Section 8(1)(ca) of ST law: It ‘can’t be invoked independently in isolation’: SHC

KARACHI: Sindh High Court (SHC) on Friday ruled that section 8(1)(ca) of Sales Tax Act, 1990 can’t be invoked or applied independently in isolation.

“It cannot be invoked or applied independently in isolation and has to be read with Section 8A; and can only be invoked against the petitioners, once an exercise has been carried out and a conclusive finding has been arrived at against them pursuant to section 8A of the Act,” a division bench of SHC comprised of Justice Junaid Ghaffar and Justice Agha Faisal declared in an order.

The bench didn’t declare provision of s.8(1)(ca) of the Act as being ultra vires or unconstitutional while giving the verdict in the pleas were urging the court to declare Section 8(1)(ca) of the Sales Tax Act, 1990 (“Act”) as ultra vires to the constitution. Petitions were filed in the court by Total Parco Pakistan Limited, Kirthar Pakistan B.V., Proctor & Gamble Pakistan Limited, ENI Pakistan Limited and others.

According to the plea of the petitioners, when they purchase goods from suppliers/active taxpayers, they are required to make payment of the goods as well as the amount of the sales tax involved and once that is paid in terms of relevant provisions of the Act including Section 73 ibid, they are then issued a sales tax invoice on the basis of which they claim input tax adjustment in their monthly sales tax returns. Once it is done, according to them, the suppliers no more remain in their control, and if ultimately a default occurs in depositing the sales tax, input tax claimed by them is then being denied on the basis Section 8(1)(ca) of the Act which according to them is ultra vires, confiscatory, unreasonable and beyond the mandate of the act read with the constitution of the country. On the other hand, the respondents argued that a mere show-cause notice has been issued; hence, petitions are not maintainable; that it is settled that all efforts are to be made to save the law rather than to declare it ultra vires; that input tax is not a fundamental right, but only a statutory right.

The court in its order observed section 8 generally restricts such claim of input tax and for the present purposes it is disallowed in terms of section 8(1)(ca), whereas, 8A9 provides for initiating a joint action against the persons so involved in it. At the same time Section 7310 of the Act requires a purchaser to follow certain guidelines while claiming any such input tax. Therefore, the court didn’t declare the provision of s.8(1)(ca) of the act as being ultra vires or unconstitutional. “We would rather save it and read it down, in the manner, that it cannot be invoked or applied independently in isolation and has to be read with Section 8A; and can only be invoked against the petitioners, once an exercise has been carried out and a conclusive finding has been arrived at against them pursuant to section 8A of the Act,” the order stated.

Copyright Business Recorder, 2021