PLJ 2010 Tax Cases (Lah.) 23
Present: Sh. Azmat Saeed, J.
M/s GAS LINKS C.N.G. PVT. (LTD.)
FAISALABAD
through its Director and others--Petitioners
versus
FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and
others--Respondents
W.P. No. 3018 of 2009, decided on 6.11.2009.
Sales Tax Act, 1990 (VII of 1990)--
----Ss. 71 & 3(1)--Constitution of Pakistan, 1973,
Art. 199--Levy and collection of sales tax--Liability of--Business of running
CNG stations--Special procedure had been formulated pertaining to collection
and payment of on natural gas and electric power, called Special Procedure
Rules, 2007--Common questions of law and facts--Petitioners not only have a
connection for supply of natural gas, but also consume electric power supplied
by distributions companies--Tax on supply of electric power is unreasonable and
arbitrary and in violation of fundamental rights of the
petitioners--Validity--Neither vires of Sales Tax Act, 1990 nor any provision
had been challenged--Petitioners had challenged the levy and collection of
sales tax on electric power supplied to CNG station by distribution companies
inter alia on the ground that sales tax on supply of natural gas constitutes a
final discharge of liability of CNG station under Sales Tax Act, and therefore,
the levy and collection of sales tax on the bill for electric power consumed by
CNG stations amount to double taxation--It is not disputed between
parties--Federal Government in view of Section 71 of the Sales Tax Act, is
vested the authority and jurisdiction to prescribe a special
procedure--Petitions were dismissed. [Pp.
27 & 28] A & B
Sales Tax Act, 1990 (VII of 1990)--
----S. 7-A--Levy of sales tax of 9%--Supply of natural
gas by transmission and distribution companies to CNG stations--Collection of
charge is ultra vires of Sales Tax Act--Question is levy of charge and
collection of sales tax on electric power supply--Double
taxation--Validity--Levy of sales tax of 9% in lieu of value addition is in
consonance with Section 7-A of Sales Tax Act and power had been invoked while
issuing notification while making Special Procedure Rules, 2007--Levy and
collection of sales tax at rate of 9% has not been challenged through these
writ petitions, nor it is the case of the petitioners that the charge is ultra
vires of Sales Tax Act, otherwise illegal--Question is the levy of charge and
collection of sales tax on electric power supply to the petitioners by
distribution companies--Held: Levy of sales tax on electric power amounts to
double taxation in view of levy of 9% tax on supply of natural gas in lieu of
value addition by CNG station. [Pp. 29
& 30] C & D
Sales Tax Special Procedures Rules, 1990--
----R. 20--Sales Tax Act, 1990, S. 7-A--Constitution of Pakistan, 1973,
Art. 199--Business of running CNG stations--Special procedure has been
formulated pertaining to collection and payment of on natural gas and electric
power--Collection and payment of sales tax on electric power--Illegality in
levy of collection of sales tax on electric power supplied to CNG
stations--Entitlement of claim refund of input tax--Validity--Such levy is
valid and 9% is being charged and collected on account of value addition by CNG
stations--No tax is being charged or collected on the supplies made by CNG
stations to their customers in lieu whereof 9% sales tax is charged and
collected by gas transmission companies--Where the supplies are converted into
another taxable supply, the same are liable to collection of sales tax--In such
an eventuality, in order to avoid duplication of the tax burden upon the
ultimate consumer, the sales tax already paid by recipient of supplies is
liable to be adjusted against the sales tax payable on the converted further
taxable supply. [P. 30] E & D
PTCL 2002 Cl. 115, ref.
Sales Tax Special Procedure Rules, 2007--
----Chapter III--Collection and payment of sales tax on
electric power--Providing of electric power to petitioners was an independent
supply subject to levy and collection of sales tax--Validity--Charge and
collection of sales tax on the supply of electric power is in consonance with
letter, spirit, scheme and structure of Sales Tax Act, 1990--No law or the
principle of law had been cited which is offended thereby--Petitioners are the
ultimate consumers of electric power they must bear the incidence of sales tax. [P. 30] G
Sales Tax Special Procedure Rules, 1990--
----Rs. 13 & 6--Sales Tax Act, 1990, Ss. 7, 8 &
8-B--Business of running CNG stations--Levy of collection of sales tax on
electric power supplied to CNG stations--Whether the petitioners are entitled
to claim refund of input tax--Premature and misconceived--Legality--Counsels
for petitioners had been unable to point out any illegality in levy of
collection of sales tax on electric power supplied to CNG stations--As to
whether the petitioners are entitled to claim refund of input tax in respect
thereto is a matter not only alien to lis at hand having not been specifically
asserted, but also premature as no such claim for adjustment or refund of the
tax has been made by petitioners and declined by the department--Petitions
appears to be premature and misconceived and are accordingly dismissed with
direction that if and when any claim for refund or adjustment of input tax is
made by petitioner in terms of Rule 17 of Sales Tax Special Procedure Rules,
1990 an order was passed and petitioners might seek their remedy available
under law. [P. 31] H
Ch. Anwar-ul-Haq, Mr. Aamir Sohail, Mr. Khalid Nawaz
Ghuman, Mr. Majid Saeed Butt, Rana Muhammad Afzal, Mr. Muhammad Saqib Sheikh,
Mr. Bilal Ahmed Qazi, Syed Ali Imran Rizvi, Mr. Muhammad Nadeem Mirza, Mr.
Muhammad Akram Nizami, Mr. Zehsan Amir, Mr. Ajmal Khan, Mr. Zulkernen Khan, Mr.
Muhammad Saleem Ch., Ch. Liaqat Ali Sandhu, Rana Muhammad Abdul Qadoos, Mr.
Abdul Qadoos Mugal, Mr. Muhammad Waseem Ch. and Mr. Sajjad Sarwar Saqib,
Advocates for Petitioners.
Sh. Izhar-ul-Haq, Advocate, Ms. Kausar Perveen & Dr.
Irteza Awan, Advocate for Respondents.
Date of hearing: 29.10.2009.
Judgment
Writ Petitions 12730-2009 KW CNG vs. Federation of Pakistan,
12729-2009 Al-Karam CNG vs. Federation of Pakistan, 2954-2009 National CNG
Service vs. Federation of Pakistan, 6778-2009 Al-Jehad Filling Station vs.
Federation of Pakistan, 6775-2009 Al-Hasan CNG vs. Federation of Pakistan,
4775-2009 Khalid Petroleum vs. Federation of Pakistan, 4774-2009 New Zealand
CNG Master (Pvt.) Ltd. vs. Federation of Pakistan, 4772-2009 New Zealand CNG
Master (Pvt.) Ltd. vs. Federation of Pakistan, 4771-2009 Kashif CNG &
Filling Station vs. Federation of Pakistan, 16125-2009 Kashmir CNG Station vs.
Federation of Pakistan, 19676-2009 Talha Saad CNG vs. Federation of Pakistan,
9811-2009 Haidar Petroleum vs. Federation of Pakistan, 9810-2009 Brite Way CNG
vs. Federation of Pakistan, 14686-2009 Huk Fuel I vs. Federation of Pakistan,
14575-2009 Shah Nawaz CNG Station vs. Federation of Pakistan, 14589-2009 Din
Petroleum Service vs. Federation of Pakistan, 12732-2009 Mehar Petroleum CNG
vs. Federation of Pakistan, 12731-2009 Tri Star CNG vs. Federation of Pakistan,
3020-2009 Fuel Care CNG vs. Federation of Pakistan, 2956-2009 Sadiq & Sons
Associate vs. Federation of Pakistan, 2955-2009 PSJ CNG Station vs. Federation
of Pakistan, 2953-2009 Mian Petroleum vs. Federation of Pakistan, 20527-2009
Khokhar Filling Station vs. Federation of Pakistan, 2764-2009 Zaman Petroleum
vs. Federation of Pakistan, 18438-2009 M/s. Khawaja CNG Station vs. Federation
of Pakistan, 17986-2009 M/s. KSK CNG vs. Federation of Pakistan, 17989-2009
M/s. Citi CNG Filling Station vs. Federation of Pakistan, 17991-2009 Bismilla
CNG Filling Station vs. Federation of Pakistan, 17995-2009 M/s. Gasoline (Pvt.)
Ltd. vs. Federation of Pakistan, 17994-2009 M/s. Ravi Point Filling Station vs.
Federation of Pakistan, 18441-2009 M/s. Gazcon CNG Station vs. Federation of
Pakistan, 17985-2009 M/s. Gasline CNG Station vs. Federation of Pakistan,
17997-2009 M/s. Ahmed CNG Station vs. Federation of Pakistan, 20513-2009 M/s.
CNG Master Pvt Ltd. vs. Federation of Pakistan, 20514-2009 M/s. Mango Garden
CNG Station vs. Federation of Pakistan, 20515-2009 M/s. Khan Filling Station
vs. Federation of Pakistan, 20514-2009 Thokar CNG Station vs. Federation of
Pakistan, 11081-2009 M/s. Gas Point CNG Station vs. Federal Board of Revenue
etc., 10959-2009 M/s. Nawals CNG vs. Federal Board of Revenue etc., 9860-2009
M/s. Superstar CNG Station vs. Federal Board of Revenue etc., 6160-2009 M/s.
Madina CNG Filling Station vs. Federation of Pakistan, 1315-2009 Qadir CNG
Station vs. Federation of Pakistan, 14572-2009 Anmol CNG Filling Station vs.
Federation of Pakistan, 14565-2009 Almadina CNG Filling Station vs. Federation
of Pakistan, 14563-2009 National CNG Filling Station vs. Federation of
Pakistan, 14571-2009 Zia-e-Madina CNG Filling Station vs. Federation of
Pakistan, 9563-2009 Mian CNG Filling Station vs. Federation of Pakistan,
1712-2009 Glaxy Filling Station vs. FBR, 13932-2009 Nur Sons CNG Filling vs.
Federal Board of Revenue, 20743-2009 Mian Muhammad Amin vs. Federation of
Pakistan, 2549-2009 Surriya Bibi C/O Prime CNG vs. Federal Board of Revenue,
19884-2009 M/s. Al-Bhai Petroleum Service vs. Federation of Pakistan, 7163-2009
Muhammad Aslam vs. Federation of Pakistan, 9571-2009 Amjad Hameed Sheikh vs.
Federation of Pakistan, 9640-2009 Fakhar CNG Station vs. Federation of
Pakistan, 3473 of 2008 (BWP) Al-Mezan CNG Filling Station vs. DG Regional
Income Tax Officer etc., 9499 of 2009 M/s. Millat Filling CNG Station vs.
Federation of Pakistan etc., 10356-2009 Iqra Filling Station vs. Federation of
Pakistan, 17269-2008 M/s. Kare CNG Filling Station vs. Federal Board of Revenue
etc., 9498-2009 M/s. Millat CNG Filling Station vs. Federation of Pakistan,
20777-2009 Bismilla CNG Filling Station vs. Federation of Pakistan, 15396-2009
M/s. Alkausar Traders vs. Chairman Federal Board of Revenue and 7821-2009 M/s.
Sunny Stars CNG Filling Station etc. vs. Federation of Pakistan filed by
various petitioners involving common questions of law and facts are being
disposed of through this order.
2. Petitioners in
the above captioned writ petitions claim to be duly registered under the Sales
Tax Act 1990, and are engaged in the business of running CNG Stations and some
of them also run petrol pump along with CNG stations. In the above context, the
petitioners not only have a connection for the supply of Natural Gas, but also
consume Electric Power supplied by various distributions companies who have
also been impleaded as respondents in these petitions. It is the case of the
petitioners that the Federal Government had issued a Notification dated
9.6.2007, whereby, in exercise of powers conferred inter alia under Section 71
of the Sales Act Tax 1990, a Special Procedure has been formulated pertaining
to the collection and payment of on Natural Gas and Electric Power, called
Special Procedure Rules 2007, and in terms of said special procedure rules, it
is contended that for the supply of Natural Gas to CNG Station, Sales Tax at
the rate of 25% of the value has been levied, out of which, 16% is chargeable
on the supply by the gas transmission companies in terms of sub-section (1) of
Section 3 of the Sales Tax Act and a further 9% in lieu of value addition made
by CNG Station.
3. In the above
perspective, the petitioners have challenged the levy and collection of the
Sales Tax on the Electric Power supplied to CNG Station by the Distribution
companies inter alia on the ground that the Sales Tax on supply of Natural Gas
constitutes a final discharge of the liability of the CNG Station under the
Sales Tax Act, and therefore, the levy and collection of Sales Tax on the bill
for the Electric Power consumed by CNG Station amounts to double taxation.
Great stress in this behalf was laid by the learned counsels for the
petitioners that Sales Tax being charged and collected by the gas transmission
company include 9% in lieu of value addition by the CNG Stations. It is next
contended that the said tax on the supply of Electric Power is unreasonable and
arbitrary and in violation of the fundamental rights of the petitioners.
4. Learned
counsels appearing on behalf of the Department have controverted the stance
being taken on behalf of the petitioners by contending that 9% of the Sale Tax
which has been levied on the supply of Natural Gas in lieu of value addition by
CNG Station, and no further tax on the supply of Natural Gas by CNG Station to
the consumer is being collected, hence, there is no question of double
taxation. It is added that the supply of Electric Power is a separate and
distinct taxable supply which is dealt with by the other provision of the
Special Procedure Rules pertaining to the supply of Electric Power. Learned
counsels have also placed on record, copy of the minutes of meeting dated
30.5.2007 held by the representative of the Department and All Pakistan CNG
Association to contend that 9% tax has been levied in lieu of value addition
with the consent of the members of the Association including the petitioners,
who are therefore estopped from challenging the same through the above
captioned writ petitions.
5. In rebuttal,
learned counsels representing the petitioners have urged at the bar that no
doubt different provisions have been enacted in the Special Procedure Rules for
the supply of the Electric Power, however, the Department is not permitting any
adjustment or refund of input tax with regard to the Sales Tax charged on the
Electric Power being supplied to the CNG Stations.
6. In response,
learned counsels for the Department have urged that these contentions were
neither pleaded by the petitioners in these petitions nor have they claimed any
refund or adjustment in this behalf from the department, hence, these
contentions are alien to the lis and cannot be adjudicated upon by this Court
while hearing the instant petitions.
7. Heard. Record
perused. At the very outset, it has been noticed that neither vires of the
Sales Tax Act 1990 nor any provision thereof has been challenged. It is a
matter of record that vide notification dated
9.6.2007, the Sales Tax Special Procedure Rules 2007 have been made and
enforced. It is not disputed between the parties that Federal Government in
view of Section 71 of the Sales Tax Act is, vested with the authority and
jurisdiction to prescribe a special procedure. It is not the case of the
petitioners that said rules are ultra vires Section 71 ibid. The aforesaid
Special Procedure Rules, inter alia, deal both with the Electric Power and the
collection and payment of Sales Tax on Natural Gas. Latter is governed by
Chapter IV of the Special Procedure Rules and the provision
in this behalf applicable to the present petitioners are as follows:
CHAPTER IV
SPECIAL PROCEDURE FOR COLLECTION AND PAYMENT OF SALES TAX
ON NATURAL GAS
19. Application:--The
provision of this chapter shall apply for collection and payment of on Natural
Gas including Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG)
Imported, produced, transmitted and supplied by gas-well head companies and gas
transmission and distribution companies licensed under the Natural Gas Rules,
1960, including their distributors, dealers, sales agents, retailers or by any
other person hereinafter called the "person" for the purposes of this
Chapter and dealing in importation, production or distribution and supply of
Natural Gas including Compressed Natural Gas and Liquefied Petroleum Gas.
20. Levy and
collection of Sales Tax :--(1) Every person who
supplies Natural Gas shall be liable to registration and shall charge and pay
Sales Tax at the rate specified in sub-section (1) of Section 3 of the Act.
(2) Sales Tax on
Natural Gas shall be levied and collection at the following stages and in the
following manners, namely:--
(a) .....................................................
(b) .....................................................
(c) In case of
supply of Natural Gas by transmission and distribution company, the person responsible
to charge, collect and deposit sales tax shall be the gas transmission and
distribution company and the value for the purpose of tax shall be the total
amount billed including price of Natural Gas, charges excluding the amount of
late payment surcharge rents, commissions and all duties and tax, local
Provincial and Federal, but excluding the amount of as provided in clause (46)
of Section 2 of the Act:
Provided that
in case of supply of Natural Gas to CNG Stations the gas transmission and distribution
company shall charge sales tax at the rate of twenty-five percent of the value
as aforesaid. This rate shall include sixteen percent as chargeable on supplies
of gas company under sub-section (1) of Section 3 and
nine percent in lieu of value addition made by CNG Stations:
Provided
further that CNG Station, if not already registered, shall obtain registration
under Chapter 1 of the Sales Tax Rules, 2006, and shall also file quarterly
return in the manner given in Rule 7; and].
8. Rule 20(2)(c) reproduced above pertains particularly to the supply of
Natural Gas by transmission and distribution companies to CNG Station, and the
first proviso thereto prescribes Sales Tax at the rate of 25% of the value
shall be charged which includes 16% is chargeable on the supply by gas
transmission companies in terms of Section 3 sub-section (1) of the Sales Tax
Act and 9% in lieu of value addition by the CNG Stations.
9. Levy of Sales
Tax of 9% in lieu of value addition is in consonance with Section 7A of the Sales
Tax Act, and power thereunder have been invoked while issuing notification
dated 9.6.2007 while making Special Procedure Rules 2007 as stated therein.
Levy and collection of the aforesaid Sales Tax at the rate of 9% has not been
challenged through these writ petitions, nor it is the case of the
petitioners that said
charge is ultra
vires of Sales
Tax Act, 1990
or otherwise illegal. In fact what has been called in question is the
levy of charge and collection of Sales Tax on the Electric Power Supply to the
petitioners by the Distribution Companies.
10. It has been
contended that levy of Sales Tax on Electric Power amounts to double taxation
in view of the levy of 9% tax on the supply of Natural Gas in lieu of value
addition by the CNG Station. Perusal of Rule 20 of the Sales Tax Act 1990
Special Procedure Rules and Section 7-A of the Act ibid makes it clear and
obvious that such levy is valid and 9% is being charged and collected on
account of value addition by CNG Stations. No tax is being charged or collected
on the supplies made by CNG Stations to their customers in lieu whereof 9%
Sales Tax is charged and collected by the gas transmission companies.
The contentions now being raised by the learned counsels
for petitioners must necessarily be examined in the context of the scheme and
structure of Sales Tax Act 1990 and the Rules framed thereunder. In pith and
substance, Sales Tax is a tax on consumption charged upon a taxable supply
collected by a registered person making the said supply as an agent and trustee
of the Federal Government. Where such taxable supplies are consumed, the burden
of tax falls upon the consumer. However, where the said
supplies are converted into another taxable supply, the same are liable to
collection of Sales Tax. However, in such an eventuality, in order to
avoid duplication of the tax burden upon the ultimate consumer, the Sales Tax
already paid by the recipient of the supplies is liable to be adjusted against
the Sale Tax payable on the converted further taxable supply. I am fortified in
this view by the dictum of law laid down by this Court in the case reported as
PTCL 2002 CL 115 M/s. Mayfair Spinning Mills Ltd. Lahore vs. Customs, Excise and Sales Tax
Appellate Tribunal Lahore and two others.
The collection and payment of Sales Tax on the Electric
Power is also dealt with and covered by Sales Tax Special Procedure Rule 2007
Chapter III. The providing of Electric Power to the petitioners is an
independent supply subject to levy and collection of Sales Tax. Viewed in the
perspective of the law, it is clear and obvious that the charge and collection
of Sales Tax on the supply of Electric Power is in consonance with the letter,
spirit, scheme and structure of Sales Tax Act, 1990. No law or the principle of
law has been cited which is offended thereby. To the extent that the
petitioners are the ultimate consumers of Electric Power, they must bear the
incidence of Sales Tax.
In fact the challenge thrown by the learned counsels for
the petitioners in this respect is a little out of focus. The only matter that
may arise would be as to whether the petitioners are entitled to claim the
adjustment or refund of said tax levied and collected on the supply of Electric
Power. Reference in this behalf is made to Rule 16 of the Sales Tax Special
Procedure Rules 1990 which reads as under:
CHAPTER III
SPECIAL PROCEDURE FOR COLLECTION AND
PAYMENT OF SALES TAX ON ELECTRIC POWER.
16. Input tax
adjustment for registered consumers:--(1) In case of registered consumers, the
Electric Power bill issued by Electric Power distribution company shall be
treated as a tax invoice as define in clause (4) of Section 2 of the Act.
(2) The registered
consumers shall be entitled to claim input tax adjustment against such invoice
after the bill has been paid, as per the provisions of Sections 7, 8 and 8 B of
the Act provided the bill contains registration number and address of the
business premises declared to the Collector by such consumer.
11. It is not the
case of the petitioners that at any point of time any claim in terms of Rule 16
was ever made and has been declined. No such allegation or assertion has been
made in any of the said petitions. Be that as it may, if and when any such
application is made, the same will obviously be subject to the provisions of
Sales Tax Act, 1990 more particularly Sections 7, 8 and 8B thereof, as has been
specifically mentioned in Rule 16, and in this behalf appropriate findings
would also be required to be returned as to whether the Electric Power or any part
thereof is used for the purpose of making a further taxable supply, if any, by
the petitioners. Such exercise cannot be conducted by this Court,
hence, this aspect of the matter cannot be adjudicated upon by this Court at
this stage.
12. For the foregoing
facts and reasons, learned counsels for the petitioners have been unable to
point out any illegality in the levy of collection of Sales Tax on the Electric
Power supplied to CNG Stations. As to whether the petitioners are entitled to
claim refund of input tax in respect thereto is a matter not only alien to the
lis at hand having not been specifically asserted, but also premature as no
such claim for adjustment or refund of the tax has been made by the petitioners
and declined by the Department. Consequently, these petitions appear to be
premature and misconceived and are accordingly dismissed with the direction
that if and when any claim for refund or adjustment of input tax is
made by the
petitioners in terms
of Rule 13
of the Sales Tax Special
Procedure Rules 1990 an order is passed thereon, and the petitioners may seek
their remedy available under the law.
(R.A.) Petition dismissed.
