MR. MUHAMMAD IBRAHIM KHAN, MEMBER (JUDICIAL).-(1). The Collector of Sales Tax & Federal Excise, Peshawar (hereinafter called as the appellant) has filed this appeal under Section 46 of the Sales Tax Act, 1990 (hereinafter referred to as the Act) against Order-in-Appeal No. 19-20 of 2007, dated 18.01.2007, passed by the Collector of Customs, Sales Tax & Federal Excise (Appeals), Peshawar.
2. Precisely, the stated facts of the case as recapitulated from the available case record are that respondents (M/s. Associated Industries Ltd., Nowshera) filed refund claim for the tax period December, 2005 amounting to Rs. 10,034,942/- under Section 10 of the Act, out of which an amount of Rs. 5,079,849/- had been claimed on the basis of supplies made to ICRC under SRO.
1035(I)/2005, dated 13.10.2005 and claimed zero rating of his supplies made against international tender as well. Under para 2 of SRO. 1035(I)/2005, dated 13.10.2005, supplies to approved voluntary non-government organizations or welfare bodies by registered manufacturers for free distribution amongst earthquake victims were exempted. Tax credit/refund of exempt supplies was inadmissible under Section 8(1 )(a) of the Act. If the case of the respondent No. 1 was processed in the light of Chapter VIH of the Sales Tax Rules, 2005, which separately deals with the issue specifically pertaining to zero rating of supplies made to privilege persons/organizations then, to, the case of the respondent No. 1 could not be accommodated therein. The aforesaid rules require that any privileged organization desirous of taking zero rated supplies from a registered person shall apply to the Assistant Collector or Deputy Collector having jurisdiction for permission to this effect alongwith original exemption order, issued by Ministry of Foreign Affairs in this behalf. The same should be kept by the said officer for official record and issue an authorization on prescribed format for zero rated supply after making entries of the goods intended to be purchased against the original exemption order. The registered person should make zero rated supply and keep the record of the same for presentation to the sales tax department. Besides, the respondent No. 1 does not qualify the preconditions for international tender which supplies may be deemed to have been made under Section 4 read with Entry No. 5 to the 'Fifth Schedule to the Act. Hence, the respondent No. 1 had claimed inadmissible refund of Rs. 5,079,849/-, which attracts the provisions of Section 8(1 )(a) and 10(4), read with Rule 8 of SRO. 575(I)/2002, dated 31.08.2002, Section 13(2)(a) read with SRO. 1035(I)/2005, dated 13.10.2005, punishable under Section 33(5) alongwith additional tax under Section 36(1) of the Act. Accordingly, a show cause notice was issued to the appellants (now respondent No. 1), and after hearing the parties, the Learned Assistant Collector (Refund) of Sales Tax & Federal Excise, Peshawar vide his Order-in-Original No. 161/2006, dated 10.10.2006 ordered as under: "6. I have gone through the case record and written submission of the claimant. The claimant claims aforesaid refund against supplies made to ICRC under SRO. 1035(I)/2005, dated 13.10.2005 and claimed zero rating of his supplies made against international tender as well. Under para 2 of SRO. 1035(I)/2005, dated 13.10.2005, supplies to approve voluntary non-government organizations of welfare bodies by registered manufacturers for free distribution amongst earthquake victims are exempt supplies. Tax credit/refund of exempt supplies is inadmissible under Section 8(l)(a) of the Sales Tax Act, 1990. The claimant had applied to the Collectorate for exemption under SRO.
1035(I)/2005, dated 13.10.2005 and the exemption was granted vide C. No. ST(Tech) SRO.
490/15/2000/12060, dated 14.11.2005 and C. No. ST(Tech)SRO. 490/15/2000/12740, dated 07.11.2005 for 231 M. Tons. If the case of the claimant is processed in light of Chapter VIH of the Sales Tax Rules, 2005, which separately deals with the issue specifically pertaining to zero rating of supplies made to privileged persons/organizations, then to the case of the claimant cannot be accommodated therein. The aforesaid rules requires that any privileged organization desirous of making zero rated supplies from a registered person shall apply to the "Assistant Collector or Deputy Collector having jurisdiction for permission to this effect alongwith original exemption order, issued by Ministry- of Foreign Affairs in this behalf. The same shall be kept by the said officer for official record and issue an authorization on prescribed format, for zero rated supply after making entries of the goods intended to be purchased against the original exemption order. The registered persons shall make zero rated supply and keep the record of the same for presentation to the sales tax department.
Besides, the claimant does not qualify the pre-conditions for international tender which supplies may be deemed to have been made under Section 4 read with entry No. 5 to the Fifth Schedule to the Sales Tax Act, 1990. Moreover, the requirement for international tender is that it should be properly advertised in a leading daily and subsequently the supplier will be chosen by the purchasing party from against many contenders. This requirement has not been fulfilled by the claimant. Therefore, M/s. Associated Industries Ltd., Nowshera have claimed inadmissible refund of Rs. 5,079,849/-, which is hereby rejected in terms of Section 8(1 )(a) and 10(4) read with Rule 8 of SRO. 575(I)/2002, dated 31.08.2002, Section 13(2)(a) read with SRO. 1035(I)/2005, dated 13.10.2005 of the Sales Tax Act, 1990. Penalty of Rs. 5,079,849/- (Equal to the amount of tax involved) is also imposed upon the claimant under Section 33(5), alongwith additional tax under Section 34(1) recoverable under Section 36(1) of the Sales Tax Act, 1990."
3. Being aggrieved by the impugned Order-in-Original, the appellants (now respondent No. 1) filed an appeal before the Collector of Customs, Sales Tax & Federal Excise (Appeals), Peshawar, who vide his Order-in-Appeal No. 19-20 of 2007, dated 18.01.2007, ordered as under: "6. I have examined the case record and considered the verbal as well as written submissions of both the parties. ICRC is a well reputed and worldwide organization and actively involved in the welfare works and ICRC has also issued a certificate, the contents of which are reproduced below: "[The ICRC Logistics Center placed the following Purchase Orders against International Tenders with the Associated Industries Limited, within the framework of the assistance programme ICRC is carrying out in Pakistan for the earthquake victims. Purchase Order Quantity.
1.ASSO1 -PK-PES-05- 0410101 M/Ton/packed in 20,000 Tins (5050 Cartons)
2.ASSO 1 -PK-PES-05- 050418.5 M/Ton/packed in 3,700 Tins (925 Cartons)
3.ASS01-PK-PES-05- 0375130 M/Ton/packed in 26,000 Tins (6,500 Cartons)
4.ASSO 1 -PK-PES-05- 04891,000 M/Ton/packed in 200,000 Tins (10,000 Cartons)]"
It has been observed from the documents produced by the appellant, that the Collectorate of Customs, Peshawar has already sanctioned ' rebates of customs duty on raw materials used in the manufacturing of goods exported by the exporter vide GD-1 No. 307-Exp, dated 17.12.2006, No. 308- Exp, dated 17.12.2005, No. 325-Exp, dated 24.12.2005 and No. 326-Exp, dated 24.12.2005. The perusal of the GD-1 No. 308-Exp, dated 17.12.2005, the report of the Customs staff is found as under: "[Inspected the consignment of 3700 Tins Packed in 925 Ctns examined the consignment of vegetable ghee and found as per GD-1 No. 308/05, dt: 17.12.2005. Total Ctns 925 each containing 4x5 kgs. The consignment as being exported to ICRC under SRO. 121 l(I)/2005, dt: 10.12.2005. The consignment is under claim for rebate....]"
7. It has also been observed that on the face of GD-1, Certificate showing Purchase Order ASS01-PK- PES-05-0504 has clearly been mentioned which is one of the purchase order as mentioned above, meaning thereby that the tender of the appellant was accepted as International Tender in terms of SRO. 1211 (I)/2005, dated 10th December, 2005. Moreover, in the instant case, the appellant has made all the remittances to the government. It is against the natural justice to keep to different criteria with the respondents/appellants. Thus, it would amount to discrimination, if equal treatment is not given to the appellants in this case. Keeping in view the above facts and over all circumstances of the case, the instant appeal is accepted and the impugned O-IN-O is set aside."
3. Being aggrieved by the above Order-in-Appeal, passed by the Learned Collector (Appeals), the appellant filed the instant appeal before this Tribunal, inter alia, on the following grounds:
(a) that the respondent No. 2 has totally ignored the fact and legal grounds incorporated in the show cause notice, wherein it has exclusively been explained that supplies to approved voluntary' nongovernmental organizations or welfare bodies by registered manufacturers for free distribution among the earthquake victims are exempt supplies; secondly, if the case of the claimant is processed in the light of Chapter VIH of the Sales Tax Rules, 2005 which separately deals with the issue specifically pertaining to zero rating of supplies made to privileged persons/organizations, then to the case of the respondent No. 1/claimant cannot be accommodated therein;
(b) that the respondent No. 1/claimant did not fulfill the mandatory requirements for making supplies to privileged persons of United Nations;
(c) that the free distribution of exempt supplies by the respondent No. 1 on behalf of ICRC amongst the earthquake victims was exclusively a welfare activity in terms of SRO. 1035(l)/2005, dated 13.10.2005 notified under Section 13 of the Act. Therefore, the respondent No. 1/claimant cannot be held entitled for refund of sales tax on exempt supplies;
(d) that the respondent No. 1/claimant has bilateral actions on a single activity of supplying goods to ICRC. On one hand, they take authorization of such supplies to ICRC from the competent authority and on the other hand, they supply goods to the same recipient on the basis of zero- rating. Meaning thereby that they carried out to types of supplies, (af Under authorization of the Collectorate's letter issued vide C. No. STfTechfSRQ-490/15/2000/ 12740. Dated 07.11.2005. (bl. Supply made without any authorization from the Collector. Supplies at fa) fall within the ambit of Section 13 of the Act read with SRO. 1035(11/2005. Whereas the supplies made at fb) above do not fall within the ambit of Section 13 of the Act read with above-mentioned SRO. Contrary, the later supplies fall under Section 4 read with entry No. 5 of Fifth Schedule to the Act- Benefit of Section 13 is extendable to any supplier subject to the conditions mentioned therein, whereas benefits of Section 4 deal with entirely different scenario and the instant case is not covered under this Section;
(e) that the refund claim with reference to supply of taxable goods to ICRC as declared by the respondent No. 1/claimant to have been made against international tender, simply falls under Chapter VII of Sales Tax Rules, 2005. The said rules require that there will be international tender and tender notice besides other requirements. The requirement for international tender is that it should be properly advertised in a leading daily and subsequently, the supplier will be chosen by the purchasing party from amongst many contenders. This requirement has not been fulfilled by the respondent No. 1/claimant. The respondent No. 1/claimant failed to provide copy of international tender and tender notice, which clearly established that supplies were not made against international tender; and
(f) further arguments shall be made at the the of hearing alongwith copies of relevant documents, if desired so.
5. On the date of hearing fixed for 16.04.2009, Mr. Abdul Razzaq, Additional Collector/Departmental Representative alongwith Mr. Muhammad Haroon Khattak, Sr. Auditor appeared and almost reiterated the same arguments as advanced by the appellant-department in the memo of appeal. He stated that the respondent No. 1 /claimant/registered person initially applied for exemption of supplies in terms of SRO. 1035(I)/2005, dated 13.10.2005 thus, exemption certificate for 130 MT and 101 MT on 14.11.2005 and 07.11.2005 respectively of vegetable ghee was issued to them.
According to him, input tax is not admissible on exempt supplies covered under Section 13 of the Act. They however, consequently changed the stance that these supplies alongwith subsequent supplies to ICRC as per purchase order for 1000 MT were claimed to have been made against international tender. He forcefully stressed that it was a typical position of approbate and reprobate, which is not sustainable in the eyes of law. He further stressed that they claimed zero- rating of their supplies on the basis that these were made against international tender to ICRC.
However, except for the letters of ICRC, they have no other evidence to substantiate their claim that they had made supplies against the international tender. He stated that international tender means that it should be an offer in to or more than to countries for the supply of goods and the services. He categorically stated that in the instant case, the respondent's claim of having supplied the goods against international tender would have been very well justified, had the tender been floated on an international level covering at least to or more than to countries. Moreover, the purpose would have been Served if the international tender had been published in a leading daily having circulation in Pakistan and some other country. However, such vital requirement was totally missing in the instant case and as such, it does not fulfill the requirements of item 4 of the 5th Schedule to the Act. He further stated that the Learned Collector (Appeals) has referred to the issue that the Customs department had accepted the supplies as export against the international tender and allowed rebate under SRO. 1211(T)/2005, dated 10.12.2005, however, he has erred in this regard by giving finding based on the Customs SRO which was not binding upon the appellant- department as the respondent No. 1/claimant work/operate under the Sales Tax Act, 1990. He prayed that the impugned Order-in- Appeal may graciously be set aside and the impugned Order-in- Original may be upheld, as the same has been passed in accordance with law.
6. On the other hand, the Learned Consultant appearing for the respondent No. 1/claimant almost reiterated the same averments as raised before the Learned Collector (Appeals), Peshawar. He stated that Section 7 of the Act clearly entitles a registered person to deduct input tax for the purpose of taxable supplies made or to be made by him from the output tax. He further stated that under SRO. 1035(D/2005. Dated 13.10.2005. The respondent No. 1/claimant had applied for exemption from sales tax on supplies to ICRC. The appellant department granted partial exemption to respondent No. 1/claimant and did not allow full exemption of sales tax although the exemption was clearly admissible under the aforesaid SRO. As a result, the respondent No. 1/claimant opted to claim these supplies as zero-rated against international tender alongwith other supplies to ICRC.
He vehemently argued that the entire confusion was, in fact, created by the appellant department.
All supplies were made by the respondent No. 1/claimant during the life/continuance of such exemption between the period from 13.10.2005 to 12.02.2006. Vide the aforementioned SRO; however, they were forced to claim refund due to the appellant department's partial exemption order/authorization. In fact, that's the reason that the respondent No. 1/claimant did not follow the exemption procedure as required by the Board. He also clarified that the respondent No. 1/claimant had never applied or asked the appellant department for processing of their claim under Chapter- VIII of the Sales Tax Rules. 2005 as also stated in their response to the show cause notice. Moreover, supplies to ICRC against international tender clearly fall under Section 4 read with S. No. 4 of the Fifth Schedule to the Sales Tax Act. 1990. Which has also been clarified by the Board and no conditions are mentioned either in the Fifth Schedule or by the Board and the ICRC obviously has its own procedure for such international tender in this type of cases. He explained that the ICRC sends quotations to various suppliers regarding a particular supply and the supplier quotes its rates for the requisite supply and thereafter, the ICRC sends purchase order to the selected supplier. The respondent No. 1/claimant followed the procedure as required by the ICRC and later on their supplies were certified by ICRC to be against an international tender.
7. The Learned consultant continued his assertions and stressed on the issue that the respondent No. 1/claimant has undesirably been dragged into the technicalities and their due and legal rights are being denied to them by plunging them into lengthy litigation proceedings, whereas there is no tax evasion or tax fraud or any sales tax payment involved and the respondent No. 1/claimant has been seriously damaged for no fault of his own (if any technical mistake has been made it is the department which can be blamed but certainly not the respondent No. 1/claimant). He also stated that the custom department has already settled a principle that such supplies fall against the international tender. Moreso, they have already accepted such supplies to ICRC as against the international tender. Moreover, the payments have also been received by the respondent No. 1/claimant from ICRC in foreign exchange. He also adverted to the judgement of the Honourable Supreme Court of Pakistan in the case of M/s. Pfizer Laboratories Ltd. Vs. Federation of Pakistan and others, reported in PTCL 1998 CL. 354 in support of his contentions. At the fag end of his arguments, he prayed that the impugned Order-in-Appeal may be upheld, being just, fair, speaking and judicious order and the appellant department may be directed to sanction the subject exemption/ refund claim of the respondent No. 1/claimant under SRO. 1035(I)/2005, dated 13.10.2005 or item 4 of the 5th Schedule of the Sales Tax Act, 1990 as already directed by the Learned Collector of Customs, Sales Tax & Federal Excise (Appeals), Peshawar.
7. We have carefully perused the available case record and have anxiously considered the written as well as oral submissions made by the Learned consultant for the appellants and the D.R. At the outset, we would like to refer to the case of M/s. Engro Chemical Pakistan Ltd. Vs. Additional Collector of Customs, reported in 2003 PTD 777, wherein the Honourable Court has observed that: "the law is well settled, that every judicial order should be a speaking order and particularly in tax matters, where the scope of appeal/ reference before the High Court is very limited. In the absence of speaking orders, the High Court finds it difficult to decide the questions of law, for under Section 36-C of the Central Excises Act, 1944, and under the analogues provisions of Customs Act and Sales Tax Act, 1990, only such questions of law can be raised before the High Court as arise out of the order of the Tribunal. Thus, if the Learned Tribunal fails to pass proper judicial order, by considering all the facts and points of law raised before it, amounts to negation of justice. The Tribunal is always required to dilate upon all the questions of facts and law agitated before it, so that, the High Court is not handicapped in deciding the questions of law."
9. In the wake of the above cited judgement, we now intend to go into the deeper appreciation of the factual and legal issues involved in this case, in chronological, systematic and legally convincing manner, as given in the succeeding paras, so as to arrive at the proper, just and fair decision in the instant appeal. However, before dilating upon the main issues involved in this case, it would be appropriate at this stage to draw the distinguishing line between exempt and zero- rated supplies. Exempt supplies are covered under Section 13 of the Sales Tax Act, 1990 while zero- rated supplies are covered under Section 4 ibid. Both zero-rated and exempt supplies do not carry any tax liability, but they are different in the sense that in the case of zerorated supplies, the person making the supplies is entitled to a credit for tax paid on his taxable purchases used or to be used in the taxable supplies whereas the person making exempt supplies is not entitled to seek refund/adjustment of input tax credit under Section 8(1 )(a) of the Sales Tax Act, 1990. The question as to whether exempt supplies on their export may be zero-rated has already been examined in the Board. It is, thus, clarified that goods which are exempt from sales tax under Section 13 of the Sales Tax Act, 1990 cannot be zero-rated under Section 4 of the said Act, on their export [Reliance: Sales Tax Ruling/Instruction No. 16/2002- CBR's Letter No. 3(15)STP/99(Vol-I), dated 25th February, 2002, reported as PTCL 2002 St. 364(i)].
10. Moreover, on perusal of Entry No. 24 to the Sixth Schedule, we find that Edible Oils and Vegetable Ghee, including Cooking Oil, on which Federal Excise Duty is charged, levied and collected as if it were a tax payable under Section 3 of the Act are exempt from sales tax. Since, the respondent No. 1/claimant made supplies of vegetable ghee to ICRC, therefore, the same were covered under Entry No. 24 to the Sixth Schedule of the Sales Tax Act, 1990, and therefore, such supplies are not liable to sales tax and as a consequence refund/input tax adjustment is not admissible under the Act.
11. Here, the question may also arise whether this Tribunal can travel beyond the scope of the subject matter of the appeal and the factual and legal issues neither raised in the show cause notice nor agitated at the original stage of adjudication nor at the first appeal stage can be considered at the second appeal stage. It is our considered view that the points of facts and law can be raised at any stage during the appeal proceedings and a number of judgements by the Superior Courts lend credence to our aforesaid view as discussed in the succeeding sub-paras:
(a) According to sub-section (4) of Section 46 of the Sales Tax Act, 1990, the Appellate Tribunal, after giving the appellants an opportunity of being heard, may pass such orders in relation to the matter before it as it thinks fit. We observe that the word "in relation to the matter before it" apparently seems to confine the powers of the Appellate Tribunal to the subject matter of appeal, however, it is not so as to discuss below. It is, however, well-settled principle in law that an appellant cannot be put in a worse position than what he was in earlier.
(b) It is also well settled principle in law that the proceedings under the Act do not come to an end with the passing of an order. If any of the rival parties files an appeal, the proceedings are kept alive; the appeal being only continuation of the original proceedings. The legal pursuit of a remedy through filing an appeal before the first and the second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity, are to be regarded as one legal proceedings. Thus, the appellate proceedings are the continuation of the original proceedings. In support of our aforesaid observation, we place reliance on the case law cited in the case, reported in PTCL 2005 CL. 738.
(c) In fact, on filing of an appeal, the entire matter reopens and becomes sub judice. We also place reliance in this behalf on the case law cited in the case, reported in PLD 1969 SC 1. Moreover, Appellate Tribunal as the final fact finding authority is obliged to consider the question(s) of fact(s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.
(d) We notice that in the case of M/s. Gatron (Industries) Ltd. Vs. Government of Pakistan, reported in PTCL 1999 CL. 359, the Honourable Court has observed that a pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case. This view has reaffirmed the earlier view taken by the Supreme Court in the case of Haji Abdullah Khan vs. Nisar Muhammad Khan, reported in PLD 1965 SC 690.
(e) By also placing our reliance on the judgement, reported in PTCL 2004 CL. 494, it is now settled principle of law that a question of law arising out of the facts of the case relating to the fundamental issues involved therein, even it was not raised before the lower forum, can be allowed to be taken before the higher forum and this Tribunal for doing complete justice may,, if the facts and circumstances of a case so demand, allow to raise a question of law which was not as such taken before the lower forum. It is, in fact, the function of this Tribunal, who is seized of the matter, to apply the correct law to meet the ends of justice. Also in the case of Gatron (Industries) Ltd. Vs. Government of Pakistan, reported in PTCL 1999 CL. 359, the Court has held that even when leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as contemplated by sub- article (1) of Article 187 of the Constitution.
12. First Issue: Whether the respondent No. 1/claimant was g required to file authorization letter for exemption under SRO. 1035(I)/2005, dated 13th October, 2005, read with the Board's letter C. No. l(24)STT/2005, dated 14th October, 2005?
(a) It is well settled and undisputed principle of taxation law that SRO regulates the different statutory provisions of the statute from the to the. Similarly, Section 13 of the Sales Tax Act, 1990 empowers the Federal Government to exempt supply or import of goods specified in the Sixth Schedule subject to certain conditions. In this way, the plain reading of SRO. 1035(I)/2005, dated 13.10.2005 reveals that it was issued by the Federal Government under Clause (a) of sub-section
(2) of Section 13 of the Sales Tax Act, 1990. In this context, it would be relevant to examine the relevant entry to the Sixth Schedule thereto under which the said SRO has been issued by the Federal Government. In this context, the contents of Entry No. 49 are reproduced below for the sake of convenience:- "Import of all goods received, in the event of a natural disaster or other catastrophe, as gifts and relief consignments, including goods imported for the President's Fund for Afghan Refugees, relief goods donated for Afghan Refugees, Gifts for President's Fund for assistance of Palestine and gifts received by Pakistani Organizations from Church World Services or the Catholic Relief Services subject to the similar conditions as are envisaged for the purposes of applying zero-rate of customs duty under the Customs Act, 1969 (IV of 1969)."
(b) It is abundantly clear that the aforesaid SRO regulated Entry No. 49 to the Sixth Schedule to the Sales Tax Act, 1990 in accordance with the emerging situation which occurred from the disaster/catastrophe of 8th October, 2005 for the relief operations of the earthquake victims.
However, it is clear enough from the language of the aforesaid SRO that its applicability was restricted only to the local supply of goods for free distribution amongst the earthquake victims. In this regard, para 2 of the said SRO is reproduced hereinafter for the sake of convenience:- "Exemption of Sales Tax shall also be admissible on such goods as are purchased by approved volunteer government organizations or welfare bodies or supplied by the registered manufacturers for free distribution amongst the earthquake victims."
(c) In view of the above stated position, we are of the opinion that SRO. 1035(I)/2005, dated 13.10.2005 was applicable only to the local supplies and the respondent's supplies were already exempt from payment of sales tax under Entry No. 49 to the Sixth Schedule of the Sales Tax Act, 1990. Therefore, the respondent No. 1/claimant was not required to file, authorization letter for exemption under SRO. 1035(I)/2005, dated 13.10.2005 read with the Board's letter C. No. l(24)STT/2005, dated 14th October, 2005. Thus, we observe that the contention of the Learned consultant to the effect that the appellant department granted partial exemption to the respondent and did not allow full exemption of sales tax although the exemption was clearly admissible under the aforesaid SRO is not convincing enough as they could have availed exemption on the entire quantity of taxable supplies under the aforesaid SRO without any hurdle, however, they later on changed their stance as discussed below.
13. Second Issue: Whether the taxable supplies made by the respondent No. 1/claimant to ICRC fell under the purview of the International Tender?
(a) Now, we advert to Section 4 of the Sales Tax Act, 1990, which is reproduced below in extenso for the sake of convenience, for subsequent deliberations:- "Zero rating.-Notwithstanding the provisions of Section 3, the following goods shall be charged to tax at the rate of zero percent-
(a) goods exported, or the goods specified in the Fifth Schedule;
(b) supply of stores and provisions for consumption abroad a conveyance proceeding to a destination outside Pakistan as specified in Section 24 of the Customs Act, 1969 (IV of 1969);
(c) such other goods as the Federal Government may, by Notification in the Official Gazette, specify: Provided that nothing in this section shall apply in respect of supply of goods which:
(i) are exported, but have been or are intended, to be re-imported into Pakistan; or (ii) have been entered for export under Section 131 of the Customs Act, 1969 (IV of 1969), but are not exported;
(iii) have been exported to a country specified by the Federal Government by Notification in the Official Gazette: Provided further that the Federal Government may, by a notification in the Official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero rated supply of goods otherwise chargeable to sales tax."
(b) Perusal of Section 4 read with Entry No. 4 to the Fifth Schedule reveals that supplies against International Tender are zero-rated. Before inferring any conclusion on this issue, we need to examine the scope of Sales Tax Act, 1990. In this respect, relevant Section 3 of the Sales Tax Act, 1990 is reproduced hereinbelow in extenso for easy reference:- "Section 3. Scope of tax.-(1). Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of [fifteen] percent of the value of--
(a) Taxable supplies made by a registered person in the course or furtherance of any [taxable activity] carried on by him; and
(b) goods imported in Pakistan.
(c) We notice that Section 3(1) of the Act is a taxing section. Section 3(l)(a) ibid consists of the components/constituents as follow; the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (i.e) in the course or furtherance of
(iv) any taxable activity/business (v) carried on by him. The expressions used in Section 3(1 )(a) and which are relevant for the purpose of resolving the controversy involved in this case, are (i) taxable supply (ii) taxable activity, and (i.e) in the course or furtherance of. Though the first to, but not the latter one and also not the word "business", have been defined under Section 2(28) or (41) ibid and Section 2(24) or (35) ibid, yet for proper appreciation of their meaning, one has to revert back to the definitions of fil goods (ii) taxable goods (iii) supply and (iv) taxable supply. Goods means and includes moveable property other than money and securities etc., and Taxable Goods means and includes the moveable property other than those which have been exempted under Section 13 of the Act, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under Section 13 of the Act.
Thus, the plain reading of Section 3 ibid transpires that it is a charging section which creates a* charge on all taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and on all goods imported into Pakistan. Thus, it is clear that the scope of sales tax is only extended to Pakistan to a registered person only and it cannot be extended beyond the boundaries of Pakistan by any methodology whatsoever.
(d) Now, we advert to the judgement in the case of M/s. Usmani Associates Sub-Proprietary Firm Vs. Central Board of Revenue and another, reported in PTCL 2003 CL. 461 (H.C. KARACHI) wherein it has been held that:- "When Sales Tax is Charged.- Sales tax is charged, levied and paid only when taxable supply is made in the course or furtherance of "taxable activity". Definition of "taxable activity" lays down in clear and unambiguous terms that it involves in whole or in part the supply of goods to any other person, which is the condition precedent for the levy of sales tax."
Yet in the case of M/s. Mayfair Spinning Mills Ltd., Lahore vs. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and to others, reported in PTCL 2002 CL. 115 (H. C. Lah), it has been held by the Court that:- "Chargeability of sales tax is provided under Section 3 of the Act, which enunciates that there shall be charged, levied and paid a tax known as sale tax at the rate of 15% (now 16%) of the value of taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and goods imported into Pakistan."
(e) Likewise, in the case of Dawood Hercules Chemicals Ltd. Vs. Collector of Sales Tax, Lahore, reported in (PTCL 1998 CL. 409 (H.C. Lah), it has been held therein that sales tax is leviable on taxable supply made in Pakistan by a registered person in course or in furtherance of taxable activity.
Similarly, in other case of M/s. Al-Hilal Motors Stores and other vs. The Collector, Sales Tax & Central Excise (East) Karachi and others, reported in PTCL 2004 CL. 1 (H.C. Kar......), it has been held therein that in terms of the provisions contained in Section 3 of the Sales Tax Act, 1990, which is the charging section, the sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course or in furtherance of any taxable activity carried on by him.
Furthermore, in the case of Collector of Customs through Additional Collector, Hub vs. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others, reported in PTCL 2008 CL. 89 (S.C. Pak.), it has been held therein that when liability to pay tax would arise. The quantum of tax liability is determined on the basis of value of taxable supply, while the liability to pay tax under Section 3(1) of the Act arises only when such supply is made in the course or in furtherance of taxable activity.
Thus, in the wake of above-stated dicta of the Superior Courts, it is crystal clear that Section 3 is the charging Section, which creates a charge on all taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and on all goods imported.
(f) We are inclined to agree with the contention of the D.R. That International Tender has neither been defined in the Act nor in the Public Procurement Regulatory Ordinance, 2002; accordingly one has to refer to the ordinary dictionary meaning of the word "International Tender", Oxford Advanced Learner Dictionary (2006 Edition) defines the word "International" as under:- "International:adj: (usually before noun) connected with or involving to or more countries.
Tender: noun: A formal offer to supply goods or carry out work at a stated price.
Verb: To make a formal offer to supply goods or carry out work at a stated price."
Seen in the light of the above dictionary meaning of the word "International" and "Tender", it is abundantly clear that International Tender means that it should be an offer in to or more than to countries for the supply of goods and services.
(g) The above legal position thus, leads us to make an irresistible observation that in the instant case, respondent No. 1/claimant is the registered person under the Sales Tax Act, 1990 while the ICRC to whom supplies have been made is neither the registered person nor involved in any taxable activity in Pakistan. Therefore in view of the scope of sales tax as enunciated in Section 3 of the Sales Tax Act, 1990, supplies against International Tender can only be construed if the International Tender has been floated by the registered person under the Sales Tax Act, 1990 and against which supplies have been made by another registered person or the Federal Government/Board specifically notifies supplies against International Tender under the Sales Tax Act, 1990. The classical example of International Tender is the International Tender floated by WAPDA, press transcript of which has also been provided by the respondent No. 1/claimant in support of their arguments and the same is placed on record.
(h) According to the Judgement of the Honourable Supreme Court of Pakistan reported in PTCL 2008 CL. 461, it has been held that:- "The person getting the benefit of grant of concession in the nature of exemption from payment of duties must satisfy all conditions for such exemptions".
Yet in another judgement reported in PTCL 1988 CL. 257, the Court has held that:- "The charging provisions of a taxing statute are construed strictly in favour of the assessee whereas the provisions relating to exemptions are to be construed in favour of the Government.
The assessee is required to prove his entitlement for the exemption." Further, in the case reported in PTCL 1997 CL. 1, the Court has observed that:- "Where exemption in regard to any goods or person is granted subject to fulfillment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied.
Before, claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the petitioners have to satisfy the respondents that their claim strictly falls within the purview of the exemption granting notification."
(i) Here, we also place reliance on the judgement, reported in PLD 1977 Lah. 1327, wherein the Court has held that "there is much difference in 'taxability or liability' and its 'payability'. The taxability or liability is created by the Legislature while payability follows to be enforced by the executive authority after quantification. The exemption concerns not the liability but only the payability. It means that though an assessee is liable to pay he can be excused payment on account of a power conferred on the subordinate legislative authority. This distinction was considered and accepted by this Court in other cases."
We also place reliance on the judgement reported in PTCL 1999 CL. 532, wherein the Court has observed that "the issuance of an exemption notification under Section 13 of the Act, therefore, pre- supposes that the goods exempted are already subject to an existing charge of the sales tax."
(j) We notice that when exemption in regard to any goods or person is granted subject to fulfillment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied. Before claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the claimants have to satisfy the department that their claim strictly falls within the purview of the exemption granting notification. We also lend credence in this behalf from the judgement, reported in PTCL 1997 CL. 1.
(k) Our aforesaid view is further supported by provisions of Section 4 of the Sales Tax Act, 1990, which cover the normal export and the enactment "Supplies against International Tender" through Fifth Schedule to the statute is exceptional one and it is to be construed strictly within the parameters of Section 3 of the Sales Tax Act, 1990. It is also observed that Schedule is regulated by the Federal Government/Federal Board of Revenue through prescribing procedures/rules or notifications issued from the to time.
(l) We are inclined to agree with the Learned consultant that neither any conditions are prescribed in SRO. 1035(I)/2005, dated 13.10.2005 nor in the 5th Schedule, however, supplies to approved voluntary non-governmental organizations or welfare by registered manufacturers for free distribution among the earthquake victims are exempt supplies. Already Chapter VIH of the Sales Tax Rules, 2005, were in the field and subsequently, the Exemption of Supplies against International Tender for Earthquake Rehabilitation Rules, 2d06 were issued and according to sub-rule (2) of Rule 1, these Rules applied to supplies of taxable goods made by the registered persons against international tender to various international organizations including International Committee of the Red Cross (ICRC) for earthquake rehabilitation. Moreover, according to Rule 3 of the said Rules, the taxable supplies made by registered persons to these organizations including ICRC against international tender for earthquake rehabilitation shall be exempted from tax. Furthermore, Rule 4 of these Rules clearly postulates the procedure and conditions for making zero-rating supplies in the following manner: - "(a) the supply shall be made against international tender issued by UNICEF, UNDP, WHO, WFP, UNHCR or ICRC. The contract signed with the concerned organization shall be retained by the supplier in his record alogwith a copy of the tender notice;
(b) the supplier shall issue a commercial invoice for each supply mentioning the full particulars of the buyer and the contract number;
(c) the goods shall be duly received by the organization which signed the contract and a certificate to this effect shall be issued by the organization, which shall be duly attested by the Federal Relief Commissioner; and
(d) a copy of the certificate mentioned in Clause (c) shall be forwarded by the organization to the Collector of Sales Tax in whose jurisdiction the supplier of goods is registered."
(m) Moreover, according to Rule 5 of these Rules, the supplier shall maintain separate records of supplies of exempt goods, number and date of the international tender, number and date and copy of the contract, name of the organization to whom goods were supplied, value of the goods, and number and date of the certificate obtained under clause (c) above. Furthermore, according to Rule 6 of these Rules, %in case the goods are found not be supplied to the organization specified in Rule 3 above, the sales tax involved on such goods shall be recoverable from the supplier besides legal or penal action under appropriate provisions of the Act.
(n) The appellant department has clearly stated that neither the supplies were made by the respondent against international tender nor the contract signed with the concerned organization i.e., ICRC by the respondent was provided nor copy of the tender by the concerned organization i.e., ICRC, was provided to them by the respondent despite of repeated reminders. Moreover, the other conditions as clearly provided in the above Rule 4, were also not met by the respondent apart from proper maintenance of the relevant records of supplies of exempt goods against the international tender.
(o) In view of the above stated legal position, the stance of the respondent No. 1/claimant that they were unable to compel the ICRC to float the international tender in the leading newspapers is irrelevant as the supplies were not covered by International Tender and these supplies were apparently covered under the signed contract between the respondent No. 1/claimant and the ICRC. Moreso, careful perusal of the certificate issued by ICRC and produced by the respondent No. 1/claimant reveals that it is a purchase order rather than an International Tender. It is well settled principle of Procurement Regulations that Purchase Order is supplied to those tenderers/bidders whose tenders/bids are accepted/ approved for supply of procurements. In the instant case, the goods were supplied against a signed contract as admitted by the respondent No. 1/claimant and no formal tender was floated in the press, therefore, it cannot be termed as an International Tender by any stretch of imagination. We are thus, of the considered opinion that the supplies made by the respondent No. 1/claimant to ICRC did not fall within the purview of the International Tender.
14. Third Issue: Whether the respondent No. 1/claimant was entitled to claim input tax adjustment under the Sales Tax Act, 1990?
(a) In the case of M/s. Mayfair Spinning Mills Ltd., Lahore vs. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and to others, reported in PTCL 2002 CL. 115 (H.C. Lah), the Court has held that, "in order to avoid double taxation and ensure the proper levy of sales tax, a mechanism of input tax and its adjustment is provided under Section 7 of the Act. A registered person is entitled to deduct input tax paid during the tax period for the purpose of taxable supply made or to be made by him from the output tax, that was due from him in respect of tax period. The registered person is also provided such other adjustment as was specified in Section 9 and under Section 10, the registered person is allowed to carry forward the excess amount or seek the refund." It has further been held therein that, "the provisions regarding input as well as out put tax as defined in the definition clause of the Act read with Section 7 and 8 thereof are only the modalities prescribed to protect the interest of the exchequer against any pilferage, evasion or fraud."
(b) In the case of Collector, Sales Tax and Central Excise (West), Karachi vs. M/s. Al-Hadi Industries (Pvt.) Ltd., reported in PTCL 2003 CL. 345 (H.C. Kar......), the Court has held that, "the provision contained in sub-section (2) of Section 7 is mandatory in nature, it is an enabling provision which prescribes the way in which the claim for deduction/ adjustment/refund of the input tax is to be preferred. Sub-section (2) of Section 7 prescribes a particular manner of claiming deduction/adjustment/ refund and on plain reading of the provision, it is abundantly clear that the non-compliance disentitles a registered person from deducting input tax from output tax."
(c) It would appear that the provisions of Section 8(1) are restrictive in nature and the restrictions so placed are given in clauses (a) and (b) of subsection (1) of Section 8 of the Sales Tax Act, 1990.
In other words, goods used for a purpose other than production of taxable supplies or the goods specified by the Federal Government as not qualified for input tax adjustment are prohibited for claiming the input tax adjustment. In this behalf, reliance is placed on the case of M/s. Muhammad Shaft Tanneries (Pvt.) Ltd. Vs. The Collector of Customs (Appeals), Karachi, reported in PTCL 2002 CL. 302 (CESTAT, Kar......).
(d) In this behalf, we also place reliance on the judgement passed in the case of M/s. Rainbow Industries vs. Collector of Customs, etc., in C.P. 469/2004, wherein the Honourable Court has observed that: "15. By now, it is well settled that fiscal statutes are to be construed strictly. If the subject is entitled to any relief it must be given to him but at the same the, if he is bound to follow a particular procedure and fails to abide by the same, then the penal consequences will have to follow. In such like cases, the question of financial loss to the exchequer or the subject are irrelevant. If the statute provides to do a certain thing in a certain manner it must be done in that particular manner and not otherwise."
(e) We have already dilated upon the issue that taxable supply means supply of taxable goods other than supply of goods which are exempt under Section 13 of the Act. We notice that supplies to approved voluntary non-governmental organizations or welfare bodies by registered manufacturers for free distribution among the earthquake victims are exempt supplies. We agree with the contention of the D.R. That free distribution of exempt supplies by the respondent No. 1/claimant on behalf of ICRC amongst the earthquake victims was exclusively a welfare activity in terms of SRO. 1035(I)/2005, dated 13.10.2005, notified under Section 13 of the Act and thus, they were not entitled for refund of sales tax on exempt supplies. In view of the afore stated position, we find that the respondent No. 1/claimant was not entitled to claim input tax adjustment on supply of goods, which are exempt under Section 13 of the Act and more so, on supplies to ICRC without adopting proper prescribed procedure in vogue.
15. Fourth Issue: Whether the additional tax under Section 34(1) and penalty under Section 33(5) of the Act are attractable in this case and recoverable under Section 36(1) of the Act?
"We observe that since there is no tax evasion or tax fraud or any sales tax payment involved, therefore, no penal action can be taken against the respondent No. 1/claimant under the provisions of the Sales Tax Act, 1990. The Learned adjudicating authority had seriously erred by attracting the additional tax and imposing penalty on the respondent No. 1/claimant in his impugned Order-in- Original No. 161/2006, dated 10.10.2006, whereas it is a case of determination of admissibility or inadmissibility of refund claim against taxable supplies to ICRC. However, after issuance of the impugned Order-in-Original, he realized his mistake to the extent of attracting the additional tax (default surcharge) and imposing penalty thereon, which is considered illegal and improper in the eyes of law and thereafter he rightly issued a corrigendum vide C. No. ST/Refund/529/05/7462, dated 01.11.2006, wherein the aforesaid penal actions were duly rectified by him in the Order-in- Original. So, this pivotal issue already stands resolved and we do not consider it appropriate to dilate on the same issue any further."
16. Fifth Issue: Whether the findings of Learned Collector (Appeals) are based on logical reasoning or the same are improper, unjust, unfair, perverse, arbitrary and fanciful?
(a) Now we advert to the relevant para covering findings of Learned Collector (Appeals) as reproduced hereinbelow in extenso:- "It has also been observed that on the face of GD-1, Certificate showing purchase order ASS01-PK- PES-05-0504 has clearly been mentioned which is one of the purchase order as mentioned above, meaning thereby that the tender of the appellant was accepted as International Tender in terms of SRO. 1211 (I)/2005, dated 10th December, 2005. Moreover, in the instant case, the appellant has made all remittances ro the government. It is against the natural justice to keep to different criteria for the respondents/appellants. Thus, it would amount to discrimination, if equal treatment is not given to the appellant in this case. Keeping in view the above facts and overall circumstances of the case, the instant appeal is accepted and the impugned O-IN-O is set aside."
(b) We would also like to divert to sub-para (d) of the grounds of appeal, wherein the appellant department have raised the averments in this behalf, which are reproduced below in extenso: "(d) The respondent No. 1/claimant has bilateral actions 'f on a single activity of supplying goods to ICRC. On one hand, they take authorization of such supplies to ICRC from the competent authority and on the other hand, they supply goods to the same recipient on the basis of zero-rating.
Meaning thereby that they carried out to types of supplies, fa) Under authorization of the Collectorate's letter issued vide C. No. ST(Tech~)SRO-490/15/2000/12740. Dated 07.11.2005. Fb)
Supply made without any authorization from the Collector. Supplies at (a) fall within the ambit of Section 13 of the Act read with SRO. 1035(11/2005. Whereas the supplies made at fb) above do not fall within the ambit of Section 13 of the Act read with above-mentioned SRO. Contrary, the later supplies fall under Section 4 read with entry No. 5 of Fifth Schedule to the Act. Benefit of Section 13 is extendable to any supplier subject to the conditions mentioned therein, whereas benefits of Section 4 deal with entirely different scenario and the instant case is not covered under this Section."
(c) After careful perusal of the findings of the Learned Collector (Appeals) and the assertions of the appellant-department as enumerated above, we are of the considered opinion that the Learned Collector (Appeals) has not applied his judicious mind to the issues involved therein and has acted beyond his jurisdiction without considering the pros and cons of to different statutes i.e. Customs Act, 1969 and Sales Tax Act, 1990. It is also noticed that the Learned Collector (Appeals) has not considered the changing stance of the respondent No. 1/claimant (before him the appellant) which was of pivotal importance and could have safely led him to the just and fair conclusion of the case. It is on the record that in the first instance, the respondent No. 1/claimant approached the Collectorate for authorization of exemption under SRO. 1035(I)/2005, dated 13th October, 2005 which was duly granted, although their supplies were exempt from payment of sales tax under the Sixth Schedule to the Sales Tax Act, 1990, and there was no condition for obtaining permission for such exempt supplies. After realizing their own misconception and apprehension that they will not be able to get their supplies zero-rated in this way, they changed their stance and switched over to the claim of supplies against International Tender, despite the fact that ICRC is already covered under Entry No. 3 (Supplies to Privilege Organizations) to the Fifth Schedule of the Sales Tax Act, 1990 and a detailed procedure thereto has been provided in Chapter-VIH of the Sales Tax Rules, 2005. Since they did not follow the prescribed procedure, therefore, they remained stick to their stance that their supplies were covered by the International Tender and hence, these were zero- rated. We agree with the contention of the D.R. That under the circumstances it is a typical position of approbate and reprobate, which is not acceptable before any Court of Law. According to Law, Terms and Phrases by PLD Publishers, Lahore, 1996 Edition, P. 105, "Approbate" means to take advantage of; a person cannot approbate and reprobate, i.e., take advantage of one portion of a document and reject another portion. We would like to add further the important maxim "Qui approbate non-reprobate" which means he who approbates cannot reprobate. In fact, these were factual controversies which were required to be addressed by the Learned Collector (Appeals) in a pragmatic manner but he hastened to focus his attention only on to the Customs SRO. 1211(1)72005, dated 10th December, 2005 and made it sole basis for his controvertible verdict.
(d) At this juncture, it would be appropriate to analyze the contents of SRO. 1211(I)/2005, dated 10th December, 2005 issued under the provisions of the Customs Act, 1969 and SRO. 1035(I)/2005, dated 13th October, 2005, issued under the provisions of the Sales Tax Act, 1990. The plain reading of SRO.
121 l(I)/2005, dated 10th December, 2005 transpires that Federal Board of Revenue authorizes repayment of whole of customs-duties paid on raw materials used in the manufacture of goods for supply in the earthquake affected areas for relief, rehabilitation and re-construction against International Tenders by UNICEF, UNDP, WHO, WFP, ICRC, GOAL, CARE and Euros, subject to the procedure and conditions contained therein. Conversely, under SRO. 1035(I)/2005, dated 13th October, 2005, goods purchased by approved volunteer government organizations or welfare bodies or supplied by the registered manufacturers for free distribution amongst the earthquake victims were granted exemption from the payment of sales tax vide para 2 of the aforesaid SRO.
(e) After careful analyses of both the aforesaid SROs, it is crystal-clear that the scope of SRO.
1035(I)/2005, dated 13th October, 2005 was to grant exemption from the payment of sales tax on the local supply of relief goods to the earthquake victims while under SRO. 1211(0/2005, dated 10th December, 2005, the Federal Board of Revenue extended the facility of duty drawback of whole of customs duties paid on raw materials used in the manufacture of goods for supply in the earthquake affected areas by the organizations mentioned therein against International Tender. It is thus, obvious that these to SRO's were issued under to different statutes i.e. Customs Act, 1969 and Sales Tax Act, 1990, having different dimensions. The primary object of SRO. 1035(I)/2005, dated 13th October, 2005 was to grant exemption from payment of sales tax on such goods which were being supplied to the earthquake victims for tree distribution amongst them by welfare organizations or manufacturers themselves while under SRO. 121 l(I)/2005, dated 10th December, 2005, duty drawback facility of customs duty paid on raw materials used in the manufacture of goods was available to those manufacturers who supplied such goods to the notified organizations subject to the procedure and conditions notified for this purpose.
(f) We now, revert to the case of M/s. New Green Hotel, Peshawar vs. Deputy Collector (Adjudication), Customs, Excise & Sales Tax, Peshawar, reported in PTCL 2003 CL. 274, wherein it has been held by this Tribunal that central excise duty and sales tax are to distinct taxes, levied under item Nos. 44 and 49 respectively of the 4th Schedule (Federal Legislative List Part-1 of the Constitution of Islamic Republic of Pakistan). The said duty and tax neither are substitutive of each other nor are levied in lieu of on another. Similarly, in the case of M/s. Pak Cement Industries vs. Pakistan FAO 82/67 Lah. H.C. (unreported), it was argued that the Federal Government has allowed the company "8 years tax holiday", and during this period, the excise duty or duty in lieu of excise duty cannot be levied on it. Held that there is hardly any force in this contention. The concession was allowed to the company under the Income Tax Act and company cannot claim the immunity against the provisions of the Central Excise Act (or Sales Tax Act) as well. Likewise, sales tax is an indirect tax, which is demanded from one person under the expectation and intention that he shall indemnify himself at the expense of another. Whereas, custom duty is imposed upon the importer or exporter on the import or export of goods. Both taxes are levied under different statutes. In fact, custom duties in the sense are pecuniary charges or tolls payable upon goods exported from or imported in the country as contrasted with excise duty, which is an indirect tax and is payable upon goods produced or consumed within the country and with the sales tax, which is also an indirect tax and is levied upon manufacturer upon sales. These three categories of taxes do not overlap each other and they are separate and distinct statutes. Thus, if exemption is granted under one statute, the same cannot be claimed under another statute unless and until clearly provided.
(g) Zero rating is an exception to the general scheme of the Act that is, it provides for zero rating of supplies which are otherwise taxable under Section 3 of the Act and as such, the provision of Section 4 read with item 4 of Fifth Schedule to the Act falls in the category of exemptions/concessions/benefits conferred upon the registered person and therefore, while interpreting these provisions, it has been declared by the higher Courts in a number of judgements that the same shall be construed strictly and in case of doubt, the same shall be resolved in favour of the revenue and against the taxpayer. This is a universally accepted principle of interpretation of statutes. In this respect, reliance is placed on the judgement of the Honourable Supreme Court of Pakistan in the case of M/s. Muhammadi Steamship Company Limited vs. Commissioner Income Tax, reported as CA K-69, 1966 PLD 828 wherein it has been held that "provisions granting exemptions or privileges have to be construed strictly against the person claiming exemption or the privilege". In Vol. XXVIH, P.T.C.L, 2010 (Case Laws) view of the aforesaid dictum of the apex Court, the respondent No. 1/claimant is under obligation to prove/substantiate its claim for refund of sales tax paid on supplies against International Tender. However, as already stated earlier, except for letters from ICRC, it has no evidence to prove that supplies were made against an International Tender floated by the ICRC.
(h) In the instant case, the respondent's claim of having supplied the goods against International Tender would have been very well justified, had the tender been floated on an international level covering at least to or more than to countries. The purpose of this provision would have been served if it had been published in a leading daily having circulation in Pakistan and some other country. However, this vital requirement is totally missing in the present case. As such, it does not fulfill the requirements of item 4 of the 5th Schedule to the Act. Whenever a registered person claims an exemption from the general scheme of a fiscal statute, it is his responsibility to the hilt that it has fulfilled all the requirements of exemption/concessionary provisions. The respondent No. 1/claimant has however miserably failed to prove that their supplies fell within the ambit of item 4 of the 5th Schedule to the Act. Accordingly, their claim of refund was liable to be rejected.
(i) We are not inclined#to sustain the plea of the Learned consultant that almost all conditions of international tender including the receipt of sales tax proceeds in foreign exchange from ICRC to which the taxable supplies were made, have been met. The Board vide its letter No. 3(36)STP/99, dated lst April, 2003 has issued Sales Tax Ruling/Instruction No. 06/2003, wherein the issue of sales tax proceeds has been settled. It is held therein that in cases, wherein L.C. Is established or sales proceeds are remitted from the Head Office/Regional Office of the buyer (having multiple offices in various countries), it may be treated as the sales proceeds have been received from the country to which the goods had been exported. We are, however, of the view that the aforesaid Sales Tax Ruling is of no help to him because it relates to export of goods to another country, whereas in the instant case the exempt supplies were made to ICRC in Pakistan for free distribution amongst the victims of earthquake in the shape of relief and rehabilitation operations.
(j) In view of the above abundantly clear legal position, we have no hesitation to conclude that the Learned Collector (Appeals) has seriously erred by reverting to the Customs SRO on the activity solely covered under the expressed provisions of the Sales Tax Act, 1990.
17. After anxious consideration of the extenuating circumstances and the factual and legal issues involved in the instant case and keeping in view the dicta of the Superior Courts, we are of the considered opinion that the respondent's exempt supplies to ICRC were covered under the signed contract as such taxable supplies were made locally within the country as a relief operation and the same cannot be construed as zero-rated supplies against the International Tender under Entry No. 4 of the Fifth Schedule to the Sales Tax Act, 1990. The obvious reason for the same is that neither such supplies were notified by the Federal Government nor by the Federal Board of Revenue under the provisions of the Sales Tax Act, 1990, as notified by the FBR in the case of repayment of customs duty under SRO. 1211 (I)/2005, dated 10th December, 2005, issued under the provisions of the Customs Act, 1969. The respondent's stance that they received remittances from ICRC, therefore, their supplies will qualify for zero-rating under the International Tender has no substance in the eyes of law as the remittances were received against a consideration for performing contractual obligation of supplies of vegetable ghee in the wake of the contract signed between the respondent No. 1/claimant and ICRC. In order to qualify for claiming zero-rated supplies against International Tender, the same will not be construed as such unless and until the Federal Government or Federal Board of Revenue notifies such supplies as already stated in the preceding paras that it is the cardinal principle of taxation statute that the schedule attached to the statute is always regulated by the Federal Government/Federal Board of Revenue by prescribing procedures/rules or notifications issued from the to the. Our this view is further strengthened by the fact that so far, the Federal Board of Revenue has prescribed procedure for making zero-rated supplies against International Tender for Afghan Refugees only, under Chapter VII of the Sales Tax Rules, 2006.
18. In view of the above stated factual and legal position, the instant appeal succeeds and is, thus, accepted. We, therefore, set aside the Order-in-Appeal No. 19-20 of 2007, dated 18.01.2007, passed by the Learned Collector (Appeals) and uphold the Order-in- Original No. 161/2006, passed by the Assistant Collector (Refund) of Sales Tax and Federal Excise, Peshawar.
19. This order shall apply mutatis mutandis to Appeal No. ST. 137/PB/2007 being identical in nature and circumstances, besides involving common points of facts and law.
20. Announced on 08.06.2009.
21. Attested copy of this judgement be dispatched to the concerned parties within ten (10) days of passing of the same.