Sales Tax Instructions

Sales Tax Instructions, 2009
IN THE LAHORE HIGH COURT MULTAN BENCH MULTAN
JUDICIAL DEPARTMENT
W.P No. 25915 of 1998
JUDGEMENT
OF HEARING 14.9.1999, 15.9.1999 AND 16.9.1999 .
APPELLANT BY (M/s Riaz bottlers (Pvt) Ltd) By Mr. Ali Sibtain Fazli, Advocate
RESPONDENT BY (Federation of Pakistan) By Kh. Saeed-uz-Zafar, DAG
No2 to 4 (C.B.Reve.) By Mr. A. Karim Malik, Advocate
NASIM SIKANDAR, J.- This judgement will dispose of Writ Petitions No. 25915 and
19045 of 1998, 803, 2076, 5313, 7776, 12312, 12313, 12405, 12867, 13520, 13521, 13841, 14425,
14426, 14439, 14609, 14619, 14655, 14656, 14657, 14804, 14805, 14806, 14807, 14808, 14809,
14810, 14812, 14813, 14887, 14888, 14889, 14961, 14962, 14963, 14971, 14972, 14973, 15035,
15048, 15049, 15050, 15071, 15072, 15073, 15074, 15085, 15114, 15179, 15180, 15220, 15240,
15497, 15498, 15675, 15747, 15911 and 15988 of 1999
2. The Sales Tax Act, 1990 was amended by Finance Act, 1998, inter ali, to add sub-section
(1-A) to section 3 which after the amendment read:-
1-A) Where taxable supplies are made in Pakistan to a person other than a registered
person there shall be charged, levied and paid a further tax at the rate of one
percent of the value in addition to the rate specified in sub-section (1).
Provided that the aforesaid one percent further tax shall not be charged, levied
and paid if the said taxable supplies are made:-
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 sub-section (4) of section 50 of the said Ordinance.‖
3. In the immediate next year by Finance Act, 1999 the above-mentioned sub-section was
further amended to enhance the rate from one percent to 3 percent and to include a reference to
clause (c) of sub-section (2) and sub-sections (4) and (5) of section 3 of the Act. Accordingly the
first part of the newly inserted sub-section now reads as under:-
1-A)
Where taxable supplies are made in Pakistan to a person other than a registered
person there shall be charged levied and paid a further tax at the rate of three
percent of the value in addition to the rate specified in sub-section (1), clause (c)
of sub-section (2) and sub-sections (4) and (5);
4. The petitioners are producers of sugar, bottlers of soft drinks, and manufacture of iron
and steel of different kinds. Only one petitoner in Writ Petition No.15114/98 is manufacturer of
Polythene items of different kinds. They have challenged the vires of the above provisions both
distinctively as well as when read with other provisions of the Act. Their various objections being
that amendment is against the basic scheme of the Sales Tax Act in as much as the above levy of
1% in 1998 and 3% in 1999 has nothing to do with sale or supply; that the levy in the garb of
sales tax is actually a penalty for non-registration which falls outside the domain of Federal
Legislative List particularly entry No.49; that levy of said additional tax will result in a strange
economic anomaly as the product of one producer/importer will have two prices i.e. one for
registered persons and other for un-registered person. Accordingly to them in such situation there
would be a supply of the same product at two different prices. Further that under section 13 of the
Sales Tax Act the supply or import of goods mentioned in 6 th Schedule are exempt from levy of
sales tax but the additional levy when seen in the light of definition of ―tax‖ as contained in