FALAK SHER VS STATE, 1993 PTD-LAHORE-HIGH-COURT-LAHORE 753 (1993)

(a) Sales Tax Act, 1990---

----S.3(4)---Notification which had the effect of imposing liability or obligation could not operate retrospectively in the absence of any legal sanction in the statute itself.

In the present case it was evident from a perusal of two notifications, first by which the fixed tax was levied and second by which rules were promulgated that these notifications had not been given any retrospective effect and, therefore, it was not understandable as to how the department could demand payment of tax from a date earlier than the issuance of the notifications.

A notification which has the effect of imposing liability or obligation cannot operate retrospectively in the absence of any legal sanction in the statute itself.

A notification which purports to impose a new liability or obligation cannot operate retrospectively in the absence of any legal sanction.

Demand of the Department for the payment of fixed tax for the period 1st July, 1'990 to 17th August, 1991 was clearly without any lawful authority especially when the notifications themselves did not purport to have any retrospective operation.

Constitutional petition was allowed and demand of the Department for payment of fixed tax on the basis of notification, dated 17th August, 1991 after the period prior to the issuance of notification was declared to be without lawful authority and of no legal effect. However, it was open to the Department to recover the sales tax for the period in question under the normal law.

Commissioner of Sales Tax (West), Karachi v. Messrs Kruddsons Ltd. PLD 1974 SC 180; Koh-i-Noor Textile Mills Ltd. v. Commissioner of Income Tax, Lahore PLD 1974 SC 284; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250 ref.

(b) Sales tax---

---- Consent of an Association of which the assessee was a member could not be made the basis of levying a tax on assessee.

Mian Saqib Nisar for Petitioner.

Sh. Maqbool Ahmad, Standing Counsel for Pakistan.

Date of hearing: 31st January, 1993.

JUDGMENT

M/s. Bashir Sons (P,,1.) Limited is running a cloth bleaching, dyeing and printing unit in Faisalabad. The Central Board of Revenue, in exercise of power vesting in it under section 3(4) of the Sales Tax Act, 1990, decided to levy and collect fixed amount of tax in lieu of sales tax payable by the petitioner. ()n 17th August, 1991, two Notifications were issued by the Board, first by which the rates of taxation were notified while by second Notification bearing No.783(I)9l, laying down for determining liability were promulgated.

2. In this petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, the grievance of the petitioner is that though fixed tax has been levied from 17th August, 1991, the respondents are demanding payment of fixed tax from 17 July, 1991 onwards.

3. 1n support of this petition, Mian Saqib Nisar, learned counsel for the petitioner has contended that as the notification levying fixed tax was issued on 17th August, 1991, the respondents cannot demand fixed tax before the date especially when the notification itself does not purport to be retroactively applicable. It is also argued that a notification cannot be given retrospective effect in the absence of any provision to that effect in the statute itself. In support of this contention, learned counsel has relied upon Commissioner of Sales Tax (West). Karachi v. Messrs Kruddsons Ltd. PLD 1974 SC 180, Kohi- Noor Textile Mills Ltd. v. Commissioner of Income Tax, Lahore PLD 1974 SC 284, Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII, South Zone, Karachi and others 1992 SCMR 250.

4. There is considerable merit in the contention raised by the learned counsel for the petitioner. It is evident from a perusal of two notifications, first by which the fixed tax was levied and second by which rules were promulgated that these notifications have not been given any retrospective effect and, therefore, it is not understandable as to how the respondent can demand payment of tax from a date earlier than the issuance of the notifications.

5. It is trite law that a notification which has the effect of imposing I liability or obligation cannot operate retrospectively in the absence of any legal sanction in the statute itself. In Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 Commissioner of Sales Tax (West), Karachi v. Messrs Kruddsons Ltd. PLD 1974 SC 180 and Kohl-Noor Textile Mills Ltd. v. Commissioner of Income Tax, Lahore PLD I 1974 SC 284, it was held by the Supreme Court that a notification which purports to impose a new liability or obligation cannot operate retrospectively in the absence of any legal sanction.

6. Faced with this situation, learned Standing Counsel has argued that the tax is being demanded with effect from 1st July, 1991 with the consent of and in consultation of All Pakistan Textile Processing Mills Association of which the petitioner is a member. However, nothing has been brought on record to substantiate this contention. Even in the parawise comments filed by the respondents, there is no such assertion, This argument of the learned Standing Counsel is, therefore, without any factual basis and cannot be accepted. Furthermore, it is highly doubtful as to whether consent of an association of which petitioner is a member can be made the basis for levying a tax on it.

7. It flows from the above that demand of the respondents for the payment of fixed tax for the period 1st July, 1990 to 17th August, 1991 is clearly without any lawful authority especially when the notifications themselves do not purport to have any retrospective operation.

For the reasons aforesaid, this petition is allowed and demand of the respondents for payment of fixed tax on the basis of notification, dated 17th August, 1991 after the period prior to the issuance of notification was declared to be without lawful authority and of no legal effect. It is, however, clarified that it shall be open to the respondents to recover the sales tax for the period in question under the normal law. No order as to costs.

M.B.A./B-76/LPetition allowed.