| Decision |
ABDUL QADEER CHAUDHRY, J.--This petition has arisen out of the following facts:-- The petitioner is carrying on business of selling footwear at a shop and also holds a godown where footwear are stored. According to the petitioner he purchases footwear from manufacturers of standard brands such as Cleopatra from Pakistan Shoe Corporation Limited, Jogger and Football of Service Industries Ltd. Lahore. Crayons' of Continental Footwear Industries Ltd., Karachi and North Star of Bata Pakistan Ltd. The petitioner also purchases footwear from manufacturers who hold licence under the Sales Tax Act and charge petitioner sales tax for every sale made to the petitioner. The petitioner purchases footwear from cottage industry manufacturer, who bring their wares to the petitioner and petitioner purchases the same. On 20-2-1985 the respondent No.2 visited the godown of the petitioner at Garden East, Karachi and made the inventory of petitioners stock which was made in the presence of Managing Director of the petitioner who was further directed to maintain a record of all receipts frog: 21-2-1985. On 21-2-1985 the petitioner addressed a letter to the respondent No.2 wherein it was pointed out that the petitioner was not a manufacturer under section 2, clause 11 of Sales Tax Act, 1951. The respondent No.2 served a letter on the petitioner alleging therein that in the meeting in the Collectorate it was agreed that a person who gets the shoes manufactured under a particular brand or name comes tinder the provision of section 2(11) of Sales Tax Act, 1951 and the petitioner was directed to obtain a manufacturing licence and maintain record of the shoes received and cleared from the petitioner's premises and the stock shall be considered as detained under section 168 of Customs Act read with section 12 of Central Excise and Salt Act, 1944 and that the goods may be cleared after payment of sales tax leviable thereon. On 2-3-1985 three subordinates of respondent No. 2 again visited the godown of the petitioner and obtained copies of total purchases made by the petitioner since 21-2-1985 upto 2-3-1985. The petitioner on 3-3-1985 wrote to the respondent No.2 reiterating the stand taken by him in the letter, dated 21-2-1985. The petitioner being aggrieved by the action of the respondents was filed this petition. In the counter-affidavit filed by Mr. Younus Wasti, Superintendent/Law Officer of the respondent No.l it has been stated that the petitioner is not only a retailer but also a manufacturer covered by the provisions of section 2(11) of the Sales Tax Act, 1951. Enquiries have revealed that the petitioner gets shoes manufactured by the shoes-makers for and in the name of English Boot House. The petitioner is required to pay sales tax on shoes, which are manufactured by others in the name of English Boot House and- on which sales tax has not been paid. Where a retailer combines in himself the functions of retailer as well as of the manufacturer as defined in section 2(11) he shall be required to pay sales tax on the goods in which he deals. In the meeting held in the Chamber of Collector, Central Excise and Land Customs, Karachi the participants promised to meet again on 2-3-1985 to work out the manner for payment of sales tax, but the petitioner did not attend on the said date. A rejoinder was filed by the petitioner wherein the petitioner has again denied that it is a manufacturer. The petitioner does not hold any patent nor does the petitioner get any shoes or footwear manufactured under a patent and repeated the same facts, which the petitioner has stated in the petition. We have heard the learned counsel for the petitioner and Mr. Liaquat Merchant learned Deputy Attorney-General on behalf of the respondents. It is contended by the learned counsel for the petitioner that as the petitioner is not a manufacturer, therefore, he is not liable to pay sales tax. In order to appreciate the contention of the learned counsel section 2(11) of the Sales Tax Act. 1951 (hereinafter referred to as the Act) is reproduced below: Section 2(11).--"Manufacturer or producer" means a person who engages, whether exclusively or not in the production of manufacturer of goods, and include a printer, publisher, lithographer or engraver, or person 'engaged in the ginning of cotton a person engaged in the business of purchasing and selling articles made wholly or partly of gold or silver and also any person (not being an employee) who manufactures goods, whether or not the materials of which the goods are manufactured are owned by him: The expression also includes.-- (i) the assignee, trustee in bankruptcy, liquidator, executor, or curator of any manufacturer or producer and, generally, any person who continues the business of a manufacturer or producer or disposes of his assets in any fiduciary capacity; (ii) any person, firm or company which owns, holds, claims or uses any patent, proprietary, sales or other right to goods being manufactured whether by them, in their name, or for them on their behalf by others, whether such person, firm or company sells, distributes, .consigns, or otherwise dispose of the goods or not; The relevant provision is section 2(11)(ii). The learned counsel states that the petitioner purchases the finished goods and, therefore section 2(11)(ii) is not applicable to the case of the petitioner. According to him the words "goods being manufactured" relates to a position prior to manufacture and they do not cover the goods, which have been purchased by a retailer for the purposes of sale. We are unable to agree with the contention raised by the learned counsel. Manufacturer or producer means a person who engages, whether exclusively or not, in the production or manufacture of goods. If the contention of the learned counsel, be accepted then it means that a person who supplies raw material for the purpose of manufacture would be liable to sales tax and when the goods are manufactured and completed in each respect then the same goods would again be liable to sales tax. This contention negates the definition of manufacturer or producer as contained in section 2(11) of the Act. On the other hand section 2(11)(ii) is wide enough to cover the case of a person or company who owns, holds or claims sales or other rights to goods being manufactured. It is thus clear that if the goods manufactured by others on the order of the petitioner and in its name, and which the petitioner according to its own admission sells in his shop, then the petitioner is liable to pay tax. The petitioner in such case holds proprietary rights of the goods. Again under section 3 (4)(iv) of the Act, there shall be levied and collected a tax on the value of goods produced and manufactured in Pakistan payable by the manufacturer or producer when the goods are actually used by the manufacturer or the producer. By virtue of section 3(4) of the Act the Central Excise and Salt Act, 1944 has been made applicable and according to the definition of manufacturer" contained in section 2(f) of the Central Excises and Salt Act, 1944, it includes any process incidental or ancillary to the completion of a manufactured product and any process of re-manufacture, remaking, reconditioning or repair and the process of packing or repacking such product. As by virtue of section 3(4) of the Act the provisions of Central Excises and Salt Act has been made applicable to the Sales Tax Act and the definition of "manufacturer under the Salt Act is wide enough to convert the cases of packing and repacking of such products. The learned Deputy Attorney-General stated that no demand is made from the petitioner on the goods, which have been supplied to it by the manufacturer of standard brand such as Shoe Corporation of Pakistan Limited or Bata Pakistan Limited. The sales tax is also not demanded for the goods whose value is less than Rs. 125. Cottage Industry is also exempted from the payment of sales tax but the tax is being demanded only on the goods, which had been manufactured on the orders of the petitioner firm. The petitioner has denied that the shoes are being manufactured by other parties on the orders of the petitioner. According to the respondent enquiries have revealed that the petitioner gets shoes manufactured by the shoe-makers for and in the name of English Boat House which are accepted under the following conditions: (i) That the shoes shall be supplied with their name embossed on the inner sole alongwith the retail price as fixed by them. (ii) That the shoes shall be supplied in the boxes with the approved lable of English Boot House Ltd. duly pasted thereon. (iii) That the shoe shall conform to the design and quality of the samples, which are first approved by English Boot House. (iv) That in certain variety of shoes the heals of the shoes shall be engraved with letters, E. B. H. which stand for English Boot House. It is, therefore, stated that it proves that the petitioners are not only the retailers of the shoes but are in fact manufacturers of the shoes as defined in section 2(11) of the Sales Tax Act. It is further stated that the shoes on which the different brands or lables other than that of the English Boot House are embossed or printed shall not be taken as the goods manufactured or produced by and/or for the petitioner on their behalf by others. The petitioners are liable to pay sales tax on all those footwear of which the retail price exceeds Rs.125. The petitioner was asked to take out a manufacturing licence and pay sales tax oh the footwear. Under the Central Excise Law offending goods are either seized or detained and the party is given a show-cause notice by the competent authority and the party is given proper opportunity to defend himself. The petitioner with a view to avoid departmental proceedings has filed this petition. The case is still under investigation and the party has the right to produce documentary evidence to the effect that th-- stock shoes held in their warehouse is duly tax-paid. The petitioner is required to pay sales tax on those shoes, which he gets manufactured in his name and receives without payment of sales tax. The learned Deputy Attorney-General has stated that the factual controversy has been raised Pin this petition. The respondents have denied the claim of the petitioner that they are not manufacturers and the question whether the petitioners are manufacturers or not require enquiry therefore, the petition is premature. The final order has not yet been passed. The petitioner has the proper remedy provided under the Act, which he has not exhausted. There is force in the contention of the learned D.A.-G. that the legal remedies are provided under sections 33, 35 and 36 of the Central Excises and Salt Act. Only enquiry is being conducted. The disputed facts have been raised in this petition, which this Court would not decide in the extraordinary jurisdiction of this Court. The allegations of the petitioner have been denied therefore, it would be proper for the petitioner to produce the material evidence before the respondents in support of its contention that it does not manufacture any shoe the petition is, therefore, premature. Learned D. A. G. has referred to the case of Khursheed Marble Industries v. Central Board of Revenue and another 1985 C L C 2437 wherein the following observation is relevant to the facts of the present case: "Mr. Liaquat Merchant appeared before us on pre-admission notice and raised two-fold contention. Firstly, that no final order has been passed, therefore, the petition was premature and secondly that the case would involve a sort of factual enquiry in regard to quality of goods and such enquiry is rarely undertaken by this Court in exercise of its extraordinary constitutional jurisdiction. We further find that this petition is also belated and liable to be defeated on the doctrine of laches because order of Central Board of Revenue was passed on 6-8-1983 viz. about 20 months back. On consideration of the material we are in no doubt whatsoever that no final order has been passed against the petitioners and the proceedings before the respondent No.2 have not reached the culmination point. After a final order is passed the petitioners will have a right to appeal and a revision. Until all such remedies, which are provided by statutes are exhausted, this Court would not be inclined to exercise its jurisdiction. We are of the view - that at present the material available on the record is not sufficient for us to arrive at a conclusion in regard to the quality of the goods. This will have to be determined on the facts of the factual enquiry, which the statutory functionaries have to carry out. We have, therefore, not entered into this question." The observation made in this authority applies to the present case also as the facts are identical and no final order has since been passed. The case is at the enquiry stage and whatever has been stated by the petitioner has been denied by the respondents. Learned counsel for the petitioner has relied upon the case of Collector of Customs v. S.M. Yousuf and others reported in 1973 SCMR 4111 wherein it has been observed, that "The opening clause in the section: "Any thing 'liable to confiscation under this Act" makes it clear that the liability of confiscation is already determined or is no longer in dispute. In the cited case the respondents disputed 'that any of the provisions of the Sea Customs Act has been contravened in respect of the foreign cloth seized from their premises and unless a determination is in appropriate proceedings reached to the contrary it cannot be postulated that the same goods are liable to confiscation." He has also referred to, the case of Salooka Steels Ltd. v. Director-General, Coast Guards of Pakistan, reported in P L D 1981 Quetta 1 wherein it has been observed that where a very jurisdiction of a Tribunal is challenged the aggrieved party can directly approach High Court. There is no cavil with this proposition, but in the instant case the respondents have the jurisdiction in the matter. The only contention of the petitioner is that it does not manufacture any goods, which has been disputed by the other side. So this question can only be determined after making detailed enquiry. The petitioner instead of explaining his] case before the authorities has approached the High Court at the initial stages. In these circumstances the present petition is not competent' and the same stands dismissed with no order as to costs. The petition was disposed of by short order dated 12-10-1985 and the aforesaid are the reasons for the same. Petition dismissed |
| Summary |
In the landmark case of English Boot House Ltd versus Collector of Central Excise and Land Customs, adjudicated by the Sindh High Court, significant legal interpretations of the Sales Tax Act, (III of 1951) were explored. The petitioner, English Boot House Ltd, a prominent retailer and alleged manufacturer of footwear, contested the imposition of sales tax on goods manufactured in its name by separate shoe-makers. Central to the dispute was the interpretation of section 2(11)(ii) of the Sales Tax Act, which defines 'manufacturer or producer' and its applicability to the petitioner’s business model. The court examined whether the petitioner, by branding and selling footwear manufactured by others under its name, fell within the ambit of a manufacturer as per the statute. The respondent, represented by Liaqat Merchant, Deputy Attorney General, maintained that the petitioner effectively held proprietary rights over the manufactured goods and was thus liable for sales tax obligations, especially for products exceeding a retail price of Rs.125. The petitioner, defended by lawyer Iqbal Kazi, argued that it functioned solely as a retailer, purchasing finished goods without engaging in the manufacturing process, thereby seeking exemption from sales tax under the sales tax regulations. The court further referenced relevant legal precedents, including Khursheed Marble Industries v. Central Board of Revenue and Collector of Customs v. S.M. Yousuf, to assess the breadth of the statutory definition and its application to cases where the manufacturer's jurisdiction is challenged. Emphasizing the necessity for detailed factual inquiry, the court determined that the petition was premature, as substantial legal remedies and investigative procedures under the Central Excise and Salt Act, 1944, had not yet been exhausted by the petitioner. The judgment underscored the importance of adhering to statutory protocols for tax disputes and the limited scope of extraordinary jurisdiction in addressing unresolved factual controversies. Ultimately, the petition was dismissed, reinforcing the respondent's position pending further legal and procedural developments. This case highlights critical aspects of tax law compliance, the delineation between manufacturing and retailing under tax statutes, and the procedural intricacies involved in tax-related constitutional petitions within the Pakistani legal framework. Businesses engaged in retail and branded manufacturing must navigate these legal definitions carefully to ensure compliance and avoid tax liabilities. The Sindh High Court's decision serves as a pivotal reference for similar cases, emphasizing the judiciary's role in interpreting tax laws and the importance of following established legal remedies before escalating matters to higher judicial authorities. For legal practitioners and entities alike, understanding the nuances of tax legislation and the judicial approach to defining manufacturing responsibilities is essential for strategic compliance and litigation preparedness. This case also illustrates the interplay between legislative definitions and practical business operations, offering insights into how courts balance statutory language with the realities of commercial practices. As businesses continue to expand and diversify, the implications of such legal interpretations will significantly influence operational strategies and tax planning within the commercial sector. |