1988 PLP 421 (PTD)

(i) That subsection (3) of section 7 of the Act is not attracted to. (ii) That no representation was in fact made by the C.B.R. to the petitioners immediately preceding to the performance of the contracts and, therefore, the respondents are not estopped from demanding the sales tax which was due and payable at the time of supply of the goods in terms of section 3(1) and 3(4)(a)(i) of the Act. (4) The basic question in the instant case is that, as to whether the above letter of the C.B.R., dated 14th April, 1971 can be treated as an exemption in terms of subsection (3) of section 7 of the Act. In this behalf it may be pertinent to reproduce the contents of the above letter which reads as follows:- "Government of Pakistan Central Board of Revenue. C. No.9(22)-ST/71 Islamabad the 14th April. 1971. From: Z.H. Qutubuddin, Second Secretary, Central Board of Revenue, Islamabad. To Superintendent/Purchases, Pakistan Ordnance Factories, Wah Cantonment. Subject:- SALES TAX EXCISE DUTY ON AMMO CONTAINERS. I am directed to refer to your letter No.POF/B/24/Purchase-4, dated 3-4-1971 addressed to the Sales Tax Officer, Factory Circle, Rawalpindi with copy endorsed to the Board on the above subject. Steel boxes used for packing of ammunition are exempt from sales tax. Moreover, products of iron foundries and steam and hammer works are exempt from sales tax. If the trays referred to by you are a product of steam and hammer works, they will be exempt, otherwise not, (Sd.) 14-4-1971 (Z.H. Qutubuddin) PTS, Second Secretary." Reference may also be made to subsection (3) of section 7 of the Act, which provides that the Board may, by special order in each case, exempt from the payment of the whole or any part of the tax, under circumstances of an exceptional nature to be stated in such order, any goods on which the tax is leviable.

5. Mr. Rasheed A. Akhund has emphasised on the factum that in order to press into service the above subsection (3) of section 7 of the Act, the two ingredients must be fulfilled i.e. (i) that the exemption should be granted separately in each case and (ii) that the Board should state the circumstances of exceptional nature. It has been vehemently urged by him that in the instant case the above two ingredients are missing. On the other hand Mr. Shaikh Abdul Aziz, learned counsel for the petitioners, has submitted that the above requirements are fulfilled in the present case inasmuch as in the above-quoted letter it has been stated expressly that the exemption from the payment of sales tax is available in relation to steel boxes used for packing ammunition. It has been further submitted by him that this is in fact covered by words 'each case' used in subsection (3) of section 7 of the Act and the circumstance of the exceptional nature has also been disclosed in the above letter, namely, used for the purpose of packing the ammunition by respondent No.3 which admittedly manufactures ammunition for the defence of the country.

6. In this regard it may again be observed that the Federal Government has by the above second S.R.O., dated 23-9-1985 exempted the steel ammunition containers from the payment of the sales tax retrospectively with effect from the first notification of 25th June, 1981. It is evident that the Federal Government was anxious not to burden the steel ammunition containers with the levy of sales tax apparently for the reason that the same are required for the defence of the country. The effect of the above notification is that the petitioners' two contractors which represent major portion of the goods, in respect of which goods were supplied after 26-6-1981, no sales-tax was payable. There remains dispute in respect of the other two contracts, which were performed prior to the above date.

7. We are inclined to hold that two views of the contents are possible of the above-quoted letter, one, which has been canvassed by Mr. Rasheed A. Akhund learned counsel for the respondents and the other, which has been urged by the learned counsel for the petitioners, Mr. Shaikh Abdul Aziz. Keeping in view the factum that the petitioners have acted in good faith on the representation of respondent No.3 (which is a Government functionary entrusted with the work of national importance of manufacturing arms and ammunition for the defence of the country), and have supplied the goods to them without charging them any sales tax though under clause 4 of the contracts they were liable to pay, we would prefer the contention urged by the learned counsel for the petitioners and hold that the above letter, dated 14th April, 1971 constitutes an exemption in terms of subsection (3) of section 7 of the Act and, therefore, the impugned demand and the recovery were illegal. It may also be observed that in a fiscal matter if two views are succeptible, one which saddles subjects with the liability and the other, which releases them from such liability, the latter is to be preferred over the former.

9. For the aforesaid reasons we allow the petition and declare the impugned demand and recovery as being without lawful authority and of no legal effect. We would also direct respondent No.l to refund the aforesaid amount illegally recovered from the petitioners. However, there will be no order as to costs. M.B.A./J-41/ K Petition allowed.