Messrs MASTER FOAM (PVT.) LTD. VS GOVERNMENT OF PAKISTAN
2005 P T D 1537
[Supreme Court of Pakistan]
Present: Nazim Hussain Siddiqui, C.J., Abdul Hameed Dogar and Mian Shakirullah Jan, JJ
Messrs MASTER FOAM (PVT.) LTD. and 7 others
versus
GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance and others
Civil Appeals Nos. 435 of 1999, 499, 819, 1344 to 1346 and 1348 of 2000, 63 to 65 of 2001, 1852 of 2002 and 1674 of 2003, decided on 08/03/2005.
Onappealfromthejudgments dated27-10-1998, 10-4-2000, 2-11-2000, 13-10-2002, 13-11-2002, 28-7-2003 of Lahore High Court passed in W.P. Nos. 18667, 7820/1998, 1671, 29629, 23563/1997, 21544/1996, 5738/1998, 136/1998, 20710/1999, 12777/2000, 266/2000, 2042/2003 respectively).
(a) Sales Tax Act ( VII of 1990)---
----S. 3(b)---Customs Act (IV of 1969), Preamble---Constitution of Pakistan (1973), Fourth Schedule, Federal Legislative List, Part I, Item No. 49 & Art. 185(3)---Scope of tax---Leave to appeal was granted by Supreme Court to consider whether S.3(b), Sales Tax Act, 1990 was repugnant to Item No. 49 of the Federal Legislative List, Fourth Schedule, Part I of the Constitution and that the Customs Act, 1969 and the Sales Tax Act, 1990 were not applicable to the territories of Azad Jammu and Kashmir and the goods in transit were not subject to payment of taxes.
(b) Constitution of Pakistan (1973)---
----Art. 1---Territory of Azad Jammu and Kashmir is not a part of Pakistan.
Noor Hussain v. State PLD 1966 SC 88 ref.
(c) Sales Tax Act (VII of 1990)---
----S. 3(1)(b)---Sales Tax Act (III of 1951), Ss. 3 & 2(c)---Constitution of Pakistan (1973), Fourth Schedule, Part I, Federal Legislative List Item No.49--Import---Meaning---Import, export, production, manufacture and consumption are distinct taxable events independent and irrespective of salesofgoods---PurposeofItem No. 49 of Federal Legislative List, Part I of Fourth Schedule, of the Constitution was to expand its scope so as to include, inter alia, import as a separate taxable event as had been the position under the Sales Tax Act, 1951---Goods imported in Pakistan, when they entered the territory of Pakistan and became liable to taxation, it was immaterial that ultimately they were to be transported to Azad Jammu and Kashmir---Import into Pakistan was a distinct taxable event independent of any event following thereafter---Principles.
In the present cases precise question for determination was whether the bringing of goods into Pakistan (import) was an independent taxable event attracting sales tax under section 3(1)(b) of the Sales Tax Act of 1990 and was not contingent on the ultimate destination of the goods (in this case AJK), or in other words, sales tax would, constitutionally and lawfully be levied on goods brought into Pakistan at the time they were brought in (imported) and was not dependent on a further event happening in respect of goods in Pakistan, such as mixing of the goods or the sale thereof in Pakistan.
Import, export, production, manufacture and consumption are distinct taxable events independent and irrespective of sales of goods. It is thus clear that the purpose of Entry 49 of Part I, Federal List, Fourth Schedule of the Constitution was to expand its scope so as to include, inter alia, import as a separate taxable event as had been the position under the Act of 1951.
A close scrutiny of the relevant provisions appearing in the Sales Tax Acts of 1951 and 1990 unambiguously reveals that they are part of the same family of laws. Insofar as they relate to the import and export of goods, they are pari materia and that one statute specifies what can be imported while the other regulates the levy and collection of tax on imports. The Sales Tax Act of 1951 predates the Sales Tax Act of 1990, therefore while enacting the latter, the Legislature is presumed to have been aware of the former and in particular of the definition of the word 'import' in section 2(c) thereof, the two statutes have to be construed together and the definition of the word 'import' used in the Sales Tax Act of 1951 would apply to the Sales Tax Act of 1990 and that even if the two statutes are not pari materia, the word 'import' has consistently been given its ordinary dictionary meaning by the Courts in Pakistan.
The Courts in Pakistan have consistently given the word 'import' its natural and ordinary meaning of 'bringing into' the country and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of original package. It being so, there is no scope that the word 'import' should be given a different meaning than what appears in section 3(1)(b) of the Sales Tax Act of 1990, especially when there is nothing in the statute to indicate that different meaning was intended by the Legislature. It appears that the Legislature, by not defining the word 'import' in the Sales Tax Act of 1990 desired the interpretation of said word in accordance with the following principle:- "When a Legislature uses in a statute a legal term, which has received a judicial interpretation, it is to be presumed that the term has been used in the sense in which it has been judicially interpreted, unless a contrary intention appears from the statute".
Thus, the goods were imported into Pakistan when they entered the territory of Pakistan and became liable to taxation accordingly. It is immaterial that ultimately they were to be transported to Azad Jammu and Kashmir. This is for the reason that import into Pakistan is a distinct taxable event independent of any event following thereafter.
Close scrutiny of Entry 49 of the Fourth Schedule, Federal List, Part I of the Constitution and other laws reveal that acceptance of contention that Entry 49 authorizes tax on import only when it is followed by sale or purchase in Pakistan, will render the words 'imported, exported, produced, manufactured or consumed' redundant and also frustrate the whole purpose of Entry 49. If sale and purchase alone were taxable events, then there was no point in adding the words 'imported, exported, produced, manufactured or consumed'. Clearly, no redundancy can be attributed to the Legislature and on this ground the contention is repelled. It is also to be noted that if the contention is accepted, a situation would arise where import into Pakistan may not be taxed at all. Besides, while examining the validity of a statute, the principle is that there is a presumption of constitutionality of a statute and that every explanation in favour of a statute must be found. Keeping in view the complexity of economic problems, great latitude is shown in favour of fiscal statutes.
Noor Hussain v. State PLD 1966 SC 88; Pakistan v. Public at large PLD 1987 SC 304; The Central India Spinning and Weaving and Manufacturing Co. v. The Empress Mills/Municipal Committee, Wardha AIR 1958 SC 341; Brown v. State of Maryland 6 L Ed. 678; Timber Traders Association v. District Board AIR1965 Pun. 97; Messrs Najhib Zarab v. Government of Pakistan PLD 1993 Kar. 93; Commissioner of Sales Tax v. Hunza Central Asian Textile and Woollen Mills Ltd. 1999 SCMR 526; Sheikhoo Sugar Mills Ltd. v. Government of Pakistan 2001 PTD 2097 = 2001 SCMR 1376; Pakistan Industrial Development Corporation v. Pakistan 1992 SCMR 891; Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan 2000 PTD 485; Pakistan Textile Mill-owners' Association v. Administrator of Karachi PLD 1963 SC 137; East and West Steamship Co. v. Collector of Customs PLD 1976 SC 618; Messrs Tahseen (Pvt.) Ltd. v. Additional Collector of Customs Dry Port, Rawalpindi 1998 PTD 2561; Concise Oxford Dictionary New Edn., p.593; Blacks Law Dictionary, 6th Edn., p.1115; Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372; Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697; WAPDA v. Collector of Central Excise and Sales Tax 2002 PTD 2077; Gramophone Co. of India v. Birendra Bahadur Pandey (1984) 2 SCC 534; Zaman Cement v. Central Board of Revenue 2001 CLC 1625; 2002 SCMR 312; Lahore Textile and General Mills Ltd. v. Collelctor of Customs, Lahore PLD 1988 Lah. 563 and Hilal Tanneries Ltd. v. Zila Council, Gujrat 1994 MLD 2366 ref.
(d) Interpretation of statutes---
----No redundancy can be attributed to the Legislature.
(e) Interpretation of statutes---
----Validity of a statute---Principle---While examining the validity of a Statute, principle is that there is a presumption of constitutionality of a Statute and that every explanation in favour of a statute must be found.
Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372 and Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697 ref.
(f) Interpretation of statutes---
----Fiscal Statute---Great latitude has to be shown in favour of fiscal statute,keepinginviewthecomplexityofeconomicproblems.
Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372 and Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697 ref
(g) Words & phrases---
----"Import"---Connotation.
Concise Oxford Dictionary New Edn., p.593 and Blacks Law Dictionary, 6th Edn., p.1115 ref.
Abid S. Zuberi, Advocate Supreme Court for Appellants (in C.A. No.435 of 1999).
S.M. Zafar, Senior Advocate Supreme Court and Irtaza Naqvi, Advocatefor Appellants (in C.A. No.499 of 2000).
Najamul Hasan Kazmi, Advocate Supreme Courtfor Appellants (in C.A. No.819 of 2000).
Nemo for Appellants (in C.A. No.1344 of 2000).
Mahmoodul Islam, Advocate-on-Record for Appellants (in C.As. Nos.1345, 1346, 1348 of 2000).
Jawahar A. Naqvee, Advocate Supreme Court for Appellants (in C.As. Nos.63 to 65 of 2001).
Ch. Muhammad Akram, Advocate-on-Record for Appellants (in C.As. Nos.1852 of 2002 and 1674 of 2003).
Makhdoom Ali Khan, Attorney-General for Pakistan with Uzair Karamat Bhindari, Advocate and Suleman Hameed Afridi, Barrister (On Court Notice).
Fakhruddin G. Ibrahim, Senior Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.3 (in C.As. Nos.435/1999 and 499/2000).
Izharul Haq, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos.819/2000 and 63 to 65/2001).
Sohail Akhtar, Advocate Supreme Court and Sh. Masood Akhtar, Advocate-on-Record for Respondents (in C.As. Nos.1344 to 1346 and 1348/2000).
Malik Itaat Hussain, Advocate Supreme Courtand M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.1852/2002 and 1674/2003).
Dates of hearing: 23rd and 24th November, 2004.
JUDGMENT
NAZIM HUSSAIN SIDDIQUE, C J.---The present appeals involve interpretation of a purely legal question, hence detailed narration of facts in each case is not called for. Suffice it to state that the appellants, viz. M/s. Master Foam (Pvt.) Ltd. (C.A. No.435 of 1999), M/s. Diamond Polymers (Pvt.) Ltd. (C.A. No. 499 of 2000), PAV Industrial Co (C.A.No.819 of 2000) M/s English Copper (Pvt.) Ltd. (C.A.No.1344of2000), M/s Shadabia Industries (Pvt.) Ltd (C.As. Nos.1345, 1346 and 1348 of 2000), M/s. Sunny Industries (C.As. Nos.63, 64 and 65 of 2001), M/s. Martial Enterprises (C.A.No.1852/2002) and M/s. Metro Flex Industries (Pvt.) Ltd. (C.A. No.1674 of 2003) all are industrial concerns incorporated as such under the Companies Ordinance, 1984. They have their industrial units set up in the Azad Jammu and Kashmir territory. They import raw materials from abroad for manufacturing their respective products.
2.The appellants, aggrieved of the levy of duties/taxes by the Collector of Customs/Collector of Sales Tax, Karachi on the goods imported by them, filed writ petitions at different points of time before the Lahore High Court, some at its Principal Seat at Lahore while others at its Rawalpindi Bench. All the writ petitions were dismissed on different dates through the judgments impugned herein.
3.In C.A. No.435 of 1999, leave to appeal was granted by this Court through order dated 4-5-1999 to consider the following contentions:-
(i)Whether section 3(b) of the Sales Tax Act, 1990 is repugnant to Item No.49 of the Federal Legislative List?
(ii)Whether the Customs Act, 1969 and the Sales Tax Act, 1990 are not applicable to the territories of Azad Jammu and Kashmir and the goods in transit are not subject to payment of taxes?
The above leave granting order formed the basis for granting leave in the rest of the appeals.
4.S.M. Zafar, learned Senior Advocate Supreme Court, appearing on behalf of appellant in C.A.No.499 of 2000 contends that the State of Azad Jammu and Kashmir (AJK) is not part of Pakistan, that the exemption granted to the appellant by the AJK Government would stand nullified if the Government of Pakistan imposes sales tax and customs duty on the goods in transit and actually consumed in Mirpur, AJK, that the goods imported and transported to Mirpur, AJK were in fact consumed for production of foam and foam products in AJK, that under thelawsofAJK,appellantisliablefortaxsubjecttoexemptioninterms of Notification No.FD/Tax 1145-1245/95 dated 8-2-1995 of the AzadGovernmentofthe State of Jammu & Kashmir, whichreadsasfollows:--
"Muzaffarabad.
Dated:8-2-1995
NOTIFICATION
No.FD/Tax 1145-1245/95. In exercise of the powers conferred by subsection (10 of section 13 of the Sales Tax Act, 1990 as in force in Azad Jammu and Kashmir) the Azad Government of the State of Jammu & Kashmir is pleased to direct that all goods produced or manufactured by such industries except these indicated below at serial number 1 to 5 which are set up on or after the 1st day of July, 1994 in Azad Jammu and Kashmir shall be exempted from the tax payable under the said Act for a period of 5 years from the date the unit starts commercial production:---
1. Cigarettes manufacturing
2. Steel re-rolling & electric furnaces
3. Flour Mills & rice husking units
4. Stone crushers
5. Oil blending units
Explanation: For the purposes of this notification the expression, 'the date of commercial production' shall mean the date intimated in writing by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least 15 days before commencing such production.
(Sd.)
(Abdul Rashid Baig)
Additional Secretary Finance
."
Explaining his contention, S.M. Zafar referred to Article 1 of the Constitution of 1973, which states that the territories of Pakistan shall comprise the four Provinces of Balochistan, North-West Frontier Province, Punjab and Sindh, Islamabad Capital Territory (Federal Capital), Federally Administered Tribal Areas and such States and territories as are or may be included in Pakistan, whether by accession or otherwise. He submitted that although the status of AJK has not been finally determined as is enunciated in the Constitution, yet the AJK has its own President, Legislature, Judiciary, which is different/independent from the President, Legislature and Judiciary of Pakistan, that both the Supreme Courts of Pakistan and AJK have already determined that the AJK is not part of Pakistan. For this purpose, reliance is placed on the case reported as Noor Hussain v. State (PLD 1966 SC 88). Suffice it to say that neither learned Attorney General for Pakistan nor learned counsel appearing for the respondents disputed above assertion of learned counsel for the appellant. As such, it cannot be said that territory of AJK is a part of Pakistan.
5.Learned counsel for the appellant strenuously argued that the Sales Tax Act, 1990 (hereinafter called "the Act of 1990") is not applicable to the goods in question as the same were neither sold nor consumed in Pakistan and that the goods were meant for being used in territory now under the control of Government of AJK, as such not liable to sales tax in Pakistan. Learned counsel contends that the goods shall, for all practical purposes, be treated as the "goods in transit" till they reach Mirpur, AJK. Further, he submitted that the Act of 1990 does not confer any jurisdiction on any authority in Pakistan to impose sales tax on goods, which are not consumed, sold or used in Pakistan. In support of above plea, he referred to Articles 141 and 142 of the Constitution, according to which the Parliament of Pakistan can make laws with respect to any matter included either in the Federal Legislative List or the Concurrent Legislative List. He specifically referred to Item 49 of said list, which is as follows:--
"49. Taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed."
It is significant to mention here that originally said item read as follows:--
"Taxes on sales and purchases"
Learned counsel maintained that the Act of 1990 has to be read in conjunction with the powers of Parliament given as per Item 49. Section 3(1)(b) of the Act of 1990 levies sales tax. The relevant portion is as under:--
"3. Scope of tax. ---(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of ----
(b) goods imported into Pakistan."
It is urged that when there is potential conflict between an identifiableConstitutionalstandardontheonehandandastatuteonthe other, the only way a statute can escape invalidation is by including in it the required substantive content, i.e. adding the condition of natural justice as a part of the statute on the principle that natural justice is to be read in a law affecting a vested interest. He referred to section 3 of the Imports and Exports (Control) Act, 1950 (hereinafter called "the Act of 1950"), which defines the word 'import' as 'bringing into Pakistan'.
6.Learned counsel emphasized that mere `bringing into' is not a taxable event; sale and purchase of such goods is an essential ingredient conferring jurisdiction on the Parliament of Pakistan to impose tax. For this proposition, reliance is placed on the case reported as Pakistan v. Public at large (PLD 1987 SC 304). Giving further argument in support of his contention, he heavily relied upon a case from Indian jurisdiction reported as the Central India Spinning and Weaving and Manufacturing Co. v. The Municipal Committee, Wardha (AIR 1958 SC 341) in which reliance was placed on the case reported as Brown v. State of Maryland (6 L Ed 678). In the latter case, Justice Marshal dealing with the word, 'importation', held that 'import' is not merely the 'bringing into', but comprises something more, i.e. incorporating or mixing of goods with the mass of the property in the local area, quoted in para. 23 of the judgment at page 346 of the report. Learned counsel also placed reliance on the case reported as Timber Traders Association v. District Board (AIR 1965 Punjab 97) in which the above view was followed. Learned counsel further referred to the case reported as M/s Najib Zarab v. Government of Pakistan (PLD 1993 Kar. 93) wherein it was held that the term, 'import' is derived from Latin word 'importare', which lexicologically does not have reference to the goods in transit. It generally contemplates 'pause and repose' of goods. Learned counsel also contended that the two Acts, i.e. Act of 1950 and the Act of 1990 arenotparimaterial,inasmuchastheformerdealswith prohibitions on export and import of goods whereas the latter deals with imposition of sales tax on imported goods. In other words, the Act of 1950 prohibits or restricts import and export of goods whereas section 3 of the Act of 1990 deals with charging a tax known as sales tax. He states that the objects and subject-matters of the two Acts are entirely different, therefore, the definition of the word, 'import' given in the Act of 1950 cannot be relied upon for defining the word 'import' used in the Act of 1990.
7.Mr. Abid S. Zuberi, Advocate Supreme Court, appearing in C.A. No.435 of 1999 adopted the arguments of S.M. Zafar with regard to goods brought into Pakistan for the purpose of their eventual transportation to AJK. Further, submits that there is no other available method for onward transport of goods to Mirpur AJK as the latter is landlocked and the imported goods have no other access to reach the manufacturersofAJK.Heplacedrelianceonthenotification dated 8-2-1995 quoted above to contend that the appellants are entitled to benefit of exemption from sales tax. Like S.M. Zafar, he also referred to section 3 of the Act 1990 and Item 49 quoted above. He vehemently contended that the goods can only be termed as 'import' when said goods are brought into Pakistan for the purpose of home consumption within the territory of this country and that the goods in question do not fall within the ambit of 'import'. He also submitted that Sales Tax authorities at Karachi charged the appellant advance sales tax for the goods, which would be manufactured at AJK, which was illegal. According to him, it amounted to double taxation. He repeated the assertion of S.M. Zafar that the Acts of 1950 and 1990 are not pari materia.
8.M/s. Najamul Hassan Kazmi and Jawahar A. Naqvee, Advocates Supreme Court, appearing for the appellants in C.A. No.819 of 2000 and C.As. Nos. 63 to 65 of 2001 respectively adopted the arguments advanced by S.M.Zafar, Senior Advocate Supreme Court and Mr. Abdi S. Zuberi, Advocate Supreme Court.
9.Mr. Fakhruddin G. Ebrahim, Senior Advocate Supreme Court, appearing for the respondents (Collectors of Customs & Sales Tax, Karachi) submitted that this Court has already considered the competency of the Legislature to enact laws for the purposes of levying sales tax in view of Item 49 referred to above in the case reported as Commissioner of Sales Tax v. Hunza Central Asian Textile & Woolen Mills Ltd. (1999 SCMR 526). Relevant paragraph of it reads as under:--
"25. The deeming provision created a legal fiction that in the aforesaid restricted parameters, the use or consumption of independently identifiable goods would be considered to be sale so as to bring such goods within the tax net. For the reasons mentioned above, we are of the view that, in the aforesaid restricted sense, the use and consumption of intermediary goods could be treated as sale by legal fiction so as to bring such goods under the levy of sales tax where the final product was not subject to sales tax when sold and that the use or consumption of intermediary goods in such circumstances have a rational nexus with sale. Federal Legislature was, therefore, competent to enact the deeming provisions under entries of 'sales of goods' in the Constitutional documents."
Learned counsel argued that the sales tax is leviable not only on profit and loss oriented transactions, but it can be charged on all taxable supplies in respect of taxable goods manufactured or consumed during a taxable activity, notwithstanding the fact of pecuniary profit as per definition of the expressions 'taxable activity' and 'taxable supply' occurring in sections 2(35) and 2(41) of the Act of 1990. He further argued that the preamble to the Act shows that it has been re-enacted to consolidateandamendthelawrelatingtothelevyoftaxonthe sale, importation, exportation, production, manufacture or consumption of goods. Under section 3 of the Act of 1990, which is a charging section, sales tax is leviable on taxable supplies and activities. According to the learned counsel, two conditions are essential to levy sales tax, namely, 'taxable supply' and 'taxable activity' and both these expressions have been defined in sections 2(35) and 2(41) of the Act as under:--
"2(35). 'taxable activity' means an activity which is carried on by any person, whether or not for a pecuniary profit, and involves in whole or in part, the supply of goods (or rendering of services on which sales tax has been levied under the respective Ordinance and use of goods acquired for private purposes or for the manufacture of exempt goods without making supply) to any other person, whether for any consideration or otherwise, and includes any activity carried on in the form of a business, trade or manufacture.
2(41)."taxable supply" means a supply of taxable goods made [***] [by an importer, manufacturer, wholesaler (including dealer), distributor or retailer] other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent. under section 4."
He referred to the case reported as Sheikhoo Sugar Mills Ltd. v. Government of Pakistan (2001 PTD 2097 = 2001 SCMR 1376) and relied upon the following paragraph:-
"8-B. As per the contention of the learned counsel appearing for the appellants/petitioners particularly Mr. Ali Sibtain Fazli the expression taxable activity has to be interpreted exhaustively and not extensively and the transaction of sale of goods is to be confined only in between two persons as per definition of word 'sale' and if it has been produced and consumed by the same person for his own use it would not be sale to himself. We are not inclined to disagree with him to interpret the expression "sales of goods" has to be interpreted exhaustively because definition clause of taxable activity i.e. section 2(35) has used the words means and includes but simultaneously other expressions used in this clause as well as clause 2(41) have to be taken into consideration broadly to ensure the objects for which the Act has been promulgated. It may be noted that as far as word "sale" is concerned it has not been defined anywhere in the Act rather it has been used as one of the component of 'supply' under section 2(33) of the Act, according to which "supply" includes sale or other disposition of goods in furtherance of business carried out for consideration and also includes putting to private business or non-business use of goods acquired, produced or manufactured in the course of business etc."
He also referred to the case reported as Pakistan Industrial Development Corporation v. Pakistan (1992 SCMR 891) as to the interpretation of Constitution, particularly entries in the Fourth Schedule. The following was held therein:-
"The Constitution provides governance to the country, confers rights, privileges and liabilities on the citizens and also controls the working in all fields of life. It is a living document and is to be interpreted in a widest possible manner to ensure continuity and balance in the several constituents and organs of the State. The item in the list in respect of which power of taxation can be exercised should not be interpreted in a restricted and pedantic manner. In this regard Mr. A.A. Fazeel, the learned Advocate Supreme Court, has pointed out that the appellant's counsel had referred to United Provinces v. Mst. Atiqa Begum and others AIR 1941 Federal Court 16, where it was observed that:-
"None of the items in the list is to be read in a narrow or restricted sense, and that each general word should be held to extend to all ancillary or subsidiary matters, which can fairly and reasonably be said to be comprehended in it."
7. In this background we have to consider Entry No.43 (c), which authorized the Central legislature to levy tax on income and Corporations. The definition of the word 'income' in the Act is inclusive in nature and is not exhaustive. In this state of statutory affairs the word 'income' has not to be given its literal and dictionary meaning but it is to be expanded to all possibilities and amplitude, which may be covered by it in a wider and liberal sense particularly to save the purpose for which the statute has been enacted. According to the judgments referred above income is a receipt in the hands of assessee not necessarily a recurrent return from a definite source but generally in the light of the Act it is a periodical monetary return from known or unexplained source. But the determination of receipt as income depends upon the facts and circumstances of the case."
He also referred to the case reported as Riaz Bottles (Pvt.) Ltd. v. Federation of Pakistan (2000 PTD 485) wherein entry 49 was read in context of entries 58 and 59 of the Fourth Schedule. It was held therein as under:--
"Item No.49 in the Federal Legislative List provides for framing of laws to impose taxes on sales and purchases of goods etc. Such power includes the power to legislate on the charging, machinery, recovery as well as penalty provisions. Item No.49 when read with Items Nos. 58 and 59 makes it otherwise clear that the legislature is competent to legislate not only on a particular subject but also on matters incidental or ancillary to those enumerated in the list."
10.For meaning of word 'import', he placed reliance on Pakistan Textile Mill-Owners' Association v. Administrator of Karachi (PLD 1963 SC 137) and East and West Steamship Co. v. Collector of Customs (PLD 1976 SC 618) and strenuously argued that the moment the goods enter into the territory of Pakistan, they are subject to sales tax unless it is shown that the goods in question have been granted exemption in terms of section 13 of the Act of 1990. He also referred to the case of M/s. Tahseen (Pvt.) Ltd. v. Additional Collector of Customs Dry Port, Rawalpindi (1998 PTD 2561) and relied upon the following paragraph:--
"8. For the present controversy the relevant provisions of the above quoted section 3 are clause (b) of subsection (1) and clause (b) of subsection (3) thereof. Under these provisions, sales tax is leviable at the rate of 12-1/2 per cent. on the goods imported into Pakistan and payable by the person importing such goods. There is no denial that the goods imported by the petitioner enter Pakistan at Karachi or Islamabad/Rawalpindi. The goods may be, later on, transported to Azad Jammu and Kashmir, but the fact remains that for the first time such goods enter territory of Pakistan and not of Azad Jammu and Kashmir. Section 3 of the Imports and Exports (Control) Act, 1950, defines the term "import" to be bringing into Pakistan. This definition is without any qualification or rider and is most relevant for the purposes of import. It even does not exclude the goods, which are, later on, transshipped to any other territory/country. The transshipped goods or goods in transit to any other territory may be allowed exemption, levy of any tax or duty but such goods will not loose the character of their import through Pakistan."
11.Learned counsel also submitted that for attracting section 129 of the Customs Act, 1969, there must be a transit trade agreement between two countries, as is the case of Pakistan and Afghanistan. He contended that in the present case, the appellants have not pleaded any such agreement between Pakistan and AJK. Learned counsel also argued that the appellants have not even referred to the Customs Export Transit Rules, 1974. He contended that the appellants pleaded that they had established their industries in AJK in view of incentive provided by the Government of AJK and the incentive so provided could not be withdrawn and the notification dated 8-2-1995 rendered totally ineffective. He concluded on this point that the moment the goods entered into the territory of Pakistan, same were subject to duties and taxes as per Pakistan laws and the tax exemptions granted by AJK Government are of no help to the appellants to avoid duties and taxes, which they are bound to pay under the Pakistan laws.
12.M/s. Izharul Haq, Sohail Akhtar and Malik Itaat Hussain, appearing for the respondents In C.As. Nos.819 of 2000 and 63 to 65 of 2001, C.As. Nos. 1344 to 1346 and 1348 of 2000 and C.As. Nos.1852 of 2002 and 1674 of 2003 respectively adopted the arguments advanced by Mr. Fakhruddin G. Ebrahim, Sr. Advocate Supreme Court for the respondents.
13.Mr. Makhdoom Ali Khan, learned Attorney General for Pakistan opened up the arguments by stating that in these matters precise question for determination is whether the bringing of goods into Pakistan (import) is an independent taxable event attracting sales tax under section 3 (1) (b) of the Act of 1990 and is not contingent on the ultimate destination of the goods (in this case AJK), or in other words, sales tax would, constitutionally and lawfully be levied on goods brought into Pakistan at the time they were brought in (imported) and is not dependent on a further event happening in respect of goods in Pakistan, such as mixing of the goods or the sale thereof in Pakistan.
14.In fact, above is the precise point, which has been raised in these appeals and is to be resolved in accordance with the Constitution and the laws related thereto.
15.Admitted facts in these cases are that the appellants operate manufacturing units in AJK, which is not part of Pakistan and that they import raw material for said manufacturing units through Karachi. The goods so imported arrive at the Port of Karachi, are unloaded there, sometimes even stored there for a while, and then re-loaded for AJK. It is significant to note that the Act of 1990 has been adopted by the AJK Government vide the Sales Tax (Adoption) Act, 1993 (Act No. IV of 1993) and its section 2(4) reads as follows:--
"In determining the input tax under subsection (1) the amount paid as input tax at the import stage to the customs authority in Pakistan shall be deemed to have been paid in Azad Jammu and Kashmir for the purpose of adjustment against the tax liability on the finished goods."
16.It is also a fact that in Pakistan there is no exemption from sales tax on the goods imported by the appellants herein. AJK has not levied or collected any sales tax at the import stage on goods imported by the appellants into AJK from Pakistan. The appellants are aggrieved of the demand by the Tax Authorities in Pakistan that sales tax be paid on the raw material imported by them through Karachi.
17.Learned Attorney General reiterated the case of the respondents (Government) that even if all the imported raw material is taken to AJK by the appellants, even if all imported raw material is used by the appellants in their factories in AJK and even if the finished goods produced by the appellants using the said raw material are sold in AJK alone, yet the appellants are liable to pay sales tax on the import of raw material in Pakistan and this is because 'import' is an independent taxableeventundersection3(1)(b)oftheAct of 1990 as well as Entry 49 as quoted above. Emphasizing it further, learned Attorney General stated that import of goods is complete as soon as they enter into the territorial waters of Pakistan irrespective of what happens to such goods subsequently. According to him, it is not necessary for 'import' to be complete that the goods shall subsequently be sold or got mixed with other goods in Pakistan.
18.The taxable event in case of imported goods is `import' and not the 'post importation sale etc.' in Pakistan. Natural and Ordinary meaning is to be given to the word 'importation' and not artificial and contrived version, which is manifestly neither ordinary nor natural. The meaning given by the appellants to the word 'import' is not the ordinary dictionary meaning, rather it is a technical and artificial meaning of that word, which as consistently been rejected by the Superior Courts of Pakistan. In the Concise Oxford Dictionary, New Edition, at page 593, the word 'import' has been defined as:-
"bring in (especially foreign goods or services) to a country"
It appears that ordinary meaning has been adopted by the Act of 1950 and section 2(c) of which defines the word 'import' as follows:-
"Import" and "export" mean respectively bringing into, and taking out of, Pakistan by sea, land or air."
Learned Attorney General vehemently argued that the Act of 1950 and the Act of 1990 are pari material. He submitted that Blacks Law Dictionary, 6th Edition at page 1115, defines the term "pari materia" as follows:-
"of the same matter; on the same subject; as, laws pari materia must be construed with reference to each other".
He referred to the case reported as Mushtaq Awan v. Government of Pakistan (PLD 1999 Lah. 372) wherein at pages 383-384, the following excerpts from Carwford's "The Construction of Statutes" were quoted with approval:-
"Statutes in pari materia that is which relate to the same matter or subject although some may be special and some general, in the event one of them is ambiguous or uncertain, are to be construed together, even if the various statutes have not been enacted simultaneously, and do not refer to each other expressly
The rule which, thus, allows the Court to resort to statutes relating to the same subject-matter, were enacted in accord with the same legislative policy, that together they constitute a harmonious or uniform system of law, and that, therefore, in order to maintain this harmony, every statute treating the same subject-matter, should not only be considered but also construed to be in harmony with each other in order that each may be fully effective."
He also referred to the book by S.M. Zafar titled 'Understanding Statutes' (Second Edition) wherein at pages 696-697 he explained the concept in the following words:--
"Statutes which relate to the same subject, the same person or thing, or the same class of persons or things, are deemed to constitute one system of law: They are considered as one statute, subsequent laws are regarded as supplementary or complementary to the earlier enactments. When enacting a new law the legislature is presumed to have had in contemplation the existing statute on the same subject, and to have framed its enactment with reference thereto. This is the real basis for the rule in pari material "
19.Learned Attorney General traced the pre-1949 history and referred to the case reported as WAPDA v. Collector of Central Excise & Sales Tax (2002 PTD 2077 at 2082). Its paragraph 11 is as follows:-
" . The subject of sales tax was on the Provincial Legislative List at Serial No.48 in the Government of India Act, 1935 and was described as Taxes on sales of goods and on advertising. In the Constitution, 1956, 'tax on sales and purchases' was mentioned at Serial No.26 of the Federal Legislative List, and therefore, for the first time it became a Federal subject. The position was maintained in 1962 Constitution, which mentioned 'tax on sales and purchases' on the Federal Legislative List as clause (j) at Serial No.43 in the Third Schedule. In 1973 Constitution as originally adopted 'tax on sales and purchases' was kept on Federal Legislative List at Serial No.49 of Part I of the Federal Legislative List given in the Fourth Schedule. The item was, however, completely substituted by Constitution 5th Amendment Act, 1976 with effect from September 13, 1976 to read 'Taxes on sales and purchases of goods imported, exported, produced, manufactured or consumed'. The second half of the amended entry appears to have been taken from the amendment made in Sales Tax Act, 1951 by Finance Ordinance, 1960. Through that amendment the words 'consumption of goods' in the preamble were substituted by 'importation, exportation, production, manufacture or consumption."
20.The Act of 1990 was introduced as an amendment to the Act of 1950 vide section 13 of the Finance Act, 1990 which substituted chapters 1 to 16 of the Sales Tax Act, 1951 with the chapters set out in the Third Schedule to the Finance Act, 1990. Further, the preamble to the Sales Tax Act, 1951 was not substituted and was retained as the preamble to the Act of 1990. Relevant part of section 3 of the Act of 1951 reads as follows:-
"3.(1)--- There shall be levied and collected a tax on the value of----
(a)all goods produced or manufactured in Pakistan, payable by the manufacturer or producer;
(b)all goods imported into Pakistan payable by the importer .."
It is noted that anomaly in the law with reference to tax was rectified by replacing the original Entry 49 with the present one quoted above and this intent was noted in the case reported as 2002 PTD 2077. Now as a result, import, export, production, manufacture and consumption are distinct taxable events independent and irrespective of sales of goods. It is thus clear that the purpose of substituting of original Entry 49 with the present one was to expand its scope so as to include, inter alia, import as a separate taxable event as had been the position under the Act of 1951.
21.A close scrutiny of the relevant provisions appearing in the Acts of 1951 and 1990 unambiguously reveals that they are part of the same family of laws. Insofar as they relate to the import and export of goods, they are pari materia and that one statute specifies what can be imported while the other regulates the levy and collection of tax on imports. The Act of 1951 predates the Act of 1990, therefore while enacting the latter, the Legislature is presumed to have been aware of the former and in particular of the definition of the word 'import' in section 2(c) thereof, therefore, the two statutes have to be construed together and the definition of the word 'import' used in the Act of 1951 would apply to the Act of 1990 and that even if the two statutes are not pari materia, the word 'import' has consistently been given its ordinary dictionary meaning by the Courts in Pakistan.
22.With reference to the case reported as AIR 1958 SC 341, relied upon by the appellants, it is noted that the rule laid down therein has its genesis in the "doctrine" of original package' enunciated by the Supreme Court of U.S.A. Said doctrine of post importation mixing or original package was clearly rejected by the Supreme Court of Pakistan in the case reported as Pakistan Textile Mills Owners Association, Karachi. Administrator of Karachi (PLD 1963 SC 137). At page 146 the following was observed:-
"Under the definition given in the Rules framed by the Municipal Corporation the word "import" means the bringing in of goods into the terminal tax limits from outside those limits. In the present case the goods are, in fact, so brought in, unloaded and stored there along with other goods similarly brought in, then reloaded for transshipment to the factory. In every sense of the term, therefore, the goods are, in our view, imported into the Municipal limits of Karachi. We see no reasons, therefore, to give any artificial meaning to the word "import" as sought to be contended by the learned counsel. "Import" and "export" in their ordinary and natural sense mean to bring into or take out of or away from a particular place. The introduction of the notion that there must also necessarily be a mixing up in mass with other goods within those limits seems to us to impose an unjustifiable restriction upon the meaning of the word "import".
23.It is evident that not only the doctrine of post importation mixing was rejected by this Court, but also the case of the Central India Spinning and Weaving and Manufacturing Co. Ltd. was distinguished on the following basis:-
"In that case the appellant-Company transported cotton bales from Yeotmal where it had its Mills to Nagpur by road and vehicles carrying them had to pass through the limits of the Wardha Municipality but did no more than use the road which traversed the said Municipal limits. That was a case purely of goods passing through the Municipal limits. There was no loading or unloading done at any point within those limits. The facts of the case before us, however, are different, for, the goods brought in even by rail are unloaded at railway stations or yards within the Municipal limits, then reloaded into other transport vehicles and carried to the Mills of the appellants either at Landhi or Manghopir."
24.It is noted that the view taken in the case of Central India Spinning and Weaving and Manufacturing Co. has subsequently been doubted by the Indian Supreme Court. It came in for criticism in Gramophone Co. of India v. Birendra Bahadur Pandey [(1984) 2 SCC 534 at 554]. Its paras. 30 and 32 are as follows:--
"30. The Calcutta High Court thought that goods may be said to be imported into the country only if there is an incorporation or mixing up of the goods imported with the mass of the property in the local area. In other words the High Court relied on the "original package doctrine" as enunciated by the American Court. Reliance was placed by the High Court upon the decision of this Court in [The Central India Spinning and Weaving and Manufacturing Co. Ltd. v. The Empress Mills/The Municipal Committee, Wardha (AIR 1958 SC 341)]. That was a case which arose under the C.P and Berar Municipalities Act and the question was whether the power to impose "a terminal tax on goods or animals imported into or exported from the limits of a municipality" included the right to levy tax on goods which "were neither loaded nor unloaded at Wardha but were merely carried across through the municipal area". This Court said that it did not. The word "import", it was thought, meant not merely the bringing into but comprised something more, that is 'incorporating and mixing up of the goods with the mass of the property in the local area', thus accepting the enunciation of the 'original package doctrine' by Chief Justice Marshall in Brown v. State of Maryland [6 L ED 678], We are afraid the case is really not of any guidance to us since in the context of a 'terminal tax' the words 'imported and exported' could be construed in no other manner than was done by the Court. We must however say that the 'original package doctrine' as enunciated by Chief Justice Marshall on which reliance was placed was expressly disapproved first by the Federal Court in the Province of Madras v. Boddu Paidanna [AIR 1942 PC 33] and again by the Supreme Court in State of Bombay v. F.N.Balsara [AIR 1951 SC 318]. Apparently, these decisions were not brought to the notice of the Court, which decided the case of [The Central India Spinning and Weaving and Manufacturing Co. Ltd. v. The Empress Mills/The Municipal Committee, Wardha (AIR 1958 SC 341)] .
"32. We have, therefore, no hesitation in coming to the conclusion that the word 'import' in sections 51 and 53 of the Copyright Act means 'bringing into India from outside India', that it is not limited to importation for commerce only, but includes importation for transit across the country."
25.It is, therefore, clear that the doctrine of original package formulated by the Supreme Court of U.S.A., which was made basis for the view in the case of Central India Spinning and Weaving and Manufacturing Co. was no longer the prevailing view even in India. Further, the original package statement of Chief Justice Marshal was an illustration rather than a formula. In fact, it is no longer valid.
26.The word 'import' was given its ordinary and natural meaning in East and West Steamship Co. v. Collector of Customs (PLD 1976 SC 618) in the context of Sea Customs Act, 1878. In the case reported as Zaman Cement v. Central Board of Revenue (2001 CLC 1625) it was held that the levy and chargeability of duty has a nexus with the day on which goods are to be imported. Said case was affirmed by this Court in the case reported as 2002 SCMR 312. With regard to the Customs Act, 1969, the word 'import' means 'bring into country' and for this reliance can be placed on the cases reported as Pakistan Textile Mill-owners' Association v. Administrator of Karachi (PLD 1963 SC 137), East and West Steamship Co. v. Collector of Customs (PLD 1976 SC 618), Lahore Textile and General Mills Ltd. v. Collector of Customs, Lahore (PLD 1988 Lah. 563) and Hilal Tanneries Ltd. v. Zila Council, Gujrat (1994 MLD 2366).
27.From above it is clear that right from 1963 till date the Courts in Pakistan have consistently given the word 'import' its natural and ordinary meaning of 'bringing into' the country and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of original package. It being so, we are of the view that there is no scope that the word 'import' should be given a different meaning than what appears in section 3(1)(b) of the Act of 1990, especially when there is nothing in the statute to indicate that different meaning was intended by the Legislature. It appears that the Legislature, by not defining the word 'import' in the Act of 1990 desired the interpretation of said word in accordance with the following principle:-
" when a Legislature uses in a statute a legal term, which has received a judicial interpretation, it is to be presumed that the term has been used in the sense in which it has been judicially interpreted, unless a contrary intention appears from the statute."
28.Thus, the goods were imported intoPakistan by the appellants when they entered the territory of Pakistan and became liable to taxation accordingly. It is immaterial that ultimately they were to be transported to AJK. This is for the reason that import into Pakistan is a distinct taxable event independent of any event following thereafter.
29.Close scrutiny of Entry 49 and other laws referred to above reveal that acceptance of appellants' argument that Entry 49 authorizes tax on import only when it is followed by sale or purchase in Pakistan, will render the words 'imported, exported, produced, manufactured or consumed' redundant and also frustrate the whole purpose of substituting present entry for the original Entry 49. and the amendment inconsequential. If sale and purchase alone were taxable events, as argued by the learned counsel for the appellants, then there was no point in adding the words 'imported, exported, produced, manufactured or consumed'. Clearly, no redundancy can be attributed to the Legislature and on this ground the argument of the appellants is repelled. It is also to be noted that, if above argument of the appellants is accepted, a situation would arise where import into Pakistan may not be taxed at all. Besides, while examining the validity of a statute, the principle is that there is a presumption of constitutionality of a statute and that every explanation in favour of a statute must be found. Keeping in view the complexity of economic problems, great latitude is shown in favour of fiscal statutes.
30.The appellants have been granted sales tax exemption in AJK on the goods manufactured by them there. There is no exemption on import of raw material. In other words, they have been granted exemption only on the value addition they made to the raw material.
31.Consequently, we do not find any merit in these appeals and the same are dismissed with no order as to costs.
M.B.A./M-223/SAppeals dismissed.