DEFENCE AUTHORITY CLUB, KARACHI VS FEDERATION OF PAKISTAN through Secretary, Revenue Division, 2007 PTD-KARACHI-HIGH-COURT-SINDH 398 (2005)

(a) Sindh Sales Tax Ordinance (VIII of 2000)---

----Sales Tax Act (VII of 1990), 5.246---Central Excise Act (I of 1944), S.2(20)---Customs House Agents Lincence Rules, 1971---Sale of Goods Act (III of 1930), S.2(7)---Constitution of Pakistan (1973), Arts.70, 199 & 142(c)---Constitutional petition---Concurrent List and Legislative List---Provincial Assembly; power to legislate on subject not mentioned in Concurrent and Legislative Lists---Levy of Sale Tax on "Services"---",Services"---Meaning---Petitioners/clubs called in question levy of sale tax on services rendered by clubs under Sindh Sales Tax Ordinance, 2000---Respondents/Province of Sindh, also filed constitutional petitions asserting therein that levy of sales tax on services under Sindh Sales Tax Ordinance, 2000 was lawful and intra vires of the Constitution---Petitioner clubs contended that Sindh Sales Tax Ordinance, 2000 was ultra vires of Constitution and beyond legislative authority of Provincial Legislature, hence, liable to be struck down; that in terms of Item No.49 to Fourth Schedule of the Constitution, only Federal Government could legislate in respect of taxes on sales; that item of tax for "services" was nowhere mentioned in Concurrent List, therefore, Provincial Legislature had no power to legislate on the subject as it was beyond its legislative power; that sales tax on services rendered by clubs could not .be demanded in respect of entrance fee, annual subscription, monthly subscription, gratuity, staff bonus etc.---Validity---Federation had got exclusive authority under Entry No.49 of Federal List to legislate law in respect of taxes on sale and purchase of goods---Legislation with reference to sales tax on services was not enumerated either in Federal List or Concurrent List and Art.142(c) of the Constitution, conferred exclusive powers to Provincial Assembly to make law with respect to any matter not enumerated in Federal List or Concurrent List---Expression "goods" according to S.2(7) of Sale of Goods Act, 1930, meant every kind of movable property other than actionable claims and money, and included stock and shares, growing crops, grass or things attached to or forming part of land which were agreed to be served before sale or under contract---Central Excise Act, 1944, did not define goods, but defined "excisable goods", as goods specified in First Schedule of the said Act and legislature was to be taken to have used the word in its ordinary dictionary meanings, hence, to become "goods", it was to be something which could ordinarily come to the market to be bought and sold and was known to the market---Expression "goods" used in Entry No.49 of Fourth Schedule of the Constitution was a controlling expression and could not be extended to include "Services" which one could render while offering goods for sale and could not be enlarged to include in it anything other than sale and purchase of goods, imported, exported, produced, manufactured or consumed, particularly after amending Entry No.49 by replacing "taxes on sales and purchase" with "taxes on sales and purchase of goods"---Oily services provided or rendered by clubs were made liable for sales tax under Sindh Sales Tax Ordinance, 2000, which did not define term "Services"---Section 2(20) of Central Excise Act, 1944 defined "excisable service" as services, facilities, and utilities specified in First Schedule read with Chapter 98 and heading 9801.4000 gave description of excisable service as service provided or rendered by club---Section 2(46) of Sales Tax Act, 1990 defined "value of supply" in respect of' a taxable supply, the consideration in money including all federal and provincial duties which supplier received from recipient and in case consideration for a supply was in kind or partly in kind and partly un money, the value of supply was to mean open market price of supply excluding the amount of tax---None of the definitions of "Service" given in S.2(20) of Central Excise Act, 1944, or S.2(46) of Sales Tax Act, 1990, was of any help to respondents because excise duty as well as sales tax leviable on excisable services provided under both the Acts advanced the stance of respondents---Term "Services provided" used in Schedule could not in any manner include membership fee or monthly subscription as the same had no nexus with services which club

Provided to its members like boarding, lodging, arranging parties, supply of foods and other stuff---Petition filed by petitioner clubs was partly allowed.

Messrs Nafees Dry Cleaners V. Government of Pakistan 2001 PTD 2018; Hafeezullah Malik and Co. v. Province of Punjab 2003 PTD 1852; and Messrs Gurgson Dry Cleaners v. Sales Tax Officers, Rawalpindi 2004 PTD 1987 rel.

The Province of Punjab and another v. National Industrial Cooperative Credit Corporation and another 2000 SCMR 567; The Chief Secretary to the Government of East Pakistan v. Moslem-ud-Dn Sikdar and another PLD 1957 SC 1 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 ref.

(b) Interpretation of statutes---

----Ordinary dictionary meanings had to be given to words used in statute, while interpreting any of its provisions.

(c) Constitution of Pakistan (1973)---

----Arts. 70 & 142(c)---Interpretation of entries in legislative lists---Scope---General principle for interpretation or construction of entries in Legislative Lists are that entries are to be interpreted broadly and liberally and widest amplitude is to be given to words employed therein---Entries in the lists are mere legislative heads having an enabling character that define and delimit the respective areas of legislative competence for Federation and Provincial Legislatures.

(d) Interpretation of Constitution---

----Interpretation of entries in legislative lists---Scope---General principle for interpretation or construction of entries in Legislative Lists are that entries are to be interpreted broadly and liberally and widest amplitude is to be given to words employed therein---Entries in the lists are mere legislative heads having an enabling character that define and delimit the respective areas of legislative competence for Federation and Provincial Legislatures.

(e) Sale of Goods Act (III of 1930 )---

----S. 2(7)---Expression "goods"---Meaning---Expression "goods" according to S.2(7) of Sale of Goods Act, 1930, meant every kind of movable property other than actionable claims and money and included stock and shares, growing crops, grass or things attached to or forming part of land which were agreed to be served before sale or under contract.

(f) Central Excise Act (I of 1944)---

----First Schedule---"Excisable goods"---Meaning---Word "Goods" was not defined in Central Excise Act, 1944 but expression "excisable goods" was defined as goods specified in First Schedule of the Act---Legislature was to be taken to have used the word in its dictionary meanings, that is, to become goods, it was to be something which could ordinarily come to the market to be bought and sold and was known to the market.

(g) Sales Tax Act (VII of 1990)-

----Goods---Definition---Sales Tax 'Act, 1990, defined "goods as goods including every kind of movable property other than actionable claims, money, stocks, shares and securities.

Mian Abdul Ghaffar, Khalid Rahman and Khalid Jawed Khan for Petitioners.

Faisal Arab, Standing Counsel, Raja Muhammad Iqbal and Muhammad Qasim Mirjat, A.A.-G. for Respondents.

Date of hearing: 10th March, 2005.

JUDGMENT

KHILJI ARIF HUSSAIN, J.---By this judgment we intent to dispose of Constitution Petitions Nos. D-1432, 1433 of 2000, D-1861, 1862 of 2001 and D-188 of 2002 as common questions of law are involved. The petitioners in all the petitions have questioned levy of sales tax on services rendered by them under Sindh Sates Tax Ordinance, 2000 ("Ordinance, 2000").

Constitution Petitions Nos.D-1432 and D-1433 of 2000 were filed by the customs agents, who are holding licences under Customs House Agents Licence Rules, 1971 and are engaged as an agent of customs house. Constitution Petitions Nos. D-1861, D-1862 of 2001 and 'D-188 of 2002 were filed by different clubs.

Heard Mian Abdul Ghaffar, Mr. Khalid Rahrnan and Mr. Khalid Jawed Khan, learned counsel for the petitioners, Mr. Faisal Arab, Standing Counsel Mr. Raja Muhammad Iqbal, Advocate and Mr. Muhammad Qasim Mirjat, Assistant Advocate-General, for the respondents.

The learned counsel for the petitioners in the first instance have questioned the Ordinance, issued by the respondent No.1 Province of Sindh on the ground that the same is ultra vires of the Constitution and beyond the legislation authority of the provincial legislature and, therefore, liable to be struck down. It was contended that in terms of Item No.49 to Fourth Schedule of the Constitution of the Islamic Republic of Pakistan, 1973 only Federal Government can legislate in respect of taxes on sales. It was further contended that the item of tax for services is nowhere mentioned in the concurrent list and, therefore, provincial legislature has no power or authority to legislate on the subject as it is beyond its legislative power. Learned counsel for the petitioners further contended that article of the Constitution should be interpreted liberally and not narrowly. The learned counsel for the petitioners in Constitution Petitions Nos. D-1861, D21862 of 2001 and D-188 of 2002 also contended that even if for any reason Court comes to the conclusion that Ordinance, 2000 was rightly promulgated by the provincial government, even then the sales tax on services rendered cannot be demanded from the petitioners in Constitution Petitions Nos. - D-1861, D-1862 of 2001 and D-188 of 2002 in respect of entrance fee, annual subscription, monthly subscription, staff bonus, gratuity, welfare/building/development levy as same does not fall within the definition of services, nor petitioner club renders services in this regard to its members. The learned counsel for the petitioners in support of his contention relied upon The Province of Punjab and another v. National Industrial Cooperative Credit Corporation and another (2000 SCMR 567). The Chief Secretary to the Government of East Pakistan v. Moslem-ud-Din Sikdar and another (PLD 1957 SC 1) and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan (PLD 1997 SC 582).

On the other hand, learned counsel for the respondents contended that only the provincial government is competent to legislate in respect of subject matter, as the same does not fall under federal legislation list or concurrent list. The learned counsel for the respondents drawn our attention to similar Ordinances issued by the other provinces imposing sales tax on services.

We have taken into consideration respective arguments advanced by the learned counsel for the parties.

In order to appreciate the contentions of the learned counsel for the respondents about the vires of the Ordinance that the same is beyond the legislative authority of the provincial legislative, we would like to reproduce Entry No.49 of Fourth Schedule of the Constitution of the Islamic Republic of Pakistan, 1973, which reads as under:--

"(49). Taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed."

It is interesting to note that Entry No.49 was amended and inserted by the Constitution's Fifth Amendment Act, 1976, prior to that the said Entry used to be read as under:--

"(49) Taxes on sales and purchases"

Ordinance VIII of 2000 was promulgated on 15-7-2000 and section 3 of the said Ordinance provided the scope of tax. Sectionl3 of Ordinance, 2000 reads as under:--

"(3) Scope of tax.--(1) Subject to the provisions of this Ordinance, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of the taxable services rendered or provided in the Province of Sindh.

(2) The tax shall be charged and levied on the services specified in the Schedule to this Ordinance in the same manner and at the same time, as if it were a sales tax leviable under sections 3, 3A or 3AA, as the case may be, of the Sales Tax Act, 1990.

(3) All the provisions of the Sales Tax Act, 1990; and rules made and notifications, orders and instructions issued thereunder shall, mutatis mutandis, apply to the collection and payment of tax under this Ordinance insofar as they relate to:--

(a) manner, time and mode of payment;

(b) registration and de-registration;

(c) keeping of records and audit;

(d) enforcement and adjudication;

(e) penalties and prosecution; and

(f) all other allied and ancillary matters."

Section 3(3) of the Ordinance, 2000 provided that all provisions of the Sales Tax Act, 1990 and rules made and notifications, orders and instructions issued thereunder shall mutatis mutandis apply to the collection and payment of tax under the Ordinance.

From a close reading of the said section it appears that 15% tax has been imposed on taxable services rendered or provided in the Province of Sindh. Details of the taxable services have given in the Schedule of the Ordinance and services provided and rendered by the hotels, marriage halls, lawns, clubs, caterers, customs agents, etc. were made liable for service tax. We have examined federal legislative list as well as concurrent legislative list with reference to Article 70 of the Constitution and we find that the legislation with reference to sales tax on services is not enumerated for any of the said lists. Article 142(c) confers exclusive powers to a Provincial Assembly to make law with respect to any matter not enumerated in either of the federal legislative list or concurrent legislative list. Sales tax on services cannot be equated with the tax on sales and purchase of the goods imported, exported, produced, manufactured or consumed. We would like to mention here that similar Ordinance issued by the Government of Punjab. Islamabad Capital Territory Tax on Services, 2001 were called in question and the Hon'ble Lahore High Court held that the legislation by the Provincial Assembly imposing tax on services is not ultra vires to the Constitution. If any case law is required, one can see Messrs Nafees Dry Cleaners v. Government of Pakistan (2001 PTD 2018), Hafeezullah Malik and Co. v. Province of Punjab (2003 PTD 1852) and Messrs Gurgson Dry Cleaners v. Sales Tax Officers, Rawalpindi (2004 PTD 1987).

The general principle for interpretation or construction of entries in the legislative lists are that the entries must be interpreted broadly and liberally widest amplitude being given to the words employed the entries in the lists are mere legislative .heads and of enabling character they define and delimits the respective areas of legislative competence for the Federation and provincial legislatures.

Federation has exclusive authority under Entry No.49 of federal list to legislate law in respect of taxes on the sale and purchase of the goods. The expression "goods" according to section 2;'7) of the sale of goods means every kind of movable property other than the actionable' claims and money, and includes stock and shares, growing crops, grass or things attached to or forming part of the land which are agreed to be served before sale or under the contract. The Central Excise and Salt Act, 1944 does not define goods, but defined "excisable goods" as goods specified in the First Schedule of Act, and legislature must be taken to have use the word in its ordinary dictionary meanings, thereby that to become, goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. Sales Tax Act, 1990 defined "goods" as goods include every kind of movable property other than actionable claims money, stocks, shares and securities. The expression "goods" used in Entry No.49 is controlling expression and cannot be extended to include "services" which one can render while offering goods for sale and cannot be enlarged to include in it anything other than sale and purchase of goods, imported, exported, produced, manufactured or consumed, particularly after amending Entry No.49 by replacing "taxes on sales and purchase" with "taxes on the sales and purchase of goods". In our view sales tax on services does not from part of Entry No.49 of Fourth Schedule of the Constitution and as such provincial Legislature has authority to legislate law in this regard.

However in our tentative assessment taxable events in the case of duties of "excise on services" and "sales tax on services" is the same unlike sales tax on goods sold where the taxable event is sale of goods.

Although both excise duty and sales tax are levied with reference to the goods the two are very different imposts in one case the levy is on the an act of manufacture or production while in the other, it is on the act of sale. In neither therefore, can it be said that the excise duty or sale tax is a tax directly on the goods for in that event they will really become the sales tax. Similarly, in the case of duties of customs including export duties though they are levied with reference to goods the taxable event is either import of goods within the customs barriers or that the export outside the customs barriers. They are also indirect taxes like excise and cannot be equated with direct tax on goods themselves, and we are not addressing this question in these petitions leaving the same to be addressed at some appropriate time as neither of the parties has argued on this point.

In the case of Hafeezullah Malik and Co. (supra), demand on services rendered by the customs agents were called in question as in Constitution Petitions Nos.D-1432 and D-1433 of 2000 and Hon'ble Lahore High Court dismissed the petition holding that the service is covered by the schedule to the Ordinance, which has already been held valid law.

Coming to the last contention of the learned counsel for the petitioners in Constitution Petitions Nos. D-1861, D-1862 of 2001 and D-188 of 2002 that the petitioners are not liable to pay sales tax in respect of the amount received by them as entrance fee, annual subscription, etc. from its members. Only services provided or rendered by the clubs were made liable for sales tax, under the Ordinance, 2000. The Ordinance does not define term "services". Section 2(20) of Central Excise Act, 1944 defined "excisable service" means services, facilities and utilities specified in First Schedule read with Chapter 98, and heading 9801.4000 gives description of excisable service as service F provided or rendered by clubs and section 2(46), of Sales Tax Act, 19901 defined "value of supply" in respect of a taxable supply, the' consideration in money including all federal and provincial duties which supplier .receives from the recipient and in case consideration for a supply is in kind or partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax.

None of the definitions given in section 2(20) of Central Excise Act, 1944 or section 2(46) of Sales Tax Act, 1990 is of any help to respondent for more than one reason. First because excise duty as well as sales tax leviable on excisable services provided under Central Excise Act and likewise sales tax levied on supply of goods or rendering of services covered under the respective Ordinances. While interpreting any proverb of law ordinary dictionary meaning has to be given to the words used in the statute. The term "services provided" used in the schedule cannot in any manner include membership fee or monthly subscription as the same has no nexus with the services which a club provided to its members like providing boarding, lodging, arranging parties, supplying foods and other stuffs.

For the foregoing reasons while dismissing Constitution Petitions Nos.D-1432, 1433 of 2000, we partly allow Constitution Petitions Nos. D-1861. D-1862 of 2001 and D-188 of 2002 only to the extent that the petitioners are not liable or sales tax on services in respect of fixed charges received by them as entrance fee, annual subscription, monthly subscription, staff bonus, gratuity.

S.M.B./D-47/K??????????????????????????????????????????????????????????????????????? Petition allowed.