2000 PLP 870 (PTD)

NASIR-UL-MULK, J.

Northern Bottling Company (Pvt.) Limited, which is engaged in the manufacturing, bottling and selling aerated waters, has through this Constitutional petition questioned the legality of levy of one percent. further tax amounting to Rs.9,92,345 for the period July 1998 to September 1998 under section 3(l A) of the Sales Tax Act, 1990 (called the Act) as well as the notice dated 27-10-1998 issued by the Assistant Collector of Sales Tax, Peshawar whereby the demand for the payment of the tax was made. The imposition was challenged on three grounds: Firstly, that no notice as envisaged under section 36(2) of the Act was given to the petitioner before the impugned order, dated 27-10-1998 was passed; secondly, that under SR0.555(1)/96, dated 1-7-1996, the Deputy Collector and not the Assistant Collector had the authority to adjudicate upon the sales tax and thirdly, that the petitioner was liable to pay sales tax under section 3(2)(c) of the Act whereas the one percent. further tax under section 3(1-A) was liable on taxable supplies charged to sales tax under section 3(1) of the Act.

2. At the hearing of the petition, the learned counsel for the petitioner, Mr. Iftikharuddin Riaz, Advocate, elaborated the grounds taken up in the writ petition and made submissions on the logic of excluding from the one percent. further tax the manufacturers liable to pay sales tax on their retail price under section 3(2) of the Act. The learned counsel pointed out that the express. inclusion of section 3(2)(c) of the Act in section 3(l A) by an amendment through the Finance Act, 1999 itself shows that prior to the amendment sales tax levied under section 3(2)(c) was not subject to the one percent. further tax.

3. Mr. K. G. Sabir, Barrister, for respondent No.3, i.e. Assistant Collector Sales Tax raised a preliminary- objection submitting that the petitioner has not exhausted the statutory alternative remedy of challenging the impugned sales tax before the appellate forums. Reliance was placed upon Central Board of Revenue v. Sheikh Spinning Mills Limited (1999 SCMR 1442). As regards the objection regarding adjudication by a non -authorised officer, the learned counsel argued that the defect can be remedied and that in any case it is the liability to the further tax that has been questioned. As to interpretation of the relevant statutes, it was contended that the one percent. further tax cannot be confined to the tax leviable under section 3(1) as the object of the legislation was to charge one percent. further tax whenever taxable supplies are made to unregistered persons as the later do not pay sales tax on further sale of the goods. To this, an argument was advanced by the learned counsel for the petitioner that since the petitioner pays sales tax on the retail price on which the retailers sell the aerated waters the sales tax paid by the petitioner covers the sale by the retailers as well as. As for the resorting to alternative statutory remedy, the learned counsel for the petitioner pressed into service the judgment of the Supreme Court in Collector Customs v. Flying Craft Limited (PLD 1988 SC 1041).

4. The first question that requires determination is the maintainability of the writ petition in view of the alternative statutory remedy available to the petitioner. It may be stated that there is no controversy between the parties on facts. Respondent No.3 has determined that the petitioner is liable to pay further tax of one percent., which the petitioner questions on the ground that respondent No.3 has misconstrued the relevant statutory provisions. The case, therefore, involves determination of pure question of law. Thus, the Constitutional jurisdiction of this Court can be invoked. As regards the judgment of the august Supreme Court in the case of C.B.R. v. Sheikh Spinning Mills Limited, (ibid), the High Court, whose judgment and order was under challenge, has given a general declaration regarding the legal effects of two notifications without their being any denial by the C.B.R. or the other Customs Authorities of any claim made by the petitioner. The august Supreme Court held that in the absence of any specific instance of denial' by the Department to the respondents to reclaim or deduct the imposed tax paid on goods it would have been appropriate to have asked the respondents to approach the forum provided under the Act after providing guidelines. In that case there was no determination of any tax and, therefore, the Supreme Court held that the High Court should not have given a mere declaration. That is not the case here as respondent No.3 has already determined the liability of the petitioner to pay a certain amount of tax.

5. For the purpose of determining as to whether the petitioner is liable to pay the one percent. further tax under section 3(l A), it will be helpful to reproduce the relevant provisions of section 3 of the Act. (3) Scope of tax.

(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of twelve and a half percent. of the value of

(a) taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him; and (b) goods imported into Pakistan. (1A) Where taxable supplies are made in Pakistan to a person other than a registered person there shall be charged, levied and paid a further tax at the rate of one percent. of the value in addition to the rate specified in subsection (1); Provided that the aforesaid one per cent, further tax shall not be charged, levied and paid if the said taxable supplies are made:

(1) by a person registered as a retailer; or (2)

(3) Notwithstanding the provisions of subsection (1)

(c) taxable supplies specified in the Third Schedule shall be charged to. tax at the rate of twelve and a half percent. of the retail price which alongwith the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be;"

6. The petitioner's product of aerated waters are chargeable to sales tax under section 3(2)(c) of the Act as aerated waters or beverages are included in the 3rd Schedule to the Act. The reading of sections 3(1) and 3(2)(c) shows that under the former provision sales tax is levied at 12% of the value of the taxable supplies whereas under section 3(2)(c) the tax is levied at the same rate on the retail price-if the goods manufactured are those specified in the 3rd Schedule. Now section 3(1-A) provides for further one percent. tax on the value of taxable supplies and not on the retail process. Furthermore, at the end of section 3(1-A) it is expressly provided that the one percent. is not addition to the rate specified in subsection (1). Thus, the further tax of one percent under section 3(1-A) is confined to taxable supplies charged to sales tax under section 3(1), even the framers of the law must have been alive to the fact that the further tax was not leviable on taxable supplies under section 3(2)(c) and that is why an amendment was brought about by section 16 of the Finance Act, 1999 in subsection (1-A) of section 3 whereby at the end of the subsection for the expression "subsection (1) the expression" subsection (1) Clause (C) of subsection (2), and subsections (4) and (5)" was substituted, thus subjecting the taxable supplies under section 3(2) to further tax under section 3(1-A) of the Act. We, thus, hold that the petitioners were not, during the relevant period, subject to further tax under section 3(1-A).

7. In view of the above finding, it is not necessary to give findings on the other two issues raised by the learned counsel for the petitioner regarding non-issuance of show-cause notice and in competency of respondent No.3 to determine the petitioner's liability to further tax. Consequently the writ petition is allowed and the impugned order dated 27-10-1998 is declared as illegal and, therefore, set aside. The parties shall bear their own costs. C.M.A./M.A.K./1/P Petition allowed.