SHEIKHOO SUGAR MILLS LTD. VS GOVERNMENT OF PAKISTAN
2001 P T D 2097
[Supreme Court of Pakistan]
Present: Iftikhar Muhammad Chaudhry and
Mian Muhammad Ajmal, JJ
SHEIKHOO SUGAR MILLS LTD. and others
Versus
GOVERNMENT OF PAKISTAN and others
Civil Appeals Nos. 1805 to 1811‑ of 1998, 1392, 1417, 1418 of 1999, 2, 22, 129, 488, 489 and Civil Petitions Nos.386‑L, 526‑L and 700‑L of 2000, decided on 27/02/2001.
(On appeal from order, dated 14‑4‑1998 in Writ Petitions Nos.259/9$, 29575/97, 2728/98, 4512/98, 4313/98, 29574/97, order dated 7‑9‑1999. in W.P. 14739/99, order dated 22‑10‑1999 in W.P. 19779/99, order dated 29‑9‑1999 in W.P. 17156/99, order dated 13‑1‑2000 in W.P. 23309/99, order dated 2‑2‑2000 in W.P. 721/2000, order dated 31‑12‑1999 in W.P. 24463/99, order dated 23‑12‑1999 in W.P. 23807/99, order dated 17‑1‑2000 in W.P. 386‑L/2000, order dated 28‑2‑2000 in W.P. 3220/2000 and order, dated 20‑3‑2000 in W.P. 4388/2000). .
(a) Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑Ss.3, 2(35)(41)(44) & (46)‑---‑ Constitution of Pakistan (1973),.Art.185(3) & Fourth' Sched., Federal Legislative List, Part I, Items Nos.49 & 59‑‑ Bagasse‑‑‑Levy of sales tax‑‑‑Validity‑‑‑Leave to appeal was granted by Supreme Court to examine the questions as to whether in view of the fact that the Sugar Mills (petitioners) were consuming ' Bagasse' and no third person was involved in the sale thereof, the Sugar. Mills were liable to the payment of sales tax on 'Bagasse'; whether within the ambit of S.3 of the Sales Tax Act, 1990; being the charging section, "taxable activity", "taxable supply"; "time of supply" and "value of supply" respectively defined in S.2(35), (41), (44) & (46) of the Sales Tax Act, 1990 could be equated with the process of 'sale' even notionally and whether the High Court was correct in observing that the effect of joint reading of Items Nos.49 & 59, Part I of the Federal Legislative List in the Fourth Sched. of the Constitution was that the Sugar Mills could be made to pay sales tax on "Bagasse" in the presence of the exemption to take effect during the financial year in question i.e. 1‑7‑1996 to 30‑6‑1997 in that the same was rescinded during its currency, on 30‑6‑1997.
(b) Words and phrases‑‑
‑‑‑‑"Bagasse"‑‑‑Meaning‑‑‑Bagasee can be termed as intermediary marketable produce used as fuel for burning boilers containing juice of sugarcane or for making soft or hard building board.
Words and Phrases, Permanent Edn. 5; The Oxford English Dictionary; The Concise Oxford Dictionary; The New Encyclopaedia Britannica, Vol. 1, p.791 and The New Encyclopaedia . Britannica Vol., p.378 quoted.
(c) Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑Ss.3, 2(33), (16), (17), (35). (41), (44), (46), 7 & 13‑‑‑S.R.O. 437(1)/97, dated 13‑6‑1997‑‑‑Exemption of Bagasse from sales tax‑‑‑Notification S.R.O. 437(I)/97‑‑‑Retrospectivity‑‑‑Test‑‑‑"Taxable activity" ‑‑‑Concept‑‑ "Taxable supply" ‑‑‑'Manufacture'‑‑‑Meaning‑‑‑'Bagasse' is an intermediary produce which is manufactured/produced during the process of extrusion of sugarcane to obtain juice by the Sugar Mills‑‑‑Sugar Mills, being registered, consume 'Bagasse' differently and distinctly as a fuel against the value which is to be calculated at market price excluding the amount of tax if it is not otherwise determinable as such Bagasse being a taxable in furtherance of 'taxable activity', is liable to sales tax under S.3 of the Sales Tax Act, 1990‑ Bagasse as per its definition is an identifiable/marketable, goods on which tax can be levied, therefore, once a taxable goods has been supplied by a person to itself same would fall within the definition of 'taxable supply'‑‑ Notwithstanding the fact whether the sale has taken place or not between two persons but fact remains that by supplying Bagasse the Sugar Mills will be doing a "taxable supply" during the process of "taxable activity "‑‑‑'Taxable activity' covers any form of those activities which are even carried out by one person in his own business‑‑‑Principles.
The dictionary meanings of word "Bagasee" suggest that it can be termed as intermediary marketable produce used as fuel for burning boilers containing juice of sugarcane or for making soft or hard building board.
Bagasse caters 70/80% requirement of energy required to be consumed for manufacturing sugar. In other words by use of Bagasse as a fuel in process of manufacturing sugar the Mills are relieved from financial burden to this, extent. Besides it, Bagasse and other derivatives of the sugarcane procured during the process of manufacturing sugar like cane molasses, cane wax etc. are considered as bye‑products of the sugar. The cane molasses is also used in preparation of livestock feed, 'alcoholic drinks etc. similarly cane wax is used in manufacturing polish, polishes, cosmetics and paper coatings. Thus Bagasse cannot be considered a residue of the sugarcane but a useable product.
Central Board of Revenue has assigned a separate head to Bngasse for the purpose of levying customs duty, sales tax, etc. alongwith other residues and waste of Food Industries. But the Federal Government had been granting exemptions on the levy of sales tax by issuing notifications from time to time earlier under subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951) and later on its amendment under subsection (1) of section 13 of the Sales Tax (Amendment) Act, 1990. Such exemption, however; was not allowed for the period commencing from 1st July, 1996 to 13th June, 1997 as the same was not reflected in the Finance Act, 1996. However, by a Notification No.SRO 437(1)/97, dated 13th June, 1997 the Federal Government extended exemption of sales tax on the Bagasse, if used in house as fuel. The notification was to operate till 30th June, 1997 but in the Finance Act, 1997 exemption of sales tax was again granted on the same conditions as it had been mentioned in the notification referred .to hereinabove.
The Sales Tax Act, 1990 has been re‑enacted to consolidate and amend the law relating to levy of tax on the sale of goods, importation, exportation, production, manufacture or consumption of goods. Ordinarily concept of sale of goods represents to a sale transaction between two persons under an agreement. It is necessary that there should be an agreement between parties for the purposes of transferring title to goods which presupposes capacity to contract, it must be supported by money consideration, and as a result of the transaction property must actually pass in the goods. If the element of transfer of property from one person to another is lacking in any transaction there is no sale and the Legislature cannot be treating it as a sale by a deeming clause to bring it within the ambit of the taxing authorities. Consumption by an owner of goods in which he deals, therefore, is not a sale within the meaning of the Sate of Goods Act.
Although as per the title of the Act it should be meant for tax on the sales and not on any other transaction but as, per its preamble and definition clause as well as under section 3 of the Sales Tax Act which is a charging section the sales tax is leviable on taxable supplies and taxable activities.
As per clause (a) of subsection (1) of section 3 of the Sales Tax Act two conditions are essential to levy sales tax namely the taxable supplies and taxable activities. Both these expressions have been defined under sections 2(35) and 2(41) of the Act.
Expression "sales 'of goods" has to be interpreted exhaustively because definition clause of taxable activity i.e. section 2(35) has used the words means and includes but simultaneously other expressions used in this clause as well as clause 2(41) have to be taken into consideration broadly to ensure the objects for which the Act has been promulgated. As far as word "sale" is concerned it has not been defined anywhere in the Act rather it has been used as one of the component of, "supply" under section 2(33) of the Act, according to which "supply" includes sale or other disposition of goods in furtherance of business carried out for consideration and also includes putting to private business or non‑business, use of goods acquired, produced or manufactured in the course of business etc.
The intention of the Legislature can be gathered from the arrangement of different parts. of section 2(35) of the Act which appears to be disjunctive and not conjunctive. Its careful study suggests that taxable activity means any activity which is carried out by any person which may include one or more than one person with pecuniary profit or without pecuniary profit with regard to supply of goods to any person for any consideration or supply of goods otherwise and the supply of goods includes any activity carried on in the form of business, trade or manufacture meaning thereby that if supply of goods has been made in the course or furtherance of business carried out for consideration putting to private business or non business use of goods acquired, produced or manufactured in the course of the business it would fall within the definition of taxable activity. Reference may also be made to the definition of manufacturer or producer under section 2(17) of the Act, according to which a person who engages whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him and. shall include a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner etc. will be considered to have manufactured or produced identifiable goods which can either be consumed independently or can be incorporated in the finished product of any item. Admittedly the intermediary produce of Bagasse which is procured during the process of extracting juice from sugarcane can be considered a marketable and identifiable goods which can be supplied by a corporate or incorporate person to itself in the course of business. While making such supply it is not necessary that it should be against money consideration to a third person because as noted that the definition of word "supply" under section 2(33) includes putting to private business etc. therefore, instead of defining the expression taxable activity extensively if it is defined exhaustively it covers any form of those activities which are even carried out by one person in his own business. As Bagasse as per its definition is an identifiable/marketable goods on which tax can be levied, therefore, concluding so once a taxable goods has been supplied by a person to itself it would fall within the definition of taxable supply. Thus notwithstanding the fact whether the sale has taken place or not between two persons but fact remains that by supplying Bagasse the Sugar Mills will be doing a taxable supply during the process of taxable activity. As such it is liable to sales tax under the Act unless otherwise it is exempted by the Federal Government to provide incentive to the traders dealing in the sugar manufacture so they may reduce the price of the sugar by saving the. price incurred by them on the fuel b burning Bagasse because if they have to consume other energy Le electricity, gas etc. they have to pay its price independently.
The definition of word 'manufacture' as para. 2(16) of the Ac clearly suggests that the sugarcane during its extrusion produces Bagasse which is admittedly capable of being put to use differently. Therefore squarely it falls within the definition of manufacture.
Sugarcane after passing through the process of extrusion doe produce an intermediary product known as Bagasse which has an independent identity, status and character known to the consumer and it is also marketable in view of its utility.
In the present case as far as Bagasse is concerned it was not to be assimilated in the production of sugar and its identity remained independent from that of end product i.e. sugar. As such sales tax was leviable on it being a distinct and different item capable of use for any other purpose unless exempted from the tax.
Bagasse is a different article having a distinctive character and purpose for which it can be used:
Bagasse is manufactured/produced as a distinct and different intermediary product which can be supplied by the Sugar Mills to themselves while preparing sugar and would be covered by taxable activity and nature of such supply would be that of a taxable supply as Bagasse has got its independent character and status.
Retrospective effect of the amending law would apply on those cases where assessment has not been made or where an appeal was pending before the Tribunal or a law was enacted. The cases which had finally been determined or had attained finality which were past and closed transactions, could not be reopened under amending legislation as there are no express words to that effect employed in the amending law. Applying this test on the present case in absence of any material on record to conclude that on the date when SRO 437(1)/97, dated 13th June, 1997 was promulgated cases of Sugar Mills were pending for assessment of the tax on Bagasse before any forum. This aspect of the case can also be viewed from another angle namely that as per Finance Act, 1996 no exemption of sales tax was allowed on the Bagasse, therefore, its recovery was automatic under the Act. Thus a presumption would be that before instituting writ petitions the department might have calculated sales tax on Bagasse liable to be paid by them and there is strong presumption that majority of the Mills might have paid this tax. Moreover, the conduct of the Sugar Mills of filing writ petitions directly suggests to hold that they did not follow the remedy available to them before the forums under the hierarchy of the Act. It is settled law that In accordance with the settled principles of interpretation of statutory rules, orders and notifications, an amendment or change which will take effect only from the date of its promulgation unless it has been expressly or by necessary intendment made to take effect retrospectively.
In SRO 437(I)/97 there is no intendment to make it retrospective as such there was no omission at all in the Finance Act, 1996 by not incorporating Bagasse in the Schedule to be the item which will be exempted from the sales tax. The act of non‑granting exemption of sales tax on Bagasse seems to be intentional because exemption of the tax was not withheld only on Bagasse but on many other items and subsequently, when Notification, dated 13th June, 1997 was issued exemption on all those items was granted including Bagasse, therefore, argument so raised in this behalf is repelled being devoid of force.
The definition of the value has to be read under section 2(46) (a)(i) of the Act which would show that even in absence of value of the supply the activity can be termed to be a taxable activity of the taxable supply.
Sugar Mills which have failed to show that their turn Aver from taxable supply had not exceeded 2.5 million rupees, it is presumed that the Mills are registered one and if they make taxable supplies they would be liable to pay sales tax.
As far as the definition of the value of the' supply under section 2(46) of the Act is concerned it also covers those cases in which apparently fixation of the value is not possible because for the taxable supply no consideration in terms of money has taken place, therefore, in such cases for the determination of the value of the supply shall mean the open market price of the supply excluding the amount of tax in terms of section 2(46)(a)(i) of the Act.
Section 7 of the Act appears to be beneficial provision of law in nature providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax. But if no input tax is paid on intermediary produce without any adjustment the tax will be paid 'in terms of section 3 of the Act on its value which will be calculated as per the provisions of section 2(46)(a)(i) or section 2(46)(c) of the Act. As such the registered persons will not be burdened with the liability of double taxation.
The deeming provision created a legal fiction that in the restricted parameters, the use of consumption of independently identifiable foods would be considered to be a sale so as to bring such goods within the tax net. The use and consumption of intermediary goods could be treated as sales by legal fiction so as to bring such goods under the levy of sales tax where the final product was not subject to sales tax when sold and that the use or consumption of intermediary goods in such circumstances have a rational nexus with sale. Federal Legislature was, therefore, competent to enact the deeming provisions under' entries of "sales of goods" in the Constitutional documents.
Bagasse is an intermediary produce which is manufactured/produced during the process of extrusion of sugarcane to obtain juice by the Sugar Mills and being registered entities and is consumed differently and distinctly as a fuel against the value, which is to be calculated at market price excluding the amount of tax if its price is not otherwise determinable. As such it being a taxable supply in furtherance of taxable activity, is liable to sales tax under section 3 of the Act.
Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woollen Mills Ltd. and others 1999 SCMR 526 reaffirmed.
Indian Aluminium Co. Ltd. and another v. A.K. Bandyopadiyay and others 1980 ELT 146 (Bom.); Messrs I.C. & E. Morton (India) Limited and others v. Superintendent of Central Excise, Chapra and others 1980 ELT 99 (Cal.); Wirecond Delhi (Pvt.) Ltd. 1980 ELT 789 (C.B.E.&C.); Union of India and another v. I. Delhi Cloth and General Mills Co. Ltd. AIR 1963 SC 791; Commissioner of Sales Tax v. Messrs Shaiq Corporation Limited PLD 1986 SC 731; Messrs Electric Lamp Manufacturers of Pakistan Ltd. v. The Government of Pakistan through Secretary Finance, Islamabad and 3 others 1989 PTD 42 and Assistant Collector of Central Excise and Land Customs and 2 others v. Orient Straw Board and Paper Mills Ltd. PLD 1991 SC 992 distinguished.
AIR 1977 SC 90; AIR 1989 SC 335; AIR 1995 SC 1395; The State of Madras v. Messrs. Gannon Dunkerley & Co' (Madras) Ltd. AIR 1958 SC 560; Bhopal Sugar Industries Ltd. M.P. and another v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bhopal and another AIR 1964 SC 1037; Deputy Commercial Tax Officer, Saidapet, Madras and another v. Enfield India Ltd. Cooperative Canteen Ltd. AIR 1968 SC 838; AIR 1954 SC 459; AIR 1978 SC 449; 1999 PTD 1892; 2000 PTD 3715; AIR 1977 SC 597; 1980 ELT (Bom.) 146; 1980 ELT 99 (Cal.); 1980 ELT 789; C.B.E. & C.; PLD 1991 SC 992; PLD 1986 SC 731; 1989 PTD 42; Noori Cotton Corporation v. Sales Tax Officer PLD 1965 SC 161; Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woollen Mills Ltd. and others 1999 SCMR 526; South Bihar Sugar Mills Ltd. and others v. Union of India and another AIR 1968 SC 922; 1993 SCMR 73; 2000 PTD 285; PLD 1983 Pesh. 112, 1985 PTCL 441; Commissioner of Income‑tax v. Olympia 1987 PTD 739; 1993 SCMR 73 and The Burmah Oil Company Limited v. The Trustees for the Port of Chittagong PLD 1961 SC 452 ref.
Alf Sibtain Fazli, Advocate Supreme Court, Imtiaz Muhammad Khan, Advocate‑on‑Record and M.A. Qureshi, Advocate‑on‑Record for Appellants (in C. As. Nos. 1805 of 1998, 2 and 22 of 2000, C. Ps. Nos.386‑L and 700‑L of 2000).
Raja Muhammad Akram, Senior Advocate Supreme Court and Ch. Mehdi Khan Mehtab, Advocate‑on‑Record, for Appellants (in C. A. No. 1806 of 1998).
Hamid Khan, Advocate Supreme Court, Imtiaz Muhammad Khan, Advocate‑on‑Record and Ejaz Ahmad Khan, Advocate‑on‑Record for Appellant (in C. As. Nos. 1807, 1809 and 1810 of 1998).
Imtiaz Muhammad Khan, Advocate‑on‑Record for Appellant (in C. A. No. 1808 of 1998).
Jawaid Shaukat Malik, Advocate Supreme Court and Mahmadul Islam, Advocate‑on‑Record for Appellant (in C.A. No. 1811 of 1998).
M. A. Zaidi, Advocate‑on‑Record for Appellant (in C.A. No. 1392 of 1999).
Jawaid Shaukat Malik, Advocate Supreme Court and M.A. Zaidi, Advocate‑on‑Record for Appellants (in C.As. Nos.1417, 1418 of 1999 and 129 of 2000).
Mahmadul Islam, Advocate‑on‑Record for Appellants (C.As. Nos.488 and 489 of 2000).
Muhammad Naeem, Advocate Supreme Court and M.A. Qureshi, Advocate‑on‑Record for Petitioner (in C.P. No.526‑L of 2000).
Mansoor Ahmad, Deputy Attorney‑General (on Court's Notice in all Cases).
Muhammad Naseem, Advocate Supreme Court, A. Karim Malik, Senior Advocate Supreme Court, K. M. Virk, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate Supreme Court, Ch. Akhtar Ali, Advocate‑on‑Record and Aslam Chaudhry, Advocate‑on‑Record for Respondents.
Dates of hearing: 8th, 9th and 10th January, 2001
JUDGMENT
IFTIKHAR MUHAMMAD CHAUDHRY, J.‑‑‑By this judgment we intend to dispose of Civil Appeals Nos.1805 to 1811 of 1998, 1392, 1417, 1418 of 1999, 2 and 22 of 2000 and Civil Petitions No. 386/L, 526‑L and 700‑L of 2000 as these matters are directed against common judgment passed by Lahore High Court, Lahore in writ petitions instituted by the appellants and petitioners involving identical questions of law.
2. We don't consider it necessary to marshall the facts of each case in detail except mentioning that the appellants/petitioners are dealing in manufacturing and producing sugar in their respective industrial units as it is evident from narration of fact mentioned in all the appeals and petitions.
Whereas department's claim against appellants/petitioners is that they are liable to pay sales tax on 'Bagasse' with effect from 1st July, 1996 to 13th June, 1997, therefore, Collector/Additional Collector Sales Tax called upon them to make payment of evaded sales tax alongwith the additional tax failing which action as contemplated under the law shall be taken.
The appellants/petitioners without approaching departmental functionaries against the issuance of show‑cause notices to them instituted writ petitions before Lahore High Court, Lahore but without any success because vide impugned orders, dated 14th April, 1998 relief sought for was declined to them. Thus civil petitions for leave to appeal were filed by them which were allowed and leave was granted to file appeals vide order, dated 16th October, 1998 whereas C.P.L.As. mentioned in title of the judgment without granting leave were clubbed with the appeals to dispose them of as well jointly with the appeals.
3. Leave to . appeal has been granted among others to examine following questions:‑‑
"(a) Whether in view of the admitted position that all the petitioners are consuming 'Bagasse' and further that no 3rd person is involved in the sale of 'Bagasse' in all cases, the petitioners are liable to the payment of disputed sales tax on 'Bagasse'?
(b)Whether within the ambit of section 3 of the Sales Tax Act, 1990, being the charging section, 'Taxable activity', 'taxable supply', time of supply'; and value of supply' respectively defined in section 2(35), (41), (44) and (46) of the Act ibid can be equated with the process of 'sale' even notionally?
(c)Whether the learned Judge in Chambers was correct in observing that the effect of joint reading of Items Nos.49 and 59, Part I of the Federal Legislative List in Fourth Schedule of the Constitution of Pakistan is that petitioners can be made to pay sale tax on 'Bagasse' in the presence of the exemption to take effect during the financial year in question i.e., 1st July, 1996 to 30th of June, 1997 in that the same was rescinded during its currency, to it on 30‑6‑1997?
4. Learned A.C.Ss. who appeared on behalf of appellants/petitioners argued their cases from different dimensions to persuade us that no sales tax can be levied on 'Bagasse'. Their respective contentions shall appear hereinbelow alongwith contra arguments of learned counsel for official respondents.
5. Before focusing on the question putforward by the appellant; through their counsel it would be appropriate to reproduce the Dictionary meanings of the word 'Bagasse' hereinbelow:‑‑
(Words and Phrases Permanent Edition 5) .
" 'Bagasse' Patent product claims and process. claims relating to manufacture of hardboard from 'wood or woody material' held not infringed by manufacture of hard board from Bagasse."
('The Oxford English Dictionary)
'Bagasse' Bagasse ad. Sp. Bagazo, hushs of olives, grapes etc. after pressing; perh. A variant of baggage 'lumber, trash' with augmentative suffix. The refuse products in sugar‑making, whether from the cane or from beet.
'The huge, square, red brick Bagasse burner, into which the residuum of crushed sugar cane passes.''
(The Concise Oxford Dictionary).
'Bagasse' the dry pulpy residue left after the extraction of juice from sugarcane, usable as fuel or to make paper etc.
(The New Encyclopaedia Britannica Volume 1 page 791).
" 'Bagasse' also called MEGASS, fibre remaining after the extraction of the sugar bearing juice from sugarcane. The word Bagasse, from the French Bagage via the Spanish bagazo, originally meant 'rubbish', 'refuse' or 'trash'. Applied first to the husks of olives, palm nuts, and grapes after pressing, use of the word was extended to mean residues from other processed plant materials such as sisal, sugarcane, and sugar beets. In modern use, the word is limited to the end product of the sugarcane mill.
Bagasse may be used as fuel in the sugarcane mill or as a source of cellulose for manufacturing animal feeds. Paper is produced from Bagasse in several Latin‑American countries, in the Middle East, and in all sugar‑producing countries that are deficient in forest resources. Bagasse is the essential ingredient for production of pressed building board, acoustical tile, and other construction materials."
The above dictionary meanings of word Bagasse" suggest that it can be termed as intermediary, marketable produce used as fuel for burning boliers containing juice of sugarcane or for making soft or hard building board. We were informed by learned counsel for appellants that Bagasse caters 70/80% requirement of energy required to be consumed for manufacturing sugar. In other words by use of Bagasse as a fuel in process of manufacturing sugar the appellants are relieved from financial burden to this extent. Besides it Bagasse and other derivatives of the sugarcane procured during the process of manufacturing sugar like cane molasses, can wax etc. are considered as bye, products of the sugar as per the New Encyclopaedia Britannica Vol. Page 378. It is needless to observe that the cane molasses is also used‑‑in preparation of livestock feed, alcoholic drinks etc. similarly cane wax is used in manufacturing polish, polishes, cosmetics and paper coatings. Thus Bagasse cannot be considered a residue of the sugarcane but a useable product as noted above. .
5‑A. It would not be out of context to point out that Central Board of Revenue has assigned a separate head to Bagasse for the purpose of levying customs duty, sales tax etc. alongwith other residues and waste of Food Industries. But the Federal Government had been granting exemptions on the levy of sales tax by issuing notifications from time to time earlier under subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (111 of 1951) and later on its amendment under subsection (1) of section 13 of the Sales Tax (Amendment) Act, 1990. Such exemption, however, was not allowed for the period commencing from 1st July, 1996 to,13th June, 1997 as the same was not reflected in the Finance Act, 1996. However, by a Notification No. SRO 437(1)/97, dated 13th June, 1997 the Federal Government extended exemption of sales tax on the Bagasse, if used in house as fuel. The notification was to operate till 30th June, 1997 but in the Finance Act, 1997 exemption of sales tax was again granted on the same conditions as it has been mentioned in the notification referred to hereinabove.
6. The edifice of arguments of Mr. Ali Sibtain Fazali learned A.S.C. was that the Sales Tax Act, 1990 (hereinafter referred to as the "Act") is meant to levy taxes on the sale of goods i.e. transfer of property from one person to other person and in absence of essential ingredients of the sale, the sales tax cannot be charged, therefore, adopting its definition exhaustively in view of the words "means" and "includes" used in section 2(35) of the Act it may be declared that sales tax cannot be recovered on Bagasse consumed by the appellants in their factories as fuel while manufacturing sugar. Reference in this behalf was made by him to the judgments reported in AIR 1977 SC 90, AIR 1989 SC 335 and AIR 1995 SC 1395.
In continuation of his above arguments he stated that unless it is established that sale of Bagasse had taken place between two persons the sales tax cannot be levied on the quantity of Bagasse which the appellants have kept for themselves to use as fuel in manufacturing of sugar. To substantiate the definition of word "sale" of goods reliance was placed by him on AIR 1958 SC 560, AIR 1964 SC 1037 and AIR 1968 SC 838.
Mr. Hamid Khan learned A.S.C. substantiated the above contentions and stressed for physical transferring of the goods from one person to other person against a consideration as per the agreement to complete the transaction of sale. He also relied on .AIR 1954 SC 459 and
Raja Muhammad Akram learned; A.S.C. advancing the case of the, appellants argued that as admittedly the appellants are consuming Bagasse as fuel, therefore, its such consumption cannot be deemed self‑sale to them. He has also referred to the judgments noted above. Learned counsel further stated that as per interpretation of the statute the word used by the legislature are required to be defined in the true sense instead of stretching them to achieve the object beyond the intention of law as held in 1999 PTD 1892 and
7. Whereas learned counsel for the official respondents argued that as per the scheme of the Act, sales tax is not only leviable on profit and loss oriented transaction between two parties but it can be charged on all taxable supplies in respect of taxable goods, manufactured, consumed during a taxable activity notwithstanding the fact of pecuniary. profit as per the definition of the expression taxable activity and taxable supplies under sections 2(35) and 2(41) of the Act.
8. The Act has been re‑enacted to consolidate and amend the law relating to levy of tax on the sale of goods, importation, exportation, production, manufacture or consumption of goods. There cannot be a cavil at all that ordinarily concept of sale of goods represents to a sale transaction between two persons under an agreement as held in the case of the State of Madras v. M/s. Gannon Dunkerley & Co., (Madras) Ltd. (AIR 1958 SC 560) that it is necessary that there should be an agreement between parties for the purposes of transferring title to goods which pre‑supposes capacity to contract, that it must be supported by money consideration; and that as a result of the transaction property must actually pass in the goods. In the case of Deputy Commercial Tax Officer, Saidapet Madras and another v. Enfield India Ltd. Cooperative Canteen Ltd. (AIR 1968 SC 838) it has been held that if the element of transfer of property from one person to another is lacking in any transaction there is no sale and the Legislature cannot by treating it as a sale by a deeming clause bring it within the ambit of the taxing authorities Similar interpretation was assigned by other judgments of Indian Supreme Court cited at the bar by learned counsel Mr. Ali Sibtain Fazli, Mr. Hamid Khan and Raja Muhammad Akram Like AIR 1968 SC 838, AIR 1954 SC 459, AIR 1978 SC 449 and in the case of Keith Raymond Pine (Appellant) v. Commissioner of Inland Revenue (Respondent) by the High Court of Appeal of Newsland. However, in one of the judgments from Indian jurisdiction in the case of Bhopal Sugar Industries Ltd. M.P. and another v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bhopal and another (AIR 1964 SC 1037) it was held that consumption by an owner of goods in which he deals, therefore, is not a sale within the meaning of the Sales of Goods Act.
8‑A. Although as per the title of the Act it should be meant for tax on the sales and not on any other transaction but as per its preamble and definition clause as well as under section 3 of the Sales Tax Act which is a charging action the sales tax is leviable on taxable supplies and taxable activities. For convenience relevant part of section 3(1) of the Act is reproduced hereinbelow:‑‑
"3Scope of tax.‑‑(1) Subject to the provisions of their Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of‑‑
(a)taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him; and
(b)goods imported into Pakistan."
The above quotation reveals that as per clause (a) of subsection (1) of section 3 of the Act two conditions are essential to levy sales tax namely the taxable supplies and taxable activities. Both these expressions have been defined under sections 2(35) and 2(41) of the Act which reads thus:‑‑
"(35)'Taxable activity' means any activity which. is carried on by any person, whether or not for a pecuniary profit, and involves in whole or in part, the supply of goods to any other person, for any consideration or otherwise, and includes any activity carried on in the form of a business, trade or manufacture."
"(41)'Taxable supply' means a supply of taxable goods made in Pakistan by an Importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4. "
8‑B. As per the contention of the learned counsel appearing for the appellants/petitioners particularly Mr. Ali Sibtain Fazli the expression taxable activity has to be interpreted exhaustively and not extensively and the transaction of sale of goods is to be confined only in between two persons as per definition of word 'sale' and if it has been produced and consumed by the same person for his own use it would not be sale to himself. We are not inclined to disagree with him to interpret the expression "sales of goods" has to be interpreted exhaustively because definition clause of taxable activity i.e. section 2(35) has used the words means and includes but simultaneously, other expressions used in this clause as well as clause 2(41) have to be taken into consideration broadly to ensure the objects for which the Act has been promulgated. It may be noted that as far as word "sale" is concerned it has not been defined anywhere in the Act rather it has been used as one of the component of "supply" under section 2(33) of the Act, according to which "supply" includes sale or other disposition of goods in furtherance of business carried out for consideration and also includes putting to private business or non‑business use of goods acquired, produced or manufactured in; the course of business etc.
9. It may be noted that the intention of the Legislature can be gathered from the arrangement of different parts of section 2(35) of the Act which appears to be disjunctive and not conjunctive. Its careful study suggests that taxable activity means any activity which is carried out by any person which may include one or more than one person with pecuniary profit or without pecuniary profit with regard to supply of goods to any person for any consideration or supply of goods otherwise and the supply of goods includes any activity carried on in the form of business, trade or manufacture meaning thereby that if supply of goods has been made in the course or furtherance of business carried out for consideration putting to private business or non business use of goods acquired, produced or manufactured in the course of the business it would fall within the definition of taxable activity. At this juncture reference may also be made to the definition of manufacturer or producer under section 2(17) of the Act, according to which a person who engages whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him and shall include a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner etc. will be considered to have manufactured or produced identifiable goods which can either be consumed independently or can be incorporated in the finished product of any item. Admittedly the intermediary produce of Bagasse which is procured during the process of extracting juice from sugarcane can be considered a marketable and identifiable goods, which can be supplied by a corporate or incorporate person to itself in the course of business. While making such supply it is not necessary that it should be against money consideration to a third person because as we have noted that the definition of word "supply" under section 2(33) includes putting to private business etc., therefore, instead of defining the expression taxable activity extensively if it is defined exhaustively it covers any form of those activities which are even carried out by one person in his own business. As it has been observed hereinabove that Bagasse as per its definition is an identifiable/marketable goods on which tax can be levied, therefore, concluding so we feel no hesitation that once a taxable goods has been supplied by a person to itself it would fall within the definition of taxable supply. Thus notwithstanding the fact whether the sale has taken place or not between two persons but fact remains that by, supplying Bagasse the appellants will be doing a taxable supply during the process of taxable activity. As such it is liable to sales tax under the Act unless otherwise it is exempted by the Federal Government to provide incentive to the traders dealing in the sugar manufacture so they may reduce the price of .the sugar by saving the price incurred by them on the fuel by burning Bagasse because if they have to consume other energy i.e. electricity, gas etc. They have to pay its price independently.
10. Mr. Shaukat Jawaid, learned A.S.C. contended that Bagasse does not fall within the definition of manufacture or produce, under section 2(16) of the Act, therefore, the appellants/petitioners are not manufacturer or producers under section, 2(17) of the Act. To further elaborate his argument he referred to the definition of manufacture under section 2(f) of the Central Excises and Salt Act, 1994. According to him in the tax laws those meanings of expressions are to be accepted which are ordinarily understood by people as held in AIR 1977 SC 597. He has also placed reliance on 1980 ELT (Bombay) 146, 1980 ELT 99 (Calcutta) and 1980 ELT 789 C.B.E. & C.
Mr. Hamid Khan learned counsel also argued in this behalf and contended that as Bagasse is obtained as residue during the process of consumption of sugarcane for preparing sugar as such it does not fall within the definition of manufacture or produce thus no sales tax can be levied on it. Reliance in this behalf was placed by him on 1992 PTCL (CL) 38, PLD 1986 SC 731, 1989. PTD 42, AIR 1968 SC 922.
11. Learned counsel for the respondents, however, controverting the above arguments of the appellants/petitioners' counsel contended that sugarcane is transformed into juice during a mechanical process for preparing sugar and Bagasse is obtained as intermediary product which has got its own identity and is also taxable as it is used in place of fuel as well as for preparing building material as such being an identifiable item falls under the definition of manufacture or produce as such is liable to sales tax.
12. It may be noted that under section 2(16) of the Act the words manufacture or produce has been defined as follows:‑‑
"(16) 'manufacture' or 'produce' includes‑‑‑
(a)any process in which an‑article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental‑ or ancillary to the completion of a manufactured product;
(b)process of printing, publishing, lithography and engraving; and
(c)process and operations of assembling, mixing, cutting, diluting, bottling, packaging, repackaging or preparation of goods in any other manner."
The above definition clearly suggests that the sugarcane during its extrusion produces Bagasse, which is admittedly capable of being put to use differently. Therefore, squarely it falls within the definition of manufacture, As far as the authorities cited by learned counsel for appellants/petitioners are concerned they are distinguishable on facts as well as the law interpreted therein. In the case of Indian Aluminium Co. Ltd. and another v. A.K. Bandyopadiyay and others (1980 E.L.T. 146 Bom.) it was held that refuse or scum thrown off during the process of manufacture cannot by any stretch of imagination be considered as a by‑product and merely because such refuse or scum may fetch some price in the market they cannot be said to be finished excisable goods. First distinction in this case is that this judgment has been delivered under the Central Excises and Salt Act, 1944, the scheme of which pertained to charging of excise, which is different than the scheme of the Act. Secondly those refuse or scum were liable to be thrown off during the process of manufacture whereas the Bagasse as it has been noted hereinabove is not a refuse liable to be thrown away but it is an intermediary product of sugarcane which is separately 'identified and can be used differently. In the case of Messrs I.C. & E. Morton (India) Limited and others v. Superintendent of Central Excise, Chapra and others (1980 ELT 99 (Cal.) the question for consideration before a Single Judge of the High Court was with regard to interpretation of section 2(f) and Item IC of the Central Excises and Salt Act, 1944, therefore, while determining that the scraps are broken parts of the boiled sweets, certainly, it comes within the definition of 'confectionery' and excise duty is liable to be paid. However, it was held that the scrap cannot be taxed as finished product if it is obtained in the course of manufacture and not out of manufacture of finished product because if the raw material undergoes some change in the process of manufacture it cannot be equated with the finished product. In the instant matter there is no question of charging sales tax on the finished product, therefore, the judgment for such reason is distinguishable. Similarly the judgment Wirecond Delhi (Pvt.) Ltd. (1980 ELT 789 (C.B.E. & C.) is distinguishable from the instant case because while interpreting the definition of manufacture under the Central Excises and Salt Act, 1944 it was held that under section 2(f) of the Central Excises and Salt Act, implies a change whereby a new and different article must emerge having a distinctive name, character or use. Since the scrap of aluminium process is not useable until and unless it is re‑melted, it can only be termed as 'aluminium in crude form' covered by item 27(a) of the Central Excise Tariff and cannot be said to be goods of a distinct and separate identity and character as envisaged by section 2(f) of the said Act. Likewise the judgment reported in case of Union of India and another v. I. Delhi Cloth and General Mills Co. Ltd. (AIR 1963 SC 791) is distinguishable because in this case as well it was held' that the substance produced by the manufacture at an intermediary stage is not put in the market would not make any difference to the chargeability of the substance to excise duty if it is covered by an item in Schedule I of the Act. As per the facts of this case during the manufacturing of hydrogenated oils known as vanaspati from the raw materials, new substance has been brought into existence by the application of processes one or more of which are with the aid of power and that substance is the same as 'refined oil' as known to the market, and excise 'duty may be leviable. However, it was further observed that in view of the Indian Standard Institution as regards what it refined oil as known to the trade in India must be preferred. As the raw oil though purified in the process of manufacturing vanaspati, is not deodorised before its hydrogenation it does not become at any stage refined oil as is known to the consumers and the commercial community and no excise duty is leviable on it.
It may be observed that this judgment has also not advanced the case of the appellants/petitioners in any manner because as it has been held that sugarcane after passing through the process of extrusion does produce an intermediary product known as Bagasse which has an independent identity, status and character known to the consumer and it is also marketable in view of its utility as discussed hereinabove.
Likewise the judgment cited by Mr. Hamid Khan reported in the case of the Commissioner of Sales Tax v. Messrs. Shaiq Corporation Limited (PLD 1986 SC 731) is distinguishable firstly in this case various provisions of Sales Tax Act, 1950 came for interpretation and secondly as per the facts of the case the assessee was a licensed manufacturer of electric fans and was exempt from the payment of tax on partly manufactured goods imported for being incorporated into the end‑product under section 4(b) of the Act. The partly manufactured goods in the normal course were leviable to charge under section 3(1)(b) and the stage at which the sales tax was payable was after import but before clearance by the Customs Authorities under section 5(I)(b) of the Act. The partly manufactured goods had been assimilated in the production of fans and the critical date on which these were sought to be assessed for payment of tax was the closing date i.e. 14th June, 1965. On that date they had lost their original shape and could not be subjected to any event as prescribed under section 4(1)(a) and (b) of the Act. That being so they were not liable ‑to payment of the tax. Whereas in the instant case as far as Bagasse in concerned it was not to be assimilated in the production of sugar and its identity remained independent from that of end product i.e. sugar. As such sales tax was leviable on it being a distinct and different item capable of use for any other purpose unless exempted from the tax.
The next case relied upon by the learned counsel i.e Messrs Electric Lamp Manufacturers of Pakistan Ltd. v. The Government of Pakistan through Secretary Finance, Islamabad. and 3 others (1989 PTD 42) is not any help to him because in this case it was held that glass shells are fit in the definition of manufactured goods and they are also marketed independent) or manufacturer of bulbs can purchase glass shells from outside for using the same in manufacturing bulbs. As such it was held that the Federal Legislature was competent to cover a case of glass shells under section 3(4)(6) of the Sales Tax Act. With reference to the facts of this case is important to note that under the scheme of section 3(6) of the Sales Ta: Act, 1951 the goods kept by a manufacturer for his own use on the fiction o the law was regarded as a sale as held in the case of Noori Cotton Corporation v. Sales Tax Officer (PLD 1965 SC 161) and re‑affirmed ii another judgment in the case of Commissioner of Sales Tax v. Messrs Shaiq Corporation Limited. In these two judgments it has also been settled that the sales tax on the partially manufactured goods is leviable even if such goods are used in the preparation of the finished goods which is exempted from the sales tax. As in the instant case for the fiscal year commencing from Ist July, 1996 to 30th June, 1997 sales tax on finished goods i.e. sugar was exempted but it was chargeable on the intermediary goods i.e. Bagasse uptill 13th June, 1997 when by issuing SRO 437(1)/1997, dated 13th June, 1997 it was exempted from the tax. This principle has also been approved by this Court again in the case of Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woolen Mills Ltd. and others (1999 SCMR 526).
In the case of South Bihar Sugar Mills Ltd. and others v. Union of India and another (AIR 1968 SC 922) learned Court while interpreting the word "manufacture" under section 2(f) of the Central Excises and Salt Act, 1944 held that the word manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinct name, character or use. Although this judgment has been delivered under different law but even if the definition of manufacture so defined in this case is applied on Bagasse then without any fear of doubt it can be held that it is a different article having a distinctive character and purpose for which it can be used.
In the judgment of Assistant Collector of Central Excise and Land Customs and two others v. Orient Straw Board and Paper Mills Ltd. PLD 1991 SC 992 the word manufacture was interpreted in view of section 2(f) of the Central Excises and Salt Act, 1944. It may be noted that original section 2(f) of the said Act has also been substituted by Finance Act, 1995 whereby more exhaustive definition to the word manufacture was assigned, therefore, even if looked from this angle the judgments cited at the bar on behalf of the appellants/petitioners relating to the old provisions of definition of manufacturer under section 2(f) of the Central Excise Act would not be of any help to them. However, over all survey of the judgments cited at the bar which have been discussed hereinabove and also keeping in view the definition of the word manufacture and produce under section 2(16) of the Act we are persuaded to hold that Bagasse is manufactured/produced as a distinct and different intermediary product which can be supplied by the appellants/petitioners to themselves while preparing sugar and would be covered by 'taxable activity and nature of such supply would be that of a taxable supply as Bagasse has got its independent character and status.
14. Learned counsel Mr. Muhammad Naedm contended that as during the fiscal year 1996‑97 exemption from sales tax on Bagasse was not granted but vide SRO 437(1)/97, dated 13th June, 1997 if used in house was exempted from sales tax, therefore, according to him because earlier from 1990 to onwards vide notifications issued from time to time exemption of sales tax was granted on it, therefore, intention of the Government may be construed that even for 1996‑97 it intended to grant exemption on the Bagasse but due to some omission it has not been done so, as such the notification may be treated to have retrospective effect. To substantiate his contention reliance was placed on 1987 PTD 739, 1993 SCMR 73 and 2000 PTD 285.
15. Learned counsel Mr. Hamid Khan also contended that non‑granting of exemption of sales tax for the period from 1st July, 1996 to 13th June, 1997 can be deemed as accidental omission because subsequently when the Federal Government realized that exemption from sales tax on Bagasse was permissible in view of the previous practice, it issued notification on 13th June, 1997 when the financial year was about to complete and there was also no season of crushing of sugarcane which according to him comes to an end maximum by the month of April or May of every year. Therefore, making the notification applicable retrospectively its benefit may be extended to the appellants. In support of his arguments reference was made by him to the judgments reported in PLD 1961 SC 452, PLD 1983 Peshawar 112 and 1985 PTCL 441.
16. Learned counsel for the respondents replying the above arguments contended that firstly notification always operate prospectively; secondly even if it is assumed for the sake of arguments that it being remedial legislation will operate retrospectively still the appellants/petitioners were bound to convince the Court that on the day of its issuance their cases were pending for adjudication before the competent forum. Thirdly there was no omission on the part of legislature in not granting exemption of sales tax on Bagasse from 1st July, 1996 to 13th June, 1997 because it was an intentional act of tax levying authority.
17. As far as the judgment in the case of Commissioner of Income Tax v. Olympia (1987 PTD 739) delivered by a learned Division Bench in the Chambers of the High Court is concerned it was re‑affirmed by this Court in the case reported in 1993 SCMR 73 with the observation that the retrospective effect of the amending law would apply on those cases where assessment has not been made by the I.T.Os. or where an appeal was pending before the Tribunal or a law was enacted. The cases which had finally been determined or had attained finality which were past and closed transactions, could not be re‑opened under amending legislation as there are no express words to that effect employed in the amending law. Applying this test on the case in hand we are inclined to observe that in absence of any material on record to conclude that on the date when SRO 437(1)/97, dated 13th June, 1997 was promulgated their cases were pending for assessment of the tax on Bagasse before any forum. This aspect of the case can also be viewed from another angle namely that as per Finance Act, 1996 no exemption of sales tax was allowed on the Bagasse, therefore, its recovery was automatic under the Act. Thus, a presumption would be that before instituting writ petitions the department might have calculated sales tax on Bagasse liable to be paid by them and there is strong presumption that majority of the industrialists might have paid this tax. Moreover, the conduct of the appellants/petitioners of filing writ petitions directly suggests to hold that they did not follow the remedy available to them before the forums under the hierarchy of the Act. It may also be noted that it is settled law that notification operates prospectively unless it has been made to operate retrospectively. However, following criteria to determine whether such notifications particularly relating to the tax will operate retrospectively has been laid down in the case of The Burmah Oil Company Limited v. The Trustees for the Port of Chittagong (PLD 1961 SC 452).
"therefore, in accordance with the settled principles of interpretation of statutory rules, orders and notifications, an amendment or change which will take effect only from the date of its promulgation unless it has been expressly or by necessary intendment made to take effect retrospectively."
18. In view of the test laid down by this Court in the case of Burmah Oil Company Limited (supra) we are of the opinion that in SRO 437(1)/97 there is no intendment to make it retrospective as such we hold that there was no omission at all in the Finance Act, 1996 by not incorporation Bagasse in the Schedule to be the item which will be exempted from the sales tax. The act of non‑granting exemption of sales tax on Bagasse seems to be intentional because exemption of the tax was not withheld only on Bagasse but on many other items and subsequently when Notification, dated 13th June, 1997 was issued exemption on all those items was granted including Bagasse, therefore, argument so raised in this behalf is repelled being devoid of force.
19. Learned counsel Mr. Muhammad Naeem contended that supply of Bagasse by the appellants/petitioners to themselves is not being made by a registered person against value, therefore, in absence of these two important components no tax can be charged on Bagasse because it does not fall within the definition of taxable supply.
20. Learned counsel appearing for the respondents contradicting his arguments stated that appellants/petitioners have been duly registered under the Act and the statement so made by the counsel is not based on correct information and secondly the definition of the value has to be read under section 2(46) (a)(i) of the Act which would show that even in absence of value of the supply the activity can be termed to be a taxable activity of the taxable supply.
20‑A. Learned counsel appearing on behalf of other appellants/petitioners did not support to Mr. Muhammad Naeem on the point that the appellants/petitioners are not registered persons for the purposes of the Act.
21. After having perused section 14 of the Act we have not been persuaded to accept his contention because at least on behalf of the appellants/petitioners for whom he is appearing he failed to show that its turn over from able supply had not exceeded 2.5 million rupees, therefore, it is presumed that the petitioner is a registered person and if he makes taxable supplies he would be liable to pay sales tax.
22. As far as the definition of the value of the supply under section 2(46) of the Act is concerned it also covers those cases in which apparently fixation of the value is not possible because for the taxable supply no consideration in terms of money has taken place, therefore, in such cases for the determination of the value of the supply shall mean the open market price of the supply excluding the amount of tax in terms of section 2(46)(a)(i) of the Act. Thus the argument advanced in this behalf being without substance is accordingly repelled.
23. Mr. Hamid Khan, learned A.S.C. contended that demand of sales tax on Bagasse would constitute double taxation against the raw material consumed by the appellants/petitioners in manufacturing the sugar. To elaborate his argument he contended that input tax is paid by the manufacturers of the sugar on the raw material which is adjustable in output tax under section 7 of the Act on the supply of the finished product. But sales tax on Bagasse would not be adjustable at the time of supply of sugar.
24. Learned counsel. for the, respondents contended that under section 7 of the Act only tax liability is to be determined and if no input tax has been paid then the appellants/petitioners will only make payment of sales tax on Bagasse treating it the tax which is liable to be paid by them on the energy.
25. We have examined section 7 of the Act carefully which appears to be beneficial provision of law in nature providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax. But if no input tax is paid on intermediary produce without any adjustment the tax will be paid in terms of section 3 of the Act on its value which will be, calculated as per the provisions of section 2(46)(a)(i) or section 2(46)(c) of the Act. As such the registered person will not be burdened with the liability of double taxation.
26. Mr. Ali Sibtain Fazli, learned A.S.C. contended that under item 49, 4th Schedule (under Article 70(4) of the Constitution of Islamic Republic of Pakistan) when the supply of Bagasse is made by the manufacturers of the sugar to themselves it would not be liable, to sales tax because such tax is payable on the sales and purchases of goods imported, exported, produced, manufactured or consumed.
27. This Court has already considered competency of the legislation to enact the laws for the purposes of levying sales tax in view of above Article of the Constitution in the case of Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woollen Mills Ltd. and others (1999 SCMR 526). Relevant para. there from is reproduced hereinabelow:‑‑
"25 The deeming provision created a legal fiction that in the aforesaid restricted parameters, the use of consumption of independently identifiable goods would be considered to be a sale so as to bring such goods within the tax net. For the reasons mentioned above, we are of the view that, in the aforesaid restricted sense, the use and consumption of intermediary goods could be treated as sales by legal fiction so as to bring such goods under the levy of sales tax where the final product was not subject to sales tax' when sold and that the use or consumption of intermediary goods ill such circumstances have a rational nexus with sale. Federal Legislature was, therefore, competent to enact the deeming provisions under entries of 'sales of goods' in the Constitutional documents."
As such in view of above decision of this. Court no further discussion is called for except re‑affirming the above decision.
28. Thus for the foregoing reasons we are inclined to hold that Bagasse is an intermediary produce which is manufactured/produced during the process of extrusion of sugarcane to obtain juice by the appellants/petitioners being registered persons and is consumed differently and distinctly as a fuel against the value which is to be calculated at market price excluding the amount of tax if its price is not otherwise determinable. As such it being a taxable supply in furtherance of taxable activity, is liable to sales tax under section 3 of the Act.
In view of above discussion we see no merit in these appeals and petitions, which are dismissed with costs:
M.B.A./117‑S/SC Appeals/petitions dismissed.