BEST BUY COMPUTERS, LAHORE and another VS DIRECTOR, INTELLIGENCE & INVESTIGATION (CUSTOMS & EXCISE), LAHORE, 2008 PTD-SUPREME-COURT 2019 (2008)

(On appeal from the judgment dated 21-4-2004 in Custom Appeals Nos.19 and 20 of 2004 passed by the Lahore High Court, Lahore).

(a) Income Tax Ordinance (XXXI of 1979)---

----S.50(5)---Notification S.R.O. No.539(I)/91, dated 30-6-1991---Constitution of Pakistan (1973), Art. 185(3)---Advance income tax at import stage---Exemption---Petitioners were assembling computers out of computer parts imported by them and claimed exemption on the plea that they were manufacturers---Authorities withdrew the exemption on the ground that petitioners were registered as commercial importer/exporter, therefore, they were not entitled to avail benefit of exemption---Validity---Petitioners had themselves admitted that imported goods were used in assembling of computers which could not be termed or classified to be goods imported for setting up an industrial undertaking, nor it be categorized as plant, machinery, fixtures, fittings or any other equipment within the purview of clause(iv) of Notification S.R.O. No.593(I)/91, dated, 30-6-1991---Reasons weighed with High Court in rejecting appeals filed by petitioners fully conform "to the requirement of law and did not call for interference by Supreme Court---Leave to appeal was refused.

(b) Discretion---

----III-gotten gains---Scope---Discretionary relief cannot be granted to help retention of ill-gotten gain by a party even if order of Tribunal may be defective due to any technical reason.

Raunaq Ali v. Chief Settlement Commissioner PLD 1973 SC 236; The Chief Settlement Commissioner, Lahore v. Raja Muhammad Paul Khan and others PLD 1975 SC 331; Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Ahmad Sher Khan and another v. Additional Commissioner (Revenue)/Settlement Commissioner (Lands) Sargodha 1998 SCMR 408; Messrs Vulcan Company (Pvt.) Ltd. v. Collector of Customs, Karachi and others PLD 2000 SC 825; Abdul Haque Indhar and others v. Province of Sindh through Secy. Forest fisheries and Livestock Department, Karachi and others 2000 SCMR 907; Muhammad Sharif through L.Rs. and others v. Sultan Hamayun and others 2003 SCMR 1221; Muhammad Shoaib and others v. Government of N.-W.F.P. through the Collector, D.I. Khan and others 2005 SCMR 85 and Executive District Officer Schools and Literacy, District Dir Lower and others v. Qamar Dost Khan and others 2006 SCMR 1630 rel.

Raja Abdul Ghafoor, Advocate-on-Record for Petitioners (in both cases).

M. Bilal, Senior Advocate Supreme Court, Sh. Izhar-ul-Haq, Advocate Supreme Court and Mumtaz A. Sheikh, Member (Legal) (in both cases).

Date of hearing: 2nd April, 2008.

JUDGMENT

CH. EJAZ YOUSAF, J.---These two petitions for leave to appeal are directed against the common judgment dated 21-4-2004 passed by a learned Division Bench of the Lahore High Court, Lahore, whereby the Appeals filed by the petitioners were dismissed.

2. Facts of the case, in brief, are that the petitioners imported goods, subject matter of these petitions, and got rebate from payment of customs duties and other taxes on the basis of exemption certificate issued under subsection (5) of section 50 of the Income Tax Ordinance, 1979 (hereinafter referred to as the said Ordinance) read with clauses (iv) and (vi) of S.R.O. 593(I)/91 dated 30-6-1991 (hereinafter, referred to as the said S.R.O.), issued by the Income Tax Department. On a report from the Directorate of Intelligence & Investigation (Customs and Excise), Central Region, Lahore, to the effect that the petitioners had imported goods for selling in market and not for the purpose of setting up any "industrial undertaking"; the exemption certificate was cancelled vide order dated 11-1-2002. Subsequently, a show-cause notice was also issued by the Collector of Customs, Excise and Sales Tax and it was, vide order dated 27-1-2003, held, inter alia, that since computer parts were being used only for manufacturing or assembling of computers, which was neither an "industrial undertaking", nor it could have been termed as a "plant" or "machinery, and fixtures, fittings", etc. within the purview of the said S.R.O, therefore, the exemption of advance income tax availed by the petitioners was not in accordance with law. Resultantly Messrs. Best Buy Computers, the petitioner in CPLA No.1339/2004 was directed to pay a sum of Rs.22,49,797 as Advance Income Tax leviable on computer parts, forthwith besides imposing a penalty of Rs.8,00,000 for violation of subsection (5) of section 50 of the said Ordinance read with the said S.R.O., vide order dated 7-5-2003, while Target Computers, the petitioner in CPLA No.1340/2004, were directed to pay a sum of Rs.91,80,580 as Advance Income Tax besides imposing a penalty of Rs.32,00,000 vide order dated 5-6-2003. The above orders were affirmed by the Customs, Excise and Sales Tax Appellate Tribunal Lahore, vide judgments, dated 25-8-2003 and the appeals were dismissed. However, the learned Appellate Tribunal remitted the imposition of penalty of Rs.8,00,000 and also Rs.32,00,000 respectively, as it were found to be unwarranted in law. Being aggrieved, the petitioners filed appeals in the High Court which were dismissed in limine, vide the impugned judgment, hence these petitions.

3. Raja Abdul Ghafoor, learned counsel for the petitioners has contended that learned High Court has gravely erred in holding that the petitioners were not industrial importers because the computer parts imported by them were not used in any industrial unit; that order dated 11-1-2002 regarding cancellation of certificate dated 8-8-2001 had to take effect from the date of issue i.e. 11-1-2002 and could not have, effect the validity of earlier imported goods. It is further his grievance that impugned order was illegal because it exceeded the mandate of show-cause notice whereby the petitioners were called upon to show that they got exemption certificate fraudulently being commercial importer/ exporter and that they were not registered under the Sales Tax Act, 1990 as manufacturer, while the impugned order was passed against the petitioners on the allegation that exemption certificate was issued under clause (iv) of the said S.R.O. dated 30-6-1991 for import of plant and machinery whereas, the petitioners imported computer parts for assembling. Learned counsel for the petitioners has added that the petitioners had applied for grant of exemption certificate vide application dated 3-8-2001 clearly stating therein that they had started business of assembling of computers and as such they may be granted exemption certificate under section 50 (5) of the said Ordinance.

4. Mr. M. Bilal, learned Senior ASC, appearing on behalf of the respondents, on the other hand, while controverting the contentions raised by the learned counsel for the petitioners has stated that since the petitioners themselves have admitted that they were not the manufactures and were simply importer of parts which were used in assembling of computers, therefore, they were not entitled for the exemption benefit contained in the said S.R.O., as such it was rightly withdrawn.

5. We have given our anxious consideration to the respective contentions of the learned counsel for the parties and have also perused the record of the case with their assistance, minutely.

6. It would be worthwhile to mention here that as per sub-section (5) of section 50 of the Income Tax Ordinance, 1979 the raw material/parts imported by the petitioner were chargeable to Advance Income Tax and Collector of' Customs was to recover the said tax at import stage in the same manner as customs duty and other taxes are recovered. However, under the proviso to subsection (5) of section 50 ibid, Central Board of Revenue (now Federal Board of Revenue) vide S.R.O. 593(I)/91 dated 30-6-1991 had specified class of person to whom the said subsection was not applicable, which also included persons, other than commercial importers, who produced certificate from Commissioner of Income Tax /Wealth Tax.

7. It is the case of the petitioners that since they were assembling computers out of computer parts at imported by them and thus were falling in the category of "manufacturer", hence they were exempted from payment of Advance Income Tax import stage under section 50 (5) of the said Ordinance. Record reveals that the petitioners had availed benefit of exemption from payment of Income Tax by producing exemption certificate that they fulfilled the requirements under subsection (5) of section 50 of the said Ordinance, read with clauses (iv) and (vi) of S.R.O. No.593 (I)/91, dated 30-6-1991, however, since it was subsequently found that only a manufacturer was entitled to "exemption" and the petitioners, by their own showing, were registered as commercial importer/exporter under the Sales Tax Act, 1990, therefore, they were not entitled to avail the benefit of "exemption" which, was withdrawn, accordingly. In order to properly appreciate the proposition it would be advantageous to have a glance at subsection (5) of section 50 of the said Ordinance, which reads as follows:--

"(5) Notwithstanding anything contained in any law for the time being in force,---

(a) the Collector of Customs shall in the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increased by the customs duty and sales tax, if any levied thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, in which the "said date", as referred to therein, falls, whichever is the later;

(b) the tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act, 1969 (IV of 1969) shall, so far as may be, apply accordingly:

Provided that in the case of a manufacturer importing raw materials other than edible oils exclusively for its own use, the Regional Commissioner of Income Tax may certify reduction of the rate of collection under this subsection, upto one hundred per cent, if the aggregate of tax paid or collected during that year equals the amount of tax paid by such assessee in the immediately proceeding year and the certificate is not issued during the first year of assessee's business:

Provided further that the provisions of this subsection shall not apply to--

(i) any person re-importing re-usable containers for re-export qualifying for customs and sales tax exemption on temporary import under customs Notification No. S.R.O. 3441(I)/95 dated the 25th April, 1995; or

(ii) any person importing the following petroleum products, namely: --

Motor Spirit (MS), Furnace Oil (FO), JP-1 and MTBE:

Provided also that if at any stage it is known that the provisions of this proviso have been misused, such person shall be treated as an assessee in default in respect of such tax and be treated accordingly".

Here it would also be beneficial to go through clause (iv) of S.R.O. 593(I)/91 dated 30-6-1991 which reads as follows:--

"(iv) Persons who import plant, machinery, fixtures, fittings or any other equipment for the purposes of setting up an industrial undertaking (including hotels) approved by the Federal Government in respect of such plaint, machinery, fixtures, fitting or any other equipment."

Bare reading of the above would lead to the inference that the "exemption", which the petitioners had claimed, was available only to those importers who had imported goods for setting up an "industrial undertaking". It is an admitted fact that the petitioner had never claimed that they had imported goods for the purpose aforesaid. Their stand before all the forums below was that since they were involved in the business, of assembling computers, therefore, they may be granted exemption certificate under subsection (5) of section 50 of the said Ordinance. Application dated 3-8-2001 submitted"' for the grant of exemption certificate under section 50 (5) of the said Ordinance, is explicit in this regard. It was further their claim that once the goods,. in pursuance of the exemption certificate, were released and the Income Tax was not deducted on the basis of said exemption, it could not have been charged under section 50 (5) of the said Ordinance, particularly, when the tax return had already been filed and the tax liability stood determined. One cannot be lost sight of the fact that cancellation of the exemption certificate was never challenged by the petitioners before any forum, rather it was accepted impliedly as neither any exemption thereafter, was claimed nor its revival or reissuance was applied or sought for. Since the petitioners have themselves admitted that the imported goods were used in the assembling of computers which by no stretch of imagination can be termed or classified to be goods imported for setting up an industrial undertaking, nor it be categorized as plant, machinery, fixtures, fitting or any other equipment within the purview of clause (iv) of the said S.R.O. No. 593(I)/91 dated 30-6-1991, therefore, to us, the reasons weighed with the learned Judges in the High Court in rejected - the appeals filed by the petitioners fully conform to the requirement of law and do not call for interference by this Court. in exercise of its constitutional jurisdiction.

8. It is well settled that discretionary relief cannot be granted to help retention of ill-gotten gains by a party even if order of the Tribunal may be defective due to any technical reason; though nothing of the sort appears to have happened in the instant case. A chain of authorities right from the case of Raunaq Ali v. Chief Settlement Commissioner (PLD 1973 SC 236) on the point is available. A few latest may advantageously be referred hereunder:

(i) The Chief Settlement Commissioner, Lahore v. Raja Muhammad Fazil Khan and others (PLD 1975 SC 331)

(ii) Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari (PLD 1997 SC 351)

(iii) Ahmad Sher Khan and another v. Additional Commissioner (Revenue) Settlement Commissioner (Lands) Sargodha (1998 SCMR 408)

(iv) Messrs Vulcan Company (Pvt.) Ltd. v. Collector of Customs, Karachi and others (PLD 2000 SC 825)

(v) Abdul Haque Indhar and others v. Province of Sindh through Secy. Forest Fisheries and Livestock Department, Karachi and others (2000 SCMR 907)

(vi) Muhammad Sharif through L.Rs. and others v. Sultan Hamayun and others (2003 SCMR 1221)

(vii) Muhammad Shoaib and others v. Government of N.-W.F.P. through the Collector, D.I. Khan and others (2005 SCMR 85)

(viii) Executive District Officer Schools and Literacy, District Dir Lower and others v. Qamar Dost Khan and others (2006 SCMR 1630).

9. Upshot of -the above discussion is that these petitions, being misconceived, are hereby dismissed and leave is refused.

M.H./B-4/SCPetition dismissed.