COLLECTOR, CENTRAL EXCISE AND SALES TAX and another VS DEWAN TEXTILE MILLS LIMITED and others, 2007 PTD-SUPREME-COURT 1605 (2007)

(On appeal from the judgment, dated 13-2-2002 passed by the Sindh High Court, Karachi Bench Karachi in Constitutional Petition No.D-1686 of 1994).

Sales Tax Act (VII of 1990)---

----Ss. 6 [as modified by Finance Act (IX of 1996) and Finance Act (XIII of 1998), 6-1A [as added by Sales Tax (Amendment) Ordinance (XXV of 2002) & 7---S.R.O. 500(I)/88, dated 26-6-1988---Special steel drums, import of---Exemption of such drums from sales tax---Withdrawal of exemption notification after opening of Letter of Credit and before landing of goods at port of destination---Effect---Sales tax would be chargeable in the same manner and at the same time as same were a duty of customs payable under Customs Act, 1969---Insertion of S.6(1A) in Sales Tax Act, 1990 made S.31-A of the Customs Act, 1969 applicable with retrospective effect---Liability of sales tax would be determined on the date of submission of Bill of Entry.

Pakistan through Ministry of Finance Economic Affairs and another v. Fecto Balarus Tractors Limited PLD 2002 SC 208; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 ref.

Civil Appeal No.1210 of 1977 rel.

Raja M. Irshad, D.A.-G. and Mumtaz Ahmad Sheikh, Member (Legal) C.B.R. for Appellants.

Nemo for Respondents.

Dates of hearing: 7th and 9th February, 2007.

JUDGMENT

SYED JAMSHED ALI, J.--- This appeal with the leave of the Court is directed against the judgment dated 13-2-2002 of the learned High Court Sindh allowing constitutional petition of the respondents.

2. Vide Notification No.S.R.O.500(I)/88, dated 26-6-1988 issued under section 7 of the Sales Tax Act, 1951, the special steel drums were exempted from levy of Sales Tax. The respondents opened letter of credit on 29-3-1994. The aforesaid exemption was, however, withdrawn vide Notification, dated 9-6-1994 and undisputedly the goods imported by the appellants landed at the port of destination on 26-6-1994. The Safes Tax Authorities raised demand for Sales Tax on which the respondents approached the learned High Court in constitutional petition which was allowed on the basis of the judgment in case Pakistan through Ministry of Finance Economic Affairs and another v. Fecto Belarus Tractors Limited PLD 2002 SC 208, in which the view taken was that the exemption in question could not have been withdrawn after contract for the import of the consignment had been concluded and, even section 31-A of the Customs Act could not be invoked for, protection of levy of the Sales Tax. In the said case the rule laid down in Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 i.e. that since a binding contract had been brought in to existence on the basis of the exemption notification (involved in the said case), its withdrawal did not affect the existing concluded contract on the basis of the principle of promissory estoppel reiterated.

3. Despite notice, nobody appears for the respondents, they are proceeded against ex parte. The learned counsel for the appellants has placed reliance on Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 and a five members Bench judgment of this Court in Civil Appeal No.210 of 1977 and other connected matters decided on 29-8-1991 to contend that the levy of Sales Tax is governed by section 6 of the Sales Tax Act and since exemption had been withdrawn before landing of the goods at the destination no exemption could be claimed. Therefore, reliance of the learned High Court on the case of Pakistan through Ministry of Finance Economic Affairs (supra) (which was otherwise modified in Federation of Pakistan) (supra), was misplaced.

4. The submissions made have been considered. After the case of Al-Samrez Enterprise (supra), section 31-A was added to the Customs Act, 1969 which is reproduced hereunder:

131A Effective rate of duty.- (1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30, 30A and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 18 ²(and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof.

(2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign currency is to be converted into Pakistan currency shall be the rate of exchange in force on the date immediately preceding the relevant date referred to in sections 30, 30A or 31.

(a) in the case of goods referred to in clause (a) of section 30 on the date (immediately preceding the date) referred to in that clause;

(b) in the case of goods referred to in clause (b) of the aforesaid section, on the date (immediately preceding the date) referred to in that clause; and

(c) in the case of goods referred to in section 31 on the date referred to in that section]."

In the judgment in Al-Samrez Enterprise (supra) and the Fecto Belarus case, this Court held that section 31-A of the Customs Act, 1969 could not be invoked to save levy of Sales Tax. The charging section in Sales Tax Act is section 6. The relevant portion thereof is reproduced hereunder:

6. Time and manner of payment.--- (1) The tax in respect of goods imported into Pakistan shall be charged and paid in the samemanner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 (and the provisions of the said Act (including section 31-A thereof), shall so far as they relate to collection, payment and enforcement of tax under this Act on such goods where no specific provision exists in this Act, apply). (underlined by us).

(2) ---------------------------------------------------------------------

(3) ---------------------------------------------------------------------

5. A perusal of the said section shows that Sales Tax is chargeable in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969. The words underlined by us were added respectively by Finance Act, 1996 (IX of 1996) and Finance Act, 1998 (XIII of 1998). Section 6-A was also added to the Sales Tax Act on 7-6-2002, by the Sales Tax (Amendment) Ordinance (No.XXV of 2002). It applied section 31-A of the Customs Act with retrospective effect as it born out by clear language employed. It is reproduced herein for facility of reference:--

6(1A) Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 " (XII of 1992), and notwithstanding any decision or judgment of any forum, authority or Court whether passed, before or after the promulgation of the Finance Act, 1998 (III of 1998), the provisions of section 31-A of Customs Act, 1969 (IV of 1969) referred to in subsection (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled to any exemption from or adjustment of or refund of tax on account of the absence of such a provision in this Act, or in consequence of any decision or judgment of any forum, Authority or Court passed on that ground or on the basis of the doctrine of the promissory estoppel or on account of any promise or commitment made or understanding given whether in writing or otherwise, by any Government or Authority)."

6. Insertion of section 6(1A) in the Sales Tax Act with retrospective effect clearly unfolds the legislative reaction that liability to pay sales tax is to be determined on the date of submission of Bill of Entry and in accordance with view taken by five members Bench in Civil Appeal No.210 of 1977 and other connected matters, withdrawal of notification of exemption before submission of the Bill of Entry was not open to any exception.

7. For what has been stated above, this appeal is allowed and the Impugned judgment of the learned High Court is set aside.

S.A.K./C-15/SCAppeal allowed.