Case laws for tax year 2010
PLJ 2010 Tax Cases (Lah.) 1 (DB)
Present: Mian Saqib Nisar & Kh. Farooq Saeed, JJ.
COMMISSIONER OF INCOME TAX GUJRANWALA ZONE, GUJRANWALA--Petitioner
versus
M/s. ALI BRICKS COMPANY JALALPUR BHATTIAN
DISTRICT, HAFIZABAD--Respondent
P.T.R. No. 17 of 2008, heard on 23.9.2008.
Income Tax Ordinance, 2001 (XLIX of 2001)--
----S. 122--Question of law--Scope of--Section 122 of the Income Tax Ordinance, 2001, with special reference to retrospectively of its sub-sections specially those which deals with cancellation of reopening of an earlier assessment finalized under Income Tax Ordinance, 1979--Held: Provisions of Section 122(5) as on date neither covered the assessments finalized under repealed Income Tax Ordinance, 1979, nor the operation of law was made retrospective in various corresponding provisions--The use of new terms like `Tax year' as against the earlier phrase `assessment' and `tax payer' as against the words `assessee' also have further titled the issue in favour of the tax payer and against the revenue. [P. 4] A
Interpretation of Statute--
----While interpreting the language of Section 122 of Income Tax Ordinance, 2001, High Court had in view the golden principle of interpretation i.e. to remain within the language of law--In taxing statutes, there is unanimity among the Courts that the basic principle of interpretation which infact is the golden principle that the language of law should be applied in its natural meanings--This has always been considered to be as the safest method. [P. 5] B
M/s Shahid Jamil Khan, Fiaz-ur-Rehman, Sajjad Ali Jafir, Muhammad Iqbal Vehniwal, Imdad Ali Nekokara, Ch. Zakir Hussain Dhothar, Amjad Hussain Malik, Main Yousaf Umar, Muhammad Nawaz Waseer, Advocates for Petitioner.
Nemo for Respondents.
Date of hearing: 23.9.2008.
Judgment
Kh. Farooq Saeed, J.--This judgment will dispose of P.T.R Nos. 17, 18, 19, 25, 31, 35, 36, 46, 47, 63, 64, 65, 66, 67, 77, 78, 98, 99, 106, 107, 108, 133, 134, 135, 136, 147, 148, 149, 150, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 206, 207, 226, 227, 228, 229, 230, 231, 250, 252, 253, 260, 264, 265, 266, 267, 268, 274, 316, 317, 318, 320, 323, 325, 327, 330, 331, 333, 334, 335, 338, 339, 348, 384, 399, 400, 409, 432, 433 and 438 of 2008, as the common question of law is involved.
2. These reference applications have been filed by the Income Tax department against the orders in appeal by Income Tax Appellate Tribunal. The questions of law proposed basically are with regard to the scope of Section 122 of the Income Tax Ordinance, 2001, with special reference to retrospectively of its Sub-Sections specially those which deals with cancellation or reopening of an earlier assessment finalized under Income Tax Ordinance, 1979 (repealed). In this regard the issues which are common and in fact cover all the controversies are as follows:--
(i) Retrospectivity and application of SRO 633 (1)/2002 dated 14.9.2002 and consequential cancellation of notices issued on the basis thereof in respect of the assessments finalized prior to the enforcement of the income tax ordinance 2001.
(ii) Retrospectivity of the provisions of law inserted in terms of Section 122 (5 A) in income tax ordinance 2001 by virtue of Finance Ordinance 2003, and whether the cases finalized under Income Tax Ordinance 1979 up to 30.6.2003 can be cancelled under the said provision.
(iii) Retrospectivity of the Section 122 (5) before and after its amendment by Finance Ordinance 2003.
3. So far as Issue No. 1 is concerned, the matter has already attained finality in terms of judgment dated 7.4.2005 in constitution Petition No. 7788 of 2004 decided by this Court in the case titled as "Kashmir Edible Oils Limited and others" which was subsequently confirmed by. Honourable S.C of Pakistan and is reported as (2006 SCMR 109). In the said judgment this Court has inter alia held that all the notices issued by income tax office in respect of assessments finalized earlier on the basis of provisions of law added by aforementioned SRO 633(1)/2002 dated September 14, 2002, are void and illegal. This obviously means that the same having no sanctity of law being on the basis of a legislation, which was held to be against the law itself were liable to cancellation. The decision of ITAT, therefore on the subject are unexceptionable.
4. Section 122 (5A) as inserted by the Finance Ordinance 2003 has not specifically been made retrospective. The arguments of the learned counsel for the petitioner basically was that even before the said insertion the law in terms of Section 122 with all its sub sections was comprehensive enough to enable the department to cancel the already completed assessments. Moreover, the provisions being substantive could only apply prospectively. This has been held in a long line of judgments including "Commissioner, Sindh Employees Social Security Institution and another vs. MS. E.M Oil Mills and Industries Limited" reported as (2002 SCMR 39). In fact the judgments reported as Kashmir Endible Oil Limited reported as 2005, 91 tax 480 High Court, Lahore, Monnoo Industries Limited vs. Commissioner Income Tax 2001 84 Tax 26 High Court Lahore, Fauji Oil Terminal vs. CIT reported as 2006 PTD 734 decided by High Court Karachi,' clinch the issue. The learned Legal Advisor's claim that the same are distinguishable and that the Court was not properly assisted with regard to the language as was obtaining on the date of issuance of notices by ignoring the above SRO does not convince us because he has referred only the discussion that suits his arguments. The objection of the learned Legal Advisor would not need much dilation as Fauji Oil Terminal and Distribution Company Karachi vs. A.C Tax Officer A Audit Division Karachi (supra) has taken care of this situation. Not only that finding in the case of Honda Shahrah Faisal vs. Regional Commissioner I.T has been followed but it has farther been added that "sub-section (5A) of Section 122 of the Income Tax Ordinance 2001 inserted with effect from 1.7.2003 is not applicable to the assessments finalized before 1.7.2003 because sub-section (5A) of Section 122 has no retrospective effect and therefore, the assessments finalized before 1.7.2003 cannot be reopened/revised/amended in exercise of jurisdiction under Section 122 (5A) of the Income Tax Ordinance, 2001".
5. The above ratio is unequivocal and clear in its meanings. The Court having found that the provision is not retrospective there is no ground for us to now agree with the department. The finding of learned Income Tax Appellate Tribunal on this issue, therefore, again is unexceptionable.
6. The provisions of Section 122 (5) have also undergone many changes until it was finally amended so as to add the words "or repealed ordinance" and certain other sentences in its sub section to make the provision perimeteria with Section 65 of the erstwhile income tax ordinance 1979. Notwithstanding the arguments that even after insertion of the above language the provision is not retrospective, the original text had full tilt toward the claim of the taxpayer. This point has also been addressed by Karachi High Court in the reported judgment 2004 PTD 1173 in the case of Allied Motors Limited vs. Commissioner Income Tax and others. The finding of the Court is again very clear and unambiguous. The relevant para is as follows:--
"We fully agree with the proposition of law very-ably argued by Mr. Aqeel Ahmad Abbasi and hold that all the pending matters at the time of commencement of Income Tax Ordinance, 2001 are required to be decided in accordance with the provision contained in the repealed Ordinance, but by an income tax authority competent under the Income Ordinance 2001."
7. It does not need any detailed discussion to bring home that the connotation `pending' includes all such issues in which lis has been started. For reference one may quote 2006 PTD 2421 re: Messrs Bahria Oil Mills, Vehari vs. Commissioner of Income Tax, Zone, Multan. The outcome therefore, is obvious. The present construction of Income Tax Ordinance 2001, which came into existence on first day of July 2002. applies in respect of tax year that starts from the said date. The provisions of Section 122 (5) as on date neither covered the assessments finalized under the repealed income tax ordinance 1979 nor the operation of law was made retrospective in various corresponding provisions. The use of new terms like `tax year', as against the earlier phrase `assessment' and `taxpayer' as against the word `assessee' also have further tilted the issue in favour of the tax payer and against the revenue.
8. The issue of the application of Section 122 on finalized assessments has been settled by the language of law itself. For example, Section 122(1) starts from the language "subject to this section" while in sub section 2 it restricts the said amendment to only the assessments, which have, been issued on the "tax. payer". "Taxpayer" as already mentioned above is a new connotation and as per Section 2(66) of I.T Ordinance 2001, means "any person who derives an amount chargeable to tax under this ordinance". Obviously the terms "this ordinance" used in the definition cannot mean and include any enactment beyond Income Tax Ordinance 2001, Reference can be made to the case of "C.I.T. Central Zone, Lahore Vs. National Security Insurance C. Ltd, Lahore" (2001 PTD 814). The construction of the provision before the amendment was very clear and unambiguous to the extent of its application from 1.7.2002 onwards. Even the amendment through which in Section 122 (1) the words " or issued under Section 59, 59-A,' 62, 63 or 65 of the repealed ordinance" were added does not help the revenue. For all practical purpose the phrase as above having been inserted in the present form w.e.f. 1.7.2003 it cannot have implied effect of retrospectively, hence its application on the assessments finalized under Income Ordinance 1979 has rightly been held to be illegal. Reference in that regard can be made to the case of "C.I.T. Central Zone, Lahore Vs. National Security Insurance C. Ltd, Lahore" (2001 PTD 814).
9. So far as addition of words "as the repealed Ordinance" and matching amendments in Section 122(5) through SRO 633(1)/2000 is concerned, the same also having been held to be as illegal are now non-existent. We have already held that the term `this Ordinance' cannot be extended to include any enactment beyond the Income Tax Ordinance, 2001.
10. While, interpreting the language of Section 122 as above, this Court had in view the golden principle of interpretation i.e. to remain within the language of law. In Taxing Statutes, there is unanimity among the Courts that the basic principle of interpretation which in fact is the golden principle that the language of law should be applied in its natural meanings. This has always been considered to be as the safest method. In this regard, one can refer the most quoted verse of Mr. J. Rowlet in "Cape Brandy Syndicate Vs. Inland Revenue Commissioner" (1921 K.B 69), who ruled:--
"It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used".
11. Since while going through the language of Section 122 of the. Income Tax Ordinance, 2001, we have followed the said principle, this Court does not have any doubt in its mind that all the propositions through questions framed are to be answered in favor of the taxpayers and against the Income Tax department. We, therefore, for the reasons of our discussion above and our detailed judgment on the issue reported as (2008 P.T. 1420) ref: "Commissioner of Income Tax/Wealth Tax, Zone-C (Legal), Lahore vs. Messrs Idrees Cloth House, Lahore" decide all the reference applications in terms thereof.
(M.S.A.) Order accordingly.
Present: Mian Saqib Nisar & Kh. Farooq Saeed, JJ.
COMMISSIONER OF INCOME TAX GUJRANWALA ZONE, GUJRANWALA--Petitioner
versus
M/s. ALI BRICKS COMPANY JALALPUR BHATTIAN
DISTRICT, HAFIZABAD--Respondent
P.T.R. No. 17 of 2008, heard on 23.9.2008.
Income Tax Ordinance, 2001 (XLIX of 2001)--
----S. 122--Question of law--Scope of--Section 122 of the Income Tax Ordinance, 2001, with special reference to retrospectively of its sub-sections specially those which deals with cancellation of reopening of an earlier assessment finalized under Income Tax Ordinance, 1979--Held: Provisions of Section 122(5) as on date neither covered the assessments finalized under repealed Income Tax Ordinance, 1979, nor the operation of law was made retrospective in various corresponding provisions--The use of new terms like `Tax year' as against the earlier phrase `assessment' and `tax payer' as against the words `assessee' also have further titled the issue in favour of the tax payer and against the revenue. [P. 4] A
Interpretation of Statute--
----While interpreting the language of Section 122 of Income Tax Ordinance, 2001, High Court had in view the golden principle of interpretation i.e. to remain within the language of law--In taxing statutes, there is unanimity among the Courts that the basic principle of interpretation which infact is the golden principle that the language of law should be applied in its natural meanings--This has always been considered to be as the safest method. [P. 5] B
M/s Shahid Jamil Khan, Fiaz-ur-Rehman, Sajjad Ali Jafir, Muhammad Iqbal Vehniwal, Imdad Ali Nekokara, Ch. Zakir Hussain Dhothar, Amjad Hussain Malik, Main Yousaf Umar, Muhammad Nawaz Waseer, Advocates for Petitioner.
Nemo for Respondents.
Date of hearing: 23.9.2008.
Judgment
Kh. Farooq Saeed, J.--This judgment will dispose of P.T.R Nos. 17, 18, 19, 25, 31, 35, 36, 46, 47, 63, 64, 65, 66, 67, 77, 78, 98, 99, 106, 107, 108, 133, 134, 135, 136, 147, 148, 149, 150, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 206, 207, 226, 227, 228, 229, 230, 231, 250, 252, 253, 260, 264, 265, 266, 267, 268, 274, 316, 317, 318, 320, 323, 325, 327, 330, 331, 333, 334, 335, 338, 339, 348, 384, 399, 400, 409, 432, 433 and 438 of 2008, as the common question of law is involved.
2. These reference applications have been filed by the Income Tax department against the orders in appeal by Income Tax Appellate Tribunal. The questions of law proposed basically are with regard to the scope of Section 122 of the Income Tax Ordinance, 2001, with special reference to retrospectively of its Sub-Sections specially those which deals with cancellation or reopening of an earlier assessment finalized under Income Tax Ordinance, 1979 (repealed). In this regard the issues which are common and in fact cover all the controversies are as follows:--
(i) Retrospectivity and application of SRO 633 (1)/2002 dated 14.9.2002 and consequential cancellation of notices issued on the basis thereof in respect of the assessments finalized prior to the enforcement of the income tax ordinance 2001.
(ii) Retrospectivity of the provisions of law inserted in terms of Section 122 (5 A) in income tax ordinance 2001 by virtue of Finance Ordinance 2003, and whether the cases finalized under Income Tax Ordinance 1979 up to 30.6.2003 can be cancelled under the said provision.
(iii) Retrospectivity of the Section 122 (5) before and after its amendment by Finance Ordinance 2003.
3. So far as Issue No. 1 is concerned, the matter has already attained finality in terms of judgment dated 7.4.2005 in constitution Petition No. 7788 of 2004 decided by this Court in the case titled as "Kashmir Edible Oils Limited and others" which was subsequently confirmed by. Honourable S.C of Pakistan and is reported as (2006 SCMR 109). In the said judgment this Court has inter alia held that all the notices issued by income tax office in respect of assessments finalized earlier on the basis of provisions of law added by aforementioned SRO 633(1)/2002 dated September 14, 2002, are void and illegal. This obviously means that the same having no sanctity of law being on the basis of a legislation, which was held to be against the law itself were liable to cancellation. The decision of ITAT, therefore on the subject are unexceptionable.
4. Section 122 (5A) as inserted by the Finance Ordinance 2003 has not specifically been made retrospective. The arguments of the learned counsel for the petitioner basically was that even before the said insertion the law in terms of Section 122 with all its sub sections was comprehensive enough to enable the department to cancel the already completed assessments. Moreover, the provisions being substantive could only apply prospectively. This has been held in a long line of judgments including "Commissioner, Sindh Employees Social Security Institution and another vs. MS. E.M Oil Mills and Industries Limited" reported as (2002 SCMR 39). In fact the judgments reported as Kashmir Endible Oil Limited reported as 2005, 91 tax 480 High Court, Lahore, Monnoo Industries Limited vs. Commissioner Income Tax 2001 84 Tax 26 High Court Lahore, Fauji Oil Terminal vs. CIT reported as 2006 PTD 734 decided by High Court Karachi,' clinch the issue. The learned Legal Advisor's claim that the same are distinguishable and that the Court was not properly assisted with regard to the language as was obtaining on the date of issuance of notices by ignoring the above SRO does not convince us because he has referred only the discussion that suits his arguments. The objection of the learned Legal Advisor would not need much dilation as Fauji Oil Terminal and Distribution Company Karachi vs. A.C Tax Officer A Audit Division Karachi (supra) has taken care of this situation. Not only that finding in the case of Honda Shahrah Faisal vs. Regional Commissioner I.T has been followed but it has farther been added that "sub-section (5A) of Section 122 of the Income Tax Ordinance 2001 inserted with effect from 1.7.2003 is not applicable to the assessments finalized before 1.7.2003 because sub-section (5A) of Section 122 has no retrospective effect and therefore, the assessments finalized before 1.7.2003 cannot be reopened/revised/amended in exercise of jurisdiction under Section 122 (5A) of the Income Tax Ordinance, 2001".
5. The above ratio is unequivocal and clear in its meanings. The Court having found that the provision is not retrospective there is no ground for us to now agree with the department. The finding of learned Income Tax Appellate Tribunal on this issue, therefore, again is unexceptionable.
6. The provisions of Section 122 (5) have also undergone many changes until it was finally amended so as to add the words "or repealed ordinance" and certain other sentences in its sub section to make the provision perimeteria with Section 65 of the erstwhile income tax ordinance 1979. Notwithstanding the arguments that even after insertion of the above language the provision is not retrospective, the original text had full tilt toward the claim of the taxpayer. This point has also been addressed by Karachi High Court in the reported judgment 2004 PTD 1173 in the case of Allied Motors Limited vs. Commissioner Income Tax and others. The finding of the Court is again very clear and unambiguous. The relevant para is as follows:--
"We fully agree with the proposition of law very-ably argued by Mr. Aqeel Ahmad Abbasi and hold that all the pending matters at the time of commencement of Income Tax Ordinance, 2001 are required to be decided in accordance with the provision contained in the repealed Ordinance, but by an income tax authority competent under the Income Ordinance 2001."
7. It does not need any detailed discussion to bring home that the connotation `pending' includes all such issues in which lis has been started. For reference one may quote 2006 PTD 2421 re: Messrs Bahria Oil Mills, Vehari vs. Commissioner of Income Tax, Zone, Multan. The outcome therefore, is obvious. The present construction of Income Tax Ordinance 2001, which came into existence on first day of July 2002. applies in respect of tax year that starts from the said date. The provisions of Section 122 (5) as on date neither covered the assessments finalized under the repealed income tax ordinance 1979 nor the operation of law was made retrospective in various corresponding provisions. The use of new terms like `tax year', as against the earlier phrase `assessment' and `taxpayer' as against the word `assessee' also have further tilted the issue in favour of the tax payer and against the revenue.
8. The issue of the application of Section 122 on finalized assessments has been settled by the language of law itself. For example, Section 122(1) starts from the language "subject to this section" while in sub section 2 it restricts the said amendment to only the assessments, which have, been issued on the "tax. payer". "Taxpayer" as already mentioned above is a new connotation and as per Section 2(66) of I.T Ordinance 2001, means "any person who derives an amount chargeable to tax under this ordinance". Obviously the terms "this ordinance" used in the definition cannot mean and include any enactment beyond Income Tax Ordinance 2001, Reference can be made to the case of "C.I.T. Central Zone, Lahore Vs. National Security Insurance C. Ltd, Lahore" (2001 PTD 814). The construction of the provision before the amendment was very clear and unambiguous to the extent of its application from 1.7.2002 onwards. Even the amendment through which in Section 122 (1) the words " or issued under Section 59, 59-A,' 62, 63 or 65 of the repealed ordinance" were added does not help the revenue. For all practical purpose the phrase as above having been inserted in the present form w.e.f. 1.7.2003 it cannot have implied effect of retrospectively, hence its application on the assessments finalized under Income Ordinance 1979 has rightly been held to be illegal. Reference in that regard can be made to the case of "C.I.T. Central Zone, Lahore Vs. National Security Insurance C. Ltd, Lahore" (2001 PTD 814).
9. So far as addition of words "as the repealed Ordinance" and matching amendments in Section 122(5) through SRO 633(1)/2000 is concerned, the same also having been held to be as illegal are now non-existent. We have already held that the term `this Ordinance' cannot be extended to include any enactment beyond the Income Tax Ordinance, 2001.
10. While, interpreting the language of Section 122 as above, this Court had in view the golden principle of interpretation i.e. to remain within the language of law. In Taxing Statutes, there is unanimity among the Courts that the basic principle of interpretation which in fact is the golden principle that the language of law should be applied in its natural meanings. This has always been considered to be as the safest method. In this regard, one can refer the most quoted verse of Mr. J. Rowlet in "Cape Brandy Syndicate Vs. Inland Revenue Commissioner" (1921 K.B 69), who ruled:--
"It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used".
11. Since while going through the language of Section 122 of the. Income Tax Ordinance, 2001, we have followed the said principle, this Court does not have any doubt in its mind that all the propositions through questions framed are to be answered in favor of the taxpayers and against the Income Tax department. We, therefore, for the reasons of our discussion above and our detailed judgment on the issue reported as (2008 P.T. 1420) ref: "Commissioner of Income Tax/Wealth Tax, Zone-C (Legal), Lahore vs. Messrs Idrees Cloth House, Lahore" decide all the reference applications in terms thereof.
(M.S.A.) Order accordingly.
PLJ 2010 Tax Cases (Lah.) 6
Present: Kh. Farooq Saeed, J.
M/s XEN SHAHPUR DIVISION, LOWER JEHLUM CANAL CIRCLE (LJC) QUARRY SUB-DIVISION, SARGODHA--Petitioner
versus
COLLECTOR SALES TAX (APPEALS) COLLECTORATE OF CUSTOMS FEDERAL EXCISE & SALES TAX, FAISALABAD
and 2 others--Respondents
W.P. No. 8532 of 2008, decided on 30.7.2008.
Constitution of Pakistan, 1973--
----Art. 165-A--Sales Tax Act, 1990, S. 26--Purpose, the object and the field of Art. 165-A of the Constitution is to fix the legal ownership of the property and the identity of the recipient of the income--This has been achieved by reinforcing the statutory corporate veil as such is no longer permissible and the distinct juristic personality of the incorporated or statutory body has been recognized notwithstanding the control, the destination and the functioning of such bodies--One should not now have any doubt as to the chargeability of tax on a corporation, a company or any other body or institution from a business or trade or any income arising from such trade even if it is owned controlled by Federal or Provincial Government, regardless of ultimate destination of such income. [Pp. 9 & 10] A
Constitution of Pakistan, 1973--
----Art. 199--Writ jurisdiction--Question of--If an act is illegal and facts of the case confirm the said illegality, there is no bar in exercising writ jurisdiction. [P. 10] C
Sales Tax Act, 1990 (VII of 1990)--
----S. 36(2)--Limitation--Jurisdiction for issuance of a notice only for three years prior to the date of such issuance--Going beyond the said limit shall which obviously cannot be allowed--Order accordingly.
[P. 11] D
PLJ 1999 SC 2331 & PLD 1985 Lah. 467 ref.
Ch. Muhammad Sadiq, Addl. A.G with Petitioner.
Mr. Muhammad Nawaz Cheema, Advocate for Respondents.
Date of hearing: 30.7.2008.
Order
Through this writ petition, the petitioner assails conformation of the default charge of the Sales Tax order passed by the Customs, Excise & Sales Tax Appellate, Tribunal dated 27.12.2007.
2. The brief facts leading to this writ petition are that the petitioner is a registered person in irrigation Department, Govt. of the Punjab, Pakistan. The petitioner is procuring and issuing stone to internal divisions of Irrigation in Punjab. It collects and deposit Sales Tax with the Sales Tax Department, on supply of stones to said internal division. The petitioner's division is only Irrigation quarry, which prepares pitching stones and spawl conforming to required specification, which are prepared as per quarrying method approved by Mineral Department. These stones subsequently are used for development works, flood protection works and other works of the Irrigation Department in the Punjab. The main purpose of the petitioner's sub-division is to supply prepared stones to the internal irrigation department of the Punjab to have an effective control over flood damages to works/life & property of the people living near river banks. The petitioner as claimed is not working on commercial basis, rather is working on no profit no loss basis. The petitioner however, is filing monthly returns in the Sales Tax Department as provided under Sec. 26 of the Sales Tax Act, 1990 alongwith tax levied on the said tax returns. The returns, which are being submitted for the last more than five years have never been confronted to be un-true.
3. In the month of April 2006, the Sales Tax Department carried out an audit of the petitioner's sub-division for the period of 07/2001 to 6/2005 and confronted certain discrepancies on the basis of said audit to the petitioner. A show cause notice, therefore, was issued under Sec. 36 of the Act (ibid), which was inter alia challenged to be as time barred.
4. The reply to the show cause notice was submitted, which however, could not find favour with the respondent/department and Sales Tax order in-original No. 46/2006 was passed on 29.11.2006. The assessing authority i.e. Additional Collector inter alia found that while filing the Sales Tax returns, the present petitioner totally ignored the provisions of Sec.2 (46) of the Sale Tax Act, 1990. Besides the Sales Tax record was not properly maintained as is required under Ss. 22, 23, 26, 34 & 36 (1) of the Sales Tax Act, 1990. It has also been observed that the petitioner by making a request for exemption under Sec.56 before the Federal Board of Revenue has accepted, the charge on their activity which stood further supported from their action of filing their returns for five years. The lacuna, therefore, was correctly, identified and charge of Rs. 1,12,45,039/- (Rs. One crore twelve lacs forty five thousand and thirty nine only) was created with a further default of surcharge under Sec. 33 (1) (2) of Sales Tax Act, 1990 @ Rs. 5000/-.
5. The appeals filed by the petitioner before the First Appellate authority as well as the Customs, Sale Tax and Federal Excise (Appeals), Faisalabad also have failed.
6. The learned counsel has challenged the impugned order with two basic arguments. He claimed that the petitioner is a limb of Government, and on lifting the veil of in-corporation what one would see is a governmental institution, which is being charged Sales Tax. Repeating earlier arguments that it is non-commercial organization, working at no profit and no loss basis, it is claimed that the charge against the petitioner is ultra vires. He however, could not answer to the quarry as to why the department has been filing Sales Tax returns in the past as well as for the present terms. The petitioner became wise after the audit department found discrepancies in the calculation of the Sales Tax payable. It was on the issue of charge to which the department had conceded earlier. The charge was never challenged by the department in the manner, that the return was being regularly filed and the Tax alongwith the same was also paid. Since the department was not having proper machinery and record was not being maintained in the prescribed manner, besides there was wrong calculation of the taxes the notice has been issued. The mistake which was found by the audit party was that while calculating the Sales Tax, royalty, excise duty and other incidental charges were not included. This was totally against the mandate of law as prescribed in Sec. 2(46) to which neither any arguments have been advanced nor the same has been challenged to be as incorrect. Even otherwise, the law is very clear on the subject and the calculation is valid and correct.
7. As already mentioned, the arguments are self negating. The petitioner's own action to submit returns regularly alongwith Tax and approaching Federal Board of Revenue for exemption contradicts the claim. Further such and similar organizations have been brought to the ambit of the Federal Taxs and there is no arguments or the case law in rebuttal.
8. The argument that if the veil of incorporation is lifted it will be the Provincial Government which is being charged to tax has been set at rest by insertion of Article 165 (A). Lifting of statutory veil is no longer permissible and the distinct juridical personality of the incorporate or statutory body has been recognized notwithstanding the control, distinction and functioning of such bodies. Reference in this regard can be placed in the case of "Karachi Development Authority Vs. Central Board of Revenue (C.B.R), (2000 A.C 53), "Shaukat Ali versus Commissioner, Lahore Division and others" (PLD 1963 (W.P.) Lahore 127) and "Mian Muhammad Abdullah versus District Judge, Sahiwal and 6 others" {PLD 1985 Lahore 467) respectively. In Karachi Development Authority (supra) the findings of the Hon'ble Supreme Court are as follows :--
"that by statutory dispensation a juristic personality is created which is distinct from that of the Government. Such a juristic personality is then entrusted with the statutory duties, some of which or all of which may partake of the functions of the Government both sovereign and non-sovereign. In the case in hand, we are concerned with the welfare activity of the Government which has been passed on to the K.D.A. It is not wholly for the discharge of sovereign functions as such. Nevertheless, the distinction that was sought to be established on the strength of Article 165 of the Constitution for the purposes of taxability between the property and income of the Government under statutory veil and the property and income of Government under no such veil has been brought to an end. The ultimate ownership of the property or the destination of the income has ceased to be the test. The statutory veil holds good for the purposes of determining the ownership of the property as well as its income. It is true that what is mentioned in Article 165-A (1) of the Constitution is limited to the levy of income tax. Nevertheless, the purpose, the object and the field of Article 165-A of the Constitution is to fix the legal ownership of the property and the identity of the recipient of the income. This has been achieved by reinforcing the statutory corporate veil for all fiscal purposes. The lifting of the corporate veil as such is no longer permissible and the distinct juristic personality of the incorporated or statutory body has been recognized notwithstanding the control, the destination and the functioning of such bodies. Such a declaratory law would certainly stand in the way of the appellant because the same distinction which was sought to be created by lifting the veil in the manner of the income tax is sought to be achieved in the manner of sale tax."
The language of Article 165(A) is so clear that one should not now have any doubt as to the chargeability of tax on a corporation, a company or any other body or institution from a business or trade or any income arising from such trade even if it is owned and controlled by Federal or Provincial Government, regardless of the ultimate destination of such income.
9. The other argument of the learned counsel is that the notice issued under Section 36 was barred by time. It related to the period of 07/2001 to 06/2005 and under Section 36 (2), the same could be issued only for 3 years. The same, therefore, being without jurisdiction was void abinitio. Thus not only that a writ jurisdiction can be invoked but also it being a point of law can be raised at all stages. His reliance is on (P.L.D 1990 Karachi 186) re: "Rice Export Corporation of Pakistan Ltd Vs. Karachi Metropolitan Corporation".
10. The other judgments which are also relevant to the issue are (PLJ 1999 S.C. 2331) re: "Ardeshir Cowasiee and ten others Vs. Karachi Building Control Authority (KMC Karachi and 4 others" and (P.L.D 1985 Lahore 467) re: "Mian Muhammad Abdullah Vs. District Judge, Sahiwal and 6 others". The question that if an act is illegal and facts of the case confirm the said illegality, there is no bar in exercising writ jurisdiction. It is correct that in this case the petitioner failed to avail the regular remedy in the terms of a "reference" before the High Court. However, since the issue raised pertains to jurisdiction, the writ jurisdiction has rightly been invoked. The very notice issued by the Additional Collector on 15.6.2006 for 7/2001 to 6/2005 apparently was late for a part of the said period. The language of the said section is as follows:--
Section 36
(2) "Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been short levied or has been erroneously refunded, the person liable to pay the amount of tax or charge or the amount of refund erroneously made shall be served with a notice within three years of the relevant dates, requiring him to show-cause for payment of the amount specified in the notice:
Provided that, where a tax or charge has not been levied under this sub-section, the amount of tax shall be recovered as tax fraction of the value of supply"
11. Section 36 can be invoked for the past three years only. This has been so provided in law in clear terms. In this regard the golden principle of interpretation of Fiscal Statutes is applicable with full authority. Law is to be applied in its natural meanings. The famous verse by Mr. J.Rowlet which is among the earliest on the issue and is being followed even today, needs reference. The same reads as follows:--
"It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used".
Applying above golden principle of interpretation one would be constrained to apply the limitation provided in the S. 36(2) which provides jurisdiction for issuance of a notice only for three years prior to the date of such issuance. Going beyond the said limit shall amount defeating the intention of legislature which obviously cannot be allowed.
In fact this court has already in its judgment dated 18.9.2007 given in W.P. No. 13331/2006 declared the said limit to be as mandatory which cannot be extended beyond the language provided therein by any sales tax authorities. The relevant paras of the said judgment read as follows:--
"The ratio settled in Re: Juma Khan and others Vs. Mst. Bibi Zenaba and others, (PLD 2002 S.C 823), a case relied upon at the bar for the revenue is clearly distinguishable. In that case, the Hon'ble Apex Court held that the question of limitation would not arise where the "case" related to right of inheritance to ancestral property. The ratio obviously does not help the revenue at all in the case in hand where the issue revolves around the competency and jurisdiction of the revenue to create a liability after the expiry of the statutory period".
13. Now I come to the factual controversy. The notice has been issued from 7/2001 to 6/2005 and the date of issuance being 15.6.2006 the same is valid upto 15.6.2003. The period prior to the said cut of date, therefore, has been added without lawful authority. This is obviously exercise of a jurisdiction beyond the mandate of law. It, therefore, provides full room for exercise of the writ jurisdiction by this Court under Article 199 of the Constitution of Islamic Republic of Pakistan. Consequently, the notice is held to be as illegal beyond the said period.
14. The result is obvious. The writ petition stands partly allowed in the manner that the charge created in principle is held to be as lawful while the period of the same is reduced to the extend of the period fixed by law u/S. 36 (2). This, writ petition, therefore, stands accordingly disposed of.
(M.S.A.) Petition disposed of.
PLJ 2010 Tax Cases (Islm.) 12 (DB)
Present: Muhammad Munir Peracha & Syed Qalb-i-Hassan, JJ.
COMMISSIONER OF INCOME TAX/WEALTH TAX,
ISLAMABAD--Petitioner
versus
M/s. PAKISTAN MOBILE COMMUNICATION (PVT.) LTD. ISLAMABAD--Respondents
I.T.R. No. 44 and 45 of 2007, decided on 26.5.2009.
Income Tax Ordinance, 2001 (XLIX of 2001)--
----Ss. 133 & 156--Reference under Section 133 of the Income Tax Ordinance, 2001--Question, whether ITAT was legally justified to prescribe time limit for action u/S. 52 of repealed Ordinance?--Held: Tribunal failed to understand as to how Section 156 can be taken into consideration to hold that period of four years is provided for declaring a person to be assessee in default--Even S. 156(4) provides a period of four years for rectifying an earlier order from the date of the order sought to be amended--Legislature has chosen not to provide any period of limitation for passing an order declaring a person to be assessee in default--Income Tax authorities or for that matter the income tax tribunal has no power to read the period of limitation prescribed under Section 156 of the Ordinance in Section 52--There is no time limit for action under Section 52 of the repealed Ordinance--Cases remanded. [Pp. 15 & 16] A & B
Mr. Shahid Iqbal, Advocate for Petitioner.
Mr. Naveed A. Andrabi, Advocate for Respondent.
Date of hearing: 21.5.2009.
Judgment
Muhammad Munir Peracha, J.--This order shall dispose of Income Tax References No. 44 and 45 of 2007.
2. The Assessing Officer vide order dated 31.12.2002 found the respondent company to be assessee in default in terms of Section 52 of the Income Tax Ordinance 1979 on the ground that it failed to deduct the tax under Section 50 of the Income Tax Ordinance regarding payments made, advances paid and the Commission paid. For the present reference, the above mentioned payments made in the assessment years 1997-98 and 1998-99 would be relevant. The plea of the petitioner that the order can not be made against it with regard to the above mentioned two assessment years, period of limitation having expired, was rejected by the Assessing Officer. The respondent challenged the said order of the Assessing Officer through an appeal filed before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) recorded a finding that the order passed by the Assessing Officer is barred by time regarding the payment made during the Assessment years 1997-98, 1998-99 as the said order could have been made within four years of the end of the Assessment years in view of Section 156 of the Income Tax Ordinance 1979. The appeal filed by the Commissioner Income Tax before the Income Tax Appellate Tribunal challenging the order of the Commissioner Appeals was rejected by the Tribunal. Paragraph 5 and 6 of the order passed by the Tribunal, is reproduced:
"At the time of hearing it was stated by learned DR that there is no limitation of time provided in the Income Tax Ordinance in respect of action u/S. 52. He stated that the learned CIT(A) was therefore, not justified to annul order u/S. 52. Learned AR stated that it has been held by the Tribunal that limitation to issue a notice u/S. 52 can not be extended beyond a period of four years whereas in this case the impugned action was taken after the period of four years and it is not, therefore, maintainable.
We have given due consideration to arguments of both the parties and we are inclined to agree with learned AR that the impugned order u/S. 52 was not passed within limitation as fixed by the higher appellate authorities. Learned CIT(A) was therefore, fully justified to annul the said order. In the light of facts and circumstances of the case we hereby uphold the order of learned CIT(A) and rejected the departmental appeal being without any merit."
3. Commissioner Income Tax (Appeals) has approached this Court through the present references. The Commissioner of Income Tax (Appeals) submits that the following questions of law arise from the judgment of the Income Tax Tribunal:
(a) Whether on the facts and in the circumstances of the case, the learned ITAT was legally justified to prescribe time limit for action under Section 52 of repealed Ordinance, whereas the law does not provide any such limitation for such action as it is more akin to recovery of outstanding taxes for which no limitation is prescribed?
(b) Whether under the facts and in the circumstances of the case, the prescription of limitation by the learned ITAT amounts to legislation, which is beyond the jurisdiction and power of the learned ITAT?
4. The references were admitted to a regular hearing and the notices were issued to the respondent. In response to the notice issued, Mr. Naveed A. Andrabi appeared for the respondent. Mr. Shahid Iqbal Advocate represented the Commissioner of Income Tax.
5. We have heard both the learned counsel and have examined the relevant provisions. Section 52 of the Ordinance reads as under:
"Liability of persons failing to deduct or pay tax:--Where any person fails to deduct or collect or having deducted or collected as the case may be fails to pay the tax as required by or under Section 50 he shall, without prejudice to any other liability which he may incur under this Ordinance, be deemed to be an assessee in default in respect of such tax."
Section 86 of the Ordinance provides that where any person fails to deduct or having deducted fails to pay any tax required under Section 50, such person "shall without prejudice to any other liability, which he may incur, be liable to pay additional tax at the rate of 18% per annum on the amount not paid for the period commencing from the date on which he was required to pay such tax to the date of the payment thereof. Section 93 (1) casts a duty on the Deputy Commissioner concerned that where any assessee is in default in making payment, he may forward to the tax recovery Officer a certificate in the prescribed form specifying the amount of tax due from the assessee. Section 156 empowers the Income Tax authorities and the appellate tribunal to amend any order passed by it to rectify any mistake apparent on the record, on its own motion or such mistake being brought to its notice by any other Income Tax authority or by the assessee. Sub-section 4 of Section 156 is relevant for the present purpose and is reproduced:
"No order under sub Section (1) shall be made after the expiration of four years from the date of the order sought to be amended."
Section 156(1) of the Ordinance comes into play only if there is an order already in existence, which requires rectification of the authority, which passed the said order. There was no order in existence which was to be rectified by the Assessing Officer through the order dated 31.12.2002.
We failed to understand as to how Section 156 can be taken into consideration to hold that period of four years is provided for declaring a person to be assessee in default. Even sub section 4 of Section 156 provides a period of four years for rectifying an earlier order from the date of the order sought to be amended. We are unable to understand, where from, it has been taken that four years are to be counted from the end of the assessment year in which the payments liable to deductions were made.
6. Let us now examine the case law cited. The judgment of the Division Bench of the Lahore High Court in case "T.R No. 345 of 2003" definitely supports the respondent. However, the judgment itself is based on an earlier judgment of the Karachi High Court reported as "Commissioner of Income Tax Zone C, Karachi Vs. M/S Agha's Super Market, Karachi, (2003 PTD 1571)". In this judgment there is no discussion on the subject in question and it simply is based on an earlier judgment of the High Court of Sindh, Karachi reported as "Commissioner of Income Tax Vs. Kamran Model Factory (2002 PTD 14)".
The said judgment (2002 PTD 14) is altogether on a different subject. In the said case, the matter involved was workers welfare fund. Sub Section 4 of Section 4 of the Workers Welfare Fund Ordinance 1971 reads as under:
"Section 4(4):--At the time of making an assessment under the Ordinance or as soon thereafter as may be, the Income-tax, Officer shall, by order in writing, determine the amount due from Industrial Establishment under Sub Section (1), if any on the basis of the income so assessed after taking into account the amount paid by the Industrial Establishment under Sub Section (3) in respect of the year and the Industrial Establishment shall pay the amount so determined on or before the date specified in order."
The said case is inapplicable while examining the provision of Section 52 of the Income Tax Ordinance 1979, because in case of Workers Welfare Fund Ordinance 1971, the Income Tax Officer making the assessment of Industrial Establishment was to make an order at the time of making an assessment under the Income Tax Ordinance, requiring the Industrial Establishment to pay the Workers Welfare Fund. If the said order is not made at the time of making the assessment under the Income Tax Ordinance, the Income Tax Officer was to make such an order soon thereafter. It was in that case that Sindh High Court came to the conclusion that such an order must be passed within 30 days. It was held that the failure to pass such an order can be a mistake apparent on the face of the record rectifiable under Section 156 of the Income Tax Ordinance, 1979. In the present case, there was no legal obligation on the Assessing Officer to pass an order declaring the respondent to be an assessee in default, while assessing the Income of the assessee itself. It, therefore, can not be said that there was an error in the order passed while assessing the income of the assessee requiring rectification.
7. The matter can be examined from another angle. Section 52 not only deals with the cases of failure to deduct but it also deals with the case of failure to deposit, deduction having been made. Should the person, who had deducted the tax while making payment be permitted to pocket the amount so deducted on the ground that he has not been declared assessee in default within four years from the end of the assessment year in which the payments liable to deductions were made. The legislature has chosen not to provide any period of limitation for passing an order declaring a person to be assessee in default. The income tax authorities or for that matter the Income Tax Tribunal has no power to read the period of limitation prescribed under Section 156 of the Ordinance in Section 52.
8. For what has been said above, we are of the opinion that there is no time limit for action under Section 52 of the repealed Ordinance. We, therefore, answer question (a) in the negative and question (b) in the positive.
9. Since the Tribunal decided the case on the legal question without examining the merits, both the cases are remanded to the Tribunal to decide on merit in the light of the findings recorded by us.
(M.S.A.) Case remanded.
PLJ 2010 Tax Cases (Lah.) 17
[Before The Customs, Federal Excise and Sales Tax Appellate Tribunal, Bench-II, Lahore]
Present: Mher Muhammad Arif Sargana and Mian Muhammad Hanif Tahir, Judicial Members
M/s. EXPOVILLA INTERNATIONAL, SIALKOT
& another--Appellants
versus
COLLECTOR, COLLECTORATE OF SALES TAX AND FEDERAL EXCISE, GUJRANWALA--Respondent
STA No. 49/LB of 2008 and 50/LB of 2008, decided on 5.10.2009.
Sales Tax Act, 1990 (VII of 1990)--
----Ss. 45-A(4) & 31--Power of adjudication--Penalty equivalent to 100 % of tax involved was imposed--Collector on executive side, could not exercise powers of adjudication u/S. 45-A(4) of Sales Tax Act--Sections 31 & 45-A(4) of Act, are different to each other--Validity--If departmental view point of exercising powers u/S. 31 of Sales Tax Act, is considered true then there was no need--Orders passed by officers, in exercise of power are appealable before Collector (Appeals), whereas there is no forum in the Act, where the order passed by Collector on executive side could be assailed, which is against the natural justice--Impugned orders were declared to be without jurisdiction--Appeals were accepted. [P. 22] A
Mr. Muhammad Akram Nizami, Advocate for Appellants.
Nemo for Respondent.
Date of hearing: 30.9.2009.
Judgment
Mher Muhammad Arif Sargana, Judicial Member.--This judgment shall dispose of the above titled two appeals as the question of facts and law are the identical.
STA No. 49/LB/2008.
2. This appeal has been directed against order in original No. 14/2007, dated 27.09.2007 passed by the learned Collector, through which the appellant was directed to pay sales tax amounting to Rs.2,29,81,341/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
3. The facts giving rise to this appeal are that during audit/investigation/inquiry of refund claim files of the appellant for the tax periods June, 2003 and August, 2003 to June, 2004, it was observed that tax fraud has been committed by availing bogus/illegal and inadmissible refunds fraudulently. As a consequence of adjudication proceedings, the appellants were directed to pay sales tax amounting to Rs.2,29,81,341/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
STA.No. 50/LB/2008
4. This appeal has been directed against order in original No. 13/2007, dated 27.09.2007 passed by the learned Collector, through which the appellant was directed to pay sales tax amounting to Rs.2,68,98,697/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
5. The appellant filed appeals before this Tribunal on 23.10.2007, which were returned with the remarks that these were not maintainable under Section 46 of the Sales Tax Act, 1990, as the impugned order was passed by the learned Collector of Sales Tax and Federal Excise, Gujranwala. The appellant filed writ petitions before the Hon'ble Lahore High Court, Lahore against return of the appeals by the Tribunal. The Hon'ble Lahore High Court, Lahore vide its orders dated 12.12.2008 passed the following orders:--
"Accordingly, the observation made by the Assistant Registrar of the Appellate Tribunal dated 23.10.2007 returning the appeal and refusing to entertain the same is set aside. The petitioner will now approach the Tribunal which will entertain and decide the appeal taking into consideration all the legal and factual issues raised before them."
6. Hence, these appeals.
7. The appeals were fixed for hearing on 27.08.2009. Mr. Muhammad Nawaz Cheema Advocate, appeared on behalf of the respondent, filed his power of attorney and sought adjournment. On his request the appeals were adjourned to 15.09.2009. On the said date Mr. Muhammad Akram Nizami Advocate, learned counsel for the appellant argued the case, but Mr. Muhammad Nawaz Cheema Advocate, learned counsel for respondent requested for adjournment. Again on his request the cases were adjourned to 29.09.2009. On the said date i.e. 29.09.2009, the clerk of the learned counsel for respondent appeared and requested for adjournment on the ground that the learned counsel was busy before the Hon'ble Lahore High Court. On his request the appeals were adjourned to 30.09.2009. On the said date i.e. 30.09.2009, none appeared on behalf of the respondent, which showed their least interest. In these circumstances, we are left with no other alternative but the decide the appeals on merits and on the basis of available record.
8. The main grounds of the appellant, as urged in the memo of appeal, are:--
(a) That the show cause notice has been issued without any lawful authority and jurisdiction. The statute has provided the authority of the persons to adjudicate the issue vide Section 45 of the Sales Tax Act, 1990. The provisions of Section 45 do not include the office of the Collector of Sales Tax to adjudicate the cases. It is a settled principle of law that the authority who cannot decide the issue, has no authority to issue show cause notice. The sales tax statute further suggests that an appeal can be filed against the orders passed by the officers appointed under Section 45 before the Collector of Sales Tax (Appeals) against the orders passed by the sales tax officer under Section 10, 11, 36, 45 or 66 ibid. By virtue of the aforesaid provisions of law, the appellant has been deprived to file an appeal before the Collector of Sales Tax (Appeals). As such, the show cause notice was illegal being issued without any legal authority and jurisdiction, hence was liable to be vacated, therefore, the order in original passed on the basis of the aforesaid illegal show cause notice is also liable to be declared illegal.
(b) That the show cause notice and the impugned order in original itself suggests that the audit of the appellant was carried out by the Collectorate of Sales Tax, but no audit observation was communicated to the answering respondent, as required under Section 25(3) of the Sales Tax Act, 1990. Therefore, the show cause notice which has been issued without adhering to the requirement of law was illegal and liable to be vacated therefore, ignoring the legal fiction the impugned order in original has been passed which is illegal and liable to be vacated.
(c) That the impugned order in original is sketchy and non speaking in all the set of allegations leveled therein and docs not contain any evidence which could be made basis to allege the appellant for the commission of the aforesaid so called tax fraud. The provisions of law invoked in the show cause notice and the impugned order in original is liable to be set aside being illegal.
(d) That the impugned order in original is also liable to be declared illegal being barred by time under first proviso of sub-section (3) of Section 36 of the Sales Tax Act, 1990.
(e) That the refund claims were sanctioned by the appropriate officer of Sales Tax after due scrutiny of the record and documentary evidence submitted by the appellant. At the time of sanctioning of refund due enquiry from the respective suppliers to the extent of issuance of invoices, supply of goods, as well as issuance of banking instruments was carried out and after satisfying the genuineness of the claim the department finalized the refund claims. It is pertinent to mention here that the enquiry pertains covering the period starting from June, 2003 to June, 2004. During this period different offices carried out the audits of the appellant firm and they did not agitate any audit issue, which could nullify the claim of the appellant firm. The contravention report was based on presumptions without any supporting evidence and the legal sanctity as required under Section 25 of the Sales Tax Act, 1990. The impugned order in original suggests that the Respondent No. 1 without applying his mind judiciously has passed the subject order in original which is illegal and liable to be set aside.
(f) That the preamble of the order in original suggest that an appeal against the impugned order in original has to be filed before the Appellate Tribunal under Section 46 of the Sales Tax act, 1990. A simple reading of the said section will reveal that an appeal can be filed before this Hon'ble Appellate Tribunal where the orders have been passed under Section 45-A or 45-B of the Sales Tax Act, 1990. This proves strongly that the Respondent No. 1 for the satisfaction of his own ambitions has passed the impugned order in original which is based on presumption and supposition. Hence, the same is liable to be declared illegal and accordingly set aside.
9. Arguments were heard. The learned counsel for the appellant argued exactly on the lines of submissions made in the memo of appeal.
10. We have heard the learned counsel for the appellant and perused the record available before us. Section 45 of the Sales Tax Act, 1990 deals with the powers of adjudication, the same is reproduced as below for ready reference:--
[5. Power of Adjudication.--[(1)] In cases involving assessment of tax, charging of [default surcharge], imposition of penalty and recovery of amount erroneously refunded [or any other contravention] under this Act or the rules made thereunder, the jurisdiction and powers of adjudication of the Sales Tax Officers shall be as follows:--
(i) Additional Collector: Cases falling under sub-section(2) of Section 11 and Section 36 without any restriction as to the amount of tax involved or amount erroneously refunded.
(ii) Deputy Collector: (a) Cases falling under sub-section (1) of Section 11.
(b) Cases falling under sub-section (2) of Section 11 and Section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees.
(iii) Asstt. Collector: Cases falling under sub-section (2) of Section 11 and Section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but does not exceed one million rupees.
(iv) Superintendent: Cases falling under sub-section (2) of Section 11 and Section 36 provided that the amount of tax involved or the amount erroneously refunded does not exceed ten thousand rupees.]
11. Bare reading of Section 45 reveals that the Collector does not figure anywhere in that section, meaning thereby that the Collector has not been given adjudication powers. The learned Collector has exercised his powers under Section 31 ibid while passing the impugned order in original. It is imperative to reproduce Section 31 as under:--
"31. Powers.-An officer of sales tax appointed under Section 30 shall exercise such powers and discharge such duties as are conferred or imposed on him under this Act; and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him."
12. It is very much clear that under Section 31 ibid, the officer of sales tax appointed under Section 30 shall exercise such powers and discharge such duties and not under Section 45 ibid. The powers of adjudication have been delegated under Section 45 of the Act. The Collector has otherwise vested with powers under sub-section (4) of Section 45A of the Act, which says "that the Collector may, suo moto, call for and examine the record of any proceeding under this Act or the rules made thereunder for the purpose of satisfying himself as to the legality or propriety of any decision or order passed by an officer of sales tax subordinate to him, and pass such order as he may deem fit." We are of the firm opinion that the learned Collector on the executive side, in presence of powers under sub-section (4) of Section 45A of the Act, could not exercise powers of adjudication under Section 45 of the Act. Section 31 and sub-section (4) of Section 45A of the Act are different to each other. We are of the view that if the departmental view point of exercising powers under Section 31 of the Act is considered true then there was no need of sub-section (4) of Section 45A. Further, the orders passed by the officers, in exercise of powers under Section 45, are appeal-able before the learned Collector-(Appeals), whereas there is no forum mentioned in the Act where the order passed by the learned Collector on the executive side could be assailed, which is against the natural justice. The learned Collector, having laid his hands upon a matter amenable only to adjudication proceedings, clearly violated the provisions of Section 45 of the Act. The impugned orders are declared to be without jurisdiction. Resultantly, both the appeals are accepted and the impugned orders in original are set aside and the show cause notices are vacated.
(R.A.) Appeals accepted.
PLJ 2010 Tax Cases (Lah.) 23
Present: Sh. Azmat Saeed, J.
M/s GAS LINKS C.N.G. PVT. (LTD.) FAISALABAD through its Director and others--Petitioners
versus
FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and others--Respondents
W.P. No. 3018 of 2009, decided on 6.11.2009.
Sales Tax Act, 1990 (VII of 1990)--
----Ss. 71 & 3(1)--Constitution of Pakistan, 1973, Art. 199--Levy and collection of sales tax--Liability of--Business of running CNG stations--Special procedure had been formulated pertaining to collection and payment of on natural gas and electric power, called Special Procedure Rules, 2007--Common questions of law and facts--Petitioners not only have a connection for supply of natural gas, but also consume electric power supplied by distributions companies--Tax on supply of electric power is unreasonable and arbitrary and in violation of fundamental rights of the petitioners--Validity--Neither vires of Sales Tax Act, 1990 nor any provision had been challenged--Petitioners had challenged the levy and collection of sales tax on electric power supplied to CNG station by distribution companies inter alia on the ground that sales tax on supply of natural gas constitutes a final discharge of liability of CNG station under Sales Tax Act, and therefore, the levy and collection of sales tax on the bill for electric power consumed by CNG stations amount to double taxation--It is not disputed between parties--Federal Government in view of Section 71 of the Sales Tax Act, is vested the authority and jurisdiction to prescribe a special procedure--Petitions were dismissed. [Pp. 27 & 28] A & B
Sales Tax Act, 1990 (VII of 1990)--
----S. 7-A--Levy of sales tax of 9%--Supply of natural gas by transmission and distribution companies to CNG stations--Collection of charge is ultra vires of Sales Tax Act--Question is levy of charge and collection of sales tax on electric power supply--Double taxation--Validity--Levy of sales tax of 9% in lieu of value addition is in consonance with Section 7-A of Sales Tax Act and power had been invoked while issuing notification while making Special Procedure Rules, 2007--Levy and collection of sales tax at rate of 9% has not been challenged through these writ petitions, nor it is the case of the petitioners that the charge is ultra vires of Sales Tax Act, otherwise illegal--Question is the levy of charge and collection of sales tax on electric power supply to the petitioners by distribution companies--Held: Levy of sales tax on electric power amounts to double taxation in view of levy of 9% tax on supply of natural gas in lieu of value addition by CNG station. [Pp. 29 & 30] C & D
Sales Tax Special Procedures Rules, 1990--
----R. 20--Sales Tax Act, 1990, S. 7-A--Constitution of Pakistan, 1973, Art. 199--Business of running CNG stations--Special procedure has been formulated pertaining to collection and payment of on natural gas and electric power--Collection and payment of sales tax on electric power--Illegality in levy of collection of sales tax on electric power supplied to CNG stations--Entitlement of claim refund of input tax--Validity--Such levy is valid and 9% is being charged and collected on account of value addition by CNG stations--No tax is being charged or collected on the supplies made by CNG stations to their customers in lieu whereof 9% sales tax is charged and collected by gas transmission companies--Where the supplies are converted into another taxable supply, the same are liable to collection of sales tax--In such an eventuality, in order to avoid duplication of the tax burden upon the ultimate consumer, the sales tax already paid by recipient of supplies is liable to be adjusted against the sales tax payable on the converted further taxable supply. [P. 30] E & D
PTCL 2002 Cl. 115, ref.
Sales Tax Special Procedure Rules, 2007--
----Chapter III--Collection and payment of sales tax on electric power--Providing of electric power to petitioners was an independent supply subject to levy and collection of sales tax--Validity--Charge and collection of sales tax on the supply of electric power is in consonance with letter, spirit, scheme and structure of Sales Tax Act, 1990--No law or the principle of law had been cited which is offended thereby--Petitioners are the ultimate consumers of electric power they must bear the incidence of sales tax. [P. 30] G
Sales Tax Special Procedure Rules, 1990--
----Rs. 13 & 6--Sales Tax Act, 1990, Ss. 7, 8 & 8-B--Business of running CNG stations--Levy of collection of sales tax on electric power supplied to CNG stations--Whether the petitioners are entitled to claim refund of input tax--Premature and misconceived--Legality--Counsels for petitioners had been unable to point out any illegality in levy of collection of sales tax on electric power supplied to CNG stations--As to whether the petitioners are entitled to claim refund of input tax in respect thereto is a matter not only alien to lis at hand having not been specifically asserted, but also premature as no such claim for adjustment or refund of the tax has been made by petitioners and declined by the department--Petitions appears to be premature and misconceived and are accordingly dismissed with direction that if and when any claim for refund or adjustment of input tax is made by petitioner in terms of Rule 17 of Sales Tax Special Procedure Rules, 1990 an order was passed and petitioners might seek their remedy available under law. [P. 31] H
Ch. Anwar-ul-Haq, Mr. Aamir Sohail, Mr. Khalid Nawaz Ghuman, Mr. Majid Saeed Butt, Rana Muhammad Afzal, Mr. Muhammad Saqib Sheikh, Mr. Bilal Ahmed Qazi, Syed Ali Imran Rizvi, Mr. Muhammad Nadeem Mirza, Mr. Muhammad Akram Nizami, Mr. Zehsan Amir, Mr. Ajmal Khan, Mr. Zulkernen Khan, Mr. Muhammad Saleem Ch., Ch. Liaqat Ali Sandhu, Rana Muhammad Abdul Qadoos, Mr. Abdul Qadoos Mugal, Mr. Muhammad Waseem Ch. and Mr. Sajjad Sarwar Saqib, Advocates for Petitioners.
Sh. Izhar-ul-Haq, Advocate, Ms. Kausar Perveen & Dr. Irteza Awan, Advocate for Respondents.
Date of hearing: 29.10.2009.
Judgment
Writ Petitions 12730-2009 KW CNG vs. Federation of Pakistan, 12729-2009 Al-Karam CNG vs. Federation of Pakistan, 2954-2009 National CNG Service vs. Federation of Pakistan, 6778-2009 Al-Jehad Filling Station vs. Federation of Pakistan, 6775-2009 Al-Hasan CNG vs. Federation of Pakistan, 4775-2009 Khalid Petroleum vs. Federation of Pakistan, 4774-2009 New Zealand CNG Master (Pvt.) Ltd. vs. Federation of Pakistan, 4772-2009 New Zealand CNG Master (Pvt.) Ltd. vs. Federation of Pakistan, 4771-2009 Kashif CNG & Filling Station vs. Federation of Pakistan, 16125-2009 Kashmir CNG Station vs. Federation of Pakistan, 19676-2009 Talha Saad CNG vs. Federation of Pakistan, 9811-2009 Haidar Petroleum vs. Federation of Pakistan, 9810-2009 Brite Way CNG vs. Federation of Pakistan, 14686-2009 Huk Fuel I vs. Federation of Pakistan, 14575-2009 Shah Nawaz CNG Station vs. Federation of Pakistan, 14589-2009 Din Petroleum Service vs. Federation of Pakistan, 12732-2009 Mehar Petroleum CNG vs. Federation of Pakistan, 12731-2009 Tri Star CNG vs. Federation of Pakistan, 3020-2009 Fuel Care CNG vs. Federation of Pakistan, 2956-2009 Sadiq & Sons Associate vs. Federation of Pakistan, 2955-2009 PSJ CNG Station vs. Federation of Pakistan, 2953-2009 Mian Petroleum vs. Federation of Pakistan, 20527-2009 Khokhar Filling Station vs. Federation of Pakistan, 2764-2009 Zaman Petroleum vs. Federation of Pakistan, 18438-2009 M/s. Khawaja CNG Station vs. Federation of Pakistan, 17986-2009 M/s. KSK CNG vs. Federation of Pakistan, 17989-2009 M/s. Citi CNG Filling Station vs. Federation of Pakistan, 17991-2009 Bismilla CNG Filling Station vs. Federation of Pakistan, 17995-2009 M/s. Gasoline (Pvt.) Ltd. vs. Federation of Pakistan, 17994-2009 M/s. Ravi Point Filling Station vs. Federation of Pakistan, 18441-2009 M/s. Gazcon CNG Station vs. Federation of Pakistan, 17985-2009 M/s. Gasline CNG Station vs. Federation of Pakistan, 17997-2009 M/s. Ahmed CNG Station vs. Federation of Pakistan, 20513-2009 M/s. CNG Master Pvt Ltd. vs. Federation of Pakistan, 20514-2009 M/s. Mango Garden CNG Station vs. Federation of Pakistan, 20515-2009 M/s. Khan Filling Station vs. Federation of Pakistan, 20514-2009 Thokar CNG Station vs. Federation of Pakistan, 11081-2009 M/s. Gas Point CNG Station vs. Federal Board of Revenue etc., 10959-2009 M/s. Nawals CNG vs. Federal Board of Revenue etc., 9860-2009 M/s. Superstar CNG Station vs. Federal Board of Revenue etc., 6160-2009 M/s. Madina CNG Filling Station vs. Federation of Pakistan, 1315-2009 Qadir CNG Station vs. Federation of Pakistan, 14572-2009 Anmol CNG Filling Station vs. Federation of Pakistan, 14565-2009 Almadina CNG Filling Station vs. Federation of Pakistan, 14563-2009 National CNG Filling Station vs. Federation of Pakistan, 14571-2009 Zia-e-Madina CNG Filling Station vs. Federation of Pakistan, 9563-2009 Mian CNG Filling Station vs. Federation of Pakistan, 1712-2009 Glaxy Filling Station vs. FBR, 13932-2009 Nur Sons CNG Filling vs. Federal Board of Revenue, 20743-2009 Mian Muhammad Amin vs. Federation of Pakistan, 2549-2009 Surriya Bibi C/O Prime CNG vs. Federal Board of Revenue, 19884-2009 M/s. Al-Bhai Petroleum Service vs. Federation of Pakistan, 7163-2009 Muhammad Aslam vs. Federation of Pakistan, 9571-2009 Amjad Hameed Sheikh vs. Federation of Pakistan, 9640-2009 Fakhar CNG Station vs. Federation of Pakistan, 3473 of 2008 (BWP) Al-Mezan CNG Filling Station vs. DG Regional Income Tax Officer etc., 9499 of 2009 M/s. Millat Filling CNG Station vs. Federation of Pakistan etc., 10356-2009 Iqra Filling Station vs. Federation of Pakistan, 17269-2008 M/s. Kare CNG Filling Station vs. Federal Board of Revenue etc., 9498-2009 M/s. Millat CNG Filling Station vs. Federation of Pakistan, 20777-2009 Bismilla CNG Filling Station vs. Federation of Pakistan, 15396-2009 M/s. Alkausar Traders vs. Chairman Federal Board of Revenue and 7821-2009 M/s. Sunny Stars CNG Filling Station etc. vs. Federation of Pakistan filed by various petitioners involving common questions of law and facts are being disposed of through this order.
2. Petitioners in the above captioned writ petitions claim to be duly registered under the Sales Tax Act 1990, and are engaged in the business of running CNG Stations and some of them also run petrol pump along with CNG stations. In the above context, the petitioners not only have a connection for the supply of Natural Gas, but also consume Electric Power supplied by various distributions companies who have also been impleaded as respondents in these petitions. It is the case of the petitioners that the Federal Government had issued a Notification dated 9.6.2007, whereby, in exercise of powers conferred inter alia under Section 71 of the Sales Act Tax 1990, a Special Procedure has been formulated pertaining to the collection and payment of on Natural Gas and Electric Power, called Special Procedure Rules 2007, and in terms of said special procedure rules, it is contended that for the supply of Natural Gas to CNG Station, Sales Tax at the rate of 25% of the value has been levied, out of which, 16% is chargeable on the supply by the gas transmission companies in terms of sub-section (1) of Section 3 of the Sales Tax Act and a further 9% in lieu of value addition made by CNG Station.
3. In the above perspective, the petitioners have challenged the levy and collection of the Sales Tax on the Electric Power supplied to CNG Station by the Distribution companies inter alia on the ground that the Sales Tax on supply of Natural Gas constitutes a final discharge of the liability of the CNG Station under the Sales Tax Act, and therefore, the levy and collection of Sales Tax on the bill for the Electric Power consumed by CNG Station amounts to double taxation. Great stress in this behalf was laid by the learned counsels for the petitioners that Sales Tax being charged and collected by the gas transmission company include 9% in lieu of value addition by the CNG Stations. It is next contended that the said tax on the supply of Electric Power is unreasonable and arbitrary and in violation of the fundamental rights of the petitioners.
4. Learned counsels appearing on behalf of the Department have controverted the stance being taken on behalf of the petitioners by contending that 9% of the Sale Tax which has been levied on the supply of Natural Gas in lieu of value addition by CNG Station, and no further tax on the supply of Natural Gas by CNG Station to the consumer is being collected, hence, there is no question of double taxation. It is added that the supply of Electric Power is a separate and distinct taxable supply which is dealt with by the other provision of the Special Procedure Rules pertaining to the supply of Electric Power. Learned counsels have also placed on record, copy of the minutes of meeting dated 30.5.2007 held by the representative of the Department and All Pakistan CNG Association to contend that 9% tax has been levied in lieu of value addition with the consent of the members of the Association including the petitioners, who are therefore estopped from challenging the same through the above captioned writ petitions.
5. In rebuttal, learned counsels representing the petitioners have urged at the bar that no doubt different provisions have been enacted in the Special Procedure Rules for the supply of the Electric Power, however, the Department is not permitting any adjustment or refund of input tax with regard to the Sales Tax charged on the Electric Power being supplied to the CNG Stations.
6. In response, learned counsels for the Department have urged that these contentions were neither pleaded by the petitioners in these petitions nor have they claimed any refund or adjustment in this behalf from the department, hence, these contentions are alien to the lis and cannot be adjudicated upon by this Court while hearing the instant petitions.
7. Heard. Record perused. At the very outset, it has been noticed that neither vires of the Sales Tax Act 1990 nor any provision thereof has been challenged. It is a matter of record that vide notification dated 9.6.2007, the Sales Tax Special Procedure Rules 2007 have been made and enforced. It is not disputed between the parties that Federal Government in view of Section 71 of the Sales Tax Act is, vested with the authority and jurisdiction to prescribe a special procedure. It is not the case of the petitioners that said rules are ultra vires Section 71 ibid. The aforesaid Special Procedure Rules, inter alia, deal both with the Electric Power and the collection and payment of Sales Tax on Natural Gas. Latter is governed by Chapter IV of the Special Procedure Rules and the provision in this behalf applicable to the present petitioners are as follows:
CHAPTER IV
SPECIAL PROCEDURE FOR COLLECTION AND PAYMENT OF SALES TAX ON NATURAL GAS
19. Application:--The provision of this chapter shall apply for collection and payment of on Natural Gas including Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) Imported, produced, transmitted and supplied by gas-well head companies and gas transmission and distribution companies licensed under the Natural Gas Rules, 1960, including their distributors, dealers, sales agents, retailers or by any other person hereinafter called the "person" for the purposes of this Chapter and dealing in importation, production or distribution and supply of Natural Gas including Compressed Natural Gas and Liquefied Petroleum Gas.
20. Levy and collection of Sales Tax :--(1) Every person who supplies Natural Gas shall be liable to registration and shall charge and pay Sales Tax at the rate specified in sub-section (1) of Section 3 of the Act.
(2) Sales Tax on Natural Gas shall be levied and collection at the following stages and in the following manners, namely:--
(a) .....................................................
(b) .....................................................
(c) In case of supply of Natural Gas by transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the gas transmission and distribution company and the value for the purpose of tax shall be the total amount billed including price of Natural Gas, charges excluding the amount of late payment surcharge rents, commissions and all duties and tax, local Provincial and Federal, but excluding the amount of as provided in clause (46) of Section 2 of the Act:
Provided that in case of supply of Natural Gas to CNG Stations the gas transmission and distribution company shall charge sales tax at the rate of twenty-five percent of the value as aforesaid. This rate shall include sixteen percent as chargeable on supplies of gas company under sub-section (1) of Section 3 and nine percent in lieu of value addition made by CNG Stations:
Provided further that CNG Station, if not already registered, shall obtain registration under Chapter 1 of the Sales Tax Rules, 2006, and shall also file quarterly return in the manner given in Rule 7; and].
8. Rule 20(2)(c) reproduced above pertains particularly to the supply of Natural Gas by transmission and distribution companies to CNG Station, and the first proviso thereto prescribes Sales Tax at the rate of 25% of the value shall be charged which includes 16% is chargeable on the supply by gas transmission companies in terms of Section 3 sub-section (1) of the Sales Tax Act and 9% in lieu of value addition by the CNG Stations.
9. Levy of Sales Tax of 9% in lieu of value addition is in consonance with Section 7A of the Sales Tax Act, and power thereunder have been invoked while issuing notification dated 9.6.2007 while making Special Procedure Rules 2007 as stated therein. Levy and collection of the aforesaid Sales Tax at the rate of 9% has not been challenged through these writ petitions, nor it is the case of the petitioners that said charge is ultra vires of Sales Tax Act, 1990 or otherwise illegal. In fact what has been called in question is the levy of charge and collection of Sales Tax on the Electric Power Supply to the petitioners by the Distribution Companies.
10. It has been contended that levy of Sales Tax on Electric Power amounts to double taxation in view of the levy of 9% tax on the supply of Natural Gas in lieu of value addition by the CNG Station. Perusal of Rule 20 of the Sales Tax Act 1990 Special Procedure Rules and Section 7-A of the Act ibid makes it clear and obvious that such levy is valid and 9% is being charged and collected on account of value addition by CNG Stations. No tax is being charged or collected on the supplies made by CNG Stations to their customers in lieu whereof 9% Sales Tax is charged and collected by the gas transmission companies.
The contentions now being raised by the learned counsels for petitioners must necessarily be examined in the context of the scheme and structure of Sales Tax Act 1990 and the Rules framed thereunder. In pith and substance, Sales Tax is a tax on consumption charged upon a taxable supply collected by a registered person making the said supply as an agent and trustee of the Federal Government. Where such taxable supplies are consumed, the burden of tax falls upon the consumer. However, where the said supplies are converted into another taxable supply, the same are liable to collection of Sales Tax. However, in such an eventuality, in order to avoid duplication of the tax burden upon the ultimate consumer, the Sales Tax already paid by the recipient of the supplies is liable to be adjusted against the Sale Tax payable on the converted further taxable supply. I am fortified in this view by the dictum of law laid down by this Court in the case reported as PTCL 2002 CL 115 M/s. Mayfair Spinning Mills Ltd. Lahore vs. Customs, Excise and Sales Tax Appellate Tribunal Lahore and two others.
The collection and payment of Sales Tax on the Electric Power is also dealt with and covered by Sales Tax Special Procedure Rule 2007 Chapter III. The providing of Electric Power to the petitioners is an independent supply subject to levy and collection of Sales Tax. Viewed in the perspective of the law, it is clear and obvious that the charge and collection of Sales Tax on the supply of Electric Power is in consonance with the letter, spirit, scheme and structure of Sales Tax Act, 1990. No law or the principle of law has been cited which is offended thereby. To the extent that the petitioners are the ultimate consumers of Electric Power, they must bear the incidence of Sales Tax.
In fact the challenge thrown by the learned counsels for the petitioners in this respect is a little out of focus. The only matter that may arise would be as to whether the petitioners are entitled to claim the adjustment or refund of said tax levied and collected on the supply of Electric Power. Reference in this behalf is made to Rule 16 of the Sales Tax Special Procedure Rules 1990 which reads as under:
CHAPTER III
SPECIAL PROCEDURE FOR COLLECTION AND PAYMENT OF SALES TAX ON ELECTRIC POWER.
16. Input tax adjustment for registered consumers:--(1) In case of registered consumers, the Electric Power bill issued by Electric Power distribution company shall be treated as a tax invoice as define in clause (4) of Section 2 of the Act.
(2) The registered consumers shall be entitled to claim input tax adjustment against such invoice after the bill has been paid, as per the provisions of Sections 7, 8 and 8 B of the Act provided the bill contains registration number and address of the business premises declared to the Collector by such consumer.
11. It is not the case of the petitioners that at any point of time any claim in terms of Rule 16 was ever made and has been declined. No such allegation or assertion has been made in any of the said petitions. Be that as it may, if and when any such application is made, the same will obviously be subject to the provisions of Sales Tax Act, 1990 more particularly Sections 7, 8 and 8B thereof, as has been specifically mentioned in Rule 16, and in this behalf appropriate findings would also be required to be returned as to whether the Electric Power or any part thereof is used for the purpose of making a further taxable supply, if any, by the petitioners. Such exercise cannot be conducted by this Court, hence, this aspect of the matter cannot be adjudicated upon by this Court at this stage.
12. For the foregoing facts and reasons, learned counsels for the petitioners have been unable to point out any illegality in the levy of collection of Sales Tax on the Electric Power supplied to CNG Stations. As to whether the petitioners are entitled to claim refund of input tax in respect thereto is a matter not only alien to the lis at hand having not been specifically asserted, but also premature as no such claim for adjustment or refund of the tax has been made by the petitioners and declined by the Department. Consequently, these petitions appear to be premature and misconceived and are accordingly dismissed with the direction that if and when any claim for refund or adjustment of input tax is made by the petitioners in terms of Rule 13 of the Sales Tax Special Procedure Rules 1990 an order is passed thereon, and the petitioners may seek their remedy available under the law.
(R.A.) Petition dismissed.
PLJ 2010 Tax Cases (Lah.) 32 (DB)
Present: Mian Saqib Nisar & Hafiz Tariq Nasim, JJ.
M/s. GUJRANWALA STEEL FURNACE--Appellant
versus
CHAIRMAN F.B.R., etc.--Respondents
I.C.A. No. 489 of 2008, decided on 29.1.2009.
Sales Tax Act, 1990 (VII of 1990)--
----Ss. 3 & 7--Law Reforms Ordinance, 1972, S. 3--Intra Court Appeal--Leavy and charge of sales tax--Charging provision of a fiscal statute must be strictly construed and applied--No tax can be imposed, levied and recovered beyond the scope, ambit and the parameters of the charging provision of a particular fiscal statute--Section 3 of the Act primarily is the relevant provision, which enables the charge of sales tax on the "taxably supply" made by a registered person in the course or furtherance of any "taxable activity" carried on by him upon the "value of the supply". [P. 36] A
Sales Tax Act, 1990 (VII of 1990)--
----S. 7(2)--Entitlement to deduct input tax from output tax--Procedure for determining "tax liability" is provided by Section 7 of the Act, which clearly specify that a registered person shall be entitled to deduct input tax from output tax, that is due from him in respect of the tax period. [P. 36] B
Sales Tax Act, 1990 (VII of 1990)--
----Ss. 3 & 7--Procedure of tax--Notional in nature--No provision of the Act allows that in case any taxable supply is charged at zero rate and is used as a raw material for another taxable supply, the value of the later supply shall be restricted to the value addition only--Moreover, the zero rated tax cannot be equated to the actual payment of the tax, but is notional in nature. [P. 37] C
Sales Tax Act, 1990 (VII of 1990)--
----S. 7-A--Concept of value addition infact--Value of supply--Sales tax chargeable on the supply of goods of such description or class shall, with such limitations as may be prescribed, be levied and collected on the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacturer, are supplied--Case of the appellants does not fall within purview of S. 7-A of Sales Tax Act.
[P. 37] D
M/s. Kh. Saeed-uz-Zafar and Mian Mehmood Rasheed, Advocates for Appellants.
M/s. Izhar-ul-Haq Shaikh, Ahmer Bilal Soofi, Ms. Kausar Parveen, Advocates for Respondents.
Date of hearing: 14.1.2009.
Judgment
Mian Saqib Nisar, J.--The instant Appeal i.e ICA No. 489 of 2008 as also ICA No. 437 of 2008, ICA No. 438-2008, ICA No. 440-2008, ICA No. 441-2008, ICA No. 442-2008, ICA No. 443-2008, ICA No. 463-2008, ICA No. 464-2008, ICA No. 465-2008, ICA No. 466-2008, ICA No. 474-2008, ICA No. 475-2008, ICA No. 476-2008, ICA No. 477-2.008, ICA No. 478-2008, ICA No. 479-2008, ICA No. 480-2008, ICA No. 481-2008, ICA No. 482-2008, ICA No. 483-2008, ICA No. 484-2008 and ICA No. 485-2008, are being disposed of together, as all involve common questions of law and facts.
2. This is a second round of litigation, in which the appellants being aggrieved of the levy and charge of sales tax on the basis of special procedure has agitated the matter through invoking the constitutional jurisdiction of this Court. At this stage, it may be pertinent to mention that during the pendency of such writ petitions, another Notification No. SRO 862(1) 2008 dated 20.8.2008 was issued, through which Special Procedure Rules 2007, were amended by inserting clause 58-MA, reading as below:--
"58MA. Option to pay sales tax on ad valorem basis:--
(1) The steel melters and re-rollers may opt to pay sale was in ad valorem basis at the rate specified in sub-section (1) of Section 3 of the Act after deduction of input tax paid on their inputs subject to limits and conditions as specified under the Act or notifications issued thereunder. Such melters and re-rollers shall discharge their liability in the manner as indicated below, namely:--
(a) such registered persons opting to pay sales tax under this rule shall inform the Collector having jurisdiction and the option so exercised shall remain in force till the end of the financial year;
(b) the Collector shall co-ordinate with the electricity distribution companies to ensure that sales tax amount at the rate specified in sub-rule (1) of Rule 58H is not included in the electricity bills of those registered persons who opt to pay sales tax under this rule;
(c) the production subject to sales tax liability shall be determined at one metric ton of billets or ingots per 800 KWH of electricity consumed for steel melters and at one metric ton of mild steel products per 130 KWH of electricity consumed for steel re-rollers;
(d) such registered persons shall pay sales tax on the production as determined as above at minimum value of forty-seven thousands rupees per metric ton of billets or ingots or at minimum value of fifty-four thousand rupees per metric ton of re-rolled mild steel products, as the case may be; and
(e) steel melters and re-rollers operating under this rule shall be entitled to input tax credit subject to limitation provided in sections 7, 8, 8B and 73 of the Act and other applicable provisions, provided the input goods are meant for taxable supplies."
Thus feeling further aggrieved of the above, the appellants after seeking permission of the Court, amended their petitions and challenged the notification as well, asserting that by virtue of the above, the relief granted to the appellants under the judgment of this Court dated 23.11.2007 passed in WP No. 7781 of 2007 read with the judgment of the Hon'ble Supreme Court of Pakistan dated 27.5.2008 in C.As Mo. 120 to 257 and 289 of 2008 on account of which, where they were permitted to opt for the normal regime, has been frustrated; the special procedure, which has been declared ultra vires stands restored and the judgment of the Hon'ble Supreme Court violated. All these petitions have been dismissed by the learned Single Judge in Chamber vide a consolidated judgment dated 26.9.2008. Hence these appeals.
3. The broader facts of the cases which are relevant for the understanding of the propositions involved are:
The appellants are the steel melters and manufacturers of ingots/billet. For the purpose of charging sales tax from them, special procedure was enforced since 2004 as per which, the sales tax was levied on the basis of the consumption of the electricity at a specified rate. This process continued till 2007, when SRO 678 (1)/2007 dated 6.7.2007 was issued, which introduced a special regime for the payment of sales tax on the basis of the consumption of the electricity @ 4.75 per unit consumed. This notification was challenged by the Steel Melters including all the appellants and in the Writ Petition No. 7781 of 2007, etc., the notification was declared by this Court to be ultra vires vide judgment dated 23.11.2007. Against the above, the matters were agitated by the Department before the Hon'ble Supreme Court of Pakistan through C.As No. 120 to 257 and 289 of 2008, in which the following order was passed on 27.5.2008:--
"FBR shall provide option to the clients of Mr. Ihsan-ul-Haq Ch., learned ASC in Civil Appeals No. 129, 136-38, 140, 148, 154, 158, 163, 187, 230, 232, 235 & 238 of 08 to pay the sales tax under the normal tax regime @ 15 % on the taxable supply as reduced by any sales tax paid as an input tax on raw material etc. Others are already paying tax under special procedure vide SRO No. 687/2007, shall continue to pay there under till any amendment in substantive law or rule is made. The option so exercised shall remain valid for at least one year. Any other tax payer may approach the FBR for exercising option for paying the sales tax @ 15%. Adjustment due under the law shall be with effect from 6th February 2008 on production and sales."
In view of above arrangement, all the captioned appeals and civil petition are disposed of accordingly."
Thereafter the Notification No. 646(1)/2007 dated 27.6.2007 was issued whereby remeltable scrap was directed to be charged at zero rate. Thus on the basis of the judgment of the Hon'ble Supreme Court of Pakistan dated 27.5.2008, claiming that they have opted for the normal regime, the appellants states to have filed their tax returns accordingly; those returns according to them, were not acceded to by the Department, constraining the appellants to file various writ petitions, which as mentioned above, were subsequently amended and were decided by the learned Single Judge in Chamber, through the impugned judgment dated 26.9.2008.
4. Learned counsel for the appellants contends that Section 3 of the Sales Tax Act 1990 (the Act), is the charging provision and under the law it has to be strictly construed and applied. Reference in this behalf has been placed on the judgments reported as Collector, Customs, Central Excise & Sales Tax, Karachi, vs. Novartis Pakistan Ltd. (2002 PTD 976) and Collector, Sales Tax & Central Excise Rawalpindi vs. Messrs Wah Nobel Chemical Ltd. Wah Cantt. (2008 PTD 1693). On account of the above, the sales tax can only be charged, if there is (i) taxable activity; (ii) taxable supply, on the basis (iii) value of supply. In the instant cases, sales/purchase/supply of the scrap, as the raw material, is an independent taxable activity, which has its own value, whereas after melting of the scrap and the manufacturing of ingots and billets, it attain the character of a distinct taxable supply, therefore, upon the activity of such manufacture, the levy of tax should be minus the value of the supply of the scrap. It is also submitted that as per the provisions of Section 2(48) and Section 4 of the Act, the sales tax on the scrap is charged at zero rate, meaning thereby that the tax at the prescribed rate shall be deemed to have been paid on the value of its supply, therefore, the appellants shall only be legally required to pay the tax on the "value added" and not on the basis of the value of their manufactured product (taxable supply). It is further argued that the scrap is either locally generated or imported and in both the case it generates as a waste of a used product, upon which the tax already stands paid, therefore, a "taxably supply" on which tax has already been paid, cannot be subjected to the tax, as it shall amount to "double taxation" which is impermissible under the law; besides, it shall be the withdrawal of the benefits of "zero rate" given to the appellants for their raw material on the one hand but taken away on the other. It is Finally argued that vide judgment dated 26.9.2008, this Court has already declared that the charging of sales tax on the basis of consumption of electricity is ultra vires and the judgment has not been set aside by the Hon'ble Supreme Court of Pakistan, rather the law declared, still holds the field but in the garb of the Clause 58MA, which was subsequently inserted through the SOR No. 862(1)/2008, same illegality has been repeated, which is liable to be struck off; moreover, the SOR was issued on 20.8.2008, but has been applied retrospectively w.e.f. 1.7.2008, which is not permissible under the law.
5. Heard. There is no cavil with the proposition that the charging provision of a fiscal statue must be strictly construed and applied. It also is the settled law that no tax can be imposed, levied and recovered beyond the scope, ambit and the parameters of the charging provision of a particular fiscal statute. In the present case, Section 3 of the Act primarily is the relevant provision, which enables the charge of sales tax on the "taxably supply" made by a registered person in the course or furtherance of any "taxable activity" carried on by him upon the "value of the supply". It is not disputed that the melting and the conversion of the scrap into ingots/billet is a "taxable activity" on part of the melters and when such product is supplied, it falls within the purview of "taxable supply". There also is no reason to give any other meaning to the value of the supply as defined in Section 2(46) of the Act, thus notwithstanding the sales, etc. of the scrap and that of the manufactured item by the appellants as an independent taxable activity, we fail to comprehend the argument of the learned counsel for the appellants that on account of the above, the tax should be charged from them only on the basis of the value addition; no provision of the Act has been referred to us on the basis of which it can be held that if the sale tax has been paid on the raw material of whatever nature, it may be, the sale tax on the final/finished product shall be minus the value of the material, meaning thereby that the tax shall be restricted to the value addition alone. Rather the procedure for determining "tax liability" is provided by Section 7 of the Act, which clearly specify that a registered person shall be entitled to deduct input tax from output tax, that is due from him in respect of the tax period. Section 7(2) particularly enunciates that "he shall not be entitled to deduct input tax from output tax unless (i) in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registered number in respect of such supply for which a return is furnished (ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number duly cleared by the customs under Section 79 or Section 104 of the Customs Act, 1969. (iii) in case of goods purchased in auction, he holds a treasury challan in his name and bearing his registration number, showing payment of sales tax." Neither the above nor any other provision of the Act allows that in case any taxable supply is charged at zero rate and is used as a raw material for another taxable supply, the value of the later supply shall be restricted to the value addition only. Moreover, the zero rated tax cannot be equated to the actual payment of the tax, but is notional in nature.
6. The concept of the value addition infact is envisaged by the provision of Section 7-A of the Act, which provides that "Notwithstanding anything contained in this Act or the rules made thereunder, the Federal Government may specify by notification in the official Gazette, that sales tax chargeable on the supply of goods of such description or class shall, with such limitation or restrictions as may be prescribed, be levied and collected on the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacture, are supplied." It is an admitted position that the case of the appellants does not fall within the purview of Section 7-A of the Act.
7. As regards the argument that the scrap is generated out of a finished taxable supply, upon which the sales tax already stands paid, therefore, to impose tax on the product manufactured from it shall amount to double taxation does not fall within the legal concept. The double taxation means, if the tax has already been charged on a subject, it cannot be subjected to the tax again. As the scrap by itself according to the appellants' own case is independent taxable supply, thus irrespective as to how it generates, but when no tax has been paid upon it, it cannot be considered to be a case of a double taxation.
8. Now examining the case from the aspect of the decision of the Hon'ble Supreme Court, according to its paragraph reproduced above, the appellants had the option to pay the tax under the normal regime; their case that they have opted in this behalf, is not spelt out in all the cases except Allah Towakal ICA No. 438 of 2008, Shaheen Steels ICA No. 443 of 2008, Chaudhry Steels ICA No. 441 of 2008 and Ibrahim Steels ICA No. 442 of 2008, regarding which the application and other documents such as sales tax return, etc. have been filed, however material regarding the other cases even though asked by this Court, have not been placed on record, therefore, as the judgment of the Hon'ble Supreme Court allowed them choice which even today has not been controverted by the department, resultantly to the extent of the four appellants, they shall be entitled to be charged sales tax on the basis of normal regime and therefore, sales tax imposed and charged from them by the department on the basis of the special procedure, obviously, is not in accordance with the judgment of the Hon'ble Supreme Court, rather is violative thereof. It is thus declared that the Department should charge from the appellants in ICA Nos. 441, 442, 443 and 438 of 2008, the sales tax w.e.f the (sic) when they opted for the normal regime. It has been pointed out by the learned counsel for the Department that (sic) have not filed the returns in accordance with law, however, we do not want to enter into this controversy and leave it to the department to proceed according to the law for the recovery of the amount of the sales tax from the said appellants from the date when they made the choice exactly and strictly on the basis of normal procedure.
6. As regards the other appellants are concerned, it may be reiterated that no document has been placed on the record, showing the exercise of choice by them, therefore, we direct that the choice of the appellants shall be taken w.e.f 1st of January 2009 and they should be taxed for the future under the normal regime. However, tax charged, levied, paid and recoverable from them prior to 1st of January 2009 under the special procedure, shall be hit by the rule of past and close transaction; the above rule shall attract particularly for the reason that the option has not been established on their part and no tax returns are placed on the record on their behalf, therefore in the absence of the above, it shall be impossible to recover any sales tax from them in the normal course prior to 1st January, 2009 and they cannot be allowed to go escort free.
In the light of above, these appeals are disposed of.
(M.S.A.) Appeals disposed of.
PLJ 2010 Tax Cases (Quetta) 56
Present: Ghulam Mustafa Mengal, J.
FATEH MUHAMMAD--Appellant
versus
STATE--Respondent
Customs Appeal No. 6/2003, decided on 16.4.2010.
Customs Act, 1969--
----Ss. 185(F) & 156(89)--Criminal Procedure Code, (V of 1898), S. 403--Constitution of Pakistan, 1973, Art. 13(a)--Conviction & sentence u/S. 156(89) of Customs Act--Double jeopardy--Principle of--Trial of accused by two different Courts--Requirements of--Validity--Where the offences were different/distinct, the accused could be tried by two different Courts under two different enactments on the basis of common set of facts and trial would not be barred--Appeal dismissed.
[P. 59] A
Mr. Obaidullah Quresh, Advocate for Appellant.
Mr. Mumtaz Yousaf, Standing Council for State.
Date of hearing: 14.12.2009.
Judgment
This Custom appeal under Section 185(F) of Customs Act, 1969 is directed against the Judgment dated 4-11-2003 passed by learned Special Judge, Customs, Quetta, whereby appellant has been convicted under Section 156 (89) of the Customs Act, 1969 and sentenced to suffer R.I for 2 years and fine of Rs.50,000/- or in default thereof to suffer R.I for 6 months, with benefit of Section 382-B, Cr.P.C.
2. Briefly stated, facts of the case are that on 10.02.2003, a case under Sections 420-468-471 P.P.C and under Section 156 (89) Customs Act, was registered in Police Station, City, Quetta vide F.I.R No. 32 of 2003 on the report of Essa Khan Shahwani, I.P/C.I.A, Quetta, wherein he alleged that on 1-2-2003, he along with Muhammad Ali, S.I and other staff were on routine checking at Meezan Chowk, Quetta. At 5:30 p.m the appellant in a suspected vehicle bearing Registration No.BC-8712-Karachi, Engine No.2590563, Chassis No.LT-78-0011859 Model, 1998, grey colour came there. The vehicle along with its registration book was taken into custody vide Roznamcha No.14 under Section 550 Cr.P.C. Thereafter the documents of the vehicle were sent to the E.T.O, Motor Registration, Karachi for verification, meanwhile complaint was sent to the competent Court of law. On receipt of report from E.T.O. Motor Registration Civic Centre, Karachi, above said F.I.R was registered against the appellant.
3. After completion of investigation, challan of the case was sent to the Court of Special Judge, Customs, Quetta, where charge under Section 156(I)(89) of Custom Act was framed against the appellant to which the appellant did not plead guilty and claimed trial.
4. After framing the charge, prosecution examined P.W-1 Essa Jan, I.P, complainant, who produced Murasala vide Ex.P/1-A and photo copy of recover memo. vide Ex,-P/1-B. P.W-2 Aurangzaib, Constable produced recovery memo. Ex.P/2-A. P.W-3 Qaisar Khan, Appraiser Officer, Collectorate of Custom, produced valuation certificate of vehicle as Ex.P/3-A and P.W-4 Muhammad Ali, S.I/Investigating Officer, produced report Ex.P/4-A, which was received from E.T.O Karachi as well as Notice under Section 171 of Customs Act as Ex.P/4-B.
5. The statement of the appellant was recorded under Section 342 Cr.P.C., wherein he denied having committed the offence. The appellant also appeared in person as his own witness under Section 340 (2) Cr.P.C, wherein he deposed that he had purchased the vehicle in question from one Abdul Muhammad vide agreement Ex-D/I. The appellant also produced D.W-1 Muhammad Anwar and D.W-2 Muhammad Iqbal in his defense.
6. Learned trial Court after hearing learned counsel for the parties convicted and sentenced the appellant as stated above and also confiscated the vehicle to the Government, hence the present appeal.
7. I have heard Mr. Obaidullah Quresh, learned counsel for the appellant and Ch. Mumtaz Yousuf, Standing Counsel for the state.
8. Mr. Obaidullah Quresh, learned counsel for the appellant has contended that the Challan of appellant in same F.I.R is in breach of Article 13 (a) of the Constitution of the Islamic Republic of Pakistan, as well as, in contravention of Section 403 Cr.P.C; as the trial of the appellant amounts to double jeopardy, which is not warranted by law and that the appellant cannot be vexed twice for the same offence, therefore, the impugned judgment is liable to be set aside.
9. Learned Standing Counsel has contended that the appellant was convicted by the Special Judge, Custom, Quetta for being found in possession of smuggled vehicle, which is punishable under Section 156(89) of the Custom Act, whereas the second Challan was submitted under Sections 420-467-468 and 471 P.P.C. Since both the offence are not the same, therefore, there is no breach of Article 13 (a) of the Constitution of Islamic Republic of Pakistan or of Section 403 Cr.P.C. as such, the principle of double jeopardy is not applicable in the case of appellant.
10. I have also heard the learned counsel for the parties and gone through the facts of the case and judgments passed by the Court below. It would be appropriate to reproduce the relevant provisions of Customs Act, 1969 and related provisions of P.P.C. The punishment for contravention of any provision of Customs Act, 1969 is provided under Section 156 of the Act. The Appellant was convicted and sentenced under Section 156(89) of the Customs Act, 1969 and under Sections 468 and 471 P.P.C., which read as under:--
Section 156 (89).--(1) If any person without lawful excuse, the proof of which shall be on such person, acquires possession of, or is in any way concerned in carrying, removing, depositing, harbouring, keeping or concealing, or in any manner dealing with smuggled goods or any goods with respect to which there may be reasonable suspicion that they are smuggled goods:
Provided that if the smuggled goods be gold bullion or silver bullion the onus of proving the plea that such bullion was obtained by processing or other means employed in Pakistan and not by smuggling shall be upon the person taking that plea.
(2) [Such goods shall be liable to confiscation and any person concerned in the offence shall be liable to a penalty not exceeding ten times the value of the goods; and, where the value of such goods exceeds one hundred thousand rupees, he shall further be liable, upon conviction by a Special Judge, to imprisonment for a term not exceeding six years and to a fine not exceeding ten times the value of such goods and if the Special Judge in his discretion so orders also to whipping].
468. Forgery for purpose of cheating.--Whoever, commits forgery, intending that the document forged shall be used for the purpose of cheating, shall be punished with imprisonment of either description for a term which may extent to seven years, and shall also be liable to fine.
471. Using as genuine a forged document.--Whoever fraudulently or dishonestly uses as genuine any document which he knows or has reason to believe to be a forged document, shall be punished in the same manner as if he had forged such document.
The plain reading and comparative study of the above said provisions of two different statutes/laws reveals that the offence of smuggling of goods is punishable under the Custom Act, 1969; whereas offences of forgery and using forged documents as genuine are punishable under Sections 468 and 471 P.P.C. Thus the offences are not same.
12. It will also be appropriate to reproduce the relevant provisions of Section 403 Cr.P.C and Article 13(a) of the Constitution, 1993 as quoted by the appellants counsel:--
403. Persons once convicted or acquitted not to be tried for the same offence.--(1) A person who has once been tried by a Court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which is different charge from the one made against him might have been made under Section 237.
(2) A person acquitted or convicted for any offence may be afterwards tried for any district offence for which is separate charge might have been made against him on the former trial under Section 235, sub-section (1).
(3) A person convicted for any offence constituted by any act causing consequences which together with such act, constituted a different offence from that of which he was convicted, may be afterwards tried for such last-mentioned offence, if the consequence had not happened, or were not known to the Court to have happened, at the time when he was convicted.
(4) A person acquitted or convicted for any offence constituted by any acts may, notwithstanding such acquittal or conviction, be subsequently charged with, and tried for any other offence constituted by the same acts which he may have committed of the Court by which he was first tried was not competent to try the offence with which he is subsequently charged.
(5) Nothing in this Section shall affect the provisions of Section 26 of the General Clauses Act, 1897, or Section 188 of this Code.
Article 13(a) Shall be prosecuted or punished for the same offence more than once; or
13. A bare perusal of above provisions of law reveals that second trial would be only barred when offence is the same, in case, offences are different/distinct then the accused can be tried by the two different Courts under two different enactments on the basis of common set of facts and trial would not be barred. Thus the contention put forth by the learned counsel for appellant has no force, as such, is repelled.
14. The upshot of the above discussion is that the appellant was not tried for the same offence but under the different and distinct offences in different Courts, therefore, his trial is not barred under Section 403 Cr.P.C or on the principles of double jeopardy. In so far as the question of sentence is concerned, it requires consideration, appellant was arrested on 7-4-2003 and since then he is facing the hardships of trial. There is nothing on the file to indicate that the appellant is habitual offender or was ever involved previously in the case of smuggling. Keeping this fact in view, the sentence of the Appellant is reduced to the period already undergone by him; however, the sentence of fine or in default thereof and confiscation of the vehicle is maintained.
15. Appeal is dismissed with the above modification in the quantum of sentence.
(A.A.) Appeal dismissed.
PLJ 2010 Tax Cases (Peshawar) 59 (DB)
Present: Ejaz Afzal Khan, C.J. and Mazhar Alam Khan, JJ.
COMMISSIONER OF INCOME TAX--Petitioner
versus
M/s. ASSOCIATED INDUSTRIES, NOWSHERA--Respondent
T.R. No. 15 of 2007, decided on 23.6.2010.
Income Tax Ordinance, 1979--
----Ss. 54 & 88--Deletion of additional tax--Adjustment against tax payable because of its subsequent creation--Question of--Whether the creation of refund, which relates to the year preceding the assessment year can be termed as subsequent so as to justify refusal of its adjustment against the tax payable--Validity--Assessee becomes liable to pay additional tax, when he fails to pay the tax u/S. 54 of Ordinance or the tax paid was less than the tax payable under that or any other Section enumerated--Creation of refund or its adjustment against the tax payable was quite out side the orbit of the provision--When the tax becomes payable and when the refund becomes due--Tax becomes payable u/S. 54 of the Ordinance on furnishing the return of income. [P. 61] A & B
Interpretation of Statute--
----Pecuniary burdens were to be construed strictly--Statute be strained and stretched to an extent where even the due benefit should be denied to the person taxed--Appellate Tribunal had construed the provisions of the Ordinance liberally to benefit the person taxed. [P. 62] C
Mr. Eid Muhammad Khattak, Advocate for Petitioner.
Mr. Fazal-ur-Rehman AAG and Ghulam Shoaib Tally, Advocate for Respondent.
Date of hearing : 23.6.2010.
Judgment
Ejaz Afzal Khan, C.J.--This reference application raises the following question of law:--
"Whether, the ITAT, on the facts and in the circumstances of the case, was legally justified to delete additional tax u/S. 88 whereas at the relevant time refund was neither established nor created on the record of the assessee?
2. Learned counsel appearing on behalf of the applicant contended that deletion of additional tax under Section 88 of the Income Tax Ordinance, 1979 was unjustified when at the relevant time no refund was created. He by referring to the cases of Pakistan Machine Tool Factory (PVT.) LTD., Karachi Vs. Commissioner of Sales, Central, Zone-B, Karachi (2006 SCMR 1577) and Messrs Bisvil Spinners Ltd. Vs. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another (PLD 1988 Supreme Court 370), contended that Statutes imposing pecuniary burden are to be construed strictly and not liberally to make out a case for the benefit of the person taxed.
3. As against that, the learned counsel appearing on behalf of the respondent, contended that refund was already created and established at the relevant time, as such, deletion of additional tax under Section 88 of the Ordinance was perfectly justified. Even if, it be otherwise, he added, it being a question of fact rather than of law cannot be gone into by this Court while being seized of a reference. He next contended that where the assesses are not paid any interest on delayed refund, the Department on the principle of parity is not supposed to charge the additional tax.
4. We have gone through the record carefully and considered the submissions of the learned counsel for the parties.
5. Creation of refund is not disputed on the record. What is disputed is its adjustment against the tax payable because of its subsequent creation. Now the question crops up whether the creation of refund, which relates to the year preceding the assessment year can be termed as subsequent so as to justify refusal of its adjustment against the tax payable. Before we answer the question, it is worthwhile to refer to Section 88 of the Ordinance, which reads as under:--
"88. Charge of additional tax for failure to pay tax with the return: Where any assessee fails to pay tax under Section 54 or the tax so paid is less than the tax payable under that section, he shall be liable to pay additional tax at the rate of twenty four per cent, per annum of the amount not paid or the amount by which the tax paid by him falls short of the tax payable under that section, as the case may be, and such additional tax shall be calculated from the first day of October or the date on which the tax was payable, whichever is the later, to the date on which the tax is paid or the date on which an order under sub-section (1) of Sections 59, 59-A, Section 62, Section 63 or Section 65, as the case may be, is made, whichever is the earlier."
6. A perusal of the above quoted provision reveals that assessee becomes liable to pay additional tax, when he fails to pay the tax under Section 54 of the Ordinance or the tax paid is less than the tax payable under that or any other Section enumerated above. Creation of refund or its adjustment against the tax payable is quite out side the orbit of this provision, if we construe it according to the plain meanings of the words used therein. It is Section 104, which envisages the adjustment of refund against the tax payable. But it has to be seen when the tax becomes payable and when the refund becomes due. The tax becomes payable under Section 54 of the Ordinance on furnishing the return of income. It becomes payable under Sections 59, 59-A, 62, 63 or 65 on completion of assessment. Assessment, in our view, does not mean determination of what is payable. It also includes determination of what is refundable. As both of them are interconnected with and have deep bearing on each other, determination of the former, as far as it is possible, must coincide with that of the latter notwithstanding they are dealt with by different provisions of the Ordinance. It is all the more desirable when refund relates to the year preceding assessment year. When confronted as to why so much slackness on the part of the Income Tax Officer, the learned counsel for the appellant, submitted that the respondent may have filed the application for rectification belatedly. When seen in this background, the learned Appellate Tribunal by off setting the refund of the tax payable was perfectly justified to delete the additional tax. The moreso when it arises out of the proceeding assessment year.
7. Yes, the Statue imposing pecuniary burdens are to be construed strictly rather than liberally as held in the cases "Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi Vs. Commissioner of Sales, Central Zone-B, Karachi and Messrs Bisvil. Spinners Ltd. Vs. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another (supra), but it does not mean that the Statute be strained and stretched to an extent where even the due benefit should be denied to the person taxed. We do not agree with the contention of the learned counsel for the applicant that the learned Appellate Tribunal has construed the provisions of the Ordinance liberally to benefit the person taxed. It, as a matter of fact, has construed it, according to the recognized principles regulating the understanding and interpretation of Statutes. We, therefore, have no hesitation to answer the question in the affirmative. This reference stands disposed of accordingly.
(R.A.) Reference disposed of.
PLJ 2010 Tax Cases (Peshawar) 62 (DB)
Present: Ejaz Afzal Khan, C.J. and Liaqat Ali Shah, J.
M/s. BALANA RESTAURANT, PESHAWAR--Petitioner
versus
COLLECTOR SALE TAX, PESHAWAR--Respondent
Tax Reference No. 4 of 2009 with C.M. No. 2 of 2009,
decided on 21.1.2010.
Sales Tax Act, 1990--
----Ss. 3 & 13(i)--Food Stuff cooked in house and served in industrial cateen was liable to sales tax--Tax Reference--Question of--Whether the food stuff cooked in house and served in industrial canteen was liable to sales tax--What is rationale or raison detre behind exemption--Claim for exemption--Validity--PTC would have claimed the exemption, had it cooked, prepared and served the food in canteen itself, because such activity by the company could not had been construed as the one in furtherance of taxable activity because of its being on loosing end--Absence of a direct linkage between the appellant and the workers would be yet another reason in such behalf--Such supply was exempt from sales tax whether it was made by PTC itself or any other person as provisions of Sixth Schedule cannot be made impressed--Held: A person supplying the cooked and prepared food to an industrial canteen for business activity can be held to be exempted from sales tax under any cannons of interpretation--Reference disposed of. [P. 64] A, B, C & D
Mr. Farrukh Jawad, Advocate for Petitioner.
Abdul Latif Yousafzai, Advocate for Respondent.
Date of hearing : 20.1.2010.
Judgment
Ejaz Afzal Khan, C.J.--M/s. Balana Restaurant Peshawar, appellant herein supplying cooked and prepared food to the PTC for its workers in its canteen at Akora Khattak, has filed Tax References Nos.4,5,6,7, and 8 of 2009, by raising the question, whether the food stuff cooked in house and served in Industrial Canteen is liable to Sales Tax under Sections 3 and 13 (1) of the Sales Tax Act, 1990?
2. As all the Tax References involve similar question of law, they are disposed of by this single judgment.
3. Learned counsel appearing on behalf of the appellant by referring to item 3(vii) of the Sixth Schedule contended that when the food stuff cooked or prepared in messes run on the basis of mutuality and Industrial Canteens for workers of a particular class are exempt under Section 13(1) read with Sixth Schedule of the Sales Tax Act, the food cooked, prepared and supplied by the appellant cannot be taxed and that the Tribunal erred in holding that it is liable to be taxed. Such supply, the learned counsel added, is exempt from Sales Tax whether it is made by the PTC itself or any other person as the provision of the Schedule cannot be made person specific by any attribute.
4. As against that, the learned counsel appearing on behalf of the respondent contended that the appellant cannot claim exemption, when supply of food to PTC, is made in the course or furtherance of a taxable activity. Only the PTC, the learned counsel , submitted, could claim exemption, had it itself cooked, prepared and served the food in the Canteens without any pecuniary consideration. The appellant, the learned counsel submitted, supplying the food for profit cannot push itself in the orbit where it can claim exemption.
5. We have gone through the record carefully and considered the submissions of the learned counsel for the parties.
6. Before we answer the question so raised, it is worthwhile to know, what is the object and purpose of the Legislature in exempting this activity? A food stuff cooked, prepared and served elsewhere is liable to be taxed under the Sales Act but the one cooked, prepared and served in messes and canteens of Industrial concerns is exempt. What is the rationale or raison detre behind this exemption? Answer to the question is provided by the Schedule itself. It exempts the food cooked, prepared and served in the messes because they are run on the basis of mutuality. It exempts the food cooked, prepared and served in the Canteens because it is provided to the workers of a particular class by such concerns, gratis or without any pecuniary consideration. The appellant admittedly embarking on this activity purely for profit or pecuniary consideration cannot push itself into the ambit of relevant provision so as to justify its claim for exemption. PTC could have claimed this exemption, had it cooked, prepared and served the food in the Canteen itself, because such activity by the Company could not have been construed as the one in furtherance of taxable activity because of its being on the loosing end. The appellant supplying the food in its capacity as a registered person in furtherance of taxable activity to PTC another registered person cannot thus claim exemption, that too when it is on the receiving end. We thus do not subscribe to the view broached at the bar by the learned counsel for the appellant. Absence of a direct linkage between the appellant and the workers would be yet another reason in this behalf.
7. The argument that such supply is exempt from Sales Tax whether it is made by the PTC itself or any other person as the provisions of the Sixth Schedule cannot be made person specific by any attribute, has not impressed us, when the learned counsel for the appellant could not satisfy us vis-a-vis the element of mutuality, especially when it has not been disputed either in the fora below or this Court that the activity so embarked upon by the appellant is for pecuniary consideration. When seen in this backdrop, we do not think, a person supplying the cooked and prepared food to an Industrial Canteen for business activity can be held to be exempt from Sales Tax under any cannons of interpretation. The question formulated above is, therefore, answered accordingly. These References are, thus, disposed of.
(R.A.) Reference disposed of.
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