| Citation(s) |
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| 2025 SLG 732 2025 SLD 732 = 2025 SCMR 1 = 2025 PTD 180 = 2025 PTCL 628 |
Civil Appeals Nos. 947 of 2002, 980, 981 and 982 of 2007 and 224 of 2010 and Civil Petition No. 246 of 2009, decided on 12th November, 2024. (Against the judgment dated 04.12.2001, passed by the Lahore High Court, Rawalpindi Bench, in C.A. No.66 of 1999; the judgment dated 29.11.2006, passed by High Court of Sindh, Karachi in S.S.T.R.As. Nos.142 and 172 of 2005; the judgment dated 25.03.2008, passed by the High Court of Sindh, Karachi in S.S.T.R.A. No.58 of 2007; and the judgment dated 28.11.2008, passed by the High Court of Sindh, Karachi in S.S.T.R.A. No.350 of 2007).
Present: Yahya Afridi, Syed Hasan Azhar Rizvi and Shahid Waheed, JJ
Ch. Muhammad Zafar Iqbal, Advocate Supreme Court assisted by Muhammad Abdul Hassan, Advocate for Appellants (in C.A. No.947 of 2002) Muhammad Siddique Mirza, Advocate Supreme Court for Appellants (in C.As. Nos.980-982 of 2007). Raja Muhammad Iqbal, Advocate Supreme Court for Appellants (in C.A. No.224 of 2010 and C.P. No. 246 of 2009). Salman Akram Raja, Advocate Supreme Court along with Malik Ahsan Mahmood, Advocate Supreme Court and Malik Ghulam Sabir, Advocate High Court for
Respondents (in C.A. No. 947 of 2002). Dr. Muhammad Farough Naseem, Advocate Supreme Court (via video link from Karachi) for
Respondents. Syed Naveed Amjad Andrabi, Advocate Supreme Court (in C.A. No.224 of 2010). Nemo for
Respondents (in C.A. No.246 of 2009). Malik Javed Iqbal Wains, Additional Attorney General for Pakistan for the Federation of Pakistan. Zubair Khan, Additional Commissioner, CTO, Lahore (via video link from Lahore) for the Department. Date of hearing: 2nd October, 2024.
The COMMISSIONER INLAND REVENUE, LEGAL ZONE, LARGE TAXPAYERS OFFICE, LAHORE and another---Appellants
VERSUS
Messrs MAYFAIR SPINNING MILLS LTD. and others---Respondents
Law: Sales Tax Act, 1990
Section: 7(1), 10 & 66
(a) Sales Tax Act (VII of 1990)---
----Ss. 7(1), 10 & 66---Taxable supplies---Input tax, adjustment of---Whether input tax deduction can be made under section 7 of the Sales Tax Act, 1990 in respect of goods which got destroyed by fire and which do not remain available for making taxable supplies----Contention of appellant-tax authority that the right to seek adjustment or refund is available only when the goods on which input tax was paid are used in further taxable activities for making taxable supplies, and not when those goods are consumed or destroyed---Validity---For a registered person to avail himself of the beneficial adjustment of input tax against output tax, section 7 of the Sales Tax Act, 1990 [as it was at the relevant time of the present case], mandates the following conditions: firstly, the input tax paid on purchases of inputs or raw materials must be intended for the purpose of making taxable supplies; secondly, the input tax paid must be for producing taxable supplies, irrespective of whether those taxable supplies have actually been made or are to be made in the future; thirdly, the input tax paid in a tax period is to be deducted from the output tax due for the same tax period and not against any future tax period---Words "taxable supplies made, or to be made" in section 7 do not limit the scope of the correlation between the purchase of the input/raw material and the actual manufacture or production of taxable supplies, that is the making of taxable supplies---Instead, they expressly expand its legal ambit to include input/raw materials intended for use in future for making taxable supplies---This explicit legislative intent to encompass future taxable supplies cannot be overlooked---In such circumstances, a registered person need not wait for the raw material, on which input tax has been paid, to be actually consumed in the manufacturing process before availing the adjustment against output tax---This interpretation aligns with sound commercial and manufacturing reasoning---There is no express requirement that the raw material, for which input tax is paid, must be actually used during the same tax period to qualify for adjustment---Denying such adjustment solely because the raw material has not been consumed during the same tax period contradicts the legislative intent---Section 8(1)(a) of the Sales Tax Act, 1990, which deals with scenarios in which input tax cannot be reclaimed or deducted, does not apply to cases where input/raw materials have been lost through fire.