Sh. IFTIKHAR AHMAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2012 P T D 158
2012 P T D 158
[Federal Tax Ombudsman]
Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Sh. IFTIKHAR AHMAD
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.282/LHR/ST(35)572 of 2011, decided on 20/08/2011.
Sales Tax Act (VII of 1990)---
----Sixth Sched., Item No.52-A & S.2(12)---Customs Act (IV of 1969), First Sched., Heading 27.16---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2(3)---Exemption---Charitable hospital---Request for grant of exemption on supply of electricity---Request was regretted by the Federal Board of Revenue on the ground that no such exemption was available to any of the charitable hospitals as the exemption under Sr. No.52-A of the Sixth Schedule of the Sales Tax Act, 1990 was available to equipment / materials used solely for the purpose of hospital activities, the said exemption was not available on utilities such as electricity and gas---Validity---Goods exempt from levy of sales tax were covered under the Sixth Schedule of the Sales Tax Act, 1990, read with reference to First Schedule to the Customs Act, 1969 (Pakistan Customs Tariff: Heading 27.16)---Electricity fell under the definition of goods, and supply ofelectricity to charitable hospital of 50 beds or more was exempt from levy of sales tax---Rejection of application for grant of exemption of sales tax on supply of goods, including electricity, being based on unreasonable grounds would tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to allow exemption of Sales Tax on supply of goods including electricity, to charitable hospitals of 50 beds or more, as provided in entry at Sr. No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.
Saeed Akhtar, Advisor Dealing Officer.
Syed Saeed Ahmad Shah for Authorized Representative.
Tehseen Sadiq, ACIR for Departmental Representative.
FINDINGS/RECOMMENDATIONS
DR. MUHAMMAD SHOAIB SUDDLE, (FEDERAL TAX OMBUDSMAN).---This complaint has been filed alleging maladministration for rejection of complainant's application for grant of exemption of Sales Tax on the supply of electricity under Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.
2.The complainant, a charitable hospital, requested the RTO Sialkot for grant of exemption on the supply of electricity under the provisions of exemption specified against Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990. After examining the request, the RTO Sialkot allowed exemption of Sales Tax on supply of electricity to the hospital. The complainant approached the Gujranwala Electric Power Company (GEPCO) for exemption of Sales Tax on supply of electricity onthebasisofexemptioncertificateNo. CIR-ENF/E-21/595dated31-8-2010 issued by the RTO Sialkot. The GEPCO authorities forwarded the case of the complainant to the F.B.R. for clarification. The F.B.R. clarified that exemption on the supply of goods to charitablehospitals under Serial No.52-AoftheSixthScheduletotheSalesTaxAct,1990,wasconditionalwhereasexemptioncertificateissuedbythe RTO Sialkotwassilentonthatscore.TheF.B.R.furtherclarifiedthat such matters fell within the domain of F.B.R., to maintain auniform policy across the country. The F.B.R. therefore directed the RTO Sialkot to withdraw exemption certificate and forward the case to the F.B.R.
3.The complainant submitted fresh application to the F.B.R. through RTO Sialkot. The case was examined by the F.B.R. and request for exemption regretted vide Letter No.1(8)STT/2002 dated 14-4-2011 on the ground that no such exemption was available to any of the charitable hospitals.
4.Feeling aggrieved, the complainant filed complaint on the ground that F.B.R. had illegally regretted the request, as exemption of Sales Tax on supply of goods to charitable hospitals of 50 beds or more was available under Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.
5.The complaint was sent to the Secretary Revenue Division for comments in terms of section 10(4) of the FTO Ordinance, 2000. The Chief Commissioner, Regional Tax Office, Sialkot, in his comments stated that goods defined in subsection (12) of section 2 of the Sales Tax Act, 1990, included every kind of moveable property other than actionable claim, money, stocks, shares and security. As electricity was not included in the above definition, it could not be considered as goods for the purpose of exemption. The F.B.R. therefore had rightly rejected the request of the complainant.
6.During the course of hearing, the AR contended that request of the complainant needed to be examined in the light of provisions of exemption specified at Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990. He submitted that electric energy was specified in the Pakistan Customs Tariff against heading 27.16 and prior to Finance Ordinance, 2000, it was exempt from Sales Tax under Sixth Schedule to the Sales Tax Act, 1990. Though this exemption of Sales Tax was withdrawn through the Finance Ordinance, 2000 (relevant Entry No.10 in the Sixth Schedule to the Sales Tax Act, 1990, was deleted), making the supply of electricity generally chargeable to Sales Tax at the standard rate, the subsequent addition of entry at Serial No.52-A of Sixth Schedule in 2008 exempted it for charitable hospitals of 50 beds ormore.
7.The DR submitted that the F.B.R. vide letter C.No.3(125)ST/2011/ 104421dated16-7-2011addressedtotheChief Commissioner, RTO, Sialkot, had clarified that though the exemption under Serial No.52-A of the Sixth Schedule was available to equipment/ materials used solely for the purpose of hospital activities, the said exemption was not available on utilities such as electricity and gas.
8.Both parties have been heard at length. The record produced has also been examined. The moot point is whether electricity is excluded from the definition of "goods". Section 2(12) of Sales Tax Act, 1990, defines "goods" to include every kind of movable property other than actionable claims, money, stocks, shares and securities. The Sales of Goods Act, 1930, defines "goods" to mean every kind of moveable property, other than actionable claims and money, and includes electricity, water, gas, stocks and shares, growing crops, grass and things attached to, or forming part of the land. More importantly, however, goods exempt from the levy of sales tax are covered under the Sixth Schedule of Sales Tax Act, read with reference to 1st Schedule to the Customs Act, 1969 (Pakistan Customs Tariff: Heading 27.16). It is thus obvious that electricity falls under the definition of goods, and supply of electricity to charitable hospitals of 50 beds or more is exempt from the levy of sales tax (Entry No.52-A of the Sixth Schedule to the Sales Tax Act, 1990).
Findings:--
9.In view of above stated position, the rejection of the complainant's application for grant of exemption of Sales Tax on supply of goods, including electricity, being based on unreasonable grounds is tantamount to maladministration in terms of section 2(3) of the FTO Ordinance, 2000.
Recommendations:
10.F.B.R to-
(i)allow exemption of Sales Tax on supply of goods, including electricity, to charitable hospitals of 50 beds or more, as provided in entry at Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990; and
(ii)report compliance within 30 days.
C.M.A./231/FTOOrder accordingly.