1. SALEEM AKHTAR, J.-1. By this application under Section 17(1) of the Sales Tax Act, the assessee has referred the following questions:- "(1) Whether in the facts and circumstances of the case the Tribunal was justified in holding that the sales made to the following parties i.e.--
(1) Messrs Crescent Industries.
(2) Messrs Zakaria Textile Mills.
(3) Messrs Gohar Textile Mills.
(4) Messrs Iqbal Textile Mills.
(5) Messrs Imperial Textile Mills.
(6) Messrs Globe Textile Mills.
(7) Messrs Haji Abdul Latif & Co.
(8) Messrs Shahabi Textile Mills.
2. Were not entitled to exemption under Section 4 of the Sales Tax Act even though Manufacturers Licences had been issued to these parties by the Sales Tax Officers.
(2) Whether on the facts and circumstances of the case the Tribunal was right in holding that the applicant did not discharge the burden of proving that it made sales to the licenced manufacturers when photostat copies of the Manufacturer's Licences and the Certificates under rule 16 of the Sales Tax Rules were duly produced and none of which have been doubled the Tribunal?
(3) Whether the Tribunal's order has been passed in complete disregard of the decision of the Karachi Bench of the High Court of West Pakistan in S.T.C. No. 26 of 1970, decided on 8th of April, 1970?
(4) Whether in the facts and circumstances of the case the Tri vinal having held the sales themselves to be unproved could legally subject the same sales to sales tax?"
2. At the outset it may be stated that the learned counsel for the assessee has not pressed Questions No. 3 and 4. The assessee is a manufacturer of. Cotton yarn and cloth and a licensed manufacturer. During the assessm ent year 1964-65 the applicant sold cotton yarn inter alia to 8 parties mentioned in the question reproduced above. All these 8 parties held licences issued to them by the Sales Tax Officer under Section 8 of the Sales Tax Act. The applicant sold yarn to the aforestated manufacturers without charging any sales tax and obtained photostat copies of licence issued to them by the Sales Tax Officer and also obtained certificates as provided by rule 16 of the Sales Tax Rules, It may, however, be mentioned at this stage that it has been admitted by Mr. Ali Athar the learned counsel for the applicant that no copy of the licence was obtained from messrs Abdul Latif & Co. And, therefore, he conceded that the applicant will not be entitled to claim Exemption in respect of the sale made to this party. The Assessing Officer rejected the claim and levied sales tax on the sale made to the aforestated parties on the ground that these purchasers were found untraceable when registered letters were sent to them. The Tribunal upheld the order of the Assessing Officer. The learned Tribunal has referred to a letter dated 29th may, 1965 addressed by the Commissioner of Sales Tax to the Secretary of Pakistan Textile Mills' Association, Karachi Zone informing him that certain sales tax licences earlier issued to 18 parties named therein had to be cancelled as on subsequent enquiry those parties were found to be fake, and bogus. It is not known when this enquiry was held and whether it was held to the knowledge of the assessee against whom this evidence is being used. However, taking this fact to be correct on its face value it seems that it was communicated to the Association on 29th May, 1965 that the licences of parlies mentioned therein .Have been cancelled. Some of the parties mentioned in the list featured as purchasers in the case of the present assessee also. The licence is issued under the Sales Tax Act and Rules made thereunder. In this regard rules 4 to 8 provide form of obtaining licence and the Form of licence to be issued to the manufacturer. Such licences are issued after the Sales Tax Officer is satisfied of the correctness of the application which contains particulars relating to the nature of business, office and branch office together with the Bankers endorsement. Therefore, at the time when the licence was issued unless it is established otherwise it shall be presumed that the licences were in existence. According to the Department after subsequent enquiries they have been found to be bogus nonexistent. The duty to issue licence was on the Department, and if they have not taken care to issue licence after proper verification and satisfaction and have gone on issuing licence to bogus parties, or non-existent parties, the responsibility entirely lies upon the Department as a licensed manufacturer would only see the copy of licence and will not make enquiries for establishing the genuiness of the licensee. How can this duty be imposed on the assessee to ascertain whether the party to whom licence has been issued exists or not?. Unless it is established that licence had been cancelled before the sale or the non- existence of the licencee was within the knowledge of the assessee it will be unjust to burden the seller/assessee to make enquiries about the genuineness of the licensee. We have discussed this aspect of the case in S.T.C.
3. No. 689/72 and have also referred to a short order passed in an unreported case No. S.T.C. 26/70.
4. Reference has also been made to 1983 PTD 53 and 1983 PTD 64. After considering all the judgements and in the facts and circumstances of the case as there is no evidence to establish that the licence of the purchasers was cancelled before the sale or the assessee had the knowledge of the cancellation of the licence at the time of sale or about the non-existence of the licences, we reply question No. 1 in the negative except with regard to the sale to Haji Abdul Latif &.
5. Co. In respect of which the assessee could not produce the licence, question No. 2 is also answered in the negative.