Utility bills of unregistered flour mills: SC upholds FBR authority to impose taxes

ISLAMABAD: The Supreme Court of Pakistan has upheld the decision of the Federal Board of Revenue (FBR) for charging further sales tax and extra sales tax on utility bills of unregistered flour mills.

According to a judgment of a three-member bench of the apex court, these petitions arise out of the orders passed by the Lahore High Court (LHC) relating to SRO 509(I)/2013 dated 12.06.2013.

The respondent flour mills challenged the SRO, assailing not only its vires but also the requirement of their registration under the enabling provisions of the Sales Tax Act, 1990. The matter was decided by the High Court, and declared that further tax and extra tax cannot be levied on and charged from the petitioners (flour mills).

‘Further sales tax or extra tax’: FBR fails to deal with legal issue of chargeability

The said decision of the High Court was challenged in the intra-court appeals (ICAs), which were finally decided in favour of the respondent flour mills vide the impugned orders.

Reliance was placed by the Division Bench of the High Court on Messrs Al-Zarina Glass Industries vs. Federation of Pakistan and others (2018 PTD 1600) wherein it was held by the Sindh High Court that “where the taxable goods were exempt under section 13 of the Sales Tax Act, 1990 (the Act) the person manufacturing them was not required to seek, registration with the department and thus could not be burdened with levy of further tax and extra tax.”

The revenue department (FBR), being aggrieved by the impugned orders of the Division Bench in the ICAs, has challenged the same before the Supreme Court in the present petitions. The respondent taxpayers, on the other hand, relied upon another judgment of the SCP in the case of Arif Ice Factory.

The SC bench headed by the Chief Justice has found the judgment relied upon by the taxpayer distinguishable and held that we have examined the judgment of the Arif Ice Factory and note that the issue therein pertained to further tax and extra tax under Section 3(1A) of the Sales Tax Act, 1990, and was not specifically related to the registration of the taxpayer.

In fact, this Court said in its order, “In our opinion, the judgment in the cited case of Commissioner Inland Revenue v ACRO Spinning and Weaving Mills Ltd is also applicable herein as that case and the instant case both deal with non obstante clauses, albeit different provisions of the Act. We are not inclined to take a view different from the one earlier taken by this Court in the said case. Further tax and extra tax under section 3(1A) of the Act could not have been imposed on the said respondents, since admittedly they were ice manufacturers and were exempt till item 27 of the Sixth Schedule was omitted.”

Therefore, leave to appeal is declined and, consequently, this petition is dismissed, SC ordered.

In view of the recent judgment of this Court in Civil Appeal No. 2019/2016, etc., dated 15.09.2022, we think that the High Court erred in deciding the matter without considering the applicable provisions of law.

Consequently, these petitions are converted into appeals, allowed, and the impugned orders are set aside, the SC order added.

Copyright Business Recorder, 2025