Ms Orient Material Pvt. Ltd. through Mr. Ameer Ahmad Danish Vs FBR through its Chairman etc

Stereo. H C J D A 38.

Judgment Sheet

IN THE LAHORE HIGH COURT AT LAHORE.

JUDICIAL DEPARTMENT

W.P. No. 63821 of 2022

M/s. Orient Material (Pvt.) Ltd.

Versus Federal Board of Revenue etc.

JUDGEMENT

Date of Hearing: 22.04.2026 Petitioner by: M/s. Imtiaz Rashid Siddiqui, Raza Imtiaz Siddiqui, Sheharyar Kasuri, Advocates for the Petitioner Respondents by: For Federation of Pakistan Mirza Nasar Ahmad, Additional Attorney General For respondent-FBR Rana Mehtab Ahmad. Advocate For Respondent No.9 M/s. Shahzad Ahmad Cheema and Rana Muhammad Usama, Advocates

KHALID ISHAQ, J. Through this Constitutional Petition, filed under Article 199 of the Constitution of Islamic Republic of Pakistan (“Constitution”), the Petitioner has called into question the order dated 07.10.2022 (“Impugned Order”) passed by Chief (Tariff & Trade), Federal Board of Revenue (“Respondent No.7”). The Impugned Order has been passed in furtherance of order dated 18.04.2022 passed by the learned Single Judge in Chambers of this Court, whereby, the earlier Constitutional Petition filed by the Petitioner i.e. W.P. No.17185 of 2021 (“1st Petition”), was disposed of with a direction to Federal Board of Revenue (“FBR”) to provide an opportunity of hearing to the Petitioner and pass a speaking order, while considering the judgment in Aisha Steel Mills 1 case.

Aisha Steel Mills Ltd. etc. v. Federation of Pakistan etc. (2011 PTD 569)

2.In essence, the Petitioner’s challenge is directed against the Impugned Order as well as against Office Memorandums dated 22.01.2021 and 02.03.2021, issued by FBR (“Impugned Memorandums”), whereby, it has been declared that the Petitioner’s imported ‘Pre-fabricated Building’ is neither plant, machinery and equipment nor listed in clause (a) and (b) of the definition of ‘Capital Goods’ as appended in Part I of Fifth Schedule to the Customs Act, 1969 (“Customs Act”), thus, it was declared that ‘Pre- fabricated Building’ is not entitled for exemption of duty in terms of PCT Code 9917(2).

3.The Petitioner claims that it is a private limited company incorporated under the laws of Pakistan and in order to avail the benefits of concessionary regime under the Special Economic Zones Act, 2012 (“SEZ Act”), it has established a ceramic manufacturing unit at the M-3 Industrial Estate, Faisalabad, managed by Faisalabad Industrial Estate Development & Management Company (“FIEDMC”)/Respondent No.6, which is a ‘Special Economic Zone’ established in terms of Clause (n) of Section 3, whereas, the Petitioner is a ‘Zone Enterprise’ by virtue of Clause (r) of Section 3 of SEZ Act. The Petitioner seeks benefits and incentives in terms of the provisions contained in Section 37, read with Sections 34 of the SEZ Act, claiming that for the purposes of extending such benefits and incentives, necessary changes have also been made in the fiscal statutes e.g. Customs Act, Sales Tax Act, 1990 (“Act, 1990”) and Income Tax Ordinance, 2001 [hereinafter jointly referred to as [“Fiscal Statutes”]. Petitioner claims that its imported ‘Pre-fabricated Building’ falls within the definition of ‘Capital Goods’ as defined in PCT Code 9917(2), contained in Sub-Chapter V of Chapter 99 of Pakistan Custom Tariff as given in the Fifth Schedule to the Customs Act, read with Serial No.19 contained in Table III of the Sixth Schedule of the Act, 1990 and Item No.126E of the Second Schedule to the Income Tax Ordinance, 2001, thus, the ‘Pre-fabricated Building’ was required to be cleared on concessionary/incentivized taxes and duties as the same is imported for installation in Special Economic Zone by the Petitioner/Zone Enterprise.

4.Needless to observe that the Petitioner was afforded the necessary exemptions and incentives at the time of import and installation of the plant, machinery and equipment for installation in the Special Economic Zone and the dispute in hand only pertains to Pre-fabricated Building.

5.Upon import of ‘Pre-fabricated Building’ and while filing the Goods Declarations (“GDs“), a dispute arose between the Petitioner and Revenue Authorities qua the entitlement of benefits and exemptions on the touchstone of the provisions contained in SEZ Act, however, the exemption and incentives so sought were denied by the Collector concerned on the premise that the definition of “Capital Equipment’, as couched in Clause (e) of Section 3 of SEZ Act, does not include the Capital Goods and is only confined to ‘Capital Equipment’. Consequently, Petitioner’s ‘Pre-fabricated Building’ was cleared upon provision of bank guarantees viz the disputed amounts of taxes and duties.

6.Through 1st Petition, the challenge laid by the Petitioner was twofold: firstly, it was argued that the Impugned Memorandums are in violation of the Fiscal Statutes as well as the SEZ Act; secondly, it was pleaded that for the case of the Petitioner Zone Enterprise, the clarifications were issued without granting an opportunity of hearing to the Petitioner and in violation of the judgment in Aisha Steel Mills supra. The Petitioner Zone Enterprise argued that imported plant and machinery includes the complete set of ‘Specially Designed Pre-fabricated Building’ and since, in terms of Section 37 of SEZ Act, the benefit of one time exemption is available to the Petitioner Zone Enterprise on plant and machinery imported for installation in the Special Economic Zone, therefore, its imported ‘Pre-fabricated Building’ is also entitled for the same treatment as the same is an inseparable component of the plant and machinery installed by it.

7.Considering the submission that the petitioner was not provided an opportunity of hearing and the law settled in Aisha Steel Mills supra was not taken into consideration while dealing with the case of the petitioner, the 1st Petition was disposed of vide order dated 18.04.2022 and the matter was

referred to the FBR. In compliance of the directions issued by this Court vide order dated 18.04.2022, a committee was constituted by FBR, which committee, included – (i) Secretary (Tariff -II), FBR, Islamabad, (ii) Deputy Collector, Collectorate of Customs Appraisement (East) & (iii) Industrial and SEZ Manager (CPEC), Prime Minister’s Office, Board of Investment; the committee granted opportunities of hearings to the Petitioner and subsequently, Respondent No. 7 proceeded to pass the Impugned Order, which has now been subjected to challenge through the Constitutional Petition in hand, on the premise and grounds enumerated above. The main thrust of the grounds raised and relief claimed by the Petitioner Zone Enterprise is rooted in the pith and substance of the concessionary and incentive regime brought about by virtue of the SEZ Act and the law laid down by the High Court of Sindh at Karachi in Aisha Steel Mills supra.

8.Conversely, it is the case of the respondent Department that the subject matter pertains to GDs filed by the Petitioner for clearance of ‘Pre- fabricated Building’, which were assessed under Section 80 of the Customs Act on 14.10.2022, which assessment/order, per learned counsel for the respondent Department, was an appealable order in terms of the provisions contained in Section 193 of the Customs Act but no such remedy was availed and consequently, the assessment has attained finality; adds that the Constitutional Petition in hand has been filed to circumvent the limitation of the statutory remedy, which has come to pass, therefore, the Constitutional Petition is not maintainable as an alternate efficacious remedy was available but was not availed by the Petitioner. It is argued that the reliance placed on Aisha Steel Mills supra is not tenable as the said judgment is clearly distinguishable from the facts and circumstances of the case in hand.

9.Arguments heard. Record perused.

10.Since an objection viz the maintainability of the Constitutional Petition in hand has been raised, therefore, it is imperative to deal with the maintainability question ahead of all other questions as the question of jurisdiction goes to the root of every dispute brought before a Court/Forum.

Considering the available record and submissions of learned counsels for the parties, we are not inclined to hold that the Petitioner Zone Enterprise had an efficacious remedy of challenging the assessment by way of filing an appeal under Section 193 of the Customs Act as it is well settled that the directives and explanations rendered by the FBR are binding on the revenue hierarchy, therefore, exposing the Petitioner to the rigors of the adjudication process is untenable. It is even otherwise well settled that the availability of an alternate efficacious remedy for denying the invocation of constitutional jurisdiction under Article 199 of the Constitution is not a rule of law and instead a rule of convenience, therefore, we hold that the Constitutional Petition in hand is maintainable per-se.

11.For the purpose of decision of the case in hand, following questions of law arise for determination by this Court:

i. Whether the Impugned Order as well as the Impugned Memorandums are in direct violation of Aisha Steel Mills judgment?

ii. Whether the Petitioner Zone Enterprise is entitled to claim exemptions, benefits and incentives, by virtue of the provisions contained in the SEZ Act?

iii. Whether ‘Pre-fabricated Building’ falls within the definition of ‘Capital Equipment’ as defined in Clause (e) of Section 3 of SEZ Act, for the purposes of a Zone Enterprise established in Special Economic Zone?

iv. Whether the analogy sought to be pleaded on the touchstone of Aisha Steel Mills judgment is available to the Petitioner/Zone Enterprise by implication, as Petitioner claims ‘exemptions/benefits’?

12.Since much reliance has been placed on the judgment of Aisha Steel Mills supra, therefore, we have considered the subject matter and the ratio decidendi of Aisha Steel Mills. The petitioner in Aisha Steel Mills case imported plant and machinery including ‘Pre-fabricated Building’ for its project and claimed exemption under SRO 575(I)/2006 dated 05.06.2006; it was pleaded by Aisha Steel Mills that since the Federal Government had issued the SRO 575(I)/2006 for extending exemption for the plant, equipment, machinery and apparatus including ‘Capital Goods’ as specified

in Column 21 of the Table given in the SRO 575(I)/2006, therefore, ‘Pre- fabricated Building’ being a Capital Good was sought to be exempted under the said SRO. In order to appreciate the analogy being drawn on the touchstone of Aisha Steel Mills supra, we have considered the terms which were employed in SRO 575(I)/2006, while juxtaposing the same, with seemingly identical provisions incorporated/used in the SEZ Act. For the purpose of convenience, Clause (e) of Section 3 of SEZ Act, which defines ‘Capital Equipment’ and the term ‘Capital Goods’ as defined in SRO 575(I)/2006 dated 05.06.2006, are reproduced herein below:

SEZ Act

(e)“capital equipment” means plant, machinery or equipment, accessories, and component part of machinery and equipment identifiable for use in or with machinery required for economic activities and machinery includes machinery and equipment of any description, such as is used in industrial process, manufacture, production or processing of other goods and rendering services, except the goods that are consumed in the manufacturing, production of processing of goods or provision of services;”

SRO 575(I)/2006

EXPLANATION: ‘Capital Goods’: mean any Plant, Machinery, Equipment, spares and accessories, classified in chapters 84, 85 or any other chapter of the Pakistan Customs Tariff, required for-

(a)the manufacture or production of any goods, and includes refractory bricks and materials required for setting up a furnace, catalysts, machine tools, packaging machinery and equipment, refrigeration equipment, power generating sets and equipment, instruments for testing, research and development, quality control, pollution control and the like;

(b)use in mining, agriculture, fisheries, animal husbandry, floriculture, horticulture, livestock, dairy and poultry industry; or

(c)service sectors listed at S. No 16 of the table below, and includes the items mentioned in clause (a) above.

13.Evidently, the definition of ‘Capital goods’ as employed in SRO 575(I)/2006 is quite expansive when compared with definition of ‘capital equipment’ in SEZ Act. The above terms, when considered for appreciating the rival contentions of the parties, though appear similar in the first blush

but when pondered for the overall analysis of the two provisions, the same have different bearings; one is part of a statute and the other has ensued from authority exercised under the delegated legislation. Coupled with the fact that the issue in hand is that of an exemption/benefit being claimed by the present Petitioner, there is a stark distinction between the two provisions. Evidently, the term ‘Capital Goods’ is missing from the definition of ‘Capital Equipment’ as couched in Section 3(e) of the SEZ Act, whereas, the SRO 575(I)/2006 repeatedly employed the term ‘other capital goods’, which capital goods include quite an expansive range of items e.g. refractory bricks, materials required for setting up a furnace, catalysts, machine tools, packaging machinery and equipment, refrigeration equipment, power generating sets and equipment, instruments for testing, research and development, quality control, pollution control and the like. It is fall to be noted that the SRO 575(I)/2006 did find mention the terms ‘Pre-fabricated Building’ albeit for certain specified categories and sectors, as mentioned in Serial Nos. 7, 8 and 17 thereof. It is in this context and scope that the term ‘Capital goods’ was extensively interpreted by the learned Division Bench of the High Court of Sindh at Karachi, while handing down the judgment in Aisha Steel Mills case. The discussion and the raison d'être, which led to the conclusion drawn in Aisha Steel Mills case for granting exemption to the ‘Pre-fabricated Building’ on the touchstone of SRO 575(I)/2006, is enumerated in Para 44 of the said law report, which is reproduced herein below:

“44. However, the question which now arises is that if the prefabricated buildings and sheds imported by the petitioner fall within the definition of plant, equipment, machinery and capital goods then why has the condition been specified in Column No.5 at Serial No.34 of the S.R.O. 575(I)/2006 that it will only be available to prefabricated buildings and sheds if imported by sectors specified at Serials Nos.7, 8 and 17 which relate to hospitals and medical or diagnostic institutes; hotels (three stars and above), tourism, sporting and other recreation services related projects as approved by the Ministry of Tourism; and goods imported for establishing wholesales/retail chain stores. A perusal of Serial No.7 and Serial No.17 leads to the conclusion that since in iv those sectors the machineries which qualify for exemption have been specifically mentioned and the exemption/concession has been allowed to the mentioned machineries only and since at Serials Nos.7 and 17 the prefabricated buildings and sheds were not

W.P. No. 63821 of 2022 Page 8

mentioned, therefore, for prefabricated buildings to qualify for exemption/concession in these sectors it was necessary either to include them in the list of machinery in that serial itself or mention them in serial 34 that they will be exempt/entitled to concession if imported by sectors specified in serial Nos.7 and 17. A perusal of Serial No.8 also reveals that in Serial No.8 it is seen that stringent condition has been provided in Column No.5 at Serial No.8. Therefore, we are of the opinion that if prefabricated buildings are imported by sectors specified in Serial No.8 then condition specified in column 5 at Serial No.8 will not be available as no such condition has been specified in Serial No.34 and such machinery will qualify for exemption/concession even if condition specified in column 5 at Serial No.8 has not been followed but the other prescribed conditions have been fulfilled. We are therefore of the considered opinion that the prefabricated buildings and sheds are integral part and fall within the definition of plant, equipment, machinery and capital goods as specified in Serial No.21 of the S.R.O. 575(I)/2006 dated 5-6-2006 and therefore the contention of the respondents in both these petitions that the prefabricated buildings and sheds do not fall within the definition of machinery and capital goods cannot be sustained.”

14.With respect, no such analogy may be drawn for the case in hand as in the instant case, the exemptions of duties and taxes are being sought on the basis of provisions contained in a statute i.e. SEZ Act and not on the basis of SRO 575(I)/2006. We have discussed that the relevant terms being employed in the SEZ Act and SRO 575(I)/2006 are not similar, therefore, we are of the opinion that the interpretation rendered viz SRO 575(I)/2006 in Aisha Steel Mills judgment is not applicable to the provisions contained in the SEZ Act.

15.The above leads us to consider that whether the Petitioner has a case on the touchstone of the provisions contained in the SEZ Act or for that matter on the basis of definition of ‘Capital goods’, as defined in PCT Code 9917(2), contained in Sub-Chapter V of Chapter 99 of Pakistan Custom Tariff, as given in the Fifth Schedule to the Customs Act, irrespective of the fact that the ratio decidendi of Aisha Steel Mills Judgment is not attracted to the Petitioner’s case? For the ease of reference, the definition of ‘Capital goods’ as defined under PCT Code 9917(2) ibid is reproduced herein below:

(2)Capital goods, as defined in the preamble of Part-I of the Fifth Schedule to the Customs Act, and firefighting equipment, except the items listed under Chapter 87 of the Pakistan Customs Tariff, imported for setting up of a Special Economic Zone (SEZ) by zone developers and for installation in that zone by Zone Enterprises, on one-time basis as prescribed in the SEZ Act, 2012 and rules thereunder subject to such conditions, limitations and restrictions as the Federal Board of Revenue may impose from time to time. Co-developer as defined in Special Economic Zone Rules, 2013, shall also be entitled to avail the same incentives and exemptions for the same period as available to the Developer under the SEZ Act 2020, subject to condition that the Developer of the SEZ relinquishes its rights to the incentives and exemptions in favour of the Co- developer; provided further that the respective Special Economic Zone Authority duly endorses such reassignment, and ensures that such reassignment shall not be misused.

The above makes it abundantly clear that even for the applicability and invocation of the benefit under PCT Code 9917(2) ibid, a Zone Enterprise’s case of benefits is contingent upon the fulfillment of the conditions and limitations prescribed in the SEZ Act and the rules framed thereunder, therefore, the benefit cannot be claimed in isolation and solely on the basis of PCT Code 9917(2) ibid. It will be explicated below as to why the case of the Petitioner Zone Enterprise does not attract the benefits claimed under the SEZ Act.

16.The perusal of the Impugned Order would reflect that in post remand proceedings, multiple opportunities of hearing were granted to the Petitioner by the Committee, which Committee also included the representatives of Board of Investment and Special Economic Zone, apart from Customs and FBR. The Impugned Order transpires that after detailed deliberation viz Chapters 84 and 85 of Pakistan Customs Tariff and the terms occurring therein, the Committee constituted by FBR reached to the conclusion that: ‘Petitioner failed to justify any mechanical linkage of the pre-fabricated Building with the production and manufacturing process of the machinery’, thus, it was concluded that the ‘Pre-fabricated Building’ of the type in issue does not even fall under the definition of ‘Machines’ as supplied in para 5 of the Chapter Notes of Section XVI of Pakistan Customs Tariff. The Impugned Order further denotes that the Aisha Steel Mills case hinges upon the interpretation of SRO 575(I)/2006, whereas, the said SRO is no longer operational as new legislation has been promulgated, therefore, it was held

W.P. No. 63821 of 2022 Page 10

that the reliance placed on Aisha Steel Mills judgment is not attracted for the purpose of case in hand.

17.Considering the findings rendered by the dint of Impugned Order, which findings also relate to definite and intricate technical aspects of the matter, this Court cannot sit on such findings as an appellate forum since it is well settled that the Courts are not equipped or have the capacity to deal with and delve into the questions of intricate technicalities, particularly in the field of classifications relating to equipment and machineries, nor the Courts can substitute the opinion of the experts and professionals of the field. As regards to the scope of interference with recommendation or opinion of expert body(s), the normal rule is that the Court shall not interfere unless it finds that the exercise of discretion has been arbitrary or against the statutory provisions2, thus, the conclusion of an expert body should not be lightly interfered by the Courts3 as Courts cannot substitute its own views.4 It is equally well settled that the expert decisions made by specialized government bodies cannot be interfered as a normal course because the Courts are not possessed with expertise in the relevant domain, therefore, the maximum deference is required to be extended to the expert opinions unless it is established beyond reasonable doubt that the exercise of jurisdiction by the experts is marred with mala fide or lack of jurisdiction. Classifications and determination of duties, taxes and tariff is a highly skilled and technical subject, therefore, it is better left to be decided by the experts of the concerned departments as the Courts lack technical expertise to render determinations on such aspects. For instance, this Court cannot substitute its opinion viz the findings rendered in the Impugned Order that: Petitioner failed to justify any mechanical linkage of the pre-fabricated Building with the production and manufacturing process of the machinery’. There is no material placed before us which may persuade us that these findings are manifestly unjust, arbitrary or wrong and that the ‘Pre-fabricated Building’ The Dental Council of India v. Subharti K.K.B. charitable Trust and another (AIR 2001 SC 2151) Union of India (UOI) and others vs Shah Goverdhan L. Kabra Teachers College (AIR 2002 SC 3675 Chairman, J & K State Board of Education vs Feyaz Ahmed Malik and Others (AIR 2000 SC 1039) @10423; National Engineering Services Pakistan [NESPAK] Pvt. Ltd. and others v. Kamil khan Mumtaz & others” (2018 SCMR 211)

W.P. No. 63821 of 2022 Page 11

imported by the Petitioner is inseparably and inextricably linked to the plant and machinery and that the plant and machinery cannot be operated without the same. Recently, in the case of K. S. Sulemanji Esmailji and Sons 5, the Supreme Court of Pakistan has held that classification of the goods is one of the most basic functions of the procedure in the context of import or export of goods – it is a specialized job and technical in nature – it essentially requires expertise and taking of the multiple factors into consideration e.g. examination of goods, all the relevant documents, understanding the classification aids and technical literature etc., thus, it was held that High Court cannot substitute the findings of the committee.

18.We deem it appropriate to deal with the question of purposive interpretation of the provisions contained in the SEZ Act. There is no cavil to the proposition that purposive interpretation of a statute further helps to assess and understand the real intent of the legislation. Under this interpretative tool, every statute has a purpose, without which it is meaningless; this purpose, or ratio legis, is made up of the objectives, the goals, the interests, the values, the policy, and the functions that the statute is designed to actualize. The Court must give the statute’s language a meaning that best realizes its purpose6. Similarly, it is trite that the interpretation which advances purpose of the statute is to be preferred rather than interpretation which defeats its purpose7; the Courts are not prevented from adopting beneficial construction particularly when such beneficial construction advances purpose of the statute8; the crucial rule while interpreting a statute is that to look at the meanings of the words, objective and purpose of the legislature9; legal text must be interpreted in context and “Additional Collector of Customs v. K. S. Sulemanji Esmailji and Sons Pvt. Ltd” (2025 SCMR 121) (Aharon Barak – Judge in a Democracy – Chapter 5.)

Federation of Pakistan through Ministry of Finance and others v. M/s. Noori Trading Corporation (Private) Limited and 14 others (1992 SCMR 710); Dr. Tariq Iqbal and 8 others v. Government of Khyber Pakhtunkhwa through Secretary Administration Peshawar and others (2019 SCMR 859), Saif-ur-Rehman v. Additional District Judge, Toba Tek Singh (2018 SCMR 1885); JS Bank Limited, Karachi v. Province of Punjab through Secretary Food, Lahore (2021 SCMR 1617 @1636); Saif-ur- Rehman v. Additional District Judge, Toba Tek Singh (2018 SCMR 1885 @1889); Shaheen Airport Services v. Sindh Employees' Social Security Institution (1994 SCMR Kadir Bux v. Province of Sind and others (1982 SCMR 582)

Nadia Naz v. The President of Islamic Republic of Pakistan, Islamabad (PLD 2023 SC 588)

W.P. No. 63821 of 2022 Page 12

purposive rather than a literal approach of interpretation is to be adopted while interpreting statutes. With the widening of the idea of context and importance being given to the rule that the statute has to be read as a whole in its context, it has to be kept in mind that nowadays it is misleading to draw a rigid distinction between literal and purposive approaches. The difference between purposive and literal constructions, in essence, is very subtle10, therefore, the real distinction lies in the balance to be struck in the particular case between literal meaning of the words on the one hand and the context and purpose of the measure in which they appear on the other11.

19.The shift from literal to purposive construction has not left taxing statutes untouched leaving them “as some island of literal interpretation,”12. Purposive approach to statutory construction could be extended to tax cases, however, the analysis of the facts depended on such purposive construction of the taxing statutes13. The context, scheme of the relevant statute as a whole and its purpose are as relevant in construing a taxing statute as in construing any other law.14 Therefore, the rule that object of the legislature has to be kept in view and a construction consistent with the object has to be placed on the words used if there be ambiguity, is also applicable in construing a taxing enactment15. Every taxing statute has a fiscal philosophy a feel of which is necessary to gather the intent and effect of its different Oliver Ashworth (Holdings) Ltd. v. Bellard (Kent) Ltd., supra, p. 805. Also see observations of LORD REID quoted in note 41, p. 34.

According to LORD MILLETT: “We are all purposive constructionists now”: ‘Construing Statutes’, (1999) 2 Statute Law Review 107, p. 108.

See further JOHN F. MANING, ‘What Divides Textualists from Purposivists’, (2006) 106 Columbia Law Review 70 [The article begins with the words “Recent scholarship has questioned whether there remains a meaningful distinction between textualism and purposivism” (p. 70), but in the end it concludes “that textualism continues to represent a superior account of legislative supremacy despite the need for a more nuanced form of justification”. (p. 111)]

Principles of Statutory Interpretation by G.P. Singh | 13th Edition | p. 33 Inland Revenue Commissioners v. McGuckin, (1997) 3 All ER 817, p. 824 : (1997) 1 WLR 991 : 1997 STC 908 (HL). See further, NATALIE LEE, ‘A purposive Approach to the Interpretation of Tax Statutes’, (1999) 20 Statute Law Review p. 141; “some view the (purposive) approach with extreme caution, if not dislike, whilst some applaud its use.”

“Commissioner for Her Majesty’s Revenue and Customs v. UBS AG and another” (2016 SCMR 1098) (UK Supreme Court)

W. T. Ramsay Ltd. v. Inland Revenue Commissioners, (1981) 1 All ER 865, pp. 870, 871 (HL); Inland Revenue Commissioners v. McGuckian, supra, p. 824.

Administrator, Municipal Corporation, Bilaspur v. Dattatraya Dahankar, AIR 1992 SC 1846, pp. 1847, 1848 : (1992) 1 SCC 361. (Overruled on merits in Mathuram Agrawal v. State of Madhya Pradesh, AIR 2000 SC 109 : (1999) 8 SCC 667). See further Oxford University Press v. Commissioner of Income-tax, AIR 2001 SC 886, pp. 897 (para 36) : (2001) 3 SCC 359.

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clauses16. Nonetheless, before resorting to the tool of purposive construction it must weigh heavy on the mind of a judge that the principle of purposive construction will only be attracted or applied when the literal construction leads to absurdity17. In the instant case no such absurdity is at play while we peruse the relevant provisions, which are clear in purpose and object.

20.Keeping the aforenoted principles in mind, there is another important strand of the case in hand, which is also inherently at play and cannot be ignored while resorting to purposive or literal approach of the provisions contained in SEZ Act; it has to be kept in mind that by seeking to attract and apply the benefits, as envisaged in Section 37 of the SEZ Act, read with PCT Code 9917(2) ibid, the Petitioner is pressing an exemption from the regular taxes and duties for its imported ‘Pre-fabricated Building’. So, the question of interpretation involves an exemption or benefit clause. For claiming one time exemption, the case of the Petitioner hinges upon the provisions contained in Section 37 of the SEZ Act and a bare perusal of the same transpires that it is in the nature of an exemption provision, which exemption or benefit is neither unbridled nor axiomatic for everything and anything related to a Zone Enterprise’s business or manufacturing activity, instead, the claimed one time exemption is circumscribed by the words: ‘one time exemption from customs- duties and taxes on import of plant and machinery into SEZ .....”. Thus, it is imperative that while keeping in mind the above principles of purposive interpretation, the settled principles of law, which relate to interpretation of exemption or benefit clause(s) are also to be applied in the sense that the interpretation of the exemption clause are to be made more stringently for the purpose of granting exemptions relating to taxes and duties under fiscal statutes. Like the principles of purposive interpretation, the interpretive tools and principles of benefit/exemption clauses are also well established. It is well settled that a literal approach is to be adopted while interpreting fiscal or taxing statutes and the Court cannot Controller of Estate Duty v. Kantilal Trikamlal, AIR 1976 SC 1935, p. 1938 : (1976) 4 SCC 643; K.P. Verghese v. ITO, AIR 1981 SC 1922, pp. 1930, 1931 : (1981) 4 SCC 173; Commissioner of Central Excise, Pondicherry v. ACER Ltd., supra.

Commissioner of Central Excise, Pondicherry v. ACER Ltd., (2004) 8 SCC 173, p. 185: (2004) 8 JT 53.

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read into or impute something when the provisions of a fiscal statute are clear18. Thus, unless there is overwhelming established material, which is to the cumulative effect that the ‘Pre-fabricated Building’, imported by the Petitioner Zone Enterprise, either explicitly falls within the terms ‘plant and machinery’ or essentially and inextricably linked to the ‘plant and machinery’, no such benefit may be extended. Contrarily, none of the two situations are attracted, therefore, declaring that Pre-fabricated Building is liable to exemption under Section 37 of the SEZ Act, clearly amounts to reading or imputing into Section 37 of the SEZ Act. This unauthorized pursuit will further lead to frustrate or defeat the applicability of the charging provisions of the taxing statutes, which too is not permissible as it is also well recognized rule of construction of fiscal statutes that for the purpose of interpretation of a fiscal statute or any of its particular provision, the intention of the legislature must be discovered from the words used. If the words used are capable of one construction only, then it would not be open to the Courts to adopt any other hypothetical construction. If the words of a statute or its provision(s) are readily understood without any ambiguity, it is not for the Court to raise any doubt as to what they mean for any contrary view, rather than implementing the same without any hesitation. A statute or any enacting provision must be so construed as to make it effectual and operational.19 The perusal of the provisions contained in the SEZ Act and the relevant provisions of the Fiscal Statutes lead to an ineluctable conclusion that the exemptions claimed by the Petitioner, on the basis of the provisions contained in SEZ Act are not absolute; these exemptions are qualified and contingent upon the conditions contained in the enactment. It is well settled that while interpreting fiscal statutes, an exemption clause occurring therein has to be strictly construed and the onus is on the taxpayer or person claiming exemption from levy to show that he is squarely entitled for such exemption.

“Allied Bank Limited Vs. The Commissioner of Income Tax, Lahore” (2023 SCMR 1166) “Islamabad Electric Supply Company Limited (IESCO) Vs. The Appellate Tribunal Inland Revenue (H.Q), Islamabad” (2023 SCMR 1516); “Commissioner Inland Revenue v. M/s Seven Star Sugar Mills Pvt. Limited” (2026 SCMR 69)

21.In order to appreciate that whether the Petitioner may be declared entitled to the benefits and exemptions claimed on the basis of Section 37 of the SEZ Act, we have also considered that if any such certification or entitlement may ensue from the provisions contained in the SEZ Act? In the scheme of SEZ Act, there exist Board of Approvals (BOA) and Board of Investment (BOI), which are respectively defined in Clauses (c) & (d) of Section 3 of the SEZ Act; BOA is constituted under Section 5 of the SEZ Act, whereas, BOI is constituted under Board of Investment Ordinance, 2001. The mandate and authority of BOA are enumerated in Sections 6 & 7 of the SEZ Act; the perusal of clause (f) of Section 6 reveals that BOI works as secretariat of the BOA; the BOA is mandated to notify the additional benefits, as couched in sub-section (2) of Section 34 of the SEZ Act. For the purpose of convenience, clause (f) of Section 6 and Section 34(1)&(2) of SEZ Act are reproduced herein below:

SECTION 6

6.Functions and responsibilities of the BOA.- The BOA- may- . . . .

(f)notify with approval of relevant authorities additional benefits under subsection (2) of section 34;

SECTION 34

34.Incentives for SEZs.- (1) On execution of development agreements, the developer of a particular SEZ as well as all zone enterprises in that SEZ shall be entitled to benefits set out in section 36 and 37 respectively.

(2)Within the objective of promoting hi-tech industries or particular regions, the BOA may grant additional benefits to a particular category of SEZs, zone enterprise, regions or sectors provided that-

(i)such additional benefits may only be granted if the BOA finds them to be justified on the basis of an economic impact assessment;

(ii)such additional benefits, if granted conditionally, may be liable to be forfeited with retroactive effect if it is finally determined that a developer or zone enterprise has failed to comply with the conditions prescribed for the additional benefits in question; and (iii) The BOA shall make the economic impact assessment of a SEZ within five years from the date the agreement is signed and within the first year of the operation of an enterprise.

22.Considering the above provisions, particularly sub-section (2) of Section 34 ibid, the minimum which could have been procured by the Petitioner Zone Enterprise was to produce an approval of the BOA, certifying that the Petitioner’s imported Pre-fabricated Building is entitled

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for the benefits under Section 37 of the SEZ Act but there is none. Although, the Petitioner has placed on record a letter dated 26.11.2020, issued by the BOI, Prime Minister’s Office, however, the said letter only denotes that a request has been made to the FBR ‘to facilitate and determine the admissibility of the plant and machinery, under the relevant provisions of the law and to monitor the utilization of the machinery, equipment in the project by the company as per rules/procedures/SOP’s, applicable’. The foregoing, as evident, is of no help to the cause of the Petitioner.

23.In view of the foregoing discussion and keeping the cardinal principles governing the interpretation of fiscal statutes in mind i.e. there is no leeway or probability of any intendment for fiscal statutes and the manner of interpretation should be such, which undoubtedly or un-mistakenly comes into sight from the plain language of the exemption with the conditions laid down in it20. Intrinsically, the onus was placed upon the Petitioner to prove that its case falls squarely within the scope of the exemption, however, no such burden has been discharged. It is also well settled that if two reasonable interpretations of an exemption clause are possible, the one favoring the Revenue must be adopted. Conversely, if a case clearly falls within the exemption, the taxpayer cannot be denied the benefit on the basis of any supposed intention to the contrary21. As discussed above, the discharge of such an onus has gone abegging in the case in hand as there is nothing on the record to refute the factual findings rendered vide the Impugned Order that there is no mechanical linkage of the Pre-fabricated Building with the manufacturing process or the machinery installed by the Petitioner Zone Enterprise. Given the well-enunciated principle that grant of concession in the nature of exemption must be given strict interpretation and person seeking such exemption or benefit must satisfy all conditions for the exemption claimed and once required conditions are complied with, Collector of Customs, Model Customs Collectorate, Peshawar v. Waseef Ullah and others (2023 SCMR 503), Jamat-i-Islami Pakistan through Syed Munawar Hassan v. Federation of Pakistan through Secretary Law, Justice and Parliamentary Affairs (PLD 2000 SC 111) Cynamid Pakistan Ltd. v. Collector of Customs (Appraisement) through Assistant Collector Customs House, Karachi and others (PLD 2005 SC 495), Muhammad Ali and others v. Muhammad Ramzan and others (2002 SCMR 426), Oxford University Press v. Commissioner of Income Tax, Companies zone-I, Karachi and others (2019 SCMR 235)

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exemption available to a person cannot be arbitrarily denial or withdrawn by the concerned authorities22, We are of the opinion that the Petitioner has failed to set up a case of exemption, thus, no case for interference is made out for setting aside the Impugned Memorandums and the Impugned Order dated 07.10.2022.

24.In view of the above, the Constitutional Petition in hand fails on merits and same is hereby dismissed.

(Hassan Nawaz Makhdoom) (Khalid Ishaq) Judge Judge

ANNOUNCED IN OPEN COURT ON 14.05.2026

Judge Judge

APPROVED FOR REPORTING.

Judge Judge Awais!

Commissioner of Income Tax/Wealth Tax Companies Zones, Peshawar v. River Side Chemicals (Pvt.) Ltd. Gadoon (PLD 2008 SC 446)