Messrs DADA STEEL MILLS (PVT.) LTD., KARACHI VS CENTRAL BOARD OF REVENUE through Chairman, Islamabad and 2 others, 2007 PTD-KARACHI-HIGH-COURT-SINDH 369 (2006)

(a) Sales Tax Act (VII of 1990)---

----Ss. 3(4), 13(4) & 50---S.R.O. 630(I)/1995, dated 2-7-1995---S.R.O. 639(1)/1995, dated 2-7-1995---Non-automatic Steel Re-rolling Factory consisting of two manufacturing units of different diameter---Exemption claimed from sales tax due to continuous closure of one production unit for more than 75 days---Validity---Word "mill" had been used in S.R.O. 630(I)/95 in a limited sense to denote a manufactory unit/plant falling under particular classification of the S.R.O., for working out figure of payable fixed amount of sales tax on such basis---Word "factory" as used in S.R.O. 639(I)/95 had much wider meaning as denoting a building where goods were manufactured or assembled chiefly by machine process---Benefit of S.R.O. 639(1)/95 would be available in case of complete closure of factory and not some particular production unit or machinery being termed as "mill" by assessee---Mere installation of two manufacturing units of different diameter covered by S.R.O. 630(I)/95 and closure of one such production unit would not bring case within scope of S.R.O. 639(I)195---Factory of assessee never remained wholly closed even for a single day during such period---Abatement or partial exemption from sales tax had been provided by S.R.O. 639(1)/95 and not by S.R.O. 630(1)/95---Case of assessee would not be governed by S.R.O. 630(1)/95, but by S,R.O. 939(I)/95 specifying condition of closure of factory and not one of its mills for purposes of waiver of sales tax---Assessee was not entitled to such claim.

Additional Collector Sales Tax Lahore and another v. Rapafab Ltd. and others 2001 PTD 2383 distinguished.

(b) Words and phrases---

----"Mill" and "Factory"---Definition.

Black's Law Dictionary 7th Edition ref.

(c) Interpretation of statutes---

----Fiscal statute---Exemption provisions would be construed strictly, and unless person claiming such exemption proved satisfactorily that his case fell within four corners of exemption clause, he would not be entitled thereto.

Junaid Ghaffar for Petitioner.

None present for Respondents.

Date of hearing: 14th November, 2006.

JUDGMENT

ANWAR ZAHEER JAMALI, J.---Petitioner Messrs Dada Steel Mills (Pvt.) Ltd. have preferred this Constitutional Petition to assail the action of respondents communicated to them vide letter No.23(S.T.)/ Joint Survey/W/95/4018, dated 20-4-1996 issued under the signature of respondent No.3. In the context of such grievance prayers made in the petition read as under:

(i) Declare that the refusal to grant abatement for the closure period of the petitioner's mill by the respondents is unlawful, mala fide, unjust, arbitrary, unreasonable, without lawful authority and of no legal effect.

(ii) Declare that the petitioner is entitled to abatement on account of non-production/closure of his mill as per Notification S.R.O.. 639(I)195, dated 2-7-1995 and S.R.O. 630(I)/95, dated 2-7-1995.

(iii) Declare that the interpretation of word "Factory" is fanciful and arbitrary and each mill is entitled to abatement as it pays sales tax separately and for its own capacity.

(iv) Direct the respondents to collect the sales tax only on the production/operation of the mil and not otherwise.

(v) Restrain the respondents from collecting sales tax and penalty for closure 9-1/2" diameters mill with effect from 30-10-1995 to 12-1-1996 and imposing an embargo on the petitioner's mill and/or from taking any other action against the petitioner.

(vi) Grant cost of the petition.

(vii) Any other relief or reliefs which this Honourable Court deems fit.

2. Succinctly, the case of the petitioner is that they are manufacturers of mild steel re-rolled product having two non-automatic re-rolling mills with diameters of 9-1/2" and 6-1/2" respectively, both installed in the same premises. Based on the manufacturing category of the petitioner, their products fall under serial Nos. 3 and 7 of S.R.O. No.630(I)/95, dated 2nd July, 1995 for levying of presumptive sales tax. The petitioners in order to avail the benefit of rule 10 of the S.R.O. 639(I)/95, dated 2nd July, 1995, which provides that sales tax shall be waived off on account of the closure of the factory for a continuous period of at least fifteen days, subject to the conditions specified therein, vide their letter, dated 28-10-1995 intimated the respondent No.3 about closing down of their mill of 9-1/2" diameter from 30-10-1995 for a uncertain period. Later on besides arranging joint survey as per the requirement of S.R.O. 639(I)/95 some other correspondences were also made by the petitioner, from time to time, with the respondent No.3 on the same subject as the mill of the petitioner engaged in the production of 9-1/2" diameter had remained closed for total seventy five days w.e.f. 30-10-1995 to 13-1-1996, which, according to the petitioner, had made them entitled for availing the benefit of Rule 10 of S.R.O. No.639(I)/1995 for such period. Further ease. of the petitioner is that in contrast to it, the respondents. not only declined to extent the benefit of rule 10 (ibid) for the remaining period of fifty-five days, but they also withdrew the sanctioned abatement benefit for twenty days earlier granted to the petitioner. The grievance of the petitioners is that such action of the respondents is arbitrary, discriminatory, mala fide and without jurisdiction as the case of the petitioners for availing the benefit of rule 10 (ibid) was fully qualified as per the terms specified in S.R.O. 639(1)/1995.

3. In their parawise comments to this petition filed by the respondents Nos. 1 to 3 on 23-9-2005, precisely, they have disputed the claim of the petitioner as regards availability of benefit of rule 10 of S.R.O. No.639(I)/1995, dated 2nd July, 1995 on the premises that the benefit of abatement under this rule was only admissible if the whole factory of the petitioner was closed for a continuous period of at least fifteen days, while at best the claim of the. petitioner, as per their own averments, is that only a part of the factory having the production capacity of 9-1/2" diameter was closed for such period of seventy-five days due to repairing purposes. The respondent had further stated that the two words "mill" and "factory" used distinctly in S.R.O. Nos.630(I)/ 1995 and 639(I)/1995 both, dated 2nd July, 1995, have different connotations for the purpose of their respective applicability and, thus, the petitioner do not qualify for availing the benefit of rule 10 of the preceding S.R.O. No. 639(I)/1995 on the basis of admitted facts that their factory remained throughout under production with reference to the re-rolling and production of 6-1/2" diameter capacity. In the end, respondents also made reference to the clarification letter, dated 1-4-1996 received by them from the office of Central Board of Revenue Islamabad for this purpose, which reads as under:--

"The Collector of Sales Tax (West), Karachi.

Subject: ABATEMENT FOR CLOSURE

Refers to your letter No.2(11)STD/NBSM/95, dated March, 1996 on the subject noted above.

It is clarified that abatement under S.R.O. 639(1)/95, dated 2^nd July, 1995 is admissible only if the whole factory is closed for a continuous period of at least 15 days. Closure of a part of factory does not attract any abatement.

(Sd.)

(Sarwat Tahira Habib)

Secretary (STC)"

Mr. Junaid Ghaffar learned counsel for the petitioner, after detailed narration of relevant facts, vehemently contended that on' mere use of word "factory" under rule 10 of S.R.O. 639(I)/1995, the benefit of said S.R.O. cannot be snatched away from the petitioner, as otherwise all the conditions provided under the said rule were fully met/complied by the petitioner and even such claim of the petitioner was initially accepted by the respondent No.3 to the extent of first twenty days of the closure of big unit of 9-112" diameter of their factory. He further contended that S.R.O. No.639(I)/1995 has been issued under section 50 of the Sales Tax Act, 1990 read with subsection (4) of section 3, which is not a charging but only rule making provision of the Act, therefore, based on such S.R.O., the petitioner cannot be burdened with any additional liability of sales tax, against the sprit of the statute which is the net result of the interpretation of said S.R.O., advanced by the respondents. He further contended that in the other S.R.O. No.630(1)/1995, which particularly relates to the levy of fixed amount of sales tax on mild steel re-rolled products manufactured by non-automatic re-rolling mills, the mill of the petitioner is categorized in serial Nos. 3 and 7 for the purpose of computation of sales lax, therefore, due to admitted non-production of item categorized at serial No.7, for all practical purposes, the benefit of other S.R.O. No.639(I)/1995 was available to the petitioner and same cannot be denied to them on mere interpretation of word "factory" used in rule 10 in a different connotation as opposed to a "mill". The learned counsel while concluding his arguments, placed reliance upon the judgment in the case of Additional Collector, Sales Tax, Lahore and another v. Rapafab Limited and others (2001 PLD 2383) and contended that the departmental instructions, rules and notifications which arc found in conflict with the provisions of the statutes, will have no overriding effect in the present case, to frustrate the claim of the petitioner.

5. Since none of the counsel representing respondents, in this petition cared to be present during the course of hearing of this petition, we have taken into consideration parawise comments submitted on their behalf wherein, inter ilia, the respondents have laid much stress upon the difference in the language and scope of S.R.O. No.630(I)/1995 and S.R.O. No. 639(I)11995, for disallowing the claim of the petitioner in terms of rule 10 of the latter S.R.O.

6. We have carefully considered the arguments advanced by the learned counsel Mr. Junaid Ghaffar and perused the material placed on record. In order to examine and appreciate properly the submissions of the learned counsel, it will be useful to reproduce hereunder S.R.O. No.630(I)/1995 and the relevant part i.e. rule 10 of S.R.O. No.639(I)/ 1995 both dated 2nd July, 1995, which read as 'under:

"S.R.O. 630(I)/95.---In exercise of the powers conferred by subsection (4) of section 13 of the Sales Tax Act, 1990, the Central Board of Revenue, with the prior approval of the Federal Government, is pleased to levy the fixed amount of sales tax, at the rates specified in column (4) of the table below on mild steel re-rolled products specified in column (3) of that table, manufactured by non-automatic re-rolling mills, on the basis of presumptive production of various types of the mills, based on their sizes as specified in column (2) thereof, in lieu of the sales tax leviable on such re-rolled mild steel products under subsection (1) of the said section in accordance with such procedure as the Board may prescribe.

TABLE

"S.R.O.639(I)/95.---In exercise of the powers conferred by section 50 of the Sales Tax Act, 1990, read with subsection (4) of section 3 thereof, and supersession of S.R.O. 858(I)/94, dated 5th September, 1994 the Central Board of Revenue, with the prior approval of the Federal Government, is pleased to make the following rules, namely:--

THE FIXED AMOUNT OF SALES TAX RULES, 1995

Rule 10 of S.R.O. 639(I)/95

10 Abatement for closure.---No waiver from fixed amount of sales tax shall be allowed except on account of closure of the factory for a continuous period of at least fifteen days and subject to the following conditions:

(i) The closure is reported in writing to the Assistant Collector concerned within twenty-four hours.

(ii) The Assistant Collector gets the closure verified within forty-eight hours of receiving notice by joint survey committee comprising two nominees of the Collectorate and two nominees of the Association.

(iii) After verification of the closure, the Assistant Collector submits the case to the Deputy Collector for formal approval of abatement for the period of closure.

7. A careful reading of S.R.O. No.630(I)/1995 reveals that it has been issued under subsection (4) of section 13 of the Sales Tax Act, 1990 which relates to exemption in the payment of sales tax, and under this notification, for the purposes of levy of fixed amount of sales tax, a table has been provided for the manufacture of mild steel re-rolled products by non-automatic re-rolling mills categorizing their products into fourteen, and further providing therein table of monthly presumptive production capacity and the amount of sales tax payable per month on the basis of such production. As against it, the other notification issued under section 50 of the Sales Tax Act, 1990 read with subsection (4) of A section 3 is neither charging nor exempting notification but simply lays down the rules for the fixed amount of sales tax, and rule 10 thereof deals with the waiver of payment of fixed amount of sales tax due to the closure of the factory for a period of at-least fifteen days, but subject to the fulfilment of certain conditions, as incorporated therein. Thus, it is palpably clear that though both the notifications have been issued on the same date but for the purpose of payment of fixed amount of sales tax the case of the petitioner is regulated by different categories, specified under the S.R.O. No.630(I)/1995, while the benefit of rule 10 of the other S.R.O. is only available to the petitioner on account of closure of their factory for minimum fifteen days, and fulfilment of other conditions provided therein. If the two S.R.Os. in question referred to above are placed in juxtaposition it is easily understandable that in S.R.O. No.630(I) of 1995 reference has been made to the re-rolling mills, while A in rule 10 of the other S.R.O. the benefit of waiver in the payment of fixed amount of sales tax is attached to the closing of the factory as a whole for a period of not less than fifteen days and not to the closer of some of its production unit.

8. In the same context it will be also pertinent to mention here that though in the common usage words "mill" and "factory" are used interchangeably/synonymously, but in order to understand the exact legal connotation of the word "mill" it will be advantageous to reproduce hereunder its definition from the Black's Law Dictionary 7th Eddition, which reads thus:--

"mill. 1. A machine that grinds corn, grain, or other substances, esp. using a wheel and circular motion. The substance ground in a mill is sometimes called grist, esp. when it is a grain. Courts sometimes refer to the grinding process as a metaphor for the judicial process <suits to collect on promissory notes are grist for the summary-judgment mill because the material facts in such cases are often undisputed> 2. The building in which the grinding is performed, along with the site, dam, or other items connected with the mill. 3. The tenth part of a cent."

From the above definition, vis-a-vis language of S.R.O. 630(I)/95, one can see that in its strict technical sense the word "mill" has limited meaning as it is used to denote a machine using a wheel involving circular motion, and in the said S.R.O. it has been used in a limited sense to denote a manufactory unit/plant, falling under a particular classification of the S.R.O. for working out the figure of payable fixed amount of sales tax on that basis. As against it, the word "factory" used in S.R.O. No.639(1)/95 has much wider meaning as it denotes a building where goods are manufactured or assembled, chiefly by machine c process. Thus, the difference in the language of the two S.R.Os. in question makes it further clear that the benefit of rule 10 of S.R.O. No.639(I)/95 is only available in the case of complete closure of the factory and not some particular production unit or machinery which is being termed as "mill" by the petitioner within the ambit of S.R.O. No.630(I)/95. In our view mere installation of two manufacturing units of different diameter, which are covered by classifications 3 and 7 of S.R.O. 630(I)/95, and closure of one of such production unit, will not bring the case of the petitioner within the scope of rule 10 of the other S.R.O. to avail its benefit. It is in this background of the matter that the Central Board of Revenue, vide its letter, dated 1st April, 1996, has rightly provided guidance to the respondents as regards the interpretation and applicability of S.R.O. No.639(1)/1995, dated 2nd July, 1995. Admittedly, despite nonworking of non-automatic re-rolling mill of 9-1/2" diameter of the petitioner company for seventy five days, as claimed by them, the factory of the petitioner, which consisted of two c manufacturing units, never remained closed as a whole for even a single day during that period. Thus, relying upon the plain language of rule 10 of S.R.O. No.639(I)/1995, we find that the petitioner have not qualified for waiver of sales tax under the said rule. The submission of learned counsel for the petitioner with reference to the judgment in the case of Additional Collector, Sales Tax, Lahore and another v. Rapafab Limited and others (supra) has also no relevancy as in the instant case we do not find any conflict in the statutory provisions and the language of the two S.R.Os. under discussion.

9. Viewing the controversy from another angle one can see that there is no conflict or overlapping in the two S.R.Os. Nos. 630(1)/95 and 639(I)/95 as no right which has been provided by the first one has been snatched away by the other one. The abatement or partial exemption has D not been provided by S.R.O. 630(I)/95 but it has been provided by rule 10 of S.R.O. No. 639(I)195, therefore, in our opinion, it will be governed by the provisions of S.R.O. No.639(I)/95 and not S.R.O.No. 630(I)/95. Further S.R.O. No.639(I)/95 clearly specifies the condition of closure of factory and not one of the mills for the purposes of waiver of sales tax. It is a settled law that the exempting provisions of fiscal statutes have to be construed strictly and unless the person claiming such exemption proves satisfactorily that his case falls within the four corners of the exemption clause, he will not be entitled to it. As discussed earlier, in the present case we are of the view that the present petitioners have failed to prove that their case falls within the four corners of rule 10 of S.R.O. 639(1)/1995, therefore, the question of allowing its benefit to them does not arise.

10. The submission of Mr. Junaid Ghaffar that no levy of sales tax can be made on the petitioner on the basis of S.R.O. No.639(I)/1995 having been issued under section 50 of the Sales Tax Act, 1990 read with subsection (4) of section 3 is also fallacious and has no force, as rule 10 of this S.R.O. simply deals with the waiver of payment of fixed amount of sales tax and it does not by itself levy and additional tax on the petitioner.

11. For the forgoing reasons we find no substance in this petition, which is accordingly dismissed with costs.

S.A.K./D-48/K??????????????????????????????????????????????????????????????????????????????????? Petition dismissed.