CRESCENT RE-ROLLING MILLS, LAHORE VS ASSISTANT COLLECTOR OF SALES TAX, LAHORE
2005 P T D 2436
[Lahore High Court]
Before Nasim Sikandar and Mian Hamid Farooq, JJ
CRESCENT RE-ROLLING MILLS, LAHORE
Versus
ASSISTANT COLLECTOR OF SALES TAX, LAHORE
S.T.As. Nos. 224 and 225 of 2002, decided on /01/.
th
July, 2004. (a) Sales Tax Act (VII of 1990)---
----S. 3(1)---Constitution of Pakistan (1973), Arts. 77 & 127---Qanun-e-Shahadat (10 of 1984), Art. 114---Levy of sales tax or change in its rate or process of its collection---Agreement regarding such matter between Revenue and Association of a class of taxpayers---Validity---Such matter could be legally settled through an administrative arrangement---Such Association had no role to play under Sales Tax Act, 1990 or the Rules framed whereunder---Such levy or charge could not be made without there being a superior or subordinate legislation---Mere minutes of meeting between Revenue and such association would neither be a superior nor a subordinate legislation---Such agreement would not be enforceable in law in absence of a delegated power and manifestation of such power through a notification or an amendment in the rules---No levy against express words of the statute could be made on the basis of such agreement---Acceptance of terms of such agreement by parties and their acting upon same for some time would not convert same into a law---Such agreement of it not reduced in the form of a statutory instrument, then any person affected by the agreement could refuse to abide by same even after having initially accepted that---No additional tax or penalties could be imposed for non-compliance with terms of such agreement---Principles.
Mere minutes of meeting between the Association and the Revenue are not enough to change the existing tax regime fully supported by the provisions of section 3(1) of Sales Tax Act, 1990. Such matter cannot be legally settled by way of an administrative arrangement. Not only the imposition of a tax, but also any change even in its rate or process of collection can be made without there being a superior or subordinate legislation. The minutes of the meeting between the Revenue and the Association of a class of taxpayers are neither a superior nor a subordinate legislations. In present taxation system, legislature at times delegates its powers to the Revenue wing of the Government to make changes giving exemptions or altering the rates of levy or the procedure to collect it. Exercise of such power by the executive, however, is certainly conditional to the existence of a delegation in the superior legislation i.e. an Act of the Parliament. In the present case, it was necessary to formally legalize the terms of the agreement either by an Act of the Parliament or if the existing law so permitted, by way of a subordinate legislation in the form of a notification. In absence of a delegated power and manifestation of that power through a notification Or an amendment in the rules, the agreement between the Association and the Revenue is, at best, a promise to pay at a certain rate on the part of one party and to refrain from conducting audit by the other. That set of promise can very well be a gentleman's promise. However, it is not enforceable in law. No levy against the express words of the statute can be made on the basis of such an agreement, much less to impose additional tax or penalties in case of non-compliance with the terms of agreement.
There is no estoppel against law. The agreement between the parties, if not reduced in the form of a statutory instrument, then any person affected by the same can very well refuse to abide by such agreement even after having initially accepted the same. An Association of taxpayers is different from a Collective Bargaining Agent, which is authorized by law to negotiate and bargain on behalf of the labourers, which it represents. An Association of taxpayers has no role to play under the Sales Tax Act nor under any of the rules framed thereunder. It can certainly represent the interest of its members. However, in absence of any support from any law, it cannot bind its members. When it comes to payment of a levy, its rate or even the procedure of its collection. This is clearly discernible from the scheme of Sales Tax Act, 1990. It also means that compliance of most of the members of the Association cannot upgrade the agreement to the status of a statutory instrument. The levy of tax, its rate and collection does not depend upon the will or agreement of some gentlemen, who support or represent other taxpayers of their class. The constitutional prohibition against imposition of tax except under the authority of a law as contained in Article 77 read with Article 127 also extends to the rate of tax and the procedure of its collection, unless the superior legislature has delegated such a power and that power has been exercised strictly in terms and conditions of the delegation. The agreement between the said Association and the Revenue, if not converted into law through the process prescribed in that behalf, then no person can be forced to comply with same. Plea that a person for some time accepted the terms of an agreement and acted upon the same does not convert that agreement into a law.
(b) Qanun-e-Shahadat (10 of 1984)---
----Art. 114---No estoppel against law.
Mian Abdul Ghaffar for Appellant.
A. Karim Malik for Respondent.
Date of hearing: 5th July, 2004.
JUDGMENT
NASIM SIKANDAR, J.---This judgment will dispose of S.T.As. Nos.224 and 225 of 2002 filed respectively by Messrs Mahmood and Company, Badami Bagh, Lahore and Messrs Crescent Steel Re-Rolling Mills, Badami Bagh, Lahore.
2. The appellants are running Steel Re-Rolling Mills at Lahore. Both were paying fixed amount of sales tax during the period of 1995-96 in terms of Notification S.R.O. 630(I)/95, dated 2-7-1995. By way of an Order-in-Original, dated 11-1-2001 the first appellant was directed to pay an amount of Rs.780,820 as sales tax along with additional tax and Penalty at Rs.390410 imposed under section 33(4)(c) of Sales Tax Act, 1990. Likewise the second appellant Messrs Crescent Steel. Re-Rolling Mills through Order-in-Original, dated 28-2-2001 passed by the Adjudicating Officer, Deputy Collector Sales Tax and Central Excise (Adjudication), Lahore was ordered to pay an amount of Rs,271,652 as sales tax along with additional tax and penalty at Rs. 135,826 under the said provisions of the Act. The basis of the Order-in-Original was summarized by the learned Tribunal in para. 2 of its order. The relevant portion of the same reads as under:--
"VAT Mode of sales tax system was introduced in Pakistan w.e.f. July, 1996, as agreed with the International Donors and it started with the manufacturing sector. The steel sector (both the Steel Re-Rolling Mills and Steel Re-Melting Mills) approached the Federal Government through their respective Associations (Pakistan Steel Re-Rolling Mills Association) (hereinafter to be called PSRMA) and Pakistan Steel Melters Association (PSMA). Here we would be referring to the PSRMA only of which the appellants were members. Main plea of PSRMA was that fixed sales tax regime should be allowed to continue in respect of .Steel Re-Rolling sector during 1996-97 and they should not be forced to work on VAT mode sales tax system on account of various grounds like lack of education, lack of expertise to maintain the records according to VAT mode system of sales tax etc. After lengthy negotiations at various levels (including the then Prime Minister of Pakistan and the then Finance Minister) PSRMA agreed to pay 20% more as sale tax during 1996-97 on the basis of their liabilities under the fixe sales tax system during 1995-96. It was also agreed that if the said criteria was met and the dues were paid, audits for the year 1996-97 would not be undertaken. Due to agreement with the International Donor Agencies of not reverting back to fixed sales tax system, notifications of agreement with PSRMA were not issued and system was enforced through executive arrangements. Most of the members of PSRMA worked according to the new arrangements, including the appellants who paid sales tax as per afore-mentioned arrangements between July-December, 1996.
3. Before the Tribunal, it was inter alia contended by the present appellants that despite the decision of the said high powered committee since no notification was issued, the minutes of the meeting or any agreement between the Revenue and the said Association was not enforceable at Law, that the appellants paid sales tax on VAT mode under section 3(1) of the Sales Tax Act, 1990 w.e.f. 1st January, 1997 While the minutes of the said meeting were circulated by C.B.R. on 19-5-1998 and, therefore, these could not have retrospective effect and that both the appellants had in fact paid excess amount of tax against the one they were required to pay under the said provisions of the Act.
4. On the other hand the Revenue pleaded before the Tribunal that the Association of Re-Rolling Mills, of which the appellants were members itself, approached the Federal Government with the request to continue with the fixed tax regime undertaking that they would pay 20% more during the year, 1996-97 as compared to the year 1995-96 and in return they were promised that no audit of any of the members of the Association will be undertaken. According to the Revenue under the agreement no audit of any of the members of the Association having been made the Revenue fulfilled its part of the agreement from which the appellants could not resile. Also that almost all members of the Association except for a very few defaulted and that the default on their part did not derogate from the terms and conditions of the agreement between the Revenue and the Association. Lastly that both the appellants in this case acted upon the agreement and paid their monthly instalments during the first six months of the year, 1996-97 and it was only thereafter w.e.f. January, 1997 that they started making payments against the agreement on actual turnover basis. A nil payment by the appellants during the first three months of the year, 1997 and payments of small amounts during the next three months of the financial year, 1996-97, according to the Revenue, indicated ulterior motives on their part of back out from the promise/ agreement legally entered into between the Revenue and the Association.
5. Learned members of the Tribunal found that the agreement between the association was not denied by the two appellants and that it was also admitted on their part that they made payments in accordance with that agreement for sometime but subsequently resiled. Therefore, the learned members of the Tribunal disapproved the conduct of the two appellants as they found that both of them failed to point out the basis of their compliance with the terms of the agreement between July, 1996 to December, 1996. In their view since most the agreements with the Revenue there was no legal or moral justification on the part of the appellants to refuse compliance after having initially accepted the agreement. Therefore, according to the learned members of the Tribunal the appellants were estopped from taking the plea of non-acceptance of the agreement at the belated stage when they stopped making payments of sales tax at the rate agreed between their Association and the Revenue.
6. After hearing the learned counsel for the parties in the perspective of their contentions made earlier before the learned Tribunal and now repeated before us we will allow both appeals for the following reasons:--
Firstly: The appellants are correct in pointing out that mere minutes of meeting between the Association and the Revenue were not enough to change the existing tax regime fully supported by the provisions of section 3(1) of the Sales Tax Act, 1990. The view of the Tribunal that the matter stood settled by way of an administrative arrangement cannot be accepted as correct statement of law. Not only the imposition of a tax but also any change even in its rate or process of collection cannot be made without there being a superior or subordinate legislation. The minutes of the meeting between the Revenue and the Association of a class of taxpayers is neither a superior nor a subordinate legislation. In our taxation system. it is correct that legislature at time delegates its powers to the Revenue Wing of the Government to make change giving exemptions or altering the rate of levy or the procedure to collect it. The exercise of such power by the executive however is certainly conditional to the existence of a delegation in the superior legislation i.e. an Act of the Parliament. In the case in hand it was necessary to formally legalize the terms of the agreement either by an Act of the Parliament or if the existing law so permitted by way of a subordinate legislation in the form of a notification. In absence of a delegated power and manifestation of that power through a notification or an amendment in the rules, the agreement between the Association and the Revenue was at best a promise to pay at a certain rate on the part of one party and to refrain from conducting audit by the other. That set of promise could very well be a gentleman's promise. However, it was not enforceable in law. No levy against the express words of' the statute can be made on the basis of such an agreement, much less to say of imposition of additional tax or penalties in case of non-compliance with the terms of agreement.
Secondly: We are also ready to accept the idea that the appellants were in any manner estopped from taking the plea of the non- acceptance of the agreement. There is no estoppel against law. The agreement between the parties having never been reduced in the form of a statutory instrument any person affected by the same could very well refuse to abide by such agreement even after having initially accepted the same. An association of taxpayers is different from a collective bargaining agent which is authorized by law to negotiate and bargain on behalf of the labourers which it represents. An association of taxpayers has no role to play under the Sales Tax Act nor any of the rules framed thereunder. It can certainly represent the interest of its members. However, in absence of any support from any law it cannot bind its members when it comes to payment of a levy, its rate or even, the procedure of its collection. This is clearly discernible from the present scheme of the Sales Tax Act, 1990. It also means that compliance of most of the members of the Association cannot upgrade the agreement to the status of a statutory instrument. The levy of tax, its rate and collection does not depend upon the will or agreement of some gentlemen who support or represent other taxpayers of their class. The Constitutional prohibition against imposition of tax except under the authority of a law as contained in Article 77 read with Article 127 also extends not only to the rate of tax and the procedure of its collection unless the superior legislation had delegated such a power and that power had been exercised strictly in terms and conditions of the delegation. The agreement between the said Association and the Revenue, as noted above, having never been converted into law through the process prescribed in that behalf no person could be forced to comply with the same. The plea that a person did for some time accepted the terms of an agreement and acted upon the same does not convert that agreement into a law.
7. Therefore, we will allow these appeals and set aside the impugned order of the learned Tribunal as also the orders of the Revenue Authorities.
S.A.K./C-112/LAppeals accepted.