2000 PLP 399 (PTD)

3. Scone 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 fifteen 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. (1-A) 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 three percent. of the value in addition to the rate specified in subsection (1), clause (c) of subsection (2) and subsections (4) and (5): Provided that the aforesaid one percent. 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) by any registered person to a person whose income is not liable to tax under the Income Tax Ordinance, 1979 (XXXI of 1979) but has deducted income-tax at source under subsection (4) of section 50 of the said Ordinance. (2) (a) .................. (b) .. (c) taxable supplies specified in the 3rd Schedule shall be charged to tax at the rate of 15 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, over a label, as the case may be; (d) ............ (e) ............ (3) The liability to pay the tax shall be

(a) in the case of supply of goods in Pakistan, of the person making the supply, and (b)-in the case of goods imported into Pakistan, of the person importing the goods. (4) (5) ............................................ However, sub-section (3-A) was added to section 3 by the Finance Act, 1998 which is in the following terms:

(3-A) Notwithstanding anything contained in clause (a) of subsection (3), the Federal Government may, by a Notification in the official Gazette, specify the goods in respect of which the liability to pay tax shall be of the person receiving the supply.

6. Comparing the two provisions it becomes obvious that the liability to apply sales tax is that of a person making taxable supplies subject to the exception that if the Federal Government issued Notification under subsection (3A) of section 3 notifying certain goods with regard to which the recipients has been made liable to pay the tax, then the person receiving the supply would have to pay the same. In the present case, it is not disputed by the learned counsel for the respondents that no Notification in terms of subsection (3-A) of section 3 has been promulgated as yet by the Federal Government. His contention that Notification No. SRO 1271(1)/96, dated 10-11-1996 notifying the Special Procedure for Ginning Industry Rules, 1996 should be construed as a Notification under subsection (3-A) is wholly unfounded, inasmuch as, on the date when the Notification was issued there was no subsection (3-A) on the Statute Book which was introduced by the amendment made by the Finance Act. 1998. That being so, at no principle of law, can it be treated as a Notification issued under subsection (3-A) of the Sales Tax Act, 1990. Furthermore, subsection (3-A) is prospective in nature and requires the Federal Government to specify the goods in respect of which the liability to pay sales tax shall be the persons receiving the supplies. The Special Procedure for Ginning Industry Rules, 1996 only lay down the procedure for collection of sales tax and have been framed in the exercise of powers under section 71 of the Sales Tax Act, 1990, as the Notification itself recites and as such this Notification is of no avail to the respondents as it cannot be treated to be a Notification in terms of subsection (3-A) of section 3 of the Act.

7. Even if the contention of Mr. A. Karim Malik is accepted and the Notification promulgating the Rules is treated as being a Notification under subsection (3-A) of the Sales Tax Act, 1990, it would not improve the position of the respondents much, inasmuch as the dispute between the parties relates to financial years 1996-97, 1997-98 and 1998-99. Subsection (3-A) was introduced by the Finance Act, 1998 and as such it would have no applicability so far as two years i.e. 1996-97 and 1997-98 are concerned.

8. Section 3 of the Sales Tax Act, 1990 has already been reproduced above. It clearly provides that the liability to pay the tax shall be, in case of supply of goods in Pakistan, of the person making supply, while rules 5 and 6 of the Special Procedure for Ginning Industries Rules, 1996 require the spinning unit which receives taxable supplies from the ginner to pay the sales tax. Rules 5 and 6 of the aforesaid Rules are clearly in conflict with the parent Act and must yield to the same. It needs no authority to point out that in case the Rules are in conflict with the Act, the former must, yield to the latter and the rules would, to the extent of inconsistency, be void. The inconsistency between subsection (3-A) of section 3 and the Special Procedure for Ginning Industries Rules, 1996 is self-evident and obvious and the two cannot stand together. In view of what has been said above, both these petitions are allowed and Rules 5 and 6 of the Special Procedure for Ginning Industries Rules, 1996 are declared to be ultra vires the Sales Tax At, 1990 and, therefore, of no legal effect. There shall be no order as to costs. Q.M.H./M.A.K./S-462/L Petitions allowed.