Raw material imported by a "manufacturer" for his own consumption

Citation Name : 2019 PTD 1342 SUPREME-COURT
Side Appellant : COMMISSIONER INLAND REVENUE, ZONE-I, LARGE TAXPAYER UNIT-II, KARACHI
Side Opponent : ORI TECH OIL (PVT.) LTD.
R. 58B, proviso (i)---Sales TAX Act (VII of 1990), S. 2(17)---Value Addition TAX (VAT), levy of---'Manufacturer', definition of---Scope---Raw material imported by a "manufacturer" for his own consumption---Respondent-company, imported certain base oil and additives for use as raw material, which raw material they got blended into lubricants under their brand name by a vendor under a Toll Blending Agreement---Respondent (importer) supplied the imported raw material along with their packaging material to the vendor and received back the raw material in the form of lubricants, duly packed in their packaging, for them to sale the same in the market---Processing/blending by the vendor was done under the Toll Blending Agreement with the formulation/specification of the respondent, and was paid by the respondent, the blending/conversion charges @ Rs.7 per litre---Contention of the TAX department was that since the respondent (importer) neither had any manufacturing facility, nor had they undertaken any manufacturing themselves, and were also not registered as a 'manufacturer' with the sales TAX authority, thus, they could not claim themselves to be a 'manufacturer', to enable them to avail the exemption extended through proviso (I) to R. 58B of the Sales TAX Special Procedures Rules, 2007 '(the Rules of 2007')---Held, that reading of proviso (I) to R. 58B of the Rules of 2007 showed that the VAT levied through said rule, was not chargeable in respect of the goods imported by a "manufacturer" for his own consumption---For availing the said exemption, the importer had to show that in the first place, he was a "manufacturer" and, secondly, that the said goods had been so imported by him for his own consumption i.e. for manufacturing/producing of his own product---Although the respondent did not have any manufacturing facility, however, the same did not denude it of the status of a "manufacturer" in the context of the Sales TAX Act, 1990 ('the Act') , and as defined by S. 2(17) thereof---Section 2(17) of the Act gave much broader meaning to the word "manufacturer" by including those who owned, held, claimed, or used any patent, proprietary or other rights to the goods being manufactured whether in their name or on their behalf---Admittedly imported raw material was delivered to the vendor in his capacity as a bailee only, for it to blend it for the respondent, whereafter it returned the same to the respondent blended into lubricants at a cost paid by the respondent---Such process of delivery of the subject goods to the vendor could not by any stretch of imagination be termed as a TAX able supply---At no point in time, during the entire process any dispossession of the imported goods was affected from the respondent to, or in favour of the vendor and at no time during the course of such transaction the respondent lost ownership of the imported goods, or the product made thereof, nor did the vendor acquire any proprietary rights therein as such---Manufacturing/blending, of the subject imported material into lubricants was carried out under the orders of, for and on behalf of the respondent, and in their name---Brand name appended to the packaging and attributed to the lubricants under which name the lubricants were sold, and marketed, was registered in the name of, and was owned by the respondent---Respondent thus possessed all the attributes of a 'manufacturer' as prescribed through sub-clause (c) of clause 17 of S. 2 of the Act, and, therefore, was fully entitled to the exemption from payment of VAT provided for under R. 58B of the Rules of 2007---Petition for leave to appeal was dismissed in circumstances.

Citation Name : 2019 PTD 1299 SUPREME-COURT
Side Appellant : PAKISTAN MATCH INDUSTRIES (PVT.) LTD.
Side Opponent : ASSISTANT COLLECTOR, SALES TAX AND CENTRAL EXCISE MARDAN
Fiscal statute---Exemption from TAX ---Where a TAX payer fairly came within the scope of an exemption, then the same could not be denied on the basis of some supposed intention of the law-maker.