2006 PLP (Trib (PTD)

MALIK A.R. ARSHAD (MEMBER JUDICIAL).

This is an appeal against the order, dated 8-2-1999 passed by the Collector of Appeals, South Zone, Karachi, in Order-in-Appeal No.28 of 1999.

2. Briefly, the facts, according to the Show-Cause Notice, dated 27-4-1998, which is based on audit report is, that the appellant, a registered person, are also .the importer of nutritional products and engaged in trading of the said item for the period from January, 1998 to March, 1998, and in view of the substitution in the Sixth Schedule no exemption of sales tax was available to the appellant either under the Sixth Schedule or notification. The show-cause notice was contested before the Adjudicating Officer. However, it did not meet favour with the Adjudicating Officer, and vide order, dated 6-7-1998 enforced the liability of sales tax along with additional tax and penalty.

3. Aggrieved by the said order, the appellant preferred an appeal before the Collector of Appeals, which was dismissed vide impugned order; hence the present appeal.

4. In defence, Mr. Aziz A. Sheikh, learned counsel for the appellant, states that exemption from levy of sales tax had been granted to the products under dispute by virtue of main heading of S. No. 3 of Sixth Schedule of Sales Tax Act, 1990; that the preparations imported by the appellant were assessed under PCT heading 1901.1010 and 2106.9091, respectively. The said exemption remained operative till 1998-99 budget instruction. As per clauses 7 and 8 of Finance Bill of June, 1998 were brought into orbit of sales tax @ 12.5% it bears brand names and trade marks effective June, 1998; the Order-in-Original is devoid of legal force; the C.B.R. letter, dated 27-6-1996 eclipsed said exemption to goods falling under PCT heading 1901 only quite contrary to provisions of S. No.3(iv) of Sixth Schedule; and that it, is an administrative order liable to be struck down as ab initio void for the transactions made during January, 1998 to March, 1998, so the amount so collected is liable to be refunded; he has cited PLD 1964 SC 21 and 1988 SCMR

691. It is further contended that the respondent has not properly interpreted Serial 3(4) of the Sixth Schedule, knowing that at the import stage the goods falling under PCT heading 1901.1010 were cleared as exempt goods due to reasons stated above coupled with letter, dated 27-6-1996 of the C.B.R.

5. It is further stated that products falling under PCT heading 2106.9091 were charged to sales tax at import stage by Customs in pursuance of C.B.R. letter, dated 27-6-1996 for the period October, 1997 to March, 1998; input tax/refund was claimed by the appellant on these goods sold during January, 1998 through March, 1998 though recovered from its customers, the details of which were given in the Memo. of Appeal; operative exemption backed by S.R.O. is violative of the fundamental rights as contained in Chapter 1 of Para-II of the Constitution and the impugned order is liable to be set aside on this score. He had placed reliance on PLD 1994 SC

621. He submits that the Letter of Credit having been opened before the so-called change, the principle of estoppel or promissory estoppel would apply to this case and that non-consideration of sales tax already paid at import stage renders the entire proceedings improper, unjust and without jurisdiction, and lastly additional tax and penalty imposed is not warranted in the facts of the case, there is no wilful evasion nor they ever recovered sales tax from the buyers. He has cited PLD 1996 Kar. 68; 1985 CLC 2796; 1986 CLC 612, PLD 1961 SC 963 and NLR 1994 Tax 14.

6. The learned counsel of appellant has relied upon Syed Wasey Zafar's case reported in PLD 1994 SC 621, that refusal to grant exemption backed by government notification like S.R.O, 674(I)/97, dated 29-8-1997 read with S.No.3(3) of Sixth Schedule to Sales Tax Act, 1990 has nexus with enforcement of fundamental rights mentioned in Chapter 1 Part (II) of Constitution 1973. It was also vehemently urged by learned counsel that in most instances the L/Cs were established prior to withdrawal of exemption notification S.R.O. 674(I)/97 (remained operative till 31-12-1997) hence created vested right in favour of appellant irrespective of its withdrawal. The dictum of Al-Samrez case 1986 SCMR 1917 shall protect transactions of appellant since provision of section 31-A of Customs Act, 1969 cannot alter the situation available under Sales Tax Act, 1990. The said rule of law was further reconfirmed rather enlarged by apex Court in Ravi Spinning's, case 1999 SCMR 412.

7. It is not disputed that appellant did not charge and collect sales tax from its customers till Show-Cause Notice, dated 27-4-1998 under firm and bona fide belief that goods classifiable under PCT heading 1901.1010 as well as PCT heading 2106.9091 namely `milk based food preparations for infants and invalids' were exempt under S.No.3(3) of Sixth Schedule to Sales Tax Act, 1990 hence attract exemption under section 65 ibid. C.B.R. Letter No.1/42-STT/96 confirms the contention of appellant besides department has also allowed refund of Rs.4,069,891 out of sales tax paid by appellant on import of goods falling under PCT heading 2106.9091. As contended by learned counsel that said refund was allowed by respondent only after deducting additional tax, penalty and surcharge adjudged vide Order-in-Original impugned, therefore, unjust, improper, harsh and contrary to provision of section 36(2) of the Act read with CGO 4 of 95.

8. It is a matter of record that government has already allowed exemption under section 65 of the Act to similar products falling under PCT heading 1901.1010 and supplied by Nestle Milkpack, Lahore, vide S. R.O. 51(I)/96, dated 16-1-1996 while similar product of appellant classified under same PCT heading 1901.1010 was denied exemption. The respondent thus offended Art. 25 of Constitution 1973 by discriminating the appellant though placed in similar situation.

9. We have heard the parties at length, carefully gone through the record and the judgments cited at the Bar by the learned counsel for the appellant,

10. We observe that the disputed period is January, 1998 to March, 1998, the appellant a regular importer, had finalized the Letters of Credit and contracts before the date of issuance of the withdrawal notification for this limited period and the law laid down by the apex Court in judgments cited before us that exemption from payments of sales tax would not apply to imports of goods. There is no rebuttal or denial that the contracts were not finalized with the foreign suppliers prior to the abrupt issuance of the withdrawal notification. The case of the appellant further finds support from the S.R.O. 51(I)/96, dated 16-1-1996 by which the Federal Government rescued the competitors of the appellant, despite the fact that the period involved therein was much longer than that of the appellant. It would be just and fair, in the circumstances of the case, to keep the said notification in view.

11. We, respectfully following the law laid down by the Supreme Court of Pakistan, are inclined to allow the appeal as prayed, remit the penalty and additional tax, and direct the department to recalculate the refundable amount to milk food preparations for infants and invalids, failing under PCT heading 1901.1010. The appeal is disposed of accordingly. Announced. C.M.A./105/Tax (Trib.) Order accordingly.