PAKISTAN MINERAL DEVELOPMENT CORPORATION, SALT MINES, KHEWRA, JHELUM VS SECRETARY, C.B.R., ISLAMABAD
2001 PTD 2215
[Lahore High Court]
Before Muhammad Nawaz Abbasi, J
PAKISTAN MINERAL DEVELOPMENT CORPORATION
SALT MINES, KHEWRA, JHELUM
Versus
SECRETARY, C.B.R., ISLAMABAD and 2 others
Writ Petition.No.628 of 1989, heard on 26/02/2001.
Sales Tax Act (III of 1951)‑‑‑--
‑‑‑‑S.7‑‑‑S.R.O. 9(1)83, dated 5‑1‑1983‑‑‑Customs General Order, dated 10‑9‑1986‑‑‑Manufacture of Blasting Powder ‑‑‑Chargeability to sales sax‑‑ Exemption‑‑‑Tax already paid on the sulphur, a component of blasting powder was deductible from the sales tax of the manufactured powder.
Sales tax on the blasting powder was chargeable under the notification, dated 1‑7‑1981 and the notice for the recovery of the sales tax for the period from 1‑7‑1981 to 4‑11‑1985 was issued by the Assistant Collector on 4‑9‑1985. The assessee did not plead the exemption of the sales tax under the notification dated 1‑1‑1983 and the fulfilment of the conditions contained therein and consequently the assessee would not be entitled to the exemption on sales tax under the said notification. The exemption of sales tax on the blasting powder under Customs General Order dated 10‑9‑1986 would be available only from the date of issue of said Customs General Order which having no retrospective effect would not be applicable to the assessee. During the period for which the sales tax was being demanded from the assessee, neither there was any such notification in the field under which sales tax on the blasting powder was exempted nor the existing law provided that‑the sales tax would not be recoverable on the sale of such goods. Under the Sales Tax Act, 1951 the sales tax was recoverable from the manufacturer on the production of the goods.
Assessee with reference to an observation made by the Deputy Collector in his order contended that the, tax already paid on the sulphur, a component of blasting powder is deductible from the sales tax of the manufactured powder.
The Collector Appeals while upholding the order of the Deputy Collector affirmed the observation, therefore, the contention to that extent being not without force, the assessee in the light of the order of the Deputy Collector Appeals would be entitled for the adjustment/refund of the sales tax which was used in the manufacture of blasting powder.
Muhammad Saleem for Appellant.
Farhat Nawaz Lodhi for C.B.R.
Date of hearing: 26th February, 2001.
JUDGMENT
The petitioner being an organization of Pakistan Mineral Development Corporation is engaged in the business of manufacturing of the blasting powder. The Deputy Collector Excise and Taxation in exercise of his power under Central Excise and Salt Act, 1944 issued a notice requiring the petitioner to show cause why he be not proceeded against for the recovery of an amount of Rs.7,11,507 as Sales Tax on the manufacturing of the blasting powder from the period from July, 1981 to 4‑11‑1985. The petitioner in contest to the show‑cause notice replied that without issuing a notice under section 28 of the Sales Tax Act, 1951 at the first instance the demand of the payment of Sales Tax was without lawful authority. However, the Deputy Collector vide order, dated 27‑1‑1986 held that the Sales Tax under the existing law was liable to be recovered from the manufacturer of the goods and consequently directed for the recovery of the amount in question from the petitioner. The appeal preferred, by the petitioner before the Collector Northern Zone, Lahore against the order passed by the Deputy Collector was dismissed by the Collector vide order, dated 4‑6‑1986. The petitioner without availing the remedy of revision available to him against the order passed by the Collector as provided under section 16 of the Sales lax Act, 1951 has invoked the Constitutional jurisdiction of this Court with the contention that sales tax on blasting powder was exempted under S. R. O. No.9 (I) 83, dated 5th of January, 1983 issued by the Ministry of Finance, Government of Pakistan, Islamabad:
2. Learned counsel for the petitioner with reference to the notification, dated 10‑9‑1986 issued under subsection (3) (sic) of Sales Tax Act, 1951 by the Central Board of Revenue, Islamabad to the effect that the sales tax on the blasting powder which vas being produced and supplied free of costs to the mines workers for the excavation of salt by Pakistan Mineral Development Corporation (Pvt.) Limited Kheora was exempted as a special case and thus the sales tax under said notification, dated 1‑1‑1983 was not recoverable. He submitted that the blasting powder manufactured by the petitioner was being supplied to the workers of the Pakistan Mineral Development Corporation free of cost and was not being sold, therefore, demand of due sales tax from the petitioner was without lawful authority.
3. The learned counsel representing the department on the other hand has submitted that under the Sales Tax Act, 1951 the sales tax was recoverable on the production and manufacture of the goods and not on the sale of goods as provided under Sales Tax Act, 1990. He submitted that the change in law being not retrospective, the petitioner cannot escape his liability of payment of sales tax for the period before the change in law. The learned counsel next argued that the exemption on the sales tax under notification, dated 5‑1‑1983 was subject to the fulfilment of the conditions contained therein but the petitioner has not claimed the fulfilment of these conditions for the purpose of getting the benefit of said notification in his reply to the show‑cause notice before the Deputy Collector or in appeal before the Collector and thus without proving the fulfilment of the said conditions he would not be entitled to the benefit of the said notification.
4. Having heard the learned counsel for the parties, I find that the sales tax on the blasting powder was chargeable under the notification, dated 1‑7‑1981 an the impugned notice for the recovery of the sale tax for the period from 1‑7‑1981 to 4‑11‑1985 was issued by the Assistant Collector on 4‑9‑1985. The petitioners did not plead the exemption of the sales tax under the notification, dated 1‑1‑1983 and the fulfilment of the conditions contained therein and consequently the petitioner would not be entitled to the exemption on sales tags under the said notification. The exemption of sales tax on the blasting powder tinder Customs General Order, dated 10‑9‑1986 A would be available only from the date of issue of said Customs General Order which having no retrospective effect would not be applicable to the petitioner. During the period for which the sales tax was being demanded from the petitioner, neither there was any such notification in the field under which sales tax on the blasting powder was exempted nor the existing law provided that the sales tax would not be recoverable on the sale of such goods. Under the Sales Tax Act, 1951 the sales tax was recoverable from the manufacturer on the production of the goods. The learned counsel for the petitioner with reference to an observation made by the Deputy Collector in his order, dated 27‑1‑1986 contended that the tax already paid on the 13 sulphur, a component of blasting powder is deductible from the sales tax of the manufactured powder. The observation of the Deputy Collector was as under:
(iii)In view of this amendment sales tax is recoverable on the blasting powder in the manner of excise duty. For the same reasons the demand for Sales Tax can be enforced for the clearances made during a period of last ten years. The point of the defence regarding the benefit of exemption of sales tax paid on the Sulphur is however, valid. The party is eligible for the adjustment/refund of the sales tax paid on the inputs used in the manufacture of taxable item. In this case the party can claim adjustment/refund of sales tax made in case of Sulphur.
The Collector Appeals while upholding the order of the Deputy Collector affirmed this observation, therefore, the contention of the learned counsel to that extent being not without force the petitioner in the light of the order of the Deputy Collector Appeals would be entitled for the adjustment/refund of the sales tax paid on sulphur which was used in the manufacture of blasting powder. This petition with the above observation is dismissed with no order as to costs.
M.B.A./P‑36/LPetition dismissed.