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S. T . A. No. 24 /KB of 1982‑83, decided on 13th December, 1983.

--S. 3(6)(d) read with Notification No. ,9, dated 27‑6‑1951‑‑Assesses manufacturing and processing brown Butting paper and paying sales tax thereon‑‑Converting this manufactured item further into corrugated board/sheet by corrugation machine installed in its factory Using such corrugated board/sheet for making cartons‑Assesses seeking exemption from sales tax on salts of same under Notification vide its Item No. 113‑Claim rejected by I.‑T. O. but allowed by A. A. C.‑Held: corrugated board/sheet manufactured by assessee being pend roduct was liable to sales tax‑Brown Butting paper manufactured by assesses, held further became "partly manufactured goods" entitling assesses to get refund in respect of sales tax paid on manufacture of such item‑Appellate Assistant Commissioner further hell, acted improperly in holding assessee's product to be chip board falling under Item 82 of Notification.

Abrar Ahmad, D.‑R. for Appellant.

I.N Pasha for Respondent.

This departmental appeal is dimmed against the order of the learned Appellate Assistant Commissioner Range, K .It relates to the sales tax assessment year 1979‑80. The‑assessee‑respondent is a public limited company deriving‑income 4ommanu facture of brown Butting paper, corrugated board and cartons. It claimed exemption from levy of sales tax in respect of sales of cartons vide item. No. 113 of Notification No. 9, dated 27th June, 1951. It offered for tax the of browns Butting paper and hence there is ran dispute about it this appeal. The Sales Tax Officer, however, was of the view that the corrugated board/sheets manufactured by the assessee were liable to sales tax at the rate of 20 % in view of Central Board of Revenue's letter C. No. 9(28)ST/71, dated 20th November, 1971. The assessee came out with. an explanation that it was manufacturing flutting liner which is mainly consumed in tire production of cartons and hence no sales ox corrugated sheets as envisaged by section 3(6)(d) of the Sales Tax ct was effected. Later on, vide its letter dated 15.4‑1981 it adopted another line of arguments, i.e. (hat it manufactures goods which fall for exemption under Explanation appended to Item No. 62 of Notification No. S . 27‑6‑1981. It further averred in the said letter that "this claim has arisen for primarily due to the decision of the Income‑tax Appellate Tribunal and particularly the one reported as (1981) 42 Tax 49 (Trib). The Sales Tax Officer repelled this contention and held that corrugated board/sheet manufactured by the respondent fall within the ambit of Sales Tax Act which was leviable to sales tax at the standard rate. He further decided that the sales tax paid at 10 % on manufacturing of paper was to be adjusted while computing the final sales tax liability. On appeal, the learned Appellant Assistant Commissioner, Range, K held the appellant's product to be 'chip board' falling under Item 62 of Notification No. 9, dated 27th June, 1951, and consequently, he annulled the impugned assessment as products of the appellant were, according to him, exempt from levy of sales tax. The learned Departmental Representative followed the same line of argument which was adopted by the assessing Officer, whereas the learned 'counsel of the assessee‑respondent also reiterated the same‑contentions before us which were tirade before the authorities below. .

2. We have carefully perused the impugned order and have given our earnest consideration to the submission made by the parties, representatives before us and We are of the opinion that the learned Appellate Assistant Commissioner has erred in holding that the product corrugated board/sheet, manufactured by the assessee was chip‑board and that it fulfilled all the requirements of Item 62 of Notification No. 9, dated 27th June, 1951. The admitted facts are that the assessee‑respondent manufactures flatting liner and pays sales tax on the sales thereof. After the flutting paper is manufactured, it is to be strengthened for making cartons. It is this manufactured item which is again processed and converted into corrugated board through the operation and assistance of corrugation machine which is specially installed in its factory. It is out of this product i. c. corrugated board that the cartons are made which are exempt from sales tax vide item No. 113 of Notification No. 9 of 27th June, 1951. The said item is as under:‑‑

"113. Paper envelopes, cartons made of. paper and card‑board, was paper and gum tape paper." .

3. It will be observed that cartons made by the assesee have been exempted from sales tax because they are taken to have been made either of paper or card‑board inasmuch as cartons made of 'chip‑board, particle board and hard -board' are not covered by Item No. 113 of Notification No. 9, Dated 27‑6‑1951‑. The decision of the‑ learned Appellate Assistant Commis sioner is based on the finding that the assessee had claimed exemption in respect of the sales of 'chip‑board' which was allegedly manufactured by it as is apparent from the opening sentence of his order. If the' appellant is manufacturer of chip‑board then the question of its being entitled to the exemption in respect of gale of cartons would not ‑arise. What the learned Appellate Assistant Commissioner seems to have held is that the brown Butting paper manufactured by the respondent is covered by Item No. 62 of Notifica tion No. 9, dated 27‑6‑1951. 'I he facts as admitted by the representatives of the parties before us and which also as such find place in the order of the Officers below, are that the assessee manufactures primarily the brown flutting paper which are processed and then the same are converted into corrugated board/sheets by the corrugation machine installed in its factory. The corrugated board/sheets so produced are used for making cartons which are, as per finding of the Sales Tax Officer, exempt from sales tax vide Item No. 113 of Notification No. 9, dated 27‑6‑1951. Now it .is to be seen whether the corrugated board/sheets thus manufactured would have been liable to sales tax if sold by the assessee in the open market. If the answer to this question is in the affirmative, then it will be judged whether action 3(6)(d) of the Sales Tax Act would come into play. In our opinion, the Sales Tax Officer has rightly examined this aspect, of the case and his finding is based on proper appreciation of be relevant facts and circumstances. Having held corrugated board/sheets man manufactured by the assessee to be liable to sales tax, the Sales Tax Officer bas again rightly allowed the deduction of sales tax paid on sales of brown flutting paper as per quarterly return and statements filed. To put it differently, what turns out is that the corrugated board/sheets manufactured by the assesses being an end product itself is liable to sales tax and the brown flutting paper manufactured by the assessee becomes "partly manufactured goods" and it becomes entitled to get relief or refund in respect of sales tax paid ore the manufacture of brown fluttinpaper. The upshot of the discussion is that the learned Appellate Assistant Commissioner has acted improperly and illegally iii holding the assessee -respondent's product‑ to be chip‑board falling under Item No. 62 of Notification No. 9, dated 27‑6‑1951 and thereby annulling the order of the Sales Tax Officer. We would, therefore, allow this appeal by yeti aside the order of the learned Appellate Assistant Commissioner CT arid restoring that of the Solos Tax Officer.

M. Z. M. Appeal allowed.

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