Cir vs M/S Muhammad Rashid Javed

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, MULTAN BENCH,

MULTAN

JUDICIAL DEPARTMENT

I.T.R. No.139 of 2025

Commissioner Inland Revenue, Sahiwal Versus Muhammad Rashid Javed

JUDGMENT

Date of hearing: 22.09.2026.

Applicant by: Mr. Abdul Razzaq Raja, Advocate.

Respondent by: Ch. Faheem Akbar, Advocate.

MUHAMMAD SAJID MEHMOOD SETHI, J.:- This consolidated judgment shall decide the instant Reference Application along with connected Reference Applications, i.e. ITR Nos.118 and 140 of 2025, as common questions of law and facts arise in all these matters.

2.Through the instant Reference Application and connected Reference Application No.140 of 2025, filed under section 133(1) of the Income Tax Ordinance, 2001 (“the Ordinance”), the applicant- department has called in question the order dated 23.06.2025 passed by the learned Appellate Tribunal Inland Revenue, Multan Bench, Multan, whereby the appeals preferred by the respondent-taxpayer were accepted and the concessional rate of minimum tax under section 113 of the Ordinance was extended to him on the premise that cement falls within the category of “fast moving consumer goods”. Through connected ITR No.118 of 2025, the applicant- department has assailed the order dated 23.05.2025 passed by the learned Appellate Tribunal Inland Revenue, Multan Bench, whereby the appeal preferred by the department against the order passed by the learned Commissioner Inland Revenue (Appeals), Multan, was dismissed.

3.The following questions of law have been proposed for determination:

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i. Whether, in the facts and circumstances of the case, the learned ATIR was justified in holding that the respondent was entitled to the concessional rate of minimum tax under Serial No.2(a) of Division IX of Part I of the First Schedule to the Income Tax Ordinance, 2001, notwithstanding that the taxpayer was not established to be a distributor of cement and, therefore, did not qualify for the concessional rate prescribed thereunder?

ii. Whether, in the facts and circumstances of the case, the learned ATIR was justified in treating cement as “fast moving consumer goods” within the meaning of clause (22A) of section 2 of the Ordinance, notwithstanding the statutory requirement that such goods must constitute “consumer goods”, be supplied in retail marketing according to the daily demand of a consumer and fall within the statutory definition applicable to the relevant tax year?

4.Brief facts of the instant Reference Application are that the respondent, an individual carrying on business under the name and style of Awais Traders Cement Dealer, G.T. Road, Lakar Mandi, Chichawatni, filed his income tax return for Tax Year 2018, declaring turnover of Rs.10,935,665/-. The return was deemed to be an assessment order under section 120 of the Ordinance. Subsequently, the Additional Commissioner Inland Revenue formed the opinion that the deemed assessment was erroneous insofar as it was prejudicial to the interest of revenue, as the respondent had failed to discharge minimum tax under section 113 at the applicable rate. Proceedings under sections 122(5A) and 122(9) of the Ordinance were accordingly initiated. The respondent claimed the concessional rate of 0.2% prescribed in Serial No.2(a) of Division IX of Part I of the First Schedule on the assertion that he was a distributor of cement and that cement constituted “fast moving consumer goods”. The assessing officer did not accept the claim and charged minimum tax at the rate of 1.25% of the declared turnover. The learned Commissioner Inland Revenue (Appeals), Sahiwal, vide order dated 12.01.2022, upheld the treatment, observing that cement did not fall within the ambit of “fast moving consumer goods”. The rectification application filed by the respondent was subsequently dismissed vide order dated 13.09.2022. The respondent then approached the learned Appellate Tribunal Inland Revenue, which, vide impugned order dated 23.06.2025, accepted the appeal. The learned Tribunal principally reasoned that cement is purchased by the end consumer for construction and repair

I.T.R. No.139 of 2025 & connected cases

of buildings and, since its effectiveness after opening a bag is limited, it could not be regarded as a durable good. On that basis, it concluded that cement fell within the expression “fast moving consumer goods” and that the respondent was entitled to the concessional rate of 0.2%. The connected ITR Nos.118 and 140 of 2025 pertain to Tax Years 2017 and 2019, respectively, and involve the same controversy concerning the entitlement to the concessional rate of minimum tax in respect of dealing in cement.

5.Learned counsel for the applicant-department contends that the learned Tribunal failed to appreciate that the concessional rate under Serial No.2(a) is available only where the taxpayer satisfies the statutory description of a “distributor” dealing in specified goods. According to him, the respondent was described in the relevant record as a dealer and failed to establish his status as an authorized distributor through any distribution agreement, sales invoices, books of account, prescribed commercial arrangements or other cogent documentary evidence. It is further contended that the learned Tribunal erroneously treated the absence of durability as sufficient to bring cement within the statutory definition of FMCGs, without examining whether cement first answered the statutory description of “consumer goods” and whether it was supplied in retail marketing according to the daily demand of a consumer.

6.Conversely, learned counsel for the respondent supports the impugned order and submits that the respondent was dealing in cement as a distributor and that cement cannot be treated as a durable good because, once a bag is opened, its utility is substantially affected within a short period. It is further contended that cement is purchased by consumers for construction and repair of houses and buildings and, therefore, falls within the statutory expression “fast moving consumer goods”.

7.We have heard learned counsel for the parties and examined the available record as well as the impugned orders. The controversy, in substance, involves two distinct but interconnected questions: first, whether the respondents established the status of “distributors”

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contemplated by Serial No.2(a) of Division IX of Part I of the First Schedule; and second, whether cement, for the relevant tax years, satisfied the statutory definition of “fast moving consumer goods”. Both questions must be answered from the statutory language applicable to the respective tax years. Section 113 of the Ordinance imposes minimum tax with reference to the turnover of a person where the tax payable for the relevant tax year is less than the prescribed minimum tax. The First Schedule, however, provides different rates for different categories of taxpayers. At the relevant time, Serial No.2(a) of Division IX of Part I prescribed a concessional rate for “Distributors of pharmaceutical products, fast moving consumer goods and cigarettes”. The language of the provision is significant. The concession was not available merely because a taxpayer happened to trade in a particular commodity. The provision identified both the class of person and the nature of goods in respect of which the concession could be claimed. Consequently, a taxpayer seeking benefit of Serial No.2(a) was required to establish, cumulatively, that he fell within the statutory category of a “distributor” and that the goods dealt in by him answered the description of the specified goods. These are distinct statutory conditions and satisfaction of one cannot dispense with the other. The distinction between a “dealer” and a “distributor” is, therefore, not merely semantic. Where the legislature has employed different expressions within the same statutory scheme, each expression is ordinarily to be given its own meaning and effect. The nomenclature adopted by the taxpayer cannot, by itself, determine his statutory status; rather, the substance of the underlying commercial relationship must be examined.

8.In the present case, the impugned order does not identify any cogent material establishing that the respondent was a distributor in the statutory sense. There is no reference to any distribution agreement between the respondent and D.G. Khan Cement Company Limited, nor has the learned Tribunal identified particular sales invoices, books of account, purchase arrangements, prescribed

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margins, evidence of onward distribution to retailers or other material demonstrating the nature of the respondent's commercial relationship with the manufacturer or the downstream market. The mere description of the respondent as a “cement distributor” could not, by itself, satisfy a statutory condition which required the factual status of the taxpayer to be established from the record. It is settled that a person claiming a concessional or preferential rate under a fiscal statute must bring his case within the express parameters of the provision. This does not mean that any particular form of evidence is indispensable where the statute prescribes none; nevertheless, the requisite status must emerge from reliable material on record. In the absence of such material, the Tribunal could not lawfully assume distributor status merely from the taxpayer's assertion or description. The first proposed question is, therefore, answered in the negative. The learned Tribunal was not justified in extending the concessional rate without first recording a sustainable finding, supported by the available evidence, that the respondent satisfied the statutory requirement of being a distributor. The matter, however, does not end here, because entitlement to the concession also depends upon the nature of the goods dealt in by the taxpayer.

9.Clause (22A) of section 2 defines “fast moving consumer goods” as consumer goods which are supplied in retail marketing as per the daily demand of a consumer, excluding durable goods. The definition is composite and its constituent requirements must be read together. It is not enough for a commodity merely to be non-durable. The goods must first answer the statutory description of “consumer goods”; they must be supplied in retail marketing according to the daily demand of a consumer; and, in addition, durable goods stand excluded. The learned Tribunal, however, proceeded principally on the basis that cement is not a durable good because its effectiveness diminishes after a bag is opened. With respect, this approach gives determinative significance to only one aspect of the statutory definition while leaving its other essential elements substantially unexamined. The exclusion of durable goods does not operate as a

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positive definition of FMCGs. Absence of durability, by itself, cannot transform a commodity into an FMCG. Otherwise, every perishable or short-lived commodity, irrespective of its nature, purpose and manner of use, could potentially fall within the expression. Section 2(13AB), which defines “consumer goods”, assumes central importance. The provision draws a statutory distinction between goods “consumed by the end consumer” and goods “used in the production of another good”. Thus, the relevant inquiry is not merely who purchases the commodity, but whether the commodity itself is consumed by the end consumer or is utilized as an input in producing or creating another good.

10.Cement, by its ordinary commercial and functional character, is a construction material. It is ordinarily utilized as an input in the construction, repair or completion of a building or other structure. Once incorporated into concrete, masonry, plaster, foundations or other construction work, it becomes an integral component of the resulting structure and no longer remains an independently consumable commodity. Its functional use is, therefore, materially different from goods which are ordinarily consumed by the end consumer as such. The fact that an individual may purchase cement for construction or repair of his house does not, by itself, alter this statutory character. The identity of the purchaser cannot be treated as the sole criterion. An end consumer may purchase an input for his own project without that input thereby becoming a “consumer good” in the statutory sense. The determining consideration is the nature and use of the commodity. Where the commodity is used in producing or creating another good or structure, the statutory distinction drawn by section 2(13AB) becomes operative. This interpretation is also consistent with the subsequent authoritative pronouncement of the Hon'ble Supreme Court of Pakistan in The Commissioner of Inland Revenue, Peshawar v. Messrs Sufi Tahir Nadeem (2025 SCMR 1687). While considering sections 2(13AB), 2(22A) and 113 of the Ordinance, the Hon'ble Supreme Court emphasized that the essential inquiry is whether the goods are meant for direct consumption by the

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end consumer rather than being used in the production of another good. The Court further observed that goods which constitute a component of other consumer products and are meant primarily for industrial or commercial use do not satisfy the statutory definition of FMCGs.

11.The above principle is relevant to the present controversy, not because cement is identical to the goods examined by the Hon'ble Supreme Court, but because the statutory question is the same: whether the commodity, in the form in which it is dealt in, is itself consumed by the end consumer or is utilized as an input in the creation of another good or structure. Cement ordinarily falls into the latter category. Its incorporation into a building or structure is a process of utilization as a construction input rather than consumption of the commodity as such. The other constituent of section 2(22A), namely, the requirement that the goods be “supplied in retail marketing as per daily demand of a consumer”, also requires meaningful consideration. Statutory words are presumed to have been employed for a purpose and cannot be treated as surplusage. Although “daily demand” should not be construed so literally as to require an actual purchase on every single day, the expression nevertheless conveys the character of recurring and routine consumer demand. Cement, by contrast, is ordinarily purchased according to the requirements and stages of a construction or repair project. Its procurement is linked to the commencement, progress and requirements of such activity rather than to a recurring pattern of ordinary household consumption. Thus, the mere fact that cement may be available for purchase through retail outlets does not, without more, bring it within the statutory expression “fast moving consumer goods”. Retail availability is only one part of the statutory formulation. The manner and purpose of consumption, the character of the goods as “consumer goods” and the requirement of supply according to the daily demand of a consumer must also be satisfied. The learned Tribunal's reliance upon the limited utility of an opened bag of cement is consequently misplaced. The durability test operates

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only as an exclusionary element within the statutory definition. It cannot substitute for the positive requirements of sections 2(13AB) and 2(22A). The Tribunal was therefore required to determine whether cement, in its ordinary commercial use, constituted goods consumed by the end consumer rather than goods used as an input in the production or creation of another good or structure. The impugned order does not undertake that statutory inquiry in the manner required.

12.The statutory scheme must further be considered in the context of the respective tax years. The present cases relate to Tax Years 2017, 2018 and 2019. Clause (22A) was inserted in section 2 through the Finance Act, 2015 and, as originally inserted, defined “fast moving consumer goods” as consumer goods supplied in retail marketing as per the daily demand of a consumer, without any reference to durable goods; the exclusion of durable goods was introduced through the Finance Act, 2017. It is a fundamental principle of income tax law that each tax year is a separate unit of account and taxation, so that the definition must be applied as it stood in the tax year in question and a subsequent amendment does not operate retrospectively unless expressly so provided or necessarily intended. Consequently, the durable-goods exclusion cannot be read into Tax Year 2017, and it applies from Tax Year 2018 onwards. This does not, however, affect the outcome, because the conclusions recorded above rest principally on the requirements of “consumer goods” under section 2(13AB) and of supply according to the daily demand of a consumer, both of which formed part of the statutory scheme for all three tax years, and not on the exclusion of durable goods. The Hon'ble Supreme Court in the case of Messrs Sufi Tahir Nadeem, supra, has also considered the effect of this amendment and treated the statutory definition applicable to the relevant tax year as determinative. Accordingly, the entitlement of the respondents must be examined with reference to the law applicable in each respective tax year and not on the basis of a generalized or dictionary meaning of FMCGs. It is a settled principle of fiscal interpretation that a taxing provision is to be construed according to its language, while a

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concession or preferential rate cannot ordinarily be enlarged beyond the class expressly contemplated by the legislature. At the same time, strict construction does not mean that words are to be read in isolation or that an interpretation is adopted which defeats a part of the statutory text. The Court's task is to give effect to the legislative language as a whole, without adding words to the statute or rendering any part of it redundant.

13.Applying the above principle, Serial No.2(a) cannot be construed as extending the concessional rate to every person dealing in a non-durable commodity. Likewise, section 2(22A) cannot be reduced to a proposition that every commodity which is non-durable and available in retail is necessarily an FMCG. The statutory requirements concerning the status of the taxpayer, the character of the goods and the manner in which they are supplied must operate conjunctively. The subsequent legislative treatment of cement also does not assist in enlarging the provision applicable to the tax years under consideration. Any subsequent amendment expressly extending concessional treatment to cement dealers, sub-dealers, wholesalers or retailers cannot be applied retrospectively unless the legislature so provides. Such subsequent legislation may demonstrate that Parliament subsequently chose to employ express language for cement or for categories of persons other than distributors, but it cannot be used to rewrite the earlier statutory provision or to supply an omission which the legislature had not made in the relevant period.

14.The cumulative effect of the statutory scheme is, therefore, that entitlement to the concessional rate required satisfaction of two independent conditions: first, the taxpayer had to establish that he was a “distributor” within the contemplation of Serial No.2(a); and second, the goods in which he dealt had to satisfy the statutory requirements of “consumer goods” and “fast moving consumer goods”. In the present cases, neither requirement has been established on the basis of the material identified in the impugned orders. The reasoning adopted by the learned Tribunal, namely, that cement is purchased by consumers for construction and repair and that its efficacy diminishes

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after opening a bag, does not sufficiently address the statutory distinction between goods consumed by the end consumer and goods used as an input in producing or creating another good or structure. Nor does it establish the requisite status of the respondents as distributors. The impugned orders, therefore, suffer from an error of law in extending the concessional rate without first satisfying the statutory conditions governing such benefit.

15.For the foregoing reasons, both proposed questions of law are answered in the negative i.e. in favour of the applicant-department and against the respondent-taxpayers. Consequently, the impugned orders passed by the learned Appellate Tribunal Inland Revenue, Multan Bench, Multan, insofar as they extend the concessional rate of minimum tax under Serial No.2(a) of Division IX of Part I of the First Schedule to the respondents, are set aside. The orders passed by the learned Commissioner Inland Revenue (Appeals), Sahiwal/Multan, as the case may be, are restored to the extent challenged before this Court. It is clarified that the above conclusion is confined to the statutory scheme applicable to Tax Years 2017, 2018 and 2019 and the material available on the respective records. Subsequent amendments concerning cement or extending concessional treatment to dealers, sub-dealers, wholesalers, retailers or other categories of persons have neither been applied retrospectively nor relied upon for determining the respondents' liability for the tax years in question.

16.The instant and connected Reference Applications are, accordingly, allowed in the above terms.

17.Office shall send a copy of this judgment under seal of the Court to the learned Appellate Tribunal Inland Revenue in terms of section 133(8) of the Income Tax Ordinance, 2001.

(Sultan Tanvir Ahmad) (Muhammad Sajid Mehmood Sethi) Judge Judge

APPROVED FOR REPORTING

Judge Judge

*Sultan*