Summary: (Allowed) The Supreme Court considered questions of law related to the adjustment of input tax and the applicability of section 66 of the Sales Tax Act. They reaffirmed that input tax could be adjusted from output tax under section 7(1) of the Sales Tax Act and that the adjustment was a concession. However, they also noted that there was no specific provision in the law regarding the time limit for such adjustment. Concerning the time limit for claiming the adjustment of input tax, the Court examined whether there was any limitation of time for availing this concession. The Court noted that the provision did not specify a time restriction for claiming the adjustment. However, the Finance Act of 1998 introduced a time limitation for claiming input tax adjustments, but it could not be retrospectively applied to the respondent-company's case. Based on the analysis, the Supreme Court ruled in favor of the respondent-company, M/s Attock Cement Pakistan Limited. The Court upheld the findings of the Customs, Excise & Sales Tax Appellate Tribunal and the High Court, which had concluded that the respondent-company had the right to adjust the input tax and claim a refund.

Summary: Background: The petitioners, various textile companies, challenged notices issued by the Deputy Commissioner for a post-sanction audit of their sales tax refund claims under Rule 36 of the Sales Tax Rules, 2006. The petitioners argued that the notices were issued without lawful authority and jurisdiction because Rule 36 requires the Commissioner Inland Revenue to carry out such audits. ----Issues: 1- Whether the Deputy Commissioner has the authority to issue notices for a post-sanction audit under Rule 36 of the Sales Tax Rules, 2006. 2- Whether the Commissioner Inland Revenue must personally conduct the audit or if it can be delegated to other officials. ----Holding/Reasoning/Outcome: The High Court dismissed the petitions, holding that: The petitioners' argument that the notices must be issued by the Commissioner Inland Revenue personally is misconceived. The court clarified that the Commissioner's role is administrative, involving the issuance of an order for conducting the audit, not performing the audit themselves. The notices issued for post-sanction audit by the Deputy Commissioner are valid as long as the Commissioner has authorized the audit process. The mere selection for an audit does not cause actionable injury to the taxpayer. The petitioners' sales tax refunds were processed and paid through online systems without pre-audit, making the post-sanction audit necessary to verify the accuracy and legitimacy of the refund claims. Conducting the audit does not constitute an adverse order against the petitioners but is a routine check to ensure compliance and accuracy. ----Citations/Precedents: Indus Motor Company Limited v. Pakistan and others (2020 PTD 297): Interpreted provisions of Section 25 of the Sales Tax Act, 1990, regarding conducting audits. Commissioner Inland Revenue v. Allah Din Steel & Rerolling Mills (2018 SCMR 1328): Held that mere selection for audit does not cause actionable injury to the taxpayer.

Summary: The issue at hand is whether the appellant, a service provider engaged in the reclamation of transformer oil, is liable to pay excise duty and sales tax on the reclaimed oil. The court analyzes the definitions of "manufacturer" and "manufacture" under the Central Excises Act and the Sales Tax Act to determine the appellant's tax liability. Under the Central Excises Act, "manufacture" includes any process incidental to the completion of a manufactured product, as well as re-manufacture, repair, and packaging. The term "manufacturer" encompasses a person employing hired labor or engaging in the production or manufacture of goods for sale. The court concludes that the appellant, who provides labor services for the reclamation of transformer oil owned by WAPDA (Water and Power Development Authority), falls under the first category of manufacturers. However, since the appellant does not own the reclaimed oil, it is not liable to pay excise duty on the reclaimed oil. Regarding sales tax, the court examines the definition of "taxable goods," "taxable supply," and "taxable activity" under the Sales Tax Act. The Act imposes sales tax on taxable supplies made by registered persons in the course or furtherance of a taxable activity. The appellant's supply of transformer oil to WAPDA is considered a taxable supply if it meets the criteria of being made by an importer, manufacturer, wholesaler, distributor, or retailer engaged in a taxable activity. While the reclamation of transformer oil constitutes "manufacture" under the Central Excises Act, the definition of "manufacture" under the Sales Tax Act is narrower and does not specifically include re-manufacture or repair. Therefore, the court determines that the appellant's supply of reclaimed transformer oil does not fall under the definition of a taxable supply. In summary, the court rules that the appellant is not liable to pay excise duty on the reclaimed transformer oil since it does not own the oil and falls under the category of providing labor services. Additionally, the court concludes that the appellant's supply of reclaimed transformer oil does not qualify as a taxable supply under the Sales Tax Act.

Summary: Background:M/s A.K Tariq Foundry and other petitioners, who are registered limited companies, partnerships, and sole proprietors with manufacturing units in the erstwhile Provincial Administered Tribal Area (PATA) and Federal Administered Tribal Area (FATA), challenged the imposition of sales tax on their electricity supply post the 25th Constitutional Amendment. This amendment merged FATA and PATA into Khyber Pakhtunkhwa, thus extending the federal fiscal and tax regimes to these areas. The petitioners contested the discriminatory treatment and exclusions under Entry No. 152 of the Sixth Schedule to the Sales Tax Act, 1990, which exempted certain industries from sales tax on electricity supply while excluding steel, ghee, and cooking oil industries, and industries established after May 31, 2018.---Issues:1. Whether the exclusion of certain industries from the sales tax exemption under Entry No. 152 of the Sixth Schedule to the Sales Tax Act, 1990, violates Articles 18 and 25 of the Constitution of Pakistan.2. Whether the legislative classification and sub-classification for tax exemption purposes are constitutionally permissible.----Holding/Reasoning/Outcome:Exclusion from Sales Tax Exemption:The Court examined whether the exclusion of steel, ghee, and cooking oil industries, as well as industries established after May 31, 2018, from the sales tax exemption on electricity supply violated the principles of equality and non-discrimination enshrined in Articles 18 and 25 of the Constitution.The Court held that the exclusion of industries established after May 31, 2018, created an unreasonable classification. Industries established before and after this date operated in the same market and faced similar conditions. Therefore, denying tax exemptions based solely on the establishment date was discriminatory and violated Article 25.Legislative Classification and Sub-Classification:The Court recognized that while the legislature has the authority to classify and differentiate between various classes of taxpayers, such classification must be based on an intelligible differentia with a rational nexus to the objective sought to be achieved.The Court found that the exclusion of steel, ghee, and cooking oil industries from the tax exemption was not arbitrary or unreasonable. These industries were treated as a separate class, and the differentiation was deemed constitutionally valid as it did not constitute discriminatory treatment under the established legal principles.The Court declared Entry No. 152 of the Sixth Schedule to the Sales Tax Act, 1990, as ultra vires to the extent that it discriminated against industries based on their establishment date. However, the exclusion of steel, ghee, and cooking oil industries from the tax exemption was upheld.----Citations/Precedents:Commissioner of Income Tax, Peshawar Vs. Gul Cooking Oil and Vegetable Ghee (Pvt) Ltd (2008 PTD 169)Affirmed the exemption of FATA and PATA industries from income tax and sales tax before the 25th Constitutional Amendment.Taj Packages Company (Pvt). Ltd Vs. Government of Pakistan (2016 PTD 203)Confirmed the immunity of goods imported for consumption in FATA from sales tax.Pakistan through Chairman FBR Vs. Hazrat Hussain (2018 SCMR 939)Reiterated the exemption of FATA industries from federal taxes.M/s Lucky Cement Ltd Vs. Khyber Pakhtunkhwa (2022 SCMR 1961)Discussed the principles of non-discrimination and equality in the context of tax laws.Pakcom Ltd Vs. Federation of Pakistan (PLD 2011 SC 44)Highlighted the principles of equal protection under the law.Messrs Elahi Cotton Mills LTD Vs. Federation of Pakistan (PLD 1997 SC 582)Elaborated on the legislative authority to classify for tax purposes and the constitutional limits on such classification.

Summary: Role of Customs in recovery of income tax and sales tax post clearance of imports. ---- The core issue was the jurisdiction of the Collectorate of Customs (Adjudication) to assess, recover, or adjudicate alleged short levies of income tax and sales tax after the clearance of import consignments, which the petitioners argued should fall within the domain of the Inland Revenue Department.The court, after hearing arguments, concluded that the Customs department had no jurisdiction to assess, recover, or adjudicate any alleged short levy of income tax and sales tax post clearance of the consignments. It was determined that such jurisdiction solely rested with the Inland Revenue department. The court highlighted that the Customs Act 1969, particularly sections 32 and 179 amended to include the word "taxes," did not extend jurisdiction to the Customs department for post-clearance tax issues beyond the scope defined by the Income Tax Ordinance 2001 and Sales Tax Act 1990.The judgment emphasized the separation of customs duty, income tax, and sales tax as distinct entities within the Constitution, each governed by its specific statutes. The court ruled in favor of the petitioners, setting aside the impugned show-cause notices issued by the Customs department as without lawful authority and jurisdiction. However, it was noted that proceedings related to short-levied sales tax and income tax could be initiated by Inland Revenue officers in accordance with the law.This case underscores the importance of adhering to statutory provisions and jurisdictional boundaries in tax assessment and collection, reaffirming the roles of different departments in handling tax matters related to import consignments.

Summary: When the intention of legislature in entry No. 151 of 6th Schedule to the Sales Tax Act, 1990 in clear words has only asked the importer to present a post-dated cheque equal to the amount of his tax liability which prima facie appears to be as a security to the Revenue that the goods imported for home consumption would be utilized in a manner and mode as provided in the tax exemption underEntry No. 151/152; thus, asking the importer for something more than a post-dated cheque would be against the mandate of the taxing statute. In our legal dispensation the role of executive is to execute the will of legislature and not to add or subtract. It is settled law that where the law requires something to be done in a particular manner, it must be done in that manner. Another important canon of law is that what cannot be done directly cannot be done indirectly.

Summary: Background: This case involves a dispute over the classification of a business entity for tax purposes under the Sales Tax Act, 1990. The tax department issued a show-cause notice to a registered entity, arguing that the entity did not qualify as a "Manufacturer-cum-Exporter" because it did not own its manufacturing facility. Instead, the entity was using a leased facility, which the department contended disqualified it from claiming sales tax refunds. As a result, the department modified the entity’s status to "Commercial Exporter," effectively denying the sales tax refund. The entity challenged the department’s decision before the Appellate Tribunal, which ruled in favor of the entity. The tax department then filed a reference before the Lahore High Court, raising three questions of law. -----Issues: 1- Whether a manufacturer using leased premises qualifies as a "Manufacturer-cum-Exporter" for sales tax refund purposes under the Sales Tax Act, 1990? ----2- Whether the tax department’s interpretation of "owning a manufacturing facility" as a precondition for receiving a sales tax refund was correct? ----3- Whether the tax department had the authority to unilaterally modify the entity’s registration status from "Manufacturer" to "Commercial Exporter"? -----Holding/Reasoning/Outcome: --First Issue: The court held that the phrase "owns or has his own manufacturing facility" under Section 2(17) of the Sales Tax Act, 1990 does not strictly require full ownership of the facility. The court interpreted the phrase in a disjunctive manner, stating that legal possession and control over a leased facility can satisfy the requirement for "having" a manufacturing facility. Since the entity had made substantial investments in construction and machinery on the leased premises, it qualified as a "Manufacturer-cum-Exporter" and was entitled to claim the refund. --Second Issue: The court rejected the department’s interpretation that "owning" a manufacturing facility was a strict requirement. It clarified that the statute allowed for different forms of control or possession over the manufacturing facility, and the entity’s use of a leased facility met the criteria under the law. --Third Issue: The court found that the tax department did not have the authority to unilaterally change the registration status of the entity from "Manufacturer" to "Commercial Exporter" under the applicable laws and rules. Specifically, Section 14 of the Sales Tax Act, 1990, and Rule 5 of the Sales Tax Rules, 2006 do not empower the Commissioner to alter the registration status without following a defined process. The court ruled in favor of the entity, confirming its status as a "Manufacturer-cum-Exporter" and reversing the department's decision. -----Citations/Precedents: Commissioner Inland Revenue, Zone-I, Large Taxpayer Unit-II, Karachi v. Messrs ORI Tech Oil (Pvt.) Ltd. (2019 SCMR 875) ORI-Tech-Oil (Pvt.) Ltd. Through CEO v. Manager Registration, Central Registration Office and 3 others (2017 PTD 1497) Suo Motu Case No.8 of 2018 and Civil Misc. Application No.649-L of 2018 (PLD 2019 Supreme Court 201) Commissioner of Income-Tax v. Muhammad Kassim (2000 PTD 280) CM Pak Limited v. Pakistan Telecommunication Authority (PLD 2018 Islamabad 243) Inam-ul-Rahiem v. Chairman, National Accountability Bureau, Islamabad and another (PLD 2018 Islamabad 251) Sheikh Kashif Imtiaz v. Faysal Bank Limited and another (2020 CLD 904)

Summary: Clause No.146 of 2 and Schedule Part I is no more the part of the statute being omitted by theFinance Act, 2021. Similarly, section 148 of the Ordinance (reference whereof was in theoperative part of the judgment of this Court rendered in W.P No.442-M/2020) has also beenomitted by Finance Act, 2020 and Entry No.151 of the Sixth Schedule of Sales Tax Act, 1990has been inserted which deals with sales tax at import stage, thus, for seeking exemption frompayment of income tax, the petitioners shall have to seek exemption u/s 159 of Chapter XDivision IV of the Income Tax Ordinance, 2001. Hence, the prayers at serial No.(i), (ii), (iii)& (iv) in term of Circular No.13 of 2021, issued on 26 th of March, 2021 read with thejudgments of this Court rendered in W.P No.442-M/2020, W.P No.1219-M/2019 and W.PNo.2009-P/2020, is misconceived.

Summary: Background: The petitioner, Raja Auto-cars Ltd., filed a reference under Section 47 of the Sales Tax Act, 1990, challenging an order passed by the Sales Tax Appellate Tribunal, Muzaffarabad, on 20.10.2009. The petitioner’s company underwent an audit conducted by the Department of Central Excise & Sales Tax, Azad Jammu & Kashmir Council, for the period of 1996 to 2000. Based on the audit, the Collector of Sales Tax issued a show-cause notice on 01.01.2004 and later passed an order on 24.06.2004, rejecting part of the petitioner's claims for the adjustment of input tax, thereby creating a demand of Rs. 70,963,557/- on account of principal amount, additional tax, and penalties. The petitioner challenged this order before the Sales Tax Appellate Tribunal, which set aside the Collector’s order and remanded the case for a fresh adjudication. ----Issues: Whether the Sales Tax Appellate Tribunal was justified in remanding the case to the Adjudication Authority for a fresh order on merits after finding that the original order was passed beyond the limitation period without proper reasoning for the extension. ----Holding/Reasoning/Outcome: Tribunal's Decision: The court held that the Tribunal had correctly dealt with the matter according to the law. The Tribunal’s decision to remand the case for fresh adjudication was justified even though the original order was passed beyond the statutory limitation period without proper reasoning. The court emphasized that it is the responsibility of the relevant authorities to ensure that any additional tax or charges are imposed strictly in line with the statutory provisions, particularly Section 34 and other enabling sections of the Sales Tax Act, 1990. The court found that no substantial question of law arose from the Tribunal's decision, and therefore, the reference application lacked merit. The reference was dismissed, and the Tribunal's order was upheld.

Summary: The appellants had availed the benefit of a specific notification (SRO No. 266) that allowed them to import silver and gold for the manufacture of jewelry, with the condition that the jewelry should be exported within 180 days. Since the jewelry was not exported, the Collector of Customs imposed penalties, which were upheld by the Customs Appellate Tribunal and the High Court. The appellants argued that a subsequent notification (SRO No. 760) had replaced SRO No. 266, thereby eliminating the obligation to export the jewelry. However, the High Court rejected this argument, stating that since the benefit of SRO No. 266 was availed, its conditions had to be fulfilled. The appellants further contended that the Tribunal had not decided their appeals within the prescribed time frame of 60 days, as required by the Customs Act. They argued that this rendered the Tribunal's judgments void and a nullity in law. The Supreme Court considered a similar provision in the Sales Tax Act and held that the time frame for deciding an appeal was mandatory. However, they noted that the Customs Act did not specify the consequences for non-compliance with the time frame. The Court concluded that if an appeal is not decided within the stipulated period, it does not negate the appeal, and the taxpayer cannot be non-suited on this ground. They emphasized that the taxpayer's right to be dealt with in accordance with the law is protected by the Constitution. They also stated that an order belatedly passed on a taxpayer's appeal is not a void order or a nullity. Based on these findings, the Supreme Court dismissed the appeals on merit and confirmed that the judgments of the Tribunal were valid, even though they were decided beyond the prescribed time frame. No costs were awarded to either party.