Messrs ABBASI TEXTILE MILLS LTD. vs COMMISSIONER OF SALES TAX (EAST), KARACHI

1. SAIDUZLAMAN SIDDIQUI,J.--This direct reference under section 17 (1) of the Sales Tax Act, 1951 has been filed by the applicants questioning the order of Tribunal refusing to grant exemption under section 4 of the Sales Tax Act, 1951, in respect of sales effected during the charge year 196.1-65 amounting to Rs. 77,13,700. The following four questions were referred by the assessee but at the hearing it was agreed that only question No. I needs be answered :- "(i) Whether in the facts and circumstances of the case the Tribunal was justified in holding that sales made to persons named in the assessment order amounting in all to Rs. 77,13,700 were not entitled to exemption under section 4 of the Sales Tar Act, 1951 ?

(ii) Whether in the facts and circumstances of the case the Tribunal is right in holding that the applicants have failed to discharge the onus to prove that the sales were trade to licensed manufacturers even though the applicants had produced copies of licences and certificates under rule 16 of the Sales Tax Rules ?

(iii) Whether the Tribunal's order has been passed in complete disregard to the decision of the Karachi Bench of the High Court of Wes Pakistan in S. T. C. No. 26 of 1970 decided on 8th April, 1970 ?

(iv) Whether in the facts and circumstances of the case the Tribunal having held the sales themselves to be unproved could legally subject such unproved sales to Sales Tax ?"

2. The exemption to the extent of the amount stated above was claimed in the return filed by the applicants for the charge year 1964-65 on the ground that the sale was of partly manufactured goods to a licensed manufacturer. The Sales Tax Officer after examining the details of sales in respect of which exemption was claimed by the applicant came to the conclusion that part of the sales were made by the applicant to persons to whom the Department had allegedly not issued any licences and the copies of the licences produced by the applicant were not genuinebut in respect of rent of the sales, he was of the view that the purchasers in these cases were no doubt issued licences by the Department cut the same were later on cancelled. However, he disallowed the exemption in respect of both the categories of sales under section 4 on the ground that the sales were made by the assessee to the persons who were not traceable on the addresses given or were non-existent. On appeal the Assistant Appellate Commissioner confirmed the order of the Sales Tax Officer and on a further appeal before the Tribunal. The Tribunal took the view that as the assessee has failed to establish identity or existence of the parties to whom the sales were made, the issuance of licence to such a party was of no consequence and accordingly the Tribunal also confirmed the order of the Sales Tax Officer and the Assistant Appellate Commissioner disallowing the exemption under section 4 of the Sales Tax Act, In con--nected case Fazal Shafiq Textile Mills Ltd. v. The Commissioner of Sales Tax. (Central), Karachi (1983 PTD 44), we have held that in order to earn the exemption under section 4 of the Act the assessee is only required to prove that the sale has been effected by him to a person who holds a valid licence issued under section 8 of the Sales Tax Act. We have also held in that reference that in the event of cancellation of such a licence the sales which were made prior to the cancellation of a licence and intimation thereof to the assessee the exemption on such sales could not be refused under section 4 of the Sales Tax Act. In the case before us the Sales Tax Officer in his order found that out of the total amount of Rs.

3. 77,13,700 the sales to the extent of Rs. 29,67,964 were effected to such parties who were issued licences by the Department which were subsequently cancelled. We are, therefore, of the view that at least there was no justification for disallowing the exemption claimed by the assessee under section 4 of the Act with regard to sales to the extent of Rs. 2,67,964. In so far the sales made by applicant to such parties which were found by the Sales Tax Officer as having not been issued any licences by the Department it is contended by the applicant that there was no evidence whatsoever available before the Sales Tax Officer or the Tribunal in this regard, It is so alleged by the applicant in the references but in reply the Department has denied this allegation without producing ,any document in support thereof, BL that as it may, as stated by us earlier, at least to the extent of sales made to persons to whom the Department admitted that licences were issued under section 8 of the Sales Tax Act, 1951, we find no justification for disallowing the exemption claimed by the assessee. This aspect of the case was entirely over--looked by the Tribunal while confirming the order of lower authorities.