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Official Citation: 2024 PLD 146
Court / Jurisdiction: Peshawar High Court
Year of Decision: 2022
Decision Date: 2022-12-31
Parties: M/s. Apallo Plastic and Chemicals (PVT) LTD., Malakand vs Government of JUDGMENT
Ruling Summary: This decision was rendered by the Peshawar High Court on 2022-12-31, officially reported as 2024 PLD 146. In this matter between M/s. Apallo Plastic and Chemicals (PVT) LTD., Malakand and Government of JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as PLD 2024 Peshawar 146
Court Name: Peshawar High Court Judge(s): Rooh-ul-Amin Khan, Syed Arshad Ali Title:M/s. Apallo Plastic and Chemicals (PVT) LTD., Malakand vs Government of
JUDGMENT
Reported As: PLJ 2023 Peshawar 125, PLD 2024 Peshawar 146, 2024 PTD 1133 Result: Petition disposed of. Judgment JUDGMENT Syed Arshad Ali, J.--This consolidated judgment of us is aimed to dispose of the instant Writ Petition as well as connected Writ Petitions because not only the manufacturing units of all the petitioners are located in the erstwhile Federally Administered Tribal Area ("FATA") but the grievances of the present petitioners are common. Particulars of the said petitions are as under: S. No.Case Title 1WP No. 5105-P/2021 "M/s. Apallo Plastic and Chemicals (Put) Ltd. vs. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 2WP No. 1618-P12021 "M/s. Hassan Zai International us. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 3WP No. 5119-P/2021 "M/s. Dargai Polymer (Put) Ltd vs. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 4WP No. 5184-P/2021 "M/s. Taj Wood Board Mills (Pvt) Ltd us. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 5WP No. 5313-P/2021 "M/s. Zam Zam Family Steel (Put) Ltd vs. The Government of Pakistan through Federal Secretary Finance & Revenue Division, Islamabad and others". 6WP No. 5361-P/2021 "M/s. Torkham Industries (Put) Ltd vs. The Government of Pakistan through Federal Secretary Finance & Revenue Division, Islamabad and others".
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7WP No. 1328-P/2021 "M/s. Al-Mashood Oil & Ghee Industries (Put) Ltd vs. Government of Pakistan through Federal Secretary Finance and Revenue Division,Islamabad and others". 8WP No. 1355-P12021 "M/s. Poly Foam (Private) Limited vs. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 9WP No. 1516-P/2021 "M/s. Bara Ghee Mills (Put) Ltd vs. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 10WP No. 1591-P/2021 "M/s. Bacha Khel Enterprises vs. Government of Pakistan through Federal Secretary Finance and Revenue Division, Islamabad and others". 11WP No. 1633-P12021 "M/s. Shahid Iqbal Steel Casting Factory vs. Government of Pakistan through. Federal Secretary Finance and Revenue Division, Islamabad and others". 12WP No. 5006-P/2021 "M/L MSK Industries vs. The Government of Pakistan through Federal Secretary Finance & Revenue Division, Islamabad and others". 2. In the instant petition, the petitioner while invoking constitutional jurisdiction of this Court has prayed that: "Considering the above submissions, it is therefore, respectfully prayed that on acceptance of this Petition, this Honourable Court may please to: (i) DECLARE that the Petitioner's imports could only be subjected to the statutory laid down procedure under Entry No. 151 of Sixth Schedule to the Sales Tax Act, 1990 only. (ii) DECLARE that the Impugned Customs General Order No. 01 of 2021 dated 25.02.2021 and subsequent Circular No. 09 of 2021 dated 01.O3.2021 and Letter No. C.No. 2(2)L&Pl2016 dated 02.03.2021 are ultra vires, unreasonable and suffering from excess of law and authority, thus, of no legal effect. (iii) Declare and Direct that the provision of paras (a) & (b) of COO No. 08 of 2021 dated 3I.O8.2021 may please also be extended to the Petitioner imports and may please treated accordingly. (iv) DIRECT the Respondents to clear the Petitioner's Imports in accordance with the procedure laid down in Entry No. 151 of the Sixth Schedule to the Sales Tax Act, 1990 and in M/s. Taj Packages Judgment dated 30.04.2015 reported as 2016 PTD 203. (v) DIRECT the Respondents to refund the exempt taxes paid by the Petitioners due to struck up created by the impugned instrument. (vi) DIRECT the Respondents to issue delay detention certificate caused by the delay due to the aforesaid impugned ultra vires instruments. Interim Relief (vii) In view of all the ingredients requisite for interim relief, it is further prayed that during the pendency of the main Petition, the Impugned Customs General Order No. 01 of 2021 dated 25.02.2021 and allied instructions may please be suspended and Petitioner's imports may please be allowed against post-dated cheque in lieu of payment of Income Tax and Sales Tax on its imports. (viii) Any other relief appropriate in the circumstances but not specifically asked for may please also be granted to the petitioner". 3. The learned counsel appearing on behalf of the petitioners has argued that the industrial unit of the present petitioners situated at erstwhile FATA before the 25th amendment in the Constitution vide Act No. XXXVII of 2018 dated 05.06.2018 were enjoying complete immunity from payment of sales tax and income tax, however, after the merger of the erstwhile tribal area into the Province of Khyber Pakhtunkhwa through SRO. 1212(1)/2018 & SRO. 1213(1)/2018 both dated 05.10.2018, the same immunity were extended to the manufacturing unit of the present petitioners for a period of five years. The learned counsel has further maintained that respondent/Revenue had always questioned the said immunity and it was through the intervention of this Court that the present
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petitioners were able to get benefit of the said immunity. In order to frustrate the said immunity to the petitioners, the respondent has issued the impugned Notifications/Customs General Orders imposing unnecessary fetters on the business activities of the present petitioners which has adversely effected the cost of the present petitioners on transportation of the imported goods to its destination. The learned counsel has further maintained that the impugned Circulars/Orders are not only malafide but beyond the authority of the respondent as well as the rights of the present petitioners of free trade guaranteed through Article 18 of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution"). He next argued that the impugned Notifications are also discriminatory and in violation of the mechanism for release of the goods as provided under the Customs Act, 1969. The learned counsel while referring to Circular No. 08 dated 31.08.2021 has argued that through the said Circular, the importers whose import is less than Rs. 200 millions per annum have been dispensed with the said rigours as provided in Circulars No. 01 and 09 whereas the present petitioners whose imports are more than Rs. 200 million per annum have been denied the said concession which action of the respondents offend Article 25 of the Constitution. On the other hand, the learned AAG and Mr. Rahmanullah, Advocate, representing the Revenue have argued that the impugned Circulars were issued by the Federal Board of Revenue ("FBR") which is a statutory body having the mandate under the law to have issued the said Circulars which does not contravene any provision of law. They have next argued that the matter in issue is indeed a fiscal matter where the Government or for that matter FBR have the jurisdiction to make classification for a particular purpose; hence, the said classification having intelligent differentia is not prohibited under Article 25 of the Constitution. 4. Arguments heard and record perused. BACKGROUND OF IMMUNITY FROM TAXES FOR THE INDIVIDUALS/PERSONS/COMPANIES ETC LOCATED IN THE ERSTWHILE FATA 5. Prior to the 25th amendment in the Constitution through Act No. XXXVII of 2018 dated 05.06.2018, there was a separate dispensation/mechanism for extension of laws to the erstwhile FATA. The relevant provision of the Constitution i.e. Article 247(3) for ease reference is reproduced as under: "247 (3). No Act of [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 [Majlis-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". 6. There remained a judicial consensus that the Income Tax as well as Sales Tax Laws were never extended to the FATA, prior to the promulgation of 25th amendment thereby omitting Article 247 from the Constitution. However, there has been a long standing dispute between the Federal Board of Revenue ("FBR") and the trade community/business community of erstwhile tribal area regarding the imposition of income tax as well as sales tax on the import of raw material for the manufacturing units, which were located in the erstwhile FATA. This Court in its celebrated judgment authored by his Lordship Justice Yahya Afridi as he then was in the case of Messrs Taj Packages Company (Put.) Ltd. through Manager vs. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 other (2016 PTD 203), has elaborately dealt with the issue of taxing the raw material/goods which were imported for the purpose of its consumption in the erstwhile FATA. The said judgment was also approved by the august Supreme Court of Pakistan in case titled Pakistan through Chairman, FBR and others vs. Hazrat Hussain
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(2018 SCMR 939), wherein it has been unequivocally held that the business concerns/manufacturing units located in the PATA are immune from the impost of both, the income tax as well as sales taxes; that similarly, the goods or machinery, which they are importing for their home consumption are equally immune from the impost of both taxes at the import stage, however, in order to ensure that the consumption of goods do not cross the limits of non-tariff area, the petitioners have to provide a security in form of post-dated cheques equal to the value of the imported goods. 7. The perusal of the aforesaid judgments would show that the main concern of the FBR was that there is no foolproof system ensuring that the goods which are imported for its consumption in the FATA and for that reason, this Court in the case of Messrs Taj Packages Company (Pvt.) Ltd. (supra) has issued the following directions. "Accordingly, for the reasons stated hereinabove, this Court would hold and-- (i) Declare that advance tax charged on import under Section 148 of the Income Tax Ordinance, 2001, is not payable by petitioners importing goods for its utilization or consumption in Federally Administered Tribal Area or Provincially Administered Tribal Area; (ii) Declare that Sales Tax charged under Section 3(1)(b) of the Sales Tax Act, 1990, is not payable by the petitioners importing goods for its utilization or consumption in Federally Administered Tribal Area or Provincially Administered Tribal Area; (iii) Direct the Federal Government to take appropriate steps to ensure that persons carrying on business in FATA or PATA are rendered immunity from the payment of taxes under Income Tax Ordinance, 2001, and the Sales Tax Act, 1990, as the said statutes have not been extended to the said areas within the contemplation of Article 247(3) of the Constitution; (iv) Direct the Federal Government to take necessary steps to formulate a uniform policy for seeking securities from the persons importing goods for its consumption and utilization in FATA or PATA, so that the immunity provided under the Constitution is not abused and in case the imported goods are utilized or sold out side the said area, then the revenue of the State is recoverable from the securities, so provided. (v) Direct that till the decision is taken by the Federal Government regarding the security mechanism stated hereinabove, the Board shall obtain from the petitioners postdated cheques for the payment of taxes at import stage under the Act and the Ordinance, as security, for goods destined for utilization and consumption in FATA or PATA. The postdated cheques shall be returned to the petitioners upon production of consumption certificates duly issued by the concerned commissioners, as specified in Notification dated 28.2.2011. It will be the liability of the petitioners to approach the respondents for the issuance of consumption certificates. 8. The apprehensions of the FBR in this regard are not without reason. The menace of tax evasion in collaboration with the government official is known to all. The Apex Court in the case of Messrs Elahi Cotton Mills LTD and others vs. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (2016 PTD 1555) has also elaborately considered various aspect of this issue. The relevant pares for reference are reproduced as under: "In the scenario of the corruption obtaining in Government and semi-Government Departments and so also to curb the dishonest tendency on the part of the tax-payers to evade the payment of lawful taxes by using unfair means, the Legislature is bound to adopt modern and progressive approach with the object to eliminate leakage of public revenues and to generate revenues which may be used for running of the State and welfare of the people". 9. After 25th amendment in the Constitution, the trade community had raised voice for continuance of the said exemption from imposition of income tax and sales tax. The Federal Government through SRO.1212 (1)/2018 dated 05.10.2018 and SRO. 1213(1)12018 dated 05.10.20218 had allowed the said exemption to the resident/domicile of the erstwhile FATA/PATA. Similarly, by
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inserting entry Nos. 151 and 152 in the 6th Schedule of the Sales Tax Act, 1990, a mechanism was provided for availing exemption of the sale tax on import of goods which were meant for its consumption in FATA. The said entries are 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 notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-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 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 tax 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". 10. Even after the said exemption through SROs ibid, the FBR it was still reluctant to provide exemption to the trade community, who would import raw material for consumption in the FATA and in this regard a good number of traders have approached this Court. However, the issue of safe transportation and avoiding the leakage of public Revenue still remained the concern of FBR as they had no mechanism for ensuring that the goods imported by a manufacturing unit located at FATA would be solely consumed in the FATA. This Court while dealing with the petitions filed by the trade community from erstwhile FATA impugning the conduct of the respondents/denial of the said exemption from tax through judgment passed in Writ Petition No. 2009-P/2020 dated 24.11.2020 has given the following declaration/direction: "In view of the above, we, while disposing of these petitions, hold that: a. The profit and gain/income of the present petitioners from their business activities solely limited within the territorial limits of erstwhile FATA is immune from payment of income tax, during the life of SRO No. 1213(1)12018 dated 05.10.2018. b. The import of the Present Petitioners for home consumption (industrial units located at erstwhile FATA) is not liable to the impost of income tax. c. The present petitioners are required to obtain exemption certificate under Section 159 of the Ordinance from the Commissioner Inland Revenue/FBR for availing the said exemption. d. The Commissioner shall giant the exemption certificate to the Petitioners if they fulfil the required criteria as provided in SRO No. 1213(1)12018 dated 05.10.2018". IMPUGNED CIRCULARS "GOVERNMENT OF PAKISTAN (REVENUE DIVISION) FEDERAL BOARD OF REVENUE C.No. 2(2)/L&P/2004 Islamabad, the 25th February, 2021 CUSTOMS GENERAL ORDER NO. 01 OF 2021-04-09 Subject: AMENDMENTS IN CUSTOMS GENERAL ORDER NO. 12 OF 2002 DATED 15.06.2002 -
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The Federal Board of Revenue is pleased to direct that the following further amendments shall be made in Customs General Order No. 12 of 2002 dated the 15th June, 2002, namely:- In the aforesaid order, after paragraph 116, the following new paragraph shall be inserted, namely:- "117. PROCEDURE FOR CLEARANCE OF GOODS IMPORTED BY INDUSTRIAL UNITS OF ERSTWHILE FATA/PATA In order to ensure safe and secure transportation of the raw material imported under SROs 1212(1)12018 & 1213 (1)12018 both dated 5th October, 2018, which grants exemption of leviable Sales Tax and Income Tax at import stage, if imported by industrial units, located in erstwhile FATA/PATA, following procedure is prescribed in respect of goods/raw materials imported thereof.- (i) On importation of goods/raw materials intended for use in industrial units availing the afore- referred benefits, TP will be filed at Karachi. (ii) Goods will be transported through bonded carriers only; (iii) The goods and raw materials shall be cleared at the nearest dry port i.e. Azakhel and Peshawar; (iv) The containers/vehicles carrying goods/raw materials meant for consumption in these industrial units shall be monitored in terms of Tracking and Monitoring of Cargo Rules, 2012 from Karachi to Peshawar and then to factory premises; (v) The industrial units availing the exemption shall be subjected to annual audit regarding input and output and other parameters to be determined by the Directorate General of Post Clearance and Internal Audit". Sd/- (Wajid Ali) Secretary (Law & Procedure) Government of Pakistan Revenue Division Federal Board of Revenue Inland Revenue C. No. 7(1)TIPU/IR/2020 Islamabad, the March 1, 2021 Circular No. 09 of 2021- Operations (Inland Revenue/Customs) Subject: Mechanism to be adopted for the release of Consignment of FATA/PATA Residents Stuck- up at the Karachi Ports A meeting was held under the Chairmanship of the Chairman, FBR with Inland Revenue- Operations and Customs Operations Wings to sort out the issues of imported goods of FATAIPATA residents stuck-up at Karachi Ports, Consumption/Installation Certificates, Postdated Cheques and Exemption Certificates under Section 148 of the Income Tax Ordinance, 2021. 2. After thorough deliberations between the Chairman, Member (IR-Operations) and Member (Customs-Operations) following mechanism was devised for the release of consignments of FATA/PATA residents stuck-up at the Karachi Ports:- (i) The stuck-up containers are to be released by Customs authorities against Postdated Cheques (PDCs) and sent to their destination (FATA/PATA) under standard tracker mechanism. (ii) The Collector Customs (Enforcement and Compliance), Peshawar, will issue detention orders of the raw materials effective from day the consignment reaches the manufacturing premise of importers. (iii) The importer/manufacturer will be responsible to take the import documents alongwith detention order to the CIR Corporate Zone, RTO, Peshawar and make arrangements to have the manufacturing premiseslraw material/machinery/goods imported verified.
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(iv) The CIR Corporate Zone, RTO, Peshawar will be liable to verify/undertake physical visit as conducted by the importer/manufacturer to the manufacturing premises where the goods are kept under detention, and allow the raw material to be consumed/utilized in writing. (v) The CIR, Corporate Zone, RTO, Peshawar will ensure the monthly stock-taking of the raw materials to consumed in the production of manufactured goods by these manufacturing units. This stock-taking will facilitate in issuance of the Consumption Certificate under S. No. 151 of the Sixth Schedule of the Sales Tax Act, 1990. (vi) The residents of FATAIPATA will apply for tax exemption certificates under Section 159 of the Income Tax Ordinance, 2001 for the import of raw material/ machinery in light of the Honorable Peshawar High Court, Mingora Bench (Dara-ul-Qaza), Swat's decision dated 24.11.2020. 3. Commissioner Corporate, RTO, Peshawar and Collector Customs (Enforcement and Compliance), Peshawar would keep a close liaison to successfully implement the laid down mechanism. Sd/- Dr. Nasser Janjua Chief (IR-Analysis) GOVERNMENT OF PAKISTAN (REVENUE DIVISION) FEDERAL BOARD OF REVENUE C.No. 2(2)/L&P/2016 Islamabad, the 31st August, 2021 CUSTOMS GENERAL ORDER NO. 08 of 2021 Subject: AMENDMENTS IN CUSTOMS GENERAL ORDER NO. 12 OF 2002 DATED 15.06.2002. The Federal Board of Revenue is pleased to direct that the following further amendments shall be made in Customs General Order No. 12 of 2002 dated the 15th June, 2002, namely:- In the aforesaid order, in para 117,-- (a) In sub-para (i), after the word "Karachi" the, the expression "whereas ST type of GD will be filed for goods imported in bulk by manufacturers of edible oil located in erstwhile FATA/PATA" shall be added; (b) In sub-para (iii), after the word "Peshawar" the expression "except the goods imported in bulk by manufacturers of edible oil, cleared under safe transportation regime as applicable to such manufacturers located outside erstwhile FATA/PATA" shall be added. (c) After sub-para (v), the following new sub-para shall be added, namely:- "(vi). The provisions from sub-para (i) to (iv) above shall not be applicable to the goods/raw materials imported by small manufacturers of plastic goods, wood, pharmaceutical, food and aluminium foil established upto March, 2021 in erstwhile FATAIPATA and having imports of Rs. 200 million or less per annum (FY). In case where the annual imports by these small manufacturers increase to more than Rs. 200 million, the imports of such an importer will be subject to provisions sub-pars (i) to (iv)". Sd/- Wajid Ali) Secretary (Law & Procedure) 11. The impugned Circulars have been challenged by the petitioners on different ground including the Authority of FBR to have issued the said Circulars and secondly that these Circulars offend the existing fiscal laws as a separate mechanism for release of goods against post-dated cheque have already been provided. From the respective contentions of the parties, the following questions are formulated by this Court being the bone of contention between the parties:- i. Whether the FBR has any Authority to have issued the impugned Circulars? ii. Whether the impugned Circulars offend any provision of the fiscal laws of the country if so then its effect?
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iii. Whether the impugned Circular No. 01 dated 25.02.2021 which was amended through Circular No. 08 dated 31.08.2021 allowing the import of those industrial concerned, whose total import is of a value less than Rs. 200 million per annum is discriminatory to the present petitioners whose import is more than Rs. 200 million per annum? i. Whether the FBR has any Authority to have issued the impugned Circulars? 12. The perusal of Circular No. 09 dated 01.03.2021 would show that it was a onetime arrangement for the release of stuck up goods at Karachi Port destined for erstwhile tribal area and even the learned counsel for the Revenue has agreed that this dispensation was one time and is no more applicable to the regular import of the present petitioners, therefore, the grievances of the present petitioners against the said Circulars are unfounded. 13. The FBR is established under Section 3 of the Federal Board of Revenue Act, 2007 ("Act of 2007"). FBR is the…
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