CENTRAL BOARD OF REVENUE THROUGH SECRETARY FINANCE, ISLAMABAD VS PIONEER STEEL MILLS (PVT.) LTD,
1999 P T D 1668
[Supreme Court of Pakistan]
Present: Ajmal Mian, C. J., Sh. Riaz Ahmed and
Ch. Muhammad Arif, JJ
CENTRAL BOARD OF REVENUE through Secretary Finance, Islamabad and another
Versus
PIONEER STEEL MILLS (PVT.) LTD,
Civil Appeal No. 1241 of 1996, decided on 23/12/1998.
Sales Tax Act (VII of 1990)--
----S.13---Customs Act (IV of 1969), S. 19---S. R. O. 366(1)/94, dated 9-5-1994---S.R.O. No.511(1)/95,dated 14-6-1995---Exemptionfrom payment of sales tax---Authority under earlier Notification No.S.R.O. 366(1)/94, dated 9-5-1994 had exempted the payment of sales tax on such raw material and components as were not produced or manufactured locally and were imported for use in manufacture of machinery=--Steel strips manufactured in Pakistan used as raw material for manufacturing steel pipes were - exempted from payment of sales tax vide Notification NO,S.R.0.511(1)/95, dated 14-6-1995 issued by Authority subsequently whereby 'it was directed that locally manufactured. raw material would be exempted from sales tax to the extent to which it was exempted at import stage if same was supplied to industrial units or consumers in areas or to projects and agencies entitled to exemption of sales tax at import stake-- Department acting under said subsequent notification directed manufacturer company to pay sales tax on steel strips used by it as raw material for manufacturing steel pipes---Legality---Manufacturer company had used steel strips in manufacturing process which were manufactured locally which was exempt from payment of sales tax---Idea behind issuance of subsequent Notification No-SRO 511(1)/95, dated 14-6-1995 was to bring locally manufactured raw material at par with regard to exemption from sales tax with that covered by earlier Notification No. S.R.O. 366(1)/94, dated 9-5-1994---Exemption from payment of sales tax to steel strips, which were locally manufactured raw material was available and expression of term "at import stage" in subsequent Notification No.S.R.O. 511(1)/95, dated 14-6-1995 would not alter nature and character of exemption.- Department could not withdraw exemption from sales tax allowed to manufacturing company on locally manufactured steel strips to manufacture steel pipes.
Izharul Haque, Advocate Supreme Court and Tanvir Ahmed, Advocate-on-Record (absent) for Appellants.
Fakhruddin G. Ebrahim, Senior Advocate Supreme Court, M. S. Baqar, Advocate Supreme Court and Sh. Salah-ud-Din, Advocate-on-Record (absent) for Respondents.
Date of hearing: 23rd December, 1998. .
JUDGMENT
SH. RIAZ AHMED, J.---This is an appeal through leave of this Court assailing the orders, dated 18-1-1996 delivered by a learned Single Judge of the Lahore High Court whereby a Constitution petition filed by the respondent Pioneer Steel Mills (Pvt.) Ltd. challenging the interpretation of the Customs Department with regard to the levy of sales tax on the steel strips used by the respondent was declared to be lawful authority and jurisdiction and it was held that the respondent company was not liable to pay the sales tax on the use of steel strips. Aggrieved by the orders passed by the learned Single Judge of the Lahore High Court, Central Board of Revenue invoked the jurisdiction of this Court to assail the said orders and vide orders, dated 24-4-1996 leave was granted to consider the true scope of 2 SRO s and the interpretation placed thereupon by the appellants governing the levy of sales tax.
2. The facts in brief are that the respondent company is the manufacturer of steel pipes, which it supplies to the gas transmission, distribution companies, notably Sui Northern Gas Pipelines Ltd., etc. Steel strips, which are manufactured by the Pakistan Steel Mills Ltd. in Pakistan are used by the respondent company as rave material for the manufacture of the steel 'pipes. Under SRO No.366(1)/1994, dated 9-5-1994, the Federal Government in exercise of the powers conferred by section 19 of the Customs Act and subsection (1) of section 13 of the Sales Tax Act, 1990, exempted from payment of sales tax on such raw material and components as are not produced or manufactured locally and are imported for use in the manufacture of machinery, equipment material, specialized vehicles, accessories, spares, chemicals and consumables to be supplied to the petroleum sector companies, for the projects in the table of notification No. SRO 367(1)/1994, dated 9-4-1994.
3. On 14-6-1995 another Notification No. SRO 511(1)/1995 was issued by the Federal Government in exercise of the powers conferred on it by subsection (1) of section 13 of the Sales Tax Act. Under this S.R.O. the Federal Government directed that locally manufactured machinery, equipment, raw material, intermediary and capital goods, shall be exempt from sales tax to the extent to which it is exempt at import stage, if these are supplied to the industrial units or consumers in areas, or to the projects and agencies entitled to exemption of sales tax at import stage subject to certain conditions mentioned in the said S.R.O. The appellant Department acting under SRO 511(1)/1995, dated 14-6-1995 directed the respondent to pay the sales tax on the steel strips. The said demand was resisted by the respondent and, thus, a dispute arose and while interpreting the said S.R.O. the appellants issued two letters, dated 11-10-1995 and 16-10-1995 and contended that exemption from payment of sales tax .was not available to the respondent. These letters were then impugned by the respondent through a constitution petition, which was allowed by the Lahore High Court, as stated above.
4. In support of this appeal, the learned counsel for the appellant Mr. Izharul Haq, Advocate, mainly relied on the expression "exempt at import stage" used in the Notification SRO 511(1)/1995, dated 14-6-1995 and contended that benefit of SRO 366(1)/1994, dated 9-5-1994 was available at import stage only on such raw material and components as are not produced and manufactured locally and are imported for use in the manufacture of machinery, equipment material and since the respondent company manufactures steel pipes by using steel strips manufactured by the Pakistan Steel Mills and since it is locally available, therefore, benefit under SRO 366(1)/1994 was not available on the import of the said material. It was further contended that the benefit of the notification would only be available to the locally manufacturing to the extent it is available at import stage. To place the correct interpretation on the Notification SRO 366(1 )/ 1994, dated 9-5-1994 and the Notification SRO 511(1)/1995, dated 14-6-1995, a
(Sh. Riaz Ahmed, J)comparison of both is necessary and, therefore, relevant portions of both these notifications are reproduced hereunder:---
Notification No.SRO 366(1)/1994, dated 9-5-1994:
In exercise of the powers conferred by section 9 of the Customs Act, 1969 (1V of 1969) and subsection (1) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to exempt from the whole of the customs duty specified in the First Schedule to the Customs Act, 1969 (IV of 1969) and sales tax on such raw material and components as are not produced or manufactured locally and are imported for use in the manufacture of machinery, equipment, material, specialized vehicles, accessories, spares, chemicals and consumables to be supplied to the petroleum sector companies of the projects mentioned in the table of the Notification SRO 367(1)/1994, dated 9-5-1994 subject to the conditions mentioned therein".
Notification SRO 511(1)/1995, dated 14-6-1995:
In exercise of the powers conferred by subsection (1) of section 13 of the Sales, Tax Act, the Federal Government is pleased to direct that locally manufactured machinery, equipment,, raw material, intermediary and capital goods, shall be exempt from sales tax to the extent to which it is exempt at import stage, if these are supplied to industrial units or consumers in the areas, or to the projects and agencies entitled to exemption of sales tax at import stage subject to the conditions laid therein. "
5. Admitted position is that the respondent company manufactures steel pipes and supplies the same to the Southern and Northern Sui Gas Pipelines Co. In the manufacturing process the respondent company uses steel strips, which are supplied to it by the Pakistan Steel Mills Ltd. and is thus, a raw material used in the manufacture of such pipes. 1t is abundantly clear that under SRO 366(1)/1994, dated 9-5-1994 the Federal Government exempted from the payment of sales tax such raw material as is not produced or manufactured locally and is imported for use in manufacturing the locally manufactured machinery, equipment as are supplied to the gas supply/ transmission companies vide table to the Notification SRO 367(1)/ 1994
6. Admittedly, steel strips is the raw material, which is locally Manufactured by the Pakistan Steel Mills Ltd. and is supplied to the respondent. A careful perusal of SRO 366(1)/1994, dated 9-5-1994 clearly indicates that no exemption from the payment of sales tax is available on the import of the steel strips if it had not been locally manufactured because the exemption is available only in respect of raw material, which is locally manufactured- 1n our well-considered view if at all it was the intention levy the sales tax on the locally manufactured raw material, there was hardly any reason to issue the notification regarding payment of sales tax on such raw material in terms of SRO 511(1)/ 1995, dated 14-6-1995 because the terms of the Notification SRO 366(1)/1994, dated 9-5-1994 are explicit and clear. To the contrary, in our view the idea behind the issuance of Notification SRO 511(1)/1995, dated 14-6-1995 was to bring the locally manufactured raw material at par with regard to the exemption from the sales tax with that covered by Notification SRO 366(1)/1994, dated 9-5-1994. 'In other words, the locally manufactured raw material would be deemed not to have been locally manufactured and treating it as imported and, thus, exemption from the payment of sales tax on them would be available in the same manner and to the same extent as was available under SRO 366(1)/1994, dated 9-5-1994. Comparison of both these notifications as reproduced above, if read together, leaves no room to doubt that the locally manufactured raw material is exempt from the payment of sales tax and the expression of the term "at import stage" in SRO 511(1)/1995, dated 14-6-1995 does not alter the nature and character of the exemption.
7. The contention raised by the learned counsel for the appellants is not tenable because in our view SRO 511(1)/1995 was issued keeping in mind that certain raw material though locally manufactured should be exempted from the payment of sales tax assuming that the same had not been locally manufactured and had been imported for the purpose of SRO 366(1)/1994, dated 9-5-1994.
8. For the foregoing reasons, we are of the view that the interpretation placed by the appellants Department on the construction of these 2 notifications is fallacious and by virtue of Notification SRO 511(1)/1995, dated 14-6-1995 the appellants cannot withdraw the exemption from the sales tax to the respondent company on the locally manufactured steel strips to manufacture the steel pipes. Resultantly, this appeal fails and is hereby dismissed leaving the parties to bear their own costs.
H.B.T./C-29/SC Appeal dismissed