D.G. KHAN CEMENT COMPANY LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 424 LAHORE-HIGH-COURT-LAHORE

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D.G. KHAN CEMENT COMPANY LIMITED VS FEDERAL BOARD OF REVENUE Ss. 7, 8 & 11(2)---Federal Board of Revenue Act (IV of 2007), Ss.4(1) (a) & 4(1) (k)---Adjustment/refund of input tax, exclusion of---Taxable activity/supply of the registered person---Scope---Petitioner/Company assailed Show-Cause Notice/Notice issued by FBR / Respondent under S. 11(2) of the Sales Tax Act, 1990 (the "1990 Act") relying on the case Nishat Mills Limited v. Federation of Pakistan and others (2020 PTD 1641), in which the Assessing / Adjudicating Officer was directed to interpret Ss. 8(1)(h) & (i) of the Sales Tax Act, 1990, on case to case basis after determining facts of each case without prejudice---Whether the inputs had been utilized for the purpose of taxable supplies or not---Held, that provisions of S. 8 of Sales Tax Act, 1990 manifest that the exclusion of adjustment/refund of input tax does not have a nexus with the taxable activity/supply of the registered person and parameters regarding adjustment of input tax are given in subsections (a) to (m) of the S. 8 of the Act, 1990---Mechanism provided in S. 8 will be read together with the provisions contained in Ss. 2 & 7 of Act 1990 when such kind of exercise regarding input tax is carried out by the competent authority---Scope of impermissibility concerning the adjustment of input tax with reference to the scope of the word "purpose" and/or "direct use" in production or manufacture of taxable goods/supplies has already been distinguished by a Division Bench of (Lahore) High Court---Then the only point involved in the matter is whether the inputs have been utilized for the purpose of taxable supplies or not and stance of the petitioners is that the items, on which input tax has been claimed by them, can only be used or have been used for the industrial establishment of the petitioner/Company---Federal Board of Revenue (FBR) in terms of Ss. 4(1) (a) & (k) of the Federal Board of Revenue Act, 2007, has to act in implementing the provisions of all fiscal laws, by (i) taking appropriate action; (ii) making policy; and (iii) issuing rules and regulations or guidelines in a clear, transparent, effective and expedient manner---Federal Board of Revenue (FBR) as a regulatory body has to deal with all the tax related affairs under relevant provisions of the 2007 Act---Petitioner in response to show-cause notice has specifically made request, after few days, to the respondents to visit manufacturing unit by deputing a team but this exercise has not been done so far---Notably, the issue-in-hand (whether the inputs have been utilized for the purpose of taxable supplies or not) can only be conveniently resolved if an on-site/physical verification of the utilized inputs of Petitioner No.1 is made, which is also the statutory mandate of Sales Tax Act, 1990, and even otherwise there is no harm in law if such exercise is done for the entire satisfaction of both the petitioner and the revenue hierarchy, before a final decision is rendered---Thus, respondents are directed to decide the matter after constitution of a team of the qualified/expert persons to attain an on-site/physical verification clarifying the fact whether the items, on which input tax has been claimed by petitioner has been done strictly as per provision of the Act or not and adjudicating authority will finally adjudicate the matter after taking into consideration the legal points, relevant provisions of Sales Tax Act, 1990, and the Federal Board of Revenue Act, 2007 as well as the judgment passed in Nishat Mills Limited case, within the prescribed period provided under the law---Constitutional petition was disposed of accordingly.

D.G. KHAN CEMENT COMPANY LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 424 LAHORE-HIGH-COURT-LAHORE

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