NASIM SIKANDAR, J.-- This is a case stated by the Lahore Bench of the Income Tax Appellate Tribunal. The following Question of law has been framed for our opinion and answer:- "Whether on the facts and in the circumstances of the case perishable commodities not forming a part of the end production be regarded as raw material used in the manufacture of goods?
2. The assessee-company respondent at the relevant time was engaged in manufacture of Sports Goods which were exclusively exported abroad. An application for refund of sale tax at Rs. 2527/- paid on raw-material consumed in the export of finished goods was made which was partly disallowed by the Assessing Officer. He found that claim of refund of Glass Paper and Kraft paper was not permissible as both of them did not form part of the finished products. Also that these items did not constitute raw material or semi finished goods for he purpose of manufacture of Sports Goods exported abroad. Therefore, the concession of refund of sale tax in terms of SRO No. 51 (R) dated 1.7.1961 was refused.
3. Learned Single Bench of the Tribunal, however, found for the assessee. It was found that glass paper or sand paper was used as improving the goods produced and in the process it was consumed, In the view of the learned Member when a glass paper got consumed it amounted to raw material used in the and product and therefore, qualified for a refund claim. Accordingly, the refund attributable to glass paper or sand paper was directed to be allowed. However, the other claim of the assessee with regard to kraft paper used for the packing of the finishing goods ^was found un-tenable.
4. Heard the learned counsel for the petitioner. The SRO No. .51 (R) of 1st July, 1961 reads as under:-
(1) In exercise of the powers conferred by section 7 of the Sales Tax Act, 1951 (III of 1951) and in supersession of the Ministry of Finance (Revenue Division) Notification No. 1 dated the lst May, 1953 the Central Government is pleased to exempt from the tax payable under the said Act all such goods (other than ginned cotton) as are manufactured or produced in Pakistan (including raw materials used in their manufacture or production) are sold for delivery outside Pakistan and are actually so delivered.
(2) Where such tax has already been paid by a person not licensed under section 9 of the said Act to a licensed manufacturer or a licensed whole- sailer on any goods to which this notification applies, the amount of the tax so paid shall be refunded to such person in accordance with the provisions of the said Act and in such manner and to such extent as may be prescribed."
5. A careful study of sub-section (1) of the SRO makes it clear that exemption contemplated in section 7 of Sales Tax Act, 1951 pertains only to goods manufactured or produced in Pakistan including raw materials used in their manufacture for production and were sold for delivery outside Pakistan and were actually so delivered. The Sand paper used in refining the shape and quality of sports goods by no stretch of imagination could be taken as a raw material used in manufacturing of goods. A raw material is something which is a part of the product assuming a form and shape after having been processed. A sand paper admittedly does not become a part of the product. The mere fact that it stands consumed in the process does not place it in the category of raw material.
Also the words used in their manufacture or production indicates that exemption was available only to raw materials which were used in order to manufacture or produce the goods. The sand paper on the other hand was not used in for the purpose of manufacturing or production of goods exported. Therefore, we are of the view that the Assessing Officer rightly refused the claim inasmuch as perishable commodities did not form part of the product nor these were exported for actual delivery abroad in one form or the other.
Our answer to the aforesaid question is, therefore, in the negative.