ISLAMABAD: The Supreme Court held that the relevant tax period for purposes of Section 66 of the Sales Tax Act, 1990 can only mean such period (or periods) after the period of exemption is over.
Section 66 of the Act at the relevant time (ie, end August/beginning September 2001) when the application was filed by the respondent was; “Refund to be claimed within one year.— No refund of tax claimed to have been paid or over paid through inadvertence, error or misconstruction or refund on account of input adjustment not claimed within the relevant tax period, shall be allowed, unless the claim is made within one year of the date of payment:
Provided further that in a case where the refund has become due on account of any decision or judgement of any officer of Sales Tax or court or the Tribunal, the period of one year shall be reckoned from the date of judgement or decision of such officer, court or Tribunal.”
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The judgment authored by Justice Munib Akhtar said: “When taxable supplies are being made, even if manufactured during the period of exemption but not sold during such period, become “taxable goods” and their supply becomes a “taxable supply”. It is only in relation to such a period (or periods) that any adjustment of input tax, including the balance available at the end of the period of exemption, becomes possible and it therefore becomes meaningful to inquire whether the taxpayer has so adjusted it.
He stated that since the “relevant tax period” did not (and could not) exist in the period of exemption no date within that period can serve as the starting point of the limitation envisaged by Section 66. Put differently, the end of the period of exemption does not mark the last day for the start of limitation since up to that point in time there was in law no “time period”. Rather, if at all any question of limitation can arise under the section, the date for its starting would (and could only) lie in the successive “time periods” that become operative after the end of the exemption.
He wrote that for purposes of computing limitation, time does not begin to run from the end of the period of exemption or any other date prior thereto located within the said period.
In the present case, the period of exemption ended on 05.09.2000 and the application for refund was made by end August/beginning September 2001. This was well within (or at most towards the end of) a period of one year from the end of the exemption. It follows that since limitation did not begin to run from 05.09.2000 (or any date prior thereto) but rather (if at all) from the successive time periods after that date, the claim was well within time and could not be defeated or denied on the ground of being time barred. Accordingly, the respondent taxpayer was entitled to the remaining Rs. 64,39,608/-, as correctly concluded by the Appellate Tribunal and the High Court.
The basic question before the Court was how is s. 66 to apply in relation to the tax paid by a person, otherwise claimable as input tax, if there is an intervening period in which the supplies made by the person are subject to an exemption under s. 13?
The respondent taxpayer is in the business of the manufacture and sale of cement. In or around end-August/beginning-September, 2001 he, with reference to Sections 7, 8 and 66 of the 1990 Act, made a claim for sales tax “refund” (in the sum of Rs93,99,551/-), by way of input tax adjustment, of the tax paid on inputs acquired during the period of exemption, as represented by the stocks as available at the end of the said period (ie, as on 05.09.2000). This claim was allowed in part (to the tune of Rs29,59,943/-) but rejected for the remainder (i.e., Rs64,39,608/-) on the ground that the latter portion related to a period more than one year before the relevant date(s) and was thus time barred under s. 66.
The respondent appealed the order ultimately made to the Appellate Tribunal, which decided in its favor. The Commissioner (referred to herein after as the “Department”) filed a tax reference in the High Court, which was dismissed by means of the impugned judgment. It is against this dismissal that the present leave petition has been presented in this court.
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