THE CENTRAL BOARD OF REVENUE, ISLAMABAD VS SHEIKH SPINNING MILLS LIMITED, LAHORE
1999 P T D 2174
[Supreme Court of Pakistan]
Present: Ajmal Mian, C. J., Munawar Ahmed Mina and Ch. Muhammad Arif, JJ
THE CENTRAL BOARD OF REVENUE, ISLAMABAD and others
Versus
SHEIKH SPINNING MILLS LIMITED, LAHORE and others
Civil Petitions Nos. 1986-L, 1987-L, 1995-L, 1996-L, 2012-L, 2013-L, 2016-L, 2019-L and 2020-L of 1998, decided on 24/12/1998.
(On appeal from the judgment, dated 2-10-1998 of the Lahore High Court in Writ Petitions Nos.9272/98, 7122/98, 10221/98, 9389/98, 9526/98, 9955/98, 10679/98 and 11968/98).
(a) Sales Tax Act (VII of 1990)---
----S.7---S.R.O. 1307(1)/97, dated 20-12-1997---Constitution of Pakistan (1973), Art. 199---Entitlement to deduction of input tax in terms of S.7, Sales Tax Act, 1990 in respect of goods which had been used for manufacturing of taxable goods but which had not become integral part of the same-- Determination ---Constitutional petition before High Court ---Maintainability- Forums provided under Sales Tax Act, 1990, held, would decide the matter with reference to the substantive provisions of the Sales Tax Act, 1990 and S.R.O. 1307(1)/97, dated 20-12-1997 and in case of any conflict between the notification and the provision of the Act, substantive provisions of the Sales Tax Act would prevail---Appropriate action of the High Court was to ask the manufacturer to approach the` forum provided under the Sales Tax Act, 1990 by providing guidelines.
(b) Interpretation of statutes-
---- Fiscal statute---Central Board of Revenue, or for that matter even the Federal Government cannot control or curtail judicial adjudicative power vested in the forums provided under the relevant law by giving a particular interpretation to a particular provision of the relevant law or by issuing notification/S.R.O. for that purpose.
Messrs Central Insurance Co. and others V. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 ref.
A. Karim Malik, Advocate Supreme Court and M. Adam Ch., Advocate-on-Record for Petitioners,
Imtiaz Rasheed, Advocate and Syed Mansoor Ali Khan, Advocate with special permission and Sh. Salauddin, Advocate-on-Record for Respondents.
Date of hearing: 24th December, 1998
JUDGMENT
AJMAL MIAN, C.J.---By the following short order we have converted the above nine petitions into appeals and disposed of the same:---
"ORDER
For the reasons to be recorded later on, the above petitions are converted into appeals and are disposed of in the terms that it will be open to the respondents to file appeals even now before the forum provided under the Sales Tax Act to agitate the question that they are entitled to the deduction of input tax in terms of section 7 of the Sales Tax Act, 1990 in respect of the goods which have been used for manufacturing of taxable goods but they have not become integral part of the same. The forums provided under the Act will decide the controversy at issue with reference to the substantive provisions of the Act and S.R.O. No.1307(1)/97, dated 20-12-1997 and in case of any conflict between the two, the substantive provisions of the Act will prevail."
2. We intend to record the reasons in support of the above short order.
3. The brief facts are that the Federal Government in exercise of the powers conferred by clause (b) of subsection (1) of section 8 of the Sales Tax Act, 1990 (hereinafter referred to as the Act), issued Notification No.S.R.O. 556(1)/96, dated 1-7-1996 providing that the goods detailed in column (2) of the table below on which a registered person shall not be entitled to claim input tax credit if such goods are purchased by him for use in his registered office or the business premises. It may be pertinent to reproduce the table referred to in the above notification, which reads as follows:
"TABLE
| Sr. No | Description | Heading of the First Schedule to the Customs Act, 1969 (IV of 1969) |
| (1) | (2) | (3) |
| 1 | Vehicles | Respective headings of Chapter 87 |
26. Reported as PTCL 1996 St. 1096
| (1) | (2) | (3) |
| 2. | Consumer durables of the house-hold type such as air-conditioners (window type or split), Refrigerators, miscrowave ovens, deep freezers and other household appliances." | |
The above notification was followed by another Notification No.S.R.O 1307(1)/97, dated 20-12-1997, which reads as under:
"Notification No. S.R.O. 1307(1)/97, dated 20th December, 1997.- In exercise of the powers conferred by clause (b) of subsection (1) of section 8 of the Sales Tax Act, 1990, and in super session of its Notification No.S.R.O. 556(1)/96, dated the 1st July, 1996, the Federal Government is pleased to direct that a registered person shall not be entitled to reclaim or deduct the input tax paid on goods which are not the direct constituent and integral part of the taxable goods produced, manufactured or supplied, during the course, or in the furtherance, of any taxable activity."
The respondents who are textile and allied items manufacturers filed writ petitions in the High Court assailing .the above second notification, dated 20-12-1997, on the ground that it was ultra vires of the provision of the Act as it purported to take away the right to claim or deduct the input tax paid on goods which are used in the manufacturing process of the taxable goods but are not the direct constituent and integral part of thereof. Besides the above respondents, a number of other mill owners filed writ petitions, which were allowed by a learned Single Judge of the High Court in the following terms:--
"Keeping in view both the notifications in juxtaposition and reading with section 8(1)(b) of Act of 1990 it is crystal clear that the respondent has authority only to collect sites tax qua the goods 'specified in the notification issued under section 8(1)(b) as reproduced above. It is fiscal matter, therefore, to be interpreted strictly. The second notification did not specify the goods, which is a condition precedent to collect the tax, therefore, the same is valid to the extent of goods specified in the first notification as the second notification was in continuation of it.
The upshot of the above discussion is that the second notification is held valid to the extent of the goods specified in the first notification, dated 1-7-1996. The petition is disposed of in the above terms."
4. The petitioner i.e. Central Board of Revenue has filed the present petitions for leave to appeal. In support of the above petitions Mr. A. Karim Malik, learned counsel appearing for the petitioner has vehemently contended that the learned Judge in Chamber erred in allowing the above writ petitions in the above terms without having any material before him indicating that factually the respondents were denied to reclaim or deduct the input tax paid on goods which were used by them for manufacturing of the textile goods but were not the direct constituent and integral part of the same. According to him, as the case requires above factual inquiry, the learned Judge in Chamber could not have pressed into service the Constitutional jurisdiction. His further submission was that under the Act forums are provided for agitating the grievances arising out of any illegal action on the part of the functionaries mentioned therein.
5. On the other hand, Mr. Imtiaz Rasheed and Syed Mansoor Ali Shah, Advocates High Court, who appeared for the respondents (with the special permission of this Court as they had appeared in the High Court), urged that the above notification, dated 20-12-1997 cannot negate the express provision of the Act which entitled the respondents to reclaim or deduct the input tax paid on goods which are used for manufacturing taxable goods though they are not direct constituents or integral part of the same. In support of the above submission they have invited our attention to clauses (12), (14), (20), (39) and (40) of section 2, and sections 7, 8 and 10 of the Act.
6. It seems to be well-settled proposition of law that the Central Board of Revenue, or for that matter even the Federal Government, cannot control or curtail judicial adjudication power vested in the forums provided under the relevant law by giving a particular interpretation to a particular provision of the relevant law or by issuing notification/S.R.O. for that purpose. In this behalf it may be pertinent to refer to the following portion of the judgment in the case of Messrs Central Insurance Co: and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232, wherein the power of the Central Board of Revenue with reference to the income-tax has been dilated upon, which reads as follows:
"It is evident from the above provisions that though the Central Board of Revenue has administrative control over the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue, on a statutory provision cannot be created as a pronouncement by a forum competent to adjudicate upon such a question judicially or quasi judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which may interfere with the judicial or quasi judicial functions entrusted to the various functionaries under a statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to the administrative matters. Theinterpretation of any provision of the Ordinance can be renderedjudicially by the hierarchy of the forums provided for under the above provisions of the Ordinance, namely, the Income-tax Officer, Appellate Assistant Commissioner, Appellate Tribunal, the High Court and this Court and not by the Central Board of Revenue. Inthis view of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the circular, can be treated as administrative interpretation and not judicial interpretation."
7. In our view the learned Judge in Chamber was not justified in granting a general declaration in respect of the above notification, dated 20-12-1997 in the absence of any specific instance of denial by the Department to the respondents to reclaim or deduct the input tax paid on goods which are not the direct constituent l and integral part of the taxable goods produced, manufactured or supplied. It would have been appropriate to have asked the respondents to approach the forum provided under the Act by providing guidelines. We have, therefore, converted the above petitions into appeals and disposed of the same in terms of the short order of even date quoted above.
M.B.A./C-32/SOrder accordingly.