1986 PLP 16 (PTD)

MUHAMMAD ZAHOORUL HAQ, J.‑The Commissioner of Sales Tax has referred the following three questions under subsection (2) of section 17 of the Sales Tax Act: "(1) Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal way justified in cancelling the order of the Sales Tax Officer? (2) Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal was justified to holding that sec tion 3(1)(e) of the Sales‑tax Act was not applicable? (3) Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal .was not incorrect in not taking cognisance of certificate prescribed under rule 16 of the Sales‑tax Rules, 1951 "?

2. The respondent is a manufacturer of aerated water and it was alleged to have purchased raw material valued at Rs. 79,544 free of sales tax from M/s. Coca Cola Export Corporation, Lahore, since the aerated water was declared exempt from levy of sales tax by Notification No. 123/(1)/70, dated 29‑6‑

70. The applicant alleges that the respondent used the raw material purchases from M/s. Coca Cola Export Corporation, Lahore free of sales tax' ore the basis of the licence issued by the. Department to the assess ment year 1970‑71 the Sales‑tax Officer charged the Rs. 15,908 at the rate of 20 % on the raw material used by the respondent in the manufacture of aerated water.

3. The respondent felt dissatisfied and went in appeal. The appeal was allowed. The Commissioner of Income‑tax made an application to the Appellate Tribunal for reference of the case to the High Court but it was dismissed and hence this direct case from the Commissioner of Sales‑tax.

4. The Sales‑tax Officer made an ex parte assessment against the respondent in the following words:‑ "The assessee‑company made Sales‑tax free purchase from M/s. Coca Cola Export Corporation, 1‑N, Gulberg, Lahore to the tune of Rs. 79,544 on which Sales‑tax @ 20 % comes to Rs. 15,908,"

5. The position adopted by the respondent before the Income‑tax Appellate Tribunal was that they had not stock of raw material on 1‑7‑70 which is the opening day of relevant year and therefore they could not be charged any sales tax for the raw materials purchased by them during the previous year because they had paid. "Sales‑tax ‑on, the Aerated water produced by them before that date. The departmental representative was not in a position to controvert that statement. The Appellate Tribunal made the following order:‑ "We have given our due consideration to the facts as well the argu ments made by the representatives of the parties and we feel inclined to agree with the contention of the authorised representative of the appellant. It is also not disputed by the learned departmental representative that aerated water was exempted from sale‑ tax with effect from 1‑7‑70 and hence the sales effected by the assessee, were admittedly not liable to sale‑tax. The Sales‑tax Officer, it is also evident from the impugned order, has levied the tax on the sales‑tax free purchases made by the assessee from M/s Coca Cola Export Corporation, Lahore. Moreover, it is evident from the scrutiny of the facts of the case in hand that the Sales‑tax Officer has not levied sales-tax on such goods which the assessee while a licensed manufacturer of aerated water had purchased without payment of sales tax and which goods were not used in the manufacturer or production of the taxable goods as it is envisaged by section 3(1)(e) of the Sales Tax Act. There is definitely no provision in the Sales Tax Act under which the Sales‑tax Officer could levy the sales tax on the sales‑tax free purchases made by the assessee. The order of the 8dales‑tax Officer is therefore ab initio void for being without lawful authority. The; impugned order is therefore hereby cancelled."

6. The order impugned by the applicant is based on facts. The position taken by the Department now was never taken by them before the Appellate Tribunal. Even today it is not presented before us in a positive form that any purchases had been made by the respondent on 23‑7‑70 from their purchaser and in view of this position the basic fact being in contro versy, the appellate Tribunal has decided the question on the basis of facts which had been placed before them and since their decision is completely based on facts, therefore, no question of law arises therefrom.

7. In fact, the order of the Sales‑tax Officer was completely devoid of detail as to when the purchase was actually made by the respondent. In these circumstances, the Tribunal was justified in cancelling the order of Sales‑tax Officer and in holding that section 3(1)(e) of the Sales Tax Act was not applicable in the case. Section 3(l)(e) of the Sales Tax Act could have applied only when it had been affirmatively established that the raw material in question had been procured after 1‑7‑i

0. But in the present case, the fact found is that the raw material had been purchased in the previous year and had been consumed before 1‑7‑

70. Therefore, sec tion 3 (1)(e) was not applicable. No certificate prescribed under rule 16 of the Sales Tax Rules, 1951, executed by the respondent has been placed before us and therefore it is futile from this High Court to get answer of that question. We are of the view that this application was completely misconceived. The answer of questions Nos. 1 and 2 is in the affirmative and the answer to the question No. 3 is that the said question does not arise to view of the lack of material on this question. Application is, therefore, disposed of. M. B. A. Application disposed of.