1987 PLP 704 (PTD)

Date of hearing: 9th May, 1987. Since a common question of law and fact is involved, both the petitions (W.P. 2897/1983 and 2058/1983) shall be disposed of by this judgment.

2. Briefly stated the facts are that M/s Tyrex Pakistan (Limited) and Lone Tyre & Rubber Company Limited are engaged in the business of retreading of tyres. They receive worn out tyres from the customers, repair, re-service and retread them and receive repair charges from them. Respondent No.l had held them liable both to Excise duty and Sales tax in respect of the tyres retreaded by them. They represented to the Central Board of Revenue and the Board replied that the goods in question were chargeable to sales tax only. According to the petitioners the position taken up by the respondent is legally untenable. Their business is not chargeable either under the Central Excise Act, 1944 or the Sales Tax Act, 1951. The sales tax could only be charged under the Sales Tax Act, 1951 and respondent No.l has illegally attempted to impose sales tax upon them by referring to the enlarged definition of manufacture as given by section 2 (f) of the Central Excises and Salt Act, 1944. Sales Tax Act has its own definition of producer and manufacturer and does not stand in need of any assistance from other statutes. The retreading has been erroneously termed as manufacturing it is stated. The definition of manufacturer or producer in the Sales Tax Act does not include repair in its ambit. The petitioners at no point of time became the owners of tyres or their manufacturer. All that they do is that they charge labour for repairing old worn out tyres. They have, therefore, prayed that being not manufacturers of goods they be declared exempt from the payment of sales tax on the retreading of tyres.

3. Learned counsel for the respondents has resisted the petitions. According to him retreading is a process of manufacture and thus shall be liable to sales tax. He states that though manufacture is not defined in the Sales Tax Act but applying the definition of manufacture as given by clause (f) of section 2 of Central Excises and Salt Act, 1944 which includes repair also the retreading shall be deemed as manufacture. He has cited certain precedents to show that calendering of clothes and refining of course clothes were held to be manufacture by the Superior Courts.

4. Learned counsel for the petitioners have repelled his contentions stating that the precedents cited by him were under the Excise Law and not the Sales Tax Act.

5. The question that falls for determination is as to whether the petitioners who retread tyres fall within the definition of manufacture as provided by section 2 (f) of Central Excises and Salt Act, 1944. For coming to the rightful conclusion it would be necessary to see what is retreading and how it is carried out? Retreading is done in the following manner: "A portion of the old tread, or all of it, as the case may be, is removed leaving bare and intact that part of the fabric which holds the tread; the side walls of the tyre are not disturbed. There is then cemented on the fabric a new tread, what is called camel-back, a solid semi-cured piece of rubber, manufactured expressly for this purpose. After the camel-back is cemented or the exposed fabric, the tyre is paced in a mould and cured, and while the tyre is in the mould the tread is given non-skid feature, by means of a die." It is merely a repair and not manufacture within the meaning of section 2 (f) of Central Excises and Salt Act. 1944.

6. Learned counsel for the petitioners has cited The King v. Boultbee Limited I DTC 215 where it was held that where the defendant merely retreads a tyre there is never a sale and unless, there is a sale no sales tax is imposed and the defendant was held to be not liable for taxes. It was further held that the sales tax was not intended to apply to the repair work carried out to an automobile owned by the customer in order to prolong its life, the customer never having parted with his possession of the same. In the present case manufacturer or producer is defined in the Sales Tax act but there is no mention of the repair work in this definition. The petitioners are being held liable to the sales tax by referring to the definition of manufacture as given by section 2 (f) of the Central Excises and Salts Act', 1944. The latter Act relates to the levy rind collection of excise duty on the goods mentioned in the Ist Schedule of the said Act. Tyres and retreading tyres are not mentioned therein. The definition of manufacture given by section 2 (f) ibid would cover only the manufacturer, repairer or re-maker of the goods mentioned in the said schedule and not others. The retreated tyres Tire not mentioned in section 3 of the Sales Tax Act, 1951 on which sales tax is leviable. It only speaks of goods produced or manufactured, imported or sold. In view of the above discussion, the petitioners' stand is very sound and they cannot be made liable to pay sales tax and the order of respondent No.2 holding the retreaded tyres chargeable to sales tax is declared to be without lawful authority and of no legal effect. The petitions are consequently accepted with costs. M.Y.H/T-17/L Petitions allowed.