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. Ss. 3(1) & 3(2)---Protection of Economic Reforms act (XII of 1992), S. 6---SRO 515(I)/95 dated 14.06.1995 ('SRO 515/95')---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 515/95 came within the ambit of section 6 of the Protection of Economic Reforms act, 1992---[Per Munib akhtar, J: SRO 515/95 reduced the rate of sales tax on the supply of PSF to 10%---at that time (14.06.1995) the rate was 15%---This notification did not, as such, apply to the company itself since the latter in any case enjoyed a complete exemption from sales tax for the specified periods in relation to its units---Rather, it applied in relation to its competitors---Now, SRO 515/95 was issued under subsection (2) of section 3 of the Sales Tax act, 1990 ('the 1990 act'), as those provisions then stood---at that time, this subsection (in its clause (a)) allowed the Federal Government, by notification in the Official Gazette, to provide that the supplies of goods as specified therein were to be charged at such higher or lower rates as set out in the notification, i.e., the specified rates could be greater or less than the statutory rate given in section 3(1)---and that is what was done by SRO 515/95---It was not an "exemption" notification, providing only for a rate of sales tax less than 15%---For many of the goods specified therein, the rate was in fact enhanced beyond and above the statutory rate---SRO 515/95 was therefore of a character somewhat different from a simple exemption notification---For the supply of some goods (such as PSF) it provided a benefit but for others it acted in a negative manner---It is therefore not easy to "fit" this notification into the scheme of section 6 of the Protection of Economic Reforms act, 1992 ('the 1992 act')---However, even if one focuses only on the supply of PSF (and those goods where the rate was reduced below that provided in the statute) the notification did not come within the scope of section 6---This is so because it did not provide for any time-bound measure---High Court erred materially in coming to the conclusion that the company was entitled to the relief that it sought in respect of SRO 515/95---To such extent the impugned judgment of High Court was set-aside]---[Per Yahya afridi, J: as to SRO 515/95, the doctrines of vested rights and promissory estoppel do not affect the exercise of its legal power by the Government to reduce the rate of sales tax on final product for the competitors, as the Government had not made any representation to the respondent-company that it would not reduce the rate of sales tax on final product for the competitors]---appeals were partly allowed.

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

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