Law: Sales Tax Act, (III of 1951)

Section: 3, 7, 8

Sales Tax Act (III of 1951), Ss. 3, 7, 8 & 28-Sacking cloth or hessian used in production of gunny bags-None of taxable events prescribed in S. 3(4) ever taking place in respect of arty, of constituents- Assessee, held, not liable to sales tax in respect of .such constituents-Gunny bags thus produced by assessee and exported out of country exempt from sales tax. The manufacturers or producers could not become liable to the payment of the sales tax upon sacking cloth or hessian which went into the production of the gunny bags as none of the taxable events prescribed in section 3(4) of the Sales Tax Act ever took place in respect of any one of these constituents. None of these constituents in its original shape was either delivered to a producer or the property in it passed to a purchaser or it was sent, consigned or exported to any place outside Pakistan. It is only when these constituents were assimilated in the process of manufacture and culminated in the end-product, namely, the gunny bags and- the gunny bags were actually exported that give rise to a legal right to receive the tax and a legal obligation to pay it. The goods to become leviable with tax has to come under section 3 (1) of the Act, and a transaction to become a taxable event must find mention in section 3 (4) of the Act. This view is highlighted by the fact that the Legislature in its subsequent amendment added a new clause, namely, clause (iv) to section 3(4) of the Act. It is patent that whatever the manner of the use of the goods by the manufacturer or producer, no tax on such goods becomes payable unless and until such use of the goods has been made a taxable event under section 3 (4) of the Act. Section 3 (1) (e) having been added in 1967, and not given retrospective effect, is not available in the present case This clause, however, brings out clearly the idea of goods that are not used by the manufacturer or producer by way of independent utilisation as distinguished from the use of the goods in the process of manufacture or production of taxable goods. The gunny bags were liable to the payment of sales tag on the happening of the taxable event, namely, exportation. It is, however,…