M/S. MASTER FOAM (Pvt.) LTD. Through Iftikhar Khan, Executive Director vs
This matter arises from a petition for leave to appeal against the judgment of the Lahore High Court, which dismissed a constitutional petition filed by Messrs Master Foam (Pvt.) Ltd. challenging the levy of customs duties and sales tax by Pakistani authorities on raw materials imported through Karachi Port and destined for the petitioner's industrial unit in Azad Jammu and Kashmir. The core legal questions involve the applicability of the Customs Act, 1969, and the Sales Tax Act, 1990, to the territories of Azad Jammu and Kashmir, and whether Section 3(b) of the Sales Tax Act, 1990, is repugnant to Item No. 49 of the Federal Legislative List. Granting leave to appeal, the Supreme Court held that the contentions raised merit consideration and issued interim directions regarding the deposit of existing arrears of duties and taxes and the clearance of future imported goods upon furnishing a bank guarantee. The key principle laid down is that the applicability of federal tax statutes to goods in transit to Azad Jammu and Kashmir warrants a formal examination by the apex court.
- Are the Customs Act, 1969 and the Sales Tax Act, 1990 applicable to the territories of Azad Jammu and Kashmir?
- Whether Section 3(b) of the Sales Tax Act, 1990 is repugnant to Item No. 49 of the Federal Legislative List?
- Can customs duties and sales taxes be levied on raw materials imported through Karachi Port and destined for an industrial unit located in Azad Jammu and Kashmir?
- Section 3(b), Sales Tax Act 1990
- Customs Act 1969
- Sales Tax Act 1990
ORDER
SH. IJAZ NISAR, J. - Leave is sought against the judgment dated 27.10.1998, passed by the Lahore High Court, Lahore, whereby it dismissed the Constitutional petition filed by Messrs Master Foam (Pvt.) Ltd., the petitioner herein.
2. The relevant facts are that the petitioner-company has set up an industrial unit in the Industrial Estate, Mirpur, Azad Jammu and Kashmir and imports various items of raw material for manufacturing foam products. 0n arrival of the goods at Karachi Port, the petitioner-company filed Bills of Entry showing that the imported goods were destined for its factory located in Azad Kashmir.
Nevertheless, the Customs and Sales Tax Authorities levied duties and taxes thereon.
3. The petitioner-company challenged the levy of duty and taxes by invoking the Constitutional jurisdiction of the Lahore High Court. The learned Judge in Chambers dismissed the writ petition filed by the petitioner-company by means of judgment dated 27.10.1998. Hence, this petition.
4. It is, inter alia contended that Section 3(b) of the Sales Tax Act, 1990, is repugnant to Item No. 49 of the Federal Legislative List, and that the Customs Act, 1969, and the Sales Tax Act, 1990, are not applicable to the territories of Azad Jammu and Kashmir. The goods in transit are not subject to payment of the ;axes, it is maintained. Letter dated 30.5.1997 issued by the Central Board of Revenue (Sales Tax Wing) is also referred to show that the sales tax is not applicable to Azad Jammu and Kashmir.
5. Leave is granted to consider the aforementioned propositions. Meanwhile, the petitioner- company is directed to deposit the arrears of duties and taxes with the Customs Authorities, if not already done. However, goods imported in future by the petitioner shall be cleared subject to furnishing bank guarantee to the extent of the duties and taxes payable in respect of the same.