' SYED HAIDER ALI PIRZADA, J.--By this Constitutional petition the petitioners have challenged the order dated 16-12-1989 passed by respondent No,1. Namely, Additional Secretary to Government of Pakistan, Ministry of Finance in a revision under Section 36 of the Central Excise and Salt Act, 1944 directed against the orders passed by respondent No,2., namely, Collector (Appeals) of Customs and respondent No,3, namely Deputy Collector-II, Central Excise and Land Customs.
2. The petitioners are a private limited Company carrying on business as manufacturers of collapsible tubes for marketing to pharmaceutical companies and others. For this purpose the petitioners have been importing aluminium slugs. It is averred that under Item 35-B of the Ministry of Finance Notification No,7 dated 27-6-1951 as amended by SRO-904 (i)/74 of 2-7-1974 the material for being used in the packing of pharmaceutical products were exempted from the levy of sales tax. The Central Board of Revenue is stated to have laid down certain procedure for adjustment of sales tax paid on raw material against sales tax payable on exciseable goods. The manufacturers of packing material of pharmaceutical products were required to submit statement of their sales to the pharmaceutical companies with their quarterly return to the Sales Tax Officer, on fulfilment of which they were allowed exemption from sales tax vide circulars marked as 'A', 'A/1' and 'A/2' respectively. Accordingly, the petitioners made claim for refund/adjustment of sales tax during the poriod from 1977-78 to 198485 which were allowed by various assessment orders.
However, the petitioners were served with a show-cause notice dated 8-9-1985 in which it was alleged that the claim by the petitioners of provisional adjustment/refund of sales tax paid at the import stage on the said aluminium slugs consumed on collapsible tubes was contrary to the provisions contained in Sales Tax Circular No,12/72 read with circular No,2 of 1973. It was alleged that the petitioners cleared without payment of sales tax total quantity of 3,23,14,319 pieces of collapsible tubes of different capacity vide S.No, 83 of existing S.R.O. No,666 (I)/81 dated 25-6-1981.
In the same show-cause notice it was alleged that the petitioners manufactured and cleared a total quantity of 1,83,03,285 pieces of collapsible tubes after payment of sales tax leviable thereon but as the quantity was supplied to the different pharmaceutical companies as packing material total amount of sales tax so paid was refunded to the recepient pharmaceutical companies as per provisions of Sales Tax General Order No,9 of 1982 and the petitioners claimed provisional adjustment of Sales Tax paid at import stage on aluminium slugs i,e. Material consumed in collapsible tubes.
3. In the said show-cause notice the petitioners were called upon as to why sales tax in the sum of Rs,10,76,341.50 should not be recovered under Rule 10 of Central Excise Rules 1944 read with section 4 of Sales Tax Act 1951. In reply to the said show-cause notice it was contended by the petitioners that no wrong claim was made by them in regard to adjustment/refund of sales tax. The submission made by the petitioners was rejected by the learned respondent No,3 vide his order dated 13-4-1987. The petitioners thereupon preferred an appeal before the respondent No,3 who dismissed the same vide his order dated 3-7-1988. The petitioners thereafter preferred the said revision before the respondent No,1 who vide his order dated 18-7-1988 dismissed the same.
4. As a result the Assistant Collector of Central Excise and Land Customs, City Division, Karachi vide his notice dated 17-10-1987 placed embargo on the clearance of petitioners' goods manufactured from time to time and threatened them that unless an amount of Rs,10,00,000 is paid the embargo will not be lifted. The petitioners being apprehensive of virtual closure of their manufacturing business sought permission of the Collector, Central Excise and Land Customs to pay the amount in installments which request was acceded to and the petitioners had paid the said amount in question under protest without prejudice to their rights. According to the petitioners that apart from them, about 2-5 industries who have been manufacturing collapsible tubes by using aluminium slugs and marketing them to various pharmaceutical companies. In their case also the authorities acting in accordance with the relevant provisions of law allowed from time to time for a number of years, adjustment and/or refund of Sales Tax claimed by the parties affording the benefits of the said provision of law.
5. The petitioners being aggrieved the above orders have filed the present petition.
6. The respondents filed counter-affidavit and resisted the petition. The respondents averred that the orders are legal and do not suffer from any infirmity. The petitioners have also filed affidavit-in- rejoinder.
7. In support of the above petition, Mr. Kunwar Mukhtar Ahmed has raised the following contentions:
(1) The petitioners are manufacturers of collapsible tubes and paying sales tax on aluminium slugs at the import stage and on collapsible tubes at the time of clearance are entitled to adjustment of sales tax on imported raw material under Section 27 (1) of the Sales Tax Act.
(2) The collapsible tubes and raw material for packing for pharmaceutical goods manufactured under S R 0 No,666 (I)/81, which applies to the petitioners industry, adjustment of Sales Tax on collapsible tubes used as raw material is not admissible to the pharmaceutical industry.
8. Mr. S.A. Wadood, learned Deputy Attorney-General submitted that the petitioners are not entitled to adjustment of sales tax on imported raw material. He supported the impugned orders. He also placed reliance on the decision reported in PLD 1990 SC 422.
9. We have heard the learned counsel for the parties and perused the impugned orders.
10. The petitioners are manufacturers of aluminium collapsible tubes which they produce from aluminium slugs imported by them out of the collapsible tubes manufactured by them, a sizeable quantity is supplied to the pharmaceutical companies as packing material for the packing of pharmaceutical products. The aluminium slugs imported by them suffered sales tax at the import stage. The aluminium collapsible tubes produced by them are liable to sales tax except those used as packing material for pharmaceutical products.
11. The controversy in the instant case is about collapsible tubes produced and supplied by them as packing material to the pharmaceutical companies. It is an admitted position that the packing material for use in the packing of pharmaceutical products were exempted from the levy of Sales Tax.
12. From the years 1977-78 to March, 1985, the petitioners claimed adjustment and obtained refund of the Sales Tax paid on the import of the aluminium slugs, used in the manufacture of aluminum collapsible tubes supplied to the pharmaceutical industries. The total amount claimed in regard came to Rs,10,76, 341.50. On detection of the case by the Head Quarters Intelligence and Audit, Karachi Collectorate, the petitioners were issued a show-cause notice dated 8-9-1985, demanding as to why sales tax wrongly claimed and erroneously allowed/refunded to them should not be recovered under the relevant provisions of law. The petitioners sent a reply. The Deputy Collector considered the reply and also heard their counsel. After perusing the reply submitted by the petitioners and after hearing them, the Deputy Collector held the demand to be in order.
13. The petitioners challenged the said order before the Collector (Appeals) who rejected the contentions of the petitioners vides his order dated 3-7-1988. The petitioners challenged the said order of the Collector in Revision before the Additional Secretary to Government of Pakistan, Ministry of Finance (Central Board of Revenue) who rejected the contentions of the petitioners vide his order dated 16-12-1989. The petitioners challenged the aforesaid orders on the ground that the impugned orders are against law and beyond the jurisdiction of the authorities passing the said orders.
14. With a view to appreciate the contentions of the learned counsel for the petitioners, it would be appropriate to note relevant provisions of section 2 (12) and section 27 (1) of the Sales Tax Act. The said provisions read as under:- "2 (12) Partly manufactured goods.--Partly manufactured goods mean goods which are to be incorporated into and form a constituent or component part of an article, which is subject to the tax."
"27 (1) Refunds.---Where partly manufactured goods are purchased by a manufacturer and tax has been paid on those goods on importation or on 'any previous sale, a refund of the amount of the tax so paid shall be made to the manufacturer."
15. In the instant case, aluminium collapsible tubes are supplied to pharmaceutical companies as packing material for pharmaceutical products. The petitioners paid sales tax on import of aluminium slugs at the time of import. These partly manufactured goods arc to be incorporated into and form a constituent or competent, part of an article which is subject to the tax. They were never subject to sales tax. It has come on record that they always stood exempted from the levy of sales tax, under various procedures for availing of the aforesaid exemption. In view of clear provisions of subsection (1) of section 27 and subsection (12) of section 2 of the Sales Tax Act, the petitioners are not entitled to any refund/adjustment of the sales tax paid at the time of import of aluminium slugs used in the manufacture of aluminium collapsible tubes for pharmaceutical companies because the aluminium collapsible tubes supplied as packing material to the pharmaceutical companies which are not subject to sales tax.
16. In PLD 1990 SC 422 it was, held as follows:- Civil Appeal No,82-K of 1986 is also covered by the decision in Noorani Cotton Corporation's case.
Here the partly manufactured goods are glass shells and glass tubes which are incorporated into or form a constituent of component part of articles, namely, electric bulbs and flourescent tubes which are liable to the levy of sales tax as the end-products are themselves except from sales-tax."
17. The above dictum is applicable to the facts of the instant case.
18. The result is that the petitioners are not entitled to refund. We do not, therefore, see any illegality in the orders passed by the respondent. We do, therefore find that the orders made are perfect legal and within the limits of the statute of sales tax.
19. The result, therefore, is that the petition has no merit and the same would stand dismissed. In the circumstances of the case, parties are directed to bear their own costs.