(a) Sales Tax Act (VII of 1990)---

----Ss.8(2), 7, 2(46), 11(2), 33, 34 & 71---Sales Tax Special Procedures Rules, 2007, Chap: III, Rr.13(3) & 15(1)---Sales Tax Rules, 2006, Chap: IV, R.25---S.R.O. 922(I)/99 dated 16-8-1999---Tax credit not allowed---Power project---Energy purchase price---Capacity purchase price---Taxable supplies---Non-taxable supplies---Exempt supplies---Apportionment of input tax---Disallowance part of input tax---Revenue confronted that Independent Power Producers failed to make apportionment of input tax in respect of amount received against Capacity Purchase Price from Water and Power Development Authority; and Capacity Purchase Price was exempted from levy of sales tax in terms of Sales Tax Special Procedures Rules, 2007 subject to provisions of Ss.7, 8 of Sales Tax Act, 1990 and all other relevant provisions of the Sales Tax Act, 1990, Rules and notifications; and if a registered person dealt in taxable supplies and non-taxable/exempt supplies, it could reclaim only such proportionate of input tax as was attributable to tax supplies in such manner as may be specified in terms of S.7 read with S.8 of the Sales Tax Act, 1990 and concluded that while Energy Purchase Price constituted consideration for 'taxable supply', the consideration for Capacity Purchase Price constituted 'non-taxable supply' which distinction permit it to restrict/disallow part of input tax; and mechanism for computation of 'value of supply' had an effect of splitting the supply/consideration into 'taxable and 'non-taxable' supplies which lawfully warranted apportionment of input tax under S.8(2) of the Sales Tax Act, 1990 read with Chapter IV of the Sales Tax Rules, 2006---Taxpayer contended that Capacity Purchase Price was excluded from value of supply under R.13(3) of the Sales Tax Special Procedures Rules, 2007; that as Capacity Purchase Price was not a part of value of supply; the Revenue could not make apportionment of input tax as Independent Power Producers were involved only and exclusively in one taxable activity i.e. production and sale of electricity; that consideration on account of Capacity Purchase Price was one of the segments of tariff/sale consideration of electricity; that Capacity Purchase Price was not a consideration for any identifiable supply rather the same was one of the components of consideration for taxable supply which was electricity; that provisions did not categorize the revenue representing Capacity Purchase Price as a consideration for 'non-taxable supply' rather these EXCLUDED the same from the amount chargeable to sales tax; that such exclusion had been wrongly and unlawfully equated by the Revenue with non-taxable/exempted supply; that where consideration in respect of one taxable supply was split into categories in a manner that part of the amount required to be subjected to sales tax and part to be excluded from charge of sales tax remain outside the purview of apportionment; that there was only one supply i.e. supply of electricity, the consideration for which was split in the Power Purchase Agreements under different heads ; that provisions of R.13(3) of the Sales Tax Special Procedures Rules, 2007 had made exclusion while prescribing the charge of tax and restricted the same to the extent of Energy Purchase Price; that such could not be construed or equated with the situation conceived by the lawmaker to be the subject matter of S.8(2) of the Sales Tax Act, 1990 read with Chapter IV of Sales Tax Rules, 2006; that in terms of provisions contained in S.8(2) of the Sales Tax Act, 1990 'apportionment' was required where a registered person dealt in 'taxable supplies' and 'non-taxable supplies', and such apportionment could only be carried out in 'such' manner as may be specified by the Federal Board of Revenue in the Rules; that Federal Board of Revenue had prescribed Chapter IV in Sales Tax Rules, 2006 in which 'apportionment' was specified between 'taxable supplies' and 'exempt supplies' exclusively; and that in said rules, the expression used was 'exempt supplies' and not 'non-taxable supplies', an expression used in primary legislation i.e. S.8(2) of the Sales Tax Act, 1990---Validity---Taxpayer dealt in taxable and non-taxable/exempt supplies and could reclaim only such proportion of input tax as was attributable to taxable supplies in such manner as may be specified by the Federal Board of Revenue---Having established that consideration paid by Water and Power Development Authority to Independent Power Producers (tariff) was taxable and that one component of the said tariff i.e. Capacity Purchase Price was exempted, input tax claimed shall be apportioned according to the manner specified by the Federal Board of Revenue---Federal Board of Revenue in R.25 of Sales Tax Rules, 2006 had formulated the methodology for apportionment of input tax for Registered Person making taxable and exempt supplies simultaneously---In the present case there being only one supply i.e. Bulk Power and as a component of said bulk power i.e. Capacity Purchase Price was exempted under Sales Tax Special Procedures Rules, 2007; and only residual input tax credit on taxable supplies could be claimed by the taxpayer meaning thereby that the taxpayer could not claim input adjustment without fulfilling the criteria laid down in Ss. 7 & 8 of the Sales Tax Act, 1990---Revenue had rightly applied R. 25 of the Sales Tax Rules, 2006 for apportioned input tax claimed by the Independent Power Producers---Show-cause notice issued under S.11(2) along with default surcharge under S.34 and penalty under S.33 of the Sales Tax Act, 1990, order in original as well as impugned order-in-appeal was upheld and appeals of the taxpayer/registered persons were rejected by the Appellate Tribunal.

Messrs Fauji Kabirwala Power Company Limited's case 2011 PTD 1306; (2013) 107 Tax 318 (Trib.); PLD 1975 Lah. 65; PLD 1980 Kar. 492; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976; 2001 PTD 2097 = 2001 SCMR 1376; Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431; Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883; Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1; Baba Farid Sugar Mills Ltd. v. Federation of Pakistan and others Writ Petition No.12851 of 2012 and The Collector of Sales Tax and others v. Superior Textile Mills Ltd. and others 2001 PTD 1486 ref.

(b) Sales Tax Act (VII of 1990)---

----S.3(1)(a)---Scope of tax---Expression "In the course of"---Phrase "In furtherance of"---Meanings---"In the course of" means connected with, related to or having some nexus with the business/taxable activity and similarly "in furtherance of" was indicative of the fact that the taxable supply had been made for the enhancement/further development of the business/taxable activity.

2001 SCMR 1376; 2008 PTD 103; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976 and 2001 PTD 2097 = 2001 SCMR 1376 rel.

2007 PTD 1902 = PLD 2007 SC 517 ref.

(c) Sales Tax Act (VII of 1990)---

----S.3(1)---Scope of tax---Independent Power Producers---Consideration paid by Water and Power Development Authority for purchase of power in accordance with Schedule 1 (Tariff, Indexation and Adjustment) of the Power Purchase Agreement to the Independent Power Producers while ensuring 18% profitability also furthered the business of the Independent Power Producers and shall be taxable in terms of S.3(1) of the Sales Tax Act, 1990.

2001 SCMR 1376; 2008 PTD 103; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976 and 2001 PTD 2097 = 2001 SCMR 1376 rel.

(d) Sales Tax Act (VII of 1990)---

----S.2(46)---Expression "Value of supply"---Meaning---Interpretation of word "means"---Term 'means' restricts the scope of the term value of supply and no other meaning could be given to value of supply in contravention of S.2(46) of the Sales Tax Act, 1990.

Messrs Fauji Kabirwala Power Company Ltd.'s case 2011 PTD 1306; Haji Sultan Ahmed v. CBR and 5 others 2008 PTD 103 and Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431 rel.

(e) Sales Tax Act (VII of 1990)---

----S.2(46)(g), proviso---Independent Power Procedures---"Value of supply"---Retail price---Meanings---Proviso to Cl. (g) of Cl.(46) of S.2 of the Sales Tax Act, 1990 was only to the extent of retail tax---Taxpayers/Independent Power Producers were not retailers and no other meaning other than what had been laid down in Cl. (46) of S.2 of the Sales Tax Act, 1990 could be given to "value of supply".

(f) Sales Tax Act (VII of 1990)---

----Ss.3 & 13(2)---Sales Tax Special Procedures Rules, 2007, R.13(2b) & (3)---Scope of tax---Exemption---Independent Power Producers---"Capacity Purchase Price"---If S.13(2) of the Sales Tax Act, 1990 was read with R.13(2b) & (3) of the Sales Tax Special Procedures Rules, 2007, the only interpretation that follows was that Capacity Purchase Price was exempted from levy of Sales Tax, otherwise, being taxable in terms of S.3 of the Sales Tax Act, 1990---Power of levy of charge as contained in S.3 of the Sales Tax Act, 1990 could not be restricted by the Rules of Procedure; however, levy of charge under S.3 of the Sales Tax Act, 1990 could be exempted by the competent authorities.

Messrs Fauji Kabirwala Power Company Ltd.'s case 2011 PTD 1306; PLD 1980 (Kar.) 492; Haji Sultan Ahmed v. CBR and 5 others 2008 PTD 103; 2001 PTD 2982 and Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431 rel.

(g) Sales Tax Act (VII of 1990)---

----S.13---Sales Tax Special Procedures Rules, 2007, R.13(3)---"Exemption"---"Exclusion"---Destination---Primary difference between "exclusion" and "exemption" was that exclusion reduces the value of taxable supply, while exemption reduces the amount of tax---Exclusion reduces the value of supply, exemption first reduces the quantum of tax and as a consequence reduces the payability of tax due, both leading to the same result of reducing the tax liability/payability of the Registered Person---Mathematically speaking exclusion of certain items from the value of supply and exemption work on opposite sides of the one and the same equation---At the end of day, both the incentives/ methodologies "reduce" and "exempt" the tax liability of the Registered Person which may be in varying degree, under the provisions of Sales Tax Act, 1990.

(h) Sales Tax Act (VII of 1990)---

----S.13(2)(a)---Independent Power Procedures---Exemption---Power of Federal Government---Section 13(2)(a) of the Sales Tax Act, 1990 empowered the Federal Government, through notification in the official gazette, to extend exemption to any taxable supplies from 'whole' or any 'part' of the tax chargeable under the Sales Tax Act, 1990---While framing Sales Tax Special Procedures Rules, 2007, the Federal Government while exercising said powers as provided under S.13(2)(a) of the Sales Tax Act, 1990 excluded the value of Capacity Purchase Price, Energy Purchase Price, Excess Bonus, Supplemental Charges, etc., from the value of electricity supply and restricted the same to the extent the value of Energy Purchase Price only, as provided in R.13(3) of the Sales Tax Special Procedures Rules, 2007---Such exclusion constitutes "exemption" from the "value" of gross price of electricity.

Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883 and Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1 rel.

Baba Farid Sugar Mills Ltd. v. Federation of Pakistan and others Writ Petition No.12851 of 2012 distinguished.

(i) Sales Tax Act (VII of 1990)---

----Ss.71(1), 13(2)(a) & 2(46)---Special procedure---While framing subordinate legislation i.e. Sales Tax Special Procedures Rules, 2007, Federal Government could not curtail the scope of definition of the "value of supply" as provided in S.2(46) of the Sales Tax Act, 1990---Federal Government was fully empowered under S.13(2)(a) of the Sales Tax Act, 1990 to exempt "whole or any part of tax chargeable", which includes the "value of supply".

Per Javed Iqbal Judicial Member [Minority view] [pp. 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 105, 106] R, S, T, U, V, W, X, Y, Z, AA, BB, CC, DD, EE, FF

1993 PTD 69; 1996 SCMR 1470; 2008 PTD 103; 2013 PTD 1420; 2010 PTD 808; 2009 PTD 722; 2008 PTD 838; 2002 PTD 877; 2002 PTD 1573; 1992 SCMR 663; 1992 SCMR 2192; 1999 YLR 710; 2008 PTD 838; 2011 PTD 2042 = 2001 CLD 1300; 2003 PTD 1321; 2008 PTD 1346; 2006 PTD 1902; 2009 PTD 1661; 1989 CLC 1369; 2005 YLR 1293; 2003 PTD 1392; 1988 PTD 535; 2012 PTD (Trib.) 263; 2008 PTD 1993; 2010 PTD (Trib.) 1643; 2003 PTD 1276; 2011 PTD 1306; (2013) 107 Tax 318 (Trib.); PLD 1975 Lah. 65 and PLD 1980 Kar. 492 ref.

Messrs Fauji Kabirwala Power Company Ltd.'s 2011 PTD 1306; PLD 1975 Lah. 65; PLD 1980 Kar. 492; 2001 PTD 2982; Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431; Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883; Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1 and The Collector of Sales Tax and others v. Superior Textile Mils Ltd. and others 2001 PTD 1486 distinguished.