2010 PLP 1269 (PTD)

EJAZ AFZAL KHAN, C.J.

Collector Sales Tax and Central Excise, appellant herein, has filed this appeal by raising the question, whether in the circumstances for the case, the respondent, who processed and packed the oil is liable to be taxed.

2. Learned counsel appearing on behalf of the appellant contended that when the respondent on receipt of oil and packing material from Messrs Lever Brothers Pakistan Ltd., processed and packed it, it was liable to be taxed on account of conversion charges and that the learned Appellate Tribunal by ignoring this essential aspect of the case failed to appreciate the law on the subject. The learned counsel by referring to section 2(16) of the Sales Tax Act, 1990 contended that when the activity embarked upon by the respondent constitutes manufacture to all intents and purposes, it could not be exempt from being taxed notwithstanding the end product, according to Sixth Schedule, is liable to be taxed.

3. As against that, the learned counsel appearing on behalf of the respondents contended that when the end-product of edible oil is exempt from sales tax under the Sixth Schedule, any activity leading to completion of its manufacture cannot be taxed. Manufacture, the learned counsel added, cannot be termed as taxable activity unless the goods manufactured are supplied. But since the learned counsel maintained, nothing has been supplied, it cannot be taxed. The learned counsel by referring to the impugned judgment of the learned Appellate Tribunal contended that when the D.R. of the Department unequivocally stated before the learned Appellate Tribunal that the Collectorate is not in a position to defend the audit observation calling for levy on the business activity of the respondent, appellant has no locus standi to pursue and prosecute this appeal.

4. We have gone through the record carefully and considered the submissions of the learned counsel for the parties.

5. A perusal of section 2(16) of the Act would reveal that processing, packing, re-shaping and any other process incidental or ancillary to the completion of a manufacture product is manufacture to all intents and purposes. But manufacture itself is not a taxable activity unless the goods manufactured are supplied. Though, according to the learned counsel for the respondent, engagement of the respondent is confined only to manufacture but we do not find ourselves in agreement with him because the respondent on receipt of raw material from Lever Brothers processes and packs it and then dispatches it back thereto. Not only that, it also receives consideration for value addition. This activity is supply par excellence. This is what is covered by the expression `supply', as defined in section 2(33) of the Sales Tax Act.

6. Yes the end product is exempt from Sales Tax under the Sixth Schedule but what is supplied here by the respondent in this case is not an end product, but, the value added to the raw material through the exercise of processing and packing. It, thus, cannot claim exemption under any canons of interpretation. If exemption can be extended on such assumption, then even the import of raw material cannot be taxed, as it also constitutes an activity preceding the manufacture and supply of an end product. We do not feel inclined to accept an interpretation, which, prima facie, leads to absurdity and tends to defeat the very purpose of the charging provision. Even otherwise, we do not understand why would the legislature exempt such an activity from tax, when it constitutes manufacture as well as supply and is admittedly carried for pecuniary consideration. We in this backdrop are constrained to hold that such activity is liable to be taxed from whatever angle, it is looked at. The question is, therefore, answered accordingly. M.H./66/P Order accordingly.