Falling within definition of ‘capital equipment’: Firefighting equipment entitled to duty, GST exemption: SHC

ISLAMABAD: The Sindh High Court (SHC) has declared that the firefighting equipment, which falls within the definition of ‘capital equipment’, is entitled to exemption from customs duties and sales tax at the import stage.

According to a judgement of the SHC, the petitioner company has contended that it had imported certain consignments consisting of firefighting and lightning equipment and claimed exemption from customs duty and sales tax under SRO No. 41(I)/2009, which was denied by the Customs Department. However, on the request of the petitioner, the goods were released against bank guarantees for the differential amount of duties and taxes, and the matter was referred to the Federal Board of Revenue (FBR).

The FBR had endorsed the viewpoint of the Customs Collectorate and subsequently, a notice was issued seeking encashment of bank guarantees pertaining to six different consignments. According to him, the imported goods are covered by the definition as provided in the SRO, whereas, the factory is located in a Special Economic Zone and the concerned province has also certified the list of equipment. Hence, the petitioner is entitled for the benefit of the claimed SRO.

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On the other hand, the Collectorate has opposed that the equipment in question does not fall within the definition of machinery as provided in the SRO, whereas, in the year 2019 the said item was inserted under HS Code 9917; hence, the benefit cannot be extended for the earlier imports.

Similarly, Assistant Attorney General has also opposed that in the definition of machinery, the equipment are also defined and such equipment is only entitled for exemption if it is operated by power of any description and is used in an industrial process; hence, no case for the claimed concession has been made out.

The SHC judgement said that it appears that the petitioner has set up an industry in the Special Industrial Zone, Faisalabad, Punjab and imported 6 different consignments of firefighting and lightning equipment and its claim of exemption under SRO.41 was denied by the respondent-Collectorate; however, on the representation of the petitioner, the goods were released against bank guarantee.

The SHC judgement added, “In view of such position, for the present purposes, we are not required to interpret that whether the equipment in question falls within the definition of machinery as provided in the SRO in question or not. Admittedly, the goods in question are equipments and are independently covered for exemption as being capital equipment. For these reasons we are unable to agree with the interpretation of the Respondent Collectorate/FBR for denying exemption to the petitioner under the SRO in question”.

In view of hereinabove facts and circumstances of the case, this petition is allowed by declaring that the firefighting equipment as well as lighting equipments covered by this petition fall within the definition of capital equipment under SRO 41 and therefore, entitled for exemption from customs duties as well as sales tax as provided therein. As a consequence, thereof, the impugned notice as well as letters duly endorsed FBR by confirming the said opinions are hereby set aside. The bank guarantee furnished by the petitioner stands discharged accordingly, the SHC added.

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