MESSRS RAMNA FITTINGS AND PIPE INDUSTRIES (PVT.) LTD. THROUGH DIRECTOR, LAHORE VS COLLECTOR OF SALES TAX, CUSTOM HOUSE, LAHORE
2002 P T D 470
[Lahore High Court]
Before Maulvi Anwarul Haq, J
Messrs RAMNA FITTINGS AND PIPE INDUSTRIES (PVT.) LTD. through Director, Lahore
versus
COLLECTOR OF SALES TAX, CUSTOM HOUSE, LAHORE
Writ Petition.No.19868 of 1996, heard on 07/11/2001.
(a) Sales Tax Act (VII of 1990)---
---S. 2(16), cls. (a), (b) & (e)---"Manufacture" or "produce"-- Section 2(16), cls. (b) & (c) of the Sales- Tax Act, 1990 are not to be read independently but rather to be read as part of or. in continuance of cl. (a)---Processes mentioned in cls. (b) & (c) of S.2(16) would constitute manufacture only with reference to initial process of manufacture as stated in cl. (a) of S.2(16) of the Sales Tax Act, 1990.
Deputy Collector, Central Excise and Land Customs; Lahore v Tyrex Pakistan (Ltd.) Lahore and others PLD 1992 SC 364 rel.
(b) Sales Tax Act (VII of 1990)---
----S.2(1.6)(c)---"Manufacture" or "produce"---Galvanization and threading of pipe fittings---Notwithstanding the too wide wordings used in cls. (b) & (c) of S.2(16) the galvanization and threading of the pipe fittings which do not at all convert the said articles into any other distinct articles or change or transform their shapes, do not bring the said act of threading and galvanizing within the mischief of cl. (c) of S.2(16) of the Sales Tax Act, 1990.
(c) Sales Tax Act (VII of 1990)---
----Ss.3(1)(a), 2(16), 2(35) & 6(1)---Scope of tax---Manufacturing; or produce---Taxable activity---Import of pipe fittings---Payment of sales tax at import stage---Galvanizing and threading of pipe fittings---Levy of sales tax once again on plea of its "manufactured" or "produced"-- Validity ---Assessee was not involved in process of manufacture in the matter of pipe fittings imported by him as such he was not liable to pay sales tax as manufacturer having paid it at the import stage---Act of galvanizing and threading pipe fittings imported by the assessee, who had paid the sales tax at import stage, was declared not to be process of manufacturing so as to make the assessee liable to pay the tax as manufacturer of the said goods/articles.
Mian Ashiq Hussain for Petitioner.
Izhar-ul-Haq Sheikh for Respondent.
Date of hearing: 7th November, 2001
JUDGMENT
The petitioner imports pipe fittings and sales tax is paid at the said stage. Thereafter the said fittings after galvanizing and threading are sold in the market. The point raised in this writ petition is as to whether the said act of threading and galvanizing falls under the definition of manufacture or production so as to make the goods liable of payment of sales tax once again at the said stage.
2. Learned counsel for the petitioner contends that the goods that are sold by the petitioner in the market remained in the same shape as they were at the time of import and as such no element of manufacture or production is involved so as to create fresh liability for the payment of sales tax. Mr. Izhar-ul-Haq Sheikh, Advocate for the respondent department on the other hand argues that in view of the definition of terms manufacture or produce stated in section 2(ii) of the Sales Tax Act, 1990, applicable at the relevant time commission of any act vis-a -vis goods imported before the sale in the market would constitute the process of manufacture liable to sales tax under section 3(1)(a) of the Sales Tax Act, 1990, notwithstanding the fact that the petitioner pays sales tax at the time of import.
3. I have given some thought to the respective contentions of the learned counsel for the parties. Under section 3(1)(a) sales tax is toy be charged, levied and paid at the prescribed rate of the value---
(a)taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable acitives carried on by him:
(b)goods imported into Pakistan.
Under section 6(1) in the matter of import of goods the said tax is to be charged and paid in same manner and at the same time as if it were duty of Customs under the Customs Act, 1969 while the tax in respect of taxable supplies made in Pakistan during tax period is to be paid at any time before filing the return in respect of that period under Chapter V.
4. Now the taxable activity is defined in section 2(35) of the said Act to mean any activity which is carried on by any person, whether or not for pecuniary benefit and involves in whole or part the supply of goods to any other person, for any consideration or otherwise, includes any activity carried in the form of business, trade or manufacturing. I may reproduce here section 2(16) of the said Act which defines manufacture or produce:---
"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, repacking or preparation of goods in any other manner."
Now so far as the said sub-clause (a) of the said section 2(16) is concerned, the same fully supports the said contention of the teamed counsel for the petitioner when he contends that the process of manufacture involves conversion of one article singly or in combination with other articles and components into a distinct article or product or in the process the original article is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly. Mr. Izhar-ul-Haq Sheikh, Advocate does not question the factual position that the pipg fittings are not transformed into a different article which can be put to any other distinct use when they are galvanized and threaded. He, however, places implicit reliance on the clause (c) of the said section 2(16) to argue that any process applied to imported article would constitute manufacture as defined in the said section 2(16). The learned counsel for the petitioner on the other hand is of the opinion that clauses (b) and (c) of said section 2(16) are not to be read independently but rather to be read into, as part of or in continuance of clause (a). The precise contention is that the processes mentioned in clauses (b) and (c) would constitute manufacture only with reference to initial process of manufacture as stated in the said clause (a). I may state here that the learned counsel relies on the case Deputy Collector, Central Excise and Land Customs, Lahore v. Tyrex Pakistan (Ltd.) Lahore and others PLD 1992 SC 364. 1 have examined the said judgment and to my mind it does support the learned counsel for the petitioner so far as the contents of said clause (a) of section 2(16). is concerned. However, in the present case the said clauses (b) and (c) of the said section 2(16) are also to be considered. To my mind, so far as the facts and circumstances of the present case in particular are concerned, notwithstanding the too wide wordings used in clauses (b) and (c) the galvanization and threading oil the pipe fittings which do not at all convert the-said articles into any other distinct articles or change or transform their shapes, do not bring the said act of threading and galvanizing within the mischief of said clause (c). Judicial notice can safely be taken of the commonplace and fact that the Pipes which people purchase are normally threaded by plumber who instals the pipe fittings. This certainly is not a process of manufacture, similarly galvanizing the said articles would not constitute the said process. The said acts certainly do not fall within the ambit of assembling, mixing, cutting, diluting, bottling, packaging and repacking and threading and galvanizing cannot be termed as preparation of they said goods. I, therefore, do find that the petitioners are not involved in process of manufacture in the matter of said pipe fittings imported by them as such they are not liable to pay sales tax as manufacturer having', paid it at the import stage. It is however, clarified that this judgment will, not have application to any other taxable activities carried on 'by the petitioners. With these observations, this writ petition is allowed. The act of galvanizing and threading pipe fittings imported by the petitioners, having paid the sales tax on import stage is declared not to be process of manufactured so as to make the petitioners liable to pay the tax as manufacturer of the said goods/articles. No order as to costs.
C.M.A./M.A.K./R-96/L Petition allowed.