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Sales Tax Case No.11 of 1977, decided on 1st September, 1986.

---S. 17(1)--Sales tax--Exemption--Questions whether goods on which exemption was claimed were cotton lint or delinted cotton or cotton waste or whether cotton lint and cotton waste meant the same thing, being questions of fact and not that of law, held, were rightly rejected by Tribunal.

Colony Textile Mills Ltd. v. Commissioner of Sales Tax 1976 PTD 128 and (1980) 42 Tax 114 distinguished.

Shaik Haider for Applicant.

Naimur Rahman for Respondent.

Date of hearing: 1st September, 1986.

.--This application has been filed under section 17(2) of the Sales Tax Act, 1951 by the department. The matter arises out of the assessment order passed by the Sales Tax Officer, Companies Circle XXII, Karachi, in respect of assessment year 1967-68 whereby the Sales Tax Officer rejected the plea of the respondent-Company that sales of lint cotton was not subject to sales tax. According to the order of the Sales Tax Officer, lint cotton was neither cotton nor cotton-seed and hence it was chargeable to sales tax. Respondent/ assessee filed an appeal, and, by order dated 22-4-1975 of the Income-tax Appellate Tribunal Karachi, the appeal was allowed.

The order dated 22-4-1975 of the Tribunal is reproduced here:--

"Appellant is a private limited company manufacturing edible oils. The only objection is to charging of sales tax on cotton lint at Rs .1,12, 482. It is urged that lint is fiber attached to unginned cotton and is, therefore, not liable to sales tax. Previously the appellant was duly granted exemption on this item. On being questioned the Departmental Representative admits that cotton lint is not liable to sales tax and the Sales Tax Officer has acted erroneously in charging it to sales tax. After hearing both the sides we therefore, direct that the amount of sales of cotton lint at Rs.1,12,482 may be excluded from the sales being charged to sales tax in the year 1967-68.

The department, being aggrieved, filed an application under section 17 (1) of the Sales Tax Act before the Tribunal praying that the following question may be referred to the High Court:

"Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that cotton lint in not liable to sales tax."

The Tribunal by order dated 7-2-1977 rejecting the said application held as follows:

"After perusing the order of the Tribunal date 22-4-1975. We find that the same was based on facts presented before it and to which the Departmental Representative had then agreed. As it is a pure finding of fact and does not give arise to any question of law, we decline to refer the same to the learned Judges of the High Court."

In the circumstances the present application under section 17 (2) of the Sales Tax Act has bean filed by the department. We have heard Mr. Shaik Haider, learned counsel for the applicant and Mr. M. Naimur Rahman for the respondent.

2. In support of the present application, Mr. Shaik Haider, learned counsel for the department has submitted that 'cotton waste" was subject to sales tax at the relevant time and in that connection referred to a decision of the Lahore High Court in the case of Colony Textile Mills Ltd. v. Commissioner of Sales Tax reported in 1976 P T D 128 and also to the decision of the Supreme Court of Pakistan dismissing the appeal of Colony Textile Mills Limited and others against the decision on the Lahore High Court referred to earlier. This decision of the Supreme Court of Pakistan is reported in (1980) 42 Tax 114. It was further submitted by the learned counsel that the departmental representative had made a wrong concession before the Tribunal. The application is opposed by Mr. Naimur Rahman, learned counsel for the respondent who had submitted that in this case no question of law arises and the matter involves only questions of fact.

3. We find no merit in this application. Before the Sales Tax Officer, the question was whether sales of lint cotton by the assesses /respondent were exempted from sales tax. Apparently, at that time cotton-seeds were exempt from payment of sales tax and the Sales Tax Officer held that lint cotton was neither cotton nor cotton-seed and as such it was chargeable to sales tax and the claim of exemption made by the respondent/assesses was rejected. When this matter came up before the Tribunal, the departmental representative admitted that cotton lint was not liable to sales tax. It appears from the order dated 22-4-1975 of the Tribunal that previously also no sales tax was being charged on also of lint cotton. The appeal was allowed, as observed earlier, and a direction was given that the sales of lint cotton he excluded from sales charged to sales tax for the assessment year in question.

The question whether the goods on which exemption was claimed were "waste cotton" was not the question before the Sales Tax Officer or even before the Tribunal. The Tribunal, ca the basis of the concession made by the departmental representative and on the previous practice of the department exempting cotton lint from sales tax decided that cotton lint was not subject to sales tax. The question whether the goods in question were cotton lint or delinted cotton or cotton waste or that cotton lint and cotton waste mean the same thing are questions of fact and no question of law arises in the present case. The decisions cited by Mr. Shaik Haider, learned counsel for the department, do not help the department. The decision of the Lahore High Court depended on the facts of that case in which it was decided on the basis of material on record that cotton waste was not exempted from payment of sales tax and that decision was upheld by the Supreme Court.

4. As no question of law arises and only question of fact are involved in this case, in our view, the Tribunal was right in rejecting: the application under section 17(1) of the Sales Tax Act made by the department. S.T.C. No. 11 of 1977 is dismissed accordingly. There will be no order as to costs.

M.B.A. Application dismissed.

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