IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE ANWAR ZAHEER JAMALI, HCJ 
MR. JUSTICE AMIR HANI MUSLIM 
MR. JUSTICE FAISAL ARAB 
 
CIVIL PETITION NO. 84-Q OF 2011 
(On appeal against the judgment dated 26.05.2011 
passed by the High Court of Balochistan, Quetta in 
Sales Tax Appeal No. 3/2004) 
 
M/s Chiltan Ghee Mills, Quetta etc 
… Petitioners 
VERSUS 
Deputy Collector of Sales Tax (Refund), Customs House, Quetta and 
another  
… Respondents 
 
For the Petitioners: 
Mr. Sahibzada Muhammad Khan, M.D, in 
person 
 
For the Respondents: 
N.R.  
 
Date of Hearing: 
 
03.10.2016 
 
JUDGMENT 
 
 
 
FAISAL ARAB, J.- The petitioner is engaged in the activity of 
producing ‘ghee’, which before its marketing is canned in tin containers also 
manufactured by the petitioner. For the purpose of manufacturing tin 
containers, the petitioner purchases tin plates. On the purchase of tin 
plates, sales tax is payable whereas the petitioner mill at the relevant time 
was exempted from the payment of sales tax on its taxable supplies under 
SRO 580(I)/91 dated 27.06.1991. For the period during which the petitioner 
was enjoying tax exemption on its supplies, the petitioner sought refund of 
the sales tax paid on the purchase of tin plates that were used in the 
manufacture of tin containers. The reasoning behind such claim was that as 
its tin containers are exempt from the payment of sales tax under the said 
SRO No. 580(I)/91 dated 27.06.1991, the sales tax paid on tin plates may be 
refunded. Taking into consideration the legal position that the sales tax 
paid on goods that are used in the manufacture of ‘exempt supplies’ 
cannot be refunded under Section 8(1)(a) of the Sales Tax Act, 1990, the 
Sales Tax Department refused to accept the petitioner’s claim. The decision 
2 
Civil Petition No. 84-Q/2011 
of the Department was challenged by the petitioner in an appeal before the 
Customs, Excise and Sales Tax Appellate Tribunal, which was dismissed. 
The same was then challenged in Sales Tax Appeal before the High Court, 
which too met the same fate. Hence this petition. 
2. 
 
Sahibzada Muhammad Khan, who is the Managing Director of 
the petitioner company, appeared in person and argued the case. He 
submitted that since the tin containers, which the petitioner manufactured 
during the relevant period, were exempt from sales tax under SRO No. 
580(I)/91 dated 27.06.1991 then any input tax paid on tin plates used in 
the manufacture of such tin containers was liable to be refunded as denying 
such relief would defeat the purpose of granting exemption under the said 
SRO. In support of his contention, he relied upon the cases of M/s Mayfair 
Spinning Mills Ltd, Lahore Vs. Customs, Excise and Sales Tax Appellate 
Tribunal, Lahore etc (PTCL 2002 CL 115) and Azad Jammu & Kashmir 
Government Vs. Spintex Limited (1998 PTD 3200) in order to demonstrate 
that where exemption is granted then the principle of promissory estoppel is 
attracted and no tax is to be charged.  
3. 
 
We have considered the contention of the petitioner mill’s 
Managing Director. Section 7 of the Sales Tax Act provides that for the 
purposes of determining tax liability in respect of ‘taxable supplies’, a registered 
person shall be entitled to deduct input tax paid during the tax period. Such 
concession is clearly available only when a registered person makes ‘taxable 
supplies’ and is not available where the supplies are totally exempt from the 
sales tax liability. This mandate of the law is further affirmed in Section 8(1)(a) 
of the Act, which provides that notwithstanding anything contained in any 
other provision of the Act, a registered person shall not be entitled to claim 
input tax paid on goods that are used in the making of supplies which have 
been exempted from the sales tax liability under the provisions of Section 13 
of the Act. This clearly means that adjustment of input tax only can be 
claimed in a situation where the goods that have been manufactured            
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Civil Petition No. 84-Q/2011 
or produced fall within the definition of ‘taxable supplies’. Where the goods 
that are to be supplied are exempt from sales tax then the question of 
seeking refund of the sales tax paid on the purchase of raw material used in 
the production of exempt supplies does not arise at all. The whole object 
behind the provision of Section 8(1)(a) of Sales Tax Act, 1990 seems to be 
that where at any stage sales tax has been legitimately paid then refund of 
input tax cannot be claimed where such goods were used in the 
manufacture of ‘exempt supplies’. Thus where a registered person is 
exempted from the liability of sales tax on its supplies, it does not mean that 
the tax that was paid on the purchase of raw material used in the making of 
such supplies would be liable to be refunded. The Department, therefore, 
was not liable to refund the same. In view of the legal position as emanating 
from the plain reading of the provisions of Section 7 and 8 of the Sales Tax 
Act, 1990, it is evident that there is no promise of the Legislature that the 
sales tax paid on the goods used in the manufacture of ‘exempt supplies’ 
would be liable to be refunded. Reliance placed on the cases of M/s Mayfair 
Spinning Mills Ltd, Lahore Vs. Customs, Excise and Sales Tax Appellate 
Tribunal, Lahore etc (PTCL 2002 CL 115) and Azad Jammu & Kashmir 
Government Vs. Spintex Limited (1998 PTD 3200) is totally misplaced as the 
same have no application to the present case.  
4. 
 
For what has been discussed above, we do not find any merit 
in this petition, which is dismissed and leave is refused.  
 
CHIEF JUSTICE 
 
JUDGE 
JUDGE 
Quetta, the 
3rd of October, 2016 
Approved For Reporting 
Khurram 
