WI-TRIBE PAKISTAN LTD. VS MINISTRY OF FINANCE, 2011 PTD-LAHORE-HIGH-COURT-LAHORE 536 (2010)

Customs Act (IV of 1969)---

----S.10---Sales Tax Act (VII of 1990), S.13---Notification S.R.O. 575(I)/2006, dated, 5-6-2006, serial No.16---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Classification of goods---Exemption from duty---Petitioner claimed exemption under Notification S.R.O. 575(I)/2006, dated, 5-6-2006, on the goods imported by it---Plea raised by authorities was that classification of goods could not be done by High Court in exercise of its Constitutional jurisdiction and petitioner was not entitled to avail exemption on the goods in question---Validity---Classification of goods was not always a pure question of fact and being a mixed question of fact and law, High Court was possessed of the jurisdiction to adjudicate upon such question in Constitutional jurisdiction, therefore, petition was maintainable---Goods in question were goods provided by petitioner to its customers and was included in the category of capital goods for service sector---Therefore, the petitioner was not entitled to claim the exemption---Objection was not sustainable, in view of the terms and conditions contained in the standard form contract, the petitioner entered into with its consumers---Goods in question remained property of petitioner and it had the right to re-possess the same---Goods were included in the purview of serial No.16 of Notification S.R.O. 575(I)/2006, dated, 5-6-2006 and petitioner was entitled to avail of the concession/exemption granted thereunder---Demand of authorities raised against goods in question was set aside---Petition was allowed in circumstances.

(C.P. No.D-1975/2010) fol.

Messrs P.M. International through Special Attorney v. Federation of Pakistan through Secretary Revenue Division (F.B.R.) and 3 others 2010 PTD 1293; Messrs FACO Trading through Attorney v. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 2 others 2008 PTD 1216; Messrs Pioneer Cement Limited, Jauharabad, District Khushab v. Assistant Collector Sales Tax, Sargodha and another 2002 PTD 920; Messrs Samar Murtaza Corporation v. Collector of Customs, Customs House, Faisalabad and 4 others 1999 CLC 1084; Messrs Ampake Pipe Industries (Pvt.) Ltd. v. Collector Customs and others 1998 CLC 674; Agha Gas Company (Pvt.) Ltd. v. Central Board of Revenue and others 1997 PTD 269; Messrs Mubeen Enterprises Limited through Muhammad Mubeen Butt v. Federation of Pakistan through Secretary, Finance Division Customs Department, Government of Pakistan, Islamabad and 3 others 1997 MLD 424; New Jubilee Insurance Co. Ltd. v. The Collector of Customs and others 1997 MLD 2770; Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Ltd., Islamabad 1999 SCMR 138; Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 and Messrs EFU General Insurance Ltd. through Joint Managing Director, Karachi v. Federation of Pakistan through Ministry of Law and Parliamentary Affairs, Government of Pakistan, Islamabad and 3 others 2010 PTD 1159 ref.

Sayyid Murtaza Ali Pirzada for Petitioner.

Babbar A. Khan for Respondents.

Date of hearing: 29th November, 2010.

JUDGMENT

MAMOON RASHID SHEIKH, J,---With the consent of the parties this petition is being treated as a Pacca matter and shall be decided on the basis of the available record.

2. Briefly stated the facts are to the effect that the petitioner (a subsidiary of Qater Telecom) is an unlisted public limited company incorporated in Pakistan under the Companies Ordinance, 1984. The petitioner, inter alia, carries on the business of providing Long Distance International (LDI) and Wireless Local Loop (WLL) services in Pakistan under license from the Pakistan Telecommunication Authority (PTA). For running its business the petitioner imports telecommunication equipment. Some of such telecommunication equipment is known as consumer premises equipment (hereinafter referred to as "the CPE"). The petitioner claims to be entitled to import telecommunication equipment at concessional rates of customs duty and total exemption from sales tax, under Serial No. 16 of S.R.O. 575(I)/2006, dated 5-6-2006, issued by respondent No.3, under section 19 of the Customs Act, 1969, and section 13 of the Sales Tax Act, 1990. The said concession/exemption is being denied to the petitioner by respondents Nos. 4 and 5 on the basis of a clarification, issued by respondent No.3, in the case of another importer/taxpayer through letter dated 1-4-2010. As a consequence, the petitioner has been forced to get clearance of its consignment of CPEs, under protest, by submitting Bank Guarantee in favour of the Collector Customs, Rawalpindi. The petitioner was, therefore, constrained to make a representation to respondent No.3, through letter dated 13-4-2010, explaining therein that the CPEs are the petitioner's final assets and are not saleable. In response thereto respondent No.6 under instructions of respondent No.3 through letter No.1/9/Mach./98. Pt.111/69707-R, dated 4-5-2010, turned down the petitioner's representation. The contents of the letter dated 4-5-2010 are being reproduced hereunder for ease of reference:--

"I am directed to refer to your letter No. WTPL (CPE)2k10-2 dated the 13th April, 2010 on the subject cited above and to say that the case has been examined in the Board. It is informed that the subject consumer premises equipment (CPE). do not qualify in the scope of capital goods under S.R.O. 575(1)/2006, dated 5-6-2006, due to which such equipment have already been got cleared by certain importer(s) on payment of duty/taxes without claiming the benefit of subject concession. The F.B.R. has already given a decision on the subject issue ruling that CPEs are not entitled the benefit of being capital goods as envisaged under S.R.O. 575(I)/2006, dated 5-6-2006."

3. The learned counsel for the petitioner submits that the CPEs are to be used by the consumers/customers of the petitioner at their premises but the CPEs are essentially the assets of the petitioner, therefore, the petitioner is entitled to the benefit under Serial No.16 of S.R.O. 575(I)/2006.

4. The learned counsel for the petitioner further submits that similar petitions came up for hearing before the Hon'ble Sindh High Court and in one of those (C.P. No.D-1975/2010) a learned Division Bench of the Hon'ble Sindh High Court at Karachi, inter alia, held as under:--

"(4) Mr. Abdul Ghaffar has drawn my attention to the provisions of preamble of the subject Notification to point out that it has been stated therein that the Federal Government was pleased to exempt plant machinery and equipment and apparatus, including capital goods from so much of the customs duty specified in the First Schedule in Column No.4 thereof and .the whole of sales tax leviable under the Sales Tax Act, 1990, subject to certain conditions.

5. He took us to Serial No.16 to show that communication equipment also has been included in this schedule and stated that it is an admitted fact that the equipment imported by him is communication equipment used for providing wireless internet services. He stated that the equipment in question is consumer premises equipment but has been installed at the consumer premises for the purpose of providing the internet services and has not been sold to the consumer but the ownership remains with the petitioner i.e. the importer. In this connection he drew our attention to the terms and conditions prescribed in the application to be made by the customers for provision of these services and pointed out sub-condition (a) of condition 2 in which it is categorically stated that all and any customer equipment supplied to the customer shall remain the property of WTL and all customer equipments shall be returned to WTL on termination of this contract and WTL shall return any security deposit if applicable, to the customer after making due deductions. The learned counsel also drew our attention to sub c1ause (ii) of the impugned Notification wherein it has been mentioned that except for certain serial numbers including Serial No.16, in which the equipment imported by the petitioner falls, for exemption under all other serial numbers the Chief Executive or the person next in hierarchy duly authorized by the Chief Executive of the importing company shall certify in the prescribed manner and format that the imported items are for the company's bona fide requirement. He also drew our attention to the explanation to clauses (i), (ii) and (iii) wherein in sub-clause (c) the service sector listed at serial No.16 had been especially mentioned and it has been specified that these service sectors include the items mentioned at Serial No.(a) above. He, therefore, prayed that the prayers made by him should be allowed and it should be declared that he falls within the exemption prescribed in serial No.16 and the letter dated 1-4-2010 issued by the respondent should be declared of no legal effect.

6. The arguments of the learned counsel for the petitioner have been strongly opposed by the learned counsel for the respondent who submitted that the equipment in question is actually sold to the subscriber and tried to persuade us on the basis of his argument by quoting various charges which are being received by the petitioner.

7. We have examined the case in the light of our above arguments of the learned counsel and perused the relevant Notifications and the terms and conditions prescribed in application form and we are of the considered opinion that Serial No.16 of the impugned Notification does not place any restriction on the exemption provided to machinery, equipment and other capital goods for service sectors mentioned below therein if any such equipment is necessary for providing the services which that particular sector provides then it is entitled to exemption without any restriction. We are also of the considered opinion that the equipment imported by the petitioner falls within the communication equipment for providing internet services to the subscriber and as per the terms and conditions of the contract the equipment though installed at the subscriber premises still belong to the petitioner and on the conclusion of the contract the petitioner that is the service provider has got the right to reposes the equipment.

8. In view of our above opinion, the letter dated 1-4-2010 wherein the exemption was refused allegedly for the reason that it was subscriber equipment cannot be sustained. This, in our view, is not based on proper reading of the Notification but conditions which have not been prescribed in the said Notification have been read into the said Notification by the respondent and the respondents or for that matter any other authority is not entitled to put words in a Notification which are not there. We are therefore of the opinion that the subject equipment imported by the petitioner falls within the ambit of Serial No.16 of S.R.O. No.575(I)/2006 dated 5-6-2010 and thus the petitioner fully qualifies for the exemption granted thereunder."

9. The learned counsel for the petitioner whilst relying on the above judgment submits that the case of the petitioner is similar in nature. The CPEs imported by the petitioner are for use in consumer premises for receiving wireless internet services provided by the petitioner. The CPEs are not sold to the consumers by the petitioner but remain the property of the petitioner. In this respect he has drawn my attention to the copy of the standard form contract normally entered into by the petitioner with its consumers, which has been appended to the petition at pages 26 to 28. The terms therein, inter alia, provide that "all equipment and data shall at all times be the property of wi-tribe". It is further provided that the equipment is returnable to wi-tribe by the consumer on termination of the contract. The learned counsel further submits that the petitioner has the right to re-possess the equipment. He, therefore, contends that the judgment of the Hon'ble Sindh High Court is applicable to the petitioner's case.

10. Prays that the petition be accepted.

11. The learned counsel for the Revenue has vehemently opposed the stance of the petitioner by, inter alia, calling into question the maintainability of the petition. Submits that the remedy, if any, of the petitioner lay before the Commissioner Appeals and not by way of filing of a petition before this Court. Further submits that the CPEs in question are goods provided by the petitioner to its consumers and do not fall in the category of capital goods for services sector. The petitioner is, therefore, not entitled to claim exemption in respect thereof as contemplated under S.R.O. 575(I)/2006. Further, contends that the judgment of the Hon'ble Sindh High Court is not applicable to the facts of the case. Relies on the judgments reported as Messrs P.M. International through Special Attorney v. Federation of Pakistan through Secretary Revenue Division (F.B.R.) and 3 others (2010 PTD 1293), Messrs FACO Trading through Attorney v. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 2 others (2008 PTD 1216), Messrs Pioneer Cement Limited, Jauharabad, District Khushab v. Assistant Collector Sales Tax, Sargodha and another (2002 PTD 920), Messrs Samar Murtaza Corporation V. Collector of. Customs, Customs House, Faisalabad and 4 others (1999 CLC 1084), Messrs Ampake Pipe Industries (Pvt.) Ltd. v. Collector Customs and others (1998 CLC 674), Agha Gas Company (Pvt.) Ltd. v. Central Board of Revenue and others (1997 PTD 269), Messrs Mubeen Enterprises Limited through Muhammad Mubeen Butt v. Federation of Pakistan through Secretary, Finance Division. Customs Department, Government of Pakistan, Islamabad and 3 others (1997 MLD 424) New Jubilee Insurance Co. Ltd. v. The Collector of Customs and others (1997 MLD 2770).

12. The learned counsel for the petitioner on the question of maintainability submits that firstly this question has been settled by the Hon'ble Sindh High Court by passing the afore-referred judgment, Further relies on the judgments reported as Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Limited, Islamabad (1999 SCMR 138), Collector of Customs (Valuation and another v. Karachi Bulk Storage and Terminal Ltd. (2007 SCMR 1357) and Messrs EFU General Insurance Ltd: through Joint Managing Director, Karachi v. Federation of Pakistan through Ministry of Law and. Parliamentary Affairs, Government of Pakistan, Islamabad and 3 others (2010 PTD 1159) to submit that the instant petition is maintainable.

13. Arguments heard. Record perused.

14. I have gone through the judgments cited by the learned counsel for the revenue and the learned counsel for the petitioner on the question of the maintainability of the petition. I find that the Hon'ble Supreme Court of Pakistan in the judgment reported as 1999 SCMR 138 (supra) has, inter alia, held that:

"(9) As regards the maintainability of writ petition in the presence of alternate remedy, it is a settled proposition of law that it is no bar if such remedy is only illusory in nature, as observed in Gulistan Textile Mills Limited v. Pakistan (1983 CLC 1474). No useful purpose would have been served if the respondent had been required to avail the remedy of appeal or revision because the highest body i.e. C.B.R. had already expressed its opinion against the respondent. A reference may be made to Messrs Usmania Glass Sheet Factory Limited, Chitagong v. Sales Tax Officer, Chitagong (PLD 1971 SC 205) wherein it was observed that where a dispute arises between the parties in respect of fiscal right based on a statutory instrument, it can be determined in writ jurisdiction. After decision given by the C.B.R. it would have been difficult for the Federal Government to take a contrary view about the assessment/evaluation of the wood imported by the respondent, and in the circumstances no exception could be taken to the respondent's invoking Constitutional jurisdiction of the High Court. Classification of goods is not always a pure question of fact and being a mixed question of fact and law, the High Court is possessed of jurisdiction to adjudicate upon such question in Constitutional jurisdiction in the light of dictum of the Supreme Court in M.Y. Khan v. M.M. Aslam and 2 others (1974 SCMR 196) and Messrs Delite House Ltd. v. Assistant Collector, Customs (1988 CLC 5)."

15. By respectfully following the above precedent I hold the petition to be maintainable.

16. As to the contention of the learned counsel for the Revenue that the CPEs in question are goods provided by the petitioner to its consumers and do not fall in the category of capital goods for services sector, therefore, the petitioner is not entitled to claim the exemption in question, suffice it to say that this objection is not sustainable in view of the terms and conditions contained in the standard form contract the petitioner enters into with its consumers, a copy whereof has been appended to the petition and the relevant portions thereof have been referred to above in para-5. The CPEs in question remain the property of the petitioner and it has the right to re-possess the same.

17. I further find that the judgment of the Hon'ble Sindh High Court referred to above is applicable to the petitioner's case on all fours. I, therefore, hold that the CPEs in question fall within the purview of Serial No.16 of S.R.O. 575(I)/2006, dated 5-6-2006 and thus the petitioner is entitled to avail of the concession/exemption granted thereunder.

18. Under the circumstances, the petition is accepted and the impugned demand of the respondents is set aside. There is no order as to costs.

M.H./W-35/LPetition allowe