PTD 2023 Judgments

2023 P T D (Trib.) 384

[Punjab Revenue Appellate Tribunal]

Before Ch. Muhammad Tariq Javed, Chairperson and Ch. Javed Anwar, Accountant Member

Messrs PAKISTAN GUM AND CHEMICALS LIMITED

Versus

ADDITIONAL COMMISSIONER, ENF-III, PRA, LAHORE

Appeal No.38 of 2021, decided on 24th November, 2022.

(a) Punjab Sales Tax on Services (Adjudication and Appeals) Rules, 2012---

----Rr.13 & 16---Punjab Sales Tax on Services Act (XLII of 2012), Ss.52 & 14---Recovery of tax not levied or short levied---Appellate Adjudication---Assessing Officer, duty of---Scope---Special provision and tax withholding provisions---Punjab Revenue Authority issued a show cause notice to the appellant for its failure to withhold and deposit sales tax on services---Assessing Officer partially accepted the stance of the appellant while rejected its' stance regarding the heads of sale promotion and freight---Appellant preferred an appeal before the Commissioner (Appeals) wherein it was held responsible for not providing the documentary evidence, therefore, findings of the Assessing Officer were upheld---Validity---Commissioner (Appeals) had failed to look into the record and the evidence produced before her i.e. copies of invoices and breakup/summary of expenses on the prescribed format---Show cause notice in the case contained the figures of trans-provincial activities of the appellant---Assessing Officer was duty bound to afford as many opportunities as possible to the appellant to get all the relevant data of the tax authorities operating on trans-provincial basis to arrive at the exact amount of tax liability payable within the bounds of Punjab Revenue Authority---Case of the appellant needed a fresh decision---Appeal was accepted, impugned order was set aside and the case was remanded to the Commissioner (Appeals) with a direction to decide the case afresh after going through the available record.

(b) Punjab Sales Tax on Services (Adjudication and Appeals) Rules, 2012---

----Rr.13 & 16---Duty of Commissioner (Appeals)---Principles of natural justice---Scope---Adjudication officer is supposed and required to dilate upon all issues involved in the case and to make a speaking order thereafter, by looking into every piece of evidence produced by the parties.

(c) Punjab Sales Tax on Services Act (XLII of 2012)---

----S.52---Recovery of tax not levied or short levied---Scope---Primary duty is always of the authority to dig out the truth which enables it to assess the tax demand in exact terms and not on presumption---In tax regime no presumptions or guess work is allowed to be the basis of tax demand/assessment rather the demand/assessment essentially requires it to be in exactness.

(d) Constitution of Pakistan---

----Art. 10-A---Right to fair trial---Opportunity of hearing---Scope---First and foremost aspect in a pending lis is, the fairness and grant of ample opportunity to both parties involved in litigation to prove its stance so that no one feels discriminated.

Zeeshan Chishti, AR for Appellant.

2023 P T D (Trib.) 450

[Punjab Revenue Appellate Tribunal]

Before Ch. Muhammad Tariq Javed, Chairperson and Ch. Javed Anwar, Accountant Member

Messrs GHALIB CITY

Versus

ADDITIONAL COMMISSIONER PRA, JARRANWALA and another

Appeal No.19 of 2021, decided on 17th October, 2022.

Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss.52 & 25---Recovery of tax not levied or short levied---Scope---Appellant, being a property developer, was declared to be providing taxable service as per Sr. No. 15 of the Second Schedule to Punjab Sales Tax on Services Act, 2012 and was held liable to pay certain tax---Contentions of appellant were that the show cause notice by the Authority did not contain any specification of allegation; that due to non-determination of nature of services allegedly provided by the appellant it could not be burdened with payment of the tax and that appellant was exempted from the tax levied prior to its compulsory registration---Validity---Letter issued by (Faisalabad) Development Authority in response to the query (aimed at monitoring of the tax collecting activities) made by the Additional Commissioner, Punjab Revenue Authority, had revealed that the appellant was a housing society which held an area of immovable property measuring 306.15 kanals---Relevant and requisite information had been provided by the government institution on the request of another government institution which could safely be considered as standard proof of receiving taxable services by the appellant---So far as the contention regarding levying of tax for the period prior to compulsory registration was concerned, the explanation clause of S. 25 of the Punjab Sales Tax on Services Act, 2012, dismissed the appellant's assertion---Appeal was dismissed.

Muhammad Anwar Bhatti for Appellant.

2023 P T D (Trib.) 1019

[Customs Appellate Tribunal (Karachi Bench-I)]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs YOUSUF & CO. and 34 others

Versus

The COLLECTOR OF CUSTOMS MODEL CUSTOMS COLLECTORATE APPRAISEMENT (EAST), KARACHI

Customs Appeals Nos.K-824 to K-841 of 2022, decided on 16th August, 2022.

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

----Ss.32, 32-A & 83---Mis-declaration---Fiscal fraud---Scope---Appellants imported consignments of "Coated Writing Paper in Sheets (gloss) (Nevia brand)" from China through their authorized Clearing Agents vide Goods Declarations---Goods were cleared under S. 83 of the Customs Act, 1969; subsequently, the post import clearance data revealed that goods were assessed and released under tariff heading 4810.1910 (attracting 20% customs duty reduced to 16% on presentation of certificates of origin issued under China-Pakistan Free Trade Agreement) which were actually classifiable under tariff heading 4810.1910 being not specifically meant for "writing" and chargeable to 20% customs duty having no tariff concession---Show cause notices were issued to the importers and their clearing agents for recovery of evaded amount of duty/taxes and penal action---Charges levelled in the show-cause notices were upheld and the appeals were also dismissed---Validity---Department had exercised its supervisory power of checking the Goods Declarations and had passed the final assessment orders in respect of more than 250 consignments of identical goods---Such assessments were neither assailed by the department under S. 193 nor re-opened under S. 195 of the Customs Act, 1969---Department had released the consignments with the admission that "the classification declared on the scanned documents is in conformity with the classification determined by the Assessing Group"---Similar controversy relating to tariff headings 4810.1910 and 4810.1990 had already been adjudicated by the Appellate Tribunal in favour of the importers---Appellate Tribunal was the final fact finding body and its findings were conclusive---Appeals were allowed and the impugned orders were set aside.

CIR v. Messrs Sargodha Spinning Mill (Pvt.) Ltd. 2022 SCMR 1082 = 2022 PTD 1079 rel.

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

----Ss.32, 32-A & 209---Mis-declaration---Fiscal fraud---Liability of principal and agents---Scope---Where the department had not placed on record any adverse material or evidence against the Customs Clearing Agents which could establish without any reasonable doubt that they were directly or indirectly the beneficiaries of alleged misdeclaration of HS Code and allegedly evaded duty/taxes thereon, which was the basic requirement of issuance of show cause notice and imposition of penalties; Appellate Tribunal observed that the Agents neither fell within the ambit Ss. 32 & 32-A nor imposition of penalties was sustainable against them under the law.

Ports Ways Customs House Agents v. Collector of Customs 2002 YLR 2651. ref.

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

----S.32---Mis-declaration---Scope---Classification of goods is a mixed question of law and facts and so also of interpretation of statutory provision i.e. tariff heading which is part of First Schedule to the Customs Act, 1969; hence, there could always be a difference of opinion in interpreting the same administratively and judicially---It is not that it always will be a case of mens rea and imposition of penalty if interpretation of tariff heading for classification of goods is not accepted by the department.

2021 PTD 1430 rel.

2011 SCMR 1279 = 2011 PTD 2220 ref.

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

----S.223---Officers of Customs to follow Board's orders, etc.---Scope---Directions of the Board contained in Customs General Order No. 12/2002, though not binding upon the authorities performing quasi-judicial functions, but such directions are mandatory in nature and are binding upon the functionaries and field officers discharging their functions and duties under the Customs Act, 1969 relating to administrative matters in terms of S. 223 of the Customs Act, 1969---Field officers of Federal Board of Revenue (FBR) are not authorized to act as per their own discretion in a situation, wherein, FBR has already issued directions and/or guidelines.

2021 PTD 1430 and 2016 PTD 35 rel.

1993 SCMR 1232; 2003 PTD 2090 and 2016 PTD 35 ref.

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

----S.194-B---Orders of the Appellate Tribunal---Scope---Unless and until stay order or supervening order is passed by the Apex Court against the order/judgment of the Appellate Tribunal the Department and the lower forums have to follow the order/judgment of the Tribunal in letter and spirit.

Aqeel Ahmed and Muhammad Bilal for Appellants.

Saboor Kakar, A.O. for Respondent.

2023 P T D (Trib.) 1049

[Customs Appellate Tribunal (Karachi Bench-I)]

Before Abdul Jabbar Qureshi, Member Judicial-I and Abdul Basit Chaudhary, Member Technical-I

Messrs FAZAL IMPEX and another

Versus

The DIRECTOR, INTELLIGENCE AND INVESTIGATION (CUSTOMS), CUSTOM HOUSE, HYDERABAD

Customs Appeals Nos.H-794 and H-796 of 2022, decided on 5th October, 2022.

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

----S.187---Qanun-e-Shahadat (10 of 1974) Arts.117 & 121---Burden of proof as to lawful authority---Scope---Section 187 of the Customs Act, 1969, provides two conditions, which are as follows: (i) when a person is charged with an offence under the Customs Act, 1969, burden of proof is cast upon him to show that he had the lawful authority to commit that act; (ii) when a person is found in possession of any goods the burden of proof is cast upon him to show that he was holding such goods under some lawful authority, permission or license, etc---Clause (ii) provides for an eventuality where a person is found to be in possession of certain goods which fall under a prohibited category or which in an unlawful manner find place in the possession of custody of the accused---In such case the burden is upon the accused to show that he falls under some exemption or exception to hold such goods---Type of eventuality as envisaged and stated in clause (ii) essentially represents a statement of the general principle of the law of evidence contained in Art. 121 of the Qanun-e-Shahadat, 1984---This principle states that anyone claiming to be under a preferential, exempt, or excepted category must demonstrate fulfillment of the conditions to fall within that category---This obviously should not be confused with the factum of possession for which no presumption or burden of proof has been spelt out, in view whereof the possession itself has to be proved independently by the prosecution beyond all reasonable doubt---In case of clause (i) it is to be determined whether the burden of proof solely lies upon the accused to disprove allegations of mis-declaration and mis-description leveled by the customs authorities and whether the customs authorities are under no obligation to lead evidence and discharge any onus of proof---This part of S. 187 perhaps appears to be contrary to the general principle of law of evidence contained in Art.117 of the Qanun-e-Shahadat, 1984, that whosoever alleges existence of a particular fact must prove the same---There is little doubt that a special law of particular statute can provide for a distinct regime of rules of evidence contained in a general law---In fact the law goes on as far as providing that the laws of evidence can be altered even by mutual consent and contract---However, on a close scrutiny of the provisions of S. 187 it appears that in such a situation it is only the evidential and tactical burden of proof which is cast upon the accused while the legal burden to bring home the allegations remains with the prosecution.

Messrs Kamran Industries's case PLD 1996 Kar. 68 and Barkat Ali v. The State PLD 1973 Kar. 659 rel.

PLD 1975 Kar. 458 ref.

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

----S.26---Obligation to produce documents and provide information---Scope---Object of S. 26 of the Customs Act, 1969 is to empower the authority to ask for information or require the production of documents or inspect the same in order to determine the legality or illegality of importation or exportation of goods which had been imported or exported, the value of such goods, the nature, amount and sources of funds or the assets with which the goods were acquired and the customs duty chargeable thereon---Such information can only be called for from the claimant for the specific purpose of determining the legality of possession of impugned goods---Authorized officer of the customs can call upon any importer or exporter to furnish information in case where such determination is required---Such officer cannot make a roving inquiry or issue notice by merely shooting in the dark in the hope that it would enable him to find out some material out of these documents and then charge the party with irregularity or illegality---Customs Authority has to state and disclose in the notice the purpose for which party is required to produce those documents or supply information---Unless such purpose is specified in the notice, the addressee would be clueless about the demand being made through such a notice---Section 26 does not provide for making indiscriminate roving and fishing inquiry, irrespective of fact whether any determination of legality or illegality in import or export of funds with which goods are acquired is to be determined---Even in cases of suspicion of commission of illegality, details should be provided to the party to enable him to have an opportunity to produce all relevant documents and disclose information---Depending on facts and circumstances of a case, any notice without disclosing any fact or particulars for which information or documents are required would be in violation of principles of natural justice and can be struck down as illegal and without jurisdiction.

Assistant Director Intelligence and Investigation v. M/s B.R. Herman PLD 1992 SC 485 rel.

1995 PTD (Trib.) 580 ref.

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

----S.26---Obligation to produce documents and provide information---Scope---State functionaries have no power and authority to conduct fishing and roving inquiries without possessing definite and proper information, just in hope to unravel some concealment and illegality on the part of the assessee/taxpayer/citizen---In other words, before embarking upon any inquiry the state functionary must already possess some definite material so as to establish any illegal action having been taken by the citizen.

Assistant Director Intelligence and Investigation v. M/s B.R. Herman PLD 1992 SC 485 rel.

1995 PTD (Trib.) 580 ref.

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

----Ss. 2(s), 156(1)(8), 156(1)(89) & 156(1)(90)---Smuggling---Scope---If a person has been found without lawful excuse in possession of smuggled goods he would be dealt with under Cl. (89) of S. 156(1) and if the evidence produced by the prosecution establishes that accused was smuggling the goods outside or into Pakistan, then he would be liable to be dealt with under Cl. (8) of S. 156(1) and in such circumstances, would not be punished, under Cl. (89) of S. 156(1)---Thus, Cl. (8) applies in relation to the very act (or acts together) which constitute the offence of smuggling---As S. 2(s) makes clear, this would include an attempt to smuggle and/or an abetment or connivance thereof---Clause (89) on the other hand applies to, or at, the stage when the offence of smuggling is already complete---Such difference can also be understood by noting that in Cl. (8), the word "smuggled" is used as a verb, whereas in Cl.(89), it is used in a descriptive sense as part of the expression "smuggled goods" (i.e. as an adjectival participle or verb adjective to indicate a past or completed action)---If the act or offense of smuggling is proven, even if it occurred a long time ago, it is crucial to establish whether the goods in question are considered "smuggled goods" and whether S.2(s) is applicable---This determination determines whether Cl. (89) or (90) should be applied---Clause (89) applies to smuggled goods, and clause (90) applies to those goods to which the former does not apply, i.e., those which are not smuggled goods---It necessarily follows from this that clauses (89) and (90) cannot simultaneously, be held to apply to the facts and circumstances of a particular case---Either the goods involved are smuggled goods, or they are not---Determination on order that concludes that both clauses apply, or purports to hold a person liable in terms of both, is bad in law and cannot be sustained---Furthermore, when Cl. (89) is examined, it is seen that it applies to "smuggled goods" in two distinct situations---Firstly, it applies when it has been determined that the goods are indeed smuggled goods---But, secondly, it also applies when there is a "reasonable suspicion" that the goods are smuggled goods---This obviously sets or requires a lower threshold, but it is important to note that the focus must still be on the goods being smuggled goods---Thus, when clauses (89) and (90) are considered together, three situations emerge: (i) the goods can be smuggled; or (ii) there may be reasonable suspicion that the goods are smuggled goods; or (iii) the goods are those to which neither (i) nor (ii) apply---The first two contingencies come within clause (89) and the third within clause (90)---For a lawful determination to be made when a question arises in relation to any goods as to whether customs duty and other taxes leviable thereon have been evaded or that such goods have been brought into Pakistan in breach of any prohibition or restriction, it must be carefully considered whether (i) the goods are smuggled goods, or (ii) are those in respect of which there can be a reasonable suspicion that they are smuggled goods---For this purpose, the definition of smuggling in S. 2(s) must be carefully considered in order to determine whether it applies in the facts and circumstances of the particular case---If the answer is in the affirmative then (and only then) clause (89) applies---If not, then it is only clause (90) that can be applied---Onus of such determination lies on the customs authorities.

(e) Equity---

----Equity is the soul of law in dispensation of justice.

(f) Administration of justice---

----Proper purpose of procedure in any system of administration of justice is to help and not to thwart the grant of rights to the people---All the technicalities have to be avoided unless it be essential to comply with them on the ground of public policy---Any system which gives effect to the form but not to the substance defeats substantive rights and is defective to the extent---Ideal must always be a system that gives to every person what is his right under the law.

Imtiaz v. Ghulam Ali PLD 1963 SC 382 rel.

Muhammad Iqbal Riaz for Appellant.

Ghulam Muhammad Shar, Superintendent for Respondents.

2023 P T D (Trib.) 1090

[Customs Appellate Tribunal (Karachi Bench-III)]

Before Shakil Ahmed Abbasi, Member Judicial-III

Messrs ATEEQ AUTOS and others

Versus

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

Customs Appeals Nos.K-571, K-572, K-573 of 2022 and K-1476 of 2019, decided on 31st January, 2023.

Customs Act (IV of 1969)---

----Ss. 32, 25, 79 & 80---Mis-declaration---Value and description of imported goods (specific size of pneumatic tires of rubber)---PCT heading, finalization of---Department alleged subject goods were for light truck whereas importers/appellants claimed the tires were useable in construction, mining or industrial handling vehicles or machinery---Held, that no mens rea was found , in the present case, on the part of the appellants---Impugned orders passed by Adjudicating Authority and Collector (Appeals), having been infested with legal infirmities, were set-aside---Clearance Collectorate was directed to finalize the assessment in light of Manufacturers' Catalogues as well as in accordance with Import Policy Order---Appeals were accepted.

Ghulam Yaseen, Consultant for Appellant.

Ghani Somroo and Naqeebullah, A.O. for Respondents.

2023 P T D (Trib.) 73

[Customs Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs KN TRADERS through Proprietor and another

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION-I) and 2 others

Customs Appeals Nos.K-792 and K-793 of 2022, decided on 9th June, 2022.

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

----Ss.32, 25 & 166---Mis-declaration---Value of imported and exported goods---Power to summon persons to give evidence and produce documents or things---Scope---Appellant imported Epoxy Menthane (Industrial Grade)---Department, on physical examination of the goods, found the goods to be in excess of the declared amount and an invoice of higher value was also found---Department confiscated the goods, gave an option to the importer to pay redemption fine and imposed penalty---Contention of importer was that the invoice did not relate to its consignment and the shipper had sent the invoice by mistake---Validity---Department had not tried to verify the documents though the importer had stated that the invoice was issued by mistake---Proper investigation/inquiry under S.166, Customs Act, 1969, should have been conducted---Importer had not made transaction with the manufacturer, therefore, any document generated by the manufacturer could not represent as evidence of transaction value---Importer could not be charged for submitting incorrect statement in terms of S.32(1) of the Customs Act, 1969---Adjudicating authority had not passed the order according to the facts of the case---Confiscation of goods and consequent option to redeem the goods upon payment of fine was excessive and unwarranted, hence, the same was set aside---Department was declared to be at liberty to determine the customs value of goods in accordance with methods provided under S.25 of the Customs Act, 1969---Appeal was disposed of accordingly.

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

----Ss.25 & 25-A---Value of imported and exported goods---Power to determine the customs value---Scope---Department cannot go beyond values fixed under S. 25-A of Customs Act, 1969, as the values are binding---Section 25-A overrides the provisions of S. 25 and empowers the relevant officer to fix by notification in the official gazette, the value of imported goods for the purposes of the Customs Act, 1969.

S.C.R.A No.29 of 2010 and Civil Appeal No.629 of 2017 ref.

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

----S.25---Value of imported and exported goods---Scope---Customs value of the goods is price actually paid or payable for the goods when sold for export to Pakistan.

(d) Constitution of Pakistan---

----Art.4---Right of individuals to be dealt in accordance with law---Scope---Every citizen enjoys the protection of law and to be treated in accordance with law is inalienable right of every citizen, wherever he may be, and every other person for the time being within Pakistan---Clause (a) of Art.4(2) expresses that no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; 2001 SCMR 838; 2003 SCMR 1505 and Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd and others 2006 SCMR 129 ref.

Muhammad Adnan Moton for Appellants.

Muhammad Raheel, A.O. present for Respondents.

2023 P T D (Trib.) 150

[Customs Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs MANSOOR ALI KHAN

Versus

The COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.H-1652 of 2022, decided on 13th August, 2022.

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

----Ss.2(s), 168 & 187---Criminal Procedure Code (V of 1898), S.103---Qanun-e-Shahadat (10 of 1984), Art. 129(g)---Smuggling---Seizure of things liable to confiscation---Burden of proof as to lawful authority---Search to be made in presence of witnesses---Withholding best evidence---Scope---Customs Department confiscated skimmed milk for having been smuggled---Claim of owner was that he had purchased the goods from open market---Validity---Goods were being transported to the border area or coastal sides---Section 2(s) of Customs Act, 1969, could not have been invoked, which was criminal in nature and required higher standard of proof or evidence instead of departmental presumption---Appellant had discharged initial burden regarding lawful possession of alleged goods in terms of S. 187 of the Customs Act, 1969, by producing proper receipt of purchase of goods from the local market---Receipt was discarded by the department without verifying the same, hence, it could be presumed under Art. 129(g) of Qanun-e-Shahadat, 1984, that had the department verified the same, result would have been different---Department had not associated any independent witness at the time of preparation of mashirnama as per requirement of S.103, Cr.P.C.---Appeal was allowed, impugned orders were modified to the extent that the goods be released on payment of leviable duty and taxes along with 20% redemption fine of the ascertained value.

The Assistant Collector, Central Exercise and Land v. Qazi Zia Ud Din PLD 1962 SC 440 rel.

(b) Administration of justice---

----Orders based on no evidence are nullity in the eyes of law.

Muhammad Adnan Moton for Appellant.

Ghulam Muhammad Shar, Superintendent present for Respondents.

2023 P T D (Trib.) 698

[Customs Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs RANA ENTERPRISES

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION-I) CUSTOMS HOUSE, KARACHI and another

Customs Appeal No.K-1238 of 2017, decided on 15th April, 2022.

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

----S.32---Mis-declaration---Absence of mens rea---Scope---Appellant declared the disputed goods to be Glass Parts for Chandelier but on physical examination the same were found in complete sets, hence, there was a difference in chargeable duty and taxes which resulted in an order for confiscation of goods---Validity---No element of mens rea and collusion was brought on surface nor mentioned in the show-cause notice---Adjudicating officer had passed the impugned order with least application of judicious mind as the pitch of fine and penalty imposed did not correspond with the gravity of the offence---Impugned order was modified to the extent that the appellant was only liable to pay all adjudged amount of additional duty and taxes---Impugned order was modified accordingly.

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

----S.32---Mis-declaration---Absence of mens rea---Scope---Element of mens area is to be seen when a criminal liability is required to be established against a person and not in the cases of assessment whether even duty/taxes has been detected.

Messrs Liver Brothers of Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal and others 2005 PTD 2462 ref.

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

----S.2(s)---Smuggling---Scope---Mala fide and mens rea are necessary ingredients for committing any offence, including that of smuggling.

Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi SBLR, 2002 Tribunal 57 and Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133 ref.

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

----S.32---Mis-declaration---Absence of mens rea---Scope---Two questions are required to be addressed before invoking S. 32 of the Customs Act, 1969, for mis-declaration (i) whether mens rea which is essential element for the purpose of subsection (i) of S.32 has been proved and (ii) whether a demand for short recovery can be made under the provisions of subsection (2) of S.32---If element of mens rea is not visible and guilty intention is not proved then provisions of S.32 cannot be invoked.

Union Sport Playing Cars Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs Export 2004 PTD 2977; Ibrahim Textile Mills Limited v. F.O.P PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630; State Cement Corporation v. G.O.P. C.A. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 ref.

Ghulam Ullah Shaikh for Appellant.

Amir Shuja, A.O., for Respondents.

2023 P T D (Trib.) 778

[Custom Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs MUSHTAQ HUSSAIN

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), QUETTA AT HYDERABAD and 2 others

Customs Appeal No.H-52 of 2022, decided on 30th June, 2022.

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

----Ss.2(s), 16 & 177---Smuggling---Restriction on possession of goods in certain areas---Scope---Appellant assailed order-in-original passed by Collector of Customs (Adjudication) whereby his vehicle was confiscated for being smuggled---Contention of appellant was that he was a subsequent purchaser of vehicle from open market after verification of its legality---Validity---There was no indication that the appellant was involved in the act of smuggling---Nothing was available on record to show collusion between the appellant and the owner of smuggled goods---Vehicle was not intercepted in an area notified under S. 177 of the Customs Act, 1969---Vehicle in question was purchased by the appellant after due verification set forth under S. 25 of the Provincial Motor Vehicles Ordinance, 1965---Subject vehicle was more than 15 years old and the import record could not be obtained after lapse of period of more than 10 years---Department was directed to release the vehicle unconditionally to the appellant---Appeal was allowed.

Collector of Customs Preventive Karachi v. Ghulam Muhammad 2008 PTD 525 and The Additional Director, Directorate General of Intelligence and Investigation-FBR, Regional Office, Karachi and others v. Imran and another 2021 PTD 1683 ref.

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

----Ss. 157 & 180---Extent of confiscation---Scope---Phrase "shall also be liable to confiscation" used in S. 157(2) of Customs Act, 1969, does not mean liable to confiscation automatically---Discretion given to the authority to confiscate the goods or vehicle must be exercised on sound judicial principles---If the words "liable to confiscation" give a discretion to the confiscating authority to deprive a person of his property, then this discretion must be exercised upon the principles of natural justice; that is to say, the person sought to be deprived of the property must be given notice to show cause and he must be provided adequate opportunity of putting forward his point of view and the same must receive due consideration.

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

----S.17---Detention, seizure and confiscation of goods imported in violation of S.15 or S.16---Scope---No person should be deprived of his property by way of penalty unless it is clear that he is in some measure responsible for assisting or furthering the commission of the offence committed and no innocent person should be unjustly punished or deprived of his property.

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

----Ss.2(s) & 16---Smuggling---Scope---Smuggling means bringing into or taking out of Pakistan in breach of any prohibition or restriction or evading payment of customs duties and taxes.

(e) Administration of justice---

----Equity is the soul of the law in dispensation of justice.

(f) Administration of justice---

----Proper place of procedure in any system of administration of justice is to help and not to thwart rights of the people.

Imtiaz v. Ghulam Ali PLD 1963 SC 382 ref.

Muhammad Adnan Moton for Appellant.

Rana Shahbaz, Inspector for Respondents.

2023 P T D (Trib.) 793

[Custom Appellate Tribunal]

Before Shakil Ahmed Abbasi, Member Judicial-III

Messra GOOD LUCK TRADERS through Proprietor

Versus

The COLLECTOR OF CUSTOMS (APPEALS) and 3 others

Customs Appeal No.K-8051 of 2021, decided on 1st March, 2023.

Customs Act (IV of 1969 )---

----Ss. 32(1), 32(2), 25, 79, 209 & 156(1), Cls. 1, 14 & 45---SRO No.499(I)/2009 dated 13-06-2009---Mis-declaration---Examination---Redemption fine and penalty, imposition of---Discriminatory treatment---Scope---Appellant/importer declared imported goods as "old & used computers"---Contention of the appellant/importer was that the redemption fine and penalty had been imposed only on the apprehension that the importer had deliberately committed mis-declaration of contents of the consignments in order to avoid payment of due amount of leviable duty and taxes---Held, that that there was absolutely no likelihood of escape of leviable duty and taxes on imported consignments of used computers as the same were invariably marked for 100 percent examination---Examination report of such consignments reflected the composition of imported goods accurately, thus making it almost impossible to evade leviable duties and taxes on such imports unless there was some oversight by the Examination Staff of the Collectorate---Such consignments , however, consisted of mixed lot purchased from abroad and it was not possible for the importers to make correct declaration of all the contents of such consignments at the time of declaration before the Department---Any mistake in the declaration was, therefore, not intentional on the part of importers of such goods by any means---Record revealed that previously the Department had released identical goods of other importers, thus discriminatory treatment with the appellant / importer was unfair---Imposition of fine and penalty, in the present case, was too harsh and thus was not applicable as no element of Mens Rea was established against the appellant/importer---Fine and penalty imposed was cancelled/waived---Order-in-Original and Order-in Appeal were set aside---Appeal was allowed, under circumstances.

Mian Muhammad Saleem for Appellant.

Nemo for Respondents.

2023 P T D (Trib.) 834

[Custom Appellate Tribunal]

Before Shakil Ahmed Abbasi, Member Judicial-III

The DIRECTOR through Deputy Director (Law) Directorate General of Intelligence and Investigation-Customs, Karachi

Versus

Messrs JUTT LIGHTS and 2 others

Customs Appeal No.K-102 of 2020, decided on 15th March, 2023.

Customs Act (IV of 1969)---

----Ss.32(1), 25, 79, 181 & 156(1), Cls. 14 & 45---SRO No.486(I)/2007, dated 11-12-2008---SRO No.499(I)/2009 dated 13-06-2009---Mis-declaration---Description and quantity of imported goods---Seizure of consignment at port area---Re-examination---Reporting agency, powers of---Importer declared goods as Miscellaneous electronics items including LED lights/ fittings and fixture, bulbs and parts thereof, chandeliers, galvanized iron and steel screws, CTCP printing plates---Respondent/ importer contended that even one of the items i.e. CTCP Printing Plates was liable to be assessed in square meter but the Department had assessed the same in Kg. (Kilogram)---Held, that the entire exercise of re-examination and assessment conducted by the Reporting agency was not only illegal and without jurisdiction but it was faulty also---In relevant PCT heading the HS Code No. 3701.3020 of the CTCP printing plates was Square meter , thus the claim of the Appellant/Department was baseless that the same was liable to be assessed in Kilograms---Under SRO 486(I)/2007 read with letter dated 11-12-2018, Seizing Agency could only re-examine the consignment with prior approval of the Chief Collector of the Customs---No glaring discrepancy in description of imported items was found, thus no Mens Rea on the part of the respondent/importer could be established---Record revealed that the respondent/importer had already paid the fine and penalty as adjudged vide impugned Order-in-Original passed by the Adjudicating Authority, thus the matter could not be dragged further---No interference in impugned order passed by the Adjudicating Authority was made out---Appeal was dismissed, in circumstances.

Saadat Khan's case 2014 PTD 1615; C.P. No.869 of 2020 and C.P. No.897 of 2020 ref.

None present for Appellant.

Ghulamullah Shaikh and Akshy Kumar for Respondent No.1.

2023 P T D (Trib.) 850

[Custom Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs JADOON TRADING COMPANY

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION-II) and another

Customs Appeal No.K-7119 of 2021, decided on 25th October, 2021.

Customs Act (IV of 1969)---

----Ss.32 & 16---Mis-declaration---Power to prohibit or restrict importation and exportation of goods---Scope---Appellant imported residue solvent---Department found the material to be petrol, high speed diesel and fuel oil---Since the fuel oils were importable only by approved oil marketing companies according to Serial No. 02, Part II of Appendix B to Import Policy Order, 2020, therefore, the goods were confiscated---Validity---No proper test was ever conducted to ascertain the exact nature of the impugned goods---Laboratory report was not sought to ascertain the description or nature of the impugned sample rather a reference was sent to the laboratory to ascertain whether the sample was petrol, diesel or fuel oil---Irresponsible handling of the matter resulted into a very unspecific report which neither pointed out the percentage of Aliphatic or Aromatic Hydrocarbons in the sample nor the specific grade/number of fuel---Order-in-original was passed without ascertaining the facts thoroughly, as such, the same was set aside---Appeal was disposed of accordingly.

PLD 2008 SC 663 and Yousaf Ali v. Muhammad Aslam Zia PLD 1958 SC 104 rel.

Afzal Bhatti for Appellant.

Zikarur Rehman, AO for Respondents.

2023 P T D (Trib.) 876

[Customs Appellate Tribunal (Karachi Bench-III)]

Before Shakil Ahmed Abbasi, Member Judicial-III

Messrs FAISAL TRADING CO.

Versus

The COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.K-1418 of 2016, decided on 31st January, 2023.

Customs Act (IV of 1969)---

----Ss.25, 25-A, 79, 80 & 81---Customs Rules, 2001, Rr. 107(a), 109 & 438---Qanun-e-Shahadat (10 of 1984), Art.85---Customs value of imported goods---Determination---Mis-declaration---Provisional assessment---Transactional value of imported goods---Burden of proof---Scope---Held, that the appellant/importer had discharged his onus with regard to the declared transactional value of imported goods by providing a valid invoice and other allied documents and it was the duty of the respondent/Department to disprove the same with cogent reasons---Respondent/Department had failed to bring on record any evidence for rejecting and refusing the declared value of the impugned goods; and instead, had only relied upon import data of identical goods imported by other importers in the past---In order to negate the declared value of the consignment, the Department was under obligation to procure evidence to discard the value declared by the appellant---Appellant could not be held guilty and transactional value of the impugned consignment declared by the appellant was valid, which shall be accepted in accordance with the provisions under S.25(1) of the Customs Act, 1969, for the subsequent assessment of the consignment accordingly---Impugned assessment order and Order-in-Appeal were set aside---Appeal was allowed, under circumstances.

Collector of Customs, Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad 2008 SCMR 438; 2005 PTD 909; 2007 PTD 1858; 2008 SCMR 438 and 2019 SCMR 1126 ref.

Sardar Muhammad Ishauqe and Waqar Ahmed for Appellant.

Adnan Younus, AO for Respondents.

2023 P T D (Trib.) 899

[Customs Appellate Tribunal (Karachi Bench-III)]

Before Shakil Ahmed Abbasi, Judicial Member-III

Messrs SHAMIM TIN MERCHANT through Proprietor

Versus

The COLLETOR OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No.K-1581 of 2022 and K-1582 of 2022, decided on 29th March, 2023.

Customs Act (IV of 1969)---

----Ss.32, 25, 79, 80 & First Schedule---General Rules for Interpretation of First Schedule to the Customs Act, 1969, R.3(a)---Customs General Order No. 12 of 2002, dated 15-6-2002---Imported goods, classification of---Assessment---Classification Committee, powers of---Dispute pertaining to classification of Tin Mill Black Plate of thickness 0.30 mm or less ('TMBP')---Whether as per version of appellant/importer TMBP was classifiable under PCT heading 7209.1891 or as per version of respondent/Department, the same was classifiable under PCT heading 7209.1810---Held, that the First Schedule to the Customs Act, 1969, (Pakistan Customs Tariff and Trade Controls) prescribed that the heading under PCT heading 7209.1891 was a specific heading for TMBP, whereas the heading relied upon by the respondent/Department pertained to some other kind of goods---Examination report as well as physical description of the impugned goods by the appropriate officer had confirmed that TMBP fell under its specified PCT heading 7209.1891 read with R.3(a) of General Rules for Interpretation of First Schedule to the Customs Act, 1969---Committee, in the present case, was formed without any reference by an aggrieved person---Formation of Committee was not even publicly communicated through any Public Notice as mandated under CGO No. 12/2002---Record also revealed that the dispute of classification of the TMBP was already settled by the Customs Appellate Tribunal previously, thus the decision of the Classification Committee, in the present case, was to disregard, disrespect and sabotage the judgment of Appellate Tribunal --- Impugned Decision was not sustainable under the law and could not be made basis to assess the consignment of the appellant-- Final assessment and Order-in Appeal were set-aside---Appeal was allowed, under circumstances.

Imran Iqbal for Appellants.

Alvis, AO for Respondents.

2023 P T D (Trib.) 928

[Customs Appellate Tribunal (Karachi Bench-III)]

Before Shakil Ahmed Abbasi, Member Judicial-III

The DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-CUSTOMS, KARACHI

Versus

MAYA CORPORATION and another

Customs Appeal No.K-385 of 2020, decided on 31st January, 2023.

Customs Act (IV of 1969)---

----Ss. 32(1), 32(2), 32(5), 79 &156(1), clauses 1, 10 & 14---Sales Tax Act (VII of 1990), Ss. 3, 6, 7, 33 & 34---SRO 1125(I)/2011 dated

31-12-2011---Mis-declaration---Evasion of tax , allegation of---Payment of sales tax on import, exemption from---PCT heading, classification of---Scope---Rule of consistency---Importer/respondent availed the exemption on payment on sales tax on import of Styrene Butadiene Rubber (SBR) Grade 1502 under SRO 1125(I)/2011 dated 31-12-2011---Appellant/Department assailed order-in-original passed in favour of importer/respondent contending that the said exemption was available on SBR in latex form only whereas normally the same (SBR) was being imported in form of lumps/solid blocks etc. having no usage in export-oriented sector---Held, that SBR in latex form was not classifiable under PCT 4002.1900, instead the same was specifically classified under PCT 4002.1100---SRO 1125(I)/2011 dated 31-12-2011 specifically granted exemption from payment of sales tax under PCT 4002.1900---Exemption enjoyed by the importer/respondent on import of SBR Grade 1502 was rightly claimed and extended by the Clearance Collectorate---Record also revealed that several consignments of many other importers had already been released extending the benefit of exemption from payment of sales tax under SRO 1125(I)/2011 dated 31-12-2011, thus rule of consistency was to be applied in the present case also---Order-in-original passed by the Adjudicating Authority in favor importer/respondent was upheld---Appeal was dismissed, in circumstances.

Aijaz Khan, IO present for the Appellant.

Siddiq Zia and Mohammad Aslam for Respondents.

2023 P T D (Trib.) 942

[Customs Appellate Tribunal (Karachi Bench-I)]

Before Abdul Jabbar Qureshi, Member Judicial-I

Messrs SOHAIL AZHAR

Versus

ADDITIONAL COLLECTOR OF CUSTOMS MCC OF PaCCS CUSTOM HOUSE, KARACHI and another

Customs Appeal No.K-7591 of 2021, decided on 30th November, 2021.

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

----S. 179---Power of adjudication---Issuance of order-in-original---Limitation---Scope---Where Adjudication Officer had passed the order-in-original after 3 years, 2 months and 24 days instead of 120 days as specified in S. 179(3) of the Customs Act, 1969, Customs Appellate Tribunal held that the time lines prescribed in S. 179(3) of the Customs Act, 1969, were mandatory and not directory---Order-in-original was set aside without touching merits of the case---Appeal was accepted.

Collector of Customs v. Israr and others 2021 PTD 501 and Collector Gujranwala v. M/s. Super Asia 2017 SCMR 1427 = 2017 PTD 1756 rel.

(b) Words and phrases---

----Remand---Meaning.

Meaning of word 'remand' is to send back a case to the same Court out of which it came for purpose of having some action on it there.

Nazzaz Ali v. Member Judicial 1993 MLD 1333 rel.

Afzal Bhatti for Appellant.

Zeeshan, I.O. for Respondent No.IV.

Zikir ur Rehman, A.O. for Respondent No.1.

2023 P T D (Trib.) 1758

[Customs Appellate Tribunal]

Before Abdul Jabbar Qureshi, Member Judicial-I and Abdul Basit Chaudhary, Member Technical-I

Messrs GHULAM MURTAZA and others

Versus

The COLLECTOR OF CUSTOMS (ADJUDICATION), CAMPT AT CUSTOM HOUSE, HYDERABAD and another

Customs Appeals Nos.H-7896 and H-7897 of 2021, decided on 20th April, 2022.

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

----Ss. 179(3), 2(s), 15, 16, 156(1), Cls. (8) & (89) & 194-A---Smuggling foreign origin goods loaded on trailer/container, allegation of---Adjudication---Time-limit to decide the case---Extension---Scope---Contention of the importer/appellant was that the order-in-original passed by the adjudicating authority was issued in violation of mandatory provision of time limit contained in S. 179(3) of the Customs Act, 1969---Validity---Impugned order passed the adjudicating authority mentioned that the extension in completion of adjudication proceedings had been duly given by the competent authority, which clearly explained that the contention of the appellant/importer, regarding time-barred issuance of order-in-original, was not of any legal significance, hence had no bearing on proceedings of the present appeal as the time period was extended by the competent authority---Appeal filed by the importer was dismissed , in circumstances.

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

----Ss.187, 2(s), 15, 16, 156(1), Cls. (8) & (89), 157(2), 168 & 194-A---Customs Rules, 2001, R. 126---Smuggling of foreign origin goods loaded on trailer/ container, allegation of---Burden of proof as to having possession of goods with lawful authority or under prescribed documents---Scope---Question was whether the documents (i.e. Goods declaration and purchase invoices) submitted by the Appellant/importer could be considered authentic in wake of his failure to provide transport note and corresponding Sales Tax Invoices prescribed under R.126 of Customs Rules, 2001---Validity---The GDs furnished by the appellant alone could not discharge the burden of proof under S. 187 of the Customs Act, 1969 from the appellant as the relevant GDs had to be correlated with transport note and Sales Tax Invoices or Sales Tax Return of the importer verifying that impugned goods imported vide said GDs were supplied to local buyer registered or unregistered under the Sales Tax regime---While the importer reflects the imports vide Annex "B" of the Sales Tax Return as well as local supplies vide Annex "C" thereof ---Whereas said supplies were also reflected in the buyers Sales Tax Return vide Annex "A" thereof---Appellant failed to provide the Sales Tax record to confirm that imported goods were supplied to certain buyers, hence he failed to discharge his burden of proof under S.187 of the Customs Act, 1969 and under R. 126 of the Customs Rules, 2001, therefore, the case of the respondents / Department stood proved---Appeal filed by the importer was dismissed, in circumstances.

Azhar Abbas for Appellants.

Irfan Ghani, I.O, for Respondents.

2023 P T D (Trib.) 1810

[Customs Appellate Tribunal (Karachi Bench-I)]

Before Abdul Jabbar Qureshi, Member Judicial-I and Muhammad Iqbal Bhawana, Member Technical-III

Messrs MONDELEZ PAKISTAN LIMITED

Versus

The DIRECTOR, DIRECTORATE GENERAL OF CUSTOMS (VALUATION), CUSTOM HOUSE, KARACHI

Customs Appeal No.K-722 of 2017, decided on 22nd March, 2022.

Customs Act (IV of 1969)---

----Ss. 25 & 25-D---Customs Rules, 2001, R. 121---Value of imported and exported goods---Revision of the value determined---Fall back method---Scope---Case revolved around the rejection of the appellant's petition under S.25D through an order-in-revision by the respondent---Validity---Appellant had submitted relevant correspondence with the exporter, bank statements indicating the payment of the transaction amount to the exporter, sales register, sales tax invoices, and other supportive documents to the respondent---However, the respondent had failed to mention these facts in the order-in-revision---Furthermore, the respondent had not addressed the genuine and just grievances of the appellant---On the contrary, respondent had treated the appellant perfunctorily---Order passed by the respondent had not met the criteria of being a speaking or judicious order and thus failed the test of judicial scrutiny---Respondent had also failed to specify which customs method, as described under Ss. 25(5), 25(6), 25(7), or 25(8), was used while issuing the impugned valuation ruling and in what "flexible manner"---Resorting to the subsequent method without exhausting the sequence indicated in S. 25 was impermissible, except for certain exceptional cases where massive group under-invoicing was suspected---Such suspicion was not visible in this case---Respondent was directed to issue a new valuation ruling based on the facts and values pertinent to the relevant period and in accordance with the relevant provisions of the law---Order-in-revision was set aside.

Sadia Jabbar v. Federation of Pakistan 2018 PTD 1746 rel.

Rehan Omer v. Collector of Customs Karachi 2006 PTD 909; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Najam Impex Lhr v. Assistant Collector of Customs, Karachi and others 2008 PTD 1250; Faco Trading Company v. Members Custom, Federal Board of Revenue and others 2013 PTD 825 and Goodwill Traders, Karachi v. Federation of Pakistan 2014 PTD 176 ref.

Muhammad Shahrukh Farogh Naseem for Appellant.

Naeem Butt for Respondents.

2023 P T D (Trib.) 1836

[Customs Appellate Tribunal (Karachi Bench-I)]

Before Abdul Jabbar Qureshi, Judicial-I and Abdul Basit Chaudhry, Member Technical-I

COLLECTOR OF CUSTOMS, MCC-PORT MUHAMMAD BIN QASIM, KARACHI

Versus

Messrs LUCKY COMMODITIES (PVT.) LTD., KARACHI and another

Customs Appeal No.K-7557 of 2021, decided on 16th February, 2023.

Customs Act (IV of 1969)---

----S. 82---Procedure in case goods are not removed from the port---Un-claimed goods---Scope---Bituminous coal was imported in bulk by fourteen different importers---Manisfested and imported quantity was 59,629 MT---After delivery of manifested and imported quantity to all fourteen importers (as declared by each of them), there remained balance quantity of 1100.63 MT at the port---Further delivery of the balance Bulk Cargo was stopped---Respondent (who had originally declared and got cleared 3600 MT) claimed ownership of the goods and filed an application for their release on payment of duty and taxes---Show cause notice was issued to the respondent and duty/taxes to the extent of balance quantity were required from the respondent---Respondent deposited the duty and taxes as claimed by the department and the balance quantity was allowed to be released vide impugned order---Contention of department was that since the excess weight was more than thirty (30) percent of the respondent's original declaration, therefore, redemption fine was required to be levied on the respondent---Contention of respondent was that the excess quantity was less than five (05) percent of the total manisfested weight of the cargo, therefore, no redemption fine was leviable under the law---Validity---Respondent could not produce any import documents to prove its ownership---Respondent's request for release of the excess quantity, other than the one manifested against its name, could not have been allowed merely on payment of duties/taxes---Such goods had become government property and were liable to be auctioned through open bid---Questions whether it was a case of mis-declaration or redemption fine was leviable could only be determined if the goods in question belonged to the respondent---Appellate Tribunal set aside the allowing of 1100 MT of coal to the respondent being illegal, void ab initio and detrimental to the interest of the state---Chief Collector was directed to probe into the matter---Appeal was disposed of accordingly.

Arsalan, Assistant Collector along with Siddique Ullah for Appellant.

Iftikhar Hussain along with Muzamil Hussain for Respondents.

2023 P T D (Trib.) 1594

[Federal Tax Ombudsman]

Before Dr. Asif Mahmood Jah, Federal Tax Ombudsman

MUHAMMAD KHALID

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1408/KHI/ST of 2022, dated 13th April, 2022,\ decided on 31st May, 2022.

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

----Ss. 2(3), 9 & 10---Sales Tax Act (VII of 1990), Ss. 11, 45-B & 73---Sales Tax Refund Rules, 2002, Rr. 7 & 37---Maladministration---Scope---Refund of tax to commercial exporter on zero rated supplies---Authorities proceeded against the importer alleging him of using fake/flying invoices while taxpayer/ importer trying to satisfy the authorities---Complaint was filed by the importer against the Authorities for issuing show-cause notice to him (claimant / importer) in present matter which remained unresolved for about two decades with series/rounds of litigations, even in presence of order in his favour having been duly passed by the Commissioner (Appeal) and the Department neither filed second appeal nor sanctioned him the refund amount---Held, that matter-in-hand was a classic example of neglect, inattention, delay incompetence, inefficiency and ineptitude that constituted maladministration in terms of S. 2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Case of the complainant, prima facie, had been mishandled badly by the department due to, inter alia, rapid changes in the jurisdiction and transfer/posting of the officers from one place to another---Situation of the present matter had reached a stage where the Department would have no choice other than to give effect to the order of the Commissioner Appeals as the same (order) had attained finality and their (Department's) representation before the President against the previous order passed by this Forum(Federal Tax Ombudsman )had also been rejected ---Issuing Show-Cause Notice again to the claimant / importer relating to 19 years old matter and rejecting the claim on allegation of fake / flying invoices without having incriminating evidence / documents would be a blatant violation of the law and the orders having been passed---During 19 years, no serious and professional effort was made on record to show that the matter-in-hand was paid any prudent heed by the Department---Federal Tax Ombudsman passed certain recommendations directing FBR to give effect to the order passed by the Commissioner Appeals in favour of the complainant; and also to treat matter-in-hand as "case study" for academic, research and training purposes at the FBR---Complaint was disposed of accordingly.

Manzoor Hussain Memon, Advisor for Dealing Officer.

Mrs. Sarwat Tahira Habib Sr. Advisor for Appraising Officer.

Obayedullah Mirza, AR for Authorized Representative.

Humyaun Farooq, Senior Auditor, CTO, Karachi for Departmental Representative.

FINDING/RECOMMENDATIONS

DR. ASIF MAHMOOD JAH, FEDERAL TAX OMBUDSMAN.----The above mentioned complaint was filed against the Chief Commissioner-IR, CTO, Karachi in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), for not refunding the amount of tax claimed in the year 2003.

1. Precisely, Mr. Muhammad Khalid owner of M/s J.F.K International, Karachi is a commercial exporter of textile goods and was duly registered with the Sales Tax Deptt on 20.09.2002 bearing STRN 12-03-9999-413-28. During the course of business activity, he received orders from his buyers for export of blended bed sheets and polyester garments valuing USD 599,705/-. On receipt of orders, he placed the same on the local suppliers namely M/s Woven Point, Karachi, M/s Pearl Tex International, Karachi and M/s Weaving Knot, Karachi duly registered with respective Collectorates of Sales Tax of their jurisdictions. After getting the goods manufactured as per specifications, he got delivery of the goods from the supplier, shipped them to the buyer who after receipt of goods, transferred the amount of payment through banking channel. In monthly sales tax returns filed for the month of July, 2003, he showed export sales (zero rated supplies) of Rs.33,516,659/- and taxable purchases of Rs.37,615,695/- on which input tax of Rs.4,906,395/- was paid, the refund of which was required to be filed within one month in terms of Rule 9 notified vide SRO No.575(I)/2002 dated 31.08.2022 and the Deptt. was required to sanction it within one month after submission of supportive documents in terms of Rule 7 of Sales Tax Refund Rules, 2002.

2. After a lapse of about one year from the date of submission of supportive documents, they received a letter dated 12.08.2004 from the Deputy Collector (II &P), Sales Tax House, Karachi stating therein that the enquiry was being conducted against some exporters/wholesalers on account of claiming refund against fake/flying invoices. It was further stated that he had claimed refund on the fake invoices issued by Mr. Abu Bakar to M/s Woven Point, Karachi (one of his supplier) and he was asked to surrender the refund amount already obtained. On receipt of the letter, they immediately responded vide letter dated 24.08.2004 intimating the Deptt that they were not familiar with the name of Mr. Abu Bakar and they had not entered into any contract for purchase of goods through him, rather they had purchased the same from the registered persons after verifying their profile on the FBR's portal; which was found satisfactory; as the suppliers were filing returns regularly and on time. Their Taxpayer Profile was also active and not suspended or blacklisted. They had also made payment against banking channel in terms of Section 73 of the Sales Tax Act, 1990. In case, the supplier had done anything contrary to the provisions of the Act, the action should be taken against him and not to the exporter. To satisfy the Deptt, he submitted all the record to them; which was audited by Mr. Shakeel Ahmed and Mr. Abdul Jabbar, Auditors and found it satisfactory. Subsequent to the completion of audit, he submitted a letter dated 16.06.2005 to the Assistant Collector (Audit) Sales Tax House, Karachi intimating him that the audit was completed and since nothing illegal was found on audit, therefore, the amount claimed by him as refund may be sanctioned.

3. Since despite various visits to the officers and issuing letters, the claim was not being sanctioned, he filed complaint with the FTO office; which was registered with No. 68/KHI/ST(15)/391/2010 The FTO issued its findings vide order dated 08.07.2010 wherein the following recommendations were made:

"4. For the past 7 years, the department has not been able to finally determine the exact modus operandi of the suppliers and of the Complainant. No concrete evidence has been produced to show that either it was a case of fake and flying invoices or that the export had not taken place. If such evidence is in the possession of the Department, the Complainant is yet to be confronted with it. On 20.05.2010, a communication to the Complainant was sent that his refund could not be accepted. However, this was done without affording him opportunity of being heard.

5. Maladministration is established on account of inattention and delay in giving response and not passing a speaking order.

1. and it was recommended to the respondent subordinates and its subordinate to:

"ensure proper examination of record, including report of investigation audit, and process the claim on merit, after affording opportunity of being heard to the complainant"

1. It was further averred that instead of relying on the audit already conducted, they again started reinvestigating the case and called the documents. He again complied with the requirement and submitted the documents; but instead of processing, the refund claim, Deputy Commissioners-IR issued show cause notice dated 14.10.2010 on the allegation that the claim of refund is based on fake/flying invoices issued by the persons whose sales tax registrations were either suspended or blacklisted. They submitted application in the office of the Adjudicating Officer with the request to provide them incriminating documents in support of the allegations levelled in the show-cause notice so that reply be prepared accordingly. It was also requested to adjourn the case till the return of their consultant from Saudi Arabia who had gone to perform Umrah. Despite their request for adjournment, the Deputy Commissioner decided the case ex parte and passed Order-in-Original No.1/2010 rejecting the claim under the provision of Section 11(2) of the Sales Tax Act, 1990 read with Rule 37 of Sales Tax Rules, 2006 while holding the charges in the show cause notice as correct.

2. Since the Order-in-Original (ONO) No.1/2010 was contrary to the findings/decision of the FTO's office, they submitted application with FTO's office for initiating defiance proceedings against IR Officer. Since no defiance proceedings were initiated and the case was getting time barred, therefore, they filed appeal against the ONO before the Commissioner-IR (Appeals-II), Karachi. The Commissioner (Appeals) after hearing the case annulled the impugned order being without lawful authority and not sustainable in the eyes of law on account of failure of the officer to ensure service of the show-cause notice and hearing notice. Besides the show-cause notice was time barred in terms of subsection (4) of Section 11 of the Sales Tax Act, 1990; as the prescribed limit of time of five years had already passed to the case. The Deptt neither filed second appeal before the income tax appellate tribunal against the order passed by the Commissioner-IR (Appeals), Karachi nor sanctioned them the refund amount, hence, again filed another complaint No.131/KHI/ST(61)/360/2012; which was disposed of vide Findings/Recommendations as below:

"12. FBR to-

i) direct the Chief Commissioner to allow effect to appellate order dated 04.11.2011 and issue refund/compensation due as per law without prejudice to the outcome of any appeal(s) that the department might file in the instant case;

ii) direct the field formations to ensure veracity of facts while submitting parawise comments before the Hon'ble FTO; and

iii) report compliance within 30 days."

1. The Deptt., however, preferred representation before the Hon'ble President of Pakistan against the Findings which was also rejected by passing the following order on 23.08.2013:

"Accordingly, the President has been pleased to reject representation of agency compliance now to be reported to FTO Secretariat within 30 days with the receipt of the copy of this order."

1. In pursuance of the President's order, they approached the FTO's office for implementation of its recommendations. After issuance of two reminders to the Deptt for compliance, a show-cause notice was issued by the Regional Office Karachi on 12.03.2014 to the Deptt and thereafter the Defiance Notice on 04.04.2014 with the direction to furnish compliance report. In response thereto, the Deptt averred that the STRN of the Complainant was also blacklisted, and for its restoration, he has to apply for the same. The matter remained pending for more than three years. Thereafter, the Hon'ble FTO vide order dated 11.12.2017 directed the Deptt to restore the Complainant's STRN for issuing refund along with compensation. Finally, the Commissioner-IR, RTO-I restored his STRN in October, 2021, however, the issue of refund remained pending with the deptt and they did not given appeal effect to the order passed by the Commissioner-IR (Appeals), Karachi. Hence, the instant complaint with prayer to direct the Deptt to immediately refund him the claimed amount of Rs.4,906,395/- along with markup in terms of Section 67 of the Sales Tax Act, 1990.

2. The complaint was referred to the Secretary, Revenue Division for comments in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the Chief Commissioner-IR, CTO, Karachi vide letter dated 25.04.2022 forwarded the comments of the Commissioner-IR, Enforcement-I, CTO, Karachi, who had not made any comment on facts of the case and simply stated that in order to give appeal effect to the Order-in-Appeal No.7 of 2011, the concerned DCIR has issued a letter to the Complainant on 22.04.2022 for production of supporting documents against refund claim; which are necessarily required for determination of admissibility of refund claim.

3. Hearing was held on 09.05.2022. AR agitated on demand of the documents on the ground that he had provided the same to them at each stage i.e. Commissioner-IR (Appeals), FTO and Hon'ble President's office on filing of representation by the Deptt., asking the same again is nothing but to linger on the issue. DR averred that the case was previously dealt with by RTO-I, Karachi and shifted to CTO by the end of year 2021. He requested the AR to provide a copy of documents; which were submitted by him earlier with RTO-I so that their refund claims can be processed to give effect to the Order-in-Appeal No.7 of 2011 dated 04.11.2011. AR assured that he would provide the same to DR before next date of hearing.

4. During hearing held on 14.05.2022, DR confirmed that the AR had submitted the requisite documents to them for processing the case to give effect to the order of Commissioner-IR (Appeals) in terms of Section 11(B) of the Sales Tax Act, 1990. He, however, added that the O-in-O was annulled by the Commissioner-IR (Appeals-II), Karachi without going into the facts of the case and simply on the grounds that the show-cause notice was not served to the Complainant. He also pointed out that the claim pertains to the year 2003, when there was no computerization of sales tax refund claims and they were processed on the basis of hard copies of sales tax invoices; which had resulted in illegal sanctioning of refund claims based on fake and flying invoices; as there was no computerized cross verification system of invoices. Therefore, verification of invoices issued by the suppliers in this case is impossible. Nevertheless, the claim would be processed and in case the amount is not found admissible, the claim would be rejected by passing speaking order after issuing show-cause notice and providing hearing opportunity to the claimant. AR averred that the Deptt never at any stage had provided them incriminating evidences/documents in support of their allegation that the claim was based on fake/flying invoices issued by his suppliers. Issuing of show cause notice at this belated stage would be badly time barred in terms of Section 11 of the Sales Tax Act, 1990. Secondly, the Order-in-Appeal passed by the Commissioner-IR (Appeals) has attained finality; as no second appeal against the Order-in-Appeal was filed by the Deptt with the Income Tax Appellate Tribunal. Thirdly, their representation filed with Hon'ble President of Pakistan against the Findings of this forum has also been rejected, wherein the Deptt was directed to give effect to the order of the Commissioner-IR (Appeals).

5. Averments of both sides heard and the record examined. The subject case is a classic example of neglect, inattention, delay, incompetence, inefficiency and ineptitude that constitutes maladministration in terms of Section 2(3)(ii) of the FTO Ordinance, 2000. Prima facie, the case has been mishandled badly by the Deptt due to, inter alia, rapid changes in the jurisdiction and transfer/postings of the officers from one place to another. Now situation has reached where the Deptt has no choice other than to give effect to the Commissioner-IR (Appeals') order; as it has attained finality and their representation has also been rejected by the President of Pakistan. Issuing show-cause notice again in the case relating to 19 years old and rejecting the claim on allegation of fake/flying invoices without having incriminating evidence/documents would be a blatant violation of the law and the orders passed. It is lamenting to note that during 19 years unfortunate trail, no serious and professional effort is on the record to show that the matter in hand was paid any prudent heed by the department.

RECOMMENDATIONS:

2023 P T D (Trib.) 1614

[Federal Tax Ombudsman]

Before Dr. Asif Mahmood Jah, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD: In the matter of

0009/OM/2022, dated 16th March, 2022\, decided on 17th May, 2022.

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

----Ss. 2(3)(i)(a)(b) & 2(3)(ii), 9 & 10---Pending cases of taxpayers, non-assigning of---Maladministration---Scope---Federal Tax Ombudsman took Own Motion against FBR Authorities to provide relief to the taxpayers because more than 65000 cases were unassigned, lying in CTO portal, in wake of split of one RTO into three RTOs---Validity---Though a large number of cases were revealed to be dead ones, however, as many as 18591 cases belonged to live / active tax-payers whose jurisdiction was yet to be ascertained---Unusually large number of cases were lying without assigning proper jurisdiction, causing not only grievance to taxpayers but also suffered from enforcement inaction, if any, by the Department---Apathy, inattention, ineptitude in discharge of duties tantamount to maladministration under S.2(3)(i)(a)(b) & (ii) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman passed directions to the FBR to ensure developing an effective IT process so as to ensure timely assignment of newly registered cases to their proper jurisdiction; and also to the 18591 cases awaiting proper jurisdiction---Own Motion was disposed of accordingly.

Ms. Seema Shakil, Advisor Dealing Officer.

Muhammad Tanvir Akhtar, Advisor Appraisal.

2023 P T D (Trib.) 96

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Dr. Muhammad Naeem, Accountant Member

The COMMISSIONER INLAND REVENUE, ZONE-X, RTO-III, LAHORE

Versus

MUHAMMAD IQBAL, PROP. BRIGHT STAR ENGINEERING WORKS, LAHORE

I.T.A. No.2280/LB of 2013, decided on 13th April, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170, 122 & 111---Refund---Amendment of assessment---Unexplained income or assets---Scope---Assessing authority while observing difference between the purchases declared in the income tax return and the sales tax returns turned down the refund request of taxpayer---Appeal filed by taxpayer before the Commissioner (Appeals) was accepted---Validity---Order was passed by the Assessing Authority on a day which was a public holiday---Addition under S.111(1)(d)(i), Income Tax Ordinance, 2001, could have been made if the taxpayer had concealed/furnished inaccurate income, suppressed any production, sales or any amount chargeable to tax---Assessing Authority had made addition under S.111(1)(d), Income Tax Ordinance, 2001, pertaining to the tax year 2007 whereas Cl.(d) was inserted through Finance Act, 2011---No specific notice under S.111(1)(d) of Income Tax Ordinance, 2001, was issued---Order passed by Assessing Authority was not sustainable in the eyes of law, which was rightly cancelled by the Commissioner (Appeals)---Appeal filed by department was dismissed.

2013 PTD 1557 and 2015 PTD (Trib.) 2042 ref.

2015 PTD 408; 2013 PTD (Trib.) 900 and 2019 PTD 1828 rel.

Ms. Irum Shabbir, DR for Appellant.

Suhail Mutee Babri, ITP for Respondent.

2023 P T D (Trib.) 134

[Inland Revenue Appellate Tribunal]

Before Zahid Sikandar, Judicial Member and Muhammad Tahir, Accountant Member

NAEEM RAFIQUE BHATTI, GUJRANWALA

Versus

The COMMISSIONER INLAND REVENUE, RTO, GUJRANWALA

I.T.As. Nos. 1510/LB, 1509/LB and 1508/LB of 2020, decided on 10th January, 2022.

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

----S.113 & First Sched., Sr. 2, Division IX---Minimum tax---Distributor---Scope---Question before Appellate Tribunal was whether the status of taxpayer was of a distributor---Claim of taxpayer was that his case fell in Sr. 2(a) of First Schedule of Division IX and to prove that fact he had produced certificates issued by different electronic companies---Validity---Certificates issued by the companies had no sanctity in the absence of any supporting evidence i.e. sales invoices, entries in books of accounts, distribution agreements, etcetera---No agreement was placed on record by the taxpayer to prove the relationship---Taxpayer had failed to establish his status as a distributor with any documentary evidence, therefore, the assessing officer had rightly charged the minimum tax---Appeals were dismissed.

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

----Ss.113, 2(22A) & First Sched., Sr. 2, Division IX---Minimum tax---Distributor---Fast moving consumer goods---Scope---Question before Appellate Tribunal was whether the household electrical appliances fell in the category of fast moving consumer goods as defined in S. 2(22A) of Income Tax Ordinance, 2001---Validity---Household electrical appliances e.g. television, refrigerator, air conditioners, etc., did not fall in the definition of fast moving consumer goods for the reason that neither they were frequently purchased by the consumer nor their costs were relatively low---Though these appliances were used in almost every house but they were also durable in nature as the consumer did not buy these items on frequent basis.

2018 PTD 1582 distinguished.

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

---S. 2(22A)---Fast moving consumer goods---Scope---Definition of fast moving consumer goods reflects that they are those goods which are in the daily usage of a consumer---Definition ousts those goods from the definition of Fast Moving Consumer Goods which are durable in nature---Despite goods of daily demand and usage if goods are durable in character the same cannot be treated as fast moving consumer goods under the Income Tax Ordinance, 2001.

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

----S.2(22A)---Fast moving consumer goods---Scope---Fast moving consumer goods are products that sell quickly at relatively low cost---Such goods are called consumer packaged goods---Fast moving consumer goods have a short shelf life because of high consumer demand (e.g. soft drinks and confectionaries) or because they are perishable (e.g. meat, dairy products or bakery item, etc)---Such goods are purchased frequently, consumed rapidly, and priced low and sold in large quantities.

Investopedia.com ref.

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

----S.2(22A)---Fast moving consumer goods---Scope---Bare reading of the definition of fast moving consumer goods given in the Income Tax Ordinance, 2001, along with definitions being used in the trading world clearly stipulate that these are those goods which are largely used in daily routine, having a high demand and relatively a low cost---Section 2(22A) further ousts the durable goods even if they fall in the definition of fast moving consumer goods for the purpose of Income Tax provisions.

(f) Constitution of Pakistan---

----Arts.189 & 201---Decisions of Supreme Court binding on other Courts---Decision of High Court binding on subordinate Courts---Scope---Judgments of superior courts are binding to the subordinate tribunals/courts and Appellate Tribunal being a subordinate functionary is bound to follow the dictums laid down by the High Courts as well as the Supreme Court of Pakistan.

(g) Income tax---

----Law existing in a particular tax year or tax period is applicable for the purpose of determining tax liability.

C.I.R. v. Three Star Rice Factory 2021 PTD 1 ref.

Muhammad Ali Awan for Appellant.

Nemo for Respondent.

2023 P T D (Trib.) 167

[Inland Revenue Appellate Tribunal]

Before Zahid Sikandar, Judicial Member and Dr. Shahid Siddiq, Accountant Member

M. SARWAR SONS, HAFIZABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, GUJRANWALA

I.T.As. Nos.1886/LB and 1887/LB of 2017, decided on 5th April, 2022.

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

----S.111---Unexplained income or assets---Non-issuance of separate notice---Effect---Appellant was aggrieved of certain additions made by assessing officer in his income under S. 111(1)(b) of Income Tax Ordinance, 2001---Appeal filed before Commissioner (Appeals) was partially allowed---Validity---Additions were made under S.111(1)(b) but nothing was available on record to suggest that the assessing officer had issued separate mandatory notice under S.111---In the absence of issuance of a separate mandatory notice under S.111 with the proposed addition in order to require the taxpayer to explain his position, the addition was illegal and unlawful---Commissioner (Appeals) had completely ignored the legal aspects and had upheld the additions which was not justified---Appeals filed by taxpayer were allowed.

2019 PTD 1828 and Commissioner Inland Revenue v. Falah ud Din Qureshi 2021 PTD 192 rel.

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

----S.111---Unexplained income or assets---Show cause notice---Scope---Purpose of show cause notice is to put a person on notice about allegations for which authorities intend to proceed against him and give him an opportunity to explain his position---Show-cause notice is required to state all the particulars so that addressee is fully informed as to which provision has been invoked and which allegation has been alleged---Such is a fundamental document which is to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same.

2022 SCMR 92; 2018 PTD 253 and 2013 PTD 1536 ref.

(c) Public functionaries---

----Public functionaries are required to act within the parameters of law and are not permitted to proceed on their whims and desires.

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

----Ss.121 & 122---Best judgment assessment---Amendment of assessments---Scope---Provisions of Ss.121 & 122 cannot be invoked simultaneously.

Farooq Khokhar for Appellant.

Bilal Hassan, DR for Respondent.

2023 P T D (Trib.) 179

[Inland Revenue Appellate Tribunal]

Before Nasir Mahmud, Judicial Member and Anwaar ul Haque, Accountant Member

Messrs SUPER VICTORIA STORE, LAHORE

Versus

The COMMISSIONER INLAND REVENUE, ZONE WHT, RTO, LAHORE

I.T.A. No.2814/LB of 2021, decided on 6th July, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S.161---Failure to pay tax collected or deducted---Scope---Department, on taxpayer's failure to deduct withholding tax, created a certain tax demand---Appeal against such demand was dismissed---Validity---Officer Inland Revenue had failed to appreciate S. 161 of Income Tax Ordinance, 2001, in its true perspective---Since all the documentary evidence/data regarding deduction of withholding tax on account of payments made to the commission agents for purchases was produced by the taxpayer the Officer Inland Revenue had failed to point out any shortfall and confront the same to the taxpayer as required under S. 161---Officer Inland Revenue had also failed to bring on record any party/person from whom tax was liable to be withheld and taxpayer had not deducted the same---Further, the Officer Inland Revenue had failed to take into consideration or call for to discharge the liabilities by the respective persons whose tax was to be deducted---Tax demand was merely based on conjectures and surmises, as no specific transactional entries had been confronted or highlighted by the Officer Inland Revenue---Commissioner (Appeals) had confirmed the order of Officer Inland Revenue without considering the submissions made on behalf of the taxpayer---Orders of the authorities below were vacated and the taxpayer's appeal was allowed.

CIR v. MCB Bank Ltd. 2021 SCMR 1325 = 2021 PTD 1367 ref.

Hamza Sh. for Appellant.

Zahid Mehmood, DR for Respondent.

2023 P T D (Trib.) 305

[Inland Revenue Appellate Tribunal]

Before Rizwan Ahmad Urfi and Mian Tauqeer Aslam, Judicial Members

Messrs BEST PAPER AND BOARD (PVT.) LIMITED, GUJRANWALA

Versus

The COMMISSIONER INLAND REVENUE, RTO, GUJRANWALA

S.T.A. No.1718/LB of 2021, decided on 28th March, 2022.

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

----S.13 & Sr.No.10, Table 2, Sixth Sched.---Exemption---Withholding tax---Agricultural produce of Pakistan not subjected to any further process of manufacturing---Scope---Department raised a tax demand against the appellant for having failed to deduct sales tax in respect of purchases made from un-registered persons---Validity---Purchases of wheat straw were exempt from levy of sales tax under Sr. No. 10 of Table 2 of the Sixth Schedule annexed to the Sales Tax Act, 1990---Wheat straw being an agricultural produce was not subject to levy of sales tax, as such, no deduction of withholding tax on payments was warranted under the law---Appeal was disposed of accordingly.

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

----S.13 & Sr. No.3, Table 2, Sixth Sched.---Exemption---Supplies made by cottage industry---Scope---Department raised a tax demand against the appellant for having failed to deduct sales tax in respect of purchases made from un-registered persons---Contention of appellant was that the paper wastes had been procured from the persons falling in the cottage industry not subject to levy of sales tax as being exempted under the Sixth Schedule annexed to the Sales Tax Act, 1990---Validity---Contention put forth by the appellant needed proper scrutiny and verification as to whether such paper wastes was actually purchased from the persons falling cottage industry---Case was remanded back to the original adjudicating authority to look into the matter afresh on such account---Appeal was disposed of accordingly.

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

----S.13---Exemption---Withholding tax---Scope---Withholding sales tax is always liable to be deducted on taxable goods and no such deduction is required to be made in case of payments on account of the goods exempted from sales tax.

Abuzar Hussain for Appellant.

Mrs. Arooj Rizvi, DR for Respondent.

2023 P T D (Trib.) 332

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Imtiaz Ahmed, Accountant Member

Messrs PESHAWAR ELECTRICITY SUPPLY COMPANY (PESCO)

Versus

The COMMISSIONER INLAND REVENUE, RTO, PESHAWAR

S.T.As. Nos.30/PB, 16/PB, 111/PB of 2016, 66/PB of 2017 and 155/PB of 2019, decided on 7th February, 2022.

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

----S.10---Sales Tax Rules, 2006, R. 29 [since amended]---Refund of input tax---Scrutiny and processing refund claim---Scope---Registered person claimed refund of amounts of input tax paid by it in excess of its output tax---Assessing Officer rejected the refunds claims---On appeal, Commissioner (Appeals) remanded two cases and upheld the decision of Assessing Officer in other two cases---Contention of registered person was that prescribed procedure of law under R.29(2) of the Sales Tax Rules, 2006, to process the refund claimed through CREST had not been followed by the department which rendered the entire proceedings void---Validity---Refund claims were required to be processed in accordance with the procedure prescribed in Rr.29(2) & (3) of Sales Tax Rules, 2006---Impugned orders were set aside; all the refund cases were remanded for processing the same under R.29(2) of Sales Tax Rules, 2006, within a period of thirty days; hard copies of the computerized record maintained by the registered person were not to be insisted and input tax relating to transmission and distribution losses was admissible---Appeals were disposed of accordingly.

Messrs Peshawar Electric Supply Company, WAPDA House, Peshawar v. CIR, RTO, Peshawar 2015 PTD (Trib.) 1112 and Messrs Faisalabad Electric Company v. C.I.R. Zone-I, R.T.O., Faisalabad 2014 PTD (Trib.) 1629 ref.

(b) Administration of justice---

----Thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all.

Ajmir Shah, Ex-Sepoy v. The Inspector General, Frontier Corps. Khyber Pakhtunkhwa and another 2020 SCMR 2129 = 2021 PLC (C.S.) 420; Zia ur Rehman v. Syed Ahmed Hussain and others 2014 SCMR 1015 and Assistant Collector Customs and others v. Messrs Khyber Electronic Store 2001 SCMR 838 ref.

Hussain Ahmed Sherazi for Appellant (in STA No.30/PB of 2016, STA No.66/PB of 2017 and STA No.155/PB of 2019).

Mrs. Fozia Iqbal, DR for Appellant (in STAs Nos.16/PB and 111/PB of 2016).

Hussain Ahmed Sherazi for Respondent (in STAs Nos.16/PB and 111/PB of 2016).

2023 P T D (Trib.) 344

[Inland Revenue Appellate Tribunal]

Before M.M. Akram, Judicial Member and Muhammad Azam, Accountant Member

Messrs ATLAS POWER LIMITED

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, LTU, LAHORE

S.T.As. Nos.683/LB of 2019 and 553/LB of 2020, decided on 23rd December, 2020.

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

----Ss.45B & 46---Appeals---Order of Appellate Tribunal to be binding---Scope---Taxpayer assailed the order passed by Commissioner Inland Revenue under S.11 of Sales Tax Act, 1990 before the Appellate Tribunal through an appeal---During pendency of appeal, the Appellate Tribunal held in another case that the order passed by Commissioner Inland Revenue under S.11 of Sales Tax Act, 1990, was appealable under S. 45B of the Sales Tax Act, 1990, before the Commissioner Inland Revenue (Appeals)---Taxpayer, despite pendency of appeal before Appellate Tribunal, filed an appeal against the order-in-original before the Commissioner Inland Revenue (Appeals)---Commissioner Inland Revenue (Appeals) rejected the appeal on the ground that the appeal did not lie before him---Validity---Commissioner Inland Revenue (Appeals) had given findings on the issue without considering and following the judgments of the Appellate Tribunal particularly when the judgments were still in field and binding on him---When a point was concluded by a decision of the Appellate Tribunal, all subordinate authorities within the territorial jurisdiction of the Tribunal and subject to the appellate jurisdiction of the Tribunal were bound by it and had to scrupulously follow the decision in letter and spirit---Commissioner Inland Revenue (Appeals) was directed to decide the appeal on merits---Appeals were disposed of accordingly.

M. Padmanabha Setty v. K.P. Papiah Setty AIR 1966 SC 1824; Kausalya Devi Bogra v. Land Acquisition Officer AIR 1984 SC 892 and Bishna-Ram Borah v. Parag Saikia AIR 1984 SC 898 ref.

Bhopal Sugar Industries Ltd. v. ITO (1960) 40 ITR 618 (SC); East India Commercial Co. Ltd. v. Collector of Customs AIR 1962 SC 1893; Baradakanta Mishra v. Bhimsen Dixit AIR 1972 SC 2466 and Lord Diplock in Cassell & Co. Ltd. v. Broome (1972) 1 All ER 901, 874 (HL) rel.

(b) Administration of justice---

----Where two forums have concurrent jurisdiction, the aggrieved person in the first instance must preferably approach to the lower forum.

Asim Zulfiqar, FCA for Appellant.

Shahzad Mehmood, DR for Respondent.

2023 P T D (Trib.) 424

[Inland Revenue Appellate Tribunal]

Before Muhammad Jamil Bhatti, Accountant Member and Zahid Sikandar, Judicial Member

COMMISSIONER INLAND REVENUE, RTO, LAHORE

Versus

Messrs PAKISTAN WAPDA FOUNDATION, LAHORE

M.As.Nos.250/LB to 253/LB of 2022 in S.T.As. Nos.325/LB to 328/LB of 2017, decided on 10th November, 2022.

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

----Ss.133 & 221---Reference to High Court---Rectification of mistakes---Doctrine of election---Scope---Against the order of the Appellate Tribunal, any aggrieved party is entitled to file tax reference under S.133 of the Income Tax Ordinance, 2001, within 90 days of the communication of the impugned order---Taxpayer also has a right to file a rectification application against an error or mistake in the impugned order under S. 221 of Income Tax Ordinance, 2001---However, once the matter arising out of the order of Appellate Tribunal has been challenged by the applicant in the tax reference before the High Court and has attained finality, the applicant cannot be allowed to re-agitate the same matter by means of an alternative remedy that was not resorted to earlier---If this is allowed, this would go entirely contrary to 'doctrine of election' which exists to ensure that once a litigant has made the choice of pursuing a certain course of action available to him or has abandoned a certain plea/action, he is not allowed to re-open the same matter only because he has received unfavourable results in proceedings of his first choice.

Commissioner Inland Revenue v. M/s. Supreme Tech International (S.T.R. No.12/2012 dated 28-10-2013) rel.

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

----S.221---Rectification of mistakes---Expression "mistake apparent from the record"---Scope---Law intends rectification of an identified mistake within the existing final order and not another independent order for different reasons---After exercising original jurisdiction, the Tribunal becomes functus officio with little window for rectification of a mistake which is an equitable remedy---Scope of S. 221 of the Income Tax Ordinance, 2001, is restricted to rectify the mistake apparent from the record---Expression "mistake apparent from the record" as used in S.221 of the Income Tax Ordinance, 2001, means that error or mistake is so manifest and clear that if permitted to remain on record, it may have material effect on the case.

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

----S.221---Rectification of mistakes---Scope---Rectification is a jurisdiction ancillary to the appellate jurisdiction intended to rectify a mistake of fact or law apparent on the face of record which does not require investigation, appraisal of evidence, interpretation of law or an enquiry into facts.

Commissioner of Income Tax Company's II Karachi v. Messrs National Food Laboratories 1992 PTD 570 rel.

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

----S.221---Rectification of mistakes---Scope---An error of law or fact having direct nexus with a question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest is not a mistake apparent from record to be rectified under S.221 of the Income Tax Ordinance, 2001.

Mushtaq Ahmad and Co. v. CIR, 2015 PTD 1926 foll.

Malik Rizwan Khalid Awan, LA and Dr. M. Babar Chohan, DR for Appellant.

H.M. Majid Siddiqui for Respondent.

2023 P T D (Trib.) 467

[Inland Revenue Appellate Tribunal]

Before Nasir Mahmud, Judicial Member and Anwaar ul Haque, Accountant Member

Messrs KBS STEEL, GUJRANWALA

Versus

The COMMISSIONER INLAND REVENUE, LTO, LAHORE

I.T.A. No.3228/LB of 2022, decided on 3rd October, 2022.

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

----Ss.122, 111 & 35---Sales Tax Rules, 2006, R.14---Amendment of assessment---Unexplained income or assets---Stock-in-trade vis-à-vis Annexure "F" of sales tax return (carry forward summary)---Scope---Appellant in Annexure "F" of its sales tax return declared its closing stock of Rs. 1.3 billion whereas it had declared the closing stock in its income tax return to be Rs. 1.115 billion---Assessing Officer treated the difference of Rs. 185 million as expenditure on excess purchases, having not been declared in income tax return---Validity---Data as given in Annexure "F" of sales tax return was basically a summary of input tax which could not be made basis for calculating stocks held on a particular date to make its comparison with that of stock-in-trade as declared in income tax return---Annexure "F" was only meant for summary of input tax and excess carry forward amount of sales tax credit---None of the provisions of Sales Tax Act, 1990, or of the Income Tax Ordinance, 2001, had purported to deem these figures of carry forward summary to be the closing stocks---Such could not be equated with stock statement of a taxpayer on the whims and wishes of the department for creating concurrent tax liabilities under two separate statutes having different standards of reporting stocks and inventory---Appeal of the taxpayer was allowed and the orders passed by the authorities were vacated.

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

----Ss.129 & 122---Decision in appeal---Scope---Language of S.129(1)(a) only empowers the Commissioner (Appeals) to confirm, modify or annul the assessment order and exception whereof is enumerated in Cl. (b) of S. 129(1), which empowers the Commissioner (Appeals) to make such order as he thinks fit---Express language of law has unequivocally prescribed power of Commissioner (Appeals) under S. 129 while dealing with the assessment order and explicitly describes Commissioner (Appeals) powers while dealing with other cases---Section 129 unequivocally eclipses and restricts the power of Commissioner (Appeals) to confirm, modify or annul the assessment.

PLD 1965 SC 434; 1975 SCMR 221; 1976 SCMR 388; 1987 CLC 2425; PLD 2003 SC 271 and 2001 SCMR 838 ref.

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

----Ss.129 & 122---Decision in appeal---Remand---Scope---Where matter in issue is an assessment order then resort can only be have to S. 129(1)(a)---Said provision unequivocally eclipses and restricts the Commissioner's scope of power to confirm, modify or annul the assessment and the Commissioner's decision cannot go beyond the ambit of assessment.

PLD 1965 SC 434; 1975 SCMR 221; 1976 SCMR 388; 1987 CLC 2425; PLD 2003 SC 271 and 2001 SCMR 838 ref.

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

----Ss.129 & 122---Decision in appeal---Remand---Scope---Order passed under S. 122 creating liability is an assessment order for all intents and purposes and can only be dealt under Cl. (a) of S. 129(1) and binds the Commissioner (Appeals) only to confirm, modify or annul the assessment order and does not in any manner confer jurisdiction on the Commissioner (Appeals) to remand the matter to the assessing officer.

Dewan Textile Mills Ltd. v. ACIR-B Audit D-1 LTU Karachi 2017 PTD 1663 and 2013 PTD (Trib.) 1288 ref.

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

----S.129---Decision in appeal---Remand---Scope---Remand should not be directed in a light vein---In ultimate analysis, a remand neither favours the revenue nor the assessee---In revenue matters, without an exception after remand the fate of an assessee never changes for the better---In most of the cases the remand order is rather employed by the assessing officer to make the fate of assessee even worse---All previous discrepancies are meticulously taken care of so that the assessee finds no favourable factual or legal proposition to urge before the appellate forum.

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

----Ss.111 & 35---Unexplained income or assets---Stock-in-trade---Purchasing excess stock; an investment or expenditure---Scope---If any difference of declared stock is found or is effectively unearthed through audit or otherwise, it cannot be added as expenditure under S.111(1)(c)---Stocks ought to be added in investment, money, assets or valuable articles owned by a person whose sources are not adequately explained by him but it cannot be added towards his expenditures---Genuinely, if any misappropriation of stocks is found by comparing the declarations made under the Income Tax Ordinance, 2001, with that information available in sales tax record then its addition can be made under S. 111(1)(b) of the Income Tax Ordinance, 2001 and the provisions of S. 111(1)(c) are least relevant on the subject---Stocks are physically tangible in trade or business whereas expenditures are irretrievably gone into costs of goods.

PLD 1982 Kar. 684 ref.

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

----S.35---Stock-in-trade---Meaning---Stock-in-trade means anything produced, manufactured, purchased or otherwise acquired for manufacture, sale or exchange, and any material or supplies to be consumed in the production or manufacturing process, but does not include stocks and shares.

(h) Interpretation of statutes---

----Strict rule of interpretation----Scope---Strict rule of interpretation mandates that plain, clear and direct meaning is given to words which are used in common parlance by the general public to which such law is applicable---No presumption with respect to a particular meaning---Particular meaning cannot be given to a word which is not clear by making a presumption that particular meaning is the intention of the legislature---Court cannot under the guise of possible or likely intention of the legislature give meaning to the words which are not clear and where contextual meaning cannot be made out.

(i) Words and phrases---

----Expenditure---Meaning---Expenditure is what is paid out or away and is something which is gone irretrievably.

PLD 1982 Kar. 684 rel.

M. Babar Zaman Khan and Abuzar Hussain for Appellant.

Hassan Mabroor, D.R. for Respondent.

2023 P T D (Trib.) 499

[Inland Revenue Appellate Tribunal]

Before Mian Abdul Basit, Judicial Member and Imtiaz Ahmed, Accountant Member

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

Versus

Messrs WI-TRIBE PAKISTAN LIMITED, ISLAMABAD

I.T.As. Nos.816/IB and 817/IB of 2013, decided on 18th August, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 153 & 152---Failure to pay tax collected or deducted---Payments to non-residents---Payments for goods, services and contracts---Scope---Taxpayer was imposed upon a liability for its failure to deduct tax at the time of making payments under Ss. 152 & 153 of Income Tax Ordinance, 2001---Validity---Once it was established that the taxpayer was a withholding agent and payments fell within the domain of S.153 of the Income Tax Ordinance, 2001 then the taxpayer was the only person who could explain the nature of payment whether deductible or not by providing the record---Assessing officer had himself mentioned in the assessment order that the taxpayer was invited to bifurcate the inter-connection charges into those paid to foreign and local telecom operators, which divulged that it was in the knowledge of the assessing officer that some of the payments were made to foreign telecom operators and no tax was required to be deducted from such payments, but regardless of this he had applied the same yardstick for creating demand under S.161 on whole expenditure and such approach was against the law of natural justice---Matter was sent back to the assessing officer to examine the record in respect of nature of payment, quantum of tax deduction and status of the parties to whom the payments were made before finalization of proceedings initiated under Ss. 161 & 205 of the Income Tax Ordinance, 2001.

87 Tax 2601; 89 Tax 430; 2000 PTD 2664 and 2012 PTD 122 ref.

Commissioner of Inland Revenue v. Messrs Islam Steel Mills 2015 PTD 2335 and Messrs BILZ (Pvt.) Ltd. v. DCIT, Multan and another 2002 PTD 1 rel.

Faheem Sikandar, DR for Petitioner.

Ms. Sadia Nazir, FCA for Respondent.

2023 P T D (Trib.) 513

[Inland Revenue Appellate Tribunal]

Before M.M. Akram, Judicial Member and Nadir Mumtaz Warraich, Accountant Member COMMISSIONER INLAND REVENUE, RTO, SIALKOT

Versus

Messrs GENERAL FAN COMPANY (PVT.) LTD., GUJRAT

MA(R) STA No.17/IB in MA (Stay) STA No.581/IB in STA No.146/IB of 2019, decided on 27th May of 2019.

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

----Ss. 46 & 40B---Appeal to Appellate Tribunal---Scope---Department sought vacation of stay granted by the Tribunal wherein the operation of order passed by the Federal Board of Revenue (FBR) under S.40B of the Sales Tax Act, 1990, was suspended till the outcome of appeal and the department was restrained from proceeding further---Validity---Appeal filed by the registered person was not maintainable as S. 46 of the Sales Tax Act, 1990 did not give any right of appeal to the registered person to file an appeal before the Tribunal against an order passed by the FBR under S.40B of the Sales Tax Act, 1990---No statutory right of appeal was available to the registered person---Application of department was accepted and order passed by the Tribunal was vacated.

(b) Appeal---

----Appeal cannot be claimed as a right unless provided by the statute.

Mughal Surgical (Pvt.) Ltd. and others v. Presiding Officer, Punjab Labour Court No.7 and others 2006 SCMR 590; Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 and Malik Umar Aslam v. Mrs. Sumaira Aslam and others 2014 SCMR 45 rel.

Shamshad Gul, DR for Appellant.

Rana Munir Hussain for Respondent.

2023 P T D (Trib.) 524

[Inland Revenue Appellate Tribunal]

Before Mian Abdul Basit, Judicial Member

The COMMISSIONER INLAND REVENUE, WITHHOLDING TAX ZONE, RTO, MULTAN

Versus

Messrs SHAH SONS PAKISTAN (PVT.) LTD. INDUSTRIAL ESTATE MULTAN

I.T.A. No.1350/LB of 2015, decided on 22nd June, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 153---Failure to pay tax collected or deducted---Payment for goods, services and contracts---Scope---Case against taxpayer related to non-deduction/non-payment of withholding tax which surfaced violation of the provisions of Ss.153 & 161 of the Income Tax Ordinance, 2001---Commissioner Inland Revenue (Appeals) had found that the Assessing Officer while framing the assessment order had chosen the figures at random from the details provided by the taxpayer without assigning any reasons and the assessing officer had not referred the documents which were not acceptable to him---Approach of the Assessing Officer was not in consonance with the practicing proceedings because tax was to be levied and charged on a clear and definite verdict---Commissioner Inland Revenue (Appeals) had rightly found that the department should have given the detail of documents along with the party name which was on default in view of the provisions of Ss.153 & 161 of the Income Tax Ordinance, 2001---Commissioner Inland Revenue (Appeals) despite holding the legal flaw in framing the assessment order had given a chance to the department to establish the default against the taxpayer---Filing of appeal against such an order was misconceived and against the facts particularly when the department had nothing to rebut the finding rendered by the Commissioner Inland Revenue (Appeals)---Appeal was dismissed.

Muhammad Arshad, DR for Petitioner.

Riaz Ahmed Raja, ITP for Respondent.

2023 P T D (Trib.) 552

[Inland Revenue Appellate Tribunal]

Before Nasir Mahmud, Judicial Member and Anwaar ul Haque, Accountant Member

Messrs TOWN CRIER (PVT.) LTD. FAISALABAD

Versus

The COMMISSIONER INLAND REVENUE, ZONE-I RTO, FAISALABAD

S.T.A. No.315/LB of 2014, decided on 7th October, 2021.

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

----Ss.11, 4 & 73---SRO No. 1125(I)/2011, dated: 31-12-2011---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Zero-rating---Scope---Appellant showed zero-rated supplies of goods to various registered persons---Cross-matching of the sales tax returns of appellant with the buyers' returns revealed that the buyers were not active taxpayers; that purchases from the appellant were not shown and that the buyers did not fall in the zero-rated sector---Appellant was ordered to pay sales tax along with default surcharge and penalty---Validity---Pre-requisite for availing benefit of zero-rating under the SRO No. 1125(I)/2011, dated: 31-12-2011, three conditions for the qualifying person to be fulfilled were (i) doing business in five major zero-rated sectors, (ii) registered under the Act as manufacturer, importer, exporter or wholesalers, (iii) appearing as an active person at ATL---All such conditions had duly been met with by the appellant---Payments had also been received through banking channel as required under S. 73 of the Sales Tax Act, 1990---Appeal was accepted and the impugned orders were set aside.

(b) Taxation---

----Tax cannot be levied on presumptions, assumptions, whims and conjectures for which there is no room in the fiscal statutes.

(c) Administration of justice---

----No one would suffer for the act of another and nobody could be punished for the wrong of others.

Khubaib Ahmed for Appellant.

Ms. Amina Batool, DR for Respondent.

2023 P T D (Trib.) 567

[Inland Revenue Appellate Tribunal]

Before Mian Tauqeer Aslam, Judicial Member and Muhammad Azam, Accountant Member

Messrs EMIRATES SUPPLY CHAIN SERVICES (PVT.) LTD., LAHORE

Versus

The COMMISSIONER INLAND REVENUE, CRTO, LAHORE

M.A. (Stay) No.92/LB of 2021, decided on 7th January, 2021.

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

----S.131---Appeal to the Appellate Tribunal---Stay of proceedings---Scope---Appellant/assessee sought stay of proceedings in consequence of an order passed by Commissioner Inland Revenue (Appeals)---Validity---Commissioner Inland Revenue (Appeals) had annulled the order of the assessing officer, therefore, no demand existed against the appellant/assessee---Department could only proceed afresh if the facts of the case and legal provisions so warranted---Request for granting stay of proceedings was not allowed.

(b) Words and phrases---

----"Annulment"---Defined.

Shahbaz Butt for Applicant.

Aman Ullah Virk, DR for Respondent.

2023 P T D (Trib.) 717

[Inland Revenue Appellate Tribunal]

Before Zahid Sikandar, Judicial Member and Muhammad Irfan Raza, Accountant Member

Messrs PUNJAB BEVERAGES (PVT.) LTD., LAHORE

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISALABAD

S.T.A. No.1089/LB of 2018, decided on 10th January, 2023.

Sales Tax Act (VII of 1990)---

----Ss. 46 & 40B---Appeals to the Appellate Tribunal---Posting of Inland Revenue Officer---Scope---Appeal was preferred against an intimation letter whereby the Commissioner had posted/nominated certain officers/staff of Inland Revenue department at the premises of the assessee under S. 40B of Sales Tax Act, 1990, for monitoring of production, supplies and stocks---Validity---Intimation in question was not an order passed by the Commissioner himself, but merely an implementation of the authorization/order by the Board for action under S. 40B of Sales Tax Act, 1990---Section 46 of the Sales Tax Act, 1990, provided for appeals against orders passed by the CIR(A), CIR, or Board under specific provisions of the Act---Appellant's case did not fall under S. 46(1)(b) as the impugned intimation letter could not be considered an order passed by the CIR for the purpose of filing an appeal---Intimation was merely an implementation of the original authorization by the Board for action under S. 40B---No appeal could be filed against the intimation/nomination of officers by the Commissioner---Commissioner was a subordinate functionary bound to obey the orders of the Board and the impugned intimation letter was an implementation of the Board's authorization, not an order passed by the Commissioner himself---Appeal was not maintainable before the ATIR and was dismissed.

Mudassar Shuja Butt for Appellant.

Ali Ahsan Warraich, DR for Respondent.

2023 P T D (Trib.) 789

[Inland Revenue Appellate Tribunal]

Before Zahid Sikandar, Judicial Member and Muhammad Tahir, Accountant Member

COMMISSIONER INLAND REVENUE, RTO-II, FAISALABAD

Versus

Messrs CRESCENT TEXTILE MILLS, LTD., FAISALABAD

I.T.A. No.2462/LB of 2015, decided on 13th July, 2022.

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

----Ss. 124 & 221---Assessment giving effect to an order---Rectification of mistakes---Scope---According to S.124 of the Income Tax Ordinance, 2001, the assessing officer must adhere to the directions given in the appeal effect order and cannot make any additions, deletions, or alterations on his own---Furthermore, the appeal effect order must solely focus on the issues stated in the appellate order and cannot address any extraneous or unrelated matters---If the assessing officer believes that an incorrect assessment has been made, he can proceed with amending the assessment subject to limitation---However, it's important to note that the assessing officer cannot amend the assessment of income in rectification proceedings.

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

----S.221---Rectification of mistakes---Scope of rectification is limited to correcting mistakes that are easily identifiable on the surface of the order.

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

----S.221---Rectification of mistakes---Scope---Section 221 of the Income Tax Ordinance, 2001, is circumscribed to rectifying mistakes that are evidently discernible from the record---Phrase "mistake from the record" utilized in S.221 pertains to an error or mistake that is glaringly evident and unambiguous and, if allowed to remain on the record, may have a substantial impact on the case.

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

----S.221---Rectification of mistakes---Scope---An error of law or fact that directly relates to a question regarding the determination of the rights of the parties involved, affecting their significant rights or causing harm to their interests, is not a mistake that is evident from the record to be rectified under S.221.

Mushtaq Ahmad and Co. v. CIR 2015 PTD 1926 rel.

Bilal Hassan, DR for Appellant.

Omer Iqbal Khawaja for Respondent.

2023 P T D 817

[Inland Revenue Appellate Tribunal

Before Zahid Sikandar, Judicial Member and Muhammad Jamil Bhatti, Accountant Member

Messrs PAKISTAN FRUIT JUICE CO. (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, CTO, LAHORE

S.T.A. No.957/LB of 2022, decided on 5th January, 2023.

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

----S.12---Sales Tax Act (VII of 1990), S.2(27)---Determination of value for the purposes of duty---Retail price---Scope---Appellant was held liable to include the notional value of Federal Excise Duty in retail price for the purpose of calculating sales tax on the ground that the excise duty was to be factored in while computing the 'retail price'---Validity---Department's valuation and methodology were clearly arbitrary---Notional excise duty had no connection whatsoever with the subject matter of excise duty, which was the manufacture of goods---Orders passed by the department were set aside and the appeal was accepted.

2007 SCMR 1367 rel.

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

----S.11---Federal Excise Act (VII of 2005), S.14---Recovery of tax---Show cause notice---Adjudication proceedings---Order-in-original---Limitation---Scope---Commissioner, under subsection (5) of S.11 of the Sales Tax Act, 1990, and subsection (2) of S. 14 of the Federal Excise Act, 2005, is obligated to record reasons in writing for the grant of an extension of time---Commissioner cannot extend the time according to his own choice and whims as a matter of routine without any limit or constraint; he can only do so after applying his mind and recording reasons for such extension in writing---Under the said provisions, routine extensions granted by the Commissioner without recording reasons are null and void---Language of the relevant provisos is clear and explicit and no exception can be taken to the fact that the Commissioner is required to adhere to the condition precedent of recording reasons in writing before passing the assessment order.

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

----S.11---Recovery of tax---Show-cause notice---Adjudication proceedings---Order-in-original---Limitation---Scope---First proviso to S. 11(5) is mandatory in nature and failure to comply with it would render the order invalid.

Collector of Sales Tax v. Messrs Super Asia 2017 SCMR 1427 rel.

Waseem Ahmad Malik for Appellant.

Ghulam Husain Yasir, DR along with Mazahar Ali DCIR for Respondent.

2023 P T D (Trib.) 889

[Inland Revenue Appellate Tribunal (Karachi Bench)]

Before Habib Ullah Khan, Accountant Member and M. Aminullah Siddiqui, Judicial Member

FILTER PAKISTAN (PVT.) LIMITED, KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, MTO, KARACHI

MA(Stay-Ext) No.969/KB of 2022 in I.T.A. No.345/KB of 2021, decided on 25th March, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S. 131---Appeal to Appellate Tribunal---Extension of stay order---Scope---Appellant sought extension of stay against recovery of tax demand---Validity---Tribunal had already granted stay to the appellant for aggregated period of 360 days in portions---There was no change in facts and circumstances of the case as were prevailing earlier---Main appeal was pending before the Tribunal and there existed special circumstances---Appellate Tribunal granted stay order to provide temporary relief to the appellant from 'undue hardship' till disposal of main appeal.

2016 PTD 1702 ref.

Messrs Holmore Power Generation Company Ltd. v. Deputy Commissioner, I.R and others (W.P.No.2608 of 2018) rel.

Faiz Ahmed for Appellant.

Tariq Tunio, DR for Respondent.

2023 P T D (Trib.) 911

[Inland Revenue Appellate Tribunal (Headquarters Bench Islamabad)]

Before Shahid Masood Manzar, Chairman and Imtiaz Ahmed, Accountant Member

Messrs PESHAWAR ELECTRIC SUPPLY COMPANY, LIMITED (PESCO), WAPDA HOUSE, PESHAWAR

Versus

The COMMISSIONER INLAND REVENUE, RTO, PESHAWAR

I.T.As. Nos.441/PB to 444/PB of 2019, decided on 28th September, 2022.

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

----Ss. 153, 161 & 53---SRO 586(I)/91 dated: 30-06-1991---Failure to pay tax collected or deducted---Payments for goods, services and contracts---Exemptions and tax concessions---Scope---Department raised demand and imposed liabilities upon the appellant for its failure to withhold income tax on payment of "Use of System Charges" (UOSC) to National Transmission and Dispatch Company---Validity---Payments relating to UOSC were in fact made for the supply of electricity---Taking into consideration the nature/definition/explanation of UOSC, it could be construed that UOSC was part and parcel of the process for electricity supply and could not be separated from supply of electricity---As such, its exempt from deduction of income tax as per Clause 46AA of the 2nd Schedule to the Part IV of the Income Tax Ordinance, 2001 and SRO 586(I)/91 dated: 30-06-1991---Orders passed by department were set aside.

Messrs Multan Electric Power Company, Multan v. The CIR, RTO, Multan (ITA No. 1687/LB/2019) rel.

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

----Ss. 161 & 177---Failure to pay tax collected or deducted---Audit---Scope---Direct invoking of S. 161 without recourse to audit under S.177 is bad in law.

2015 PTD (Trib.) 654 and 2012 PTD (Trib.) 122 ref.

(c) Administration of justice---

----Thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all.

2001 SCMR 838 and 2003 SCMR 1505 ref.

(d) Qanun-e-Shahadat (10 of 1984)---

----Art.129(e)---Public documents---Presumption---Scope---Presumption of regularity and correctness is attached to the contents of all official documents.

2001 SCMR 279 and 2017 CLC Note 139 ref.

Hussain Ahmed Sherazi and Mouazzam Ali Butt for Appellants.

None for Respondent.

2023 P T D (Trib.) 1069

[Inland Revenue Appellate Tribunal, Karachi]

Before Mrs. Ambreen Aslam, Judicial Member and Saifullah Khan, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-I, LTU, KARACHI

Versus

ABU DAWOOD TRADING COMPANY (PVT.) LTD., KARACHI

S.T.A. No.417/KB of 2015, decided on 29th November, 2019.

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

----Ss. 11, 3, 7 & 8---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Determination of tax liability---Tax credit not allowed---Scope---Taxpayer adjusted and claimed a certain amount as input tax on obsolete stock---Department while refusing to accept the claim of taxpayer ordered for recovery---Commissioner (Appeals) allowed the appeal filed by taxpayer---Validity---In the scheme of Sales Tax Act, 1990, Ss. 7 & 8 are not charging sections---Both the sections pertain to the domain of payability---Section 7 enunciates the principle for determining the tax liability for particular tax period of a registered person in respect of taxable supplies and it is provided that such registered person shall be entitled to deduct input tax paid during the tax period for the purpose of taxable supplies made or to be made by him from the output tax that is due from him in respect of a particular tax period---Amount paid by the taxpayer belonged to him and the assessee was entitled to seek at its discretion either adjustment or refund---Impugned order did not require interference---Appeal of the department was dismissed.

Messrs Mafair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others 2002 PTCL 115 foll.

Muhammad Azam, D.R. for Appellant.

Adan Mufti, FCA for Respondent.

2023 P T D (Trib.) 1103

[Inland Revenue Appellate Tribunal (Karachi Bench)]

Before Sardar M. Ajaz Khan, Judicial Member and Imtiaz Ali Solangi, Accountant Member MUHAMMAD ALI TABBA, KARACHI

Versus

The COMMISSIONER INLAND REVENUE, AEOI, ZONE, LTO, KARACHI

I.T.A. No.645/KB of 2023, decided on 9th June, 2023.

(a) Finance Act (XIII of 2022)---

----S. 8---Capital Value Tax---Foreign assets of taxpayer---Amnesty scheme---Immunity from taxation---Scope---Appellant (taxpayer) assailed imposition of capital value tax on foreign assets---Contention of appellant was that he had declared foreign assets by availing Amnesty Scheme and his assets were immune from any taxation---Validity---At the time of availing Amnesty Scheme, law legislated by the Parliament was acknowledged and availed, which sought declaration of foreign assets---No objection was raised that Amnesty Schemes had extra territorial operations---Constitutionality of Wealth Tax Act, 1963, was consistently upheld by constitutional courts, which law had taxed the assets, either inside or outside Pakistan---No case for arbitrariness and unintelligible classification arose within the class of persons subjected to tax, which constituted a reasonably and intelligibly defined classification---Appeal was dismissed.

C.P. No.4942 of 2022 rel.

2023 PTD 268 foll.

(b) Finance Act (XIII of 2022)---

----S.8---Capital Value Tax---Jurisdiction---Scope---Officer Inland Revenue has inherent jurisdiction for the purpose of collection of Capital Value Tax over persons whose income tax records and income tax affairs, the Officer Inland Revenue can examine for their income tax treatment.

(c) Finance Act (XIII of 2022)---

----S.8---Capital Value Tax---Foreign assets---Scope---Imposition of capital value tax on foreign assets of resident individuals by legislature is to bring fairness in taxation by imposing direct tax on the rich individuals in Pakistan---However, as individuals having foreign assets up to 100 million rupees have been exempted from such tax, therefore, this tax can be said to have been imposed on super rich instead of even rich individuals---Such persons are required to file declaration of capital value tax and pay capital value tax.

(d) Taxation---

----Principles of tax equity demand levy of higher tax on individuals with higher ability to pay tax.

(e) Taxation---

----Non-provision and non-production of documents does not give the taxpayer right to enjoy while sitting on the fence.

(f) Equity---

----One who seeks equity must have equities in his favour and anyone who seeks justice must come with clean hands.

(g) Qanun-e-Shahadat (10 of 1984)---

----Art. 117---Burden of proof---Scope---One who asserts existence of facts must prove that the facts exist.

Syed Shabbar Zaidi and Asim Zulfiqar, FCAs for Appellant.

Barrister Dr. Huma Sodher, Legal Advisor and Ajaz Ahmed, DR for Respondent.

2023 P T D (Trib.) 1582

[Inland Revenue Appellate Tribunal (Lahore Bench)]

Before Aeysha Fazil Qazi, Judicial Member and Dr. Shahid Siddiq, Accountant Member

MUHAMMAD MUTI-UR-REHMAN, LAHORE

Versus

COMMISSIONER INLAND REVENUE, RTO, LAHORE

MA(Rect.) No.242/LB of 2022 in I.T.A. No.3117/LB of 2020, decided on 22nd February, 2023.

Income Tax Ordinance (XLIX of 2001)---

----S. 221---Civil Procedure Code (V of 1908), O. XLVII, R. 1---Rectification of mistakes---Review---Scope---Word "review" refers to the re-examination of a previously expressed "view" by a court or other legal forum---If no view has been expressed on certain vital issues that are fundamental to a case and have a direct impact on its outcome, then direction to adjudicate the unresolved issues under S. 221 of the Income Tax Ordinance, 2001, cannot be considered a "review"---Rather, it is a simple "rectification" of the "mistake" of failing to adjudicate the vital issues that are directly related to the fate of the case---Furthermore, the wording of S. 221 is similar to R. 1 of O.XLVII of the C.P.C., which supports the view that even though the section is titled "Rectification of Mistakes," the title of a section cannot control the power given by the express wording of the section---If the wording permits "review," it cannot be considered "prohibited" under the Income Tax Ordinance, 2001.

2008 PTD 169 ref.

Sayyid Ali Imran Rizvi for Applicant.

M. Asif, D.R. for Respondent.

2023 P T D (Trib.) 1606

[Inland Revenue Appellate Tribunal (Lahore Bench)]

Before Zahid Sikandar, Judicial Member and Muhammad Tahir, Accountant Member

Messrs CITY CASH AND CARRY, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISALABAD

S.T.A. No.319/LB of 2023, decided on 5th June, 2023.

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

----Ss. 3(9-A), 11, 33(24) & 40-C---Issuance of invoices by registered person outside the Point of Sales (POS) system---Penalty---Assessment and recovery of tax short-levied, etc.---Scope---Plea of the appellant was that invoices-in-question could not be issued in prescribed manner due to some connectivity problem of the software with the internet in the computerized system at relevant time ; and that the same were duly shown in monthly sales tax returns, hence no violation of law and tax evasion had been committed---Validity---Record revealed that appellant had also been penalized for similar default on issuing invoices on different dates, which showed the regular involvement of the appellant in issuing invoices outside POS system---Every person integrated with the FBR system was required to conduct transactions in the prescribed manner and was liable for penal consequences in case of committing default---Issuance of invoices outside the POS system had not been denied by the appellant, rather had contested the default by raising the ground / plea of internet connectivity problem, which amounted to an admitted position that the appellant was habitual in committing such default as penalty was also imposed on appellant (registered person ) against other invoices of different dates---Record also showed that the appellant had not pursued the matter with due diligence before the authorities below rather had avoided the proceedings there---Plea / ground taken by the appellant appeared to be an afterthought, which was neither convincing nor substantial---Commissioner Appeals had rightly confirmed the penalty order, which was nether arbitrary nor fanciful---Tribunal upheld the impugned orders for having been passed in accordance with law---Appeal filed by the taxpayer(registered person) was dismissed , in circumstances.

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

----Ss.3(9-A), 11, 33(24) & 40-C---Issuance of invoices by the registered person outside the Point of Sales (POS) system---Penalty---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Plea of the appellant (registered person) was that S.11 of the sales Tax Act, 1990, for being related to short payment of tax , could only be invoked for assessment purposes and not for penalty---Held, that 'sales tax' included the tax, additional tax, default charge, a fine, penalty of any other sum payable under the provisions of the Sales Tax Act, 1990, or the Rules made thereunder---Sales tax (including penalty) could only be assessed and recovered under S. 11 of the Sales Tax Act, 1990, hence the contention of the appellant (registered person) was turned down---Tribunal upheld the impugned orders passed by both authorities below for having been passed in accordance with law---Appeal filed by the taxpayer (registered person) was dismissed, in circumstances.

Basharat Ali for Appellant.

Mst. Zil e Huma, DR for Respondent.

2023 P T D (Trib.) 1628

[Inland Revenue Appellate Tribunal (Lahore Bench)]

Before Zahid Sikandar, Judicial Member and Ch. Muhammad Tarique, Accountant Member

COMMISSIONER INLAND REVENUE, LTU, LAHORE

Versus

Messrs ADAM JEE INSURANCE COMPANY LTD.

I.T.A. No.3546/LB of 2015, decided on 21st March, 2023.

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

----Ss.233, 158(c), 161 & 205---Brokerage and Commission---Advance tax, deduction of---Insurance companies, business of---Collection of premium---Principal and agent, relationship of---Commissioner Appeals deleted the liability under the commission under S. 233 of Income Tax Ordinance, 2001, imposed by the Assessing Officer---Plea of the appellant / Department was that S.233 of Income Tax Ordinance, 2001, envisaged that where any company made payment on account of brokerage and commission to another person (agent), the Principle (Company) would deduct advance tax at the rate specified---Validity---Record revealed that the respondent/company had not made payment directly to the commission agent rather it was paid by lead Insurer Company and the respondent, being co-insurer, shared the cost of commission through book adjustments and internal account settlement---Insurance services were, normally, provided by a number of insurance companies jointly by creating a consortium under an agreement to the client / insured---Premium is collected from the insured by the lead Insurer and allocated among the Insurance Companies proportionate to their understanding of the risk---It is the duty of the lead Insurer Company to ensure the discharge of deduction of advance tax against the payments made to the Commission Agent---There is no separate transaction / payment between the lead Insurer and the Co-insurer for the purpose of collection of advance tax under S.233 of the Ordinance, 2001---Insurance premium is received in full by the lead Insurer ;and after payment of taxes / deductions on the entire amount, the rest is distributed among the Co-insurer on the basis of alleged shares---Co-insures and their shares of risk are decided through agreement---Co-insurance agreement is only in the nature of general regulation for sharing the risk and premium involved in an insurance policy and the entire insurance premium as well as payment to Commission Agent has already suffered tax at the time of its receipt / payment in the hands of the lead Insurer---If there was any non-deduction on the payment made to Agent, the lead Insurer might be inquired but not the Co-insurer who had not made any payment directly to the Commission Agent---Tax liability, in the present case, was created by the Assessing Officer on a defective understanding of the subject which had rightly been deleted by the Commissioner Appeals---Tribunal directed the Appellant/Department to verify the factum of payment of withholding tax by the lead/Co-insurer on the disputed transactions and in case any non-deduction was found, proceedings be initiated against the lead Insurer in accordance with law---Tribunal further directed that the respondent shall provide all the necessary details regarding payment, lead Insurers and transactions---Commissioner Appeals had rightly deleted the tax-in-question---Tribunal upheld the impugned orders for having been passed in accordance with law---Appeal filed by the appellant (Department) was dismissed, in circumstances.

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

----Ss. 153 (1)(b) & 149(3) as inserted by Finance Act, 2014---Payment of salaries by the employer to its employees---Deduction of tax at source---Payments for services---Director's fee---Deduction of tax---Among the salaries paid by the taxpayer (company), Officer Inland Revenue taxed the payments on account of Director' fee by holding that said payments were in nature of services and tax deduction was applicable under S. 153(1)(b) of Income Tax Ordinance, 2001---Commissioner Appeal deleted the same by observing that the fee paid to directors had been made liable to withholding tax vide Finance Act, 2014, through insertion of subsection (3) of S. 149 of the Ordinance, 2001, whereas the matter-in-hand pertained to tax year 2013---Validity---Held, that under the existing provisions of the Income Tax Ordinance , 2001 ('Ordinance 2001') at the relevant time (tax year 2013), a company, being an employer, was required to deduct tax at the time of payment of salary to its employees---However, there was no specific provision for deduction of tax on the remuneration paid to a director which was not in nature of salary---Director had not provided any technical or professional service to the assessee, therefore, payment of sitting fees did not constitute payment for rendering services under S.153(1)(b) of the Ordinance, 2001---Had it been included in S.153(1)(b) of Ordinance, there was no need of insertion of subsection (3) in S.149 of Ordinance, 2001 specifically providing the deduction of tax at the time of payment made for directorship fee---Amendment brought in tax year 2014 relating to deduction of tax on director's fee in S. 149 of Ordinance, 2001 was prospective and did not apply in the present case---Commissioner Appeals had rightly deleted the tax -in-question---Tribunal upheld the impugned order passed by the Commissioner Appeals for having been passed in accordance with law---Appeal filed by the appellant (Department) was dismissed, in circumstances.

Muhammad Zeeshan, DR for Appellant.

Asim Zulfiqar Ali, FCA for Respondent.

2023 P T D (Trib.) 1662

[Inland Revenue Appellate Tribunal]

Before Nasir Mahmud, Judicial Member and Rizwan Ahmed Urfi, Accountant Member

Mian FEROZE SALAH UD DIN

Versus

The COMMISSIONER INLAND REVENUE, ZONE-IV, RTO, LAHORE

I.T.A. No.3880/LB/2023, decided on 2nd August, 2023.

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

----Ss.121(3) & 131---Best judgment assessment---Limitation---Scope---Order passed by the Officer Inland Revenue against the taxpayer was confirmed by the Commissioner Appeals---Objection of the appellant / taxpayer was that the order passed by the Officer Inland Revenue was barred by time as the order under S. 121 of Income Tax Ordinance, 2001 ('Ordinance, 2001')could legally be passed within 5 years after the end of the tax year and/or the income year---Validity---Record revealed that the Commissioner Appeals had rejected the said objection (regarding limitation) without discussing or determining the dates relevant for determination of question of limitation---When limitation as a moot point was asserted in any litigation, the same had to be decided on the basis of facts and law---Tax year-in-issue was 2017 and the limitation to adjudicate under S.121 of the Ordinance, 2001 ended on 30-06-2022 whereas, admittedly, the order under S. 121 of the Ordinance, 2001, in the present case, was passed by the Officer Inland Revenue on 28-02-2023, thus the same was beyond period of limitation as prescribed under S. 121(3) of the Ordinance, 2001---Issue of limitation was not a technicality which could not be ignored---Tribunal set-aside both the orders passed by the Officer Inland Revenue as well as the Commissioner Appeals---Appeal filed by the taxpayer was allowed, in circumstances.

Additional CIR v. M/s. Eden Builders Ltd. and others 2018 SCMR 991; Asad Ali v. The Bank of Punjab PLD 2020 SC 736 and Dr. Muhammad Javaid Shafi v. Syed Arshad and others PLD 2015 SC 212 ref.

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

----Ss.132, 131 & 121---Constitution of Pakistan, Art. 189---Judgments of the Supreme Court---Binding on all Courts---Best judgment assessment---Limitation---Officer Inland Revenue passed order against the taxpayer after passing of 5 years of relevant tax-year, however, the same was confirmed by the Commissioner Appeals---Contention of the appellant / taxpayer was that the order passed by the Officer Inland Revenue was barred by time as the Supreme Court had held that the order under S. 121 of Income Tax Ordinance, 2001 ('Ordinance, 2001') could legally be passed within 5 years after the end of the tax year and/or the income year---Validity---Issue regarding limitation had already been conclusively determined and settled by the Supreme Court through its authoritative pronouncement---Appellate Tribunal Inland Revenue could not re-examine the issue already settled and decided by the Supreme Court which was binding upon the Tribunal under Art.189 of the Constitution---Tribunal set-aside both the orders passed by the Officer Inland Revenue as well as the Commissioner Appeals---Appeal filed by the taxpayer was allowed, circumstances.

Muhammad Hamza Sheikh for Appellant.

Yousaf Ismail, DR for Respondent.

2023 P T D (Trib.) 1788

[Inland Revenue Appellate Tribunal (Karachi Bench)]

Before Qazi Anwer Kamal, Judicial Member and Dr. Tauqeer Irtiza, Accountant Member

Ms. TANVIR SHARAFAT, through her attorney

Versus

The COMMISSIONER INLAND REVENUE, ZONE-II, RTO-I, KARACHI

I.T.A No.838/KB/2022, decided on 21st January, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 122(5A) & 218---Assets Declaration Ordinance (III of 2019), Ss. 3 & 4---Non-resident tax payer---Return of income filed as "Nil"---Assessment order, amendment of---Notices issued through IRIS (portal) only without following and adopting other modes of service of notices---Effect---On the incorrect advice of her tax consultant appellant/taxpayer filed her declaration under Assets Declaration Ordinance, 2019 and declared her old properties therein---In the meantime appellant/taxpayer obtained a second opinion from another tax consultant who advised her not to pay tax and file declaration as this declaration was only for those persons who have unexplained and unreconciled wealth---Consequently appellant/taxpayer did not pay tax thereupon---It is on this non-payment of tax in respect of the declared properties, that the Additional Commissioner treated the deemed order erroneous and prejudicial to the interest of revenue and added total assets shown in declaration under S. 111(1)(b) of the Income Tax Ordinance, 2001 without confronting the taxpayer---Validity---Additional Commissioner only issued notices through IRIS (portal) without following and adopting other modes of service of notices as provided under S. 218 of the Income Tax Ordinance, 2001---Properties in question were purchased by the appellant/taxpayer in 1993 and 1998 from verifiable and reconciled funds---Present matter was a matter of verification of facts and the documents produced before the Appellate Tribunal needed to be checked and verified by the department---Appellate Tribunal remanded present case back to the department for reconsideration to thrash out the issue in the light documents discussed above and verify the claim of the appellant/taxpayer to arrive at a just and judicious conclusion strictly in accordance with law---Appeal was disposed of accordingly.

Muhammad Immad Qamar for Petitioner.

Absent for Respondent.

2023 P T D (Trib.) 1819

[Inland Revenue Appellate Tribunal (Lahore Bench)]

Before Shahid Masood Manzar, Chairman and Anwaar-ul-Haque, Accountant Member

Messrs MUJTABA SAUD TEXTILE, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISALABAD

S.T.As. Nos. 734/LB and 1125/LB of 2022, decided on 2nd November, 2022.

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

----S. 3(1A), First proviso, 6, 7, 22, 23, 26 & 46---S.R.O 648(I)/2013 dated 09-07-2013---Further tax, levy of---Scope---End-consumers---Scope---Appellant(registered person) being a manufacturer/retailer had integrated its point of sale with the Online Computer System of FBR---Alleged discrepancies were pointed out by the Authorities that the appellant had failed to pay amount of further tax---Validity---Appellant admittedly had supplied its textile products to the persons who were neither liable for sales tax registration nor were actually registered under the Sales Tax Act, 1990 ('the Act, 1990'), thus, all of them were "end-consumers"---Appellant had made supplies to the general public for their own use as such, the alleged buyers were end-consumers" whereas liability to pay further tax under S. 3(1A) of the Act, 1990 arose only when a taxable supply was made in the course of business / taxable activity---Meaning of "in furtherance of" was indicative of the fact that the taxable supply had been made for the enhancement or further development of the business / taxable activity---Contrarily, the appellant had supplied the alleged goods to the general public for their own use and the said goods were never used in the course of furtherance of business / taxable activity---Relevant documents (form of registration 181 and computer profile) showed that the appellant was engaged in retail sales of its textile products to end-consumers from his retail outlets---Expression "end-consumer" as used in the S.R.O 648(I)/2013 dated 09-07-2013 was to be interpreted in the light of words associated to it and not in pure isolation as per whims and wishes of the Inland Revenue (officers)---Appeal was allowed, in circumstances.

Collector of Customs Sales Tax and Central Excise and others v. M/s. Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 ref.

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

----S. 3(1A) First proviso---Further tax, levy of---Scope---If the goods are supplied to purchasers other than registered persons i.e. end-consumers, it would, in no case, injure the Government Treasury because the tax is charged on the market price i.e. price to be paid by ultimate consumer, meaning thereby that the Government Treasury collects the ultimate tax ( which it would have collected when supplied goods were actually sold in the market ) well in advance at the time of sale of goods from the sale-outlet or factory manufacturing premises of the taxpayer/registered-person without any fear of returning it to any person in case of refunds because end-consumers cannot claim it as input under the law, therefore, charging of further tax is illegal and unlawful in the given circumstances.

M/s. Nimsay Redefining Style (Pvt.) Limited, Faisalabad v. The CIR, RTO, Faisalabad 2021 PTD (Trib.) 1266 ref.

(c) Interpretation of statutes---

----Ejusdem Generis, rule of---Scope---Said rule provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, disassociated from the context, but these are to be read together and construed in the light of overall context of the provisions of law.

Khubaib Ahmed for Appellant.

Mrs. Sana Aslam Janjua, D.R. for Respondent.

2023 P T D 21

[Islamabad High Court]

Before Babar Sattar, J

EURO TILES AND GRANITE through Proprietor and 4 others

Versus

FEDERATION OF PAKISTAN through Secretary Commerce Division and others

Writ Petition No.4232 of 2016, decided on 29th August, 2022.

(a) Anti-Dumping Duties Act (XIV of 2000)---

----Ss.40 & 55---Constitution of Pakistan, Art.199---Anti-dumping duty---Preliminary determination---Provisional anti-dumping duty---Refund---Principle---Petitioner companies assailed order passed by National Tariff Commission (NTC) rejecting their request for refund of provisional anti-dumping duty imposed on the basis of preliminary determination---Validity---Provision of S.55 of Anti-Dumping Duties Act, 2015 addressed situation where at the end of adjudicatory process NTC would reach a conclusion while making its final determination that there was no injury or threat of injury described under S.55(4) of Anti-Dumping Duties Act, 2015 as negative final determination---National Tarrif Commission was under obligation to issue a refund of "any cash deposit made during the period of application of provisional measures within the period of forty-five days of such determination"--- Issuance of refund was not the product of any adjudicatory process but was a mandatory requirement with a fixed timeline---National Tarrif Commission terminated investigation without imposition of any measures pursuant to S.40 of Anti-Dumping Duties Act, 2015, or issued a negative final determination---Effect of it was that NTC determined that matter before it did not involve any injury or threat of injury to domestic industry and any security deposit received by NTC as a provisional measures pursuant to the provisions of Ss. 43, 44 & 51 of Anti-Dumping Duties Act, 2015 had become refundable automatically pursuant to S.55(4) of Anti-Dumping Duties Act, 2015, which was to be refunded within a period of forty-five days of termination of investigation without imposition of any measures or issuance of a negative final determination as the case could be---High Court set aside order passed by NTC as the same was in breach of S.55(4) of Anti-Dumping Duties Act, 2015---High Court directed NTC to refund cash deposit received as provisional anti-dumping duty within a period of forty-five days---Constitutional petition was allowed accordingly.

M.I. Sanitary Store and others v. The Federation of Pakistan (W.P No. 12255/2014); Fecto Belarus Tractor Ltd. v. Government of Pakistan 2005 PTD 2286 and Messrs Home Life v. National Tariff Commission, Islamabad (W.P 2000 of 2010) distinguished.

Ghulam Mustafa Jatoi v. Additional District and Sessions Judge 1994 SCMR 1299; Mahbub Ahmad v. First Additional District Judge PLD 1976 Kar. 978; Cape Brandy Syndicate v. Inland Revenue Commissioner (1921) 1 K.B. 64; Collector of Customs v. Muhammad Mahfooz PLD 1991 SC 630; Star Textile Mills Ltd. v. Government of Sindh 2002 SCMR 356 and Province of the Punjab v. Muhammad Aslam 2004 SCMR 1649 ref.

(b) Interpretation of statutes---

----Duty of Court---Scope---Court must give meaning and effect to words used by the Legislature in a statue in order to garner legislative intent.

Federation of Pakistan v. Durrani Ceramics 2014 PTD 2016; Jamat-I-Islami v. Federation of Pakistan PLD 2000 SC 111; Standard Printing Press v. Sindh Employee's Social Security Institution 1988 SCMR 91 and Gul Taiz Khan Marwat v. Registrar, Peshawar High Court PLD 2021 SC 391 rel.

(c) Anti-Dumping Duties Act (XIV of 2000)---

----Preamble---Anti-dumping duty---Object, purpose and scope---Object of imposing anti-dumping duty is to prevent infliction of injury on Domestic Industry by import of goods at a price that constitutes dumping.

Salman Farooq and Umer Altaf for Petitioners.

Ahmed Sheraz for NTC and Farrukh Shahzad Dall, A.A.G. for Respondents.

2023 P T D 102

[Islamabad High Court]

Before Athar Minallah, CJ and Sardar Ejaz Ishaq Khan, JJ

PAKISTAN TELEVISION CORPORATION through Company Secretary

Versus

COMMISSIONER INLAND REVENUE (AUDIT-V), LARGE TAXPAYERS OFFICE and 4 others

F.E.R.A. No.04 of 2021, decided on 25th May, 2022.

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

----S.2(12a)---Franchise---Necessary ingredients---To infer a franchise under S. 2(12a) of Federal Excise Act, 2005 necessary ingredients are namely, (i) authority by franchiser, (ii) resultant right acquired by franchisee, (iii) franchised service or product, (iv) fee therefor and (v) identification of product or service with franchiser.

(b) Interpretation of statutes---

----Words in statute---Meaning---Principle---Words in a statute, in absence of express language to the contrary are to be given their ordinary and plain meaning.

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

----Ss.2(12a) & 34-A---Reference---Franchise---Determination---Assessee was aggrieved of order passed by Appellate Tribunal Inland Revenue maintaining order of authorities and assessee was required to pay excise duty on services---Validity---Fee charged for technical services was not per se ground to infer a franchise, when neither S.2(12a) of Federal Excise Act, 2005, so prescribed nor was such a business reality---Name 'technical fee' or 'fee for technical assistance' were mere convenient labels and no more---When two companies charged technical fee for telecommunication network support activities to mobile companies, software companies charge technical fee for customized software deployed in networks, a maintenance and operations service provider charged technical fee to solar power projects, none of such were franchise relationships---Franchise as defined in S.2(12a) of Federal Excise Act, 2005 based on label given in a company's accounts to fee received for services was tantamount to rewriting S.2(12a) of Federal Excise Act, 2005, in its entirety---Television Channel in question was not a franchised service and was not caught by S.2(12a) of Federal Excise Act, 2005---Reference was allowed accordingly.

Honda Atlas Car Pakistan Ltd. v. Federation of Pakistan and others 2016 PTD 1328; Lt. Col. Nawabzada Mohammad Amir Khan v. The Controller of Estate Duty PLD 1961 SC 119; Abdul Haq Khan and others v. Haji Ameerzada and others PLD 2017 SC 105; 1999 SCMR 138; 2007 SCMR 1367; PLD 1987 SC 213; PLD 1973 SC 49 and PLD 1994 SC 894 ref.

Hafiz Muhammad Idrees and Syed Farid Ahmed Bukhari for Applicant.

Babar Bilal, Muhammad Khurram Additional Commissioner and M. Sarim Bhatti, Deputy Commissioner, FBR for Respondents.

2023 P T D 206

[Islamabad High Court]

Before Babar Sattar and Saman Rafat Imtiaz, JJ

Messrs SUN DIPLOMATIC BONDED

WAREHOUSE (PVT.) LTD.

Versus

CUSTOMS APPELLATE TRIBUNAL, BENCH I, ISLAMABAD and 2 others

Customs Reference No.13 of 2016, decided on 22nd November, 2022.

Customs Act (IV of 1969)---

----Ss.25, 81 & 196---Customs Rules, 2001, R.113---Provisional assessment---Transactional value of goods---Goods imported by petitioner / importer were released on the basis of provisional assessment as there was dispute with regard to transactional value of goods---Validity---By the time order was passed by Collector of Customs to finalize provisionally assessed cases of goods imported by petitioner / importer in terms of Ss.25(5) & 25(6) of Customs Act, 1969, limitation period provided under S.81(2) of Customs Act, 1969 had already expired---Provisional determination made in respect of subject Goods Declarations was deemed to be final determination by virtue of S.81(4) of Customs Act, 1969---Valuation purportedly conducted under Ss.25(5) & 25(6) of Customs Act, 1969 was without satisfying pre-requisites and conditions stipulated therein nor was it in accordance with the applicable Customs Rules, 2001---High Court set aside orders passed by the forums below---Provisional determination had attained finality therefore security lying with authorities was to be released to petitioner/importer---Reference was allowed, in circumstances.

Collector of Customs Lahore v. Messrs Fazal Illahi & Sons 2015 SCMR 1488; Sadia Jabbar v. Federation of Pakistan and another 2018 PTD 1746; Sadia Jabbar v. Federation of Pakistan 2012 SCMR 617; The Collector of Customs v. Messrs Faco Industries 2017 PTD 2474; Sus Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan 2011 PTD 235; Messrs Faiz Chemical Industries (Pvt.) Ltd. v. Collector of Customs, Model Customs Collectorate of Appraisement 2022 PTD 1183 and Messrs Rehan Umar v. Collector of Customs and 2 others 2006 PTD 909 ref.

Sikandar Naeem Qazi for Applicant.

Riffat Hussain Malik for Respondents.

2023 P T D 316

[Islamabad High Court]

Before Aamer Farooq, J

Messrs ASKARI BANK LIMITED through Senior Executive Vice President

Versus

FEDERATION OF PAKISTAN through Chairman Federal Board of Revenue and 4 others

Writ Petitions Nos.1154 of 2017, 1356 and 1352 of 2018, decided on 4th October, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.49, 161(1A) & 205---Constitution of Pakistan, Art. 199---Show-cause notice, assailing of---Exemption from deduction of withholding tax---Failure to pay tax, collected or deducted---Petitioner / company assailed show-cause notices on the plea that Armed Forces were exempted from deduction of withholding tax---Validity---Show-cause notices in question were not subject to challenge under Art.199 of the Constitution---Principles which were applied to make a Constitutional petition maintainable against notices, were not attracted in the facts of circumstances of petitioner/company---Petitioner / company was to contest the notices and put forward its stance in the light of legal provisions which have already been held to be applicable to Appellate Tribunal Inland Revenue---High Court declined to interfere in the matter and petitioner / company could reply to the notices by taking all factual and legal objections to the same to be decided by competent authority in accordance with law---Constitutional petition was dismissed in circumstances.

PKP Exploration Limited v. Federal Board of Revenue 2021 PTD 1644; Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Limited PLD 1992 SC 562; Commissioner of Income Tax, East Pakistan, Dacca v. Wahiduzzaman PLD 1965 SC 171; BP Pakistan Exploration and Production INC. Karachi v. Additional Commissioner Inland Revenue Enforcement Collection Division, Karachi 2011 PTD 647; Rajab Ali Hamani Karachi v. Commissioner Income Tax, Karachi 2011 PTD 925; Messrs Riaz Bottlers (Pvt.) Ltd. Lahore v. Commissioner of Income Tax, Companies Zone-I, Lahore 2008 PTD 877 and Sultan Paper Board Mills Ltd. v. Federation of Pakistan and others 1982 PTD 359 rel.

Hafiz Muhammad Idrees and Syed Farid Ahmad Bukhari for Petitioner.

2023 P T D 351

[Islamabad High Court]

Before Mohsin Akhtar Kayani and Babar Sattar, JJ

Messrs ARMY WELFARE TRUST, RAWALPINDI

Versus

COMMISSIONER OF INCOME TAX

Tax Reference No.50 of 2005 and I.T.R. No.4 of 2009, decided on 7th April, 2022.

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

----Ss.2(29), 9, 10, 11, 80(2)(b)(v), 133 & Second Sched., Part-I, Cl.58(2)(1)---Income Tax Ordinance (XXXI of 1979), Ss.2(24), 11, 15, 23(1)(x) & Second Schedule, Part-I, Cl. 62(1)---Income of trust---Tax exemption---Overriding title---Applicant/Trust sought exemption on the plea that its income was diverted by virtue of overriding title of Directorate of Army controlling the affairs of applicant/Trust and other projects---Validity---Concept of overriding title leading to diversion of income had no application when had come to income of a trust or society or a charitable institution---Constituent documents of such entity constrain its ability to determine freely how the income was to be used once it had reached the entity, who was not free and autonomous to use it as it pleased---Constituent documents of the entity determined how income was to be employed or even who all would be the beneficiaries of such income---Such constraint did not transform income of welfare entity (whether constituted as a S. 42 company or a trust or a society) into that of the beneficiaries---Once income had reached the entity (i.e. the taxpayer), it qualified as income under Ss.2(24) & 11 of the Income Tax Ordinance, 1979 and Ss. 2(29), 9 & 10 of Income Tax Ordinance, 2001---Manner in which such income was to be employed was a question of its utilization and not that of overriding title--- Income that had reached a taxpayer or accrued to it, notwithstanding the manner of its utilization, remained income in the hands of taxpayer and was to be taxed as such---What qualified as "income" under Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 was income liable to tax in the hands of taxpayer who was in receipt of such income---Applicant / Trust was under no legal obligation to transfer its entire income to the Directorate due to legal necessity---Even in the event that the constituent documents of applicant / Trust stated that its entire income would be employed in welfare activities through another organization such as the Directorate, such arrangement for utilization of income of applicant / Trust would still not create any overriding title in favour of Directorate over the properties and income of applicant / Trust to the extent that applicant / Trust had received income generated by assets and projects owned by it and such income would be liable to tax in the hands of applicant / Trust---Reference was disposed of accordingly.

Octavius Steel Company, Ltd. v. The Commissioner of Income Tax, Dacca PLD 1960 SC 371; Commissioner Inland Revenue v. Multan Educational Trust 2014 PTD 402; The Commissioner of Income Tax v. Shri Sitaldas Tirathdas AIR 1961 SC 728; Bejoy Singh Dudhuria v. The Commissioner of Income Tax (1933)1 ITR 135 and Associated Power Company Ltd. v. Commissioner of Income Tax AIR 1996 SC 894 ref.

The Commissioner of Income Tax, East Pakistan, Dacca v. The Liquidator, Khulna-Bagerhat Railway Company Ltd., Ahmadabad PLD 1962 SC 128; Commissioner of Inland Revenue v. Korean Syndicate Limited 1 KBD 598 e 603; Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan, Lahore and others 2004 SCMR 1319; Lucky Cement Ltd. v. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar 2015 SCMR 1494; Tuticorin Alkali Chemicals and Fertilizers Ltd. v. Commissioner of Income Tax 1997 Supp. (1) SCR 528 and 1998 PTD 900 rel.

(b) Co-operative Societies Act (VII of 1925)---

----Ss.3 & 5---Cooperative Society---Status---Society is a juristic person and body incorporated and formed under Cooperative Societies Act, 1925---As legal personality of society registered under Cooperative Societies Act, 1925 becomes distinct from personality of natural persons who come together to create the society, it becomes a body corporate formed as a legal person by virtue of its registration under Cooperative Societies Act, 1925.

Commissioner Inland Revenue (Legal Division) v. Messrs Multan Educational Trust 2014 PTD 420 and Commissioner of Income Tax/Wealth Tax Companies Zone-II, Lahore v. Messrs Lahore Cantt. Cooperative Housing Society, Lahore 2009 PTD 799 rel.

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

----Second Sched., Part I, Cl. 58(1)---Income Tax Ordinance (XXXI of 1979), Second Sched., Part I, Cl. 62(1)---Tax exemption---Trust, entitlement of---Army Welfare Trust is a welfare institution and is entitled to seek exemption under Second Schedule, Part I, Cl. 62(1) of Income Tax Ordinance, 1979 as well as under Second Sched., Part I, Cl. 58(1) of Income Tax Ordinance, 2001, in relation to "income from business as is expended in Pakistan for purposes of carrying out welfare activities" to the extent permissible under such clauses.

(d) Words and phrases---

----Expend---Meaning.

Oxford Advanced Learner's Dictionary rel.

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

----Second Sched., Part I, Cl. 58(1)---Income Tax Ordinance (XXXI of 1979), Second Schedule, Part I, Cl. 62 (1)---Tax exemption---Welfare activity---Onus to prove---Onus of discharging obligation of establishing that a certain amount from income from business has been expended in carrying out welfare activities in tax year in question rests with the taxpayer.

(f) Income tax---

----Profit margin---Determination---Taxation officer, discretion of---Scope---Taxation officer has no discretion to determine in arbitrary manner profit margin that he finds reasonable in relation to a certain income stream---What is vested in taxation officer under Income Tax Ordinance, 2001 is not discretion but a right to exercise judgment while reassessing income pursuant to provisions of Income Tax Ordinance, 2001---Where such judgment is being exercised in a manner that rejects the treatment afforded to income by taxpayer, the taxation officer is under an obligation to provide reasons for the manner in which he/she has chosen to exercise judgment---Without such reasons, which are justiciable, rejection of tax treatment afforded by taxpayer or change in profit margin applied bytax department cannot be countenanced---Tax authorities cannot arbitrarily apply a profit margin.

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

----S.29---Bad debts---Pre-condition---For purposes of any tax year in relation to which either Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 is applicable, a necessary precondition for any debt to qualify as bad debt is for the taxpayers to have written off such debt in its books and accounts for such tax year as bad debt--- Such written off amount in lieu of bad debts then determines ceiling of bad debt in lieu of which adjustment can be sought in relation to a particular tax year---Treatment in the books and accounts of debt in relation to which taxpayer seeks a deduction on account of it being bad debt as having been written off in relevant tax year is a necessary precondition---Once such condition is met, the second condition to be satisfied is reasonability of belief that such written off debt is irrecoverable---Where a taxpayer has not written off debt within its own books and accounts for relevant tax year for having become irrecoverable, question of seeking deduction for such debt as bad debt does not arise.

Commissioner of Income-Tax v. National Bank of Pakistan Karachi PLD 1976 Kar. 1025; Commissioner Inland Revenue (Zone-I), Karachi v. Messrs Faisal Bank Limited 2020 SCMR 1045 and Commissioner of Income Tax (Legal), Islamabad v. Askari Commercial Bank Limited, Rawalpindi 2018 PTD 1089 rel.

Khaliq uz Zaman Khan for Applicant.

Saeed Ahmed Zaidi, Dr. Farhat Zafar, Sheikh Anwar ul Haq, Babar Bilal and Ms. Shazia Bilal for Respondents.

2023 P T D 390

[Islamabad High Court]

Before Tariq Mehmood Jahangiri and Babar Sattar, JJ

COMMISSIONER INLAND REVENUE (ZONE-II) LTU, ISLAMABAD

Versus

Messrs INTERNATIONAL WIRELESS COMMUNICATION PAKISTAN LTD.

I.T.R. No.32 of 2013, decided on 5th April, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistakes---Scope---Commissioner issued an exemption for the purposes of S. 152(5-A) allowing the respondent to make certain payments to a foreign company---Commissioner, after a period of four years, issued an order under S. 221 holding that the payment made by respondent was liable to withholding tax---Commissioner (Appeals) allowed the appeal of taxpayer---Appellate Tribunal dismissed the appeal of department---Validity---Income Tax Ordinance, 2001, vested no power in Commissioner to undertake a review of its previous order in exercise of authority under S.221 of the Income Tax Ordinance, 2001---Such exemption could not have been withdrawn retrospectively after a period of four years on the basis that the Commissioner granting such exemption had mis-interpreted provisions of the treaty---In the event that there were two reasonable interpretations of the provisions of the treaty which were possible and the Commissioner had opted for one such interpretation, such exercise of judgment could not have been overridden by another Commissioner to prefer a different interpretation of the treaty provisions---Such exercise tantamounted to a review of the decision previously made and not a rectification of any mistake apparent from the record for purposes of S. 221, Income Tax Ordinance, 2001---Scope of S. 221 had been appreciated by the Appellate Tribunal in its true perspective and needed no interference---Reference was answered accordingly.

2023 P T D 455

[Islamabad High Court]

Before Athar Minallah, CJ and Babar Sattar, J

The ATTOCK OIL COMPANY LIMITED

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD and others

Income Tax Reference No.80 of 2007 and 13 of 2019, decided on 31st March, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Income Tax Ordinance (XXXI of 1979), S.26(b), Fifth Schedule, Part-I, Rr.3 & 6(10)---Pakistan Petroleum (Exploration and Production) Rules, 1986, Rr. 2(k) & 38---Reference---Wellhead value---Depletion allowance, calculation of---Deduction of royalty amount---Issue was with regard to calculating depletion allowance and deduction of amount of royalty---Validity---Wellhead value under R.2(k) of Pakistan Petroleum (Exploration and Production) Rules, 1986, meant market value of petroleum as calculated for the purposes of R.38 of Pakistan Petroleum (Exploration and Production) Rules, 1986, after excluding gathering, processing, treatment and transportation costs of such petroleum---Definition of wellhead value as incorporated by reference in R.6(10) of Part-I of Fifth Schedule to Income Tax Ordinance, 1979, did not allow reading into such definition exclusion of royalty payable by petroleum exploration and production companies to government for purposes of calculation of depletion of allowance under R. 3 of Part-I of Fifth Schedule to Income Tax Ordinance, 1979---For the purpose of calculating depletion allowance under R.3 Part-I of Fifth Schedule to Income Tax Ordinance, 1979, amount of royalty paid by taxpayer to government was not to be deducted while computing wellhead value---Reference was disposed of accordingly.

Amanullah Khan v. Chief Secretary, Government of N.W.F.P 1995 SCMR 1856; Nadeem Ahmed Advocate v. Federation of Pakistan 2013 SCMR 1062; Gul Taiz Khan Marwat v. Registrar, Peshawar High Court PLD 2021 SC 391; Cape Brandy Syndicate v. Inland Revenue Commissioner (1921) 1 K.B. 64; Collector for of Customs v. Muhammad Mahfooz PLD 1991 SC 630; Star Textile Mills Ltd. v. Government of Sindh 2002 SCMR 356 and Province of the Punjab v. Muhammad Aslam 2004 SCMR 1649 rel.

Makhdoom Ali Khan, Saad M. Hashmi, Rashid Anwar, Ali Mehdi, Hafiz Muhammad Idrees, Syed Farid Bukhari, Ms. Ayesha Hamid, M. Abdul Wali Irfan, Aziz ul Haq Nishtar, Abad ur Rehman and Umair Majeed Malik and Muhammad Akif Khan, Deputy Chief Legal, PPL for Applicants.

Saeed Ahmed Zaidi, Syed Ishfaq Hussain Naqvi, Dr. Farhat Zafar, Babar Bilal, Sheikh Anwar ul Haq and Ms. Shazia Bilal for Respondents.

2023 P T D 505

[Islamabad High Court]

Before Aamer Farooq, J

Messrs PAKISTAN OILFIELDS LIMITED through Managing Director

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 4 others

Writ Petition No.1951 of 2017, decided on 22nd September, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S.122(5A) & (9)---Constitution of Pakistan, Art.199---Constitutional petition--- Amendment of assessment---Pre-conditions---Petitioner / assessee was aggrieved of show-cause notice issued by authorities to amend its assessment---Authorities objected to maintainability of petition against show cause notice---Validity---Petition under Art. 199 of the Constitution against a show-cause notice was maintainable in limited circumstances---Notice under S.122(9) of Income Tax Ordinance, 2001 did not lie if assessment order was not erroneous so as to be prejudicial to the interest of the revenue---Only such two factors were attracted S.122(9) of Income Tax Ordinance, 2001 and would be maintainable, otherwise it was not valid and barred by law---Show-cause notice did not show that Additional Commissioner issuing the notice elaborated erroneous elements in assessment order and a resultant prejudice caused to the Revenue---Both the terms could not be segregated and apply independently---It had to be mentioned by the Additional Commissioner pointing out erroneous assessment and resultant prejudice which did not find mentioned in show-cause notice in question---High Court set aside show-cause notice and remanded the matter to Additional Commission Income Tax to consider issue of assessment as erroneous so as to cause prejudice to revenue initially---High Court directed the Authority to proceed to decide on merits only after he would reach the conclusion that elements of S.122(5A) of Income Tax Ordinance, 2001, were attracted---Constitutional petition was allowed accordingly.

Messrs S.N.H. Industries (Pvt.) Ltd. v. Income-Tax Department and another 2004 PTD 330; Glaxo Laboratories Limited v. Inspecting Assistant Commissioner of Income-Tax and others 1992 PTD 932; Pakistan Oilfields Limited v. Federation of Pakistan and others 2022 PTD 413; Commissioner Inland Revenue and others v. Jahangir Khan Tareen and others 2022 SCMR 92; Malabar Industrial Co. Ltd. v. Commissioner of Income-tax 2001 PTD 1106; Chairman, Lahore Gymkhana Club and others v. Basharat Ali and others 2019 PLC 162; Akhtar Ali v. Altafur Rehman PLD 1963 Lah. 390 and Rasheed Ahmed v. Chief Settlement Commissioner and others 2020 MLD 108 rel.

Abad-ur-Rehman for Petitioner.

2023 P T D 569

[Islamabad High Court]

Before Miangul Hassan Aurangzeb and Babar Sattar, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs ISLAMABAD ELECTRIC SUPPLY COMPANY LIMITED, ISLAMABAD (IESCO)

Income Tax Reference No.253 of 2015, decided on 19th January, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133 , 161 & 174---Constitution of Pakistan, Art.10-A---Reference---Tax demand---Record, maintenance of---Limitation---Failure to pay tax collected or deducted---Authorities issued notice for recovery of tax for the period beyond six years---Appellate Tribunal Inland Revenue set aside the demand created by tax authorities as the same was barred by time---Validity---In the event that State generates a tax demand by making an adverse presumption against taxpayer that he has not discharged his obligation to withhold tax on behalf of the State, due to failure of such taxpayer to produce tax records, even though the time period prescribed by law for preservation and maintenance of tax records has already passed, such demand cannot be considered to be in accordance with law and qualifies as confiscatory in nature---Such adverse presumption by tax authorities due to failure of production of tax records after prescribed period under S.174 of Income Tax Ordinance, 2001, fell foul of the guarantee under Art. 10-A of the Constitution, which promises that civil rights and obligations are to be adjudicated fairly through due process---Any tax demand generated pursuant to proceedings initiated under S.161 of Income Tax Ordinance, 2001, on the basis of taxpayer's failure to produce tax record beyond the period prescribed for preservation of such records under S. 174 of Income Tax Ordinance, 2001, was not backed by legal authority--- Reference was dismissed, in circumstances.

Habib Bank Ltd. v. Federation of Pakistan through Secretary, Revenue Division and 5 others 2013 PTD 1659; The Commissioner Inland Revenue, Zone-1, LTU v. MCB Bank Limited 2021 SCMR 1325; Maple Leaf Cement Factory Ltd. v. Federal Board of Revenue 2016 PTD 2074 and Commissioner Inland Revenue, Zone-IV, Lahore v. M/s Panther Sports and Rubber Industries (Pvt.) Ltd. and others 2022 SCMR 1135 ref.

Saeed Ahmed Zaidi for Applicant.

2023 P T D 603

[Islamabad High Court]

Before Aamer Farooq, C.J. and Saman Rafat Imtiaz, J

COMMISSIONER OF INCOME TAX/WEALTH TAX, ISLAMABAD and others

Versus

HAMEEDA BEGUM and others

Tax Appeals Nos.147, 123, 124, 238, 290, 291 and 292 of 2000, decided on 8th February, 2023.

Income Tax Ordinance (XLIX of 2001)---

----S.136---Registration Act (XVI of 1908), S. 17---Assessment---Oral gift---Non-registration of gift declaration---Authorities were aggrieved of accepting unregistered oral gift of immovable property held by assessee---Validity---Gift deed executed under Transfer of Property Act, 1882, was required to be registered compulsorily in light of S.17 of Registration Act, 1908, which provided that transfer of immovable by way of deed, was to be registered---Oral gift was exception to that and the same was duly acknowledged by Courts of the country---Oral gift conferred valid title upon donee, provided three elements recognized for same were present viz offer of gift, acceptance of the same and delivery of possession of the property in question---Fact that in relevant records, gift had not been transferred was immaterial and the same could not bean invalid gift---Such legal position stood confirmed and had remained subject matter of ample consideration without any ambiguity---For the purposes of income tax laws, it would be only appropriate that transaction of property, whether it was sale, gift or through any other means, be recorded in revenue record to avoid chances of tax avoidance---Gift could not be invalid only because of the fact that it was not recorded in relevant record of the regulator or custodian of the property---High Court declined to interfere in judgment passed by Income Tax Appellate Tribunal---Appeal was dismissed, in circumstances.

Muhammad Zaman Khan v. The Additional Chief Land Commissioner and another 1986 SCMR 1121 and Mst. Saadia v. Mst. Gul Bibi 2016 SCMR 662 rel.

Mustasim Malik Toor for Appellant.

2023 P T D 704

[Islamabad High Court]

Before Aamer Farooq, C.J.

JS BANK LIMITED through duly authorized/attorney and others

Versus

PAKISTAN through Secretary Revenue and Ex-officio Chairman Federal Board Revenue, Islamabad and others

Writ Petitions Nos.3709 and 4095 of 2016, decided on 31st January, 2023.

Federal Excise Act (VII of 2005)---

-----Ss. 19(6) & 21---Constitution of Pakistan, Art.199---Constitutional petition---Show-cause notice without jurisdiction---Criminal proceedings, initiating of---Pre-conditions---Petitioners were aggrieved of proceedings initiated by authorities on the allegation of obstructing tax recovery process--- Plea raised by authorities was that petitioners had alternate remedy of appeal available to them---Validity---Objection taken to maintainability of constitutional petition by authorities was without substance, as order passed by authorities was without jurisdiction and the matter was rightly agitated in a petition under Art.199 of the Constitution, without availing statutory right of appeal---Petition under Art.199 of the Constitution was maintainable against show-cause notice which was without jurisdiction and lawful authority---Petitioners were slapped with criminal liability without adopting course of action as provided in Federal Excise Act, 2005---High Court apprehended that if such course was allowed as a matter of routine, that would bring chaos and would displace criminal jurisprudence---Questions raised by petitioners were of paramount importance, viz, in presence of proper procedure provided for adjudication of criminal trial, imposition of fine in the garb of penalty through an executive order would amount to high handedness on the part of authorities and would be without lawful authority---High Court in exercise of Constitutional jurisdiction set aside show-cause notices and orders-in-original passed against petitioners---Constitutional petition was allowed, in circumstances.

S.A. Haroon v. Collector of Customs PLD 1959 SC 177; M. Amir Khan v. Controller of Estate Duty PLD 1961 SC 119; Pakistan v. Qazi Zia ud Din PLD 1962 SC 440; Nagina Silk Mills v. Income Tax Officer PLD 1963 SC 322; Murree Brewery v. Pakistan PLD 1972 SC 279; Premier Cloth Mills v. Sales Tax Officer 1972 SCMR 257; Town Committee v. Authority-under Payment of Wages Act PLD 2002 SC 452; National Bank of Pakistan v. Sacked Employees Review Board Establishment Division 2019 PLC (C.S.) 1516; Kinza Anwar v. Office of the Ombudsman for Protection against Harassment of Women at Workplace 2022 CLC 1477; Hydri Ship Breaking Industries v. Sindh Government 2007 MLD 770; Usmania Glass Sheet v. Sales Tax Officer 1971 PTD 1; Edulji Dinshaw Ltd. v. Income Tax Officer 1990 PTD 1155; Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; Oil and Gas Company v. FBR 2016 PTD 1675; Dowell Schlumberger (Western) SA v. Pakistan (W.P. No.1486 of 2016); Khyber Pakhtunkhwa Exploration Limited v. Federal Board of Revenue 2021 PTD 1644; Shahnawaz (Pvt.) Ltd. v. Pakistan 2011 PTD 1558; Engro Vopak Terminal Ltd. v. Pakistan 2012 PTD 130; Association of Builders and Developers of Pakistan 2018 PTD 1487; State v. Zia Ur Rehman PLD 1973 SC 49; Maula Dad Khan v. West Pakistan Council PLD 1975 SC 469; Pakistan Fisheries Ltd. v. United Bank Limited PLD 1993 SC 109; Amba Lal v. Union of India AIR 1961 SC 264; Manicklal Sen v. Additional Collector of Customs AIR 1965 Cal. 527 and Commissioner of Income Tax v. Aasia Film Artist 2001 PTD 678 ref.

Hyder Ali Khan for Petitioners.

2023 P T D 803

[Islamabad High Court]

Before Mohsin Akhtar Kayani, J

D-WATSON CHEMIST AND SUPER STORE and others

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.608 3124, 699, 650, 610, 609, 576, 446, 321, 313 of 2020 and 2538, 646 of 2021, decided on 18th October, 2021.

(a) Interpretation of statutes---

----Harmonious interpretation---Court, duty of---Statute cannot be read in isolation and Courts have to protect Constitutionality of statutes on the principle of interpretation of statues.

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

----Ss.2(43A) & 50---Federal Excise Act (VII of 2005), S. 40---Customs Act (IV of 1969), S.219---Constitution of Pakistan, Art. 199---SRO No.470 (I)/2007, dated 09-06-2007---SRO No. 494(I)/2015, dated 30-06-2015---SRO No.1360(I)/2018, dated 12-11-2018 and SRO No.1203(I)/2019, dated 10-10-2019---Constitutional petition---Tier-1 Retailer--- Classification of retailers---Point of Sale (POS) software, installing of---Monitoring of sales---Petitioner/taxpayers were retailers and aggrieved of directions issued by authorities to install Point of Sale, software for monitoring of their sales--- Validity---Rules promulgated through SRO No. 470 (I)/2007, dated 09-06-2007, SRO No. 494 (I)/2015, dated 30-06-2015, SRO No.1360 (I)/2018, dated 12-11-2018 and SRO No.1203(I)/2019, dated 10-10-2019 were rightly made within the four corners of its parent laws under the principle of delegated rule making authority---Tier-1 retailers had to integrate their retail outlets through computerized system for real time reporting of their sales---Federal Board of Revenue under S.40 of Federal Excise Act, 2005, was empowered to implement monitoring or tracking of production, sales, clearances, stocks or any other related activity in respect of any registered person or class of registered persons or any goods or class of goods through electronic or other means, as could be prescribed---Federal Board of Revenue was empowered under S.219 of Customs Act, 1969, to make rules for carrying out purpose of Customs Act, 1969---Provisions of S.50 of Sales Tax Act, 1990, also stipulated that the Board could prescribe use of computerized system for carrying out purposes of law---Power so vested was rightly used therefore, question raised by the petitioners / taxpayers regarding non-reasonability of classification of individuals who had been covered in Tier-1 was not legally justified---There was wide scope available to policy domain of Government who could amend definition (in a provision) while considering emerging needs and could not be restricted within the same definition, subject to its own policy domain--- Point of Sale was not harmful concept against petitioners / taxpayers who were just middle persons who were collecting agents, receiving sales tax from consumers / end users and transmitting the same to Government Treasury for which transparent monitoring system with modern concept of technology was required---High Court declined to interfere in the matter as the policy was rightly applied and there was no violation of fundamental rights of Tier-1 Retailers, nor were they aggrieved in any strict sense---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; Jameel Sweets v. Federation of Pakistan and others 2020 PTD 752; Gwalior Rayon Silk MFG (WVG) Co. v. Assistant Commissioner of Sales 1973 SCR (2) 879; Khawaja Ahmad Hassan v. Government of Punjab and others 2005 SCMR 186; Zarai Taraqiati Bank Ltd. v. Said Rehman and others 2013 SCMR 642; Khalid Mehmood v. NWFP through its Chief Secretary Peshawar and others PLD 2011 Pesh. 120; Molasses Trading and Export Co. (Pvt.) Limited v. Government of Pakistan and others 2007 PTD 1005; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582; National Engineering Service Pakistan NESPAK (Pvt.) Ltd. v. Kamil Khan Mumtaz and others 2018 SCMR 211; Dossani Travels (Pvt.) Ltd. v. Travels Shop (Pvt.) Ltd. PLD 2014 SC 1; Shahid Pervez v. Blitz Ahmad and others 2017 SCMR 206 and Ghulam Rasool v. Government of Pakistan PLD 2015 SC 6 ref.

Hafiz Muhammad Idress, Muhammad Mohsin Nazir, Syed Farid Bukhari, Ch. Naeem-ul-Haq, Muhammad Musawar Gill, Abdul Hameed Khan Kundi for Petitioners in their respective petitions.

Syed Ishfaq Hussain Naqvi, Sheikh Anwar-ul-Haq and Arshad Mehmood for Respondents.

2023 P T D 919

[Islamabad High Court]

Before Sardar Ejaz Ishaq Khan, J

FAIRDEAL EXCHANGE COMPANY (PRIVATE) LIMITED through Director of Company

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and 3 others

Writ Petitions Nos.35 and 136 of 2022, decided on 27th January, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss.120, 171(1), 177(1) & 214C---Constitution of Pakistan, Art.199---Constitutional petition---Audit Selection Regime---Petitioners / taxpayers were aggrieved of selection of their cases for Audit---Validity---Selection for audit under S. 177(1) of Income Tax Ordinance, 2001, by Commissioner Inland Revenue was not contingent on selection for audit by Board under S.214C of Income Tax Ordinance, 2001---Such was the position regardless of creeping erosion of deemed assessment status of a tax return under S.120 of Income Tax Ordinance, 2001---Audit could or could not lead to an amended assessment and audit report was subject to audi alteram partem and was to be issued only after obtaining taxpayers explanation---Another opportunity of hearing was to be afforded before amending assessment following the hearing on audit report---Audit selection notice under S.177 (1) of Income Tax Ordinance, 2001, must place reasons for selection and the reasons must be communicated to taxpayer---If reasons given for selection were manifestly inadequate, the notices would be set aside or remanded for the revenue to give proper reasons after hearing the tax payer---Law did not invariably require a two step progression to audit where proper reasons were given in audit-selection notice---Audit could proceed without an intermediate hearing and speaking order by Commissioner and preliminary audit was not required---Where audit-selection notice identified discrepancies between salary expense and withholding taxes deducted on salaries, incorrect proration of expenses, unexplained cash expenses and several others with discrepant numbers given where available, such reasons met the required standard---Constitutional petition was disposed of accordingly.

Pakistan Telecommunication Company Limited v. Federation of Pakistan 2016 PTD 1484; Kohinoor Sugar Mills v. Federation of Pakistan and others 2018 PTD 821; The Federal Board of Revenue and others v. Messrs ChenOne Store Ltd. 2018 PTD 208; Pakistan Tobacco Company Limited v. Federation of Pakistan and others 2022 PTD 1574; Commissioner of Inland Revenue, Sialkot v. Allah Din Steel and Rolling Mills 2018 SCMR 1328 and CellandGene Pharma v. F.O.P. 2022 PTD 1464 ref.

Faisal Rasheed Ghouri for Petitioner (in W.P. No.35 of 2022).

Barrister Atif Rahim Barki for Respondents Nos.2 to 4 (in W.P. No.35 of 2022).

Ch. Tahir Mehmood, A.A.G. (in W.P. No.35 of 2022).

Hafiz Muhammad Idris for Petitioner (in W.P. No.136 of 2022).

Babar Bilal for Respondents Nos.1 to 3, Ch. Muhammad Tahir Mehmood, A.A.G. assisted by Masood Akhtar, Commissioner IR Audit LTU and Muhammad Faheem, Deputy Commissioner, IR Unit, LTU, Islamabad for Respondents (in W.P. No.136 of 2022).

2023 P T D 1095

[Islamabad High Court]

Before Babar Sattar, J

Messrs FIRST MICRO FINANCE BANK LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.4793 of 2016, decided on 25th February, 2021.

Income Tax Ordinance (XLIX of 2001)---

----Ss.147 & 205---Advance tax paid by the taxpayer---Default surcharge---Scope---Taxpayer has the right to file an estimate of the advance tax payable under S. 147(6) of the Income Tax Ordinance, 2001 and thereafter pay an amount that the taxpayer deems to be due in accordance with such estimate---Income Tax Ordinance, 2001 vests no authority in the taxation authorities to recover the amount that they deem to be due under S. 147 in contradiction of any tax estimate filed by the taxpayer under S. 147(6)---Scheme of the Income Tax Ordinance, 2001, is based on self assessment undertaken by the taxpayer---Income Tax Ordinance, 2001, vests power in taxation authorities to undertake reassessment of the tax return filed by a taxpayer in compliance with the provisions of the Ordinance and seek recovery of any non-payment or short payment on the basis of such reassessment---Section 147(6) also enables taxpayer to self-assess advance tax liability to the extent that such taxpayer estimates that the tax payable for the relevant tax year is likely to be less than the amount he is required to pay under S. 147(1)---In the event that the estimate filed by the taxpayer under S.147(6) is incorrect, a remedy is provided under S. 205 to impose a surcharge to the extent of short payment to penalize the taxpayer---This interpretation of law is further strengthened by the provisions of the Finance Act, 2018, pursuant to which a proviso was added to section S. 147(6) of the Ordinance which provides taxation authorities with the authority erstwhile not extended i.e. to affect recovery if such authorities come to the conclusion that the estimate filed under S. 147(6) is misconceived.

Commissioner (Legal) Inland Revenue v. E.N.I Pakistan (M) Ltd., Karachi 2011 PTD 476; Karachi Port Trust, Karachi v. Commissioner. Inland Revenue Karachi 2011 PTD 1996 and Messrs Pak Telecom Employees Trust v. Federation of Pakistan and others (W.P. No. 2462/2016) rel.

Hafiz Muhammad Idrees and Syed Farid Bukhari for Petitioners.

Raja Saad Sultan, Assistant Attorney General for Respondent.

Imdad Hussain, Inland Revenue Officer for Respondents.

2023 P T D 1833

[Islamabad High Court]

Before Arbab Muhammad Tahir, J

CHIEF COMMISSIONER ICT

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.4600 of 2021, decided on 15th March, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S. 122-A---Constitution of Pakistan, Art. 199---Constitutional petition---Revision by the Commissioner---Alternate remedy, availing of---Scope---Taxpayer assailed order issued under S. 140 of the Income Tax Ordinance, 2001, read with R. 69 of the Income Tax Rules, 2002, by the Assistant Commissioner Inland Revenue whereby a bank was required to remit outstanding tax from the official accounts of the taxpayer to the Commissioner Inland Revenue through pay order, demand draft or through cheque---Validity---Taxpayer had assailed the assessment orders by filing applications under S. 122-A of the Income Tax Ordinance, 2001---As the taxpayer had already availed alternate efficacious remedy before appropriate forum against the assessment orders, there was no need left to comment upon merits of the case---Constitutional petition was disposed of accordingly.

Rabi Bin Tariq, State Counsel.

Syed Ashfaq Hussain Naqvi and Muhammad Akhtar Abbasi for Respondents Nos.2 to 5.

Syed Nazar Hussain Shah, A.A.-G. for Respondent No.1.

2023 P T D 9

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Messrs ZAKWAN STEEL and others

Versus

The FEDERATION OF PAKISTAN through Secretary (Revenue/Chairman) and others

C.Ps.Nos.D-7101 of 2021 and D-1641 of 2022, decided on 27th June, 2022.

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

----Ss.25 & 25-A---Goods declaration---Imported goods---Determination of value---Methodology---Petitioners/importers were aggrieved of act of Customs authorities applying London Metal Bulletin (LMB) prices as existed on date of Bill of Lading instead of date of Registered Bank Contracts---Plea raised by petitioners was that Customs Authorities wrongly applied the methodology as petitioners had to pay duties and taxes at an exorbitant rate---Validity---Legislature specifically provided in S.25(10) of Customs Act, 1969, that S.25 (1), (5), (6), (7), (8) and (9) of Customs Act, 1969 had defined as to how customs value of imported goods was to be determined--- Methods of customs valuation were required to be applied in a sequential order except reversal of order of S.25 (7) and (8) of Customs Act, 1969, at importer's, request, if so agreed by Customs Authorities---Customs value of imported goods were to be the transaction value i.e. price actually paid or payable for goods when sold for export to Pakistan---High Court set aside assessment made by Customs Authorities from Bill of Lading through LMB instead of date of Bank Registered Contract, as the same was ultra virus the S.25A of Customs Act, 1969---High Court declared that such valuation was without legal effect and directed that consignments of petitioner/importers were to be valued on declared value via Bank Registered Contract and petitioners / importers were only liable to pay duty, taxes etc. on such basis---High Court further declared that excessive pricing was anti-productive as it would fuel inflation as well as depletion of foreign reserves---Constitutional petition was allowed accordingly.

Sky Overseas v. The Federation of Pakistan 2019 PTD 1964 ref.

Rehan Umer v. Collector of Customs 2006 PTD 909; Najam Impex Lahore v. Asst. Collector of Customs, Karachi 2008 PTD 1250; Faco Trading Co. v. Member Customs, Federal Board of Revenue 2013 PTD 825; Goodwill Traders Karachi v. Federation of Pakistan 2014 PTD 176 and Sadia Jabbar v. Federation of Pakistan 2018 PTD 1746 = PTCL 2014 CL 537 rel.

(b) Administration of justice---

----Good Governance---Scope---Object of good governance cannot be achieved by exercising discriminatory powers unreasonably or arbitrarily and without application of mind---Such objective can only be achieved by following rules of justness, fairness and openness in consonance with command of Constitution enshrined in different Articles of the Constitution including Arts. 4 & 25 of the Constitution which is supreme law of the country.

(c) Maxim---

----Verba cum effectu accipienda sunt---Connotation---Verba cum effectu accipienda sunt is a judicial maxim that means that words must be interpreted so as to have effect---Every word and every provision is to be given effect and none should be ignored so as to needlessly be given another interpretation that causes it to duplicate another provision or to have no consequence---Redundancy could not be attributed to legislation---Words cannot be considered meaningless, else they would not have been used.

Black's Law Dictionary; Seventh Edition; Reading Law: The Interpretation of Legal Texts; Antonin Scalia and Bryan A Garner; Collector of Sales Tax v. Messrs Mega Tech (Pvt.) Ltd. 2005 SCMR 1166; Iqbal Hussain v. Pakistan 2010 PTD 2338 and United States v. Butler 297 US 165 rel.

Muhammad Adeel Awan for Petitioners (in C.P. No.D-7101 of 2021).

Ms. Wajiha Maryam Mehdi for Petitioner (in C.P. No.D-1641 of 2022) along with Muhammad Usman Ahmed.

Mirza Nadeem Taqi and Afsheen Aman for Respondents/Department.

Shahab Imam, Amicus Curiae.

Kafeel Ahmed Abbasi, DAG.

2023 P T D 39

[Sindh High Court]

Before Irfaan Saadat Khan and Mahmood Ahmed Khan, JJ

MUMTAZ ALI RAJPAR AND BROTHERS through Managing Partner and others

Versus

PROVINCE OF SINDH through Secretary Mines and Minerals Development and others

Constitutional Petitions Nos.D-952, D-1170, D-2488, D-2489, D-5127, D-5161 of 2018 and D-3834 of 2021, decided on 25th April, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161(2) & 236(A)---Failure to pay tax collected---Advance tax at the time of sale by auction---Royalty collection---Contractual liability---Petitioners were engaged in carrying out business of recovering tolls, levies, entry fee, etc. on behalf of government agencies---Petitioners participated in open auctions and were awarded bids for collection of royalty rights---Authorities issued demand notices to petitioners seeking clearance of their dues---Validity---Tax collected on lease, right to collect tolls, etc. was final tax liability---If any tax was collected from a person on lease of right to collect tax, the same was final determination of tax liability of that person and that person was neither entitled for any refund on tax so collected nor was required to pay any additional tax collected in such behalf---Matter required threshing out fact with regard to contract entered between the parties--- Interpretation of S.236-A or 161 of Income Tax Ordinance, 2001 was not involved---Civil suits could be filed by parties against each other for the existence of liability or its enforcement/specific performance arising from the terms of the contract entered in between the parties---High Court declined to interfere in the matter---Constitutional petition was disposed of accordingly.

Mst. Kaniz Fatima through Legal Heirs v. Muhammad Salim and 27 others 2001 SCMR 1493 ref.

Zaheer-ul-Hassan Minhas and Asif Ali for Petitioners.

Saifullah, A.A.G. for Respondents Nos.1 and 2.

Kafeel Ahmed Abbasi for Respondent 3.

Ameer Bux Metlo for Respondent No.4.

Syed Mohsin Imam Wasti for Respondent No.5.

2023 P T D 51

[Sindh High Court]

Before Irfan Saadat Khan and Mehmood Ahmed Khan, JJ

The COLLECTOR OF CUSTOMS (ENFORCEMENT) CUSTOMS HOUSE, KARACHI and others

Versus

HASSAN TRADING COMPANY and others

S.C.R.As. Nos.125, 126 along with Constitution Petitions Nos.D-1366 and D-1367 of 2022, decided on 28th April, 2022.

Customs Act (IV of 1969)---

----Ss.25, 189 & 196---Show-cause notice, non-issuance of---Confiscation of goods---Dispute was with regard to declaring imported goods as White Spirit but in fact it was Xylene and even port of loading was also wrongly mentioned as Iraq instead of Iran---Authorities issued show cause notice to import agent and then confiscated goods and imposed fine upon importer---Validity---Importer was regular importer of White Spirit---No allegation of either smuggling or mis-declaration was found or detected against importer or on the agent in past---Customs authorities, before confiscation of goods, did not give any show cause notice, as required under S.180 of Customs Act, 1969, to importer---Show-cause notice was only issued to agent---As goods belonged to importer, authorities were under legal obligation to issue show cause notice to importer which was not done by authorities---Order with regard to outright confiscation of goods was passed by authorities and such action was not in accordance with law---High Court maintained order passed by Customs Appellate Tribunal against authorities---High Court directed the authorities to comply with judgment of Customs Appellate Tribunal in letter and spirit---Reference was dismissed, in circumstances.

Shahid Ali Qureshi for Petitioners (in S.C.R.As. Nos.125 and 126 of 2022).

Muhammad Nadeem Qureshi for Respondent No.1 (in S.C.R.A. No.125 of 2022).

Muhammad Nadeem Qureshi for Respondent No.1 (in S.C.R.A. No.126 of 2022).

Nemo for Respondent No.2 (in S.C.R.As. Nos.125 and 126 of 2022).

Muhammad Nadeem Qureshi for Petitioner No.1 (in C.P. No.D-1366 of 2022).

Muhammad Nadeem Qureshi for Petitioner No.1. (in C.P. No.D-1367 of 2022).

Shahid Ali Qureshi for Federation and others.

2023 P T D 68

[Sindh High Court]

Before Irfan Saadat Khan and Mahmood A. Khan, JJ

The DIRECTOR OF CUSTOMS VALUATION through Additional Director Directorate General of Customs Valuation

Versus

Messrs HANNA DAIRIES

Special Customs Reference Application No.180, C.M.A. No.16850 of 2017 and C.M.A. No.1783 of 2020, decided on 23rd May, 2022.

Customs Act (IV of 1969)---

----S.196---Limitation Act (IX of 1908), S.5---Reference---Limitation---Condonation of delay---Government department, entitlement of---Force majeure---Authorities sought condonation of delay in filing of Reference on the plea of force majeure and misplacement of order of Customs Appellate Tribunal---Validity---Each day's delay was to be satisfactorily explained in time barred matters---No sufficient cause existed which prevented authorities in filing Reference in time---Issue of limitation was always a mixed question of law and fact and was to be decided on the ground of circumstances obtaining in the matter---Such reason for delay was not plausible---Government departments or autonomous bodies and their cases had to be dealt with in the same manner as that of an ordinary litigant citizen---High Court declined to condone the delay caused in filing of Reference by authorities---Reference was dismissed, in circumstances.

Sardar Khan v. Muhammad Idrees PLD 2008 SC 591 distinguished.

Commissioner of Income-Tax v. Rais Ahmad Khan 1981 SCMR 37; Nakuleswar Sikdar v. Barun Chandra Chakravorty and another 1971 SCMR 54; Government of the Punjab through Secretary (Services), Services General Administration and Information Department, Lahore and another v. Muhammad Saleem PLD 1995 SC 396; Province of East Pakistan v. Abdul Hamid Darji and others 1970 SCMR 558; The Deputy Director, Food, Lahore Region, Lahore and others v. Syed Safdar Hussain Shah 1979 SCMR 45; Sheikh Muhammad Saleem v. Faiz Ahmad PLD 2003 SC 628; Food Department, Gujranwala through its Deputy Director and others v. Ghulam Farid Awan 2010 SCMR 1899; East Pakistan v. Abdul Hamid Darfi and others 1970 SCMR 558; Federation of Pakistan v. Niaz Ahmad 1997 SCMR 959; Pakistan through Secretary, Ministry of Defence v. Messrs Azhar Brothers Limited 1990 SCMR 1059; The Province of West Pakistan, Lahore v. Mian Noor Ahmad and others 1975 SCMR 91; Government of Balochistan v. Abdul Nabi and another 1988 SCMR 1906; Federation of Pakistan through Secretary, Ministry of Foreign Affairs, Government of Pakistan, Islamabad and 5 others v. Jamaluddin and others 1996 SCMR 727; The Inspector General of Police, Punjab through District Police Officer v. Abdus Salam and another 2019 CLC 1156; Chairman, District Evacuee Trust, Jhelum v. Abdul Khaliq through Legal Heirs and others PLD 2002 SC 436 and Collector, Land Acquisition, Chashma Right Bank Canal Project, WAPDA, D.I. Khan and others v. Ghulam Sadiq and others 2002 SCMR 677 rel.

Ms. Masooda Siraj for Applicant.

Khalid Hidayat Khan for Respondent.

2023 P T D 143

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

SAIF-UL-MULK

Versus

The STATE

Special Criminal Bail Application No.83 and C.M.A. No.9761 of 2019, decided on 8th October, 2019.

(a) Criminal Procedure Code (V of 1898)---

----S.497---Sales Tax Act (VII of 1990), Ss.33(11)(c) & 33(13)----Bail---Requirement of cash surety---Scope---Accused was granted bail with the consent of Special Prosecutor (Customs) subject to the deposit of 25% of the alleged evaded amount of sales tax with the Nazir of the High Court as well as furnishing of solvent surety---Accused through the listed application submitted that neither he nor his family members were able to deposit 25% of the alleged evaded amount of sales tax as security in cash but he was ready to furnish the documents of property equivalent to 25% of alleged evaded amount of sales tax as security---Demand of security from the accused was only imposed as there was a consent from the prosecution but in a criminal case it was not justified to force an accused to deposit security in the shape of cash amount and furnishing documents of an urban property was sufficient to cater the requirement of security---Accused was only required to furnish security to the satisfaction of the Nazir of the High Court which could be in the shape of cash amount or a document of urban property but could not be less than the worth of security amount---Earlier order was modified accordingly.

(b) Criminal Procedure Code (V of 1898)---

----S.513---Deposit instead of recognizance---Scope---Criminal court, at the time of granting bail, cannot force an accused to deposit security in the shape of cash because the security/surety in the shape of cash is alien to the of Criminal Procedure Code, 1898---Section 513, Cr.P.C., however, permits a person to execute a bond in lieu thereof to deposit cash security if he so desires.

Ahmed v. The State 1999 YLR 2504 ref.

Habib Ahmed for Applicant.

Ashiq Ali Anwar Rana, Special Prosecutor (Customs).

2023 P T D 174

[Sindh High Court]

Before Muhammad Iqbal Kalhoro and Shamsuddin Abbasi, JJ

AYESHA ZAFAR

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Narcotics Control and 7 others

C.P. No.D-2716 of 2020, decided on 5th October, 2020.

Prevention of Smuggling Act (XII of 1977)---

----Ss.31 & 32---Notice to person holding property (house) suspected to be acquired by smuggling---Order of Special Judge---Scope---Petitioner questioned the proceedings pending before the Special Court in terms of an application filed under S. 31 of Prevention of Smuggling Act, 1977, by Anti-Narcotics Force for forfeiture of properties/assets of petitioner and persons involved in smuggling of narcotics in favour of Federal Government under S. 32 of Prevention of Smuggling Act, 1977---Contention of petitioner was that the original owner (accused) from whom she had purchased the property had been acquitted by the Supreme Court and his properties including the one in question was ordered to be restored to him---Validity---Two FIRs were registered against the accused, from one of which he was acquitted while in the other he was declared as a proclaimed offender and the case was consigned to dormant file against him---Acquittal of the accused in one of the FIRs was not likely to offset the fact that he was a fugitive from law---Petitioner's association with the brother of accused, who had a worse history than him, was undeniable fact as she had remained his sister-in-law and had happened to be owner of the house at that time---Petitioner had come into possession of the house only as a result of a compromise in a suit filed by her against an associate of the accused---Taking note of the matter and proceeding to inquire it for the purposes Special Court had rightly sought evidence from the parties and its order did not seem to suffer from any illegality to warrant interference---Constitutional petition was dismissed.

2020 SCMR 300; PLD 1796 Lah. 580; 1997 SCMR 193; 2012 SCMR 167; PLD 2017 Sindh 140; PLD 2002 SC 572; 2002 SCMR 273; PLD 2006 Kar. 25; 2010 PCr.LJ 1980; PLD 2013 Kar. 190; 2016 PTD 2881; PLD 2001 Pesh. 65; 2001 PCr.LJ 669; 2006 SCMR 512 and PLD 2000 Quetta 19 ref.

Muhammad Akram Shaikh and Jam Asif Mehmood for Petitioner.

Dr. Amjad H. Bokhari for Respondent No.8.

Mir Ali Nawaz Talpur, Special Prosecutor ANF.

2023 P T D 186

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

RELIANCE PETROCHEM INDUSTRIES (PVT.) LTD. through Authorized Representative

Versus

FEDERATION OF PAKISTAN through Secretary Revenue, Ex-Officio Chairman, FBR and 3 others

Constitution Petition No.D-6084 of 2017, decided on 30th September, 2022.

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

----S.122---Amendment of assessment---Seeking information from assesse---Scope---In case, if Assessing Authority comes across any information or needs any information from taxpayer, the authority can ask taxpayer to clarify those aspects, whether during the course of assessment or after completion of assessment as the case may be subject to fulfillment of conditions as prescribed under S.122 of Income Tax Ordinance, 2001.

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

----S.122---Amendment of assessment---Opinion already formed---Scope---Taxpayer company was aggrieved of show-cause notice issued by authorities reopening of its case for amendment of assessment--- Plea raised by taxpayer was that Assessing Authority could not change his opinion already formed in earlier assessment--- Validity--- Dilating on issues on which Assessing Authority had already formed opinion and deliberated upon constituted change of opinion but in cases where issues were neither deliberated upon, nor any opinion was found by Assessing Authority, such matter did not fall under the ambit of change of opinion, simply on the ground that there was neither any opinion nor any deliberation on such matter---Assessing Authority was fully authorized under the law to reopen an assessment, amend, further amend, as the case could be, looking to the circumstances of that matter if chargeable tax as escaped assessment, assessed at low rate or was subject to excessive relief or refund or was misclassified and other factors as given under S.122 of Income Tax Ordinance, 2001---Show-cause notice issued by authorities was not barred by law and was not abuse of process of law nor was of change of opinion---High Court directed taxpayer to appear before concerned tax authorities by filing proper reply in respect of all query's raised in notice issued to it---High Court directed the authorities to consider reply of taxpayer along with documents attached, If any, and thereafter decide the matter in accordance with law, after providing opportunity of hearing to taxpayer---High Court declined to interfere in show-cause notice issued---Constitutional petition was disposed of accordingly.

Commissioner Inland Revenue and others v. Jahangir Khan Tareen and others 2022 SCMR 92; Usmania Glass Sheet Factory v. Sales Tax Officer, Chittagong PLD 1971 SC 205; Burma Oil Company (Pakistan Trading) v. The Trustees of the Port of Chittagong PLD 1962 SC 113; Commissioner of Income Tax v. Hamdard Dawakhana (QAQF), Karachi PLD 1992 SC 847; Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division PLD 1972 SC 279; ICI Pakistan Limited v. Federation of Pakistan (Civil Appeal No.36 of 2006); Julian Hoshang Dinshaw Trust) v. Income Tax Officer 1992 SCMR 250; Al Ahram Builders v. Income Tax Appellate Tribunal 1993 SCMR 29; Edulji Dinshaw Limited v. Income Tax Officer PLD 1990 SC 399; Messrs S.N.H Industries (Pvt.) Ltd. v. Income Tax Department and another 2004 PTD 330; Pakistan Herald Limited v. Inspecting Assistant Commissioner and Chairman, Panel-02, Companies-III, Karachi and another 1996 PTD 186; Commissioner of Income Tax, Companies-II, Karachi v. Syed Khalid Jamal 2003 PTD 1093; Dewan Khalid Textile Mills Ltd. v. Commissioner of Income Tax (Legal Division), Large Taxpayers Unit, Karachi 2019 SCMR 158; C.P. No.D-8028 of 2019 and C.P. No.D-8029 of 2019 and Messrs Yunus Textile Mills Limited v. Federation of Pakistan 2022 PTD 1082 ref.

Ovais Ali Shah for Petitioner.

G.M. Bhutto, Assistant Attorney General for Respondent No.1.

Muhammad Aqeel Qureshi for Respondent No.4.

2023 P T D 231

[Sindh High Court]

Before Irfan Saadat Khan and Mahmood A. Khan, JJ

COMMISSIONER OF WEALTH TAX

Versus

SINDH STEEL CORPORATION (PRIVATE) LIMITED, KARACHI

Wealth Tax Case No.236 of 2005, decided on 12th May, 2022.

Wealth Tax Act (XV of 1963)---

----Ss.16(3), 17 & 27---Wealth tax assessment---Jurisdiction---Principle of redundancy---Applicability---Valuation date previous to previous year---Dispute was with regard to non-filing of wealth tax return by assessee for year previous to previous year---Assessing Authority imposed tax and additional which were annulled by Income Tax Appellate Tribunal---Validity---Authorities were not vested with power or authority to issue notice under S.14(2) of Wealth Tax Act, 1963 but was fully empowered by that time, to have issued notice under S. 17 of Wealth Tax Act, 1963, which was not done---Intention of the Legislature was to call for return of networth of a person as on valuation date of previous year, under the provision of S.14(2) of Wealth Tax Act, 1963 and for the year previous to the previous year, under S.17(2) of Wealth Tax Act, 1963---Authorities could not be permitted to issue notice under S.14(2) of Wealth Tax Act, 1963 for previous to the previous year, where wealth was escaped assessment as provision of S.17 of Wealth Tax Act, 1963 would become redundant---Both the provisions of law catered and dealt with two different situations and no redundancy could be attributed to law---High Court declined to interfere in the order passed by Income Tax Appellate Tribunal---Appeal was dismissed, in circumstances.

Aftab Shaban Mirani v. Muhammad Ibrahim PLD 2008 SC 779 and Collectorate of Sales Tax and Central Excise Enforcement and another v. Mega Tech (Pvt.) Ltd., 2005 SCMR 1166 rel.

Kafeel Ahmed Abbasi for Appellant.

None present for Respondent.

Arshad Siraj Memon, Amicus Curiae.

2023 P T D 264

[Sindh High Court]

Before Muhammad Shafi Siddiqui and Agha Faisal, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs NEW ALLIED ELECTRONICS INDUSTRIES (PVT.) LTD.

Special Sales Tax Reference Application No.455 of 2017 and C.M.A. No.1426 of 2020, decided on 8th September, 2021.

Sales Tax Act (VII of 1990)---

----S.11---Customs Act (IV of 1969), S.32---Mis-declaration---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Respondent imported mobile phones and paid duty at the rate of Rs. 250/- per piece whereas the Sales Tax Department was of the view that the mobile phones attracted higher duty---Department issued a show cause notice on the issue of misdeclaration---Validity---Purported allegation of misdeclaration was in fact within the domain and jurisdiction of Collectorate of Customs, which, in case of any controversy, could have retained the consignment/goods for further inquiry or chemical test and determine the duty provisionally till disposal of the inquiry or re-assessment---Dispute of classification was never raised at customs level---Exercise undertaken by the department was a futile attempt in absence of any concrete resolution of misdeclaration---Reference application was dismissed.

Ameer Baksh Metlo for Applicant.

2023 P T D 527

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

NESTLE PAKISTAN LIMITED through Authorized Officer and others

Versus

The FEDERAL BOARD OF REVENUE through Chairman and others

C.P. No.D-5482 of 2017, (And connected matters, particularized in the Schedule1 hereto) decided on 29th November, 2022.

(a) Constitution of Pakistan---

----Art.199---Constitutional petition---Constitutional matter, decision of---Principle---Cardinal principle while exercising Constitutional jurisdiction is that courts should abstain from deciding a Constitutional question, if a case could be decided on other or narrower grounds and that courts should not decide a larger question than was necessary for determination of the case.

LDA and others v. Imrana Tiwana and others 2015 SCMR 1739; S A Haroon v. Collector of Customs PLD 1959 SC 177; Pakistan v. Qazi Ziauddin PLD 1962 SC 440; Nagina Silk Mill v. ITO Lyallpur PLD 1963 SC 322; Lt. Col. N M A Khan v. Controller of Estate Duty PLD 1961 SC 119; Usmania Glass v. Sales Tax Officer Chittagong PLD 1971 SC 205; Murree Brewery v. Pakistan PLD 1972 SC 279; Edulji Dinshaw Limited v. ITO PLD 1990 SC 399; Julian Hoshang Dinshaw Trust v. ITO 1992 SCMR 250; Attock Cement v. Collector Customs 1999 PTD 1892 and CIT v. Eli Lilly 2009 SCMR 1279 rel.

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

----S.148---Tax collection---Customs department, role of---Scope---Customs department merely acts as a collecting agent for advance tax in terms of S.148 of Income Tax Ordinance, 2001---Such conferment does in no manner create any other jurisdiction for customs department in regards to income tax.

Pakistan (FBR) v. Hazrat Hussain 2018 SCMR 939 rel.

(c) Interpretation of statutes---

----Headings---Object, purpose and scope---Headings do not control meaning and do not define its scope--- Headings may assist in interpretation of a section, if words appear to be doubtful, however, they cannot restrict plain words of the section.

(d) Interpretation of statutes---

----Redundancy, principle of---Applicability---Redundancy should not to be attributed to legislation or to any word therein---Court may also not import words into legislation which are not expressed or which cannot be reasonably implied on any recognized principle of construction.

Collector of Sales Tax v. Mega Tech 2005 SCMR 1166; Iqbal Hussain v. Pakistan 2010 PTD 2338 and United States v. Butler 297 US 1, 65 (1936) rel.

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

----Ss. 32, 79, 80 & 179---Constitution of Pakistan, Art. 199---Constitutional petition---Word "taxes"---Re-assessment of taxes---Release of goods---Petitioners were aggrieved of re-assessment of income tax and sales tax after their consignments had been released/cleared---Validity---Insertion of word taxes in Ss. 32 & 179 of Customs Act, 1969 conferred parallel jurisdiction upon Customs department to the extent contemplated vide the parent statutes--- In either instance ambit was circumscribed to imports and that also at import stage, which was prior to or at the time that import / consignment was assessed and released per S. 79 or 80 of Customs Act, 1969---Notices / constituents in question related to a fiscal right based on a statutory instrument requiring no factual determination, seeking to assess, recover or adjudicate any alleged short levy of income tax / sales tax, post release / clearance of consignments, were determined to be patently without jurisdiction and illegal on the face of the record---Customs authorities had no jurisdiction to recover or adjudicate any short levy / recovery of sales tax and income tax once imported consignments were assessed to duty and taxes in terms of S.80 of Customs Act, 1969 and were released / cleared from Customs---High Court set aside show-cause notices in question as the same were issued without lawful authority and jurisdiction---Officials of Inland Revenue Department could initiate proceedings, if any, in respect of short levied sales tax and income tax---Constitutional petition was disposed of accordingly.

Federation of Pakistan v. Durrani Ceramics 2014 SCMR 1630; CIR v. MCB Bank Limited 2021 PTD 1367; Whitney v. Inland Revenue Commissioners [1926] A.C. 37 (1925); CIR v. MCB Bank Limited 2021 PTD 1367; Pakistan (FBR) v. Hazrat Hussain 2018 SCMR 939; Al Haj Industrial Corporation v. Collector of Customs 2004 PTD 801; Crescent Pak Industries v. Pakistan 1990 PTD 29; English Biscuits v. Assistant Collector 1991 PTD 178; Kohinoor Textile v. Pakistan 2002 PTD 121; HBL v. Pakistan 2013 PTD 1659; ECP v. Asif Iqbal PLD 1992 SC 342; PTC v. KMC PLD 1967 SC 241; Chairman District Council Jhelum v. Ali Akbar 1970 SCMR 105; SLIC v. Mercantile Mutual Insurance 1993 SCMR 1394; Master Foam v. Pakistan 2005 PTD 1537; FGEHF v. Malik Ghulam Mustafa 2021 SCMR 201; Zahid Iqbal v. Hafiz Muhammad Adnan and others 2016 SCMR 430; Nadeem Ahmed Advocate v. Federation of Pakistan 2013 SCMR 1062; Amanullah Khan v. Chief Secretary NWFP and others 1995 SCMR 1856 and Ayrshire Employers' Mutual Insurance Company v. IRC (1946) 27 TC 331 ref.

Engro Vopak Terminal Limited v. Pakistan 2012 PTD 130; Association of Builders and Developers of Pakistan v. Sindh 2018 PTD 1487; United States v. Delaware and Hudson Company 213 US 366 @ 407; United States v. Jin Fuey Moy 241 US 394 @ 401; Hashwani Hotels Limited v. Pakistan 2004 PTD 901 and Hashwani Hotels Limited v. Pakistan 2007 SCMR 1131 rel.

Hyder Ali Khan, Imtiaz Rashid Siddiqui, Sami-ur-Rehman Khan, Tasawwar Hashmi, Fahad Ali Hashmi, Saifullah Sachwani and Vivek Harani for Petitioners.

Shahid Ali Qureshi, Dr. Shah Nawaz Memon, Khalid Rajpar, Kafeel Ahmed Abbasi, Ms. Fozia M. Murad, Syed Mohsin Imam Wasti, Mohabat Hussain Awan, Aatif Awan, Muhammad Bilal Bhatti, Muhammad Rashid Arfi, Parvaiz Ahmed Memon, Bilal Memon, Qaim Ali Memon, Ms. Bushra Zia and Irfan Mir Halepota for Respondents.

Syed Yasir Ahmed Shah, Assistant Attorney General.

2023 P T D 576

[Sindh High Court]

Before Muhammad Shafi Siddiqui and Agha Faisal, JJ

WAZIR ALI INDUSTRIES LTD.

Versus

FEDERATION OF PAKISTAN and others

C.P. No.D-4729 of 2021 along with 89 others petitions and three High Court Appeals (As per Annexure 'A' to this judgment) decided on 20th December, 2021.

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

----S.25(1)---Access to record and documents---Pre-conditions---Phrase "as an when required"--- Scope---Event or stage when said phrase may come into play and is given some meaning is when a Commissioner examines return of a tax payer, he may have some queries which might be tempting to call record as he may not be able to reconcile and/or resolve them through return statement---Such queries must be understood and settled to the satisfaction of the Commissioner before he can make up his mind further---Audit is nowhere in the scheme when such questions come for consideration after going through the returns while the Commissioner acts under 25(1) of Sales Tax Act, 1990--- Record may satisfy curious mind but queries must be genuine at the time of calling the record which could not have been answered without going through the record required--- Record calling cannot be a roving exercise and cannot be a courtesy call either.

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

----S.25(1)---Access to record and documents---Commissioner, jurisdiction of---Scope---Requirements of S.25(1) of Sales Tax Act, 1990, are neither unfettered nor are so liberal that a hunting expedition would commence---There has to be an event or occasion when Commissioner requires record and documents maintained under Sales Tax Act, 1990, or any other Act--- Even requiring documents/record for satisfaction of queries must be revealed so that notice may not transform into a hunt.

PLD 2019 Sindh 144 and 8 N.J. Misc. 418 (1930) rel.

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

----S.25(2)---Access to record and documents--- Phrase "on the basis of the record , obtained under subsection (1)"---Applicability---Phrase applies to Commissioner's act of authorizing officer to conduct audit, i.e., selecting taxpayer for an audit, and not officer's act of conducting audit itself--- Provision of S.25(2) of Sales Tax Act, 1990, does not concern the manner in which audit is to be conducted but specifically concerns selection of a person for an audit, inquiry or investigation.

Dewan Sugar Mills Ltd. v. Federation of Pakistan and others Suit 850/2020 and others and Pakistan Tobacco Co. Ltd. v. Federation of Pakistan 2002 PTD 1574 rel.

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

----S.25(1) & (2)---Access to record and documents---Commissioner, duty of---Scope---Two provisions of S.25 of Sales Tax Act, 1990, are distinct and different but inseparable as well---Commissioner who calls documents and/or record of taxpayer for the satisfaction of queries and objections in context of returns, he must have formed a view for officer of Inland Revenue to be communicated for conducting audit---Provision of S.25(2) of Sales Tax Act, 1990, cannot work independently unless Commissioner has framed such obligations on the basis of record that "he" obtained.

2016 PTD 1429 rel.

(e) Constitution of Pakistan---

----Art.199---Judicial review---Scope---All administrative actions are subject to judicial review---To judicially review such actions, Courts must be able to see its legitimacy, based on which the authority has acted---If no legitimate occasions are disclosed, there is no basis on which an action can be judicially reviewed---That is precisely why the Courts have consistently "read in" the requirement to provide reasons in all statutes, even where such requirement is not explicitly mentioned in a statute.

Muhammad Amin Muhammad Bashir v. Government of Pakistan 2015 SCMR 630; Zahir Shah v. Muhammad Usman Ghani - 2005 YLR 1394; Chaudhry Muhammad Hussain v. Commissioner of Income Tax 2005 PTD 152 and Airport Support Services v. Airport Manager, Quid-e-Azam International Airport, Karachi 1998 SCMR 2268 rel.

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

----Ss.25 & 72B---Selection of case for audit---Federal Board of Revenue and Commissioner---Jurisdictions---Distinction---Petitioners were taxpayers who were aggrieved of selection of their cases for audit by Commission on the directions of Federal Board of Revenue---Validity---Powers of Commissioner under S.25 of Sales Tax Act, 1990 and powers of Federal Board of Revenue under S.72B of Sales Tax Act, 1990, were independent---Former was based on subjective criteria and Commissioner was empowered to critically analyze returns of taxpayer---While the Commissioner was required to apply his mind to case of individual taxpayer and decide if there were reasons to select a taxpayer for audit---Federal Board of Revenue's powers under S.72B of Sales Tax Act, 1990, were objective in substance and were done under an objective policy for that year and then taxpayers were selected and/or a sector or sectors of taxpayers were selected through computer balloting on the basis of criterion---Where the Commissioner was to apply mind and provide reasons for selection, the later scheme of Federal Board of Revenue under S.72B of Sales Tax Act, 1990, enabled it to select a taxpayer through random and parametric balloting based on the development of a software which tookover the task of a Commissioner--- It was an automatic selection and in some cases even notices calling for documents/record under S.25(1) of Sales Tax Act, 1990 under automatic audit selection---In the present case the entire exercise by Commissioner was carried out at the behest and on directions of Federal Board of Revenue and resulted in demand created against petitioners and Federal Board of Revenue itself was responsible for such foul play---High Court quashed notices issued by authorities---Constitutional petition was allowed accordingly.

Commissioner of Inland Revenue v. Allah Din Steel and Rolling Mills 2018 SCMR 1328; Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484; Indus Motors Co. Limited v. Federation of Pakistan 2020 PTD 297; Hyundai Nishat Motor v. The Federal Board of Revenue - W.P. No.25793 of 2021; Wateen Telecom's case 2019 PTD 1030; Assistant Director (I&I) v. B.R. Herman PLD 1992 SC 485; Saif-ur-Rehman v. Additional District Judge and others 2018 SCMR 1885; Muhammad Nawaz Chandio v. Muhammad Ismail Rahu and others 2016 SCMR 875; Dilawar Hussain and others v. Province of Sindh and others PLD 2016 SC 514; Director General, FIA and others v. Kamran Iqbal and others 2016 SCMR 447 and Lahore Development Authority v. Ms. Imrana Tiwana 2015 SCMR 1739 ref.

Hyder Ali Khan, along with Sami ur Rehman, Shaheer Roshan and Hamza Waheed, Ali Almani, Arshad Hussain, Naeem Suleman, Ovais Ali Shah along with Ms. Maryam Riaz, Abdul Rahim Lakhani, Abdul Jabbar Mallah, Attta Muhammad Qureshi, Ijaz Ahmed, M. Saleem Mangrio along with Vivek Herani, Iqbal Salman Pasha, Anwar Kashif Mumtaz, Muhammad Aleem, Maqbool Hussain Shah, Ms. Lubna Pervez, Muhammad Usman Alam, Darvesh K. Mandan, Imran Ali Abro, Syed Mohsin Ali, Syed Muhammad Hassan Meerza, Naveed Sultan, Manzar Hussain Memon, Irfan Ali Shaikh, M. Amin Bakdukda, Inzmam Sharif holds brief for Qazi Umair Ali, Ghazanfar Ali Jatoi, Mansoor Ali Ghanghro, Aamir Ali Shaikh, Rehmat Shakil, Ms. Tehmina Ashraf and Waseem Shaikh for Petitioners.

Ameer Bux Metlo, Shahid Ali Qureshi, Ayaz Sarwar Jamali along with Raja Love Kush, Imran Ali Metlo, Dr. Shah Nawaz Memon, along with Ms. Fozia M. Murad Tunio, Aqeel Ahmed Khan, Qaim Ali Memon, Imran Ali Mithani, Fayaz Ali Metlo, along with Barkat Ali Metlo, Rana Sakhawat Ali, Syed Shafqat Ali Shah Masoomi, Munawar Ali Memon, Barrister Ali Tahir, Haider Naqi, Chaudhry Mehmood Anwar, Touqeer Ahmed, Irfan Mir Halepota, Ms. Bushra Zia holding brief for Zubair Hashmi, Imtiaz Ali Solangi, Akhtar Jabbar Shaikh, Kafeel Ahmed Abbasi, Deputy Attorney General, Barrister Hussain Bohra, Assistant Attorney General for Respondents.

2023 P T D 607

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

SHELL PAKISTAN LIMITED through Legal Counsel and others

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance and others

C.P. No.D-5842 of 2022 along with connected matters, particularized in the Schedule1 hereto), decided on 22nd December, 2022.

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

----Ss. 4B, 4C & First Schedule, Part I, proviso to Division IIB (inserted vide Finance Act, 2022)---Constitution of Pakistan, Arts. 23 & 24---Super tax, vires of---Charging section---Retrospective effect---Property rights---Petitioners / taxpayers sought striking down of S.4C of Income Tax Ordinance, 2001, on the plea that charging section could not be retrospective in nature---Contention of authorities was that protected right created vide S.4B of Income Tax Ordinance, 2001, stood impliedly superseded with retrospective effect by insertion of S.4C in Income Tax Ordinance, 2001---Validity---There was a clearly expressed statutorily protected right in respect of super tax, created in favor of tax payer---Under no stroke of interpretation, even strained, strict or convoluted, the benefit stood diminished---Tax payers availed benefit for two years so far and nothing was demonstrated before High Court to consider them disentitled to remaining period---Provision of S.4C of Income Tax Ordinance, 2001, merited in the scenario whereby authorities claimed that rights subsisting vide S.4B of Income Tax Ordinance, 2001, had been vitiated vide S.4C of Income Tax Ordinance, 2001, notwithstanding manifest absence of any express legislative intent to such effect---Super tax was to be recovered from every person, subject to qualifying quantum of income, on the basis delineated in the identified schedule---Relevant schedule precluded recovery of super tax from every person for a period inclusive of tax year 2022---There was a manifest inconsistency with S.4C of Income Tax Ordinance, 2001, which sought to recover super tax for the tax year 2022---Levy under S.4C of Income Tax Ordinance, 2001 was on the income of every person and differentiation in respect of quantum of income was determinant factor for application of the designated tax rate---Higher the level of income the higher was the incidence of taxation intended---Similar treatment was accorded under S.4B of Income Tax Ordinance, 2001, which was reasonable having a nexus with the objective of the levy---Constitution had conferred fundamental rights upon citizens with respect to property, per Arts. 23 & 24 of the Constitution---Such rights could not be abridged by measures determined to be discriminatory---Proviso could not survive test of intelligible differentia, as it could not be demonstrated that imposition of a two hundred and fifty percent (250%) higher rate of super tax was based on any intelligible differentia, having nexus with the purpose of the law---Super tax levied once again vide S.4C of Income Tax Ordinance, 2001, could not be recovered during subsistence of benefit / protection granted to the tax payer vide S.4B of Income Tax Ordinance, 2001---Only avenue to save conflicting provisions of law was to harmonize the same--- Provision of 1st proviso to Division IIB of Part I of the First Schedule to Income Tax Ordinance, 2001, was discriminatory as there was no intelligible differentia therein, having rational nexus with the object of classification--- Provision of S. 4C of Income Tax Ordinance, 2001, was read to reflect that the levy would be applicable from the tax year 2023---High Court declared provision of 1st proviso to Division IIB of Part I of the First Schedule to the Income Tax Ordinance, 2001, as discriminatory and ultra vires to the Constitution---Constitutional petition was allowed accordingly. [pp. 624, 626, 631, 635, 636] A, B, F, G & H

HBL Stock Fund v. ACIR 2020 PTD 1742; D.G. Khan Cement v. Pakistan 2020 PTD 1186; Attock Cement v. Pakistan 2019 PTD 934; Multiline Associates v. Ardeshir Cowasjee 1995 SCMR 362; Matiari Sugar Mills v. Sindh PLD 1999 Kar. 424; Trustees Port of Karachi v. Muhammad Saleem 1994 SCMR 2213; LDA and others v. Imrana Tiwana and others 2015 SCMR 1739; Shahid Gul and Partners v. DCIT Peshawar 2021 SCMR 27; Nagina Silk Mills v. ITO PLD 1963 SC 322; East Pakistan v. Sharafatullah PLD 1970 SC 514; CIT v. EFU Insurance PLD 1982 SC 247; G H Shah v. Chief Land Commissioner 1983 CLC 1585; Al Samrez Enterprises v. Pakistan 1986 SCMR 1917; WAPDA v. Capt. Nazir 1986 SCMR 96; Chief Land Commissioner v. G H Shah 1988 SCMR 715; Molasses Trading and Export v. Pakistan 1993 SCMR 1905; Muhammad Hussain v. Muhammad 2000 SCMR 367; Shahnawaz v. Pakistan 2011 PTD 1558; Zila Council Jhelum v. PTC PLD 2016 SC 398; Al Tech Engineers v. Pakistan 2017 SCMR 673; Super Engineering v. CIR 2019 SCMR 1111; H.M. Extraction v. FBR 2019 SCMR 1081; Anwar Yahya v. Pakistan 2017 PTD 1069; CIR v. Pakistan (Civil Appeals 930 and 931 of 2017); Elahi Cotton Mills v. Pakistan PLD 1997 SC 582; PIDC v. Pakistan 1992 SCMR 891; Cape Brandy Syndicate v. IR [1921] 1 KB 64, 71, 12 TC 358, 366; Canadian Eagle Oil Co. Limited v. The King 27 TC 205, 248; Pakistan Television v. CIR 2019 SCMR 282; Pakistan Television v. CIR 2017 SCMR 1136; Citibank NA v. Commissioner Inland Revenue 2014 PTD 284; Commissioner of Customs (Imports) v. Dilip Kumar and Company TS-421-SC-2018; Sun Export Corporations v. Collector of Customs (1997) 6 SCC 564; Collector of Customs FBR v. Fitter Pakistan (Pvt.) Ltd. 2020 SCMR 1157; London Investment and Mortgage Company Limited v. Worthington 38 TC 86, 115 (HL), [1959] 37 ITR 56, 62; Province of East Pakistan v. Sirajul Haq Patwari PLD 1966 SC 854; Mehreen Zaibun Nisa v. Land Commissioner PLD 1975 SC 397; Mian Asif Aslam v. Mian Muhammad Asif PLD 2001 SC 499; Pakistan Muslim League (Q) v. Chief Executive of Pakistan PLD 2002 SC 994; Pakistan Lawyers Forum v. Federation of Pakistan PLD 2005 SC 719; Messrs Master Foam (Pvt.) Ltd. v. Government of Pakistan 2005 PTD 1537; Watan Party v. Federation of Pakistan PLD 2006 SC 697; Federation of Pakistan v. Haji Muhammad Sadiq PLD 2007 SC 133; Dr. Mobashir Hassan and others v. Federation of Pakistan and others PLD 2010 SC 265; Iqbal Zafar Jhagra v. Federation of Pakistan 2013 SCMR 1337; Seaford Court Estates Limited v. Asher [1949] 2 All ER 155, 164 (CA); Hakimsons Impex v. Federation of Pakistan (C.P. D-4146 of 2022); Sheraz Kaka v. Federation of Pakistan 2018 PTD 336; 1991 SCMR 1041; CIR Peshawar v. Tariq Mehmood 2021 SCMR 440; Amin Soap Factory's case PLD 1976 SC 277; Elahi Cotton Mills v. Pakistan PLD 1997 SC 582; Syed Nasir Ali v. Pakistan 2010 PTD 1924 and Lucky Cement v. Khyber Pakhtunkhwa 2022 SCMR 1994 rel.

(b) Interpretation of statutes---

----Amendment---Inconsistency---Scope---Law accepts that an amendment becomes a part of original statute and both ought to be construed together---In case of any inconsistency, harmonization may be employed so as to impede an irreconcilable conflict---While an amendment is considered as the last expression of will of the legislature, generally prevails, however such effect is prospective and should not be given any retroactive construction, overriding effect on prior rights unless the verbiage of the provision makes such construction necessary.

Bashir Ahmed v. Member BOR Punjab PLD 1997 SC 294; ICAI v. Price Waterhouse (1997) 6 SCC 312 and Sri Venkatramana Thevaru v. State of Mysore AIR 1958 SC 255 rel.

(c) Interpretation of statutes---

----Taxing statute---Anomaly, preventing of---Scope of a provision cannot be extended by analogy or beneficent / equitable construction in order to prevent an anomaly---If section of taxing statute creates doubt or ambiguity then it should not to be construed to extract a new added obligation, not formerly cast upon the tax payer.

Jiwan Das v. CIT 4 ITC 40, 46 (FB) and F.L. Smidth & Co v. Greenwood 8 TC 193, 206 (HL) rel.

(d) Constitution of Pakistan---

----Art.25---Discrimination---Reasonable classification, principle of---Scope---Provision of Art. 25 of the Constitution envisages equality between citizens, however it allows for differential treatment of persons not similarly placed under a reasonable classification---Reasonable classification has to be based upon intelligible differentia having a nexus with the object sought to be achieved.

Hadayatullah v. Pakistan 2022 SCMR 1691 rel.

Khalid Jawed Khan, Ovais Ali Shah, Farogh Naseem, Salman Akram Raja, Ijaz Ahmed Zahid, Jahanzeb Awan, Tariq Masood, Abid H. Shaban, Mushtaq Hussain Qazi, Anwar Kashif Mumtaz, Naveed A. Andrabi, Arshad Hussain Shehzad, Abdul Rahim Lakhani, Qazi Umair, Naeem Suleman, Ahmed Hussain, Lubna Pervaiz, Shahab Imam, Ameen M. Bandukda, Uzair Qadir Shoro, Tasawur Ali Hashmi, Fahad Ali Hashmi, Khalid Mehmood Siddiqui, Mariam Riaz, Faiz Muhammad Durrani, Ghulam Muhammad, Hanif Faisal Alam, Inzimam Sharif, Basil Nabi Malik, Omer Memon, Sufiyan Zaman, Muneeb Qidwai, Aitzaz Manzoor Memon, Abdallah Azzam Naqvi, Ajeet Kumar, Muhammad Ajmal Khan, Nadir Hussain Abro, Saifullah Sachwani, Rashid Khan Mehar, Ahmed Ali Hussain, Mohammad Aizaz Ahmed, Darvesh K. Mandhan, Muhammad Adnan Motan, Waqar Ahmed, Atir Aqeel Ansari, Hamza Hashim, Muhammad Amayed Ashfaq Tola, Muhammad Asad Ashfaq Tola, Muneer Ahmed, Shahbakht Pirzada, Zahid Ali Sahito, Samay Shams, Muhammad Ilyas Ahmed, Shams Mohiuddin Ansari, Furqan Mohiuddin Ansari, Ali Nawaz Khuhawar, Fahad Khan, Hamza Waheed, Yousuf Makda, Munawar uz Zaman Juna, Mohsin Khan, K. Jehangir, Rashid Mureed, S. Hassam Abidi, Jawaid Farooqi, Ammar Athar Saeed, Usman Alam, Ghulam Rasool Korai, Muhammad Taimoor Ahmed, Imtiaz Ali Sahito, Naveeda Basharat, Saima Anjum, Anas Makhdoom, Ahmed Farhaj, Muhammad Salman Aziz, Adnan Ali, Syed Zeeshan Ali, Maaz Waheed, Muhammad Aleem, Kashan Bashir Memon, Tauqeer Randhava, Muhammad Ali Bhatti, Imran Iqbal Khan, Arif Ali, Kanwar Yousuf Ali Khan, Abdul Jabbar Mallah, Arshad M. Tayebaly, Atta Mohammad Qureshi, Shahzad Saeed, Aurangzeb, Mashooq Ali Soomro, Muhammad Aziz, Ghazala Rafiq, Ellahi Bakhsh Qureshi, Muneer Ahmed Sahito, Saifullah Khawaja, Farhad Khan, Abdul Rehman Adeed, Mariam Salahuddin, Arshad M. Tayebaly, Sameera Iqbal, M. Mohsin Khan, Jamal Nasir, Omrazia Nadeem, Ghulam Nabi Abbasi, Shazia Aziz Khan, Muhammad Syed, Muhammad Hassan Meerza, Naveed Sultan, Faheem Bhayo, Raghib Ibrahim Junejo, Sagar Ladhani, Awais Farooqi, Umer Ilyas Khan, Kanwar Mujahid Ali Khan, S.M. Hassan, Subhan Tasleem and Meerajuddin for Petitioners.

Faisal Siddiqi, Shah Nawaz Memon, Ghazi Khan Khalil, Ameer Bakhsh Metlo, Ameer Nausherwan Adil Memon, S. Ahsan Ali Shah, Huma Sodher, Amna Usman, Shakoh Zulqarnain, Syed Mohsin Imam Wasti, Fozia M. Murad, Imran Ali Metlo, Fayyaz Ali Metlo, Muhammad Aqeel Qureshi, Bilal Memon, Imran Mithani, Mohsin Mithani, Hayat Muhammad Junejo, Abdul Hakeem Junejo, Abdul Razaque Panhwer, Shaheer Saleem Memon, Zain Mustafa Soomro, S. Mohsin Ali Shah, Asif Ali Siyal, Abid Ali, Abdul Sami, Zohib Khan, Abdul Shakoor Mangi, Zubair Hashmi, Bushra Zia, Faheem Raza, Ali Tahir Soomro, Ayaz Sarwar Jamali, Mian Rafiq Ahmed Tunio, Arshad Ali Tunio, Sajjad Ali Solangi, Qaim Ali Memon, Syed Shafqat Ali Shah Masoomi, Muhammad Idrees, Mehmood Hussain, Syed Yasir Ahmed Shah (Assistant Attorney General), Qazi Ayazuddin (Assistant Attorney General) and Abdul Wahid Shar (Additional Commissioner, Inland Revenue, LTO, Karachi) for Respondents.

2023 P T D 649

[Sindh High Court]

Before Irfan Saadat Khan and Rashida Asad, JJ

Messrs ZAM ZAM LPG (PVT.) LIMITED through attorney

Versus

FEDERATION OF PAKISTAN through Secretary/Chairman Revenue Division and 3 others

Constitutional Petition No.D-1079 of 2022, decided on 4th October, 2022.

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

----Ss.25 & 177---Selection of case for audit---Word "reasons"---Scope---Petitioner taxpayer was aggrieved of letter and notices issued by authorities selecting its case for audit---Validity---Word "reason" connotes an expression giving justification for an action, a ground to explain something, a consensus of informed thoughts whether factual or legal---Reasons should be so explicit so as to catch one's eye at the first glimpse and should not be a leap in a dark or a subject of fishing and roving expedition, but has to be based on sound principles of law---Before conducting audit, department is legally obliged to muster those grounds after proper application of mind and thereafter, while confronting taxpayer about selecting the case for audit, mindful as well as meaningful reasons have to be advanced, which have to be convincingly intimated to taxpayer to enable the latter to furnish a suitable reply and advance objections, if any, and those reasons should be based on independent application of mind and not on the basis of some unfounded notions, or capricious believes---Requirements of section 25 of Income Tax Ordinance, 2001, would not be fulfilled until and unless proper, just and identifiable reasons were intimated to taxpayer with regard to selection of its case for audit---Only when such reasons were given and thereafter if no compelling response was received, the case could be selected for audit---Other parameters as enshrined under S.25 of Income Tax Ordinance, 2001, would then come into play---Such requirement of law could not be termed to be simply procedural only---High Court vacated letter and subsequent notices in question as those were not in accordance with law and directed that authorities were fully authorized under the law that if they had certain requisite material for selecting case of petitioner for audit, the same should be communicated to petitioner and proceedings could be initiated afresh in accordance with law---Constitutional petition was allowed accordingly.

Commissioner of Inland Revenue, Sialkot and others v. Messrs Allah Din Steel and Rolling Mills and others 2018 SCMR 1328; Commissioner Inland Revenue and others v. Jahangir Khan Tareen and others 2022 SCMR 92 and Dr. Iqrar Ahmad Khan v. Dr. Muhammad Ashraf and others 2021 SCMR 1509 distinguished.

Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484; Indus Motor Company Limited and others v. Pakistan and others 2020 PTD 297; Wateen Telecom Ltd. through Authorized Attorney v. Sindh through The Secretary of Ministry of Finance Government of Sindh, Karachi and 2 others 2019 PTD 1030; Hyundai Nishat Motor (Pvt.) Limited v. The Federal Board of Revenue through its Chairman and others PTCL 2022 CL. 56; Dewan Sugar Mills Ltd. v. Federation of Pakistan and others PTCL 2022 CL. 67; Messrs Pakistan Tobacco Company Limited v. Federation of Pakistan through the Secretary, Ministry of Finance and others 2022 PTD 1574 and Raza Motor Industries v. The Federation of Pakistan and others 2022 PTD 19 rel.

Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan through Secretary Ministry of Finance, Central Secretariat, Islamabad and others 2015 SCMR 630; Zain Yar Khan v. The Chief Engineer, C.R.B.C., WAPDA. D.I. Khan and another 1998 SCMR 2419; Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others 1998 SCMR 2268; Amanullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092; Government of N.W.F.P. through Secretary and 3 others v. Mejee Flour and General Mills (Pvt.) Ltd., Mardan and others 1997 SCMR 1804; Director Food, N.W.F.P and another v. Messrs Madina Flour and General Mills (Pvt.) Ltd. and 18 others PLD 2001 SC 1; Shahida Bibi and others v. Habib Bank Limited and others PLD 2016 SC 995; Zia ur Rehman v. Syed Ahmed Hussain and others 2014 SCMR 1015; Daniyal Aziz v. Muhammad Tariq Anis and others 2017 CLC Note 46; Muhammad Anwar and others v. Mst. Ilyas Begum and others PLD 2013 SC 255; Arslan Poultry (Pvt.) Ltd. v. Officer Inland Revenue and others 2015 PTD 448; Port Qasim Authority through Secretary v. Executive District Officer (Revenue), Karachi and others 2017 YLR Note 14; Shakeel Ahmed v. Pakistan Telecommunication Company Limited through President and others 2017 PLC (C.S.) Note 76; Suo Motu Case No.18 of 2010: In the matter of (Violation of Public Procurement Rules, 2004) PLD 2011 SC 927; Haji Khan Bhatti v. Province of Sindh and 4 others 2017 CLC 1650; Shahnawaz Mallah and 2 others v. Raza Muhammad Brohi and 8 others 2013 CLC 792; Muhammad Tariq Khan v. Khawaja Muhammad Jawad Asami and others 2007 SCMR 818; Mst. Balqees Begum v. Additional District Judge and others 2020 CLC 1950; Executive District Officer (Education), Rawalpindi v. Muhammad Younas 2007 SCMR 1835; Moulana Atta-ur-Rehman v. Al-Hajj Sardar Umar Farooq and others PLD 2008 SC 663; Omer Ismail Khalid and others v. Pakistan Medical and Dental Council and others PLD 2015 Isl. 65; Asad Jamal Daudpoto v. Assistant Commissioner Ratodero and 4 others 2020 CLC 1945; Shafqat Ali Shah v. Nasreen Akhtar and 3 others PLD 2020 Pesh. 148; Justice Khurshid Anwar Bhinder v. Federation of Pakistan and another PLD 2010 SC 483 and Atlis Honda Limited v. Federation of Pakistan 2022 PTD 866 ref.

(b) General Clauses Act (X of 1897)---

----S.24A---Speaking order---Scope---Parameters as enshrined under S.24A of General Clauses Act, 1897, with regard to exercise of discretion by an executive authority for giving reasons for its decision are mandatory---Any action taken by an executive authority in violation of such principle is liable to be struck down.

Muhammad Amin Muhammad Bashir Limited v Government of Pakistan through Secretary Ministry of Finance, Central Secretariat, Islamabad and others 2015 SCMR 630; Zain Yar Khan v The Chief Engineer, C.R.B.C., WAPDA. D.I. Khan and another 1998 SCMR 2419; Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others 1998 SCMR 2268; Amanullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092 and Government of N.W.F.P. through Secretary and 3 others v. Mejee Flour and General Mills (Pvt.) Ltd., Mardan and others 1997 SCMR 1804 rel.

Mushtaq Hussain Qazi for Petitioner.

Pir Riaz Muhammad Shah, Deputy Attorney General for Pakistan (DAG) for Respondent No.1.

Dr. Shah Nawaz for Respondents Nos.2 to 4.

2023 P T D 666

[Sindh]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Syed ATIF SALMAN HASHMI and another

Versus

FEDERATION OF PAKISTAN through Secretary Revenue, Ex-Officio Chairman FBR and others

Constitutional Petition No.D-3974 of 2021, decided on 9th January, 2023.

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

----Ss. 3, 3(1A) & 24---Criminal Procedure Code (V of 1898), Ss.249-A, 365-K & 561-A---Constitution of Pakistan, Art.199---Constitutional petition---Quashing of criminal proceedings without petitioner approaching Trial Court---Recovery of bogus tax returns--- Initiation of proceedings---Limitation---Petitioner was accused of committing fraud in receiving bogus tax returns---Petitioner sought quashing of his case without filing application under Ss.249-A/265-K, Cr.P.C., before Trial Court---Plea raised by petitioner was that proceedings were initiated beyond period of limitation---Validity---It was the third time when authorities proposed to initiate civil / criminal proceedings against petitioner, which twice had culminated/dropped and finalized in favour of petitioner--- Proceedings initiated by authorities were not in accordance with law--- Proceedings of FIR were lodged after 11 years of tax fraud, if any, and authorities required the petitioner to submit accounts details, documents etc., pertaining to that period which was beyond the mandatory period as provided under S. 24 of Sales Tax Act, 1990--- Criminal proceedings against petitioner fell within exceptional circumstances and he was entitled that FIR lodged against him be quashed---High Court quashed FIR lodged against petitioner and all criminal aspects emanating from that FIR were declared null and void and of no legal effect---Constitutional petition was allowed accordingly.

Muhammad Measum and others v. Federation of Pakistan through Secretary and others 2015 PTD 702; Decision of the Hon'ble Supreme Court of Pakistan in Civil Appeals Nos.1475 to 1479 of 2015; Zaheer Ahmed v. Directorate General of Intelligence and Investigation-IR and others (C.P. No.D-3337 of 2013); Messrs Popular Juice Industries (Pvt.) Ltd. and others v. Federation of Pakistan through Chairman, Federal Board of Revenue and others 2021 PTD 1329; Lucky Cement v. Federation of Pakistan and others (C.P. No.D-216 of 2013); Messrs Yasir Enterprises through Ch. Basher Ahmed v. Federation of Pakistan through Secretary and 7 others 2013 PTD 821; Khurram Farooq Siddiqui v. Department of Customs and Excise, Collectorate of Customs (Export) and another 2009 PTD 992; Taj International (Pvt.) Ltd. and others v. Federal Board of Revenue and others 2014 PTD 1807; Waseem Ahmed and another v. Federation of Pakistan through Chairman and 4 others 2014 PTD 1733; Commissioner Inland Revenue, Zone-IV, Lahore v. Messrs Panther Sports and Rubber Industries (Pvt.) Ltd. and others 2022 SCMR 1135; Habib Bank Ltd. v. Federation of Pakistan through Secretary, Revenue Division and 5 others 2013 PTD 1659; Nagina Daal Factory through Allah Ditta Partner v. ITO and another 18 TAX 1 SC; Model Customs Collectorate Islamabad v. Aamir Mumtaz Qureshi 2022 SCMR 1861; Sahabzadi Maharunnisa and another v. Mst. Ghulam Sughran and another PLD 2016 SC 358; Bashir Ahmed Badini, D&SJ, Dera Allah Yar and others v. Hon'ble Chairman and Member of Administration Committee and Promotion Committee of Hon'ble High Court of Balochistan and others 2022 SCMR 448; Unique Engineering Works (Pvt.) Ltd., through Chief Executive v. Federation of Pakistan through Secretary of Law Islamabad and 3 others 2022 PTD 1502; Pepsi Cola International (Private) Limited through Authorized Representative v. Federation of Pakistan through Secretary Revenue Division, Islamabad and another 2022 PTD 51; Maple Leaf Cement Factory Ltd., v. Federal Board of Revenue and others 2016 PTD 2074; D.G. Khan Cement Co. Ltd., through Chief Financial Officer and others v. Federal Board of Revenue through Chairman and 5 others 2020 PTD 2111 ref.

(b) Criminal Procedure Code (V of 1898)---

----Ss.249-A, 265-K & 561-A---Constitution of Pakistan, Art. 199---Constitutional petition--- Quashing of proceedings---Inherent jurisdiction of High Court---Scope---When a criminal matter is pending before a Trial Court and interim challan has been submitted, under normal course application under S. 265-K, Cr.P.C is to be filed before concerned Court in case the accused is of the opinion that charge is either groundless or there is no probability of conviction---In exceptional circumstances if facts of a case so warrant a person/accused can approach High Court for quashing of FIR, if the action is patently illegal, without jurisdiction---In such circumstances sending a person to go through full process of trial and then get himself acquitted would be a miscarriage of justice with that person---High Court should exercise its powers under S.561A, Cr.P.C., in such circumstances.

Haji Sardar Khalid Saleem v. Muhammad Ashraf and others 2006 SCMR 1192; A Habib Ahmed v. MKG Scott. Christian and 5 others PLD 1992 SC 353; Ghulam Muhammad v. Mozamil Khan and others PLD 1967 SC 317; Muhammad Hassan Nadeem and 2 others v. Model Customs Collectorate (Enforcement and Compliance) through Collectors and 4 others 2021 PTD 764 and Muhammad Amir v. Federation of Pakistan (C.P No.D-4410/2020) ref.

Ovais Ali Shah and Umer Ilyas Khan for Petitioner No.2.

G.M. Bhutto, Assistant Attorney General for Respondents Nos.1 and 2.

Shahid Ali Qureshi for Respondent No.3.

Ghulam Asghar Pathan for Respondent No.4.

2023 P T D 689

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Messrs MODERN TEXTILE MILLS LIMITED through Liquidator

Versus

COMMISSIONER INLAND REVENUE and another

I.T.R.A. No.98 of 2018, decided on 6th January, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss.18, 79(1)(e), 122(4)(5A), 133 & 166(1)(a)---Reference---Tax exemption---'Adventure in nature of trade'---Scope---Taxpayer was an industrial unit and sold its land by converting it into a housing scheme and earned profit---Validity---For an adventure in nature of trade there had to be "indicia of trade" which was present in transaction in question---Intention of a person in selling out any asset depended upon the conduct of that person and the circumstances of the case--- Manner and method in which land was sold out fell under adventure in the nature of trade and was taxable in the hands of company and was not exempted under S.79 of Income Tax Ordinance, 2001, as claimed by the tax payer---Earlier proceedings on same subject under S.122 (5) of Income Tax Ordinance, 2001, which were dropped, in those proceedings procedure through which the issue was probed during audit proceedings was not carried out by the department---Such was neither a case of change of opinion nor it was a past and closed transaction---All three authorities below i.e. Taxation Officer, Commissioner Appeals and Appellate Tribunal Inland Revenue were justified in reaching to the conclusion that exemption claimed by taxpayer under S.79(1)(e) of Income Tax Ordinance, 2001, was not applicable---Reference was dismissed, in circumstances.

Fecto Cement Limited v. Additional Commissioner Inland Revenue C.P. No.D-2595/2015 and Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer and others 1992 SCMR 250 distinguished.

Fancy Foundation v. Commissioner of Income Tax, Karachi 2017 SCMR 1395 and Load Sands in IR v. Livingstone 11 TC 538 rel.

Anwar Kashir Mumtaz and Usman Alam for Applicant.

Kafeel Ahmed Abbasi for Respondents.

2023 P T D 710

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

COLLECTOR OF CUSTOMS through Deputy Collector of Customs and others

Versus

Messrs NETPAC and others

Special Customs Reference Application No.75 of 2022 and Constitution Petition No.D-2065 of 2022, decided on 16th November, 2022.

Customs Act (IV of 1969)---

----Ss.25-A, 32 & 196---Reference---Goods Declaration---Invoice retrieved from consignment---Effect---Authorities instead of imposing duty / taxes on the basis of self-assessment by declaring lower invoice value relied upon invoice retrieved from consignment---Customs Appellate Tribunal set aside the duties / tax imposed on importer on the basis of invoice retrieved from consignment---Validity---Cases where invoice was retrieved from any container, as per provision of S.25A of Customs Act, 1969, the value was to be taken as per the invoice retrieved form the consignment---Co-relation between retrieved invoice was to be kept into consideration with what importer and exporter had mentioned in the invoice---In case any invoice was retrieved, it was incumbent upon the authorities to substantiate their assessment by making confirmation from the shipper or to ascertain its market value or to examine the value declared by similar consignments---In absence of such parameters retrieved invoice would lose its significance when goods declaration and other documents produced by importer were found to be genuine and original and were backed by other necessary documents---In cases where retrieved invoice was found to be genuine and the goods declaration of importer was found to be fake then in such circumstances not only the importer was liable to be assessed on the basis of retrieved invoice but was also guilty of mis-declaration of imported consignment and concealment of material facts and in such situation provision of S.32 of Customs Act, 1969, were fully attracted---Authorities did not bring on record any cogent material to substantiate its assessment and failed to take into account the document furnished by importer and that those documents were not found to be fake and forged---High Court declined to interfere in the order passed by Customs Appellate Tribunal---Reference was dismissed, in circumstances.

Junaid Traders v. Additional Collector of Customs (Appraisement-I) 2012 SCMR 1876; Federation of Pakistan through Secretgary, Ministry of Finance, Federal Board of Revenue, Islamabad and others v. Messrs Horison International, Karachi and others 2018 PTD 1403 and Collector of Customs, Karachi v. M/s. Muhammad Shafiq (Civil Appeal No.1846 of 2016) ref.

Mrs. Masooda Siraj along with Javed Hussain for Petitioner (in Special Customs Reference Application No.75 of 2022).

Imran Iqbal Khan along with Aneel Zia for Petitioners (in Constitution Petition No.D-2065 of 2022 and Special Customs Reference Application No.75 of 2022).

G.M. Bhutto, Assistamt Attorney General for Pakistan (A.A.G.) for Respondent No.1 (in Constitution Petition No.D-2065 of 2022).

Mirza Nadeem Taqi for Respondent No. 2 (in Constitution Petition No.D-2065 of 2022).

2023 P T D 725

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Messrs XAVIER COMPANY through Partner

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL and another

Special Customs Appeal No.63 of 2002, decided on 3rd November, 2022.

Customs Act (IV of 1969)---

----Ss.25, 32 & 196---Reference---Misdeclaration---Criminal proceedings---Pre-condition---Appellant / importer was aggrieved of criminal proceedings initiated against him by authorities for misdeclaration of value of goods and duty paid thereon---Validity---Post General Agreement Tarrifs and Trade (GATT) era S.25 of Customs Act, 1969, not only eliminated concept of economic zones for comparison and fixation of values of imported goods for customs purposes but at the same time required such valuation to be based on actual value of imported merchandise on which duty was to be assessed and had barred valuation hinged to the value of merchandise of national, or any other country's origin, or on arbitrary or fictitious values---Offense under S.32 of Customs Act, 1969, could not be constituted in absence of mens rea on the part of an importer and could not be put in operation--- Provision of S.32 of Customs Act, 1969could only be invoked on an importer upon availability of deliberate act or connivance, error, omission or misconstruction---Element of mens rea was missing and no deliberate misdeclaration was apparent from the record---Authorities did not adduce any evidence to substantiate that it was a willful fault and deliberate mis-declaration---Authorities' desire to levy fine in absence of incriminating evidence could not be entertained--- Merely hypothecation would not ipso facto mean that element of mens rea was present making importer liable for imposition of penalty--- High Court set aside allegation of mis-declaration and imposition of fine and penalty as the same could not be sustained---Appeal was allowed, in circumstances.

2021 PTD 2027 and Messrs Latif Brothers v. Deputy Collector, Customs, Lahore 1992 SCMR 1083 rel.

Ammar Yasser for Appellant.

G.M. Bhutto, A.A.G. for Respondents Nos.1, 2 and 4.

Sarfaraz Khan Marwat for Respondent No.3.

2023 P T D 742

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Messrs MICRO INNOVATIONS AND TECHNOLOGIES (PVT.) LTD. through constituted attorney

Versus

FEDERATION OF PAKISTAN through Federal Secretary Ministry of Commerce and 4 others

C.P. No.D-2890 of 2020, decided on 12th December, 2022.

(a) Interpretation of statutes---

----Redundancy, principle of---Applicability---No provision of law is to be read either in isolation nor such interpretation be made which may render other provisions as redundant or nugatory.

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

----S.32---Show-cause notice, issuance of---Re-assessment of goods---Limitation---Petitioner was importer and aggrieved of issuance of show-cause notice for re-assessment of goods and recovery of taxes under S.32 of Customs Act, 1969, beyond period of limitation---Validity---For reopening of any matter or issuing show-cause notice upon a person, time limit has to be counted as five years from the relevant date and not from the detection date---Issuance of a show-cause notice in a timely manner is a sine-qua-non for assuming jurisdiction vested under the provision of S.32 of Customs Act, 1969---Where show-cause notice is issued beyond period of limitation, it has to be considered and declared as null and void--- Notices issued beyond mandatory period are liable to be struck down as acceptance of a show cause notice after period of limitation will amount to enhancement of period of limitation and this is not legally permissible--- High Court set aside show-cause notices issued beyond period of limitation---Constitutional petition was allowed accordingly.

Messrs Lever Brothers Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal and another 2005 PTD 2462; Muhammad Measum and others v. Federation of Pakistan and others 2015 PTD 702; Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed 2017 SCMR 152; Commissioner Inland Revenue, Zone-I, RTO, Hyderabad v. Messrs Hyderabad Electric Supply (HESCO) Hyderabad) 2014 PTD 951; Messrs Gulistan Textile Mills Ltd., Karachi v. Collector (Appeals) Customs Sales Tax and Federal Excise, Karachi and another 2010 PTD 251; Multan Electric Power Co. Ltd. v. Commissioner Inland Revenue, Multan and others (Tax Ref. No.27/2014); Messrs Lucky Cement Limited v. Federation of Karachi Pakistan and others (C.P. No.D-216/2013) and Nestle Pakistan Limited v. The Federal Board of Revenue and others (C.P. No.D-5482/2017) ref.

Additional Collector, Model Customs Collectorate, Multan v. M/s. Reliance Commodities (Pvt.) Ltd. and others (Cus. Ref. No.12/2016); Collector of Customs (Preventive), Karachi v. Pakistan State Oil Karachi 2011 SCMR 1279 and Commissioner Inland Revenue and others v Jahangir Khan Tareen and others 2022 SCMR 92 rel.

Qazi Umair Ali for Petitioner.

G.M. Bhutto, Assistant Attorney General for Respondent No.1.

Muhabbat Hussain Awan for Respondents Nos.2 to 5.

2023 P T D 773

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

COMMISSIONER (LEGAL DIVISION)

Versus

PAKISTAN SERVICES LIMITED

Income Tax Reference Application No.D-493 of 2009, decided on 14th February, 2023.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 111---Assessment on production of accounts, evidence, etc---Penalty for concealment of income---Scope---During the assessment proceedings, the taxation officer alleged that certain expenses claimed by the respondent were false and inaccurate and were added to the total income as concealed income---However, the original order was subsequently amended and part of the alleged addition was deleted while some of it was set aside---No record of the original proceedings was presented to rebut the factual determination made by the lower forums against the department---Taxation officer failed to determine the actual guilt warranting a penal action and did not consider the exception created by subsection 2(A) of S.111 of the Ordinance, which stated that a mere disallowance of an expenditure would not constitute concealment of income or furnishing of inaccurate particulars of income unless it was proven that the assessee deliberately claimed a deduction for an expenditure not actually incurred---Deletion of the penalty was fully justified, therefore, the Reference Application was dismissed in limine.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.111---Penalty for concealment of income---Scope---Mens rea---Scope---Existence of mens rea is a mandatory condition for levying any penalty under S.111 of the Income Tax Ordinance, 1979---Burden to prove such act of an assessee is also on the department---Mere failure to determine correct income and pay tax accordingly, until it is a result of fraud or willful gross neglect, will not ipso facto warrant imposition of penalty---Falsity of an explanation by the taxpayer is not in and of itself a cause to mandatorily impose penalty under the Ordinance---Assessee is not called upon to prove his innocence; it is for the department to establish his guilt---Penalty can be imposed only when the revenue officer establishes a case indicating dishonest motive of an assessee in filing a return---For the purposes of imposition of penalty, the assessee must be conscious of having concealed the particulars of his income---For imposition of penalty it is not sufficient that the assessee's explanation was not satisfactory or was even false; an evidence independent of assessee's explanation should be on record before penalty could be imposed---Even if an assessee agrees to a higher assessment than the returned income, it is not sufficient to levy penalty, whereas, the position may be different if the assessee admits that the addition may be treated as its concealed income, in which case the department need not establish anything more to levy penalty---Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.

Commissioner of Income Tax v. Habib Bank Limited 2007 PTD 901; Commissioner of Income Tax v. Civil Aviation Authority 2002 PTD 388; Commissioner of Income Tax v. Gokuldas Harivallabhdas (1958) 34 ITR 98; Muhammad Muslim v. Commissioner of Income Tax (1980) 42 Tax 129; Anantharam Veerasinghhaiah & Co. v. CIT [1980] 123 ITR 457 (SC); Commissioner of Income Tax v. Kamran Steel Re Rolling Mills [1989] 60 Tax 13; Commissioner of Income Tax, Andhra Pradesh v. C.V.C. Mining Company, Gudur (1976) 102 ITR 830 and Commissioner of Income Tax v. Anwar Ali AIR 1970 SC 1782 ref.

Muhammad Aqeel Qureshi for Applicant.

2023 P T D 825

[Sindh High Court]

Before Muhammad Iqbal Kalhoro and Agha Faisal, JJ

DIGRI SUGAR MILLS LIMITED

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE and another

Sp. S.T.R.A. No.59 of 2007, decided on 22nd April, 2022.

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

----Ss. 11, 3(1A) & 2(25)---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Further tax---Registered person---Scope---Show-cause notice was issued to the applicant alleging supplies made to unregistered persons and consequent thereto recovery of further tax was sought---Applicant acknowledged having made supplies to unregistered persons but based its defense on the argument that such persons were "liable to be registered" as defined in S. 2(25) of the Sales Tax Act, 1990, therefore, such persons should be considered registered for the purposes of the Act, and no further tax was due---Department did not agree with the defense and an order-in-original was passed---Appellate Tribunal maintained the order-in-original---Validity---Section 3(1A) of the Sales Tax Act, 1990, required that further tax should be charged, levied and paid where taxable supplies were made to an unregistered person---Section 3(1A) unequivocally imposed the obligation of further tax upon supplies to unregistered persons---Definition could not override the charging section of law---Definition given in a statute had to be construed so as not to be repugnant to the context and a mere definition by itself could not create any charge, liability and/or exception---Applicant's reading of the law would have rendered S.3(1A) as redundant, but the law required that redundancy should not be attributed to legislation---Verbiage of S. 2(25) also contained a proviso precluding conferment of any benefit, in respect of supplies to persons liable to be registered---Applicant was held liable to pay further tax under subsection (1A) of S.3 of the Sales Tax Act, 1990, for supplies made to unregistered persons.

Chairman Federal Board of Revenue v. Al Technique Corporation of Pakistan Limited PLD 2017 SC 99 and Suresh Kumar v. Federation of Pakistan PLD 2020 Sindh 62 rel.

Zak Re Rolling Mills (Pvt.) Limited v. Appellate Tribunal Inland Revenue and others 2020 SCMR 131; Tandlianwala Sugar Mills Limited and others v. Federation of Pakistan and others 2001 SCMR 1398; Collector of Sales Tax v. Messrs Mega Tech (Pvt.) Ltd. 2005 SCMR 1166 and Iqbal Hussain v. Federatin of Pakistan 2010 PTD 2338 ref.

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

----Ss. 11 & 33---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Offences and penalties---Scope---Penalty may only be contemplated in the demonstrable presence of culpable mens rea attributed to the person.

Zak Re Rolling Mills (Pvt.) Limited v. Appellate Tribunal Inland Revenue and others 2020 SCMR 131; Tandlianwala Sugar Mills Limited and others v. Federation of Pakistan and others 2001 SCMR 1398; Muhammad Waheed v. Customs Appellate Tribunal 2016 PTD 35; NICON (Private) Limited v. CIR RTO 2016 PTD 2748; Commissioner of Income Tax v. Habib Bank Limited 2007 PTD 901; DG Khan Cement Company Limited v. Federation of Pakistan 2004 PTD 1179 ref.

(c) Administration of justice---

----Courts ought to abstain from deciding larger questions, if a case could be decided on narrower grounds---It is preferred for the courts to confine determinations to questions pivotal for the determination of a case.

Zak Re Rolling Mills (Pvt.) Limited v. Appellate Tribunal Inland Revenue and others 2020 SCMR 131 rel.

Ahmed Hussain for Applicant.

Irfan Ahmed Memon, Deputy Attorney General for Respondents.

Ameer Bux Metlo, Imran Ahmed Metlo and Imran Ali Mithani for Respondents.

2023 P T D 847

[Sindh High Court]

Before Yousuf Ali Sayeed and Adnan Iqbal Chaudhry, JJ

Messrs ASTRO PLASTIC (PVT.) LTD through Company Secretary and another

Versus

MINISTRY OF FINANCE GOVERNMENT OF PAKISTAN through Secretary and 3 others

Constitution of Petition No.D-946 of 2013, decided on 26th December, 2022.

Customs Act (IV of 1969)---

----S.195-C---Alternative Dispute Resolution (ADR)---Scope---Section 195-C of the Customs Act, 1969, provides that ADR can be invoked only for disputes of the specified type that are under litigation in any court of law or appellate authority---Federal Board of Revenue (FBR) is required to inform the court or appellate authority when an ADR Committee has been constituted---If the aggrieved person is satisfied with the decision of the ADR Committee and withdraws the case from the court or appellate authority within a specified time, then the decision is binding on the Collector---If the ADR Committee cannot decide the dispute within 90 days, then the FBR shall dissolve the Committee and the dispute shall be resolved by the court or the appellate authority where it is pending---Therefore, it is evident that ADR under S.195-C of the Customs Act, 1969, can only be invoked if the dispute remains under litigation and is yet to be adjudicated by the court or the appellate authority---Scheme is such that if the ADR succeeds, the aggrieved person withdraws his case from the court or the appellate authority where it is pending---If the ADR fails, the aggrieved person falls back on the forum where the dispute is pending for adjudication---In other words, ADR under S.195-C of the Customs Act, 1969, is an 'alternate' remedy, not an 'additional' remedy.

Khalid Jawed Khan for Petitioner.

Qazi Ayazuddin Qureshi, Assistant Attorney General for Pakistan for Respondents Nos.1 and 4.

Nemo for Respondent No.2.

Sardar Zafar Husain along with Haroon Waqar Malik, ADC and Tauqeer Ahmed, P.A. Customs for Respondent No.3.

2023 P T D 896

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

IBRAHIM FIBRES LIMITED

Versus

CUSTOMS APPELLATE TRIBUNAL and others

Special Customs Reference Applications Nos.259 to 269 C.M.A. No.1816 of 2012 and 1594 of 2014, decided on 15th December, 2020.

Customs Act (IV of 1969)---

----Ss.196, 194A & 194B---Reference to High Court---Appeals to the Appellate Tribunal---Reasons for decision---Scope---Appellate Tribunal must independently decide the controversy before it and not approve the finding of Collector (Appeals) in a slipshod manner---As the last fact-finding forum, it is the Tribunal's duty to reach an independent decision after considering the contentions raised by the parties---High Court cannot approve a mere endorsement of Collector (Appeals) appellate order---If the Tribunal does not take relevant facts into consideration or deliberate on the reasons for or against the appeal, then it has not decided the appeal and any purported order or judgment would be a nullity in law---Therefore, if the Tribunal fails to address a question of law or fact raised before it or before any other forum under the relevant statute, it is treated as a question of law for the purposes of a reference application before the High Court.

Wateen Telecom Ltd. v. Commissioner Inland Revenue 2015 PTD 936 ref.

Pervez Iqbal Kasi for Applicant.

2023 P T D 908

[Sindh High Court]

Before Muhammad Shafi Siddiqui and Agha Faisal, JJ

Messrs OBS PAKISTAN (PVT.) LTD. through Senior Manager Finance

Versus

The CUSTOMS APPELLATE TRIBUNAL and another

Special Customs Reference Application No.136 of 2017, decided on 27th March, 2023.

Customs Act (IV of 1969)---

----Ss. 32, 32-A, 80 & 196---Pak-China Free Trade Agreement (FTA) notified vide SRO 659(I)/2007 dated 30-06-2007---Reference---Imported goods, classification of---Question of facts---Scope---Importer/applicant declared the imported goods as 'Methyldopa USP 34' and claimed exemption of customs duty under S. No. 1083 of Table-1 to SRO 659(I)/2007 dated 30.06.2007 ('the Notification')---Department issued Show Cause Notice against the importer contending that the exemption of customs duty was available to some other commodity " Alanine" thus disentitling the importer for exemption under 'the Notification'---Importer /applicant filed Customs Reference impugning the Order-in-Original and Order-in-Appeal passed against him contending his version as a question of law---Held, that Serial Nos. 1082 and 1083 at the Notification disclosed description of the goods as "Alanine" ---Jurisdiction of the High Court could not be invoked for reappraisal of the facts as to the classification of goods imported by the applicant---Tribunal had determined the concerned question(s) of facts, which had attained finality---Questions raised by the Importer /applicant in the Reference were not based on law but on facts---No interference by the High Court made out against the order and judgment passed by the Customs Appellate Tribunal---Reference application was dismissed, in circumstances.

Pervez Iqbal Kasi for Applicant.

Khalid Mehmood Siddiqui for Respondents.

2023 P T D 938

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

Messrs JAMAL SEAMLESS PIPE (PVT.) LTD. through Constituted Attorney

Versus

FEDERATION OF PAKISTAN through Secretary (Revenue Division) and 4 others

Constitution Petition No.D-699 of 2023, decided on 2nd February, 2023.

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

----S.81---Provisional determination of liability---Scope---Petitioner sought direction to the department to allow provisional release of imported consignments under S. 81 of the Customs Act, 1969, till such time its representation for granting exemption from levy of regulatory duty was finally decided by the department---Validity---Pendency of mere representation could not be accepted as a cause for provisional release of any consignment---Petition being misconceived was dismissed.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction---Ad-interim relief---Scope---High Court, in exceptional circumstances, can pass ad-interim orders pending final adjudication of a petition; but that can only be done when a prima facie case is made out that the petitioner may be able to succeed before the Court in its final determination of the dispute---Ad-interim relief can only be granted where there is every likelihood that if such a relief is not granted, the party approaching the Court may be prejudiced---It is only when the Court is empowered to grant the final relief, an ad-interim relief can be granted---Approaching a constitutional court, in any other situation or manner, is not a correct approach.

2023 P T D 962

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PaCCS, CUSTOM HOUSE, KARACHI

Versus

Alhaj AJAB KHAN

Special Customs Reference Application No.73 of 2009, decided on 9th February, 2022.

Customs Act (IV of 1969)---

----S.194-C---Customs Appellate Tribunal---Technical Member---Scope--Legislature does not want a Single Member, Technical, to be prevented from hearing case that involves decision in relation to a question of law---Member Technical is fully empowered under the law to decide a question of law.

Collector of Customs v. Syed Rehan Ahmed 2017 SCMR 152 ref.

Iqbal Khurram for Applicant.

Nemo for Respondent.

2023 P T D 985

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

MUHAMMAD AMIR

Versus

DEPARTMENT OF PLANT PROTECTION and 2 others

Constitution Petition No. D-4335 of 2019, decided on 12th October, 2022.

(a) Pakistan Plant Quarantine Rules, 2019---

----Rr. 8, 44, 46 (4) & 56---Import Policy Order, 2022, Sr. No. 78, Pt-IV---Plant and Plant Products, import of---Necessary documents---Petitioner was auction purchaser of consignment of Dark Red Kidney Beans---Plant Protection Authorities declined to issue Plant Protection Release Order (PPRO) as petitioner did not have Phytosanitary Certificate issued by concerned authority of exporting country, resultantly the consignment could not be released from the port---Validity---Consignment of Red Kidney Beans could only have been imported under Sr. No. 78, Pt-IV titled Import of Plant and Plant Products of the Import Policy Order, 2022, along with (i) Valid Import Permit issued by DPP (ii) Phytosanitary Certificate from National Plant Protection Organization (NPPO) of country of origin and Phytosanitary Certificate for re-export if the country of export was other than the country of origin, and (iii) compliance with food safety requirements---In absence of such essential requisites, respondent authority could not be compelled to provide Plant Protection Release Order-PPRO, nor an order for conducting phytosanitary inspection of the consignment at such stage could be passed as it would frustrate the entire scheme of law posing serious bio hazards---Plant protection and phytosanitary laws, rules, conventions and guidelines were put into place globally to protect indigenous plants and crops from pests and diseases that could accompany plants and plant products imported into the country of import, which would have ultimate effect on public health and could danger the eco- balance---Such regime was to ensure local plants, flora and fauna's protection and aimed to save crops from pests and diseases---It was for such public purpose that stringent border controls were created and phytosanitary standards were made compulsory at the highest levels in World Trade Organization (WTO)---Only option available to customs authorities in respect of such phytosanitary-offensive consignment would be that such consignments was confiscated, destroyed, or returned to the port of origin at the expense of the importer---Such goods could never be permitted to be let out to reach national soil or waters, resultantly the exercise to have the goods auctioned was not only illegal but also without any application of sound mind exhibiting complete lack of coordination between different organs of Customs authorities---High Court directed Customs authorities to have the consignment returned to port of origin at the expense of importer or in alternate, to have complete consignment destroyed and return auction amounts submitted by petitioner to him along with all taxes paid by him in such pursuit---Constitutional petition was dismissed, in circumstances.

(b) Maxim---

----Quando aliquid prohibetur ex directo, prohibetur et per obliquum---Meaning---When anything is prohibited directly, it is prohibited also indirectly.

Pervez Iqbal and Ms. Falak Naz Fatima for Petitioner.

Rashid Arfi for Respondents Nos. 2 and 3/Customs Department.

G.M. Bhutto, D.A.G. and M. Ishaque Pirzada for Respondents.

Allah Ditta Abid, Plant Protection Adviser and Director General of Respondent No.1

2023 P T D 1013

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

COMMISSIONER (LEGAL DIVISION) LTU

Versus

PAKISTAN PETROLEUM LTD.

I.T.C. Nos.483 and 484 of 2004, decided on 25th January, 2022.

(a) Income Tax Ordinance (XXXI of 1979)---

----S.24---Deductions not admissible---Scope---Pre-requisites to employees---Assessing Authority declined to allow deduction of expenditure incurred by respondent on the provision of perquisites to its employees---Commissioner (Appeals) dismissed the appeal---Appellate Tribunal allowed the appeals by holding that the law did not permit making of ad hoc addition under S. 24(i) of the Income Tax Ordinance, 1979---Validity---Section 24(i) of the Income Tax Ordinance, 1979, had empowered the Assessing Authority to add to the income of a company any perquisite, allowance or other benefit given to an employee which was in excess of the 50% of his salary---No power was vested with the Assessing Authority to make any ad hoc additions to the income of the assessee in a slip shod manner or without properly working out the excess perquisites claimed by the assessee, in a shortcut manner---Assessing Authority being a quasi judicial authority was supposed to make the additions to the income of the assessee by giving cogent reasons and the justification for making such additions, if any---Assessing Authority though had opined that excess perquisites were given to the employees, but instead of adding those amounts, which were to be calculated after working out the excess perquisites, rather adopted a shortcut method of making ad hoc additions to the income of the assessee, in both the years under consideration, which was not in accordance with law---Reference applications were decided against the department.

Messrs Rajput Metal Works Ltd., Gujranwala v. The Commissioner of Income-Tax, Rawalpindi Zone, Rawalpindi PLD 1976 Lah. 223 rel.

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

----S.122---Amendment of assessments---Scope---Any addition made to the income of the assessee without giving reasons and justification for the same is not warranted under the law and is liable to deleted.

Muhammad Aqeel Qureshi for Appellant.

Fawad Syed for Respondent.

2023 P T D 1087

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

MUHAMMAD TAHIR through Attorney

Versus

FEDERAL BOARD OF REVENUE through Chairman Ministry of Finance, Islamabad and another

Constitutional Petition No.D-6773 of 2022, decided on 25th November, 2022.

Sales Tax Act (VII of 1990)---

----S.21---Sales Tax Registration---Suspension---Principle of natural justice, violation of---Petitioner was aggrieved of suspension of his Sales Tax Registration without providing him any opportunity of hearing---Validity---After noting some shortcomings on the part of petitioner, the concerned authority suspended Sales Tax Registration with immediate effect---Such act proved that prior to order of suspension, petitioner was not communicated with regard to shortcomings, if any recorded by the authority---No reply was obtained from the petitioner nor any opportunity of hearing was given to him---High Court declined to endorse action taken by authority with immediate effect as no one could be condemned unheard---Before drawing any adverse inference, authority was bound to call explanation / reply from petitioner and in absence of such mandatory legal requirement, action of authority was non-est in the eyes of law---High Court directed the authority to restore Sales Tax Registration of petitioner in accordance with law as its decision was illegal and unqualified for---Constitutional petition was allowed accordingly.

C.P. No.D-8101 of 2017 rel.

Ahmed Masood for Petitioner.

None has appeared for Respondents Nos.1 and 2.

G.M. Bhutto, Assistant Attorney General for the Federation of Pakistan (A.A.G.) On Court Notice.

2023 P T D 1415

[Sindh High Court]

Before Muhammad Shafi Siddiqui and Agha Faisal, JJ

HASCOL PETROLEUM LTD. through Authorized Attorney and another

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and 2 others

C.Ps. Nos.D-4446, D-4513, D-4552, D-6927, D-4553 and D-4618 of 2022, decided on 14th April, 2023.

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

----Ss.18 & 30---Goods dutiable---Regulatory duty---Date of determination of rate of import duty---Scope---Petitioners claimed entitlement to benefit under SRO 806(I)/2022, dated 20-06-2022---Validity---Federal Government had imposed 10% regulatory duty on import of motor spirit vide SRO 806(I)/2022, dated 20-06-2022 subject to the condition that the duty shall not be levied on cargoes for which Letter of Credit had been established before the effective date i.e. 20-06-2022 or carrier vessels of which were in high seas before promulgation of SRO 806(I)/2022---SRO 806(I)/2022, dated 20-06-2022 was a protection to those transactions which were already at the verge of being materialized i.e. either Letter of Credits had been established or in relation to which "commercial transaction" the goods were in the high seas carrying cargos for the importer---Two limbs of SRO 806(I)/2022 were not completely isolated i.e. for a cargo in the high seas it had to be established that they were on the way to discharge their cargo for consignee and not waiting for a call from any potential buyer as these kind of cargo vessels were invariably available at high seas for a prompt response to any commercial call---Petitioners' Letter of Credits were not opened prior to 20-06-2022 and presence of vessel at high sea did not demonstrate that it was there for the petitioners on account of some commercial transaction recognized by law---Petitioners were not entitled to the protection and benefit under SRO 806(I)/2022---Constitutional petitions were dismissed, in circumstances.

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

----S. 30---Date of determination of rate of import duty---Scope---Rate of duty applicable to any import shall be the rate of duty in force.

Khalid Jawed Khan along with Uzair Qadir Shoro and Masood Anwar Ausaf along with Munim Masood for Petitioners.

Qazi Ayazuddin Qureshi, Assistant Attorney General and Muhammad Khalil Dogar and Agha Shahid Majeed for Respondents.

2023 P T D 1498

[Sindh High Court]

Before Muhammad Iqbal Kalhoro and Agha Faisal, JJ

COMMISSIONER INLAND REVENUE, ZONE-IV

Versus

BYCO PETROLEUM PAKISTAN LIMITED and others (and connected Matters, particularized in the Schedule1 hereto.)

Special Sales Tax Reference Application No.191 of 2018, decided on 6th May, 2022.

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

----Ss. 33 & 34---Offences and penalties---Default surcharge---Mens rea---Scope---Existence of mens rea is essential for imposition of default surcharge and/or penalty---Even non-payment of tax due to misinterpretation of law in good faith does not attract a penalty.

D. G. Khan Cement v. Federation of Pakistan 2004 PTD 1179; Deputy Collector Central Excide v. ICI Pakistan 2006 SCMR 626; Commissioner of Income Tax v. Habib Bank 2007 PTD 901; Additional Collector of Customs v. M Hussain 2016 PTD 2748; CIR v. Tianshi International Pakistan 2018 PTD 900; Fatima Fertilizer Company Ltd. v. Commissioner-II 2021 PTD 484; China Hub Power Generation Company v. Federation of Pakistan C.P. D-3532 of 2020; Sindh Petroleum and CNG Dealers Association v. FOP 2021 PTD 713; Aameer Mustaaly Karachiwala v. Deputy Commissioner 2021 PTD 335; IMS Health Pakistan (Pvt.) Ltd. v. Commissioner II SSTRA No. 02 of 2017; Gharibwal Cement Ltd. v. Income Tax Appellate Tribunal 2005 PTD 1; Coca Cola Beverages v. Customs, Excise and Sales Tax 2017 PTD 2380 and Additional Commissioner of Income Tax v. Narayandas Ramkishan 1994 PTD 199 ref.

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

----Ss. 33 & 34---Offences and penalties---Default surcharge---Mens rea---Scope---Default surcharge ought not to be imposed in a perfunctory manner and may only be warranted upon proper adjudication as to willful default and the presence of mens rea.

China Power Hub Generation Company (Private) Limited v. Pakistan and others (C.P. D-3532 of 2020) rel.

R.C.D. Ball Bearing Limited v. Sindh Employees Social Security Institution, Karachi PLD 1991 SC 308; Masood Textile Mills v. Ihsan ul Haq, CIT, Faisalabad 2003 PTD 2653 and CIR-III v. China Power Hub Generation Company (Private) Limited v. Federation of Pakistan and others (C.P. 546-K of 2021) ref.

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

----Ss. 33 & 34---Offences and penalties---Default surcharge---Mens rea---Scope---Penalties under fiscal laws are quasi criminal in nature and warrant imposition in the presence of culpable intent.

M. Muslim v. Commissioner of Income Tax, 1980 (1980 PTD 227); Iram Ghee Mills (Pvt.) Ltd. v. Customs, Central Excise and Sales Tax (Appellate) Tribunal, Karachi 2004 PTD 559; Commissioner of Income Tax v. Kamran Steel Re-rolling Mills 1989 PTD 521; Commissioner of Income Tax v. Aasia Film Artist 2001 PTD 678; Commissioner of Income-Tax/Wealth Tax, Zone-B, Lahore v. Makhdoom Zada Syed Hassan Mehmood 2002 PTD 381 ref.

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

----S. 34---Income Tax Ordinance (XLIX of 2001), Ss. 161 & 205---Default surcharge---Mens rea---Scope---Section 34 of the Sales Tax Act, 1990 is materially not different in scope from Ss.161 & 205 of the Income Tax Ordinance, 2001, relating to default and willful default and the levy of default surcharge on a hypothetical basis, and without establishing willful default on the part of taxpayer, is illegal.

Tianshi International Pakistan v. CIR 2018 PTD 900 rel.

109 Tax 385 (ATIR); 1992 PTD 342 (SHC) and 2006 SCMR 626 ref.

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

----S.47---Reference jurisdiction---Scope of reference jurisdiction is primarily confined to legal questions emanating from the judgment impugned and it is settled law that the Appellate Tribunal is the final arbiter of facts.

Squibb Pakistan (Pvt.) Ltd. v. Commissioner 2017 PTD 1303; F.M.Y. Industries v. Deputy Commissioner 2014 SCMR 907; Fawad Ahmad Mukhtar v. The Commissioner Inland Revenue (Zone-II) Regional Tax Office Civil Appeals 1521-1526 of 2018; Fatima Fertilizer Company Ltd v. Commissioner-II 2021 PTD 484; Commissioner of Income Tax v. Matrix Press 2016 PTD 97; Commissioner Inland Revenue v. Al-Hamad International 2017 PTD 2212 and Commissioner Inland Revenue v. Triple Tree Associates 2017 PTD 662 ref.

Ameer Bux Maitlo, Imran Ahmed Maitlo and Kafeel Ahmed Abbasi for Petitioners.

Hyder Ali Khan and Sami ur Rehman for Respondents.

2023 P T D 1519

[Sindh High Court]

Before Zulfiqar Ahmad Khan, J

MUHAMMAD ANWAR

Versus

PAKISTAN through Secretary to the Government of Pakistan Ministry of Finance, Islamabad and 6 others

Suit No. 212 of 1984, decided on 9th June, 2022.

Income Tax Ordinance (XXXI of 1979)---

----S. 162---Damages, recovery of---Civil suit---Maintainability---Negligence of authorities---Quantum of loss, determination of---Mental shock, agony and torture---Proof---Plaintiff claimed that ship purchased by him for breaking sank near shore and 2100 metric tons of scrap remained under water and Income Tax Authorities/defendants restrained plaintiff from cutting, scrapping, removing and lifting that scrap from capsized ship, which resulted into loss---Authorities raised plea of bar of S. 162 Income Tax Ordinance, 1979, regarding maintainability of suit---Plaintiff claimed recovery of damages for the loss sustained by him---Validity---When certain actions of officials of Income Tax Department were called in question and they were found to be in excess of jurisdiction and tainted with mala fide then bar contained in S. 162 of Income Tax Ordinance, 1979, was not attracted and suit was maintainable---For relief of damages as claimed by plaintiff, there was no hard and fast rule to calculate quantum of compensation, as well as there was also no yardstick to measure the sufferings---Plaintiff claimed damages on account of huge present and future economic loss and on account of undergoing irreversible phase of perpetual mental torture and loss of reputation---Mental shock, agony and torture implied a state of mind, which could be proved only by positive assertion of one who had experienced the same---Plaintiff claimed that owing to illegal act of authorities jointly and severally he suffered mental shock and agony but he could not produce any medical record to bolster/strengthen such contention---Plaintiff introduced on record that owing to acts of authorities whereby they directed plaintiff to stop work of breaking/cutting the vessel which he was legally entitled to perform, he suffered a lot and detailed out the same in his plaint---Quantum of damages would have been different if plaintiff had produced medical record in support of his claim of damages on account of mental torture---High Court awarded damages against officials of Income Tax department as their illegal acts tainted with mala fide and aggravated by their ex facie maladministration, were proved---Excessive use of lawful power was itself unlawful---Due to the actions of officials, plaintiff was prevented at least to a certain degree, from use and enjoyment of the vessel which he imported---High Court directed officials to pay the damages awarded against them jointly and severally, considering the principle of vicarious liability---Where government functionaries were guilty of committing illegality of such a degree, then they had to compensate the person wronged---Suit was decreed accordingly.

Amanullah Khan v. Mst. Akhtar Begum 1993 SCMR 504; Abbasia Cooperative Bank and another v. Hakeem Hafiz Muhammad Ghous and 5 others PLD 1997 SC 3; Al-Riaz Pvt. Ltd. v. Muhammad Ismail 2018 CLC 596; PLD 2021 Sindh 1 and 1996 CLC 627 rel.

Plaintiff present in person.

Nemo for Defendants.

2023 P T D 1541

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

COLLECTOR OF CUSTOMS

Versus

KRISTOF W. DUWAERTS

S.C.R.A. No. 326 of 2017, decided on 26th October, 2022.

Customs Act (IV of 1969)---

----Ss.19 & 196---Import Policy, 2013, Para. 20---Import of vehicle---Diplomatic exemption---Foreign experts from donor country---Relaxation in exemption criteria---Federal Government, jurisdiction of---Dispute was with regard to import of vehicle in question on the grounds that importer was not entitled to such exemption and vehicle was older than the period provided for under Import Policy, 2013---Validity---Federal Board of Revenue issued certificate to importer qualifying him for such exemptions particularly in terms of SRO 540(I)/2001, which had defined privileged personnel to mean all foreign experts, consultants or technicians visiting and residing in Pakistan under a proper aid agreement in which provision for application of customs concessions were made---Such experts included not only personnel directly in the employment of foreign or donor country or agency, but also those who had served in Pakistan under direct or agreement with such government or agency and whose salary and travelling expenses to and from Pakistan were paid by foreign government or agency---Federal Government under Para. 20 of Import Policy Order, 2013, enjoyed powers to allow import in relaxation of any prohibition or restriction under Import Policy Order, 2013---Federal Board of Revenue issued letter in such regard condoning the period to a period of one year and nine months in respect of import of vehicle in favour of importer---Application of Import Policy Order, 2013, did not apply to a privileged personnel working under grant-in-aid agreements particularly when a relaxation had been sought by the importer from Federal Government under Para. 20 of Import Policy Order, 2013, for import of an older car for latter's personal use---High Court answered the questions against the department and in favour of the importer---Reference was dismissed, in circumstances.

Masooda Siraj along with Jawed Hussain and Ishaque Pirzada for Applicant.

Nemo. for Respondent.

2023 P T D 1671

[Sindh High Court]

Before Irfan Saadat Khan and Zulfiqar Ahmad Khan, JJ

Messrs NATIONAL DEVELOPMENT FINANCE CORPORATION

Versus

COMMISSIONER OF INCOME TAX and another

I.T.As. Nos.829, 831 and 832 of 1999, decided on 3rd March, 2022.

(a) Income Tax Ordinance (XXXI of 1979) [Since repealed]---

----Ss. 22 & 23---Income from business and profession---Deductions---Bad debts---Scope---While claiming any income from any business and profession, under S. 22 of the Income Tax Ordinance, 1979, certain expenditures under S. 23 are allowable---Section 23(1)(x) deals with the claim made in respect of the bad debts claimed by an assessee---Bad debts are generally those accounts/amounts which due to any reason have become irrecoverable and all possible efforts with regard to their recovery including the hope of recovery has vanished which amounts are claimed as bad debts by an assessee---However, legislature has put a bar upon an assessee that only such amounts would be allowed as bad debts which are determined by the Deputy Commissioner to be irrecoverable---It is not a matter of discretion of an assessee to decide what is a bad debt, rather the assessee has to establish with cogent material and on reasonable grounds that such and such accounts/amounts since have become irrecoverable, therefore, the same are declared as bad debts---However the discretion to allow or not to allow the same has not been given to the assessee rather the said power is given to the concerned Deputy Commissioner Inland Revenue to determine the amounts which actually have become irrecoverable as bad debts and the onus in this regard for claiming any accounts/amounts as irrecoverable as bad debts lies squarely on an assessee.

(b) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 22 & 23---Income from business and profession---Deductions---Bad debts---Scope---Simply on the basis of mere provision an expenditure cannot be allowed and for allowing the claim of the assessee the Assessing Officer is duty bound to call the record, necessary explanations/clarifications from the assessee and thereafter allow or disallow any claim.

(c) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 22 & 23---Income from business and profession---Deductions---Bad debts---Scope---Assessee is required to give the names of the account holders and amounts considered as bad debt in each case, as may be indicated in a certificate issued by the State Bank of Pakistan---Assessing Officer has the authority under the law to enquire into genuineness of the claim and the assessee has no arbitrary or irrational authority to write off any amount as bad debt until and unless the parameters, as provided under the law, have been fulfilled or met out, as simply making a provision for doubtful debt is not sufficient to claim deduction under S. 23(1)(x) of the Income Tax Ordinance, 1979.

(d) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S.8---All officers to follow the orders of the Central Board of Revenue---Scope---Instructions of the CBR, now FBR, issued from time to time are binding upon the departmental authorities under S. 8 of the Income Tax Ordinance, 1979.

Mazhar Elahi Jafri for Appellant.

Muhammad Zubair Qureshi for Respondents.

2023 P T D 1701

[Sindh High Court]

Before Irfan Saadat Khan and Mahmood A. Khan, JJ

Messrs SAJID PLASTIC FACTORY

Versus

FEDERATION OF PAKISTAN through Chairman Federal Board of Revenue, Islamabad and 2 others

Constitution Petition No.D-2165 of 2021, decided on 3rd June, 2022.

Import Policy Order, 2020---

----Clause 8---Notification SRO 902(I)/2020 dated 25-09-2020---Constitutional petition---Petitioner / importer was aggrieved of his consignment not being released by Custom Authorities, despite its clearance---Plea raised by petitioner was that the consignment was importable under SRO 902(I)/2020 dated 25-09-2020---Validity---When consignment of similar nature was imported, duly classifiable under a particular head and the same was also found to be in accordance with the declaration, there remained no justification available with the department to give similar previous unapproved treatment to newly imported consignments if those were found to be of similar nature and no change in their classification etc. was detected---Authorities were bound to accept same classification, HST Code, rate, duty and taxes as applied to previous consignment, if facts and circumstances of consignment of petitioner were found to be of similar nature---In order to ascertain goods, lab test was a prerequisite condition and lab test was done by authorities themselves---Sample of imported goods sent to lab was found to be synthetic polymer polyvinyl chloride, as declared by the petitioner---Insistence of authorities to again send samples to another laboratory was misconceived and uncalled for, as authority's own lab had affirmed and confirmed, from the drawn sample of the consignment imported by the petitioner that those were in accordance with the declaration as made by the petitioner---High Court restrained the authorities from drawing any adverse view who were bound to release the goods in accordance with the law forthwith---Constitutional petition was allowed, in circumstances.

Aqeel Ahmed Khan for Petitioner.

Kafeel Ahmed Abbasi, Deputy Attorney General for Pakistan (DAG) for Respondent No.1.

Khalid Rajpar for Respondent No.2.

Mrs. Aneela Jamil for Respondent No.3.

2023 P T D 1769

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

The COLLECTOR OF CUSTOMS, KARACHI through Deputy Collector of Customs and others

Versus

Messrs A.R. INDUSTRIES and others

Special Customs References Applications Nos.223, 224, 226, 228, 229, 230, 231, 232, 240, 241, 242 and 243 of 2022, decided on 17th March, 2023.

Customs Act (IV of 1969)---

----Ss. 25, 25-A & 196---Customs Rules, 2001, R.120---Duty, determination of---Fall back method---Authorities were aggrieved of order passed by Customs Appellate Tribunal on the ground that without proper appreciation of law, Valuation Ruling and Order-in-Revision could not have been set aside when respondents / importers had failed to substantiate their transactional values---Validity---Values determined under the Fall back method, were provided under S. 25(9) of Customs Act, 1969---No such determination could have been made by Director Valuation by placing reliance on some Database, EDE data of Chinese exports of Pakistan, market information and international prices obtained through web---When Valuation Ruling in question was issued, proviso 2 to S. 25A of Customs Act, 1969, which had empowered the Director to rely and seek assistance from internationally acclaimed publications, bulletins or official websites of manufacturers of indenters of such goods was not available as it was inserted through Finance Act, 2021---Any reliance on such values would be without lawful authority and against the relevant provision of S.25A of Customs Act, 1969, as prevalent at the time of determination of values in question---As to placing reliance on any other supportive material, the Director Valuation also failed to give any justifiable reasons and also the material on the basis of which such values were determined by him---Exercise so carried out by Director Valuation while determining values under S. 25(9) of Customs Act, 1969, had been done against the spirit of S. 25 of Customs Act, 1969, read with R.120 of the Customs Rules, 2001---High Court remanded the matter to Director of Valuation for re-determination of values of the goods in question to the extent of respondents / importers afresh in accordance with law---Reference was allowed accordingly.

Messrs Sky Overseas through Authorized Attorney v. Federation of Pakistan through Secretary, Revenue Division and 4 others 2019 PTD 1964; Collector of Customs through Additional Collector of Customs v. Messrs Osaka Electronics and Industries Co. 2022 PTD 836; Collector of Customs through Additional Collector of Customs v. Ms. Shazia Aman 2022 PTD 674; Messrs Zakwan Steel and others v. The Federation of Pakistan through Secretary (Revenue/Chairman) and others 2023 PTD 9 and Saadia Jabbar v. Federation of Pakistan 2018 PTD 1746 ref.

Khalid Rajpar for Applicant (in SCRAs Nos.229 to 232 of 2022).

Aamir Raza for Applicant (in SCRAs Nos.223, 224, 226 and 228 of 2022).

Irfan Mir Halepota for Applicant (in SCRAs Nos.240 to 243 of 2022).

Khawaja Shamsul Islam for Respondents.

2023 P T D 1829

[Sindh High Court]

Before Adnan Iqbal Chaudhry, J

SEARLE COMPANY LIMITED and others

Versus

FEDERATION OF PAKISTAN and others

Suits Nos.1717, 2600 of 2015, 2439 and 2573 of 2016, decided on 11th April, 2022.

(a) Constitution of Pakistan---

----Art.189---Decisions of Supreme Court binding on other Courts---Scope---Leave grating order simpliciter passed by the Supreme Court is not precedent under Art.189 of the Constitution as it does not take an enunciation of law.

Muhammad Tariq Badar v. National Bank of Pakistan 2013 SCMR 314 ref.

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

----S.5A---Constitution of Pakistan, Art.73---Tax on undistributed profit---Section 5A of the Income Tax Ordinance, 2001, vires of---Insertion of S.5A of the Ordinance, including amendments thereto from time to time, does not fall within the parameters delineated under Art.73 of the Constitution, hence the impugned provision is ultra vires of the Constitution---High Court restrained the department from taking any action against the tax-payers on the basis of S.5A of the Income Tax Ordinance, 2001.

Sapphire Textile Mills Ltd. v. Federation of Pakistan 2021 PTD 971 ref.

Abdul Ahad, Uzair Qadir Shoro and Hamza Waheed for Plaintiffs.

Syed Mohsin Imam Wasti for Defendant No.3 (in Suit No.2573 of 2016).

Khilji Bilal, Assistant Attorney General for Pakistan along with Mansoor Ahmed, MIS Officer, FBR for the Defendants.

2023 P T D 1

[Lahore High Court]

Before Shahid Karim, J

Messrs WORLDCALL TELECOM LTD. through Chief Financial Officer

Versus

GOVERNMENT OF THE PUNJAB through Secretary, Ministry of Finance and 6 others

Writ Petition No.1615 of 2017, heard on 15th March, 2022.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss.3, 5(3) & 10---Constitution of Pakistan, Art.199---Constitutional petition---Taxable services---Amendment of Schedule of the Act---Petitioner/taxpayer assailed notification issued by Punjab Government amending Second Schedule to Punjab Sales Tax on Services Act, 2012---Plea raised by petitioner/taxpayer was that Schedule could not be amended without the same placing before Provincial Assembly---Validity---Nature of taxable services were listed in Second Schedule as per S.3 of Punjab Sales Tax on Services Act, 2012 and exclusions were not deemed to be services liable to tax under S.10 of Punjab Sales Tax on Services Act, 2012---Services provided by petitioner/taxpayer were covered by one of the exclusions and was originally not a taxable service to be subject to tax---Provincial Assembly did not deem it expedient to levy tax on petitioner in the first place---If such tax was sought to be imposed under purported authority of S.5 of Punjab Sales Tax on Services Act, 2012 then Government of Punjab could not apply the provision selectively---Power exercised by Government of Punjab was tantamount to amending S.3 of Punjab Sales Tax on Services Act, 2012, in actuality by seeking to include an exclusion as a taxable service---Such could only be done by a Money Bill and by an Act of Provincial Assembly---Such was precisely the reason Punjab Government laid before the Provincial Assembly all such notifications at the time of presenting Annual Budget Statement---Exercise of powers by Provincial Government under a statute had to be done collectively by Chief Minister and Provincial Ministers---Exercise of any power by an executive officer of the Province or even by the Chief Minister acting alone was ultra vires and a nullity---High Court declared notification in question ultra vires the powers of Provincial Government and was struck down---Constitutional petition was allowed accordingly.

Syed Zia Haider Rizvi and others v. Deputy Commissioner of Wealth Tax, Lahore and others 2011 SCMR 420 ref.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan 2016 PTD 2269 rel.

(b) Interpretation of statutes---

----Delegated power, exercise of---Principle---If Legislature imposes a condition for exercise of a delegated power, that power cannot be used unless the condition is fulfilled---If the power entails levy of a tax on a person which cannot be left unbridled and so must remain subject to overarching regulatory authority of Provincial Assembly.

(c) Constitution of Pakistan---

----Arts.129 & 130---"Provincial Government"---Connotation---Term "Provincial Government" connotes Chief Minister and Provincial Ministers taken together---Decision by Provincial Government has to be taken by Cabinet as a whole as delineated in Art.130 of the Constitution.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan 2016 PTD 2269 rel.

Khurram Shahbaz Butt, Asad Abbas Raza, M. Ahsan Mahmood, M. Usman Zia and Shahzad Ahmad Cheema for Petitioners.

Ahmad Hassan and Tnazil ur Rehman Hotiana and Salman Alam Khan, A.A.G for Respondents.

2023 P T D 30

[Lahore High Court]

Before Shahid Karim and Anwaar Hussain, JJ

SHAHBAZ HUSSAIN

Versus

FEDERATION OF PAKISTAN through Secretary and 3 others

I.C.A. No.50591 in W.P. No.46287 of 2021, heard on 20th June, 2022.

Sales Tax Act (VII of 1990)---

----Ss.3(9A), 11, 33(25) & 40C---Sales Tax Rules, 2006, R.150ZEF---Adjudicatory mechanism---Integrating business for monitoring, failure of---TIER-I retailer---Determination---Consequences of non-compliance or contravention---Appellant was aggrieved of penalty imposed by authorities for not integrating his business for monitoring---Validity---Proceedings were not initiated in terms of S.11 of Sales Tax Act, 1990 and after initiating proceedings order-in-original passed did not qualify to be an order referred in R.150ZEF of Sales Tax Rules, 2006---Besides imposing penalty as applicable, order of recovery of tax amount due was not made---When law required something to be done in a particular way, it should have been done in that only and not otherwise---Appellant was hard done by deprivation of procedural safeguards for determination of whether he was liable to be registered as a TIER-1 retailer and subsequent consequences---Such was more so when appeal against compulsory registration as TIER-1 retailer filed by Appellant was pending and was still to be decided---Division Bench of High Court declared that order-in-original was illegal and unlawful---Intra court appeal was allowed, in circumstances.

Federal Board of Revenue through Chairman, Islamabad and others v. Abdul Ghani and another 2021 SCMR 1154 ref.

Executive District Officer (Education), Rawalpindi v. Muhammad Younas 2007 SCMR 1835 rel.

Jahangir Ahmad for Appellant.

Shahid Sarwar Chahil for Respondents Nos.3 and 4.

2023 P T D 44

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Asim Hafeez, JJ

COMMISSIONER INLAND REVENUE, LEGAL ZONE, LARGE TAXPAYERS OFFICE, LAHORE

Versus

Messrs SAPPHIRE DAIRIES (PVT.) LTD.

S.T.R. No.20573 of 2021, decided on 30th May, 2022.

Sales Tax Act (VII of 1990)---

----Ss.2(39), 2(41), 2(48), 3, 13 & 47---Notification SRO No.549 (I)/2008 dated 11-06-2008---Exempted goods---Import and supplies---Scope---Authorities contended that benefit of notification SRO No.549(I)/2008, dated 11-06-2008 could only be extended to registered person, which was not importer-cum-supplier of goods---Validity---Expression "Import and supplies thereof" had to be construed in the context of definition of taxable supplies---Such supplies included supply of taxable goods made by an importer or manufacturer, as the case could be---Expression "Import and supplies thereof" covered incidence of import and supplies, in the context of goods and separately amenable to chargeability of tax and zero-rated regime---Expression 'Import and supplies thereof in column (3) of Sr.4, of Notification SRO No.549(I)/2008, dated 11-06-2008 covered imports-cum-supplies and supplies of locally produced/manufactured goods---No qualification / limitation was imposed nor intended to exclude taxable supplies of goods, locally produced/manufactured, from seeking benefit of Notification SRO No.549(I)/2008, dated 11-06-2008---High Court declined to interfere in order passed by Appellate Tribunal Inland Revenue and decided questions against the authorities---Reference was dismissed, in circumstances.

Collector of Custom FBR and another v. Messrs Fitter Pakistan (Pvt.) Ltd 2020 SCMR 1157; Collector of Customs, Lahore v. NESTLE Milk Pak Limited, Sheikhupura 2007 PTD 921 and Messrs Nestle Pakistan Ltd, Lahore v. C.I.R., Zone-II, L.T.U., Lahore 2013 PTD 420 ref.

Barrister Ahmad Pervaiz for Applicant.

2023 P T D 63

[Lahore High Court]

Before Abid Aziz Sheikh and Muzamil Akhtar Shabir, JJ

DIRECTOR (ASO) CUSTOMS INTELLIGENCE AND INVESTIGATION

Versus

TAIMUR TARIQ BUTT and 2 others

Customs References Nos.44631 and 44640 of 2022, decided on 19th July, 2022.

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

----Ss.2(kk), 163, 168 & 196---Reference---Smuggled goods---Raid on warehouse---Authorities seized goods lying in warehouse of respondent on the plea of smuggled goods---Customs Appellate Tribunal set aside the order passed by authorities---Validity---Authorities failed to establish that goods were smuggled---Respondent had discharged his burden to possess the goods under lawful import documents and authorities failed to establish its allegation of smuggling---Customs Appellate Tribunal made such finding after due appreciation of record---Deciding such question of law by High Court was merely an exercise in futility as final result of the matter would not be changed by deciding same question in favour of either of the parties---Question of fact which was converted into one of law merely by use of phraseology as usual to frame questions of law, could not be answered---High Court declined to answer question referred by authorities as the same was un-necessary for just decision of the matter and without any substance---Reference was dismissed, in circumstances.

Pakistan Match Industries (Pvt.) Ltd. v. Assistant Collector, Sales Tax and Central Excise Mardan 2019 SCMR 906; Army Welfare Trust (Nizampur Cement Project), Rawalpindi and another v. Collector of Sales Tax (Now/ Commissioner Inland Revenue), Peshawar 2017 SCMR 9; Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax and another 2014 SCMR 907 and Rafiq Spinning Mills (Pvt.) Limited, Faisalabad v. Customs, Central Excises and Sales Tax Appellate Tribunal, Lahore and another 2003 PTD 1789 rel.

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

----S.196---Advisory jurisdiction of High Court---Scope---High Court in its advisory jurisdiction under Reference is not bound to answer each and every question of law proposed for its decision---High Court can refuse to answer any question if it reaches the conclusion that substantial question of law has not arisen from decision of Customs Appellate Tribunal or decision of the question is not necessary in given circumstances of the case or does not have any bearing on end result of the case and amounts to an academic discussion only.

Commissioner of Inland Revenue, Legal Division, Lahore and others v. Messrs Rafeh Limited 2020 PTD 1657 (SC) = PLD 2020 SC 518 and Messrs Squibb Pakistan (Pvt.) Limited and another v. Commissioner of Income Tax and another 2017 SCMR 1006 ref.

Muhammad Awais Kamboh for Applicant.

2023 P T D 146

[Lahore High Court]

Before Jawad Hassan, J

MUBASHIR YAMEEN

Versus

ASSISTANT/DEPUTY COMMISSIONER INLAND REVENUE, RTO, RAWALPINDI and others

Writ Petition No.724 of 2021, decided on 17th October, 2022.

Income Tax Ordinance (XLIX of 2001)---

-----Ss.140 & 138---Constitution of Pakistan, Arts.4 & 10-A---Constitutional petition---Recovery of tax out of property and through arrest of taxpayer---Recovery of tax from persons holding money on behalf of a taxpayer---Scope---Petitioner impugned the actions/order of the respondents regarding attachment of his accounts and recovery of tax amount by directly issuing notice under S. 140 of the Income Tax Ordinance, 2001---Validity---Department before invoking S. 140 of the Income Tax Ordinance, 2001, was required to issue a notice under S.138 of the Income Tax Ordinance, 2001, intimating the taxpayer regarding the invocation of S. 140 and requiring him to make payment of tax liability within a reasonable time---Under Art.4 of the Constitution, it was an inalienable right of the citizen to be treated in accordance with law---Also the fair trial and due process were the fundamental rights of the every citizen of Pakistan under Art.10-A of the Constitution---Impugned actions regarding attachment and recovery of tax amount from the bank accounts of the petitioner were illegal and without lawful authority---Constitutional petition was allowed and the notice was declared to be without lawful authority and of no legal effect.

Mst Fouzia Razzak v. Federal Board of Revenue and others" 2021 SLD 199 = 2021 PTD 162 and Messrs HUAWEI Technologies Pakistan (Pvt.) Ltd. v. Commissioner Inland Revenue and others 2016 PTD 1799 ref.

Ch. Naeem-ul-Haq for Petitioner.

Malik Itaat Hussain Awan for Respondent/FBR.

Malik Akhtar Abbas, Assistant Advocate-General for Respondents.

2023 P T D 182

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs LAHORE RUBBER STORE

S.T.R. No.80 of 2016, heard on 17th October, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133 & 221---Sales Tax Act (VII of 1990), S.57---Federal Excise Act (VII of 2005), S.70---Rectification---Principle---Taxpayer was a retailer who was treated as manufacturer for the purposes of taxation---Taxpayer sought rectification of ex-parte order passed by Income Tax Appellate Tribunal, which was allowed and order passed by authorities was set aside---Validity---Rectification was a jurisdiction ancillary to appellate jurisdiction intended to rectify a mistake of fact or law apparent on face of record, which did not require investigation, appraisal of evidence, interpretation of law or inquiry into facts---Rectification jurisdiction could not be a substitute of tax reference, therefore, Tribunal was to check bona fide by seeking explanation for not filing rectification application soon after date of receiving certified copy of final order---After exercising original jurisdiction, Income Tax Appellate Tribunal had become functus officio with a little window for rectification of a mistake, which was an equitable remedy because law favoured justice to ensure an apparent and floating mistake, causing injustice was allowed to be rectified within limitation of five years---Appealable order attained finality on expiration of limitation for filing appeal or other remedy, such a finality could not be compromised by filing an application for rectification to manage rehearing or review the matter---Any injustice, because of an identified mistake, was rectifiable as envisaged in S.221 of Income Tax Ordinance, 2001, S.57 of Sales Tax Act, 1990 and S.70 of Federal Excise Act, 2005---High Court set aside order in question as jurisdiction was improper and remanded the matter to Income Tax Appellate Tribunal to decide application of rectification afresh---Reference was disposed of accordingly.

Commissioner Inland Revenue, Gujranwala v. S.K. Steel Casting Gujranwala 2019 PTD 1493; Commissioner of Income Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 and Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570 rel.

Waqar A. Sheikh and Rana Muhammad Mehtab for Applicant.

Hassan Kamran Bashir, assisted by Sikandar Ali, Asim Bin Majeed and Afzal Hussain for Respondents.

2023 P T D 223

[Lahore High Court]

Before Shahid Jamil Khan, J

RAO TARIQ ISLAM and others

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and others

Writ Petition No.228757 of 2018, heard on 11th November, 2022.

(a) Constitution of Pakistan---

----Arts. 7, 18, 23, 24 & 77---Tax, imposition of--- Object, purpose and scope---Tax cannot be expropriatory or confiscatory, which takes away a citizen's property without compensation or destroys business of taxpayer--- State is meant to serve the citizen and for running its affairs---Attribute of charging tax is bestowed by Art.7 of the Constitution---Tax can be levied by or under the authority of Parliament under Art.77 of the Constitution---Act of Parliament, levying a tax, was not to offend any of the fundamental rights guaranteed by the Constitution---Unreasonable taxing procedure, if destroys business, offends the right under Art. 18 of the Constitution and an income tax taking away property without compensation offends Arts. 23 & 24 of the Constitution.

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

----S.236-D---Federal Board of Revenue Act (IV of 2007), S.7---Constitution of Pakistan, Arts. 7, 77 & 199---Tax, imposition of---Amendment, vires of---Petitioners assailed amendment in S.236D of Income Tax Ordinance, 2001, fixing Rs.20,000/- as minimum slab for advance income tax to be collected of a person receiving services of or holding / arranging functions in marriage halls---Validity---Income tax was meant to be charged from citizens, who were earning income---Citizens who were not earning any income, deserved to be compensated by the State to meet their basic and essential requirement for living---Later class of citizens was already subjected to indirect taxes and was taxed through un-adjustable advance income tax, which could only be termed as expropriatory and confiscatory---Constitutional Courts had been observing judicial restraint from declaring such laws as ultra vires, for avoiding an impediment against State's tax collection system---Government was adamant to charge advance tax, ignoring its expropriatory and confiscatory character from the persons not liable to pay tax---Imposing an obligation of tax collection on private persons ignoring reasonability and prejudice to their business, could not be ignored by Courts, in judicial review---Citizens in tax net, who were burdened with obligation to withhold tax by declaring them an agent, were also required to be treated rationally and equitably---Putting extra burden of compliance which was not in normal course of business and that too without remuneration or concession in tax liability, needed to be revisited by Government as well as tax Administrators---Collection of an un-adjustable advance income tax from a person not liable to pay income tax or file income tax return, was without lawful authority and un-Constitutional---High Court referred the matter to Attorney General for Pakistan and Federal Board of Revenue for suitable amendments---High Court converted petitions into representations under S.7 of Federal Board of Revenue Act, 2007 and sent to the Chairman, FBR, for suitable amendment in Income Tax Ordinance, 2001---Constitutional petition was allowed, in circumstances.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582; Human Rights Case No.18877 of 2018 (PLD 2019 SC 645); Rai Ramkrishna and others v. State of Bihar 1963 AIR (SC) 1667; Manattillath Krishnan Thangal v. The State of Kerala AIR 1971 Ker 65 and Devkumarsinghji Kasturchandji v. State of M.P. and others 1967 AIR (M.P.) 268 rel.

Abdullah Dogar, Shahbaz Butt, Abad-ur-Rehman, Farhan Shahzad, Muhammad Mohsin Virk, Raja Hassam Kayani, Nawab Saeed Ullah Khan, Asad Abbas Raza, Muhammad Ahsan Mahmood, Shamail Arif, Muhammad Usman Zia, Ibrahim Hassan, Javed Iqbal Bhatti, Muhammad Shahid Baig, Ahtisham-ud-Din Khan, Muhammad Nouman Sarwar, Usman Khalil, Zulfiqar Ali Khan, Farrukh Gulzar Awan, Chaudhary Hasham Hayat Wathra, Mian Talat Mahmood, Sardar Azeem Afrasiab, Kashif Akbar Bandesha, Mirza Mubashir Baig, Ch. Zulfiqar Ali, Wasif Javed Sipra, Afzal Hussain, Mazhar Elahi and Muhammad Bilal Parvez for Petitioners.

For Federation:

Mirza Nasar Ahmad, Additional Attorney General and Syed Sajjad Haider Rizvi, Assistant Attorney General for Pakistan.

For Province:

Barrister Shehryar Riaz, Assistant Advocate General Punjab.

For Department:

Adeel Shahid Karim, Shahzad Ahmad Cheema, Malik Abdullah Raza, Syed Zain-ul-Abidien Bukhari, Ibrar Ahmad, Ijaz Mehmood Chaudhary, Kausar Parveen and Foziya Bukhsh.

2023 P T D 252

[Lahore High Court]

Before Shahid Jamil Khan, J

SYNTHETIC PRODUCTS ENTERPRISES LIMITED

Versus

FEDERAL BOARD OF REVENUE and others

Writ Petition No.62961 of 2021, decided on 11th November, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.120(2A) & 170(3)(a)---Workers Welfare Fund Ordinance (XXXVI of 1971), S.4---Workers Welfare Fund (WWF)---Recovery---Refund, determining of---System generated notice, non-issuance of---Dispute was with regard to adjustment of Workers Welfare Fund (WWF) as to whether it was part of deemed assessment---Validity---On furnishing of complete return Commissioner was taken to have made assessment order of "taxable income" and "tax due thereon"---Order under S.120 of Income Tax Ordinance, 2001, was taken to be assessment order for all purposes of Income Tax Ordinance, 2001--- Provision of subsection (2A) was inserted in S.120 of Income Tax Ordinance, 2001 and after the date it was notified, return of income was processed through automated system---Certain adjustments of incorrect claim were allowed to be made by Commissioner, before the return had attained status of assessment order by operation of law---On identifying incorrect claim, a system generated notice was issued, before making adjustment--- If no adjustment was made within six months of filing the return, amounts specified in the return were deemed to be rightly adjusted amounts, therefore, would be part of assessment order under S.120 of Income Tax Ordinance, 2001---No system generated notice under S.120(2A) of Income Tax Ordinance, 2001 was issued, therefore, WWF adjusted or allowed to be adjusted was part of order under S.120 of Income Tax Ordinance, 2001, under third proviso to S.120(2A) of Income Tax Ordinance, 2001---Constitutional petition was allowed in circumstances.

Workers' Welfare Funds, Ministry of Human Resources Development, Islamabad v. East Pakistan Chrome Tannery (Pvt.) Ltd. PLD 2017 SC 28 and OBS Pakistan (Pvt.) Ltd. through Manager Legal v Federation of Pakistan through Secretary Revenue Ex-Officio Chairman Federal Board of Revenue and 2 others 2022 PTD 290 ref.

Syed M. Ijaz, M. Hamza Rauf, M. Imran Khan and M. Fahim Khadim for Petitioners.

Muhammad Shahbaz Butt, Imtiaz Rashid Siddiqui, Barrister Shehryar Kasuri, Mansoor Usman Awan, Barrister Hamza Shehram Sarwar, Umair Ahmad Khurram Shahbaz Butt, Muhammad Ajmal Khan, Waqqas Ahmad Mir, Ahmad Hassan, Shamail Arif, Hashim Aslam Butt Afzal Hussain, Raza Imtiaz Siddiqui, Jamshid Alam Faisal Rasheed Ghouri, Haris Irfan, Muhammad Younas Khalid, Hamza Rauf, Sardar Azeem Afrasiab, Rizwan Afzal Tarrar, M. Rashid, Abrar Mubarak, Ahmad Yar Khan, Basharat Ali Awan, Usman Khalil, Touqeer Ranjha, Shahzaib ul Hassan Chattha, Mirza Mubashir Baig, Kashif Akbar Bandesha, Asghar Leghari, Mustafa Kamal Syed Saqlain Hussain, Ghulam Murtaza, Hafiz Hamid Aziz Ahsan, Muhammad Akbar, Farooq Raza, Muhammad Faisal, Muhammad Abbas Wattoo, Muddasir Ijaz Asad Abbas Raza, Muhammad Ahsan Mehmood, Muhammad Usman Zia, M. Ibrahim Hasssan, Muhammad Abrar, Yasir Hameed, Azeem Suleman, Mian Shahzeb Qaddous, M. Hamzah Sheikh, Sabir Tariq Manan, Shahid Sharif, Mian Talat Mehmood and Rizwan Afzal Tarar for Petitioners in connected petitions.

Mirza Nasar Ahmad, Additional Attorney General for Pakistan.

Sajjad Haider Rizvi, Assistant Attorney General for Pakistan.

Barrister Ahmed Pervaiz, Malik, Rizwan Khalid Awan, Abdul Muqtadir Khan, Kausar Parveen, Adeel Shahid Karim, Muhammad Yahya Johar, Barrister Ahtasham Mukhtar and Barrister Saffi ul Hassan for Respondents-FBR.

2023 P T D 268

[Lahore High Court]

Before Asim Hafeez, J

ZAKA UD DIN MALIK

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.50314 of 2022, decided on 23rd January, 2023.

(a) Finance Act (XIII of 2022)---

----S.8(2)(b)---Constitution of Pakistan, Arts.1(3), 142(a), 199 & Fourth Sched., Entry No.50---Constitutional petition---Capital Value Tax---Foreign assets of tax resident---Vires---Pith and substance, rule of---Applicability---Amnesty Scheme, immunity from taxation---Extra territorial operations---Scope---Petitioners assailed charging of Capital Value Tax from tax residents holding foreign assets---Plea raised by petitioners was that they had declared foreign assets by availing Amnesty Schemes introduced by Federal Government and such assets were immune from any taxation---Validity---Tax was levied on value of assets, which assets were identified as foreign assets of a resident person---Applying rule of pith and substance manifestly tax levied was 'in relation to the capital value of the assets' and the same could not be equated with levy on corpus of immovable property--- Determination of capital value of assets could include immovable property, which alleged factor was not to alter essential nature and character of tax in question---At the time of availing Amnesty Scheme, law legislated by Parliament was acknowledged and availed, which sought declaration of foreign assets---No objection was raised that Amnesty Schemes had extra territorial operations---Constitutionality of Wealth Tax Act, 1963 was consistently upheld by Constitutional Courts, which law had taxed the assets, either inside or outside Pakistan---No case for arbitrariness and unintelligible classification had arisen within the class of persons subjected to tax, which constituted a reasonably and intelligibly defined classification---Without any endeavor to suggest a nomenclature for levy under reference, it could appropriately be classified as tax on capital value of foreign assets of resident individual---Apparent and obvious purpose / objective of the levy was to discourage concentration of wealth--- Provision of S.8(2)(b) of Finance Act, 2022 was valid, Constitutional and intra vires---High Court declined to interfere in the matter as there was no fault in exercise of legislative powers by Parliament under Entry 50 of Federal Legislative List in Fourth Schedule to the Constitution, which matter was within the competence of Parliament in terms of Art.142(a) of the Constitution---Constitutional petition was dismissed in circumstances. Case law referred.

(b) Finance Act (XIII of 2022)---

----S.8 (2)(b)---Constitution of Pakistan, Fourth Sched., Entry 50---Expression 'assets'---Scope---Expression 'assets' is required to be read and construed in the context of / company of tax on the capital value of assets, which cannot be bracketed with expression 'immovable property', latter being employed in the context of separate class / category of levy---No association / commonness is found in expressions 'assets' and 'immovable property' nor could possibly be inferred in the context of a separate kind / categories / classes of taxation envisaged in Entry 50 of Fourth Schedule to the Constitution---Capital value is based on the principle of aggregation---Capital value of assets is base / object of first part of Entry 50 of Fourth Schedule to the Constitution, and later part thereof provides for taxation on immovable property, which class / category of impost is excluded from domain of Parliament, and power to tax immovable property is extended to Provincial legislature(s).

(c) Interpretation of statutes---

----Ejusdem Generis, rule of---Scope---Rule of Ejusdem Generis implies that general words, preceding particular / specific words, must confirm to string of genus / class / category of preceding words---In absence of any nexus between enumeration and general words or inferable distinction between enumerated genus and following words, the rule has had no application.

Thakur Amar Singhji and others v. State of Rajasthan and others AIR 1955 SC 504 rel.

(d) Finance Act (XIII of 2022)---

----S.8(2)(b)---Constitution of Pakistan, Fourth Sched., Entry 50---Expression 'taxes'---Scope---Expressions 'tax(es)' in the first and second part of Entry 50 cannot be construed as specific class / genus to otherwise artificially widen the scope or effect of immovable property by limiting scope of class of tax in first part of Entry 50 of Fourth Schedule to the Constitution, which provides description of a complete genus-tax on capital value of assets---Exclusion followed thereto indicates another separate category / genus---Rule of ejusdem generis or Noscitur a socii cannot be attracted.

United Town Electric Co. Ltd. v. A-G for Newfoundland [1939] 1 ALL ER 423 and Maharashtra University of Health Sciences and others v. Satchikitsa Prasarak Mandal and others AIR 2010 SC 1325 rel.

(e) Finance Act (XIII of 2022)---

----S.8(2)(b)---Constitution of Pakistan, Fourth Sched., Entry 50---Noscitur a socii, rule of---Applicability---Rule of Noscitur a socii entails recognition of statutory terms in the context of associated words or in the light of its surroundings / company---No connection / proximity / link is found inter se tax on the capital value of foreign assets and tax on immovable property - both are distinct and separate imposts--- For applicability of rule of Noscitur a socii no associated words in Entry 50 of Fourth Schedule to the Constitution are found for the purposes of assimilation / merger of otherwise distinct category of taxes.

Messrs Siddeshwari Cotton Mills (P) Ltd. v. Union of India and another AIR 1989 (SC) 1019 and Russel v. Scott 1948 2 All England Reporter 1(HL) rel.

(f) Constitution of Pakistan---

----Art.141---Federal and Provincial laws---Extent---Extent of domain of Federal and Provincial laws is envisaged under Art.141 of the Constitution and has authorized the Parliament to make laws, including laws having extra territorial operations.

(g) Maxim---

----Expressio unius est exclusion alterius---Meaning---Expression of one thing is exclusion of the other.

(h) Finance Act (XIII of 2022)---

----S.8 (2)(b)---Constitution of Pakistan, Fourth Schedule, Entry 50---Redundancy or superfluousness---Applicability---No redundancy or superfluousness can be attributed to second part of Entry 50 of Fourth Schedule to the Constitution, which protects legislative authority of Provinces to tax immovable property---No room exists for conjectural debate, speculation qua applicability of linguistic canons of construction, which otherwise defined scope and extent of tax on capital value of assets and tax on immovable property, latter possessing distinguishing characteristics / features and otherwise coming within the legislative domain of Provincial Legislature(s).

(i) Maxim---

----Expressio unius est exclusion alterius--- Meaning--- Expression of one thing is exclusion of the other.

For Petitioners.

Ch. Anwaar ul Haq.

Shahbaz Butt, Muhammad Ahsan Mahmood, Asad Abbas Raza, Muhammad Ibraheem Hassan and Muhammad Usman Zia (in connected W.Ps.Nos.67450, 67451, 67587, 67608, 71372, 71369, 71371, 71378, 71380 and 72393 of 2022).

Syed Muhammad Ijaz, M. Hamza Rauf, M. Imran Khan and Mian Faheem Khadim for Petitioner (in connected W.P. No.55307/2022).

Salman Akram Raja, Tariq Bashir, Arsalan Riaz, Usman Ali Bhoon, Atira Ikram and Syed Muhammad Islam (in connected W.Ps. Nos.59443, 59438 and 59463 of 2022).

Ibrahim Haroon (in connected W.P. No.67493/2022).

Muhammad Mansha Sukhera, Muqadam Sukhera and Muhammad Ali Awan (in W.Ps. Nos.58940, 59033 and 62659 of 2022).

Shazib Masood (in connected W.P. No.75732/2022).

Waseem Ahmad Malik (in connected W.P. No.75755/2022).

Malik Ahsan Mehmood (in connected W.P. No.59488 of 2022).

Muhammad Ajmal Khan (in connected W.P. No.60097 of 2022).

Faisal Rasheed Ghouri, Azeem Suleman, Saqib Qadeer, Muhammad Abrar, Muhammad Nouman Shams Qazi and Yasir Hamid (in connected W.Ps. Nos.62154, 62161, 62162, 67966, 68014, 62156, 62158 and 62151 of 2022).

Rai Amir Ijaz Kharal (in connected W.P. No.64121 of 2022).

Muhammad Abubakar, Malik Nadir Ali Sherazi and Muhammad Usman (in connected W.Ps. Nos.65115, 65189, 65217, 77760, 77826, 77823, 77827, 77824, 77825 and 67479 of 2022).

Mustafa Kamal (in connected W.P. No.65901 of 2022).

Hammad-ul-Hassan Hanjra (in connected W.Ps. Nos.67030 and 60109 of 2022).

Khalil-ur-Rehman (in connected W.Ps. Nos.67402, 67982 and 74674 of 2022).

Muhammad Shahid Baig and Muhammad Bilal Pervaiz (in connected W.Ps. Nos.67846, 67928, 67943, 68027 and 80631 of 2022).

Usman Khalil (in connected W.P. No.67852 of 2022).

Mudassar Shuja-ud-Din (in connected W.Ps. Nos.62021 and 69356 of 2022).

Zahid Imran Gondal (in connected W.P. No.68885 of 2022).

Ahsan Ahmed Munir (in connected W.P. No.68995 of 2022).

Khurram Tawassal (in connected W.P. No.69625 of 2022).

Shahid Jami (in connected W.Ps. Nos.72887 and 72885 of 2022).

Arshed Javed (in connected W.Ps. Nos.76940, 76945, 76949, 76951, 76957, 76963 and 76966 of 2022).

Muhammad Javed Arshad (in connected W.P. No.77291 of 2022).

For Respondents.

Sheraz Zaka, Assistant Attorney General for Pakistan.

Muhammad Awais Ahsan Joiya, Assistant Advocate General, Punjab.

Ahmed Pervaiz, Saffi-ul-Hassan, Ali Umrao and Ahtasham Mukhtar for CIR.

Liaqat Ali Chaudhary for Respondent/CIR (in connected W.P. No.77823/2022).

Sheikh Muhammad Ali, Maryam Asad, Muhammad Sharfeen, Baran Khan Sherwani and Muhammad Rizwan for FBR.

Syed Zain-ul-Abidein Bukhari for Respondents/CIR.

Shahid Sarwar Chahil for Respondent/CIR (in W.Ps. Nos.52371/2022 and 67402/2022).

Nadeem Khan for FBR.

Adeel Shahid Karim.

Bilal Munir, Advocate/Legal Advisor for FBR (in connected petitions).

Anwar Ali Sanga for FBR.

Abdul Muqtadir Khan for FBR.

Khalid Ishaq, Nida Aftab and Nayab Tarar for FBR.

Ch. Sultan Mehmood, Samran Mushtaq Ch. and Ahmed Ali Gondal.

Ms. Sana Awan, Law Officer, Finance Department.

Naeem Khan, Advocate for FBR.

Nasir Mehmood Bhatti, Law Officer, Finance Department, Government of the Punjab.

Ms. Laila Ghafoor, Director, Law, FBR.

Muhammad Majid, CIR (Legal).

2023 P T D 312

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

The COMMISSIONER INLAND REVENUE, LAHORE

Versus

Messrs TASNEEM AKHTAR

I.T.R. No.61061 of 2022, decided on 20th October, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111, 122(5A) & 133---Constitution of Pakistan, Fourth Schedule, Entry No.50---Agriculture income---Late payment---Penalty, imposing of---Principle---Authorities sought recovery of tax under S.111 of Income Tax Ordinance, 2001---Income Tax Appellate Tribunal vacated order passed by authorities as the taxpayer had paid agriculture tax---Plea raised by authorities was that as agriculture tax was paid beyond specified date, therefore, penalty was to be imposed on taxpayer---Validity---Amount declared as agriculture income, though not taxable under Income Tax Ordinance, 2001, would be credited in books of account of taxpayer, therefore it fell in the category (a) under S.111 of Income Tax Ordinance, 2001---Taxpayers claim of agriculture income would fail if on explanation sought, proof for payment of provincial agriculture income tax was not produced and amount so credited in books of accounts was to be taxed under Income Tax Ordinance, 2001, as income from other sources and not as agriculture income---Agriculture income could not be taxed under Income Tax Ordinance, 2001, as the same was beyond competence of Federation under Entry No. 50 of Fourth Schedule to the Constitution---Matter during proceedings could not be taken to be past and closed transaction, if agricultural income tax was paid during appeal before Appellate Tribunal and effect of charging provision in S. 111, Income Tax Ordinance, 2001 would be obliterated---Penalties or default surcharge for late payment of agriculture tax could only be imposed under the relevant provincial law, levying tax on agriculture income---Reference was dismissed accordingly.

Ch. Muhammad Shakeel for Applicant.

Nemo. for Respondent.

2023 P T D 340

[Lahore High Court]

Before Shahid Jamil Khan, J

Messrs AL-GHANI CHAIN INDUSTRIES (PVT.) LTD. through Ahassam Amin

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.57607 of 2022, heard on 29th September, 2022.

Customs Act (IV of 1969)---

----Ss.25A, 25D, 80 & 81---Constitution of Pakistan, Art.199---Constitutional petition---Goods valuation---Revision---Provisional assessment---Petitioners / importers got their consignments released on provisional assessments and sought revision of valuation rulings---Validity---Ruling under S. 25A of Customs Act, 1969, was by Directorate of Customs Valuation to determine customs value and category of goods---Ruling so issued was in field and applicable on declared goods for the purpose of Ss. 80 & 81 of Customs Act, 1969, unless changed in exercising powers under S.25D of Customs Act, 1969, by Director General Valuation--- Provisions of S.81 of Customs Act, 1969, did not allow, even through implication that during proceedings under S.25D of Customs Act, 1969, provisional assessment could be passed for releasing the goods---High Court depreciated tendency of filing petition for release of goods provisionally after filing a revision under S.25D of Customs Act, 1969, as the same was against scheme of law---High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

Danish Jahangir v. The Federation of Pakistan through Secretary/Chairman and 2 others 2016 PTD 702 ref.

Umar Ahmad Khan and Irum Naz for Petitioner.

Syed Sajjad Haider Rizvi, Assistant Attorney General for Pakistan.

Rana Muhammad Mehtab for Respondent-Department.

2023 P T D 393

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Asim Hafeez, JJ

COMMISSIONER INLAND REVENUE, FAISALABAD

Versus

Messrs ENGINEERS ASSOCIATED PRECAST (PVT.) LTD.

S.T.R. No.85 of 2015, decided on 17th May, 2022.

Sales Tax Act (VII of 1990)---

----S.47---Limitation Act (IX of 1908), S.5---Reference---Limitation---Condonation of delay, non-availing of---Authorities assailed order passed by Appellate Tribunal Inland Revenue without filing application for condonation of delay---Validity---Reference application was barred by time for 03 months and 03 days---Office raised certain objections which authorities were required to remove before lapse of prescribed period and refile reference applications within the period of limitation provided by the law but the same was refiled after lapse of as many as 110 days, much beyond the period of limitation---Reference application was barred by time and was not accompanied by application for condonation of delay, in absence whereof delay could not be condoned---Applicant department could not be allowed to reap and retain benefits of its own negligence---Delay in filing proceedings could not be condoned lightly unless it was shown there were sufficient reasons causing the delay---Negligence did not constitute sufficient cause to condone delay---Party seeking advantage of S.5 of Limitation Act, 1908 must have satisfied the Court that it had not been negligent and had been pursuing the case with due diligence and care---High Court declined to interfere in the matter---Reference was dismissed in circumstances.

Asad Ali and 9 others v. The Bank of Punjab and others PLD 2020 SC 736; Muhammad Boota v. Basharat Ali PLD 2014 Lah. 1; Almas Ahmed Fiaz v. Secretary Government of the Punjab Housing and Physical Planning Development, Lahore and another 2007 PLC 64 and Central Board of Revenue, Islamabad through Collector of Customs Sialkot Dry Port, Sambrial, District Sialkot and others v. Messrs Raja Industries (Pvt.) Ltd. through General Manager and 3 others 1998 SCMR 307 rel.

Muhammad Yahya Johar, Legal Advisor for Applicant-Department.

2023 P T D 411

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

ALLIED BANK LIMITED

Versus

APPELLATE TRIBUNAL INLAND REVENUE, LAHORE and 2 others

Income Tax Reference Application No.63041 of 2022, heard on 21st October, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133, 210 & 122(5A)---Reference---Delegation, doctrine of---Phrase "other than power of delegation"---Scope---Taxpayer assailed delegation of powers to Additional Commissioner to exercise jurisdiction under S.122(5A) of Income Tax Ordinance, 2001---Validity---Basic restriction was that power of delegation could not be further delegated and such restriction was enforced in S.210(1) of Income Tax Ordinance, 2001 by using the phrase "other than power of delegation"---Commissioner could delegate all or any of its powers and functions to any other taxation officer---Notification or order of delegation would determine the extent of power to be exercised by delegatee taxation officer---Provisions of S.122(5A) of Income Tax Ordinance, 2001, were to be read with Ss.210 & 211 of Income Tax Ordinance, 2001, while conferring power of amendment or further amendment on the ground of erroneousness and prejudicial to the interest of revenue, which could not be divided between consideration and passing final order--- Another principle under doctrine of delegation was that the delegatee was not absolved of responsibility after delegation of power and functions conferred by statute/law---Such aspect was taken care of through provisions under Ss. 211 & 122(5A) of Income Tax Ordinance, 2001---Delegation of all or any powers and functions were allowed under S. 210(1) of Income Tax Ordinance, 2001, which was the main provision--- Phrase "power" in S. 210(1A) of Income Tax Ordinance, 2001 was used to curtail delegation to an officer lower than Additional Commissioner---Word "power" used in S.210 (1) of Income Tax Ordinance, 2001, included functions as well because S.210 (1A) of Income Tax Ordinance, 2001 was its subsidiary and both were to be read together---High Court declined to interfere in order passed by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

Pakistan Tobacco Company Ltd. Islamabad v. Addl. Commissioner (Unit-II), Taxation Officer, Large Taxpayers Unit, Islamabad (2013) 107 TAX 29 and Messrs Shell (Pakistan) Ltd. through Associate Legal Counsel v. Pakistan through Secretary Revenue Division and 2 others 2013 PTD 1012 rel.

Mansoor Beg for Applicant.

Muhammad Yahya Johar (On Court's call) for Respondents.

2023 P T D 430

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE LYALLPUR ZONE, RTO, FAISALABAD

Versus

Messrs IDEAL SWEETS, BAKERS AND NIMKO FAISALABAD

S.T.R. No.162977 of 2018, heard on 3rd November, 2022.

Sales Tax Act (VII of 1990)---

----Ss.47 & 57---Rectification jurisdiction---Mistake of fact, non-mentioning of---Absence of original Bench of Appellate Tribunal---Taxpayer invoked rectification jurisdiction in absence of original Bench who passed order against which rectification was sought---Validity---Rectification application was allowed by another Bench, consisting of different Members and that too without determining alleged mistake of fact---High Court deprecated practice of moving application for rectification with a delay when original Bench was not available attributing with mala fide, unless otherwise proved and delay in filing rectification application was explained---Another Bench, before which the fact of indecision did not accrue, could not identify the alleged mistake---Appellate Tribunal Inland Revenue amended / reviewed the earlier order which had attained finality and merged into the judgment by Division Bench of High Court---Limitation of five years in rectification jurisdiction was meant to protect just decision and not to open past and closed transaction or an order which had attained finality---High Court declared order passed by Appellate Tribunal Inland Revenue without jurisdiction and same was set aside--- Reference was allowed in circumstances.

Commissioner Inland Revenue v. M/s. Lahore Rubber Store 2023 PTD 182; Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570 and Fayyaz Hussain v. Akbar Hussain and others 2004 SCMR 964 ref.

Liaquat Ali Chaudhry for Applicant-department.

Khurram Shehbaz Butt for Respondent-taxpayer.

2023 P T D 492

[Lahore High Court]

Before Asim Hafeez and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, LAHORE

Versus

Messrs DESCON ENGINEERING LIMITED, LAHORE

P.T.R. No.112 of 2014, heard on 28th March, 2022.

(a) Words and phrases---

----Determine---Meaning.

Merriam-Webster's Dictionary of Law (Revised and updated guide to the language of law; Words and Phrases (Permanent Edition) Vol.12, Thomson/West; P. Ramanatha Aiyar's Advanced Law Lexicon (4th Edition) Vol.2 and Black's Law Dictionary (Ninth Edition) rel.

(b) Administration of justice---

----Principle of natural justice---Order in writing---Requirements---Order in writing must fulfill requirements of a speaking decision / order---Essential that party against whom such order is being passed must be given a proper notice confronting relevant material and providing fair chance to explain its stance and raise all legal and factual objections---Minimum requirement of principles of natural justice, especially principle of audi alteram partem i.e. no one should be condemned unheard, must be observed in all proceedings concerning determination of rights of a party, pertinently when certain liability is being created.

Caritativo v. California Et Al 357 U.S. 549 (1958); Mullane, Special Guardian v. Central Hanover Bank & Trust Co., Trustee, Et Al 339 U.S. 306 (1950) and Selvarajan v. Race Relations Board" ([1976] 1 All ER 12 rel.

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

----S. 122---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.4---Workers' Welfare Fund (W.W.F.)---Written order, absence of---Authorities raised demand of tax on the amount payable to Fund on the ground that no written order was passed under S.4 of Workers' Welfare Fund Ordinance, 1971---Appellate Tribunal Inland Revenue set aside demand of authorities---Validity---Amount of W.W.F. due and obligation to pay, in the context of agreement, must be determined and communicated in writing, upon issuance of notice---Failure to fulfill requirement of proper notice, observance of principles of natural justice and determination by way of order in writing, rendered demand in question unsustainable---Order in writing did not necessarily mean a separate order---Taxation Officer was authorized under the law to make an order relating to W.W.F. while finalizing the assessment proceedings through a written order and order relating to charge of W.W.F. would be part of assessment order---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue---Reference was dismissed, in circumstances.

Syed Ali Haider and 2 others v. Pakistan International Airline Corporation Limited through Company Secretary 2021 PLC (C.S.) 221; Messrs Resource Industries (Pvt.) Ltd. through General Manager v. Sarhad Development Authority, PIA Building, Peshawar Cantt. through Chairman and 3 others 2019 CLC Note 28; Rashid Ali Khan v. Government of Khyber Pakhtunkhwa and another PLD 2018 Pesh. 170; Mehar Pervaiz Akhtar v. Director General Excise and Taxation, Lahore and others 2017 PTD 1962; Iyazul Haq Chaudhry v. NIB Bank Limited through Authorized Attorney and 4 others 2017 CLD 521; Dr. Ashfaq Ahmad Khan v. Deputy Commissioner of Income Tax, Peshawar and others 2012 PTD 1329; Messrs Kind Traders v. Dy. Collector and 2 others 2008 PTD 1551 and Messrs Bisma Textile Mills v. Federation of Pakistan and others 2002 PTD 2780 rel.

Liaquat Ali Chaudhry, Legal Advisor for Applicant.

Ch. Mumtaz-ul-Hassan for Respondent.

2023 P T D 516

[Lahore High Court]

Before Shahid Jamil Khan, J

Messrs PRESSON DESCON INTERNATIONAL (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.10593 of 2022, decided on 20th April, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.124, 221 & 226---Constitutional petition---Appeal Effect Order, non-issuing of---Plea of rectification--- Petitioner / taxpayer was aggrieved of non-issuance of Appeal Effect Order by authorities on the plea of pending rectification application---Validity---Inactions in discharge of statutory obligations, like filing of appeal before Appellate Tribunal within time and non-filing of reference was covered up by moving rectification application, which was not a regular proceeding---Application under S.221 of Income Tax Ordinance, 2001, was meant to rectify a mistake, legal or factual, floating on record, where no interpretation or long drawn arguments were required to rectify it, for which limitation was five years---Proceeding in an application for rectification before Appellate Tribunal did not fall under S.226(b)(ii) of Income Tax Ordinance, 2001---Commissioner was bound to issue Appeal Effect Order under S.124(4) of Income Tax Ordinance, 2001, within two months as order by Appellate Authority had attained finality---Commissioner had ample power, after implementation of order under S. 124(4) of Income Tax Ordinance, 2001, if rectification application was accepted, to take a remedial action for recovery of tax while giving effect to Appellate Tribunal's order under relevant provisions of S. 124 of Income Tax Ordinance, 2001---Excuse and grounds for non-implementation raised by authorities had no force---Constitutional petition was allowed accordingly.

Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570 ref.

Shahbaz Butt, Ibrahim Hassan, Asad Abbas Raza, Muhammad Usman Zia, Muhammad Ahsan Mahmood, Muhammad Adnan Afzal, Kashif Akbar Bandesha, Salman Farooq and M. Irfan Arif Sheikh for Petitioner.

Barrister Ahmed Pervaiz and Saffi-ul-Hassan for Respondents.

Asad Ali Bajwa, Deputy Attorney General for Federation of Pakistan.

Ishtiaq Ahmad, Commissioner Inland Revenue, LTO, Lahore. for Respondents.

2023 P T D 541

[Lahore High Court]

Before Shahid Jamil Khan, J

PEPSI COLA INTERNATIONAL (PVT.) LIMITED

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.81107 of 2021, decided on 1st April, 2022.

Income Tax Ordinance (XLIX of 2001)---

----S.161---Income Tax Rules, 2002, R.44(4)---Constitution of Pakistan, Art. 199---Constitutional petition---Tax due---Recovery---Reconciliation--- Dispute was with regard to notice of recovery of tax due issued under S.161 of Income Tax Ordinance, 2001---Validity---Rational in S. 161 (1B) of Income Tax Ordinance, 2001, was that a tax liable to be adjusted against tax due, could not be recovered when tax due had already been paid--- Recovery of any amount, thereafter, not adjustable against tax due for relevant period was to be refunded and whole exercise for recovery would be futile, as tax collected would not become part of National Exchequer rather would burden it with an expense which could have been expended for recovery of tax due--- Pursuit of creating such demands by tax administrators, to meet budgetary targets, not only wasted resource and revenue but burdened judicial hierarchy up till Supreme Court--- There must, at least initially, be some reason or information available with Commissioner for him to conclude that there was, or could have been, a failure to deduct tax--- All tax authorities for the purpose of S.161 Income Tax Ordinance, 2001 were to identify payments, whether singly or in lump sum (i.e.) as part of a broader class or category of such payments---Triggering event for issuance of Notice was a failure to either collect tax or deduct it---Commissioner was to point out a payment to cast burden wholly or solely on the taxpayer---After issuance of Notice, the first thing needed to be verified was, whether tax, required to be deducted or collected, of a person had been paid or not---If tax liability for relevant tax year was found paid/discharged, the Commissioner could proceed only to impose default surcharge and penalty---Reconciliation, under R. 44(4) of Income Tax Rules, 2002, could not be called without first ensuring filing of statements under the rule---High Court set aside order in question as the same was passed by authorities ignoring judgments passed by Superior Courts---Constitutional petition was allowed accordingly.

Commissioner Inland Revenue Zone-I, LTU v. MCB Bank Limited 2021 SCMR 1325 and Commissioner Inland Revenue v. M/s PEPCO Pakistan 2015 PTD 863 fol.

Pepsi Cola International (Private) Limited through Authorized Representative v. Federation of Pakistan through Secretary Revenue Division, Islamabad and another 2022 PTD 51; Northern Power Generation Company Limited v. Federation of Pakistan and others 2015 PTD 2052; Nagina Silk Mill, Lyallpur v. The Income-Tax Officer, A-Ward, Lyallpur and another PLD 1963 SC 322; M/s Pakistan Mobile Communication (Pvt.) Ltd. v. The Commissioner of Income Tax, Companies Zone, Islamabad, (Civil Appeals Nos. 1091-1092/2009 etc.); Habib Bank Ltd. v. Federation of Pakistan through Secretary, Revenue Division and 5 others 2013 PTD 1659; Commissioner Inland Revenue v. M/s. PEPCO Pakistan 2015 PTD 863; Sui Northern Gas Pipelines v. Deputy Commissioner Inland Revenue and others 2014 PTD 1939; Messrs Riaz Bottlers (Pvt.) Ltd. through Tax Manager v. Lahore Electric Supply Company (LESCO) through Chief Executive and 3 others 2010 PTD 1295 and Messrs BILZ (Pvt.) Ltd. v. Deputy Commissioner of Income Tax and another 2002 PTD 1 ref.

Salman Akram Raja for Petitioner.

Mirza Nasar Ahmad, Additional Attorney General for Pakistan.

Anas Sheikh for Respondents.

2023 P T D 679

[Lahore High Court (Multan Bench)]

Before Muhammad Sajid Mehmood Sethi and Muhammad Raza Qureshi, JJ

COMMISSIONER INLAND REVENUE, LEGAL ZONE, LTO, MULTAN

Versus

Messrs USMAN TRADER LINKERS, MULTAN

S.T.R. No.35 of 2022, heard on 23rd November, 2022.

(a) Interpretation of statutes---

----Fiscal statutes---Words "or" and "and"---Scope---In legislative instruments/provisions, word "or" is employed in disjunctive sense (means it separates things) and word "and" in conjunctive sense (means it combines things)---In certain cases, words "and" and "or" may be interchangeable---Such course of action is only permissible in order to give effect to clear and obvious intention of legislature or to avoid absurdity, unreasonableness or redundancy--- While construing a statute / legal provision, no part of same or word used therein is superfluous---Every word has to be taken into account and meaning is to be given to the same---Courts always presume that every word and expression used by legislature has a purpose and intent---No provision of an enactment can be treated as redundant or surplus and has to be given its meaning and effect---While interpreting taxing statutes, if there is any doubt or ambiguity in the language used in statute which may render same capable of several interpretations, then interpretation favourable to assessee is to be adopted.

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

----S.2(17) & proviso---Word "or"---Scope---Word "or" appearing in proviso to S.2(17) of Sales Tax Act, 1990, is used in disjunctive sense, which means that words owns and has his own manufacturing facility have been used to convey different meanings.

Suo Motu Case No.8 of 2018 and Civil Misc. Application No.649-L of 2018 (PLD 2019 SC 201); Commissioner of Income Tax v. Muhammad Kassim 2000 PTD 280; CM Pak Limited v. Pakistan Telecommunication Authority PLD 2018 Isl. 243; Inam-ul-Rahiem v. Chairman, National Accountability Bureau Islamabad and another PLD 2018 Isl. 251 and Sheikh Kashif Imtiaz v. Faysal Bank Limited and another 2020 CLD 904 rel.

(c) Words and phrases---

----Own---Meaning.

Black's Law Dictionary, Bryan A. Garner, 11th Edition; Cambridge Advanced Learner's Dictionary, Fourth Edition; Chambers Concise Dictionary and Oxford Advanced Learner's Dictionary, International Student's Edition, New 9th Edition rel.

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

----Ss.2(17) & 47---Sales Tax Rules, 2006, Rr.7(4) & 29(1)(b)---Reference---Commercial Exporter---Expeditious Refund System---Particulars of registration, change of---Commissioner Inland Revenue---Suo motu powers---Respondent entity was registered as "Manufacturer-cum-exporter" for the purposes of tax return but authorities modified its registration as "Commercial Exporter"--- Income Tax Appellate Tribunal set aside the order passed by authorities with regard to modification of registration of respondent entity---Validity---In order to announce a registered person as "Commercial Exporter", one of the basic conditions was that due to lack of manufacturing facility, it was exporting goods after receiving the same from other registered persons, irrespective of the fact that the goods were in the same state or processed or manufactured---Respondent entity was itself manufacturing the goods, therefore, could not have been declared as "Commercial Exporter" instead of "Manufacturer"---Respondent had his own manufacturing facility and was Manufacturer-cum-Exporter duly entitled to claim refund under Sales Tax Act, 1990, which was to be processed under the Expeditious Refund System (ERS), provided in R.29(1)(b) of Sales Tax Rules, 2006---Commissioner, after scrutiny of available information, necessary inquiry and providing opportunity of hearing to registered person, could pass an order regarding modification(s) in particulars of registration---No power was bestowed upon Commissioner Inland Revenue under R.7 of Sales Tax Rules, 2006, to suo motu make any change in particulars of registration---High Court declined to interfere in order passed in favour of respondent entity by Appellate Tribunal Inland Revenue---Reference was dismissed, in circumstances.

Commissioner Inland Revenue, Zone-I, Large Taxpayer Unit-II Karachi v. Messrs ORI Tech Oil (Pvt.) Ltd. 2019 SCMR 875 and ORI-Tech-Oil (Pvt.) Ltd. through CEO v. Manager Registration, Central Registration Office and 3 others 2017 PTD 1497 ref.

Muhammad Suleman Bhatti, Advocate/Legal Adviser for Applicant.

Mian Khalid Hussain Mitru and Inayat-ur-Rehman for Respondents.

2023 P T D 720

[Lahore High Court]

Before Shams Mehmood Mirza, Muhammad Sajid Mehmood Sethi and

Shahid Jamil Khan, JJ

COMMISSIONER OF INLAND REVENUE, LEGAL DIVISION, REGIONAL TAX OFFICE, LAHORE

Versus

Messrs RAFAQAT MARKETING, LAHORE through Chairman and another

S.T.R. No.18 of 2010, heard on 9th December, 2022.

Sales Tax Act (VII of 1990)---

----Ss. 21(3), 47 & 73---Sales Tax Rules, 2006, R.12 (5)---Reference---Refund claims---Scrutiny---Factual controversy---Dispute was with regard to invoices issued by suppliers who had either been declared blacklisted or were non-existent with "registration suspended" status---Show-Cause Notices for refund claims issued by authorities were rejected by Appellate Tribunal Inland Revenue---Validity---Findings of facts were given by Appellate Tribunal Inland Revenue that respondent-taxpayer produced relevant documents including invoices, proof of purchases and payments through banks and compliance of S.73 of Sales Tax Act,1990 was also made---Authorities failed to show that findings of facts made by Appellate Tribunal Inland Revenue were either perverse or contrary to record---High Court decided the question against authorities and in favour of respondent-taxpayer---Reference was dismissed, in circumstances.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Works 2018 PTD 108 and Civil Petitions Nos.432-L, 446-L, 468-L, 469-L, 719-L, 1006-L, 1090-L, 1092-L, 1140-L, 632-L, 447-L and 695-L of 2018 ref.

Sh. Nadeem Anwaar, Waqar A. Sheikh, Izharul Hque Sheikh, Sarfraz Ahmad Cheema, Rana Muhammad Mehtab, Ch. M. Imtiaz Elahi, Javed Athar, Syed Zain ul Abidein Bokhari, Malik Abdullah Raza, Kausar Parveen, Sheikh Nadeem Anwaar, Waqas B. Khokhar, Mohsin Ali vice Ch. Muhammad Zafar Iqbal, Noor Muhammad Khan Chandia, Mian Yusuf Umar, Sardar Ali Masood Raza, Shahzad Ahmad Cheema, Ch. Muhammad Yasin Zahid and Sultan Mehmood for Petitioners.

Asad Raza, Syed Saqlain Hussain, Muhammad Fayyaz Mansab, Saood Nasrullah Cheema, Azhar Mukhtar, Muhammad Asghar, Hashim Aslam Butt, Abdul Sattar, Muhammad Naeem Munawar, Imran Rasool, Shah Behram Sukhera, Sumair Saeed Ahmad, M. Hafeez Uppal, Khurram Ahmad Saeed, Mumtaz Hussain Bhutta, Imran Rashid and Mian Abdul Bari Rashid for Respondents.

2023 P T D 732

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, LTU, LAHORE

Versus

Messrs MARWAT ENTERPRISES (PVT.) LIMITED, LAHORE

P.T.R. No.280 of 2013, decided on 28th September, 2022.

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

----S.16---Advance tax---Scope---Purpose of advance tax is collection of tax in advance and its adjustment at later stage but not charging or levy of tax---For collection of advance tax, certain persons are obliged, by the Statute, to collect and deposit the same in treasury---Person obliged, under the Statute, to withhold or deduct tax of another person is in fact an agent of the State---If he fails to comply with the statutory obligation, such tax can be recovered from him.

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

----Ss.161(1B)---Advance tax---Failure to pay tax deducted or collected---Effect---Subsection 161(1B) of the Income Tax Ordinance, 2001 casts an obligation upon the Commissioner or Taxation Officer to satisfy itself that the tax due of the person, from whose payment advance tax was to be deducted or collected, has been paid---Rationale in subsection (1B) is very simple that a tax liable to be adjusted against tax due, cannot be recovered when the tax due is already paid---Recovery of any amount, thereafter, not adjustable against tax due for the relevant period, shall have to be refunded and the whole exercise for recovery would be futile, as tax collected would not become part of National Exchequer rather would burden it with an expense which could have been expended for recovery of tax due---Pursuit of creating such demands by tax administrators, to meet budgetary targets, not only wastes resource and revenue but burdens the judicial hierarchy up to the level of the Supreme Court---Tax authorities cannot launch expeditious probes, and shift the burden under S.161, from the very inception, wholly and solely on the taxpayer by the expedient of simply identifying one or more payments, or a class or category of payments.

Commissioner Inland Revenue Zone-I, LTU v. MCB Bank Limited 2021 SCMR 1325 and Bils (Pvt.) Ltd. v. Deputy Commissioner of Income Tax and another 2002 PTD 1 = PLD 2002 SC 353 ref.

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

----Ss.161 & 162(2)---Advance tax---Failure to pay tax deducted or collected---Default surcharge, recovery of---Scope---Provisions of S.162(2) of the Income Tax Ordinance, 2001 regarding imposition and recovery of default surcharge etc. are only attracted where failure to deduct tax is established under S.161.

(d) Income Tax Rules, 2002---

----R.44(4)---Income Tax Ordinance (XLIX of 2001), S. 161---Advance tax---Annual statement of tax collected or deducted---Scope---Practice of calling reconciliation, in absence of any statement, is against the spirit of R.44 of the Income Tax Rules, 2002---Rule 44 envisages, unequivocally, that reconciliation has to be of the biannual or annual statements with other material and declaration submitted in or with the return---If there is no statement filed by the taxpayer, no occasion of reconciliation arises---It is duty of the Commissioner, as tax administrator to ensure that biannual or annual statements are filed within the time stipulated by the Statute---Commissioner is equipped with power of imposing penalty, if statutory obligation is not fulfilled by any taxpayer---In the present case had Commissioner fulfilled the duty of ensuring compliance for filing statements, at the earliest, the occasion of issuing notice under S.161 of the Income Tax Ordinance, 2001 for tax years in question, would never have arisen as the amount, to be collected or deducted would have been deposited in Exchequer much earlier---Reference was disposed of.

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

----Ss.161(1B) & 162---Income Tax Rules, 2002, R.44(4)---Advance tax---Failure to pay tax deducted or collected---Default surcharge, recovery of---Show-cause notice, issuance of---Principles and pre-requisites for issuing a show notice under Ss. 161 & 162 of the Income Tax Ordinance, 2001 stated.

For issuing notice under sections 161 and 162 of the Income Tax Ordinance, 2001:

(i) There must, at least initially, be some reason or information available with the Commissioner for him to conclude that there was, or could have been, a failure to deduct.

(ii) All the tax authorities have to do, for the purpose of Section 161, is to identify the payments, whether singly or in lump sum (i.e.) as part of a broader class or category of such payments.

(iii) The triggering event for issuance of Notice is a failure to either collect tax or deduct it.

(iv) The Commissioner has to point out a payment to cast burden wholly or solely on the taxpayer.

(v) After issuance of Notice, the first thing that needs to be verified is, whether tax, required to be deducted or collected, of a person has been paid or not. If tax liability for the relevant tax year is found paid/discharged, the Commissioner can proceed only to impose default surcharge and penalty.

(vi) Reconciliation, under the Rule 44(4) [of the Income Tax Rules, 2002], cannot be called without first ensuring filing of statements under this Rule.

Pepsi Cola International (Pvt.) Limited v. Federation of Pakistan and others 2023 PTD 541 quoted.

Commissioner Inland Revenue Zone-I, LTU v. MCB Bank Limited 2021 SCMR 1325 and Bils (Pvt.) Ltd. v. Deputy Commissioner of Income Tax and another 2002 PTD 1 = PLD 2002 SC 353 ref.

Syed Zain-ul-Abidein Bokhari, Raja Sikandar Khan, Ibrar Ahmed, Shahid Sarwar Chahil, Shahzad Ahmad Cheema, Kausar Parveen, Foziya Bakhsh, Riaz Begum, Muhammad Yahya Johar, Imran Rasool and Naeem Khan, Advocates / Legal Advisors, Hafiz Muhammad Arshad, Inspector, FBR and Hafiz M. Fahad, LDC for Petitioners.

Muhammad Mohsin Virk, Muhammad Shaban, Saood Nasrullah Cheema, Syed Tassadaq Mustafa Naqvi, Ahmad Nawaz Khurram, Muhammad Ijaz Ali Bhatti, Farhan Shahzad, Zohaib Ali Sidhue, Ahmad Wasim and Sardar Azeem Afrasiyab for Respondents.

2023 P T D 758

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE ZONE-II, RTO, GUJRANWALA

Versus

Messrs CRYSTAL DISTRIBUTORS, GUJRANWALA

I.T.R. No.41041 of 2022, heard on 22nd September, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111, 122(1), 129, 132 & 133---Reference---Appellate Tribunal Inland Revenue---Powers---Remanding of the matter---Object, purpose and scope---Taxpayer assailed assessment order and Commissioner Inland Revenue (Appeals) remanded the matter to Assessing Officer for de novo proceedings but the order was set aside by Appellate Tribunal Inland Revenue---Validity---Once Appellate Tribunal Inland Revenue had come to the conclusion that order of remand of Commissioner (Appeals) was without jurisdiction, the best course was to set aside the remand order and had referred the case back to Commissioner (Appeals) to decide it on merits---Appellate Tribunal, under S.132(3)(c) of Income Tax Ordinance, 2001, was empowered to remand case to Commissioner or Commissioner (Appeals) by issuing directions for making further enquiry or devising a course of action---Appellate Tribunal also had the power to proceed and decide on merits instead of remitting it back to Commissioner (Appeals)---In such eventuality, one of the parties would be deprived of one forum and even the Appellate Tribunal would not take benefit of the views of Commissioner (Appeals) while deciding the appeal---Rationale behind more than one appellate forums under Taxation Laws was to cross check the exercise of powers by the authorities and ensure proper taxation under the statute---High Court set aside the orders passed by Appellate Tribunal Inland Revenue as it did not exercise its jurisdiction as ordained under S.132 of Income Tax Ordinance, 2001, and matter was remanded to CIR (Appeals) for decision afresh---Reference was disposed of accordingly.

Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and 3 others 2001 SCMR 838; Khyber Tractors (Pvt.) Ltd. Through Manager v. Pakistan through Ministry of Finance, Revenue and Economic Affairs, Islamabad PLD 2005 SC 842; Shahida Bibi and others v. Habib Bank Limited and others PLD 2016 SC 995; The Collector of Sales Tax, Gujranwala and others v. Messrs Super Asia Mohammad Din and Sons and others 2017 SCMR 1427 and Federation of Pakistan through Secretary Finance, Islamabad and another v. E-Movers (Pvt.) Limited and another 2022 SCMR 1021 rel.

Syed Zain-ul-Abidein Bokhari for Applicant.

Sarfraz Ahmad Cheema for Respondent.

2023 P T D 863

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Syed Mansoor Ali Shah and Munib Akhtar, JJ

SNAMPROGETTI ENGINEERING B.V. through Special Attorney

Versus

COMMISSIONER OF INLAND REVENUE ZONE-II, L.T.U, ISLAMABAD and others

Civil Petitions Nos. 3286 to 3289 of 2017, decided on 2nd August, 2022.

(Against the consolidated judgment of Islamabad High Court, Islamabad dated 15.06.2017, passed in ITR Nos. 160 of 2016, etc.)

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

----S.107---International tax conventions, agreements or treaties---Interpretation---Reasons as to why treaty interpretation rules differ from domestic tax rules stated.

International tax conventions or agreements or treaties are of a special nature and the role of a state (being party to such a bilateral agreement) is more of implementing the terms of such agreement rather than that of interpreting the same and that too in a unilateral manner. Treaty interpretation rules differ from domestic tax rules for the following among other reasons:

(a) As international treaties, the Vienna Convention on the Law of Treaties of 23rd May 1969 ("VCLT") governs double tax agreements. Therefore, their interpretation is based on the rules of interpretation under customary international law. As these principles and procedures of interpretation of agreements differ from rules applied to domestic legislation, an interpretation under the domestic law as a taxing statute may be misleading and unsuitable;

(b) Unlike the domestic law which contains highly technical legislative language relevant to a specific jurisdiction, tax treaties are based on the mutual understanding among two or more contracting states. Moreover, more than one language may be involved. They must be applied by the tax authorities and the courts in each contracting state in auniform way (common interpretation) that may differ from the domestic laws and practices in each state;

(c) Tax treaties are primarily relieving in nature and do not impose tax, while the domestic tax law seeks to impose tax in specific circumstances. A treaty specifies general taxing principles to avoid double taxation. Moreover, as the life of a treaty can be long it must be flexible enough to adapt to changes in the domestic law while continuing to reflect the original negotiated balance of obligations and concessions;

(d) Tax treaties tend to be less precise and require a broad purposive "substance over form" interpretation. Therefore, they are often interpreted more liberally than domestic law in the context of their object and purpose. On the other hand, in states that prefer a liberal, purposive interpretation of their domestic law, the interpretation of the tax treaties may be stricter under the statutes. In both cases, a neutral interpretation and common understanding requires the use of an international fiscal language, which may not be found in the domestic laws and may provide a definition quite independent from domestic laws;

(e) Treaty interpretation is a subject in itself and not merely an extension of statutory interpretation despite the fact that treaties may be enforceable only when made part of the domestic law under a statute in certain countries. Therefore, tax treaties should be kept as free as possible from the interpretation rules under domestic law, unless specified in the treaty itself.

Roy Rohatgi, Basic International Taxation (Kluwer Law International Second Edition 2001); Commissioner of Taxation v. Lamesa Holdings BV (1997) 77 FCR 597; McDermott Industries (Aust) Pty Ltd. v. Commissioner of Taxation (2005) 142 FCR 134 and A.P. Moller v Taxation Officer of Income Tax 2011 PTD 1460 ref.

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

----S. 107(2)(c)---Convention between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income' ("Convention"), Arts. 5 & 7---Non-resident company---Engineering services provided by the petitioner (non-resident company) to a local company---Exemption from tax under the domestic tax regime of Pakistan---Petitioner (non-resident company) and the local company did not have a contractual relationship ascribing any building, construction, installation, assembly project or supervisory activities role to the former---Rather, the role of the petitioner was limited to providing engineering services only---Tax department failed to bring on record any evidence satisfying the threshold requirement of Clause 4 of Article 5 of the Convention that the petitioner had furnished services within Pakistan through employees or other personnel for a period or periods aggregating 'more than four months within any twelve months period', which was necessary for any activity of furnishing services to constitute a permanent establishment---Petitioner was entitled to the exemption provided in the Convention, and the income derived by the petitioner from providing the services to the local company was exempt from income tax in Pakistan because of not fulfilling the conditions necessary to constitute a permanent establishment as set out in Clause 4 of Article 5 of the Convention.

The petitioner-company, being a tax resident of the Netherlands, is entitled to the benefits and concessions under the Convention between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income' ("Convention"), in line with the provisions of section 107 of the Income Tax Ordinance, 2001 ('Ordinance'). Under subsection (2)(c) of section 107 of the Ordinance, the taxability of the petitioner's income is to be determined under the provisions contained in the Convention which override the Ordinance. The Convention involved in the present case was signed and enforced by Pakistan and the Netherlands in 1982. Its Article 7 provides that the business profits of an enterprise of one of the states shall be taxable in the other state only if the enterprise maintains a permanent establishment in the latter state and only to the extent that the profits are attributable to the permanent establishment.

The contract between the petitioner-company and the local company reflects that the petitioner was hired for the provision of engineering services only. The scope of the petitioner's work consisted of providing engineering services for the plants as well as for the procurement of two years' spare parts. The petitioner's obligations mainly included: (i) carrying out the work exercising due skill, care and diligence in accordance with good and internationally acceptable engineering, design and procurement practices; (ii) furnishing five sets of the final version of the engineering documents to the local company; (iii) providing on an ongoing basis engineering data including computer files to the local company for review of the work being performed by the petitioner; and (iv) witnessing at its own expense at the place of manufacture all such tests and inspections of the equipment and materials and other parts of work, as specified in the contract to ensure that they comply with the engineering developed by the petitioner on the basis of the desired standards. It is expressly clarified in the contract that notwithstanding anything to the contrary, the petitioner shall not be responsible for the construction and the overall management activities of the project which shall be the exclusive responsibility of the local company. The local company was to perform or cause to be performed the construction and erection activities for the implementation of the plants and be responsible for the management and administration of such activities and any associated cost and time schedule. The local company was to use an expert and competent construction contractor and was required to ensure that construction would be performed according to acceptable standards. All work excluded from the petitioner's work was the local company's responsibility to perform or cause to be performed.

The burden of proving the fact that the petitioner had a permanent establishment in Pakistan and must, therefore, suffer tax from the business generated from such permanent establishment was initially on the department. The recitals of the contract adequately show that the petitioner and the local company did not have a contractual relationship ascribing any building, construction, installation, assembly project or supervisory activities role to the former. Rather, the role of the petitioner was limited to providing services only. The Assessing Officer's view about the actual involvement of the petitioner in the construction activity is not supported by any material on record. Clause 3 of Article 5 of the Convention has, therefore, no relevance to the petitioner's case.

Assistant Director of Income Tax v. E-Funds IT Solution Inc. (2018) 13 SCC 294 and DIT (International Taxation), Mumbai v. Morgan Stanley and Co. Inc. (2007) 7 SCC 1 ref.

However, the petitioner's case may fit in the category identified under Clause 4 of Article 5 of the Convention if the petitioner had rendered services through its employees in Pakistan provided the services were rendered for a specified period. Clause 4 of Article 5 of the Convention provides that permanent establishment shall "encompass the furnishing of services including consultancy services, by an enterprise through employees or other personnel, engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than four months within any twelve month period." The view of the Assessing Officer about the impossibility of the implementation of the contract without the physical presence of the petitioner in Pakistan appears irrational and purely assumptive because he failed to take note of the fact that the employees/representatives of the petitioner admittedly stayed in Pakistan for 97 days only.

The language used in Clause 4 of Article 5 of the Convention with respect to calculating the period of four months necessary for any activity of furnishing services to constitute a permanent establishment shows that there may be a number of periods, interspersed with breaks, during which services are furnished by an enterprise. If the aggregate of these periods crosses the threshold of four months within any twelve-month period, a permanent establishment will stand constituted. The department has failed to bring on record any evidence satisfying the threshold requirement of Clause 4 of Article 5 of the Convention that the petitioner had furnished services within Pakistan through employees or other personnel for a period or periods aggregating more than four months within any twelve-month period. The furnishing of services as envisaged under the Convention does not, of itself, create a permanent establishment unless it continues for a period or periods aggregating more than four months within any twelve-month period.

The income derived by the petitioner from the provision of engineering services to the local company being not attributable to a permanent establishment located in Pakistan is not taxable in Pakistan as long as it is not covered by other Articles of the Convention that would allow such taxation. The petitioner is entitled to the exemption provided in the Convention, and the income derived by the petitioner from providing the services to the local company is exempt from income tax in Pakistan because of not fulfilling the conditions necessary to constitute a permanent establishment as set out in Clause 4 of Article 5 of the Convention. Petitions for leave to appeal were converted into appeals and allowed accordingly.

Makhdoom Ali Khan, Senior Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Petitioner (in all cases).

Babar Bilal, Advocate Supreme Court along with Shahid Soomro, Commissioner (Legal) for Respondents (in all cases).

2023 P T D 892

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Muhammad Ali Mazhar, JJ

Messrs MIDDLE EAST CONSTRUCTION COMPANY, KARACHI

Versus

The COLLECTOR OF CUSTOMS, KARACHI

Civil Appeals Nos. 2016 and 2017 of 2022, decided on 16th February, 2023.

(Against the judgment dated 10.05.2022 passed by the High Court of Sindh, Karachi in C.P. No. D-1390 of 2020 and SCRA No. 303 of 2020)

Customs Act (IV of 1969)---

----S.196---Reference to High Court---Scope---Jurisdiction of High Court limited to questions of law---Imported vehicles, nature of---Tribunal was the last forum for the determination of facts---In the present case the Tribunal had concluded that the imported vehicles were prime movers---High Court realized the shortcomings in the references of the Customs department, therefore, it took it upon itself to ascertain the nature of the vehicles---High Court's jurisdiction under section 196 of the Customs Act, 1969 was limited to a question of law, therefore, it did not lay within the jurisdictional domain of the High Court to itself determine the nature of the imported vehicles---If the High Court preferred any particular reports which were before it, and if it was setting aside the judgments of the Tribunal then it should have given valid reasons for its preference---However, the High Court should not have embarked upon determining the nature of the vehicles itself, and to do so by relying upon material which had not been produced either before the adjudicating officer or the Tribunal---Manner in which the High Court took upon itself to ascertain the nature of the imported vehicles could not be endorsed---Appeals were allowed by setting aside the impugned judgments of the High Court, with the direction that the subject vehicles be released immediately on payment of the applicable duties and taxes, if the same had not already been paid.

Shahzada Mazhar, Advocate Supreme Court (through video-link, Lahore) for Appellant (in both cases).

M. Nadeem Qureshi, Advocate Supreme Court and Ms. Sania Rasool Bhutto, Assistant Collector (though video-link, Karachi) for Respondent (in C.A. No. 2016 of 2022).

2023 P T D 953

[Lahore High Court]

Before Shahid Karim and Raheel Kamran, JJ

COMMISSIONER INLAND REVENUE

Versus

MUHAMMAD AFZAL CHEEMA

Income Tax Reference No.64481 of 2022, decided on 22nd May, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(2), 133 & 214-A---Federal Board of Revenue Notification C. No. 3 (22) S (IR-Operations) 2020, dated 30-06-2020---Reference---Assessment, amendment of---Limitation, extension of---Principle---Word "finalization"---Connotation---Extension of limitation by authorities in view of Notification C. No. 3 (22) S (IR-Operations) 2020, dated 30-06-2020, was set aside by Appellate Tribunal Inland Revenue---Validity---Where notice for amendment of assessment was issued within the period of limitation prescribed in S.122 (2) of Income Tax Ordinance, 2001, and final order could not be passed therein manifestly for any justifiable reason beyond the control of revenue authority or taxpayer, exercise of discretionary power on the part of Federal Board of Revenue under S.214-A of Income Tax Ordinance, 2001, to extend time to complete proceedings within a reasonable period was justified---Word "finalization" was synonym for closing, completion, culmination of something which was already in progress or had already been commenced---Applicability of clause (i) of Notification C. No. 3 (22) S (IR-Operations) 2020, dated 30-06-2020, was confined to extension of limitation in the class of cases involving tax year 2014 for closing or completion wherein proceedings had already been commenced within the period of limitation, whereas notice under S. 122 of Income Tax Ordinance, 2001, was issued to taxpayers on 30-11-2020---High Court declined to give any expensive interpretation to the word "finalization" used in clause (i) of Notification C. No. 3 (22) S (IR-Operations) 2020, dated 30-06-2020, to authorize commencement of proceedings in relation to issue pertaining to year 2014 after expiry of the period of limitation specified in S.122 of Income Tax Ordinance, 2001---High Court declined to extend benefit of Notification C. No. 3 (22) S (IR-Operations) 2020, dated 30-06-2020 to the authorities---Reference was dismissed, in circumstances.

Chambers Concise Dictionary; The Collector of Sales Tax, Gujranwala and others v. Super Asia Muhammad Din and Sons and others 2017 PTD 1756; Federal Board of Revenue through its Chairman, Islamabad and others v. Abdul Ghani and another 2021 SCMR 1154 and Faisalabad Electricity Supply Company Limited v. The Federation of Pakistan and others 2021 SCMR 1463 ref.

The American Heritage Dictionary (Fifth Edition); Random House Webster's Unabridged Dictionary (Second Edition) and Collins English Dictionary rel.

Raja Sikandar Khan for Applicant.

Shahbaz Butt for Respondent.

2023 P T D 997

[Lahore High Court]

Before Shahid Karim and Raheel Kamran, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs PRIME COMMERCIAL BANK LTD.

P.T.R. No.173 of 2013, heard on 12th January, 2023.

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

----Ss.122 & 133---Reference---Assessment order, amendment of---Audit---Selection of case---Authorities were aggrieved of order passed by Appellate Tribunal Inland Revenue setting aside amendment of assessment order---Validity---If audit was conducted and discrepancies were noted by Taxation Officer, that would clearly constitute definite information to clothe Taxation Officer with the power to amend or further amend assessment order in respect of a tax year---Appellate Tribunal Inland Revenue relied upon extraneous circumstances to uphold order of Commissioner (Appeals) in stating that there was no definite information with the department for amendment of assessment order---High Court decided question of law in favour of authorities as Taxation officer issued notice in terms of S.122(9) to respondents / taxpayers who had power to pass order of amendment of assessment---Reference was allowed, in circumstances.

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

----Ss. 120, 122, 133 & 171(1)---Reference---Refund---Compensation---Scope---Authorities allowed compensation for the period starting from three months after receipt of appellate order and rejected the claim for period during which order under S. 120 of Income Tax Ordinance, 2001, was operative---In appeal, Commissioner (Appeals) allowed compensation for the year as well against which the authorities filed an appeal before Appellate Tribunal Inland Revenue---Validity---Authorities did not dispute that compensation was due on account of delayed refund---Only dispute was regarding one of the periods in question for which compensation was denied---Provision of S.171(1) of Income Tax Ordinance, 2001, was clear and unequivocal, which had obliged the Commissioner to pay to taxpayer a further amount by way of compensation where refund due to taxpayer was not paid within three months of the date on which it had become due---Two forums below were right in holding that for the purpose of S.171(1) of Income Tax Ordinance, 2001, refund became due on the date of assessment order made under S.120(1) of Income Tax Ordinance, 2001---High Court decided question of law in favour of respondents / taxpayers---Reference was dismissed, in circumstances.

Sui Northern Gas Pipelines Ltd. v. Commissioner Inland Revenue Legal Division Large Taxpayer Unit 2021 SCMR 1453 distinguished.

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

----Ss.122, 133 & 151(1)---Banking Companies Ordinance (LVII of 1962), 5(c)---Reference---Assessment order, amendment of---Banking company---State Bank of Pakistan, status of---Dispute was with regard to amount of loan agreement executed by respondent / tax payer and State Bank of Pakistan---Validity---Loan agreement was with State Bank of Pakistan, therefore, it was not covered by exclusion of 151 (1)(d) of Income Tax Ordinance, 2001, as State Bank of Pakistan was not a banking company or a development financial institution by any stretch of imagination nor by the definition of the term "banking company" as given in Banking Companies Ordinance, 1962--- Such factual aspect was not determined by three forums below and for such purpose matter was to be referred back to Taxation Officer to determine precisely the nature and sweep of loan agreement only to the extent whether it had been executed with a banking company or a development financial institution as defined in Income Tax Ordinance, 2001---If such was not the case, respondents / tax payers were not entitled to exception given in S.151(1)(d) of Income Tax Ordinance, 2001---High Court set aside the order passed by Appellate Tribunal Inland Revenue and remanded the matter to Taxation Officer to conduct such inquiry---Reference was allowed accordingly.

Workers Welfare Funds v. East Pakistan Chrome Tannery (Pvt.) Ltd. (2016) 114 Tax 385 ref.

Liaqat Ali Chaudhry, Shehzad Ahmad Cheema, Malik Abdullah Raza and Rohil Ahmad Khan for Applicant.

Syed Muhammad Ijaz, Mansoor Beg, Muhammad Hamza Rauf, Mohsin Ehsan Warraich, Muhammad Imran Khan, Ghulam Ahmad Ansari, Ashiq Ali Rana and Fahim Khadim for Respondents.

2023 P T D 1046

[Lahore High Court]

Before Shahid Karim and Anwaar Hussain, JJ

COMMISSIONER INLAND REVENUE

Versus

PUNJAB MEDICAL STORE

I.T.R. No.77610 of 2022, decided on 7th June, 2023.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153 & 161---Income Tax Rules, 2002, R. 44---Failure to pay tax collected or deducted---Payments for goods, services and contracts---Statement of tax collected or deducted---Scope---Department noted that payments were made to various persons by the respondent but no proof of tax deduction in terms of S. 153(1)(a) of the Income Tax Ordinance, 2001, was provided and taking cognizance of the default of withholding tax provisions, notice under R.44(4) of the Income Tax Rules, 2002 was issued, which was not responded by the taxpayer and resultantly after issuing show-cause notice and affording multiple opportunities of hearing, order-in-original was passed and a tax demand was raised---Appeal preferred before the Commissioner (Appeals) was dismissed, however, the Appellate Tribunal allowed the appeal---Validity---Taxpayer was a prescribed person, obligated to deduct tax while making payments against purchases in terms of S. 153(1)(a)---Appellate Tribunal on the one had held that default of tax deduction for the tax year concerned stood established and on the other hand it had been held that the recipients of the payments had filed their returns, therefore, the Assessing Officer was not justified to create the impugned tax demand that appeared to be a self-contradictory finding---Respondent had not brought on record any proof of payment of the amount due by the recipients of the payments from the respondent, before the forums below and, therefore, mere filing of the returns by the said recipients was not sufficient to establish that the tax due was actually paid---Respondent could not be absolved from its statutory obligation to collect and deposit the tax as withholding agent---Reference application was allowed.

Ibrar Ahmad for Applicant.

2023 P T D 1120

[Lahore High Court]

Before Jawad Hassan, J

SERVICE GLOBAL FOOTWEAR LIMITED and another

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 58683 of 2022 (and other connected Petitions), decided on 27th June, 2023.

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

----Ss. 2(42), 4, 4C, 80, 114, 120, First Sched., Chap. V, Part-I, Division-I & First Proviso, Division-II B [as inserted by Finance Act, 2022]---Constitution of Pakistan, Arts. 25 & 199---Constitutional petition---Vires of Super Tax---Discrimination---Term 'person'---Textualism, doctrine of---Applicability---Petitioners/taxpayers assailed imposing of Super Tax on the plea of discrimination---Validity---Term 'person' had wider amplitude and was used in broad sense---All petitioners fell within the definition of a 'person' under S. 2(42) read with S. 80(1)(b) of Income Tax Ordinance, 2001---Petitioners'/ taxpayers' liability to pay tax for income tax had arisen under Chapter II, S. 4 of Income Tax Ordinance, 2001---Liability of petitioners/taxpayers to pay tax, even if created by charging provision, materialized upon filing of return in terms of S. 114 of Income Tax Ordinance, 2001, which was treated as an assessment order under S. 120 of Income Tax Ordinance, 2001, and procedure and method to file return was provided under S. 118(2) of Income Tax Ordinance, 2001---Super Tax imposed for persons other than banking company having income equal to or exceeding Rs.500 million was gradually reduced between years 2018 to 2022 from 3% to 0% as per Division IIA of Income Tax Ordinance, 2001, while at the same time, a new Super Tax was imposed through S. 4C of Income Tax Ordinance, 2001---As per Division IIB of Income Tax Ordinance, 2001, an exorbitant and sudden increase in super tax @ 10% (which was equal to 250% increase from normal maximum rates of super tax) was imposed which was unreasonable and unjustified as compared to Super Tax earlier imposed through S. 4B of Income Tax Ordinance, 2001---There was no basis of imposing 10% Super Tax because already Supreme Court had reduced rate of Super Tax from 10% to 4%---High Court declared First Proviso to Division IIB of Part I of the First Schedule of Income Tax Ordinance, 2001 to be discriminatory on the basis of doctrine of Textualism and documents produced in Court, including budget speech and policy statement---High Court reduced rate of Super Tax to 4% from 10%---Constitutional petition was allowed accordingly.

Shell Pakistan Limited through Legal Counsel and others v. Federation of Pakistan through Secretary Ministry of Finance and others 2023 PTD 607; Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan and others 1993 SCMR 1905; Lotte Pakistan PTA Ltd. through Chief Financial Officer and Company Secretary v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and others 2011 PTD 2229 and FBR through Chairman, Islamabad and others v. Messrs Wazir Ali and Company and others 2020 SCMR 959 ref.

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

----S. 74---Tax year---Types---Special tax year---Scope---There are two types of tax years; one is normal tax year while the other is special tax year---Period of both of tax years in terms of S. 74 of Income Tax Ordinance, 2001 is twelve months---Availing special tax year under S.74(3) of Income Tax Ordinance, 2001, is subject to applying in writing to the Commissioner to use a twelve months' period other than normal tax years---Such permission is further subject to S. 74(5) of Income Tax Ordinance 2001---Availing any special tax year for payment, tax liability is just to accommodate that category of taxpayers and not for the purpose to evade payment of income tax due in a normal tax year.

(c) Interpretation of statutes---

----Fiscal statute---Textualism, doctrine of---Scope---Doctrine of Textualism envisages a method of statutory interpretation that asserts a statute should be interpreted according to its plain meaning and not according to the intent of the legislature, the statutory purpose, or the legislative history.

(d) Constitution of Pakistan---

----Art. 25---Discrimination---Intelligible differentia, doctrine of---Applicability---Differential treatment of persons who are not similarly placed has been allowed under Art. 25 of the Constitution, under reasonable classification---In order to justify such difference in treatment, reasonable classification must be based on intelligible differentia that has a rational nexus with the object being sought to be achieved---Any distinct treatment meted out to a class of persons can only be sustained under Art. 25 of the Constitution, if such test is satisfied.

Hadayat Ullah and others v. Federation of Pakistan and others 2022 SCMR 1691; Dr. Mobashir Hassan and others v. Federation of Pakistan and others PLD 2010 SC 265; Syed Azam Shah v. Federation of Pakistan through Secretary Cabinet Division, Cabinet Secretariat, Islamabad and another 2022 SCMR 201 and Government of Khyber Pakhtunkhwa through Chief Secretary and others v. Syed Sadiq Shah and others 2021 SCMR 747 rel.

Petitioner(s) by:

Salman Akram Raja, ASC, Malik Ahsan Mehmood, Arslan Riaz and Barrister Raja Hamza Anwar, Advocates (in W.Ps. Nos. 58672, 64994, 67221 and 65025 of 2023).

Mansoor Usman Awan, ASC, Haris Irfan and Hamza Shehram Sarwar, Advocates (in W.Ps. Nos.12761, 58689, 59245, 59251, 59911 and 12768 of 2023).

Barrister Haroon Dugal, ASC with Subhe Nasib, Advocate (in W.P. No.75277 of 2022).

Zoe K. Khan, Advocate (in W.P. No. 75528 of 2022).

Shazib Masud, ASC, M. Asad Buttar, ASC and Jawad Jamil Mailk, Advocate (in W.Ps. Nos.56758, 83260 and 59133 of 2023).

Dr. Mazhar Ilahi, Advocate with Barrister Asfandyar Khan Tareen, Arslan Saleem Chaudhry and M. Siddique Butt, Advocates (in W.Ps. Nos. 567, 829 and 1043 of 2023).

Muhammad Shahbaz Butt, ASC with Khurram Shahbaz Butt, Muhammad Hassan Dogar, Advocates (in W.Ps. Nos. 403, 530, 2452, 4359, 5291, 11364, 11635, 11646, 13559, 13615, 20124, 83497, 67867, 67979, 68023, 68017, 74076, 78120, 79612, 82816 of 2023, 83497 and 83301, 83126, 83311, 5297, 5299, 5347, 83320, 83323 of 2022 and 2023).

Abdul Waheed Habib, Mirza Mubashar Baig and Jawad Ahmad, Advocates (in W.Ps. Nos. 404 of 2023, 83485 and 83486 of 2022).

Munawar ul Salam, ASC, Muhammad Shoaib Rashid, ASC and Hassan Pervaiz, Advocate (in W.Ps. Nos. 60340 and 83294 of 2022).

Adil Umar Bandial and Sajjad Ali, Advocates (in W.P. No.82429 of 2022).

Scheherezade Shaharyar, Advocate (in W.P. No. 78882 of 2022).

Khalil-ur-Rehman, Saad Ullah and Azam Jan Muhammad, Advocates (in W.Ps. Nos. 93, 8245, 323, 10273, 571, 14746, 17747, 83231, 13464, 83098, 83384, 83484, 83473, 930, 6960, 2359 and 23807 of 2023).

Muhammad Nauman Yahya and Shakeel Ahmad Basra, Advocates (in W.Ps. Nos. 108 and 1211 of 2023).

Bashir Ahmad Khalid and M.A. Rizwan Kamboh, Advocates (in W.Ps. Nos. 112, 379, 3423 of 2023, 81874, 82187, 81884, 82192, 82788, 82969, 83482, 83371 and 82805 of 2022).

Jahangir Ahmad, Advocate (in W.Ps. Nos. 163 of 2023 and 83400 of 2022).

Nadir Ali Sherazi, Barrister M. Abubakar and Muhammad Usman, Advocates (in W.Ps. Nos. 200, 312, 627, 1998, 2531, 5550, 6347, 9987, 20606 of 2023, 82897, 82899, 82905, 83321, 83293, 82908, 82910, 66947, 82917, 83417, 83418, 83019, 83023 and 83025 of 2022).

Faisal Rasheed Ghouri and Omar Iqbal Khawaja, Advocates (in W.Ps. Nos. 206, 518, 3455, 2483, 9824, 9825 of 2023 and 67998, 83335, 66678, 68018, 66716, 66947, 67096, 83665, 83667, 83668 of 2022).

Mustafa Kamal, Advocate (in W.Ps. Nos.250, 1339, 1837, 2415, 3397, 4958, 5913, 6645, 12858, 13416, 14899 of 2023, 60348, 64237, 66560, 79617, 80573, 82706, 82905, 83302, 81930, 82935, 83106, 83133, 83322, 83331, 83413, 83446 and 83571 of 2022).

Zia Haidar Rizvi and Zahid Imran Gondal, Advocates (in W.Ps. Nos.304 of 2023, 83590 and 83610 of 2022).

Muhammad Zulqarnain, Advocate (in W.Ps. Nos. 436, 83503 and 83505 of 2023).

Muhamad Asif Rana and Amir Khan, Advocates.

H. M. Majid Siddiqi, Advocate (in W.Ps. Nos. 497 and 1989 of 2023).

Muhammad Faisal Hafeez, Advocate (in W.P. No.556 of 2023).

Ahmad Yar Khan and Hashim Aslam Butt, Advocates (in W.Ps. Nos. 557, 1999, 83392, 83410 and 83433 of 2023).

S.M. Raheel, Advocate (in W.P. No. 577 of 2023).

Mudassar Shujauddin and Shahid Pervez Jami, Advocates (in W.Ps. Nos. 653, 655, 2345, 4736, 82430, 82749, 82769, 82980, 83154, 83156, 83477, 83480, 2251, 83507, 83508, 83349, 83476, 83510 and 83514 of 2023).

Usman Javaid Qazi, Muhammad Waseem and Javed Iqbal Qazi, Advocates (in W.Ps. Nos. 820, 3237 and 3302 of 2023).

Muhammad Zafar Iqbal Mian, Rana Muhammad Ishaq M. Rashid Tobassam and Mar Shoakat Hayat, Advocates (in W.Ps. Nos. 990 and 83166 of 2023).

Muhammad Ashraf Chaudhry and Jamil Akhtar Baig, Advocates (in W.P. No.1012 of 2023).

Basharat Ali Awan, Advocate (in W.Ps. Nos.1137 and 2040 of 2023).

Muhammad Humzah, Advocate (in W.P. No.1195 of 2023).

Babar Murtaza Khan, Sajjad Ali Chaudhry and Mian Muzaffar Hussain, Advocates (in W.P. No.1285 of 2023).

Ch. Qamar-uz-Zaman, M. Waqar Akram, Muhammad Khalid, Rai Inam Qadir, Arif Munir, Zeba Munir, Ali Raza Cheema and Muhammad Bilal, Advocates (in W.Ps. Nos. 1404, 1409, 83624, 7096 and 1404 of 2023).

Allah Nawaz Nasir, Advocate (in W.P. No.1851 of 2023).

Waqar Hasan, Advocate (in W.Ps. Nos. 2067 and 2251 of 2023).

Muhammad Naeem and Muhammad Aslam Sheikh, Advocates (in W.Ps. Nos.90, 2362, 5545 and 5576 of 2023).

Ch. Anwaar ul Haq Arif and Shahnawaz, Advocates (in W.Ps. Nos.76770 and 2399 of 2023).

Rai Amer Ijaz Kharal, Advocate (in W.Ps. Nos.3434 and 2403 of 2023).

Amir Fahim Chaudhry, Abbas Ali Awan, Zaheer Ahmad and Abrar Hussain, Advocates (in W.Ps. Nos. 2324, 14472 and 15259 of 2023).

Muhammad Amjal Khan, Khawaja Riaz Hussain, Babar Zaman, Omer Wahab, Rana Usman Habib Khan, Muhammad Ahsan Nawaz and Noureen Fouzia, Advocates (in W.Ps. Nos. 2429, 5427, 12198, 13955, 14272, 83419 and 2630 of 2023).

Muhammad Naeem Munawar and Farhan Ahmed Jan, Advocates (in W.Ps. Nos. 2636, 7192 and 2639 of 2023).

Syed Saif-ur-Rehman Gillani and Asif Hayat Khattak, Advocates (in W.P. No.2715 of 2023).

Muhammad Mohsin Virk, Arfan Ahmad Chattha, Syed Tanzeel Haider, Hamza Habib Shaikh, Ch. Shoaib Ilyas, Tahir Shabbir, Waleed Akbar Chattha and Hassan Irtaza Tarar, Advocates (in W.Ps. Nos.2726, 81772 and 5832 of 2023).

Syed Najaf Hussain Shah, Advocate (in W.Ps. Nos. 3261, 8371, 7868, 7869, 7872, 7874 and 8371 of 2023).

Ahsan Ahmed Munir, Ghias Ahmad and Ramsha Shahid, Advocates (in W.P. No.3431 of 2023).

Rana Muhammad Afzal and Matie-ur-Rehman, Advocates (in W.Ps. Nos. 3442, 83358, 83396, 83422, 83316, 83298, 83223 and 83356 of 2023).

Zeeshan Asif and Rizwan Anwar Baig, Advocates (in W.Ps. Nos. 3704, 3707, 3746 and 3750 of 2023).

Hassan Ali, Waqqas Ahmad Mir, Ahmad Hassan, Momna Taufeeq, Saad Mazhar and Hamza Hayat, Advocates (in W.Ps. Nos. 83141 of 2022 and 3743 of 2023).

Zahid Imran Gondal, Advocate (in W.P. No. 4119 of 2023).

Mahmood Ahmad, Mehmood Arif and Asmar Tariq, Advocates (in W.Ps. Nos.4198 and 5803 of 2023).

Shafaqat Ali, Hassan Maqsood Ahmad Aujla, Waris Nishaber Ali Cheema and Muhammad Idrees Aslam Chauhan, Advocates (in W.Ps. Nos. 4615, 9493, 18117, 4839, 5297, 5299 and 5347 of 2023).

Sardar Abdul Majeed Dogar, Syed Qasim Askari and Sardar M. Arslan Raza Dogar, Advocates (in W.Ps. Nos. 4659 and 8111 of 2023).

Farhan Ahmed Jan, Advocate (in W.P. No.5454 of 2023).

M. Zohaib Ali Sidhu, Syed Ali Tarab, Ali Aqib Shah and Usman Latif, Advocate (in W.P. No.5916 of 2023).

Zahid Ateeq Choudhary, Advocate (in W.P. No.6293 of 2023).

Fahad Majeed Rathor, Advocate (in W.P. No.6300 of 2023).

Javed Farooq, Usman Khalil, Shahzaib ul Hassan Chattha, Ali Ijaz Shah and Tauqeer Ahmad Ranjha, Advocates (in W.Ps. Nos.6549 and 6560 of 2023).

Mahmood Ahmad, Shahid Rasool and Saad Asif, Advocates (in W.P. No.6708 of 2023).

Zahid Ateeq Choudhry, Advocate (in W.P. No.6925 of 2023).

Waseem Ahmad Malik, Mahmood Ahmad, Mehmood Arif and Asmar Tariq, Advocates (in W.Ps. Nos.9221, 83548, 83549 and 75893 of 2023).

Zaheer-ud-Din Babar, Advocate (in W.P. No. 11525 of 2023).

Muhammad Younas Khalid and Umer Farooq, Advocates (in W.P. No.12485 of 2023).

Syed Zeeshan Ali and Syed Muhammad Baqir Ali, Advocates (in W.P. No.12800 of 2023).

Saad Nusrullah and Irtiza Shoukat, Advocates (in W.P. No.13276 of 2023).

Mirza Mubasher Baig, Advocate (in W.P. No.15958 of 2023).

Hassan Kamran Bashir, Sikandar Ali and Asim Bin Majeed, Advocates (in W.Ps. Nos.13154, 16149, 59809 and 78738 of 2023).

Akmal Inayat Butt, Advocate (in W.P. No.18716 of 2023).

Shehzad A. Elahi, Mussadiq Islam, Salman Zaheer Khan and Ch. Muhammad Ali, Advocates (in W.Ps. Nos. 60005 of 2022, 60425, 81376, 81380, 81384, 81390 and 68129 of 2023).

Malik Faiz Rasool Rajwana, ASC, Barrister Malik Kashif Rajwana, ASC and Malik Asif Rajwana, Advocate (in W.P. No. 64130 of 2022).

Sheikh Anwar-ul-Haq, Sheikh Naveed Anwaar and Sajjid Ali Baloch, Advocates (in W.P. No.65256 of 2022).

Muhammad Asif, Advocate (in W.P. No.65917 of 2022).

Naved A. Andrabi, ASC and Khurram Saleem, Advocate (in W.Ps. Nos.66055, 82705 and 67781 of 2022).

Ahsan Ahmed Munir, Ghiaz Ahmed and Ramsha Shahid, Advocates (in W.Ps. Nos.66883 and 66898 of 2022).

Dr. Ilyas Zafar, ASC with Syed Nasir Ali Gillani, Advocate (in W.P. No.67937 of 2022).

Hamad-ul-Hassan Hanjra, Muhammad Nasir Khan and Muhammad Awais, Advocates (in W.P. No.74210 of 2022).

Sh. Aqeel Ahmad, Advocate (in W.Ps. Nos. 83411, 83412, 75186 and 83424 of 2022).

Sultan Haider Ali Malik, Usman Khalil, Shahzaib ul Hassan Chattha, Ali Ijaz Shah and Tauqeer Ahmad Ranjha, Advocates (in W.Ps. Nos.75811 and 75861 of 2022).

A.W. Chaddha, ASC with Jahanzaib Ahmad and Raja Ali Feroz, Advocates (in W.P. No.75869 of 2022).

Muhammad Jawad Zafar, ASC with Khawar Shabbir Khan and Muhammad Talha Mushtaq, Advocates (in W.P. No.80898 of 2022).

H.M. Majid Siddiqi, Advocate (in W.Ps. Nos. 82101, 83062 and 83079 of 2022).

Muhammad Afzal, Waqas Ahmad Virk and Waseem Bhatti, Advocates (in W.P. No.82260 of 2022).

Barrister Muhammad Abubakar, Advocate (in W.Ps. Nos. 82264, 82420 and 82265 of 2022).

Muhammad Muqaddam Sukhera, Muhammad Mansha Sukhera and Muhammad Ali Awan, Advocates (in W.Ps. Nos.82221 and 82277 of 2022).

Muhammad Ajmal Khan, ASC with Saleem Iqbal Rathor, Omer Wahab, Rana Usman Habib Khan, Muhammad Ahsan Nawaz and Noreen Fouzia, Advocates (in W.Ps. Nos.82305, 82753 and 83295 of 2022).

Salman Aslam Butt, ASC with Muhammad Shoaib Rashid, Furqan Naveed and Manahil Khan, Advocates (in W.Ps. Nos. 83307, 82791 and 82378 of 2022).

Muhammad Ijaz Lashari, ASC (in W.P. No.82670 of 2022).

Mian Abdul Bari Rashid, ASC with Mian Sajid Salam and Asim Mehmood, Advocates (in W.Ps. Nos. 83033, 83035 and 82692 of 2022).

Jamshaid Anwar and Muhammad Riaz, Advocates (in W.P. No.82941 of 2022).

Hamad Ul Hassan Hanjra, Advocate (in W.Ps. Nos. 83048 and 83051 of 2022).

Muhammad Rafique Ch. and Shahbaz Siddique, Advocates (in W.P. No.83149 of 2022).

Barrister Sheharyar Kasuri, ASC, Raza Imtiaz Siddiqui, Jamshid Alam, Muhammad Humza, Sabeel Tariq Mann, Qadeer Kalyar and Fasih-ur-Rehman, Advocates (in W.Ps. Nos.83181, 82708, 82716, 82131, 82721 and 82727 of 2022).

Sumair Saeed Ahmed and Akhtar Ali, Advocates (in W.Ps. Nos.83182, 83185, 83189, 83299, 83289, 83262 and 83318 of 2022).

Syed Alamdar Hussain Naqvi, Rana Sajid Rasool and Rai Abdullah Zahid Khan, Advocates (in W.P. No.83217 of 2022).

Yawar Mehdi Naqvi and Shahid Hussain Ch. , Advocates (in W.P. No.83224 of 2022).

Muhammad Bilal Pervaiz, Advocate (in W.P. No. 83547 of 2022).

Mirza Mahmood Ahmad, ASC with Barrister Muhammad Saram Israr, Advocate (in W.P. No.83256 of 2022).

Munawar us Salam, ASC with Muhammad Shoaib Rashid, Advocate (in W.P. No.83294 of 2022).

Ch. Babar Waheed, ASC with Jawad Latif Chughtai, Moazzam Jaryal, Hamza Sajid and Akash Gohar, Advocates (in W.P. No.83297 of 2022).

Adil Khalid Tirmizey, Barrister Aun Ali Raza, Rida Aslam Bhatti and Ahmed Nisar Khan, Advocates (in W.P. No.83308 of 2022).

Faisal Naseer Rana and Muhammad Mujahid Arshad Tarar, Advocates (in W.P. No.83310 of 2022).

Tanzil-ur-Rehman Hotiana, Advocate (in W.P. No. 83313 of 2022).

Moiz Tariq, ASC with Mian Mansoor Akbar, Advocate (in W.Ps. Nos.83315, 83319, 83332, 83430 and 83436 of 2022).

Zia Haider Rizvi, ASC with Zahid Imran Gondal, Advocate (in W.P. No.83341 of 2022).

Khuram Ahmed Saeed and Muhammad Javed Arshad, Advocates (in W.P. No.83401 of 2022).

Muhammad Ifan, Asaad Fazil Shaikh, Faisal Ismail and Mian Dawood, Advocates (in W.P. No.83414 of 2022).

Muhammad Amir Rehman and Shahbaz Siddique, Advocates (in W.P. No.83425 of 2022).

Sheikh Aqeel Ahmad, Advocate (in W.Ps. Nos. 83437, 83439, 83442, 83426, 83428, 83434, 83435 and 83444 of 2022).

Hassan Shakil, Advocate (in W.P. No.83479 of 2022).

Akhtar Javed, Waseem Ahmed Malik and Mehmood Arif, Advocates (in W.Ps. Nos.83541 and 83546 of 2022).

Rana Munir Hussain, ASC with Shahbaz Siddique, Advocate (in W.P .No.83613 of 2022).

Muhammad Ishaq Beryar and Farhan Shahzad, Advocates (in W.Ps. Nos. 83615, 83617, 83619 and 83620 of 2022).

Respondent(s) by

Nasir Javed Ghumman, Deputy Attorney General for Respondent No.1.

Khalid Ishaq, ASC, Nida Aftab, Ahmad Pervaiz, ASC, Jawad H. Tarar and Syed Zain-ul-Abidin Bukhari, Advocates for Respondent No.2/FBR.

Ms. Asma Hamid, ASC for Respondent No.3/CIR assisted by Noor Ahsan, Hammad Hussain, Muhammad Bilal Munir and Sana Azhar, Advocates along with Mir Badsha Khan Wazir, Chief Commissioner, IR, LTO, Lahore, Muhammad Majid Chudhary, Commissioner, IR, LTO Lahore and Ms. Laila Ghafoor, Director Law, IR Lahore.

Hussain Ibrahim Muhammad, Assistant Advocate General.

Dr. Asim Murtaza Cheema, Civil Judge/Research Officer, Lahore High Court, Lahore.

Dates of hearing: 8th, 9th, 16th, 20th, 21st, 22nd, 29th, 30th, 31st March, 3rd, 4th, 5th, 6th, 7th, 10th, 11th and 12th April, 2023.

"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes."

2023 P T D 1158

[Lahore High Court]

Before Shahid Karim and Muhammad Sajid Mehmood Sethi, JJ

PAK ARAB REFINERY LIMITED

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX (APPEALS), ZONE-I, LAHORE

PTR No.545 of 2006, heard on 20th October, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221 & 122(5A)---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss.62, 80-D, 156 & Third Sched., R.5---Constitution of Pakistan, Art. 4---Assessment order---Rectification---Change of opinion---Scope---Taxation Officer, powers of---Scope---Initial depreciation allowable on building and plant and machinery installed by 30th June, 2002---Original assessment was finalized on 28-09-2002 and further proceeded under Ss. 156 & 80D of Income Tax Ordinance, 1979---Earlier two notices under S.122(5A) of Income Tax Ordinance, 2001, (ITO, 2001) having been issued in the year 2003 were still pending, another notice under S.221 of the ITO, 2001 was served upon the applicant (Refinery Company) alleging that initial depreciation on buildings and plant & machinery was incorrectly allowed---Appellate Tribunal treated notice under S.221 of ITO, 2001 as valid one---Applicant assailed order of the Tribunal contending that the impugned order amounted to "change of opinion" from assessment order passed in the year 2002, which could not be passed during pendency/disposal of two notices already issued under S.122(5A) of the ITO, 2001---Validity---Record revealed that initial depreciation was never claimed by the applicant/company , rather First Year Allowance @ 80% of the "capitalized assets" was claimed---Taxation officer allowed initial depreciation under R.5(1)(cc) of the Third Schedule of the Income Tax Ordinance, 1979, which provision was not relevant to the facts of the present case, because the same prescribed 40% depreciation allowance to machinery or plant given on lease by a Scheduled Bank, a Financial Institution or Modarba or leasing company duly approved by the FBR---Case of applicant/company for allowing initial depreciation being against the said provision of law, compelled the Taxation Officer to rectify the order in exercise of power under S.221 of the ITO, 2001---Incorrect statement of law was always open to rectification and penitence---Taxation Officer was empowered to rectify assessment order under S. 221 of ITO, 2001and rectification of the Assessment Order under S.221 of ITO, 2001, could be applied retrospectively---Expression "mistake apparent from the record" as used in S. 221 of ITO, 2001, meant that error or mistake was so manifest and clear, which if permitted to retain on record, could materially affect the case---Conditions precedent to amend an assessment order under S. 122(5A) of ITO, 2001, were different from the conditions laid down in S. 221 of ITO, 2001---For S. 122(5A) of Income Tax Ordinance, 2001, the order had to be erroneous insofar as prejudicial to the interest of revenue, whereas S. 221 of the ITO, 2001, empowered the Taxation Officer to amend the order to the extent of rectifying the legal or factual mistake apparent from the face of the assessment or if mistake was apparent, obvious and floating on the surface of order and could be rectified without long drawn arguments and proceedings for appreciating facts and interpretation of provisions of law---There was no involvement of any fresh investigation---Mistake was apparent on the basis of facts floating on record as well as the applicable law---Under the law Taxing Authority had power to correct a mistake in tax matter resulting in loss of revenue in blatant violation of law after terming such mistake to be apparent on face of record---Any other interpretation of the said provision would be against the spirit of Art. 4 of the Constitution guaranteeing equal treatment in accordance with law---Findings of facts given by the Appellate Tribunal were not open to further scrutiny by the High Court in reference jurisdiction when the same had not been shown either to be perverse or against record and the High Court had to give opinion in advisory jurisdiction, on the basis of facts as determined by the Appellate Tribunal---No adjudication on merit was made on the earlier notices, therefore, doctrine of res judicata was not applicable---Mere issuance of notices did not bar the Authority from either issuing fresh notice or exercise power of rectification within scope of S.221 of the Income Tax Ordinance, 2001---No interference was made out in the order passed by the Appellate Tribunal---Reference was dismissed accordingly.

Syed Ali Zafar and Mehak Zafar for Applicant.

Liaquat Ali Ch. for Respondent.

2023 P T D 1258

[Lahore High Court]

Before Asim Hafeez, J

Messrs IT COMM PRIVATE LIMITED through Authorized Representative

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS (APPRAISEMENT) and 4 others

Writ Petition No.82461 of 2022, decided on 26th December, 2022.

Customs Act (IV of 1969)---

----Ss.80, 81 & 193---Judicial and merit reviews---Distinction---Provisional Assessment order---Release of goods---Petitioner / importer was aggrieved of assessment order passed by authorities in exercise of jurisdiction under S. 80 of Customs Act, 1969---Validity---Scope of merits review and judicial review is different---Assessment order, passed under S.80 of Customs Act, 1969, on its merits, can be challenged by invoking remedy of appeal under S. 193 of Customs Act, 1969---In the context of remedy of judicial review sought, it was evident that S. 80(3) of Customs Act, 1969, conferred jurisdiction on the officer of Customs to reassess duties, taxes and charges, while checking the goods declarations, without prejudice to any other action to be taken under Customs Act, 1969---High Court did not find any illegality in exercise of jurisdiction, whereby goods were assessed---Claim of proximity of goods for the purposes of classification and assessment of duties, in the context of earlier decisions of the Tribunal, was another matter, which involved merits of the case and determination thereof required factual analysis---High Court refrained from commenting on factual issues as petitioner / importer failed to prove application of S. 81 of Customs Act, 1969, when goods had already been re-assessed under S.80 of Customs Act, 1969---Provisions of Ss. 80 & 81 of Customs Act, 1969, were mutually exclusive, which catered for different situations / scenarios and could not be applied or invoked at the same time--- Provisions of section 81 of Customs Act, 1969 could be invoked, in case assessment could not be made by the officer of Customs under S.80 of Customs Act, 1969, in which circumstances S. 81 of Customs Act,1969, would come into play and importer could claim that goods be released against provisional assessment---High Court declined to interfere in the order of assessment made by authorities--- Constitutional petition was dismissed, in circumstances.

SUS Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman, Islamabad and 2 others 2011 PTD 235 and Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad & Company (Pvt.) Limited, Islamabad 1999 SCMR 138 distinguished.

Commissioner of Income-Tax, Central Zone 'B' v. M/s Farrokh Chemicals Industries 1992 PTD 523; The Commissioner of Income-Tax, Lahore v. Messrs Lucky Stores and Zubair Medical, Stores, Lahore Cantt 1981 SCMR 656; Commissioner of Income- Tax, East Pakistan, Dacca v. Wahiduzzaman PLD 1965 SC 171; Messrs Assam-Bengal Cement Co. Ltd. v. The Commissioner of Income Tax, East Pakistan, Dacca PLD 1962 SC 295; Karachi Properties Investment Company (Pvt.) Limited, Karachi v. Income-Tax Appellate Tribunal, Karachi and another 2004 PTD 948; Collector of Customs and another v. Messrs Fatima Enterprises Ltd. and others 2012 SCMR 416; Collector of Customs and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Province of Punjab through Secretary Communication and Works Department, Lahore through Chief Engineer (North/Central) Punjab Highway Department, Lahore 2021 SCMR 624 and M/s Al-Ghani Chain Industries (Pvt.) Ltd. v. Federation of Pakistan and others (W.P.No.57607/2022) ref.

Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 rel.

Salman Mansoor for Petitioner.

Sheraz Zaka, Assistant Attorney General.

2023 P T D 1342

[Lahore High Court]

Before Shahid Karim and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs PAK LAND TRAVELS (PVT.) LTD., FAISALABAD

P.T.R. No.129 of 2008, heard on 25th November, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133, 115(4), 169(1)(b) & 233(3) [as amended by Finance Act, 2004]---CBR's Circular No. 7 of 2004 dated 1-7-2004---Withholding tax---Advance tax---Tax withheld from commission paid to Travel and Insurance Agents---Presumptive tax regime---Final tax---Scope---Loss was declared in annual return by the Tax payer/travel agent who was engaged in sale of air tickets on behalf of Travel Air Lines (Principal Company)---Authorities/applicant assailed order of Tribunal passed in favour of the taxpayer/respondent, contending that the commission earned by the Travel Agent from the principal company fell within the purview of Presumptive Tax Regime---Held, that the Travel and Insurance agents ('agents') were subjected to withholding taxes under subsection (3) of S.233 of Income Tax Ordinance, 2001 ('the Ordinance 2001')through an amendment introduced by Finance Act, 2004 and the tax withheld from commission paid to the agents was brought in the Presumptive Tax Regime under subsection (4)---Amendment made in subsection (b) of S. 169 of the Ordinance 2001 clearly provided that tax withheld from agents under S. 233(3) of the Ordinance, 2001 was to be treated as final tax---Section 115(4) of the Ordinance, 2001, was also amended to provide that the tax withheld from agents was the final tax and they were not required to furnish return of income for the tax year 2005 and onward---Said (amended) provision was also clarified vide CBR's Circular No. 7 of 2004, dated 1-7-2004---Tribunal, while misconstruing said provisions of law as well as circular, had concluded in the impugned order that the income of agents did not fall in the ambit of final tax for the year 2005 ---Tax deducted on payments on account of commission made by the principal to a Travel Agent @ 10% would be treated final discharge of tax liability for tax year 2005 and onward---Ordinance, 2001 used the term 'Advance Tax' for withholding tax because normally income tax was to be paid after the end of tax year accounting period but the withholding tax was deducted/collected during the tax year, hence, was in nature of tax paid in advance ---Judgment passed by the Appellate Tribunal was set-aside---Reference application was allowed.

Sarfraz Ahmad Cheema for Applicant.

Syed M. Raheel and Murtaza Naeem for Respondent.

2023 P T D 1410

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Jawad Hassan, JJ

The COMMISSIONER INLAND REVENUE, ZONE-III, LARGE TAXPAYERS, KARACHI

Versus

Messrs ADAM SUGAR MILLS LTD., KARACHI

Sales Tax Reference Application No.97 of 2013, heard on 12th April, 2023.

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

----S.38---Authorized officers to have access to premises, stocks, accounts and records---Scope---Section 38 of the Sales Tax Act, 1990, permits an officer authorized by the Federal Board of Revenue or the Commissioner Inland Revenue to have free access to business or manufacturing premises, registered office or any other place whereby any stocks, business records or documents required under this Act are kept or maintained belonging to any registered person; and such officer may, at any time, inspect the goods, stocks, records, data, documents, correspondence, accounts and statements, utility bills, bank statements, information regarding nature or sources of funds or assets with which his business is financed and any other records or documents and may take into custody such records, statements, diskettes, documents or any part thereof, in original or copies thereof in such form as the authorized officer may deem fit against a signed receipt---While taking cognizance under this provision, inter alia, the authorized officer must restrict himself to the record/documents that are in plain sight or voluntarily made available by the person present at the premises, for the purposes of inspection and taking into custody---This provision does not envisage any authority to compel the production of any record or document that is not presented voluntarily---Any record or document forcibly taken into custody must not be used adversely against the person from whose custody it was taken---Powers under this provision, by no stretch of imagination, can compromise the fundamental rights and constitutional guarantees embedded in the Constitution.

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

----Ss. 40 & 40A---Searches under warrant---Scope---Section 40A (since omitted) was to be applied only where an officer of sales tax not below the rank of an Assistant Collector has reasons to believe that any documents or things which, in his opinion, may be useful for, or relevant to, any proceedings under this Act are concealed or kept in any place and that there is a danger that they may be removed before a search can be effected under S. 40, he may, after preparing a statement in writing of the ground of his belief for which search is to be made, search or cause search to be made in his presence for such documents or things in that place.

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

----Ss. 38 & 40---Authorized officers to have access to premises, stocks, accounts and records---Searches under warrant---Scope---Failure to place any material before the Court to establish that there are sufficient reasons and grounds for by-passing normal course of action specified in S. 40 and non-satisfaction of pre-requisites mentioned in S. 40A renders the action taken under S. 38 unsustainable---Sections 40 & 40A are aimed as to curtail and monitor the unlimited and unbridled powers of the Sales Tax Authorities to avoid undue harassment to the taxpayers.

Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and Messrs Diplex Beauty Clinic and others 2007 PTD 2356 and Chairman, Central Board of Revenue and others v. Messrs Haq Cotton Mills (Pvt.) Ltd., Burewala 2007 SCMR 1039 = 2007 PTD 1387 ref.

Shahzad Ahmad Cheema, Legal Advisor for Applicant.

Abdus Salam Sajid for Respondent.

2023 P T D 1434

[Lahore High Court]

Before Shams Mehmood Mirza, J

ABDUL SABOOR

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 16567 of 2021 (and other connected petitions), decided on 2nd September, 2022.

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

----Ss. 192, 192A, 194 & 199---Anti-Money Laundering Act (VII of 2010), Ss. 2 (xviii), 3, 8, 9 & Schedule-I---Constitution of Pakistan, Arts. 12 & 199---Constitutional petition---Money laundering---Investigation---Predicate offence---Directorate of Intelligence and Investigation (I&I), Inland Revenue---Status---Petitioners were aggrieved of investigation of offence of money laundering by Directorate (I&I), Inland Revenue, during proceedings under Income Tax Ordinance, 2001---Validity---Conduct of investigation of an offence was an essential part and closely related to procedure---Authority which was subsequently added as investigating agency had no bar on its powers and authority to investigate cases in which the offense was committed in the past---Purpose of Anti-Money Laundering Act, 2010, was to prevent money laundering and to attach/confiscate properties generated from the proceeds of crime which had its genesis in the predicate offence---Commission of predicate offence was prerequisite for proceedings under Anti-Money Laundering Act, 2010, to commence before the Court---Proceeds of crime could only materialize once a predicate offence was committed---As Anti-Money Laundering Act, 2010, was a penal statute therefore, it could have no retrospective operation by virtue of Art. 12 of the Constitution---Any proceedings commenced under Anti-Money Laundering Act, 2010, could not sustain in respect of transaction which crystallized prior to the introduction of Ss. 192, 192A, 194 & 199 of Income Tax Ordinance, 2001, as predicate offences through amendment made in Schedule-I of Anti-Money Laundering Act, 2010---Punishment prescribed for the offence under Anti-Money Laundering Act, 2010, did not relate to the commission of predicate offence rather it was the offence of money laundering that had been made punishable---Date of commission of predicate offence was not material---Offence of money laundering that could be proceeded must be committed after Anti-Money Laundering Act, 2010, had come into force or inclusion of predicate offence in Schedule-I to Anti-Money Laundering Act, 2010---Question whether any person was in possession of any property derived from proceeds of crime was a question of fact ---High Court directed investigating officer to strictly adhere to law laid down by superior courts and declined to interfere in the process of investigation---Constitutional petition was dismissed in circumstances.

Col. Shah Sadiq v. Muhammad Ashiq and others 2006 SCMR 276; Ghulam Muhammad v. Secretary Housing and others 2018 CLC 176 and Ghulam Hussain Baloch and another v. National Accountability Bureau and others PLD 2007 Kar. 469 rel.

Mustafa Impex and others v. Federation of Pakistan PLD 2016 SC 808; F.M. Textile Mills and others v. Federal Board of Revenue and others 2017 PTD 1875; Nestle Pakistan Limited and another v. The Federation of Pakistan and others 2021 PTD 521; Assistant Director Intelligence and Investigation v. Messrs B.R. Herman PLD 1992 SC 485; A.M.Z. Spinning and Weaving Mills (Pvt.) Limited v. Federation of Pakistan 2009 PTD 1083; Commissioner Inland Revenue v. MCB Bank Limited 2021 SCMR 1325; Amanullah Khan v. The Federal Government of Pakistan PLD 1990 SC 1092; Abid Hassan v. PIAC 2005 SCMR 25; Sarhad Development Authority v. Syed Muhammad Latif 2015 SCMR 1061; Government of Baluchistan v. Azizullah Memon PLD 1993 SC 341; Election Commission of Pakistan v. Province of Punjab PLD 2014 SC 668; Mandi Hassan v. Muhammad Arif PLD 2015 SC 137; Secretary Housing and Physical Environmental Plannings v. Muhammad Ramzan 2018 SCMR 301; Muhammad Tariq Badr v. National Bank of Pakistan 2013 SCMR 314; Sheikh Fazal Ahmad v. Raja Ziaullah Khan PLD 1964 SC 494; Qazi Faez Isa v. The President of Pakistan PLD 2001 SC 1; Rafi Ullah v. The State 2019 PCr.LJ 1608; Pakistan Mental and Dental Council v. Muhammad Fahad Malik 2018 SCMR 1956; Chief Commissioner IR v. Messrs Giggy Food (Pvt.) Limited C.P. No. 1622-L of 2018; Pakistan Tobacco Co. Limited v. Karachi Municipal Corporation PLD 1967 SC 241; S. Zafar Ijaz v. Chairman Steel Mills Corporation 1998 PLC (C.S.) 777; Adamjee Insurance Company Limited v. Assistant Director, Economic Enquiry Wing 1989 PCr.LJ 1921; Ghulam Hussain Baloch and another v. National Accountability Bureau and others PLD 2007 Kar. 469 and Muhammad Idress and another v. The State and others 2021 SCMR 612 ref.

(b) Anti-Money Laundering Act (VII of 2010)---

----S. 9---Call-up notice---Ingredients---Call-up notice must at the bare minimum specify information regarding alleged commission of offence of money laundering and details of property which has allegedly been acquired from proceeds of crime or contravention of any provision of Anti-Money Laundering Act, 2010---Notice which does not fulfill such requirements cannot be termed as a valid notice under S.9 of Anti-Money Laundering Act, 2010.

Dr. Arsalan Iftikhar v. Malik Riaz Hussain and others PLD 2012 SC 903 and Assistant Director Intelligence and Investigation Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485 rel.

(c) Interpretation of statutes---

----Rules, framing of---Scope---Where Legislature intends that rules are required to be framed for a certain function under the statute to be performed or carried out, it makes provision for it by requiring it to be done through the prescribed manner.

(d) Anti-Money Laundering Act (VII of 2010)---

----Ss. 8 & 9---Inquiry and investigation---Non-framing of rules---Effect---Process for inquiry/investigation under Anti-Money Laundering Act, 2010 and Standard Operating Procedure is expansive and envisages rigorous and intrusive regime that does not warrant any further guidance to investigating officers through rules---Standard Operating Procedures are consistent with the provisions of Income Tax Ordinance, 2001 and Directorate (I&I) Inland Revenue can frame in-house rules for conducting investigation of offences of money laundering---Rules are neither necessary nor inevitable for carrying out functions of investigating and prosecuting agencies under Ss. 8 & 9 of Anti-Money Laundering Act, 2010---Non-framing of rules does not impair functions of investigating officer in any manner.

M.A.U. Khan v. Rana M. Sultan and another PLD 1974 SC 228; M.S. Khawaja v. The State PLD 1965 SC 287; Shahnaz Begum v. The Hon'ble Judges of the High Court of Sindh and Balochistan PLD 1971 SC 677 and Director, Central Bureau of Investigation v. Niyamavedi AIR 1995 SCW 2212 rel.

(e) Anti-Money Laundering Act (VII of 2010)---

----S. 21(2)---Criminal Procedure Code (V of 1898), Ss. 173 & 202---Term "complaint"---Scope---Term "complaint" mentioned in S. 21(2) of Anti-Money Laundering Act, 2010, is not the same complaint as contemplated by S. 202, Cr.P.C.---Such complaint is in the nature of report/challan to be filed by investigating/prosecuting agency in terms of S. 173, Cr.P.C. before appropriate Court.

Manzoor Ahmad Akhtar v. The Special Judge Central, Lahore another PLD 1995 Lah. 1; Rafi Ahmed and others v. Special Judge Central, Lahore and another PLD 2010 Lah. 692 and Said Bakhshad v. The State PLD 2020 Pesh. 129 rel.

(f) Interpretation of statutes---

----Harmonious construction---Scope---Rule of harmonious construction dictates that the provisions be construed such that as between two or more reasonable constructions of their terms which saves them should prevail---Statue must be read as a whole to ascertain meaning of its various provisions---Courts must interpret offending provisions in such a manner so as to give effect to each of them.

(g) Criminal Procedure Code (V of 1898)---

----S. 4(l)---Investigation---Scope---Investigation of cognizable offence or non-cognizable offence has reference to procedure which does not affect substantive rights of accused.

(h) Interpretation of statutes---

----Substantive and procedural law---Scope---Litigant has a vested right in substantive law but no such right exists in procedural law.

The Commissioner of Income Tax v. Asbestos Cement Industries Limited 1993 SCMR 1276 rel.

(i) Anti-Money Laundering Act (VII of 2010)---

----Ss. 8 & 9---Criminal Procedure Code (V of 1898), S. 5(2)---Investigative process---Scope---Investigative process prescribed by provisions of sections 8 and 9 of Anti-Money Laundering Act, 2010, are closely connected with attachment of property involved in the offence of money laundering---Procedure so provided is distinct and separate that bears no resemblance with the procedure envisaged by Criminal Procedure Code, 1898.

(j) Criminal Procedure Code (V of 1898)---

----S. 154---First Information Report---Object, purpose and scope---Principal objective of F.I.R. is to set the law in motion for initiation of investigation by police officer for the purpose of collecting evidence relating to crime.

Muhammad Bashir v. Station House Officer Okara Cantt. and others PLD 2007 SC 539 rel.

(k) Anti-Money Laundering Act (VII of 2010)---

----S.9---First Information Report, registration of---Scope---Investigating officer is empowered to register FIR against accused person under Anti-Money Laundering Act, 2010---Inquiry/investigation can be carried out after registration of FIR under Anti-Money Laundering Act, 2010, when the person to whom notice under S. 9 of Anti-Money Laundering Act, 2010, has been issued is not forthcoming in providing information to investigating officer.

(l) Interpretation of statutes---

----Retrospective effect---Scope---There is no prohibition on the Parliament to make retrospective legislation, particularly when such intention is expressly or impliedly clear from the text of the statute.

(m) Anti-Money Laundering Act (VII of 2010)---

----S. 3, Explanation-II---Predicate offence, commission of---Scope---Mere allegation of commission of predicate offence suffices for registration of FIR and initiation of inquiry/investigation under Anti-Money Laundering Act, 2010.

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

----Ss. 192, 192A, 194 & 199---Anti-Money Laundering Act (VII of 2010), Ss. 3, 8, 9 & Sched.-I---Compounding of offence---Principle---Predicate offences mentioned in Schedule-I of Anti-Money Laundering Act, 2010, in relation to Income Tax Ordinance, 2001, are all compoundable---In case an accused compounds predicate offence, the trial of offence of money laundering continues and is decided on its own merits---It is not necessary for both the trials to be held simultaneously.

(o) Anti-Money Laundering Act (VII of 2010)---

----S.9(5)---Attachment of property---Duration---Attachment of property, under S. 9(5) of Anti-Money Laundering Act, 2010, ceases to have effect if on conclusion of trial of both the offences of money laundering and predicate offence the person concerned is acquitted.

Petitioners By:

Imtiaz Rashid Siddiqui, Barrister Sheheryar Kasuri, Raza Imtiaz Siddiqui, Jamshaid Alam, Sabeel Tariq Mann, Qadeer Ahmad Kalyar and Muhammad Hamza Sheikh (in W.Ps. Nos.16567, 27072, 67652 and 28111 of 2021)

Barrister Muhammad Umer Riaz, Saqib Haroon Chishti, Haroon Rashid Mir, Waqas Umer and Rana Rehan (in W.Ps. Nos. 56349, 67310, 56280, 60213 of 2021 and 3646 of 2022).

Ashtar Ausaf Ali, Barrister Asad Rahim Khan, Ms. Nimra Arshad and Khalil Ahmed Bhulla (in W.Ps. Nos.24755 and 24757 of 2021).

Mohammad Shoaib Rashid, Waleed Khalid and Faizan Daud (in W.Ps. Nos. 21462 of 2022, 80285 of 2021 and 363 of 2022).

Muhammad Ajmal Khan, Mian Ejaz Latif and Malik Farhan Babar (in W.Ps. Nos. 48665, 18942, 38830, 48846 of 2021, 12661, 3678, 3189, 12657, 3675, 12660 and 12662 of 2022).

Muhammad Mohsin Virk, Tahir Shabbir, Nasir Khan, Malik Farhan and Muhammad Fezan Saleem (in W.Ps. Nos. 37934, 39048, 39045, 39058, 42302, 49013, 45025, 67756 and 74919 of 2021).

Syed Tassadaq Murtaza Naqvi and Syed Tassadaq Mustafa Naqvi (in W.P. No.74306 of 2021).

Shahbaz Butt, Khurram Shahbaz Butt, Muhammad Ahsan Mahmood Butt, Asad Abbas Raza, Muhammad Usman Zia, Muhammad Ibraheem Hassan, Mudassir Aftab, Muhammad Yaqoob, Muhammad Danish Zuberi and Aqeel Jffar (in W.Ps. Nos. 12031, 34504, 35964, 35967, 35977, 35989, 36873, 36889, 36883, 36900, 42551, 46861, 47618, 48978, 52337, 55404, 27704, 29710, 29716, 39236, 39243, 39249, 39253, 45551, 57164, 52333, 58076, 44232, 59967, 60012, 65189, 63615, 70197 of 2021 and 50 of 2022).

Ch. Muhammad Arfan Faiz Kalaar, Ch. Rizwan Kashif and Ch. Adnan Faiz Kalaar (in W.P. No.25509 of 2022).

Muhammad Mansha Sukhera, M. Muqadam Sukhera and Malik Muhammad Ali Awan (in W.Ps. Nos.9830, 9839, 29000, 29005, 29011 and 30179 of 2022).

Hashim Aslam Butt, M. Hafeez Uppal, Syed Saqlain Hussain, Asad Tariq and Ahmad Yar Khan (in W.P. No.28990 of 2022).

Touqeer Ahmad Ranjha, Shahzaib Chattha and Ali Ijaz Shah (in W.Ps. Nos.4624, 4626, 12486, 15993 and 16001 of 2022).

Riaz Ahmed Ch. (in W.P. No. 71322 of 2021).

Mukhtar Ahmad Awan (in W.P. No.26299 of 2022).

Ghulam Ahmed Ansari (in W.P. No.35694 of 2021).

Mian Muhammad Naseer and Zunaira Pattrick (in W.P. No. 39503 of 2021).

Mian Danish Quddous (in W.P. No. 363, 21462 of 2022 and 80285 of 2021).

S.M. Raheel, Qamar ul Haq Bhatti, Muhammad Imran ul Haq Bhatti and Murtaza Naeem (in W.Ps. Nos. 36488 and 78377 of 2021).

Farhan Shahzad, Zohaib Ali Sidhu, Syed Ali Tarab and Ghulam Ahmed Ansari (in W.Ps. Nos. 57350, 56291, 57342, 76686, 76689, 71303, 76711, 72157, 72160 of 2021 and 6284 of 2022).

Mian Shakeel Ahmad (in W.P. No. 81801 of 2021).

Riaz Ahmed Khan (in W.P. No. 54711 of 2021).

Syed Abid Raza Kazmi (in W.Ps. Nos. 61531 and 61524 of 2021).

Rana Rehan (in W.P. No. 60213 of 2021).

Muhammad Zikria Sheikh, Ch. Amanat Ali and Rai Shaban Ali Kharal (in W.P. No. 80410 of 2021).

Hafeez ur Rehman Ch., Malik Asif Iqbal, Noor Dad Chaudhary and Ms. Roha Khan (in W.Ps. Nos. 30005, 30008 and 21623 of 2021).

Muhammad Naeem Shah (in W.Ps. Nos. 49933 and 50183 of 2021).

Muhammad Naeem Munawar (in W.Ps. Nos. 5087, 34780 and 34695 of 2022).

Muhammad Nasir Khan (in W.P. No.71354 of 2021).

Asif Shahdat, Ahmad Hassan, Rana M. Khurram Rafique and Rana M. Umer Rafique (in W.Ps. Nos.29771 and 71399 of 2021).

Muhammad Akram Sheikh (in W.Ps. Nos.79268, 37382 of 2021 and 15377 of 2022).

Aftab Ahmed Bajwa (in W.P. No.42491 of 2021).

Shahnawaz (in W.P. No. 54858 of 2021).

Tanveer Ahmed and Sh. Zafar ul Haq (in W.Ps. Nos. 68138, 68534, 71353, 71354 and 71355 of 2021).

Muhammad Ayub Sheikh (in W.P. No. 50533 of 2021).

Syed Imtiaz Hussain (in W.P. No.72160 of 2021).

Muhammad Ashfaq Mughal (in W.P. No.36529 of 2022).

Shahzad Hassan Sheikh (in W.Ps. Nos. 23432 and 23428 of 2021).

Shakeel Ahmad Basra, Ijaz Rehmat Basra and Mirza Mubashir Baig (in W.P. No. 30611 of 2022).

Mudassar Shuja ud Din, Behwal Asad Rasul, Touseef Arshad and Shahid Pervez Jami(in W.Ps. Nos. 26906, 77267, 77978, 77986, 77239, 76158, 78051, 78231, 81539, 78010, 75273, 81529, 31599 and 61491 of 2021).

Rana Usman Habib Khan, Noreen Fouzia and Haseeb Arif (in W.Ps. Nos. 48846 of 2021 and 3189 of 2022).

Muhammad Ijaz Ali Bhatti (in W.P. No.42983 of 2021).

Waseem Ahmed Malik (in W.Ps. Nos.30790 and 75214 of 2021).

Muhammad Imran Rasheed (in W.Ps. Nos. 74742, 71849 and 71877 of 2021).

Imran Muhammad Sarwar (in W.Ps. Nos.77284 and 77186 of 2021).

Mustafa Kamal (in W.Ps. Nos. 1253 of 2021 and 25389 of 2022).

Haris Tanveer Rana and Mian Tabassum Ali (in W.P. No.3 of 2022).

Mian Shakeel Ahmad (in W.P. No. 81808 of 2021).

Mahar Saghir Ahmad (in W.Ps. Nos.29011 and 29000 of 2022).

Sh. Muhammad Akram (in W.Ps. Nos. 74742, 37382, 71877, 79268 and 71849 of 2021).

Omer Wahab and Muhammad Ahsan Nawaz Sial (in W.P. No. 38830 of 2021).

Tanveer Ahmad, Shahid Rafiq Mayo and Ms. Nasreen Naseer-ud-Din (in W.Ps. Nos. 63138, 68534, 71355, 71354 and 71353 of 2021).

Barrister Osama Zafar (in W.P. No.71654 of 2021).

Zafar Iqbal Mian (in W.Ps. Nos. 76889, 76884 of 2021, 17981, 21673, 26529, 30166 and 37408 of 2022).

Mian Muhammad Arshad (in W.P. Nos.48194 of 2021).

Syed Muhammad Ghazanfar (in W.P. No. 50533 of 2021).

Ghulam Hussain Awan and Ch. Zeeshan ur Rehman (in W.P. No. 44548 of 2021).

Barrister Danyal Ijaz Chadhar (in W.P. No.80680 of 2021).

Shehzad Hassan Sheikh (in W.Ps. Nos.23432 and 23428 of 2021).

Usman Khalil, Ali Ijaz Shah, Tuqeer Ahmad Ranjha and Shahzaib ul Hassan Chattha (in W.Ps. Nos.4624, 4626, 12486, 15993 and 16001 of 2022).

Ch. Qamar uz Zaman, Muhammad Waqar Akram, Muhammad Khalid, Rai Inam Qadir, Arif Munir and Ms. Zeba Munir (in W.P. No.39064 of 2021).

Mian Muhammad Naseem (in W.P.No.39503 of 2021).

Muhammad Amir Latif Sehr Bhutta (in W.P. No.38746 of 2021).

Muhammad Naseem Munawar (in W.P. No.5087 of 2022).

Farrukh Ilyas Cheema (in W.P. No.76686 of 2021).

Ch. Anwaar ul Haq Arif (in W.P. No.59858 of 2021).

Zahid Ateeq Choudhry, M. Ehsan Awan and Rashid Khan (in W.P. No.22738 of 2021).

Fahad Azhar Butt (in W.Ps. Nos.35710, 23666 and 23584 of 2022).

Ikram-ul-Haq Sheikh (in W.P. No.31668 of 2022).

Respondents By:

For Federation

Azmat Hayat Khan Lodhi, Assistant Attorney General for Pakistan (in all cases).

For FBR

Sarfraz Ahmed Cheema (in W.Ps. Nos. 65189, 22738, 37934, 27072, 23432, 28111, 24755, 24757, 60219, 61524, 29716, 29710, 67756, 71322, 76711, 76686, 80680, 80285, 77186, 63615, 67652, 81808, 77284, 69545, 74919, 38830, of 2021 and 363, 3189, 1406, 4624, 3646, 4626, 6284, 12031, 12486, 15993, 16001, 19916, 19910, 19913, 19906, 21462, 29011, 23666, 23584 and 26299 of 2022).

Khawar Ikram Bhatti (in W.Ps. Nos. 29771, 31599, 38746, 26906, 60012, 59967, 78377, 81539 and 70197 of 2021).

Riaz Begum and Muhammad Waseem Malik (in W.Ps. Nos. 61491, 71354, 71353, 71355, 71399, 75214, 77978, 77986, 78010, 50533, 52333, 39058, 39045, 39064, 61531, 44548, 60213, 80410 of 2021 1253, 9830, 9839, 12661, 15377, 12660, 26529, 37408, 48194 and 3678 of 2022).

Zain ul Abideen Bukhari (in W.Ps. Nos.27704, 77267, 78231, 81529, 42302, 42983, 48846, 48978, 56291, 68138, 68534, 27072 of 2021, 3675, 16507, 17981, 21673, 25509, 34695, 34780 and 25389 of 2022).

Adeel Shahid Karim (in W.Ps. Nos.36873, 34504, 35989, 36889 and 36883 of 2021).

Mrs. Amina Parveen (in W.Ps. Nos. 21623, 30005, 39243, 39236, 30008, 39249, 39253, 55404 and 67310 of 2021).

Malik Abdullah Raza (in W.Ps. Nos.35964, 35967, 35977, 36900 of 2021 and 3646 of 2022).

Yahya Johar (in W.Ps. Nos. 74306, 76158, 76889, 78051, 30179, 37382, 39503, 54858, 60206, 71849, 71877, 75273 and 76884 of 2021).

Ch. Muhammad Imtiaz Elahi (in W.Ps. Nos. 30790, 61521, 60213, 39045, 39058, 39064, 44548, 50533, 52333 and 48194 of 2021).

Ahmed Pervaiz and Scheherezade Shaharyar (in Instant petition and in W.Ps. Nos. 18942, 79269, 16567, 79268 of 2021 and 74742, 35710, 39982 and 3 of 2022).

Sohail Zahid Butt (in W.P. No.30166 of 2022).

Faran Ahmad Cheema (in W.Ps. Nos.76686, 80680, 80285 and 77186 of 2021).

Izhar ul Haque for Respondents Nos.2 to 4 (in W.P. No.42491 of 2021 and 31688 of 2022).

Ch. Muhammad Ashfaq Bhullar (in W.Ps. Nos.50337, 50183, 46861 and 49933 of 2021).

Ms. Shagufta Ijaz (in W.Ps. Nos. 44232 and 47618 of 2021).

Aamir Riaz Minhas, Sardar M S Tahir, M. Yasir Khan and Zafar Iqbal Bhatti (in W.Ps. Nos.76689, 48665, 49013, 61491,16567 and 42302 of 2021).

Ch. Muhammad Zafar Iqbal, Mohsin Ali and M. Wasaf Masood (in W.Ps. Nos. 48665, 49013, 76689, 71303, 72157, 72160 of 2021, 5087, 12657, 29000, 29005, 28990, 30166 and 12262 of 2022).

Anas Sheikh (in W.Ps. Nos.23428 of 2021 and 34700 of 2022).

Abu Bakr Shahzad (in W.Ps. Nos. 37011 and 54401 of 2021).

Ch. Umar Imran Mayo for Respondents Nos.3 and 4 (in W.Ps. Nos.56280 and 56349 of 2021).

Mian Faisal Naseer (in W.P. No.29716 of 2021).

Ch. Imran Masood for Respondents Nos.3 and 4 (in W.Ps. Nos.56280, 56349 of 2021 and 6039 of 2022).

Usman Azam Gondal (in W.P. No.29710 of 2021).

Ms. Nadia Bashir Chaudhary, Legal Advisor on behalf of Director Intelligence (in W.Ps. Nos. 45025, 42551, 77239, 36488 and 50 of 2022).

Representatives of FBR in all cases

Dr. Khalid Malik, Director and Dr. Tanvir Hussain Bhatti Additional Director, (I&I) Islamabad.

Ms. Sarkhshan Khalid, Deputy Director (I&I) Faisalabad.

Abid Rasool, Additional Director (I&I) Multan.

Muhammad Irfan, Additional Director (I&I) Lahore.

For Customs Department

Huma Shahid Butter (in W.P. No 74742 of 2021).

2023 P T D 1528

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, REGIONAL TAX OFFICE, FAISALABAD

Versus

Messrs AHMAD STRAW BOARD PRIVATE LIMITED, FAISALABAD

S.T.R. No.155 of 2015, heard on 21st September, 2022.

Sales Tax Act (VII of 1990)---

----Ss. 11, 36 & 47---Reference---Wrong provision of law---Effect---Show-cause notice was set aside by Customs Appellate Tribunal for mentioning of S.11(3) instead of S.36 of Sales Tax Act, 1990---Validity---Merely because show-cause notices were labelled under S.11(3) instead of S.36 of Sales Tax Act, 1990, was not such a defect or vagueness to undergo test of judicial scrutiny---Such omission did not cause any prejudice to respondent-taxpayers and the same could not be declared invalid under the law---Main issues raised by parties were not decided by Customs Appellate Tribunal, therefore, High Court in reference jurisdiction was deprived of the views of the Tribunal, as Reference Application was to be decided on the basis of facts determined by Appellate Tribunal---High Court set aside order in question and matter was remanded to Customs Appellate Tribunal for decision afresh after providing opportunity of being heard to both the parties---Reference was allowed accordingly.

Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others 2008 SCMR 615; Commissioner of Income Tax, Karachi v. Abdul Ghani 2007 PTD 967 and Commissioner of Income Tax, Peshawar v. Messrs Islamic Investment Bank Ltd. 2016 SCMR 816 rel.

Ms. Saba Saeed Sheikh, Legal Advisor for Applicant.

Abuzar Hussain for Respondent.

2023 P T D 1564

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Jawad Hassan, JJ

The COLLECTOR OF CUSTOMS, DRY PORT, LAHORE

Versus

BILAL AKBAR and others

I.C.A. No.1197 of 2021, heard on 5th April, 2023.

Customs Act (IV of 1969)---

----S.19---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Import Policy Order, 2016, Para. 5---Powers to prohibit or restrict imports and exports---General power to exempt from customs duty---Scope---Respondent imported a vintage car and, pursuant to SRO 833(I)/2018 dated 03-07-2018, sought exemption from customs, regulatory and excise duties, as well as sales tax and withholding income tax---However, the department declined to release the vehicle on the ground that cars older than three years could not be imported---Single Judge of the High Court accepted the respondent's constitutional petition through the impugned order---Validity---SRO 833(I)/2018 dated 03-07-2018 had been issued by the Ministry of Finance, Economic Affairs, Statistics and Revenue, whereas the Ministry of Commerce had exclusive jurisdiction to regulate the import of vehicles under the Import Policy Order, 2016---SRO 833(I)/2018 dated 03-07-2018 had only exempted taxes and duties on vintage cars---Main barrier to the import of vintage cars was that they could only be allowed when the Federal Government, through the Ministry of Commerce (the Regulatory Authority), relaxed the prohibition on importing vintage cars---SRO 833(I)/2018 dated 03-07-2018 had not provided for the importability of vintage cars---Appeal was allowed.

Federal Board of Revenue and others v. Kh. Saad Saleem and another 2014 PTD 1531 ref.

2020 PTD 660 and 2021 PTD 407 not foll.

Waqar A. Sheikh and Rana Mehtab for Appellant.

Ali Sibtain Fazli, Abad-ur-Rehman and Hasham Ahmad Khan for Respondent No.1.

2023 P T D 1667

[Lahore High Court]

Before Shahid Jamil Khan, J

DAWAT SARAYE

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.67081 of 2022, decided on 10th July, 2023.

Sales Tax Act (VII of 1990)---

----Ss. 14(1), 14(2),13(2), 3(1A), 3(5), Sixth Sched., Serial No. 53, Table 2---Registration number, not obtained---Exempted supplies---Further tax and extra tax was charged from the petitioner in the electricity bill for "not obtaining registration number" as well as "not being active taxpayer"---Petitioner invoked constitutional jurisdiction of the High Court against imposition of further and extra taxes by the Commissioner contending that for providing exempt supplies, he was not required to be registered, hence he was not on active taxpayer list, thus impugned levies (further tax and extra tax) were against the spirit of relevant law---Validity---Section 14 of the Sales Tax Act, 1990 ('the Act, 1990'), deals with registration and requires every person, engaged in making taxable supplies in Pakistan including zero rated supplies to register himself if he falls within the categories noted in subsection (1) as (a) to (f)---Section 14(2) of the Act, 1990 envisages an option for a person who is not engaged in making taxable supplies in Pakistan by stipulating (words/phrases in the S. 14(2) as ) "if required to be registered "and "may apply for registration"---Tenor of the provision of S. 14 does not compel one to read 'may' as ' shall'---Using the word 'may' is an option with the person not engaged in making taxable supplies, if he intends to import or export---However, if any other provision of the Act 1990 or any other federal law requires registration, the Commissioner can ask him to register even if he is making exempt supplies---Interpretation of the respondent / Department of reading 'may' as 'shall' is fallacious in absence of a determination that such taxpayer is required to be registered under any other provision or federal Law---However, on a notice for registration required under another provision or law, if the person making exempt supplies does not comply, the Commissioner may pass an order for imposition of further or extra tax---Section 3(1A) of the Act, 1990 envisages that the tax is leviable where taxable supplies are made to a person who has not obtained registration number or is not on active taxpayer list---Condition of taxable supply being electricity is though fulfilled, but the petitioner being recipient of supply is not required to be registered compulsorily---Phrase " who has not obtained registration number" implies that a person, required to be registered under S. 14(1) of the Act 1990 or any other provision or law has not obtained registration, shall be burdened with further tax---High Court was not in agreement with the interpretation of the Commissioner that a person falling under S. 14(2) of the Act, 1990 would also be caught by the phrase "not obtained registration", for not opting for registration and only way to avoid it is to get registration---Respondent / Commissioner in the impugned order has himself admitted that petitioner falls under S.14(2) of the Act, 1990---It is not established through an order, after issuing notice for registration, that petitioner is required to be registered under any other provision of the Act, 1990 or Federal Law---High Court declared imposition of further and extra taxes as illegal---Constitutional petition was allowed, in circumstances.

Qamar-uz-Zaman Cheema and Mehr Ahsan for Petitioner.

Syed Sajjad Haider Rizvi, Assistant Attorney General for Federation.

Abdul Muqtadir Khan, Legal Advisor for Respondents.

2023 P T D 1687

[Lahore High Court]

Before Abid Aziz Sheikh and Raheel Kamran, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs MEHRAN BUSINESS INTERNATIONAL (PVT.) LTD.

Sales Tax Reference No.53 of 2017, heard on 31st May, 2023.

Sales Tax Act (VII of 1990)---

----S. 57 [as substituted by Finance Act (XXII of 2013)]---Rectificational jurisdiction---Nature and scope---Review---Scope---Correction of clerical errors---Mistake---Conditions---Expression "apparent on the face of record"---Scope---By allowing the application for rectification filed by the tax-payer, Appellate Tribunal Inland Revenue ('Tribunal') reversed its order and accepted the appeal preferred by the tax-payer---Applicant /Department filed reference before the High Court contending that the Tribunal unlawfully assumed jurisdiction of review in the garb of rectification which was confined to correction of any clerical or arithmetical error apparent on the face of record whereas review entailed re-consideration of the matter on discovery of new facts or patent error of law occurring in the order or judgment sought to be reviewed---Validity---While exploring the nature and scope of jurisdiction qua rectification under S. 57 of the Sales Act, 1990 ('the Act, 1990'), it would be advantageous to mention that the said section was substituted by the Finance Act, 2013 ; so the comparison of the text of provisions of S. 57 of the Act, 1990 prior and after its substitution by the Finance Act, 2013, envisaged that the scope of rectification, which was previously confined to correction of clerical or arithmetical errors in any assessment, adjudication, order or decision, had been enlarged to rectify any mistake in the order which was apparent from the record---However, the essential condition for the exercise of such power was that such mistake should be apparent from the record i.e. the mistake which might be seen floating on the surface and did not require investigation or further evidence---Any mistake in the order which was not patent and obvious from the record , could not be termed to be rectifiable---Although the power of the rectification visualized under S.57 of Sales Tax, 1990, might not cover a full-fledged review of an order on discovery of new evidence or fresh legal ground becoming available after the decision sought to be corrected---However, the failure to adjudicate upon a substantial plea taken or controversy raised, when materially affects outcome of the case, it does constitute a mistake apparent from the record which is rectifiable under S.57 of the Sales Act, 1990, subject to satisfaction of other conditions and limitations specified therein---Mistake is not rectifiable when the decision sought to be rectified is already assailed in appeal or Tax Reference which merged into the final decision of that higher forum ---In the present case, relevant paragraph of the impugned order, revealed that the respondent raised a categorical plea that 10% unadjusted input tax was available for adjustment in the very next tax period which, being a substantial right of the taxpayer, could not be denied---This being a substantial plea, materially affecting outcome of the case i.e. determination of tax liability of the respondent, was required to be adjudicated upon and failure to do so by the Tribunal constituted a mistake obvious and apparent from the record, thus was rectifiable, which prompted the respondent to file an application for rectification under S.57 of the Sales Act, 1990---Tribunal had allowed said application of rectification while recording valid reasons---Applicant /Department could not point out any illegality or infirmity in the impugned order passed by the Tribunal---Reference filed by the Department was dismissed, in circumstances.

Commissioner Inland Revenue v. Messrs Lahore Rubber Store 2023 PTD 182 and Commissioner Inland Revenue, Multan v. Messrs Hafeez Ghee and General Mills (Pvt.) Ltd. Multan 2020 PTD 2025 ref.

Sultan Mahmood and Shahzad Ahmed Cheema for Applicant.

Sumair Saeed Ahmed for Respondent.

2023 P T D 1704

[Lahore High Court]

Before Muzamil Akhtar Shabir and Jawad Hassan, JJ

SAMMAN GHEE MILLS (PVT.) LTD.

Versus

FEDERAL BOARD OF REVENUE and others

I.C.A. No.67776 of 2021, decided on 1st November, 2021.

Income Tax Ordinance (XLIX of 2001)---

----S. 177---Audit---Collective audit of several years---Scope---Petitioner assailed the notices issued by department whereby it was selected for income tax audit for the years 2016, 2018, 2019 and 2020---Contention of petitioner was that a taxpayer once selected for audit for a particular tax year could not be selected again without giving reasonable cause and that the audit selection in terms of S. 177 of the four years was arbitrary, illegal and unlawful based on guess work---Validity---Appellant was selected under S. 177(1) and reasons for its selection for audit were duly and briefly mentioned therein---Powers of Commissioner qua issuance of impugned notices were not ambiguous in any manner rather were in the letter of the law---There was nothing in S. 177 that could bar the Commissioner to issue impugned notices and conduct audit for one or more periods which come within the period of six years---Appeal was dismissed.

Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484; Indus Motor Company Limited through Authorized Officer and others v. Federation of Pakistan through Secretary Finance and others 2020 PTD 297; Defence Housing Authority v. Commissioner Inland Revenue and others 2015 PTD 2538 and The Federal Board of Revenue and others v. Messrs Chenone Stores Ltd. 2018 PTD 208 ref.

Muhammad Asif for Appellant.

Barrister Zargham Lukhesar, Assistant Advocate General.

Sheikh Nadeem Anwar, Assistant Attorney General.

2023 P T D 1791

[Lahore High Court]

Before Raheel Kamran, J

Messrs ABDULLAH SUGAR MILLS LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 42272 of 2023, decided on 21st June, 2023.

Sales Tax Act (VII of 1990)---

----Ss. 2(9), 3(1), 6(2), 7(1), 11(1), 26(1), 34(1)(a) & 33(5)---Sales Tax Rules, 2006, R. 18(9)---Show-cause notice---Petitioner / taxpayer was aggrieved of show-cause notice issued under S.11(1) of Sales Tax Act, 1990, for violating the provisions of Ss. 2 (9), 3(1), 6 (2), 7 (1), 26 (1) of Sales Tax Act, 1990 read with R.18(9) of Sales Tax Rules, 2006, for non-payment of liability of and non-filing of sales tax returns---Plea raised by petitioner / taxpayer was that its case fell within the purview of S.11(6) and outside the scope of S. 11(1) of Sales Tax Act, 1990---Validity---Provision of S.11(1) of Sales Tax Act, 1990, could be invoked only against a person required to file a return under Sales Tax Act, 1990 i.e. registered person and the same did not visualize proceedings against those who were liable to be registered but not registered---Upon registration of a person, provision of S. 11(1) of Sales Tax Act, 1990, had become invocable against even for such period of default during which the person was liable to be registered and had furnished return under Sales Tax Act, 1990---In the absence of any apparent inconsistency or patent conflict within the provisions of subsection (1) and (6) of S. 11 of Sales Tax Act, 1990, plea of the petitioner regarding non-obstante nature of S. 11(6) of Sales Tax Act, 1990 was of little help to assail show cause notice under S.11(1) of Sales Tax Act, 1990---Constitutional petition was dismissed in circumstances.

Commissioner Inland Revenues Gujranwala v. S.K. Steel Casting, Gujranwala 2019 PTD 1493 ref.

Muhammad Mohsin Ghuman and others v. Government of Punjab through Home Secretary, Lahore and others 2013 SCMR 85 rel.

Abad ur Rehman for Petitioner.

Muhammad Mansoor Ali Sial, Assistant Attorney General for Pakistan.

2023 P T D 1831

[Lahore High Court (Rawalpindi Bench)]

Before Jawad Hassan and Anwaar Hussain, JJ

COMMISSIONER INCOME TAX

Versus

ABDUL QADEER

I.T.R. No.81 of 2012, decided on 29th November, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 130, 133 & 237---Appellate Tribunal Inland Revenue---Coram non-judice---Validity---Impugned order had been passed by the Chairman in clear violation of S. 130(2) of the Income Tax Ordinance, 2001, ('the Ordinance, 2001'), which stipulated that the Appellate Tribunal Inland Revenue ('Tribunal') would consist of a Chairman and such other Judicial and Accountant Members who would be appointed in such numbers and in such manners as the Prime Minister might prescribe by Rules, which might be made and would take effect notwithstanding anything contained in S. 237 of the Ordinance, 2001, or any other law or rules for the time being in force---High Court remanded the matter to the Tribunal for decision afresh---Reference was allowed, in circumstances.

Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024; Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed 2017 SCMR 152 and Messrs Quick Contractor and Traders and others v. Federation of Pakistan and others 2022 PTD 1302 ref.

Malik Itaat Hussain Awan for Applicant.

2023 P T D 56

[Peshawar High Court]

Before Shakeel Ahmad and Fazal Subhan, JJ

KHYBER PAKHTUNKHWA, REVENUE AUTHORITY (KPRA) through Director General, Peshawar

Versus

Messrs LEGACY PHARMACEUTICAL (PVT.) LIMITED, PESHAWAR

Sales Tax Reference No.58-P of 2022, decided on 28th October, 2022.

(a) Interpretation of statutes---

----Amending Act---Retrospective effect---Principle---Where Legislature has made its intention clear that amending Act should have a retrospective effect / operation, it must be so construed, even though consequence may entail hardship to a party.

The State v. Maulvi Muhammad Jamil and others PLD 1965 SC 681 and Dr. Azam Sarfraz v. Government of Pakistan through Secretary Establishment Division Islamabad and others 2005 SCMR 1785 and 590 rel.

(b) Interpretation of statutes---

----Fiscal statute---Amendment---Effect---Amendment in fiscal statute has always prospective effect unless retrospective effect is given to it by the Legislature.

(c) Khyber Pakhtunkhwa Finance Act (XXI of 2013)---

----S.86(2)---Limitation Act (IX of 1908), S.5---Sales Tax on services---Reference to High Court---Limitation---Condonation of delay---Sales Tax Reference was filed beyond stipulated period of sixty days---Order in question was passed on 12-04-2022, certified copy was issued to authorities on 15-04-2022, whereas Reference application was filed on 07-07-2022---Effect---Sales Tax Reference was barred by 24 days---Object of law of limitation was to help the vigilant and not the indolent---Law of limitation was required to be construed strictly---Each day of delay was to be explained by the party concerned---Government department could not be treated differently than private individual on the question of limitation---Authorities failed to offer any plausible explanation for condonation of delay in their application---Negligence to file Sales Tax Reference must have its reward to punish the indolent---High Court declined to condone the delay in filing of Sales Tax Reference---Reference was dismissed, in circumstances.

Province of Punjab and others v. Ghulam Shabbir 2004 YLR 10; Military Estate Officer and another v. Syed Qamoos Shah and 20 others PLD 2004 Pesh. 40 and Muhammad Afzal v. Executive Engineer and another 2009 MLD 82 rel.

Rahman Ullah for Appellant.

Nemo for Respondent.

2023 P T D 488

[Peshawar High Court]

Before Syed Arshad Ali and Dr. Khurshid Iqbal, JJ

Messrs NAFEES PLASTIC INDUSTRIES, BARA

Versus

The CHIEF COMMISSIONER INLAND REVENUE, PESHAWAR and 9 others

Writ Petition No.2694-P of 2022, decided on 5th August, 2022.

Sales Tax Act (VII of 1990)---

----Sixth Schedule, Entry No. 151---Notification Letter C.No.2(2)L&P/2016, dated 31-08-2021---Port of clearance---Determination---Petitioner company was aggrieved of denial of authorities to clear goods imported by petitioner at Karachi Port---Plea raised by petitioner company was that total import for financial year was less than Rs.200 million and authorities were not allowing it to clear imported consignment at Karachi Port---Validity---Goods imported by petitioner company were destined for its home consumption at manufacturing unit situated at Federally Administered Tribal Area---Clear data was not readily available---Authorities could redress grievance of petitioner company if its import fell within the concession provided by Federal Board of Revenue through notification Letter C.No.2(2)L&P/2016, dated 31-08-2021---High Court directed petitioner company to approach relevant authorities at Karachi for doing the needful for release of consignment in terms of letter dated notification Letter C.No.2(2)L&P/2016, dated 31-08-2021---Constitutional petition was disposed of accordingly.

Pakistan v. Hazrat Hussain 2018 SC 939 = 2018 PTD 1204 ref.

Abdul Rauf Rohaila for Petitioner.

Qazi Babar Irshad, DAG for Federation.

Mukhtar Ahmad Maneri along with Arshad Hilali Law Officer and Sharifullah A.D. (Legal).

2023 P T D 556

[Peshawar High Court (Mingora Bench)]

Before Muhammad Naeem Anwar and Dr. Khurshid Iqbal, JJ

Messrs SOHAIL STEEL GL SHEET COMPANY through Proprietor

Versus

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

Writ Petition No.258-M of 2022, decided on 15th November, 2022.

Income Tax Ordinance (XLIX of 2001)---

----Ss.148 & 159---Sales Tax Act (VII of 1990), Second Schedule, Part-I, Cl.146 & Sixth Schedule, Entry 151---Sales tax at import stage---Exemption from income tax---Petitioners were running their manufacturing units in erstwhile Provincially Administered Tribal Areas, who sought tax exemption over raw material imported by them---Validity---Clause No. 146 of Second Scheduled Part-I of Sales Tax Act, 1990 was no more on the part of statue as the same was omitted by Finance Act, 2021---Provision of S.148 of Income Tax Ordinance, 2001 was omitted by Finance Act, 2020---Entry No. 151 of Sixth Schedule of Sales Tax Act, 1990 was inserted which dealt with sales tax at import stage---For seeking exemption from payment of income tax, the petitioners were to seek exemption under S.159 of Income Tax Ordinance, 2001---High court declined to interfere in the matter---Constitutional petition was dismissed, in circumstances.

Messrs Hadi Khan Silk Mills and others v. Government of Pakistan through Secretary Finance and others 2021 PTD 1842 rel.

Nemo for Petitioner.

Said Jamil, Assistant Attorney General and Razauddin Khan, Additional Advocate General for Official Respondents.

Ishtiaq Ahmad (Junior) for Respondents Nos.2, 3 and 4.

2023 P T D 750

[Peshawar High Court]

Before Abdul Shakoor and Syed Arshad Ali, JJ

COLLECTOR CUSTOMS MCC, PESHAWAR

Versus

PAINDA NOOR and another

Customs Reference No.12-P of 2022, decided on 31st March, 2022.

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

----Ss.2(s), 16, 18, 79, 178 & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3(3) &(10)---Notification SRO No.499(I)/2009, dated 13-06-2009, Clause (b)---Reference---Vehicle used in smuggling---Confiscation---Barring clause---Confiscation of vehicle by authorities on the plea that it had been used in smuggling---Validity---In order to attract baring clause i.e. clause "b" of Notification SRO No.499(I)/2009, dated 13-06-2009, authorities had to establish that smuggled goods which a vehicle was carrying were concealed in false cavities or the vehicle was wholly and exclusively used in smuggling of goods---Word wholly and exclusively used in Notification SRO No.499(I)/2009, dated 13-06-2009, were used in adjective form which meant "in its entirety" and was being used for no purpose other than smuggling as the word exclusively denoted---In the present case neither the smuggled goods were concealed in false cavities of vehicle in question nor it was the normal course of business of the owner of vehicle to use the same for the purpose of smuggling---When the vehicle in question had no history of being repeatedly involved in smuggling of goods then under Cl. 2(f) of Notification SRO No.499(I)/2009, dated 13-06-2009, it could be released against payment of redemption fine and vehicle would not be liable to outright confiscation under clause (b) of Notification SRO No.499(I)/2009, dated 13-06-2009---High Court declined to interfere in the order passed by Customs Appellate Tribunal---Reference was dismissed, in circumstances.

(b) Interpretation of statutes---

----Taxing statute---Two interpretations---Principle---Taxing statue usually contains charging and machinery provisions--- Former fixes liability to pay tax and has to be constructed strictly--- Where two reasonable interpretations are possible, one which favors the tax payer should be accepted.

Asbestos Cement's case (1992) 66 Tax 140 and Trustee of Port Karachi's case 1989 PTD 1048 rel.

Rahat Ali Khan Nahqi for Petitioner.

Waqas-ur-Rehman for Respondent No.1.

2023 P T D 763

[Peshawar High Court (Abbottabad Bench)]

Before Wiqar Ahmad and Kamran Hayat Miankhel, JJ

The COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE, ABBOTTABAD and another

Versus

Messrs SAIM TRADERS and another

Sales Tax Reference No.8-A of 2016, decided on 7th February, 2023.

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

----Ss.3, 47 & Fifth Schedule---Constitution of Pakistan, Art. 247 [since repealed]---Reference---Exemption from duty and taxes---Applicability---Dispute was with regard to exemption granted to respondent tax-payer on the plea that goods were supplied by Norwegian Refugee Council to internally displaced persons---Validity---Any person could be exempt from levy and imposition of income tax if he had earned income from business inside tribal area---If income was earned from business in settled area, then same person would be liable to tax---Immunity provided in Art. 247 (since repealed) of the Constitution was territory specific and not persons specific---Immunity from payment of sales tax under Art.247 (since repealed) of the Constitution was area specific by its letter as well as intent---Customs Appellate Tribunal wrongly held supplies made to Internally Displaced Persons in settled area as exempt from levy of sales tax under Art. 247 (since repealed) of the Constitution---Norwegian Refugee Council was neither privileged person nor was exempted from payment of tax under Fifth Schedule of Sale Tax Act, 1990---High Court set aside order passed by Customs Appellate Tribunal as exemption under Art. 247 (since repealed) of Constitution was not available---High Court restored orders-in-original as well as judgments passed by Appellate Authority---Reference was allowed, in circumstances.

Commissioner of Income-Tax Peshawar v. Messrs Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. Through the Chief Executive and 6 others 2003 PTD 1913; Gul Cooking Oil's case 2008 PTD 169; Messrs Taj Packages Company (Pvt.) Ltd. Through Manager v. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others 2016 PTD 203 and Pakistan through Chairman FBR and others v. Hazrat Hussain and others 2018 SCMR 939 rel.

(b) Administration of justice---

----Tax matters---Ignorance of law in tax matters cannot be pleaded as good ground of defense.

Zahid Idrees Mufti for Petitioner.

Ishaq Ali Qazi for Respondents.

2023 P T D 1679

[Peshawar High Court]

Before Qaiser Rashid Khan, CJ and Syed Arshad Ali, J

COLLECTOR OF CUTOMS, MODEL CUSTOMS COLLECTORATE, CUSTOMS HOUSE, JAMRUD ROAD, PESHAWAR

Versus

Messrs WAHEED HAMID BROS. LTD and another

Customs Reference No.832-P of 2016, decided on 1st November, 2022.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 32, 129, 169, 201 & 196---Imports and Exports (Control) Act (XXXIX of 1950), S. 3(1)---Pak-Afghan Transit Trade Agreement, 1965---Transit of goods across Pakistan to a foreign country (Afghanistan)---Confiscation of transit goods, restoration of---Seized transit goods, how to be dealt with---Procedure for sale of goods and application of sale proceeds---Auction proceedings---Scope---Afghan importer (company) imported a consignment of certain miscellaneous goods for transit to Afghanistan, but the containers were seized and confiscated after contraband goods (foreign origin liquor) was recovered from them (containers)---Customs Appellate Tribunal ('Tribunal') set-aside confiscating orders and passed judgment that said transit goods be restored to importer/company ('owner') unconditionally for dispatch in transit to Afghanistan---However, when the owner of goods applied for the recovery/restoration of goods, it transpired to him that said goods were sold by the Department; and it was refunded only 17% of sale proceeds (auction amount) on the ground that the owner was only entitled to said amount after deduction of leviable taxes---During second round of litigation, the Tribunal finally passed order in favour of owner of goods by holding that the seized goods were neither liable to confiscation nor any taxes / duties were payable on the same and that the goods should be restored to the owner or entire sale proceeds be recovered without payment/deduction of any taxes/duties for its onward transportation to Afghanistan---Petitioner / Department filed reference against the order of the Tribunal contending that from the auction proceeds, first the duties/taxes should be deducted and thereafter the remaining amount would be payable to the owner of the goods (i.e. respondent)---Validity---Under the mandate of S.129 of the Customs Act, 1969 ('the Act, 1969') the transit of goods across Pakistan to foreign territory, when reaches Pakistan is not subject to incidence of taxation---Fiscal statute normally contain two provisions; charging provisions imposing the charge to tax and machinery provisions providing the machinery for quantification of tax and levy/collection of tax so imposed---Charging provisions are construed strictly while machinery provisions of the statute are not generally subject to a rigorous construction---Good-in-question were liable to confiscation as S. 201(2)(c) of the Customs Act, 1969, envisaged that the goods if sold under any provision of the Act, 1969, the sale-proceeds would be subject to certain statutory deduction (custom-duty and taxes) payable to the Federal Government---Words "payable to Federal Government" occurring in S.201(2)(c) of the Act, 1969 meant that the said deduction had been subject to the incidence of taxation under the charging section of relevant fiscal Statutes i.e. Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Customs Act, 1969---Thus, provision of S. 201(2)(c) of the Act, 1969 would be applicable to the amount of sale proceeds only when, under charging provision of a Statute, any taxes/duties were payable to the Federal Government---Similarly, S. 169(5) of the Act, 1969 only referred to the deduction of taxes as provided under S.201(2)(c) of the Act, 1969, whereas S. 201(2)(c) of the Act 1969 applied only when tax was charged and payable to Federal Government under any fiscal statute against any goods which were sold during the adjudication proceedings---Impugned order was rightly passed by the competent forum (Tribunal) which had attained finality---Reference filed by the Customs Department was dismissed, in circumstances.

Commissioner of Wealth Tax v. Sharvan Kumar Swarup & Sons 1995 ECR 425 SC and W.H. Cockerline & Company v. The Commissioner of Inland Revenue (16) TC 1 at 19 ref.

Shahid Qayyum Khattak for Petitioner.

Isaac Ali Qazi for Respondents.

2023 P T D 1709

[Peshawar High Court]

Before Abdul Shakoor and Syed Arshad Ali, JJ

COMMISSIONER INLAND REVENUE WITHHOLDING, REGIONAL TAX OFFICE, PESHAWAR

Versus

Messrs CHASHMA SUGAR MILLS (PVT.) LTD., D.I. KHAN

S.T.R. No.9-P of 2016, decided on 2nd May, 2023.

(a) Interpretation of statutes---

----Fiscal statute---Necessary ingredients---Fiscal statute normally contains two provisions; charging provisions which impose charge to tax and machinery provisions which provide machinery for quantification of tax and the levy and collection of tax so imposed---Charging provisions are construed strictly while machinery provisions of the statute are not generally subject to a rigorous construction.

Commissioner of Wealth Tax v. Sharvan Kumar Swarup & Sons 1995 ECR 425 SC rel.

(b) Interpretation of statutes---

----Fiscal statute---Language---Retrospective applicability---Principle---In a taxing statute, as in other statutes, there should be no departure from general rule that words used in a statute must first be given their ordinary and natural meaning---It is only when such an ordinary meaning does not make sense that resort can be made to discovering other appropriate meanings---Principle upon which this view rests is that a tax cannot be imposed without use of clear and express language---To hold otherwise would allow Courts to impose taxation and that would clearly constitute an encroachment upon power of the Legislature---More than that taxation is a process which interferes with personal and property right of the people---Although it is a necessary interference but because it takes from the people a portion of their property, seems to be a valid reason for construing tax laws in favour of tax payer---Intention to impose a tax on the subject must be shown by clear and unambiguous language---Principle that a tax cannot be levied or collected except by authority of law, does not involve further proposition that under the Constitution taxes cannot be levied retrospectively---Once a competent legislature has passed a fiscal law with retrospective effect, the tax levied thereby must be held to be by authority of law and it would be constitutional and not invalid because of its being retrospective---There is nothing inherently unreasonable in giving retrospective effect to an enactment, the object of which is to prevent a loss of revenue to the state which would otherwise occur---No retrospective effect should be given to a fiscal statute unless there is a clear provision or unless the effect is a necessary implication of the provision---Court must lean against giving a statute retrospective operation on the presumption that the legislature does not intend what is unjust---Where the enactment prejudicially affects vested rights or legality of past transaction or impairs existing contacts, then the rule in question prevails---Even if through interpretation two views are equally possible, the one that saves vested rights would be adopted in the interest of justice, specially where Courts deal with taxing statute---Interpretation of fiscal statute has to be made strictly and any doubts arising from interpretation of a fiscal provision must be resolved in favour of tax payer.

S.M. Zafar in first edition of Understanding Statutes, Canons of Construction; Bindra's interpretation of Statutes" 7th Edn. Page-771; Mewar Textile Mills Ltd. v. Union of India AIR 1955 Raj 114; Motibhai Lalobhai & Co. v. Union of India AIR 1957 All 84, 86; Tkamdas Nathiaraal v. State of Madhya Pradesh AIR 1966 Madh Pra 271; Messrs Super Engineering and another v. Commissioner Inland Revenue, Karachi 2019 SCMR 1111; Muhammad Ishaq v. State PLD 1956 SC 256; Nagina Silk Mill Lyallpur v. Income Tax Officer, A-Ward, Lyallpur PLD 1963 SC 322; The State v. Muhammad Jamel PLD 1965 SC 681; Abdul Rehman v. Settlement Commissioner PLD 1966 SC 362; Adnan Afzal v. Capt. Sher Afzal PLD 1969 SC 187; Pakistan Television Corporation Ltd. v. Commissioner Inland Revenue 2019 SCMR 282 and Pakistan Television Corporation Ltd. v. Commissioner Inland Revenue 2017 SCMR 1136 rel.

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

----Ss. 3, 11 [as amended by Finance Act 2016] & 47---Withholding of tax---Retrospective effect---Applicability---Authorities issued show cause notice to respondent company for certain discrepancies with regard to withholding of short/less amount of sales tax as withholding agent while making purchases etc. pertaining to years 2013 and 2014---Appellate Tribunal Inland Revenue held that S.11(2) of Sales Tax Act, 1990, was not applicable to respondent company---Validity---Dispute was with regard to liability of withholding agent in respect of failure to deduct and deposit sales tax on purchases made by it for a period prior to year 2016 as a withholding agent---Provisions of Finance Act, 2016, did not give any impression of its retrospective application---Liability to pay sale tax was on the person making taxable supplies and withholding agent was only responsible to withhold certain amount of tax at specified rate to deposit the same with the revenue---Liability in question was created through Finance Act, 2016, which had no retrospective application---Demand of the revenue for the period prior to the Finance Act, 20l6, was without lawful authority---No tax was due against respondent company, therefore, penalty and default surcharge could not be imposed upon it for the relevant tax period prior to the Finance Act, 20l6---Reference was dismissed, in circumstances.

Barrister Syed Mudasir Ameer for Petitioner.

Isaac Ali Qazi for Respondents.

2023 P T D 1782

[Peshawar High Court]

Before Lal Jan Khattak and Abdul Shakoor, JJ

TELENOR MICROFINANCE BANK LIMITED

Versus

APPELLATE TRIBUNAL FOR SALES TAX ON SERVICES

Sales Tax Reference No.19-P of 2021, decided on 24th May, 2022.

Khyber Pakhtunkhwa Finance Act (XXI of 2013)---

----Ss. 40 & 99---Assessment of tax---Limitation---Condonation of time-limit---Scope---Scope of subsection (3) of Ss. 40 & 99 of the Khyber Pakhtunkhwa Finance Act, 2013, is quite different to each other---When legislators have authorized the assessment officer under subsection (3) of S. 40 to condone the delay caused in making assessment order after issuance of the show cause notice to the defaulter who has not deposited the amount of sales tax due to the authority under the law, then the authority in terms of S.99 cannot extend the delay, if any, caused by the assessment officer in passing assessment order within time set out under subsection (3) of S.40 after show cause notice to the taxpayer.

Syed Muhammad Ijaz and Mohammad Hamza Rauf for Petitioners.

Mian Naveed Gul Kakakhel for Respondent.

2023 P T D 1801

[Peshawar High Court]

Before Abdul Shakoor and Syed Arshad Ali, JJ

Messrs TEST INTERNATIONAL

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division / Chairman FBR, Islamabad and others

Writ Petition No.737-P of 2021, decided on 11th April, 2023.

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

----Ss.25, 79 & 81---SRO 499(I)/2013 dated 12-06-2013---Value of goods---Declaration---Assessment of imported goods, correctness of---Provisional determination of liability---Final determination not completed within stipulated period---Consequences---Differential amount paid or bank guarantee secured, return of---Scope---While final determination was not completed within six months, appropriate officer passed the impugned final assessment order by holding that the amount determined through provisional assessment order had become final and as a result thereof , the security instrument i.e. bank guarantee for differential amount should be encashed---Petitioner / importer assailed impugned order passed by invoking constitutional jurisdiction of the High Court---Validity---Though the appropriate officer, had herself admitted her failure to complete the final determination within six months, but her approach was not in consonance with the purpose, mandate and language of S. 81(4) of the Customs Act, 1969 ('the Act 1969'); she, while passing the impugned order, was probably misled by the explanation; as at the end S. 81 of the Act, it was explained that the provincial assessment meant the amount of duties and taxes paid or secured against bank guarantee, however, the provisional determination of the duty as provided under subsection (1) of S. 81 of the Act, 1969, did not include the additional amount determined on the basis of provisional assessment and the said differential amount was indeed a speculated amount of duty which could ultimately be the actual amount of duty , taxes and other charges after a complete probe and inquiry leading to the final determination of duties / taxes etc.---It was only when there was actual final determination within the stipulated period that the additional amount was relevant and was adjustable in terms of subsection (3) of S. 81 of the Act, 1969---Said differential amount secured through bank guarantee in terms of S. 81(1) of the Act, 1969 was not part of provisional determination, therefore, when the appropriate officer failed to pass an order of final determination as per inquiry envisaged under the enabling provision of S. 81 of the Act, 1969 , then the amount only determined as a provisional assessment would be deemed as a final determination and as a consequence thereof, the differential amount if already paid, would be refunded or if it was secured through an instrument (pay-order / bank guarantee) the same would be returned to the importer---High Court set aside the impugned order passed by the Appropriate Officer, declaring that her findings were not based on correct appreciation of subsection (4) of S.81 of the Act 1969 and directed the respondents / Department to return the bank guarantee through which the differential amount was secured from the petitioner / importer---Constitutional petition filed by the importer was allowed, in circumstances.

SUS Motors (Pvt.) Ltd. v. Federation of Pakistan, Islamabad and 2 others 2011 PTD 235 ref.

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

----Ss. 79, 81, & 193---Constitution of Pakistan, Art. 199---Declaration / assessment of imported goods, correctness of---Provisional determination of liability---Final determination not completed within stipulated period---Consequences---Differential amount paid or bank guarantee secured, return of---Scope---While final determination was not completed within six months, appropriate officer passed the impugned final assessment order by holding that the amount determined through provisional assessment order had become final and as a result thereof, the security instrument i.e. bank guarantee for differential amount should be encashed---Petitioner / importer assailed impugned order passed by invoking constitutional jurisdiction of the High Court---Objection of the respondents / department was that impugned order could be challenged before the next higher forum in terms of S.193 of the Customs Act, 1969 (' the Act, 1969')---Validity---Section 193 of the Act, 1969 had provided specifically that an order passed by any officer of the Customs Department under different provisions of the Act, 1969 was appealable---Section 81 of the Act, 1969 did not figure in the said order which were appealable before the next higher forum---Indeed, appeal was a creation of statute and in absence of any provision of law envisaging for filing appeal against an order, the appeal could not be entertained by the upper forum as a matter of course---High Court set aside the impugned order passed by the appropriate officer, declaring that her findings were not based on correct appreciation of subsection (4) of S. 81 of the Act, 1969 and directed the respondents / department to return the bank guarantee through which the differential amount was secured from the petitioner / importer---Constitutional petition was allowed, in circumstances.

Hussain Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1 and Messrs Alpha Chemicals v. Federation of Pakistan and 4 others 2013 PTD 2064 ref.

Aamir Bilal for Petitioner.

Sanaullah DAG, Gul Nazir Azam and Ishtiaq Ahmad (Junior) for Respondents.

2023 P T D 662

[Balochistan]

Before Zaheer-ud-Din Kakar and Muhammad Aamir Nawaz Rana, JJ

COLLECTOR MODEL CUSTOMS COLLECTORATE OF GAWADAR

Versus

Syed SHABBIR AHMED SHAH and another

Customs Reference Application No.73 of 2020, decided on 4th August, 2022.

Customs Act (IV of 1969)---

----S.196---Reference---Redemption fine---Release of vehicle---Tampered chasis number---Authorities were aggrieved of release of vehicle which was confiscated for smuggling of petrol---Customs Appellate Tribunal released the vehicle on deposit of 20% redemption fine---Validity---Vehicle in question had tampered chasis number and same was proved from unchallenged forensic report---Vehicle was rightly confiscated by Custom Authorities---Customs Appellate Tribunal committed grave error by releasing vehicle in question subject to payment of 20% redemption fine on its custom value---High Court set aside the order passed by Customs Appellate Tribunal which overlooked forensic report vis-à-vis tempered chasis number and order of authorities confiscating vehicle was upheld---Reference was allowed, in circumstances.

Chaudary Maqbool Ahmed v. Customs, Federal Excise and Sales Tax, Appellate Tribunal 2009 PTD 77 and Noor Muhammad v. Customs Appellate Tribunal, Peshawar 2020 SCMR 246 rel.

Changaiz Baloch for Applicant.

Mazhar Ali Khan and Yasmeen Khattale for Respondent No.1.

2023 P T D 1695

[Balochistan High Court]

Before Abdullah Baloch and Iqbal Ahmed Kasi, JJ

The DIRECTOR DIRECTORATE OF INTELLIGENCE AND INVESTIGATION CUSTOMS FBR, QUETTA through Deputy Director and others

Versus

Messrs INTERNATIONAL BUSINESS HUB and others

Customs References Applications Nos.15 to 66 of 2023, decided on 31st May, 2023.

Customs Act (IV of 1969)---

----Ss.25-A, 29 & 196---Valuation of goods---Jurisdiction---Tare weight---Determination---Release of goods---Dispute was with regard to valuation of goods imported by respondents / importers, after the same had been released to respondents / importers---Validity---Collector and Director both were equally competent under S. 25-A of Customs Act, 1969, to determine customs value independently of each other without being bound by each other's determination---Rightful course of action was to have the conflict between the two customs values resolved under S. 25-A (3) of Customs Act, 1969, by Director General Valuation, which was not done by him on his own motion after the Collector endorsed copy of valuation of goods imported to him---It was Director General Valuation who was required to resolve the conflict under S.25-A(3) of Customs Act, 1969, but he did not opt to do so, thereby validating Valuation Ruling of Collector, which was later / subsequent determination in time---Clearance of goods was made on declared value in accordance with the directions of Director General Valuation---Proposed application of valuation ruling by Directorate of Intelligence was not only unjustified but also tantamount to undermining exercise of statutory powers of Director General Valuation---Application of percentage of tare weight on goods which had already been cleared for home consumption was in violation of provision of S. 29 of Customs Act, 1969, which had restricted any amendment of any sort in Goods Declaration once the goods had been removed from customs area---No amendment under S. 29 of Customs Act, 1969, in goods declaration which had been cleared could be made on the basis of presumptions---High Court declined to interfere in judgment passed by Customs Appellate Tribunal, as percentage of tare weight claimed by authorities was higher and excessive and that too without providing any reasoning of application of proposed percentage of 2% and 7% respectively---Reference was dismissed, in circumstances.

Barrister Iftikhar Raza Khan for Appellant.

2023 P T D 111

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Jamal Khan Mandokhail, JJ

Messrs PAKISTAN WAPDA FOUNDATION

Versus

The COLLECTOR OF CUSTOMS, SALES TAX, LAHORE and others

Civil Appeal No. 458 of 2017, decided on 8th December, 2022.

(Against the judgment dated 04.10.2016 passed by the Lahore High Court, Lahore in Excise Tax Reference No. 02 of 2009)

(a) Central Excises Act (I of 1944)---

----Ss.2(25) & 3---Central excise duty---Term 'manufacture' within the purview of the Central Excises Act, 1994---Principles for adjudging as to what constitutes 'manufacture' within the purview of the scheme envisaged in the Central Excises Act, 1944 stated.

Following are the principles for adjudging what constitutes 'manufacture' within the purview of the scheme envisaged in the Central Excises Act, 1944:

i. The Central Excises Act, 1944 enlarges the scope of the word 'manufacture' to such acts, processes, works, and repair which may not generally be covered by the word literally;

ii. The word 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product and any process of re-manufacture, remaking, reconditioning or repair and the process of packing or repacking such product;

iii. It is not necessary that any new article may be produced in this process. The article may even remain the same but the processing may make it a finished good different in quality or utility from the original one;

iv. A process in which goods, though remain same, are made marketable and are, therefore, regarded by the purchasing public as different articles having a positive and specific use in their new state; and

v. The definition of the word 'manufacture' contained in the Central Excises Act, 1944 is not an absolute one but a qualified.

Assistant Collector of Central Excise v. Orient Straw Board PLD 1991 SC 992; Superintendent of Central Excise v. Faqir Muhammad PLD 1959 W.P. (Rev.) 103; Collector of Customs v. Mahboob Industries 2006 PTD 730 and Federation of Pakistan v. Messrs Noori Trading Corporation 1992 SCMR 710 ref.

Servo-Med Industries v. Commissioner of Central Excise (2015) 14 SCC 47 and Mineral Oil Corporation v. CCE, Kanpur Manu 1999 (114) E.L.T. 166 distinguished.

(b) Central Excises Act (I of 1944)---

----Ss. 2(25) & 3---Sales Tax Act (VII of 1990), Ss. 2(16), 2(17), 2(39), 2(41), 3(1) & 3(3)---Central Excises Rules, 1944, R. 7---Reclamation of used transformer oil carried out by Pakistan WAPDA Foundation ('appellant') for WAPDA---Question as to whether such reclamation comes within the purview of the Central Excises Act, 1944; and whether the said process is a taxable supply chargeable to sales tax under the provisions of section 3 of the Sales Tax Act, 1990---Held, that the appellant is not a manufacturer of transformer oil within the contemplation of section 2(25) of the Central Excises Act, 1944 read with Rule 7 of the Central Excises Rules, 1944---Appellant is, therefore, not liable to pay the excise duty for reclaiming (manufacturing) transformer oil---Services provided by the appellant for reclaiming transformer oil may have come within the purview of excisable services provided under heading 9809.0000 in the table of services provided in the First Schedule of the Central Excises Act, 1944 however, no definite finding can be rendered on said issue by the Supreme Court, and that too at present stage, when the same was not put to the appellant to respond to in the Show Cause Notice---Regarding sales tax, the appellant is not a manufacturer within the purview of section 2(17) of the Sales Tax Act, 1990---Supply of reclaimed transformer oil by the appellant to WAPDA, thus, does not come within the scope of taxable supplies under the Sales Tax Act, 1990---Appellant is, therefore, not liable to pay the sales tax.

Admittedly, the Pakistan WAPDA Foundation ('appellant') and WAPDA are two distinct and separate legal persons, who had entered into an agreement, whereby waste transformer oil, the so-called raw material, was provided free of cost by WAPDA to the appellant for reclamation of transformer oil. The title of waste transformer oil during the entire process of reclamation remained with WAPDA. Therefore, the transfer of possession of waste transformer oil by WAPDA to the appellant under a contract, so that the same is reclaimed and made useable, and thereafter, is returned to WAPDA, would constitute 'bailment'. In such circumstances, when the appellant did not have title over waste transformer oil and was reclaiming the same for WAPDA under a contract, it cannot be described as the real 'manufacturer', while the capacity of WAPDA, the real owner of the waste as well as of reclaimed transformer oil, can hardly be described otherwise.

The waste transformer oil was provided by WAPDA to the appellant, and the same remained the property of WAPDA during the entire reclamation process. In such a scenario, the role of the appellant in the entire reclamation process could at most be described as rendering services for the reclamation of transformer oil by providing 'labour' for 'hire' to WAPDA under a contractual arrangement.

Manufacturing of transformer oil is also an 'excisable good' under the Central Excises Act, 1944. However, the excise duty on this 'excisable goods' is to be paid by the manufacturer, not by the service provider. As the appellant is not a 'manufacturer', it is not liable to pay the excise duty on reclaimed transformer oil, an 'excisable goods'.

The appellant provided 'services' for reclaiming transformer oil to the 'manufacturer' - WAPDA. One needs to see whether such 'service' is an 'excisable service' under the Central Excises Act, 1944 specified in the First Schedule to the said Act. Perusal of the First Schedule to the Central Excises Act, 1944 shows that the services provided while carrying out reclamation of waste transformer oil or, for that matter, any waste oil are not specifically mentioned in the table of 'excisable services' provided in the Schedule. However, there is an omnibus heading; 9809.0000 titled "Services provided or rendered by persons engaged in contractual execution of work or furnishing supplies". An argument could be advanced that the activity of reclamation of transformer oil performed by the appellant could be considered as 'work' so as to fall within the meaning of 'contractual execution of work'. However, no definite finding can be rendered by the Supreme Court on this point, and that too at present stage, when the same was not put to the appellant in the Show Cause Notice.

Moving onto sales tax, it is important to note that the appellant only reclaimed or repaired transformer oil. During the process of reclamation, impurities are removed from used transformer oil. This activity does not involve conversion of any article singly or in combination with other articles into another distinct article or product. Nor does the process change or transform transformer oil in a way rendering it capable of being put to use differently or distinctly. The appellant returned the same good, that is transformer oil, to the owner of that good, WAPDA, after charging the latter for the repair work done by it. The process of reclamation of transformer oil by the appellant, thus, does not fall within the meaning of 'manufacture' as provided in section 2(16) of the Sales Tax Act and, in sequel, the appellant is not a 'manufacturer' as defined in section 2(17). As the appellant is not a manufacturer, it does not get caught up in the activity of making a 'taxable supply' as per section 2(41) for only a supply of taxable goods by an importer, manufacturer, wholesaler (including dealer), distributor or retailer falls within 'taxable supply' under that section. The appellant, not belonging to any of the said capacities, therefore, cannot be charged to sales tax under section 3 of the Sales Tax Act, 1990.

Chairman FBR v. Al-Technique Corporation PLD 2017 SC 99 ref.

(c) Central Excises Act (I of 1944)---

----Ss. 2(25) & 3---Central excise duty---Term 'manufacturer' within the purview of the Central Excises Act, 1944 explained.

Word 'manufacturer' within the purview of the Central Excises Act, 1944 falls into the following two categories:

i. a person who employs hired labour in the production or manufacture of excisable goods; and

ii. a person who engages in the production or manufacture of excisable goods on his own account if those goods are intended for sale.

A person who himself does not engage in the production or manufacture of excisable goods, but hires the labour of another person, whether natural or juristic, on contract for this purpose, falls within the scope of the first category of manufacturers mentioned above.

United Iron Works v. Standard Brass Casting Co. (231 P. 567, 569, 69 Cal. App. 384) ref.

Mian Ashiq Hussain, Advocate Supreme Court for Appellant (through video-link, Lahore).

Mrs. Kausar Parveen, Advocate Supreme Court and Naeem Hassan, Secy. Litigation, FBR for Respondents.

2023 P T D 163

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Jamal Khan Mandokhail, JJ

MUHAMMAD TAHIR

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, ABBOTTABAD and another

Civil Appeal No. 317 of 2022, decided on 31st October, 2022.

(Against the judgment dated 01.12.2021 of the Peshawar High Court, Abbottabad Bench passed in I.T.R. No. 1-A of 2019)

Income Tax Ordinance (XLIX of 2001)---

----S. 170---Constitution of Pakistan, Art. 247(6) [since omitted]---Resident of a Provincially Administered Tribal Area adjoining Mansehra District (the 'said tribal area')---Income tax refund, claim for---President had issued an order vide S.R.O. No.118(I)/2011 on the 10th February, 2011 published in the Gazette of Pakistan Extraordinary on 12 February, 2011 which ordered that the said tribal area had ceased to be a tribal area---President had the constitutional power to issue the order and his order changed the status of the said tribal area and made it a non-tribal area---Order passed by the President under Article 247(6) of the Constitution meant that the area lost its status as a tribal area---Consequently, once the President had passed the order, any tax levied/deducted in accordance with the Income Tax Ordinance, 2001 was leviable/payable, because the Ordinance automatically stood extended to the said area---Fact that the area was hitherto a tribal area wherein tax under the Ordinance could not be levied/deducted would be of no consequence---Admittedly, the said tribal area adjoined Mansehra District and the order of the President was of a date prior to the levy/deduction of income tax, therefore, the refund claim submitted by the appellant-tax payer was correctly rejected by the Deputy Commissioner---Appeal was dismissed.

Riaz Hussain Azam, Advocate Supreme Court for Appellant.

Zahid Idris Mufti, Advocate Supreme Court and Anis M. Shehzad, Advocate-on-Record for Respondents.

Ayaz Shoukat, DAG, Ayaz Swati, A.A.G. Balochistan and Mian Shafaqat Jan, A.A.G. Khyber Pakhtunkhwa on Court's Notice.

2023 P T D 241

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Muhammad Ali Mazhar, JJ

Messrs PAKISTAN TELECOMMUNICATION COMPANY LTD.

Versus

COLLECTOR OF CUSTOMS, KARACHI

Civil Appeal No. 24 of 2015, decided on 4th November, 2022.

(Against the order dated 25.08.2014 passed by the High Court of Sindh, Karachi in Special Customs R.A. No. 328 of 2011)

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

----Ss. 19, 19A & 33--- Equipment imported by Pakistan Telecommunication Company Ltd. (PTCL)---Over-paid customs duty, refund of---Concessionary rate of customs duty under SRO.457(I)/2004 dated 12.06.2004 ('SRO 457'), benefit of---Held, that the imported equipment fell within the purview of 'components' stated in SRO 457---'Conditions of Import', provided in SRO 457, stipulated two essential conditions precedent for availing the concessionary rate of customs duty: firstly, the imported goods should not be manufactured locally, and this fact was to be certified through the erstwhile Central Board of Revenue by the Facilitation Committee of the Board of Investment (BOI); and secondly, the importer was to produce NOC or license, as the case may be, from the concerned agencies for the purpose---Factually, the appellant (PTCL) fulfilled both the said conditions---section 19A was inserted in the Customs Act, 1969 when the refund claims of the appellant were pending adjudication before the Additional Collector of Customs, however as section 19A provided for a rebuttable presumption, it fell within the purview of procedural law, and thus, had retrospective application to the refund claims of the appellant---At the time when the appellant had filed the Goods Declaration and refund claims, section 33 of the Customs Act, 1969 did not expressly require a claimant (importer) to show that the incidence of the paid customs duty had not been passed on to the buyer as part of the price of the imported goods, therefore, section 33(4) , being substantive law, could not be applied retrospectively---In the present case, admittedly the imported equipment had not been sold further by the appellant to any third person/buyer either directly, as they were actually imported, or indirectly, as a raw material or as a component part in the finished product; rather the same had been used and installed by the appellant in its own project of telecommunication services---Therefore, the concept of unjust enrichment referred to in section 19A, could not be applied to the present case---Appeal was allowed, and the refund claims of the appellant in respect of the over-paid customs duty were allowed.

Messrs Fecto Belarus Tractor v. Government of Pakistan 2005 PTD 2286 distinguished.

(b) Interpretation of statutes---

----Prospective/retrospective application of a new law---Scope---Any new law, which deals with the procedure and does not affect the rights or liabilities of the parties, generally applies to all proceedings, pending as well as future, while a new law, unless expressly provided, which affects the rights or liabilities of the parties, being substantive in nature, is applied prospectively, and not retrospectively.

State v. Muhammad Jamil PLD 1965 SC 681; Muhammad Alam v. State PLD 1967 SC 259; Commissioner of Income Tax v. Messrs Asbestos Cement Industries 1993 SCMR 1276 and Mumtaz Ahmed v. Federal Service Tribunal 2000 SCMR 832 ref.

(c) Interpretation of statutes---

----Retrospective application of a new law/provision---Scope---New provision relating to a rebuttable presumption---Rebuttable presumption falls in the realm of the procedural law of evidence, and thus would have retrospective application.

Abdul Rehman v. Allah Wasai 2022 SCMR 399 ref.

(d) Interpretation of statutes---

----Tax statute---While construing a tax law, the language used in it is not to be either stretched in favour of the State or narrowed in favour of the taxpayer.

Yousaf Rerolling Mills v. Collector of Customs PLD 1989 SC 232 ref.

Faisal Siddiqi, Advocate Supreme Court and Khizar Ali Khan, Manager Legal, PTCL for Appellant.

Raja Muhammad Iqbal, Advocate Supreme Court and Jalal Zaidi, D.C. Customs, Islamabad for Respondent.

2023 P T D 320

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Jamal Khan Mandokhail, JJ

The COMMISSIONER INLAND REVENUE, KARACHI

Versus

Messrs ATTOCK CEMENT PAKISTAN LIMITED, KARACHI

Civil Appeal No. 1422 of 2019, decided on 12th January, 2023.

(Against the judgment dated 20.08.2018 passed by the High Court of Balochistan, Quetta, in Sales Tax Appeal No. 01 of 2005)

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

----S. 7---Input tax, adjustment of---Scope and nature---Section 7 of the Sales Tax Act, 1990 by nature is a beneficial provision of law providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax.

Sheikhoo Sugar Mills v. Government of Pakistan 2001 SCMR 1376; Collector of Customs, Sales Tax and Central Excise v. Messrs Sanghar Sugar Mills Ltd. PLD 2007 SC 517 = 2007 PTD 1902, Chiltan Ghee Mills, Quetta v. Deputy Collector of Sales Tax (Refund), Customs House, Quetta 2016 SCMR 2183; AIR 1992 SC 2078; India Agencies (Regd.), Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore AIR 2005 SC 1594; Jayam and Co. v. Assistant Commissioner AIR 2016 SC 4443; State of Karnataka v. M.K. Agro Tech.(P) Ltd. (2017) 16 SCC 210 and ALD Automotive Pvt. Ltd. v. The Commercial Tax Officer AIR 2018 SC 5235 ref.

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

----S. 7(1)--- Input tax, adjustment of---Whether any time limit for adjustment of input tax---Held, that section 7(1) of the Sales Tax Act, 1990 does not stipulate any condition or restriction of time for adjustment of the 'input tax' from the 'output tax' payable in respect of taxable supplies made in a tax period---Noted stipulation of time in section 7(1), that is, a tax period, is with regard to determining the tax liability of the 'output tax' on taxable supplies made by the tax payer during that period, and does not relate to the period of payment of 'input tax' on the taxable supplies received by him---For purposes of the present case, at the relevant period there was no express obligation on the tax payer to avail the facility of adjustment of 'input tax' in the same tax period in which it was paid---Such restriction was, however, for the first time introduced by inserting the words 'during the tax period' after the words, "input tax paid", in section 7(1) vide the Finance Act, 1998--- More amendments with regard to the time limit for availing the adjustment facility of 'input tax' followed later.

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

----Ss. 7(1) & 66---Import of new machinery and spare parts---Input tax, refund/adjustment of---Time and manner of claiming the adjustment of input tax---Appellant-tax authority asserted that the adjustment could be claimed in the same tax period and that too in the monthly returns, while the respondent-company claimed it as a right enforceable beyond the tax period in which the input tax was paid---Held, that section 66 of the Sale Tax Act, 1990 ('the Act') provides for refund of tax claimed to have been 'paid or over paid' through 'inadvertence, error or misconstruction' and prescribes a period of one year for preferring such claims---In the present case, the respondent-company, during the relevant period, was not obliged to pay 'output tax' equivalent to the amount of 'input tax' paid on imports, but it overlooked availing the facility of adjustment of the 'input tax' afforded under section 7(1) of the Act---Such omission, as asserted by the respondent-company, was due to 'confusion' and 'misunderstanding' on its part, and would thus come within the purview of the word 'inadvertence', envisaged under section 66 of the Act---Facility of making adjustment of the 'input tax' was available to the respondent-company till 1st July 1997, when the taxable supply of cement, was exempted from payment of sales tax by the Finance Act, 1997---Obviously, after the said exemption of cement from payment of sales tax, there was no question of payment of 'output tax', and hence 'input tax' paid could not have been adjusted by the respondent-company---Only remedy, thus, available to the respondent-company was to seek the refund of the excess amount of 'output tax' paid by the respondent-company, under section 66 of the Act---Period of limitation prescribed for seeking the refund under section 66 was one year from the date of over-payment of tax that is, when 'output tax' was paid by the registered person without adjusting the 'input tax'---In the present case, the respondent-company would, therefore, be entitled under Section 66 of the Act to claim refund of an amount of the overpaid 'output tax', equivalent to the 'input tax' not adjusted in the monthly returns filed during the period of one year preceding 11-06-1997, that is, from 11-06-1996 till 10-06-1997---Appeal was partly allowed.

(d) Interpretation of statutes---

----Amendment in a provision/section of a statute---Scope---Amendment is generally made to bring about a change in the state of law; however, it is not so when the amendment is mere explanatory or clarificatory in nature.

Syed Mohsin Imam, Advocate Supreme Court for Appellant.

Mansoor Ali Ghanghro, Advocate Supreme Court for Respondent.

2023 P T D 396

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Amin-ud-Din Khan and Muhammad Ali Mazhar, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, PESHAWAR

Versus

WASEEF ULLAH and others

Civil Petitions Nos. 389, 696 to 742 of 2022, decided on 6th July, 2022.

(Against the judgment dated 01.12.2021 passed by the Peshawar High Court, Peshawar, in Custom References Nos.270-P to 317-P of 2020)

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

----S. 19--- Sales Tax Act (VII of 1990), S. 13(2)(a)--- Income Tax Ordinance (XLIX of 2001), Ss. 48 & 153---Hybrid Electric Vehicles (HEVs) falling under PCT Code 87.03, import of---Exemption from customs duty, sales tax and with-holding tax---Federal Government, vide S.R.O. 499(I)/2013 dated 12-6-2013 ('the S.R.O.'), exempted customs duty, sales tax and with-holding tax on import of Hybrid Electric Vehicles (HEVs) falling under PCT Code 87.03---During the existence of the S.R.O., the Assistant Collector of Customs issued a Circular ('the Circular') wherein a condition was sought to be imposed, beyond the purview of the original S.R.O., that the benefit of exemption of duties and taxes on the import of HEVs under the S.R.O. was only available to Fully Hybrid Vehicles which had larger batteries and a motor to drive the electric vehicle---Legality---Through the Circular, the Assistant Collector of Customs innovated a new criteria that the benefit in the original S.R.O. was only extended to the Fully Hybrid Vehicles which had larger batteries and a motor to drive the vehicles, but nothing was mentioned in this regard in the S.R.O. itself---Nothing was placed on record as to how the Assistant Collector of Customs, had any lawful authority to issue such Circular in order to make an amendment in the original S.R.O. whereby he added certain conditions under the guise of a so-called clarification which changed the complexion and substratum of the S.R.O. without any lawful authority---Both the Appellate Tribunal and High Court had rightly discarded the Circular which was unjustifiably and irrationally approved in the Appellate Order while describing the Circular as clarificatory in nature---In fact, the Federal government exempted duties on the import of HEVs falling under PCT Code 87.03 without any distinction of new or used hybrid vehicles, or large or small batteries, or with any specific qualification sine qua non for exemption---Anything which was being inferred extraneously or beyond the scope or tenor of the S.R.O. was not permissible under any rule of interpretation---Supreme Court observed that HEVs technology besides being fuel efficient, was also an alternative solution to cautiously concentrate on the issue of global warming; that the proper and futuristic use of this technology will not only improve and recuperate the atmosphere and ecosystem, but also alleviate destructive facets of climate change; that on the face of it, the exemption on the import of HEVs was logically issued for protection against climate change, and to minimize its adverse impact in the future, and it was also the need of the time and a pressing priority to promote and encourage HEVs more and more, rather than applying irrational interpretations resulting in unwarranted restrictions on the exemption already in field---Petitions for leave to appeal were dismissed and leave was refused.

(b) Interpretation of statutes---

----Statutory Regulatory Order (S.R.O) issued under a fiscal statute---S.R.O. requires purposive interpretation or construction which complements its effect to the purpose by following conscientious and exact meaning---S.R.Os are issued fundamentally in the aid of substantive principles of law set out in the parent legislation, and to give effect to administrative directions and instructions for the implementation of the law---If the words used are capable of one construction only, then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act.

(c) Taxation---

----Taxing statute---Exemption, benefit of---Burden of proof---Burden rests on the person who claims an exemption or concession to substantiate that he is entitled to the same.

(d) Interpretation of statutes---

----Taxing statute---Exemption, benefit of---In a taxing statute, there is no leeway or probability of any intendment but the manner of interpretation should be such which undoubtedly or unmistakably comes into sight from the plain language of the notification with the conditions laid down in it, but with the caution that the benefits arising from a particular exemption should not be defeated or negated---In case of any ambiguity or mischief, the taxing statute should be construed in favour of the assessee---By and large, an exemption notification is interpreted rigidly, but when it is found that the assessee has satisfied the exemption conditions, a liberal construction should be made---If the tax-payer is entitled for exemption in plain terms of a notification, then the department could not deny the benefit of an exemption which was intended for the benefit of the taxpayer so it should be construed accordingly.

N. S. Bindra's interpretation of Statutes (Tenth Edition), page 1118 ref.

(e) Taxation---

----Taxing statute---Exemption, benefit of---Substantial compliance, doctrine of---Said doctrine, though on one hand premeditated to avoid hardship, simultaneously safeguards the essential compliance of the prerequisites in which the exemption in tax or customs duty are invoked.

Abdul Rauf Rohaila, Senior Advocate Supreme Court for Petitioner.

Nemo for Respondents.

2023 P T D 417

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Jamal Khan Mandokhail, JJ

The COMMISSIONER INLAND REVENUE

Versus

Messrs HABIB INSURANCE COMPANY LTD.

Civil Appeals Nos. 632 and 633 of 2019, decided on 3rd November, 2022.

(Against the order dated 23.11.2017 of the High Court of Sindh, Karachi passed in I.T.Cs. Nos. 228 and 229 of 2003)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 26(a) & Fourth Sched., R. 5---Insurance Act (IV of 1938), S. 40-C---Insurance company---Deduction of expenses spent on the management---Limit---Whether the Controller of Insurance had pursuant to the proviso to section 40-C(1) of the Insurance Act, 1938 condoned the excess amount said to have been spent on the expenses of management by the respondent (insurance company) in the present case---Held, that once the respondent had admitted that the prescribed maximum limit of expenses had been exceeded it was incumbent upon it to show that the excess in the expenses of management had been condoned by the Controller of Insurance, and to what extent---However, documents in this regard which the respondent should have possessed were not produced, despite the noting of the stated discrepancy by the Tribunal---If, for whatever reason, the requisite documents were not produced before the Tribunal the same should have been produced before the High Court, but this too was also not done, nor were the same produced before the Supreme Court---Burden to establish that the Controller of Insurance had condoned the excess management expenses lay upon the respondent but the respondent had failed to produce any document to establish this fact---Appeals were allowed, impugned order of the High Court was set-aside and the orders of the Tribunal were restored.

Commissioner of Income Tax v. Messrs ALPHA Insurance Co. Ltd. PLD 1981 SC 293 distinguished.

Syed Mohsin Imam, Advocate Supreme Court for Appellant.

Anwar Kashif Mumtaz, Advocate Supreme Court for Respondent.

2023 P T D 435

[Supreme Court of Pakistan]

Present: Ijaz ul Ahsan, Munib Akhtar and Sayyed Mazahar Ali Akbar Naqvi, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, (RTO) LAHORE

Versus

MIAN LIAQAT ALI PROPRIETOR, LIAQAT HOSPITAL, HOUSE NO.6, STREET NO.6, LAL PUL, PANJ PIR ROAD, MUGHALPURA, LAHORE

Civil Petitions Nos. 648-L, 649-L and 650-L of 2021, decided on 31st May, 2022.

(Against order dated 26.01.2021 passed by the Lahore High Court, Lahore in I.T.Rs. Nos. 4919, 4922 and 4923 of 2021)

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

----Ss. 111(1)(d) & 122(5)---Concealment of business income from sales---Amendment of deemed assessment order---Words "chargeable to tax" as used at the end of sub-clause (i) of section 111(1)(d) of the Income Tax Ordinance, 2001 ['the sub-clause (i)']---Said words applied to the whole of the sub-clause (i), i.e., also to the suppressed production and/or sales---If "any amount" can be brought within the scope of sub-clause (i) only if, and to the extent, that it is "chargeable to tax" (i.e., constitutes "income" properly so called), then production and sales must be given the same treatment---Thus, it is only production or sales chargeable to tax that can be brought within the ambit of clause (d) to section 111(1) of the Ordinance---Both under section 122(5) and section 111(1)(d) of the Ordinance, the taxpayer is exposed to the same tax liability in respect of the income that has escaped assessment, or been suppressed, i.e., he is liable to tax on the "net" amount, or "income" properly so called---Appeals were dismissed.

Waris Meah v. The State and another PLD 1958 SC 157 and Jibendra Kishore Achharya Chowdhury v. Province of East Pakistan PLD 1957 SC 9 ref.

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

----Ss. 111(1)(d) & 122(5)---Concealment of business income from sales---Amendment of deemed assessment order---Words "chargeable to tax" as used at the end of sub-clause (i) of section 111(1)(d) of the Income Tax Ordinance, 2001 ['the sub-clause (i)']---Said words applied to the whole of the sub-clause (i), i.e., also to the suppressed production and/or sales---Directions given by the Supreme Court to the Federal Board of Revenue to align sections 122(5) & 111(1)(d) of the Income Tax Ordinance, 2001 closely with the principles laid down in the case reported as Waris Meah v. The State and another PLD 1958 SC 157 stated.

In order to further align sections 122(5) and 111(1)(d) of the Income Tax Ordinance, 2001 closely with the principles laid down in the case reported as Waris Meah v. The State and another PLD 1958 SC 157, Supreme Court directed that the Federal Board of Revenue (FBR), in exercise of its powers under the Income Tax Ordinance, 2001 ('the Ordinance') (whether under section 206 and/or section 237 or any other enabling provision), shall forthwith issue appropriate guidance and provide the necessary yardstick, measure, guidelines and standard to the tax authorities, consistent with the present judgment, inter alia as to when and how, and in which circumstances and against what taxpayers, action can be initiated under the first clause of section 122(5) on the one hand, or the two sub-clauses of clause (d) of section 111(1) of the Ordinance on the other; that in issuing such guidelines, the FBR must take into account, and appropriately incorporate therein, the following points:

(i) If the tax authorities intend to take action against a person within the time period permissible under section 122, then such action must ordinarily be taken in terms of subsection (5) (or any other applicable subsection, as the case may be) thereof and in a manner compliant therewith, rather than under section 111(1)(d). If at all during the said period the designated Officer of Inland Revenue (OIR) nonetheless intends to proceed under the latter provision then clear reasons must be given why this is being done. In respect of such reasons to be given, the onus will lie on the tax authorities to justify such action and the threshold will be a high one. Furthermore, the reasons will be subject to judicial scrutiny in terms, inter alia, of the hierarchy of remedies provided by and under the Ordinance.

(ii) If the tax authorities intend to take action under section 111(1)(d) against a person beyond or after the time period stipulated under section 122, and the taxpayer shows that the information on which such action is based was, or ought reasonably to be regarded either as being or such as could have been, in the knowledge of the tax authorities within the said time period, then the tax authorities will have to give reasons as to why action was not taken under section 122 --- The reasons to be given by the OIR if the taxpayer meets the initial burden cast upon him will be subject to judicial scrutiny in terms, inter alia, of the hierarchy of remedies provided by and under the Ordinance.

Ch. Muhammad Shakeel, Advocate Supreme Court, Naeem Hassan, Secretary (Litigation), FBR for Petitioner (in all cases).

Syed Mansoor Ali Bukhari, Advocate Supreme Court for Respondent (in all cases).

2023 P T D 487

[Supreme Court of Pakistan]

Present: Qazi Faez Isa and Muhammad Ali Mazhar, JJ

COLLECTOR OF CUSTOMS, MCC (E&C) CUSTOMS HOUSE, PESHAWAR and another

Versus

ZAIN UL ABIDIN and others

Civil Petition No. 4145 of 2022, decided on 6th February, 2023.

(Against the judgment dated 06.09.2022 of the Peshawar High Court, Peshawar in Customs Reference No. 21-P of 2022)

Limitation---

----Condonation of delay---Scope---If decisions are assailed they should be done within the prescribed period, and it should not be assumed that delay would be condoned when there is no valid reason to condone the same.

Yousaf Ali, Advocate Supreme Court for Petitioners.

Nemo for Respondents.

2023 P T D 644

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, Yahya Afridi and Muhammad Ali Mazhar, JJ

COMMISSIONER INLAND REVENUE ZONE-I, REGIONAL TAX OFFICE, QUETTA

Versus

Messrs HAJVAIRY STEEL INDUSTRIES (PVT.) LIMITED, QUETTA and another

Civil Petitions Nos. 3134 and 3135 of 2022, decided on 30th January, 2023.

(Against the judgment dated 22.06.2022 of the High Court of Balochistan, Quetta passed in Sales Tax Reference Applications Nos. 03 and 04 of 2021)

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

----Ss. 3(1A) & 71---Sales Tax Special Procedures Rules, 2007, R. 58H---Steel re-rolling mills---Scope and payment of sales tax---'Final discharge' of tax liability---Tax department (petitioner) contended that since the Sales Tax Special Procedure Rules, 2007 was applicable in the present case, the tax payers (respondents) were not liable under section 3 of the Sales Tax, Act, 1990 ('the Act'), but they would still be liable under section 3(1A) of the Act because amendments therein were made subsequently, that is, during the subsistence of section 71 of the Act---Validity---Section 71 of the Act enables special procedure to be made with regard to the scope and payment of tax to be made and the Sales Tax Special Procedures Rules, 2007 ('the Special Procedure') were made pursuant thereto, which contained an overriding, non obstante, clause, which uses categorical and clear language and must be given effect to, and the respondents were entitled to be treated in accordance therewith---Particular rate and mechanism for the imposition of sales tax on steel re-rollers was prescribed and it was stipulated that it 'will be considered as their final discharge of tax liability', which the respondents had discharged in accordance therewith---Petitions for leave to appeal were dismissed.

Zak Re-Rolling Mills (Pvt.) Ltd. v Appellate Tribunal Inland Revenue, 2020 SCMR 131 not applicable.

(b) Constitution of Pakistan---

----Art. 185(3)---Tax laws---Petitions for leave to appeal/appeals filed before the Supreme Court---Relevant provisions of the law to be attached with petitions/appeals---Supreme Court observed that tax laws in the country are subject to extensive changes almost every year, and at times more than once in a year, therefore, in tax cases the relevant provisions of the law as at the relevant time must be reproduced or attached with the appeal/petition filed in the Supreme Court, but more often than not, this is still not done; that resultantly considerable court-time is unnecessarily wasted in just trying to ascertain the law at the relevant time.

(c) Precedent---

----To constitute precedent the law which was interpreted must be the same or similar to the case in hand.

Ahsan Ahmad Khokhar, Advocate Supreme Court and Khalid Aziz, Assistant Director, RTO, Quetta for Petitioners (in both cases).

Tariq Mahmood, Senior Advocate Supreme Court for Respondent (has filed caveat) (in C.P. No. 3134 of 2022).

Nemo for Respondent (in C.P. No. 3135 of 2022).

2023 P T D 964

[Supreme Court of Pakistan]

Present: Muhammad Ali Mazhar and Syed Hasan Azhar Rizvi, JJ

COMMISSIONER INLAND REVENUE Z-III, CORPORATE REGIONAL TAX OFFICE, TAX HOUSE, KARACHI and another

Versus

Messrs MSC SWITZERLAND GENEVA and others

Civil Review Petitions Nos. 432-K to 459-K of 2022 in Civil Petitions Nos. 672-K to 692-K of 2021 and 694-K, 724-K to 729-K of 2021, decided on 9th February, 2023.

(Review against the order of this Court dated 23.05.2022)

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

----S. 107--- Treaties for the avoidance of double taxation, interpretation of---Such treaties have to be given preference and would prevail over the provisions of income tax law.

Commissioner Inland Revenue (Legal Division), LTU, Islamabad v. Messrs Geofizyka Krakow Pakistan Ltd. 2017 SCMR 140 ref.

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

----S. 107--- Avoidance of Double Taxation Treaties (DTT(s)), interpretation of---When any definite and unambiguous stipulation is assimilated in the Double Taxation Avoidance treaty or Agreement, said provision will obviously supplant and supersede the general provisions encompassed under Tax Laws---However, the fact remains that the foremost purposefulness of a DTT is required to be explored in the background of ministering commercial relations between treaty partners and as being essentially a bargain between the two signatories thereof as to the division of tax revenues between them in respect of income falling to be taxed in both jurisdictions.

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

----Ss. 4B, 44(1), 107(1) & 109---Constitution of Pakistan, Art. 188---Review petition---Non-resident companies---Super tax, imposition of---Double Taxation Treaties---Convention between the Islamic Republic of Pakistan and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes on Income ("Swiss DTT"), Art. 2---Held, that High Court considered the pros and cons of the entire controversy and the questions of law raised and thereafter reached to the analytical conclusion that the levy of Super Tax was identical to the levies that existed at the time the treaties in question came into force, hence the tax-payers within the realm of double taxation treaties are either exempt or, wherever applicable, liable to pay the Super Tax at reduced rates in terms of their respective treaties---No justification or rationale existed to entertain and consider the present review petitions when the High Court had extensively considered all the questions raised before it and comprehensibly discussed the pros and cons and passed a reasonable consolidated judgment which did not warrant any interference and was therefore affirmed by the Supreme Court through the order under review---Review petitions were dismissed accordingly.

(d) Constitution of Pakistan---

----Art. 185(3)---Leave refusing order passed by the Supreme Court---Scope---There is no hard and fast rule that in all circumstances the Supreme Court is obligated to pass a detailed leave refusing order---At the leave granting stage, the paramount factor is only to consider the soundness and aptness of the impugned judgment /order to ascertain whether a case for leave to appeal is made out or not for further proceedings in the matter.

(e) Constitution of Pakistan---

----Art. 188--- Supreme Court Rules, 1980, O. XXVI--- Review jurisdiction of the Supreme Court---Scope and principles of review jurisdiction stated.

Review may be entreated only in instances or occurrences of errors in the judgment or order, floating on the surface of record with a substantial impact on the final outcome of the lis, but it does not connote and entail a right of rehearing of the decided case despite there being a mindful and thoughtful decision on the point of law as well as of fact. Every judgment articulated by the Courts of law is presumed to be a solemn and conclusive determination on all points arising out of the lis. Mere irregularities having no significant effect or impact on the outcome would not be sufficient to warrant the review of a judgment or order, however, if the anomaly or ambiguity is of such a nature so as to transform the course of action from being one in the aid of justice to a process of injustice, then obviously a review petition may be instituted for redressal to demonstrate the error, if found floating conspicuously on the surface of the record, but a desire of re-hearing of the matter cannot constitute a sufficient ground for the grant of review which, by its very nature, cannot be equated with the right or remedy of appeal. The clemency by dint of review is accorded to nip in the bud an irreversible injustice, if any, done by a Court such as misconstruction of law, misreading of the evidence and non-consideration of pleas raised before a Court that would amount to an error floating on the surface of the record, but where the Court has taken a conscious and deliberate decision on a point of fact or law, a review petition will not be competent. Review by its nature is neither commensurate to a right of appeal or opportunity of rehearing merely on the ground that one party or the other conceived himself to be dissatisfied with the decision of the court, nor can a judgment or order be reviewed merely because a different view could have been taken.

Messrs Habib and Company and others v. Muslim Commercial Bank and others PLD 2020 SC 227; Engineers Study Forum (Regd.) and another v. Federation of Pakistan and others 2016 SCMR 1961; Government of Punjab and others v. Aamir Zahoor-ul-Haq and others PLD 2016 SC 421; Haji Muhammad Boota and others v. Member (Revenue) BOR and others 2010 SCMR 1049; Sh. Mehdi Hassan v. Province of Punjab through Member, BOR and others 2007 SCMR 755; Abdul Rauf and others v. Qutab Khan and others 2006 SCMR 1574; Lt-Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan PLD 1962 SC 335; Land Acquisition Officer and Assistant Commissioner, Hyderabad v. Gul Muhammad through legal heirs PLD 2005 SC 311; Board of Intermediate and Secondary Education, Lahore through Chairman v. Bashir Ahmad Khan PLD 1997 SC 280; Major (Retd.) Barkat Ali and others v. Qaim Din and others 2006 SCMR 562; Abdul Hakeem and others v. Khalid Wazir 2004 SCMR 1770; Suba through legal heirs v. Fatima Bibi through legal heirs and others 1996 SCMR 158; S. Sharif Ahmad Hashmi v. Chairman, Screening Committee, Lahore and another 1978 SCMR 367; Messrs Sajjad Nabi Dar & Co. v. The Commissioner of Income-Tax, Rawalpindi Zone, Rawalpindi PLD 1977 SC 437; Messrs M. Y. Malik & Co. and 2 others v. Messrs Spendlours International 1995 SCMR 922; M. Moosa v. Muhammad and others 1975 SCMR 115; Mirza Bashir Ahmad v. Abdul Karim 1976 SCMR 417; Basharat Khan v. The State 1984 SCMR 1033(1); Muhammad Nazir v. The State 1979 SCMR 89; Kala Khan and others v. Misri Khan and others 1979 SCMR 347; Syed Saghir Ali v. Mehar Din and others 1968 SCMR 729; Wahajuddin and another v. Razia Begum and others 1979 SCMR 241; Abdul Ghaffar-Abdul Rehman and others v. Asghar Ali and others PLD 1998 SC 363; Irshad Masih and others v. Emmanuel Masih and others 2014 SCMR 1481; Akbar Ali Bukhari v. State Bank of Pakistan 1981 SCMR 518; Zulfiqar Ali Bhutto v. The State PLD 1979 SC 941; Justice Qazi Faez Isa and others v. President of Pakistan and others PLD 2022 SC 119; Mukesh v. State (NCT of Delhi) (2018) 8 SCC 149; Sow Chandra Kante and another v. Sheikh Habib, (1975) 1 SCC 674; Kamlesh Verma v. Mayawati and others (2013) 8 SCC 320; Messrs Thungabhadra Industries Ltd. v. Government of Andhra Pradesh through Deputy Commissioner, Commercial Taxes Anantapur AIR 1964 SC 1372; Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi (1980) 2 SCR 650; Saijan Singh v. State of Rajasthan [1965] 1 S.C.R. 933, 948; G. L. Gupta v. D. N. Mehta [1971] 3 S.C.R. 748-760; O. N. Mahindroo v. Distt. Judge Delhi and another [1971] 2 S.C.R. 11, 27; Chandra Kanta v. Sheikh Habib [1975] 3 S.C.R. 933 and Delhi Administration v. Gurdip Singh Uban and others AIR 2000 SC 3737 ref.

(f) Constitution of Pakistan---

----Art. 188---Supreme Court Rules, 1980, O. XXVI---Review petitions filed before the Supreme Court---Practice of filing review applications fleetingly and unthinkingly in routine on the basis of certificates issued by the advocates with a plain replica of the grounds urged in the main petition or appeal without any accurate allusion to any error in the judgment or order which warrants or merits reversal---Supreme Court deprecated such practice which wastes the precious time of the Court with the exception in the clearest form, that while adverting to a provision or construction of any law and/or Constitution, some errors are apparent on the face of the record which cause substantial injury and which requires some remedial measures to advance the cause of justice for which not only the specific ground(s) should be mentioned in the certificate of the advocate, but it should be pinpointed also in the review petition rather than mentioning sweeping and stereotypical grounds having no significance or nexus with the case---Supreme Court observed that while issuing the certificate and drawing the review application, the advocates should be mindful and conscious that they are not issuing certificate for advocating vexatious or pointless review application; that in order to avoid wasting the precious time of the Court, especially keeping in mind the huge backlog of dockets waiting in the queue for disposal, the advocate should, before issuing the certificates, sincerely consider whether a fit case of review is made out or not.

Delhi Administration v. Gurdip Singh Uban and others AIR 2000 SC 3737 ref.

Dr. Shah Nawaz, Advocate Supreme Court and Irfan Mir Halepota, Advocate Supreme Court for Petitioners.

Syed Mehmood Abbas, Advocate-on-Record for Respondent No. 1 (in C.R.Ps. Nos. 432-K, 434-K, 435-K, 438-K, 440-K, 444-K, 447-K, 448-K, 452-K and 453-K).

2023 P T D 1419

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Syed Mansoor Ali Shah and Ayesha A. Malik, JJ

SINDH REVENUE BOARD through Secretary Government of Sindh, Karachi and others

Versus

Messrs QUICK FOOD INDUSTRIES (PVT.) LIMITED and others

Civil Petition No. 414 of 2021, C.M.A. No. 1963 of 2021 in C.P. 414 of 2021, Civil Petitions Nos. 1188 to 1259, 475-K, 476-K, 1422 to 1430, 2819, 317-K to 389-K of 2021, 579 and 777 of 2022, decided on 12th October, 2022.

(Against the judgments and orders dated 17.11.2020, 01.02.2021, 19.01.2021, 09.02.2021, 23.12.2021 and 19.01.2022, passed by the High Court of Sindh in C.Ps. Nos.D-5283, D-5220, D-5252 to D-5224, D-5244, D-5281, 5282, D-5284, D-5285, D-5449 to D-5452, D-5477 to D-5479, D-5586 to D-5588, D-5603, D-5612 to D-5614, D-5645, D-5690 to D-5694, D-5723, D-5733 to D-5735, D-5856, D-5926, D-5927, D-5936, D-5937, D-6017, D-6220, D-6226, D-6268, D-6453, D-6611, D-6622, D-6866, D-6888, D-7453, D-7610, D-7683, D-7987 of 2017, D-505, D-5146, D-5151, D-6126, D-6238 of 2018, D-443, D-4472, D-4473, D-5265, D-6608, D-6612, D-6613, D-8126 of 2019, D-344, D-494, D-495, D-1014, D-1468, D-1373, D-1867 of 2020, D-5691 of 2017, D-6124 of 2020, D-555, D-556, D-1275, 2544, D-2871, D-3469, D-3724, 6124 of 2018, D-8288 of 2017, D-8014 of 2018, D-5220, D-5603, D-5479, D-6622, D-5937, D-5451, D-7987, D-5285, D-7610, D-5693, D-5936, D-5477, D-5284, D-5690, D-5613, D-5586, D-6220, D-5927, D-5733, D-5223, D-7453, D-5587, D-5283, D-5692, D-5723, D-6866, D-5244, D-6226, D-5450, D-5735, D-5222, D-5449, D-5614, D-5612, D-5694, D-6611, D-6453, D-6017, D-7683, D-5478, D-6268, D-5645, D-5856, D-5224, D-5282, D-5281, D-5691, D-5588, D-5452, D-5734, D-5926, D-5273, D-6888 of 2017, D-6238, D-6126, D-505, D-5146 of 2018, D-4472, D-4473, D-6612, D-6608, D-8126, D-6613, D-5265, D-443 of 2019, D-5151 of 2018, D-495, D-1468, D-494, D-1014, D-1373, D-1867, D-344 of 2020, D-2968 of 2018 and D-7464 of 2021, respectively)

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

----Ss. 2(55A), 2(78), 3(1), 4(1)(a), 4(3)(a), 5(1)(a) & 8(1)---Sindh Sales Tax on Services Rules, 2011, Rr. 42D & 42E---Sales tax on services---"Value of taxable service", interpretation of---'Labour and manpower supply services' and 'security agency services'---Whether the tax is to be levied on the gross amount charged inclusive of salaries and allowances (collectively, salaries) that are paid to the security personnel (guards, etc.) and labour and manpower (collectively, security and manpower) in supply of services---High Court concluded that the sales tax on services was charged on the consideration paid for the service provided by the service provider, and can not include salaries in its calculation since they are not part of the service itself---Validity---Value of taxable service is determined on the basis of the value of economic activity carried out in the provision of the service and salaries, being reimbursable expenses, are not part of the taxable service or its value; thus, they are not included in value of the service---Sales tax on services can only be levied on consideration paid for service provided or rendered, and salaries paid by the employer to the employees are not part of the service rendered for this purpose, and so are not taxable.

Section 5 of the Sindh Sales Tax on Service Act, 2011 ('the Act'), being the charging provision, is a substantive provision and has a direct nexus to the taxable event provided for under Section 4 which particularly excludes the services of the employees to the employer. In any event, the taxing event cannot go beyond the parameters drawn under Section 8 of the Act which restricts the scope of the tax to the value of taxable service. Put simply, the charging provision (Section 5) must align with the taxable event (Section 4) while staying within the scope of the tax (Section 8).

The amount of sales tax on services levied is based purely on the value charged by the service provider for the service it renders, which value is determined by the service provider itself, establishing a connection between the consideration paid and the service provided. Moreover, for a service to be taxable, it must be listed in the First Schedule to the Act and involve an economic activity conducted as a business, profession, or trade, whether or not for profit. The service is treated under the Act as an economic activity and will not include the activities of the employee to carry out the service. As per the procedure under the Sindh Sales Tax on Services Rules, 2011 ('the Rules'), the service provider is required to collect and deposit the tax in the government treasury, for which purpose, the service provider issues an invoice that includes the value of the service including the salaries paid, and other expenses associated with security and manpower.

Argument of petitioner (Sindh Revenue Board) that the gross amount charged includes all amounts, including reimbursable expenses such as salaries, lacks merit. This is because these amounts are actually paid by the service recipient, and neither do they form part of the economic activity conducted by the service provider, nor of the consideration paid for by the service recipients for the services rendered. Gross amount charged, for the purposes of sales tax on services, relates to the consideration in money paid for the value of the taxable service under section 5, the applicability of which is restricted by Section 8 defining the scope of the tax, which means that quantum is charged for the service alone, nothing more and nothing less. The value of taxable service is determined on the basis of the value of economic activity carried out in the provision of the service and salaries, being reimbursable expenses, are not part of the taxable service or its value; thus, they are not included in value of the service. The consideration paid is only for the services rendered and cannot include the cost borne by the service recipient in respect of the salaries paid to the security and manpower it procured. Therefore, the sales tax on services can only be levied on consideration paid for service provided or rendered, and salaries paid by the employer to the employees are not part of the service rendered for this purpose, and so are not taxable.

The scope of the tax as provided under the Act cannot be altered by the Rules. Hence, the scope or value of the tax could not be expanded than what the Act has proscribed through the Rules. So, irrespective of the amendments through which the provisos to Rules 42E(3) and 42E(5) of the Rules were omitted, salaries could not be included in the gross amount charged or taxed. Even if the amendments were brought about only to bring the salaries paid to the labour and manpower with the preview of the tax, the same still could not have been allowed being not only beyond the scope of the Act but also being inconsistent with it. Petitions for leave to appeal were dismissed and leave was refused.

Suo Motu Case No. 13 of 2009 PLD 2011 SC 619 and Suo Motu Case No. 11 of 2011 PLD 2014 SC 389 ref.

(b) Delegated legislation---

----Delegated legislation is intended to enforce the law and advance the purpose of the underlying legislature, without overriding it and while minutiae could be filled in, the parent statute could neither be added to nor subtracted from.

Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan 2015 SCMR 630 ref.

(c) Interpretation of statutes---

----Rules framed under a statute---Scope---If a rule goes beyond what the parent statute contemplates, it must yield to the statute.

Collector of Central Excise and Sales Tax v. Rupali Polyester Limited 2002 SCMR 738 ref.

Uzair Karamat Bhandari, Advocate Supreme Court and Anis M. Shahzad, Advocate-on-Record for Petitioners (in C.P. No.414 and C.M.A. 1963 of 2021).

Azid Nafees, Advocate Supreme Court and Tariq Aziz, Advocate-on-Record for Petitioners (in C.Ps. Nos.1188 to 1259, 1422 to 1430, 2819 of 2021, 579 and 777 of 2022).

Saifullah, Additional Advocate General, Sindh (via video link from Karachi) for Petitioners (in C.Ps. Nos.317-K to 389-K, 475-K and 476-K of 2021).

Makhdoom Ali Khan, Senior Advocate Supreme Court, Saad Hashmi, Advocate and Syed Rifaqat Hussain Shah, Advocate-on-Record for Respondents (in C.Ps.320-K, 324-K, 330-K, 337-K, 340-K, 342-K, 345-K to 347-K, 351-K, 353-K, 356-K, 361-K, 366-K, 377-K, 378-K, 380-K and 385-K of 2021).

Abdul Sattar Pirzada, Advocate Supreme Court for Respondents (in C.Ps. Nos.1207, 1208, 1226, 1245 and 1251 of 2021).

Zaheer Minhas, Advocate Supreme Court for Respondents (in C.P.414 of 2021).

Faisal Siddiqui, Advocate Supreme Court for Respondents (in C.Ps. Nos.1222 of 2021 and 359-K of 2021).

Moiz Ahmed, Advocate Supreme Court for Respondents (in C.Ps. Nos.348-K and 384-K of 2021).

Khalid Mehmood Siddiqui, Advocate Supreme Court (via video link from Karachi) for Security Services (in C.Ps. Nos.2819 of 2021 and

475-K of 2021).

Nemo for other Respondents (in all cases).

2023 P T D 1492

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Ayesha A. Malik and Athar Minallah, JJ

COMMISSIONER INLAND REVENUE ZONE-IV, LARGE TAXPAYER UNIT, KARACHI

Versus

Messrs AL-ABID SILK MILLS LTD., A-39, MANGHOPIR ROAD, SITE, KARACHI

Civil Appeal No. 1032 of 2018, decided on 23rd May, 2023.

(Against the judgment dated 27.03.2018 of the High Court of Sindh, Karachi passed in STRA No. 737 of 2015)

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

----Ss. 25 & 8(1)(c)(a)---Constitution of Pakistan, Art. 10A---Allegation of issuing fake/flying invoices and claiming input tax against such invoices---Liability raised against tax payer based on presumptions---No attempt made by the Department to verify the invoices---In the present case the show cause notice was issued in a mechanical manner---Allegations were vague and the facts had not been verified---Moreover, the taxpayer was asked to establish that its suppliers i.e. the eight distinct entities had not made supplies and that they had not deposited the output tax in the government treasury---It was on this basis that it was presumed that the invoices were fake/flying and thus the input tax adjusted against such invoices was alleged to be inadmissible---Taxpayer was further asked to produce documents which were not required to be maintained under the Sales Tax Act, 1990 ('Act of 1990') at the relevant time---Department had issued a vague show cause notice pursuant to a report, without first making an inquiry of its own to verify the facts relating to the eight entities i.e whether they had deposited the tax in relation to the supply made to the taxpayer.

Before the issuance of the show cause notice no meaningful effort was made by the sales tax officials to conduct an audit nor was a proper inquiry made by exercising powers conferred under the Sales Tax Act, 1990 ('Act of 1990') in order to verify the allegations made in the report. The show cause notice was based on vague allegations and an assumption that, since some of the supplies were made by the eight entities which were involved in the issuance of fake/flying invoices, therefore, the invoices relating to such supplies must also have been of the same status. It was not the case of the Department that the eight entities were never engaged in business nor had made supplies. The taxpayer was asked by the sales tax authorities to provide documents which, at the relevant time, were not required to be maintained by a registered person.

When the department alleges that a registered person is liable to make the payment of tax and the same has not been levied or charged, the former is burdened with a statutory duty to establish before the adjudicating forum, through persuasive and proper evidence, that the allegations are highly probable to be true, rather than being unreliable, false or doubtful. The duty to establish facts on the standard of balance of probabilities is on the department under the Act of 1990. In the present case the onus was on the Department to first establish that the eight suppliers had not made actual supplies and, thus, the invoices against which the input was claimed were fake/flying invoices. Moreover, it was the Department's responsibility to verify whether or not the eight entities had deposited the sales tax in the government treasury relating to the invoices against which the taxpayer had claimed input tax. It is evident from the record that the Department had made no attempt to verify whether the invoices relatable to the claim of input tax were fake/flying or otherwise. Appeal filed by Commissioner Inland Revenue was dismissed.

(b) Interpretation of statutes---

----Fiscal statute---While interpreting fiscal statutes, the court looks to what is clearly said and there is no room for any intendment nor is there any equity about a tax---There is no presumption as to tax and nothing was to be read in or implied and one could only look fairly at the language used.

Messrs Mirpurkhas Sugar Mills Ltd. v. Government of Sindh and others 1993 SCMR 920; Muhammad Younus v. Central Board of Revenue and others PLD 1964 SC 113; Commissioner of Income Tax v. Mst. Khatija Begum PLD 1965 SC 472; Government of West Pakistan and others v. Messrs Jabees Ltd. PLD 1991 SC 870 and Government of Pakistan and others v. Messrs Hashwani Hotels Ltd. PLD 1990 SC 68 ref.

(c) Constitution of Pakistan---

----Art. 10A---Right to fair trial---Reverse onus on accused---Scope---Concept of reverse onus i.e. placing the burden on the person against whom an allegation has been made runs contrary to the established principle of presumption of innocence---It is therefore, for this reason that Courts lean in favour of interpreting or reading down such provision in an effort to safeguard the fundamental principles of fair trial.

Mrs. Asma Hamid, Advocate Supreme Court for Appellant.

Ghulam Rasool Mangi, Advocate Supreme Court/Advocate-on-Record (via video-link, Karachi) for Respondent.

2023 P T D 1514

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Qazi Faez Isa and Syed Mansoor Ali Shah, JJ

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

Versus

SUS MOTORS (PVT.) LTD. and others

Civil Appeals Nos. 565/2011, 772 to 780/2012, 768 to 772/2014, 1070/2015, 132 to 156/2017, decided on 24th July, 2023.

(On appeal against the judgments/orders dated 12.11.2010, 04.06.2011, 29.11.2013, 24.07.2015 and 21.09.2016 passed by the High Court of Sindh, Karachi in C.P. No. D-1285/2008, SCRAs Nos. 150-158/2010, 117 to 121/2010, 218/2012 and 70 to 94/2010)

Customs Act (IV of 1969)---

----S. 81---Imported goods---Provisional determination of liability---Scope---Subsection (4) to section 81 of the Customs Act, 1969 provides that if the final assessment is not completed within the period specified given under subsection (2) to section 81 then provisional assessment shall become final.

Imported goods are assessed to duty when the bill of entry, later changed to goods declaration, is filed under section 80 of the Customs Act, 1969. If however imported goods could not immediately be assessed to duty they would be provisionally assessed/reassessed by the concerned officer of Customs and within the stipulated period finally assessed/reassessed. If within the stipulated period the goods could not be assessed/reassessed the Collector of Customs was empowered in exceptional circumstances to extend the period for final assessment/ determination. The law enables the Collector to extend the period 'in circumstances of exceptional nature.'

Subsection (4) to section 81 of the Customs Act, 1969 provides that if the final assessment is not completed within the period specified given under subsection (2) to section 81 then provisional assessment shall become final. In other words, subsection (4) to section 81 is a penal provision incorporated in the scheme for the benefit of the assessees/ importers/exporters to save them from unnecessary harassment by the Customs Authorities by way of lingering on their cases for indefinite period on the pretext of finalizing the assessment.

Collector of Customs, Lahore v. S. Fazal Illahi and Sons 2015 SCMR 1488; Collector of Customs v. Auto Mobile Corporation of Pakistan 2005 PTD 2116 and Dewan Farooque Motors Ltd v Customs, Excise and Sales Tax Appellate Tribunal 2006 PTD 1276 ref.

M. Khalil Dogar, Advocate Supreme Court (through Video Link, Karachi) for Appellants (in C.As. Nos. 565/11, 132-156/17).

K. A. Wahab, Advocate-on-Record (through Video Link, Karachi) for Appellants (in C.As. Nos. 565/11, 765-772/14, 1070/15, 132-156/17).

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants (in C.As. Nos. 772-780/12, 768-772/14 and 1070/15).

Makhdoom Ali Khan, Senior Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Respondents (in C.As. Nos. 772-780/12).

Qari Abdur Rasheed, Advocate-on-Record for Respondents (in C.As. Nos. 768-772/14).

Khalid Javed Khan, Advocate Supreme Court for Respondents (in C.As. Nos. 132-156/17).

2023 P T D 1534

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Syed Mansoor Ali Shah and Ayesha A. Malik, JJ

COLLECTOR OF CUSTOMS, CUSTOM HOUSE, LAHORE and another

Versus

Messrs WASIM RADIO TRADERS, LAHORE and others

Civil Petitions Nos. 323-L to 326-L of 2014, decided on 23rd February, 2022.

(Against the orders dated 3.12.2013, 10.12.2013, 12.12.2013 and 10.1.2014, passed by the Lahore High Court, Lahore, in Writ Petitions Nos. 31010, 31839 and 32085 of 2013 and 466 of 2014)

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

----S. 5---Constitution of Pakistan, Art. 185(3)---Multiple connected Civil Petitions for Leave to Appeal filed before the Supreme Court on the same question of law---One such Petition was barred by seven days---Supreme Court condoned such delay on the basis that it was a connected Petition, where the same question of law was involved.

FBR through Chairman, Islamabad and others v. Messrs Wazir Ali and Company and others 2020 SCMR 959 ref.

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

----Ss. 25A, 25D & 81---Customs Rules, 2001, R. 125---Imported consignments---Valuation Ruling ('the Ruling') issued by Customs department under section 25A of the Customs Act, 1969 ('the Act')---Importers challenged the Valuation Ruling under section 25D of the Act, but at the same time also applied to the High Court for release of the consignments--- High Court ordered release of imported consignments under section 81 of the Act read with Rule 125 of the Customs Rules, 2001---Legality---Basic issue in the present case was whether Section 81 of the Act is relevant and can be invoked where a Valuation Ruling has been issued under section 25A of the Act, for provisional release of the goods and secondly, whether section 81 of the Act can be invoked as of right before the High Court in such cases---Held, that purpose of section 81 of the Act is to make a provisional determination in a situation where an assessment cannot be made---In order to invoke section 81 of the Act, the Custom Officers must first satisfy themselves that it is not possible to assess the correctness of the value because it is necessary to first test the goods for further enquiry---Then and only then can the importer have the goods provisionally released under section 81 of the Act---Accordingly, section 81 cannot apply where a Valuation Ruling has been issued as the Valuation Ruling represents the declared value for the assessment of the goods or category of goods, which the importer is required to pay---As the Valuation Ruling is a formal decision providing the assessment value of the goods, the requirements of section 81 of the Act per se are not invoked---Consequently, where the goods are pre-assessed or capable of assessment, section 81 of the Act does not apply---Furthermore with respect to Rule 125 of the Customs Rules, 2001, the said Rule does not apply to cases where a Valuation Ruling has been issued, as it applies to cases where section 81 of the Act is applicable---Impugned orders of the High Court were, thus, against the mandate of the Customs Act, 1969, and were, therefore, set aside---Petitions for leave to appeal were converted into appeals and allowed.

Sarfraz Ahmed Cheema, Advocate Supreme Court for Petitioners (in all cases).

Shahid Tasawar Rao, Advocate Supreme Court for Respondent No. 1 (in C.Ps. Nos. 323-L to 325-L of 2014).

Ex-parte Respondent No. 1 (in C.P. No.326-L of 2014).

2023 P T D 1550

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Muhammad Ali Mazhar and Ayesha A. Malik, JJ

CIVIL APPEAL NO. 1275 OF 2009, AND C.M.A. NO. 6731 OF 2018

(On appeal from the judgment dated 09.02.2005 passed by the High Court of Sindh at Karachi in I.T.A. No. 915 of 1999)

AND

CIVIL APPEALS NOS. 1292 TO 1296 OF 2009 AND CIVIL APPEAL NO. 227 OF 2011

(On appeal from the judgments dated 15.04.2008 and 22.06.2009 passed by the Lahore High Court, Multan Bench, Multan in T.Rs. Nos. 3, 4, 5, 6, 7 and 8 of 2008)

The COMMISSIONER OF INCOME TAX, COMPANIES ZONE-II, NEW INCOME TAX BUILDING, SHAHRAH-E-KAMAL ATTATURK, KARACHI and another

Versus

Messrs PAK SAUDI FERTILIZERS LTD., KARACHI through M.D. and another

Civil Appeal No. 1275 of 2009, C.M.A. No. 6731 of 2018, Civil Appeals Nos. 1292 to 1296 of 2009 and Civil Appeal No. 227 of 2011, decided on 13th March, 2023.

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 80-C---Contract Act (IX of 1872), S. 182---Sale of Goods Act (III of 1930), Ss. 19 & 20---Presumptive tax regime---Fertilizer manufacturing company and marketing company---Whether principal-agent relationship---Income Tax Appellate Tribunal held that as marketing company was an agent of the fertilizer manufacturing company, hence, keeping in view the relationship of agent and principal, the manufacturing company could not claim any benefits under the presumptive tax regime provided under section 80-C of the Income Tax Ordinance, 1979 ('ITO 1979') and was liable to dealt with through normal assessment under section 62 of the I.T.O., 1979---High Court, however, held that the agreement between the two companies envisaged the outright sale of fertilizers manufactured by the manufacturing company to the marketing company, thus, the advance income tax deducted under section 50(4) of the I.T.O., 1979 upon the payments made by the latter to the former qualified to be treated as the income of the manufacturing company under section 80-C of the I.T.O., 1979 and the assessment should be finalized for the year in question under section 80-C of the I.T.O., 1979---Held, that survey and analysis of the terms and conditions of the 'Agreement' between the two companies showed that it was an agreement for outright sale by means of which the payments were being made in full after deduction of the advance income tax by the marketing company for settlement of invoices---Neither substratum of the agreement under lined any characteristics of agency nor contained any provision for agency commission---Even if issue of relationship between the companies was left to one side, section 80-C of the I.T.O., 1979 articulates that any amount received under which tax was deductible under Section 50(4) was deemed to be the total income tax liability of the assessee which was not disputed or resisted by the tax department in the present case, therefore, the amount received after deduction under section 50(4) was rightly deemed to be the total income tax liability and for all practical and legal purposes, the manufacturing company could not be deprived of the benefit of section 80-C of I.T.O., 1979---No irregularity or perversity was found in the impugned judgments passed by the High Court---Appeals were dismissed.

Bolan Beverages (Pvt.) Ltd. v. PepsiCo Inc. and 4 others PLD 2004 SC 860; Messrs Vijay Traders v. Messrs Bajaj Auto Ltd. 1995 SCC (6) 566; State of Mysore v. Mysore Spinning and Manufacturing Company Limited AIR 1958 SC 1002; Gordon Woodroffe & Co. v. Sheikh M. A. Majid & Co. AIR 1967 SC 181; Bhopal Sugar Industries Ltd. v. Sales Tax Officer, Bhopal 1977 SCR (3) 578; W.T. Lamb and Sons v. Goring Brick Company Limited (1932) K.B. 710; Hutton v. Lippert (1883) 8 A.C. 309 and Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry AIR 1968 SC 784 ref.

Dr. Shah Nawaz, Advocate Supreme Court (via video link from Karachi) for Appellants (in C.A. No. 1275 of 2009).

Zafar Iqbal Chaudhry, Advocate Supreme Court and Mrs. Tasneem Amin, Advocate-on-Record (via video link from Lahore) for Appellants (in C.As. Nos. 1292-1296 of 2009 and 227 of 2011).

Rashid Awan, Advocate Supreme Court (via video link from Karachi) for Respondents (in all cases).

Syed Rifaqat Hussain Shah, Advocate-on-Record for Respondent No. 1 (in all cases).

2023 P T D 1571

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Muhammad Ali Mazhar and Ayesha A. Malik, JJ

Mian AZAM WAHEED and 2 others

Versus

The COLLECTOR OF CUSTOMS through Additional Collector of Customs, Karachi

Civil Petitions Nos. 3215, 3644, 3656, 3657 to 3689, 3731 to 3732, 3216, 3745 to 3749, 3217, 3634 to 3643, 3645 to 3655, 3690 to 3730, 3733 to 3744, 3750 to 3780 of 2021, decided on 7th June, 2022.

(Against the judgment passed by the High Court of Sindh at Karachi dated 22.03.2021 in SCRAs. Nos. 212-323, 324-329 and 330-361 of 2016)

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

----Ss. 25, 25A & 25D---Constitution of Pakistan, Art. 199---Valuation Ruling ('the Ruling') issued by Customs department---Constitutional petition before the High Court challenging such Ruling---Maintainability---Alternate remedy of review under section 25D of the Customs Act, 1969 not availed---Effect---Instead of challenging the Valuation Ruling directly in the High Court, the best course available to the petitioners (importers) was to file a Review Petition against the said Ruling under section 25D of the Customs Act, 1969 which was an appropriate remedy provided under the law in which all factual disputes with regard to the valuation as well as transactional value could be raised, but this statutory remedy was circumvented---Legislature had purposely and consciously provided this remedy under section 25D of the Act to an aggrieved person to assail the Valuation Ruling and, at the same time, it also provides an opportunity to the Director General Valuation to rectify the legal or factual defects, if any, made while issuing the Valuation Ruling---In the present case the impugned Valuation Ruling could not be construed as violative or in contravention of any provision of Customs Act, 1969 for the purposes of challenging it within the domain or realm of Constitutional jurisdiction of High Court, however, the remedy provided under section 25D had its own wide scope and parameters where an aggrieved person may file review petition to challenge the Ruling which was the best available remedy rather than approaching the High Court directly---Writ petitions had been rightly dismissed by the High Court due to lack of jurisdiction---Petitions for leave to appeal were dismissed and leave was refused.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of the High Court---Scope---Exhaustion of remedies, doctrine of---Scope---Writ jurisdiction of the High Court cannot be exploited as the sole solution or remedy for ventilating all miseries, distresses and plights regardless of having equally efficacious, alternate and adequate remedy provided under the law which cannot be bypassed to attract the writ jurisdiction---Doctrine of exhaustion of remedies stops a litigant from pursuing a remedy in a new court or jurisdiction until the remedy already provided under the law is exhausted---Profound rationale accentuated in this doctrine is that the litigant should not be encouraged to circumvent or bypass the provisions assimilated in the relevant statute paving the way for availing remedies with precise procedure to challenge the impugned action.

(c) Interim order---

----Principles---No interlocutory order survives after the original proceeding comes to an end---Interim orders are made in the aid of the final order that the court may pass and they merge into the final order and do not survive after the final adjudication.

Gen. (Retd.) Pervez Musharraf through Attorney v. Pakistan through Secretary Interior and others PLD 2014 Sindh 389 and PLD 2016 SC 570 ref.

Shafqat Mehmood, Advocate Supreme Court for Petitioners.

Dr. Farhat Zafar, Advocate Supreme Court for Respondent.

2023 P T D 1590

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Muhammad Ali Mazhar and

Ayesha A. Malik, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE, ISLAMABAD

Versus

Messrs FAUJI FOUNDATION LIMITED

Civil Petitions Nos. 3121 to 3125 of 2021, decided on 10th June, 2022.

(Against the judgment dated 18.01.2021 of the Islamabad High Court, Islamabad, passed in Income Tax References Nos.06/2003, 53 to 56/2007)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 22 & 30---Fauji Foundation---Income from interest on Bank deposits---Whether such income is to be considered and taxed as 'income from other sources' or as 'income from business'---Held, that respondent-taxpayer/Fauji Foundation is a welfare trust which derives income from business activities for undertaking welfare projects---Essentially it utilises income earned from its investments for the collective benefit of the beneficiaries of the Foundation---Hence, it is the business of the Foundation to invest in business to raise income, for the purposes of its welfare projects---Foundation can invest in industrial undertakings or otherwise, and any surplus income from these undertakings are to be utilized for the benefit of the Foundation's beneficiaries---In this context interest from bank deposits is also surplus income, used to carry out the objectives of the Foundation---Hence, it is business income and not income from other sources---Petitions for leave to appeal were dismissed and leave was refused.

(b) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 22 & 30---'Income from other sources' or 'income from business'---Determination---In cases where the dispute relates to determining whether its business income or income from other sources, the facts have to be duly considered so as to determine the objects of the assessee company, its functions and its memorandum of association or foundation documents---Once the primary business and functions are verified, the business activities need to be assessed to see it in the perspective of the declared objects and functions---Hence, the actual work of the assessee, its tax returns and how it treats its income has to be considered, to determine whether its income is business income or income from other sources.

Ms. Shazia Bilal, Advocate Supreme Court, Kamranullah, Additional Commissioner and Naeem Hassan, Secretary Litigation (FBR) for Petitioner.

Syed Ali Zafar, Advocate Supreme Court and Zahid Nawaz Cheema, Advocate Supreme Court (through video link from Lahore) for Respondent.

2023 P T D 1600

[Supreme Court of Pakistan]

Present: Syed Mansoor Ali Shah and Syed Hasan Azhar Rizvi, JJ

ALLIED BANK LIMITED

Versus

The COMMISSIONER OF INCOME TAX, LAHORE and others

Civil Petition No. 6-L of 2023, decided on 23rd May, 2023.

(Against the judgment dated 20.10.2022, passed by the Lahore High Court, Lahore in ITR No. 63041 of 2022)

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

----Ss. 2(13), 122(5A), 210 & 211---Amendment of assessments---Commissioner (Inland Revenue)---Delegation of power under section 122(5A) of the Income Tax Ordinance, 2001 ('the Ordinance')---Scope---Powers exercised by the Commissioner under section 122(5A) of the Ordinance to amend or further amend an assessment order, if he considers that the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue, could be delegated to the Additional Commissioner Inland Revenue under section 210 of the Ordinance.

The Bank of Punjab v. The Commissioner Inland Revenue, C.As. Nos. 1669 to 1692 of 2013, decided on 06.02.2019; Pak Telecom v. FBR, 2013 PTD 2151; Pakistan Tabacco v. Additional Commissioner 2013 PTD 747 and Shell (Pakistan) v. Pakistan 2013 PTD 1012 ref.

(b) Interpretation of statutes---

----Fiscal statute---Literal approach of interpretation---Literal approach is to be adopted while interpreting fiscal or taxing statutes, and the Court cannot read into or impute something when the provisions of a taxing statute are clear---While interpreting a taxing statute, the Court must look to the words of the statute and interpret it in light of what is clearly expressed therein, and it cannot imply something which is not expressed or import provisions in the statute so as to support any assumed deficiency.

Pearl Continental Hotel v. Government of NWFP 2010 PTD 2018; Commissioner of Income Tax v. Khurshid 2016 PTD 1393 and Hirjina v. Commissioner of Sales Tax 1971 PTD 200 ref.

(c) Words and phrases---

----Maxim "delegatus non potest delegare"---Scope and meaning---Delegation of power---It is a general principle of public law that where the legislature vests powers in a person, indicating that trust is being placed in his individual judgment and discretion, that person is prima facie required to exercise that power personally, however, the said principle is not absolute and yields to the language, scope and object of the statute conferring the said powers---Legislation may expressly provide for a statutory procedure to delegate such powers vested in an administrative authority, after the exercise of which, the delegate can then exercise the delegated power in their own right.

De Smith's Judicial Review 304-314 (Sweet and Maxwell, 6th ed. 2007) and Legal briefing - Delegations, authorisations and the Carltona principle, Australian Government Solicitor (June 16, 2022), https://www.ags.gov.au/publications/legal-briefing/lb-20220616#fn4 ref.

Dr. Ikram ul Haq, Advocate Supreme Court for Petitioner.

Ch. Muhammad Shakeel, Advocate Supreme Court and Naveed Akhtar, DC for Respondents.

Assisted by Muhammad Hassan Ali, Law Clerk, Supreme Court.

2023 P T D 1610

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Ayesha A. Malik and Athar Minallah, JJ

COLLECTOR OF CUSTOMS, PESHAWAR

Versus

Messrs NEW SHINWARI LTD. and another

Civil Petitions Nos. 5671 and 5672 of 2021, decided on 24th February, 2023.

(Against the judgment dated 10.06.2021 of the Peshawar High Court, Peshawar passed in Customs References Nos. 5-P and 6-P of 2012)

Customs Act (IV of 1969)---

----Ss.32 & 129---Pak-Afghan Transit Trade Agreement, 2010 ('the agreement')---Consignments found in excess of the quantities declared at the port of entry---Confiscation of good---Legality---Respondent-company had availed the transit facility pursuant to the Agreement executed between two sovereign States (i.e. Pakistan and Afghanistan)---It is not the case of the department that the consignments were transported in violation of the rules nor that the seals had been tampered with---Only allegation against the respondent-company was that upon examination of the consignments, the consignments of polyester fabric were found in excess of the quantities declared at the port of entry i.e. Karachi---Transit facility was not breached since it is not the case of the department that the rules were violated or an attempt was made to tamper with the seals or pilferage of the goods in transit---Levy and charge of custom duty and taxes are attracted in the case of transit goods if they are unauthorizedly unloaded from the licensed bonded carriers or even if such an attempt is made, or the transit rules are materially breached---In the absence of such acts, the goods in transit are not subject to payment of duties and taxes---In the present case the show cause notice had alleged violations of sections 32 & 129 of the Customs Act, 1969 ('Act of 1969'), despite no attempt having been made to pilfer the goods in transit and the absence of any actus rea that could have been construed as an intent to use the goods for a purpose other than transit to Afghanistan---Offence under section 32 of the Act of 1969 is relatable to the duty, taxes or charge which has not been levied or has been short levied or has been erroneously refunded---In the case in hand, there is no allegation against the respondent-company of having evaded or of making an attempt to evade the duties, taxes or any charge---Offence under section 32 of the Act of 1969 was, therefore, not attracted in the facts and circumstances of the case---It is also not the stance of the petitioner department that the Federal Government, by notification, had prohibited bringing into Pakistan the polyester fabric found in excess of the declared value---Petition for leave to appeal was disposed of and leave was refused.

Abdul Rauf Rohaila, Senior Advocate Supreme Court for Petitioner.

Ayaz Shaukat, D.A.G. along with Afnan, Additional Collector for Federation.

Nemo for Respondents.

2023 P T D 1617

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Syed Mansoor Ali Shah

and Munib Akhtar, JJ

CIVIL APPEAL NO. 24-Q OF 2014

(On appeal from the judgment dated 20.09.2010 passed by the Balochistan High Court, Quetta in Constitutional Petition No.320 of 2010)

AND

CIVIL APPEAL NO. 26-Q OF 2018

(On appeal from the judgment dated 15.07.2013 passed by the Balochistan High Court, Quetta in Custom References Nos. 20 and 23 of 2018)

Haji TOOTI and another

Versus

FEDERAL BOARD OF REVENUE, ISLAMABAD and others

Civil Appeal No.24-Q of 2014 and Civil Appeal No. 26-Q of 2018, decided on 26th May, 2021.

Per Munib Akhtar, J; Umar Ata Bandial, CJ. agreeing; Syed Mansoor Ali Shah, J. also agreeing but with his own reasons.

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

----Ss. 181 & 223---SRO 574(I)/2005 dated 06.06.2005 ("SRO 574"), vires of---Option to pay fine in lieu of confiscated goods---Officers of customs to follow Board's orders, etc.---Whether SRO 574 issued by the Federal Board of Revenue in exercise of its powers under section 181 of the Customs Act 1969 ("Act") is ultra vires the proviso to section 223 of the Act---Legislative and administrative orders issued by the Federal Board of Revenue under sections 181 & 223 of the Customs Act 1969---Extent, scope and nature of such orders explained.

Per Munib Akhtar, J. (Majority view):

The case put forward by the appellants was that SRO 574(I)/2005 dated 06.06.2005 ("SRO 574") was ultra vires section 223 of the Customs Act, 1969 ('the Act'); that this was so because it unlawfully interfered with the discretion granted by the main part of section 181 of the Act to the concerned officer to "give the owner of the goods an option to pay in lieu of the confiscation of the goods such fine as the officer thinks fit"; that the second proviso made the notification issued by the FBR (i.e., SRO, 574) binding thereby wholly depriving the officer of the discretion conferred on him. This, according to the appellants, could not be done by the FBR by reason of section 223 of the Act.

The order made by the concerned officer under section 181 is not in exercise of quasi-judicial functions. It is in exercise of a statutory power, and is in the nature of an administrative or executive order. Secondly, if the submissions made by the appellants are accepted that would in effect reduce the second proviso of section 181 to redundancy. This would be so because any exercise of the statutory power thereby conferred would "interfere" with the power conferred on the officer of customs under the main part. The result would be that the power under the second proviso could never be exercised, i.e., would be made redundant. Thirdly, appellants misunderstood section 223. This section is not exclusive to the Act; it is to be found in all fiscal statutes, cast in nearly identical terms. It confers a broad and general power, of an administrative and executive nature, on the FBR (in its capacity as the body at apex of the fiscal hierarchy) to supervise, control and guide the tax authorities in the discharge of their duties and functions under the tax laws. However, some of those powers and duties are of a quasi-judicial nature such as, e.g., those conferred on officers holding an appellate post (Collector (Appeals)) or exercising powers in revision. It would obviously be wrong in principle (and contrary to the well-established jurisprudence of the Supreme Court and the High Courts) for the FBR to be in a position to influence or affect the proceedings of such authorities. Hence, the proviso. It is not to be regarded as a standalone provision; it makes sense only when read along with the main part of section 223.

The power exercised by the FBR in terms of the provisos to section 181 is not an exercise of the general statutory power conferred by section 223. That is, a notification issued under section 181 is not some general administrative or executive order, instruction or direction given by the FBR. It is rather the exercise of a specific and separate statutory power conferred under a different provision for a distinct purpose.

Sections 181 and 223 are separate and distinct, one from the other. The effect of the submissions made by the appellants would however be to conflate and merge the two, one into the other. SRO, 574 cannot therefore be regarded as ultra vires section 223 of the Act. Appeals were dismissed.

Per Syed Mansoor Ali Shah, J.

The power exercised by the customs officer under section 181 of the Customs Act, 1969 ('the Act') is quasi-judicial in nature. An order passed by the customs officer, in exercise of his discretion under section 181 of the Act, giving or not giving the owner of the goods an option to pay in lieu of the confiscation of the goods such fine as he thinks fit, being ancillary to his power of confiscating the goods and involving the exercise of discretion, is quasi-judicial and not administrative or executive in nature.

M.A. Rahman v. Federation of Pakistan 1988 SCMR 691; Tariq Transport Company v. Sargodha-Bhera Bus Service PLD 1958 SC 437; Messrs Faridsons Ltd. v. Government of Pakistan PLD 1961 SC 537 and Dr. Zahid Javed v. Dr. Tahir Riaz PLD 2016 SC 637 ref.

The orders made by the Federal Board of Revenue ('the Board') under the provisos to section 181 and the orders, instructions or directions issued by it under section 223 of the Act are two different species: one passes for delegated legislative power while the other is merely recognition of administrative supervisory power of the Board. Section 223 provides that officers of customs and other persons employed in the execution of the Act are to observe and follow the orders, instructions and directions of the Board. Under the said provision, the Act is recognizing or acknowledging that the Board has the power to issue orders, instructions and directions to all the officers of customs and that any such orders, instructions and directions issued by the Board shall be binding on the officers of customs in execution of the Act. This statutory acknowledgement of the power of the Board to issue administrative orders, instructions and directions to all the customs officers has no bearing on the rights of the third parties. Section 181 of the Act, on the other hand, provides for giving an option to the owner of goods to pay fine in lieu of confiscation of goods, and its provisos authorize the Board to specify, by an order, any goods or class of goods where such option shall not be given and also to fix the amount of fine, which in lieu of confiscation shall be imposed on any goods or class of goods. The delegation of power under the provisos to the Board, thus, passes for delegated legislation and affects third party rights. The two species of power, therefore, do not conflate or converge.

The Legislature by enacting the first proviso to section 181 has delegated the power to the Board for creating exception to the application of the main provisions of the Section to certain goods or class of goods, and by the second proviso delegated such power for limiting the discretion of the adjudicating customs officer in fixing the amount of fine which he, in lieu of confiscation, can impose on certain goods or class of goods under the main provisions of the Section. An order made by the Board under the powers conferred on it by any one of the two provisos to section 181 is, thus, delegated legislation. Once the Board validly makes such order, it partakes the colour and authority of a statutory instrument. It is read as part of section 181 and has the force of law accordingly. Such order having the force of law is, therefore, binding on the adjudicating customs officer while performing his quasi-judicial function under section 181.

Collector of Customs v. Muhammad Tasleem 2002 MLD 296 and Collector Customs v. Salman Khan 2015 PTD 1733 affirmed.

Collector of Customs v. Wali Khan 2017 SCMR 585 and Maqbool Ahmed v. Customs Appellate Tribunal 2009 SCMR 226 ref.

The orders, instructions and directions issued by the Board under section 223 to the Customs Officers are, therefore, administrative/ executive in character as only the customs officers and other persons employed in the execution of the Act are bound to observe and follow them. Such orders, instructions and directions are not binding on the assessees or other persons whose matters are to be dealt with under the Act. As a corollary, they are also not binding on customs officers who exercise quasi-judicial functions as well as on the appellate authority/tribunal and the courts. They being not applicable to and enforceable against all concerned, thus, lack generality - an essential characteristic of a legislative instrument. They are also limited to the administrative matters dealt with by the customs officers in the execution of the Act, and can be issued by the Board only in respect of matters falling within the range of the administrative functions of the customs officers.

State Bank of Travancore v. Commissioner of Income Tax AIR 1986 SC 757; Messrs Central Insurance Co. v. CBR 1993 SCMR 1232 and Collector of Customs v. Askari Cement 2020 SCMR 649 ref.

The provisos to Section 181 and the SROs issued thereunder, thus, do not conflict in any manner with the proviso to section 223 of the Act as the latter relates to the administrative orders, instructions or directions of the Board, and not to the legislative order of the Board.

Per Munib Akhtar, J.

(b) Interpretation of statutes---

----Redundancy of a provision in a statute---Redundancy is not to be lightly imputed, and an interpretation that yields such a result is to be avoided if at all possible.

Naseebullah Khan, Advocate Supreme Court for Appellants (in both cases, Video-Link, Quetta).

Shakeel-ur-Rehman, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.A. No.24-Q of 2014).

Iftikhar Raza Khan, Advocate Supreme Court for Respondents (in C.A. No.26-Q/2018, Video-Link, Quetta).

2023 P T D 1635

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Munib Akhtar and Yahya Afridi, JJ

FEDERAL BOARD OF REVENUE

Versus

DEWAN SALMAN FIBER LTD. and others

Civil Appeals Nos. 1089 to 1090 of 2015, decided on 1st September, 2023.

(On appeal from the order dated 14.5.2015 passed by the Islamabad High Court, Islamabad in I.C.A. No.82 of 1997, W.Ps. 287 and 1105 of 1996 in of 20)(sic.)

Per Munib Akhtar, J; Umar Ata Bandial, J., agreeing; Yahya Afridi, J. partially dissenting.

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

----S. 13(1)---Protection of Economic Reforms Act (XII of 1992), Ss. 3 & 6---SRO 580(I)/91 dated 27.06.1991 ('SRO 580/91')---SRO 561(I)/94 dated 09.06.1994 ('SRO 561/94')---SRO 612(I)/94 dated 14.06.1994---Manufacturer of polyester staple fiber (PSF) in North-West Frontier Province (now Khyber Pakhtunkhwa)---Exemption from sales tax, removal of---Sales tax imposed on raw materials i.e. mono-ethylene glycol (MEG) and pure terephthalic acid (PTA)---Legality---Whether SRO 580/91 came within the ambit of section 6 of the Protection of Economic Reforms Act, 1992---[Per Munib Akhtar, J. (Majority view): If a notification came within the scope of section 6 of the Protection of Economic Reforms Act, 1992 ('the 1992 Act'), it could not then be "altered to the disadvantage of the investors"---SRO 580/91 came squarely within the scope of said section; it was intended to encourage industrialization in North-West Frontier Province (now Khyber Pakhtunkhwa)---SRO 580/91 thus provided a fiscal incentive for investment, which came within the scope and meaning of "economic reforms"; it specified the period within which the industry had to be set up: 01.07.1991 to 30.06.1996---SRO 561/94 on the other hand, while covering the same ground as SRO 580/91 and even (if the provisos were taken into account) ostensibly the same period, clearly altered the benefit and incentive provided under the earlier notification to the disadvantage of the investors---It could not prevail against the provisions of section 6 of the 1992 Act---In this context section 3 of the 1992 Act is also relevant, which provides that the Act is to have overriding effect over the various statutes mentioned therein and also "any other law for the time being in force"---Sales Tax Act, 1990 was a law that clearly came within the scope of the overriding clause---Therefore, notwithstanding the issuance of SRO 561/94 and the purported supersession of SRO 580/91 thereby, the latter notification continued to remain available for its term by virtue of section 6 of the 1992 Act---Benefit of the exemption from sales tax under SRO 580/91 was available for the respondent company's Unit II, and could not be defeated by SRO 561/94---Impugned judgment of High Court was affirmed]---[Per Yahya Afridi, J. (Minority view): Challenge of the respondent-company to SRO 561/94 is to be upheld not only on the basis of section 6 of the Act of 1992, as done by the Majority view, but also on the doctrines of vested rights and promissory estoppel]---Appeal were dismissed.

Collector of Central Excise v. Azizuddin Industries PLD 1970 SC 439 and Army Welfare Sugar Mills v. Federation of Pakistan 1992 SCMR 1652 ref.

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

----S. 13(1)---Protection of Economic Reforms Act (XII of 1992), S.6---SRO 462(I)/88 dated 26.06.1988 ('SRO 462/88')---SRO 482(I)/92 dated 14.05.1992 ('SRO 482/92')---SRO 529(I)/88 dated 26.06.1988 (SROs 529/88)---SRO 580(I)/91 dated 27.06.1991 (SRO 580/91)---Manufacturer of polyester staple fiber (PSF) in North-West Frontier Province (now Khyber Pakhtunkhwa)---Exemption from sales tax, removal of---Sales tax imposed on raw materials i.e. mono-ethylene glycol (MEG) and pure terephthalic acid (PTA)---Legality---Whether SRO 462/88 came within the ambit of section 6 of the Protection of Economic Reforms Act, 1992--- [Per Munib Akhtar, J. (Majority view): SRO 462/88 provided exemption from sales tax on the import/supply of MEG and PTA, the raw materials of PSF---SRO 462/88 superseded SRO 652(I)/81 dated 25.06.1981---Perusal of the latter notification shows that the exemption for MEG and PTA had also been given therein---SRO 462/88 was superseded by SRO 482/92, and the latter notification did away with the exemption for MEG and PTA---Protection of Economic Reforms Act, 1992 ('the 1992 Act') did not as such apply to SRO 462/88 in and of itself---This is so for two separate and distinct reasons---Firstly, SRO 462/88 was issued before 07.11.1990, the date specified in the definition of "economic reforms" for purposes of the 1992 Act---Secondly, it was not a time bound notification, i.e., the exemption granted in terms thereof did not operate over any specific period---High Court erred materially in coming to the conclusion that the company was entitled to the relief that it sought in respect of SRO 482/92---To such extent the impugned judgment of High Court was set-aside]---[Per Yahya Afridi, J. (Minority view): While examining the claim of the respondent-company in respect of SRO 482/92, the Majority view has not adverted to doctrines of vested rights and promissory estoppel and the well-established principle that what cannot be done directly is not permissible to be done indirectly, and has limited the judicial review of the act of the Government only to the extent of examining its legal power to issue the said SRO, within the scope of Act of 1992---Admittedly, SRO 482/92 withdrew the exemption of sales tax on raw material earlier granted vide SRO 462/88, and thus, the payment thereof became an additional cost for the respondent-company, as it could not be adjusted against the output tax, which had been exempted vide SRO 529(I)/88 dated 26.06.1988 (SROs 529/88) and SRO 580(I)/91 dated 27.06.1991 (SRO 580/91)---More importantly, the incentives offered for establishing an industrial unit in a less developed area had in effect been reduced to naught, and that too, after the respondent-company had done all that was required on its part, to acquire vested right to avail the benefit under the said SROs---Such impugned steps were in effect respondent-company specific, and not only adversely affected its vested rights, but blatantly benefited the commercial interests of the competitors---More so, the Government also defied the raison d'etre of the Act of 1992---By taking such unconscionable steps, like issuing SRO 482/92, the very object of inviting and protecting foreign investments in less developed areas of the country had been blatantly thwarted---SRO 482/92 cannot be made applicable to the respondent-company in taking away indirectly the exemption of sales tax granted to it by SROs 529/88 and SRO 580/91; and SRO 482/92 shall not apply to the respondent-company during the period of exemption from sales tax provided under SROs 529/88 and SRO 580/91]---Appeals were partly allowed.

Abdul Baqi v. Government of Pakistan PLD 1968 SC 313; Nawaz Sharif v. President of Pakistan PLD 1993 SC 473; Shahid Mehmood v. Afzal Mehmood 2011 SCMR 551; Al-Jehad Trust v. Federation of Pakistan PLD 2011 SC 811; Hanif Abbasi v. Imran Khan PLD 2018 SC 189 and Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 ref.

(c) Central Excise Act (I of 1944)---

----S. 3---Protection of Economic Reforms Act (XII of 1992), S. 6---SRO 531(I)/88 dated 26.06.1988 ('SRO 531/88')---SRO 555(I)/79 dated 28.06.1979 ('SRO 555/79')---SRO 500(I)/93 dated 14.06.1993 ('SRO 500/93')---SRO Nos. 545(I)/94 and 546(I)/94, both dated 09.06.1994 ('SRO 545/94' and 'SRO 546/94' respectively)---SRO 477(I)/95 dated 14.06.1995 ('SRO 477/95')---Manufacturer of polyester staple fiber (PSF) in North-West Frontier Province (now Khyber Pakhtunkhwa)---Exemption from excise duty on raw materials mono-ethylene glycol (MEG) and pure terephthalic acid (PTA)---Removal of---Legality---Whether SRO 531/88 came within the ambit of section 6 of the Protection of Economic Reforms Act, 1992---[Per Munib Akhtar, J: SRO 531/88 amended a general exemption notification issued under the Central Excises Act, 1944 ('1944 Act'), SRO 555(I)/79 dated 28.06.1979 ("SRO 555/79")---Effect was to grant complete exemption from excise duty in respect of the manufacture of PSF---Now, before this notification (i.e., SRO 531/88) was issued, the position was that even under SRO 555/79 the manufacture of PSF was liable to the payment of excise duty, though at the exempted rate of Rs.2.50 per kg---Thus, when the respondent-company was incorporated (1989) and its units came into operation thereafter the complete exemption from excise duty was a relatively recent phenomenon---Practice adopted under the 1944 Act was for general exemption notifications to be issued, encompassing a wide range and variety of manufactured goods---SRO 555/79 was replaced by another such general notification (SRO 500/93), which in turn gave way to two general notifications, both issued on 09.06.1994, being SRO 545/94 and SRO 546/94---For present purposes, the combined effect of all of this was that the (complete) exemption from excise duty on the manufacture of PSF provided by SRO 531/88 was continued---Then came SRO 477/95, which amended SRO 546/94 such that a 5% excise duty was imposed on the manufacture of PSF---Protection of Economic Reforms Act, 1992 ('the 1992 Act') did not as such apply to SRO 531/88 in and of itself---This is so for two separate and distinct reasons---Firstly, SRO 531/88 was issued before 07.11.1990, the date specified in the definition of "economic reforms" for purposes of the 1992 Act---Secondly, neither it nor the general exemption notification that it amended (SRO 555/79), nor the general exemption notifications that came thereafter were time-bound notifications, i.e., the exemptions granted in terms of the general notifications did not operate over any specific period---High Court erred materially in coming to the conclusion that the company was entitled to the relief that it sought in respect of SRO 477/95---To such extent the impugned judgment of High Court was set-aside]---[Per Yahya Afridi, J: As to SRO 477/95, the doctrines of vested rights and promissory estoppel do not affect the exercise of its legal power by the Government to withdraw the exemption of excise duty as the Government had not made the earlier exemption from excise duty conditional on establishing an industrial unit in the specified less developed areas, as it had done in regard to sales tax exemption]---Appeals were partly allowed.

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

----Ss. 3(1) & 3(2)---Protection of Economic Reforms Act (XII of 1992), S. 6---SRO 515(I)/95 dated 14.06.1995 ('SRO 515/95')---Manufacturer of polyester staple fiber (PSF) in North-West Frontier Province (now Khyber Pakhtunkhwa)---Exemption from sales tax, removal of---Sales tax imposed on raw materials i.e. mono-ethylene glycol (MEG) and pure terephthalic acid (PTA)---Legality---Whether SRO 515/95 came within the ambit of section 6 of the Protection of Economic Reforms Act, 1992---[Per Munib Akhtar, J: SRO 515/95 reduced the rate of sales tax on the supply of PSF to 10%---At that time (14.06.1995) the rate was 15%---This notification did not, as such, apply to the company itself since the latter in any case enjoyed a complete exemption from sales tax for the specified periods in relation to its units---Rather, it applied in relation to its competitors---Now, SRO 515/95 was issued under subsection (2) of section 3 of the Sales Tax Act, 1990 ('the 1990 Act'), as those provisions then stood---At that time, this subsection (in its clause (a)) allowed the Federal Government, by notification in the Official Gazette, to provide that the supplies of goods as specified therein were to be charged at such higher or lower rates as set out in the notification, i.e., the specified rates could be greater or less than the statutory rate given in section 3(1)---And that is what was done by SRO 515/95---It was not an "exemption" notification, providing only for a rate of sales tax less than 15%---For many of the goods specified therein, the rate was in fact enhanced beyond and above the statutory rate---SRO 515/95 was therefore of a character somewhat different from a simple exemption notification---For the supply of some goods (such as PSF) it provided a benefit but for others it acted in a negative manner---It is therefore not easy to "fit" this notification into the scheme of section 6 of the Protection of Economic Reforms Act, 1992 ('the 1992 Act')---However, even if one focuses only on the supply of PSF (and those goods where the rate was reduced below that provided in the statute) the notification did not come within the scope of section 6---This is so because it did not provide for any time-bound measure---High Court erred materially in coming to the conclusion that the company was entitled to the relief that it sought in respect of SRO 515/95---To such extent the impugned judgment of High Court was set-aside]---[Per Yahya Afridi, J: As to SRO 515/95, the doctrines of vested rights and promissory estoppel do not affect the exercise of its legal power by the Government to reduce the rate of sales tax on final product for the competitors, as the Government had not made any representation to the respondent-company that it would not reduce the rate of sales tax on final product for the competitors]---Appeals were partly allowed.

Dr. Farhat Zafar, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record for Appellant.

Abdul Hameed Anjum, Secy. Legal FBR (in C.As. Nos.1089-1090 of 2015).

Sikandar Bashir Mohmand, Advocate Supreme Court for the Contesting Respondents (in C.As. Nos.1089-1090 of 2015).

2023 P T D 1718

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, CJ, Qazi Faez Isa and Syed Mansoor Ali Shah, JJ

Civil Appeals Nos. 94 to 106/2008

(On appeal against the judgment dated 12.10.2007 passed by the High Court of Sindh, Karachi in ITRAs Nos. 71/1997, 99/2006, 274/1997, 275 to 281/1998, 514 to 516/2006)

And

Civil Appeal No. 550/2011

(On appeal against the judgment dated 11.11.2010 passed by the High Court of Sindh, Karachi in I.T.R. No. 229/2005)

The COMMISSIONER OF INCOME TAX

Versus

Messrs INTER QUEST INFORMATICS SERVICES

Civil Appeals Nos. 94 to 106/2008 and Civil Appeal No. 550/2011, decided on 8th September, 2023.

Per Qazi Faez Isa, J.; Umar Ata Bandial, CJ. agreeing; Syed Mansoor Ali Shah, J. dissenting

Income Tax Ordinance (XLIX of 2001)---

----Ss. 107 & 133(1)---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss. 163 & 136(1)---Convention between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, 1982, Arts.7, 12, paras. (3)(a), (3)(b), 22, 23 & 24---Concept of "Royalties"--- Scope--- Business profits---Non-resident foreign company---Exemption from income tax---Income/royalties earned by the non-resident company in Pakistan for the lease of certain software---Whether such income was business profits and thus exempt from payment of income tax in Pakistan under Article 7 of the Convention between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ('the Convention'), or the same constituted "royalties" as defined in paragraph 3 of Article 12 of the Convention and was liable to tax.

Per Qazi Faez Isa, J. (Majority view)

The respondent, a company incorporated in the Netherlands and thus a non-resident for Pakistan income tax purposes, and another company ('SSI'), which had a place of business in Pakistan, entered into an 'Agreement for Lease of FLIC Tapes' dated 1 February 1986 and a 'Software Rental Agreement' dated 1 January 1995 (respectively 'the 1986 Agreement', 'the 1995 Agreement' and collectively 'the Agreements'). In the 1986 Agreement 'SSI' is described as the lessee and in the 1995 Agreement it is described as the customer. The tax returns filed by the respondent claimed that the said receipts were business profits and exempt from payment of income tax in Pakistan under Article 7 of the Convention between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ('the Convention'). However, the appellant's (tax department's) case was that the receipts were royalties under Article 12 of the Convention and the respondent was liable to pay income tax thereon at the rate of fifteen percent. The Income Tax Officer, Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal unanimously determined that the receipts of payments by the respondent constituted royalties in terms of paragraphs 3(a) and (b) of Article 12 of the Convention and were liable to income tax. The respondent then assailed the assessment orders, the appellate orders and the judgments of the Tribunal before the High Court by filing references. The High Court decided in favour of the respondent, and held that the amounts received by the respondent for leasing FLIC tapes (software programs) did not fall within the definition of income arising from royalties.

The respondent did not clearly set out its case and did not provide the following information, documents and facts or provided misleading information:

(1) The respondent did not explain what each Agreement dealt with, which was necessary in view of their technical nature and as the language used therein was not self-evident, particularly the terms mentioned in the schedules thereto;

(2) The respondent did not state that the 1986 Agreement, the duration of which was for four years, still subsisted, yet referred to FLIC tapes which were only mentioned therein (FLIC tapes were not mentioned in the 1995 Agreement);

(3) The respondent did not itemize the nature of the receipts and then on the basis thereof claim that they did not constitute royalties (under Article 12 of the Convention) and that the same constituted business profits (under Article 7 of the Convention);

(4) The respondent in its reply to the notices sent by the Income Tax Officer did not deny certain components of royalties (mentioned in paragraph 3 of Article 12 of the Convention);

(5) The respondent did not specifically state under which Agreement it had received payment, and for what; and

(6) The respondent had relied upon Article 12 of the 'Organization for Economic Co-operation and Development Model Convention' ('OECD MC'), its Commentary and textbook explanation/interpretation thereof, and did so despite the fact that the Convention's Article 12 had applied Article 12 of the 'United Nations Model Double Taxation Convention between Developed and Developing Countries' ('UN MC'), and not Article 12 of the OECD MC.

There were also the following drawbacks and legal shortcomings in the respondent's case:

(1) The respondent did not present its case to the competent authority of its country (the Netherlands) under Article 24 of the Convention, and thus its point of view did not come forth and could not be considered;

(2) If the respondent had presented its case (as stated above) and if the competent authority of the Netherlands had supported the respondent's contention there was the possibility of the two countries resolving the matter and/or making regulation/s with regard thereto in terms of the Convention;

(3) That by foregoing (1) and (2) (above) a very technical matter came before the High Court, which the High Court proceeded to determine without having the requisite technical expertise and without being provided it; and

(4) The respondent had invoked the jurisdiction of the High Court under section 136(1) of the Income Tax Ordinance, 1970 ('ITO 1979') and section 133(1) of the Income Tax Ordinance, 2001 ('ITO 2001') which was restricted to questions of law, however, factual determination of whether the receipts constituted royalties was considered despite three forums (below) concurrently deciding the same against the respondent.

The High Court erred with regard to the following:

(1) The High Court overlooked the fact that the High Court's jurisdiction under section 136(1) of the ITO 1979 and section 133(1) of the ITO 2001 was limited to considering and deciding questions of law, however, the instant cases were filed to overturn the factual determination made by three qualified forums (below) which had determined that the receipts were not royalties in terms of Article 12 of the Convention;

(2) The High Court did not appreciate, as probably it was not explained to by the respondent, that there was no mention of FLIC tapes in the 1995 Agreement, and presumed that the receipts were payment for temporary use of FLIC tapes, which were only mentioned in the 1986 Agreement;

(3) The High Court proceeded on an incorrect assumption that Article 12 of the Convention was based on Article 12 of the OECD MC, whereas in fact it was based on Article 12 of the UN MC, whereunder royalties earned in Pakistan were taxable;

(4) The High Court did not consider the matter and the Convention holistically, including comprehensively considering Articles 7 and 12 thereof, and overlooked its Articles 22, 23 and 24;

(5) The High Court without setting out the nature of the receipts, let alone doing so in detail, assumed that they did not constitute royalties in terms of Article 12 of the Convention, and did so without analogizing the receipts against the definition of royalties in paragraph 3 (a) and (b) of Article 12 of the Convention;

(6) The High Court failed to appreciate that the Convention was a complete document, each term whereof had to be considered, and instead proceeded to interpret it in the light of precedents and textbook explanations of general terms (which were not so used in the Convention), and also did so without appreciating that the Convention's Article 12 was based on Article 12 of the UN MC and not on Article 12 of the OECD MC;

(7) The High Court also (apparently) failed to appreciate that if the respondent was taxed in Pakistan under paragraph 2 of Article 12 of the Convention its tax liability to such extent would have been accordingly adjusted in the Netherlands, and the respondent would not have been double taxed;

(8) The High Court appears not to have considered that the receipts that were taxed were the respondent's earnings in Pakistan, and to have kept this under consideration when considering the applicability of Article 12 of the Convention; and

(9) The High Court did not abide by the recognized principle of interpretation that the State in which payment is made (under the Convention) is generally entitled to tax such payment.

A. P. Moller v Commissioner of Income Tax 2012 SCMR 557 ref.

Impugned Judgments of the High Court in all appeals are not sustainable nor are the reasons given by the High Court to set aside the assessment orders, the appellate orders and the Tribunal's judgments, which are accordingly restored. Consequently, present appeals are allowed by setting aside the impugned Judgments of the High Court.

Per Syed Mansoor Ali Shah, J. (Minority view)

The character of payments received in transactions involving the transfer of computer software depends on the nature of the rights that the transferee acquires under the particular arrangement regarding the use and exploitation of the program. For a payment to constitute royalty under the Convention, it must fall at least in one of the three categories provided in Article 12(3) of the Convention. One can start by narrowing down the possibilities envisaged in Article 12(3) of the Convention. The agreement for the use of FLIC tapes (software programs) concluded between the respondent and the lessee on 1 February 1986 ("Agreement") did not involve payments made for the use of or the right to use any patent, trademark or trade name, design or model, or cinematograph films and tapes for television and broadcasting. The next issue is whether the Agreement involved payments made for the use of or the right to use any industrial, commercial or scientific equipment. 'Equipment' consists of tangible movable objects and since the software itself is only comprised of instructions and is pure intangible information, it is not covered by the equipment clause. It follows that the Agreement also did not involve payments made for the use of or the right to use any industrial, commercial or scientific equipment.

Matthias Valta and Stella Langner, in Reimer and Rust (eds), Klaus Vogel on Double Taxation Conventions (5th edn 2021) vol 1, art. 12, paras 160-162, 173-174 ref.

As regards the remaining possibilities envisaged in Article 12(3) of the Convention, insofar as the present case is concerned, with the payments made for the use of or the right to use secret formula or process, information concerning industrial, commercial or scientific experience or a copyright of a literary, artistic or scientific work. A secret formula or process comprises all kinds of company secrets, also known as industrial or trade secrets. The key element here is secrecy. This information must be confidential, meaning it is not widely known or easily accessible to those who typically deal with such information. It should have commercial value because of its secrecy and should be actively protected by the person who rightfully controls it through reasonable efforts. In the Agreement under the definition clause, the term 'FLIC tapes' means the full set of the respondent's proprietary software programs developed for use in oilfield data processing and log interpretation, including the software programs set out in the schedule attached to the Agreement, together with the related FLIC/VAX Handbook. Notably, however, what is not included is "any other related documentation such as, but not limited to, source code listings, program specifications, system flow charts, logic diagrams, system manuals or other documentation underlying and supporting the FLIC tapes". The reason for this exclusion is the respondent's intention that users shall have no knowledge of how FLIC tapes operate. It shows that the Agreement did not envisage supplying of information about the ideas and principles underlying the program, such as logic, algorithms or programming languages or techniques. The transaction between the respondent and the lessee cannot, therefore, be said to be a transfer of secret formulas or process behind the software.

Concerning the question of information regarding industrial, commercial or scientific experience which is also known as know-how, it is seen that it is legally unprotected, not-secret-but-undisclosed knowledge that has been attained through experience. Such experience knowledge must go beyond the pure technical progress; it is related to persons having gained the knowledge by their activities. Such experience cannot be obtained simply by using the goods and services that are produced with the knowledge. Experience-based knowledge extends beyond mere technical progress and is tied to individuals who have acquired it through their activities. No such experience was shared between the parties under the Agreement. When know-how is shared, it cannot be taken back and its use cannot be prohibited. The transfer of the use cannot be distinguished from a transfer of full ownership. However, in this case, the lessee, on termination of the Agreement, and the lease granted under it, was bound to deliver up the FLIC tapes to the respondent together with all copies of any part of the FLIC tapes held or made by the lessee. Moreover, know-how beyond software can only be the specific programming design and structure such as algorithms and not the program itself. This means that the chance of the Agreement to involve payments for the use of or the right to use information concerning industrial, commercial or scientific experience is also eliminated.

Matthias Valta and Stella Langner, in Reimer and Rust (eds), Klaus Vogel on Double Taxation Conventions (5th edn 2021) vol 1, Art. 12, paras 163-168 and Matthias Valta and Stella Langner, in Reimer and Rust (eds), Klaus Vogel on Double Taxation Conventions (5th edn. 2021) vol 1, art 12, para 175 ref.

Finally it has to be determined if the case falls under the last possibility: whether the payments were made to the respondent in consideration for the use of or the right to use a copyright of a literary, artistic or scientific work. The Agreement between the respondent and the lessee did not contemplate any licence to reproduce and distribute to the public software incorporating the copyrighted program, or to modify and publicly display the program. Therefore, there wasn't any transfer of rights to use the program in a manner that would, without such licence, constitute an infringement of copyright. Nor was there any transfer of the full ownership of the rights in the FLIC tapes. The rights acquired by the lessee comprised of partial rights in the copy of the program. Income from the renting out of software is not covered by Article 12 but by Article 7 of the UN Model Convention ("UN MC") and OECD Model Convention ("OECD MC"). In view of this, what follows is that no copyrights were leased out to the lessee which merely acquired a program copy of FLIC tapes for its operations.

Matthias Valta and Stella Langner, in Reimer and Rust (eds), Klaus Vogel on Double Taxation Conventions (5th edn 2021) vol 1, art. 12, para 174; Geoquest Systems B.V. Gevers Deyootweg v. Director of Income Tax (2010) 327 and Engineering Analysis Centre of Excellence Private Limited v The Commissioner of Income Tax 2022 (3) SCC 321 ref.

The reliance placed by the High Court on the OECD MC and its Commentary, in order to decipher the true nature of payments received by the respondent and to understand the concept of royalties in the context of double taxation makes no material difference to the adjduciation of the case in hand. Notably, the UN MC Commentary on paragraph 3 of Article 12 includes the entire extract of the OECD MC Commentary on the question whether payments received as consideration for computer software are to be classified as royalties or not.

The majority judgment (of the present case) without definitively addressing whether the amounts received by the respondent constitute royalties, instead embarks upon a discussion which was not in contention between the parties. Thus the remark (in the majority judgment) that if the respondent was not taxed in Pakistan, it might still be subject to taxation in the Netherlands, is not a pertinent consideration for a court tasked with adjudicating a legal dispute. Once it is established that the income earned by the respondent non-resident Dutch company for leasing software in Pakistan does not qualify as royalty, delving into irrelevant factors serves no useful purpose. Furthermore, the majority asserts that the High Court's jurisdiction in this case was limited to addressing and deciding questions of law. It is worth noting that the sole point of contention between the parties revolved around whether the amounts received by the respondent constituted royalties or not, a matter which is a question of law squarely within the purview of the High Court.

The majority judgment suggests that the respondent had an alternative remedy under Article 24 of the Convention to present its case to the competent authority in its own country. It is said that if the competent authority in the respondent's country agreed, it could then take up the matter with the competent authority in Pakistan. However, this provision of the Convention neither precludes the respondent from pursuing a remedy available under the laws of Pakistan, nor does it prevent the Supreme Court from adjudicating a question coming before it in its lawful jurisdiction.

Respondent is correct in claiming that there is distinction between the use of copyright and the use of copyright product. No copyrights were leased out to the lessee which merely acquired a program copy of FLIC tapes (software programs) for its operations. Further, the transaction of lease of FLIC tapes software programs between the respondent and the lessee did not involve payments made for the use of or the right to use secret formula or process, or information concerning industrial, commercial or scientific experience. Income resulting from the lease of FLIC tapes amounts to business profits and cannot be treated as income arising from royalties. Therefore, Article 12 of the Convention is not applicable to this case. Judgment of the High Court did not warrant any interference.

A.P. Moller v. Commissioner of Income Tax 2012 SCMR 557 distinguished.

Ms. Misbah Gulnar Sharif, Advocate Supreme Court for Appellant (in C.As. Nos. 94 to 106 of 2008).

Ch. Akhtar Ali, Advocate-on-Record for Appellant (in C.A. No. 94 of 2008).

Sh. Mehmood Ahmed, Advocate-on-Record for Appellant (in C.As. Nos. 95 to 106 of 2008).

Hafiz Ahsan Ahmad Khokhar, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellant (in C.A. No. 550 of 2011).

Makhdoom Ali Khan, Senior Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record assisted by Saad Hashmi and Khawaja Aizaz Ahsan, Advocates for Respondent (in all cases).

2023 P T D 1779

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J. Ayesha A. Malik and Athar Minallah, JJ

DIRECTOR GENERAL CENTRAL DIRECTORATE OF SAVINGS and others

Versus

ABID HUSSAIN and others

Civil Appeals Nos. 23 and 24 of 2017, decided on 8th December, 2022.

(Against the judgment dated 02.05.2016 of the Islamabad High Court, Islamabad passed in Intra Court Appeal No. 13 of 2014)

Income Tax Ordinance (XLIX of 2001)---

----S. 151(1)(a)---National Savings Center located in erstwhile Federally Administered Tribal Area (FATA)---Saving and investment schemes---Deduction of withholding tax---Clause (a) of subsection (1) of section 151 of the Income Tax Ordinance, 2001 ('Ordinance of 2001'), inter alia, provides that where a person pays yield on an account, deposit or a certificate under the National Savings Scheme or Post Office Savings Account, then it becomes a mandatory statutory obligation of the payers of the profit to deduct tax at the rate specified in Part III of the First Schedule from the gross amount of the yield or the profit paid to the recipient---It is a statutory duty of the Central Directorate of National Savings, ("Directorate") to comply with the express requirement provided under section 151(1)(a) of the Ordinance of 2001---National Savings Center, therefore, acts only to facilitate the public in the erstwhile Tribal Areas to avail the benefits of the various national saving schemes offered by the Directorate---Income of the Directorate does not arise nor accrues in the Tribal Areas---Single Judge of High Court had rightly held the deduction of withholding tax relating to the certificates obtained from the Center as legal and constitutional---Appeals were allowed.

Rashdeen Nawaz Qasuri, Additional Attorney General for Appellants (in C.A. No. 23 of 2017).

Ghulam Shoaib Jolly, Advocate Supreme Court for Appellant (in C.A. No. 24 of 2017).

Muhammad Raza Khan, Advocate Supreme Court for Respondents Nos. 1 - 5.

Ex party for Respondents Nos. 6 - 7.

2023 P T D 1797

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Ayesha A. Malik and Athar Minallah, JJ

COLLECTOR OF CUSTOMS PORT MUHAMMAD BIN QASIM, KARACHI

Versus

Messrs MIA CORPORATION (PVT.) LTD. ISLAMABAD

C.M.A. No. 819 of 2019 and Civil Appeal No. 1080 of 2011, decided on 2nd May, 2023.

(Against the judgment dated 28.04.2011 of the High Court of Sindh, Karachi passed in Special Custom Reference Application No.3 of 2010)

Customs Act (IV of 1969)---

----Ss. 80, 81 & 32---Imported goods---Provisional determination of liability---Scope---Initiation of proceedings under section 32 of the Customs Act, 1969 ('Act of 1969'), after the provisional assessment under section 81 of the Act of 1969 has attained finality---Finality of assessment, whether under section 80 or section 81, as the case may be, does not preclude invocation of the offence under section 32, nor proceedings for recovery of duty, taxes or charge that has not been levied, short levied or erroneously refunded within the prescribed time from the relevant date---Finality of assessment under section 80 or section 81, as the case may be, is distinct from the offence described under section 32 and does not bar the proceedings thereunder, provided they are within the limitation period explicitly specified in the case of each eventuality separately.

Raja M. Iqbal, Advocate Supreme Court for Appellant.

Farhat Nawaz Lodhi, Advocate Supreme Court for Respondent.

2023 P T D 1824

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, C.J., Ayesha A. Malik and Athar Minallah, JJ

COMMISSIONER INLAND REVENUE, CHENAB ZONE, RTO, FAISALABAD

Versus

Messrs ROSE FOOD INDUSTRIES, FAISALABAD and another

Civil Petition No. 1345-L of 2021, decided on 2nd February, 2023.

(Against the order dated 12.01.2021 of the Lahore High Court, Lahore passed in STR No. 142 of 2011)

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

----S. 25---Constitution of Pakistan, Art. 10A--- Allegation of suppression of supplies---Show cause notice, issuance of---Scrutiny or re-examination of record---Adjudicating authority adjudicating upon matters without issuance of a fresh show cause notice---Legality---In the present case re-examination of the record was in the nature of conducting an audit under section 25 of the Sales Tax Act, 1990 ('Act of 1990')---Such exercise had led the sales tax officers to raise fresh observations which were distinct from the allegations mentioned in the already served show cause notice---Respondent company, therefore, was at a disadvantage because it did not have a fair and reasonable opportunity to meet the observations since they were beyond the show cause notice which was being adjudicated---High Court had correctly appreciated that the scrutiny or re-examination of the record amounted to an audit and, therefore, the statutory requirements prescribed under section 25 of the Act of 1990 had to be complied with before adjudicating the tax liability.

The show cause notice was issued pursuant to an audit conducted by the sales tax officers. It does not appear from the record that, before issuing the show cause notice, audit observations were issued as required under section 25 of the Sales Tax Act, 1990 ('Act of 1990'). The show cause notice alleged suppression of supplies on the basis of comparison of the declared supplies and the consumption of electricity. After the first order in original was set aside by the Federal Board of Revenue and the matter was remanded, the adjudication officer had ordered re-examination of the record maintained by the respondent company. The re-examination of the record was in fact in the nature of conducting an audit under section 25 of the Act of 1990. This exercise had led the sales tax officers to raise fresh observations which were distinct from the allegations mentioned in the already served show cause notice. The respondent company, therefore, was at a disadvantage because it did not have a fair and reasonable opportunity to meet the observations since they were beyond the show cause notice which was being adjudicated. Moreover, the exercise of re-examination of the record was in the nature of conducting an audit attracting the provisions of section 25 of the Act of 1990. This exercise, undertaken during the adjudication proceedings, had rendered the show cause notice as redundant.

In the case in hand, the re-examination of the record required to be maintained by the respondent company under the Act of 1990, was in the nature of conducting an audit during the quasi-judicial adjudication proceedings. It had resulted in raising of specific allegations which were not part of the show cause notice issued and adjudicated upon. The procedure prescribed under section 25 of the Act of 1990 was also not followed. The adjudicating authority had adjudicated upon matters without issuance of a fresh show cause notice. The invoices submitted by the respondent company could not have been declared as 'fake/ fabricated' nor the adjudication officer was justified in concluding that the respondent company had not made supplies to a distinct recipient company without issuing a fresh show cause notice within the prescribed limitation period. The recipient company was not privy to the adjudication proceedings nor was the respondent company put to notice regarding the observations of the sales tax officials who had subjected the records of the two distinct entities to scrutiny which was in the nature of conducting an audit. The High Court had correctly appreciated that the scrutiny or re-examination of the record amounted to an audit and, therefore, the statutory requirements prescribed under section 25 of the Act of 1990 had to be complied with before adjudicating the tax liability. Petition for leave to appeal was dismissed and leave was refused.

(b) Constitution of Pakistan---

----Art. 10A---Tax matters---Show cause notice, contents of---Scope---Issuance of a show cause notice is the most crucial in the context of a fair trial and due process---It enables a tax payer to precisely know what allegations are to be met, explained and answered to the satisfaction of the adjudication officer---It is the duty of the Department to ensure that a show cause notice is issued after a proper inquiry and investigation---It should be manifest from the contents of the show cause notice that it was issued after ascertaining the facts and the allegations are not vague or ambiguous---Charges or allegations should be specific, otherwise the taxpayer would be prejudiced and denied the right to a fair trial---As a corollary, the adjudication authority has to confine the proceedings to the specific charges and allegations clearly mentioned in a show cause notice and cannot adjudicate any charge or allegation beyond it---Adjudicating a charge or allegation not confronted in the show cause notice would not be sustainable in law.

Mrs. Kausar Parveen, Advocate Supreme Court, M. Ozair Chughtai, Advocate-on-Record and Syed Hassan Sardar, Additional Commissioner for Petitioner.

Nemo for Respondents.

2023 P T D 1843

[Supreme Court of Pakistan]

Present: Qazi Faez Isa, C.J., Amin-ud-Din Khan and Athar Minallah, JJ

Civil Review Petition No. 426 of 2022

(For review of the order dated 03.10.2022 passed by this Court)

In Civil Appeal No. 51 of 2020

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, PESHAWAR and another

Versus

AJMAL ALI SHIRAZ MESSRS SHIRAZ RESTAURANT, PESHAWAR

Civil Review Petition No. 426 of 2022 in Civil Appeal No. 51 of 2020, decided on 27th September, 2023.

Income Tax Ordinance (XLIX of 2001)---

----S. 122---Constitution of Pakistan, Art. 188---Review petition---Power of the Commissioner to amend an assessment order---Delegation of authority by the Commissioner of such power to the Deputy Commissioner---Legality---Plea of Commissioner, Inland Revenue (review petitioner) is that the Deputy Commissioner was delegated powers to amend the assessment vide order No. 616, dated 5th December 2009, issued by the Commissioner Inland Revenue (Audit-I), Regional Tax Office, Peshawar ('the said order') mentioned at serial No. 1 of the Table contained in the said order---Held, that the said order does not refer to section 122 of the Income Tax Ordinance, 2001 ('the Ordinance') with regard to amendment of assessment nor is it so stated under column No. 4 of the Table pertaining to Jurisdiction---Furthermore the said order has neither been gazetted nor is it available on the website of the Federal Board of Revenue ('FBR')---Taxpayers should know who is exercising authority and whether such exercise of authority is permissible---Point raised in the present review petition had already been argued at the time of hearing the order under review and indulgence had also been shown to the petitioner (Commissioner Inland Revenue) to disclose the requisite authority bestowed on the Deputy Commissioner---Same officer, who is present before the Supreme Court today, namely, the Additional Commissioner, FBR was in attendance then too, but he did not refer to the said order---In any case the said order does not delegate the statutory power of the Commissioner to Deputy Commissioners, therefore, the purported amendment made to the assessment order was not sustainable---Said order also does not grant such specific authorization---Consequently, present review petition was dismissed with costs of ten thousand rupees; to be paid to a charity of the choice of the petitioner---Supreme Court observed that all notifications, orders etc. should be gazetted and also displayed on the website of the FBR to facilitate the officers of the FBR, tax practitioners and taxpayers.

Ms. Neelam Azra Khan, Advocate Supreme Court along with Sohail Ahmed, Additional Commissioner (Legal), FBR (through video-link from Peshawar) for Petitioners.

Nemo for Respondent.