Saeeduzzaman Siddiqui J.- 1. All the above references are filed under section 17 of the Sales Tax Act, 1951 (I will hereafter refer this Act as "the Act" in this order). References 72-79/1972 are filed directly by the assessee for the charge years 1957-58 to 1964-65 while references No. 93/72, 281/74 and 290/74 are filed by the department. On 1-11-1982 only S.T.C. No. 72- 79/1972 and S.T.C. No. 93/72 were fixed for hearing in Court. However, when these references came up for hearing before us the learned counsel for the parties made a joint request for summoning from the office the other two pending connected references S.T.C. No. 281/74 and S.T.C. No, 290/74 for hearing alongwith these references. As the point involved in all the references is the same and the parties in all these references are represented by the same counsel, we allowed their joint request and called for references No. 281/74 and 290/74 from the office. This order will therefore, govern the disposal of all the above-noted references.
2. We have heard Mr. Ali Athar and Mr. Hyder Ali Pirzada, the learned counsels for the assessee and the department respectively in the above references.
3. The admitted position in the above cases is that Messrs Pakistan Welding Electrodes Limited, who are applicants in references No. 72-79/72 and respondent in S.T.C. No. 93/72, 281/74 and 290/74 sold welding electrodes to various licensed manufacturers of textile, silk, cloth, cement, chemical, paper and jute during the charge years 1957-58 to 1966-67 and claimed exemption on such sales under section 4 of the Act. Lt was claimed that the goods sold by them were "party manufactured goods" which were sold to licensed manufacturers and as such these sales were exempted under section 4(a) of the Act. The exemption claimed by the applicant for the charge years 1957-58 to 1963-64 was in the first instance allowed by the Sales Tax Officer but later on these cases were reopened under section 28 of the Act and notices were issued to the applicant on 9-5-1968.
However, in respect of charge years 1965-66 and 1966 67 the exemption claimed by the applicant was disallowed by the Sales Tax Officer. As a result of the proceedings taken under section 28 of the Act the exemption granted to the applicant for the years 1957-58 to 1963-64 was withdrawn by the Sales Tax Officer on the ground that the welding electrodes sold by the assessee was not a "partly manufactured goods" and as such no exemption could be claimed on these sales under section 4 (1) (a) of the Act. The Assistant Appellate Commissioner reversed the above decision of Sales Tax Officer on appeal filed by the assessee and held that in view of addition of clause (e) to subsection (1) of section 3 of the Act by the Finance Act of 1967 the Sales Tax Officer should have proceeded against the purchasing manufacturer for recovery of the Sales Tax- On appeal filed by the department against the above decision of Assistant Appellate Commissioner, the Tribunal set aside the order of Assistant Appellate Commissioner and restored that of the S.T.C. In respect of charge years 1957-58 to 1962-63. However, in respect of the charge year 1963-64 the Tribunal observed that for this year the assessee had obtained a certificate under rule 16 of the Sales Tax Rules from the purchasing manufacturer which turned out to be wrong, therefore the Sales Tax Officer should have taken action against th* purchasing manufacturer instead of proceeding against the applicant and putting him to double jeopardy. Against this later part of the order of the Tribunal for the charge year 1963-64 the department has filed reference No. 93/72. For the charge years 1965-66 and 1966-67 the Sales Tax Officer initially did riot allow exemption claimed by the assessee under section 4 (1) (a) of the Act on the ground that the articles sold by them were not "partly manufactured goods'' but this decision of the Sales Tax Officer has been set aside by the Income-tax Appellate Tribunal on appeal against which the Department has filed S.T.C. No. 281 and 290 of 1974.
4. In reference No. S. T. C. 72-79/72, the assessee has referred for decision the following four questions: - "(1) Whether in the facts and circumstances of the case the Tribunal is; right in holding that the applicant-assessee could not claim the benefits of provisions of section 3 (1) (e) of the Sales Tax Act, 1951 ?
(2) Whether in the facts and circumstances of the case the Tribunal is- right in holding that only in respect of sales for which certificates- under rule 16 of Sales Tax Rules were furnished the Sales Tax authorities can recover Sales Tax from those licensed manufacturers who purchased the goods from the applicant without payment of Sales Tax ?
(3) Whether in the facts and circumstances of the case, the applicant having satisfied the Sales Tax authorities that the sales in dispute were made to persons who were licensed manufacturers who- claimed the right to purchase goods from the applicant without payment of Sales-tax under section 4 of the Sales Tax Act, the Tribunal was right in upholding the levy of Sales Tax on such goods particularly as in the original assessments for several earlier years such sales were not subjected to tax ?
(4) Whether in the facts and circumstances of the case the Tribunal should not have afforded to the applicant opportunity to obtain and produce the certificates under rule 16 of Sales Tax Rules, if not already filed, instead of rejecting the appeal particularly in view of the fact that in the original assessm ent for several earlier years sales made to licensed manufacturers were not subjected to tax even though for these years certificates were not produced?" However, at the hearing of these references Mr. Ali Athar, the learned counsel for the assessee stated before us that out of the 4 questions mentioned above he would press for decision of only question No. 1. In references Nos.
S.T.C. 93/1972, 281/74 and 290/74, the department has- referred the following question for decision :- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to exemption under section 4 (1) (a) of the Sales Tax Act, 1951 for the assessm ent year 1963-64, even in respect of such goods, sold to a, licensed manufacturers as were admittedly not their partly manufactured goods ?"
5. In our view the decision of all the above references will depend on a true construction and interpretation of section 4 (1) (a) of the Act under which a licensed manufacturer is entitled to exemption of Sales Tax on sales of "partly manufactured goods'' to another licensed manufacturer. Partly manufactured goods are defined in subsection (l2) of section 2 of the Sales Tax Act as follows :- "Partly manufactured goods'' means only goods which are to be incorporated into and form a constituent or component part of an article which is subject to the tax." It is frankly conceded by Mr. Ali Athar, the learned counsel for the assessee before us that in view of the above definition of "partly manufactured goods" the welding electrodes sold by the applicant/assessee to the various manufacturers of textile, silk, cloth, cotton, cement, chemicals, jute and paper manufacturers could not be treated as the sale of "partly manufactured goods" to the licensed manufacturer as the welding electrodes sold by the assessee could not be incorporated into or form a constituent or component part of the goods produced or manufactured by those manufactures. The learned counsel however, claimed that in view of the existence of clause (e) to subsection (1) of section 3 of the Act on the date the reopened cases were finalised by the Sales Tax Officer the proper course for the S. T. O., was to proceed against the purchasing manufacturers for recovery of sales taxon welding electrodes instead of demanding the same from the selling manufacturers (assessee). In so1 far the orders of the Appellate Tribunal challenged in reference Nos. 93/72, 281 and 290/74 are concerned the learned counsel- urged that the Tribunal was justified in directing the S. T. O. To grant exemption to assessee in cases where sales were supported by certificate of purchasing licensed manufacturer under rule 16 of the Sales Tax Rules. It is not disputed before us that under section 4 of the Act a licensed manufacturer can claim exemption of sales tax only in respect of sale of such goods to another licensed manufacturers which are "partly manufactured goods". We are therefore in no doubt that exemption of sales tax on sale of goods by one licensed manufacturer to another depended on the fact that the goods sold were "partly manufactured goods". The absence or existence of a certificate under rule 16 of the Sales Tax Rules could not therefore be a determining factor for grant or refusal of exemption of sales tax under section 4 of the Act. Therefore, unless the goods sold by the applicant fell under the category of "partly manufactured goods" the applicant could not claim any exemption of sales tax. On their sales irrespective of the fact that the purchasing manufacturer had given or not given the certificate required by rule 16 of the Sales Tax Rules. It has been frankly conceded before us by the learned counsel for the assessee that the welding electrodes sold by the applicant to various manufactures of cotton, cloth, silk, cement, paper and jute could not be described as the "partly manufactured goods". We are therefore, of the view that in these circumstances the existence or otherwise of the certificate required under rule 16 of the Sales Tax Rules was of not much consequences in these cases. The grant or refusal of exemption under section 4 (a) of the Act as stated by us earlier depended on the nature of goods sold by the assessee namely whether these were "partly manufactured goods". If the goods were not "partly manufactured goods" then mere existence of a certificate under rule 16 could not entitle the applicant to claim exemption under section 4 (a) of the Act. Similarly if the goods sold by the applicant fell under the category of "partly manufactured goods" then there fact the sale was not accompanied by a certificate under rule 16 could not be a ground for refusal of exemption under section.
4 (a) of the Act. We therefore, feel no difficulty in answering the question referred to us in S. T. C.
Nos. 93/72, 281/74 and 290/74 in the negative.
6. We will now consider the contention of learned counsel for the assessee in references No. 72- 79/72. The contention of Mr. Ali Athar in all these references is that although it is true that the goods sold by the applicant were not "partly manufactured goods" bul in view of addition of clause (e) to subsection (1) of section 3 of the Act the Sales-tax Officer should have proceeded against the purchasing manufacturer instead of demanding sale tax from the applicant. Clause (e) which was added to subsection 1 of section 3 of the Sales Tax Act by Finance Act of 1967 is as follow "(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 manufacture or production of taxable goods, payable by such manufacturer or producer.'' The contention of Mr. Ali Athar is that after addition of this clause to subsection (1) of section 3 of the Act, the Sales Tax Officer in such circumstances could only proceed against the purchasing manufacturer and not against the selling manufacturer. We are not impressed by the contention of the learned counsel for the assessee. Clauses {a) of subsection (1) of section 3 of the Act provides that the sales tax will be levied and collected on the value of all goods produced or manufactured in Pakistan payable by the manufacturer or the producer. It is not disputed that sales tax is chargeable on welding electrodes manufactured/produced by the applicant under the Act. The applicant had claimed exemption of sales tax on sales of these welding elections on the ground that they were sold as "partly manufactured goods" within the meaning of section 4 (a) of the Act to a licensed manufacturer. It has been conceded before us that these welding electrodes did not fall within the definition of "partly manufactured goods" and therefore there can be no exception to the order of the Sales Tax Officer refusing to grant the exemption under section 4 (a) of the Act to the applicant.
The fact that after addition of clause (e) to subsection (1) of section 3 of the Act it became permissible for the Sales-tax Officer to proceed against the purchasing manufacturer for recovery of the sale-tax in such circumstances did not mean that the demand of sales-tax from the q selling manufacturer on sales of such goods was not a valid demand. The ^ liability on the applicant for payment of sales tax arose under section 3 (1) (a) of the Act in the present case and this liability in our view was neither altered nor changed with the addition of clause (e) to subsection (1) of section 3 of the Act. In these circumstances if the S. T. O. Had chosen to recover the sales tax from the manufacturer or producer of the taxable goods under the Act, then no exception could be taken to it. We accordingly answer question No. 1 in references No. 72-79/72 in the affirmative.
7. These references are accordingly disposed of but there will be no order as to costs.