AJMAL MIAN, By this common judgment, we intend to dispose of the above ten Sales Tax references as they involve common point of law. The brief facts leading to the filing of the above references are that the respondent assessee (hereinafter referred to as the assessee) is a manufacturer and vendor of multiple types of wires and cables. The assessee imports aluminium billets, which are put through an extrusion process, which results into aluminium rods (hereinafter referred to as the rods), which in turn pass through Drawing Machines and thus breaking into aluminium wire twisted to form the shape of conductors cables. It appears that the conductors cables of certain specifications were exempted from the payment of sales tax (hereinafter referred to as the tax).
The assessing Officer in the assessme nt years 1970-71, 1971-72, 1972- 73, 1973-74 and 1974-75 (which are covered by STC Nos. 31/1982 to 34/1982 and STC No. 42 of 1982), 1975-76, 1976- 77, 1977-78, 1978- 79 and 1979-80 (which are covered by STC Nos. 49/1986 to 53/1986) included the rods which were utilized in manufacturing the conductors cables which were not subjected to tax, for assessing the amount of tax. In the above first i.e cases upon appeals, the Appellate Assistant Commissioner of Sales Tax maintained the assessm ent orders of the Assessing Officer, whereas, in the above second bunch of i.e cases the Appellate Assistant Commissioner of Sales Tax decided the appeals in favour of the assessee. The assessee in the above first bunch of i.e cases, whereas the Department in the above second bunch of i.e cases went in appeal separately before the learned Income Tax Appellate Tribunal, which allowed the assessee's above 5 appeals by a detailed order date It March, 1980 by holding that the rods are not produced or manufactured by the appellant but are a semi manufactured item for further incorporation into the aluminium conductors cables.
Whereas the learned Income Tax Appellate Tribunal dismissed the Department's above i.e appeals by an order dated 28th January, 1986 while following the Tribunal's earlier view. The Department's application for making references to this Court in the above cases were declined and, therefore, the department has filed the present references under section 17 (4) of the Sales Tax Act, 1951 (hereinafter referred to as the Act) soliciting the opinion of this Court on the following legal question:- "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that Sales Tax is not chargeable/payable on Aluminium Rods under the Sales Tax Act, 1951".
2. In support of the above references Mr. Shaikh Haider has vehemently urged that the learned Income Tax Appellate Tribunal has erred in deciding the above question in favour of the assessee inspire of clear pronouncement of the Honourable Supreme Court in the case of M/s. Noorani Cotton Corporation v. The Sales Tax Officer "A" Ward, Lyallpur (PLD 1965 S.C 161) and the subsequent judgments of this Court.
On the other had Mr. Ali Athar, learned counsel for the assessee has candidly submitted that though the Karachi view consistently has been against the view taken by the learned Income Tax Appellate Tribunal but the above position is no longer relevant in view of the recent pronouncement of the Honourable Supreme Court in the case of Commissioner of Sales Tax v.
Shafiq Corporation Limited PLD 1986 SC 731 = PTCL1989 CL. 203.
3. In or view, the controversy in the present cases is within a very narrow compass, namely, whether the view taken by the Honourable Supreme Court in the above Shafiq Corporation's cases is contrary to its earlier view taken in the above case of Noorani Corporation Ltd., which has been consistently followed by this Court including by a Full Bench of three learned Judges. In this behalf, it may be pertinent to refer to the above case of M/s. Noorani Cotton Corporation v. The Sales Tax Officer "A" Ward, Lyallpur, reported in PLD 1965 S.C. 161 in which the facts were that the appellants were licenced manufacturers under section 8 of the Act. They were carrying on the business of ginning cotton and extracting oil from the cotton seeds obtained by ginning. The appellants had not previously been paying sales-tax on the manufacture of cotton seeds but because of a letter issued by the Central Board of Revenue on 19th December, 1960 such tax was demanded from them by the Sales Tax authorities. The appellants, which were several in number filed Constitutional Petitions in the erstwhile High Court of West Pakistan but the same were dismissed by the High Court. Against the above dismissed order several appeals were filed before the Supreme Court, which were allowed and it was declared by the Honourable Supreme Court that on the manufacture of cotton seed which was to be used for extraction of cotton seed oil no sales-tax was payable as the sales tax was to be paid on the extracted oil from the cotton seed. It may be pertinent to reproduce some of the observations of the Supreme Court as they will have direct bearing on the controversy under reference. The relevant observations read as follows:- "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 incorporated 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 difficulty 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."
4. The above Supreme Court case was followed by a Division Bench of erstwhile High Court of Sind and Baluchistan in the case of M/s. Paratha Textile Mills v. Commissioner of Sales Tax reported in 1980 PTD 17, in which the assessee had claimed the refund of sales tax on ginned cotton used in manufacture of yarn sold outside of Pakistan. Upon reference, the High Court held that since under section 4(a) of the Act partly manufactured goods were exempt from sales tax if sold by a licensed manufacturer but the definition of partly manufactured goods made it clear that only those goods were to be included which were incorporated into and formed a constituent or component part of an article which itself was subject to sales tax and as no sales tax was paid on the yarn exported, the ginned cotton used in the manufacture of such yarn was not covered by the definition of "partly manufactured goods", given under section 2(12) of the Act and, hence the assessee was not entitled to the refund applied for. The above case was followed by a Division Bench of this Court in the case of Abbasi Textile Mills Ltd. v. Commissioner of Sales Tax (East) Karachi reported in 1982 PTD 17 in which it was held that ginned cotton used in manufacture of yarn exported and yarn used in manufacture of cloth exported were not exempt from sales tax for the reason that no sales tax was payable on the exported yarn and cloth.
5. The above controversy came up for consideration before a Full Bench of this Court comprising of three learned Judges in the case of Gul Ahmed Textile Mills Limited, Karachi v. Commissioner of Sales Tax (Central) Karachi reported in 1985 PTD 211 = PTCL 1989 CL. 183 In the above Full Bench case three questions were referred to for the opinion of the Court but at the time of hearing of the reference only following question No. 2 was pressed by the learned counsel for the applicant- assessee- "2. Whether in the circumstances of the case the Tribunal was right in holding that the yarn made out of cotton waste and incorporated in Mazari cloth has been correctly charged to Sales-tax by the Sales Tax Officer?
The judgment was delivered by Naimuddin, J. (as he then was). After reviewing the case-law, the above quoted question was answered by the Full Bench in the affirmative. It was held that the rule laid down by the Dacca High Court in Latif Bawany Jute Mills Ltd. And others v. Sales-Tax Officer, Companies Circle 1, Dacca and another reported in 1970 PLD 716 referred to a herein below holding that a transaction to become taxable event must find mention in section 3(4) of the Act cannot be considered as good law in view of the interpretation given to section 3(6)(d) of the Act by the Supreme Court in Noorani Cotton Corporation case to the effect that the above provision was also a charging provision. It was also pointed out that in the Lahore case of the Commissioner of Sales Tax. Rawalpindi Zone, Rawalpindi v. Shafiq Corporation Limited Gujrat 1974 PTD 15, above Supreme Court case of Noorani Corporation Ltd. Was not considered. However, it may be pointed out that subsequent to the above Full Bench Karachi's judgment, the Supreme Court has upheld the above judgment of the Lahore High Court. The above judgment of the Supreme Court has been relied upon by the learned counsel for the assessee.
The same view was taken earlier by a Division Bench of this Court in an unreported judgment dated 22nd December, 1983 in the case of Metallics Corporation v. Commissioner of Income Tax and Sales Tax (STR No. 103 of 1973).
6. Before dilating upon the above Supreme Court case of Shafiq Corporation, was may refer two cases, which have been referred to in the above Shafiq Corporation case and are cited by the learned counsel for the assessee, Mr. Ali Athar in order to contend that contrary view was taken in the said cases. The first case is the case of Commissioner of Income Tax (East) Pakistan v. M/s. Ayurvedic Pharmacy (Dacca Limited reported in PLD 1970 S.C. 93), in which during the assessm ent years in question the assessee respondents (who were more than one in number) did not i.e any return of any of the quarters of the years to the Sales Tax Officer and did not pay any sales-tax for a product known as "Mahabhringaraj oil" which was manufactured by them. The Sales Tax Officer held that sales tax was payable on the above product as he was of the view that the same was not an Ayurvedic medicine and, therefore, was not exempt. He .Was also of the view that since the yearly turnovers of each of the respondents assessee was in excess of Rs. 60,000, they were not covered by the notification dated 27th June, 1951 issued under sub-section (2) of Section 8 of the Act for exempting from the payment of sales tax on medicine whose turnovers were less than- Rs.
60,000. The assessee filed appeals against the orders of assessment and the Appellate Assessm ent Commissioner in each of the appeals took the view that Mahabhringaraj oil was Ayurvedic medicine and as such was not liable for sales tax in view of notification No. 5 dated 16th March, 1951. He also found that even if above product was not exempt from sales tax, then also the total turnover of the taxable manufactured goods (i.e Mahabhringaraj oil) of each of the respondents-assessee was below the minimum taxable limit and, therefore, sales tax was not payable. The Department went in appeal against the above decision. The Income Tax Appellate Tribunal did not examine the question, as to whether Mahabhringaraj oil was Ayurvedic medicine but had held that even if Mahabhringaraj oil was not an Ayurvedic medicine, the assessee could not be assessed for sales tax since the turnover of the taxable commodity in each case was less than Rs. 60,000. The above view was affirmed by the High Court upon a reference under section 17(1) of the Act. The Department filed an appeal before the Supreme Court, which while dismissing the appeal held that the turnover of non-taxable commodities could not have any bearing in determining the size of an industry for the purpose of notification issued under section 8(2) of the Act and their gross takings could not be taken into account once the exemption was granted for any of the purposes of the Act in the absence of express words permitting the same, and once the goods have been exempted under section 7 of the Act, they go out of the purview of the Act.
7. The other case is the case of Latif Bawany Jute Mills and others v. Sales Tax Officer, Companies Circle-1 (Dacca) and another reported in 1970 PLD 716, in which the facts were that the petitioner companies were, carrying on business, inter alia, of the manufacture of jute products at its mills situated at different places in East Pakistan. As a result of certain Government Notifications under section 7 of the Act, they were given the benefit of exemption in respect of certain jute product, namely, Gunny Bags, upon fulfilment of conditions mentioned therein. They submitted returns for assessm ent for different assessm ent years in time, upon which assessment orders were passed and the entire sales-tax assessed on them was paid. It appears that the Sales Tax Officer, who was the respondent in the case issued notices on 24th April, 1967 under section 28 of the Act averring therein that the value of taxable sales of their business in the aforesaid assessment years had partially escaped assessm ent and, therefore, he intended to reopen the above assessments. The above notices were replied to by the petitioners. However, they were served with second set of notices dated 8th June, 1967. In compliance with the above second set of notices the petitioners filed the returns and statements along with covering letters impugning the legality of the notices but they were served with further notices and, therefore, they filed Constitutional Petition in the Dacca High Court, in which it was contended by them that under notification dated 31st May, 1953 issued by the Central Government under section 7 of the Act Gunny Bags exported by the petitioners during the assessm ent years in question were exempted from the payment of the tax under the Act and that the Sales Tax Officer then proposed action to reopen the assessments on the ground that the petitioner were liable to pay sales tax on the sacking cloth or hessian used by the petitioners in the making of the Gunny Bags which were ultimately exported by them and which were exempted from payment of sales tax, was illegal. A Division Bench of the Dacca High Court allowed the Writ Petitions. The Department relied upon section 3(6)(d) of the Act for sustaining the impugned notices. But the Court repelled the above submission and observed as follows:- "It may at once be stated here that section 3(6)(d) is not the charging provision. It merely provides for a method to determine the value for sales tax in certain circumstances or conditions of difficulty, and in this context it provides that "when such goods are for use by the manufacturer or producer and not for sale, the Sales Tax Officer may determine, the value for tax under the Act, and such transactions, shall for the purpose of the Act, be regarded as sales".
It seems clear to us that the goods to become leviable with tax has to come under section 3(1) of the Act, and transaction to become a taxable event must find mention in section 3(4) of the Act.
This view is highlighted by the fact that the Legislature in its subsequent amendment added a new clause, namely, clause (iv) to Section 3(4) of the Act (Vide section 4 of Finance Act of 1966). The added clause reads as follows:- "When the goods actually used by the manufacturer or producer."
Under this clause as soon as the manufacturer or producer, who has manufactured or produced the goods, actually uses the goods, the tax at once becomes payable on it.
This amendment, however, came in the year 1966, and was not made retrospective, and is thus not available in the present case even if it was applicable to the facts of present case.
It is patent, therefore, that whatever the manner of the use of the goods by the manufacturer or producer, no tax on such goods becomes payable unless and until such use of the goods has been made a taxable event under section 3(4) of the Act."
The learned Judges of the Division Bench also commented upon the above , cited judgment of the Supreme Court in the case of Noorani Cotton Corporation Ltd. As follows:- "The case of Messrs Noorani Cotton Corporation (PLD 1965 S.C. 161) is not inconsistent with or view as to the inapplicability of Section 3(6)(d) of the Act to the cases of the petitioners. The case under report is also distinguishable in one respect viz. The end-product was not liable to payment of sales-tax as it is in the present cases. The gunny bags were admittedly liable to the payment of sales-tax on the happening of the taxable event, namely, exportation. It is, however, another matter if the Central Government of its own free will in the interest of the State considered it advisable to grant exemption to the gunny bags, hessian and other jute manufactures on their exportation.
There is no doubt about the fact that each one of these goods was a manufactured goods and would on the happening of taxable event liable to payability of sales-tax thereon. The conversion of hessian or sacking cloth into a gunny bag involves a simple method of sewing it up into the shape of a gunny bag and the gunny bag or anyone of its constituents when sold in the internal market becomes subject to the liability of payment of tax. It was its exportation alone which earned the exemption. In the case under report section 3(6)(d) of the Act was considered with reference to the definition of "sale" as given in section 2 (11) of the Act. Throughout the discussion the Supreme Court contemplated a situation where a manufacturer kept the goods for himself by way of independent utilization instead of using it in the process of manufacture leading to the manufacture of an end- product."
8. Another case which may be mentioned is the case of Commissioner of Sales Tax v. Crescent Textile Mills Ltd. Reported in 1975 P.T.D 75 in which, the facts were that the respondent- assessee was manufacturer of yam and cloth including the mazri cloth. They filed quarterly return under the Act. The Sales-Tax Officer by his order dated 25th March, 1964 allowed the exemption from sale tax claimed by the respondent- assessee on the manufactured cloth and yarn exported abroad by them. He also allowed exemption to the assessee on the sale of the mazri cloth under item No. 90 of notification No. SRO* 289, dated 1st July, 1959. But at the same time he was of the view that the raw material used in the production of the goods exported abroad must be charged to tax. He, therefore, imposed tax on cotton consumed in manufacturing the exported yarn and the yarn consumed in manufacturing the exported cloth by the assessee. The assessee filed an appeal, which was allowed by the Appellate Assistant Commissioner of Income Tax and Sales Tax. He held that the raw material used in the manufacture of Mazri cloth was cotton and not the Mazri yarn.
The Department went in appeal before the Income Tax Appellate Tribunal which maintained the order of the Appellate Assistant Commissioner and sustained the levy of tax on raw material on the basis of the above Supreme Court case of Noorani Cotton Corporation Ltd. Referred to hereinabove. Upon a reference a Division Bench of the Lahore High Court while dismissing the same held that no question of law was involved.
9. This lead us to the case of Commissioner of Sales Tax v.
Shafiq Corporation Ltd. Reported in PLD 1986 SC 731, - PTCL 1989 CL. 203 in which the facts were that the respondent-assessee was engaged in the manufacture of electric fans and held manufacturing licence issued under section 8 of the Act. The assessment for the charge year 1964- 65 was completed by the Sales Tax Officer on 4th August, 1966 on a turn over of Rs. 11,909. It appears that one It.-Col. Mushtaq Hussain, who was the Managing Director of the Assessee- Company had given certain loans to the company. On 11th December, 1964 he transferred his holdings in the company to one Mst. Iqbal Begum in pursuance of an agreement. As a result of which, the assessee company under its new management decided to transfer the following goods to its aforesaid er-Managing Director in lieu of the outstanding loans advanced to the company by him:-
(i) Finished goods of the value of Rs. 13,690.
(ii) Raw material of the value of Rs. 32,108.
It further appears that the Central Board of Revenue issued a notification No. SRO-475(K)/65, dated 14th June, 1965 under section 7 of the Act by which the fans were exempted from the tax. On the above date, the value of the closing stock of the finished goods belonging to the company/assessee was Rs. 3,625. The Department felt that the raw material utilised in the manufacture of electric fans had escaped the assessment. Accordingly, the Sales Tax Officer(Companies) Circle-1, Rawalpindi, issued a notice to the assessee under section 28 of the Act and by an order dated 18th November, 1969 passed a fresh assessment order as he was of the view that the transfer of the finished goods amounting to Rs. 13,690 by the respondent assessee to its Ex- Managing Director on 11th December, 1964 constituted a sale, taxable under the law. But as out of the stocks, the finished goods of the value of Rs. 2,506, had already been subject to the sales-tax under the original assessme nt order, the Sales Tax Officer, therefore, levied tax on the remaining stock of Rs. 11,184. He was also of the view that by reason of manufacturing licence the assessee-company had purchased the raw material for its own use free of sales-tax but later on a part of the above raw material valued at Rs. 39,208 was transferred by the assessee by way of sale to its Ex-Managing Director and, therefore, he also levied tax on the above amount. He further levied the tax on the raw material of the finished goods of the value of Rs. 3,525 constituting the closing stock on 14th June, 1965, the date on which the above notification for exemption from the payment of sales-tax of fans was issued. The assessee company being aggrieved by the above order filed appeal, which was allowed by the Appellate Assistant Commissioner of Sales Tax A'
Range, Rawalpindi, as he was of the opinion that in view of the above notification neither the electric fans nor the raw material could be subject to sales-tax for the reason that under section 3(5) of the Act tax was attracted at the stage of import of raw material and not after they had been used up in the manufacture of finished goods as at that time no such provision as corresponding to section 3(l)(b) of the Act introduced on It July, 1967 was available. The Department went in appeal before the Income- tax Appellate Tribunal, Peshawar Bench, which was partly accepted. It upheld the levy of the tax on the value of the finished goods amounting to Rs. 11,184 transferred by the assessee-company to its Ex-Managing Director but as regards the raw material valued at Rs.
39,208 transferred to the Ex- Managing Director, the Tribunal was of the view that it did not constitute a sale taxable under the law at the relevent time. The Commissioner of Sales-tax, Rawalpindi directly filed an application in the Lahore High Court under section 17(1) of the Act for soliciting the opinion of the Court on the following question:-- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in granting exemption from sales tax on Rs. 39,208 the value of raw material transferred to It. Col. Mushtaq Hussain and the element of raw material included in Rs. 3,625 the value of closing stock of finished goods, lying with the company on 14th June, 1965?
The first part of the above question was answered by the High Court in favour of the Department while the second against it. The Department filed an appeal in the Supreme Court. Before the Supreme Court the reliance was placed on the above cited case of the Supreme Court, namely, Noorani Cotton Corporation Ltd., whereas the Assessee-Company relied upon, inter alia, on the above case of the Supreme Court namely, Commissioner of Income-tax (East) Pakistan v.
Ayurvedic Pharmacy (Dacca) PLD 1970 SC 93 and also on the above cited case of the Dacca High Court, namely, Latif Bawany Jute Mills v. Sales Tax Officer 1970 D L C 716. The Supreme Court held that the decision in the Noorani Cotton Corporation Ltd.'s case turns on its peculiar facts on the interpretation of section 3(6)(d) read with section 2(11) of the Act, whereas the case of Latif Bawany Jute Mills Ltd. Was analysed as follows:- "The distinction thus emphasized was that whatever the meaning of the term use of the goods by the manufacturer or producer may be, no tax on such goods become payable unless and until such use of the goods has been made a taxable event under section 3(4) of the Act as was by the new added clause. Again another significant feature was brought out as from the language of the section 3(6) (d) of the Act, that the words "for use by the manufacturer or producer" could only means independent utilization of the products by the . Manufacturer or producer as contra- distinguished from the assimilation of the goods in the process of manufacturer culminating in the end-product. This feature is obvious if clause (d) of this sub section was compared with the added sub-section (e) to section 3(1) of the Act by the Finance Act, 1967 and the proviso to section 2(11) of the Sales Tax Act."
After analysing the above case of Latif Bawany Jute Mills Ltd. And after referring to the two Canadian cases and of its judgment in the case of Commissioner of Income-tax (East) Pakistan v.
Ayurvedic Pharmacy (Dacca) Limited the Supreme Court concluded as under:- "Now coming to the facts of the case, the assessee was a licensed manufacturer of electric fans and was exempted from the payment of tax on partly manufactured goods imported for being incorporated into the end product under section 4(b) of the Act. The partly manufactured goods in the normal course were leviable to charge under section 3(1) (b) and the stage at which the sales tax was payable was after import but before clearance by the Customs authorities under section 5(l)(b) of the Act. That stage had passed away. The partly manufactured goods had been assimilated in the .Production of fans and the critical date on which these were sought to be assessed for payment of tax was the closing date, that is 14th June, 1965. On that date they had lost their original shape and could not be subjected to any event as prescribed under section 4(l)(a) and (b) of the Act. That being so they were not liable to the payment of the tax. In this context the High Court rightly declared the case on the basis of the two judgments cited above while distinguishing Noorani Cotton Corporation's case.
Lastly, on the critical date a notification was issued under section 7 of the Act granting exemption to the fans produced or manufactured by the assessee without any condition. Therefore, as there was a wholesale exemption, the raw material which had been incorporated could not be regarded as having a separate identity for the purpose of payment of tax. In this connection reference may be made to the judgment of this Court in the case of Commissioner of Income Tax East Pakistan (supra)."
10. It may be observed that in the instant case, it is an admitted position that the assessee manufactures rods from aluminium billets for various parties and charges for the same and pays sales-tax thereon. In other words, the rods are treated as manufactured item on which the assessee pays tax. It may also be pointed out that Mr. Ali Athar has candidly conceded that clause
(iv) to sub-section (4) of section 3 of the Act enacted by section 4 of the Finance Act of 1966 reproduced in the above quoted passage from the judgment in the case of Latif Bawany Jute Mills Ltd. Was holding the field during the relevant assessment years. According to the above judgments of the Noorani Cotton Corporation Ltd. And of the above Karachi cases, the assessee are liable to pay tax on the rods which were used for manufacturing the conductors/cables which were exempt from payment of sales-tax. Whereas the ratio decidendi of the above cited case of Latif Bawany Jute Mills Ltd. And of Shafiq Corporation Ltd. Which has tacitly approved the view, taken in the former case appears to be that if the taxable event in terms of sub-section (4) of section 3 of the Act does not happen or happens at a time when no tax was payable, inter alia, for the reason that the tax was payable on the end-product, the department cannot reopen the matter and cannot ask for payment of tax on the raw material or partly manufactured goods, which were incorporated or had been assimilated in the end product and ceased to have their identity as the raw material or partly manufactured goods.
11. Having analysed the case-law, we may refer to relevant provisions of the Act with reference to the facts of the present references. It may be observed that sub-section (1) is the charging provision. In other words, it creates chargeability of the tax, whereas sub-section (4) of section 3 of the Act provides the point of time when the tax becomes payable i.e. It gives the time of payability with reference to various clauses of above sub-section (1). It may a Iso be observed that Clause
(iv) to sub-section (4) of section 3 provides the point of time for payability in relation to the goods retained by a manufacturer or producer for his use in terms of clause (d) of sub-section (6) of the above section 3, (which was enacted by Finance Ordinance, 1966) reproduced hereinabove in the quoted passage from the judgment in the case of Latif Bawany Jute Mills Ltd. By providing that manufacturer or producer will become liable to pay the tax when the goods are actually used by them. In the present case as observed hereinabove the above clause (iv) to sub-section (4) of section 3 was very much available at the relevant time 'as conceded by the learned counsel for the assessee, and, therefore, the assessee was liable to the tax on the rods at the time of when they were actually used for manufacturing cables/conductors exempted from the payment of the tax.
The view which we are inclined to take is in consonance with the above case of Noorani Corporation Ltd., of the aforesaid Karachi cases and also of the case of Latif Bawany Jute Mills Ltd., in which it was pointed out by the learned Judges of the Division Bench that the above clause (iv) of sub-section (4) of section 3 was enacted by the Finance! Ordinance, 1966 and, therefore, was not applicable to the facts j of the said case as it pertained to the assessment year prior to j the incorporation of the said clause (iv). But its import was noticed, whereas in the above case of Shafiq Corporation Ltd. The above clause (iv) was not in issue and was not referred to.
However, Mr. M Athar, learned counsel for the assessee has vehemently contended that in order to attract section 3(6)(d) of the Act, it is necessary that the manufacturer or producer should retain the goods for independent utilisation as contradistinction from the assimilation of the goods in the process of manufacture culminating in the end-product. The reliance has j been heavily placed by him on the observations of the j Hon'ble Supreme Court quoted hereinabove from the judgment of Shafiq Corporation's case and also on the observations from the judgment of Latif Bawany Jute Mills Ltd. Reproduced hereinabove. In or humble view, in presence of above clause (iv) to sub- section (4) of section 3 of the Act, which provides the time of payability of the tax, namely, "when the goods are actually used by the manufacturer or producer", the above contention is not available. The above clause provides the time of payability of the tax, namely, when the goods are actually used by the manufacturer or producer without any qualification as to the nature of the use. We may also observe that we have already pointed out hereinabove that the assessee manufactures aluminium rods for third parties and pays the tax thereon, which clearly establishes that aluminium rods as such are manufactured goods and they can be subjected to the charge under sub-section (1) of section 3, which is a charging provision. We may also observe that if the above clause (iv) would not have been in the field which we understand has been deleted sometime back, the complexion of the instant case might have been different.
12. For the above reasons, or answer to the above quoted question is that in view of clause (iv) to sub-section (4) of section 3 of the Act the assessee was liable to pay the tax on the aluminium rods at the time when they were actually used for manufacturing cables/conductors exempted from the payment of the tax and the finding contrary to the above by the Income Tax Tribunal is not proper and legal.
The above references stand disposed OF in the above terms with no order as to costs.