1973 PLP 361 (PTD)

MUHAMMAD AKRAM, J.‑

This is an application made to this Court under section 17 of the Sales Tax Act III of 1951 (as amended). It arises out of an order dated the 25th of March 1971, passed by the income‑tax Appellate Tribunal (Pakistan), Lahore against the petitioner in Sale Tax Act No. 90 of 1970‑71 in respect of the assessment year 1964‑65.

2. The petitioner in a registered firm and is a manufacturer of ordinary plastic straps, metallic chains and bracelets worn with the watches. There is no dispute before us concerning the saes tax levied on the plastic straps. In the course of assessment for the charge year 1964‑65 the petitioner raised the plea that the metallic watch chains and bracelets manufactured by it a ere articles commonly and commercially known as ornaments and Jewellery and as such exempt from the payment of sales tax under item No. 16 of the Government of Pakistan, Ministry of Finance (Revenue Division) Notification (Sales Tax) No. IX dated 27th of June 1951, as added by the Government of Pakistan, Ministry of Finance (Revenue Division) Notification (Sales Tax No. S. R. O. 289 dated the 1st of July 1959 issued under section 7 of the Sales Tax Act. But the Sales Tax Officer, A‑Circle, Lahore by his order dated the 19th of June 1970 dis allowed the exemption and brought those articles to sales tax. The order was armed by the Appellate Assistant Commissioner Sales Tax, A‑Circle, Lahore who dismissed the appeal of the petitioner on the 24th of August 1970. Its Second Appeal (Sale Tax Act No. 90 of 1970‑71) against the order was likewise rejected by the Income‑tax Appellate Tribunal (Pakistan), Lahore, on the 25th of March 1971. Hence this reference application by the assessed made to the High Court for its opinion on the following two questions of law said to arise out of the order passed by the Tribunal:

(i) Whether on the facts and in the circumstances of the case the Tribunal was not bound to decide as to whether watch chains and bracelets did or did not fall within the classification of Item 16 of Notification No. 9, dated 27th of June 1951, and the assessee was or was not, consequently, entitled to claim exemption from sales tax? (ii) Whether on facts and in the circumstances of the case the watch chains and bracelets manufactured by the assessee fall within the classification of item 16 of Notification No. 9 dated the 27th June 1951, as amended per Notification No. S. R. O. 289 dated 1st July 1959, and the assessee is in law not liable to sales tax?

3. We have heard the learned counsel for the parties at considerable length in this case before us. In‑connection with question No. 2, above the learned counsel for the petitioner elaborately argued that the metallic watch chains and bracelets manufactured by the petitioner were pieces of ornaments and jewellery exempt from Sales Tax under item No. 16 of the Notifi cation No. IK dated the 27th of June 1951, as amended by Notification No. S. R. O. 289 dated the 1st of July 1959, issued under section 7 of the Sales Tax Act. In the alternative the learned counsel for the petitioner contended that at any rate these articles in dispute were products of "hammer works" and as such exempt from sales tax under item No. 15 of the Notification No. IX (Sales Tax) dated the 27th of June 1951, issued by the Government of Pakistan, Ministry of Finance (Revenue Division) Notification forming the subject‑matter of question No. 1 above. In this connection it is alleged in this application before us that this plea was specifically raised before the Appellate Tribunal which has illegally failed to go into this aspect of the case at all. But the contentions were repelled by the learned counsel for the respondent. He argued in reply that the metallic watch chains and bracelets manufactured by the petitioner from base metal are not articles commonly or commercially known and used as pieces of, ornaments or jewellery nor are they goldsmith and silversmith products within the ambit of the aforesaid exemption in question claimed by the petitioner. He asserted that at say rate the onus in this connection lay on the assessee but he has failed to discharge it and bring its case squarely within the scope of the exemption. According to the respondent the petitioner should not be permitted to raise an altogether new plea in the alternative at this stage in these proceedings to the effect that these articles in question were products of "hammer work" exempt from the payment of the tax under item No. 15 of the aforemen tioned Notification No. IX dated the 27th of June 1951.

4. We shall first deal with a consideration of the second question formulated above. Section 3 (1) (a) of the Sales Tax Act lays down that there shall be levied and collected a tax on the value of all goods produced and manufactured in Pakistan payable by the manufacturer or producer. In this connects m, however, section 7(1) provides that the Central Government may, by notification in the official Gazette, exempt any goods or class of goods from the tax payable under the Act. The assessee claimed the exemption from sales tax in respect of the metallic chains and bracelets manufactured by it under item No. 16 of the Govern ment of Pakistan Ministry of Finance (Revenue Division) Notifica tion (Sales Tax) No. IX dated the 27th of June 1951 as added by the Government of Pakistan Ministry of Finance (Revenue Division) Notification (Sales Tax) No. S. R. O. 239 dated the 1st of July 1959, issued under section 7 of the Sales Tax Act. According to this notification the following articles are exempt from the payment of the Sales Tax :‑ "Articles commonly or commercially known as ornaments and jewellery, whether real or imitation, being goldsmiths and silversmiths products for personal use or for adornment of persons."

5. In this connection the Sales Tax Officer disallowed the exemption and observed that in our country the metallic chains and bracelets for watches are not used as pieces of jewellery. There was no question of any adornment or beautification involved in the use of these articles manufactured by the assessee from base metal unlike the goldsmith and silversmith who do not use any base metal in the jewellery produced by them. In the opinion of the Income‑tax Officer these are utility goods used merely for a secondary purpo3e as adjunct to the watches and are not worn as items of jewellery in this country. He also visited the factory of the petitioner and observed that even the every manufacturing process employed by the assessee was altogether different from that used by a goldsmith and a silversmith. In their case the entire work was done by manual labour. On the other hand, the process employed by the assessee in the manufac ture of the metallic chains consisted of three stages :‑ (i) Cutting of metal sheets into small stripe; (ii) interlocking and interlacing of the sties into chains; and (iii) finishing of the chains. In this connection the Sales Tax Officer further observed that the cutting of the metal sheets and the conversion of the strips into chains was all done by the machinery. But the finishing was done by electroplating by a combined process with the interplay & electricity and chemicals. Hardly any manual labour was involved in the manufacture of these chains and bracelets by the petitioner. In these circumstances according to the Sales Tax Officer to equate the products of the assessee, manufactured by a highly mechanised process, with those of a goldsmith and silversmith would be stretching the things too far. Inclusion be held that the assessee was not entitled to the exemption under the notification in question in respect of metallic watch chains and bracelets manufactured by the petitioner.

6. On appeal the Appellate Assisstant Commissioner of Sales Tax, A‑Range, Lahore was also of the same opinion. According to him under the notification in question only those articles could be possibly exempted from sales tax which, in commercial or common parlance, could be conveniently dubbed as articles of jewellery or ornaments. He observed that the word jewellery is not defined in the Sales Tax Act or the rules made thereunder. Therefore, it was permissible to fall back on its dictionary meaning. It means an article worn for personal adornment. In conclusion the learned Appellate Assistant Commissioner held that the metallic watch chains are not worn as pieces of jewellery or for personal ornamentation. He observed that according to section XIV of Chapter 71 of the Pakistan Customs Tariff published by the Ministry of Commerce the expression jewellery means any small object of personal adorn ment and includes a watch chain. But in his opinion that definition was peculiar to the Pakistan Customs Tariff and was meant for a limited purpose only. The sole object behind this definition of the jewellery in that context was to allow a certain amount of relief to persons coming to Pakistan by land, sea or air routes to permit them to bring small articles of personal adorn ment or use held or worn by them. Therefore, according to the learned Appellate Assistant Commissioner the definition of the term jewellery in the Pakistan Customs Tariff was irrelevant for our purposes. In his opinion the primary consideration in the use of metallic watch chains in place of the plastic or leather straps lay in their permanent value rather than adornment. The chain is a necessary adjunct to a watch and is not worn as a piece of adornment. Moreover, the watch chain was not a goldsmith or a silversmith product. As such it was not exempt from sales tax under the notification in question. Even the every process employed by the petitioner in the manufacture of these metallic watch chains proved that these articles were not the products of goldsmith and silversmith exempt from sales tax.

7. On further appeal the Income‑tax Appellate Tribunal held that the watch chains and bracelets in question are made of base metal. They are used as necessary adjuncts for the watches and are not worn as pieces of jewellery or ornaments. In its opinion these articles are not commonly or commercially known as jewellery and ornaments. On this ground alone the Tribunal rejected the appeal before it.

8. A close study of the notification reproduced above shows that the exemption from sales tax is confined to the articles commonly or commercially known as ornaments and jewellery, for personal use or for adornment of persons. This is regardless of the fact whether these ornaments and jewellery are real or imitation. Therefore the first requirement before this exemption can be Invoked Is that the articles in question must be commonly known and commercially sold and purchased as pieces of ornaments or jewellery. The term "ornament" is defined is Webster's New International Dictionary to mean "that which is added to embellish or adorn; that which adds grace or beauty; embellishment, a decoration." Similarly according to the dictionary "jewellery" means "jewels collectively, personal ornaments; as badges, bracelets, broaches, pendants, set or studded with jewels as a brides jewellery . . . . " To be more precise jewellery means ornaments set or studded with jewels and its purpose is the same to embellish or adorn, to add beauty and lend grace and luster to those who wear them. These are the Inherent qualities of a piece of ornament or a jewellery. This quality in the articles is high‑lighted and emphasised in the notification in question in that it is expressly laid down that the exemption is in favour of these articles meant for personal use and adornment of persons, It Is the ordinary and common use of the articles that must be seen in order to determine its character as an ornament or jewellery. Commercially these are made, commonly sold in the market and readily available at the shops as pieces of ornaments or jewellery. Therefore all exceptional or casual uses to which such an article may be put must be ignored in arriving at the conclusion. It is further evident that this exemption applies to the articles commonly and commercially known as ornaments and jewellery, "being goldsmith and silversmith products" for personal use and adornment. This expression in the context can have two meanings. Looked from one angle it means that the ornaments and jewellery actually produced by the goldsmiths and the silversmiths are exempt from tax. So to say this exemption is allowed to them for their products of the kind. But from another point of view this expression connotes a specie and a class of articles as are generally manufactured by the goldsmiths and silversmiths. It appears that both these interpretations are equally tenable. It was admitted before us that the petitioner is not a goldsmith or silversmith. The manufacturing process employed by the petitioner described above is quite distinct and separate from that of goldsmith or silversmith. These metallic chains and bracelets in question were made from base metal and are not generally manufactured by the goldsmiths and silversmiths. In these circumstances these could not be regarded as goldsmith and silversmith products. It needs no emphasis to mention here that this exemption is confined to ornaments and jewellery no matter whether real or Imitation. Therefore, the fact that these chains and bracelets In question, are manufactured from base metal and not from any precious metal is not directly relevant to the real issue before us. 8‑A. In this case the Sales Tax Officer was of the opinion that these metallic watch chains and bracelets in question manufacture by the assessee are not used for adornments, beautification or to enhance the charm of the person wearing them. They are merely utility goods used with the watches. He further observed that these articles could not be said to be goldsmith and silversmith products. In fact, according to him, the manufacturing process employed by the assessee was highly machanised and quite different from that used by the goldsmiths and silversmiths in the manufacture of their products. On appeal the learned Assistant Commissioner of Income‑tax agreed with these findings and observed : "Now it is common knowledge that metallic chains of watches such as are manufactured by the appellant are not used either by male or female persons in Pakistan with a view to enhance his/her charm nor are such chains used as a piece of jewellery or for personal ornamentation. On the other hand it is every day experience to find that the metallic chains as are manufactured by the appellant are used as a necessary adjunct to a watch either by a male or female." He was also of the opinion that the watch chains manufactured by the assessee could not be possibly termed as goldsmith or silversmith products and even the manufacturing process employed in the case of these articles in question was quite distinct and separate from that followed by the goldsmiths and the silversmiths. On further appeal, in the opinion of the Income‑tax Appellate Tribunal the watch chains are only necessary adjuncts to the watches and not worn as pieces of jewellery or ornaments. In interpreting the notification in question the Tribunal observed and held that : "Thus the first requirement envisaged by the rule‑making authority is that the articles whether real or made in imitation are such as are in commercial or common parlance known as jewellery or ornaments. It is only after this first requirement is fulfilled that it would be necessary to examine whether the articles on which exemption from payment of sales tax is claimed satisfy the other requirements laid down in the Notification. The products of the appellant were displayed before us, they were all made of base metal and by no stretch of imagination can be classified as articles of jewellery or ornaments. Gold chains and bracelets we a also displayed befog a us In order to show that the watch chains manufactured by the appellant were made in imitation of these gold chains and bracelets and thus articles of jewellery. Now merely because the gold chains and bracelets are made by goldsmith would not imply that they were articles of jewellery since there is no denying the fact that jewellers manufacture many articles which are not articles of jewellery for personal use or personal adornment of a person. Watch chains are only necessary adjuncts of watches and not worn as jewellery or ornaments. Only these articles qualify for exemption which are commonly or commercially called jewellery or ornaments and this basic requirement is in our opinion lacking in the case of watch chains and bracelets. By using gold or even diamonds a watch chain or bracelets may be made ornamental, but it would still not be an article of jewellery and the question therefore does not arise of regarding a metallic watch chain as an article of jewellery or ornament. The first requirement of item 16 not having been satisfied the issue is clinched against the appellant on this score alone and it seems un necessary to consider the various other arguments advanced before us in support of the appellant's plea since they are all redundant in view of our finding recorded above."

9. All the three income‑tax authorities were unanimously of the opinion that these matallic watch chains and the bracelets are not commonly used as pieces of jewellery and ornaments for adornment to enhance the charm of the person wearing them. They are mere adjuncts to the watches and are used for a secondary purpose just to fasten or hold the watches. The Tribunal based its conclusion on the finding that these articles In question are not commonly worn as pieces of ornaments and jewellery. This is a pure finding of fact binding on the parties. As such no question of law at all arises out of the order passed by the Tribunal.

10. In connection with the above the learned counsel for the petitioner relied on Item No. 71.12, Section XIV, Chapter 71 of the Pakistan Customs Tariff published by the Central Board of Revenue, Ministry of Finance, Government of Pakistan. I his prescribes the duty chargeable on the import of "Articles of jewellery and parts thereof, of precious metal or rolled precious metal." In the explanatory Note No. 8 under Chapter it is laid down that for the purposes of Item No. 71.12, the expression "articles of jewellery" means :‑ "(a) any small objects of personal adornment (gem‑set or not) (for example, rings, bracelets, necklaces, broaches, ear‑rings, watch‑chains, fobs, pendents, tie‑pins, cuff‑links, dress studs, religious or other medels and insignia)." From this the learned counsel contended that "bracelets" and "watch‑chains" are admitted' by the Government to be articles of jewellery In this connection we may observe that section 20 of the Sea Customs Act VIII of 1878 lays dowry that custom duties shall be levied at such rate as may be prescribed by or under any law for the tine being in force on the imported goods. The Customs Tariff prescribes the duty chargeable on the imports and this definition of the term is meant for the purposes of the Tariff Act and the Sea Customs Act only. The meanings cannot be imported into and hive no application to the other enactments. In this connection their Lordships of the Privy Council in Laurence Arthur Adamson and others v. Melbourns and Metropolitan Board of Works (AIR 1929 PC 181) observed that :‑-- "It is always unsatisfactory and generally unsafe to seek the meaning of words used in an Act in the definition clauses of another statute dealing with matters more or less cognate, even when enacted by the same Legislature and much more so when report is had to the enactments of other Legislatures." Therefore this reliance placed by the learned counsel on the Pakistan Customs Tariff is altogether irrelevant and cannot advance his case.

11. On the interpretation of this notification in question the learned counsel for the petitioner contended before us that the doubt or ambiguity if any in this behalf must be resolved in favour of the subject. In this connection he relied on page 278 of the Interpretation of Statutes by Maxwell (11th Edition) to contend that the statutes which impose pecuniary burdens are subject to the rule of strict construction. It is a well settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they E operate as penalties. The subject is not to be taxed unless the language of the statute clearly imposes the obligation. In this connection the learned author further observed t‑ "In a Taxing Act one has to look merely at what is clearly said. There Is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing has to be implied. One can only look fairly at the language used." There is no quarrel and we fully agree with the principle that the ambiguity, if any, in the construction of a taxing statute must be resolved in favour of the subject. But this principle has no application where, as in this case, the charging section clearly G imposes the liability but the assessee relies on an exemption which is in the nature of an exception to the general rule on the subject. In this connection Maxwell on page 293 of his treatise has further observed that enactments of personal character which confer any exceptional exception from a common burden are construed against those persons more strictly, perhaps, than any other kind of enactment. In Inland Revenue Commissioner v. Forrest ((1890) 15 A C 344) the Court held that since all exemptions from taxation increase the burden on the other members of the community, they should be deprecated except to the extent permissible by the express language of the statute. In Littman v. Barron (Inspector of Taxes) ((1951) 2 A E R 393) Cohen, L. G. in this connection observed :‑ " . . I agree with him that the principle that in case of ambiguity a tax statute should be construed in favour of tax‑payer does not apply to the provisions giving a tax payer relief in certain cases from a section clearly imposing liability." This decision by the Court of appeal was affirmed on appeal by the House of Lords in Barron (Inspector of Taxes) v. Littman (1952 A E R 548). In our country in Abdul Khalid v. Sh. Muhammad and others (P L D 1961 B J 79) a Division Bench of the West Pakistan High Court observed that "where an exemption is granted the order or notification granting exemption should receive a strict interpretation." This principle was authoritatively laid down by the Supreme Court of Pakistan in Muhammadi Steamship Co. Ltd. v. Commissioner of Income‑tax (Central), Karachi (P L D 1966 S C 828) to the effect that the provisions granting exemptions or privilleges have to be construed strictly against the person claiming exemption or privilege. In the "Law of Sales Tax by Mr. Muhammad Amin Butt, on page 103 (Second Edition), it is rightly mentioned that the onus in this connection lies on the assessee claiming exemption to establish his plea. 'The exemption must be strictly construed and confined to the exemp tion itself and not extended beyond it. Therefore, for all these reasons we have no hesitation in repelling this contention advanced before us on behalf of the petitioner.

12. In relation to question No. 1 the learned counsel for the petitioner ventured to advance an alternative argument. He asserted that at any rate these metallic watch chains and bracelets are products of "hammer work" exempt from sales tax under item No. 15 of the Government of Pakistan, Ministry of Finance (Revenue Division) Notification (Sales Tax) No. IX dated the 27th of June 1951. It does not appear from the record produced before us that this argument was at all pressed before the income‑tax authorities. There is nothing to this effect in the orders passed by the Income‑tax Appellate Officer and the Appellate Assistant Commissioner. The Income‑tax Tribunal disposed of the appeal before it on the sole ground that these watch chains are not worn as pieces of ornaments and jewellery and are mare adjuncts to the watches. In this view of the matter the Tribunal observed that it was not necessary to consider any other argument as it would be redundant. This in itself sufficiently suggests that an independent argument under the notification in question No. 1 above was at all pressed at the hearing before the Tribunal. This notification raises mixed questions of law and fact. We cannot, therefore, entertain this new plea pressed before us for the first time in these proceedings.

13. For the foregoing reasons we find that no question of law arises out of the impugned order passed by the Income‑tax Appellate Tribunal (Pakistan), Lahore. Accordingly we reject this application. But there shall be no order as to costs in the circumstances. Petition dismissed.