COLLECTOR SALES TAX AND CENTRAL EXCISE, RAWALPINDI VS WAH NOBEL CHEMICAL LTD., WAH CANTT., 2008 PTD-LAHORE-HIGH-COURT-LAHORE 1693 (2008)

(a) Sales Tax Act (VII of 1990)---

----S. 3---Scope of tax---Sales tax cannot be levied on the packing charges being a part of the price covered by the manufacturer/assessee on the packaged goods.

(b) Sales Tax Act (VII of 1990)---

----Ss. 3 & 2(12)--Scope of tax---`Scrap' is chargeable under Sales Tax Act, 1990 being waste of the manufacturing process and having nexus with the main business---Scrap is a "goods" and is acquired in furtherance of business being a product retrieved on use of the same raw material on which input tax has been paid---[Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976; "Messrs Habib Sugar Mils Ltd. through Law Officer v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others 2007 PTD 171 dissented from].

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others 2007 PTD 1902 fol.

Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976; "Messrs Habib Sugar Mils Ltd. through Law Officer v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others 2007 PTD 171 dissented from.

(c) Sales Tax Act (VII of 1990)---

----Ss. 2(33) & 3---`Supply'--Definition of wide import---Term "supply" includes sale, lease or other "disposition of goods in furtherance of business---If any of the ingredients mentioned in definition of supply are missing, it will not become a "supply" and for that matter a "taxable supply"---Principles.

Collector Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976 and State of Gujrat v. Raipur Manufacturing Co. Ltd. AIR 1967 SC 1066 ref.

(d) Sales Tax Act (VII of 1990)---

----S. 3(1)(a)---Transportation and handling---Chargeability to sales tax--Scope---Term "in furtherance of business" occurring in S.3(1)(a) Sales Tax Act, 1990---Connotation---Anything which is directly connected with products being supplied by the assessee as well as by-products and then sold would be "in furtherance of business"---Transportation and handling being not in "furtherance of business", sales tax was not chargeable on the same---Such "service" is neither a "goods" nor can be called a 'disposal'-Principles.

The terms "in furtherance of business" and the business separately would not cover providing of additional facility like transportation charges paid or handling charges. Furtherance is a term which is used in the present form, would restrict only to the activities attached to the main track and the aspects directly connected thereof. As for example in the present case the assessee inter alia has been supplying formaldehyde and bonding material to its buyer. Anything which is directly connected with this product as well as by-products and then sold would be in furtherance of the business.

"Furtherance" means continuity with the main activities having direct nexus but would not include activities which do not have attachment or are not a part of the main process. The reason being that the term is to be read as a whole which is `in furtherance of the business'. Obviously the business of the assessee is not transportation or handling, or packing. It is manufacturing of certain products like glasreen, formaldehyde based resins used as a bonding agent in the Chipboard, Plywood and Flush door and such like other manufacturing industries. Therefore, there is no reason to agree that transportation or handling is in furtherance of business and that sales tax is chargeable on these items.

In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

While interpreting a fiscal statute if there is any doubt, the same should be decided in favour of the taxpayer.

Nothing can be intended, no presumption can be attached, nothing can be read into which is not provided. Besides, even if one considers it to be as a doubtful situation it again cannot go in favour of Revenue.

The providing of handling charges as well as transportation as such is not `in furtherance of the business'. Assessee is providing an additional service which is neither a `goods' nor a profit making venture. Further one would not need much discussion to say that a service is not covered within the definition of supply on the face of it. Here again the above method of interpretation goes to favour the taxpayer. `The definition clearly says that it is on disposal of goods while a `service' is neither a `goods' nor it can be called a disposal.

The claim of the assessee that there is no charge on transportation under Sales Tax Act stands accepted.

Chambers English Dictionary; Black's Law Dictionary Fifth Edition; AIR (1921) 1 K.B. 64; Commissioner of Income Tax v. Messrs Lever Brothers Pakistan Ltd 1990 PTD 389-B and Messrs Jugotekstil Impex, 61001, Lubijana Yugosalavia v. Messrs Shams Textile Mills Ltd. 1990 MLD 857 para. 13 ref.

(e) Words and phrases---

----"Furtherance"---Meaning.

Chambers English Dictionary and Black's Law Dictionary Fifth Edition ref.

(f) Interpretation of statutes---

----Fiscal statute---Principles for interpretation.

In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

While interpreting a fiscal statute if there is any doubt, the same should be decided in favour of the taxpayer.

Nothing can be intended, no presumption can be attached, nothing can be read into which is not provided. Besides even if one considers it to be as doubtful situation it again cannot go in favour of Revenue.

Rizwan Akhtar Awan for Appellant.

Saleem Zulifqar Khan for Respondent.

Date of hearing: 17th March, 2008.

JUDGMENT

KH. FAROOQ SAEED, J.---In these cross tax 'appeals filed by the taxpayer as well as the department, the assessee has challenged charge of sales tax on transportation charges received by it while Revenue claims that the sales tax inter alia is chargeable on packing material, scrap sale as well as handling charges received by the company.

2. The appeals are against the order of the Customs Federal Excise and Sales Tax Appellate Tribunal, dated 7-3-2002. The appellant's case basically is that the arrangement of transport by the appellant-Company is through a third party of the reason that the goods are supplied at the retail shop point of their customers. The transportation charges are neither covered within the definition of section 2(46) of the Sales Tax Act nor any other relevant section and provisions thereof. The arrangement is only to the extent of payment of the transportation charges on behalf of the buyer and its reimbursement. That arrangement is neither a transaction of the supply of goods being a service nor the tax-payer is getting any benefit from the same in terms of addition in value etc. This is an ancillary service to the sale/supply of the product of the appellant to the said parties against which the appellant does not have any benefit except that it is in continuation to the supply of its goods on which sales tax is liable to be paid and it is obviously not in dispute. Similarly talking about the departmental claim with regard to handling charges, scrap and packing, he said that the same are neither products nor by-products of this appellant.

3. The Legal Advisor of the Revenue however says that the entire process is that of the trading of business on different items and is covered within the definition of supply, hence the Department should be allowed to recover the sales tax as well as penalty of the evaded amount. His claim remains that the definition includes the consideration in money excluding all Federal and Provincial Taxes if any, which the "supplier receives from the recipient for that supply but excluding the amount of tax-----------. The order of the learned Tribunal through which the direction has been given to not charge tax on the packing and transportation of goods, therefore, is assailed.

4. Relevant part of the findings of the learned Tribunal are reproduced as follows:--

"So far as the collection of tax on the packing and transportation of the goods is concerned the Department has failed to show any evidence that the packing and transportation costs are separately recovered in addition to what has been recovered as the cost of packaged goods. Therefore, sales tax cannot be levied separately on the so-called packing charge, these being part of the price recovered by the appellants on the packaged goods. However, the appellant has conceded that they arranged special vehicles for the carriage of goods from 3rd parties and that these were then transported by the 3rd party and the transportation charges are paid by the buyers. This argument is however not tenable as the goods are supplied to the general 'body of retailers/ consumers/shop-keepers and the normal business practice is that the goods supplied to the shops/retail points at their premises. This transportation cost becomes part of the price. The respondent's contention is, therefore, correct to this extent and transportation charges will become part of the value for tax purposes and charged to sales tax".

5. From the above, para, there are certain obvious statements of facts which decided the controversy with regard to packing and a part of the transportation charges leaving the amount which has separately been charged in addition to the price of goods supplied. These two items have become a part of the same and there is no question of either receipt of any additional amount and in fact to said extent practically there should not be any controversy. Unless the said amounts have separately been received, there is no question of its bringing into the controversy regarding its chargeability.

6. Thus the findings that the sales tax cannot be levied on the packing charges being a part of the price covered by the appellant on the packaged goods is therefore unexceptionable. Even otherwise the fact that any separate amount on that was received or not in an issue of fact and not of law. However, since the taxpayer, admits transportation and carriage by third party and separate receipt of transportation charges, the definition of the `supply' would obviously require further dilation. Before we come to the same, the issue with regard to the sale of scrap is taken up first.

7. Since Hon'ble Supreme Court in its judgment (2007 PTD 1902) re: "Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others" has held the supply of fixed assets as well as scrap sale to be as covered within the term `supply', we, therefore, are not in a position to take the benefit of the cases referred by the appellant taxpayer decided by the Hon'ble Sindh High Court in terms of (2002 PTD 976) in case of "Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd." as well as (2007 PTD 171) in case of "Messrs Habib Sugar Mills Ltd. through Law Officer v. Additional Collector, Sales Tax, Customs House, Site Hyderabad and 2 others".

8. In view thereof, we hold that the scrap is chargeable under sales tax law and accordingly reverse the judgments of the learned Customs Tribunal to this extent. Even otherwise scrap is waste of the manufacturing process hence does have nexus with the main business. It definitely a goods and is acquired in furtherance of business. Moreover, it is a product retrieved on use of the same raw material on which input tax has been paid.

9. Now the issue which requires adjudication is transportation and handling charges. The Sales Tax Act, 1990, through its section 3 levies tax at the rates specified from time to time. This charge is on `supply' which has been defined in section 2(33) read with section 2(46) which defines the term `Value of Supply'. The same reads as follows:--

Section 2(33) "supply" includes sale, lease or other disposition of goods in furtherance of business carried out for consideration and also includes---

(a) Putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business.

(b) Auction or disposal of goods to satisfy a debt owner by a person;

(c) Possession of taxable goods held immediately before a person ceases to be a registered person; and

(d) Such other transaction as the Federal Government may, by Notification in the official Gazette, specify:

Section 2(46) "value of supply" means,

(a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

Provided that--

(i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open marked price of the supply excluding the amount of tax; and

(ii) in case the supplier and recipient are associated persons and the supply is made or no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax;

(b) in case of trade discounts, the discounted price excluding the amount of tax; provided that the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;

(c) in case where for any special nature of a transaction if is difficult to ascertain the value of a supply, the open market price; .

(d) in case of imported goods, the value determined under section 25 or 25B of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;

(e) in case where there is sufficient reasons to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Sales Tax Department constituted by the Collector;

(f) in case the goods ,other than taxable goods are supplied to a registered person, for processing, the value of supply of such processed goods shall mean the price excluding the amount of sales tax which such goods will fetch on sale in the market;

(g) in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a Notification in the Official Gazette, specify:

Provided that, where the Central Board of Revenue deems it necessary, it may, by Notification in the official Gazette, fix the value of any taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of supplies:

Provided further that where the value at which the supply is made is higher than the value fixed by the Central Board of Revenue, the value of goods shall be the value at which the supply is made".

10. The term supply, therefore, includes sale, lease or other "disposition of goods in furtherance of business". Obviously if any of the ingredients mentioned in the aforementioned definition are missing, it c will not become a supply and for that matter a taxable supply. In fact in the judgment referred before us in terms of (2002 PTD 976) by the High Court Karachi in case of "Collector, Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd", this aspect has been discussed in detail.

11. The definition is inclusive, thus obviously of wide import. However, certain examples in terms of goods acquired produced or manufactured in the course of business, auction or disposal of goods to satisfy a debt owed by a person, possession of taxable goods held immediately before a person or such other transaction as the Federal Government may, by Notification in the official Gazette specify makes it particular to a great extent. It is true that the definition being inclusive can cover more items. However, the thing which requires strict application of the above provision of law is that the said supply should be the disposition of goods and in furtherance of a business. It means it shall include those goods which are sold in continuation of the business being carried on by the said taxpayer. A similar term came for discussion before the Supreme Court of India in case of "State of Gujarat v. Raipur Manufacturing Co. Ltd" (AIR 1967 SC 1066). In the said case the question as to whether the disposal of old and discarded items such as scrap, boxes and such other miscellaneous goods in which the company/assessee was not carrying on business could attract taxability under the statute. It was held that since the company was not trading or carrying on business in relation to such items, any disposal of the same could not be construed as "business" under the Act. The Hon'ble Sindh High Court after taking benefit of the said finding and being impressed of the interpretation of the judgment of the Indian origin as well as certain others, ultimately found that the terms In furtherance of business' would not cover the activities which are not part of the main business. It was therefore, concluded as follows:--

"The term "business" has not been defined in the Act, 1990 and the settled meaning of the said expression as found in the aforesaid case-law as also various dictionaries as relied upon in the case of CIT v. Habib Insurance confirms that in order to be construed as "business" the activity must be recurring, for profit motive and must be and the nature of trade, commerce or manufacture. In the present case disposal of fixed assets can by no figment of imagination be construed as an activity for profit motive or in the nature of trade, commerce or manufacture. Thus, it is not an activity in the furtherance of "business. The assessee did not trade in or manufacture the fixed assets, it does not continue "supply" under section 2(33) in which event it could also not be construed as "taxable supply" under section 2(41). Accordingly another essential ingredient to successfully create a charge under section 3 of the Act, 1990 is also missing".

12. We feel ourselves convinced that the terms "in furtherance of business" and the business separately would not cover providing of additional facility like transportation charges paid or handling charges. Furtherance is a term which is used in the present form, would restrict only to the activities attached to the main track and the aspects directly connected thereof. As for example in the present case the appellant inter alia has been supplying formaldehyde and bonding material to its buyer. Anything which is directly connected with this product as well as by-products and then sold would be in furtherance of the business. The term furtherance as defined in dictionary reads as follows:

Chambers English Dictionary.

Furtherance means: "a helping forward; fur'therer a promoter, advancer"

Black's Law Dictionary Fifth Edition.

Furtherance: "Act of furthering, helping forward, promotion, advancement or progress. Maryland Casualty Co. v. Smith, Tex City App. 40 S.W. 2d 913, 914".

13. As is evident from the above, "furtherance" means continuity with the main activities having direct nexus but would not include activities which do not have attachment or are not a part of the main process. The reason being that the term is to be read as a whole which is in furtherance of the business'. Obviously the business of the appellant is not transportation or handling or packing. It is manufacturing of certain products like glasreen, formaldehyde based resins used as a bonding agent in the Chipboard, Plywood and Flush door and such like other manufacturing industries. Therefore, there is no reason for us to agree that transportation or handling is in furtherance of business and that sales tax is chargeable on these items. Our finding is further supported by the dictum laid down in the case of AIR (1921) 1 K.B. 64, the same speaks as follows:--

"In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

14. The other principle which is equally important is that while interpreting a fiscal statute if there is any doubt, the same should be decided in favour of the taxpayer. The case-law which can be referred with advantage are "Commissioner of Income Tax v. Messrs Lever Brothers Pakistan Ltd" (1990 PTD 389-B) and "Messrs Jugotekstil Impex, 61001, Lubijana Yugosalavia v. Messrs Shams Textile Mills Ltd." (1990 MLD 857 para. 13). The above principle fully applies to this judgment. The obvious answer to the proposition, therefore, would be that in this case nothing can be intended, no presumption can be attached, nothing can be read into which is not provided. Besides, even if one considers it to be as a doubtful situation it again cannot go in favour of revenue.

15. The providing of handling charges as well as transportation as such is not `in furtherance of the business' of this appellant. He is providing an additional service which is neither a `goods' nor a profit making venture. Further one would not need much discussion to say that a service is not covered within the definition of supply on the face of it. Here again the above method of interpretation goes to favour the taxpayer. The definition clearly says that it is on disposal of goods while a `service' is neither a `goods' nor it can be called a disposal.

16. Upshot of the above discussion is obvious. The claim of the assessee that there is no charge on transportation under Sales Tax Act stands accepted and the departmental claim that on handling and packing the Customs Excise and Sales Tax Tribunal's finding declaring it as not chargeable under the said Act is not accepted. However, with respect to sale of scrap there being a judgment by the Supreme Court, the order of Customs Excise and Sales Tax Appellate Tribunal is confirmed.

M.B.A./C-13/LOrder accordingly.