Decanting & desalting of crude oil: Payments to ARL do not constitute taxable supplies: SC
ISLAMABAD: The Supreme Court of Pakistan ruled that the payments received by Attock Refinery Limited for decanting and desalting crude oil, supplied by oil and gas exploration companies, do not constitute taxable supplies or taxable activities liable to sales tax under Section 3 of the Sales Tax Act, 1990 A three-member bench, headed by Justice Munib Akhtar and comprising Justice Malik Shahzad…
The Supreme Court of Pakistan has ruled that payments received by Attock Refinery Limited (ARL) for decanting and desalting crude oil, supplied by oil and gas exploration companies, do not constitute taxable supplies or taxable activities under Section 3 of the Sales Tax Act, 1990. The court dismissed the Islamabad High Court's judgment and the decision of the Appellate Tribunal Inland Revenue, Islamabad.
The dispute arose from the department's contention that the payments received by ARL from crude oil suppliers were consideration for taxable services and, therefore, liable to sales tax. However, the Supreme Court found that the crude oil remained the same identifiable product before and after the processes of decanting and desalting, and no separate or distinct product came into existence as a result of these processes.
The court rejected the Department's interpretation, stating that for the charging provision to apply, there must be a taxable supply made by a registered person in the course or furtherance of a taxable activity, with all elements having the necessary legal connection.
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