Supreme Court rules in favour of Attock Refinery in sales tax dispute over crude oil processing

Pakistan’s Supreme Court has ruled that Attock Refinery Limited did not owe sales tax on amounts it received from crude suppliers for handling and treating oil at its premises. The case involved transactions from July 1, 2008, to June 30, 2009, and also named Oil and Gas Development Company Limited among the suppliers. The bench treated the payments as a price adjustment for crude oil, rather than fees for a service supplied by the refinery.

The judges said tax could be charged only if the legal requirements for a taxable supply and taxable activity were both met, with the necessary connection between them. They found the processes did not produce a different product from the crude oil, and said the tax authorities had not established a separate taxable supply. The judgment overturns earlier rulings by the Islamabad High Court and the Appellate Tribunal Inland Revenue, and places the burden of proving a taxable transaction on the state.