' Titled appeal has been filed at the instance of the taxpayer against the impugned Order-in- Appeal No,16/A of 2011 dated 24-11-2011 passed by the Commissioner Inland Revenue (Appeals-II, Lahore).
2. Briefly stated, the relevant facts leading to the filing of instant appeal are that the taxpayer in.
This case is a private limited company registered as manufacturer under The Sales Tax Act, 1990.
The appellant manufactured "sheltered houses" which were supplied to Messrs GP BIDC (Pvt.) Ltd.
And Messrs Ideal Hydrotech System Pakistan. Ltd. And two recipients of these supplies have been awarded contract by the Governmentt of Pakistan to establish "Clean Drinking Water Facilities for All" in Balochistan and Sindh against international tenders. According to the appellant, the taxpayer has issued zero-rated invoices while supplying subject shelter houses as supplies relating to the international tenders are zero-rated and consequently the appellant has ' claimed the refund of the sales tax paid as input tax on the materials/goods purchased by the appellant for manufacturing the shelter houses during June 2008 to March 2009. The refund claim was not approved by the Deputy Commissioner Inland Revenue and the rejection was upheld by Commissioner Inland Revenue (Appeals-II), Lahore.
3. We have heard the learned counsel for both the parties and examined the record. The learned A.R. For the appellant has justified the subject refund on the ground that the appellant's shelter houses have been supplied for establishment of "Clean Drinking Water Facilities for All" by the two recipients of these supplies who have been awarded contract under international tenders and hence the supplies of the shelter houses are zero-rated under section 4(a) read with Serial No, 4 of the Fifth Schedule of the Sales Tax Act, 1990.
4. The learned D.R. Argued that the appellant is not the original awardees of the contract by the Government of Pakistan and being subcontractor, hence is not eligible to claim refund with reference to zero-rated sales tax facility. He also pointed out that the appellant has not complied with the relevant rules relating to international tenders under the Sales Tax Rules, 2006. He further pointed out that the appellant has not provided the relevant record to justify the claim for refund and in particular, he referred to pages 106-109 of the Memo of appeal which comprise the contract between Messrs GP BIDC (Pvt.) Ltd. And the Government of Pakistan.
5. The learned counsel for the appellant read and explained the relevant rules relating to International tenders In Chapter VII of the Sales Tax Rules, 2006. He emphasized that these rules have been essentially framed to cater to the requirements of aid given to Afghan Refugees as is apparent from the title of this Chapter which reads "ZERO-RATING OF SUPPLIES AGAINST INTERNATIONAL TENDER FOR AFGHAN REFUGEES". He pointed out that Rule 50 ibid provides that provisions of Rules 45 to 49 shall, mutatis mutandis, apply in case of supplies made against other international tenders. According to him the term mutatis mutandis has been defined in the defined in the Black's Law Dictionary (Eighth Edition) as:-- "[Latin] All necessary changes having been made; with the necessary changes what was said regarding the first contract applies mutatis mutandis to all later ones ."
6. He explained the legal position of appellant's refund under Rules 46, 47, 48 ibid and argued that mutatis mutandis compliance has been made with these rules. He drew our attention to the copies of the contract, zero-rated invoices issued by the appellant, copies of the certificates counter- signed by the Project Director CDWA Project Balochistan and Chief Engineer Public Health Engineering Department Government of Sindh and separate record of zero-rated supplies made by the appellant. He argued that Rule 46(ii) abid refers to the receipt of payment for supply in foreign currency and brought on record copies of Ministry of Industries, Production and Special Initiatives letter C. No, F.No76/CDWA/PMU/2007 which proves that the biding documents, the award of contract and payments made by the Government of Pakistan were all in Pak rupees and hence rule 46(ii) is not applicable to the appellant's case.
7. As regards the A:R's contention of being sub-contractors the appellant relied on two judgments of The Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad Bench-II, Order-in- Appeal No,419 of 2000 and Appeals Nos. 95/ST/IB/2006 and 96/ST/IB/2006 in the case of Messrs M.R. Electric Concern (Pvt.) Ltd. v. The Collector Sales Tax Rawalpindi. Para 7 of the judgment in Appeal No, 419 of 2000 is reproduced below:- "It is admitted fact that the Islamabad Lahore Motorway was completed against International Tender by the National Highway Authority and Ministry of Communication. The supply of P.C. C.
Poles by the Messrs M.R. Electric Concern (Pvt.) Ltd. Which is registered firm under Sales Tax Act (Reg. No,07-01-6810-004-19) were made to the National Highway Authority and on site of the Motorway keeping in view the provisions under section 4(a) of the Sales Tax Act, 1990 read with serial. No, 4 of Fifth Schedule which was further clarified by the CBR vide its letter of 28th March, 1997 cited above. The department has not rebutted the contention of the appellant that they have not supplied PCC poles on site for Motorway project or documents on record issued by the National Highway Authority are not genuine. We are therefore of the considered view that the supplies of PCC poles by Messrs M.R. Electric concern (Pvt.) Ltd. Are covered under the exemptions at Serial No, 4 of the Fifth Schedule read with section 4(a) of the Sales Tax Act, 1990. The Order-in- Original No, 20 of 1999 passed by the Additional Collector, Sales Tax, Rawalpindi is set aside and the appeal is accepted."
8 The learned D.R. Was asked to comment on these decisions but he reiterated that the appellant being sub-contractor is not eligible to the zero-rating facility.
8. The appellant has also claimed zero-rating facility under Serials Nos. 3 and 7 of S.R.O.
549(1)/2008, dated 11th June 2008. The relevant part of the S.R.O. 549(1)/2008, dated 11th June 2008 is reproduced below:--'
S. No. Description of Goods Conditions and Restrictions
(1) (2) (3)
3. (i) ------------.. (ii) Plant, machinery and equipment, whether locally manufactured or imported------------.. (ii) Supplies thereof; Provided that the expressions "plants" "machinery" and "equipment" mentioned in this serial number do not include consumer durables and office machines.
7. Raw materials, components, sub- components and partsIf imported or purchased locally for use in the manufacturing of such plant and machinery as is chargeable to sales tax at the rate of zero percent subject to the condition that the importer or the purchaser of the raw materials, components, sub-components and parts holds a valid sales tax registration showing his registration category as "manufacturer".
' The appellant produced a copy of the Sales Tax Registration certificate showing their status as manufacturer. It was further explained that the subject shelter houses are covered by the term "plant and machinery" as mentioned above, in this regard reliance was placed on 2011 PTD 569.
(Aisha Steel Mills (Pvt.) Ltd. Karachi and others v. Federation of Pakistan through Secretary Revenue Division/ Chairman Federal Board of Revenue Islamabad and others). He contended that the term "plant and machinery" has been elaborately examined in this judgment and the High Court has held that prefabricated buildings and sheds are integral part of "plant and machinery". According to the learned A.R., the appellant's. Shelter houses are integral part of the Clean Drinking, Water Plants installed by the Government.
10. In the impugned assessm ent order and impugned order-in-original the afore-mentioned justification of refund claims under S.R.O. 549(1)/2008, dated 11th June 2008 has been mentioned but not examined and considered with the objection that these grounds are beyond the scope of show cause notice. The appellant emphasized that the scope of a show cause notice, as far as prosecution is concerned, is limited to the charges mentioned therein but it can never restrict any valid defense which is relevant to the facts and legal position of the case. The appellant relied on 2005 PTD 480 (Caltex Oil (Pakistan) Ltd. v. Collector of Excise and Sales Tax) wherein the Supreme Court held that a question of law can be raised at any stage even for the first time in the Supreme Court of Pakistan.
11. The D.R, at this stage was asked by the court whether any further inquiry relating to the facts of the case is pending, to which he replied in the negative and stated that no such inquiry is pending.
He repeated the stance as to the aforesaid plea being outside the scope of show cause notice as mentioned in the two impugned orders passed by the lower fora.
12. We have given careful consideration to the submissions made by the learned A.R. And the learned D.R. As well as record of the case. As claimed by the appellant, the subject refund claims relate to the input tax paid on the raw material and the goods which have been used for the manufacturing of shelter houses by the appellant. These shelter houses have been supplied on the basis of zero-rated invoices and used as integral part of Clean Drinking Water plants. It is not disputed that contract for "Clean Drinking Water Facilities for All" has been awarded by the Government of Pakistan on the basis of international tenders. We are inclined to agree with the submissions made by the appellant that relevant rules contained in chapter VII titled as "ZERO- RATING OF SUPPLIES AGAINST INTERNATIONAL TENDER FOR AFGHAN REFUGEES" of the Sales Tax Rules, 2006 are basically meant for aid supplied to Afghan refugees and these can only be applied mutatis mutandis to other international tenders. For instance, if a contract by the Government of Pakistan is awarded in Pak rupees and the payment is also made in Pak rupees, condition relating to documentary evidence as to payment in foreign currency under rule 46(ii) ibid cannot be made applicable. The appellants have provided relevant record along with the Memo of Appeal and the D.R. Has stated before this Tribunal that no further inquiry as to facts of the case is pending. We have examined the two, judgments of the Tribunal relied upon by the learned A.R. And we are in agreement with the principle of law deduced therein. The sales tax in Pakistan is essentially a value added tax and its burden is ultimately passed on to the consumer. Resultantly under the zero- rating scheme, sales tax is not payable/refunded where the end consumer is not to be burdened with this levy. "Clean Drinking Water Facilities for All" relates to a social welfare measure aimed at improving the general health of the society and hence the project has been zero-rated. Keeping in view the above discussion the appellant's supplies of shelter houses are zero-rated supplies.
13. We are also inclined to agree with the contention of learned A.R. That appellant's refund claims are covered by serial Nos. 3 and 7 of S.R.O. 549(I)/2008, dated 11th June 2008. We have given careful consideration to the Karachi High Court judgment 2011 PTD 569 (Aisha Steel Mills (Pvt.) Ltd. Karachi and others v. Federation of Pakistan through Secretary Revenue Division/Chairman Federal Board of Revenue Islamabad and others) wherein the term "plant and machinery" has been extensively examined in detail and High Court has held the prefabricated buildings and sheds to be integral part of "plant and machinery". The failure of the lower fora to consider this justification for refund on the ground of the same being an afterthought, is contrary to accepted principles of law laid down by the superior courts. The honorable Supreme Court of Pakistan has held that a question of law can be raised at any stage. Resultantly it is evident that the appellant's refund claim is also covered by Serials Nos. 3 and 7 of S.R.O. 549(1)/ 2008, dated 11th June 2008.
14. In view of the above discussion and the case law cited supra, the appeal is accepted, the impugned assessm ent order and Order-in-Original ordered to be annulled and the refund claims directed to be paid to the appellant.
15. Appeal allowed.