GOVERNMENT JALLO ROSIN & TURPENTINE FACTORY, LAHORE vs COMMISSIONER OF SALES TAX, LAHORE ZONE, LAHORE
These three petitions arise from orders of the Lahore High Court refusing to stay the recovery of sales tax assessed on the petitioner, a commercial enterprise of the Provincial Government manufacturing rosin and turpentine, under the Sales Tax Act, 1951. The petitioner challenged the tax assessment on constitutional grounds and filed references before the High Court, subsequently seeking a stay of recovery of the tax demand pending the outcome of the references. The High Court dismissed the stay applications, holding that the Interim Constitution provision invoked had no application and that subsection (7) of section 17 of the Sales Tax Act explicitly mandates that tax shall be payable in accordance with the assessment notwithstanding any reference to the High Court. Upon further appeal, the Supreme Court of Pakistan addressed the core legal question of whether the recovery of assessed tax should be stayed pending reference disposal. The Court held that the clear and mandatory provisions of subsection (7) of section 17 preclude granting a stay against tax recovery despite any potential financial hardship to the enterprise. The petitions were accordingly dismissed.
- Whether the High Court can stay the recovery of sales tax pending a reference under section 17 of the Sales Tax Act, 1951?
- Does subsection (7) of section 17 of the Sales Tax Act, 1951 mandate the payment of tax in accordance with the assessment notwithstanding a pending reference?
- Can financial hardship justify the stay of tax recovery contrary to express statutory provisions?
- Section 17, Sales Tax Act 1951
- Section 17(7), Sales Tax Act 1951
- Section 151, Code of Civil Procedure 1908
- Article 201, Interim Constitution of Pakistan 1972
- Article 137, Interim Constitution of Pakistan 1972
ORDER
1. MUHAMMAD GUL, J.-These three petitions are from three orders of a Division Bench of the Lahore High Court, each dated 4-7-1972, refusing to stay the recovery of sales tax assessed on the business and sale of certain goods by the petitioner under Sales Tax Act, 1951 (Act III of 1951).
2. The petitioner is a commercial enterprise of the Provincial Government wherein rosin and turpentine are manufactured and marked for sale. The Sales Tax Officer, Companies Circle III, Lahore, assessed the petitioner to sales tax in the sum of Rs.5,83,985 for the years 1962-63, 1963-64 and 1964-65 each, despite the petitioner's objection that its business was exempt from the payment of sales tae in view of the provisions of Article 137 of the 19,,2 Constitution. The petitioner's appeals to the Assistant Commissioner Income-tax and the Income-tax Tribunal having failed, three references under section 17 of the Act have been admitted by the High Court to determine the question of law:- "Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the sales effected within its own territories of goods manufactured and produced by the Provincial Government were liable to assessment under Sales Tax Act, 1951."
3. It appears that in the meantime the Income-tax department threatened to initiate proceedings for the recovery of the demand. This obliged the petitioner to apply under section 151, Civil Procedure Code, read with Article 201 of the Interim Constitution in each case praying for the stay of recovery of the demand pending decision in the reference. The prayer was refused by the High Court on the ground that Article 201 of the Interim Constitution had no application and that subsection (7) of section 17 of the Act provides that notwithstanding any reference to the High Court under the said section "tax shall be payable in accordance with the assessment made fn the case."
4. Learned counsel for the petitioner argued in support of the petition that the recovery of the tax assessed in respect of each assessment year will impose unbearable financial burden on the petitioner putting the enterprise 4 into serious jeopardy. Because of the clear provisions of subsection (7) of section 17 of the Act, this argument cannot be of any avail and no valid objection can be taken against the order of the High Court in each case.
5. The petitions are, therefore, dismissed.