1988 PLP 962 (PTD)

SAAD SAOOD JAN, J.--The appellant in this appeal by special leave is a private company. It is engaged in the manufacture of stay wire, which is used for giving support to electric poles. It states that it sells the entire wire manufactured by it to the Water and Power Development Authority. (2) By Notification No.S.R.O. 125(1)/70, dated 29-6-1970, issued under section 7 of the Sales Tax Act, 1951, the Federal Government has exempted machinery or articles for use in the machinery or component or spare parts thereof from payment of sales tax. The word "machinery" has been defined in the notification in the following terms:-- (i) Machinery, operated by power of any description (excluding agricultural machinery or implements imported into Pakistan) such as is used in any industrial process, including the generation, transmission and distribution of power, or used in processes directly connected with the extraction of minerals and timber, construction of buildings, roads, dams, bridges and similar structures and the manufacture of goods; (ii) ......................................................... (iii) ......................................................... (iv) ..................................................... ... In the years beginning from 1969-70 and ending with 1974-75 the appellant sought exemption in respect of the stay wire sold by it to the Water and Power Development Authority. Its claim in this regard was allowed by the Sales Tax Officer. On 10-6-1976 the Central Board of Revenue issued a clarification stating that the stay wire was not a machinery or an article or component thereof and as such the exemption provided by the notification was not extendable to it. Upon this, acting under section 28, Sales Tax Act, the local Sales Tax Officer issued notices to the appellant why it should not be required to pay sales tax for the assessment years 1970-71 to 1974-75. It also asked the appellant to submit returns of its total sales of stay wire during these years. Instead of participating in the proceedings, which were to ensue from the issuance of notices, the appellant invoked the Constitutional jurisdiction of the High Court to call in question the legality of the notices. A learned Single Judge in the High Court dismissed its petition on the ground that it was premature. It has now come in appeal to this Court.

3. Leave to appeal in this case was granted to consider the question whether the Sales Tax Officer had the jurisdiction to reopen the question of liability of the item in dispute to sales tax in spite of the fact that in an earlier assessment order, dated 21-2-75 relating the assessment year 1969-70 he had held the said item as exempt.

4. The notices have been issued to the appellant under section 28, Sales Tax Act, subsection (1) of which reads as follows:- "(1) If for any reason in any year tax escaped assessment or has been under assessed or assessed at a rate lower than that provided under this Act, or excessive relief or refund has been allowed, the Sales Tax Officer may-- (a) where a return for the relevant quarter, quarters or year has not been filed, serve a notice at any time on the assessee, and after making such enquiry as he considers necessary make the assessment at any time within two years from the end of the year in which such notice was served; and (b) in other cases, serve a notice at any time within three years from the end of the year in which the assessment was first made or excessive relief was allowed or the order for return was first passed, and after making such enquiry as he considers necessary re-assess, at any time within two years from the end of the year in which such notice is served, the tax payable, or relief or refund allowed, and the provisions of subsections (2), (3), (4), (5) and (6) of section 10 shall, so far as may be, apply accordingly." A perusal of this subsection leaves no room for doubt that if in a case the Sales Tax Officer is satisfied that the product sold by "a person is not covered by the exemption notification and yet the benefit of the same has been given to it, he can lawfully reopen the case and initiate proceedings for assessment.

5. It is contended on behalf of the appellant that it has already been allowed exemption in the assessment years beginning from 1969-70 and that the notices have been issued to it merely because the Sales Tax Officer had changed his mind and that the change of mind on the part of the Sales Tax Officer cannot be regarded as a sufficient ground for initiating proceedings under section 28, Sales Tax Act.

6. We have seen the previous assessment orders beginning from 1969-70. Prima facie we are not satisfied that this is a case of mere 'change of mind or opinion' on the part of the Sales Tax Officer. However, we would not like to offer any firm opinion on the question lest it should prejudice the case of the appellant before the Sales Tax Officer, for, we are in agreement with the High Court that the appellant should take this objection in the first place before the said officer.

7. As already mentioned, apart from issuing notices to the appellant no further proceedings had been taken by the Sales-tax Officer before the appellant moved the Constitutional jurisdiction of the High Court. In the circumstances of this case the petition before the High Court was clearly premature and the learned Single Judge C was right in dismissing it on this ground. We would, therefore, dismiss this appeal without costs. We may hardly need to add that it will be open to the appellant to take up all the defences, which it wishes to urge in support of this appeal before the Sales Tax Officer who will no doubt consider them on merits before making any order. M.Y.H./C-24/5 Appeal dismissed.