National Foods Limited wins customs duty and sales tax exemption
In a ruling that could ease the path for industrial development within its Special Economic Zones (SEZs), the High Court of Sindh at Karachi has sided with National Foods Limited, overturning earlier decisions that denied the company customs duty and sales tax exemptions on imported prefabricated building structures.
The judgment, issued on May 12, 2025, by Justices Muhammad Junaid Ghaffar and Mohammad Abdur Rahman, addressed a key legal question: “Whether the learned Tribunal was justified to hold that the prefabricated building structure imported by the Applicant is liable to payment of customs duties and sales tax?”.
National Foods Limited, in the process of establishing a new food manufacturing plant in the Special Economic Zone, Faisalabad, had imported consignments of “overhead cranes” and claimed exemptions as “Capital Goods” under the SEZ Act, 2012, and related notifications. This claim was initially denied, leading to a protracted legal battle through customs appeals and ultimately to the High Court.
The core of the dispute revolved around the interpretation of “Capital Goods” and the applicability of various exemption notifications, particularly SRO 41/2009 and Chapter 9917(2) of the Customs Tariff.
The court extensively referenced a previous Division Bench ruling in Aisha Steel Mills Ltd. V. Federation of Pakistan (2011 PTD 569), which had expansively interpreted “Capital Goods” to include prefabricated buildings and sheds for exemption purposes. The court emphasized that the definition of “Capital Goods” remained “pari materia” across relevant SROs and the Fifth Schedule to the Customs Act, 1969, and that the Aisha Steel precedent was binding.
The judgment also critiqued the Customs Appellate Tribunal’s reliance on an opinion from the Federal Board of Revenue (FBR), stating that FBR’s interpretations are not binding on quasi-judicial functions of customs authorities or the Tribunal itself. The court clarified that the exemption under Chapter 9917(2) was available to “Zone Enterprises” like National Foods Limited, not just “Zone Developers,” a point misunderstood by the Tribunal.
By setting aside the orders of the lower forums, the High Court has affirmed the broad scope of exemptions for capital goods imported into Special Economic Zones, signaling a consistent judicial approach aimed at facilitating industrial investment and development in Pakistan.
