1981 PLP (Trib (PTD)

MUHAMMAD MAZHAR ALI (PRESIDENT).‑--These are three sales tax appeals at the instance of the Sales tax Office Companies Circle B‑2 Central Zone, Karachi pertaining to the assessment year 1975‑76, 197`‑77 and 1977‑78.

2. The relevant facts giving rise to these appeals are these. The assessee respondent is a private limited company. It is engaged in the manufacture of Aluminium Rigid containers with wads, Aluminium collapsible tubes with caps, plastic spoons, plytene snap on caps, Aluminium pilfer proof caps, white Alkatehne caps crown corks. Out of the total sales effected during the relevant year the assessee claimed sales to the tune of Rs. 31,83,231, Its 42,15,271, and Rs. 50,84,431, (All inclusive of Excise Duty) as exempt from sales tax in the assessment year 1975‑76, 1976‑77 and 1977‑78 respectively. The Sales Tax Officer, by separate orders, but all similarly worded, rejected the claims for exemption. On appeal, the learned Appellate Assistant Commissioner, by his combined order under appeal, held that the Sales Tax Officer was not justified in rejecting the exemption claimed. Consequently, he directed him to verify the figures of sales by obtaining certificates from the pharmaceutical companies and allow exemptions accordingly. Hence these departmental appeals. We have heard the parties' Representatives at length. The learned D. R. adopted the same line of argument which led the S. T. O. to reject the claims of exemption. He argued that since the assessee‑companies failed to prove that packing materials sold to pharmaceutical companies were actually used by them in packing pharmaceutical products it was not entitled to the exemption claimed. He submitted that no doubt, in the quarterly returns the assessee had claimed exemption but not in accordance with pro forma prescribed vide Circular No. 4 of 1975. He vehemently urged that even if the sales to the extent of exemption claimed were held to have been made to the pharmaceutical companies, yet the assessee was not is a position to prove that as products were actually used by pharmaceutical companies, and in the absence of thus proof the exemption claimed could not be allowed.

4. We do not find any force in the contention of the learned Depart mental Representative. The Central Government vide Item No. 35‑B‑as substituted by S. R. O. 82(1)/75 dated 15‑1‑1975 has exempted the goods is question in the following manner:‑- "Exemption under section 7 S. R. O. No. 82(1)75, dated 15‑1‑1979.‑In exercise of the powers conferred by subsection (1) of section 7 of the Sales Tax Act, 1951 (111 of 1951) the Federal Government is pleased to make the following further amendments in the late Ministry of Finance (Revenue Division) Notification No. 7, dated the 27th June, 1951, namely:‑‑ In the aforesaid Notification for Item 35‑B the following shall be sub stituted, namely:‑‑ 35‑B. Raw materials and packing materials used tit the manufacture and packing of pharmaceutical products :‑ Provided that if the manufacturer of pharmaceutical products instead of using such raw materials or packing materials in the manufacture packing of pharmaceutical products, disposes of them otherwise the exemption shall cease to be operative and he shall become liable to pay the tax originally payable in respect of such raw materials or packing materials. The Central Board of Revenue vide Circular No. 4 of 1975 dated 8th February, 1975, issued necessary instructions for its Officers stating therein inter alia "However, it has been provided under the new Notification that the manufacturer of the pharmaceutical products would be liable to pay sales tax in respect of such raw materials of packing materials which are obtained by him without payment of sales tax by virtue of exemption under the Notification but which are not used by him in the manufacture and packing of pharmaceutical products. "the I.‑T. Os. were further directed that while making income‑tax assessment for any year of a manufacturer of pharmaceu tical goods they should examine with particular care the new raw materials and packing materials purchased by him from assessee of sales tax under the Notification have actually been utilize by him and in cases where any such materials were found to have been used for any other purposes the sales tax which would have been payable on the materials so used were to be recovered from the manufacturer of pharmaceutical goods. The assessee‑respondent before .us undoubtedly is the manufacturer of packing materials for pharmaceutical products. The S. T. O. in his impugned orders has disallowed the claim for exemption merely on the ground that the use of packing materials sold by the assessee to the manufacturer of pharmaceutical goods was not proved to have been by them. The non‑user of the assessee's i. e. packing material used in the packing of pharmaceutical products by the manufacturers of pharmaceutical products would render them (the manufactu rers of pharmaceutical product) liable‑to pay tax originally payable in respect of such packing materials but it would not disentitle the assesses‑respondent to claim exemption. The approach of the S. T. O. is wholly fallacious and contrary to the provisions of law. The learned A. A. C. has therefore, rightly reversed his order with a direction to him to allow the promotion from the S, T. O. after obtaining certificates from concerned pharmaceutical companies.

7. For the foregoing reasons, we do not find any substance is these departmental appeals and dismiss them accordingly. S. Q. Appeal dismissed.