2010 PLP (Trib (PTD)

MUHAMMAD IBRAHIM KHAN, MEMBER (JUDICIAL):

This appeal filed by Messrs Balana Restaurant, Murad Plaza, University Road, Peshawar, the appellant, is against the Order-in-Appeal No.125 of 2003 dated 22-5-2003 passed by Mr. S.A. Alam, the learned Collector Customs, Sales Tax and Federal Excise (Appeals), Peshawar, whereby the learned Collector while maintaining Order-in-Original No.2 of 2003 dated 27-1-2003 dismissed the appeal of the appellant.

2. Messrs Balana Restaurant Murad Plaza, University Road, Peshawar being (a registered sales tax payer) entered into a catering agreement, operative w.e.f. 1st February, 2002 for a period of one year with a condition for its further extension or termination, with Messrs Pakistan Tobacco Company Limited. Akora Khattak, District Nowshera (a registered sales tax payer) for sale/purchase of food products/food stuff along with catering services for running a canteen located inside the premises of Messrs Pakistan Tobacco Company Limited (here-in-after called PTC. Akora Khattak) per specification in Appendix-A of the said agreement with a number of other terms and conditions in the light of which, the supply of food stuff was made by Messrs Balana Restaurant (hereinafter called Balana Restaurant) to PTC, Akora Khattak for the period agreed upon, for which Balana Restaurant, charged the sales tax amounting to Rs.26,49,854.51 which on recovery was deposited in the Government Treasury, in accordance with the prescribed procedure.

3. The consumer Pakistan Tobacco Company, Akora Khattak vide its letter dated 3-4-2002 asked Balana Restaurant to get the said amount of Rs.26,49,854.51 refunded and returned to PTC, Akora Khattak on the grounds that the supply of food products to the PTC, Akora Khattak falls under the exemption from the charge of sales tax, in terms of section 13(1) of the Sales Tax Act, 1990 read with item 3(vii) of the Sixth Schedule of the Act (ibid) and accordingly it was in the light of the said letter when Balana Restaurant filed a refund claim for the amount of Rs.28,49,854.51 before the Deputy Collector Sales Tax and Federal Excise (Refunds). Peshawar which claim was processed and the Taxing Authority arrived at the conclusion that sales tax has rightly been charged, thus a show cause notice C.No.ST(Refund)44/2002/2154 dated 18-9-2002 was issued to Balana Restaurant calling upon it to show cause as to why the refund claim filed by it under section 66 of the Sales Tax Act, 1990, should not be rejected for the reason that Balana Restaurant (the claimant) is a separate registered person under food Rules published vide Notification No.S.R.O. 1039(I)/99 dated 14-9-1999 and not being a part of PTC, Akora Khattak and whereas under rule 3(1) of the Special Procedure for Supply of Food Rules, 1999 made applicable vide afore-mentioned S.R.O., every person supplying food, in or from the premises of Clubs, Caterers, Canteen, Hotels or Rest House, shall be liable to charge and pay sales tax at the rate specified under rule 4, thereof irrespective of the fact whether food is consumed in that premises or supplied or catered outside or supplied as take away. As such, the supplies of the food stuff by Balana Restaurant to PTC, Akora, being charged at the strength of the invoices, has rightly been, charged and deposited in the Government Treasury.

4. On the reply of Balana Restaurant, it was submitted with stress and emphasis, laid upon item 3 of clause (vii) of the Sixth Schedule in terms of section 13 of the Sales Tax Act, 1990 and is of view that such a food stuff supplied to the industrial canteen stands exempted from sales tax and the sales tax to the tune of Rs.26,49,854.51 for the said period charged under the misconception of law was wrongly deposited in the Government Treasury in the light of the afore-mentioned clause, which is as under:- "Cooked or prepared food stuff served in messes run on the basis of mutuality and industrial canteens for workers of a particular class" is exempted from the charge of sales tax.

5. To resolve the issue whether such a supply was taxable under the Sales Tax Act, 1990 or otherwise, the matter was placed before the Deputy Collector, Refunds (Mr. Muhammad Saleem) who on hearing the matter rejected the refund claim of the Balana Restaurant being inadmissible with his observations mainly contained in paras. 5 and 6 of the Order-in-Original No.2 of 2003 delivered on 27-1-2003 which is quotam verbatim:-- "

5. On going through the facts, available record and considering the written arguments advanced by the claimant it revealed that serial number 3(vii) of the Sixth Schedule provides exemption from sales tax to cooked or prepared food stuff served in industrial canteens for workers of a particular class. However, in the instant case Messrs Balana Restaurant is a separate registered person having sales tax registration No.05-01-9801-026-49. They made supplies to Messrs PTC Ltd. which is also a registered person and correctly charged/paid sales tax involved in these supplies in accordance with the Food Rules notified under S.R.O. 1039(I)/99 dated 14-9-1999. The contention of the claimant that cooked or prepared food supplied to Messrs PTC Ltd. have been served in industrial canteen for workers are exempted under serial No.3(vii) of the Sixth Schedule of the Sales Tax Act, 1990 is not tenable. The supply in this case is taxable supply as has been made by claimant to Messrs PTC for consideration in furtherance of their taxable activity. Messrs PTC, is a registered person itself whereas its industrial canteen is not a person thus activity carried out is in conformity with the taxable activity as provided in the Sales Tax Act, 1990. Besides, the claimant has been registered as restaurant which has been defined under S.R.O. 1039(I)/99 dated 14-9-1999 and repro duced for ready reference. "Restaurant means an establishment/ organization or place, by whatever name called, supplying food consumed in that premises or catered outside or supplied as take away, whether or not it provides and other services, facilities or utilities and includes a club, marriage hall or establishment meant for holding ceremonies where food is supplied on such ceremonies.

6. Fore-going in view, it is concluded that the claimant is a restaurant and as such as per clause (3) of Food Rules, 1999 shall be liable to charge and pay sales tax at the rate specified in subsection (1) of section 3 of the Sales Tax Act, 1990 irrespective of the fact whether the food is consumed in that premises or supplied or catered outside or supplied as take away. Messrs Balana Restaurant, Murad Plaza, University Road, Peshawar has, therefore, correctly charged sales tax on supplies made to Messrs PTC Ltd., Akora Khattak. The refund claim is found inadmissible and, therefore, rejected accordingly."

6. Feeling aggrieved of the impugned Order-in-Original, Balana Restaurant filed an appeal bearing No.ST-158/2003 before Mr. S.A. Alam, the learned Collector Customs, Sales Tax and Federal Excise (Appeals), Peshawar mainly on the grounds as agitated before the Deputy Collector (Refunds) with regard to the exemption of the food stuff supplied by the appellant to the PTC, Akora Khattak which matter was heard for considerable length of hearings and it was on 22-5-2003, when the learned Collector (Appeals) vide his Order-in-Appeal No.125 of 2003, dismissed the appeal, holding that:- "

11. I have carefully considered the record available on the file and also heard the argument advanced by both the respondent and appellant Messrs Balana Restaurant lodged a claim on the advice of Messrs Pakistan Tobacco Company as Messrs PTC were of the view that Messrs Balana Restaurant Sales Tax Registration 05-01-9801-026-19 should lodge a claim of refund on respondent and after obtaining the same the amount may refund it to Messrs PTC as they thought that supplies were exempt under Sixth Schedule of Sales Tax Act, 1990. The issue of exemption was thoroughly examined by the respondent in order passed by him. It is my considered view that the type supply as envisaged under item 3(vii)/gives coverage only to industrial canteen run by an internal management committee on no profit and no loss basis. In the instant case food might have been supplied to industrial workers, but the supply was made a commercial concern where profit motive cannot be ruled out. Further both the supplier and recipient are separately registered under Sales Tax Law. The supplier in this case is caterer and services provided by him are clearly taxable."

7. Feeling not satisfied with the impugned judgment issued through Order-in-Appeal No. 125 of 2003, the appeal in hand (ST-252/PB/2003) was filed before this Tribunal controverting the impugned order mainly on the grounds as incorporated in para 4 thereof which is as under:-- (i)(A) The judgment portion of the impugned Order-in-Appeal, inter alia, reads as under:-- "It is my considered view that the type supply as envisaged under item 3(vii) gives coverage only to industrial canteen run by an internal management committee on no profit and no loss basis." The above version of the learned respondent No.2 is unlawful due to the following submissions:-- Subsection (1) of section 13 of the Sales Tax Act, 1990 reads:-- "Exemption.

(1) Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the Federal Government, be exempted from tax under this Act." Sales Tax is levied and charged under section 3 of the Sales Tax Act, 1990. Due to the non obstante clause, subsection (1) of section 13 overrides the provisions of section

3. It means that the goods specified in the Sixth Schedule to the Sales Tax Act, 1990, subject to such conditions as may be specified by the Federal Government, cannot be subjected to sales tax. Clause (vii) of S.No.3 of the Sixth Schedule reads:-- "cooked or prepared food stuff served in messes run on the basis of mutuality and industrial canteens for workers of a particular class." It means that cooked or prepared foodstuff served in industrial canteens for workers of a particular class, is exempt from payment of sales tax. No condition, whatsoever, has been imposed by the Federal Government under section 13(1) of the Sales Tax Act, 1990, in this respect. S.No.3(vii) of the Sixth Schedule does not impose any such condition that to earn the exemption, industrial canteen must be run by an internal management committee. Throughout Pakistan, caterers/ contractors supply cooked foodstuff to be served in the industrial canteens. S.No.3(vii) of the Sixth Schedule, for proper understanding, can be split up as under:-- Cooked or prepared food stuff served in

(a) messes run on the basis of mutuality (on no profit and on no loss basis); (b) industrial canteens for workers of a particular class. (In most of the industries in Pakistan food is served in the canteens on subsidized rates. Messrs Pakistan Tobacco Co., Ltd. serve the food in their industrial canteen to their workers free of cost.). According to Oxford Dictionary "serve", inter alia, means to "present (food) to eat." So, foodstuff, wherever cooked or prepared, if served in an industrial canteen, is exempt from payment of sales tax. This contention is supported by the definition of "food" as provided by clause (f) of rule 2 of the Special Procedure for Supply of Food Rules, 1999, framed through S.R.O. 1039(I)/99, dated 14-9-1999 which reads:-- "(f) "food" includes baked, cooked, prepared or fresh food, ice-cream, beverages or drinks, whether alcoholic or otherwise and other eatables, whether prepared by the person supplying the same or otherwise procured from other." Thus, the foodstuff supplied by the appellant which was served in the industrial canteen of Messrs Pakistan Tobacco Co. Ltd., Akora Khattak is fully covered by clause (vii) of S.No.3 of the Sixth Schedule and is, therefore, exempt from payment of sales tax. (b) The judgment portion of the impugned order further reads:-- "In the instant case food might have been supplied to industrial workers, but the supply was made by a commercial concern where profit motive cannot be ruled out." In this respect, it is humbly submitted that the phrase "on the basis of mutuality", occurring in clause (vii) of S.No.3 of the Sixth Schedule, relates to messes and not to industrial canteens. The "running of messes" is not an issue in this case. However, the phrase "on the basis of mutuality" relates to the members of the mess and not to the supplier of the food. There is no law in Pakistan, which prohibits a supplier from making of profit. The assertion of the learned respondent No.2 is, therefore, unfounded and baseless. (c) The judgment portion of the impugned order further reads: "Further both the supplier and recipient are separately registered under Sales Tax Law." In this respect, it is respectfully submitted that the learned respondent No.2 did not cite any authority under which exemption from payment of sales tax stands forfeited, if both the supplier and recipient are separately registered under Sales Tax Law. Moreover, rule 3(8) of the Special Procedure for Supply of Food Rules, 1999, framed by S.R.O. 1039(I)/99 dated 14-9-1999 (relied upon by the learned respondent No.1 in the show, cause notice), reads as under:-- "Where the said person is engaged in making taxable supplies as well as exempt supplies, the input tax credit shall be allowed as per the Apportionment of Input Tax Rules, 1996." It is, therefore, absolutely clear that the exemption granted by S.No.3(vii) of the Sixth Schedule cannot, in any way, be forfeited; provided that the cooked (any where and by any body) foodstuff is served in an industrial canteen to the workers. (d) The judgment portion of the impugned order ends as under:-- "The supplier in this case caterer and services provided by him are clearly taxable." In this respect, it is humbly submitted that clause (41) of section 2 of the Sales Tax Act, 1990 has defined "taxable supply" as under:-- "means a supply of taxable goods made by an importer manufacturer. Wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4." The cooked foodstuff supplied by the Appellant and served in the industrial canteen to the workers of Messrs Pakistan Tobacco Co. Ltd., is exempt from payment of sales tax 'vide clause (vii) of S.No.3 of the Sixth Schedule and was, therefore, not a taxable supply. Moreover, words "services provided" have been used by the learned respondent No. 2 "caterer" has been defined by clause (b) of rule 2(1) of the Special Procedure for Supply of good Rules, 1999, framed by S.R.O. 1039(I)/99 dated 14-9-1999. According to the definition, a caterer has two roles to play; which are

(1) to supply foods, drinks and other eatable (goods); and (2) to provide entertainment, furniture, crockery, cutlery, ornamental or decorative accessories or lighting for illumination, on hire, lease or for any other consideration (services). The, appellant only supplied cooked foodstuff (goods) and did not provide services of any kind to Messrs Pakistan Tobacco Co., Ltd. The learned respondent No.2 has, thus, seriously erred while interpreting clause (vii) of S.No.3 of the Sixth Schedule to the Sales Tax Act, 1990. The impugned order is, therefore; erroneous, arbitrary, void and unlawful. (ii) In case of Messrs Pfizer Laboratories Ltd. v. Federal of Pakistan and others reported as PLD 1998 SC 64, the Honourable Supreme Court of Pakistan has held:-- "Denial of refund of money, which was not payable due to exemption from customs duty and sales tax, would be violative of Article 24(1) of the Constitution." (iii) The Sales Tax Refund Rules, 2000 (hereinafter called "the Rules") have been framed through S.R.O. 417(I)/2000 dated 20-6-2000. These rules are applicable to the instant refund case by dint of clause (iv) of sub-rule (2) of rule 1 and II thereof proviso to sub-rule (2) of rule 4 of the rules reads as under:-- "Provided that in case of a refund claim where such supportive documents have not been so received, the officer-in-charge may require the claimant through telephone, facsimile or in writing to furnish the same within such time as may be specified by him." No supportive document, in respect of the instant refund claim, was demanded by the learned respondent No.1 since the filing of the claim, i.e. 3-4-2002. It means that the refund claim was admitted to be complete. Rule 6 of the rules is reproduced below for ready reference:-- "Sanction and payment of refund claim.

(1) If on the basis of supportive documents, refund examination report, recommen dations, scrutiny or verification report as the case may be, the officer-in-charge is fully satisfied about the genuineness and admissibility of the claim, he shall, subject to the provisions of rule 7 sanction the claim and send the original copy of the sanction order to the treasury officer for issuance of cheque to the claimant. Provided that if the claimant is liable to pay any duty or tax, additional duty or additional tax or penalty under any law administered by the Board, payment of the refundable amount shall be made only after adjustment of unpaid outstanding amount of duty or tax or as the case may be, additional duty or additional tax and penalty. (2) The treasury officer, before issuing cheque to the claimant, shall personally ensure that cheque of only such amount is issued to the claimant as is specified and sanctioned in the sanction order: Provided that refund cheque shall be issued to the claimant only through courier service, or through urgent mail service with due acknowledgement: Provided, further that the treasury officer shall maintain all the record and registers, etc., prescribed under the treasury or financial laws for the purpose of keeping account of payment of Federal revenue refunds. (3) The duplicate copy of the sanction order shall be retained in the Refund Division in relevant file." Sub-rules (2) and (5) of rule 7 of the rules read as below:-- (2) In case of manufacturer-cum-exporter, refund on zero rated supplies shall be sanctioned, and paid within twenty days of furnishing of the supportive documents, and refund, if any, on domestic supplies or, as the case may be, input stocks in balance shall be sanctioned and paid in the following manner namely:- (i) Fifty per cent of such claim shall be sanctioned and paid within twenty days of filing of supportive documents; (ii) The remaining fifty per cent shall be sanctioned and paid after verification of deposit of tax paid on goods in respect of which refund of input tax has been claimed; and (a) If not already done in terms, of sub-rule (3) of rule 5, scrutiny of relevant records or accounts and verification of stocks of the claimant: (b) Provided that in case action under this clause is not completed within forty days of the receipt of supportive documents, the remaining fifty per cent refund shall be paid if otherwise admissible on the basis of supportive documents and action under this clause shall be completed thereafter; Provided further that manufacturer-cum-exporters who zero rate their supplies and also make domestic supplies reflected in their monthly return, may, ipso facto, deduct the amount of tax, payable on their domestic supplies from the amount of refund due on their zero-rated supplies and claim refund only for the balance amount, if any." (5) The refund claims of registered manufacturers, importers, wholesalers of retailers shall be sanctioned and paid in the manner prescribed in clause (i) and clause (ii) of sub-rule (2) read with the first proviso to subsection (1) of section 10 of the Act." Where sub-rule (5) is read with sub-rule (2) of rule 7 of the rules, it becomes absolutely clear that the instant refund claim was to be sanctioned and paid in full, within forty days of the receipt of the supportive documents. As submitted above, the instant refund claim was filed completely on 3-4-2000. So, the refund claim was to be sanctioned and paid on or before 13-5-2002. Rule 8 of the rules reads as under: "Action on inadmissible refunds.

(1) In case any refund claim or part thereof is found to be genuine and not admissible under the law,. a notice shall be served on the claimant requiring him to show cause in writing, within fourteen days, as to why the claim or as the case may be, part thereof should not be rejected and as to why the claimant should not be proceeded against under the relevant provisions of law: Provided that in case where the amount of refund liable to rejection does not exceed five million rupees, the officer-in-charge shall bring to the knowledge of Additional Collector having jurisdiction in writing on the relevant' file the reasons for issuing the notice: Provided further that the cases involving amounts of refund liable to rejection exceeding five million rupees shall be brought to the knowledge of the Collector before issuance of notice. (2) After affording a reasonable opportunity of hearing to the claimant, the officer-in-charge shall issue the show cause notice to such claimant and pass an adjudication order specifying reasons therein:-- Provided that in case the claimant does not respond to the show cause notice or does not appear himself, or through his authorized representative, to defend his position on three dates of hearing, the officer-in-charge may decide the case ex parte on the basis of facts and evidence available on record." Reading of rule 8 with rule 7 of the rules, makes it absolutely clear that the learned respondent No.1 was required to either sanction and pay fifty per cent of the amount of the refund claim within twenty days of the filing of the supportive documents, in terms of clause (i) of sub-rule (2) of rule 7; or declare the refund claim or part thereof to be inadmissible under the law and proceed for action under rule

8. The instant refund claim, complete in all respect, was filed on 3-4-2002. In view of the above submissions, proceedings under rule 8 could be initiated on or before 23-4-2002. The show cause notice was issued on 18-9-2002, i.e. long after the date by which the proceedings under rule 8 could be undertaken. The show cause notice, therefore, barred by the limitation of time; and is, thus, void and unlawful.

8. I have heard Barrister Mr. Farrukh Jawad Panni, Advocate for the appellant and Mr. Abdul Latif Yousafzai, Advocate assisted by the representatives' of the respondents/department and have gone through the record of the case.

9. The appeal in hand controverting the Order-in-Appeal No.125 of 2003 remained pending for a long time for the reasons that at times the bench was not complete for want of one of the members but in view of the enhancement of the fiscal jurisdiction of the single bench in the Finance Bill, 2008, the matter was entrusted to this bench on 11-11-2008 and the matter was heard on 22-1-2009. In view of the arguments advanced for and against, at the very outset it could be said that the issue raised before this Tribunal for its resolution is very simple in terms of legal parlance but appears to have been made complicated for desirable and favourable interpretations by the parties. Admittedly, Balana Restaurant (the supplier) is an independent registered tax payer and likewise the PTC, Akora Khattak is also a registered Tax Payer (the consumer) both of whom executed a deed for the supply of the food stuff by the former to the later an agreement between two (registered sales tax) persons certain transaction falling within the taxable activity and in this connection wisdom on taxability of such a transaction can be gathered from a judgment reported in 2001 SCMR 1376 = 2001 PTD 2097 titled as Shikhoo Sugar Mills Limited v. Government of Pakistan and others.

10. So far the exemption claimed by PTC, Akora Khattak making Balana Restaurant to file a refund claim is concerned, it is obvious to note that PTC Akora Khattak is neither a party to the present litigation nor ever before the learned lower forums. What the PTC Akora has done, is that it wrote a letter to the supplier (Balana Restaurant) on 3-4-2002 to the effect that the food stuff supplied to them for its industrial canteen is exempted from sales tax under section 13 of the Sales Tax Act, 1990, therefore, the same be returned and it was in this background when Balana Restaurant filed a refund claim but it is to be mentioned here, that the sales tax charged to the tune of Rs.26,49,854.51 by Balana Restaurant had already been deposited in the Government Treasury. It is an admitted legal aspect, that sales tax once charged and deposited in the Government Treasury whether genuinely or under misconception of law, as is contended, could not be refunded under section 3-B of the Sales Tax Act, 1990 thus the refund claim on this score alone could not be entertained and has rightly been rejected in light of the said section of law, which is as under:-- "3-B Collection of excess tax, etc.

(1) Any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this Act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which has been passed on to the consumer, shall pay the amount of tax or charge so collected to the Federal Government. (2) Any amount payable to the Federal Government under the subsection (1) shall be deemed to be an arrear of tax or charge payable under this, Act and shall be recoverable accordingly and no claim for refund in respect of such 'amount shall be admissible. (3) The burden of proof that the incidence of tax or charge referred to in subsection (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge,"

11. Next comes the controversy with regard to the exemption in view of section 13, read with items 3(vii) of the Sixth Schedule of the Act, which reads as under:-- "cooked or prepared food stuff served in messes run on the basis of mutuality and industrial canteens for workers of a particular class." Item 3(vii) of the Sixth Schedule of Sales Tax Act, 1990 in the light of section 13 of the Act (ibid) stands improperly interpreted in the desired and favourable manner by PTC Akora Khattak, stating that it has established a canteen where food is cooked/prepared for the workers of the Factory/Company and that way stands exempted from the sales tax but the said clause (reproduced hereinabove) is very much clear in terms of words used and intent declared and does not call for any further interpretation. What it means is that any canteen inside the Factory, if run by the Factory Management itself or with the help of nominated body of the workers for service of food to the workers and that too, to a particular class of workers, i.e., the labourers, would stand exempted from the sales tax but in the present case it is not so because the food stuff is supplied by Messrs Balana Restaurant, (Registered Tax Person) to PTC, Akora Khattak, another registered tax person where the supply is made by the former to the latter and where the same is cooked/prepared for the workers thereof and that way, such a deal or transaction falls within ambit of taxable activity between the two taxable registered persons and could not seek the exemption on the supply of the food stuff because taxability, liability and payability are the terms which must be taken into in its true essence and the provisions for exemption of an items from the charge of sales tax must be strictly construed in view of the prevailing practice where the charging provision of a taxing statutes, no doubt, are construed in favour of the assessee but the provisions relating to the exemptions are to be construed in favour of the Government and that way the assessee has to provide his entitlement for such an exemption which is not so in the case in hand, as has been mentioned earlier, that PTC, Akora Khattak is not a party to the present litigation before this Tribunal nor was so before the lower forums. Otherwise, also grants or concession in the nature of exemption from payment of duties/taxes are to be given a rigid interpretation against the tax payer and in favour of the-taxing power in view of a judgment in the matter of "Hashwani Hotels Limited v. Government of Pakistan and others reported in 2007 SCMR 1131 = 2007 PTD 1473. Although stated time and again by the learned counsel for the appellant that it is the goods itself which carries the exemption irrespective of the involvement of the supplier and the consumer but this assertion on the part of the learned counsel for the appellant, in my humble view, is not the correct appreciation because in the case in hand PTC, Akora Khattak is a Company earning hundreds of millions of rupees every year through their workers thus bound under the prevalent (welfare) practice and laws to facilitate its workers rendering their services in performance of their functions as employees of the said Company. No doubt, the appellant has claimed the exemption under item 3(vii) of the Sixth Schedule of the Sales Tax Act, 1990 but that exemption could be availed by the management of those industrial canteens which cooked or prepared food with every arrangements inside the industrial canteen without involving third party for the supply of the food stuff, whereas in the case in hand, third party i.e. Balana Restaurant an independently registered tax person and tax payer in terms of rule 2(b) and rule 2(i) of the Supply of Food Rules, 1999 read with Notification No. S.R.O. 1039(I)/99 dated 14-9-1999 has been involved for the supply of food stuff/food products, thus could not avail the exemption from the charge of sales tax on such an activity falling within the scope of Taxable activity between two registered sales tax persons.

12. If presumed for the sake of arguments that the portion of supplies of the products made by the appellant to PTC, Akora Khattak stands exempted then Notification No.S.R.O.698(I)/98 becomes applicable for the purpose of apportionment of input tax, therefore, the appellant has to: (a) segregate the taxable and exempt supplies in, the monthly returns, and; (b) justify its claim of input tax under the afore-mentioned S.R.O. i.e. Notification No.S.R.O.698(I)/98. Again, in this connection a reference could also be made to an E-mail (page 33, Appeal No.ST-184(PB/07) whereby the Messrs Engro Company has observed in response to the query made by the learned counsel for the appellant, with regard to the contended exemption on the supply of foods stuff by a third party for the canteen of the PTC, Akora Khattak, which is, that:-- "Strictly speaking the onus of charging sales tax is on the contractor and not on the Company, being the consumer." The observation of Messrs Engro Company (reproduced above) would further strengthen the stance of the respondents/department that the appellant being the contractor is liable for the payment of the adjudged liabilities. The controversy has also been settled by the Federal Board of Revenue vide C.No.1/33-STB/2005 dated 6-6-2005 wherein the supplies made by the appellant to Messrs Pakistan Tabacco Company are said to be a transaction not covered under serial No.3(vii) of the Sixth Schedule of the Sales Tax Act, 1990. Although, the learned counsel for the appellant has made reference to a number of judgments of the Honourable Superior Courts but the same do not relate to the issue involved in the instant case as these judgments pertain to the concept of supply, exemptions and spirit behind the statute Regulatory orders to bring under developed regions of the country to the level of the developed regions, newly set up industrial units and denial of promised exemptions.

13. Besides the appeal in hand ST-252/PB/2003 where the refund claim for the amount of Rs.26,49,854.51 (already paid as sales tax) was rejected being inadmissible, there are four other sub-judice Sales Tax Appeals involving identical question of law on the grounds of the stated "Exemption" of sales tax on the basis of supply of the food stuff/products to Messrs Pakistan Tobacco Company, by Messrs Balana Restaurant rendering handsome amount(s) of sales tax, for the payment of which notices, have already been issued, which are shown here-under, with the amount involved therein, for the given period(s): (i) Appeal No.ST-202/PB/2005, involving sales tax amount of Rs.913533 (with additional tax to be calculated as yet) for the period of March, 2002 to June, 2002; (ii) Appeal No.ST-184/PB/2007, involving payment of sales tax amounting to Rs.53,09,972 (with additional tax to be calculated as yet) for the period of July, 2002 to June, 2004; (iii) Appeal No.ST-1881PB/2006 involving payment of sales tax to the tune of Rs.26,88,038 (with additional tax yet to be calculated) for the period of July, 2004 to June, 2005; and (iv) Appeal No.ST-226/PB/2007 involving payment of Rs.46,17,463 (with additional tax etc. yet to be circulated) for the period of July, 2005 to 30th November, 2006.

14. As sequel to the foregoing discussion, the impugned Order- in-Appeal as well as Order-in-Original delivered by the learned lower forums, having resulted into the filing of the present Appeal (ST-252/PB/2003) suffer from no illegality or irregularity rather based on the proper appreciation of facts on record and law on the subject would call for no interference by this Tribunal. As such, the appeal in hand being without any substance stands, hereby dismissed. As the remaining four appeals tabled hereunder also involve common question of law and facts and being identical in nature, where the appellant has been issued with notice(s) for payment of the outstanding sales tax for different periods, as per details in the preceding para, this judgment shall also apply mutatis mutandis to all of the four said following appeals:-- S .No. Appeal No. Appellant(s) Respondent(s) Impugned O-in-O No. and Date Impugned O-in A No. and Date

1. ST.202/PB of 2005 Messrs Balana Restaurant Collector Sales Tax and Federal Excise Peshawar etc. 70/2004 Dated. 28-12-2004 423 of 2005 Dt. 29-6-2005

2. ST.226/PB of 2007 Messrs Balana Restaurant Collector Sales Tax and Federal Excise Peshawar etc. 1/2007 Dt. 31-3-2007, 181/2007` Dt. 29-6-2005

3. ST-188/PB of 2006 Messrs Balana Restaurant Collector Sales Tax and Federal Excise Peshawar etc. 4/2006 Dt. 31-5-2006 301/2006 Dt. 26-8-2006 4.. ST-184/PB of 2007 Messrs Balana Restaurant Collector Sales Tax and Federal Excise Peshawar etc. 21/2006 Dt. 14-3-2006 63/2007 Dt. 14-3-2007 M.H./108/(Trib.) Appeal dismissed.