2021 PLP 699 (PTD)

Through this reference application under Section 47 of the Sales Tax Act, 1990 the judgment dated 14.02.2008, passed by the Customs, Federal Excise and Sales Tax Appellate Tribunal, Special Bench, Lahore, ("Appellate Tribunal") is assailed. Out of the proposed questions, only the following questions are pressed and argued for our opinion:- . 1. "Whether classification of a product as a drug by the Drug Authorities as well as adjudication of such classification to be accurate by the Sales Tax Collectorate with respect to import, is also applicable for the purposes of determining sales tax liability on supply of such drugs and the Respondents erred in law and facts by not applying the same principles to the subject matter?

2. Whether classification made at the time of import having attained finality may be unilaterally changed at the time of supply of such product in the absence of any change in the nature of the product?

3. Whether classification of the products of the applicant as drugs by the Drugs Authorities and the same classification having been adjudicated to be correct by the Sales Tax Collectorate may be ignored and set aside while determining the liability for supply of such product particularly keeping in view adjudication by the Excise Authority that the product imported as such was supplied without any further manufacturing by the applicant?

4. Whether on the facts and circumstances of the case the honourable Respondent No.1 and learned Respondent No.2 correctly applied the classification/PCT Heading to the products supplied by the Applicant?"

2. Brief facts of the case are that applicant, a Pharmaceutical Company specialized in the manufacture of products having applications in dermatology, was issued a Show-Cause Notice ("SCN") dated 07.07.2004, alleging therein that it imported Pongitar and Polytar Liquids shampoos and got cleared the same by mis-declaring as pharmaceutical products under Chapter 30 instead of cosmetics classified under Chapter

33. The SCN culminated in passing of order-in-original dated 30.05.2005 by Additional Collector (Adjudication-I), Lahore. Simultaneously, another SCN dated 01.04.2004 was issued to applicant, which culminated in passing order-in-original dated 30.04.2005, whereby SCN was vacated. However, appeal was filed before learned Appellate Tribunal, which was disposed of vide judgment dated 05.12.2005 whereby the matter was remanded back to the Collector (Sales Tax), Lahore for de novo consideration. In post-remand proceedings, fresh show-cause notice was issued to applicant-taxpayer which resulted in decision dated 02.08.2007, which was impugned by the applicant by way of filing appeal before learned Appellate Tribunal. The appeal was dismissed vide judgment dated 14.02.2008. Hence, instant Reference Application.

3. Learned counsel for applicant-taxpayer submits that learned Appellate Tribunal erred in law by ignoring the fact that initially show-cause notice was issued on 07.07.2004, which was contested and order-in-original was passed in favour of applicant that consignment in question fell in Chapter 30 and not

33. Adds that aforesaid order attained finality, therefore, proceedings through fresh show-cause notice, which culminated in decision dated 02.08.2007 carry no value in the eye of law. On the contrary, learned counsel for respondent-department defends the impugned judgment.

4. Arguments heard. Record perused.

5. Undeniably, initially the SCN was served on 07.07.2004 with the allegations that applicant-taxpayer imported "Fongitar and Polytar" liquid shampoos and got cleared the same by mis-declaring as pharmaceutical products under Chapter-30 instead of cosmetics classified under Chapter-33, which was contested. The matter was adjudicated and decided by Additional Collector (Adjudication-I), Lahore, vide order dated 30.05.2005, operative part whereof is reproduced below:- "13. ...... It has been entirely over looked by the prosecution that the concerned import group at Custom House Karachi, does not grant pharmaceutical status to any imported product. The Import group verifies the status of the product with respect to certificate of registration and D.G. Health certified invoices issued under provisions of Section 23 of Drug Act, 1976 duly issued by Ministry of Health, Islamabad-Pakistan, that declares the pharmaceutical quantities in any product with Maximum Retail Price (M.R.P.). Then only the import assessment is validated. In this case also the registration certificate No.F.3-2/94-Reg-I (M-107) dated 14.06.1994 has been duly issued under Section 7 of the Drugs Act, 1976 and Rules 30 of Drugs (Licensing, Registering and Advertising) Rules, 1976; has been issued to the Impugned product FONGITAR manufactured by M/s. Stiefel Laboratories, IRELAND has been granted status of registered drug with due conditions."

6. Learned Appellate Tribunal, during pendency of appeal, felt necessity to seek opinion of the CBR and the Classification Committee regarding the correct classification of products and decided the matter on the basis of their opinion instead of dilating upon the points raised by both the sides. Learned Appellate Tribunal failed to consider that regarding goods in question, an order-in-original was earlier passed, which had attained finality and thus became past and closed transaction.

7. Law on the subject is well settled that once matter has been determined by Taxation / Customs Authorities, the Revenue should have assailed those orders, instead of simultaneously initiating proceedings through another SCN. Respondents, for all intents and purposes, have accepted and acknowledged the finality of order passed in one set of proceedings. No legal and moral justification exists to re-adjudicate the issue which has already been decided against the department and even otherwise tantamounts to vexing twice in the same cause. One cannot be tried twice for the charge based on the same allegation and evidence in the same transaction. In this regard, reliance is placed on Zarai Taraqiati Bank Limited and others v. Mushtaq Ahmed Korai (2007 SCMR 1698), Noor Muhammad and others v. Ghulam Rasul and others (1999 SCMR 705), Arshad Hussain v. Collector of Customs and others (PTD 2010 Karachi 104), Ch. Sugar Mills Limited v. Chief Commissioner (2016 PTD 527) and K.B. Enterprises v. Federation of Pakistan and others (2016 PTD 483).

8. It is not denied that the said products had been regularly imported by the applicant for the past many years that the said products were classified under Chapter-33 and not under Chapter-30. The instructions contained in CGO 21/1973 are binding on the lower functionaries of FBR, which clearly state that if at all a change from the established practice has to be made, it can only be prospective and not retrospective. Even otherwise, under the law, the most specific description shall be preferred to headings providing a more general description. Reference can be made to GLAXO Laboratories of Pakistan Ltd. v. Federation of Pakistan and others (PLD 1992 Supreme Court 455).

9. In view of above, the questions, pressed and argued before us are answered in favour of applicant. The instant reference application is decided in favour of applicant-taxpayer and against respondent-department.

10. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal Inland Revenue as per section 47(5) of the Sales Tax Act, 1990. SA/S-18/L Order accordingly.