund under this subsection is that the tax should have been paid on a previous sale. The question whether tax was paid on a previous sale or not is one of the evidence and we agree with the Tribunal that no legal presumption can be raised in this regard.

22. It may be pertinent to observe that under subsection (1) of section 27 of the Act, refund of the sales tax is admissible where partly manufactured goods (i.e. the goods which are to be incorporated into and form the constituents or component parts of an article which is subject to the tax as per definition given in caluse 12 of S. 2 of the Act) are purchased by a manufacturer and sales tax has been paid on these goods on importation or on' any previous sale. In the present case as pointed out hereinabove, no sales tax M was payable on the vegetable ghee in view of the above notification dated 11-6-1967 during the relevant period and admittedly no amount as a sales tax had been paid by the appellants while purchasing the vegetable ghee for using the same in the manufacture of biscuits. What was paid by them was the price of vegetable ghee which included excise duty. In this view of the matter, the above contention of Mr. Iqbal Naim Pasha is also untenable.

23. We may also observe that there are two basic principles of interpretation of a provision of a statute involving exemption from payment of a tax, namely; the first rule is that the burden of proof of exemption is on the person who claims the same. In this regard, reference may be made to the case of Madras Provincial Co-operative Bank, Ltd. v. Commissioner of Income-tax, Madras (AIR 1933 Madras 489) and the case of Commissioner of Income-tax, Madras v. S.L. Mathias AIR 1939 PC 1; and the second rule, is, that a provision relating to grant of tax exemption is to be construed strictly against the person asserting and in favour of taxing officer. In this regard, reference may be shade to the case of Muhammad Steamship Co. Ltd. v. The Commissioner of Income-tax (Central), Karachi (PLD 1966 SC 828) and the case of Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs, Circle, Sheikhupura and another (PLD 1988 SC 370), and also the following treatises on the construction of the statutes:-

(i) Sutherland on Statutory Construction, Vo1.3, Edition 3 at page 296;

(ii) Craies on Statute Law, Seventh Edition, page 431;

(iii) Crawford on Statutory Construction, page 500;

(iv) N.S. Bindra on the Interpretation of Statutes, Third Edition, page 488.

24. In the present case, there is no provision either in the Central Excises and Salt Act or in Item No.11 of the First Schedule thereof, on the basis of which exemption from the payment of sales tax could have been claimed by the appellants. The exemption was granted from the payment of sales tax in respect of vegetable ghee under the above notification dated 11-6-1967. The above notification was to be construed keeping in view inter alia the above basic two principles of construction in case of any controversy in respect thereof.

25. The upshot of the above discussion is that we are inclined to hold that the Tribunal's order is founded on the matters which were extraneous for the purpose of deciding the question involved as is evident from the above-quoted portion of the order in para 2 hereinabove. The High Court's approach to the controversy seems to be in consonance with law, and, therefore, the judgment under appeal does not suffer from any infirmity as to warrant any interference this Court. The above appeals, therefore, have no merits and, hence, the by same arc dismissed. However, there will be no order as to costs. Appeals dismissed.

M.B.A./A-909/S. Appeals dismissed.