1997 PLP 1872 (PTD)

5. The petitioners, except petitioner in writ petition No.979 of 1992, have taken the additional ground that the sales tax in question could also not be competently levied on the petitioners in view of the exemption from custom duties and sales tax granted to the Industrial Units set up in Gadoon Amazai Industrial Estate, N.-W.F.P. under S.R.O. No.517(1)/89, dated 3-6-1989.

6. The respondents in their comments have taken up the position that the exemption from Sales Tax granted to the petitioners is still intact and that the 2 % levy was not a sales tax on the petitioners but was an additional tax levied on the retailers under subsection (4) of section 3 of the Sales Tax Act, 1990, in lieu Sales Tax and was to be collected at source from the petitioners as manufacturers of the goods. As for the ground of the petitioners regarding exemption to the Industrial concern in Gadoori Amazai, the respondents stand is that S.R.O. No.517 has been withdrawn on 9-5-1991 and there is no concession available any more to the petitioners under the said S.R.O.

7. During the pendency of the writ petitions, and after filing of the comments by the respondents, the 2 % tax in question was withdrawn from the manufacturers vide S.R.O. No.559(1)/94, dated 9-6-1994 whereby the following amendments in S.R.O. No.692(1)/92 were brought about:-- ?(i)?????? in the first paragraph, the words and figure and 2% of the ex-?factory price in case of locally manufactured goods' shall be omitted; (ii)??????? in paragraph 2, the words and manufacture' shall be omitted; and (iii)?????? paragraph 3 shall be omitted.

8. After the aforesaid amendment the 2% tax remains leviable on imported goods alone. Thus, the only question that falls for determination now is whether the tax on the petitioners between 22-7-1992 when S.R.O. No.692 was issued, and 9-6-1994, when the tax was withdrawn, was competently imposed in the light of the exemption from the Sales Tax on the goods manufactured by the petitioners.

9. Learned counsel for the petitioners contended that 2 % tax in question was a sales tax as the same was imposed under the Sales Tax Act, 1990 and in view of the exemption granted to the petitioners industries from Sales Tax under S.R.O. No.529, the petitioners were not liable to pay the same. The subsequent withdrawal of the tax by the S.R.O. No.559, it was argued, in a way supported the case of the petitioners as the respondents had realised that the imposition was without a legal justification. The doctrine of promissory estoppel was also invoked and it was contended that the petitioner had acquired a vested right to remain exempt from sales tax and the same cannot be taken away indirectly through the impugned S.R.O.?

10. On the other hand, it was argued for the respondents that the 2 levy was not sale tax under section 1 of the Sales Tax Act, 1990 but was an additional tax under subsection (4) of section 3 and that it was levied not on the petitioners but on the retailers of the goods manufactured by the petitioners, but the collection was made at source from the petitioners. As for the contention of the petitioner regarding promissory estoppel, it was contended that - the exemption from Sales Tax had not been withdrawn and the doctrine was not relevant to the facts of the case.

11. To determine as: to whether the 2 % tax falls within the ambit of the concessions provided under S.R.O. No.529(1)/88 and S.R.O. No.580(1)/9l it will be appropriate to examine the text of these S.R.Os. the relevant part of S.R.O. No.529, issued under the Sales Tax Act, 1951 (Act III of 1951) on 26-6-1988 thus reads: "S.R.O. 529(1)/88.

In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1 st July, 1988, and the 30th June, 1991, in the following areas shall be exempt from the tax payable under the said Act:-- (i) Province of Balochistan except in Hub Tehsil. (ii) The North-West Frontier Province. The subsequent S.R.O. No.580, issued on 27-6-1991 under subsection (1) of section 13 of the Sales Tax Act, 1990, which had substantially substituted Act III of 1951, is in pari. materia with the earlier notification except that it extended the exemption to industries set up to 30-6-1996. It is not necessary to dilate upon the periods of exemptions prescribed by the two S.R.Os. as it is not disputed that the petitioners qualify for exemptions from tax under them. It will be seen from a bare reading of the S.R.Os. that the exemptions provided thereunder is from tax payable under the two Acts. Now the Sales Tax Act, 1951 defines 'tax' as "tax payable under the Act" whereas subsection (23) of section 2 of the Sales Tax Act, 1990 (hereinafter called the Act) defines 'Tax to mean "the sales tax and includes additional tax or any sum payable under any provision of the Act or the rules made thereunder. Section 3 of the Act makes provisions for the levy of tax; subsection (1) of he section provides for imposition of ad valorem tax known as sales tax at the rate of 15% of the value of taxable supplies whereas subsection (4) of the section empowers the Central Board of Revenue to levy, with the approval of the Federal Government, fixed tax in lieu of the tax leviable under subsection (1). The 2% tax in question has been levied in exercise of the powers conferred by subsection (4) of section 1 of the Act. Though section 3(1) of the Act refers to the ad valorem imposition as sales tax while section 3(4) calls the fixed levy as simply tax, the distinction is not relevant for the present case. S.R.O. Nos.529 and 580 provide exemption from tax and not just sales tax payable under the Acts and as the definition of tax under both the Acts is all embracing and covers all levies imposed thereunder, the imposition of 2 % tax under section 3(4) of the Act will fall within the scope of the exemption provided under S.R.Os.

12. Be that as it may, the tax under dispute cannot be termed anything but sales tax. This is a Federal tax and the Federal Government derives its power of taxation from the Constitution. Article 77 whereof provides that tax for the Federation can be levied only by or under the authority of Act of Parliament. Article 70 of the Constitution lays down that a Bill relating to matters falling within the Federal Legislative List or Concurrent Legislative List only can be moved before a House of Parliament. The concurrent Legislative List given in the Fourth Schedules to the Constitution does not include power to impose any tax. Thus, the Federation's authority of taxation is restricted to the items enumerated in the Federal Legislative List, more specifically items Nos.43 to 54, item No.49 of which provides for imposition of taxes on sales and purchases of goods imported, exported, produced, manufactured or consumed. A cursory look at the said item would make it clear that the Sales Tax Act, 1990 was enacted by the Parliament in exercise of its authority under item No.49, (ibid,). The preamble of the Act is also couched In words similar to the one appearing in item No.49, which reads; "Whereas it is expedient to consolidate and amend the law relating to the levy of a tax on the sale, importation, exportation, production, manufacture or consumption of goods." Thus tax under the Act can be levied only on activities mentioned in item No.49, ibid, or the preamble of the Act. Section 3(l) provides for imposition of tax known as sales tax on (a) taxable supplies made in Pakistan

and (b) goods imported into Pakistan. Now, section 3(3) under which the 2% tax has been levied, provides for fixed tax in lieu of tax under section 3(l) but it does not provide its own separate activities for imposition of the tax. The transactions or activities specified in section 3(1) are the only ones on which tax is also leviable under section 3(3). It follows that the nature of the tax under the two provisions is the same. Thus tax leviable under section 3(3) is as much sales tax as the one imposed under section 3(1). Further support for the proposition can be found from S.R.0.692(1)/92 itself, which provides that the 2% tax is to be collected in accordance with Fixed Amount of Sales Tax (At Source) Rules, 1992. Rules 5, 6, 9, 10 and 12 of these rules refer to the 2% tax as Sales Tax. The stance of the respondents that the levy in dispute is additional tax has no merit as such a tax is in the nature of penalty for not payment of no merit as such a tax is in the nature of penalty for not payment of tax within time and is leviable expressly under section 34 of the Act. The tax was further defended on the ground that it was not levied on the petitioners manufacturers but on the retailers. A bare look at the S.R.Os. providing exemption would clarify the position; the exemption has been provided to the goods manufactured by the petitioners. The concession has therefore been A tied up with the goods, even when they reach the hands of the retailers. To interpret otherwise would negate the purpose of the concession, which is to keep the price of the goods low in order to make them competitive in the market and thus boost up the petitioners industries. The imposition on the retailer would add to the price of the goods, thus, nullifying the benefit of the exemption. That which cannot be done directly cannot be allowed to be done indirectly.

13. The doctrine of promissory estoppel relied upon by the learned counsel representing the petitioners has no relevance to the issues involved in these Constitutional petitions. The doctrine comes into play only to protect vested rights created by concession, against their withdrawal. The S.R.Os. providing exemptions were never withdrawn. On the contrary, the case of the respondent is that the concessions are still intact, and indeed they are.

14. For the foregoing reasons, we are inclined to hold that the exemption from tax provided to the petitioners under S.R.O. No.529 (1-88) and S.R.O. No.580 (1-91) extends to the 2% tax levied under S.R.O. No.692 (1-92) and consequently, we allow all these Constitutional petitions and declare imposition of the said levy on the petitioners to be without lawful authority and of no legal effect. The bank guarantees furnished by the petitioners to secure payment of the tax shall be released to them. There shall be no order as to costs. A.A./2127/Pesh. ???????????????????????????????????????????????????????????????????????????????? Petitions accepted.