MUHAMMAD AFZAL LONE, J.--Through this reference application filed by the Commissioner of Income-tax under section 17(4) of the Sales Tax Act, 1951 the following question of law said to have arisen out of the Tribunal's order dated 24-5-1978 is sought to be referred to the High Court for its opinion:- "Whether on the facts and in the circumstances of the case, the Tribunal was justified to hold that steel files used in the manufacture of surgical instruments constitute raw material and are thus entitled for refund of Sales Tax under section 27 of the Sales Tax Act, 1951."
2. The circumstances under which the reference application was filed, are that the respondent who is a manufacturer of surgical instruments claimed refund of sales tax, paid on steels files, on the plea that these constituted raw material for the goods manufactured by him and were exempted from sales tax under Notification No. SRO 51(R), dated 1-7-1961 issued under section 7 of the Sales Tax Act. This claim was refused by the Sales Tax Officer. With this refusal the Appellate Assistant Commissioner did not differ and rejected the respondent's appeal on 11-12-1975. The respondent then approached. The Tribunal in second appeal. The Tribunal relied on its earlier decision, wherein it has been held that files are raw material, consumed in the manufacture and sale of surgical goods. The appeal was thus accepted and refund allowed to the assessee. The department thereafter filed reference application, requesting the Tribunal to refer the aforesaid question of law to the High Court but it was rejected under order dated 11-3-1987.
3. We have heard the learned counsel for the parties. The question which is subject-matter of this application, also fell for determination before a Division Bench of this Court, in Tax Reference No. 102 of 1971 but was answered in the negative. The D.B. Took the view:-- "....We find force in the argument that by their very nature, steel files belong to the category of items which is classified as tools and equipment and which even in the ordinary parlance is distinguished from the category of "raw material". According to Webster's new International Dictionary, IInd Edition, "raw material" means "material suitable for manufacture or development".
Raw material therefore, is that material which serves as the starting point of the manufacturing process and out of which something is made. In this view of the matter, steel files, which are merely used for giving shape to surgical goods, cannot be regarded as being "raw material" although in the process of rubbing they completely wear out. Steel files perhaps wear out more quickly than other tools and equipment. This, however, cannot be regarded as a reason for treating them as "raw material".
4. We respectfully agree with this decision and answer the question in the negative, leaving the parties to bear their own costs.