GAS LINKS CNG (PVT.) LTD. through Director, Faisalabad VS FEDERATION OF PAKISTAN through Secretary Finance, Islamabad, 2010 PTD-LAHORE-HIGH-COURT-LAHORE 1 (2010)

2010 P T D 1

[Lahore High Court]

Before Sh. Azmat Saeed, J

GAS LINKS CNG (PVT.) LTD. through Director, Faisalabad

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Writ Petition No. 3018 of 2009, decided, on 6th November, 2009.

Sales Tax Act (VII of 1990)---

----Ss.3(1), 7-A & 71---Sales Tax Special Procedure Rules, 1990, Rr.13, 16 & 20(2)(c)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Sales tax, charging of---Supply of electricity---Double taxation---Petitioners were engaged in running Compressed Natural Gas stations and were consuming electric power supplied by various distribution companies---Petitioners contended that levy and collection of sales tax on the bill for electric power consumed by Compressed Natural Gas stations amounted to double taxation---Validity---Sales tax was a tax on consumption charged upon taxable supply collected by registered person making such supply as agent and trustee of Federal Government---Where such taxable supplies were consumed, the burden of tax had to fall upon consumer, however, where such supplies were converted into another taxable supply, the same were liable to collection of sales tax---In order to avoid duplication of tax burden upon ultimate consumer, sales tax already-paid by recipient of supplies was liable to be adjusted against sales tax payable on converted further taxable supply---Petitioners were unable to point out any illegality in levy of collection of sales tax on the electric power supplied to Compressed Natural Gas stations--Entitlement of petitioners to claim refund of input tax was a matter not, only alien to the lis at hand having not been specifically asserted but also premature as not such claim for adjustment or refund of tax had been made by petitioners and declined by authorities---Petition being premature was misconceived---High Court directed the authorities to pass an order if and when any claim for refund or adjustment of input tax would be made by petitioner in terms of Rs.13 of Sales Tax Special Procedure Rules, 1990, and petitioner could seek their remedy available under law---Petition was dismissed accordingly.

Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Appellate Tribunal Lahore and 2 others PTCL 2002 CL 415 rel.

Ch. Anwar-ul-Haq, Aamir Sohail, Khalid Nawaz Ghuman, Majid Saeed Butt, Rana Muhammad Afzal, Muhammad Saqib Sheikh, Bilal Ahmed Qazi, Syed Ali Imran Rizvi, Muhammad Nadeem Mirza, Muhammad Akram Nizami, Zeshan Amir, Ajmal Khan, Zulkernen Khan, Muhammad Saleem Ch., Ch. Liaqat Ali Sandhu, Rana Muhammad Abdul Qadoos, Abdul Qadoos Mughal, Muhammad Waseem Ch. Sajjad Sarwar Saqib for Petitioners.

Sh. Izhar-ul-Haq, Kausar Parveen and Dr. Irteza Awan for Respondents.

Date of hearing: 29th October, 2009.

JUDGMENT

SH. AZMAT SAEED, J.---Writ Petitions 12730 of 2009 KW CNG v. Federation of Pakistan, 12729 of 2009 Al-Karam CNG v. Federation of Pakistan, 2954 of 2009 National CNG Service v. Federation of Pakistan, 6778 of 2009 Al-Jehad Filling Station v; Federation of Pakistan, 6775 of 2009 Al-Hasan CNG v. Federation of Pakistan, 4775 of 2009 Khalid Petroleum v. Federation of Pakistan, 4774 of 2009 New Zealand CNG Master (Pvt.) Ltd. v. Federation of Pakistan, 4772 of 2009, New Zealand CNG Master (Pvt.) Ltd. v. Federation of Pakistan, 4771 of 2009 Kashif CNG and Filling Station v. Federation of Pakistan, 16125 of 2009 Kashmir CNG Station v. Federation of Pakistan, 19676 of 2009 Talha Saad CNG v. Federation of Pakistan, 9811 of 2009 Haider Petroleum v. Federation of Pakistan, 9810 of 2009 Brite Way CNG v. Federation of Pakistan, 14686 of 2009 Huk Fuel I v. Federation of Pakistan, 14575 of 2009 Shah Nawaz CNG Station v. Federation of Pakistan, 14589 of 2009 Din Petroleum Service v. Federation of Pakistan, 12732 of 2009 Mehar Petroleum CNG v. Federation of Pakistan, 12731 of 2009 Tri Star CNG v. Federation of Pakistan, 3020 of 2009 Fuel Care CNG v. Federation of Pakistan, 2956 of 2009 Sadiq & Sons Associate v. Federation of Pakistan, 2955 of 2009 PSJ CNG Station v. Federation of Pakistan, 2953 of 2009 Mian Petroleum v. Federation of Pakistan, 20527 of 2009 Khokhar Filling Station v. Federation of Pakistan, 2764 of 2009 Zaman Petroleum v. Federation of Pakistan, 18438 of 2009 Messrs Khawaja CNG Station v. Federation of Pakistan, 17986 of 2009 Messrs KSK CNG v. Federation of Pakistan, 17989 of 2009 Messrs Citi CNG Filling Station v. Federation of Pakistan, 17991 of 2009 Bismilla CNG Filling Station v. Federation of Pakistan, 17995 of 2009 Messrs Gasoline (Pvt.) Ltd. v. Federation of Pakistan, 17994 of 2009 Messrs Ravi Point Filling Station v. Federation of Pakistan, 18441 of 2009 Messrs Gazcon CNG Station v. Federation of Pakistan, 17985 of 2009 Messrs Gasline CNG Station v. Federation of Pakistan, 17997 of 2009 Messrs Ahmed CNG Station v. Federation of Pakistan, 20513 of 2009 Messrs CNG Master (Pvt.) Ltd. v. Federation of Pakistan, 20514 of 2009 Messrs Mango Garden CNG Station v. Federation of Pakistan, 20515 of 2009 Messrs Khan Filling Station v. Federation of Pakistan, 20514 of 2009 Thokar CNG Station v. Federation of Pakistan, 11081 of 2009 Messrs Gas Point CNG Station v Federal Board of Revenue and others, 10959 of 2009 Messrs Nawals CNG v. Federal Board of Revenue and others, 9860 of 2009 Messrs Superstar CNG Station v. Federal Board of Revenue and others, 6160 of 2009 Messrs Madina CNG Filling Station v. Federation of Pakistan, 1315 of 2009 Qadir CNG Station v. Federation of Pakistan, 14572 of 2009 Anmol CNG Filling Station v. Federation of Pakistan, 14565 of 2009 Almadina CNG Filling Station v. Federation of Pakistan, 14563 of 2009 National CNG Filling Station v. Federation of Pakistan, 14571 of 2009 Zia-e-Madina CNG Filling Station v. Federation of Pakistan, 9563 of 2009 Mian CNG Filling Station v. Federation of Pakistan, 1712 of 2009 Glaxy Filling Station v. Federal Board of Revenue, 13932 of 2009 Nur Sons CNG Filling v. Federal Board of Revenue, 20743 of 2009 Mian Muhammad Amin v. Federation of Pakistan, 2549 of 2009 Surriya Bibi C/o Prime CNG v. Federal Board of Revenue, 19884 of 2009 Messrs Al-Bhai Petroleum Service v. Federation of Pakistan, 7163 of 2009 Muhammad Aslam v. Federation of Pakistan, 9571 of 2009 Amjad Hameed Sheikh v. Federation of Pakistan, 9640 of 2009 Fakhar CNG Station v. Federation of Pakistan, 3473 of 2008 (BWP) Al-Mezan CNG Filling Station v. DG Regional Income Tax Officer and others, 9499 of 2009. Messrs Millat Filling CNG Station v. Federation of Pakistan and others, 10356 of 2009 Iqra Filling Station v. Federation of Pakistan, 17269 of 2008 Messrs Kare CNG Filling Station v. Federal Board of Revenue and others, 9498 of 2009 Messrs Millat CNG Filling Station v. Federation of Pakistan, 20777 of 2009 Bismilla CNG Filling Station v. Federation Of Pakistan, 15396 of 2009 Messrs Alkausar Traders v. Chairman Federal Board of Revenue and 7821 of 2009 Messrs sunny Stars CNG Filling Station and others v. Federation of Pakistan filed by various petitioners involving common questions of law and facts are being disposed of through this order.

2. Petitioners in the above captioned writ petitions claim to be duly registered under the Sales Tax `Act, 1990, and are engaged in the business of running CNG Stations and some of them also run petrol pump along with CNG stations. In the above context, the petitioners not only have a connection for the supply of Natural Gas, but also consume Electric Power supplied by various distributions companies who have also been impleaded as respondents in these petitions. It is the case of the petitioners that the Federal Government had issued a Notification dated 9-6-2007, whereby, in exercise of powers conferred inter alia under section 71 of the Sales Tax Act, 1990, a Special Procedure has been formulated pertaining to the collection and payment of on Natural Gas and Electric Power, called Special Procedure Rules, 2007, and in terms of said special procedure rules, it is contended that for the supply of Natural Gas to CNG Station, Sales Tax at the rate of 25% of the value has been levied, out of which, 16% is chargeable on the supply by the gas transmission companies in terms of subsection (i) of section 3 of the Sales Tax Act and a further 9% in lieu of value addition made by CNG Station.

3. In the above perspective, the petitioners have challenged the levy and collection of the Sales Tax on the Electric Power supplied to CNG Station by the Distribution companies inter alia on the ground that the Sales Tax on supply of Natural Gas constitutes a final discharge of the liability of the CNG Station under the Sales Tax Act and therefore, the levy and collection of Sales Tax on the bill for the Electric Power consumed by CNG station amounts to double taxation. Great stress in this behalf was laid by the learned counsel for the petitioners that Sales Tax being charged and collected by the gas transmission company include 9% in lieu of value addition by the CNG Stations. It is next contended that the said tax on the supply of Electric Power is unreasonable and arbitrary and in violation of the fundamental rights of the petitioners.

4. Learned counsel appearing on behalf of the Department have controverted the stance being taken on behalf. of the petitioners by contending that 9% of the Sale Tax which has been levied on the supply of Natural Gas in lieu of value addition by CNG Station, and no further tax on the supply of Natural Gas by CNG Station to the ,consumer is being collected, hence, there is no question of double taxation. It is added that the supply of Electric Power is a separate and distinct taxable supply which is dealt with by the other provision of the Special Procedure Rules pertaining to the supply of Electric Power. Learned counsel have also placed on record, copy of the minutes of meeting dated 30-5-2007 held by the representative of the Department and All Pakistan CNG Association to contend that 9% tax has been levied in lieu of value addition with the consent of the members of the Association including the petitioners, who are therefore estopped from challenging the same through the above captioned writ petitions.

5. In rebuttal, learned counsel representing the petitioners have urged at the bar that no doubt different provisions have been enacted in the Special Procedure Rules for the supply of the Electric Power, however, the Department is not permitting any adjustment or refund of input tax with regard to the Sales Tax charged on the Electric Power being supplied to the CNG Stations.

6. In response, learned counsel for the Department have urged that these contentions were neither pleaded by the petitioners in these petitions nor have they claimed any refund or adjustment in this behalf from the department, hence, these contentions are alien to the lis and cannot be adjudicated upon by this Court while hearing the instant petitions.

7. Heard. Record perused. At the very outset, it has been noticed that neither vires of the Sales Tax Act, 1990 nor any provision thereof has been challenged. It is matter of record that vide notification dated 9-6-2007, the Sales Tax Special Procedure Rules, 2007 have been made and enforced. It is not disputed between the parties that Federal Government in view of section 71 of the Sales Tax is vested with the authority and jurisdiction to prescribe a special procedure. It is not the case of the petitioners that said rules are ultra vires section 71 ibid. The aforesaid Special Procedure Rules, inter alia, deal both with the Electric Power and the collection and payment of Sales Tax on Natural Gas. Latter is governed by Chapter-IV of the Special Procedure Rules and the provision in this behalf applicable to the present petitioners are as follows:---

CHAPTER-IV

SPECIAL PROCEDURE FOR COLLECTION AND PAYMENT OF SALES TAX ON NATURAL GAS

19. Application.-The provision of this Chapter shall apply for collection and payment of on Natural Gas including Compressed Natural Gas (CNG) and Liquefied Petroleum Gas. (LPG) imported, produced, transmitted and supplied by gas-well head companies and gas transmission and distribution companies licensed under the Natural Gas Rules, 1960, including their distributors, dealers, sales agents, retailers or by any other person hereinafter called the "person" for the purposes of this Chapter and dealing in importation, production or distribution and supply of Natural Gas including 'Compressed Natural Gas and Liquefied Petroleum Gas.

20. Levy and collection of Sales Tax.---(1) Every person who supplies Natural Gas shall be liable to registration and shall charge and pay Sales Tax at the rate specified in subsection (1) of section 3 of the Act.

(2) Sales Tax on Natural Gas shall be levied and collected at the following stages and in the following manners, namely:---

(a)

(b)

(c) In case of supply of Natural Gas by transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the gas transmission and distribution company and the value for the purpose of tax shall be the total amount billed including price of Natural Gas, charges excluding the amount of late payment surcharge rents, commissions and all duties and tax, local Provincial and Federal, but excluding the amount of as provided in clause (46) of section -2 of the Act:

Provided that in case of supply .of Natural Gas to CNG stations the gas transmission and distribution company shall charge sales tax at the rate of twenty-five per cent of the value as aforesaid. This rate shall include sixteen per cent as chargeable on supplies of gas company under subsection (1) of section 3 and nine per cent in lieu of value addition made by CNG stations:

Provided further that CNG station, if not already registered, shall obtain registration under Chapter I of the Sales Tax Rules, 2006, and shall also file quarterly return in the manner given in rule 7; and].

8. Rule 20(2)(c) reproduced above pertains particularly to the supply of Natural Gas by transmission and distribution companies to CNG Station, and the first proviso thereto prescribes Sales Tax at the rate of 25% of the value shall be charged which includes 16% is chargeable on the supply by gas transmission companies in terms of section 3 subsection (1) of the Sales Tax Act and 9% in lieu of value addition by the CNG Stations.

9. Levy of Sales Tax of 9% in lieu of value addition is in consonance with section 7A of the Sales Tax Act and power thereunder have been invoked while issuing notification dated 9-6-2007 while making Special Procedure Rules, 2007 as stated therein. Levy and collection of the aforesaid Sales Tax at the rate of 9% has not been challenged through these writ petitions, nor it is the case of the petitioners that said charge is ultra vires of Sales Tax Act, 1990 or otherwise illegal. In fact what has been called in question is the levy of charge and collection of Sales Tax on the Electric Power Supply to the petitioners by the Distribution Companies.

10. It has been contended that levy of Sales Tax on Electric Power amounts .to double taxation in view of the levy of 9% tax on the supply of Natural Gas in lieu of value addition by the CNG Station. Perusal of Rule 20 of the Sales Tax Act, 1990 Special Procedure Rules and section 7A of the Act ibid makes it clear and obvious that such levy is valid and 9% is being charged and collected on account of value addition by CNG Stations. No tax is being charged or collected on the supplies made by CNG Stations to their customers in lieu whereof 9% Sales Tax is charged and collected by the gas transmission companies.

The contentions now being raised by the learned counsel for petitioners must necessarily be examined in the context of the scheme and-structure of Sales Tax Act, 1990 and the rules framed thereunder. In pith and substance, Sales tax is a tax on consumption charged upon a taxable supply collected by a registered person making the said supply as an agent and trustee of the Federal Government. Where such taxable supplies are consumed, the burden of tax falls upon the consumer. However, where the said supplies are converted into another taxable supply, the same are liable to collection of Sales Tax. However, in such an eventuality, in order to avoid duplication of the tax burden upon the ultimate consumer, the Sales tax already paid by the recipient of the supplies is liable to be adjusted against the Sales Tax payable on the converted further taxable supply. I am fortified in this view by the dictum of law laid down by this Court in the case reported as PTCL 2002 CL 115 Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Appellate Tribunal Lahore and two others.

The collection and payment of Sales Tax on the Electric Power is also dealt with and covered by Sales Tax Special Procedure Rules 2007, Chapter III. The providing of Electric Power to the petitioners is an independent supply subject to levy and collection of Sales Tax. Viewed in the perspective of the law, it is clear and obvious that the charge and collection of Sales Tax on the supply of Electric Power is in consonance with the letter, spirit, scheme and structure of Sales Tax Act, 1990. No law or the principle of law has been cited which is offended thereby. To the extent that the petitioners are the ultimate consumers of Electric Power, they must bear the incidence of Sales Tax.

In fact that challenge thrown by the learned counsel for the petitioners in this respect is a little out of focus. The only matter that may arise would be as to whether the petitioners are entitled to claim the adjustment or refund of said tax levied and collected on the supply of Electric Power. Reference in this-behalf is made to Rule 16 of the Sales Tax Special Procedure Rules, 1990 which read as under:

CHAPTER III

SPECIAL PROCEDURE FOR COLLECTION AND PAYMENT OF SALES TAX'ON ELECTRIC POWER

16. Input tax adjustment for registered consumers.---(1) In case of registered consumers, the Electric Power bill issued by Electric Power distribution company shall be treated as a tax invoice as define in clause (4) of section 2 of the Act.

(2) The registered consumers shall be entitled to claim input tax adjustment against such invoice after the bill has been paid, as per the provisions of sections 7, 8 and 8B of the Act provided the bill contains registration number and address of the business premises declared to the Collector by such consumer.

11. It is not the case of the petitioners that at any point of time any claim in terms of Rule 16 was ever made and has been declined. No such allegation or assertion has been made in any of the said petitions. Be that as it may, if and when any such application is made, the same will obviously be subject to the provisions of Sales Tax Act, 1990 more particularly sections '7, 8 and 8B thereof, as has been specifically mentioned in Rule 16, and in this behalf appropriate findings would also be required to be returned as to whether the Electric Power or any part thereof is used for the purpose of making a further taxable supply, if any, by the petitioners. Such exercise cannot be conducted by this court: hence, this aspect of the matter cannot be adjudicated upon by this court at this stage.

12. For the foregoing facts and reasons, learned counsel for the petitioners have been unable to point out any illegality in the levy of collection of Sales Tax on the Electric Power supplied to CNG Stations. As to whether the petitioners are entitled to claim refund of input tax in respect thereto is a matter not only alien to the lis at hand having not been specifically asserted, but also premature as no such claim for adjustment or refund of the tax has been made by the petitioners and declined by the Department. Consequently, these petitions appear to be premature and misconceived and are .accordingly dismissed with the direction that if any when any claim for refund or adjustment of input tax is made by the petitioners in terms of Rule 13 of the Sales Tax Procedure Rules, 1990 an order is passed thereon, and the petitioners may seek their remedy available under the law.

M.H./G-115/LPetition dismisse