1982 PLP 372 (PTD)

NAIMUDDIN, J.‑The Income‑tax Appellate Tribunal, Karachi Bench, Karachi by the order dated 10‑8‑1970, has referred to this Court the following question of law for answer: "Whether on the facts and circumstances of the case the Tribunal was justified in law in holding that Sodium Silicate was not a product of steam and as such not exempt from the payment of sales tax under Item No. 15 of Notification No. 9 dated 27‑6‑1951 ? This question is based on the following statement of facts : "These five Applications under section 17(1) of the Sales Tax Act preferred by the assessee require us to refer the following common questions to the High Court for its opinion : "(i) Whether on the facts and circumstances of the case the Tribunal was justified in holding that the applicant is liable to assessment of Sales Tax in respect of its product called Sodium Silicate ? (ii) Whether the Tribunal was justified in holding that the product Sodium Silicate was not a steam product within the meaning of Item No. 15 of the Notification of the Central Board of Revenue No. 3 dated 26‑3‑1968 ? (iii) Whether there was any evidence before the Tribunal to hold that there was no concern of steam with the making of Sodium Silicate, so that it was not used as energy and was not this finding contradictory to the evidence on the record in the form of technical and scientific data ? (iv) Whether the Tribunal was justified in coming to the conclusion that in order to characterize a product as a steam product it was necessary that it should enter the product as an integral part thereof or that it should be used as energy ?" "

2. The facts material for the purpose of these Reference Applications are that the assessee who is a manufacturer of Sodium Silicate was assessed to sales tax for the assessment years 1958‑59, 1959‑60, 1960‑61, 1961‑62 and 1962‑63 by the Sales Tax Officer by his orders dated 28‑3‑1963, 29‑6‑1964, 21‑6‑1965, 30‑5‑1966 and 27‑4‑1967 respectively. For the assessment year 1958‑59 return of turnover was filed disclosing the total sales at Rs. 15,63,

100. On bearing the party and after examination of the books of account the not taxable sales were determined at Rs. 5,50,000 after deducting sales of old bardana amounting to Rs. 3,75,000 and Rs. 7,22,000 on account of sales under section 4 of the Sales Tax Act and Rs. 49,000 on account of sales tax. For the assessment years 1959‑60, 1960‑61, 1961‑62 and 1962‑63 the not taxable sales were determined at Rs. 9,22,731, Rs. 4,72,189, Rs. 1,67,146 and Rs. 7,82,023 respectively. With regard to the assessment years 1959‑60, to 1962‑63 the assessee claimed that it was exempt from payment of sales tax on sales of Sodium Silicate inasmuch as it was a product of steam. The Sales Tax Officer, however, negatived this contention of the assessee in view of the fact that Sodium Silicate was being taxed at the standard rate. As against the aforesaid orders of assessment the applicant preferred appeals to the Appellate Assistant Commissioner D‑Range, Karachi, who by his consolidated order dated 7‑2‑1967 passed in Sales‑tax Appeals Nos. K. Co. 6(8)/34, 342, 128, 375/D relating to the assessment years 1958‑59, 1959‑60, 1960‑61 and 1961‑62, rejected the contention of the assessee‑applicant that the Sodium Silicate is a product of steam and as such as exempt from payment of sales tax. The Appellate Assistant Commissioner observed in his order inter alia as under :‑ The appellant disclosed turnover at Rs. 15,63,100 in the year 1958‑59, which the Sales Tax Officer enhanced to Rs. 16,95,000 for the reasons given in the assessment order under appeal. The appellant preferred appeal against the corresponding income‑tax assessment to the Income tax Appellate Tribunal, who by their order I. T. A. No. 171 of 1964‑65, dated 10‑1‑1966 directed the Income‑tax Officer to accept the book version of the appellant. In this view of the matter, the Sales Tax Officer is directed to take the turnover for the purposes of sales tax in accordance with the directions of the Tribunal in their order referred to above. As regards the year 1959‑60, the Sales Tax Officer also discarded the declared version of the appellant and estimated the turnover as per corresponding income‑tax assessment. The corresponding income‑tax assessment has been modified by my order No. K. Co. 6/166/13, dated 29‑12‑1966 in respect of the charge year 1961‑

62. The Sales Tax Officer is, therefore, directed to take the same turnover as has been adopted therein. In respect of the years 1959‑60, 1960‑61 and 1961‑62, the contention of the appellant is that Sodium Silicate is a product of steam arid is, therefore, exempt from sales tax. This contention was raised by the appellant at the assessment stage in respect of the year 1959‑60 when revised return was filed, but the Sales Tax Officer did not agree with the contention of the appellant in view of the fact that Sodium Silicate had always been considered taxable at the standard rate and had been taxed as such in the past and that such assessment had been accepted by the appellant and this method was followed in the sub sequent two assessments for the years 1960‑61 and 1961‑

62. In the appeals it has been urged that the Sodium Silicate is a product of steam and is, therefore, exempt from tax. The appellant has not produced any authority in support of his claim. With regard to the assessment year 1962‑63 the appellant's appeal on the ground of Sodium Silicate being exempt front payment of sales tax being a product of steam was also rejected by the Appellate Assistant Commissioner by his order dated 30‑6‑1963 in Sales Tax Appeal No. K. Co. 6/440/13. As against the aforesaid orders passed by the Appellate Assistant Commissioner the applicant preferred appeals before the Income‑tax Appellate Tribunal being S. T. A. Nos. 209, 210, 211 and 212 of 1966‑67 and S. T. A. No. 34 of 1967‑

68. The Tribunal by its order dated 22‑1‑1969 passed in S. T. A. Nos. 209 to 212 of 1966‑67 dismissed the appeals rejecting the contention of the applicant that Sodium Silicate was exempt from the payment of sales tax on account of being product of steam oberving inter alia :‑ Coming to the common ground Mr. Ali Athar's whole reliance, therefore, is on the Tribunal's decision reported as (1963) 8 Taxation 83, Para. 3 of this order is relevant and may be reproduced below "

2. We are quite familiar with the terms steam rollers, steam engines i.e. rollers and engines run with steam power. In this context of the phrase, and if the intention were that hammer works in order to be qualified for exemption must be those carried on with steam power alone then the second 'and' in item 15 would at once become superfluous and meaningless. In our opinion the second 'and' has been used to separate hammer works from the products of steam. We find support in this view from the fact that there are products of steam such as rubber, Sodium Silicate and distilled water. These products are admixture of steam and other materials and since they have the element of steam as a component part they are and can rightly be termed as steam products, which means there does exist such a thing as a steam product. The issue in that case which the Tribunal was called upon to decide was whether second 'and' occurring in Item 15 of the aforesaid Notification No. 3 was 'disjunctive' or 'conjunctive'. The Tribunal held that it was 'disjunctive' and this view has since been approved by the High Court of West Pakistan (Karachi Bench) in Reference Case No. 269 of 1964, decided on 27‑11‑1967. We are inclined to say that the Tribunal's observations in the para. quoted above are in the nature of obiter dicta when it was just stated that Sodium Silicate like some other articles was a steam product. As we have now been able to understand the composition and preparation of Sodium Silicate we are convinced to state that it is not a product of steam. Sodium Sidcate is produced from two things, namely silica sand and soda ash. They are put together and subjected to a process of beating and the admixture obtained is called 'Sodium Silicate'. From the various documents and certificates filed before us it is crystal clear that in so far as the manufacture . of Sodium Silicate is concerned neither steam is used as energy nor it enters the compound as an integral part thereof. When we used the term 'Sodium Silicate' in our earlier order on which the assessee is trying to rely we used it in a generally known technical sense, obviously because the issue then was totally different. Today the specific question is whether Sodium Silicate is a product of steam or not and as wt have pointed out there is no element of steam in the making of Sodium Silicate. When there is no concern of steam with the making of Sodium Silicate the question of exemption as demanded does not arise." The applicant's appeal with regard to the assessment year 1962‑63 was also dismissed on the basis of the Tribunal's order passed on 22‑1‑1969 in S. T. As. Nos. 209 to 212 of 1966‑67.

3. Mr. Ali Athar, appearing on behalf of the applicant has urged before us that Sodium Silicate is a product of steam and as such is exempt from the payment of sales tax by virtue of item No. 15 of Sales Tax Notification No. 9 dated 27‑6‑195I. The aforesaid Notification in so far as it is relevant for the purpose of these Reference applications, is in the following terms: "In exercise of the powers conferred by subsection (1) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Central Government is pleased to exempt the goods or class of goods specified hereunder being goods manufactured or produced in Pakistan from the tail payable under the Act, but except in the case of goods specified in item 33 (a) nothing in this exemption shall affect the tax payable on the raw materials from which the goods are manufactured. "

15. Products of iron foundries and steam and. hammer works." "Mr. Ali Athar has urged that opinions of various authorities were referred to before the Tribunal wherefrom it will be evident that Sodium Silicate is a product of steam and it is as such exempt from payment of sales‑tax under the provisions of Item No. .15 of the Notification referred‑ to above. He, therefore, . urges that in view of the basis of the authorities referred to before Tribunal .the finding of the Tribunal to the effect that "From the various documents and certificates filed before us it is crystal clear that in so far as the manufacture of Sodium Silicate is concerned neither steam is used as energy nor it enters the compound as an integral part thereof is a finding which involves the interpretation of Item No. 15 of Notification No. 9, dated 27‑6‑1951 vis‑a‑vis the material produced regarding the process of manufacture of Sodium Silicate and as such is a question of law arising out of the order of the Tribunal dated 22‑1‑1969. Mr. Muhammad Farid, appearing on behalf of the Department vehemently contends that in view of the fact that the Tribunal has arrived at a finding that Sodium Silicate is not a product of steam the question sought to be referred is a question of fact already decided by the Tribunal in view of which the same cannot be referred and these applications are liable to be rejected. He urged before us that when a finding of fact is arrived at by the Tribunal and it is based on materials it cannot be re‑opened and from this finding of fact no question of law arises. "

4. We have given our earnest consideration to the arguments advanced by the parties and have concluded that from the facts and circum stances of the case a question of law does arise out of the orders of the Tribunal involving interpretation of item 15 of Notification No. 9 dated 27‑6‑1951 to determine as to whether the inference of facts arrived at by the Tribunal is justified by the material on record. We, therefore, allow these applications, and refer the same to the High ‑Court for opinion, but we however, reframe the question referred in a manner so as to bring out the real question of law at issue as under." (The question already quoted above). According to the above statement the applicant‑assessee are the manufacturers of Sodium Solicate. However, it appears that Sodium Silicate is in two forms namely, liquid and solid. Mr. Ali Athar learned counsel for the applicant stated that subsequently the Tribunal for the assessment years 1958‑Si to 1960‑61, i9f)3‑b4 to 1965‑66, and 1967‑68 to 1971‑72 in appeals filed before them by the present assessee after holding that if the Sodium Silicate is in liquid form it would be exempted under Item No. IS of Notification No. 9, dated 27‑6‑1951, to find out, whether the applicant is manufacturing Sodium Silicate in liquid form or not, remanded the case to the Sales Tax Officer by the order dated 14‑12‑1974, which is reported in 1976 (34) Taxation

5. In the present case the learned Tribunal while stating the facts has not stated whether the applicant was manufacturing at the relevant time Sodium Silicate in liquid form or otherwise. We are, therefore, not satisfied that the statement of facts submitted to this Court is sufficient to answer the question of law referred, and we would, therefore, require the Appellate Tribunal to clearly state whether the applicant was manufacturing at the relevant time Sodium Silicate in liquid form or otherwise for in our opinion the consequences of this finding of fact might possibly be different for the purposes of answer. We may however, record that Mr. Haider Ali Pirzada, learned counsel for the respondent submitted that we cannot require further statement of fact and in this connection he relied on Messrs Karnani Properties Ltd. v. The Commissioner of Income‑tax. West Bengal, Calcutta (A1 R 1972SC2315). . However; in this case the High Court had opined that some of the facts. found by the Tribunal were not correct. That finding was arrived at on reappraisal of evidence on record but the question whether the findings of facts reached by the Tribunal were vitiated for any reason was not before the Court. In this context it was held by the Supreme Court that the jurisdiction of the High Court in dealing with the reference under section 66 was very limited one. They observed the High Court had to accept the facts as found by the Tribunal unless the question whether the findings of the Tribunal were vitiated for one or the other reason recognized by law was before the Court. In this case the High Court had come to the conclusion that the assessee had only one source of income and rot two as found by the Tribunal. However, in the present case the Tribunal hart not stated whether Sodium Silicate manufactured by the petitioner was in liquid form or in solid for and such a finding is material for the purposes of answer to the question. Further, the present reference is under. section 17(1) of the Sales Tax Act, 1951 and subsection (3) of section 17 specifically authorised the High Court that if it is not satisfied that the statement in a case referred under this section is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modification therein as it may direct. We may reproduce herein below the relevant part of section 17 of the Sales Tax Act, 1951 "

17. Reference to High Court.‑(I) Within sixty days of the date on which an order of the Appellate Tribunal is communicated to him under subsection (6) of section 15, the assessee or the Commissioner may present an application in .the prescribed form and, where the application is by the assessee, accompanied by a fee of one hundred rupees, to the Appellate Tribunal requiring it to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall draw up a statement of the case and refer it to the High Court. (2) The statement to the High Court shall set forth the facts, the determination of the Appellate Tribunal and the question of law which arises out of the case. (3) If the High Court is not satisfied that the statement in a case referred under this section is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modification therein as it may direct. (4) . . . . . . . . . (5) . . . . . . . . . (6) . . . . . . . . . (7) . . . . . . . . . (8) . . . . . . . . . (9) . . . . . . . . . We may state that we have reproduced the above section 17 from 'The Law of Sales Tax in Pakistan' by Raza Naqvi, ‑9th Revised Edition, page 592. tie has stated therein that subsections (1), (2), (3) and (4) ‑were substituted by the Finance Act, 1974. No other amendment in the above section has come into our notice or has been brought to our notice. In fact Mr. Pirzada candidly stated that here is no amendment in this section after 1974. Therefore, in view of the clear language of subsection (3), we decide to require the Tribunal to make necessary modification in the statement of facts. The learned counsel for the applicant requests that some time may be fixed. He suggests that a period of six months would be sufficient. We agree. Order accordingly.