1. NNAIMUDDIN, J.-This is a reference under section 17(1) of the Sales-tax Act 1951 (hereinafter called the Act), made by Messrs International Industries Limited, referring the following two questions of law raised to arise out of the order dated 4-7-1971, of the Income-tax Appellate Tribunal, Karachi, whereby they rejected the appeal of the applicants:- "(1) Whether in the facts and circumstances of the case the Tribunal is right in holding that the applicant's product steel pipes and tubes are not liable to sales tax the reduced rates of 5 %. Under Item 10 of Notification No. 11 dated 27-6-1951 ?
(2) Whether in the facts and circumstances of the case the Tribunal is right in holding that the applicants products are not exempt under Items 2 and 9 of the Notification No. 9, dated 27th of June, 1951 ?
2. These are The applicants are engaged in the business of manufacturing steel pipes and tubes of 10' and 20' length from steel sheets. It is the case of the applicants that they import steels and subject to it only one process of pending into rounded shapes and welding the ends which gives it a shape of a pipe. According to them their product is primarily meant for the purpose of being used as a cycle frame and their import category has been determined on the basis of the manufacture of the pipes for cycle frames. The applicants have been granted tax holiday under section 15(BB) of the Income-tax Act, wherein also the applicants' products have been described as pipe for cycle frames. The applicants have however, stated that the pipes manufactured by them are also purchased by manufacturers of steel furniture---s. The applicants for the financial year 1964-1965, claimed that their products were liable to reduce rate of 5 per cent of sales-tat under Item No. 10 of the Ministry of Finance (Revenue Division)
3. Notification No. 11, dated 27-6-1951. The Notification reads as follows : "Levy of sales-tax at reduced rates.-Notification No. 11, dated 27th June, 1951.-In exercise of powers conferred by subsection (1) of section 7 of the Sales-tax Act, 1951 (1rI of 1951), the Central Govern-- ment is pleased to direct that in respect of the goods or class of goods specified in the first column of the sub joined table the rate of tax leviable shall be the reduced rate specified in the second column thereof."
4. The rate of tax provided for in Item No. 10, "Iron and Steel" is 5 per cent. However, the Sales Tax Officer by the order dated 16-6-1970, rejected the claim holding that he products do not fulfil the condition of iron and steel as the conduit or pipe has to undergo the process of bending and welding of steel plates through electrically operated machines and these pipes after completion of the bending and welding process cannot be called "iron and steel".
5. Aggrieved by the order the applicants preferred an appeal with the Appellate Assistant Commissioner of Income Tax 'B' Range, Karachi, before whom it was contended by the Secretary of the applicants that the conduit pipes came under the definition of "Iron and steel" but he did not accept the contention and upheld the order of the Sales-tax Officer by the order dated 16-1-1971.
6. This order, therefore, led the applicants to prefer an appeal wich the Income-tax Appellate Tribunal, Karachi Bench, Karachi.
7. This process as explained before the Tribunal involved in bending the steel sheets or plates in rounded shapes and then welding the same at the joint in order to form a pipe or a conduit. It was the case of the applicants that the tubes are primarily meant for the purposes of manufacture into cycle frames and other component parts of cycles. Before the Tribunal it was also stated that applicants bad been given the benefit of tax-holiday under section 15(BB) of the Income-tax Act, wherein their products have been described as pipes for cycle frames. It was also pointed out to the Tribunal that the applicants have been given an import category for manu--facture of pipes for cycle frames. It was however, not denied by the cants before the Tribunal that the ends products of the applicants were used and could be used for the purpose other than manufacture of cycle frames such as manufacture of steel furniture and also building material.
8. Before the Tribunal besides claiming reduced rate of 5 per cent of sales-tax, a claim was also made that under Ministry of Finance (Revenue Division), Notification No. 9, dated 27-6-1951, the goods or class of goods specified therein, being the goods manufactured or produced in Pakistan were exempted. It may be convenient to reproduce therein below the Notification in extenso and the relevant items mentioned therein:- "Notification No. 9, dated 27th June, 1951.-1n exercise of the powers conferred by subsection (1) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Central Government is pleased to exempt the goods or class of goods specified hereunder being goods manufactured or produced in Pakistan from tax payable under the Act, h-t except in case of goods specified in item 30(a) nothing in this exemption shall affect the tax payable on the raw materials from which the goods are manufactured:
2. Bicycle components.
9. Cycle accessories'."
9. After taking note of the submissions and discussing the cases cited, the Tribunal came to the conclusion that the steel pipes or conduits, manufactured by the applicants did not come within the scope or the term "iron and steel" as used in Item No. 10 of Notification No. 11 dated 27-6-1951, for the reasons that words "iron and steel" were used as generic names designating a particular category of raw material. It may be pertinent if we here reproduce, paragraph 5 of the order which contains the main reasoning : The question, therefore, which arises for determination in the case before us is as to whether the steel pipes or conduits manufactured by the appellant come within the scope of the term 'iron and steel' as used in item 10 of notification 11 dated 27-6-1951 quoted hereinabove. Iron and steel are generic names for designating a particular category of raw material. This may come in various sizes and various shapes and various specifications inasmuch as the item is not hedged in by any qualification or restriction and, therefore, different specifications of few materials composed of iron and steel would fall within the item. The question arises as to whether after being subjected to the process in which the assessee is engaged in the end product manufactured by the assessee can still be categorised or termed as iron and steel. It cannot be gainsaid that the assessee applies human labour and skill to the raw material of steel sheets or plates as received by it. After undergoing the process which is applied by the assessee the raw Material undergoes a change in its shape and form. Utility is added to the raw material and it also acquires a new generic name as a pipe as conduit and is identifiable as such. No doubt it still retains the character and qualities of iron and steel but it becomes an iron or a steel pipe. We feel it would be straining the language if we may say that even after undergoing the process no new material comes into being and the original raw material of iron and steel still continues. A carpenter takes wood and after applying his skill and labour produces a chair or a table. After application of the labour and skill the original material does not cease to be wood but a new product is evolved namely, a wooden chair or wooden table. Similarly a tailor takes cloth and manufac--tures of produces a shirt or a pair of trousers. The end product Jones not cease to be cloth but it is a shirt or trousers of the material from which it is produced. In short it can be said that the assessee manufactures steel pipes or conduits and the product is liable to sales-tax under section 3(I) (a) of the Sales-tax Act. The raw material is no doubt iron and steel but after subjecting the same to the process in which the assessee is engaged the new product namely a conduit or pipe is produced which has a generic name by which it is identifiable. The activity comes within the scope of the term "manufacture" as used in section 3(1) (a) of the Sales-tax Act. In the case of Messrs Muhammad & 1hined Co. v.
10. Commissioner of Income-tax, East Pakistan, Dacca PLD 1966 Dacca 449, wherein considering as to whether in dyeing gray cloth purchased from the market the assessee was engaged in manufacture their Lordships made the following observations ; We have already noticed there is no definition of the word "manufacture in the Act with which we are concerned. It is necessary for us to consider the dictionary meaning of the word. On a reference to the Oxford English Dictionary, it is found that the meaning of the word is.
11. The action of process of making articles or material (in modern use, on a large scale) by the application of physical labour or mechanical power. The word also means "An article or material produced by the application of physical labour or mechanical power."
12. Their Lordships also quoted with approval the following observations in the case of State of Bihar v.
13. Messrs Chrestair Mica Industries Ltd. (AIR 1957 Pat. 184): "The essential point is that something is brought into existence which is different from that originally existing, in the sense that the thing produced is by itself a commercial commodity and is capable as such of being sold or supplied. It is not necessary that stuff or material of the original articles must lose its character or identify or it should become transformed in its basic or essential properties."
14. Their Lordships concluded :-, "It cannot be denied that in the instant case after dyeing and calendering marking was greatly improved and was made vendible product in its present condition. The tribunal has found that marking not only became coloured but its texture underwent an improvement and that it became more durable and assumed a better and improved look. This would undoubtedly constitute what is called "manufacture" of goods and is therefore assessable."
15. The Tribunal further reasons that although the end product may have retained in properties 9f iron or steel nevertheless it underwent a change in its shape and form and utility so much so that it could be identified by a name of its own as "steel pipe or conduit pipe". Accordingly, they upheld the order of the Assistant Commissioner and dismissed the appeal.
16. We have heard Mr. Muhammad Nasim learned counsel for the applicants and Mr. Shaikh Haider learned counsel for the respondents.
17. Now, taking up the second question, it was submitted that iron pipes or conduits were exempted under Notification No. 9 dated 27-6-1955, under Items Nos. 2 and 9. It may be stated that it was not the case of the applicants before the Sales Tax Officer or the Appellate Assistant Commissioner of Income-tax that the pipes or conduits were exempted under the said notifica--petition. The applicants claimed before them the liability of payment of sales tax at reduced rate.
18. However, before the Tribunal reference was made to Notification No. 9 dated 27-6-1951 and items 2 and 9 thereof for claiming total exemption.
19. "Mr. A.I Athar has, however, admitted that the raw materials which enter into the manufacture of bicycle components and cycle accessories would be liable to tax. We are, therefore, again taken back to the original consideration as to whether the pipes or conduits which are manufactured by the assessee can be designated as iron and steel and as such are entitled to taxation at the reduced rate of 5 %"
20. It was however, submitted by Mr. Muhammad Nasim that if an article though exempted is capable of being used for some other purposes that would not erect its exempt ability. In support of this proposition the learned counsel relied on the M. S. Muhammad Eli, Sialkot v. Commissioner of Income---tax, North Zone (West Pakistan), Lahore ((1973) 27 Taxation 224), Commissioner of Sates Tax, Lahore v. Lutfi & Company (Pakistan), Lahore ((1973) 28 Taxation 168) and Assessee v.
21. Department ((1976) 33 Taxation 33).
22. However, it is not claimed before us nor could it be in view of the stand taken before the Tribunal that pipes or conduits manufactured by the applicants are by themselves bicycle components or cycle accessories. These could be used for making bicycle frames which could be said to form the compo--nent or part of bicycle, for which exemption could be claimed but since ripe or conduits are generally used as building material and could also be used in making steel furniture (as was concede before the Tribunal) and bicycle frames, if the Government had in tended to exempt the same from the sale-tax liability, they would have used the words or pipe or conduit in the notification. To our mind the intention of the Government from the wording of the notification is clear that they had not intended to exempt the same.