Law: Sales Tax Act, (III of 1951)

Section: 3,7

Law: Central Excise Rules, 1944

Section: 10,210,226

Sales Tax Act (III of 1951)---Ss. 3 & 7---Central Excise Rules, 1944, Rr. 10, 210 & 226---Sales tax--Petitioner was a manufacturer of `urea-formaldehyde, imported (menthanol), a chemical which prior to becoming end-product (urea-formaldehyde), was exempt from sales tax but during process becomes `formaldehyde' which was a taxable product---Petitioner earlier, manufactured and sold in market few consignments of that intermediary product (formaldehyde), which fully established that (formaldehyde) was capable of being manufactured and marketed independently--¬Petitioner, in circumstances, was rightly found liable to pay sales tax on use of formaldehyde in end-product. Abbasi Textile Mills Ltd. v. Commissioner of Income-tax 1990 PTD 189; Gul Ahmad Textile Mills v. Commissioner of Sales Tax (Central), Karachi 1985 PTD 211; Excide Pakistan Limited v. Central Board of Revenue and others 1989 PTD 1000; Noorani Cotton Corporation's case PLD 1965 SC 161; Shaiq Corporations Limited's case PLD 1986 SC 731 ref. JUDGMENT SALEEM AKHTAR, J.---The petitioner is engaged in manufacture of urea-formaldehyde. For manufacturing it the petitioner imports menthanol, a chemical, which after it is exidised becomes another chemical product namely formaline which when absorbed in water becomes formaldehyde. After further processing of formaldehyde with chemical additives and urea it result in urea-formaldeyhde, which is the end-product. Urea-formaldeyhde is exempt from sales tax under S.R.O. 666(1)/81, dated 25-6-1981. The petitioner commenced production on 20-5-1984 and made sale of two consignments of formaldehyde weighing 9.66 tons and paid sales tax on them. Except for these consignments the petitioner states that it has not sold it in market and has used if. for manufacturing the end-product namely urea-formaldehyde. The respondents 3 and 4 directed the petitioner to take out a license as manufacturer of formaldehyde which was a taxable good. The petitioner was accordingly registered as manufacturer of formaldehyde on which sales tax was payable at the rate of 12.50 per cent. Respondent No. 4 also required the petitioner to maintain the record of production as required by…

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