1987 PLP 1876 (SCMR)

NASIM HASAN SHAH, J.-- The relevant facts are that the petitioner is a manufacturer of carpets and rugs of man-made fibre. Under section 3 of the Sales Tax Act, 1958 a sale tax is leviable on all goods manufactured in Pakistan at the rate of 12 of the value of goods. However, the Federal Government has the power by notification under section 7 to exempt any goods from the sale tax or to make a reduction in the rate of sale tax leviable in respect of any goods. Accordingly, the Federal Government issued a notification No.666 (1)/81 dated 25-6-1981 whereby goods as specified in the table subjoined to the notification were exempted from sale tax. By virtue of item No.38 of the said table exemption from tax was made applicable to the fabrics of man-made fibre and carpets manufactured by the petitioner were treated as covered by the said item 38 and the same were allowed exemption. Simultaneously with the above notification another notification No. 667 (1)/81, dated 25-6-1981 was issued whereby sale tax was reduced in respect of goods mentioned therein under section 7 of the Sales Tax Act. Subsequently, the Federal Government issued a notification No.579 (1)/83, dated 11-6-1983 amending notification No. SRO 666 (1)/81 dated 25-6-1981, but by the said amending notification the said item 38 was continued to-be operative with the result that the exemption there under of the petitioner's goods was allowed to continue. By another notification No. 580(1) /83, dated 11-6-1983 the notification No. SRO 667 (1)/81 dated 25-6-1981 relating to reduction in rate of sale tax in respect of certain goods was amended and there under levy of sale tax was reduced to 5% of the value of goods in respect of machine made carpet falling under sub-head (e), (f) and (g) of heading No.58.02 and 59.02 of the I.D.C. Schedule. The respondents acting under the said notification No.580 (1) / 83 dated i1-6-1983 made a demand from the petitioner to pay sale tax at the reduced rate in respect of carpets lying in their stores. The legality of the said demand was challenged by the petitioner by instituting a constitutional petition in the Lahore High Court, Lahore. During the pendency of the said writ petition a concession was made on behalf of respondents that according to the decision of Central Board of Revenue, Sale Tax would be charged only with effect from 11-6-1983 and the previous liability in respect of the tax was waived. However, the other question which was raised in the constitutional petition, namely, that no duty could be charged on machine made carpets despite issuance of the notification No.580 (1) /83 dated 11-6-1983 was rejected and the constitutional petition was dismissed by order dated 19-1-1985 of the Lahore High Court. Hence this petition for leave to appeal. Mr. Muhammad Amin Butt, learned counsel for the petitioner has, inter alia, submitted that according to the departmental practice when it is proposed to levy duty, even though at reduced rate, on any goods, which were previously exempt, the provision regarding exemption is formally deleted by a notification and thereafter a new notification is issued imposing levy at the reduced rate. In support of this practice he drew our attention to the case of cosmetics. In the said case in the notification No.666 dated 25-6-1981 cosmetics were exempted from duty but when it was proposed to impose some duty thereon notification No.579 (1)/ 83 dated 11-6-1983 was issued whereby the entry relating to cosmetics in the notification No.666 dated 25-6-1981 was omitted and by a subsequent notification No.580 (1)/83 issued on 11-6-1983 the duty of 7.5 % was levied thereon. No such procedure was adopted in the case of machine made carpets. On the other hand, although carpets were admittedly included in the expression "Fabrics of man made fibre" which were exempted from sale tax by virtue of item No.38 in the notification No.666/81 but this item has not been deleted and is still intact in the notification No. 579 dated 11-6-1983; therefore, despite the issuance of notification No.580 (1)/83 whereby machine made carpets have been made leviable to duty at the rate of 5% the exemption already allowed under notification No.666 of 1981 will continue to rule the field and has not ceased to be operative. The case is one of first impression. We would, accordingly, grant leave to appeal. Security shall be furnished in the sum of Rs.2,

500. The appeal shall be made ready on the present record with permission to the parties to add additional documents, if any. The learned counsel for the petitioner prays for a stay order. This is vehemently opposed by Malik Abdul Qayyum, Deputy Attorney General of Pakistan. We consider that the best course to be followed is that instead of issuing any interim order in this case the appeal itself should be heard at a very early date. Let the appeal be fixed for hearing in the month of November, 1987. S.Q./B-16/S Leave granted.