DAWOOD HERCULES VS COLLECTOR OF SALES TAX
2007 P T D 1161
[Lahore High Court]
Before Mian Allah Nawaz, J
DAWOOD HERCULES
Versus
COLLECTOR OF SALES TAX
Writ Petition No.15851 of 1996, decided on 16/09/1997.
(a) Constitution of Pakistan (1973)---
----Art. 199---Constitutional jurisdiction of High Court---Doctrine of exhaustion---Applicability and scope.
Principle of exhaustion/that no one is entitled to invoke the constitutional jurisdiction of High Court against any supposed/threatened injury/adverse order/proceedings adios until the said aggrieved party has availed remedies available to him under the relevant statute, does not bar the jurisdiction but regulates its exercise.
Doctrine of exhaustion embodied in Article 199 of the Constitution is not absolute bar against exercise of jurisdiction under Article 199 of Constitution. This rule is regulatory in nature and ordinarily High Court insists that aggrieved person must, in the first instance, avail the statutory remedies available to him and invoke the constitutional jurisdiction of High Court after undertaking that exercise. However, this rule is not absolute and if High Court comes to conclusion that assailed order/action/proceedings is/are wholly without jurisdiction or in excess of jurisdiction or is/are manifestly unjust and oppressive, then High Court has power to come to rescue of aggrieved party and keep functionaries of the State within defined sphere of their powers.
Champion Clocks Co. v. C.B.R. 1991 PTD 778; Commissioner Income Tax v. Messrs Shaiq Corporation Ltd. PLD 1986 SC 731; Noorani Cotton Corporation v. Sales Tax Officer PLD 1965 SC 161; Commissioner of Sales Tax v. Messrs Lah. Textile and Gen. Mills Ltd. PLD 1992 SC 39; Latif Bawany Jute Mills Ltd. v. S.T.O. 1971 PTD 26; Shamas Din and Bros v. Income Tax and Sales Tax Officer PLD 1959 (W.P.) Lah. 955; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan Works Division and 2 others PLD 1972 SC 279; Syed Ali Abbas and others v. Vishan Singh and others PLD 1967 SC 294; Ali Muhammad v. Hussain Bakhsh and others PLD 1976 SC 37; Mst. Hussain Bibi v. Haji Muhammad Din and 3 others 1976 SCMR 395; Hydri-Ship Breaking Industries Ltd. v. Sindh Government and others 2007 MLD 770 and Messrs Julian Hoshang Dinshew Trust and others v. Income Tax Officer, Circle XVIII South Zone Karachi and others 1992 SCMR 250 ref.
(b) Sales Tax---
----Concept---Sales Tax is a levy on sales of goods and services.
(c) Sales Tax Act (VII of 1990)---
----S. 3---Sales Tax Act (III of 1951), S.3---Comparison of S.3 in each of Sales Tax Act, 1990 & 1951.
Noorani Cotton Corporation v. Sales Tax Officer PLD 1965 SC 161; Latif Bawany Jute Mills Ltd. v. Sales Tax Officer 1971 PTD 26; Commissioner of Sales Tax v. Shaiq Corporation Ltd. PLD 1986 SC 731; Champion Clock Company v. Central Board of Revenue and others 1991 PTD 778 and Commissioner of Sales Tax v. Messrs Lahore Textile and General Mills Ltd. PLD 1992 SC 39 ref.
(d) Words & phrases-
----'Other'-Meaning-'Other' means `different or distinct from that already mentioned; additional or further.
Black's Law Dictionary (Sixth Edn.) ref.
(e) Interpretation of statutes---
----Fiscal/taxing statute is to be construed strictly and no word is to be added therein and subtracted therefrom.
(f) Sales Tax Act (VII of 1990)---
----Ss. 13 & 2(41)---Exemption---Expressions "other than a supply of goods which is exempt under S.13" occurring in S. 2(41), Sales Tax Act, 1990---Significance---Word `other' completely obliterates any other circumstance i.e. the use of partly manufactured goods/finished products/end-products---Whatever is covered by expression `taxable supply' shall be subject to leviability of Sales Tax.
(g) Sales Tax Act (VII of 1990)---
----Ss. 13 & 2(41)---S.R.O. 492(I)/93 dated 14-6-1993---S.R.O. 555(I)/94 dated 9-6-1994---Exemption---Polythene liners/plastic bags, manufactured and used for packing end product produced by the assessee are not immune from levy of Sales Tax under Notification No.S.R.O. 492(I)/93 dated 14-6-1993 (superseded by S.R.O. No.555(I)/94 dated 9-6-1994).
Champion Clocks Company's case 1991 PTD 778 dis tinguished.
Dr. Ilyas Zafar for Petitioner.
Sheikh Izhar-ul-Haq for Respondent.
Dates of hearing: 18th, 23rd June and 1st July, 1997.
JUDGMENT
MIAN ALLAH NAWAZ, J.---The sole point, falling for determination in this constitution petition, is whether polythene liners/ plastic bags, manufactured by the petitioner and used for packing and product/fertilizers produced by the petitioner, are immune from levy of Sale Tax under Notification No. S.R.O. 492(I)/93, dated 14-6-1993 now superseded by Notification No. S.R.O. 555(1)/94, dated 9-6-1994.
2. The facts, briefly stated, giving rise to this petition may, at the outset, be described Messrs Dawood Hercules Chemicals Ltd. petitioner manufactures and produces fertilizers. This product was exempted from Sales Tax vide entry No.39 of Notification No. S.R.O. 492(I)93, dated 14-6-1993 which was superseded by yet another Notification No. S.R.O. 555(I)/94, dated 9-6-1994. There Notifications were issued under section 13(1) of the Sales Tax Act, 1990 and were designed to give a boost to agriculture sector. The fertilizer, so produced, was packed in polythene- liners/plastic bags which were put into cotton gunny-bags. The petitioner had been paying Sales Tax as well as Excise and Custom Duty on these bags. However, it was felt that these were exempt from incidents of Sales Tax and Excise duty. Petitioner so sent a memorandum to the Collector, Central Excise and Sales Tax, Custom House Lahore on 15-8-1996/stating therein that polythene bags/liners were manufactured by the petitioner and the fertilizer was packed therein; that the petitioner did not market this product, and that it was only produced for the purpose of packing fertilizer and so these were part and parcel of the fertilizer and were so exempt from Sales Tax and Custom duty under the above mentioned notification. This view was not accepted by the Collector, Sales Tax and it was held that, the plastic bags/liners were separate and independent items and so they were not immune from chargeability of the Sales Tax as well as Customs Duty. This was embodied in following words:---
"The manufacture of plastic bags and use thereof in the manufacture of Fertilizer falls within the plastic bags is not exempt from the levy of Sales Tax. As per S.No.34 of sixth Schedule of Sales Tax Act, 1990, partly manufactured goods if used within the same factory to manufacture goods in respect of which Sales Tax is leviable on their supply are exempt from the levy of Sales Tax.
It is, however, clarified that if in future any of the above clarification is found, in any case in conflict with the Sales Tax Act, 1990 then legal provisions of the said Act shall prevail."
Feeling dissatisfied, the petitioner has invoked the constitutional jurisdiction of this Court on the following grounds:
Firstly: that the polythene liners/bags were/are manufactured for the purpose of using as liner packing material for fertilizer and so these bags are part and parcel of fertilizer and not liable to incident of Sales Tax and Excise duty. Reference was made to Champion Clocks Co. v. C.B.R. (1991 PTD 778 (Lahore), Commissioner Income Tax v. Messrs Shaiq Corporation Ltd. (PLD 1986 SC 731), Noorani Cotton Corporation v. Sales Tax Officer (PLD 1965 SC 161), Commissioner of Sales Tax v. Messrs Lah. Textile and Gen. Mills Ltd. (PLD 1992 SC 39) and Latif Bawany Jute Mills Ltd. v. S.T.O. (1971 PTD 26).
Secondly: that the object of aforementioned Notification was/is to give a protection to fertilizer industry so as to make the fertilizer available to farmers at reasonable price. According to the learned counsel, levy of Sales Tax and Excise duty on these bags so would be irrational and. a burden on farmers.
3. On the contrary, Mr. Izharul Haq Sheikh, learned standing counsel for the respondents contended that the polythene bags/liners were/are not fertilizers and are different entity from the end-product; that these bags were/are manufactured independently on different machinery by so many parties and so these cannot be treated as part and parcel of the end-product i.e. the fertilizer. It was further maintained that the assessment of Sale Tax on these bags was subject to incidents of appeal under section 12 of the Sales Tax Act, second appeal under section 46 and Reference to the High Court under section 47 of the Sales Tax Act, 1990. On the strength of above, it was maintained that the petitioner has come to this Court without exhausting the aforesaid statutory remedy and so the petition was not competent.
4. As regards the preliminary objection, it is to be noted that the same is grounded upon the principle of exhaustion/that no one is entitled to invoke the constitutional jurisdiction of this Court against any supposed/threatened injury/adverse order/proceedings adios until the said aggrieved party has availed of remedies available to him under the relevant statute. This rule, however, does not bar the jurisdiction but regulates its exercise. This rule was enunciated by a Division Bench of West Pakistan High Court in Shamas Din and Bros. v. Income Tax and Sales Tax Officer (PLD 1959 (W.P.) Lah.955). Speaking for the Bench his lordship Mr. Justice Shabir Ahmed (as he then was) said as under:
"Before dealing with the petition on merits, It will dispose of the second of the above-mentioned contentions raised on behalf of the respondent. It is correct that ordinarily the discretionary power of this Court to issue a writ should not be exercised if the relief sought by the petition for issue of the writ can be obtained by resorting to other proceedings under the law, but this is not an inflexible rule. If in a certain case it appears to this Court that the issue of a writ would ensure to the benefit and the convenience of the parties, and will save time, this Court will not hesitate to issue a writ in spite of the fact that the person who prayed for the writ could obtain the relief he seeks by resorting to some other proceedings. Whether or not the Court will exercise writ jurisdiction where another remedy is open will depend on the facts and circumstances of each case and no hard and fast rule can be laid down. In the present cases, it appears to me that the mere fact that the relief sought by petitions can be obtained by the petitioners by resorting to appeals and references under the Sales Tax Act should not stand in the way of issuing writs if the petitioners can show that they should issue in their favour. My reason for this view is that if a decision is given by this Court, at this stage, it will shorten the proceedings which would have to be followed if resort is bad to the provisions contained in the Sales Tax Act. I would, therefore, proceed to consider whether or not the petitioners or any of them is entitled to the grant of the writ prayed for."
The aforesaid view was enunciated by Supreme Court of Pakistan in the Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others (PLD 1972 Supreme Court 279). It was held therein:--
"It is thus evident that the appellant challenged the very jurisdiction of the Capital Development Authority (hereinafter referred to as the C.D.A.) to make the impugned acquisition under the Ordinance. If it had succeeded in establishing that the impugned acquisition was ultra vires the Ordinance, its appeal under section 36 would have been an exercise in futility. It was held by the Supreme Court in Lt. Col. Nawabzada Muhammad Amir Khan v. Controller of Estate Duty and others PLD 1961 SC 119 that the rule that the High Court will not entertain a writ petition when other appropriate remedy is yet available is not a rule of law barring jurisdiction but a rule by which the Court regulates its jurisdiction. It was further observed that one of the well-recognized exceptions to the general rule is a case where another is attacked on the ground that it was wholly without authority."
The above rule was reiterated in Syed Ali Abbas and others v. Vishan Singh and others (PLD 1967 SC 294), Ali Muhammad v. Hussain Bakhsh and others (PLD 1976 SC 37) and Mst. Hussain Bibi v. Haji Muhammad Din and 3 others (1976 SCMR 395). The same point was examined by the Division Bench of Karachi High Court in Hydri Ship-Breaking Industries Ltd. v. Sindh Government and others (2007 MLD 770). I am tempted to quote Paras Nos.8, 9 and 10 of this judgment. After masterly analysis of relevant law/precedents His Lordship Mr. Justice Nasir Aslam Zahid (as he then was) said:
"(8) A review of the case-law-referred to hereinabove shows that in certain cases the superior Courts of our country did not allow the petitioners to invoke the writ jurisdiction on the ground of availability of an alternative remedy, by way of appeal or otherwise, but on the other hand, in other cases, notwithstanding the pendency of an appeal or availability of an alternate remedy the Courts did not hesitate to exercise such writ jurisdiction and in fact granted relief to the petitioners. It may be expressed as a generally accepted principle, however, that just because an alternate remedy by way of appeal or otherwise is available to a petitioner the High Courts will not invariably decline to exercise their extraordinary constitutional jurisdiction. The mere availability of an alternate remedy does not debar the High Courts from exercising such jurisdiction. But as observed by Dorab Patel, J. in 1930 CLC 412 (Hassan Ali v. Muhammad Ahsan Baloch) the question whether a writ should be entertained when an alternate remedy is always one within the discretion of the Court. In cases of total lack or absence of jurisdiction of authority, or apparent excess of jurisdiction, the Courts in general would not hesitate much in entertaining a constitutional petition although an alternate remedy may well be available. In other cases, the Courts would generally direct the party to avail and exhaust the alternate remedies available first before entertaining the writ, if in the opinion of the Courts the alternate remedy is an adequate remedy.
(9) Whether the alternate remedy available to the applicant, who is seeking the constitutional remedy, is adequate or not depends on the special or particular circumstances of the individual case, and it is precisely for this reason that in one case the High Court may not entertain the petition under its constitutional jurisdiction and in another case the same may be entertained. In taking a decision whether the alternate remedy in a given case is adequate or not to enable the High Court to take the further decision relating to entertaining the constitutional petition, the Court, in the background of the particular facts of the case before it, considers several factors. The question of speed and expense of the alternate remedy may be considered. Whether the alternate remedy is an effective or efficacious as the constitutional remedy is also a relevant factor. Whether, in the circumstances of the case, the alternate remedy or the writ would the appropriate remedy can also be a pertinent consideration.
(10) In the instant cases an alternate remedy by way of appeal under Rules 48 and 216 of the 1964 Octroi Rule is available to the petitioners. In some cases, the petitioners have in fact, filed appeals which are pending before the concerned officer of K.M.C. in other cases appeals have not been filed and the Petitioners have straightaway approached this Cowl. Nevertheless we have decided to entertain these constitutional petitions and the following reasons have prompted us to take this decision:--
(a) The vires of the relevant Octroi Rules have been challenged in these petitions and it 'could not be reasonably expected that an officer of KMC, the designated appellate authority, would decide that the Rules were ultra vires.
(b) On merits the point involved in those petitions is the interpretation of the words" consumption, use or sale within the octroi limits" used in the 1964 Octroi Rules.
(c) Nearly two years have passed and not a single decision by the appellate authority has apparently been given. Huge amounts are involved and practically the entire shipbreaking industry is affected. A speedy decision on the question involved was not only necessary but desirable to clarify the legal position.
(d) If the petitioners are now directed to go back and file appeal or pursue them, as the case may be, the final decision would be further delayed by some years. If KMC were very serious about their objections in this regard, the point about the maintainability should have been taken immediately the first petition was filed and the Court asked to decide the question.
(e) The point involved for decision in these petitions is a matter of general importance and is going to affect a very large number of citizens.
(f) The question being decided does not involve an inquiry into any disputed facts. In fact the decision being given is based on admitted facts only.
In the circumstances of the present cases and for the reasons recorded above, we are of the view that constitutional petition was the appropriate remedy in these cases and the appeal under Rules 48 and 216 of the 1964 Octroi Rules is not an adequate and efficacious remedy."
Reference also be made to Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others (1992 SCMR 250).
5. The ratio, deduced from the aforesaid discussion, is that doctrine of exhaustion embodied in Article 199 of the Constitution (1973) is not absolute bar to exercise of jurisdiction under Article 199 of Constitution. This rule is regulatory in nature and ordinarily this Court insists that aggrieved person must, in the first instance, avail of the statutory remedies available, to him and invoke the constitutional jurisdiction of this Court after undertaking that exercise. However, this rule is not absolute and if this Court comes to conclusion that assailed order/action/proceedings is/are wholly without jurisdiction or in excess of jurisdiction or is/are manifestly unjust and oppressive, then this Court has power to come to rescue of aggrieved party and keep functionaries of the State within defined sphere of their powers.
6. Applying the aforesaid principles to the facts and circumstances of the case, it is quite clear that petitioner had been paying the sales tax on plastic bags/liners till 15-8-1996; that on this date, the petitioner sent a memorandum to Collector Central Excise and Customs and Sales Tax, Lahore/complaining therein that the polythene bags/liners were exempt from payment of sales tax; that this view was not accepted by the learned Collector; and found that plastic bags were not subject to incident of sale tax; that the interpretation of 'law is within exclusive domain of this Court. On this view, this Court is entitled to examine the sole question. Seen from every angle, I do not find any merit in this contention and so, preliminary objection, raised by the learned counsel for the respondent, is repelled.
7. Having disposed of the challenge to maintainability of petition, now I turn to the sole point. Answer to the above point hinges upon section 3 of the Sales Tax Act, 1990 which was made effective from 1st July, 1990. This substituted Sales Tax Act (Act III of 1951). Conceptually, the Sales Tax is a levy on sales of goods and services. However, this theoretical premises has not been strictly adhered to in the above Statutes. Chronologically, Pakistan Sales Tax Act, 1948 was the first Statute which provided for levy of general tax on the sales of goods in the Provinces of Pakistan. This was repealed by Act III of 1951. This Statute was also substituted by Sales Tax Act, 1990. Incidentally, the charging sections in both Statutes bear the same number i.e. section 3. It will be highly advantageous to refer to these sections:--
| Section 3 of the Act 1951.Section 3 of the Act, 1990. | |
| 3. (1) There shall be levied andcollected a tax on the value of--- | 3. Scope of tax-(1) Subject to theprovisions of this Act there shall be charged levied and paid a tax known as sales tax at the rate of twelve and half per cent of--- |
| (a) all goods produced ormanufactured in the Provinces of Pakistan or the Capital of theFederation payable by themanufacturer or producer:-- | (a) taxable supplies made in Pakistan by a registered person in the course of furtherance of any business carried on by him; and |
| (b) all goods imported into theProvinces or the Capital of the Federation, payable by the importer:- | (b) goods imported into Pakistan, |
| (c) all goods sold by a licensed ofwholesaler, payable by the licensedwholesaler. | (2) Notwithstanding the provisions subsection (1) the Federal Government may, by notification in the official Gazette, declare that; |
| (d) such goods or classes of goods that as the Central Government may,by notification in the officialGazette, specify in this behalfwhich are exported from theProvinces or the Capital of theFederation payable byexporter. | (a) in respect of any goods or classof goods imported into or producedin Pakistan or any taxable suppliesmade by registered persons the taxshall be charged at such rate orthe rate, as may be specified in the notification; |
| | (b) in respect of any goods or class of goods the tax shall be charged on the whole sale or retail price as may be specified. |
| (2) ******** | |
| (2) ******** | |
| (3) ******** | |
| (4) The tax in respect of the goods mentioned in clauses (a) and (c) of subsection (1) shall be payable on the occurrence of the first of the following events:-- | (3) The liability to pay the tax shallbe,-- |
| (i) when the goods are delivered tothe purchaser or | (a) in the case of supply of goods in Pakistan, of the persons makingthe supply, and |
| (ii) when the property in the goodspasses to the purchaser, or | (b) in the case of goods importedinto Pakistan, of value; the person importing the goods. |
| (iii) when the goods are sent, consigned or exported to any place outside the Provinces and the Capital of the Federation, and for the purposes of this clause the goods shall be deemed to have been sold when they are sent, consigned or exported to any such place as aforesaid. | |
| (5) The tax in respect of the goods mentioned in clauses (b) and (d) or subsection (1) shall be paid on importation or exportation, as the case may be, as provided hereunder-- | |
| (i) where the goods on importation are directly cleared for home consumption before the order for such clearance is made by Customs Officer; | |
| (ii) Where the goods on importation are taken out of bond for home consumption before the goods are removed from the ware-house; | |
| (ii) where the goods are exported by sea-before the shipping bill is passed by the Customs Collector; | |
| (iv) where the goods are imported or exported by land before the permit for the passage of the goods out of or into foreign territory is issued, and the provisions of the Sea Customs Act, 1878, and of the Land Customs Act, 1924, relating respectively to the clearance, shipping and removal of goods and the passage of goods out of or into foreign territory shall, so far as may be, apply to the payment of the tax under this Act as they apply for the purposes of those Acts. | |
| (6) Where goods are produced or manufactured in the Provinces or the Capital of the Federation under such circumstances or conditions as render it difficult to determine the value thereof for the tax because | |
| (a) a lease of such goods or the right of using the same but the right of property therein is sold or given; or | |
| (b) such goods having royalty imposed thereon the royalty is uncertain or is not from other causes a reliable means of estimating the value of the goods; or | |
| (c) such goods are manufactured by contract for labour only and not including the value of the goods that enter into the same or under any other unusual or peculiar manner or conditions; or | |
| (d) such goods are for use by the manufacturer or producer and not for sale the Sale Tax Officer may determine the value for the tax under this Act and all such transactions shall, for the purpose's of this Act, be regarded as sales. | |
| (7) If any person other than the manufacturer, producer or importer or licensed wholesaler or exporter hereinbefore mentioned acquires from or against anyone of these persons the right to sell any goods, whether as a result of the operation of law or of any transaction not taxable under the next succeeding section, the sale of such goods by him shall be taxable as if made by the manufacturer or producer or importer or licensed wholesaler or exporter as the case may be, and the person so selling shall be liable to pay the tax." | |
The bare reading of section 3 of Act of 1951 postulates (i) that it was a charge on the value of the goods (ii) that those goods were subject to tax which were either manufactured, imported, exported or disposed of in wholesale and (iii) that it was payable in the immediately preceding case by manufacturer, importer, exporter and wholesalers respectively.. Section 7 of this Act empowered Government to grant exemption of goods from levy of tax. At this stage, I deem it necessary to refer five precedents cited by learned counsel for petitioner. The first case is Noorani Cotton Corporation v. Sales Tax Officer (PLD 1965 SC 161). In this case the question arose before Supreme Court as to whether partly manufactured imported goods/raw material used in final product/fan was exempt from leviability of tax, Section 3 of the Act was considered by Supreme Court along with exemption clause and it was held:
"Now what is the device adopted for ensuring that sales tax is paid only one stage in spite of what is contained in the charging section making all manufactured goods when they go to the purchaser to the payment of tax? The device adopted, as will appear from section 4 is, that the sale of `property manufactured goods' to a manufacturer is not liable to the charge of tax. It may be clarified here that the Sales Tax Act does not recognize a manufacturer who has not obtained a licence under it for manufacture. The provision in section 4 is that the sale by a licensed manufacturer to another licensed manufacturer of partly manufactured goods is not liable to the incidence of tax. The definition of `partly manufactured goods' is that they are goods which are to be incorporated into another articles. So, these provisions are sufficient guarantee that the tax will be paid only with respect to the last state of manufacturer of goods. However, there is one difficulty which had to be removed. Suppose the manufactured article into which partly manufactured goods are to be incorporated is for some reason not liable to the payment of sales tax? In that case if no tax is paid on partly manufactured goods no tax will be paid at all. Therefore, in the definition of `property manufactured goods' a limitation has been introduced that the article into which the goods are to be incorporated should be one which is liable to the payment of sales tax. It is not liable to payment of tax then the goods which are incorporated into it are also manufactured goods on which sales tax has to be paid."
The learned Judge went on to say:--
"But suppose that the last article is not liable to the payment of sales tax. Unless a special provision was made that person would not be paying any tax on the production of the first article too. This situation is met by the general provision in the last part of section 3(6) that the keeping of goods by the manufacturer for his own use would be regarded as a sale."
And that:--
"In fact learned counsel for the appellants began his argument by saying that cottonseed oil was admittedly exempt and his contention was that as cottonseed oil was exempt any article which is incorporated into it should also be exempt, a contention which is clearly not sustainable in view of what is contained in the Sales Tax Act. If the cottonseed oil was not exempt from the payment of sales tax, then admittedly the 'manufacturer or production of cotton seed itself which is being used for the making of cottonseed oil would not be liable to payment of sales tax for though the keeping of cottonseed by the manufacturer for extracting cotton seed oil was a sale, it was a sale of partly manufactured goods and, therefore, not subject to the payment of tax."
This point was examined by Dacca High Court in Latif Bawany Jute Mills Ltd. v., Sales Tax Officer (1971 PTD 26) and it was found that partly manufactured material used in the end-product was exempt from the incident of Sales Tax as the end product was not subject to that levy. Again this point cropped up before Supreme Court in Commissioner of Sales Tax v. Shaiq Corporation Ltd. (PLD 1986 SC 731). In this case, the respondent-Company was engaged in the manufacturing of the electric fans and assessment of sales tax relating to year, 1964-65 was completed on 4-8-1966 on a turnover of Rs.11,909. Subsequently, it was found that Lt. Col. Mushtaq Hussain/Managing Director of the Company had been advancing loan and on 11-12-1964 he had transferred his shares in the Company to one Mst. Iqbal Begum. The Central Board of Revenue issued a Notification under section 7 of Sales Tax Act, 1951/exempting the fans from the levy of the tax. Department, however, felt that the raw material used in the manufacturing of electric fans had escaped from assessment and so the Sales Tax was levied on that material. Against this order, Company filed appeal which was allowed by the Appellate Authority. Now, the department filed an appeal which was partly accepted and levy of the tax on value of end-product amounting to Rs.11184 was upheld. The Commissioner of Sales Tax Rawalpindi moved an application under section 17 of the Act for seeking answer to the following question:
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in granting exemption from sales tax on Rs.39208 the value of raw material transferred to Lt. Col. Mushtaq Hussain closing stock of finished goods, lying with the Company on 14th June, 1965?".
The High Court answered the first question in favour of department and second against it. Against this decision leave to appeal was filed. However, the appeal was dismissed by Supreme Court on 25-5-1986. His lordship Mr. Justice Muhammad Haleem, the then Chief Justice of Supreme Court, after the analysis of the case-law said:-
"Now coming to 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) and the stage at which the sales tax was payable was after import but before clearance by the Customs Authorities under section 5(1)(b) of the Act. That stage had passed away. 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, that is, 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 the payment of the tax. In this context the High Court rightly decided the case on the basis of the two judgments cited above while distinguishing Noorani Cotton Corporation's case."
8. I will now examine case Champion Clock Company v. Central Board of Revenue and others (1991 PTD 778). In this case petitioner's company manufactured wall clocks known as Champion clocks which were assembled from the components such as movements, screws, hard board etc.; that petitioner-Company prepares cases/bodies wherein the manufactured clocks were fitted. It was maintained that the wall -clocks/end product was exempt from the chargeability of the sales tax and so the cases were also exempt from that levy. This point was considered and writ petition was allowed by his lordship Mr. Justice. Irshad Hassan Khan in which it was held that:--
"In the instant case, the wall clocks as well as bodies/cases thereof are manufactured by the petitioner-company. The petitioner manufactures the bodies of the wall clocks and then incorporates them into a wall clock. There is no sale of the first manufactured bodies because the petitioner only uses them for the manufacture of the wall clocks and, therefore, no sales tax can be levied on the bodies which are used for the manufactures of wall clocks, inasmuch as, the notification referred above grants exemption to wall clocks manufactured in Pakistan without any condition. Therefore, in view of the wholesale exemption on the wall clocks, the raw material, that is, body of the clock which is incorporated into the wall clock could not be regarded as having a separate identity for the purpose of payment of tax as held in the case of the Commissioner of Sales Tax (supra) and in the case of Commissioner of Income Tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) (PLD 1970 SC 93). Respectfully following the ratio laid down in the aforementioned cases of the Supreme Court, I hold that the exemption granted from payment of sales tax on wall clock would also exempt the bodies from the payment of sales tax in terms of clause (iv) of subsection (4) of section 3 of the Act.
It may also be observed that subsection (6) of section 3 of the Act is not attracted to the facts and circumstances of the present case, in that, it relates to determination of the value for tax in circumstances or condition as render it difficult to determine the value thereof for the tax because such goods are for the use of manufacturer or producer and in such circumstances the Sales Tax Officer is to determine the value of the tax under the Act and all such transactions for the use of such goods by the manufacturer or producer by fiction, of law have been made a sale. Here the body of the clock though a separate item on which sales tax is leviable but when used by incorporating into wall clock, loses its separate entity for the purpose of payment of tax as stated in the last two precedent cases of the Supreme Court and, therefore, clause (d) of subsection (6) of section 3 of the Act cannot be pressed into service.
In view of the above, the writ petition is accepted and the Central Board of Revenue is restrained from levying the sales tax on wall clock bodies/cases manufactured by the petitioner in Pakistan for the purposes of manufacturing the wall clocks, in terms of Notification No.S.R.O. 666(1)/81, dated 14-6-1982, as long as the said Notification remains operative."
I now come to see Commissioner of Sales Tax v. Lah. Textile and Gen. Mills (PLD 1992 SC 39). In this case the respondent-Company held a manufacturing licence under the Sales Tax Act of 1951. During the relevant years, the sale of yarn and cloth produce/exporting were notified as exempt form payment of sales tax and so Sales Tax Officer charged to sales tax ginned cotton and yarn which had been manufactured by them or had been bought by them free of, tax under section 4 and had been used by them in the manufacture of such yarn and the cloth respectively. The assessee-companies disputed the said levy by invoking the reference which was answered by Lahore High Court in favour of assessee. He Commissioner of Sales Tax filed petition for leave to appeal which was granted and appeal was accepted in following terms:
"As regards the second proposition, namely, whether the partly manufactured goods can be taxed where the end product is not liable to the sales tax by virtue of any exemption notification, the same has been clearly answered in the affirmative by this Court in the case of Abbasi Textile Mills Ltd. (supra), which has affirmed the rule stated in the case of Noorani Cotton Corporation (supra). In the case of Abbasi Textile Mills Ltd. Muhammad Haleem, C.J. held that where the end produce was not leviable to the sales tax, then the situation was met by the provisions of the last part of section 3(6)(d), that is to say the keeping of goods by the manufacturer for his own use, could be regarded as sale, as the scheme of the Act appeared to be to ensure that sales tax was paid only at one stage. The Learned Chief Justice held that there appeared to be no doubt that section 3(6)(d) was a charging section according to its tenor and that the case was covered by the observations of this Court in the ease of Noorani Cotton Corporation. At this stage our attention stands drawn to the Judgment of a Division Bench of the Karachi High Court reported as Dada Soap Factory Ltd. v. The Commissioner of Income Tax (1987 PTD 420) where section 2(12) of the Act has been examined in some depth. In this case the words "subject to the tax", as appearing in section 2(12), were examined in some detail to determine whether they implied leviability to tax or the actual payment of tax. The words "Subject to contract" and "subject to shipment", as appearing in different contracts and which had been received judicial interpretation, were found to he terms imposing conditions and obligations and as subject to a formal contract being executed or the shipment being actually made. Referring to various authorities, the Judges of the Karachi High Court came to the conclusion that what was intended by words "subject to the tax" was that the sales tax ultimately payable or had been exempted. This decision basically clinches the true intent behind section 2(12), namely, that where partly manufactured goods lead to the production of different manufactured goods on which no tax is recoverable or payable, the said goods ceases to be partly manufactured goods and if they have been produced or manufactured by the same producer or manufacturer, are liable to tax as manufactured or produced goods under section 3(1)(a), and if they have been bought by the manufacturer or producer free of tax by virtue of section 4, are liable to tax under section 12(1), as the said provision was before its amendment in 1973, thus maintaining the scheme of the Sales Tax Act which is to ensure that sales tax is paid only at one stage. Even the learned Judges of the Division Bench of the Lahore High Court who rendered the judgment in Haji Muhammad Hussain's case, subsequently in Hamra Asian Textile and Woollen Mills Ltd. v. Commissioner of Sales Tax, Rawalpindi 1973 PTD 544 following the dictum laid down in Messrs Noorani Cotton we have no hesitation in holding that ginned cotton and yarn and cloth (including mazri cloth) respectively and that the said partly manufactured goods were held to be exempt from payment of sales tax by virtue of certain notification, holding the field in that respect.
For the forgoing reasons, all these appeals are accepted."
9. From the foregoing discussion, it clearly follows that the rule propounded in Noorani Cotton Corporation's case (PLD 1965 SC 161) was reaffirmed by the apex Court in Commissioner of Sales Tax v. Messrs Lahore Textile and General Mills Ltd. (PLD 1992 SC 39) and it was held that ginned cotton yarn which was used in the manufacture of end-product was subject to levy of sales 'tax on account of amendment in section 4 read with section 12 of the Act of 1951. This is now law declared by Supreme Court and binding upon this Court. Apart from what has been stated above, it is needless to state that Sales Tax Act of 1990 was promulgated with effect from 1-11-1990 and now the Act of 1951 is no longer in the field. The critical comparative study of section 3 of this Act shows that sales tax is leviable on taxable supply made in Pakistan by a registered person in course or in furtherance of taxable activity. This section is radically different from section 3 of Act of 1951 which charged tax on goods/persons especially enumerated therein. The new section prescribes a new criterion i.e. taxable supply. This expression is defined in section 2(41) of the Act, 1990. It read as under:
"taxable supply" means a supply of taxable goods made in Pakistan' other than a supply' of goods which is exempt under section 13 and including a supply of goods chargeable to tax at the rate of zero per cent under section 4."
The use of "other than a supply of goods which is exempt under section 13" is significant. The word `other' according to Black's Law Dictionary (sixth edition published by the Publisher's Editorial Staff) (Centennial Edition 1891-1991) means "Different or distinct from that already mentioned; additional, or further." It is settled principle that fiscal/taxing statutes are to be construed strictly and no word is to be added and subtracted therein by resorting to principle (sic.) it is quite clear that the word `other' completely obliterates any other circumstances i.e. the use of partly manufactured goods/finished product/end-product; it clearly says that whatever is covered by expression `taxable supply' shall be subject to leviability of sales tax. It is common ground between the parties that plastic bags/plastic liners were/are subject to chargeability of sales tax. The only stand is that they were used in the manufacturing of finished product i.e. fertilizer and so they were entitled to benefit of exemption granted to end-product i.e. fertilizer. The word `other' used in expression "taxable supply" is clear answer to this stand and petitioners are not entitled to this benefit. I am, therefore, very clear in my mind that rule laid down in Champion Clocks Company's case (1991 PTD 778 (Lah.) is not applicable to facts of case in hand. On the basis of above critical and comparative study of Act of 1951, Act of 1990 and case-law referred above, I have no hesitation in concluding that the view taken by Collector is eminently correct, just and is not open to any exception. As a result of the above discussion this petition is found be wholly without merit and is accordingly dismissed. There is no order as to costs.
M.B.A./D-2/LPetition dismissed.