YAHYA AFRIDI, J.---Through this single judgment, this Court proposes to dispose of fifteen writ petitions, as they all have common questions of law involved therein. The particulars of the said writ Petitions are as follows:--
(1) Writ Petition No.916-P/2013 with I.R. & C.M No.344/2012. (M/s. Taj Packages Company (Pvt.) Ltd.
Sakhakot Zarabad, Near Taj CNG, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(2) Writ Petition No.920-P/2013 with I.R. (M/s Taj Wood Board Mills (Pvt.) Ltd Main Road, Opposite Ali Flour Mills, Near Taj Ghee Mills, Sakhakot, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(3) Writ Petition No.1830-P/2014 with C.M No.204-P/2015. (M/s. Sher Steel Furance & Re-Rolling Mills Main Road Dargai, Malakand Agency, PATA v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and eight others).
(4) Writ Petition No.190-P/2015 with C.M No.15-P/2015. (M/s. Universal Steel Mills Ghallanai, Mohmand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(5) Writ Petition No.192-P/2015 with C.M No.18-P/2015. (M/s. AK Tariq Foundry Aka Khel, Alam Godhar, Bara Road, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(6) Writ Petition No.194-P/2015 with C.M No.21-P/2015. (M/s Mohmand Moulding Works Shah Kas, Jamrud, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(7) Writ Petition No.221-P/2015 with C.M No.24-P/2015. (M/s Alhaj Foundry, Shah Kas, Bara Road, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(8) Writ Petition No.917-P/2013 with I.R & C.M No.345-P/2013. (M/s. Taj Packages Company (Pvt)
Ltd Sakhakot Zarabad, Near Taj CNG, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(9) Writ Petition No.919-P/2013 with I.R. (M/s Taj Wood Board Mills (Pvt) Ltd Main Road, Opposite Ali Flour Mills, Near Taj Ghee Mills, Sakhakot, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(10) Writ Petition No.1644-P/2014 with I.R. (Umar Zada s/o Malak Zada Managing Partner of M/s Pearl White Packages v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and four others).
(11) Writ Petition No.1831-P/2014 with COC No.80-P/2015. (M/s Sher Steel Furance & Re-Rolling Mills Main Road Dargai, Malakand Agency, PATA v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and eight others).
(12) Writ Petition No.191-P/2015 with C.M No.16-P/2015. (M/s Universal Steel Mills Ghallanai, Mohmand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(13) Writ Petition No.193-P/2015. (M/s AK Tariq Foundry, Aka Khel, Alam Godhar, Bara Road, Khyber Agoncy v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(14) Writ Petition No.195-P/2015 with C.M No.23-P/2015. (M/s Mohmand Moulding Steel Furnace Shah Kas, Jamrud Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
(15) Writ Petition No.222-P/2015 with C.M No.25-P/2015. (M/s Alhaj Foundry, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others).
2. There are two sets of petitions; in the first set of petitions, stated herein above at serial Nos.1 to 7, the petitioners seek to invoke the Constitutional jurisdiction of this Court, praying essentially that:- "It is, therefore, respectfully prayed that on acceptance of this petition, an appropriate writ/order may kindly be issued declaring that petitioner's import to FATA or PATA are not liable to Income Tax."
While, in the second set of petitions, listed hereinabove at serial Nos.8 to 15, the petitioners have essentially sought that:- "It is therefore, respectfully prayed that on acceptance of this petition, an appropriate writ/order may kindly be issued declaring that petitioner import to FATA or PATA are not liable to Sales Tax. "
3. In essence, the petitioners have a common contention that they are carrying on business in Federally Administered Tribal Area ("FATA") or Provincially Administered Tribal Area ("PATA") and so the advance tax and sales tax levied upon imports being made by the petitioners for its consumption within the territorial jurisdiction of FATA or PATA are beyond the purview of levy and collection regimes provided in the Income Tax Ordinance, 2001 ("Ordinance"), and the Sales Tax Act, 1990 ("Act"), as the said enactments have not been extended to FATA or PATA in terms of the command of Article 247(3) of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution").
Accordingly, the petitioners seek issuance of appropriate writ, declaring that the goods imported by petitioners and destined for consumption in FATA or PATA are not liable to advance Tax and Sales Tax under the relevant enactments.
4. The submissions of the worthy counsel for the petitioners can best be recaptured in the written arguments that he submitted, wherein it was, essentially contended that:-- "Petitioner has to import the aforesaid (i) raw material far consumption in their units and (ii) machinery for upgrading and updating of their units which import in view of Article 247(3) of the Constitution cannot be subject to Taxes leviable either under the Income Tax Ordinance, 2001 or under the Sales Tax Act, 1990.
2.1 That despite of prevalent sunshine legal position, the Customs authorities bent upon to charge payment of aforesaid taxes.
2.2 The petitioner explained to Customs authorities as being a unit of the FATA, their consignments are not liable to any income tax for being destined and to be consumed in FATA / PATA to which so far the aforesaid two statutes have not been extended yet, authorities refused to submit to the Constitution.
2.3 Hence, petitioners invoked the constitutional jurisdiction of this honourable Court to protect their constitutional immunity against payment of Sales Tax and Income Tax more precisely at import stage.
3. That in the following it is hereby demonstrated that how despite of immunity from the taxes leviable under the Income Tax Ordinance, 2001 because of its non-extension in terms of Article 247 ibid how the petitioners is being subjected to income tax specially at import stage.
3.1 That Income Tax Ordinance, 2001, is a DIRECT TAX where the incident of tax is to. Be borne by the tax payer.
3.2 That relevant to the case it is not the provisions of the Customs Act, 1969 per se rather it is section 148 of Income Tax Ordinance, 2001 which empowers the Collector Customs to collect income tax at import stage.
3.3 That the income tax collected at import stage is either final tax liability or adjustable / deductible against the final tax liability.
3.4 That in case of imports of industrial raw material- or machinery under subsection (7) of Section 148 ibid these are final tax liability rather adjustable towards assessed liability.
3.5 Thus, tax paid by the industries of settled area at import stage on import of raw material or machinery are adjustable against the final tax liability assessed in their Return filed under section 114 ibid or against the Assessment Orders passed under sections 120, 121, 122 of the Ordinance.
3.6 That the final liability of income tax primarily to be discharged by filing Annual Return under section 114 ibid (base on profit and loss account) or Annual Statement under section 115 ibid in case of final tax liability.
3.7 That under section 209(3) ibid, the income tax assessee files their tax returns either before the Commissioner of Income Tax having jurisdiction either on his place of business or place of residence.
3.8 That petitioners being a resident of FATA at first place have (i) neither have a taxable income
(ii) nor having Income Tax Authorities having jurisdiction either upon their place of business or residence, thus, (iii) stricto sensu no valid legal mechanism available through which tax paid at import stage be refundable to them.
3.9 That in view of the above, where the petitioners having no final taxable income collecting of tax at import stage is not only against the law but also in naked violation of the Constitution.
3.10. Attention is invited, inter alia, to clause 72(B) of the Second Schedule ibid, if there is no likelihood of any tax payable at the end of the year then tax payable under section 148 ibid at import stage is exempted to him.
3.11 That on analogy of clause 72(B) ibid where the petitioners liability under the Income Tax Ordinance, 2011 in view of Article 247(3) of the Constitution can never arises, therefore, without prejudice of constitutional immunity, petitioners imports of raw material and machinery are like industrial importers of the settled areas are otherwise exempt from Income Tax at import stage.
3.12 That there are host of importers of different categories who enjoy exemption under various provisions of the Income Tax Ordinance, 2001 and their consignments are released without any payment of Income Tax without any apprehension and fear then the reluctancy in case of industries of the Tribal Area smells mala fide, discrimination because of their place of business and residence which is a stark violation of fundanental rights as protected under Articles 18, 23, 24 and 25 of the Constitution.
3.13 That approach of the Revenue is against the letter and spirit of Article 37 of the Constitution which ordain that the state promote the downtrodden Areas and people vis a. Vis of the developed (settled) Areas. .
4. That now tax leviable under the Sales Tax Act, 1990, which is an indirect tax, a final incident of tax is to be borne by the end consumers which is incidentally for the first instant is the petitioner who is an industrial consumer for importing of their consumption within their industries and in final analysis their buyers/end consumers of their products are also residentsee of FATA, who in view of Article 247(3) ibid cannot be charged for sales tax as delineated below: 4.1 That as the sales tax is based on Value Added Tax (VAT) System, therefore, it considers (i) the importer, (ii) the manufacturer, (iii) the dealer, (iv) the Distributor, (v) the whole seller and (vi) the retailer as intermediatory, a mere collecting agent to transmit the incidence of tax from importer / manufacturer to the end consumers.
4.2 That the reading sections 3,4,6,7,8(A), 10,23 and 26 ibid provide a CHAIN as to how tax paid at import stage is to be finally transferred to or exacted from the end consumers.
4.3 That under the Sales Tax Act, 1990, there are two charging sections.
4.3.1 Section-3 whereby imports and local supplies are charged at varying rates say ad valorem 17% or at reduced rates or specific rates.
4.3.2 Section 4 whereby imports, local supplies and exports are charged subject to zero rate of sales tax.
4.4 That import stage again not the provisions of the Customs Act, 1969 per se rather it is section 6 ibid, empowers the Collector Customs to collect the sales tax leviable under the Sales Tax Act, 1990.
4.5 That in the instant case, the petitioners per se consumers (industrial consumer) and buyer of their finished product being resident of FATA/PATA are not liable to pay sales tax because of non- extension of Sales Tax Act, 1990 in terms of Article 247(3) of the Constitution as held by the three Members Bench of the apex Court headed by the honourable Chief Justice Mr. Justice Iftikhar Muhammad Chaudhry in C.As. Nos.811 to 818/2008 dated 24.6.2011.
4.6 That due to non-extension of Sales Tax Act, 1990 to FA TA, the petitioners can neither issue a sales tax invoice under section 23 ibid nor can file Sales Tax Return under section 26 ibid so as to retrieve or recover the tax paid at import stage under section 7 ibid from the buyers/consumers incidentally resident of Tribal Areas.
4.7 That registered person under the Sales Tax Act, 1990 can file monthly sales tax return under section 26 ibid to the authority having jurisdiction over its place of business which authority is non-existence in case of the petitioners.
4.8 That under section 13 ibid there are lot of goods and a lot of importers of the Tariff Area whose imports are exempt and they are importing and transporting their exempted goods to their place of business without any conditions to and selling their finished product without any hindrance all over the country.
4.9 That Gadoon i.e is one of the examples where both imports and their subsequent supplies were exempt and is being supplied to all over the country.
4.10 That where petitioners imports are constitutionally immune from the tax leviable under the Sales Tax Act, 1990, therefore, the apprehension of the revenue merely On the basis of place of business is not only harsh, discriminative but also in violation of the Constitution.
5. In rebuttal, the worthy counsel for the Revenue has also submitted his written arguments, which are essentially in terms: "(a) That the instant writ petition is not acceptable as it should be filed in Darul Qaza and should not be filed at principal seat.
(b) That the adequate remedy is available to petitioners and can avail that remedy i.e petitioner can file application or presentation under different provisions of the Income Tax Ordinance, 2001, Sales Tax Act, 1990, Customs Act and Federal Excise Act, 2005. Furthermore, if even then the petitioner is aggrieved from concerned officer order on the application of the petitioner then appeal or revision or review provision is also available in hierarchy under the Income Tax Ordinance, 2001, Sales Tax Act, 1990, Customs Act and Federal Excise Act, 2005.
(c) That in every law exemption provision is also available and the petitioner can come under that provision and can seek exemption from the concerned quarters and if not satisfied from concerned quarters order then even can file writ petition but direct filing of writ petition is not appropriate.
(d) That similarly, the provision of the refund is also available to petitioner and if the petitioner thinks that any amount or tax or levy is wrongly collected so then he can apply for refund to respondents.
(e) That the matter is decided matter and this Honourable Court has already decided the matter in favour of respondent and this is golden principle of law that this being identical matter may also be decided in same way and the writ petition in hands may be dismissed with costs.
(f) That the import goods is raw material that there is no guarantee that these goods consume in an area where Income Tax has not been extended with an Art 247(3) of the Constitution.
(g) That the petitioner can apply under section 159 of the Income Tax Ordinance, 2001, to concerned officer needless to mention that the respondents gave exemption to those persons who were not belonging to FATA but they establish the case and the respondents gave exemption without any delay.
(h) That if the petitioner is not satisfied over the order Under section 159(4) then petitioner can apply very smoothly under section 122(B) for revision in Income Tax Ordinance, 2001.
(i) That 'the petitioner can also apply under section 193 of the Customs Act, 1969 if not satisfied from any assessment under section 80 or provisional assessment under 81 of the Customs Act, 1949.
(D That there are certain provisions for exemption under different Income Tax Ordinance, 2001, Federal Excise Act, 2005 etc so the petitioner may apply under those provision for exemption.
(k) That similarly in past the worthy court declared that once the taxable events is import in to Pakistan then it is immaterial that these goods meant for consumption in an area where the tax has not been extended within the terms of Art.247(3) of the Constitution, 1973.
(1) That there are numerous judgments in which on the same point the petitions are dismissed i.e W.P. No.854 of 2006 M/S Lal Ghee v. Pakistan etc., W.P. No-589 Government of Pakistan, W.P.
No.1845/11, M/S Roshni Mat v. Collector Customs etc, Review Petition No.44/11 M/S Star Plastic v.
Collector Sales Tax etc., W.P No.3564/2010 decided on 12.6.2014 M/S Adil Corporation v. Government of Pakistan etc., W.P No.459/2010 decided on 18.10.2012 M/s. Waziristan Flour Mills v. Government of Pakistan etc, 2008 PTD 196 Commissioner Income Tax v. M/s Gul Cooking Oil and six others.
(in) That this is duty of respondents Nos.5 and 6 to collect duty and taxes from petitioner under section 81 and others provisions of the Customs Act and other laws.
6. Before this Court considers the contested contentions of the parties, it is essential to note that the Ordinance and Act have not been extended to FATA or to PATA, within the contemplation of Article 247(3) of the Constitution.
7. It is a matter of record that, this High Court, and the august Supreme Court have in the past rendered their valuable findings on the extent of applicability of the provisions of Act and the Ordinance, to persons carrying on business in FATA and PATA. The review of the said decisions, reveal that the views of the superior Courts have evolved with time.
8. In the circumstances, it would be appropriate for this Court, to first trace the stages of evolution in the judicial views, so rendered by this Court, and that of the august Supreme Court. For clarity, the same are discussed, herein below in chronological order, as follows:- 4.01.2000. Gul Cooking Oil's case (Writ Petition No. 1278 of 1999)
The High Court accepted the petition and held that Income Tax Ordinance, 1979 ("Ordinance of 1979"), is not applicable to Malakand Division, within the contemplation of Article-247 of the Constitution. The notices issued to the company by the Revenue under sections 56 and 63 of the Ordinance of 1979, were declared illegal and without lawful authority. There was also direction to the Revenue to release the raw material of the petitioner-company without deducting 2% of withholding tax at import stage.
25.04.2003. Gul Cooking Oil's case (Civil Appeal No.1578 of 2000)
(Three member Bench)
The apex Court upheld the decision of the High Court, interalia, declaring that the company in the instant case being situated in the Tribal Area, where Ordinance of 1979 has not been extended within the meaning of Article 247(3) of the Constitution, as such, would stand exempted from payment of income tax.
24.11.2004.Master Foam's case (PLD 2005 SC 373).
(Five member Bench)
Import destined to the petitioner-company carrying on business in Azad Jammu Kashmir, was made liable to payment of sales tax at Karachi Port at import stage, under section 3(1)(b) of the Act, in terms that:-- "15. Admitted facts in these cases are that the appellants operate manufacturing units in AJK, which is not part of Pakistan and that they import raw material for said manufacturing units through Karachi. The goods so imported arrive at the Port of Karachi, are unloaded there, sometimes even stored there for a while, and then re-loaded for AJK. It is significant to note that the Act of 1990 has been adopted by the AJK Government vide the Sales Tax (Adoption) Act, '1993 (Act No.IV of 1993) and its section 2(4) reads as follows: "In determining the input tax under subsection (1) the amount paid as input tax at the import stage to the customs authority in Pakistan shall be deemed to have been paid in Azad Jammu and Kashmir for the purpose of adjustment against the tax liability on the finished goods."
16. It is also a fact that in Pakistan there is no exemption from sales tax on the goods imported by the appellants herein. AJK has not levied or collected any sales tax at the import stage on goods imported by the appellants into AJK from Pakistan. The appellants are aggrieved of the demand by the Tax Authorities in Pakistan that sales tax be paid on the raw material imported by them through Karachi 27. From above it is clear that right from 1963 till date the Courts in Pakistan have consistently given the word 'import' its natural and ordinary meaning of 'bringing into' the country and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of original package. It being so, we are of the view that there is no scope that the word 'import' should be given a different meaning than what appears in section 3(1)(b) of the Act of 1990, especially when there is nothing in the statute to indicate that different meaning was intended by the legislature. It appears that the Legislature, by not defining the word 'import' in the Act of 1990 desired the interpretation of said word in accordance with the following principle: "....When a Legislature uses in a statute a legal term, which has received a judicial interpretation, it is to be presumed that the term has been used in the sense in which it has been judicially interpreted, unless a contrary intention appears from the statute."
28. Thus, the goods were imported into Pakistan by the appellants when they entered the territory of Pakistan and became liable to taxation accordingly. It is immaterial that ultimately they were to be transported to AJK. This is for the reason that import into Pakistan is a distinct taxable event independent of any event following thereafter."
19.02.2007. Mahsud Ghee Industries' case (CPLA No. 307 of 2004). (Two member Bench)
The apex Court upheld the decision rendered by this Court and dismissed the petition for leave to appeal of the Revenue, More - importantly, the august Supreme Court rendered a clear finding that the decision in Master Foam's case (supra) would not be applicable to cases relating to FATA and PATA in terms that:- "6. We are afraid, the principle laid down in Master Foam case (supra) can hardly be borrowed and extended to the facts of the present case when all the writ petitioner industries were set up and engaged in the manufacture of ghee in the nontaxable territory, to which the provisions of Ordinance, 1979 or 2001 Ordinance were neither applicable nor extended through any direction by the President or the Governor, NWFP within the meaning of Article 247 (3) of the Constitution.
Any interpretation to the contrary, in our view, would appear to be repugnant to the spirit and clear mandate of the Constitution.
7. It was vehemently contended that on arrival of the raw material at the Port of Karachi, the goods became liable to payment of advance income tax irrespective of the declaration and ultimate destination of the goods to the territories, to which the Ordinance, 1979 or 2001 Ordinance was not applicable. It was also urged that notwithstanding the location of the industries in PA TA and FA TA, respondents-companies with registered offices in Islamabad under the provisions of Companies Ordinance, 1984 and the respondents ultimately selling some of the products in settled areas could not avoid the payment of advance tax. The argument, on the face of it, appears to be devoid of any merit and is fallacious, as irrespective of the fact of registration with the Registrar of Companies at Islamabad, writ petitioners had unequivocally declared before the High Court that they were permanent residents of Tribal Areas and carrying on business in such territories, therefore, they were not liable to pay income tax. Mr. Mumtaz Ahmad Sheikh, vehemently urged that the writ petitioners after the payment of advance tax could adjust and claim refund of the amount paid in advance after obtaining a certificate of exemption from the Commissioner, Income Tax, Peshawar, the fact remains that the respondents-industries' stance is that they do not derive any taxable income within the territory where they are permanently settled and where their business is carried on. Thus, irrespective of the defence, requiring in-depth factual enquiry and not at all controverted by the petitioners before the High Court and rather conceding to the acceptance of the writ petitions would hardly carry any weight. Indeed, in the face of a clear and elaborate enunciation of law on the subject involving liability for payment of income tax in Gul Cooking Oil (supra), very act of filing the petitions for leave to appeal was ill-advised, misconceived and uncalled for.
8. Lastly, a feeble attempt was noted to persuade this Court to grant leave because in C.P.L.As Nos.1150 to 1154 of 2006, another Bench of this Court has granted leave to appeal on 15.1.2007. In the absence of the facts of such petitions, the judgments of the High Court and the precise questions of law arising out of such judgments, leave grant order can neither bind this Court nor has any persuasive value so as to grant leave without due consideration of the question of law involved in the instant petitions.
97 For the aforesaid facts, circumstances and reasons, we find no merit in these petitions, which are devoid of any force and accordingly dismissed."
(emphasis provided)
05.03.2007. Gul Cooking Oil's case (2008 PTD 169). (Five member Bench of the Apex Court)
The Revenue sought review of the earlier decision of the Apex Court, the relevant findings regarding the facts leading to the case, and the legal discourse on the constitutional applicability of the levy on the persons carrying on business in PATA was discussed by the Apex Court, in its decision in review jurisdiction, in terms that: "2. The facts of the case in small compass leading to the filing of present review petition are that Deputy Commissioner Income Tax, Peshawar issued a notice to the respondent No.1, a Joint Stock Company under section 56 of the Income Tax Ordinance, 1979, for filing return of income tax for the assessment year 1998-99. The Company without filing return, raised an objection to the legality of the notice with the assertion that Income Tax Ordinance, 1979, was not applicable in the tribal area of Malakand Dargai where the factory of the Company with its registered office, is situated and is carrying its business. The Deputy Commissioner of Income Tax then served a notice under section 61 of the ibid Ordinance to the Company for production of books of accounts of its business, but the Company instead of contesting the notice before the department, challenged its legality before the Peshawar High Court, Peshawar, in a writ petition which was allowed by a learned Division Bench of the High Court vide judgment dated 4.1.2000.
The petitioner assailed the judgment of the High Court before this Court in C.A No.157 of 2000, but failed and hence this review petition.
3. The case of the petitioner department is that Collector of Customs, Karachi insisted for recovery of withholding tax from the respondent under section 80(DD) read with section 50(5) of the Income Tax Ordinance, 1979 as under the law, he was obliged to collect the advance tax on imported goods, in the present case edible oils on the basis of the value as provided there under and since the company was carrying business of manufacturing and sale of its products not only in Malakand Dargai where its industry was set up and registered office was established but was also running its business in the settled areas in which Income Tax Ordinance, 1979, was applicable and consequently, the respondent Company was liable to pay income tax in respect of the income derived by it from the business being carried on in the taxable area."
"There is no cavil to the legal position that exemption under the law from payment of income tax is available to a person or company carrying its business in tribal areas and income tax cannot be collected from such person or company by the tax collecting authorities of the Government unless the law relating to the collection of Income Tax is extended to the tribal areas by virtue of Article 247 of the Constitution. However, the question whether a company or a person derives income from business being carried out in taxable or non-taxable area is a pure question of fact which cannot be decided without holding proper inquiry for determination of controversial facts regarding the tax liability. The business of a person or Company may or may not be confined to a particular place or are rather it may be expended beyond the local limits of the area in which Income Tax Ordinance is not applicable and thus if the income tax is derived from the sale or products which are manufactured in the factory situated in nontaxable area both from taxable and nontaxable area, the question relating to the tax liability of such a business concern cannot be determined only on the basis of location of factory or its registered office rather the requirement of law in such case is to hold a proper inquiry and ascertain the correct factual position for determination of tax liability. The exemption from payment of tax is certainly available on the business being carried in tribal area in which income tax law is not applicable but the real question for determination in the present case would be that a company with its manufacturing unit and registered office is non-taxable area, if is also carrying business in taxable area is exempted from payment of income tax on its income as a whole or only on the income being derived from non-taxable area.
The careful examination of the record would suggest that no material was brought before the High Court or this Court on the basis of which a positive opinion could be formed about the business activities of the company and its tax liability for the purpose of exemption of income tax. It is apparent on record that this essential aspect of the case escaped the notice of this Court and instead the question of taxability was decided only on the basis of consideration that the registered office of the company was situated in tribal areas in which the Income Tax Ordinance, 1979, was not applicable. In the light of the factual position narrated above, the controversial question as to whether the company was carrying business only in the tribal area or it was also operating in the settled area and was liable to pay income tar, requiring determination has not been attended. It is thus manifest on the record that this essential aspect of the case was overlooked in the judgment, which has caused serious prejudice to the case of petitioner on merits. In view thereof, we are of the considered opinion that review of the judgment in the present case is fully justified as it is crystal clear that immunity from payment of Income Tax could not be claimed without establishing the fact that taxable income was not being derived from the area where the Income Tax Ordinance, 1979 is applicable.
The upshot of the above discussion is that this review petition succeeds and in consequence thereto the Income Tax Department is competent to proceed in the matter in accordance with law."
(Emphasis provided).
18.11.2009. Mahsood Ghee Industries' case (CRP 64/2007).
(Two member Bench of the Apex Court)
The Revenue also sought review of the judgment dated 19.2.1997 passed by the Apex Court, which was decided in terms of the principles settled by the Apex Court in its decision in review of its judgment in Gul Cooking Oil's case (supra) in terms that: "Since notice was issued to the respondents in terms of the order dated 18.6.2007, reproduced above, it follows that the judgment in review dated 5.3.2007 is squarely attracted to this case.
For the reasons noted in the aforesaid judgment in Civil Review Petition No.63 of 2003 in order dated 19.2.2007 is reviewed in terms of the judgment dated 5.3.2007. The Review Petitions are, therefore, allowed in view of the principle enunciated in the judgment dated 5.3.2007 reproduced above."
18.12.2009. Messers Lal Ghee Oil Mills (2010 PTD 438).
This Court while deciding, whether the Revenue could levy and charge Federal Excise and Regulatory Duty on edible oil at the import stage, when the same was destined for consumption in the Tribal Area, where the Federal Excise Act had not been extended in view of Article 247(3) of the Constitution, went on to hold that:-- "Once the goods are imported into Pakistan, they are liable to be taxed under the acts mentioned above or the SROs issued thereunder regardless of altogether of the fact that those have been imported for being transported to be consumed in an area where neither of the enactments mentioned above or SROs issued there under are applicable....."The question with regard to refund of duty collected, thus, does not arise in this background, If, at all there is a discrepancy in collection had been related to the factual controversy can well be urged in a proper forum. We, thus, would not hesitate to hold that the import of goods being within the regime of the acts mentioned above can not be exempted from the levy."
24.2.2011. Excellence Plastic's case (W.P No.2212 of 2006 decided on 24.2.2011).
This Court declared that levy of advance tax on import of goods to be consumed in manufacturing units situated in FATA was legal and valid.
24.2.2011. Roshni Mat's case (W.P No. 1845 of 2005 decided on 24.2.2011).
This Court held that the Sales Tax on import of goods was valid, as taxable event is import of goods, which has nothing to do with its onward transportation to an area, which is outside the applicability of the Act.
27.5.2014. Abdul Shakoor Proprietor's case (Tax Reference No. 15 of 2009.)
This Court while rendering its opinion, held that the Income Tax Appellate Tribunal was not justified to accept the claim of the taxpayer regarding exemption from advance tax under section 148 of the Ordinance, without carrying out a definite inquiry, as to whether the respondent taxpayer has been carrying on business in non taxable area or otherwise, as was directed by the apex Court in Gul Cooking Oil's case (supra),
9. On reviewing the valuable legal discourse rendered by the superior Courts in the aforementioned judgments, the summary of the judicial pronouncements on core issues rendered, are as follows: Supreme Court.
(1) That the Ordinance and the Act have not been extended to FATA or PATA within the contemplation envisaged under Article 247 (3) of the Constitution.
(II) Persons carrying on business and deriving income within FATA or PATA would not be liable to payment of Sales Tax and Income Tax under the Act and the Ordinance, respectively.
(III) The principle laid down in Master Foam's case (supra) cannot be borrowed and extended to a person carrying on business in FATA or PATA, as the Ordinance has not been extended to FATA or PATA.
(IV) The only exception to the general rule of exemption from payment of Income Tax under the Ordinance to a person carrying on business in FATA or PATA is when the said person extends its business beyond the territorial limits of FATA or PATA into the settled areas.
(V) The Revenue has the authority under the Ordinance to carry out an inquiry to ascertain whether the person is carrying on business in FATA or PATA or has extended the scope of it business or commercial activities beyond the territorial limits of the said area into the settled area.
(VI) The final judgment in the field, which is to determine the applicability of the Ordinance, would be adjudged on the principles laid down in the judgment of the Apex Court in review of its decision in Gul Cooking Oil's case, which was also confirmed in the decision of the Apex Court in Review of its decision in Mahsood Ghee Industries' case.High Court.
(I) Sales Tax and Advance Income Tax is leviable at import stage from persons carrying on business in FATA or PATA.
(II) Sales Tax paid at import stage is nonrefundable to a person carrying on business in FATA or PATA.
10. In view of the above, it is striking to note that this Court, while rendering its decisions in M/s Lal Ghee Oil Mill's case (supra), Excellence Plastic's case (supra) and Roshni Mat's case (supra), has not taken into consideration, the clear findings of the Apex Court rendered in Mahsood Ghee Industries' case, regarding the non-applicability of the principle laid down in Master Foam's case concerning persons carrying on business in FATA, in view of the command of Article 247(3) of the Constitution.
11. When the worthy counsel for the Revenue was confronted with the above position, he responded by contending that the above mentioned decisions of this Court had correctly applied the principles laid down in Master Foam's case for the following two reasons: First, that the principles laid down by a five members Bench of the Apex Court in Master Foam's case (supra) had a precedence over the decision rendered in Mahsood Ghee Industries' case, by a worthy Bench of two eminent learned Justices of the august Court.
This Court is in complete consonance with the general principle relating to precedents that, the decision of the larger Bench of the Apex Court is to be given precedence over its other decisions.
However, in the peculiar circumstances, the Apex Court, while deciding Mahsood Ghee Industries' case, rendered a specific finding that, the principle laid "down in Master Foanz's case related to Azad Jammu Kashmir and could not be made applicable to cases relating to FATA, mainly for the reason, that the Ordinance of 1979 and the Ordinance of 2001 "were neither applicable nor extended through any direction by the President or the Governor, NWFP within the meaning of Article 247 (3) of the Constitution. Any interpretation to the contrary, in our view, would appear to be repugnant to the spirit and clear mandate of the Constitution."
Once, such a pronouncement was made by the Apex Court, even if it is of a worthy Bench comprising of two esteemed Justices, it would not be legally appropriate for the High Court to ignore such a specific finding. Moreso, when the decision of the Apex Court in Gul Cooking Oil's case and Mahsood Ghee Industries case, in its review jurisdiction, were subsequent in time to the decision in Master Foam's case and the specific finding stated hereinabove, in the decision of Mahsood Ghee Industries case was not disturbed by the Apex Court in the said subsequent decision. Furthermore, there is a stark difference in the constitutional command relating to applicability of law to FATA/PATA (Article 247) and Azad Jammu and Kashmir (Article 258). The intention of the legislature is evident from the bare reading of the said provisions of the Constitution. Thus, any law or principle laid down for Azad Jammu Kashmir, would not be applicable to FATA or PATA. Moreover, even the facts leading to the decision of the Apex Court, in Master Foam's case are reviewed, it would be apparent that Lhe same are contrary to the peculiar circumstances of the present cases, and ,hence the ratio of the decision would not be applicable to the present cases. The said judgment dealt with the adjustment of the input tax paid at the import stage to the custom authorities in Pakistan, against the tax liability on the finished goods payable in Azad Jammu Kashmir. The Sales Tax paid at the import stage was adjustable by the importer in the final output tax payable in Azad Jammu Kashmir under Azad Jammu Kashmir Sales Tax (Adoption) Act, 1993. This facility of adjustment sales tax paid at import stage is not available to the petitioners carrying on business in FATA or PATA. Hence, the ratio of Master Foam's case cannot be applied to the circumstances of the present cases.
Secondly, the worthy counsel contended that without prejudice to the earlier submissions and also without conceding, the decisions of the Apex Court in Gul Cooking Oil's case and Mahsood Ghee Industries' case, would not apply to the cases relating to sales tax payable at import stage under the Act, as the Apex Court, while deciding the two cases only dealt with advance tax under the Ordinance. He further contended that the principle laid down in Master Foam's case, which was in relation to sales tax payable at import stage under the Act should be applied and followed to at least the cases relating to the second set of cases (Serial No.9 to 15) challenging the levy of Sales Tax at import stage under the Act.
In order to address this issue, it would be important to first revisit the facts of the two sets of cases; Master Foam's case on the one hand, and Gul Cooking Oil's case and Mahsood Ghee Industries' case on the other hand. As far as the former case is concerned, the worthy counsel is correct in stating that, it related to the levy of Sales Tax under the Act, on goods imported into Pakistan but destined for Azad Jammu Kashmir. While the other two cases, related to advance Tax being charged under the Ordinance on goods imported into Pakistan, but destined for FATA. Having noted the facts, now this Court has to see whether a finding on advance tax on imports under the Ordinance, can be applied to sales tax on imports under the Act. Comparing the scope of sales tax and advance tax at import stage under the two enactments; it is noted as follows:-- Sales Tax Act, 1990.
The provisions of the Act, in its charging section 3(1)(b) provides in express term, a levy of Sales Tax on goods being imported, at the import stage, the same reads as under:- "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 17% 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 into Pakistan, "
(Emphasis provided)
What is also important to note is that the incidence of the sales tax being an indirect tax and when paid at import stage is to be passed on to the ultimate consumer through the adjustments to be made in the output taxes by each person in the production and commercial chain leading to the final consumer, as provided under the enabling provisions of the Act.
Income Tax Ordinance, 2001.
On the other hand, when we glance through the provisions of the Ordinance, we note that section 148 of the Ordinance, requires the payment of an Advance Tax on goods being imported. The said section provides as under:-- "148. Imports.
( ) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part-II of the First Schedule.
(2) Nothing contained in subsection (1) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the Board."
(5) Advance tax shall be collected in the same manner and at the same time as the customs duty payable in respect of the import or, if the goods are exempt from customs-duty, at the time customs-duty would be payable if the goods were dutiable.
(6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant shall apply to the collection of tax under this section.
(7) The tax collected under this section shall be a final tax except as provided under subsection
(8) on the income of the importer arising from the imports subject to subsection (1) and this subsection shall not apply in the case of import of:
(a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use;
(b) fertilizer by manufacturer of fertilizer, and
(c) motor vehicles in CBU condition by manufacturer of motor vehicles.
(emphasis provided)
The bare reading of the above provision of the Ordinance, clearly stipulates payment of advance tax at the time of importation. It would be also pertinent to mention that the said advance tax is declared as the final tax, but there are exceptions to the same, which are clearly provided in the proviso to subsection (7) of Section 148 of the Ordinance. The said proviso keeps advance tax paid on imports including machinery and raw material, to be utilized by the importer, as in the present cases, from being declared the final tax. The said advance tax, so paid by the importer, is to be adjusted, as Tax Credit, within the contemplation of clause (b) of subsection (2) of Section 168 of the Ordinance, while computing the final tax payable by the said person. The said provisions read as: "Section 168.
Credit for tax collected or deducted.
(1) For the purposes of this Ordinance,
(a) .............
(b) the amount of any tax collected under Division II of this Part or Chapter XII or deducted under Division III of this Part or Chapter XII shall be treated as tax paid by the person from whom the tax was collected or deducted.
(2) Subject to subsections (3) and (4), where an amount of tax has been collected from a person under Division II of this Part or Chapter XII or deducted from a payment made to a person under Division III of this Part or Chapter XII the person shall be allowed a tax credit for that tax in computing the tax due by the person on the taxable income of the person for the tax year in which the tax was collected or deducted."
(emphasis provided)
In fact, the legislature has through legal fiction, included the advance tax payable under section 148 of the Ordinance, as part of the income defined under subsection (29) of Section 2 ibid, and also brought the same payable within the purview of the charging section of tax on taxable income under subsection (b) of Section 4 ibid. The said provisions read as under: "Section-2 (29)
"Income" includes any amount chargeable to tax under this Ordinance, any amount subject to collection or deduction of tax under sections 148, 150, 152(1), 153, 154, 156, 156A, 233, 233A, subsection (5) of sections 234 and 236M, any amount treated as income under any provision of this Ordinance, and any loss of income.
Section 4.
Tax on taxable income.
(1) Subject to this Ordinance, income tax shall be imposed for each tax year, at the rate or rates specified in (Division 1, IB or II) of Part 1 of the First Schedule, as the case may be, on every person who has taxable income for the year.
(I) The income tax payable by a taxpayer for a tax year shall be computed by applying the rate or rates of tax applicable to the taxpayer under this Ordinance to the taxable income of the taxpayer for the year, and from the resulting amount shall be subtracted any tax credits allowed to the taxpayer for the year.
(2) Where a taxpayer is allowed more than one tax credit for' a tax year, the credits shall be applied in the following order.
(a) Any foreign tax credit allowed under section 103; then
(b) Any tax credit allowed under Part X of Chapter III; and then
(c) Any tax credit allowed under sections 147 and 168.
(3) Certain classes of income including the income of certain classes of persons may be subject to:
(a) Separate taxation as provided in sections 5,6 and 7; or
(b) Collection of tax under Division II of Part V of Chapter X or deduction of tax under Division III of Part V of Chapter X as a final tax on the income of the person.
(4) Income referred to in subsection (4) shall be subject to tax as provided for in sections 5,6 or 7 or Part V of Chapter X, as the case may be, and shall not be included in the computation of taxable income in accordance with section 8 or 169, as the case may be.
(5) Where, by virtue of any provision of this Ordinance, income tax is to be deducted at source or collected or paid in advance, it shall, as the case may be, be so deducted, collected or paid, accordingly."
(emphasis provided)
What is also important to note is that, the scheme of taxation envisaged under the Ordinance, provides for "tax"; on Taxable Income (Section 4), on Dividends (Section 5), on certain Payments to Non-Residents (Section 6), and on Shipping and Air Transport Income of a ,Non-Resident Person (Section 7), all provided under Chapter-II ibid. When reviewed together, it is clear that although advance tax collected under section 148 of the Ordinance, has not been included in taxable income, as provided under section 4 of the Ordinance, yet the payments made thereunder have been expressly brought within the scope of the charging section by its clear stipulation in subsection (5) of section 4 of the Ordinance.
In the circumstances, it would be safe to state that;
(i) The legislature has provided equal emphasis and force behind both the taxes to be collected at import stage under the relevant enactments.
(ii). Both the taxes are to be adjusted by the importers; the advance tax as tax credit under section 168 of the Ordinance and sales tax as input tax adjusted in the output tax under section 13 of the Act.
In view of the above, it is noted that though the two taxes are conceptually different; Tax under the Ordinance being a direct tax, while Sales Tax under the Act being an indirect tax, yet the legislature in its wisdom has placed the two taxes in the respective enactments in a manner, whereby the scope and burden on the payer of the two taxes have a very striking similarity. Thus, a legal finding on one would surely be applicable upon the other.
12. It is by now settled principle of safe administration of justice that, when precedents of the High Court rendered by a worthy Bench comprising of equal or more worthy Justices, did, not take into consideration, the clear principle laid down by the Apex Court, then the High Court has to follow the ratio decidendi of the decision of the Supreme Court and there is no legal requirement to refer the case in hand to a larger Bench for its deliberation and decision, as is the case in the present petitions. In similar circumstances, the Sindh High Court in a recent decision in Pak Turk Enterprises' case (2015 CLC 1) has very eloquently described this aspect of Stare Deciees in terms that: "In my respectful view, the foregoing observations correctly lay down an exception to the rules of precedent as they apply in this country as well. I am bound first and foremost by decisions of the Supreme Court. If a decision of a larger Bench of this Court is on any point "manifestly inconsistent" with a prior decision of the Supreme Court on account of having misunderstood or misapplied it, then that which binds me is the latter and not the former. Of course, this exception to the rules of precedent would only apply in rare circumstances and only where the inconsistency is clear and direct, and no other conclusion is reasonably possible. It is after a very careful consideration of what the learned Division Bench said in United Bank that, with the utmost respect, I have come to the conclusion that it is manifestly inconsistent with the Supreme Court decisions in Australasia Bank (and Central Bank of India) and Khan of Mamdot. I am bound to apply the latter and therefore, I have respectfully ventured to differ from the learned Division Bench."
13. Another very crucial issue to note and deliberate is that, the rate of Advance Tax and Sales Tax on import of goods is determined by the Parliament and incorporated in the Ordinance and Act, respectively. But the authority to exempt a person or class of persons or good or classes of goods from the payment thereof is, inter alia, vested in the Federal Government, which it may exercise through delegated legislation. The crucial issue remaining, that the exemption from payment of taxes, under both the taxing statutes, rests with the Federal Government. What is most vital to understand is that, persons carrying on business in FATA or PATA do not require a specific exemption from the Federal Government, through any subordinate legislation, as they have been granted an express immunity from those taxing enactments, such as the Ordinance and the Act, which have not been extended to the said areas, under Article 247(3) of the Constitution.
14. Similarly, it is also striking to note that, goods being imported into Pakistan for their onward transit to Afghanistan, are exempt from payment of duties and taxes at the import stage. Moreover, exemptions are also provided to goods being imported for its utilization in Export Processes Zones, situated in the settled areas of Pakistan. This Court has also been informed that similar exemptions have been granted by the Federal Government to persons carrying on business in certain areas for encouraging industrialization. While granting exemptions, the Federal Government stipulates conditions to be fulfilled by its beneficiaries, in order to secure the revenue and prevent the abuse of such exemption. For the purpose of clarity and illustration, some of the relevant prescribed rules, and notification are enumerated herein below:-- Notification Nature of Exemption Condition for ensuring consumption SRO 450(1)/2001 dated 18.6.2001.
The Customs Rules, 2001 Customs Rules, 2001 are general in nature, the below are various regimes which are in practice whereby goods clearing, forwarding and transporting from Port of Entry say at Karachi to upcountry warehousing or consumption without payment of duties and taxes and any of the regimes with suitable amendments / adjust ment can be adopted by the Revenue to ensure tax enforce-ment of the consti-tutional immunity under Article 247(3) of the Constitution from taxes leviable under the Sales Tax Act, 1990 and Income Tax Ordinance, 2001 to the residential and consumer of Tribal Area.
1. Warehousing Rules 342 to 363 ibid Sections 86 to 115 of the Customs Act, 1969.In warehousing duties and taxes are DEFERRED under section 80 ibid at the port of entry and finally, the duties and taxes are paid at the place of manufacturer at the timeThe person must be licensee of bonded warehouse granted by the Collector Customs of its jurisdiction under section 15 ibid. of clearance of consumption under section 104 ibid.Goods are transported under Bond which released on reaching the goods at warehouse.
2. Public Bonded WarehouseDo Do
3. Transshipment Rules 236 to 338 ibid sections 121 to 126 ibidIs the facility from allowing transporting of goods from one Customs Station to the other generally from the port of entry to the other Dry Ports elsewhere in the Country without payment of Duties and Taxes.The goods are allowed to be transporting from one custom station to the other only by license bonded career which are Pakistan Railway, NLC and other licensee private bonded career who are responsible for carrying the goods.
Export Related Regime: Export related regime are closely akin to the requirement of Tribal Area, the consume good imported for consumption in foreign Territory or non- tariff territory.
4. Export-Processing Zone Rules 225 to 236 ibidExport Processing Zone ("EPZ") is a non-tariff area established within the Tariff Area separated by clear demarcation. The raw material or machinery are imported free of duties and taxes and goods manufactured out of it mostly exported from Pakistan or exported to Pakistan.It is a kind of Customs Station where the goods are transshipped from the port of entry to the EPZ and finished goods to exporting eustoms port.
Imports are made against Bond.
5. Manufacturing into Bond Rules 237 to 263 ibidThis is again carrying the same feature as of bonded warehouse which facility is normally extended to the export oriented industries with only differentiating feature is that it carrying a concept of no payment of duties and taxes at import and no duty drawback or refund at export.The conditions of transportation are same as of warehousing.
The rest of the features are same of the DTRE Rules which are delineated in the next section.
Imports are made against Bond.
6. Duty and Taxes Remission Rules 296 to 307 ibidIt is more liberal regime of manufacturing into bond, its features are delineated in the next column.The person entitled for availing DTRE facility should be a sales tax registered person and should make at least 15% value addition and have a valid export contact.
The exporter is allowed to make imports and acquire locally manufacture goods without payment of duty and taxes used in this finished product to be exported against postdated cheques/corporate guarantee.
The goods imported or locally acquired shall be utilized in manufacturer of the goods to be exported within 12 months or in such extended period as approved by the competent authority.
The person entitled shall apply to the Regulatory Collector of Customs in whose jurisdiction its manufacturing facility is located.
That on satisfaction, the Regulatory Collector against the security in form of bond and bank / corporate guarantee to grant license.
Prior to approval, Regulatory Collector shall verify manufacturing facility requested for the goods intended to be exported.
That on receipt of Application within 3 days issue the Provisional DTRE Approval subject to final determination of the input output ratios to the "Input Out Coefficient Organization (IOCO) or Engineering Development Board (EDB)".
The Regulatory on receipt of the Application within 7 days refer the Application to either IOCO or EDB which has to finally determine the ratios within 30 days.
That where after the Regulatory shall issue final approval of DTRE to the Applicant.
That no DTRE Application shall be rejected without affording opportunity to the Applicant.
7. Common Bonded Rules Warehouse (conventional)
Rules 279 to 295 ibidIt is carrying all the features of the manufacturing into bond license for export oriented industries, however, it is deferred in because like public bonded warehouse, it can be used by many industries together.Goods are imported under Bond or Postdated cheques.
SRO 108(1)/1995 dated 12.02.1995 In exercise of powers conferred by Section 19 of the Customs Act, 1969 and subsection (1) of Section of the Sales Tax Act, 1990 exemption of quantity of equal to one-fourth is exempted from five whole of Customs Duty and Sales Tax leviable for a period of five years.Exemption from Customs Duties and components as are imported for the exclusive manufacturers of goods by recognized industrial units located in approved industrial estate of Gadoon Amazai, NWFP.i. Suitable in-house capacity to manufacture the goods. ii. Manufacturer shall furnish the list of items that he is manufacturing along with the details of raw material. iii. To prepare a deletion program spreading over a maximum period of years within which period he shall achieve a minimum deletion target to the extent of 75 percent of the C&F value of the inputs of manufacturer item.
(2) _________________ _________________ iv. Declaration by the manufacturer to the effect that raw materials and components have been imported in accordance with his entitlement in terms and conditions. v. Bank Guarantee equivalent to the customs duty and sales tax in respect of which exemption is sought. vi. Maintenance of the record of raw materials and components and items manufactured out of them. vii. Apply for discharging of bank guarantee within one year of date of importation. vii. Maintain record of the sales of the items manufactured under this Notification.
SRO 71(1)/1995 dated 19.01.1995
(a) The industries excluding those specified in the table in this SRO which commence commercial operation upto the 31 December, 2002 in Special Industrial Zone and whose letter of credit are opened upto 31 January 1996.
(b) All industries that are not already existing till the date of this notification in Pakistan and are setup in special Industrial Zones shall be exempt for a period of ten years from whole of customs duty and sales tax on import of raw materials which are not produced locally provided the letter of credit for theirExemption from twenty- five percent of the Customs Duty leviable under first schedule of Customs Act. 1969 on import of such Raw materials which are not produced locally for the manufacture of their goods.
Exemption of whole Custom Duty and Sales Tax on import of raw materials which are not produced locally.i. The project shall cost more than US$ ten million and should empty minimum one hundred person. ii. Suitable in-house facilities for manufacture of goods. iii. Furnish list of goods he is manufacturing or intends to manufacturing to the person authorized. iv. Written declaration of the Bill of entry that raw materials imported according to conditions. v. undertaking to collector customs to abide by the conditions given in this notification. vi. To maintain record of raw materials and componentsst st plant and machinery are opened upto the 31 of January and commercial operations are commenced unto the 30th June. 1999.manufactured as prescribed by CBR. ix. Shall maintain a record of the sale of manufactured goods and machinery and shall produce the same on demand of competent authority. x. To communicate the consumption of imported goods within one month of consumption. If not consumed within 180 days than custom duty and taxes to be said and plausible reason shall be given and seek extension for a reasonable period.
S.R.O. 330(1)189 dated 03.06.1989Exemption from customs duty and sales tax on Plaint and machinery.The importer shall, at the time of importation, by documents in his possession, satisfy the Collector of Customs that the plant and machinery have been imported for projects located in the areas specified in the Table and shall furnish an indemnity bond in the FORM set out below to the extent of customs duties and sales tax exempted under this Notification. The said indemnity bond will be discharged subsequently on production of a certificate from the Assistant Collector, Customs and Central Excise. The Secretary Kashmir Affairs Division, or an officer authorized by him in this behalf or the Resident Commissioner for Northern Areas, as the case may be, the effect that the plant andst machinery as declared to the customs have been duly installed in an area specified in the Table and such other evidence as the Collector of Customs may require and after such enquiry as he deems fit, in order to establish such installation: the importer shall, at the time of importation of the plant and machinery, furnish a bond to the Collector of Customs to abide by the conditions laid down in this Notification failing which he would pay the amount of customs duties and sales tax due and make payment of any penalties that may be imposed in behalf.
The certificate of installation referred to in such paragraph (2) shall be submitted to the Collector of Customs not later than one year from the date of importation of such plant and machinery and if the plant and machinery are removed to an area other than that for which these have been imported within a period of ten years from the date of installation; the amount of customs duties and sales tax exempted under this notification and any penalties that may be imposed in this behalf shall be recovered under section 202 of the Customs Act, 1969 (IV of 1969).
SRO 1125(1)/2011 dated 31.12.2011 It is aero ratedThe benefit of this notification shall beOn import by registered manufacturers of five zero- regime under the Sales Tax Act. 1990 for 128 Article for five sectors for being export orientedavailable to every such person doing business in textile (including jute). carpets, leather. sports and surgical goods sectors, who is registered as:
(a) manufacturer;
(b) importer:
(c) exporter; and
(d) wholesaler;rated sectors mentioned in condition (i) above, sales as shall be charged at the rate of zero per cent on goods useable as industrial inputs; The goods imported by. or supplies made to manufacturers, other than manufacturers mentioned in condition (i) above, shall be charged sales tax at the rate of five percent; The commercial importers, on import of goods useable as industrial inputs, shall be charged sales tax at the rate of two per cent along with one per cent value addition tax at the import stage. which will be accountable against their subsequent liabilities arising against supply of these goods to the zero-rated sector at the rate of MO per cent or to non-zero-rated sectors or unregistered persons at the rate of five per cent as the case may be. The balance amount shall he paid with the monthly sales tax return or in use of excess payment shall be carried forward to the next tax period;
15. Reviewing the aforementioned provisions contained in the Rules and the SROs, relating to the concessions, benefits and exemptions from payment of duties and taxes on import of goods, reveals that the Federal Government has allowed the release of goods at the time of import, on securing the deferred payment of taxes and duties through securities including postdated cheques.
16. It would be pertinent to mention, that this Court, faced with circumstances as in the present cases, where payment of duties and taxes were challenged by persons carrying on business in FATA or PATA, have allowed release of goods, without payment of duties and taxes, securing the said payments through postdated cheques. The particulars and the directions in some of the said cases are as follows: W.P NO.453/2004 (M/s. Afridi Poly Propylene Industries' case), wherein it was directed that: "We would, therefore allow this writ petition and hold that the petitioner is not liable to pay sales tax and withholding income tax on raw material imported for consumption in its industrial unit set up at Bara, Khyber Agency. To ensure that the raw material is consumed by such unit, the petitioner shall inform the respondents, namely, the Departments of Sales Tax and Income Tax of the arrival of consignments of raw material and at a point before the same are taken into Tribal area, upon verifying the consignment from the bill of entry, the same shall be taken under the supervision of the staff of the Departments to the site of the petitioner's industry.
Simultaneously, the petitioner shall issue postdated cheques, good for payment on presentation, in favour of the Departments of the amount of tax otherwise leviable thereon. The postdated cheques shall be returned to the petitioner upon production of consumption certificate duly issued by the Departments. It will be the liability of the petitioner to approach the respondents for the issuance of certificates."
Similarly, other such cases, where petitioners are still availing the facility of releasing goods on furnishing postdated cheques, as provided in the case stated herein above, are reported as follows:
(i) Writ Petition No.1443-P of 2003 (Messrs Malakand Ghee Industries' case),
(ii) Writ Petition No.1826 of 2004 (M/s Taj Vegetable Oil's case)
(iii) Writ Petition No.453 of 2001 (Messrs Afridi Polypropylene Industries case).
(iv) Writ Petition No.264 of 2004 (Gul Shazada Enterprises' case).
(v) Writ Petition No.1669 of 2005.
(Roshni Mat's case).
(vi) Writ Petition No.53 of 2006.
(Nafees Plastic's case).
(vii) W.P No.1008/2003 (M/s Inamullah Khan Afridi's case)
This Court is alive to the fact that, the directions for seeking postdated cheques, as security were rendered prior to the decision of the Apex Court in Gul Cooking Oil's case, in its review jurisdiction.
However, what is important to note is that the petitioners in the said cases are still availing the benefits, as decided by this Court and highlighted hereinabove. There has to be parity between all, who are carrying on business in FATA or PATA, and that too without any discrimination. Accordingly, it would be fair to state that till the final decision is taken by the Federal Government, all persons carrying on business in FATA or PATA and requiring raw material or machinery for the furtherance and consumption in the said area should be allowed to import without payment of advance tax or Sales Tax subject to furnishing securities. This would secure the revenue till an inquiry is carried out by the Taxation officers, as directed by the Apex Court in its decision in review of Gul Cooking Oil's case.
17. Considering the legal discourse rendered hereinabove, this Court finds that, any specific directions by this Court to the Federal Government on what exact steps to take, would surely tread on the delicate balance of trichotomy of powers, as envisaged in the Constitution. However, it would be pertinent to suggest to the Federal Government certain issues, which warrant immediate policy decisions to ensure; First, that the persons carrying on business in FATA or PATA are rendered the immunity from the application of those taxing statutes, which have not been extended within the contemplation of Article 247(3) of the Constitution, and Secondly, the relevant security mechanism is put in place to ensure that the immunity, so provided under the Constitution, is not abused by the persons carrying on business in FATA or PATA. In this regard, the attention of the Court was drawn to the steps already taken by the Federal Bureau of Revenue in specifying the jurisdiction of Revenue Officers under the various taxing enactments, including the Act and the Ordinance, to matters arising in FATA and PATA. The same is embodied in Notification of 28.2.2011, which reads: "NOTIFICATION (Inland Revenue Wing, FBR)
Subject:JURISDICTION OF COMMISSIONERS INLAND REVENUE, REGIONAL TAX OFFICE, PESHAWAR.
In exercise of the powers conferred under subsection (1) of section 209 of the Income Tax Ordinance, 2001 (hereinafter read as 'Ordinance'), subsection (1) of section 30 and section 31 of the Sales Tax Act, 1990, subsection (I) of section 29 of the Federal Excise Act, 2005, and in supersession of the all earlier orders or notifications of the Board in respect of jurisdiction of RTO, Peshawar, (except the jurisdiction of Chief Commissioner Inland Revenue, RTO, Peshawar) the Federal Board of Revenue is pleased to direct that the Commissioners of Inland Revenue specified in column (2), shall exercise the powers and functions, as specified in column (3), in respect of the persons or classes of persons or cases or classes of cases or areas as specified in column (4) of the Table below (excluding cases or classes of cases or persons or classes of persons assigned to other RTOs/LTUs).
2. This notification shall take effect from 1st March, 2011.
S. No. Commissioner Inland RevenuePowers and Functions Jurisdiction
(1) (2) (3) (4)
1. Commissioner Inland Revenue (Zone-1), RTO, PeshawarThe Commissioner Inland Revenue shall exercise powers and perform functions as assigned in:
(a) Income Tax Ordinance, 2001, and Rules thereunder;
(b) Sales Tax Act, 1990 and Rules thereunder;
(c) Federal Excise Act, 2005 and Rules thereunder;
(d) Wealth Tax Act, 1963 (repealed); and
(e) Finance Act, 1989 (Act No. V of 1989), as amended vide Finance Act, 2010.....................................
(d) All cases of persons falling in the civil district of Peshawar, Khyber Agency and FR Peshawar not assigned to any other Commissioner Inland Revenue.
2. Commissioner Inland Revenue (Zone-II), RTO, PeshawarThe Commissioner Inland Revenue shall exercise powers and perform functions as assigned in:
(a) Income Tax Ordinance, 2001, and Rules thereunder;
(b) Sales Tax Act, 1990 and Rules thereunder;
(c) Federal Excise Act, 2005 and Rules thereunder;....................................... d) All cases of persons falling in the civil District of Mardan, Nowshera, Swabi, Charsadda, Malakand Division, Bajor Agency and Mohmand Agency not assigned to any
(d) Wealth Tax Act, 1963 (repealed); and
(e) Finance Act, 1989 (Act No. V of 1989), as amended vide Finance Act, 2010.other Commissioner Inland Revenue.
3. Commissioner Inland Revenue (Zone-III), RTO, PeshawarThe Commissioner Inland Revenue shall exercise powers and perform functions as assigned in:
(a) Income Tax Ordinance, 2001, and Rules thereunder;
(b) Sales Tax Act, 1990 and Rules thereunder.
(c) Federal Excise Act, 2005 and Rules thereunder;
(d) Wealth Tax Act, 1963 (repealed); and
(e) Finance Act, 1989 (Act No. V of 1989), as amended vide Finance Act, 2010......................................... d) All cases of persons falling in the civil districts of D.I.Khan, Tank, FR Tank, South Waziristan Agency, Lakki Marwat, FR Lakki Marwat, Bannu, FR Bannu, North Waziristan Agency, Karrak, Kohat, FR Kohat, Hangu, Kurram Agency and Orkazi Agency not assigned to any other Commissioner Inland Revenue"
8. Needless to state that, the authority of the Revenue Officers under the Ordinance or the Act, as vested vide the aforementioned notification of 28.2.2011, cannot be extended beyond the "inquiry" envisaged by the Apex Court, in Gul Cooking Oil's case. Moreover, the essential steps are yet to be taken by the Federal Government to ensure that the security mechanism for the purpose of securing revenue and preventing abuse of the Constitutional immunity by the persons carrying on business in FATA and PATA are effective and meaningful.
19. Before parting with this judgment, it would be appropriate to address the first preliminary objection raised by the worthy counsel for the Revenue regarding the jurisdiction of this Court, to entertain the present petitions at the principal seat. The contention of the worthy counsel for the Revenue was that, as some of the petitions related to persons carrying on business in PATA, the competent jurisdiction to entertain the said petitions, was the Bench at Darul Qaza and not at the principal seat. This Court is not in consonance with the contention of the worthy counsel for the Revenue, as identical challenge had already been made by persons carrying on business in FATA and the said petitions were pending adjudication at the principal seat, propriety demanded that all cases relating to common question of law be dealt with together at the principal seat. Moreover, public policy also demanded that there should be consistency in judgments on common question of law. Accordingly, this Court repels the said objection taken by the worthy counsel for the Revenue.
20. Now moving on to the other preliminary objection taken by the worthy counsel for the Revenue regarding the alternative remedy provided to the petitioners in the relevant enactments. This Court is not in accord with this line of argument, as the very issue before this Court in the instant petitions is the applicability of the enactments to the petitioners in view of the command of the Constitution contemplated in Article 247(3) of the Constitution. Hence, it would not be legally correct to declare the petitioners to have an alternative remedy for this Court to refrain from exercising its jurisdiction as is provided under Article 199 of the Constitution. This contention of the worthy counsel for the Revenue is also repelled.
21. Accordingly, for the reasons stated hereinabove, this Court would hold and:--
(i) Declare that advance tax charged on import under section 148 of the Income Tax Ordinance, 2001, is not payable by petitioners importing goods for its utilization or consumption in Federally Administered Tribal Area or Provincially Administered Tribal Area;
(ii) Declare that Sales Tax charged under section 3(1)(b) of the Sales Tax Act, 1990, is not payable by the petitioners importing goods for its utilization or consumption in Federally Administered Tribal Area or Provincially Administered Tribal Area;
(iii) Direct the Federal Government to take appropriate steps to ensure that persons carrying on business in FATA or PATA are rendered immunity from the payment of taxes under Income Tax Ordinance, 2001, and the Sales Tax Act, 1990, as the said statutes have not been extended to the said areas within the contemplation of Article 247(3) of the Constitution;
(iv) Direct the Federal Government to take necessary steps to formulate a uniform policy for seeking securities from the persons importing goods for its consumption and utilization in FATA or PATA, so that the immunity provided under the Constitution is not abused and in case the imported goods are utilized or sold out side the said area, then the revenue of the State is recoverable from the securities, so provided.
(v) Direct that till the decision is taken by the Federal Government regarding the security mechanism stated hereinabove, the Board shall obtain from the petitioners postdated cheques for the payment of taxes at import stage under the Act and the Ordinance, as security, for goods destined for utilization and consumption in FATA or PATA. The postdated cheques shall be returned to the petitioners upon production of consumption certificates duly issued by the concerned commissioners, as specified in Notification dated 28.2.2011. It will be the liability of the petitioners to approach the respondents for the issuance of consumption certificates. These petitions are disposed of in the above terms.