PROCUREMENT OF ELECTRICITY WITHOUT PAYMENT OF SALES TAX UNDER DUTY & TAX REMISSION RULES, 2001

PROCUREMENT OF ELECTRICITY WITHOUT PAYMENT OF SALES TAX UNDER DUTY & TAX REMISSION RULES, 2001 <!--[if gte mso 10]> PROCUREMENT OF ELECTRICITY WITHOUT PAYMENT OF SALES TAX UNDER DUTY & TAX REMISSION RULES, 2001 BY Akhtar Javed, Advocate, Lahore Messrs Superior Textile Mills had sought a clarification from Chief (D.T.R.E.) C.B.R., camp office at Karachi as they were of the opinion that under D.T.R.E. Rule, they were not obliged to pay sales tax on electricity consumed by them for the manufacture of exported goods. Chief (D.T.R.E.) vide his letter dated 1-10-2001 had informed that power bills, telephone bills, doubling charges of yarn, etc. or taxes included any other services are not covered under D.T.R.E. Rules. However, none of the D.T.R.E. rules was cited by the learned Chief C.B.R. to support the aforesaid contents of his reply. 2. Being aggrieved, Messrs. Superior Textile Mills had filed a writ petition in Lahore High Court Lahore. While disposing the petition, Mr. Justice Jawwad S. Khawaja had observed that in the D.T.R.E. Rules, there is no distinction between powers bills and other inputs utilized by the petitioner in manufacturing the end products which are exported by the petitioner. It had been further observed by the Honourable Court that there is no justification whatsoever for the stance adopted by the Customs Department and the petitioner would be obliged to make payment of sales tax on its power bills, notwithstanding the provisions of D.T.R.E. Rules. The Honourable Court was further pleased to hold that the petitioner was entitled to the benefit of D.T.R.E. Rules even in respect of lower bills which represent an input admittedly in respect of power consumed by the petitioner for producing goods for exports. 3. While allowing the petition, the Court had declared that subject to the compliances of the provisions of the Custom Rules relating to D.T.R.E., the petitioner would be entitled to the benefit of said Rules in respect of the electric power consumed by it. The Customs Department had been allowed 30 days from the date of judgment to make appropriate arrangements with WAPDA in the light of the decision of the Court. 4. In the light of the above referred judgment of the Lahore High Court Lahore, when the Customs Department approached WAPDA to procure electricity without payment of sales tax under D.T.R.E. Rules, the WAPDA Authorities were reluctant. Being aggrieved, Messrs Superior Textile Mills filed another writ petition against the WAPDA Authorities praying the Court to direct WAPDA Authorities to supply electricity without payment of sales tax. The petition was heard on 25-9-2002 and the Honorable Court was pleased to observe that: "Learned counsel Khawaja Muhammad Saeed appearing on behalf of WAPDA/LESCO states that by means of letter dated 25-7-2002, LESCO has already deferred recovery of general sales tax from Messrs Superior Textile on account of the order dated 19-7-2002 passed by the high court in writ petition filed by Superior Textile against Customs Authorities. 2. In view of the aforesaid letter issued by WAPDA/LESCO this petition having borne fruit is disposed of." 5. In view of the judgment of the Lahore High Court, the exporter operating under D.T.R.E. rule can procure electricity from WAPDA without payment of sales tax. However, as has been informed by us vide our Information No. 57 that C.B.R. has made necessary amendments in D.T.R.E. Rules and by virtue of these amendments, the exporters operating under D.T.R.E. Rules have been entitled to get refund of sales tax paid on electricity used in the manufacture of goods meant for export for which raw materials had been procured without payment of duties and taxes under D.T.R.E. Rules.