BELARUS NEWS AND ANALYSIS

DATE:

11/01/2009

Eligibility for Benazir tractor scheme: Minfal asks Fecto Belarus to submit a clean chit

MUSHTAQ GHUMMAN

ISLAMABAD (January 11 2009): The Ministry of Food, Agriculture and Livestock (Minfal) is unlikely to allocate tractor scheme to a Karachi-based firm, Fecto Belarus company, until it provides a clean chit from the concerned departments, including the Federal Board of Revenue (FBR), a top official Dr Qadir Bakhsh Baloch told Business Recorder on Saturday.

"We have conveyed to Fecto Belarus to submit a clearance certificate to become eligible for Benazir tractor scheme to be launched very soon," he added. Replying to a question, he said that the modus operandi of Benazir tractor scheme had been discussed at high level meeting, chaired by Prime Minister Syed Yousuf Raza Gilani last week.

Dr Baloch said the government would take all possible measures this time to ensure transparency in the scheme. He said local tractor manufacturers and importers had been asked to submit lowest prices for supply of tractors by Monday. In replying to another question, he said mode of payment, delivery mechanism and other formalities would be finalised after the evaluation of price bids by the local manufacturers and importers.

Awami tractor scheme, launched by the Federal government in 1994 to import of 10,000 duty-free tractors, but one of the companies, ie Fecto Belarus, charged full duty from the farmers. Consequently, a taxpayer had filed a petition in Lahore High Court.

According to a judgement of the Supreme Court, Awami tractors scheme was introduced in 1994 for import of 10,000 tractors without payment of duties and taxes, as per SRO 921(1)/94 dated 22-9-1994 and SRO 1189(1)/94 dated 11-12-1994 respectively. For the second tranch, in 1996 for import of 10,000 tractors (while 8,600 could be imported), concession and exemption was provided vide notification SRO 288(I)/96 and 414(I)/96 dated 13-6-1996 at concessional duty at the rate of 10 percent and sales tax 18 dollars per cent.

On February 24, 1997, taxpayer had filed a petition before LHC against the levy, relying on the letter of authorisation dated June 26, 1996 issued by the Minfal whereby exemption of duty and sales tax was informed to be available as in the first tranch, provided tractors were sold for Rs 230,000 each and exchange fluctuation, if any.

On a reference, the ECC decided that sales tax was payable as no exemption was notified by the FBR. The LHC (single bench) dismissed the petition of the importer on February 24, 1997. Sales tax was realised for the imports made by that time. On August 4, 1997, intra-court appeal (ICA) was accepted by D.B. of LHC holding in favour of the Fecto that the scheme could not be withdrawn nor amended to the disadvantage of the petitioner. On October 9, 1997, the FBR filed CPLA and Supreme Court allowed release of imported tractors against bank guarantees and granted leave.

On September 1, 1999, the apex court decided the case in favour of the government / CBR, which encashed bank guarantees and realised sales tax whereas on February 19, 2001, review petition No 80 of 1999 was allowed by the apex court on in favour of the Fecto by holding that withdrawal of SRO, exempting the payment of customs duties and sales tax, would not be applicable to the second phase of the scheme for import of tractors relying upon Al-Samraiz case, doctrine of Estoppels and Economic Reforms Act, 1992.

Besides, the apex court was informed by the Fecto that it had to go by the instructions to sell the tractor at Rs 230,000. Therefore, any sales tax payment would be from their own sources. In fact, the tractors were sold by the year 2000 and for price ranging between Rs 335, 000 and Rs 430, 000 to the ADBP and the farmers inclusive of sales tax as told to the ADBP by the importers.

The review on the basis the Fecto's statement on May 2, 2002, the taxpayer filed contempt proceedings vide criminal petition 15 of 2002 dated 11-5-2005 on the ground that the sales tax realised by the FBR bank guarantees, earlier encashed by the FBR, were not refunded in the light of review judgement. In the meantime, the SC ordered the FBR to deposit Rs 493 million realised as sales tax with the SC, which was done by the FBR.

On May 11, 2005, Supreme Court passed the order in criminal review petition in favour of the department holding that the incidence of sales tax u/s 3B was not examined and that the Supreme Court had not directed in review judgement about the refund, and incidence was passed on the consumers and no refund would be payable.

Supreme Court dismissed the petition for contempt of court with observations that the FBR had complied with the order of the court by depositing the amount of Rs 493 million (this is recoverable from SCP) and that passing incidence on consumer could be inquired under section 3B of sales tax and section 19(3).

In April 2008, a review petition filed again by the Fecto. This was decided in April, 2008 holding that the payment of sales tax would apply even in the presence of judgement where refund was not ordered and since the incidence was passed on to the consumers, so no refund was payable.

BASIC REASONS WERE THAT:

i) Rule of business empowers the FBR (Revenue Division) only to issue exemption from sales tax.

ii) Tractors price was charged at Rs 335,000 to Rs 450,000, which included sales tax as admitted by them to the ADBP instead of agreed price of Rs 230,000.

iii) Sales tax was paid but was, in turn, charged from consumers.

(iv) In review, only error apparent can be taken up and decided.

(v) That opportunity to prove that incidence was not passed on was provided.

(vi) That all the issues raised were examined in the Cr.O.P

2. The department collected information from the ADBP/Zarai Tariaqiati Bank, Ministry of Food and Agriculture, Collector, Port Qasim (Tariq Aziz, officer of the collectorate provided full support), and by collecting the information files from the FBR's wings to fight the case. The FBR was represented by Malik M. Qayyum, Attorney General; Mumtaz Ahmad, Member (Legal), FBR, from government side . Khalid Anwar, Sr. ASC and his team represented Fecto.

Source:

http://www.brecorder.com/index.php?id=862402&currPageNo=1&query=&search=&term=&supDate=

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