1995 PLP 1252 (PTD)

2. I have heard the learned counsel for the parties and have gone through the impugned orders passed by respondents 2 to

4. At the time of the admission of this petition, learned counsel for the petitioner frankly conceded at the Bar, that no sales tax was charged on supply of beer to diplomats, consequently, the petitioner was not entitled to claim the refund and confined his submission to the solitary question that consumption of caustic soda for washing bottles forms part of manufacturing process, thus, is not chargeable to sales tax and this petition was admitted to regular hearing on this limited question only. Today, also, the learned counsel appearing on behalf of the petitioner has confined his submission only to this limited question and has not challenged the impugned orders in regard to the refund of the sales tax gotten adjusted by the petitioner on empty quarts and pints used in filling of beer sold to diplomats and diplomatic missions and has assailed the impugned orders only to the extent of recovery orders passed against the petitioner .of Rs.7,344 as an over-adjusted amount which was initially paid by the petitioner on soda caustic used for the washing of the empty bottles during the disputed period. The impugned orders of recovery to the extent of Rs.13,244 are, therefore, upheld, wherein, it was held that the petitioner was not entitled to refund the sales tax paid on empty quarts and pints of beer sold to diplomats and diplomatic missions, and the adjustment was wrongly made in the petitioner's account and to that extent, this writ petition is dismissed.

3. The Assistant Collector/respondent No.4 while passing the impugned order in regard to the use of soda caustic for washing of the bottles held as follows:

"In this connection, it is clarified that sales tax refunds/adjustments in the subject cases have been claimed under section 27(1) of the Sales Tax Act, 1951 which goes as where partly manufactured goods are purchased by a manufacturer and tax has been paid on those goods on importation or on any previous sale, a refund of the amount of the tax so paid shall be made to the, manufacturer.' Thus, in the cases in question, adjustment/refund cannot be claimed on the material which does not constitute a material part of the end product. Again soda caustic used for the washing of bottles does not affect the marketability of the finished product because the sole purpose of washing empty bottles before filling is hygienic rather than the completion of the manufacturing process. Had this washing been done with simply hot water, the manufacturing process would have never remained incomplete. Thus, the contention taken by the party regarding the role played by soda caustic in this process of manufacture is out rightly rejected." And it was also held:

"that refund/adjustment on soda caustic used for the washing of empty bottles is not admissible under section 27(1) of the Sales Tax Act, 1951 because it does not contribute materially to the completion of the end products and without its use, the manufacture process cannot be said to be incomplete." It is submitted by the learned counsel for the petitioner that the petitioner purchased soda caustic on payment of sales tax at the time of its purchase and the soda caustic is used to clean the bottles and a refund was claimed on account of the sales tax paid on the partly manufactured goods within the meaning of section 27 of the Sales Tax Act of 1951 which is exempt from tax and the same was correctly refunded and adjusted. Section 2(12) of the Sales Tax Act, 1951, defines "partly manufactured goods" as only goods which are to be incorporated into and form a constituent or component part of an article which is subject to the tax and section 27(1) of the same Act dealing with the "Refunds" reads as follows:

"Where partly manufactured goods are purchased by a manufacturer and tax has been paid on those goods on importation or on any previous sale, a refund of the amount of the tax so paid shall be paid to the manufacturer." In view of the above provisions, it is submitted on behalf of the petitioner that the soda caustic is to be treated as partly manufactured goods within the meaning of section 2(12) of the Sales Tax Act, 1951, as it was used for cleaning the bottles which is necessary for the manufacture of the end product and the petitioner having paid sales tax on the soda caustic at the time of its purchase is entitled to its refund under section 27(1) of the said Act because the petitioner has paid sales tax on the end product as well and, therefore, it was correctly refunded and adjusted and if the impugned orders are not set 'aside, the petitioner will in fact be paying sales tax twice which cannot be permitted in law. Reliance is placed upon Messrs Noorani Cotton Corporation v. The Sales Tax Officer "A" Ward, Lyallpur PLD 1965 SC

161. It is also submitted on behalf of the petitioner that the washing of the bottles is a highly technical process for the production of the end product and the Assistant Collector/respondent No.4 is not bound to suggest ways and means of the production by making observation that bottles can be washed by simply hot water. It is only for the petitioner to Judge to maintain the quality of production and soda caustic is a component part of the end product. Reliance in this connection is placed upon Commissioner of Income-tax, East Pakistan v. Amin Jute Mills Ltd: PLD 1966 Dacca 456, wherein, it was held that "Batching oil" used .for jute goods sold in Pakistan and being subject to tax constitutes "partly manufactured goods" and is, therefore, exempt from tax.

4. On the other hand, the learned counsel for the respondents submitted that though it is admitted position that the petitioner is using soda caustic for cleaning the bottles for hygienic purposes, the same cannot be said to be "partly manufactured goods" within the meaning of section 2(12) of the Sales Tax Act, 1951 as it is not constituent or component part of the end product of the petitioner.

5. Admittedly, the petitioner is using the soda caustic for cleaning the bottles and as such, it is "partly manufactured goods" within the meaning of section 2(12) of the Sales Tax Act, 1951 as it is a constituent part of an article which is subject to tax and the above said partly manufactured goods were admittedly purchased by the petitioner/manufacturer and the tax was paid on those goods on previous sale or sales and as such, the petitioner has entitled to its refund under section 27(1) of the Sales Tax Act, 1951 and the petitioner correctly and lawfully applied for the refund of the tax paid at the time of the purchase of the caustic soda and the same was correctly refunded and adjusted and respondents 2 to 4 acted illegally in holding the claim of refund and the refund, to be based on fraud and misrepresentation.

6. The Revenue Authorities are nobody to suggest to the petitioner to use hot water in cleaning the bottles instead of soda caustic because it may amount to compelling the petitioner to lower the standard of hygiene being maintained by the petitioner of the article which is subject to the tax.

7. In view of the above discussion and for the reasons mentioned above, this petition succeeds. partly and the impugned orders are partly set aside and it is held that petitioner is not liable to pay back Rs.7,344 as the same was legally claimed by it as a refund and was correctly refunded to it under section 27(1) of the Sales Tax Act, 1951. AA./M.2166/L Petition partly accepted.