1963 PLP 265 (PTD)

"Whether on the facts of the case sales‑tax under the Sales Tax Act 1951 is payable by the assessee‑respondent under sub -clause (a) of subsection (1) of section 3 of the Act as "manu facturer or producer" within the definition of "manufacturer or producer" as given in subsection (Il) of section 2 of the Act, in respect of goods sold by him after 30th June 1951, but manufactured before 1st July 1951?"

2. The facts giving rise to the reference are these: the respondent is a manufacturer of plastic goods. The goods liable to tax were manufactured before the 1st July 1951 when Sales Tax Act III of 1951 came into force. The goods were sold after the 30th June 1951. The Income‑tax Officer held that the goods manufactured before the 1st July 1951 but sold after the 30th June 1951 were liable to tax under the Act. The Appellate Assistant Commissioner in appeal confirmed the order of the Sales Tax Officer. The Tribunal, however, decided in favour of the respondent and expressed the opinion on the point as under: "With regard to goods in the stock of the assessee worth Rs. 90,637 before the new Act came into force from 1st July 1951 by no stretch of imagination could the assessee be called a manufacturer or producer, the definition of which is given for the first time in the new Act. So far the goods in his hand before the new Act came into force, he was a dealer under the old Act. The different provisions of the new Act such as the charging section 3, section 4 providing for exemption, section 27 of the Act providing for refunds, section 19 providing for keeping accounts, as well as the rules under the new Act have to be operated after the Act came into force and not before. Though the assessee manufactured the stock of goods in hand before the new Act came into force, he was at that time not a manufacturer assessable under the new Act but a dealer under the old Act. So it was on the goods that are manufactured after 1st July 1951, that the assessee can be taxed, under the present Act. For the goods at hand before 1st July 1951, he will be taxed according to the provisions of section 40." 1, Mr. Noorul Arfin, the learned Advocate for the Income‑tax Commissioner, contended that the sales tax is a tax at the point of sale. The question for determination of the nature of goods sold or of the status of the seller will only arise at the time when the goods are sold. The assessee, it is contended, admittedly sold the goods after the 30th June 1951. The question, therefore, whether the goods were manufactured or produced by the assessee will arise only after the 30th June 1951. The assessee after the 30th June 1951 became a manufacturer or producer within the meaning of the Sales Tax Act 1951. There is not much force in this contention.

4. It is conceded by the learned Advocate for the assessee that the respondent has to pay sales tax but the question is whether he has to pay the sales tax under the old Act V of 1948 or under Act III of 1951. The tax payable under Act V of 1948 would be less than the tax payable under Act III of 1951.

5. The charging section under Act V of 1948 and Act III of 1951 is section

3. Under the repealed Act the sales tax was charge able in any year at the turnover made by a dealer. `Turnover' is defined in the repealed Act as an aggregate amount for which goods are either bought by or sold by the dealer. Under section 3 of Act III of 1951 sales tax is levied on the value of all goods produced or manufactured in Pakistan payable by the manufacturer or producer. It may further be mentioned that "manufacturer or producer" is not defined in Act V of 1948. These terms were for the first time defined in Act III of 1951.

6. The relevant provisions which Mr. Noorul Arfin relied upon are section 3 (1) (a) and (4) of the Act. They run as under:‑ "3 (1) There shall be levied and collected a tax on the value of‑ (a) all goods produced or manufactured in Pakistan, pay able by the manufacturer or producer. (4) The tax in respect of the goods mentioned in clause (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 . . . . ." The learned Advocate for the Income‑tax Commissioner con tended, as already mentioned above, that the point when the tax is to be levied is when the goods are delivered to the purchaser. It is immaterial, it is contended, whether the goods were manufactured before 1st July 1951, or afterwards. 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 may 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 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 com mencement of the Act.

7. The tax that would be leviable on the assessee in respect of the goods manufactured before 1st July 1951 would, therefore, be not as manufacturer or producer within the meaning of Act III of 1951. Our answer to the reference, for the reasons given above, would be in the negative. Reference answered in negative.