2001 PLP 2636 (PTD)

(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) Notwithstanding the provisions of subsection (1). (a) ......... (b) ........... (c) taxable supplies specified in the Third Schedule shall be charged to tax at the rate of (fifteen) per cent. 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: (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. " The respondents contended before the High Court in the writ petition that the goods sold by them were covered under section 3(2)(c) of the Act and as such the same was not subject to the payment of additional tax imposed by virtue of section 3(1‑A) of the Act. The contention of the respondent was accepted by the High Court as follows:‑‑‑ "(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 per cent 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 per cent is not addition to the rate specified in subsection (1), This the further tax of one per cent 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 sub section (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), anti subsections (4) and (5)" was substituted, thus subjecting the taxable supplies under section 3(2) of 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 petitioners regarding non‑issuance of show‑cause notice and incompetency of respondent No.3 to determine the petitioners' 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." The above reasoning given by the learned Judges of the High Court, in our view, does not suffer from any infirmity. It is quite clear that the sales tax is levaible at the rate of 12.50 per cent both under section 3(1) as well as section 3(2) of the Act. It is not disputed before us that the aerated water manufactured by the respondents is mentioned in the 3rd Schedule to the Act. The learned Judges, of the High Court rightly came to the conclusion that the rationale behind levy of sales tax under clauses (1) and (2)(c) of section 3 of the Act is different. A plain reading of the above section will show that under section 3(1) of the Act the tax at the rate of 12.50 per cent is recoverable on the taxable supplies by a registered person while the sales tax is recoverable under clause (c) of, subsection (2) of section 3 of the Act at the same rate on the retail price of the product which is to be prominently, legibly and indelibly printed or embossed by the Manufacturer on each packet, container, package, cover or label of the goods. It is, therefore, quite clear that the sales tax under subsection (2)(c) .of section 3 ibid, is not payable on the basis of taxable supp)jes but on the retail price while under section 3(1) the sales tax at the same rate of 12.50 per cent is recoverable on the taxable supply. Subsection (1‑A) which was added in section 3 after subsection (1), makes an additional tax payable at the rate of one per cent of the value on the taxable supplies in addition to the tax payable under subsection (1) in respect of all supplies made in Pakistan to a person other than a registered person. It may also be mentioned here that through Finance Act IV of 1999 subsection (1‑A) of the Act has been further amended as follows:‑‑ "(1) in subsection (1‑A).‑‑ (a) for the word 'one', where occurring the word "three' shall be substituted; and (b) for the expression "subsection (1)". the expression 'subsection (1), clause (c) of subsection (2), and subsections (4) and (5)' shall be substituted; and" The above amendment introduced in subsection (I‑A) of the Act supports the conclusion that the cases falling under clause (c) of subsection (2) were not previously within the mischief of subsection (I‑A) of the Act. We are, therefore, of the view that the conclusion reached by the learned Judges of the High Court does not suffer from any legal infirmity. No case for interference with the judgment of the High Court is made out. The petition is, accordingly, dismissed and leave is refused. Q.M.H./M.A.K./A‑146/SC Petition dismissed.