Sales Tax Act (VII of 1990)---

----Ss. 33(4)(c), 3 & 47---S.R.O. No.630(I)/95 dated 2-7-1995-- Constitution of Pakistan (1973), Arts.77 & 127---Association of Re -Rolling of Steel Mills, of which the appellants, in the present case., were the members, approached the Federal Government with the request to continue with the fixed tax regime undertaking that the members of the Association would pay 20% more during the year 1996-1997 as compared to the year 1995-1996 and in return they were promised by the Revenue that no audit of any of the members of the, Association will be undertaken--Revenue under the agreement fulfilled its part of the agreement also that almost all members of the Association except for a very few including the appellants defaulted--Revenue directed the appellants to pay a certain amount as Sales Tax along with additional tax and penalty---Validity---Held, mere minutes of the meeting between the Association and the Revenue was not enough to change the existing tax .regime fully supported by the provisions of S.3(1), Sales Tax Act, 1990---Such matter could not be settled by way of an administrative arrangement--No levy against the express words of the Statute could 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---Appellants were not in any manner estopped from taking the plea of non-acceptance of the agreement,---Agreement between the Association and the Revenue having never been converted into law through the process prescribed in that behalf no person could be forced to comply with the same---Plea that a person did for some time accept the terms of agreement and acted upon the same, would not convert that agreement into a law---Principles.

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 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 taxation system of Pakistan it is correct that Legislature at times delegates its powers to the Revenue wing of the Government to make changes 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 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 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.

The appellants were not in any manner estopped from taking the plea of 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 bargain agent which is authorized by law to negotiate and bargain on behalf of the labourers which if 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 by 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 purport to represent other taxpayers of their class. The Constitutional prohibition against imposition of tax, except under the authority of a law as contained in Articles 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, 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 accept the terms of an agreement and acted upon the r same would not convert that agreement into a 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 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 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.7,80,820 as sales tax along with additional tax and penalty at Rs.3,90,410 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.2,71,652 as sale's tax along with additional tax and penalty at Rs.1,35,826 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 enforced 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 sales tax during 1996-97 on the basis of their liabilities under the fixed 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 aforementioned 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 agreements on actual turn over 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 to 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 of the members of the association complied with the terms of the agreement 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 times delegates its powers to the Revenue wing of the Government to make changes 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 not ready to accept the idea that the appellants were in any manner estopped from taking the plea of 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 bargain 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 by 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 purport to represent other taxpayers of their class. The Constitutional prohibition against imposition of tax, except under the authority of a law as contained in Articles 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 would not convert that agreement into a law.

Therefore, we will allow these appeals and set aside the impugned order of the learned Tribunal as also the orders of the Revenue authorities.

M.B.A./M-753/LAppeals allowed.