ABDUL SATTAR MOOR MUHAMMAD & CO. VS GOVERNMENT OF PAKISTAN
1999 P T D 4016
[Supreme Court of Pakistan]
Present: Saiduzzaman Siddiqui, Sh. Ijaz Nisar and Mamoon Kazi, JJ
ABDUL SATTAR MOOR MUHAMMAD & CO. and others
Versus
GOVERNMENT OF PAKISTAN and others
Civil Appeals Nos. 1104 to 1117 of 1996, decided on 08/03/1999.
(On appeal from the judgment of the High Court of Balochistan, Quetta, dated 11-12-1995 passed in Civil Petitions Nos.283 to 288 of 1995, 296, 321 to 324, 326, 327 and 344 of 1995).
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 50 (5) (a) (b) [as amended by Finance Ordinance (I of 1995)]--- Customs Act (IV of 1969), S.3---Constitution of Pakistan (1973), Art .185(3)---Deduction of income-tax at source---Leave to appeal was granted by Supreme Court to consider the contention of the importer that the rate of 4 % as advance income-tax was applicable from 1-7-1995 while the Bill of Entry on the basis of which the tax was payable was filed before 30-6-1995 and, thus, the new rate of 4% could not be applied: that a vested right had accrued to the importer and that the full amount of 2% which was payable prior to 1-7-1995, when the Finance Ordinance, 1995 came into force had been paid in full in advance and that the entire liability of the importer for the income year ending 30-6-1995 had already been crystallized prior to the promulgation of Finance Ordinance, 1995 and accordingly no additional liability could be imposed thereon---Contention of the Authorities was that as the importer had not completed the documents required for assessment of duty and had not even paid the instalments as required by the rules, there could not be final determination of the customs duty, which was the basis for requiring advance income tax.
(b) Income Tax Ordinance (XXXI of 1979)--
----S. 50 (5) (a) (b) [as amended by Finance Ordinance (I of 1995)]--- Customs Act (IV of 1969), ---S. 3---Deduction of income-tax at source-- Procedure---If the importers had deposited before 1-7-1995 advance 2% as calculated in terms of S.59(5)(a) of the Income Tax Ordinance, 1979 which was the prevailing rate on the date of such deposit, then liability for the advance income-tax stood discharged completely and the subsequent amendment in the rate which was effective from 1-7-1995 did not apply to them---Mere fact that whole of the customs duty was not paid by the importer before 30-6-1995 because they had availed of the benefit of payment of customs duty in instalments under the rules could not change their liability in respect of advance income-tax under the Income Tax Ordinance, 1979 which they paid in full before 30-6-1995.
The liability for payment of advance income-tax under the Income tax Ordinance, 1979 is to be calculated under sub-clause (a) to clause (5) of section 50 of the Ordinance which provided that 2 % advance tax is to be collected by computing the same on the value of the import of goods by adding to it the amount of customs duty and sales tax payable on it. However, recovery of the advance income-tax so determined under sub clause (a) to clause (5) of section 50 of the, Ordinance is be done as provided in sub-clause (b) of clause (5) of section 50 of the Ordinance in accordance with the provisions of Customs Act 1969 applicable to the recovery of customs duty. It is, therefore, quite clear that in so far the assessment of the amount of advance income-tax was concerned, it was to be done in accordance with the provisions of sub-clause (a) of clause (5) section 50 of the Ordinance and only to the recovery of the amount of tax so determined that the provisions of the Customs Act, 1969 applied under section 3 of the Customs Act, the rate of custom duty applicable is that which is prevailing on the date of presentation of bill of entry to the customs authority. Therefore, if the importer had deposited before 1-7-1995 advance tax at the rate of 2% as calculated in terms of sub-clause (a) to clause (5) of section 50 of the Ordinance, which was the prevailing rate on the date of such deposit, their liability for the advance income-tax stood discharged completely and the subsequent amendment in the rate which was effective from 1-7-1995 did not apply to them. Mere fact that whole of the customs duty was not paid by the importers before 30-6-1995, because they had availed, of the benefit of payment of customs duty in instalments under the Rules, could not change their liability in respect of advance tax under the Income Tax Ordinance, 1979 which they and in full before 30-6-1995.
The above ruling is applicable only if the importers tad deposited the full amount of advance of income-tax at the rate of 2% with the customs authorities before 30-6-1995.
Contention that as the importers availed of the benefit of deferment of customs duty under the Rules, they could not deposit the advance income tax in full with the 1stinstalment of customs duty, no such interpretation arises either from the language of section 50(5)(a)(b) of the Income Tax Ordinance or from the provisions of the Rules.
Muhammad Ali Sayed, Senior Advocate Supreme Court, Akhtar Ali Mahmood, Advocate Supreme Court, A. Aziz Khan and K.A. Wahab, Advocates-on-Record for Appellants.
Maulvi Anwarul Haq, Deputy Attorney-General and NasFtllah Awan. Advocate Supreme Court for Respondents.
Date of hearing: 9th March, 1999.
JUDGMENT
SAIDUZZAMAN SIDDIQUI, J.---Leave was granted in the above mentioned appeals to consider the following contentions:-
"3. The learned counsel for the petitioners contended that the rate of 4% was applicable from 1-7-1995 while the bills of entry on the basis of which the tax was payable were filed before 30-6-1995 and, thus, the new rate of 4 % could not be applied. It was further contended that a vested right had accrued to the petitioners and that the full amount of 2% which was payable prior to 1-7-1995 when the Finance Ordinance, 1995 came into force had been paid in full in advance. Mr. Khalid Anwar further argued that the entire liability of the petitioners for the income year ending 30-6-1995 had already crystallized prior to the promulgation of Finance Ordinance, 1995 and accordingly no additional liability could be imposed thereon. Mr. Raja Rab Nawaz, learned Deputy Attorney-General contended that as the petitioners had not completed the documents required for assessment of duty and had not even paid the instalments as required by the Rules, there could not be final determination of the customs duty, which was the basis for requiring advance income-tax. The contentions raised require consideration and interpretation of the provisions of the Customs Act and the Income Tax Ordinance. Leave is granted."
We have heard Mr. Muhammad Ali Sayed, the learned counsel for the appellants in Civil Appeals Nos. 1104 to 1107, 1111 and 1113 to 1116 of 1996 and Mr. Akhtar Ali Mahmood, Advocate Supreme Court, in the remaining cases for the appellants, Mr. Nasrullah Awan, Advocate Supreme Court, for the department and Maulvi Anwarul Haq, Deputy Attorney General for the Federal Government.
2. The appellants, who are engaged in the business of ship breaking, imported different vessels for the purposes of scrapping under the import policy valid for the period ending 30-6-1995. The case of the appellants is that all the vessels imported by them arrived in the territorial waters of Pakistan much before 30-6-1995 and bills of entry for home consumption for clearance of these vessels were filed much before 1-7-1995. In paragraph 11 of the petition of leave to appeal, the appellants have stated as follows:-
"11: That the petitioner had upon filing the bill of entry, on 16-5-1995 vide IGM 9 paid the sum of Rs.51.743 million towards the first instalment of Customs Duty at the rate of thirty four per cent (34 % ) plus sales tax with the complete two per cent (2 %) income tax on 27-6-1995 (customs duty and sales tax Rs.51,743,437 and income tax Rs:7,016,563. Both amounts were accepted by the- customs department after checking the same and the challan relating to income tax, on the basis of which payment alone can be accepted by National Bank on behalf of the petitioner, were, forwarded to the Bank with the pay orders by the Customs Department itself. It may be noted that the procedure of the customs department is that the payment is taken to the dealing customs officer who makes a noting in the file and register and then personally deposits the pay order in National Bank of Pakistan which affixes a stamp of payment not 0lmerely on the bill of entry but also the official customs file, which can be summoned to Court for inspection. Thus, it is impossible to make payment without customs approval."
It is an admitted position that under section 50 (5) (a) (b) of the Income Tax Ordinance, 1979 (hereinafter to be referred as 'the Ordinance' only), the customs authorities were required to recover from every importer advance income tax at the rate of 2% computed on the basis of the value of imported goods as increased by the customs duty and sales tax, if any, and the credit for the tax so collected in any financial year subject to the provisions of section 53 of the Ordnance, was to be given in computing the tax payable by such importers for the assessment year commencing on first day of July next following the said financial year or in the case of assessee to whom section 72 or section 81 applies, the assessment year, in which the 'said date', as referred therein falls, whichever is the later. The relevant part of the provisions of section 50 (5) (a) (b) of the Ordinance, which is under consideration in the present cases, reads as follows:-
"(5) Notwithstanding anything contained in any law for the time being in force---
(a) The Collector of Customs shall, in the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increase by the customs duty and sales-tax, if any (levied) thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payableby such importer for the assessment year commencing on the first day of July of next following the said financial year, or in the case of an assessee to whom section 72 or section 8: applies, the assessment year, in which the "said date", as referred to therein, falls, whichever is the later;
(b) The tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as if such goods (even though exempt from such only) were liable to such duty, and all the provisions of Customs Act, 1969 (IV of 1969) shall, so far as may be, apply accordingly:
Provided that in the case of a manufacturer importing raw materials exclusively for its own use, the Regional Commissioner of Income Tax may certify reduction of the rate of collection under this subsection by fifty per cent, if the aggregate of tax paid or collected under this subsection during that year equals the amount of tax paid by such assessee in the immediately preceding year and the certificate is not issued during the first year of assessee's business."
By Finance Act I of 1995, which came into effect on 1-7-1995, in paragraph 'F' of the First Schedule to the Ordinance, the word "2" was substituted by "4" with the result as and froth 1-7-1995, the rate of advance income tax under section 50 (5) (a) of the Ordinance was to be collected at the rate 4 % instead of 2 % . It appears that the appellants availed of the concession of deferment of import duty on the ships imported by them in accordance with the provisions of Deferment of Import Duty (on Ships for Scrapping) Rules, 1993 (hereinafter to be referred as 'the Rules) which was amended on l I-1-1995 by SRO No. 27 (I)/95 as follows:---
"S.R.O 27 (I)/95.-In exercise of the powers conferred by section 219 of the Customs Act, 1969 (IV of 1969), the Central Board .of Revenue is pleased to direct that the following further amendments shall be made in the Deferment of Import Duty (on Ships for Scrapping) Rules, 1993, namely:-- In the aforesaid Rules,--
(1) in rule 2, in clause (v), .for the words 'at the time' the words 'within fifteen days' shall be substituted;
(2) rule 3 shall be omitted; .
(3) for rule 4 the following shall be substituted, namely:-,
4. Schedule of deferment, 'The duties leviable on import of ships for breaking may be paid in accordance with the following schedule, namely:
(a) First instalment of 34% within 15 days of the filing of the bill ofentry.
(b) Second instalment of 33 % within 30 days of the payment of first instalment.
(c) Third instalment (final payment) of 33 % within 30 days of the payment of second instalment'
(4) in rule 5,---
(a) In sub-rule (4) for the words and figure 'half the duties under rule 3' the words and figure paying the first instalment under rule 4' shall be substituted;
(b) In sub-rule (5), for the word 'extended' the word 'allowed' shall be substituted; and
(c) for sub-rule (7), the following shall be substituted, namely:-
(7) In case of failure by the importer to make payment in accordance with the schedule specified in rule 4, he shall be stopped breaking the ship forthwith and shall not be allowed to avail facility of deferment of duties payable in respect of the ship for which such deferment was permissible and no such deferment' duties shall be allowed to him in future.
(Sd.)
(Muhammad Zahir-ud-Din),
Secretary (Tariff-II.)"
In terms of the Rules as amended, the appellants paid first instalment of 34 % of the total customs duty payable on the ships imported by them at the time of clearance of the ships. The appellants, however, claim to have deposited the total advance income tax in terms of section 50 (5) (a) of the Ordinance at the rate of 2 % alongwith first instalment of customs duty. It further appears that at the time the appellants offered to pay the 2nd and 3rd instalments of customs duty under the Rules, the customs authorities insisted for payment of advance income tax under the Ordinance at the rate of 4 % in view of the amendment made in the Schedule to the Ordinance by Finance Act 1 of 1995. The appellants resisted the above demand and accordingly challenged the action of the customs authorities through separate writ petitions filed before the High Court of Balochistan, at Quetta. It was contended before the learned Judges of the High Court that the bills of entry for home consumption for clearance of ships imported for scrapping. Having been filed much before 1-7-1995, the customs duty in terms of section 30 of the Customs Act, 1969 was payable at the rate prevalent on the date of presentation of the bills of entry under section 79 of the Customs Act, 1969. It was also contended that the advance income tax' in terms of section 50(5)(a)(b) of the Ordinance could be recovered from the appellants only in accordance with the rate prevailing on the date of presentation of the bill of entry before the Customs Authorities. It was argued before the learned Judges of the High Court of Balochistan that the amendment in the Schedule to the Ordinance providing for recovery of advance income tax at the rate of 4% having been made on 1-7-1995, the same could not be applied retrospectively to the cases in which the liability had already arisen and determined in accordance with the provisions of section 50 (5) (a) of the Ordinance. The above contention of the appellants was, however, rejected by the learned Judges of the High Court as follows:--
"The above meanings persuaded us to hold that the Collector shall compute Advance Income-tax during same period and at the same moment, neither before nor after, in the identical method, in which customs duty and sales tax was collected. It is to be seen that relevant parts of statute relating to collection of tax should be interpreted in such a manner so that taxes are recovered without any complication, and while charging the tax there should not be any doubt concerning method adopted to achieve the object. Additionally tax can only be exacted against the tax, payer on notifying the amount of tax levied against him on the basis of data, so placed before the concerned authority.
As such, we are persuaded to hold that Advance Income Tax is to be charged on the basis of value of imported goods increased by Customs Duty and Sales Tax, worked out by the Customs Department at the rate which was prevailing at the time to allowing permission to Importer under Rule 2 (c) of the Inspection Valuation Assessment Rules, 1994. To make the payment in public ex chequer.
Learned Deputy Attorney-General placed on record statement containing details of amounts paid by petitioner against first instalment of 34 % under Deferment Scheme before 28th October, 1995. A perusal of which indicates that petitioners even did not make full payment of first instalment of duty. Relevant entries from the said statement reads as under:---
| S.No. | Name of Importer. | % of duty paid Upto 30-6-1995 Custom Duty | Sales Tax |
| 1. | M/s. Al-Hamza ShipBreaking Co. | 13.6% | 30% |
| 2. | M/s. Ahmad Meritime Breakers. | 31.70% | 25.06% |
| 3. | M/s. Abdul Sattar Noor Muhammad and Co. | 19.57% | 40.87% |
| 4. | M/s. Metco ShipBreakers | Nil | Nil |
| 5. | M/s. Dewan Sons | 19.34% | 21.61% |
| 6. | M/s. Sadaf Enterprises. | 33.57% | 38.89% |
| 7. | M/s. Imran Shipbreaking Co. | Nil | Nil |
In the rejoinders filed to counter-affidavits of Customs Department, petitioners had not controverted to above factual position. Thus, it is decided that petitioners without making full payment of first instalment i.e. 34% of the Import Duty had no authority to deposit without permission of Collector, 2% Advance Income Tax on the valuation of customs duty which they worked out themselves. As payment of customs duty sales tax under Deferment Scheme is relate able to the computing and collecting of Advance Income Tax, therefore petitioners are liable to pay such tax at the rate which will prevailing when remaining amounts of the duty shall be paid by them.
In view of above discussion it is held that advance Income Tax shall be computed according to the method, prescribed under section 50(5) (a) (b) of the Ordinance of 1979 and collection of the tax shall be made on the amount of duty which actually had been paid by Importer under the sanction of Tax Levying Authority i.e. Collector Customs at the rate prevailing at the time when such amount is paid and there is no concept of self-execution of above provisions. Under the circumstances, official respondents were within their lawful right to demand Advance Income Tax, at the rate of difference of 2% from petitioners after 1st July, 1995, on promulgation of Finance Act 1995. Because petitioners have not fully discharged the liability to pay Advance Tax under the provisions of section 50 (5) (a) (b) of the Ordinance of 1979, therefore, no vested right had accrued to them, and the judgment cited at Bar on behalf of petitioners are of no help to them.
For the above discussion, petitions are dismissed."
We are unable to accept the above reasoning of the learned Judges of the High Court. The liability for payment of advance income tax under the Ordinance is to be calculated under sub-clause (a) to clause (5) of section 50 of the Ordinance which provided that 2 % advance tax is to be collected by computing the same on the value of the import of goods by adding to it the amount of customs duty and sales tax payable on it. However, recovery of the advance income tax so determined under subclause (a) to clause (5) of section 50 of the Ordinance is to be done as provided in subclause (b) of clause (5) to section 50 of the Ordinance in accordance with the provisions of Customs Act, 1969 applicable to their recovery of customs duty. It is, therefore, quite clear that in so far the assessment of the amount of advance income tax was concerned, it is to be done in accordance with the provisions of sub-clause (a) of clause (5) of section 50 of the Ordinance and only to the recovery of the amount of tax so determined that the provisions of the Customs Act, 1969 applied. Under section 3 of the Customs Act, the rate of customs duty applicable is that which is prevailing on the date of presentation of bill of entry to the customs authority. We are, therefore, of the view that if the appellants had deposited before 1-7-1995 advance tax at the rate of 2% as calculated in terms of sub-clause (a) to clause (5) of section 50 of the Ordinance which was the prevailing rate on the date of such deposit; their liability for the advance income tax stood discharged completely and the subsequent amendment in the rate which was effective from 1-7-1995 did not apply to them. Mere fact that whole of the customs duty was not paid by the appellants before 30-6-1995 because they had availed of the benefit of payment of customs duty in instalments under the Rules, could not change their liability in respect of advance tax under the Ordinance which they paid in full before 30-6-1995. The learned counsel for the department has however, contended that he is not in a position to make a definite statement regarding factual position asserted by the appellants in paragraph 11 of the petition for leave to appeal filed before this Court, and therefore, he is not in a position to say whether the appellants deposited the entire advance income tax at the rate of 2% before 30-6-1995 or not. In view of the stand of learned counsel for the department, we clarify, that the above finding recorded by us is applicable only if the appellants had deposited the full amount of advance of income tax at the rate of 2 % with the customs authorities before 30-6-1995. The learned Deputy Attorney-General has, however, contended that since the appellants have availed of the concession of deferment in payment of customs duty under the Rules, therefore, any payment of advance income tax was also to be recovered in the same manner and in the same proportion as the customs duty. Therefore, any deposit of advance tax made by the appellants in excess of that proportion was unauthorised and of no avail. It is accordingly, contended by the learned Deputy Attorney-General that on the date when the appellants offered to pay 2nd and 3rd instalment of the customs duty, they were liable to pay the advance income tax according to the rule which was applicable on that date. We are unable to accept the contention of the learned Deputy Attorney-General. that as the appellant availed of the benefit of deferment of customs duty under the Rules, they could not deposit the advance income tax in full with the 1st instalment of customs duty. No such interpretation arises either from the language of section 50 (5) (a) (b) of the Ordinance or from the provision of the Rules. We; accordingly, allow these appeals, set aside the order of the learned Division Bench of High Court of Balochistan, in the terms stated above. There will, however, be no order as to costs.
M.B.A./A-155/SCAppeal allowed.