Sales Tax Instructions

Sales Tax Instructions, 2009
MUNIR A. SHEIKH ―J‖- By this common judgment, we propose to decide the titled appeals
involving identical questions of law and facts.
2. Civil Appeals Nos. 1262/1999, 1293, 1294, 1296 and 1301 of 2001 by leave of
the court are directed against the judgments dated 8-4-1999, 1-3-2000, 12-4-2000 of the Lahore
High Court through which constitutional petitions filed by the respondents have been accepted
whereas Civil Appeal Nos.1866/1996 and 1288/2000 by leave of the court are directed against the
judgments dated 18-2-1999 and 30-5-1995 of the Peshawar High Court through which
constitutional petitions filed by the appellants in these appeals have been dismissed.
3. The question which arises for consideration in these appeals is whether the sales
tax payable form the date of receipt in advance of the amount of consideration for taxable supply
on the date of delivery of goods to the purchaser.
4. The facts giving rise to these appeals are that on 22-9-1994, the Directorate
General Intelligence and Investigation sought instruction from the Board of Revenue as to the
interpretation of section 2(30) of the Sales Tax Act, 1990 as to when sales tax under the said
provisions of the Act would become due in the case of Cement Industries when the advances were
received earlier and the goods were supplied subsequently. It was indicated in the said letter that
the Directorate Intelligence held the view that in the cases where the payment for certain supplies
are received in advance, the sale tax for such supplies should be paid to the Government by 20 th of
the following month. It was further stated that the Department had observed that the manufacturers
of cement though used to receive payment qua supplies well in advance of their actual delivery
who instead of making payments of the sales tax by 20 th of the month following thereof postponed
the same till actual delivery of the goods. It was pointed out that usually the supply of goods used
to be made 2-4 months after the receipt of advance payment, therefore, the manufacturers had
been wrongly retaining with them the amount of sales tax which had become due on the 20 th of the
succeeding month of the receipt of the advance payment i.e. the time fixed by the statute.
5. The Board of Revenue through letter dated 4-11-1994 informed that the matter
had been examined by it and it was of the view that language of section 2(30)(I) was quite clear
and devoid of any ambiguity. The payment of sales tax was to be made up to 20 th of the
succeeding month of the date of receipt of the advance payment and not from the date of actual
supply of the goods. The Directorate was, therefore, permitted to take action accordingly.
6. A show cause notice was issued to the manufacturers and subsequently an
assessment order was made under section 11 of the Act on 18-6-1995. The respondents feeling
aggrieved from the interpretation made by the Board of Revenue in its letter dated 14-11-1994
filed constitutional petitions seeking declaration that the same was without lawful authority and of
no legal effect with further prayer that the writ petitioners were liable to pay tax on the completed
transaction of sale and not when mere agreement of sale was made. Their case was that receipt of
any amount of consideration in advance did not bring into existence transaction of complete sale
but merely an agreement of sale which would become sale when properly in goods would pass to
the buyers.
7. The Lahore High Court in judgments impugned in Civil Appeal Nos.
1262/1999, 1293, 1924, 1296 and 1306 of 2001 was of the view that the sale tax was payable on
the incident of sale of goods as envisaged by the Sales of Goods Act under which no sale of any
goods could be completed till the stage the properly in goods sold had passed to the buyer and it is
with reference to the said date that the sales tax was payable on the 20 th of the succeeding month
thereof which would be the tax period, therefore, the interpretation made by the Board of Revenue