1998 PLP 3490 (PTD)

Through the certificate of incorporation issued by Deputy Registrar of Companies Peshawar Region, Pine Match (Pvt.) Limited Hattar, District Haripur was incorporated on the 13th of February 1993. After going through all the requirements of construction and installation of machinery, the aforesaid company came into production on 27-6-1995. The Management of the company applied to the Government of Pakistan, Central Board of Revenue (Sales Tax Wing) for an exemption from the payment of sales tax under S.R.0.561 (1)/94 dated Islamabad the 9th of June, 1994 because, according to the Management, the company was set up in the North-West -Frontier Province between the 1st of July, 1991 and the 30th of June, 1994. Such exemption was twice rejected by letter dated 3-1-1996 (Annexure 'I') and letter dated 22-1-1996 (Annexure 'J').

2. The aforesaid exemption from the payment of sales tax, having been refused by the Government, the Pine Match (Pvt.) Ltd. have challenged such refusal before this Court under Article 199 of the Constitution . In the writ petition, it was also claimed in the last portion thereof that the company was entitled to the exemption under S.R.0.580(1)/91 dated 27-6-1991 as well because of the industry having been set up in-between the 1st of July, 1991 and the 30th of June, 1996. What indirectly was further claimed, was, that through the issuance of S.R.O. No. 561(1)/94 dated 9-6-1994, the exemption already granted by S.R.O. No. 580 (1)/91 dated 27-6-1991 could not be withdrawn because the petitioner-company had already taken material steps under the promise and incentive given by the aforesaid Notification No.S.R.O. 580(1)/91.

3. From the perusal of letters dated 3-1-1996 (Annexure 'I') and 22-1-1996 (Annexure 'J') whereby the claimed exemption was refused, and, from the perusal of the comments filed in the writ petition, it is apparent that the exemption was refused on the ground that the company had not furnished a certificate to the effect that it was financed by any Bank or DFI before the 30th of June, 1994 and that it had opened any L/C before 30-6-1994.

4. So far as the aforesaid objections are concerned, it appears that the case of the petitioner before the Sales Tax Wing was otherwise genuine for the exemption of sales tax, but for the opening of L/C and but for the arrangement of finances before 30-6-1994. If these are the only two objections against the petitioner-company then the writ petition is entitled to be straightaway accepted because the company. had neither imported any machinery from abroad so as to fulfil the condition of the opening of L/C nor had obtained any financial facility from any Bank or D.F.I. The Industry was installed with the finances totally arranged by the company itself without any loan having been obtained and the machinery installed therein was completely locally manufactured at Lahore. The respondents could not lay hands on any documentary evidence and also failed to take a plea in the comments that the company had ever taken any loan from such and such Bank/D.F.I. and had ever imported any machinery from any country of the world.

5. We are not at all convinced that the exemption granted by both the Notifications above was restricted to only those Industries who would have imported the machinery from abroad or who would have obtained any loan from the Bank. Both these ingredients are, rather, not a qualification for an Industrialist but a negative point, in that, the finances are obtained from the National Wealth and the machinery is imported by a use of or by the loss of foreign exchange. The condition of opening an L/C or firming of financial arrangement before 30-6-1994 is imposed in order only to check the bona fides of an industry and also to check if material steps towards the setting up of an industry were or were not taken in between a specific period. When both such facilities of import of foreign machinery and the obtaining of loans, are not availed by some Industry, they are supposed to otherwise prove that their Industry was set up in-between the dates specified in the Notifications.

6. Coming to the case of the petitioner-company, according to Notification S.R.O. No. 580(I)/91, the entitlement of exemption from the payment of sales tax for a period of five years is available to the Industry which are set up between the 1st of July, 1991 and the 30th of June, 1996. The present company came into production on 27-5-1995 and, therefore, we hold for the moment that the exemption was available even under S.R.O. 580(1)/91.

7. If we advert to Notification S.R.0.561(I)/94, it is understood that the exemption is available for a period of five years to those Industries which are set up between the 1st of July, 1991 and the 30th of June, 1994. If such crucial dates are kept under consideration, even then the petitioner-company is entitled to exemption because it happens to have taken material steps which are covered by the incentives given by S.R.0.561(I)/94 and hence cannot be denied the exemption. Let us come to the step by step progress initiated and completed by the company.

8. It was incorporated on 13-2-1993 vide a certificate of incorporation (Annexure 'A'). It adverted to match manufacturing through a lease deed with the Governor on the basis of a deed of rectification dated 15/16-12-1993 (Annexure 'B'). The construction agreement, being a material step towards coming into production, was entered into with Messrs Naqvi Engineering Company vide agreement dated 12-1-1994 (Annexure 'C'), meaning thereby, that the actual construction had initiated on 12-1-1994. As the petitioner-company had not imported any match manufacturing machines or item from abroad, it got the machineries manufactured by Mughal Engineering Works Lahore, agreement dated 22-1-1994 with whom is (Annexure ' D'). The most material steps towards the construction of match Industry had already been taken in-between the dates provided by S.R.O.561(I)/94 as 1st of July, 1991 and the 30th of June, 1994. We hold that the case of petitioner-company falls within the period of exemption granted by S.R.O. 561(1)/94.

9. So far as the incentives given by S.R.O.580(i)/91 are concerned, the crucial dates requiring the setting up of industries are between 1st of July, 1991 and 30th of June, 1996. If these dates are kept in view, the entire industry of the petitioner right from the date of incorporation (13-2-1993) up to the date of coming into production (27-6-1995), perfectly falls within the period given in S.R.O. No.580(1)/91 and the petitioner fully becomes entitled to the exemption which cannot be taken away by the issuance of S. R.O. 561(1)/94.

10. This brings us to another aspect of the case as to whether the exemption given by Notification No. 580(1)/91 can be withdrawn or limited through the issuance of another Notification No. S.R.0.561(I)/94. especially, when the petitioner-company had taken material step towards the setting up of the Industry. This Court in a previous judgment in case Messrs Wily Food. (Pvt.) Limited v. Pakistan through Secretary, Ministry of Finance 1997 PTD 63 written by one of us (Sardar Muhammad Raza, J.) had already held that the rights having accrued to an Industry under S.R.O. No.580(I)/91 cannot be taken away through subsequent Notification S.R.0.561(I)/94 particularly when material steps have been taken consequent to representation or inducement given by the former Notification. Learned counsel for the respondent could not apprise us of any judgment of the Supreme Court whereby the aforesaid judgment is or has been set aside or modified. Whether any steps have been taken by the petitioner-company or whether any commitments have been made, we would be re-asserting at the cost of repetition, with reference to the dates mentioned in S.R.O.580(I)/91 that the petitioner-company after being incorporated on 13-2-1993, had entered into an agreement of construction on 12-1-1994 (Annexure 'C'). It had entered into agreement for manufacturing local machines on 22-1-1994 (Annexure ' D'). The certificate that the industry was installed on self financing is (Annexure 'F') dated 12-12-1995. The certificate regarding production and commercial production are (Annexures A-1 and A-2) dated 19-5-1995 and 5-7-1995 showing that the company had come into production on 27-6-1995. All this is indicative of the. fact that all the required commitments had been done by the company falling within the period specified in S.R.O.580(I)/91 and, thus, the petitioner-company is entitled to the exemption from the payment of sales tax under S.R.0.580(I)/91 which cannot be withdrawn by subsequent Notification No. S.R.O. 561 (1)/94; notwithstanding the fact, as held earlier, that the case of the petitioner even falls within the ambit of S.R.O.561(I)/94 for the purposes of exemption.

11. Learned counsel for the respondent did not enter into much arguments and stated that he would be producing one latest judgment of the Hon'ble Supreme Court. We reserved the judgment for the purpose but the learned counsel from Rawalpindi did not turn up. Through our own efforts, we could lay hands upon one judgment by the Hon'ble 'Supreme Court in Messrs ,M. Y. Electronics Industries (Pvt.) Limited v. Government of Pakistan and others 1998 SCMR 1404 = 1998 PTD 2728.

12. We have gone time and again through the learned discourse of the Hon'ble Supreme Court and have come to the conclusion that the judgment aforesaid is distinguishable and is not applicable to the facts of the present case. In the aforesaid judgment the Supreme Court has made observations to the effect, that: (a) Those Notifications which are bound by a time period cannot be withdrawn before the expiry of such time. (b) The theory of promissory estoppel is not applicable against the Legislature because the latter is not capable of making a representation. (c) The exemptions like one in hand, granted by the Government can be withdrawn by the Legislature as it was done through the enactment of section 31 A of the Customs Act. (d) Section 31-A of the Customs Act is not applicable to the provisions of the Sales Tax Act.

13. For our purpose it is most important to see as to whether the exemption granted to the Industries vide Notifications under discussion stood withdrawn through the enactment of section 31-A of the Customs Act. For facility of reference, we would reproduce section 3(5) of the Sales Tax Act, 1951 to see as to how far it makes any section of the Customs Act applicable to itself: "The tax in respect of goods mentioned in clauses (b) and (d) of. subsection (1) shall be payable at the same time and in the same manner as the custom duties under the Customs Act, 1969 (IV of' 1969), and the provisions of the said Act and the rules made thereunder shall so far as may be and with the necessary modifications, apply for the purposes of this Act as they apply for the purposes of the said Act." A plain reading of the aforesaid section would clearly indicate that it does not go to provide that the sales tax and the customs duty are one and the same thing or analogous in any manner whatsoever. The only resemblance that appears to be in existence between the two Acts for the purposes of section 3(5) of the Sales Tax Act, 19511, is that the time and manner of the collection of customs duty and the sales tax is made similar. This aspect was extensively dealt with by Sindh High Court in Crescent Pak Industries (Pvt.) Ltd.: v. Government of Pakistan (1990 PTD 29) and it was held, duly concurred by the Hon'ble Supreme Court, that the two taxes namely, sales tax and the custom duty are different in nature and further that section 31-A of the Customs Act has no nexus with sales tax levied under the Sales Tax Act, 1951.

14. Consequent upon what has been discussed above, the writ petition is accepted and the petitioner-company is held entitled to the exemption from payment of sales tax for a period of five years from the date the industry is set up. C.M.A./153/P Petition accepted.