1966 PLP 415 (PTD)

On a reference to the assessment order for the year 1956‑57, it is found that Sales Tax Officer reached the conclusion that 31.5 % of the total turn over for the year represented export to foreign countries and he also found that export to foreign countries amounted to Rs. 56,93,

952. Similarly, for the year 1957‑58, the Sales Tax Officer found that the total sale amounted to Rs. 1,63,90,213 of which foreign export was for Rs. 87,04,

318. He found that 53 % of the total turnover repre sented export to foreign countries for the said year. Export of Jute manufactured goods during these years were exempted from sales tax. The Sales Tax Officers ordered refund to the extent of 68.5 % for the year 1956‑57 and 47 Y. for the year 1957‑

58. It will therefore be found that he ordered refund of the tax paid on account of the hatching oil for the turn over representing local sales of the jute manufactured goods which were subject to sales tax. The Sales Tax Officer did not order refund for the tax paid for the batching oil used for the jute goods exported to foreign countries. As stated above, he allowed exemption for the said oil used in the goods sold in this country. The assessee preferred appeals against the assessment orders of both the years to the Appellate Assistant Commissioner who dismissed the appeals and upheld the orders of the Sales Tax Officer. Aggrieved by the said orders appeals were preferred to the Income‑tax Appellate Tribunal which set aside the orders of the Sales Tax Officer and the Appellate Assistant Commissioner and directed refund of the tax paid by the assessee for the two years in question. On the application of the Commissioner of Income‑tax, the Tribunal, however, referred the two questions as stated above for the determination of this Court. Section 4 (a) of the Act is as follows: "Notwithstanding anything contained in section 3, the tax shall not be payable on goods sold by a licensed manufacturer to another licensed manufacturer if the goods are partly manufactured goods;" Mr. Afzalul Huq, learned Advocate for the Income‑tax Commis sioner submits that the jute batching oil does not come within the meaning of section 2 (12) in so far as the same is necessary for jute goods exported to foreign countries. Mr. M. H. Khondkar, learned Advocate for the assessee, submits that jute batching oil cannot be "partly manufactured goods" when used for the jute‑manufactured goods sold in this country and cease to be so when used for the jute‑manufactured goods sold to a foreign country. Section 4 (a), quoted above, lays down that the tax will not be payable if the goods are sold by one licensed manufacturer to another licensed manufacturer provided the goods are "partly manufactured goods". It is not disputed here that the B. O. C. and I. C. I. Ltd. are licensed manufacturers and the assessee is also a licensed manufacturer. So the first part of the section is complied with. It is only to be seen whether the goods in question, namely, batching oil in this case, can be said to be partly manufactured goods within the meaning of section 2 (12) of the Act. Section 2 (12) is as follows: "partly manufactured goods" means only goods which are to be incorporated into and form a constituent or component part of an article which is subject to the tax;" Here again it is not disputed that hatching oil is to be incorporated into and forms a constituent part of the finished jute goods. Mr. Afzalul Haq admits that the same is used in the process of manufacture, but it is urged by him that unless the article itself is subject to tax, the batching oil which is incorporated into it, cannot be said to be "partly manufactured goods" within the meaning of subsection (12) of section 2 of the Act. It appears to us that the expression "article which is subject to the tax" is significant and is to be taken due notice of but the Tribunal overlooked the same and thought that rule 16 imposed the condition that the article for which the partly manufactured goods would be used must be taxable. Section 2 (12) also says so. Rule 16 cannot, therefore, be said to be ultra vires. The Tribunal is of opinion that the assessment has been made in consideration of rule 16 of the rules framed under the Act and declared the said rule to be ultra vires. The order made by the Sales Tax Officer is supported by provisions of section 4 (a) read with section 2 (12) of the Act and rule is also consistent with the same. Although the batching oil is incorporated into and forms a constituent part of the manufactured jute goods exported to foreign countries, the same not being subject to the tax, batching oil cannot be said to be "partly manufactured goods" in so far as jute goods exported to the foreign countries are concerned. Therefore, the Sales Tax Officer rightly held that the assessee was liable to pay tax for the batching oil used for goods exported to foreign countries and as such it could not claim any refund for the same. But he ordered refund of the tax paid for the batching oil used for jute goods sold in this country. He was right in doing so, for jute goods sold in this country were liable to tax for the relevant years. Therefore, the batching oil which is used for such goods comes within the meaning of the definition of "partly manufactured goods" under section 2 (12) of the Act. Apportionment made by the Sales Tax Officer in this behalf is not challenged before us. We are, therefore, of opinion that the order of the Sales Tax Officer is legal and calls for no interference. For the reasons stated above, we answer both the questions in the negative. In the facts and circumstances of the case we leave the parties to bear their respective costs. HASAN, J.‑I agree. S. Q. Questions answered in the negative.