| Case ID |
e339648d-db6a-406d-9c42-4f57342a7091 |
| Body |
View case body. Login to View |
| Case Number |
2067 of 2016, 1074 of 2016, 1881 of 2016, 1973 of |
| Decision Date |
Aug 02, 2019 |
| Hearing Date |
|
| Decision |
The Sindh High Court has ruled that the plaintiffs, M/S. GETZ PHARMA (PVT.) LIMITED & OTHERS, are not entitled to claim an exemption from sales tax on the import of packing materials under Entry No. 105 of the 6th Schedule to the Sales Tax Act, 1990. Consequently, all related suits have been dismissed with all pending applications. The court further directed that any amounts deposited with the Nazir of the Court must be returned to the respective Collectorates, and any bank guarantees or other forms of security should be encashed and paid to the Collectorates accordingly. This decision solidifies the Defendants' stance that packing materials do not qualify as raw materials eligible for sales tax exemption under the specified entry. |
| Summary |
In the landmark decision rendered by the Sindh High Court on August 2, 2019, the court addressed a significant tax exemption dispute involving prominent pharmaceutical companies and the Federation of Pakistan. The case, cited as 2019 SLD 2779 and (2019) 120 TAX 296, revolves around the plaintiffs, including M/S. GETZ PHARMA (PVT.) LIMITED & OTHERS, seeking exemption from sales tax on imported packing materials essential for manufacturing pharmaceutical products. Under Entry No. 105 of the 6th Schedule to the Sales Tax Act, 1990, the plaintiffs argued that these packing materials qualify as raw materials, thereby entitling them to a tax exemption similar to that granted for raw materials used in production.
The crux of the dispute lies in the interpretation of what constitutes 'raw materials' under the specified sales tax entry. The plaintiffs contended that since the packing materials are integral to the manufacturing process and have been recognized as raw materials for customs duty exemptions by the Input Output Coefficient Organization (IOCO) and the Drug Regulatory Authority of Pakistan (DRAP), they should similarly qualify for sales tax exemptions. They cited various legal precedents and definitions, including interpretations from the Blacks Law Dictionary and relevant Supreme Court rulings, to bolster their argument that packaging materials used in pharmaceutical production should fall within the ambit of raw materials under the Sales Tax Act.
Conversely, the Defense, represented by the Federation of Pakistan and other associated bodies, maintained that packing materials do not qualify as raw materials under the tax exemption entry. They emphasized a strict interpretation of the law, asserting that the exemption was explicitly and solely intended for raw materials directly involved in the basic manufacture of pharmaceutical active ingredients and products. The Defense highlighted that the packing materials are distinct products whose primary function is packaging rather than direct involvement in the manufacturing process of active ingredients, thereby excluding them from the raw materials category as per the legislative intent of the Sales Tax Act.
Throughout the proceedings, the court meticulously analyzed the statutory language, legislative intent, and applicable legal precedents. The plaintiffs presented compelling arguments regarding the interconnectedness of packaging in the pharmaceutical production process and its classification as a raw material for tax purposes. Nonetheless, the court ultimately sided with the Defense, concluding that the legislative framework did not intend for packing materials to be encompassed within the raw materials exemption. The judgment underscored the importance of adhering to the specific language of tax statutes and the limits of judicial interpretation in extending statutory definitions beyond their explicit wording.
This decision has significant implications for the pharmaceutical industry in Pakistan, particularly in the realm of tax compliance and import regulations. By clarifying the boundaries of what constitutes raw materials eligible for sales tax exemptions, the Sindh High Court's ruling provides clear guidance to businesses regarding their tax obligations and the scope of available exemptions. Pharmaceutical companies must now reassess their import strategies and tax planning to ensure compliance with the Sales Tax Act, especially concerning the classification and utilization of packing materials in their production processes. Moreover, this judgment reinforces the judiciary's role in upholding legislative intent and maintaining the integrity of tax laws, ensuring that exemptions are applied consistently and as intended by the legislature.
In summary, the Sindh High Court's decision serves as a pivotal reference point for future tax exemption cases within the pharmaceutical sector, emphasizing precise statutory interpretation and the delineation of governmental tax policies. The ruling not only resolves the immediate disputes but also sets a precedent for how similar cases will be adjudicated, fostering a more transparent and predictable legal environment for businesses operating in Pakistan's pharmaceutical industry. |
| Court |
Sindh High Court
|
| Entities Involved |
M/S. GETZ PHARMA (PVT.) LIMITED & OTHERS,
FEDERATION OF PAKISTAN & OTHERS
|
| Judges |
MUHAMMAD, JUNAID GHAFFAR, JUSTICE
|
| Lawyers |
Mr. Ghulam Hyder Shaikh,
Mr. Abdul Ahad,
Mr. Muhammad Khalil Dogar,
Ms. Masooda Siraj,
Ms. Fozia Rasheed,
Dr. Shah Nawaz,
Mr. Kashif Nazeer,
Mr. Mohammad Vawda,
Mr. Ammar Yasir,
Mr. Adnan Molan,
Mr. Faiz Ahmed,
Mr. Haroon Dugal,
Mr. Osman A. Hadi,
Mr. Mirza Nadeem Taqi,
Mr. Shahid Ali,
Mr. Iqbal M. Khurram,
Mr. Khalid Mehmood Siddiqui
|
| Petitioners |
M/S. GETZ PHARMA (PVT.) LIMITED & OTHERS
|
| Respondents |
FEDERATION OF PAKISTAN & OTHERS
|
| Citations |
2019 SLD 2779,
(2019) 120 TAX 296
|
| Other Citations |
Shazeb Pharmaceutical Industries Ltd., v. Federation of Pakistan Others (2015 PTD 1532),
Commissioner of Sales Tax v. Crescent Textile Mills Ltd. reported as PLD 1975 Lahore 631,
The Commissioner of Income Tax, East Pakistan v. Messrs Ayurvedic Pharmacy (DACCA) Ltd. reported as PLD 1970 Supreme Court 93,
The Commissioner of Sales Tax v. Messrs Shaiq Corporation Limited reported as PLD 1986 Supreme Court 731,
Searle IV Solution (Pvt.) Ltd and others V. federation of Pakistan and others (2018 SCMR 1444),
Magor St. Mellons Rural District Council v. Newport Corporation 119511 2 All E.R. 1226,
Seaford Court Estates Ltd. v. Asher [1949] 2 All E.R. 155,
Magor St. Mellons Rural District Council, 119511 2 All E.R. 839,
Commissioner of Inland Revenue Zone-III v. IGI Insurance Company Limited reported as 2018 PTD 114,
Commissioner Inland Revenue, Zone-III v. Messrs IGI Insurance Company Ltd. reported as 2018 PTD 114
|
| Laws Involved |
Sales Tax Act, 1990,
Customs Act, 1969,
Civil Procedure Code (V of 1908)
|
| Sections |
2(16),
7(2),
8B,
13(2),
155D,
Order14,
Rule2
|