Court abates SRB's sales tax proceedings against toll manufacturers

KARACHI: Sindh High Court (SHC) on Tuesday stopped all proceedings initiated by the Sindh Board of Revenue (SRB) under sales tax on services against toll manufacturers.

The court observed that if Sindh government intended to get any share out of the sales tax already collected by the Federal Board of Revenue (FBR) under its head, the earlier should approach the federation of its amicable settlement.

Disposing of the petitions of toll manufactures against levy of sales tax by the Sindh government, SHC’s division bench comprising Justice Mohammad Junaid Ghaffar and Justice Agha Faisal observed that the tax, which has already been paid by the petitioners to the federation through FBR in respect of toll manufacturing, was their final discharge of liability in respect of sales tax, (either under the Sales Tax Act, 1990 or under the Sindh Sales Tax on Service Act, 2011 Act), and they would not be obliged to pay any further sales tax on such activity, the judges added.

The court observed that post 18th Amendment in a number of cases of like nature it’s the taxpayers who were being dragged into unnecessary and protracted litigation and were being subjected to double taxation by the federation as well as the province in addition to a very heavy burden on the courts by way of petitions which perhaps, would have been better resolved amicably and with consultation between the federation and the province.

Additional advocate general opposed the petitions and submitted that Sindh government’s consent recorded in the meeting of the National Tax Council was not binding on the provincial government. He questioned the constitution and formation of the National Tax Council, submitting that same was constituted without any support of law. The minutes of the said meeting were not an impediment against the stance of the province as already reiterated earlier, including in the comments, which sales tax is to be paid on toll manufacturing to the province, being a service, he added.

The court took exception over statement of the provincial law officer and observed that such response on the part of the officers of Sindh, including the one who had attended the meeting of National Tax Council that were Finance Secretary, Chairman SRB, and its advisors, was not only without any justification but reflected badly on the part of the province as to their conduct before the court.

There was no denial of the fact that such meeting was attended by the gentlemen on behalf of the province of Sindh, whereas, not even the content of the minutes of the said meeting have been denied, according to the court.

It also noted that despite court order no response had been filed in writing on behalf of SRB but mere oral statement by provincial law officer on their behalf to that effect or contrary to what has been agreed upon in the said meeting does not suffice.

The court observed that it had been noted by the court in previous order that once it has been agreed by the province that such collection of sales tax on toll manufacturing will rest with the FBR, then admittedly, it is no more a service.