Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 7 & 45‑A‑‑‑S.R.O. No.600(1)/1990 dated 7‑6‑1990‑‑‑S.R.O. 697(1)/1977 dated 4‑8‑1977‑‑‑Supplies 'of Air‑Conditioning Plants more than 10HP Classifiable under PCT Heading 84.15‑‑,‑Exemption‑‑ Conditions ‑‑‑Interpretation, application and scope of S.R.O. No.600(1)/ 1990 dated 7‑6‑1990.

The only controversy in the present case now emanating from the record, which is factual one, is in respect of alleged supply of package type Air‑Conditioning plants of more than 10 H.P. during the period 1989‑1990 to 1992‑1993 (up to September, 1992) by the assessees in open market, which according to the department were not covered by exemption provided in the S.R.O. 600(1)/1990 due to the non‑fulfilment of condition contained in the Proviso of this S.R.O.

A bare reading of S.R.O. No.600(I)/1990 dated 7‑6‑1990 goes to show that for its applicability the word, "machinery" has been given a much wider meaning than its ordinary dictionary meaning. Further the language of this S.R.O. does not spell out any intention of law makers that its applicability is only restricted to the supplies/sales of articles which are directly made to the industrial units so as to be identifiable for intended use only with machinery and not to the supplies/sales made otherwise in open market. It is, therefore, amply clear that to avail the benefit of S.R.O. 600(1)/1990 and the other earlier S.R.O., the assessees were neither supposed to restrict their supplies/sales of articles "package type Air‑conditioning plants of more than 10 H.P. classifiable under P.C.T. Heading 84.15" directly to the industrial units to ensure its intended use only with machinery nor they were under any obligation not to follow normal norms of the business/trading by appointing agents/dealers through whom supply/sale of these Air‑conditioning plants could be made in open market' for its consumption within the scope of S.R.O. 600(1)/1990. Indeed, proviso to S.R.O. 600(1)/1990 imposes condition for availing of exemption that the articles are identifiable as intended for use only with machinery, but after due clarification given by the Central Board of Revenue in this regard vide their letter dated 18‑12‑1991 no room for discrimination was left open for the department on the basis of mode of sales/supplies of the articles in question. Apart from it, it was also nowhere disputed by the department that the articles supplied/sold by the assessees were otherwise identifiable as intended for use only with machinery within the ambit of two said S.R.Os.

The contention that the Tribunal could not have set aside the order impugned before it without first deciding as to whether before such sales/supplies of the package type Air‑Conditioning plants of more than 10 H.P. by the assessees during the relevant years, the conditions laid down in the relevant S.R.Os. were fulfilled by them, has also no force, as the Tribunal, relying on the clarifications of S.R.O. 697(1)/1977 and S.R.O. 600(1)/1990 issued by the Central Board of Revenue, has rightly accepted the plea of the assessees. Moreover, the contention that the clarifications in respect of the interpretation and applicability of S.R.O, No.600(1)/1990 and earlier S.R.O. 697(1)/1977 issued by the Central Board of Revenue were binding upon the Sales Tax Authorities and relying on such letters issued by the Board of Revenue assessees had rightly availed the benefit of supplying their package type Air -Conditioning plant of more than 10 H.P. during the relevant period without recovering any sales tax from its buyers, has also much force.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation o~ Pakistan and others 1992 SCMR 1652 ref.

Sattar Silat for Appellant.

Dr. Amjad Hussain Bukhari for Respondents.

Date of hearing: 19th January, 2005.

JUDGMENT

ANWAR ZAHEER JAMALI, J.‑‑‑This appeal under section 47 of the Sales Tax Act, 1990, has been preferred against the Order, dated 20‑10‑1999, passed by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi, whereby Appeal No. K‑2 of 1995, preferred by the respondent under section 46 of the Sales Tax Act, 1990 (hereinafter referred to as "the Act") was allowed and consequently order passed by the Collector of Sales Tax West Karachi, dated 30‑11‑1995, purportedly an Order in exercise of powers under section 45‑A of the Act, was set aside.

2. Succinctly the relevant facts forming the background of this dispute are that in respect of levy of Sales Tax on the supplies/sales of package type Air‑conditioning plants of more than 10 H.P. made during the years .1989‑1990, 1991‑1992 and 1992‑1993 (up to September, 1992). Assistant Collector, Central Excise and Sales Tax: Site Division, Karachi, had issued show‑cause notice to the Respondents calling upon them for the payment of sales tax and additional sales tax over their supplies/sales of above referred package type Air‑conditioning plants during that period. On submission of reply, by the Respondents, which was accompanied with various clarification letters issued by the Central Board of Revenue relating to the interpretation and applicability of Notification S.R.O. No.600(I)/1990, dated 7‑6‑1990 and earlier S.R.O. No.697(I)/1977, dated 4‑8‑1977, the Assistant Collector concerned was satisfied, therefore, vide his order‑in‑original, dated 15‑7‑1993 such show‑cause notice was withdrawn by him. Subsequent to it, in October, 1994, the case of the respondents relating to the same dispute of levy of Sales Tax was re‑opened by the Collector, Central Excise and Sales Tax Karachi, in exercise of his powers under section 45‑A of the Act and such proceedings terminated in passing of impugned order‑in‑original, dated 5‑12‑1995, calling upon the respondents for payment of Sales Tax as per details contained in the said order.

3. The respondents challenged the order of Collector of Sales Tax (West) Karachi, before the Tribunal in appeal, where, after due opportunity of hearing to both the parties the impugned order‑in‑original passed by the Collector Sales Tax was set aside

4. Mr. Sattar Silat, 'learned counsel for the appellant vehemently contended that with reference to the applicability or otherwise of Notification S.R.O. No.600(I)/1990, dated 7‑6‑1990 and earlier Notification S.R.O. 697(1)/1977, dated 4‑8‑1977 the main controversy involved in this appeal is that whether without first determining the material fact that the condition contained in S.R.O.No.600(1)/1990, regarding supply of articles (Air‑conditioning plants of more than 10 H.P. covered by P.C.T. Heading 84.15) which were identifiable for intended use only with machinery, was fulfilled or not, the Tribunal was justified in setting aside the impugned order, dated 5‑12‑1995. In this context, learned counsel made reference to the case of Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others, 1992 SCMR 1652 to add force to his submission that in a situation where a party was seeking benefit of exemption under some specific provision of law/S.R.O. then the burden of proof was on that party to show that required conditions, if any, as provided under the relevant statute/S.R.O. were fulfilled by him. In the end he urged that it is a fit case where this appeal may be allowed and case may be remanded to the Collector of Sales Tax for fresh adjudication after due opportunity of hearing to both the parties.

5. In reply to the above. Mr. Amjad Bukhari, learned counsel for the respondent, contended that in respect of two S.R.O's. 600(1)/1990, dated 7‑6‑1990 and S.R.O. 697(1)/1977, dated 4‑8‑1977 repeatedly clarifications were sought by the respondents and many other companies, who were entitled to claim benefit under these S.R.Os and they were categorically informed by the Central Board of Revenue that supplies of Air‑conditioning plants of more than 10 H.P. classifiable under PCT Heading 84.15 were exempt from levy of Sales Tax at the relevant time by virtue of these S.R.Os. In this regard learned counsel made specific reference to letter, dated 12‑3‑1985 and 18‑12‑1991. He further contended that it was on such interpretation/clarification advanced by the Central Board of Revenue, which is binding on the appellant, that the respondents had not charged any sales tax over their supplies of package type Air‑conditioning plants, classifiable under PCT Heading 84.15, during the relevant period from its buyers. He urged that admittedly payment of sales tax was not to be made by the respondents from their own pocket but they had to collect such tax, if leviable, from the buyers which was not done in the instant case due to the clarification issued by the Central Board of Revenue, therefore, the respondent cannot be burdened with such liability at this belated stage, that too contrary to appellant's own interpretation of two S.R.Os. He also made reference to the detailed discussion made in the impugned order passed by the Tribunal to show that cogent and valid reasons have been assigned by the Tribunal for setting aside the order passed by the Collector of Sales Tax, dated 5‑12‑1995. In the end, learned counsel urged that no question of law arises out of the impugned order, thus this appeal is not maintainable within the scope of section 47 of the Act.

6. We have, carefully considered the arguments advanced by the learned counsel for the parties and perused the material placed on record. The whole claim of the appellant regarding levy of sales tax and initiation of proceedings under section 45‑A of the Act by the Collector of Sales Tax Karachi, seems to be based or the assumption that all supplies/sales of articles (in the instant case package type Air-conditioning plants of more than .10 H.P. classifiable under PCT Heading 89.15) made by respondents during the relevant period, except the supplies directly made to the industrial units, did not meet the condition provided in the proviso to S.R.O. 600(1)/1990, dated 7‑6‑1990 that the articles are identifiable as intended for use only with machinery, therefore, benefit of said S.R.O. in force at the relevant time could not have been availed by the respondents.

7. Coming to the facts, it is an admitted position that earlier to S.R.O. 600(1)/1990, dated 7‑6‑1990 another S.R.O. No.697(I)/1977, dated 4‑8‑1977 exempting the package type Air‑conditioning plants of more than 10 H.P. classifiable under PCT Heading 84.15 was in force and under both these S.R.Os. the respondents have availed exemption from payment of sales tax over their supplies at the relevant time. The only controversy now emanating from the record, which is factual one, is in respect of alleged supply of package type Air‑conditioning plants of more than 10 H.P. during the period 1989‑1990 to 1992‑1993 (upto September, 1992) by the respondents in open market, which according to the learned counsel for the appellant were not covered by exemption provided in the S.R.O. 600(1)/1990 due to the non‑fulfilment of condition contained in the Proviso of this S.R.O. To examine this aspect in more detail, it will be advantageous to reproduce hereunder relevant portion of the above referred S.R.O., which reads thus:‑‑

"S.R.O. 600(1)/1990. In exercise of the powers conferred by section 7 of the Sales Tax Act, 1951 (111 of 1951), and. in supersession of this Ministry's Notification No. S.R.O. 697(1)/1977, dated the 4th August, 1977, the Federal Government is pleased to direct, that the articles produced or manufactured in Pakistan falling under hearing numbers of the First Schedule to the Customs Act, 1969 (IV of 1963), specified in the table below which are machinery or component parts of machinery as hereinafter defined, shall be exempt from the tax payable under the said Act:

Provided that the articles are identifiable as, intended for use only with machinery.

Definition of machinery.

(i) Machinery operated by power of any description such as is used in any industrial process, including the generation, transmission and distribution of power, or used in processes directly connected with the extraction of minerals and timber, construction of buildings, roads, dams, bridges and similar structures and the manufacture of goods.

(ii) Apparatus and appliances, including metering and testing apparatus and appliances specially adapted for use in conjunction with machinery, specified in item (i) above;

(iii) Mechanical and electrical control and transmission gear adapted for use in conjunction with machinery as specified in item (i) above; and

(iv) Component parts of machinery, as specified in items (i), (ii) and (iii) above, identifiable as for use in or with such machinery.

This exemption shall not affect the tax payable on the raw materials from which such goods are produced or manufactured. Heading numbers of the First Schedule to the Customs Act, 1969 (IV of 1969).

... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..... ... 84.15 (Air‑conditioning plants of more than 10 H. P. only) ..."

8. A bare reading of above S.R.O. goes to show that for its applicability the word, "machinery" has been given a much wider meaning than its ordinary dictionary meaning. Further the language of this S.R.O. does not spell out any intention of law makers that its applicability is only restricted to the supplies/sales of articles which are directly made to the industrial units so as to be identifiable for intended use only with machinery and not to the supplies/sales made otherwise in open market. It is, therefore, amply clear that. to avail the benefit of S.R.O. 600(1)/1990 and the other earlier S.R.O., the respondents were neither supposed to restrict their supplies/sales of articles "package type Air‑conditioning plants of more than 10 H.P. classifiable under P.C.T. B Heading 84.15" directly to the industrial units to ensure its intended use only with machinery nor they were under any 'obligation not to follow normal norms of the business/trading by appointing agents/dealers through whom supply/sale of these Air‑conditioning plants could be made in open market for its consumption within the scope of S.R.O. 600(1)/1990. Indeed, proviso to S.R.O. 600(1)/1990 imposes condition for availing of exemption that the articles are identifiable as intended for use only with machinery, but after due clarification given by the Central Board of Revenue in this regard vide their letter dated 18‑12‑1991 no room for discrimination was left open for the appellant on ‑the basis of mode of sales/supplies of the articles in question. Apart from it, it was also nowhere disputed by the appellant that the articles supplied/sold by the respondents were otherwise identifiable as intended for use only with machinery within the ambit of two S.R.Os.

9. The submission of Mr. Sattar Silat that the Tribunal could not have set aside the order impugned before it without first deciding that whether before such sales/supplies of the package type Air‑conditioning plants of more than 10 H.P. by the respondents during the relevant years, the conditions laid down in the relevant S.R.Os. were fulfilled by them, has also no force, as the Tribunal, relying on the clarifications of S.R.O. 697(1)/1977 and S.R.O. 600(1)/1990 issued by the Central Board of Revenue, and its decision in the earlier case of Messrs S.A. Brothers has rightly accepted the plea of the respondents. Moreover, the submission of Mr. Amjad Bukhari that the clarifications in respect of the interpretation and applicability of S.R.O. No.600(I)/1990 and earlier S.R.O.. 697(1)/1977 issued by the Central Board of Revenue were binding upon the Sales Tax Authorities and relying on such letters issued by the Board of Revenue respondent had rightly availed the benefit of supplying their package type Air‑conditioning plant of more than 10 H.P. during the relevant period without recovering any sales tax from its buyers, has also much force.

10. In view of the above, we find no force in this appeal which is, accordingly, dismissed.

M.B.A./C‑19/KAppeal dismissed.