PESHAWAR, Feb 24: The Peshawar High Court declared on Wednesday the levy of sales and income taxes on import of raw material for a factory in tribal area as unconstitutional and illegal.
A two-member bench, comprising Chief Justice Nasirul Mulk and Justice Qaim Jan Khan, accepted a writ petition filed by the Afridi Polypropylene Industries, Bara, Khyber Agency, and declared the issuance of notices to it by the income tax department and the customs and sales tax authorities as illegal.
The bench observed that the Sales Tax Act, 1990, and the Income Tax Ordinance, 1979, were not extended to the Federally Administered Tribal Areas (Fata) in terms of Article 247 of the Constitution.
Barrister Adnan Saboor Rohaila appeared for the petitioner and argued that under Article 264 of the Constitution, Khyber Agency was part of Fata. He contended that under Article 247(3) of the Constitution no law and act of parliament was applicable to Fata unless the President of Pakistan so directed.
Mr Rohaila contended that till to-date the president had not issued the notification for extending the Sales Tax Act and the Income Tax Ordinance to Fata. The petitioner's counsel contended that the industry was situated in tribal area and proper LCs were opened from time to time for the import of raw material through Karachi port or Peshawar Dry Port.
He contended that although the raw materials were received in settled area yet they were fully consumed in the industry in tribal area, thus, these taxes could not be levied on that material.
He argued that there was no route in tribal areas for the import of raw material and the petitioner had to import it through settled area. Mr Rohaila said the General Sales Tax was indirect taxation which the government received from manufacturer and the manufacturer transferred it to the consumer.
How the petitioner could recover that tax from the consumer in tribal areas when it was not applicable there, he added. He referred to various judgments of the superior courts in support of his contention. Advocate Eid Mohammad Khattak appeared for the Income Tax Department, whereas advocate Waqar Seth represented the sales tax authorities.