Mirza NASRULLAH KHAN VS SUPERINTENDENT, CENTRAL EXCISE AND SALES TAX, HAFIZABAD, 2004 PTD-LAHORE-HIGH-COURT-LAHORE 636 (2003)

Sales Tax Act (VII of 1990)---

----Ss. 2(16) & 3---Central Excises and Salt Act (I of 1944), Ss.2(f) & 3---S.R.O. 546(I)/94, dated 9-6-1994, Hdg. No. 2710.0082-- S.R.O. 545(I)/94, dated 9-6-1994, Hdg. No. 2710.0081---Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977, R. 18-- Constitution of Pakistan (1973), Art. 199---Constitutional petition-- Reclaimed lubricating oil produced through reprocess of used/rejected mobile oil by employing chemicals and acids---Levy of sales tax and excise duty on sale of reclaimed oil---Validity---Blending and reclamation plant of petitioner was registered under R.18 of Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977---Petitioner was issued licence by Assistant Collector for manufacture of and dealing in lubricating oils---Petitioner had not denied his engagement in business of producing oil under such licences by reprocessing and reclaiming used mobile oil in reclamation plant---Nothing on record to show that reclaimed oil was different from lubricating oil included in Table of S.R.O. 546(I)/94 and S.R.O., 545(I)/94 against Hdg. No.2710.0081 and 2710.0082---Such reclaimed and reprocessed oil was also different and distinct in its properties, propensities, uses and value from original or used mobile oil---Such product, thus, would attract levy and charge of excise duty and sales tax---Distinct and new product could not be said to be subjected to double or manifold taxation---High Court dismissed Constitutional petition.  

Deputy Collector Central Excise v. Tyrex Pakistan Limited PLD 1992 SC 364; Noori Trading Corporation v. Federation of Pakistan P.LD f989 Quetta 74; Union of India v. Dehli Cloth and General Mills AIR 1963 SC 791; Black's Law Dictionary; Ayer's Terms and Phrases; Assistant Collector of the Central Excise and Land Customs and others v. Orient Straw Board Papers Mills PLD 1991 SC 992 and Sethi Straw Board Mills Limited v. Pakistan through Secretary to the Government of Pakistan and others 1994 SCMR 1872 ref.

Malik Saeed Hassan for Petitioner.

Izharul Haq Sheikh for Respondent.

Date of hearing: 17th October, 2003.

JUDGMENT

The petitioner claims to be engaged in cleaning lubricating oil at a small factory at Ali Pur, Hafizabad, District Gujranwala, holding a central excise licence as well as registration under the Sales Tax Act, 1990. He also states to be registered under rule (18) of the Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977. The petitioner's case is that he purchases used mobile oil from service stations and reclaims the same through a process using chemicals, acids and other cleansing agents. The lubricating oil so reclaimed is sold in the market for various uses other than in vehicles etc.

2. This reprocessed and reclaimed lubricating oil was subjected to excise duty and sales tax by the respondents thus providing a grievance to the petitioner for the present Constitutional petition. The stand of the learned counsel for the petitioner is that since the mobile oil was subject to excise duty and sales tax therefore such duty and tax cannot be re- imposed on reclamation of the used mobile oil rejected after vehicular use. And that the chemicals, acids and agents employed to reclaim the rejected mobile oil were also duty-tax paid wherefore levy and imposition of excise duty and sales tax on the reclaimed oil amounted to manifold taxation on the same item. Learned counsel for the petitioner relying upon the dictionary meaning of the term `Manufacture' submitted that reclaiming of mobile oil did not fall within the definition of the term `Manufacture'. Reliance was also placed upon the cases of "Deputy Collector Central Excise v. Tyrex Pakistan Limited" PLD 1992 SC 364 "Noori Trading Corporation . v. Federation of Pakistan" PLD 1989 Quetta 74 and "Union of India v. Dehli Cloth and General Mills" (AIR 1963 SC 791).

3. In response to notice, report and parawise comments were filed by the respondents. Their learned counsel supported the levy. It was also stated that the reclaimed oil as produced was covered in the definition of `Manufacture `under the Sales Tax Act, 1990 as well as the Central Excises Act, 1944.

4. I have considered the submissions of the learned counsel for the partied and have also examined the record filed by the parties. Petitioner's grievance is, that the reclaimed oil produced by him at his plant/factory from the used/rejected mobile oil through various processes by employing cleansing agents, chemicals and acids, was not a lubricating oil to fall within the Heading No. 2710.0081 and 2710.0082 of the Notification of S.R.O. No. 546(I)/94, dated 9th June, 1994 and Notification of S.R.O. No.545(I)/94, dated 9th June, 1994. And further that the reclaimed oil as produced by the petitioner does not fall within the definition of `Manufacture' to attract the provisions of the Central Excises Act, 1944 and the Sales Tax Act, 1990. And also that the duty or tax so levied amounted to, triple taxation.

5. It is note worthy that no material has been brought on record by the petitioner to show that the reclaimed oil produced through reprocess of the used mobile oil was different from lubricating oil included in the table of the above referred Notifications against Headings No.2710.0081 and No. 2710.0082. It was on petitioner's application that his. blending and reclamation plant was registered on November 6, 1994 under ripe (18) of the Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977. Furthermore petitioner has, himself relied upon the licence issued to him on 8-8-1993 by the Assistant Collector, Central Excise and Land Customs, Gujranwala for the manufacture of and dealing in lubricating oils". The petitioner has not denied that he is engaged in the business of producing oil under above. licences by reprocessing and reclaiming the used mobile oil in his reclamation plant. Where for his contention that he is producing an oil called reclaimed oil and not the lubricating oil cannot be accepted.

6. The next contention of the learned counsel for the petitioner is that the definition of the term `Manufacture' as contained in the Blacks Law Dictionary and Ayer's Terms and Phrases read with the above referred judgments do not bring petitioner's product within the definition of `Manufacture' to attract the, central excise duty or the sales tax. The Hon'ble Supreme Court of Pakistan has been pleased to set at rest any controversy on the subject of `Manufacture' by pronouncing law in the cases of "Assistant Collector of the Central Excise and Land Customs etc. v. Orient Straw Board Papers Mills" PLD 1991 SC 992 and "Sethi Straw Board Mills Limited v. Pakistan through Secretary to the Government of Pakistan and others" (1994 SCMR 1872). On elaborating and illuminating discussion on the definition of `Manufacture' with specific reference to section 2(f) of the Central Excises and Salt Act, 1944, it was held that:

"In general and. literal sense `manufacture' means production, preparation or making any article or product of corporeal or substantial in nature manually or mechanically from material which after such production' changes its shape, character or nomenclature or transforms into a good complete for use or sale in the existing form or otherwise. However, the Act enlarges the scope of this word by including in its meaning any process which is incidentally or in an ancillary manner required for making the manufactured product complete and finished article including repairing, remaking, reconditioning, packing and repacking. This expression was considered in Superintendent of Central Excise, Lyallpur v. Ch. Faqir Muhammad PLD 1959 SC. 103 in which the question before the Supreme Court was, whether calendering is process ancillary to the completion of the manufacture product. Taking note of, the word `manufacture' their Lordships disagreed with the view of the High Court and it was observed:--

"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 uncalendered cloth is also sold in the market. The fact that its price is higher after it is calendered shows that the purchasing calendered cloth as a different article .having a. positive and specified use in 'its new state."

In Pakistan and Collector of Central Excise and Land Customs v. Muhammad Aqil PLD 1960 SC 4 it was held that the processes of dyeing and glazing tanned leather of sheepskins are calculated to produce goods and were held liable to excise duty. It was also observed that "duty does not fall upon any process, but upon the goods produced.

In Messrs Star Vacuum Bottle Manufacturing Co. Ltd. v. Collector of Central Excise and Land Customs, Karachi and others PLD 1972 Karachi 210 the petitioner claimed that the flasks were made by assembling together the excisable items viz. tin, plastic and glass purchased in free made condition. It also turned out that glass flasks are subjected to a process of oxidization by the petitioners which gives a highly polished surface and maintains the temperature. It was held that even assembly would amount to manufactures..." Also referring to the case Civil and Military Press Ltd. (PTCL 1992 CL 1) the Hon'ble Supreme Court of Pakistan noted that:--

"the word manufacture means bringing into existence a vendible product known to the market."

It was also held that:--

"The word `manufacture' as defined is intended to enlarge its field of operation to such acts, processes, works and repair which flay not generally be covered by it literally. By bringing any process incidental or ancillary to the completion of a manufactured product within the meaning of a manufacture its scope and concept has been widely extended and by such legal fiction even a process which ordinarily may not amount to manufacture in its literal sense will be covered by it provided use of such process is necessary or subsidiary and ancillary for completing manufactured goods. Such process may be manual or mechanical intended to complete the manufactured goods. It is not necessary that by such process any new article may be produced. The article may remain the same but the processing may make it a finished goods which may be different in Quality or utility from the original one." (underlining added)

7. The test was thus laid down by the Hon'ble Supreme Court of Pakistan. In the case of "Sethi Straw Board Mills Limited v. Pakistan through the Secretary to the Government of Pakistan and 3 others" (1994 SCMR 1872) the proposition for consideration before the Hon'ble Supreme Court of Pakistan was whether the Glazed Paper Board and the Glazed Chip Board fell within the definition of `Manufacture' or not to attract the excise duty. The appellant had alleged that the processes tarried out in the mill did not fall within the definition of `Manufacture' as the article was hot manufactured in Pakistan in the case of imported paper and. paper board and in the case of indigenous paper and paper board processed in the mills. The same having already suffered central excise duty, not further duty was chargeable. The Hon'ble Supreme Court of Pakistan held that the Glazed Paper Board and Glazed Chip Board fell within the definition of `Manufacture' and were thus excisable. The following passage from the judgment in appeal before the Hon'ble Supreme Court of Pakistan was quoted with approval:--

"The definition of `manufacture' in section 2(f) of the Act, reproduced in para. 11 above, shows that it includes therein any process incidental or ancillary to the completion of a manufactured product and any process of remanufacture, remaking, reconditioning or repair and the process of packing or repacking such product. The definition of Paper Board, reproduced in para. 10 above, shows that Corrugated Paper Board, Glazed Paper Board and Glazed Chip Board would be covered by it. The processes applied to bring the above products into being clearly include the process of remaking and reconditioning the original products ...."

8. Applying the above test to the present case, there is no doubt that the reclaimed lubricating oil produced in the reclamation plant by processing used mobile oil employing chemicals and acids, is an item distinct from the original mobile oil. The reclaimed and reprocessed oil so produced is also different and distinct in its properties, propensities, uses and value from the original or the used mobile oil. Such product, therefore attracts the levy and charge of excise duty and the sales tax. Furthermore this distinct and new product cannot be said to be subjected to double or manifold taxation. This writ petition is therefore dismissed with no order as to costs.

S.A.K./N-370/L Petition dismissed.