SALEEM AKHTAR, J.--1 The petitioner manufactures cables which are supplied to the Ministry of Defence, Government of Pakistan. They are manufactured according to the specification of Defence Ministry and the entire production is used for defence purposes. In Petition No. 725/89 the petitioner claiming that the goods manufactured by it were exempted from sales tax requested the Central Excise Authorities to allow clearance of cables without payment of sales tax. The Superintendent, Central Excise informed that clearance without payment of sales tax would be made provisionally subject to the confirmation of C.B.R. The petitioner cleared the consignment in this manner till May, 1987 when the Superintendent issued a letter dated 17th May, 1987 requiring the petitioner to clear the goods on payment of sales tax. Respondent No. 3 issued a show-cause notice on 23th July, 1987 why the sales tax of Rs. 22,90,921 should not be realised for the period 30th April, 1986 to 5th May, 1987 as the sale of petitioners goods did not qualify for exemption granted under S.R.O. 697(I)/77, dated 4th August, 1977. The petitioner pleaded that the specialised cables are used in communication network of defence and unless these cables transmit power to the apparatus they cannot function. Respondent No. 3, however, did not agree with it and maintained the demand holding that the cables were not exempted under the Notification. He also imposed penalty. In appeal the penalty imposed by respondent No. 3 was remitted but the demand was maintained. The same was confirmed in Revision.
2. In Petition No. 806/87 the petitioner applied to the Superintendent, Central Excise for clearance of the cables without payment of sales tax in terms of notification and claimed exemption but the petitioner was asked to provisionally clear without payment of Sales Tax subject to the confirmation from the C.B.R. On 17th May, 1987 the petitioner was required to pay the sales tax at the standard rate. The petitioner has challenged the action in from petition.
3. In both these petitions the Question arises whether the sale of cables manufactured by the petitioner is exempted from sales tax in terms of Notification No. S.R.O. 697(I)/77, dated 4th August, 1977 which reads as follows:-- "GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE AND ECONOMICFFAIRS NOTIFICATIONS Islamabad, the 4th August, 1977 SALES TAX S.R.O. 697(I)/77.--In exercise of the powers conferred by section 7 pf the Sales Tax Act, 1951 (III of 1951), and iii, supersession of this Ministry's Notification No. S.R.O. 125(I)/70, dated the 29th June, 1970 the Federal Government is pleased to direct that the articles falling under heading numbers of the First Schedule to the ^Customs Act, 1969 (IV of 1969), specified in the table below which are machinery or articles for use with machinery or a%component parts or spare parts of machinery as hereinafter defined, shall be exempted from tax payable under the said Act: Provided that, the articles are identifiable as intended for use only with machinery, and, in the case of imports, have been imported for the projects approved by the Government for initial installation, or for balancing, modernisation, replacement or extension of the existing units.
Definition of Machinery:
(i) Machinery operated by power of any description (excluding agricultural machinery or implements imported into Pakistan) such as used in any industrial process, including the generation, transmission and distribution of power, or used in processes directly connected with the extraction of mineral and timber, construction of buildings, roads, dams, bridges and similar structures and the manufacture of goods;
(ii) Apparatus and appliances, including metering testing apparatus and appliances specially adapted for use in conjunction with machinery, specified in item (i) above;
(iii) Mechanical and electrical control and transmission gear adapted for use in conjunction with machinery as specified in item (i) above;
(iv) Component parts, including spare parts of machinery as specified in items (i), (ii) and (iii) above, identifiable as for use in or with such machinery.
(2) This exemption shall not affect the tax payable on the raw materials from which such goods are produced or manufactured.
TABLE Heading numbers and sub-heads in the First Schedule to the Customs Act, 1969 (IV of 1969) * * Sub-head B of 85.23." * * The description of heading 85.23 of P.C.T. Reads as follows: "Insulated (including enamelled or anodised electric wire, cable, bars; strip and the like (including couril cable) whether or not fitted with connectors."
(a) Enamelled copper wire.
(b) Others."
The word machinery has been defined and it controls the entire scheme of exemption under the notification. The apparatus, appliances or component parts must be of a machinery as defined in it.
From the notification it is clear that articles covered by the heading numbers mentioned in the First Schedule of the Customs Act specified in the Table of the notification which are machinery as defined in it or its component parts shall be exempted from payment of tax. According to the petitioner its case falls under sub-head B of 85.23.
4. The question therefore arises whether cables can be treated as a machinery or apparatus and appliances for use in conjunction with machinery or a component part of machinery as defined in this notification. Mr. Amanullah the learned counsel for the petitioner has contended that cable is a component part of the machinery as it transmits and distributes and carries the current for operating telephone. Learned counsel has referred to the meaning of the word 'cable' which is reproduced as follows:-- "(1) Chamber Dictionary of Science & Technology: Cable.--An electric circuit comprising of one or more conductors surrounded by dielectric and sheath.
(3) Encyclopaedia of electronics by STN. (Gobilises.
Cable.-Any group of electrical conductors, bound together is a cable..................... Cables are usually covered by a tough protective material e.g. Rubber or polyethylene; cables are used extensively in communications and electronics."
5. According to the learned counsel telephone in which cable is used has been defined by Black's Law Dictionary IVth Edition as follows:- "Telephone.-In a general sense, any instrument or apparatus which transmits sound behind the limits of ordinary audibility. But, since the recent discoveries in telephone the name is technically and primarily restricted, to an instrument or device which transmits sound by means of electricity and wires similar to telegraphic wires. In a secondary sense, however, being the sense in which it is most commonly understood, the word "telephone" constitutes a generic term, having reference generally to the art of telephone as an institution, but more particularly to the apparatus, as an entity ordinarily used in the transmission, as well as in the reception, of telephonic message."
6. There can be no dispute that cable is used for transmission and distribution of power as is obvious from the meaning o/ the cable. Cables are made of electric conductors which are bound together surrounded by tough protective materials and offer a low resistance to the passage of electric current, In operation it carries the current for electric transmission and distribution, It is due to this quality of the cable that it is used for the purposes of transmitting power through electric current- in telephone. Therefore, it is a component part of the telephone but being a component part of the telephone is not sufficient to claim exemption. According to the definition of machinery provided in the SRO the articles should be competent part of the machinery as defined in it. And the machinery has been defined as machine operated b^ power of any description and it has been illustrated by specifically mentioning machinery used in industrial process including generation and transmission and distribution of power. Therefore, the machinery should be power operated line, the one used in any industrial process or generation and transmission and distribution of power or used for construction or extraction of mineral. Therefore, the meaning of the machinery has been used in a restricted sense. Telephone in which cables are used does not fall within the definition of machinery. Therefore, the question of exemption does not arise even if it forms a component part of the telephone.
7. We therefore, find no force in the petitions which and dismissed.