C.P. No.D-644 Of 1986




Mr. Justice Gulzar Ahmed.

Mr. Justice Irfan Saadat Khan.


Date of hearing                         :           10th January 2011.


Petitioner through                      :           Mr. Muhammad Ali Sayeed, Advocate.


Respondent through                   :           Ms. Masooda Siraj, Advocate






IRFAN SAADAT KHAN, J:This Constitutional Petition has been filed against the notice dated 20.07.1986 issued by Superintendent Collectorate of Central Excise and Land Customs Karachi whereby the said respondent has observed that the petitioner is manufacturing storage Tanks for storing of Molasses which in his opinion is chargeable to Sales tax @ 12.5% of the value of the said tank.


2.         Briefly stated the facts of the case are that the petitioner is a private limited company and is engaged in the business of storage of molasses, tallow, edible oils and other liquids in bulk quantities. In order to facilitate its business  the petitioner hired the service of M/s. Tankage Engineering Services, a firm of contractors well versed in the construction of storage tanks, on a labour contract basis for building tanks in order to enable the petitioner to store the above mentioned items in the said tanks. The entire material required for the construction of said tanks was provided by the petitioner to the contractor. Thereafter the said tanks were erected at Kemari on concrete ring wall foundation in earth and superstructure firmly embedded in the concrete foundations with bottoms laid and welded on well compacted sub-grade. The tanks are of an average height of 55 feet and its diameter ranges between 22 feet to 75 feet. The steel used in the construction of said tanks ranges between 100 tons to 215 tons. That on 26.01.86 the respondent No. 02 served a notice upon the petitioner that as the petitioner has fabricated storage tanks and in the opinion of respondent No. 02 the manufacturing of the said tanks is chargeable to Sales Tax @ 12.5 of the value of said tank.


3.         That there were other tanks owners also who received similar notices from the Respondent No.2. The Respondent No.2 then vide his letter dated 25.05.1986 explained reasons to one of the companies, to whom a notice for charging sales tax was also issued wherein detailed description was given whereby it was explained as to how the said tank in his opinion were liable to Sales Tax. That on 20.07.1986 the Superintendent served a notice upon the petitioner to provide him certain information and particulars for assessing the Sales Tax chargeable on the storage tanks within 15 days, failing which the petitioner was warned of action as provided under section 9 of the Central Excise Act 1944. It is against this notice that the present petition has been filed.


4.         Mr. Muhammad Ali Sayeed, learned senior counsel, appeared on behalf of the petitioner and submitted that sub-clause (a) of section 3 of the Sales Tax Act 1951 (the Act) specifically provides that Sales Tax will be charged on all goods produced or manufactured in Pakistan. According to him the word ‘goods’ means goods of any kind of ‘movable property’ and the storage tanks, which are quite huge and enormous and are embedded in the earth by way of solid concrete, could by no stretch of imagination be considered as ‘movable property’. Thereafter he elaborated the term ‘goods’ and submitted that as these tanks are not movable property hence these do not fall under the definition of ‘goods’ and are not liable for Sales Tax. He further submitted that the department has incorrectly placed reliance on the Pakistan Customs Tariff Heading No. 73.22 by considering the said tanks to be storage tanks and that whether by simply defining these tanks as storage tanks would these become storage tanks in a real sense. He went on to argue that the reliance of the Respondent No. 02 on Pakistan Customs Tariff is totally misplaced as there is no relevancy of the said description of the storage tanks to the tanks erected by the petitioners.


5.         The learned counsel further submitted that the main purpose of Act was to impose tax on the goods ‘manufactured or produced’ while the above tanks were neither manufactured nor produced by the petitioner rather the same were built for the smooth running of the business of the petitioner. He submitted that if this analogy of this department is accepted then all the over head water tanks built in residential houses would also be liable for sales tax. He submitted that perhaps this cannot and should not be the intention of the legislature. He submitted that the petitioner admittedly is not engaged in the manufacturing or producing storage tanks and the storage tanks firmly and permanently embedded in the earth are not a movable property hence are not liable for Sales Tax. Learned Counsel further submitted that a question has been raised on behalf of the department with regard to maintainability of this petition, he submitted that this point is not available to the department as the petition was admitted way back on 1.9.1986 by specifically noting that the issue raised needs examination. He further submitted that at this juncture raising this issue that the petition is not maintainable is nothing but an afterthought on the part of the department. In the end the learned Counsel submitted that petition is maintainable and the notice issued by the respondent being without jurisdiction is liable to be annulled. In support of his above contentions, he relied upon the following decisions:-


                        Murree Brewery – PLD 1972 S.C 279

                        Nagina Silk Mills – PLD 1963 S.C. 322

                        Sindh Employees Social Security – PLD 1975 S.C. 450 (456-457)

                        Lt. Col. Nawabzada Mohd. Amin Khan – PLD 1961 S.C. 119

                        Kulsum Malik – 1996 SCMR 710 (725)

                        Gatron Industries -1999 SCMR 1072

                        Sher Shah Industries – PLD 1982 Karachi 653

                        Amin Textile Mills case 2000 SCMR 201

                        Muhammad Saleem, 1997 SCMR 315 (321)

                        Eduljee Dishaw – PLD 1990 S.C. 399 (413, 414)

                        also PTCL 1990 CL 604

                        Usmania Glass Sheet – PLD 1971 S.C. 205

                        PLD 1962 S.C. 113

Collector of Customs V/s. Karachi Bulk Storage and Terminal, 2007 SCMR 1357  



6.         Mrs. Masooda Siraj, advocate on the other hand appeared on behalf of the department and submitted that the present proceedings were the out come of the investigation carried out by the Sales Tax Intelligence Branch according to which a number of oil marketing companies were found indulging in fabrication and calendestine removal of oil storage tanks and the petitioner was one of them. She submitted that the department has simply issued a notice to the petitioner and the petitioner instead of replying to the same has come up before this Court by way of filing Constitutional Petition, which according to her is not appropriate. She submitted that the petitioner should have filed a proper reply of the said notice issued to them by the department and if aggrieved could have filed an appeal before the appropriate forum provided under the law, which admittedly has not been done by the petitioner, hence the present petition is not maintainable and is liable to be dismissed with cost.


7.         She further submitted that whether the petitioner is engaged in the manufacturing of said storage tanks or not is a factual controversy which cannot be addressed in the writ jurisdiction of this court, as the petitioner has miserably failed to point out that the notice issued by the department lacks proper jurisdiction. While arguing the case on merit the learned counsel submitted that the storage tanks were clearly identifiable as storage tanks as per Pakistan Customs Tariff heading 73.22 of the First Schedule to the Customs Act 1969. She submitted that if the said heading is read in juxtaposition to the definition of the word ‘goods’ given under section 3 of the Act everything would become clear. She also invited our intention to the Notification No. 66(I) /81 dated 25.06.1981 whereby the said storage tanks have clearly been marked as not exempt from the payment of Sales Tax.  She further submitted that notice to companies engaged in similar activities were issued by the department and those companies have paid the taxes thereon, hence the objections raised by the petitioner are misconceived and are liable to be dismissed / ignored. She further submitted that perusal of section 3 of the Act would reveal that the companies engaged in the manufacturing of storage tanks are liable to pay sales tax and the petitioner admittedly had manufactured and fabricated these tanks and thus is liable to pay the sales tax. She submitted that though the word ‘goods’ has not been defined in the Act however as per the definition of this word given in certain dictionaries the storage tanks erected and embedded in earth would fall under the said definition. In the end she submitted that the department has full authority and is fully empowered to ask the petitioner for payment of sales tax on the said tanks in view of above narrated facts and there is no any illegality in the said notice issued by the department to the petitioner and the petition is thus not maintainable on this point being premature and is liable to be dismissed in limine with cost. In support of her above contentions the learned counsel relied upon the following decisions:-


Colony Sarhad Textile Mills Ltd. V/s Collector of Central Excise and Land Custom [PLD 1969 Lah. 228 (235, 236, 237 C&D)]

                        Muhammad Arif Dar V/s Income Tax Officer [PLD 1989 S.C. 109]

Muhammad Asim Kurd V/s Assistant Commissioner-Cum-Returning Officer Karachi [1996 CLC 1772 (1776)]

                        AIR 1965 Guj. 215

                        Unreported judgment in C.P. 2605/1994

8.         We have heard both the learned counsel at some length and have perused the record and the decisions relied upon by them.


9.         So far as the question of maintainability of the petition is concerned, in our view, an important question of law has been raised in the instant petition with regard to whether notice issued by the Respondent No. 02 was with lawful authority or not and whether the interpretation of law made by the said Respondent with regard to interpretation of sub-section 6 of section 2 was in accordance with law or not? In our opinion the question raised in the instant petition is of prime importance as the petitioner has questioned the jurisdiction of Respondent No. 02 whether he has acted in a lawful manner and authority and whether his action in issuing the notice was not prejudicial, unjust and mala fide. We are fortified by the decision given by this Court in the case of MCB Ltd V/s Deputy Commissioner of Income Tax (2004 PTD 1901) wherein the Division Bench of this Court observed as under:-


“There are a large number of pronouncements made by the Supreme Court to the effect that if the order or action complained of was so patently illegal, void or wanting in jurisdiction that any further recourse to alternative remedy might only be counter productive and by invoking Article 199 the mischief could forthwith be nipped in the bud then in such matters existence of alternative remedy would not bar the exercise of Constitutional jurisdiction by this Court. Such pronouncements were made by the Supreme Court in the cases of: (i) Khalid Mehmood v. Collector of Customs, reported in 1999 SCMR 1881; (ii) Gatron Industries Ltd. v. Government of Pakistan and others, reported in 1999 SCMR 1072; (iii) Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance Islamabad and 5 others, reported in 1993 SCMR 1778; (iv) Edulji Dinshaw Ltd. v. Income Tax Officer, reported in PLD 1990 SC 399 = 1990 PTD 155; (v) The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others, reported in PLD 1972 SC 279; and (vi) Usmania Glass Sheet Factory v. Sales Tax Officer, reported in 1971 PTD 1. The observations arrived at effect that relief in writ/Constitutional jurisdiction would be available to a party where impugned order was without lawful authority, prejudicial, unjust and mala fide.



Hence in our considered view as a question with regard to issuance of notice without having lawful authority has been raised, which is dealt with in detail in the later part of this judgment, we find the petition to be maintainable and hereby repell the preliminary objection raised by the Respondent that the petition is not maintainable.    


10.        Before coming to the second limb of the arguments raised by Mr. Muhammad Ali Sayyed, it would be in fitness of things if the relevant laws are first discussed.

As per the Section (2) sub-Section 6 of the Sales Tax Act 1951 (The Act) the term ‘goods’ has been defined as under:-

goods” means all kind of movable property other than actionable claims, money, stocks, shares and securities”.  



            Perusal of the word ‘goods’ would reveal that it means all kinds of “movable property” other than actionable claim etc. The term movable property is defined in clause 34 of Section 3 of General Clause Act 1887 as per which the term movable property means:-

movable property shall mean property of every description, except immovable property”.


As per Blacks Law Dictionary VIth Addition, Page No. 1014 movable property means:-

that which can change its place, as movable property or in time as movable feast or terms of court”.


11.        The term immovable property has not been defined in the Act however the said term has been defined in Registration Act 1908 Section (2) sub-Section 6 as under:-

immovable property” includes land, building benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth, hereditary allowances, rights to ways, lights, ferries and fisheries but does not include—


a)      standing timber, growing crops or grass whether immediate severance thereof,  is intended or not;

b)      fruit upon and juice in trees whether in existence or not grow in future; and

c)       machinery embedded on or attached to the earth, when dealt with apart from the land: (emphasis supplied)”.


            The term immovable property has also been defined in Transfer of Property Act 1882 according to which immovable property means:-

immovable property” does not include standing timber, growing crops of grass”.


            The term immovable property has also been defined in Section 25 of Section 3 of the General Clauses Act 1887 as under:-

immovable property” shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth”.


The term immovable property has also been defined on page No. 750 of the Black’s Law Dictionary as per which immovable property means:-

refers to land and those things so firmly attached thereto that they may be regarded as part of it and law of Situs governs in choice of law”.


12.        In a decision given by a Division Bench of this court, though which was not referred to by any of the counsel, in the case of Defence Authority Club Karachi and five others V/s Federation of Pakistan and Others 2007 PTD 398 it was observed that “to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market”.


In an another judgment reported as Sarwar and Company (Pvt) Ltd. Lahore V/s Collector Sales Tax Multan and Others, PTC 2006 CL 1, a division bench of Lahore High Court while dealing with the case where construction of the bridge of specific size and specification, which was eventually handed over to PHA, was not treated to be goods falling under the definition of the term goods as defined in Sales Tax Act 1990 by the department. In the said judgment the learned bench observed as under:-

In the present case, the Punjab Highway Authority had designed the bridge and the size of the girder to be used in its construction were of a specific size and specification which is not available in the open market and the appellant was supposed to pre-cast the same at site under the direct supervision of the Engineer of P.H. Authority. The appellant thus cannot be termed as manufacturer, producer and whole-seller as he does not indulge in the manufacturing of any kind of goods which could be brought or sold in open market”.


            In the same judgment it was held as under:-


To become a “goods” an article must be same thing which can be ordinarily come to market, to be bought and sold, and is known to the market”.


If the above terms are examined in juxtaposition of the above provisions of the law and the above referred decisions it will be clear that the law makers have defined the term “goods” followed by the term “means” meaning thereby that they have given it an exhaustive definition.


13.        Now coming to the facts of the present case, it is an admitted fact that these Storage Tanks were built, fabricated and installed by the petitioner for their own commercial use. As per the description the said tanks were constructed by using specialized material and were built by an engineering firm, which is well versed with the construction of the said tanks as not ordinary contractor can built such solid tanks. It is also an admitted fact that the super structure of these tanks is firmly embedded in the earth and it is not possible to remove these tanks from their places of erection until and unless the same are totally dismantled or demolished which will not leave them to be tanks. The definition of the word “goods” as given under the law clearly defines the same as every kind of movable property; now the question is whether these goods are movable property or not? From the description of the tanks given which has not been denied by the respondent, it is clear that it is virtually impossible to move these goods in their original shape of tanks meaning thereby that for all practical purposes these are immovable assets or property.


14.        In the decisions referred supra it is also seen that the term “goods” means “something which can ordinarily be brought to market and could be sold” and so far as these tanks are concerned these can neither be moved nor could be sold in the market. Hence in our opinion by no stretch of imagination these could be termed to be movable assets falling under the definition of the term “goods”. In a similar manner bridges, which were eventually handed over to KDA/PHA, were also not considered to be movable property, in the decision Usmani Associates V/S CBR reported as PTCL 2003 CL 461.


15.        The main contention of the department is that the petitioner has produced or manufactured the storage tanks which in their opinion are liable to be taxed under section 3 of the said Act and reliance in this regard is placed on the PCT Heading 73.22. We have examined that it is not the case of the department that the petitioner after producing or manufacturing the said storage tanks have ever sold these items. Sales Tax is a tax levied, as the name indicates, on the sale of certain goods which falls under the ambit of the said law barring the exemptions provided under the statute wherein certain items and goods have specifically been exempted from the said levy. Putting this acid test to the goods alleged to have been manufactured and produced by the present petitioner if for the arguments sake it is accepted that the petitioner has produced or manufactured said goods, but the question is whether these items fall under the definition of goods or not. It has already been discussed in the upper paragraphs of this order that to constitute something as goods it must ordinarily be something which could be brought to the market and sold. We were able to lay our hands on a decision in the case of Addu Achiar V/s The Custodian Evacuee Property, Hyderabad Deccan, reported in A.I.R 1953 Hyderabad 14 wherein the High Court of Hyderabad Deccan bench observed as under:-

“If the machinery and other articles pertaining to the factory are in the nature of permanent fixtures then they would be regarded as immovable property (para 5). The test as to whether a thing would be regarded as being embedded in the earth in order to constitute immovable property is whether its rests by its own weight on earth and whether it can change places and can change hands and can be removed from one place to another. This is based on the principle that whatever is fixed to the soil becomes in the contemplation of the law, a part of it. The correct test would be to ascertain whether it was to create a permanent improvement to the premises or was it merely a temporary annexation for the enjoyment of the chattel by the tenant. Where, therefore, a tenant running the factory in the premises of another, installs machinery it will always be presumed that he installs the same with the intention of removing the same whenever he chooses to vacate the premises.


The amount of the degree of annexation is also a matter which will be taken into consideration in coming to a conclusion as to whether it is a permanent fixture or not. If the degree of annexation is such that the fixture cannot be taken away without destroying the principle it would be regarded as permanent fixture”.      



Hence in view of the explicit findings of the courts and in view of the law discussed above, we are of the view that the Storage Tanks of the petitioner do not fall under the definition of the term “goods” as given under  subsection (6) of section 2 of the Act.


This petition is therefore allowed and the impugned notice issued by the department on 20th July 1986 is hereby vacated.               








The ______ March 2011