COLLECTOR OF SALES TAX, FAISALABAD VS UNITED INDUSTRIES LTD., FAISALABAD, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 2447 (2017)

Sales Tax Act (VII of 1990)---

----Ss. 8, 3 & 47---Scope of sales tax ---Taxable supply---Tax credit not allowed---Input tax adjustment---Question before the High Court was whether sales tax could be charged on sale of old vehicles and machinery which were not admissible for input tax deduction in terms of S. 8(1) of the Sales Tax Act, 1990---Validity---No legal provision existed which excluded sale of old plant machinery, vehicles or scarp from purview of taxable supply and the same were chargeable to sales tax and supply thereof, was taxable supply---Reference was answered, accordingly.

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

Sarfraz Ahmad Cheema for Appellant.

Mudassar Shujauddin for Respondent.

ORDER

JAWAD HASSAN, J.---This is an Appeal under section 47 of the Sales Tax Act, 1990 (the "Act").

2.Following questions of law are pressed for our opinion, which is asserted to have arisen out of order dated 11.07.2001 passed by the Customs, Excise and Sales Tax Appellate Tribunal, Lahore Bench-I ("Appellate Tribunal"):--

QUESTIONS OF LAW

Whether the Appellate Tribunal, on the facts and circumstances of the case, was justified to give finding that it is not just and fair to charge sales tax on sale of vehicles and such other goods which are not admissible for input tax deduction in terms of section 8(1)(b) of the Act?

Whether the Appellate Tribunal, on the facts and circumstances of the case, was justified to give finding that since the controversy between the department and the Appellants relates to interpretation of different legal provisions of imposition of additional tax and penalty has no justification and the same are accordingly waived?

3.Learned counsel for the Appellant submitted that the Appellant Tribunal has not passed the order dated 11.07.2001 in accordance with law and has fallen in error by holding that the additional tax and penalty has no justification and the same are accordingly waived; that the impugned order has been passed without any jurisdiction; that the impugned order is without any reason or legal basis, as such liable to be set aside. Learned counsel has relied upon the case titled Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902.

4.On the other side, learned counsel for the Respondent submitted that the impugned order has been passed strictly in accordance with law and does not require any interference by this Court. He also prayed for dismissal of this Appeal.

5.We have heard the learned counsel for the parties at length and have gone through the record. The Appellant disputes the order dated 11.07.2001 of the Appellate Tribunal which allowed the Appeal of the Respondent and declared that the machinery and other goods is fictional transaction and therefore, does not fall within the purview of the tax net and thus sale tax is not chargeable thereon and has waived the additional tax and penalty. The learned counsel for the Appellant has controverted the same and stated that the Appellate Tribunal has based its findings on memorandum dated 03.06.2000 issued by the Ministry of Law and Justice but during the pendency of this case (since 2001), the Hon'ble Supreme Court of Pakistan has passed a detailed judgment, which is binding on all the Courts below under Article 189 of the Constitution of the Islamic Republic of Pakistan, 1973 and has placed reliance on the case of Collector of Customs supra. The relevant portion of the same is reproduced herein below and is as under:--

"There is no legal provision excluding the sale of old plant and machinery, vehicles or scrap from the purview of taxable supply. These goods were purchased by the Respondent in the course of their taxable activity, their sale cannot be considered as a transaction which is divorced from their normal business activity. The Act makes no distinction between the goods supplied by a registered person in the normal and continuous course of business activity as frequent and constant supply or otherwise and there can be no exemption on presumptions. The disposal of fixed assets, scrap by a registered person, being not exempted under section 13 or being not specified in the 6th Schedule to the Sales Tax Act are chargeable to Sales Tax and supply thereof, are taxable supply. The consideration/sale proceeds received against disposal of fixed assets as well as scrap/waste are their income and therefore, it had been taken as income and accounted for as such in their financial accounts. Such income being a part of business and investing activity done during the course of business is an act of furtherance of business. It is statutory authority under subsection (2) of section 13 of the Sales Tax Act, 1990, which vests in the Federal Government the power to exempt any taxable supply made in Pakistan or any goods or class of goods from the whole or any part of the tax chargeable under the said Act, subject to the conditions and limitations so specified. No exemption has since been notified by the Federal Government in relation to the sale, auction or otherwise disposal of goods, moveable fixed assets including plant/machinery equipment having no value addition to the goods and for which the input tax was not allowed.

25. The conclusion of the above discussion is that the fixed assets as have been referred in the case are goods or taxable goods and comes within the ambit of taxable supply and liable to the levy of sales tax."

6.In view of above, our answer to the above questions is in-negative i.e. in favour of the Appellant. Keeping in view the above situation, we allow the Appeal of the Appellant and set aside the order dated 11.07.2001.

7.Therefore, the Appeal is decided in favour of the Appellant.

8.Office shall send a copy of this order under the seal of the Court to the Appellate Tribunal as per Section 47(5) of the Act.

HBT/C-25/L Order accordingly.