MAULVI ANWARUL HAQ, J- The petitioner is a Public Ltd. Company involved in the manufacture of footwear, which product stands exempted from the payment of sales tax under SRO 553(l)/94, dated 9.6.1994 as amended by SRO 517(l)/95, dated 14.6.1995. According to the writ petition in order to manufacture the said footwear it purchases raw materials and pays sales tax on the purchase of the same, In the process of manufacture the petitioner prepares EVA sheets (micro cellular sheets) which are used as an insole in the final product is. Footwear. The grievance made out in this writ petition is that the respondent is demanding sales tax on the manufacture of said EVA sheets when the said sheet is neither independently purchased for consumption nor sold as a separate item. Upon the said demand some correspondence took place between the parties but the petitioners were unable to convince the respondents as to the illegality of their demand, as alleged by the petitioner.
2. Syed Mansoor Ali shah, Advocate, learned counsel for the petitioner contends that under Section 3(1) of the Sales Tax Act, 1990 the sales tax is to be charged, levied and paid at the prescribed rate on the value of taxable supplies made in Pakistan by a registered person in course or furtherance of any taxable activity Further refers to the definition of taxable activity in Section 2(35) and argues that the said activity involves the supply of goods to "any other person". According to learned counsel upon a reading of the said Section 3 and the said Section 2(35) of the said Act the said sheets are liable to tax only in a case of supply by the petitioner to some other person of the said sheets is made out. Mr. Izhar-ul-Haq Sheikh, Advocate, learned counsel for the respondents, on the other hand, relies upon the later part of Section 2(35) which includes any activity carried in the form of business, trade or manufacture, in the definition of taxable activity. Furthers refers to the definition of "taxable supply" in Section 2(41) and of the word "supply" in Section 2(33) of the said Act. According to Sheikh Izhar-ul-Haq, a reading of the said sections together would clearly spell out that the tax is payable on the said sheets. Learned counsel for the respondent relies on the case of M/s. Kamran Industries Ltd. v. Deputy Collector, Central Excise and Land Customs, Karachi and others (1990 PTD 605). While both the learned counsel have referred to case of Sheikhu Sugar Mills Ltd. v. Govt, of Pakistan and others (PTCL 2001 CL 331). Learned counsel for the respondents places reliance on the said judgment of the Hon'ble Supreme Court of Pakistan while learned counsel for the petitioner seeks to distinguish the same while pressing this writ petition.
3. I have given some thought to the respective contentions of the learned counsel for the parties and have examined the relevant provisions quoted above with their assistance. So far as the factual aspects are concerned there appears to be no dispute that the EVA sheets are ultimately used in the process of manufacture leading to the end product i.e. Footwear which stands exempted in the case of the petitioner.
4. So far as the contentions raised by the learned counsel for the petitioner are concerned I deem it proper to reproduce Section 2(35) of the Sales Tax Act, 1990 hereunder:- "taxable activity" means any activity which is carried on by any person, whether or not for a pecuniary profit, and involves in whole or in part, the supply of goods to any other person, whether for any consideration or otherwise, and includes any activity carried bn in the form of a business, trade or manufacture".
A plain reading of the said Section would show that the meaning assigned to the taxable activity in the first part has further been extended by including the activities mentioned in the later part i.e. Business, trade or manufacture. Learned counsel for the petitioner would have carried the day had the definition been limited only to the meaning assigned to the said term i.e. "taxable activity" in the first part of the Section but the extended meaning of the term by introducing the inclusion clause, turns the table. This would be evident upon a reading of the term "supply" as defined in Section 2(33) of the said Act. The said term includes sale, lease or other disposition of goods in furtherance of business carried out for consideration and also includes, inter alia, putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business. The contention of the learned counsel for respondents that the meaning of the term "taxable activity" thus stands enlarged by emphasis inclusion clauses by the legislature, is fully supported by the said judgment in the case of Sheikhu Sugar Mills Ltd. Mr. Justice Iftikhar Ahmad Chaudhary in the leading opinion delivered in the said case observed as follows in para 9 of the judgment at pages 350 and 351 of the report:-
(9) "It may be noted that the intention of the legislature can be gathered from the arrangement of different parts of Section 2(35) of the Ac which appears to be disjunctive and not conjunctive. Its careful study august that taxable activity means any activity which is carried out by any person which may include one or more than one person with pecuniary profit or without pecuniary profit with regard to supply of goods to any person for any consideration or supply of goods otherwise and the supply of goods includes any activity carried on in the form of business, trade or manufacture meaning thereby that if supply of goods has been made in the course or furtherance of business carried out for consideration putting to private business or non-business use of goods acquired, produced or manufactured in the course of the business it would fall within the definition of taxable activity. At this juncture reference may also be made to the definition of manufacturer or producer under Section 2(17) of the Act, according to which 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 person who by any process or operation assembles, mixes, cut, dilutes, bottles, packages, repackages or prepares goods by any other manner etc. Will be considered to have manufactured or produced identifiable goods which can either be consumed independently or can be incorporate^ in the finished product of any item. Admittedly the intermediary produce of Bagasse which is procured during the process of extracting juice from sugarcane can be considered a marketable and identifiable goods which can be supplied by a corporate or incorporate person to itself in the course of business. While making such supply it is not necessary that it should be against money consideration to a third person because as well have noted that the definition of word "supply" under Section 2(33) includes putting to private business etc., therefore, instead of defining the .
Expression taxable activity extensively if it is defined exhaustively it coves any form of those activities which are even carried out by one person in his own business. As it has been observed hereinabove that Bagasse as per its definition is an identifiable/marketable goods on which tax an be levied, therefore, concluding so we feel no hesitation that one a taxable goods has been supplied by person to itself it would fall within the definition of taxable supply. Thus notwithstanding the fact whether the sale has taken place or not between two persons but fact remains that by supplying Bagasse the appellants will be doing a taxable supply during the process of taxable activity. As such it is liable to sales tax under the Act unless otherwise it is exempted by the Federal Government to provide incentive to the traders dealing in the sugar manufacture so they may reduce the price of the sugar by saving the price incurred by them on the fuel by burning Bagasse because if they have to consume other energy i.e. Electricity, gas etc. They have to pay its price independently."
As stated by me above learned counsel for the petitioner has made an attempt to distinguish the said judgment vis-a- vis the facts of his case. The contention is that in the said relevant para of the judgment the mention is of supply of goods to "any person" instead of "any other person", It is true that the expression used by his Lordship is "any person" and not "any other person" but nothing turns on the said contention of the learned counsel. His Lordship after referring to the facts of the case in the light of the provision as incorporated in the said para has, clearly observed that the intermediary produce of Bagasse which is procured during the process of extracting juice from sugarcane can be considered marketable and identifiable which can be supplied by a corporate or incorporate person to itself in the course of business, It has further been observed by his Lordship that while making such a supply it is not a necessary that it should be for a money consideration to a third person, It will thus be seen that the observation of the Hon'ble Supreme Court noted above were made in the background where it was being contended that a supply made by a person to itself would not be a taxable supply within the meaning of the Sales Tax Act, 1990.
5. Learned counsel for the petitioner has further contended that from the observation made in the said case of Sheikhu Sugar Mills Ltd., it is apparent that it was found by their Lordship that the Bagasse is an independent product. The precise contention is that since Bagasse itself is not a component of the ultimate product i.e. Sugar, the same is a distinguishing feature in the present case. I am afraid the observations noted above leave no manner of doubt that the emphasis is upon putting to private, business or non-business use of goods-manufactured in the course of business and not as to whether or not the goods so put to use can be so used for the ultimate product or not. In my humble opinion unlike the case of the said goods, the observations of his Lordship noted above are more applicable to the present case where admittedly the sheets manufactured in the course of business are being put to use by the petitioner in the course of said business of the manufacture of the footwear.
6. The judgment cited by the learned counsel for the respondent although rendered under the provisions of Sales Tax Act, 1951 vis-a-vis the concept of partly manufactured goods may not be squarely applicable on all fours but does cover and support the contention of the learned counsel so far as the factual aspect of the case are concerned.
7. For all that has been stated above the writ petition is found without any force and is dismissed, leaving the parties to bear their own costs.