AVARI HOTEL LTD. VS COLLECTOR OF SALES TAX
2000 P T D 3765
[Lahore High Court]
Before Nasim Sikandar, J
AVARI HOTEL LTD.
Versus
COLLECTOR OF SALES TAX and 3 others
Writ Petition No. 8154 of 1939, decided on 18/09/1999.
(a) Sales Tax Act (VII of 1990)---
----S.3---Constitution of Pakistan (1973), Fourth Sched., Item 49---Sales tax --Further levy---Not unconstitutional---Fact that a commodity was already being taxed by Federal and Provincial Governments on the same activity per se was not sufficient reason to declare the levy of a further tax as unconstitutional---Item 49 of, the Fourth Sched. to the Constitution of Pakistan (1973) permits levy of the kind without making a distinction of the goods or commodities which could be the subject-matter of sales tax.
(b) Sales Tax Act (VII of 1990)---
----S.2(41)---Taxable supply---Sale of liquor---Section 2(41) of the Sales Tax Act, 1990 defining taxable supply was sufficiently broad to bring into its ambit the sale of liquor.
(c) Sales Tax Act (VII of 1990)---
----Ss.14 & 3AA---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Requirement of registration---Retail tax--- Petitioner/assessee registered in manufacturing taxable supplies and services as hotels was further required to be registered as "retailer" under S.3AA of the Sales Tax Act, 1990---Department contended that petitioner/assessee was not the aggrieved party as he was only the collecting agency---Validity---Collection of revenue casts a number of duties upon the person required to collect revenue i.e. to maintain correct and faithful account of all sums received and then to see their safe credit to national coffer---Additional staff is also required for this purpose and even liable if any of his staff members fumbles in accounts deliberately or misappropriate and also liable to a number of penalties if he fails or falters on any count---Such was a duty cast upon him with no benefit or reward and was coupled with a constant fear of prosecution, penalties and punishments---Not correct to say, in the circumstances that the petitioner/assessee was either not aggrieved party or that it was merely pleading the cause of a third party on whom the incidence of tax will finally fall:
(d) Sales Tax Act (VII of 1990)---
----S.2(28)---Retailer---Kinds of---Retailers were of two kinds: Firstly those who purchased a commodity in bulk and then sc:3 same in small quantities, pieces or fragments by maintaining a balance between the bulk price paid and the sale price charged .for small quantity; secondly the retailers purchasing the goods and setting them almost in the same shape for various reasons including preservation of Brand name, quality, quantity and other peculiar characteristics of goods which were to remain in a particular size or form till they reached the hands of the consumers:
(e) Sales Tax Act (VII of 1990)--
----S.2(28)---Retailer---"General public"---Concept--Words "general" as well as "public" were used and understood to imply things of wider amplitude and implications---Words were antonym for particularization---When read together they supplement each other in conveying the sense to people as a whole---Word "public" was used to mean people as well as a specific class of people---if the word "public" had been used in the definition in its usual sense then there was no need to affix it with the word "general "---Together use of words general and public gives the sound argument that retailers contemplated by the Legislature were not of their kind as they were dealing with a peculiar class as their customers.
(f) Interpretation of statutes-
---- Fiscal statute---Principles.
Following are the principles for interpretation of a fiscal statute:
(i) Only words of the statute should be looked into.
(ii) Levy can only be made by express and exact words.
(iii) A person must be taxed only if he comes within the letter of law otherwise he is free even though his case falls within the spirit of law.
(iv) Only the letter of law is to be looked into and that there is no room for any intendment, equity or presumption.
(v) Fiscal statutes should be strictly construed so far liability to tax is concerned.
(vi) Language of a taxing statute should not be stretched to hold subject liable to tax.
(vii) Where two equally reasonable interpretations are possible one strict and other liberal, then the one favourable to the subject should be adopted.
(viii) In fiscal statute every word must be construed in the perspective it has been used, that nothing should be considered as superfluous, or surplusage.
(ix) Subject should be allowed to escape the incidence of taxation if he cannot be brought within the four corners of words of law.
Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and others 1977 SCMR 371; Hijvari & Co. v. Commissioner of Sales 1971 SCMR 128; Hira Chand v. Emperor AIR 9931 Lah. 572; Commissioner of Agricultural Income-tax, East Bengal v. B.W.M. 'Abdul Rehman 1989 PTD 909; Nawabzada M. Amir Khan v. Controller of Estate Duty PLD 1961 SC 119; Bank of Chettinad Ltd. v. CIT, Madras AIR 1940 PC 183 and CIT, East Pakistan v. Hussain Qasim Dada PLD 1961 SC 375 rel.
(g) Sales Tax Act (VII of 1990)--
----Ss.3AA, 14 & 2(28), (25), (33), (35)--Prohibition (Enforcement of Hadd) Order (4 of 1979), Art. 17---Constitution of Pakistan (1973), Art. 199---Retail tax--Requirement of registration ---Petitioner/assessee was registered with 'Sales Tax Department on account of making taxable supplies and services as hotels and was also licence holder under Art.17 of Prohibition (Enforcement of Hadd) Order, 1979 to sell liquor to permit holders---Department required the petitioner/assessee to get itself registered as retailer under S.14 read with S.3AA of the Sales Tax Act, 1990 for sale of liquor ---Petitioner/assessee contended that it vas retailer in terms of S.2(28) of the Sales Tax Act, 1990 as liquor was not sold to general public and being registered as hotel, it was not required to be registered for second time as a "retailer"---Validity---No reason existed to hold that the, petitioner was making a taxable supply to "general public" ---Customers of the petitioner, .the permit holders with the conditionalities attending to the permits and to their own class as such by no stretch of imagination were "general public"-- No finding favourable to the revenue could be made without doing unnecessary violence to the language of the statute---Customers of the petitioner/assessee or the recipients of the taxable supply were so limited in number and so specific in nature that holding them to be ."general public" or public simipliciter was not possible ---Petitioner/assessee was not "retailer" as defined in S.2(28) of the Sales Tax Act, 1990 in circumstances.
Ali Sibtain Fazli for Petitioner.
A. Karim Malik and Ghulam Haider Alghazali, Addl. A.-G. for Respondent.
JUDGMENT
NASIM SIKANDAR, J.---(1) The petitioners are members of an International chain of Hotels. Admittedly they are holders of licences under section 17 of the Punjab (Enforcement of Hadd) Order, 1979 to sell liquor to the Permit Holders who are non-Muslim residents or non -residents/foreigners. Both of them were served with notices to get- themselves registered as "retailer" under section 14 read with section 3AA of the Sales Tax Act, 1990 (for short the Act). Their reluctance based upon various reasons advanced was however refused by the respondents No. I and 2. This has brought them to file this Constitutional petition asking for a declaration that' they are not "retailers" * in terms of the definition contained in section 2(28) of the Sales Tax Act, 1990 and therefore are not required to be registered as such. A number of alternate reliefs have also -been sought/including that the petitioners already being registered with the Sales Tax Department on account of their engagement in making taxable supplies and services as hotels are not required to be registered for the second time as a "retailer"; that all matters pertaining to manufacturing, selling or consumption of liquor being a provincial subject, the respondents Sales Tax Officers have no power to levy tax on the sales made by the petitioner to the Permit Holder.
2. During the pendency of this petition statedly the petitioners have started collecting sales tax as "retailer" to avoid any personal liability in case of an adverse decision. However their claim for the above declaration and challenge to the levy on them as a "retailer" and the creation of arrears since 1-7-1998 remains intact.
3. The respondents Nos. l to 3 the Sales Tax Department and the Federation of Pakistan through Central Board of Revenue have contested the petition. They have filed a consolidated written statement assailing the maintainability of the writ petition as also the various grounds taken therein, The respondent No.4---The Government of Punjab through Add. A.-G. hasadopted the submissions made by the other respondents though practically no relief has been claimed against it.
4. The learned counsel for the petitioners makes a detailed resume of the law prohibiting consumption of liquor and the position of the Licence Holders vis-a-vis the Permit Holders. He claims that the hotels do not provide any service to the Permit Holders. According to him "Permit Room" in both Hotels is merely a selling outlet. It is strongly emphasised that selling of liquor for various reasons does not fall within the ambit of a retailer to general public. By pointing out the definition of retailer as given in subsection (28) of section 2 of the Act, he states that the word "general public" as used therein is of vital significance. It is argued that the commodity being supplied by the petitioner even if accepted to be a taxable supply is not liable to be taken as an ordinary sale inasmuch as the customers of the petitioner by no imagination could be described as "general public". Further points out that the liquor being a controlled item whose price is fixed by the Government of Punjab, the incidence of the retail tax cannot be passed on to the Customer. It is maintained that the sales tax primarily being a tax on consumption of goods or use of services can only be directed to be paid by the purchaser and not by the seller. In this connection, he points out that an enhancement or revision of rates of liquor by the Hotel Management is no more possible. A letter No. 1999-99(395) by Director Enforcement withdrawing Office Memorandum No.1997-97/771-Ex(P)1, dated 23-9-1997 whereby hotel managements were authorised to revise liquor rates is accordingly referred. It is further claimed that for providing service and food items etc., the petitioners are already registered persons as defined in subsection (25) of section 2 of the Sales Tax Act, 1990. Lastly it is submitted that Federal Government under the guise of sales tax cannot impose tax on an activity which otherwise falls within the domain of the Provincial Government. In order to bring home the multiplicity of taxes on liquorby the Provincial and Federal Government, learned counsel refers to Annexure A wherein it is explained that every bottle of a common brand is subjected to various levies aggregating more than 392% of the value of the liquor. Any further tax or an increase on the same in the view of the learned counsel will be confiscatory and totally unreasonable.
5. Mr. A. Karim Malik, Advocate for the respondents 1 to 3 however stresses that simultaneous levy of Central Excise, Sales Tax and Provincial taxes is not prohibited by the Constitution. Further submits that the assessee were justifiably served with a notice and required to be registered as a retailer inasmuch as they were clearly engaged in retail business of a taxable supply. According to him all makers of taxable supplies are liable to be registered as retailer if the other conditions given in the said provisions of the Act are satisfied. Further submits that supplies of alcoholic liquor from the permit room is a "supply" in terms of section 2(33) of the Sales Tax Act and the sales from the permit rooms are a taxable activity under section 2(35) of the Sales Tax Act, 1990. Therefore in his view the petitioners cannot avoid registration on one pretext or the other. It is also disputed that taxable supplies are not being made to "general public" in terms of the definition clause of section 2(28) of the Sales Tax Act, 1990. According to him, the sale of liquor -is admittedly a taxable supply and the permit holders can, conveniently be taken as a section of "general public". Therefore, supports the service of notice for registration as made by the respondent Collectorate of Sales Tax.
6. After considering the submissions from both sides, I will readily grant a number of contentions made for the Revenue. The fact that a commodity was already being taxed by Federal and Provincial Governments on the same activity per se is not a sufficient reason to declare the levy of a' further tax as unconstitutional. It is also not to say that manufacture and' consumption of liquor does not in any manner fall within the tax domain of Federal Legislature. Item 49 of the 4th Schedule to the Constitution of Pakistan permits levy of the kind without making a distinction of the goods or commodities which could be the subject-matter of sales tax. The fact that the petitioners are engaged in making a taxable supply has also not been seriously disputed. Even otherwise subsection (41) of section 2 of the Sales Tax Act, defining taxable supply is sufficiently broad to bring into its ambit the sale of liquor by-the petitioners. The expected increase in value of the goods being supplies, namely liquor, again is hardly a good ground to assail registration. All submissions made in this regard rather plead the case of Permit Holder and not the Licence Holder as the incidence of further levy will fall upon formers and the petitioners will act only as collecting agents. At the same time, I am not inclined to hold that the petitioners are not an aggrieved party. The collection of revenue even as an agent costs a number of duties upon the person required to do so. He is to maintain correct and faithful accounts of all sums received and then to see their safe credit to national coffer. He may need additional staff for this purpose and may even be liable if any of his staff members fumbles in accounts deliberately ,on, misappropriate even smallest amount of public money collected. An agent appointed by law or deemed under a similar statute is also liable to a number of penalties if he fails or faliers on any count. This phenomena in fact is a recent development in tax regimes that persons who are otherwise neither employed by the State nor they represent it in any other manner are designated to collect Revenue for the State without any ostensible reward. This is a duty cast upon them with no benefit and is coupled with a constant fear of prosecution penalties and punishments. It is one of several other prices that one has to pay to live in a society. Therefore it would not be correct to say that the petitioner is either not aggrieved party or that it is merely pleading the cause of a third party on whom the incidence of tax will finally fall.
7. The contention that the petitioners are retailers also hardly appears open to exception. Generally speaking, retailers are of two kinds. Firstly those who purchase a commodity in bulk and then sell it in, small quantities, pieces or fragments by maintaining a balance between the bulk price paid and the sale price charged for small quantity. In other case the retailers purchase the goods and sell them almost in the same shape for various reasons including preservation of Brand name, quality, quantity and other peculiar characteristics of goods which are to remain in a particular size or form till they reach the hands of the consumer. Both the petitioners fall in this category of retailers who are mostly engaged in retail business on commission basis whether or not it is retail able to the quantity of goods disposed of. According to "A Dictionary of Economics and Commerce" by J.L. Hanson, 5th Edition published by the English Language Book Society and Macdonald & Evans, The main service of the retailer is to ensure that consumers are offered the things they want in the form and in the quantity in which they want them. He should therefore carry a varied stock... Convenience of situation is also regarded as an important service of the retailer". The petitioners are engaged in retail selling under an authority from the Government of Punjab and the said supply otherwise being a taxable supply the Revenue has a strong case to that extent.
8. However, the learned counsel for the revenue is not correct in saying that the only criterion in such situation is that there should only be a supply of taxable goods. The definition clause subsection (28) of section 2 of the Act defines the word "retailer" as under:---
"Section 2(28) 'retailer' means a person supplying goods to general public for the purpose of consumption."
The learned counsel for the petitioner is right in pointing out that only a retailer as defined in this clause is required to be registered as such under section 3AA of the Act. Also that though essentially a king of sales tax, the retail tax has been categorized and given a different nomenclature. It is levied and charged through an independent charging provision. The retailer accordingly must squarely be covered by the said definition as given in the Act. All the moreso, when the person being pressed to be registered as a retailer is already a registered person collecting sales tax on food items supplied and services provided to its guests.
9. The use of word "general public" in the above definition clause has rightly been pointed out by the learned counsel for the petitioner is of special significance. Both words "general" as well as "public" are used anti understood to imply things of wider amplitude and implications. They are antonym for particularization. When read together they supplement each other in conveying the sense of people as a whole. No doubt that the word "public" is used to mean people as well as a specific class of people. In the above definition if the word 'public' had been used in its usual sense then there was no need to affix it with the word "general". Their use together gives the petitioners a sound argument that retailers contemplated by the Legislature were not of their kind as they were dealing with a peculiar class as their customers. It is explained and the revenue does not deny that the permits for consumption of liquor are given to a particular class of persons subject to the payment of fee which expire after a certain period. Their renewal is subject to the same process and fee which is prescribed for fresh applicants. Every Permit Holder has a fixed quantity which it can buy from a licence holder. The permit holders are allowed to consume liquor only in connection with their religious ceremony. All permit holders are under restraint that the liquor purchased by them even on permit will not be used at any public place. The price of liquor is admittedly fixed by the Provincial Government and presently the petitioners are not allowed to enhance or charge any amount above the rate, fixed by the Provincial Government. In fact such a charge, which the petitioners are already enforcing to avoid personal liability under the threatened punitive action, is an implied violation of the terms of their licence under section 17 of the Prohibition Act.
10. The rules of interpretation of fiscal statute are by now very well known. These are that only words of the statute should be looked into 1977 SCMR 371 re: Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and others; that a levy can only be made by express and exact words 1971 SCMR 128 re: Hijvari & Co. v. Commissioner of Sales that a person must be taxed only if he comes within the letter of law otherwise he is free even though his case falls within the spirit of law. AIR 1931 Lahore 572 re: Hira Chand v. Emperor that in fiscal statutes only the letter of law is to be looked into and that there is no room for any intendment, equity or presumption 1989 PTD 909 re: Commissioner of Agricultural Income-tax, East Bengal v. B.W.M. Abdul Rehman that such like statutes should be strictly construed as for liability to tax is concerned (PLD 1961 SC 119) re: Nawabzada M. Amir Khan v. Controller of Estate duty; that the language of a taxing statute should not be stretched to hold subject liable to tax (AIR 1940 PC 183) re: Bank of Chettinad Ltd. v. CIT, Madras; that where two equally reasonable interpretations are possible one strict and other liberal then the one favourable to the subject should be adopted (PLD 1961 SC 375) re: CIT, East Pakistan v. Hussain Qasim Dada. To epitomize all of them, in fiscal statute every word must be construed in the, perspective it has been used, that nothing should be considered as superfluous, or surplusage. Also that subject should be allowed to escape the incidence of taxation if he cannot be brought within the four I corners of words of law.
11. The aforesaid facts when judged on these principles of interpretation there appears no reason to hold that the petitioners are making a taxable supply to "general public". Holding otherwise would amount to restrict general words and to make them fit in a moulder wished and prepared by the revenue. The customers of the petitioners, the permit holders with the conditionalities attending to the permits and to their own class as such by no imagination are "general public". No finding favourable to the revenue can be made without doing unnecessary violence to the language of the statute. The customers of the petitioners or the recipients of the taxable supply are so limited in number and so specific in nature that holding them to be general public or public simplicities is not possible. That will simply be stretching the meaning for the benefit of the revenue to rope in the petitioners. Such-like approach as observed above, would not be in consonance with the above- stated settled rules of interpretation.
12. Accordingly this petition is accepted. It is held that petitioners are not "retailer" as defined in section 2(28) of the Act. Therefore, the arrears created against them since 1-7-1998 are declared to be of no legal effect. Further that the provisions of section 3-B of the Act shall take care of the retail tax already collected by them and passed on to the national exchequer during the pendency of these petitions.
C.M.A./M.A.K./A-119/L Petition accepted.