ADDITIONAL COLLECTOR, SALES TAX, LAHORE VS RUPAFAB LIMITED
2001 P T D 2383
[Supreme Court of Pakistan]
Present: Iftikhar Muhammad Chaudhry and Hamid Ali Mirza, JJ
ADDITIONAL COLLECTOR, SALES TAX, LAHORE and another
Versus
RUPAFAB LIMITED and others
Civil Appeal No. 1005 of 1999, decided on 09/04/2001.
(On appeal from order dated 28‑7‑1999 passed Lahore High Court, Lahore in Writ of 1997),
(a) Fixed Amount of (Processed Fabrics) Rules, 1995‑‑‑
‑‑‑‑R.9‑‑‑Sales Tax Act (VII of 1990), S.10‑‑‑Leave to appeal was granted by Supreme Court to consider; whether an importer/manufacturer opting to come under the Fixed Amount of (Processed Fabrics) Rules, 1995 would not be bound by the provisions of R.9 of the Rules to claim refund of input tax under S.10 of Sales Tax Act, 1990; whether in view of the amendment of S.8 of Sales Tax Act, 1990 (which is to be read with S.10 of Fixed Amount of (Processed Fabrics) Rules, 1995) by‑ the Finance Act, 1999 with retrospective effect, refund of input tax paid under the Rules of 1995 could still be claimed; whether the refund of input tax could be claimed under S.10 of Sales Tax Act, 1990, in respect of goods imported before the enforcement of the Fixed Amount of (Processed Fabrics) Rules, 1995, or exercise of the option of the manufacturer to come under them.
(b) Interpretation of statutes‑‑‑
‑‑‑‑Rules made under a statute‑‑‑Overriding effect of the rules ‑‑‑Validity‑‑ Rules which are merely subordinate legislation, cannot override or prevail upon the provisions of the parent statute and whenever there is an inconsistency between Rules and Statute, the latter must prevail‑‑‑All efforts to reconcile the inconsistency must first be made and the provisions of the parent Statute prevail only if the conflict is incapable of being resolved.
Harjina Salt Chemicals (Pak.) Ltd. v. Union Council, Gharo and others 1982 SCMR 522; Mian Ziauddin v. Punjab Local Government and others 1985 SCMR 365; Federation of Pakistan v. Azam Ali 1985 SCMR 386; The Chairman, Railway Board v. M. Wahabuddin & Sons PLD 1990 SC 1034 and Multiline Associates v. Ardeshir Cowasjee PLD 1995 SC 423 ref.
(c) Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑S.10‑‑‑Fixed Amount of (Processed Fabrics) Rules, 1995, R.9‑‑ Provision of R.9 of Fixed Amount of (Processed Fabrics) Rules, 1995 had no overriding effect on the provisions of S.10 of Sales Tax Act, 1990‑‑‑Rules did not override the provisions of S.10 of Sales Tax Act, 1990, relating to the, refund of the excess amount if the same had been paid by registered person after deduction of input tax.
Harjina Salt Chemicals (Pak) Ltd. v. Union Council, Gharo and others 1982 SCMR 522 rel.
(d) Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑S.3‑‑‑Notification S.R.O. No.640(1)/95, dated 2‑7‑1995‑‑‑Fixed sales tax, recovery of‑‑‑Procedure‑‑‑Both the modes of the recovery of sales tax i.e. under S.3(1) of S‑.les Tax Act, 1990 or under Notification S.R.O. No.640(I)/95, dated, 2‑7‑1995 issued under S.3(4) of Sales Tax Act, 1990, are not mutually destructive to each other‑‑‑Where option was exercised by the importer to come under the regime of payment of fixed. sales tax voluntarily, the Federal Government under the law was competent to recover the fixed sales tax from such importer.
Central Board of Revenue and 3 others v. Seven‑Up Bottling Company (Pvt.) Ltd. 1996 SCMR 700 ref.
(e) Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑Ss.3, 8 & 10‑‑‑Notification S.R.O. No.640(I)/95, dated 2‑7‑1995‑‑‑Fixed Amount of (Processed Fabrics) Rules, 1995, R.9‑‑‑Fixed sales tax, recovery of‑‑‑Input tax credit, claim of‑‑‑Option was exercised by the importer to come under the regime of payment of fixed sales tax voluntarily but later on, the importer claimed refund of input tax and the same was declined by the Authorities‑‑‑High Court in exercise of Constitutional jurisdiction directed the Authorities to credit the input tax to the importer‑‑‑Validity‑‑‑Legislature competently, legislated S.8(5) of the Sales Tax Act, 1990, providing therein that no input tax credit would be allowed to the person who paid fixed tax under any provision of Sales Tax Act, 1990‑‑‑Where the importer had voluntarily opted to avail the facility of paying fixed tax, such importer had waived his right to claim the refund, as the importer did not have any vested right and even if assumedly the importer had any such right the same had been taken away by S.8(5) of Sales Tax Act, 1990‑‑‑Rule 9 of Fixed Amount of (Processed Fabrics) Rules, 1995, was not inconsistent to S.10 of Sales Tax Act, 1990, and the Competent Authority of the Federal Government had legally issued S.R.O. 640(I)/95, dated 2‑7‑1995, benefit of which had been fully availed by the importer‑‑‑Even if there was any contradiction or inconsistency between R.9 of Fixed Amount of (Processed Fabrics) Rules, 1995, and S.10 of Sales Tax Act, 1990, that stood ratified in view of provisions of S.8(5) of Sales Tax Act, 1990‑‑‑‑Importer had no legitimate claim to the refund of input tax in circumstances judgment of the High Court was set aside.
Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 1989 SC 64; 1990 ALD 582; 1994 CLC 994; 1994 CLC 1612; 1994 PTD 1324; Messrs Shiv Shanker Dal Mills and others v. State of Hirayna AIR 1980 SC 1037; Aluminium Corporation of India Ltd. v. Union of India and others AIR 1975 SC 2279 and Sales Tax Officer, Banaras and others v. Kanhaiya Lal Makund Lal Saraf, Agra Bullion Exchange and others AIR 1959 SC 135 distinguished.
Commissioner of Income‑tax, Madras v. R.SV. Sr. Arunachalam Chettiar AIR 1965 SC 1216; 1986 SCMR 1916; 1993 SCMR 1081; PLD 1997 SC 582; 1999 SCMR 412; 1999 SCMR 715; Al‑Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and Molasses Trading & Export (Pvt.) Ltd. v. Federation of Pakistan 1993 SCMR 1905 ref.
A. Karim Malik, Advocate Supreme and Abul Aasim Jaffary, Advocate‑on‑Record (absent) for Appellants
Ali Zafar, Advocate Supreme Court and Haider Zaman, Advocate Supreme Court and Imtiaz Muhammad Khan, Advocate‑on‑Record for Respondent.
Dates of hearing: 8th, 31st January, 2000; 8th, 9th and 13th February, 2001.
JUDGMENT
IFTIKHAR MUHAMMAD CHAUDHRY, J.‑‑‑This appeal by leave of the Court is directed against the judgment; dated 28th July, 1997 passed by Lahore High Court, Lahore whereby Writ Petition No.3982 filed by respondent No. 1 has been allowed.
2. Briefly stating facts of the case are that respondent No. 1 submitted applications, before the Assistant Collector Sales Tax (Refund) claiming refund of input tax, details of the applications so submitted by the respondent No.1 are reproduced. hereinbelow:‑‑‑
| Application | Goods | Sales Tax | Claimed Rs |
| 1. 7‑6‑1996 3/95 to 9/96 | Pumps, Street Light Boiler Chiller, Frame | 15% | 8,02,812.85 |
| 2. 8‑5‑1996 8/94 to 6/96 | Imported & Local Machinery Equipment Transformer etc. | 15% | 1,59,39,462.45 |
| 3. 11‑7‑1996 10/9 to 6/96 | Plant & Machinery | 15% | 1,33,84,442.00 |
| | | | Total: 3,01,28, 717.30 |
3. The Assistant Collector Sales Tax (Refund) instead of acceding to the request of respondent No. 1 issued show‑cause notice to it vide C. No.IV B(S) Refund/29/96/874, dated 22‑8‑1996 to explain as to why the claim of refund of sales tax shall not be rejected. The respondent No.1 submitted its reply on 27th August, 1996. However, after hearing respondent No.1 the Assistant Collector vide order, dated 20th January, 1997 rejected its claim. Relevant paras from the said order read as under:‑‑‑
7 As per C.B.R's. Letter C. No. 2(24) STP/85/pt, dated 14‑t1‑1996 with reference to Collectorate's Letter C. No.01‑ST/Refund/Misc/P‑II/112, dated 18th September, 1996 comparison between 'Rule' and 'Act' is, of no value, if a manufacturer has voluntarily opted to operate under some specific rule. Limitations under this rule do cover all rebates, remissions, refunds, adjustment and drawback of sales tax under any provision of the Act The C.B.R's., has stated that case may be decided accordingly on merits.
8. I have gone through the records produced by the applicant, as well as clarification of C.B.R. and have been led to the conclusion that the case is hit by provision and rules 9 and 13 of S.R.a. 639(I)/94 and 636(I)/95 which reads as under:‑‑‑
A manufacturer paying sales tax under the 'notification shall not claim any rebate, remission, refund, adjustment or drawback of sales tax under any provision of the Act or any other rules made thereunder.
9. Therefore, the refund claim of input tax amounts to Rs.3,01,28,717 (Rs.8,02,818.85, Rs.1,59,39,462.45 and Rs:1,33,86,442) filed by M/s. Rupafab Limited, 30 KM Lahore Raiwind Road, Lahore, under section 10 of Sales Tax Act, 1990 vide their applications dated 7‑5‑1996, 8‑5‑1996 and 11‑7‑1996 cannot be acceded and the said amount of refund claim is hereby rejected. And if any amount of output tax is adjusted against the above sales tax (Input Tax), the same amount is to be recoverable alongwith additional tax and surcharge thereon."
4. The respondent No.1 preferred writ petition before Lahore High Court, which was allowed, vide impugned judgment. As such leave to appeal was granted vide order dated 20‑7‑1999 to examine the following questions:‑‑‑
(1)Whether an importer/manufacturer opting to come under the Fixed Amount of (Processed Fabrics) Rules, 1995 will not be bound by the provisions of Rule 9 (ibid) to claim refund of input tax under section 10 of the Sales‑Tax Act, 1990?.
(2)Whether in view of amendment of section 8 of the Sales Tax Act, 1990 (which is to be read with section 10 (ibid) by the Finance Act, 1999 with retrospective effect, refund of input tax paid under the aforesaid Rules, 1995 can still be claimed?
(3)Whether the refund of input tax can be claimed under the aforesaid section 10 in respect of goods imported before the enforcement of the Rules, 1995 or exercise of the option of the manufacturer to come under them?"
5. Learned counsel for appellants contended that as respondent No.1 had voluntarily opted to come under the Fixed Amount of (Processed Fabrics) Rules, 1995 (hereinafter referred to as the "Rules"), therefore, it had no entitlement to claim refund of input tax under section 10 of the Sales Tax Act, 1990 (hereinafter referred to as the "Act").
6. On the other hand learned counsel for respondent No.1 contended that Rule 9 of the Rules is ultra vires to section 10 of the Act, therefore, a right which has been conferred on an importer by the Act cannot be taken away by framing the Rules being subordinate legislation.
7. It may be noted that the Rules were promulgated vide Notification S.R.O. 640(I)/95 on 2nd July, 1995 and it remained in force till 30th June, 1996. Its Rule 9 being relevant is reproduced hereinbelow:‑‑‑
"9. Limitation for rebate, remission, refund, drawback or adjustment.‑‑‑A manufacturer paying sales tax under the notification shall not claim any rebate, remission, refund, adjustment or drawback of sales tax under any provision of the Act or any other rules made there under. "
8. It may also be noted that as per section 10 of the Act as it stood up to 1st July, 1995 when the Finance Act for the fiscal year 1995‑96 was promulgated the excess amount was liable to be refunded to the registered persons subject to the conditions mentioned therein. Section 10 of the Act for convenience is reproduced hereinbelow:‑‑‑
"10. Excess amount to be carried forward.‑‑‑(1) Subject to the provisions of subsection (2), if in. relation to a tax period the total deduction of input tax and other adjustments as specified in section 9 exceed the output‑tax, the excess amount shall be carried forward by the registered person to the next period and shall be treated as input tax for that tax period:
"Provided that if the excess amount is not fully covered by the tax payable during a period of six months following the tax period in which the credit first arose, the balance outstanding at the end of that period shall be refunded to the registered person as may be prescribed.
Provided further that the tax charged on the acquisition of plant and machinery shall be adjustable against the output tax in sixty equal monthly instalments;
'Provided also that the tax charged on or after the 1st July, 1994, on the acquisition plant and machinery, spare parts of plant and machinery, and the machine tools shall be adjustable against the output tax in twenty‑five equal monthly installments.'
(2) In case of exports the amount of input tax not covered by the output tax shall be refunded to the exporter in such manner as the Board may determine. "
It is pertinent to point out here that during fiscal year of 1995‑96 vide Ordinance (XXXVII of 1996) promulgated on 8th March, 1996 section 10 was amended. However, 2nd proviso of amended section being relevant as far as question for determination involved in the instant case is reproduced hereunder:‑‑‑
"Provided further that the tax charged on the acquisition of plant and machinery, spare parts of plant, and machinery and machine tools shall be immediately adjustable against the output tax, and if the tax amount is not fully covered by the tax payable during the period of two months including the tax period in which the credit first arose, the balance outstanding at the end of that period shall be refunded to the registered person of filing of an application for such refund. "
9. A perusal of above provision would show that a right to claim refund of Sales Tax to the taxpayer was conceded, however, it was subject to the conditions laid down therein. But the S.R.O. No.640(I)/95, dated 2nd July, 1995 denied the right of rebate, remission, adjustment, refund or drawback of sales tax to a manufacturer, therefore, the proposition of law requiring consideration would be as to whether such right can be denied to a manufacturer by means of a subordinate legislation or not.,,
10. Learned counsel for appellants contended that the respondent company voluntarily exercised option on 6th August 1995 to pay fixed sales I tax in pursuance of Notification S.R.O. No.939(I)/94, dated 25th December 1994 and continued to avail the benefits of making payment of fixed sales tax even on promulgation of fresh Notification S.R.O. 640(1)/95 dated 2nd July, 1995, therefore, demand of refund of input tax by respondent No. 1 at a subsequent stage was not entertainable merely for the reason that as per its stand option to make payment of sales tax was due to bona fide mistake.
11. In this context learned counsel for respondent No. 1 has cited number of judgments on the proposition of law that when there is inconsistency between the Act of Parliament and Rules then the .latter will give way to the former being the parent law.
12. There is no cavil with the proposition put forth by the respondent's counsel. However, to re‑affirm this principle of law a para. from the case of Harjina Salt Chemicals (Pak.) Ltd. v. Union Council, Gharo and others 1982 SCMR 522 is reproduced hereinbelow:‑‑‑
"17. It is now a well‑established principle of interpretation of statutes that Rules which are merely subordinate legislation, cannot override prevail upon the provisions of the parent Statute and whenever there is an inconsistency between a Rule and the Statute, the latter must prevail. This, however, envisages that all efforts to reconcile the inconsistency must first be made and the provisions of the parent Statute prevail only if the conflict is incapable of being resolved. "
The above rule has been re‑affirmed in the case of (1) Mian Ziauddin v. Punjab Local Government and others 1985 SCMR 365, (2) Federation of Pakistan v. Azam Ali 1985 SCMR 386, (3) The Chairman Railway Board v. M. Wahabuddin & Sons PLD 1990 SC 1034 and (4) Multiline Associates v. Ardeshir Cowasjee PLD 1995 SC 423. Besides these judgments there is plethora of case‑law on the subject decided from time to time by the superior Courts.
13. The principle of law pronounced by this Colin in Hirjina Salt Chemicals Ltd. (ibid) persuades us to hold that Rules have not to override the provisions of section 10 of the Act relating to the refund of the excess amount if it has been paid by a registered person after deduction of input tax. It may be noted that during existence of S.R.O. 640(1)/95, dated 2nd July, 1995 section 3(4)‑ of the Sales Tax Act remained as under:‑‑‑
"3. Scope of tax.‑‑‑(I) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent. of the value of‑‑‑
(a) taxable supplies trade in Pakistan by a registered person in the course or furtherance of any business carried on by him; and
(b) goods imported into Pakistan.
(2)..........................
(3)..........................
(4) With the prior approval of the Federal Government, the Central Board of Revenue or the Collector may in lieu of levying and collecting the tax under subsection (1), by Notification in the official Gazette, levy and collect such fixed amount of tax as it may deem fit on any goods or class of goods, payable by any establishment or undertaking producing or manufacturing such goods.
(5),
Subsection (4) of section 3 of the Act as it was applicable had conferred jurisdiction upon the Federal Government to collect fixed amount of tax as it may deem fit on any goods or class of goods in addition to or in lieu of levying or collecting tax under its subsection (1). Therefore, in pursuance of such powers read with section 50 of the Act, S.R.O. 640(1)/95, dated 2nd July 1995 was promulgated providing concession to a manufacturer to pay fixed sales tax which was in lieu of sales tax as it was due on such manufacturer or registered person as per section 3(1) of the Act. It may be observed that the registered person or manufacturer opting to pay fixed tax as per its option was not required to pay tax as per the rate mentioned in section 3(1) of the Act meaning thereby that in any case, sales tax was required to be paid whether at the rate prescribed by the Federal Government under section 3(1) of the Act or at the fixed rate in` terms of section 3(4) of the Act and the Rules framed there under i.e., S.R.O. under discussion. It is nobody's case that under section 3(1)‑of the Act, the sales tax was not liable to be paid by respondent No.l but it has been illegally recovered from him by promulgating SRO, dated 2nd July, 1995. Had the‑case of respondent been otherwise there was no difficulty in holding that Rule 9 of the Rules had curtailed the right of manufacturer/ respondent to claim the refund of the tax which was not due at all. As has been observed hereinabove the sales tax in any case was due against the respondent notwithstanding the fact whether it should be at a rate fixed by the Federal Government under section 3(1) of the Act or under section 3(4) of the Act. To support this conclusion reference may be made to the case of Central Board of Revenue and 3 others v, Seven‑Up Bottling Company (Pvt.) Ltd. 1996 SCMR 700. In this case vires of Excise Duty on Production Capacity (Aerated Water) Rules, 1990 issued under sections 3(4) and 37 of the Central Excise and Salt Act, 1944 (‑I of 1944) was under consideration before this Court because learned High Court vide, judgment dated 11th December 1993 declared that the levy made and recoveries effected from the petitioner (Seven Up Bottling Company Ltd.) was without lawful authority etc. During the arguments it was pointed out that Government is competent to adopt different modes of levy of excise duty and if such procedure is adopted it would be mutually exclusive. The right of Central Board of Revenue to recover excise duty on produce either on the basis of actual production of the goods or on the production capacity of the plant determined under the Rules but its claim was that excise duty is leviable under the Rules on the basis of the duty last paid by them on the actual production of the goods produced by them in the producing area. Therefore, in this context it was held that "where the Government has decided to recover excise duty on the basis of production capacity of plant, machinery etc., it could not demand the excise duty on the basis of actual production of goods. Sections 3(1) and 3(4) of the Act enact these two alternative principles for levy of excise duty on goods envisaged by entries Nos.44 and 52 of the List of the Constitution." It was further observed that the rationale behind these two mutually exclusive modes of levy of excise duty on goods is quite obvious when the excise duty is recovered on the basis of actual production of goods under section 3(1) of the Act the production capacity of the plant, machinery etc has no relevancy at all. Similarly., when excise duty is sought to be imposed on the basis of production capacity of plant, machinery etc. the actual production of goods becomes irrelevant.
Applying this principle in broader spectrum on the facts of the instant case we are inclined to substantiate above findings that both tote modes of the recovery of sales tax i.e. under section 3(1) of the Act or under S.R.O.No.640(I)/95 dated 2nd July, 1995 issued under section 3(4) of the Act are not mutually destructive to each other and the Federal Government under the law was competent to recover the fixed sales tax from the respondent because option was exercised by the respondent to come under the regime of payment of fixed sales tax voluntarily.
14. Learned counsel for the respondent heavily relied on the judgment of Pifzer Laboratories Ltd. v. Federation of Pakistan PLD 1989 SC 64 and argued with great vehemence that it was the normal duty of the appellants to refund the excess amount of sales tax. As far as the principles discussed in this judgment are concerned there is no cavil with them but question is whether this judgment has rendered any help to respondent No. 1 or not. In this case this Court examined the effect of subsections (1), (2) and (3) of section 32 and section 33 of the Customs Act. As per subsection (1) of the latter section the refund of the customs duty or charges claimed to have been paid or over paid through inadvertence, error or misconstruction shall not be allowed unless the claim is made within six months of the date of payment and according to its subsection (2) in the case of provisional payments made under section 81 of the Customs Act, the period of six months shall be reckoned from the date of the adjustment of the duty after its final assessment. Therefore, in view of such provisions and after considering the case law on the subject and the treaties this Court deduced following principle:‑‑‑
" 15. In the instant case the imported item Salinomycin was exempted from payment of customs duty and sales tax under section 19 of the Act and section 7 of the Sales Tax Act, 1951. In para. (f) of the grounds of the above memo. of appeal, it has been averred by the appellant that they, in good faith, genuinely believed that they could apply for refund after they could satisfy the authorities that they had consumed the raw material for the manufacture of medicines as pointed out hereinabove in para. 6. Be that as it may, the fact remains that they would not have been liable to pay the impugned amount by virtue of the aforesaid exemption, if they had fulfilled the conditions contained in the S.R.O. inter alia referred to hereinabove. They would not have paid the amount involved if they would not have been under a mistake either as to the factum of exemption or as to the time of claiming refund of the same, thus the above amount 'was paid under a mistake as contemplated in section 72 of the Contract Act."
In view of the above principle we feel no hesitation in‑ holding that neither the sales tax at the fixed rate was paid under a mistake because it was due against the respondent nor the respondent paid the tax due to inadvertence, error or misconstruction mote than the amount due against it because by exercising option respondent instead of paying tax at the rate of 15 % agreed to pay due sales tax at the fixed rate. It is also not the case of the respondent that realization of the sale tax was outside the authority of the sales tax officer. Therefore, we are of the opinion that the judgment relied upon by the learned counsel for the respondent has not rendered any: help to him because no case of illegally withholding of respondent's money paid by it as fixed sales tax has been made out. Undoubtedly the respondent had succeeded in making out a case in its favour if it had shown that the amount of the input/sales tax has been withheld without any justification. Thus, for such reasons the other judgments relied upon by the respondent's counsel reported in 1990 ALD 582, 1994 CLC pages 994 and 1612 and 1994 PTD 1324 need no discussion.
Learned counsel has also relied upon the judgments from the Indian jurisdiction, effect of whereof case‑wise is reproduced below:‑‑‑
Messrs Shiv Shanker Dal Mills etc. v. State of Hirayana AIR 1980 SC 1037.
In this case it was held that 'where public bodies, under colour of public laws, recover people's moneys, later discovered to be erroneous levies the dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies on the virtue of returning what was wrongly recovered to whom it belonged. Nor is it palatable to our jurisprudence to turn ‑down the prayer for high prerogative writs, on the negative plea. of alternative remedy since the root principle of law married to justice is ubi jus ibi remedium." The principle discussed in this judgment of course would not be applicable on the facts of this case because the sales tax was not recovered erroneously from the respondent by the appellants because the respondent itself voluntarily paid the same at the fixed rate instead of paying it at the rates prescribed under section 3(1) of the Act.
"Aluminium Corporation of India Ltd. v. Union of India and others AIR 1975 SC 2279.
In this case effect of Notification No.66/60, dated 20‑4‑1960 issue under Rule 8 of the Central Excise Rules (1944) imposing a single point levy at the ultimate stage of the manufacture was examined because the appellant company claimed refund of over levied excise duty as such it was held that as an intermediate products, i.e. ingots, bars etc. are used for manufacturing plates, sheets, circles etc. and 50% which become scrap although it had suffered duty as ingot, bar or block etc. and 50% which became scrap too was taxable as per notification, therefore, it was held that the appellant company was entitled to refund of the excess duty paid on the scrap which is not used in manufacturing end product.
In the instant case admittedly the respondent has no case of partial refund of the sales tax in view of the argument on the basis of which the judgment relied upon has proceeded, therefore, it is not helpful to respondent in any manner.
The sales Tax Officer, Banaras and others v. Kanhaiaya Lal Makund Lal Saraf, Agra Bullion Exchange and others AIR 1959 SC 135.
In this judgment with reference to the provisions of section 72 of the Contract Act it was held that true principle is that if one party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established would entitle the party paying the money to recover it back from the party receiving the same.
As it has been discussed hereinabove that the sales tax either at the rate prescribed under section 3(1) or under section 3(4) of the Act was due against the respondent, therefore, it has not been paid by mistake to the appellants.
"Commissioner of Income‑tax, Madras v. R.SV. Sr. Arunachalam Chettiar AIR 1965 SC 1216".
In this judgment it was held that the doctrine of approbate and reprobate is only a species of estoppel. It applies only to the conduct of parties. As in the case of estoppel it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income‑tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income‑tax Officer has no power to impose tax on the said income.
In view of the ratio decidendi of this judgment the respondent has never pleaded that the sales tax was not due against it because in the instant case apparently there is a dispute in respect of the rate of the tax i.e. either it should be at the rate specified under section 3(1) of the Act or under S.R.O. 640(1)/95 dated 2nd July 1995. As such the principle of law discussed in this judgment cannot be applied on the facts of the instant case.
15. Learned counsel for the appellants then contended that if there was any illegality in refusing to refund Sales Tax under the Act it has been cured by the legislature by adding subsection (5) to section 8 of the Sales Tax Act by giving it retrospective effect, therefore, Notification dated 2nd July, 1995 stands validated for all intent and purposes. He further contended that legis lature is always competent to legislate retrospectively. Reliance in this behalf was placed by him on the judgments reported in 1986 SCMR 1916, 1993 SCMR 1081, PLD 1997 SC 582; 1999 SCMR 412 and 1999 SCMR 715.
16. On the other hand learned counsel for the respondent stated that section 8(5) of the Act cannot operate retrospectively because no such intendment is visible in the Finance Act, 1999 in pursuance whereof subsection (5) has been added in section 8 of the‑Act. According to him newly added subsection has effected the past and closed transactions, therefore, there must have been reasons in law to satisfy the Court that original law on basis of which a right has accrued in favour of respondent was defective, therefore, to remove such defect this subsection has been promulgated. Learned counsel further contended that in the case where amending Ordinance is going to reopen the past and closed transactions or if it nullifies the findings of the Court then it must expressly state that it applies to such cases specifically. He was also of the opinion that such amendment if is allowed to continue it would be void in the eye of law because it tantamounts to transgress the jurisdiction of the Court exercised under Article 185(3) or Article 199 of the Constitution of Islamic Republic of Pakistan.
17. We have examined the respective contentions of both the parties counsel carefully and have also gone through subsection (5) of section 8 of the Act which was added vide section 16 of the Finance Act, 1999. For reference subsection (5) is reproduced hereinbelow:‑‑
"16. Amendment of the Sales Tax Act, 1990.‑‑‑The following further amendments shall be made in the Sales Tax Act, 1990, namely.‑‑‑
(ii) after subsection (4), the following new subsection shall be added namely.‑‑‑
'(5) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provision of this Act as it existed at any time prior to the first day of December, 1998.
A perusal of above newly added subsection indicates that language employed therein substantially is the same which was used in section 31‑A of the Customs Act, 1969 by means of section 5 of the Finance Act, 1988.
Subsection (1) of section 31‑A of the Customs Act, 1969 for purposes of comparison is reproduced hereinbelow:‑‑‑
"31‑A. Effective rate of duty.‑‑‑(1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of sections 30 and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 182 of the Finance Ordinance, 1982 (XII of 1982), and section 5 of the Finance Act, 1985 (I of 1985), and the anti‑dumping or countervailing duty imposed under the import of Goods (Anti‑Dumping and Countervailing Duties) Ordinance, 1983 (III of 1983), and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof.
(2)
(3) ......................................................
(4) ."
It may be noted that section 31‑A of the Customs Act was enacted after the pronouncement of judgment by this Court in the case of Al‑Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917. The facts of Al- Samrez Enterprises case are that the Federal Government of Pakistan had issued Notification S.R.O. No.372(I)/72, dated 8th June, 1972 in exercise of the powers conferred by section 19 of the Customs Act, 1969 exempting certain items of machinery or articles for use with machinery or as component parts or spare parts of the machinery, as defined in the notification and set out in the table given there under. In pursuance of this notification Al‑Samrez Enterprises purchased 100 metric tons of strained copper wire on 3rd June, 1977 from Japan after completing formalities. In pursuance whereof the contract was confirmed in writing on 7th June, 1977 by means of a memo. of sale executed between the parties. Later on an amount of Rs.35,000 was deposited by the appellant in the State Bank of Pakistan towards the fees of a commercial import licence for the import of the said goods, as such licence was duly issued on, 10th June, 1977. In the meanwhile instructions were also passed on to Habib Bank Limited to open an irrevocable letter of credit as payment for the said goods, instructions for which had been given in advance. Because the goods in question were on the free list, therefore, the letter of credit was actually opened on 15th June, 1977. In the meanwhile on 11th June, 1977 Federation of Pakistan issued Notification S.R.O. No.499(I)/77 in pursuance whereof earlier notification granting exempting was amended. As such under the circumstances the vires of the last mentioned notification were challenged by the appellants before the High Court of Sindh but without any success. As such appeal by the leave against the judgment of Sindh High Court, dated 16th November, 1917 was filed before this Court. The question put up before it for consideration was whether the impugned notification having been issued after contract between the appellants and Japanese Exporter, could be given retrospective effect and enhanced customs duty and sales tax on goods booked before the said notification could be legally demanded. The question was answered as follows:‑‑--
"It will be inequitable and unjust to deprive a person who acts upon such assurance of the right to exemption and expose him to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he has made legal commitments. It is in this perspective that a right is created in his favour and a ‑subsequent withdrawal of exemption cannot be given retrospective operation by an executive act to destroy this right."
It so happened that section 31‑A was inserted in the Customs Act vide section 5 of the Finance Act, 1988 which has been reproduced hereinabove. Later on the importers claimed exemption of duty under section 19 of the Customs Act, 1969 in view of ratio decidendi in the case of Al‑Samrez Enterprises but relief so claimed was denied to them, as such some of the importers invoked Constitutional jurisdiction of Sindh High Court but their writ petitions were dismissed Thereafter, with leave of the Courts appeals were filed by them before this Court which were decided as per 'the judgment reported to 1993 SCMR 1905 (Molasses Trading & Export (Pvt.) Ltd. v. Federation of Pakistan). Appeals were heard by a Bench comprising of five Hon'ble Judges of this Court including Mr. Justice Zafar Hussain Mirza (as he then was) who authored the majority opinion on behalf .of the Court. It may be noted that his Lordship was also author of the judgment to the case of Al‑Samrez Enterprises. In this case following important principles of law were pronounced: ‑‑‑
(i)The legislature which is competent to make a law, has full plenary powers within its sphere of operation to legislate retrospectively or retroactively.
(ii)The vested rights can be taken away by such legislation and it can not be struck down on that ground.
(iii)A statute cannot be read in such a way as to change accrued rights, the title to which consists in transactions past and closed or any fact or events that have already occurred.. (In support of this principle reliance was placed on the case of Province of East Pakistan v. Sharafatullah PLD 1970 SC 514).
In view of the above principles pronounced by this Court without any fear of doubt it can be held that legislature competently legislated section 8(5) of the Act providing therein that no input tax credit shall be allowed to the persons who paid fixed tax under any provision of this Act. As far as question of accruing a right in favour of respondents is concerned that too does not arise because the respondent after having voluntarily opted to avail the facility of paying fixed tax has waived its right to claim the refund. Therefore, for such reason no vested right was available to the respondents and if for sake of arguments it enjoyed any such right that had been taken away by subsection 8(5) of the Act.
18. Thus, for the foregoing reasons we are inclined to hold that Rule 9 of the Rules is not inconsistent to section 10 of the Act and the competent authority of the Federal Government had legally issued S.R.O. 640(1)/95, dated 2nd July; 1995 benefit of which had been fully availed by the respondent and even if for sake of arguments there was any contradiction or inconsistency between Rule 9 and section 10, of the Act that stands ratified in view of provision of section 8(5) of the Act and the respondent had no legitimate claim for the refund of input tax as per applications dated 7‑5‑1996, 8‑5‑1996 and 11‑7‑1996 submitted before Assistant Collector Sales Tax (Refund).
For the foregoing reasons appeal is allowed with costs and impugned judgment, dated 28th July, 1999 is set aside.
Q.M.H./M.A.K./A‑145/SC Appeal allowed.