' NAIMUDDIN, J.-- The applicants have filed this application under section 17(2) of the Sales Tax Act, 1951 in the following circumstances.
' During the assessm ent year 1960-61 the applicant exported yarn and cloth to foreign country to the extent of 8,40,000 lbs. And 1,18,150 yards respectively. They also manufactured 11,74,150 yards of 'Mazari' cloth in the same assessm ent year.
2. The export of cotton and yarn to foreign countries was exempted from sales tax under Notification No, 1, dated 1-5-1953. The manufacture of 'Mazari' cloth was exempted from sales tax under Notification No, SRO 289-dated 27-6-1961.
3. The Sales Tax Officer by the order, dated 30-6-1961 passed under section 10(3) of the Sales Tax Act subjected cotton and yarn respectively consumed in the yarn and the cloth exported. He also subjected to sales tax the yarn consumed in the manufacture of 11,74,150 yards 'Mazari' cloth exported.
4. The applicants aggrieved by the order preferred an appeal with the Assistant Appellate Commissioner of Income Tax and Sales Tax, who by the order, dated 28-5-1966, rejected the same holding that the action of the S.T.O. In charging Sales Tax on cotton consumed in the manufacture of yarn exported to foreign countries was correct in view of Dacca High Court's decision in the case of Amin Jute Mills wherein according to him it was held that Sales Tax on raw material was payable when the finished products were not subject to Sales Tax. He further stated that in the case under appeal, the finished goods were exempted by Notification No, 1, dated 1st May, 1953 (Items 44 and 48) and that whether the finished products are exempted through a Notification or a section of the Sales Tax Act, the position is the same that the finished product remained exempt. He further held that Sales Tax was properly charged by the S.T.O. On yarn and not on cotton because the raw material for cloth was yarn and not cotton for the reason that the yarn might be manufactured by the Mill itself. He held that the proper course for the S.T.O. Was to charge sales tax on yarn which was the raw material for manufacture of the cloth.
5. Dissatisfied with the above order the applicants filed an appeal with the Income-tax Appellate Tribunal (Karachi Bench) Karachi.
5-A. The Tribunal by the order, dated 14-4-1969, rejected the same. We may here for ready reference reproduce the relevant observations:- "Mr. Ali Athar argues that the raw material for exported cloth is cotton and not yarn but the Sales Tax Officer has subjected to sales tax the value of yarn instead of cotton as raw material of exported cloth. He says that in a textile mill there is one integrated process of producing cloth from cotton. The intermediate product, namely yarn is not liable to sales tax in the circumstances of this case. He argues that section 3(6)(d) has no application to such cases. This argument is erroneous.
A legal fiction has been created by the above section for charging to sales tax such goods which are used by the manufacturer or producer. Now in the instant case yarn has been manufactured by the appellant which on its turn has been used for the manufacture of cloth. In our opinion this case is covered by section 3(6)(d). We, therefore, hold that the Sales Tax Officer was legally justified in charging to sales tax on the value of yarn contained in the manufacture of cloth which was exported."
6. This led the applicants to file an application before the Income-tax Appellate Tribunal for referring to this Court the following questions claiming the same to be questions of law arising out of its order, dated 14-4-1969:- "(1) Whether in the circumstances of the case, the Tribunal was right in holding that the raw material consumed in the manufacture of Mazari cloth is not cotton waste but yarn, when the process of manufacturing Mazari cloth is an integrated process in the factory of the applicants?
(2) Whether in the circumstances of the case the Tribunal was right in holding that yarn made out of cotton waste and incorporated in Mazari cloth has been correctly charged to sales tax by the Sales Tax Officer?
(3) Whether in the circumstances of the case the Tribunal was right in holding that yarn made out of cotton waste and incorporated in the manufacture of Mazari cloth was "goods used by the manufacture" within the meaning of section 3(6)(d) of the Sales Tax Act, 1951?"
7. However, the Income-tax Appellate Tribunal, by its order, dated 26-2-1971, received by the applicants on 17th May, 1971, rejected the application holding that the questions are no more referable questions as the same have been decided by the highest judicial authority.
8. The applicants have therefore, filed the present application under section 17(2) of the Sales Tax Act, 1951 (hereinafter for convenience sake called the Act) for a direction to the Income-tax Appellate Tribunal to state the case and refer the said questions for decision by this Court.
However, meanwhile in 1971, inter alia section 17 of the Act was amended and the amendment being procedural in nature, we are now directly required to answer the questions raised.
9. In view of conflicting decisions on the interpretation of section 3(1) and (6) of the Act and/or the question No,2 in Latif Bawany Jute Mills Ltd. And 4 others v. The Sales Tax Officer, Companies Circle I Dacca and another 1971 PTD 26; Commissioner of Sales Tax V. Crescent Textile Mills Ltd. 1975 PTD 75; Commissioner of Sales Ta North Zone (West Pakistan), Lahore v. H. Muhammad Hussain & Co Lahore 1974 PTD 20 = PLD 1974 Note 21 at p. 57; Commissioner o Sales Tax, Rawalpindi Zone, Rawalpindi v. Shafiq Corporation Limited Gujrat 1974 PTD 15 = PLD 1974 Note 25 at p. 64 on one hand, an two decisions of this Court in Messrs Parachi Textile Mills v. Commis sioner of Sales Tax 1980 PTD 17; Messrs Abbasi Textile Mills Ltd. v Commissioner of Sales Tax (East) Karachi 1982 PTD 17, on the othe hand this Full Bench has been constituted to answer the question raised in this case and two other connected cases, being S.T.C. No 173 of 1971, and 174 of 1971 as the same questions have been referre in all these cases on the same facts and in the same circumstance except that in S.T.C. No, 173 of 1971 assessm ent year involved is th year 1961-62, and in S.T.C. No, 174 of 1971, the assessm ent yea involved is 1962-63. We have, therefore, heard all these cases together
10. Mr. Ali Athar has already given up the questions Nos. 1 and as noticed in the order, dated 3-12- 1981, and today again he reiterate that he would not press them and accordingly he argued on questio No,2 only. We, therefore, proceed to consider question No,2 mentione hereinbefore.
11. It is submitted by Mr.Ali Athar that the Income-tax Appellat Tribunal wrongly relied on section 3(6)(d) of the Act to subject th partly manufactured goods namely, 'cotton yarn' to sales tax as th words "for the use by manufacturer of producer" used in section 3(6)(d of the Act only means independent utilization of the products by the manufacturer or producer as contradistinguished from the assimilatio of the goods in the process of manufacture culminating in the end product. He submitted that no sales tax could be levied on cotton yar used in the manufacture of 'Mazari' cloth unless and until such use the goods has been made a taxable event under section 3(4) of t Act, and as none of the taxable events mentioned therein even t place, therefore, no sales tax was leviable on cotton yarn used in t manufacture of 'Mazari' cloth. In support of the submissions he heavil relied on Latif Rawany Jute Mills Ltd. And 4 others v. The Sales T Officer, Companies Circle I Dacca and another (supra); The Commission of Sales Tax North Zone (West Pakistan) Lahore v. H.
Muhammad Hussai & Co. Lahore (supra); The Commissioner of Sales Tax Rawalpindi Zon Rawalpindi v. Shafiq Textile Mills Ltd. Gujrat (supra). Mr. Ali Ath himself brought to our notice another decision of Lahore High Cou namely, Hunza Asian Textile Woollen Mills Ltd. v. Commissioner f Sales Tax, Rawalpindi Zone, Rawalpindi 1973 PTD 544 wherein a vie contrary to the view expressed in Commissioner of Sales Tax v. Cresce Textile Mills Ltd., has been taken by that Court.
12. On the other hand, Mr. Nasarullah Awan mainly relied on Noora Cotton Corporation v. The Sales Tax Officer PLD 1965 SC 161, which reliance was placed also by the Income-tax Appellate Tribuna and two decisions of this Court in Messrs Paracha Textile Mills Commissioner of Sales Tax (supra)
Messrs Abbasi Textile Mills Ltd. Commissioner of Sales Tax (supra) to contend that Sales Tax was payab even on partly manufactured goods even if they are not use independently but are used in the manufacture of another article.
13. Before we examine the respective contentions and consider the cited cases we must first refer to the relevant provisions of the Act a ey stood at the relevant time. The first provision to be noticed is section 3 of the Act which is a charging section and reads as follows:- "3. Charge of tax.--(1) There shall be levied and collected a tax on the value of:-
(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 (Board) 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 a tax of fifteen per cent 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 percentage as may be fixed by the (Board) 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 subsection (1)-- the sale price;
(ii) in the case of goods falling under caluse (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), (c) and (d) of subsection (1) and clause (d) of subsection (6) 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, or
(iv) when the goods are actually used by the manufacturer or producer: ' Provided that in the case of goods specified in the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the said Act'), the tax shall be payable at the same time and in the same manner as the duty of excise and the provisions of the said Act relating to the payment of duty and the removal of goods shall, so far as may be, apply to the payment of the tax under this Act as they apply for the purposes of the said Act.
(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 bounds 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;
(iv) 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, apply to the payment of the tax under this Act as they apply for the purposes of those Acts.
(6) Determination of value of 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 or labour only and not including the value of 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 Sale Tax Officer may determine the value for the tax under this Act and all such transactions shall, for the purposes of this Act, be regarded as sales.
(7) If any person other than the manufacturer or producer, 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 succeeding section, the sale of such goods by him shall be taxable as if made by the manufacturer or producer or importer or licenced wholesaler or exporter, as the case may be, and the person so selling shall be liable to pay the tax.
14. Next section to be considered is section 4 of the Act, which exempts from payment of the tax, notwithstanding anything contained in section 3 the following classes of goods:
(a) goods sold by a licensed manufacturer to another licensed manufacturer if the goods are partly manufactured goods; or
(b) goods imported by a licensed manufacturer if the goods are partly manufactured goods; or
(c) goods imported by a licenced wholesaler; or
(d) goods sold by a licensed manufacturer to a licensed wholesaler; or
(e) goods sold by a licensed wholesaler to a licensed manufacturer if the goods are partly manufacturer goods; or ' Provided that if a licensed wholesaler sells goods to another licensed wholesaler at a price less than the value upon which the tax would be computed under clause (iii) of clause (iv) of subsection (3) of section 3, the vendor shall forthwith become liable to pay the tax upon the difference between such value and his sale price;
15. Section 7 of the Act inter alia authorises the Government by notification in the official Gazette to exempt any goods or class of goods or any person or class of persons from tax payable under the Act on such condition as may be specified in the notification.
16. It may also be appreciated here to refer the definition of "manufacturer or producer" and "partly manufactured goods" as given at the relevant time in section 2(11) and subsection (12) of the Act respectively. These are: "(11) 'manufacturer or producer' means a person who engages, whether exclusively or not, in the production or manufacture of goods, and includes a printer, publisher, lithographer or engraver, or a person engaged in the ginning of cotton, and also any person (not being an employee) who manufactures goods, whether or not the materials of which the goods are manufactured are owned by him: ' 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 person supplying the material shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer.
' The expression also includes--
(i) the assignee, trustee in bankruptcy, liquidator, executer or, curator of any manufacturer or producer and generally any person who continues the business of a manufacturer or producer or disposes of his assets in any fiduciary capacity;
(ii) any person, firm or company which owns, holds, claims, or uses any patent, proprietary, sales or other rights to goods being manufactured, whether by them, in their name, or for on their behalf by others, whether such person, firm or company sells, distributes, consigns, or otherwise disposes of the goods or not;
(12) "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;"
17. Now, it is admitted fact that 'Mazari' cloth has been exempted under section 7 of the Act from payment of sales tax that the provisions of section 4 of the Act are not attracted to the cotton yarn manufactured of the applicant and used in the manufacture of 'Mazari' cloth. Therefore, the only provisions to be considered are sections 3(4) & 3(6)(d) of the Act. The use of cotton yarn in the manufacture of Mazari cloth is admittedly not covered by section 3(4) of the Act. The question, therefore, is whether it is covered by section 3(6)(d) of the Act or not.
18. With regard to clause (d) of subsection (6) of section 3, it was argued that the word 'use' in this clause has been used in a limited sense i,e, when the partly manufactured or produced article is used by the manufacturer independently and not when it is incorporated or assimilated into another product. However, this argument was noticed and dealt with by the Supreme Court in Messrs Noorani Cotton Corporation v. Sales Tax Officer "A" Ward Lyallpur and the dictum laid down therein is binding on us in view of the Article 189 of the Constitution of the Islamic Republic of Pakistan, 1973, which is incorporated in the Provisional Constitution Order, 1981, by virtue of Article 2 thereof. In that case the appellants were licensed manufacturers under section 8 of the Sales Tax Act. They all carried on business of cotton ginning and extracting oil from the cottonseed obtained by ginning of cotton. They had not previously been paying sales tax on the manufacture of cottonseed but by virtue of a letter issued by the Central Board of Revenue, such a tax was demanded from them by the sales tax authorities under the provisions of the Act and then they all filed writ petitions in the High Court of West Pakistan, challenging the liability of the demand and contended that the tax was not leviable. The High Court rejected the contention and dismissed the petitions. On appeal the Supreme Court while analysing the relevant sections of the Sales Tax Act has dealt with the above argument and regarded the provisions of section 3(6)(d) of the Act as charging section for consuming the partly manufactured goods when they are incorporated into another product on which sales tax is not to be paid. We here quote the relevant observations which appear at page 167 of the report:- "It will be proper to explain here the scheme of the Act. As the various provisions of the Act show the intention was to levy only one tax on manufactured or produced goods which are offered for sale to the consumer. A process of manufacture may involve different stages of goods manufactured by one person may be purchased by another not for the purpose of consumption, but for being incorporated into another article on which sales tax is to be paid. A stage of manufacture or the manufacture of goods which are to be incorporated in another article is not liable to sales tax. To explain the point we may take as an illustration the very case with which we are dealing.
Cottonseed is at first extracted from cotton. This a manufacturing 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 the cottonseed himself for the production of cottonseed oil. In its turn the cottonseed oil 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 should 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. Now what is the device adopted for ensuring that sales tax is paid only at one stage in spite of what is contained in the charging section making all manufactured goods when they go to the purchaser liable to the payment of tax? The device adopted, as will appear from section 4 is, that the sale of "partly manufactured goods" to a manufacturer is not liable to the charge of tax. It may be clarified here that the Sales Tax Act does not recognise a manufacturer who has not obtained a licence under it for manufacture. The provision in section 4 is that the sale by a licensed manufacturer to another licensed manufacturer of partly manufactured goods is not liable to the incidence of tax. The definition of "partly manufactured goods" is that they are goods which are to be incorporated into another article. So these provisions are a sufficient guarantee that the tax will be paid only with respect to the last stage of manufacture of goods. However, there is one difficulty which had to be removed. Suppose the manufactured article into which partly manufactured goods are to be incorporate is for some reason not liable to the payment of sales tax? In that case if no tax is paid on partly manufactured goods no tax will be paid at all. Therefore, in the definition of "partly manufactured goods" a limitation has been introduced that the article into which the goods are to be incorporated should be one which is liable to the payment of sales tax. If it is not liable to payment of tax then the goods which are incorporated into it are also manufactured goods on which sales tax has to be paid. One further difficultly would still remain. What is to happen if a person himself manufactures goods and then incorporates them into another article? There is no sale of the first manufactured goods because the person producing them is only using them for manufacture of other goods. Tax is payable only when there is a sale. In a case where the article that is ultimately produced is liable to the payment of sales tax there would be apparently no need of a provision relating to goods that are to be incorporated in the last article. But suppose that the last article is not liable to the payment of sales tax. Unless, a special provision was made that person would not be paying any tax on the production of the first article too. This situation is met by the general provision in the last part of section 3(6) that the keeping of goods by the manufacturer for his own use would be regarded as a sale. As a matter of fact this last proposition has been contested by the appellants and is one of the points argued by them before the High Court. We are stating the ultimate conclusion and the reasoning will appear shortly.
To take up the first contention raised before the High Court namely that subsection (6) of section could not be the basis of the imposition of sales tax in a case where the article was kept for use by the manufacturer, it will be observed that according to subsection 6(d) the Sales Tax Officer may determine the value for the tax in a case where the goods are kept for use by the manufacturer and such a transaction is to be regarded as a sale. The contention put forward on behalf of the appellants was that in the definition of "sale" there was no extension of its meaning so as to include a case where the manufacturer keeps the goods for himself, that subsection (6) related only to assessm ent of value for the purpose of charge of tax, and that as long as the definition of "sale" did not include as such a transaction there would be no liability to pay sales tax. While it has to be accepted that the correct way of bringing a transaction within the definition of "sale" was to make provision in the definition, there can be no doubt at all as to the intention of the Legislature in subsection (6). It has clearly been provided that all such transactions are to be regarded as sales for the purpose of this Act. At the same time if we do not regard this transaction as a sale subsection 6(d) becomes wholly redundant for then no need will ever arise of assessing the value in a case where manufactured goods are kept by the manufacturer. The need for such assessment arises only if tax is payable on goods which are kept by the manufacturer for his own use. There is one point which needs explanation here. According to section 3(4) tax on manufactured goods is to be paid when goods are delivered to the purchaser or property in the goods passes to the purchaser. It does not say that tax is payable when there is a sale. Section 3(6) on the other hand does not use the word "purchaser" anywhere. It does not say that the keeping of goods for use by a manufacturer will amount to a delivery of goods to the purchaser or to the passing of property to the purchaser. However, it used the word 'sale' and according to the definition of sale in the Sale Tax Act a sale occurs when property passes from one person to another. If the effect of subsection
(d) be that keeping of goods by the manufacture becomes a sale then property does pass to the purchaser. Even otherwise as we have stated the fact that value is to be compute in such a case necessarily involves that the keeping of good by the manufacturer has become liable to the payment of sale tax."
17. The Supreme Court case of Noorani Cotton Corporation, wa considered and followed by the Lahore High Court in Hunza Asia Textile & Woollen Mills Ltd. Saidpur Road, Rawalpindi v.
Commissioner of Sales Tax. Rawalpindi Zone, Rawalpindi. We may here with advantage quote the relevant observations with regard to the said case. Thes are: "38. There is considerable force in some of these contention vehemently advanced before us by Mr. A.K. Brohi, learne counsel for the petitioner. But this matter is no longer re interra before us now. In this connection, in Messrs Nooran Cotton Corporation v. The Sales Tax Officer, "A" Ward Lyallpu under more or less similar circumstances the Supreme Court regarded section 3(6)(d) of the Sales Tax Act as the charging section for such transaction. In that case, licensed manufacturers were carrying on the business of gaining cotton and extracting oil from cottonseed obtained by ginning.
The assessees were called upon to pay sales-tax on the manufactured by one person may be purchased by another not for the purpose of consumption, but for being incorporated into another article on which sales-tax is to be paid. In explaining this point further the Court observed that cottonseed is at first extracted from cotton. This is a manufacturing process and if this cottonseed is sold to the consumer, sales-tax will have to be paid to the manufacturer of cottonseed. However, the manufacturer may use the cottonseed himself for the production of cottonseed oil. In its turn cottonseed oil 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. The Supreme Court further observed that 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 should not be paid either on the production of cottonseed or on the production of cottonseed oil which production become, in such a case, only steps in the manufacture of vegetable ghee. In this connection in the opinion of the Supreme Court section 4 of the Act introduces a device for ensuring that sales-tax is paid only at one stage in spite of what is contained in the charging section and the sale by a licensed manufacturer of partly manufactured goods is not subject to tax.
' In that case, their Lordships of the Supreme Court posed a question... What is to happen if a person himself manufactures goods and the incorporates then into another article? There is no sale of the first manufactured goods because the person producing them is only using them for manufacture of other goods. In the opinion of the Supreme Court the situation is met by section 3(6). In that context the Supreme Court then observed:-- "While it has to be accepted that the correct way of bringing a transaction within the definition of "sale" was to make a provision in the definition there can be no doubt at all as to the intention of the Legislature in subsection (6). It has clearly been provided that all such transactions are to be regarded as sales for the purpose of this Act. At the same time if we do not regard this transaction as sale subsection (6)(d) becomes wholly redundant for then no need will ever arise of assessing the value in a case where manufactured goods are kept by the manufacturer for his own use."
' If fact, it appears to us, that the Legislature, after getting this hint from the Supreme Court, has already made suitable amendments in law in this respect.
' We are respectfully bound by the law declared by the Supreme Court of Pakistan and in the face of the pronouncement in Messrs Noorani Cotton Corporation v. The Sales Tax Officer (supra) there is no alternative for us but to repel all these contentions forcefully advanced before us by the learned counsel for the petitioner. At one stage, in the course of the hearing, we were persuaded to hold that, perhaps, section 3(6)(d) was not applicable to partly manufactured goods and the term "such goods" in the context has reference to the finished goods produced or manufactured in Pakistan kept for own use by the manufacturer or producer. But it is difficult for us to sustain this contention in the face of the above pronouncement by the Supreme Court".
18. In view of the interpretation given to section 3(6)(d) of the Act by the Supreme Court in Noorani Cotton Corporation rule laid down by the Dacca High Court in Latif Bawany Jute Mills case that a transaction to become taxable event must find mention is section 3(4) of the Act, cannot be considered as good law for the Supreme Court in that case, as already stated, considered the provisions of section 3(6)(d) of the Act also as charging provisions.
19. As regards Lahore case of Commissioner of Sales Tax v. Crescent Textile Mills (supra) it would suffice to say that the same Division Bench of Lahore High Court in the case of Hunza Asian Textile and Woollen Mills Ltd., which was decided about 8 months after the decision in Crescent Textile Mills has held that the Woollen Yarn produced from raw material and used in the manufacture of fabric was liable to tax under section 3(6)(d) of the Act. We have already quoted a passage from this judgment and the submission that the provisions of section 3(6)(d) would be attracted only when a manufacturer or producer uses partly manufactured or produced goods independently and not when he assimilates or incorporates the goods into an article or product was also noticed by the High Court and not accepted in view of the pronouncement of the Supreme Court in Noorani Cotton Corporation's case. Therefore, it is not necessary to deal with the submission in any greater detail.
20. It was however, argued by Mr. Ali Athar that there is distinction between the liability of the charge to tax and its payability which was succinctly brought out by the Lahore High Court in the case of Commissioner of Sales Tax v. El. Muhammad Hussain & Co. Lahore. But his argument lost all its force when the Supreme Court in Noorani Cotton Corporation's case regarded section 3(6)(d) of the Act as charging section.
21. As regards Commissioner of Sales Tax v. Shafiq Corporation it would suffice to say that the Supreme Court decision in the case of Noorani Cotton Corporation Ltd., was not considered in this case.
22. Out of the two cases on which Mr.Nasarullah. Awan has placed reliance, the decision in Abbasi Textile Mills Ltd. v. Commissioner of Sales Tax (East), Karachi, seems to follow the decision of the Supreme Court in the case of Noorani Cotton Corporation and has not followed Commissioner of Sales Tax v. Crescent Textile Mills Ltd., Commissioner of Sales Tax Rawalpindi Zone, Rawalpindi v.
Shafiq Corporation Limited Gujrat and Commissioner of Sales Tax, North Zone (West Pakistan), Lahore v. H. Muhammad Hussain & Co. Lahore, which were relied upon by the counsel before the Division Bench of this High Court in that case.
23. In the other case of Messrs Paracha Textile Mills v. Commissioner of Sales Tax, one of the two questions referred was:-- (1 ) "Whether in the facts and circumstances of the case the Tribunal was right in holding that the applicant was liable to pay sales tax on ginned cotton purchased as partly manufactured goods without payment of sales tax and consumed in the manufacture of yarn which was later exported?" and dealing with the same, it was observed as follows: "The effect of this Notification, read with section 7 of the Act, is to exempt cotton yarn sold outside Pakistan from sales tax. Now under section 4(a) partly manufactured goods are .Exempted from sales tax if sold by a licensed manufacturer. But the definition of "partly manufactured goods" makes it clear that only those goods are to be included in this item which are incorporated into and form a constituent or component part of an article which itself is subject to sales tax. Any cotton yarn sold outside Pakistan, by reason of the provisions of section 7 of the Sales Tax Act and the Government Notification reproduced above, cannot come under the expression 'article which is subject to sales tax', and therefore, ginned cotton used in the manufacture of such yarn cannot be treated as "partly manufactured goods", within the meaning of section 9(a) of the Sales Tax Act. If the definition of "partly manufactured goods" contained in section 2(12) of the Sales Tax Act is kept in mind, then it would not be difficult to understand the order of the Sales Tax Officer and that of the Tribunal upholding the first order. Section 2(1) read with section 4(a) of the Sales Tax Act, read with the above Notification, which was issued under section 7 of the Act, effectively negative the assessee's claim for refund of sales tax on such ginned cotton as was used in the manufacture of yarn sold outside Pakistan, no exception can, therefore, be taken to the order of the Sales Tax Officer and that of the Tribunal upholding this order."
' There is not much discussion in the two cases relied on by Mr. Awan and in our view there was no need in the face of the Supreme Court decision in Noorani Cotton Corporation. The Division Bench was bound to follow the same as we have.
24. We, therefore, answer question No,2 in the affirmative. The applicants shall bear the costs of the respondents.