Granting respite to Federal Board of Revenue on Thursday, the Supreme Court converted the FBR appeal against Islamabad High Court verdict into Intra Court Appeal (ICA) over a notification to collect sales tax at the rate of 17 percent instead of five percent on the import of textile and leather goods. On October 29, 2014, hearing petition of an importer of Lahore, a single-member bench of the Islamabad High Court declared provisions of the FBR notification SRO No 420(1)/2014 of June 4, 2014 contrary to budget speech of finance minister on June 3, 2014.
The single-member bench held and declared that collection of sales tax @ 17 percent which is standard rate of sales tax through SRO No 420(1)/2014 of June 4, 2014 is not justified, saying collection of tax from five percent to 17 percent with effect from June 4, 2014 to June 30, 2014 is declared null and void on the grounds that it should have been made from the beginning of financial year 2014-15 ie July 1, 2014.
Issuing notification SRO No 420(1)/2014 of June 4, 2014, the FBR made amendment to its earlier notification SRO No 1125(1)/2011 seeking withdrawal of concessionary rate of sales tax available to finished imported textile and leather goods (other than used and worn clothing). By this notification, the standard rate of sales tax (17%) was made applicable.
Challenging the IHC verdict before the apex court, counsel for the FBR contended that exemption granted by an authority can be withdrawn by the same authority under the provisions of Section 21 of General Clauses Act 1897. On Thursday, heading a three-judge bench Justice Ejaz Afzal Khan said the IHC granted condonation of delay to file ICA but the Board filed appeal before apex court for remedy. However, the judge said that there are fora exercising appellant and referral jurisdictions so the vires of tax collection cannot be challenged before the Supreme Court directly.
Later, treating the FBR's CPLA as an Intra Court Appeal, the bench sent the same to the IHC with directives to decide the matter in accordance with law instead of dismissing the plea.