NASIR ASLAM ZAHID, J.---During 1988, the petitioner placed, orders for import of certain plastic materials and obtained seven import licences for importing such materials into Pakistan.
According to the petitioner, Irrevocable Confirmed Letters of Credit were opened in favoity of the suppliers through Habib Bank Limited and the goods were shipped by the suppliers on various dates. The goods arrived in Karachi during May, June and July, 1988, in respect whereof Bills-of- Entry were filed. According to the petitioner, the said goods were exempted from levy of sales tax in view of exemption Notification No.SRO/530/(l)/86, dated 29-5-1986, but the Customs Authorities were illegally demanding sales tax at 12-1/2 per cent ad valorem on the said consignment and refusing to release the same without payment of sales tax. The claim made by the Customs Authorities for sale, tax. Was based oti Notification dated 26-6-1988 bearing No.S.R.O./500/(l)/88 which superseded the earlier Notification dated 29-5-1986. In the fresh Notification dated 26-6- 1988, the goods imported by the petitioner no longer remained exempted. The demand of sales tax by the Customs Authorities on the said consignments has been challenged in the present Constitutional Petition. .
2. We have heard Mr. Muhammad Nasim, learned counsel for the petitioner and Mr. Lkram Ahmed Ansari, Deputy Attorney-General assisted by Mr.S.M. Sayedain Zaidi, Advocate.
3. Mr. Muhammad Nasim, learned counsel for the petitioner, contended that the petitioner had acquired vested rights to import the said goods without payment of' sales tax as before the issuance of the second Notificaiton dated 26-6-1988 (which superseded the earlier Notification dated 29-5-1986 which had granted exemption to the goods in question from levying of sales tax) the petitioner had already placed orders for the purchase/import of the goods in question, opened Irrevocable Confirmed Letters of Credit in favour of the suppliers and goods in question had also been shipped by the suppliers and in case of 4 of the 7 consignments, Bills of Entry had also been filed. The learned counsel has relied upon the following two reported decisions of this Court:
(i) Crescent PA. Industries (Pvt Ltd. v. Central Board of Revenue 1990 P`TD 29; and
(ii) Yaseen Sons v. Collector of Customs (1990) CLC 1979.
In both these decisions, reliance was placed on the well-known decision of the Supreme Court in the case of A]-Samraz Enterprises v. Federation of Pakistan 1986 SCM R 1917 in which it had been, inter alia, held that the withdrawal of exemption by a subsequent notification could not affect vested rights, acquired by the importers.
4. Mr. Ikrani Ahmed Ansari, learned Deputy Attorney-General submitted that the decision of this Court in Crescent Pak. Industries case has been taken to the Supreme Court by the Government where leave has been granted and the appeal of the Government is still pending. Learned Deputy Attorney-General also relied upon section 31-A inserted in the Customs Act, 1969, by the Finance Act, 1988 for the proposition that the aforesaid section 31-A has nullified the effect of the decision in A]-Samraz Enterprises case and he relied upon the recent decision of the Supreme Court dated- -24-9-1991 in the case of Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan and others Civil Appeals No.915-K to 918-K of 1990.
5. We may refer to another decision of the Supreme Court dated 7-2-1991 in the case of Federation of Pakistan v. Messrs Mahmood Sons (Pvt.) Ltd. (Civil Appeals No.187-K to 191-K of 1990). This decision of the Supreme Court disposed of several appeals filed against the judgment of this Court by which judgment, this Court had struck down the levy of regulatory duty of 20% and sales tax at the rate of 12-1/2 ad valorem on imported shredded and bundled scrap of iron and steel. Para. 5 of the said judgment of the Supreme Court dated 7-2-1991 reads as follows:-- "As regards the re-imposition of the sales tax and denial of the benefit of the exemption, our decision in Al-Samraz Enterprises v. Federation of Pakistan 1986 SCM R 1917 holds the field as by a Notification, the Federal Government could not by withdrawing exemptions, enhance the fiscal liability on concluded contracts evidenced by the opening of the irrevocable letters of credit in favour of the suppliers. Section 31-A of the Customs Act cannot be invoked for protecting the levy of sales tax because that relates to customs duty and not to sales tax.
6. As, in the present Constitution Petition, the- challenge is to the demand of sales tax and not to customs duty. In view of the aforesaid law, declared by the Supreme Court, Section 31-A of the Customs Act cannot be pressed into service by the Department for protecting the levy of sales tax by the second Notification dated 26-6-1988 as contracts had already been concluded between the petitioner and the suppliers in respect of the seven consignments in question evidenced by the opening of the Irrevocable Confirmed Letters-of-Credit by the petitioner in favour of the suppliers The aforesaid two reported decisions of this Court relied upon by Mr. Muhammad Nasim also support the case of the petitioner that the levy of sales tax on the consignments in question is illegal.
7. Mr.Ikram Ahmed Ansari, Deputy attorney-General, however, relied upon subsection (5) of Section 3 of the Sales Tax Act, 1951 in contending that as the said provision makes -Customs Act, 1969 applicable to Sales Tax, section 31-A of the Customs Act would be applicable and the decision in Molasses case by the Supreme Court demolishes the case of the petitioner. Section 3(5) of the Sales Tax Act, 1951, is as follows- "(5) The tax in respect of goods mentioned in clauses (b) and (d) of subsection (1) shall be payable at the same time and in the same manner as the customs duties under the Customs Act, 1969 (IV of 1969). And the provisions of the said Act and the rules made thereunder shall, so far as may be and with the necessary modification, apply for the purposes of this Act as they apply for the purposes of the said Act."
8. We find no merit in the contention raised by the learned Deputy Attorney-General. As observed, the law has been declared by the Supreme Court in its judgment dated 7-2-1991 in the -case of Federation of Pakistan v. M/s. Mehmood Sons (Pvt.) Ltd. Where it has been held that Section 31-A of the Customs Act cannot be invoked for protecting levy of the sales tax because that relates to customs duty and not to sales tax. We may also refer to the following observations of this Court in the case of Crescent Pak: Industries (Pvt.) Ltd. v. Central Board of Revenue (1990 PTD 29) which fully answers the contention raised by the Deputy Attorney-General. In para. 4 of the said judgment, effect of Section 3(5) of the Sales Tax Act has been considered and is reproduced here:- "There is little to argue on the point that the Sales Tax Act of 1951 and the Customs Act of 1969, though. Taxing statutes, operate in different fields. To our minds what Section 3(5) of the Sales Tax Act, 1951 achieves is, the introduction of machinery operating under the Customs Act to realizations under the Sales Tax Act, as well. There is a clear distinction between charging provisions of a statute and the, machinery part thereof. It is axiomatic that mode and manner of recovery does not alter the nature of a tax nor can a tax be introduced or imposed by implication. We are clear in our minds that it is only payability which is covered by Section 3(5) of the Sales Tax Act and not the imposition or levy of sales tax, which is provided for elsewhere in the Sales Tax Act itself. Merely, because of the invocation of Section 3(5) of the Sales Tax Act and the application of the Customs Act, 1969, pursuant thereto Sales Tax is not divested of its inherent attributes and does not - become Customs duty and, therefore, the introduction of Section 31-A in the Customs Act, cannot take away vested rights under the Sales Tax Act and does not make any difference whatever on that score."
We are in respectful agreement with the aforesaid interpretation of section 3(5) of the Sales Tax Act.
9. In the circumstances this petition is allowed and it is declared that the levy demand of sales tax from the petitioner in respect of the said consignments on the basis of the S.R.0 dated 26-6-1988 is without lawful authority and of no legal effect. By order dated 31-1-19,99 passed in this petition on the application for interim relief, the consignments were allowed to be cleared on payment of admitted customs duty and other charges on furnishing a Bank guarantee for the disputed amount of sales tax with 14% mark-up to the satisfaction of respondent No.3 (Collector of Customs)
(Appraisement), Customs House, Karachi. The guarantee furnished by the petitioner is discharged.
There will be no order as to costs.