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: It is well-settled law that appeal is not only a statutory right but is a continuation of proceedings initiated at the lower forum and the appellate fora can adjudicate upon an issue which remained directly and substantially an issue before the first forum and has no authority to go beyond the said issue. In support of the above, this Court is fortified with the law laid down by the august Supreme Court in Collector Central Excise and Land Customs and another v. Rahm din (1987SCMR 1840) wherein; it has been held that: -However, we are of the opinion that it is not necessary to determine this question of law in the facts of the present case as this petition can be disposed of on the short ground that the order of adjudication being ultimately based on a ground which was not mentioned in the show-cause notice, the order was palpably illegal and void on the face of it. We have carefully examined the show-cause notice and find no reference whatsoever or necessary facts relating to the ground that the alleged contraband goods were imported into Pakistan from an unauthorized route. In view of this palpable legal infirmity, we do not consider it necessary to examine the other contentions raised by the learned counsel.

Summary: (a) Federal Excise Act (VII of 2005)--- ----S. 3---Federal Excise Duty---Scope---Such duty is an indirect tax, incident whereof is to be passed on to the consumer. (b) Federal Excise Act (VII of 2005)--- ----S.34-A & First Schedule, Table-I, Serial No. 5---Khyber Pakhtunkhwa General Clauses Act (VI of 1956), S.24---Notification CEGO No. 4 of 2002 dated 15-06-2002---Reference---Taxable supply---Vires of CEGO notification---Raw material of soft drinks---Taxpayer company was aggrieved of demand raised by authorities declaring sale of soft drink through machine as taxable---Validity---Subject matter was specified 'excisable goods' and 'excisable services' as provided in First Schedule to Federal Excise Act, 2005---Taxing event was when 'excisable goods' were produced or manufactured or when 'excisable services' were provided or rendered; the person liable to pay tax was who produced or manufactured 'excisable goods' or the one who provided or rendered 'excisable services'---Extent of liability that was the rate of excise duty was specified in First Schedule to Federal Excise Act, 2005---It was only when the first two essential conditions were fulfilled that the excise duty at the rate specified under Federal Excise Act, 2005 would be chargeable to the person who manufactured 'excisable goods' or the person who provided 'excisable services'---Two different rates of duties were provided under law relating to payment of excise duty on sale of concentrate vis-a-vis aerated water containing added sugar or other sweetening matters of flavoreds in First Schedule to Federal Excise Act, 2005---Keeping in view the two different rates, Federal Board of Revenue in its own wisdom had allowed bottling factories to pay excise duties as per the rates applicable to concentrate or avail the second option---There was no inconsistency in the scheme procedure and mechanism of levying duties on concentrated vis-a-vis aerated water---Provisions of notification CEGO No. 4 of 2002 dated 15-06-2002 were alive under the mandate of S. 24 of Khyber Pakhtunkhwa General Clauses Act, 1956 and were enforceable on repeal of Central Excise Act, 1944, through re-enacted Federal Excise Act, 2005 and would continue so unless it was rescinded or recalled by appropriate and competent forum under the scheme of re-enacted Federal Excise Act, 2005---Reference was answered in affirmative, in circumstances. Messrs Pakistan WAPDA Foundation v. The Collector of Custom, Sales Tax Lahore and others 2023 SCMR 79 rel. Barriter Hassaan Akhtar and Ishtiaq Ahmed (Sr.) for Petitioners. Ghulam Shoaib Jally for Respondents.

Summary: (a) Federal Excise Act, 2005—Repeal and re-enactment—Applicability of General Clauses Act, 1897—Continuation of notifications issued under repealed law ----S. 48 of the Federal Excise Act, 2005; S. 24 of the General Clauses Act, 1897—Central Excise General Order (CEGO) No. 4 of 2002—Effect of repeal of Central Excise Act, 1944 on CEGO—Held, Section 24 of the General Clauses Act applies to situations where a statute is repealed and re-enacted, and notifications or orders issued under the repealed statute continue to remain in force unless inconsistent with the new law or expressly superseded—Court found no express repeal or inconsistency between CEGO No. 4 of 2002 and the scheme of the Federal Excise Act, 2005—Mechanism and dual rate structure for concentrate and aerated beverages existed under both repealed and re-enacted statutes—Therefore, CEGO No. 4 of 2002 remains valid and enforceable. (b) Federal Excise Duty—Concentrates vs. aerated beverages—Optional method of tax assessment—No inconsistency found in CEGO procedure ----CEGO No. 4 of 2002—Options for bottling plants—Held, bottling plants could either pay excise duty on concentrate syrup (PCT 2106.9010) or opt to pay duty as if aerated beverages were produced from the syrup—Second option absolved post-mix operators from excise obligations—Tribunal’s finding that this scheme was inconsistent with the re-enacted Federal Excise Act, 2005, held to be misconceived—The Court observed that both old and new statutes permitted different rates and mechanisms for concentrate and aerated beverages, and thus the optional scheme under CEGO No. 4 of 2002 aligned with both statutory regimes. (c) Taxation—Interpretation of the term “inconsistent” under S. 24, General Clauses Act, 1897—Scope and application ----Held, “inconsistency” under S. 24 must be assessed with reference to the entire scope, purpose, and structure of the repealed and re-enacted enactments—Mere existence of a separate duty rate or procedural variance does not automatically amount to inconsistency—Court relied on Stroud’s Judicial Dictionary to explain that inconsistency arises only when the coexistence of two provisions renders the new law unworkable or defeated in application—Thus, unless CEGO No. 4 of 2002 was expressly repealed or shown to undermine the new statute, it remains in effect. (d) Federal Board of Revenue—Statutory competence—Power to issue General Orders under repealed and re-enacted statutes ----S. 3, 43 of Federal Excise Act, 2005; S. 3(2) of Central Excise Act, 1944; S. 4 of Federal Board of Revenue Act, 2007—Held, FBR (formerly CBR) was fully competent to issue CEGO No. 4 of 2002 under valid delegation—Such general orders regulating tax collection mechanisms continue unless specifically revoked—Court reaffirmed that FBR's powers include formulation of tax procedures, issuance of instructions, and quasi-judicial enforcement—No challenge to FBR’s competence was raised, and the issuance of CEGO remained within statutory bounds. (e) Disposition—Sales Tax Reference allowed—Tribunal's interpretation of inconsistency reversed—CEGO No. 4 of 2002 held enforceable —Held, Appellate Tribunal Inland Revenue erred in treating CEGO No. 4 of 2002 as inconsistent with Federal Excise Act, 2005—Sales Tax Reference allowed—CEGO held to survive repeal and to remain effective under the reenacted statute—Matter answered in positive under S. 86(5) of the Act. Messrs Pakistan WAPDA Foundation v. The Collector of Customs, Sales Tax, Lahore (2023 SCMR 79) Stroud’s Judicial Dictionary of Words and Phrases (4th Ed.)

Summary: (a) Customs Act, 1969 ----S. 196(5)---Smuggled vehicle---Burden of proof---Re-punching of chassis number---Factual determination---Tribunal's findings---Question of law---Vehicle in question was seized on allegations of smuggling due to re-punching of its chassis number---Respondent failed to initially produce goods declaration or import documents---However, during adjudication and appellate proceedings, the respondent produced FIR No.145/2010 registered at P.S. Gadap, Malir, Karachi, confirming the vehicle had been completely burnt in a major accident involving multiple vehicles---Customs Department's representative verified contents of FIR and confirmed same chassis number was linked to the burnt vehicle---Sindh Engineering Company Ltd., the original manufacturer and importer, confirmed in writing that all dues, including Customs Duty and Sales Tax, had been paid on the vehicle---Sale invoices, spare parts receipts, and verification from authorized dealers further corroborated lawful import and reconditioning of vehicle---Tribunal concluded that the vehicle was lawfully imported, reconditioned, and re-registered, and allowed the appeal with direction to release the vehicle to its lawful owner---High Court held that no question of law arose from the Tribunal’s factual findings, which were supported by verified documentation and departmental confirmations---Special Customs Reference Application was dismissed accordingly. Cited Cases: None reported in the order. Disposition: Application dismissed.

Summary: [Custom Act, 1969 (147)] Smuggled goods are liable to outright confiscation and cannot be released on payment of redemption fine under Section 181 of the Customs Act, 1969 -----Background: The Applicant, representing the Customs Department, challenged the decision of the Customs Appellate Tribunal to release foreign-origin cloth (60% of the seized consignment) on payment of duty and taxes, despite the cloth being classified as smuggled goods under Section 2(s) of the Customs Act, 1969. The Tribunal's judgment was based on the claim that the goods were a mixture of locally produced and foreign-origin cloth, with the latter forming the majority. The Applicant argued that smuggled goods notified under SRO 566(I)/2005 cannot be released, even upon payment of duty and taxes, and must be confiscated outright. -----Issues: 1- Whether the Customs Appellate Tribunal erred in law by ordering the release of smuggled goods (foreign-origin cloth) on payment of duty and taxes despite their classification under SRO 566(I)/2005. -----2- Whether the Tribunal failed to recognize the Respondent’s obligation to provide material evidence to substantiate the legal import or local procurement of the confiscated goods. -----Holding/Reasoning/Outcome: The Tribunal appointed a commission to inspect the goods, which determined that 60% of the seized cloth was foreign-origin and 40% locally produced. The High Court emphasized that factual determinations made by the Tribunal are final and cannot be reassessed in a Reference jurisdiction under Section 196 of the Customs Act. --Release of Smuggled Goods: The High Court held that smuggled goods notified under SRO 566(I)/2005 are subject to outright confiscation and cannot be released even upon payment of duty, taxes, or redemption fine. The release order issued by the Tribunal was in direct violation of Section 181 of the Customs Act and SRO 499(I)/2009. --Evidence of Legal Procurement: The Tribunal found that the Respondent failed to provide sufficient evidence of the lawful import or local purchase of the foreign-origin cloth. This failure substantiated the Applicant's claim that the goods were smuggled. --Rationale: The Tribunal’s decision to release the smuggled goods contradicted the law, as the confiscation of goods notified under SRO 566(I)/2005 is mandatory. The reliance on case law such as Abu Bakr Siddique (2006 SCMR 705) by the Respondent was misplaced, as the facts of that case did not involve the release of smuggled goods notified under Section 181 of the Customs Act. The High Court allowed the Reference Application and set aside the Tribunal's judgment concerning the 60% foreign-origin cloth. The Adjudicating Authority’s order for outright confiscation of the smuggled goods was restored. -----Citations/Precedents: Commissioner Inland Revenue v. Sargodha Spinning Mills Limited, 2022 SCMR 1082: Established limits on the High Court's Reference jurisdiction. Collector of Customs, Peshawar, 2017 SCMR 585: Clarified the conditions under which confiscated goods can be redeemed and upheld mandatory confiscation of smuggled goods under SRO 499(I)/2009. Abu Bakr Siddique, 2006 SCMR 705: Addressed procedural aspects in customs cases but found irrelevant to the present case.

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 petitioner, a private limited company, filed a writ petition challenging the classification of imported goods, “Aluminum Plates White with Black,” and sought enforcement of earlier decisions by the Customs Appellate Tribunal. The petitioner claimed that the goods were misclassified under a different PCT heading by the customs authorities, despite earlier Tribunal decisions settling the classification. The petitioner also requested the release of the consignment under Section 81 of the Customs Act, 1969, pending final assessment. -----Issues: 1- Whether the customs authorities erred in reclassifying the imported goods contrary to the earlier decisions of the Customs Appellate Tribunal. 2- Whether the petitioner has a right to provisional release of goods under Section 81 of the Customs Act, 1969, while challenging the assessment. 3- Can the petitioner bypass the statutory appeal process and invoke constitutional jurisdiction in this case? -----Holding/Reasoning/Outcome: Reclassification of Goods: The court held that the customs authorities were within their jurisdiction to reassess the imported goods under Section 80 of the Customs Act, 1969. The petitioner’s claim that the goods should be classified based on earlier Tribunal decisions was deemed a factual issue requiring a merits review, which should be pursued through an appeal, not constitutional jurisdiction. Provisional Release under Section 81: The court rejected the petitioner’s argument for provisional release under Section 81, ruling that Section 81 is applicable only when the customs officer cannot make an assessment under Section 80. In this case, the goods were already reassessed under Section 80, thus making Section 81 inapplicable. Constitutional Jurisdiction: The court emphasized that the petitioner had an adequate and efficacious remedy through the statutory appeal process under Section 193 of the Customs Act, 1969. Invoking constitutional jurisdiction was not appropriate since the dispute involved factual determinations regarding the assessment of duties and taxes. The petition was dismissed for lack of merit, and the court reiterated that judicial review is not a substitute for statutory remedies. -----Citations/Precedents: SUS Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan (2011 PTD 235) Collector of Customs, Customs House, Lahore v. Messrs S.M. Ahmad & Company (Pvt.) Ltd., Islamabad (1999 SCMR 138) Commissioner of Income-Tax, Central Zone ‘B’ v. M/s Farrokh Chemicals Industries (1992 PTD 523) The Commissioner of Income-Tax, Lahore v. Messrs Lucky Stores & Zubair Medical Stores, Lahore Cantt (1981 SCMR 656) Commissioner of Income-Tax, East Pakistan, Dacca v. Wahiduzzaman (PLD 1965 SC 171) M/s Assam-Bengal Cement Co. Ltd. v. The Commissioner of Income Tax, East Pakistan, Dacca (PLD 1962 SC 295) Karachi Properties Investment Company (Pvt.) Ltd., Karachi v. Income-Tax Appellate Tribunal, Karachi and another (2004 PTD 948) Collector of Customs v. Messrs Fatima Enterprises Ltd. (2012 SCMR 416) Collector of Customs v. Universal Gateway Trading Corporation (2005 SCMR 37) Province of Punjab through Secretary Communication and Works Department v. Chief Engineer (North/Central) Punjab Highway Department, Lahore (2021 SCMR 624) Khalid Mehmood v. Collector of Customs, Customs House, Lahore (1999 SCMR 1881)

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: Facts:The Commissioner Inland Revenue issued a show cause notice to RYK Mills alleging incorrect Federal Excise Duty (FED) charge of 0.5% instead of the required 8% on local sugar supplies. RYK Mills responded, claiming compliance with SRO 77(I)/2013, which allowed the lower rate based on equivalent exported quantities. The Department's Order-in-Original and subsequent appeals affirmed the duty demand, which was challenged by RYK Mills at the Tribunal and succeeded. The Department's Excise Tax References (ETRs) to the Lahore High Court were dismissed, leading to this appeal.---Procedural History:RYK Mills' challenge against the Department's duty demand was upheld by the Appellate Tribunal, which was affirmed by the Lahore High Court. The Department's appeal to the Supreme Court sought review of the High Court's decision.---Issue:Whether the Tribunal erred in granting RYK Mills the benefit of SRO 77(I)/2013 despite alleged non-compliance.Whether RYK Mills failed to provide necessary export documentation as required by law.Holding:The Supreme Court refused leave to appeal and dismissed the petitions, upholding the decisions of the Tribunal and the High Court.---Reasoning:The Court noted the original show cause notice did not mention SRO 77(I)/2013 or its conditions, making subsequent adjudications on these grounds beyond the scope of the notice. Principles of natural justice and fair trial were emphasized, underscoring the necessity for specific allegations in show cause notices to allow for a meaningful response. The Tribunal's factual determinations, including compliance with the SRO, were not contested with substantive evidence by the Department, and the Court found no reason to interfere with these findings. The issue of the appeal being time-barred was not pursued at the High Court level, and the Court chose not to address it.---Disposition:The petitions were dismissed, and the High Court's judgment was upheld, confirming RYK Mills' compliance with SRO 77(I)/2013 and the inapplicability of the 8% FED rate on their local sugar supplies.---Quote: ''The significance and purpose of a show cause notice. Adjudication on the show cause notice can only be based on the grounds and allegations levelled therein. Where, in defence, the recipient raises substantial grounds or puts forth substantial factual aspects that are not covered in the initial show cause notice and, therefore, require further inquiry or verification by the department, then, after conducting such further inquiry or verification, a fresh or supplementary show cause notice should be issued to the taxpayer, if it is then so required.''