APPELLATE TRIBUNAL INLAND REVENUE, SPECIAL
BENCH, PESHAWAR
STA No.102/PB/2014
(Tax period Feb, 2013 to Nov, 2013)
STA No.40/PB/2015
(Tax period Dec, 2013 to Sep, 2014)
|
M/S Frontier Green Wood Industries
(Pvt) Ltd; House No.22, University Town, Old Jamrud Road, Peshawar.
|
|
Appellant
|
|
|
Vs
|
|
|
The Commissioner Inland Revenue,
(Withholding Zone), RTO, Peshawar.
|
|
Respondent
|
|
|
|
|
|
Appellant by:
|
|
Mr.
Isaac Ali Qazi, Advocate
|
|
Respondent by:
|
|
Mr.
Ashfaq Masood & Mr. Muhammad Younis
Khan, DRs
|
|
|
|
|
|
Date of hearing
|
|
05.10.2020
|
|
Date of order
|
|
05.10.2020
|
O R D E R
RDER
M. M. AKRAM (Judicial Member): The titled appeals have been filed by the
Appellant/registered person against Order-in-Appeal Nos.278/2014 dated
28.10.2014 and 392/2015 dated 27.04.2015 passed by the learned Commissioner
Inland Revenue (Appeals), Peshawar in respect of tax periods February, 2013 to
November, 2013 and December, 2013 to September, 2014 respectively on the
grounds as set forth in the memo of appeals. The facts of the case and the
issue involved in the instant appeals are the same and identical, therefore,
both the appeals are being disposed of through this order.
2. The precise facts culled out from the record are that the
Appellant registered persons filed its sales tax returns for the tax periods
under consideration but did not deduct/withhold the sales tax as per rule 2 of
Sales Tax Special Procedure (Withholding) Rules, 2007 notified vide SRO
505(I)/2007 dated 30.06.2007 and subsequently amended through SRO 98(I)/2013
dated 14.02.2013 and SRO 505(I)/2013 dated 13.06.2013 at the time of making
payment to the recipients. On the basis of the aforesaid default, a show cause
notice under section 11(2) of the Sales Tax Act, 1990 (“the Act”) was issued by the Assessing Officer. In response
thereto, the registered person submitted that the raw wood purchase in from of
standing trees being agricultural produce is exempt from the levy of sales tax.
The Assessing Officer did not accept the plea of the registered person and
levied sales tax as well as default surcharge and penalty. Felt aggrieved, the
Appellant registered person preferred the appeals before the learned CIR(A) who
vide orders dated 28.10.2014 and 27.04.2015 confirmed the treatment accorded by
the Assessing Officer. Being aggrieved of the said orders, the appellant has
filed the appeals before this Tribunal and assailed the orders on a number of
grounds.
3. The aforesaid appeals of the Appellant were earlier heard and
disposed of by this Tribunal vide order dated 14.05.2015 by the decision of the
majority Members in favour of the registered person. The Respondent Department
went to choose the reference application under section 47 of the Act before the
Hon’ble Peshawar High Court. The Hon’ble High Court through a common judgment
dated 07.11.2019 disposed of the matter in favour of the Department by
observing in paras 12 to 14 of the judgment which reads as under;-
“12.
It may not lose the sight of the Court the word “wood” has not been
specifically mentioned in entry No.10 of table-2 of the 6th Schedule
of the Sales Tax Act, 1990 to be exempted from the sales tax being agricultural
produce. In the light of the above discussion, in our view, the majority of Members
have fallen into error by observing, the wood used by the respondents for the
manufacturing of chipboard, has not lost its character as wood (agricultural
produce). Informing the same opinion, they mainly put the example of tobacco
used for manufacturing of cigarettes. It may not be forgotten, tobacco, after going
through the manufacturing process, despite acquiring the shape of cigarette,
does not lose its original character as tobacco. While such was not the case,
in the use of wood for the manufacturing of chipboard, as it after going
through the manufacturing process, not only changed its character but no way
could be used as wood in its original form.
13. In the light of the above discussion, we
resettle the answer to the questions raised herein, which have already been
answered by the decision of the Minority i.e Accountant Member of the learned
Tribunal, by observed the wood used in the manufacturing process of chipboard
has lost his character as agricultural produce. Therefore, the respondent was
liable to recover the sales tax from the persons who had sold the same to them
as per the mandate of the above quoted provisions of the Sales Tax Act, 1990.
14. Accordingly, the instant Reference and the
connected References are answered affirmative. The office is directed to send
the copy of this judgment under the seal of this Court to learned Appellate
Tribunal Inland Revenue, Peshawar Bench for the disposal of appeals in the
light of the above observations which shall be deemed pending before it for
their disposal.”
4. Against the above order of the Hon’ble Peshawar High Court,
the Appellant registered person went to file the appeals before the Hon’ble
Supreme Court of Pakistan whereby their Lordships while deciding the appeals
vide order dated 25.06.2020 sent the matter again before this Tribunal with the
following observations:-
“3. Today they were heard with respect to section 13 of the Sales Tax
Act, 1990 read with item No.13 onwards of Table-I in items 10 onwards of the
Table-2 to the 6th Schedule. The department urges that, under the
referred provisions, the wood does not fall within the exempted category of the
Sales Tax regime being not an agricultural produce. This aspect of the matter
was also not attended to by the Tribunal. Therefore, in view of the
observation, as noted above, the learned Tribunal shall also consider this aspect
of the matter. However, the opinion, as expressed by the learned High Court or
the forum below, maybe treated by the learned Tribunal as tentative in nature.
Since that this matter pertains to the year 2015, it is expected that the same
will receive due attention by the learned Tribunal and will preferably be
decided within a period not more than two months. Needless to say, any parties,
if aggrieved will be at liberty to avail the remedy in accordance with the law.”
5. In, compliance with the aforesaid order of the Hon’ble Supreme
Court, the titled case came up for hearing before this Bench on 05.10.2020. The
learned AR for the Appellant at the very outset without touching upon the
merits of the case contended that the show cause notice and in consequence
thereof the order passed by the Assessing Officer suffered from serious legal
and jurisdictional infirmities/flaws that go to the root of the case and must
be considered and settled first. He submits that the Assessing Officer lacks
the powers/jurisdiction which he erroneously exercised in passing the original
assessment order under section 11(2) of the Act. He explains that provisions of
sub-section (2) of Section 11 of Sales Tax Act, 1990 are
applicable only in case of a person who has not paid tax due on his supplies
made by him or has made short payment or has claimed input tax credit or refund
which was not admissible under this Act. Default of withholding tax cannot come
within the ambit of sub-section (2) of section 11 ibid, thus according to him, the demand created by the Assessing
Officer is unsustainable in law. He states that if non-deduction/ withholding
of tax on purchases comes within the ambit of “short payment of tax” then there was no need to insert sub-section
(4A) in section 11 of the Act. The said sub-section was inserted through
Finance Act, 2016 having no retrospective effect and therefore, not
applicable for the tax period prior to June, 2016. Reliance is placed on 2019
PTD 561. He, therefore, pleaded that the appeal be accepted on this score
alone.
6. On the other hand, the learned DR has
strongly opposed the contentions made by the learned Counsel for the registered
person and supported the order passed by the lower authorities. Learned DR has
also relied upon the judgment of the Hon’ble Lahore High Court titled as M/s.
Punjab Beverages Company (Pvt) Ltd. Vs. Federation of Pakistan wherein
it was held that non-deduction/withholding of tax on purchases is in fact a
short payment of sales tax and therefore, squarely covers within the ambit of
section 11(2) of the Act. He, therefore, submits that that the impugned order
passed by the learned CIR(A) is legal, lawful, and within the framework of the law.
In rebuttal, the learned AR for the Appellant submits that the aforesaid
judgment of the Hon’ble High Court was suspended in ICA No.1118/2016 vide order
dated 01.08.2016 and the matter is still pending.
7. We have heard the parties and perused the
record. The submissions made by the learned AR for the Appellant have substance
on the point of legal issues.
However, before dilating upon the legal issues raised by the learned AR
for the Appellant, it is necessary for us to first comply with the order dated
25.06.2020 passed by the Hon’ble Supreme Court. Therefore, the question arises
as to “whether the “wood” used by the appellant for manufacturing of its goods
fall within the ambit of Entry No.10 of Table-2 of 6th Schedule to
the Act?” Before forming our opinion on the issue, it is expedient to
first repopulate the precise facts and the relevant law hereunder:-
Facts
The brief facts
are that the Appellant purchased the raw wood from the market for manufacturing
of its goods but did not withhold and deposit the sales tax on purchase
thereof. The Assessing Officer issued the show cause notice to the Appellant
for such default. In response, the Appellant took the plea that the raw wood is
exempt from the levy of sales tax in terms of Entry No.10 of Table-II of 6th
Schedule to the Act. The Assessing Officer did not accept this plea of the
Appellant and pass the order against them.
Relevant Law
Entry No.10
of Table-II
is reproduced as under:-
|
Serial No.
|
Description
|
Heading Nos. of the
First Schedule to the Customs Act, 1969 (IV of 1969)
|
|
10.
|
Agricultural
produce of Pakistan, not subjected
to any further process of manufacture. (Emphasis supplied)
|
Respective
headings
|
“Section 2(16):-Manufacture
or produce includes–
(a) any
process in which an article singly or in combination with other articles,
materials, components, is either converted into another distinct article or
product or is so changed, transformed, or reshaped that it becomes capable of
being put to use differently or distinctly and includes any process incidental
or ancillary to the completion of a manufactured product;
(b) process of
printing, publishing, lithography, and engraving; and
(c) process and operations of assembling,
mixing, cutting, diluting, bottling, packaging, repacking or preparation
of goods in any other manner.”
Opinion
It can be seen from the above
Entry No.10, it is clearly mentioned therein that agricultural produce which is
not subject to further manufacturing shall be exempt from tax so it gives a
general exemption to agriculture produce of Pakistan provided they are not subject
to any further process of manufacture. It is also to be noted that Sixth
Schedule to the Act comprises of the following three Tables:-
1.
Table-1
(Imports or Supplies)
2.
Table-II
(Local Supplies only)
3.
Table-III
(Supplies with conditional exemptions)
Sixth Schedule Table-I also
mentions some other agriculture products as exempt but without imposing any
condition of “not subject to any further process of manufacture” meaning
thereby that the following products whether imported or locally supplied,
whether or not taken through the manufacturing process will be exempt from the
levy of sales tax. These are as under:-
13. Edible vegetables including roots and
tubers, (except ware potato and onions), whether fresh, frozen, or otherwise
preserved (e.g. in cold storage) but excluding those bottled or canned.
14. Pulses.
15. Edible fruits excluding imported fruits
(except fruits imported from Afghanistan) whether fresh, frozen, or otherwise
preserved but excluding those bottled or canned.
16. Red chilies excluding those sold in retail
packing bearing brand names and trademarks.
17. Ginger excluding those sold in retail packing bearing brand names
and trademarks.
18. Turmeric excluding those sold in retail packing bearing brand
names and trademarks.
19. Cereals and products of milling industry,
excluding the products of milling industry other than wheat and meslin flour,
as sold in retail packing bearing brand name of a trademark.
20. Seeds,
fruit, and spores of a kind used for sowing.
21. Cinchona
bark.
22. Sugar
beet.
23. Sugar
cane.
It is evident from the above
list that the legislature has deliberately not placed the condition of “not
subject to any further process of manufacture” upon these products. To
further distinguish the situation foreseen under Tables I & II, it will be
interesting to note that cereals though taken through the process of milling
yet these have been given exemption.
Further products other than
those mentioned in Table-I will have to be seen through the prism of Entry
No.10 of Table-II of Sixth Schedule which places the condition “not subject to any further process of
manufacture” as specified in Entry 10 of Table II to Sixth Schedule. In the
instant case wood has not been purchased as standing trees from the farmers but
as cut logs and scrap from middlemen. By cutting the trees and reducing them to
the specified size of logs for easy handling and transportation the trees have
been taken through a process of manufacture as cutting has been included in the
definition of manufacturing as defined in section 2(16) of the Sales Tax Act,
1990. It can be seen from a plain reading of section 2(16) of the Sales Tax
Act, 1990 cutting is a process of manufacturing. Reliance may be placed in the
case titled Malik Shamas Din & Brothers Vs The Income Tax and Sales Tax Officer
and other, (1959 PTD 718), in this case, the petitioner
claims that he is a timber merchant and his
business is to take forests on a lease, fell down the trees, cut the trees into
pieces for selling it in the market. Therefore, he claims that his activities
do not fall within the provisions of the Sales Tax Act, 1951 and, therefore,
the Sales tax authorities have no justification to assess their sales of timber
to sales tax under the Sales Tax Act of 1951. The Hon’ble Lahore High Court was held that fell down trees, cut
off the branches, remove the leaves and cut the wood into pieces and to sell
those pieces in the markets is covered under the definition of
"manufacture" and it is, therefore, obvious that the process to which
a person resort to make the trees marketable by turning it into what is called
timber is a process of manufacture for the purpose of the Sales Tax Act, 1951.
Therefore, the Hon’ble Court held that the same is liable to sales tax.
Accordingly, we hold that
wood purchased by the Appellant for use in further manufacturing has already
been through a process of manufacturing and hence does not qualify for
exemption under Entry 10 of Table-II of Sixth Schedule of the Sales Tax Act,
1990.
8. Now we come to the following legal
questions that emerge
from the records which are required to be considered and dilated upon by this
Tribunal while deciding the instant appeal:-
i). Whether under the facts and in the
circumstances of the case, the provision of sub-section (4A) of section 11 of
the Sales Tax Act, 1990 inserted through Finance Act, 2016 having a retrospective
effect and is applicable for the tax periods February, 2013 to September, 2014?
ii). Whether under the facts and in the
circumstances of the case, the provision of sub-section 11(2) of the Sales Tax
Act, 1990 was relevant and the case of the Appellant falls under the said
provision?
In order to
appreciate the divergent views of the parties, it would be appropriate to first
examine and review the relevant provisions of section 11(2) of the Act which
reads as under:-
“Section 11(2). Where a person has not paid the tax due to supplies
made by him or has made short payment or has claimed input tax credit or refund
which is not admissible under this Act for reasons other than those specified
in sub-section (1), an officer of Inland Revenue shall after a notice to show
cause to such person, made an order for assessment of tax actually payable by
that person or determine the amount of tax credit or tax refund which he has
unlawfully claimed and shall impose a penalty and charge default surcharge in
accordance with section 33 and 34.”
A careful reading
of the provisions of section 11(2) of the Act, as reproduced above, inter alia,
mandates that:-
i.
Where a person has not paid the tax due on supplies made by him. Or
ii.
Where a person has made a short payment on
supplies or
iii.
Where a person has claimed input tax credit or
refund which is not admissible under this Act.
The Officer of Inland Revenue
after a notice to show cause to such person, made an order for assessment of
tax actually payable by that person.
9. Subsequently, through Finance Act, 2016
certain amendments were made in the Act, and sub-section (4A) of section 11 of
the Act was inserted which read as under:-
“(4A). Where any person, required to
withhold sales tax under the provisions of this Act or the rules made
thereunder, fails to withhold the tax or withholds the same but fails to
deposit the same in the prescribed manner, an officer of Inland Revenue shall
after a notice to such person to show cause, determine the amount in default.”
It
can be seen from the plain reading of the above provisions of law that after
insertion of sub-section (4A) through Finance Act, 2016, the person who has been
required to withhold sales tax under the provision of this Act or the rules
made thereunder fails to withholds the same or fails to deposit the same shall
be charged to tax after issuance of show cause notice, determine the amount in
default. It is quite significant to note that prior to the said amendment,
there was no provision in the Act that declared a person in default if such
person fails to withhold sales tax or fails to deposit the same in the
Government treasury.
10. Now we come to question No. (i) as to
whether the
provision of sub-section (4A) of section 11 of the Sales Tax Act, 1990 inserted
through Finance Act, 2016 having a retrospective effect and is applicable for
the tax periods February, 2013 to September, 2014? The
Assessing Officer vide orders dated 27.06.2014 and 24.03.2015 passed under
section 11(2) of the Act observed that the appellant did not deduct/withhold
the tax while making payments to the recipient therefore, it is liable to pay
the tax as determined in the said orders. The crucial point of divergence
between the parties is the applicability of section 11(4A) inserted through the
Finance Act, 2016, and in simple terms, the contest is as to whether the same
would apply to the case of the appellant for the tax period which relates to
the period commencing from February, 2013 to September, 2014 or otherwise?
11. It is a settled principle of statutory
interpretation that the applicability of enactment can best be adjudged from
its expressed content and implied intent. When the enactment itself provides
for the same to have effect from a particular point in time, the express
command of the legislature is to be abided, interpreted, and applied
accordingly. In the present case, the Finance Act, 2016 provides:
"1.
Short title, extent and commencement:- (1) This Act may be called the
Finance Act, 2016.
(2) It extends to the whole of Pakistan.
(3)
It shall come into force on and from the first day of July, 2016, except the
following provisions thereof which shall come into force on the next day following
the assent of the President of the Islamic Republic of Pakistan given to this
Act, namely……………….."(Emphasis
supplied)
Sub-section
(3) of section 1 of the Finance Act, 2016, highlighted above, clearly and
expressly provides for its provisions to take effect from 1st July 2016. This
being so, there can be no cavil to its applicability commencing from 1st July
2016 and not for any period prior thereto.
12. With regards to the contention of the
learned DR that the amendments related to the procedure, and would thus have
retrospective effect on the case of the Appellant, we are afraid this line of
argument, though attractive, is not applicable to the facts of the present
case. Like any other fiscal enactment, the Act provides for three distinct
types of provisions. The charging provisions, which relate to the levy or
charge of the tax, which usually state that tax is to be levied and on what
matters, or goods or income and in which manner and at what rate and matters
relevant thereto. The assessment provisions, which deal with the assessment,
calculation, or quantification of the tax for the purposes of determining the
amount of tax due and payable or which has escaped collection or has been under-assessed
or assessed at a lower rate or on which excessive relief or refund has been
allowed. The collection provisions, which relate to the mode and manner of
receipt or collection of the tax. The charging sections have to be strictly
construed and any benefit found therein has to be given to the taxpayer.
However, the assessment and collection provisions are merely the machinery
sections and they can be liberally construed. The aforesaid categorization of
provisions of fiscal statutes has been very aptly explained in detail by His
Lordship Mr. Justice. Rustam S. Sidhwa, in M/s Friends Sons and Partnership Concern
v. The Deputy Collector Central Excise and Sales Tax, Lahore and others (PLD
1989 Lahore 337).
13. Now, to the crucial issue of applicability
of amendments introduced in fiscal statutes. It was in 1905, when Lord
Macnaghten, in The Colonial Sugar Refining Company v. Irving (1905 AC 369) case,
speaking for the Privy Council, opined that:
"As regards
the general principles applicable to the case there was no controversy. On the
one hand, it was not disputed that if the matter in question is a matter of
procedure only, the petition is well-founded. On the other hand, if it be more
than a matter of procedure, if it touches a right in existence at the passing
of the Act, it was conceded that, in accordance with a long line of authorities
extending from the time of Lord Coke to the present day, the appellants would
be entitled to succeed. The Judiciary Act is not retrospective by express
enactment or by necessary intendment. And therefore the only question is, was the
appeal to His Majesty in Council a right vested in the appellants at the date
of the passing of the Act, or was it a mere matter of procedure? It seems to
their Lordships that the question does not admit of doubt. To deprive a suitor
in a pending action of an appeal to a superior tribunal which belonged to him
as of right is a very different thing from regulating procedure. In principle,
their Lordships see no difference between abolishing an appeal altogether and
transferring the appeal to a new tribunal. In either case, there is an
interference with existing rights contrary to the well-known general principle
that statutes are not to be held to act retrospectively unless a clear
intention to that effect is manifested."
The
above principle of interpretation of statutes was followed and further
developed by the Hon’ble Supreme Court of Pakistan. Some of the leading cases
are 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) and Abdul Rehman v. Settlement Commissioner
(PLD 1966 SC 362). It was the case of Adnan Afzal v. Capt. Sher
Afzal (PLD 1969 SC 187) that the said principle was articulated by
the Hon’ble Supreme Court in terms that:
"Nevertheless,
it must be pointed out that if in this case process any existing rights are
affected or the giving of retroactive operation cause inconvenience or
injustice, then the Courts will not even in the case of a procedural statute,
favour an interpretation giving retrospective effect to the statute. On the
other hand, if the new procedural statute is of such a character that its
retroactive application will tend to promote justice without any consequential
embarrassment or detriment to any of the parties concerned, the Courts would
favourably incline towards giving effect to such procedural statutes
retroactively."
The opinion of
the Apex Court, rendered in the above referred cases, has remained un-wavered,
as can clearly be seen from decisions that followed, in particular Ch.
Safdar Ali v. Malik Ikram Elahi and another (1969 SCMR 166), Muhammad Abdullah v. Imdad Ali (1972
SCMR 173), Bashir v. Wazir Ali
(1987 SCMR 978), Mst.
Nighat Yasmin v. National Bank of Pakistan (PLD
1988 SC 391), Yusuf Ali Khan v. Hong Kong and Shanghai Banking Corporation,
Karachi (1994 SCMR
1007), Malik Gul Hasan & Co. and 5 others v. Allied Bank of Pakistan (1996
SCMR 237) and Commissioner of Income Tax,
Peshawar v. Islamic Investment Bank Ltd. (2016 SCMR 816). In the more recent case of Additional
Commissioner Inland Revenue, Audit Range, Zone-I v. Eden Builders Limited (2018
SCMR 991), where the question was
whether or not the provisions of section 122(2) of the Income Tax Ordinance,
2001, being procedural in nature, would have retrospective effect, and whether
pursuant to the amendment brought about in section 122(2) of the Income Tax
Ordinance, 2001 through Finance Act, 2009 consequential extension in date of
expiry of the limitation period would operate prospectively or otherwise, the
Hon’ble Supreme Court held that prospective applicability:
"……….. was
not permissible as certain rights had already come to vest in the respondents
on the date on which they had filed their tax returns under the original
section…..."
The Hon’ble
Supreme Court also went on to reiterate the view taken earlier in the Nagina
Silk Mill case (supra):
"The Courts must lean against giving a statute retrospective
operation on the presumption that the Legislature does not intend what is
unjust. It is chiefly where the enactment would prejudicially affect vested
rights, or the legality of past transactions, or impair existing contracts,
that the rule in question prevails ... Even if two interpretations are equally
possible, the one that saves vested rights would be adopted in the interest of
justice, especially where we are dealing with a taxing statute."
Thus,
the judicial consensus, as it stands today, are that firstly, unless the
statute expressly provides otherwise, charging provisions are to be applied
prospectively. Secondly, the assessment and recovery provisions are to be
considered retrospectively unless the enactment expressly or impliedly provides
otherwise.
14. When we revisit the provisions contained in
section 11(2) of the Act and particular sub-section (4A) of section 11 of the
Act in the light of the above discussed settled principles of interpretation,
it prima facie established that section 11(2) mandates that where a person has not paid
the tax due on supplies or has made a short payment on or has claimed input tax
credit or refund which is not admissible under this Act, the Officer of Inland
Revenue shall after notice to show cause to such person, made an order for
assessment of tax actually payable by that person.
While sub-section (4A) of section 11 ibid specifically provides that a person
who has been required to withhold sales tax under the provision of this Act or
the rules made thereunder fails to withholds the same or fails to deposit the
same shall be charged to tax after issuance of show cause notice, determine the
amount of tax in default. In the case in hand, the amendment had enhanced the
appellant’s tax liability which in fact was the liability of the recipients to
pay the same in terms of sub-section (3)(a) of section 3 of the Act,
resultantly burdening the appellant to pay the tax. Any other interpretation
will violate sub-section (3) of section 1 of the Finance Act, 2016, and the law
laid down by the Apex Court cited supra.
15. In view of the above deliberation, the
answer to question No. (i) is negative, the provisions of sub-section (4A) of
section 11 inserted through Finance Act, 2016 would not apply retrospectively
for the tax periods prior to tax period June, 2016.
16. To answer the second question as to whether the provision of
sub-section 11(2) of the Sales Tax Act, 1990 was relevant and the case of the
appellant falls under the said provision? We have to glance at the provisions
of sub-sections (2) of section 11, in juxtaposition with sub-section (4A) of
section 11 of the Act, as reproduced above. In sub-section
(2) of section 11 give the mandates that where a person has not paid the tax due on
supplies made by him or has made a short payment on supplies or claimed input
tax credit or refund which is not admissible under this Act. The Officer of
Inland Revenue shall after a notice to show cause to such person, made an order
for assessment of tax actually payable by that person. Whereas sub-section (4A)
of section 11 of the Act provides that where a person
who is required to withhold sales tax under the provision of this Act or the
rules made thereunder fails to withholds the same or fails to deposit the same
shall be charged to tax after issuance of show cause notice, determine the
amount in default. In the instant case, undisputedly, there is no allegation on the
part of the department that the Appellant had not paid the tax due on its
supplies or had made a short payment on its supplies or had claimed input
credit or refund which was not admissible to them under the Act. Rather the
Appellant did not deduct/withhold the sales tax as per rule 2 of Sales Tax
Special Procedure (Withholding) Rules, 2007 while making payments to the
recipients. We, therefore, have no two
opinions that the appellant’s case is not covered in sub-section (2)
of section 11 of the Act. The legislature itself while enacting the
latest provision of sub-section (4A) inserted through Finance Act, 2016 in
section 11 of the Sales Tax Act, 1990, was conscious of the fact
that earlier the default of withholding tax of a person is not covered in the sub-section
(2) of section 11 ibid. While
inserting sub-section (4A) in section 11 of the Act the withholding default of
the person was included therein. This subsequent inclusion by a positive
act of legislation is conclusive proof of the fact that the
same was earlier not included in the provisions of section 11 of the Act.
Consequently, we hold that under sub-section (2) of section 11 of
the Act, the default of withholding tax by the Appellant is not covered in
the said sub-section and the orders passed by the Assessing Officer are
illegal, void ab-initio, and without jurisdiction. It is settled law
that amendments are made in the statute to bring a change in the law. Reliance may be placed on the judgment of the Hon’ble Supreme Court of
Pakistan titled as Commissioner of Income Tax/Wealth Tax Companies Zone-II, Lahore Vs M/s Lahore Cantt Cooperative Housing Society, Lahore and 7 others
(2009 PTD 799). In the said judgment it was
held by the Hon’ble Supreme Court that the societies are not covered by the
definition of the Company as provided in section 2(16)(b) of the repealed
Income Tax Ordinance, 1979. While enacting the Income Tax Ordinance of 2001,
such Cooperative Societies were included in the definition of
Company. This subsequent inclusion of Cooperative Societies by a positive
act of legislation is conclusive proof of the fact that
the same were excluded in the earlier enactment.
Therefore,
for the foregoing reasons, the answer to this question is also negative.
17. For
what has been discussed above, the assumption of jurisdiction
under sub-section (2) of section 11 of the Act by the Assessing Officer is
indeed incomplete negation thereto. It is an immutable principle of law that defective assumption/exercise
of jurisdiction by the authorities is incurable. Reliance may be placed on Director
General Intelligence and Investigation FBR Vs Sher Andaz and 20 Others, (2010 SCMR 1746), Director
General Intelligence and Investigation and others Vs M/s AL-Faiz Industries
(Pvt.) Limited and others, PTCL
2008 CL 337(S.C) and Collector, Sahiwal and 2 others Vs Muhammad Akhtar, (1971 SCMR 681). In all these judgments it
was held by the Hon’ble Supreme Court of Pakistan that: -
i. Where
essential feature of assumption of jurisdiction is contravened or forum
exercises power not vested in it, or exceed authority beyond the limit
prescribed by law the judgment is rendered Coram non-judice and inoperative
(2002 SCMR 122).
ii. If a mandatory condition
for the exercise of jurisdiction before the Court, Tribunal, or Authority is
not fulfilled, then the entire proceedings which follow become illegal and
suffer from want of jurisdiction. Any order passed in continuation of these
proceedings in appeal or revisions equally suffer from illegality and are
without jurisdiction (2008 SCMR 240)”
CONCLUSION
18. Keeping in view the provisions of the law as discussed above and
the judgments of the Apex Court relating thereto, we, therefore, conclude as
under:-
i. The
“wood” is an independent marketable good and therefore, liable to sales tax. It
does not come within the ambit of Entry No.10 of Table-II of the 6th
Schedule to the Sales Tax Act, 1990.
ii. Both
the impugned orders passed by the lower authorities are void ab-initio and
without jurisdiction.
iii. Since
the basic order passed by the Assessing Officer is void ab-initio, without
jurisdiction and this defect is not curable, therefore, we have no alternative
except to vacate the impugned orders passed by the lower authorities.
iv. Accordingly, the appeals of the Appellant
are accepted.
19. This order consists of (14) pages and each page bears my
signature.
|
Sd/-
|
Sd/-
(M. M. AKRAM)
JUDICIAL
MEMBER
|
|
(MIR
BADSHAH KHAN WAZIR)
ACCOUNTANT MEMBER
|
|
CERTIFICATE U/S 5 OF THE LAW REPORT ACT
This
case is fit for reporting as it settles the principles of highlighted above.
(M. M. AKRAM)
JUDICIAL
MEMBER
