2000 PLP 3715 (PTD)

WAHID BUX BROHI, J.

This order shall dispose of Constitutional Petitions Nos. D-788 of 1994 and D-789 of 1994.

2. The petitioner M/s. Dadex Eternit Limited is a public limited company and is engaged in the business of manufacture and sale of asbestos cement and PVC pipes. The petitioner has been registered under section 14 of the Sales Tax Act, 1990, and the registration is being renewed annually. The petitioner has been complying with provision of Sales Tax Act, 1990, herein below referred to as Act, and paying sales tax according to law, and submitting monthly reports duly since `promulgation of the Act. On 10-7-1993 the Chairman Central Board of Revenue issued a letter addressed to all the Collectors of Central Excise and Sales Tax giving a ruling that some manufacturers were claiming adjustment of input tax paid on the material which were not used directly in the preparation of taxable supplies and that they were claiming adjustment of input tax on parts and accessories acquired as replacement parts of plant and machinery and other items. He directed the functionaries not to allow adjustment and secondly to institute recovery cases where adjustment had been allowed in the past. This circular letter was entirely contrary to and. ultra vires the statute inasmuch as there was no such embargo on the claim and adjustment or materials which were not used directly in the preparation of taxable supplies or goods other than those mentioned in SRO No.1111(I)/90, dated 1-11-1990. Subsequently the respondent No1 changed the negative list of goods under section 8 of the Sales Tax Act, 1990, vide SRO No.1053(I)/93, dated 30-10-1993. Under this notification, the earlier. notification No. SRO 1111(1)/90, dated 1-11-1990 was superseded and in place of the five items on which input tax could n6t be claimed earlier all goods acquired otherwise than as "stock-in- trade" by a registered person were substituted. In effect, the scope of negative goods was enlarged and instead of the five items viz. (i) vehicles, (ii) building materials, (iii) stationery, (iv) office equipment, furniture, fixtures, furnishing and (v) electrical goods and gas appliances, a general negative prescription was brought in the form of "goods which are acquired otherwise than a stock-in-trade". According to petitioner the respondent No. 1 vide its Letter C. No. 1(4) GST-1/93, dated 1-11-1993 defined the said term as "goods and commodities which are purchased for sale or for conversion into finished products". On the basis of the. impugned letter, dated 10-7-1993, the respondent No.2 issued a show-cause notice, dated 19-2-1994 calling upon the petitioner to show cause, why the input tax amounting to Rs.1,420,697 for the period 4-7-1993 to 30-1-1993 adjusted on spare parts should not be recovered from the petitioner under section 36 of the Sales Tax Act, 1990 and as to why the petitioner should not be punished under section 33(i)(d) of the Act.

3. It is the case of - petitioner that the said show-cause notice under section 33(1)(d) is void, ab initio and illegal being ultra vires the statutes and without jurisdiction/lawful authority. It was pleaded that impugned letter, dated 10-7-1993 and S. R. O. 1111(1)%90, dated 1-11-1990 have been superseded by the impugned letter, dated 10-7-1993 and the S.R.O. 1111(1)/90, dated 1-11-1990 have been. superseded by S.R.O. 1053(1)/93, dated 30-10-1993.

4. Accordingly the petitioner filed these Constitutional, petitions seeking the following relief:

(a) Quash impugned show-cause notice, dated 19-2-1994. (b) Declare that the petitioner was entitled and had correctly claimed the adjustment of input tax; (c) Declare that the demand of Rs.1,420;697 raised in the impugned notice is not recoverable from the petitioner under section 36; (d) Restrain the respondent No. 2 from passing any order under section 36 and from recovering tile impugned demand of Rs.1,420,697 or any additional tax and surcharge thereon; (e) Give any other relief this Honourable Court may deem fit and property (f) Award costs of the petition to the petitioner. (a) quash the impugned show-cause notice and orders passed by the respondents Nos.2 and 4; (b) declare that the petitioner was entitled and had correctly claimed the adjustment of input tax; (c) declare that the demand of Rs.5,863,565 raised in the impugned notice and orders passed by the respondents Nos.2 and 4 are not recoverable from the petitioner under section 36; (d) quash the order passed by respondents Nos.2 and 4 under section 36 and declare that recovery of the impugned demand of Rs.2,154,083 of any additional tax and surcharge at Rs.3,709,482 thereon as illegal and without jurisdiction; (e) give any other relief this Honourable Court may deem fit and proper; (f) award costs of the petition to the petitioner. 5: We have heard Mr. Sirajul Haq learned counsel for petitioner and Ch. Muhammad lqbal learned counsel for respondent. Both learned counsel were unanimous on the point that the proposition of law involved in the instant petitions has substantively been decided by the Honourable Supreme Court in Civil Appeal No.929 of 1995 reported as 1999 PTD 1892 Attock Cement Pakistan Ltd. v. Collector of Customs.

6. It would be significant to mention that the question with regard to accessories and spare parts was decided by the Honourable Supreme Court in the cited case making following observation: "The crucial question arising for determination is whether the accessories and parts, which are required by the appellant for efficient and smooth running of its plaint or. its upkeep and maintenance fall within the definition of goods or can they be treated as acquisition of plant and machinery. The answer to this question is very simple. Under the notification referred to above, parts and accessories are not included. Even otherwise, by no stretch of imagination, the accessories or spare parts for the running and maintenance of the plant can be equated with the acquisition of machinery and plant. Such accessories and spare parts are imported under a bill of entry, which is cleared by the Customs Department under section 79 or machinery itself but being spare parts, under section 7(2)(ii) of the Act the appellants are entitled to deduct the input tax 'from the output tax. However, as already discussed above, such deduction is not permissible under section 8 if the Federal Government under a notification includes the accessories and spare parts in the goods within the meaning of section 8(1)(b) of the Act."

7. Regarding the term "Stock-in-trade" Honourable Supreme Court referred to different dictionaries and held that in the absence of technical definition of this term by the Legislature in the Act or the Rules framed thereunder, one has to resort to the dictionary meaning referred to above, the accessories and spare parts for the maintenance and running of a plant cannot be termed as stock-in-trade. On the other hand plant and machinery would be construed as stock-.in-trade. Finally the Honourable Supreme Court has held as under;-- "Having come to the conclusion that the accessories and spare parts having not been included by the Federal Government under section 8(2) of the Act, the appellant was entitled to claim adjustment of the input tax and therefore, the impugned show-cause notice issued to the appellant is without lawful authority and jurisdiction. Resultantly, this appeal is allowed and the impugned show-cause notice is 'hereby declared .to have been issued without lawful authority and jurisdiction. The costs to be borne out by the parties.

8. The decision of the Honourable Supreme Court fully applies to the controversy involved in the instant petitions, therefore, learned counsel for the parties conceded that these petitions may also be disposed of in the same terms. Consequently, both these Constitutional petitions were allowed with no order as to costs by a short order on 30-11-1999; these are the reasons for the same. Q.M.H./M.A.K./D-5/K Petitions allowed.