(a) Sales Tax Act (IX of 1990)---

----S.3(1)(b) & (3)(b)---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Levy of sales tax ---Exemption---"Import"---Connotation-- Goods entering Pakistan for the purpose of transhipment to any other State or territory (Azad Jammu and Kashmir) will be subject to levy of sales tax notwithstanding their ultimate destination being Azad Jammu and Kashmir unless such goods are specifically exempted from levy of sales tax by Government of Pakistan in exercise of its statutory powers ---Transhiped goods or goods in transit to any other territory will not lose the character of their "import" through Pakistan---Such importer, thus, cannot claim exemption from levy of sales tax by presumption.

East and West Steamship Co. v. The Collector of Customs and others PLD 1976 SC 618 distinguished.

Federation of Pakistan v. Jamaluddin and others 1996 SCMR 727; Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad and 3 others PLD 1996 Lah. 718; Pakistan Textile Mill Owners Association, Karachi and 2 others v. Administrator of Karachi and 2 others PLD 1963 SC 137 and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

(b) Imports and Exports (Control) Act (XXXIX of 1950)---

----S.3---"Import"---Meaning elaborated.

Mian Abdul Ghaffar for Appellant.

Farhat Nawaz Lodhi, Legal Adviser for Respondents Nos. 1 to 3.

Ch. Afrasiab Khan, Standing Counsel for Respondent No.4.

Date of hearing: 28th April, 1998.

JUDGMENT

This judgment shall dispose of five Constitutional petitions, namely, Writ Petition No. 1069 of 1997, Writ Petition No. 1555 of 1997, Writ Petition. No.2469 of 1997, Writ Petition No.730 of 1998, and Writ Petition 731 of 1998, brought by M/s. Tahseen (Pvt.) Limited, involving common questions of law and facts in respect of applicability of sales tax on the goods imported by the said Company.

2. Briefly, the facts leading to these petitions are that M/s. Tahseen (Pvt.) Limited, Bhimber, Azad Kashmir, imported components of diesel engines from China through various letters of credit opened with the Union Bank Limited, Brandreth Road Branch, Lahore. These goods were imported for Rawalpindi Dry Port via Karachi by presenting the bills of entry for warehousing to the Customs Authorities at Karachi. The goods were thereafter transhipped to Rawalpindi Dry Port and then with the permission of the Dry port Authorities were warehoused at Bhimber (Azad Kashmir) working under the supervision of the Rawalpindi Customs Authorities. Those goods were, however, charged to sales tax in accordance with section 3 of the Sales Tax Act, 1990.

3. The petitioner's Company being aggrieved of levy of the sales tax on components of diesel engines imported by its' has brought these five Constitutional petitions claiming that, since the imported goods were to be used for manufacture of diesel engines at its factory at Bhimber situated within the territory of Azad Kashmir where the Sales Tax Act, 1990, is not applicable, sales tax cannot be charged thereon. It was thus urged that no sales tax could be levied on the goods the ultimate destination of which was Azad Jammu and Kashmir.

4. Mian Abdul Ghaffar, Advocate, the learned counsel representing the petitioners, contended that the sales tax under section 3 (1)(b) of the Sales Tax Act, 1990, can only be levied on the goods which are imported into Pakistan but not on the goods which are imported for Azad Jammu and Kashmir. He was of, thus, of the view that the goods which are imported for the purpose of use in Azad Kashmir may be brought through any port of Pakistan shall deemed to be goods in transit for Azad Jammu and Kashmir. In this connection, he referred to the goods imported by Afghanistan through Pakistan but those were not subject to sales tax. In support of his contentions, he relied upon Federation of Pakistan v. Jamaluddin and others (1996 SCMR 727), wherein the Supreme Court had held that where the goods are transhipped to Afghanistan in accordance with the Transit Trade Agreement and the Protocol appended thereto, customs law relating to the importation would not be applicable.

5. Learned counsel further referred to various opinions of the Law Division, Government of Pakistan, wherein it was confirmed that territory of Azad Jammu and Kashmir has not yet been annexed with Pakistan nor the Sales Tax Act, 1990, enforced in Pakistan has been made applicable in that territory. The learned counsel also contended that it was a case of great hardship that once the goods imported by the Company are subjected to sales tax at the time of import under the Sales Tax Act, 1990, and again the sales tax is charged on its manufactured goods in accordance with law enforced by the Government of Azad Jammu and Kashmir. In this way, the same goods are liable to double taxation for which no refund was allowed. It was also claimed that several representations were made and in this regard Kashmir Affairs, Northern Areas State and Frontier Regions Division, Government of Pakistan, had also recommended for exemption from levy of sales tax on import of goods to be used in Azad Jammu and Kashmir, but no action has been taken by the Government of Pakistan to provide any relief to the manufacturers located in Azad Jammu and Kashmir. On the other hand, imports made in the Northern Areas where too the Sales Tax Act, 1990, was not applicable, no sales tax is charged on the goods imported from China at Sust Border.

6. Mr. Farhat Nawaz Lodhi, Advocate, the learned Legal Advisor, Customs Department,. claimed that the goods imported by the petitioner- company are imported in Pakistan and were, thus, liable to payment of sales tax in accordance with section 3 of the Sales Tax Act, 1990. He explained that the goods imported by the petitioner's company land either at Karachi or Rawalpindi and are warehoused at Bhimber where warehousing facilities have been provided by the Customs Authorities of Pakistan, and for the purpose of ex-bonding, approval is also accorded by the Customs Authorities at Rawalpindi. In this connection, he referred to Messers Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan Islamabad and 3 others (PLD 1996 Lahore 718), wherein a Division Bench of this Court relying upon two judgments of the Supreme Court in Pakistan Textile Mill Owners' Association, Karachi and 2 others v. Administrator of Karachi and 2 others (PLD 1963 SC 137) and East and West Steamship Co. v. The Collector of Customs and other (PLD 1976 SC 618) had held that the expressions ' import' and 'export' shall have to be taken in ordinary and natural meaning which is bringing in and taking out. The learned Legal Advisor thus contended that when the goods land at Karachi or Rawalpindi, notwithstanding that such goods are thereafter transported to Azad Jammu and Kashmir, Northern Areas or any other country, those will be subject to levy of sales tax under the provisions of section 3 of the Sales Tax Act, 1990.

7. The sales tax is levied under the provisions of section 3 of the Sales Tax Act, 1990, which-for facility of reference is reproduced below:--

"3. Scope of tax.---(1) Subject to the provisions of this Act, there shall be charged,levied and paid a tax known as sales tax at the rate of twelve and a half per cent. of the value of---

(a) taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him; and

(b) goods imported into Pakistan.

(2) Notwithstanding the provisions of subsection (1)---

(a) -------------------------------------

(b)---------------------------------------

(c) taxable supplies specified in the Third Schedule shall be charged to tax at the rate of twelve and a half per cent. of the retail price which alongwith the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be;

(d) taxable supplies specified in Fourth Schedule shall be charged to tax at the fixed rate specified therein till the 30th June, 1998:

Provided that a person whose supplies fall under this clause may opt for paying sales tax at any other rate applicable to such supplies under this section subject to the condition that he shall not be allowed to adopt fixed tax scheme unless a notice of his intention to adopt such scheme is given to the Collector three months prior to such adoption.

(3) The liability to pay the tax shall be---

(a) in case of supply of goods in Pakistan, of the person making the supply, and

(b) in the case of goods imported into Pakistan of the person importing the goods.

(4) The Federal Government may, in addition to or in lieu of levying and collecting the tax under subsection (1), levy and collect such fixed amount of tax on any goods to be payable by any registered person or class of registered persons, supplying such goods or class of goods, in such mode, manner and time, and subject to conditions and limitations as it may specify by a notification in the Official Gazette."

8. For the present controversy the relevant provisions of the above- quoted section 3 are clause (b) of subsection (1) and clause (b) of sub section (3) thereof. Under these provisions, sales tax is leviable at the rate of 12 1/z per cent. on the goods imported into Pakistan and payable by the person importing such goods. There is no denial that the goods imported by the petitioner enter Pakistan at Karachi or Islamabad/Rawalpindi. The goods may be, later on, transported to Azad Jammu and Kashmir, but the fact remains that for the first time such goods enter territory of Pakistan and not that of Azad Jammu and Kashmir. Section 3 of the Imports and Exports (Control) Act, 1950, defines the term "import" to be 'bringing into Pakistan'. This definition is without any qualification or rider and is most relevant for the purposes of import. It even does not exclude the goods which are, later on, transhipped to any other territory/country. The transhipped goods or goods in transit to any other territory may be allowed exemption levy of any tax or duty but such goods will not loose the character of their import through Pakistan.

9. The same is the position in the case of goods in transit to Afghanistan. The goods imported by Afghanistan are for all intents and purposes of the Imports and Exports (Control) Act, 1950, are imported in Pakistan' and are then transhipped to Afghanistan. These are exempt from levy of any import duty or other taxes in accordance with the Afghan Transit Trade Agreement. 1n view thereof, the dictum of honourable Supreme Court laid down in Federation of Pakistan and others v. Jamal-ud-Din and others (1996 SCMR 727) is not applicable in the instant case. In the said case it was actually held that the goods imported for transit to Afghanistan under the Afghan Transit Trader Agreement could not be detained or confiscated by the Customs Authorities in pursuance of any direction of the Central Board of Revenue as such directions were exclusively in the domain of the Ministry of Commerce, Government of Pakistan.

10. It was also rightly pointed out by the learned Legal Advisor that the petitioner's Company cannot claim exemption from levy of sales tax by presumption. In Messers Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others (1992 SCMR 1632), it was held that the exemption from payment of tax cannot be claimed as of a right as it was discretionary with the Government under the provisions of the relevant law. Even the letter addressed by the Federal Minister for Kashmir Affairs, Northern Areas and States and Frontier Regions, Government of Pakistan, for exemption of levy of income tax and sales tax leviable on the goods imported for Azad Jammu and Kashmir to the Finance Minister, in fact, contradicts the claim of the petitioner's Company that the goods imported by it were not liable to levy of sales tax. Unless the Government of Pakistan specifically accords exemption to the goods imported by the petitioner through Pakistan from charging of the sales tax, such goods will be subject to levy of sales tax. The territory of Azad Jammu and Kashmir has not formally been annexed with Pakistan, as its future status is to be determined in accordance with the wishes of the people of State of Azad Jammu and Kashmir through democratic method of free and fair plebiscite as envisaged by UNCIP Resolutions adopted from time to time. Further, till the plebiscite is held, the territory known as Azad Jammu and Kashmir liberated by Pakistan shall be under the governance and control of Government of Pakistan as envisaged in the UNCIP Resolutions and more clearly explained in the Azad Jammu and Kashmir Interim Constitution Act, 1974. Meaning thereby, that it cannot be treated at par with Afghanistan which is an independent country and competent to enter into a transit agreement with Pakistan for transit of its goods through Pakistan and exemption of taxes and duties which are otherwise leviable thereon. Likewise, if for Northern Areas specific exemption from sales tax has been allowed on the import of goods, the same exemption cannot ipso facto be applicable to the goods imported for Azad Jammu and Kashmir imported through Pakistan.

11. Since under the law, the sales tax is leviable on the goods entering in Pakistan, may be for the purpose of transhipment to any other state or territory, the goods imported by the petitioner will be subject to levy of sales tax notwithstanding their ultimate destination being Azad Jammu and Kashmir unless as stated above, such goods are specifically exempted from, levy of such tax by the Government of Pakistan in exercise of its statutory powers.

12. In view of the above discussion, the Constitutional petitions brought by the petitioner's company assailing the levy of sales tax on the goods imported by it are devoid of any merit and are accordingly dismissed with no orders as to costs.

M.B.A./T-41/L Petition dismissed.