1985 PLP 36 (PTD)

AJMAL MIAN, J.‑‑ This is a Sales Tax Reference, which raises the following question of law:‑ "Whether the Tribunal was justified in law in holding that unless sales‑tax has been proved to have been paid no order of refund of the sales‑tax payable can be made on the presumption that sales‑tax has been paid at an earlier stage under section 2.' of the Sales‑tax Act." The brief facts leading to the filing of the above reference are that the applicant is manufacturer of the vegetable ghee. The applicant preferred a claim for the refund for Rs.6,79,491 on the purchases of Rs.52,07,143 of, cotton‑seed oil, made during the period commencing from 1‑7‑1964 to 30th April, 7.965: The Sales Tax Officer by his order dated 11‑3‑1967 rejected the applicant's above claim. The applicant being aggrieved by the above order filed an appeal, which was allowed by, the Appellate Assistant Commissioner by his order, dated 12‑6‑1967. The department being aggrieved by the above order filed appeal before the Income‑tax Appellate Tribunal, Karachi, Bench, Karachi (S.T.A. No.37/67‑68) (assessment year 1964‑65), which was allowed by an order dated 1‑9‑1970. The Income‑tax Appellate Tribunal upon an application under section 17(1) of the Sales Tax Act (hereinafter referred to as the Act) filed by the applicant framed the above‑quoted question for reference to this Court. 2. (a) Mr. Nizam Ahmed, learned counsel for the applicant in support of the above reference has urged as follows:‑ (i) That once a manufacturer proves that the sales tax was payable on partly manufactured item, Which he had purchased, he is entitled to the refund of the sale tax under section 27(1) of the Act without proving the factum that the sale tax was actually. paid. (ii) That even if the department had failed to recover the sale tax on the partly manufactured item on account of any omission/ mistake, it can still recover the same from the manufacturer of the partly manu factured item. (b) On the other Mr. Sheikh Haider, learned counsel for the respondent has contended that the wording of section 27(1) of the Act itself provides that no refund can be made unless payment of the sale tax amount of which refund is sought, is proved. Mr. Sheikh Haider in support of his above contention has referred to the case of Messrs Tribal Textile Mill Ltd. v. Commissioner of Sales Tax 1980 P T D 373 and the case of Messrs Pakistan Toilet Works v. Income‑tax Appellate Tribunal and another 1982 P T D 14. 3. (a) In order to appreciate the respective contentions of the learned counsel for the parties, it may be advantageous to reproduce hereinbelow section 27 of the Act, which reads as follows:‑ "27. (1) Whether partly manufactured goods are purchased by a licensed 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 licensed manufacturer. (2) If any person satisfies the Sales Tax Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this act, he shall be entitled to a refund of such excess, and the provisions of this act in respect of appeal and revision shall apply to an order passed by the Sales Tax Officer under this subsection as they apply to an assessment." It may be noticed that the above section has two parts, namely, subsection (1), which relates to a claim of refund on partly manufactured goods purchased by a licensed manufacturer, on which tax has been (2) deals with a claim for refund on account excess payment. We are only concerned with subsection (1) of section

27. The point for consideration is, as to whether the above subsection contemplates that the person making claim for a refund should prove the actual payment of sale tax, of which refund is claimed or is he merely to show that he. is a licensed manufacturer and has purchased partly manufactured goods on which at the relevant time sale tax was payable. We are inclined to hold that the use of the words "tax has been paid on those goods‑‑a refund of the amount of tax so paid shall be made to the licensed manufacturer" clearly indicates that in order to press into service the above subsection, it is incumbent on a Licensed manufacturer claiming refund of the tax to prove the factum of actual payment of the tax on the partly manufactured goods purchased by him. It is not enough to show that tax was payable.

4. It may be pertinent to point out that the factum payment of the sale tax, of which the refund leas claimed by the applicant was not proved as a matter of fact either before the Income‑tax Officer, or before the Assistant Appellate Sales Tax Commissioner or before the Income‑tax Appellate Tribunal. It may also be pertinent to mention that it is the case of the respondent that till the decision of the Supreme Court in the case of M/s. Noorani Cotton Corporation and another v. Sales Tax Officer, A‑Ward, Lyallpur and another 1965 P T D 273 (which was decided on 10‑11‑1964), the department and the manufacturers of the Cotton‑seeds Oil and the Vegetable Ghee were under the mis apprehension that no sale tax was payable on Cotton‑seeds Oil. Se that as it may, we are even otherwise inclined to hold that under subsection (1) of section 27 of the Act no refund can be claimed without proving the actual payment of the sale tax amount, of which refund is claimed.

5. The cases cited by Mr. Shaikh Haider, learned counsel for the respondent support the view, which we are inclined to take. In the first case a Division Bench of the Lahore High Court held that under section 27(1) of the Act refund can be claimed subject to the condition of the tax having been paid as a matter of fact on the importation on previous sale. In the second case a Division Bench of this Court, dismissed a writ petition filed by the assessee against the order of the Sale Tax Officer and the Income‑tax Appellate Tribunal declining to allow the refund of the sale tax amount for want of proof of payment.

6. For the aforesaid reasons, our answer to the above question is in the affirmative. There will be no order as to costs. M.B.A Answered in the affirmative