ITA NOS. 151/LB AND 152/LB OF 1984-85, DECIDED ON 30TH JULY, 1992. VS ITA NOS. 151/LB AND 152/LB OF 1984-85, DECIDED ON 30TH JULY, 1992., 1993 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 939 (1992)

Workers' Welfare Funds Ordinance (XXXVI of 1971)---

----S. 2--- Industrial establishment"---Definition---Assessee engaged in processing of cloth---Term "manufacture" was applicable to the process on cloth in which the assessee was engaged ---Assessee being engaged in process of manufacturing was an "industrial establishment" as defined in S.2 of the Ordinance and was liable to pay the Workers' Welfare Fund.

Assistant Collector of Central Excise and Land Customs and 2 others v. Orient Straw Board and Paper Mills Limited PLD 1991 SC 992; Superintendent of Central Excise, Lyallpur v. Ch. Faqir Muhammad PLD 1959 SC 103 and Pakistan etc. v. Muhammad Aqil PLD 1960 SC 4 ref.

Nemo for Appellant.

F.D. Qaiser, D.R. for Respondent.

Date of hearing: 15th June, 1992.

ORDER

These appeals for the assessment years 1981-82 and 1982-83 filed by a registered firm engaged in processing of cloth are directed against a consolidated order of C.I.T. (Appeals), Zone II, Faisalabad, dated 10-4-1984. The only ground agitated regards charge of Workers' Welfare Fund at a rate of 2% for the assessment years 1981-82 and 1982-83.

2. The assessee-appellant filed a return to declare income at Rs.1,25,000 for the assessment year 1981-82 and at Rs.110,000 for the assessment year 1982-83. The returns were accepted under section 59(1) of the Ordinance. However, Workers' Welfare Fund was charged at a rate of Rs.2,500 and Rs.2,200 respectively for the assessment years 1981-82 and 1982-83 being 2% of the income declared. The assessee feels aggrieved of this charge on the ground that it was not obliged under the law to pay the Workers' Welfare Fund as it was not an industrial establishment as defined under section 2 of the said Ordinance. It was further contended that the appellant neither produced nor manufactured any article, rather carried out processing of cloth which did not change .the nature or use of the cloth. It was further contended that only such industrial establishments were liable to the charge which bring about a change in the article so as either to change the nature or use of the material or to make it so usable which was not possible before effect of operations in the factory. It was submitted that the assessee-appellant only carried out a process which merely beautified the cloth and, therefore, was not engaged in manufacture in any sense of the term. The learned C.I.T. (Appeals) did not accept this plea on the ground that the articles manufactured by the appellant were produced and adopted with the aid of mechanical process which was not generated by human or animal agency and in which aid of electrical/thermal energy was employed. Therefore, the learned appellate authority concluded that the process carried out on grey cloth in this manner, produced entirely a new thing which resulted in a radical change in its nature and use. With these observations the contentions were rejected and the charge of Workers' Welfare Funds at the said rates was upheld for both of the years.

3. We have heard the learned D.R. who supported the impugned order of the appellate authority. The appellant has failed to appear in spite of service of notice in this regard. Therefore, the appeals are being disposed of by resorting to Rule 20(2) of the Income Tax Appellate Tribunal Rules.

4. In a recent reported case re: Assistant Collector of Central Excise and Land Customs and 2 others v. Orient Straw Board and Paper Mills Limited cited as NTR 1992 SC 1 their 'Lordships examined at length the term `manufacture' as used in section 2(1) of the Central Excises anZ1 Salt Act, 1944. While referring to the case-law on the topic, a passage from the case re: Superintendent of Central Excise, Lyallpur v. Ch. Faqir Muhammad PLD 1959 SC 103 was also referred. In this case the question before the Supreme Court was, whether calendering is a process ancillary to the completion of the manufactured product. Their Lordships quoted the following paragraph in which the view arrived at by the High Court was disapproved in the following words:

"We are unable to agree with the view of the learned Judges that unless the content of the article is changed it remains the same in spite of its being given a finish. It might have been so if without the finish the goods were not marketable, but un-calendered cloth is also sold in the market. The fact that its price is higher after it is calendered shows that the purchasing public regards calendered cloth as a different article having a positive and specific use in its new state."

In this very judgment another cage reported as PLD 1960 SC 4 re: Pakistan and Collector of Central Excise and Land Customs v. Muhammad Aqil, was referred wherein it was held that processes of dyeing and glazing tanned leather of sheep skins are calculated to produce goods and, therefore, were held liable to excise duty.

5. As is evident from the above said authorities the term `manufacture' is certainly applicable to the process on cloth in which the assessee-appellant is engaged. Central Excises and Salt Act being a statute in pari materia with the Workers' Welfare Fund Ordinance, 1971, the ratio of the said authorities and the meaning of the term expounded by their Lordships is applicable to the facts of this case. Therefore, no exception can be taken to the charge of Workers' Welfare Fund since the appellant is engaged in process of manufacturing and therefore, is an industrial establishment as defined in section 2 of the Workers' Welfare Ordinance.

6. Resultantly, we will dismiss both of the appeals.

M.B.A./2286/TAppeals dismissed.