This judgment shall decide Writ Petitions Nos.19201 of 1999,22472, 7481, 9090, 7480 and Writ Petition No.6454 of 1996 as common questions are involved in these cases and these were ordered to be heard together.
2. All the petitioners in these cases are in the business of manufacture of tyres and tubes for motor cars, motorcycles and scooters. According to the petitioners the said items being manufactured by them stood exempted from payment of the sales tax vide Item No.18 of S.R.O. No.(D553/94, dated 9-6-1994. This exemption was, however, applicable only to the goods manufactured for supply to the manufacturers of motor cars, aotorcycles and scooters. Vide S.R.O. 670(1)/94 this exemption was withdrawn whereby the said serial No.18 was omitted from the said S.R.O. 553(1)/94, dated 9- 6-1994. At the same time S.R.O. No.555(I)/94, dated 9-6-1994 was amended vide S.R.O.
No.672(I)/94, dated 3-7-1994 and Item No.93 was added thereto. This item reads as "parts and components of motorcycles, auto rickshaws, motor cars and agricultural tractors". According to the petitioners they were enjoying the said exemption when show-cause notices were issued to them calling upon them to pay the said tax alongwith additional tax. The petitioners approached the concerned directorates with the explanation that the said goods stand exempted under the provisions of the said notifications. The petitioners were confronted with ruling of the Sales Tax Wing of Central Board of Revenue contained in Circular No.16(19)STT/89, dated 3-10-1995 holding that tyres and tubes are not components and parts of the said vehicles and as such are not exempted under S.R.O. No.555(I)/94, dated 9-6-1994 as amended.
3. Mr.' Ali Sibtain Fazli, Advocate contends that a reading of Item No.18 in S.R.O. No.553(1)/94, dated 9-6-1994 would show that its deletion by S.R.O. No.670(I)/94, dated 3-7-1994 and the amendment of S.R.O. No.555(I)/94, dated 9-6-1994 by S.R.O. No. 672(1)/94, dated 3-7-1994 adding Item No.93 therein would show that the effect was that the condition laid down in the said Item No.18 as to exemption only on such parts and components as are to be supplied to approved manufacturers of the said business stood removed. According to the learned counsel this has the effect of rather enlarging the scope of exemption provided to the items manufactured by the petitioners in these cases i.e. The tyres and tubes. Learned counsel insists that tyres and tubes being manufactured by the petitioners in these cases do form a part and component of motor cycles, auto rickshaws, motor cars and agricultural tractors within the meaning of said Item No.93. Further contends that the ruling of the C.B.R. Circulated vide the said circular, dated 3-10-1995 is a result of misinterpretation and misconstruction of the relevant provisions and the headings in the harmonized Customs Tariffs and Trade Controls. No one has turned up for the respondents. On the last occasion when this case came up Mr. Izharul Haq, learned counsel for the respondents in these cases was on general adjournment and the case was accordingly adjourned. Today no one has turned up for the respondents despite calls. They are proceeded against ex parte.
4. I have already reproduced the relevant contents of the various S.R.Os. Being relied upon by the petitioners. The controversy needing resolution in these cases is as to whether or not the tyres or the tubes being manufactured by the petitioners form a part or component of the said vehicles.
According to the learned counsel for the petitioners these items do form part and component of the said vehicles. On the other hand, the C.B.R. Has ruled that tyres and tubes are not exempted from payment of sales tax under Item No.93 of S.R.O. No.555(I)/94, dated 9-6-1994. For this ruling the reliance has been placed vide Circular, dated 3-10-1995 (Annexure G to Writ Petition No.19201 of 1999) on harmonized Commodity Description Coding Systems explanatory notes of Section XVII, which covers chapters 86 to 89 section Note No.2. The said Note reads as follows:--- "(2) The expressions 'parts' and 'parts and accessories' do not apply to the following articles, whether or not they are identifiable as for the goods of this section:
(a) Joints, Washers or the like of any material (classified according to their constituent material or in heading No.84.84) or other articles of vulcanized rubber other than hard rubber (heading 40.16):"
5. Now according to Mr. Ali Sibtain Fazli, Advocate the reliance of the C.B.R. On the said Note is entirely misconceived. Learned counsel elaborates that the tyres and tubes in question are dealt with under separate independent headings. The "new preumatic tyres of rubbers" are dealt with under heading 40.11 while the "inner tubes of rubber" are dealt with under heading 40.13 of the harmonized Customs Tariff and Trade Controls; whereas "other Articles of vulcanized rubber other than hard rubber "are dealt with under heading 40.16. The precise contention is that the tyres and tubes under the said headings 40.11 and 40.13 cannot be read into the said section Note No.2 which deals with Articles of vulcanized rubber under the heading 40.16. I find myself in agreement with the learned counsel that the sad section Note No.2 could not have been pressed into service for depriving the petitioners of the exemption they are otherwise entitled to enjoy under the said Item No.93.
6. To my mind the tyres and tubes do form parts and components of the said vehicles in any sense of the said words. I may here refer to a judgment in the case of Messrs Premier Machinery Works, Karachi and others v. Commissioner of Income-tax PLD 1993 SC 233.
In the said case manufacturer of conduit pipes claimed exemption from payment of sales tax on the ground that it forms a component part of the mechanized and electrical control and transaction gear mentioned in Item V of Notification No.3-ST, whereby the said articles were exempted from payment of the sales tax. Mr. Justice Salim Akhtar (as his Lordship then was) thus concluded in para. 18 of the judgment at page 244 of the report:--- "18. In this background if we consider the aforestated meanings it is evident that in the field of electrical engineering the transfer of power or energy or current is made through wire. To control it, combination of switching devices with their associated equipments, apparatus and appliances are used. In such combination of devices conduit pipe is used for the protection, safety and smooth operation of transmission line in conjunction with machinery as defined in item (i) of the Notification. The use of conduit pipe is so necessary for the safe and smooth transmission of power that as held by the Tribunal it has become a necessary ingredient of the process. We are, therefore, of the view that item (v) of the Notification will cover all such conduit pipes which are used for transmission of power in conjunction with the machinery defined in item (i). The appeals are allowed with no order as to cost."
7. Reading the said Item No.93 in the light of the said dictum of the Hon'ble Supreme Court, I have no hesitation in stating that the tyres do form part of the said motor vehicles for the simple reason that the entire mechanism meant ultimately to activate the wheels would not make the vehicles move without the wheels being equipped with the tyres and tubes. All these writ petitions are accordingly allowed and the impugned circular, dated 3-10-1995 of the Central Board of Revenue is declared to be without lawful authority. No orders as to costs. .