RACHNA CHEMICAL INDUSTRIES VS GOVERNMENT OF PAKISTAN
1991 P T D 1
[Karachi High Court]
Before Haider Ali Pirzada and Haziqul Khairi, JJ
RACHNA CHEMICAL INDUSTRIES
Versus
GOVERNMENT OF PAKISTAN through the Secretary, Ministry of Finance,
Islamabad and 3 others
Constitutional Petitions Nos.D-929/930/932/1203/1212/1221/1222/1223/1224/1225 of 1988, decided on 11/06/1990.
Sales Tax Act (III of 1951)---
----S. 7---Sales tax---Exemption---Withdrawal of exemption with retrospective effect---Validity---Exemption granted under Sales Tax Act, 1951, which regulated levy of sales tax was a separate and distinct enactment---Facts which had occurred prior to the date of notification whereby exemption from sales tax was withdrawn, clearly established that petitioners had acquired vested rights in the exemption under the notification applicable at that time---Such acts including contractual commitments made by petitioners were done on the assurance contained in the earlier notification extending exemption from payment of Sales Tax---Vested right having thus been created in favour of petitioners, subsequent withdrawal of exemption could not 'be given retrospective operation by an executive act to discharge that right---Petitioners were thus, entitled to claim exemption from Sales Tax in circumstances.
1984 PTD 216 ref.
A. Sattar Usman Memon for Petitioner.
Abul Khair Ansari for Respondents.
Date of hearing: 11th June, 1990.
JUDGMENT
HAIDER ALI PIRZADA, J.---In these ten Constitution Petitions the common question that arises for consideration is whether the withdrawal of exemption under section 7 of the Sales Tax Act, 1951 with effect from 26-6-1988 would not be given effect to retrospectively so as to infringe the petitioner's vested rights which accrued to them when they made payments and opened Letters of Credit prior to 26-6-1988.
As the facts are not in dispute in these matters, it is not necessary to state the facts in each one of them. It will suffice if we refer to the relevant facts in Const. Petition No.D-929 of 1988. The petitioner is an industrial importer registered under the Import Export Control Act and uses inedible Tallow (hereinafter referred to as "TALLOW") in the manufacture of its products etc. The Tallow is allowed to be imported by the respondent No.1 on the free list of Imports, and that at material times it was exempted from levies of Sales Tax.
The petitioner agreed to purchase from COLYER FEHR TALLOW-PTY-LTD. 49-51, YORK STREET, G.P.O. Box No.2545 Sydney, Australia, 250 M/Tons of Tallow at U.S. $.400 per Metric Ton, May/June, 1988 against shipment vide indent No. R.C. 1/102/CFT/4040. On the basis of the contract of purchase and Import Licence the petitioner opened Irrevocable Letter of Credit bearing Documentary Credit No.40/144 dated 26-5-1988 in the sum of U.S. $.99,960 through Muslim Commercial Bank Ltd. It is the case of the petitioner that on receipt of Letter of Credit, the shipper/seller COLYER FEHR TALLOW PTY LTD. shipped total 248.35 Metric Tons of TALLOW in two different consignments on m.v. "BOTANY TRIBUNE" on 3rd June, 1988. The said vessel arrived within territorial jurisdiction of Pakistan before 28-6-1988 but berthed at Karachi on 1-7-1988. The petitioner filed two Bills of Entries for release of consignment on 30-6-1988.
The further case of the petitioner as set out in petition is that no sales tax was leviable on Tallow under heading No.15.02-A of the Pakistan Customs Tariff 1985-86 as it was exempted from levy of Sales Tax at the time of entering into contract for the purchase and also at the time of opening of an irrevocable. Letter of Credit. However, much after the goods were shipped and after the ship arrived within the territorial limits of Pakistan, Notification dated 26th June, 1988 (S.R.O. 500(1) of 1988) was issued in pursuance of section 7 of the Sales Tax Act, 1951 under which Sales Tax has been imposed at 12-1/2% on the import. Photostat copy of the Notification is annexed to the petition as Annexure `H'. The petitioners challenged this Notification through these petitions.
We have heard Messrs Abdul Sattar Memon and J.H. Rahimtoola counted for the petitioners and Messrs Aninuddin Khan and Asim Afzal holding brief for Mr. Abul Khair Ansari, learned counsel appearing for the respondents in the above petitions. Learned counsel appearing for the parties have submitted that the point involved in these petitions is covered by a decision reported in 1984 P T D 216.
The point involved in these petitions was considered in the above reported case by a Division Bench of this Court wherein after considering similar arguments and identical points and all the relevant authorities of the Supreme Court and Lahore High Court on the subject enunciated the following principles:--
(1) "There is little to argue on the point that the Sales Tax Act of 1951 and the Customs Act, 1969 and the Customs Act of 1969, though taxing statutes, operate in different fields.
(2) What section 3(5) of the operating under Sales Act, 1951 achieves of machinery the Customs Act to realizations under the Sales Tax Act, as well.
(3) There is a clear distinction between charging provisions of a statute and the machinery part thereof.
(4) It is axiomatic that mode and manner of recovery does not alter the nature of a tax nor can tax be introduced or imposed by implication.
(5) It is only payability which is concerned by section 3(5) of the Sales Tax and not the imposition of levying of Sales Tax Act itself.
(6) Merely, because of the invocation of the section 3(5) of the Sales Tax Act and the application of the Customs Act, 1969, pursuant thereto Sales Tax is not diverted of its inherent attributes and does not become customs duty and, therefore, the introduction of section 31-A in the Customs Act, cannot take any vested rights under the Sales Tax Act and does not make any difference whatever on the score."
We are in respectful agreement with the judgment of our learned brothers for the reasons given by them in this decision. We hold that the exemption granted under the Sales Tax Act which regulates the levy of Sales Tax is a separate and distinct enactment. All these facts which occurred prior to the date of Notification issued on 26-6-1988 clearly established that the petitioners had acquired vested rights to the exemption under the prior notification applicable at that time. These acts including the contractual commitments made by them were done on the assurance contained in the prior notification extending the exemption from payment of Sales Tax right is created in their favour and subsequent withdrawal of exemption cannot be given retrospective operation by an executive act to discharge that right.
Accordingly, these petitions succeed. The bank guarantees furnished by the petitioners in favour of the respondent No.3 stand cancelled and shall be a delivered back to the petitioners. In the circumstances of the case the parties are directed to bear their own costs.
A.A./R-151/KPetitions accepted.