1986 PLP (Trib (PTD)

These three sales tax appeals are directed against the impugned order of the learned A. A. C. by virtue of which he set aside the assessment with a directive to re-determine whether Guldans manufactured by the assessee were made of China and were, therefore, chargeable to sales-tax or were made of plastic or glass and accordingly exempt from the levy of sales-tax? However, chargeability of sales tax on manufacture of decoration articles was upheld by the learned A. A. C.

2. Brief facts giving rise to these appeals are that the assessee, namely, Messrs Murad Pottery Works, Gujrat, according to information on record, derives income from the manufacture of flower pots and decoration pieces. The assessee during the assessment proceedings claimed exemption from sales-tax on flower pots and decoration pieces. However, claim of the assessee was turned down by the respective Sales-tax Offices as a consequence of which he was made liable to pay following amounts on account of sales-tax for the manufacture of flower pots and decoration pieces:- Assessment year Sales tax determined as payable by the assessee 1970-71 Rs,1,200 1971-72 Rs. 891 1973-74 Rs. 4,690

3. The liability on account of sales-tax in respect of the charge years 1970-71, 1971-72 and 1973-74 was contested in appeal before the learned A.A.C. who by virtue of Appeals Nos. 50, 60 and 60-A, dated 24-1-1980 held as under:-- "I have listened to the arguments of the counsel and gone through the records of the case. The fact remains as to whether the products manufactured by the appellant would fail under the exemption as claimed by him. So far as the Sales-tax levied on the sales of Guldan is concerned, the same is set aside with the direction that the Sales-tax Officer should examine whether the same are of China which are chargeable to sale-tax or of plastic or glass which would be exempt. As far as the decoration articles which are the main product of the appellant cannot be termed as toys which are solely for entertainment of children and I do not, find any reason to interfere with the order of Sale-tax Officer regarding the treatment meted out in this behalf.

4. Learned counsel of the assessee at the time of hearing has pointed out that all goods of the assessee are made from pottery which is exempt by virtue of Notification No. 9, dated 27-6-1951 item

24. The said notification alongwith the item is set out below:-- "In exercise of the powers conferred by subsection (1) of section 7 of the Sales-tax Act, 1951 (III of 1951), the Central Governments pleased to exempt the goods or class of goods specified hereunder being goods manufactured or produced in Pakistan from the tax payable under the Act but except in the case of goods specified in item No. 33(a) nothing in this exemption shall effect the tax payable on the raw material from which goods are manufactured:

24. Pakistani crockery and pottery including plastic and glass crockery."

5. Arguing further, learned counsel of the assessee has submitted that under Notification No. 7, dated 27-6-1951 vide item No. 42 even toys qualify for exemption under heading Nos. 97.01, 97.02 and 97.03. These headings as detailed in First Schedule to the Sales-tax Act ibid are given below:-- 97.01 Wheeled toys designed to be ridden by children (for example toy bicycle and tricyles and pedal motor cars); dolls' prams and dolls' push chairs 97.02 Dolls 97.03 Other toys; working models of a kind used for recreational purposes."

6. Learned counsel of the assessee has stated that in view of Items Nos. 24 and 42 and headings Nos. 97.01, 97.02 and 97.03, flowers pots and decoration pieces made by the assessee are exempt from the purview of Sales-tax Act ibid.

7. Learned D.R. on behalf of the department has repeated the same arguments to justify levy of sales tax on pottery goods manufactured by the assessee as are available in the assessment order made by the respective Sales-tax Officers and appeal order passed by the learned A: A. C.

8. After hearing both the parties, we have first to determine whether goods manufactured by the assessee are products of a pottery or not? Before a verdict is delivered on this issue, we can with advantage rely on the meaning of pottery as is given in Chambers Twentieth Century Dictionary page 1050. In this dictionary, pottery has been defined as articles of baked clay collectively, especially earth work vessels: a place where goods are manufactured: art of pottery. In our opinion, goods having been made from baked clay collectively, fall under the heading of pottery and are, therefore, vide item 24 of Sales-tax Notification No. 9, dated 27-6-1951, exempt from levy of sales-tax.

9. The so-called decoration articles which are made by the assessee are in fact toys according to item 42 of Notification No. 7, dated 8 27-6-1951. Such toys are, therefore, exempt from the levy of sales-tax provided they fall under Heading No. 97.01, 97.02, 97.03 of the First Schedule to the Tariff Act, 1934. After discussion of this case with learned counsel of the assessee, we find that the assessee was making the kind of toys which fall under Heading No. 97-03. Such toys and working models used for recreational purposes and, therefore, exempt from the levy of sales-tax.

11. Before closing, we will like to state here that in the assessment proceedings, it was not case of the department that the assessee's goods were made of China. In our opinion, all these assessments had been made on the premises that the assessee had made its goods in clay. Therefore, we are tempted to say that the learned A. A. C. unnecessarily brought in the suggestion that possibly assessee could have made goods of China which are chargeable to sales tax. However, as factually the assessee made its goods from clay, we have proceeded on this premises with the object of delivering a decision in respect of these appeals. Subject to this observation, appeals filed by the assessee succeed for all these years. M . Y . H .

Appeal accepted.