1. SALAHUDDIN AHMED, J.-All these five petitions have been heard together as common questions of fact and law are involved in them and they are now being disposed of under one judgment.
2. These Rules nisi are directed against the legality of notices issued by respondent No. 1 the Sales Tax Officer Companies Circle I, Dacca under section 28 of the Sales Tax Act, 1951 dated 25-4-67 and 8- 5-68.
3. Each one of the petitioners is a public limited company and carries on the business, inter alia, of the manufacture of jute products at its mill situated at different places in East Pakistan.
4. The different petitioners started production at different times. The exact date when each of them had first started their production will be mentioned hereafter. It is the common case of all the petitioners that they had submitted returns for assess--ment of different assessment years in time upon which assessm ent orders were passed and entire sales tax assessed on them were paid. As a result of certain Government notifications under section 7 of the Sales Tax Act (Annexures `P' and `P-I' to the petition) they were given the benefit of exemptions in respect of certain jute manufactures, namely, gunny bags upon the fulfilment of the conditions mentioned in the said notifications. This is evident from the relevant orders of assessment passed in respect of the different assessm ent years which are annexed to the petition.
5. The different assessm ent years involved in the present case in respect of the different petitioners are as follows :- Petition No. 154 of 1968 is that of Karim Jute Mills Limited which commenced its production in 1956 and the assessm ent years involved in the petition are 1957-58, 1958-59, April to June 1959, 1959-60 and 1960-61.
6. Petition No. 155 of 1968 is that of Star Jute Mills Limited which commenced its production in the year 1958 and the assessm ent years involved are 1958-59, 1959-60 and 1960-61.
7. Lastly Petition No. 156 of 1958 is that of Bawa Jute Mills Limited which commenced its production in the year 1954 and the assessm ent years involved are 1954-1955, 1955-56, 1956-57, 1957-58, 1958- 59, April to June 1959, 1959-60 and 1960-61.
8. The petitioners have proceeded to state that long after the conclusion of the assessment in respect of the aforesaid assessm ent years respondent No. 1 for the first time on 24-4-67 purported to issue notices upon them under section 28 of the Sales Tax Act, 1951 in the following terms :- "Whereas I have reason to believe that the value of taxable sales of your business in the year ending . . .
(i) has partially escaped assessm ent.
(ii) I therefore propose,
(a) to assess the said value of taxable sales that has escaped assessment.
(b) to revise the assessm ent of sales tax.
(2) I hereby require you to deliver to me within thirty-five days of the receipt of this notice, a return in the attached form of total taxable sales of your business assessable for the year ending . . . . ."
9. As many notices as concerned the different assessment years or part of the year were sent to the different petitioners.
10. It appears that instead of complying with the notices the petitioners who were members of the Pakistan Jute Mills Association submitted through it a petition dated 18-5-67 to the Finance Minister, Government of Pakistan protesting against the notices issued against them (ride Annexure `I' to the petition).
11. A second series of notices dated 8-6-67 were sent to the petitioners calling upon them to furnish certain further particulars in respect of each one of the, assessment years involved and fixing 17-6- 67 for hearing. These notices are Annexure `A' series. Another notice bearing the same date, namely, 8-6-67 was also sent to the petitioners and it was in the following terms :- "Office of The Income-tax Officer, 'Companies Circle-I, Pakistan Secretariat, Segun Bagicha, Dacca No. 955/1 Dated, the 8-6-67.
12. The Principal Officer, Messrs Latif Bawany Jute Mills Ltd., 122-124, Motijheel Co. Area, Dacca.
13. Subject :-Sales tax assessm ent for the assessment years from 1956-57 to 1960-61.
14. Notices under section 28 of the Sales Tax Act were issued on 25-4-67 requiring you to file returns for the above-mentioned years.
15. As you manufacture jute yarn, twine, hessian sacking cloth and gunny bags and you consume your partly manufactured goods of jute yarn, twine, sacking cloth and hessian for manufactur--ing hessian, gunny bags and hessian bags and you are not to pay sales tax on hessian and gunny bags or hessian bags exported, you are liable to pay sales tax on your partly manufac--tured goods consumed for finished products exported in accord--ance with the provision of section 3(6)
(d) of Sales Tex Act of 1951.
16. If you are of the view that you are not liable to pay sales tax on your partly manufactured goods, referred to above, you are requested to state reasons for the same.
17. To complete the above assessm ents you are also requested to furnish the following particulars for each of the above years separately :-
1. (a) Total quantity' and value of jute yarn consumed for manufacturing jute goods locally sold and exported.
(b) Quantity and value of jute yarn consumed for manufacturing goods exported.
2. (a) Total quantity and value of twine consumed for manufacturing goods locally sold and exported.
(b) Quantity and value of twine consumed for manufacturing goods exported.
3. (a) Total quantity and value of sacking cloth consumed for manufacturing goods locally sold and exported.
(b) Quantity and value of sacking cloth consumed for manufacturing goods exported.
4. (a) Total quantity and value of hessian consumed for manufacturing goods locally sold and exported.
(b) Quantity and value of hessian consumed for manufactur--ing goods exported.
18. Compliance by 17-6-67 requested.
19. (Sd.) M, A. Nawab, P. T. S., Sales Tax Officer, Companies Circle-1, Dacca."
20. It may be noted that compliance by 17-6-67 was required in this notice. The petitioners in compliance with the notices dated 8-6-67 filed the returns and statements for the assessment years in question along with their forwarding letters dated 24-6-67 and in these letters the petitioners asserted that the proposed assessment was time-barred and that no part of taxable sales in respect of any one of the assessment years for the period in question had escaped assessm ent (vide Annexure `L' to the petition). It has been stated that the returns filed in compliance with notices of 8-6-67 were no other than the carbon copies of the returns filed by the petitioners upon which they had been originally assessed. Once again notices dated 26-6-67 were served upon the petitioners -by respondent No. 1 wherein reference was made to the said notices dated 8-6-67 and 29-6-67 was fixed for the hearing of these cases. Finally the petitioners were served with yet another notice dated 8-5-68 (Annexure `O'). This notice is in identical terms with the notice dated 8-6-67 (Annexure `X') and directed the petitioners to furnish the required particulars by 17-5-68.
21. It is this notice in each case dated 8-5-68 and the notice which was first issued under section 28 of the Sales Tax Act dated 25-4-67 that have been impugned before us as illegal.
22. The sum and substance of the petitioner's case is that under Notification No. 1 dated 31-5-53 issued by the Central Govern--ment under section 7 of the Sales Tax Act gunny bags exported by the petitioners during the assessm ent years in question were exempted from payment of the tax under the Act. The petitioners sold gunny bags in the internal markets as well as exported and sold them outside Pakistan, and only the latter goods were entitled to and granted exemption. On the basis of such exemp--petition the petitioners submitted returns for all the assessment years in question and assessm ents were made and taxes duly paid and accepted thereon. The assessment years covered the period 1954-55 to 1960-61. All of a sudden the petitioners received notices dated 26-4- 67 from respondent No. 1 purporting to have been issued under section 28 of the Act and seeking to reopen the assessm ents in respect of the assessment years in question with a view to revise or reopen the assessm ents on the ground that there was partial escapement of assessment. A series of similar notices followed giving and asking for more particulars in regard to the proceedings contemplated in the notices. It transpired that respondent No. 1 Sales Tax Officer proposed to reopen the assessm ents in question and assess or re-assess them on the ground that the petitioners were liable to pay sales tax on the sacking cloth or hessian inasmuch as the sacking cloth or the hessian was used by the petitioner in the making of the gunny bags which were ultimately exported by them and were thus exempted from payment of the sales tax. The petitioners have submitted that the exemptions granted under the said notification fully and squarely covered the gunny bags exported by them and the respondents, cannot be permitted to take away with one hand that what they gave with the other by any device whatsoever. In any event neither the sacking cloth nor hessian that was used in the process of manufacturing gunny bags was subject to the payment of sales tax.
23. The case of the respondents as disclosed in their affidavits sworn by respondent No. 1 the Sales Tax Officer Company Circle I, Dacca is that the petitioners having used the sacking cloth or hessian (a partly manufactured goods) in the making of the gunny bags are liable to pay sales tax on these constituents under section. 3 (6) (d) of the Act. The respondents have not disputed the averments of the petitioners that they were entitled to and were duly granted exemptions from payment of sales tax on the gunny bags exported by them. It is, however, claimed that the petitioners were liable to pay sales tax on their "partly manufactured goods", that is, sacking cloth or hessian consumed by there- for manufacturing the gunny bags that were exported and as such were exempted from payment of the sales tax. The respondents have stated that as in course of the original assessm ents in question the jute yarn, jute twine, sacking cloth and hessian, each one of them had escaped assessm ent from sales tax, these goods were liable to assessment under section 28 of the Sales Tax Act.
24. Mr. A. K. Brohi, learned Advocate appearing on behalf of the petitioners has very ably and lucidly placed before us the case of the petitioners.
25. Before we proceed to consider the contentions of Mr. Brohi we think it desirable to observe that had it not been for the utter futility of the exercise which the impugned notices and the proceedings commenced thereunder involved we would be inclined to reject the applications in limine in view of the in--ordinate delay in approaching this Court under Article 98 of the Constitution. As may have been noticed the first notice issued .Under section 28 was dated 25-4-67 and the subsequent notices leading finally to the notice dated 8-5-68 were mere continuance of the first notice, in an endeavour to secure com--pliance with the original notice. It is true that some detailed particulars were given in the subsequent notices. They, however, do not afford any justification for the delay.
26. The petitioners have stated that as the respondents never took any steps on the failure of the petitioners to comply with the notices issued prior to the notices dated 8-5-68 although specific dates had been fixed for compliance and as the respondents remained absolutely silent between the period 8-6-67 and 8-5-68 the petitioners were entitled to believe that the respondents had abandoned their notices issued prior to the notices of 8-5-68 on the representation made by the petitioners through the Pakistan Jute Mills Association. The explanation is not convincing and it is not acceptable to us.
27. The obvious purpose of the exemption was to give a fillip to the export of jute manufactures in order to earn the much needed foreign exchange.
28. The said notification so far as it is applicable to the present case is as follows: "In exercise of the power conferred by section 7 of the Sales Tax Act, 1951 (III of 1951), the Central Government is pleased to exempt the goods specified in the Schedule hereto, from the tax payable ,under the said Act, subject to thefollowing conditions, namely :-
(1) That such goods are manufactured or produced in Pakistan,
(2) that they are sold for delivery outside Pakistan, arid
(3) that they are actually so delivered.
2. Where such tax has already been paid by a person not licensed under section 9 of the aforesaid Act to a licensed manufacturer or a licensed wholesaler on any goods to which this Notification applies, the amount of the tax so paid shall be refunded to such person in accordance with the provisions of the said Act.
"THE SCHEDULE
22. Gunny bags, hessian and other jute manufactures."
29. Vide Annexure 'P' to the petition.
30. This notification was subsequently amended by two other notifications dated 22-8-59 and 3-7-61 but they are not relevant for our purpose as they do not affect the petitioners and the exemptions granted to gunny bags, hessian and other jute manufactures.
31. Mr. Brohi has contended that although gunny bags were leviable with tax under the Sales Tax Act, hereinafter called the Act, as soon they are exported outside Pakistan they become entitled to and are granted exemption from payment of sales tax under the said notification. He has argued that the exemptions already earned and granted cannot be made nugatory by any means whatsoever.
32. It is not disputed that the gunny bags which were exported by the petitioners during the assessm ent years in question fulfilled the conditions mentioned in the notification and were granted exemptions by the respondents. It is also not disputed that the petitioners submitted returns in respect of the said assessme nt years and fully disclosed the particulars about the export of the gunny bags to the authorities concerned and the latter having found the goods entitled to exemptions from sales tax did not recover any tax on the occurrence of the taxable event, namely, export of the goods.
33. The respondents on the other hand contend that inasmuch as the hessian or the sacking cloth, nay, even the jute twine and the jute yarn that went into the manufacture of the end-product, namely, gunny bags, each one of the constituents being "partly manufactured goods" as soon as it was used by the manufacturers, namely, the petitioners, in the manufacture of the gunny bags, it becomes liable to the payment of sales tax on it. This argument fails to take note of the fact that the Act has through--out maintained a cleat cut distinction between "leviability" (liability to charge) in respect of the goods under section 3 (1) of the Act and "payability of tax" which is controlled by section 3(4) of the Act.
34. We shall presently see that the scheme of the Act and the provisions thereunder support the petitioners, and do not justify the respondents' contentions. The relevant provisions of section 3 of the Sales Tax Act are as follows:
(1) There shall be levied and collected a tax on the value of charge of tax-
(a) all goods produced or manufactured in Pakistan payable by the manufacturer or producer,
(b) all goods imported into Pakistan, payable by the importer,
(c) all goods sold by a licensed wholesaler, payable by the licensed wholesaler,
(d) such goods or classes of goods as the Central Govern--ment may, by notification in 'the official Gazette, specify in this behalf which are exported from Pakistan payable by the exporter.
(2) The tax shall be tax of fifteen percent. On the value of the goods as aforesaid except in the case of goods, specified in the Schedule to this Act in which case it shall be such percent--age as maybe fixed by the Central Government by notification in the official Gazette.
(3) The value of the goods shall be-
(i) in the case of goods falling under clause (a) of sub--section (1) the sale price,
(ii) in the case, of goods falling under clause (b) or clause (d) of the said subsection-the duty-paid value,
(iii) in the case of goods falling under clause (c) of the said subsection being imported goods the duty-paid value,
(iv) In the case of goods falling under clause (c) of the said subsection being goods manufactured or produced in Pakistan --the price for which the goods were purchased by the licensed wholesaler.
(4) The tax in respect of the goods mentioned in clauses (a) and (e) of subsection (1) shall be payable on the occurrence of the first of the following events :-
(i) when the goods are delivered to the purchaser, or
(ii) when the property in the goods passes to the purchaser, or
(iii) when the goods are sent, consigned or exported to any place outside Pakistan, 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) of 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 the Customs Officer,
(ii) where the goods on importation are taken out of bond for home consumption-before the goods are removed from the warehouse,
(iii) where the goods are exported by sea-before the shipping bill is passed by the Customs Collector.
35. 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, applied to the payment of the tax under this Act as they 'apply for the purposes of those Acts.
(6) Determination of value for tax in certain circumstances.- Where goods are produced or manufactured in Pakistan 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 not the right of property therein is sold or given, or
(b) such goods having a 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 of 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 Sales Tax Officer may determine the value for the tax under this Act and all such transactions shall, for the purpose of this Act, be regarded as sales.
(7) If any person other than the manufacturer or producer or importer or licensed wholesaler or exporter hereinbefore mentioned acquires from or against any one 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 succeed--ing 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 my be, and the person so selling shall be liable to pay the tax.
36. 3-A., Regulatory tax.-(1) The Central Government may by notification in the official Gazette, levy, subject to such con--ditions, limitations or restrictions as it may deem fit to impose, additional sales tax (hereinafter referred to as regulatory tax), on all goods or such goods and at such rate or rates as may be specified in the notification Provided that rate of sales tax (including the regulatory tax) shall not exceed in the aggregate 30 percent. Of the duty-paid value or the sale price of the goods, as the case may be.
(2) The regulatory tax levied under subsection (1) shall be in addition to any tax imposed under section 3 or under any other law for the time being in force.
(3) Any notification issued under subsection (1) shall, if not earlier rescinded, stand rescinded on the expiry of the financial year in which it was issued."
37. It is evident from the aforesaid provision of the Act that as soon as certain goods are produced or manufactured a tax to be collected from the producers or manufacturers become leviable on the goods. Unless, however, some taxing event as prescribed under subsection (4) of section 3 has happened, the tax does not become legally, payable or realisable. This interpretation finds support from the language of sections 7 and 8(2) of the Act which are as follows :- "7.-(1) The Central Government may, by notification in the official Gazette, Exemption (sic),exempt any goods or class of goods or any person or class of persons from the tax payable under this act, and may also, by notification as aforesaid, make a reduction in the rate of tax leviable in respect of any goods or class of goods.
(2) Any exemption notified under subsection (1) may be made subject to such conditions as may be specified in the notification. ---(3)-------(1)
(2) The Central Government may grant any class of manufacturer or producer or exporter exemption from the pay--ment of the tax on goods manufactured or produced by him and no person who is a member of a class so exempted shall be given a licence: Provided that where a manufacturer is exempt from the payment of the tax in respect of goods manufactured by him as well as the raw materials used in the manufacture of such goods, a licence under this section may be issued with the prior approval of the Central Government and subject to such conditions as may be specified in this behalf.
(3) Any exemption granted under subsection (2) may be withdrawn by the Central Government at any time, and upon its withdrawal the provisions of subsection (1) shall apply to all members of the class in respect of which the exemption has been withdrawn."
38. Both these sections as may have been noticed refer to the payment of the tax.
39. The respondent's contention that the petitioners as manufacturers or producers became liable to the payment of the sales tax upon sacking cloth or hessian which went into the production of the gunny bags is untenable inasmuch as none of the taxable, events prescribed in section 3(4) of the Act ever took place in respect of any one of these constituents. None of these constituents in its original shape was either delivered to a producer or the property in it passed to a purchaser or it was sent consigned or exported to any place outside Pakistan. It is only when these constituents were assimilated in the process of manufacture and culminated in the end-product, namely, the gunny bags and the gunny bags were actually exported that gave rise to a legal right to receive the tax and a legal obligation to pay it.
40. Having been confronted with this obvious legal position the respondents have erroneously sought to rely on the provisions of section 3(6)(d) of the Act.
41. It may at once be stated here that section 3(6) (d) is not the charging provision. It merely provides for a method to determine the value for sales tax in certain circumstances or conditions of difficulty, and in this context it provides that "when such goods are for use by the manufacturer or producer and not for sale, the Sales Tax Officer, may determine the value for the tax under the Act and such transactions, shall for the purpose of the Act, be regarded as sales".
42. It seems clear to us that the goods to become laviable with tax has to come under section 3(1) of the Act, and a transaction to become a taxable event must find mention in section 3(4) of the Act.
43. This view is highlighted by the fact that the Legislature in its subsequent amendment added a new clause, namely, clause (iv) to section 3(4) of the Act. (Vide section 4 of Finance, Act of 1966). The added clause reads as follows :-- "When the goods are actually used by the inanufucturer or producer." (The underlining* is ours).
44. Under this clause as soon as the manufacturer or producer, who has manufactured or produced the goods, actually uses the goods, the tax at once becomes payable on it.
45. This amendment, however, came in the year 1966, and was not made retrospective, and is thus not available in the present case even if it was applicable to the facts of the present case.
46. It is patent, therefore, that whatever the manner of the, use of the goods by the manufacturer or producer, no tax on such goods becomes payable unless and until such use of the goods has been made a taxable event under section 3(4) of the Act.
47. Mr. Brohi has contended that the words "for use by the manufacturer or producer" can only mean independent utilisation of the products by the manufacturer or producer as contradisting-uished from the assimilation of the goods in the process of manufacture culminating in the end-product.
48. This contention is not without any substance as will be evident on a comparison of similar phrases connected with the word "use" in sec--petition 3(6) (d), section 3(1) (e). (This new clause was introduced by the Finance Act of 1967), and the proviso to section 2(11). Section 3(6) (d) has been already quoted elsewhere. The other two provisions are as follows :- Section 3(1) (e) :-- "Such goods or classes of goods purchased without payment of sales tax by a licensed manufacturer or, producer of taxable goods as are not used in the manufature or production of taxable goods, payable by such manufacturer or producer.
49. The underlining* is ours. *(Here in italics)
50. Section 2 (11), Proviso: Provided that where one person other than a person engaged in the ginning of cotton , manufactures goods for another, wholly or in part out of materials supplied by that other, and the goods are not for the use of, but are for sale by, that other, the persons supplying the materials shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer."
51. It shall be noted that section 3(1)(e) having been added in 1967, and not given retrospective effect, is not available in the present case. This clause, however, brings out clearly the idea of goods that are not used by the manufacturer or producer by way of independent utilisation as distinguished from the use of the goods in the process of manufacture or production of taxable goods.
52. The case of Messrs Noorani Cotton Corporation (PLD 1965 SC 161) is not inconsistent with our view as to the inapplicability of sec--petition 3(6) (d) of the Act to the cases of the petitioners. The case under report is also distinguishable in one respect viz. The end-- product was not liable to payment of sales tax as it is in the present cases. The gunny bags were admittedly liable to the payment of sale tax on the happening of the taxable event, namely, exportation. It is, however, another matter if the Central Government of its own free will in the interest of the State considered it advisable to grant exemption to the gunny bags, hessian and other jute manufactures on their exportation.
53. There is no doubt about the fact that each one of these goods was a manufactured goods and would on the happening of taxable event liable to payability of "sales tax thereon. The conversion of hessian or sacking cloth into a gunny bag involves a simple method of sewing it up into the shape of a gunny bag and the gunny bag or any one of its constituents when sold in the internal market becomes subject to the liability of payment of tax. It was its exportation atone which earned the exemption. In the case under report section 3(6)(d) of the Act was considered with reference to the definition of `sale' as given in section 2(11) of the Act. Throughout the discussion the Supreme Court contemplated a situation where a manufacturer kept the goods for himself by way of independent utilisation instead of using it in the process of manufacture leading to the manufacture of an end product. Kaikaus, J. Who delivered the judgment of the Court, clearly observed that any stage of manufacture for the manu--facture of goods which are to be incorporated in another article is not liable to sales tax, and he proceeded to illustrate this with reference to the fats of the case before the Court. He observed "Cottonseed is at first extracted from cotton, This is a manu--facturing process and if this cottonseed is sold to the consumer sales tax will have to be paid on the manufacture of cottonseed. However, the manufacturer may use this cottonseed himself for the production of cottonseed oil. In its turn the cottonseed on which is again a manufactured article may be sold to one who manufactures vegetable ghee for the purpose of being incorporated in the vegetable ghee. In a case where the cottonseed oil manufactured by a person from cottonseed extracted by himself from cotton goes into the vegetable ghee the intention of the law is that sales tax may be paid only on the manufacture of vegetable ghee and shall not be paid either on the production of cottonseed or on the production of cottonseed oil which productions become in such a case only steps in the manufacture of vegetable ghee." This view fully coincides with the view we have taken. At another place the learned Judge observed : "The need for such assessm ent arises only if tax is payable on goods which are kept by the manufacturer for his own use." In the facts and circum--stances of the present case by no stretch of imagination can it be said that the manufacturers, namely, the petitioners, kept hessian or sacking cloth for their own use as distinguished from its use in the shape of assimilation in the process of manufacture leading to an end-product, viz. The gunny bags. Viewed in this light section 3(6)(d) of the Act can be assigned a meaning, namely, it deals with the use of the end-product by the manufacturer, that is where instead of selling the end-product, the manufacturer retains it for its own independent, use.
54. There is nothing in the section which would justify its extension to the assimilation of the goods in the earlier stages of manufacture leading to the end-- product. This view also finds support from two Canadian cases, namely, The King v. Fraser Companies Ltd. (1931 SCR 490) and Bank of Nova Scotia v. The King (1930 3 C R 174). Photostat copies of these two cases have been supplied to us by Mr. Brohi and they are on record. In both these cases provisions similar to section 3(6)(d) of the Act were under consideration. In the first case the manufacturer of lumber, who was also a building contractor, used a portion of his lumber in construction of building. In the other case a bank for its own use in the head office or branches manufactured stationery supplies. In both these cases it was held that the goods in question were "for use by the manufacturer or producer and not for sale".
55. Mr. Brohi has also refuted -the contention of Mr. Afzalul Haque, Advocate, appearing on behalf of the respondents, and stated that each one of the constituents, namely, hessian and sacking cloth, is a fully manufactured article in itself and leviable with tax on its production or manufacture and not a "partly manufactured goods" as alleged by the respondents. This is evident from the definition of the phrase as given in section 2 (12) of the Act which says "Partly manufactured goods" means only goods which are to be incorporated into and form a constituent or a component part of an article which is subject to the tax. We have no doubt that the goods mentioned in section 3(6)
(d) refer to finished or fully manufactured goods and not to `partly manufactured goods'. The two Canadian cases mentioned above support this.
56. For the foregoing reasons we have come to the conclusion that the exemption under the said Government notification fully applied to the gunny bags exported by the petitioners, and the exemption covered also "other jute manufactures" including hessian or sacking cloth that went into the making of the gunny bags. It has been held in the case of the Commissioner of Income--tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) Ltd. (PLD 1970 SC 93) that once such goods have been exempted under section 7 of the Act, they go out of the purview of the Act and their gross takings cannot be taken into account for any of the purposes of the Act in the absence of express words permitting the same. In the case under report it has been further observed that "all goods pro--duced or manufactured" that come under section 3(1)(a) of the Act obviously refer to all goods which have not been exempted from payment of tax.
57. Mr. Brohi has next contended that in view of the fact that the petitioners submitted their returns under section 10 of the Act, only section 28(1) of the Act, if applicable, is attracted. Inasmuch as however, the impugned notices were issued beyond the time specified in the subsection, they are illegal and furnish no legal basis for assessment or re-assessment. Mr. Brohi has strenuously argued that subsection (2) of section 28 is only attracted m a case where no return was ever filed as required under section 10 of the Act.
58. On the other hand, Mr. Afzalul Haque has equally vehement--ly argued that the petitioner's case is covered by subsection (2) of section 28 and the notices and the contemplated proceedings there- -under are illegal.
59. Section 28 as it stood at the relevant time is as follows :- "(1) If for any reason any tax payable under this Act has escaped assessment or has not been paid in any year, the Sales Tax Officer may at any time within five years, of the end of that year assess the tax payable, after issuing a notice to the assessee and making such inquiry as he considers necessary.
(2) Notwithstanding anything to the contrary contained in subsection (1), the assessment for the tax payable for any one quarter or more quarters than one of the period beginning on the first day of April 1954, and ending on the thirtieth day of June 1961, may be made at any time before the thirtieth day of June 1965, after issuing a notice to the assessee and making such enquiry as the Sales Tax Officer considers necessary and no assessment or re-assessment made, any other proceeding taken or notice issued shall be called in question by any Court, tribunal or any authority merely on the ground that at the time the assessment or re-assessment was made, proceeding taken or notice issued the time within which such assessment or re--assessment should have been made, proceeding taken or notice issued under this section, as in force before its amendment, had expired, and Explanation.-The expression `Tax payable under this Act' as used in this section, includes the tax payable by a licensed manufacturer in respect of partly manufactured goods under section 12."
60. Mr. Brohi has given us a detailed history of section 28 of the Act from the time when section 28, constituted a single section without any subsection right down to the present time when it has two subsections and an explanation attached. The history of the section shows that in the year 1951 section 28 was as follows :- "If for any reason any tax payable under this Act has escaped assessment or has not been paid in any year, the Sales Tax Officer may at any time within four years of the end of that year assess the tax payable, after issuing a notice to the assessee and making such enquiry as he considers necessary."
61. The section continued in the same form until 1959 when a proviso had to be added of necessity following a change in the constitution of the financial year. The section and the proviso continued to remain in the same shape until 1961 when an explanation was added and this explanation has continued to remain the same to this day. Thereafter the section continued to remain the same until 1963 when the period of limitation was increased from four years to five years. As a result of certain interpretation given by the Supreme Court in the case of Negina Silk Mill v. Income-tax offer (PLD 1963 SC 322) section 28 was substantially amended in the year 1964 and the section was divided into two subsections. Subsection (1) stood as it did just before the amendment by subsection (2) substituted the proviso. Thereafter the section was again amended in the year 1966 and the terminal period of limitation in subsection (2) was changed from 30-6-65 to 30-6-67. In the year 1967, however, subsection (1) itself was subjected to further change and on amendment it stood thus: "If for any reason in any year tax has escaped assessment or has been under-assessed, or has been assessed at a rate lower than that provided under this Act, or excessive relief or refund has been allowed, the Sales Tax Officer may at any time within five years of the end of that year assess or re-assess the tax payable or the relief or refund allowed after issuing a notice to the assessee and making such enquiry as he considers necessary."
62. Subsection (2) of section 28 further continued to be amended in the years 1968 and 1969 but these amendments only extended the terminal date from 30-6-68 to 30-6-69 and finally to 30-6-70.
63. Even before section 28(1) had been substantially amended in the year 1967 the Courts held that section 28 as it originally stood subsequently in subsection (1) of section 28 until 1966 covered cases of partial escapement as well as complete escape--ment of assessment. Nevertheless although on such interpretation it might not have been necessary to introduce the words "Assess or re-assess" in subsection (1), such amendments were made in the year 1967. It is signified, however, that subsection (2) con--sistently retains the word `assessment' in the first part of the subsection. These facts have led Mr. Brohi to contend that subsection (2) of section 28 applies only to a case where no return was ever filed. In support of this contention Mr. Brohi has submitted that the rationale behind this enhanced period of limitation in regard to a case where no return has been filed is not a new conception, and has been noticed in several legal decisions including that of the Commissioner of Income-tax, East Pakistan v. Messrs Hossen Kasam Dada, Karachi (PLD 1961 SC 375 Having regard to the fact, however, that the, conclusions which we have earlier reached are sufficient to dispose of the case we do not feel called upon to express any definite opinion on this contention.
64. There remains for us to notice two other contentions of Mr. Brohi.
65. He has contended that the impugned notices are themselves bad as being vague, not furnishing the requisite particulars and calling for documents which under the law the petitioners were not called upon to maintain for such a long period. It appears that the petitioners never before complained of these defects, in the impugned notices. As a matter of fact the notices were sent in the prescribed form and the petitioners fully understood the nature of the proceedings contemplated thereunder and knew what was required of them. The petitioners in their own way sought to comply with the notices by submitting the necessary sales tax returns. The notice dated 8-6-67 (Annexure `K' to the petition) gave the petitioners fuller details and stated the basis upon which assessm ent or re-assessm ent was sought. In these circumstances we think it is too late in the day for the petitioners to press these objections against the notices.
66. Lastly Mr. Brohi has raised a Constitutional objection to the interpretation of the word "use" in section 3(6)(d) of the Act in the manner the respondents want the Court to interpret. He has contended that if the respondents' meaning be accepted, `use' would mean `consumption' of the goods by the manufacturer or producer, and as consumption of goods is not included in the Third Schedule to the Constitution of 1962, the Central Govern--ment which enacted the Sales Tax Act is not competent to legislate on `consumption of goods' which according to Mr. Brohi falls within the legislative field of the Provinces. We, however, do not consider that this question falls for our consideration in view of the conclusions we have arrived at on the payability of sales tax on hessian and sacking cloth.
67. For the reasons stated above, we declare that the impugned notices dated 25-4-67 and 8-5-68 and the proceedings contemp--lated thereunder against each one of the five petitioners are without lawful authority and of no legal effect.
68. We accordingly make all the five Rules absolute but in the facts and circumstances of the case make no order as to costs.
69. HABIBUR RAHMAN, J.-I agree. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.