ISLAMABAD: The Supreme Court granted leave to appeal, which have challenged the vires of SRO No 563(I)/2022 dated 29.04.2022.
A two-judge bench, headed by Chief Justice Yahya Afridi and comprising Justice Miangul Hassan Aurangzeb on Wednesday heard a case for setting aside SRO No 563(I)/2022 dated 29.04.2022 in respect of refund claims having been issued without lawful authority by Federal Board of Revenue (FBR).
The department (FBR) has challenged the judgment of the Lahore High Court (LHC), while Al Ghazi Tractors through senior advocate Makhdoom Ali Khan filed an appeal against the Sindh High Court (SHC) judgment.
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A Division Bench of the LHC in Millat Tractors v Federal Board of Revenue case read down the impugned SRO, and held that it would only apply prospectively and would not apply to refund claims already pending before the issue of the impugned SRO. The primary issue before the LHC centered on Rule 390 inserted through SRO 563 which made applicable the Chapter to existing and future refund claims.
The Sindh High Court (SHC) had dismissed the petition as not maintainable, saying it was premature and had been filed before any cause of action accrued. The SHC verdict said that the petitioner did not need to challenge the vires of SRO 563(1)/2022. It ought to have simply responded to the letter which applied SRO 563(I)/2022 with all legal objections which could then have been decided by the department.
According to the Al Ghazi Tractors petition, under Sr No 25 of Table-I of the Eighth Schedule, taxpayers are liable to pay a reduced sales tax rate of five per cent on the supply of “Agricultural Tractors”. The petitioner was paying tax at the rate of five per cent on supplies of agricultural tractors till such time that item at Sr 25 was deleted through the Finance Act 2022.
It contends that it is settled law that the executive does not have the power to issue rules or regulations with retrospective effect unless the legislature specifically and in clear words grants it such power. In this case, neither Sec 3(2)(aa) nor Sec 50 of the 1990 Act grant such power to the FBR.
The impugned SRO, even assuming it were valid, cannot, therefore, apply to tax periods prior to 29.04.2022. Rule 390 of the Impugned SRO which provides that it shall apply to all existing or pending refund applications is without jurisdiction and beyond the powers conferred on the department under S 50 the 1990 Act. It is, therefore, ultra vires the 1990 Act.
The petitioner submitted that Rule 39Q of the Impugned SRO states that only “eligible persons” as defined therein can avail of the reduced rate of five per cent under Sr No 25 of Table-I of the Eighth Schedule. Rule 39P(b) of the impugned SRO defines an eligible person as a manufacturer of agricultural tractors who supplies tractors to persons holding valid proof of landholding duly verified by the relevant provincial land revenue authority. Rule 39P(a) then defines an “agricultural tractor” restrictively as a tractor used by farmers or growers engaged in the production of agricultural produce by tractor.
Copyright Business Recorder, 2025
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