KHAWAJA & COMPANY FRUIT PRODUCTS (PVT.) LTD. through Director VS SECRETARY, CENTRAL BOARD OF REVENUE (SALES TAX WING), REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD and 3 others
2005 P T D 1499
[Lahore High Court]
Before Nasim Sikandar and Muhammad Sair Ali, JJ
KHAWAJA & COMPANY FRUIT PRODUCTS (PVT.) LTD. through Director
versus
SECRETARY, CENTRAL BOARD OF REVENUE (SALES TAX WING), REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD and 3 others
W.P. No. 12094 of 2003, decided on 20/09/2004.
Sales Tax Act (VII of 1990)---
----Ss. 11(2), 34 & 72---SRO 555(I)/2002 dated 23-8-2002---CBR Instruction No.19 of 2003 dated 15-8-2003--Customs Import Tariff, Ch.30, PCT heading, 30.03---Constitution of Pakistan (1973), Art.199---Constitutional petition---Murabbajaat---Held, in view of their basic nature and use, "murabbajaat" as specified cannot be classified under Chapter 30 of Customs Import Tariff or item 28.08 dealing with foods, nuts and other edible parts of plants but are properly classifiable under PCT Heading 30.03 having medicinal qualities and thus exempt from levy of Sales Tax---Chutney and pickles, however, do not fall in the same classification---Principles---Show-cause notice raising demand of Sales tax on murabbajaat under S.11(2) Sales Tax Act, 1990 was declared to be without lawful authority.
Burmah Oil Co. v. Trustees of the Port of Chittagong PLD 1962 SC 113; M.Y. Khan v. M.M. Aslam and 2 others 1974 SCMR 196; Messrs Chenab Cement Product (Pvt.) Ltd. v. Banking Tribunal Lahore and others PLD 1996 Lah. 672; Collector of Customs v. S.M. Ahmed and Co. 1999 SCMR 138; Messrs Hoechst Pakistan Ltd. Karachi v. Government Pakistan PLD 1980 Kar. 434 and Messrs Sterling Products (Pakistan) Ltd. v.Deputy Collector Central Excise and Land Customs, Karachi and another PLD 1979 Kar. 643 ref.
M. Saleem Sehgal for Petitioner.
Dr. Sohail Akhtar for Respondents.
Date of hearing: 25th June, 2004.
JUDGMENT
NASIM SIKANDAR, J.---The petitioner is a Private Limited Company and is engaged in manufacture and sale of "Murabbajaat" of Harrar (Myrobalan), Amla, Quince, Hanzal (Tumma), Bailgery etc. as well as of Gulqand which are claimed to be medicaments known for their medicinal qualities. It is stated that these medicamentsare in prescriptions of Hakims in the sub-continent from the time immemorial. It is further claimed that under the substituted as well as the present Sales Tax Act these items were exempted from levy of sales tax. For a short period in the year, 1996 the exemption enjoyed by these items was withdrawn but again allowed in same year. It is stated that despite the provisions of S.R.O. 555(I)/2002, dated 28-8-2002 exempting "medicaments as are available under any heading of Chapter 30 of the First Schedule to the Customs Act, 1969 (IV of 1969), from the whole of the sales tax leviable thereupon" it was served with a show-cause notice, dated 19-6-2003 by Additional Collector Sales Tax, Lahore raising a demand of Rs.5,882,002 as sales taxunder section 11(2) of the Sales Tax Act, 1990 for the years 1999-2000 to 2001-2002 alongwith additional tax under section 34 and various penalty provisions of that Act.
2.It appears that the petitioner with reference to a number of notifications earlier issued by the Revenue on the subject-matter as also the view expressed by Collector Sales Tax Lahore on 6-6-1997 addressed to Central Board of Revenue made a representation against issuance of thatnotice. On these representations the impugned sales tax ruling/ Instruction No.19 of 2003 was issued by the Central Board of Revenue (Sales Tax Wing) on 15-8-2003. The relevant para. 2 of that ruling/instruction reads as under:--
"The matter has been examined in the Board in consultation with Collector of Sales Tax and Central Excise, Lahore, "Murabbajaat" in question are actually fruits preserved with additives like sugar etc. They are usually first boiled and then preserved with the help of sugar. They are meant for human consumption as energizers. Specimens obtained from the market show that the containers of "Murabbajaat" indicate the word "preserved" including fruit, sugar and preservatives as ingredients. They are available for sale without prescription in bakeries, general stores etc., for use as a part of food. The contention that they are classifiable under PCT heading 30.03 ofthe 1st Schedule to the Customs Act, 1969, is not tenable as the said heading includes medicaments consisting of two or more constituents which have been fixed together for therapeutic orprophylacticuses, not put up in measured doses or in form or packing for retail sale. "Murabbajaat" under reference are manufactured for retail sale and, therefore,do not qualify to be classified under heading 30.03 of the 1st Schedule to the Customs Act, 1969. It is, therefore, ruled that "Murabbajaat" sold in packed/bottled form in retail sale bulk packing are classifiable under Chapter 20 of the 1st Schedule to the Customs Act, 1969, and, therefore, chargeable to sales tax."
Hence this Constitutional petition assailing the show-cause notice, dated 19-6-2003andthesaidrulinggivenbyCentralBoardofRevenueon15-8-2003.(sic)
3.The Revenue in its reply/parawise comments has maintained that the petitioner is manufacturing "Murabbajaat" which are preserved in sugar including Black Myrobalan (Harar), Quince (Bahi), Rose (Gulkand), Apple (Seb), Wood Apple (Bailgery), Colocynth (Tumma), Phyllanthus (Amla), Carrot (Gajar), Ginger (Adrak). Asharfi, Karnoda, Mango chutney and pickle etc. it is alleged that these Murabbajaat are preserved fruits and are not meant for medicinal use. According to the Revenue every food item has some specific actions on body e.g. meat is high in protein. Apple contains iron, and Carrot is source of vit: A etc. Therefore, "Murabbajaat" manufactured by the petitioner cannot be treated as medicines as these are classifiable under Chapter 20 instead of Chapter 30.
4.On 2-10-2003 this Constitutional petition was admitted for hearing with the following note:--
"To support the maintainability of the petition, learned counsel inter alia relies upon re: Burmah Oil Co. v. Trustees of the Port of Chittagong (PLD 1962 SC 113), re: M.Y. Khan v. M.M. Aslam and 2 others (1974 SCMR 196), re: Messrs Chenab Cement Product (Pvt.) Ltd. v. Banking Tribunal Lahore and others (PLD 1996 Lahore 672) and re: Collector of Customs v. S.M. Ahmed and Co. (1999 SCMR 138) and states that after issuance of Circular Sales Tax Ruling/Instruction No.19 of 2003 by C.B.R. to the concerned Collectorate the right of appeal against the proposed assessment qua the treatment of "Murabbajaat" being prepared by the petitioner has become illusory as in all likelihood the functionaries of the respondents-Sales Tax Collectorate will follow the ruling which is otherwise mandated by section 72 of the Sales Tax Act, 1990."
5.After hearing the learned counsel for the parties at the out set I will reject the objection against maintainability of the petition. Learned counsel for the petitioner is correct in pointing out that after making of the impugned ruling there is absolutely no likelihood that any departmentalofficer including the adjudicating authority will adopt a different view or at least will be open to consider the legal and factual submissions made before it against chargeability of the items produced by the petitioner.
6.As far the merits of the case are concerned again I will allow most part of the arguments which pertain to exemption of "Murabbajaat" used for medicinal purposes as contemplated in SRO 555(I)/2002, dated 23-8-2002 being medicaments classified under Chapter 30 of the 1st Schedule of the Customs Act, 1969.
7.The petitioner in its representation, dated 21-2-1994 claimed to be a manufacturer of following items.
| Oriental Name | English Name | Botanieal Family | Family Name |
| 1. Harar | Black Myrobalan | Terminalia | Terminalia Chebula |
| 2. Bhai | Quince | Roseaceae | Cydonia Oblonga |
| 3. Gulkand | Rose | Roseaceae | Rosa Alba Indiea |
| 4. Seb | Apple | Roseaceae | Pyrus Malus |
| 5. Bailgery | Wood Apple | Rutaceae | Aegle Marmelos |
| 6. Tumma | Colocynth or Bitter Gourd | Cucurbitaceae | Citrullus Colocynthis |
| 7. Amla | Phyllanthus | Euphorbiaceae | Embelica Officinalis |
| 8. Gajar | Carrot | Umbellifereae | Daucus Carota |
8.None of the above in my view can possibly be described either as preserved fruit, vegetable or otherwise a palatable item used by an average family in Pakistan. The petitioner is correct in claiming that local Hakims have long been treating their patients with these items on account of their medicinal values. As found by a Full Bench of the Karachi High Court in re: Messrs Hoechst Pakistan Ltd. Karachi v. Government of Pakistan (PLD 1980 Karachi 434) the primary use of a commodity as understood generally by public is normally the most relevant consideration for the purpose of its classification. Their Lordships were interpreting Item 29(1) of the Scheduleto the Central Excises and Salt Act (I of 1944). The primary use of all "Murabbajaat" details above including that of Gajar (Carrot) is normally understood to be a cure and of supply in bulk of a particular deficiency in the human body. None of these "Murabbajat" it needs to be repeated, forms part of any dish either in a home or a hotel or any other eating spot in the country. Mere fact that some nutritious value is also available in other food items normally used by people does not make the above as food items or a form of preserved fruit. In re. Messrs Sterling Products (Pakistan) Ltd. v.Deputy Collector Central Excise and Land Customs, Karachi and another, (PLD 1979 Kar. 643), it was inter alia held that a drug prepared as such and registered as a medicine does not go out of that category for the mere fact that it was also being used as a cleaner or shampoo in certain circumstances. Therefore, the cream prepared by the petitioner was found covered by Item 28 of the 1st Schedule to Central Excises and Salt Act as a kind of perfumery, cosmetics and toilet preparation.
9.The impugned ruling is a typical instance of the mind set of a Revenue Collector. I am not aware of an individual or a family which takes any of the aforesaid "Murabbajaat" as part of its breakfast, lunch, dinner or as a supplement to them. The petitioner is correct in pointing out that from time immemorial Hakims are prescribing one or more of these "Murabbajaat" to their patients in order to cure either a particular disease or to be a source to meet a particular deficiency in the body. As far Items Nos. IV and VIII, Seb (Apple) and Gajar (Carrot) in the above list are concerned, their use as a part of some dishes is not denied. However, mere fact that apple and carrot are consumed as vegetable as well as fruitdoesnottakethemoutsidetheaforesaidlistinasmuchasthewaythesearepreservedandusedmakethemofspecifickindtobeconsumedforspecificoccasions. Ahealthymanonceina while may eat the two "Murabbajaat" for their good taste. However apersonwhohasparticularlybeenadvisedto usetheseitemsinviewof his special body needs takes them for their medicinal value. A healthy man eating an apple a day "to keep the doctor away' is certainlynot using the fruit as a medicine but a person having an ailing heart advised to eat carrot or apple or its "Murabbajaat" uses them as a medicine.
11.TheobservationsmadebyMr.KhalidNasim,Collectorinhis letter, dated 6-6-1997 addressed to be the Secretary C.B.R.reversinghisearlieropinionappearstobeacorrectviewofthematter.
12.The petitioner has given a long list of books in para. (a) of the grounds which according to him contain material about medicinal properties of "Murabbajaat". He is also correct in pointing out that many of these "Murabbajaat" are not even edible except for their medicinal value, such as Murabba of Tumma (Colocynth), Harrar (Black Myrobalan),Ginger,Amla(Phyllanthus)andBailgery. Iwillalsoagree that in view of the basic nature these cannot be classified under Chapter 20 or Item 28.08 dealing with foods, nuts and other edible parts of plants but are properly classifiable under PCT Heading 30.03 having medicinal qualities. The practice of the department in not charging any sales tax on preparation of the Murabbajaat also lends support to the submissions made at the bar for the petitioner. It has also been correctly pointed out that mere availability of these Murabbajaat on sale points like general stores and bakeries will not by itself change their basic character to be placed and considered under a specific PCT Heading. Therefore, as far the Murabbajaat of the aforesaid 8 items are concerned I will allow the submissions made at the bar.
13.It needs to mention here that the petitioner has not claimed manufacturingofmangochutneyandpickles.Inthereplyhoweverthe revenue claims that the petitioner is also manufacturing these two and similar other items. If that be the case then I am veryclear in my mind that mango chutney and pickles are not of medicinal value northesecaninanymannerbedescribedtobeamedicine.Boththeseandsimilarotheritemsaremostlyusedtochangeor enhancethetasteofotherfood items. Asacommonperceptiontheydo not posses any wholesome quality muchless to say of having a healing or medicinal value. Therefore, to the extent of these two items I will refuse to interfere with the impugned show-cause notice or the ruling made by the Central Board of Revenue, if these pertained to them as well.
14.ThisConstitutionalpetitionstandsallowedintheaboveterms.
M.B.A./K-93/LOrder accordingly.