AGRO PACK (PVT.) LIMITED, PESHAWAR VS ASSISTANT COMMISSIONER INLAND REVENUE PESHAWAR
2013 P T D 1041
2013 P T D 1041
[Supreme Court of Pakistan]
Present: Nasir-ul-Mulk and Tariq Parvez, JJ
Messrs AGRO PACK (PVT.) LIMITED, PESHAWAR
Versus
ASSISTANT COMMISSIONER INLAND REVENUE PESHAWAR and another
CivilPetitionsNos. 271-Pto295-Pof2011,decidedon24th January, 2013.
(On appeal from the judgment of the Peshawar High Court, Peshawar, dated 29-3-2011 passed in Customs References Nos.42 to 66 of 2010).
Sales Tax Act (VII of 1990)---
----S. 4, first proviso, Cl. (iii)---Customs Rules, 2001, R. 247(c)(i)---S.R.O.190(I)/2002 dated 2nd April, 2002---Constitution of Pakistan, Art.185(3)---Claim for refund of sales tax---Exemption from sales tax granted on exported goods in terms of R. 247(c)(i) of Customs Rules, 2001---Scope---Tax payer (petitioner) was granted manufacturing bond license under the Customs Rules, 2001 and exported its products to Afghanistan---Tax payer was exempted from payment of sales tax on raw material utilized in manufacturing of its exported products---Tax payer claimed refund of sales tax paid by it on electricity bills and packing material used for products exported to Afghanistan in terms of R. 247(c)(i) of Customs Rules, 2001---Claim of tax payer was rejected bytax authorities on the basis of S.R.O.190(I)/2002 dated 2nd April, 2002---Appeals filed by tax payer before appellate fora and the High Court were also dismissed---Tax payer contended that it was entitled to refund of sales tax in accordance with R. 247(c)(i) of Customs Rules, 2001; that S.R.O.190(I)/2002 dated 2nd April, 2002 relied upon by the tax authorities was issued under a different regime i.e. Sales Tax Act, 1990 and thus was not attracted to the claim of the tax payer, which was based on the Customs Rules, 2001---Validity---S.R.O.190(I)/2002 dated 2nd April, 2002 was issued by Federal Government in exercise of its power under clause (iii) of the first proviso to S.4 of Sales Tax Act, 1990, which clause allowed Government to withdraw the exemption from payment of sales tax on goods exported---Exemption from sales tax could only be granted under the Sales Tax Act, 1990 and the Rules framed thereunder---Rule 247(c)(i) of Customs Rules, 2001, on proper construction did not provide for such exemption---Provision of issuing invoice under R.247(c)(i) of Customs Rules, 2001 was only procedural andnotasubstantiveprovisiongrantingexemptionfromsalestax---ContentionoftaxpayerthatS.R.O.190(I)/2002 dated 2nd April, 2002 was issued under Sales Tax Act, 1990 and thus could not take away an exemption granted under Customs Rules, 2001 was devoid of merits---Petition for leave to appeal was dismissed in circumstances.
Pakistan v. Aryan Petro Chemical Industries (Pvt.) Ltd. 2003 SCMR 370 distinguished.
Abdul Latif Yousafzai, Senior Advocate Supreme Court and Muhammad AjmalKhan,Advocate-on-RecordforPetitioner(inall cases).
Dr. Farhat Zafar, Advocate Supreme Court for Respondents (in all cases).
Date of hearing: 24th January, 2013.
JUDGMENT
NASIR-UL-MULK, J.---The petitioner manufactures plastic bags in its factory setup in Industrial Estate, Gadoon Amazai, District Swabi, Khyber Pakhtunkhwa. It was granted Manufacturing Bond License under Rule 238 of the Customs Rules, 2001. The petitioner exports its products to Afghanistan through land route. It was exempted from payment of sales taxes on raw material utilized in the manufacturing of its export products. A controversy arose regarding their claim for refund of sales tax from May 2005 to May 2007 paid by the petitioner on the electricity bills and locally manufactured packing material on the ground that both were used for the products exported to Afghanistan in terms of Rule 247 of the Customs Rules, renumbered as Rule 352. Instead of entertaining the claim of refund the Assistant Collector (Refund) Regional Tax Office, Peshawar, issued a show cause notice to the petitioner as to why its claim shall not be rejected. It was ultimately rejected by the Assistant Collector in his order in original dated 13-8-2007. The said order was upheld by the Collector (Appeals), then by the Appellate Tribunal Inland Revenues, Peshawar and finally by the Peshawar High Court in References filed by the petitioner.
The petitioner's claim was rejected in view of the provisions of S.R.O.190(I)/2002 issued by the Federal Government in exercise of the powers conferred upon it by the first proviso to section 4 of the Sales Tax Act, 1990. Two relevant provisions to the present controversy are Rule 247, renumbered 352, on which reliance is placed by the petitioner and S.R.O.190(I) of 2002 pressed into service by all the forums in rejecting the petitioner's claims. For the sake of facility they are reproduced as under:--
"Rule 247. Procurement of input goods for production of finished goods meant for export.---The input goods for production of finished goods according to the specifications approved in the Analysis Certificate shall be procured by the licensee in any of the following manner:-
(a)...................................................................
(b)...................................................................
(c)Procurement of sales taxable input goods:
(i) the taxable goods meant for further processing shall be supplied to the licensee of the manufacturing bond against a tax invoice after payment of sales tax; and the licensee shall be entitled for refund of input tax credit in accordance with the Sales Tax Refund Rules, 1996."
"Notification No. S.R.O.190(I) 2002 dated 2nd April,2002.---In exercise of the powers conferred by clause (iii) of the first proviso to section 4 of the Sales Tax Act, 1990 and in supression of its Notification No. S.R.O. 751(I)/99 dated the 15th June, 1999, the Federal Government is pleased to direct that the provisions of the said section shall not apply in respect of supply of the following categories of goods, exported by air or via land route to Afghanistan and through Afghanistan to Central Asian Republics.--
(a)Manufactured in the Export Processing Zones or in manufacturing bonds;
(b)...................................................................
(c)...................................................................
(d)..................................................................."
The learned counsel appearing for the petitioner submitted that the petitioner's claim for refund was under a separate regime provided for under the Customs Rules, 2001, Rule 247(c)(i) of which entitles the petitioner to refund of input tax credit in accordance with the Sales Tax Refund Rules, 1996. He contended that S.R.O.190(I)/2002 was issued under a different regime under the Sales Tax Act and not attracted to the claim of the petitioner under the Customs Rules, 2001. Elaborating he argued that the latter S.R.O. neither makes reference to nor supersedes the said Rule 247. In the alternative, it was submitted that even under section 4 of the Sales Tax Act, providing for zero rating, the petitioner was not liable to pay sales tax on all exported goods. With reference to the restriction made on export of goods to Afghanistan, the learned counsel referred to Pakistan v. Aryan Petro Chemical Industries (Pvt.) Ltd. (2003 SCMR 370).
After going through the judgment in the said case of Aryan Petro Chemical Industries (Pvt.) Ltd. (ibid) we straightway found that the principle laid down there is inapplicable to the issue in the present case. The controversy in that case was over legality of sub-rule (6) of rule 15 of Manufacturing In Bond Rules of 1997 under which restriction was imposed on the export of shopping bags and plastic sheets to any country by land route. While maintaining the judgment of the Peshawar High Court this Court held that the impugned Rule made by the Central Board of Revenue in exercise of its powers under section 219 of the Customs Act 1969, section 50 of the Sales Tax 1990 and section 30 of the Central Excise Act, 1944 was beyond the scope of such powers as they were conferred to carry out the purpose of the said statutes through subordinate legislation, which did not include the power of restriction or prohibition. That such powers exclusively lay with the Federal Government under section 3 of the Imports and Exports (Control) Act, 1950. In the present case, there is no prohibition and the S.R.O. 190(I) of 2002 was issued by the Federal Government in exercise of a specific power to withdraw exemption from sales tax at the rate of zero per cent, in other words withdrawal of exemption from payment of sales tax.
We have compared the provisions of Rule 247 and S.R.O.190(I)/2002. Sales tax is levied under section 3 of the Sales Tax Act 1990 and section 4 provides for exemption from the tax the relevant part thereof for our purpose reads:--
"4. Zero rating... Notwithstanding the provisions of section 3, the following goods shall be charged to tax at the rate of zero per cent:-
(a)goods exported, or the goods specified in the Fifth Schedule;
(b)...................................................................
(c)...................................................................
Provided that nothing in this section shall apply in respect of a supply of goods which-
(i)...................................................................
(ii)...................................................................
(iii)Have been exported to a country specified by the Federal Government, by notification in the official Gazette."
S.R.O. 190(I) of 2002 was issued by the Federal Government expressly inexerciseofitspowersunderclause(iii)ofthefirstprovisoof section4oftheSalesTaxAct.Theexemptiononexportedgoods under clause (e) of section 4 is subject to the powers of the Federal Government under clause (iii) of the first proviso of section 4, allowing the Government to withdraw the exemption from payment of sales tax on goods exported. The learned counsel was not in a position to dispute conferment of such statutory powers of the Federal Government or its exercise in terms of S.R.O. 190(I) of 2002.
The contention of the learned counsel was that withdrawal of exemption by the Federal Government under S.R.O.190(I)/2002 could not take away the exemption granted to the petitioners under a different regime namely, the Customs Rules of 2001. This argument is not founded on true interpretation of the relevant statutory provisions. The levy, collection of and exemption from sales tax are provided for under the Sales Tax Act and the Rules framed thereunder. Section 3 is the chargingsectionandsection 4 of the Act provides for exemptions. Rule 247, later renumbered as 352, on proper construction does not provide for such exemption. The said Rule can be split into two parts; the first provides for issuance of sales tax invoice after payment of sales tax and the second relates to entitlement of refund of input tax credited in accordance with Sale Tax Refund Rules, 1996. It is the second part that relates to the refund which is to be made in accordance with the Sales Tax Refund Rules, 1996 if the exporter is entitled to a refund. We are mindful that the said Rule appears in the Customs Rules of 2001 and according to Rule 2(d) the officials entrusted to perform functions under the Rules are those of the Department of Customs. However, we have also noted that for quite a while it was the Department of Customs that wasconferredpowersundertheSalesTaxActandusedto collect suchtaxes.Theprovisionofissuinginvoiceunderthefirstpart of Rule 247(c)(i) is only procedural and not a substantive provision granting exemption from sales tax. Exemption can be granted only under the Sales Tax Act and the Rules framed thereunder. That is why for the purpose of refund reference has been made in Rule 247 of the Customs Rules, 2001 to the Sale Tax Refund Rules, 1996. The argument of the learned counsel that the petitioner was being granted exemption under a different regime than the Sales Tax Act has therefore no merits.
For the afore-stated reasons, the judgments of the High Court as well as the other forums are maintained.
All these petitions are dismissed and leave declined.
MWA/A-4/SCPetitions dismissed.