Import goods | The Lahore High Court ruled against Messrs Infotech (Pvt) Ltd, affirming that the company was not entitled to tax exemptions under S.R.O. 593(I)/91 for their imports of computer parts, as they were deemed commercial importers rather than manufacturers.

The Lahore High Court ruled against Messrs Infotech (Pvt) Ltd, affirming that the company was not entitled to tax exemptions under S.R.O. 593(I)/91 for their imports of computer parts, as they were deemed commercial importers rather than manufacturers.

**کیس کا خلاصہ: میسرز انفوٹیک (پرائیویٹ) لمیٹڈ بمقابلہ کلکٹر کسٹمز**

**عدالت:** لاہور ہائی کورٹ

**ججز:** اعجاز الحق اور عابد عزیز شیخ، ججز

**تاریخ:** 20 مارچ، 2014

**حوالہ:** 2015 پی ٹی ڈی 1236

**حقائق:**

- **درخواست گزار:** میسرز انفوٹیک (پرائیویٹ) لمیٹڈ، جو کمپیوٹرز اور پرزے درآمد کرتا ہے۔

- **جواب دہندگان:** کلکٹر کسٹمز اور دیگر۔

- **مسئلہ:** کسٹمز حکام نے انکم ٹیکس کے فوائد کو مسترد کر دیا۔

**پس منظر:**

درخواست گزار نے کمپیوٹر کے پرزے درآمد کیے اور انکم ٹیکس آرڈیننس 1979 کے تحت ایک استثنیٰ سند حاصل کی، جس کے مطابق انہیں ایڈوانس انکم ٹیکس میں چھوٹ ملی۔ تاہم، کسٹمز حکام نے اس استثنیٰ کو چیلنج کیا، جس کے نتیجے میں ٹیکس اور جرمانے کا مطالبہ کیا گیا۔

**قانونی مسائل:**

1. **استثنیٰ کا حق:** کیا درخواست گزار کو S.R.O. 593(I)/91 کی شقوں (iv) اور (vi)(c) کے تحت استثنیٰ حاصل ہے؟

2. **کسٹمز حکام کی اختیارات:** کیا کسٹمز حکام کو جرمانہ عائد کرنے کا اختیار تھا؟

3. **کسٹمز حکام کا کردار:** کیا کسٹمز حکام انکم ٹیکس محکمہ کے ایجنٹ کے طور پر کام کر رہے تھے؟

**فیصلہ:**

عدالت نے فیصلہ دیا کہ درخواست گزار نے کمپیوٹرز اور پرزے تجارتی مقاصد کے لیے درآمد کیے ہیں، نہ کہ صنعتی منصوبے کے لیے۔ اس لیے، انہیں شق (iv) کے تحت استثنیٰ نہیں مل سکتا۔ شق (vi)(c) کے تحت بھی، چونکہ درخواست گزار ایک تجارتی درآمد کنندہ تھا، استثنیٰ قابل قبول نہیں ہے۔ عدالت نے یہ بھی کہا کہ کسٹمز حکام نے قانونی طور پر عمل کیا اور موجودہ شواہد کی بنیاد پر کوئی غلطی نہیں کی۔

**نتیجہ:**

تمام قانونی سوالات کا جواب درخواست گزار کے خلاف دیا گیا اور ریفرنس کو مسترد کر دیا گیا۔

2015 P T D 1236

[Lahore High Court]

Before Ijaz ul Ahsan and Abid Aziz Sheikh, JJ

Messrs INFOTECH (PVT.) LTD.

versus

COLLECTOR OF CUSTOMS and 3 others

Customs Reference No.1 of 2006, heard on 20th March, 2014.

Customs Act (IV of 1969)---

----S.196---Reference to High Court---Question of fact---Scope---Exemption certificate---

Importer was aggrieved of order passed by authorities whereby they disallowed benefit of

exemption certificate issued by Income Tax Department---Validity---Advisory jurisdiction of

High Court under S. 196 of Customs Act, 1969, was clearly distinguishable from its appellate or

revisional jurisdiction---Purpose of reference was not to get a decision for or against a party

before Tribunal but it was for resolution of a problematic or debatable legal question---Unless

there was perversity, the question of fact could not be examined by High Court---Exemption

certificate was issued under the impression that importer was a manufacturer---Importer was not

engaged in manufacturing process, therefore, on the face of it importer did not fulfil condition of

exemption certificate, therefore, Customs authorities had acted lawfully---Order passed by

Customs Appellate Tribunal was well reasoned and grounded on correct principle of law relevant

to the facts of the case---Reference was dismissed in circumstances.

Commissioner of Income Tax Zone-C, Lahore v. Messrs Margalla Textile Mills Limited,

Lahore 2008 PTD 1982 and Messrs Best Buy Computers, Lahore and another v. Director,

Intelligence and Investigation (Customs and Excise), Lahore and others 2009 SCMR 19 ref.

Commissioner of Income Tax v. Messrs Multan Fabrics (Pvt.) Ltd. 2013 PTD 2077 rel.

Muhammad Mansha for Petitioner.

Izhar-ul-Haq Sheikh for Respondent No.3.

Mrs. Amna Warsi for Respondent No.1.

Date of hearing: 20th March, 2014.

JUDGMENT

ABID AZIZ SHEIKH, J.---This customs reference under section 196(1) of the Customs Act,

1969 (Act), has been filed against the judgment dated 14-4-2005 passed by the Customs Excise

and Sales Tax Appellate Tribunal, Lahore (Tribunal), whereby customs appeal of the petitioner

against the order dated 24-3-2003 passed by the Collector of Customs Sales Tax (Adjudication),

(Collector) was dismissed.

Brief facts are that Director of Intelligence and Investigation (Customs Excise) Lahore,

had received an information that commercial importer of computers and parts thereof were

availing benefit of exemption from payment of advance income tax at the import stage, which

was not admissible to them under S.R.O. 593(I)/91 dated 30-6-1991. Consequently, import

record of the petitioner was scrutinized and a show-cause notice dated 1-11-2002, was issued to

the petitioner for recovery of Rs.4301560. The petitioner, replied to the show-cause notice and

after hearing the parties the Collector, Customs and Sales Tax and Central Excise (Adjudication)

Lahore, vide order in Original No. 41 of 2003 dated 24-4-2003 ordered the petitioner to pay

Rs.4301560 as income tax along with a penalty of Rs.1500000 for violating section 50(5) of the

Income Tax Ordinance, 1979 (Ordinance) read with S.R.O. 593(I)/91 dated 30-6-1991 (here-inafter referred to S.R.O.). The appeal against the said order was also dismissed by the learned

Tribunal vide impugned order dated 14-4-2005. The questions of law raised, which were

admitted for regular hearing on 21-1-2009, are as under:--

(1)

Whether on the facts and circumstances of the case the Customs Authorities justified to

disallow the benefit of exemption certificate issued by the Income Tax Department in terms of

clause (vi) (c) of the SRO by issuing show-cause notice dated 1-11-2002?

(2)

Whether on facts and circumstances of the case had the customs authorities jurisdiction to

impose penalty of Rs.15,00,000 on the alleged violation of subsection (5) of section 50 of the

Income Tax Ordinance, 1979 read with S.R.O. No. 593(I)/91 dated June 30, 1991?

(3)

Whether in view of the facts and in the circumstances of the case, was the customs

authorities acting as agent of the Income Tax Department in terms of section 50(5) of the

repealed Income Tax Ordinance, 1979?

(4)

Whether on facts and circumstances of the case, after completion of assessment for a

assessment year and discharge of tax liability for the same, could thereafter advance tax under

section 50(5) of the repealed Ordinance may be recovered for the same completed assessment

year ?

The learned counsel for the petitioner argued that the petitioner was granted exemption

certificate under section 50(5) of the Ordinance in terms of clause (vi)(c) of the S.R.O. and

therefore, the impugned order dated 14-4-2005 for alleged violation of clause (iv) of the said

S.R.O. is not sustainable. The learned counsel contends that the petitioner is an importer of plant

and the machinery for the purpose of setting up an industrial undertaking, therefore, it is entitled

for exemption under clause (iv) of the SRO. Further submits that the petitioner being not a

commercial importer the exemption under clause (vi) of the SRO was also available to the

petitioner. Adds that once the exemption certificate was issued under section 50(5) of the

Ordinance by the Income Tax Department, the Customs Authorities had no jurisdiction to go

behind the said certificate and established liability unless the said certificate was found to be

fake. Reliance is placed on the case reported as Commissioner of Income Tax Zone-C, Lahore v.

Messrs Margalla Textile Mills Limited Lahore (2008 PTD 1982).

Conversely, the learned counsel for respondents argued that as Per certificate of

registration of the petitioner, the petitioner is a commercial importer, therefore, not entitled to the

exemption under clause (vi) of the SRO. Further, the petitioner being engaged in import and

assembling of computers not for setting up an industrial undertaking; even exemption under

clause (iv) of the said SRO is not available to the petitioner. Further adds that each of the

exemption certificate issued to the petitioner clearly mentioned that if later it is discovered that

the imported material has not been exclusively consumed for self manufacturing, the assessee

shall be treated as an assessee in default in respect of the tax payable under section 50(5) of the

Ordinance. Submits that the language of certificate shows that it could only be availed by the

manufacturer and that too for exclusive consumption of the imported material in the process of

manufacture, which admittedly not applicable to the petitioner. Argued that the question raised in

this reference relates to factual controversy, which has already been decided by the two Courts

below and no question of law is required to be answered by this Court, in this reference.

We have given our anxious consideration to the arguments of the learned counsel for the

parties and have gone through the record, appended herewith.

Out of different questions of law raised by the petitioner the only moot legal question

arising out of learned Tribunal's order in terms of section 196(2) of the Act is whether the

petitioner is entitled for exemption from the provisions of section 50(5) of the Ordinance, in

terms of clauses (iv) and (vi) (c) of the SRO. It is expedient to reproduce the aforesaid clauses of

SRO, as under:--

"(iv) persons who import plant, machinery, fixtures, fittings or any other equipment for purposes

of setting up an industrial undertaking (including hotels) owned by such persons, or for

installation in an existing industrial undertaking (including hotels) owned by them, and a

certificate to that effect from the Commissioner of Income Tax, in respect of such plant,

machinery, fixtures fittings or equipment; is produced)

(vi)

persons, other than commercial importers, who produce a certificate from the

Commissioner of Income Tax concerned to the effect that:

(a)

their income during the income year is exempt from tax ( )

(b)

their income during the income year is not likely to be chargeable to tax; or

(c)

no tax is likely to be payable by them on their income during the income year on account

of any brought forward loss, depreciation allowance or tax credit;"

It is admitted position that the petitioner is engaged in the import of computers and its

parts for its sale and supply in the market. The said computer equipments obviously do not

require any further manufacturing except its assembling and inter connection with wires and

leads for ultimate consumer, therefore, it cannot be said that the petitioner import equipment for

the purpose of setting up an industrial undertaking. The similar question whether a person

engage in assembling of computers will be entitled to exemption clause (iv) of the said S.R.O.

came before the August Supreme Court of Pakistan in the case reported as Messrs Best Buy

Computers, Lahore and another v. Director, Intelligence and Investigation (Customs and Excise),

Lahore and others (2009 SCMR 19) and it was held that goods not imported for setting up

industrial undertaking; hence, exemption under clause (iv) of SRO not available. It is expedient

to reproduce the relevant extract of the findings by the Apex Court:--

"Since the petitioners have themselves admitted that the imported goods were used in the

assembling of computers which by no stretch of imagination can be termed or classified to be

goods imported for setting up an industrial undertaking, nor it be categorized as plant,

machinery, fixtures, fitting or any other equipment within the purview of clause (iv) of the said

S.R.O. No. 593(I)/91 dated 30-6-1991, therefore, to us the reasons weighed with the learned

Judges in the High Court in rejecting the appeals filed by the petitioners fully conform to the

exercise of its constitutional jurisdiction."

In view of the aforesaid findings of the august Supreme Court of Pakistan we see no

illegality in the order of the Tribunal to the extent that exemption under clause (iv) of the SRO is

not available to the petitioner. The next question is whether the petitioner is entitled for

exemption under clause (vi) (c) of the SRO. The petitioner himself placed on record his

certificate of registration under the Sales Tax Act according to which, the petitioner has been

registered as an importer. As per clause (vi) (c) of the SRO a commercial importer is not entitled

for the exemption. The word "commercial importer" is not defined under the Ordinance,

therefore, its ordinary dictionary meaning will be relevant. The word "importer" as defined in

Oxford Dictionary 8th Edition is "a person, company etc. that buys goods from another country

in order to sell them in their own country". The word "commercial" as defined in same dictionary

means "connected with the buying and selling of goods and services" The petitioner being

admittedly engaged in the import of computers and other related accessories from outside

country for the purposes of supply and sale in the market, the said import will come within the

purview of ordinary dictionary meaning of word "commercial importer", and therefore, not

entitled for exemption under clause (vi) (c) of the SRO as well. We have also noted that in

response to the show-cause notice dated 1-11-2002 the petitioner itself in reply claimed its

exemption only under clause (iv) of the SRO and it was never the case of the petitioner in said

reply that it is entitled for exemption under clause (vi) of the SRO. The petitioner obviously

cannot improve its case or raise a new plea which he never raised in reply to the show-cause

notice. Even otherwise, the question whether the petitioner is a commercial importer or not is a

question of fact, which has already been adjudicated by the Collector and learned Tribunal. The

advisory jurisdiction of this Court under section 196 of the Act is clearly distinguishable from its

appellate or the revisional jurisdiction. The purpose of reference is not to get a decision for, or

against a party before the Tribunal but it is for resolution of a problematic or debatable legal

question. Unless there is perversity, the question of fact cannot be examined by this Court.

Reliance is placed on the case reported as Commissioner of Income Tax v. Messrs Multan

Fabrics Private Limited (2013 PTD 2077).

As far as the arguments of the learned counsel that exemption certificate was under

clause (vi) (c) of the SRO, therefore, Customs Authorities could not go behind it, is concerned,

the perusal of the exemption certificate under section 50 (5) of the Ordinance shows that

although the said certificates referred to clause (iv)(c) of the said SRO, however, in the said

certificates it is specifically mentioned, that:--

"If is later discovered that the imported material has not exclusively been consumed in

self manufacturing, the assessee shall be treated as an assessee in default in respect of the tax

which was payable under section 50(5) of the Income Tax Ordinance, 1979."

The above language of certificate itself shows that certificate was issued under the

impression that petitioner was a manufacturer. As already discussed above, the petitioner is not

engaged in manufacturing process, therefore, on the face of it petitioner did not fulfill the

conditions of exemption certificates, therefore, customs authorities have acted lawfully. The

impugned order passed by the learned Tribunal, is well reasoned and grounded in correct

principle of law relevant to the facts of this case.

In view of above, the question of law raised in this reference are answered accordingly.

10.

The office shall send a copy of this judgment under the Seal of the Court to the learned

Appellate Tribunal, Inland Revenue, as per section 196(5) of the Act.

MH/I-12/L

Reference dismissed.

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