APPELLATE TRIBUNAL INLAND REVENUE, DIVISION
BENCH-1,
ISLAMABAD
STA No.202/IB/2021
(Tax Period 07/2015 to 06/2016)
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M/s Muhammad Shoaib C/o Shoaib Traders, Chak Da
Roza Bhera. |
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Appellant |
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Vs |
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Commissioner Inland Revenue, Zone-I, RTO,
Sargodha. |
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Respondent |
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Appellant by: |
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Muhammad
Bashir Malik, Advocate Mazhar
Ali Shah, Advocate |
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Respondent by: |
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Mr.
Abdul Shakoor Paracha, LA &
Mr. Niaz Ahmed, DR |
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Date of hearing: |
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15.03.2022 |
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Date of order: |
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15.03.2022 |
O R D E R
M. M. AKRAM (Judicial Member):
The titled sales tax appeal has been filed by the appellant/registered person
against the Sales Tax Order in Appeal No.775/2021 dated 29.04.2021 passed by
the Learned CIR (Appeals), Sargodha for the tax period 07/2015 to 06/2016 on
the grounds as set forth in the memo of appeal.
2. Briefly
facts culled out from the record are that information in the form of a report
from Intelligence and Investigation Faisalabad received that M/s Azhar
Corporation (Pvt) Ltd. (Manufacturer of Ghee & Cooking Oil) made supplies
Ghee & Cooking Oil to registered person during the period 07/2015 to 06/2016
i.e Tax Year-2016 of the value of Rs.15,726,738/-. The supplies of Ghee &
Cooking Oil were liable to Sales tax @ 17% as provided under section 3 read
with Serial No. 24 of the 6th Schedule of the Sales Tax Act, 1990 (“the
Act”). Hearing notices were issued from time to time. In response thereto,
the appellant's various detail and documents were examined by the Assessing
Officer. Various discrepancies
were noted during the audit proceedings and based thereon, show cause notice
vide No.2497 dated 21.12.2020 was issued and duly served on the appellant. The
explanation/reply submitted by the appellant was found unsatisfactory and
resultantly, the impugned order was passed on 14.01.2021 wherein sales tax
liability amounting to Rs.2,673,545/- & Further tax to Rs.314,535/- was
held recoverable along with default surcharge u/s 34 ibid and penalty amounting
to Rs.138,891 /- u/s 33(5) of the Act, as per following detail: -
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Tax Year |
Purchases from M/s Azhar Corporation (Pvt) Ltd. |
Sales Tax @ 17% u/s 3(1)A of STA, 1990 |
Sales Tax @ 2% u/s 3(1)A of STA, 1990 |
Total Sales Tax Recoverable |
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2016 |
Rs.15,726,738 |
Rs.2,673,545 |
Rs.314,535 |
Rs.2,988,080 |
The registered person being aggrieved, filed an appeal
before the learned CIR(A) who decided the appeal vide Sales Tax Order in Appeal
No.775/2021 dated 29.04.2021 and confirmed the treatment accorded by the
assessing officer. Being aggrieved, the appellant has now come up before this
forum and has assailed the impugned order on a number of grounds.
3. The case was heard on 15.03.2022. Learned
AR reiterated the contentions already submitted in the grounds of appeal as set
forth in the memo of appeal. Further contended that the appellant was
compulsorily registered on 19.02.2020 by the concerned CIR under section 14 of
the Act read with rule 6 of the Sales Tax Rules, 2006, and therefore, under the
law, the liability to pay the tax would arise from the date of compulsory
registration in terms of sub-rule (4) of rule 6 of the Sales Tax Rules, 2006.
It has been stated that there is no allegation on the part of the department
that the appellant charged the tax from its customers prior to its registration
but did not deposit the same. Therefore, he submitted that as per the scheme of
the Act, the assessing officer cannot ask the appellant to pay the tax in
respect of the tax period when it was not registered under the Act. According
to him, the law does not empower the assessing officer to assess the liability
in respect of the tax period when it was not registered and particularly when
admittedly the appellant did not charge the tax from its customers. Further
argued that the learned CIR(A) has not properly appreciated the law and erred
in holding that in terms of section 2(25) of the Sales Tax Act, 1990 there is
no difference or distinction between a registered person and a person liable to
be registered and the liability can be created against a person who is liable
to be registered as well. The AR further submitted
that under the provisions of the Act and Rules of 2006, only registered person,
having sales tax number, ID, Pin Code, and password, can file sales tax returns,
issue sales tax invoices, charge and collect sales tax from the purchasers
while making taxable supplies to them. He explained that there is no provision
under the law which allow that all the suppliers will be automatically
registered under the Act. A new supplier is allowed to get registered
immediately subject to certain exemption envisaged under the Act while making a
taxable supply and if such default is made by him then the only course
available with the revenue under the Act is to immediately compulsory
registered to him and they may also impose the penalty against
non-registration.
4. On the other hand, the learned Legal
advisor (LA) opposed the appeal on the ground that the learned Commissioner
(Appeals) has passed a speaking order and there is no illegality or lacuna in
his order. He explained that the taxpayers who are registered with the Income
Tax Department are liable to be registered under the provisions of the Act
because they are making taxable supplies to registered/unregistered persons but
the taxpayers had not sought voluntarily registration therefore, after proper
service of show cause notice, as required under the law, the taxpayers were
compulsorily registered under section 14 of the Act read with rule 6 of the
Sales Tax Rules, 2006. Section 3 and section 2(25) of the Act clearly indicates
that the taxpayer who is making taxable supplies is under statutory obligation
to deposit the due sales tax in the National Exchequer from the date of making
taxable supplies therefore, the taxpayers are liable to be registered come
under the ambit of registered person defined in section 2(25) ibid. It has been
stated that if there is any conflict between the statute and the Rules made
thereunder, the provisions of the statute are to be complied with and have to
be given an overriding effect over the rules. In support, he referred to section
14(1) of the Act and rule 6 of the Sales Tax Rules, 2006. He explained that the phrase “if not
already registered, is required to be registered under this Act” used in section
14(1) of the Act clearly suggest that if a person who is making taxable
supplies not already registered, is required to be registered under the Act and
the relevant provision of the Act provided under section 2(25) ibid would
prevail over the rule 6 ibid. The learned LA, therefore, asserted that the plain
reading of the definition of the registered person given in section 2(25) expressly
brings within the purview of the term “Registered Person” not only a person,
who is actually registered but also the one who is liable to be registered
under the Act, therefore, both the persons at par with each other. As regards
the legal obligation to make compliance to all the provisions of sales tax is
concerned a person liable to be registered is under statutory obligation to
make compliance to all the provisions of the Act irrespective of the fact
whether the department had initiated the action for compulsory registration
against him or not. Hence, the appellant was under a legal obligation to
deposit the due tax from the date of making taxable supplies which he failed to
do so. As far as rule 6(4) is concerned which provides that the provisions of
the Act and the Rules made thereunder would apply from the date of compulsory
registration, the learned LA submitted that as per the definition of the registered
person both the persons are at par, therefore, both the persons are required to
deposit the tax on taxable supplies made as per provisions of section 3(1) of
the Act from the date of making taxable supplies and the provisions of rule
6(4) cannot defer, postpone or delay the liability to deposit sales tax on
taxable supplies made. If the contention of the AR that statutory obligation to
pay sales tax arises from the date of compulsory registration is considered
valid then it would defeat the purposes of law contained in section 2(25) and
section 3(1) of the Act. The learned LA has also relied upon the judgment
titled Commissioner Inland Revenue, Gujranwala Vs M/s S. K. Steel
Casting, Gujranwala, (2019 PTD 1493).
5. We have heard both the parties and perused
the record available on file. A few facts necessary, to appreciate the issue involved
are that the appellant was registered compulsorily under section 14 of the Act
read with rule 6 of the Sales Tax Rules, 2006 by the concerned Commissioner Inland
Revenue on 19.02.2020. After compulsory registration, the assessing officer
proceeded against the appellant in respect of the tax period prior to
compulsory registration and created the sales tax liability under the Act. However,
it is also an admitted fact that there was no allegation on the part of the
revenue department that the appellant prior to compulsory registration collected
the tax from the purchasers while making taxable supplies to them but did not
deposit the tax into the government treasury. Thus, the stance of the revenue
department is that the plain reading of the definition of the registered person
given in section 2(25) of the Act expressly brings within the purview of the
term “Registered Person” not only a person, who is actually registered but also
the one who is liable to be registered under the Act, therefore, both the
persons at par with each other and liable to pay tax while making taxable
supplies. Therefore, all the provisions of the Act and Rules made thereunder
would apply immediately while making taxable supply. Conversely, the appellant
submitted that as per the scheme of the Act, the assessing officer cannot ask
the appellant to pay the tax in respect of the tax period when it was not
registered under the Act. According to him, the law does not empower the
assessing officer to assess the liability in respect of the tax period when it
was not registered and particularly when admittedly the appellant did not
charge the tax from purchasers. Thus, the core issue between the parties may be
summarized by proposing the following questions for determination:
i. Whether the
charge, levy and pay the tax under section 3 of the Act is on the registered
person who is actually registered under the Act or the person who is liable to
be registered or both?
ii. Whether the
provisions of the Act and the Rules made thereunder would come into play from
the date of voluntary registration or compulsory registration of a person
making taxable supplies under the Act?
iii. Whether the
Commissioner Inland Revenue (CIR) has the power to compulsory register a person
under section 14 of the Sales Tax Act, 1990 read with Rule 6 of the Sales Tax
Rules, 2006 from the date he became liable for
registration?
To
answer the proposed questions, it would be appropriate to reproduce hereunder
the definition of “registered person”
which has been defined in section 2(25) of the Sales Tax Act, 1990 and the
charging provisions: -
“2(25).
“Registered person” means
a person who
is registered or is liable to be registered under this Act;
Provided that a person liable to be registered but
not registered under this Act shall not be entitled to any benefit available to
a registered person under any of the provisions of this Act or the rules made thereunder.
“3.
Scope of tax. (1) Subject to the provisions of this Act, there shall be charged, levied, and paid a tax known
as sales tax at the rate of seventeen percent of the value of-
(a) Taxable supplies made by a registered person in the course of furtherance of any taxable activity carried on by him; and
(b) Goods
imported into Pakistan.” (Emphasis supplied)
6. The perusal of the above-quoted definition
of the term “registered person”
indicates that the prime meaning of the terms is, the person who is actually
registered under the Act. This meaning has been extended artificially by
providing that it includes a person who is liable to be registered under the
Act. Thus, it may conveniently be said that the definition of a “registered
person” has two parts. The first part, viz., registered person means a person
who is actually registered under the Act, having sales tax registration number
allotted by the department, and the second part by fiction, viz., a
person who is liable to be registered but not actually registered under the Act,
having no registration number. It is settled law that a definition clause in a
statute is declaratory though normally the definitions provided for in the
definition clauses are to be read into the provisions of the Act while
interpreting the defined terms/words if the contents of the provisions of the
Act indicate otherwise, the definition clause cannot override the main
provision of the statute. In the instant case, section 2 of the Act makes it
explicit by providing that “unless there
is anything repugnant in the subject or context.” Reliance may be placed on
the judgment titled Syed Muhammad Haider Zaidi and others Vs Abdul
Hafeez and others, (1991 SCMR 1699).
7. Now keeping in view, the definition of the
registered person and by applying the law laid down by the Supreme Court in the
case reported as 1991 SCMR 1699 we have to see that which part of the
definition would apply while considering the different provisions of the Act in
order to avoid redundancy and create harmony.
The word “registered person” used in sections 3(1), 6(2), 7, 8, 8A, 23, 25, 26, 33, and 34 of the Act refers to its
primary meaning, namely, the person actually registered under the Act and not
its extending meaning i.e liable to be registered. The person who is actually
registered under the Act is required under the law to charge the tax, issue the
tax invoice, file the return and deposit the tax in terms of sections 3, 23, 26,
and 6(2) of the Act respectively read with the procedure laid down in
Chapter-II of the Sales Tax Rules, 2006. The second part of the definition does
not apply in the aforesaid provisions of law for the reason that a person
liable to be registered under the Act cannot issue the tax invoice as envisaged
under section 23 which requires registration numbers of the supplier as well as
the recipient on the sales tax invoice to be issued by him, otherwise, it would
not be an invoice in accordance with section 23 of the Act. Without the issuance
of a valid tax invoice, he cannot collect the tax from the recipient. Similarly,
without having a registration number, the person liable to be registered cannot
deposit the tax along with return as required under section 6(2) read with
section 26 of the Act. The combined reading of sections 3(1),
6(2), 7, 8, 8A, 23, 25, 26, 33, and
34 of the Act, 1990 read with Rule 6 of the Sales Tax Rules, 2006 provides that
where a person is required to be registered under the Act as envisaged under
section 14 of the Act is under a legal obligation to apply for registration and
in case of failure, the department Authorities shall issue a notice to such
person and after allowing him an opportunity of being heard shall pass an order
whether or not such person is liable to be registered compulsorily or not. A person registered compulsorily under
sub-rule(2) or (3) of rule 6 of the Sales Tax Rules, 2006 is required to comply
with all the provisions of the Act and the Rules made thereunder from the date
of compulsorily registration, and in case of failure to do so, the
Commissioner Inland Revenue having jurisdiction may issue a notice under
section 25 of the Act for production of records or documents and appear in
person to assess the amount of sales tax payable under section 11 of the Act
and take any other action as required under the law against such person. Under
sub-rule (4) of rule 6 of the Sales Tax Rules, 2006, the department cannot levy
and assess the liability prior to the period of registration.
8. Now we come to Section 3 of the Act which is
a charging provision that imposes the charge on the registered person. This
charge is “subject to the provisions of
this Act” meaning thereby the charge is dependent on other provisions of
the Act as well. Reliance may be placed on the judgment titled M/s
Mayfair Spinning Mills Ltd, Lahore Vs Customs Excise and Sales Tax Appellate
Tribunal, Lahore, (PTCL 2002 CL 115). Sub-section (3) of section 3
provides that liability to pay the tax shall be, in the case of a supply of
goods in Pakistan, of the person making the supply. These provisions are to be
seen from the perspective of the overall scheme of the law. The scheme of the
law is that sales tax on goods
under the Sales Tax Act, 1990 is paid under a value-added tax (VAT) mode. The
purpose of imposing a tax under VAT mode is to ensure that each registered
person only pays sales tax on the value it adds to a product or material. This
is only possible if a registered person can deduct the input tax it has paid on
any goods consumed, or services received, by it for the purposes of
manufacturing, producing, or marketing the goods it sells, from the output tax
payable on those goods. One of the essential features of VAT mode is taxation,
the passing on the input tax, to be credited against output tax, till the final
output tax is borne by the ultimate consumer under section 7(1) of the Act.
Under this provision to calculate its final tax liability, a registered person
is entitled to deduct input tax paid or payable during a tax period to make
taxable supplies against the output tax paid or payable by it for that tax
period on those taxable supplies. The tax which is paid or payable by
the registered person at the time of purchases is called "Input Tax"
as per section 2(14) of the Act and is adjustable against output tax chargeable
on the supplies of finished products. Thus, under the scheme of the Act, a registered person who is actually
registered under the Act is entitled to claim an input tax credit for sales tax
on purchases paid or payable by it against the output tax on the sales of its
products, which is payable to the Federal Government, in order to calculate its
final liability under Section 7 of the Act.
9. We
may also be noted that section 6(2) of the Act provides that the tax in respect
of taxable supplies made in Pakistan during the tax period shall be paid by the
registered person at the time of filing of return in respect of that tax period
under Chapter-V of the Act. This provision of law makes it explicitly clear
that tax has to be paid along with the return. The returns of sales tax as
required under section 26 of the Act have to be filed electronically in terms
of Rule 18 of the Sales Tax Rules, 2006 by every registered person who is
actually registered under the Act. A person liable to be registered under the
Act, not actually registered under the Act cannot file its return
electronically as per procedure given in Chapter-II of the Sales Tax Rules,
2006. Hence, there is no mechanism/procedure available to the person who is
liable to be registered to file its return and to collect tax from the purchasers/recipients
of taxable goods without the issuance of a tax invoice.
10. It
may also be pointed out that the term “tax
invoice” has been defined in section 2(40) of the Act to mean, a document
required to be issued under section 23 of the Act at the time of making taxable
supplies. The definition is conclusive meaning thereby that no other document
can be treated as a tax invoice. Under section 23, a tax invoice should contain
the name, address, and registration number of the supplier and the
recipient. Sub-section (2) of section 23 provides that no person other than the
registered person paying tax shall issue the tax invoice. In such a scenario, a
person liable to be registered cannot issue the tax invoice being not actually
registered, having no sales tax registration number, and therefore, cannot
comply with the requirement as enumerated in sub-section (1) of section 23 of
the Act.
11. It
may further be pointed out that sub-section (1) of section 38
of the Act specifies the four different kinds of persons in respect of whom the
powers of section 38 may be exercised. These are:
1) Any registered person;
2) A person liable for registration;
3) A person whose business activities are covered under this Act; or
4) A person who may be required in any inquiry or investigation or tax fraud committed by him or his agent or any other person.
It clearly emerges that there are four categories of persons
who may be made subject to the proceedings under section 38. Sections 6(2), 7,
8, 8A, 11, 23, 25, 26, 33, and 34 of the Act, however, only relates to a
registered person who is actually registered under the Act and none else in
whose respect any liability under the Act can be created based on these
provisions. This distinction is sufficient to reject the proposition tried to
be advanced by the Department that the liability of tax can be created against
the person liable to be registered. Had it been the intention of the
legislature then it would have been incorporated the words “a person liable to
be registered” along with the words “registered person” as used in sections
6(2), 7, 8, 8A, 23, 25, 26, 33 and 34 of the Act. Therefore, the persons liable
for registration not actually registered or whose business activities are
covered under the Act are at least two of the categories which are not covered
by the provisions of sections 6(2), 7, 8, 8A, 11, 23, 25, 26, 33 and 34 of the
Act. It is, therefore, a misconception on the part of the department that the
liability to pay tax can be created against the person who is liable to be
registered under the Act. Otherwise, incorporating the words “a
person liable for registration” independently along with the words “registered person”
in the provisions of section 38(1) is redundant and without purpose. It
is settled principle of interpretation of the statutes that every word
appearing in a section is to be given effect to and no word is to be rendered
or surplus so was held by the Apex Court in the cases of (i) In the matter of
Reference by the President of Pakistan under Article 162 of the Constitution of
Islamic Republic of Pakistan PLD 1957
SC (Pak.) 219, (ii) Muhammadi Steamship Company Ltd Vs CIT,
(Central) Karachi (PLD 1966 SC 828), (iii) M/s V. N. Lakhani and Company
vs M. V. Lakatoi Express and 2 others (PLD 1994 SC 894) and (iv) Director General Intelligence and
Investigation FBR Vs Sher Andaz and 20 Others (2010 SCMR 1746).
12. The department
is, however, reading the definition of a “registered person” in the context
that a person liable to be registered under the Act is also deemed to be considered
as a registered person and the same is at par with the person who is actually
registered under the Act. This interpretation is completely perverse and is not
made out from the plain language of the charging provisions of section 3 of the
Act. The legislative intent is
abundantly clear from a combined reading of sections 3(1), 6(2), 7, 8,
8A, 11, 23, 25, 26, 33, and 34 of the Act that a tax can only be levied,
charged and paid by the person who is actually registered under the Act. The rule of construction of provisions
creating legal fiction is well settled. In interpreting a provision creating a legal fiction the court is to ascertain
for what purpose the fiction is created, and after ascertaining this, the court
is to assume all those facts and consequences which are incidental or
inevitable corollaries to the giving effect to the fiction. But in so
construing the fiction it is not to be extended beyond the purpose for which it
is created, or beyond the language of the section by which it is created.
It cannot also be extended by importing another fiction. In this connection, we
may refer to two decisions of the Indian jurisdiction. In the case of CIT Vs Shakuntala, (AIR 1966 SC
719) a three-Judge Bench of the Supreme Court speaking through S.K. Das, J., made the
following pertinent observation in paragraph 8 of the Report: -
"The question here is one of interpretation only and that
interpretation must be based on the terms of the section. The fiction enacted
by the legislature must be restricted by the plain terms of the statute."
In another case titled CIT vs Moon Mills Ltd, (AIR 1966 SC 870) another
three-Judge Bench of the Supreme Court speaking through Subba Rao, J., observed in
paragraph 8 of the Report in connection with the provision creating such legal
fictions as under: -
"The fiction is an indivisible one. It cannot be enlarged by
importing another fiction……....”
It is also a well-settled law that there is no intendment
or presumption about a tax. One can look at the language clearly employed by
the legislature, which is to be strictly construed, and that nothing can be
implied or read in. It is the universally acclaimed principle that any
ambiguity in a fiscal statute must be resolved in favour of the taxpayer and
that the tax sought to be charged must fall strictly within the letter of law. Here
it may be beneficial to refer to the following judgments: -
Excise and Taxation Officer and others Vs Burmah Shell Storage and
Distribution Company of Pakistan Ltd and others, (1993 SCMR 338)
“There is no room for
any intendment. There is no equity about a tax. There is no presumption as to a
tax. Nothing is to be read in, nothing is to be implied. One can look at the
language used.”
Chairman Federal Board of Revenue, Islamabad Vs M/s Al-Technique
Corporation of Pakistan Ltd and others, (PLD 2017 SC 99)
“4. Heard. It is a settled principle of law that tax cannot be charged and levied unless it falls squarely within the purview of the charging provisions. Taxing laws are not to be extended by implication beyond the clear import of the language used. To hold otherwise would violate another principle of interpretation of taxing statutes: that tax laws should be construed in favour of the taxpayer and any substantial doubt resolved in favour of the citizen and against the government. This principle is based on the fact that taxation is a process which interferes with the personal and property rights of the people, although it is a necessary interference. But because it does take from the people a portion of their property, the tax laws must be construed in favour of the taxpayers.”
13. It is also noted
that in the instant case, there is no allegation on the part of the revenue
department that the appellant has collected the tax from the purchasers/recipient
while making taxable supplies but did not deposit the same into the Government treasury.
Now, charging the tax prior to the tax period from the date of compulsory
registration is also against the statutory provisions of the Act and the Rules
made thereunder which provide that the sales tax is an indirect tax and burden
is to be borne by the ultimate consumer. Now at this stage, if the tax is
imposed before the tax period from the compulsory registration, it cannot be
passed on, so such a levy deprived the tax of its
essential characteristic of being indirect. It, therefore, ceased to be a
"sales tax on taxable goods " and became a personal tax of a category
quite distinct from "sales tax". The levy at this stage also
contravenes the fundamental right guaranteed to the citizens of Pakistan to
hold property under Article 24 of the Constitution. Levy of sales tax deprived
the appellant of the right of passing it on and recovering it from his purchaser/buyer,
that this constituted a restraint on "the right to hold property"
(the amount of the tax-levy) conferred by Article 24. Had the legislature
intended to charge the sales tax from the date when the first taxable supply
was made by the person who was liable to be registered under the Act then a
provision like section 114(6) of the Income Tax Ordinance, 2001 would have been
incorporated in the Act. For convenience, the relevant provision of section 114
of the Ordinance is reproduced below: -
114.
Return of income.- (1)…………….
(2)…………………….
(4) Subject to subsection
(5), the Commissioner may, by notice in writing, require any person who, in the
Commissioner’s opinion, is required to file a return of income under this
section for a tax year or assessment year but who has failed to do so to
furnish a return of income for that year within thirty days from the date of
service of such notice or such longer or shorter period as may be specified in
such notice or as the Commissioner may allow.
(5) A notice under
sub-section (4) may be issued in respect of one or more of the last five
completed tax years or assessment years:
Provided that in case of a
person who has not filed return for any of the last five completed tax years,
notice under sub-section (4) may be issued in respect of one or more of
the last ten completed tax years.”
14. The learned LA has also drawn the attention
of the Bench to the order passed by learned Division Bench of the Hon’ble High
Court in STR No.54 of 2016 titled Commissioner Inland Revenue,
Gujranwala Vs M/s S. K. Steel Casting, Gujranwala, (2019 PTD 1493)
and submits that a somewhat similar question was posed and considered in the
aforesaid judgment wherein it was held that: -
“17. In
view of the above, our answer to the proposed questions is that the combined
reading of the provisions of the Act of 1990 and the Rules framed thereunder
manifestly disclose the intention of the lawmaker that, where a person is
liable to be registered, the applicant-department is first required to register
that person compulsorily or otherwise in accordance with law, and then charge
sales tax from it under Section 3 of the Act of 1990, and may proceed against
that person regarding prior to registration contravention of the provisions of
the Act of 1990, if any. In that eventuality, taxpayer shall be entitled to raise
all factual and legal objections against the proceedings so initiated or to be
initiated by the applicant-department which are not dealt with in this
judgment.”
We
have keenly gone through the above judgment, wherein the proposed questions were
neither discussed nor any declaration of law made. In the absence of any
pronunciation/enunciation of law the observations therein, at best can be
termed as mere obiter(s). Guidance is sought from the ratio of the decision in
the case of Fasih-ud-Din Khan and others Vs. Government of Punjab and
others, (2010 SCMR 1778), the relevant extract of the judgment is
reproduced as under: -
“The word
per incuriam means “carelessness” as held by this Court in “Sindh High Court
Bar Association v. Federation of Pakistan” (PLD 2009 Supreme Court 879). It is
also a settled principle of law that once the Court has come to the conclusion
that the judgment was delivered per incuriam. Such judgment itself is without
jurisdiction as per incuriam, therefore, learned High Court erred in law to
give due weight to said observation without application of mind.”
While
elucidating various categories/classes of precedents, his lordship Mr. Justice Fazal
Karim, in his book “Judicial Review of Public Actions (Second Edition)
Volume-1, describes obiter dicta as under: -
“Obiter
Dicta: Distinction is then to be made between what is the ratio decidendi of
the case and what is mere obiter dicta. What was necessary for the decision of
the issue in the case is ratio decidendi and is binding but what was said ‘by
the way’ and was entirely unnecessary for the decision of the case or what is a
mere gratuitous statement of the law is obiter dicta and is not binding. The
distinction, as was pointed out by Lord Greene MR in Young v. Bristol Aero
plane, (1944) 2 All ER 293, 298, is between a decision and a dictum. “So
far as dicta are concerned, we are, of course, not bound to follow them”.
In
view of the above, the judgment relied upon by the department is not relevant
to the issue.
15. In
view of the foregoing discussion, the liability to pay the tax under section 3
of the Act is created only on the person who is actually registered under the
Act and the provisions of the Act would apply from the date of voluntary or
compulsory registration. Accordingly, the answer to the question Nos. (i) and
(ii) are disposed of.
16. Now we turn to the last question No. (iii), under
the provisions of the Act, every person engaged in making taxable supply
including zero-rating supply in the course or furtherance of any taxable
activity, if already not registered, is required to be registered in any of the
specified categories enumerated in section 14. Sub-section (3) of section 14
provides that the sales tax registration shall be regulated through rules
notified by the Board (FBR). The Board in the exercise of the power conferred
inter alia by the said subsection, prescribed the rules known as Sales Tax
Rules, 2006. Chapter-1 of the said rules prescribes the procedure for
registration, compulsory registration, and de-registration. Rule 6 of the said
rules specifically prescribed the procedure for compulsory registration of any
person. According to sub-rule (1) of rule 6, the Commissioner Inland Revenue or
any other officer authorized by the Board has the power to issue notice to such
person who has not applied for registration in the form set out in the Form
STR-6. The whole reading of rule 6 of Sales Tax Rules, 2006 makes it clear that
only the Commissioner Inland Revenue has conferred the power to pass an order
of compulsory registration.
To answer the question, it would be more beneficial to
first reproduce hereunder the relevant provisions of law that are relevant to
the issue: -
Before substitution of Rule 6 in the Sales Tax Rules, 2006,
Section 19 of the Sales Tax Act, 1990 provides for compulsory registration and
reads as follows:
“Section 19. Compulsory Registration: - If a person who is
required to be registered under this Act does not apply, for registration and
the Collector or such other officer as may be authorized by him in this behalf,
after such inquiry as he thinks fit, is satisfied that such person was required
to be registered, the Collector or such other officer shall register that
person and that he shall be deemed to have registered from the date he became
liable for registration.
Provided that if it is subsequently established that a person who
was not liable to be registered but was wrongly registered under this section
due to inadvertence, error, or misconstruction, the Collector shall cancel such
registration and such person shall, subject to the provisions of section 3B,
not be liable to pay any tax, additional tax or penalty under any of the
provisions of this Act or rules made thereunder”.
“Section
14 Registration: - (1) Every person engaged in making taxable supplies in
Pakistan, including zero-rated supplies, in the course or furtherance of any
taxable activity carried on by him, falling in any of the following categories,
if not already registered, is required to be registered under this Act, namely:
-
(a) ……………………………….;
(b) ……………………………….;
(c) ……………………………….;
(d) ………………………………;
(e) ……………………………….; and
(f) a person who is required, under any other
Federal law or Provincial Law, to be registered for the purpose of any duty or
tax collected or paid as if it were a levy of sales tax to be collected under
the Act;
(2)…………………………………..
(3) The
registration under this Act shall be regulated in such manner as the Board may,
by notification in the Official Gazette, prescribe.
Rule 6.
Compulsory registration: - (1) If a
person, who is required to be registered under the Act, does not apply for
registration and the Commissioner
Inland Revenue or any other officer, as may be authorized by the Board, after
such inquiry as deemed appropriate, is satisfied that such person is
required to be registered, he shall issue notice to such person in the form set
out in Form STR-6.
(2) In case the Commissioner receives a written reply from the said person
within the time specified in the notice under sub-rule(1), contesting his
liability to be registered, the Commissioner shall grant such person
opportunity of personal hearing, if so desired by the person, and shall
thereafter pass an order whether or not such person is liable to be registered
compulsorily. Copy of the said order shall invariably be provided to that
person. Where the Commissioner passes the order for compulsory registration, he
shall cause the said person to be registered through a computerized system.
(3) Where the person to whom a notice is given
under sub-rule (1), does not respond within the time specified in the notice, the Commissioner shall cause to compulsorily
register the said person through the computerized system under
intimation to the said person through courier service.
(4) A person registered compulsorily
under sub-rule (2) or (3) is required to comply with all the provisions of the
Act and rules made thereunder from the date of compulsory registration,
and in case of failure to do so, the
Commissioner Inland Revenue having
jurisdiction may issue a notice under section 25 of the Act for production of
records or documents and appearance in person to assess the amount of sales tax
payable under section 11 of the Act, and take any other action as required
under the law against such person:
Provided that if it is subsequently established that a person was not liable to be registered but was wrongly registered under this rule due to inadvertence, error, or misconstruction, the Commissioner shall cause to cancel his registration through the computerized system. In case of such cancellation of registration, such person shall not be liable to pay any tax, default surcharge, or penalty under the Act or rules made thereunder, subject to the conditions, limitations, and restrictions prescribed under section 3B of the Act.” (Emphasis supplied)
17. It can be seen from the combined reading of
the above provisions of law which provides that before
the Finance Act, 2004, section 19 of the Act, provided for compulsory
registration. In the said section it was clearly provided that where a person
who was required to be registered under the Act did not seek registration, the
Collector (now Commissioner IR) would compulsorily register such person and the
said person would be deemed to be registered from the date he became liable for
registration. In Fatima Sugar Mills Ltd. v. Collector, (GST
2003 CL 413) it was, inter alia, held that a person was liable to be registered
under the Act, but not actually registered, was to be construed as a registered
person since under section 2(25) the definition of the term “registered
person” included the persons actually registered and those who were liable
to be registered. This interpretation is also quite in line with the express
provision contained in section 19 (before its omission by the Finance Act,
2004) whereby persons who were liable to be registered and not registered were
deemed to have been registered from the date they become liable to be
registered. However, after the repeal of section 19 of the Act through Finance
Act, 2004 and thereafter substitution of rule 6 by notification
No.S.R.O.494(I)/2015 dated 30th June 2015 in the Sales Tax Rules,
2006, the sub-rule (4) of rule 6 ibid clearly and expressly provides
that the provisions of the Act and the Rules made thereunder would apply from
the date of compulsory registration. Further, it is noted that after the repeal
of section 19 ibid correspondingly the second part of the definition of
“registered person” as explained above, should have also been repealed in order
to maintain harmonious construction with the other provisions of the Act but
this has not been done so far that is why the second part of the definition is
still creating an anomaly. 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 sub-rule (4) of rule 6 ibid provides:
“(4) A person registered compulsorily under sub-rule (2) or (3) is required to comply with all the provisions of the Act and rules made thereunder from the date of compulsory registration, and in case of failure to do so, the Commissioner Inland Revenue having jurisdiction may issue a notice under section 25 of the Act for production of records or documents and appearance in person to assess the amount of sales tax payable under section 11 of the Act, and take any other action as required under the law against such person:”
Sub-rule (4) of rule 6, highlighted above, clearly and expressly
provides for its provisions to take effect from the date of compulsory
registration. This being so, there can be no cavil to its applicability
commencing from the date of compulsory registration and not for any tax period
prior thereto. 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. Equally in Abdul
Razzaq v. Muhammad Sharif, PLD 1997 Lahore 1, it has been held that
where power is given to do a certain thing in a certain way, then that thing
must be done in that way or not at all and all other methods of performance not
so prescribed are necessarily forbidden. Thus, the effect of the compulsory
registration of a person cannot be made from the date he became liable for
registration.
18. For what has been discussed above, the
answer to question No. (iii) is in the negative. The effect of the compulsory
registration would be from the date of the order thereof.
19. The appeal of
the appellant is allowed on the legal plain only and therefore, there is no
need to dilate upon the merit of the case.
20. This order
consists of (20) pages, and each page bears my signature.
|
|
Sd/- (M. M. AKRAM) JUDICIAL
MEMBER |
|
Sd/- (MUHAMMAD IMTIAZ) ACCOUNTANT
MEMBER |
|
CERTIFICATE U/S 5 OF THE LAW
REPORT ACT
This case is fit for reporting
as it settles the principles highlighted above.
(M. M. AKRAM)
JUDICIAL
MEMBER
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