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S.T.A. Nos. 107, 108, 109, 110, 111 of 1979-80,decided on 30^th April, 1986 .

---S. 3-C, Fifth Sched., R.6(2)--C.B.R. Circular No. 63(211)IT-4/76, dated 14-7-1976--Notification No. 9, dated 27th June, 1951--Raw material or partly manufactured goods, if used in the end product which is exempt from sales tax, held, were not necessarily exempt unless exemption was allowed to such goods independently.

---S. 3-C, Fifth Sched. R. 6(2)--C.B.R. Circular No. 63(23) IT-4/76, dated 14-7-1976, paras. 16 and 19--Declaration filed under S. 3-C by assessee accepted and processed-- Assessee, held, would not be liable to sales-tax under R. 6(2) of Fifth Sched.

Siraj-ud-Din Khalid for Appellant.

Amjad Ali Ranjha, AC/DR for Respondent.

--These five appeals under the Sales Tax Act, 1951, have been filed by the assessee in respect of the assessment years 1973-74 to 1977-78 taking objection to the decision of the learned A.A.C. of sales-tax who confirmed the orders of the Sales Tax officer in regard to levy of .sales-tax on Sodium Silicate, being manufactured by the assessee. In the first three years the status of the assessee was that of individual whereas for the last two years viz. 1976-77 and 1977-78 the status was that of a firm. The learned counsel for the assessee and the D.R. have been heard and all the appeals are disposed of by this combined order.

2. To begin with the A.R. took the stand in regard to appeals for 1976-77 and 1977-78 that he would not like to press the same. Accordingly the appeals for these two years stand dismissed.

3. In regard to three earlier years a number of arguments have been advanced in support of the assessee's contention that the Sodium Silicate being manufactured, was not liable to sales-tax being liquid Sodium Silicate and that in any case the provisions of the Fifth Schedule to the Income-tax Act issued in pursuance of section 3-C of the Income-tax Act relating to the levy for tax on undisclosed income and the instructions contained in the Central Board of Revenue's circular issued vide C. N0. 3(211)-IT-IV/76, dated the 14th July, 1976 apply in this case. The further plea is that the assessee was entitled to adjustment of packing material as was made in the subsequent assessment years against the sales assessed. The grounds of appeal are common in the first two years. In the third year for the assessment year 1975-76 besides claiming that the product of the assessee was not liable to sales-tax. It has also been contended that the sales adopted at Rs.4,50,000 should have been reduced to Rs.4,20,000 for the sales-tax as these have been reduced in appeal for the purposes of income-tax. This is admittedly a no accounts case. In respect of the assessment year 1973-74 the assessee declared shares of Rs.80,000 and claimed exemption under item No.15 of the Sales Tax Notification No.9, dated 27-6-1951 before its amendment vide SRO 798(1)/74, dated 7th July, 1974. For the assessment year 1973-74 the assessee had claimed exemption on the plea that Sodium Silicate was a product of steam, and since products of steam are exempt under Item No.15 referred to above, therefore, he was not liable to sales-tax. The STO agreed that steam was one of the ingredients for the manufacture of Sodiam Silicate but it was not a product in the sense in which it was used by the legislature in the Act. Further the assessee's claim of exemption cannot be accepted as there are other ingredients like Sodium Carbonate, sand, gas and water which are also used in the manufacture of the item.

4. In appeal before us it has been stated that even if we do not consider it as a product of steam by interpreting the exemption "product of iron foundries and steel and hammer works" by referring only to products of iron foundries which are also products of steam and hammer work under the principle of ejusdem generis even then no sales-tax could be levied for the year 1973-74 in view of the immunity granted to persons making declarations of undisclosed income under section 3-C. In view of Rule 6 of the Rules framed for computing tax on undisclosed income under the Fifth Schedule the rule is as follows:

"Where a person has made a declaration under this Schedule:-

(i) ...................................

(2) He shall not be liable to any charge, levy, penalty or prosecution under this Act (except the provisions of section 3-C and this Schedule), the Sales Tax Act, 1951 (III of 1951), the Wealth Tax Act, 1963 (XV of 1963) or the Central Excises and Salt Act, 1944 (I of 1944), in respect of the income declared under this Schedule.

The next plea taken was that para. 19 of the CBR's circular, dated 14th July, 1976 under section 3-C referred to above lays down that whereas assessment for any year under the Income-tax and Sales Tax Act are pending for which the declaration has been made under section 3-C, the I.-T.O. will finalize the assessments on the basis of returns filed. Still another plea is that under para. 16 the assessee has immunity from any assessment. A plea was taken that the assessee had filed a nil return (sales Rs.80,000, Rs.80,000 as steam products) and claimed exemption as the return had to be accepted as such under para. 19 of the Central Board of Revenue's circular instructions, dated 14th July, 1976 issued under section 3-C referred to above. The assessee's plea that Sodium Silicate is used in the manufacture is steel re-rolling products, which are exempt from sales-tax, therefore, Sodium Silicate is also exempt. This plea is not tenable under the law since the raw material or partly manufactured goods, if used in the end product which is exempt from sales-tax are not necessarily exempt unless exemption has been allowed to them independently. We are of the view that though para. 16 of the Board's circular does not apply, yet the assessee is not liable to sales-tax for the assessment year 1973-74 under rule 6(2) of the Fifth Schedule to the Income-tax Act read with para. 19 of the Board's circular as the declaration filed under section 3-C of the Income-tax Act for the period 1965 to 30th June, 1976 at Rs.1,10,800, was accepted and processed. We, therefore, accept the appeal as the assessee is not liable to sales-tax for the reasons stated above.

In respect of assessment year 1974-75 the assessee declared sales of Rs.1,10,000, and claimed exemption as product of steam work. The STO, however, charged the same to sales-tax as he has done in the case of assessment year 1973-74. The assessee has, however, claimed exemption in the return declaring nil return. The arguments advanced in respect of these two years are identical except that the products of steam work ceased to be exempt vide the revised Item No.15 of the sales-tax Notification No.9, dated 27-6-1951 inserted on 2nd July, 1974, which exempted "water pumps, oil engines, sanitary fittings and agricultural implements which are products of iron and steel foundries." As discussed in respect of the assessment year 1973-74 the sales for the year 1974-75 are also exempt since it is covered in view of declaration filed under section 3-C for the reasons stated above, Section 3C covers the period upto 30-6-1975.

5

In respect of the assessment year 1975-76 the position is that neither Item No.15 of the sales-tax Notification No.9, dated 27th June, 1951, as amended, applies nor the rules in the Fifth Schedule to the Income-tax Act, apply, nor do the instructions of the Central Board of Revenue laid down in the Board's circular, dated 14th June, 1976 referred, to above, apply, The return filed in the form SST-5 declared sales at Rs.3,00,000 on estimated basis as no books of accounts were produced. The assessee furnished a break-up of Rs.3,00,000 as under:-

6. In regard to the claim of exemption the assessee furnished written arguments to the effect that Sodium Silicate is used in the manufacture of soap and steel re-rolling products. Both these products are exempt from sales-tax vide Items Nos. 6 and 69 of Notification No.9 and as such the products of the assessee used ultimately exempted products is also exempt from sales-tax. We have earlier pointed out that raw material or partly manufactured goods, if used in the end products, which are exempt from sales-tax would not exempt the raw material as such. A reference to Notification No.9, dated 27th June, 1951 shows that it has expressly stated that nothing in this exemption shall affect the tax payable on the raw material from which goods are manufactured therefore, even if products of re-rolling mills and soap are exempt this would not render Sodium Silicate also exempt from sales-tax. The ST0 taking notice of the fact that the assessee had paid Rs.1,54,265 on account of Sui-gas consumption estimated the sales of Sodium Silicate at Rs.6,20,000. He allowed exemption to the extent of 25% under section 4 in respect of packing at Rs.1,55,000. The balance amount of Rs.4,65,000 was subjected to sales-tax. The order was confirmed by the learned A.A.C. We have considered the circumstances of this case and are of the view that in respect of assessment year 1975-76 the Sodium Silicate does not enjoy exemption under any provision of the taw or rule and, therefore, it was rightly subjected to sales-tax.

7. As regards the plea that the sales of Rs.4,50,000 were reduced in the Income-tax case to Rs.4,20,000 should have been adopted by the STO, no details have been furnished, nor has the position been explained by the learned A.R. with reference to the income-tax assessment order. This is admittedly a no-accounts case and we do not find reasons for interfering with the estimates of tire STO who has already allowed exemption of packing material upto 25% of the sales estimated. The appeal for 1975-76 is accordingly rejected.

8. In the result all the appeals are decided as indicated above.

M.Y.H Order accordingly.

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