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Petition No. 378 of 1964, decided on 10th May 1967.

S. 7(1) read with Notification No. 10, dated 27‑6‑51, item No. 15‑"Products of iron foundries" --Exemption‑Products of assessee : (1) Rice Huller Shells ; (2) Hand Pumps ; (3) Hand Pump Plungers ; (4) C. I. Pans ; (5) Hamam Dastan ; (6) Jalkati and (7) Rain Water Pipes Held, covered by item No. 15 of notification‑Assessment of such products to Sales Tax, held, without lawful authority.

Tiger Wire Products Ltd. v. Sales Tax Officer, 17 D L R 237 distinguished.

Shahabuddin Ahmed and Fariduddin Ahmed for Petitioner.

Afzalul Huq for Respondents.

Dates of hearing: 14th, 15th March and 27th April 1967.

‑This Rule nisi was issued upon the respondents at the instance of the petitioner firm, Mansur Engineer ing Works Ltd., Chittagong, to show cause why the order of respondent No. 2 Sales Tax Officer dated 17‑6‑60 assessing Sales Tax on certain items manufactured by the petitioner firm and the order of the Commissioner of Sales Tax (Respondent No. 1) dismissing the appeal of the petitioner against the aforesaid assess ment and the proceeding in certificate Case No. 710 S. T. of 1963‑64 before respondent .3 Certificate Officer, for recovery of the Sales Tax under the impugned order should not be declared as made or taken without lawful authority and of no legal effect.

The items in respect of which Sales Tax was assessed by the Sales Tax Officer are :

(1) C. I. (Cast Iron) Pans, (2) Rice Huller Shells, (3) Hand Pumps, (4) Hand Pump Plungers, (5) Rain Water Pipes and (6) Hamam Dastan, (7) Jalkati and (8) Structural Works. Admittedly under notification No. 10 of dated 27th June 1951, the Central Government exempted certain goods or class of goods from Sales Tax under the powers conferred by section 7 (1) of the Sales Tax Act, 1951. Items Nos. 14 and 15 of the Notifications are as follows :

(14) Metal Utensils.

(15) Products of iron foundries and steam and hammer works.

The contention of the petitioner is that all the above 8 items in respect of which tax has been assessed are also foundry products and the Sales Tax Officer and Commissioner of Sales Tax acted illegally in holding that they were not so. The reason given by the Sales Tax Officer in his order dated 17‑6‑60 is that "in all the cases of foundry products operations other than those relating to casting were effected and hence these cannot be termed exclusively as foundry products and exemption claimed is not therefore admissible" (vide Annexure B'). The Sales Tax Officer, therefore, exempted only Galvanised Iron Bukets, the only other product manufactured by the firm. The Commissioner, Sales Tax, upheld the order agreeing with the Sales of iron foundries and items cannot be termed as the products of iron foundries and steam and hammer works".

Specimens of the different items in question were produced before the Court, and a further affidavit has also been sworn on behalf of the petitioner firm describing in details the process of manufacture of the products. No counter affidavit has been filed to controvert the statements in this affidavit, obviously, because there was nothing to controvert.

Now, with regard to the items, (1) C. I. Pans, (2) Rain Water Pipes, (3) Hamam Dastan, (4) Jalkati. We find no difficulty in holding at once that they are foundry pro ducts, as after the process of casting is done, nothing else remains to be done for the completion of the manufacture of these articles, and the objection of the Sales Tax Officer referred to above in any case cannot apply to these articles.

As regards the remaining articles, they are described in the affidavit of the petitioner as follows :‑

"Rice Huller Shells:‑It is a spare part for Rice Mill. An iron rod is cut to size and placed inside the centre of the dice, then melted cast iron is poured inside the dice. Thereafter the cover of the dice is removed when it becomes hard and the whole thing is placed in open space to be cooled down by natural air.

"Hand pumps:‑ Hand pumps are nothing but water pumps commonly known as Tube‑wells.

Different parts of the Hand pumps are produced in the Foundry by use of different dices made in the earth with sand and earth. Melted cast iron is poured from the furnace into the dice. After the parts are produced these are brought out from the dices and cleaned, then assembled together. A few imported nuts and bolts are also used for assembling the Hand pumps.

"Hand Pump Plungers :‑These ate the Spare Parts of Hand Pump/Tube‑wells, consisting of three separate parts.

Three separate dices are made by the moulder in the earth with earth and sand. Then melted cast iron is poured inside the dices. When the parts are produced those are brought out from the dices and assembled together. Thread has to be cut in one of these parts as otherwise it becomes useless.

"Structural Works :‑This is not a particular item or parti cular items of works. Petitioner Company from time to time gets special orders from different firms to manufacture different items as per their design and specifications to be produced by the petitioner‑company with the help of steam and hammer. These types of works are done on contract basis.

In the particular year 1955‑56 the petitioner's company received orders on contract basis for erecting the Iron Structure of roof of the factory buildings of the following Company. Eastern Engineering Works, Messrs Tar Mohammad & Co., Messrs Halim Engineering Works, Pakistan Mills Stores, all of Chittagong. Structural designs of the roof were supplied by the above‑mentioned firms and the Petitioner‑Company were asked to erect the Iron Structural portion of the roof of their factory buildings which they did with angles, Iron Joists and Steel Plates."

Now, as regards item No. 1 Rice Huller Shell described above, we are unable to appreciate what exception can be taken to this item falling within the description of foundry product. It is absurd to contend that it is not such a product because a piece of steel rod is placed at the centre of the mould before the casting is done. As regards the item No. (2) Hand Pump, as seen above, the separate parts of the pump are cast in the foundry and then assembled together by means of a few imported nuts and bolts. Similarly, in making the plunger (item No. 3), the three parts of the same are cast separately and they are assembled together, and threads have to be cut in one of these parts. We fail to see why the hand pump or one of its parts, the plunger, should cease to be product of an iron foundry because the separate parts pro duced in the foundry have to be assembled together by using a few bolts or nuts or cutting threads to complete the process of manufacture of the articles. The process involved in each case is not creation of a new article out of raw material produced by process of casting, but simply joining the different parts together to complete the article manufactured by process of casting. We are unable to find any substance in the contention of Mr. Afzalul Haque, the learned. Advocate for Respondents that because some slight process has to be done to complete the manufacture of the articles, they cease to be attracted by the term "products of iron foundry".

The only ruling cited at the Bar regarding the questions of interpretation of the term "product of iron foundries" is the case of Tiger Wire Products Ltd. v. Sales Tax Officer (P L D 1965 Dacca 492). In that case the firm used to manufacture wires, naively, steel wires, galvanized iron wires, etc., of various sizes, and exemption from sales tax on these products was sought on the contention that they were products of re‑rolling mills. It was, however, held that though some products of re‑rolling mills. (M.S. rods) were used by the company for manufacture, of their wires, these wires were not products of re‑rolling mills. Even the manufacturing license in that case, it appears, was taken on the basis that the wires manu factured by the company were not covered by the notification exempting products of re‑rolling mills from sales tax.

In the instant case, the circumstances are quite different. Here the raw material used is iron which is melted to make the different parts of the products of the foundry themselves, and the process of manufacture of these articles, as already stated, is simply completed by the simple operations already mentioned. We are unable to find any substance in this contention of Mr. Afzalul Haque that because of those operations they lose the character of product of iron foundry. If these contentions were to prevail the exemption would be rendered largely negatory without any valid reason.

In the result we find that (1) Rice Huller Shell, (2) Hand Pump, (3) Hand Pump Plunger as also (4) C. I. Pans, (5) Hamam dastan, (6) Jalkati and (7) Rain Water Pipe are all covered by item No. 15 of the notification in question.

As regards the last item, namely, "Structural Work" from 'he description of the same as given in the supplementary affidavit of the, petitioner quoted above, it may possibly fall within the term "product of steam and hammer works". But it is to be noticed that in the order of the Sales Tax Officer (Annexure E' to the petition) the Officer refused to accept that Structural Work of Rs. 43,992 had been actually done. The relevant portion of the order is as follows :‑

"Structural Work.‑It has been claimed that structural works were executed on contract basis for construction of structure of Eastern & Engineering Works, Tar Muhammad & Co., Halim Engineering Works, Pakistan Mills Stores, etc. In respect of this copies of bills have been produced but no original copy of agree ment have been produced. It appears from the statement of account for the period from 1‑4‑55 to 31‑3‑56 filed at the time of I. T. Assistant for the year 1956‑57 that the assessee had shown total receipt of job works at Rs. 9,318‑6‑0 and also as per another supplementary statement filed Sales Tax collected on it has been shown at Rs. 103‑7‑3 but as per present statement filed his receipt from structural works has been shown at Rs. 43,992 and the same has been claimed as exempt from Sales Tax. It is not difficult to understand why this has not been done. The raw material shown as opening stock or purchased or imported during the year must have been diverted to some other channel and the statement has now been filed to show that these were utilised for execution contract works. As the assessee had collected sales tax from such works nature of worm actually done must have been different from what has now been claimed. As per copies of bills filed the following materials stated to have been utilised for executing structural works.

As per bill No. 5/55 total supply of Iron and Steel material has been shown at 8 tons 10 cwt. As per bill No. 1/54 issued to Tar Muhammad & Co., total amount shown is Rs. 41,827 out of which Rs. 7,217 was deducted for materials not supplied by the assessee. It is not known why the bill should be made up for goods not supplied by the assessee in the case of a contract work. The bills are, therefore, not in order. It further appears that as per bill of Messrs Bird & Co. in the case of G. I. Wire included in purchases on 5‑10‑55 carrying charges have been claimed for transport by Messrs Bird & Co., up to Nahar Building. For transport charges from Nahar. Building to the office or godown premises of the assessee no expenses have been debited. In view of this it is clear that all the goods imported or purchased during the period claimed to have been used mainly for executing struc tural works must have been diverted to some other channel than what has been shown. I, therefore, reject the books of accounts produced and estimate gross turnover at

It appears from the earlier part of the Annexure B' that total sale of G. I. Buckets (products of hammer work) was shown as Rs. 71,605. It thus appears that the Sales. Tax Officer deducted the sum of Rs. 70,000 on account of those G. I. buckets and there was no deduction from sales tax on account of structural work as he refused to believe that any such work had actually been done. No specific grievance appears to have been made on this account either before the Commissioner, Sales Tax (vide Annex ures C' and D' to the petition) or in the present petition. In the circumstances the question whether "structural work" falls within the term "steam and hammer work" or not seems to be immaterial in this case.

In the result the Rule is made absolute without‑any order as to costs and we declare that the impugned orders passed o 30‑4‑60 and 17‑6‑60 and the proceeding in Certificate Case No. 710 S. T. of 1963‑64 are made and taken without lawful authority and of no legal effect. We direct that respondent No. 2 shall reassess the Sales Tax in the light of our observations above and in accordance with law.

I agree.

S.Q. Rule made absolute.

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