1999SCMR526 (PLP)

SAIDUZZAMAN SIDDIQUI, J.

The abovementioned appeals are filed with the leave of this Court to question two separate judgments of the High Court of Sindh, dated 26-5-1992 and 28-10-1993 disposing of two Income Tax References (I.T.Rs.) bearing Nos. 49 of 1987 and 205 of 1988 respectively. In both the I.T.Rs., the following question of law was referred to the High Court of Sindh, under section 136(1) of the Income Tax Ordinance, 1979, for decision relating to assessment year 1978-79:-- "Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the benefit of export rebate envisaged in clause (a) of subsection (4) of section 3 of the Finance Ordinance, 1978 is admissible to the partners in addition to the export rebate already allowed to Registered Firm in respect of its export sales." The learned Division Bench of the High Court in I.T.R. No.49 of 1987 answered the above question of law as follows, which was followed by the other learned Division Bench of the said Court in I.T.R. No.205 of 1988:

"Turning back to the provision of section 3(4)(a) of the Finance Ordinance, 1979, it may be pointed out that the section provides benefit to 'an assessee'. There appears to be no controversy on the point that in view of the provisions contained in subsection (5) of section 23 of the repealed Income-tax Act, 1922 super-tax (but not income-tax) is payable by the firm, whereas income-tax is payable by its individual partners. The relevant provisions of the Finance Act makes reference only to 'an assessee' without making any distinction between a registered firm or its partners. No doubt, the proviso to section 3(4)(a) refers to a registered firm, however, as is evident from the language used in the proviso, the intention appears to be only to fix a ceiling which should not exceed the super-tax paid by such firm. However, nothing can be spelt out from the provisions of section 3(4)(a) to indicate that in case any benefit is derived by the firm under the said section, its partners are to be excluded therefrom. We would like to point out that as has been held by the Kerala High Court, the total income of the firm computed by the Income Tax Officer will have to be divided amongst its partners according to the proportion to which the profits are to be shared by them. Naturally if any profits or gains have been derived from the export of goods manufactured in Pakistan, the shares of the partners will include such profits or gains. If effect is to be given to the provisions of section 3(4)(a), of the Finance Ordinance, 1978, then benefit of the said provisions is to be provided, to each of its partners individually while assessing his income-tax. The deduction referred to in the said section would be admissible in case of the individual partners notwithstanding the fact that the benefit under the said provisions has already been allowed to the firm of which they are the partners. Accordingly to the language used by the Legislature in section 3(4)(a), if the income of an assessee includes profits or gains derived from the export of goods as referred to in the said section, the assessee would be entitled to the deduction as provided in the said section. In our view, the question of availing the benefit of the said section twice under such circumstances would hardly arise. The question of availing the benefit twice would have arisen if income-tax was also payable by the firm besides its partners or super-tax was payable by the partners besides the firm, which is not the case in the present case:" Leave was granted in both the appeals to consider the following contention:-- "Mr. Nasrullah Awan, the learned counsel for the petitioner has contended that under the scheme of the Finance Act, both the registered firm and the partners could not have claimed benefits of rebate. He further contended that the judgment of the Indian High Court , (Commissioner of Income-tax v. Indo-Marine Agencies (1973) 87 ITR 41) is distinguishable as the provisions of the Indian Finance Act, 1963 were different from the provisions of the Finance Act, 1978 involved herein. The question raised is a legal question of general importance. We, therefore, grant leave."

2. We have heard only Mr. Nasrullah Awan, the learned counsel for the appellant. None appeared for the respondents.

3. The learned counsel for the appellant contended that the High Court by holding that the concession of export rebate in terms of clause (a) of subsection (4) of section 3 of the Finance Ordinance, 1978 (hereinafter to be referred as 'the Ordinance'), is admissible not only to the registered firm but also to its partners, has in fact extended the benefit of rebate in respect of the same income twice, once to the firm and second time to its partners. This plea of the appellant was considered by the learned Judges of the High Court and repelled on the ground that under subsection (5) of section 23 of the repealed Income-tax Act of 1922, the firm is liable only to super-tax whereas income-tax is paid by its individual partners. This position is not disputed by the learned counsel for the appellant. Mr. Nasrullah, however, contended that in the impugned judgment of High Court as well as in the judgment of Income-tax Appellate Tribunal, reliance has been placed on a decision of Indian High Court of Kerala in the case of Commissioner of Income-tax, Kerala v. Indo-Marine Agencies, Cochin (1973) 87 ITR 41, which in turn proceeded on the provisions contained in section 2(5)(1) of Indian Finance Act, 1963. It is urged by the learned counsel that provisions of section 2(5)(1) of Indian Finance Act, 1963, differed substantially from the provisions contained in section 3(4)(a) of the Ordinance. The learned counsel specially referred to the proviso to section 3(4)(a) of the Ordinance to demonstrate the difference between the Indian provision and the provisions in the Ordinance. The decision of the above appeals, therefore, according to the submissions of learned counsel, rests mainly on the true meaning and scope of the proviso to section 3(4)(a) of the Ordinance.

4. It is a well-settled principle of interpretation that a proviso deals with the subject, which is covered by the enacting part of the provision. The proviso only carves out an exception which, but for the proviso would fall within the language and meaning of the enacting part.

5. A proviso, therefore, has to be interpreted strictly, and where the language of main enacting part is clear and unambiguous, the proviso cannot by implication exclude from its purview what clearly falls within the express terms of the main enacting part. We would, therefore, first determine the scope and meaning of the main enacting part of section 3(4)(a) of the Ordinance in the light of the abovestated legal position. It is quire clear from the enacting part of section 3(4)(a) of the Ordinance that where the total income of "an assessee" includes any profit or gain derived from the export of goods manufactured in Pakistan, the income-tax and super-tax payable in respect of such profit and gain is to be reduced by an amount equal to half of the income-tax and super-tax which is attributable to the sale proceeds of the export goods subject, of course, to the conditions mentioned in clause (b), (c) and (d) of section 3(4) of the Ordinance. The expression "an assessee""--used in the encating part cannot, by any logic of interpretation, exclude from its purview the partners of a registered firm if they are assessed to income. We are, therefore, of the view that the expression "an assessee" used in section 3(4)(a) of the Ordinance include both the registered firm as well as its partners, if they are assessed to income tax or super-tax. This conclusion is further fortified by the use of expression "income tax and super-tax" in the main enacting part of section 3(4)(a) of the Ordinance. It is admitted by the learned counsel for the appellant that the firm pays only super tax while the income-tax is paid by its partners. Therefore, we are in no doubt that the enacting part of section 3(4)(a) includes, within its ambit, both the registered firm and its partners. Accordingly, we hold that the export rebate contemplated under section 3(4)(a) of the Ordinance is admissible both to the registered firm as well as its partners in respect of super-tax and income-tax payable by them, respectively.

6. We now turn to the proviso which has been relied by the learned counsel for the appellant in support of his contention that export rebate concession is admissible only for the registered firm and not to its partners. A careful reading of the proviso would show that it only lays down the method of calculation of the super-tax payable by the registered firm under paragraph (c) of para. 2 of the Schedule, which was introduced by the Ordinance. The proviso does not lay down anywhere that the reduction envisaged in the main enacting part of section 3(4)(a) of the Ordinance on account of export rebate to "an assessee" in respect of income-tax, would not be admissible. As earlier pointed out by us, the proviso only limits the operation of the main enacting part to the extent it is indicated in the proviso, meaning thereby that but for the proviso, the case would fall within the ambit of the enacting part. The enacting part used two different expressions, namely; admissibility of export rebate out of the income tax as well as super tax while the proviso deals only with the super-tax which is payable by the registered firm. It is, therefore, quite clear that the proviso in its operation could not limit the concession of export rebate tax admissible on the income-tax payable in terms of section 3(4)(a) of the Ordinance. The enacting part of the section is not to be construed in the light of the proviso but it is the proviso which is to be interpreted in light of the main enacting part of the statute. We, therefore, agree with the conclusion of the learned Judges of the High Court of Sindh that under section 3(4)(a) of the Ordinance, both the registered firm as well as its partners are entitled to the export tax rebate in respect of the super-tax and income-tax payable by the registered firm and its partners respectively. No case for interference with the judgments of the High' Court is made out. The appeals are accordingly dismissed. However, as the respondents have not appeared and contested the cases, there will be no order as to costs. M.B.A./C-26/S Appeals dismissed not visualize a sale by a person to himself. It was contended that the word "sale", not having been defined in the Constitutional documents but judicially and otherwise interpreted as aforesaid, could not, by fiction of a deeming definition, be given a meaning it never bore that is a sale by a person to himself. Reference was made to Articles 131 and 132 of the 1962 Constitution and Article 142 of the 1973 Constitution. Articles 131 and 132 of the 1962 Constitution read as follows:-- "131.

(1) The Central Legislature shall have exclusive power to make laws (including laws having extra-territorial operation) for the whole or any part of Pakistan with respect to any matter enumerated in the Third Schedule. (2) .. (3) .. (4) .. (5) ..

132. A Provincial Legislature shall have power to make laws for the Province, or any part of the Province, with respect to any matter other than a matter enumerated in the Third Schedule." Article 142 of the 1973 Constitution is as follows:--

142. Subject to the Constitution

(a) Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to any matter in the Federal Legislative List; (b) Majlis-e-Shoora (Parliament), and a Provincial Assembly also, shall have power to make laws with .respect to any matter in the Concurrent Legislative List; (c) A provincial Assembly shall, and Majlis-e-Shoora (Parliament) shall not, have power to make laws with respect to any matter not enumerated in either the Federal Legislative List or the Concurrent Legislative List; and (d) Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to matters not enumerated in either of the Lists for such areas in the Federation as are not included in any Province. " It was argued on behalf of the assessee that sales tax could not be levied on the use or consumption of "goods" in the manufacture of the final product as such use or consumption is not sale by any interpretation, and, in view of the Entries in the Federal Legislative List of the 1962 Constitution and the 1973' Constitution, as Federal Legislature could levy tax on sale of goods, tax on use or consumption could not be levied by such Legislature. It was contended that the fiction created by stretching or extending the meaning of "sale" in the definition section 2(15) and in sections 3(4) (iv) and 3(6)(d) of the Sales Tax Act, 1951, is ultra vires the Constitution and beyond the legislative competence of the Federal Legislature. For this contention, the following reasons were advanced:-- (i) The word 'sale' in the aforesaid Entries in the Legislative Lists has been used in the same sense as defined in the Sale of Goods Act, 1930 and as per the judicially. recognized meaning and as also according, to its ordinary dictionary meaning; (ii) No sale'can be envisaged by creating a fiction to change the meaning of "sale" used in the Entries; (iii) No sale can be made by a person to himself in view of the ordinary meaning of the word and also according to its judicially recognized meaning or as per its definition in the Sale of Goods Act, 1930. Such meaning presupposes a seller, a buyer and consideration. It is in this sense that 'sale' in the Entries is to be interpreted. It was submitted by Mr. Pirzada that the words "such goods are for use by the manufacturer or producer and not for sale" in section 3(6)(d) were perhaps borrowed from the Canadian Law. Reference was made to two judgments of the Supreme Court of Canada. First is the case of Bank of Nova Scotia and His Majesty the King (1930 SCR 174) and the other is His Majesty the King and Fraser Companies Limited (1931 SCR 490). It was pointed out that in the relevant Canadian Statute, Special War Revenue Act, section 87(d) read as follows:-- "

87. Wherever goods are manufactured or produced in Canada under such circumstances or conditions as render it difficult to determine .the value thereof for the consumption or sale tax because (d) such goods are for use by the manufacturer or producer and not for sale; the Minister may determine the -value for the tax under this Act, and all such transactions shall for purposes of this Act be regarded as sales." According to Mr. Prizada, however, the Constitutional provisions in the Canadian C6nstitutional document at that time i.e. the Canada Act, 1867, was different; reference was made to section 91 thereof, and, according to Entry No.3 therein, the Legislative Authority of Parliament of Canada extended to "The raising of Money by any Mode or system of Taxation". But here, according to learned counsel, the relevant entries in the Federal Legislative Lists are restricted to taxes on sales and purchases. Reliance was placed on several decisions from the Indian Jurisdiction for the proposition that where the relevant legislative entry gave power to tax on sales, the same could be availed of only where there had, in fact, been a sale with transfer of property as recognized by the general law, as otherwise the tax would be ultra vires and that the concerned Legislature could not enlarge the definition of sale according to the established concept of a 'sale' in the laws of contracts or the Sale of Goods Act, 1930. Reference was made to the Shorter Constitution of India, 11th Edition by Basu, pages 1343-1347 and also pages 1144-1145. Following cases from Indian Jurisdiction were also relied upon: (i) State of Madras v. Dunkerly AIR 1958 SC 560; (ii) S.T.O. v. Budh Prakash AIR 1954 SC 459; (iii) George Oakes v. State of Madras AIR 1962 SC 1037; (iv) Bhopal Sugar Industries v. S.T.O. AIR 1964 SC 1037; (v) Abdul Kader v. S.T.O. AIR 1964 SC 922; . (vi) New Indian Sugar Mills v. C.S.T. AIR 1963 SC 1207; (vii) Bhopal Sugar Industry v. S.T.O. (1962) SC (Pet 85 of 1961): (viii) Johan & Co. v. Titaghar Paper AIR 1965 SC 1082; (ix) Kantilal Babulal v. HC Patel AIR 1968 SC 445; (x) Tevimula Timber v. C.T.O. AIR 1968 SC 784; (xi) Deputy Tax Collector v. En Field AIR 1968 SC 838; (xii) Orissa Province v. Titaghar Paper AIR 1985 SC 1293; and (xiii) Builders Association of India v. Union of India AIR 1989 SC 1371

16. On the use of the deeming clause, Mr. S. Shrifuddin Prizada argued that this concept is a part of every legal system but it is also an established principle that such clause should never be over-stretched. He referred to the case of Muhammad Afzal v. Commissioner of Lahore (PLD 1963 SC 401) and also indirectly relied upon Pakistan Textile Mills Owners' Association v. Administrator of Karachi (PLD 1963 SC 137) for the proposition that words in a statute are to be given first their ordinary and natural meaning and other appropriate meaning is to be given only when ordinary meaning does not make sense. It was contended that by extending the tax on sales to use or consumption of goods or partly manufactured goods, Federal Legislature resorted to illegal over-stretching of the deeming clause and, by such illegal process, use or consumption of goods by the assessee itself could not be converted to sale to bring it within the legislative competence of the Federal Legislature to tax such use or consumption of goods under the Legislative entries in question.

17. Mr. Mansoor Ahmad Khan, learned Senior Advocate Supreme Court, also appearing for the assessee/appellants in the Karachi Appeals, referred to the various provisions of the Sales Tax Act, 1951, and amendments made therein from time to time. It was emphasized that sales tax is a single-point tax and it could not be levied at the intermediate stage on materials or goods which are in the process of manufacturing the final product and that it was only when the sale takes place of any product that sales tax can be levied. In the case of the Karachi assessee, it was pointed out that sales tax was leviable only on the final products when sold but, at the relevant time, such products had been exempted and, in these circumstances, sales tax could not be levied at any intermediary stage, where, in any case, no sale has took place.

18. Ch. Muhammad Farooq, learned Attorney-General for Pakistan, who appeared pursuant to notice on the Constitutional question; submitted that the following principles of interpretation are attracted while ascertaining the meaning and scope of the relevant entries in the Legislative List:-- (i) Entries in the Legislative Lists are to be interpreted liberally and in their widest amplitude. (ii) Courts interpreting laws involving economic activities interpret the same with greater latitude, keeping in view the complexity of economic problems which do not admit of solution through any doctrinaire or straight jacket formula. (iii) There are good reasons for judicial restraint in utilities, tax and economic regulation cases if not judicial deference to legislative judgment. . (iv) Power of taxation rests on necessity, being an essential and inherent attribute of sovereignty, and is not dependent upon any grant by the Constitution or the consent of the owner of the property subject to taxation, and, in fact, Constitutional provisions with regard to taxation constitute a limitation on the legislative power and not a grant of power. (v) The law should be saved rather than destroyed and the Courts should lean in favour of upholding the constitutionality of a legislation keeping in view that there is a presumption in favour of the constitutionality of legislative enactment. Reliance was placed by the learned Attorney-General on a recent decision of a Full Bench (five Judges) of this Court in the case of Elahi Cottori Mills Ltd. v. Federation of Pakistan (OLD 1997 SC 582). In the reported judgment, Entry No.47 (and some other entries also) in Part I of the Federal Legislative List were examined in great detail. Relying upon the aforesaid principles and Elahi Cotton Mills' case (supra), it was contended that the concerned provisions of sections 2(15), 3(4)(iv) and 3(6)(d) of the Sales Tax Act, 1951, were competently legislated by the Federal Legislature. Learned Attorney-General also argued that the judgments from the Indian Jurisdiction are distinguishable. 19: The Darned Attorney-General is correct in his submission that Legislative entries in a Constitution are to be interpreted liberally. This principle is well recognized and was recently confirmed by this Court in its judgment (Full Bench of 5 Judges) in the case of Elahi Cotton Mills Ltd. (PLD 1997 SC 582). While considering the term "incpme-tax" in Entry No.49 -in Part I of the Federal Legislative List (Fourth Schedule) of the 1973 Constitution, it was observed that, from the case-law and treatises considered in the judgment, one of the principles deducible therefrom is that while construing the said word "income" used in the entry in the Legislative List, restrictive meaning cannot be applied keeping in view that the allocation of the subjects to the legislative lists is not by way of scientific or logical definition but by way of mere simplex enumeration of broad categories. It was observed, after having noted that as per dictionary the word "income" means a thing that comes in, that its natural meaning embraces any profit or gain, which is actually received. While interpreting the word, it was recognized that the rule of interpretation of any entry in Legislative List is that the same should be given widest possible meaning. However, it was also observed that this did not mean that' the p Legislature can choose to tax as income an item which in no rational sense be regarded as a citizen's income and that the item taxed should rationally be capable of being considered as the income of a citizen.

20. In Elahi Cotton Mills' case (supra) the main question which was under consideration was whether sections 80-C, 80-CC and 80-D added in the Income Tax Ordinance, 1979, were competently enacted by the Federal Legislature under Entry No.47 (and/or any other entry) of Part I of the Federal Legislative List (Fourth Schedule) of 1973 Constitution which reads as follows:-- "

47. Taxes on income other than agricultural income." The aforesaid amendment in the Income Tax Ordinance, introduced presumptive and minimum taxes and the same were held to be competently enacted by the Federal Legislature. Noting the various principles of interpretation in this regard it was inter alia observed as follows:-- (a) While interpreting Constitutional provisions Court should keep in mind, social setting of the country, growing requirements of the society/nation, burning problems of the day and the complex issues facing the people, which the Legislature in its wisdom through legislation seeks to solve. The judicial approach should be dynamic rather than static, pragmatic and not pedantic and elastic rather than rigid. (b) The law should be saved rather than be, destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of a Constitutional provision. (c) In view of wide variety of diverse economic criteria, which are to be considered for the formulation of a fiscal policy. Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc. for taxation. (d) Courts while interpreting laws relating to economic activities view the same with greater latitude than the laws relating to civil rights such as freedom of speech, religion etc., keeping in view the complexity of economic problems which do not admit of solution through any doctrinaire or strait jacket formula as pointed out by the Holmes. J. in one of his judgments. (e) Frankfurter, J. in Morey v. Doud (1957) U.S. 457 has remarked that "in the utilities, tax and economic regulation cases, there are good reasons for judicial- self-restraint if not judicial deference to the legislative judgment.

21. The dictionary meaning of sale as also the meaning of the word in the laws relating to contracts and Sale of Goods Act, k930, presupposes a seller, a purchaser and transfer of property from one to the other for consideration. However, by the deeming clause contained in section 3(6)(d) in the Sales Tax Act, 1951, use of the goods by the manufacturer or purchaser (and not for sale) mentioned in that clause was to be considered by fiction of law, as a sale. Generally the effect of a deeming provision in taxing statute is to bring within the tax net a transaction or an amount which ordinarily would not come within the tax net. In the judgment in Elahi Cotton Mills' case (supra) certain principles regarding deeming provisions were also recognized. These principles were recited as follows:-- (1) Generally the effect of a deeming provision in a taxing stature is that it brings within the tax net an amount which ordinarily would not have been treated as an income. In other words, it brings within the net of chargeability income not actually accrued but which supposedly to have accrued notionally. (2) When a statute enacts that something shall be deemed to have been done which in fact and in truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to. (3)Where a person is deemed to be something the only meaning possible is that whereas he is not in reality that something, the Act required him to be treated as he were with all inevitable corollaries of that state of affairs. (4) The legal fictions are limited for a definite purpose, they cannot be extended beyond the purpose for which they are created. Legal fiction or deeming provisions are not concepts of the modem judicial system; these have always been recognized as permissible methods of legislation, but subject to recognized limitations. There is no omnibus power vested with the Legislature to make any deeming or fictional provision and certain limitations have already been noted in Elahi Cotton Mills' case (supra) referred hereinabove. In Elahi Cotton Mills' case (supra), a large number of deeming provisions in the Income Tax Ordinance, 1979, were noted, which were already part of the said Ordinance prior to the incorporation of the impugned provisions in that case i.e. sections 80-C, 80-CC and 80-DD. These deeming provisions were noted in paragraph 38 of the judgment of Ajmal Mian, J. (as he then was) as follows: Section Subject 1. 2(20) Deemed dividend 2. 2(24) Bonus shares

not to be considered as income in certain cases. 3. 12(8) A discontinued business shall be deemed to have continued for the purpose of Income Tax Ordinance. 4. 12(12) Assets other than stocks and shares purchased from a Company at less than market value

difference deemed to be income of the purchased. 5. 12(13) Unadjustable advance rent deemed to be income-to be taxed in ten years (1 / 10th each year). 6. 12(18) Bonus exceeding Rs.1,00,000 received otherwise than through cross cheque deemed to be income of the recipient of loan. 7. 12(19) Payment received by "lessor" against leased assets to be income of certain persons. 8. 13(1)(a) Unexplained credits in books to be income of the assessee. 9. 13(1)(aa) Unexplained investment etc., to be income. 10. 13(l)(b) Unexplained/unrecorded investment etc., to be income. 11. 13(1)(c) Money or valuable article, the sources of which remains unexplained -- is deemed income. 12. 13(1)(e) Unexplained expenditure deemed income. 13. 19 The charge is on ALV rather than the actual rent received. 14. 25(c) Trading liability remaining unpaid for more than three years deemed to be income. 15. 29 Clandestine transactions deemed to be transaction of beneficiary. 16. 50(3) Any sum (chargeable to tax) when paid out to a non resident such sum is deemed to be income and tax is to be withheld at normal rates. 17. 78 Every agent who is declared to be or is treated as an agent is deemed to be an assessee. 18. 79 When business transaction as arranged between a resident and a non-resident where no profit or loss arises to a resident, reasonable profits be determined by I.T.O. to be income of resident. 19. 80 Shipping business of non . residents. Aggregated receipts to be deemed to be income and tax at 8 % is collected 20. 80(A) Air-line business of a non resident. 21. 80(AA) Aggregate of technical fees received is deemed to be income and tax is collected at 20 % of such income. 22. 88 All income arising to any person by virtue of a receivable transfer of assets is deemed to be income of the transferor. 23, 99(5) Where department takes no action upon the refund application of the assessee fill 30th June, the amount of refund is deemed to be due to the assessee. 24. 132 Where appeal is not decided within three months, the relief claimed shall be ' deemed to have been given. 25'. 156 If the mistake pointed out by the assessee is not rectified by the department within a given period, the mistake is deemed to have been rectified.

22. Keeping in view the aforesaid principles of interpretation, we may now test the validity of the challenged deeming parts of the relevant provisions i.e. sections 2(15), 3(4)(iv) and 3(6)(d) of the Sales Tax Act, 1951 on the basis of the competence of Federal Legislature under Entry No.49 of Part I of the Federal Legislative List (Fourth Schedule) of the 1973 Constitution and the corresponding Entry No.43(t) of the Third Schedule to the 1962 Constitution. As already observed, the dictionary and natural meaning and the definition of 'sale' in the laws of contract and the Sale of Goods Act, 1930, mean transfer of goods or property between a willing seller and willing buyer for consideration. However, the 'word 'sale' in the legislative entries in the Constitution has to be given very liberal meaning which may not be restricted or confined within the parameters of the ordinary meaning of the word as "the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of mere simplex enumeration of broad categories"

Ref: Elahi Cotton Mills' case (supra) illustration, reference can be made to a forced sale on a notified price under a statutory fiat, where there is no contract between a willing seller and a wiling buyer and the so-called "consideration" is also fixed under the law, and yet such transaction has been considered to fall within the taxing power of the Legislature under the legislative entry of "sale or purchase of goods" (See Vishnu Agencies (Pvt.)' Ltd. v. Commercial Tax Officer AIR 1978 SC 449). However, in Elahi Cotton case (supra), while considering the meaning and scope of the entry "taxes on income", it was observed that the rule of interpretation that while interpreting an entry in a Legislative List it should be given the widest possible meaning, does not mean that the Legislature can choose to tax as income an item which in no rational sense can be regarded as a citizen's income. It was further observed that the item taxed should rationally be capable of being considered as the income of a citizen. It had been argued on behalf of the assessees that the deeming provisions purport to convert the process of use or consumption of partly manufactured goods into a sale. It was argued that how could there be sale by a person to himself; where there is no question of payment of consideration; where the item sought to be taxed remains with the assessee. Reliance had been placed on a number of judgments of the Indian Supreme Court for the proposition that 'sale' in the legislative entry must be given its ordinary natural meaning; that the expression "sale of goods" was a term of well recognized legal import and that sale of goods meant sale of goods where a consensual transfer takes place between a seller and buyer for consideration.

23. It has been noticed that though the challenged deeming provisions in section 2(15) and section 3(4)(iv) were introduced through the Finance.Act, 1966, section 3(6)(d) has been a part of the Sales Tax Act, 1951, since it was originally enacted. The deeming clause has always been there since 1951. It t created a 4egal fiction intended to cover actions in a very limited field. Its j parameters are clearly defined. There is no ambiguity about the actions it brings within the net of sales tax. First of all it may be observed that the deeming provisions come into operation only in a case where the final product is exempt from sales tax. It in admitted on all sides that sales tax is a one point levy. This was the stand taken on behalf of the assessees as well as by learned counsel appearing for the Department, as observed earlier in this judgment. If the final product which is sold by the assessee is subject to sales tax, under the deeming provisions read with other provisions of the Sales Tax Act, 1951, no sales tax can be levied at any intermediary stage. This position is also clear from the judgment of this Court in the case of Noorani Cotton Mills (supra). Secondly, according to the deeming provisions, only such goods are liable to sales tax at the intermediary stage, which are identifiable as separate, goods and are subject to sales tax as such goods. In the case of Pakistan Cables Ltd. (Karachi assessees) during the process of manufacture of cables, which were exempt from sales tax at the relevant time, at the intermediary stage, the raw material is converted into aluminium rods. As observed in the relevant impugned judgment of the High Court, such aluminium rods were independently sold in the market and were subject to levy of sales tax. In the case of Electric Lamp Manufacturers of Pakistan Limited, also a Karachi assessee, in the process of manufacture of electric bulbs, which were exempt from levy of sales tax at the relevant time, from the raw materials, first glass shells are produced which glass shells, admittedly were identifiable goods and marketable items independently and subject to sales tax. In the case of Exide Pakistan Limited (another Karachi assessee), during the manufacture of batteries (the final product) which -were exempt from levy of sales tax at the relevant time, one of the raw materials used is lead which is converted by chemical process into led oxide and, according to the impugned judgment of the High Court, it could not be denied that lead oxide was an independent marketable item. At the relevant time oxide was subject to levy of sales tax. In the four Lahore appeals, the assessees, while producing hosiery goods, exempt from levy of sales tax at the relevant tin1g, first raw material is converted into woolen yarn, an independent marketable item subject to sales tax at the relevant time. It is also an accepted position that the aforesaid goods at the intermediary stage, which were independently identifiable and marketable goods, were subject to sales tax at the relevant time in case they had been sold, and, in the case of some assessees, such goods at the intermediary stage were in fact sold and, therefore, sales tax was leviable and was paid by the assessees. But other similar goods were not sold and were used or consumed in the manufacture of final products which were exempt from sales tax; the assessees claimed that as no sale in the ordinary sense of the word took place, they were not liable to pay sales tax, .whereas according to the Department, these were subject to levy of sales tax in view of the deeming provisions.

24. As observed, legislative entries should be given liberal and very wide interpretation and that the judicial approach in this regard should be dynamic rather than rigid. Another principle that has been noted in the earlier part of this judgment is that the Legislature enjoys a wide latitude in the matter of selection K of persons subject-matter, events etc. for taxation. Reference has already been made to (1957) U.S. 457 where Frankfurter, J. has observed that, in the utilities tax and economic regulation cases, there are reasons for judicial self-restraint if not judicial deference to the legislative judgment.

25. The deeming provision created a legal fiction that in the aforesaid restricted parameters, the use or consumption of independently identifiable goods would be considered to be a sale so as to bring such goods within the tax net. For the reasons mentioned above, we are of the view that, in the aforesaid restricted sense, the use and consumption of intermediary goods could be treated as sales by legal fiction so as to bring such goods under the levy of sales tax where the final product was not subject to sales tax when sold and that the use or consumption of intermediary, goods in such circumstances have a rational nexus with sale. Federal Legislature was, therefore, competent to enact the deeming provisions under entries of "sales of goods" in the Constitutional documents.

26. As observed, on behalf of the assessees, reliance had been placed on a number of decisions from the Indian jurisdiction. All the said decisions are based on the ordinary or natural meaning of the word 'sale'. However, we have given our reasons for coming to the conclusion that the Federal Legislature had I competently enacted the deeming provision through a legal fiction with very restricted operational field. Cases relied upon are, therefore, of no help to the case of the assessees. A large number of decisions of this Court as also of the various High Courts were also cited before us but in none of these decisions the question of competence of the Federal Legislature was directly in issue as in the present cases. The following decisions were cited before us:-- DECISIONS OF SUPREME COURT OF PAKISTAN:

1. Sh. Fazal Elahi v. Federation of Pakistan 1988 SCMR 2103;

2. CIT v. Ayurvedle Pharmacy PLD 1970 SC 93;

3. CIT (Agr.) v. Azizuddin Industries 1973 SCMR 445;

4. Collector, CE&CL v. Azizuddin Industries PLD 1970 SC 439;

5. Amin Soap Factory v. Pakistan PLD 1976 SC 277

6. Al-Samrez Enterprise v. Federation 1986 SCMR 1917; 7 Muhammad Yunus v. CBR PLD 1964 SC 113; 8 CST v. Lahore Textile & General Mills. PLD 1992 SC 364; and

9. CBR v. Champion Clock Co. 1996 SCMR 1468 DECISIONS OF THE VARIOUS HIGH COURTS OF THE COUNTRY:

1. Latif Company Jute Mills v. STO (1971) 23 Tax 302;

2. CST v. H. Muhammad Hussain & Co. 1974 PTD 20 = PLD 1974 Note 21 at p.57;

3. CST v. Shafiq Corporation 1974 PTD 15 = PLD 1974 Note 25 at p.64;

4. S. Muhammad Din & Sons v. STO PLD 1977 Lah. 1225;

5. CIT v. Chemical Glass Factory (1980) 42 Tax 43;

6. Tribal Textile Mills v. CST 1980 PTD 373;

7. Paracha Textile Mills v. CST 1980 PTD 373;

8. Abbasi Textile Mills v. CST 1982 PTD 17;

9. CST v. Haji E Dossa & Sons (1982) 46 Tax 64;

10. Phillips Electrical v. Superintendent, CE&LC 1985 PTD 777;

11. Gul Ahmed Textile Mills v. CST 1985 PTD 211 (FB);

12. Dada Soap Factory v. CST 1987 PTD 420;

13. S. Muhammad Din & Sons Ltd. v. Sales Taxe Officer, Special Circle 1, Lahore PLD 1977 Lah. 1225.

14. Tribal Textile Mills v. CST 1980 PTD 383 Reliance had also been placed on behalf of the assessees on the judgments in the case of C.B.R. v. Champion Cloth 1996 SCMR 1468 and in the case of Flying Kraft Paper Mills v. C.B.R. 1977 SCMR 1874. It was rightly pointed out by Mr. Mansoor Ahmad, learned counsel for the department, that in the first case, section 3(6)(d) was not taken into consideration and taxable event was also not considered, and the second case related to exemption and is not relevant to the first case.

27. As regards the question of chargeability, it may be observed that in Noorani cotton case (supra) it was held that section 3(6)(d) was also a charging) section and this view is reiterated.

28. As a result Civil Appeals Nos.289, 290, 291 and 292 of 1978 are allowed and Civil Appeals Nos. 899-K of 1990 to 911-K of 1990 are dismissed. There is no order as to costs. M.B.A./C-27/S Order accordingly