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Petitioner: M/s. Taj Packages Company (Pvt.) Ltd. VS Respondent: Government of Pakistan and 6 others.
Court Name: Peshawar High Court Judge(s): Yahya Afridi, Muhammad Daud Khan Title:M/s. Taj Packages Company (Pvt.) Ltd. vs Government of Pakistan and 6
others. Case No.: Writ Petition No, 916-P of 2013 Date of Judgment:2015-04-30 Reported As: 2016 PTD 203, PTCL 2016 CL. 402 Result: Order accordingly Judgment JUDGEMENT: MR. JUSTICE YAHYA AFRIDI.--(1). Through this single judgment, this Court proposes to dispose of fifteen writ petitions, as they all have common questions of law involved therein. The particulars of the said writ Petitions are as follows:-- (1) Writ Petition No, 916-P/2003 with I.R. & C.M. No, 344/2012. (M/s. Taj Packages Company (Pvt.) Ltd. Sakhakot Zarabad, Near Taj CNG, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (2) Writ Petition No, 920-P/2013 with I.R. (M/s. Taj Wood Board Mills (Pvt.) Ltd. Main Road, Opposite Ali Flour Mills, Near Taj Ghee Mills, Sakhakot, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (3) Writ Petition No, 1830-P/2014 with C.M. No, 204-P/2015. (M/s. Sher Steel Furnace & Re-Rolling Mills Main Road Dargai, Malakand Agency, PATA v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and eight others). (4) Writ Petition No, 190-P/2015 with C.M. No, 15-P/2015. (M/s. Universal Steel Mills Ghallanai, Mohmand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (5) Writ Petition No, 192-P/2015 with C.M. No, 18-P/2015. (M/s. AK Tariq Foundry Aka Khel, Alam Godhar, Bara Road, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (6) Writ Petition No, 194-P/2015 with C.M. No, 21-P/2015. (M/s. Mohmand Moulding Works Shah Kas, Jamrud, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance
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and Revenue Division Islamabad and six others). (7) Writ Petition No, 221-P/2015 with C.M. No, 24-P/2015. (M/s. Alhaj Foundry, Shah Kas, Bara Road, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (8) Writ Petition No, 917-P/2013 with I.R & C.M. No, 345-P/2013. (M/s. Taj Packages Company (Pvt.) Ltd. Sakhakot Zara bad Near Taj CNG, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (9) Writ Petition No, 919-P/2013 with I.R. (M/s. Taj Wood Board Mills (Pvt.) Ltd. Main Road, Opposite Ali Flour Mills, Near Taj Ghee Mills, Sakhakot, Malakand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (10) Writ Petition No, 1644-P/2014 with I.R. (Umar Zada s/o Malak Zada Managing Partner of M/s. Pearl White Packages v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and four others). (11) Writ Petition No, 1831-P/2014 with COC No, 80-P/2015. (M/s. Sher Steel Furnace & Re-Rolling Mills Main Road Dargai, Malakand Agency, PATA v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and eight others). (12) Writ Petition No, 191-P/2015 with C.M. No, 16-P/2015. (M/s. Universal Steel Mills Ghallanai, Mohmand Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (13) Writ Petition No, 193-P/2015. (M/s. AK Tariq Foundry, Aka Khel, Alam Godhar, Bara Road, Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (14) Writ Petition No, 195-P/2015 with C.M. No, 23-P/2015. (M/s. Mohmand Moulding Steel Furnace Shah Kas, Jamrud Khyber Agency v. The Government of Pakistan through Federal Secretary Finance and Revenue Division Islamabad and six others). (15) Writ Petition No, 222-P/2015 with C.M. No, 25-P/2015. (M/s. Alhaj Foundry, Khyber Agency v. The Government of Pakistan through Federal Secretary FinanFe and Revenue Division Islamabad and six others). 2. There are two sets of petitions; in the first set of petitions, stated herein above at serial Nos. 1 to 7, the petitioners seek to invoke the Constitutional jurisdiction of this Court, praying essentially that:-- "It is, therefore, respectfully prayed that on acceptance of this petition, an appropriate writ/order may kindly be issued, declaring that petitioner's import to FATA or PATA are not liable to Income Tax" While, in the second set of petitions, listed hereinabove at serial Nos. 8 to 15, the petitioners have essentially sought that:-- "It is, therefore, respectfully prayed that on acceptance of this petition, an appropriate writ/order may kindly be issued declaring that petitioner import to FATA or PATA are not liable to Sales Tax." 3. In essence the petitioners have a common contention that they are carrying on business in Federally Administered Tribal Area ("FATA") or Provincially Administered Tribal Area ("PATA") and so the advance tax and sales tax levied upon imports being made by the petitioners for its consumption within the territorial jurisdiction of FATA or PATA are beyond the purview of levy and collection regimes provided in the Income Tax Ordinance, 2001 ("Ordinance"), and the Sales Tax Act, 1990 ("Act"), as the said enactments have not been extended to FATA or PATA in terms of the command of Article 247(3) of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution"). Accordingly, the petitioners seek issuance of appropriate writ, declaring that the goods imported by petitioners and destined for consumption in FATA or PATA are not liable to advance Tax and Sales Tax under the relevant enactments. 4. The submissions of the worthy counsel for the petitioners can best be recaptured in the written
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arguments that he submitted, wherein it was, essentially contended that:-- "Petitioner has to import the aforesaid (i) raw material for consumption in their units and (ii) machinery for upgrading and updating of their units which import in view of Article 247(3) of the Constitution cannot be subject to Taxes leviable either under the Income Tax Ordinance, 2001 or under the Sales Tax Act, 1990. 2.1 That despite of prevalent sunshine legal position, the Customs authorities bent upon to charge payment of aforesaid taxes. 2.2 The petitioner explained to Customs authorities as being a unit of the FATA, their consignments are not liable to any income tax for being destined and to be consumed in FATA / PATA to which so far the aforesaid two statutes have not been extended yet, authorities refused to submit to the Constitution. 2.3 Hence, petitioners invoked the constitutional jurisdiction of this honourable Court to protect their constitutional immunity against payment of Sales Tax and Income Tax more precisely at import stage. 3. That in the following it is hereby demonstrated that how despite of immunity from the taxes leviable under the Income Tax Ordinance, 2001 because of its non-extension in terms of Article 247 ibid how the petitioners is being subjected to income tax specially at import stage. 3.1 That Income Tax Ordinance, 2001, is a DIRECT TAX where the incident of tax is to be borne by the taxpayer. 3.2 That relevant to the case it is not the provisions of the Customs Act, 1969 per se rather it is section 148 of Income Tax Ordinance, 2001 which empowers the Collector Customs to collect income tax at import stage. 3.3 That the income tax collected at import stage is either final tax liability or adjustable/deductible against the final tax liability. 3.4 That in case of imports of industrial raw material or machinery under subsection (7) of Section 148 ibid these are final tax liability rather adjustable towards assessed liability. 3.5 Thus, tax paid by the industries of settled area at import stage on import of raw material or machinery are adjustable against the final tax liability assessed in their Return filed under section 114 ibid or against the Assessm ent Orders passed under sections 120, 121, 122 of the Ordinance. 3.6 That the final liability of income tax primarily to be discharged by filing Annual Return under section 114 ibid (base on profit and loss account) or Annual Statement under section 115 ibid in case of final tax liability. 3.7 That under section 209(3) ibid, the income tax assessee files their tax returns either before the Commissioner of Income Tax having jurisdiction either on his place of business or place of residence. 3.8 " That petitioners being a resident of FA TA at first place have (i) neither have a taxable income (ii) nor having Income Tax Authorities having jurisdiction either upon their place of business or residence, thus, (iii) stricto sensu no valid legal mechanism available through which tax paid at import stage be refundable to them. 3.9That in view of the above, where the petitioners having no final taxable income collecting of tax at import stage is not only against the law but also in naked violation of the Constitution. 3.10 Attention is invited, inter alia, to clause 72(B) of the Second Schedule ibid. if there is no likelihood of any tax payable at the end of the year then tax payable under section 148 ibid at import stage is exempted to him. 3.11 That on analogy of clause 72(B) ibid where the petitioners liability under the Income Tax Ordinance, 2001 in view of Article 247(3) of the Constitution can never arises, therefore, without prejudice of constitutional immunity, petitioners imports of raw material and machinery are like industrial importers of the settled areas are otherwise exempt from Income Tax at import stage.
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3.12 That there are host of importers of different categories who enjoy exemption under various provisions of the Income Tax Ordinance, 2001 and their consignments are released without any payment of Income Tax without any apprehension and fear then the reluctancy in case of industries of the Tribal Area smells mala fide, discrimination because of their place of business and residence which is a stark violation of fundamental rights as protected under Articles 18, 23, 24 and 25 of the Constitution. 3.13 That approach of the Revenue is against the letter and spirit of Article 37 of the Constitution which ordain that the state promote the downtrodden Areas and people vis a vis of the developed (settled) Areas. 4. That now tax leviable under the Sales Tax Act, 1990, which is an indirect tax, a final incident of tax is to be borne by the end consumers which is incidentally for the first instant is the petitioner who is an industrial consumer for importing of their consumption within their industries and in final analysis their buyers / end consumers of their products are also residentse of FATA, who in view of Article 247(3) ibid cannot be charged for sales tax as delineated below: 4.1That as the sales tax is based on Value Added Tax (VAT) System, therefore, it considers (i) the importer, (ii) the manufacturer, (iii) the dealer, (iv) the Distributor, (v) the whole seller and (vi) the retailer as intermediatory, a mere collecting agent to transmit the incidence of tax from importer/manufacturer to the end consumers. 4.2That the reading sections 3, 4, 6, 7, 8(A), 10, 23 and 26 ibid provide a CHAIN as to how tax paid at import stage is to be finally transferred to or exacted from the end consumers. 4.3That under the Sales Tax Act, 1990, there are two charging sections. 4.3.1 Section 3 whereby imports and local supplies are charged at varying rates say ad volarem 17% or at reduced rates or specific rates. 4.3.2 Section 4 whereby imports, local supplies and exports are charged subject to zero rate of sales tax. 4.4That import stage again not the provisions of the Customs Act, 1969 per se rather it is section 6 ibid, empowers the Collector Customs to collect the sales tax leviable under the Sales Tax Act, 1990. 4.5 That in the instant case, the petitioners per se consumers (industrial consumer) and buyer of their finished product being resident of FATA / PATA are not liable to pay sales tax because of non- extension of Sales Tax Act, 1990 in terms of Article 247(3) of the Constitution as held by the three Members Bench of the apex Court headed by the Honourable Chief Justice Mr. Justice Iftikhar Muhammad Chaudhry in C.As. Nos. 811 to 818/2008 dated 24.6.2011. 4.6That due to non-extension of Sales Tax Act, 1990 to FATA, the petitioners can neither issue a sales tax invoice under section 23 ibid nor can file Sales Tax Return under section 26 ibid so as to retrieve or recover the tax paid at import stage under section 7 ibid from the buyers/consumers incidentally resident of Tribal Areas. 4.7 That registered person under the Sales Tax Act, 1990 can file monthly sales tax return under section 26 ibid to the authority having jurisdiction over its place of business which authority is non- existence in case of the petitioners. 4.8 That under section 13 ibid there are lot of goods and a lot of importers of the Tariff Area whose imports are exempt and they are importing and transporting their exempted goods to their place of business without any conditions to and selling their finished product without any hindrance all over the country. 4.9 That Gadoon i.e, is one of the examples where both imports and their subsequent supplies were exempt and is being supplied to all over the country. 4.10 That where petitioners imports are constitutionally immune from the tax leviable under the Sales Tax Act, 1990, therefore, the apprehension of the revenue merely on the basis of place of business is not only harsh, discriminative but also in violation of the Constitution. </i>
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5. In rebuttal, the worthy counsel for the Revenue has also submitted his written arguments, which are essentially in terms: "(a) That the instant writ petition is not acceptable as it should be filed in Darul Qaza and should not be filed at principal seat. (b) That the adequate remedy is available to petitioners and can avail that remedy i.e, petitioner can file application or presentation under different provisions of the Income Tax Ordinance, 2001, Sales Tax Act, 1990, Customs Act and Federal Excise Act, 2005. Furthermore, if even then the petitioner is aggrieved from concerned Officer order on the application of the petitioner then appeal or revision or review provision is also available in hierarchy under the Income Tax Ordinance, 2001, Sales Tax Act, 1990, Customs Act and Federal Excise Act, 2005. (c) That in every law exemption provision is also available and the petitioner can come under that provision and can seek exemption from the concerned quarters and if not satisfied from concerned quarters order then even can file writ petition but direct filing of writ petition is not appropriate. (d) That similarly, the provision of the refund is also available to petitioner and if the petitioner thinks that any amount or tax or levy is wrongly collected so then he can apply for refund to respondents. (e) That the matter is decided matter and this Honourable Court has already decided the matter in favour of respondent and this is golden principle of law that this being identical matter may also be decided in same way and the writ petition in hands may be dismissed with costs. (f) That the import goods is raw material that there is no guarantee that these goods consume in an area where Income Tax has not been extended with an Art. 247(3) of the Constitution. (g) That the petitioner can apply under section 159 of the Income Tax Ordinance, 2001, to concerned officer needless to mention that the respondents gave exemption to those persons who were not belonging to FA TA but they establish the case and the respondents gave exemption without any delay. (h) That if the petitioner is not satisfied over the order under section 159(4) then petitioner can apply very smoothly under section 122(B) for revision in Income Tax Ordinance, 2001. (i) That the petitioner can also apply under section 193 of the Customs Act, 1969 not satisfied from any assessment under section 80 or provisional assessment under 81 of the Customs Act, 1969. (j) That there are certain provisions for exemption under different Income Tax Ordinance, 2001, Federal Excise Act, 2005 etc. so the petitioner may apply under those provision for exemption. (k) That similarly in past the worthy court declared that once the taxable events is import into Pakistan then it is immaterial that these goods meant for consumption in an area where the tax has not been extended within the terms of Art. 247(3) of the Constitution, 1973, (l) That there are numerous judgments in which on the same point the petitions are dismissed i.e, W.P. No, 854 of 2006 M/s. Lal Ghee v. Pakistan etc., W.P. No, 589 Government of Pakistan, W.P. No, 1845/11 M/s. Roshni Mat v. Collector Customs etc., Review Petition No, 44/11 M/s. Star Plastic v. Collector Sales Tax etc., WP. No, 3564/2010 decided on 12.6.2014 M/s. Adil Corporation v. Government of Pakistan etc., WP. No, 459/2010 decided on 18.10.2012 M/s. Waziristan Flour Mills v. Government of Pakistan etc., 2008 PTD 196 Commissioner Income Tax v. M/s. Gul Cooking Oil and six others. (m) That this is duty of respondents Nos. 5 and 6 to collect duty and taxes from petitioner under section 81 and others provisions of the Customs Act and other laws. 6. Before this Court considers the contested contentions of the parties, it is essential to note that the Ordinance and Act have not been extended to FATA or to PATA, within the contemplation of Article 247(3) of the Constitution. 7. It is a matter of record that, this High Court, and the august Supreme Court have in the past
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rendered their valuable findings on the extent of applicability of the provisions of Act and the Ordinance, to persons carrying on business in FATA and PATA. The review of the said decisions, reveal that the views of the superior Courts have evolved with time. 8. In the circumstances, it would be appropriate for this Court, to first trace the stages of evolution in the judicial views, so rendered by this Court, and that of the august Supreme Court. For clarity, the same are discussed, herein below in chronological order, as follows:-- 4.01.2000. Gul Cooking Oil's case (Writ Petition No, 1278 of 1999) The High Court accepted the petition and held that Income Tax Ordinance, 1979 ("<b>Ordinance of 1979</b>"), is not applicable to Malakand Division, within the contemplation of Article-247 of the Constitution. The notices issued to the company by the Revenue under sections 56 and 63 of the Ordinance of 1979, were declared illegal and without lawful authority. There was also direction to the Revenue to release the raw material of the petitioner-company without deducting 2% of withholding tax at import stage. 25.04.2003. Gul Cooking Oil's case (Civil Appeal No, 1578 of 2000) (2003 PTD 1913). (Three member Bench) The apex Court upheld the decision of the High Court, inter-alia, declaring that the company in the instant case being situated in the Tribal Area, where Ordinance of 1979 has not been extended within the meaning of Article 247(3) of the Constitution, as such, would stand exempted from payment of income tax. 24.11.2004. Master Foam's case (PLD 2005 SC 373). (Five member Bench) Import destined to the petitioner-company carrying on business in Azad Jammu Kashmir, was made liable to payment of sales tax at Karachi Port at import stage, under section 3(1)(b) of the Act, in terms that: "15. Admitted facts in these cases are that the appellants operate manufacturing units in AJK, which is not part of Pakistan and that they import raw material for said manufacturing units through Karachi. The goods so imported arrive at the Port of Karachi, are unloaded there, sometimes even stored there for a while, and then re-loaded for AJK. It is significant to note that the Act of 1990 has been adopted by the AJK Government vide the Sales Tax (Adoption) Act, 1993 (Act No, IV of 1993) and its section 2(4) reads as follows: "In determining the input tax under subsection (1) the amount paid as input tax at the import stage to the customs authority in Pakistan shall be deemed to have been paid in Azad Jammu and Kashmir for the purpose of adjustment against the tax liability on the finished goods." 16.It is also a fact that in Pakistan there is no exemption from sales tax on the goods imported by the appellants herein. AJK has not levied or collected any sales tax at the import stage on goods imported by the appellants into AJK from Pakistan. The appellants are aggrieved of the demand by the Tax Authorities in Pakistan that sales tax be paid on the raw material imported by them through 27. From above it is clear that right from 1963 till date the Courts in Pakistan have consistently given the word 'import' its natural and ordinary meaning of 'bringing into' the country and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of original package. It being so, we are of the view that there is no escape that the word 'import' should be given a different meaning than what appears in section 3(1)(b) of the Act of 1990, especially when there is nothing in the statute to indicate that different meaning was intended by the legislature. It appears that the Legislature, by not defining the word `import' in the Act of 1990 desired the interpretation of said word in accordance with the following principle: "....when a Legislature uses in a statute a legal term, which has received a judicial interpretation, it is to be presumed that the term has been used in the sense in which it has been judicially interpreted, unless a contrary intention appears from the statute."
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28.Thus, the goods were imported into Pakistan by the appellants when they entered the territory of Pakistan and became liable to taxation accordingly. It is immaterial that ultimately they were to be transported to AJK. This is for the reason that import into Pakistan is a distinct taxable event independent of any event following thereafter." 19.02.2007. Mahsud Ghee Industries' case (CPLA No, 307 of 2004). (Two member Bench) The apex Court upheld the decision rendered by this Court and dismissed the petition for leave to appeal of the Revenue. More importantly, the august Supreme Court rendered a clear finding that the decision in Master Foam's case (supra) would not be applicable to cases relating to FATA and PATA in terms that:-- "6. We are afraid, the principle laid down in Master Foam case (supra) can hardly be borrowed and extended to the facts of the present case when all the writ petitioner industries were set up and engaged in the manufacture of ghee in the non-taxable territory, to which the provisions of Ordinance, 1979 or 2001 Ordinance were neither a lick nor extended through an direction the President or the Governor, NWFP within the meaning of Article 247(3) of the Constitution. Any interpretation to the contrary, in our view, would appear to be repugnant to the spirit and clear mandate of the Constitution. 7. It was vehemently contended that on arrival of the raw material at the Port of Karachi, the goods became liable to paym ent of advance income tax irrespective of the declaration and ultimate destination of the goods to the territories, to which the Ordinance, 1979 or 2001 Ordinance was not applicable. It was also urged that notwithstanding the location of the industries in PATA and FA TA, respondents-companies with registered offices in Islamabad under the provisions of Companies Ordinance, 1984 and the respondents ultimately selling some of the products in settled areas could not avoid the payment of advance tax. The argument, on the face of it, appears to be devoid of any merit and is fallacious, as irrespective of the fact of registration with the Registrar of Companies at Islamabad, writ petitioners had unequivocally declared before the High Court that they were permanent residents of Tribal Areas and carrying on business in such territories, therefore, they were not liable to pay income tax. <u>Mr. Mumtaz Ahmad Sheikh, vehemently urged that the writ petitioners after the paym ent of advance tax could adjust and claim refund of the amount paid in advance after obtaining a certificate of examption of the commissioner Income Tax, Peshawar the act remains that the res on dents-industries stance is that they do not derive any taxable income within the territory where they are permanently settled and where their business is carried on. Thus, irrespective of the defence, requiring in-depth factual enquiry and not at all controverted by the petitioners before the High Court and rather conceding to the acceptance of the writ petitions…
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