S.T.A. NO.25 OF 1961-62, DECIDED ON 8TH APRIL, 1994. VS S.T.A. NO.25 OF 1961-62, DECIDED ON 8TH APRIL, 1994.
1995 P T D (Trib.) 23
[Income-tax Appellate Tribunal Pakistan]
Present: Nur Ilahi President, H. U. Siddiqi and K. Salahuddin, Members
S.T.A. No.25 of 1961-62, decided on 08/04/1994.
(a) Sales tax---
----Appeal---Fresh ground---Ground which required further investigation and had not been raised or discussed before lower appellate forum was not allowed to be raised by Income-tax Appellate Tribunal
(b) Sales Tax Act (III of 1951)---
----Ss.2(12) & 4---Exemption---Expression "partly manufactured goods"-- Connotation--- "Shoe lasts" being moulds on which shoes are made were not such goods as would ultimately become an integral part of the shoe manufactured on such moulds---Shoe lasts, therefore, were not "partly manufactured goods" and not exempt from sales tax under provisions of S.4 of Sales Tax Act, 1951 even though the purchasers happened to be licensed manufacturers.
Muhammad Amin Butt for Appellant.
Malik Asrar Ahmad Khan, PTS for Respondent.
ORDER
H.U. SIDDIQI (MEMBER). ---This appeal has been filed against the order of the Appellate Assistant Commissioner of Sales Tax, in respect of sales tax assessment for the year 1956-57.
2. The appellant which manufactures shoe-lasts claimed a refund of the sales tax of Rs.3,272 on the ground that the goods in question were not exigible to tax. The plea which seems to have been taken before the Sales Tax Officer was that the shoe-lasts are spare parts of machinery and in the alternative if they were not such spare parts then the sales thereof having been made to another licensed manufacturer were exempt from payment of sales tax under section 4(a) of the Sales Tax Act. It was held by him that shoe-lasts were neither spare parts of machinery nor were they "partly manufactured goods" within the meaning of section 2(12) of the Sales Tax Act. The refund was accordingly disallowed. Against this order the assessee preferred an appeal to the Appellate Assistant Commissioner of Sales Tax who confirmed the order of the assessing officer. Hence this appeal.
3. The memorandum of appeal has listed the following grounds:
"(1) That the order of the worthy Assistant Commissioner is against the facts of the case and the law applicable thereto.
(2) That the appellants are licensed manufacturers of partly manufactured goods and sell their goods to the licensed manufactures, hence their production is exempted from the sales tax. "
4. Apart from the general ground at No. l above, the only specific ground of objection relates to the claim for exemption presumably under section 4 of the Sales Tax Act as the reason stated therefore is that the appellant is a licensed manufacturer which sold partly manufactured goods to another licensed manufacturer. At the time of the hearing, however, its authorised representative sought permission to raise an additional ground based on Notification No.3-ST, dated the 15th March, 1954, issued under section 7 of the Sales Tax Act exempting from levy of sales tax all such goods as are specified in the Schedule to Customs Notification No. 14-C dated 15th March 1954, Item (iii) in the said Schedule refers to "apparatus and appliance not otherwise specified, specially adapted for use in conjunction with machinery". The contention is that shoe-lasts are in the nature of appliances or apparatus and being adapted for use conjunctively with shoe-making machines,' their sales are exempt from liability to pay sales-tax. That the plea now sought to be put in is not new, it is argued, is evident from the following excerpt taken from the assessment order:
"Assessee in his application stated that he is a manufacturer of shoe-lasts and shoe-lasts are spare parts of machinery, therefore, the total sales must be exempt from sales tax and further added that if these are not spare parts of machinery and are liable to sales tax then sales made to licence-holders must be exempt from sales tax under section 4 of the Act. "
We do not, however, allow this additional ground to be raised for several reasons. In the first instance it was sought to be taken belatedly and secondly this plea that exemption was available for shoe-lasts of their being adapted for a conjunctive use with machinery was not taken at all at any stage of the proceedings, either before the assessing officer or before the Appellate Commissioner. Now if we were to allow it to raise this new ground, we shall have to refer the case back for recording of a finding on whether or not a shoe last is such an apparatus or appliance as is designed for use in conjunction with machinery. It is a wholesome principle of law that a fresh ground should not normally be allowed to be taken in appeal when for adjudication thereon it would be necessary to send the case back to the lower authorities for a finding which could only be given after holding fresh investigation into the matter. We, therefore, consider ourselves justified in refusing at this stage the additional ground for, exemption from sales tax to be taken under section 7 of the Sales Tax Act.
5. Under section 4(a) of the Sales Tax Act goods sold by a licensed manufacturer to another licensed manufacturer are exempt from the levy of tax if they are "partly manufactured goods". The expression "partly manufactured goods" is defined in section 2(12) as goods which are to be incorporated into and form a constitution or component part of an article which is subject to the tax. It is obvious that shoe-lasts which are the moulds on which shoes are made are not such goods as would ultimately become an integral part of the shoes manufactured on such moulds. The most important aspect of such goods is that they enter into the corpus of and become constituent part of the finished product which is subject to sales tax. By no straining of language can it be said that shoe lasts are "partly manufactured goods" as defined by section 2(12) and accordingly the provisions of section 4 are not attracted at all in respect of their sales even though both the seller and the purchasers happens to be licensed manufacturers as in the instant case.
6. The authorised representative of the appellant, however, sought to raise certain extraneous considerations. It was submitted that if a person cheats the seller into believing that the former was a licensed manufacturer and thereby the, goods are sold to him which the latter instead of using the same as component parts of finished goods, sells in specie, then the important question of principle that arose was on whom as between the seller and the purchaser should the incidence of taxation fall. It was urged by him that as the seller is not to blame in the instance given as he acted bona fide on the assurance of the purchaser that he wanted the partly manufactured goods for use as component part of the finished goods, the tax should be borne not by the innocent party to the transaction but by the purchaser in view of his conduct which in the fitness of things should disentitle him to reap any benefit out of it. The argument in effect was that to subject the sales of such partly manufactured goods to tax at the stage of sale would be tantamount to putting a premium on criminality. In its last analysis the plea resolved itself into the contention that the innocence of the seller should exempt him from any liability for sales tax in partly manufactured goods sold to a fraudulent purchaser who on assuring the seller obtains such goods without payment of sales tax and which he later on sells in the market.
7. This argument is not relevant at all. Apart from the sweeping generality of a subjective test, proposed by the appellant's counsel against the adoption of which very weighty considerations may prevail, the contention is invalid inasmuch as it assumes that the appellant acted bona fide and the purchaser of shoe-lasts from it, mala fide and further that the latter disposed of the said articles in contravention of the law. This is going much further than what the material on record can possibly warrant. All that the argument entails is beside the point involved in the present case. Instead of assessing the legal relation implied in the hypothetical case, expounded by the learned counsel for the appellant, we had better look for guidance to the pertinent law on the subject. The law clearly lays down that it is only "the partly manufactured goods" whose sale to a licensed manufacturer by a licensed manufacturer would be exempt from tax. If the goods cannot be designated as "partly manufactured goods" as is the case here, it is evident that exemption is not available under section 4 of the Sales Tax Act and the argument advanced on behalf of the assessee is clearly seen as merely irrelevant to the issue, firstly, because, section 3(1)(a) clearly pinpoints, the responsibility of the manufacturer or producer to pay tax on all goods produced or manufactured by him in Pakistan, and, secondly, because as it ignored altogether tie objective nature of the goods which are the subject of sale as an important element in determining whether exemption is or is not available under section 4 of the Act.
8. For these reasons no interference with the appellant order of the appellate Assistant Commissioner is called for. The appeal is accordingly rejected.
M.B.A./64/T.T.Appeal dismissed.