PTD 2017 Judgments

2017 P T D (Trib.) 141

[Customs Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Messrs HERO TEA AND FOOD COMPANY, RAMPURA GATE, PESHAWAR

Versus

COLLECTOR CUSTOMS (APPEALS), PESHAWAR and 2 others

Cus. 364/PB of 2010, decided on 12th December, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 26, 156, 157, 193 & 194-A---Import and Export (Control) Act (XXXIX of 1950), S.3---Seizure and confiscation of goods---Truck carrying foreign goods (black tea), was intercepted---Occupants/driver and cleaner, of the truck having failed to produce any proof with regard to legal import/lawful possession of goods so recovered, goods along with truck was seized under Ss.2(s), 16 & 157 of the Customs Act, 1969, read with S.3(1) of the Import and Export (Control) Act, 1950---Adjudicating Authority vide order-in-original outrightly confiscated the goods, but vehicle was released on payment of 20% redemption fine in addition to payment of customs duty and taxes leviable thereon---Appellate Authority also imposed a personal penalty on the driver and conductor of the truck, and maintained rest of the impugned order-in-original---Appellant/owner of goods in question had filed goods declaration, paid relevant duty and taxes at import stage and goods had been cleared by the Customs Authorities---Appellant at supply stage had paid output tax---Seized/confiscated black tea, which was imported one, was packed in packing; each and every packing carried the name of importer, along with address and phone number---Transportation Bills, also showed the name of company---Seizing Officer despite all that, neither gave notice under S.26 of Customs Act, 1969, nor summoned the owner of the goods to join the investigation and produced the required documents; though seizing officer was bound to give said notice---Seizure made by the seizing officer, was illegal and without lawful authority, in circumstances---Seizure could not be made on mere suspicion; and no seizure was to be made without adequate material---Where adequate documents were not found with the consignment, but were claimed to be available, it should have been more appropriate to detain the consignment under S.17 of Customs Act, 1969; and issue notice under S.26 of the Customs Act, 1969 for furnishing the documents within 7 days, instead of making an outright seizure---Before making the seizure detecting agency was required to verify the documents from the concerned quarters; and also to check the purchase, stock and supply register of registered person or company---When the import of goods into the country for home consumption was issued a sales tax invoice in respect of said goods, provisions of Customs Act, 1969 were not applicable---Appellate Authority, had found that Goods Declaration produced by appellant, was nothing, but an afterthought---Said finding could not be accepted, because the goods declaration had been produced well within time at the adjudicating stage---Goods Declaration, could not be an afterthought---Goods (black tea) seized and confiscated in the case having been legally imported by the appellant, both order-in-original and order-in-appeal, were set aside, with direction that confiscated black tea be released unconditionally to its lawful owner.

2002 PTD (Trib.) 1455 ref.

Atiqur Rehman and Pir Alam Shah, Consultant Mufti Law Associates for Appellants.

Naseer Khan, Superintendent Customs for Respondents.

2017 P T D (Trib.) 221

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs NUZZER PHARMACUTICAL AND NUTRITIONS

Versus

DEPUTY COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-1313 of 2015, decided on 28th June, 2016.

(a) Customs Act (IV of 1969)---

----S. 25-A---Valuation Ruling---Scope---Validity of Valuation Ruling, issued by the Director, Directorate General Valuation under the provisions of S.25-A of the Customs Act, 1969, was only for 90 days.

(b) Customs Act (IV of 1969)---

----S. 81---Provisional assessment duty---Clearance of goods---Effect---When Customs Officer would allow clearance under S.81 of the Customs Act, 1969, it was mandatory for him to secure the difference of duty and taxes, between the declared and ascertained description/PCT, and value in the shape of pay order; or bank guarantee.

Messrs Reckitt Benckiser Pakistan v. Federation of Pakistan 2009 PTD 642 and Messrs P.M. International, Karachi v. Federation of Pakistan and 3 others 2010 PTD 1293 rel.

(c) Customs Act (IV of 1969)---

----Ss. 80 & 81---Re-assessment---Gate out of goods---Effect---Subordinate of Deputy Collector of Customs, after gate out of the consignment, took up the Goods Declaration, and re-assessed the same and recovery was created in isolation, without following the mandated requirement of law of issuance of show-cause notice and for pressurizing importer for payment of said amount, despite illegal, and not payable under law---Once the goods were gate out/out of the Customs, Officers of Customs would become functus officio---Plea of the importer that the Valuation Ruling, was not applied at the time of passing assessment order, was also without any substance, and legal effect, because, if the Valuation Ruling, was not applied at the time of passing assessment order, that could not be applied subsequently, when the goods were out of the charge, and not in custody of customs---Orders passed by Customs Authorities, were declared to be illegal, null and void and were set aside.

Messrs Paramount International (Pvt.) Ltd. v. FOP and others 2014 PTD 1256; Messrs Smith Kline French v. Pakistan 2004 PTD 3020; Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310; Edulji Dinshaw Ltd. v. Income Tax Officer 1990 PTD 155; Messrs Abdullah Traders, Gujranwala v. Collector of Customs (Appeal) 2015 PTD (Trib.) 1064; Messrs Sikander Enterprises v. Central Excise and Sales Tax Tribunal Karachi 2008 PTD 1968; Messrs S.T. Enterprises v. Federation of Pakistan 2009 PTD 467 and Sadia Jabbar v. FOP PTCL 2014 CL 537 ref.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Ijaz Akhter, Principal Appraiser for Respondents.

2017 PTD (Trib.) 244

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II

Messrs SUNRISE CORPORATION

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR and 3 others

Customs Appeal No.K-1333 of 2015, decided on 30th August, 2016.

Customs Act (IV of 1969)---

----Ss.32, 79, 80, 83, 158, 171, 179, 180, 186, 194-A & 156(1)(4)(45)---Customs Rules, 2001, Rr.433, 435, 438 & 442---S.R.O. No.486(I)/ 2007, dated 9-6-2007---S.R.O. No.371(I)/2002, dated 15-6-2002---Misdeclaration---Confiscation of imported goods---Consignment was imported and shipping documents were delivered to clearing agent for transmitting Goods Declaration; as per pre-requisite upfront duty and taxes were deposited, consequent to which Goods Declaration was numbered---Nominated Appraiser got the imported goods examined prior to passing assessment order---Officials posted at terminal, after physical verification of the goods confirmed the declaration and Competent Authority passed assessment order on the basis of examination report; additional amount of duty and taxes leviable thereon, were also paid; consequent to which inbuilt authority passed clearance order---Clearing agent of the importer, thereafter obtained the delivery---Directorte General of Intelligence and Investigation stopped the container on the pretext that the duty and taxes had been paid short as against actuate and put on hold on Goods Declaration and goods were detained for conducting of re-examination---Officials of Director General of intelligence and investigation seized the consignment in terms of provisions of S.168(1) of the Customs Act, 1969 after serving notice under S.171 of the Customs Act, 1969, and subsequently prepared contravention report stating that importer, had tried to obtain clearance of the goods under HS Code 7315.1190 as against the actual one--Said fact had been accepted by the importer, and he agreed to pay the differential amount of duty and taxes---Such inadvertent error on the part of the employees of the clearing agent was termed as an act of misdeclaration by the importer---Deputy Collector of Customs issued a show-cause notice to the importer and Deputy Collector, being dissatisfied with reply of the importer passed impugned order whereby imported goods were held liable to confiscation; giving option to the importer to get the goods redeem on payment of 20% redemption fine---Appeal filed by the importer against the order was rejected by Collector of Customs (Appeal)---Validity---Officials of Directorate General of Intelligence and Investigation, were not empowered to detain the consignment of the importer; as the Directorate derived powers for functioning within the territory of Pakistan under S.R.O. No.486(I)/2007, dated 9-6-2007 for thwarting the act of smuggling; which would not mean that it had unfettered powers to intercept and detain the goods cleared by the Officials of Clearance Collectorate; after completion of codal formalities and realization of the leviable duty and taxes, for delivery to the importer through his clearing agent/representative, either in the terminal or their office---Officials of Directorate could not assume powers of seizing the goods under the provisions of S.168(1) of the Customs Act, 1969, as no allegation of smuggling, had been levelled---Directorate stretched its powers beyond the allotted sphere, same were not permitted, unless enabling provisions to the said effect was available in the Customs Act, 1969 or the notification---Said unlawful act of the officials of Directorate, was an act of high handedness abuse of powers being in violation of the provisions of law, hence void ab initio and as such coram non judice---Federal Board of Revenue had not delegated powers to the Directorate under provisions of Ss.32 & 79 of the Customs Act, 1990---Exercise of jurisdiction by the Deputy Collector of Customs being without lawful authority and jurisdiction, issuance of show-cause notice and passing of order-in-original, were void ab initio and of no legal effect upon passing of assessment order under S.80 of the Customs Act, 1969 and R.438 of Customs Rules, 2001 and thereafter passing of clearance order by Competent Authority, could not be disturbed by any authority for the purpose of preparing contravention report and adjudication proceedings---Issuance of show-cause notice and passing order-in-original in the case by Deputy Collector of Customs also fell under the ambit of "double jeopardy" not permitted under Art.13 of the Constitution---Preparation of contravention report by Director General of Intelligence and Investigation and issuing of show-cause notice, order-in-original by Deputy Collector of Customs and order-in-appeal passed by Collector of Customs (Appeals) were ab initio, illegal and void and of no legal effect---Same were set aside by Appellate Tribunal, appeal was allowed with directions to Directorate General of Intelligence and Investigation to release the pay orders/post dated cheque deposited by the importer as security for obtaining delivery of the goods in compliance of the order of the Tribunal.

Case Law referred.

Nadeem Ahmed Mirza for Appellant.

Zafar Naqvi and Zia Moin, I.O, for Respondent No. 1.

Faiz Mudassir, A.O Present for the Respondent No. 2.

2017 P T D (Trib.) 390

[Customs Appellate Tribunal]

Before Ch. Muhammad Tariq, Chairman/Member Judicial and Khalid Mahmood, Member Technical-I

PORT QASIM AUTHORITY through Secretary

Versus

DIRECTOR GENERAL INTELLIGENCE AND INVESTIGATION-FBR and 3 others

Customs Appeal No.K-3134 of 2013, decided on 18th May, 2015.

Customs Act (IV of 1969)---

----S.194A---Pakistan Merchant Shipping Ordinance (LII of 2001), Preamble---S.R.O. 55(I)/2008, dated 11-6-2008---Exemption from sales tax and income tax---Import of dredger under Merchant Shipping Ordinance, 2001---Contention of importer was that dredger was exempted from Sales Tax and Income Tax in view of S.R.O. 55(I)/2008, dated 11-6-2008---Validity---All floating crafts, tugs dredgers, survey vessels and other specialized crafts purchased or chartered by Pakistani entity flying Pakistani flag were exempted from payment of sales tax vide S.R.O. 55(I)/2008, dated 11-6-2008 but in the present case, subject Dredger was not registered under Merchant Shipping Ordinance, 2001, hence, was not entitled to flying Pakistan flag without registration---Appeal was dismissed, accordingly.

Aga Faquir Mohammad for Appellant.

Tariq Aziz PA, Shahid Rizvi PA and Khurram Rafique AO for Respondents.

2017 P T D (Trib.) 453

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Khalid Mahmood, Member Technical-I

Messrs ZAMSUN STEEL INDUSTRIES

Versus

COLLECTOR OF CUSTOMS and another

Customs Appeal No. K-1300 of 2015, decided on 7th November, 2015.

Customs Act (IV of 1969)---

----Ss. 32(1)(2), 79, 181 & 194-A---Mis-declaration of description and P.C.T. heading of imported goods---Importer filed Goods Declaration declaring the goods as (i) Iron and Steel Remeltable Scrap 94,750 KG (P.C.T. heading 7204.4990) and, (ii) Iron and Steel Rollable Scrap 8,000 KG (P.C.T. heading 7204.4910) and sought clearance of the goods through his clearing agent---Consignments were examined for verification of description/P.C.T./quality/weight and other physical attributes of the goods---Shed staff reported as:- (i) Iron and Steel Remeltable Scrap (5,135 Kg) (P.C.T. 7204.4990), (ii) Iron and Steel Re-Rollable Scrap (34,400 Kg) (P.C.T. 7204.4910), and (iii) Over Size Iron and Steel Round Bar 963,215 Kg) (P.C.T. 7214.2010)---Quality of goods as mentioned at (ii) were found mis-declared; while the goods mentioned at (iii) had been found undeclared/mis-declared, within the over all total declared weight of 10,2750 KG---Importers were charged for wilfully and deliberately mis-declaring the description and P.C.T. heading of the goods to evade duty/taxes which involved a loss of Rs.32,77,647 to the exchequer---Issue was about the part of the consignment in which Iron Scrap containing bars had been found larger in size compared to the specification/definition of the waste and scrap, given in the Import Policy Order---Department's charge upon the importer, was that the over-sized bars did not meet the definition of scrap; hence not entitled to the import status of tariff treatment available to the scrap---Part of the consignment though consisted the bars exceeded the size provided for the waste and scrap in the Import Policy Order, but entire consignment was put to '1st Examination' which was a standing Policy for all kinds of scrap---Consignment was purchased and supplied by the supplier to the buyer, and supplier did not understandably take care for the size applicable to the bars (treated as scrap) in Pakistan---No essential element of misdeclaration was found on the part of importer, in circumstances---In the absence of any clear mens rea, it would be fair to give a benefit of doubt to the importer---Importer's request for mutilation/scrapping of offending bars, was reasonable and fair, in circumstances---Appellate Tribunal directed that the offending part of the consignment, be subjected to mutilation/scrapping; and duty and taxes be charged as imposed on waste/scrap of iron in the value ascertained as per customs standardized practice for the scrap---Redemption fine imposed vide impugned order-in-original, was remitted accordingly---Appeal was allowed to that extent---Delay and detention certificate, could also be issued to the importer.

Afzal Awan and Adeel Awan for Appellant.

Mubasher Hasan, A.O. for Respondent.

2017 P T D (Trib.) 481

[Customs Appellate Tribunal]

Before Chaudhary Muhammad Tariq, Chairman and Khalid Mahmood Member, Technical-I

Messrs SINGER PAKISTAN LTD.

Versus

COLLECTOR OF CUSTOMS, and 2 others

Customs Appeals Nos.K-1113 of 2014 and K-661 of 2015, decided on 26th May, 2015.

(a) Customs Act (IV of 1969)---

----S. 4---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 166---Recovery of short levied tax---Contention of Importer was that in terms of S. 148 of Income Tax Ordinance, 2001, Customs Department had power only to collect income tax on imported goods at the time of export and thereafter Commissioner Income Tax alone had power to recover short levied tax under S. 162 of Income Tax Ordinance, 2001, therefore, issuance of show-cause notice by Customs Department was beyond jurisdiction---Validity---Provision of S. 4 of Customs Act, 1969 had authorized and delegated certain powers to customs officers and at the same time imposed some restrictions---When S. 4 of Customs Act, 1969, was interpreted in light of Ss. 148(5) & 162 of Income Tax Ordinance, 2001, then no ambiguity was left that recovery of short payment of income tax was exclusive prerogative of Income Tax Commissioner----Under S. 4 of Customs Act, 1969, customs department in addition to customs duty can collect sales tax, income tax etc. only at the time of import or export, but thereafter, once that stage had passed, they had no jurisdiction to demand short levied taxes---Issuance of show-cause notice by Customs Department for short recovery of Income Tax was against the very spirit of law---Customs Department could not recover any short payment of Income Tax under S. 162 or 166 of Income Tax Ordinance, 2001, nor could invoke jurisdiction to such effect under Customs Act, 1969.

(b) Income Tax Ordinance (XLIX of 2001)---

----Preamble---Sales Tax Act (VII of 1990), Preamble---Income Tax Ordinance, 2001, and Sales Tax Act, 1990 not only provided specific procedure for collection of taxes but had also constituted forums for enforcing law---Both statutes provided independent mechanism for recovery of uncollected taxes.

(c) Customs Act (IV of 1969)---

----Ss. 194C(7) & 194C(8)---Customs Appellate Tribunal---Scope of powers---According to Ss. 194(7)-C & 194(8)-C of Customs Act, 1969, Customs Appellate Tribunal would be deemed to be a court, governed partially under Civil Procedure Code, 1908---Any proceedings before Customs Appellate Tribunal would be deemed to be judicial proceedings---Provisions of C.P.C. were also applicable to proceedings pending/decided before such forum.

Pervez Iqbal Kansi and Nasir Ahmad Malik for Appellants.

Rana Kamran - Deputy Collector, Arslan Majeed Assist. Collector Ghulam Muhammad Deputy Director, Qadeer Khan, AO, Khan Muhammad AO and Arif Maqbool Senior Auditor for Respondents.

2017 P T D (Trib.) 492

[Customs Appellate Tribunal]

Before Ghulam Murtaza Bhatti, Member (Judicial)

FAZAL AKBAR and another

Versus

STATE through Superintendent Customs

Custom Appeal No.1/LB of 2015, decided on 13th April, 2015.

Customs Act (IV of 1969)---

----Ss. 2(KK), 16, 156, 157, 168 & 194-A---Seizure and confiscation of truck loaded with goods of foreign origin, being in contravention of S.16 punishable under Cl.(90) of Ss.156 & 157 of the Customs Act, 1969---Appellant/driver of the truck, had submitted a copy of bill of entry, which matched with the goods as described in the impugned order---Department had not placed on record any material, which could show that said bill of entry was not correct or false---Claim as made by the appellant, was accepted having not been proved to be wrong by the department---Appeal filed by the appellant was accepted and the impugned order with regard to the goods was modified accordingly.

PLD 1972 SC Pages 5 to 10 ref.

Ahsan Baqar for Appellant.

Imtiaz Elahi for Respondent.

2017 P T D (Trib.) 502

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Judicial Member and Imran Tariq, Technical Member

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE

Versus

COLLECTOR OF CUSTOMS (APPEALS) and another

C.A. No.205/LB of 2011, decided on 19th May, 2016.

Customs Act (IV of 1969)---

----Ss. 25, 32, 81, 193-A(3) & 194-A---Customs value of goods---Determination--- Mis-declaration--- Remand--- Adjudicating authority finalized the provisional assessment vide Director General's valuation letter---Importer being not satisfied with the decision of adjudicating authority preferred appeal to Collector (Appeals), who set aside the order of adjudicating authority and remanded case to adjudicating authority for finalizing the value strictly in terms of S.25 of the Customs Act, 1969---Collector appeal also remanded the matter to the Adjudicating Authority---Validity---Appellant/importer in the memo of appeal pointed out amendment in S.193-A(3) of the Customs Act, 1969 which pertained to the power of remanding the appeal to the Adjudicating Authority by Collector (Appeals) having been taken away---Appeal filed by the importer was accepted by the Tribunal and valuation with direction that of goods was to be finalized keeping in view Director General valuation's letter---Appeal was accepted, in circumstances.

Imtiaz Elahi for Appellant.

Ehsan Baqir for Respondents.

2017 P T D (Trib.) 569

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs AL-FAZAL INTERNATIONAL

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others

Cus. Appeal No.K-1634 of 2015, decided on 13th July, 2016.

(a) Customs Act (IV of 1969)---

----Ss. 4, 80, 168, 171, 179, 182 & 194-A---Pakistan Plant Quarantine Rules, 1967, R.20---SRO No.371(I)/2002, dated 15-6-2001---Confiscation of imported goods---Consignment of 14986 Kgs. of Bananas was imported and on receipt of import documents, goods were delivered to Clearing Agent; who transmitted Goods Declaration with MCC of Appraisement---As per pre-condition of availing the regime of "WeBOC" upfront duty and taxes was paid---Appraiser completed the assessment, subject to clearance order from the Plant Protection Department---Importer agitated upon the condition alleging that same did not exist---Importer contended that demand of department was unlawful---Principal Appraiser issued show-cause notice to the importer but Deputy Collector of Customs, while ignoring the condition of certificate, insisted that the submission of 'RO' was mandatory and ordered the confiscation of imported goods---Appeal filed against said order was rejected by Appellate Authority---Validity---Containers of imported Bananas, were held by Deputy Collector of Customs, which squarely fell within the ambit of notional seizure and provision of S.168(1) of Customs Act, 1969 would apply with full force---Since detention, which was notional seizure had been made under S.168(1) of the Customs Act, 1969, a notice to said effect under S.171 of Customs Act, 1969 had to be mandatorily served on the person, from whose possession the goods had been seized, but no such notice had been served on the importer---Non-serving the notices, had rendered the whole proceedings as of no legal effect, hence, was void ab initio and without lawful authority/jurisdiction---No provision of the Customs Act, 1969, had been spelled out in the show-cause notice, which importer contravened---Instead a non-issue had been made an issue, on the strength of which the case could at the most be termed as non-fulfilment of condition of Import Policy Order i.e. of no revenue loss---Case, in circumstances, fell within the provisions of S.80 of the Customs Act, 1969, under which Principal Appraiser had jurisdiction in the terms of Notification No. SRO 371(I)/2002, dated 15-6-2002, and he was the only authority to adjudicate the case---Deputy Collector of Customs, on the one hand had committed grave illegally and on the other hand usurped the powers of his subordinate i.e. Principal Appraiser, which he could have only exercised under S.4 of the Customs Act---Deputy Collector of Customs had acted without lawful authority, jurisdiction and superstructure built upon by way of order-in-original and order-in-appeal were without power/jurisdiction and coram non judice---Orders by Authorities were not judicial orders; nor independent and reflected non-application of mind, and based on personal biased opinion---Impugned order smacked of mala fide, as not a single argument of the importer advanced was considered or rebutted---Impugned orders being violation of basic principles of good governance, was not only illegal and void, but also not sustainable order---Show-cause notice was vacated and impugned order was set aside---Authorities, were directed to pay the cost of goods including the refund of the paid duty and taxes, in circumstances.

Case law referred.

(b) Administration of justice---

----Principle that every judicial or quasi-judicial findings should be based on reasons containing the justification for the finding in the order itself, was an established principle of dispensation of justice.

Nadeem Ahmed Mirza for Appellant.

Asfandyar, Deputy Collector and Mubarik Shah for Respondents.

2017 P T D (Trib.) 680

[Customs Appellate Tribunal]

Before Ch. Muhammad Maqsood-ul-Hassan, Member (Judicial)

Messrs CHARMANG CORPORATION and 9 others

Versus

ADDITIONAL COLLECTOR CUSTOMS, ADJUDICATION, PESHAWAR and another

Appeals Nos. CUS-282 to 291/PB of 2015, decided on 25th November, 2015.

Customs Act (IV of 1969)---

----Ss. 32 & 156(1)(14)---Misdeclaration and misclassification of imported goods---Observations of Audit Team pointed out that "lead acid batteries" were under-valued as Valuation Ruling No. 60 dated 24-10-2013 and 2-12-2013, were not applied; besides, the item in question was also misclassified under P.C.T. Heading 8506.8000 (attracting customs duty at the rate of 10%) instead of correct classification under P.C.T. heading 8507.2090 (attracting customs duty at the rate of 20%) which resulted in short realization of customs duty---Importer allegedly had evaded duty/taxes to the tune of Rs.325730 by violating S.32(3)(3A) of the Customs Act, 1969, which were recoverable from importers/Clearing Agent, besides taking penal action against the importer under S.156(1)(14) of the Customs Act, 1969---Collector Customs (Adjudication) after issuing show-cause notice to the importers and after observing of necessary formalities, vide order-in-original, ordered the importers to deposit the short paid amount of duty/taxes, with penalty---Validity---Importers had imported 'lead acid batteries', description of which was not specifically declared in the goods declaration and other allied documents---Importers, declared quantity of the imported lead acid batteries, in Dozens instead of correct unit of measurement of the item i.e. Kgs---Non-declaration of correct measurement unit of said batteries, non-application of the valuation ruling thereon, coupled with mis-classification of the same, resulted in short payment of duty/taxes---Importers had not been able to point out any material irregularity or infirmity in the impugned order-in-original, they were liable to pay short paid amount, duty/taxes into the Government Treasury---No mens rea having been attributed to the importers in the show-cause notices, no punitive provision of Customs Act, 1969, was attracted---Personal penalty imposed on the importers, was not sustainable, which accordingly was ordered to be remitted, in circumstances.

2011 PTD (Trib.) 174 and 2005 PTD (Trib.) 135 ref.

Danish Ali Qazi for Appellants.

Muhammad Arshad, Inspector for Respondents.

2017 P T D (Trib.) 744

[Customs Appellate Tribunal]

Before Tahir Zia, Judicial Member and Muhammad Nazim Saleem, Technical Member

Messrs FATEH TEXTILE MILLS

Versus

COLLECTOR MODEL CUSTOMS COLLECTORATE, HYDERABAD

Customs Appeal No.H-2161 of 2013 (Old No. H-608 of 2012), decided on 30th April, 2016.

Customs Act (IV of 1969)---

----S. 32---Customs Rules, 2001, R.352(3)---Import of goods---Misdeclaration---Importer, imported 26 consignments of raw material to manufacture finished goods for export---Assistant Collector of Customs issued letters to the importer to provide evidence of export under manufacturing bond---Importer having failed to provide required information; it was concluded by the department that importer had not exported the goods and importer was liable to pay leviable duty and taxes thereon---Out of 26 imported consignments used in the manufacture of goods meant for export, importer had satisfied Customs authorities about export of finished goods manufactured out of 20 consignments while whereas in the case of remaining consignments, importer had not been able to produce relevant record for reconciliation; to establish that the finished goods had been exported---Stance of the importer was that he had submitted Goods Declaration wise complete record regarding all the 26 consignments to the department---Neither the department nor Adjudicating Authority had been able to specifically identify, as to which documents were not produced by the importer---Department confirmed that 20 Goods Declarations had been reconciled through on-line system; and that 6 Goods Declarations, could not be reconciled being not legible---Department, had been changing its stance regarding submission of record by the importer---Importer submitted copy of letter, along with a statement showing consumption of raw material, and export of finished goods imported under manufacturing bonded werehouses---Importer had also handed over copy of statement and 26 files to the department---On the insistence of the importer that complete record had already been provided, it was stated on part of the department that record pertaining to remaining 6 Goods Declarations, was not legible, as such reconciliation could not be done which had confirmed that the department had been changing its position regarding provisions of complete record of all 26 Goods Declaration---Impugned order-in-original, was set aside to the extent of 6 Goods Declarations---Department, was directed to undertake on-line verification/reconciliation exercise afresh pertaining to 6 Goods Declaration on the basis of documents, already provided by the importer---Importer was also directed to extend full co-operation to the department, in case it required any information/document.

Fahim Bhayo for Appellant.

Nawabzadi Aliya Khanji, Deputy Collector, Yousaf Magsi, Deputy Collector and Qazi Tousif, Inspector for Respondent.

2017 P T D (Trib.) 914

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs GOOD LUCK COSMETICS, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others

Customs Appeal No.K-970 of 2015, decided on 30th August, 2016.

(a) Customs Act (IV of 1969)---

----Ss. 2(a), 80, 83, 193, 193-A & 195---Customs Rules, 2001, Rr.438 & 442---S.R.O. No.371(I)/2001, dated 15-6-2001---Assessment of duty---Clearance for home consumption---Procedure in appeal---Powers of Federal Board of Revenue or Collector---After passing of assessment order under S.80 of the Customs Act, 1969 and under R.438 of Customs Rules, 2001 and clearance of goods under S.83 of Customs Act, 1969 and R.442 of Customs Rules, 2001 by adjudicating authority, in exercise of the powers vested upon him through S.R.O. No. 371(I)/2001, dated 15-6-2001; such order could not be disturbed by any authority for the purpose of preparing contravention report and adjudicating proceedings---Only course left for adjudicating authority, was to challenge the said order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969---Collector Customs (Appeals), was empowered to incorporate in his order all the apprehensions, misreading of facts and contraventions of the provision of Act/Rules---Collector of Customs, upon receipt of the appeal and going through the facts and grounds, if would think that the contention of the Deputy Collector of Customs, Customs Intelligent Units, seemed to be correct and the duty and taxes had not been either levied or short paid on the basis of the goods already cleared, was empowered to issue show-cause notice to the importer, as expressed in second proviso to subsection (3) of S.193-A of the Customs Act, 1969---Deputy Collector of Customs, in the present case, instead of such prescribed method, reopened the assessment/clearance order under S.195 of the Customs Act, 1969---When the right of appeal had been accorded by the legislature in the provision of S.193 of the Customs Act, 1969, provision of S.195 of the Customs Act, 1969 was not operative and could not be exercised, by the authority defined therein---Act and commission of Deputy Collector of Customs, Customs Intelligence Unit, was in derogation of Ss.193 & 195 of the Customs Act, 1969 and being of no legal effect, was coram non judice.

Case-law in referred.

(b) Customs Act (IV of 1969)---

----S. 179---Power of adjudication, exercise of---Scope---Section 179 of the Customs Act, 1969, had expressed, that power of adjudication had to be determined by authority on the basis of "amount of duty and taxes" involved excluding the conveyance---In the present case amount of duty and taxes involved were Rs.3,878,131 (Rs.597,103) were paid upfront, Rs.111,045 were paid as additional duty and taxes upon receipt of view message from adjudicating authority---Rupees 2,832,993 was shown in show-cause notice as evaded amount of duty and taxes---Case involving such amount fell within the powers of Collector of Customs---'Additional Collector, Collectorate of Customs (Adjudication)' in the present case, issued show-cause notice and passed order-in-original, while usurping the powers of his superiors, which was not permitted by law---No body was allowed to usurp the powers of defined authority in the statute---Order passed without powers/jurisdiction, was ab initio, null and void and coram non judice---Exercise of jurisdiction by an authority was mandatory requirement and its non-fulfilment would entail the entire proceedings to be coram non judice.

Case-law in referred.

(c) Customs Act (IV of 1969)---

----Ss. 2(a), 80, 83, 193 & 194-A---Customs Rules, 2001, Rr.438 & 442---Notification No.371(I)/2002, dated 15-6-2002---Assessment of duty---Deputy Collector of Customs, (Customs Intelligence Units), in Second conducted examination report, which he termed valid and examination conducted earlier, on the basis of which assessment/ clearance orders under the provisions of Ss.80 & 83 of the Customs Act, 1969 and Rr.438 & 442 of the Customs Rules, 2001 were passed by adjudicating authority, in exercise of the power vested upon him through Notification No.371(I)/2002, dated 15-6-2002, were ignored---Rationale adopted by Deputy Collector of Customs and his subordinates during the course of conduction of second report for determining the quantity differently to the first examination report, was not understandable; as nothing was available in record validating the plea of Deputy Collector of Customs---Assessment made earlier, had to remain in field, unless not reversed by the appropriate authority defined in S.193 of the Customs Act, 1969 or the authority superior to him---Assessment order in field having not been challenged before the Collector of Customs (Appeals), within stipulated period of 30 days, had attained finality and could not be disturbed being past and closed transaction through limitation.

Case-law in referred.

(d) Customs Act (IV of 1969)---

----Ss. 32, 80 & 80-A---Constitution of Pakistan, Arts.4 & 25---Mis-declaration---Deputy Collector of Customs and Additional Collector had termed the goods as nut bolts' and assessed in the first examination report and passed the assessment/clearance order as 'motor cycle parts' in the second examination report---No rationale or reasoning had been recorded by the Deputy Collector of Customs for terming the 'nut and bolts' as 'motorcycle parts'---Additional Collector also failed to adduce any reasoning in the order as to how nut bolts were held by him to be specifically meant for motorcycle, in absence of expert opinion of the dealers of motorcycle assembler, or dealers of its parts---Authorities, were of the opinion that since, the importer had not produced any manufacturers' brochure, presumption was that nut bolts imported were deemed to be construed as motorcycle parts---Authority levelling the allegation, had to prove the same; no onus would lie on the importer to prove that imported nut and bolts were not motorcycle parts---Authorities were to prove that the imported nut bolts were in fact not nut bolts, but were motorcycle parts, irrespective of their shape---Opinion and finding of the authorities, were without any substance; due to the fact that motorcycle parts and accessories fell within the ambit of Heading 8714.1020, under which certain components of the motorcycle were listed and those were eighteen in number, in any one of the number nut bolts were not included---Nut bolt imported by the importer had been termed as component of motorcycle by stretching the word component in accordance to the meaning adopted by the authorities for penalizing the importer, despite no fault or default on his part---Nut bolts being not component, same would not fall under PCT Heading 8714.1020, but fell under PCT Heading 73.18---Authorities, needlessly had created an issue on the one hand; while ignoring the specific PCT under which the imported nut bolts fell; on the other hand had dealt the importer differently, inspite of the fact that importer stood on the same pedestal---Said act of authorities would amount to giving a partial and differential treatment---Person placed at the same pedestal, could not be treated differently, as it would constitute negation of Arts.4 & 25 of the Constitution---Detaining of subject consignment for conducting of re-examination and for preparation of contravention report by the Deputy Collector of Customs was without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original by the Additional Collector were declared to be illegal, null and void and were vacated/set aside---Appeal was allowed as prayed.

Case-law in referred.

Nadeem Ahmed Mirza, (Consultants) for Appellant.

Kaleemullah, A.C. and Javed A.O. for Respondent.

2017 P T D (Trib.) 945

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II) and Muhammad Nazim Saleem, Member Technical-II

Messrs GAS AND OIL PAKISTAN (PVT.) LIMITED through Manager and another

Versus

SUPERINTENDENT PREVENTIVE SERVICE ANTI-SMUGGLING ORGANIZATION/HQ NMB, WHARF, KARACHI and another

Customs Appeal No.K-1717 of 2015, decided on 30th May, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(2), 157(2), 168, 171, 178 & 194-A---S.R.O. No.499(I)/2009, dated 13-6-2009---Smuggling---Seizure and confiscation of oil tankers containing smuggled diesel oil---Two oil tankers, loaded with 109098 liters diesel oil, allegedly smuggled, were seized and confiscated by Customs Authorities---Representative of appellant/Gas and Oil Company, appeared, and claimed ownership of said diesel oil, contending that said oil tankers were loaded from Hub area (Pakistan) and produced photocopies of two delivery orders, and not the original delivery orders---Chemical Analysts Reports, reflected that the flash point range/specification of detained diesel in both the oil tankers did not match with the given flash range/specification of the company at Hub (Pakistan) which led to the conclusion, that the detained diesel in both the oil tankers was smuggled, non-duty paid---Diesel oil thus recovered was seized along with two oil tankers under S.168 of Customs Act, 1969 for violation of Ss.2(s), 156(2) and 178 of Customs Act, 1969, punishable under Cl.89 of S.156(1), read with S.157(2) of the Customs Act, 1969---Collector of Customs did not agree with the reply of the appellant to show-cause notice issued and decided the case vide order-in-original, imposing penalty of Rs.500,000 on claimant for misuse of documents to cover smuggled diesel brought into the country---Validity---Oil company from whom, the claimant alleged to have purchased the diesel in question, besides refining crude oil, was also occupied in illegal purchase and sale of smuggled/non-duty paid diesel---Such was a serious matter which called legal action against said company and the appellant by the concerned departments---No reason existed to differ with impugned order-in-original and same was upheld being lawful order---Appeal filed by the claimant was dismissed being devoid of merits, in circumstances.

Mian Abdul Basit for Appellants.

Malik Safdar, Preventive Officer for Respondents.

2017 P T D (Trib.) 1103

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II

SHAHID NADEEM AKRAM

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR, KARACHI and another

Customs Appeal No. K-752 of 2015, decided on 8th September, 2016.

Customs Act (IV of 1969)---

----Ss.2(s)(iii), 16, 156(1)(89), 162, 163, 168 & 186---S.R.O. No.499(I)/ 2009, dated 13-6-2009---Smuggling---Seizure and confiscation of goods---Quantity of 13 units foreign origin heavy duty generators of different brands, origin and capacity, which were lying/stored in the workshop of the appellant/claimant, were seized by seizing authority, alleging that same were smuggled and non-duty paid---Shifting of generators to the Intelligence State Warehouse; being not practicable, same were given under superdari of owner/claimant in terms of S. 168(1) of the Customs Act, 1969; with the direction not to remove, dispose off, part with, alter, sell mortgage or deal with any manner without permission of the Directorate of Intelligence and Investigation---Collector of Customs (Adjudication)/Adjudicating Authority, vide order-in-original, ordered for outright confiscation of said generators under Cl.(89) of S.156(1) of the Customs Act, 1969, read with S.R.O. No.499(I)/2009, dated 13-6-2009---Validity---Appellant/claimant was dealing in repair and maintenance of old and used heavy duty generators, besides purchasing and letting them on hire---No 'reasonable grounds' existed with the seizing agency to treat said old and used generators with age ranging from 8 to 25 years as "smuggled" ones and to suspect that those generators brought into the country from a route other than routes declared and authorized under Ss.9 & 10 of Customs Act, 1969---Seizing agency, could not approach industrial units/business concerns owners of those generators, to call from them import documents or sales tax invoices in case of local purchase---Seizing agency, had not contested the fact that appellant/claimant had workshop, where he was engaged in repair and maintenance of the generators---Documents on record had confirmed said activity of the appellant/claimant---Seizing agency had failed to establish that seized/confiscated generators were brought into the country from a route other than prescribed/declared under the law---Nothing was available on record to show any reasonable ground leading to suspicion that generators in question were smuggled into Pakistan---Section 163 of the Customs Act, 1969 could not be invoked in the present case, as the goods were Heavy Duty Generators which could not be removed from the site/godown of the appellant hurriedly---Case was a fit case where S.162 of the Customs Act, 1969 could have been conveniently invoked by the seizing agency---Search conducted by the seizing agency was unlawful---Seizure, was illegal being riddled with a number of legal infirmities, besides contradictions in facts---Collector of Customs (Adjudication), had not been able to notice glaring acts of commission and omission on the part of seizing agency---Impugned order-in-original, was set aside being defective one both on law and facts, in circumstances.

2005 PTD (Trib.) 135; PLD 1991 SC 630; PTCL 1994 CL 22; 1983 PCr.LJ 620; 1983 PCr.LJ 623; 1983 CLC 786; PTCL 1983 CL 47; 1987 PCr.LJ 1413; 1987 PCr.LJ 1091; 2004 PCr.LJ 1958; 2005 PTD (Trib.) 135; 1981 PCr.LJ 66; 1981 PCr.LJ 986; 1984 PCr.LJ 3096(2); 1987 PCr.LJ 325; 1988 PCr.LJ 435 and S.M. Anwar Sethi v. South British Insurance Company Ltd. PLD 1975 Kar. 458 ref.

Nadeem Ahmed Mirza for Appellant.

Arif Maqsood, SIO for Respondents.

2017 P T D (Trib.) 1285

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Judicial Member and Imran Tariq, Technical Member

Messrs ZAHID PACKAGES (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), MCC, FAISALABAD and another

C.A. No.95/LB/2014, decided on 3rd September, 2015.

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

----Ss. 2(41), 4, 8 & 13---SRO No.551(I)/2008, dated 11-6-2008---Exemption---Admissibility of exemption of sales tax on sales of permitted admissible process waste--Duty and Tax Remissions Scheme for Exports---Object and Scope---Crux of the present case revolved around the admissibility of exemption of sales tax on sales of permitted admissible process waste which accrued out of manufacturing process under Duty and Tax Remissions for Export Scheme (D.T.R.E.)---'D.T.R.E.' Scheme, enabled import or local procurement of duty and tax from inputs for export purpose---Objective of D.T.R.E. scheme was to neutralize the incidence of duty and taxes on the imported or locally procured content of the export product---Neutralization was provided by way of duty and tax remission against the exporter product---Term 'remission' had a special connotation in legal terms---When 'D.T.R.E.', was universally seen as a Duty Remission Scheme, it must be understood as a duty waiver by the Government---Tax or duty which the Government was otherwise entitled to collect and retain, was being waived or being given remission of by way of a policy to encourage exports---Such benefit must be considered to be a temporary duty waiver by the Government---Supplies envisaged under the Sales Tax Act, 1990, were classified under three general categories e.g., exempt, zero rated or standard rated for the purposes of imposition of tax---Supplies that were standard rated or zero-rated, were considered to be 'taxable supplies'---All export supplies were zero-rated under S.4 of the Sales Tax Act, 1990 and under the law, a zero-rated supply was a taxable supply on which sales tax was levied at the rate of 0%---No output tax would be payable in respect of zero-rated supplies---Entities registered under the Sales Tax Act, 1990, effectuating zero-rated supplies, were entitled to claim their input tax deductions on goods in services acquired in the course of making such taxable supplies---By virtue of exclusion from the ambit of subsection (41) of S.2 of the Sales Tax Act, 1990, sales tax was not chargeable on exempt supplies, which fell within the folds of S.13 of the Sales Tax Act, 1990---Gulf of difference existed between zero-rated and export supplies---Any remission under 'D.T.R.E. Scheme', could not be associated with an exemption under the Sales Tax Law---'D.T.R.E.' Scheme, specifically dealt with zero-rated supplies---Only benefit which 'D.T.R.E. Scheme' extended was that it pushed back the matter of export or zero-rating one step behind in the supply chain---Exemption of sales tax availed by the appellant on the sale of admissible bona fide waste accrued out of manufacturing process under 'D.T.R.E. Scheme', could not be termed as a double exemption---Exemption of sales tax under S.R.O. No. 555(I)/2008, date 11-6-2008, could not be denied on the ground of double exemption in circumstances.

2010 PTD 2673 ref.

(b) Duty and Tax Remissions for Export Scheme (D.T.R.E.)---

----Rr. 305 & 296---Utilization of input goods---Local sale---Scope---Utilization of input goods, under R.305 of 'D.T.R.E.' Scheme, specifically dealt with the input goods specified therein and according to sub-rule (i) of R.296(I) of the Scheme, input goods meant "goods and services eligible for acquisition or used or consumed in the manufacture of output goods for export"---Law solely required input goods to be used or consumed in exported goods within the period stipulated under R.305 of 'D.T.R.E. Scheme'---Process waste was not an input product, but in fact was a product accruing out of consumption process---Local sale thereof, could not be tagged with the utilization period stipulated under 'D.T.R.E. Scheme'.

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

----S. 2(44)---Duty and Tax Remission for Export Scheme---Admissibility of waste or manufacturing loss---Actual wastage or loss incurred during manufacturing operation, was admissible only upto the extent allowed vide the consumption certificate issued by the competent authority under R.299(3)(4) of 'D.T.R.E.' Scheme---Impugned audit report showed that the appellant company, maintained its process wastage within the tolerance limits allowed under the scheme---Policing mechanism devised under 'D.T.R.E.' Scheme was applicable only to the extent of ensuring that the user would remain within the limits of process waste allowed under R.299 of the Scheme---Local sale of said material would attract subsection (44) of S.2 of the Sales Tax Act, 1990---Relevant time for imposition or exemption under S.2(44) of the Sales Tax Act, 1990 would be the time at which the goods were delivered or made available to the recipient of the supply---Transaction, the date of sale/delivery of process waste to the buyer, would be the relevant date for the purposes of sales tax.

(d) Customs Act (IV of 1969)---

----S. 156(1)(10-A)---Penal consequences for violation of any condition, limitation or restriction, in respect of the goods on which exemption had been granted---In the present case, the Adjudicating Officer had imposed a penalty of Rs.500,000 under S.156(1)(10-A) of the Customs Act, 1969 for late submission of reconciliation statement under R.307-D of Duty and Tax Remission for Exports Scheme---Penal consequences under S.156(1)(10-A) of the Customs Act, 1969, were actuated whence conditions; limitations or restrictions with regard to exemption grated under the Customs Act, 1969, were breached; but in the present case no such event had occurred as Duty and Tax Remissions for Exports Scheme, could not be equated with exemption---Penalty imposed by the Adjudicating Officer, stood vitiated.

(e) Words and phrases---

----'Remission'---Meaning explained.

Webster's Third New International Dictionary (Unabridged) and Balck's Law Dictionary ref.

Tariq Mehmood, A.R. for Appellant.

2017 P T D (Trib.) 1391

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Judicial Member

MUHAMMAD NAEEM, DISTRICT GUJRAT

Versus

ADDITIONAL COLLECTOR (ADJUDICATION), CUSTOMS HOUSE, LAHORE and another

C.A. No.107/LB of 2014, decided on 14th May, 2015.

(a) Customs Act (IV of 1969)---

----Ss. 2(s), 156(1)(89), 168, 178, 181 & 187---SRO No.499(I)/2009, dated 13-6-2009---Smuggling---Seizure and confiscation of smuggled vehicle---Van was intercepted by Staff of Directorate of Intelligence and Investigation-FBR---Driver of the van and Motor Registration Authority could not provide any documentary evidence regarding legal import of the van in question, same was seized under S.168 of the Customs Act, 1969 being liable to confiscation---Adjudicating authority, after issuing show-cause notice to appellant, who claimed to be owner of the van, ordered to confiscate the van under cl.(89) of S.156(1) of the Customs Act, 1969, and in view of cl.(a) of SRO No.499(I)/2009, dated 13-6-2009, option under S.181 of the Customs Act, 1969 was not allowed---Motor Registration Authority, submitted report to the effect that van in question was registered by the Authority registration book was issued to said van, but record of the said van had been burnt/destroyed---Framers of law in order to dampen rampant business of smuggled or non-duty paid goods formulated a strict confiscatory regime with very wide connotation---On every occasion, whence goods were seized under the Customs Act, 1969, the possessor or the owner had to prove that he held the goods under lawful authority, or under a permit, licence or other document prescribed by or under any law for the time being in force---Section 2(s) of the Customs Act, 1969, stipulated a well defined classification of smuggled goods based on an intelligible differentia---Appellant, was in possession of van under valid registration book issued by Motor Registration Authority, record of which was destroyed in an arson attack during riots---Department's case hinged on the premise that unless the appellant would produce the import documents i.e. the Goods Declaration or its allied customs documents it would be presumed that van was smuggled vehicle under Customs Act, 1969---Statute required test of proportionality as the touchstone of construction and interpretation of reverse onus clause and accused could not be expected to discharge an unduly high-standard of proof---Section 187 of the Customs Act, 1969, cast an evidentiary burden subject to creation of a prima facie case by accused and the legal or persuasive burden always rested on the prosecution/department---When an accused had to rebut the presumption under S.156(2) or 187 of the Customs Act, 1969, the standard of proof for doing so was that of preponderance of probabilities---If accused was able to raise a probable defence which would create doubt about the existence of a legally enforceable debit or liability the prosecution could fail---Appellant, who claimed to be the owner of the van had succeeded in making out a prima facie case and it was held that preponderance of probability was also in favour of the appellant---Existence of factum of smuggled nature of impugned vehicle was doubtful---Burden of proof under S.187 and S.156(2) of the Customs Act, 1969 stood shifted upon the prosecution/department to establish the case---Department having failed to discharge the legal or persuasive burden which lay heavily on it, benefit of doubt was extended to the appellant---Impugned order-in-original was set aside and unconditional release of confiscated van was ordered to be given to its lawful owner.

Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 ref.

(b) Customs Act (IV of 1969)---

----Ss. 2(s) & 181---S.R.O. No.499(I)/2009, dated 13-6-2009---S.R.O. No. 566(I)/2005, dated 6-6-2005---Option to pay fine in lieu of smuggled confiscated goods---Vehicles being notified smuggled goods depicted at Serial No.26 of S.R.O. No. 566(I)/2005, dated 6-6-2005, then release was prescribed under S.R.O. No. 499(I)/2009, dated 13-6-2009 and S.2(s) of the Customs Act, 1969---Section 181 of the Customs Act, 1969, though entrusted powers to the Customs Adjudicating Officer to release delinquent non-duty paid goods on payment of duties and taxes and imposition of redemption fine, but said powers were not unbridled---First and second proviso to S.181 of Customs Act, 1969, read with S.R.O. No.499(I)/2009, dated 13-6-2009, manifestly abridged those powers---Goods falling under subsection (s) of S.2 of the Customs Act, 1969, were to be outrightly confiscated without any recourse to the possessor.

(c) Provincial Motor Vehicles Ordinance (XIX of 1965)---

----S. 25---Registration of motor vehicles---Registration of motor vehicles required the registering authority to take all possible steps to verify the genuineness of applications for registration and specific documents had to be produced by the person applying for registration---In case of imported vehicles, paper indicating the payment of customs duty etc. leviable or in case of locally manufactured vehicles, sale authority letter and invoice issued by the authorized manufacturer; or in case of re-registration, registration certificate issued by the original registering authority together with a "No Objection Certificate" (N.O.C.)" issued by it---According to subsection (4) of S.25 of the Provincial Motor Vehicles Ordinance, 1965, only the temporary registration could be effected on basis of initially tendered documents and that final registration certificate could only be issued subsequently after authentication by the relevant quarters; that under first and second provisos to S.25 of Provincial Motor Vehicles Ordinance, 1965, in case of non-verification by concerned agencies, the temporary registration would be annulled and the Government would wield the power to seize the delinquent vehicle and dispose it of in accordance with law---Motor Vehicle Registration Law in vogue, stipulated a narrow and strict colander so that the smuggled car/vehicle could be prevented from getting registered---Original motor vehicle registration book authenticated by the Registering authority had presumption of truth attached to it under Art.92 of the Qanun-e-Shahadat, 1984.

Khalid Mohsin for Appellant.

2017 P T D (Trib.) 1450

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

AJMAIR TRADERS

Versus

COLLECTOR OF CUSTOMS (EXPORTS) and another

Customs Appeal No.K-958 of 2016, decided on 13th January, 2017.

Customs Act (IV of 1969)---

----Ss. 14-A, 16, 19, 32, 32-A, 131, 179, 180, 194-A & 198---Customs Rules, 2001, Rr.444, 445, 447 & 452---S.R.O. No.499(I)/2009, dated 13-6-2009---S.R.O. No. 886(I)/2012, dated 18-7-2012---Export of goods---Selection of Goods Declaration for examination---Mis-declaration---Confiscation of goods---Redemption on payment of fine and taxes---Issuance of show-cause notice exporter prepared invoice/packing list and dispatched those to the clearing agent for transmitting Goods Declaration for export in terms of S.131 of the Customs Act, 1969 and clearing agent did accordingly---Said Goods Declaration was selected for examination---Concerned Official instead of conducting the examination on the basis of correct invoice and packing list, opted to consider the invoice/packing list, which had no nexus with the goods; which led him to form opinion that the goods stuffed in the containers were contrary to the declaration and that the exporter had committed act of misdeclaration---Confiscation of goods was ordered subject to redemption on payment of 20% and penalty---Show-cause notice issued by the Authority was unique in nature, as same was transmitted to importer company abroad---Said show-cause notice though contained different events of the case and opinion of Collector of Customs (Exports) and certain provisions of the Act/Rules, but it did not contain any direction to submit reply, which defect was not curable---Proper/valid and legal show-cause notice was to contain comprehensive description of the events on the basis of which case had been made out against the exporter by making reference to the evidence collected in supportive evidence and the attracted provisions of the Act and Penal clauses---Show-cause notice was not a casual correspondence or a tool or a licence to commence a rowing inquiry into the affair based on assumption and speculation, but was a fundamental document that carried definitive legal and factual position of the department against the exporter---No valid show-cause notice in the present case had been served/transmitted, rendering the order so passed by Collector of Customs (Adjudication) as void ab initio, coram non judice and of no legal effect and jurisdiction---No loss of revenue was apparent, because the case pertained to export consignment on which no duty and taxes were leviable---Case, therefore, fell within sub-para (d) of para (iii) of S.R.O. No.886(I)/2012, dated 18-7-2012---Cases of such nature were ought to be adjudicated by the Executive Collectorate---By laying hands on the exclusive domain of Executive Collectorate, Collector of Customs (Adjudication) had encroached the jurisdiction, which act was transgression, which was not permitted under law rendering the entire proceedings without powers/jurisdiction, void ab initio and coram non judice---Where there was no revenue loss, case had to be adjudicated by the Principal Appraiser in terms of S.131 of the Customs Act, 1969---By laying hands on the present case, the Deputy Collector usurped the powers of Principal Appraiser of Executive Collectorate---Purported show-cause notice and order-in-original in the present case were without any powers/jurisdiction rendering the entire act right from show-cause notice as void ab initio and ab initio wrong and suffered from legal infirmity liable to be struck down as of no legal effect and nullity of law and non existent---Impugned show-cause notice was vacated impugned order passed thereon, was set aside---Collector of Customs (Exports), was directed to issue delay and detention certification under S.14-A(2) of the Customs Act, 1969 accordingly.

Case-law referred.

Nadeem Ahmed Mirza for Appellant.

Nasim Nisar for Respondents.

2017 P T D (Trib.) 1569

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I and Muhammad Nazim Saleem, Member Technical-II

COLLECTOR OF CUSTOMS through Assistant Collector of Customs and others

Versus

The COLLECTOR OF CUSTOMS and others

Customs Appeals Nos.G-1546 to 1555 of 2015, decided on 22nd February, 2016.

Per Muhammad Nadeem Qureshi, Judicial Member-I

(a) Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(8)(89), 157(2), 168, 171, 181 & 194-A---S.R.O. No. 566(I)/2005, dated 6-6-2005---S.R.O. No. 499(I)/2009, dated 13-6-2009---Smuggling---Seizure and confiscation of alleged smuggled Diesel oil---Redemption of vehicle loaded with smuggled diesel oil---Notice under S.171 of the Customs Act, 1969 was issued to the arrested person and proper recovery memo was also prepared---Adjudicating Officer after fulfilment of codal formalities decided to confiscate vehicle loaded with diesel oil in question and also to be confiscated under S.157(2) of Customs Act, 1969---Collector of Customs, Appellate Authority allowed vehicle in question to be redeemed on payment of fine and modified order passed by Adjudicating Officer---Validity---Seizure had been made far from the border area and near populated city---Such seizure was made on the basis of presumptions and assumption---Seizing authorities, had not fulfilled the legal criteria, nor preformed their duty in accordance with prescribed law and rules, and failed to collect the samples from High Speed Diesel Oil loaded on the vehicle in question---Seizing authorities without conducting the chemical process or obtaining any opinion from the concerned laboratories, made declaration that the subject diesel was of foreign origin---Allegation attributed against the respondents, in circumstances, could not be considered as admissible evidence in proof of the claim made by the authorities at the time of seizure---After issuing the show-cause notice, nobody had claimed ownership of diesel oil in question, nor any body had appeared to contest the show-cause notice for the claim of seized property, only owner of the oil tankers contested the subject show-cause notice---Department had relied only on the official statements---Mashirs/witnesses had not been produced before the competent authority---Department had failed to present any substantial evidence to establish the mens rea and connivance of owners of vehicle with the alleged offence---Order of collector (appeals) to release the vehicle in question was well founded in circumstances---No person was to be deprived of his property by way of penalty, unless, it was clear that he was, responsible for assisting or furthering the commission of the offence committed---Discretion given to the Authority to confiscate the goods or vehicle must be exercised on sound judicial principles and on the basis of principles of natural justice---Vehicle in question was not part of the act which was prohibited by law---Equity was the soul of law in dispensation of justice---Orders passed by the Collector (Appeals), needed no interference---Subject appeals, were rejected, in circumstances.

Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-I) and others Karachi Customs Reference No.157 of 2008 and Imtiaz v. Ghulam Ali PLD 1963 SC 382 ref.

(b) Administration of justice---

----All judicial, quasi judicial and administrative authorities while exercising their mandatory or discretionary jurisdictions must follow the rule, for fair exercise of power in a reasonable manner, and must ensure the dispensation of justice with spirit of law---Proper place of procedure in any system of administration of justice was to help and not to thwart the grant to the people of their rights---All the technicalities had to be avoided, unless it was essential to comply with them on ground of public policy---Any system, which by giving effect to the form, not to the substance, would defeat substantive rights---Ideal, must always be a system that would give to every person what was his right under the law.

Per Muhammad Nazim Saleem, Member Technical, agreeing with Muhammad Nadeem Qureshi, Judicial Member

(c) Customs Act (IV of 1969)---

----Ss. 2(s), 156(1)(8)(89), 157(2) & 161---Smuggling---Seizure and confiscation of vehicle loaded with smuggled diesel oil---Main thrust of the appellant/Collector of Customs, was that seized vehicle was a truck and not an 'oil tanker' having special cavities/internal tanks---Narrative part of notice revealed that there was a mention of 'truck', which was found along side the road, loaded with smuggled foreign diesel, but in a table which summarized, details about oil and the vehicle, it was mentioned as "Hino Oil Tanker"---Order-in-original, indicated said vehicle as "truck", but in another para of the order it was shown as "Oil Tanker"---Said position unambiguously, confirmed that the seized/confiscated vehicle was an 'oil tanker' and not a truck---Emphasis of authorities that there were special tanks/cavities in the vehicle carried no weight---Tribunal observed that seizing agencies needed to be very careful in highlighting facts of the case besides meeting legal requirements while effecting seizures under the Customs Act, 1969.

Aftabullah Shah Deputy Collector and Muhammad Umer, Inspector, present for Appellants.

Mallag Assa Dashti for Respondents.

2017 P T D (Trib.) 1744

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Member (Judicial)

Messrs IQRA INTERNATIONAL, PESHAWAR

Versus

COLLECTOR OF CUSTOMS, MCC, PESHAWAR and 3 others

Cus. Appeal No. 298/PB of 2015, decided on 7th March, 2016.

Customs Act (IV of 1969)---

----Ss. 25, 32, 79, 80, 81, 83, 156(1)(14) & 194-A---Mis-declaration---Order to deposit short paid amount of duty/taxes and imposition of penalty---Audit team vide audit observation, pointed out that 'acid batteries' imported by importer, were undervalued as Valuation Ruling No.600 dated 24-10-2013 and 2-12-2013 were not applied---Besides, the item in question was also misclassified under PCT heading 8506.8000 attracting duty at 10%, instead of correct classification under PCT heading 8507.2090 attracting customs duty at 20%---Said irregularity resulted in short realization of customs duty---Additional Collector Customs (Adjudication), vide his consolidated order-in-original, ordered appellant/importer to deposit the short paid amount of duty/taxes---Adjudicating Authority also imposed a penalty in terms of cl.14 of S.156(1) of the Customs Act, 1969---Conclusion of short realization of duty/taxes, was mainly drawn by the department on the basis of image available in 'WeBOC' data---Such an image, could not be made "material in particular" to substantiate that importer had paid short amount of duty/taxes, as the same did not provide necessary corroboration in the form of any legal sanctity in terms of S.2(kka) of the Customs Act, 1969---Section 32 of the Customs Act, 1969 provided that phrase "reason to believe" and "in any material particular", could not give space to any vague estimate, however strong it could be---Said phrase, could only be used where definite and positive belief could be estimated with regard to the submission of the incorrect documents, or wrong statement---When a system was laid for the purpose of determination of correctness of declaration, it had to be adhered to and appreciation of any advice in that respect had to be in conformity with what was prescribed---Examination report tendered by the Customs Authorities, constituted an itself an independent piece of evidence, what itself negated the departmental stance and on the contrary fortified the point of view of the importer---All the import documents stood verified by the customs at the time of examination/assessment and the Adjudicating Officer could not substantiate its observation or view point with any document and evidence which could rebut or nullify the documentary evidence of import---Documents submitted by importer sufficed the legal requirements of submission of prescribed documents to be submitted by the importer to the customs at the time of importation---Examination report revealed that no mis-declaration was found during the physical examination---Appeal filed by the importer was allowed and impugned order-in-original, would not stand the thrust of actual and prime course of justice, same was set aside to the extent of importer.

Aamir Bilal for Appellants.

Azeem Khan, DS, Ruhul Amin Inspector and Abdul Hadi, Appraiser Customs for Respondents.

2017 P T D (Trib.) 1792

[Customs Appellate Tribunal]

Before Ch. Muhammad Shahbbir Gujjar, Member (Judicial)

Messrs INTERLINK INTERNATIONAL, PESHAWAR

Versus

The ADDITIONAL COLLECTOR CUSTOMS (ADJUDICATION) and another

Cus. 1006/PB of 2015, decided on 2nd May, 2016.

Customs Act (IV of 1969)---

----Ss. 32, 25, 26 & 156(1)(10-A)(14)---Valuation Ruling No.203, dated 30-12-2009---Misdeclaration---Evasion of tax and duty---Importer was alleged to have knowingly and wilfully managed to obtain clearance of imported goods through misdeclaration of rate in violation of Valuation Ruling No.203, dated 30-12-2009 and evaded duty and taxes to the tune of Rs.14,96,302 by contravening the provisions of Ss.26, 32(2)(3), punishable under S.156(1)(10-A)(14) of Customs Act, 1969---Additional Collector (Adjudication) vide impugned order-in-original, directed that amount of duties and taxes, as pointed out by audit, should immediately be paid by the importer---Penalty of Rs.50,000 was also imposed on the importer---Department had failed to produce any direct evidence against the taxpayer as provided under Art.117 of the Qanun-e-Shahadat, 1984---Departmental representative, conceded that grounds on which customs department had proposed to take action against the importer, were never revealed in the show-cause notice---Initiation of action against the importer, in circumstances, was in violation of the provisions of S.180 of the Customs Act, 1969, as the very essence of any notice was to enable any person affected thereby be known the particulars of the charges mentioned in the notice---Basis of allegations, was not known to the importer---No chemical examination of any laboratory, had been produced by the department to substantiate that lead acid batteries (imported goods) fell under P.C.T. Heading 8507.2090---Show-cause notice issued to the importer was time barred having been issued beyond the time limitation of 5 years---Paramount duty of the Customs department was that before embarking upon any allegation, the functionary must already possess some definite material so as to establish any illegal action having been taken by the importer---Impugned order-in-original, in circumstances, would not stand the thrust of actual and prime course of justice---Same was set aside to the extent of importer.

1992 SCMR 1898; 2001 SCMR 838; PLD 1998 SC 64; 2011 SCMR 1279 = 2011 PTD 2220; PLD 1962 Dacca 162 + 14 DLR (1962) 296; PLD 1970 Dacca 43; 2012 PTD (Trib.) 1697; 2006 PTD 2209; 2009 PTD 1835; 2011 PTD (Trib.) 174; 2005 PTD (Trib.) 135; 2009 PTD 467; 2009 PTD 281 and 2004 PTD 1048 ref.

Danish Ali Qazi for Appellant.

Muhammad Azeem, DS and Ruhul Amin, Inspector, Customs for Respondents.

2017 P T D (Trib.) 1827

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial)

MUHAMMAD SHAHID and others

Versus

SUPERINTENDENT OF INTELLIGENCE AND INVESTIGATION-FBR, LAHORE and another

C.A. No.145/LB of 2014, decided on 26th January, 2015.

Customs Act (IV of 1969)---

----Ss. 156(1)(90), 157, 168, 171 & 181---SRO No.499(I)/2009, dated 19-6-2009---Constitution of Pakistan, Art.25---Seizure and confiscation of goods---Redemption of goods on payment of fine---Principle of equality---Seized Generators had been confiscated under Cl.(90) of S.156(1) of the Customs Act, 1969---Adjudicating Officer had given the appellants an option to redeem the same on payment of fine equivalent to 35% of customs value---Counsel for the appellants, who had challenged the pitch of fine, had placed on record certain orders-in-original, wherein under the similar circumstances, Collector of Customs (Adjudication), had released numerous similar generating sets on payment of duties and taxes, plus a nominal penalty of 5% of value of goods under active consent from the Directorate of Intelligence and Investigation-(FBR)---Under Art.25 of Constitution, all persons equally placed, were to be treated alike both in privileges conferred and liabilities imposed; otherwise it would be violative of principle of equality before law---Equal treatment should be meted out with appellant's merchandise as had been done in case of a large number of generators apprehended in similar circumstances---Denial of lower pitch of redemption fine to the appellant would tantamount to discrimination, entailing violation of Fundamental Rights enshrined under the Constitution---Impugned order was modified to the extent that the redemption fine imposed by the Adjudication Officer on confiscated generating sets were scaled down to 5%.

2014 PTD 1883; 2013 PTD 1883; 2012 PTD 1279; 2005 SCMR 492; 2002 SCMR 312; PLD 1995 SC 396; 1990 SCMR 1072; 1990 SCMR 1059; 1975 SCMR 352; PLD 1997 SC 334 and 1997 SCMR 1874 ref.

Asad Goraya for Appellants.

2017 P T D (Trib.) 1843

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

COLLECTOR OF CUSTOMS, MODEL CUSTOM COLLECTORATE

Versus

Messrs DIWAN INTERNATIONAL ASSOCIATES and another

Cus-Appeals Nos.K-1780 of 2015 and K-1781 of 2015, decided on 15th June, 2016.

Customs Act (IV of 1969)---

----Ss. 25 & 25-A---Customs Rules, 2001, Rr.76 & 107---Assessment and determination of value of goods/rims of motor cycle---Motorcycle being defined as vehicle, its rims were to be termed as rims, not part of vehicle---Valuation of the item had to be done while considering those as rims not part and the levy of duty, taxes under the respective PCT meant for rims and not parts---Order of High Court on valuation ruling was applicable in general on all the transactions made by the public during conduct of their business activities---When any order was suspended by the court it was mandated upon the field formation to give effect of said order to the general public and not to the extent of the company which impugned the order---Tribunal observed that valuation Ruling by the Director, Directorate General of valuation under provision of S.25-A of the Customs Act, 1969, had to be issued specifically for the "goods", "category of goods" and 'country of import' and with the application of S.25 of the Customs Act, 1969 in sequential manner and specific to the PCT and the country of origin---When motorcycle was defined as "vehicle", valuation ruling meant for "vehicle rims", was applicable.

S.M. Naqi son of Syed Muhammad Hussain Karachi v. Collector of Customs (Adj-I) and others Customs Reference No.157 of 2008 and Qazi CNG Filling Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 2 others 2016 PTD (Trib.) 107 ref.

Sajjad Rizvi A.C. and Junaid Ahmed A.O. for Appellant.

Nadeem Ahmed Mirza for Respondents.

2017 P T D (Trib.) 1993

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Judicial Member

Messrs FRONTIER CORPORATION, PESHAWAR

Versus

COLLECTOR OF MCC, PESHAWAR and 3 others

Cus. Appeal No. 279/PB of 2015, decided on 2nd May, 2016.

Customs Act (IV of 1969)---

----Ss. 25, 32, 80 & 156(1)(4)---Determination of customs value of goods and assessment of duty---Misdeclaration---Audit team duly constituted for post clearance audit, pointed out that "Lead acid batteries" imported by the importer vide different Goods Declarations, were misclassified under PCT Heading 8506.8000 attracting customs duty at 10%, instead of correct classification under PCT Heading 8507.2000 attracting Goods Declaration at 20%---Collector of Customs (Adjudication)/Adjudicating Authority vide its consolidated order-in-original ordered the importer to deposit the short amount of duty/taxes paid into Government Treasury---Adjudicating Authority also imposed a personal penalty upon the importer in terms of cl.(14) of S.156(1) of the Customs Act, 1969, which had been challenged by the importer before the Appellate Tribunal---No chemical examination of any laboratory was produced to establish that Batteries in question were "Lead acid Batteries" falling under PCT heading i.e. 8507.2000, attracting Goods Declaration at 20%---Department was not in possession of any sample so that, it could have been referred to a laboratory for chemical analysis and its composition---No extra weightage, in circumstances, could be given to picture of the battery alone, when its chemical composition could not be substantiated from an independent laboratory report---Conclusion of short realization of duty/taxes, was mainly drawn by the department on the basis of image available in "WeBOC data"---Such an image, could not be made "material in particular" to substantiate that the importer had paid short amount of duty/taxes---When a system was laid for the purposes of determination of correctness of declaration, it had to be adhered to and appreciation of any evidence in that respect; had to be in conformity with what was prescribed; because otherwise depending on something outside the laid methodology, would amount to an aberration and upon hearsay; which could damage the requirement given by the law---Examination report tendered by the Customs Authorities, constituted in itself an independent piece of evidence, which itself negated the departmental stance and on the contrary fortified view point of the importer---All the important documents stood verified by the customs at the time of examination/assessment and the Adjudicating Officer could not substantiate its observation or view point with any documentary evidence, which could rebut or nullify the documentary evidence of import, purchases and examination report of the examiner---Customs authorities, though had disputed the description of the subject goods on the basis of said "image", but the Adjudicating Officer did not analyze the authenticity and legal sanctity of the "image"---'Image' could not be taken as conclusive evidence---Importer had submitted the entire requisite commercial documents viz., commercial invoice, packing list, certificate of origin of bill of lading before the customs authorities---Said documents sufficed the legal requirements of submission of prescribed documents to be submitted by the importer to the customs at the time of importation---Examination report, had revealed that no misdeclaration was found during the physical examination---Impugned order-in-original, passed by Adjudicating Authority did not stand the thrust of actual and prime course of justice---Order-in-Original was set aside to the extent of the importer---Order of Adjudicating Authority would mutatis mutandis stand applicable to the appeals being identical in nature, having similar question of law and fact.

2011 PTD (Trib.) 174; 2005 PTD (Trib.) 135; 2009 PTD 467; 2004 PTD 1048 and PLD 1991 SC 963 ref.

Danish Ali Qazi for Appellants.

Azeem Khan, DS, Ruhul Amin Inspector and Abdul Hadi, Appraiser Customs for Respondent.

2017 P T D (Trib.) 2022

[Customs Appellate Tribunal]

Before Ghulam Murtaza Bhatti Chairman/Member Judicial and Khawaja Umar Mehdi, Member Technical

WAZIR ZULFIQAR, PA, SRDP and 5 others

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION), CUSTOMS HOUSE, LAHORE and 3 others

Customs Appeal No.30/LB of 2014, decided on 14th September, 2015.

Customs Act (IV of 1969)---

----Ss. 32, 168, 171 & 194-A---Misdeclaration---Seizure of imported goods---Five trucks stuffed with foreign origin TV Remotes etc., were intercepted---Drivers of the trucks produced bilities, issued by Goods Forwarding Agency---Produced goods declaration and examination reports were examined and compared with the recovered foreign origin goods and it was proved that misdeclaration was made in terms of quantity and same were also assessed on lower side---Recovered goods along with five trucks were seized under S.168 of the Customs Act, 1969---Counsel who appeared on behalf of the Seizing Agency, contended that the department had no objection, if the seized goods were released on payment of duty and taxes---Adjudicating Officer, passed order---Collector of Adjudication, had also made remarks against the concerned staff, as they caused huge loss to the national exchequer of its legitimate revenue in active connivance with the importer and clearing agency, and directed to hold departmental inquiry---Validity---Impugned order, had not stated any reason for the conclusion---Judgment in question did not speak a word about the alleged connivance between the concerned customs staff and importer/clearing agent--Conclusion drawn by the Adjudicating authority being without evidence on record, amounted to "non-speaking" order which was expunged, in circumstances.

Ahsan Baqar for Appellant.

Mrs. Amna Parveen for Respondent.

2017 P T D (Trib.) 2069

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs GALAXY ENGINEERING, LAHORE

Versus

DEPUTY COLLECTOR OF CUSTOMS, R&D, MCC OF APPRAISEMENT-EAST, CUSTOMS HOUSE, KARACHI and 2 others

Customs Appeal No.K-1285 of 2015, decided on 25th January, 2017.

Customs Act (IV of 1969)---

----Ss. 32, 79, 80, 83, 156(1), Cls. (14)(14A), & 186---S.R.O. No. 371(I)/2002, dated 15-6-2002---Misdeclaration---Upfront duty and taxes were deposited to which goods declaration was numbered---Nominated Appraiser opted to get the goods examined---Officials posted at terminal after physical verification of the goods confirmed the declaration---Appraiser passed assessment order on the basis of declaration, examination report, images and infield valuation ruling and transmitted the view message for payment of additional amount of duty and taxes, which were paid and Authority passed the clearance order---Officials of terminal operator informed the importer that hold had been placed on the goods declaration by the Deputy Collector and delivery could not be effected---Deputy Collector of Customs(MCC), informed the Clearing Agent that it was their apprehension that duty and taxes had not been levied correctly---Importer, upon apprehending the mala fide on the part of Deputy Collector Customs (MMC) filed constitutional petition before High Court on which order was passed that goods be allowed to be released after submitting of pay order of specified amount with the Nazir of the High Court and thereafter importer to present certificate and Nazir of the Court issued certificate---Department, thereafter, framed contravention report and show-cause notice was issued to the importer, with the allegation that the importer was involved in mis-declaration of description, brand, quality, classification, value and non-application of valuation ruling, resulting in loss of Revenue and that importer had violated the provisions of S.32 of the Customs Act, 1969---Validity---Consignment of importer could be detained under S.186 of the Customs Act, 1969 after payment of leviable duty and taxes and order of clearance by the authority defined in the SRO No.371(I)/2002, dated 15-6-2002, if any adjudication order against the said importer was in field and wherein fine/penalty had been imposed upon him and which he had not paid; or in a case wherein contravention report had been framed in an under clearance consignment for adjudication by the competent authority for imposition of fine or penalty---In the absence of availability of said conditions, consignment could not be detained under S.186 of the Customs Act, 1969---In the present case, no such order was available, wherein adjudicating Authority had imposed any fine or penalty on the importer nor any contravention report was prepared for the purpose of adjudication prior to passing of assessment/clearance under the respective provisions of Act/Rules---Department was only authorized to take action for issuance of detention notice, once the amount alleged to have been evaded had been finally adjudicated and decided against the person---Show-cause notice which was barred by time by 128 days was without power, jurisdiction and lawful authority hence, void ab initio and not enforceable under the law---Deputy Collector of Customs (Adjudication) issued show-cause notice and passed order in original by usurping the powers of Additional Collector, which was not permitted under the law---Exercise of jurisdiction by Deputy Collector of Customs (Adjudication) was without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original, were void ab initio, in addition to the order passed by Collector of Customs (Appeals)---After passing of clearance order by the competent Authority, same could not be disturbed by any Authority, for preparing contravention report for adjudication proceedings---No misdeclaration of quantity, quality, weight for alleged PCT or value, were visible, as the weight in both the examination reports, assessment order and show-cause notice were one and the same; difference was shown only in description---Preparation of contravention report by Deputy Collector of Customs (MMC) and issuing/passing of show-cause notice/order-in-original by the Deputy Collector of Customs (Adjudication) and order-in-appeal by Collector of Customs (Appeals) were ab initio illegal and void, and of no legal effect which were annulled and set aside by the Tribunal.

Case law referred.

Nadeem Ahmed Mirza for Appellant.

Azam Shah A.O. for Respondents.

2017 P T D (Trib.) 2159

[Customs Appellate Tribunal]

Before Tahir Zia, (Member Judicial-II) and Muhammad Nazim Saleem, (Member Technical-II)

MUHAMMAD IQBAL

Versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No.K-1283 of 2015, decided on 30th April, 2016.

Customs Act (IV of 1969)---

----S. 194-A---SRO 266(I)/2001, dated 7-5-2001---Delay in filing appeal---Delay, condonation of---Appeal against order-in-original and order-in-appeal, was time barred by 236 days---Contention of appellant was that delay was bona fide and beyond his control; as both order-in-original and order-in-appeal (impugned orders) were not communicated to him, as he had gone abroad and his premises remained closed for 4 to 5 years---Validity---Order-in-appeal, showed that it was not an ex parte order, but was decided on an appeal filed by the appellant---Application for condonation of delay, along with affidavit, was incorrect to that extent, in circumstances---Appellant's contention was that he received copies of order-in-original and order-in-appeal on 1-7-2015, when he returned from abroad---As to wherefrom appellant received those documents and came to know about those orders was not mentioned---Equity, demanded that applicant/appellant must come for justice with clean hands, but appellant had not approached the Appellate Tribunal with clean hands---Appellant's request for condonation of delay in filing of appeal, did not merit consideration---Appeal was dismissed on the point of limitation, in circumstances.

2002 SCMR 343 ref.

Asim Muneer Bajwa for Appellant.

Aurangzeb for Respondents.

2017 P T D (Trib.) 2201

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs ALLAH WALA AUTO ENGINEERING

Versus

DEPUTY COLLECTOR OF CUSTOMS and another

Custom Appeal No.K-178 of 2016, decided on 1st June, 2017.

(a) Customs Act (IV of 1969)---

----Ss. 32, 32-A, 79 & 180---Show-cause notice---Preparation, issuance and scope---Show-cause notice, was a vital basic document, which was to be prepared with utmost care after going through the provisions of the Act/Ordinance---Cosmetic show-cause notice was not a legal document---Authority, issuing show-cause notice after the establishment of charge, was to carefully go through the facts of the case and applicable provisions of the Act alleged to be contravened and the penal clauses attracted----Decision on any fresh ground, which was not spelled out in the show-cause notice, was not permitted---Provisions of law which were not applicable and were invoked, would render the show-cause notice palpably illegal---Proceedings before Adjudicating Officer, were in the nature of quasi judicial proceedings and issuance of notice under S.180 of the Customs Act, 1969, was very important document---Decision to issue show-cause notice, was to be taken by the Collector Adjudication, by application of independent mind and not merely signing the draft show-cause notice submitted by the Investigation Agency, separate from the Adjudication Department---Each category of officers were required to perform their respective functions/duties under the law---Practice to submit draft show-cause notice by the Director General of Intelligence and Investigation to the Collector Adjudication was depreciated---While passing order-in-original/appeal, it was mandated upon the adjudicating authority to examine the charter of show-cause notice and remain within its ambit---Where order so passed was beyond the charter of the show-cause notice, same would be deemed to be illegal---Appellate Tribunal, in such a situation would have no after option but to declare the notice to be suffering from legal infirmity and void.

Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369; Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898; Rose Color v. Chairman, CBR 2013 PTD 813; Collector Excise and Land Customs and others v. Rehm Din 1987 SCMR 1840; Adam v. Collector of Customs, Karachi PLD 1969 SC 446; Muhammad Sadqain v. Collector of Customs (Appraisement) 2006 PTD 2742 and Messrs Exide Pakistan Ltd. v. Deputy Collector of Customs (Adjudication-III), Karachi, 2004 PTD 1449 ref.

(b) Customs Act (IV of 1969)---

----Ss.2(kka), 25, 25-A & 32---"Declaration"---Meaning---Assessment---Mis-declaration---Where any assessment for levy of duty and taxes was being made with the application of valuation ruling issued by Director, Directorate General of Valuation under the provision of S.25-A of the Customs Act, 1969, retrieved invoice; whether of higher or lower value as against declared, was of no significance even if it was a transaction value within the meaning of S.25(1) of the Customs Act, 1969---'Customs Value' as determined under S.25-A of the Customs Act, 1969, with the application of different subsection of S.25(1) of the Customs Act, 1969 in sequential manner, notwithstanding the retrieved invoice was not to be considered as declaration within the meaning of S.2(kka) of the Customs Act, 1969---Entire proceedings in the present case, right from framing of contravention report till issuance of order was based on mala fide and caprice which was of no legal effect and ab initio void.

Nadeem Ahmed Mirza, Mirza Abeer, Consultants and Obaid Mirza for Appellants.

Mahmood ur Rehman Khattak, Deputy Collector along with Masood Ahmed, Appraiser for Respondents.

2017 P T D (Trib.) 2217

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs SHAKEEL BROTHERS AND YOUSUF AYUB, KARACHI

Versus

COLLECTORATE OF CUSTOMS, ADJUDICATION, QUETTA and another

Customs Appeal No.H-413 of 2015, decided on 28th February, 2017.

(a) Customs Act (IV of 1969)---

----Ss. 2(s), 16, 168, 177 & 186---SRO No.118(I)/83, dated 12-2-83---S.R.O. No.486(I)/2007, dated 9-6-2007---"Smuggling"---Detention and seizure of goods---Jurisdiction---Appellant after buying 4875 Kgs. betal nuts, transported same through Goods Forwarding Agency by container---Officials of Directorate General of Customs intercepted the trailer and detained the same under S.186 of the Customs Act, 1969 and seized the goods under S.168 of the Customs Act, 1969 and framed contravention report---Functionaries of Directorate General had been appointed "Officers of customs" in terms of S.3-A of the Customs Act, 1969 and they derived powers for functioning through S.R.O. 486(I)/2007, dated 9-6-2007---Said Notification/SRO, nowhere delegated powers to the Customs officials under Ss.2(s) & 177 of the Customs Act, 1969 which expressed the definition of word "smuggle" and "restriction on possession of goods in certain areas"---In the absence of availability of powers, the functionaries of Customs Directorate were barred by law to exercise powers not vested with them---Neither the Customs Act, 1969, nor any notification empowered the said functionaries of Customs Directorate to either intercept or detain any goods transported by any person through public carrier within the territory of Pakistan, with the exception of area expressed in S.177 of the Customs Act, 1969 read with SRO No.118(I)/83, dated 12-2-83---Customs officials had stretched their powers beyond the provision of Customs Act, 1969 and SRO No.486(I)/2007, dated 9-6-2007, which was not permitted---Interception of the vehicle and detention of loaded goods and demand of import/purchase documents of the transported goods from the driver or the shipper of the goods, without power/ jurisdiction, was coram non judice---Transporting of the goods by the appellant through public carrier, did not fall within the meaning of "smuggling" and not the goods as "smuggled" through any stretch of imagination---Order accordingly.

Case-law referred.

(b) Customs Act (IV of 1969)---

----Ss. 2(s), 16, 177 & 187---SRO No.566(I)/2005, dated 6-6-2005---S.R.O. No. 499(I)/2009, dated 13-6-2009---S.R.O. No.118(I)/83, dated 12-2-1983---Qanun-e-Shahadat (10 of 1984), Arts.117 & 121---"Smuggling"---Burden of proof---Goods/betel nuts were seized from National Highway during transportation from Karachi to Lahore---Betel nuts were lawfully imported and were purchased by the appellant for the purpose of business; which was not restricted under provisions of Customs Act, 1969---Said item could not be either intercepted or detained---Container or vehicle through which the appellant was transporting goods, was having no hidden or false cavities made or artificially made; instead at the hind of vehicle openly and due to the said reason the Customs officials released the vehicle without any hitch or hindrance---Such was ample proof that neither the appellant was involved in any type of "smuggling" nor the goods transported by him were "smuggled goods", rendering the interception of the vehicle and detention---Seizure of the goods was nullity in law---If the item alleged to be "smuggled" was freely available in the open market and the import of such goods were not banned in the country, presumption would be that the goods in question were lawfully brought in the country, unless contrary was shown---Appellant had discharged the burden of proof laid upon him under S.187 of the Customs Act, 1969---Customs officials had failed to prove the charge of "smuggling" or transportation of "smuggled goods" under Arts. 117 & 121 of the Qanun-e-Shahadat, 1984---Seizure notice and connected proceedings which were infested with patent illegalities, were held to be null and void---Order-in-original based on such proceedings were also ab initio, null and void, and was set aside---Appeal was accordingly allowed with the direction to the department to deliver the goods to the appellant forthwith, without hitch and hindrance.

Case-law referred.

Asim Munir Bajwa for Appellant.

Wilayat Ali, Senior Superintendent for Respondent.

2017 P T D (Trib.) 2250

[Customs Appellate Tribunal]

Before Zulfiqar A. Kazmi, Member (Technical-I)

SUPREME PLASTIC INDUSTRIES

Versus

The DEPUTY COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-2195 of 2016, decided on 29th May, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 32, 79 & 80---Misdeclaration---Declaration was filed at total invoice value of US $ 6250---Importer sought clearance of the same by determining the liability of taxes on his own---Goods declaration was selected for scrutiny---Images attached and scrutiny of the examination report, had revealed that value given was Indian rupees 2,504,200 which came to US $ 37,629 and final value came to US $ 38000; which clearly manifested under invoicing to the extent of 508 %---Said facts had shown that the importer had deliberately concealed the actual contents of the goods by mis-declaring the value of the goods in order to suppress duty/taxes and with mala fide intention and had attempted to evade the legitimate revenue amounting to Rs.654512---Adjudicating authority, found that charges against the importer stood established and in exercise of powers under Ss.32(1)(2) & 79(1) of Customs Act, 1969, importer was given an option to redeem the same on payment of leviable duty/taxes and redemption fine, with penalty of Rs.50,000---Validity---Adjudicating authority, had adjudged duty/taxes on the 'ICEGATE' invoice by stating in the impugned order that the importer had admitted the charges of under-invoicing and showed willingness to pay the differential duty/taxes---Said conclusion was found to be factually incorrect as record, did not reveal any such act or statement by the importer; rather he had contested the charges and depended his declaration and documents furnished with the goods declaration at all stages of adjudication and appeal---Evidence of actual payment also supported the declaration of the importer---Supplier had also confirmed the transaction value for the impugned goods at US $ 6,250, whatever information was given at the Indian Web-site, could not over-rule or set aside the transaction value, unless the department evidently would prove that such a consideration had been exchanged for which the provisions of S.25 of the Customs Act, 1969, were required to be followed---Impugned order had no legal premise to stand---Appeal having merit, was allowed.

Nadeem Mirza for Appellant.

Syed Kareem Adil, D.C. along with Saeed Durrani, A.O. for Respondent.

2017 P T D (Trib.) 2265

[Customs Appellate Tribunal]

Before Zulfiqar A. Kazmi, Member (Technical-I)

Messrs I.T. IMPEX

Versus

DEPUTY DIRECTOR and 2 others

Customs Appeals Nos.K-1214 and 1215 of 2016, decided on 30th May, 2017.

Customs Act (IV of 1969)---

----Ss. 25 & 81(3)---Customs value of goods---Determination---Provisional assessment of duty---Goods were imported vide declaration at the rate of unit value of US $ 2.5000; assessment was made at the rate of unit value of US $ 3.5000---Assessment was finalized and appeal against said assessment was dismissed---Validity---Goods were assessed provisionally on 15-7-2015 under S.81(3) of the Customs Act, 1969 and finalization of that assessment was to be done legally within six months from the date of provisional assessment---Contention of department was that finalization was done on 23-1-2016 and not by the cut-off date of 15-1-2016, for the reason that matter was under finalization with the Directorate of Valuation---Said order was upheld to the effect that "final assessment" having been made within the stipulated time on the ground that importer had been duly informed---Said assumption had no basis as legally requisite determination of value under S.25 of the Customs Act, 1969 had not been made within the statutory limitation of time---Fact remained established that finalization of assessment in the case was barred by 16 days---Impugned assessment and order, were not lawful and not supported by the relevant statutory provisions---Appeal was allowed and impugned order was set aside as not legally maintainable.

Case-law referred.

Nadeem Mirza for Appellant.

None for Respondents.

2017 P T D (Trib.) 2357

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I and Muhammad Nazim Saleem, Member Technical-II

JAVED IQBAL

Versus

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, FBR, KARACHI and another

Customs Appeal No.H-744 of 2014, decided on 3rd September, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 9, 10, 16, 156(1)(8)(89), 157(2), 179 & 194-A(4)---"Smuggling"---Seizure and confiscation of goods---Information was received by the department that an attempt of smuggling of huge quantity of antiques was being undertaken, to move the items from Islamabad to Karachi for onward transportation abroad in a Trailer/container---Team was constituted under the supervision of Superintendent, Range Office, which intercepted said truck---Said container was filled with 28 boxes found subsequently to contain 700 articles of antiques---Adjudicating Collector of Customs, passed order-in-original, in which he agreed with the contention of seizing agency that the seized antiques were brought into the country through an unauthorized route---Seized antiques were confiscated in terms of cls.(8) & (89) of S.156(1) of Customs Act, 1969 for the violation of S.2(s)(ii)(iii) and S.157(2) of the Customs Act, 1969---Validity---Scheme and structure of S.2(s) of the Customs Act, 1969, was that the offence of 'smuggling', was defined to have occurred only when the offending goods brought into or taken out of the country, meaning thereby that the criminal action had been completed and offence had already taken place---Exception to such definition, was provided under Cl.(iii) of S.2(s) of Customs Act, 1969, whereby an attempt, to bring into or taken out of the country, offending goods through an unspecified route was also stated to constitute offence of "smuggling"---Adjudicating authority, having realized that the "attempt to smuggling" per se was not an offence at par with that of "smuggling" unless it was in relation to the use of an unspecified route, instead of deciding the case on merits and upon basis as were stated clearly in the law, chose to introduce the same in the order-in-original despite knowing that such was not an allegation against the appellant in the case made by Detecting Agency---Such an action of the adjudicating authority was prejudicial to the interests of the appellant, as there was no such allegation against him in the show-cause notice, and he was effectively denied an opportunity to be heard in that regard which was violation of the principles of natural justice---Impugned order-in-original, was outright illegal on account of being, neither warranted nor sustainable under the law---Order-in-Original was time barred; as proceedings under S.179(3) of Customs Act, 1969 were to be completed within 120 days of the issuance of the show-cause notice, but in the present case these were completed in 425 days, in violation of mandatory provisions of law---Proceedings, actions and orders passed by adjudicating authority completely suffering from grave legal infirmity, were declared ab initio illegal, and of no legal effect on various accounts---Appeal was accordingly allowed.

2009 PTD 762; 2008 PTD 578 and PTCL 2005 CL 841 ref.

Zain A. Jatoi for Appellant.

Ghulam Muhammad, I.O. Present for the Respondent.

2017 P T D (Trib.) 2403

[Customs Appellate Tribunal]

Before Zulfiqar A.Kazmi, Member (Technical-I)

Messrs SHAHEEN CHEMICAL

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others

Customs Appeal No.K-1000 of 2016, decided on 13th January, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 79, 80, 157, 168, 193 & 194-A---Assessment of duty---Confiscation of goods---Importer filed Goods Declaration for the import of "Plastic Granules Recycled" and determined his liability of payment of applicable duty and taxes, and sought clearance under S.79(1) of the Customs Act, 1969---In order to ascertain correction of the particulars and amounts of duties and taxes, Goods Declaration was selected for scrutiny in terms of S.80 of the Customs Act, 1969---Importer had provided copy of the non-hazardous certification from the supplier, but same was not accepted---Case was adjudicated and goods were outrightly confiscated---Appeal filed by the importer against the impugned order was dismissed by the appellate authority---Validity---Importability of recycled plastic granules, was essentially governed by the condition, which condition had shown that "certificate" was required from the "exporting country" in respect of the impugned goods and not for any type of waste---Such a certification had undertaken that recycled plastic granules being exported to Pakistan were "free from hazardous substances"---In the present case, certificate by the exporting firm had been furnished with respective Trade Body's authentication; that alone was found to suffice the need for ensuring that the goods imported, were free from any hazardous substance, including any waste, which had been identified and listed in the "Basel Convention"---Same Clearance Collectorate had been accepting identical certificates in the past to allow import of recycled plastic granules---Impugned order was set aside as not maintainable in circumstances.

The State v. Zia-ur-Rehman and others PLD 1973 SC 49; 2009 PTD 1083; Lt. General (Retd.) Shah Rafi Alam v. Lahore Race Club 2004 CLD 373; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517; Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587; Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485; Central Insurance v. CBR 1993 SCMR 1232; Nazir Ahmed v. Federation of Pakistan and 11 others PLD 1970 SC 453; 2002 PTD 976; 2002 SCMR 312; 2009 PTD 1507 and 2005 SCMR 492 ref.

Nadeem Mirza for Appellant.

Abid Shah, A.O. for Respondents.

2017 P T D (Trib.) 2435

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem Member (Technical-II)

ABDUL JABBAR

Versus

DIRECTOR

Customs Appeal No.K-380 of 2014, decided on 30th August, 2016.

Customs Act (IV of 1969)---

----Ss. 32, 32-A, 79, 80, 156(1)(14)(14-A), 179 & 194-A---SRO No.1125(I)/2011, dated 31-12-2011---Misdeclaration and fiscal fraud---Appellant was alleged to be involved in import and clearance of textile material without payment of leviable sales tax, Value Addition Tax and consequential Withholding Tax against false declaration of a manufacturing unit---Further allegation against appellant was that he, in collusion with their clearing agents, had misdeclared their status and fraudulently and unduly claimed benefit of zero-rating of sales tax under S.R.O. No.1125(I)/2011, dated 31-12-2011; that appellant and clearing agent had committed offence of mis-declaration and fiscal fraud under Ss.32(1(2), 32-A, 79, 80 of the Customs Act, 1969---Adjudicating Authority ordered the appellant to deposit recoverable amount into the Government Treasury; personal penalty was also imposed on the appellant---Controversy in the appeal, revolved around the issues that whether any material had been placed on record to establish evasion of sales tax, Value Addition Tax and consequential Withholding Tax by the appellant and appellant wrongfully claimed benefit of the SRO; that whether alleged evasion of sales tax, even at import stage, could entail initiation of proceedings under the penal provisions of the Customs Act, 1969; that whether Officers of the Directorate General of Intelligence and Investigation had the authority to take action in the matter of the alleged evasion of sales tax; that whether order-in-original passed by the adjudicating authority was bad and unsustainable in law---Held, there were three requirements for a person to be ellegible for claiming benefits of S.R.O. No.1125(I)/2011, dated 31-12-2011; said person should be doing business in one of five specific sections (leather, textile, carpets, sports and surgical goods); person should be registered with the Inland Revenue Authority and manufacturer, importer, exporter and name of person should appear on the Active Taxpayers' list---Appellant fulfilled all said conditions---Penalty had been imposed on the appellant in terms of commission of the offence of mis-declaration only under S.32 of the Customs Act, 1969, there was no allegation against the appellant as to mis-stating and/or under-stating the description, weight, value and/or quantity, or for that purpose making any other false statement---Allegation of commission of an offence under S.32 of the Customs Act, 1969 could not be made against the appellant---Order-in-original passed by the adjudicating authority, was time barred, having been passed in violation of S.179(3) of the Customs Act, 1969---Courts were required to maintain the norms of justice and equity; litigants were to be respected not on account of courts' power to legalize injustice on technical grounds, but to remove injustice---In the present case, orders passed by the hierarchy of the customs, were infested with patent illegalities which were set aside being void and without lawful authority---Appeal was allowed, in circumstances.

Al-Haj Industrial Corporation (Pvt.) Ltd. v. Collector of Customs 2004 PTD 801; Shujabad Agro Industries (Pvt.) Ltd. v. Collector of Customs and others 2014 PTD 1963; Philip Morris (Pakistan) Ltd. v. Additional Collector and others 2016 PTD (Trib.) 1008; 2009 PTD 762; 2008 PTD 578 and PTCL 2005 CL 841 ref.

Zain A. Jatoi for Appellant.

Saud hasan, I.O. and Aqil Alam for Respondent.

2017 P T D (Trib.) 2463

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)

AMJAD KHAN and others

Versus

SUPERINTENDENT OF CUSTOMS (ASO), CUSTOMS HOUSE, LAHORE and another

C. A. No.24/LB of 2015, decided on 4th April, 2016.

Customs Act (IV of 1969)---

----Ss. 2(KK)(S), 16, 156(1)(89), 168(1), 181 & 194-A---"Smuggling"---Seizure of goods---Option to pay fine in lieu of confiscated goods---Customs authorities found foreign origin tyres outside the stand of Goods Transport Company, which were booked by different persons---Persons, who claimed ownership of said tyres, could not produce any documentary evidence in support of lawful possession or legal import of said foreign origin tyres---Tyres in question were detained under S.2(KK) of the Customs Act, 1969---Alleged claimants expressed their willingness to pay duty and taxes leviable thereon---Sufficient reasons existed to believe that the detained tyres had been brought into the country in breach of the restrictions and prohibitions---Said tyres were seized under S.168(1) of the Customs Act, 1969 for the contravention of Ss.2(S) & 16 of said Act, punishable under S.156(1)(89) of the Customs Act, 1969---Confiscated tyres were redeemed to its lawful owners by the Adjudicating Authority on payment of redeeming fine equal to 20% of the assessed value of the same in addition to payment of duty/taxes leviable thereon; and personal penalty of Rs.10,000 each was imposed upon the claimants/owners of confiscated/redeemed tyres and the vehicle---Validity---Importation or goods having entered into the country without payment of proper duties and taxes---Appellant had failed to produce evidence of lawful duty paid and establish the factum of lawful importation or possession of tyres in question---Appeal being devoid of merits, was dismissed, in circumstances.

Ehsan Baqir for Appellant.

Mansoor Akhtar with M. Adnan Khalid, D.C. for Respondents.

2017 P T D (Trib.) 2490

[Customs Appellate Tribunal]

Before Justice (Retd.) Malik Manzoor Hussain, Chairman/Member Judicial-I

Messrs KING ENTERPRISES, KARACHI

Versus

The COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 3 others

Customs Appeals Nos. K-1567 to K-1572 of 2015, decided on 30th November, 2016.

Customs Act (IV of 1969)---

----Ss. 25 & 32---S.R.O. No. 659(I)/2007, dated 30-6-2007---Import of goods---Determination of customs value---Untrue statement, error etc.---Consignment containing glassware crockery, kitchenware, was imported by the importer under different P.C.T. Headings and claimed benefit of S.R.O. No.659(I)/2007, dated 30-6-2007---Hotpot was classified by the Appraisement Collectorate under P.C.T. Heading 1924.1000 instead of P.C.T. Heading 9617.0020 filed in Goods Declaration by the importer---Importer vide order-in-original, was directed to deposit the assessed amount of duty and taxes, beside personal penalty of Rs.10,000 was also imposed on the importer---Appeal filed by importer against order-in-original had been dismissed by the Collector of Customs (Appeals)---Validity---Importer's four consignments were assessed as per Classification Committee Ruling, because those were cleared after issuance of ruling; while the remaining consignments were cleared much before the ruling applied---Nothing was mentioned in the ruling that same would be applicable retrospectively or already cleared consignments---Any ruling, rules/regulations or notification, could not affect the earlier transaction concluded before issuance of the same and would have prospective effect---Present was not the case of wrong Goods Declaration or mis-declaration of consignment; also no fraud or collusion or mis-representation was alleged; in such an eventuality, the Adjudicating Officer should have been conscious enough to save the interest of taxpayer and decide the matter judiciously, fairly and strictly in accordance with law---Forums below had failed to properly appreciate the legal position to secure the rights accrued to the importer before issuance of ruling was applied giving retrospective effect---Orders passed by adjudicating authorities were patently illegal, unfair and void ab initio and were set aside in circumstances.

M.H. Awan for Appellant.

Muhammad Akram, A.O. for Respondents.

2017 P T D (Trib.) 1608

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II)

Messrs HI-TECH IMPEX KARACHI and 5 others

Versus

The DEPUTY COLLECTOR OF CUSTOMS, GROUP IV, MCC OF PACCS, CUSTOMS HOUSE, KARACHI and another

Cus. Appeals Nos. K-729 to 735 of 2014, decided on 17th November, 2014.

Customs Act (IV of 1969)---

----Ss. 3-D, 25, 26-A, 32, 79 & 80---Customs Rules, 2001, Rr.107, 110, 193, 433, 438 & 442---S.R.O. No.500(I)/2009, dated 13-6-2009---Notification No.371(I)/2002, dated 15-6-2002---Re-assessment of goods declaration---Clearing Agent of importer filed goods declaration and deposited upfront duty and taxes---Goods declaration was not auto processed, instead selected for conduction of examination---Competent Adjudicating Authority assessed value at USS 1.50 Kg for levy of duty and taxes, which the importer paid and consignment was allowed clearance for delivery through a valid clearance order---Subsequent to that Deputy Collector of Customs/Adjudication authority, passed another assessment order through which he determined value at US$ 1.87 Kg and transmitted 'view message' for payment of additional amount of duty and taxes for obtaining delivery, irrespective of the facts that the delivery had already been obtained by the importer---Appellate Authority rejected the appeal of importer---Validity---Show cause notice which was prerequisite had been issued to the importer before re-assessment---Re-assessment made by Deputy Collector of Customs, of the goods declaration of the importer after clearance, amounted to conduction of audit under S.26-A of the Customs Act, 1969 to which he was not empowered---Act of Deputy Collector of Customs was without power/jurisdiction, as such void, ab initio and coram non judice---Upon passing of assessment order and thereafter passing of clearance order by the Authority, it could not be disturbed by any Authority for the purpose of re-assessment, preparing contravention report and adjudication proceedings---Re-assessment after release of the goods was permitted only after calling for the documents and upon receipt of documents or the information so transmitted, if was found to be incorrect in respect of earlier assessment---No mis-declaration having been noticed in material particular, re-assessment was not warranted---Adjudicating Authority, while creating recovery through 'view message', had committed violation of the provisions of S.32(3) of the Customs Act, 1969 and principles of natural justice, rendering the recovery so created without any lawful authority, as such void ab initio---Authority enjoying powers under S.32(3) of the Customs Act, 1969 was the 'Principal Appraiser'; for recovery, but to the contrary the Adjudicating Authority issued recovery/demand notice by usurping the powers of his subordinate, which was not permitted under the law---Adjudicating Authority, through 'view message' also created recovery for the short paid Sales Tax and Income Tax due to in advertence, while re-assessing the goods declaration ignoring that S.80(3) of the Customs Act, 1969 only spoke about "duty" and not the taxes for which the appropriate authorities were "Officials Inland Revenue" and Customs Officials figured nowhere---Adjudication Authority was not empowered to create recovery of sales tax and income tax for post clearance---Initial assessment order passed by the Appraiser with the application of highest value available in the data maintained by the Collectorate, Adjudication Authority, while passing re-assessment order, ignored lowest value of the identical goods available in the data---While nullifying the dictate of law, Authority defeated the norms of independence and fair play---Appellate Authority below, which should have passed order within 120 days from the date of filing appeal was barred by 289 days---Same was without power/jurisdiction and could not be enforced under law---Order passed by the Adjudication Authority, in circumstances, was not proper order and was passed without application of judicial mind---Said order was unlawful and had to be treated illegal, void, arbitrary and a result of misuse of authority vested in public functionary---Whole proceedings were infested with inherent legal infirmities and substantive illegalities, tantamounting to patent violation of mandatory statutory provisions---Re-assessment order and view message passed by the Adjudicating Authority, as well as order passed in appeal by Appellate Authority below suffered from grave infirmities, and was declared to be illegal, null and void and set aside.

Case law Referred.

Nadeem Ahmed Mirza (Consultant) and Obayd Mirza for Appellants

Kousar Hussain Appraiser Respondent Nos. 2 and 3.

2017 P T D 1144

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs MUSLIM TRADERS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-OLN/0000079 of 2016, decided on 11th January, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 14, 11 & 19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 10---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Complaint against proceedings initiated against complainant for sales tax registration and realization of sales tax---Contention of complainant, inter alia, was that he was not required to register for sales tax under S. 14 of the Sales Tax Act, 1990---Validity---Department had issued notice to the complainant to inquire about his position with regard to sales tax registration and realization of sales tax, and complainant, instead of filing a reply to the said notice, preferred to file complaint before the Federal Tax Ombudsman---Federal Tax Ombudsman observed that issuance of notice does not cause any grievance or prejudice for filing of complaint---Complaint was rejected, in circumstances.

2016 PTD (Trib.) 2348 ref.

Haji Ahmad, Advisor and Abdur Rehman Dogar, Advisor, Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 1205

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs MUSLIM TRADERS

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No. FTO-OLN/0000080 of 2016, decided on 11th January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 165 & 153---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 10---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Complaint against proceedings initiated for default in filing of withholding statement and short deduction of tax under Ss.165 & 153 of the Income Tax Ordinance, 2001----Contention of complainant was inter alia that notice was issued to the complainant by the Department without looking at the relevant record, which was tantamount to "maladministration"---Validity----Department had required the complainant to explain his position with regard to rate of deduction of tax and it was complainant's obligation to reply to the issues raised in the notice, however, the complainant preferred to file present complaint, which was premature---Federal Tax Ombudsman observed that issuance of notice does not cause any grievance or prejudice for filing of complaint---Complaint was rejected, in circumstances.

Haji Ahmad, Advisor and Abdur Rehman Dogar, Advisor Dealing Officers.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 1405

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

MUHAMMAD ZAFAR IQBAL

Versus

The SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-ONL/0000078 of 2016, decided on 3rd March, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 205 & 153---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9, 2(3) & 10---Federal Tax Ombudsman, jurisdiction of---Maladministration---Disposal of complaints---Scope---Complaint against initiation of proceedings under Ss.161 & 205 of the Income Tax Ordinance, 2001 for default in deduction of withholding tax at source---Contention of complainant was that proceedings initiated in respect of the default in deduction of withholding tax already stood annulled by the Commissioner (Appeals) and there was no justification for initiation of said proceedings again---Validity---Federal Tax Ombudsman observed that the matter had gone though two rounds of appeal and was also subject of a complaint made to the Federal Tax Ombudsman, and thereafter fresh proceedings were initiated against complainant---Federal Tax Ombudsman disposed of the complaint on assurance of the Department to consider the complainant's reply to the notice on merits and with the direction to resolve the matter early as per law on receipt of reply and documents from the complainant.

1994 SCMR 2232 and PLD 1990 SC 666 ref.

Abdur Rehman Dogar, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 1447

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs SHAH SONS PAKISTAN (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-ONL/00000038 of 2017, decided on 11th May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 120---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2)(b), 2(3) & 10---Complaint against non-issuance of income tax refund---Jurisdiction of the Federal Tax Ombudsman in relation to cases of tax refund---Maladministration---Scope----Contention of the Department was that per S.9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000; the Federal Tax Ombudsman had no jurisdiction to investigate matters related to assessment of income or wealth and liability of tax in which statutory remedy of filing appeal was available---Validity---Federal Tax Ombudsman was a forum for looking into arbitrary acts of negligence and inattention, which tantamount to maladministration and not for determination of income or tax liability or interpretation of law---Failure of Commissioner to pass an order under S.170(4) of the Income Tax Ordinance, 2001 did not absolve him of the responsibility to pass such order within the time prescribed by law and failure to deal with such statutory obligation within time prescribed amounted to "maladministration"---Department could examine genuineness and accuracy of claims for refund but same had to be sorted out within the time prescribed under the law which had not been done in the present case---No condition existed in law that before filing of a complaint before the Federal Tax Ombudsman, complainant had to make representation(s) to Departmental authorities---Federal Tax Ombudsman observed that neglect and inattention in issuance of refund was tantamount to maladministration under S. 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 and recommended that the Department direct the Commissioner to dispose of the refund/ compensation claim early---Complaint was disposed of, accordingly.

Order No.55 of 2007-Law (FTO) dated 31.07.2008 and Orders Nos. 26/FTO/2016 dated 16.08.2016 and No.78/FTO/2016, dated 16.08.2016 rel.

Abdur Rehman Dogar, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 1480

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs SHAH SONS PAKISTAN (PVT.) LTD.

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-ONL/0000049 of 2017, decided on 17th May, 2017.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 9(2)(b) & 10 ---Nature and scope of the jurisdiction of the Federal Tax Ombudsman---Bar on the jurisdiction of the Federal Tax Ombudsman on matters which are sub-judice---Complaint against issuance of show-cause notice by the Department under provisions of the Sales Tax Act, 1990---Contention of the Department was that the jurisdiction of the Federal Tax Ombudsman was barred as the complainant had filed an appeal before the Appellate Tribunal---Validity---Appeal filed by the complainant before the Appellate Tribunal was sub-judice and therefore the bar on jurisdiction of the Federal Tax Ombudsman was applicable and a challenge to a show-cause notice was no different than filing a petition on basis of an apprehension or speculation and was not mature for adjudication---Complaint was rejected, in circumstances.

Auditor General of Pakistan v. FTO Writ Petition No.1238 of 2013 rel.

Abdur Rehman Dogar, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 1556

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs SHAHEEN CLOTH PROCESSING MILLS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-FSD/0000611 of 2016, decided on 24th April, 2017.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 9(2)(a), 2(3) & 10---Sales Tax Act (VII of 1990) Ss. 47, 66 & 67---Complaint against non-issuance of sales tax refund---Jurisdiction of the Federal Tax Ombudsman---Maladministration---Scope---Matter sub judice before High Court---Effect---Contention of the Department was that per S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000; jurisdiction of the Federal Tax Ombudsman was barred since the matter was subject of a reference before the High Court under S.47 of the Sales Tax Act, 1990 which was filed before the present complaint---Validity---Contention of Department was misconceived as the Federal Tax Ombudsman looks into acts of omission and delay caused due to inefficiency, neglect and inattention of the Department---No justification existed in the present case for unwarranted delay in process of verification of complainant's application and disposal of the refund claim---Contention that refund should be withheld till decision of the reference before the High Court was not convincing as no stay was granted by the relevant court of law---Appeal by itself did not have the effect of staying of the operation of the order appealed against---Federal Tax Ombudsman observed that the neglect and inattention of the Department in the process of verification and disposal of refund claim tantamount to maladministration and recommended the Department to direct the concerned Commissioner to issue due refund/compensation within 45 days---Complaint was disposed of, accordingly.

2002 PTD 2646; 2013 PTD 534; 2013 PTD 2341; 2002 PTD 1805; 2012 PTD 424, 2013 PTD 534; Messrs Mumtaz Ghani Textile (Pvt.) Ltd. v. Secretary Revenue Division, Islamabad 2013 PTD 1770 Complaint No.300/LHR/51(62) ??? 583/2012 ref.

2002 PTD 6446; 2013 PTD 534; 2013 PTD 2341 and Order No.14/2007-Law/FTO rel.

S. Ashraf Ahmad Ali, Advisor Dealing Officer.

Khubaib Ahmad, Authorized Representative.

2017 P T D 1651

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs M. SHAH SONS PAKISTAN (PVT.) LTD.

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. FTO-ONL/0000056 of 2017, decided on 19th May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 10, 2(3) & 9---Federal Tax Ombudsman, jurisdiction of---"Maladministration"---Disposal of complaints---Delay in issuance of refunds---Scope---Complaint against non-issuance of refund / compensation under S.170(4) of the Income Tax Ordinance, 2001---Contention of complainant was that order on its application for issuance of refund was not processed within the 60 days period provided for in S.170(4) of the Income Tax Ordinance, 2001---Department contended that jurisdiction of the Federal Tax Ombudsman was barred under S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Refund claim was not an issue pertaining to assessment of income or determination of tax liability and Commissioner had to determine excess refundable amount after verification of tax payment and in case there was any deficiency, then the Commissioner was required to requisition the same by issuing a letter under S.120(3) of the Income Tax Ordinance, 2001 and no such exercise was conducted in the present case---Failure to deal with a statutory obligation within the time prescribed under a statute amounted to "maladministration"---Federal Tax Ombudsman recommended to the Department to direct to the Commissioner to settle the complainant's refund claim in accordance with the provisions of law without further delay---Complaint was disposed of, accordingly.

Order No.55/2007-Law (FTO); Orders No.26/FTO of 2016, dated 16.08.2016; No.78/FTO of 2016 dated 16.08.2016; 2016 PTD 377 (2015 LHC 6191) rel.

Sardar Irshad Shaheen, Advisor and Abdur Rehman Dogar, Advisor Dealing Officers.

Riaz Ahmad Raja, ITP Authorized Representative.

2017 P T D 2485

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

Messrs PIONEER CABLES LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 380/KHI/CUST(44)561 of 2017, decided on 26th October, 2017.

Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 2(3), 9 & 10---Customs Act (IV of 1969) Ss. 33 & 18---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Maladministration---Scope---Complaint against delay in refund of Customs Duty and imposition of additional Customs Duty---Contention of Department was that delay in refund was on account of non-provision of certain documents by complainant---Validity---Complainant undertook to provide the documents which had been identified by the Department and the Department undertook to finalize the matter upon submission of the required information --- Federal Tax Ombudsman observed that matter was pending before the Department for the last nine months however, since no time-line was provided for in the Customs Act, 1969 for passing of orders on refund applications, therefore no case of maladministration was made out --- Federal Tax Ombudsman, however, advised Department to finalize proceedings for the complainant expeditiously and furthermore to consider amendment in Customs Act, 1969 for inclusion of specific time-period for decision on refunds --- Complaint was disposed of accordingly.

Shahid Ahmad, Advisor, Dealing Officer.

Pervaiz Lakhani, Authorized Representative.

2017 P T D 1058

[High Court (AJ&K)]

Before Sardar Abdul Hameed Khan and Ch. Jahandad Khan, JJ

Messrs AZAD KASHMIR LOGGING AND SAW MILLS CORPORATION (AKLASC), MUZAFFARABAD

Versus

COMMISSIONER INCOME TAX, INLAND REVENUE, MUZAFFARABAD

Income Tax Appeal No.217 of 2012, decided on 5th June, 2015.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 65, 134, 135 & 136---Reference to High Court---Revised assessment---Assessee corporation filed return of its income for relevant assessment year; which subsequently was revised and Taxation Officer enhanced the amount of tax---On filing appeal by the assessee, appellate authority below allowed some expenses, but disallowed most of the claim of assessee---Assessee feeling dissatisfied by the order of appellate authority below filed appeal before Appellate Tribunal, which appeal was accepted, but case was sent back to the Taxation Officer to calculate the amount of tax on the basis of revised return---Reference to High Court---Question of law which arose out of the order of the Tribunal was; "whether the Tribunal after accepting the version of the assessee corporation in toto, was justified to direct the Taxation Officer to re-calculate the amount of tax, specially with reference to Proviso to S.62(1) of Repealed Income Tax Ordinance, 1979"---Tribunal had finally resolved that the Tribunal was satisfied that the documents furnished before the Taxation Officer were sufficient explanation of expenditure under different heads and that Taxation Officer was not competent to reject the audited revised returns without solid reasons---Tribunal was not justified to direct the Taxation Officer to re-calculate the tax amount; rather it was manifest to order the acceptance of the revised return---Revised returns had been accepted as correct by the Tribunal, and those observations had attained finality for having not been challenged by the department---Impugned remand order, with direction for re-calculation of the tax amount passed was likely to push the assessee to another endless round of an unnecessary proceedings---Question of law referred by the assessee and formulated by the High Court, was answered in the negative---Judgment of the Tribunal to the extent of re-calculation of the tax amount, was set aside---Revised return filed by assessee stood accepted---Order accordingly.

1971 SCMR 681; 1984 PTD 355; 2011 PTD 2612; 2005 PTD 2534; 2001 PTD 987; 1995 PTD 752 = (1995) 71 Tax 156 (H.C. Kar.); (1970) 21 Tax 1; 1994 SCMR 229 = 1994 PTD 174; PLD 1992 (sic) 954; PLD 2011 (sic) 2161; 2006 PTD 2654; 2005 PTD 2368; 1991 PTD 463; 1998 PTD 1014; Messrs Shahab Industries Ltd. Karachi v. The Commissioner Income Tax 1991 PTD 463 and Ch. Muhammad Sadiq v. Income Tax Officer and others 1988 PTD 1014 ref.

Raja M. Arif Rathore and Iqbal Suleman Pasha for Appellant.

2017 P T D (Trib.) 70

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fiza Muzaffar, Accountant Member

Messrs SHAMA EXPORTS (PVT.) LTD., FAISALABAD

Versus

C.I.R. (A), FAISALABAD and others

S.T.A. No.770/LB of 2014, decided on 14th January, 2015.

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

----S. 11---Show-cause notice---Scope, object and contents of a valid notice.

Show-cause notice, was a foundational document, which was to describe the case comprehensively, made out against the taxpayer by invoking relevant provisions of law and by making references on corroborating and solid evidence collected in support of the same. Said notice was the narration of facts along with supporting material evidence determining the offences attracted in a particular situation in meaningful and tangible manners. Show-cause notice was not a casual correspondence; or a tool; or licence to commence a roving inquiry into the affairs of the taxpayer based on assumption and speculation, but it was a document of fundamental value carrying a definitive and factual position of the department against the taxpayer. Any proceedings taken without issuing proper legal show-cause notice, would be illegal, void ab initio and without jurisdiction---Valid show-cause notice, must satisfy and contain the basic legal and mandatory requirements; that notice must be properly served on the concerned taxpayer and must give sufficient time to enable him to collect relevant information/record to defend the allegations and charges levelled therein and to prepare written submissions for its defence; that notice must contain a complete and comprehensive charge-sheet along with material evidence provided therein enabling the taxpayer to defend himself; that notice must be adequate and not merely repeat the statutory language and provisions of law; that notice must cite only those sections and legal provisions thereof which were materially relevant to the subject and objectively fixed therein with proper application of independent judicial mind and not at all in mechanical and hypothetical way; that notice not disclosing essential particulars of the charges and specific provisions of law relevant to the subject, any action based upon it would also be illegal and void ab initio; that notice must describe the case made out against the taxpayer; whether it was a case of assessment of tax or rejection of input tax credit/refund under S.11(2) of the Sales Tax Act, 1990; that notice must require the taxpayer to show-cause to the proper office as to why he should not pay a certain stated amount, or as to why amount of refund inadmissibly claimed may not be rejected; that for a proper, legal and valid show-cause notice, it was mandatory for the tax functionary issuing the same to put his name and to emboss his official designation and to affix his signature thereon; in absence of all that, notice would be illegal and without jurisdiction; that notice should be issued on the subjective satisfaction of the concerned office and any notice issued in pursuance of an advice or opinion, would be illegal and liable to be quashed; that basic principle was that a show-cause notice must be real show-cause notice, keeping an open and judicial mind with regard to the subject matter of inquiry proposed therein; that Revenue Authority must apply its own independent judicial mind, while issuing show-cause notice; that, if notice merely states that "it appears" or "sufficient reason to believe" or "prima facie" or "it had been reported to the undersigned" that the assessee had violated some provisions of law or conditions and tax demanded without asking the taxpayer to show-cause, it would amount to utter violation of statutory provisions of fiscal laws and controvert to laws set by natural justice making consequent demand of taxes nullity in the eyes of law; that amount of tax as assessed and recoverable, must be stated and manifestly specified in the notice itself; that notice must contain specific amount of penalty and default surcharge; that amount determined by the tax authority as payable inclusive of principal amount, penalties and default surcharge etc. would not exceed its counterpart amount specified in the show-cause notice; that main object of issuance of a show-cause notice, was to intimate the concerned party, besides indicating him about nature of allegations, contravention and penal action intended to be taken against him, and in the absence of any of legal and mandatory conditions mentioned and without confronting the material available on record in support of the charges, the tax functionaries would have no power or jurisdiction to serve a show-cause notice under provisions of Sales Tax Act, 1990 for assessment of tax on the basis of any short payment or non-payment, rejection of inadmissible amount of input tax credit or refund claimed and that any show-cause notice issued to the taxpayer without fulfilling said statutory, mandatory conditions, would be illegal without jurisdiction and nullity in the eye of law. Show-cause notice issued to the taxpayer without fulfilling the mandatory formalities of law, being illegal void ab initio, without jurisdiction, subsequent proceedings and superstructure built thereon, were also illegal and void.

2013 PTD (Trib.) 2344 ref.

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

----Ss.2(14), 3, 10, 11, 46 & 73---Input tax, claim for---Tax payer had transacted all payments to his suppliers through Banking channel, by complying with the mandatory provisions of S.73 of the Sales Tax Act, 1990, which was the sole obligation on the buyer to ensure varacity of transaction in addition to verifying normal and operative status of his suppliers---Both, the necessary conditions of verifying genuineness of suppliers from exportal of Federal Board of Revenue for its operative status and sufficient condition of making payments through Banking channel to ascertain the veracity of such transactions was also complied with by taxpayer---Legislature had consciously given a right to a buyer in such cases to reclaim input tax so paid, where registration of the supplier had been suspended, or had been declared blacklisted, either as a refund or by way of adjustment---No provision existed in the Sales Tax Act, 1990 and the Rules framed thereunder empowering the revenue authorities to recover amount of input tax refunded to a buyer due to subsequent suspension of registration and blacklisting of his supplier---Right of input tax was a substantive and inalienable right of the buyer which could not be denied to him on subsequent default of the supplier---Taxpayer, always enjoyed 'proprietary interest' in deduction of input tax from output tax---Input tax, was property of buyer, which was paid to supplier, so that same could be deducted at the time of supply of goods by the buyer---Any sub-constitutional limitation restricting a buyer from deducting input tax from output tax impugned on rights of property (input tax) guaranteed to a tax payer under the Constitution (Arts. 23 & 24) and must successfully filtered through the test of constitutionality---Orders passed by both the authorities below suffering from grave legal infirmities and substantive illegality, were set aside and appeal accepted by Appellate Tribunal.

Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; Messrs Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340; Commissioner Inland Revenue v. Rana Riasat Tufail and others 2014 PTD 1530 and Messrs Nimra Textile Mills (Pvt.) Ltd. v. Federation of Pakistan and others W.P. No.17237 of 2013 ref.

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

----Ss. 3(3)(a) & 8---Prime liability to pay sales tax---Scope---Shifting of liability---Scope---Prime liability to pay sales tax was on the supplier under S.3(3)(a) of the Sales Tax Act, 1990; same could be shifted to the buyer only by way of notification under S.3-A of the Sales Tax Act, 1990, which provided shifting of tax liability to the person receiving the supply of specific goods---In the present case of taxpayer, no such notification having been issued by the Federal Government, default amount had to be recovered from the defaulter (Supplier) instead of the buyer (taxpayer)---No one would suffer for the act of another, and no body could be punished for the wrong of others---No provision existed in Sales Tax Act, 1990, whereby the person receiving the supply, would be responsible to pay sales tax, except that the Federal Government could specify the goods in the official gazette by a notification in terms of S.3(3-A) of the Sales Tax Act, 1990---If due tax had not been deposited by the supplier, amount of input tax refunded to the buyer on the strength of invoices issued by him, could not be recovered, merely relying on the provisions of S.8(1)(ca) of the Sales Tax Act, 1990; as every person had separate legal character enjoying distinct rights and liabilities under the law and to impose the liability of one over the other was opposed to the basic fundamentals of law, which would offend due process, logic and rationality.

1992 SCMR 1652; 2014 PTD 1530; 2011 PTD (Trib.) 2619; 2000 PTD 399; 2001 PTD 1486 = PLD 2001 SC 600; Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others 2000 PTD 399 and Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others PLD 2013 Lah. 693 ref.

(d) Taxation---

----Retrospectivity---Scope---Executive order and notification, which were detrimental or prejudicial to the interest of a person imposing liability or obligation, could not operate retrospectively---Executive order and notification which conferred a benefit or right, could be given retrospective effect---Any record/documents produced by a taxpayer during the course of adjudication proceedings, either at the original stage or at the appellate stage, if not discussed and controverted, and had gone unchallenged and unrebutted by the functionaries, would itself amount to admission of its legality and authenticity.

Khubaib Ahmad for Appellant.

Farrukh Majeed, D.R. for Respondents.

2017 P T D (Trib.) 113

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Raza Baqir, Accountant Member

Messrs KAMAL LIMITED, KHURRIANWALA, FAISALABAD

Versus

C.I.R.(A), FAISALABAD and others

S.T.A. No.490/LB of 2013, decided on 4th April, 2014.

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

----Ss. 11(3), 36 & 46---Assessment of tax---Recovery of tax, not levied or short-levied or erroneously refunded---Appellant/company was manufacturer-cum-exporter and was engaged in making of zero-rated supplies of textiles and textile articles thereof---Department, while conducting post audit of the appellant refund files for the months from August-2010 to June 2012, observed that appellant had illegally claimed/received refund of input tax; on the strength of invoices issued by a company, whose registration was suspended and subsequently was blacklisted---Show-cause notice for recovery of already refunded amount of sales tax, was issued to appellant, asking to pay back the amount of tax under S.11(3) of the Sales Tax Act, 1990; which was allegedly inadmissibly sanctioned---Impugned show-cause notice and adjudication pertaining to the tax periods from August 2010 to June 2012, were illegal and without jurisdiction, because amendment in S.11(3) of Sales Tax Act, 1990 took effect from 1st July, 2012; would not be applicable to cases, where the default had been committed in the tax periods prior to that amendment---Law applicable in the matter was provisions of S.36 of the Sales Tax Act, 1990, when amount of tax was refunded and not as it stood during the period when show-cause notice and adjudicating order, was issued at belated stage---By deletion of S.36 and insertion of S.11(3) to Sales Tax Act, 1990, without its any retrospective application and saving clause for protection of recovery cases under S.36 for the period prior to that insertion, there remained a statutory gap for the cases of recovery where amount of refund was erroneously or illegally sanctioned prior to 1st July, 2012---In the present case, department had invoked the provisions of newly inserted S.11(3) of the Sales Tax Act, 1990; which was applicable prospectively and not retrospectively and even no saving clause for protection of such omitted provision as contained in S.36 of the Sales Tax Act, 1990, was given, therein---Right of law existing on a day on which omission or commission was made, was a vested right and that right was governed by law prevailing on the date of its decision, and that vested right could be taken away only by a subsequent amendment, if it so provided expressly, or by necessary intendment---Case was to be decided in accordance with the law prevalent at that moment of time when an omission or commission was made---Whole proceedings, in the present case, were infested with legal infirmity and substantive illegalities, tantamounted to patent violation of mandatory statutory provision, in utter disregard of the principles of settled law---Impugned show-cause notice, as well as consequent orders were declared to be illegal, void, ab initio without jurisdiction, nullity in the eyes of law and were set aside.

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

----Ss. 21(3), 46 & 73---De-registration, blacklisting and suspension of registration---Transactions not admissible---Appellant/company, had transacted all payments to its supplier through Banking channel by complying with the mandatory provision of the Sales Tax Act, 1990, which was sole obligation on the buyer to ensure veracity of transaction in addition to verifying normal and operative status of its supplier---Both, the necessary conditions and sufficient conditions of making payments through Banking channel to ascertain the veracity of such transaction, was also complied with by the appellant---Legislature had consciously given a right to a buyer in such cases to reclaim input tax so paid where registration of supplier had been suspended or had been declared blacklisted, either as a refund or by way of adjustment; unless the registered buyer had fulfilled his responsibilities under S.73 of the Sales Tax Act, 1990---Reclaim of input tax paid, was an alienable right of a taxpayer, which could not be denied on any subsequent default of some one else, particularly in the cases where due vigilance was observed at the time of making payments in compliance of S.73 of Sales Tax Act, 1990 against invoices of such persons, whose registration was suspended, or even blacklisted subsequently---Amendment in S.21(3) of the Sales Tax Act, 1990, being beneficial and remedial, was applicable in the pending cases and in the present case---All remedial and curable legislations, when they provided a relief and were beneficial to the interest of the taxpayer, would always apply retrospectively on all pending cases---Making payments by a registered buyer to his registered supplier from the business Bank account, not declared to the Commissioner in whose jurisdiction, he was not registered, could not be termed as "tax fraud" and would not attract the provisions of S.2(37) of the Sales Tax Act, 1990, particularly when no clandestine transactions were established on either part---Acts of inadvertence on part of a taxpayer, due to any procedural mistake, would not create demand of sales tax.

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

----Ss. 2(14), (a), (44), 7 & 8---Input tax, adjustment of---Physical transfer of goods---Condition of physical transfer of goods, was nowhere expressly provided under Sales Tax Act, 1990, or the rules made thereunder, but its inference had been found available in S.2(14)(a) of Sales Tax Act, 1990---Provisions of S.2(14)(a) of Sales Tax Act, 1990 being a definition clause, had no legal impact and effect on input tax adjustment/credit under Ss.7 & 18 of Sales Tax Act, 1990 which had provided a mechanism for entitlement of input tax to a registered person---Statute, required no proof of physical transfer of goods from supplier to buyer as a pre-condition for making an input tax, adjustment, or as the case may be, refund---Past and closed transactions, could not be reopened especially when a beneficiary had no role in the irregularity committed by the other party---Appellate Authority had erred in equating physical transfer of goods with that of entitlement of input tax adjustment, credit or refund thereon under S.2(14) of the Sales Tax Act, 1990 and made the first one condition precedent for the second one, without catering into provision of S.2(44) of the Sales Tax Act, 1990 wherein definition of "time of supply" was given.

The CIR (Zone-III), R.T.O., Faisalabad v. Kamal Fabrics, Faisalabad 2012 PTD (Trib.) 453 ref.

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

----Ss. 14 & 23---Registration, tax invoices---Establishing genuineness and veracity of transactions---Sales tax liability was created against the appellant/buyer mainly on the ground that the purchases were made from the supplier, who was not traceable and genuine one---Adjudicating and Appellate Authorities had wrongly placed and shifted the burden on the appellant to establish genuineness and veracity of transactions made with the supplier, particularly when the initial burden had already been discharged by the appellant by producing sales tax invoices duly issued under S.23 of the Sales Tax Act, 1990 and registration certificate of his supplier issued under S.14 of the Sales Tax Act, 1990---Duty to issue registration certificate after due verification of antecedents and particulars of the supplier, was very much lay on the department and, if it had not taken care to issue registration certificate after due satisfaction and had gone on issuing certificate to bogus, false and non-existent party, responsibility entirely lay upon the department---Party should not be made to suffer on account of act/omission on the part of the court or other state functionaries.

Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), Karachi 1984 PTD 216; Messrs Jupiter Textile Mills Ltd. v. Commissioner of Sales Tax (Central), Karachi 1984 PTD 133 and Commissioner of Sales Tax v. Messrs Sultan Textile Mills Ltd. 1973 PTD 216 ref.

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

----S.8-A---Over-suspecting the input tax invoices of supplier to buyer---Provisions of S.8-A of the Sales Tax Act, 1990 simply required that the buyer should have the knowledge and reasonable grounds to suspect that the supplier would not deposit the sales tax in the national exchequer paid by him---In order to attract the provisions of S.8-A of the Sales Tax Act, 1990, initial burden would lie on the department to establish that the taxpayer had prior 'knowledge' and "reasonable grounds" to suspect the supplier that sales tax paid to him, would remain unpaid in its eventuality, and then proceed against the taxpayer---Legislature had consciously made a registered person, while receiving a taxable supply, obligatory to have knowledge, or to have any reasonable grounds to suspect at the time of making payment of sales tax to the supplier, that in chain of supply, certain tax would go unpaid.

(f) Interpretation of statutes---

----When a statute would direct that certain acts would be done by a specified person, his performance by any other person, was impliedly prohibited.

(g) Jurisdiction---

----Any transgression of jurisdiction, not being a technical defect, would render entire exercise of authority to be illegal and void ab initio---When a particular Authority had exclusive jurisdiction to proceed with a case, any attempt by any other authority to take cognizance of the matter, or to institute proceedings, would render cognizance and proceedings illegal, void ab initio and of no legal effect.

Messrs Khyber Tractors (Pvt.) Ltd., v. Government of Pakistan PLD 2005 SC 482 ref.

(h) Interpretation of statutes---

----Fiscal enactment---Notification, executive order and instruction, could be given retrospective effect, if it would go to benefit of taxpayer, but if it was detrimental or prejudicial to the interest of taxpayer imposing liability or obligation, would always operate prospectively.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Messrs Anoud Power Generation Ltd. and others v. Federation of Pakistan and others PLD 2001 SC 340 and PLD 1975 Lah. 44 ref.

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

----S. 45---Duty of adjudicating and first appellate Authorities and administration of substantial justice---Adjudicating and First Appellate Authorities are duty bound to weigh conflicting evidences and to draw their own inference and conclusion in order to administer substantial justice---Onerous duty was cast on the Adjudicating and Appellate Authorities to discuss all issues and dispose of what had been argued---Appellate Authority, ought to have act as an unbiased and impartial umpire, otherwise, it would be very hard for him to escape from the allegations of mala fide and maladministration---Passing of a summary order was devoid of lawful authority and of no legal force---Impugned decisions of Adjudicating Authority and First Appellant Authority, were not speaking orders and had no imprint of the effort, made by them to decide the matter in a judicial manner---Impugned orders, were devoid of lawful authority, non-speaking, non-judicious, void ab initio and of no legal effect.

PLD 1975 Lah. 44 and PLD 1970 SC 173 ref.

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

----Ss. 33 & 34---Additional demand of default surcharge and imposition of penalty---Additional demand of default surcharge under S.34 of the Sales Tax Act, 1990 and hundred percent penalty involved under S.33(11)(c) of Sales Tax Act, 1990 was by all means a tax of punitive nature, until and unless it was established by the department that taxpayer had either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct; or acted in conscious disregard of the obligation, or the default was conscious, wilful, mala fide and in the absence of all mandatory conditions, imposition of penalty and default charges, was illegal, unlawful and harsh---In absence of any charge of "collusion or of a deliberate action", levy of default charges and penalty was not called for and was deleted in circumstances.

1995 PTD 91; 1999 PTD 1308; PTCL 2002 CL 224(sic); 2004 SCMR 456 = 2004 PTD 1179; 2004 PTD 1048; 2006 SCMR 626 and 2009 PTD 1112 ref.

Khubaib Ahmad for Appellant.

Jamsheed Fakhri, D.R. for Respondents.

2017 P T D (Trib.) 156

[Inland Revenue Appellate Tribunal]

Before Abdul Qayyoom Sheikh, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs LUCKY PARAGON READY MIX LTD., KARACHI

Versus

C.I.R., (APPEALS-IV), KARACHI

S.T.A. No.11/KB of 2015, decided on 6th April, 2015.

Sales Tax Act (VII of 1990)---

----Ss. 2(25), (35), (37), (41), 3, 11(2), 13, 36, 46 & 65, Sixth Schedule---Failure to pay tax due---Tax fraud or tax evasion, determination of---Show-cause notice, validity of---Department, while scrutiny of data available in "Integrated Tax Management System" (Income Tax and Sales Tax Returns) of registered person, considered that it had been engaged in the business and supply of "Ready-mix Concrete (RMC)", which was a taxable supply as per provisions of S.3 of Sales Tax Act, 1990, and failed to declare and charge/levy/pay sales tax payable thereupon---Deputy Commissioner, issued show-cause notice to registered person, which culminated in charging sales tax vide an order-in-original under S.11(2) of Sales Tax Act, 1990---Said order was upheld by "Commissioner Inland Revenue (Appeals)/Appellate Authority"---Validity---Show-cause notice, which alleged the fraud and tax evasion on the part of registered person on account of non-levy of sales tax on product supplied by him, known as 'Ready Mix Concrete (RMC)', did not contain any reference to any provision of Sales Tax Act, 1990, or the item number of any Schedule attached thereto, or any PCT heading reference to suggest the legal position of the taxability of the product in question---Concerned Government and Legislative Authorities, possessed the power to exempt and levy sales tax on any goods or supply by including its identifiable name and code/heading in the relevant Schedule---Non-levy and non-payment of sales tax on goods in question, was neither a tax fraud nor a tax evasion, but at the greater extent justified due to past practice and inadvertence on the part of concerned authorities as visualized under S.65 of the Sales Tax Act, 1990; benefit of which was legally extendable to the taxpayer/registered person; that aspect had not been considered by Authority while issuing show-cause notice---Said show-cause notice, which was defective/ vague and time barred failed to meet the fundamental legal requirements and demand created as a result thereof, was not sustainable---Vague show-cause notice would not stand judicial scrutiny---Entire edifice built on such show-cause notice, was declared, illegal and void---Both orders passed by authorities below on the basis of said show-cause notice were held to be illegal and unsustainable in the eye of law---Impugned orders were annulled, in circumstances.

Case law referred.

Shafqat M. Sagar for Appellant.

S. Shakeel Ahmed DR RTO for Respondent.

2017 P T D (Trib.) 211

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs N.H. PACKAGES, MANSOORABAD, FAISALABAD

Versus

CIR (APPEALS), FAISALABAD and others

S.T.A. No.902/LB of 2014, decided on 10th September, 2014.

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

----Ss. 11(3), 33, 34, 36 & 46---Assessment of tax---Recovery of tax not levied or short levied or erroneously refunded---Issuance of show-cause notice---Appellant/registered person, was registered as a manufacturer of plastic products making taxable supplies---Sales tax paid on its input goods was adjusted and credited under law---Appellant claimed/adjusted false input tax during the period from July 2008 to March 2012---Show-cause notice was issued as to why inadmissible input tax may not be rejected and declared output tax may not be recovered from appellant under S.11(3) of the Sales Tax Act, 1990, along with default surcharge and penalty under Ss.33 & 34 of the Sales Tax Act, 1990---Appellant was proceeded in absentia without providing him any opportunity of hearing, and case was decided at his back---Said order of adjudicating Authority had been upheld by Appellate Authority below---Validity---Impugned show-cause notice and consequent adjudication order pertaining to the period from July 2008 to March 2012 for recovery of sales tax purportedly adjusted illegally, issued under S.11(3) of the Sales Tax Act, 1990 were illegal and without jurisdiction; because at that juncture of time, in case of any inadmissible and illegal input tax adjustment, the provisions of S.36 of the Sales Tax Act, 1990, were applicable for its recovery and by virtue of Finance Act, 2012 provisions of S.36 of the Act, were deleted and new S.11(3) was inserted to the Sales Tax Act, 1990, in such case, where any recovery of inadmissible and illegal adjustment was requisitioned---Deletion of S.36 and insertion of S.11(3) of Sales Tax Act, 1990, had no retrospective application and was without any saving clause for protection of recovery cases under S.36, for the period prior to that insertion---Whole exercise carried out under S.11(3) of the Sales Tax Act, 1990 was illegal, unlawful and without jurisdiction---Provisions of S.11(3) of the Act, were not deemed to be curative, remedial and beneficial in nature; as it curtailed right of a registered person not to be called upon to show-cause notice after expiry of time limitation under S.36(2) of the Sales Tax Act, 1990 by impeding him with tax liabilities beyond three years in case of inadvertence, error and misconstruction as well---Provisions of S.11(3) of the Sales Tax Act, 1990, in circumstances, could not be made applicable retrospectively---Whole proceedings culminated under S.11(3) of the Sales Tax Act, 1990, were declared to be illegal, void ab initio and nullity in the eyes of law---Any right or vested interest accrued to a party under a law, could not be snatched away or curtailed by subsequent addition and deletion in law---Right of law existing on a day on which omission or commission was made, was a vested right, which was governed by prevailing on that day and not by the law prevailing on the date of its decision and that vested right could be taken away only by a subsequent amendment---Case was to be decided in accordance with law prevalent at that moment of time, when an omission or commission was made---Impugned show-cause notice as well as consequent orders, were declared to be illegal, void ab initio and were set aside and appeal filed by taxpayer was accepted, in circumstances.

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

----Ss. 33 & 34---Additional demand of default surcharge and imposition of penalty---Additional demand of default surcharge, and hundred percent penalty of amount of tax, was by all means a tax of punitive nature and no penalty and default surcharge, could be imposed and adjudged against a taxpayer through an adjudication order until and unless, each and every subsection was specifically mentioned and confronted in the show-cause notice---If any penalty was imposed without confronting the relevant provision as contained subsections of 33, it would fall beyond the scope and contents of show-cause notice which would render it illegal, unlawful and void ab initio---Adjudicating Authority had imposed a penalty equivalent to hundred percent of amount of tax involved, but neither specified amount of penalty, nor the extent of percentage of penalty in the impugned show-cause notice---Hundred percent penalty imposed against the taxpayer, was otherwise not recoverable with the said specification, until and unless a lump-sum amount, or percentage thereof given in the subsection was not confronted in the show-cause notice---Order accordingly.

Khubaib Ahmad for Appellant.

M. Bilal Malik, D.R. for Respondents.

2017 P T D (Trib.) 324

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Muhammad Waseem Chaudhary, Judicial Members and Muhammad Asif Accountant Member

Messrs K.B. ENTERPRISES, FAISALABAD

Versus

CIR (APPEALS), RTO., FAISALABAD

M.A. (Stay) No. 127/LB and S.T.A. No. 78/LB of 2015, decided on 31st January, 2015.

Per: Muhammad Jawed Zakaria, Judicial Member; Muhammad Asif Accountant Member agreeing with most of the observations and pointing out another aspect of the matter. [Majority View].

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

----Ss. 45-B, 46 & 48---Power of Appellate Tribunal to grant stay to taxpayer---Application for grant of stay of recovery proceedings was dismissed by the Appellate Authority---Appeal to Appellate Tribunal along with application for stay of demand---Applicant had prayed that recovery of entire demand till the decision of main appeal by the Appellate Authority be stayed and direction to the concerned authorities be issued for early disposal of main appeal---Validity---Appellate Tribunal could stay the recovery proceedings for 180 days, if tax levied and its recovery proceedings would cause undue hardship to the taxpayer---Tribunal had power to dispose of matter (application/appeal) of stay, which related to Sales Tax under subsection (2) of S.46 of the Sales Tax Act, 1990---When stay was refused by Appellate Authority below and tax levied was still sub judice and not yet upheld, main appeal lay before Appellate Authority and consequently tax levied not yet upheld by Appellate Authority, Tribunal's inherent powers had expressly been put to some fetters/embargo/restriction/limitation barring the Tribunal to grant stay to the taxpayer---Appeal before the Tribunal could be filed against refusal of stay under by the Appellate Authority, as according to S.46 of the Sales Tax Act, 1990, Tribunal had statutory powers to admit, hear and dispose of the appeal---Refusal of stay order was not an assessment order---Tribunal could direct Appellate Authority, and remand the matter for further examination/ reconsideration of the matter of stay or issue consequential directions---No automatic stay existed---Mere filing and pendency of appeal, would not operate as suspension of tax demand---Order by the Tribunal staying recovery of tax levied and upheld by Appellate Authority, and not otherwise, was a restriction imposed by inbuilt provision expressly and clearly---Other main considerations while considering stay application were balance of convenience in relation to the interest of the both tax payers and Revenue Department and to save injury to any one of them---Applicant seeking a stay, should show that there was likelihood of substantial loss to it, if stay was not granted---Tribunal seized with application for stay, should have regard to facts and circumstances of the case in order to determine, whether or not there was sufficient cause of undue hardship for stay of tax recovery---Appellate Authority was obliged either to grant the stay or decide the appeal out of turn to avoid causing any injury, misery, injustice, unfairness and harassment to the taxpayer---Appellate Authority, ought not to forget, that taxes were the life blood of any Government, but it could not be over-emphasized that the blood was taken from the arteries of the taxpayer, and therefore the transfusion had to be accomplished in accordance with the principle of justice and fair play---Order of the Appellate Authority was vacated, and stay application filed before the said Authority, would be deemed to have been pending before it.

Messrs Chenab Board, Faisalabad v. CIR 2012 PTD (Trib.) 941; 2010 PTD (Trib.) 557 and 1996 PTD (Trib) 1128 ref.

(b) Civil Procedure Code (V of 1908)---

----O. XXXIX, Rr.1 & 2---Grant of stay/injunction---Principles---Points/principles to be considered before grant of stay/injunction were discretionary relief, granting was purely within the discretion of the court subject to fetters/restrictions/limitations, expressly and clearly imposed by the statute---Discretion, should be exercised in favour of the party who would come to the court with clean hands---Even if the conditions as laid down for grant of temporary injunction were fulfilled, it could be refused as it was a matter of discretion of the court---Injunction was a form of equitable relief and it was to be used in aid of equity and justice, but not to aid injustice to any party---In order to obtain an interim relief, applicant had not only to establish that he had a strong prima facie case, but he had also to show that the balance of convenience, was on his side and that he would suffer irreparable injury, unless he was protected during the pendency of his appeal---Last but not the least, the applicant had to prove categorically that applicant would be caused undue hardship if proceedings were not stayed---Where no serious controversy was raised in the application, mere allegations without producing any prima facie material to substantiate it or pointing out circumstances to justify it, could hardly lead to the conclusion that there was a prima facie case justifying grant of injunction---Power to grant interim relief, was judicial, or at least quasi judicial in nature, and the matter of stay, was purely of discretion in nature of the Authority which ought to be judiciously exercised.

(c) Interpretation of statutes---

----If the language of the statute was clear and intelligible and did not admit of two meanings, effect must be given to the words used and thus the intention of the legislation must be carried out.

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

----S.45-B---Appeal---Principles---Appellate Authority dispensing with justice and exercising judicial powers, were supposed to apply its mind to the cases and to determine respective stances taken by the taxpayer and after giving opportunity to the department and further evaluating those to give its own verdict justified by reason.

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

----S. 45-B---Appeal---Jurisdiction and duty of Appellate Authority---Appellate Authority had the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issues, if necessary appropriate directions to the authority against whose decision, the appeal was preferred to dispose of the whole, or any part of the matter afresh, unless forbidden from doing so by the statute.

Per Mohammed Asif Accountant Member agreeing with most of the observations of Muhammad Jawed Zikaria Judicial Member and pointing out another aspect of the matter.

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

----Ss. 45-B, 46 & 48---Appeal before Appellate Authority---Stay application, rejection of---Re-instating/restoring stay application---Provisions of S.45-B of Sales Tax Act, 1990, did not envisage that the taxpayer should be given opportunity of hearing, if the Appellate Authority was not inclined to stay the recovery---Principle of hearing opportunity was embedded in every statute, Appellate Authority would hear the taxpayer and if it was satisfied that no undue hardship would be caused to the taxpayer, he could simply file the application under intimation to the taxpayer and in view of such position if the Appellate Authority would pass an order of refusal of injunction, same would have no sanction of law and in case of appeal against the order of refusal of injunction, taxpayer was not entitled to any relief---Law would not require that in such like cases, Appellate Authority had to pass order---Impugned order had no sanction in the law and was non-existent and had to be vacated---Accountant Member, agreed with the findings of Judicial Member that Appellate Authority's refusing the stay application was not sustainable in the eyes of law, however Accountant Member disagreed with second part of observations of the Judicial Member about the application for stay before Appellate Authority and observed that "Tribunal could declare the impugned order as non-existent in the eyes of law and could do no more [Minority view].

Per Muhammad Waseem Chaudhary Judicial Member agreeing with Muhammad Jawed Zikaria, Judicial Member

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

----Ss. 45-B, 46 & 48---Power of the Tribunal to grant stay to taxpayer---To issue directions for stay of the recovery of tax, or to allow the recovery by rejecting application for stay, should be fair and just for the advancement of the purpose of the enactment---Such directions/orders were to be reasoned and copy of the order was to be provided to the concerned parties---Appellate Authority had to pass a speaking order in both the situations, whether application for stay was to be accepted or rejected---Appropriate directions, could be given to the Appellate Authority against impugned order of rejection of application for stay of tax demand---Application was allowed as well as the appeal filed by the registered person, was disposed of accordingly.

Khubaib Ahmad for Appellant.

Masood Aslam, D.R. for Respondent.

2017 P T D (Trib.) 366

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Sikandar Aslam, Accountant Member

Messrs TAWAKKAL PLASTIC INDUSTRIES

Versus

C.I.R., ZONE-III, R.T.O.-III, KARACHI

S.T.A. No.44/KB of 2012, decided on 10th June, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11, 33, 34, 36, 45, 45-B & 46---Short payment of sales tax---Appeal to Appellate Tribunal---Maintainability---Assistant Commissioner Inland Revenue, finding taxpayer to have paid short sales tax, and directed the taxpayer to deposit sales tax along with default surcharge and penalty under S.33 of Sales Tax Act, 1990---Direct appeal to Appellate Tribunal---Validity---Under S.45-B of Sales Tax Act, 1990, appeal against order of Assistant Commissioner, was to be filed before Commissioner Inland Revenue (Appeals)---Appeal directly filed before Appellate Tribunal, was not maintainable---Commissioner Inland Revenue (Appeals) could condone the delay in filing of appeal because of bona fide mistake of counsel of taxpayer by filing appeal before wrong forum---Taxpayer could not be made victim of his counsel's mistake.

2013 PTD (Trib.) 2130; 2013 PTD (Trib.) 1971 and S.T.A. No.134/LB of 2011, dated 14.10.2011 ref.

Plyfo Industries (Pvt.) Ltd. v. Asst. Collector 2011 PTD 2795 rel.

Muhammad Mehtab Khan for Appellant.

Umar Farooq, D.R. for Respondent.

2017 P T D (Trib.) 373

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir Accountant Member

Messrs SERVO MOTOR OIL (PVT.) LTD. MULTAN

Versus

C.I.R., SPECIAL ZONE, R.T.O., MULTAN

S.T.A. No.1592/LB of 2015 and S.T.A. No.338/LB of 2016, decided on 12th April, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 11, 33, 34, 45-B & 46---Failure to charge/pay extra tax and further tax on the supplies made---Issuance of show-cause notice and order to deposit sales tax along with default surcharge---Registered person, having not charged/paid extra tax and further tax on the supplies made by him, Adjudication Authority, after issuing show-cause notice to the registered person, directed him to deposit sales tax in question along with default surcharge and penalty under Ss.33 & 34 of the Sales Tax Act, 1990---Being aggrieved, registered person filed appeal before Commissioner/Appellate Authority, who remanded the case to Adjudicating Authority with certain directions for fresh appraisal---Fresh proceedings were initiated accordingly, but Adjudicating Authority finalized the proceedings by repeating the earlier treatment and passed order-in-original---Being still aggrieved, the registered person again filed appeals before Appellate Authority below; who annulled the order-in-original observing that since "no contravention/audit report was issued to the registered person, which was the basic requirement of law, impugned show-cause notices were coram non judice and without lawful authority, hence superstructure built on the same would fall flat"---Appellate Authority on the other hand had given directions for thrashing out the matter properly after examining the record; which was quite contrary to the provision of S.45-B of the Sales Tax Act, 1990---Appellate Authority was not justified in remanding the case, same being violative of subsection (3) of S.45-B of the Sales Tax Act, 1990, particularly when earlier Appellate Authority had annulled the orders of the Adjudicating Authority after holding the impugned show-cause notices as coram non judice and without lawful authority---Orders of both authorities below were vacated and appeals filed by registered person, were allowed, in circumstances. [

2012 PTD (Trib.) 1123 ref.

Riaz Ahmad Raja for Appellant.

Shahid Sattar, D.R. for Respondent.

2017 P T D (Trib.) 465

[Inland Revenue Appellate Tribunal]

Before Ikram Ullah Ghouri, Judicial Member

NAUMAN MAHMOOD

Versus

COMMISSIONER INLAND REVENUE (APPEALS-III), ISLAMABAD

I.T.A. No.56/IB of 2014, decided on 12th May, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(9), 120, 122(5A) & 130(8)---Income from real estate---One time transaction---Assessee was a chartered accountant and Assessing Officer issued show cause notice to him alleging that he was engaged in business of sale and purchase of immovable properties---Validity---Revenue's treatment of transaction of assessee as trade in property and characterization of capital gain as business income was without authority of law---No evidence was available to the effect of engagement of assessee in repetitive transaction of property or recurring income from sale of property---Appellate Tribunal Inland Revenue had annulled the orders passed by Commissioner Inland Revenue (A) and Assessing Officer treating assessee's capital gain as business income---Appeal was allowed in circumstances.

G. Venkataswami Naidu and Co. v. Commissioner of Income Tax 1958 IMI 49633 ref.

Jamil Ahmed, FCA for Appellant.

Shaukat Hayat, D.R. for Respondent.

2017 P T D (Trib.) 506

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member

QAISER PERVAIZ

Versus

COMMISSIONER INLAND REVENUE, R.T.O., RAWALPINDI

I.T.A. No.469/IB of 2013, decided on 28th July, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1)(5) & 177(4)---Filing of income tax return---Selection of case for audit---Amendment of assessment---Case of taxpayer was selected for audit under S.177(4) of Income Tax Ordinance, 2001---Assessing Officer, while passing ex parte order made additions in trading account regarding 25% of purchases and also disallowed 50% of claim of rest of profit and loss expenses---On filing appeal by the taxpayer and against order of Assessing Officer, appellate authority maintained disallowance of 25% of the trading account expenses; and deleted the 50% disallowance made by the Assessing Officer out of profit and loss expenses---Validity---Basic canon of accounting was that sales were made through purchases made, if the sales were verifiable, then how purchases could be termed as unverifiable---Admitted fact was that Assessing Officer, had not interfered with the sale---Assessing Officer principally having accepted the sales then terming the purchases as disallowance @ 25% was unjust and improper---Assessing Officer, appeared to be not cognizant with basic and generally accepted accounting principles---Section 122(5) of Income Tax Ordinance, 2001 was invoked by the Assessing Officer, which spoke about "definite information", but it was not ascertained as to what was the "definite information" that was available with the Assessing Officer---Provisions of S.122(5) of Income Tax Ordinance, 2001, allows amendment of any assessment only when the department was in possession of "definite information" and not otherwise---Assessing Officer, in that context, was under legal obligation to specifically identify the nature of assessed income and issue notice with specification as to under what terms and under which cl.(i)(ii)(iii) of subsection (5) of S.122 of the Income Tax Ordinance, 2001; to notice was issued by highlighting the fact under which category taxpayer's case fell---Non-issuance of such notice, clearly meant that while passing the amending assessment order, Assessing Officer was not in possession of "definite information"---Entire proceedings were void ab initio and illegal---Simple issuance of notice under S.122(9) of the Income Tax Ordinance, 2001, just after conducting audit of the taxpayer and prior to confrontation audit report/objection/charge-sheet for obtaining rebuttal/explanation by the taxpayer, was not enough to further proceed in the matter for amending the assessment under S.122 of the Income Tax Ordinance, 2001---Before making any additions and disallowances to the assessed income under the garb of audit under S.177 and amending the assessment, department was required to acquire legal jurisdiction under the provisions of S.122(5) of the Income Tax Ordinance, 2001---Requirements of S.122(5) of the Income Tax Ordinance, 2001, were to be strictly fulfilled in letter and spirit---Lump-sum disallowance in purchases and profit and loss expenses, was not tenable---Orders of the officers below were unlawful, not tenable being void ab initio---Tribunal disapproved the addition on percentage basis at 25% in the trading account expenses and directed that same be deleted.

C.I.R. v. Messrs Khan CNG and Filling Station 2013 PTD 884 and 2015 PTD (Trib.) 1242 ref.

Naeem-ul-Haq for Appellant.

Muhammad Jawad, D.R. for Respondent.

2017 P T D (Trib.) 547

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

COMMISSIONER INLAND REVENUE

Versus

Messrs DEWAN SUGAR MILLS LTD.

M.A. (Rect) No.138/KB of 2016 in S.T.A. No.50/KB of 2014, decided on 5th September, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 221---Rectification of order of Tribunal---Department had sought rectification in the order of Appellate Tribunal which was fairly elaborate and speaking reasoned order taking into account the relevant provisions of law and facts of the case and no grievance was left undecided---Department had already filed Reference application before the High Court against the said order of the Tribunal---When the issue was pending adjudication before the High Court on the same subject, no rectification application was required to be moved by either party before the Tribunal---Rectification application filed by the department was misconceived and not maintainable---No apparent and patent mistake was noticed on the surface of the order of the Tribunal, relating to the finding on the issue---Department had filed application for rectification order, with the intention of re-arguing the matter, which had been concluded by the Tribunal---Approach of the department was clearly against the principles of res judicata---Department had not approached the Tribunal with clean hands and would not deserve any relief---Rectification application was dismissed being beyond the scope of rectification, meritless, and not tenable in law.

National Foods Laboratories's case 1992 SCMR 687 = 1992 PTD 570 and CIR v. ENI Pakistan Ltd. 2013 PTD 508 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 221---Powers of Tribunal to rectify its order---Scope, application and object of S.221, Income Tax Ordinance, 2001---Tribunal had no power to correct error of judgment and review of its own order, because the "error of judgment" was not synonymous of "mistake in judgment"---For exercising jurisdiction under S.221 of the Income Tax Ordinance, 2001, it was not mandatory condition that such mistake should be wide, apparent, manifest and patent and something which involved serious circumstances of dispute or question of fact or law to be established by a long drawn process and reasoning on the point to be rectified---Matter and glaring mistake or evident error which apparently floated on surface of the order of Tribunal and did not require elaborate discussion of evidence or arguments to establish; would be an error/mistake apparent on the face of the record which could be rectified under the ambit of S.221 of the Income Tax Ordinance, 2001---Section 221 did not confer powers on the Tribunal to review its earlier order---Tribunal had no power to review/revisit or re-hear its order passed on merits under the garb of rectification of mistake---No order could be passed under S.221 of Income Tax Ordinance, 2001, which amounted to reversal of the order passed after discussing all the facts and statutory provisions in detail---Powers under S.221, was confined to a rectification of mistake apparent on record---Section 221 of the Income Tax Ordinance, 2001, was not a carte blanche for the Tribunal to change its own view by substituting a view which it believed, should have been taken in the first instance---Section 221, was not a mandate to unsettle decision taken after due reflection---Said provision empowered the Tribunal to correct mistakes, and was not on a venue to revive a proceedings by recourse to a disingenuous argument, nor did it contemplate a fresh look at a decision recorded on merits.

CIT v. McDowell and Co. Ltd., (2004) 269 ITR 451 ref.

(c) Civil Procedure Code (V of 1908)---

----S. 11---Res judicata, principle of---Object and scope---Principle of res judicata, was of universal application, as it was based on two age old principles; "interest reipublicae ut sit finis litium", which would mean that it was in the interest of the State that there should be an end to litigation---Other principle was; "nemo debet bis vexari, si constat curiae quod sit pro una et cadem causa", meaning thereby that no one ought to be vexed twice in a litigation, if it appeared to the court that it was for one and the same cause---Doctrine of res judicata, was common of all civilized system of jurisprudence to the extent that a judgment after a proper trial by a court of competent jurisdiction should be regarded as final and conclusive determination of the question litigated and should forver set the controversy, at rest---Said principle of finality of litigation, was based on high principle of public policy---In the absence of such a principle, great oppression might result under the colour and pretence of law in as much as there would be no end of litigation, and rich and malicious litigant would succeed in infinitely vexing his opponent by repetitive suits and actions---Same could compel the weaker party to relinquish his right---Doctrine of res judicata had been evolved to prevent such an anarchy---Res judicata was not a technical doctrine, but a fundamental principle which would sustain the rule of law in ensuring finality in litigation---Said principle, would seek to promote fresh and a fair administration of justice and to prevent abuse in the matter of accessing court for agitating on issues which had become final between the parties---Any proceedings which had been initiated in breach of the principle of res judicata, was prima facie a proceeding which had been initiated in abuse of the process of the court---Decisions pronounced by court of competent jurisdiction should be final, unless they were modified or reversed by appellate authorities---No one should be made to face the same kind of litigation twice over, because such a process would be contrary to considerations of fair play and justice.

Zafar Rafiq, D.R. for Applicant.

Muhammad Faheem Bhayo for Respondent.

2017 P T D (Trib.) 611

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member, Muhammad Raza Baqir, Accountant Member and Ch. Anwaar-ul-Haq, Judicial/Referee Member

Messrs IMAGE GARMENTS (PVT.) LTD., SATIANA ROAD, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE (ZONE-I), R.T.O., FAISALABAD

M.A. No.474/LB of 2015, decided on 11th January, 2016.

Per Ch. Shahid Iqbal Dhillon (Judicial Member; Muhammad Raza Baqir, Accountant Member, dissenting. [Minority view]

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

----Ss. 21(3), 46 & 57---Sales Tax Rules, 2006, Rr.12(5) & 13---Application for rectification of order of Appellate Tribunal---Scope---Applicant/registered person, had sought rectification of order passed by Appellate Tribunal, contending that the department had misled the Tribunal by concealing material facts and managed to obtain the order in question on the grounds which were not relevant to the case; that order-in-original and order in appeal, were based on the interpretation of R.12(5) of the Sales Tax Rules, 2006, but order in question had gone beyond the scope of show-cause notice as well as the order of the authorities below; that S.21(3) of the Sales Tax Act, 1990, had been applied in the case giving retrospective effect; that the Tribunal being last fact finding forum, was to decide the factual controversies, could look into the vital factual aspects of the case and had prayed for amendment in order in question by rectifying the mistake, apparent from record---Validity---Appellate Authority, in the present case, had allowed relief on the grounds on which the Tribunal had already resolved the matter in favour of applicant---Applicant had made purchases after obtaining proper invoices, payments were made through Banking channel and necessary proof had also been furnished, not only before the Adjudicating Officer, but also before the Appellate Authority---Appellate Authority, in such circumstances, had rightly allowed the input tax adjustment and the objection of the department was not legally justified---Patent mistake, apparent on the face of record, needed rectification---Appellate Authority had rightly allowed input tax adjustment and vacated order-in-original---Tribunal's earlier order, in circumstances, was recalled/rectified and order passed by Appellate Authority was upheld and appeal preferred by the department was rejected. [Minority view]

Per Muhammad Raza Baqir Accountant Member, disagreeing with Ch. Shahid Iqbal Dhillon, Judicial Member [Majority view]

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

----Ss. 21(3), 46 & 57---Sales Tax Rules, 2006, Rr.12(15) & 13---Application for rectification of order of Appellate Tribunal---Scope---Appellate Tribunal had dismissed appeal filed by applicant/registered person, applying conscious application of mind---No justification existed to give a different finding on the same facts and circumstances of the case; as the applicant had filed application on the same set of facts and law, which had already been considered and dismissed by the Tribunal---Finding given in the draft order, was a 'review' of earlier order, which was not permissible in law---Scope of rectification was restricted to mistakes, which floated on the surface of the order and must not involve elaborate discussion, detailed probe or process of determination or re-determination---Mistake, which was sought to be rectified must be so obvious and apparent from record that it could immediately strike on the face of it---Main appeal was decided against the applicant after due opportunity of hearing to the parties and after carefully considering all facts and points of the case---If any party had felt aggrieved with the order of the Tribunal, it could prefer the course of action as provided under the relevant provisions of the law---Tribunal was not legally competent to review its own orders for no apparent reason and to sit as an appellate or review body on its own decision by expanding the scope of rectification---Applicant had failed to show any specific mistake floating on the surface of order in question---Since there was no cogent reason for rectification of order in question, it appeared to be an attempt to invoke the provisions of rectification for seeking the relief, which was not extended by Tribunal in its order---Request of the applicant, was beyond the scope of rectification---Application for rectification of the order in question, was dismissed, in circumstances. [Majority view].

1992 SCMR 687 ref.

Per Ch. Anwaarul Haq, Judicial Member agreeing with Muhammad Raza Baqir, Accountant Member [Majority view]

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

----Ss. 21(3), 46 & 57---Sales Tax Rules, 2006, Rr.12(5) & 13---Application for rectification of order of Appellate Tribunal---Scope---Applicant, filed application under S.57 of the Sales Tax Act, 1990 for rectification/review order of Tribunal---Judicial Member, accepted said application and recalled earlier order, and proposed to reject the departmental appeal---Accountant Member, was not in agreement of the viewpoint of Judicial Member that S.57 of the Sales Tax Act, 1990, empowered the Tribunal to amend any order only to rectify any mistake apparent from the record which the registered person/applicant had failed to point out in that case---Contention of the applicant was that department had mislead the Tribunal by concealing material facts and managed to obtain the order in question on the grounds which were not relevant to the case---Said serious allegation was not taken by the applicant in his rectification application---Under R.13 of the Sales Tax Rules, 2006, where a fact which could not borne by or was contrary to the record was alleged, same would be stated clearly and concisely by a duly sworn affidavit whereas no such affidavit had been filed by the applicant or his counsel---Application had been filed by the counsel, who was not present at the hearing of main appeal---Instead of the applicant, contents of the rectification application had been sworn by the counsel, who was not competent to do the same---Rectification application was also liable to be rejected on that sole ground---Tribunal, in the present case, had given findings after conscious application of mind---Accountant Member, who was also author of the order sought to be reviewed, duly reproduced the relevant portion of the said decision in his dissenting note---Applicant, in his application sought "review" of the Tribunal's order which was not permissible under the law---Applicant, had failed to point out glaring mistake floating on the surface of order sought to be rectified---Applicant, could not seek, rectification on the basis of 'difference of opinion' or 'different interpretation of law'---Judicial/Referee Member fully endorsed and concerned with the view-point of Accountant Member, and also agreed with his conclusion drawn in the dissenting note---Rectification application filed by applicant, being devoid of any merits or substance, was dismissed, in circumstances. [Majority view]

1992 PTD 570 ref.

Saood Nasrullah for Applicant.

Salman Ahmad Khan, D.R. for Respondent.

2017 P T D (Trib.) 633

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs TOUFIQUE ASSOCIATE

Versus

COMMISSIONER INLAND REVENUE, ZONE-IV, REGIONAL TAX OFFICE-III, KARACHI

M.A. Stay No.192/KB in S.T.A. No.396/KB of 2016, decided on 1st August, 2016.

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

----Ss. 46 & 48---Appeal to Appellate Tribunal---Forcible recovery of tax---Application for stay against such recovery pending appeal---Taxpayer, had already approached the High Court, which had suspended the order of recovery---Such order of High Court held the field---Interim order of High Court granted earlier would remain in force and operative---Interim order passed by High Court was neither time bound nor subject to any condition---Same would continue, until and unless specifically vacated by High Court---No specific order was required for extention of the interim stay order---Tribunal being a sub-ordinate court to the High Court, was bound to follow the order of High Court and could not grant further stay---Stay application of the taxpayer, was misconceived and devoid of merit.

Raja Talat Mehmood v. Ismat Ehtisham-ul-Haq 2000 MLD 1755 and Raja Talat Mahmood v. Ismat Ehtisham-ul-Haq 1999 SCMR 2215 rel.

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

----S. 46---Application for fixation of appeal on out of turn basis---Procedure---Appellant desiring the appeal to be heard on out of turn basis, was to approach the Chairman, Appellate Tribunal Inland Revenue, as such power of fixation of appeal out of turn vested in him, and appellant would seek order in writing from Chairman for fixation of case before any other available Bench.

Sikandar Khan for Appellant.

Naveed Jamali, D.R. for Respondent.

2017 P T D (Trib.) 672

[Inland Revenue Appellate Tribunal]

Before Ms. Raana Ahmed, Accountant Member and Ch. Anwar-ul-Haq Judicial Member

C.I.R. ZONE-BAHAWALPUR, R.T.O., BAHAWALPUR

Versus

Messrs S.A. COTTON GINNERS, HAROONABAD

I.T.A. No.986/LB of 2012, decided on 14th July, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 115(4), 126(2)(b), 127, 131 & 182(1)---Income Tax Rules, 2002, R.73(2-D), (2-E)---Failure to file income tax return within due date---Imposition of penalty---Taxpayer, having not filed income tax return/statement under S.115(4) of Income Tax Ordinance, 2001 within due time, adjudicating authority imposed penalty on taxpayer under S.182(1) of Income Tax Ordinance, 2001---On filing appeal by taxpayer against order of imposing penalty, Appellate Authority below deleted said penalty and Revenue had assailed order of Appellate Authority below before Appellate Tribunal---Order of Appellate Authority was self-contradictory, as on the one hand he had observed that by filing requisite return, taxpayer had discharged his liability legally, but on the other hand he had advised the taxpayer to be careful in future about his legal obligations---Default was committed by the taxpayer as Income Tax Return filed by the taxpayer manually, was not a valid return as envisaged under S.115(4) of the Income Tax Ordinance, 2001---Observation of Appellate Authority that there was no loss of revenue due to manual filing of return was misconceived, since data of such returns, was not entered in the system---Such being invalid returns in terms of S.115(4) of Income Tax Ordinance, 2001, read with R.73(2-D) & (2-E) of Income Tax Rules, 2002, would escape selection for audit---In such cases imposition of penalty would remain the only deterrence---Order of Appellate Authority was vacated, and that of Adjudicating Authority, restored.

Mrs. Bushra Jaffar, D.R. for Appellant.

None for Respondent.

2017 P T D (Trib.) 725

[Inland Revenue Appellate Tribunal]

Before Shahid Pervez Memon, Judicial Member and Dr. Manzoor Ahmed, Accountant Member

Messrs RAAB PACKAGES (PVT.) LTD., KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-IV, R.T.O., KARACHI

S.T.A. No.551/KB of 2015, decided on 12th April, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 3, 11, 21(2) & 46---Order of blacklisting of registered person---Appellant/registered person, had assailed order of his blacklisting passed by Commissioner, on the grounds; that all suppliers, being duly active and alive, appellant could not be penalized for any post event; that appellant had paid the tax in terms of S.3 of Sales Tax Act, 1990 on supplies, and it was the suppliers, who as Revenue Agent should have paid the tax; that transactions made basis of blacklisting were much earlier and at that time there was nothing against suppliers; that even some suppliers suspended subsequently, were not blacklisted being statutory requirement after suspension; that subsequent blacklisting of a supplier could not be made a tool to deprive the registered persons of a valuable right accrued in his favour for purpose of transactions made prior to the suspension of registration of such supplier and that order passed by the Commissioner in favour of appellant, when an order under S.11(2) of the Sales Tax Act, 1990 was passed regarding a Corporation, was again made one of the basis of the blacklisting order---Validity---Order of blacklisting under S.21(2) of Sales Tax Act, 1990 was passed on 18-12-2015 and the subsequent proceedings under S.11 of the Sales Tax Act, 1990 under relevant subsection, if so warranted had not been initiated, or if initiated, the same had not culminated---Explanation of the appellant, could be acceptable in the eyes of Assessing Officer referring to law and record---Blacklisting order, adversely affecting the business affairs of the taxpayer could not be allowed to continue for indefinite period, as, in the present case, almost four months had passed after blacklisting---Appellate Tribunal, in the interest of justice directed that the order of blacklisting would be considered annulled from the date of receipt of that order by the Commissioner---Order accordingly.

Ajeet Sundar for Appellant.

Iqbal Hussain Sheikh, D.R. for Respondent.

2017 P T D (Trib.) 764

[Inland Revenue Appellate Tribunal]

Before Ch. Anwar-ul-Haq, Judicial Member and Ms. Raana Ahmed, Accountant Member

C.I.R., ZONE-I, R.T.O., LAHORE

Versus

Messrs DIVINE DEVELOPERS (PVT.) LTD., LAHORE

I.T.A. No.712/LB of 2012, decided on 23rd August, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 113, 120, 122(3)(5-A), 131 & First Schedule---Charge of Minimum Tax on aggregate turnover from rent of property and all the sources of taxpayer---Amendment of Income Tax Return---Income Tax return filed by the taxpayer declaring income, was treated to be an assessment order in terms of S.120 of the Income Tax Ordinance, 2001---Return was revised declaring loss, which was treated to be an amended assessment order in terms of S.122(3) of Income Tax Ordinance, 2001---Adjudicating Authority, on scrutiny of record, noticed certain discrepancies which rendered the amended assessment order as erroneous and prejudicial to the interest of Revenue and warranted further amendment under S.122(5-A) of Income Tax Ordinance, 2001 and the same was further amended accordingly by making certain additions---Taxpayer being aggrieved, filed appeal before Appellate Authority, which upheld the treatment with regard to taxability of income from property on yearly basis and proration of expenses while on the issue of calculation of Minimum Tax Liability, Appellate Authority directed to charge minimum tax on turnover from all sources after giving the effect of tax paid on property income---Principal argument of the taxpayer, accepted by the Appellate Authority, was that rent was also a "source" to be included in "turnover"---Validity---Appellate Authority had fatally erred in accepting the argument by reading the word "sources" used in the last line of subsection (1) of S.113 of Income Tax Ordinance, 2001, in isolation, instead of reading it in conjunction with the definition of "turnover" given in subsection (3) of S.113 of the Income Tax Ordinance, 2001---"Sources" referred in the last line of subsection (1) of S.113 had been specified in cl.(a) through (d) of subsection (1) of S.113, and any amount, not listed therein, could not be treated as "turnover" for the purpose of S.113---Legislature had logically and consciously confined the "sources" to a single 'Head' i.e. 'income from business'---Person would pay "Minimum Tax" instead of "actual tax" payable under Division II of Part 1 of the First Schedule, and not tax payable under Division VI, Part-1 of the First Schedule---Income from property tax chargeable and tax withheld thereon, were not relevant for purposes of S.113 of Income Tax Ordinance, 2001, and tax on income from property, was to be paid in addition to and over and above minimum tax on turnover---On the issue of charge of minimum tax on rent of property as part of turnover, the order of Appellate Authority was vacated and the order of Adjudicating Authority restored.

2009 PTD 1707 ref.

Imran Saee D.R. for Appellant.

Zafar Iqbal for Respondent.

2017 P T D (Trib.) 770

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member

C.I.R. WHT, R.T.O., HYDERABAD

Versus

Messrs QADIR BUILDERS AND DEVELOPERS, HYDERABAD

I.T.As. Nos. 82/KB and 83/KB of 2015, decided on 28th April, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(7) & 165---Filing monthly statement manually, instead of electronically---Imposition of penalty---Taxpayer being a withholding agent, had been regularly filing monthly statement manually instead of electronically---Deputy Commissioner, finding that the taxpayer had failed to file the monthly statement electronically, issued show-cause notices, whereas the taxpayer filed affidavit regarding non-receipts of said show-cause notices---Show-cause notices were served through courier service---Deputy Commissioner, imposed penalties on the taxpayer for the default of non-filing of statement under S.165 of the Income Tax Ordinance, 2001, electronically---Appellate authority vide impugned order deleted the amounts of penalty imposed by authority below---Validity---Appellate Authority, had rightly deleted the penalty order passed by authority below; as taxpayer being a withholding agent as per provision of S.153(7) of the Income Tax Ordinance, 2001, had regularly been filing monthly statement manually instead of filing electronically---Order passed by Appellate Authority, being legal and with lawful authority, was maintained, in circumstances.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 165 & 182---Imposition of penalty for failure to furnish return of statement---Section 165 or 182 of Income Tax Ordinance, 2001 was not charging section and machinery provisions, could not be used as substitute of charging provision of tax levy---Said provisions, were also not a revenue generating provisions---Department almost in all cases abusedly invoked penal provisions for enhancing revenue; which clearly was not the intention of the legislature---Taxpayer, being withholding agent taxpayer, was performing duties as a servant of the Government; without any salary and without any benefits---Taxpayer had been working on behalf of the Government, and for the Government without getting any advantage therefrom, he had been imposed penalty, which was highhandedness of the department---Revenue officer was under wrong impression that the penalty had to be imposed without any exception, if there was a default---Concerned Officer was directed by the Tribunal to be judicious in imposition of penalty---Appellate Tribunal observed that authorities must act fairly, judiciously and honestly in penalty proceedings.

Muhammad Irtaza D.R. for Appellant.

A.S. Jafri for Respondent.

2017 P T D (Trib.) 776

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member, Muhammad Raza Baqir, Accountant Member and Ch. Anwaar ul Haq, Judicial/Referee Member

Messrs USMAN TRADERS, LAHORE

Versus

COMMISSIONER OF INLAND REVENUE, R.T.O., LAHORE

MA (A.G.) No.13/LB of 2016 and I.T.A. No.1533/LB of 2015, decided on 12th February, 2016.

Per Ch. Shahid Iqbal Dhillon, Judicial Member; Muhammad Raza Baqir, Accountant Member, dissenting

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(1)(4)(5)(5-A), (6)(8)(9), 131, 177 & 214-C---Amendment of assessment---Taxpayer was selected for audit in terms of S.214-C of Income Tax Ordinance, 2001; subsequently, show-cause notice was issued to the taxpayer wherein he was confronted with certain discrepancies; which later on were added to the income of the taxpayer through amended assessment---Said order of Assessing Authority was assailed by the taxpayer on the ground that procedure laid down in S.177 of Income Tax Ordinance, 2001 for conducting the audit had not been followed even from the initiation of proceedings as the taxpayer was not communicated the reason before requisition of record for the purpose of audit, which was mandatory provision of S.177 of Income Tax Ordinance, 2001---Validity---Section 177 of Income Tax Ordinance, 2001, did not in itself provide any power to modify assessment, or redetermine the income of taxpayer---Point which was to be kept in mind was that it was not the return of income which was being processed by Adjudicating Authority during audit; authority actually was to decide a deemed assessment, which by process of law had acquired a sanctity---Finalized assessment, could not be modified or disturbed in continuation of the proceedings of audit under S.177 of Income Tax Ordinance, 2001---Selection of audit, even conducting of audit, would not mean or include as assessment or amended assessment/alteration or modification of assessment---No 'definite information' was found to have been available within the meaning of S.122(5) read with S.122(8) of Income Tax Ordinance, 2001---Appeal of the taxpayer was allowed and order in appeal as well as order-in-original, amendment order under S.122(1)(5) of the Income Tax Ordinance, 2001 were annulled, in circumstances. [Minority view]

Chenone Stores Ltd. v. The Federation of Pakistan 2012 PTD 1815; 2007 PTD 2601; 2011 PTD (Trib.) 321; 2010 PTD 1506; 2001 SCMR 838; 1993 PTD 756 and 2013 PTD 884 ref.

Per Muhammad Raza Baqir, Accountant Member disagreeing with Ch. Shahid Iqbal Dhillon, Judicial Member [Majority view]

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(1)(4), (5)(5-A)(6)(8)(9), 131, 177 & 214-C---Amendment of assessment---Taxpayer was selected for audit in terms of S.214-C of Income Tax Ordinance, 2001; subsequently, show-cause notice was issued to the taxpayer wherein he was confronted with certain discrepancies; which later on were added to the income of the taxpayer through amended assessment---Said order of Assessing Authority was assailed by the taxpayer on the ground that procedure laid down in S.177 of Income Tax Ordinance, 2001 for conducting the audit had not been followed even from the initiation of proceedings as the taxpayer was not communicated the reason before requisition of record for the purpose of audit, which was mandatory provision of S.177 of Income Tax Ordinance, 2001---Judicial Member, had proposed to vacate the impugned order for the reason that Assessing Authority had no "definite information" in his possession within the meaning of S.122(5) read with S.122(8) of the Income Tax Ordinance, 2001---After careful perusal of available record and arguments put-forth by the representatives of both sides, Assessment Officer did possess sufficient 'definite information' gathered from the audit proceedings concluded under S.177 of the Income Tax Ordinance, 2001---Discrepancies detected, which resulted into consequential additions in the income of the taxpayer, were sufficient to make amendment of assessment under S.122(5) of Income Tax Ordinance, 2001---Said discrepancies fell under the definition of "definite information" and Assessing Authority had confronted the same to the taxpayer, but he failed to dislodge the same at assessment stage---Assessing Authority, in circumstances, had rightly invoked the provision of S.122(5) of the Income Tax Ordinance, 2001 and suitably amended the deemed assessment---Taxpayer had failed to make out a case with any plausible explanation or any corroborative documentary evidence that the Assessing Authority had not acted in accordance with law---Judicial Member had overlooked the important aspects of the case and cancelled the impugned order merely on technicalities without going into merits of the case---Impugned order of the Appellate Authority, was liable to be maintained. [Majority view]

2013 PTD 883 ref.

Per Ch. Anwaar-ul-Haq, Judicial Member agreeing with Muhammad Raza Baqir, Accountant Member [Majority view]

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(1)(4)(5)(5-A)(6)(8)(9), 131, 177 & 214-C---Amendment of assessment---Taxpayer, did not challenge the selection of the case for audit and partial compliance by the notices issued---Assessing Authority, after detailed deliberation on each head of account had made certain additions---Consequently, the declared income of the taxpayer was modified and tax liability was created vide order passed under S.122(1)(5) of Income Tax Ordinance, 2001---No findings of the Bench were on record with regard to acceptance of said additional grounds of appeal---Additional grounds of appeal revealed that taxpayer had not challenged any of the addition on its merits as well as on application of any specific sections, whereunder each addition was made---As per additional grounds of appeal, taxpayer had made emphasis on issue of "definite information"---Sufficient evidence was available on record which taxpayer had failed to rebut---While joining the audit proceedings, taxpayer was bound to reply the each and every query raised by the Auditing Officer and in terms of subsection (6) of S.177 of the Income Tax Ordinance, 2001, after completion of audit, Commissioner, could, if considered necessary, after obtaining taxpayer's explanation on all issues raised in audit, amend the assessment under subsection (1) or (4) of S.122 of the Income Tax Ordinance, 2001---Each addition made in the present case, was an outcome of the audit proceedings---Information gathered during the audit proceedings, would fall within the ambit of subsection (1)(5) of S.122 of the Income Tax Ordinance, 2001---Orders of both the authorities below were maintained, taxpayer's appeal was rejected, in circumstances. [Majority view]

Syed Ashraf for Appellant.

M. Nazir Rizvi, D.R. for Respondent.

2017 P T D (Trib.) 846

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member

COMMISSIONER INLAND REVENUE (ZONE-II), R.T.O., FAISALABAD

Versus

Messrs CHAWALA ENTERPRISES, FAISALABAD

S.T.A. No.820/LB of 2013, decided on 23rd February, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 3(3)(a), 7, 10, 11(3), 23, 46 & 73---Determination of tax liability---Assessment of tax---Making late payments to suppliers beyond specified period of one hundred and eighty days---Condonation of delay---Record had shown that assessee had made late payments beyond one hundred and eighty days to his supplier and received refund of input tax on the strength of invoices issued by said suppliers, who subsequently were blacklisted---No controversy existed in the manner of payments, having been transacted through prescribed Banking mode; but its time was delayed over one hundred and eighty days, beyond date of tax invoice, due to certain financial constraints and pecuniary hardship---Such act on the part of assessee, was not deliberate and contumacious having caused for financial problems, which was beyond control of assessee---Said procedural lapse, and technical omission, entailing no revenue loss at all, was condoned to maintain inalienable right of input tax and assessee, could not be deprived of his statutory right of input tax due to any procedural omissions; because neither any procedural mistake would affect legal entitlement; nor such procedural lapse had caused any prejudice to the department---Acts of inadvertence on the part of assessee, due to any procedural mistake would not create demand of sales tax---Liability to pay sales tax was on the supplier under S.3(3)(a) of Sales Tax Act, 1990, which was independent to the provisions of S.73 of the Sales Tax Act, 1990---Deposit of sales tax, being independent to payment under S.73 of the Sales Tax Act, 1990, in case of delayed payments, no revenue loss was involved, particularly when the supplier had already paid output tax to the Government---Demanding refunded amount of input tax back from the buyer, despite having it deposited by the supplier in the national exchequer, would amount to double taxation, not permissible under any law---Refund of input tax, was a substantive right of the assessee, which could not be taken away or withheld on mere technicalities and procedural lapses---Subsequent blacklisting, would not disentitle the buyer from his lawful right of input tax in respect of invoices issued, when supplier was a registered and active person, unless those invoices were specifically declared false; and had direct nexus with blacklisting---Impugned order of the department being based on facts, and strictly in accordance with law, would not call for any interference which was upheld---Appeal filed by the department, being devoid of any merits was dismissed, in circumstances.

M/s. Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Commissioner Inland Revenue v. Messrs Tariq Poly Pack (Pvt.) Ltd. 2015 PTD 2256 ref.

Shafiq-ur-Rehman Siddiqui, D.R. for Appellant.

2017 P T D (Trib.) 867

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Ms. Farzana Jabeen, Accountant Member

Mess FAYSAL BANK LIMITED

Versus

C.I.R. (APPEALS-I), L.T.U., KARACHI

I.T.A. No.175/KB of 2012, decided on 28th May, 2014.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 205 & 221---Failure to pay tax, collected or deducted---Inland Revenue Officer, initiated proceeding and passed order under Ss.161 & 205 of the Income Tax Ordinance, 2001 to recover tax shortly deducted by the taxpayer, along with additional tax/default surcharge---Commissioner Inland Revenue (Appeals) confirmed default surcharge/ additional tax---Validity---Only wilful default, and that too on establishment of 'mens rea' would lead to charge of the default surcharge---Non-payment of income tax over a long period of time by the taxpayer, proved the guilty mind and mens rea on part of the taxpayer---Taxpayer withheld the amount of tax for a long time intentionally and also committed wilful default---Action of Officer levying default surcharge, was confirmed on that score---Default surcharge being additional tax to be levied, charged and collected on the default amount for the period, during which it remained unpaid from the due date was not doubly taxation on same receipt/income/ payment---By not paying the tax collected, government money was utilized in an unauthorized manner and the cost of such utilization, had to be compensated in that way---Taxpayer was an assessee/taxpayer in default, order passed by Commissioner Inland Revenue (Appeals), being fair, did not call for any interference.

2003 PTD (Trib.) 346 and 1973 PTD 446 ref.

2010 PTD (Trib.) 1081 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 205---Failure to pay tax collected or deducted---Levy of default surcharge and additional tax---Scope and nature---Default surcharge, was levied because taxpayer utilized Government money and took its benefit, or the Government was deprived of that utility/profits---If the tax was admitted due and not paid on due date, that would amount to utilization of Public Exchequer---Compulsion of payment of default surcharge (additional tax) was quite in accordance with equity and natural justice---Taxpayer could not be absolved of payment of default surcharge qua late payment of admitted liability of tax on the plea of not being wilful---Imposing the default surcharge as a sanction for the speedy collection of revenue, was different from the penalty for a crime or fine or forfeitures provided as a punishment for the violation of criminal or penal laws---Default surcharge, was merely a method of enforcing payment of taxes.

Westminster Bank Ltd. v. Riches (1947) 28 TC 159; 15 ITR (Supp) 86 (HL) and Helvering v. Mitchell 303 US 390 ref.

Asif Haroon, A.R. for Appellant.

Zulfiqar Ali Memon, D.R. for Respondent.

2017 P T D (Trib.) 880

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Sheraz Mirza, Accountant Member

Messrs MASHALLAH PAPER BOARD MILLS, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.412/LB of 2015, decided on 8th February, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 2(33)(35), 3(1)(a), 11 & 46---Calculation of sales tax on the basis of consumption of electricity---Sales tax, in the present case, was calculated by the department on the basis of consumption of electricity and not on the basis of the actual supply---Departmental presumption was that since the assessee was in a position to produce more for which certain formula was adopted on the basis of consumption of energy, supply of the product should have been on the basis thereof---Validity---Under S.3(1)(a) of the Sales Tax Act, 1990 sales tax was charged on sale and supply of goods, which necessarily entailed 'delivery of goods' or 'receipt of money consideration' and no corroboratory evidence for any clandestine removal of goods, or for receipts of money consideration had been provided by the department---Assessment of sales tax on the basis of consumption of electricity units was hardly a safe yard stick to assess the production---Production, was not covered within the definition of "supply" as given under S.2(33) of the Sales Tax Act, 1990---Under S.2(35) of the Sales Tax Act, 1990, the yard stick to charge and levy sales tax, was the sale constituting a taxable activity for a taxable supply---Dispossession and actual transfer of goods by the manufacturer to the other party, was a basic requirement to bring the goods within the charge---Unless the department was in a position to establish that the assessee had more production, and same had been transferred to another party, sales tax could not be charged---Departmental case, was totally based upon hypothetical calculation, without any proof, which established beyond any shadow of doubt that impugned liability of sales tax, was based on the figures and calculations---Sales tax imposed on the basis of assumptions and presumptions was not warranted in law, and would be liable to be struck down---Impugned show-cause notice as well as consequent orders by both the authorities below, were declared to be illegal, void, ab initio and were set aside, in circumstances.

Messrs Avari Hotel Ltd. v. The Collector of Sales Tax and 3 others 2000 PTD 3765 rel.

Khubaib Ahmad for Appellant.

2017 P T D (Trib.) 891

[Inland Revenue Appellate Tribunal]

Before Javid Iqbal, Judicial Member and Muhammad Pervez Alam, Accountant Member

Messrs SHAHID GUL PARTNER, PESHAWAR

Versus

COMMISSIONER INLAND REVENUE, R.T.O., PESHAWAR

I.T.As. Nos.128(PB), 129(PB), 5(PB), 144(PB), 145(PB) and 3(PB) of 2010, decided on 8th May, 2013.

Income Tax Ordinance (XLIX of 2001)---

----S. 20(1)---Capital assets---Depreciation---Intangible assets, amortization of---Doctrine of commercial expediency and necessity---Principle---Dispute was with regard to amortization regarding property purchased from Privatization Commission---Plea raised by assessee was that amortization should be allowed as expenses---Validity---Depreciation was allowable on capital assets and amortization was allowable on intangible assets not used as a stock in trade---When an asset was used as stock in trade by taxpayer then, the provisions of depreciation or amortization were not applicable thereto and provision of S.20(1) of Income Tax Ordinance, 2001, which provided for deductions in computing income chargeable to tax under the head 'income from business' for a tax year, a deduction for any expenditure incurred by the person in the year wholly and exclusively for the purpose of business would become applicable---Under the doctrine of commercial expediency and commercial necessity, any expenditure incurred wholly and solely for the purpose of business was deductible expense for the determination of taxable income of the taxpayer---Doctrine of commercial expediency allowed for deduction of any expenditure under the accounting principle---If plea of the assessee is that amortization be allowed as expenses as per accounting principles, even then the plea could not stand as the property was purchased from Privatization Commission for a consideration of Rs. 36,40,00,000 and if the amortization was taken as per 34% of saleable land/building then it should be Rs. 12,37,60,000 out of which Rs. 9,10,00,000 was allocated during the period relevant to assessment year 2001-2002, the balance amount for amortization should stand at Rs. 3,27,60,000 while for subsequent years 2001-2002, 2002-2003, amortization had been claimed and allowed as allowable expense as the cost of land, however, it should be worked out to the extent of 34% of land sold out for which the matter was remanded to adjudicating authority to allow balance cost of land at Rs. 3,27,60,30 to the subsequent years i.e., 2003, 2004 and 2005, however, while calculating cost of land, allowed in previous years should also be taken into account---Appeal was disposed of accordingly.

1996 PTD 420; 1991 PTD 786; 2000 PTD 2407; (1961) 42 ITR 197; 1975 PTD (Trib.) 6; 1988 PTD (Trib.) 354; 1989 PTD (Trib.) 460; (sic) PTD (Trib.) 191; 1989 PTD (Trib.) 233 and 1989 PTD (Trib.) 150 ref.

Nasrullah, I.T.P. for Appellant (in I.T.As. Nos.128(PB), 129(PB) and 5(PB) of 2010).

Haroon Masood, D.R. for Respondent (in I.T.As. Nos.128(PB), 129(PB) and 5(PB) of 2010).

Haroon Masood, D.R. for Appellant (in I.T.As. Nos.144(PB), 145(PB) and 3(PB) of 2010).

Nasrullah, I.T.P. for Respondent (in I.T.As. Nos.144(PB), 145(PB) and 3(PB) of 2010).

2017 P T D (Trib.) 1010

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Ms. Fiza Muzaffar, Accountant Member

Messrs MAGNA TEXTILE INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

C.I.R. (ZONE-I), R.T.O., FAISALABAD

S.T.A. No.1564/LB of 2014, decided on 16th January, 2015.

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

----Ss. 11(3), 45-A(4) & 46---Commissioner Inland Revenue, by way of impugned order passed under S.45-A(4) of the Sales Tax Act, 1990, proceeded to re-open order-in-original passed by the adjudicating authority and remanded the case to adjudicating authority with direction to pass a fresh order in accordance with law---Validity---Commissioner, no doubt had ample powers to call for and examine the record and to pass an order as he could deem fit, but for that purpose, Commissioner was legally bound to first adjudge and record an illegality or impropriety of the decision/order made by any Officer subordinate to him; which was the first pre-condition, which must be present and fulfilled---In the present case, the Commissioner had re-opened the case without recording any illegality or impropriety, and showing as to what circumstances prevailed upon the Commissioner to exercise powers under S.45-A(4) of the Sales Tax Act, 1990 for re-opening the adjudication order---Adjudging an illegality and impropriety in the order passed by a subordinate Officer, was a mandatory condition while exercising powers of re-opening by Commissioner under S.45-A(4) of the Sales Tax Act, 1990---Whole exercise of the Commissioner for re-opening the adjudication order was declared to be illegal, void and without jurisdiction---Commissioner, after re-opening order-in-original, instead of passing fresh order by himself, remanded the case to adjudicating authority below to decide afresh---In terms of S.45-A of the Sales Tax Act, 1990, no authority or provision existed empowering the Commissioner to delegate his powers to a subordinate Officer; as under subsection (4) of S.45-A of the Sales Tax Act, 1990, it was the Commissioner, who could pass a necessary order as deemed fit by himself and not by his subordinate Officer; that was a legal obligation imposed on the Commissioner by the law itself---If legislature imposed a personal obligation on an Authority; then the same Authority was required to discharge that legal obligation; obligation could not be passed on to any body else---Since basic order of re-opening the case passed by the Commissioner under S.45-A(4) of the Sales Tax Act, 1990 was illegal and unlawful, any subsequent proceeding and superstructure based on such illegal or void order, would have no legs to stand and had to fall on the ground automatically along with the order on which it was based.

Messrs Paramount International (Pvt.) Ltd. Karachi v. Pakistan through Secretary Revenue Division and 2 others 2014 PTD 1256; 2007 PTD (Trib.) 2295 and 1997 SCMR 641 rel.

Messrs Paramount International (Pvt.) Ltd. Karachi v. Pakistan through Secretary Revenue Division and 2 others 2014 PTD 1256; Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; Muhammad Tariq Khan v. Khawaja Muhammad Jawad Asami and others 2007 SCMR 818 and Moulana Atta-ur-Rehman v. Al-Hajj Sardar Umar Farooq and others PLD 2008 SC 663 ref.

(b) Administration of justice---

----If the law had prescribed method for doing of a thing in a particular manner, such provision of law was to be followed in letter and spirit---Achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law, would not be permitted.

Mehar Sultan Jung v. Qurban Hussain 1972 SCMR 73; Yusuf Ali Khan v. State PLD 1977 SC 482 and Khalid Saeed v. Shamim Rizvan and others 2003 SCMR 1505 rel.

(c) Words and phrases---

----"Illegal"---Meanings.

Black's Law Dictionary ref.

(d) Words and phrases---

----"Importer"---Defined and explained.

(e) Constitution of Pakistan---

----Art. 189---Order of the Supreme Court---Binding force---Order of Supreme Court, was binding under Art.189 of the Constitution and any contrary judgment of any Authority, including the Appellate Authority, would have no binding force.

Khubaib Ahmad for Appellant.

2017 P T D (Trib.) 1030

[Inland Revenue Appellate Tribunal]

Before Javid Iqbal, Judicial Member and Muhammad Pervez Alam, Accountant Member

Messrs FORVIL COSMETICS MINGORA SWAT

Versus

COMMISSIONER INLAND REVENUE, RTO, PESHAWAR

S.T.A. No.11/PB of 2014, decided on 17th September, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 3(6)(7), 23 & 26---Khyber Pakhtunkhwa Finance Act (I of 1966) [as amended by Khyber Pakhtunkhwa Finance Act (XVII of 2013)], Ss. 116 & 117---Sales Tax Special Procedure (Withholding) Rules, 2007, Rr. 2(3-A) & 2(8)---Advertisement services---Show cause notice---Evidence, non-providing of---Authorities issued show cause notice to the appellant alleging that advertisement services involving sales tax was received but were not withheld and deposited sales tax amount in government treasury---Validity---No material evidence in support of charges leveled in the notice was provided and right of appellant to contest the case on merits was usurped as evidence in support of charges had not been provided which was the basic right of the defendant---Adjudicating officer was responsible to disclose material evidence in support of charges leveled in show cause notice enabling the defendant to examine its record and rebut the charges---After promulgation of Provincial Sales Tax Act, 2013, only Provincial government of Khyber Pakhtunkhwa was competent to pass order about levy of tax on services with effect from 01-07-2013 and onwards---Proceedings against appellant were initiated on 26-09-2013, i.e., well after July, 2013 hence, such proceedings were not pending proceedings as on July, 2013, on the date of enactment of Khyber Pakhtunkhwa Finance Act, 2013---Appellate Tribunal Inland Revenue vacated the order as adjudicating officer acted beyond jurisdictional norms---Appeal was allowed in circumstances.

Waseem Ahmed Malik assisted by Mushtaq Akbar, FCA for Appellants.

Zulfiqar Ahmed, IRAO for Respondent.

2017 P T D (Trib.) 1044

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Farzana Jabeen, Accountant Member

SEARLE COMPANY LTD.

Versus

COMMISSIONER INLAND REVENUE, ZONE-IV, LTU, KARACHI

M.A. (Stay) No.97/KB and I.T.A. No.184/KB of 2014, decided on 7th March, 2014.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 128(1-A) & 131(5)---Appeal against refusal to grant stay order---Commissioner Inland Revenue (Appeals)/Appellate Authority, refused to grant stay order on the ground that taxpayer having already availed 30 days, further stay could not be granted---Taxpayer, since the institution of main appeal before the appellate authority, had made strenuous efforts to ensure the speedy and efficacious disposal of the appeal---Taxpayer had attended the office of functionary and conducted several hearings, but no order was passed by appellate authority as the functionary was transferred---Successor authority re-fixed appeal, but case was adjourned due to slackness of department---Taxpayer faced hardship and appeal could not be concluded on the pretext that the department had not filed the comments---Taxpayer could not be penalized or punished due to negligence/act of the department---Tribunal observed that where the appeal was lying pending adjudication or reserved for orders and was not disposed of for any reason that would amount denial of justice and violation of appellant's substantive legal/vested and constitutional right---Main appeal had not been disposed of by the appellate authority, even after passing of 60 days of the order of the Tribunal---Taxpayer was not on fault---Taxpayer ought to file stay application once again before the appellate authority would also be at liberty to avail the constitutional remedy or could knock the door of any appropriate forum---Appellate authority, was directed to pass speaking, judicial decision on main appeal within six working days.

2010 PTD (Trib.) 557 and 1996 PTD (Trib.) 388 ref.

(b) Administration of justice---

----Courts and quasi judicial officers, were required, not only to do meaningful speedy justice, but also must perform their duties in such a manner that justice was seen to have been done.

Mrs. Asra Rauf, FCA for Appellant.

Ghulam Murtaza, D.R. for Respondent.

2017 P T D (Trib.) 1080

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member

Messrs RESILIENCE EXPERT (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, RANGE-B, WHT, RTO, KARACHI

I.T.A. No.229/KB of 2014, decided on 15th July, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 182, 115, 131, 149, 153(7), 165 & 165-A---Imposition of penalty for failure to submit a return or statement---Scope---Penalty under subsection (1A) of S.182(1) of Income Tax Ordinance, 2001, could be imposed, where a person would fail to furnish statement as required under Ss.115, 165 or 165-A of the Income Tax Ordinance, 2001 within due date---Taxpayer was required to file statement under S.165(5) of Income Tax Ordinance, 2001 as taxpayer neither collect tax under Division-II, Part IV of Chapter XII of the Income Tax Ordinance, 2001 nor deduct tax from a payment under Division-II of Part-V of Chapter-XII of the said Ordinance---Taxpayer was not a "prescribed person" as defined under S.153(7) of the Income Tax Ordinance, 2001---Appellate authority had ignored the condition of compulsory submission of statement under S.165 of the Income Tax Ordinance, 2001---No revenue loss had occurred to the national exchequer, owing to the allegation---Penalty was imposed without appreciation of S.182 of Income Tax Ordinance, 2001---Impugned order passed by appellate authority, in circumstances, was illegal, unlawful and without jurisdiction---Law ought not be used to penalize a taxpayer unless, it could be shown that the default on the part of the taxpayer had resulted in loss of revenue---Orders passed by the appellate authority were vacated, in circumstances.

(b) Interpretation of statutes---

----Law was to be interpreted in the totality of the scheme contained in the statute and was not to be taken in isolation---If there were two possible constructions of the words of the statute, effect was to be given to one that was in favour of citizen and not the one that would enhance or increase burden on him.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 182---Imposition of penalty for failure to submit a return or statement---Scope---Penalty was not to be imported, without any exception---Major pre-requisite for imposition of penalty had always been a default committed---Onus to prove would lay on the department---Officers of Inland Revenue were directed by Appellate Tribunal to be judicious in imposition of penalty and must act fairly and honestly---Section 182 of the Income Tax Ordinance, 2001, by no means, was charging provision and the legislature's intention was not to generate tax or revenue income---Purpose and intention of the penalty provisions, was not the source of resources mobilization; same was only mode of ensuring collection of tax and compliance thereof---Revenue department could not be allowed to use provisions of S.182 of Income Tax Ordinance, 2001, as substitute of normal assessment or new source of revenue/tax originating provisions.

M. Moazzam for Appellant.

Iqbal Hussain Shaikh, D.R. for Respondent.

2017 P T D (Trib.) 1091

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Riaz, Accountant Member

Messrs PESHAWAR ELECTRIC SUPPLY CO., PESHAWAR

Versus

C.I.R., R.T.O., PESHAWAR

S.T.A. No.101/PB of 2014, decided on 9th June, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 3, 11, 25, 33, 36 & 46---Sales Tax Special Procedure Rules, 2007 Chapter XI---SRO No.555(I)/96, dated 1-7-1996---Assessment of tax---Recovery of tax not levied or short levied or erroneously refunded---Audit report had revealed that appellant Electric Supply Company, had Collected Sales Tax at Rs.6 per unit of electricity consumed from steel melters, but adjusted the same against its input tax---Assessing Officer ordered recovery under Ss.11(2) & 36(1) of the Sales Tax Act, 1990, along with default surcharge and penalty---Said order of Assessing Officer was upheld by appellate authority---Validity---Contention of appellant company was that impugned show-cause notice was hit by S.R.O. No.555(I)/96, dated 1-7-1996, which provided a maximum pecuniary jurisdiction of Rs.1 million, in case of Adjudicating Authority was valid---Said notification was in the field when the show-cause notice was issued---Show-cause notice issued in excess of the monetary limits prescribed by S.R.O. No.555(I)/96, dated 1-7-1996 during its (notification's) validity period were unlawful---Orders passed without jurisdiction would be non est in the eyes of law and transgression of pecuniary jurisdiction, would render entire exercise of authority to be void ab initio and illegal---Impugned assessment order and order-in-appeal, were held to be void on that legal ground---Case was finalized in 184 days; whereas S.11(3) of the Sales Tax Act, 1990, provided a maximum of 30 days to be deducted from the specific period on account of adjustment; while the Commissioner Inland Revenue for reason to be recorded, could extend that period for 60 days---Contention of appellant that order of Commissioner Inland Revenue, extending period to decide by 60 day, did not find mention in the impugned assessment order and in impugned order-in-appeal was right---Section 11 of the Sales Tax Act, 1990 provided a period of 120 days, which could be stretched by another 30 days---(one hundred and fifty days)---Matter in the present case was decided in 184 days---Assessment order, in circumstances, was held to be hit by limitation rendering the same void under S.11(3) of the Sales Tax Act, 1990---Order accordingly.

case law referred.

Hussain Ahmed Sherazi for Appellant.

2017 P T D (Trib.) 1126

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Sikandar Aslam, Accountant Member

Messrs SUI SOUTHERN GAS COMPANY LTD., KARACHI

Versus

C.I.R., ZONE-III, LTU, KARACHI

M.A. (Stay) No.19/KB and S.T.A. No.28/KB of 2014, decided on 14th April, 2014.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 131(5)---Grant of stay of recovery of tax demand by Appellate Tribunal---Principles---Stay of recovery demand by the Tribunal, could be granted, if it was proved that taxpayer was facing hardships or financial constrains---In the present case, it was not proved by the taxpayer, that the department had initiated any coercive measures for recovery of the demand---Stay could not be granted on the basis of general rule, but applicant had to prove its case---Stay could be granted if party seeking stay had a prima facie case; that in case of refusal of stay party could suffer irreparable loss and the balance of convenience or inconvenience, if the stay was not allowed---Section 131(5) of the Income Tax Ordinance, 2001, unequivocally provided that the Tribunal could stay the recovery proceedings, if the recovery proceedings caused undue hardship to the taxpayer---Applicant/taxpayer had failed to make out a case for grant of stay as no hardship was seen to have been caused to the taxpayer---Applicant/taxpayer had filed vexatious and frivolous applications and by doing so, he had not only wasted the time of the court, but also dragged unnecessarily the revenue---Taxpayer having not shown that any coercive measures were being initiated by the department, neither any notice of hardship was issued, nor any recovery proceedings were seen to have been initiated by the department against the taxpayer, application for grant of stay was rejected by the Tribunal in circumstances.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 131---Appeal---Powers of Appellate Tribunal---Scope---Power to grant stay, pending appeal before Tribunal---Powers of Appellate Tribunal, were of widest amplitude in dealing with appeals before it---Tribunal had the power of granting stay during the pendency of the appeal before it---Stay would be granted for a limited and specified period---No automatic stay---Mere filing of and pendency of appeal, would not operate as suspension or stay---No provision in the Income Tax Ordinance, 2001 existed that an assessment would become provisional or non-existent with the filing of an appeal against it---Mere fact of pendency of an appeal would not operate as stay of execution, nor would it affect the executability of the decision appealed against---Matter of grant of stay, no doubt was one of discretions with the Appellate Tribunal, but such power was to be exercised judicially---Primary consideration, should be "undue hardship caused to the taxpayer"---Appellate Tribunal was obliged to form opinion that the recovery of tax in question would cause undue hardship to the taxpayer.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 131(5)---Stay, grant of by the Tribunal---Principles---Points to be considered before grant of stay/injunction were; (a) granting of any injunction under the rule, was purely within the discretion of the court; said discretion should be exercised in favour of the party, who would come with clean hands; (b) injunction was a form of equitable relief; it was to be issued in aid of equity and justice, but not in aid of injustice; in order to obtain an interim relief, the applicant, had not only to establish that he had strong prima facie case, but also to show that the balance of convenience, was in his side and that he would suffer irreparable injury unless he was protected during the pendency of his appeal; applicant had to prove that he would be caused undue hardship, if necessary proceedings were not stayed; and (c) where no serious controversy was raised in the application for stay, mere allegation without producing any prima facie material to establish the same or pointing out circumstances to justify it, could hardly lead to the conclusion that there was a prima facie case justifying grant of injunction.

Arshad Mehmood, FCA for Appellant.

Chaudhry Anwar, DR. for Respondent.

2017 P T D (Trib.) 1175

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Ms. Farzana Jabeen, Accountant Member

Messrs MCB EMPLOYEES SECURITY SYSTEM AND SERVICES (PVT.) LTD.

Versus

DCIR, UNIT-05 WHT ZONE RTO-II, KARACHI

M.A. (Stay) No.86/KB and I.T.A. No.155/KB of 2014, decided on 21st February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 127, 128, 131, 137 & 138---Application for stay before appellate authority---Scope---Appeal was filed against order of appellate authority below, whereby conditional stay was granted subject to payment of 25% of the tax demand---Powers to grant interim relief, was a judicial, or at least quasi judicial in nature and the matter of stay was discretionary---Powers of appellate authority, were of widest amplitude in dealing with appeals before it---Appellate authority had the powers of granting stay---Stay could be granted for a limited and specified period as was in-built in the provisions of law---Taxpayer, was directed to file fresh application of stay before appellate authority, within a week and appellate authority was directed to consider the application judiciously and after application of conscious mind in accordance with the provision of law under S.128(1-A) of Income Tax Ordinance, 2001---Appellate authority, was also directed to take up the main appeal within a week and to decide and dispose of the appeal within 30 days from the receipt of order---Stay application was directed to be disposed of within three days from filing thereof and appellate authority was to comply with the directions in letter and spirit.

Adnan Zaman, FCA for Applicant.

Absent for Respondent.

2017 P T D (Trib.) 1228

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Ms. Farzana Jabeen, Accountant Member

C.I.R., ZONE-II, R.T.O., SUKKUR

Versus

Messrs PAWAN KUMAR AND CO. THUL

I.T.A. No.495/KB/2012, decided on 18th September, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S. 131---Appellate Tribunal Inland Revenue Rules, 2010, R.22---Dismissal of appeal for non-prosecution---Counsel represented the taxpayer, but none appeared on behalf of the department---Department was called thrice to contest the case no one appeared and no adjournment application was submitted---Taking a lenient view and in the interest of justice, case of the appellant/department was placed at last number and after hearing all other cases, appellant was again called to appear for hearing, but no one appeared---Tribunal, addressed a letter to the Chief Commissioner regarding such non-appearance, despite that no effective measures had been taken by the department and no serious attention had been given by the high ranking authorities of Chief Commissioners---Such attitude of the concerned Commissioner, was not expected---Appellate Tribunal Inland Revenue, observed that Tribunal like any judicial body, had a number of procedural requirements which were to be complied with before appeal could be heard---Several departmental representatives, even some of them most senior and highly qualified had neglected to comply with requirements, of law, decency, decorum of the court craft and court culture; bypassing the interest of the revenue, with the result that their matters get adjourned and they wasted their own time and that of the department and the Bench of the Tribunal---Despite proper service of notice of hearing, in the present case, none appeared on behalf of the department nor submitted any adjournment application---Appeal was dismissed in default under R.22 of the Appellate Tribunal Inland Revenue Rules, 2010.

None for the Appellant.

Udha Ram Rajput for Respondent.

2017 P T D (Trib.) 1416

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haque Khan, Accountant Member

Messrs CRESOX (PVT.) LTD.

Versus

C.I.R., ZONE-IV, LTU, KARACHI

I.T.A. No.293/KB of 2012, decided on 31st October, 2013.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A), 127, 128 & 131---General Clauses Act (X of 1897), S.24-A---Amendment of assessment---Taxpayer had challenged validity of order passed by Commissioner Inland Revenue/Appellate Authority contending that it was bad in law and facts---Validity---No reason had been assigned by the Appellate Authority for the findings recorded---Order ought to contain the point or points for determination, the decision thereon and the reasons for the decision; order of appellate authority, in circumstances, was violative of principles of natural justice---Appellate authority had not applied its independent, judicial, judicious and conscious mind honestly and fairly---Failure to give reasons would amount to denial of justice---Appellate authority without appreciating the facts of the case and without applying its mind, simply confirmed the treatment meted out by adjudicating officer in few words---Impugned order being non-speaking did not conform to the mandatory requirements of S.24-A of the General Clauses Act, 1897---Any order which did not contain substantial reasons and did not show that it was passed on objective consideration, would be treated as illegal, void, arbitrary and a result of misuse of authority vested in public functionary---Such illegal, void and arbitrary orders in any system of law could not be approved---If any authority, court/tribunal gave a finding of fact, which was not based on material available on record, was illegal, arbitrary and perverse---Finding of fact which was violative of the established principles of appreciation of evidence on record, was not sustainable in law---Principle that "every judicial, or quasi-judicial finding should be based on reasons containing the justification for the findings in the order", itself was an established principle of dispensation of justice---Impugned order, was defective, as the same lacked the essentials required by law to be noted therein; which at the same time was abuse of exercise of vested discretion, thus not sustainable in law---Case was remanded by Appellate Tribunal to appellate authority for recording appropriate, detailed findings/reasons, observations on each and every issue contested before him, after providing reasonable opportunity of being heard to the taxpayer as well as to the department.

2003 PTD (Trib.) 116; PLD 1992 SC 562 = 1992 PTD 954; PLD 1997 SC 582; Ellahi Cotton Mills Limited's case 1997 PTD 1555 and Call Tell (Pvt.) Ltd.'s case 2004 PTD 3032; ref.

1986 Public Law 437; Nafees Cotton Mills Ltd. v. ITAT 2003 PTD 2841; Engro Chemicals Pakistan Limited v. Additional Collector of Custom and others 2003 PTD 777; 2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519; 2005 PTD 1189; 2003 PTD 2369; PLD 1995 SC (Pak) 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014; 2012 PTD (Trib) 619; Waqda v. Mir Khan Muhammad Khan Jamali 2006 CLC 92; Mollah Ejahar AM v. Government of East Pakistan and others PLD 1970 SC 173; Akhter Saeed v. Azad Khasmir Government PLD 2003 SC (AJ&K) 1 and 2002 CLC 4 ref.

(b) Administration of justice---

----Appellate authority/judicial or quasi-judicial, including officials/ administrative or taxing authorities, while dispensing justice and exercising judicial or quasi-judicial powers, were supposed to apply their mind to the cases and to determine after evaluating those to give their own verdict justified by reasons---All judicial/quasi-judicial authorities, were obliged to pass judicial adjudication by a speaking order, manifesting by itself, that the judicial/adjudicating authority had applied its judicial mind to the issues and the point of controversy involved in the case.

Messrs Airport Support Services v. Airport Manager 1998 SCMR 2268, 2277; Zahur Ilahi v. Secretary to Government PLD 1975 Lah. 499; S.S Miranda v. Chief Commissioner PLD 1959 SC 134 and Government of Pakistan v. Dada Amir Haider PLD 1987 SC 504 ref.

Saqib Masood, FCA and Shabbir Veejilani, FCA for Appellant.

Najeeb Ahmed, D.R. for Respondent.

2017 P T D (Trib.) 1517

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Farzana Jabeen, Accountant Member

Messrs BANK ISLAMI PAKISTAN LTD., KARACHI

Versus

The C.I.R., AUDIT UNIT-4 ZONE-II, LTU, KARACHI

M.A. (Rect.) Nos.10/KB, 11/KB and 12/KB of 2013 In F.E. Stay Nos.06/KB, 07/KB and 08/KB of 2013, decided on 3rd December, 2013.

(a) Federal Excise Act (VII of 2005)---

----Ss. 36 & 37---Recovery of tax---Application for stay order---Scope---Rectification of stay order---Scope---Appellate Tribunal Inland Revenue could not rectify stay order under S.36, Federal Excise Act, 2005 Matter of stay being purely discretionary in nature---Where the taxpayer could not prove the prima facie case, stay order could not be granted---Section 37 of the Federal Excise Act, 2005, unequivocally provided that the Tribunal could in particular case, stay the recovery subject to such condition as it could deem fit so as to safeguard the interest of revenue---Powers to grant stay were to be exercised judiciously after conscious application of mind---Order granting stay could not be rectified through an application for rectification---Apart from prima facie case other main considerations were balance of convenience in relation to the interest of both the taxpayer and Revenue Department; to save injury accruing to any one of them and applicant seeking stay should show that there was likelihood of substantial loss to it, if the stay was not granted---Mere reference of words that "substantial loss will accrue if stay were not granted" were not sufficient compliance of the duty cast on the applicant seeking stay of recovery of tax levied---Applicant had to elaborate without elaborating grounds for "shall cause prima facie case", balance of convenience and "substantial loss/irreparable injury to the applicant"---Tribunal would not withhold stay of tax demand without keeping in view or without applying mind to or without examining or prima facie attending to facts and circumstances of each case---Tribunal seized with application for stay should have regard to facts and circumstances of case in order to determine; whether or not there was sufficient cause of undue hardship for stay of tax recovery---Applicant had not shown that any coercive measures were being initiated by the department, neither any notice of hardship was issued, nor any recovery proceedings were seen to have initiated by the department against the applicant/taxpayer---No apparent bona fide mistake was pointed out in the impugned order of rejection of stay, which was floating on the surface of the record---Scope, power and extent to rectify mistake in order under S.36 of the Federal Excise Act, 2005, was very limited, restricted and qualified---Proposed rectification as prayed by the applicant/taxpayer could not be permitted under the law/Federal Excise Act, 2005---No merits being available for consideration in application for rectification filed by the applicant, same was rejected.

2012 PTD (Trib.) 954 ref.

(b) Federal Excise Act (VII of 2005)---

----Ss. 36 & 37---"Stay of recovery of tax" and "injunction"---Distinction---Appeal and rectification proceedings---Procedure---Appellate powers of the Tribunal---Scope---"Order of stay" would take effect immediately on being passed, even if it was not brought/served to the Tax Department/Officers below; whereas an "injunction" order would operate upon being served on the party against whom it was directed---When judgment/order was reserved by the court/ Tribunal, it would not mean the same had a prima facie case in appellant's favour---Reserving judgment by the Tribunal, operation of the recovery proceedings, was not automatically suspended, unless expressly ordered to do so---Powers of the Tribunal, were of widest amplitude in dealing with appeals before it---Tribunal had the powers of granting stay during the pendency of appeal before it---Stay could be granted for a limited and specified period---No automatic stay was available---Mere filing and pendency of appeal, would not operate as suspension or stay---No provision existed in Federal Excise Act, 2005 to the effect that an assessment would become provisional or non-existent with the filing of appeal against it or during pendency of appeal---Mere fact of pendency of appeal, would not operate as stay of execution, nor would it affect the executability of the decision appealed against---Scope of appeal, was much wider as compared to the rectification of mistake, as envisaged under S.36 of the Federal Excise Act, 2005---In appeal proceedings, aggrieved party/appellant was allowed to raise all the questions/grounds of facts and law while in case of rectification as spelt out in S.36 of the Federal Excise Act, 2005, objection, which ought to be allowed to be raised, were also restricted to the rectification of the mistake; floating and apparent from surface of the record---Where the issue would require debate; further probe/deep investigation and long drawn arguments, same would fall outside the scope of "mistake"---Mistakes must be apparent floating on the surface of the record.

1992 SCMR 687 = 1992 PTD 570 ref.

Muhammad Arshad, FCA for Applicant.

Faisal Rauf Memon, D.R. for Respondent.

2017 P T D (Trib.) 1536

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Ms. Fiza Muzafar Accountant Member

ADDITIONAL DIRECTOR, LAHORE

Versus

Messrs FLYING BOARD AND PAPER PRODUCTS, LAHORE

S.T.As. Nos. 1086/LB and 448/LB of 2009, decided on 27th April, 2015.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7, 8, 11, 36 & 46---Illegal adjustment of input tax---Deputy Collector, came to know that registered person, during relevant period had taken an illegal adjustment of input tax against fixed sales tax payable on the goods manufactured and cleared by registered person under the capacity taxation fixed by Collector whereby no adjustment of Excise Duty and Sales Tax was admissible---Registered person was served with show-cause notice---Collector of Customs (Adjudication) vacated order of the show-cause notice---Department came up in appeal before the Tribunal---Validity---Held, that departmental appeal was devoid of any legal substance on the grounds that no enactment or notification was issued by the Government with regard to the issue of capacity tax, in the field of Central Excise Duty or Sales Tax, authorizing the Collector to fix production capacity of the unit---Input tax adjustment was a statutory right of a registered person which could not be defeated by the order of Collector---Visit of the Superintendent of Directorate, along with Staff at business premises of the registered person, without warrant was illegal---Filing of appeal before the Appellate Tribunal by the Additional Director on behalf of the Sales Tax Department, was illegal---Appeal was disposed off accordingly.

Messrs Mayfair Spinning Mills Ltd., Lahore's case PTCL 2002 CL. 115 (LHC); Messrs Kohinoor Textile Mills Ltd., Rawalpindi's case 2007 PTD (Trib.) 728; Messrs Trade Links International, Lahore's case 2003 PTD (Trib.) 928; 2004 PTD 1731; 2007 PTD 2356; 2004 STR 801; 2005 PTD 1933 = 2005 SCMR 1166; 2006 SCMR 129; 2008 PTD 356 and 2005 PTD 2539 (K.H.C.) ref.

Imran Hayee, D.R. for Appellant.

2017 P T D (Trib.) 1638

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member

Messrs S.S.D. RICE MILLS, DAHARKI

Versus

COMMISSIONER INLAND REVENUE, AUDIT-II, UNIT, RTO, SUKKUR

I.T.A. No.410/KB of 2014, decided on 7th June, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 113, 120 & 122(5-A)---SRO No.57(I)/2012 dated 24-1-2012---Amendment of assessment---Taxpayer filed return of income declaring Rs.710,000 on which tax was worked out as Rs.79,853---Scrutiny of return revealed that taxpayer had declared turnover of Rs.89,750,000 and its tax as per S.113 of Income Tax Ordinance, 2001 at 1% comes to Rs.897,500 which had not been charged and paid---Deemed order was amended under S.122(5-A) of Income Tax Ordinance, 2001, after issuance of show-cause notice under S.122(9) of Ordinance, and tax was charged as per S.113 of the Ordinance---Appellate Authority below having confirmed the action of the Deputy Commissioner Inland Revenue---Validity---Appellate Authority had failed to allow reasonable opportunity of being heard to the taxpayer---Any remedial enactment, would be considered in favour of the taxpayer---S.R.O. No.57(I)/2012 dated 24-1-2012 having been issued during the period pertaining to the tax year 2012, same would apply in case of the taxpayer---Appellate Authority having failed to apply its judicial mind, and confirmed the order of Deputy Commissioner Inland Revenue without considering the arguments of the taxpayer, orders passed by the authorities below were vacated, in circumstances.

2013 PTD (Trib.) 589 (603); 2013 PTD (Trib.) 1684 (1689); 2015 PTD (Trib.) 434 (34); 2015 PTD (Trib.) 1625 (1634); 2015 PTD 2570 and 2016 PTD 325 ref.

CIT v. Shahnawaz Ltd. and others 1993 SCMR 73; 2004 PTD (Trib.) 2417 and Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary, Finance, Islamabad PLD 1997 SC 582 = 1997 PTD 1555 rel.

Ajeet Sundar for Appellant

Ch. Tassawar Iqbal Bhumla, D.R. for Respondent.

2017 P T D (Trib.) 1663

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Sikandar Aslam, Accountant Member

Messrs DEWAN TEXTILE MILLS LTD., KARACHI

Versus

The ACIR-B, AUDIT-D-I, LTU, KARACHI

I.T.As. Nos.415/KB and 416/KB of 2012, decided on 30th May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 120, 122(5-A), 129 & 131---Powers of appellate authority---Scope---Return of income to be the assessment order---Amendment of assessment---Remand of case to Assessing Officer---Return of income filed by the taxpayer for relevant year, was treated as an assessment order, deemed to have been issued in terms of S.120 of the Income Tax Ordinance, 2001---Said assessment order, subsequently having been considered erroneous, as well as prejudicial to the interest of revenue requiring further amendment, Assessing Officer amended the said order---Commissioner Inland Revenue (Appellate Authority), remanded the case to Assessing Officer---Validity---Appellate authority could himself decide the issue on his own and need not remand the matter to the Assessing Officer for fresh consideration---Appellate authority could exercise all such powers as the Assessing Officer could have exercised at the time of original proceedings and what the Assessing Officer could have done, appellate authority could also do in appeal proceedings---Scope of appellate authority was conterminous as co-existence with that of Assessing Officer---Order of appellate authority in circumstances, was not sustainable in the eyes of law---Matter was remanded by the Appellate Tribunal to the appellate authority to pass speaking judicious order after application of judicial, judicious and conscious mind and after examination of records of assessment and details/information and cross-verification of details and after confrontation and obtaining rebuttal of the taxpayer within 60 days of the receipt of that order, subject to reasonable opportunity of hearing to the appellant/taxpayer as well as revenue department---Appellate authority, after the amendment by Finance Act, 2005, could confirm, modify or annul the assessment order because said authority had wider powers to conduct enquiry and could enhance the assessment, confirm the assessment or modify the assessment, but appellate authority was divested of powers to set aside the case for de novo proceedings.

2001 PTD 1467; (1969) 20 Tax 51 (Trib.); Chairman WAPDA, Lahore and others v. Gulbat Khan 1996 SCMR 230; Shahab Industry Ltd. v. Commissioner of Income Tax, Karachi 1991 PTD 463; Ayenbee (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Headquarter, Karachi 2002 PTD 407; Ch. Muhammad Sadiq v. Income Tax Officer 1988 PTD 1014 and Sandal Engineering (Pvt.) Limited, Faisalabad v. The Inspecting Additional Commissioner of Income Tax, Faisalabad 2001 PTD 1467 ref.

Salman Pasha for Appellant.

Rafiq-ur-Rehman, D.R. for Respondent.

2017 P T D (Trib.) 1785

[Inland Revenue Appellant Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Bakht Zaman, Accountant Member

Messrs BASF CHEMICAL AND POLYMERS PAKISTAN LTD.

Versus

TAXATION OFFICER, ACIT, KARACHI

M.A. (Rect) No.27/KB of 2009 in I.T.A. No.167/KB of 2010, decided on 6th November, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 131 & 133---Rectification of order of Appellate Tribunal---Appeal, scope of---Rectification application had been filed by the applicant/taxpayer, seeking rectification of the order of the Tribunal---Said application had already been considered and conscious order had been passed by the Division Bench of the Tribunal---Application for rectification of mistake once considered, and dismissed after conscious application of mind with reasons by the one of the Authors of main order---Once the matter was decided conclusively same would attain finality---Matter, in the present case had been challenged by the taxpayer before the High Court, which was sub-judice and pending adjudication---No apparent bona fide mistake had been pointed out which floated on the surface of the record---Scope of S.221 of the Income Tax Ordinance, 2001 was restricted and qualified---Scope of appeal, was much wider as compared to the application for rectification of mistake as envisaged under S.221 of the Income Tax Ordinance, 2001---Aggrieved party, in appeal was allowed to raise all the questions/grounds of facts and law while in case of application for rectification, objection, which was allowed to be raised was restricted to the rectification of mistake, which ought to be floating and apparent from surface of the record---Present application for rectification was nothing; but waste of time of the court---After rejection of earlier application in taxpayer's own case on the identical facts and circumstances, proper remedy was available with the taxpayer to file reference before the High Court, which remedy had been availed by the taxpayer---Application for rectification, was dismissed, in circumstances.

2004 SCMR 1622; 2004 SCMR 1947; 2008 CLD 149; 1999 PTD 2895; PLD 1995 SC 66; 2006 SCMR 1519; 2000 PTD 359; 2010 PTD (Trib.) 2649; 2010 PTD (Trib.) 878; 1983 PTD 246; 2009 PTD (Trib.) 888; 1998 PTD (Trib.) 2552; 2003 PTD (Trib.) 260 and 1992 SCMR 687 = 1992 PTD 570 ref.

Nayyar Raza, ACA for Applicant.

Hyder Ali Dharejo, D.R. for Respondent.

2017 P T D (Trib.) 1821

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Muhammad Ahmad, Accountant Member

Messrs ROYAL WEAVING FACTORY, Prop: Umar Imtiaz, Small Industrial Estate

Versus

C.I.R., R.T.O. FAISALABAD

I.T.A. No.238/LB of 2017, decided on 20th March, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5)---Amendment of assessment---Return filed by the taxpayer for relevant year, was deemed assessment order under S.120(1) of the Income Tax Ordinance, 2001---Taxation Officer amended the assessment on information regarding import of machinery from Customs import data which was not disclosed by the taxpayer---In the present case, a barter contract was entered between the two parties---Contention of the taxpayer was that he having duly furnished documentary evidence regarding barter trade with other company, question of investment would not arise---Validity---Intention of the assessee/taxpayer had to be considered in each case of sale or exchange and principles had to be borne in mind in deciding; whether the transaction of sale and exchange would amount to "adventure in the nature of trade" or otherwise---Each individual transaction had to be considered after going into the full facts of the case---Impugned assessment order as well as the order of appellate authority were not sustainable in the eyes of law---Both the orders of the authorities below were annulled, in circumstances.

2012 SCMR 1526 ref.

M. Imran Rashid for Appellant.

Faisal Asghar, D.R. (RTO) for Respondent.

2017 P T D (Trib.) 1836

[Inland Revenue Appellate Tribunal]

Before Qamar-ul-Haq Bhatti, Judicial Member and Sheraz Mirza Accountant Member

Messrs M.A. INDUSTRIES 105 INDUSTRIAL, MULTAN

Versus

C.I.R., R.T.O., MULTAN

S.T.A. No.96/LB of 2016, decided on 1st March, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), (37), 3, 7, 8-A & 73---S.R.O. No. 555(I)/2006, dated 5-6-2006---Tax fraud---Claim/adjustment of input tax---Appellant/ registered person had claimed/adjusted input tax on strength of false/flying invoices issued by the blacklisted/suspended units---Show-cause notice was issued to the registered person, who could not substantiate his version with any plausible reasoning---Adjudicating authority agreed with the contention of registered person to the extent of certain payments, accordingly balance amount, inadmissibly adjusted as input tax and claimed refund was rejected by the adjudicating authority, directing the registered person to deposit the said amount---Appellate authority confirmed the order passed by the adjudicating Authority---Validity---Appellate Tribunal could exercise jurisdiction comprehensively by directing the Commissioner or Commissioner (Appeals) for production of relevant record and for making necessary further enquiries and investigation in the matter of tax fraud to determine; (i) whether, the registered person/purchaser, who claimed or deducted input tax, had actually paid the tax to the supplier or not; (ii) if the input tax was paid by the registered person/purchaser, but not deposited by the supplier, then for the purpose of S.8-A of the Sales Tax Act, 1990; whether registered person was in knowledge, or had reasonable ground to suspect that sum or all of the tax payable in respect of supply would go unpaid; (iii) whether particular invoice issued prior to blacklisting, was false and flying, had direct nexus with the blacklisting---Orders passed by both the authorities below, were set aside and matter was remanded to the Adjudicating Officer for fresh proceedings accordingly.

S.T.A.No.885/LB of 2013 dated 10.11.2015 and CIR v. Messrs Tariq Poly Pack (Pvt.) Ltd S.T.R. No.98 of 2014 ref.

Raiz Ahmed Raja, ITP for Appellant.

Ms. Rabia Shah, D.R. for Respondent.

2017 P T D (Trib.) 1865

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Farzana Jabeen, Accountant Member

Messrs BOC PAKISTAN LTD.

Versus

The COMMISSIONER INLAND REVENUE, (L.D) LARGE TAXPAYER UNIT, KARACHI

I.T.A. No.641/KB of 2011, decided on 26th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 29, 120, 122, 131 & 177---Selection of case for audit---Amendment of assessment---Bad debt---Case of the taxpayer was selected for audit and after completion of audit proceedings, assessment was amended---Taxpayer being aggrieved with amendment order filed appeal before appellate authority, which vide impugned order was disposed of---Validity---Claim of taxpayer of written off of provision for bad debt and that of stores and spares were also disallowed to the taxpayer---Recovery proceedings having not been initiated, debts could not be held to be bad as irrecoverable---Taxpayer had also not fulfilled the condition of S.29 of the Income Tax Ordinance, 2001, for claiming written off bad debts---Action of Departmental Officer was confirmed by the Tribunal and appeal of the taxpayer in that respect was dismissed---Claim of obsolete stock and spares was allowed by the Tribunal---Claim for turnover/stock holding, having not been thrashed out properly through investigation to ascertain the allowability of the same for arriving at proper and justifiable conclusion, Tribunal remanded the case to Assessing Officer with direction to decide the same within sixty days from receipt of present order after giving proper and adequate opportunity of being heard and after considering all the details and aspects of the case and arguments of the taxpayer and pass judicial and speaking order after application of conscious mind.

1990 PTD 731 ref.

M. Saleem Siddiqui, FCA for Appellant.

Zulifiqar Ali Memon, D.R. for Respondent.

2017 P T D (Trib.) 2108

[Inland Revenue Appellate Tribunal]

Before Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

ASSISTANT COMMISSIONER, UNIT-4, SRB

Versus

Messrs OPTIMUS CAPITAL MANAGEMENT (PVT.) LTD.

Appeal No.AT-35 of 2016, decided on 23rd January, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 43 & 44---Failure to pay Sales Tax---Words "knowingly" and "fraudulently" occurring in S.43, Sindh Sales Tax on Services Act, 2011---Meaning---Imposition of penalty---Taxpayer who was engaged in providing/rendering taxable services chargeable to Sales Tax was alleged to have failed to pay said tax---Assessing officer vide order-in-original ordered the taxpayer to pay sales tax, default surcharge and penalty---Appellate Authority maintained order to the extent of amount of tax and payment of default surcharge and allowed the appeal to the extent of penalty---Validity---Serial No.3 of S.43 of Sindh Sales Tax on Services Act, 2011, dealt with the penalty for failing to deposit the tax within time or in the manner laid down under the Act, while Serial No.6(d) of the said section dealt with for penalty for knowingly or fraudulently failing to pay, recover or deposit the actual amount of tax claimed inadmissible tax credit or adjustment or deduction or refund---In the present case, Assessing Officer imposed penalty for non-payment of tax under said two provisions of S.43 of Sindh Sales Tax on Services Act, 2011 relating to non-payment of tax---Both the provisions catered two different situations and could not be invoked simultaneously---If a taxpayer would fail to deposit the tax amount due or any part thereof in the manner laid down under the Act or Rules made thereunder, subject to presence of mens rea, penalty could be imposed under Serial No.3 of S.43 of the Sindh Sales Tax on Services Act, 2011---If the same offence was committed knowingly or fraudulently subject to presence of mens rea, penalty could be imposed under Serial No.6(d) of S.43 of the Act---Word "knowingly", would mean with knowledge; whereas word "fraudulently" would mean an intention to deceive or defraud---Taxpayer, in the present case, was penalized twice for committing same offence of non-payment of tax---Liability to pay penalty was not a necessary consequence or corollary of every non-payment of tax within stipulated period, but was subject to prove that the non-payment of tax was knowingly or fraudulently with mala fide intention not to pay or evade the tax---Penalty could only be imposed when the department would establish a case indicating dishonest motives of a taxpayer---Department had failed to establish the necessary ingredients of imposing penalties under said two provisions of S.43---Mere non-deposit of tax or failure to pay tax without element of mens rea and mala fide, could not entail penalty---Order of appellate authority was upheld.

Messrs D.G. Khan Cement v. Federation of Pakistan 2004 SCMR 456 = 2004 PTD 1179; Pakistan through Secretary Ministry of Finance and others v. Hardcastle Waud (Pakistan) Ltd. PLD 1967 SC 1 and Commissioner of Income Tax v. Habib Bank Ltd. 2007 PTD 901 ref.

Tariq Ali, A.C. for Appellant.

2017 P T D (Trib.) 2169

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Sikandar Aslam, Accountant Member

Messrs HABIB BANK LTD.

Versus

COMMISSIONER INLAND REVENUE

M.A. (Stay) No.109/KB to 113/KB and I.T.As. Nos. 637/KB and 641/KB of 2015, decided on 27th May, 2015.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 127, 128(1A), 131(5) & 132---Recovery of tax demand---Stay---Powers of Appellate Tribunal---Scope---Commissioner (Appeals)/ appellate Authority, had refused request of the taxpayer for stay of recovery of tax demand---Taxpayer had contended that appellate Authority had rejected stay sought by him solely on the ground that there was no issue of recovery of demand and that the adjustment of determined refund, would cause undue hardship to it and that the demand had been raised incorrectly---Stay of recovery of entire demand was sought from the Appellate Tribunal till the decision of main appeal by the appellate Authority and directions to the said Authority for early disposal of its appeal---Validity---Order of refusal for grant of stay passed by appellate Authority was not a speaking order, which was against the fundamentals of justice---Quasi judicial order must be a speaking order manifesting by itself that the authority had applied its judicial mind to the issues and the points of controversy involved in the cause---Section 131(5), read with proviso, of the Income Tax Ordinance, 2001 had unequivocally provided that the Tribunal could stay the recovery proceedings for 180 days---Said provision of law had restricted the empowerment of the Tribunal to grant stay of recovery, unless tax levied and upheld by the appellate Authority---In the present case, tax had been levied, but not upheld by the appellate Authority---Mere refusal of appellate Authority to grant stay would not mean that the Authority had upheld the levy of tax pending adjudication of appeal---Tribunal had power to dispose of the matter of stay which related to income tax or sales tax and could remand and direct the appellate Authority to further examine/reconsider the stay application---Appellate Tribunal could direct the appellate Authority for allowing/granting the stay---No automatic stay existed---Pendency of appeal, would not operate as suspension of stay---Recovery of tax levied and upheld by the appellate Authority, in the present case, would cause undue hardship to the taxpayer---Applicant seeking stay was to show that there was likelihood of substantial loss to it, if stay was not granted---Power to grant interim relief was a judicial or at least quasi judicial in nature and the matter of stay was purely discretionary in nature, which was to be exercised judiciously---Powers of the appellate Authority below were of the widest amplitude while dealing with the appeals and stay applications---Appellate Authority had the power of granting stay during the pendency of appeal before him---Taxpayer was not at fault in the present case and it was being penalized and punished for its obedience to law---Appellate Authority had rejected stay application on solitary ground that there was no issue of recovery of demand through coercive measures due to determined refund available to the taxpayer---Appellate Authority, in circumstances could not observe that there was no issue of recovery of demand in the present case despite determined refund---Appellate Authority, was directed by the Appellate Tribunal to grant the stay for clear 30 days against the recovery through any mode of recovery or coercive measures including contra entries and decide the main appeal at the soonest possible time before the expiry of stay order and pass judicious speaking order after application of conscious mind; dispose of appeal and issue the appellate order within 30 days.

Messrs Chenab Board Faisalabad v. CIR 2012 PTD (Trib.) 941 and Messrs Z.N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746 distinguished.

2011 PTD 1290; I.T.A. No.2180/LB of 2014; Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan and others PLD 1970 SC 173; Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and other 1984 SCMR 1014; Airport Support Services v. Airport Managerr QIA 1998 SCMR 2268; 2010 PTD (Trib.) 557 and 1996 PTD (Trib.) 388 ref.

(b) Administration of justice---

----Court interpret law for advancement of justice---Law should not be allowed to operate so as to defeat the ends of justice---Court and quasi judicial officer, were required, not only to do meaningful speedy justice, but also must perform their duties in such a manner that justice was seen to have been done.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 170---"Refund"---Meaning and scope---Refund, would mean returning back to the taxpayer of the amount of tax which was payed in excess of what was due from him---Refund, in essence, would imply and postulate some amount of tax which had already been paid to the department, which had got to be refunded---Refund was simply a repayment of amount overpaid under whatever mode or set of circumstances---Overpayment was recognized by the statute and ascertained for purposes of repayment to the taxpayer---Tendency of the Revenue to take the plea of technicalities or technical plea of limitation as the bar for granting of refund legitimately due to the taxpayer was deprecated---If Government or a public Authority would take up a technical plea, the court had to decide the same and if the plea was well-founded, it had to be upheld by the court---Mere technicalities were not to be the criteria to deny legitimate refund of taxes paid by mistake or otherwise---Determined refund was legitimate money of taxpayer and it could not be treated as Government money and taxpayer was legally justified, not only to claim refund, but also compensation/interest thereon---Legitimate rights of taxpayers could not be seized by the taxing functionaries in any manner or under any circumstances---Seizing/capturing or adjusting of determined refund against super tax demand was nothing, but clearly coercive measure of recovery of tax demand and depriving the taxpayer from the claim of compensation thereon and compensation on compensation---Excess tax paid not only by way of advance tax, but also by way of tax deduction at source, was to be refunded with compensation/ interest---Taxpayer was also entitled to compensation/interest on interest/compensation from date on which the refund was due to the date refund was granted---Taxing Authority was not justified to withhold the legitimate determined refund on frivolous grounds/ technical grounds or illegal objectives/demands raised---Refund was an "Amanat" and the public servants held such amount as an Amanat, and were supposed to refund/return same to the person entitled to it---Non-returning or non-refunding the "Amanat" was tantamount to Khayanat and could be termed as sin and against the canon/teachings/Injunctions of Islam---Willingness and promptness with which the Government was serious in enforcing collection and recovery of taxes by using all the powers vastly conferred, was conspicuously absent when any claim for refund would arise and for that purpose it was immaterial; whether the Authority who had to grant refund was a quasi judicial authority or even the appellate Authority---Appellate Tribunal observed that Inland Revenue Department ought to show same speed for refunding "the refund" as they were showing at the time of levying, collecting, enforcing recovery of taxes.

Gujarat Florochemicals Ltd. v. CIT (2008) 300 ITR 328; Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 and HMM Ltd.'s case (1990) 77 STC 17 SC ref.

Syed Shabbar H. Zaidi, FCA and Asra Rauf, FCA for Applicant.

Abdul Qadeer Abbasi, D.R. for Respondent.

2017 P T D (Trib.) 2210

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs BELA LUBRICANTS (PVT.) LTD.

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS, SALES TAX AND CENTRAL EXCISE

M.A. (RE-CALL) No.3/KB in F.E.A. No.45/KB of 2015, decided on 6th March, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S. 131---Recalling of order of Inland Revenue Appellate Tribunal---Scope---Application by taxpayer for recalling the order passed by Appellate Tribunal---Main appeal had already been dismissed in default by the Tribunal---After dismissal of appeal, the taxpayer moved application for restoration which was allowed by the Division Bench of the Tribunal---Tribunal after restoration of appeal issued several notices, even after recalling impugned order, to contest case, but neither the taxpayer nor any of his representative appeared, despite several adjournments---Taxpayer again filed application for recalling said order, on the pretext that counsel who was to appear before the Tribunal, could not attend the proceedings due to his illness---No supporting document i.e. medical certificate from the recognized Medical Hospital had been produced---Validity---After restoration of the order of the Tribunal, the taxpayer should have been cautious, but he opted to remain absent and sought adjournments from time to time---In view of the non-compliant attitude of the taxpayer, his application was dismissed.

Sardar M. Ishaque for Appellant.

None for Respondent.

2017 P T D (Trib.) 2234

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhilllon, Judicial Member and Raana Ahmed, Accountant Member

Messrs A.H. SYED AND COMPANY (PVT.) LTD., JHANG

Versus

C.I.R., R.T.O., FAISALABAD

I.T.As. Nos. 2359/LB and 2360/KB of 2016, decided on 13th February, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 113-A & 233---Tax on income of certain persons---Criteria, to determine whether a person was an "agent", a "broker" a "distributor" a "dealer" or a "wholesaler", tabulated.

| | | | | | | --- | --- | --- | --- | --- | | Agent | Broker | Distributor | Dealer | Wholesaler | | acts as a representative or buys or sells on behalf of the principal, under express (oral or written) or implied authority delegated by the principal, controlled by/ obligated to the principal, so as to bring the principal into contractual relationships with | acts as an intermediary or negotiator, between prospective buyers and sellers or between other persons in matters of trade, commerce, or navigation, not generally liable personally on the contract | manufactures and/or purchases goods (non-competing products or product lines) or property from a manufacturer, warehouses them, and resells them, on manufacturer's account/behalf as an agent, to retailers and/or end users | manufactures and/or purchases goods or property from a manufacturer and/or distributor for his own account/behalf as a principal, and resells them to retailers and/or end users | purchases large quantities of goods or property from a manufac-turer and / or distributor for his own account/ behalf as a principal, and resells them in smaller quantities to retailers or other merchants, who in turn sell to end users/ ulti-mate consumers | | third parties, thereby acquiring legal obligations and rights and binding the principal with his acts | | | | | | does not have ownership of or title to goods or property he deals in | does not have ownership of or title to goods or property he deals in | does not have ownership of or title to goods or property he deals in | may or may not have ownership of or title to goods or property he deals in | has ownership of or title to goods or property he deals in | | does not have dominion over and/or possession of goods or property he deals in | does not have dominion over and/or possession of goods or property he deals in | has dominion over and possession of goods or property he deals in | has dominion over and possession of goods or property he deals in | has dominion over and possession of goods or property he deals in | | recognizes commission from the principal as revenue in his final accounts | recognizes brokerage from the client as revenue in his final accounts | recognizes commission from the manufacturer as revenue in his final accounts | recognizes sales as revenue in his final accounts | recognizes sales as revenue in his final accounts |

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 113 & 233---Payment on account of brokerage or commission under International Accounting Standards though a distributor was obliged to recognize only the amount of commission as revenue in his final accounts; however, as per local commercial practices, only a small number of distributors were recognizing the amount of commission received from their principles as revenue in his final accounts, while a huge number of distributors were recognizing the value of sales made on behalf of their principal as revenue in their final accounts---Legislature, fully cognizant of said two local commercial practices, had covered both, in the former situation, such commission was subject to withholding of tax under S.233 of the Income Tax Ordinance, 2001 and accordingly liable to tax at 10% under final tax regime and not liable to minimum tax under S.113 of the Income Tax Ordinance, 2001; as commission was not covered by the definition of "turnover" given under S.113 of the Income Tax Ordinance, 2001 and the latter situation, such sales were liable to minimum tax as under S.113 of the Income Tax Ordinance, 2001---In the present case the taxpayer, having himself chosen to recognize sales made on behalf of his principal as revenue in his final accounts, such sales were liable to minimum tax at 0.2% under S.113 of the Income Tax Ordinance, 2001---Order accordingly.

Case-law referred.

Shahabaz Butt, A.R. for Appellant.

Kashif Azhar, D.R. for Respondent.

2017 P T D (Trib.) 2280

[Inland Revenue Appellate Tribunal]

Before Justice (Retd.) Nadeem Azhar Siddiqui, Chairman

RESOURCE MARKING CONSULTANTS

Versus

ASSISTANT COMMISSIONER (UNIT-16), SRB, KARACHI

Appeal No.AT-72 of 2016, decided on 23rd January, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

----S. 43, Second Sched.---Levy of sales tax for short payment, default surcharge and penalty---Taxpayer was a registered person engaged in providing or rendering "Event Management Services---Allegation against the taxpayer was that he had provided Event Management Service but failed to pay amount of sales tax for the relevant period and that file monthly sales tax return---Assessing officer, in his order-in-original had stated that taxpayer had only charged sales tax on "commission service fee" and failed to charge, collect and pay sales tax on "value of taxable service", and paid short amount of tax---Assessing officer in circumstances, levied sales tax for short paid amount of sales tax, default surcharge and penalty---Appellate Authority dismissed appeal filed by taxpayer for non-prosecution---Validity---Taxpayer had deposited tax due only immediately after order-in-appeal---Allegation against the taxpayer was not of non-payment of tax, but short payment---Liability to pay default surcharge and penalty was not a necessary consequence or corollary of non-payment of tax, within stipulated period, but was subject establishment of mens rea, non-payment of tax, mala fide intention or evasion of tax by tax-payer---In the present case, department had failed to establish the necessary ingredients of imposing default surcharge and penalty---Mere non-deposit of tax without element of mens rea, wilfulness and mala fide, could not entail surcharge and penalty---Orders-in-original passed by Assessing Officer and appellate Authority, were set aide to the extent of imposing penalty and default surcharge.

Pakistan through Secretary Ministry of Finance and others v. Hardcastle Waud (Pakistan) Limited PLD 1967 SC 1 and Commissioner of Income Tax v. Habib Bank Limited 2007 PTD 901 ref.

Javed iqbal for Appellant.

2017 P T D (Trib.) 2291

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Sikander Aslam, Accountant Member

C.I.R., ZONE-III, LTU, KARACHI

Versus

MAL PAKISTAN LTD., KARACHI

I.T.As. Nos.306/KB and 307/KB of 2012, decided on 6th February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 29, 114, 120 & 122(5-A)---Amendment of assessment---Bad debt, deletion of---Return of income filed by taxpayer was deemed as assessment order under S.120 of the Income Tax Ordinance, 2001---Said assessment was considered erroneous and prejudicial to the interest of revenue requiring amendment under S.122(5-A) of Income Tax Ordinance, 2001 and Adjudicating Authority amended the assessment accordingly---Appeal filed by the taxpayer against impugned order was allowed by deleting the addition of "bad debts" written off---Validity---Issue of "bad debt" written off, was remanded by the Appellate Tribunal to the Assessing Authority for de novo proceedings, with direction to re-do the assessment proceedings with regard to deletion of bad debt and proceed accordingly after careful examination of facts of the case, and considering the evidence produced by the taxpayer strictly in accordance with law within sixty days after affording the proper opportunity of being heard to the taxpayer---Tribunal for their directed that while determining as to whether the expenditure was wholly and exclusively, laid out for the purpose of the business; the reasonableness of the expenditure should be considered from the point of view of the businessman, and not that of an outsider, including the Income Tax Officer.

2011 PTD (Trib.) 1716 ref.

Zulfiqar Ahmed Memon, D.R. for Appellant.

Syed Shabbar H. Zaidi, FCA for Respondent.

2017 P T D (Trib.) 2316

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Mrs. Ambreen Aslam, Judicial Members and Faheem-ul-Haq Khan, Accountant Member

Messrs HABIB INDUSTRIES (PVT.) LTD., KARACHI

Versus

I.A.C. RANGE-III, COMPANY-IV, KARACHI

W.T.As. Nos. 407/KB to 412/KB of 2001, decided on 30th November, 2016.

(a) Wealth Tax Act (XV of 1963) [Since repealed]---

----Ss. 2(e)(ii), 16(3), 23 & 17-B---Imposition of wealth tax---Assessee, a private limited company, engaged in the business of manufacturing and fabrication of machinery parts, due to temporary cessation of business activities, leased out portion of its plot of land on a monthly rent; and declared the income of rent as "business income"---Assessee contended that leased out property, was not hold for the purposes of letting out---Deputy Commissioner of Wealth Tax, imposed wealth tax under S.16(3) of the Wealth Tax Act, 1963, estimating the value of property on the basis of actual rent received on the sole pretext of its being letting out on rent---Assessee, in appeal contended that subject property leased out on rent, could not be taxed under provision of S.2(e)(iii) of the Wealth Tax Act, 1963, as property owned by it was not hold for letting out as the principal business of the assessee was manufacturing and fabrication of machinery parts---Appellate authority set aside assessment order passed by Deputy Commissioner of Wealth (Adjudicating Authority), and remanded case to the adjudicating authority for re-examination of the matter afresh with reference to the law contained in S.2(e)(iii) of the Wealth Tax Act, 1963---Assessing/adjudicating authority as per directives of the appellate authority, found that the assessee was not liable to wealth tax---Subsequently, Inspecting Additional Commissioner (I.A.C.), under S.17-B of the Wealth Tax Act, 1963, cancelled all the assessment orders on the ground that the immoveable property on the valuation date was on rent, was sufficient to bring the assessee into the ambit of chargeability under the Wealth Tax Act, 1963---Validity---Inspecting Additional Commissioner was all along associated with assessment proceedings and order was approved by him, revision of such order by said official was not permissible---Powers conferred on Inspecting Additional Commissioner were restricted with in-built limitation, supervisory in nature and if an assessment order was passed by adjudicating authority, consciously after application of mind to the material facts, after considering provisions of Wealth Tax Act, 1963, such assessment could not be branded as erroneous---Inspecting Additional Commission was debarred to take action under S.17-B of the Wealth Tax Act, 1963---Powers of the Inspecting Additional Commissioner (I.A.C.) to revise, adjudicating authority's orders could be exercised if conditions contained in S.17-B of the Wealth Tax Act, 1963, were satisfied---Inspecting Additional Commissioner was unjustified to invoke the provisions of S.17-B of the Wealth Tax Act, 1963 as the order passed under Ss.16(3)/23 of Wealth Tax Act, 1963, was neither erroneous nor prejudicial to the interest of revenue, and was passed after giving conscious considerations to the submissions of the assessee that intention of the legislature for insertion of S.2(e)(iii) of the Wealth Tax Act, 1963 was to tax those immovable properties that were held for the purpose of business of construction and sale or letting of property---Assessee, was not indulged and not carrying out the business of letting out the property---Wealth Tax assessment for the relevant year could not be re-opened/revised by Inspecting Additional Commissioner under S.17-B of the Wealth Tax Act, 1963 which was liable to be annulled and order passed by adjudicating authority under Ss.16(3)/23 of the Wealth Tax Act, 1963, was restored---Order accordingly.

Case law referred.

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

----S. 17-B---Revisional jurisdiction of Inspecting Additional Commissioner (I.A.C.)---Scope and extent---Inspecting Additional Commissioner (I.A.C.), was not given free hand to invoke the provisions of S.17-B of the Wealth Tax Act, 1963, in each and every assessment/order made by adjudicating authority---Very purpose and tenor of said section was to safeguard the interest of revenue and for that purpose the I.A.C., was vested with the power to revise the order of the subordinate officer where he had acted with flagrant violation of law and fact---Limited and restricted powers of modifying or enhancing or revising had been vested in I.A.C. by said section---Powers under S.17-B of the Wealth Tax Act, 1963, could be exercised only, if the order of the Taxation Officer, was erroneous and prejudicial to the interest of the revenue---Revisional power under S.17-B of the Wealth Tax Act, 1963, was a quasi judicial power hedged in with limitation and had to be exercised subject to the same and within its scope and ambit---Exercise of revisional power by the 'I.A.C.', should not become fiat, but should be within the bounds of law and satisfy the need of fairness in administrative action and fair play and full compliance with the requirements of the principles of natural justice as in quasi judicial proceedings---Scope of interference under S.17-B of the Wealth Tax Act, 1963 was not to set aside merely unfavourable orders and bringing to tax some more money to the Treasury, nor was the said section meant to get at sheer escapement of revenue, which was taken care of by other provisions in the Wealth Tax Act, 1963---Powers of suo motu revision, could be exercised by I.A.C., if examination of the records of any proceedings under said Act, he considered that any order passed therein by Taxation Officer, was erroneous, in so for it was prejudicial to the interests of revenue---Such was not an arbitrary or unchartered power, but could be exercised only on fulfilment of the requirements laid down in S.17-B of the Wealth Tax Act, 1963---Consideration of the I.A.C., as to whether an order was erroneous in so far as it was prejudicial to the interest of the revenue, must be based on material on the record of the proceedings called for by him---If there were no material on record on the basis of which, it could be said that I.A.C., acting in a reasonable manner, could have come to such conclusion, the very initiation of proceedings by him would be illegal and without jurisdiction---Order accordingly.

Case law referred.

(c) Interpretation of statutes---

----Taxing statute---Provisions of taxing statute, were strictly interpreted and the charges were imposed on the taxpayer with a clear and unambiguous language---Court/Tribunal should apply correct law, whether, litigants pointed out or not---If there were two reasonable views/interpretations, possible, views which favour the subject/citizens to be adopted---If there were two consistent rational/interpretations, the court should not adopt such construction which would lead to an absurdity---Fiscal provisions of a statute, were to be construed liberally in favour of taxpayer, and in case of any substantial doubt, the same was to be resolved in favour of the taxpayer---If the language used in a statute, was capable of two constructions, one which was consistent with good sense and fairness and the other which would make its operation unduly oppressive, unjust or unreasonable, or which would lead to strange, inconsistent results or otherwise introduce an element of bewildering uncertainly and practical inconvenience in the working of the statute the court was to choose the former---When the statute was inclined to give some benefit to a taxpayer in terms of provisions of the policy, should be interpreted in a liberal manner and with an intention to see that the purpose for which the policy was framed, was fulfilled and the beneficiary was helped---Interpretation, must not be such which would frustrate the object of the policy---Interpretation that had been consistently followed by superior appellate fora or by department and which had become a longstanding practice, had almost acquired force of law and such practice, could not be lightly departed---Where department had followed a particular course in implementation of rules, whether right or wrong, it would be extremely unfair to make a departure from it.

Case-law referred.

Miss Lubna Pervez for Appellant.

Naeem Hassan, D.R. for Respondent.

2017 P T D (Trib.) 2426

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Abdul Nasir Butt, Accountant Member

C.I.R., R.T.O., MULTAN

Versus

Messrs SHAH SONS PAKISTAN (PVT.) LTD., MULTAN

S.T.As. Nos.18/LB and 19/LB of 2016, decided on 13th June, 2017.

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

----Ss. 8(1)(a) & 11(3)---S.R.O. No.490(I)/2004, dated 12-6-2004 (as amended by S.R.O. No.450(I)/2013, dated 27-5-2013)---Input tax adjustment---Assessing Officer, during scrutiny of sales tax returns, observed that registered person had claimed input tax adjustment on certain steel products as well as lubricants and grease, which was not permissible under the law---Assessing Officer, passed impugned order-in-original whereby adjustment of said tax demand was ordered to be recovered from the registered person---Appellate authority below in appeal had set aside the order of Assessing Authority---Validity---Registered person who was engaged in the business of manufacturing of engineering products, claimed input tax adjustment on purchase of steel products and lubricants which were used in the factory premises for production of taxable goods---Appellate authority below had given a categorical finding that Assessing Officer did not bring on record any reason or proof to connect the said purchase with non-taxable activity---Department had also not proved that the products consumed by the registered person were included in the negative list of S.R.O. No.490(I)/2004, dated 12-6-2004 as amended by S.R.O. 450(I)/2013, dated 27-5-2013---Departmental representative was unable to dislodge the finding of appellate authority below---No exception could be taken to the treatment as recorded by the appellate authority below, which was found to be fair and reasonable in the ambient circumstances of the case---Order of appellate authority below was maintained, in circumstances.

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

----Ss. 8, 11 & 73---Input tax adjustment---Department had received information that registered person had claimed input tax adjustment on the strength of false/flying invoices; on the basis of said information, registered person was called upon to show as to why sales tax, could not be recovered along with default surcharge and penalty---Registered person filed requisite record, but the Assessing authority observing that registered person had not provided complete record in compliance of S.73 of the Sales Tax Act, 1990 and passed impugned order-in-original whereby said tax demand was ordered to be recovered from the registered person---Appellate authority, on appeal, cancelled impugned order-in-original passed by Assessing Officer---Validity---Departmental contention that registered person was involved in consuming flying/ false invoices had no force---Appellate authority after taking into consideration the relevant record, concluded that allegation of tax fraud levelled against the registered person was based on surmises and conjectures---Departmental Representative was unable to dislodge the said finding of appellate authority below---In presence of record produced by registered person there was no justification for the Assessing Officer to observe that registered person had not complied with the provisions of S.73 of the Sales Tax Act, 1990---Record had revealed that compliance to the provisions of S.73 of the Sales Tax Act, 1990 was fully adhered to while making payments to the supplier---No reason existed to disturb the order passed by appellate authority below, which was maintained by the Appellate Tribunal.

Faisal Asghar, D.R. for Applicant.

Riaz Ahmad Raja for Respondent.

2017 P T D (Trib.) 2450

[Inland Revenue Appellate Tribunal]

Before Javid Iqbal, Judicial Member and Muhammad Pervez Alam, Accountant Member

Messrs SHAHID GUL

Versus

DEPUTY COMMISSIONER I.R. (AUDIT-III) ZONE-I, INLAND REVENUE, RTO, PESHAWAR and another

S.T.As. Nos. 105(PB) to 107 (PB) of 2013, decided on 16th September, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(25), 3, 6, 11, 14, 22, 23, 29 & 46---Sales Tax Rules, 2006, Rr.5, 6, 13(2) & 20(2)(b)---SRO 555(I)/2006 dated 5-6-2006---S.R.O. 480(I)/2007 dated 9-6-2007---Clarification issued by FBR No.1(ii)STR/2004 dated 14-4-2005---Failure to get registered under S.14, Sales Tax, Act, 1990---Department, during audit of appellants record, observed that, appellants who supplied natural gas, and were engaged in the business of the power generation (Electricity); and its subsequent sales/supplies, had failed to get themselves registered in accordance with S.14 of the Sales Tax Act, 1990, read with Sales Tax Rules, and Sales Tax Special Procedure 2007; and by so doing had violated provisions of Sales Tax, Rules and Sales Tax Special Procedure Rules, 2007---Sales Tax law, provided that registration, would be required for such persons, and be regulated in such manner; and subject to the rules as the Federal Board of Revenue, notified in the official gazette---Chapter 1 of Sales Tax Rules, 2006, notified through SRO 555(I)/2006 dated 5-6-2006, had provided for regulation and manner of registration---Appellants, were not manufacturers, retailers, importers, wholesale dealers; and distributors, commercial exporters or possessing any other category as specific in the Rules---Building managed by the appellants, was a private building---Exclusion of the appellants from the term 'distributor, was clear beyond any doubt---Appellants, in circumstances, were not liable to be registered---Appellants, had placed on file a clarification issued by the FBR No.1(ii) STR/2004 dated 14-4-2005, stating that generation, distribution buildings, was not liable to sales tax---Appellants, who in the income tax return declared transaction, but they could not be subjected to sales tax on account of said transaction, as they did not fall in any of the categories of registered persons---Appellants, had produced letter of Assistant Collector, whereby, it was clarified that a person, who was not engaged in making a taxable supply was not required to be registered---Appeal allowed.

Ishtiaq Ahmad for Appellant.

Nawab Khan, D.R. and Zulfiqar Ahmad for Respondent.

2017 P T D (Trib.) 1911

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Muhammad Waseem, Mrs. Ambreen Aslam, Judicial Members, Ahmed Saeed and Dr. Manzoor Ahmad, Accountant Members

I.T.As. Nos. 181 to 185/KB, 893, 1051/K of 2011, and 1096/KB of 2015 237, 148, 377/KB and 357/KB of 2014, decided on 6th February, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A) & 177---Amendment of assessment---Interpretation applicability---Scope and object of S.122(5-A) of the Income Tax Ordinance, 2001--- Question of law for determination was that as to "whether S.122(5-A) of the Income Tax Ordinance, 2001, allowed the Commissioner/Additional Commissioner to make enquiries and seek information and details from the taxpayer in the manner which was akin to the audit proceedings under S.177 of the Income Tax Ordinance, 2001; so as to establish that an order (including deemed order) was erroneous in so far as prejudicial to the interest of Revenue"---Department had started fishing and roving enquiries as if provision of S.122(5-A) of the Income Tax Ordinance, 2001 had conferred unlimited powers to the department---Contention of Authorized Representative of the taxpayer was that if the unlimited inquiry was allowed, there would be no difference between Ss.177 & 122(5-A) of the Income Tax Ordinance, 2001---Under S.177 of the Income Tax Ordinance, 2001, Taxing Officer was empowered to call books of account, record, information, evidence, explanations, probe the matter indepth and conduct unlimited enquiries---Two/twin mandatory requirements i.e. there should be some illegality in the existing order and there should be apparent loss of revenue, must be before the Tax Officer to proceed further under S.122(5-A) of the Income Tax Ordinance, 2001---Inquiry should be on the apparent said two conditions and sense of inquiry should not be in respect of calling of information---Section 122(5-A) & S.177 of the Income Tax Ordinance, 2001, were two entirely different provisions with distinct purposes---Department had nothing to fulfill the requirements with regard to the said two mandatory conditions to invoke S.122(5-A) of the Income Tax Ordinance, 2001 in the matter of inquiries---Calling of information and thereafter finalizing the order under S.122(5-A) of the Income Tax Ordinance, 2001, without the presence of two mandatory conditions, was not permissible---Distinction was to be drawn for conduct of enquiries---Enquiries were to be restricted to the extent of two/twin mandatory conditions as prescribed in the S.122(5-A) of the Income Tax Ordinance, 2001---Use of word 'enquiries' could not be read in isolation and it did not mean calling for information from the taxpayers and thereafter proceeding to finalize the order under S.122(5-A) of the Income Tax Ordinance, 2001---Enquiries conducted without the presence of said twin mandatory conditions, were not permissible and would come within the ambit of "fishing and roving enquiries" which were to be dispelled---Roster was directed to fix all appeals as well as other such appeals before the respective Benches of the Tribunal for order on merits.

2015 PTD 2824; 2015 PTD 1639; 2014 PTD (Trib.) 2085; 2015 PTD (Trib) 1193; 2014 PTD (Trib.) 1629; 2012 PTD (Trib.) 1739; 2012 PTD (Trib.) 1593; 2010 PTD (Trib.) 111; 2004 PTD 330; I.T.A. No.193 of 1998 Lahore High Court dated 31-01-2012; 1999 PTD (Trib.) 2851; 1999 PTD (Trib.) 7000; 1999 PTD (Trib.) 3229; I.T.A. No.449/KB of 1999-2000 ITAT dated 24-12-1999; 65 Tax 254; 2008 PTR 184; 1995 PTD 413; 1992 PTD 668 and 2012 PTD 1055 (Trib.) ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 177 & 122(5-A)---Application of S.122(5-A), Income Tax Ordinance, 2001---Scope---Audit proceedings and amendment of assessment---Section 177 of the Income Tax Ordinance, 2001, was not a charging section, but it only defined procedure for conduct of audit through S.122 of the Income Tax Ordinance, 2001---Any case taken up by Commissioner for audit under S.177, could result into an amendment of earlier assessment finalized under Ss.120 & 122 of the Income Tax Ordinance, 2001---Section 177 of the Income Tax Ordinance, 2001, in fact, was different for those taxpayer who had filed returns of income under "Universal Self Assessment Scheme"---Said scheme provided that all returns of income filed under S.114 of the Income Tax Ordinance, 2001, were accepted; whether it was nil income or loss declared or any income declared, every return was accepted as it was---Said Scheme further provided that declaration made by taxpayers was correct and true; there was a check mechanism in the form of audit under S.177 of the Income Tax Ordinance, 2001 and was a deterrent for those who had concealed their income or filed inaccurate particulars in the returns of incomes---Department was advised by the Tribunal to utilize said section for the purpose of audit and not S.122(5-A) of the Income Tax Ordinance, 2001---Canvas was broader and Tax Officer had full powers to call any information, conduct any sort of enquiries, call book of accounts and vouchers and any other record for the purpose of audit---Department was further cautioned by the Tribunal not to use S.122(5-A) of the Income Tax Ordinance, 2001 for revenue generation purposes---Section 122(5-A) was a curative section available for certain circumstances, and twin mandatory conditions were there in case of an earlier finalized order to plug the leakage of revenue---Section 122(5-A) did not authorize the Department to conduct audit, section being revisional in nature.

Mohammad Shabbar Zaidi, FCA, Asim Zulfiqar, FCA and Muhammad Arshad, FCA for Appellants.

Amjad Javed Hashmi, D.R. and Dr. Farrukh Ansari, CIR, LTU for Respondents.

2017 P T D (Trib.) 2013

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haque Khan, Accountant Member

Messrs CENTRAL INSURANCE CO. LTD., KARACHI

Versus

C.I.R., ZONE-III, LTU, KARACHI

M.A. (Rect.) No.258/KB of 2012 in I.T.A. No.761/KB of 2011, decided on 24th November, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S. 221---Remand of case by the Appellate Tribunal---Rectification of order of Appellate Tribunal---Application was filed by the taxpayer under S.221 of the Income Tax Ordinance, 2001, seeking rectification of impugned order passed by the Appellate Tribunal whereby case was remanded to the appellate authority---Submission of taxpayer was that, Appellate Tribunal due to oversight had not given any findings relating to two grounds of appeal---Tribunal had remanded the case to be decided by the appellate authority on all issues/grounds---Order of the Tribunal would be deem to be applicable to said two grounds---No mistake was apparent from the record as the Tribunal had remanded the case to the appellate authority which was still pending before the said Authority---Despite lapse of more than 2-1/2 years, the issues were pending before appellate authority which was deprecated---Unnecessary delay by the appellate authority, was against the National Judicial Policy, which spoke about speedy and meaningful disposal of the cases---Appellate authority was directed by Tribunal to pass the order within 45 days of the receipt of present order after providing reasonable opportunity of being heard to the parties.

Mohsin Waheed, ACA for Applicant.

Tariq Hussain, D.R. for Respondent.

2017 P T D 150

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi and Shaukat Aziz Siddiqui, JJ

COMMISSIONER INLAND REVENUE (ZONE-II), LTU, ISLAMABAD

Versus

Messrs GHAZI BAROTHA CONTRACTORS ISLAMABAD

I.T.R. No.11 of 2013, decided on 21st January, 2016.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 11(1)(b), 52 & 86---Income Tax Ordinance (XLIX of 2001), S. 133 & 161(1)(b)---Convention between the Government of Republic of Italy and Islamic Republic of Pakistan, for avoidance of Double Taxation and the Prevention of fiscal evasion with respect to Taxes on Income, Art. 7---Reference---Foreign Banks---Repayment of loans---Dispute between the parties was with regard to charging of tax on interest paid by assessees to non-resident Banks who were not chargeable to tax in Pakistan---Authorities were aggrieved of order passed by Appellate Tribunal Inland Revenue---Validity---Non-resident Banks did not have any permanent establishment in Pakistan nor any tax demand against non-resident Banks was due under the provisions of Income Tax Ordinance, 1979---When assessing officer had no authority to charge income of non-resident Banks, collection of advanced tax for adjustment under S. 50(8)(b) of Income Tax Ordinance, 1979 did not arise---Assessing officer invoked provision of S. 78 of Income Tax Ordinance, 1979 and appointed two non-resident members of assessee company as agents of non-resident Banks but such action under S. 50(3) of Income Tax Ordinance, 1979 and S. 161 of Income Tax Ordinance, 2001 could not be initiated as if a person was himself liable as agent of non-resident person in terms of S.78 of Income Tax Ordinance, 1979 then he was not required to deduct any tax under S. 50(3) of Income Tax Ordinance, 1979---Question of deduction of tax did not arise as the payments made to non-residents were exempted from tax---High Court declined to interfere in the findings recorded by Appellate Tribunal Inland Revenue as the same were free from any legal infirmity---Reference was declined in circumstances.

Messrs American Express Bank Karachi v. Commissioner of Income Tax 2009 PTD 1791 and Mountains Estate Mineral Enterprises v. Commissioner of Income Tax 2008 PTD 1087 ref.

Dr. Farhat Zafar and Sheikh Anwar-ul-Haq for Petitioner.

Mian Ashiq Hussain for Respondent.

2017 P T D 361

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

Messrs EAGLE INDUSTRIES (PVT.) LTD. through Chief Manager (Admin)

Versus

FEDERATION OF PAKISTAN, through Secretary, Revenue Division Islamabad and 3 others

W.P. No.1547 of 2012, heard on 15th December, 2015.

Customs Act (IV of 1969)---

----S. 25-D---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Clearance of goods---Delay in assessment---Factual controversy---Petitioner imported goods in question which were cleared after provisional assessment---Petitioner was aggrieved of delay in finalizing assessment of goods in question---Validity---Petitioner could have filed review petition against valuation ruling as per S. 25-D of Customs Act, 1969 which he did not avail and filed Constitutional petition---Petitioner could not accuse authorities of any delay in finalizing the issue---Authorities provided by the petitioner opportunity of hearing and petitioner himself submitted cheques as guarantee---Petitioner had knowledge of reservations of authorities on his declared value---High Court, under constitutional jurisdiction could not sit as a Court of inquiry to determine factual controversy---No admitted facts and figures were available before High Court about actual valuation of the consignment and value declared by petitioner---High Court, in circumstances, could not determine the actual value---Interference was declined by High Court---Constitutional petition was dismissed in circumstances.

Messrs S.Fazal Elahi and Sons v. Deputy Collector 2007 PTD 2119; Messrs Crescent Art Fabric v. Assistant Collector Customs 2011 PTD 2851; Messrs Farooq Woolen Mill v. Collector of Customs 2004 PTD 795; SUS-Motors v. Federation of Pakistan 2011 PTD 235 and Messrs Toyo International v. Federation Pakistan 2008 PTD 1494 ref.

Raza Ahmed Cheema for Petitioner.

Reehan Seerat and M. Tahir Khan, MCC, IBD for Respondents.

2017 P T D 873

[Islamabad High Court]

Before Athar Minallah, J

NATIONAL TESTING SERVICE PAKISTAN through Company Secretary

Versus

ASSISTANT COMMISSIONER I.R., UNIT-I, ZONE-I and 5 others

W.P. No.3401 of 2016, heard on 23rd January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.132---Disposal of appeals by the Income Tax Appellate Tribunal---Taxpayer/petitioner impugned recovery of tax made from it, by the Department---Contention of Department was, inter alia, that Constitutional petition was not maintainable since appeal of the petitioner was pending before the Appellate Tribunal---Validity---Matter was pending before the Appellate Tribunal, and therefore the Tribunal was competent to consider and determine whether or not provisions of Income Tax Ordinance, 2001 had been violated and the Appellate Tribunal was vested with power and jurisdiction to consider and record its finding relating to the questions raised by the taxpayer---High Court observed that an adequate and efficacious remedy was available to the petitioner---Constitutional petition was disposed of, with the observation that the Appellate Tribunal was expected to decide and dispose of the petitioner's appeal within a period of six months, as expressed in S.132(2A) of the Income Tax Ordinance, 2001.

Brothers Engineering (Pvt.) Ltd. v. Appellate Tribunal Sales Tax 2003 PTD 1836 and Sun-Rise Bottling Company (Pvt.) Ltd. Through Chief Executive v. Federation of Pakistan and 4 others 2006 PTD 535 ref.

Sayyid Murtaza Ali Pirzada for Petitioner.

Babar Bilal for Respondent No.1.

2017 P T D 1181

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi and Athar Minallah, JJ

Messrs TELENOR PAKISTAN (PVT.) LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and 3 others

I.T.R. No.63 of 2015, decided on 9th January, 2017.

(a) Interpretation of statutes---

----Redundancy, avoidance of---Principle---In order to avoid redundancy and interpretation leading to absurd interpretation, every word and expression has to be given meaning---Provisions must be given its true meaning by construing them together in harmonious manner.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.2(29C)(a)(i) to (iv)---"Industrial undertaking"---Connotation---Undertaking which is not engaged in one of the trades and businesses described in clauses (ii) to (iv) of S.2(29C)(a) of Income Tax Ordinance, 2001, can be treated as an "industrial undertaking" if it satisfies tests provided in clause (i) of S.2(29C)(a) of Income Tax Ordinance, 2001.

(c) Words and phrases---

----"Materials"---Connotation---Material inter alia also refers to information and data.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Oil and Gas Development Company Limited through Manager (Pricing) v. Federal Board of Revenue through Chairman and 2 others 2016 PTD 1675; Zaver Petroleum Corporation Limited through Director-General, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332; Dr. Raja Aamer Zaman v. Omer Ayub Khan Khan and others 2015 SCMR 1303; Mst. Rooh Afza v. Aurangzeb and others 2015 SCMR 92; Advanced Law Lexicon (3rd Edition); The Chambers Dictionary (10th Edition); Concise Oxford Thesaurus (3rd Edition); Oxford Advanced Learner's Dictionary of Current English (7th Edition); Encyclopedia Law Dictionary along with Legal Maxims and Indian Edition: Oxford Paperback Threasurus rel.

(d) Words and phrases---

----"Process"---Connotation---Expression "process" has wide meaning going beyond mere manufacturing of goods as materials.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Oil and Gas Development Company Limited through Manager (Pricing) v. Federal Board of Revenue through Chairman and 2 others 2016 PTD 1675; Zaver Petroleum Corporation Limited through Director-General, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332; Dr. Raja Aamer Zaman v. Omer Ayub Khan Khan and others 2015 SCMR 1303; Mst. Rooh Afza v. Aurangzeb and others 2015 SCMR 92; Advanced Law Lexicon (3rd Edition); The Chambers Dictionary (10trh Edition); Concise Oxford Thesaurus (3rd Edition); Oxford Advanced Learner's Dictionary of Current English (7th Edition); Encyclopedia Law Dictionary along with Legal Maxims and Indian Edition: Oxford Paperback Threasurus rel.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(29C)(a)(i) to (iv), 133 & 148---Mobile Cellular Policy, 2004, clause 9---Reference---Question of fact---Advance income tax---Industrial undertaking---Determination---Applicant companies were providing cellular phone services and claimed to be "industrial undertakings"---Applicant companies were aggrieved of deduction of advance income tax by authorities under S.148(7) of Income Tax Ordinance, 2001---Validity---Telecommunication systems used by companies engaged in providing telecommunication services were covered under the definition of an "industrial undertaking"---Data processing through various machines, equipment and other modes was also to be covered within the meaning of 'subjection of goods and materials to any process'---Appellate Tribunal on factual side had to examine the process through which telecommunication operators render the services---If Appellate Tribunal failed to advert to a question of law or fact raised before it or before any other forum under the relevant statute, it was treated as a question of law for the purposes of S.133 of Income Tax Ordinance, 2001---High Court set aside the order remanded the matter and directed the Appellate Tribunal to advert to factual aspects in each case---Reference was decided accordingly.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference---Question of fact---Effect---Decision or determination of Appellate Tribunal on question of fact attains finality, thereby making the Tribunal a final forum in such regard---Failure to advert to a question raised before Appellate Tribunal in itself is a question of law.

(g) Words and phrases---

----"Decide"---Meaning.

Black's Law Dictionary, Sixth Edition rel.

(h) Words and phrases---

----"Decision"---Explained.

Quoting Wilcox v. Sway 160 p.2d 154 rel.

Ali Sibtain Fazli, Malik Sardar Khan Awan for Applicant (in I.T.Rs. Nos.63 to 67 of 2015).

Saeed Ahmed Zaidi for Applicant (in I.T.Rs. Nos.73 to 79 of 2015).

Sardar Ahmed Jamal Sukhera for (in I.T.Rs. Nos.114 to 121 of 2016) Applicant.

Khalid Anwar and Iftikhar Ahmed Bashir for Respondents (in I.T.Rs. No.73 to 79 of 2015).

Saeed Ahmed Zaidi for Respondents (in all other references).

2017 P T D 1215

[Islamabad High Court]

Before Shaukat Aziz Siddiqui and Mohsin Akhtar Kayani, JJ

UCH POWER (PVT.) LTD.

Versus

GOVERNMENT OF PAKISTAN, FEDERAL BOARD OF REVENUE and 2 others

I.C.A. No.14 of 2014 in W.P. No.247 of 2013, decided on 7th November, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 9 & 74---Sales Tax Rules, 2006, R. 22(6) ---Law Reforms Ordinance (XII of 1972) S. 3(2)---Constitution of Pakistan, Art. 199 Constitutional jurisdiction of High Court---Intra-court appeal---Maintainability---Sales tax---Issuance of debit and credit note---Adjustment of input and output tax---Condonation of time-limit---Appellant company impugned order of High Court whereby its Constitutional petition was dismissed---Appellant had impugned order of Commissioner Inland Revenue, whereby respondent (OGDCL's) application for condondation of delay in issuing debit notes to the appellant was allowed, which put sales tax liability upon appellant---Contention of appellant, inter alia, was that the Commissioner Inland Revenue had no authority to condone time limit for the respondent (OGDCL) for the debit/credit note, since the same directly affected the appellant---Validity---Perusal of agreement between the petitioner and the respondent (OGDCL) revealed that the said agreement made it mandatory upon both parties to follow the law in letter and spirit and Supreme Court while dismissing civil petition for leave to appeal held that the respondent (OGDCL) had to collect and charge tax from the appellant under a specific head, therefore they rightly applied to do the same---Said agreement showed that it was clear that if there was any dispute between the parties regarding invoice of payment or anything else, they could resolve the same in terms of Dispute Resolution mechanism provided for in the agreement, which provided for, inter alia, mediation and arbitration---Question as to whether appellant was liable to sales tax was already subject to arbitration proceedings therefore, appellant's Constitutional petition was not competent as the appellant could not exercise two remedies at the same time---Constitutional petition was therefore, rightly dismissed---Intra court appeal being not maintainable was dismissed, in circumstances.

Shahid Hamid for Appellant.

Riaz Hussain for Respondents Nos. 1 and 2.

Nasim Sikandar and Barrister Qadir Buksh for Respondent No.3.

2017 P T D 1257

[Islamabad High Court]

Before Aamer Farooq and Miangul Hassan Aurangzeb, JJ

JAVED IQBAL and another

Versus

PAKISTAN MOBILE COMMUNICATIONS LTD. and 3 others

I.C.A. No.80 of 2016 in W.P. No.3235 of 2012, decided on 17th January, 2017.

Income Tax Ordinance (XLIX of 2001)--

----S.130---Constitution of Pakistan, Arts. 175, 203, 189 & 199---Law Reforms Ordinance (XII of 1972), S.3(2)---Chairperson/members of the Appellate Tribunal---Scope---Appellate Tribunal under S.130 of the Income Tax Ordinance, 2001 was not a "court"---Appellant impugned order of High Court passed in Constitutional petition filed by respondent, whereby appointments made under S.130 of the Income Tax Ordinance, 2001 to the Appellate Tribunal were declared illegal on the ground that the Appellate Tribunal, exercises judicial functions and fell within the definition of "Court" and therefore meaningful consultation with the Chief Justice of Pakistan for appointment chairperson or members of the Appellate Tribunal was required---Validity---High Court observed that the Supreme Court, in PLD 2013 SC 501, specifically held that the Appellate Tribunal, constituted under the Customs Act, 1969; similar to the Appellate Tribunal constituted under Income Tax Ordinance, 2001, was not a "court" for the reason that the said Appellate Tribunal was not mentioned or provided for in the Constitution, therefore, the same could not be regarded as a "court" and that since the Supreme Court had not followed its earlier decision, therefore Appellate Tribunal could not be considered "court" under the scheme of the Constitution requiring consultation with the Chief Justice of Pakistan in appointment of Chairperson and members of the same; and order of the Supreme Court which was later in time and rendered by the same number of Judges, would prevail---Impugned judgment was set aside, and Constitutional petitions stood dismissed---Intra-court appeal was allowed, accordingly.

Riaz Ul Haq v. FOP PLD 2013 SC 501 distinguished.

Army Welfare Trust v. Collector of Sales Tax C.P. No.1983 of 2012 rel.

Government of Balochistan v. Aziz Ullah Mamon and others PLD 1993 SC 341; Government of Sindh v. Sharaf Faridi PLD 1994 SC 105; Imran v. Presiding Officer, Punjab PLD 1996 Lah. 542; Mehram Ali v. FOP and others PLD 1998 SC 1445; Liaqat Hussian v. FOP and others PLD 1999 SC 504; Zia Ullah v. Najeeb Ullah PLD 2003 SC 656 and Riaz-ul-Haq v. Federation of Pakistan and others PLD 2013 SC 501 ref.

Barrister Qadir Buksh, Nasim Sikandar and Saeed Ahmed Zaidi, Advocates in their respective appeals along with Khawaja Muhammad Imtiaz, Standing Counsel and Afnan Karim Kundi Additional Attorney-General for Appellants.

Muhammad Raheel Kamran Sheikh, Ali Sibtain Fazli, Ayyaz Shaukat, Malik Sardar Khan and Hasham Ahmed Khan for Respondents.

2017 P T D 1544

[Islamabad High Court]

Before Aamer Farooq, J

FAUJI FERTILIZER COMPANY LIMITED EMPLOYEES GRATUITY FUND

Versus

FEDERATION OF PAKISTAN through Chairman, Federal Board of Revenue, Islamabad and others

W.P. No.2169 of 2015, decided on 19th May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 53, 150, 151, 159 & Second Schedule, Part-IV, clause, 47-B---Trusts and Pension Funds---Deduction of advance income tax---Exemption---Exemption certificate---Principles---Tax payers/petitioners were approved Gratuity/Provident Funds under Income Tax Ordinance, 2001, and their income was exempted from tax under clause 57(3) of Part-1 of Schedule-II to Income Tax Ordinance, 2001---Taxpayers were aggrieved of circular Letter dated 12-5-2015, directing the authorities to apply S. 159 of Income Tax Ordinance, 2001, to petitioners---Validity---Application of Ss. 150 & 151 of Income Tax Ordinance, 2001, in case of Trusts and Pension Funds, was not excluded under clause 47-B of Part-IV of Second Schedule to Income Tax Ordinance, 2001---Where Commissioner was satisfied under S. 159(1) of Income Tax Ordinance, 2001, that income falling in Division II or III (which included Ss.150 & 151 of Income Tax Ordinance, 2001, as those fell in Division III) was exempted from payment of tax, he could grant a certificate to such effect---Legislature by laying down the requirement of obtaining exemption certificate where income was exempted had not taken away the exemption but rather had provided a mechanism to ensure that exemption was not misused in any way---Any person under S. 159(2) of Income Tax Ordinance, 2001, who was required to deduct advance tax under Division II or III would do so while making payment to the person entitled to receive the same unless the payee produced exemption certificate duly issued under S. 159(1) of Income Tax Ordinance, 2001---Payee had to provide a certificate specifically covering exemption deduction of advance tax and could not claim immunity from deduction on the basis of clause 47-B of Part-IV of Second Schedule to Income Tax Ordinance, 2001 or any other provision by asserting exemption due to operation of law---High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

1999 PTD 1892; 1993 SCMR 139; 2005 PTD 246; 2002 PTD 720; Commissioner of Income Tax v. Habib Sugar Mills Limited 1993 PTD 343; Call Tell and another v. Federation of Pakistan and others 2005 PTD 833 and Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Private) Limited 2005 SCMR 1166 ref.

Meezan Islamic Fund and others v. DG (WHT) FBR and others 2016 PTD 1204 and Messrs Cherat Packaging Ltd., Staff Provident Fund and Gratuity, Peshawar v. Federation of Pakistan through Secretary Finance and Economic Affairs, Revenue Division, Islamabad and 9 others 2016 PTD 2257 foll.

Naveed A. Andrabi, Ayyaz Shaukat, Hassan Kamran Bashir, Ehtisham Mahmud, Hyder Ali Khan and Ch. Naeem Ul Haq for Petitioners.

Malik Muhammad Siddique Awan, Ummarah Maqsood, Saeed Ahmed Zaidi, Syed Ishfaq Hussain Naqvi, Muhammad Javaid Iqbal Malik, Hafiz Muhammad Idrees, Muhammad Mohsin Nazir, Hafiz Munawar Iqbal and Riaz Hussain Azam for Respondent.

2017 P T D 2269

[Islamabad High Court]

Before Aamer Farooq, J

Messrs TELENOR PAKISTAN (PVT.) LTD., Versus

FEDERATION OF PAKISTAN and 4 others

Writ Petition No.1618 of 2015, decided on 7th July, 2017.

(a) Constitution of Pakistan---

----Art.199---Exercise of Constitutional jurisdiction of High Court in striking down legislative instruments---Scope---Law was to be saved rather than destroyed, and every effort was to be made to bring legislative instruments in harmony with principles of the Constitution and only when the same could not be done, a legislative instrument was to be struck down.

Lahore Development Authority through its D.G. v. Ms. Imrana Tiwana and others 2015 SCMR 1739 rel.

(b) Federal Excise Act (VII of 2005)---

----Ss. 7, 3 & Sched.---Constitution of Pakistan, Arts. 270AA, 142, 199 & Foruth Sched.---Federal Excise Rules, 2005, R. 43---S.R.O. No. 550(I) 2006 dated 05.06.2006---Declaration and continuance of laws after the Eighteenth Constitutional Amendment with regard to collection of levy / fee / taxes---Levy, collection and payment of excise duty---Telecommunication services---Nature of S. 7 of the Federal Excise Act, 2005---Distinction between machinery provisions and charging provisions---Effect of application of the provisions of the Sales Tax Act, 1990 by virtue of S. 7 of the Federal Excise Act, 2005 to the nature of excise duty---Scope---Petitioners impugned vires of S. 3(1)(d) and Entry No. 6 of the Table-2 of the First Schedule to the Federal Excise Act, 2005 and S.R.O. No. 550(I) 2006 dated 05.06.2006 which sought to impose excise duty on telecommunication services---Contention of petitioners, inter alia, was that the said levy was supposed to be collected in the Sales Tax Mode under S. 7 of the Federal Excise Act, 2005 and after the Eighteenth Constitutional Amendment, sales tax on services was the legislative domain of the Provinces and appropriate legislation had been done by the Provinces, therefore the Federation could not impose said excise duty---Validity---Under S. 3(1)(d) of the Federal Excise Act, 2005, duties of excise were levied and collected on services, which included telecommunication services as given in the schedule to the Federal Excise Act, 2005---Rule 43 of the Federal Excise Rules, 2005 as well as impugned S.R.O. provided procedure and mechanism for collection of such duty---Under S. 7 of the Federal Excise Act, 2005, said duty could be recovered in the Sales Tax Mode and relevant provisions of the Sales Tax Act, 1990 and Rules framed thereunder were applicable---Duties of excise were separate from taxes on sales and purchase of goods and sales tax on services and perusal of Entries Nos. 44 and 49 of Part I of the Federal Legislative List provided in Fourth Schedule to the Constitution revealed that the same were two separate entries which meant that the Legislature intended to keep levy of excise duty and sales tax separate---Fact that excise duty on telecommunication services was to be recovered through Sales Tax Mode did not make the said levy a sales tax on services and provision contained in S.7 of the Federal Excise Act, 2005 was merely a machinery section which was distinct from charging provisions---High Court observed that the levy sought to be collected, in the present case, remained one under S. 3(1)(d) of the Federal Excise Act, 2005 and protection was afforted to all levies and taxes in the Art. 270AA(7) of the Constitution after the Eighteenth Constitutional Amendment---Constitutional petition was dismissed, in circumstances.

Messrs Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax, Lahore and 03 others PLD 1989 Lah. 337; Hirjina and Co. v. Islamic Republic of Pakistan and another 1993 SCMR 1342; PLD 2001 Kar. 422; 1985 SCMR 70 and AIR 2002 SC 3499 rel.

2017 PTD 1; Hirjina and Co. v. Islamic Republic of Pakistan 1993 SCMR 1342; Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad v. Punjab Beverage Company (Pvt.) Ltd. 2008 SCMR 308; Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29; Farhan ud Din v. Pakistan Telecommunication Company Ltd. and others 2009 PTD 519; Government of Punjab v. Zia Ullah Khan and 2 others 1992 SCMR 602; 1993 SCMR 526; Pakistan Telecom Mobile Limited v. Additional Commissioner Inland Revenue Audit Large Taxpayer Unit W.P. No.715 of 2010; Multiline Associates v. Ardeshir Cowasjee PLD 1995 SC 423 and Federation of Pakistan and others v. Haji Muhammad Siddiqui and others PLD 2007 SC 133 rel.

Ali Sabtain Fazli, Malik Sardar Khan, Sardar Ahmad Jamal Sukhara, Ayaz Shoukat, lmtiaz Rasheed Sidiqui and Syed Husnain Ibrahim Kazmi, for Petitioners.

Hafiz Munawar lqbal, Babar Bilal, Muhammad Irshad Chaudhry, Malik Waris Khokhar, Raja Khalid Mehmood, Deputy Attorney-General and Rashid Hafeez, Additional Advocate General Punjab for Respondents.

2017 P T D 2377

[Islamabad High Court]

Before Aamer Farooq, J

UCH POWER (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and 5 others

Writ Petition No.4698 of 2016, decided on 4th April, 2017.

(a) Words and phrases

----"Otherwise"---Meaning of: "In a different way"; "in other respects"; "as an alternative".

Oxford Dictionary 4th Edition rel.

(b) Sales Tax Act (VII of 1990)

----S. 34---Levy of Sales Tax---Default surcharge---Willful default---Interpretation of S.34 of the Sales Tax Act, 1990---Bare perusal of S.34 of the Sales Tax Act, 1990 revealed that payment of default surcharge was not confined only to cases of willful default but same could be demanded in cases where there was default "otherwise"; and the word "otherwise" is defined as "in a different way"; "in other respects"; "as an alternative".

Oxford Dictionary 4th Edition rel.

Messrs RCD Ball Bearing Limited v. Sindh Employee Social Security Institution, Karachi PLD 1991 SC 308; Masood Textile Mills v. Commissioner of Income Tax 2003 PTD 2653; Commissioner of Income Tax v. HBL 2007 PTD 901; Messrs Bhola Weaving Factory v. Customs, Excise and Sales Tax Appellate Tribunal and another 2004 PTD 1048 and D.G. Khan Cement Company Limited v. Federation of Pakistan and others 2004 PTD 1179 distinguished.

Umair Majeed Malik for Petitioner.

2017 P T D 1

[Sindh High Court]

Before Munib Akhtar and Abdul Maalik Gaddi, JJ

PAKISTAN INTERNATIONAL FREIGHT OF FORWARDERS ASSOCIATION through General Secretary

Versus

PROVINCE OF SINDH through Secretary and another

C.P. No.D-3184 of 2014, decided on 2nd June, 2016.

(a) Taxation---

----Fiscal statutes---Fundamentals---Taxing event is fundamental to all fiscal statutes---Such statutes are necessarily a manifestation or exercise of a taxing power constitutionally vesting in appropriate legislature---Taxing event lies at the heart of such power and of any associated legislative entry---Autonomy on constitutional plane of taxing power cannot be overemphasized---Taxing power controls taxing event as set out in sub-constitutional legislation and not vice versa---On constitutional plane, the same taxing event does not fall within the scope of two separate and distinct taxing powers, even though the events may seemingly spring from or be relatable to, the same act or transaction.

(b) Interpretation of Constitution---

----Concurrent taxing power---Scope---No concurrent taxing power in Pakistan---Only a division exists and there is no sharing of taxing powers---Concurrent Legislative List does not contain any entry relating to a taxing power.

(c) Taxation---

----Taxing event can be described as a levy (whether called a duty or tax) on "rendering or providing of services".

(d) Constitution of Pakistan---

----Art. 268(1)---Term 'existing laws'---Scope---Existing law had to be considered simply as a law in its own right and its pith and substance determined---If pith and substance was relatable to any entry on Federal Legislative List or the Concurrent Legislative List (both Lists existed on the commencing day) then the 'existing law' stood allocated to Federation---If pith and substance was not relatable to any enumerated power then it stood allocated to the Provinces.

(e) Interpretation of statutes---

----Vires of statute---Principle---If a challenge as to the vires of a statue fails on one ground that itself precludes a subsequent challenge on another ground.

(f) Sindh Sales Tax Ordinance (VIII of 2000)---

---S.3---Constitution of Pakistan, Art. 160---Vires of provisions of Sindh Sales Tax Ordinance, 2000---Levy of tax---Province, power of---National Finance Commission (NFC) Award---Object, scope and purpose---NFC Award makes recommendations under Art. 160(2) of the Constitution regarding distribution between the Federation and the Provinces of tax revenues mentioned in Art. 160(3) of the Constitution---Latter clause lists various taxes that fall within the ambit of Art. 160 of the Constitution but clearly states that those are the taxes 'raised under the authority of Majlis-e-Shoora (Parliament)'---Revenues raised under Sindh Sales Tax Ordinance, 2000, could not be made subject to Art. 160 of the Constitution, as the same were not raised under Parliament's authority---Such revenues were raised under the authority of Provinces simply because provincial laws provided that the tax was to be collected on the same basis as though it were a federal tax and collection was made by a federal agency (i.e. CBR) did not mean that the tax was raised under Parliament's authority---Entire exercise of pooling such tax revenues and then sharing them under NFC Award was, prima facie, unconstitutional---Provisions of Sindh Sales Tax Ordinance 2000, was ultra vires the Constitution as it sought to impose a tax that lay exclusively in Federal domain---Treatment of tax collected under Sindh Sales Tax Ordinance, 2000, was also constitutionally suspect for such reasons.

(g) Interpretation of Constitution---

----Exception---Scope---"Exception" has to be given proper meaning and effect---To impute redundancy to even a statutory provision or to so interpret a statute that a part of it is rendered futile or nugatory is a strong thing---Such approach would be almost impossible in relation to the Constitution---Exception is ordinarily be regarded as limiting or restricting main enactment by, e.g. taking something out of it but for the exception, would be regarded as falling within the main enactment.

(h) Interpretation of statutes---

----Proviso---Scope---Sometimes a proviso is not to be regarded as a "true" proviso but rather as an independent substantive provision in its own right---Such an interpretation of a proviso is rare but recognized in its own right.

Case law referred.

(i) Constitution of Pakistan---

----Art. 70 (4), Fourth Schedule, Federal Legislative List, entry 49 [as amended by S. 101 of Constitution (Eighteenth Amendment) Act (X of 2010)]---Exception---Scope---Exception added to entry No. 49 of Federal Legislative List is not a 'true' exception, as such it is an independent provision in its own right and has two primary effects---Exception recognizes expressly on the Constitutional plane that a taxing power in respect of taxing event of rendering or providing of services vests in the Provinces---Crucial question is whether or not such power is exclusive to the Provinces---Same taxing event cannot simultaneously vest in two legislatures, for that to happen would mean that the taxing power is also the same---Constitutional scheme does not envisage a sharing of a taxing power---Constitution recognizes a division of taxing power and that is all---Both of such principles are fully attracted and applicable and the real effect of the 'exception' is to 'shift' taxing power in relation to taxing event of rendering or providing of services from Federation to the Provinces.

Case law referred.

(j) Sindh Sales Tax on Services Act (XII of 2011)---

----S. 3---Constitution of Pakistan, Art. 70 (4), Fourth Schedule, Federal Legislative List, entry 53---Vires of Sindh Sales Tax on Services Act, 2011---Levy of taxes---Terminal taxes---Powers of Provinces---Scope---Provisions of Sindh Sales Tax on Services Act, 2011, has encroached and directly trenched upon a legislative field reserved exclusively for the Federation---No doubt on the definitions as they stand and the placement of the terms in Second Schedule, the provincial statute is unconstitutional and is liable to be declared as such being an encroachment on the taxing power contained in Federal entry No.53 in Fourth Schedule to the Constitution.

(k) Federal Excise Act (VII of 2005)---

----S.3, First Schedule, Table II---Central Excise Act (I of 1944), S.3---Sindh Sales Tax Act (XII of 2011), S.3---Constitution of Pakistan, Arts. 199, 270AA (7), Fourth Schedule, Federal List, entries Nos.44, 49 & 53 [as amended by Constitution (Eighteenth Amendment) Act (X of 2010)]---Constitutional petition---Vires of provisions of Sindh Sales Tax Act, 2011 and Federal Excise Act, 2005---Suspension of judgment---Effect---Petitioner company assailed vires of levy of excise duties by Provincial Government---Validity---Power to impose a levy on providing or rendering services solely vested in Federation, taxing power was contained in entry No.44 of Federal List of Fourth Schedule to the Constitution---Both Central Excise Act, 1944 and Federal Excise Act, 2005, were valid as Federal laws---Provisions in Federal Excise Act 2005, as related to providing or rendering services became ultra vires the Constitution in relation to Sindh Province with effect from 1-7-2011---Provisions of Sindh Sales Tax Ordinance, 2000, were ultra vires the Constitution as it directly trenched and encroached upon a taxing power that was then exclusively in the Federal domain---Power to impose a levy on providing or rendering of services shifted and transferred under Eighteenth Amendment to the Constitution, to the Provinces---Due recognition was given to the same on the Constitutional plane by the 'exception' added to entry No. 49, which was an independent provision in its own right and not something akin to a proviso in the ordinary sense---Provision of Art. 270AA (7) of the Constitution (as amended by Eighteenth Amendment) allowed relevant provision of Federal Excise Act, 2005, to remain in the field till such time as the Provinces enacted their respective laws---Sindh Sales Tax on Services Act, 2011 was enacted with effect from 1-7-2011 and that date onwards, the relevant provisions of Federal Excise Act, 2005, became ultra vires the Constitution---Provisions of Sindh Sales Tax on Services Act, 2011, as related to shipping agents, etc. were however ultra vires the Constitution as they included and purport to tax rendering or providing of services as fell within the exclusive Federal domain, on account of terminal taxes within the meaning of entry No.53 of Federal List to Fourth Schedule to the Constitution---High Court suspended the operation of judgment for two months, in order to give any aggrieved person an opportunity to prefer appeal to Supreme Court---High Court directed that interim orders made earlier would continue to remain in force for two months even after disposal of petition, so as to maintain parity---Constitutional petition was disposed of accordingly.

Case law referred.

(l) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---High Court judgment, especially in exercise of jurisdiction under Art. 199 of the Constitution, can operate at two levels: Firstly it operate in personam, i.e. in relation to persons party to petition and secondly it can have effect throughout the Province not only in respect of Courts subordinate to High Court but also in the relation to any law (Federal or Provincial) that is applicable in Province and also any Government, authority or agency acting or exercising powers within the Province or which have reached therein.

Muhammad Yousuf, Arif Muhammad Khan, Shaiq Usmani, Usman Hadi, Ali Almani, Hyder Ali Khan, Samir ur Rahman Khan, Jam Zeeshan, Ahad Zubair, Anwar Kashif Mumtaz, Khalid Javed Khan, Muhammad Ahmer, Muhammad Ameen Bandukda, Iqbal Salman Pasha, Nafees Ahmed Siddiqui, Emad ul Hasan, Pervez Iqbal Kasi, Imdad Hussain, Abdul Sattar Awan, Umair Qazi, Ms. Sarwat Israr for Petitioners.

Salman Talibuddin, Addl. Attorney General, Ashfaq Rafiq Janjua, Standing Counsel, Saifullah, A.A.G., Ms. Nasreen Sehto, Standing Counsel, Anwar Mansoor Khan, Ms. Umaimah Khan, Ms. Reem Tashfeen Niaz, Atifuddin, for SRB, assisted by Syed Zainul Abidin, Deputy Commissioner, SRB Sarfraz Ali Metlo, Syed Irshadur Rahman, Kafeel Ahmed Abbasi and Amjad Javed Hashmi for FBR/Inland Revenue Department, assisted by Sharjeel Ahmed, DC IR, LTU, Karachi (FBR) for Respondents.

2017 P T D 130

[Sindh High Court]

Before Faisal Arab, C.J. and Muhammad Iqbal Kalhoro, J

NEW ALLIED ELECTRONICS INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and another

Const. Petitions Nos. D-526, D-1519, D-2000, D-2001, D-2577, D-2606, D-3611 of 2014 and D-3494 of 2015, decided on 20th October, 2015.

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

----Ss. 3, 7-A, 13, 71, & 2 (13)----Sales Tax Special Procedure Rules, 2007, R. 58-B---S.R.O. 482(I), 2011, dated 03.06.2011---Constitution of Pakistan, Arts. 199 & 77---Constitutional petition---Scope of tax---Levy and collection of tax on specified goods on value addition---Exemption---Special procedure---'Importer'---Meaning and scope---Tax to be levied by law only---Payment of sales tax on account of minimum value addition---Collector of Customs was charging three per cent minimum value addition tax on import of cellular mobile phones from importers under R. 58-B of Sales Tax Special Procedure Rules, 2007 read with S.R.O. 482(I), 2011, dated 03.06.2011---Contention raised by importers was that they were already paying tax under S. 3 of Sales Tax Act, 1990 on imports and taxable supplies, and that levy of said value addition tax did not trigger at import stage, and that the same was, therefore, against scheme of Sales Tax Act, 1990---Validity---Arrangement of Sales Tax Act, 1990 provided that tax was to be charged and collected on added value of goods at each supply---Section 7-A of Sales Tax Act, 1990 empowered Federal Government to specify, charge and collect sales tax on the difference between values of supply, for which, goods were acquired, and value of supply, for which, goods, either in the same state or on further manufacture, were sold or supplied---Under S. 7-A (2) of Sales Tax Act, 1990, if certain persons or class of persons, so required, declared minimum value addition for supply of goods of such description or class as might be prescribed, Federal Government was authorized to waive the requirement of audit or scrutiny of records on such declaration---Levy of value addition tax was interrelated and subject to event of supply of goods---Each supply was supposed to signify value addition to goods, which had been made a taxable activity under Sales Tax Act, 1990 in form of input tax and output tax---If input tax exceeded output tax, difference was refundable or adjustable in next tax year; vice versa, supplier had to pay differential amount---Reason behind charging sales tax at every stage of supply was an admitted increase in value that Legislature had made taxable---"Importer", as defined under S. 2(13) of Sales Tax Act, 1990, was any person who imported any goods into Pakistan, and whose status was palpably distinguishable from that of supplier, who supplied goods after adding some value to the same---Under S. 3 of Sales Tax Act, 1990, 'import' had been distinctively mentioned from "taxable supplies", which suggested dissimilarity between the two events---"Import" and "supplies", by implication and connotation, had to be considered as two different areas for tax purpose---Under Ss. 3(2) & 3(3) of Sales Tax Act, 1990, tax on import had to be paid by person importing goods; specification of manner, mode and fixation of rates, at which such tax had to be charged and collected, had been made prerogative of the Government---No question over authority of Federal Government, as to charging of sales tax at specified rate and mode of recovering such tax, could be legally raised---As soon as importer on arrival of his goods at port was charged with sales tax, event to the extent of import got completed, and then next event relating to supply of goods started, that, under the law, was independently taxable and could not be intertwined or mingled with the imports---Under S. 3 (3) of Sales Tax Act, 1990, person making the supply would pay the tax---Any person supplying goods, under said provisions of Sales Tax Act, 1990, could not be equated with importer---Imposing tax on any activity in manner not provided under any statute is illegal and unlawful---Rules framed by Federal Government by exercising powers under Sales Tax Act, 1990, had to be necessarily in consonance with the Act to achieve its aims and objects---Rule 58-B of Sales Tax Special Procedure Rules, 2007 levying value added sales tax on import of goods was inconsistent with provisions of Sales Tax Act, 1990 and the same, therefore, could not be permitted to hold (the ground)---Petitioners were paying tax in terms of S. 3 of Sales Tax Act, 1990, and value addition tax under R. 58-B of Sales Tax Special Procedure Rules, 2007 could not be charged from them---Constitutional petitions were allowed accordingly.

2010 PTD 2673; 2013 PTD 1491 and 2014 SCMR 220 ref.

Engineer Iqbal Zafar Jhagra and another v. Federation of Pakistan 2013 PTD 1491 rel.

(b) Constitution of Pakistan---

----Arts. 77 & 199----Sales Tax Act (VII of 1990), Ss. 3, 7-A & 71---Sales Tax Special Procedure Rules (2007), R. 58-B---Constitutional petition---Tax to be levied by law only---Scope---Scope of tax---Levy and collection of tax on specified goods on value addition---Special procedure---Delegated legislation---Powers of Executive---Scope---Payment of sales tax on account of minimum value addition---Levy of tax plays pivotal role in the society, but since it puts pecuniary burden on person, its imposition is not permissible unless warranted by law---Levying tax is essentially the domain of Parliament as mandated by Art. 77 of the Constitution---Article 77 of the Constitution provides in clear terms that tax can be imposed and collected either by or under authority of the Act of Parliament, and nowhere it is provided that Executive, on its own, can introduce some new tax on basis of rules in derogation to what the main statute prescribes---Purpose of delegating powers to Executive to frame rules, devise regulations and issue notifications and guidelines is only to facilitate implementation of laws to the best of their object and mandate---Executive, assuming such powers, is not permitted to frame rules or issue notification that are independent of the scheme of parent law---Any such attempt would render the rules, regulations, etc. nullity in eyes of law.

Engineer Iqbal Zafar Jhagra and another v. Federation of Pakistan 2013 PTD 1491 rel.

Khalid Javed Khan for Petitioner (in C.P. No.D-526 of 2014).

Iqbal Salman Pasha for Petitioner (in C.Ps. Nos. D-1519 and D-2001 of 2014).

Iqbal Salman Pasha for Petitioner (in C.P. No.D-2000 of 2014).

Iqbal Salman Pasha for Petitioner (in C.P. No.D-2577 of 2014).

Iqbal Salman Pasha for Petitioner (in C.P. No.D-2606 of 2014).

Iqbal Salman Pasha for Petitioner (in C.P. No.D-3611 of 2014).

Ghulam Haider Shaikh for Petitioner (in C.P. No.D-3494 of 2014).

Amjad Jawed Hashmi and Ch. Muhammad Zafar for Respondents.

Ashfaque Ahmed Janjua, Federation of Pakistan.

2017 P T D 237

[Sindh High Court]

Before Munib Akhtar and Zulfiqar Ahmed Khan, JJ

COMMISSIONER INLAND REVENUE ZONE-II, RTO, HYDERABAD

Versus

Messrs JAMSHORO POWER COMPANY LTD.

I.T.R.A. No.178 of 2012, decided on 7th March, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.113, 74(1) & 2(68)----Minimum tax on income---Determination---Question was whether the Appellate Tribunal was justified in confirming the decision of Commissioner of Inland Revenue (Appeals) for deletion of minimum tax under S. 113 of Income Tax Ordinance, 2001, as the same had been omitted through amendment brought about through Finance Act, 2008---Appellate Tribunal had answered said question in negative---Validity---Section 113 of Income Tax Ordinance, 2001 provided for the payment of certain 'minimum' income tax by the various categories of taxpayers as specified therein; said provision had been omitted by Finance Act, 2008, but the same was reintroduced by Finance Act, 2009---Income Tax Ordinance, 2001, generally speaking, applied in respect of the relevant income period, as the same stood on the next succeeding first of July---Under Income Tax Ordinance, 1979 [since repealed], the relevant tax period was known as the 'income year' and the income earned during that period was brought to tax in the next succeeding 'assessment year'---Income year, in general, was the same as the financial year, that ran from July 1st in one calendar year to June 30th in the next---Assessment year was reckoned from the next day that was succeeding July 1st, which meant that Income Tax Ordinance, 1979 [since repealed] applied as the same stood on the first of July, that was on the first day of the assessment year---Under Income Tax Ordinance, 2001, the equivalent concept was that of a 'tax year' as defined in S. 2(68) read with S. 74(1) of the Ordinance---Income Tax Ordinance, 2001, thus, had to be applied to the appellant/taxpayer in respect of the tax year 2008, as the same stood on first of July, 2008; thus, the tax in terms of S. 113 of the Ordinance could not have been levied on the taxpayer, as the provision had been omitted---Reference was dismissed by High Court.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 39, 18(1)(d) & 11(1)(a) to (e)----Income from business/Income from other sources---Determination---Question before the High Court was that whether the Appellate Tribunal was justified to hold that the amount reimbursed by the purchaser of electric power to the taxpayer, being the income tax paid by the latter, was 'business income' under S. 18(1)(d) of Income Tax Ordinance, 2001 and not a receipt to be included under the head 'Income from other sources' under S. 39 of the Ordinance---In terms of the Power Purchase Agreement, the income tax paid by the appellant/taxpayer on the income earned by it was to be reimbursed to it by the purchaser of electric power, and a certain sum had been reimbursed to the taxpayer on said account---In terms of Power Purchase Agreement, a number of outlays and expenditures that would fall on, and to be the account of, the seller of electric power/respondent were 'passed through' to the purchaser; said 'pass through' was by way of a reimbursement of the former by the latter, which was the issue in the present case---Actual 'pass through' items (and the manner thereof) depended upon the exact term of the Power Purchase Agreement, but that was not uncommon for the income tax payable by the seller to be 'passed through'---One, while determining the 'head' of income under which a particular receipt fell, started first by looking at the specific heads under S. 11 (1) (a) to (d) of Income Tax Ordinance, 2001, and in case, the receipt did not come under any of those heads, then the same was allocated to the 'residual' head, 'Income from other sources' under S. 11 (1) (e) of the Ordinance; therefore, it was incorrect to reverse said order (for determination of particular head) and to start first with the latter---Section 18 (1) (d) of the Ordinance required that the 'fair market value' of a 'benefit' or 'prerequisite', derived in the circumstances (i.e. on account of past, present or future business relationship), was to be regarded as a "business receipt", and that was so regardless of whether the same was convertible into money or not; S. 11 (1) (d) of the Ordinance applied only in such a situation---Reimbursement certainly conferred a 'benefit' on the appellant; however, no sensible answer to the question as to what was the 'fair market value' of the reimbursed income tax could be given---Income tax was liability towards the State, paid in money by the one (the appellant/taxpayer) on whom the same laid and reimbursed by the third party (the purchase of electric power)---Situation as contemplated by S. 18 (1) (d) of the Ordinance was materially different from the present case, therefore, said provision was not applicable---Reimbursement in question, regardless of the fact that S. 18 (1) (d) of the Ordinance did not apply, was a receipt, which was to be allocated under the head 'Income from Business'---Order of Appellate Tribunal was upheld---Reference was dismissed.

Syed Irshad ur Rehman for Applicant.

S. Riazuddin for Respondent.

2017 P T D 355

[Sindh High Court]

Before Sajjad Ali Shah, C.J. and Zulfiqar Ahmad Khan, J

Messrs FAISAL MOTORS

Versus

MODEL COLLECTOR OF CUSTOMS (EAST) and others

C.P. No. D-2753 of 2016, decided on 16th August, 2016.

Import Policy, 2013---

----Cl. 2(1)---"New vehicle"---Connotation---Registered vehicle---Petitioner imported 2016 model car from Japan which was already registered there and was driven only 75 kilometers---Authorities declined to allow import of car in question allegedly for the reason that import of registered car did not fall within the meaning of 'new vehicle'---Validity---Held, it was a must for bringing vehicle within the purview of Cl. 2(1) of Import Policy, 2013, that vehicle had to have manufacturing date of past twelve months preceding date of importation into Pakistan---Such vehicle was not to be (a) registered in country of export, or (b) not used in country of export, prior to its importation in Pakistan---Mere proof of registration of vehicle prior to its importation in foreign country alone or alternatively its prior use was not conclusive to remove vehicle from importability as 'new vehicle' under Cl. 2(1) of Import Policy, 2013---Vehicle in question was manufactured within 12 months from the date of import, though had been registered in country of export (Japan) but being unused and legitimately showing only 75 kilometers on its speedometer, qualified definition of a 'new vehicle' set in Cl. 2(1) of Import Policy, 2013---High Court directed the authorities to treat vehicle in question as 'new vehicle'---Constitutional petition was allowed in circumstances.

Shazeb Pharmaceutical Industries Ltd. v. Federation of Pakistan 2006 PTD 2237 ref.

Khwaja Shamsul Islam for Petitioner.

Iqbal Khurram, Asim Mansoor Khan, D.A.G. and Ilyas Ahsan, Principal Appraiser (Legal) for Respondents.

2017 P T D 370

[Sindh High Court]

Before Munib Akhtar and Aziz-ur-Rehman, JJ

Messrs INTERNATIONAL PETROCHEMICALS (PVT.) LTD.

Versus

DEPUTY COLLECTOR OF CUSTOMS (PREVENTIVE) CUSTOM HOUSE, KARACHI and 2 others

Special Customs Reference Application No.185 of 2011, decided on 13th October, 2015.

Customs Act (IV of 1969)---

----S. 25----Customs Rules, 2001---Import of goods---Determination of, value of goods imported for the first time----Scope---Under S. 25 of Customs Act, 1969, it was not permissible to reject declared value simply on the ground that relevant goods had been imported for the first time and hence the values of any identical and/or similar goods were not available----Simply because the Department had no data it may consider relevant for comparative purposes, it could not for that reason alone reject the declared value on the ground that goods in question had been imported for the first time and it was not within contemplation and framework of S. 25 of Customs Act, 1969 either expressly or even impliedly that price paid or payable be rejected only for such a reason---Price paid or payable could only be rejected for a legally valid reason as set out in S. 25 of Customs Act, 1969 or in Customs Rules, 2001---Reference was answered accordingly.

Ziaul Hassan for Applicant.

Ghulam Haider Shaikh for Respondents.

2017 P T D 397

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

PAKISTAN STATE OIL CO. LTD. through G.M.

Versus

COLLECTOR OF CUSTOMS, through Additional Collector of Customs and 2 others

Special Custom Reference Applications Nos. 201 to 282 of 2011, decided on 4th February, 2015.

Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Scope---Factual controversy---Supreme Court in the present case had remanded the matter to Adjudicating Officer to decide factual controversy afresh---Decision made Adjudicating Officer in post remand proceedings was maintained upto Customs Appellate Tribunal---Validity---Supreme Court had remanded the matter to adjudicating authority precisely on the ground that the matter involved the resolution of factual controversy---Supreme Court in remand order had categorically held that insofar as question of law was concerned, the same already stood decided by the court against importer in earlier round of litigation---No substantial question of law had been referred for opinion of High Court by importer---Reference application which did not relate to actual controversy and related to factual aspect of the matter could not be examined by High Court while exercising reference jurisdiction under S. 196 of Customs Act, 1969---High Court declined to answer questions proposed by importer as the same already stood decided against importer in earlier round of litigation by Supreme Court---No factual controversy could be agitated or decided by High Court under S. 196 of Customs Act, 1969---Reference was dismissed in circumstances.

Collector of Customs Excise and Sales Tax v. Pakistan State Oil Company 2005 SCMR 1636 and Pakistan State Oil Company Ltd. v. Collector of Customs Excise and Sales Tax and others 2006 SCMR 425 ref.

Collector of Customs and another v. Messrs Fatima Enterprises Ltd. 2012 SCMR 416; Messrs Gold Trade Impex through Partner and another v. Appellate Tribunal of Customs, Excise and Sales Tax through Collector of Customs and 2 others 2012 PTD 377 and Collector of Customs through Additional Collector of Customs, Karachi v. Qasim International Container Terminal (Pvt.) Ltd. 2013 PTD 392 rel.

Farrukh A. Shaikh for Applicant.

G. Haider Shaikh for Respondents.

2017 P T D 446

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

ABDUL GHAFFAR

Versus

CUSTOMS APPELLATE TRIBUNALS and 2 others

Special Custom Reference Application No.331 and C.M.A. No.1758 of 2015, decided on 27th September, 2016.

Customs Act (IV of 1969)---

----S. 196(1)---Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, Rr.5(3) & 12(3)---Reference---Memorandum of appeal---Deficient documents---Appeal was dismissed by Customs Appellate Tribunal on the ground of failure to file certified copy of Order-in-Original---Validity---Appellate Tribunal had authority to accept memorandum of appeal, which was not accompanied by all or any of the documents referred to in the Rules---Tribunal by ignoring such authority vested in it in terms of Rr. 5(3) & 12(3) of Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, dismissed the appeal in a cursory manner without assigning any reason as to why such discretion could not be exercised in favour of applicant---Appeal was filed in time and was also accompanied with all relevant documents except Order-in-Original---Applicant was not given opportunity to explain his position and to make out such deficiency, on the contrary appeal was dismissed on such account alone, instead of being disposed of on merits---High Court set aside the order in question and remanded the matter to Customs Appellate Tribunal to decide the appeal on merits---Reference was allowed accordingly.

M. Akram Shahbaz for Applicant.

2017 P T D 458

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

KHYZAR IQBAL

Versus

DEPUTY COLLECTOR (GR-VI), CUSTOMS HOUSE, KARACHI

Special Custom Reference Application No.314 of 2013, decided on 29th May, 2015.

(a) Customs Act (IV of 1969)---

----Ss. 25(1) & 196---Determination of customs value of goods---Import of auto-parts---Scope---Contention of importer was that transactional value of importer should have been accepted for assessment purposes in terms of S. 25(1) of Customs Act, 1969---Validity---Decision of Department was in respect of piston and other parts of the motorcycle and not in respect of APE Piston for Auto Rikshaw as contended by importer---Department had not given any directions for making assessment of goods in question in terms of S. 25(1) of Customs Act, 1969, hence, contention of importer in such regard appeared to be misconceived and contrary to record---Importer had not been able to justify acceptance of its transactional value within contemplation of S.25(1) of Customs Act, 1969 and did not discharge initial burden to justify valuation of imported goods, as such onus was on importer and not on the department---Reference was answered accordingly.

(b) Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Factual enquiry---Scope---Factual inquiry would not be undertaken by High Court in Reference in terms of S. 196 of Customs Act, 1969.

Messrs Gold Trade Impex through Partner and another v. Appellate Tribunal of Customs Excise and Sales Tax Through Collector of Customs and 2 others 2012 PTD 371 and Collector of Customs, Karachi v. Messers Qasim International Container Terminal (Pak) Ltd., 2013 PTD 392 rel.

Applicant in person.

Kashif Nazeer assisted by Ilyas Ahsan Appraising Officer (Legal) for Respondent.

2017 P T D 603

[Sindh High Court]

Before Sajjad Ali Shah and Muhammad Junaid Ghaffar, JJ

SINDH INSTITUTE OF UROLOGY AND TRANSPLANTATION through Authorized Representative

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 4 others

C.P. No.D-4116 of 2014, decided on 6th October, 2015.

(a) Customs Act (IV of 1969)---

----S.18A & First Schedule----Sales Tax Act (VII of 1990), Sixth Schedule Entry No.52---Customs Tariff, Chap. 99, Entry No.9914----Import of goods---Imports supplies, exemption of---"Equipment"; meaning and connotation---Scope---Perusal of Sales Tax under Entry No. 9914 of Customs Tariff of Chapter 99 and Entry No. 52 of Sixth Schedule of Sales Tax Act, 1990 reflected that equipment, apparatus, reagents, disposables and spares imported for charitable non-profitable institution, operating hospital of fifty beds or more as well as hospitals run by Federal Government or a Provincial Government were chargeable to customs duty at the rate of (zero) 0%---Entry No. 52 of Sixth Schedule of Sales Tax Act, 1990 provided that goods imported by or donated to hospitals run by Federal Government or a Provincial Government; and non-profit making educational and research institutions, subject to similar restrictions, limitations, conditions and procedures as were envisaged for purpose of applying zero rate of customs duty on such goods under Customs Act, 1969 were also exempt from levy of Sales Tax---Purpose and intent of Entry No. 9914 of Customs Tariff of Chapter 99 was to provide and to facilitate hospitals to import and buy equipment as well as apparatus, reagents, disposables and spares without payment of any customs duty and Sales Tax---Word "equipment" had not been defined in First Schedule to Customs Act, 1969 i.e. Customs Tariff, therefore, if a restrictive meaning was assigned to word "equipment" by confining it only to equipment stricto sensu used in performing medical functions that would not be appropriate---No prefix attached to word "equipment" in Entry No. 9914 of Customs Tariff of Chapter 99 such as testing equipment and medical equipment or for that matter any other special equipment---Use of word "equipment" was in a broader sense as against restrictive meaning being assigned on behalf of department---Requirement of Hospital had to be looked into before grant or refusal of exemption that as to whether goods could be termed as "equipment" or not---Specialized tiles imported by taxpayer would be covered under definition of equipment under Entry No. 9914 of Customs Tariff of Chapter 99 being entitled for Zero (0%) rating of customs duty whereas Entry No. 52 of 6th Schedule of Sales Tax Act, 1990 did not even restrict exemption to any equipment---Only restriction was that it was subject to similar restrictions, limitations, conditions and procedure as were envisaged for purpose of applying Zero rating of customs duty on such goods under Customs Act, 1969 i.e. furnishing of an undertaking to satisfaction of Collector of Customs concerned which taxpayer had already undertaken to fulfil---Taxpayer's goods i.e. tiles in question would also be entitled for exemption of Sales Tax against Entry No 52 of Sixth Schedule to Sales Tax Act, 1990---Taxpayer, in circumstances, was entitled for zero rating of customs duty on import of specialized porcelain tiles being "equipment" under Entry No. 9914 of Customs Tariff and for exemption of sales tax under Serial No. 52 of Sixth Schedule to Sales Tax Act, 1990---Constitutional petition was allowed accordingly.

(b) Customs Act (IV of 1969)---

----S. 18---Customs Tariff, Chap. 99, Entry No.9914---Sales Tax Act (VII of 1990), S.4---Import of goods---Zero rating customs duty---Scope---Contention of taxpayer/petitioner was that goods in question i.e. "bacteria free porcelain tiles" fell within definition of "equipment" and therefore entitled for zero rating of customs duty under Entry No. 9914 of Customs Tariff---Held, that word "equipment" included all sorts of materials and inputs etc. required by Hospital for its own use and consumption and was not limited to medical and or other Hospital equipments---Since entry itself did not define as to what fell within meaning of equipment, therefore, dictionary meaning of word "equipment" had to be relied on.

(c) Words and phrases---

----"Equipment"---Meaning---Necessary item for a particular purpose---Things that are used for a particular purpose or whatever a person, group or thing is equipped with, or special things needed for some purposes---Set of articles or physical resources serving to equip a person a thing as used in an operation or activity or all fixed assets other than land and buildings of a business enterprise.

Ijaz Ahmed for Petitioner.

Ms. Afsheen Aman for Respondents Nos. 3 and 4.

Aminuddin and Muhammad Khalil Dogar for Respondent No.5.

2017 P T D 662

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, LTU-II INCOME TAX

Versus

TRIPLE TREE ASSOCIATES

I.T.R.A. No.151 of 2016, decided on 12th August, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 174 & 133---Reference---Factual controversy---Expenses, disallowance of---Non-issuance of show-cause notice---Concurrent findings of facts by two forums below---Authorities were aggrieved of concurrent findings of Commissioner Inland Revenue (Appeals) and Appellate Tribunal Inland Revenue, whereby additions made under S. 174(2) of Income Tax Ordinance, 2001, were deleted for want of supporting evidence and for non-issuance of show-cause notice---Validity---Concerned authority failed to confront taxpayer by issuing any show-cause notice in such regard, therefore, any disallowance or addition made by authorities under such circumstances was not justified in law and fact---Such disallowance of expense by authorities without providing opportunity of being heard to taxpayer amounted to denying fair trial, which was against principles of natural justice---Appellate Tribunal Inland Revenue concurred with findings as recorded by Commissioner Inland Revenue (Appeals) in respect of subject additions, which prima facie referred to a factual controversy---No substantial legal question of law had arisen from orders by Appellate Tribunal Inland Revenue---Questions proposed were questions of fact and not question of law---Reference was dismissed in circumstances.

2017 P T D 730

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

ARTISTIC DENIM MILLS LTD.

Versus

FEDERAL BOARD OF REVENUE and others

Suit No. 41 of 2015, decided on 15th July, 2016.

(a) Interpretation of statutes---

----No redundancy to be attributed to legislature.

(b) Interpretation of statutes---

----Casus omissus, principle of---Scope---Statute is to be interpreted by gathering intention of legislature from plain reading of words used, which also includes and means that attention should be paid to what has been said and so also to what has not been---Neither Courts nor anybody else is competent to add words to a statute/act or for that matter a schedule (which is also a part of act)---To read words into an act unless it is absolutely necessary to do so is contrary to all rules of construction---Courts cannot and must not reframe legislation (except reading it down as and when needed) for the very good reason that it has no power to legislate---Principle of 'Casus Omissus' is applicable where a matter which should have been but has not been provided for in a statute cannot be supplied by Courts, as to do so is legislation and not construction.

Case Law referred.

(c) Customs Act (IV of 1969)---

----Ss.18, 32, 217 & Sched. V, Entry 11---Sales Tax Act (VII of 1990), Sched. VI, Serial 6---Notification No. S.R.O. 567(I)/2006, dated 5-6-2006--- Exemption--- Power generators--- In-house/commercial use---Plaintiffs were engaged in business of manufacturing and or export of textile and other products and all of them imported generating sets for power generation, which were being used by them in-house for running their industries---Plea raised by plaintiffs was that they were entitled for exemption from duties and taxes on the import of generating sets in terms of Sched. V of Customs Act, 1969, and Sched. VI of Sales Tax Act, 1990---Plaintiffs further raised the plea that clarification dated 5-12-2014 to Notification No. SRO 567(I)/2006, dated 5-6-2006, was illegal---Validity---No restriction or condition was attached to the effect that such exemption would only be available to those power generation projects which exclusively produced power as an independent entity and was not available to power generating machinery (gas/diesel generating sets) to be imported by units for producing power whose final product was not electricity---Neither there was any ambiguity in transportation of Notification S.R.O. 567(I)/2006, dated 5-6-2006, to Sched. V of Customs Act, 1969, and to Sched. VI to Sales Tax Act, 1990, nor it appeared to be any case of 'Policy' matter as contended on behalf of Federal Board of Revenue in clarification in question---Schedule and its Entry No. 11 of Customs Act, 1969, were clear and express in terms and did not require any further dilation in such regard and as a consequence clarification dated 5-12-2014 was set aside---Plaintiffs were entitled for exemption of duty and sales tax in terms of Entry No.11 of Sched. V of Customs Act, 1969, and Serial No. 6 of Sched. VI of Sales Tax Act, 1990, as a consequence thereof---High Court set aside the demands of duties raised after release of consignments---Suit was decreed in circumstances.

Case Law referred.

Rashid Anwar, Sofia Saeed, Muhammad Hanif Khattana, Ali Mehdi, Ghulamullah, Mehmood Abbas, Ameen Bandhukda and Iqbal Khurrum for Plaintiffs.

Amjad Javed Hashmi, Ghulam Haider Shaikh, Kashif Nazeer, Masooda Siraj for Defendnats.

Ilyas Ahsan, Appraising Officer, Customs.

2017 P T D 756

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-I

Versus

Messes INDUSTRIAL CHEMICALS (PVT.) LTD.

I.T.Rs. Nos.158, 159 and C.M.A. No.229 of 2016, decided on 12th August, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 149 & 133---Reference---Factual controversy---Tax deduction---Salaries of daily wages employees---Concurrent findings of facts by two forums below---Authorities were aggrieved of concurrent findings of Commissioner Inland Revenue (Appeals) and Appellate Tribunal Inland Revenue, regarding disallowance of staff salaries when the same was based upon erroneous belief that the staff welfare and bonuses paid to daily wage employees did not come under the purview of tax deduction under S.149 of Income Tax Ordinance, 2001---Validity---Concerned authority could not satisfactorily dispute factual and legal position nor could point out any error or illegality in the orders passed by two forums below on the matters which were based on appreciation of facts---Concurrent findings as recorded by Commissioner Inland Revenue (Appeals) as well as Appellate Tribunal Inland Revenue were findings of facts, and no substantial legal question of law had arisen from orders by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

2017 P T D 851

[Sindh High Court]

Before Munib Akhtar and Muhammad Karim Khan Agha, JJ

NEW HAMPSHIRE INSURANCE COMPANY, PAKISTAN BRANCH through Attorney

Versus

COMMISSIONER OF INLAND REVENUE-E

Income Tax Reference Application No.12 of 2014, decided on 9th August, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 32 (2), 34, 122(5A) & 133---Security and Exchange Commission (Insurance) Rules, 2002, Annexure, II, Part-B, Para-6, cl. (2)---Reference---"Incurred But Not Reported" claims---Insurance company was aggrieved of disallowing claim of provision against "Incurred But Not Reported" claim (IBNR)---Validity---Fact that no notice received by insurer in respect of (IBNR) claim did not stand in the way of such claim being deductible for income tax purposes---Claim could be considered to be incurred under Annexure, II, Part-B, Para-6, cl. (2) of Security and Exchange Commission (Insurance) Rules, 2002, at the time of incident giving rise to the claim---All events that determined liability for the purposes of S. 34(3) of Income Tax Ordinance, 2001, would have occurred on such date---High Court declined to accept contrary view suggested for such provision by authorities and decided the question in favour of taxpayer and modified the order passed by the Appellate Tribunal---Reference was allowed accordingly.

Federal Commissioner of Taxation v. Mercantile Mutual Insurance (Workers Compensation) Ltd. [1999] FCA 351; (1999) 162 ALR 130; Fiji Southern Pacific Insurance Co (Fiji) Ltd. v. Commissioner of Inland Revenue [1986] UKPC 14; [1986] STC 178; New Zealand Commissioner of Inland Revenue v. Mitsubishi Motors New Zealand Ltd. [1995] UKPC 38 and [1995] 3 NZLR 513 ref.

Ijaz Ahmed for Applicant.

Sarfraz Metlo for Respondent.

2017 P T D 864

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maaik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-II

Versus

LUCKY COTTON MILLS (PVT.) LTD.

I.T.R.A No.182 and C.M.A. No.303 of 2016, decided on 28th September, 2016.

Income Tax Ordinance (XLIX of 2001)---

---Ss.18(1)(d) & 133(1)---Reference---Business relation---Determination--Income from business---No business relationship existed between taxpayer company and its Directors who were Directors of the company which had advanced interest free loan to the company---Taxation officer could not establish any business relationship between taxpayer company and its Directors, nor any finding to such effect had been recorded by Taxation Officer---Treating amount of loan advanced as "income from business" in terms of S. 18 (1)(d) of Income Tax Ordinance, 2001, was contrary to facts and law and such addition was rightly deleted by Commissioner (Appeals)---Appellate Tribunal Inland Revenue concurred with such finding after ascertainment of entire facts of the case and by making correct interpretation of provisions of S.18(1)(d) of Income Tax Ordinance, 2001---Decision of Appellate Tribunal Inland Revenue was based on correct finding on facts, which finding did not suffer from any factual or legal infirmity---High Court declined to interfere in the orders passed by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

2017 P T D 876

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, REGIONAL TAX OFFICES, KARACHI

Versus

Messrs RELIANCE SECURITIES LTD.

I.T.R.A. No.61 and C.M.A. No.79 of 2013, decided on 17th January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Cl.110, Part 1, Second Sched., Ss.53 & 133---Companies Ordinance (XLVII of 1984), S.2(30A)---Exemption from tax---Income chargeable under head of "capital gains"---Sale of redeemable capital---Term "Finance Certificate"---Question before the High Court was whether return obtained on Term Finance Certificates (TFCs) was exempt from tax under Cl.110 of the Second Schedule to the Income Tax Ordinance, 2001---Held, under provisions of Cl.110, Part I of the Second Schedule to the Income Tax Ordinance, 2001; any income chargeable under head of "capital gains" being income from the sale of, inter alia, instruments of redeemable capital as defined in the Companies Ordinance, 1984 were exempt from levy of tax---Redeemable capital had been defined under S.2(30A) of the Companies Ordinance, 1984 which included finance obtained on the basis of "Participation Term Certificate (PTC)", "Musharika Certificates" as well as "Term Finance Certificate" (TFCs)---Contention that exemption for TFCs had not been specifically mentioned in the Second Schedule to the Income Tax Ordinance, 2001 was misconceived as intention of the Legislature had been expressed therein, where exemption to any income chargeable under the head of capital gains from sale of redeemable capital had been included and such legislative intent was clear and unambiguous---Reference was answered, accordingly.

Amjad Jawaid Hashmi for Applicant.

2017 P T D 903

[Sindh High Court]

Before Irfan Saadat Khan and Muhammad Humayon Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I

Versus

Messrs SIEMENS PAKISTAN ENGG. CO. LTD.

Income Tax Reference Application No. 129 of 2013, decided on 28th November, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 132(3), 133 & 221---Reference---Rectification of mistake---Scope---Contentious issue---Services outside Pakistan---Assessment order of taxpayer was amended by authorities in exercise of powers under S.122(1) of Income Tax Ordinance, 2001---Appellate Tribunal Inland Revenue set aside the amended assessment order---Validity---Powers of Deputy Commissioner Inland Revenue under S.221 of Income Tax Ordinance, 2001, were limited to the extent of mistakes apparent from record---Other provisions of law could deal with the authority of department officials with regard to reopening of assessment, revision etc.---Where department was of the view that certain income had escaped from chargeability of tax but for exercising such powers under S. 221 of Income Tax Ordinance, 2001, there must be a mistake apparently floating on the surface which was to strike one's mind without entering into long drawn process of reasoning, detailed deliberation etc.---Only those mistakes were rectifiable which were apparent from the record and floating on the surface and which did not require any long drawn process of reasoning, deliberation on a moot or debatable point---Issue with regard to taxability on services rendered by taxpayer outside Pakistan had been a continuous issue between authorities and taxpayer, therefore, the same fell outside the scope of mistake apparent from the record---In cases where there could conceivably be two views / opinions the same fell outside the scope and ambit of rectification of mistake---High Court answered all questions in favour of taxpayer---Reference was dismissed in circumstances.

CIT v. Shadman Cotton Textile Mlills Ltd. 2008 PTD 253; Commissioner of Income Tax and another v. Messrs Pakistan Petroleum Ltd. and 2 others 2012 PTD 501; Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; CIT v. Messrs Adam Limited Karachi 1969 PTD 351; CIT v. Hero Cycle (Pvt.) Limited Company and others 228 ITR 463 (SC)); (3) T.S. Balaram I.T.O. Company Circle No.IV Bombay v. Volkart Brothers and others 82 ITR 50 (SC); CIT v. Abdul Ghani 2007 PTD 967; Helal Jute Press Limited v. Commissioner of Income-Tax, DACCA Zone, DACCA and another 22 Taxation 157 and Commissioner Inland Revenue, Karachi v. Messrs E.N.I. Pakistan (M) Limited Karachi 2013 PTD 508 ref.

Kafeel Ahmed Abbasi for Applicant.

Ammar Athar Saeed for Respondent.

2017 P T D 941

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

Messrs JFK INTERNATIONAL through Proprietor

Versus

COMMISSIONER INLAND REVENUE, ZONE-I and 2 others

Spl. S.T.R.A. No.26 and C.M.As. Nos.236 and 237 of 2013, decided on 13th January, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 47 & 46---Appeal/Reference to the High Court---Nature and scope---Bar to adjudication under S. 47 of the Sales Tax Act, 1990 on questions of law not raised before Appellate Tribunal---Effect---While exercising jurisdiction under S. 47 of the Sales Tax Act, 1990; the High Court exercised a limited jurisdiction only to the extent of examination of such questions of law which arose and had been decided by the Appellate Tribunal---Questions raised for the first time before High Court, which were neither raised nor had been decided by the Appellate Tribunal, could not be decided by the High Court in its jurisdiction under S. 47 of the Sales Tax Act, 1990.

Ammar Yasser for Applicant.

2017 P T D 959

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

ENGRO ELENGY TERMINAL (PVT.) LTD. through Authorized Representative

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 6 others

Suit No.1084 of 2015, decided on 26th May, 2016.

(a) Customs Act (IV of 1969)---

----S. 217---General Clauses Act (X of 1897), S. 24-A---Alternate remedy, availing of---Principle---Speaking order---Normally, a party is not allowed to seek relief directly either through Civil Court or Court exercising Constitutional jurisdiction and must avail alternate remedy as provided in law---For availing alternate remedy there must be an order in clear and express terms detailing out reasons and jurisdiction for passing such adverse order which seriously prejudices importer---Authority deciding any matter must discuss issue and give reasoning and thereafter either accept claim of party or reject it with cogent reasons---If not, such order cannot be termed as order in accordance with law being in violation of S. 24-A of General Clauses Act, 1897.

Case law referred.

(b) Civil Procedure Code (V of 1908)---

----S. 9---Original Civil jurisdiction of High Court---Scope---High Court cannot only examine vires of law/statutes but is equally competent to grant any relief which can be granted by High Court under its Constitutional jurisdiction---Exclusion of jurisdiction of Civil Court under S. 9, C.P.C. is not to be readily inferred, whereas such exclusion can only be inferred where statute under discussion itself gives finality to the order of lower authority on which it confers jurisdiction and provides for adequate alternate remedy to do what the Court normally do in such matters---Even if statute excludes conferring any jurisdiction on a civil Court, such provision does not exclude situations where authority vested with such jurisdiction has not complied with or has not acted in compliance with the mandate of judicial procedure---If any such order is not in compliance with the mandate of statute and fundamental principles of judicial procedure, then Court can come to a conclusion that such order is in excess of jurisdiction---Civil suit under S. 9, C.P.C. is maintainable whenever order impugned is in excess of jurisdiction or tainted with mala fide and has been passed outside the ambit of statute in question itself.

Case law referred.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 148(2), 159(3) & Second Schedule, Part-I, cl. 141---Customs Act (IV of 1969), S. 218---S.R.O. No. 678(I)/2004, dated 7-8-2004---S.R.O. No. 947(I)/2008, dated 5-9-2008---Specific Relief Act (I of 1877), Ss. 42 & 54---Suit for declaration and injunction---Levy of advance income tax and customs duty---Floating Storage Regasification Unit (FSRU)---Plaintiff imported FSRU and was aggrieved of assessment made by authorities imposing customs duty and advance income tax---Validity---Plaintiff was recognized as a petroleum company in terms of S.R.O. No. 678(I)/2004, dated 7-8-2004, for which exemption from income tax was provided in clause (iii) of S.R.O. No.947(I)/2008, dated 5-9-2008, whereby provision of S. 148 of Income Tax Ordinance, 2001, was not applicable to them, therefore, plaintiff could not be left out and discriminated---Such aspect of the matter required consideration by authorities who passed orders in question---In view of Cl. 141 of Part-I of Second Schedule to Income Tax Ordinance, 2001, plaintiff and like companies were exempted from any sort of income tax, including minimum tax and alternate corporate tax---In terms of S. 159 of Income Tax Ordinance, 2001, it was provided that where Commissioner was satisfied that amount to which Division II or Division III of Chapter XII, applied, was exempt from tax under Income Tax Ordinance, 2001, Commissioner, upon application in writing by the person, would issue the person with an exemption certificate or otherwise---Nothing was available on record to suggest that Commissioner recorded his satisfaction in respect of such provision as to why the certificate was not issued to plaintiff under cl. 141 of Part-I of Second Schedule to Income Tax Ordinance, 2001---Plaintiff was not entitled from complete exemption under condition (vii) and was liable to pay Customs Duty at the rate of 5%, under cl. 2(a) of S.R.O. No. 678(I)/2004, dated 7-8-2004---High Court remanded the matter to authorities for decision afresh---Suit was dismissed accordingly.

Case law referred.

Makhdoom Ali Khan for Plaintiff.

Sohail Muzaffar, along with Mrs. Masooda Siraj, assisted by Nayyar Shafiq Additional Collector for Defendants.

Adnan Qadoos Shaikh Assistant Collector.

Tariq Aziz Principal Appraiser.

Asad Aleem Principal Appraiser Law.

Liaquat Ali Principal Appraiser.

2017 P T D 1001

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Khadim Hussain M. Shaikh, JJ

COMMISSIONER INLAND REVENUE

Versus

MADINA ENTERPRISES LIMITED

I.T.R.As. Nos. 272 and 273 of 2011, decided on 12th January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133 & 148(9) [as inserted by Finance Act (III of 2006)]---Reference---Withholding tax at import stage---Explanation inserted in S.148(9) of Income Tax Ordinance, 2001, prospective effect---Scope---Authorities were aggrieved of the order passed by Appellate Tribunal Inland Revenue declaring that Explanation inserted in S. 148(9) of Income Tax Ordinance, 2001, was prospective in nature---Validity---Explanation in question was not clarifactory or procedural in nature, as substantial change had been introduced by including "Crude Palm Oil" within the definition of "Edible Oil", whereby importers of "Crude Palm Oil" were denied claim of adjustment of withholding tax paid at import stage during two years, prior to the year in which such Explanation was introduced through Finance Act, 2006---If such Explanation was made applicable retrospectively i.e. prior to 30-6-2006, it would violate principles as enunciated by superior Courts in earlier cases---No person could be saddled with responsibility or any liability for non-compliance of law to be enacted in future---Requirement of deduction of tax on import stage in respect of "Crude Palm Oil" would apply from the date of insertion of such Explanation prospectively i.e. after 30-6-2006 and not retrospectively for the previous years---High Court declined to interfere in order passed by Appellate Tribunal Inland Revenue as it did not suffer from any error or illegality---Reference was dismissed in circumstances.

Adnan Afzal v. Capt. Sher Afzal PLD 1969 SC 187; Ghulam Mustafa and others v. Omaid Ali and 9 others 1984 SCMR 1126; Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others 1993 SCMR 1905; The Collector, Customs and Central Excise, Peshawar and others v. Messrs Rais Khan Limited 1996 SCMR 83; Messrs Star Textile Ltd. and 5 others v. Government of Sindh through Secretary, Excise and Taxation Department, Sindh Secretariat, Karachi and 3 others 2002 SCMR 356; Ehsanullah Tarar v. Messrs Hafizabad Straw Board Mills Ltd. and 3 others PLD 2010 Lah. 160; Commissioner of Income-Tax, Karachi v. Messrs Nazir Ahmed and Sons (Pvt.) Ltd. 2004 PTD 921; Commissioner, Sindh Employees Social Securities Institution and another v. Messrs E.M. Oil Mills and Industries Ltd. and 2 others 2002 SCMR 39; Ali Murad v. The State PLD 1995 Kar. 137; Noor Muhammad v. Additional District Judge, Chakwal and 7 others PLD 1994 Lah. 170; Messrs Ihsan Yousaf Textile (Pvt.) Ltd. v. Collector of Sales Tax (Adjudication), Faisalabad and 2 others 2003 PTD 1747; Ahmed Shuja, Superintendent and 160 others v. Government of Punjab through Secretary, Finance Department, Civil Secretariat, Lahore and another 2000 PLC (CS) 1148; Mst. Fazal Bibi v. Habibullah PLD 1951 Baghdad Ul Jadid 47; Messrs Allied Engineering Services Ltd. v. Commissioner of Income Tax and another PLD 2016 SC 545 = 2016 PTD 1393; Commissioner Income Tax v. Messrs Eli Lily Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 RID 1392 and Messrs Kurdistan Trading Company v. Commissioner Inland Revenue 2014 PTD 339 ref.

Javaid Farooqi for Applicant.

Khalid Mehmood Siddiqui for Respondents.

2017 P T D 1018

[Sindh High Court]

Before Irfan Saadat Khan and Muhammad Humayon Khan, JJ

Messrs PREMIER COATING RESIN (PVT.) LTD.

Versus

COLLECTOR OF CUSTOM EXPORT

Spl. Cus. Ref. Application No.57 and C.M.A. No.360 of 2012, decided on 18th November, 2016.

Customs Act (IV of 1969)---

----S. 196---Reference---Maintainability---Applicant had a license to maintain a private warehouse and during validity of such license he had imported several consignments for export oriented unit without payment of customs duty and taxes---Applicant was proceeded against by customs authorities on the allegation that he failed to export 100% of its production to other countries and violated terms and conditions of the license---Applicant was aggrieved of the orders passed by authorities whereby he was directed to pay customs duties pertaining to such consignments---Validity---Reference could be filed before High Court in respect of any question of law only and no issue beyond mandate of law could be considered in reference---Jurisdiction under S. 196 of Customs Act, 1969, was advisory in nature and opinion of High Court was to be given on point of law only arising out of an order by Appellate Tribunal---If no question of law had arisen or agitated than reference was fit to be dismissed on such ground only---High Court declined to interfere in the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Ghandhara Nissan Diesel Ltd. v. Collector of Customs 2007 PTD 117; Collector of Customs v. Messrs Pak Arab Refinery, Karachi 2010 PTD 900; Mr. Fakhar-E-Alam Khan v. Federal Board of Revenue, Islamabad and 3 others 2012 PTD 44 and Messrs F.M. Y. Industries Ltd. v. Deputy Commissioner Income Tax and another 2014 SCMR 907 = 2014 PTD 1511 rel.

S. Abid Hussain Shirazi for Applicant.

Kashif Nazeer for Respondent.

2017 P T D 1025

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Rasheed Ahmed Soomro, JJ

DESCON ENGINEERING LTD. through Incharge Corporate Services

Versus

SINDH REVENUE BOARD through Chairman and others

Constitutional Petition No.D-5263 of 2016, decided on 19th October, 2016.

Sindh Sales Tax on Service Act (XII of 2011)---

----Ss. 78 & 79---Withholding tax---Engineering Procurement and Commission Contracts---Petitioner company was aggrieved of inaction on the part of Sindh Board of Revenue who had not responded to the query of petitioner---Plea raised by petitioner was that Engineering Procurement and Commission Contracts executed between petitioner and other parties were outside the ambit of goods or services and were not chargeable under Sindh Sales Tax on Services Act, 2011---Validity---Such determination required proper scrutiny of facts and interpretation of Engineering Procurement and Commission Contracts, therefore, it required a legal determination through some quasi-judicial proceedings by revenue authorities and could not be decided through some administrative order or instructions in terms of S. 78 of Sindh Sales Tax on Services Act, 2011---Relief claimed by petitioner was misconceived in facts and law and constitutional petition was filed without any legal cause of action, as no adverse order was passed by competent authority relating to subject controversy in accordance with law---Constitutional petition was dismissed in circumstances.

Dr. Ikramul Haq and Ms. Lubna Pervaiz for Petitioner.

Nemo for the Respondents.

2017 P T D 1042

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Rasheed Ahmed Soomro, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, LARGE TAXPAYERS

Versus

DIGICOM TRADING (PVT.) LTD., and another

I.T.R.A. No.24 of 2016, decided on 24th October, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 132 (2)(3)(6) & 133---Reference---Maintainability---Authorities were aggrieved of direction issued by Appellate Tribunal to Commissioner (Appeals)---Validity---Reference would lie against an order of Appellate Tribunal deciding appeal of an aggrieved party or Commissioner in terms of Ss. 132 (2), (3) and (6) of Income Tax Ordinance, 2001---No reference would lie against an order passed by the Tribunal on some miscellaneous application seeking implementation of an order passed on stay application, when no final order had been passed on merits in terms of S. 132 of Income Tax Ordinance, 2001, on appeal pending before Appellate Tribunal---Reference was dismissed in circumstances.

Amjad Jawaid Hashmi for Applicant.

2017 P T D 1053

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Khadim Hussain M. Shaikh, JJ

MUHAMMAD ASIM

Versus

PROVINCE OF SINDH through Chief Secretary and 3 others

Constitutional Petition No.D-5624 of 2014, decided on 2nd December, 2016.

Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 8, 3 & 42A---Show-cause notice---Petitioner impugned issuance of show-cause notice issued to it under the provisions of the Sindh Sales Tax on Services Act, 2011 requiring the petitioner to register/enroll itself under the Sindh Sales Tax on Services Act, 2011---Contention of the petitioner, inter alia, was that it did not provide any taxable services under the Sindh Sales Tax on Services Act, 2011----Validity---Perusal of record revealed that the petitioner had been confronted to explain certain facts relating to its business activity and instead of submitting reply to the said show-cause notice, the petitioner approached the High Court under Art. 199 of the Constitution----High Court observed that the circumstances of the case involved disputed questions of facts, therefore, the same could not be decided on merits---High Court directed the petitioner to submit its reply to the impugned show-cause notice and the Department was directed to ensure that unless and until the submissions made by the petitioner regarding its business activity were examined in terms of the Sindh Sales Tax on Services Act, 2011; the petitioner may not be unnecessarily required to get itself enrolled/registered in terms of the Sindh Sales Tax on Services Act, 2011 and shall not be made liable to pay any sales tax in terms of S. 8 of the Sindh Sales Tax on Services Act, 2011; since the initial burden to bring a person within the charging provisions of the taxing statute rested upon the Department---Constitutional petition was disposed of accordingly.

Messrs Pak Telecommunication Company Ltd., v. Province of Sindh 2015 PTD 2072; Messrs Maritime Agencies (Pvt.) Ltd., v. Assistant Commissioner-II, SRB 2015 PTD 160 and Messrs Mobile Communication Ltd., v. SRB and others 2014 PTD 2048 ref.

Dr. Akhtar Hassan Khan and others v. Federation of Pakistan and others 2007 SCMR 1357; Muhammad Abbasi v. S.H.O. Bhara Kahu and 7 others PLD 2010 SC 969; Feroze Khan v. The State 2012 MLD 1092; Rashed and others v. The Chief Commissioner Karachi and another PLD 1956 W.P. Kar. 474; Muhammad Tufail v. Abdul Ghafoor and others PLD 1958 SC 201; Diwan Ziaul Haq and others v. The Government of West Pakistan PLD 1956 Lah. 358; The Province of East Pakistan v. Kshiti Dhar Roy and others PLD 1964 SC 636; Dr. Akhtar Hassan Khan and others v. Federation of Pakistan and others 2012 SCMR 455; Dossani Travels (Pvt.) Ltd. and others v. Messrs Travels Shop (Pvt.) Ltd., and others PLD 2014 SC 1 distinguished.

Mushtaque Hussain Qazi for Petitioner.

Asadullah Shaikh, Meer Hussain, Standing Counsel, Saifullah, A.A.G. and Syed Zain-ul-Abideen Shah, Deputy Commissioner, S.R.B. for Respondents.

2017 P T D 1069

[Sindh High Court]

Before Munib Akhktar and Muhammad Karim Khan Agha, JJ

ANWAR YAHYA and 3 others

Versus

FEDERATION OF PAKISTAN through Secretary and 4 others

C.Ps. Nos. D-6586 of 2014 and 4199 of 2015, decided on 9th August, 2016.

(a) Interpretation of statutes---

---Fiscal statute---Two interpretations---Scope---If there are two interpretations reasonably possible of a charging section, the one favouring taxpayer prevails.

(b) Income Tax Ordinance (XLIX of 2001)---

---S. 37A & First Schedule [as amended by Finance Act (IX of 2014) & Finance Act (V of 2015)]---Capital gain tax on disposal of securities---Petitioner bought and sold shares of listed companies from time to time, and rates at which capital gains were to be taxed were defined---Petitioner was aggrieved of interpretation of Federal Board of Revenue namely that the section and Table applied as they stood on the date on which a given lot of shares was disposed of---Validity---Shares held for more than a year, as on and up to 30-6-2014, taxpayer acquired a vested right by reason of proviso to S.37A of Income Tax Ordinance, 2001, which did not apply at all to any capital gains on disposal of such shares, regardless of the date of disposal---During period 1-7-2014 till 30-6-2015, Table in Division VII as it stood during such period, was in law, inoperative and did not and could not apply, hence any capital gains made on disposal of shares at any time during such period could not be brought to tax, if such shares had been held for a period of 12 months or more as on the date of disposal---Any tax levied, paid or collected in any manner whatsoever, in respect of any capital gains to which either sub-paras (a) or (b) applied was unlawful and the same was set aside and quashed---High Court directed that taxpayer was entitled to a suitable refund/adjustment in respect of any such tax as was paid or collected---Constitutional petitions were disposed of in terms of declarations and orders by the High Court.

Following are the declarations and orders by the High Court:

(a) It is declared that in respect of shares held for more than a year, as on and up to 30.06.2014, the taxpayer acquired a vested right by reason of the proviso, such that section 37A did not apply at all to any capital gains on the disposal of such shares, regardless of the date of disposal.

(b) It is declared that (quite independently of, and without prejudice to, sub-para (a)) during the period 01.07.2014 till 30.06.2015; Sr. No. 4 of the Table 2014 (i.e., the table in Division VII as it stood during this period) was, in law, inoperative and did not and could not apply, and hence any capital gains made on the disposal of shares at any time during this period could not be brought to tax, if such shares had been held for a period of 12 months or more as on the date of disposal.

(c) It is declared that any tax levied, paid or collected in any manner whatsoever in respect of any capital gains to which either sub-paras (a) or (b) (above) apply was unlawful and is liable to be, and hereby is, declared to be such, quashed and set aside, with the result that the taxpayer shall be entitled to a suitable refund/adjustment in respect of any such tax as has been paid or collected.

(d) The department are restrained from levying or collecting in any manner whatsoever any tax on capital gains to which either sub-paras (a) or (b) (above) apply, under any applicable provision of the 2001 Ordinance (including but not limited to section 100B read with the Eighth Schedule).

Excise and Taxation Officer, Karachi and another v. Burmah Shell Storage and Distribution Company of Pakistan Ltd and others 1993 SCMR 338 ref.

Ms. Lubna Parvez for Petitioners.

Amjad Javed Hashmi and Irshad ur Rehman for FBR/Inland Revenue Department.

Ashfaq Rafiq Janjua, Standing Counsel.

Tariq Qureshi for KSE.

Haider Naqi for NCCPL.

2017 P T D 1085

[Sindh High Court]

Before Irfan Saadat Khan and Zafar Ahmed Rajput, JJ

KARIM CONTAINERS (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

C.P. No.D-2061 of 1992, decided on 28th April, 2016.

Central Excises and Salt Tax Act (I of 1944)---

---S. 33---Sales Tax Act (III of 1951), S. 2(11)---Notification S.R.O. No. 555(I)/79, dated 28-06-1979---Sales tax, levy of---Petitioners claimed to have fabricated metal tin containers for packing vegetable ghee and tin-tops and bottoms for combi-cans for washing powders---Assessing officer imposed recovery of Central Excise Duty and Sales Tax, which order was maintained by Appellate authority as well as Provincial Government---Validity---Action of assessing officer in imposing Sales Tax on petitioners was within his jurisdiction who had petitioners as manufacturer in respect of items manufactured by them as manufactured items fell under category of 'exempt items' under the Notification S.R.O. No. 555(I)/79, dated 28-06-1979 therefore, no Central Excise Duty could be imposed by authorities upon petitioners---High Court declared imposition of Central Excise Duty to be illegal and deleted the same---Constitutional petition was allowed accordingly.

Collector of Customs, Model Customs Collectorate of Paccs, Karachi v. Messrs Kapron Overseas Supplies Co. (Pvt.) Ltd. Karachi 2010 PTD 465; Isman Drug House Ltd. v. A.C. Customs, Airport, Lahore 1988 CLC 313; Pakistan Oxygen Limited v. Pakistan Through The Secretary, Ministry of Finance, Islamabad and others 1991 PTD 472; The Commissioner of Income-Tax, East Pakistan v. Messrs Ayurvedic Pharmacy (Dacca) Ltd. PLD 1970 SC 93; Government of Punjab v. Zia Ullah Khan and others 1992 SCMR 603; Messrs Souvenir Tobacco Co. Ltd. v. Collector (Adjudication), Rawalpindi 2004 PTD (Trib.) 1328; Messrs Sarwar & Co. (Pvt.) Ltd. v. Customs, Central Excise and Sales Tax, Appellate Tribunal, Lahore and another 2006 PTD 162 and Pakistan Oxygen Ltd. v. Pakistan and others 1992 PTD 1000 ref.

Syed Irtaza Hussain Zaidi for Petitioner.

Muhammad Javed K.K., for Respondent No.1.

Syed Irshad-ur-Rehman for Respondents Nos.2 to 4.

Arshad Siraj Memon, Amicus Curiae.

2017 P T D 1100

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs PAK ARABPIPE LINE COMPANY LTD.

I.T.R. No.158-A of 2011, decided on 10th October, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5)(a) & 133---Reference---New plea---Plea raised by department was that provisions of S. 122(5)(a) of Income Tax Ordinance, 2001, could be invoked in case of misclassification of head of income---Validity---Question proposed by department did not arise from the order passed by Appellate Tribunal Inland Revenue, as it was neither raised nor argued or had been decided by the Tribunal---Proposed question could not be termed as a question of law arising from the order passed by Appellate Tribunal Inland Revenue---Scope of reference under S. 133 of Income Tax Ordinance, 2001, was only limited to the extent of examining the question of law---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

Commissioner of Income Tax North Zone v. Mst. Wazirunnisa Begum 1972 SCMR 116; Messrs Allied Engineering Services Ltd. v. Commissioner of Income Tax and another 2015 PTD 2562; Ghulam Mustafa Jatoi v. Commissioner of Income Tax, Central Zone-B, Karachi 2006 PTD 1647 and Ahmad Karachi Halva Merchants and Ahmed Food Products v. Commissioner of Income Tax, Karachi 1982 SCMR 489 ref.

Amjad Javed Hashmi for Applicant.

2017 P T D 1115

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-III

Versus

Messrs MULLER AND PHIPPS PAKISTAN (PVT.) LTD.

I.T.R.A. No.58 and C.M.A. No.73 of 2016, decided on 7th September, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 28(1)(a) & 133---Reference---Interest free loan to employees---Authorities disallowed markup expenses in terms of S.28(1)(a) of Income Tax Ordinance, 2001, on account of interest free loan advanced to employees for purchase of motorcycles---Validity---Amount advanced/loan given to employees by taxpayer's company was meant for the purposes of purchasing motorcycles to ensure that employees would reach office in time, and such act was to improve punctuality and to increase efficiency of employees to benefit purpose of business of taxpayer's company---Commissioner Inland Revenue (Appeals) rightly observed that such advance of money could not be equated with advances/loan for personal use of employees such as marriage loan, house purchase loan, personal loan etc.---Concurrent findings as recorded by two appellate forums in absence of any material contrary to such facts, did not suffer from any error or illegality nor such findings were either based on misreading or non-reading of evidence---Reference was dismissed in circumstances.

Muhammad Sarfaraz Ali Metlo for Applicant.

2017 P T D 1122

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs KASB BANK LIMITED through Muhammad Ali, Head of Financial Reporting Tax

Versus

DEPUTY COMMISSIONER INLAND REVENUE and 3 others

C.,P. No.D-128 f 2014, decided on 20th September, 2016.

(a) Federal Excise Act (VII of 2005)---

----S. 33---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Alternate and efficacious remedy---Taxpayer assailed assessment order passed by Deputy Commissioner, Inland Revenue in constitutional jurisdiction before High Court---Validity---Such order of Deputy Commissioner was appealable order and could be assailed by filing appeal under S. 33 of Federal Excise Act, 2005, before Commissioner (Appeals), within statutory period i.e. 30 days from the date of receipt of order---High Court depreciated tendency to approach High Court directly by-filing Constitutional petition under Art. 199 of the Constitution, by-ignoring and by passing statutory forums, except for valid reasons, including jurisdictional defect or some patent illegality manifest from record---High Court disapproved such practice, as it would render statutory forums and remedies redundant and would increase burden of Courts unnecessarily---High Court declined to interfere in assessment order in question---Constitutional petition was dismissed in circumstances.

Messrs H.M. Abdullah’s case 1993 SCMR 1195; Income Tax Officer and another’s case 1993 SCMR 1108; Hyderabad Chamber of Commerce and Industry’s case 1998 SCMR 206; Hafiz Muhammad Arif Dar’s case 60 Tax 52 and Nagina Dal Factory’s case 18 Tax 1 ref.

(b) Limitation Act (IX of 1908)---

----S. 14---Exclusion of time---Bona fide proceedings before a forum without jurisdiction---Scope---Petitioner aggrieved with order passed by authorities, assailed the same before High Court in Constitutional jurisdiction, instead of filing appeal as prescribed by relevant law---Effect---High Court directed the authorities to consider the period spent before High Court, if petitioner would intend to seek condonation of delay in filing of appeal.

I.C.I. Pakistan Ltd. v. Federation of Pakistan and others 2006 PTD 778 rel.

Anwar Kashif Mumtaz and Ammar Athar Saeed for Petitioner.

Muhammad Javed K.K. for the State.

ORDER

AQEEL AHMED ABBASI, J.---Through instant petition, the petitioner has impugned an assessment order passed by the Deputy Commissioner, Inland Revenue and has sought following relief(s):-

\ The impugned order passed by the Respondent No. 1 may be graciously declared to be illegal and without lawful jurisdiction and barred the limitation.

\ The entire proceeding is in violation of Article 10-A of the Constitution of Pakistan.

On the last date of hearing i.e. 25.08.2016, learned counsel for the petitioner was confronted as to maintainability of instant petition on the following terms:--

"Learned counsel for respondent has raised objections with regard to maintainability of instant petition on the ground that it has not been filed by an authorized person as no Board's Resolution has been attached with the Memo. of petition, and secondly, against the impugned order passed in the instant matter, statutory remedy of filing an appeal before the Commissioner (Appeals), Inland Revenue is already available to petitioner in terms of section 33 of Federal Excise Act, 2005 and the same cannot be bye-passed, as held by superior Courts in large number of reported cases.

Learned counsel for the petitioner was inquired as to whether against the assessment order which is subject matter of instant petition, the petitioner has filed an appeal before the forum as provided under the statute, however, the learned counsel for the petitioner has requested for short adjournment to seek instructions in this regard and to assist this Court as to maintainability of instant petition on the next date of hearing.

By consent, adjourned to 20.09.2016. Interim order passed earlier to continue till next date of hearing.

1. Attention of the learned counsel for the petitioner was drawn to the above order of the Court, in response to which, he has candidly submitted that in spite having communicated Court's order, neither the Board Resolution as required by this Court, has been supplied nor it has been informed as to whether, against the impugned assessment order, any appeal has been preferred by the petitioner before the Commissioner (Appeals), Inland Revenue or not. Learned counsel for the petitioner requests for further time to ascertain such facts and to assist this Court as to maintainability of the instant petition. Such request of the learned counsel for the petitioner at this belated stage in the instant matter, which is pending since 2014 before this Court, cannot be acceded, more particularly, when learned counsel for the petitioner was specifically confronted as to maintainability of instant petition on the last date of hearing.

2. We are of the opinion that instant petition is not maintainable as it has been filed against an assessment order passed by the Deputy Commissioner, Inland Revenue, under the Federal Excise Act, 2005, which is an appealable order, and can be assailed by filing an Appeal before the Commissioner (Appeals) under section 33 of the Federal Excise Act, 2005 within the statutory period i.e. 30 days from the date of receipt of the order. Tendency to approach this Court directly by filing constitutional petition under Article 199 of the Constitution, by ignoring and bypassing the statutory forums, except for valid reasons including jurisdictional defect or some patent illegality manifest from record, cannot be approved, as it will render the statutory forums and the remedies as redundant, and will increase the burden of Courts unnecessarily.

3. It will be advantageous to refer to few cases of the Hon'ble Supreme Court, wherein, the issue of maintainability of constitutional petition in fiscal/tax matters has been elaborately decided:--

(i) In the case of Messrs H.M. Abdullah (1993 SCMR 1195), when the notice under section 65 of the Income Tax Ordinance, 1979 was challenged through Constitutional petition, it was held that the assessee was not entitled to invoke the Constitutional jurisdiction of High Court and bypass the remedy available under the Ordinance, as any decision taken by the Income Tax Officer could have been challenged through appeal before the high forum and then in second appeal before the Tribunal, more particularly when the questions urged in the Constitutional petition, could be raised before the Income Tax Officer.

(ii) In the case of Income Tax Officer and another (1993 SCMR 1108), when the action of income tax authorities in the form of notice under section 65 of Income Tax Ordinance, 1979 was challenged before the High Court in its Constitutional jurisdiction under Article 199. Such practice was disapproved by the Hon'ble Supreme Court, and mode of availing of alternate remedy even in tax matters, was suggested.

(iii) In the case of Hyderabad Chamber of Commerce and Industry (1998 SCMR 206), order of the High Court dismissing Constitutional petition on the ground of availability of alternate remedy to the petitioner was maintained by the Hon'ble Supreme Court with the observation that High Court had rightly dismissed the petition on the ground of alternate remedy available to the petitioner.

(iv) In the case of Hafiz Muhammad Arif Dar (60 Tax 52) it was held by the Hon'ble Supreme Court that one of the conditions for grant of relief in writ jurisdiction of High Court is that the petitioner before it should not have any alternative adequate remedy, where remedy by way of appeal was available against the impugned order, then no relief could be granted to the petitioner under Article 199 of the Constitution. It was further observed that amongst others petitioner can file a complaint and grievance application before the Federal Ombudsman who can provide effective redress as that forum has several attributes of a Court in many aspects of its powers and it can also move in a matter promptly whenever is needed. Further it does not suffer from some of the handicaps, due to the technicalities of procedural nature, which operate as impediments or thwart such like action by the Courts.

(v) In the case of Nagina Dal Factory (18 Tax 1) it was held by the Hon'ble Supreme Court that when a statute, under which action is taken itself provides remedies, recourse must be had to those remedies first. Direct access to High Court for relief in its writ jurisdiction, thus bypassing the special forums, which are created by the special law itself, was considered not permissible.

1. Accordingly, we are of the opinion that instant petition is misconceived in law, hence not maintainable, which is hereby dismissed along with listed application. However, before parting with the above order, we may observe that if the petitioner has not, so far, availed such remedy against the impugned assessment order by filing an appeal under section 33 of the Act, before the Commissioner (Appeals), in view of the pendency of instant petition before this Court, the petitioner will be at liberty to approach such forum and may seek condonation of delay in filing the appeal for the period consumed during the operation of interim order in the instant case, whereas, such request of the petitioner will be considered by such authority in accordance with law as laid down by this Court in the case of I.C.I. Pakistan Ltd. v. Federation of Pakistan and others (2006 PTD 778).

MH/K-23/Sindh Petition dismissed.

2017 P T D 1131

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gadi, JJ

Messrs CHEMTIRE TRADERS

Versus

CUSTOMS APPELLATE TRIBUNAL and 3 others

S.C.R.A. No.822 of 2015, decided on 25th August, 2016.

Customs Act (IV of 1969)---

----S. 196---General Clauses Act (X of 1897), S.24-A---Reference---Appellate Tribunal in the impugned order had not addressed the legal grounds and questions as raised by the applicant in the memo and grounds of appeal; nor had recorded its own findings while dismissing the appeal of the applicant, and instead simply concurred with the findings of the forums below---Such practice by the appellate forum, would render the remedy as illusionary and would in appropriate cases, give a cause of action to an aggrieved person to challenge such order for being violative of provisions of S.24-A of General Clauses Act, 1897---High Court observed that Appellate Tribunal, was required to record its findings on all relevant facts and the law, and decide the appeal through a well-reasoned and speaking order---Reference application was disposed of by remanding the matter to the Customs Appellate Tribunal to decide the appeal afresh, after providing opportunity of being heard to both the parties---Well-reasoned order would be passed by addressing all the grounds and questions as could be raised by the parties during the course of hearing of appeal---Appeal could be decided preferably, within a period of two months from the date of receipt of the present order.

2017 P T D 1141

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

SINDH REVENUE BOARD through Assistant Commissioner

Versus

Messrs HABIB MODARABA MANAGEMENT (PVT.) LTD.

Special S.T.R.A. No.2810 of 2015, decided on 28th September, 2016.

Sindh Sales Tax on Service Act (XII of 2011)---

----Ss. 61(4) & 63---Appeal---Condonation of delay---Principle---Appeal filed by authorities was dismissed by Appellate Tribunal on the ground that it was filed after an unexplained delay of 33 days---Validity---On expiry of period of limitation as provided under the statute, a substantial right accrued in favour of taxpayer and the same could not be taken away in a casual manner to the disadvantage of succeeding party---Each and every day was to be explained while seeking condonation of delay in filing appeal or reference---No different approach in such regard could be adopted to accommodate departmental authorities to the disadvantage of litigant party, as a substantial right had already accrued in its favour on the expiry of period of limitation as provided in the statute for filing appeal or reference---No error or illegality existed in order passed by Appellate Tribunal and authorities failed to make out a case for seeking condonation of delay in filing appeal before Appellate Tribunal---High Court declined to interfere in the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Ghulam Hyder Shaikh for Applicant.

2017 P T D 1146

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs BUTYAL ENTERPRISES

Versus

COLLECTOR CUSTOMS APPRAISEMENT CUSTOMS HOUSE

Special Customs Appeal No.D-169 of 2001, decided on 28th September, 2016.

Customs Act (IV of 1969)---

----S. 196---Appeal---Condonation of delay---Unexplained delay of 10 months---Validity---Appeal was barred by limitation and no explanation for delay occurred in filing appeal was given nor any application seeking condonation of delay was filed---Substantial legal right had accrued in favour of succeeding party, after expiry of period of limitation provided under relevant statute, which could not be taken away in a casual manner, unless there was some plausible explanation and evidence explaining delay of each and every day was given---No plausible explanation was offered by appellant to condone inordinate delay of more than 10 months---Appeal was dismissed in circumstances.

Collector of Customs v. Shahder Vankovani 2016 PTD 55 and Messrs Pakistan Soap Manufacturers v. Custom Appellate Tribunal Sp. Customs Ref. No.367 of 2016 rel.

Muhammad Afzal Awan for Appellant.

2017 P T D 1149

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COLLECTOR OF CUSTOMS, through Additional Collector of Customs

Versus

Messrs HABIB UNIVERSITY FOUNDATION

Special Customs Reference Applications Nos. 748 and 749 of 2014, decided on 6th September, 2016.

Customs Act (IV of 1969)---

----Ss. 194-A & 196--- Reference--- Classification of goods---Determination---Authorities claimed that goods imported were to be classified under PCT Heading 99.15 and were not entitled to any exemption but Appellate Tribunal found that goods were classified under PCT Heading 99.13 and importer had rightly claimed exemption from levy of customs duty and sales tax---Validity---Findings as recorded by Customs Appellate Tribunal with regard to classification of goods under PCT Heading 99.13 and claim of exemption by importer from payment of customs duty and sales tax was based on peculiar facts and circumstances of the case, which otherwise depicted correct legal position---High Court declined to interfere in the order passed by Customs Appellate Tribunal---Department failed to raise any substantial question of law from the order passed by Customs Appellate Tribunal---Reference was dismissed in circumstances.

Kashif Nazir for Petitioner.

2017 P T D 1156

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs AL-HUSSAIN TRADES CONTRACTOR

Versus

GOVERNMENT OF SINDH through Secretary and 2 others

C.P. No.D-2829 and C.M.A. No.13525 of 2016, decided on 4th October, 2016.

Sindh Sales Tax on Services Act (XII of 2011)---

----S. 23(2)---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Show cause notice---Petitioner assailed show cause notice issued by authorities---Validity---On mere issuance of show cause notice by competent authority, which otherwise did not suffer from any jurisdictional error or some patent illegality on the face of record, same could not be assailed by invoking extraordinary Constitutional jurisdiction of High Court under Art. 199 of the Constitution---Constitutional petition was dismissed in circumstances.

Maritime Agencies (Pvt) Limited v. The Assistant Commissioner-II, SRB and others 2015 PTD 160; Civil Aviation Authority v. Sindh Revenue Board and others 2013 PTD 2048; Roche Pakistan Limited v. Deputy Commissioner of Income Tax and others 2001 PTD 3090; and Sitara Chemical Industries Limited v. Deputy Commissioner of Income Tax 2003 PTD 1285 rel.

Muhammad Jawwad Zafar for Petitioner.

Saifullah, A.A.G. along with Ms. Nasreen Sehto for Respondent.

Zainul Abedin Shah, AC, SRB.

2017 P T D 1163

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COLLECTOR OF CUSTOMS, through Additional Collector of Customs

Versus

Messrs PAK SUZUKI MOTOR COMPANY LTD.

Special Customs Reference Applications Nos. 533, 534 and 535 of 2014, decided on 31st August, 2016.

Customs Act (IV of 1969)---

----Ss. 194-A(5) & 196---Reference---Limitation---Condonation of delay---Customs Appellate Tribunal dismissed appeals filed by authorities as those were barred by time and delay was not explained---Validity---Delay of each day was to be explained while seeking condonation---High Court declined to adopt different approach in such regard to accommodate authorities to the disadvantage of taxpayers---Substantial right accrued to a litigant party, in case of expiry of period of limitation, as provided under the statute---Order passed by Customs Appellate Tribunal did not suffer from any error or illegality while dismissing appeals of authorities on the point of limitation, as no reasonable explanation was given by authorities for seeking condonation of delay in filing appeals---Reference was dismissed in circumstances.

Messrs West Pakistan Tanks Terminal (Pvt.) Ltd. v. Collector of Customs (Appraisement) and others 2007 SCMR 1318 and WAPDA v. Muhammad Khalid 1991 SCMR 1765 distinguished.

2017 P T D 1171

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs KING PIN INVESTMENT LTD.

I.T.R.A. No.162 of 2007, decided on 31st August, 2016.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(5), 80-AA & 133---Reference---Reimbursement expenses---Independent experts and consultants---Receipts towards services of independent engineers and other consultants was treated as taxable under S. 12(5) read with S. 80-AA, of Income Tax Ordinance, 1979---Validity---Commissioner (Appeals) and Income Tax Appellate Tribunal after having taken into consideration the entire evidence and material produced by taxpayer in such regard had rightly held that disputed amount was paid towards reimbursement expenses incurred by taxpayer and the same did not have characteristics of income, hence could not be taxed by invoking provisions of Ss. 12(5) & 80-AA of Income Tax Ordinance, 1979---No error or illegality in concurrent findings on facts as recorded by Income Tax Appellate Tribunal were on record which otherwise depicted correct legal position and did not require any interference---Reference was dismissed in circumstances.

Jawaid Farooqui for Appellant.

Arshad Siraj for Respondent.

2017 P T D 1178

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

RAFIQ UR REHMAN

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 4 others

C.P. No.D-538 of 2014, decided on 23rd September, 2016.

Sales Tax Act (VII of 1990)---

----S. 37---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Show cause notice---Taxpayer was aggrieved of show cause notice issued by authorities---Plea raised by taxpayer was that no such notice could be issued on the basis of vague allegations---Validity---Merely on the basis of some vague allegations and without confronting taxpayer with the set of allegations and material, no adverse order could be passed under Sales Tax Act, 1990, as the same would be violative of principles of natural justice and fair trial---High Court declined to interfere in the proceedings as merely a notice in terms of S. 37 of Sales Tax Act, 1990, had been issued in term---On mere issuance of show cause notice, unless the same lacked jurisdiction or there was some patent illegality or perversity manifest from the record, Constitutional jurisdiction under Art. 199 of the Constitution could not be invoked, as the same would amount to ignore or bypass relevant forums and remedies provided under special law particularly fiscal laws i.e. Sales Tax Act, 1990, Income Tax Ordinance, 2001, Customs Act, 1969, or Sindh Sales Tax on Services Act, 2011---Petition was dismissed in circumstances.

Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090; Sitara Chemical Industries Ltd. and another v. Deputy Commissioner of Income Tax 2003 PTD 1285 and I.C.I. Pakistan Ltd. v. Federation of Pakistan and 3 others 2006 PTD 778 rel.

Iftikhar Husain for Petitioner.

Saeed A. Memon for Respondent.

2017 P T D 1201

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs EXPORT INTERNATIONAL through Proprietor

Versus

COLLECTOR OF CUSTOMS

S.C.R.A. No.230 and C.M.A. No.1601 of 2012, decided on 7th September, 2016.

Customs Act (IV of 1969)---

----Ss.2 (bb), 80, 81, 193 & 196---Reference---Assessment order, nature of---Jurisdiction of Appellate authority---Importer claimed that assessment order in question was final order passed under S.80 of Customs Act, 1969, and not provisional assessment order passed under S. 81 of Customs Act, 1969---Validity---Customs Appellate Tribunal wrongly formed an opinion regarding nature of assessment order in question by treating the same as order passed under S.81 of Customs Act, 1969, which order on the face of it was a final assessment order---Reference to provisional release of subject consignment in terms of S. 81 of Customs Act, 1969, had already been made in such assessment order as observed by concerned authorities---Customs Appellate Tribunal seriously erred in fact and law by holding that appeal before Collector (Appeals) was not maintainable in terms of S. 193 of Customs Act, 1969, against an order presumably passed under S.81 of Customs Act, 1969---Order in question was final assessment order passed in terms of S. 80 of Customs Act, 1969---High Court decided the question in affirmative in favour of importer---Reference was allowed in circumstances.

Sus Motors (Pvt.) Limited, Karachi v. Federation of Pakistan and others 2011 PTD 235 ref.

Khalid Jawaid for Petitioner.

2017 P T D 1207

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

PAKISTAN SOAP MANUFACTURER ASSOCIATION through Chairman

Versus

CUSTOMS APPELLATE TRIBUNAL and 2 others

Special Customs Reference Application No.367 and C.M.A. No.1724 of 2016, decided on 16th September, 2016.

Customs Act (IV of 1969)---

----Ss. 2-A & 196---Reference---Limitation---Unexplained delay---Importer was aggrieved of determination of customs value for the purposes of assessment of goods imported---Reference application was filed before High Court with a delay of more than six months from the date of order passed by Customs Appellate Tribunal---Validity---In case of expiry of limitation provided for filing any appeal or reference, substantial right accrued to succeeding party and the same could not be taken away lightly in a casual manner, unless aggrieved party had come forward with some plausible explanation and evidence explaining delay of each and every day while seeking condonation---Importer failed to give any plausible explanation which could require High Court to condone delay of about six months and fifteen days in the matter---High Court declined to interfere in the matter as the reference was barred by time---Reference was dismissed in circumstances.

Collector of Customs v. Shandev Vankwani PTCL 2016 CL 392 ref.

Naveed Ahmed Khan and Mohabbat Hussain Awan for Applicants.

2017 P T D 1211

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE ZONE-I

Versus

Messrs FAISALABAD OIL REFINERY MILLS (PVT.) LTD.

I.T.R.A. No.60 of 2016, decided on 31st March, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133, 132 & 131---Reference to High Court---Nature of jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---"Questions of law"---Scope---Order, based on concurrent findings of facts which otherwise did not suffer from any perversity or legal infirmity could not be altered by the High Court in its reference jurisdiction under S.133 of the Income Tax Ordinance, 2001---Under the jurisdiction of High Court in terms of S.133 of the Income Tax Ordinance, 2001 only substantial legal questions could be examined, which may arise from an order passed by the Appellate Tribunal whereas questions which required no interpretation of any provision of law, rules or regulations, or its application on undisputed facts of a case did not constitute a question of law to be decided by the High Court under S.133 of the Income Tax Ordinance, 2001.

Collector of Customs, Port Muhammad Bin Qasim, Karachi v. Messrs Kaghan Ghee Mills (Pvt.) Ltd. 2008 SCMR 1538; Collector of Customs and another v. Messrs Fatima Enterprises Ltd and others 2012 SCMR 416; Messrs Gold Trade Impex and another v. Appellate Tribunal of Customs, Excise and Sales Tax and 2 others 2012 PTD 377 and Collector of Customs v. Messrs Qasim International Container Terminal (Pak.) Ltd. 2013 PTD 392 rel.

2017 P T D 1225

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

SINDH REVENUE BOARD through Assistant Commissioner

Versus

Messrs TELEVISION MEDIA NETWORK (PVT.) LTD.

Special S.T.R.A. No.29 and C.M.A. No.881 of 2016, decided on 23rd February, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

----Ss.43, 23 & 63---Non-payment of sales tax on services---Assessment of tax---Imposition of penalty on taxpayer for non-payment of sales tax on services in terms of S.43 of the Sindh Sales Tax on Services Act, 2011---Reference to High Court---Question before the High Court was whether the Appellate Tribunal was justified in deleting penalty imposed on the taxpayer in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011--Validity---Perusal of record revealed that Appellate Tribunal had confirmed penalty on the taxpayer for non-registration and failure to file returns but deleted the penalty imposed in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011 for the reason that since there was no assessment order passed under S.23 of the Sindh Sales Tax on Services, 2011 by which taxpayer's liability could be determined, therefore the said penalty was not justified---High Court observed that in absence of determination of any sales tax liability through an assessment under S.23 of the Sindh Sales Tax on Services Act, 2011, penalty on taxpayer in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011 could not be imposed---Order of Appellate Tribunal, therefore, depicted the correct legal position---Reference was answered, accordingly.

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2017 P T D 1240

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

MUHAMMAD IDREES through Attorney---Petitioner

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others---Respondents

Special Customs Reference Application No.173 of 2016, decided on 16th September, 2016.

Customs Act (IV of 1969)---

----S.196---Reference---Maintainability---Factual controversy---Taxpayer sought rectification of factual error or to remand the matter back to Customs Appellate Tribunal to examine the facts once again---Validity---Such was misconceived and contrary to the scope of S.196 of Customs Act, 1969, which was limited only to the extent by examining questions of law arising from the order passed by Appellate Tribunal in appropriate cases---High Court declined to interfere in the order passed by Customs Appellate Tribunal---Reference was dismissed in circumstances.

2017 P T D 1253

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-II

Versus

Messrs FECTO SUGAR MILLS LTD., Special S.T.R.A. No.142 of 2016, decided on 10th March, 2017.

Sales Tax Act (VII of 1990)---

----Ss.11, 8, 47 & Sched.---Reference---Sales tax on sale/disposal of assets---Limitation---Exemption---Scope---Department impugned order of Appellate Tribunal whereby it was held that the taxpayer was entitled to exemption from sales tax on sales of assets other than those falling under Sixth Schedule of the Sales Tax Act, 1990---Perusal of record revealed that the Commissioner without examining the nature of assets of taxpayer or ascertainment as to whether any input adjustment was claimed by the taxpayer on such assets during the relevant period, charged sales tax on sale of fixed assets on the pretext that disposal of assets attracted the imposition of sales tax under Ss. 11(2) & 11(3) of the Sales Tax Act, 1990---Recovery proceedings against taxpayer, in the present case, were also time-barred for the reason that assets were sold during the financial year 2008-2009 whereas under S.11(5) of the Sales Tax Act, 1990, limitation period was five years from the relevant date, which period of limitation in the present case expired on 30.6.2013---No illegality existed in the order of the Appellate Tribunal---Reference was answered, accordingly.

2017 P T D 1263

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-III

Versus

ALLIANZ EFU HEALTH INSURANCE CO. LTD.

I.T.R.As. Nos.42 of 2013, 192 and 94 of 2012 and C.M.A. No.153 of 2013, decided on 30th August, 2016.

Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference---Proposed question---New facts---Question proposed did not arise from the orders passed by Appellate Tribunal Inland Revenue, as there was no discussion either in the order of the Tribunal or the orders passed by authorities below to the effect whether taxpayer was engaged in the business of life insurance or general insurance---Effect---Order passed by Appellate Tribunal Inland Revenue was based on decisions of High Court on the subject controversy and did not require any interference---Reference was dismissed in circumstances.

Commissioner (legal) Inland Revenue v. Messrs EFU General Insurance Ltd. 2011 PTD 2042 rel.

Amjad Javed Hashmi for Applicant.

Arshad Siraj for Respondent.

2017 P T D 1266

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs PAKISTAN MOTOR CAR CO. (PVT.) LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX

I.T.R. No.227 of 2003, decided on 7th September, 2016.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 17(2)(a), cls. (79-A), (79-B) & 133---Reference---Interest on securities---Judgment of High Court---Effect---Dispute was with regard to exemption claimed on WAPDA Bonds---Validity---Question proposed by taxpayer company was decided earlier by Division Bench of High Court, in favour of taxpayer and against the authorities---Though controversy in judgment passed by Division Bench of High Court was in respect of Second issue of WAPDA Bonds, whereas the claim raised by taxpayer was in respect of Third issue of WAPDA Bonds---Ratio of case decided earlier by Division Bench of High Court was fully applicable to the facts, therefore, proposed question was answered in negative, in favour of taxpayer and against the authorities---Reference was allowed in circumstances.

Habib Bank Ltd. v. Commissioner of Income Tax Karachi 2009 PTD 443 fol.

Ammar Athar Saeed for Applicant.

Jawaid Farooqui for Respondent.

2017 P T D 1278

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

ADDITIONAL DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR, REGIONAL OFFICE, KARACHI

Versus

MEMBER (TECHNICAL), CUSTOMS, FEDERATION EXCISE AND SALES TAX and another

Special Customs Reference Applications Nos. 572 and 573 of 2011, decided on 24th August, 2016.

(a) Customs Act (IV of 1969)---

----Ss. 2(s), 156(1)(89), 157(1)(2) & 196---Reference---Smuggled goods---Proof---High Speed Diesel was seized from respondent at National Highway within local limits of District "S" and the same was alleged to be smuggled from foreign country but Customs Appellate Tribunal set aside the order passed by authorities---Validity---High Speed Diesel was seized at National Highway within local limits of district "S", whereas it was not sent for laboratory test to ascertain its flashpoint and other properties which were different in case of local oil and smuggled oil, nor any effort was made to ascertain origin of seized oil---Respondent produced purchase invoice in respect of subject oil which was being transported from one filling station to other and such fact was not disputed by seizing authority---High Court declined to interfere in order passed by Customs Appellate Tribunal as authorities did not raise any question of law, arising from order passed by Customs Appellate Tribunal, nor such questions had given rise to any legal controversy which could be resolved by High Court under its Reference jurisdiction in terms of S. 196 of Customs Act, 1969---Reference was dismissed in circumstances.

(b) Customs Act (IV of 1969)---

----S. 196---Reference---Jurisdiction of High Court---Scope---While exercising reference jurisdiction under S. 196 of Customs Act, 1969, High Court has to examine and decide only such questions of law, which may arise from the order passed by Customs Appellate Tribunal and cannot decide questions of facts unless such findings on facts is found to be perverse or contrary to record, as Appellate Tribunal is final fact finding forum as provided under law.

Muhammad Khalil Dogar for Applicant.

Aqeel Ahmed for Respondents.

2017 P T D 1297

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

The COLLECTOR OF CUSTOMS, MODEL CUSTOM COLLECTORATE, HYDERABAD

Versus

Messrs BYCO PETROLEUM (PVT.) LTD. and 3 others

S.C.R.A. No.494 and C.M.As. Nos. 2891, 2839 and 2840 of 2016, decided on 30th August, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 187 & 196---Reference---Smuggled goods---Proof---High Speed Diesel recovered from respondent was alleged to be smuggled from foreign country but Customs Appellate Tribunal set aside order-in-original---Validity---Receipt of Goods Transfer Note produced by respondent to adjudication authority was duly verified from Petroleum Company and the same was found to be genuine, whereas oil and trucks were intercepted within the local city limits---High Court declined to interfere in order passed by Customs Appellate Tribunal as there was no error or illegality in the same---Authorities did not raise any question of law, arising from order passed by Customs Appellate Tribunal, which was based on findings of fact and there was no misreading or non-reading of evidence---Reference was dismissed in circumstances.

Deputy Collector of Customs and Sales Tax and Central Excise (Adjudication) Quetta at Hyderabad v. Nak Muhammad and others Civil Appeal No.1585 of 2006; Central Board of Revenue and others v. Messrs Al-Hajj Enterprises and another Civil Petition No.869 of 2006; Collector Customs Sales Tax and Central; Excise Qeutta v. Naimatullah 2003 PTD 2118; PLD 1970 SC 282; 1956 Cal. 553 and Collector of Customs, Customs House Peshawar and others v. Zarshad and others 2006 SCMR 973 ref.

2017 P T D 1407

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

ALI MUHAMMAD and another

Versus

FAIZULLAH and another

Suit No.1569 of 2000, decided on 16th December, 2016.

Partnership Act (IX of 1932)---

----S. 42---Suit for dissolution of partnership, rendition of accounts and injunction---Partnership---Proof---Predecessor-in-interest of parties were partners in business and plaintiffs claimed that after death of their father they had become partner in the business---Validity--- Plaintiffs failed to bring on record income tax return filed by them showing business as partnership concern in which they were also taxpayers---Survey Form filed by plaintiffs reflected that it had same National Tax Number of the firm, as well as that of plaintiffs and defendants and the same was not conceivable---Survey Form ceased to have any evidentiary value being contradictory and ambiguous in nature--- In a partnership business, the firm was required to file its own return, whereas partners to file their independent returns as well---Plaintiff failed to bring on record any material to show that business continued with defendants in the form of partnership including any details of Bank accounts, balance sheet, profit and loss account or even settlement of accounts prior to date from which they claimed their share of profit---Suit was dismissed in circumstances.

Punjab and Sindh Bank, Ltd. v. Kishen Singh Ghulab Singh and others AIR 1935 Lah. 350; Tulsiram Sanganeria and another v. Smt. Anni Bai and others AIR 1963 ORISSA 11; Raghumull v. Lunchmondas AIR 1917 Cal. 52; Mian Pir Muhammad and another v. Faqir Muhammad through L.Rs and others PLD 2007 SC 302; Fazle Ghaffor v. Chairman Tribunal Land Disputers, DIR, Swat at Chitral at Mardan and 6 others 1993 SCMR 1073 and Zakaullah Khan v. Muhammad Aslam and another 1991 SCMR 2126 distinguished.

Javed Rafat Khan v. Messrs Shabbir Tiles and Ceramics Limited through Representative PLD 2005 Kar. 1; Commissioner of Income Tax, Madhya Pradesh, Nagpur and Bhandara v. Seth Govindram Sugar Mills AIR 1966 SC 24; Mt. Sughra v. Babu AIR 1952 All. 506 and Narayanan Chettiar v. M.S.M. Umayal Achi (MANU/TN/0189/1959) rel.

Shehanshah Hussain along with S.Arshad Ali for Plaintiffs.

H.A. Rehmani along with Ms. Naheed Akhtar for Defendants.

2017 P T D 1441

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, LTU

Versus

Messrs N.P. SPINNING MILLS LTD.

I.T.R.A. No.111 of 2012, decided on 30th March, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.182(1), 137 & 133---Offences and penalties under the Income Tax Ordinance, 2001---Penalty for failure to furnish a return or statement---"Tax payable" meaning of---Explanation regarding meaning of expression "tax payable", inserted into S. 182(1) of the Income Tax Ordinance, 2001 could not have retrospective effect---Scope---Question before the High Court was whether explanation inserted in S. 182(1) by Finance Act, 2011, relating to meaning of the term "tax payable" was only applicable from tax year 2012---Validity---Per explanation inserted through the Finance Act, 2011 expression "tax payable" had been redefined in such a manner that it changed the purport of the said expression to the disadvantage of the taxpayer and the same could not be given retrospective effect, and would therefore apply to the tax year 2012 onwards---Reference was answered, accordingly.

Commissioner Inland Revenue, Zone-III v. Messrs General Tyre and Rubber Company of Pakistan Ltd., Karachi 2013 PTD 387; Commissioner Inland Revenue Legal Division, RTO, Karachi v. Messrs Munir Associates I.T.R.A. No.38 of 2010, dated 1.10.2010 and Kingcrete Builders through General Manager v. C.B.R. through Chairman CBR, Islamabad (2013) 108 Tax 363 (H.C. Isl) rel.

Altamash Faisal Arab for Appellant.

2017 P T D 1497

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

ORI-TECH-OILS (PVT.) LTD. through CEO

Versus

MANAGER REGISTRATION, CENTRAL REGISTRATION OFFICE and 3 others

C.P. No.D-2358 of 2015, decided on 8th May, 2017.

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

----Ss. 2(17), 2(16), 2(41) & 15---Sales Tax Rules, 2006, R. 5---Constitution of Pakistan, Art. 199---Constitutional petition---Application for registration---Definition of manufacturer / producer for purpose(s) of Sales Tax Registration and taxable supplies---Toll manufacturing arrangement---Scope---Petitioner taxpayer had applied for sales tax registration as a manufacturer / importer and wholesaler but it was registered only as an importer / wholesaler and request for registration as manufacturer was turned down by the Sales Tax Authorities on the ground that neither machinery was found at the declared premises of the petitioner, nor manufacturing of goods in process was found there---Validity--Record revealed that petitioner was engaged in the manufacturing of its products through a toll manufacturing arrangement and had entered into an agreement in such regard and furthermore, the petitioner exclusively for the manufacture of its own products, imported raw materials which, together with packing materials, it provided to the vendor to manufacture its products for consideration as mentioned in the agreement---Under S. 2(17) of the Sales Tax Act, 1990, a manufacturer was a person who was engaged in the manufacture of goods---As per definition of the word manufacture in the Sales Tax Act, 1990, there existed no provision in the Sales Tax Act, 1990 which could exclude a person who did not possess its own facility of manufacturing and got his products manufactured from toll manufacturing from claiming himself / itself as a manufacturer---Petitioner also had proprietary rights over its brand name and fixed the retail price and sold the finished products, therefore, in view of the statutory definitions in their legal and usual context, it was clear that the petitioner fell within meaning of "manufacturer" as provided in S. 2(17) of the Sales Tax Act, 1990 and was making "taxable supply" as per S. 2(41) of the Sales Tax Act , 1990 and should be registered as such---Constitutional petition was allowed, accordingly.

Chairman, Federal Board of Revenue, Islamabad v. Messrs Al-Technique Corporation of Pakistan Ltd. and others PLD 2017 SC 99 and Messrs Amie Investment (Pvt.) Ltd. v. Additional Collector-II and 4 others 2006 PTD 1459 rel.

(b) Interpretation of statutes---

---Taxation law---Definition clause of the statute---Construction---Scope---Definition clause provided a foundational basis while construing provisions of law and reference to ordinary dictionary meaning of a word was to be avoided in presence of such definition clause---Definition given in a statute should be so construed as not to be repugnant to the context and should not defeat the purpose of an enactment while keeping in view scheme of the statute and remedy intended by it---Taxation laws were not be to extended by implication beyond the clear import of the language used in the same, and to hold otherwise would violate the principle that taxation laws were to be construed strictly and in case of any ambiguity or doubt, the same should be resolved in favour of the citizen and against revenue.

Chairman, Federal Board of Revenue, Islamabad v. Messrs Al-Technique Corporation of Pakistan Ltd. and others PLD 2017 SC 99 rel.

Emad-ul-Hassan for Petitioner.

Muhammad Aqeel Qureshi for Respondents.

2017 P T D 1585

[Sindh High Court]

Before Munib Akhtar and Sadiq Hussain Bhatti, JJ

STANDARD CHARTERED BANK (PAKISTAN) LTD. through Senior Manager (Taxation)

Versus

PAKISTAN through Secretary Finance (Revenue Division) and 3 others

C.P. No.D-4123 of 2013 and I.T.R.A. No.340 of 2010, decided on 29th August, 2016.

Income Tax Ordinance (XLIX of 2001)---

---Ss.24, 97 & 122(5-A)---"Goodwill"---Intangible assets---Amalgamation of Banking companies---Taxpayer assailed show cause notice issued under S.122(5-A) of Income Tax Ordinance, 2001---Validity---Transferor Banking company was 'generator/creator' of goodwill and would have been entitled to amortize the same and entitled to benefit of deductions allowable under S.24 of Income Tax Ordinance,2001 and as provided in S.97 (2)(c) of Income Tax Ordinance,2001 the benefit thereof passed on to the transferee company, the petitioner---Even if the authorities were correct in ascertaining that S.97 of Income Tax Ordinance, 2001 applied to amalgamation situation, that would not materially alter the position and bring it in its own favour---Taxpayer was required under S.24(1)(a) of Income Tax Ordinance, 2001, wholly or partly 'use' intangible in tax year to derive income from business chargeable to tax---Intangible was 'available for use' on any day (including a non-working day) in the tax year was to be treated as having been used on that day---"Goodwill" was inextricably linked to, and based on, transferor Bank's banking business which was acquired by taxpayer as a whole and a going concern and that business was continued and operated by the latter, it was clear that the goodwill was not merely 'available for use' during tax year concerned but was so in fact used---To operate business was, in effect, to use goodwill---High Court restrained the authorities from taking any proceedings on the basis or in terms of first part of the show cause notice which was set aside and quashed---Constitutional petition was allowed accordingly.

Dr. M.B. Ankalsaria v. Commissioner of Wealth Tax Karachi 1992 SCMR 1755; Commissioners of Inland Revenue v. Muller and Co.'s Margarine Ltd. (1901) AC 217 and Commissioner of Income Tax Kolkota v. Smifs Securities Ltd. (2012) 348 ITR 302 ref.

Dr. M. Farogh Naseem for the Taxpayer.

M. Sarfraz Ali Metlo for Respondent Department in the Constitutional Petition.

Kafeel Ahmed Abbasi, for the Respondent Department in the Tax Reference, both along with.

Dr. Najeeb Ahmed, Additional Commissioner IR, Range B, Zone II, LTU, Karachi.

Asim Mansoor Khan, DAG.

Ashfaq Rafiq Janjua, Standing Counsel.

2017 P T D 1683

[Sindh]

Before Sajjad Ali Shah, C.J. and Zulfiqar Ahmad Khan, JJ

THAL LTD. through duly Authorized Attorney and others

Versus

FEDERATION OF PAKISTAN and others

Constitution Petitions Nos.D-6067, D-6615, D-6068 and D-6069 of 2016, decided on 8th February, 2017.

Customs Act (IV of 1969)---

----S. 18(1)(a)---S.R.O. No. 558(I)/2004, dated 1-7-2004---SRO No.585(I)/2012, dated 1-6-2012---Exemption from customs duty---Petitioners were importers of jute fiber and they were aggrieved of imposing customs duty on their goods---Plea raised by petitioners was that import of jute fiber was exempted from customs duty---Validity---Exporting country was a SAARC country as well as LDC, imports of jute and other textile bast fibers or raw or retted therefrom enjoyed 100% concession from payment of customs duties in accordance with Notifications S.R.O. No.558(I)/2004, dated 1-7-2004 read with S.R.O. No.585(I) /2012, dated 1-6-2012---No customs duty could be charged from petitioners importing goods falling under PCT headings 5303.1000, 5303.1010, 5303.1020 and 5303.1090 from the exporting country (being SAARC and LDC) till exemption granting S.R.O. No.585(I)/2012 dated 1-6-2912 was in field---Constitutional petition was allowed in circumstances.

Ali Almani and Samiullah Khan for Petitioners (in C.Ps. Nos. D-6067, 6089 and 6969/2016).

Muhammad Rehan-Attorney of Petitioner (in C.P. No. D-6615/ 2016 in person).

Mrs. Fozia Rasheed and Sohail Muzaffar for Respondent No.3.

Kafeel Ahmed Abbasi Advocate for Respondent No.6.

Ghulam Shabbir Baloch, Standing Counsel.

2017 P T D 1803

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

CONTINENTAL BISCUITS LTD.

Versus

FEDERATION OF PAKISTAN through Secretary Defence, Ministry of Defence, Islamabad and 3 others

C.P. No.D-6377 of 2014, decided on 23rd February, 2017.

(a) Constitution of Pakistan---

---Arts. 77, 162 & 163---Levy of tax and fee etc.---Principle---Fiscal and charging statutes are to be strictly construed---No government or authority can compulsorily extract money from any class of persons either in form of tax, fee, charge or levy, unless specifically authorized under law.

(b) Interpretation of statutes---

---Delegated legislation---Levy of fee---Scope---When a parent statute (the governing law) does not empower levy of fee, then levy of such fee through delegated legislation in shape of by-laws is not permissible.

(c) Words and phrases---

---"Fee" and "Tax"---Distinction---"Tax" is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered whereas, "fee" may be generally defined to be a charge for a special service rendered to individuals by some government agency or a local council under principle of quid pro quo.

Collector of Customs v. Sheikh Spinning Mills 1999 SCMR 1402; McCarthy and Stone (Developments) Ltd. v. London Borough of Richmond upon Thames 1994 SCMR 1393 and Lucky Cement Factory v. Government of N.W.F.P. 2013 SCMR 1511 rel.

(d) Cantonments Act (II of 1924)---

---Ss. 282, 284 & 286-B---Advertisement fee, charging of---Delegation of powers---Principle of Quid pro quo---Applicability---Petitioner company was aggrieved of demand notice issued by a private company for recovery of advertisement fee on behalf of Cantonment Board with regard to signboards and advertisements affixed in private shops---Validity---Cantonment Board was not providing any service to petitioner for displaying and advertising its products on billboards/signboards of shops on its private vendors/retailer shops---Such was a private arrangement between petitioner and shopkeepers---Petitioner used billboards/signboards of shops to advertise its products at the expense of petitioner---High Court declared illegal, money demanded by private company under the name of 'advertisement fee' without providing any services in respect thereof, on principle of quid pro quo---Cantonment Board could not delegate power to a private person and could only delegate the same to its own officers---Delegation of sovereign right to levy or collect any tax by State to private person was otherwise contrary to Constitutional mandate---Such delegation of power to private company to collect subject levy was unlawful---High Court quashed proceedings pending before Magistrate for recovery of advertisement fee---Constitutional petition was allowed in circumstances.

Hyderabad Cantonment Board v. Raj Kumar 2015 SMCR 1385; Excide Pakistan Ltd. v. Cantonment Board 2012 CLC 1124; Treet Corporation Ltd. v. Government of Pakistan PLD 1992 Kar, 427; Pioneer Traders v. Province of Sindh PLD 2006 Kar. 648; Haji Hashmatullah and others v. Karachi Municipal Corporation and others PLD 1971 Kar. 514; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Government of North-West Frontier Province v. Rahimullah 1992 SCMR 750; All Pakistan Textile Mills Association v. Province of Sindh 2004 YLR 192; Dubai Islamic Bank Pakistan Ltd. v. Federation of Pakistan 2014 MLD 957; Khawaja Muhammad Asghar v. Government of Pakistan through Secretary, Ministry of Defence, Islamabad and 3 others 2012 MLD 415; Cantonment Executive Officer and another v. Burshane (Pakistan) Ltd. and others 1986 SCMR 1308; Rajkumar v. Hyderabad Cantonment Board 2006 MLD 549 and Munawar Younus and others v. Karachi Cantonment Board 2011 MLD 1006 ref.

Atif Chaudhary for Petitioner.

Mir Hussain, Standing Counsel for Respondent No.1.

Rafiq Ahmed for Respondent No.2.

2017 P T D 1832

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Nazar Akbar, JJ

COMMISSIONER INLAND REVENUE, ZONE-II

Versus

SIEMENS PAKISTAN ENGINEERING, COMPANY LTD., KARACHI

I.T.R.As. Nos. 70, 71 and C.M.A. No.135 of 2016, decided on 2nd May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001---Maintainability / competence of reference where questions of law contained therein had already been decided by the Superior Courts---Scope---Scope of filing a reference application in terms of S. 133 of the Income Tax Ordinance, 2001 could not be equated with filing an appeal or revision and its scope was restricted only to extent of referring question(s) of law arising form an order passed by Appellate Tribunal, for the opinion of the High Court---High Court observed that filing of frivolous references by Department needed to be addressed so that the High Court as well as the litigants may not be unnecessarily burdened with such cases where question of law already stood decided by the Superior Courts.

2000 PTD 3741 and 2006 PTD 2256 ref.

Asif Ali for Applicant.

2017 P T D 1839

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Nazar Akbar, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, REGIONAL TAX OFFICE, SUKKUR

Versus

Messrs RANIPUR CNG STATION, RANIPUR

I.T.R.A. No.224 of 2015 and C.M.A. No.223 of 2016, decided on 11th May, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 111, 120 & 133---Constitution of Pakistan, Art. 10A---General Clauses Act (X of 1897), S. 24-A---Unexplained income or assets---Addition to income/assessment of taxpayer under S. 111 of the Income Tax Ordinance, 2001---Show-cause notice to taxpayer for such addition was mandatory---Scope---Question before the High Court was whether for invocation of an addition to income of the taxpayer to be made under S. 111 of the Income Tax Ordinance, 2001, show-cause notice needed to be issued---Validity---Section 111 of the Income Tax Ordinance, 2001 made it clear that addition to income under S. 111 of the Income Tax Ordinance, 2001 could be made only if an opportunity was provided to the taxpayer through specific notice whereby the taxpayer was confronted with any of the eventualities visualized in the said section, and if the taxpayer failed to offer any explanation about the nature and source of the amount credited or investment made, or about money or valuable articles or funds from which expenditure was made, only then such addition could be made in the income of the taxpayer---High Court observed that in view of Art. 10A of the Constitution and S. 24-A of the General Clauses Act, 1897, every public functionary, including taxation authorities were required to provide fair opportunity of being heard to any person before taking adverse action or passing any order of assessment or creating additional liability of tax, by confronting such a person with the proposed action in writing, as fair trial and right of hearing were regarded as cardinal principles of natural justice, which had to be read into every statute, even if the same had not been provided specifically therein---Reference was answered, accordingly.

(b) Natural justice, principles of---

----Scope---Right to fair trial and right/opportunity of hearing, were cardinal principles of natural justice which had to be read into every statute even if the same were not specifically provided therein.

2017 P T D 1852

[Sindh High Court]

Before Mohammad Shafi Siddiqui, J

CHINA HARBOUR ENGINEERING COMPANY LTD. through Liu Ce

Versus

PAKISTAN through Secretary Revenue Division and 3 others

Suit No.991 and C.M.As. Nos.9048, 9819 to 9822 of 2015, decided on 24th July, 2015.

Income Tax Ordinance (XLIX of 2001)----

----Ss. 121, 124(4), 129, 132 & 137(2)---Specific Relief Act (I of 1877), Ss. 39, 42 & 54---Suit for cancellation, declaration and permanent injunction---Best judgment assessment---Assessment giving effect to an order---Disposal of appeal by the Appellate Tribunal---Due date for payment of tax---Commissioner Inland Revenue (Appeals) had been directed to decide the plaintiff's appeal within certain period and till final disposal of the plaintiff's appeal, the defendants had been restrained from taking any coercive action against the plaintiff---Tabulation made by the plaintiff, wherein certain heads of account had been either deleted or sent for rectification under S. 221 of Income Tax Ordnance, 2001, was not disputed---In terms of S. 124 (4) of the Income Tax Ordinance, 2001, where direct relief was provided in order under Ss. 129 & 132 of the Ordinance, the Commissioner would issue Appeal Effect Order within two months of the date the Commissioner was served with the order---In pursuance of S. 137 (2) of Income Tax Ordinance, 2001, where any tax was payable under assessment order or amended assessment order or any other order issued by the Commissioner under the Income Tax Ordinance, 2001, a notice would be served upon the taxpayer in the prescribed form specifying the amount payable and thereupon the sum so specified would be paid within 15 days from the date of the service of the notice---Original demand notice had been issued prior to amended assessment; hence, the same was not sufficient compliance of issuing notice of demand in pursuance of amended assessment to provide opportunity of 15 days specifying the total amount in pursuance of amended assessment---Compliance to Ss. 124 (4) & 137(2) of Income Tax Ordinance, 2001 was necessary---Appeal Effect Order was an amended assessment tabulation and the same had to be given effect like any other amended decree---High Court directed the defendants to deposit the amount, which had been recovered by them from the Bank account of the plaintiff, in the Court till further orders.

B.P. Industries (Pvt.) Ltd. v. Secretary Revenue Division 2008 PTD 1162 ref.

Dr. Mohammad Farogh Naseem for Plaintiff.

2017 P T D 1981

[Sindh High Court]

Before Muhammad Faisal Kamal Alam, J

AL-RIAZ (PVT.) LTD. through Director and another

Versus

MUHAMMAD ISMAIL and 3 others

Suit No.539 of 2000, decided on 14th July, 2017.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 93, 121 & 162---Civil Procedure Code (V of 1908), S. 9---Attachment of property---Misuse of authority---Civil Court, jurisdiction of---Plaintiff company was owner of the property which was attached by income tax authorities---Plea raised by authorities was that jurisdiction of Civil Court was barred under S. 162 of Income Tax Ordinance, 1979---Validity---Jurisdiction of Civil Court as envisaged in S. 9, C.P.C. had to be construed strictly and if it was found that government officials or authorities mentioned under particular statute, which was invoking statutory bar, had not acted fairly, justly and reasonably, then such bar could not be pressed into service---Procedure mentioned in S. 93 of Income Tax Ordinance, 1979, was never adhered to by income tax officials while passing attachment order in respect of suit property---Attachment order in respect of suit property was without any legal justification and was liable to be set at naught---High Court declared that suit property was owned by plaintiff company and income tax authorities illegally, wrongfully and by excessive use of power and authority had attached suit property---High Court directed government to initiate disciplinary proceedings against income tax officials forthwith and all officials were liable to pay damages to plaintiff company---Suit was decreed in circumstances.

Asia Petroleum Limited through Kh. Izz Hamid, Managing Director v. Federation of Pakistan through Secretary Finance, Ministry of Finance, Government of Pakistan, Pak Secretariat, Islamabad and 3 others 1999 PTD 1313; Syed Raunaq Raza v. Province of Sindh through The Senior Member, Board of Revenue, Government of Sindh, Hyderabad and 2 others 1994 CLC 317; Niaz and others v. Abdul Sattar and others PLD 2006 SC 432; Abdul Majeed Khan v. Tawseen Abdul Haleem and others PLD 2012 SC 80; Basharat Ali v. Director, Excise and Taxation, Lahore and another 1997 SCMR 1543; Abbasia Cooperative Bank [Now Punjab Provincial Cooperative Bank Ltd.] through Manager and another v. Hakeem Hafiz Muhammad Ghaus and 5 others PLD 1997 SC 3; Federation of Pakistan and others v. Shaukat Ali Mian and others PLD 1999 SC 1026; Independent Newspapers Corporation [Pvt.] Ltd. and another v. Chairman, Fourth Wage Board and Implementation Tribunal For Newspaper Employees, Government of Pakistan, Islamabad and 2 others 1993 SCMR 1533 and Karachi Transport Corporation v. Muhammad Hanif 2009 SCMR 1005 ref.

Arif Khan for Plaintiff No.1.

Masood Hussain Khan, Assistant Attorney General for Defendant No.4.

Nemo for Plaintiff No.2 and Defendants Nos.1 to 3.

Date of hearing: 30th May, 2017.

Case law cited by the Plaintiff's counsel

1. 1999 PTD Page-1313

(Asia Petroleum Limited through Kh. Izz Hamid, Managing Director v. Federation of Pakistan through Secretary Finance, Ministry of Finance, Government of Pakistan, Pak Secretariat, Islamabad and 3 others)

1. 1994 CLC Page-317 [Karachi]

(Syed Raunaq Raza v. Province of Sindh through The Senior Member, Board of Revenue, Government of Sindh, Hyderabad and 2 others)

1. PLD 2006 Supreme Court Page-432

(Niaz and others v. Abdul Sattar and others)

1. PLD 2012 Supreme Court Page-80

(Abdul Majeed Khan v. Tawseen Abdul Haleem and others)

1. 1997 SCMR Page-1543

(Basharat Ali v. Director, Excise and Taxation, Lahore and another)

Case-law relied upon by Defendants' counsel

Other Precedents:

(1). PLD 1997 SC Page-03

(Abbasia Cooperative Bank [Now Punjab Provincial Cooperative Bank Ltd.] through Manager and another v. Hakeem Hafiz Muhammad Ghaus and 5 others)

(2). PLD 1999 Supreme Court Page-1026

(Federation of Pakistan and others v. Shaukat Ali Mian and others)

(3). 1993 SCMR 1533 [Supreme Court of Pakistan]

(Independent Newspapers Corporation [Pvt.] Ltd. and another v. Chairman, Fourth Wage Board and Implementation Tribunal For Newspaper Employees, Government of Pakistan, Islamabad and 2 others) [Independent Newspapers Case]

(4). 2009 SCMR Page-1005

(Karachi Transport Corporation v. Muhammad Hanif)

Law under discussion:

(1) Income Tax Ordinance, 1979.

(2) The Code of Civil Procedure, 1908.

(3) Qanoon-e-Shahadat Order, 1984.

2017 P T D 2029

[Sindh High Court]

Before Muhammad Ali Mazhar and Adnan-ul-Karim Memon, JJ

S. NASIM AHMED SHAH and 115 others

Versus

STATE BANK OF PAKISTAN through Governor and another

C.P. No.D-440 of 2012, decided on 13th July, 2017.

(a) Interpretation of statues---

----Hardship or inconvenience caused to a citizen by a provision of law was not a ground to be considered by the Courts in interpreting and determining the legality of a provision of a statute; and if a subject fell within the ambit of statute, then irrespective of hardships which such subject/person may face, the provision of the statute was to be given effect and a citizen could not be absolved from his liability on sympathetic or humanitarian grounds.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 16 & 2 (c)(i)---FBR Circular No. 15 of 1997 dated 06.11.1997---"Salary" liable to be taxed under the Income Tax Ordinance, 1979---Amounts received by retiring employees under a voluntary separation scheme/golden handshake, as "salary" under the Income Tax Ordinance, 1979---Petitioners, inter alia, sought reimbursement of the income tax deductions made on amounts derived from their availing of golden handshake schemes from the State Bank of Pakistan---Validity---By virtue of golden handshake / voluntary separation scheme, the terms and conditions of retiring employees were modified which resulted in termination of their employment, and once it was decided that such payments made to retiring employees were "salaries" as defined in S.16 of the Income Tax Ordinance, 1979, the natural consequence of the same was that such payments would be liable to be taxed---Language used in Ss.16(2)(a)(iii) & 2(c)(i) of the Income Tax Ordinance, 1979, even in absence of words "payments" or "profits received on retirement or termination on account of voluntary separation", without any doubt brought such payments within ambit of definition of salary in the Income Tax Ordinance, 1979 , chargeable to tax.

(c) Constitution of Pakistan---

----Art.189---Decision of Supreme Court binding on other courts---High Court could not revisit, explicate or expound the law on an issue decided by the Supreme Court, which had a binding effect on the High Court.

Malik Muhammad Inam and others v. Federation of Pakistan 2006 SCMR 1670 foll.

Hussain Badshah and another v. Akhtar Zaman and others 2006 SCMR 1163 ref.

Mst. Nawab Bibi and another v. Chairman Allotment Committee and others PLD 1987 SC 145 distinguished.

PTCL 1997 Statute 1942 rel.

(d) Constitution of Pakistan---

----Arts. 189 & 201---Decisions of Supreme Court and High Court binding on subordinate courts---Doctrine of "precedent", "stare decisis" and "ratio decidendi" contained in Arts. 189 & 201 of the Constitution---Scope---Articles 189 & 201 of the Constitution recognized and adopted the doctrine of precedent and also seemed to have accorded recognition to one of existing realities of life, namely that judges made and changed the law---Under Articles 189 & 201 of the Constitution only such decision was binding which decided a question of law or was based upon a principle of law, or enunciated a principle of law---Doctrine of binding precedent had the merit of promoting certainty and consistency in judicial decisions and enabled organic development of law, besides providing assurance to an individual as to the consequence of transactions forming part of his daily affairs and therefore, there existed a need for a clear and consistent enunciation of legal principles in the decisions of a court---Doctrine of "stare decisis" meant to abide by or adhere to decided cases and it was a doctrine under which a deliberate or solemn decision of court was made after argument on question of law fairly arising in the case and necessary to its determination, which became an authority or binding precedent in the same court or in other courts of equal or lower rank in subsequent cases where such point was again in controversy---Doctrine of "stare decisis" had been given Constitutional recognition in Arts. 189 & 201 of the Constitution---Expression "ratio decidendi" was the ground or reason of a decision, the point in a case which determined the judgment---Decision of a Court generally decided the "ratio decidendi" or "rule of law" for which it was the authority, and what it decided between the parties included far more---Law provided that once a case had been heard and all appeals had been taken (or the time for appeal had expired) all parties to a dispute and their successors were bound by the Court's findings on the issues raised between them and on questions of fact and law necessary to the decision of such issues---In a controversy raising a dispute inter parties, things adjudged were conclusion between parties both on questions of law and fact but as to what the Court decided generally was the "ratio decidendi" or "rule of law" for which the same was an authority---Ratio decidendi was applicable to subsequent cases presenting the same problem between third parties not involved in the original case.

Union of India v. Raghubir Singh (1989) 2 SCC 754 = 1989 SC 1933; Constitutional Limitations and Judicial Review of Public Actions, Volume 1 Justice (R) Fazal Karim. Page 515 rel.

(e) "Per incuriam"---

----Meaning, concept, connotation and terminology, elaborated.

Black's Law Dictionary, Ninth Edition rel.

M.M. Aqil Awan for Petitioners.

Rashid Anwer for Respondents.

Sheikh Liaquat Hussain, Standing Counsel.

2017 P T D 2123

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Nazar Akbar, JJ

The COLLECTOR, MODEL CUSTOMS COLLECTORATE and 2 others

Versus

Messrs NAVEENA INDUSTRIES LTD. and others

High Court Appeals Nos. 263 to 288, 304 to 306, 321, 322, 338, 339 of 2016, 82 to 85, 95 and 96 of 2015, decided on 3rd August, 2017.

(a) Sindh Civil Courts Ordinance (II of 1962)---

----S. 7 [as amended by Sindh Civil Courts (Amendment) Act (III of 2010)]--- Civil Procedure Code (V of 1908), S.9--- Suit before High Court--- Original Civil jurisdiction of High Court--- Scope--- Single Judge of High Court while trying a civil suit on its original side exercises same power as of a civil court as vested in District Judge in terms of S.7 of Sindh Civil Courts Ordinance, 1962--- Restrictions and qualification imposed in terms of S.9 of Civil Procedure Code, 1908, are equally applicable in respect of a suit before High Court.

(b) Customs Act (IV of 1969)---

----Ss. 80 & 217--- Goods declaration--- Civil suit--- Maintainability--- Principle--- When there is no mala fide on the part of Customs Authorities nor there is any jurisdictional defect in decision/orders passed under S.80 of Customs Act, 1969, there is no justification to abandon and by-pass statutory forums and no suit can be filed before High Court while exercising jurisdiction and powers of a civil court.

(c) Customs Act (IV of 1969)---

----Ss. 80, 193, 194, 194 & 217--- Sales Tax Act (VII of 1990), S.51--- Federal Excise Act (VII of 2005) S. 41---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.29--- Sindh Civil Courts Ordinance (II of 1962), S. 7 [as amended by Sindh Civil Courts (Amendment) Act (III of 2010)]--- Civil Procedure Code (V of 1908), S. 9--- Fiscal matter--- Civil suit--- Maintainability--- Taxpayers assailed orders passed by authorities, before High Court in original civil jurisdiction--- Single Judge of High Court allowed the civil suit and passed judgment and decree in favour of taxpayers--- Validity--- Legislative intent as manifested under various provisions of Customs Act, 1969, for the purposes of determination and assessment of duty and taxes, providing for specialized statutory forums of appeal and Reference to High Court on a point of law, which could be finally agitated and decided by Supreme Court under Art. 185 of the Constitution, as well as the express bar of civil suit provided in terms of S. 217 of Customs Act, 1969, read with S. 9, C.P.C. led to the only conclusion that any dispute in relation of determination and assessment liability of duty and taxes and the orders passed by Customs authorities under Customs Act, 1969, could not be made subject of a decision by a civil court established and constituted in terms of Sindh Civil Courts Ordinance, 1962--- Civil court constituted under Sindh Civil Courts Ordinance, 1962, as amended by Sindh Civil Courts (Amendment) Ordinance, 2002, did not confer any jurisdiction under the Constitution or any other law to entertain or decide a dispute relating to determination and assessment of duty and taxes under special taxation laws including Customs Act, 1969, Sales Tax Act, 1990, Income Tax Ordinance, 2001, Federal Excise Act, 2005 as well as under Sindh Sales Tax on Services Act, 2011, therefore, could not be termed as a civil court of ultimate jurisdiction for the purposes of deciding any controversy arising or relatable to the taxing statutes--- Assumption of jurisdiction by civil court including High Court, was without lawful authority--- Division Bench of High Court set aside judgment and decree passed by Single Judge of High Court and allowed the High Court appeal.

Case law referred.

Ms. Masooda Siraj, Zafar Hussain and Tariq Aziz for Appellants (in H.C.As. No.276 to 280, 288, 304 to 306, 338 and 339 of 2016).

Kashif Nazir for Appellant (in H.C.As. Nos.321 and 322 of 2016).

Mirza Nadeem Taqi, for Appellants (in H.C.A. No.263/2016).

Rashid Anwar for Respondents (in H.C.As. Nos.263, 281 to 288 of 2016).

Khalid Jawaid Khan for Respondents (in H.C.A. No.321/2016).

Syed Asif Ali for Respondent (in H.C.As. Nos.276 and 281 of 2016).

Zaheer-ul-Hasan Minhas and Haroon Gudal for Respondents (in H.C.As. Nos.82 to 85 of 2015).

Muhammad Ameen Bandukda for Respondent (in H.C.A. No.322 of 2016).

Ms. Sofia Saeed Shah, for Respondent (in H.C.As. Nos.280, 285, 287 and 304 of 2016).

Ghulam Shabbir Baloch, Assistant Attorney General.

2017 P T D 2191

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

KHAYABAN-E-IQBAL (PVT.) LTD. through Authorized Representative

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 4 others

C.P. No.D-6696 of 2014, decided on 28th January, 2017.

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

----S. 21(2)---Sales Tax Rules, 2006, R. 12(5)---Suspension of sales tax registration---General sales tax, collection of---Scope---Sales tax registration was suspended and extra general sales tax was collected---Validity---Petitioner's sales tax registration was suspended on account of non-filing of sales tax returns of various tax years---Petitioner subsequently filed sales tax returns of the defaulted period with penalty---Department upon receiving sales tax return of the defaulted period recommended the restoration of sales tax registration---Nothing was on record that petitioner challenged suspension of its sales tax registration being illegal before the tax authorities or any other legal forum or court of law---Petitioner had agitated the suspension of sales tax registration after restoration of the same and had demanded the refund of extra general sales tax for the period its sales tax registration remained suspended---Such suspension could not be presumed to be illegal in absence of any order from competent forum---Claim of petitioner was based on allegations of fraud and arbitrariness on the part of department which required scrutiny of controversial facts and examination of evidence---Such exercise could not be undertaken in exercise of constitutional jurisdiction of High Court---Constitutional petition had been filed while bypassing the relevant forum---Constitutional petition was dismissed in limine---Petitioner would be at liberty to seek redressal of its grievance if permissible in law before appropriate forum.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope.

Article 199 of the Constitution casts an obligation on the High Court to act in aid of law and to protect the fundamental rights of citizens, however, within the framework of Constitution and law, and this extra ordinary jurisdiction of High Court can be invoked in extraordinary situation where there is inefficacious alternate remedy provided under law, whereas, the illegality of the impugned action of an authority can be established without any detailed enquiry into complicated or disputed facts.

Anjuman Fruit Arhitan and others v. Deputy Commissioner, Faisalabad and others 2011 SCMR 279 rel.

Taimur Ali Mirza for Petitioner.

Meer Hussain for Respondents.

2017 P T D 2197

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

ORIENT ELECTRONIC (PVT.) LTD. through Authorized Officer

Versus

GOVERNMENT OF SINDH through Secretary Finance Karachi

Constitutional Petition No.D-968 of 2017, decided on 28th February, 2017.

(a) Sindh Sales Tax on Services Act (XII of 2011)---

----S. 63---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Sales tax on services---Show-cause notice, issuance of---Scope---Petitioner raised all the legal grounds including the one with regard to legality of show cause notice but could not succeed before the forums provided under the statute---Order passed by the Appellate Tribunal could be impugned in terms of S.63 of Sindh Sales Tax on Services Act, 2011---Petitioner had not availed such remedy and had filed constitutional petition---Petitioner had filed rectification application before the appellate forum which was pending disposal---Tendency to bypass or abandon the statutory forums without valid reason could not be approved---Constitutional petition was dismissed with costs.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope.

Article 199 of the Constitution casts an obligation upon the High Court to act in aid of law and to protect the fundamental rights of citizens as guaranteed under Constitution, however, within the framework of Constitution and law, whereas, this extraordinary jurisdiction of High Court can be invoked in extraordinary circumstances, when there is no alternate remedy is available or alternate remedy provided under law is inefficacious. Moreover, an aggrieved person has to demonstrate that the impugned order or the action of an authority is without jurisdiction or suffers from some patent illegality, whereas, the grievance may not involve scrutiny of evidence or determination of some disputed facts.

Anjuman Fruit Arhtian and others v. Deputy Commissioner, Faisalabad and others 2011 SCMR 279; Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) Karachi PLD 1992 SC 847; Messrs Pak Saudi Fertilizers Ltd., v. Federation of Pakistan 2002 PTD 679; Bulk Shipping and Trading (Pvt.) Limited v. Collector of Customs 2004 PTD 509 and BP Pakistan Exploration and Production Inc. Karachi v. Additional Commissioner Inland Revenue 2011 PTD 647 rel.

Nadeem Yaseen for Petitioner.

Nemo for the Respondent.

2017 P T D 2212

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Nazar Akbar, JJ

COMMISSIONER INLAND REVENUE, ZONE-II

Versus

AL-HAMAD INTERNATIONAL CONTAINER TERMINAL (PVT.) LTD.

Special F.E.R.A. No.48 of 2016, decided on 27th April, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133, 132 & 131--Reference to High Court---Nature of jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---Concurrent findings of fact recorded by two Appellate Forums under the Income Tax Ordinance, 2001; unless found to be perverse and contrary to record, could not be interfered with by the High Court while examining questions of law proposed under S. 133 of the Income Tax Ordinance, 2001---Scope of reference jurisdiction under S. 133 of the Income Tax Ordinance, 2001 was restricted only to the extent of examining questions of law arising from order passed by the Appellate Tribunal and not to decide question of facts, or for determining disputed facts.

2017 P T D 2366

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

SUI SOUTHERN GAS COMPANY-LPG PRIVATE LIMITED through Representative

Versus

FEDERATION OF PAKISTAN, MINISTRY OF PETROLEUM AND NATURAL RESOURCES, CENTRAL SECRETARIAT, ISLAMABAD through Secretary and 2 others

C.P. No.D-1324 of 2015, decided on 14th July, 2017.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 161, 162, 182(2), 205 & 236-A---Constitution of Pakistan, Arts. 176 & 192---Advance income tax, collection of---Auction by High Court---Scope---Petitioner company participated in auction proceedings conducted by High Court and its bid was accepted by High Court---Petitioner company had assailed show-cause notice issued by income tax authorities on grounds that petitioner company had failed to deduct tax from gross amount paid to High Court for purchase of assets sold in pursuance of order passed in execution petition---Validity---High Court and Supreme Court established under constitutional provisions were entirely separate and independent establishments which could not be subjected to provisions of Income Tax Ordinance, 2001 (or any other taxing statute)---Neither any of the High Courts established under Art. 192 of the Constitution or Supreme Court established under Art. 176 of the Constitution could be treated as assessee or subject to assessment proceedings under Income Tax Ordinance, 2001---Proceedings initiated against petitioner company under Ss. 161, 205 & 236-A of Income Tax Ordinance, 2001 for recovery of advance income tax in respect of auction proceeds through official of High Court were void ab initio and without lawful authority---Order passed under S. 162 of Income Tax Ordinance, 2001 in violation of High Court's restraining order in such regard were equally illegal and without lawful authority---High Court declared notices issued to petitioner under Ss.161, 205 & 236-A of Income Tax Ordinance, 2001 as illegal and without lawful authority---Constitutional petition was allowed in circumstances.

Asim Iqbal for Petitioner.

Salman Talibuddin, Additional Attorney General for Pakistan for Respondent No.1.

Muhammad Aqeel Qureshi for Respondents Nos. 2 and 3.

2017 P T D 2413

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Aziz-ur-Rehman, JJ

COMMISSIONER INLAND REVENUE (ZONE-IV)

Versus

Messrs SAIMA PACKAGING (PVT.) LTD.

I.T.R.A. No.34 of 2013, decided on 13th September, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 13(7), 85(2) & (3), 108, 109 & 133---"Arm's length", principle of---Interest free loans to employees---Concurrent findings of two forums---Authorities were aggrieved of findings of two forums below declaring that interest free loans given by tax payer to its employees was covered under principle of "arm's length"---Validity---Until and unless taxation officer had discharged his onus to establish that interest free loan advanced by an employer to its employee was a transaction which was not at "arm's length" and employee was an associate of employer, provisions of Ss. 108 & 109 of Income Tax Ordinance, 2001 could not be invoked---Taxation officer did not discharge such onus while invoking provisions of Ss. 108 & 109 of Income Tax Ordinance, 2001---High Court declined to interfere in concurrent findings of facts recorded by Appellate Tribunal Inland Revenue and Commissioner (Appeals) as same had depicted correct legal position---Reference was dismissed in circumstances.

Dr. Shahnawaz Memon for Applicant.

Dervesh K. Mandhan for Respondent

2017 P T D 2456

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Aziz-ur-Rehman, JJ

SINDH REVENUE BOARD through Assistant Commissioner

Versus

ASKARI BANK LTD.

Special Sales Tax Reference Application No.47 of 2016, decided on 11th September, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

---Ss. 24, 44 & 63---Reference---Amount of default surcharge---Deletion---Factual controversy---Authorities were aggrieved of order passed by Appellate Tribunal, deleting amount of default surcharge---Validity---Question proposed by authorities did not arise from order passed by Appellate Tribunal as same was based on peculiar findings of facts which were entirely distinguishable from facts of cases referred and relied upon by taxpayer---High Court declined to interfere in order passed by Appellate Tribunal as same did not suffer from any factual or legal error---Reference was dismissed in circumstances.

D.G. Khan Cement v. Federation of Pakistan and others 2004 PTD 1179 ref.

Muhammad Sarfaraz Ali Metlo for Applicant.

Nemo for the Repondent.

2017 P T D 2474

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

The COLLECTOR OF CUSTOMS through Additional Collector (Law)

Versus

Messrs FACO INDUSTRIES

Special Customs Reference Application No.2807 and C.M.A. No.6305 of 2015, decided on 22nd September, 2016.

Customs Act (IV of 1969)---

----Ss. 32, 80, 81(4) & 196---Assessment of duty---Mis-declaration---Reference to High Court---Classification and description of the consignment---Importer had declared the goods under PCT 7220.9090, whereas, the same had been assessed by the department under PCT 7220.9010---Difference of 5% additional value between declared and assessed value under respective PCT headings---Consignment was physically examined by the department and same was found as per the declaration---No case of misdeclaration was made out---Department had disputed the classification of goods---Provisional assessment having not been finalized by the department which reflected that in terms of subsection (4) of S.81 of the Customs Act, 1969, the provisional determination as per goods declaration, stood finalized---No case of mis-declaration having been established by the department, no justification existed for imposing any redemption fine, or penalty upon the importer when there was no evasion or even difference of duty and taxes in the case---Impugned order passed by the Customs Appellate Tribunal, did not suffer from any error or illegality; whereas it was based on finding of facts, which was neither perverse nor suffering from mis-reading or non-reading of the evidence, but it depicted correct legal position---Reference application, being devoid of any merits, was dismissed, in circumstances.

Messrs Salman Tin Merchant, Karachi v. Collector of Customs, Karachi 2014 PTD 438 and 2011 PTD 79 ref.

Iqbal Khurram for Applicant.

Ghulam Ahmed Khan for Respondent.

Muhammad Javed K.K., Standing Counsel for Respondent.

2017 P T D 83

[Lahore High Court]

Before Shahid Karim, J

Sufi MUHAMMAD FARRUKH AMIN

Versus

FEDERATION OF PAKISTAN through Secretary of Finance and 4 others

W.P. No.19763 of 2013, decided on 17th June, 2016.

(a) Interpretation of statutes---

----Fiscal statute---Levy---Tax---Presumption---Court would presume constitutionality of a statute and that a particular levy was a tax if that was the stance of Federal Government and other authorities.

(b) Levy/fee---

----Determining factor---For a levy to be a fee, relation between the purpose and the persons on whom the levy is being exacted has to be established--- Levy is a common burden and a compulsory exaction of money for raising revenue and expending it for the purpose of public revenue of the State.

(c) Income Support Levy Act (XXII of 2013)---

----Ss. 3 & 9--- Constitution of Pakistan, Art.25---Reasonable classification--- Intelligible differentia--- Petitioners assailed Income Support Levy at the rate of 0.5% on the value of net movable assets/wealth as being ultra vires the Constitution--- Validity--- Reasonable classification was permissible provided it was based on intelligible differentia which had reasonable nexus with the object sought to be achieved and under which distinct persons or things were grouped together--- Different laws could be validly enacted for different persons having different financial standing--- Requirement of reasonable classification was fulfilled if in a taxing statue the Legislature had classified persons or properties into different categories which were subject to different rates of taxation with reference to income or property and such classification would not be open to attack on the ground of inequality--- Distinction between subject levy i.e. nature of which defined quality of levy, on the one hand, which must not be compared with the measure of liability, that was, the quantum of the tax---Legislature had merely created a different category of persons who were made subject to a different rate of taxation under S. 9 of Income Support Levy Act, 2013--- Such category was set apart with reference to income or net movable wealth which that category was in possession of--- Class of persons was set apart as possessing a certain threshold of affluence---No ground existed for laying a challenge on such basis and the differentia had a reasonable nexus to the object to be achieved by such classification--- High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

Panama Refining Co. v. Ryan 293 U.S. 388, 439 (1935); Haji Muhammad Shafi and others v. Wealth Tax Officer and others 1992 PTD 726; Haji Muhammad Shafi and 3 others v. Wealth Tax Officer, Circle IV, Karachi and 3 others 1989 PTD 488; Messrs I.C.C. Textile Ltd., and others v. Federation of Pakistan and others 2001 PTD 1557; ICC Textiles Ltd. v. Federation of Pakistan through Secretary of Finance, Islamabad and 2 others PLD 1999 Lah. 251; National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services 132 S.Ct. 2566 (2012); Unites States v. Constantine 296 U.S. 287 (1935); QUILL Corp. v. North Dakota, 504 U.S. 298 (1992); Nelson v. Sears Roebuck & Co. 312 U.S. 359 (1941); United States v. Sotelo 436 U.S. 268 (1978); Blodgett v. Holden 275 U.S. 142, 148 (1927); Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; United States v. Reorganized CF&I Fabricators of UTAH Inc. 518 U.S. 213, 224 (1996); Federation of Pakistan through Secretary M/o Petroleum and Natural Resources and another v. Durrani Ceramics and others 2014 SCMR 1630; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Flour Mills Association and another v. Government of Sindh and others 2003 SCMR 162 and 83 ITR 582 (1972) ref.

Navid A. Andrabi, Rasaal Hassan Syed, Naeem Sarwar, Muhammad Azhar Siddique, Shahid Mehmood Bhatti-I, Ch. Muhammad Ali, Mian Ashiq Hussain, Shehzad A. Elahi, Muhammad Ajmal Khan, Mian Haseeb ul Hassan, Muhammad Saqib Sheikh, Mansoor Usman, Malik Asif Hayat, Mian Muhammad Rashid, Mansoor Baig, Syed Ali Imran, Mehr Ghulam Murtaza, Khurram Shehbaz Butt, H.M Majid Siddiqui, Khurram Abbas, Javed Iqbal Qazi and Muhammad Mohsin Virk for Petitioners.

Muhammad Javed Kasuri, D.A.G., Sarfraz Ahmad Cheema, Liaqat Ali Chaudhry, Muhammad Yahya Johar and Kausar Perveen for Respondents.

2017 P T D 107

[Lahore High Court]

Before Abdul Sami Khan, J

The STATE through Commissioner Inland Revenue

Versus

AHMED ALI KHAN

Criminal Revisions Nos. 154 to 156 of 2010, heard on 29th June, 2016.

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

----Ss.33(5), 33(11) & 33(13)---Offences and penalties---Failure to deposit tax amount---Issue or use a document which was forged or false---Tax fraud---Accused were charged with allegations that they were involved in charging sales tax on fake invoices and they were not depositing the same in the government exchequer, thus had caused huge loss to national exchequer---Trial Court convicted accused persons on basis of confessional statements---Validity---Filing a Constitutional petition, rather than revision against an order passed on confessional statement of accused, carried no weight---Non-mentioning of exact amount in charge sheet by Trial Court was not fatal so as to vitiate whole proceedings---Accused persons were convicted under Ss. 33(5), 33(11) & 33(13) of Sales Tax Act, 1990---Revision petitions were disposed of accordingly.

(b) Criminal Procedure Code (V of 1898)---

----S.412---No appeal in a case when accused pleads guilty---Conviction was recorded on basis of confessional statement, law even ousted remedy of appeal as enshrined in S.412, Cr.P.C.

Muhammad Khalid Chaudhary assisted by Ch. Aftab Maqsood for the State.

Ahmad Awais, Saeed Ahmad Cheema, Abdul Waheed and Muhammad Hammad for Respondents.

2017 P T D 196

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood, Sethi, JJ

COLLECTOR OF SALES TAX

Versus

Messrs KHURSHID SPINNING MILLS LTD. and another

S.T.R. No.67 of 2010, decided on 15th November, 2016.

(a) Jurisdiction---

----Cognizance---Principle---Any forum cannot take cognizance of a matter beyond its pecuniary jurisdiction, prescribed in the relevant law---Inherent defect cannot be cured to defeat the provisions of statutes or enactments affecting jurisdiction of a forum.

(b) Administration of justice---

----Prejudice---Scope---Order passed against a person by a forum against express provisions of law on the subject, if allowed to stay intact, cause serious prejudice to legal right of citizens.

Izhar Alam Farooqi, Advocate, v. Sheikh Abdul Sattar Lasi and others 2008 SCMR 240; Mst. Fateh Bevi and others v. Additional District Judge, Khushab and others 2008 SCMR 1262; Muhammad Anwar and others v. Mst. Ilyas Begum and others PLD 2013 SC 255 and OMV Energy v. Ocean Pakistan and others 2015 CLC 1504 rel.

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

----Ss. 45 & 47---Reference---Pecuniary jurisdiction---Waiver or estoppel---Applicability---Scope---Show cause notice---Taxpayer assailed show cause notice issued by authority beyond its pecuniary jurisdiction---Appellate authority accepted appeal filed by taxpayer and the order was maintained by Appellate Tribunal Inland Revenue---Validity---Objection to jurisdiction was a basic lacuna on assumption of jurisdiction, which could be raised at any stage of proceedings including appeal inasmuch as it went to the very roots of the matter and had rendered entire proceedings coram non judice---When a Court/ forum suffered from want of inherent jurisdiction, no act of consent or acquiescence in the proceedings could vest such forum/Court with such jurisdiction---No question of waiver or estoppel was attracted in such circumstances---Non-raising of such objection by parties, the forum taking cognizance of the matter must have at the first instance to decide question of its jurisdiction at the commencement of proceedings---Order passed or an act done by Court or Tribunal, incompetent to entertain proceedings, was without jurisdiction---Jurisdictional defect could not be removed by mere conclusion of proceedings and passing of order-in-original and order-in-appeal---When a law required an act to be done in a particular manner, it had to be done in that manner alone, not otherwise---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

Muhammad Hussain and another v. Muhammad Shafi and others 2004 SCMR 1947 and Munawar Hussain and 2 others v. Sultan Ahmad 2005 SCMR 1388 rel.

Sultan Mahmood for Applicant.

2017 P T D 243

[Lahore High Court]

Before Abid Aziz Sheikh, J

Messrs KAMAL LTD. through Director

Versus

FEDERATION OF PAKISTAN through Chairman and 2 others

W.P. No.36533 of 2016, decided on 23rd November, 2016.

Income Tax Ordinance (XLIX of 2001)---

----S. 131(5)---Constitution of Pakistan, Art. 199---Constitutional petition---Stay of recovery---Tax payer was aggrieved of non-extending of stay order under S. 131(5) of Income Tax Ordinance, 2001---Validity---High Court directed Appellate Tribunal Inland Revenue to decide appeal of taxpayer expeditiously preferably within a period of one month from the receipt of certified copy of order passed by High Court and restrained the authorities from taking any coercive measures for recovery of disputed amount till the decision of appeal---Petition was allowed accordingly.

Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax and others 2003 PTD 1746 and Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679 rel.

Khubaib Ahmad for Petitioner.

2017 P T D 283

[Lahore High Court]

Before Shahid Karim, J

MURREE BREWERY COMPANY LIMITED through Chief Executive

Versus

PROVINCE OF PUNJAB through Chief Secretary and 2 others

Writ Petition No.24811 of 2015, decided on 27th June, 2016.

(a) Constitution of Pakistan ---

----Art.151---Constitution of the United States of America, Art.1, S.8---Inter-Provincial trade---Similarities and distinction between Art.151 of the Constitution of Pakistan and S. 8 of Art. 1 of the Constitution of the United States of America.

(b) Constitution of Pakistan---

----Art. 151---Inter-Provincial trade---Scope---Article 151 of the Constitution enjoined all Inter-Provincial trade and commerce to be free and resided all power to legislate, and thereby to regulate, in the Parliament lest the freedom to trade and carry out commerce be shackled by the Provinces in any manner---Article 151 of the Constitution gave expression to the important concept of Federalism---Said Article was repository of the powers that were to vest in the Federal Government with regard to trade, commerce and intercourse throughout the country---By virtue of Art.151(2) of the Constitution such power had come to reside in the Parliament which, by law, could impose such restrictions on the freedom of trade, commerce or intercourse between one Province and another or within any part of Pakistan as may be required in the public interest---Provincial legislature was not empowered to enact a law which imposed such a restriction and it was with this intention that Art.151(1) stated in emphatic terms that the trade, commerce and intercourse throughout the country shall be free.

(c) Constitution of Pakistan---

----Art. 151---Inter-Provincial trade---Scope---Where there was commerce which concerned more Provinces than one, the power to regulate the same laid with the Parliament and a Province could not regulate such activity---Commercial activities which were completely within a province, were the only ones immune from federal power; the rest must yield in favour of federal commerce power.

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 6 L.Ed.23 (1824)

(d) Interpretation of the Constitution---

----Legislative history was a worthwhile aid to ascertain the intention behind an enactment and in particular a constitutional document.

(e) Punjab Excise Act (I of 1914) ---

----Ss. 31 & 32---Constitution of Pakistan, Arts. 151 & 199---Notification No.SO(E&M)/2-3/2011 dated 24.06.2015 issued by the Excise and Taxation Department, Government of the Punjab ("impugned notification")---Constitutional petition---Maintainability---'Still head duty', levy of---Levy of 'still head duty' had been extended by the impugned notification to Pakistan Made Foreign Liquor and Beer consumed outside the Province of Punjab---Petitioner-brewery was directly affected by the 'still head duty' as they contended that their liquor and beer was likely to become uncompetitive and, therefore, may not be purchased by the ultimate consumers outside the Province of Punjab to whom the duty was likely to be passed on---Constitutional petition filed by the petitioner-brewery challenging the impugned notification, whereby 'still head duty' was levied was held to be maintainable.

Messrs Nishat Talkies and another v. The Director/Collector, Excise and Taxation, Karachi and another PLD 1976 Kar. 712 and Province of Balochistan through Secretary Excise and Taxation Department, Quetta and 2 others v. Murree Brewery Company Ltd. through Secretary 2007 PTD 1195 distinguished.

(f) Constitution of Pakistan ---

----Art. 151---Inter-Provincial trade---Scope---Any law which imposed financial burdens on the trade or impeded the flow of trade and commerce (between Provinces) was violative of Art.151 of the Constitution.

Pakistan Tobbacco Company Ltd. v. Government of N.W.F.P. PLD 2002 SC 460 rel.

(g) Constitution of Pakistan ---

----Art. 141---Extent of Federal and Provincial laws---Scope---Laws which had an extra-territorial or Inter-Provincial operation were beyond the competence of a Provincial Assembly and resided within the Parliament's remit.

(h) Punjab Excise Act (I of 1914) ---

----Ss. 31 & 32---Constitution of Pakistan, Arts. 141 & 151---Notification No.SO(E&M)/2-3/2011 dated 24.06.2015 issued by the Excise and Taxation Department, Government of the Punjab ("impugned notification")---Freedom of trade, commerce and intercourse between different Provinces---Scope---'Still head duty' (excise duty), levy of---By way of impugned notification 'still head duty' was extended to Pakistan Made Foreign Liquor and Beer consumed outside the Province of Punjab---Legality---No prohibition on inter-provincial trade and commerce could be imposed by a levy which had the effect of taking away the freedom of movement envisaged by Art.151 of the Constitution---Constitution took away all powers from a Provincial Government to take any executive action which caused the prohibition or restriction on imports or exports---'Still-head duty' under challenge not only burdened the petitioner and commercially made them run out of competition but also impeded the flow of trade and commerce to their detriment and was tantamount to prohibition of the export from the Province of Punjab---'Still head duty' in question also ran counter to the doctrine of Federalism on which the Constitution was based---Impugned notification, whereby 'still head duty' was imposed was thus declared ultra vires and without lawful authority and was set aside---Constitutional petition was allowed accordingly.

By way of Notification No.SO(E&M)/2-3/2011 dated 24.06.2015 issued by the Excise and Taxation Department, Government of the Punjab, "still head duty" was extended to Pakistan Made Foreign Liquor and Beer consumed outside the Province of Punjab. Petitioner-brewery which manufactured liquor and beer within the province of Punjab contended that levy of "still head duty" tantamount to export duty on liquor and beer being manufactured by the petitioner and consumed outside the Province of Punjab, which had the effect of rendering the petitioner as uncompetitive in the markets of other provinces.

Fundamental factor which prompted the framers of the Constitution to enact clauses (1) and (2) of Article 151 of the Constitution was to prevent goods manufactured in one Province from being put at disadvantage by imposition of taxes so as to destroy the market for those goods in a particular Province. Entire crux of petitioner's challenge to the 'still head duty' was that their goods were put at a disadvantage by the imposition of the duty, which had the effect of virtually destroying the market of those goods in the other Provinces. If the intention of the framers of the Constitution was to obviate possibility of such a course of action to take place and to thwart any attempt by one Province to impose a tax or a duty without the regard for its consequences, then the 'still head duty' under challenge must be held to be ultra vires as it had precisely the same effect as was contemplated by the framers of the Constitution.

No prohibition on inter-provincial trade and commerce could be imposed by a levy which had the effect of taking away the freedom of movement envisaged by Article 151 of the Constitution. Any restriction which directly and immediately affected the flow of trade, commerce or intercourse, must be held to offend the provisions of Article 151.

Mirpurkhas Sugar Mills Limited v. District Council, Tharparkar through Chairman and 3 others 1991 MLD 715 ref.

Laws which had an operation across the territory of a Province were beyond the scope of Article 141 of the Constitution and, in case they impacted freedom of trade, commerce and intercourse, they impinged upon the right guaranteed by Article 151.

Constitution took away all powers from a Provincial Assembly to make any law or a Provincial Government to take any executive action which caused the prohibition or restriction on imports or exports. There could not be a greater restriction than the imposition of a tax which placed a 'discriminatory burden' on certain goods. Such discrimination in the present case was accentuated by the fact that similar goods being imported by other Provinces were not subject to the same tax and were thus at a clear advantage with regard to the ultimate price at which they were sold in the market.

'Still-head duty' under challenge not only severally and fatally burdened the petitioner and financially and commercially made them run out of competition but also impeded the flow of trade and commerce to their detriment and was tantamount to prohibition of the export from the Province of Punjab.

Pakistan Tobbacco Company Ltd. v. Government of N.W.F.P PLD 2002 SC 460; Mirpurkhas Sugar Mills Ltd. v. District Council, Tharparkar and 2 others 1990 MLD 317 and Mirpurkhas Sugar Mills Limited v. District Council, Tharparkar through Chairman and 3 others 1991 MLD 715 ref.

'Still-head duty' was, in fact, an excise duty as per the Provincial Government's own showing and was not for the purposes of regulation or for providing services which in fact benefited the petitioner. Absent such element, the levy was a prohibition and restriction which directly and immediately affected the free flow of trade, commerce and intercourse and must be held to be invalid.

Entire concept of Article 151 of the Constitution would be rendered nugatory and facile if the levy under challenge was allowed to stand. Levy in question also ran counter to the doctrine of Federalism on which the Constitution was based.

Progress of a country as a whole also required free flow of commerce and intercourse as between different parts, without any barrier so that the economic resources of the various parts may be exploited to the common advantage of the entire nation. This was particularly essential in a federal system.

Impugned notification trampled upon the mandate of Article 151(3)(a) of the Constitution and must be held to be void to such extent. Notification in question ran counter to the freedom of trade rule embodied in Article 151 of the Constitution and was thus declared ultra vires and without lawful authority and was set aside as a consequence.

Shahid Hamid and Mrs. Ayesha Hamid for Petitioners (in W.P. No.24811 of 2015).

Syed Irteza Ali Naqvi for Petitioner (in W.P.No.21927 of 2015).

Nasar Ahmad, D.A.G., Samia Khalid, A.A.G. for Respondents.

Rizwan Ahmad Sherwani, Director E&T.

Mian Abid Zia, Law Officer, E&T Deptt. Lahore.

2017 P T D 352

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

Messrs AYUB TEXTILE INDUSTRIES through Proprietor

Versus

COMMISSIONER (COLLECTOR) OF SALES TAX, REGIONAL TAX OFFICE, FAISALABAD and 3 others

S.T.R. No.132 of 2015, decided on 29th March, 2016.

Sales Tax Act (VII of 1990)---

----S. 47---General Clauses Act (X of 1897), S.24-A---Constitution of Pakistan, Art.10-A---Reference---Jurisdiction of Appellate Tribunal---Nature---High Court observed that Appellate Tribunal was vested with the jurisdiction to decide factual controversies and was a forum of last resort in that respect---Onorous obligation was cast on the Tribunal to render its findings on each issue raised before it and such finding must reflect an application of mind by the Tribunal---Impugned order passed by the Tribunal lacked application of mind and determination on each issue independently; which had seriously prejudiced the rights of the parties and offended the principle of due process---Section 24-A of the General Clauses Act, as also Art.10-A of the Constitution guaranteed due process to all persons in respect of the determination of their civil rights---Cornerstone of the principles of due process, was an adjudication on merits by forum tasked with such matters and established forums of last resort to determine issues of facts---Impugned order passed by Tribunal, which was last resort in that regard, was without reasons and without application of mind and was not sustainable---High Court further observed that series of orders passed by the Tribunal had been assailed before High Court; which seemed that appeals before the Tribunal were being disposed of in a cyclostyled manner without application of mind---Such was a serious dent in the administration of justice---Matter was remanded by High Court to the Tribunal to hear and decide the appeal de novo.

Muhammad Akram Nizami for Applicant.

Ms. Saba Saeed for Respondents.

2017 P T D 406

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi, J

Messrs COLONY SUGAR MILLS LTD. through Deputy Manager

Versus

PROVINCE OF PUNJAB and 5 others

Writ Petition No.18345 of 2012, decided on 15th July, 2016.

(a) Punjab Excise Act (I of 1914)---

----Ss. 3(6)(14) & 31---Constitution of Pakistan, Federal Legislative List, Entry 44---Ethanol (spirit), imposition of duty---Vires---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposition of duty by Provincial Government---Plea raised by petitioners was that imposition of such duty was ultra vires the Constitution---Validity---"Spirit" squarely fell within the definition of liquor and alcoholic liquor was umbrella term which covered all liquors including spirit---Alcoholic liquor, which included 'spirit' as an excisable article and squarely fell within legislative competence of provincial legislature in terms of Entry No.44 of Federal Legislative List of the Constitution as well as S. 3(6) of Punjab Excise Act, 1914---No arbitrariness, unreasonableness, irrationality and unconstitutionality was found in S. 31 read with Ss. 3(6) & (14) of Punjab Excise Act, 1914 and it was a valid piece of legislation---High Court declared that notification issued by Provincial Government levying duty on product i.e. spirit being manufactured by petitioners and others was validly issued on the strength of S. 31 of Punjab Excise Act, 1914---Petition was dismissed in circumstances.

Case-law referred.

(b) Interpretation of statutes---

----Terms used in statute---Principle---Rule of construction teaches that meaning of particular terms in a statute may be ascertained by reference to words associated with them in the statute---Where two or more words of analogous meaning are employed together in a statute, they are understood to be used in their cognate sense to express same relationship and give colour and expression to each other---Statute has to be construed and interpreted in the context embodied in it and any import into it may render different meaning and different sense which the law-maker may not have intended to assign to it---Defined words should not be given wider meanings than the one already given in the definition, lest it may defeat the very purpose of the law itself.

Case-law referred.

(c) Punjab Excise Act (I of 1914)---

----S. 31---Punjab Liquor Import, Export, Transport and Possession Orders, Chapter 6, order 6.12(3)(f)---Ethanol (spirit), imposition of duty---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposing of duty by Provincial Government---Plea raised by petitioners was that ethanol was an export product and protected under order 6.12(3)(f) of Chapter 6 of Punjab Liquor Import, Export, Transport and Possession Orders---Validity---Levy of duty by its very nature was altogether distinct from levy of export tax, which was an inland tax leviable on manufacturers within the country or licensed for specific activities---Levy was not a border tax and did not purport to have any nexus with export of ethanol---Levy in question was imposed regardless of the ultimate destination of excisable article but was primarily leviable on the quantum of its manufacture---Immunity to pay tax was not relevant in circumstances.

(d) Constitution of Pakistan---

----Art. 25---Equality---Taxation---Imposition of tax/duty---Classification of persons---Scope---Legislature is competent to classify persons or properties into different categories subject to different rates of taxes---If same class of person is subjected to an incidence of taxation, resulting in inequality amongst them, is liable to be struck down on account of infringement of Fundamental Right of equality---Neither discrimination can be pleaded in fiscal statutes nor such statute can be struck down at the touchstone of Art. 25 of the Constitution---Equal protection of law does not envisage that every citizen is treated alike in all circumstances but it contemplates that persons similarly situated or similarly placed are to be treated alike.

Case-law referred.

(e) Punjab Excise Act (I of 1914)---

----S. 31---Ethanol (spirit), imposition of duty---Subsequent stage---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposing of duty by Provincial Government---Plea raised by petitioners was that levy in question was not imposed at the time of issuance of license by authorities to petitioners---Validity---Non-imposition of levy in question at the time of issuance of license by authorities did not create an embargo upon Provincial Government to levy duty on excisable items at a subsequent time as it was competent under S. 31 of Punjab Excise Act, 1914.

(f) Interpretation of statutes---

----Preamble of statute---Scope and object---Pre-amble to an Act is an introductory statement that explains purpose and underlying philosophy of that Act---Object of preamble is to clarify meaning or purpose of operative part of the text in case of any ambiguity or dispute---Pre-amble prevails only where it provides a clear and definite interpretation whereas meaning of enacting word is indefinite or unclear.

Case law Referred.

(g) Punjab Excise Act (I of 1914)---

----S. 34---License---Scope---License does not confer a right rather it creates a corresponding duty on the part of beneficiary to regulate manufacturing process as per law.

(h) Estoppel---

----Imposition of tax---Legislative power---Scope---Legislature cannot be estopped from issuing notification for the purpose of imposition of tax with a view to generate revenue keeping in view its growing requirement to generate funds to address burning problems of the day and the complex issues faced by people, which the legislature in its wisdom through legislation seeks to resolve---No estoppel against Provincial Government to levy duty on excisable items.

Case-law referred.

(i) Constitution of Pakistan---

----Art. 199---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 120---Constitutional petition---Vires of statute---Presumption---Burden to prove---When vires of any statute are challenged, strong presumption as to legislative competence and validity of the statue is always attached---Burden is always on the person challenging vires of any statute to show that statute in question is beyond the legislative competence or is in violation of any Constitutional provision or guarantee or in negation of rights guaranteed under the Constitution.

Case-law referred.

(j) Constitution of Pakistan---

----Art. 199---Constitutional petition---Vires of statute---Jurisdiction of High Court---Principle---Court cannot sit in judgment over the wisdom of legislature and strike it down, except on two grounds, namely lack of legislative competence and violation of any of the fundamental rights guaranteed in the Constitution.

Case law referred.

Ali Sibtain Fazli, Hasham Ahmad Khan, Muhammad Umer Riaz and Shehzad Maqsood for Petitioners.

Asma Hamid, Additional Advocate General, Muhammad Ejaz, Assistant Advocate General, Mian Abid Zia, Law Officer, Excise and Taxation Department, and Akhter Ali Kureshi, Standing Counsel for Pakistan for Respondents.

2017 P T D 495

[Lahore High Court]

Before Syed Mansoor Ali Shah, C.J. and Faisal Zaman Khan, J

Messrs PAK GEN POWER LTD. through Senior Manager Finance

Versus

COMMISSIONER INLAND REVENUE and 4 others

S.T.R. No.115 of 2015, heard on 31st October, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 8(2), 2(33), 2(41), 2(39), 2(46)---Sales Tax Special Procedures Rules, 2007, 13(3)---Sales Tax Rules, 2006, R. 24---Power purchase agreement---Capacity Purchase Price---Nature---Tax credit not allowed---Taxable and non-taxable supplies---Special procedure for collection and payment of sales tax on electric power---Interpretation of R. 13(3) of the Sales Tax Special Procedure Rules, 2007----Taxpayer/ petitioner, entered into a power purchase agreement with WAPDA, with two major components, Energy Purchase Price (EPP) and the Capacity Purchase Price (CPP)---Question before the High Court was whether consideration received by taxpayer as Capacity Purchase Price amounted to non-taxable supply and whether S. 8(2) of the Sales Tax Act, 1990 was applicable on the same---Held, that definitions of "supply" and "taxable supply" given in S. 2 of the Sales Tax Act, 1990, clearly showed that there had to be transfer of goods in order to constitute "supply" and admittedly, there was no supply of goods against the payment of CPP, as the same was merely a consideration received by the taxpayer to maintain and upkeep the power plant facility and also constituted a part of the consideration for the singular supply that was supply of electricity by the taxpayer to WAPDA---Rule 13(3) of the Sales Tax Special Procedures Rules, 2007 recognized just one "supply" under the EPP and then elaborated that for the purposes of calculating the value of such supply, the payment (consideration) received under CPP, etc. would not be included---Rule 13(3) of the Sales Tax Special Procedures Rules, 2007 simply excluded certain payments from being included in the value of supply and excluded CPP from being considered while calculating the value of electricity to WAPDA---Said Rule did not, in any manner, provide or suggest that exclusion of CPP from determining the value of supply (supply of electricity to WAPDA) amounted to a non-taxable supply and any such interpretation put on R. 13(3) of Sales Tax Special Procedure Rules, 2007 would be violative of the Sales Tax Act, 1990 and inconsistent with the definitions of "supply", "taxable supply", "taxable goods" and "value of supply" provided therein---Assumption that mere exclusion of CPP from tax for the purposes of R. 13(3) of the Sales Tax Special Procedures Rules, 2007 led to a non-taxable supply was therefore misconceived---In the present case, there was only one supply, and the question of two simultaneous supplies did not arise and thus there was no existence of an "exempt supply"---Section 8(2) of the Sales Tax Act, 1990, therefore, had no applicability to the supply of electricity made by the taxpayer to WAPDA under the power purchase agreement---Reference was answered, accordingly.

Messrs Baba Farid Sugar Mills Ltd. v. Federation of Pakistan and others W.P. No.12851 of 2012 rel.

Khurram Shahbaz Butt along with Asim Zulfiqar, Chartered Accountant, A.F. Ferguson and Co., Lahore for Petitioner.

Sarfraz Ahmad Cheema, along with Dr. Ishtiaq Ahmad, Commissioner (Legal), Inland Revenue for Respondents.

2017 P T D 517

[Lahore High Court]

Before Shahid Karim, J

WATER AND POWER DEVELOPMENT AUTHORITY through Director Services and Estates

Versus

EXCISE AND TAXATION DEPARTMENT, GOVERNMENT OF THE PUNJAB through Director General and 4 others

W.P. No.25605 of 2014, decided on 2nd December, 2016.

(a) Punjab Urban Immovable Property Tax Act (V of 1958)---

----S.16(4)---Constitution of Pakistan, Arts.165, 98, 157, 90, 154, 153 & Fourth Sched.---Water and Power Development Authority Act (XXXI of 1958) Ss. 3, 21 & Preamble---Constitutional exemption of certain public property from taxation under Art. 165 of the Constitution---Property owned by, and in use of, Water and Power Development Authority ("WAPDA") as an instrumentality of the Federal Government---Test to determine whether benefit of Art. 165 of the Constitution should be extended to an instrumentality of the Federal Government---Constitutional mandate for functions performed by and authority over, WAPDA---Scope---Petitioner/Water and Power Development Authority ("WAPDA"), impugned notice under S. 16(4) of the Punjab Urban Immovable Property Tax Act, 1958 wherein it was held liable for payment of Provincial property tax---Contention of the petitioner WAPDA was that, per Art. 165 of the Constitution, as an instrumentality of the Federal Government, it was entitled to exemption in respect of property tax levied by the Provincial Government---Validity---For the purposes of invoking Art. 165 of the Constitution, what had to be shown was that the instrumentality owning property performed functions of the Federal Government, and that it was a virtual monopoly and a department of the Federal Government---Provisions of the Constitution clearly showed that it was the sovereign function of the Federal Government to construct or cause to be constructed hydroelectric or thermal power installations and said function was exclusively devolved upon the Federal Government by the Constitution and must be performed by it to the exclusion of all others---Although, the Provinces had a limited scope of activity in the area however, scale of construction of hydroelectric and thermal power was unique and so enormous that no other entity including a Province could compete with WAPDA in such activity ---WAPDA therefore, exercised the sovereign powers of the Federal Government in the performance of its functions in terms of Art. 157 read with Art. 98 of the Constitution and was for all practical purposes, a department of the Federal Government---Part II of the Fourth Schedule to the Constitution referred to WAPDA as being administrated and managed by the Federal Government and there could be no clearer expression of the intention in no less a document than the Constitution that WAPDA was administered and managed by the Federal Government, which also was the intention that was also gathered from an entire reading of the Water and Power Development Authority Act, 1958---Constitutional provisions relating to the power of Federal Government to construct in any province or cause to be constructed inter alia, hydroelectric or thermal power installations were to be performed by WAPDA as an authority of the Federal Government and thus WAPDA performed a Constitutional function and had exclusively been set up to undertake such function by the Federal Government under the mandate of the Constitution---Per the Constitutional mandate as expounded in Art. 154 of Constitution, Council of Common Interests (CCI), formulated and regulated policies in relation to matters in Part II of the Federal Legislative List and exercised supervision and control over related institutions---WAPDA, therefore, for all its independence as a body corporate and an instrumentality of the Federal Government, was not only subject to the administrative and management control of the Federal Government but was also subject to the CCI which exercised supervision and control over it and to such extent, the executive power of the Federal Government stood abridged and curtailed and had come to vest in the CCI---WAPDA was therefore, not an ordinary instrumentality but was a Constitutional public utility provider and, the mere fact that the said authority had been set up by a statute did not detract from the said conclusion to be drawn---Impugned notices / challan forms demanding payment of property tax from WAPDA were held to be issued without lawful authority and of no legal effect, and furthermore the Provincial Government was permanently restrained from imposing or charging property tax on WAPDA---Constitutional petition was allowed, accordingly.

National Bank of Pakistan v. Executive District Officer (Revenue) Multan and another 2015 CLC 1618; Union Council Ali Wahan, Sukkur v. Associated Cement (Pvt.) Ltd. 1993 SCMR 468; Province of N.-W.F.P. through Secretary Local Government and Rural Development Peshawar and others v. Pak Telecommunication through its Chairman and others PLD 2005 SC 670; Islamabad and another v. WAPDA and another PLD 2014 SC 766; Karachi Development Authority v. Central Board of Revenue through Members Central Excise and Land Customs, Islamabad and others 2005 PTD 2131; Messrs Gadoon Textile Mills and others v. WAPDA and Federation of Pakistan 1997 SCMR 641; A Biography of Pakistan Federation, Unity in Diversity by Mian Raza Rabbani; Federation of Pakistan v. United Sugar Mills Ltd. PLD 1977 SC 397; Muhammad Nawaz Sharif v. Federation of Pakistan PLD 1993 SC 473 and Corpus Juris Secundum, Volume 81A rel.

(b) Words and phrases

----"Sovereignty"---Meaning and concept explained.

Major Law Lexicon, vol. 6, by P. Ramanatha Aiyar; Sovereign Power in Words and Pharases volume 39A (West Publishing Co.); Harold J. Laski, in The Foundation of Sovereignty and other Essays (1921) and The Grammar of Politics, (1941) rel.

(c) Words and phrases

----"Sovereign power"---Meaning and concept, explained.

Sovereign Power in Words and Pharases Volume 39A (West Publishing Co.) rel.

(d) Water and Power Development Authority Act (XXXI of 1958)---

----S.3---Constitution of Pakistan, Arts.165, 98, 157, 90, 154, 153 & Fourth Sched.---Constitution of the Authority as instrumentality of the Federal Government---Object and scope.

Umer Sharif for Petitioners.

Nasar Ahmad, D.A.G. for Respondents.

Anwar Hussain and Muhammad Jamal ud Din Mamdot, A.A.Gs. along with Abid Zia, Law Officer.

2017 P T D 558

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

Messrs SARWAR AND COMPANY (PVT.) LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and others

P.T.R. No.71 of 2014, decided on 28th April, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 18(1)(a), 122, 133, 153(1)(c), 169 & Second Schedule, Part-I---Reference---Exemption from tax---Final Tax Regime---Taxpayers were aggrieved of notices issued under S. 122 of Income Tax Ordinance, 2001, specifying that they were not entitled to concession for being taxed under Final Tax Regime---Validity---For taxation under Final Tax Regime in view of S. 169 of Income Tax Ordinance, 2001, no question of "profits and gains" earned by taxpayer had arisen because tax withheld/deducted on certain transactions was taken as final discharge of tax liability without entering into an inquiry as to which expenditure was allowable under S. 20 of Income Tax Ordinance, 2001, or which was not under S. 21 of Income Tax Ordinance, 2001---High Court decided the matter in favour of authorities and against taxpayer by answering the question in negative---Reference was disposed of accordingly.

Dr. Muhammad Anwar Kurd and 2 others v. The State through Regional Accountability Bureau, Quetta 2011 SCMR 1560; Messrs Rashid and Co. v. Commissioner of Income Tax, Zone-A, Lahore 2005 PTD 1790; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan, through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; Commissioner of Income Tax/Wealth Tax v. Messrs Ellcot Spinning Mills Ltd. 2008 PTD 1401; Uch Power (Pvt.) Ltd. and others v. Income Tax Appellate Tribunal and others 2010 PTD 1809; Messrs Humayun Ltd. v. Pakistan and others PLD 1991 SC 963; Bank of Commerce v. Tennesse 161 US 134 and Karachi Development Authority v. Central Board of Revenue through Members Central Excise and Land Customs, Islamabad and others 2005 PTD 2131 ref.

(b) Interpretation of statutes---

----Fiscal statute---Exemption clause---Scope---While interpreting an exemption clause, plain language is to be considered and implications are not allowed---Conditions stipulated in exemption clause must be fulfilled---In case of any doubt or two possible interpretations, the one favouring chargeability of tax is to be employed---Exemption presupposes chargeability.

Collector of Customs and others v. Ravi Spinning Ltd. and others 1999 SCMR 412 rel.

Rana Muhammad Afzal for Applicants (in P.T.Rs. Nos. 69, 70 and 71 of 2014).

Ibrar Ahmad for Applicants (in P.T.Rs. Nos. 364, 365 and 366 of 2013).

Ch. Muhammad Yasin Zahid and Liaquat Ali Chaudhry for Applicants (in I.T.Rs. Nos. 477 to 482 of 2015).

Muhammad Iqbal Hashmi and M. M. Akram for Respondents (in P.T.Rs. Nos. 364, 365 and 366 of 2013).

Muhammad Ajmal Khan for Respondents (in I.T.Rs. Nos. 477, 478 and 479 of 2015).

Dr. Ishtiaq Ahmad Khan, Commissioner Inland Revenue, LTU, Lahore.

Muhammad Yasir Pirzada, Additional Commissioner Inland Revenue, Lahore.

2017 P T D 590

[Lahore High Court]

Before Shahid Karim, J

Messrs IQBAL AND SONS through Authorized Representative

Versus

FEDERATION OF PAKISTAN through Secretary and 3 others

W.P. No.24062 of 2016, decided on 27th September, 2016.

(a) Interpretation of statutes---

----Redundancy/superfluity---Principle---Redundancy and superfluity cannot be attributed to legislature and effect must be given to every provision---Court was not to lay a challenge to legislative policy as reflected in various provisions of statues---Function of Court is in fact to give effect to such provisions.

(b) Maxim---

----Verba cum effectu sunt accipienda---Scope---Every word and every provision is to be given effect---None should be ignored and not to be given an interpretation that causes it to duplicate another provision or to have no consequence.

Reading Law: The Interpretation of Legal Texts by Antonin Scalia and Bryan A. Garner and United States v. Butler 297 US 1, 65 rel.

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

----Ss. 25 & 38---Notice---Inspection of record---Petitioners were aggrieved of the notices issued by authorities to inspect their record under the provisions of S. 38 of Sales Tax Act, 1990---Plea raised by petitioners was that without recourse to the provisions of S. 25 of Sales Tax Act, 1990, notice to inspect record could not be issued---Validity---Provision of S. 38 of Sales Tax Act, 1990, was a self-executing provision and could be set in motion without recourse to S. 25 of Sales Tax Act, 1990---When there were allegations of tax fraud or evasion of tax, the provision of S. 38 could not be invoked unless an opinion was formed under S. 25 of Sales Tax Act, 1990, by Commissioner concerned---Petitioners were informed of the requisite cause for inspection to be carried out under S. 38 of Sales Tax Act, 1990---Officer who was appointed was a properly authorized officer---Provision of S. 25 of Sales Tax Act, 1990, was an independent provision and was relatable to S. 38 of Sales Tax Act, 1990, in limited circumstances and did not impinge upon or detract from independent standing of S. 38 of Sales Tax Act, 1990---Notices under S. 38 of Sales Tax Act, 1990, served upon petitioners were valid and proper and there was no cause for interference in such notices by High Court in exercise of Constitutional jurisdiction---Petition was dismissed in circumstances.

Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd. 2005 PTD 1933; Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others v. Messrs Master Enterprises (Pvt.) Ltd. through Managing Director 2003 PTD 1034; Messrs Ihsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 2003 PTD 2037; Messrs Firdous Cloth Mills (Pvt.) Ltd. through Company Secretary v. Federation of Pakistan through Ministry of Finance and others 2016 PTD 257 and A.M.Z. Spinning and Weaving Mills (Pvt.) Ltd. through Manager Finance v. Federation of Pakistan through Secretary, Revenue Division/Ex-Officio Chairman, C.B.R., Islamabad and 2 others 2009 PTD 1083 distinguished.

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

----S. 38---Inspection of record---Authorized officer, powers of---Scope---Powers of authorized officer do not travel beyond inspection of record maintained by a person---Such power cannot be stretched to be employed as tool to harass that person or to use it as an element of intimidation for a collateral purpose.

Muhammad Mohsin Virk, Hassan Kamran Bashir and Kh. Mahmood Ayaz for Petitioners.

Muhammad Almas, Asjad Saeed, Shahid Sarwar Chahil and Sarfraz Ahmad Cheema for Respondents.

2017 P T D 627

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

Messrs FLYING CEMENT COMPANY LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and others

S.T.R. No.46 of 2011, decided on 7th September, 2016.

(a) Interpretation of statutes---

----Fiscal law---Machinery provision---Scope---Machinery provision is to be construed liberally for achieving purpose of statute.

Deans Associates (Pvt.) Limited v. Inspecting Additional Commissioner of Income-Tax, Range No.1, Company Zone I, Lahore 2002 PTD 441; Commissioner of Income-Tax and Wealth Tax, Sialkot Zone Sialkot v. Messrs Thapur (Pvt.) Sialkot 2002 PTD 2112 and L.T-Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty and others PLD 1961 SC 119 rel.

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

----Ss. 2 (46) (b), 9 & 47---Reference---Commission on sales---Trade discount---Scope---Grievance of applicant company was that after issuance of sale invoice in respect of supplies some adjustments of commission was paid subsequently through 'debit credit note'---Validity---After issuance of tax invoice, events permissible under law were dealt with under S. 9 of Sales Tax Act, 1990---Applicant was registered person who paid commission on achieving given target of sale/purchase by recipient of supplies and the same was not known at the time of issuing invoice---Trade discount, as envisaged in S.2(46)(b) of Sales Tax Act, 1990, was different in nature from commission assertively paid by applicant and it was to be determined whether commission paid after issuance of invoice was permissible under law---Such aspect was not delineated upon by Appellate Tribunal Inland Revenue, therefore, matter was remanded to the Tribunal for determination, keeping in view the interpretation of S. 9 of Sales Tax Act, 1990---High Court answered the question in negative which was in favour of the applicant---Case was remanded in circumstances.

Rana Muhammad Afzal for Applicant.

Sarfraz Ahmad Cheema for Respondents.

2017 P T D 636

[Lahore High Court]

Before Shahid Karim, J

PEPSI-COLA INTERNATIONAL (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.24827 of 2012, decided on 19th December, 2016.

(a) Federal Excise Act (VII of 2005)---

----S. 14(1)---Sales Tax Act (VII of 1990), S. 11---Income Tax Ordinance (XLIX of 2001), Ss. 122(5) & (9)---Constitutional of Pakistan, Art. 199---Constitutional petition challenging issuance of show-cause notices by Revenue department---Maintainability---Plea of Revenue department was that when proceedings for adjudication of assessment and recovery of taxes and duties had been set in motion by the officers empowered to undertake such adjudication under the Federal Excise Act, 2005, the Sales Tax Act, 1990 and the Income Tax Act, 2001, Constitutional petition should not be entertained by the High Court---Validity---Generally, when proceedings for assessment and recovery had commenced, the same could not be challenged in the Constitutional jurisdiction of High Court unless the proceedings were without jurisdiction/authority, or, the statutory functionary had acted in a mala fide, unjust and oppressive manner---Present Constitutional petition was maintainable, in that, petitioner-company had alleged that the proceedings which had been initiated by the impugned show-cause notices were without jurisdiction and that the dispute between the parties was in respect of fiscal right based on a statutory instrument---Constitutional petition was held to be maintainable accordingly.

Murree Brewery Co. Ltd. v. Pakistan and others PLD 1972 SC 279; Chairman, Central Board of Revenue v. Pak-Saudi Fertilizer Ltd. 2001 SCMR 777; Collector of Customs, Lahore v. S.M. Ahmed and Co. 1999 SCMR 138; Pak Land Cement v. Central Board of Revenue 2007 PTD 1524; 2011 PTD 2260; 2009 PTD 1392 and 2012 PTD 1374 ref.

(b) Federal Excise Act (VII of 2005)---

----Ss. 2(46)(e), 12 & 14---Sections "12" & "14" of the Federal Excise Act, 2005---Distinction---Sections 12 & 14 of the Federal Excise Act, 2005 had different connotations and dealt with separate situations---Tenor of S. 12 was with regard to the assessment of duty of excise (by the department)---Section 12 made reference to S. 2(46)(e) of the Federal Excise Act, 2005; the latter dealing with assessment to be done by the department independent of the assessment done by the person liable to duty---Commissioner was empowered to set up a Valuation Committee if there was sufficient reason to believe that the value of supply has not been correctly declared in the invoice---Section 14, on the other hand, was clearly concerned with the recovery of unpaid duty and this was a stage which came after the assessment had been made---Section 14 applied where any person had not levied or paid any duty or had short levied or short paid such duty or where any amount of duty had not been refunded, and it was only then that such person shall be served with a notice requiring him to show cause for payment of such duty---Section 14 related to the service of notice of show cause and the determination of the amount of duty payable by such person.

(c) Federal Excise Act (VII of 2005)---

----Ss. 8, 12(1), 14 & 19---Sales Tax Act (VII of 1990), Ss. 2(46), 11(2), 33, 34 & 36(1)---Income Tax Ordinance (XLIX of 2001), Ss. 122(5) & (9)---Evasion of excise duty, sales tax and income tax---Issuance of show-cause notice, legality of---Valuation of goods by Valuation Committee---Scope---Beverage-company had granted franchise rights to certain bottlers---Company was not involved in the actual production, bottling and distribution of the finished beverages but only sold and supplied the concentrate to make the beverage---Company and the bottlers had entered into a marketing and advertising agreement ("marketing agreement") which set out the mutually agreed marketing and advertising commitments of company and each of the bottlers---Revenue department issued show-cause notices to the company alleging that the company understated the value of the concentrate sold to bottlers by splitting the cost of advertising / marketing incurred by the bottlers on its behalf from the actual cost of the concentrate; that the bottlers/franchisers under the garb of marketing agreement actually received cash payments as reimbursement for advertising and marketing undertaken for and on behalf of the company; that the amount incurred on marketing and advertising by the bottlers had to be considered as having been incurred on behalf of company and, therefore, be part of the price of the concentrate sold by the company for the purposes of calculating sales tax, excise duty and income tax---Validity---Assessment of duty had to precede the recovery of the unpaid duty under S. 14 of the Federal Excise Act, 2005---Since the Revenue department was not satisfied with the assessment of duty made by the company it ought to have invoked the provisions of S. 2(46)(e) of the Sales Tax Act, 1990 and resort should have been made to said provision, which was not done in the present case---Issuance of the notice under S. 14 was, thus, incompetent and ultra vires---Principle regarding assessment and recovery being two distinct and separate incidents applied equally to the duty levied under the Federal Excise Act, 2005 as also the sales tax in terms of the Sales Tax Act, 1990---Both involved the liability of the duty and the tax as the case may be to be paid at the rate which was dependent on the value of the goods and, therefore, a reference to the Valuation Committee set up under S. 2(46)(e) of the Sales Tax Act, 1990 was a prerequisite ahead of any recovery proceedings which were to be set in motion by the department---Without any assessment, there could not be any recovery---High Court directed that the Commissioner shall, by proceeding under S. 2(46)(e) of the Sales Tax Act, 1990, set up a Valuation Committee, which shall make a determination of the value of the concentrate on which the duty under the Federal Excise Act, 2005 and the tax under the Sales Tax Act, 1990 was to be assessed; that upon the assessment of the duty and taxes, the department shall proceed on the impugned show-cause notices accordingly; that the impugned notices shall be held in abeyance till the time the Valuation Committee returned its findings and thereafter the proceedings shall be dependent on the valuation so made by the Committee; that the impugned show-cause notice with regard to the allegation of evasion of excise duty may only be proceeded with by the officer concerned and company may take all objections available to it in reply to the show-cause notice which will be considered on its own merits by the concerned officer, and that the show-cause notices dealing with amendment in income tax returns of the company shall also be held in abeyance till the determination by the Valuation Committee and thereafter shall take their own course in terms of the conclusion drawn by the Valuation Committee---Constitutional petition was allowed accordingly.

(d) Interpretation of statute---

----"Purposive interpretation---Scope---Purposive interpretation rested on the premise that law was enacted to fulfill a purpose.

Khalid Anwar, Muhammad Raza Qureshi Jawad Qureshi and Asad Hussain for Petitioners.

Nasar Ahmad D.A.G. for Respondents.

Sarfraz Ahmad Cheema and Liaqat Ali Chaudhry for Respondent-department along with Dr. Ishtiaq Ahmad, CIR for Respondents.

2017 P T D 665

[Lahore High Court]

Before Abid Aziz Sheikh, J

AN INDUSTRIES (PVT.) LTD. through Director

Versus

FEDERATION OF PAKISTAN through Secretary and others

W.Ps. Nos.1671, 1283, 5742, 7224, 8158 and 13555 of 2014, heard on 27th October, 2016.

(a) Interpretation of statutes---

----Circular by Federal Board of Revenue---Subordinate legislation---Scope---If subordinate legislation by regulator is in excess of provision of statute or is in conflict with substantive provision of law under which Circular was issued, then that subordinate legislation must be regarded as ultra vires of substantive provision and statute.

(b) Constitution of Pakistan---

----Art. 199---Judicial review---High Court, powers of---High Court in judicial review can always examine question as to whether subordinate legislation is within the parameters of substantive provision and statute under which such order/circular was issued.

Suo Motu Case No.11 PLD 2014 SC 389 and Suo Motu case No.13 of 2009 PLD 2011 SC 619 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 206, Second Schedule, Part-IV, Cl. 72B---FBR Circular No. 8 dated 3-9-2013---FBR Circular No.12 dated 11-11-2013---Exemption certificate---Imposing of conditions through Circulars---Taxpayer was aggrieved of FBR Circular No. 8 dated 3-9-2013 and Circular No.12 dated 11-11-2013, on the plea that the same were against the provision of Cl. 72B of Part-IV, Second Schedule, to Income Tax Ordinance, 2001---Validity---Federal Board of Revenue under S. 206 of Income Tax Ordinance, 2001, could not clothe itself with power which the statute itself did not give to it---Federal Board of Revenue had no jurisdiction to introduce condition No. (iii) in Cl. 72B of Part-IV, Second Schedule, to Income Tax Ordinance, 2001, through Circulars in issue---High Court declared condition No. (iii) of Circular 8 dated 3-12-2013, as ultra vires of the powers of Federal Board of Revenue, as well as against the provision of Cl. 72B of Part-IV, Second Schedule, to Income Tax Ordinance, 2001---Constitutional petition was allowed in circumstances.

Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 and Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 PTD 766 ref.

(d) Interpretation of statutes---

----Amendment in statute is meant to bring change in law.

K.G. Old, Principal, Christian Technical Training Centre, Gujranwala v. Presiding Officer, Punjab Labour Court, Northern Zone and 6 others PLD 1976 Lah. 1097 and Prime Commercial Bank and others v. Assistant Commissioner of Income Tax 1997 PTD 605 rel.

Khurram Shahbaz Butt for Petitioners.

Liaquat Ali Ch., along with Malik Abdullah Raza, Sarfraz Ahmad Cheema for Respondents.

2017 P T D 675

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, SPECIAL ZONE, R.T.O., MULTAN

Versus

Messrs ARAIN FIBERS LTD.

S.T.R. No.7 of 2014, decided on 15th June, 2016.

Sales Tax Act (VII of 1990)---

----Ss.33, 34 & 47---Sales Tax Rules, 2002, R.6 (3)---Notification No. S.R.O. 1271(I)/96, dated 10-11-1996---Reference---Instalments of duty---Promissory estoppel---Authorities alleged that taxpayer was not entitled to claim adjustment or refund of input tax in respect of such purchases unless he had paid the amount of additional tax or penalty---Validity---Nobody could be allowed to approbate and reprobate in the same breath---After allowing instalments without making it conditional to payment of additional tax and penalty, vested right was created in favour of taxpayer on the theory of 'promissory estoppel' and doctrine of vested rights---Authorities could not be allowed to go against its own conduct and representations/concessions---Once the taxpayer had discharged its liability by way of depositing principal amount of sales tax within the time frame in installments, nothing remained payable as an additional amount on the account of any additional tax/default surcharge and penalty---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue and proposed questions were decided against the authorities---Reference was dismissed in circumstances.

Messrs Bawani Violen Textile Mills v. Commissioner of Income Tax PLD 1967 Kar. 688 ref.

Messrs Syed Bhais v. Chairman, C.B.R. and others 2001 CLC 1445 rel.

M. Tariq Rasheed Qamar for Applicant.

2017 P T D 686

[Lahore High Court]

Before Shahid Jamil Khan, J

NESTLE PAKISTAN LTD. and others

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.32597 of 2015, decided on 9th January, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss. 214C & 237---Sales Tax Act (VII of 1990), Ss.50(1) & 72B---Federal Excise Act (VII of 2005), Ss. 40 & 42B---Selection for audit through random ballot by Federal Board of Revenue ("FBR") under Audit Policy 2015 ("Audit Policy")---Legality---Self-executing provisions---Scope---Plea of petitioners/tax payers was that without framing Rules under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, and the Federal Excise Act, 2005, FBR could not exercise power to select taxpayers for audit---Validity---Non-framing of Rules did not render a statute as a nugatory or unworkable unless the legislation indicated an intention to such effect in clear and unmistakable terms---Section 214C of the Income Tax Ordinance, 2001, S. 72B of the Sales Tax Act, 1990, and S. 42B of the Federal Excise Act, 2005 which empowered the FBR to select taxpayers for audit, were self-executing provisions because, the power and manner of exercising the power had been provided therein, without use of any word showing intention for further/subordinate legislation to carry out the selection---Language of S. 50(1) of the Sales Tax Act, 1990, which bestowed general rule making power to FBR, contained the word "may", conferring discretion upon FBR to make Rules for carrying out the purposes of the said Act---Similar discretion was found invested in corresponding provisions i.e., S. 237 of the Income Tax Ordinance, 2001 and S. 40 of the Federal Excise Act, 2005---Federal Board of Revenue had been empowered to select persons or classes of persons for audit through computer ballot, with additional discretion that the ballot may be parametric or random as FBR may deem fit---Failure on part of FBR to regulate the discretionary powers may not render the exercise of the power to select for audit as illegal ab initio, yet courts would tend to intervene if the exercise of discretionary power appeared to be arbitrary and capricious---Constitutional petition was disposed of accordingly.

Jahangir Mirza v. Government of Pakistan PLD 1990 SC 1013 and M. U. A. Khan v. Rana M. Sultan and another PLD 1974 SC 228 ref.

(b) Interpretation of statutes---

----Self-executing provision---Meaning and scope---Provision was self-executing if rights granted or duties imposed were enforceable in absence of any supplementary legislation i.e. if manifest intention was found in language of the provision that power conferred should go into immediate effect and no ancillary legislation was necessary---Provision was not self-executing if it indicated merely a line of policy or principles, without giving means by which such policy or principles were to be carried into effect, or it was directed in the provision for framing of Rules through delegated powers to enforce the rights, duties or powers given therein---Discretionary powers, even under a self-executing provision, needed to be structured to ensure just, fair and transparent exercise of discretionary powers.

Hakim Khan and 3 others v. Government of Pakistan through Secretary Interior and others PLD 1992 SC 595; SOSA v. Alvarez-Machian ET AL 542 U.S. 692 (2004); Timber Development, Inc. v. Wunnicke, Commissioner, Department of Natural Resources of Alaska, ET AL. 467 U.S. 82 (1984); Government of N.-W.F.P. through Secretary and 3 others v. Majee Flour Mills (Private) Limited 1997 SCMR 1804 and Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan through Secretary Ministry of Finance, Central Secretariat, Islamabad and others 2015 SCMR 630 ref.

(c) Discretion---

----Exercise of---Discretionary powers, even under a self-executing provision, needed to be structured to ensure just, fair and transparent exercise of discretionary powers.

Government of N.-W.F.P. through Secretary and 3 others v. Majee Flour Mills (Private) Limited 1997 SCMR 1804 and Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan through Secretary Ministry of Finance, Central Secretariat, Islamabad and others 2015 SCMR 630 ref.

(d) Words and phrases---

----"Audit"---Definition.

Black's Law Dictionary 9th Edn. P.150 ref.

(e) Words and phrases---

----"Tax audit"---Definition.

Black's Law Dictionary 9th End. P.150 ref.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 & 214C---Sales Tax Act (VII of 1990), Ss. 11 & 72B---Federal Excise Act (VII of 2005), Ss. 14 & 42B---"Audit"---Scope and significance---For tax administration, audit was a fundamental and necessary approach to address non-compliance issues---Scope of audit had travelled beyond mere verification of correct reporting by the taxpayers and raising revenue directly from audit activities---Besides creating deterrence by punishing the defaulting taxpayer, an effective audit program pinpointed non-compliant trends; defects in the system, ambiguities in practice and the law---On the basis of gathered information and intelligence from an effective audit, and its publication, future tax administration could be reshaped; necessary steps could be taken to suggest curative legislation and clarifications of ambiguous practices---Gathered information could also be used to scrutinize record of the taxpayers, not selected for audit, for recovery of evaded tax by invoking respective provisions of the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, and the Federal Excise Act, 2005---Results achieved from effective audit program may also help to improve risk management techniques and determine 'parameters' for future selection of high risk cases for audit.

(g) Income Tax Ordinance (XLIX of 2001)---

----S. 214C ---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Selection for audit---Audit Officer, role of---Scope---Role of audit officer was to dig out the instances of tax evasion and non-compliance to the statutory provisions causing tax evasion; his role finished on issuance of Audit Report, after seeking explanation, based on which further action was to be taken by an officer having quasi-judicial power of adjudication---Asking an Audit Officer to raise demand and making monthly collection through qualitative indicator was alien to the scope and concept of audit---Any plea bargain to drop audit proceedings, if certain percentage of extra tax was paid, was against the provisions, in the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, and the Federal Excise Act, 2005, dealing with audit---Selection for audit could not and should not be allowed to be used for raising revenue simpliciter, without conducting any audit and preparation of Audit Report.

(h) Income Tax Ordinance (XLIX of 2001)---

----S. 214C ---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Selection for audit---Constitution of Pakistan, Arts. 10A & 175(3)---'Audit' and 'adjudication'---Distinction---To maintain separation between administrative and judicial powers, as envisaged in Art. 175(3) of the Constitution, it was necessary that quasi-judicial proceedings against a taxpayer were carried out by a taxation officer other than Audit Officer who conducted the audit because adjudication and audit were separate proceedings under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, and the Federal Excise Act, 2005---Procedural standards, under judicial or quasi-judicial proceedings, were different from standards of administrative proceedings---Audit was an inquiry/investigation of the tax affairs whereas adjudication needed to satisfy the requisites of fair trial as guaranteed to the taxpayer under Art.10A of the Constitution.

(i) Income Tax Ordinance (XLIX of 2001)---

----S. 214C ---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Selection for audit---Federal Board of Revenue, Audit Policy, 2015, Cl. 3.19---Practice of keeping audit proceedings pending beyond the period (of one year)---High Court deprecated such practice by observing that to keep an audit proceedings pending beyond the period given in Audit Policy meant; either FBR was not interested to conduct audit or lacked capacity to audit in the given period; that sword of being audited could not be allowed to hang over a taxpayer for an unspecified period, and that such exercise of power was indeed arbitrary and gave room to capriciousness, like dropping the selection for audit if payable tax was enhanced by the taxpayer---Constitutional petition was disposed of accordingly.

(j) Income Tax Ordinance (XLIX of 2001)---

----S. 214C ---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Selection for audit---Plea that certain business sectors had a ninety to hundred percent chance of being selected for audit, therefore, the alleged random selection through computer ballot lacked transparency and fairness---Validity---Results of random selection alone were not enough to establish any malpractice---Even otherwise, Federal Board of Revenue had been given sufficient power to select 'person or classes of persons', hence selection of one business sector through computer ballot was not in excess of the mandate given to the Board---Constitutional petition was disposed of accordingly.

(k) Income Tax Ordinance (XLIX of 2001)---

----S. 214C ---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Federal Board of Revenue Act (IV of 2007), S. 7---Federal Board of Revenue, Audit Policy, 2015---Selection for audit---High Court issued directions for ensuring consistency, transparency, fairness and certainty of procedures in selection of taxpayers for audit by the Federal Board of Revenue.

High Court gave the following directions for ensuring consistency, transparency, fairness and certainty of procedures in selection of taxpayers for audit by the Federal Board of Revenue:

i. A taxpayer selected and audited in preceding tax year/ period shall not be selected and audited without giving reasons for such selection. Federal Board of Revenue ("FBR") shall enhance its capacity to audit a selected taxpayer for last five years to give respite from consecutive selections.

ii. Audit, being administrative proceedings, shall be complete on issuance of Audit Report. If audit was not completed within the given time frame, the selection shall be deemed to have been dropped. After issuance of Audit Report, adjudication proceedings shall be carried out by some other taxation officer to satisfy the Constitutional right of "fair trial".

iii. After selection for audit, any demand for increase in payable tax to drop audit proceedings was not only against the scope and spirit of audit but was in violation of the provisions relating to audit under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, and the Federal Excise Act, 2005.

iv. The audit shall be conducted in accordance with "Income Tax Manual Part V" and "Sales Tax Audit Hand Book" and such procedure for conduct of audit shall be incorporated in the Rules for Selection and Conduct of Audit.

v. Remedy against any grievance, regarding selection or conduct of audit, under section 7 of the Federal Board of Revenue Act, 2007 shall, henceforth, be read as part of every Audit Policy and its procedure should be incorporated in the Rules for Selection and Conduct of Audit.

vi. The decision, directions and observations made in the present judgment shall be followed while implementing the Audit Policy, 2015 and future audit policies.

By Petitioners.

Imtiaz Rashid Siddiqui, Barrister Shehryar Kasuri, Muhammad Humzah, Mansoor Usman Awan, Rana Muhammad Afzal, Rana Munir Hussain, Shahbaz Butt, Khurram Shahbaz Butt, Shehzad Ata Elahi, Shahid Pervez Jami, Mudassar Shuja-ud-Din, Ch. Muhammad Ali, Hassan Kamran Bashir, Mian Ashiq Hussain, H. M. Majid Siddiqi, Salman Akram Raja, Dr. Ilyas Zafar, Syed Nasir Ali Gillani, Salman Zaheer Khan, Navid A. Andrabi, Khurram Saleem, Ijaz Ahmad Awan, Nauman Mushtaq Awan, Sajjad Ahmad Awan, Mahvish Tahira, Muhammad Raza Qureshi, Shezada Mazhar, Asad Raza, Hamid Shabbir Azar, Khalil-ur-Rehman, Suhail Raza Arbey, Hafiz Muhammad Saif-ur-Rehman, Shahbaz Siddique, Abdul Waheed Habib, Ms. Ayesha Rasheed, Iftikhar Ahmad Mian, Salman Ahmad, Mian Haseeb-ul-Hassan, Ali Sufyan Faiz, Muhammad Naveed, Muhammad Nauman Yahya, Shabbir Goraya, Rana Muhammad Arshad Khan, Kh. Mehmood Ayaz, Muhammad Azam Chughtai, Nadeem Ahmad Sheikh, Ahmed Tariq, Muhammad Aamir Qadeer, Rao Tahir Shakeel, Muhammad Ali, Majid Jahangir, Jan Muhammad Chaudhry, Waheed Shahzad Butt, Muhammad Maroof Mittha, Rasheed Ahmad Sheikh, Shoaib Ahmad Sheikh, Kamran Shahid, Arslan, Riaz, Shahid Hussain Chaudhry, Muhammad Imran Rasheed, Yawar Mehdi Naqvi, Imtiaz Ahmad Butt, Muhammad Ijaz Ali Bhatti, Muhammad Ajmal Khan, Sumaira Khanum, Javed Iftikhar Ahmad Ansari, Malik Atif Imran Khokhar, Javed Iqbal Qazi, Usman Javed Qazi, Faisal Hanif, Muhammad Riaz, Muhammad Waseem, Muhammad Mohsin Virk, Muhammad Ahsan Virk, Muhammad Mansha Sukhera, Muhammad Ali Awan, Sirdar Ahmad Jamal Sukhera, M. Iqbal Hashmi, M. M. Akram, Sumair Saeed Ahmad, Waseem Ahmad Malik, Muhammad Naeem Munawar, Sheikh Aqeel Ahmad, Saood Nasrullah Cheema, Muhammad Shahid Baig, M. Azam Shahid Malik, Ashiq Ali Rana, Muhammad Saad Khan, Afzal Bhatti, Hassan Shakil, Mustafa Kamal, Hasham Aslam Butt, Mehar Alam Sher, Abdul Quddus Mughal, Mian Mahmood Rashid, Monim Sultan, Muhammad Nasir Khan, Mirza Anwar Baig, Mirza Bilal Zafar, Masood Ahmad Wahla, Ghulam Murtaza, Ch. Maqbool Hussain, Shafiq Ahmed Chawla, Muhammad Afzal Sulehri, Kamran Khalil, Zaheer-ud-Din Babar, Muhammad Ramzan, Muhammad Farooq Sheikh, Kashif Siddique Bhatti, Malik Fida Hussain, Malik Ahsan Mehmood, Muhammad Shabbir Hussain, Usman Ali Bhoon, Mubashir Rehman, Barrister Kashif Rafiq Rajwana, Zulfiqar Ali Khan, H. M. Azhar Ali, Sayyid Ali Imran Rizvi, Rana Muhammad Zubair Rafique, Amir Umer, Shahid Umer, Tariq Mehmood Ansari, Zaeem-ul-Farooq Malik, Habib-ur-Rehman, Inamul Haq Sheikh, Mustafa Raza Ansari, Naeem Khan, Zahid Ateeq Ch., Munawar-us-Salam, Mahmood Ahmad, Malik Muhammad Arshad, Mian Mansoor Ahmad, M. Mukhtar Nadeem Ch., Muhammad Usman Hafeez, Abdul Hafeez Ansari, Nadeem Kausar, Ahmad Bilal, Barrister Zurgham Lukhesar, Mian M. Shakeel Ahmad, Syed Naeem-ud-Din Shah, Amir Umar Khan, Iqbal Qazi, Atif Imran, Muhammad Arif Latif, Rana Shahzad Khalid, Waqas Latif, Touseef Hider, M. Shahbaz Ahmad, Ch. Naveed Akhtar Bajwa, Muhammad Saqib Sheikh, Agha Sarfraz Ahmad, Farhan Shahzad, Sami Ullah Zia, Khurram Abbas Sheikh, Zafar Iqbal Chohan, Ghulam Rasool Sial, Waseem Ahsan, Aurangzeb Tahir, Rana Muhammad Imran Qamar, Syed Alamdar Hussain, Mirza Mubasher Baig, M. Mubashar Khalid Hajvery and Haseeb Zia Ch. for the Petitioners in connected writ petitions.

By Respondents.

Sarfraz Ahmad Cheema, Mian Qamar-ud-Din Ahmad, Raja Sikandar Khan, Izharul Haque, Ch. Muhammad Zafar Iqbal, Muhammad Nawaz Waseer, Muhammad Asif Hashmi, Liaquat Ali Chaudhry, Muqtadir Akhtar Shabbir, Asjad Saeed, Nasir Mahmud, Muhammad Yahya Johar, Ch. Imtiaz Elahi, Akhtar Ali Monga, Barrister Pirzada Aurangzaib, Ibrar Ahmad, Muhammad Amir Malik, Qamar Farooq, Waqar A. Sheikh, Rana Muhammad Mehtab, Saeed-ur-Rehman Dogar, Imran Rasool, Hafiz Shahzad Ahmad Cheema, Malik Abdullah Raza, Ch. Muhammad Yasin Zahid, Muqtedir Akhtar, Hashim Aslam Butt, Shahid Sarwar Chahil, Ms. Foziya Bukhsh, Javed Athar, Muhammad Awais Kamboh, Khawar Bharwanah, Muhammad Akram Awan and Rizwan Khalid Awan for the Respondents in connected petitions.

Tahir Mehmood Khokhar, Standing Counsel for Pakistan.

Dr. Hamid Attique, Commissioner LTU, Zone-II, Lahore.

Tariq Chaudhry, Commissioner LTU Zone-III, Lahore.

Dr. Ishtiaq Ahmad Khan, Commissioner Inland Revenue, LTU, Lahore.

Aftab Ahmad Khan, Member Audit, FBR.

Khalid Sultan, Deputy Secretary Audit, FBR.

2017 P T D 753

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COLLECTOR OF CUSTOMS (APPEALS)

Versus

Messrs SAINT ANTHONY COLLEGE and 3 others

Custom Reference No. 68 of 2016, decided on 24th January, 2017.

(a) Customs Act (IV of 1969)---

---S. 201(1)---S.R.O No.172(I)/2013 dated 05-03-2013---Auction of vehicle by customs department despite stay order by Customs Appellate Tribunal ("Tribunal")---Tribunal had ordered return of the sale proceeds of the auctioned vehicle to the purchaser---Question as to whether the Tribunal passed the order without determining as to whether the vehicle qualified for the Amnesty Scheme for vehicles introduced vide S.R.O. No.172(I)/2013 dated 05.03.2013 or not---Tribunal had rightly observed that despite having conveyed stay orders to the concerned official quarters, the vehicle in question was auctioned---Customs department purportedly sent a pre-auction notice but there was nothing on record to show that it was received by the concerned officials---High Court directed that the Collector Customs should conduct an enquiry as to why the vehicle was auctioned while a stay was in field and it was in the knowledge of the department, and further as to why it was not ensured that a notice was issued to the concerned officials---Reference application was disposed of accordingly.

(b) Customs Act (IV of 1969)---

----S. 196---Reference before High Court---Scope---While exercising jurisdiction in terms of S.196 of the Customs Act, 1969 the Court was required to examine only question of law, which may arise from the order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereas, the question of fact could not be examined under its reference jurisdiction.

Messrs Pak Suzuki Motor Company Limited, Karachi v. Collector of Customs, Appraisement Collectorate, Custom House, Karachi 2015 PTD 2600 ref.

2017 P T D 761

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

Messrs HAFIZ STEEL FURNACE and 4 others

Versus

DIRECTORATE OF INTELLIGENCE AND INVESTIGATION FBR and 2 others

Custom Reference No.3 of 2017, decided on 24th January, 2017.

(a) Customs Act (IV of 1969)---

----S. 156(1)(89)---S.R.O. No.499(I)/2009 dated 13-06-2009---Smuggled goods, confiscation of---Importer had admitted smuggling of the goods as he had requested for their release against payment of duties and tax along with some suitable fine---Revenue department objected to the release of the goods as the same fell within the ambit of "smuggled goods" hence, their release would be derogatory to S.R.O. No.499(I)/2009 dated 13th June, 2009---Order of adjudicating authority with regards to outright confiscation of the smuggled goods in terms of S. 156(1)(89) of the Customs Act, 1969 was upheld---Reference was disposed of accordingly.

(b) Customs Act (IV of 1969)---

---S. 156(1)(89)---S.R.O. No.499(I)/2009 dated 13-06-2009---Confiscation of vehicle transporting smuggled goods---Legality---Trailer/transport vehicle (on which smuggled goods were being transported) could not be confiscated as a strict and necessary consequence, in absence of any evidence of involvement of the owner or driver thereof in the impugned offence---Outright confiscation of trailer, in the present case, tantamount to travesty of justice---High Court directed that the trailer should be released unconditionally to its lawful owner---Reference was disposed of accordingly.

(c) Customs Act (IV of 1969)---

----S. 196---Reference before High Court---Scope---While exercising jurisdiction in terms of S. 196 of the Customs Act, 1969 the Court was required to examine only question of law, which may arise from the order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereas, the question of fact could not be examined under its reference jurisdiction.

Messrs Pak Suzuki Motor Company Limited, Karachi v. Collector of Customs Appraisement Collectorate, Custom House, Karachi 2015 PTD 2600 ref.

2017 P T D 768

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER OF INCOME TAX

Versus

PAK CHINA CHEMICALS (AOP)

P.T.R. No.283 of 2007, decided on 10th January, 2017.

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Third Sched. Rr. 5A, 5B & 5C---Depreciation allowance---Association of Persons (AOP)---Whether the term 'industrial undertaking' as used in Rr. 5A, 5B & 5C of the Third Schedule to the Income Tax Ordinance, 1979 included an Association of Persons (AOP)---Rule 5B of the Third Schedule to the Income Tax Ordinance, 1979 was applicable to industrial undertakings; R. 5C of the Schedule, applied to only those industrial undertakings as referred to in R. 5A---Rule 5A of the Schedule was applicable only to the industrial undertakings owned and managed by a company---Association of Persons(AOP) being not a limited company, therefore, it was not entitled to the benefit of R.5C of the Third Schedule of Income Tax Ordinance, 1979.

2017 P T D 774

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

CRESCENT SUGAR MILLS AND DISTILLERY LTD.

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, LAHORE and others

I.T.R. No.320 of 2016, decided on 31st January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to High Court---Scope---Question of law---Grounds raised as questions of law had been repeatedly urged before all other forums and were considered in all the orders---No question of law was made out, High Court declined to exercise its jurisdiction under S.133 of the Income Tax Ordinance, 2001---Reference was decided against the taxpayer.

Khurram Shahbaz Butt for Applicant.

2017 P T D 793

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs ALBA INTERNATIONAL

Custom Reference No.1 of 2017, decided on 17th January, 2017.

Customs Act (IV of 1969)---

----S.196---Reference to High Court---Jurisdiction of High Court under S.196 of the Customs Act, 1969---Nature and scope---Department contended that certain questions of law had arisen out of the order of Appellate Tribunal---Interpretation given by the Appellate Tribunal in its order being clearly in accordance with law, no question of law arose---High Court declined to exercise its jurisdiction under S.196 of the Customs Act, 1969---Reference was decided against the taxpayer, accordingly.

Pfizer Laboratories v. Federation of Pakistan PLD 1998 SC 64 rel.

2017 P T D 795

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER OF INCOME TAX and others

Versus

MUBASHAR SHEIKH, CITY TOWERS

P.T.R. No.670 of 2008, decided on 25th November, 2016.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 148(1), 148(2), 170 & 133 ---Advance tax paid to a collection agent---Imports---Value of supply---Question before the High Court was whether for purpose of calculating tax under S. 148(1) of the Income Tax Ordinance, 2001, value of imported goods shall be the value minus the customs duty or sales tax, if levied thereon---Held, advance tax was to be collected at import stage from the importer on the "value of goods" and such "value of goods" was defined in S. 148(9) of the Income Tax Ordinance, 2001, which clearly stated that the ad valorem duty shall be increased by payable taxes on imported goods---Tax envisaged under S. 148(1) of the Income Tax Ordinance, 2001 was an advance tax at specified rate of "value of supply" as defined by S. 148(9) of the Income Tax Ordinance, 2001 and such advance tax had to be adjusted against final tax liability of taxpayer and unadjusted amount was liable to be refunded after determination under S. 170 of the Income Tax Ordinance, 2001---Argument that tax payable included in the "value of supply" was not "income", was misconceived, as firstly it was included in value of supply and secondly; it had to be adjusted if not subject to tax under the Final Tax Regime, where tax withheld was taken to be final tax under fiction of law---Reference was answered accordingly.

Messrs Ramma Pipe and General Mills (Pvt.) Limited through its Director v. The Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 1994 PTD 848; CIT v. Crescent Steel and Allied Products Ltd. PTR No.136 of 2006 and Deputy Collector of Customs, Railway Station, Lahore v. Messrs Abdul Ghaffar Abdul Rehman and others 2005 PTD 194 distinguished.

(b) Interpretation of statutes---

----Mandatory provision of a statute, if ignored, was tantamount to transgressing on the express provision of law and was against the spirit of Legislation---Statute or provision thereof was to be construed so as to make it workable and any construction which defeated the main scheme of law, was to be avoided---Court was to interpret the law as it stood and redundancy must not be attributed to a statute or provision thereof---Every word or expression had to be given meaning and questions essentially relating to the wisdom of Legislature in enacting law, were the exclusive prerogative of the Parliament.

Abdul Razzaq Khokhar v. Province of Punjab through Secretary to Government of Punjab and others 1990 SCMR 183; Market Committee Khudian through its Administrator v. Town Committee Khudian through its Chairman 1992 SCMR 1403; Qazi Hussain Ahmad, Ameer Jamaat-e-Islami Pakistan and others v. General Pervaiz Musharraf, Chief Executive and others PLD 2002 SC 853; Aftab Shahban Mirani and others v. Muhammad Ibrahim and others PLD 2008 SC 779; District Bar Association, Rawalpindi and others v. Federation of Pakistan and others PLD 2015 SC 401; Messrs Habib Rafiq (Pvt.) Ltd. through Authorized Representative v. Government of Punjab and another PLD 2015 Lah. 34 and Pakistan Telecommunication Company Ltd. v. Pakistan Telecommunication Authority PLD 2015 Isl. 184 and Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484 rel.

(c) Precedent ---

----Order passed by consent of parties did not constitute a binding precedent.

(d) Interpretation of statutes ---

----No estoppel against clear provision of law---Explicit provision of law could not be made redundant by consent of parties or statement by any one of them contrary to statutory provision---Legal provision continued to exist despite any statement to the contrary as there could be no estoppel against clear provision of law---Rules of statutory interpretation did not permit a court to restrict or enlarge the meaning of express words used in a statute and an admission by a party could not create an estoppel against law.

Fauja v. Mst. Karim Khatoon and 6 others 1993 MLD 1078; Muhammad Asif Bangash v. A.S.P., Kohat and 4 others PLD 2005 Pesh. 107; Messrs Habib Bank Ltd. through Attorneys and 2 others v. Messrs Schon Textile Ltd. through Director and 8 others 2010 CLD 1819 and Commissioner of Wealth Tax, Rawalpindi v. Hafiz S. A. Rahman, Rawalpindi 2014 PTD 2063 rel.

(e) Constitution of Pakistan---

----Arts. 189 & 185 ---Decisions of Supreme Court binding on other Courts---Granting of leave to appeal or refusing the same by the Supreme Court had no binding effect against settled principles on an issue, for the reason that the same did not lay down a law to be followed having a binding force, as envisaged under Art. 189 of the Constitution---Only those judgments / orders of the Supreme Court were binding which decided a question of law or enunciated a principle of law.

Kareem Nawaz Khan v. The State through PGP and another 2016 SCMR 291 and Pervaiz Rasheed and others v. Ex-Officio Justice of Peace and others 2016 YLR 1441 ref.

(f) Waiver---

----Waiver of one party did not estop another party from raising legal objections and the same did not get foreclosed merely because of having been waived in another set of proceedings, or even at the same stage in the proceedings.

Imran Rasool for Applicant.

2017 P T D 803

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

MUHAMMAD ASLAM

Versus

FEDERATION OF PAKISTAN and others

I.C.A. No.90 of 2017, decided on 1st February, 2017.

Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---Show-cause notice---Petitioner had impugned the order whereby his Constitutional petition against show-cause notice issued by authorities was dismissed---Validity---No adverse order had been passed against the petitioner and the petitioner should have filed reply and legal objections to the show-cause notice, which would be decided by the authorities---Apprehension that under garb of show-case notice, coercive action would be taken against the petitioner was nothing but an apprehension and High Court in its Constitutional jurisdiction did not act upon mere apprehension---Show-cause notice was just a notice and no substantive right had been infringed---Intra-court appeal of petitioner was dismissed, in circumstances.

Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company (Pvt.) Ltd. 2007 PTD 1347 rel.

2017 P T D 805

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

MUHAMMAD KHALID QURESHI

Versus

PROVINCE OF PUNJAB through Secretary, Excise and Taxation Department, Lahore and another

Writ Petition No.26223 of 2014, decided on 19th October, 2016.

(a) Constitution of Pakistan---

----Art. 25---Equality, doctrine of---Scope---Intelligible differentia---Court, duty of---Legislature has been authorized to make classification on the basis of an intelligible differentia between distinct persons and things grouped together and from those who have been left out, provided it is not arbitrary or capricious---Court cannot demand scientific accuracy for the classification so created by the Legislature---Intelligible classification of persons, things or houses is not repugnant to the equality doctrine as long as the same is not arbitrary or capricious, is natural and reasonable and bears a fair and substantial relation to the objection of the Legislation.

Case-law referred.

(b) Punjab Finance Act (XVII of 2014)---

----S. 8(9)---Constitution of Pakistan, Art.25---Luxury House Tax---Exemption---Scope---Legislature had empowered competent authority to exempt certain individuals/area from payment of luxury tax---Such provisions of law are in consonance with the mandate of the Constitution.

Case-law referred.

(c) Punjab Finance Act (XVII of 2014)---

----S. 8---Punjab Urban Immovable Property Tax Act (V of 1958), S.3(2)---Constitution of Pakistan, Arts.142, 260 & Fourth Schedule, Federal Legislative List, Entry 50---Taxation---Provincial authority---Immovable property---Luxury House Tax, vires of---Double taxation---Petitioners were aggrieved of levy of tax under Punjab Finance Act, 2014, on Luxury Houses---Plea raised by petitioners was that levy of such tax was ultra vires the Constitution---Validity---Provincial Legislature was given exclusive powers under Art.142 of the Constitution, on the subjects not included in Federal Legislative List---Language of Entry No.50 of Federal Legislative List gave the Parliament power to levy taxes on capital value of assets and specifically excluded Parliament to levy taxes on immovable property---Provincial Assembly was vested with exclusive power to levy taxes on immovable property---Federal Legislature, under Entry 50 of the Fourth Schedule to the Constitution, read with Art.142(c) of the Constitution, could tax only capital value of assets---Provincial Legislature was made competent to tax remaining all aspects of immovable property---Interpretation of any legislative entry in Constitution itself had to be broad and liberal---Definition of "taxation" available in Art.260 of the Constitution manifested that competence of Province to tax an immovable property could not be given restricted meaning---Taxation included imposition of any tax or duty, whether general, local or special---High Court declined to interfere with Luxury House Tax levied by Provincial Government---Constitutional petition was dismissed accordingly.

Case-law referred.

(d) Punjab Finance Act (XVII of 2014)---

----S. 8---Punjab Urban Immovable Property Tax Act (V of 1958), S.3(2)---Luxury House Tax, vires of---Double taxation---Petitioners assailed show-cause notices issued by authorities for recovery of Luxury House Tax, as imposed under S.8 of Punjab Finance Act, 2014---Plea raised by petitioners was that levy of such tax was double taxation as authorities were already recovering property tax under Punjab Urban Immovable Property Tax Act, 1958---Validity---Two levies in question were charged neither for the same purpose nor on the same basis---Tax sought to be imposed by provision in question could not be termed "double taxation"---Marked distinction existed in both the levies, as tax in question was one time levy on the land and superstructure, whereas property tax under S.3(2) of Punjab Urban Immovable Property Tax Act, 1958, was levied, charged and paid on annual value of buildings and lands in rating areas---All statutory authorities or bodies derived their powers from statutes which created them and from the rules and regulations framed thereunder---Any action taken or exercise of powers by a statutory authority or body, which was in derogation of the statute/rules could be assailed and declared ultra vires---High Court declared show-cause notices issued to petitioners without lawful authority as no assessment was carried out in terms of S.8(1) of Punjab Finance Act, 2014---Constitutional petitions were allowed accordingly.

Case-law referred.

(e) Interpretation of statutes---

----Retrospective effect---Scope---Legislature is fully competent to pass legislation with retrospective effect, even to the extent of taking away a vested right.

Case-law referred.

(f) Taxation---

----Levy of tax---Vires---Power of court---Scope---Power to levy taxes is a sine qua non for the State insofar as the same is essential for the purposes of generating financial resources and utilization of those resources for welfare of people at large---Legislature enjoys plenary power to impose taxes within the framework of the Constitution and such power rests on necessity as it is an essential and inherent attribute of sovereignty belonging to a matter of right to every independent State or government---By exercising such powers, mala fide cannot be attributed to legislature.

Case-law referred.

(g) Legislature---

----Wisdom of legislature---Scope---Wisdom of legislature should not be questioned by Courts, as long as the law in question is not violative of fundamental rights guaranteed by the Constitution----As long as Legislature has competence to legislate grounds or wisdom of Legislature remains its exclusive prerogative---Legislature is not debarred from promulgating provisions of law under the Constitution.

Case-law referred.

(h) Statute, vires of---

----Two interpretations---Effect---Where validity of a statute or provision thereof is questioned and there are two interpretations, one which makes the law valid, is to be preferred over the other which renders it void---Criteria before Court, for determining vires of a provision of law is that Court must be able to hold beyond any iota of doubt that violation of Constitutional provisions was so glaring that Legislative provision under challenge could not stand---Without such violation of Constitutional provisions, law made by Parliament or a State Legislature cannot be declared bad.

Case-law referred.

Salman Mansoor, Taffazul H. Rizvi, Zahoor Ali Nasir Tagga and Noshab A. Khan, argued the case on behalf of all the Petitioners. The names of remaining lawyers representing and appearing on behalf of the petitioners are mentioned in Schedule-A.

Khawaja Haris Ahmad, Tahir Mehmood Ahmad Khokhar, Standing Counsel for Pakistan, Shan Gull Additional Advocate General assisted by Muhammad Hammad Khan Rai, Barrister Khalid Waheed Khan, Omar Farooq and Muhammad Ejaz, A.A.G's for Respondents.

2017 P T D 844

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

C.I.T. CO., ZONE-I, LAHORE

Versus

Messrs GULISTAN POWER GENERATION LTD., LAHORE

C.T.R. No.12 of 2005, decided on 6th February, 2017.

Income Tax Ordinance (XXXI of 1979)---

----Ss.30, 136 & Second Sched.---Reference to High Court---Income from other sources---Interest income---Applicability of S.30 of the Income Tax Ordinance, 1979 to "interest income on business activities"---Scope---Question before the High Court was whether "interest income earned by taxpayer on security deposit which was held with a Bank for purpose of obtaining Bank guarantees was part of the business income and exempt from tax and accordingly not taxable under S.30 of Income Tax Ordinance, 1979"---Held, that S.30(2)(b) of the Income Tax Ordinance, 1979 dealt with "income from the sources" and was only applicable where investment of money by a company had not been made as part of its business activity but where such money had been invested by a company in its business, as in the present case, profit generated on such investment, for all intents and purposes, would be considered to be profit earned from business and not from any other source---Reference was answered, accordingly.

Luck Cement Ltd. v. Commissioner Income Tax 2015 SCMR 1494 rel.

Ms. Foziya Baksh for Applicant.

2017 P T D 999

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs SAJJAD TEXTILE MILLS LTD.

W.T.A. No.214 of 2002, decided on 13th February, 2017.

Wealth Tax Act (XV of 1963)---

----Ss. 27, 24 & 3---Appeal to High Court---Exercise of jurisdiction of High Court under S. 27 of the Wealth Tax Act, 1963---Determination as to whether a question of law was made out---Charge of wealth tax---Scope---Question before the High Court was whether Appellate Tribunal was justified in holding that charge of penalty could not be imposed on taxpayer for reason of uncertainty---Validity---Held, that perusal of order of Appellate Tribunal revealed that no question of law had arisen, and the question of law framed in the present appeal under S. 27 of the Wealth Tax Act, 1963 by the Department was not substantive---Impugned order had been passed after scrutinizing relevant record and on the basis of valid reasons and did not suffer from legal or factual infirmity---Appeal was decided against the Department, accordingly.

I.C.C. Textile's Case 2001 PTD 1557 ref.

2017 P T D 1024

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

HUNZA GHEE INDUSTRIES (PVT.) LTD.

P.T.R. No.276 of 2010, decided on 14th February, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001---Determination as to whether a question of law was made out ---Scope---Taxpayer had asserted a question of law and contended that the same arose out of the order of the Appellate Tribunal---Validity---Perusal of record revealed that no question of law had arisen in the present reference and the decision of the Appellate Tribunal did not call for any interference---Reference was decided against the taxpayer accordingly.

2017 P T D 1050

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

Mian MUSHTAQ AHMAD

Versus

GOVERNMENT OF PUNJAB and others

I.C.A. No.1466 of 2016, decided on 8th February, 2017.

Punjab Sales Tax On Services Act (XLII of 2012)---

----S. 63---Law Reforms Ordinance (XII of 1972) S. 3(2) & Proviso---Constitution of Pakistan, Art. 199---Constitutional jurisdiction of High Court---Intra-court appeal---Appealable orders---Alternate Remedy---Scope---Appellant in intra-court appeal impugned the order passed in Constitutional petition whereby appellant's Constitutional petition against order of Commissioner, Punjab Revenue Authority was dismissed on the ground that the remedy of appeal under S. 63 of the Punjab Sales Tax on Services Act, 2012 was available to the appellant---Validity---Appellants had not challenged the order of the Commissioner, Punjab Revenue Authority in appeal before the competent forum and proviso to S. 3(2) of the Law Reforms Ordinance, 1972 barred remedy of intra-court appeal in cases where the relevant law provided the remedy of appeal, revision or review---Impugned order of the Commissioner, Punjab Revenue Authority, had clearly mentioned that the appellant had the remedy of appeal against said order in the manner prescribed in S.63 of the Punjab Sales Tax on Services Act, 2012---Intra-court appeal being not maintainable, was dismissed, in circumstances.

Muhammad Aslam Sukhera and others v. Collector Land Acquisition, Lahore Improvement Trust, Lahore and another PLD 2005 SC 45 rel.

Shahbaz Siddique for Appellant.

Sultan Mahmood, Assistant Advocate-General.

Nadeem Salah ud Din, DS (Legal) PRA.

2017 P T D 1064

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

HASEEB RAZA KHAN

Versus

SUB-REGISTRAR and others

I.C.A. No.872 of 2010, decided on 8th February, 2017.

(a) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of the High Court---Scope---Constitutional jurisdiction of High Court could not be exercised for the purpose of examining a factual controversy---Constitutional jurisdiction in matters of factual controversy was barred---Law did not permit the High Court for recording evidence in Constitutional jurisdiction.

Amir Jamal and others v. Malik Zahoor-ul-Haq and others 2011 SCMR 1023; Pervez Alam v. Pakistan Dairy Products (Pvt.), Limited, Karachi and 2 others 2005 PLC SC 366 and Abdur Rahman and 5 others v. Rifatullah and 8 others 2016 CLC 35 ref.

(b) Punjab Finance Act (VI of 2010)---

---S. 6(5)---Capital Value Tax (CVT)---Scope---For purposes of execution of sale deed Appellant presented sale deed before the Sub-Registrar for execution, however Registrar refused to register the same on ground of insufficient stamp duty---Appellant re-submitted documents before the Sub-Registrar, however by that time Capital Value Tax (CVT) was applicable on sale of property---Appellant contended that he was not bound to pay Capital Value Tax (CVT) as he had submitted documents before the enforcement of CVT, and it was only because of objection by the Registrar that he had to re-submit the documents---Validity---Section 6(5) of the Punjab Finance Act, 2010 provided that CVT had to be collected by the concerned person at the time of registering or attesting the transfer---Admittedly, the appellant has re-submitted documents for registering on 07-07-2010 after complying with all laws, when the Punjab Finance Act, 2010 was in force, and CVT was imposed through the same---Sub-Registrar was, thus, justified in collecting 2% CVT from the appellant, under the Punjab Finance Act, 2010---Intra-court appeal was dismissed accordingly.

City District Government, Karachi v. Muhammad Irfan and others 2010 SCMR 1186 and Farman Ali and others v. The State PLD 2007 Lah. 495 distinguished.

District Officer (Revenue) Lahore and others v. Raja Muhammad Yousaf and others 2016 SCMR 203 ref.

Muhammad Irfan Khan Ghazanvi for Petitioner.

2017 P T D 1119

[Lahore High Court]

Before Ibad-ur-Rehman Lohdi, J

FOUNDATION WIND ENERGY-I LTD. through G.M. Finance

Versus

ASSISTANT COMMISSIONER INLAND REVENUE, (WHAT) and 3 others

Writ Petitions Nos.283 and 284 of 2017, decided on 30th January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.127, 128(1A) & 131---Constitution of Pakistan, Art.199---Constitutional petition---Alternate remedy---Petitioner/taxpayer filed appeal before Appellate Authority against recovery notice and had sought suspension of notice from High Court under Constitutional jurisdiction---Plea raised by petitioner was that it had not other efficacious or adequate remedy available---Validity---Without waiting any decision from Appellate Authority, for grant of injunction, taxpayer rushed to High Court by filing Constitutional petition, and sought the same relief which had already been prayed for by the taxpayer before Appellate Authority---Taxpayer could reconsider its stance of having no other adequate remedy available to it---High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

2017 P T D 1134

[Lahore High Court]

Before Shahid Jamil Khan, J

SHAHNAWAZ Proprietor Tooba Traders

Versus

APPELLATE TRIBUNAL INLAND REVENUE and others

Writ Petition No.7636 of 2017, decided on 15th March, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 131(5), 133 & 132(7)---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability----Disposal of appeals by the Appellate Tribunal----Nature of and distinction between, jurisdiction of Appellate Tribunal under Ss. 131(5) & 132 of the Income Tax Ordinance, 2001---Interim relief under S. 131(5) of the Income Tax Ordinance, 2001---Orders of Appellate Tribunal amenable to Reference before the High Court under S. 133 of the Income Tax Ordinance, 2001---Alternate remedy---Scope----An order on an application for interim relief was required to be passed by Appellate Tribunal under S. 131(5) of the Income Tax Ordinance, 2001 whereas a Reference application was filed under S. 133(1) of the Income Tax Ordinance, 2001; under which section a Reference application could only be filed against an order of Appellate Tribunal communicated under S. 132(7) of the Income Tax Ordinance, 2001---Section 131 of the Income Tax Ordinance, 2001 provided procedure for filing appeal whereas S. 132 of the same, dealt with power of Appellate Tribunal for disposal of appeals---Appeals were decided through final order made under S. 132 of the Income Tax Ordinance, 2001 and under S. 131(5) Income Tax Ordinance, 2001, application for interim relief was decided during proceedings of the main appeal---Both orders being distinct in nature and character, could not be treated alike for purpose of Reference application under S. 133 of the Income Tax Ordinance, 2001----No statutory remedy was provided in the Income Tax Ordinance,2001 against an order made under S. 131(5) of the Income Tax Ordinance, 2001 for refusing to grant stay or interim relief, therefore, Constitutional petition against the same under Art. 199 of the Constitution, was maintainable as no other adequate alternate remedy was provided by law. [

C.P. No.53 of 2007 and 83 of 2012 and Imran Raza Zaidi v. Government of Punjab 1996 SCMR 645 ref.

The Commissioner Inland Revenue v. Tariq Mehmood and others 2015 PTD 120 and The Commissioner Inland Revenue v. Messrs Macca CNG Gas Enterprises and others 2015 PTD 515 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 131(5), 132 & 121---Constitution of Pakistan, Art. 199---Constitutional petition---Appeal of taxpayer/petitioner against remand of his case to taxation officer by the Commissioner (Appeals) for re-adjudication---Application of taxpayer/petitioner for restraining Taxation Officer from reassessment was dismissed by Appellate Tribunal on the ground that Appellate Tribunal was not vested with power to stay the re-adjudication proceedings---Validity---Section 131(5) of the Income Tax Ordinance, 2001 provided jurisdiction to grant stay against recovery of tax for up to 180 days after providing opportunity of being heard, and the said provision was silent regarding other ancillary or incidental interim reliefs---Appellate Tribunal, in exercise of appellate jurisdiction under S. 132 of the Income Tax Ordinance, 2001 could affirm, modify or annul an assessment or an order appealed against, in addition to remanding the case to Appellate Commissioner----In order to exercise such jurisdiction effectively, power to suspend impugned order or to restrain Taxation Officer from passing assessment order, pursuant to the order impugned before it, fell within incidental and ancillary jurisdiction, particularly when no restriction or limitation, on exercise of such ancillary or incidental power, was available in S. 131(5) of the Income Tax Ordinance, 2001----In the present case, allowing Taxation Officer to complete re-assessment would not only lead to multiplicity of litigation but would frustrate the right of appeal before Appellate Tribunal if subsequent order was passed---Impugned order was set aside and High Court remanded application for grant of stay to Appellate Tribunal with the direction that the same be decided on merits and till a decision on the same proceedings before the Taxation Officer shall remain suspended---Constitutional petition was allowed, accordingly.

Imran Raza Zaidi v. Government of Punjab 1996 SCMR 645 and Sindh Employee's Social Security Institution and others v. Adamjee Cotton Mills Ltd. PLD 1975 SC 32 rel.

Mudassar Shujauddin for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

2017 P T D 1153

[Lahore High Court]

Before Shahid Jamil Khan and Masud Abid Naqvi, JJ

Messrs GHEE CORPORATION OF PAKISTAN (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE and others

I.T.R No.13 of 2017, decided on 1st February, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 132, 131 & 133---Reference to High Court---Adjudication of appeal by the Appellate Tribunal---Scope---Contention of taxpayer, inter alia, was that Appellate Tribunal passed impugned order without application of independent mind---Validity---Appellate Tribunal, in the present case had merely observed that undue favour was given to taxpayer and based on the same, the order of the Commissioner (Appeals) was vacated and the Appellate Tribunal while observing that it had a valid reason to vacate said order, did not disclose the said reason; which was not sufficient to reverse findings of the Commissioner (Appeals)---Order of Appellate Tribunal was passed without applying judicious mind and without giving elaborate necessary reasons, and was therefore set aside and the matter was remanded to the Appellate Tribunal for re-consideration in the manner laid down by the law---Reference was disposed of, accordingly.

Commissioner of Income Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 and Commissioner Inland Revenue v. Messrs Mehran Traders 2015 PTD 1330 rel.

Waheed Shahzad Butt for Appellant.

2017 P T D 1167

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER OF INCOME TAX

Versus

GHEE CORPORATION OF PAKISTAN (PVT.) LTD.

P.T.R No.341 of 2008, decided on 23rd May, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133, 132 & 131---Reference to High Court---Jurisdiction of High Court---Nature and scope---High Court, in exercise of its advisory jurisdiction under S. 133 of the Income Tax Ordinance, 2001, had to decide a reference application on the facts and circumstances founded by the Appellate Tribunal, which was the last fact-finding forum---High Court, in its jurisdiction under S. 133 of the Income Tax Ordinance, 2001 could not change the findings of fact arrived at by the Appellate Tribunal.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

Muhammad Asif Hashmi for Applicant.

2017 P T D 1387

[Lahore High Court (Multan Bench)]

Before Abid Aziz Sheikh and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs CRESCENT CARRIERS

I.C.A. No.132 in W.P. No. 361 of 2013, decided on 24th April, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Law Reforms Ordinance (XII of 1972), S.3---Limitation Act (IX of 1908) S.12 & Art. 151---Intra-court appeal---Limitation---Condonation of delay--- Grounds--- Scope--- Audit--- Appellant/ Commissioner Inland Revenue, sought condonation of delay of 37 days in filing of intra-court appeal, on the ground, inter alia, that the procedural constraints required permission to be sought from the Department, which caused delay---Validity---Said reason was neither cogent nor confidence inspiring and in time-barred proceedings, defaulting party must explain delay of each day caused in preferring valid proceedings in accordance with law and the same was not done in the present case---Sufficient cause must be shown by person seeking condonation of delay, which meant "circumstances beyond control of the party concerned", and nothing shall be deemed to have been done in good faith which was not done with due care and attention--- High Court observed that for purposes of limitation, Government (departments) could not be treated differently---Intra-court appeal being barred by time, were dismissed, accordingly.

Mst. Khajida Begum and 2 others v. Mst. Yasmeen and 4 others PLD 2001 SC 355 and Central Board of Revenue, Islamabad through Collector of Customs, Sialkot Dry Port, Samberial, District Sialkot and others v. Messrs Raja Industries (Pvt.) Ltd. through General Manager and 3 others 1998 SCMR 307 rel.

Tariq Manzoor Sial and Agha Muhammad Akmal Khan for Appellant.

Malik Mumtaz Hussain Khokhar and Rana Muhammad Hussain, Assistant Advocate General for Respondent.

2017 P T D 1402

[Lahore High Court]

Before Shahid Jamil Khan, J

NAZIR AHMAD

Versus

The FEDERATION OF PAKISTAN through Secretary and another

Writ Petition No.4771 of 2017, decided on 27th February, 2017

Sales Tax Act (VII of 1990)---

----Ss. 74 & 45---General Clauses Act (X of 1897), S. 24-A---Adjudication of claims by Sales Tax authorities---Statutory limitation---Condonation---"Speaking order"---Scope---Petitioner/taxpayer impugned order of Commissioner Inland Revenue, whereby its claim for refund was denied on ground that petitioner's/taxpayer's claim was time-barred and delay of each and every day was not explained by taxpayer/ petitioner Validity----Authorities were required to pass reasoned and "speaking orders" under S.24-A of the General Clauses Act, 1897 and impugned order was not a "speaking order"---Impugned order was set aside and Department was directed to decide the matter through a "speaking order"---Constitutional petition was disposed of, accordingly.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64; Shahtaj Sugar Mills Ltd. v. Additional Secretary Government of Pakistan, Ministry of Finance Karachi and others 2009 PTD 1544 and Colony Thal Textile Mills's case PLD 1980 Lah. 377 ref.

Waheed Shahzad Butt for Petitioner.

2017 P T D 1485

[Lahore High Court (Multan Bench)]

Before Abid Aziz Sheikh and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs GOLDEN PEARL COSMETICS

S.T.R. No.21 of 2016, decided on 10th May, 2017.

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

----S. 47---Reference/appeal to High Court---Nature of jurisdiction of High Court under S.47 of the Sales Tax Act, 1990---Re-framing/ amendment of question(s) of law---High Court, in order to decide real issues between the parties, could reframe and resettle question(s) of law under S.47 of the Sales Tax Act, 1990.

Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570 rel.

(b) Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss. 1(4), 3,4 & Sched.---Sales Tax Act (VII of 1990), Ss. 11 & 47---Constitution (Eighteenth Amendment) Act (X of 2010), Preamble---Constitution of Pakistan, Arts. 270AA(6) & 264---Punjab Sales Tax on Services (Withholding) Rules, 2015, R. 7---Sales Tax Special Procedure (Withholding) Rules, 2007, R. 2(3A)---Sales Tax on services---Deduction of Sales Tax on advertisement services---Declaration and continuance of laws---Conflict of Federal and Provincial Laws after the Constitution (Eighteenth Amendment) Act, 2010)---Effect of Art.270AA(6) of the Constitution on Federal Laws on Sales Tax on Services---Implied repeal of Federal Law by enactment of a Provincial Statute on the subject of Sales Tax on Services under Art.270(AA) of the Constitution---Scope---Maxim: leges posteriores priores contrarias abrogant---Applicability---Question before the High Court was whether sales tax deductions on service of "advertisement", were under jurisdiction of the Federal Board of Revenue under Sales Tax Special Procedure (Withholding) Rules, 2007 framed under Sales Tax Act, 1990 or under the Rules framed per Punjab Sales Tax on Services Act, 2012---Validity---After enforcement of Punjab Sales Tax on Services Act, 2012, various services were notified including advertisement services under the Schedule to the said Act and such services were subject to deduction of withholding tax under S.4(2) of the Punjab Sales Tax on Services Act, 2012 and subsequently R.7 of the Punjab Sales Tax on Services Withholding Rules, 2015 was specifically framed to deduct tax on advertisement services---High Court observed that as a consequence, an anomalous situation developed since on the one hand, Sales Tax Special Procedure (Withholding) Rules, 2007 levied Federal sales tax on advertisement services and on the other hand, Punjab Sales Tax on Services Act, 2012 and Rules thereunder also levied Provincial sales tax on the same advertisement services, which situation squarely attracted maxim "leges posteriores priores contrarias abrogant" which meant later laws repeal earlier laws inconsistent therewith---After the Constitution (Eighteenth Amendment Act, 2010), legislative competence to enact laws regarding "services" being with the Province, the Punjab Sales Tax on Services Act, 2012 would prevail over the Sales Tax Special Procedure (Withholding) Rules, 2007 and thus R.2(3A) of the Sales Tax Special Procedure (Withholding) Rules, 2007, levying withholding of sales tax on advertisement services was impliedly repealed---Reference was answered accordingly.

Tanveer Hussain v. Divisional Superintendent, Pakistan Railways PLD 2006 SC 249; Messrs Tank Steel and Re-Rolling Mills (Pvt.) Ltd. Dera Ismail Khan and others v. Federation of Pakistan and others PLD 1996 SC 77; Commissioner Inland Revenue v. Messrs Al-Mehdi International and 2 others 2013 PTD 2125; Ahmad Khan Niazi v. Town Municipal Administration, Lahore through Town Municipal Officer and 2 others PLD 2009 Lah. 657 and Government of Punjab through Secretary, Home Department v. Zia Ullah Khan and 2 others 1992 SCMR 602 rel.

(c) Interpretation of statutes---

----Implied repeal, doctrine of---Applicability---Scope---Essential condition for implied repeal was that when a provision of a former statute was inconsistent and in conflict with the provision of a later statute and the two could not be reconciled or harmonized, so as to stand together, then in such a situation, provision of the earlier statute would give way to similar provision of the later statute on the basis of doctrine of implied repeal.

Tanveer Hussain v. Divisional Superintendent, Pakistan Railways PLD 2006 SC 249; Messrs Tank Steel and Re-Rolling Mills (Pvt.) Ltd. Dera Ismail Khan and others v. Federation of Pakistan and others PLD 1996 SC 77; Commissioner Inland Revenue v. Messrs Al-Mehdi International and 2 others 2013 PTD 2125; Ahmad Khan Niazi v. Town Municipal Administration, Lahore through Town Municipal Officer and 2 others PLD 2009 Lah. 657 and Government of Punjab through Secretary, Home Department v. Zia Ullah Khan and 2 others 1992 SCMR 602 rel.

(d) Maxim---

---Leges posteriores priores contrarias abrogant---Applicability.

Tariq Manzoor Sial for Applicant.

Javed Iqbal Qazi and Malik Mumtaz Hussain Khokhar for Respondent.

2017 P T D 1528

[Lahore High Court]

Before Abid Aziz Sheikh, J

MUHAMMAD ILYAS QURESHI

Versus

FEDERAL BOARD OF REVENUE through Member Legal and others

W.P. No.1283 of 2015, heard on 6th March, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 236A---Constitution of Pakistan, Art. 199---Constitutional petition---Interpretation of S. 236A of the Income Tax Ordinance, 2001---Scope---Advance tax at time of sale by auction---Retrospective application of enhancement of advance tax on past and closed auction transactions---Relevant tax year for assessment of such tax---Question before the High Court was whether enhancement in the rate of advance tax under S. 236A of the Income Tax Ordinance, 2001 done via Finance Act, 2013 would apply to transactions completed prior to the date that such enhancement came into effect on 01.07.2013---Validity---Words "in that tax year" used in S. 236A(2) of the Income Tax Ordinance 2001 made it clear that said advance tax had to be computed and collected with reference to the tax year when the sale through auction was finalized and such transactions which were finalized before 01.07.2013 created vested rights in favour of the auction-purchasers and subsequent enhancement in the rate of the advance tax could not be applied retrospectively to such auctions which took place and were confirmed before 01.07.2013---Applicable rate of advance tax under S. 236A would be the one at the time of the sale by auction---While final liability to pay income tax would be on the last day of the relevant financial year, however if the advance tax had to be computed on basis of sale price of auctioned property in a particular tax year, then rate of advance tax applicable at time of sale through auction would apply and any subsequent amendment in the same could not be applied retrospectively---Constitutional petitions were disposed of, accordingly.

Government of Khyber Pakhtunkhwa and others v. Khalid Mehmood 2012 SCMR 619; Muhammad Tariq Badr and another v. National Bank of Pakistan and others 2013 SCMR 314 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 ref.

Commissioner of Income Tax, Peshawar v. Messrs Islamic Investment Bank Ltd. 2016 PTD 1339 distinguished.

(b) Interpretation of statutes---

----Statutory heading(s) and subheading(s)---Scope---Aids to interpretation---Headings prefixed to sections or entries could not control the plain words of the provision and could not also be referred to for purpose of construing provisions, when words used in the said provision were clear and unambiguous---However, in cases of ambiguity or doubt, heading or subheading(s) of such statutory provisions may be referred to as an aid in construing such provision of law.

(c) Interpretation of statutes---

----Taxation/fiscal statutes---Retrospective effect and interpretation of such statutes---Scope---Where a provision of law affected an accrued right of a taxpayer, said provision could not be applied retrospectively, unless the Legislature by express words or by necessary implication intended to give it such retrospective affect---In absence of a stipulation to the contrary, any change in law affecting substantive rights of taxpayers had to have prospective effect.

Commissioner of Income Tax v. Messrs Elli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392; Commissioner Inland Revenue v. Messrs Ghausia Builders (Pvt.) Limited 2015 PTD 772; CIR v. Major General Retd. Dr. C.M. Anwar and others 2015 PTD 424; The Colonial Sugar Refining Co. Ltd. v. Irving LR (1905) AC 369; F.B. Ali v. State PLD 1975 SC 506; Sutlej Cotton Mills Ltd. v. Industrial Court PLD 1966 SC 472; Shohrat Bano v. Imsail Dada Adam Soomar 1968 SCMR 574; Garikapati v. Subbiah Chaudhry AIR 1957 SC 540; PIA Corporation v. Pak Saaf Dry Cleaners PLD 1981 SC 553; Nazir Begum v. Qamarunnisa 1982 CLC 2271; Muhammad Ibrahim v. Surrayiaun Nisa PLD 1992 SC 637; Mian Rafiud Din v. Chief Settlement and Rehabilitation Commissioner PLD 1971 SC 252; Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Lyallpur and another PLD 1963 SC 322; Adnan Afzan v. Capt. Sher Afzal PLD 1969 SC 187; Nabi Ahmed and another v. Home Secretary, Government of West Pakistan, Lahore and 4 others PLD 1969 SC 599; Province of East Pakistan v. Sharafatullah and 87 others PLD 1970 SC 514; Sona and another v. The State and others PLD 1970 SC 264; Hassan and others v. Fancy Foundation PLD 1975 SC 1; The Collector, Customs and Central Excise, Peshawar and others v. Messrs Rais Khan Limited through Muhammad Hashim 1996 SCMR 83; Malik Gul Hasan and Co. and 5 others v. Allied Bank of Pakistan 1996 SCMR 237; Manzoor Ali and 39 others v. United Bank Limited through President 2005 SCMR 1785; Muhammad Tariq Badr and another v. National Bank of Pakistan and others 2013 SCMR 314 and Badshah Gul Wazir v. Government of Khyber Pakhtunkhwa through Chief Secretary and others 2015 SCMR 43 rel.

Naveed Ahmad Khawaja and Sami Durrani for Petitioners.

Malik Abdullah Raza on behalf Sarfraz Ahmad Cheema for Respondents.

Mian Ghulam Rasul for Respondent.

2017 P T D 1579

[Lahore High Court (Bahawalpur Bench)]

Before Muhammad Sajid Mehmood Sethi and Tariq Iftikhar Ahmad, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs ADEEL BROTHERS

P.T.R. No.7 of 2016/BWP, decided on 31st January, 2017.

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

----Ss. 33 & 47---Reference---Penalty---Reduction in quantum of penalty imposed upon taxpayer under S.33 of the Sales Tax Act, 1990---Jurisdiction of High Court under S.47 of the Sales Tax Act, 1990---Quantum of the penalty imposed on taxpayer for non-filing of Sales Tax Return was reduced by the Appellate Tribunal---Question before the High Court was whether Appellate Tribunal could have reduced the mandatory penalty imposed on taxpayer---Validity---Penalty had to be imposed in compliance with provisions of law and quantum of the same must be proportionate to the gravity of default committed by a person and the forums below had rightly found that levy of extreme amount of penalty was not justified---Penalty could be reduced/remitted /waived by the authority in exercise of jurisdiction conferred upon it by a statute---Keeping in view the facts of the present case, there was no mens rea or mala fide on part of taxpayer or loss to the Revenue caused by the taxpayer and such findings arrived at by the Appellate Tribunal were findings of fact which were based on appreciation of facts and correct application of law---No question of law was therefore made out requiring interference by the High Court in its jurisdiction under S.47 of the Sales Tax Act, 1990---High Court declined to exercise jurisdiction under S.47 of the Sales Tax Act, and reference was dismissed, accordingly.

Commissioner Inland Revenue v. Madina Cotton Ginners and Oil Mills 2016 PTD 643; 2004 PTD 1048; D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456; Century Flour Mills Ltd. v. Commissioner of Income-Tax 2001 PTD 2381; Shiv Narayan Shivhare v. Commissioner of Income-Tax 1998 PTD 1668; Commissioner of Income-Tax v. Muhammad Ali Ghulam Ali 2000 PTD 139; Commissioner of Income-Tax v. P. Joseph Swaminathan 2000 PTD 632; Commissioner of Income-Tax v. Best Supply Agency 2001 PTD 1741; Commissioner of Income-Tax v. Mrs. Kuku Narang Wealth Tax 2001 PTD 1929; Syed Akhtar Ahsan through Legal Heir v. Income Tax Officer, Circle 05, Zone-B, Lahore and 4 others 2005 PTD 858; Additional Collector Sales Tax, Collectorate of Sales Tax, Multan v. Messrs Nestle Milk Pak Ltd., Kabirwala 2005 PTD 1850; Messrs Gold Trade Impex through partner and another v. Appellate Tribunal of Customs, Excise and Sales Tax through Collector of Customs, and 2 others 2012 PTD 377; Collector, Model Customs Collectorate, Hyderabad v. Messrs Khuda Raheem and others 2012 PTD 428; Commissioner Inland Revenue, Zone-I, RTO, Karachi v. Messrs Allied Rental Modaraba 2014 PTD 593; Commissioner Inland Revenue (Zone-IV) v. Messrs Medicaids Pakistan (Pvt.) Ltd. 2015 PTD 2533 and Commissioner of Income Tax, Legal Division, R.T. O. v. Messrs Matrix Press (Pvt.) Ltd. 2016 PTD 97 rel.

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

----S. 47---Reference to High Court---Scope and nature---High Court was to decide on a Reference under S.47 of the Sales Tax Act, 1990 on facts and circumstances founded by the Appellate Tribunal which was the last fact finding forum and High Court could not change such findings of fact arrived at by the Appellate Tribunal unless the same were found to be perverse and contrary to record.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-II Regional Tax Office-II v. Messrs Sony Traders Wine Shop 2015 PTD 2287; Messrs Pak Suzuki Motor Company Limited, Karachi v. Collector of Customs, Appraisement Collectorate, Custom House, Karachi 2015 PTD 2600 and Commissioner of Income Tax, Legal Division, R.T.O. v. Messrs Matrix Press (Pvt.) Ltd. 2016 PTD 97 rel.

Ms. Zartaj Naeem for Appellant.

Muhammad Siddiq Chohan for Respondent.

2017 P T D 1654

[Lahore High Court (Multan Bench)]

Before Abid Aziz Sheikh and Jawad Hassan, JJ

M. AMIN and others

Versus

MEMBER CUSTOMS and others

Custom Reference No.11 of 2016, heard on 17th May, 2017.

Customs Act (IV of 1969)---

----Ss. 194 & 196---Constitution of Pakistan, Art. 10-A---Reference to High Court---Question of law, determination of---Non-exercise of jurisdiction by Appellate Tribunal---Natural justice, fair trial and due process---Scope---Question before the High Court was whether the Appellate Tribunal, after submission of verification report by the Department regarding purchase(s) of the taxpayer, could pass an order based on such report when no date of hearing was fixed, and the taxpayer was condemned unheard---Contention of the Department, inter alia, was that the taxpayer was already heard by the Appellate Tribunal, before filing of verification report, and therefore there was no need to give further opportunity of hearing to the taxpayer---Validity----Once Department itself moved application to verify record and submit report, the Appellate Tribunal could not on its own presume that the invoices of the taxpayer were not genuine and if stance taken by the Department in its application was to be considered, then Appellate Tribunal was bound to fix the case for further hearing and could only after confronting taxpayer with the stance taken by the Department, pass final judgment---Impugned order of the Appellate Tribunal was violative of the rule of the natural justice and Art.10-A of the Constitution which guaranteed fair trial in adjudication and non-exercise of jurisdiction by the Appellate Tribunal was itself relatable to a question of law---Impugned order was set aside and matter was remanded to the Appellate Tribunal, with direction to provide opportunity of hearing to the taxpayer---Reference was answered, accordingly.

Commissioner of Tax Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 rel.

Syed M. Mohsin Hamdani for Petitioners.

Ahmad Raza for Respondents.

2017 P T D 1706

[Lahore High Court]

Before Shahid Jamil Khan and Masud Abid Naqvi, JJ

FEDERATION OF PAKISTAN and others

Versus

DIGICOM TRADING and others

I.C.A. No.1179 of 2015, decided on 14th April, 2017.

(a) Customs Act (IV of 1969)---

----Ss. 18 & 18-C---Regulatory duty, imposition of---Delegation of executive power---Scope---Rationale behind delegation of power to Federal Government to impose regulatory duty in addition to statutory rates provided in First Schedule to the Customs Act, 1969 and/or in presence of exemptions from such rates under Free Trade Agreements, is to safeguard interest of trade in Pakistan and to promote exports---Local and international market positions are not foreseeable and are susceptible to quick changes, therefore, delegation has been made by legislature to Federal Government for instant response, which cannot be done by normal legislature procedure---Words 'Regulatory Duty' denote the duty, in addition, is allowed to be imposed by Executive to regulate balance between imports and exports in interest of trade in Pakistan.

(b) Customs Act (IV of 1969)---

----Ss.18 & 18-C---Notification S.R.O. No.659(I)/2007, dated 30-06-2007 & S.R.O. No. 568(I)/2014, dated 26-06-2014---Law Reforms Ordinance (XII of 1972), S.3---Intra-court Appeal---Regulatory duty---Levy and charge of---Vires of notification---Respondent was importer of cellular mobile phones to be imported free of customs duty on basis of Notification S.R.O. No.659(I)/2007, dated 30-06-2007 issued in pursuance of Free Trade Agreement between Pakistan and China---Respondent assailed charge of regulatory duty under Notification SRO No.568(I)/2014, dated 26-06-2014 on grounds that same was ultra vires the law---Single Judge of High Court declared notification S.R.O. No.568(I)/2014, dated 26-06-2014 as ultra vires to law and held Free Trade Agreement to be offshoot of General Agreement on Tariff and Trade (GATT)---Validity---Neither violation of any mandatory rule was pleaded before the single Judge of High Court nor it was admitted at appellate stage---To hold any notification as ultra vires it was imperative that violation of rules of business was claimed, pleaded and examined by Court and upon finding of fact that mandatory rule was violated, necessary consequence would be a declaration that such notification was ultra vires---Provisions of Notification S.R.O. No.568(I)/2014, dated 26-06-2014 was not examined or adjudicated on such touchstone therefore, it could not be held as ultra vires by mere placing of reliance by respondents at appellate stage---Exemptions granted through Notification S.R.O. No.659(I)/2007, dated 30-06-2007 was of statutory/standard duty levied under S. 18(1) of Customs Act, 1969 only and not from duty levied through Notification S.R.O. No. 568(I)/2014, dated 26-06-2014 issued under S. 18(3) of Customs Act, 1969---Despite grant of exemptions through Notification S.R.O. No.659(I)/2007, dated 30-06-2007 in terms of Free Trade Agreement, Federal Government was competent to impose regulatory duty on goods falling under Free Trade Agreement---Exemption agreed to be granted under Free Trade Agreement was subject to consequential legislations as well as conditions mentioned in exempting Notification S.R.O. No. 659(I)/2007, dated 30-06-2007---Free Trade Agreement was not offshoot of GATT therefore, provisions of S. 18(5) of Customs Act, 1969 did not apply---Division Bench of High Court set aside judgment passed by the Single Judge of High Court---Intra-court appeal was allowed in circumstances.

Majeed and Sons Steels (Pvt.) Ltd. and others v. Federation of Pakistan through Secretary M/o Economic Affairs, Islamabad and others 2016 SCMR 655 and Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 rel.

Messrs Haider Industries through Sole Proprietor and 7 others v. Federation of Pakistan through Secretary, Ministry of Finance and 3 others 2015 PTD 2447; Societe Generale De Surveillance S. A. v. Pakistan through Secretary, Ministry of Finance, Revenue Division, Islamabad 2002 SCMR 1694; Ms. Shehla Zia and others v. WAPDA PLD 1994 SC 693; Shahid Pervaiz v. Ejaz Ahmad and others 2017 SCMR 206; Collector of Customs and others v. Ravi Spinning Ltd. and others 1999 SCMR 412; Indus Trading and Contracting Company v. Collector of Customs (Preventive) Karachi and others 2016 SCMR 842; Messrs Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670 and Messrs Qaiser Brother (Pvt.) Ltd. v. Government of Pakistan others PLD 1991 SC 884 ref.

(c) Vires of notification---

----To hold a notification as ulta vires it was imperative that violation of Rules of Business was claimed, pleaded and examined by the court and on finding of fact that the mandatory Rule (s) was violated court could declare the same as ultra vires.

Ch. Muhammad Zafar Iqbal, Sarfraz Ahmad Cheema, Sh. Muhammad Akram, Babar Sattar and Izharul Haque for Appellants.

Nayyar Ali, Additional Collector.

Ch. Nabeel Rafaqat for Respondents.

Shahbaz Butt, Shazib Masud, Shafqat Mehmood Chohan, Malik Hafiz Muhammad Arshad, Monim Sultan, Sumaira Khanum, Rai Khadim Hussain Kharal, Muhammad Mohsin Virk, Shahzad Rabbani, Akhtar Ali, Sumair Saeed Ahmed, Hashim Aslam Butt, Usman Malik, Shahid Paracha, M. M. Akram, Khurram Shahbaz Butt, Muhammad Yousaf Khan-II, M. Hafeez Uppal, Abdul Rehman, Mian Abdul Bari Rashid, Muhammad Yousaf Khan, Muhammad Ayub Aheer, Adnan Ahmad, Muhammad Shahzad Tanveer, Ch. Aamir Shehzad, Muhammad Azam Zafar, Hafiz Ahmad Yar Khan and Waqar Ahmad Khan for Respondents in connected appeals.

Dr. Jamal Ahmad Shahzad, Advocate for OPPO Mobiles.

Adeel Nawaz Mohal, Advocate for Club International.

2017 P T D 1774

[Lahore High Court]

Before Shahid Karim, J

SUI NORTHERN GAS PIPELINES LIMITED (SNGPL)

Versus

FEDERATION OF PAKISTAN and others

W.P. No.9308 of 2015, heard on 18th April, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 147, 120 & 122---Advance tax under S.147 of the Income Tax Ordinance, 2001--- Nature and concept---Advance tax as estimate to be made by taxpayer---Scope---Amount paid as advance tax was not the property of the Federal Government but remained vested in an assessee and was merely an amount which was paid in advance in respect of tax before it became due---Tax became due only after regular assessment and in case an amount was found to have been paid more than what was due, a refund to the assessee was in order---By such token, therefore, advance tax was an estimated amount of income tax to be paid by the taxpayer in four quarterly installments and concept underlying entire regime of advance tax was that estimate was to be made by the taxpayer and it was not for the tax authorities to question or object till the close of the tax year and it was then that the law empowered taxation officers to verify advance tax paid and to impose any liability in case it was found that an additional tax was due from the taxpayer---If more amount had been paid as advance tax, taxpayer was entitled to refund of excess amount---Per S. 147(4A) of the Income Tax Ordinance, 2001 it was clear that entire concept of advance tax was based on estimate of the tax payable for the relevant taxpayer and such estimate had to be made by the taxpayer which was the theme that ran through the entire length and breadth of S. 147 of the Income Tax Ordinance, 2001---Estimate had to be made by the taxpayer and on basis of such estimate, taxpayer made payment of advance tax in accordance with S.147(4) of the Income Tax Ordinance, 2001----Same concept permeated S.147(6) of the Income Tax Ordinance, 2001 where the taxpayer was required to make the payment of advance tax under S.147(1) of the Income Tax Ordinance, 2001 and where taxpayer estimated at any time before the last installment was due that tax payable by him for the relevant tax year was likely to be less than the amount he was required to pay, then under S.147(1) of the Income Tax Ordinance, 2001 taxpayer may furnish to the Commissioner Inland Revenue an estimate of the amount of the tax payable by him and thereafter pay such estimated amount, as reduced by the amount, if any, already paid---Nowhere in S.147 of the Income Tax Ordinance, 2001 any discretion or authority been vested in an officer of the Income Tax to dispute or challenge the estimate made by the taxpayer during the course of the remittances made by the taxpayer for each quarter of a tax year.

Call Tell and another v. Federation of Pakistan and others 2005 PTD 833; Lone Cold Storage, Lahore v. Revenue Officers, Lahore Electronic Power Co. and others 2010 PTD 2502 and Commissioner of Income Tax v. Abestos Cement Industries Ltd., and others 1993 PTD 343 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 147, 176 120 & 122---Constitution of Pakistan, Art. 199---Constitutional petition---Interpretation of S.147 of the Income Tax Ordinance, 2001---Concept, nature and scope of "Advance Tax" under the Income Tax Ordinance, 2001---Demand of advance tax as tax due from taxpayer after return of income for that tax year had been filed by taxpayer---Powers of Inland Revenue to raise demand for payment of Advance Tax---Scope---Petitioners / taxpayers impugned show-cause notices issued under S.147(7) of the Income Tax Ordinance, 2001 which raised demand for payment of Advance Tax---Contention of the petitioners inter alia was that the petitioners had already filed Return of Income and as such, payment of Advance Tax could not be demanded by the Department---Validity---Provisions of S.147(7) of the Income Tax Ordinance, 2001 did not confer power on the Deputy Commissioner who had issued the impugned notices to do so and per S.120(1) of the Income Tax Ordinance, 2001 where a taxpayer had furnished a complete return of income for a tax year, the same shall be taken as an assessment order of taxable income for that tax year---Section 147(7) of the Income Tax Ordinance, 2001 did not convey an impression or intent that the said provision was to be used for the purpose of issuance of a show-cause notice of the nature which had been issued in the present case for payment of advance tax and unless further processes were set into motion, a taxpayer could not be saddled with a liability in respect of a tax due which crystallized upon the return of income having been furnished---Spirit of S.147 of the Income Tax Ordinance, 2001 was in an estimate to be made by the taxpayer and on the basis thereof advance tax to be paid and it would be a contradiction in terms if such basic theme of said section were to be nullified by conferring jurisdiction on an officer of the Income Tax to dispute each estimate made by the taxpayer and to issue show-cause notices of the nature which were issued to petitioners and such a construction of S.147 would tantamount to nullifying the intent of the Legislature---Purpose of S.147(7) was none other than to lay down that in case the advance tax was found to be under-assessed or assessed in contravention of the formula given in S.147, the amount due would be taken as tax due under an assessment order and key words were 'assessment order' which stage arrived only after the return of income had been filed by a taxpayer---Amendment in assessment order was a prerequisite for an amount to become tax due which could only be done under S.122 of the Income Tax Ordinance, 2001 by the Commissioner---High Court observed that the impugned notices were unilateral and an ex-parte determination of an alleged advance tax due from the tax payer which was not the mandate of S. 147(7) of the Income Tax Ordinance, 2001---Impugned notices were set aside, and Constitutional petition was allowed, accordingly.

Khurram Shehbaz Butt for Petitioner.

Sarfraz Ahmad Cheema and Shahid Usman along with Dr. Ishtiaq Ahmad, Director Law, FBR for Respondents.

2017 P T D 1824

[Lahore High Court]

Before Shahid Jamil Khan and Ali Akber Qureshi, JJ

Messrs GHEE CORPORATION PAKISTAN (PVT.) LTD. LAHORE

Versus

DCIT, OFFICER, LAHORE

CTR No.10 of 2005 and R.As. Nos.391/LB, 392/LB of 2003, decided on 2nd June, 2015.

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 80-D, 88, 54 & 136---Reference to High Court -- Minimum tax on income of certain persons---Charge of additional tax for failure to pay tax with the return---Payment of tax with return of income---Question before the High Court was whether tax under S. 88 of the Income Tax Ordinance, 1979 could be charged after levying of minimum tax under S. 80-D of the Income Tax Ordinance, 1979 upon the taxpayer---Validity---Per S. 80-D(1) of the Income Tax Ordinance, 1979, key words were "tax payable or paid" and payable tax was arrived at after an assessment and in case the declared version of the taxpayer was accepted, the tax to be paid after claimed deduction/ allowances was tax payable---Perusal of S. 80-D of the Income Tax Ordinance, 1979 showed that it was meant for charging a minimum tax where due to certain allowance the tax payable dropped from 0.5%---High Court observed that if additional tax and penalty were held not chargeable after charging of tax under S. 80-D of Income Tax Ordinance, 1979, then the same would lead to an absurd interpretation as the taxpayer would take benefit of its own omission to pay tax---Appellate Tribunal was therefore justified in upholding that tax under S. 88 of the Income Tax Ordinance, 1979 could be charged after levying of minimum tax under S. 80-D of the Income Tax Ordinance, 1979---Reference was answered, accordingly.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan, through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582=1997 PTD 1555 rel.

Waheed Shehzad Butt for Applicant.

2017 P T D 1875

[Lahore High Court]

Before Shahid Karim, J

F.M. TEXTILE MILLS and others

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.37358 of 2016, decided on 6th July, 2017.

(a) Interpretation of statutes---

----"Purposive approach"---Concept and Scope---Purposive interpretation was based on the concept of purpose and purpose was a normative concept that the law constructed---Concept of purposive interpretation rested on the straightforward premise that law was enacted to fulfill a purpose and laws were presumed to be valid, and the Legislature did not commit a mistake and did not waste its words.

Foreword to Harvard Law Review 2002; Pepper v. Hart, (1993) 1 All ER 42, 50; Gadoon Textile Mills v. WAPDA 1997 SCMR 641, 829; Lord Roskill in Anderson v. Ryan, (1985) 2 All ER 355, 359 and Attorney-General v. Prince Ernest Augustus of Hanover (1957) A.C. 436 at 473 rel.

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

----Ss. 30, 30A, 30E, 32 & 2(18)---Federal Board of Revenue Act (IV of 2007), Ss. 3, 5 4(e), 4(i) 4(k)---FBR S.R.O.No. 116(I)/2015 dated 09.02.2015---Powers and functions of the Federal Board of Revenue---Officer of Inland Revenue---Directorate General (Intelligence and Investigation), Inland Revenue---Powers and functions of the Directorate under the Sales Tax Act, 1990---Petitioners impugned S.R.O. No. 116(I)/2015 dated 09.02.2015 issued by the Federal Board of Revenue ("FBR") whereby Directorate General of Intelligence and Investigation ("DG(I&I)") was setup and officers for the same were notified---Contention of petitioners, inter alia, was that under Ss. 30 & 30A of the Sales Tax Act, 1990, impugned S.R.O. could not confer powers to the said officers prior to their declaration as officers under S. 30E of the Sales Tax Act, 1990 and that the impugned S.R.O. conferred powers on the said officers beyond remit of authority of such officers under the law---Validity---Impugned S.R.O. presupposed appointment of employees of officers to DG (I&I), and its effect was to appoint officers of FBR as officers of Inland Revenue with any other designation and when a transfer was made of an officer of the Inland Revenue within meaning of S. 30 of the Sales Tax Act, 1990 to any attached department of the FBR, no need arose for designating such officer as officer of Inland Revenue---FBR by virtue of impugned S.R.O. had conferred on the designated officers of DG (I&I), jurisdiction to exercise powers and functions of, inter alia, Chief Commissioner (Inland Revenue) and also Commissioner (Inland Revenue); which was against mandate of S. 30(3) of the Sales Tax Act, 1990---No officer of the officer of DG (I&I) could be conferred with powers of the Commissioner Inland Revenue or any officer higher than the same and only such powers could be conferred which would render such an officer subordinate to the Commissioner Inland Revenue---Through the impugned S.R.O., powers under S. 31 of the Sales Tax Act, 1990 had been conferred upon the Director General of Intelligence and Investigation, which defied logic as with a broad sweep and without any specifics, an entire array of powers of "all the officers of the Inland Revenue" had been conferred to be exercised by the said Director General, and by such conferment of power by the impugned S.R.O., intent and purpose of S. 32 of the Sales Tax Act, 1990, which dealt with delegation of powers was compromised---FBR had sufficient powers under the Federal Board of Revenue Act, 2007 to appoint, by posting or transfer, officers of DG (I&I), and upon such appointment such officers were to perform functions, which were peculiar to such Directorate---Powers and functions were to be specified by FBR through a notification issued under S. 30E of the Sales Tax Act, 1990 and such powers and functions would have a close nexus with the purpose which DG (I&I) was designed to achieve---By appointment, once again, as officers of Inland Revenue (as has been done through impugned S.R.O.), officers so appointed were to be deemed to have been transferred and thereby ceased to function as officers of DG (I&I)---Appointment made under S. 30 of the Sales Tax Act, 1990 was independent of an appointment made under S. 30A of the Act and must remain so---High Court observed that the fundamental principle was that officers should be posted to the Directorate independently with separate and distinct functions and impugned S.R.O. failed to meet such foundational requirements and was therefore without lawful authority and of no legal effect, and accordingly was set aside---Constitutional petition was allowed, accordingly.

Wasim Ahmad v. Federation of Pakistan 2014 PTD 1733 ref.

Imtiaz Rasheed Siddiqui, Shahryar Kasuri, Muhammad Hamza, Raza Imtiaz, Omer Tariq Shamim, Jamshed Alam, Qadeer Kalyar, Khurram Shahbaz Butt for Petitioners.

Nasar Ahmad D.A.G., Barrister M. Umer Riaz, Ch. Imtiaz Elahi, Kausar Parveen, Sarfraz Ahmad Cheema, Shahid Usman, Saqib Haroon Chishti, Shahid Sarwar Chahil and Atif Ali Bukhari for Respondents.

2017 P T D 1962

[Lahore High Court]

Before Shahid Jamil Khan, J

Mehar PERVAIZ AKHTAR

Versus

DIRECTOR GENERAL EXCISE AND TAXATION, LAHORE and others

Writ Petition No.3851 of 2017, heard on 24th May, 2017.

(a) Constitution of Pakistan--

----Arts. 23, 24, 4, 10A & 7---General Clauses Act (X of 1897), S.24-A---Power of State to impose and collect taxes---Constitutional provisions as to property of citizens and protection of property rights---Due process and natural justice in imposition of taxes---Non-association of tax payer in assessment proceedings as a violation of due process---Scope---Power to impose tax was predominant and paramount attribute of the State under Art. 7 of the Constitution; however imposition and collection of tax necessarily had an effect of depriving a citizen from his property, to which he was entitled under Art.23 of the Constitution and Art.24 of the Constitution bestowed a Fundamental Right that he shall not be deprived of his property which was saved under law---Non-association of any citizen in assessment proceedings, for charging of a tax not only amounted to denial of fair trial and dealing with him against the law, but was a sheer violation of due process which was meant to protect a citizen from arbitrary use of executive power; exercised without following exact course of law---Such non-association in assessment proceedings also amounted to condemning a citizen unheard---Assessment of a tax, levied under a valid statute, was meant to determine the tax liability subject to conditions stipulated in law and a taxpayer, who fell within the mischief of a charging provision had Fundamental Right to defend himself from such levy or its charging as per the conditions under a statute---Any doubt in the charging provision had to be resolved in favour of the taxpayer because it deprived the taxpayer from his/her property, therefore, the same fell within the exception under Art. 24 of the Constitution---For providing opportunity to defend, issuance of show cause notice was mandatory, therefore, any assessment order without issuance and due service of the show-cause notice was a nullity in law and if a statue did not provide specifically for issuance of show cause notice, such procedure had to be prescribed by subordinate legislation under said statute---On receipt of reply to such show-cause notice, an assessing officer was bound to provide opportunity of being heard and pass a reasoned assessment order as required under S.24A of the General Clauses Act, 1897 and communication or service of such assessment order, as per law, was a necessary requisite of due process, absence of which denied the right of appeal or revision under the law and any demand of tax or coercive measures for its recovery, without due process was illegal, being violative of the Arts.10A, 4 read with Arts. 23 and 24 of the Constitution.

Messrs Mustafa Impex v. The Government of Pakistan PLD 2016 SC 808 rel.

(b) Punjab Urban Immovable Property Tax Act (V of 1958)---

----Ss. 10, 4, 8, 9 14 & 15---Constitution of Pakistan, Art. 199---Punjab Urban Immovable Property Tax Rules, 1958, Rr. 7, 11 & 10---Recovery of property tax---Valuation of property---Objections of taxpayers---Exemption---Adjudication of objections by authorities---Communication of reasons to taxpayer(s) Scope---Petitioner impugned notice for sealing of his premises as well demand notice for property tax issued under the Punjab Urban Immovable Property Tax Rules, 1958, on the ground that the same were issued without following the process prescribed under the law and without associating petitioner in the assessment proceedings and the valuation of the property was done without confronting the petitioner about the same---Validity---Form P.T.1 was an assessment order containing all the assessed information regarding property to be taxed and duly authenticated by the assessing authority and R. 11 of Punjab Urban Immovable Property Tax Rules, 1958 was silent about communication of said form to taxpayer and if S.10 of the Punjab Urban Immovable Property Tax Act, 1958 was examined, it provided a right of appeal and revision to a taxpayer---Person aggrieved by an order of appropriate authority upon which objections made before that authority under S. 8, 9, 14 or 15 Punjab Urban Immovable Property Tax Act, 1958 may file appeal against such order within thirty days, however, procedure for communication of the reasons for rejection of the objections was not provided under the Punjab Urban Immovable Property Tax Rules, 1958 and R.10(4) envisaged that the reasons for the disposed of objections shall be recorded in register and through said register, as well as, P.T.1 is open to inspection, yet order in this regard was never communicated to the taxpayer---High Court observed that such practice or procedure could not be allowed to be continued and directed that the Provincial Government revise the Punjab Urban Immovable Property Tax Rules, 1958 accordingly and till such revision the Authorities shall communicate the reasons for rejection of the objections in writing to the taxpayer and shall also communicate a copy of Form P.T.1 to the taxpayer on taxpayers' address, enabling him to seek his right of appeal or revision and limitation for same shall commence from the date of such communication---High Court held that impugned notices for sealing of property in the present case, the valuation list and assessment was completed without following mandatory provisions/procedure and were declared without lawful authority and set aside---Constitutional petition was allowed, accordingly.

Muhammad Khalid Qureshi v. Province of Punjab through Secretary Excise and Taxation Department, Lahore and another 2017 PTD 805 rel.

Ch. Shafat Ali and Mughees Aslam Malik for Petitioner.

Umar Farooq Khan and Malik Muhammad Bashir Lakhesir, Assistant Advocates General, Punjab for Respondents Nos. 1 to 4.

Mian Muhammad Ashfaq Hussain, for Respondent No.5/Pakistan Railways.

Tariq Manzoor Sial, Advocate/Amicus Curiae.

Qurban Ali Shahid, Excise and Taxation Officer, Vehari, Bashir Ahmad Kharal, Assistant Excises and Taxation Officer, Vehari, Rana Sakhawat Ali, Excise and Taxation Officer (Property Tax) Multan, and Munawar, Inspector Legal Excise and Taxation Department.

2017 P T D 2011

[Lahore High Court]

Before Shams Mehmood Mirza, J

MUHAMMAD ANWAR

Versus

FEDERATION OF PAKISTAN through President and 2 others

W.P. No.30317 of 2017, decided on 13th June, 2017.

Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 32---Representation to the President of Pakistan--- Limitation of 30 days to file representation to the President under S.32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Valid grounds for condonation of delay---Scope--- Representation filed by Department against order of the Federal Tax Ombudsman, in a complaint filed by the petitioner, to the President under S.32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, was allowed---Contention of the petitioner was that the said representation was barred by time and therefore could not have been filed---Validity--- Only ground mentioned for condonation of delay in the said representation was the transfer of the Commissioner Inland Revenue and structural changes of the jurisdiction of the Federal Board of Revenue, which ground alone was not sufficient for condoning of delay---Delay of each and every day had to be explained, which was not done in the present case, and the said representation was allowed without adverting to said vital aspect---Order allowing representation of the Department before the President, of Pakistan was set aside---Constitutional petition was allowed, in circumstances.

Waheed Shahzad Butt for Petitioner.

2017 P T D 2019

[Lahore High Court]

Before Ayesha A. Malik and Mudassir Khalid Abbasi, JJ

Messrs SHAHZADI POLYPROPYLENE INDUSTRIES through Proprietor

Versus

FEDERATION OF PAKISTAN through President and 4 others

I.C.A. No.1213 of 2017, decided on 30th May, 2017.

Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 9 & 32---Income Tax Ordinance (XLIX of 2001) Ss. 170 & 120---Constitution of Pakistan, Art. 199---Law Reforms Ordinance (XII of 1972) S. 3 & proviso--- Complaint against non-issuance of income tax refund---Jurisdiction of the Federal Tax Ombudsman in relation to cases of tax refund---Intra-court appeal---Maintainability---Petitioner's complaint before the Federal Tax Ombudsman regarding non-issuance of income tax refund was decided in petitioner's favour, which was subsequently set aside by order in Representation to the President of Pakistan filed by Department---Petitioner's Constitutional petition against said order in Representation was dismissed---Validity---Federal Tax Ombudsman had no jurisdiction to investigate or inquire into matters which related to assessment of income , determination of liability of tax , interpretation of law, rules and regulations relating to assessment/determination in respect of which legal remedies of appeal, review or revision were available under the relevant legislation---Intra Court appeal was hit by proviso to S.3(2) of the Law Reforms Ordinance, 1972 as S. 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 provided remedy of representation before the President against recommendations of the Federal Tax Ombudsman---Intra Court appeal was dismissed, in circumstances.

2017 P T D 2050

[Lahore High Court]

Before Ayesha A. Malik, J

BLI PAKISTAN (PVT.) LTD. and others

Versus

GOVERNMENT OF PAKISTAN and others

W.P. No.6565 of 2015, decided on 8th May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 182 & 165---Constitution of Pakistan, Art. 73---Requirement of filing statement of withholding tax---Penalty for non-filing of withholding tax statement---Determination as to what constitutes a "Money Bill" under Art. 73 of the Constitution---Nature and scope of imposition of "penalty" under the Income Tax Ordinance, 2001---Petitioners impugned vires of S. 182(1) of the Income Tax Ordinance, 2001 which provided for penalty in case of failure to furnish statement of withholding tax as required under S. 165 of the Income Tax Ordinance, 2001---Validity---In terms of Art. 73 of the Constitution, for purpose of a "Money Bill", any provision dealing with imposition, abolition, remission, alteration or regulation of any tax was included meaning thereby that any law relating to regulation of any tax fell within domain of "Money Bill"---Purpose of penalty was to ensure that statutory provisions of the Income Tax Ordinance, 2001 were complied with and failure to do so would render a taxpayer liable under S. 182 of the Income Tax Ordinance, 2001---For purpose of levy of such penalty, an exercise had to be carried out by the Department, wherein it was to be determined whether or not non-filing of withholding statement was deliberate and whether the same was done with a mala fide intent---For purpose of levy of penalty, mens rea was an essential ingredient---High Court observed that challenge to the vires of S. 182(1) of the Income Tax Ordinance, 2001 was not competent---Constitutional petition was disposed of, accordingly.

D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 rel.

Khurram Saeed for Petitioners.

Muhammad Ajmal Khan for Petitioners (in W.Ps. Nos.27554/2013, 2901/2014 and 40714 of 2016).

Shahid Sarwar Chahil and Sarfraz Ahmad Cheema for Respondents with Dr. Ishtiaq Ahmad Khan, Director Legal FBR.

2017 P T D 2064

[Lahore High Court]

Before Abid Aziz Sheikh, J

Sardar QASIM HASSAN KHAN

Versus

FEDERATION OF PAKISTAN and others

W.P. No.21403 of 2014, decided on 4th April, 2017.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 231-B, 234 & 148---Import of motor vehicles---Advance tax on private motor vehicles---Petitioners/taxpayers impugned demand of advance tax under S. 231-B of the Income Tax Ordinance, 2001 at the time of their application for registration of imported vehicles---Contention of the petitioners, inter alia, was that the tax under S. 148 of the Income Tax Ordinance, 2001 had already been paid at the time of import of the said vehicles, therefore no advance tax was recoverable from the petitioners at the time of registration / transfer of ownership of said vehicles---Validity---Under S. 231-B(4) of the Income Tax Ordinance, 2001 every manufacturer of vehicles shall collect advance tax at the time of sale of vehicles and S. 231-B(4) of the Act provided an exception that the said tax shall not apply if a person produced evidence that tax under S. 231-B(3) in case of a locally manufactured vehicle or tax under S. 148 of the Income Tax Ordinance, 2001, was collected from the same person in respect of same vehicle---Words "person produces evidence" and "same person in respect of same vehicle" used in S. 231-B(4) of the Income Tax Ordinance, 2001 left no doubt that S. 231-B(1) of the Income Tax Ordinance, 2001 would not apply, only if registration of vehicle S. 231-B(1) of the Income Tax Ordinance, 2001 was sought in the name of same person who already paid advance tax under S. 231-B or 148 of the Income Tax Ordinance, 2001 at the time of import in respect of same vehicle---For registration of vehicle in name of a person who was not an importer and had not paid tax under S. 148 of the Income Tax Ordinance, 2001 the benefit of exception S. 231-B(4) Income Tax Ordinance, 2001 would not apply and subsequent purchaser shall be liable to pay advance tax under said section---Petitioners, in the present case, were subsequent purchasers of said vehicles and had not themselves paid tax under S. 148 of the Income Tax Ordinance, 2001 at the time of import and therefore demand of tax under S. 231-B of the Income Tax Ordinance, 2001 was not illegal---Constitutional petitions, were dismissed, in circumstances.

(b) Interpretation of statutes---

----Interpretation of taxing/taxation statutes---Resolution of ambiguities---Scope---In case of any ambiguity or two possible interpretations, the one that favours the taxation authorities had to be adopted.

Islamabad and another v. Wapda and another PLD 2014 SC 766; Messrs Army Welfare Sugar Mills Limited and others v. Federation of Pakistan and others 1992 SCMR 1652; Collector of Customs and others v. Ravi Spinning Ltd and others 1999 PTD 1078 and Ahmad Ali Anjum v. Deputy Commissioner, Faisalabad 1998 SCMR 1950 rel.

Ikram Ullah Malik for Petitioners.

Mian Muhammad Javaid, A.A.G. and Khalid Waheed Khan, A.A.G. for Respondent.

Zafar Iqbal Advisor for Respondent.

2017 P T D 2162

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs SEFAM (PVT.) LTD.

P.T.R. No.404 of 2012, heard on 17th May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 111, 120 & 133---Amendment of assessment---"Definite information obtained from audit or otherwise"---Meaning, scope and application of "definite information" for amendment of assessment---Unexplained income or assets---Application of S.111 of the Income Tax Ordinance, 2001---Scope---Question before the High Court was "whether transfer of sale proceeds of taxpayer to alleged benmai account constituted 'definite information' under S. 122 of the Income Tax Ordinance, 2001 and whether on basis of the same, addition could be made in taxpayer's income under S. 111 of the Income Tax Ordinance, 2001"---Held, every information did not qualify as a 'definite information' and such information could not form basis for reopening of assessment---Expression "definite information" could not be given a universal meaning and the same had to be determined in context of circumstances of each case as to whether material in question constituted 'definite information' or not---'Definite information' was a pre-requisite to attract provisions of S.122(5) of the Income Tax Ordinance, 2001 and it may be acquired from audit or otherwise---In the present case, it was during sales tax audit when it was discovered by auditors that taxpayer was diverting major portion of its sale receipts through an undisclosed/undeclared benami account and the auditors inter alia got hold of such Bank statements and details of money transfers---High Court observed that since all such material was acquired by Department during course of an audit, same qualified as "definite information"---High Court further observed that since it was established by Department that taxpayer was actual owner of benami Bank account, and the money deposited therein, therefore, the matter fell within ambit of S.111(b) of the Income Tax Ordinance, 2001 which made owner of "any money" liable, who failed to offer any explanation about nature and source of such money---Reference was answered accordingly.

Income Tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; Messrs E.F.U. General Insurance Co. Limited v. The Federation of Pakistan and others PLD 1997 SC 700; Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others 2013 PTD 884 and Commissioner Inland Revenue v. Messrs Sika Paint Industries (sic) 2017 LHC 1679 rel.

Sarfraz Ahmad Cheema for Applicant.

Iqbal Hashmi for Respondent.

2017 P T D 2208

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COLLECTOR, SALES TAX AND FEDERAL EXCISE

Versus

IMRAN PIPE MILLS (PVT.) LTD.

STR No.112 of 2007, decided on 25th January, 2016.

Sales Tax Act (VII of 1990)---

----S. 47---Reference / appeal to High Court---Nature of jurisdiction of High Court under S.47 of the Sales Tax Act, 1990---Question of law, determination of---Scope---Questions before the High Court involved the order of the Appellate Tribunal whereby proceedings against taxpayer were dismissed on ground of incomplete record furnished by Department---Validity---Perusal of Appellate Tribunal's order revealed that incomplete record was produced by the Department, maintenance of which was denied by the taxpayer, and Appellate Tribunal concluded that the Department had failed to establish charges against taxpayer---High Court observed that no question of law arose out of the Appellate Tribunal's order and declined to exercise jurisdiction under S.47 of the Sales Tax Act, 1990, accordingly.

Commissioner Inland Revenue v. Messrs Macca CNG Gas Enterprises and others 2015 PTD 515 and Commissioner of Income Tax v. Messrs Multan Fabrics (Pvt.) Ltd. and another 2013 PTD 2077 ref.

Ch. Imtiaz Elahi for Applicant.

2017 P T D 2247

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

Messrs MAGNA PROCESSING INDUSTRIES (PVT.) LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and others

S.T.Rs. Nos.6 and 7 of 2014, heard on 16th May, 2017.

Sales Tax Act (VII of 1990)---

----Ss.73, 3, 8A, 7 & 47---Sales tax liability---Determination of---Input tax adjustment---Sales tax transactions not admissible---Documents to establish genuineness of transactions under S. 73 of the Sales Tax Act, 1990---Blacklisted suppliers---Blacklisting of suppliers subsequent to transaction with taxpayer---Effect and scope---Proceedings against taxpayer were initiated on ground that it had illegally claimed and adjusted input tax against invoices issued by blacklisted suppliers and said invoices were found to be fake and bogus---Contention of taxpayer, inter alia, was that it had provided documentary evidence to establish genuineness of said transactions---Validity---Validly issued invoices by a supplier when such supplier was active and registered would not be affected by subsequent blacklisting or suspension of said supplier unless such invoices were specifically declared fake through a speaking order after hearing of parties and if the same had direct nexus with subsequent blacklisting---During period under consideration, in the present case, suppliers of the taxpayer were fully operative and impugned invoices had no direct nexus with their subsequent blacklisting, therefore refund/adjustment could not be denied to the taxpayer for the said invoices---Taxpayer had taken a consistent stand before all forums that it had genuinely purchased all goods and produced copies of cheques along with Bank statements to establish that provisions of S. 73 of the Sales Tax Act, 1990 had been complied with and it produced sufficient material on record to rebut that allegation that the impugned invoices were not mere paper transactions, which documents of the taxpayer were not considered by the Department---High Court remanded the matter to Adjudicating Officer to decide the matter afresh after taking into account the documentary evidence produced by the taxpayer through a speaking order---Reference was answered, accordingly.

Commissioner Inland Revenue v. Tariq Ply Pack (Pvt.) Ltd. 2015 PTD 2256 and Commissioner Inland Revenue v. Messrs Amtex Ltd. 2016 PTD 467 rel.

Khubaib Ahmad for Applicant.

Kausar Parveen for Respondent.

2017 P T D 2255

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs COCA COLA BEVERAGES (PAKISTAN) LTD.

S.T.R. No.52 of 2013, heard on 9th May, 2017.

Federal Excise Act (VII of 2005)---

----Ss. 4(2) & 3---Sales Tax Act (VII of 1990) S. 47---CBR Letter C. No. 1(20)-CEB/94 dated 27.9.1994---Filing of return and payment of excise duty---Determination of value for the purposes of excise duty---Retail price---Deduction of "chilling charges" from retail price by manufacturers of beverages---Scope----Question before the High Court was "whether for payment of excise duty for the retail price, under the Federal Excise Act, 2005, manufacturers of aerated water could deduct chilling charges"---Held, words "charges and taxes" used in S. 4(2) of the Federal Excise Act, 2005 were to be given the same meaning on the principle of ejusdem generis and it was nobody's case that charges incurred in furtherance of an economic activity should be considered among "charges" contemplated by S. 4(2) of the Federal Excise Act, 2005---Per CBR Letter C. No. 1(20)-CEB/94 dated 27.9.1994, chilling charges were to be excluded from consumer price of a chilled bottle for arriving at retail price and when the same was read with subsequent letter of the CBR dated 13-4-1995, it left no doubt that packages which were sold un-chilled were not allowed backward deduction of chilling charges from retail price---Reference was answered, accordingly.

2001 PTD 1854; Messrs Riaz Bottlers (Pvt.) Ltd. v. Central Board of Revenue and others 2000 PTD 353; C.P.L.A. No.3811 to 3817 of 2001 decided on 16-9-2003 and Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs, Circle 'C', Karachi and others PLD 1984 SC 86 rel.

Ch. Muhammad Zafar Iqbal for Petitioner.

2017 P T D 2284

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs LUCKY PLASTIC INDUSTRIES (PVT.) LTD. and others

S.T.R. N.30 of 2014, heard on 11th May, 2017.

(a) Limitation---

----Object and rationale for law of limitation---Law of limitation was founded on public policy and State interest and was vital for an orderly and organized society---Statutes of limitation were jurisprudential necessities because they achieved peace and good administration.

Atta Muhammad v. Maoula Bakhsh and others 2007 SCMR 1446; Dr. Muhammad Javaid Shafi v. Syed Rashid Arshad and others PLD 2015 SC 212 and Savitri Rani Malik v. Commissioner of Income Tax 186 ITR 701 rel.

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

----Ss. 74, 36(3) & 47---Recovery of sales tax---Adjudication---Limitation prescribed under S. 36(3) of the Sales Tax Act, 1990---Condonation of time limit and exercise of power under S. 74 of the Sales Tax Act, 1990---Scope---Question before the High Court was "whether limitation provided under S. 36(3) of the Sales Tax Act, 1990 was mandatory or directory and whether the same could be condoned by virtue of S. 74 of the Sales Tax Act, 1990"---Held, S. 74 of the Sales Tax Act, 1990 had a general application and would have an overriding effect over the first proviso to S. 36(3) of the Sales Tax Act, 1990 and would be taken as an exception thereto---Department was, therefore, competent to extend time limit for decision of a case by Adjudicating Officer even though original limitation under S. 36(3) of the Sales Tax Act, 1990 had expired---Department under S. 74 of the Sales Tax Act, 1990 however, did not have unfettered powers to extend time and such power should be exercised after application of mind and within reasonable time---Extension of time should be for a reasonable period and could not be for an indefinite period and for purposes of S.36(3) of the Sales Tax Act, 1990 after expiry of the two time lines envisaged in the proviso thereof, Department would have six months within which it may grant an extension, which extension should not exceed six months---Such reasonable time if lapsed, then transaction would be treated as past and closed and a vested right would accrue in favor of the registered person / taxpayer---Reference was answered, accordingly.

Messrs Abbasi Enterprises and another v. Collector of Sales Tax, Peshawar and 3 others 2008 PTD 2025 ref.

Messrs Super Asia Muhammad Din son (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala and others 2008 PTD 60 and The Collector of Sales Tax, Gujrawala and others v. Messrs Super Asia Muhammad Din and sons and others Civil Appeal No.682 rel.

Shahid Sarwar for Applicant.

2017 P T D 2296

[Lahore High Court]

Before Shahid Karim, J

PAK TELECOM MOBILE LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.20727 of 2014, decided on 5th October, 2017.

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

---Ss. 3(3B), 2(33), 2(41) & Ninth Sched.---Constitution of Pakistan, Art. 199 & Entry No. 49 of Part I of the Fourth Sched.---Sales Tax---Scope and levy of---Supply, Sale and Transfer---Concept---Cellular/ telecommunication services---Supply of Subscriber Identification Module (SIM) Cards by Cellular Service Company--- Supply of SIM Cards by the company did not necessarily constitute "sale" in terms of the Sales Tax Act, 1990---Petitioner, which was a Cellular Services Company, impugned entry at serial number 1 of the Ninth Schedule to the Sales Tax Act, 1990 which imposed sales tax on supply of SIM Cards by petitioner to its customers---Contention of company , inter alia, was that SIM Cards remained its property after supply to customers, therefore no sales tax was payable on the same---Validity----Core ingredient of Entry No. 49 of Part I of the Fourth Sched. to the Constitution (Federal Legislative List) was the concept of sale which was its foundational element, and if a sale or purchase took place, sales tax may be imposed on such transaction and every sale envisaged a purchase necessarily and vice versa---Although SIM Cards was one of the goods mentioned in the Ninth Schedule to the Sales Tax Act, 1990, however said SIM Cards were not sold by the company; and therefore, no supply of goods took place---Pivotal clause in the Cellular Agreement between the company and its customer was that all SIM Cards shall remain the property of the company and there could be no clearer expression that ownership of SIM Cards vested in the company---High Court observed that for all intents and purposes, SIM Cards did not become property of customers, and therefore no sale in such regard took place, therefore charging of sales tax on the same was not countenanced by provisions of Sales Tax Act, 1990 nor was it covered by the definition of "supply" given in the same---High Court held that Serial No.1 of the Ninth Schedule to the Sales Tax Act, 1990, which related to SIM Cards, was ultra vires the Sales Tax Act, 1990 and petitioner was not liable to pay sales tax on supply of SIM Cards to its customers---Constitutional petition was allowed, accordingly.

Idea Mobile Communication Ltd. v. Commissioner of Central Excise and Customs, Cochin (2011) 12 Supreme Court Cases 608; Bharat Sanchar Nigam Ltd., and another v. Union of India and others (2006) 3 Supreme Court Cases 1 and Beecham Foods, Ltd. v. North Supplies (Edmonton), Ltd. (1959) 2 All E.R. 336 rel.

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

----Ss. 2(33) & 2(41)---Expression "transfer of the right to dispose of goods as owner"---Meaning and connotation---Term "sale" and the words "other transfer of the right to dispose of goods as owner" used in S. 2(33) of the Sales Tax Act, 1990 were similar and had to be read ejusdem generis with each other; and given the context, the said words had to be given a meaning which appeared to determine its most apt and likely sense.

(c) Words and phrases---

----"Sale", meaning of.

STROUD'S Judicial Dictionary of Words and Phrases; Merriam - Webster's Dictionary of Law and Black's Law Dictionary, Ninth edition rel.

(d) Words and phrases---

----"Transfer", meaning of.

STROUD'S Judicial Dictionary of Words and Phrases; Merriam - Webster's Dictionary of Law and Black's Law Dictionary, Ninth edition rel.

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

----Ss. 2(33), 2(41) & 3---Levy and scope of sales tax---Terms "Sale"; "Supply" and "transfer"---Concept, meaning and scope elaborated.

STROUD'S Judicial Dictionary of Words and Phrases; Merriam - Webster's Dictionary of Law; Black's Law Dictionary, Ninth edition; Halsbury's Laws of England (volume 91) Fifth Edition; Idea Mobile Communication Ltd. v. Commissioner of Central Excise and Customs, Cochin (2011) 12 Supreme Court Cases 608; Bharat Sanchar Nigam Ltd., and another v. Union of India and others (2006) 3 Supreme Court Cases 1 and Beecham Foods, Ltd., v. North Supplies (Edmonton), Ltd. (1959) 2 All E.R. 336 rel.

Sardar Ahmad Jamal Sukhera for Petitioner.

Sarfraz Ahamd Cheema for Respondent.

2017 P T D 2340

[Lahore High Court]

Before Shahid Karim, J

USMAN HASSAN and another

Versus

FEDERATION OF PAKISTAN and others

W.P. No.32241 of 2015, decided on 10th October, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 53, 159, Cl. 47B of Part IV of Second Sched & Cl. 57 of Part I of the Second Sched.---Exemption from Income Tax---Nature of exemptions and tax concessions in the Second Schedule to the Income Tax Ordinance, 2001 under S. 53 thereof---Exemption granted to income of approved recognized Provident Fund approved Gratuity Fund or Provident Pension Fund---Nature of requirement of obtaining an exemption certificate under S. 159(2) of the Income Tax Ordinance, 2001---Distinction between exemption from tax and exemption from operation of certain provisions---Scope----Petitioners were trustees of approved recognized Provident Fund, approved Gratuity Fund or Provident Pension Fund entitled to exemption under Cl. 47B of Part IV of the Second Schedule to the Income Tax Ordinance, 2001---Contention of petitioners, inter alia, was that since Legislature itself granted tax exemption to the Funds there was no further requirement of obtaining exemption certificate under S. 159(2) of the Income Tax Ordinance, 2001 in order to avail said exemptions---Validity----Clause 47B of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 intended that various taxing provisions mentioned therein would not apply to withholding agents, who were persons making payments to petitioners and it would be as if said provisions did not exist for such persons---Distinction, therefore, existed between "exemption from tax" and "exemption from operation of certain provisions" and S.53(1)(d) of the Income Tax Ordinance, 2001 provided that in case of any person who made payment to certain entities, operation of certain provisions would cease to have effect, which was a Legislative command---High Court observed that it would be a fallacy to state that petitioners were obliged to apply for exemption certificate under S.159 of the Income Tax Ordinance, 2001 for an exemption already provided for in Cl. 47B of Part IV of the Second Schedule of the same---Exemption certificate, if it was held as a sine quo non in the present case, would render said Cl. 47B and S. 53(1)(d) of the Income Tax Ordinance, 2001 as non-existent and superfluous which could not be the intention of Legislature and Department could not be permitted to place a construction on the whole scheme of law which ran counter to that of the intent of law---High Court held that the petitioners were not required to apply for an exemption certificate under S. 159 of the Income Tax Ordinance, 2001 if other requirements of the Income Tax Ordinance, 2001 were fulfilled and as long as petitioners continued to be exempted from tax---Constitutional petitions were allowed, accordingly.

Meezan Islamic Fund and others v. D.G. (WHT) FBR and others 2016 PTD 1204 distinguished.

Mansoor Usman Awan, Shahzeen Abdullah, Hussain Ibrahim and Muhammad Abubakar for Petitioners.

Syed Naveed A. Andrabi, Ashiq Hussain Hanjra, Barrister Saad Ehsan Warraich, Muhammad Azam Zia, Abbas Haider Hashmi, Sarfraz Ahmad Cheema and Dr. Ishtiaq Ahmad Khan, Director Law, FBR for Respondents.

2017 P T D 2380

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

COCA-COLA BEVERAGES PAKISTAN LTD.

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL and others

S.T.R. No.11 of 2007, heard on 27th April, 2017.

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

----Ss. 3, 2(33), 2(35) & 2(41)---"Supply"---Meaning of---Taxable activity---Taxable supply---Scope of sales tax---Question before the High Court was "whether placement of certain appliances at retail outlets by taxpayer for sale of its goods, constituted "supply" in terms of S.2(33) of the Sales Tax Act, 1990"---Held, concept of "supply" postulated furnishing or providing something on a demand by someone and as such, supply was connected with demand---Production of something or providing something without a demand or a counter purchase, therefore, was not "supply "---Supply involved a kind of continuity of relationship in which one person sold some items to other on an agreed rate on demand and it involved a kind of continuity or relationship in deal, i.e. purchase and sale---Most important factor in supply was that the product was provided on demand and most of the time it was furnished at the place earmarked by the buyer---Expression "other disposition" used in S. 2(33) of the Sales Tax Act, 1990, from the context, referred to a bilateral or multilateral act and did not refer to a unilateral act and said expression occurred after the words "sale" and "lease" and as such, it should be construed in a manner that it should have the same attribute of transfer of right as the words "sale" and "lease" had---In the present case, appliances were placed at the retail outlets by way of bailment under an express covenant that no interest whatsoever therein shall pass to the retailers and therefore, such placement could not be reckoned as a "supply" within the meaning of S. 2(33) of the Sales Tax Act, 1990 and inasmuch as the transaction did not qualify to be a "supply", the same did not come within the ambit of taxable "supply" and was not liable to the levy of sales tax---Reference was answered, accordingly.

Case law Referred.

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

----Ss. 7, 8 & 3---Determination of sales tax liability---Tax credit not allowed---Deduction / adjustment of input tax for purpose of taxable supplies---"Purpose" of taxable supplies---Scope---Interpretation and nature of Ss. 7 & 8 of the Sales Tax Act, 1990---Question before the High Court was "whether input tax in relation to appliances of taxpayer placed with retailers in their showrooms, could be adjusted"---Held, Ss. 7 & 8 of the Sales Tax Act, 1990 were not the charging sections and pertained payability of tax and were machinery provisions and helped in determining the liability to pay the tax as contemplated in S.3 of the Sales Tax Act, 1990---Keyword used in Ss. 7 & 8(1)(a) of the Sales Tax Act, 1990 was "purpose" which meant that input tax could be deducted only on goods used for purpose of taxable supplies---In order to determine whether input tax was admissible in a particular case, it had to be seen whether goods were used in relation to taxable supplies and it was not necessary that such goods should be an integral part thereof---Once a registered person established that goods in respect of which such person claimed input tax adjustment were used for the purpose of taxable supplies, such taxpayer would be entitled to the adjustment unless the Federal Government had issued a notification under S. 8(1)(b) of the Sales Tax Act, 1990 to disallow the same---In the present case, there was no denying the fact that taxpayer placed the appliances with retailers to facilitate the sale of its products, being its taxable supplies and therefore such appliances were used for the purpose of taxable supplies and taxpayer could claim adjustment of input tax in respect of the same---Reference was answered, accordingly.

Case-law referred.

(c) Words and phrases---

----"Purpose", meaning of---Purpose meant the intention or function of something, the thing that something was supposed to achieve.

Case law referred.

(d) Words and phrases---

----"Stock-in-trade", meaning of---Inventory carried by a retail business for sale in the ordinary course of business and tools and equipment owned and used by a tradesman; something that was seen as fundamental to a particular trade or activity or all the goods of shopkeeper for sale; equipment, merchandise, or materials necessary to or used in a trade or business; stock-in-trade of a company (synonymous with inventory) was a collection of raw materials or goods held by a manufacturer, wholesale, retailer or end-user, or any collection of a company's assets; equipment necessary to or used in the conduct of a trade or business; the goods kept for sale by a shopkeeper or the fittings and appliances of a workman or the aggregate of things necessary to carry on a business and something held to resemble the standard equipment of a tradesman or business---Stock-in-trade may be construed as equipment necessary to conduct one's business.

Case law referred.

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

----Ss. 33 & 34---Offences and penalties under the Sales Tax Act, 1990---Default surcharge / additional tax, imposition of---Mens rea for offences---Willful default / evasion of tax---Scope---Penalty could only be imposed where there was willful evasion of duties and taxes---For a statutory offence, presumption was that mens rea was an essential ingredient unless such statute creating the offence, by express terms or by necessary implication, ruled it out---For imposition of additional tax, it should be seen whether evasion or non-payment of tax was willful or mala fide and every case should be decided on its own merits---Every default on part of registered person / taxpayer would not ipso facto make such taxpayer liable for penalty or additional tax/default surcharge and the department must establish that the same was dishonest, willful or mala fide.

Case law referred.

Jahanzeb Inam for Applicant.

Sarfraz Ahmad Cheema and Dr. Ishtiaq Ahmad Khan, Director Law, FBR for Respondents.

2017 P T D 2424

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs CHAUDHRY SUGAR MILLS LTD., and another

S.T.A. No.149 of 2003, decided on 20th September, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 7, 66, 33, 11 & 47---Determination of sales tax liability---Input tax adjustment---Refund / adjustment under S. 66 of the Sales Tax Act, 1990---Remitting of penalty and additional tax---Scope---Questions before the High Court related input tax adjustment claimed under S. 66 of the Sales Tax Act, 1990 and whether when there existed no willful default on part of taxpayer, additional tax and penalty could be imposed on taxpayer---Held, input tax adjustment was required to be availed under S. 7 of the Sales Tax Act, 1990 during the relevant tax year and in case the taxpayer failed to avail the same, it was required to apply to the Department under S. 66 of the Sales Tax Act, 1990 for refund/adjustment of amount demanded by Department, and in the present case, the Department was ordered to adjust the said amount---Appellate Tribunal, in the present case, was also justified in remitting penalty and additional tax back to the taxpayer---Where a registered person/taxpayer did not deduct input tax within the relevant period, such person may claim adjustment of such tax under S. 66 of the Sales Tax Act, 1990 and no exception could be taken to the same---Reference was answered, accordingly.

2017 P T D 2431

[Lahore High Court]

Before Ayesha A. Malik, J

VORTEX INTERNATIONAL

Versus

FEDERATION OF PAKISTAN and others

W.P. No.55114 of 2017, heard on 25th September, 2017.

Customs Act (IV of 1969)---

----S. 18, 25 & 30---Constitution of Pakistan, Art. 199---SRO No.563(I)/2017 dated 01.07.2017---Constitutional petition---Import of goods---Imposition of customs duty---Expression "goods imported into Pakistan"---Scope and effect---Determination of the date on which goods were deemed as imported into Pakistan---Petitioner impugned the applicability of S.R.O. No.563(I)/2017 dated 01.07.2017, to import of goods by the petitioner on the ground that the said goods were imported by petitioner prior to 01.07.2017, and therefore, the said SRO could not be applied---Validity---Under S.18 of the Customs Act, 1969 liability to pay customs duty shall accrue the moment the goods enter into Pakistan---Taxable event was import of goods which had nothing to do with ascertaining value of the same under S.25 of Customs Act, 1969 or determination of the rate of import duty---In the present case, goods were imported into Pakistan prior to the issuance of the SRO which was evident from date of Import General Manifest---High Court observed that for the purposes of determining applicability of a SRO, relevant date would be the date of import, that was the date when such goods entered into territorial waters of Pakistan and not the date of the Goods Declaration---Constitutional petition was allowed, in circumstances.

East and West Steamship Co. v. The Collector of Customs and others PLD 1976 SC 618 rel.

Mian Abdul Bari Rashid for Petitioner.

Muhammad Anwar Khan for Respondents.

2017 P T D 2447

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs UNITED INDUSTRIES LTD., FAISALABAD

Custom Appeal No.372 of 2001, decided on 3rd October, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 8, 3 & 47---Scope of sales tax ---Taxable supply---Tax credit not allowed---Input tax adjustment---Question before the High Court was whether sales tax could be charged on sale of old vehicles and machinery which were not admissible for input tax deduction in terms of S. 8(1) of the Sales Tax Act, 1990---Validity---No legal provision existed which excluded sale of old plant machinery, vehicles or scarp from purview of taxable supply and the same were chargeable to sales tax and supply thereof, was taxable supply---Reference was answered, accordingly.

Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

Sarfraz Ahmad Cheema for Appellant.

2017 P T D 2461

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

MUHAMMAD KHALID SETHI

I.T.R. No.244 of 2016, decided on 2nd October, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5) & 133---Amendment of assessment---Jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---Nature---Question of Law---Scope---Question before the High Court was "whether Appellate Tribunal was justified in holding that amendment of taxpayer's assessment was not justified in the circumstances of the case"---Held, wealth statement, Bank statements and other document were filed by taxpayer in his reply to the Department and entries referred to by Department were all duly explained, and therefore there was no occasion for amending assessment of taxpayer under S.122(5) of the Income Tax Ordinance, 2001 and no question of law arose in the present case---High Court declined to exercise jurisdiction under S.133 of the Income Tax Ordinance, 2001, in circumstances.

Liaqat Ali Chaudhry for Appellant.

2017 P T D 2469

[Lahore High Court]

Before Ayesha A. Malik, J

Mian MEHMOOD-UR-RASHEED

Versus

FEDERATION OF PAKISTAN through Additional Secretary and Ministry of Finance and 3 others

Writ Petitions Nos.4311, 30920, 36734, 3829 and 3399 of 2016, heard on 22nd September, 2017

Sales Tax Act (VII of 1990) ---

----S.3---Constitution of Pakistan, Arts.77 & 199---Tax to be levied by law only---Nature and effect of Art.77 of the Constitution---Public interest litigation---Petitioners, in public interest, impugned increase in prices of petroleum products, inter alia, on the ground that the Federal Government had encroached upon jurisdiction of Parliament by fixing sales tax on petroleum products under S.3 of the Sales Tax Act, 1990---Validity---Under Art. 77 of the Constitution, no tax could be levied except by or under authority of an Act, which meant that there must exist an Act of Parliament which either levied tax or granted authority to levy tax---Provisions of S.3 of the Sales Tax Act, 1990 authorized Federal Government to impose conditions and restrictions by way of notification on the manner in which sales tax was to be charged, collected and paid and it could specify higher or lower rates of the same in a notification---Impugned S.R.Os. whereby sales tax has been notified on petroleum products had been issued pursuant to S.3 of the Sales Tax Act, 1990 meaning thereby the same were authorized by the Parliament---Levy of tax could not be declared unconstitutional or against public interest if it increased or lowered prices---Constitutional petition was dismissed, in circumstances.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 ref.

Sheraz Zaka for Petitioner (in Writ Petitions Nos.4311, 30920 and 36734 of 2016).

Nemo for Petitioner (in Writ Petition No.3829 of 2016).

Mohammad Azhar Siddique, Ali Raza Kabir, M. Rizwan Gujjar, Adeel Hassan, Ms. S.Parveen Mughal, Ms. Mafia Kausar and Mian Shabbir Asmail for Petitioners (in Writ Petition No.3399 of 2016).

Nasar Ahmad, D.A.-G. and Tahir Mehmood Ahmad Khokhar, D.A.-G. along with Atteeq Aslam, Executive Secretary, OGRA for Respondents.

Safraz Ahmad Cheema, Respondent for Federal Board of Revenue.

2017 P T D 2480

[Lahore High Court]

Before Shams Mehmood Mirza, J

Malik FAISAL IMRAN

Versus

FEDERATION OF PAKISTAN through Secretary of Finance and 3 others

Writ Petition No. 19101 of 2016, decided on 30th June, 2017.

Sales Tax Act (VII of 1990)---

----S.45-B(2)---Terms "Annulled and setting aside"---Applicability---Petitioner was taxpayer and his grievance was that when assessment order was annulled by the Commissioner Inland Revenue (Appeals), it had attained finality and Assessing Officer could not re-open the same---Validity---Assessment order, in the present case, was an ex parte order against which an appeal was preferred by petitioner before Commissioner Inland Revenue (Appeals)---Petitioner was not served with notice of hearing before Assessing Officer and Appellate Authority accepted the stance of petitioner and annulled the order of assessment---Decision based on such ground could not be termed as 'annulment' of the decision of Assessing Authority for declaring same non-est---Assessment order passed by Assessing Authority, was the result of an irregular exercise of power with no allegation that he lacked jurisdiction to pass the order---Use of expression by Commissioner Inland Revenue (appeals) describing the order as having been annulled did not mean that decision appealed against was declared void ab initio---Assessment order did not suffer from any legal infirmity of jurisdiction and Assessing Authority was justified in sending fresh notice of hearing to petitioner---Constitutional petition was dismissed in circumstances.

Glaxo Smith Kline Pakistan Limited Karachi v. Collector of Customs, Sales Tax and General Excise (Adjudication) Karachi III 2004 PTD 3020 and Saeed-ur-Rehman v. Assistant Commissioner of Income Tax, Circle 16 Abbotabad and others 2002 PTD 2379 ref.

Muhammad Mohsin Virk for Petitioner.

2017 P T D 2488

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

LAHORE ELECTRIC SUPPLY COMPANY LTD.

Versus

COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICER, LAHORE and others

S.T.R. No.68374 of 2017, decided on 25th September, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 47, 3 & 7---Determination of sales tax liability---Jurisdiction of High Court under S.47 of the Sales Tax Act, 1990---Nature---Question before the High Court was whether the Appellate Tribunal and forums below were justified in holding that the taxpayer, an Electricity Supply Company, was liable to pay full amount of sales tax collected, which was charged through consumer bills, and not just the tax according to the amount of units declared in its return, which was substantially less---Held, no substance existed in the Reference and High Court declined to exercise its jurisdiction under S.47 of the Sales Tax Act, 1990.

2017 P T D 450

[Peshawar High Court]

Before Yahya Afridi and Ishtiaq Ibrahim, JJ

COMMISSIONER INLAND REVENUE (RTO), PESHAWAR

Versus

ZUBAIR AHMAD

Tax Reference No.51-P of 2015, decided on 8th September, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122, 133, 177(1) & 214-C---Reference---Jurisdiction---Selection for audit---Appellate Tribunal Inland Revenue remanded matter to Commissioner (Appeals) for deciding the same keeping in view the grounds raised in memo of appeal---Authorities were aggrieved of clarification made by Appellate Tribunal Inland Revenue with regard to remand order passed earlier---Validity---Appellate Tribunal Inland Revenue, in its original order, did not consider grounds of appeal, which clearly entailed jurisdiction challenge made by taxpayer regarding selection of case for audit---Order in question only corrected scope of consideration for Commissioner (Appeals) in deciding appeal of taxpayer---Commissioner (Appeals) was directed to decide appeal including challenge made to jurisdictional issue regarding selection of case for audit in view of Ss. 177 & 214-C, of Income Tax Ordinance, 2001---Reference was disposed of accordingly.

Messrs Chenone Store Limited's case 2012 PTD 1815 ref.

Neelum A. Khan for Petitioner.

Qazi Danish Gul for Respondent.

2017 P T D 488

[Peshawar High Court]

Before Yahya Afridi and Rooh-ul-Amin Khan, JJ

HAQ DAD

Versus

The CUSTOMS, SALES TAX AND FEDERAL EXCISE APPELLATE TRIBUNAL, PESHAWAR and others

Custom Reference Application No.33-P of 2013, decided on 12th April, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 139, 181 & 196---Reference to High Court---Smuggling case---Applicant had challenged the order-in-appeal passed by Collector Customs (Appeals) and order-in-original passed by Collector of Customs---Judgment of the Customs Appellate Tribunal was based on determination of facts and findings rendered by the Special Judge Customs---Adjudication proceedings were distinct and separate from the prosecution proceedings provided separately under the Customs Act, 1969 and both the proceedings were to proceed independently without relying on each other---In the present case, the Customs Appellate Tribunal had relied upon the determination relating to crucial factual disputes by the forums provided for prosecution under the enabling provisions of Act---Reference, no doubt, had been made to the decision given by the initial forum of the hierarchy provided for adjudication under the Customs Act, 1969, but the contention of the applicant, having not been considered, had surely prejudiced his case---Customs Appellate Tribunal, was the last forum, provided under the law to determine the factual dispute, thus it would be appropriate that the cause of the applicant be reconsidered by the said Tribunal---Order of the Tribunal was set aside and matter was remanded to the Customs Appellate Tribunal to pass appropriate order---High Court observed that case being an old matter, Tribunal would dispose of the same expeditiously.

1991 PCr.LJ 644 ref.

Qazi Danish Ali for Petitioner.

Hashim Raza for Respondent.

2017 P T D 1036

[Peshawar High Court]

Before Muhammad Younis Thaheem, J

CHAIRMAN, CENTRAL BOARD OF REVENUE, ISLAMABAD and another

Versus

GENERAL MANAGER and 3 others

Cr.A. No.74-M with Cr. M. No. 69-M of 2016, decided on 16th August, 2016.

Khyber Pakhtunkhwa Consumers Protection Act (VI of 1997)---

----Ss. 13 & 17---Sales Tax Act (VII of 1990), S.5---Constitution of Pakistan, Art. 247(3)---Sales tax, recovery of---Non-extension of law to certain area---Effect---Refund/adjustment of tax collected---Authorities were aggrieved of the judgment passed by Trial Court restraining them from recovery of General Sales Tax in supply of Sui Gas bills issued in the area of Swat---Validity---Consumer Court had jurisdiction to entertain and decide matter relating to General Sales Tax, being not a matter relating to tax only---General Sales Tax was included in Sui Gas utility bills of consumers, in the area where Sales Tax Act, 1990, was not extended by Parliament---Authorities were bound to return recovered General Sales Tax to domestic consumers or the same could be adjusted in their monthly gas utility bills---High Court declined to interfere in the judgment passed by Trial Court---Appeal was dismissed in circumstances.

Ishtiaq Ahmad for Appellants.

Syed Ali Haider and Usman Ali for Respondent No.2.

2017 P T D 1272

[Peshawar High Court]

Before Waqar Ahmed Seth and Rooh-ul-Amin Khan, JJ

COLLECTOR OF CUSTOMS

Versus

LUCKY CEMENT LTD. through Chief Executive

Custom Reference No.28-P of 2014, decided on 18th January, 2017.

Customs Act (IV of 1969)---

---S. 196---Customs Rules, 2001, Rr. 296(1) & 297(2)---Notifications S.R.O. No. 450(I)/2001, dated 18-06-2001, S.R.O. No.450(I)/2001, dated 18-6-2001 and S.R.O. No.766(I)/2009, dated 04-09-2009, S.R.O. No.1119(I)/2011, dated 28-12-2011---Duty and Tax Remission for Exports Rules, 2001, R.297(2)(b)---Import Policy Order, 2009, paras. 6 & 11---Reference---Duty and Tax Remission for Exports (DTRE)---Tire derived fuel---Rubber wastage/tire scrap---Show cause notice was issued to importers on the ground that rubber wastes/tire scrap was not covered within definitions of "input goods"---Adjudicating officer set aside show cause notice issued to importers and his order was maintained by Customs Appellate Tribunal---Validity---Disputed imported rubber wastes/tire scrap in shredded form was not specifically defined as 'input goods' nor importers had complied with provisions of mandatory requirements---Import in question was made in clear violation of Duty and Tax Remission for Exports Rules, 2001, R.297(2)(b) read with R.296 of Customs Rules, 2001 were in violation of paragraphs 6 and 11 of Import Policy Order, 2009---Importers did not obtain any permission, consent and approval from competent authority to import and consume rubber wastes/tire scrap in shredded form---Importers had also not complied with guidelines as provided---Restrictions imposed through Notifications and amended paragraphs were applicable to import of disputed rubber wastes for the period 01-03-2012 to 30-01-2013---Importers did not comply with directions of Environmental Protection Agency contained in Tire Derived Fuel (TDF) for particular purpose---Rubber wastes/tire scrap in shredded form could not be considered 'input goods' according to Rr.296(l)(i) and 297 of Customs Rules, 2001 and Notification S.R.O. No.450(I)/2001, dated 18-06-2001---High Court set aside orders passed by Customs Appellate Tribunal as well as by adjudicating officer---Reference was allowed in circumstances.

Abdur Rauf Rohaila for Petitioner.

Issac Ali Qazi and Ishtiaq Ahmed for Respondent.

2017 P T D 1359

[Peshawar High Court]

Before Yahya Afridi, C.J. and Muhammad Ayub Khan, J

PAKISTAN TELECOMMUNICATION COMPANY LTD. through Authorized Attorney

Versus

GOVERNMENT OF KHYBER PAKHTUNKHWA (KPK) through Secretary Law, Parliamentary Affairs and Human Rights Department, Peshawar and 4 others

W.P. No.2963-P of 2014, decided on 7th March, 2017.

Khyber Pakhtunkhwa Finance Act (XVII of 2013)---

----S.19 & Sch.II---Constitution of Pakistan, Arts. 142 & 199---Taxable Service---Constitutional validity---Maintainability of a Constitutional petition against taxing/fiscal statutory provisions on ground of unreasonableness, hardship or being excessive or discriminatory vis-à-vis rate of said tax being different in other Provinces---Scope---Fiscal statute could not be struck down merely on ground of its harshness or hardship that it may cause, unless it was confiscatory and also could not be struck down merely on ground of unreasonableness ---Spirit of the Constitution envisaged a Federal form of government, vesting in its federating units with autonomy and presumption in favour existed in the Constitutionality of a law made by Parliament or Provincial legislature and no enactment could be struck down by stating that the same was arbitrary, unreasonable or irrational, unless some Constitutional infirmity had to be found---High Court was not concerned with wisdom or un-wisdom or the justice or injustice of such a statute, as the Legislature(s) were supposed to be alive to such needs of the people who they--- "Hardship" was not relevant in pronouncing on the Constitutional validity of a fiscal statute and in the field of taxation, the Legislature enjoyed a greater latitude for classification---Fiscal statute could not be struck down solely on ground that the rate of tax levied was unreasonably high and any interpretation of the law which was in conflict with the spirit of the Constitution was to be avoided and one in support thereof was to be applied, hence Provincial autonomy ingrained in the Constitution was to be upheld.

D.G. Khan Cement Company v. The Federation of Pakistan Writ Petition No.3515 of 2012 distinguished.

Lahore Development Authority's case 2015 SCMR 1739; Rakehs Kohli's case 2013 SCMR 34; Messrs Elahi Cotton Mill's case 1997 PTD 1555; Anoud Power Generation's case PLD 2001 SC 340; Haji Muhammad Sadiq's case 2007 PTD 67; Ali Haider Khan's case 2016 PTD 2525 and Muzaffar Khan's case 2013 SCMR 304 rel.

Barrister Babar Shahzad Imran for Petitioner.

Shumail Ahmad Butt, Waqar Ahmad Khan, A.A.G. and Sharifullah Deputy Collector KPRA for Respondents.

2017 P T D 2114

[Peshawar High Court]

Before Yahya Afridi, C.J. and Ijaz Anwar, J

Messrs VINCRAFT (PVT.) LTD. through Authorised Representative

Versus

FEDERAL BOARD OF REVENUE through Chairman and 4 others

Writ Petition No.758-P of 2017, decided on 1st June, 2017.

Income Tax Ordinance (XLIX of 2001)---

----S. 175--- Sales Tax Act (VII of 1990), S. 38--- Power of entering and searching premises of tax-payer--- Scope--- Petitioner company was aggrieved of entry and search of its premises by Income Tax authorities--- Validity--- Legislation of Income Tax Ordinance, 2001 was later in time to Sales Tax Act, 1990, therefore, if intention of legislation was to have considered respective S. 38 of Sales Tax Act, 1990 and S. 175 of Income Tax Ordinance, 2001 as para-materia then there was no need of giving numerous details in S. 175 Income Tax Ordinance, 2001--- Provisions of S. 175 of Income Tax Ordinance, 2001 were self-contained and had provided actions step-by-step in S. 175(1)(a) of Income Tax Ordinance, 2001 and thereafter--- All such subsections could not be read disjunctively but be read conjunctively because actions taken by Commissioner or officers authorized followed one after the other--- Provision of S. 175(7) of Income Tax Ordinance, 2001 had an overriding effect over any rule or law relating to privileges or public interest in relation to access to premises or places and searches, examination of record impounding documents/computers that was carried out under mandate of subsections of S. 175 of Income Tax Ordinance, 2001--- Law mandated authorities to be given full and free access to premises without prior notice and involving police for search was never intention of the legislature--- Action taken by authorities was not illegal and they had acted within parameters set by S. 175 of Income Tax Ordinance, 2001--- High Court declined to interfere in the matter as search made by authorities was not without jurisdiction--- Constitutional petition was dismissed in circumstances.

2014 SCMR 30; 2003 PTD 1034; 2007 PTD 2356; 2005 SCMR 1166; PLD 1991 SC 630; 1999 PCr.LJ 1546; 1997 SCMR 408; PLD 1996 SC 574; 2005 PTD 1200 and 2005 SCMR 37 distinguished.

Shumail Ahmad Butt for Petitioner.

Ghulam Shoaib Jally for Respondent No.1

Rehmanullah for Respondents Nos. 2 and 3.

Mian Zamrud Shah for Respondents Nos. 4 and 5.

2017 P T D 1472

[Balochistan High Court]

Before Muhammad Kamran Khan Mulakhail and Naeem Akhtar Afghan, JJ

Messrs WORLD TRADE ENTERPRISES, CUSTOMS C&F AGENTS and others

Versus

CUSTOMS APPELLATE TRIBUNAL BENCH-I and others

Customs Reference Applications Nos.27 to 41 and 45 of 2014, decided on 29th April, 2016.

(a) Words and phrases---

----"Mutatis mutandis"---Connotation---Expression 'mutatis mutandis' is an adverbial phrase qualifying the verb 'shall apply' and meaning 'those changes being made which must be made', means necessary changes in point of detail were to be made when necessary---When law directs that a provision made for certain type of case would apply 'mutatis mutandis' in another type of that case, that would mean that expression 'mutatis mutandis' applies with such changes as may be necessary but not that even if no change be necessary, some changes nevertheless have to be made.

Vankatarama's Law Lexicon and Muhammad Sharif v. The State PLD 1999 SC 1063 rel.

(b) Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Disposal of cases with single order---Grievance of importers was that authorities decided all matters on the basis of single order-in-original and Appellate Tribunal maintained such order---Validity---Administration of justice stipulated that a factual inquiry based on record for the purpose of adjudication had to be conducted---Adjudicating authorities in no case could direct that order/judgment rendered in a particular case would mutatis mutandis apply to any other case---Such could be termed as no order in the eyes of law as it seriously diminished the very purpose of adjudication as well as principles of natural justice, which always required formulation of speaking order by reflecting a discussion of a factual position and handing down of a judgment or a finding on such basis---Any order passed against norms of natural justice and having been passed by mis-exercise of jurisdictional domain would be perverse, fanciful, ridiculous, non-speaking and liable to be turned down---High Court set aside the orders as Appellate Tribunal had failed to follow principles of natural justice---High Court remanded the matters to the authorities for fresh adjudication and passing of orders-in-original---Reference was allowed accordingly.

Messrs Pakistan Telephone Cables Ltd. v. The Federation of Pakistan 2011 PTD 2849 and Messrs Prime Chemicals v. The Government of Pakistan 2004 PTD 1388 rel.

Sadbar Jan and Mazhar Ali Khan for Applicants.

Syed Ikhlaq Shah, Standing Counsel-II for Respondents.

2017 P T D 1858

[Balochistan High Court]

Before Muhammad Kamran Khan Mulakhail and Naeem Akhtar Afghan, JJ

INSPECTOR GENERAL, FRONTIER CORPS

Versus

Messrs ZAIN ALI and another

Custom Reference Application No.1 of 2013, decided on 10th December, 2015.

(a) Customs Act (IV of 1969)---

----S.196---Control of Narcotic Substances Act (XXV of 1997), S. 72---Constitution of Pakistan, Arts. 141, 143 & Schedule IV Lists---Transporting of narcotic substances---Applicability of Customs Act, 1969---Provisions of Control of Narcotic Substances Act, 1997, has overriding effect on other laws for the time being in force.

(b) Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Scope of reference before High Court is related and dependent upon such questions which arise out of the orders of Appellate Tribunal---Jurisdiction of High Court in such behalf is limited only to the extent of question of law but not in any incidental and ancillary question which was not issue in proceedings.

(c) Customs Act (IV of 1969)---

----S. 196---Control of Narcotic Substances Act (XXV of 1997), S. 32---Constitution of Pakistan, Art. 199---Reference to High Court---Release of vehicle---Supervisory jurisdiction of High Court---Dispute was with regard to possession of vehicle in question which was allegedly used in transporting huge quantity of narcotic substances---Customs authorities confiscated vehicle under the provisions of Customs Act, 1969 but Appellate Tribunal set aside the order---Plea raised by criminal investigating agency was that a heavy quantity of narcotics was recovered from the vehicle and custody of the same could not be decided under Customs Act, 1969---Validity---In view of the confined/limited scope of S. 196 of Customs Act, 1969, High Court declined to set aside the order passed in respect of vehicle in question, however, High Court, in exercise of its supervisory jurisdiction under Art. 199 of the Constitution, set aside the order passed by Trial Court remanded the matter for passing appropriate order in respect of vehicle, in view of the provisions of S. 32 of Control of Narcotic Substances Act, 1997---Reference was disposed of accordingly.

Muhammad Hassan Mengal along with Haji Azam, Law Officer, Customs for Petitioners.

Khalid Ahmed Kubdani for Respondents.

2017 P T D 2227

[Balochistan High Court]

Before Jamal Khan Mandokhail and Nazeer Ahmed Langove, JJ

Messrs SAINDAK METALS LTD. through Managing Director

Versus

CHAIRMAN, FEDERAL BOARD OF REVENUE and 3 others

Income Tax References Nos.7 and 8 of 2016, decided on 15th June, 2017.

(a) Words and phrases---

----"Business"---Meaning---"Business" was the activity of making, buying or selling goods or providing services in exchange for money and was a commercial enterprise carried on for profit; a particular occupation or employment habitually engaged in livelihood or gain.

Webster Dictionary and Black's Law Dictionary rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.221 & 122---"Amendment"---Meaning and scope---"Amendment" was the formal revision or addition proposed or made to a statute, Constitution, pleadings, order or other instrument and it was a change made by addition, deletion or correction; an alteration in the wording, a change in statements of allegations, an addition of supplemental information, the deletion of unnecessary, undesirable, outdated or untrue information---Amendment was done for the purpose of adjustment, betterment, elaboration, improvement or perfection to a statute, pleadings or documents---Amendment made to a section or part of a statute, order, pleadings or document did not change its nature and the basic document remained the intact.

Black's Law Dictionary rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.221---"Rectification" of mistake---Meaning---Rectification was the court's equitable correction of a contractual term that was misstated, the judicial alteration of a written contract to make it conform to the true intention of the parties---As an equitable remedy, the court altered the terms as written as to express the true intention of the parties---Rectification was the correction of something that was wrong, or to correct by removing of an error; and was a process by which something wrongly entered in or omitted from a record or any document was corrected so as to express the true intention of the recorder or author, which was not expressed in the original version.

Webster Dictionary and Black's Law Dictionary rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 122 & 133---Assessment---Amendment of assessment---Rectification of mistake---Taxpayer in its return classified a portion of its income under the head of "income from business", which return was subsequently rectified under S. 221 of the Income Tax Ordinance, 2001 by an order of the Commissioner, and said income was reclassified as income from other sources---Contention of the taxpayer, inter alia, was that such amendment did not fall within ambit of S. 221 of the Income Tax Ordinance, 2001 and was time barred under S. 122 of the Income Tax Ordinance, 2001---Validity---Difference between Ss. 122 & 221 of the Income Tax Ordinance, 2001 was that under said S. 122; an amendment was allowed in returns submitted by the taxpayer, whereas under S. 221 of the Income Tax Ordinance, 2001 empowered the named authorities to amend its own order to rectify mistake apparent in the assessment order---Taxpayer, in the present case, while submitting his returns classified its income as "income from business" which was initially accepted by the Commissioner through an order, without realizing it was not an income from business---Return submitted by the taxpayer under such classification of income was against fundamental principle of the Income Tax Ordinance, 2001 which was mistakenly accepted by the Commissioner and as such required rectification---When such mistake surfaced on the record, impugned notice was issued and mistake made in the returns was legitimately designed to avoid payment of tax; therefore the same needed to be corrected---Such amendment in the order rectifying an apparent mistake fell within ambit of S. 221 of the Income Tax Ordinance, 2001 instead of S. 122 of the same---No illegality therefore existed in the impugned orders---Reference was answered, accordingly.

Gohar Yaqoob Yousafzai and Habib-ur-Rehman for Petitioner.

Syed Ikhlaq Shah, D.A.G. for Respondent.

Rehmatullah Durrani, Additional Commissioner Income Tax.

2017 P T D 138

[Supreme Court of Pakistan]

Present: Anwar Zaheer Jamali, C.J., Amir Hani Muslim and Faisal Arab, JJ

Messrs CHILTAN GHEE MILLS, QUETTA and others

Versus

DEPUTY COLLECTOR OF SALES TAX (REFUND), CUSTOMS HOUSE, QUETTA and another

Civil Petition No. 84-Q of 2011, decided on 3rd October, 2016.

(On appeal against the judgment dated 26.05.2011 passed by the High Court of Balochistan, Quetta in Sales Tax Appeal No.3/2004)

Sales Tax Act (VII of 1990)---

----Ss. 7, 8(1)(a) & 13---Sales tax, refund of---Scope---Adjustment of input tax could only be claimed in a situation where the goods that had been manufactured or produced fell within the definition of 'taxable supplies'---Where the goods that were to be supplied were exempt from sales tax then the question of seeking refund of the sales tax paid on the purchase of raw material used in the production of exempt supplies did not arise at all---Where a registered person was exempted from the liability of sales tax on its supplies, it did not mean that the tax that was paid on the purchase of raw material used in the making of such supplies would be liable to be refunded.

Section 7 of the Sales Tax Act, 1990 provided that for the purposes of determining tax liability in respect of 'taxable supplies', a registered person shall be entitled to deduct input tax paid during the tax period. Such concession was clearly available only when a registered person made 'taxable supplies' but was not available where the supplies were totally exempt from the sales tax liability. Such mandate of the law was further affirmed in section 8(1)(a) of the Sales Tax Act, 1990 which provided that notwithstanding anything contained in any other provision of the Act, a registered person shall not be entitled to claim input tax paid on goods that were used in the making of supplies which had been exempted from the sales tax liability under the provisions of section 13 of the said Act.

Adjustment of input tax could only be claimed in a situation where the goods that had been manufactured or produced fell within the definition of 'taxable supplies'. Where the goods that were to be supplied were exempt from sales tax then the question of seeking refund of the sales tax paid on the purchase of raw material used in the production of exempt supplies did not arise at all. The whole object behind the provision of section 8(1)(a) of Sales Tax Act, 1990 seemed to be that where at any stage sales tax has been legitimately paid then refund of input tax could not be claimed where such goods were used in the manufacture of 'exempt supplies'. Thus where a registered person was exempted from the liability of sales tax on its supplies, it did not mean that the tax that was paid on the purchase of raw material used in the making of such supplies would be liable to be refunded.

Sahibzada Muhammad Khan, M.D. in person for Petitioners.

Nemo for Respondents.

2017 P T D 381

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Maqbool Baqar and Khilji Arif Hussain, JJ

COLLECTOR OF CUSTOMS, CUSTOM HOUSE, KARACHI

Versus

Syed REHAN AHMED

Civil Appeal No.490 of 2009, decided on 23rd November, 2016.

(Against the judgment dated 5.12.2008 of the High Court of Sindh, Karachi passed in Custom Reference Application No. 404 of 2007)

(a) Customs Act (IV of 1969)---

----S. 194-C(2) & (4)---Customs Appellate Tribunal ("Tribunal")---Chairman or other Member of the Tribunal, authorized by the Chairman, sitting singly and deciding a case---Scope---Chairman or Member of Tribunal could decide a case sitting singly provided that such Member or Chairman was already a member of a Bench constituted by the Chairman under S. 194-C(2) of the Customs Act, 1969 and the case must have been allotted to such Bench---Such Member (or Chairman) could only decide such cases sitting singly where, the value of the goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of confiscation under S. 181 did not exceed five million rupees; OR, in any disputed case, the difference in duty or tax or the duty or tax involved or the amount of fine or penalty involved did not exceed five million rupees---Decision by the Chairman to allow himself or any other member of a Bench to sit singly to dispose cases falling within the ambit of S. 194-C(4) should not be as a matter of course or right, rather should be done upon proper application of mind by the Chairman who shall himself make such decision, and not delegate it to any other officer to undertake as an administrative action---Chairman was obliged to examine the circumstances warranting the decision of letting him or another member of a Bench to dispose of a matter sitting singly before taking such step. [Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali (2010 PTD 1024) held to be good law].

Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024 held to be good law.

(b) Customs Act (IV of 1969)---

----S. 194-C(3) & (3A) [as amended by the Finance Act (IV of 2007) but prior to amendments made by the Finance Act (I of 2009)]---Customs Appellate Tribunal ("Tribunal")---Technical Member---Whether technical member of the Tribunal, sitting singly, had the jurisdiction to decide matters involving questions of law---Amendment brought about by the Finance Act, 2007 which omitted only the explanation to S. 194-C(3A) of Customs Act, 1969 and not the second proviso to S. 194-C(3) was a clear indication that the legislature did not want the Single Member Benches constituted under S. 194-C(3A) to be prevented from hearing cases that involved decisions in relation to a question of law, and the second proviso to S. 194-C(3) was left intact.

(c) Interpretation of statutes---

----Harmonious interpretation---Statute must be harmoniously interpreted only where there was a conflict between its provisions.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellant.

Ex parte for Respondent.

2017 P T D 470

[Supreme Court of Pakistan]

Present: Amir Hani Muslim, Qazi Faez Isa and Ijaz ul Ahsan, JJ

ARMY WELFARE TRUST (NIZAMPUR CEMENT PROJECT), RAWALPINDI and another

Versus

COLLECTOR OF SALES TAX (NOW COMMISSIONER INLAND REVENUE), PESHAWAR

Civil Petition No. 1983 of 2012, decided on 14th October, 2016.

(On appeal from the judgment dated 24.4.2012 in SAO No.2 of 2000 passed by the Peshawar High Court, Peshawar)

(a) Customs Act (IV of 1969)---

----S. 194---Sales Tax Act (VII of 1990), S. 2(1)---Constitution of Pakistan, Arts. 175(1) & 185(2)(d)---Appellate Tribunal, Inland Revenue ("Appellate Tribunal")---Status---Order passed by Appellate Tribunal set aside by the High Court---Whether judgment of High Court was to be challenged before the Supreme Court by filing an appeal OR petition for leave to appeal---Appellate Tribunal could neither be categorized as a "court" nor "equated with the tribunals envisaged in the Constitution" which exercised judicial powers---Appellate Tribunal, Inland Revenue, was not mentioned or provided for in the Constitution, therefore, it could not be categorized or be deemed to be a court in terms, of Art. 185(2)(d) of the Constitution---Where the High Court set aside an order of the Appellate Tribunal, it did not do so of a 'court immediately below', consequently, if an order or judgment of the Appellate Tribunal was set aside by the High Court, the only remedy against the judgment of the High Court would be by filing a petition for leave to appeal before the Supreme Court.

Mehram Ali v. Federation of Pakistan PLD 1998 SC 1445 and Riaz-ul-Haq v. Federation of Pakistan PLD 2013 SC 501 ref.

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

----S. 47(5)---Reference/appeal(erstwhile) to the High Court against order of Appellate Tribunal---Scope---Jurisdiction of the High Court under S. 47(5) of the Sales Tax Act, 1990, was restricted to matters involving only questions of law---Reference or appeal (erstwhile) to the High Court against a judgment of the Appellate Tribunal under the Sales Tax Act, 1990 could only be filed on a question of law.

F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

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

----Ss. 3B(1), 13(1) & 47(5)---S.R.O. No. 561(I)/94 dated 9th June, 1994---Sales tax, collection of---Cement manufacturer exempted from sales tax---Question as to whether the manufacturer had collected sales tax on supplies made by it---Such question was a question of fact which could not be decided by the High Court in a reference filed before it under S. 47(5) of the Sales Tax Act, 1990---Even otherwise in the present case, no evidence of sales tax collection was produced before the Appellate Tribunal, before the High Court or even before the Supreme Court---Internal pricing mechanism of a manufacturer was not a substitute for proof/ evidence of actual collection of sales tax in terms of S. 3B of the Sales Tax Act, 1990---Since sales tax was not collected by the cement manufacturer the question of paying the same to the revenue department did not arise---Appeal was allowed accordingly.

Ali Sibtain Fazli, Advocate Supreme Court and Mahmood A. Qureshi, Advocate-on-Record (absent) for Petitioners.

Dr. Farhat Zafar, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondent.

2017 P T D 622

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Faisal Arab and Ijaz ul Ahsan, JJ

COLLECTOR OF CUSTOMS APPRAISEMENT, COLLECTORATE, CUSTOMS HOUSE, KARACHI

Versus

Messrs GUL REHMAN, PROPRIETOR MESSRS G. KIN ENTERPRISES, GHAZALI STREET, NASIR ROAD, SIALKOT

Civil Appeal No. 450 of 2010, decided on 25th November, 2016.

(Against the order dated 18.3.2010 of the High Court of Sindh at Karachi passed in C.P. No. D-777/2008)

(a) Customs Act (IV of 1969)---

----Ss. 19A & 33(1), proviso---Customs duty, refund of---Importer seeking refund of customs duty and penalty paid by it on the basis of an order-in-original, which was subsequently set aside by Collector (Appeals)---Customs department refused to refund the amount by contending that the importer had already passed on the incidence of duty onto the end consumers, therefore, in terms of proviso to S. 33(1) of the Customs Act, 1969, the importer was not entitled to a refund---Legality---Language of S. 33(1) of the Customs Act, 1969 made it clear that refund in terms thereof was to be allowed only where/if customs duty had been paid as a result of some inadvertence, error or misconstruction, which was not the position in the present case---Importer right from the beginning had agitated that the declaration made by it was correct and only 14% customs duty was applicable, whereas stance of the customs department was that imported goods attracted 25% customs duty---No inadvertence, error or misconstruction was involved in the declaration by the importer---Issue was conclusively resolved by the Collector (Appeals) in favour of the importer---Holistic reading of S. 33 of the Customs Act, 1969, clarified that where a refund became due as a result of any decision or judgment passed by a customs officer, Appellate Tribunal etc., the proviso to S. 33(1) would not be applicable, meaning thereby that the refund had to be made notwithstanding the fact that the incidence of customs duty had been passed onto the customer and therefore S. 19A of the said Act would not be attracted---Appeal filed by Customs department was dismissed accordingly.

(b) Interpretation of statutes---

----'Proviso' to a provision---Scope and purpose---Generally a proviso was an exception to or qualified the main provision of law to which it was attached---Proviso was to be strictly construed and it applied only to the particular provision to which it was appended---Proviso was limited to the provision which immediately precedes it---Purpose of a proviso was to qualify or modify the scope or ambit of the matter dealt with in the main provision, and its effect was restricted to the particular situation specified in the proviso itself---Before a proviso could have any application, the section or provision itself must apply.

Dr. Muhammad Anwar Kurd and 2 others v. The State through Regional Accountability Bureau, Quetta 2011 SCMR 1560; Interpretation of Statutes (11th Ed.), N.S. Bindra and K.E.S.C. Progressive Workers' Union through its Chairman and others v. K.E.S.C. Labour Union through its General Secretary and others 1991 SCMR 888 ref.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellant.

Azhar Maqbool Shah, Advocate Supreme Court and Ahsan Hameed Lilla, Advocate Supreme Court for Respondent.

2017 P T D 717

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Manzoor Ahmad Malik and Khilji Arif Hussain, JJ

COMMISSIONER OF INCOME TAX and another

Versus

BALOCHISTAN CONCRETE AND BLOCK WORKS LTD. and others

Civil Appeals Nos. 1264 to 1270 of 2006, 975 of 2007, 229 of 2010, 716, 717, 722, 723 of 2011, 697 of 2015 and C.M.A. No.793 of 2008 in Civil Appeal No.1574 of 2007, decided on 25th November, 2016.

(Against the judgments dated 27.1.2006/30.3.2006, 30.4.2009/ 15.4.2011/5.5.2011/12.11.2014 of the High Court of Sindh, Karachi passed in I.T.A. No.178/1999, I.T.R. No.102/1991, Ref. Case No.130/1997, I.T.R. No.131/1997, I.T.A. No.177/1999, I.T.A. No.217/1999, I.T.A. No.208/1999, I.T.R. No.185/1997, I.T.R.A. No.531/2000, I.T.A. No.295/1997, I.T.A. No.296/1997, I.T.A. No.929/2000, I.T.A. No.930/2000 and I.T.C. No. 482/2004)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 35---Business loss, carry forward of---Conditions for the right to carry forward business losses for the purposes of set-off enumerated.

Following are the conditions that must exist for the right to carry forward business losses for the purposes of set-off:

(i) The loss should fall under the head "income from business or professions" defined in section 22 of the Income Tax Ordinance, 1979;

(ii) It should not be a loss to which section 36 of the Income Tax Ordinance, 1979 applies, i.e. speculation losses;

(iii) The loss shall be carried forward to the following assessment year and set-off against the profits and gains of such business or profession assessable for that year. In other words, the loss being carried forward cannot be set-off against a source other than the profits and gains of such business or profession;

(iv) The business or profession in which the loss was originally sustained should continue to be carried on by the assessee for the assessment year in which carried forward loss was sought to be set-off;

(v) Loss cannot be carried forward for more than six years from the assessment year for which the loss was first computed; and

(vi) Loss cannot be carried forward unless it had been determined in pursuance of a return filed under section 55 of the Income Tax Ordinance, 1979. In order to be entitled to carry forward a loss, the assessee must submit a return under Section 55 and have an assessment made for the year in which he had incurred the loss. The Assessing Officer had to notify to the assessee by an order in writing the amount of the loss as computed by him which the assessee was entitled to have carried forward.

(b) Interpretation of statutes---

----Tax statute---Ambiguity in interpretation---Interpretation in favour of the tax payer should be preferred.

Pakistan through Secretary Finance and others v. Messrs Lucky Cement and another 2007 SCMR 1367 ref.

(c) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 14, 34, 35 & Second Sched., Cls. 118D, 119, 122 & 125---Industrial undertaking---Carry forward of business loss incurred during tax holiday period---Scope---Industrial undertaking was entitled to carry forward the losses incurred during the tax holiday period and have it set-off against the income earned in the assessment years beyond the tax holiday period in accordance with S. 35 of the Income Tax Ordinance, 1979.

The Commissioner of Income-Tax, East Zone, Karachi v. Messrs lqbal Engineering Works and another PLD 1986 SC 556 distinguished.

(d) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 38(6) & Third Sched., R. 3A---Industrial undertaking---Unabsorbed depreciation allowance---Industrial undertaking was not entitled to carry forward- to the post-tax holiday period, the unabsorbed depreciation allowances that arose during the tax holiday period.

Rule 3A of Third Schedule to the Income Tax Ordinance, 1979 provided for depreciation allowance to be deemed to have been allowed, which in turn meant that it had been given due effect for the purposes of section 38(6) of the Ordinance and therefore could not be carried forward to subsequent assessment years. Rule 3A provided a clear exception to carrying forward of unabsorbed depreciation allowances under section 38(6) of the Income Tax Ordinance, 1979.

Dr. Farhat Zafar, Advocate Supreme Court, Muhammad Siddiq Mirza, Advocate Supreme Court, Shakeel Ahmed, Advocate Supreme Court, Muhammad Habib Qureshi, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants (in all cases).

Nemo for Applicants (in C.M.A. No.793 of 2008).

Mian Allah Nawaz, Senior Advocate Supreme Court for Respondents (in C.A. No.1268 of 2006).

Salman Pasha, Advocate Supreme Court for Respondents (in C.As. Nos.716, 717 of 2011 and 697 of 2015).

Ex parte for Respondents (in C.As. Nos.1264, 1270 of 2006 and 975 of 2007).

Nemo for Respondents (in C.As. Nos.229 of 2010, 722 and 723 of 2011).

2017 P T D 884

[Supreme Court of Pakistan]

Present: Mushir Alam and Dost Muhammad Khan, JJ

Major (Retd.) PERVEZ IQBAL

Versus

MUHAMMAD AKRAM ALMAS and others

Civil Appeal No.1129 of 2013, decided on 10th January, 2017.

(Against order dated 4.4.2012 passed by Lahore High Court, Lahore in W.P. No.3974 of 2005).

(a) Income Tax Rules, 1982---

---Rr. 100, 111, 134, 137, 149, 150, 152, 154, 162(1) & 167(1),----Income Tax Ordinance (XXXI of 1979) [since repealed], S. 93(1)---Civil Procedure Code (V of 1908), S. 12(2)---Tax defaulter---Attachment and auction of property by tax department---Allegation of fraud---Appellant was adjudged a tax defaulter---Certificate to such effect in terms of subsection (1) of S. 93 of the Income Tax Ordinance, 1979 read with R.100 of the Income Tax Rules, 1982 was issued by the Income Tax Officer to the Tax Recovery Officer (TRO), to effect the recovery, by attachment, arrest and sale of the property of the defaulter/appellant---Show-cause notice was served to the appellant under S. 93(1) of Income Tax Act, 1979 read with R.162(1) of the Income Tax Rules, 1982---Appellant admitted that he was arrested and he agreed to pay dues in instalments, which commitment he could not adhere to---Appellant was again arrested and produced before the TRO and, in order to earn his release, the appellant disclosed his property and placed the same at the disposal of TRO for the recovery of tax dues in terms of R.167(1) of Income Tax Rules, 1982---Appellant also authorised the TRO to auction the said property and recover the amount due---Consequently, appellant's property was attached for the second time, in terms of R.137 of the Income Tax Rules, 1982---Attempt made by appellant to obtain stay from civil court failed and the High Court also declined any indulgence to stay the auction---Subject property was auctioned in the year 2001 and respondent was declared the successful bidder---Appellant was fully aware of the auction, but chose not to avail the remedy under Rr. 111, 149 and/or R.150 of Income Tax Rules, 1982, before the hammer was struck down---Appellant belatedly chose to challenge the auction proceedings in the year 2009, and that too in collateral proceedings under S. 12(2), C.P.C.---In terms of scheme of Income Tax Rules, 1982, where no application was made for setting aside the sale of the attached property under R.149 or 150 of the Rules; or where any such application was made and was dismissed, the TRO, in terms of R.152 was obliged, on payment of entire bid amount, to confirm the sale, which then became absolute and consequently TRO was further obligated in terms of R.154 to issue the sale certificate---Respondent being declared successful bidder and having paid the entire bid amount with the gain tax due (payable by the appellant) was denied sale certificate and became victim of brawl between the TRO and Military Estate Officer---Neither the appellant nor any other concerned official filed any application against the auction of the subject property within the contemplation of Income Tax Rules, 1982---Appellant could not question sale on the ground of irregularity in service in terms of R.150 of the Income Tax Rules, 1982, when he himself had authorised the attachment and sale of his property---Any error or irregularity in publishing or conduct of sale of immoveable property in terms of R.134 did not vitiate the sale---Even otherwise, all such grounds, if at all available could have been raised before the forum and hierarchy provided under the Income Tax Rules, 1982 and not in collateral proceedings under S. 12(2), C.P.C.---Appeal was dismissed accordingly.

(b) Civil Procedure Code (V of 1908)---

---S. 12(2)---Application under S. 12(2), C.P.C---Maintainability---Special law---Procedure for challenging an action---Where special law provided elaborate mechanism and procedure to challenge a certain action under the scheme of special law, recourse to general law and or challenge to such action, that too through collateral proceedings (such as application under S. 12(2), C.P.C.) was not approved.

Mian Ashaq Hussain, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Appellants.

Mian Asrar ul Haq, Senior Advocate Supreme Court for Respondent No.1.

Tahseen Sadiq, Addl. Commissioner (FBR) for Respondent No.3.

Nemo for Respondent No.5.

2017 P T D 1158

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Ejaz Afzal Khan and Umar Ata Bandial, JJ

Messrs SHIFA INTERNATIONAL HOSPITAL, ISLAMABAD

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, ISLAMABAD

Civil Petition No.2640 of 2016, decided on 2nd February, 2017.

(Against the judgment dated 31-5-2016 of the Islamabad High Court, Islamabad passed in I.T.R. No.24 of 2008).

(a) Interpretation of statutes---

----Fiscal statute---Provisions of a fiscal statute were to be strictly construed and applied.

(b) Income Tax Ordinance (XXXI of 1979) [since repealed]-

----S. 23 & Third Sched. Entry I & II---Hospital building---Depreciation allowance---"Factory" or "workshop"---Scope---Deprecation allowance allowed for buildings was 5% [Entry I of Third Sched. to the Income Tax Ordinance, 1979], whereas for "factory" or "workshop" it was 10% [Entry II of Third Sched. to the Income Tax Ordinance, 1979]---Question was whether a hospital could be considered as a "factory" or "workshop", entitling it to 10% depreciation allowance---Hospital whilst being an enclosed structure was undoubtedly a building, however, by no stretch of imagination could it be considered to fall within the definition of a "factory" or "workshop" as it was not a building where goods were manufactured, repaired or assembled---Hospital was, thus, only entitled to depreciation allowance at the general rate of 5% instead of 10%---Petition for leave to appeal was dismissed accordingly.

Commissioner of Income Tax v. Dr. B. Venkahta Rao 2001 PTD 1124 and Commissioner of Income Tax v. Dr. B. Venkata Rao (1993) 202 ITR 303 distinguished.

(c) Precedent---

----Judgments from foreign (Indian) jurisdiction---Scope---Such judgments may be relevant in understanding and resolving the issues before the courts but had no binding effect upon the courts in Pakistan.

Hafiz Muhammad Idrees, Advocate Supreme Court for Petitioner.

Babar Bilal, Advocate Supreme Court and Ms. Shazia Bilal, Advocate Supreme Court for Respondents.

2017 P T D 1244

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Maqbool Baqar, JJ

COLLECTOR OF CUSTOMS, PESHAWAR

Versus

WALI KHAN and others

Civil Appeal No. 1050 of 2009, decided on 23rd February, 2017.

(Against the judgment dated 17.2.2009 of the Peshawar High Court, Peshawar passed in Customs Reference No. 24 of 2007)

(a) Customs Act (IV of 1969)---

----S. 2(s)---S.R.O. No.566(I)/2005 dated 6-6-2005---Smuggled goods---Scope---'Black tea'---Consignment of "black tea" was confiscated on 06-01-2007---Item No.35 of S.R.O. No.566(I)/2005 dated 6-6-2005 stated "Black Tea (except Op-Pekoe)", thus black tea was a restricted/prohibited item and fell within the meaning of smuggled goods in terms of S. 2(s) of the Customs Act, 1969.

(b) Customs Act (IV of 1969)---

----S. 2(s)---S.R.O. No.566(I)/2005 dated 6-6-2005 ("the SRO.")---Smuggled goods---Scope---'Artificial silk cloth'---Item No.28 of S.R.O. No.566(I)/2005 dated 6-6-2005 pertained to man-made or synthetic fibers/fabric---Cloth, in the present case, was described as artificial silk cloth and was undoubtedly a man-made fabric as it comprises of synthetic fiber and thus was squarely covered by Item No.28 of the SRO---Cloth in question was of a foreign origin and was a restricted/prohibited item as per Item No.28 of the SRO, therefore, it fell within the meaning of smuggled goods in terms of S. 2(s) of the Customs Act, 1969.

(c) Customs Act (IV of 1969)---

----S. 156(1), Cl. 89---"Smuggled goods"---Salient features of Cl. 89 of table provided under S. 156(1) of the Customs Act, 1969---Clause 89(i) dealt with smuggled goods as well as those goods regarding which there was reasonable suspicion that they were smuggled---Person was permitted to acquire possession etc. of such goods only with lawful excuse, the burden of proof of which laid on such person, and in case he failed to do so, it would be presumed that the goods were smuggled entailing the consequences provided in Column 2 of Cl. 89(i).

(d) Customs Act (IV of 1969)---

----S. 156(1), Cl. 90---"Smuggled goods"---Salient features of Cl. 90 of table provided under S. 156(1) of the Customs Act, 1969---Clause 90 of S. 156(1) dealt with goods that were not smuggled and regarding which there was "fraudulent evasion or attempt at evasion of any duty chargeable thereon"---Burden laid on the person involved in such activities to prove the contrary, in the absence of which it would be presumed that the goods were non-duty paid in terms of Cl. 90---In this regard, first the department had to show that the goods which were of a foreign origin could only be imported on payment of duty or under a licence or their import was prohibited or restricted; it would then be for the possessor of such goods to show that they were lawfully imported either before any restrictions/prohibitions were imposed or in accordance with such restrictions/prohibitions.

Messrs S.A. Haroon and others v. The Collector of Customs, Karachi and the Federation of Pakistan PLD 1959 SC 177 and Sikandar A. Karim v. The State 1995 SCMR 387 ref.

(e) Customs Act (IV of 1969)---

----Ss.2(s) & 181---S.R.O. No.574(I)/2005 dated 6.6.2005 ("SRO 574")--Smuggled goods, confiscation of---Option to pay a fine in lieu of confiscation of goods---Section 181 of the Customs Act, 1969 allowed an officer passing an order for confiscation of goods to give the owner of the goods an option to pay a fine in lieu of such confiscation---First proviso to S. 181, however, provided that the Federal Board of Revenue may by an order specify the goods or class of goods where such option shall not be given---Board had issued SRO 574 which provided, inter alia, that "no option shall be given to pay fine in lieu of confiscation in respect of… (i) smuggled goods falling under Cl. (s) of S. 2 of the Customs Act, 1969 or (ii) conveyance including packages and containers found carrying offending goods of S.2(s) of the Customs Act, 1969---Since the smuggled goods in the present case were covered under SRO 574, therefore, the imposition of redemption fine at 30% by the Collector Customs (Appeals) and 15% by the Appellate Tribunal was in violation of S. 181 of the Customs Act, 1969 and S.R.O. 574---Appeal was allowed accordingly.

Muhammad Habib Qureshi, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Appellant.

Isaac Ali Qazi, Advocate Supreme Court for Respondent No.1.

Nemo for Respondents Nos.2 and 4.

Ex parte for Respondent No.3.

2017 P T D 1303

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

Messrs SQUIBB PAKISTAN PVT. LTD. and another

Versus

COMMISSIONER OF INCOME TAX and another

Civil Appeals Nos. 622, 623 of 2008, 1403 and 1404 of 2009, decided on 26th April, 2017.

(Against the judgment dated 24.10.2007/8.5.2009 of the High Court of Sindh, Karachi passed in I.T.As. Nos. 1114, 1115 of 1999, 485 and 486 of 2000)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Income Tax Ordinance (XXXI of 1979), S. 136 [since repealed]---Indian Income Tax Act (11 of 1922), S. 66 [since repealed]---Indian Income Tax Act (VII of 1918), S. 51 [since repealed]---Taxes Management Act 1880 [43 & 44 Vict. Ch. 19], S. 59 [since repealed]---Reference before High Court---Scope---Question as to whether new questions of law not urged or examined by the lower fora (Tribunal) could be raised in a reference before the High Court---History and background of provisions of different statutes from Pakistan, India and the United Kingdom relating to the subject of 'reference before the High Court', and how they were interpreted by the courts, discussed.

Tata Iron and Steel Company Ltd. v. The Chief Revenue Authority of Bombay AIR 1923 PC 148; Raja Bahadur Sir Rajendra Narain Bhanj Deo v. Commissioner of Income Tax, Bihar and Orissa AIR 1940 PC 158; Ishar Das Dharamchand: In the matter of AIR 1926 Lah. 168; P. Thiruvengada Mudaliar: In the matter of AIR 1928 Madras 889; A.K.A.C.T.V. Chettyar Firm v. Commissioner of Income Tax, Burma AIR 1928 Rangoon 281; S.A. Subbiah Iyer v. Commissioner of Income Tax, Madras AIR 1930 Mad. 449; Commissioner of Income Tax, Burma v. P.K.N.P.R. Chettyar Firm AIR 1930 Rangoon 78; Gurmukh Singh v. Commissioner of Income Tax, Lahore AIR 1944 Lah. 353 (2); The Commissioner of Income Tax, Bihar and Orissa v. Maharajadhiraja Kameshwar Singh of Barbhanga (1933) 1 ITR 94; National Mutual Life Association of Australasia, Ltd. v. Commissioner of Income Tax, Bombay Presidency and Aden AIR 1936 PC 55; Messrs A. Abboy Chetty and others v. Commissioner of Income Tax, Madras AIR 1948 Mad. 181; Commissioner of Income Tax, Excess Profits Tax, Madras v. Modern Theatres Ltd. AIR 1952 Mad. 255; Commissioner of Excess Profits Tax, West Bengal v. Jewanlal Ltd. Calcutta (1951) 20 ITR 39; Chainrup Sampatram v. Commissioner of Income Tax, West Bengal (1951) 20 ITR 484; Maharaj Kumar Kamal Singh v. Commissioner of Income Tax (1954) 26 ITR 79; Commissioner of Income Tax B and O v. Ranchi Electric Supply Co. Ltd. Ranchi AIR 1955 Pat. 151; Madanlal Dharnidharka v. The Commissioner of Income Tax, Bombay City AIR 1940 Bom. 24; Commissioner of Income Tax, Delhi v. Punjab National Bank Ltd. Delhi (1952) 21 ITR 526; Mohanlal Harilal v. Commissioner of Income Tax C.P. and Berar, Nagpur (1952) 22 ITR 448; R. S. Munshi Gulab Singh and Sons v. Commissioner of Income Tax, Punjab PLD 1950 Lah. 476; The Scindia Steam Navigation Co. Ltd. v. The Commissioner of Income Tax PLD 1959 Kar. 527; Abdul Ghani and Co. v. Commissioner of Income Tax PLD 1962 Kar. 635; Pakistan through the Commissioner of Income Tax, Karachi v. Messrs Majestic Cinema, Karachi PLD 1965 SC 379; Messrs Sutlej Cotton Mills Ltd., Okara v. The Commissioner of Income Tax, North Zone (West Pakistan), Lahore PLD 1965 SC 443; Messrs Hunza Asian Textile and Woolen Mills Ltd. v. Commissioner of Sales Tax, Rawalpindi Zone, Rawalpindi 1973 PTD 544; Walayat Flour Mills, Lyallpur v. Commissioner of Income Tax, Rawalpindi 1973 PTD 530; Collector of Customs E & S.T. and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636; Towellers Ltd. through Chief Operating Officer v. Government of Pakistan Represented by Member Sales Tax Central Board of Revenue, Islamabad and another 2006 PTD 310; Haseeb Waqas Sugar Mills Ltd. v. Government of Pakistan and others 2015 PTD 1665; Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024; Army Welfare Trust (Nizamupur Cement Project), Rawalpindi and another v. Collector of Sales Tax (Now Commissioner Inland Revenue), Peshawar 2017 SCMR 9; Attorney General v. Avelino Aramayo and Company [1925] 1 KB 86 and Aramayo Francke Mines, Limited v. Eccott [1925] A.C. 634 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference before High Court---Scope---Question as to whether new questions of law not urged or examined by the lower fora could be raised in a reference before the High Court---Section 133 of the Income Tax Ordinance, 2001, ("the Ordinance") did not impute any extraordinary limitations on the type of questions which may be posed in a reference before the High Court---Facts as stated in the Tribunal's order had to be taken as recorded and any question which could be made out from those facts may be raised in a reference under S. 133 of the Ordinance, regardless of whether it was previously urged or not---No reason existed for confining the questions which may be referred to only those which were argued before the Tribunal on the hypothesis that this was an advisory jurisdiction as that was not what the language of S. 133 of the Ordinance contemplated---Law, as it presently stood, allowed all questions "arising" out of the order of the Tribunal to be referred to the High Court and not just questions "argued" or "raised" before the Tribunal.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference before High Court---Nature---Remedy of reference before the High Court under S. 133 of the Income Tax Ordinance, 2001 was appellate in nature and must be construed and applied as such.

(d) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 79 [as it stood prior to the Finance Act (VII of 1992)]---Income from transactions with non-resident---Pre-requisites for application of S. 79 of the Income Tax Ordinance, 1979 ("the Ordinance")---According to S. 79 of the Ordinance, the Income Tax Officer was to determine the amount of profits which may reasonably be deemed to have accrued to the resident and include such amount in the total income of the resident if four elements were present in a transaction; first, that there was a resident and a non-resident; second, that there was a close connection between them; third, that business was carried on between them; and, fourth that the course of business was so arranged that the business transacted between them produced to the resident either no profits, or less than the ordinary profits which might be expected to arise in that business---For the Income Tax Officer to exercise powers under S. 79 of the Ordinance, all the said elements were required to be present---Absence of any one of elements rendered the section inapplicable to a case.

(e) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 79 [as it stood prior to the Finance Act, 1992]---Income from transactions with non-resident---Pre-requisites for application of S.79 of the Income Tax Ordinance, 1979 ("the Ordinance")---Burden of proof---Scope---'Transfer pricing', concept of---Scope---For the Income Tax Officer to exercise powers under S. 79 of the Ordinance, one of the elements/pre-requisites that had to exist was that the course of business was so arranged that the business transacted between the resident and non-resident produced to the resident either no profits, or less than the ordinary profits which might be expected to arise in that business---Said element clinched the issue of transfer pricing---Where the pricing of transactions between closely connected parties was not at arm's length, it may result in reduced (or no) profit for the resident taxpayer, thus the tax authorities were empowered under S. 79 of the Ordinance, to adjust the profit upwards and impose tax accordingly---In order to invoke S. 79 of the Ordinance, the Income Tax Officer had to see whether prima facie, the course of business was so arranged between the closely connected resident and non-resident that the business transacted between them produced to the resident less than the ordinary profits which might be expected to arise in that business---For such purpose the Income Tax Officer needed to base such prima facie opinion upon evidence gathered in a reasonable investigation showing that his proposed method of pricing was the most appropriate for determining the arm's length transfer price---Burden would then shift to the taxpayer to establish that the transfer price of the transaction with its closely connected non-resident was indeed at arm's length based upon another pricing method which was more appropriate in the facts and circumstances of the case; this was to be proven from inter alia the transfer pricing documentation.

(f) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 79 [as it stood prior to the Finance Act (VII of 1992)]---Income from transactions with non-resident---Pre-requisites for application of S. 79 of the Income Tax Ordinance, 1979 ("the Ordinance")---Tax officer failing to establish that course of business was so arranged between the resident and non-resident companies that the business between them produced to the resident less than the ordinary profits expected to arise in such business--- Effect--- Appellant-companies were resident companies (registered in Pakistan) engaged in the import, manufacture and sale of pharmaceutical products--- Appellants imported pharmaceutical raw material from their parent companies (foreign companies)---Raw material imported by appellants from their foreign parent companies was priced higher than that charged by other sources for similar products---Assessments for appellants were finalized by making additions under S. 79 of the Income Tax Ordinance, 1979 ("the Ordinance") on account of the difference between the price of raw material imported by the appellants from their parent companies and that imported by some other companies from other sources---High Court had upheld the addition under S. 79 of the Ordinance---Contentions of appellants were that the raw materials imported from foreign parent companies at a higher value than that paid for by some other companies was due to the superior nature and quality of the raw material; that there was no manipulation and arranged dealing between the resident (appellant companies) and non-resident (foreign parent companies) as required by S. 79 of the Ordinance---Validity---Income Tax Officers failed to show that the course of business was so arranged between the closely connected resident (appellants) and non-resident (parent companies) that the business transacted between them produced to the resident less than the ordinary profits which might have been expected to arise in that business---Income Tax Officers merely tabulated the differences in the import prices without giving any precise details regarding the parallel cases upon which he placed reliance nor did he provide any prima facie justification that the pricing method adopted (if any) by him was the most apt in the peculiar facts and circumstances of the case---Reason cited by the Income Tax Officer that the raw materials imported by parallel companies from other sources fulfilled the requirements, as laid down in the relevant law on drugs and cleared by the Assistant Drugs Controller, was not sufficient to establish prima facie transfer mispricing---Various factors affected the price of a product and mere approval of some authority may mean that it (the product) had met the minimum specifications for the ingredient laid down in law but it did not necessarily mean that the said products could be treated at par with the goods imported by the resident companies for the purposes of pricing---Income Tax Officer had not conducted a reasonable investigation or offered prima facie evidence based on an appropriate pricing method adopted by him, thereby showing transfer mispricing and resultant depletion in profits of the resident (appellant) companies---Income Tax Officer had, therefore, erred in invoking S. 79 of the Ordinance, and adjusting the profit of the resident (appellant) companies---Appeal was allowed accordingly and addition made under S. 79 of the Ordinance was set aside.

Dr. Muhammad Farough Naseem, Advocate Supreme Court for Appellants (in C.As. Nos. 622 and 623 of 2008).

Dr. Farhat Zafar, Advocate Supreme Court for Appellants (in C.As. Nos. 1403 and 1404 of 2009).

Muhammad Siddique Mirza, Advocate Supreme Court for Respondents (in C.As. Nos. 622 and 623 of 2008).

Makhdoom Ali Khan, Senior Advocate Supreme Court for Respondents (in C.As. Nos. 1403 and 1404 of 2009).

2017 P T D 1372

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Maqbool Baqar and Ijaz ul Ahsan, JJ

Messrs PAKISTAN TELEVISION CORPORATION LIMITED

Versus

COMMISSIONER INLAND REVENUE (LEGAL), LTU, ISLAMABAD and others

Civil Petitions Nos. 3551 to 3555 of 2015, decided on 24th April, 2017.

(On appeal from the judgment of the Islamabad High Court Islamabad dated 23.09.2015 passed in I.T.Rs. Nos. 224-228 of 2015)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference before the High Court---Maintainability---'Question of law'---Scope---Reference before High Court under S. 133 of the Income Tax Ordinance, 2001 ("the Ordinance") would lie on a question of law only---When a reference filed before the High Court required an interpretation of various provisions of the Ordinance, it would essentially be a "question of law".

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 20, 21(c), 153(1)(b), 158(b), 161, 162 & 233(2), [as existed for the tax years 2009 to 2013]---Deductions not allowed in computing income---Scope---'Television licence fee' was collected from consumers through their electricity bills by Electricity Distribution and Supply Companies ("the Distribution companies") on behalf of Pakistan Television Corporation Ltd. (PTV)---Distribution companies would remit the balance licence fee to PTV after retaining a portion of it as their fee for this collection service---Pakistan Television Corporation Ltd. (PTV) claimed the collection service charges retained by Distribution companies as expenditure in terms of S. 20 of the Ordinance in the income tax returns it filed for the tax years 2009 to 2013, which stood finalized---Subsequently show cause notice was issued to PTV for further amendment of the assessments on the ground that the television licence fee collection expense was a commission earned by Distribution companies and PTV was required to deduct tax under S. 153(1)(b), or alternatively under S. 233(2) of the Ordinance, and since this was not done, therefore this expense was liable to be disallowed under S. 21(c) of the Ordinance---Legality---Section 158(b) of the Ordinance stipulated that a person who was required to deduct tax from an amount paid by the person shall do so at the time the amount was actually 'paid'---Effect of the combined reading of Ss.153(1)(b) & 158(b) of the Ordinance made it clear that deduction was to be made by a person "making the payment" "at the time the amount was actually paid", however in the present case, no payment was made by PTV to Distribution companies, instead the Distribution companies retained a portion of the licence fee and remitted the balance to PTV---Section 153(1)(b) of the Ordinance only required prescribed persons to deduct, and not collect, tax from the payment being made to a resident person for the rendering of or providing of services at the time of making the payment, thus, PTV could not have possibly deducted such tax as it did not make any actual payments to the Distribution companies---Advance tax in terms of S. 233(b) of the Ordinance could only be collected if there was a relationship of principal and agent between the parties---Agreement between PTV and Distribution companies for collection of licence fee did not indicate a relationship of principal-agent, rather the wording employed therein suggested that it was a contract for the provision of services for which the latter was entitled to a 'service fee'---As no relationship of principal and agent existed between PTV and Distribution companies, therefore PTV was not required to collect tax from the Distribution companies in terms of S. 233 of the Ordinance---Since PTV was not liable to deduct tax under S. 153(1)(b) of the Ordinance or collect advance tax under S. 233(2) of the Ordinance, thus it did not fall within the garb of the exception of S. 21(c) of the Ordinance, and was entitled to claim deduction of service fee from its income as expenditure---Further Ss. 161 & 162 of the Ordinance did not apply to the present case as both sections reflected a presumption that a person was required to deduct and/or collect tax, and PTV could neither have deducted tax nor was it liable to collect tax from Distribution companies---Appeal was allowed accordingly.

The Ramkola Sugar Mills Co., Ltd. v. The Commissioner of Income-Tax, Punjab and North-West Frontier Province Lahore PLD 1955 Federal Court 418 ref.

(c) Interpretation of statutes---

----'Fiscal statute'---Fiscal statute, particularly the provisions creating a tax liability, must be interpreted strictly and any doubt arising therefrom must be resolved in favour of the taxpayer.

Chairman, Federal Board of Revenue, Islamabad v. Messrs Al-Technique Corporation of Pakistan Ltd. and others PLD 2017 SC 99; Commissioner of Income Tax Legal Division, Lahore and others v. Khurshid Ahmad and others PLD 2016 SC 545; Zila Council Jhelum through District Coordination Officer v. Messrs Pakistan Tobacco Company Ltd. and others PLD 2016 SC 398; Government of Sindh through Secretary and Director General, Excise and Taxation and another v. Muhammad Shafi and others PLD 2015 SC 380; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 and The State v. Zia-ur-Rehman and others PLD 1973 SC 49 ref.

(d) Interpretation of statutes---

----Statute was the edict of the legislature and the language employed in the statute was determinative of the legislative intent.

(e) Interpretation of statutes---

----Redundancy could not be attributed to statutory provisions or any part thereof.

Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd 2005 SCMR 1166; Aftab Shahban Mirani and others v. Muhammad Ibrahim and others PLD 2008 SC 779 and Messrs Master Foam (Pvt.) Ltd. and 7 others v. Government of Pakistan through Secretary, Ministry of Finance and others 2005 PTD 1537 ref.

M. Makhdoom Ali Khan, Senior Advocate Supreme Court, Hafiz Muhammad Idris, Advocate Supreme Court, Faisal Hussain Naqvi, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Petitioner (in all cases).

Muhammad Bilal, Senior Advocate Supreme Court, Babar Bilal, Advocate Supreme Court and Ehsan Ullah Khan, Dy. Commissioner Inland Revenue for Respondents (in all cases).

2017 P T D 1481

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Maqbool Baqar, JJ

FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad and others

Versus

Messrs SAHIB JEE and others

Civil Appeal No.1074 of 2009, decided on 19th January, 2017.

(Against the judgment dated 20-3-2009 of the Lahore High Court, Lahore passed in W.P. No.11983 of 2005).

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 11 & 32---Reference to the President against recommendation of Ombudsman---Scope---When the Revenue Division or any person was aggrieved of a recommendation made by the Federal Tax Ombudsman in terms of S.11 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, it/he may file a representation to the President of Pakistan within 30 days of such recommendation---Said remedy of representation, though not stricto sensu akin to an appeal, was nevertheless a statutory remedy and, therefore, the provision must be strictly construed and applied, meaning thereby that a representation was only available to either the Revenue Division or an aggrieved person as against a recommendation of the Federal Tax Ombudsman within 30 days' time.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 11 & 32---Reference to the President against recommendation of Ombudsman---Scope---Section 32 of the Ordinance, providing for representation before the President, did not envisage a representation against an order passed by the Federal Tax Ombudsman which was not in the nature of a recommendation.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.14(8)---Federal Tax Ombudsman---Review, power of---Scope---Section 14(8) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 empowered the Ombudsman to review any finding communicated or recommendation made or any order passed by him---Said power of review either invoked on behalf of an aggrieved person or the Revenue Division had a wider scope and three kinds of decisions could be reviewed by the Ombudsman; first, the findings which were communicated in terms of S.11 of the Ordinance; second, a recommendation made by him; and third, any other order passed by him.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 14(8) & 32---Reference to the President against order of Ombudsman passed in review jurisdiction---Scope---Whilst exercising power of review, if the Ombudsman sets aside his earlier decision, irrespective of whether it was a recommendation or not, and passed a new recommendation in the order of review, then such (new recommendation) shall have been passed pursuant to S. 11(1) of the Ordinance and a representation would be competent against---Conversely, where a recommendation earlier made by the Ombudsman was not set aside while exercising the power of review, the order dismissing the review petition would not tantamount to a fresh recommendation in terms of Ss.11 & 32 of the Ordinance against which a representation could be competently filed.

Khalid Abbas Khan, Advocate Supreme Court for Appellants.

Nemo for Respondent No.1.

Ex parte: for Respondents Nos.2 and 3.

2017 P T D 1514

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs PAK SAUDI FERTILIZER LTD.

Civil Appeal No. 1338 of 2007, decided on 20th February, 2017.

(On appeal against the judgment dated 14.03.2006 passed by the High Court of Sindh, Karachi in ITR No. 03 of 1994)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Second Sched. Pt. 1, Clause 170 [since repealed]---National Funds Bonds---Interest income---Exemption from tax---Company had invested in National Funds Bonds---Interest income on such bonds was exempt under the Income Tax Ordinance, 1979---Company had also borrowed loans from international borrowers and foreign states---Income tax Officer drew an inference that borrowed monies/loans were diverted to purchase the National Funds Bonds to derive tax free income, therefore, he disallowed the interest accrued on the loans in proportion to the interest income derived from the Bonds---High Court found that tax authorities were not justified in confirming disallowance of proportionate interest on the basis that loans obtained by the company were utilized in the purchase of fixed assets and the investment in the National Funds Bonds was made from the capital and unappropriated profits available with the company---Validity---Tax department failed to point any restriction under the law that would have disentitled the company from claiming exemption on the interest income in case there were loans standing against it---Perusal of statement of accounts filed by the company showed that long term loans were obtained by the company prior to the purchase of the Bonds which were to be discharged with interest over a long period of time, hence, independent of the financial obligation against the long term loans, the company made investment in the National Funds Bonds with its own funds generated from its business---Interest income derived thereon was admittedly exempt under the law and had no co-relation whatsoever with the loans---Irrespective of any co-relation between the two, no provision of law provided that mere existence of financial obligation in the form of loans would have disentitled the company from claiming exemption granted under Clause 170 of Second Schedule to Part I of the Income Tax Ordinance, 1979---Appeal filed by tax department was dismissed accordingly.

Dr. Farhat Zafar, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellant.

Iqbal Salman Pasha, Advocate Supreme Court for Respondent.

2017 P T D 1526

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Maqbool Baqar and Khilji Arif Hussain, JJ

COMMISSIONER INLAND REVENUE (LEGAL DIVISION), LTU, ISLAMABAD

Versus

Messrs GEOFIZYKA KRAKOW PAKISTAN LTD.

Civil Petition No. 1361 of 2015, decided on 7th November, 2016.

(Against the judgment dated 16.2.2015 of the Islamabad High Court, Islamabad passed in Tax Reference No.16 of 2005)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 24(i) & 163(4)---Convention between the Islamic Republic of Pakistan and the Polish Peoples Republic for the Avoidance of Double Taxation of Income---Foreign company (resident of Poland)---Convention/Treaty for avoidance of double taxation---Preference over domestic income tax law---Respondent-company was a foreign entrepreneur (resident of Poland) and there was a Treaty for Avoidance of Double Taxation between Pakistan and Poland---According to the provisions of S. 24(i) of the Income Tax Ordinance, 1979 such treaties for the avoidance of double taxation had to be given preference and would prevail over the provisions of the income tax law---Non-obstante clause of S. 163(4) of the Income Tax Ordinance, 1979 clearly postulated that such treaties for the avoidance of double taxation would be awarded preference and any tax which could be levied and charged against the respondent-company under the income tax law would be subject thereto---High Court was correct in holding that the tax laws of Pakistan were not applicable to the case of the respondent-company in view of the provisions of the Treaty for Avoidance of Double Taxation for avoidance of double taxation---Petition for leave to appeal was dismissed accordingly.

Babar Bilal, Advocate Supreme Court for Petitioner.

Nemo for Respondent.

2017 P T D 1540

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Faisal Arab and Ijaz-ul-Ahsan, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs GILANI TRANSPORT COMPANY

Civil Appeal No. 908 of 2009, decided on 21st November, 2016.

(Against order dated 31.10.2008 of High Court of Sindh at Karachi, passed in I.T.A. No. 25 of 2001)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 80-C(4) & 89---Presumptive Tax Regime---Charge of additional tax for failure to pay tax or penalty---Scope---Section 89 of the Income Tax Ordinance, 1979 empowered the department to levy and recover additional tax only in case an assessee failed to pay the whole or any part of tax levied under Chapter VII or the whole or any part of the penalty levied under Chapter XI of the Income Tax Ordinance, 1979.

For the assessment year 1991-92 a sum of Rs.240,260/- was payable by the taxpayer as tax on or before 30.09.1991 in terms of section 80-C(4) of the Income Tax Ordinance, 1979. Amount in question was not paid on its due date. It was paid subsequently over a period of time in instalments. This prompted the Income Tax Department to issue a show cause notice calling upon the taxpayer to explain why additional tax in the sum of Rs.164,823/- may not be recovered from him in terms of section 89 of the Income Tax Ordinance, 1979. Contention of department that since the taxpayer failed to pay tax on or before the due date, the department was justified in resorting to the provisions of section 89 of the Ordinance to levy and recover additional tax.

Section 89 of the Income Tax Ordinance, 1979 empowered the department to levy and recover additional tax only in case an assessee failed to pay the whole or any part of tax levied under Chapter VII or the whole or any part of the penalty levied under Chapter XI of the Income Tax Ordinance, 1979. Tax recoverable from the assessee had neither been levied under Chapter VII nor had any penalty been imposed under Chapter XI of the Ordinance which was sought to be recovered. Tax liability of the assessee arose under section 80-C(4) of the Ordinance which fell under Chapter VIII and was therefore beyond the purview of Section 89 of the Ordinance.

Further, the competent authority had not allowed stay of payment of tax or payment of the same in installments that may have furnished any justification to invoke the provisions of section 89 of the Income Tax Ordinance, 1979 to claim additional tax from the assessee. Show cause notice and order passed by the competent authority, therefore, suffered from lack of jurisdiction.

Baig Spinning Mills Ltd. v. Federation of Pakistan 2005 PTD 1102 ref.

(b) Interpretation of statutes---

----Taxing statute---Charging provisions---Such provisions were to be strictly construed in favour of the subject so that if there was any substantial doubt, it had to be resolved in favour of the taxpayer.

Hyderabad Cantonment Board v. Raj Kumar 2015 SCMR 1385; C.I.T. v. Elli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 and Muhammad Amir Khan v. Controller of Estate Duty PLD 1961 SC 119 ref.

M. Habib Qureshi, Advocate Supreme Court for Appellant.

Ex parte for Respondent.

2017 P T D 1561

[Supreme Court of Pakistan]

Present: Dost Muhammad Khan, Qazi Faez Isa and Faisal Arab, JJ

HUSNAIN COTEX LIMITED through Chief Executive and others

Versus

COMMISSIONER INLAND REVENUE, LAHORE and others

Civil Petitions Nos. 3364 to 3366, 3517 to 3519 and 3147-L to 3149-L of 2016, decided on 26th January, 2017.

(On appeal against the judgment dated 28.04.2016 passed by the Lahore High Court, Lahore in P.T.Rs. Nos. 69 to 71 of 2014, 364 to 366 of 2013 and 477 to 482 of 2015)

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(1)(c), 153(3) & 169(b)---Taxpayers falling within domain of 'normal tax regime' and 'final tax regime'---Distinction---Taxpayers who were covered under the 'normal tax regime', were those whose net profit in a tax year was determined by matching costs with the income, after taking into consideration various other factors such as allowances, deductions, depreciations, rebates, amortization etc.---Applicable rate of income tax was then applied to the net profit thus arrived at to determine the tax liability of the tax year---On the other hand taxpayers who fell within the domain of 'final tax regime' by virtue of Ss. 153(1)(c) & 153(3) read with S. 169(b) of the Income Tax Ordinance, 2001, their income tax liability in a tax year was a certain percentage deducted from the payments which were made to them by the contract awarding entity towards the performance of the contract at a rate specified in the First Schedule to the Ordinance---Income tax thus deducted at source fully discharged the taxpayer/contractor from his income tax liability irrespective of what profits and gains he had actually made as the same were of no consideration for the purposes of determining his tax liability.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 53, 153(1)(c), 153(3), 169(b) & Second Sched. Pt. 1, Cl. 126F---Federal Board of Revenue, Circular No. 14 of 2011 dated 6th October, 2011---Income tax, exemption from---Tax relief granted to taxpayers of certain areas of the province of Khyber Pakhtunkhwa, Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) ["affected areas"], whose business suffered on account of internal strife---Scope---Taxpayers falling with in domain of 'normal tax regime' and 'final tax regime'---Distinction---Petitioner-companies (Contractors) were not located in the 'affected areas' but were performing contracts in such areas---Petitioners claimed benefit of exemption under Clause 126F of Part I of Second Schedule to the Income Tax Ordinance, 2001, which provided that all profits and gains derived by the taxpayers located in the affected areas stood exempt from income tax for a period of three years---Held, that whole stimulus behind the tax exemption granted under Clause 126F on the face of it was that in the past the businesses located in the affected areas could not make profits on account of adverse business environment, thus it was purely an external factor that diminished the capacity of the businesses to make profits and gains that was germane in granting tax exemption under Clause 126F---Such businesses/taxpayers could only be the ones who fell under the 'normal tax regime'---On the other hand taxpayers such as the petitioners who fell under the 'final tax regime', faced no adverse situation; firstly, they were not located in the affected areas; secondly, they only went to the affected areas when they succeeded in securing contracts, which in itself created business opportunity for them; thirdly, where the contract awarded was to be performed in the areas affected, the same had no impact on contractor's margin of profit which he already incorporated in the contract price, thus the contractor was not affected by any external factor that was not conducive for doing good business---Business environment of the area where contract was to be performed didn't have any correlation with contractor's profit and gains, therefore, the petitioners could not equate themselves with those taxpayers falling under the domain of 'normal tax regime' whose businesses being located in affected areas suffered financially on account of adverse business environment---To extend the benefit of exemption under Clause 126F to category of taxpayers who did not even exist in the affected areas before succeeding in obtaining contracts to be performed there could never have been envisioned by the Legislature while incorporating Clause 126F in the Income Tax Ordinance, 2001---Supreme Court directed that income tax department should proceed to recover the income tax that had been wrongly refunded to any of the petitioners under the exemption---Petition was dismissed accordingly.

Muhammad Akram Sheikh, Senior Advocate Supreme Court, Muhammad Iqbal Hashmi, Advocate Supreme Court and Ahmed Nawaz Ch., Advocate-on-Record (Absent) for Petitioners (in Civil Petitions Nos. 3366 and 3517 to 3519 of 2016).

Sajid Ijaz Hotiana, Advocate Supreme Court and Ahmed Nawaz Ch., Advocate-on-Record (Absent) for Petitioners (in Civil Petition No.3364 of 2016).

Muhammad Raheel Kamran, Advocate Supreme Court and Ahmed Nawaz Ch., Advocate-on-Record (Absent) for Petitioners (in Civil Petition No.3365 of 2016).

Rana Muhammad Afzal, Advocate Supreme Court and Imtiaz A. Shoukat, Advocate-on-Record (Absent) for Petitioners (in Civil Petitions Nos. 3147-L to 3149-L of 2016).

Nemo for Respondents (in Civil Petition No. 3364 of 2016).

Hafiz Ahsan Ahmed Khokhar, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in Civil Petitions Nos. 3365, 3366, 3517 to 3519 and 3147-L to 3149-L of 2016).

2017 P T D 1606

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Maqbool Baqar and Ijaz ul Ahsan, JJ

COMMISSIONER INLAND REVENUE FBR through Commissioner Inland Revenue

Versus

Messrs ICI PAKISTAN

Civil Petitions Nos. 569-K and 570-K of 2016, decided on 13th March, 2017.

(Against the judgment dated 13.06.2016 of the High Court of Sindh, Karachi passed in ITRA No.190 of 2012, Constitutional Petition No. D-2302 of 2011)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 65, 66 & 66-A---Income Tax Ordinance (XLIX of 2001), S. 122(5A)---Notice issued under S. 122(5A) of Income Tax Ordinance, 2001 for amendment of assessment order---Limitation period---Notice purportedly issued by the Department under the provisions of S. 122(5A) of the Income Tax Ordinance, 2001, was akin to the notice/proceedings which the Department would initiate in terms of Ss. 66 & 66-A of the Income Tax Ordinance, 1979 as the said notice was issued on the ground that the assessment order was erroneous and prejudicial to the interest of the Revenue---Period of limitation provided under Ss. 66 & 66-A of the Income Tax Ordinance, 1979 was four years and the notice issued by the Department in the present case was beyond such period---Notice in question could not be held to be issued under S. 65 of the Income Tax Ordinance, 2001 as it was not issued on the basis of some definite information---Petition for leave to appeal was dismissed accordingly.

Commissioner of Income Tax v. Elli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 ref.

Muhammad Sarfaraz Metlo, Advocate Supreme Court for Petitioner.

Dr. Muhammad Farogh Naseem, Advocate Supreme Court and Mahmood A. Sheikh, Advocate-on-Record for Respondent.

2017 P T D 1642

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

KHALID TEXTILE MILLS and others

Civil Appeals Nos. 1590 to 1598 of 2006, decided on 29th March, 2017.

(Against the judgment dated 1.9.2005/22.3.2006/16.2.2006/ 29.3.2006/8.3.2006/14.4.2006/2.5.2006/5.4.2006/26.4.2006 of the High Court of Sindh, Karachi passed in I.T.R. No. 13/1999, 133/1997, 38/1998, 173/1997, 949/1999, 22/1993, 459/1990, 56/1995 and I.T.C. No.410/1997)

(a) Taxation---

----'Tax credit'---Meaning---Tax credit was an incentive or relief given to the taxpayer, usually for the purposes of promoting certain industries or activities.

(b) Taxation---

----'Tax credit'---Definition.

Black's Law Dictionary (9th Ed.); P. Ramanatha Aiyar's Concise Law Dictionary (4th Ed.) and The Oxford Advanced Learner's Dictionary of Current English (8th Ed.) ref.

(c) Taxation---

----'Tax credit'---Scope---Tax credit was an amount which was directly offset against or adjusted/deducted from the tax liability and not the gross income.

(d) Words and phrases---

----'Exclude'---Meaning.

Chambers 21st Century Dictionary (2007) and The Oxford Advanced Learner's Dictionary of Current English (8th Ed.) ref.

(e) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 23(1)(v), 107 & Third Sched., R. 8(8)(b)---Tax credit for replacement, balancing and modernisation of machinery or plant---Scope---Depreciation allowance, computation of---Tax credit available under S. 107 of the erstwhile Income Tax Ordinance, 1979 (the Ordinance)---Said tax credit was a deduction albeit from the tax payable and being admissible under the Ordinance it clearly fell within the ambit of R. 8(8)(b) of the Third Schedule to the Ordinance---Tax credit available under S. 107 of the Ordinance did fall within the purview of R. 8(8)(b) of the Third Schedule to the Ordinance and thus was to be excluded (i.e. not to be considered) while computing the actual cost of an asset when determining the written down value thereof for the purposes of calculating depreciation allowance.

Gulshan Spinning Mills Ltd. and others v. Government of Pakistan and others 2005 PTD 259 distinguished.

Dr. Farhat Zafar, Advocate Supreme Court for Appellant (in C.A. No. 1590 of 2006).

Muhammad Habib Qureshi, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellant (in C.As. Nos. 1591 to 1594 of 2006).

Muhammad Siddique Mirza, Advocate Supreme Court for Appellant (in C.A. No.1595 of 2006).

Iqbal Salman Pasha, Advocate Supreme Court for Respondents (in C.As. Nos. 1590, 1591, 1593 to 1595, 1597 and 1598 of 2006AH32).

Ex parte for Respondents (in C.As. Nos. 1592 and 1596 of 2006).

2017 P T D 1657

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Maqbool Baqar, JJ

AL-TECH ENGINEERS AND MANUFACTURERS

Versus

FEDERATION OF PAKISTAN and others

Civil Appeal No. 548 of 2011, decided on 31st January, 2017.

(On appeal from the judgment dated 01.02.2002 passed by the Lahore High Court, Lahore in W.P. No. 6640 of 1997)

Customs Act (IV of 1969)---

----Ss. 21(c) & 31A [as in force on 16.01.1996]---Notification No. S.R.O. 5(I)/1992 dated 06.01.1992---Notification No.SRO No.(1)/1996 dated 16.01.1996---Duty drawback granted on the raw material consumed in the manufacture of exported goods---Accrued and vested rights of exporter---Scope---Past and closed transaction, doctrine of---Scope---Appellant was a manufacturer and exporter of special types of steel nuts, screws and bolts, which were primarily meant for the export market---Vide Notification No.SRO 5(I)/1992 dated 06.01.1992 ("first notification") issued by the Federal Government a benefit was conferred upon the appellant (and other similarly placed exporters) assuring duty drawback upon the raw material consumed in the manufacture of their goods etc which were exported @ 26.75% of their Free On Board (FOB) value---Subsequently, vide Notification No.SRO No.(I)/1996 dated 16.01.1996 ("second notification") the rate of duty drawback allowed on such exported goods was reduced to 7.72 % of their FOB value---Appellant applied for duty drawback on export consignments of his goods shipped after 16.01.1996, the date of issuance of the second notification on the basis that the Letters of Credit in favour of the appellant were opened by the foreign importer before the date of the second notification, i.e. 16.01.1996---Said claims were, however, declined by the customs authorities---Legality---Duty drawback granted by SRO 5(I)/1992 dated 06.01.1992 was in the nature of a concession on the basis of the value of imported material consumed in the manufacture of goods that were exported from Pakistan---Such concession granted under S. 21(c) of the Customs Act, 1969 was not an exemption, therefore, the duty drawback given for exported goods fell outside the purview of S. 31A of the Customs Act, 1969---Resultantly, the principle of past and closed transaction that safeguarded accrued and vested rights of contracting parties applied squarely to the present case---Binding legal commitment made by the appellant to honour his export contracts fixed the date on which he acquired a vested legal right to claim the rate of available duty drawback under SRO No.5(I)/1992 dated 06.01.1992---Binding legal commitment between the appellant and his foreign importer would be established when the parties had taken substantial steps demonstrating adherence to their contract inter se---When the foreign importer of goods manufactured by the appellant had established a letter of credit prior to 16.01.1996 mandating a shipment date within six months its date of issuance, then the benefit under the first notification No.SRO 5(I)/1992 dated 06.01.1992 shall constitute a vested right of the appellant---Supreme Court directed the customs authority to undertake scrutiny of the export documents of the appellant in order to establish the creation of binding legal commitments, if any, between the contracting parties prior to 16.01.1996 in order to extend the appellant benefit of SRO.5(I)/1992 dated 06.01.1992 - Appeal was allowed accordingly.

Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 ref.

Malik Muhammad Qayyum, Senior Advocate Supreme Court for Appellant.

Sohail Mehmood, DAG for Respondent No. 1.

Ex parte for Respondent No.2.

Ibrar Ahmed, Advocate Supreme Court for Respondent No.3

2017 P T D 1687

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

FANCY FOUNDATION

Versus

COMMISSIONER OF INCOME TAX, KARACHI

Civil Appeal No. 8 of 2007, decided on 13th April, 2017.

(Against the judgment dated 12.4.2006 of the High Court of Sindh, Karachi passed in I.T.A. No. 55 of 1999)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 2(11) & 136---Reference before High Court---Maintainability---Mixed question of fact and law---Question as to whether the sale/purchase of property constituted 'business' within the meaning of S. 2(11) of the Income Tax Ordinance, 1979 and its effect on the taxpayer, involved a factual determination of the characteristics of the transaction in question and an interpretation of the said provision of law, therefore, it was a mixed question of fact and law and the reference before the High Court was maintainable.

Naseer A. Sheikh and 4 others v. The Commissioner of Income-Tax (Investigation), Lahore and others 1992 PTD 621 ref.

(b) Words and phrases---

----"Adventure"---Meaning.

Black's Law Dictionary (9th Ed.); Chamber's 21st Century Dictionary; Oxford Advanced Learner's Dictionary (9th Ed.) and P. Ramanatha Aiyar's Concise Law Dictionary (4th Ed.) ref.

(c) Words and phrases---

----"Trade"---Definition.

Black's Law Dictionary (9th Ed.); Chamber's 21st Century Dictionary; Oxford Advanced Learner's Dictionary (9th Ed.) and P. Ramanatha Aiyar's Concise Law Dictionary (4th Ed.) ref.

(d) Words and phrases---

----"Business"---Definition.

Black's Law Dictionary (9th Ed.); Chamber's 21st Century Dictionary; Oxford Advanced Learner's Dictionary (9th Ed.); P. Ramanatha Aiyar's Concise Law Dictionary (4th Ed.) and Major Law Lexicon (4th Ed.) 2010 ref.

(e) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 2(11)---Transaction by assessee---Question as to whether the transaction was an "adventure in the nature of the trade" amounting to business in terms of S. 2(11) of the Income Tax Ordinance, 1979---No hard and fast rule existed as to whether a transaction constituted an "adventure in the nature of trade" amounting to 'business' in terms of S. 2(11) of the Ordinance; instead, such a determination was dependent upon the facts and circumstances of each case---Principles.

In order to make a determination whether a transaction by an assessee was an "adventure in the nature of the trade" amounting to business in terms of section 2(11) of the Income Tax Ordinance, 1979, the following guiding principles may be employed:-

(i) Generally, in order to constitute 'business', there must be a continuous, regular or habitual activity for the purpose of earning gain or profit;

(ii) However, this did not mean that a single transaction could not constitute an adventure in the nature of trade, which must be examined on a case to case basis;

(iii) A transaction was not necessarily in the nature of trade because the purchase was made with the intention of resale;

(iv) A capital investment and resale did not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and the possibility of enhanced values motivated the investment;

(v) The intention to resell, by itself was not conclusive proof, of an adventure in the nature of trade, rather would have to be examined in conjunction with the conduct of the assessee and attendant circumstances, to determine the business character of the transaction; and

(vi) If it was alleged that an activity was in the nature of an adventure, there must be positive material brought on the record to prove that the assessee intended to indulge in such an activity and, in the absence of evidence, the sale of immovable property would give rise only to capital accretion.

Naseer A. Sheikh and 4 others v. The Commissioner of Income Tax (Investigation) Lahore and others 1992 PTD 621; Commissioner of Income-Tax (Central), Karachi v. Messrs Habib Insurance Co. Ltd., Karachi PLD 1969 Kar. 278; Messrs Habib Insurance Co. Ltd. v. Commissioner of Income Tax (Central) Karachi PLD 1985 SC 109; Commissioner of Income Tax v. Mahmood Ali 2008 PTD 82; Major General (Retd.) M. Jalaluddin v. ACIT, CIR-VI, Zone-C, Karachi 2011 PTD 1377; Pakistan Steel Mills Corporation (Pvt.) Ltd., Karachi v. Commissioner Inland Revenue (Legal Division), Karachi and another 2012 PTD 723; Messrs Narain Swadeshi Weaving Mills v. The Commissioner of Excess Profits Tax AIR 1955 SC 176; G. Venkataswami Naidu and Co. v. The Commissioner of Income Tax AIR 1959 SC 359; Saroj Kumar Mazumdar v. Commissioner of Income Tax, West Bengal AIR 1959 SC 1252; The Commissioner of Income Tax, Punjab, Haryana, Jammu and Kashmir and Himachal Pardesh v. Prabhu Dayal (dead) by his legal representatives AIR 1972 SC 386; The Commissioner of Income Tax, Nagpur v. Messrs Sutlej Cotton Mills Supply Agency Ltd. AIR 1975 SC 2106; Commissioner of Income Tax v. A. Muhammad Mohideen (1989) 176 ITR 393 and Commissioner of Income Tax, Madras v. Kasturi Estates (P) Ltd. (1966) 62 ITR 578 ref.

(f) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 2(11), 22 & 27(2)(a)---"Adventure in the nature of the trade" amounting to business in terms of S. 2(11) of the Income Tax Ordinance, 1979---Scope---Registered charitable trust---Profit made upon sale of property---Exemption from income tax---Burden of proof---Appellant, a registered charitable trust, purchased certain property vide a registered sale deed, on 28.06.1963 for a consideration of Rs.1,895,183---Appellant sold the property for Rs.18,287,500/- in the year 1995---Appellant filed its income tax return for the year 1996-97, in which it claimed exemption from payment of income tax on the surplus/differential between the purchase and sale prices of the property in terms of S. 27(2)(a) of the Income Tax Ordinance, 1979 ("the Ordinance")---Tax department, however, passed an assessment order to the effect that the purchase and ultimate sale of the property was an "adventure in the nature of the trade" in terms of S. 2(11) of the Ordinance thus the profit/surplus made on the sale thereof was a profit and gain of a business carried on by the appellant and was chargeable to income tax under the head 'income from business or profession' under S. 22(a) of the Ordinance---Legality---Memorandum of Association of the appellant did allow it to "purchase, take on lease, exchange, hire or otherwise acquire any real and personal or immoveable and moveable property", however, the mere permissibility of a transaction by itself did not automatically confer on it the status of a 'business'---Burden was on the department to prove that the surplus earned from the single transaction of sale of the property fell within the scope of 'income' being a profit/gain of the appellant's business---Department wanted to draw an inference from the fact that the appellant converted the property into a parking lot and derived some rental income therefrom, that the appellant had intended, at the time of purchase of the property, to indulge in an adventure in the nature of trade to generate profit---Department failed to discharge its initial burden as there was no concrete material presented by it which proved that the appellant purchased the property with the intention to indulge in a trading activity, therefore the question of the appellant proving that the transaction was not an adventure in the nature of trade and hence a business, did not arise as the burden never shifted onto the appellant---Fact that the property had increased in value when it was finally sold by the appellant and therefore fetched a price higher than that for which it was purchased, would not ipso facto mean that the act of selling was an "adventure in the nature of trade" and constituted a 'business' under S. 2(11) of the Ordinance and was liable to tax under S. 22(a) thereof---Rather, being a sale of an immoveable property and not a capital asset, the profit/gain from its transfer was not chargeable to income tax under S. 27(2)(a)(ii) of the Ordinance---Single and isolated incident of buying and selling property by the appellant was, thus, not an "adventure in the nature of trade" and would not constitute 'business' in terms of S. 2(11) of the Ordinance, and the surplus earned therefrom was not a profit/gain in terms of S. 22(a) of the Ordinance and was not liable to income tax.

(g) Income tax---

----Income---Scope---Receipts falling within the scope of 'income'---Burden of proof---Burden to prove that an assessees' receipts fell within the scope of 'income' and were liable to be taxed, laid on the department, and if the latter managed to establish the same, then the burden shifted onto the former to show that such receipts were exempt from tax.

The Commissioner of Income Tax v. Messrs Smith, Kline and French of Pakistan Ltd. and others 1991 PTD 999; Parimisetti Seetharanamma v. Commissioner of Income-tax, Hyderabad AIR 1965 SC 1905) = (1965) 57 ITR 532; S. A. Ramakrishnan v. Commissioner of Income-Tax Madras (1978)] 114 ITR 253 (Mad) and Sumati Dayal v. Commissioner of Income-tax Bangalore AIR 1995 SC 2109 ref.

Iqbal Salman Pasha, Advocate Supreme Court for Appellant.

M.D. Shahzad Feroz, Advocate Supreme Court for Respondent.

2017 P T D 1756

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Maqbool Baqar and Faisal Arab, JJ

The COLLECTOR OF SALES TAX, GUJRANWALA and others

Versus

Messrs SUPER ASIA MOHAMMAD DIN AND SONS and others

Civil Appeals Nos. 682 to 684 of 2008, 131, 233, 253, 504, 219 and 220 of 2011, 678-683, 783 and 729-732 of 2012, 389-401 and 710-713 of 2013, 1632 of 2014, 565 of 2015 and 1424-1425, 1507, 2470 of 2016 and 733 of 2010, decided on 31st March, 2017.

(On appeal against the judgments/orders dated 7.11.2007, 18.12.2007, 05.11.2008, 25.09.2009, 09.07.2009, 29.01.2009, 01.04.2008, 07.04.2008, 04.05.2012, 05.04.2012, 05.04.2012, 06.06.2012, 19.07.2012, 06.06.2012, 05.04.2012,13.07.2011, 05.04.2012, 07.12.2011, 10.09.2014, 21.01.2015, 17.11.2015, 22.03.216 of the Lahore High Court, Lahore passed in W.P.13331/2006, S.T.R.68/2006, S.T.R.13/2007, S.T.A.5/2005, S.T.R.42/2006, W.P.13499/2003, W.P.16171/2008, S.T.A.23/2006, S.T.A.2/2007, S.T.R.44/2010, S.T.R.29/2010, S.T.R.144/2011, S.T.R.95/2010, S.T.R.36/2011, S.T.R.26/2010, S.T.R.76/2010, S.T.R. 55/2009, S.T.R.82/2010, S.T.R.32/2010, S.T.R.73/2010 S.T.R.22/2010, S.T.R.77/2009, S.T.R.21/2010, S.T.R.43/2010,, S.T.R.85/2010, S.T.R.101/2010, S.T.R.21/2011, S.T.R.62/2011, S.T.R.68/2011, S.T.R.69/2011, S.T.R.75/2011, S.T.R.70/2011, S.T.R.22/2011, S.T.R.83/2011, S.T.R.130/2011, S.T.R.13/2011, S.T.R.114/2011, S.T.R.89/2014, S.T.R.14/2015, S.T.R.194/2015, S.T.R.195/2015 and S.T.R.58/2016 respectively)

(a) Interpretation of statutes---

----Mandatory/directory/provision, determination of--- Test--- Word "shall" used in a provision of law---Scope---Word 'shall' was to be construed in its ordinary grammatical meaning and normally the use of word 'shall' by the legislature branded a provision as mandatory, especially when an authority was required to do something in a particular manner---Ultimate test to determine whether a provision was mandatory or directory was that of ascertaining the legislative intent---While the use of the word 'shall' was not the sole factor which determined the mandatory or directory nature of a provision, it was certainly one of the indicators of legislative intent---Other factors included the presence of penal consequences in case of non-compliance, but the clearest indicator was the object and purpose of the statute and the provision in question---Court was duty bound to garner the real intent of the legislature as expressed in the law itself.

Haji Abdul Karim and others v. Messrs Florida Builders (Pvt.) Limited PLD 2012 SC 247; Safeer Travels (Pvt.) Ltd. v. Muhammad Khalid Shafi through Legal Heirs PLD 2007 SC 504; Mian Muhammad Nawaz Sharif v. President of Pakistan and others PLD 1993 SC 473; Syed Zia Haider Rizvi and others v. Deputy Commissioner of Wealth Tax, Lahore and others 2011 SCMR 420; In re: Presidential Election, 1974 AIR 1974 SC 1682; Lachmi Narain v. Union of India AIR 1976 SC 714 and Dinesh Chandra Pandey v. High Court of Madhya Pradesh and another (2010) 11 SCC 500 ref.

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

----Ss. 11(4), first proviso [erstwhile], 36(3), first proviso [erstwhile], 11(5) & 74---Sales tax, recovery of---Show cause notice---Adjudication proceedings---Order-in-original---Limitation period---Question as to whether the limitation period contained in the first provisos to the erstwhile Ss. 11(4) & 36(3) of the Sales Tax Act, 1990, and the current S. 11(5) of the Act for passing an order thereunder was 'mandatory' or 'directory' in nature; held, that provisions of S. 11 and the erstwhile S.36 of the Sales Tax Act, 1990 ("the Act") were mandatory in nature, and any order passed beyond the time period stipulated therein would be invalid---Collector/Commissioner had the power to extend the time within which an order under provisions of S. 11 or the erstwhile S. 36 of the Act was to be passed---Such time could also be extended in a particular case or class of cases by the Federal Board of Revenue ("the Board") or the Commissioner if empowered by the Board, as per the provisions of S. 74 of the Act---Power to extend time in terms of S. 74 of the Act must be exercised within a reasonable time period of 'six months' from the date when the time period provided in the first provisos to S. 11 and the erstwhile section 36 of the Act and the extension granted thereunder had lapsed, and such power could only be exercised (by the Board under S. 74) to grant an extension of not more than a reasonable time period of 'six months'.

Plain language of the first provisos to the erstwhile sections 11(4) and 36(3) of the Sales Tax Act, 1990, clearly indicated that the tax officer was bound to pass an order within the stipulated time period of forty-five days, and any extension of time by the Collector could not in any case exceed ninety days. The Collector could not extend the time according to his own choice and whim, as a matter of course, routine or right, without any limit or constraint; he could only do so by applying his mind and after recording reasons for such extension in writing. Language of the first proviso was, thus, meant to restrict the officer from passing an order under sections 11(4) and 36(3) whenever he wanted. It also restricted the Collector from granting unlimited extension. The curtailing of the powers of the officer and the Collector and the negative character of the language employed in the said first provisos pointed towards their mandatory nature. This was further supported by the fact that the first provisos were inserted through an amendment. Prior to such insertion, undoubtedly there was no time limit within which the officer was required to pass orders under sections 11(4) and 36(3) of the Act. The insertion of the first provisos through an amendment reflected the clear intention of the legislature to curb the earlier latitude conferred on the officer for passing an order under the said sections. When the legislature made an amendment in an existing law by providing a specific procedure or time frame for performing a certain act, such provision could not be interpreted in a way which would render it redundant or nugatory. Thus, the first provisos to erstwhile sections 11(4) and 36(3) of the Act and the first proviso to the current section 11(5) of the Act were mandatory in nature, and the natural corollary of non-compliance with their terms would be that any order passed beyond the stipulated time period would be invalid.

Collector had the power to grant extensions within which an order under erstwhile sections 11(4) and 36(3) of the Act were to be passed, however, such extension could not exceed ninety days. It was not incumbent upon the Collector to extend the time within the currency of the initial time period of forty-five days; it was entirely possible to extend the time even after the expiry of the initial time period but the critical period in this regard was ninety days because at the expiry of this maximum period time could not be further extended. As per the first provisos to erstwhile sections 11(4) and 36(3) of the Act, if an officer failed to pass an order within forty-five days (the initial time period), the Collector need not grant an extension within such forty-five days, instead he could do so after the said number of days. However, since the latter part of the first provisos only allowed him to grant an extension of ninety days, thus any extension granted must not exceed the maximum limit of one hundred and thirty-five days (forty-five plus ninety) from the date of the show cause notice.

In terms of section 74 of the Act, the Federal Board of Revenue ("the Board") also had the power to extend the time within which an order under the erstwhile sections 11(4) and 36(3) of the Act and the current section 11(5) of the Act were to be passed. However this did not mean that in exercise of its power under section 74 of the Act, the Board would have unfettered and unbridled authority to extend time when, and for however long, it felt it expedient to do so. Rather time would only be extended in certain cases, after application of mind and that too for a reasonable amount of time. For the purposes of settling the reasonable time, after the expiry of the two time periods envisaged by the first provisos to erstwhile sections 11(4) and 36(3) of the Act, i.e. forty-five days [within which the order was to be passed] and a further ninety days [extended period under the first provisos], the Board should have six months within which it may grant extension of time under section 74 which (extension) could also not exceed six months. If such reasonable time also lapsed, then the rule of past and closed transaction shall apply because it was inconceivable in law that the Board would have infinite and unlimited time within which it could grant extensions under section 74. Board could not grant infinite and unlimited extension under section 74 to obliterate the vested rights that stood created in favour of the taxpayer on account of lapse of time.

Federal Land Commission through Chairman v. Rias Habib Ahmed and others PLD 2011 SC 842 ref.

(c) Interpretation of statutes---

----Casus omissus, principle of---Scope---Principle of reading in or 'casus omissus' was not to be invoked lightly, rather it was to be used sparingly and only when the situation demanded it---Courts should refrain from supplying an omission in the statute because to do so steered the courts from the realms of interpretation or construction into those of legislation.

Abdul Haq Khan and others v. Haji Ameerzada and others PLD 2017 SC 105 and Principles of Statutory Interpretation (13th Ed.) by Justice G. P. Singh ref.

(d) Interpretation of statutes---

----'Directory' and 'mandatory' provisions---Scope---When a statute required that a thing should be done in a particular manner or form, it had to be done in such manner, but if such provision was directory, the act done in breach thereof would not be void, even though non-compliance may entail penal consequences; however, non-compliance of a mandatory provision would invalidate such act.

Rubber House v. Excellsior Needle Industries Pvt. Ltd. AIR 1989 SC 1160 ref.

Izhar-ul-Haq, Advocate Supreme Court for Appellants (in C.As. Nos. 682-684/08, 131, 233, 253, 504/11, 389-401/13, 710, 711, 713/13, 219 and 220/11)

Dr. Farhat Zafar, Advocate Supreme Court, M. S. Khattak, Advocate-on-Record and Raja Abdul Ghafoor, Advocate-on-Record for Appellants (in C.As. Nos. 678-683/12, 783/12, 1632/14, 565/15, 1424, 1425, 1507, 2470/16 and 729-732/12).

Farhat Nawaz Lodhi, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants (in C.A. No. 733/10).

Ch. M. Zafar Iqbal, Advocate Supreme Court for Appellants (in C.A. No. 712/13).

Nemo for Respondents (in C.A. No. 220/11).

Syed Naveed Andrabi, Advocate Supreme Court for Respondents (in C.As. Nos. 682/08, 397 and 398/13).

Riaz Hussain Azam, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents (in C.A. No. 733/10).

Waqar Azeem, Advocate Supreme Court for Respondents (in C.As. Nos. 682-684/08).

Nemo for Respondents (in C.A. No. 131/11).

Nazir Mahmood Qureshi, Advocate Supreme Court for Respondents (in C.A. No. 233/11).

Nemo for Respondents (in C.A. No. 253/11).

Muhammad Iqbal Hashmi, Advocate Supreme Court for Respondents (in C.As. Nos. 504/11, 396, 399, 710/13).

Nemo for Respondents (in C.As. Nos. 678/12, 713/13, 683/12, 392/13).

Shazib Masud, Advocate Supreme Court for Respondents (in C.A. No. 390/13).

Mian Ashiq Hussain, Advocate Supreme Court for Respondents (in C.A. No. 4 00/13).

Nemo for Respondents (in C.As. Nos. 394, 401/13, 711/13, 1632/14, 2470/16, 565/15, 730/12, 712/13, 732/12).

M. Ajmal Khan, Advocate Supreme Court for Respondents (in C.A. No. 1507/16).

Ex parte for Respondents (in C.As. Nos. 219/11, 729/12, 731/12).

Nemo for Respondents (in C.As. Nos. 679-682, 783/12, 382, 391, 393, 395/13, 1424, 1425/16).

2017 P T D 1974

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

COLLECTOR OF CUSTOMS (EXPORT) and others

Versus

SAIFUDDIN

Civil Appeal No. 1079 of 2011 and C.M.A. No. 2273 of 2013, decided on 17th May, 2017.

(Against the judgment dated 08.09.2011 of the High Court of Sindh, Karachi passed in C.P. No. 1337 of 2010)

(a) Customs Act (IV of 1969)---

----Ss. 18(2) & 18(3)---Regulatory duty on exported goods, levy of---Permissibility---Subsection (2) of S. 18 of Customs Act, 1969 provided the general rule that all goods exported from Pakistan shall not be charged with export duty, whereas subsection (3) provided the exception to such general rule, in that it specifically authorized the Federal Government to impose a regulatory duty, by notification in the official Gazette, on all or any of the goods imported or exported---Combined reading of both the said subsections made it abundantly clear that neither did they conflict with each other nor did either have supremacy over the other---Notification issued by the Federal Government under S. 18(3) of the Customs Act, 1969 imposing a regulatory duty on certain export items was valid and legal and such duty would be chargeable from the date of the notification.

(b) Customs Act (IV of 1969)---

----Ss. 18(3), 31 & 131(1)(a)---Regulatory duty on exported goods, levy of---Relevant date for determination of the duty---Regulatory duty shall be charged at the rate applicable on the date when the "goods declaration" was delivered or filed---Date of entering into or conclusion of contract was not relevant for such purpose.

(c) Customs Act (IV of 1969)---

----Ss. 18(3), 31 & 131(1)(a)---Regulatory duty on exported goods, levy of---Notification issued by Federal Government imposing regulatory duty---Scope---Relevant date for determination of the rate of regulatory duty on exported goods was the date when the "goods declaration" was delivered or filed---Exported goods for which the declarations were filed on or after the date of the notification imposing regulatory duty, such goods were liable to regulatory duty as envisaged by the notification---Goods for which the declarations were filed prior to the issuance of the notification, such exports were not liable to regulatory duty under the notification---With respect to goods for which declarations were filed prior to the issuance of the notification, but were subsequently amended after the date of the notification, then as long as the 'particulars of the goods', required to be correct and complete as per S. 131(1)(a) of the Customs Act, 1969 remained the same, any subsequent substitution, amendment or revision in respect of any other information contained in the declaration, was immaterial for the purpose of S. 31 of the Act, and regulatory duty would not be leviable.

Shakeel Ahmed, Advocate Supreme Court for Appellants.

Sardar Muhammad Aslam, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Respondent.

2017 P T D 2016

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

Messrs AL-HAJ ENTERPRISES (PVT.) LTD.

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE (MCC) and others

Civil Petition No. 2226 of 2016, decided on 22nd May, 2017.

(On appeal against the judgment dated 20.04.2016 passed by the Islamabad High Court, Islamabad in Customs Reference Application No.31/2015)

Customs Rules, 2001---

----R.564(4)---Interpretation of R. 564(4) of the Customs Rules, 2001---Scope---Export of fuel to International Security Assistance Force (ISAF) in Afghanistan---Variation in the quantity of fuel declared for export and the one certified by ISAF at the place of destination---Rule 564(4) of the Customs Rules, 2001 required that in case there was a variation of more than one percent in the quantity declared and the one certified by ISAF at the place of destination, action 'shall be taken' against the concerned carrier and other persons found involved---Post export audit showed that that fuel exported to Afghanistan was short supplied, which was in excess of the one percent permissible under R.564(4)---Petitioner-company, which was responsible for transporting the fuel, was issued show cause notices for the short supply---Collector of Customs, passed order-in-original requiring the petitioner to pay taxes and duties of the short supplies amounting to Rs.6,070,342/- along with default surcharge---Customs Appellate Tribunal reduced the quantum of duties and penalty from Rs.6,070,342 to Rs.3,622,683---Petitioner argued that a strict procedure was followed for delivery of fuel as the tankers were locked and sealed and yet evaporation in hot weather was bound to take place that could reach beyond one percent limit for which the petitioner could not be held responsible; that provisions of R. 564(4) of the Customs Rules, 2001, ought to be interpreted in a way that in case of variation beyond one percent, there should be some adjudication as to the real cause behind the shortage, and in case the carrier justified the loss for no fault of his own then he should not be penalized for the breach of the limit provided in the Rule---Validity---Consequence for short supply beyond one percent had been clearly provided in R. 564(4) of the Customs Rules, 2001, which rule was fully attracted to the case of the petitioner and accordingly applied in the present case---No legal error was committed by any of the forums below, which required interference from the Supreme Court---Petition was dismissed accordingly and leave was refused.

Wasim Sajjad, Senior Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Petitioner.

Muhammad Habib Qureshi, Advocate Supreme Court, M.S. Khattak, Advocate-on-Record and Shahid Jan, Deputy Collector Customs for Respondents.

2017 P T D 2054

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs HASSAN ASSOCIATES (PVT.) LTD. and another

Civil Appeals Nos. 26 of 2009 and 228 of 2010, decided on 16th May, 2017.

(On appeal against the judgment dated 16.10.2008 and 27.04.2009 of the High Court of Sindh, Karachi passed in I.T.C. No.293 of 1992 and I.T.A. No.594 of 2000 respectively)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 23(1)(xviii)---Permissible deductions falling within the purview of S. 23(1)(xviii) of the Income Tax Ordinance, 1979 [since repealed]---"Encashment of bank guarantee" for breach of contract by the assessee---Damages or compensation paid in the course of carrying on business---Scope---Assessee-company was awarded a construction contract by Provincial Government subject to furnishing of a performance bond (bank guarantee)---Provincial Government encashed the bank guarantee for alleged breach of contract by the assessee---Assessee claimed the said amount as expenditure in the income tax return filed for the relevant assessment year and also filed a civil suit against such encashment---Income Tax Officer disallowed the said amount as expenditure and added it to the respondent's income on the ground that it (the amount) was recoverable from the Provincial Government---Legality---Any expenditure incurred as a penalty or fine paid on account of an infraction, breach or violation of law would not be allowed to be an expenditure laid out wholly or exclusively for the purpose of the business of the assessee---Whereas any amount paid as damages or compensation was an expenditure laid out wholly or exclusively for the purpose of the business of the assessee---Said amount was a revenue loss incurred in the course of carrying on of the business and therefore an admissible deduction under S. 23(1)(xviii) of the Income Tax Ordinance, 1979---In the present case, the contract was executed between the assessee and the Provincial Government, in connection with the business of assessee, who failed to perform its part of agreement, as such the Provincial Government encashed the performance bond---Encashment of bank guarantee could at best be considered to be damages or compensation paid to the Provincial Government for unsatisfactory performance of a contract by the assessee which was a revenue loss incurred by the latter in the course of carrying on its business---Transaction between the parties was purely a business transaction and there was no infraction or violation of any law whatsoever---Forfeiture of an amount under a contract could not be equated with a fine or penalty incurred due to infraction or violation of any law---Further, the civil suit filed by the assessee against the Provincial Government having been dismissed, amount in question was no more adjustable---High Court had rightly set aside the judgments of the fora below and allowed the amount in question as permissible deductions falling within the purview of S. 23(1)(xviii) of the Income Tax Ordinance, 1979---[Commissioner of Income Tax v. Premier Bank of Pakistan [1999 PTD 3005 = 1999 SCMR 2013], held not applicable].

Commissioner of Income Tax v. Premier Bank of Pakistan 1999 PTD 3005 = 1999 SCMR 2013 held not applicable.

Commissioner of Income Tax and Premier Bank Ltd., Karachi (1999) Tax 589 (SC Pak); Commissioner of Income Tax, Karachi v. Eastern Automobiles Ltd., Karachi (1967) 15 Tax 233; Karachi Steam Navigation Co. Ltd. v. Commissioner of Income Tax (1967) 15 Tax 73; Hind Mercantile Corporation Ltd. v. Commissioner of Income Tax, Madras (1963) 49 ITR 23; Commissioner of Income Tax (Central) v. Inden Biselers (1973) 91 ITR 427; Additional Commissioner Income Tax v. Rustam Jehangir Vakil Mills Ltd. (1976) 103 ITR 298; Commissioner Income Tax v. Tarun Commercial Mills Co. Ltd. (1977) 107 ITR 172; Commissioner Income Tax v. Surya Prabha Mills (P.) Ltd. (1980) 123 ITR 654 and Commissioner Income Tax v. Bharat Vijay Mills Ltd. (1981) 128 ITR 633 ref.

(b) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 23(1)(xviii)---State Bank of Pakistan Foreign Exchange Manual, Chap. 13, Para. 44---Permissible deductions falling within the purview of S. 23(1)(xviii) of the Income Tax Ordinance, 1979---Scope---Fine/penalty imposed for violation of a law---State Bank imposed a penalty on the respondent-company (assessee) in terms of Para. 44 of Chap. 13 of the (State Bank of Pakistan) Foreign Exchange Manual---Respondent (assessee) claimed the said amount as an expenditure in its income tax returns, however, the Assessing Officer refused to allow the same on the ground that such amount was a penalty incurred on account of infraction of law and was thus an impermissible deduction---Respondent (assessee) contended that the State Bank charged an 'interest' and not a fine or penalty under any law---Validity---Any expenditure incurred as a penalty or fine paid on account of an infraction, breach or violation of law would not be allowed to be an expenditure laid out wholly or exclusively for the purpose of the business of the assessee---Perusal of Para. 44 of Chap. 13 of the (State Bank of Pakistan) Foreign Exchange Manual showed that amount payable under the same was not a mere interest or additional amount demanded by the State Bank, rather the word used therein was" fine" which was akin to a penalty---Foreign Exchange Manual contained the basic regulations issued by the Federal Government and the State Bank under the provisions of the Foreign Exchange Regulations Act, 1947, therefore, it had the force of law and any violation thereof would entail the penal consequences provided therein---Since the respondent failed to comply with the provisions of the Manual, a fine was charged at the prescribed rate; it was essentially a fine for infraction of the law, and not damages or compensation for breach of a contract---Assessing Officer had rightly treated the amount paid as a penalty and an impermissible deduction in terms of S.23(1)(xviii) of the Income Tax Ordinance, 1979---[Commissioner of Income Tax v. Premier Bank of Pakistan [1999 PTD 3005], held applicable.

Commissioner of Income Tax v. Premier Bank of Pakistan 1999 PTD 3005 = 1999 SCMR 2013 held applicable.

Muhammad Siddiq Mirza for Appellant (in both cases).

Ms. Lubna Pervez, Advocate Supreme Court for Respondents (in C.A. No. 26 of 2009).

Iqbal Salman Pasha, Advocate Supreme Court for Respondents (in C.A. No. 228 of 2010).

2017 P T D 201

[Supreme Court (AJ&K)]

Before Mohammad Azam Khan, C.J. and Raja Saeed Akram Khan, J

Civil Appeal No.20 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

COMMISSIONER OF INCOME TAX (AJ&K) and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.54 of 2005).

Civil Appeal No.21 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.67 of 2005).

Civil Appeal No.22 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.69 of 2005).

Civil Appeal No.23 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.65 of 2005).

Civil Appeal No.24 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.70 of 2005).

Civil Appeal No.25 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.72 of 2005).

Civil Appeal No.26 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.63 of 2005).

Civil Appeal No.27 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.64 of 2005).

Civil Appeal No.28 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.66 of 2005).

Civil Appeal No.29 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.71 of 2005).

Civil Appeal No.30 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.60 of 2005).

Civil Appeal No.31 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.61 of 2005).

Civil Appeal No.32 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.59 of 2005).

Civil Appeal No.33 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.68 of 2005).

Civil Appeal No.34 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

ASSISTANT COMMISSIONER INCOME COMPANY CIRCLE MIRPUR and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.62 of 2005).

Civil Appeal No.35 of 2015

Messrs AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR through Director (Authorized)

Versus

COMMISSIONER OF INCOME TAX AJ&K COUNCIL MUZAFFARABAD and another

(On appeal from the judgment of the High Court dated 13.06.2014 in Reference No.51 of 2005).

Civil Appeals Nos. 20 to 35 of 2015, decided on 26th February, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to the High Court---Limitation---High Court dismissed Reference being time barred----Validity---When Income Tax Appellate Tribunal passed order and notice was served then the party or assessee or Commissioner Income Tax might move an application to the Tribunal within a period of 90 days to refer the question of law to the High court arising out of such order---If Income Tax Appellate Tribunal refused to refer the question of law to the High Court then assessee or Commissioner Income Tax could file a reference in the High Court within 120 days after receipt of notice of refusal by the Tribunal---Income Tax Appellate Tribunal had passed order on 30-10-2004 which was conveyed to the appellants on 06-11-2004---Reference was filed before the High Court on 04-03-2005 which was within time---Impugned judgment passed by the High Court was set aside and case was remanded for decision on merit---Appeal was allowed accordingly.

Khan Iftikhar Hussain Khan of Mamdot (represented by 6 heirs) v. Messrs Ghulam Nabi Corporation Ltd., Lahore PLD 1961 SC 550; Dost Muhammad and 15 others v. The State PLD 1971 Lah. 381 and Walton Tabacco Company (Pvt.) Ltd. and others v. Azad Govt. of the State of Jammu and Kashmir and others 1999 CLC 66 ref.

Haji Muhammad Afzal for Appellant (in Civil Appeals Nos. 20 to 35 of 2015).

Muhammad Rafique Dar for Respondents (in Civil Appeals Nos. 20 to 35 of 2015).