FEDERAL BOARD OF REVENUE vs DEWAN SALMAN FIBER LTD — 2023 SCMR 1871 SUPREME-COURT

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FEDERAL BOARD OF REVENUE VS DEWAN SALMAN FIBER LTD. S. 13(1)---Protection of Economic Reforms act (XII of 1992), S.6---SRO 462(I)/88 dated 26.06.1988 ('SRO 462/88')---SRO 482(I)/92 dated 14.05.1992 ('SRO 482/92')---SRO 529(I)/88 dated 26.06.1988 (SROs 529/88)---SRO 580(I)/91 dated 27.06.1991 (SRO 580/91)---Manufacturer of polyester staple fiber (PSF) in North-West Frontier Province (now Khyber Pakhtunkhwa)---Exemption from sales tax, removal of---Sales tax imposed on raw materials i.e. mono-ethylene glycol (MEG) and pure terephthalic acid (PTa)---Legality---Whether SRO 462/88 came within the ambit of section 6 of the Protection of Economic Reforms act, 1992--- [Per Munib akhtar, J. (Majority view): SRO 462/88 provided exemption from sales tax on the import/supply of MEG and PTa, the raw materials of PSF---SRO 462/88 superseded SRO 652(I)/81 dated 25.06.1981---Perusal of the latter notification shows that the exemption for MEG and PTa had also been given therein---SRO 462/88 was superseded by SRO 482/92, and the latter notification did away with the exemption for MEG and PTa---Protection of Economic Reforms act, 1992 ('the 1992 act') did not as such apply to SRO 462/88 in and of itself---This is so for two separate and distinct reasons---Firstly, SRO 462/88 was issued before 07.11.1990, the date specified in the definition of "economic reforms" for purposes of the 1992 act---Secondly, it was not a time bound notification, i.e., the exemption granted in terms thereof did not operate over any specific period---High Court erred materially in coming to the conclusion that the company was entitled to the relief that it sought in respect of SRO 482/92---To such extent the impugned judgment of High Court was set-aside]---[Per Yahya afridi, J. (Minority view): While examining the claim of the respondent-company in respect of SRO 482/92, the Majority view has not adverted to doctrines of vested rights and promissory estoppel and the well-established principle that what cannot be done directly is not permissible to be done indirectly, and has limited the judicial review of the act of the Government only to the extent of examining its legal power to issue the said SRO, within the scope of act of 1992---admittedly, SRO 482/92 withdrew the exemption of sales tax on raw material earlier granted vide SRO 462/88, and thus, the payment thereof became an additional cost for the respondent-company, as it could not be adjusted against the output tax, which had been exempted vide SRO 529(I)/88 dated 26.06.1988 (SROs 529/88) and SRO 580(I)/91 dated 27.06.1991 (SRO 580/91)---More importantly, the incentives offered for establishing an industrial unit in a less developed area had in effect been reduced to naught, and that too, after the respondent-company had done all that was required on its part, to acquire vested right to avail the benefit under the said SROs---Such impugned steps were in effect respondent-company specific, and not only adversely affected its vested rights, but blatantly benefited the commercial interests of the competitors---More so, the Government also defied the raison d'etre of the act of 1992---By taking such unconscionable steps, like issuing SRO 482/92, the very object of inviting and protecting foreign investments in less developed areas of the country had been blatantly thwarted---SRO 482/92 cannot be made applicable to the respondent-company in taking away indirectly the exemption of sales tax granted to it by SROs 529/88 and SRO 580/91; and SRO 482/92 shall not apply to the respondent-company during the period of exemption from sales tax provided under SROs 529/88 and SRO 580/91]---appeals were partly allowed.

FEDERAL BOARD OF REVENUE vs DEWAN SALMAN FIBER LTD — 2023 SCMR 1871 SUPREME-COURT

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