COMMISSIONER OF SALES-TAX Versus LUTFI & COMPANY (PAKISTAN)
MUHAMMAD AFZAL CHEEMA, J .--These three Civil References (No.60 of 1967, No. 12 of 1970 and No.90 of 1971), made by the Income-tax Appellate Tribunal (Pakistan) Lahore under Section 17 (1) of the Sales-tax Act, 1951 (No. III of 1951) are connected matters involving the determination of the identical question of law, which has been formulated as under:-
"Whether on the facts and circumstances of the case, the Tribunal was right in holding that 'hot-patches' are exempt from levy of sales-tax under item No.9 of Notification No.9, dated 27-6-1951, issued by the Government of Pakistan Ministry of Finance (Revenue Division) under Section 7 (1) of the Sales-tax Act?"
2. The facts giving rise to the reference are that M/s. Lutfi and Company (Pakistan) Limited, Lahore, manufactured "hot-patches", which are handy pieces of rubber used for mending punctures having been processed with certain chemicals containing sticking material, which on being heated becomes readily applicable to the punctures. The assessee's assertion that they were exclusively manufactured for mending cycle tubes does not appear to have been controverted at any stage. They claimed exemption of their declared turn-over in this regard from payment of sales-tax under item No.9 of Notification No.9, dated 27-6-1951 according to which inter alia "Cycle accessories" were not chargeable to sales-tax. Their contention before the Sales-tax Officer that "hot-patches" were a kind of "cycle accessories" was repelled by him on the ground that hot-patches "were not additional, subsidiary, adventitious contributing to or aiding the manufacture of cycles", that they did not constitute an item of equipment, secondary or non-essential and as such did not fall within the definition of cycle accessories. These arguments before the Assistant Appellate Commissioner that hot-patches legitimately fell within the domain of cycle accessories found favour with him and he allowed their appeal. The view taken by him was, that there were various types of accessories of an essential and non-essential kind and that hot- patches like an inflator, or extra valves that a cyclist might keep with him as a matter of caution lest he might be stranded, were accessories of a non-essential character. Feeling aggrieved the Department preferred appeals before the Income-tax Appellate Tribunal.
3. On behalf of the Department it was argued before the Tribunal that only such items could be considered as accessories, as were subsidiary additional or contributory to the better enjoyment of a cycle adding to its utility, whereas a hot-patch was at best an "accessory" of the tube of the cycle which was one of its components and that the scope of the cycle accessories could not be so enlarged as to cover accessories of its components. It was also contended that the hot-patches were not exclusively used for mending punctures of cycle tubes but also tubes of vehicles. On the other hand, position, taken up by the assessee's representative was that since Notification No.9 had, inter alia exempted cycle components, cycle accessories and cycles manufactured or assembled in Pakistan, the law-giver proposed to confer the widest amplitude on the scope of exemption in regard to all types of articles, which could be used by a cyclist in connection with this transport, and since a tyre of a tube was a component of a cycle, a hot-patch could be legitimately described as an accessory. The argument that hot-patches could also be used for mending tubes and tyres of vehicles, was met on the basis of [(1963) 13 Sales Tax Cases 313], wherein the view taken was that once it was established that an exempted article was extensively used for, a particular purpose the fact of its alternative use would not affect its exemption.
4. Having considered the contentions and having also relied on the dictionary meaning of "accessory" the learned Members of the Tribunal took the view that the use of a hot-patch having become unavoidable in certain contingencies it could be reasonably brought within the-definition of a "cycle accessory" particulary having regard to the rather broad based and comprehensive provision of the Notification covering all items connected with cycles. The contention that hot-patches were not exclusively used for mending cycle tubes and tyres was also repelled on the basis of [ (1963) 13 Sales-tax Cases 313].
5. Before us, almost same contentions were reiterated by the learned counsel for the parties. In the absence of the definition of the expression "cycle accessories", the point involved assume considerable nicety and fineness particularly when no judicial decision is available one way or the other. As such, in order to come to a reasonable conclusion, we have perforce, to fall back upon the dictionary meaning of the term "accessory" as has been done by the Courts below.
6. A perusal of the relevant notification reveals that the exemption was confined to components and accessories of cycles during the years 1959-6a and 1960-61 while the third category of "complete cycle" was subsequently added in the year 1962-63 by means of an amendment. We have also seen the hot-patches and their tin containers bearing a specific inscription to their exclusive use for cycles'. Even otherwise, in view of [(1963) 13 Sales-tax Cases 313], relied upon by the, authorities below, we have no hesitation in holding that even the extensive, if not exclusive use of hot-patches for cycles would not affect their exemption from the incidence of sales tax if otherwise brought within the scope of cycle accessories. In support of the view taken by them, the authorities below also relied upon the wide scope of the relevant provision referring to components accessories and cycles. As stated earlier, the latter category was added only in the year 1962-63, but this, in our view, would make no difference, inasmuch as the scope of the expression "accessories" used in contradistinction to "components" alone has to be determined.
7. It was argued before us on behalf of the Department that the handle, the frame, the wheels, the chain etc., would constitute the components of a cycle, whereas the bell, the lamp, the pump (inflator), the carrier and the stand, would fall within the category of "accessories", and even if the rim, the tyre and the tube, comprising the wheel, were also treated as components, the hot-patches could, at best be characterised as accessory of the tube and not of the cycle. It was contended that treating a hot-patch as a cycle accessory would be rather over-stretching; the meanings beyond the contemplated extent. Lastly it was contended that it was for the assessee to strictly bring his case within the four corners of the exemption and could not claim the benefit of doubt in border line cases, which had to go to the Department.
8. Taking the last contention first, we would readily concede that since the exemption creates an exception to the general rule of taxation, it would be for assessee to show that his case falls strictly within the scope of the exemption, which, in turn, would depend on the precise implication and connotation of the expression "accessories" We are in no manner of doubt either that the hot-patches are primarily manufactured by the assessee for mending punctures of cycle tubes. Earlier comparatively crude modes and materials were employed for the purpose which would require rubber, a pair of scissors, for cutting to size pieces of rubber, and a rubber solution used as sticking material. However, with the advancement of technological "know-how" comparatively quicker and cheaper devices have been evolved, manufactures of hot-patches being one of them. We would not be surprised if the expression "accessories" was deliberately left undefined either as a difficult if not impossible task or in view of a clearly envisaged virtue in its vagueness.
9. According to the Oxford English Dictionary, "access" would mean "coming towards or approaching getting near or contact with; and "accessory" as something as an addition, contributing in an additional and subordinate degree, as something additional, extra, adjunct or accompaniment. Considering in the context of this wide connotation, we are inclined to think that hot-patches would be very much covered by the expression "accessory". The matter could also be considered from another point of view. If the lamp, the stand, the carrier or the pump (inflator) be characterised as "accessories" of a cycle, as admitted by the learned counsel for the Department, we seen no reason why hot-patch may not be similarly characterised having regard to its use and utility. The hot-patch inasmuch useful and indispensable to render a punctured cycle serviceable, as an inflator. In fact, unless the puncture is mended in the first instance, there would be hardly any question of the use of the inflator. Accordingly, even looking from this aspect, we are of the view that hot-patches fall within the category of "accessories" as rightly, held by the Appellate Assistant Commissioner and the Income-tax Tribunal.
10. Since the words "component" and "accessories" have been used in the same context the correct understanding of the former might also be collaterally helpful in appreciating the connotation of the latter. Component is a derivative of the verb compose which in the present context would mean "putting together parts". Component would thus connote constituent part of element in contra-distinction from accessory which is an adventitious part attached or connected only indirectly. Thus, if the wheel of a cycle is to be treated, as it should be, a major or primary component, the tyre, the tube and the rim which in turn constitute the wheel would be its primary components though secondary components or accessories of the cycle. Similarly "hot-patches" being directly connected with the tube would be adventitiously connected with the cycle falling within the domain of its accessories.
Again a persual of different lists of articles of import attached to import Control Orders and Notifications issued by the Government clearly indicates that some tools and lubricators have also been categorised as cycle parts and accessories, lubricators are mentioned against item No.205 (XI) of the Import Policy Order, 1972 published in the Gazette of Pakistan, Extraordinary, dated 25th of May, 1972 on that analogy also "hot-patches" in our view legitimately fall within the category of accessories.
11. The upshot of the discussion, therefore, is that we uphold the view taken by the Income-tax Tribunal and decide the reference accordingly, with no order as to costs.
M.B.A./C-12/L Order accordingly.