(On appeal from the judgment of the High Court of Sindh, Karachi dated 26-10-1993 passed in C.P. 1871/93 & C.P. 1947/93).

Sales Tax Act (III of 1951)---

----S. 7---S.R.O. No. 600(1)/90, dated 7-6-1990, items Nos. 73.04, 73.06 & 73.08---S.R.O. No.601(1)/90 dated 7-6-1990, item No. 85.17---Exemption from sales tax---Pakistan Customs Tariff---Constitution of Pakistan (1973), Art.185(3)---Leave to appeal granted to consider question regarding exemption from sales tax in respect of Telephone Poles/Tubes manufactured by the manufacturer, which required interpretation of relevant Notification issued under section 7 of the Act, and the items of Pakistan Customs Tariff.

Messrs Premier Machinery Works, Karachi and others v. Commissioner of Income Tax PLD 1993 SC 223 ref.

Khalid M. Ishaque, Advocate Supreme Court and Mrs. Majida Razvi, Advocate-on-Record for Petitioners.

A. Aziz Khan, Deputy Attorney-General for Respondents.

Date of hearing: 22nd February 1994.

ORDER

SALEEM AKHTAR, J.---The petitioners in the above two petitions seek leave to appeal against the order passed by the learned Judges of the High Court whereby their Constitution Petitions challenging order of the respondents refusing to gram- exemption from sales tax in respect of telephone poles/tubes manufactured by them .were dismissed in limine.

2. The petitioners manufacture telephone poles/tubes, which, according to them, form integral part of the machinery used for telegraphs, telex, teleprinter, and exchanges, which are operated by power for transmission/distribution of power from machinery room to other distant places by respondent No.l. The items manufactured by the petitioners are supplied to respondent No.l and are claimed to be part of telecommunication machinery system covered by item Nos.73.04, 73.06 and 73.08 of SRO No.600(1)/90 and entry No.85.17 of SRO No.601(1)/90 dated 7-6-1990. The petitioners claim that the poles/tubes manufactured by them are exempted from sales tax under these notifications. On 11-10-1992 one truck of the petitioners loaded with telephone poles/tubes destined to the Incharge Telegraph Stores Depot, Kotri, was seized by the staff of respondent No. 2 on the plea that they had evaded to pay the sales tax on these goods. The truck was, however, released on furnishing bank guarantee, but the goods remained lying in the open place of respondent No. 2. The petitioners' representation to respondents Nos. 2 and 4 for release of the seized goods did not bear any fruit as the petitioners were required to pay sales tax and their claim was not accepted. A show-cause notice 9-12-1992 was served by the Deputy Collector, Central Excise and Sales Tax, Karachi calling upon the petitioners to show cause why action should not be taken against them for evading sales tax. The petitioners consequently filed Constitution petitions in the High Court, which were dismissed in limine by the impugned order. In support of their plea the petitioners relied upon a certificate dated 18-10-1992 issued by respondent No.l, which reads as follows:--

"It is certified that tubes of different types sockets, sole plates and bkts, locally manufactured by the contractors M/s. Sunny Impex, M. Tayyab Casting Foundry and Malik & Co. under various purchase orders issued by Pakistan Telecommunication Corporation on F.O.R. basis is the integral part and component of Telephone Telegraph, Telex, Teleprinter, Exchanges machinery which is operated by power for transmission and distribution of power for communicating system right from Machinery Room to other distant end.

It is further certified that Tubes, Sockets, Sole Plates and Bkts. purchased from M/s. Sunny Impex, M. Tayyab Casting Foundry and Malik & Co. by Pakistan Telecommunication Corporation is intended for use and is used only for the Telephone, Telegraph, Telex, Teleprinter and Fax Exchange Machinery."

The learned Judges were of the view that the poles manufactured by the petitioners cannot be regarded either as machinery or component parts thereof or apparatus or appliances, which may be used in conjunction with such machinery as defined in the notification. It was further held that these poles cannot be regarded as electric apparatus including apparatus for line telephony, line telegraphy or for carrier current line system and are thus not covered by heading 85.17.

3. The learned counsel contended that the poles/tubes were manufactured exclusively for respondent No. 1 to be supplied to him on his order and were covered by the notifications. It was further contended that the poles/tubes were apparatus and appliances used for transmitting and distribution of power for communicating system from machinery room to other distant ends. In this regard we have noted judgment in M/s. Premier Machinery Works, Karachi and others v. Commissioner of Income Tax (PLD 1993 SC 233) in which similar notification under section 7 of the Sales Tax Act was issued and the meanings of the words `machinery' and `apparatus' were also considered. Exemption was sought in respect of conduit pipes and it was held that as it was used to cover the wiring and its use was necessary in conjunction with the main machinery for safe and proper transmission of electrical energy, the appellants were given benefit of the exemption. After discussing the meaning of `machinery' as defined in the notification and the word `apparatus', it was observed as follows:--

"In this background if we consider the aforestated meanings it is evident that in the field of electrical engineering the transfer of power or energy or current is made through wire. To control it, combination of switching devices with their associated equipments, apparatus and appliances are used. In such combination of devices conduit pipe is used for the protection, safety and smooth operation of transmission line in conjunction with machinery as defined in item (i) of the Notification. The use of conduit pipe is so necessary for the safe and smooth transmission of power that as held by the Tribunal it has become a necessary ingredient of the process. We are, therefore, of the view that item (v) of the Notification will cover all such conduit pipes which are used for transmission of power in conjunction with the machinery defined in item (i)."

The questions raised require interpretation of the notifications and the referred items of Pakistan Customs Tariff. We, therefore, grant leave.

4. The petitioners have been granted interim stay. Mr. A. Aziz Khan, learned Deputy Attorney-General requests for two days' time to seek instructions. Adjourned to 24-2-1994 for orders on the stay application.

M.BA./S-855/S?????????????????????????????????????????????????????????? ????????????????????????? ????????? Leave granted.