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Civil Appeal No. 36 of 1959, decided on 9th November, 1959.

(On appeal from the judgment and order of the High Court of West Pakistan, Karachi Bench, Karachi, dated the 10th December, 1958, in Writ Petition No. 749 of 1958).

Central Excises and Salt Act (1 of 1944), S. 3, First Sched. item 23---Dyeing and glazing of tanned leather by use of power--- Product dutiable-Licence necessary.

Held, that the processes of dyeing and glazing of tanned leather made from sheep-skins are calculated to produce---goods which would fall within the description of the first of the- t-o categories of tanned leather specified in item 23, First Schedule to Central Excises and Salt Act (I of 1944).

Such goods, therefore, are excisable and under section 3 of the Act, the authorities are enjoined to levy and collect duties upon such goods.

Duty does not fall upon any process, but upon the goods produced.

The articles produced being excisable, it is necessary that the producer should take out a licence under the rules framed under the Act.

It is not necessary to suppose that the use of power shall be applied at the stage at which raw skins are being converted into tanned leather ; it may be any stage in the entire process leading to the production of leather which would include all kinds of tanned leather.

The leather produced after dyeing and glazing falls within the definition of uppers.

Nazir Ahmad Khan, Attorney-General of Pakistan (M. Ismail Bhatti, Advocate Supreme Court, with him), instructed by Iftikharuddin Ahmad, Attorney for Appellants.

Respondent : Ex-pane.

Date of hearing : 9th November, 1959.

.-This appeal by special leave is brought by the Republic of Pakistan against one Muhammad Aqil in a taxation matter falling under the Central Excises and Salt Act I of 1944, to call in question a writ issued by the High Court of West Pakistan upon a petition by Muhammad Aqil, to the following effect, viz. directing the Republic of Pakistan "not to levy any excise duty on the tanned leather which the petitioner (Muhammad Aqil) subjects to dyeing and glazing".

The facts are briefly as follows. As stated in the first paragraph of his petition to the High Court, Muhammad Aqil;

" is carrying on the business of dyeing and glazing tanned leather of sheep and the local shoe manufacturers and leather merchants bring to him tanned leather and he puts colour on such tanned leather and polishes the same to give it shine and charges wages for dyeing and glazing such tanned leather ".

In paragraph 2, it was asserted that Muhammad Aqil "neither sells nor tans any hide or skin" and his factory "is neither a part of any tannery for producing leather nor it produces or converts any skins and hides into leather". On these premises, he sub mitted that he was not a manufacturer and further that the process of dyeing and glazing was not "incidental or ancillary to the completion of tanned leather". Therefore, his case did not fall within the mischief of section 6 (a) or section 9 (b) of the Central Excises and Salt Act I of 1944. It was asserted on behalf of the Republic, and was not denied that Muhammad Aqil uses power in his factory. The contention for the Republic was that processes applied by Muhammad Aqil were steps in the production of tanned leather and should be regarded as incidental and ancillary to the production of tanned leather.

The learned Judges in the High Court found, on the facts, that Muhammad Aqil received in his factory, leather which was already tanned, that the taxing Act provided that duty was to be paid on tanned leather and not on "finished product" and that although tanned leather by undergoing the process of dyeing and glazing by machine might become' more valuable, yet it remains tanned leather. The argument that processes of dyeing and glazing were incidental or ancillary to the completion of the manufactured product was negatived by saying that "dyeing and glazing does not in any way add to the completion of tanned leather" and that "admittedly, tanned leather can be put to use without undergoing tee process of dyeing and glazing". It is common ground that if the articles produced at Muhammad Aqil's factory are liable to duty under the taxing Act, it is also necessary that Muhammad Aqil should take out a licence under the rules framed under that Act.

Having heard the attorney-General of Pakistan for the appellants, the respondent not being represented, we are clearly of the opinion that the view of the High Court cannot be sustained. The taxing provision is contained in section 3 of the Central Excises and Salt Act I of 1944 which lays down that duties of excise shall be levied end collected on all excisable goods produced or manufactured in Pakistan at rtes set down in the First Schedule to the Act. The term "excisable goods" was defined as including all goods specified in the First Schedule, and by the Finance Act XXII of 1958, item No.23 was added to that Schedule, which reads as follows :-----

Description, Rate of Duty.

"23, Tanned leather produced in a factory

ordinarily using power in the course of

production of leather . . . . .

(i) Uppers including all varieties of tanned One anna

leather made from goatskin, sheepskin per square

and the skins of any other animal foot.

generally used in the manufacture of

uppers, or lining of footwear, and for

other leather goods.

(ii) "Soles" including leather from cow One anna

hide, buffalo hide and the hides of six pies

other animals generally used in the per pound.

manufacture of soles for footwear,

and for other leather goods. .

It would seem to follow as a matter of obvious inference that any goods falling within one or the other category of tanned leather specified in this item are excisable goods upon which duty is payable at the rate stated in the Schedule, and any person producing such goods would be under the necessity of obtaining a licence as required by the rules. It is clear from the careful differentiation appearing in column 2 that it is not tanned leather per se that is excisable. The first requisite is that it should have' been produced in a factory ordinarily using power for the purpose of producing leather. This requisite is satisfied in the present case, since the use of power is admitted, and by the differential use of the expression "leather" rather than "tanned leather" it is evident that the widest meaning is to be inferred, i.e. that it is not necessary to suppose that the use of power shall be applied at the stage at which raw skins are being converted into tanned leather ; it may be any stage in the entire process leading to the production of leather which would include all kinds of tanned leather. Next, the different rates of duty are applied not to all tanned leather but to two specified categories, namely, "uppers" and "soles". The definition of "uppers" uses the widest language to indicate that what is meant is the pro duction from every kind of animal skins of that kind of tanned leather which is used for making the upper portions or the lining of footwear, and other leather goods for which similar leather is employed. This type of tanned leather is usually thinner and softer than that which is used for soles of shoes, and for heavy leather goods, and accordingly in the definition of "uppers" mention is made of goatskins and sheepskins, whereas in the second category which is described as "soles", mention is made of cow-hides and buffalo-hides and the hides of other animals, presumably larger and thicker-skinned animals, which are generally used in the manufacture of soles of footwear and for "other leather goods," presumably heavy goods such as suit-cases, saddles, straps etc. In the present case, the admission by Muhammad Aqil that he dyes and glazes sheep-skins which are brought to him is in our opinion a sufficient indication that what he produces', falls within the category of "uppers". Dyed and glazed leather is mostly employed for purposes mentioned in the definition of "uppers". Leather used for the making of soles is mostly not dyed, or glazed, although thick leather of the same kind used for manufacturing suit-cases, straps etc. is often seen to be both dyed as well as glazed. Therefore, the processes of dyeing and glazing of tanned leather made from sheep-skins are calculated to produce goods which would fall within the description of the' first of the two categories of tanned leather specified in item 23 aforesaid. That being the case, there is no escape from the conclusion that the goods turned out at Muhammad Aqil's factory are excisable goods. They are produced in Karachi, i.e. inside Pakistan, and consequently under section 3 of the taxing Act, the authorities are enjoined to levy and collect duties upon these goods. The learned Judges in the High Court were of the opinion that the "process of dyeing and glazing by the petitioner would not attract the provisions of the Central Excises and Salt Act". There would appear to be a misconception here, for the duty does not fall upon any process, but upon the goods, produced, and the articles produced by Muhammad Aqil are clearly, as seen above, tanned leather of the category falling within the precise definition of "uppers" contained in item 23 of the First Schedule to the Act.

We accordingly allow this appeal and direct that the writ issued in this case by the High Court should be recalled. As the respondent is not represented before us, we make no order as to costs.

A. H. Appeal allowed.

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