Manufacture or produce

2020 PTD 1502 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.2(16) & 2(17)Manufacture or produce"Manufacturer" or "producer"Scope"Manufacturer" is a person engaged in manufacture of goods

"Manufacture" is defined under S.2(16), Sales Tax Act, 1990, as a process whereby an article singly or in combination with other articles is either converted into another distinct article or it is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly

Such activity includes processes incidental or ancillary to the completion of a manufactured product, such as process of printing, publishing, lithography, graving and operations of assembling, mixing, cutting, diluting, bottling, packing, repacking or preparation of goods in any other manner.

2013 PTD 1723 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.2(16)Manufacture or produceManufacturing activitiesSeries of activity were involved in production process involving material, machine and human skills

Entire manufacturing activities may be done under one roof or at the option of manufacturer, parti-cularly depending upon the nature of manufacturing

Manufacturing activities could be outsourced either fully or partly, in a close location or distinct location

Factors compelling to decentralize or outsource the manufacturing activities completely or any parts thereof was usually cost effectiveness, requiring specialized skill, availability of processing equipments, convenient location, favourable terms of contract or utilization of own performing capacity in more projecting activities and depend on other exigencies of decision making.

2013 PTD 1723 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.2 (16), 3, 6, 22, 26, 33, 34 & 36(1)Federal Excise Act, 2005, Ss.3A, 4, 8 & 19S.R.O. No.655(I)/2007 dated 29-6-2007Manufacture or produceTool manufacturingComparison of sales tax returns with income tax returnsDeclaration of lesser amount of sales in sales tax returnsTaxationDifferential amount represented job receipts performed by the taxpayer for other parties i.e. customers

Taxpayer preferred manufacturing job specified by the customer without purchasing the raw-material or selling same by himself

Material was provided by the customer (raw or semi finished), defined jobs performed by the taxpayer and return of goods to the customer for further processing, packing, sale etc.

Job performed by the taxpayer fell in the category of tool manufacturing

Main issue was with regard to the "manufacturing of goods"

Contention of the department was that the taxpayer was indulged in the business of "manufacturing" while the taxpayer's stand was that he was providing "services" and the glass frosting and glass tempering were exempt as it came into the ambit of services, and no tax was leviable on the same

Sufficient material was not produced by the taxpayer to establish its case

Neither basic record/specific initial material was called by the Adjudicating Officer as envisaged under S.22 of the Sales Tax Act, 1990 nor the taxpayer had provided the same for examination

First Appellate Authority had also not thrashed out the case properly and his observations were contradictory

Case was remanded to Adjudication Authority to examine all the materials to be produced before him as prima facie it was apparent that the Adjudicating Officer had neither initiated any enquiry to find out the veracity of the claim of the taxpayer nor any record was called by the Adjudicating Authority

No corroborative evidence was produced by the taxpayer in support of his claim

Taxpayer was directed to produce all the relevant records and evidence in support of his claim

Adjudicating Authority was directed that after affording a reasonable opportunity of being heard decide theissue

Tribunal further directed that Taxation Officer either personally visit the factory premises or depute some one to ascertain whether the taxpayer was indulged in the manufacturing activity or not and then proceed in accordance with law

Effect of remand was of course, in the interest of both the parties as the findings drawn by the authorities below had not been properly investigated

Whole exercise was directed to be completed within two months strictly.