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Sales Tax Reference No. 53 of 1975, decided on 7th August, 1985

Sales Tax Act (III of 1951)--

--S. 7--Notification No. S.R.0. 51-(R dated 1-7-1961--Exemption-Conditions to be fulfilled in order to claim exemption--To claim exemption under Notification No. S.R.O. 51(R), dated 1-7-1961 goods should be sold for delivery outside Pakistan and not that assessee must himself export the goods. In order to claim exemption following conditions must be fulfilled

(1) That the goods are manufactured or produced in Pakistan.

(2) That they are sold for delivery outside Pakistan.

(4) That they are actually so delivered.

If all these conditions are satisfied then the assessee becomes entitled to claim exemption.

What is required to claim exemption under the notification was that goods should be sold for delivery outside Pakistan. If the requirement would have been that the manufacturer or producer should himself export the goods, different language would have been used.

Adam Ltd. v. C.I.T. (1969) 16 Taxation 97 and Messrs H Nizam Din and Sons v. Commissioner of Sales Tax, East Karachi 1983 P 'I D 108 ref.

K. Salahuddin for Applicant.

Iqbal Naim Pasha for Respondent.

Date of hearing: 7th August, 1985.

-- By this reference a/s 17(2) of the Sales Tax Act, 1951 the following question of law has been referred to this Court for answer:

"Whether, on the facts anal in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that goods manufactured by the assessee and sold to other party locally who exported the same, are exempt in the hands of the assessee-Company under Sales-tax Notification No. SRO-51 (l1), dated 1-7-1961."

2. The facts giving

rise to this question, as stated by the Commissioner of Income-tax Central Zone Karachi, are that the respondent is manufacturer of cloth. In the assessment year 1966-67 the respondent claimed exemption from payment of sales-tax with regard to export saes to the extent of Rs. 2,55,950. The Sales Tax Officer disallowed the exemption claim in respect of exports sales of Rs.1,040,72 on the grounds that the goods to that extent were not exported by the respondent itself. The goods to the extent of the said amount although manufactured by the respondent were exported by another party to whom the same were sold. The Sales Tax Officer held that the exemption under Sales Tax Notification SRO-51(R), dated 1-7-1961 was to be allowed only to the party who exported the' goods and since the goods to the extent mentioned above were not directly exported by the respondent, the exemption thereunder was not admissible in the case of respondent.

3. Aggrieved by the order of the Sales Tax Officer the respondent filed an appeal before the Income-tax Appellate Tribunal (Vth Bench) Karachi which was allowed by the order dated 17-5-1974, giving rise to the present reference.

We have heard Mr. Salahuddin, Advocate for the applicant and Mr. Iqbal Naim Pasha, Advocate for the respondent.

4. Before we examine and answer the question, we may reproduce hereinbelow the relevant notification:

"S.R.O. 51 (R) dated 1-7-1961--

(1) In exercise of the powers conferred by section 7 of the Sales-tax Act, 1951 (III of 1951) and in supersession of the Ministry of Finance (Revenue Division) Notification No.l dated the 1st May, 1953, the Central Government is pleased to exempt from the tax payable under the said Act all such goods (other than ginned cotton) as are manufactured or produced in Pakistan (including raw materials used in their manufacture or production) are sold for delivery outside Pakistan and are actually so delivered.

(2) ------------------------------------------------------------------------------------

5. A perusal of the above notification shows that in order to claim exemption following conditions must be fulfilled.

(1) That the goods are manufactured or produced in Pakistan.

(2) That they are sold for delivery outside Pakistan.

(3) That they are actually so delivered. If all these conditions are satisfied then the assessee becomes entitled to claim exemption.

It is submitted by Mr. Salahuddin that condition 2 was not satisfied in this case in that the respondents have not proved that when they sold the goods to the party who eventually exported then they sold them for the purposes of export. Otherwise Mr. Salahuddin agrees that other two conditions were fulfilled. Even otherwise from the statement of facts, it is clear that the goods to the extent of disputed amount were exported by the party to whom the same were sold by the respondent. However, the ground on which the Sales Tax Officer disallowed the claim was that in order to become entitled to exempt the assessee must himself export the goods.

However, we do not find any such requirement or condition in the notification. What is required to claim exemption' under the notification was that goods should be sold for delivery outside Pakistan. If the requirement would have been that the manufacturer or producer should himself export the goods different language would have been used.

Reliance is also placed on Adam Ltd v. C.I.T. (1969) 16 Taxation 97; M/s. H. Nizam Din & Sons v. Commissioner of Sales Tax, East Karachi 1983 P. T. D. 108.

6. As regards the submission of Mr. Salahuddin we may state that in the statement of facts, it is not claimed that the respondent id not sell the goods for delivery outside Pakistan.

7. Mr. Iqbal Naim. Pasha has pointed out that in the case of M/s. Nizam Din & Sons v. Commissioner of Sales Tax, East, Karachi (Supra) the following questions of law were referred to this Court for answers and were- answered against the department.

"(i) Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that tentssold by the appellant to the Red Cross Society were not for delivery outside Pakistan, when the fact of export outside Pakistan was not disputed

(ii) Whether the Tribunal was right in holding that the exemption from sales-tax was available only to an exporter and the applicant not himself being an exporter the exemption was not available to him .

(iii) Whether there was any evidence in support of the finding of the Income-tax Appellate Tribunal that the tents sold by the applicant to the Pakistan Red Cross Society were not for 'delivery outside Pakistan and was not this finding in disregards of the evidence on record proving that the tents were actually delivered outside Pakistan i.e. Turkey."

Now, if the department's case was what has been contended before us by Mr. Salahuddin then the first 'and the third questions which were raised in the aforesaid case would have also raised in this case but no such questions have been referred to in the present case. Therefore, we cannot on that ground answer the question raised in the case on hand in any other manner except in the affirmative and we accordingly do so.

8. In the circumstances of the case, we leave the parties to bear their own costs.

M.B.A/C-11/K Reference answered accordingly.

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