Sales Tax Instructions

Sales Tax Instructions, 2009
2. At the hearing of the petition, the learned counsel for the petitioner, Mr. Iftikharuddin
Riaz, Advocate, elaborated the grounds taken up in the writ petition and made submissions on the
logic of excluding from the one percent further tax manufacturer liable to pay sales tax on their
retail price under section 3(2) of the Act. The learned counsel pointed out that the express
inclusion of section 3(2)(c) of the Act in Section 3(1-A) by an amendment through the Finance Act,
1999 itself shows that prior to the amendment sales tax levied under section 3(2)(c) was not
subject to the one percent further tax.
3. Mr. K. G. Sabir, Barrister, for respondent No.3, i.e. Assistant Collector Sales Tax, raised
a preliminary objection submitting that the petitioner has not exhausted the statutory alternative
remedy of challenging the impugned sales tax before the appellate forums. Retailers was placed
upon Central Board of Revenue Vs. Sheikh Spinning Mills Limited (1999 SCMR 1442). As regards
the objection regarding adjudication by a non-authorized officer, the learned counsel argued that
the defect can be remedied and that in any case it is the liability to the further tax that has bee
questioned. As to interpretation of the relevant statutes, it was contended that the one percent
further tax cannot be confined to the tax leviable under section 3(1) as the object of the legislation
was to charge one percent further tax whenever taxable supplies are made to unregistered persons
as the later do not pay sales tax on further sale of the goods. To this an argument was advanced
by the learned counsel for the petitioner that since the petitioners pay sales tax on the retail price
on which the retailers sell the aerated waters the sales tax paid by the petitioner covers the sale by
the retailers as well as. As for the resorting to alternative statutory remedy, the learned counsel
for the petitioner pressed into service the judgment of the Supreme Court in Collector Customs Vs.
Playing Craft Limited PLD 1988 SC 104.]
4. The first question that requires determination is the maintainability of the writ petitioner
in view of the alternative statutory remedy available to the petitioner. It may be stated that there is
no controversy between the parties on facts. Respondent No.3 has determined that the petitioner is
liable to pay tax of one percent, which the petitioner question on the ground that respondent No.3
has misconstrued the relevant statutory provisions. The case, therefore, involves determination of
pure question of law. Thus the constitutional jurisdiction of this Court can be invoked. As regards
the judgment of the august Supreme Court in the case of CBR Vs. Sheikh Spinning Mills Limited,
ibid, the High Court, whose judgment and order was under challenge, has given a general
declaration regarding the legal effects of two notification without their being any denial by the
CBR or the other customs authorities of any claim made by the petitioner. The august Supreme
Court held that in the absence of any specified instance of denial by the Department to the
respondents to reclaim or deduct the imposed tax paid on goods it would have been appropriate to
have ask the respondents to approach the forum provided under the Act after providing guidelines.
In that case there was no determination of any tax and, therefore, the Supreme Court held that the
High Court should not have given a mere declaration. That is not the case here as respondent
No.3 has already determined the liability of the petitioner to pay a certain amount of tax.
5. For the purpose of determining as to whether the petitioner is liable to pay the one
percent further tax under section 3(1-A) it will be helpful to reproduce the relevant provisions of
Section 3 of the Act:-
(3) Scope of tax. – (1) Subject to the provisions of this Act, there shall be charged, levied and
paid a tax known as sales tax at the rate of twelve and a half percent of the value of:-
(a) taxable supplies made in Pakistan by a registered person in the course of furtherance of
any taxable activity carried on by him; and