' MRS. KHALIDA RACHID, J.---The petitioner, through this petition under Article 199 of the Constitution of Islamic Republic of Pakistan, seeks declaration to the effect that show-cause notice, dated 14-4- 1994 issued by respondent No,2, Deputy Collector II, to the petitioner alleging evasion of Sales Tax amounting to Rs,3,48,888 on Polo brand cigarettes manufactured during the period October, 1992 to January, 1993, and Demand Notice issued by respondent No,1, Superintendent, Central Excise and Sales Tax, Nowshera, vide Letter No,55-FS.R.T.I./92/270, dated 21-4-1994 are illegal, without lawful authority and hence without jurisdiction. The petitioner further prayed for the issuance of appropriate writ declaring that the petitioner is exempt from the levy of sales tax on cigarettes on the basis of Notification No,S.R.O.580(1)/91, dated 27th June, 1991. Any other relief appropriate has also been prayed for in the petition.
2. The petitioner, a private limited company, set up an industrial unit near Hakimabad-Noshwera to manufacture cigarettes, the trial production of which commenced in September, 1992. The Federal Government vide its Notification No,S.R.O.580(1)/91, dated 27-6-1991, in exercise of powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, directs that all goods, produced or manufactured by such industries which are set up in N.-W.F.P. Between 1st July, 1991 and 30th June, 1996, shall be exempt from the tax payable under the Sales Tax Act, 1990 for a period of five years from the date the industry is set up. In pursuance of the said Notification on 30-9-1992, the petitioner was issued Central Excise Licence in Form L-I, by the Assistant Collector, Central Excise and Sales Tax Division, Peshawar, declaring the petitioner-company exempt from sales tax. The petitioner-company entered into a contract, dated 28-9-1992 with Messrs Pakistan Tobacco. Co.
Ltd. Under which Pakistan Tobacco Company sold the raw material to Messrs Father and Son Tobacco Company to manufacture PTC's order. The petitioner on such terms and conditions initially manufactured and supplied 1469 pack rites of Polo brand of cigarettes. On 14-4-1994 petitioner was served with the impugned show-cause notice issued by respondent No,2, Deputy Collector II, alleging evasion of sales tax amounting to Rs,3,48,888 on Polo brand manufactured during the period of October, 1992 to January, 1993. On the basis of C.B.R. Letter No,16(44)ST/87, dated 9-1-1994, respondent Nor, Superintendent Central Excise and Sales Tax, issued Letter No,55- FS.R.T.I./92/270, dated 21-4-1994, for the payment of sales tax at the time of clearance of the cigarettes manufactured for Pakistan Tobacco Company Ltd.
3. The comments of the respondents were called for which were accordingly filed.
4. Arguments of Mr. Farrukh Jawad Pani, Advocate, assisted by Mr. Muhammad Sardar Khan, Advocate, for the petitioner and Mr. Abdul Latif Yousafzai, Advocate, for the respondents were heard at length.
5. The learned counsel appearing for the respondents at the very outset raised a preliminary objection as to the maintainability of the writ petition. He insisted that no written order has been passed by the respondents and as such the notice impugned herein cannot be construed to be an order. He further maintained that the petitioner has not availed of the alternate remedy of filing an appeal or revision under section 45 of the Sales Tax Act, 1990, therefore, this petition is not maintainable. In support of his contention, the learned counsel for the respondents relied upon Firdous Textile Printing Mills (Pvt.) Limited, Faisalabad v. Federation of Pakistan 1993 PTD 713 and Messrs R.B. Avari Enterprises (Pvt.) Limited, Karachi v. Government of Pakistan 1994 PTD 866. The facts and circumstances of these cases are not applicable to the case in hand. In the former case, according to Rule 5 of the Fixed amount of Sales Tax (Processed Fabrics) Rules, 1991, the amount of tax was to be determined on the basis of joint survey which never took place and Superintendent of Sales Tax, using his arbitrary powers determined the tax. The dispute was not denial/evasion of the tax, but the rate was to be fixed wherein the present case the petitioner's right of exemption is effected which has been given to him by the aforementioned S.R.O. In the latter referred case, the Court asked the petitioner to approach respondent No,2, Director, for appropriate adjudication according to law in the context of the exemption claimed from the sales tax under the Sales Tax Act, 1951, by the petitioner. We see no relevance between the two cases, in said case exemption certificate followed after the pesticide had arrived at Karachi Port. The effect of the findings was that import of pesticide without their registration was found to be illegal. In the present case, there is no need of interpretation of law. The law is clear. The question of exemption is to be resolved.
6. Repelling the objection, the learned counsel for the petitioner-company submitted that in fiscal disputes writ petition is maintainable despite the existence of alternate remedy and that the party aggrieved can directly approach the Superior Courts under its Constitutional jurisdiction. Our attention was invited to several cases and decisions of the superior Courts who in exercise of their Constitutional jurisdiction issued appropriate writs in cases involving fiscal disputes. In case of Usmania Glass Sheets Factory v. Sales Tax Officer PLD 1971 SC 205 it was held by the Supreme Court that in cases involving fiscal rights, a writ petition was appropriate remedy. Similarly, in case of Nasim Silk Mills v. Income Tax Officer PLD 1963 SC 322 the Supreme Court had quashed the assessm ent order of the Income Tax Officer despite the existence of an alternate remedy. Our attention was also drawn towards a famous case Edulji Dinshaw v. Income Tax Officer PLD 1990 SC 399 wherein the Honourable Supreme Court held that in case of fiscal dispute the party aggrieved can approach the superior Courts invoking their Constitutional jurisdiction. Similarly, an objection raised on behalf of the respondents was repelled by the High Court in case of Fecto Cement Ltd. v.
Collector of Customs Appraisement 1994 M LD 1136 (Kar.) wherein it is observed that " ---Art. 199--- Constitutional petition---Alternate remedies being available were not availed before filing Constitutional petition---Effect---Dispute between parties being fiscal dispute, aggrieved party could directly approach superior Courts by invoking Constitutional jurisdiction." Similarly, a Division Bench of Sindh High Court in case of Hussain Sugar Mills Ltd. v. Pakistan 1991 PTD 169 quashed the order of Income Tax Officer in spite of existence of alternate remedy. Thus, in the circumstances, the Constitutional writ petition is not premature and deserves to be decided on merits.
7. Before proceeding with the contention of the learned counsel for the petitioner, it may be convenient to refer to the relevant provisions of the Act and Notification which are pertinent for the purpose of deciding the moot question as to whether petitioner-company can claim exemption under section 13 of the Sales Tax Act, 1990, for manufacturing the cigarettes for Pakistan Tobacco Company Limited.
8. Section 13 of the Sales Tax Act, 1990, reads as under:-- "13. Exemption.---(1) The Federal Government may, by notification in the official Gazette, exempt any taxable supplies made by a registered person in Pakistan or any goods or class of goods, from the whole or any part of the tax chargeable under this Act, subject to such conditions and limitations as may be specified.
(2) The Board may, by special order in each case stating the reasons, exempt any supply from the payment of the whole or any part of the tax chargeable under this Act."
' Notification No,S.R.O.580(1)/91, dated June, 27, 1991, is reproduced hereunder:-- "S.R.O.580(10)/91.---In exercise of the powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that all goods produced or manufactured by such Industries which are set up in the North-West Frontier Province between the 1st July, 1991 and the 30th June, 1996, shall be exempted from the tax payable under the said Act for a period of five years from the date the industry is set up.
' Explanation.---For the purpose of this Notification, the expression set up shall mean the date on which the industry goes into production including trial production, which date shall be intimated in writing, by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least fifteen days before commencing such production."
9. In support of the petition, the learned counsel for the petitioner vehemently urged that claim of the respondents vide impugned notice for the payment of sales tax on the goods/cigarettes manufactured for Messrs Pakistan Tobacco Company is an utter violation of statutory as well as Constitutional provisions and hence in no sense it could be called an evasion, it is only an avoidance of tax which cannot be considered as an illegal act on the part of the petitioner- company. In this context, the learned counsel referred to AIR 1968 SC 49 at page 53 wherein it is said:-- .... Avoiding of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibitory. A tax payer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income Tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty be violated but it may lawfully be circumvented...."
10. The respondents, on the other hand, raised the following two crucial issues with regard to tax evasion against petitioner Messrs Father and Sons who are producing and processing cigarettes for Messrs Pakistan Tobacco Company and Polo is their brand name which fall in the sphere of taxable product within the meaning of Sales Tax Act, 1990:-
(i) That petitioner-company does not have a complete cigarettes manufacturing facilities and they act as job vendor.
(ii) That Messrs Pakistan Tobacco Company pays sales tax on their product and since Polo is their product, therefore, Polo brand manufactured by the petitioner can be taxed.
11. Messrs Father & Sons, petitioner, are producing and processing cigarettes for Messrs Pakistan Tobacco Company and Polo is the brand name of Messrs Pakistan, Tobacco Company. Within the meaning of subsection (3)(a) of section 3 of the Sales Tax Act, 1990, liability of the tax should be on the person who is making supply. For the convenience sake, the relevant portion of section 3 of the Act is reproduced as under:-- "3. ___________ The liability to pay the tax shall be--
(a) in the case of supply of goods in Pakistan, of the person making the supply, and"
' The word 'supply' is defined by subsection (22) of section 2 of the Act which reads as follows:-- 2(22). Supply means sale, transfer, lease or other disposition of goods in the course or furtherance of business carried out for consideration and includes--
(a) putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business;
(b) auction or disposal of goods to satisfy a debt owned by a person;
(c) possession of taxable goods held immediately before a person ceases to be registered person;
(d) removal of goods from the manufacturing premises to the sale point or place of storage owned or operated by the manufacturer or his agent; and
(3) such other transaction as the Federal Government may, by a notification in the official Gazette, specify."
' Subsection (30) of section 2 of the Act specifies the time of supply which reads as under:-- "2(30). Time of supply.--A supply made in Pakistan shall be deemed to take place at the earlier of the time of delivery of goods or the time when any payment is received by the supplier in respect of that supply: ' Provided that--
(a) where any goods are supplied by a registered person to an associated person and the goods are not to be removed, the time of supply shall be the time at which these goods are made available to the recipient;
(b) where the goods arc supplied under hire purchase agreement, the time of supply shall be the time at which the agreement is entered into; and
(c) where the goods are removed from the manufacturing premises to the sale point or place of storage owned or operated by the manufacturer or his agent, the time of supply shall be time of removal of goods from the manufacturing premises."
The petitioner-company is given exemption vide S.R.O.No,580(1)/91, dated 27-6-1991 under which the exemption given to the company reads that 'all goods produced or manufactured by such industries which are set up in the N.-W.F.P. Between 1st of July, 1991 and 30th June, 1996, shall be exempt from the tax payable under the said Act for a period of five years from the date the industry is set up. The petitioner is, therefore, exempted from any tax for a period of five years from the time of its inception. It is also clear that there is no restriction imposed by the said S.R.O., reproduced above, as far as getting the job or contract is concerned. In this respect, reliance can be placed on Maclay v. Dixon 1944 All England Law Reports 22 wherein it is observed:-- "Where a statute does not make contracting out illegal, nor objection can be taken that the parties so arrange their affairs that the restrictions imposed by the statute are avoided. The mere fact that the parties set out to arrange a letting which would be outside the Rent Acts does not prevent such a letting being a bona fide letting within the terms of the Act. Where both parties agree to avoid the restrictions of the Act, it cannot for that reason be said that the letting is not a bona fide one."
12. It can conveniently be presumed that at the time of issuance of said S.R.O. The issuing authorities were well aware of the complications and knew that in future it may be used to the benefit of the manufacturers who are not so exempted. It may also be clarified that the question of evasion would arise only if a person sought to be taxed comes within the letter of law. In this case, the question of imposition of tax is in dispute and not the procedure. The petitioner claims total exemption under the aforesaid S.R.O., therefore, he is neither evading nor avoiding the tax. It is evident that the spirit behind the S.R.O. Was to bring underdeveloped region of the country to the level of the developed regions. If this S.R.O. Is not accepted in its full spirit the whole concept of development for underdeveloped region would remain unachieved. Now to determine the question whether the petitioner's position is a job-vendor or manufacturer, within the meaning of section 2(12) of the Act which reads:- "2(12). 'Manufacturer' or 'producer' means a person who engages, whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include--
(a) a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner;
(b) an assignee or trustee in bankruptcy, liquidator, executor, or curator or any manufacturer or producer and any person who disposes of his assets in any fiduciary capacity; and
(c) any person, firm or company which owns, holds, claims or uses any patent, proprietary or other right to goods being manufactured, whether in his or its names, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns or otherwise disposes of the goods."
Since the petitioner-company is manufacturing and producing cigarettes though the raw material is provided under the contract by Pakistan Tobacco Company Limited, therefore, it comes within the meaning of manufacturer under section 2(12) of the Act, as it is stated, "Manufacturer or producer means a person who engages whether exclusively or not in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him". The position of the petitioner is further confirmed as manufacturer, as the product they are producing falls within the meaning of section 2(11) which is reproduced as under:-- "2(11) 'manufacture' or produce includes---
(a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the completion of a manufactured product;
(b) process of printing, publishing, lithography and engraving; and
(c) process and operations of assembling, mixing, cutting, diluting, bottling, packing, repacking or preparation of goods in any other manner;"
The goods or cigarettes as per Sales Tax Act, 1990 should have been taxed at the time of removal from the factory. Since the factory is exempted, no tax would be levied. Once exemption from payment of tax is granted, the goods so exempted go out of the taxing statute. Reliance in this respect may be placed on PTCL 1990 CL 764. In this case the Bata Shoe Company was buying shoes with their trade mark 'Bata' from the small manufacturers who were manufacturing the shoes under the exemption of cottage industries. Thus, `Bata' despite using its own brand name could not be taxed since the true manufacturers were small industrial units within the meaning of section 2(11) of Sales Tax Act, 1951.
13. In view of the above discussion, we accept the writ petition and declare that the petitioner- company is exempt from levy of sales tax on cigarettes manufactured by it for Pakistan Tobacco Company Ltd. In lieu of Notification No,S.R.O.580(1)/91, dated 27th June, 1991, and hence show-cause notice, dated 14-4-1994 issued by respondent No,2 and Demand Notice dated 21-4-1994 vide Letter No,55-FSRII/92/270, dated 21-4-1994 are illegal, without lawful authority and jurisdiction. The bank guarantee so furnished by the petitioner in favour of the respondents shall stand cancelled. We make no order as to costs.