2010 PLP 2403 (PTD)

UMAR ATA BANDIAL, J.

This order shall dispose of Writ Petition No. 4048-06, Writ Petition No.5234-07, Writ Petition No.4757-06 and Writ Petition No.1814-08, as these challenge the vires of the same impugned notifications.

2. The petitioners are manufacturers of export goods from Pakistan and aggrieved by the refusal of the respondent Collectorate, to grant refund of sales tax paid on inputs of the manufactured goods exported by the petitioners. Accordingly, these petitions challenge S.R.O. No.538(I)/05 dated 6-6-2005, S.R.O. No. 992(I)/2005 dated 21-9-2005 and S.R.O. No. 487(I)/2006 dated 26-5-2006 ("impugned S.R.Os.") whereby restrictions are placed on an exporting manufacturer's right to obtain refund of sales tax paid on inputs of its finished goods that are exported from the country. The right to recover refund of input sales tax is conferred by section 7 read with section 10 of the Sales Tax Act, 1990 ("Act"). The Act makes the right of refund subject to conditions that may be imposed by the Federal Government in exercise of is powers contained in sections 8 and 10 of the Act.

3. With effect from 6-6-2005 the Federal Government decided to make all inputs of export goods manufactured by the petitioners to be sales tax free and therefore no occasion arose for refund of sales tax on inputs of export goods purchased after the said date. This change of policy is reflected in S.R.O. 538(I)/2005 dated 6-6-2005 and was extended to the petitioners vide S.R.O. No. 621(I)/2005, dated 17-6-2005. However, for raw materials of export goods purchased on payment of input tax prior to 6-6-2005 the Federal Government directed that their corresponding finished goods must be exported by certain cut off dates in order for claim of refund of input tax paid on such raw material to be admissible. The three impugned S.R.Os. successively fixed that cut off date for export of finished goods as 30-6-2005, 30-9-2005 and 31-12-2005 respectively. By twice extending the cut off dates for exporting the finished goods, the Federal Government. recognized that the petitioners who are manufacturers of export goods needed further time to avail their statutory right to obtain refund of all input tax they had paid on the raw material of their exported goods. Accordingly, the governmental action to revise the cut off export dates affirms 'rather than rejects the petitioners' statutory right to receive the refund in question.

4. The only point in dispute about the impugned S.R.Os. is whether sufficient time has been granted by the Federal Government to the petitioners to export their goods manufactured with the inputs purchased by them prior to 6-6-2005 when S.R.O. 538(I)/2005 was issued. If time period granted is insufficient for the petitioners to manufacture their finished goods with the subject-matter inputs, then clearly a vested legal right of the petitioners to receive refund of input tax by sections 7 and 10 of the Act as also recognized by the Federal Government through the impugned notifications, stands infringed.

5. The petitioners before this Court were able to export all their finished goods made from inputs purchased before 6-6-2005 but not within the final deadlines fixed by the impugned S.R.Os. Consequently, their learned counsel submits that the time limitation imposed by the cut off date for export of finished goods is un-reasonable and that it defeats the vested right of the petitioners that is conferred by statute for refund of relief from input tax. In support of their challenge they submit that the impugned notifications operate retrospectively to curtail the petitioners' said vested right which is otherwise recognized in the impugned notification. They rely on Lt. Muquddus Haider v. Federal Public Service Commission (2008 SCMR 773) and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others (1992 SCMR 1652) to submit that executive action cannot be applied retrospectively to impair vested legal rights of citizen.

6. The Hon'ble Sindh High Court has in an identical challenge by its judgment dated 18-3-2009 passed in C.P. No.1684 of 2007 titled Great Sea Industry v. Collector of Sale Tax and others given the finding that input tax paid prior 6-6-2005 by manufacturers of exported goods like the petitioners, is liable to be refunded to such manufacturers as and when their finished goods are exported. To the mind of this Court the said finding given by the Hon'ble Sindh High Court is fair, just and in accordance with law. By imposing a time limit for exporting finished goods the impugned S.R.Os. are retrospectively curtailing a right to receive refund of sales tax paid on inputs prior to the date of issuance of the notification. Such enforcement of the impugned S.R.Os. on prior purchases is retrospective in effect. Accordingly, the restriction with respect to cut off date for export of finished goods imposed by the impugned S.R.Os. is illegal.

7. However, it is to be noted that the petitioners have a right of refund of input tax only in respect of those raw materials that were purchased before 6-6-2005 and were consumed in finished goods that were duly exported from the country. Consequently, the vested right recognized above is liable to enforcement if the petitioners satisfy the respondent authorities on both counts: namely, date of acquisition of raw materials as well as the factum of export of finished goods resulting from such raw materials. The F.B.R. has also through its direction, dated 13-1-2010 in deference to the above principle ordered the officers of the collectorates in the country to release of the instant refund claims, inter alia, made by the petitioners after scrutiny and audit. These petitions are accordingly allowed in the above said terms. H.B.T./C-8/L Order accordingly.