Summary: Sales Tax Act (VII of 1990)--- ----Ss. 2(34), 11, 33, 34 & 47---Reference---Recovery proceedings---Delay in filing of tax return and deposit of tax due---Penalty and default surcharge, imposing of---Principle---Authorities initiated recovery proceedings against respondent / taxpayer for filing delayed tax returns and payment of tax due---Appellate Tribunal Inland Revenue set aside imposition of penalty and default surcharge on the ground that liability on account of principal amount of tax stood discharged voluntarily prior to initiation of proceedings under S. 11(1) of Sales Tax Act, 1990---Validity---Even if upon filing of return after due date no tax, as defined in terms of S. 2(34) of Sales Tax Act, 1990 and subject to the context, was payable, still penalty and default surcharge could be ordered and claimed---Restrictive interpretation of scope of "order of assessment of tax" would nullify disciplined compliance envisaged in law and otherwise would render Ss. 33 & 34 of Sales Tax Act, 1990 as redundant---Such redundancy was to be avoided upon harmonized reading of applicable provisions---Division Bench of High Court set aside order of Appellate Tribunal Inland Revenue as the same was legally defective---Division Bench of High Court remanded the matter to Appellate Tribunal Inland Revenue for de novo determination on appeal of respondent / taxpayer afresh, after affording opportunity of hearing to parties---Reference was allowed accordingly. Commissioner Inland Revenue v. Madina Cotton Ginners and Oil Mills 2016 PTD 643; Messrs Attock Refinery Limited and others v. The Collector of Sales Tax and others 2021 PTD 1680; Messrs Punjab Small Industries, Rawalpindi v. Deputy Collector Adjudication and others 2021 PTD 871; Dhan Fibers Ltd. v. Central Board of Revenue, Islamabad and others 2006 PTD 2683 and The Commissioner Inland Revenue Zone-I, Regional Tax 643 Office, Quetta v. Messrs Quetta Electric Supply Company Limited, Zarghoon Road, Quetta 2022 PTD 1265 ref. Syed Zain-ul-Abidein Bokhari for the Applicant-department. Waseem Ahmad Malik assisted by Ms. Najia Noreen Maitla for Respondent-taxpyer.

Summary: Background: This case involves an appeal against a decision by the Customs, Central Excise, and Sales Tax Appellate Tribunal. The appellant, a tax authority, challenged the tribunal’s decision to allow an input tax adjustment claimed by the respondent despite non-compliance with Section 73 of the Sales Tax Act, 1990. Section 73 requires that transactions exceeding Rs. 50,000 must be conducted through specified banking instruments. The respondent admitted to making cash payments for transactions but argued that the non-compliance did not invalidate the input tax claim. The tribunal allowed the tax adjustment but imposed a procedural penalty on the respondent. -----Issues: 1- Mandatory Nature of Section 73: Whether Section 73 of the Sales Tax Act, 1990, is mandatory, making non-compliance an illegality rather than a procedural defect. -----2- Disallowance of Input Tax Adjustment: Whether non-compliance with Section 73 justifies the disallowance of input tax adjustment and the imposition of penalties. -----3- Effect of Admission of Non-Compliance: Whether the respondent's admission of non-compliance with Section 73 bars them from appealing further. -----Holding/Reasoning/Outcome: --Interpretation of Section 73: The court held that non-compliance with Section 73 does not automatically result in the disallowance of input tax adjustment, as the section does not specify such a penalty. Instead, the non-compliance was procedural. --Penalty Imposition Upheld: The court upheld the procedural penalty of Rs. 5,000 imposed by the Appellate Tribunal, agreeing that this was a reasonable sanction for the procedural lapse. The court dismissed the reference, maintaining the tribunal’s decision to allow the input tax adjustment while upholding the procedural penalty. -----Citations/Precedents: National Logistic Cell v. Hakas (Pvt.) Limited (2010 YLR 1448)

Summary: (a) Interpretation of statutes--- ----Fiscal laws---Charging of tax---Principle---No tax can be levied against a person beyond the scope of a charging section and it has to be construed and applied strictly---Before taxing any person, it must be shown that he falls within the ambit of charging section by clear words used therein---If a case does not fall within the four corners of the charging section, no tax can be imposed by inference, analogy, or by trying to probe into intention of the Legislature. (b) Federal Excise Act (VII of 2005)--- ----Ss. 3, 7, 34A & Second Sched.---Sales Tax Act (VII of 1990), S.7---Reference---Federal Excise Duty, levy of---Ghee and Cooking oil---Authorities were aggrieved of order passed by Appellate Tribunal Inland Revenue setting aside show cause notice issued to respondents / taxpayers to recover Federal Excise Duty---Validity---Levy and collection of Federal Excise Duty on Ghee and Oil sector placed in Second Schedule to Federal Excise Act, 2005, were recoverable in the manner and mode as provided under Sales Tax Act, 1990---Intention of law maker by inserting S.7 in Federal Excise Act, 2005 where input adjustment had already been provided was aimed to allow to assessee all adjustment even admissible to it under the regime provided under Sales Tax Act, 1990, including input adjustment of sales tax on all purchases made by a registered person during taxable/economic activities---Through S.7 to Federal Excise Act, 2005 by reference the beneficial regime of input adjustment as provided under S.7 of Sales Tax Act, 1990 was borrowed which was also a machinery provision relating to adjustment of input tax---Findings of both the forum relating to liability of respondents to pay Federal Excise Duty were not based on correct principles as stated above---Assessing officer passed order of assessment ignoring essential legal and factual aspects of the case whereas Appellate Tribunal Inland Revenue straightaway annulled assessment order ignoring the fact that during period in question, respondents/taxpayers were subject to impost of Federal Excise Duty---High Court set aside order passed by Appellate Tribunal Inland Revenue as well as assessment in question and remanded the matter to assessing officer for assessment afresh---Reference was disposed of accordingly. Messrs Taj Vegetable Oil Processing Unit, Skhako Dargai, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others (Writ Petition No. 4495-P/2017 decided on 10.03.2020); Commissioner of Wealth tax v. Sharwan Kumar Swarup & Sons 1995 ECR 425 SC; W.H. Cockerline & Company v. The Commissioner of Inland Revenue (16) TC 1 at 19, Halsbury's Law of England (Fourth Edn. Vol. 23, Para 29); Understanding Statutes, Canons of Construction first edition by S.M. Zafar and Nagpur Improvement Trust v. Amrik Singh and others AIR 2002 SC 3499 ref. Rahmanullah and Sharif Ullah, Assistant Director (Legal) for Petitioner. Shumail Ahmad Butt, Qazi Shehzad Iqbal, Saad Ali Qazi and Ms. Khoshnuma for Respondents. Date of hearing: 12th September, 2023. SYED ARSHAD ALI, J.--- This consolidated judgment is aimed to decide the instant Tax Reference as well as the connected References, the detail whereof along with disputed claim in the show cause notices is provided in Annexure 'A' to this judgment, as adjudication of common questions of law and facts are involved therein.

Summary: Sales Tax Act (VII of 1990)--- ----Ss. 3, 13 & Sixth Schedule, Serial No.32---Supplies of goods---Manufacturing of printing services---Sales tax and withholding sales tax, liability of---Scope---Whether the manufacturing of printing services used in the supplies of goods which are exempt in terms of Sixth Schedule to the Sales Tax Act, 1990, are liable to sales tax and withholding sales tax---Held: Record transpires that during the assessment proceedings, the appellant /registered person had conceded the allegation of non-payment of sales tax amount, however, based the reason of non-payment on the dispute between the KP Revenue Authority and FBR for non-payment of the sales tax---The supplies of books to the KPTBB are exempt from sales tax in terms of S. 13 of the Sales Tax Act, 1990, read with serial No.32 of the Sixth Schedule to the Sales Tax Act, 1990---It is also evident that KPTTB shall make payment to the appellant without withholding sales tax---It is also clear that printing of the books falls within manufacturing as provided in the Sales Tax Act, 1990, therefore, the same does not fall within the scope of Sales Tax Act, 1990---Since the supplies of books are exempt from sales tax and the printing of books falls within manufacturing and the same does not fall within the scope of the Sales Tax Act, 1990, hence, the appellant /registered person was not liable to pay sales tax on the same---Appellate Tribunal Inland Revenue vacated the sales tax demand upon the appellant/registered person for the relevant months, resulting into vacation of the orders passed by the two forums below---Appeal, filed by the registered person was allowed accordingly. Messrs Spinzer Enterprises (Pvt.) Ltd.'s case Writ Petition No.4254-P of 2015 and GST Reference No.11-P of 2013 ref. Danish Ali Qazi for Appellant. Ishfaq Ahmed, DR for Respondent. Date of hearing: 25th August, 2023.

Summary: Sales Tax Act (VII of 1990)--- ----S.3---SRO No. 1222(I)/2021 dated 17.09.2021---SRO No. 509(I)/2013 dated 12.06.2013---Persons who had not obtained Sales Tax Registration---Extra / further tax, levy of---Scope---Petitioners (taxpayers running charitable institutions, hospitals, schools or some other kind of business) impugned SRO No 1222(I)/2021 dated 17.09.2021 superseding an earlier SRO No. 509(I)/2013 dated 12.06.2013) whereby, an extra tax had been levied on the billed amount on supplies of electric power and natural gas to persons having industrial and commercial connection, who had either not obtained Sales Tax Registration or were not on the Active Tax-Payers list---Case of the petitioners was that they were not engaged in any taxable supplies or engaged in making exempt supplies, nor were they required to be registered under the Sales Act, 1990---Validity---Admittedly, the petitioner approached the High Court and availed ad-interim orders, primarily, following the judgment in the case reported as 2018 PTD 1600 titled Al-Zarina Glass Industries v. Federation of Pakistan (Al-Zarina Glass case) wherein the predecessor SRO 509(I)/2013 dated 12.06.2013 was impugned, and the controversy was decided in favour of the tax payers, however, the Civil Appeal (The Chief Commissioner (IR) Region v. M/s Al Zarina Glass Industries) filed by the Department against said judgment had been allowed by the Supreme Court---Thus, there was no reason to entertain any such further ground(s) as primarily the petitioners case was dependent on Al Zarina Glass Industries case leaving no justification to entertain ground(s) as the Supreme Court had now finally decided the issue---Pertinently, the extra tax under S. 3(5) of the Sales Act, 1990, had been levied on supply of electric power and natural gas; which was in addition to the tax levied under S. 3(1) of the Sales Tax Act, 1990---It was not on the activity or business of the Petitioners from which any exemption could be claimed on the ground that they were not engaged in any taxable activity---It is just like a tax on the consumer who avails any service or buys any goods and has to pay such tax---At times, the said tax is neither refundable nor adjustable but this in and of itself is not a ground to declare it as illegal---Constitutional petitions were dismissed, in circumstances. The Chief Commissioner (IR) Region v. Messrs Al Zarina Glass Industries (Civil Appeal No.920 of 2018) ref. Commissioner Inland Revenue v. Hajvairy Steel Industries (Pvt.) Limited 2023 SCMR 681 and ZAK Re-Rolling Mills v. Appeals Tribunal Inland Revenue 2020 SCMR 131 distinguished. Muhammad Tariq Masood, Syed Aijaz Hussain Shirazi, Shams Mohiuddin Ansari, Naeem Suleman, Zafar Hussain, Mian Ashfaq Ahmed, Ehsan Ghulam Malik, Shariq A. Razzak, Manzoor Arain, Riaz Moin Siddiqui, Rehmat Shakil, M. Anjum Khan, Syed Hamza Ahmed Hashmi, Atir Aqeel Ansari, Imran Iqbal Khan, Arshad Hussain Shehzad, Jahanzeb Awan, Shahan Karimi, Rashid Khan Mehar, Abdullah Azzam Naqvi, Mohsin Kadir Shahwani, Adnan Ali Khan Sherwani, Muhammad Taimur Ahmed, Ghulam Akbar Lashari and Waheed Hussain for Petitioners. Syed Ahsan Ali Shah, Kafeel Ahmed Abbasi, Aamir Ali Shaikh, Zulfiqar Ali Mirjat, Bilal Bhatti, Zohaib, Ameer Bakhsh Metlo, Imran Ahmed Maitlo, Ali Tahir Soomro, Burhan Jagirani, Ghazi Khan Khalil, Ameer Nausherwan Adil, Abdul Hakeem Junejo, Abdul Razzak, Syed Kumail Abbas, Muhammad Shahid, Irfan Mir Halepota and Qaim Ali Memon for Respondents. G.M. Bhutto, Assistant Attorney General for Federation of Pakistan. Date of hearing: 24th August, 2023.

Summary: Customs Act (IV of 1969)--- ----Ss. 25(2)(d)(e) & 196---Reference---Transactional value---Determination---Royalty and license fee---Pendency of matter before High Court---Dispute was with regard to issuance of show-cause notice by authorities to applicant / importer for adding payment of technical/royalty fee to its supplier in transactional value of imported goods---Show-cause notice in question was issued during the pendency of Special Customs Reference Application (SCRA) already pending before High Court on similar question wherein authorities were restrained to pass any final order in the proceedings pending before them---Validity---Based on the expressions employed in agreements in question, neither it was established that royalty and license fees in question relating to the goods valued was paid to the buyer either directly or indirectly, nor it was a condition of sale of goods valued---Royalty fee in question was not liable to be added to customs value determined in terms of S. 25(1) read with Ss. 25(d) & 25(e) of Customs Act, 1969---Show-cause notice in question for subsequent imports was based squarely on the same issue, which was before High Court by way of SCRA against the orders passed by Custom Appellate Tribunal, in favour of applicants / importers and authorities still intended to pass similar orders, disregarding the Tribunal’s order in question--- Resort to statutory remedies below the Customs Appellate Tribunal level were a mere formality, as the Tribunal’s order itself was before High Court in SCRA and had not been decided---High Court declined to dismiss the Reference Application as not maintainable---High Court quashed show-cause notice in question---Reference was disposed of accordingly. Honda Atlas Cars (Pakistan) Ltd. Lahore v. Collector (Appeals) Customs, Lahore 2012 PTD (Trib.) 649; Ghandhara Nisan Ltd. v. Collector of Customs (APPG), Karachi and another 2008 PTD 1610; Assistant Collector Customs and others v. M/s Khyber Electric Lamps and 3 others 2001 SCMR 838; 2006 PTD 978; 2004 PTD 1449; 2005 PTD 950; 2006 PTD 2237; 2003 PTD 2020; 2004 PD 295; 2023 PTD 527; Amtex Limited v. Customs Excise and Sales Tax Appellate Tribunal 2011 PTD 602; Al-Tech Engineers and Manufacturers v. Federation of Pakistan and others 2017 SCMR 673; Messrs Clariant Pakistan Limited v. Collector of Customs (Appeals), Karachi and another 2004 PTD (Trib.) 2712; Honda Atlas Cars Pakistan Limited v. Appellate Tribunal and 2 others 2021 PTD 1947; Collector of Customs, Bombay v. M/s. Maruti Udyog Ltd., Gurgaon (1989 (22) ECR 482 (S.C.), Commissioner of Customs, New Delhi v. Prodelin India (P) Ltd. (2006) 10 SCCR 280; Commissioner of Customs (Port), Kolkata v. J.K. Corporation Limited (2007) 9 SCC 401, Commnr. of Customs (Port), Chennai v. Toyota Kirloskar Motor (Pvt.) Ltd. (2007) 5 SCC 371; Commissioner of Customs v. Ferodo India (Pvt.) Ltd. (2008) 4 SCC 563, WEP Peripherals Ltd. v. Commissioner of Customs, Chennai (2008) 4 SCC 561; Indusind Media and Communications Ltd. v. Commissioner of Customs, New Dehli AIR 2019 SC 4812; Commissioner For The South African Revenue Service v. Delta Motor Corporation (Pvt) Ltd. (2002) ZASCA 114; 1991 (55) ELT 15 (Bom.); 20 1995 (76) ELT 481 (S.C.); 1987 (28) ELT 390 (Tri.Delhi); 1989 (22) WCR 482 (SC); (2006) 10 SCC 280; (2007) 9 SCC 401; (2007) 5 SCC 371; (2008) 4 SCC 563; 27 MANU/SASC/0015/2002 or (2002) ZASCA 114; CIT v. National Refinery Limited 2003 PTD 2020; CIT v. Gohar Ayyub Khan 1995 PTD 1074; Iram Ghee Mills (Pvt.) Ltd. Lahore v. Income Tax Appellate Tribunal, Lahore 1998 PTD 3835; Engro Vopak Terminal Ltd v. Pakistan 2012 PTD 130 and Dr. Zafar Sajjad v. CIR 2022 PTD 109 ref. Rashid Anwar and Aadil Saeed for Petitioners. Dr. Shah Nawaz Memon, Khalid Rajpar, Sardar Muhammad Ishaque, Muhammad Khalil Dogar, Waqar Ahmed Maitlo, Khalid Mehmood Siddiqui, Muhammad Bilal Bhatti, Munawwar Ali Memon, Masooda Siraj, Fozia M. Murad, Zuhaib Ahmed, Muhammad Idrees Jakhrani, Bushra Zia for Muhammad Zubair, Pervaiz Ahmed Memon, Syed Mohsin Iman, Touqeer Ahmed Seehar, Hafeezullah, Muhammad Aqeel Qureshi, Jazib Aftab, Shumaila, Qazi Ayazuddin Qureshi (Assistant Attorney General) and Syed Zain-ul-Abdin, Deputy Commissioner, SRB for Respondents (in Petitions). Munawwar Ali Memon, Masooda Siraj and Syed Mohsin Imam for Applicants (in SCRAs). Dr. Muhammad Farogh Naseem, Ahmed Hussain, Khalid Jawed Khan, Hanif Faisal Alam, Uzair Qadir Shoro and Umer Akhund for Respondents (in SCRAs). Dates of hearing: 20th February, 6th, 7th and 8th March, 2023.

Summary: Issue:Whether the show cause notice issued to the respondent was based on adequate and proper inquiry as required under the Sales Tax Act 1990.---Holding:The Supreme Court dismissed the appeal, affirming the High Court's judgment that the show cause notice and subsequent tax liability were not based on a proper inquiry or audit as mandated by the Sales Tax Act 1990.----Rationale:The Court highlighted the appellant's failure to conduct a proper audit or inquiry before issuing the show cause notice. The notice was deemed vague and based on assumptions rather than verified facts. The Court emphasized that the burden of proof in matters of tax liability lies with the tax authorities, who must establish allegations with persuasive evidence. The requirement to maintain certain documents cited by the authorities was not applicable at the time of the alleged transactions, making their demand unreasonable.----Judgment:The petition for leave to appeal was dismissed, upholding the High Court's decision in favor of the respondent. The actions of the tax authorities were found to lack the necessary procedural rigor and factual basis required under the Sales Tax Act 1990.

Summary: Sales Tax Act (VII of 1990)--- ----S. 3---Sales Tax Special Procedure Rules, 2007, Rr. 58-S & 58-T---Notification SRO 896(I)/2013 dated 4-10-2013---Delegated legislation---Extra tax, levy of---Estoppel, principle of---Applicability---Petitioners / taxpayers assailed show cause notices issued to them for recovery of 2% extra tax levied on goods so notified in addition to tax already levied---Validity---Certain functions have been delegated by Sales Tax Act, 1990 itself which otherwise are more of procedural in nature as to the effective date and its paraphernalia regarding input adjustment and payment in lieu thereof---Levy of extra tax was not a case of excessive delegation or for that matter, delegation of any legislative functions---By way of SRO 896(I)/2013 dated 4-10-2013, an extra tax of 2% was being collected in terms of S. 3(5) of Sales Tax Act, 1990---Provision of R. 58-T (5) of Sales Tax Special Procedure Rule, 2007 also provided that the specified goods on which extra sales tax was paid in the manner so provided, would be exempted from payment of sales tax on subsequent supplies including those as made by a retailer---This was in fact never an extra tax in essence, rather a mode to facilitate trade merely by making collection of a tax which was to be paid subsequently on supplies or at retail stage---Petitioners / tax-payers were estopped by their conduct as they had been availing such facility---This was never a d irect tax upon petitioners / taxpayers but was on the end consumer and was to be made part of cost of goods and value of supply for the purposes of paying sales tax under Sales Tax Act, 1990---Such levy was neither discrimi natory being confiscatory in nature and did not imping upon any fundamental rights---Division Bench of High Court declined to interfere in the competence and validity of legislation in question i.e. S. 3(5) of Sales Tax Act, 1990 as well as Rr. 58-S and 58-T of Sales Tax Spe cial Procedure Rule, 2007 introduced by way of an amending SRO 896(I)/2013 dated 4-10-2013---Division Bench of High Court declared the provision of Sales Tax Act, 1990 and SRO 896(I)/2013 dated 4-10-2013 to be validly and competently enacted / issued and were not ultra vires---Constitutional petition was dismissed in circumstances. 2017 CLC 1204; Mustafa Impex v. Government of Pakistan PLD 2016 SC 808; Pakistan Medical and Dental Council v. Muhammad Fahad Malik 2018 SCMR 1956; Government of Sindh v. Dr. Nadeem Rizvi 2020 SCMR 1; Muhammad Fahad Malik v. PMDC PLD 2018 Lahore 75; Eng. Zafar Iqbal Jhagra v. Federation of Pakistan 2013 SCMR 1337; M. Afzal and Son v. Federal Government PLD 1977 Lahore 1327; New Allied Electronics Ind. Ltd v. Federation of Pakistan 2017 PTD 130; Sakrand Sugar Mills Limited v. Federation of Pakistan PTCL 2014 CL 154; Cannon Products Ltd. v. Income Tax Officer PLD 1985 Karachi 572; Province of Sindh v. MQM PLD 2014 SC 531; Jurist Foundation v. Federal Government PLD 2020 SC 1; Director Food v. Madina Flour and General Mills Ltd PLD 2001 SC 1; Human Rights Case No. 14392 of 2013, Shakeel Ahmed v. Federation of Pakistan 2016 PTD 577; Mir Muhammad Khan v. Haider and others PLD 2020 SC 233; Almoiz Industries Ltd v. Federation of Pakistan 2018 PTD 1633; Ziaullah Afridi v. Government of Khyber Pakhtunkhwa PLD 2018 Peshawar 83; Haji Sultan Ahmed v. Chairman CBR 2008 PTD 103; All Pakistan Paramedical Staff v. Federation of Pakistan PLD 2017 Lahore 640; PLD 1983 SC 385; Muhammad Rafiq v. Federation of Pakistan 2014 PTD 1881; Quality Steel Re Rolling Mills v. Federation of Pakistan 2022 PTD 39; Asad Ali v. Federation of Pakistan PLD 1998 SC 161; PLD 2013 SC 829; ZAK Re Rolling Mills v. Appellate Trib 2020 SCMR 131; Tandliawala Sugar Mills v. Federation of Pakistan 2001 SCMR 1398; Pak Telecommunication v. Government of Pakistan 2017 PTD 1359; LDA v. Imrana Tiwana 2015 SCMR 1739; State of M.P. v. Rakesh Kohli 2013 SCMR 34; Elahi Cotton v. Federation of Pakistan PLD 1997 SC 582; Hakimsons Impex v. Federation of Pakistan C.P. 4614 of 2022 SHC; Fecto Belarus Tractors Ltd v. Government of Pakistan PLD 2005 SC 605; Pir Baksh v. Chairman Allotment Committee PLD 1987 SC 145; OGRA v. Midway CNG 2014 SCMR 220; ZaibTun Textile Mills Ltd v. CBR PLD 1983 SC 358; Multiline Associates v. Ardeshir Cowasjee 1995 SCMR 1362; Province of East Pakistan v. Sirajul Haq Patwari PLD 1966 SC 854; Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan PLD 1988 SC 670; Ravi Spinning's case 1999 SCMR 412; Yousuf Re-Rolling's case PLD 1989 SC 232; Qaiser Brothers's case PLD 1991 SC 884; East West Steamship Company's case PLD 1958 SC (Pak) 41 and R.K. Garg v. Union of India (1981) 4 SCC 675 rel. For Petitioners Dr. Muhammad Farogh Naseem, Ameen Bandukda, Fouzia Rasheed, Ahmed Hussain, Ammar Yasser, Naeem Suleman, Arshad Hussain Shehzad, Kashan Ahmed, Asghar Bangush, Tauqir Randhawa, M. Saad Shafiq Siddiqui, Saiyed Younus Saeed, Ajeet Kumar, Nadir Hussain Abro, Raghib Ibrahim Junejo, Fahad Khan, Mushtaque Hussain Qazi, Ghazala Rafiq, Ellahi Buksh Qureshi, Muhammad Arif, Abdul Sattar Silat, Muhammad Arif, Zain A. Jatoi, Muhammad Mustafa Namdani, Syed Arshad Ali, Sagar Ladhani, Shehanshah Hussain, Syed Irshad-ur-Rehman, Abdul Rehman Adeed, Mariam Salahuddin, M. Adeel Awan, Duaa Aryaan and Asadullah, Muhammad Jehangir holding brief for Ismat-un-Nissa. For Respondents Shahid Ali Qureshi, Ameer Bakhsh Metlo, Dr. Shah Nawaz, Nusrat Ali Shar, Imran Ahmed Metlo, Abdul Mujeeb Zeeshan, Afsheen Aman, Muhammad Aqeel Qureshi, Khalid Rajpar, Muhammad Khalil Dogar, Nuzhat Shah, Fozia M. Murad, Zohaib Ahmed, Abdul Saim Malik, Muhammad Taseer Khan, Abdul Sami Malik, Muhammad Idress Rahimoon, Qaim Ali Memon, Syed Ahsan Ali Shah, Bilal Memon, Waleed Khanzada, Muhammad Bilal Bhatti, Fayaz Ali Metlo, Farha Naz Qazi, Ashfaq Ali Gilal, Kashif Nazeer, Preetam Das, Jawed Hussain, Irshad Ali Tunio, Sajjad Ali Solangi, Ghulam Rasool Korai, Masooda Siraj, Umer Zd Gul, Khalid Mehmood Siddiqui, M. Rashid Arfi, Ayaz Sarwar Jamali, Mohsin Mithani, Danyal Muzaffar, Syed Shohrat Hussain Rizvi, Pervaiz Ahmad Memon, Bushra Zia for Muhammad Zubair Qureshi. Qazi Ayazuddin Qureshi and G. M. Bhutto Assistant Attorney Generals. Kafeel Ahmed Abbasi, Additional Advocate General Sindh. Dates of hearing: 23rd January, 2023, 2nd February, 2023 and 1st March, 2023.

Summary: In the present case, subject matter of the dispute is the liability of the withholding agent in respect of his failure to deduct and deposit the sales tax on purchases made by it for a period prior to 2016 being a withholding agent. We have perused the text of Finance Act, 2016 which does not give any impression of its retrospective application and it is for obvious reason that the liability to pay sale tax is on the person making taxable supplies and the withholding agent was only responsible to withhold certain amount of tax at specified rate to deposit the same with the revenue. Since, the liability as stated above was created through Finance Act, 2016 which has no retrospective application, therefore, the demand of the revenue for the period prior to the Finance Act, 2016 in our humble view is without lawful authority.

Summary: (a) Sales Tax Act, 1990 (STA): ----Sections 7 & 8(1); Input Tax Adjustment---Admissibility---Unaccounted for Gas (UFG) over and above permissible limits---Disallowance of input tax adjustment by CIR(A) upheld for non-steel items but overturned for UFG based on Tribunal's larger bench decision---Input tax adjustment claimed on UFG was deemed admissible as the gas was originally intended for taxable supplies---Reliance placed on principles established in STA No. 833/LB/2016 and affirmed by the Lahore High Court in Mayfair Spinning Mills case (2002 PTCL CL 115) holding that input tax paid on goods intended for taxable supplies remains admissible even if the goods are later destroyed or lost during transmission. (b) Tribunal Precedent and Larger Bench Authority: ----Binding nature of larger bench decisions---Tribunal clarified that decisions of larger benches are binding on smaller benches unless overruled by higher courts---CIR(A) erred in ignoring the larger bench decision in favor of the appellant, leading to the disallowance of input tax adjustment on UFG, which was subsequently rectified by the Tribunal. (c) Unaccounted for Gas (UFG): ----Input tax adjustment on UFG exceeding OGRA benchmarks---Tribunal upheld the appellant's entitlement to input tax adjustment for UFG losses exceeding OGRA's threshold, recognizing the gas as intended for taxable supplies---Decision aligns with legal precedents supporting input tax adjustment for distribution losses incurred during taxable supply processes (2015 PTD 1112; 2014 PTD 1629). ----Disposition: Appeal allowed; CIR(A)'s disallowance of input tax on UFG set aside, and the appellant's entitlement to input tax adjustment upheld.