Law: Sales Tax Act, (III of 1951)

Section: 2(12)

Law: Constitution of Pakistan, 1973

Section: 185(3)

Sales Tax Act (III of 1951)---S.2(12) Constitution of Pakistan (1973), Art, 185(31 Expressions "Subject to tax" and "Subject to payment of tax" Connotation Leave to appeal was granted to examine the interpretation of S.2(12) of the Act. ORDER ZAFAR HUSSAIN MIRZA, J. The petitioner Dada Soap Factory Ltd. is, company engaged in the business of manufacture and sale of washing soaps an' detergents. Washing soap was exempted from sales tax, the detergent was taxable under the Sales Tax Act, 1951 (hereinafter referred to as Act) up to the charge year 1969 70. Those taxes were leviable on wholesale price of detergents. However, from 1 1 1989, according to the petitioners, sales tax was merged with excise duty, the levy whereof was fixed at the rate of 20 per cent on retail price. For the assessment years 1973 74, 1974 75, and 1975 76 the petitioners applied under section 27 of the Act claim on the ground Of sales tax paid by them on the purchase of raw materials used in manufacturing detergents. The Sales Tax Officer rejected the claim on the ground that there is no levy of sales tax on detergents and only excise duty is payable and no claim for ground can be entertained. Additionally it was hold that the petitioners were not entitled to claim refund of sales tax paid on raw materials used in non taxable goods. The appeal filed by the petitioners was, however, accepted by the Appellate Assistant Commissioner. On a second appeal filed by the department, the Tribunal reversed the appellate order and restored that of the Sales Tax Officer. Upon this the petitioners submitted an application under section 17 of the Act for reference. Which was accepted and the following question was referred to the Sindh High Court: "Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the goods manufactured by the assessee were not subject to tax payable under the Sales tax Act and hence refund of tax could be allowed under section 27 of the Act?" The decision of this question turned on the interpretation of the expression "subject to tax" as it occurs in the definition of the term "partly manufactured goods" in Section 2(12) of the Act…

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