2001 PLP 2234 (PTD)

sales tax and customs‑duty on import of electricity manufacturing units. Notification No. S.R.O 584(1)/95, dated 1‑7‑1995. Under S.R.O. 279(1)/94 dated 2‑4‑1994 exemption allowed from sales and customs duty was restricted for those who had entered into Power Project Agreements with WAPDA or KESC. Notification No. S.R.O 773(1)/95, dated 1‑9‑1995. Exemption allowed under Notification No.279(I)/94;dated 2‑4‑1994, was restricted for sponsors entering into implementation Agreement with the Government. Notification No. S.R.O. 585(1)/97, dated 1‑7‑1995. Exemption from customs‑duty in excess of 10% of the duty leviable on imports of electricity manufacturing units were allowed. Notification No. S.R.O 426(1)/96, dated 13‑6‑1996. Exemption from sales tax under Notification NO.S.R.0.279(1)/94, dated 2‑4‑1994 in respect of sales tax was withdrawn completely. Notification No. S.R.O. 230(1)/97, dated 29‑3‑1997. Exemption from sales tax was allowed on plant and machinery specified in the Sixth Schedule to the Sales Tax Act, 1990. Notification No. S.R.O. 582(1)/98, dated 12‑6‑1998. Superseded Notification No.S.R.O. 230(I)/97, dated 29‑3‑1997 and excluded generators, generating sets, wires and cables for the purpose of exemption of Sales Tax from the definition of Plant and Machinery.

15. The petitioners in all these writ petitions have admittedly imported electricity manufacturing units from February, 1997 onward. During the relevant period, by virtue of amendment of the principal notification, namely Notification NO.S.R.O.279(1)/94, dated 2‑4‑1994, made through Notifications Nos. S. R. O. 584(1)/95, dated 1‑7‑1995, 773(1)/95, dated 1‑8‑1995 and S.R.0.426(I)/96, dated 12‑6‑1996, the petitioners who had not entered into Implementation Agreements with the Government were not entitled to any exemption thereunder from levy of sales tax or customs duties on the electricity manufacturing units imported by them. Such units were, however, exempt from levy of customs‑duty in excess of 10% of the duty leviable thereon under Notification No.585(I)/95, dated 1‑7‑1995, provided that the Bills of Entry in respect of these goods were submitted to the concerned authorities before the 1st July, 1998, as by virtue of Notification NO.S.R.O.582(1)/98, dated 12‑6‑1998, generators generating sets, wires and cables were excluded from the definition of plant and machinery. Hence, barring generators generating sets, wires and cables, other plant and machinery, for generation of electricity energy were still allowed exemption under Item 44 of the Sixth Schedule to the Sales Tax Act, 1990. This exemption was, however, later on again restricted to imports or supplies made by WAPDA, KESC and other power generation companies approved by the Federal Government vide Notification No. S.R.O. 950(1)/98, dated 4‑9‑1998, whereby Notification NO.S.R.O.582(1)/98, dated 12‑6‑1998 was amended.

16. In this connection, the contentions of the learned counsel representing the Central Board of Revenue and Customs Department that Notification NO.S.R.O.230(1)/97, dated 29‑3‑1997, as clarified by the Central Board of Revenue letters, dated 9‑4‑1997 and 18‑6‑1997, do not entitle the importers of electricity manufacturing units to claim any exemption of customs‑duty or sales tax as those goods were excluded from the definition of plant and machinery specified therein have no force. In the first place, the administrative letters of the Central Board of Revenue need to be completely ignored as statutory notifications cannot be interpreted through administrative instructions. However, I agree with his view that the Central Board of Revenue letter of 9‑4‑1997 does not provide any additional benefit to importers as claimed by the petitioners but only clarifies that certain goods were partially exempted from levy of sales tax as specified in the Seventh Schedule to the Sales Tax Act, 1990, which was later on omitted by virtue of the Finance Act, 1997. The expression machinery operated by power of any description such as to be used in any industrial process for the manufacture of goods; and apparatus and appliances, including metering and testing apparatus and appliances specifically adopted for use in conjunction with the said machinery, clearly falls within the definition of 'Plant and Machinery'. Any other interpretation that electricity manufacturing units do not fall within the definition of plant and machinery referred to above will obviously be fallacious. The electricity manufacturing units certainly fall within the aforesaid expression. This fact further finds support from the very Noti fication NO.S.R.0.582(1)/98, dated 12‑6‑1998, wherein the Federal Govern ment had specifically, while superseding Notification No.S.R.O. 230(I)/97, dated 29‑3‑1997, clarified that for the purposes of exemption of sales tax, 'generator generating sets, wires and cables' will not be included in the plant and machinery specified therein. Meaning thereby that the Central Board of Revenue itself was of the view that these generators, generating sets, wires and cables do fall within the definition of 'Plant and Machinery'. This exclusion further contradicts the interpretation made by the Central Board of Revenue through its two letters, dated 9‑4‑1997 and 18‑6‑1997.

17. Mr. Tariq Javed, Advocate, the learned counsel for the petitioners, contended that majority of the petitioners had opened the letters of credit much earlier than enforcement of Notification No.582(I)/98, dated 12th June, 1998 therefore, notwithstanding the exclusion of generators or other electrical manufacturing units there from imported by those petitioners cannot be denied exemption from sales tax. In this respect, support was drawn from Al‑Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917. It is however, clear that when the letters of credit were opened the petitioners would be aware of the amending notifications and extent of exemptions from taxes and duties which were available to them on their imports. In Messrs Madina Traders v. Federation of Pakistan and 4 others 1999 SCMR 95, it was held by the apex Court that at the time of opening of letters of credit the importer was aware as to what will be the valuation on the basis of which he had to pay the customs‑duties and other taxes on the imports being made by him and as a prudent person he should have not imported the satire if he was to suffer any loss. Further, the provisions of section 31‑A of the Customs Act, 1969, which were enacted after, the decision of AI‑Samraiz Enterprises v. Federation of Pakistan (supra) clearly provides that the customs‑duties are levied on the imports at the rates prevalent on the date of submission of bills of entries for clearance of the goods for home consumption. Nevertheless, for the purpose of sales tax admissible under Notification No.S.R.O. 230(1)/97, dated 29th March, 1997, when the letters of credit were opened on the said date or thereafter till when Notification NO.S.R.O.582(I)/98. dated 12‑6‑1998 came into force on 1‑7‑1998, shall be admissible as the Sales Tax Act, 1990, does not contain any provision parallel to section 31‑A of the Customs Act, 1969 Support in this connection is drawn from Messrs M.Y. Electronics Industries (Pvt.) Ltd. and others v. Government of Pakistan and others 1998 SCMR 1404.

18. Mr. Farhat Nawaz Lodhi, Advocate, the learned counsel for the Central Board of Revenue and Customs Department, lastly contended that the petitioners will even not be entitled to exemption from customs‑duty under Notification NO.S.R.O.585(I)/95, dated 1‑7‑1995, as such exemption was available to power projects only as mentioned therein and as was specified in the Power Policy, 1994. He, however candidly conceded that the term 'power projects' has not been defined in the said Notification or in the Power Policy nor it clarifies as to the generators or machinery of which capacity will be considered for a power project. Hence, for that purpose a small generator producing electricity for ones own business or for sale thereof at a small scale will also fall under the expression of power project.

19. In view of the above discussion, the imports of electricity manufacturing units or generators imported by the petitioners who have not entered into any Implementation Agreements with the Government shall be entitled to exemption of customs‑duty in excess of 10% of such duty leviable thereon under Notification No.585(I)/95, dated 1‑7‑1995, and from sales tax in terms of Notification No.S.R.O. 230(I)/97, dated 29‑3‑1997, read with item 39 of the Sixth Schedule to the Sales Tax Act, 1990, provided that such imports were made prior to coming into force of Notification No.S.R.O. 582(I)/98, dated 12‑6‑1998. The petitions are allowed accordingly with no orders as to costs. H.B.T./S‑224/L Petitions allowed.