AYESHA A. MALIK, J. --- This judgment decides upon the issues raised in W.P. Nos, 71500/17, 74282/17, 74285/17, 74774/17 and 78500/17 as all the petitions raise common questions of law and facts.
2. Through these petitions, the Petitioners have challenged the determination dated 25.5.2017 issued by the Deputy Chemical Examiner, Lahore ("DCE") with reference to the PCT classification for Tea Whitener ("TW") and letter dated 15.8.2017 issued by the Respondent Federal Board of Revenue ("FBR") seeking recovery of sales tax consequent to the determination by the DCE on 25.5.2017.
3. The common facts of the case are that the Petitioner in W.P. No 71500/17 produces TW under the brand name 'Tea Whitener'. The Petitioner in W.P. Nos, 74774/17 produces the TW under the brand name 'Qudrat' and 'Chaika'. The Petitioner in W.P. Nos, 74282/17 and 74285/17 manufactures liquid TW sold also under the brand name 'Qudrat' and `Chaika'. The Petitioner in W.P. No, 74282/2017 and 74285/2017 manufactures various products including liquid TW sold under the brand name 'Tea Max'. On 5.5.2011 Collector, Model Customs Collectorate of Appraisement, Custom House, Karachi, considered the case of TW produced by the Petitioner in W.P. Nos, 74282/17 and 74285/15 and held that the classifiable PCT heading is 1901 and that PCT heading 2106 was not applicable to TW.
Consequently TW fell under PCT heading 1901.9090 and was under the zero rated regime as per item 85 of the 6th schedule of the Sales Tax Act, 1990. On 25.5.2017 DCE examined the "Dcstea" TW and found that it contained an aqueous food preparation consisting upon Vegetable Fat, carbohydrates, Protein, trace amount of minerals, emulsifier and stabilizing agent derived from guar gum for maintain its viscosities. It is milky white thin emulsion stated to be used as tea mix for enhancing its taste and quality. Such food preparations which are used to enhance taste and quality of food are appropriately classifiable U/Heading 2106.9090 of PCT in our opinion which may further be verified by the concerned authority in the light of HS Notes as per specific use of the product. On the basis of this finding the DCE was of the opinion that the TW fell under PCT heading 2106.9090. Pursuant to the opinion of the DCE, on 15.8.2017 Respondent FBR issued a letter in which it stated that "Hence Tea Whitener does not fall under 5th Schedule or 6th Schedule to the Sales Tax Act, 1990 as it is not 'milk' classifiable under Chapter 4 of Pakistan Customs Tariff. The LTUs/RTOs are requested to calculate and recover sales tax on supplies of Tea Whitener by manufacturers falling under their jurisdiction for the period 2011-12 to 2016-17. Year-wise detail of amount of sales tax recoverable alongwith default surcharge may be communicated to the Board by 20.8.2017.
Consequent to which sales tax recovery was directed for the period 2011-12 and 2016-17.
Consequently notice under Section 3B of the Sales Tax Act, 1990 ("Act") were issued to the Petitioners seeking specific information with respect to the sold TW, tea whitener (Liquid), tea whitener (Dry), Infant milk for one year age child and infant milk for more one year age child.
4. Mr. lmtiaz Rashid Siddiqui, Advocate for the Petitioner (in W.P. No, 71500/2017) stated that the objective of the notices under Section 38B of the Act was to obtain information so as to determine the total amount of tax that should be recovered from the Petitioners consequent to the directive issued by the FBR on 15.8.2017. Learned counsel further argued that the DCE in his letter dated 25.5.2017 merely stated his opinion. That the DCE is not the competent body to issue classification rulings as the service is rendered under Custom General Order No, 10/2001, dated 4.9.2001 by the Classification Committee. The process was followed and classification ruling dated 5.5.2011 was issued with respect to the TW which is the relevant classification ruling on the basis of which the products of the Petitioners are considered since 2011. Learned counsel further argued that on the basis of the opinion of the DCE the FBR has sought to recover amounts which are not due from the Petitioners.
5. Mr. Mansoor Usman Awan, Advocate for the Petitioners (in W.P. Nos, 74282/17, 74285/17 and 74774/17 argued that the classification rulings dated 5.5.2011 was issued in the case of Haleeb Foods specifically with reference to their TW. That since the competent authority issued classification ruling in the case of the Petitioner before the Court which include Haleeb products, the reliance on the opinion of the DCE was totally unlawful and recovery sought thereafter is nothing more than abuse of the authority. Learned counsel further argued that Classification Rulings dated 5.5.2011 has duly considered the relevant classifications as well as the explanatory notes for the purposes of interpreting. He further argued that the Respondents cannot seek to recover any amount on the basis of the impugned letters 25.5.2017 and 15.8.2017 which are illegal.
6. Report and parawise comments have been filed by the Respondents. Mr. Sarfraz Ahmad Cheema, Advocate for the Respondents argued that the Petitioners have impugned notices issued under Section 38B of the. Act in which the issues raised before the Court are not mentioned. The notices provide simply that the Petitioners are manufacturing and selling multifarious products in the market, hence in order to determine the exact quantum of input tax and output tax Section 38B of the Act was invoked. Learned counsel also argued that under Section 38B the Petitioners are obligated to produce the required information and documents as well as to appear before the Officer Inland Revenue. Further that any dispute that the Petitioners may have with respect to the PCT heading can always be raised before the competent authority and as such the instant petitions are not maintainable.
7. Heard and record perused.
8. The basic prayer of the Petitioners in these petitions is that they seek a declaration that the classification of TW under PCT heading 1901.9090 is binding on the Respondents. The Petitioners have impugned letters dated 25.5.2017 and 15.8.2017 and seek to restrain the Respondents from recovering amounts in pursuance of the impugned letters. Although copies of the impugned letters have not been appended in the writ petitions as they have not made available to the Petitioners, the Respondents do not deny the existence of the letters nor do they dispute the contents of the letters. As per the first impugned letter dated 25.5.2017 the DCE obtained samples of 'Dostea' TW and on examination found that the contents of the TW were such that it would be appropriate to classify that TW under PCT heading is 2106.9090. The letter also states that this opinion can be further verified by the concerned authority in the light of the classification as per specific use of the product. On the basis of this letter, FBR on 15.8.2017 issued a direction stating that since the TW do not fall under the 5th Schedule or 6th Schedule of the Act, the LTUS/RTOs are requested to recover sales tax on supply of TW for the period 2011-12 to 2016-17. Notices under Section 38B of the Act were issued on 21.8.2017 to the Petitioner. All notices before the Court are identical and state that since the Petitioners are making and supplying goods other than dairy products, in order to determine the quantum of input tax and output tax information was sought with respect to sold TW (Liquid), TW (Dry), Infant milk for one year age child and infant milk for more one year age child. A bare review of the documents and the record show that the notices under Section 38B were issued pursuant to the impugned directive of the FBR dated 15.8.2017 with the specific intent of collecting information for the purposes of recovering sales tax as per the directive.
9. The controversy started consequent to the opinion given by the DCE with respect to 'Dostea' TW.
In the first instance it is noted that the opinion of the DCE is confined to the TW that it examined and cannot be applied across the board to all TWs as its opinion is based specifically on the contents of the 'Dostea' TW which it examined. Furthermore it is noted that the DCE merely gave its opinion that it suggested PCT heading and its opinion could not have been treated as Classification Rulings for all TVVs by the Respondent FBR. Classification Rulings are issued by the Classification Committee under SRO 670(1)/2013, dated 8.7.2013 which considers the products, its contents in great detail before determining the classification for the purposes of custom tariff. In the cases before the Court, a Classification Ruling has been issued on 5.5.2011 with respect to TWs which ruling is still intact and has never been challenged. In the report and parawise comments filed by the Respondents, the Respondents have tried to justify their re4nce on the DCE report, however there is absolutely no justification for the Respondent FBR to rely on the opinion of the DCE and to change the PCT heading consequent thereof. The DCE is not the competent authority to determine the PCT heading nor can his opinion substitute the ruling of the competent authority. It was simply examining a specific TVV and gave its opinion in relation to that TVV which opinion cannot he made applicable across the board to all TWs. The Classification Committee -gave its ruling on 5.5.2011 when it held that TWs fall under PCT heading 1901. It is interesting to note that in case of Petitioner in W.P. Nos, 74282/1.7 and 74285117, reliance has been placed on the opinion 'of 'the DCE even though the order of the Classification Committee was rendered in their case. Therefore the acts off the Respondents to rely on the opinion of the DCE are Without any legal justification and an attempt to. hastily recover sales tax from the Petitioners.
10. In view of the aforesaid, all these petitions are allowed. The impugned letter issued by the FBR dated 15.8.2017 and impugned notice dated 21.8.2017 are aside. The Respondents are restrained from recovering the sales tax from the Petitioners on the basis of the Opinion of the pct. dated 25.5.2017.