ASSISTANT COLLECTOR OF SALES TAX, SARGODHA VS Messrs REHMAN AND RAFIQ GYPSUM, WARCHA ROAD, QUAIDABAD, DISTRICT KHUSHAB
2002 P T D 942
[Lahore High Court]
Before Naseem Sikandar and Mansoor Ahmad, JJ
ASSISTANT COLLECTOR OF SALES TAX, SARGODHA
Messrs REHMAN AND RAFIQ GYPSUM, WARCHA ROAD, QUAIDABAD, DISTRICT KHUSHAB and another
Customs Appeal No. 11‑S of 2001, decided on 09/01/2002.
Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑Ss. 2(26), 3, 13, 45 & 46‑‑‑Constitution of Pakistan (1973), Fourth Sched., Entries Nos. 49 & 51‑‑‑Excavation and supply of Gypsum‑‑ Chargeability to sales tax‑‑‑Authority made demand on supply of Gypsum by respondent to a company‑‑‑Respondent's explanation was not accepted by Authority and was made liable to pay sales tax on such supply‑‑‑First appeal filed by respondent was dismissed, but Appellate Tribunal set aside the order holding that sales tax was not leviable on Gypsum, which was a kind of mineral and did not fall within the legislative competence of Federal Government‑‑‑Validity‑‑‑Sales tax was a kind of tax, which had been levied by Legislature within the ambit and, scope of Entry No.49 of the 4th Schedule of the Constitution‑‑‑Sales tax was a tax on supply of taxable goods, but not a kind of tax on any mineral activities‑‑‑Gypsum after its excavation from the mine became a movable property and its further supply by respondents to another buyer constituted a taxable supply as it was not exempt under S.13 of the Sales Tax Act, 1990‑‑‑Such taxable‑ supply became chargeable to sales tax‑‑ Merely because Gypsum had been produced through process of excavation and quarried from the mine and was defined as minor mineral, would not be of any significance, when after excavation the same became taxable goods and was made to subject of taxable supply‑‑ Tribunal had not correctly held that levy and charge of sales tax on Gypsum was ultra vires, thus, High Court set aside its judgment.
Kh. Saeed‑uz‑Zafar and Ch. Muhammad Hussain for Appellant. M. M. Akram for Respondents.
Date of hearing: 16th October, 2001.
JUDGMENT
MANSOOR AHMAD, J.‑‑‑This sales tax appeal arises out from the judgment, dated 22‑12‑2000 rendered by Custom Excise. and Sales Tax Appellate Tribunal, Lahore.
2. Facts giving rise to the present appeal are that a contravention ease was made out by the Sales Tax Department against Messrs Rehman and Rafiq Gypsum, Warcha Road, Quaidabad, District Khushab.
3. A show‑cause notice was issued and it was stated in the notice that respondent supplied 3107 M. Tons of Gypsum valuing Rs.6,67,785 whereby sales tax of Rs.83,473 was chargeable but the respondent did not get itself registered under the Sales Tax Act, 1990 and evaded to pay the required sales tax. Reply to the show‑cause notice was submitted by the respondent wherein it was stated that they had supplied Gypsum to Messrs Pioneer Cement Factory, Chinki, Jauharabad during the period from 1‑7‑1997 to 30‑6‑1998 and all charges and leviable taxes were paid.
4. The Adjudicating Officer did not accept the explanation of respondent and passed an order in original, dated 15‑7‑1999 whereby the respondent was made liable to pay the sales tax. The respondent filed an appeal from the order‑in‑original which was disposed of by the Collector (Appeals) Lahore vide its order, dated 29‑3‑2000. The appeal was partially accepted and the order in original was modified to the extent of remitting the additional tax and penalty but it was maintained so for it related to the levy of sales tax. '
5. The respondent filed a second appeal. Custom Excise and Sales Tax Appellate Tribunal vide its impugned judgment accepted the appeal and held that the sales tax is not leviable in case of Gypsum which is a tcind of mineral and does not fall within the legislative competence of the Federal Government.
6. The Revenue has filed the present appeal from the judgment of the Tribunal.
7. We have heard the arguments of the parties. Perusal of the judgment reveals that the Tribunal has misdirected itself. Neither Punjab Minor Mineral Concession Rules, 1986 or 1990 nor the provision of Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948 are relevant in the controversy.
8. The question before the Tribunal was whether under the Sales Tax Act, 1990, sales tax is chargeable on the supply of Gypsum. Sales ,Tax Department did not levy any tax on excavation, querrying or any other activity relating to the mining. The demand made by the appellant was on the tax supplies made by the respondent. Admittedly the respondent supplied to Pioneer Cement Factory Chinki, Jauharabad 3107 M. Ton of Gypsum. The supply of Gypsum by respondent is a taxable supply as it was the supply of taxable goods made in Pakistan. The supply of Gypsum has not been exempted under section 13 of the Sales Tax Act from the levy of sale tax, therefore, Gypsum constituted a taxable goods and respondent made supply of taxable goods to Pioneer Cement Factory. Accordingly the provision of section 3 of the Sales Tax was attracted to which envisaged that there shall be charged, levied and paid sale tax at the rate of 15 % of the value of taxable supplies made in Pakistan.
9. Another important question of law which arises out of the order of the Tribunal relate to interpretation of Entry Nos.49 and 51 of the 4th Schedule of Constitution of Islamic Republic of Pakistan, 1973. Plain reading of Entry No.51 of 'the 4th Schedule shows that it was not relevant. For facility of reference it is reproduced hereunder:‑‑
"Taxes on mineral oil, natural gas and minerals for use in generation of nuclear energy."
Gypsum is minor mineral which is being excavated by the respondent after obtaining. a licence/lease from Government of the Punjab. Sales tax is not a kind of tax on any mineral activities. Taxes on sales are, enumerated in Entry No.49 of the 4th Schedule which is reproduced hereunder:‑‑'
"Taxes on sales, purchases of goods imported, exported, produced manufactured or consumed."
10. Sales Tax Act, 1990 is enacted by the legislature to consolidate and amend the law relating to the levy of tax on sales, importation, exportation, production, manufacture or consumption of goods. Unequivocally and without any ambiguity sales tax is a kind of tax which has been levied by the legislature within the ambit and scope of Entry No.49 of the 4th Schedule. Under Act VII of 1990 various transactions for the purposes of sales tax have been spelled oat. Besides the process of manufacturing or production, taxable goods, taxable activities and taxable supplies are also described. Taxable goods mean all goods other than those which have been exempted under section 13 and goods include every kind of moveable property other than actionable claim, money, stocks, shares and securities. Gypsum, therefore, falls within the ambit of moveable property. Further, it is provided that whenever taxable goods made in Pakistan are further supplied it constitute taxable supply and section 3 of the Sales Tax Act, 1990 contemplate that sales tax shall be charged and levied on taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him.
11. In the present case, the petitioner who holds a licence from the Government of Punjab to excavate Gypsum from the mine. After its excavation from the mine, it becomes a movable property. Its further supply by the petitioner to any other buyer constitute a taxable supply and as it is not exempted under section 13 of the Sales Tax Act, 1990, therefore, this taxable supply becomes chargeable to sales tax. Merely because the Gypsum was produced through process of excavation and quarried from the mine and is defined as minor mineral, would not be of any significance when after excavation it becomes taxable goods and is made to subject of taxable supply. There is hardly any ambiguity that sales tax is a tax on supply of taxable goods. It is complete misconception to urge that it is a levy on any kind of mining activity. We, therefore, hold that the Tribunal was not correct to hold that the levy and charges of sales tax on Gypsum was ultra vires. The Gypsum was a taxable good and the petitioner made a taxable supply which was subject to the incidence of sales tax.
12. We, therefore, vacate the judgment, dated 22‑12‑2000 passed by the Customs, Excise and Sales Tax, Appellate Tribunal, Lahore Bench, Lahore and send a copy of this judgment to the Chairman of the Tribunal who shall pass such orders as .are necessary to dispose of the case conformably to such decision.
S.A.K./A‑386/L Order accordingly.