SYED ARSHAD ALI, J. This consolidated judgment is aimed at deciding the instant petition as well as connected petitions, the detail whereof has been provided in Annexure 'A' to this judgment, challenging the amendment in Entry No. 151 of the Sixth Scheduled to the Sales Tax Act, 1990 through Finance Act, 2024.
2. Mr. Isaac Ali Qazi, Advocate, learned counsel appearing on behalf of the petitioner has referred to the history of extension of laws to the erstwhile Federally Administered Tribal Area/Provincially Administered Tribal Area ("FATA/PATA") and has argued that the fiscal laws i.e. Income Tax Ordinance, 2001 ("Ordinance, 2001") as well as the Sales Tax Act, 1990 ("Act, 1990") were never extended to FATA/PATA as there has been a dispute between the persons, carrying business in the erstwhile FATA/PATA and the Revenue. He next argued that even after the omission of Article 247 from the Constitution of the Islamic Republic of Pakistan, 1973 ("Constitution") through Act No. XXXVII dated 04.06.2018 when the normal law of taxation stood extended to the aforesaid area, the Federal Government had allowed the said exemption to the residents of erstwhile FATA/PATA The petitioners stilt enjoy the said exemption in form of Entry No. 151 of the Sixth Schedule to the Act, 1990, however, in the past as a security against the import of raw material, the petitioners would provide post-dated cheque equivalent to the amount of leviable duties and taxes to ensure that the raw material imported for consumption in the erstwhile tribal area is consumed in the tribal area. Through the impugned order, the petitioners are required to provide pay order instead of post-dated cheque. The learned counsel has maintained that for providing a pay order from a scheduled Bank, the petitioners' are required to pay the leviable taxes and duties at the import stage, despite the fact, that the said imports are exempt from leviable taxes and duties. He next contended and referred to the judgment of this Court in the case of Messrs Taj Packages Company (Pvt.) Ltd. through Manager v. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others (2016 PTD 203) as well as the judgment passed by the Apex Court in the case of Pakistan through Chairman, FBR and others v. Hazrat Hussain (2018 SCMR 939) approving the ratio of Messrs Taj Packages case and has argued that both the said judgments refer to a good number of exemption in terms of section 13 of the Act, 1990 nowhere the Revenue had demanded the cash security in form of pay order, therefore, the exemption provided to the petitioners despite special background has been made contingent with the cash security which is not only discriminatory but offends Articles 9, 14, 18, 23, 24 and 25 of the Constitution.
3. Mr. Shuman Ahmad Butt, Advocate, learned counsel also appearing on behalf of the petitioner, while referring to the scheme of charging section, input adjustment under section 7 of the Act, 1990, has argued that in cases when the person deals in taxable supplies is not exempt from payment of sales tax can adjust the input tax at the time of making supply; whereas when the respondents are demanding the pay order which means that the entire tax is paid to the respondents in advance with no option to the petitioners to adjust the input tax. He next contended that the condition imposed through Entry No. 151 is ultra vires because under section 13 of the Act, 1990, it is only the Federal Government to impose a condition on any form of exemption.; whereas through Entry No. 151 the Parliament has imposed the said condition and it is settled law that when there is a conflict between schedule and the main statute/charging section then in such circumstances, the schedule will yield to the charging section. He has also stated that the impugned legislation is discriminatory and is an unreasonable restriction on the business activities of the petitioners. The learned counsel has also argued that the impugned legislation through the Finance Bill was not permissible as it does not relate to imposition of any taxes but rather regulates the imports by substituting the condition of post-dated cheque to that of pay order which is beyond the scope of a money bill as provided under Article 73 of the Constitutions.
4. The learned Deputy Attorney General along with the learned counsel for the Revenue and Customs have argued that the impugned legislation has been passed by the competent legislation, therefore, cannot be struck down. They next argued that pursuant to the Finance Act, 2024, the import to the tribal area has been rationalized.
5. Pakistan Vanaspati Manufacturer Association (PVMA) and Pakistan Association of Large Steel Producers (PALSP)/the intervenors have filed applications seeking their impleadment in the writ petitions on the ground that if any order has been passed in favour of the petitioners then their business concerns/activities would be adversely affected. The said contention was opposed by the learned counsel for the petitioners on the ground that neither the said industrial concerns have any business activities in the tribal area not the petitioners are their competitors, therefore, they are not necessary party to the proceedings. Irrespective of the contentions of the parties, in the interest of justice, we deem it appropriate to provide an opportunity to the intervenors to argue their case, therefore, the said applications are allowed and they be accordingly impleaded as respondents in the writ petitions with red ink.
6. The learned counsel representing on behalf of intervenors has argued that the petitions filed by all the petitioners are defective as it does not challenge the vires of the law. The impugned law has been legislated by the competent legislature in order to ensure that the State revenue is protected, besides, the intervenors are competitors of the petitioners and very often the goods manufactured in the tribal area are freely transported to the settled area, which has adversely affected the business of all the intervenors.
7. Arguments heard and record perused.
8. In order to appreciate the respective arguments of the learned counsel for the parties, we would like to provide a brief background of the exemption to the tribal area.
9. Prior to the 25th Amendment in the Constitution there was a separate dispensation for the extension of laws to the erstwhile tribal areas both Provincial as well as Federal as provided under Article 247(3)[1] of the Constitution. There has been a judicial consensus that the income-tax as well as sales tax laws were never extended to the FATA/PATA prior to the promulgation of 25th Amendment in the Constitution[2]. Therefore, the goods imported for consumption in the tribal area have never remained subject to the impost of the aforesaid taxes provided that the importers of the goods shall ensure that the goods would be consumed within the tribal area. Since it has always been the concern of the Revenue that since the business community is not regulated through any fiscal regime, therefore, there is every likelihood of leakage of state revenue. This Court, while dealing with the said issue in the case of Messrs Taj Packages (supra), directed the Federal Government to devise a mechanism to regulate the said import and till the time that the said mechanism is evolved by the Federal Government, the then Board now Federal Board of Revenue (FBR) shall obtain from the importers post-dated cheque for the payment of taxes at import stage as a security for goods destined for utilization and consumption in FATA/PATA. The said post-dated cheques shall be returned to the petitioners upon production of consumption certificate only issued by the concerned Commissioner as specified in the notification dated 28.02.2011.
10. After the 25th amendment in the Constitution, the trade community raised its voice for continuance of the said exemption from imposition of income tax and sales tax. The Federal Government through SRO 1212(I)/2018 dated 05.10.2018 and SRO 1213(I)/2018 dated 05.10.20218 had allowed the said exemption to the resident/domicile of the erstwhile FATA/PATA. Similarly, by inserting entries Nos. 151 and 152 in the Sixth Schedule of the Act, 1990, a mechanism was provided for availing exemption of the sale tax on the import of goods which were meant for consumption in tribal areas. The said entries reads as under:- "151. (a) Supplies; and
(b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic Republic of Pakistan,- as may till 30th June, 2023, to which the provisions of the Act or the not issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment) Act, 2018 (XLVII of 2018): Provided that, in case of imports, the same shall be allowed clearance by the Customs authorities on presentation of a post-dated cheque for the amount of sales tax payable under the Sales Tax Act, 1990, and the same shall be returned to the importer after presentation of a consumption or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction: Provided further that if plant, machinery and equipment, on which exemption is availed under this serial number, is transferred or supplied outside the tribal areas, the tar exempted shall be paid at applicable rate on residual value.
152. Supplies of electricity, as made from the day of assent to the Constitution (Twenty-fifth Amendment) Act, 2018, till 30th June, 2023, to all residential and commercial consumers in tribal areas, and to such industries in the tribal areas which were set and started their industrial production before 31st May, 2018, but excluding steel and ghee or cooking oil industries".
11. One of the salient features of the omission of Article 247 of the Constitution is that the provision of the sales tax stood applicable to the tribal area and it is under section 13 of the Act, 1990 that the importation of goods, which are destined for consumption in the tribal area, are now exempt from the payment of sales tax; whereas prior to the 25th amendment in the Constitution, the imports were immune from the operation of Act, 1990, meaning thereby that the other provisions of the Act, 1990 are applicable to all the persons, who are located in the erstwhile tribal area and they are required to be registered with the Revenue. The effect of such registration would be that the petitioners would maintain the record as provided under section 32 of the Act, 1990; to file their returns under self-assessm ent scheme provided under section 26 of the Act, 1990; the revenue can access to the said record and conduct an audit of the petitioners under section 25 of the Act, 1990; any discrepancy relating to the short levy of the sales tax can be assessed under section 11 of the Act, 1990 under the adjudicating schemes provided ibid. It would be important to note that when the goods are imported under the concessionary regime, stated above, for consumption in the tribal area after the manufacturing process in their units established in the tribal area, there is no bar on its transportation/supply to the non-exempt area; the mechanism whereof has been provided under section 40D(1)[3] of the Act, 1990 against the leviable duties as per entry No. 74 of fill Sixth Schedule to the Act, 1990.
The import of raw material regulated by the FBR.
12. After the 25th amendment in the Constitution, that taxation laws were extended to the erstwhile FATA/PATA and keeping in view the demand of the local people were under the provisions of Ordinance, 2001 and Act, 1990 the business activities solely carried in the erstwhile FATA/PATA were exempt from the imposition of taxes, the detail whereof has been explained above, since then the Federal Board of Revenue (FBR) has been issuing various instructions/circulars to regulate the import of raw material machinery destined to the tribal area through various instruments.
13. On 25.02.2021 Custom General Order No.01 of 2021 was issued, which prescribed procedure for clearance of goods imported by industrial unit of erstwhile FATA/PATA. According to the said procedure, on importation of goods/raw material intended for use in industrial units availing the exemption, TP will be filed at Karachi and the goods will be transported through bonded carrier only to the final destination at Aza Khel Dry port for clearance. The said carrier of goods shall be monitored in terms of Tracking and Monitoring of Cargo Rules, 2012 from Karachi to Peshawar and then to factory premises.[4]
14. However, through Circular No. 09 of 2021, the consignment which was already stuck up at Karachi for transportation to FATA/PATA was given one time concession and the said consignments were to be released against post-dated cheques and sent to their destination under standard tracker mechanism.[5]
15. Through Circular No. 13 of 2021 issued on 26.03.2021 procedure was provided for the issuance of Exemption Certificate for the import of industrial inputs/machinery by FATA/PATA. According to the said circular, the obtaining of an exemption certificate was regulated in terms of section 181A of Ordinance, 2001.[6]
16. On 16.04.2022, Sales Tax General Order No. 14 of 2022 was issued, which, inter alia, envisages that in order to ensure further transparency and prevent leakage of revenue, it has been decided that the industrial units located in erstwhile FATA/PATA shall be allocated import quota of raw material as determined by Directorate General IOCO-IR in consultation with the RTO, Peshawar on the basis of installed capacity of these units. The annual import quota assigned to any particular industry shall be apportioned equally in 12 equal parts on monthly basis and that shall be duly entered in the WeBOC against each manufacturer/industrial unit. After each updation, the balance available quota for the remaining year shall also be clearly mentioned[7].
17. On 10.08.2021, Circular No. 3 of 2022 was issued by the FBR to regulate the establishment of check-posts to oversee the transportation of goods manufactured in the tribal area to the settled area in terms pf section 40D of the Act, 1990 so that at the said check-post the applicable taxes are recovered from the persons taking the goods to the settled areas[8].
18. On 25.11.2022, 05.09.2023, 28.11.2022 different points were identified as check-posts under Rule- 69F of Chapter-XK of the Sales Tax Rules, 2006 for the aforesaid purposes.
19. It is evident from the aforesaid Circulars that a comprehensive mechanism has been devised by the FBR to oversee the transportation of imported goods right from the stage of its import till it reaches to the manufacturing unit and if any person, who intends to sell the goods outside the territorial limits of FATA/PATA, the same is being it not only through a legal dispensation (section 40D of Act. 1990) but the check-posts have also been established for the said purpose. Needless to mention that a person, who imports raw material, shall ensure that it has the capacity to consume the said raw material in its/his industrial unit and in this regard after the verification of installed machinery, a particular quota is assigned/granted to the importer for the consumption.
20. Having discussed the aforesaid legal and factual aspect of the case, we will now move on to the present issue. The dispute between the parties is an amendment in Entry No. 151 through the Finance Act, 2024, therefore, at this juncture, we would like to reproduce the said Entry.
Prior to Amendment After Amendment
151. (a) Supplies; and
(b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic of Pakistan.- as made till 30th June, 2023, to which the provisions of the Act or the notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution not been omitted under the Constitution (Tewenty- fifth Amendment) Act, 2018 (XXXVII of 2018); Provided that, in case of imports, the same shall be allowed clearance by the Customs authorities on presentation of a post- dated cheque for the amount of sales tax payable under the Sales151. (a) Supplies; and
(b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic of Pakistan.- as made till 30th June, 2025, to which the provisions of the Act or the notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution not been omitted under the Constitution (Tewenty- fifth Amendment) Act, 2018 (XXXVII of 2018); Provided that, in case of imports, the same shall be allowed clearance by the Customs authorities on presentation of a post-dated cheque for the amount of sales tax payable under the Sales Tax Act, 1990, and the Tax Act, 1990, and the same shall be returned to the importer after presentation of a consumption case or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction: Provided further that if plant, machinery and equipment, on which exemption is availed under this serial number, is transferred or supplied outside the tribal areas, the tax exempted shall be paid at applicable rate on residual value.same shall be returned to the importer after presentation within six months of a consumption or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction: Provided further that if plant, machinery and equipment, on which exemption is availed under this serial number, is transferred or supplied outside the tribal areas, the tax exempted shall be paid at applicable rate on residual value.
Tax Regime
21. The Sales Tax Act introduces an indirect tax to be levied, charged and collected on imported goods or on taxable supplies of goods, and the same is collected by the supplier on behalf of the Government, while the incidence of the tax is finally borne by the consumer of the imported goods or of the taxable supplies of the goods. The charging section 3 of the Sales Tax Act lays down the foundational parameters of the sales tax, which are: firstly, the quantum of the tax is based on the value of the goods imported into Pakistan or the taxable supplies made in Pakistan by a registered person; secondly, the incidence of the tax is triggered or made chargeable when the goods are imported into Pakistan or when the registered person makes taxable supplies in the course or furtherance of any taxable activity carried out by him; and finally, the liability to pay the tax is on the person importing the goods in respect of the imported goods, or on the person making the supplies in respect of taxable supplies made in Pakistan.[9]
22. Section 13 of the Act, 1990, which starts with a non-obstante clause, stipulates that the supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the Federal Government, be exempt from tax under the Act[10].
23. Lord Dunedin, a known jurist in the case of Whitney v. IR Commissioners (1926) 10 TC 88[11], spelt out the three stages of a tax (at the broadest plane) in the following terms: "Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessm ent. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessm ent particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."
24. Not only exemption and immunity from taxation finds itself in various modern taxation jurisdictions, but section 13 of the Act, 1990, as stated above, also deals with the exemption of any registered person from taxation. Therefore, if there is an exemption in the field, then the second stage in the scheme of taxation, as identified by Lord Dunedin (i.e., assessment of' tax liability), may not be reached at all in particular circumstances when the exemption is allowed as a whole, However, if the exemption is subject to certain conditions as in the present case that the supplies/import of the present petitioners under entry 151 ibid is exempt from the sales tax only to the extent of its consumption in a specific territory and in case of its sale/consumption to the normal tariff area, then the same is subject to the impost of sale tax at a specified rate. (Section 40D of the Act, 1990).
25. In the present case, the supplies and the import of plant, machinery and equipment are exempt from impost of sale tax in the manner as stated above; however, the proviso added to Entry No.151 ibid prior to the Finance Act, 2024 had put a condition that the clearance of goods at any port for onward destination to the erstwhile tribal areas is subject to the presentation of a post-dated cheque equal of the amount of sales tax payable under the Act, 1990 which (post-dated cheque) shall be returned to the importer after presentation of consumption or installation certificate as the case may be. Through the Finance Act, 2024, the requirement of a post-dated cheque has been changed to pay order and further the obtaining of the consumption or installation certificate has been made time bound (to be provided within a period of six months).
26. Payment order is a cheque like instrument issued by a bank on request of its customers or against payment of its own expenses or dues, drawn on itself, to pay a specified sum of money to the order of specified person. Payment orders are usually issued by the banks on receipt of full amounts involved, which means that it would not be returned unpaid due to lack of funds; it is also called banker's cheque.[12]
27. The consequence/effect of providing pay order would be that the petitioners shall be required to arrange for the amount of sales tax on the import of goods which shall be deposited with the bank, upon the said sum the petitioners would have no control and can be demanded by the revenue without adjudication of the tax liability of the petitioners. No doubt the petitioners/importers of the goods are entitled to its (payment order) return after presentation of the consumption certificate to the sales tax authorities; however, the entire scheme of the Act, 1990 is completely silent about the procedure for providing a consumption certificate. The Government of Pakistan Revenue Division Federal Board of Revenue Inland Revenue through Circular No.05 of 2021 has provided guidelines for issuance of consumption certificate. The said notification is reproduced as under:- "Government of Pakistan Revenue Division Federal Board of Revenue Inland Revenue C.No.7(1)TIPU/IR/2020 Islamabad, March 26, 2021 Circular No. 05 of 2021 -- Operations (Sales Tax/Federal Excise)
Subject: Procedure for Issuance of Consumption Certificate for Import of Industrial Inputs by FATA/PATA Domiciled Industries In order to earnestly implement and enforce the tax-related incentives and benefits extended by the Parliament to residents of FATA/PATA, Circular No. 9 of 2021 dated March 1, 2021, has been issued. The Circular rakes account of safe arrival of industrial inputs imported by FATA/PATA domiciled industries from the port to the intended manufacturing sites. Section 13(1) read with Serial No. 151 of Table I of Sixth Schedule to the Sales Tax Act, 1990, exempts import of "industrial inputs" to FATA/PATA-located industries "on presentation of a post-dated cheque for the amount of sales tax payable under..., and the same shall be returned to the importer after presentation of a consumption...certificate...in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction." This particular benefit is subject to a further condition that if the goods produced from the exempted raw materials are "transferred or supplied outside the tribal areas, the tax exempted shall be paid at the applicable rate."
2. This makes CONSUMPTION CERTIFICATE issued by Commissioner Inland Revenue (CIR) the centerpiece of the tax-exempt cycle of importation of industrial inputs, production of finished goods by FATA/PATA-domiciled industries and their ultimate consumption within the FATANATA regions. It is therefore that a standardized procedure for the issuance of Consumption Certificate is being rolled out so as to ensure fair operationalization of the exemptions enshrined in the law.
3. A FATA/PATA based manufacturer/Registered Person (RP), who is also an "active taxpayer" in terms of section 2(1) of the Sales Tax Act, 1990 (hereinafter "the STA, 1990", and intending to import raw materials for consumption at his own manufacturing site would make a written application to the CIR concerned providing therein: - i. Production capacity of the manufacturing unit, and if the same has increased over time, the month from which the enhanced production capacity was installed along with particulars of the additional manufacturing capacity; ii. Month-wise quantity of (a) raw material imported, and (b) purchased locally since July, 2020 (or 1st month of the tax year); iii. Quantity of stock available from earlier imports; iv. Month-wise details of Gas and Electricity consumed since July, 2020 (or 1st month of the tax year); v. Month-wise particulars of goods produced; vi. Month-wise details of post-dated cheques (PDCs) deposited with Customs authorities, if any; vii. List of buyers of the goods produced; viii. Bank statement for the relevant periods; ix. Electricity Sand Gas bills for the relevant period; and x. Month-wise proof of Federal Excise paid -- only in case of goods covered under the Federal Excise Act, 2005.
3. The CIR would ensure that particulars supplied by the RP are verified before the issuance of Consumption Certificate. In case any data are not verified, the RP would be given an opportunity to complete the application, provide the required information, and make up the deficiency. The Consumption Certificate issued will be directly mailed to the Collector Customs concerned with a copy thereof being duly marked to Member (IR Operations) and Member (Customs Operations), and under no circumstances will be handed over to the taxpayer. If the CIR decides to reject the application for a Consumption Certificate, the previous PDCs deposited would be encashed"
28. It is the assertion of the petitioners that the power to grant exemption certificate has also been delegated to the officers of the Revenue Department, which is oftenly misused by revenue officer.
Therefore, the entire business/import of raw materials for consumption in the erstwhile tribal areas has been made subject to the discretion/whims of the officers of the Revenue, which is indeed an excessive delegation per se.
29. The object of imposition of a tax is to generate state revenue. However, the government as well as the parliament has the authority to grant exemptions from taxation to an assessee/registered person or class of assessees/registered persons. Needless to mention that the said exemption can be either absolute or conditional. Exemption once granted to a person, as far as the said exemption remains in field, it is in the nature of a property right and the denial of the same would thus offend Articles 23 and 24 of the Constitution. We are also mindful of the legal proposition that, in construing- a taxing measure for determining its constitutional validity, the question of reasonableness cannot enter into a judicial mind. However, the impugned amendment has the effect of regulating the exemption which has been unequivocally granted to the residents of the erstwhile tribal areas in view of its specific background as stated above. Therefore, despite being the act of parliament, the same is subject to the test of reasonableness. Its reasonability is subject to judicial review by the court under Articles 18, 23 and 25 of the Constitution. Thus, it would follow that any restriction imposed upon the property or business is subject to the test of public interest and reasonableness. The Supreme Court of India in the case of Prag Ice Mills[13] in Para-9 of the judgment has held that any law would be open to judicial review on the ground; that nexus of the law with the public interest, alleged is not reasonable, despite the fact, that the word 'reasonable has not been used in Article 302 of the Indian Constitution.
Similarly, the Supreme Court of Pakistan in the case of Mohammad Imran[14] has provided guidelines to gauge the reasonableness of a statute by a constitutional court; some of the said guidelines germane to the present controversy are reproduced as under: i. Article 18 supra confers upon a citizen a right to freedom of trade, business or professions which is designed to enable the citizen to explore and adopt the best for his future, means of living and earning, and for the expression and recognition of his skills and abilities; ii. However, this right is not absolute, unqualified or unfettered, but subject to regulation and reasonable restrictions which' may be imposed l law in the larger interests of the society or for public welfare; iii. Although 'reasonable restrictions' does not feature in Article 18 supra, this does not mean that imposition of unreasonable restrictions is permissible under the Constitution; iv. Reasonable restriction does not mean prohibition or prevention completely; v. Under the Constitution, a proper balance is intended to be maintained between the exercise of the right conferred by Article 18 of the Constitution and the interests of the citizen in the exercise of his right to acquire, hold or dispose of his property to carry on occupation, trade or business. In striking that balance the danger which may be inherent in permitting unfettered exercise of a right must of necessity influence the determination of the restrictions which may be placed upon the right of the citizen;
30. In the present case, the imposition of the impugned condition of providing payment order at the time of the clearance of goods for an amount equal to the sales tax is the negation of the exemption which was granted to the present petitioners keeping in view their geographical location as well as business activities. Admittedly, the petitioners, if consuming the raw materials imported through the aforesaid concessionary regime, are not liable to pay any tax. However, at the same time, the petitioners are not prohibited from selling their product outside the erstwhile tribal areas on payment of sales tax. The said activities are obviously subject to the assessment regime as provided under the Act, 1990 as explained in the preceding paragraphs.
31. The condition of payment order equal to the amount of sale tax at the time of import would revert the exemption into the payment of sales tax regime as provided under section 3 of the Act, 1990 (charging section) and its adjustment as provided under section 7 of the Act, 1990 with a slight modification that instead of input tax (in cash) the form would be changed to payment order. Therefore, the demand of payment order from the business community belonging to the erstwhile tribal areas is an unreasonable condition depriving them to utilize their money for the business activities which otherwise would also offend the mandates of Articles 23 and 24 of the Constitution. It would be important to note that without the cost of repetition that the object of the impugned legislation is to regulate the exemption granted to the residents of the' erstwhile tribal areas and the same does not deal with the imposition of any tax. Needless to mention that the import of raw materials by all the petitioners has already been regulated, as explained in the preceding paragraphs of the judgment.
Discrimination
32. We have also examined all the entries of the Sixth Schedule to the Act, 1990, nowhere the exemption granted through any other entry has been made contingent to the condition of depositing the payment order equal to the amount of taxation and this is for the obvious reasons that the persons who qualify the exemption are not required to pay sales tax under the Act, 1990.
This Court in the case of Messrs Taj Packages (supra) in Para-14 of the judgment has referred to the various instruments whereby exemption has been granted to different class of registered persons from payment of sales tax. None of the said exemptions are contingent upon providing of pay order against the sales tax. The said judgment was affirmed by the Apex Court in the case of Hazrat Hussain (supra). Paras 30 and 31 of the said judgment highlight that the exemption/immunity to which the residents of PATA/FATA are entitled, cannot be discriminated.
The said paragraphs are reproduced as under:
30. We next take up the issue relating to the security mechanism to be placed in position by the Government so as to ensure that the facility is not misused by unscrupulous importers. In the judgment under appeal, we have noticed that in paragraph 14 the learned High Court has set out a large number of exemption notifications issued, from time to time, by the Government/Federal Board of Revenue granting exemptions as well as the conditions for ensuring that the facility is nor misused By way of illustration we may refer to Entry 5 contained therein. It relates to manufacturing in bond In this case the condition for exemption laid down is that the imports are to be made against a bond. Similarly, in entry No.6 of the said table a reference has been made to the duty and tax remission for exporters under Rules 296 and 297 of the Customs Rules, 2001, in terms whereof exporters are allowed the facility not to pay duty in advance but furnish post-dated cheques. The same facility has been granted under Entry No.7 which relates to common Bonded Warehouses. In this case too, goods can be imported under bond or postdated cheques.
31. The point we make is that since the above relate to exemptions granted by the Government in its discretion, from time to time, the case for granting the facility of not demanding advance payment in the present case rests on a much stronger foundation. The Constitution itself grants a complete immunity for, and in relation to, sales tar and income tax in FATA/PATA. Obviously persons carrying on business in these areas cannot be subjected to discriminatory treatment. The High Court, after reviewing the facts and circumstances of the case, was, in our opinion, completely justified in allowing the release of goods without prior payment of tax/duty against deposit of post-dated cheques. It has also been found, as a matter of fact, that the facility was not misused or abused by the importers of the raw materials. The High Court has recommended that the Federal Government should lay down a uniform policy."
33. Similarly, in the case of M/s. Lucky Cement Ltd.[15], the Apex Court has very elaborately highlighted the equal protection of law to all citizens in the following words: "Article 25 of the Constitution mandates equality before the law and Article 18 of the Constitution secures the right to conduct any lawful trade or business. If both these Articles are read together and applied to the present case it means that the appellant cannot be made to face a more onerous tax regime than its competitors. It would be appropriate to reproduce applicable extracts from the five-member Bench decision of this Court in the case of I.A. Sharwani v. Government of Pakistan.
(i) that equal protection of law does not envisage that every citizen is to be treated alike in all circumstances, but it contemplates that persons similarly situated or similarly placed are to be treated alike;
(ii) that reasonable classification is permissible but it must be founded on reasonable distinction or reasonable basis;
(v) that a law applying to one person or one class of persons may be constitutionally valid if there is sufficient basis or reason for it, but a classification which is arbitrary and is not founded on any rational basis is no classification as to warrant its exclusion from the mischief of Article 25;
(vi) that equal protection of law means that all persons equally placed be treated alike both in privileges conferred and liabilities imposed;
(vii) that in order to make a classification reasonable, it should be based:--
(a) on an intelligible differentia which distinguishes persons or things that are grouped together from those who have been left out;
(b) that the differentia must have rational nexus to the object sought to be achieved by such classification.'
The aforesaid principle was enunciated in a service matter but it is equally applicable in matters of taxation. In the case of Collector of Customs v. Flying Kraft Paper Mills (Pvt.) Ltd.7 it was held, by a three-Member Bench of this Court, that, 'while there is a power in the Legislature and other taxing authorities to classify persons or properties into categories and to subject them to different rates of taxes, there is none to target incidence of taxation in such a way that similarly placed persons are dealt with not only dissimilarly but discriminately.' Therefore, we have no hesitation in declaring that the treatment meted out to the appellant to the extent of imposing property tax on its buildings at a higher rate than which was imposed on the buildings of other cement manufacturers was discriminatory and to such extent it is illegal and ultra vires. "
34. In view of what has been stated above, we hold that the amendment in Entry No.151 of the Sixth Schedule to the Act, 1990 does not qualify the test of reasonableness, beside it is discriminatory and ultra vires the mandates of Articles 18, 23, 24 and 2 of the Constitution which are accordingly struck down and as a consequence thereof, the petitioners, against the import of raw material, machinery etc. or other input on clearance of the goods, shall provide post-dated cheque equal to the amount of sales tax. The instrument(s) of pay order already deposited by the petitioners, if any, shall be returned to them against which the petitioners shall provide post-dated cheques.
Annexure 'A'
S. NoCase Title
1. W.P. No.3459-P/2024 " M/S International Pipe and tube Small Indus and others v. FBR and others"
2. W.P. No.5191-P/2024 "M/S Malakand Engineering (Pvt.) Ltd. v. The Federation of Pakistan and others"
3. W.P. No.4553-P/2024 "M/s Swat Aqua Terra Eng. and others v. The Federation of Pakistan and others"
4. W.P. No.4760-P/2024 "M/s UAT Foods and Manufacturing Co. v. Federation of Pakistan and others."
5. W.P. No.3670-P/2024 "M/s HBK Steel Mills and others v. The Federation of Pakistan and others".
6. W.P. No.3460/2024 "M/s Gul Shahzada Enterprises and others v. FBR and others"
7. W.P. No.3509/2024 "M/s Taj Vegetable Oil Processing Unit and others v. Federation of Pakistan and others"
8. W.P. No.3676/2024 "M/s Falak Sair Dyeing Mills (Pvt.) Ltd. and another v. Federation of Pakistan and others".
9. W.P. No.3599/2024 "M/s HMB Oil and Ghee v.
Federation of Pakistan and others"
10. W.P. No.3612/2024 "M/s. Khaleej Steel Indus and others v. Federation of Pakistan and others"
11. W.P. No.3513/2024 "M/s Bara Ghee Mills and others v. Federation of Pakistan and others".
12. W.P. No.3585/2024 "M/s Build Trade and others v.
Federation of Pakistan and others"
13. W.P. No.3579/2024 "M/s Inter Foam Ltd. v.
Federation of Pakistan and others"
14. W.P. No.3526/2024 "M/s Alam Ghee and Oil Ltd. v.
Federation of Pakistan and others".
15. W.P. No.3522/2024 "M/s Zubaida Mehar Oil and Ghee Industries and others v. Federation of Pakistan and others".
16. W.P. No.3611/2024 "M/s Sarhad Tea Company and others v. Federation of Pakistan and others."
17. W.P. No.4189/2024 "M/s Nafees Plastic Industries v.
Federation of Pakistan and others."
18. W.P. No.3978/2024 "M/s Ritual Tea and Foods Barikot Swat v. Federation of Pakistan and others"
19. W.P. No.3684/2024 "M/s Maidan Ghee and Oil Mills (Pvt.) Ltd. and others v. Federation of Pakistan and others"
20.W.P. No.3735/2024 "M/s Swat Oil Mills v. Federation of Pakistan and others"
21. W.P. No.3685/2024 "M/s Aliza Industries and others v.Federation of Pakistan and others"
22.W.P. No.5191/2024 "M/s Malakand Engineering (Pvt.)
Ltd. v. The Federation of Pakistan and others"
1. 247(3). No Act of 1 [Majlis-e-Shoora (Parliament)] shall apply to any Federally Administered Tribal Area or to any part thereof, unless the President so directs, and no Act of 1 Mijlis-e-Shoora (Parliament)] or a Provincial Assembly shall apply to a Provincially Administered Tribal Area, or to any part thereof unless the Governor of the Province in which the Tribal Area is situate, with the approval of the President, so directs; and in giving such a direction with respect to any law, the President or, as the case may be, the Governor, may direct that the law shall, in its application to a Tribal Area, or to a specified part thereof have effect subject to such exceptions, and modifications as may be specified in the direction.
2. Messrs Taj Packages Company (Pvt.) Ltd. through Manager v. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others (2016 PTD 203); Pakistan through Chairman, FBR and others v. Hazrat Hussain (2018 SCMR 939) and Commissioner Income Tax Peshawar v. M/s. Gul Cooking Oil and Vegetable Ghee (pvt.) Ltd. (2008 PTD 169).
[3]40D. Provisions relating to goods supplied from taxes exempt areas.---(1)
The conveyances carrying goods supplied from the tax exempt areas, shall be accompanied by such documents in respect of the goods carried as may be prescribed under rules.
4. Copy of the Customs General Order No.01 of 2021 is annexed as Annexure 'B' to this judgment.
5. Copy of Circular No. 09 of 2021 is annexed as Annexure 'C to this judgment.
6. Copy of Circular No. 13 of 2021 is annexed as Annexure 'D' to this judgment
7. Copy of Sales Tax General Order No. 14 of 2022 is annexed as Annexure 'E' to this judgment.
8. Copy of Circular No. 3 of 2022 is annexed as Annexure 'F' to this judgment.
9. The Commissioner, Inland Revenue, Karachi v. Messrs Attock Cement Pakistan Limited, Karachi (2023 SCMR 279)
[10]13. Exemption. (I) Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such as may be specified by the Federal Government, be exempt from tax under this Act.
11. H.M. Extraction (Ghee and Oil Industries (Pvt.) Ltd. and another v. Federal Board of Revenue and another (2019 SCMR 1081)
12. Guidelines on Standardization of Payment Orders and Demand Drafts issued by the State Bank of Pakistan.
13. Prag Ice Mills v. Union of India (AIR 1978 SC 1296)
14. Mohammad Imran v. Province of Sindh (2019 SCMR 1753)
15. M/S Lucky Cement Ltd. through its General Manager, Peshawar v. Khyber Pakhtunkhwa through Secretary Local Government and Rural Development, Peshawar and others (2022 SCMR 1961).