P L D 1965 Supreme Court 146 (PLP)

CORNELIUS, C. J.‑This appeal is brought by special leave by the Commissioner of Sales‑tax (Central), Karachi, and calls in question the answer given to a reference made to the High Court of West Pakistan under section 17 of the Sales Tax Act, 1951. The subject‑matter of the reference is the assessment of sales‑tax upon certain goods manufactured by the respondent company, Dada Plastic Works, on dates prior to the 1st July 1951, which had up to that date been unsold in their hands but were sold later. On the 1st July 1951, the Sales Tax Act of that year came into force. It made material changes from the scheme of taxation under the preceding Act, namely, the Pakistan General Sales Tax Act, 1948, but of these specific mention need be made of only one. Under the Act of 1948, Dada Plastic Works would have been treated as a "dealer," and as section 3 of that Act will show, the tax to be paid by such "dealer" would be assessed upon the "turnover" which meant the aggregate amount for which during the year of taxation, the dealer bought or sold "goods" of the kind enumerated in the definition of "goods" contained in that Act. Since the goods in this case remained unsold in the bands of the manufacturer so long as the old Act remained in force, their value could not 'conceivably be included in any return of "turnover" for any period covered by that Act. The Tax Authorities treated the sale‑proceeds as taxable under section 3 of the new Act. Subsection (1) of this section provides that the tax shall be levied and collected on firstly, goods "produced or manufactured in Pakistan, payable by the manufacturer or producer," clause (a), secondly, on goods "imported into Pakistan, payable by the importer" clause (b), thirdly, on goods "sold by a licensed wholesaler payable by the licensed wholesaler-clause (c), and fourthly certain classes of goods to be notified by the Government which are .made the subject of export from Pakistan, the tax being payable by the exporter, this being in clause (d). Subsection (2) fixes the rate of the tax, and subsection (3) lays down the methods of evaluation of the different classes of goods enumerated in the first subsection. Subsections (4) and (5) prescribe the events upon the happening of which the tax becomes payable and may be reproduced in full:‑ "(4) The tax in respect of the goods mentioned in clauses (a) and (c) of subsection (1) shall be payable on the occurrence of the first of the following events‑ (i) When the goods are delivered to the purchaser, or (ii) When the property in the goods passes to the purchaser, or (iii) When the goods are sent, consigned or exported to any place outside Pakistan, and for the purposes of this clause the goods shall be deemed to have been sold when they are sent, consigned or exported to any such place as aforesaid." (Proviso to this subsection is not relevant for the purposes of this case.) "(5) The tax in respect of the goods mentioned in clauses (b) and (d) of subsection (1) shall be paid on importation or exportation, as the case may be, as provided hereunder‑ (i) Where the goods on importation are directly cleared for home consumption before the order for such clearance is made by the Customs Officer; (ii) Where the goods on importation are taken out of bond for home consumption‑before the goods are removed from the warehouse; (iii) Where the goods are exported by sea‑before the shipping bill is passed by the Customs Collector; (iv) Where the goods are imported or exported by land‑before the permit for the passage of the goods out of or into foreign territory is issued; and the provisions of the Sea Customs Act, 1878, and of the Land Customs Act, 1924, relating respectively to the clearance, shipping and removal of goods and the passage of goods out of or into foreign territory shall, so far as may be, applied to the payment of the tax under this Act as they apply for the purposes of those Acts." Subsection (6) of section 3 provides specific procedures and formulae for the determination of the values for taxation of certain classes of goods, and subsection (7)'fixes the liability for the tax upon persons who acquire by licence or otherwise from manufacturers, producers, importers, licensed wholesalers or exporters, their respective rights of disposal in the goods. The Sales‑tax Officer assessed the goods in question under the new Act. There was an appeal before the Appellate Assistant Commissioner which was rejected. There was a further appeal to the Income‑tax Appellate Tribunal, Karachi Bench, which allowed the appeal on the ground that the tax under the Act of 1951 could only apply to goods manufactured after the 1st July 1951, but for the goods in hand before the 1st July 1951, the assessee would be taxed in accordance with the provisions of section 40 of the new Act which provided that in the case of goods on which tax is not leviable under the new Act, produced or manufactured in or imported into the Provinces or the Capital on or before the date of the commencement of this Act, the tax leviable under the Act of 1948 should be charged, levied and collected as if that Act had not been repealed. At the instance of the Income‑tax Commissioner, the following question was thereafter referred to the High Court:‑ "Whether on the facts of the case sales‑tax under the Sales Tax Act, 1951 is payable by assessee‑respondent under sub‑clause (a) of subsection (1) of section 3 of the Act as `manufacturer or producer' within the definition of `Manufacturer or Producer' as given in subsection (11) of section 2 of the Act, in respect of goods sold by him after 30th June 1951, but manufactured before 1st July 1951." A Division Bench of the High Court answered the question in the same sense as the Income‑tax Appellate Tribunal. The learned Judges repelled the argument that under the new Act, the point of levy of the tax was when the goods were delivered to the purchaser, and that it was immaterial whether the goods were manufactured before or after the 1st July 1951. They expressed their opinion in the following words: "We think that the point as to when the goods were manufactured is of vital importance in applying section 3 of the Act. Under sub‑clause (3) of section 1 of the Act, the Act shall come into force on such date as the Central Government tray by notification in the official Gazette appoint. The Central Government appointed 1st July 1951, to be the date for commencement of the provisions of the Act. `All goods produced or manufactured' occurring in section 3 (1) (a) of the Act would therefore mean all goods produced or manufactured on or after 1st July 1951, and not what may have been produced or manufactured before that date. In sub‑clause (4) of section 3 of the Act the words `in respect of the goods mentioned in clause (a)' are very significant. It would mean the goods produced or manufactured on or after the commencement of the Act." We have heard Mr. Nurul Arfin in support of the appeal. Messrs Dada Plastic Works have not chosen to defend the appeal. The answer to the question posed before the High Court turns upon the true construction to be placed on the relevant provisions in section 3 of the new Act. Subsection (4) is explicit when it lays down the point of the levy of the tax, and in the case of goods produced or manufactured in Pakistan, it is clear that this point arrives at the moment when the goods in question are delivered to the purchaser. It is clear also that unless this point of time occurs during a period in which the new Act is in force the proceeds of the sale would be free of tax thereunder. This subsection commences with the words "the tax in respect of the goods mentioned in clauses (a) and (c) of subsection (1) shall be payable . . . . ." and the words of relation, "in respect of" have been construed by the learned Judges as if they operate to apply this restriction of time also to the point of manufacture. The correctness of this reading has been questioned before us, on the ground that neither the words nor the intention of the statute justify the extension of the restriction, which is specifically expressed to apply .to levy of the tax at a certain point, to cover also subsection (1) which deals with comprehensive classification, by description, of all goods upon the sale of which, the tax is to be applied. The argument, in my opinion, is clearly not without force. As has been seen, the goods upon which the tax is to fall are mentioned in four clauses in the first subsection. A point of difference from the Act of 1948, is that for the first time the new Act imposed the tax upon goods at the point of import into Pakistan and upon limited categories of goods at the point of export from Pakistan. As to exported goods, it is evident that the tax introduced by the new Act would attach only to goods which are exported after the Act came into force. Subsection (5) lays down the point of levy in relation to import and export and it could be urged that this subsection by itself makes it clear that the levy in relation to the fact of import or the fact of export could not apply on any date earlier than the 1st of July 1951. But that does not relieve all imported goods from the levy. For subsection (3), in clause (iii) makes specific provision in respect of goods sold by a licensed wholesaler, being imported goods, and as the tax applies as from the 1st July 1951, it would fall on sales of such goods in the warehouse or otherwise in possession, and untaxed. The natural presumption would be that the goods had been imported prior to the 1st July 1951, and it is only by attaching the temporal restriction to the point of import as well, that it would be possible to avoid the tax under the new Act. On precisely the same considerations, goods of Pakistan manufacture or production, in a warehouse or otherwise in possession, of a licensed wholesaler, on the 1st July 1951, ,vOL11d presumably have been manufactured or produced on an earlier date. Giving full value to the words of subsection (1) and subsection (4) as they apply to licensed wholesalers, it becomes evident that both on imported goods as well as upon goods manufactured or produced in Pakistan, which were in the licensed A wholesaler's warehouse on the 1st July 1951, and therefore o earlier importation or manufacture the tax would clearly b leviable upon sale, appropriation or consignment. Thus, I conclude that while the provision in subsection (1) that the tax should be collected on "all goods imported into Pakistan, payable by' the importer" have the effect of making the importer himself free of liability for the tax if the import took place prior to the 1st July 1951, yet that does not prevent the tax under the Act of 1951 from falling upon a licensed wholesaler, who sells goods imported prior to that date. The exemption a licensed wholesaler enjoys in respect of imported goods is that goods imported by him are not liable to tax at the point of import the reason being that there is specific provision for tax on the sale by a licensed wholesaler of imported goods, and the new tax was intended to be a single‑point tax. This provision too does not differentiate between goods imported before the 1st July 1951, and those imported after that date. The conclusion seems to me to be unavoidable that the relevant provisions in subsection (1) of section 3 .cannot be read as, in themselves, fixing a terminal date, viz., the 1st July 1951, as the B date on or after which goods should be imported, in order that the tax should be leviable under the new Act. Such a conclusion necessarily reacts upon the meaning to be attached to the words "all goods produced or manufactured in Pakistan" occurring in clause (i) of subsection (1) of section 3 in what may be described as a temporal sense. The learned Judges in the High Court have construed this provision as if it, by implication, required that the goods sold should have been produced or manufactured in Pakistan prior to the 1st July 1951, in order that the tax should be attracted. The words, on their face, do not bear such a narrow interpretation. They appear to be used in a descriptive sense, and as such, they are sufficient to describe a class of goods, and to distinguish them from other classes of goods e.g., imported goods. To add in addition, by way of connotation, a sense of time of manufacture or production would appear beyond the import of the words used. As in the case of such goods whether home‑produced or otherwise in the warehouse of a licensed wholesaler, it would appear difficult to construe the provision applying the tax simpliciter to goods produced or manufactured in Pakistan in a meaning restricted as to time of manufacture or production. If it were a case of double taxation, and the condition were that by mere production or manufacture without more, the goods would become subject to levy of tax under the repealed Act, perhaps a different construction might, in the interest of justice, require to be applied. But there appears to be no apprehension of double taxation in the present case, and it being clear that the first sale in respect of these goods occurred after the coming into force of the new Act, there is no reason why the tax should not be levied on them under the provisions of subsection (4) of section 3 of the new Act. The occasion for the application of the provision contained in section 40 of the new Act, making the machinery of the old Act applicable to the levy of the tax in a particular case wherel~ it is not leviable under the new Act, would therefore not seem to arise. For these reasons, I would answer the question referred to the High Court in the affirmative. As there has been no resistance of the appeal, I would leave the parties to bear their own costs. S. A. RAHMAN, J.‑I agree. FAZLE‑AKBAR, J.‑I agree. B. Z. KAIKAUS, J.‑I agree. HAMOODUR RAHMAN, J.‑I agree. A. H. Appeal allowed.