Tax case laws 2012

PLJ 2012 Tax Cases (Kar.) 1 (DB)
Present: Muhammad Athar Saeed and Irfan Saadat Khan, JJ.
MUHAMMAD JAMAL--Petitioner
versus
FEDERATION OF PAKISTAN through Secretary Ministry of Interior, Islamabad and 2 others--Respondents
C.P. No. D-1090 of 2011, decided on 12.4.2011.
Constitution of Pakistan, 1973--
----Art. 199--Criminal Procedure Code, (V of 1908), S. 498--Customs Act, 1969, Ss. 32, 79, 155(A)(C)(E) & (F) & S. 156(1)(i), 9, 14, 77 & 88--Sales Tax Act, 1990, Ss. 33(11)(c)--Income Tax Ordinance 2011, S. 148--Constitutional petition--Sought protective bail--Granted for 15 days subject to surrender before trial Court--Validity--Without touching merits, protective bail for period of 15 days to surrender before trial Court subject to furnishing solvent surety in sum of Rs. one million along with P.R. Bond of same amount to satisfaction of High Court--Concession of protective bail would not be extended for any reason whatsoever and if accused did not surrender before trial Court during validity of protective bail, amount of surety would be forfeited. [P. 2] A & B
Syed Mehmood Alam Rizvi, Advocate for Petitioner alongwith Mr. Irfan Aziz Advocate.
Date of hearing: 12.4.2011.
Order
This petition has been filed for grant of protective bail as the petitioner who is out of the country apprehends that as soon as he returns to Pakistan he will be arrested in FIR No. MCC/Misc/142/2011-R&D dated 18.03.2011 registered with Model Customs Collectorate of PaCCS, Customs House, Karachi for offences under Sections 32, 79, 155 (A) (C) (E) & (F) and 192 of the Customs Act, 1969, Section 33 of Sales Tax Act, 1990 & Section 148 of the Income Tax Ordinance, 2001 and under clause 1, 9, 14, 77 & 86 of Section 156(1) of the Customs Act, 1969 clause 11 (C) of Section 33 of Sales Tax Act, 1990 and Section 148 of Income Tax Ordinance 2001 and therefore seeks protective bail so that he may come to Pakistan and surrender before the trial Court.
Without touching the merits of the case, we are admitting the petitioner to protective bail for a period of 15 days from today i.e. upto 27th April 2011 to surrender before the trial Court subject to furnishing solvent surety in the sum of Rs. One million alongwith a P.R. Bond of the same amount to the satisfaction of the Nazir of this Court.
The petitioner is cautioned that this concession of protective bail will not be extended for any reason whatsoever and if he does not surrender before the trial Court during the validity of this protective bail, the amount of surety shall be forfeited.
(R.A.) Petition allowed

PLJ 2012 Tax Case (Isl.) 7 (DB)

Present: Iqbal Hameed-ur-Rehman, C.J. and Noor-ul-Haq N. Qureshi, J.

COMMISSIONER OF INCOME TAX/WEALTH TAX--Appellant

versus

RAMIZ-UL-HAQ--Respondent

Tax Appeal No. 122 of 2000, decided on 12.12.2011.

Wealth Tax Act, 1963 (XV of 1963)--

----S. 27(1)--Appeal was filed by commissioner of Income Tax--Objection about delay in filing appeal and not adopting legal procedure--Proof of service of order--Question of--Either party within 120 days from date of such refusal through a notice, apply to High Court requesting for such relief--No application within 90 days of date upon which notice was served--Validity--Such position was lacking on part of appellant who had not bothered to pursue his own claim by adopting legal procedure as envisaged by S. 27(1) of Wealth Tax Act, 1963, enabling appellate tribunal for making reference to High Court--Unless proper procedure was not adopted by a party under law, party could not seek such relief by invoking any of jurisdiction of High Court beyond boundaries sketched by law--When party themselves sit over their own rights with such slackness on their part, as such, they were not entitled for relief claimed, for which procedural law did not provide any favour--Appellant had failed to follow spirit of law for seeking relief claimed in instant appeal--Appeal badly time barred as well as appeal in its present form was not in consonance with law. [P. 11] A, B, C & E

Wealth Tax Act, 1963 (XV of 1963)--

----S. 27--Limitation--Removing of objection--Twenty days of passing of period of limitation--Application for condonation of delay--Inordinate delay in filing of appeal in such like situation, after expiry of by period of limitation would be considered as barred time. [P. 11] D

Hafiz Munawar Iqbal, Advocate for Appellant.

Date of hearing: 12.12.2011.

Order

The appellant/Commissioner of Income Tax/Wealth Tax, Companies Zone, Islamabad has filed the instant appeal under Section 27(1) of the Wealth Tax Act, 1963, against the order dated 23.10.1999 and has requested to decide the following questions of law;--

(i) Whether in the facts and circumstances of the case the honourable Tribunal was justified to hold that assessee in this case was not legal owner of the plot in question as the title therein was not transferred to him and, therefore, it could not be included in his net wealth?

(ii) Whether in the facts and circumstances of the case the honourable Tribunal was justified to hold that due to non-execution of conveyance deed the plot in question did not belong to the assessee on the valuation date and consequently could not be included in his net wealth for charge of Wealth Tax?"

2. Arguments heard and record perused.

3. Learned counsel for the appellant contended that the old appeals pending since long were not placed before the Court, but the appellant has interest towards the appeal pending. On query raised by the Court about Office Objection, which was to be complied within three days, but neither the appellant nor the counsel ever cared about it to comply the Office Objection within the period stipulated.

4. Likewise, on an objection about the delay in filing the appeal and not adopting the legal procedure as envisaged by Section 27(1) of the Wealth Tax Act, 1963, as well as the proof of service of the order upon them. Learned counsel for the appellant contended that while receiving copy of the order in the Office, they used to affix the date of receiving at front page with receiving diary number. In our view, it is not supported from the record.

5. The very main issue respecting proposition of law, it is quite obvious that the appellant had to submit an application under sub-section (1) of Section 27 of Wealth Tax Act, 1963 to Income Tax Appellate Tribunal to state the case on the ground of question of law arises be referred to the High Court. Either party within 120-days from the date of such refusal through a notice, apply to the High Court requesting for such relief, as they initiated in the instant appeal. Surprisingly, no such application within 90-days of the date upon which, he served with the notice on an order as required by sub-section (4) of Section 27(1) of the Wealth Tax Act, 1963, has ever submitted nor such notice of refusal has also been submitted or said to have been issued by the Tribunal informing such refusal through the notice.

6. The relevant procedure to seek such reference by making an application to the Tribunal as envisaged by Section 27 (1) of Wealth Tax Act, 1963. For the convenience, whole Section 27 of Wealth Tax Act, 1963 is reproduced hereunder:--

27(1) Within ninety days of the date upon which he is served with an order by the Appellate Tribunal, the assessee or the Commissioner may present an application in the prescribed form and, where the application is by the assessee, accompanied, by a fee of one hundred rupees, to the Appellate Tribunal requiring it to refer to the High Court any question of law arising out of such order, and the appellate Tribunal shall draw up a statement of the case and refer it to the High Court.

(2) The statement of the High Court shall set forth the facts, the determination of the Appellate Tribunal and the question of law which arises out of the case.

(3) If the High Court is not satisfied that the statement in a case referred to it under this section is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modifications therein as it may direct.

(4) If on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may, within ninety days from the date on which he is served with notice of the refusal, apply to the High Court, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, frame the question of law and proceed to hear the case.

(5) If the High Court is not satisfied that the case as stated is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modification therein as it may direct.

(6) The High Court, upon hearing any such case shall decide the question of law raised therein, and in doing so may, if it thinks fit, after the form of the question of law and shall deliver judgment thereon containing the ground on which such decision is founded and shall send a copy of the judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal and the Appellate Tribunal shall pass such orders as are necessary to dispose of the case conformably to such judgment.

(7) Where the amount of any assessment is reduced as a result of any reference to the High Court, the amount, if any, overpaid as wealth tax shall be refunded with such interest as the Commissioner may allow unless the High Court, on intimation given by the Commissioner within thirty days of the receipt of the result of such reference that he intends to ask for leave to appeal to the Supreme Court makes an order authorizing the Commissioner to postpone payment of such refund until the disposal of the appeal in the Supreme Court.

(8) The costs of any reference to the High Court shall be in the discretion of the Court.

(9) Section 5 of the Limitation Act, 1908, shall apply to an application to the High Court under this section.

(10) Any application made to the Appellate Tribunal or any question of law referred to the High Court by the Appellate Tribunal before the first day of July, 1971, shall be disposed of by the Appellate Tribunal or the High Court, as the case may be, as if the Finance Ordinance, 1971, had not come into force."

7. When such application has not been submitted, therefore, no question of its refusal or issuance of notice arises.

8. Such position is lacking on the part of appellant, who has not. bothered to pursue his own claim by adopting the legal procedure as envisaged by Section 27(1) of the Wealth Tax Act, 1963, enabling the Appellate Tribunal for making reference to the High Court.

9. Therefore, in our humble view, unless a proper procedure is not adopted by a party under the law, the party cannot seek such a relief by invoking any of the jurisdiction of the High Court beyond the boundaries sketched by law.

10. Therefore, under the circumstances, when the party i.e. the appellant themselves sit over their own rights with such slackness on their part, as such, they are not entitled for the relief claimed, for which the procedural law does not provide any favour. The appellant failed to follow the spirit of law for seeking relief claimed in the instant appeal.

11. From the perusal of the appeal it is evident that the present appellant had filed the instant appeal on 12.02.2000 against the order of Income Tax Appellate Tribunal dated 23.10.1999, however, certain objections were raised by the office and the appellant was directed to file the appeal after removing the objections within three days, but the appellant filed the instant appeal on 30.3.2000 after removing the objection i.e. after about twenty days of the passing of period of limitation, as the appellant in Para-3 of the appeal, himself has mentioned that limitation under Section 27 of Wealth Tax Act, 1963 expires on 14.2.2000 and that too, without any application for condonation of delay. It has been the constant view of the superior Courts that inordinate delay in filing of the appeal in such like situation, after the expiry of period of limitation would be considered as barred by time. In this regard, reliance is placed on the judgment reported as "1997 SCMR 1224 (LAHORE Development Authority Vs. Muhammad Rashid)". As such, the instant appeal is badly time barred as well as the appeal in its present form is not in consonance with law. Resultantly, the same is hereby dismissed in limine.

(R.A.) Appeal dismissed

PLJ 2012 Tax Cases (Quetta) 12 (DB)

Present: Mrs. Syeda Tahira Safdar and Muhammad Noor Meskanzai, JJ.

COLLECTOR, CUSTOMS SALES TAX AND CENTRAL EXCISE, CUSTOM HOUSE, QUETTA--Appellant

versus

M/s. MANAN KHAN and another--Respondents

Custom Appeal No. 6 of 2005, decided on 25.8.2011.

Customs Act, 1969 (IV of 1969)--

----Ss. 196, 181, 185-F, 193, 194 & 196--Custom appeal--Tribunal while holding that customs authorities had failed to prove case against accused--Acquitted of charge by special judge custom--Confiscation of vehicle--Question of--Evidence recorded in some other case cannot be relied upon--Order of collector can be assailed before tribunal--Validity--Confiscation so made did not amount to a punishment for crime allegedly committed by a person--Whereby an option was given to owner for payment of fine in lieu of confiscation, it was clear to extent that order of confiscation was made as a tool to collect revenue in shape of penalty while sentence awarded was in addition to punish the person committed the act--Proceedings taken by customs authorities for confiscation of goods were some how in nature of departmental while imposition of civil penalties i.e. confiscation would not amount to conviction and sentence--Civil penalties would absolve transgressor from liability to criminal prosecution and vice versa--No restriction on holding criminal proceedings prior to adjudication by officer of customs or afterwards or even simultaneously--Held: Appellate tribunal had made an error, while placing reliance on order of Special Judge, thereby decided appeal and set aside order in original--Appellate tribunal had to apply its mind apart from decision of Special Judge made in criminal case and had to decide matter in accordance with law which had not been done in instant case--Appeal was accepted. [P. 16] A, B, C & D

Ch. Mumtaz Yousaf Standing Counsel for Appellant.

Mr. Ghulam Hussain Mengal, Advocate for Respondents.

Date of hearing: 9.3.2011.

Judgment

Mrs. Syeda Tahira Safdar, J.--Being aggrieved by the order of Customs Appellate Tribunal, Bench-III, Karachi, dated 18.5.2005, instant appeal has been preferred on the following law points:--

"1. Whether the Tribunal has erred in Law in directing to release the seized vehicle to the respondent?

2. Whether the Tribunal seriously erred in Law in ignoring and passing an order testifying an illegal vehicle and has failed to examine the facts of the case brought before it.

3. Whether findings of Appellate Tribunal were based on misreading and non reading of record/facts leading to the seizure of the said vehicle placed before it during the course of hearing of appeal.

4. Whether the learned Appellate Tribunal has erred in holding that as the appellant has been acquitted of the charge by the Special Judge Customs under the criminal offence, hence appeal is decided in his favour. This view of the Court is against the law as well as settled principles of justice i.e. evidence of one case cannot be used in other.

5. Whether the learned Appellate Tribunal has decided the matter without giving any reason and is a non speaking order contrary to the judgments of the superior Courts in which directions have been given to the Tribunal to decide the matter properly with cogent reasons.

6. Whether the learned Tribunal was justified to release the vehicle on mere sympathetic ground without discussing the merits and probabilities of the case.

7. Whether the findings of the learned Appellate Tribunal are based on misreading and non-reading of the material/facts available."

It is contention of the appellants that the impugned order is based on misreading, and non reading of the material/facts, while the Appellate Tribunal wrongly held that as Special Judge, Customs under criminal hierarchy has acquitted the appellant of the charge, hence appeal should be accepted without discussing the facts, and deciding the matter on its own merits. Further, the evidence, and the facts of one case cannot be relied upon in other case. Therefore, the Appellate Tribunal while doing so has acted illegally. It is further contended that the fact that the engine number of the vehicle way tempered, and act of forgery was conclusively established in the papers obtained from Excise and Taxation Office, Karachi, it was not considered by he Appellate Tribunal; rather sole reliance was made on acquittal orders of the Special Judge, Customs. Furthermore, this fact has also not been considered by the Appellate Tribunal that the status of the vehicle in question has been established as smuggled one, and was being filed on the basis of fake, and forged documents. Further, Forensic Examination by the Police Crimes Branch also transpired that engine number of the vehicle was completely punched. It is contended that the Tribunal without considering the facts as mentioned hereinabove, recorded its findings relying on the decision made in the criminal case, which is illegal, thus not sustainable.

The learned counsel for the parties are heard, while record is perused. Through instant appeal order dated 10.3.2005 has been assailed, whereby the Appellate Tribunal while holding that Customs Authorities have failed to prove their case against the appellant, the order in original was set aside and appeal was allowed. The learned counsel for the appellant mostly stressed that the Tribunal has made a non speaking order, further the appeal is decided on the basis of the fact that the respondent has been acquitted of the charge by Special Judge, Customs. It is asserted that it is an error of law as evidence recorded in some other case cannot be relied upon. The perusal of the impugned order reveals that the Appellate Tribunal while dilating upon the matter concluded that:--

"5. In view of the facts discussed above we have of the view that customs authorities have failed to prove their case made out against appellant as during the trial before Sessions Judge/Special Judge, Customs, Quetta, it is admitted by the Investigating Officer that the registration book produced by accused Manan Khan is a genuine one. With this discussion order in original is hereby set aside and appeal is allowed."

The perusal of record reveals that the petition was admitted on the point formulated through order dated 23.11.2005 to the effect that:--

"Whether the acquittal in criminal case would amount to acquittal in custom case?

The bare perusal of the impugned order reveals that the learned Appellate Tribunal has not recorded its findings on any other material, rather complete reliance has been made on the decision given by the Special Judge, Customs in Sessions case No. 28 of 2004, and Customs Case No. 13 of 2004. The learned counsel for the appellant stands to his contention, and stressed that the evidence recorded in some other case can not be relied upon. But in reply the learned counsel for the respondent failed to address this issue.

Section 156 of the Customs Act 1969 provided the punishment for the offences under the Act. The plain reading of the section reveals that most of the offences mentioned therein are to be adjudicated by the Customs Authorities, while there are also certain offences, which are triable by the Special Judge, Customs. It is further to be noted that there are also several offences, which are to be adjudicated by both the Customs Authorities, as well as by the Special Judge. In such like cases both the forums exercised their jurisdiction independently. In case in hand the confiscation of the vehicle has been made under Clauses (8) and (89) of Section 156(1) of the Customs Act, 1969. While the trial before the Special Judge, Customs, was held for the offence under Section 156(89) Customs Act, 1969, and offences under Sections 420, 468 and 471 Pakistan Penal Code (PPC). The perusal of Clauses (8) and (89) of Section 156 of Act, 1969 shows that two penalties are provided therein, one pertains to confiscation of the goods, and the person is liable to be fined. While the second penalty provided therein is of imprisonment awarded by the Special Judge upon his conviction. The order of confiscation is to be made in view of provisions contained in Section 179 of the Act, which describes the jurisdiction, and powers of the officers of Customs for making order for confiscation of goods, and imposition of penalty. Furthermore, in addition Section 181 of the Act, empowers the Officer, passing the order of confiscation, to give the owner an option to pay fine in lieu of the confiscation of the goods. While on the other hand, the Special judge, appointed under Section 185 of the Act, has to exercise its powers within the ambit of Section 185-A of the Act. Further, the perusal of provisions of the Act reveals that separate procedures are provided for both the forums, with separate appellate forums. The appeals against order of the officer of Customs lies to Collector (Appeals), as provided under Section 193 of the Act, while the order of the Collector can be assailed before the Tribunal constituted under Section 194 of the Act, and in said hierarchy to this Court as provided under Section 196. As far as Special Judge is concerned, the matter adjudicate thereon, the appeal provided against his order lies to Special Appellate Court established under Section 185-F of the Act.

Keeping in view the above referred provisions of the Act, it is to be noted that the penalty, and punishment are mentioned side by side in the "TABLE", while simultaneous jurisdiction of both the Custom Officer, and Special Judge are provided therein. Furthermore, keeping in mind the object behind the law, the confiscation so made does not amount to a punishment for the crime allegedly committed by a person. Rather, in view of Section 181 of the Act, where by an option is given to the owner for payment of fine in lieu of confiscation, it is clear to the extent that the order of confiscation is made as a tool to collect revenue in shape of penalty. While the sentence awarded is in addition to punish the person committed the act. Therefore, in view of the same, it can safely be concluded that the proceedings taken by Customs Authorities for confiscation of goods, are some how in nature of departmental proceedings for purpose of collection of revenue, which does not bar the Authorities from initiating criminal proceedings against the wrong doer. Thus in view of the same, the criminal proceedings are quite distinct from the proceedings held by the Department, while the imposition of civil penalties i.e. confiscation penalties will not amount to conviction and sentence. Therefore, the civil penalties will not absolve the transgressor from liability to criminal prosecution and vice versa. In addition, there is also no restriction on holding criminal proceedings prior to adjudication by the Officer of Customs, or afterwards or even simultaneously.

In views of above discussion, the point formulated is decided in negative. The Appellate Tribunal has made an error, while placing reliance on the order of the Special Judge, thereby decided the appeal, and set aside order in original. The Appellate Tribunal had to apply its mind apart from the decision of the Special Judge, made in a criminal case, and had to decide the matter in accordance with law, which has not been done in present case. Thus in view of the mentioned facts, the appeal is hereby accepted, impugned order dated 23.5.2005 is hereby set aside.

(R.A.) Appeal accepted

PLJ 2012 Tax Cases (Isl.) 29 (DB)

Present: Shaukat Aziz Siddiqui and Muhammad Anwar Khan Kasi, JJ.

M/s. PAKISTAN ORDNANCE FACTORIES (POF) WAH CANTT.--Petitioner

versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), COLLECTORATE OF CUSTOMS ST&CE, ISLAMABAD and another--Respondents

S.T.R. No. 1 of 2007, decided on 14.3.2012.

Sales Tax Act, 1990 (VII of 1990)--

----Ss. 36(3) & 47--Quasi-judicial and judicial proceedings--Pakistan Ordnance Factory did not pay sales tax--Offences and penalties--Order in original was passed with delay of 313 days--No justification--Validity--Govt. departments could not be put at higher pedestal when it comes to limitation--Executive functionaries, quasi and non-quasi judicial tribunals were supposed to follow mandate of law and perform their duties, exercise their jurisdiction and execute their authority within period provided by law--Exception of un-reasonable delay can be evaded if statute does not prescribe time period in which act has to be performed. [Pp. 36 & 37] A & B

Hafiz Muhammad Idrees, Advocate for Petitioner.

Syed Touqeer Bukhari, Advocate and Raja Karim Akhtar, Inland Officer Legal-II for Respondents.

Date of hearing: 23.2.2012.

Judgment

Shaukat Aziz Siddiqui, J.--Through instant Sales Tax Reference, the petitioner/applicant M/s. Pakistan Ordnance Factories, Wah Cantt has sought indulgence of High Court, vested in it under Section 47 of Sales Tax Act, 1990, requesting therein to decide the questions of law emanating from Order-in-Original No. 02/2004, dated.25-02-2004 passed by Collector (Adjudication) Collectorate of Customs, Sales Tax and Central Excise, Rawalpindi and judgment dated 07-03-2007 passed in appeal by the Appellate Tribunal of Customs, Central Excise and Sales Tax, Islamabad.

2. Instant reference was filed before, the Hon'ble Lahore High Court Rawalpindi Bench, Rawalpindi and vide order dated 18-03-2008 passed by learned Division Bench, out of 10 proposed questions, admitted Question Nos. 1, 2 and 9 of law, for hearing and notices were issued. Questions are as under:--

(i) Whether under the law and circumstances of the case, the learned Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad Bench-II (hereinafter referred to as Appellate Tribunal) was justified in confirming the Order-in-Original No. 02/2004 passed by the Collector (Adjudication)?

(ii) Whether under the law and circumstances of the case the Appellate Tribunal was justified in confirming the levy of Sales Tax on generation of electricity and its self-consumption by the applicant?

(iii) Whether the appellate Tribunal was justified in confirming the levy of additional tax and penalty when the applicant had not committed any default?

3. Briefly, the facts gleaning out of instant S.T.R, are that, Assistant Collector (Audit-1) Collectorate of Sales Tax & Central Excise, Rawalpindi, conducted the audit of M/s. Pakistan Ordnance Factories, Wah Cantt for the period from August 1999 to May, 2001 and observed as under:--

(i) M/s. P.O.F supplied Electric Power to its subsidiaries without charging sales tax. As per data provided by M/s. P.O.F for the period September, 1999 to May, 2001, a total of 207,587,492 units of electric power were supplied to its subsidiaries. The market value of such supplies comes to Rs.978,456,130/- by multiplying units supplied with market price,, (i.e Wapda's tariff) provided by M/s. P.O.F Wah as specified under Section 2(46)(a)(ii) "in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax". Thus, the Sales Tax short deposited comes to Rs.146,768,419/- M/s. P.O.F had thus, contravened the provision of Sections 2(41), 2(44), 3,6,22 & 26 of the Sales Tax Act, 1990.

(ii) M/s. Pakistan Ordnance Factories, Wah Cantt, have failed to issue serially numbered tax invoices at the time of supply. They violated Section 23 of the Sales Tax Act, 1990, punishable under Section 33 ibid.

(iii) M/s. P.O.F Wah Cantt, failed to provide the data of power generation and the supply for the period 16-08-1999 to 31.08.1999, as tax on electric power was imposed w.e.f 16.08.1999. Thus, they have violated the provisions of Section 25 ibid, punishable under Section 23 of the said Act.

4. Accordingly, a Show Cause Notice C. No. ST/Coll/Adj/21/ 2002/15033-35 dated 14-12-2002 was issued calling upon P.O.F within fifteen days of the issuance of notice as to why they should not pay, Sales Tax of Rs. 146,768,419/- in terms of Section 11 & 36(1) of the Sales Tax Act, 1990 alongwith additional tax under Section 34 of the Act ibid and why penal action under Section 33 should not be taken against them for violation of Sections 2(41), 2(44), 3, 6, 22, 23, 25, 26 and 38 of the Act, ibid.

5. The gist of replies/comments/stance taken by the petitioner in response to Show cause Notice and during quasi-judicial and judicial proceedings, mentioned above is that, POF did no pay sales tax as it is not manufacturer of any taxable goods, under which sales tax is leviable. POFs are engaged in the manufacturing of arms and ammunition supplied to Armed Forces and has been declared as exempted from Excise Duty and Sales Tax, vide judgment C.No. CE/ADJ/10/93/13665, dt.31-10-2002. That vide Section 2 (41) "taxable supply means a supply of taxable goods made in Pakistan by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempted under Section 1 and includes a supply of goods chargeable to tax at the rate of zero per cent under Section 4 inserted by Finance Act, III of 1998 dated 01-07-1998 whereas taxable goods have been defined in Section 2(39). Since POF has been declared to be non-manufacturer of taxable goods, therefore, Section 2(46)(a)(ii) is not attracted at all, therefore, POF has not contravened any of the provision of sections mentioned above. So far as the second objection is concerned, tax invoices under Section 23 of Sale Tax Act are only to be prepared by a registered person who makes a taxable supply, therefore, POF has not violated Section 23 of Sales Tax Act. That POF is paying 15% Sales Tax on the import of Electricity from WAPDA for distribution in Estate (residential area).

6. In rebuttal the stance taken by the respondent, Collectorate of Sales Tax was that as far as Order-in-Original No. 39/2002 issued vide ST/Adj/10/93/13665 dated 31-10-2002 is concerned, it endorses sales tax written off by Federal Government on Arms and Ammunition manufactured by POF during the period 07-06-1990 to 12-06-1996 vide Board's C.No. 1(51) CEB/90(Pt.) dated 19-09-2002 and no exemption on the supply of generated electrical energy is granted in the said judgment. Furthermore, exemption on electrical energy was withdrawn by Federal Government w.e.f 16-08-1999 vide S.R.O. No. 922(I)/99 dated 16-08-1999. Therefore, M/s. POF was required to pay sales tax on supply of electrical energy w.e.f 16-08-1999. The electrical energy is not exempt under Section 13 of the Sales Tax Act, 1990 and a registered person making a taxable supply shall issue a serially numbered tax invoice, as required under Section 23 of the said Act but M/s. P.O.F failed to do so. Therefore, as per show cause notice POFs, Wah Cantt is required to pay the short paid amount alongwith penalties and additional tax in terms of Sections 33, 34 of the Sales Tax Act, 1990.

7. M/s. POF, Wah Cantt present petitioner also submitted rejoinder to the comments filed by Collectorate of Sales Tax, contents whereof are as under:--

(a) Safes Tax is payable by those organizations who generate electricity for sale, whereas "Generation" of electric power which is made for the "Consumption of persons, who are owning, operating or managing those facilities is not Generation for the purpose of the Act, as defined in Rule 2(h) of Special Procedure for collection of payment of Sales Tax (Electric Powers) Ordinance, 2000, notified vide S.R.O. No. 124(I)/2000, dated 15-03-2000. POF being a public sector project and not involved in the sale of electric power, is therefore, exempted from Sales Tax, as electric power which is taxable, not generated by POF. Furthermore, the electric power which is being generated and utilized by Factories, cannot be termed as supply as defined in Section 2(33) of the Sales Tax Act, 1990, therefore, Sales Tax on POF cannot be levied.

(b) Although, the exemption on electrical energy was withdrawn w.e.f 16-08-1999. However, since POF is generating electric power for production of Arms & Ammunition, which are exempted from Sales Tax, for the reason that electric power generated is not being provided to consumers because as per definition given in Special Procedure for collection of payment of Sales Tax (Electric Powers) Ordinance, 2000, the factories to whom electric power is being supplied does not come under the terms of consumer.

(c) The Central Board of Revenue (Sales Tax Wing) vide clarification C.No. 1(33)-STR/99(Pt), dated 19-06-2001, has clearly laid down that if POF is supplying/producing electricity on commercial basis or to its colonies and for other purposes, other than for making taxable supplies, then they are liable to pay the Sales Tax.

(d) It is admitted that exemption on electric power has been withdrawn w.e.f 16-08-1999, however, electric power for the purpose of Act, is the electric power which is distributed to consumers for sale, therefore, POFs being not covered by that definition is not liable to pay the assessed Sales Tax.

8. After hearing the respective stance of the parties mentioned above, the Collector (Adjudication) Collectorate of customs, Sales Tax and Central Excise vide Order-in-Original No. 2, dated 25-02-2004 observed as under:--

"Keeping in view the clarification of the Board, there is no option for the undersigned to hold that the electricity generated by them was liable to sale tax, M/s. POF, Wah are directed to pay Sales Tax amounting to Rs.140,574,737/- on generation of 198,772,820 units of electric power in contravention of Section 2(41), 2(44), 3 and 26 of the Sales Tax Act, 1990, M/s. POF Wah are directed to pay principal amount of Sales Tax Rs. 140,574,137/- alongwith additional tax under Section 34 of the Sales Tax Act, 1990 (to be calculated at the time of payment) and a penalty equal to the 3% of the amount involved under section 33(2) of the Sales Tax Act, 1990 is also imposed.

As regards the second charge regarding non issuance of serially numbered sales tax invoices, M/s. POF Wah are directed to pay penalty as per Section 33(2) of the Sales Tax Act, 1990.

As regards the third charge, regarding non maintenance of records of power generation, M/s. POF Wah are directed to pay penalty of five percent of amount of tax involved as per section 33(3)(b) of the Sales Tax Act, 1990."

9. Being aggrieved of the above order-in-original, M/s. POF Wah, filed Appeal No. 59/ST/IB/2004, before Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad which was decided vide order dated 07-03-2007. The Bench adjudicates upon following two issues emanating from the rival arguments/stance of the parties:--

(i) Whether the adjudication is barred by limitation?

(ii) Whether tax can be levied on self-consumption of electricity by POF?

10. The tribunal held that, time limit prescribed for adjudication of cases is not mandatory rather directory and by placing their reliance on judgment reported as PTCL 2006 CL.60 not entertained the Objection No. 1 of learned consultant for the appellants.

11. While deciding the Issue No. 2, the learned Tribunal while placing reliance on judgment titled as Adil polypropylene products Limited and others Vs. The Federation of Pakistan through Secretary Finance & others (2000 SCMR 1708) observed as under:--

"It is clear from the above illuminating judgment that the exemption of one product, which is exempt or non-taxable, does not exclude the production of another product from the ambit of taxable activity of goods. We are therefore, of the firm view that the ratio of the above case is squarely applicable to the facts and circumstances of the appeal under adjudication before us and we have no option but follow the settled ratio decidendi of the above judgment of the Honourable Supreme Court of Pakistan.

The learned consultant has argued at the bar on minor and curable defects of the show cause notice issued to the appellants. In this case the onus of proof was on the appellant that there was no in-house out by the revenue in the written material dated 24-03-2006 as referred to above. They never informed this Tribunal the position which is contrary to the stand taken by the revenue and failed to discharge their burden as to the quantum of usage of electricity on commercial basis or using the same for the purpose of manufacture/production of taxable goods or exempt goods.

In the light of above discussion, we do not wish to disturb the order of Collector (Adjudication).

11. Learned counsel for petitioner submitted that show cause notice in terms of Sections 11 and 36(1) of the Sales Tax Act 1990 was issued on 04-12-2002 whereas order in original was passed on 25.02.2004, whereas under the law it should have been passed within 135 days which included even the extended/grace period but impugned order-in-original was passed after 448 days of show cause notice, with an inordinate delay of 313 days. Learned counsel, further submits that even extension obtained on 20-11-2003 was patently time barred. Learned counsel for petitioner in support of his contention placed reliance on 2008 PTD 2025, 2009 PTD 2004, 2010 PTD 1520 and 2011 SCMR 1279.

12. Conversely, learned counsel for respondent submitted that limit of show cause is 06 years, no prejudice has been caused to the petitioner even if order is passed beyond the stipulated period. Learned counsel invited our attention to Article 254 of the Constitution of Islamic Republic of Pakistan and also placed reliance on PTCL 2006 CL 152 and PLD 1974 SC 134.

We have heard, the learned counsels and perused the documents annexed with the reference. Before answering the questions, we find it appropriate to bring the extract of Section 36 from the statute of Sales Tax Act, 1990 which is as under:--

"36. Recovery of tax not levied or short-levied or erroneously refunded.--(1) Where by reason of some collusion or a deliberate act 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 any amount of tax or charge or the amount of refund erroneously made shall be served with a notice within five years of the relevant date, requiring him to show cause for payment of the amount specified in the notice.

(2) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been shor-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 date, 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.

(3) The officer of (Inland Revenue) empowered in this behalf shall, after considering the objections of the person served with a notice to show under sub-section (1) or sub-section (2), determine the amount of tax or charge payable by him and such person shall pay the amount so determined.

[Provided that order under this section shall be made within (one hundred and twenty) days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed (sixty) days.

[Provided further that any period during which the proceedings are adjourned on account of a Stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding thirty days shall be excluded from the computation of the periods specified in the first proviso]

(4) For the purpose of this section, the expression "relevant date" means--

(a) the time of payment of tax or charge as provided under Section 6; and

(b) in a case where tax or charge has been erroneously refunded, the date of its refund.

13. An important aspect of the matter is that above section falls in chapter-VII of the Act ibid, which relates to OFFENCES AND PENALTIES. Any provision which brings penal consequences is required to be invoked or exercised within the limit prescribed by the Statute itself. This is an admitted fact that impugned order-in-original was passed with a delay of 313 days and no reasonable justification has been shown, on the contrary, it demonstrate that authorities proceeded in the matter in a mechanical fashion. It is well settled law, with the mandate of dictums of the Court of Apex that Govt. departments cannot be put at higher pedestal, when it comes to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law.

14. As learned counsel for respondent took refuge under Article 254 of Constitution, therefore, we are reproducing the said article which reads as under:--

"254. Failure to comply with requirement as to time does not render an act invalid. When any act or thing is required by the Constitution to be done within a particular period and it is not done within that period, the doing of the act or thing shall not be invalid or otherwie ineffective by reason only that it was not done within that period."

The plain reading of above article negates the contention of learned counsel for respondent, as above command does not relate to issue brought before this Court. The Sales Tax Act, 1990 on the basis of which show cause notice was issued, itself demands that in pursuance of notice, order-in-original must be passed within the period prescribed by Section 36(3) of Act ibid. The Judgments relied by learned counsel for petitioner provided strength to our opinion, more particularly Hon'ble Supreme Court in case of Collector of Customs (Preventive), Karachi Vs. Pakistan State Oil, Karachi. The august Supreme Court while dilating upon the question of issuance of show cause notice, u/S. 32(3) of Customs Act, 1969 has observed as under:--

"It has been observed with grave concern that in a few cases, notices were issued after 44 and 38 months instead of six months for the reasons best known to the Customs Authorities. In our view such an inordinate delay cannot be ignored where a specific period of six months has been provided under Section 32(3) of the Customs Act and thus the factum of delay being a mandatory requirement of law has rightly been considered by the learned Division Bench."

15. As far as judgment relied by the learned counsel for respondent i.e. PTCL 2006 CL 152, is concerned, to our estimation, this judgment also supports the contention of petitioner. For convenience sake, operative part is reproduced herein below:--

"No order can be scraped or annulled or set aside, only on the ground that the same has been passed with un-reasonable delay.--The observations of the learned Single Judge of the High Court that the order-in-original dated 26-09-1992 passed by the appellant was not within a reasonable time from the date of the issuance of notice dated 10-07-1989, the same are neither here nor there. No order can be scraped or annulled or set aside, only on the ground that the same has been passed with un-reasonable delay. There is no such concept attached to the judicial and quasi-judicial proceedings, unless provided in the statute" (emphasis is our).

16. The exception of un-reasonable delay can be evaded if statute does not prescribe the time period/limit in which act has to be performed. The Hon'ble Supreme Court through different authoritative pronouncements has held time and again that inefficiency, slackness, incompetence and inaction on the part of executive functionaries or persons on the helm of affairs by itself is no ground to ignore the command of law of performing any act within the stipulated period, therefore, we answer the Question No. 1 in negative by holding that Appellate Tribunal was not justified in confirming the Order-in-Original No. 02/2004 passed by Collector (Adjudication).

17. Since we have answered the Question No. 1 relating to time limit, do not find it appropriate to answer the remaining questions, as same are regarding the facts, which need not be answered as the answer to Question No. 1 goes to the root of the controversy.

(R.A.) Order accordingly

PLJ 2012 Tax Cases (Lah.) 38 (DB)

[Bahawalpur Bench Bahawalpur]

Present: Abdus Sattar Asghar and Amin-ud-Din Khan, JJ.

COMMISSIONER INLAND REVENUE, LEGAL DIVISION ZONE, RAHIM YAR KHAN, BAHAWALPUR--Petitioner

versus

ZULFIQAR ALI, PROP. M/S. ALI ELECTRONIC SPARE PARTS, RAHIM YAR KHAN--Respondent

I.T.R. No. 1 of 2012/BWP, heard on 1.3.2012.

Income Tax Ordinance, 2001--

----Ss. 133(4), & 128(5)--Reference Petition--Return of income--Issuing statutory notices calling for explanation of source of investment--Amended assessment was cancelled--Opportunities of clear 15 days should be offered to assessee before making assessment--Validity--Both notices only five day time each was provided to assessee to make explanation violate to CBR--Amended assessment order was obviously made without providing reasonable opportunity of explaining position and same was not tenable in law--Since respondent was not provided ample opportunity to explain his position through reply of notices, therefore, he could not be penalized for default on part of Assessment Officer--Appellate Tribunal observed that there was no valid reason with T.O. to amend completed assessment--Jurisdiction of High Court is of advisory nature clearly distinct and distinguishable from its appellate or revisional jurisdiction--Object of Reference before High Court u/S. 133(4) Ordinance remains that an affirmative or negative reply to High Court should furnish guidance to parties for useful, comfortable and effective assessment proceedings on substantial legal issues of general interest. [Pp. 40 & 41] A, B, C & D

1970 SCMR 872 & 2007 PTD Lah. 333, ref.

Mr. Muhammad Siddique Chohan, Advocate for Petitioner.

Sh. Zafar-ul-Islam and Mr. Niaz Ahmad Khan, Advocate for Respondent.

Date of hearing: 1.3.2012.

Judgment

Abdus Sattar Asghar, J.--In this Reference Petition under Section 133(4) of the Income Tax Ordinance, 2001, the Revenue through Commissioner in-land Revenue Legal Division, Zone Rahimyar Khan, Regional Tax Office, Bahawalpur claims that following question of law arises out of the order of the Appellate Tribunal Inland Revenue, Lahore Bench (Camp at Multan), Lahore dated 18.10.2011:--

"Whether on the facts and in the circumstances of the case, the Tribunal has not erred in law by not cognizance of fact that the Commissioner (Appeals) had admitted the documentary evidence without establishing that the taxpayer was prevented by sufficient cause from providing such evidence before the Taxation Officer as provided in sub-section (5) of Section 128 of the Income Tax Ordinance, 2001"

2. Contents of the Reference Petition reveal that the respondent/assessee is an individual. He filed return of his income at Rs.1,10,000/- for the Tax Year 2009. Later on the Department got information that the respondent had purchased a plot situated at Sohail Market, Rahimyar Khan for consideration of Rs. 15,00,000/- on 18.03.2009. On scrutiny of the return filed by the respondent it revealed to the Department that the income declared by him did not commensurate with his investment. Consequently the Department initiated proceedings against the respondent by issuing statutory notices calling for explanation of source of investment. On his failure in submission of requisite explanation/reply to the notices on the due date despite opportunities, the Deputy Commissioner in-land Revenue amended the assessment at Rs.17,60,000/- and charged the tax thereon at Rs.4,40,000/- vide order dated 31.05.2010.

3. Being aggrieved the respondent filed an appeal before the Commissioner In-land Revenue (Appeals), Multan on various technical and legal grounds. The appeal was allowed vide order dated 27.01.2011 and amended assessment was cancelled mainly on the grounds, firstly that the respondent (appellant) was not furnished reasonable opportunity of explaining the position as stipulated in the CBR's Circular Letter No. 7(2) dated 01.02.1994, and secondly that reconciliation statement as at 30.06.2009 filed by the respondent (appellant) shows availability of funds to make investment in the property duly taken into consideration in exercise of powers under Section 128(5) of the Income Tax Ordinance, 2001 vested in the Commissioner (Appeals). The Department impugned the order of the learned CIRA dated 27.01.2011 before the learned Appellate Tribunal Inland Revenue, Lahore Bench (Camp at Multan) through an appeal mainly on the grounds that the learned Commissioner (Appeals) was not justified to entertain the wealth statement as on 30.6.2009 under Section 128(5) of the Income Tax Ordinance, 2001 in the absence of any sufficient cause which had prevented the respondent from producing such material or evidence before the learned Commissioner. The appeal lodged by the Department however was dismissed vide order dated 18.10.2011, hence the Reference.

4. We have given patient hearing to the learned counsel for Revenue as well as the respondent and gone through the record carefully.

5. At the out-set it is pertinent to notice that the CBR Circular No. 7(2) dated 01.02.1994 manifests that three opportunities of clear 15 days should be offered to the assessee before making estimation/ assessment. In the instant case the Assessing Officer issued first notice to the respondent on 14.04.2010 allegedly served on 17.4.2010 with a date of compliance i.e. 22.04.2010 whereas the second notice was issued on 24.05.2010 allegedly served on 26.5.2010 with a date of compliance i.e. 31.05.2010. It is crystal clear that in both the notices only five days time (each) was provided to the respondent assessee to make the explanation/reply violative to the CBR Circular cited above. Therefore amended assessment order passed on 31.05.2010 was obviously made without providing reasonable opportunity of explaining the position and thus the same was not tenable in law.

6. At this stage, it may be expedient to reproduce the relevant provision of Section 128 (5) of the Income Tax Ordinance, 2001, which reads below:--

"The Commissioner (Appeals) shall not admit any documentary material or evidence which was not produced before the Commissioner unless the Commissioner (Appeals) is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Commissioner."

7. The learned Appellate Tribunal vide order dated 18.10.2011 dismissed the appeal while taking into consideration the legal points of opportunity of hearing as well as the Authority of the Commissioner (Appeals) in terms of Section 128(5) of the Ordinance ibid. Concluding para of the order dated 18.10.2011 is reproduced hereunder:--

"The department has objected the cancellation of the orders but while perusal of the impugned order, we have found that the order passed by the Taxation officer has been cancelled with the observations that the reasonable opportunity to the taxpayer in this case was not allowed and the reconciliation statement filed by the taxpayer was showing availability of funds to make investment in the property on the basis of which the addition has been-made and the amended order has been passed by the Taxation Officer. The learned CIR (A) after considering the details furnished by the taxpayer has cancelled the order being satisfied that there was no valid reasons to amend the already completed assessment. The learned DR is unable to point out that the order passed by the Taxation Officer has been cancelled without any justification. The appeal filed by the department is, therefore, dismissed."

8. There is no cavil to the proposition that sub-section (5) of Section 128 of the Ordinance ibid empowers the Commissioner Inland Revenue (Appeals) to entertain any documentary material or evidence although such admission is subject to his satisfaction that the appellant was prevented by sufficient cause from producing such material or evidence before the Deputy Commissioner Inland Revenue. The expression "to his satisfaction" used in sub-section (5) of Section 128 of the Ordinance bears grave importance. In his order dated 27.01.2011 Commissioner (Appeals) has categorically expressed his satisfaction to exercise his powers under sub-section (5) of Section 128 of the Ordinance ibid. In this case record reveals that the Department did not question the "satisfaction" of the Commissioner Inland Revenue (Appeals) when he entertained and examined the wealth statement as on 30.06.2009 furnished by the respondent. In the peculiar circumstances of this case since the respondent was not provided ample opportunity to explain his position through reply of the notices, therefore he could not be penalized for default on the part of the Assessment Officer. Learned Appellate Tribunal therefore has rightly observed that there was no valid reason with the Taxation Officer to amend the already completed assessment.

9. It is pertinent to mention that jurisdiction of this Court in terms of Section 133(4) of the Ordinance ibid is of advisory nature clearly distinct and distinguishable from its appellate or revisional jurisdiction. The purpose of reference therefore should be only to resolve problematic and debatable legal question instead to get a decision for or against a party. In this Reference question raised by the Department appears to be `point of law' which could not be equated with the expression `question of law'. The object of the Reference before this Court under Section 133(4) of the Ordinance ibid remains that an affirmative or negative reply to a question referred to this Court should furnish guidance to the parties for useful, comfortable and effective assessment proceedings on substantial legal issues of general interest. Certainly general practice on the part of the Department or the assessees to convert the factual controversy into legal issues not falling within the purview of "question of law" cannot be approved at all. Reliance is made upon, (i) The Lungla (Sylhet), Tea Co. Ltd. vs Commissioner of Income Tax Dacca Circle Dacca (1970 SCMR 872), (ii) Commissioner of Income Tax/Wealth Tax, Multan Zone vs Muhammad Rafi, Medical Officer, D.H.Q. Khanewal (2007 PTD 333-Lahore).

10. For the above discussion and reasons we are of the considered view that the above question as framed in the Reference Petition is neither a question of law nor it involves a substantial legal issue between the parties. Therefore, we decline to entertain and answer the aforesaid question. This petition is disposed of accordingly.

(R.A.) Petition disposed of

PLJ 2012 Tax Cases (Lah.) 38 (DB)

[Bahawalpur Bench Bahawalpur]

Present: Abdus Sattar Asghar and Amin-ud-Din Khan, JJ.

COMMISSIONER INLAND REVENUE, LEGAL DIVISION ZONE, RAHIM YAR KHAN, BAHAWALPUR--Petitioner

versus

ZULFIQAR ALI, PROP. M/S. ALI ELECTRONIC SPARE PARTS, RAHIM YAR KHAN--Respondent

I.T.R. No. 1 of 2012/BWP, heard on 1.3.2012.

Income Tax Ordinance, 2001--

1970 SCMR 872 & 2007 PTD Lah. 333, ref.

Mr. Muhammad Siddique Chohan, Advocate for Petitioner.

Sh. Zafar-ul-Islam and Mr. Niaz Ahmad Khan, Advocate for Respondent.

Date of hearing: 1.3.2012.

Judgment

4. We have given patient hearing to the learned counsel for Revenue as well as the respondent and gone through the record carefully.

6. At this stage, it may be expedient to reproduce the relevant provision of Section 128 (5) of the Income Tax Ordinance, 2001, which reads below:--

(R.A.) Petition disposed of

PLJ 2012 Tax Cases (Pesh.) 64

Present: Khalid Mahmood, J.

JOHAR ALI (RAKI) and another--Petitioners

versus

DISTRICT CO-ORDINATION OFFICER (D.C.O.) and 9 others--Respondents

W.P. No. 214 of 2011, decided on 22.5.2012.

Constitution of Pakistan, 1973--

----Art. 199--Khyber Pakhtunkhwa Local Government Ordinance (XIV of 2001)--S.116 [as amended by N.-W.F.P. Local Government (Amendment) Ordinance (II of 2005)] & S. 127--Constitutional petition--Taxes to be levied--Imposition of local tax--Petitioners were importers of goods from China through dry port Sust Gilgit--Grievance of petitioners was that local government was not entitled to recover Kohistan Development Fee-Cess--Validity--Collection of tax under S. 127 of Ordinance, 2005, was meant for- Provincial tax levied by Provincial Government--No publication before levying of tax had been produced vide which objections from public were invited nor any legal procedure for imposition of disputed tax had been brought on record--Government had abolished Octroi/Zilla tax on transportation of articles so transported within the country from one district to another--High Court in exercise of Constitutional jurisdiction declared Kohistan Development Fee-Cess, illegal and void--Petition was allowed. [P. 70] A & B

Ch. M. Ashraf Gujjar, Advocate for Petitioner.

Mr. Muhammad Nawaz Khan Sindhu, A.A.-G. along with Mr. Abdul Qayyum for Respondents.

Date of hearing: 22.5.2012.

Judgment

Johar Ali Raki and another petitioners seek the constitutional jurisdiction of this Court praying for:--

"(a) that on acceptance of this writ petition, the imposition, collection and recovery of Kohistan Development Fee-Cess (KDF-Cess) by Respondents Nos. 1 to 8 is illegal, unlawful, ultra-vires, arbitrary, discriminatory, colourful exercise of power, without lawful authority and disadvantageous to the importers/traders of Northern Area, as compare to other importers operating at different Air, Sea and Dry Ports of the Country,

(b) that the impugned notifications.--(1) No. Notification No. 1040/1/2 Dek, dated 16-6-1996, (2) AO-II/LCB/12-24/96 dated 21-10-1996 and 16-2-1997, published in the Gazette dated 18-3-1996, (3) Letter No. SOII/LG/2-2/2009 SUST, dated 9-10-1999 and (4) Letter No. AO-KDF/8031/DCO Kh: dated 12-10-2010 be declared as illegal, unlawful, ultra vices, void ab initio, inoperative upon the petitioners and other importers and without lawful authority.

(3) that illegally and unlawfully imposed "Kohistan Development Fee-Cess" amounts to double taxation, as the petitioners/importers engaged in the business of import from China pay all kind of taxes, i.e. (1) Customs Duty, (2) Import Duty, (3) Sale Tax, (4) Additional Sales Tax, (5) Withholding tax, (6) Anti-Dumping Duties and (7) Income tax,

(4) that due to extortion of Development tax/Cess by the Kohistan District Government or the KPK Government, the importers of the China goods have been placed at a highly disadvantageous position as against the other importers operating at all the other Air, Sea an Dry-ports of the country.

(5) that the petitioners are not under any mandatory or legal obligation to pay any tax/cess under the guise of "Kohistan Development Fee-Cess" (KDF-Cess) unlawfully levied either by the above mentioned Provincial or District Government,

(6) that the petitioners are being subjected to discriminatory treatment as there is no such tax payable by the Pakistani importers at any Air, Sea or Dry-port of Pakistan or at any adjoining or neighbouring district(s).

(7) that the petitioners and other importers are entitled for refund of amount illegally recovered by the Respondents Nos. 1 to 4, under the guise of KDF-Cess.

(8) that the Respondents Nos. 1 to 8 be perpetually restrained from collecting "Kohistan Development Fee-Cess" (KDF-Cess) or any other tax illegally and unlawfully from the petitioners and other importers engaged in the business of import of china-goods through Dry-Port Sust, Gilgit".

2. As per contents of petition, petitioners are running their trading companies namely Messrs Ali and Raki International Traders and Messrs Five Star Trading Company respectively and are renowned importers/exporters of the country and are also engaged in the business of importing China-goods through dry port Sust Gilgit. It has been averred in the petitioner that earlier Provincial or District Government has charged different taxes, however, which were abolished during Federal Ministers Budget Speech 1999-2000 delivered in National Assembly on 12-6-1999, which was communicated to all Administrators vide letter dated 2-7-1999. Respondents Nos. 1 to 4 on their own off the record are charging 5% to 10% of the total cost, insurance and freight value (CIF-value) imported China goods and illegally imposed payment @ 1% of the CIF-value, as Kohistan Development Fee-Cess". The Chief Secretary, Northern Areas (Gilgit Baltistan) in his summary for Federal Minister/Chief Executive Northern Areas, dated 15-5-2006 termed the coercive recovery of Kohistan Development Fee-Cess as an extortion and an arbitrary act committed by respondents KPK Government. Hence, this writ petition.

3. Learned counsel for the petitioners contended that respondents have no right or authority to charge tax either on CIF value or on each truck basis rather this amounts to double taxation. It was argued that imposition and recovery of "Kohistan Development Fee-Cess (KID-Cess)" is illegal, unlawful, void, arbitrary, discriminatory and colourful exercise of power and inoperative upon the petitioners. It was also argued that District or the Provincial Government cannot levy any such tax or Cess on the imported items duly cleared by the Customs authority at Sust dry port. It was further argued that no such tax has either been levied by any other District upon the imported goods. It was concluded that recovery of such tax in the name of "Kohistan Development Fee-Cess (KID-Cess)" being illegal, unlawful, void, arbitrary, discriminatory and colourful exercise of power and inoperative upon the petitioners is liable to be set-aside.

4. On the other hand, learned A.A.-G. for the respondents opposed the contentions of petitioners and supported the impugned imposition of tax.

5. Arguments heard and record perused.

6. Admittedly, the petitioners are paying the Customs Duty, Import Duty, Sales Tax, Additional Sales Tax, Withholding Tax, Anti-Dumping Duties and Income tax at the Dry-Port Sust, Gilgit and where after the goods are cleared and allowed to be ex-bonded from the dry-port. Respondents Nos. 1 to 4 charged the Provincial/District Development Tax, which vary from 5% to 10% of the total Cost, Insurance and Freight Value (hereinafter called "CIF-Value" of the imported China-goods from the petitioners and others). The staff so deputed by Respondents Nos. 1 to 4 for recovery of Kohistan Development Fee-Cess also compelled the importers to accept the following schedule of payment and also illegally imposed payment @ 1 % of the CIF-Value.

Specification of carriage Amount of tax

(i) Heno Truck, Rs,25,000

(ii) Bedford Truck Rs. 20,000

(iii) Toyota/Datsun Pick up Rs.7000

(iv) Flying Coach Rs.5000

The Customs Authorities at Sust Dry Port, Gilgit used to deduct "Kohsitan Development Fee-Cess" @ 1% of the CIF-Value, which was challenged before Northern Areas Chief Court, Gilgit through Writ Petition No. 33 of 2006 and Honourable Chief Court vide its judgment dated 16-12-2008 also declared the collection of "Kohsitan Development Fee-Cess" without jurisdiction and void ab-initio. The Court further directed the concerned authorities to refund the amount, which they had illegally collected on account of "Kohsitan Development Fee-Cess".

7. Facing such a hardship situation, the Federal Minister during his Budget Speech 1999-2000 delivered in the National Assembly on 12-6-1999 is of immense importance and is reproduced below:--

"93. Tax payers, have been agitating against multiplicity of taxes and levies. People, businessmen and industrialists have to pay multiple-federal, provincial and local taxes and levies and they are being harassed at every step. The zila tax, export tax and octroi have made the life of the people miserable. They are forced with over 570 institutions (including metropolitan corporations, municipal corporations, municipal committees, town committees and district councils) collecting zilla and export tax and octroi at thousands of places. Every one hears the stones of extortions and corruptions. The contractors are collecting much more taxes that what is being paid to Government. To relieve the public from this regressive tax it has been decided to withdraw all such taxes from July 1, 1999. In order to facilitate the normal working of these local bodies, the Federal and Provincial Governments will provide Rs.19.5 billion to them, in which the share of Federal Government will be over Rs. 13 billion. Mr. Speaker:

94. This is a big concession for the business and industrial community. It is, therefore, logical to expect that they would meet their responsibility by paying the national taxes honestly so that the national needs are met more effectively."

8. Previously, Tax Collector Check Post Waso, District Council Kohistan had been recovering from the traders the Provincial Development Tax at the rate of 5% to 10% of the total price of goods on the ground, which was challenged in Writ Petition No. 1042 of 2005 and honourable Division Bench of this Court held as under:--

"We have considered the arguments of the learned counsel for the parties. The comments furnished by respondents indicate that the respondents have denied the recovery at the rate of 5% to 10% of the total price of goods which demonstrate that there is no legal tax at the rate of 5% to 10%. It has been clearly admitted in para 8 of the comments that the tax is being charged at the rate of 1% on CIF value. We do not see any force in the explanation offered by Mr. Mir Baz Khan TMO. Such an explanation, can be used as coverage for the unjustified recovery of unwarranted taxes. In the minutes it has been made clear that each truck/carrier will carry a certificate. The goods contained therein were covered under specific bill of entry which shall duly bear the number an date of the bill of entry. It is also provided in the minutes that the goods on which the custom duty has not been paid will be charged as per schedule (Notification No. AOll/LCB/12-4/96 dated 21st October, 1996. It is also provided in the meeting that to check any evasion/avoidance of the tax the DCO Kohistan at his own or on a complaint from the contractor shall verify the genuineness of contents of the bill of entry and the goods carried from Custom Department at Sust. Any mischief in payment of due tax was to be visited in the light of notification dated 31st October, 1996.

In view of the foregoing circumstances and clear cut admission given in comments we allow this Writ Petition and direct that respondents shall recover the tax at the rate of 1% on CIF value of goods as provided in clause (b) of the minutes dated 2nd August, 2004".

9. The Customs Authorities Sust Dry Port, Gilgit used to deduct "Kohsitan Development Fee-Cess" @ 1% of the CIF-Value which was challenged before Northern Areas Chief Court, Gilgit through Writ Petition No. 33 of 2006 and honourable Chief Court vide its judgment dated 16-12-2008 also declared the collection of "Kohsitan Development Fee-Cess" without jurisdiction and void ab-initio. The Court further directed the concerned authorities to refund the amount, which they had illegally collected on ac.count of "Kohsitan Development Fee-Cess".

10. The respondents were asked that how, when and under what law the disputed tax has been levied, they sought time to consult the record. Several adjournments were granted to them but except production of letter dated 9-10-2009, minutes dated 23-5-2006; notification issued on 21-10-1996 and the judgment of this Court, they failed to produce any resolution passed by the District Assembly or any legal procedure adopted under the Local Government Ordinance, 1979 or under Local Government Ordinance, 2005 wherein the procedure for levying of tax has been laid down. Under Section 127 of Local Government Ordinance, 2005 provides: --

"Relations of Government with the District Government--(1) The District Government shall carry out is decentralized functions in accordance with the provisions of this Ordinance and the rules made thereunder:-

(2) The District Government shall collect such provincial tax or taxes within its local area as the Government may direct, excluding those being collected by the Government through its own agencies and the District Government shall after the collection of such tax or taxes, deposit the same in the relevant Government account.

(3) The Government may provide guidelines and render advice to the District Government through the concerned Zilla Nazim for achieving the ends of Government policy and for promoting economic, social and environmental Security of the Province".

11. Section 116 of the Ordinance ibid reads as under:--

"Taxes to be levied.--(1) A council may levy taxes, cesses, fees, rates, rents, tolls, charge, surcharge and levies specified in the second Schedule:--

Provided that Government shall vet he tax proposal prior to the approval by the concerned Council:

Provided further that the proposal shall be vetted within thirty days from the date of receipt of the proposal failing which it would be deemed to have been vetted by the Government.

(2) No tax shall be levied without previous publication of the tax proposal and after inviting and hearing public objections.

(3) A counsel may, subject to provisos of sub-section (1), increase, reduce, suspend, abolish or exempt any tax".

12. Under Section 127 of the Ordinance ibid collection of tax is meant for the Provincial tax levied by the Provincial Government. No publication before levying of tax has been produced vide which the objections from public were invited nor any legal procedure for the imposition of disputed tax has been brought on record. It is also pertinent to note that throughout the country Government had abolished the Octroi/Zilla tax on the transportation of articles so transported within the country from one district to another.

13. Consequently, this writ petition is allowed and impugned "Kohistan Development Fee-Cess (KID-Cess)" is declared illegal and void. No order as to costs.

(R.A.) Petition allowed

PLJ 2012 Tax Cases (Kar.) 70 (DB)

Present: Muhammad Athar Saeed and Munib Akhtar, JJ.

PAKISTAN TELECOMMUNICATION COMPANY LTD.--Petitioner

versus

DEPARTMENT OF EXCISE OF TAXATION--Respondents

C.P. No. 604 of 2009, decided on 13.6. 2011.

West Pakistan Urban Immovable Property Tax Act, 1958 (V of 1958)--

----Ss.5 & 5-A--Constitution of Pakistan, 1973, Art. 199--Constitutional petition--Annual value, ascertainment of--Valuation table--Industrial establishment--Determination--Petitioner was a telecommunication service provider company and dispute was with regard to charging of property tax against its properties located in Karachi city--Petitioner company claimed that property tax was chargeable at industrial rates, whereas authorities intended to charge against commercial rates--Validity--Some additional elements must be present for technical support to amount to industrial activity--Those additional elements must be activity or action, directly in relation to petitioner's telephone exchanges (or the other devices used by it to provide telecommunications services and must be substantially more than a mere servicing or care thereof--Petitioner did not carry out industrial activities on its properties, in which case the annual value of properties would not have to be determined on the basis that those were industrial properties--Properties of petitioner company must be brought to tax on the basis that those were commercial properties and there was nothing on record in relation to such additional activities or actions, if any-- High Court directed that in respect of each property, where petitioner claimed to carry out industrial activities, would make application to authorities, giving full details of its activities--Petition was disposed of. [Pp. 81 & 82] A, B & C

2009 PTD 1602; 2006 SCMR 1738; 2007 CLC 1215; 2006 CLC 1372; 1993 SCMR 29, ref.

Mr. Khurram Rasheed, Advocate for Petitioner.

Mr. Saifullah, Assistant Advocate-General for Respondents.

Dates of hearing: 28.9.2010 and 9.5.2011.

Order

Munib Akhtar, J.--This petition arises under the Sindh Urban Immoveable Property Tax Act, 1958 ("the 1958 Act" or "the Act"). The petitioner is the well-known telecommunications company, which in years gone by was the only supplier of such services in the country, and even today is the largest such provider, and the only provider of such services through landlines. The petitioner owns properties up and down the province, many of which are in Karachi division. The question that requires determination is whether the property tax payable under the Act in respect of the properties in Karachi is to be paid, as contended by the petitioner, at rates applicable to industrial properties, or, as contended by the Province, at the rates that apply to commercial properties.

2. Learned counsel for the petitioner submitted that property tax under the 1958 Act was payable in Karachi .division in terms of section 5A thereof. That section (which is considered in detail below) provides that the annual value of a property may be determined on the basis of valuation tables issued by the Provincial Government. It appears that in respect of Karachi, this power has been exercised from time to time, and as presently relevant, in terms of a Notification No. SO(TAXES)/E&T/310/2001. Pt II issued on 20-6-2001 ("the notification"). Learned counsel submitted that in terms of the notification, properties had been divided into residential, commercial and industrial categories, and property tax was payable as per the rates notified for each category. The rates specified for commercial properties are substantially higher than those for industrial properties. The primary basis on which the petitioner contends that its properties are liable to tax as industrial properties is that the telecommunications sector has been declared an industry by the Federal Government by means a notification dated 20-4-2004 ("the federal notification"). This contention formed the core of learned counsel's submissions. Learned counsel submitted that since the petitioner was part of the telecom "industry", any property owned by it ought to be taxed as an "industrial" property. Learned counsel submitted that the term "industrial" had a wide and comprehensive meaning, and that the activities of the petitioner were fully within the ambit thereof. In other words, according to him, the petitioner was carrying on "industrial activities" on its properties, which were liable to tax accordingly. In this regard, he placed reliance on a decision of the Lahore High Court, involving the petitioner itself, and reported as Pakistan Telecommunication Company Ltd, v. Government of Punjab and others 2009 PTD 1602. Learned counsel also sought to distinguish a decision of the Supreme Court reported as Tures Hotel, Islamabad and others v. Capital Development Authority and others 2006 SCMR 1738, a case on which reliance was placed by the respondents.

3. Learned A.A.G. opposed the petition. He submitted that the fact that the telecom sector had been declared to be an "industry" by the Federal Government was not relevant. Even if the petitioner was part of an "industry" for federal purposes pursuant to some policy of the Federal Government, that could not affect the position under the 1958 Act, which was a provincial law and thus fell within the provincial domain. He submitted that this very point, in the context of the notification itself, had already been considered and repelled by a Division Bench of this Court in Arabian Sea Enterprises Ltd. v. Government of Sindh and others 2007 CLC 1215, and an appeal taken against that decision to the Supreme Court had also proved unsuccessful. In its leave refusing order, the Supreme Court had referred to its earlier decision in the Tures Hotel (supra). Learned A.A.-G. submitted that the properties in question had been declared as commercial properties, and were therefore rightly being valued as such under the notification, and taxed accordingly. He further contended that the petitioner had availed the statutory remedies of appeal and revision provided by the 1958 Act, and the orders of the appellate and revisional authorities did not suffer from any legal or other infirmity as would require interference by the Court. Finally, learned A.A.-G. submitted that the vices of section 5A and the valuation table notified in terms thereof had also been considered and upheld by a Division Bench of this Court in Karachi Properties Investment Co. (Pvt.) Ltd. v. Government of Sindh and others 2006 CLC 1372. He prayed that the petition be dismissed.

4. We have heard learned counsel for the parties, gone through the record with their assistance, and considered the case-law relied on by them. Before embarking on an analysis of the 1958 Act, one point must be mentioned. The 1958 Act was enacted by the erstwhile Province of West Pakistan. When that province was broken up into its constituent parts, i.e., the four Provinces that we have today, the 1958 Act passed on to each province as part of the laws inherited from West Pakistan. Thereafter, each province has made many amendments to the Act as applicable therein. Unfortunately, law books do not always faithfully reflect the state of the law as applicable in the different provinces, and in most instances, the reader is left to make his way; as best he can, through a sometimes bewildering hotchpotch of different amendments and substitutions in respect of each province, without any certainty or clarity as to what the state of the law is. We have therefore chosen to use the version of the 1958 Act as available (as a link) at the official website of the Excise and Taxation Department of the Government of Sindh (http ://www. sindh. go v.pk/dpt/Excise%20&% 20 Taxation/IMMOVABLE%20PROPERTY%20TAX%20%2023-02-09.pdt). Unfortunately, even this version is not free from various typographical errors, some of which are fairly egregious, but these can at least be sorted out without too much difficulty. This version shows the state of the 1958 Act as on 23-2-2009. The present petition was filed on 9-4-2009, and there is nothing in the Sindh Finance Acts of 2009 and 2010 as is relevant for present purposes. Nonetheless, and we say this with some regret, since it reflects on the ability of the Provincial Government to make up-to-date and accurate versions of the laws of Sindh available there is still some residual doubt as to the accuracy of the text that we have used. (We would draw attention to the situation in the Punjab, in respect of the laws of which an excellent website is available: http://www.punjablaws.gov.pk.) Subject to the foregoing caveat, we turn to an examination of the various provisions of the 1958 Act, and the submissions of learned counsel in terms thereof.

5. We start with the charging provision, which is contained in Section 3(2):

"The tax shall be charged, levied and collected at the rate of twenty percent of the annual value of the lands and buildings."

It will be seen that the charging provision requires two things: (a) lands and buildings, and (b) the annual value thereof. At first sight, this may seem a somewhat strange way of putting it: would not lands and buildings in every case have an annual value? In fact, the answer to this question may not necessarily always be in the affirmative. In any case, we are in the realm of fiscal statutes, and the charging provision must be carefully examined if the nature and scope of the levy is to be properly appreciated. Although the word "land" is defined in Section 2(da) of the Act, the term "annual value" is not defined (and "building" likewise remains undefined). Section 5 lays down the manner for ascertaining the "annual value", and as presently relevant, provides as follows:

"5. Annual value.--The annual value of any land or building shall be ascertained by estimating the gross annual rent at which such land or building... might reasonably be expected to be let from year to year...."

This is what may be called the normal method for determining the "annual value": the "annual value" is the "gross annual rent" at which the property may "reasonably" be "expected to be let from year to year". Section 5A, on the other hand, provides as follow:--

"5A. Valuation Tables to ascertain annual value.--Notwithstanding the provisions of section 5 the annual value may be determined on the basis of the valuation tables as may be notified by or under the authority of Government for various locations."

Thus, Section 5A overrides Section 5 by way of a non-obstante clause, and provides an alternative method of determining the "annual value", namely, on the basis of "valuation tables" notified by the Government for "various locations". Now the Act does not define "valuation tables", nor does it itself provide any direct guidance or clue as to how such tables are to be formed, established or determined. The question as to what are the correct legal principles applicable to the proper interpretation and application of a notification under Section 5A lies at the heart of this petition.

6. As noted above, the main plank of the petitioner's case is that the Federal Government has notified the telecom sector as an "industry", and the learned A.A.-G. has sought to demolish this mainstay by referring to the Arabian Sea Enterprises case. That decision (whereby a number of conjoined petitions were disposed off) involved the application of the notification to hotels. One ground taken by the petitioners was that their sector had been declared to be an "industry" by a circular issued by the Federation, and for that reason, property tax was payable by hotels at the rates applicable to industrial properties, and not commercial properties. After considering the matter at some length (see pp. 1221-1224), the learned Division Bench was pleased to repel the petitioners contention. It was observed as follows:

"It may be true that in order to promote tourism the Federal Government has provided certain concessions to the tourism including hotels etc. to attract investors. However, such concessions or the change of status was only for the purposes of providing specified concessions and incentives and it cannot be said that it has changed the status of the property even for the purposes of assessment of property tax." (pg. 1224)

The petitioner's case on this point is no different from that of the petitioners in the Arabian Sea Enterprises case, and the foregoing observations apply equally to the federal notification relied on by the petitioner. The distinction between federal law (and federal purposes) on the one hand, and provincial law (and provincial purposes) is clear. As presently relevant, the Federation cannot alter the applicability of a provincial law by issuing a notification or circular, nor indeed, does it appear that the federal notification relied on by the petitioner is intended to have any such effect. We are in full agreement with the observations of the learned Division Bench noted above (which are, in any case, binding on us), and therefore, we likewise repel the contention that simply on account of the federal notification in relation to the telecom sector, the properties of the petitioner under the 1958 Act are to be taxed as industrial properties.

7. There is another point in this context that requires to be noted, and that is the distinction between the two words, "industry" and "industrial". "Industry" is a "industrial" is an adjective. Everything that an "industry" (or a member thereof) does is not necessarily "industrial". To take a simple example (and one which we put to learned counsel for the petitioner at the hearing): suppose that the petitioner were to purchase a residential property, to be used as a residence for its area general manager. Would such a property be liable to property tax as an "industrial" property simply because it is owned and used by the petitioner, a member of the telecom "industry"? The answer to this question is obviously in the negative. The submission made on the basis of the federal notification tends to obliterate the distinction between "industry" and "industrial", which in our view, is real and substantial in the present context. We therefore, find no merit in the main submission made by learned counsel for the petitioner. However, the matter does not end here, since in our view, the important (and indeed, crucial) question, namely the proper legal basis of interpreting and applying a notification under Section 5A, still remains to be addressed.

8. Before turning to address this question, two other aspects must first be considered, One relates to the Arabian Sea Enterprises case. For reasons that will presently become clear, it is necessary to note also the other grounds on which the learned Division Bench was pleased to dismiss the hotels' petitions. The learned Division Bench observed that earlier, the hotels had themselves declared their properties as. "commercial" during some general survey that had been carried out under the Act. In this context, it was also noted that at least in some of the cases, the hotels had, after the issuance of the notification, sought to have their properties reclassified as "industrial", and for this purpose had taken recourse to statutory remedies under the Act. However, while those remedies were still being availed, the petitions had also been filed. The learned Division Bench held (relying on Al-Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29) that this was impermissible, and that the petitions of the hotels concerned were liable to be dismissed on this ground as well. Secondly, reference must also be made to the decision of the Supreme Court in Tures Hotel, Islamabad and others v. Capital Development Authority and others 2006 SCMR 1738, which was relied on by learned A.A.G., but which learned counsel for the petitioner sought to distinguish. In this regard, learned counsel for the petitioner submitted that the Tures Hotel case arose under the Capital Development Authority Ordinance, 1960 ("1960 Ordinance"). That law (which is a federal law applicable to Islamabad) itself allowed for the levy of property tax, and in terms thereof, and for purposes of levying property tax, the Islamabad Capital Territory (Imposition of Taxes) Rules, 1981 and certain regulations had been promulgated. Learned counsel submitted that in the scheme envisaged under the 1960 Ordinance, properties in Islamabad were classified in the three familiar categories of residential, commercial and industrial, but (crucially for present purposes) hotels were expressly placed in the commercial category. It was on this basis that the Supreme Court held that hotels in Islamabad were to be classified as commercial properties, and brought to tax accordingly. We find force in the submissions made by learned counsel for the petitioner. The question raised in this petition did not arise before the Supreme Court, and therefore, with respect, the reliance that learned A.A.-G. sought to place on the Tures Hotel case is misconceived. We may however, note that it was also argued before the Supreme Court that since hotels had been declared to be an industry by the Federal Government, their properties were liable to be taxed accordingly. This submission was repelled by the Supreme Court (at pg. 1743), and it was observed as under:

"On the other hand it is also evident that no statutory enactment has been made in the CDA, rules whereby hotels/motels situated in the jurisdiction of CDA, have been included in the term" "industry", "industrial" or "institution", as such appellants cannot claim such relief. The appellants were allotted commercial plots for the construction of hotels. The orders or notifications issued by Federal Government under other laws declaring business of hotel as industry would not affect the nature of building or use of plot as defined in the Regulation No. 3 of CDA."

Thus, even in the context of a federal law relating to property tax, a notification or circular issued by the Federal Government granting the status of "industry" to a particular sector has been held to be ineffective. It is true that, as pointed out by learned A.A.G., when an appeal was taken to the Supreme Court from the decision of this Court in the Arabian Sea Enterprises case, the Supreme Court, while refusing leave to appeal, referred to the Tures Hotel case. (The (unreported) leave refusing order is Beach Luxury Hotel (Pvt.) Ltd. v. Province of Sindh and others, C.P. 393-K/2007, dated 21-6-2007.) However, in our view, the reference was in a somewhat different context, being related to the issue of discrimination, a question that was not raised before us by learned counsel for the petitioner in his submissions. It is to be noted further that leave to appeal was refused also on the ground that had found favour with the learned Division Bench, namely that there was an alternate efficacious remedy "already available and already availed".

9. We now turn to the notification, and a consideration of what are, in our view, the correct legal principles applicable to its proper interpretation and application. As noted above, the 1958 Act itself does not provide any direct guidance in this regard. That however, does not mean that the Provincial Government has an untrammeled discretion in the exercise of powers under Section 5A. There is, in law, no such thing as an unfettered discretion. Even if statutory powers are conferred in ostensibly unconstrained terms, the exercise of such powers must be in a structured and regulated manner. The scope and extent of the powers conferred, and the proper exercise thereof, must be determined, inter alia, by examining the scheme and policy of the relevant statute. Now the purpose for which powers have been conferred by Section 5A is to determine the "annual value" of properties; and the objective of this determination is to levy the tax under the Act. As noted above, "annual value" is one of the two elements (the other being "lands and buildings") that together constitute the charging provision of the Act. Thus, in interpreting and applying the notification, the well-known principles applicable to the charging provisions of fiscal statutes will have to kept in mind, and applied as appropriate.

10. When the notification is examined, the first thing to be noticed is that while it divides properties into the three categories of residential, commercial and industrial, it does not, except in certain cases not presently relevant, provide for a specific and detailed description of what sorts of properties fall into the different categories. This may be contrasted with the position in the regulation considered by the Supreme Court in the Tures Hotel case (see at pg. 1743), where detailed descriptions were given of commercial and business plots on the one hand, and industrial plots on the other. This lack of description was also noted in the Arabian Sea Enterprises case (at pg. 1222):

"However, neither the said Notification nor the schedule (Valuation table) annexed thereto specifies the kind of properties to be assessed under each head except the properties falling under the head of concessionary specified commercial properties'."

There are, in our view, at least three possible ways in which a particular property, which, is not expressly provided for therein, can be categorized under the notification--

(a) on the basis of how the property has been declared and/or classified, e.g., on the basis of some survey under the Act, or in terms of some town planning regulation, as applicable, or in terms of the lease relating to the property;

(b) on the basis of how the property is, in fact, being used; or

It would seem that the learned Division Bench in the Arabian Sea Enterprises case may have applied apply (a) above (see pg. 1224).

However, it did not make any definite determination on this point since, as noted above, it dismissed the petitions on the ground that statutory remedies were being availed in respect of the proper classification under the notification. In our view, the point is therefore open. In the present case, the petitioner has already availed the statutory remedies. On a consideration of the notification as a whole, in the light of the factors mentioned in Para 9 above, we are of the view that if a property is declared or classified in one category, but is in fact being used in a manner that could bring it in another category, then, unless specific provision to the contrary is made in the notification itself, the property should be placed in that category which imposes the least burden on the taxpayer. Thus, e.g., if the property was earlier declared or classified as commercial, but is in fact being used in a manner that could bring it in the industrial category, then for purposes of the notification, it should be classified in the category that imposes the least burden on the owner of the property (who is the taxpayer under the Act: see Section 3(5)). The reason why this is so is twofold. Firstly, the notification itself indicates that the determination of the "annual value" can be in terms of usage. For example, it is provided as follows:

"Properties built for residential purposes, if being used for commercial purpose, whether self-occupied or rented shall be assessed at prescribed commercial rates of that zone...."

The reference to "properties built for residential purposes" can only mean that the properties were intended to be used for residential purposes, but are in fact being put, to commercial use. Rates for commercial properties are of course, substantially higher than those for residential properties. Thus, where the intent is to determine the "annual value" on the higher side, express provision has been made in the notification. It would seem therefore that the meaning of the expressions "residential", "commercial" and "industrial" properties, as used in the notification, cannot be limited only to properties which may have been declared or classified as such (possibility (a) above). These expressions could also mean properties being used in a manner, or for purposes that come within the descriptive categories of "residential", "commercial" and "industrial", as the case may be (possibility (b) above). In our view, the proper application of the notification requires a combination of (a) and (b) (i.e., possibility (c) above), and the reason why this is so brings us to the second point. The "annual value" is part of the charging provision of a fiscal statute. Its determination is therefore subject to the fundamental rule of interpretation that where the relevant' statutory language is unclear or ambiguous, or no express provision has been made, and two reasonable interpretations are possible, then that interpretation shall be preferred which reduces the burden on the taxpayer. There is an ambiguity in the notification. The precise meanings of the expressions "residential", "commercial" and "industrial" properties are not clear. Two reasonable interpretations are possible. In our view therefore, the foregoing rule will apply in all cases for which the notification does not make any express provision. The case of the petitioner falls precisely in this category. As noted above, there is no general express description of "commercial" and/or "industrial" properties. The petitioner's properties do not come within any of the cases expressly provided for. If therefore, its properties were earlier classified or declared as "commercial", but are in fact being put to a use that could bring them within the "industrial" category, then for purposes of the notification, the properties must be placed in that category which imposes the least tax burden. It would seem that that would invariably be the "industrial" category.

11. The next question that therefore requires consideration is as to what is meant by "industrial" properties in the context of the notification, and with reference to the petitioner. As noted above, for this purpose learned counsel for the petitioner placed reliance on the decision of the Lahore High Court reported as Pakistan Telecommunication Company Ltd. v. Government of Punjab and others 2009 PTD 1602. We have carefully considered the views expressed in that case. After considering the correct meaning of "industry" and "industrial", the High Court made the following observations with regard to the petitioner in para 14:

"Looking into the above discussion, if this Court looks into the work being carried out in the building under discussion, the conclusion shall not be difficult to draw. The petitioner in this case is an Organization which is providing service in terms of telephone connections. The building is used for fixation of machinery which connects thousands of the people who are getting services from the said telephone exchange. It has connecting staff and have offices also. It is a huge and complicated network, in which, most of the employees are Engineers and Technicians. It also have some administrative staff as well which deals with preparation and receiving the bills etc. However, major portion of the staff is placed to control and take care of the machines which is the basic services provider to a number of telephone users. There cannot be any doubt that the machinery in use, its function and its maintenance up-keep and repairs, whenever required, is totally the job of artisans, technicians and other qualified Engineers etc. through the skilled staff. The building being in use for the industrial purposes, is obviously an industrial unit, fully covered within the classifications, provided by the Provincial Government and is entitled to all the benefits in terms of reduced rates etc., provided therein."

The High Court thereafter concluded its judgment in the following terms:

"Any building unit in which articles are manufactured, altered, cleaned, repaired, ornamented, finished, broken up or demolished, or in which materials are transformed; including shipbuilding, and the generation, transformation, and transmission of electricity telegraphic and telephonic installation and motive power of any kind is carried out is an `Industrial Unit'." (para 15)

12. In our view, and with the utmost respect, the Lahore High Court has perhaps put the matter too broadly. As recognized by the High Court itself, the petitioner is in the business of providing telecommunication services. Those services are provided through electromechanical and/or electronic devices (e.g., telephone exchanges). These devices may require periodic (or even constant) supervision, care, maintenance, repair or even replacement. For this purpose, trained engineers and technicians must be available, it would seem at all hours. But does the repair, care, maintenance, etc. of the devices itself amount to "industrial" activities? In Para 15, the High Court has observed that "any building unit in which articles are ... altered, cleaned, repaired ... or in which materials are transformed; including ... the generation, transformation, and transmission of electricity telegraphic and telephonic installation and motive power of any kind is carried out is an `Industrial Unit'." With respect, we cannot agree with this astonishingly broad description. For example, the mere cleaning or repairing of articles does not of itself make the activity industrial. Likewise, any building in or from which a device is transmitting electrical, telegraphic or telephonic signals cannot, for that reason alone, be held to be an "industrial unit". In our view, the High Court has (if we may say so with respect) conflated "industrial" activity with what might be called technical support. The telephonic exchanges owned and operated by the petitioner, being electromechanical and/or electronic devices, may certainly require technical support. But that does not, in and of itself, make the activities carried out in relation thereto "industrial". We appreciate that there is not necessarily a sharp or clear cut dividing line or separation between technical support and industrial activity. The former may well, in some circumstances, shade off into the latter. Nonetheless, there is a distinction between the two. Thus, industrial activity itself may require technical support. For example, the operation of a textile mill is undoubtedly industrial activity. But the machines deployed at the mill may themselves require repair, maintenance, care or even replacement, i.e., technical support, and for this purpose, the mill may employ many engineers and technicians. In our view, as presently relevant, the description of the petitioner's activities as given in Para 14 of the Lahore High Court's decision (which was reaffirmed before us by learned counsel for the petitioner) may well amount only to technical support. However, in our view, there must be some additional elements present for the technical support to amount to industrial activity. Those additional elements must be activity or action directly in relation to the petitioner's telephone exchanges (or the other devices used by it to provide telecommunications services), and must be substantially more than a mere servicing or care thereof. If so, then it may be that the petitioner does carry out industrial activities on its properties, in which case the annual value of the properties would have to be determined on the basis that they are industrial properties. If not, then the properties must be brought to tax on the basis that they are commercial properties. However, there is nothing on the record in relation to such additional activities or actions, if any.

13. In view of the foregoing, we dispose off this petition in the following terms. The petitioner shall, in respect of each property where it claims to carry out industrial activities, make an application to the Excise and Taxation Department, giving full details of its activities, and in particular, the reasons why, according to the petitioner, those activities amount to more than mere technical support (in the sense that this phrase has been used above). For this purpose, the petitioner shall, as appropriate, separately identify those activities that it considers to be technical support, and the additional elements that, according to it, when taken together with the technical support, amount to industrial activity. Of course, the matter will have to be examined in its totality. The concerned authority shall give an opportunity of hearing to the petitioner, and if the authority is referring to, or relying on, any expert or technical advice or assistance, the report of such expert shall also be made, available to the petitioner for comment. The authority shall then pass a reasoned order separately for each property in respect of which a claim as above is being made by the petitioner. The order must be in conformity with this judgment, and in particular, the parameters and guidelines set forth in Paras 10 and 12 herein above, and the reasons must show that there has been a proper application of mind by the adjudicating authority in this regard. The entire exercise shall be completed within 60 days from the date of announcement of this judgment, and the petitioner shall, if aggrieved by the order(s), have the right to avail such statutory remedies as may be available. The authorities exercising appellate and/or revisional jurisdiction must also ensure proper compliance with the terms of this decision and in particular, Paras 10 and 12 hereof. Furthermore, to ensure that there are no procedural or other issues or difficulties, the impugned departmental orders currently in the field, being the appellate and revisional orders dated 24-1-2007 and 16-11-2007, are set aside and quashed. Finally, and by way of interim arrangement, the petitioner may make payment of the property tax at the rates applicable to industrial properties, but must give a bank guarantee (or guarantees) acceptable to the Nazir of this Court for the differential amount(s). The said guarantee(s) must be kept alive till such time .as the order(s) as above are made and/or any statutory remedies against the same are availed or the period thereof stands exhausted. The guarantee(s) may thereafter be encashed should the relevant order (whether original, appellate or revisional) be against the petitioner. The petition stands disposed off in the above terms, without any order as to costs.

(R.A.) Order accordingly

PLJ 2012 Tax Cases (Kar.) 83 (DB)

Present : Faisal Arab and Nadeem Akhtar, JJ

Messrs FAUJI OIL TERMINAL AND DISTRIBUTION COMPANY LTD. through General Manager--Petitioner

versus

PAKISTAN through Secretary, Revenue Division, Islamabad and 2 others--Respondents

C.P. Nos.D-1707 to D-1711 of 2012, decided on 28.5.2012.

Sales Tax Act, 1990 (VII of 1990)--

----Ss. 11, 26, 34 & 36(1)--Constitution of Pakistan, 1973, Art. 199(4-A)--Constitutional petition--Outstanding amounts, recovery of--Recovery was stayed by Appellate Court subject to depositing of 25% amount of defaulted amount--Issuance of notice by tax authority demanding such amounts from taxpayer due to expiry of six months after passing such stay order--Validity--Authority had issued impugned notice when appeal was still pending before Tribunal for passing final decision and such stay order was operative--Provisions of Art. 199(4-A) of Constitution of Pakistan would apply to a stay order passed by High Court in revenue matters, but not to an stay order passed by any other forum, Tribunal or sub-ordinate court--Authority had no power or jurisdiction to evaluate validity of stay order granted by a higher authority i.e. Appellate Tribunal--Authority was not justified to the impugned notice before decision of taxpayer's appeal by Tribunal or seeking recall of such stay order from Tribunal--Petition accepted. [Pp. 93, 95 & 96] A, B, C, F, G, H & I

2006 PTD 2207; 2002 PTD 403; 2009 PTD 1828; 2002 PTD 1616; 2006 PTD 332; 2006 PTD 2721; 2006 PTD 535; 2005 PTD 1368; 2003 PTD 1746; 2009 PTD 1220; PLD 1961 (W.P.) Lah. 78; PLD 1961 SC 237; PLD 1977 SC 397; PLD 1999 SC 880 and PLD 2005 SC 719 ref.

1999 PTD 1892 and 2002 PTD 403 rel.

Taxation--

----Outstanding or defaulted amounts, recovery of--Stay order passed by an authority/forum higher than revenue collecting authorities-- Exercise of powers by such authorities to recover such amounts-- Scope--Such authorities could not evaluate validity of such stay order--Purpose of establishing such authorities would be for betterment of society in order to improve economic growth of country through recovery of such amounts by due process of law and not to pressurize, harass or suffocate taxpayers doing business and paying taxes to improve dilapidated economy of the country--Such authorities must exercise powers within their limits and in accordance with law, but must not indulge in aggressive practice, which would create chaos in country--Reference by such authorities to speeches of Judges of superior courts for purposes of effecting such recovery might cause embarrassment to such courts and their Judges. [P. 94] D & E

2002 PTD 403 rel.

Barrister Dr. Muhammad Farogh Naseem, Advocate for Petitioner.

Mr. Siddique Mirza, Advocate for Respondents.

Date of hearing : 28.5.2012.

Judgment

Nadeem Akhtar, J.--All the above mentioned five petitions were allowed by the following common short order announced by us on 28-5-2012:

"For the reasons to be recorded later on, this petition is allowed to the extent that recovery proceedings shall not be carried out against the petitioner until the Tribunal, which is seized of the matter, delivers judgment. We further direct the Tribunal to decide the said case that was reserved for judgment on 17-2-2012, by 15-6-2012. A copy of this order be dispatched to the Tribunal."

Since facts of all these petitions and the questions of law involved therein are common, we deem it proper and convenient to pass this common judgment in respect of all these five petitions.

2. Facts of these cases are that the petitioner, which is an unlisted public company, is a registered Terminal Operator and is engaged in the business of maintaining, handling and unloading of bulk cargo oil from ships. It is the case of the petitioner that such business is being carried out by the petitioner under an agreement dated 8-12-1992 between the petitioner and Port Qasim Authority. The petitioner received the following show-cause notices all dated 13-5-2011 from the Respondent No. 3 calling upon the petitioner to show-cause as to why the amount of Sales Tax mentioned therein along with default surcharge should not be recovered from the petitioner under Sections 11, 34 & 36(1) of the Sales Tax Act, 1990, besides penal action against the petitioner under Section 33 of the said Act :--

Const. Petition No. Period Amount in Rs.

C.P. No. D-1707/2012 July 2005 to June 2006 93,722,718.00

C.P. No. D-1708/2012 July 2006 to June 2007 92,610,548.00

C.P. No. D-1709/2012 July 2007 to June 2008 118,264,843.00

C.P. No. D-1710/2012 July 2008 to June 2009 153,420,330.00

C.P. No. D-1711/2012 July 2009 to June 2010 151,814,336.00

3. Hearings in respect of the above mentioned show case notices took place wherein the petitioner strongly opposed the said show cause notices. However by the following Orders in Original passed by the Deputy Commissioner, IR-II (Zone-II), Large Taxpayers' Unit, Federal Board of Revenue, Karachi, petitioner's objections were rejected and the petitioner was directed to pay the following amounts along with default surcharge:--

Constitution Petition Number of Order-in-

No. Original and Date Amount

C.P. No.D-1707 2012 05/2011 - 25-5-2011 Rs. 45,000,000.00

C.P. No.D-1708/2012 04/2011 - 25-5-2011 Rs. 45,000,000.00

C.P. No.D-1709/2012 03/2011 - 25-5-2011 Rs. 58,500,000.00

C.P. No.D-1710/2012 02/2011 - 16-5-2011 Rs.153,420,330.00

C.P. No.D-1711 /2012 01/2011 - 16-5-2011 Rs.160,664,831.00

4. Against all the above mentioned orders-in-original, the petitioner filed separate First Appeals before the Commissioner Inland Revenue (Appeal-I). The petitioner also filed applications in all the said appeals for stay of demands which were allowed subject to deposit of 50% of the impugned demands. Being still aggrieved, the said stay orders were challenged by the petitioner before the Appellate Tribunal Inland Revenue (Pakistan) Karachi, who by orders dated 2-7-2011, modified the stay orders by reducing the amounts to be deposited by the petitioner from 50% to 25%. In compliance of the orders of the Appellate Tribunal, 25% amounts of the impugned demands was duly deposited by the petitioner.

5. By separate orders dated 20-8-2011 passed in the appeals filed by the petitioner, the Commissioner Inland Revenue rejected the appeals filed by the petitioner and upheld the orders-in-original. All the said orders were then challenged by the petitioner by filing separate appeals before the Appellate Tribunal Inland Revenue, Karachi. In the said appeals, the petitioner also filed stay applications for grant of stay of the impugned demands and default surcharge till the decision by the Appellate Tribunal of petitioner's appeals against the orders-in-original. By orders dated 12-10-2011 passed on petitioner's stay applications, stay was granted to the petitioner by the Appellate Tribunal.

6. In the meantime, all the appeals filed by the petitioner were heard at length by the Appellate Tribunal and were then reserved for final order on 12-2-2012. Thereafter the petitioner received recovery notices dated 26-4-2012, 2-5-2012 and 3-5-2012 from Respondent No. 3, namely, Deputy Commissioner Inland Revenue, calling upon the petitioner to pay the principal amounts of sales tax and default surcharge thereon as specified in the said recovery notices. The said recovery notices were responded to by the petitioner, but the respondents kept on pressing the petitioner to deposit the impugned demands on the grounds that the interim stay order granted by the Appellate Tribunal has expired under Article 199(4-A) of the Constitution of Pakistan, and that the Hon'ble Chief Justice of Pakistan while addressing the session of International Judicial Conference was pleased to observe that since the interim order ceases to have effect on expiration of a period of six months from the date of passing of the order, the concerned authorities will be within their rights, after passage of six months, to seek enforcement of the judgment/order against which any such interim order is passed. The above mentioned recovery notices have been impugned in these petitions with the prayer that the same may be declared to be completely without jurisdiction, void ab initio and of no legal effect, and that the petitioner is not liable to pay the impugned demands.

7. Dr. Muhammad Farogh Naseem, learned counsel for the petitioner, contended that the appeals filed by the petitioner were finally heard and reserved by the Appellate Tribunal on 12-2-2012 and since then the same are at the stage of announcement of orders. He contended that the petitioner is not responsible for the delay caused in passing and announcement of orders by the Appellate Tribunal, as the petitioner never tried to delay the proceedings before the Appellate Tribunal. According to the learned counsel the petitioner not only fulfilled its duty by concluding hearing of the appeals diligently before the Appellate Tribunal on 12-2-2012, but has also deposited 25% amount of the impugned demands as directed by the Appellate Tribunal. He specifically invited our attention to the stay granted by the Appellate Tribunal on 12-10-2011 on the applications filed by the petitioner wherein the petitioner had prayed that the impugned demands and default surcharge thereon should be stayed till decision of appeals by the Appellate Tribunal. The learned counsel also submitted that the petitioner cannot be held responsible in any manner for the delay in passing and announcing of orders by the Appellate Tribunal. He very strongly asserted that all the impugned recovery notices are mala fide, uncalled for and absolutely unjustified in view of his above submissions. In support of his submissions, Dr. Muhammad Farogh Naseem cited and relied upon the following reported cases:--

(i) 2006 PTD 2207 (Division Bench - Sindh High Court) Karachi Shipyard and Engineering Works Ltd. Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi, and 2 others.

(ii) 2002 PTD 403 (Division Bench - Sindh High Court) Messrs EVICRETE Limited through Chairman v. Customs Central Excise and Sales Tax Appellate Tribunal (Karachi Bench) and others.

(iii) 2009 PTD 1828 (Single Bench - Lahore High Court) SS Talleries through Proprietor v. Assistant Collector (Audit and Enforcement Division-II), Lahore and 2 others.

(iv) 2002 PTD 1616 (Single Bench - Lahore High Court) Adeel Hosiery Dyeing through Proprietor Muhammad Rasheed, Faisalabad v. Assistant Collector, Collectorate of Sales Tax, Faislalabad and another.

(v) 2006 PTD 332 (Single Bench - Lahore High Court) Messrs Wak Ltd. through Chief Executive v. Federation of Pakistan through Ministry of Finance, Islamabad and 5 others.

(vi) 2006 PTD 2721 (Single Bench - Lahore High Court) SS Talleries through Proprietor v. Assistant Collector (Audit and Enforcement Division-II), Sales Tax and Federal Excise and 2 others.

(vii) 2006 PTD 535 (Single Bench - Lahore High Court) Sun-Rise Bottling Company (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan and 4 others.

(viii) 2005 PTD 1368 (Single Bench - Lahore High Court) Messrs Pearl Continental Hotel, Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another.

(ix) 2003 PTD 1746 (Single Bench - Lahore High Court) Z N Exporters (Pvt.) Ltd. v. Collector of Sales Tax.

(x) 2009 PTP 1220 (Single Bench - Lahore High Court) Messrs Dawood Textile Printing Industries (Pvt.) Ltd. Faisalabad through Chief Executive v. Federation of Pakistan through Secretary, Revenue Division, F.B.R. and 4 others.

8. Facts of all the above mentioned cases cited and relied upon by Dr. Muhammad Farogh Naseem and the principles laid down therein are almost common. In all the said cases, appeals before the Appellate Tribunal were either pending or were lying reserved for orders, and interim orders staying the impugned demands were operating in the said appeals. Despite such interim stay orders, the concerned authorities had issued recovery/demand notices on the ground that interim orders passed by the Appellate Tribunal stood vacated upon expiration of six months. All such impugned demands were challenged by the assesses in the constitutional jurisdiction of this Court and Lahore High Court in the above mentioned cases, wherein more or less similar orders were passed by holding inter alia: --

. Where appeal was pending and could not be taken up for hearing because of non-availability of Member in the Tribunal, the Department would not take any adverse action against the assessee on the basis of impugned order and recovery notice till appeal of the assessee was taken up for hearing by the Tribunal;

. Where the Appellate Tribunal grants interim relief, it is incumbent upon the Tribunal to dispose of that appeal within statutory period of six months in order to safeguard the interest of both the assessee as well as the Revenue. The Appellate Tribunal was directed by the High Court to dispose of pending appeal of assessee at the earliest but not later than three months with the directions not to take coercive mode of recovery against the assessee;

. During pendency of appeal and for effectiveness of right to maintain the appeal, the assessee was entitled to protection against coercive measures for effective dispensation of justice and law in absence of any efficacious remedy, and that the assessee could make an application before the Appellate Tribunal for early hearing of appeal. But in the meanwhile authorities were restrained by the High Court from adopting any coercive, measure against the assessee for recovery of the amount under appeal ;

. Access to justice was fundamental right and essential feature of such right was determination of any grievance or dispute by an independent tribunal. Grievance of the assessee was that the authorities were not entitled to recover the tax liability on account of the fact that interim injunction already granted by the Appellate Tribunal had expired with lapse of six months pursuant to Section 46(4) of the Sales Tax Act, 1990. By allowing the petition, High Court directed the authorities not to press for recovery of dues from the assessee, and also directed the Appellate Tribunal to endeavour for deciding the appeal of the assessee within a period of three months, and during such period authorities were restrained from pressing order for recovery of disputed dues through coercive measures ;

. Appeal filed by the assessee had already been heard by the Tribunal, but the judgment was awaited and despite the fact that the Tribunal had reserved its judgment, the Revenue was bent upon enforcing the recovery which was the subject matter of appeal before the Tribunal. High Court allowed the prayer for interim relief till the decision of the appeal by the Tribunal and directed the Tribunal to decide the appeal within fifteen days. It, was further ordered that till the decision of the appeal no coercive modes of recovery shall be enforced against the assessee, and in case any order enforcing the recovery had already been issued, the same shall forthwith cease to have effect for the aforesaid period; and

. Appellate Tribunal stayed recovery of amounts impugned in appeal by the assessee, which interim order ceased to remain effective after expiration of six months. The Tribunal was not in a position to extend the same because of the express provisions of Section 46(3) of the Sales Tax Act, 1990. Therefore, remedy before Appellate Tribunal was no longer available to the assessee so far as interim relief was concerned. High Court accepted constitutional petition and stayed recovery of amounts during pendency of assesses appeal before the Appellate Tribunal subject to provisions of Article 199 of the Constitution.

9. Learned counsel for the petitioner further submitted that the above referred speech of the Hon'ble Chief Justice of Pakistan cannot be made the basis or ground for issuing recovery notices to the petitioner. In this context, he relied upon the case of The State v. Sir Edward Snelson K.B.E., Secretary to Government of Pakistan, Ministry of Law, decided by a learned Full Bench and reported as PLD 1961 (W.P.) Lahore 78. It was held in the aforesaid case by the learned Full Bench as under:-

"Again, when Mr. Ghias Muhammad wanted to refer to a speech made by an ex-Chief Justice of Pakistan and to two made by the present Chief Justice of West Pakistan, I pointed out to him that as those speeches had not been the subject of decision by any Court, a reference to them was entirely irrelevant for the present proceedings, and he came out with a reply that he had been instructed by the Central Government to refer to those speeches during the course of his arguments."

(`E', Paragraph 9 at Page 91).

We may point out here that the decision of the aforementioned Full Bench case relied upon by Dr. Muhammad Farogh Naseem was upheld by a larger bench of the Hon'ble Supreme Court comprising of five Hon'ble judges in the cases of (1) Sir Edward Snelson K.B.E., Secretary to Government of Pakistan, Ministry of Law v. The Judges of the High Court of West Pakistan, Lahore, and the Central Government of Pakistan, and (2) The Government of Pakistan v. The Judges of the High Court of West Pakistan, Lahore, and Sir Edward Snelson K.B.E., Secretary to Government of Pakistan, Ministry of Law, reported as PLD 1961 Supreme Court 237.

10. In reply to the above submissions made on behalf of the petitioner, Mr. Siddique Mirza, learned counsel for Respondents 2 and 3, defended the impugned recovery notices by emphasizing on Clause (4-A) of Article 199 of the Constitution of Islamic Republic of Pakistan, 1973. According to him, the above referred Clause (4-A) of Article 199 specifically provides that an interim order passed on an application to question the validity or legal effect of any order made, proceeding taken or act done by any authority or person, which has been made, taken or done or purports to have been made, taken or done under any law, or is connected with State property or assessment or collection of public revenues, ceases to have effect upon expiration of a period of six months from the date of such order. Learned counsel also submitted that because of the word "shall" used in this Clause (4-A), the provisions thereof are mandatory in nature. Mr. Mirza contended that, since the recovery notices have been issued to the petitioner admittedly after more than six months of passing of the interim stay order by the Appellate Tribunal, Respondents 2 and 3 were fully justified in issuing such notices to the petitioner. He prayed for dismissal of all these petitions by asserting that the petitioners are liable to pay the impugned demands. In support of his contentions, Mr. Mirza relied upon the following reported cases:-

(i) PLD 1977 SC 397 (Larger Bench of five Hon'ble Judges) Federation of Pakistan through the Secretary, Ministry of Finance, Government of Pakistan, Islamabad, and others v. United Sugar Mills Ltd. Karachi.

Learned counsel for Respondents 2 and 3 specifically relied upon the portion marked as `C' at Pages 406 and 407 of the above referred authority, wherein it was held that the underlying intendment of inserting Clause (4-A) in Article 199 of the Constitution was to put an end to gross abuse of the process of the Court by which enormous sums of money recoverable by the State as taxes are held in abeyance for indefinite period as a result of stay orders.

(ii) PLD 1999 SC 880 (Full Bench)

Zahur Textile Mills Ltd. v. Federation of Pakistan and others.

In the, above referred authority also, it was held that interim orders passed by a High Court stand expired on expiration of six months by operation of the Constitutional provision.

11. In his rebuttal, Dr. Muhammad Farogh Naseem submitted at the very outset that the above authorities cited by the learned counsel for Respondents 2 and 3 are not applicable in these petitions for the simple reason that Clause (4-A) of Article 199 is applicable only to an interim order passed by a High Court and not by any other Court, tribunal or other forum. He further submitted that interim stay orders in these matters were passed in favour of the petitioner by the Appellate Tribunal and not by a High Court, therefore, reliance on Clause (4-A) by Respondents 2 and 3 is misconceived and unjustified. In view of the above submissions, the impugned recovery notices are misconceived, baseless, and of no legal effect according to the learned counsel.

12. Dr. Muhammad Farogh Naseem further submitted without prejudice and in addition to his above submissions, that the petitioner challenges the contention of the respondents that an interim injunction order ceases to have effect after expiration of six months from the date of such order. Learned counsel submitted that through the seventeenth amendment in the Constitution of the Islamic Republic of Pakistan, 1973, several new provisions were introduced, and by one of such new provisions, the clog on the power of the High Court not to pass an interim order for a period of more than six months was removed. In support of this submission, he relied upon the case of a larger bench comprising of five Hon'ble Judges of the Supreme Court of Pakistan, namely, Pakistan Lawyers Forum and others v. Federation of Pakistan and others, reported as PLD 2005 Supreme Court 719 (relevant portion: Paragraph 36 at Pages 755 and 756).

13. From the facts on record and the submissions made before us, following admitted position has emerged: --

All the appeals filed by the petitioner were heard and reserved for orders by the Appellate Tribunal on 12-2-2012;

Final order/decision had not been announced by the Appellate Tribunal till the issuance of the impugned recovery notices ;

Stay was granted by the Appellate Tribunal on applications filed by the petitioner containing specific prayer that the impugned demands and the amounts of default surcharge thereon may be stayed till decision of petitioner's appeals before the Appellate Tribunal ;

Stay granted by the Appellate Tribunal on petitioner's applications was in the field when the appeals were heard and reserved, and was still operating when the impugned recovery notices were issued;

The said stay orders were not varied, modified, recalled or vacated by the Appellate Tribunal till the time when the appeals were heard and reserved, or till the time when the impugned recovery notices were issued ; and

The petitioner had deposited 25% amount of the impugned demands, which was the prerequisite for grant of the first stay order.

14. In view of the above mentioned admitted position and the law cited by Dr. Muhammad Farogh Naseem, we are inclined to agree with him that the authorities should have refrained themselves from issuing the impugned recovery notices especially when they were fully aware of the above mentioned admitted position. After examining all the three recovery notices impugned in these petitions, we have observed the following with grave concern:--

(i) Recovery notices dated 26-4-2012.--In this impugned notice, the Respondent No. 3 had mentioned/admitted that stay was granted to the petitioner till the decision of its appeals. Yet the Respondent No. 3 Deputy Commissioner Inland Revenue, who is subordinate to the Appellate Tribunal, stated in this impugned notice that the Appellate Tribunal can provide stay for a maximum period of six months and lapse thereof can entail recovery proceedings.

(ii) Recovery notices dated 2-5-2012.--In this second impugned notice, the Respondent No. 3 Deputy Commissioner Inland Revenue/subordinate authority once again asserted that the stay granted by the higher authority/the Appellate Tribunal on 12-10-2011 had expired on 12-4-2012 after passage of six months.

(iii) Recovery notices dated 3-5-2012.--This third impugned notice was issued by the Respondent No. 3 Deputy Commissioner Inland Revenue/subordinate authority in an evasive manner without referring to petitioner's appeals heard and reserved by the higher authority/Appellate Tribunal and the stay granted therein to the petitioner.

15. We appreciate that different revenue authorities have been established under special laws in order to expedite recovery of outstanding or defaulted amounts. It is indeed the jurisdiction, function and power of such authorities to exercise their respective jurisdiction, functions and powers, but such exercise must be undertaken by the authorities cautiously, within their limits and strictly in accordance with law. In these matters, we have noted with concern that the authorities have exceeded their jurisdiction, power and authority by evaluating and interpreting the stay granted by an authority higher to them, namely, the Appellate Tribunal. The purpose of establishing revenue collecting authorities is for the betterment of the society in order to improve the economic growth of our country through recovery by due process of law, and not to pressurize, harass or suffocate taxpayers / assesses who are doing businesses and paying taxes to improve the dilapidating economy of our country. The authorities must not indulge into such aggressive practice, as has been done in these cases, by coercing taxpayers/assesses and by unnecessarily referring to speeches of Hon'ble judges of superior Courts. Such irresponsible conduct on the part of the authorities is bound to create chaos in our country and may also cause embarrassment to our superior Courts and to their Hon'ble judges.

16. We are of the clear opinion that the respondents had no power, authority or jurisdiction to evaluate the validity of the stay order which was granted by their higher authority, namely, the Appellate Tribunal. In this context, we would like to refer to a Full Bench case of the Hon'ble Supreme Court reported as 1999 PTD 1892, Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others, wherein it was held that where the action involves fiscal rights on the allegations of misapplication of law or abuse of power, the Superior Court can step in to examine whether or not the public functionary concerned acted in accordance with the power conferred on him by the statue. We, therefore, hold that all the impugned recovery notices are without jurisdiction and of no legal effect.

17. It is a well established principle of law that relief granted by a Court should be examined and interpreted in the context of the prayer made by the applicant. In these cases, petitioner's prayer in the stay applications was as under:--

"In the afore-said circumstances, the applicant requests the honourable Tribunal for grant of stay of entire demand of ......... million along with the amount of default surcharge [as to be calculated till the date of final payment] in respect of the tax periods from ........ till decision of Hon'ble Appellate Tribunal in the appeal filed by the appellant against the order-in-appeal."

Following order was passed by the Appellate Tribunal on 12-10-2011 on petitioner's stay applications containing the above quoted prayers:--

"Stay granted. Let the case be fixed for 22-10-2011 before an appropriate bench."

The above order granting stay to the petitioner was passed without any condition, and it was not mentioned therein that the said stay was being granted till the next date of hearing or till a particular date. We have already, observed above that admittedly the stay order had not been varied, modified, recalled or vacated by the Appellate Tribunal till the time when the appeals were heard and reserved or till the time when the impugned recovery notices were issued. It is, therefore, held that the stay was granted by the Appellate Tribunal till decision of petitioner's appeals and that there was no justification of issuing impugned recovery notices by the respondents to the petitioner before decision of appeals by the Appellate Tribunal or seeking recall of the stay order from the Tribunal.

18. With respect to the learned counsel for the respondents, we are unable to convince ourselves to agree with him that by virtue of Clause (4-A) of Article 199 of the Constitution, the stay granted to the petitioner stood vacated upon expiration of six months. In our opinion, the language of the said Clause (4-A) is clear and unambiguous which can be ascertained even by a bare reading as the words "An interim order made by a High Court" have been specifically used therein. The words "High Court" would not have been used in the said Clause (4-A) by the law makers if this Clause was to be applied also in respect of orders passed by any other forum, tribunal or subordinate Court other than a High Court. Our above view is fortified by the decision of a learned Division Bench of this Court in the case of Messrs EVICRETE Limited through Chairman v. Customs Central Excise and Sales Tax Appellate Tribunal (Karachi Bench) and others, 2002 PTD 403, wherein it was held by the learned Division Bench of this Court that Constitutional provision contained in Article 199(4-A) is only attracted when an interim order is passed by the High Court in its jurisdiction under Article 199 inter alia in revenue matters and has no application to the interim orders by any other forum. While rejecting this objection raised by the respondents, we follow the judgment delivered by the learned Division Bench of this Court in 2002 PTD 403 (supra) and hold that the provision contained in Article 199(4-A) is only attracted when an interim order is passed by the High Court in its jurisdiction under Article 199 inter alia in revenue matters, and that Article 199(4-A) of the Constitution of the Islamic Republic of Pakistan, 1973, has no application to the interim orders by any other forum.

19. In view of the above discussion, all these five petitions are allowed and the three recovery notices-impugned herein are declared as without jurisdiction and of no legal effect. The Appellate Tribunal shall decide all these cases expeditiously as per the directions contained in the short order announced by us on 28-5-2012.

(R.A) Petition accepted.