(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 2(33)(a), 3, 34, 36 & Sixth Sched., Sr. No.33 [as same stood up to 30‑6‑1997].‑‑‑Constitution of Pakistan (1973)., Art.199‑‑‑Constitutional petition‑‑‑Supply of imported parts to customers in their original shape without subjecting such goods to any manufacturing process‑‑‑Demand of sales tax on supply of such imported goods‑‑‑Validity‑‑‑Entry No.33 of Sixth Schedule of the Sales Tax Act, 1990 allowed exemption to supplies made in Pakistan by any person except made by manufacturer‑‑Where an assessee was engaged in supply of goods manufactured by itself as well as supply of goods imported by it, then sales tax would be payable on supply of goods manufactured by assessee, while supplies of goods not manufactured by such assessee would enjoy exemption‑‑‑‑ Language of law was very clear, but if there was any ambiguity, same would be resolved in favour of the assessee‑‑‑Assessee could not be subjected to levy of sales tax in respect of supplies which were exempted from sales tax under provisions of Entry No.33 of Sixth Schedule of the Act as same stood up to 30‑6‑1997‑‑‑High Court accepted Constitutional petition and cancelled the impugned show‑cause notice being illegal, without jurisdiction, void and inoperative.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes, interpretation of ‑‑‑Preamble‑‑‑Assessee is to be taxed by a clear and unambiguous language‑‑‑If there is any ambiguity or doubt, same is always to be resolved in favour of assessee.

Muhammad Ather Saeed for Petitioner.

Raja Muhammad Iqbal for Respondent.

ORDER

A short question involved in this petition is whether the show -cause notice dated 20th November; 1998 issued by the respondent No. 3 is without jurisdiction, invalid and inoperative in law'? The impugned notice reads as follows:‑‑

Show‑cause notice

"Whereas it has been reported to the undersigned by the Audit Division of Collectorate of Sales Tax (West) Karachi that during the course of audit of the records of Messrs Hino Pak Motors Ltd., D‑2, S.I.T.E., Karachi for the period 1996‑97, it was observed that the leviable sales tax on the supply of "spare parts and dumper" valued Rs.14,08,01,000 was not paid. On query the Management argued that since the same has been acquired through import and as it is supplied to the local buyers therefore, they understand that no sales tax is leviable on the said supply. On perusal of the then Sixth Schedule it was found that under serial No.33 "supplies" were exempt except those made by manufacturer. As Messrs Hino Pak Motors Ltd., was discharging their liabilities as manufacturer under 'subsection (33)(a) of section 2 of the Sales Tax Act, 1990, the same is covered under the definition of "supply", therefore, the same is chargeable to sales tax. The sales tax amounting to Rs.2,34,43,229 and additional tax Rs.3,05,81,668 totalling Rs.5,40,24,897 is recoverable from them under section 36 read with section 34 of the Sales Tax Act, 1990. They have thus violated the provisions of sections 3, 6, 22, 23, 26 of the Sales Tax Act, 1990 punishable under section 33 (ibid).

2. Messrs Hino Pak Motors Ltd., are therefore, called upon to show‑cause within seven (7) days from the date of issue of this notice as to why sales tax amounting to Rs.2,34,43,229 and additional tax of Rs.3,05,81,668 totalling Rs.5,40,24,897 should not be recovered from them under section 36 read with 34 of the Sales Tax Act, 1990, and why penal action should not be taken against them under section 33 for the violation of abovementioned provisions of the Act.

3. Hearing in the case is fixed on 20‑12‑1999 at 11‑00 hours in the office located at ST‑18/A Block‑6, Gulshan‑e‑Iqbal Main University Road, Karachi, when they or their authorized representative should appear before the undersigned to attend the hearing. If no reply to the show‑cause notice is received and no one appeared in the hearing on the stipulated date and time, it will be presumed that they have nothing to say in their defence and the matter will be decided ex parte without further notice.

(Sd.) Mrs. Suraiya Ahmed Butt,

Additional Collector‑II. "

The admitted facts are that, the petitioner is a manufacturer engaged in the assembly of buses and trucks. In addition to the manufacturing activity, the petitioner is engaged in trading activity as well. In the course of trading activity the petitioner imports spare parts of trucks and buses and supplies the same to various customers in their imported shape without subjecting the imported goods to any manufacturing process. The petitioner regularly pays the sale tax on the items manufactured by them and no sale tax is being paid on the supply of non‑manufactured goods sold by the petitioner in their original form without subjecting to any manufacturing process. The contention of the petitioner is that the supply of imported goods without subjecting them to any manufacturing process enjoys exemption under the provisions of Entry No.33 of Sixth Schedule to the Sales Tax Act, 1990 as it stood before amendment by Finance Act, 1997. The Entry No.33 of the Sixth Schedule of the Sales Tax Act, 1990, as it stood before amendment by Finance Act, 1997, reads as follows:‑‑

The Sales Tax Department had always accepted the act, that the sales of non‑manufactured goods by the petitioners' company were not liable to levy of sales tax as they were exempt under the provisions of Entry No.33 reproduced above. However, an Audit Team of the Sales Tax Department visited the premises of the petitioner's company for audit of Sales Tax, for the year 1996‑97 (from 1st July, 1996 to 30th June, 1997). The issue of payment of Sales Tax on the sale of imported goods without subjecting them to any manufacturing process was raised by the audit team and after a protracted correspondence, the show‑cause notice dated 20th November, 1998, reproduced in earlier part of this order was issued. The petitioner has assailed the said show‑cause notice being without jurisdiction, illegal, invalid and void ab initio.

Heard Mr. Muhammad Ather Saeed, learned counsel for the petitioner and Mr. Raja Muhammad Iqbal, learned counsel for the respondents.

Mr. Muhammad Ather Saeed has submitted that, the facts are admitted and the exemption available under Entry No.33 of the Sixth Schedule to the Sales Tax Act, 1990, as it stood‑ before its amendment by Finance Act, 1997 is also admitted. He has' further submitted that, a similar question came for consideration before another Bench of this Court in C.P. No.D‑39 of 2000. While disposing of the said petition by order dated 6‑9‑2002, it was observed as‑follows:‑‑

"The respondent shall keep in mind the relevant law, which was applicable at the relevant time, viz., that petitioner would only be liable to tax on goods manufactured by it".

On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the respondents has supported the impugned show‑cause notice. He has however, not denied that the petitioner is paying sales tax on supply of the goods manufactured by them and the exemption claimed is in respect of supplies of imported goods which are not subjected to any manufacturing process. His contention is that since the petitioner is a manufacturer therefore, all the supplies made by it, whether in respect of goods manufactured by it or consisting of imported goods which are not subjected to any manufacturing process, shall be liable to the payment of sales tax.

We have carefully considered the contentions raised by the learned Advocates for the parties. A bare perusal of the Entry No.33 of the Sixth Schedule to the Sales Tax Act, 1990, shows that exemption has been allowed to the supplies made in Pakistan except made by the manufacturer. The language of the law is very clear and according to our considered opinion, only such supplies are subject to the payment of sales tax which are made by an assessee who manufactures the goods and not otherwise. Even if there is any ambiguity, it is to be resolved in favour of assessee, because of the cardinal principle of the interpretation of tax statutes, that, an assessee is to be taxed by a clear and unambiguous language and if there is any ambiguity or doubt, it is always to be resolved in favour of an assessee. We are of the opinion that, the Entry No.33 allows exemption to supplies made in Pakistan by any assessee and if any person is engaged in supplies of goods manufactured by itself as well supply of goods imported by it, the sales tax shall be payable on the supply of goods manufactured by the assessee, while the supplies of the goods not manufactured by the said assessee shall enjoy exemption.

Consequent to the above findings, it is declared that, the petitioner cannot be subjected to the levy of sales tax in respect of supply of goods which has not been subjected to the process of manufacture by the petitioner and such goods are exempt from the sales tax under the provisions of Entry No.33 of the Sixth Schedule to, the Sales Tax Act, 1990, as it stood up to 30th of June, 1997. Consequent to the above declaration, the impugned show‑cause notice, dated 20‑11‑1998 is hereby cancelled, being without jurisdiction, illegal, void and inoperative.

The petition is allowed as above, with no order as to costs.

After hearing the learned Advocates, for the parties in Court today, the petition was allowed by a short order and. these are the detailed reasons for the same.

S.A.K./H‑80/K Order accordingly.