The petitioner is a limited company. 1t manufactures sponge foot--wear popularly known as havai (happal. In order to make these chappals it also produces its own microcellular sole sheets. Havai chappals are exempt from payment of sales tax by operation of a Notification issued by the Federal Government. Similarly, by virtue of another Notifica--tion the microcellular sole sheets too are exempt from payment of sales tax provided certain conditions are satisfied. According to the petitioner-Company the conditions prescribed in the notification make the microcellular sole sheets liable to sales tax and as such are contrary to law. It has accordingly challenged the levy of sales tax on the sheets produced by it.
2. It is not disputed that microcellular sole sheets are separately identifiable goods, and can be marketed independently. However, it is contended on behalf of the petitioner that it does not sell the sheets produced by it in the market and that it utilizes them solely for the purpose of making haval chappals.
3. The main contention on behalf of the petitioner is that sales tax can only be levied on the value of the goods produced and manufactured; the tax, therefore, by definition, cannot be levied on the component-parts which are incorporated in such goodsas component-parts fall within the definition of partly manufactured goods as given in section 2 (12) of the Sales Tax Act they are not liable to sales tax. In support of this contention reliance is placed upon a decision of the Dacca High Court reported as Latif Bawany Jute Mills v. Sales Tax Officer 1971 PTD.26.
4. It seems difficult to accept the contention of the petitioner. Under section 3(1) of the Sales Tax Act, sales tax is leviable inter alia on all goods manufactured or produced in Pakistan. The goods referred to in this sub section are obviously such goods as are marketable. Under subsection (4)
(iv) it is not a precondition to the levy of the tax that the goods must be sold to; another person. The tax becomes leviable even if the manufacturer or pro--ducer uses them himself. The Dacca case upon which the petitioner company relies drew a distinction between an independent use and a use for the purpose of manufacture of further goods and held that when .s the goods covered by the former were subject to the payment of sales tax the latter were not. But then this distinction was made without taking into account clause (iv) of sub-section 4 which was inserted in the Sales Tax Act by Finance Act, 1966. Apart from that perhaps in view of the above decision of the Dacca High Court the' Legislature amended section 4 of the Sales Tax Act by the Finance Act, 1973, and did away the exemption enjoyed by the partly manufactured goods from, the liability to sales tax. To allow the tax to remain a one-point tax the Legislature permitted section 27(1) to stay in the Statute.
5. Since the microcellular sole sheets are independent marketable goods the petitioner-Company are liable to pay sales tax even though it uses them itself to make another marketable product. The writ petition is without any merit and is hereby dismissed in limine.