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ISLAMABAD: The Supreme Court has suspended the Balochistan High Court (BHC) judgment regarding the refund of sales tax in view of Article 247(3) of the Constitution.

A three-judge bench headed by Chief Justice Umar Ata Bandial, and comprising 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, Appellate Tribunal, and the Commissioner Appeal had accepted the contention of taxpayer/Sherani traders and ordered for issuance of refunds. Sherani Traders imported timber from Afghanistan in the non-tariff area of Balochistan District Zhob and claimed sales tax refunds in view of Article 247(3) of the Constitution, that being exempt and non-tariff area, the law of sales tax has no application there.

Advocate Hafiz Ahsaan Ahmad Khokhar, representing the Federal Board of Revenue (FBR), argued that Sherani Traders failed to provide the relevant invoices and proof for such consumption in non-tariff areas to the taxing authorities.

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He contended that though the tax exemption was available under Article 247 (3) of the Constitution to PATA areas of Balochistan, but while claiming tax exemptions/refunds under the Sales Tax Act 1990 the taxpayer is legally obliged to fulfil the requirements of Sections 22, 23, and 73 of the Act 1990.

He submitted that the taxpayer has to show the documents and invoices for such consumption in support of his refunds claim to the tax authorities that the imported goods after importing from Afghanistan have been consumed in non-tariff area, adding in case he fails the taxpayer has no right to claim refunds. He stated that in the present case despite issuing notice to the taxpayer, he has failed to provide the documents and invoices in support of his claim.

Hafiz Ahsaan informed that the Commissioner Appeal, the Appellate Tribunal and the High Court while deciding the matter had relied upon the Supreme Court’s judgment 2003, adding this judgment was revisited by the apex court in 2008, therefore, the verdicts of all three forums are not sustainable in law and need to be set aside.

The counsel further said that in the instant matter the taxpayer had failed to fulfil the requirement and only relied on constitutional provision without supporting his claim of consumption in the non-tariff area of Zhob district.

Hafiz Ahsaan submitted that the three forums below have failed to appreciate that a company or a person derives income from business being carried out in taxable or nontaxable area is a question of fact which cannot be decided without holding a proper inquiry, for the purpose of tax liabilities and all other question regarding manufacturing, consumption in or outside of local limit etc including, non-taxable area both from taxable and non-taxable areas.

He said that the impugned judgments passed by the below forums area result of misreading and non-reading of the material points of law and facts of the subject cases and have failed to take into account the principle of law.

The bench, after hearing the arguments, suspended the BHC’s judgment and passed leave granting order on the FBR appeal.

Copyright Business Recorder, 2022


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