PAKISTAN READYMADE GARMENTSMANUFACTURERS AND EXPORTERS ASSOCIATION ("PRGMEA") VS GOVERNMENT OF PAKISTAN through Ministry of Finance, 2013 PTD-LAHORE-HIGH-COURT-LAHORE 1582 (2013)

(a) Sales Tax Act (VII of 1990)---

----Ss. 4 & 3---S.R.O. No. 14(1)/2013 dated 28-2-2013---General Clauses Act (X of 1897) S. 21---Constitution of Pakistan, Art. 199---Constitutional petition---Zero-rating---Competency of Federal Government to remove goods from list of zero-rated goods vide notification---Petitioners impugned the issuance of S.R.O. No.14(1)/2013 dated 28-2-2013 whereby previous zero-rating on textile products was enhanced to two percent---Contention of the petitioners was that S.4 of the Sales Tax Act, 1990 began with a non-obstante clause which had an overriding effect on the provisions of S. 3 of the Sales Tax Act, 1990, and therefore, the charging S. 3 of the Act was not applicable to the goods notified under S. 4(c) of the Act---On this basis, the petitioners submitted that the Federal Government had the power to include goods in the ambit of S. 4 of the Sales Tax Act, 1990 but did not have the power to remove the same once they were added to the list of goods that were zero-rated---Validity---Held, before the S.R.O. No. 14(1)/2013 dated 28-2-2013 was issued, a number of S. R. Os. had been issued whereby not only import and supply. of goods mentioned in Tables of said S. R. Os. were zero rated but also reduced rate of sales tax was introduced on the import and supply of goods; and the petitioners kept"enjoying said rates till the issuance of the impugned S.R.O.---Although S.R.O. No. 14(1)/2013 dated 28-2-2013 had not been introduced only under S. 4(c) of the Sales Tax Act, 1990, however, even if it were, then by virtue of S. 21 of the General Clauses Act, 1897 the Federal Government had the power to amend, vary or rescind orders, rules or bye-laws---Bare reading of S. 4(c) of the Sales Tax Act, 1990 revealed that rates mentioned in S. 3 of the Sales Tax Act, 1990 would not be applicable to goods mentioned in the notification issued by the Federal Government---Through the impugned S. R. O., only the earlier S.R.O. had introduced the rate of two percent instead of zero percent on the import and supply of goods mentioned in the Table given in the said S.R.O.s---Imp[gned S.R.O. had neither infringed or withdrawn any vested right of the petitioner and was to be applied prospectively and not retrospectively---Impugned S.R.O. was not only issued under S.4(c) of the Sales Tax Act, 1990 instead it was issued under Ss.4(c), 3(2)(b), 3(6), 8(1)(b) and S. 71 of the Sales Tax Act, 1990---S.R.O. No. 14(1)/2013 dated 28-2-2013 was therefore not ultra vices to the Sales Tax Act,,, 1990---Constitutional petition was dismissed in circumstances.

Messrs Tradecom Pakistan v. Deputy Collector Customs CFS Dry Port and another 2008 PTD 1482; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan 1997 PTD 1555; The Engineer -in-Chief Branch through Ministry of Defence Rawalpindi and another v. Jalaluddin PLD 1992 SC 207; Messrs Fazal Din and Sons (Pvt.) Ltd. v. Federal Board of Revenue Islamabad and others 2009 SCMR 973; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---"Aggrieved . person "---Scope---Under Art.199 of the Constitution, a Constitutional petition could only be filed by an aggrieved party---"Party" meant one who was competent to maintain an action---Constitutional petition could be filed a person, a number of persons, a corporate body or firm---Non-registered association had no locus standi to file a Constitutional petition,

Barrister Mian Belal for Petitioner. Muhammad Yaha Johar for Respondents. Date of haring: 20th May, 2013.

JUDGMENT

SHEZADA MAZHAR, J.---The petitioner in the present case is an association of manufacturers and exporters who are involved in manufacturing, supply and export of readymade garments. The petitioner claimed that they are being recognized by the government of Pakistan. The present writ petition is being filed in the representative capacity on behalf of the various manufacturers and exporters of readymade garments in Pakistan.

2. Although in the writ petition the petitioner had challenged two S.R.O's. i.e. S.R.O. No.154(I)/2013 dated 28-2-2013 and S.R.O. No.98(I)/2013 dated 14-02-2013 however at the very outset the petitioner counsel submits that he would like to confine his submissions to the extent of S.R.O. No.154(I)/2013 dated 28-2-2013 (hereinafter referred to as the impugned S.R.O.).

3. Learned counsel for the petitioner submits that earlier to the impugned S.R.O., Federal Government issued S.R.O. No.1125(I)/2011 dated 31-12-2011 whereby sales tax was levied at zero rate/the rate of zero percent in respect of the five zero rated sectors. The benefit of the notification was available to every person doing business in textile (including jute), carpets, leather, sports and surgical goods sectors, who was registered as manufacturer, importer, exporter and wholesaler. Further submits that by introduction of impugned S.R.O. the rate of zero percent was amended/enhanced to 2%. The petitioner have challenged the said amendment/increase in the rate of tax on the ground that section.4 of the Sales Tax Act, 1990 begins with a non-obstante clause which has the effect to overriding the provisions of section 3. Therefore, the applicability of section 3 (the charging section) is made non applicable to section 4 or in other words charging section (section 3)- is not applicable to the goods notified under section 4(c). Learned counsel further states that the concept of zero rating in terms of the class of goods statutorily entrenched by section 4 of the Sales Tax Act, 1990 cannot be taken away by means of issuing a notification to that effect. He submits that the statute in the absence of any enabling provision cannot be amended/ abridged or modified by way of a notification. The learned counsel submit that respondent No.1 has power only to include goods in the ambit of section 4 and have no power to remove the goods from the ambit of section 4 once they are added in the list of goods which are zero rated. In this regard learned counsel for the petitioner relied upon the judgment of this Hon'ble Court reported as 2008 PTD 1482 (Messrs Tradecom Pakistan v. Deputy Collector Customs CFS Dry Port and another) and submits that the impugned S.R.O. is liable to be set aside.

4. On the other hand learned counsel for the respondent department raised preliminary objection regarding locus standi of the petitioner as they have failed to attach any registration of the association, the list of its members and authorization from its members to file this petition. The learned counsel for the respondent department further submits that the petitioner have failed to establish how the impugned S.R.O. effects the petitioner and what constitutional rights it possesses and therefore the writ is liable to be dismissed on these grounds. On merits, learned counsel for the respondent department submits that the objection raised by the learned counsel for the petitioner is based on erroneous reading of law that the non-obstante clause at the beginning of section 4 overrides and defenestrates the provisions of section 3 in all circumstances. The non-obstante clause only means that the categories of goods specified in or under section 4 shall be charged at zero rate of sales tax, notwithstanding any rate of sales tax specified in section 3. However, goods which are not specified in or under section 4, will continue to be charged at the rate specified in section 3. Learned counsel for the respondent department further submits that under sections 4(a) and 4(b) certain goods are already specified which will be charged to sales tax at zero percent. Whereas under section 4(c) Federal Government has the power to add any other goods to zero percent sales tax through notification. Thus in exercise of power conferred under clause (c) of section 4 read with others provision of Sales Tax Act, 1990 the Federal Government has issued the impugned S.R.O. He further submits that Federal Government has from time to time issued various notifications specifying items chargeable at zero rate and have also amended, withdrawn and superseded such notifications in past. Learned counsel for the respondent department referred to section 21 of the General Clauses Act, 1897 which gives the power to amend, vary or rescind any notification, order; rule or bye laws and state that the assertion of the learned counsel for the petitioner that once a notification is issued under section 4(c) cannot be withdrawn is totally frivolous and based upon ignorance of law. In support of his contentions the learned counsel for the respondent department has relied upon 1997 PTD 1555 (Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan).

5. Arguments heard record perused.

6. The concept of zero rating is not new to the Sales Tax Act, 1990 (hereinafter referred to as the Act). It is incorporated in the Act from the very beginning. The Federal Government is also issuing notification under Section 4 of the Act to include goods at zero-rate. Till year, 2007 the notifications regarding zero rated goods were issued under section 4(c) of the Act. The last in the series was S.R.O. No.509(I)/2007 dated 9-6-2007 which states as under:

"In exercise of the powers conferred by clause (c) of section 4 of the Sales Tax Act, 1990, and in supersession. of the Notification No. S.R.O. 525(1)/2006, dated the 5th June, 2006, the Federal Government is pleased to notify the goods specified in column (2) of the Table below, falling. under the PCT Heading No. mentioned in column (3) of;/he scsid,ra'able, to be the. goods on which sales tax 'sh'all be charges at the rate of zero per cent on the supply and import thereof, namely:--

TABLE

7. Under these S.R.O's. goods were mentioned in the table which were imported and supplied at the rate of zero per cent sales tax. The S.R.O. No.509(I)/2007 dated 0906.2007 remained in field till the issuance of S.R.O. 283(I)/2011 dated 1-4-2011 which states as under:

"In exercise of the powers conferred by clause ? of section 4 read with clause (b) of subsection (2) and subsection (6) of section 3, clause (b) of subsection (1) of section 8, clause (a) of subsection (2) of section 13 and section 71 of the Sales Tax Act, 1990, and subsection (2) of section 16 read with section 3A of the Federal Excise Act, 2005 and in supersession of its Notification No.S.R.0. 509(1)/2007,?dated_'the 9th June, 2007, the Federal Government is pleased to notify the goods specified in column (2) of the Table below under the PCT heading numbers mentioned in column (3) of the said Table, to be the goods on which sales tax shall, subject to the conditions stated in this notification be charged at the rate of zero per cent on the supply and import thereof, or at reduced rate of sales tax of six per cent or, as the case may be, at four per cent as specified in the said conditions, namely:

TABLE

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8. The S.R.O. No.283(1)/2011 dated 1-4-2011 was amended vide S.R.O. No.1012(1)/2011 dated 23-11-2011. The S.R.O. 1012(1)/2011 dated' 23-11-2011 was further amended vide S.R.O. No.1125(1)/2011 dated 31-12-2011. In all these S.R.Os. not only import and supply of goods. mentioned in the table of said S.R.O's, were zero rated but also reduced rate of 4% and 6% of sales tax were also introduced under the said S.R.O's. on the import and supply of goods subject to certain conditions mentioned in the said S.R.O's. The petitioner kept on enjoying the said rates till the issuance of the impugned S.R.O. without any objection. Vide impugned S.R.O. the respondent No.1 only amended the earlier notification and introduced the rate of 2% instead of 0% on the import and supply of goods mentioned in the table of S.R.O. 1125(I)/2011 dated 31-12-2011. The impugned S.R.O. states as under:

"S.R.O. 154(1)/2013. In exercise of the powers conferred by clause (c) of section 4 read with clause (b) of subsection (2) and subsection (6) of section 3, clause (b) of subsection (1) of section 8 and section 71 of the Sales Tax Act, 1990, the Federal Government is. pleased to direct the following amendments shall be made in its Notification No. S.R. 0.1125(1)/2011, dated the 31st December, 2011 namely:

(a) in the preamble, for the words "at zero-rate", the words ,"at the rate of two percent" shall be substituted;

(b) after the Table, for the Conditions, the following Conditions shall be substituted, namely:-

CONDITIONS

(i) The benefit of this notification shall be available only to persons doing business in textiles (including jute), carpets, leather, sports and surgical -goods sectors, who are registered, as manufacturer, importer, exporter or wholesaler under the Sales Tax Act, 1990, and appear on the active Taxpayers List (ATL) on the website of Federal Board of Revenue;

(ii) this notification shall apply from

(a) spinning stage onwards, in case of textile sector;

(b) production of PTA or MEG, in case of synthetic sector;

(c) regular manufacturing, in case of carpets and jute products;

(d) tannery onwards, in case of leather sector; and

(e) organized manufacturing, in case of surgical and supports goods;

(iii) on import by registered manufacturers of the five sectors mentioned in condition(i), sales tax shall be charges at the rate of two per cent on goods useable as industrial inputs;

(iv) on import by commercial importers of goods useable as industrial inputs, sales tax shall be charged at the rate of two per cent along with two per cent value addition tax at the import stage, which shall be accountable against their subsequent liabilities arising against supply of these goods to persons in the five sectors mentioned in condition (1) at the rate of two per cent, and to persons outside the said five sectors at the rate of five per cent. The balance amount shall be paid with the monthly sales tax return, or in case of excess payment shall be carried forward to the next tax period;

(v) import of finished goods ready for use by the general public shall be charged to tax at the rate of two per cent and value addition tax at the rate of two per cent;

(vi) supplies of goods, usable as industrial inputs, to registered persons of the five sectors mentioned in condition (i), shall be charged to tax at the rate of two per cent, whereas supplies to persons not belonging to the said five sectors shall be charged to tax at the rate of two per cent;

(vii) supplies of finished products of the sectors specified in condition (i) to registered retailers shall be charged to sales tax at the rate of two per cent;

(viii) registered persons engaged in the retail sale of these goods shall pay sales tax at the rate of two per cent on their retail sales and shall be entitled to input tax adjustment. Such goods supplied at the rate of two per cent shall not constitute part of turnover for the purpose of turnover tax payable as prescribed under Chapter III of the Sales Tax Special Procedure Rules, 2007;

(ix) registered manufacturers who process goods owned by others shall charge sales tax at the rate of two per cent on the value of goods, inclusive of processing charges received by them;

Explanation. ---For the purposes of this provision, and in terms of the proviso to subsection (33) of section 2 of the Sales Tax Act, 1990 the return of goods by the processor to the principal after processing shall constitute supply, and the value of supply of such goods shall be the open market price of such goods inclusive of the processing charges;

(x) a registered person who has consumed any other inputs acquired on payment of sales tax, shall be entitled to input tax adjustment or, as the case may be, refund against taxable supplies made by him, subject to the relevant provisions of the Sales Tax Act, 1990 and Rules made thereunder;

(xi) registered manufacturers shall be entitled to adjustment of input tax paid on machinery, parts, spares and lubricants acquired by them for their own use, subject to the relevant provisions of the Sales Tax Act, 1990 and Rules made thereunder; and

(xii) supply of electricity and gas to the registered manufacturers or exporters of the five sectors mentioned in condition(i), shall be charged sales tax at the rate of zero per cent in the manner specified by the Board.

(2) This notification shall take effect on and from the 1st day of March, 2013."

9. Under the impugned S.R.O., respondent No.1 has only abolished zero rate on the goods mentioned in the table of the S.R.O. 1125(I)/2011 dated 31-12-2011. The zero rate as mentioned in section 4(a) and (b) of the Act still available to the registered persons.

Although the impugned S.R.O. is not issued only under section 4(c) however, even if it had issued only under section 4(c) of the Act even then by virtue (.f section 21 of the General Clauses Act, 1897 respondent No. 1 had the power to amend, vary or rescind orders, rules or bye-laws. In this regard reliance is placed on PLD 1992 SC 207 (The Engineer-in-Chief Branch through Ministry of Defence, Rawalpindi and another v. Jalaluddin) wherein it was held by the Hon'ble Supreme Court that under section 21 of the General Clauses Act, 1897 the authority which can pass an order, is entitled to vary, amend, add to or to rescind that order. Similar view was taken by the Hon'ble Supreme Court in 2009 SCMR 973 (Messrs Fazal Din and Sons (Pvt.) Ltd. v. Federal Board of Revenue Islamabad and others).

10. Further through impugned S.R.O. neither any vested right of the Petitioner have been infringed nor withdrawn by the respondent No.1. The impugned S.R.O. shall ' be applied prospectively and not retrospectively as mentioned in the impugned S.R.O. that the sale is applicable from 1-3-2013. The rights accrued to the petitioner before the issuance of the impugned S.R.O. are fully protected under the law as well as under the impugned S.R.O. and the respondent department cannot deny the petitioner said rights i.e. any supply made or goods imported before .1-3-2013 will remain zero rated. Reference is made to 1986 SCMR 1917 (Al-Samrez Enterprise v. The Federation of Pakistan) wherein it was' held that the retrospective operation cannot be given to executive orders so as to destroy contractual rights and obligations already accrued. It had been inter alia held that the withdrawal of exemption by a subsequent notification could not affect vested rights, acquired by the importers. Similarly in Messrs Army Welfare Sugar Mills Ltd. case reported as 1992 SCMR 1652 (Messers Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others. it was held that a beneficial or concessionary notification or executive order may be given retrospective effect as it confers benefit and advantage on the assessee or citizen but a notification or order that imposes new liability, obligation or burden on any assessee or citizen cannot be given such effect and must operate prospectively.

In the present case, petitioner have challenged the impugned S.R.O. on the ground that section 4 of the Act starts with non-obstante clause and therefore the provisions of section 3 of the Act are not applicable to the notifications issued under section 4(c) of the Act. The Section 4 is reproduced as under:-

4. Zero rating.--Notwithstanding the provisions of section 3, the following goods shall be charged to tax at the rate of zero per cent;--

(a) goods exported, or the goods specified in the Fifth Schedule;

(b) Supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969);

(c) such other goods as the Federal Government may, by Notification in the Official Gazette, specify:

Provided that nothing in this section shall apply in respect of a supply of goods which--

(i) are exported, but have been or are intended to be re-imported into Pakistan; or

(ii) have been entered for export under Section 131 of the Customs Act, 1969, (IV of 1969), but are not exported

(iii) have been exported to a country specified by the Federal Government, by Notification in the official Gazette:

Provided further that the Federal Government may, by a notification in the Official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero rated supply of goods otherwise chargeable to sales tax.

(d) such other goods as may be specified by the Federal Board of Revenue through a general order as are supplied to a registered person or class of registered persons engaged in the manufacture and supply of zero-rated goods.

The bare reading of above reveals that the rates mentioned in section 3 of the Act will not be applicable to:--

(a) the goods exported or specified in 5th Schedule,

(b) supplies aboard a conveyance, proceeding to a destination outside Pakistan, and

(c) goods mentioned in the notification issued by the Federal Government.

11. The impugned S.R.O. as well as all the notification from 2011 onward are not issued only under section 4(c) of the Sales Tax Act, 1990 instead they are issued under sections 4(c), 3(2)(b), 3(6), 8 (1)(b) and section 71 of the Sales Tax Act, 1990. Under section 4(c) respondent No.1 had the power to mention goods on which rates mentioned in section 3 of the Act will not be applicable. Whereas under sections 3(2)(b) and 3(6) of the Act grants respondent No.1 power to impose any tax. Under section 8(1)(b) respondent No.1 can restrict the claim of adjustment of input tax and under section 71 respondent No.1 can prescribe special procedure for scope, payment of tax etc. in respect of any supplies. Therefore the impugned S.R.O. is not ultra vires to the Act.

Even otherwise the petitioner has neither placed on record any document regarding its registration nor any authority of the members to file the present writ petition. Therefore, from the record it is not established that whether petitioner is a registered association or not. Under Article 199 of the Constitution the petition can only be filed by an aggrieved party and by "party" means one who is competent to maintain an action. Petition could be filed by a person, a number of persons, a corporate body or a firm. The petitioner being not a registered association has no locus standi to file the present writ petition.

12. In view of what has been discussed above, the S.R.O. 154(I)/ 2013 dated 28-2-2013 is not ultra vires the Sales Tax, Act, 1990 and therefore the writ petition is dismissed with no order as to costs.

KMZ/P-10/L?????????????????????????????????????????????????????????????????????????????????????? Petition dismissed.