AUS Food (Petitioner) VS Fed. of Pakistan and Others (Respondent)

IN THE HIGH COURT OF SINDH, KARACHI

Present: Mr. Justice Muhammad Junaid Ghaffar Justice Ms. Sana Akram Minhas

1.Const. P. 7493/2021 AUS Food VS Fed. of Pakistan and Others

2.Const. P. 1310/2022 National Textile Foundation Karachi VS Fed. of Pakistan and Others

3.Const. P. 1448/2022 M/s Dawat-e-Hadiyah and Others VS Fed. of Pakistan and Others

4.Const. P. 1739/2022 M/s Wagha Food VS Fed. of Pakistan and Others

5.Const. P. 1769/2022 Western Roller Floor Mills & Ors VS Fed. of Pakistan and Others

6.Const. P. 1915/2022 Qureshi Flour Mills & Others VS Fed. of Pakistan and Others

7.Const. P. 2763/2022 Generation's School (Pvt) Ltd and Another VS Fed. of Pakistan and Others

8.Const. P. 2794/2022 Gulshan Begum VS Fed. of Pakistan and Others

9.Const. P. 3276/2022 Abdul Jabbar VS Fed. of Pakistan and Others

10.Const. P. 3878/2022 MBJ Health Association VS Fed. of Pakistan and Others

11.Const. P. 4440/2022 M/s A.K Indiustries VS Fed. of Pakistan and Others

12.Const. P. 4639/2022 Wonderland (Pvt) Ltd VS Fed. of Pakistan and Others

13.Const. P. 4880/2022 Jafer Imam VS Fed. of Pakistan and Others

14.Const. P. 4989/2022 Murtaza Quad & Another VS Fed. of Pakistan and Others

15.Const. P. 546/2022 M/s Hilton Public School VS Fed. of Pakistan and Others

16.Const. P. 547/2022 S. Rehmat Shakil VS Fed. of Pakistan and Others

17.Const. P. 548/2022 M/s The Royal City School System VS Fed. of Pakistan and Others

18.Const. P. 5564/2022 Professional Educators VS Fed. of Pakistan and Others

19.Const. P. 5565/2022 Al-Muneeb Foundation VS Fed. of Pakistan and Others

20.Const. P. 5595/2022 M/s Alamgir Welfare Trust VS Fed. of Pakistan and Others

21.Const. P. 5643/2022 Afzal & Co. VS Fed. of Pakistan and Others

22.Const. P. 5660/2022 M/s Marcos Maintenance Services Pvt Ltd VS Fed. of Pakistan and Others

23.Const. P. 5728/2022 karachi Medicos & Radiology VS Fed. of Pakistan and Others

24.Const. P. 6002/2022 M/s Mukhtar Sons & CO. VS Fed. of Pakistan and Others

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25.Const. P. 6006/2022 Sir Syed University of Engineering VS Fed. of Pakistan and Others

26.Const. P. 6161/2022 Private Hospital & Clinic Association VS Fed. of Pakistan and Others

27.Const. P. 6191/2022 M/s Foundation Public School Pvt Ltd VS Fed. of Pakistan and Others

28.Const. P. 6192/2022 M/s Head Start Pvt Ltd VS Fed. of Pakistan and Others

29.Const. P. 6446/2022 Mariam Ali Muhammad Tabba Foundation VS Fed. of Pakistan and Others

30.Const. P. 6639/2022 M/s Chiniot Anjuman Islamia VS Fed. of Pakistan and Others

31.Const. P. 7069/2022 Altamash Institute of Dental Medicine & Others VS Fed. of Pakistan and Others

32.Const. P. 7125/2022 M/S Karachi Public School VS Federation of Pakistan & Others

33.Const. P. 7296/2022 Juanidy Shoaib Asad VS Fed. of Pakistan and Others

34.Const. P. 7534/2022 M/s S G Allied Business Ltd VS Fed. of Pakistan and Others

35.Const. P. 7923/2022 Dawood Foundation VS Fed. of Pakistan and Others

36.Const. P. 7924/2022 Dawood Corp Pvt Ltd VS Fed. of Pakistan and Others

37.Const. P. 5023/2022 Usman Memorial Foundation VS Fed. of Pakistan and Others

38.Const. P. 7924/2022 Dawood Corporation Pvt. Ltd. VS Fed. of Pakistan and Others

39.Const. P. 3330/2023 M/s Al-Mustafa Welfare Society VS Fed. of Pakistan and Others

40.Const. P. 3716/2023 Usman Bashir VS Fed. of Pakistan and Others

41.Const. P. 536/2023 Dr. Ziauddin Hospital VS Fed. of Pakistan and Others

42.Const. P. 618/2023 Sindh Institute of Urology& Transplantation (SIUT) VS Fed. of Pakistan and Others

For the Petitioners: M/s. Muhammad Tariq Masood, Syed Aijaz Hussain Shirazi, Shams Mohiuddin Ansari, Naeem Suleman, Zafar Hussain, Mian Ashfaq Ahmed, Ehsan Ghulam Malik, Shariq A. Razzak, Manzoor Arain, Riaz Moin Siddiqui, Rehmat Shakil, M.

Anjum Khan, Syed Hamza Ahmed Hashmi, Atir Aqeel Ansari, Imran Iqbal Khan, Arshad Hussain Shehzad, Jahanzeb Awan, Shahan Karimi, Rashid Khan Mehar, Abdullah Azzam Naqvi, Mohsin Kadir Shahwani, Adnan Ali Khan Sherwani, Muhammad Taimur Ahmed, Ghulam Akbar Lashari, Waheed Hussain Advocates for Petitioner.

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For the Respondents: M/s. Syed Ahsan Ali Shah, Kafeel Ahmed Abbasi, Aamir Ali Shaikh, Zulfiqar Ali Mirjat, Bilal Bhatti, Zohaib for Ameer Bakhsh Metlo, Imran Ahmed Maitlo, Ali Tahir Soomro, Burhan Jagirani, Ghazi Khan Khalil, Ameer Nausherwan Adil, Abdul Hakeem Junejo, Abdul Razzak, Syed Kumail Abbas, Muhammad Shahid, Irfan Mir Halepota, Qaim Ali Memon, Advocates for Respondent.

Federation of Pakistan: Through Mr. G. M. Bhutto, Assistant Attorney General.

Date of hearing: 24.08.2023

Date of Order: 24.08.2023.

ORDER

Muhammad Junaid Ghaffar, J: Through all these Petitions the Petitioners have impugned SRO No.1222(I)/2021 dated 17.09.2021 issued under Section 3(5) of the Sales Tax Act, 1990 (“Act”) (superseding an earlier SRO No. 509(I)/2013 dated 12.06.2013) whereby, an extra tax has been levied on the billed amount (excluding Federal taxes), in addition to the tax payable under sub-section (1) of Section 3 of the said Act, on supplies of electric power and natural gas to persons having industrial and commercial connection, but who have either not obtained Sales Tax Registration or are not on the Active Tax-payers List maintained by FBR on rates as provided in the table annexed to such SRO. The Petitioners before us are either running some Charitable Institutions; Hospitals; Schools or some kind of business. It further appears that it is not in dispute that they are having either an industrial or commercial connection of electricity or gas as the case may be. However, their case is that since they are not engaged in any taxable supplies or are otherwise, engaged in making exempt supplies, nor are required to be registered under the Act as they are not engaged in any taxable activity; hence not liable to pay any further tax or extra tax, pursuant to the impugned Notification; hence, K-Electric (for the present purposes) be restrained from charging any such extra tax through electricity bills.

2.It is a matter of admitted position, that primarily ad-interim orders in these petitions were passed following the judgment in the case reported Page 3 of 6

as Al-Zarina Glass Industries1 wherein the predecessor SRO 509(I)/2013 dated 12.06.2013 was impugned; and the controversy was decided in favor of the tax payers; however, the Appeal filed by the department against the said judgment has been allowed by the Supreme Court vide its order dated 15.09.2022 in Civil Appeal No.920 of 2018 and other connected matters (The Chief Commissioner (IR) Region v M/s Al Zarina Glass Industries). It further appears that pursuant to this judgment of the Supreme Court in some of the Petitions vide order dated 16.02.2023 this Court had recalled the ad-interim orders.

3.Today, some of Petitioners Counsel have made their best efforts to argue that notwithstanding the judgment of the Supreme Court in The Chief Commissioner (IR) Region v M/s Al Zarina Glass Industries (supra) they still have an arguable case on various other grounds. However, we do not see any reason to entertain any such further grounds as primarily their case was dependent on and filed on the basis of Judgment of this Court in Al Zarina Glass Industries (Supra) which now stands set aside by the Supreme Court. For this there appears to be no justification to entertain such grounds as the Apex Court has now finally decided the issue. The question before this Court in Al Zarina Glass Industries (Supra) was in respect of SRO 509(I)/2013 which stands superseded through impugned SRO 1221(I)/2021; however, the issue was identical i.e. as to the validity of levy of extra tax on persons who are not liable to be registered. The only difference appears to be in the rate of tax being notified depending upon the Billed amount of Electricity. The relevant findings of Supreme Court in its order dated 15.09.2022 is as under: -

“4. Civil Appeals No.920 to 927 of 2018. In these Appeals, in additional to the above issue, the vires of SRO No.509(I) of 2013 dated 12.06.2013 was challenged before the High Court even before any show cause notice was issued to the Respondents. The High Court ultimately came to the conclusion that the SRO in question was not applicable to the Respondents who enjoyed exemption. This question has also been dealt with by this Court in a judgment reported as Zak Re-Rolling Mills (Pvt) Ltd. v. Appellate Tribunal Inland Revenue (2020 SCMR 131) in which the scope and interpretation of Section 3(1A) of the Sales Tax Act, 1990 has been elaborated. As such, we find that the judgments of the Sindh High Court which have been impugned before us through these appeals do not proceed on the correct principles of law as interpreted by this Court and consequently suffer from an error insofar as they have proceeded to strike down an SRO without taking note of the interpretation of the said SRO given by various pronouncements by this Court. Further, we are of the view that by pre-empting even the issuing of a show cause notice, the Respondents had short-circuited the system which had deprived the department of its right to interpret the SRO and apply the same to all parties which were found to be liable to pay tax in question.”

1 Al-Zarina Glass Industries Vs. Federation of Pakistan and 3 others (2018 PTD 1600), Page 4 of 6

4.In view of the above finding we do not see any further room to entertain and respond to any additional or further arguments of the Petitioners Counsel. At this juncture, some of the Counsel have also argued that subsequently, in the case of Hajvairy Steel2 the Supreme Court has arrived at a somewhat contrary view, and therefore, the judgment in the case of The Chief Commissioner (IR) Region v M/s Al Zarina Glass Industries (Supra) would not be applicable.

5.To that, firstly, we may observe that this cannot be their case as in most of the Petitions they have annexed copy of the judgment passed by this Court in the case of Al Zarina Glass Industries supra, whereas, the ad-interim orders so obtained are also based on such judgment of this Court. Secondly, though the Supreme Court in the case of The Chief Commissioner (IR) Region v M/s Al Zarina Glass Industries (supra) while setting aside the Judgment of this Court has made reference to the case of ZAK Re-Rolling Mills3 which has been distinguished in Hajvairy Steel by the Supreme Court subsequently; however, there is no dispute that the facts; issue as well as the SRO under consideration in the case of Hajvairy Steel (Supra) were not akin to the present Petitioners case. Here their argument is that since they are not liable to be registered; or are engaged in making exempt supplies; hence, no extra tax can be levied on them through electricity bills, whereas, in Hajvairy Steel the issue before the Supreme Court was in respect of overriding effect of Rule 58H of the Sales Tax Special Procedure Rules, 2007 notified under Section 71 of the Act, having a non-obstante clause prevailing over the general charging section of the Act, including Section 3(1A) ibid. In that background it was held by the Supreme Court that payment of tax under the Special Procedure Rules was the final liability of such persons and no extra tax is to be paid by them under Section 3(1A) of the Act. Therefore, on facts, the ratio of Hajvairy Steel’s case appears to be distinguishable; hence of no avail.

6.Lastly, it is pertinent to note that this extra tax under Section 3(5) of the Act has been levied on supply of electric power and natural gas. It is in addition to the tax levied under section 3(1) of the Act. It is not on the activity or business of the Petitioners from which any exemption can be claimed on the ground that they are not engaged in any taxable activity. It is just like a tax on the consumer who avails any service or buys any 2 Commissioner Inland Revenue v Hajvairy Steel Industries (Pvt.) Limited (2023 SCMR 681) 3 ZAK Re-Rolling Mills Vs. Appellate Tribunal Inland Revenue (2020 SCMR 131) Page 5 of 6

goods and has to pay such tax. At times, the said tax is neither refundable nor adjustable; but this in and of itself is not a ground to declare it as illegal.

7.In view of hereinabove facts and circumstances of these cases, since the issue stands decided against the Petitioners by the Supreme Court, we are left with no choice; but to dismiss all these Petitions with pending applications. Ordered accordingly.

JUDGE

JUDGE

Arshad/

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