P L D 197 8 Karachi 943 (PLP)

I. MAHMUD, J.‑This Constitution petition under Article 98(2) of the Constitution of Pakistan (1962) seeks to challenge as being without lawful authority, the assessment order passed by the Sales Tax Officer, Company Circle 2, respondent No. 2, and the demand of sales tax, on Oxygen gas cylinders imported by the petitioner for use in conjunction with its business as manufacturer of Oxygen and acetylene gases.

2. The petitioner, Pakistan Oxygen Limited, Karachi is engaged in the business of manufacture of Oxygen and acetylene gases which are sold in solid drawn steel cylinders. The cylinders are not sold to the customers but a deposit is taken from them as security for the return of the cylinders, which remain the property of the petitioner. As the sale of gas produced and manufactured by the petitioner, was chargeable to sales tax under section 3(a) of the Sales Tax Act, 1951 (hereinafter referred to as the Act), the petitioner filed the prescribed returns under section 10 of the Act, relating to the sales of gas made during the assessment year 1964‑

65. During the relevant year, the petitioner imported empty gas cylinders of the duty paid value of Rs. 98,928 and claimed exemption from payment of sales tax by virtue of notification dated 5th December, 1962 No. S. R. O. 1302 (K)/62 granting exemption to machinery of all sorts and apparatus and appliances specially adapted for use in conjunction with machinery. The Customs Officer accepted the contention of the petitioner and allowed clearance of the cylinders free of sales tax. While making the assessment under sec tion 10(3) of the Act, the Sales Tax Officer, added the duty paid value of the cylinders amounting to Rs. 98,928 to the taxable sales of gas determined by him on the returns filed by the petitioner and levied sales tax at 15 / on the aggregate amount. The petitioner preferred revision to the Commissioner of Sales Tax which is pending and, we are informed by Mr. Ali Athar, that in respect of the subsequent assessment year 1965‑66, the appeal filed by the petitioner has since been allowed.

3. The main contention of Mr. Ali Athar, learned counsel for the petitioner is that the Sales Tax Officer had no jurisdiction to make assessment of sales tax in respect of imported goods under section 10 of the Act and in particular, in respect of the gas cylinders imported by the petitioner. He referred to relevant sections of the Act to support his contention. Section 10 applies to a manufacturer, producer, licensed wholesaler and exporter who are required to file a return in the prescribed form and in the prescribed manner relating to sales made by them in each quarter. An importer is not one of such categories of persons and in fact, no return under section 10 is called for from an importer of goods. Nor is any form of return prescribed for such a person. However, an importer of goods is liable to pay sales tax on the value of the goods imported by him, under section 3(b) of the Act. But the sales tax is payable at the time of importa tion and before clearance of the goods. Section 3(5) of the Act empowers the Customs Officer to levy the sales tax on the value of the imported goods declar ed by the importer in the Bill of Entry. Section 29 of the Act, gives jurisdiction to the Sales Tax Officer and prescribes the procedure under which the Sales Tax Officer may proceed to assess sales‑tax on imported goods in case it is found that the tax payable by the importer under section 3(b) has not been paid and has escaped payment or if it is found that the tax paid by the importer was less than the amount payable by him. In such cases, the Sales Tax Officer, may within 5 years of the end of the year in which the tax was payable on importation, and after notice to such person, make a demand for the amount of tax not paid. It is not disputed that the required notice under section 29 was not given to the petitioner. The requirement of proper notice being mandatory, as was held by the Lahore High Court in Commis sioner of Sales Tax, Lahore v. Haji & Company, Chiniot (1966 P T D 104), the Sales Tax Officer acted without jurisdiction in making the assessment and demanding sales tax on the imported gas cylinders without issuing a proper notice under section 29 of the Act.

4. From the impugned assessment order Annexure D to the petition, it appears that the Sales Tax Officer was not proceeding under section 29 of the Act and making a demand of the actual amount of sales tax which according to him, had escaped payment by the petitioner. But what he did was that he was adding the duty paid value of the cylinders towards the taxable sales as if the duty paid value of the cylinders was to be included in the value of the "sales" as defined in section 2(15) of the Act, and, as if ha was determining the value of the gas cylinders for tax under section 3(6) (d) of the Act, because such goods were for use by a manufacturer or producer. The impugned assessment order, however was not being challenged on these grounds. The only case set up by the petitioner in its petition is that levy of sales tax was void because it was entitled to exemption under the Notifica tion dated 5th December, 1952.

5. Be that as it may, the position seems to be that the impugned assesment order, by adding the duty paid value on the imported cylinders to taxable sales, is in effect, levying sales tax, which had been exempted by the Customs Officer. As such, section 29 of the Act was attracted and in the absence of the required notice, the assessment was without jurisdiction. In this view of the matter, it is not necessary for us to decide on merits the question whether Oxygen cylinders are covered by the exemption under the aforesaid Notification. Nor is it necessary for us to consider the contention of Mr. Mansoor Ahmed Khan, learned counsel for the Commissioner, whether the petitioner which had imported goods for use in connection with its manufacture falls within the definition of "manufacturer" in section 2(ii) of the Act, and as such is liable to direct assessment under section 10 of the Act.

6. No other argument was pressed.

7. In the result, we would allow this petition and set aside the impugned assessment order and the demand notice. However, it is open to the Sales Tax Officer to initiate fresh proceedings by giving the required notice, if he so wishes. There will be no order as to costs. S. Q. Petition allowed.