P L D 1982 Supreme Court 107 (PLP)

MUHAMMAD HALEEM, ACTG. C. J.‑These appeals, by special leave, arise from the common judgment of the erstwhile High Court of West Pakistan, Lahore, dated 25th of May, 1970, by which Civil Miscellaneous Nos. 2306 and 2307 of 1970, were dismissed. By this application under section 17(2) of the Sales Tax Act, 1951, a prayer was made that the Income‑tax Appellate Tribunal be directed to state the case and to refer it to this Court. The question framed for reference was as follows :‑‑ "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the almirabs manufactured by the assessee were products of hammer works and as such exempt from sales tax under Notification No. 9, dated 27th of June, 1951." The Income‑tax Tribunal had declined to refer this question on the ground that it was a question of fact as to whether a particular article was a result of hammer works or not. The application in Civil Miscellaneous No. 2306 of 1970 arose from the following facts. The respondent in both the appeals is the same and at the relevant time was engaged in the manufacture of steel almirahs and safes. The Sales Tax Officer issued notice to the respondent requiring it to file its returns for the assessment years 1958‑59 and 1959‑

60. But as the respondent failed to file the returns, the Sales Tax Officer ex parte levied sales tax at the prescribed rate of 10 % on the basis of the estimated sales corresponding to the Income‑tax assessment for these years by separate orders dated 5th of March, 1963 and 25th of June, 1965. The respondent appealed to the Appellate Assistant Commissioner, `B' Range, Lahore, against the order for the assessment year 1958‑59 and claimed that the goods manufactured involved the application of hammer works and as such these were exempt from sales tax ‑under Item 15 of the Sales Tax Notification No. 9, dated 27th of June, 1951, as amended by Sales Tax Notification No. 3 of 16th of March, 1952, Item No. 15 reads as under:‑ "

15. Products of iron foundries and steam and hammer works." The Appellate Assistant Commissioner Sales Tax, firstly relied on the report of the S. T. O., dated 18th of May, 1964, detailing the manufacturing process as divisible into four major stages, namely, cutting, bending, welding and rivetting. As for cutting and rivetting, his opinion was unanimous that it was done with the help of hammer, but as for bending, he gave out that it was done with the processing machines without any involvement of hammer work. These three stages, according to the report, were peculiar to the manufacture of almirahs but in the case of the safes there was the process of welding which was done by making holes in the metal sheets with drill machines and then screwed. Concluding thus the report indicated that the actual process involved more than 75 % work done without the aid of hammer; and secondly, reliance was placed on the report of the Director of Industries and Commerce dated 19th of December, 1964, which indicated that the process was partly mechanical and partly manual and, therefore, the manufacture could not entirely be termed as hammer work. The appeal was, accordingly, dismissed as the manufacturing business of the respondent did not fall within the definition of hammer work. The respondent, thereupon, filed an appeal before the Income‑tax Appellate Tribunal and succeeded as it was‑ allowed by order dated 17th of March, 1979,. The Income‑tax Appellate Tribunal, after holding a practical demonstra tion held that the dominant manufacturing process was the hammer work. It will be here relevant to produce what emerged from the practical demonstra tion and accepted by the Income‑tax Appellate Tribunal :‑ " . . The facts as emerged and the demonstration of process made before us leave us in no doubt that so far as almirahs are concerned the use of hammer is a dominant feature in the manufacturing process, but the same cant),)t be said about the safes which do not involve the use of hammer t. such an extent that it can be regarded as a dominant factor. The sales of the two ctitegories of goods have, therefore, to be estimated separately." In effect ' it negatived the plea that the process should consist entirely of hammer work. The result of this finding was that the assessments were set aside and ordered to be made "de noro" after determining the turnovers of almirahs and safes separately. Aggrieved by this order the appellant filed an application before the Income‑tax Appellate Tribunal for referring the question as aforementioned but did not succeed. The facts and decisions of the Sales Tax Authorities in Civil Appeal No. 13 of 1972, also rest on the same basis and need not be recapitulated here for repetition sake. Leave to appeal was granted to examine the conflict of decision between this Court and that of the High Court of Judicature at Dacca and further to construe the Notification. In the Dacca case it was held that a question of law arose for decision from the finding of the Tribunal that the production of wire nails was the result of hammering by a mechanical process as distin guished from manual process. It is not known as to what decision the High Court of Dacca gave but in construing Item No. 15, the criterion can either be that the manufacturing process should be entirely the result of hammer work or the hammer‑work should be a dominant feature involving other incidental process. In Mansur Engineering Works Ltd. v. The Commis sioner of Income‑tax Sales Tax, East Pakistan and others (1), the question arose as to whether the manufacture of one of the items such as hand‑pumps could be termed as the "product of iron foundry" and it was held that the assemblage of parts was not the creation of a new product but a process by which different parts were joined to complete the article manufactured by the process of casting; and that this process could not take it out from the category of the term "products of iron foundry" Here also the dominant factor was the manufacture of different . parts in the foundry though some other slight process was involved in completing the article. The language of the Item itself does not explicitly make out that the sole criterion should be the hammer work as the word "product" means "a thing produced". In the absence of anything to qualify the hammer work, it will be consistent with the object of the Notification to construe that hammer work should be the dominant factor otherwise the exemption granted thereunder would become illusory without any justifiable reason. However, it will be a question in each case for decision as to what extent the hammer work is used to produce a thing which shall be the dominant factor. Further, it is not possible to go behind the finding of the Income‑to Appellate Tribunal that the goods were the products of the hammer work which finding was one of fact and the High Court ‑rightly held from this finding no question of law arose. In The Commissioner of Sales Tax v. Messrs Alnoor Industries Ltd., Lahore (2), this Court held that the question (1) 1968 P T 1) 90 (2) 1980 P T D 188 as to what process is used for the manufacture of a particular article is question of fact while upholding the finding of the Tribunal that as a matter of fact the article produced was the product of hammer work and did not raise a question of law. We reiterate this view and finding no substance in the appeals we dismiss them but with no order as to costs. s. A. H. Appeal dismissed.