THE COMMISSIONER OF INCOME-TAX VS M/S. PACKAGES LTD., 1991 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1089 (1991)

(a) Sales Tax Act (III of 1951)---

----Ss.27(1) & (3) & 27-A---Provisions of S.27-A were in no way in conflict with S.27, in fact S.27-A was supplementary to the latter---Refund---Payment of safes tax by assessee on partly manufactured goods or goods purchased etc.-- Application as required by S.27(3) was essential for refund of such tax paid-- Refund determined under S.27(l) could not be allowed to the assessee in face of the fact that an application under S.27(3) was either not made or made beyond the period of limitation ---Assessee could not claim adjustment of an excess 'amount paid by him as sales tax under S.27-A independently of S.27 of the Act

Although by use of the word "shall" in subsection (1) of section 27, the Legislature makes it obligatory for the Sales Tax Officer to refund sales tax referred to in the said section to an assessee who has paid the same on partly manufactured goods or goods purchased, etc, but subsection (3) of the said section further provides that an application pursuant to subsection (1) may be made in the prescribed manner within four years of the end of the year in which the tax in respect of which the refund is made was paid. Notwithstanding the use of the word "may" by the Legislature in subsection (3) an application for refund which may be filed by an assessee has been made subject to two conditions viz. firstly, that the same has to be made in the prescribed manner and secondly, that it must be made within four years of the end of the year in which the tax in respect of the refund is claimed was paid. The term "prescribed" has been defined in section 2 of the Sales Tax Act as "prescribed by rules" made under the said Act.

In the present case, it was only while passing the order that the assessing officer came to a conclusion that the assessee was entitled to refund of sales tax but he found himself helpless in providing any benefit to the assessee in this regard because no such application as required by subsection (3) of section 27 of the said Act had been filed on behalf of the assessee.

No doubt, if subsection (1) of section 27 is read in isolation it makes it incumbent on the Sales Tax Officer to refund sales tax paid by an assessee reference to which has been made in the said subsection but one cannot be oblivious of the language used in subsection (3) of the said section which clearly provides for a period of four years for making an application "pursuant to subsection (1)". Furthermore, if subsection (1) of section 27 is construed in isolation the same is also bound to render subsection (3) of the said section redundant because an assessee may not file an application within the period of limitation as prescribed by subsection (3) and yet he can obtain a refund of sales tax under subsection (1). This could not be the intention of the Legislature to provide a period of limitation for making an application for refund on the one hind and to provide an opportunity for an assessee to receive a time-barred refund in contravention of the provisions of subsection (3) on the other. The use of the words "pursuant to subsection (1) or subsection (2)" in subsection (3) of section 27 is also not without significance because by use of such words the Legislature clearly intended to make subsections (1) and (2) of section 27 subject to the provisions of subsection (3) thereof.

Set off can be allowed to an assessee only when in the first instance "u refund or repayment is found to be due", as is clearly suggested by such words appearing in the said section. It, consequently, appears to be doubtful that set off can be allowed to an assessee when no application as contemplated by subsection (3) of section 27 has been made by him, claiming the refund.

Section 27 enables an assessee to claim the amount of tax paid by him in excess of the amount with which he is properly chargeable under the Act, provided he applies on a prescribed form within the period of limitation. On the other hand section 27-A enables the Department to make an adjustment of the amount so found due and refundable to the assessee under section 27 of the Sales Tax Act or under any other provisions in the other Acts mentioned in that section.

The provisions of section 27-A arc in no way in conflict with those of section 27 of the Sales Tax Act; in fact, they arc supplementary to the latter. An assessee cannot claim adjustment of an excess amount paid by him as Sales Tax under section 27-A independently of section 27 of the Act. In this behalf he must make an application within the period of limitation as provided by section 27(3) of the Act.

Interpretation of Statutes 111th Edn., pp. 28 & 29 and Sales Tax v. Zelin Limited, Karachi 1967 P T D 139 ref.

Sales Tax v. Messrs Zelin Ltd. Karachi 1985 S C M R 1292 distinguished.

(b) Interpretation of statutes---

---- Construction has to be made of all the parts of a statute together and not of one part only by itself, for the true meaning of any passage is that which best harmonises with the subject and with every other passage of the statute.

Interpretation of Statutes 10th Edn., pp. 28 & 29 ref.

Shaikh Haider for Applicant.

Sirajul Haque for Respondent.

Dates of hearing: 1st and 2nd April, 1991.

JUDGMENT

MAMOON KAZI, J.---Brief facts of the case are that the assessing officer worked out refund due to the respondent assessee at Rs.5,13,253 and Rs.6,23,204 in the assessment years 19621-69 and 1969-70 respectively which the assessee had paid on partly manufactured goods vide his order dated 30-6-1976 passed under section 10(3) read with sections 28(1) and 16(2) of the Sales Tax Act, 1951. The assessing officer, however, declined to allow refund of the said amounts for the reason that the respondent had not filed application in the prescribed manner within four years of the end of the year in which the tax in respect of which the refund was claimed, was paid, as required by section 27 (3) of the Sales Tax Act. Furthermore, according to the assessing officer, the respondent had not claimed adjustment/refund in its quarterly returns filed from time to time. However, the learned Appellate Assistant Commissioner did not agree with the said view, taken by the learned assessing officer. The Department went in appeal before the Income Tax Appellate Tribunal, which by its majority view confirmed the order of the learned Appellate Assistant Commissioner and dismissed the appeal. However, on an application by the Department the following question has been referred to us for our opinion:--

"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that refund determined under subsection (1) of section 27 could be allowed to the assessee notwithstanding the fact that an application under section 27(3) was either not made or made beyond the period of limitation?"

2. Since the entire controversy has revolved around sections 27 and 27-A of the Sales Tax Act, 1951, it is, therefore, pertinent to reproduce the said sections which are as follows:--

"27. Refunds.--(I) Where partly manufactured goods are purchased by a manufacturer and tax has been paid on those goods on importation or on any previous sale, a refund of the amount of the tax so paid shall be made to the manufacturer.

(2) If any person satisfies the Sales-tax Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this Act, he shall be entitled to a refund of such excess, and the provisions of this Act in respect of appeal and revision shall apply to an order passed by the Sales-tax Officer under this subsection as they apply to an assessment.

(2-A) The Board, if it is satisfied that tax has been paid on goods manufactured or produced in Pakistan, or on raw materials used in the manufacture or production of such goods which have been exported outside Pakistan, may, upon an application made in the behalf in such manner and within such time as may be prescribed refund the tax so paid.

(3) An application pursuant to subsection -(I) or subsection (2) maybe made in the prescribed manner within four years of the end of the year in which the tax in respect of which the refund is claimed was paid."

"27-A. Power to set off amount of refunds, against tax remaining payable:-- Where under the provisions of this Act, the Income-tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV of 1940), the Finance Act 1942 (X11 of l9-I2), the Excess Profits-tax Ordinance, 1')43 (XVI of A 1943), the Business Profits-tax Act, (XXI of 1947), the Estate Duty Act, 1950 (X of 195(1), the (lift-tax Act, 1963 (XIV of 1963), and the Wealth tax Act, 1963 (XV of 1~3) a refund or repayment is found to be due to any person, the Sales-tax Officer or the Commissioner, as the case may be, may, in lieu of the payment of the refund or the repayment, set off the amount to be refunded or repaid, or any part of the amount against the tax, if any, remaining payable by the person to whom the refund or re-payment is due."

3. The scope of the said sections was examined first by the learned Appellate Assistant Commissioner and subsequently by the learned Appellate Tribunal and we would first like to refer to the views expressed in the said orders The Learned Appellate Assistant Commissioner while dealing with sections 27 and 27-A of the said Act has expressed his opinion as follows:--

"22.We submit that the construction put by the Sale-tax Officer on section 27(3) is unwarranted. He has not only read subsection (3) of section 2; in isolation but has so construed it as to make the filing of an application under the subsection a condition of refund ability or adjustment. It is clear from subsection (1) of section 27 that a duty is cast on the Sales-tax Officer to refund the tax paid by a manufacturer on partly manufacture goods on importation or on previous sale. The duty is not controlled in any manner whatsoever by subsection (3) of section 27. Subsection (3) is merely directory and on the face of it is not mandatory. Subsection (3) merely says that an application may be made within four years. It nowhere says that refund will be allowed only if an application is made within 4 years. This interpretation would be absolutely clear if subsection (3) of section 27 of the Sale-tax Act is compared to the wording of section 50 of the Income-tax Act. Section 50 of the Income-tax Act lays down that no claim to any refund of Income-tax or Super-tax under this Chapter (Chapter VII) shall be allowed unless it is made within four years. There is no provision corresponding to section 50 of the Income-tax in the Sales Tax Act. Whereas Section 50 of the Income-tax Act in terms controls section 48 and other sections relating to refund, subsection (3) of section 27 of the Sales Tax Act does not control subsections (1) and (2) of section 27. A proper interpretation of section 27 as a whole would leave no room for doubt that whenever it is found that a manufacturer has paid sales-tax on partly manufactured goods on import or previous purchase, the tax so paid shall be refundable to the manufacturer whether application under section 27 (3) has or has not been made within 4 years. It may kindly be noted that section 50 of the Income-tax Act was on the statute book since 1922 and is presumed to be try, known to the legislature which enacted the Sales Tax Act, 1951. If the legislature which enacted the Sales Tax Act, 1951 intended to provide a period of limitation for allowance of refund nothing prevented it from adopting the phraseology of section 50 of the Income-tax Act.

23. The absence of any prohibition against claim of refund on the expiry of a period of 4 years in the Sales Tax Act makes it abundantly clear that the relevant authorities cannot refuse to perform their duty to refund the tax contemplated by subsections (1) and (2) of section 27 of the Sales Tax Act merely because an application under subsection (3) of section 27 has not been made within 4 years. Any other interpretation would be most unreasonable, unjust and in violation and disregard of the fundamental and basic Scheme of the Sales Tax Act, 1951 i.e. of levying sales-tax at a single point. It would be more unreasonable and unjust in a case in which the liability to sales-tax of the finished goods is subject-matter of bona fide dispute and to say the least is doubtful.

24.Further the Sales-tax Officer has completely ignored the provisions of section 27-A of the Sales Tax Act, which authorises the Sale-tax Officer and also the Appellate Assistant Commissioner to allow adjustment of any amount found to be refundable or repayable to an assessee. Section 27-A does not require any application nor does it prescribe any period for making such application. Under section 27-A of the Sales-tax Act the relevant authorities have only to be satisfied that an amount is refundable or repayable to an assessee. Once they are so satisfied they have to allow adjustment instead of allowing refund."

3-A. When the matter went before the learned Appellate Tribunal, two of its learned Members confirmed the view taken by the learned Appellate Assistant Commissioner but the learned third Member namely, Mr. Abrar Hussain Naqvi could not persuade himself to agree with the majority view and he found that subsection (1) of section 27, which makes it incumbent upon the Sales Tax Authorities to refund the amount of tax paid on partly manufactured goods or goods purchased by a manufacturer when any tax has been paid on any previous sale thereof, was subject to the provisions of subsection (3) of the said section. Likewise, he also found the provisions of section 27-A to be subject to those of subsection (3) of section 27.

4. Although by the use of the word `shall' in subsection (1) of section 27, with which we are only concerned at present for the purpose of the present controversy, the Legislature makes it obligatory for the Sales-tax Officer to refund sales-tax referred to in the said section to an assessee who has paid the same on partly manufactured goods or goods purchased, etc. but subsection (3) of the said section further provides that an application pursuant to subsection (1) may be made in the prescribed manner within four years of the end of the year in which the tax in respect of which the refund is made was paid. Notwithstanding the use of the word "may" by the Legislature in subsection (3) an application for refund which may be filed by an assessee has been made subject to two conditions viz. firstly that the same has to be made in the prescribed manner and secondly, that it must be made within four years of the end of the year in which the tax in respect of the refund is claimed was paid. The term "prescribed" has been defined in section 2 of the Sales Tax Act as "prescribed by rules" made under the said Act . In the present case, as has been pointed out earlier, it was only while passing the order dated 30-6-1976 that the assessing officer came to a conclusion that the respondent was entitled to refund of sales tax but as has been pointed out earlier, he found himself helpless in providing any benefit to the respondent in this regard because no such application as required by subsection (3) of section 27 of the said Act had been filed on behalf of the respondent. Mr. Shaikh Haider, learned counsel for the applicant, has vehemently argued that section 27 is to be read subject to the provisions of subsection (3) thereof and any other interpretation of the said section is bound to lead to absurd results and we are inclined to agree with the learned counsel in this regard.

5. It is one of the elementary rules of construction that construction is to be made of all the parts of a statute together and not of one part only by itself for the true meaning of any passage is that which (being permissible) best harmonises with the subject and with every other passage of the statute. (See Maxwell on THE INTERPRETATION OF STATUTES, 10TH EDITION, pp 28 & 29). No doubt, if subsection (1) of section 27 is read in isolation it makes it incumbent on the Sales Tax Officer to refund sale tax paid by an assessee reference to which has been made in the said subsection but we cannot be oblivious of the language used in subsection (3) of the said section which clearly provides for a period of four years for making an application "pursuant to subsection (l.)" Furthermore, if subsection (1) of section 27 is construed in isolation the same is also bound to render subsection (3) of the said section redundant because an assessee may not file an application within the period of limitation as prescribed by subsection (3) and yet he can obtain a refund of sales tax under subsection (1). This could not be the intention of the Legislature to provide a period of limitation for making an C application for refund on the one hand and to provide an opportunity for an assessee to receive a time-barred refund in contravention of the provisions of subsection (3) on the other. The use of the. words "pursuant to subsection (1) or subsection (2)" in subsection (3) of section 27 is also not without significance because by use of such words the Legislature clearly intended to make subsections (1) and. (2) of section 27 subject to the provision of subsection (3) thereof. While relying upon section 27-A of the Sales Tax Act, Mr. Sirajul Haque, learned counsel for the respondent has contended before us that the case of the respondent in fact fell within the purview of the said section because it was only after dealing with the case under section 28 of the said Act that the Sales-tax Officer found that the respondent was entitled to refund of sale tax. According to the learned counsel section 27-A is to be interpreted independently of section 27 as it deals with cases of set off because it authorises the Sales-tax Officer or the Commissioner as the case may be to set off the amount to be refunded or repaid to an assessee in lieu of the payment of the refund or the repayment. No doubt, the learned counsel is right to a certain extent but set off can be allowed to an assessee only when in the first instance "a refund or repayment is found to be due", as is clearly suggested by such words appearing in the said section. It, consequently, appears to be doubtful that set off can be allowed to an assessee when no application as contemplated by subsection (3) of section 27 has been made by him, claiming the refund. The provisions of section 27-A were interpreted by a Division Bench of this Court in Commissioner of Sales Tax v. Zelin Limited, Karachi 1967 PTD 139 and it was observed as follows:--

"Section 27 enables an assessee to claim the amount of tax paid by him in I excess of the amount with which he is properly chargeable under the Act, provided he applies on a prescribed form within the period of limitation. On the other hand section 27-A enables the Department to make an adjustment of the amount so found due and refundable to the assessee under section 27 of the Sales Tax Act or under any other provisions in the other Acts mentioned in that section .

In the final analysis the learned Division Bench concluded:

"13. We have, therefore, no hesitation in reaching the conclusion that the' provisions of section 27-A are in no way in conflict with those of section 27 of the Sales Tax Act; in fact, they are supplementary to the latter. An assessee cannot claim adjustment of an excess amount paid by him as Sales Tax under section 27-A independently of section 27 of the Act. In this behalf he must make an application within the period of limitation as provided by section 27 (3) of the Act.

This case came up to be examined by the Supreme Court in the case of Commissioner of Sales-Tax M/s. Zelin Ltd. (1985 SCMR 1292) but the question under examination before the Supreme Court was different as the said case was considered by the Supreme Court in the light of section 30-A of the Sale Tax Act and it was held that a refund under section 27 can be possible only in those cases which are not covered by section 30-A of the Sales Tax Act. The case decided by the Supreme Court, therefore, has no bearing on the point in issue in the present case.

6. We are, consequently, of the view that the learned Member of the Income Tax Appellate Tribunal who did not agree with the majority view was right and the claim of refund, if any, was barred by limitation as provided by subsection (3) of section 27 of the Sales Tax Act and no claim for refund could be allowed to the respondent either under the provisions of the said section or section 27-A of the Sales Tax Act. The question referred to us, therefore, is answered in the negative.

M.B.A./C-221/KOrder accordingly.