ISLAMABAD – The Supreme Court of Pakistan on Thursday stayed the judgment of the Balochistan High Court (BHC) regarding the refund of sales tax under Article 247(3) of the Constitution.
A three-member Supreme Court bench headed by Chief Justice Pakistani Justice Umar Ata Bandial and including Justice Qazi Faez Isa and Justice Syed Mansoor Ali Shah heard the appeal of Commissioner Inland Revenue Zone-II, Regional Tax Office, Quetta.
The High Court, Court of Appeal and Commissioner of Appeal had accepted the Sherani Taxpayers/Traders’ claim and ordered refunds to be issued.
Sherani Traders imported timber from Afghanistan in the non-tariff zone of Balochistan Zohab district and applied for sales tax refunds under Article 247(3) of the Constitution, which being an exempt zone and non-tariff, sales tax law does not apply. .
Lawyer Hafiz Ahsaan Ahmad Khokhar, representing the Federal Board of Revenue (FBR), argued that Sherani Traders failed to provide relevant invoices and proof of such consumption in non-tariff zones to tax authorities.
He argued that although tax exemption is available under Section 247(3) of the Constitution for the PATA regions of Balochistan, but while claiming tax exemptions/refunds under the sales tax, the taxpayer is legally required to meet the requirements of Sections 22, 23 and 73 of the 1990 Act.
He argued that the taxpayer should present documents and invoices of such consumption in support of his claim for reimbursement from the tax authorities that the goods imported after importation from Afghanistan were consumed in an area not tariff, adding that if it failed, the taxpayer would not be entitled to claim refunds. He stated that in this case, despite sending a notice to the taxpayer, he did not provide the documents and invoices in support of his request.
Hafiz Ahsaan informed that the Appeals Commissioner, Appeals Tribunal and High Court, while deciding the case, relied on the 2003 Supreme Court Judgment, adding that this judgment has been reconsidered by the Supreme Court in 2008, therefore, the verdicts of the three instances are not viable in law and should be reversed.
The lawyer further stated that in this case, the taxpayer failed to meet the requirement and only relied on the constitutional provision without substantiating his claim for consumption in the non-tariff area of Zhob district. .
Hafiz Ahsaan argued that the three forums below failed to understand that a company or person earning income from an activity carried on in a taxable or non-taxable area is a question of fact that cannot be decided without a proper investigation, for the purposes of tax liabilities and any other matters regarding manufacture, consumption within or outside the local boundary, etc., including non-taxable area of both taxable and non-taxable areas.
He stated that the challenged judgments rendered by the instances below are the result of misreading and failure to read the points of law and material facts of the cases in question and failed to take into account the principle by right.
The bench, after hearing argument, stayed the BHC judgment and issued an order granting leave to appeal on the FBR appeal.