SHAHEEN STEEL FURNACE, GUJRANWALA through Proprietor VS GOVERNMENT OF PAKISTAN, MINISTRY OF FINANCE through Secretary
2009 P T D 722
[Lahore High Court]
Before Khawaja Farooq Saeed, J
Messrs SHAHEEN STEEL FURNACE, GUJRANWALA through Proprietor
Versus
GOVERNMENT OF PAKISTAN, MINISTRY OF FINANCE through Secretary and 4 others
Writ Petitions Nos.7950 to 7954, 8118, 8233, 9883, 9884, 10290 to 10292, 10327, 10349, 10361 to 10368, 10461, 10462, 10665, 12362 to 12389, 12497 to 12500 and 12531 of 2008, decided on /01/.
th
November, 2008. (a) Constitution of Pakistan (1973)---
----Art. 189---Obiter dicta in judgment of Supreme Court---Effect---Decisions of Supreme Court are binding even to the extent of obiter dicta in judgments---Authority to explain judgment of Supreme Court is also with Supreme Court.
(b) Sales Tax Act (VII of 1990)---
----Ss.2 (41), 4 & 13---Supply, taxable and exempted---Scope---Anything produced in Pakistan if supplied is covered within the definition of "taxable supply" but it does not include supplies which have specifically been exempted or which have been declared to be as "zero rated"---Basic difference between "exempt" and "zero rated" supply is that though both of them do not pay any sales tax on their supplies but the person who is making supply as zero rated is entitled to credit for tax paid on his business purchases, whereas person making exempt supply is not entitled to seek refund or adjustment of input tax.
(c) Sales Tax Act (VII of 1990)---
----S.4 & Sched. 5---Customs Act (IV of 1969), S.24---"Zero per cent"--Connotation---Phrase "zero per cent" is nothing more than declaring a supply to be practically as exempt from sales tax---Meaning of expression as contained in S.4 of Sales Tax Act, 1990, is exactly that goods specifically mentioned in 5th Schedule or goods which are specified in S.24 of Customs Act, 1969, for consumption abroad or those which are notified in official Gazette by Federal Government are all exempt---Such concept appears to have been introduced only for the purpose of claiming adjustment or refund of input tax which a supplier may have paid on his purchases.
(d) Interpretation of statutes---
----Fiscal statute---One has to look merely at what is clearly said; there is no room for any intendment and there is no equity about a tax---Nothing is to be read in, nothing is to be implied---One can only look fairly at the language used.
Messrs Elahi Cotton Mills and others v. Federation of Pakistan through Secretary M/O Finance, Islamabad and 6 others PLD 1997 SC 582 fol.
(e) Sales Tax Act (VII of 1990)---
----Ss.3, 4 & 7(2)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Deduction of input tax from output tax---principle---Petitioners were manufacturers and dealers of steal ingots prepared from scrap purchased from unregistered scrap dealers---Plea raised by petitioners was that there was exemption for scrap for charge at zero rate, therefore, the same should be equated with actual payment of tax and their amount should be reduced from supply for determination of sales tax---Validity---For entitlement of reduction of input tax from output tax in addition to actual payment, there should be documentary evidence in terms of either tax invoice or a treasury challan of payment bearing registration number---Where there was neither any physical payment or transfer of possession of something nor there was any documentary evidence regarding tax paid by registered person, in absence of any such legislative intent, adjustment was beyond question---Use of word "actually" had made the situation very obvious---Since there was neither any physical transfer or deposit of tax in case of scrap dealers nor they were registered treating it as tax paid would be being naive---Petition was dismissed in circumstances.
Messrs Usmani Associates, Sub Proprietary Firm v. Central Board of Revenue and another 2001 PTD 2982; Fauji Sugar Mills v. Assistant Collector Sales Tax and others 2005 PTD 662; Deputy Collector, Central Excise and Land Customs, Lahore and 2 others v. Tyrex Pakistan (Ltd.), Lahore and another PLD 1992 SC 364; Habibullah Jan and 3 others v. Muhammad Hassan Khan and 6 others PLD 1991 SC 93; Amreti Steels (Pvt.) Ltd. and others v. Federation of Pakistan and others 2004 PTD 2930; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; Collector of Customs, Lahore and others v. Messrs Universal, Gateway Trading Corporation and another 2005 SCMR 37 = 2005 PTD 123; A.R. Khan v. P.N. Boga through Legal Heir PLD 1987 SC 107; Mian Shaukat Ali and another v. Secretary, Irrigation, Government of Punjab, Lahore and 13 others 2003 MLD 1231; Muhammad Waris and 3 others v. Province of Punjab through Secretary, Co-operative Department, Lahore and 16 others PLD 2003 Lah. 242; Adeel-ur-Rehman and others v. Federation of Pakistan and others. 2004 PTD 534; Hyundai-Hidco-Hakas Joint Venture v. Water and Power Development Authority PLD 2003 Lahore 714 and Funfair (Pvt.) Limited and another v. Karachi Development Authority and 2 others PLD 2004 Karachi 170 ref.
(f) Sales Tax Act (VII of 1990)---
----S.7---Term "actually paid" and "paid"---Distinction---If one needs to claim input tax of output tax, such person must have in its mind that the same is "actually paid" only then it can be claimed subsequently---Use of prefix "actually" has added emphasis on the word "paid"---Term "paid" means actually passing on something physically (specially money) from one hand to another and there is no room for notional position---Handing over of possession (money) is pre-condition for payment---In certain special circumstances word "payable" may be considered as paid as the same speaks of future transfer of something (money etc.)
Webster Comprehensive Dictionary, International Edition, Volume Two ref.
(g) Interpretation of statutes---
----Fiscal statutes---Exemption---Object and scope---Tax statutes are framed for creation of charges and exemption are granted as a special facility---Such facilities are always in contradiction to the spirit and philosophy of payment of taxes i.e. equitable distribution are also never liberally granted---Provisions granting exemption are always given a restrictive meaning as against normal method of interpretation of fiscal statutes and in case of doubt, it is decided in favour of taxpayer.
Kh. Saeed-uz-Zafar, Mian Mehmood Rasheed, Zafar dsIqbal Chohan and Miss. Shazia Hassan for Petitioners.
Ahmar Bilal Sufi, Kausar Parveen and Izhar-ul-Haq Sheikh for Respondents.
Date of hearing: 26th September, 2008.
JUDGMENT
KHAWAJA FAROOQ SAEED, J.---This judgment will dispose of Writ Petitions Nos.7950, 7951, 7952, 7953, 7954, 8118, 8233, 9883, 9884, 10290, 10291, 10292, 10327, 10349, 10361, 10362, 10363, 10364, 10365, 10366, 10367, 10368, 10461, 10462, 10665, 12362, 12363, 12364, 12365, 12366, 12367, 12368, 12369, 12370, 12371, 12372, 12373, 12374, 12375, 12376, 12377, 12378, 12379, 12380, 12381, 12382, 12383, 12384, 12385, 12386, 12387, 12388, 12489, 12497, 12498, 12499, 12500 and 12531 of 2008, as the common questions of law and facts are involved in the same.
2. The brief facts leading to the present writ petitions are that the petitioners are engaged in manufacturing and selling of iron and steel products mainly steel ingots for which, steel furnaces have been established in their respective premises. The petitioners are liable to sales tax on production and sale of said ingots which are made from local scrap mostly. The petitioners claim that they have been paying sales tax on their manufactured products on the basis of value addition of their items. The rate statedly paid by them was Rs.400 per metric ton for the year 2004-2005 and Rs.450 for the year 2006-2007 which practice was accepted by the respondents. On 6-7-2007 a Notification bearing S.R.O. No.678(I)/2007 was issued by the Government of Pakistan, Ministry of Finance, Economic Affairs, Statistics and Revenue (Revenue Division) which introduced a special regime for payment of sales tax on the basis of the consumption of the electricity @ Rs.4.75 per unit consumed. The WAPDA authorities were directed to include the said amount in their electricity bills which resulted in enhancement of sales tax by about 500 times. The Notification was challenged and this court vide its order dated 23-11-2007 in the writ petition filed by the Steel Furnaces declared the said Notification to be ultra vires of the law.
3. The order was challenged before the Hon'ble Supreme Court of Pakistan, whereby, the same was modified and direction was issued to allow the petitioners to adopt either of the two methods. Thus, the petitioners have became entitled to avail either normal tax regime and to pay sales tax @ 15% as per law or special regime and to pay Rs.4.75 per unit of the electricity consumed. The petitioners, thereby, filed their returns on the basis of the value added amount i.e. sale minus, purchase price of scrap and paid tax thereon. The department did not accept this interpretation of the petitioners and asked them to pay the said amount @ 15 % of the total sale. It is on the basis of this controversy that the present writ petitions have been filed.
4. The petitioners contacted the respondents for redressal of their grievance stating that they are entitled to payment of the sales tax only on the amount of value addition and not on the scrap purchased by them, however, their point of view was turned down and they were asked to pay the tax on the whole amount of the sale transacted by them.
5. Learned counsel for the petitioners supporting its claim firstly referred section 3 of the Sales Tax Act. He said that section 3 is the charging provision and it clearly creates .charge on supply of the goods minus input tax paid by the manufacturer/supplier. These provisions are to be seen in the prospective of the over all scheme of the Sales Tax Act. Referring section 2(14) he said that the same defines word `input tax' and section 2(20) explains `output tax'. Similarly "taxable activity" and "taxable supply" have been defined in sections 2(35) and 2(41) respectively. The provision of Sales Tax Act, 1990, show that it is basically a value added tax having been imposed at every stage. It is no more one time levy and there is now a departure from the said philosophy of one time levy as was available through Sales Tax Act, 1951. In favour of his arguments he particularly referred subsection (3) of section 3-A which inter alia creates this charge on the person who makes the supply. Referring the famous case of "Messrs Usmani Associates, Sub Proprietary Firm v. Central Board of Revenue and another" 2001 PTD 2982 he claimed that sales tax in it new form is more a value added tax (VAT) than one time levy.
6. The emphasis of the learned counsel for the petitioners was that since scrap dealers are an un-registered sector in the sales tax empire and there is an outright exemption for them for charge at zero rate, the same should be equated with actual payment of tax and their amount should be reduced from the supply for determination of the Sales Tax. Further the scrap on one hand is a by-product of an already taxed item and on the other hand when it is called as zero rated it presupposes that it has been charged to tax and has been allowed exemption. Hence, if the same is later brought to tax by not reducing the said amount from the total value of supply, it shall amount to double taxation. It is never intended by law to charge tax twice and reliance is on (2005 PTD 662) ref: "Fauji Sugar Mills v. Assistant Collector Sales Tax and others", (PLD 1992 SC 364) ref: "Deputy Collector, Central Excise and Land Customs, Lahore and 2 others v. Tyrex Pakistan (Ltd.), Lahore and another" and (PLD 1991 SC 93) ref: "Habibullah Jan and 3 others v. Muhammad Hassan Khan and 6 others". Similarly in support of the arguments that it is a by-product of an already taxed product, hence cannot be brought into charge directly or indirectly, he claims support from 2004 PTD 2930 ref: "Amreti Steels (Pvt.) Ltd. and others v. Federation of Pakistan and others".
7. The arguments of the learned counsel were adopted by the other counsel. However, the learned Legal Advisor wanted some time to continue from the respondents' side and the case was thus adjourned at mutual request. On the next date of hearing the respondents produced a new Notification issued by Ministry of Finance, Economic Affairs, Statistics and Revenue (Revenue Division) on 20-8-2008 vide S.R.O. 862(I)/2008. Through the said S.R.O. the Ministry of Finance, Economic Affairs, Statistics and Revenue (Revenue Division) has further amended Sales Tax Special Procedure Rules, 2007, and have made it retrospective from 1st of July, 2008. Through the said Notification inter alia following further amendments have been brought in the said Rules:--
"(4) in rule 58H, in sub-rule (4), for the words "five hundred and forty-five", the words "eight hundred and forty-eight" shall be substituted;
(5) for rule 58I, the following shall be substituted, namely:--
"58I. Invoices and returns.---(1) Sales tax invoices shall be issued by steel melters to re-rollers showing sales tax amount of five thousand five hundred and twenty-six rupees per metric ton."
Further in order to facilitate Rule 58 NAM has also been inserted. Through this Rule the direction of the Hon'ble Supreme Court has been implemented. The petitioners on this development sought time to further prepare their briefs in the light of the change in the procedure as well as Rules by the Federal Government. The request for amendment of the petition was made which was allowed and accordingly petitions were amended. In addition to the earlier arguments that the petitioners were only chargeable to their value added supply, the amendments in Rule 58-H and addition of Rule 58 MB have further been challenged.
8. Kh. Saeed-uz-Zafar, Advocate, who was counsel in Writ Petition No.9883 of 2008 while adopting the earlier arguments of his fellow colleagues further added that section 25 provides access to record and the documents of a taxpayer to the sales tax authorities and to do necessary audit. Thus, if any discrepancy is found the tax shortage can be recovered. Further under section 3 subsection (3) the liability to pay the tax is on those persons who supply their product, while in the case of goods imported into Pakistan it is on the person importing the goods. He contended that there is a clear difference in the charge between the above two persons. In the case of supply of goods the charge is on a person who is making the supply and the recipient is not made responsible of the same, while in the case of importer it is not the one who has sent the said product but liability to pay sales tax is on the one who has imported and is receiving the said goods. This distinction he said alone makes it clear that the melters being recipient of the scrap it is not their duty to pay the tax on the product which they are purchasing. They being in receipt of the supply of goods are not responsible for the payment of sales tax to the extent of purchase of raw material. Now if on after melting the said scrap and its conversion into ingots etc, if he is made to pay tax on the total value, of the same he is made liable to pay on his purchases also which is against the spirit of section 3(3).
9. The competent authority by putting remeltable scrap in zero rated charge through Notification vide S.R.O. 646(I)/2007 dated 27-6-2007 which was issued amending Notification in S.R.O. 462(I)/2007 dated 9-6-2007 has decided the controversy. Further through the same Notification the Federal Government has put the remittable scrap in P.C. heading 72.04 which again means that remittable scrap has also been brought to the ambit of formally recognized charge and is simultaneously exempt by being in zero rated tax. Referring section 3(A) he said that the Federal Government does have powers to make the recipient of supply liable to pay tax but through the above Notification no such impression directly or impliedly has been given. The purpose in his opinion is obvious. There is no charge created in respect of recipient of supply i.e. steel melters in respect of remittable scrap received by them. It is further added that if on one hand the Federal Government has not created this charge for the recipient which was well within their powers and on the other hand it has been declared as zero rated, there is no rationale in charging sales tax on full amount of manufactured product by the present petitioners.
10. Learned counsel has even gone to argue that the judgment of Hon'ble Supreme Court is not being implemented in its actual context. In his opinion the judgment given by this court earlier is exhaustive and has dealt various connecting issues which have not been brought to discussion in the later order. The directions of the Hon'ble Supreme Court being based on the consent of the parties in proceeding is binding only on the parties to the said judgment. It is only an arrangement between them and cannot be referred as a precedent. It is further contended that the judgment of this court to the extent of the issues which have not been adjudicated upon by the Hon'ble Supreme Court of Pakistan shall still hold field, hence may be followed by this court also.
11. Referring Article 77 of the Constitution of Islamic Republic of Pakistan, 1973, he said that legislation in respect of fiscal matter is the prerogative of the legislature only. The provision that deals with charge or determination of application of fiscal laws is entirely within the jurisdiction of the Parliament. No one including the Government or Federal Board of Revenue are empowered to legislate except for the areas for which they have been delegated specific powers which also are for limited purpose. These powers are specifically provided in relevant laws and parameters of the same are always fixed. The authority which is delegated for such legislation cannot exceed beyond the prescribed parameters in any form. Any provision that is in excess of the parameters fixed by such an enactment becomes automatically redundant being entering into the jurisdiction of the legislature. Such power is always granted for limited purposes and are generally for prescribing procedure for implementation of the provisions of law. Wherever, said power is used in excess of the delegation it becomes redundant.
12. The language of law with respect thereto is very particular. The tax under the same can only be levied by or under the authority of Act of Parliament (Sr?-4i). Thus, the Federal Government on the face of it is not empowered to levy tax. Under the provisions of section 71 of the Sales Tax Act, 1999, the Federal Government does have powers to issue through Notification in the official Gazette procedure for the scope and payment of tax, registration book, keeping invoicing, requirement and return etc. The powers through the said Section, therefore, is restrictive, prescribed and cannot be exercised beyond the said parameters. The notifications, therefore, are liable to be declared as ultra vires, to the powers of the Federal Government, it was finally commented.
13. In support of his claim he referred some judgments but the copies or the ratio there-from has not being provided. In any case if need arises, same can be discussed in the later part. Lear therefore, said that the Notification dated 6-7-2007 vide S.R.O. 678(I)/2007 which has already been held as ultra vires to the powers of the Federal Government and the subsequent procedure and amendment in rule 58-H through S.R.O. 862(I)/2008 dated 28-8-2008 be also declared to be, not within lawful authority of the Federal Government. In his opinion even after the judgment by the Hon'ble Supreme Court, the S.R.O. be declared as non-existent.
14. From the respondents side objection was raised on the very maintainability of the writ petition by Miss Kausar Parveen, Advocate. It was inter alia stated that the matter can be agitated in departmental hierarchy and Federal Board of Revenue could have been approached for deciding the matter at their end. The tendency of immediately filing writ. petitions should not be appreciated and the same should be dismissed in limine. Reliance has been placed on the cases of (1999 SCMR 1881) ref: "Khalid Mehmood v. Collector of Customs, Customs House, Lahore", (2005 SCMR 37 = 2005 PTD 123) ref: "Collector of Customs, Lahore and others v. M/s Universal Gateway Trading Corporation and another". Further that Article 189 of the Constitution of Islamic Republic of Pakistan, 1973, provides for a direction that any decision of the Hon'ble Supreme Court shall be binding on all other courts in Pakistan. There is, therefore, no question of any other interpretation except that now there are two schemes governing the methods of payment of sales tax. Further that the taxpayers itself having agreed to the arrangement before the Hon'ble Supreme Court of Pakistan cannot now change their stance. There cannot be any approbate and reprobate at the same time. Nobody can be allowed to approbate when the matter goes in his favour and then to reprobate when the same is not in his interest. In favour of her arguments that this is not permissible, she has referred (PLD 1987 SC 107) ref: "A.R. Khan v. P.N. Boga through Legal Heir", (2003 MLD 1231) ref: "Mian Shaukat Ali and another v. Secretary, Irrigation, Government of Punjab, Lahore and 13 others" and (PLD 2003 Lah. 242) ref: "Muhammad Waris and 3 others v. Province of Punjab through Secretary, Co-operative Department, Lahore and 16 others". She further added that it is a matter of factual controversy and a writ petition is not to be invoked where the matters under discussion are of facts and there is no question of law. Reliance is on (2004 PTD 534) ref: "Adeel-ur-Rehman and others v. Federation of Pakistan and others", (PLD 2003 Lahore 714) ref: "Hyundai-Hidco-Hakas Joint Venture v. Water and Power Development Authority" and (PLD 2004 Karachi 170) ref: "Funfair (Pvt.) Limited and another v. Karachi Development Authority and 2 others". It was also argued by her that the petitioners have not come to the court with clean hands, hence, are not entitled to any favour or relief. In her opinion, since the judgment of Hon'ble Supreme Court had been obtained after offering a consent, now challenging the same issue is not permissible, in law.
15. Coming to the issue of charge on value addition only, she added that the power to exempt a person from payment of tax or granting him exemption from charge of the sales tax is exclusively with Federal Board of Revenue. Since no specific direction has been issued for charge of the sales tax on the value added amount only by the said Federal Board of Revenue, there is no question of any such benefit to the petitioners at this stage. Zero rating in her opinion also does not mean that it has been charged to tax.
16. Similar arguments were advanced by Sh. Izhar-ul-Haq, Advocate, who had mostly relied upon the provisions of law. He referred provision of sections 3, 4 and 7 and said that the law is very clear in its application. Section 3 is the charging provision and creates a charge on the taxable supply while section 4 defines the cases which are covered under the zero rated tax and grants powers to the Government and the F.B.R. to decide as to which class of the business shall be placed at zero rating. Section 7 determines the tax liability and provides room for deduction of input tax while making taxable supplies. In section 7(1) it is very clearly mentioned that a registered person shall be entitled to deduct input tax "paid or payable" during the tax period for the purpose of taxable supplies made by him from the output tax. The emphasis he said is mainly on the `tax paid' and in zero rating tax, there is no concept of tax paid at all. It is only a facility to a class of the retailers. As per survey and general consensus, this class cannot be registered as being small businessman. Some of them are working at different places temporarily and they keep changing their business places also. There is, therefore, no way to agree that the said zero rating means payment of tax on their sale.
17. Mr. Ahmer Bilal Sufi, Advocate, said that the judgment of Hon'ble Supreme Court has in fact decided the same lis which came into discussion before this court. It is on the basis of same proposition that an appeal was filed by the Federal Board of Revenue which was decided by this court. In his opinion, the Hon'ble Supreme Court of Pakistan by virtue of its jurisdiction and being the highest authority in judicial hierarchy has effectively set aside the order. Section 112 of the C.P.0 has further saved the powers of the august Court and thus its decision be that in any form is binding. In his opinion the Hon'ble Supreme Court has a total freedom to frame its own rules and to decide the, case in the manner it deems fit and direction remains binding on all forums. He said that the issue before this, court as well as Hon'ble Supreme Court was with regard to the charge of tax under special regime as well as regular regime. By virtue of the judgment an option has been provided to taxpayer, which obviously is not detrimental to the interest of the parties.
18. Coming to the writ jurisdiction of this court under Article 199 of the Constitution under which the present writ petitions have been admitted and are being decided, he said that this court also has special powers. As a court of equity it enjoys the discretion to declare any law to be as void if the same is inconsistence with or is in derogation to the fundamental rights and to confirm the same in the general public interest if it is just and fair. The notification has in fact provided a sigh of relief to the tax payers in the manner that it has curtailed the, rigors of law. It should, therefore, be given treatment accordingly. As a result of the order of the Hon'ble Supreme Court of Pakistan, the taxpayer has been allowed two methods and the other method being simple and acceptable to many of the manufacturers which is evident from the response being received, interference by this court will be against the fundamental rights besides being against the general public interest.
19. Mr. Ahmar Bilal Sufi, Advocate, claims that section 111 of the C.P.C. also comes into operation in this case. There is `res judicata' in the present case. The matter having attained finality, this court should not try this issue as the same has directly and substantially been decided in the earlier suit between the same parties. He further referred section 117 of the C.P.C. to say that the said Code is applicable to this court and its provisions as well as the rules also apply to the proceedings of this court.
20. Referring famous judgment of the Hon'ble Supreme Court in the case of "Messrs Elahi Cotton Mills and others v. Federation of Pakistan through Secretary M/O Finance, Islamabad and 6 others", reported as (PLD 1997 SC 582), he said that in present scenario of corruption obtaining in government and semi government departments and so also to curb the dishonest tendency on the part of the taxpayer to avoid payment of lawful taxes, the old fashioned cumbersome and pendantic policies and system should now come to an end. The welfare of the public is always the prime factor and responsibility of the State. Modern, simple and transparent methods for collection of revenue is the requirement of the day.
21. The S.R.Os. under discussion having simplified the procedure of payment of sales tax and the Hon'ble Supreme Court having allowed option to adopt any of the two acceptable to the taxpayer, the learned counsel commented that they should come out with open heart and continue shouldering their national duty of payment of due taxes for welfare of the people at large which obviously includes the present taxpayer as well as their families.
22. I have heard the learned counsel for both the parties at length and had valuable assistance from all concerned. The issues in fact through the present writ petition even after amendment subsequent to the Notification dated 20-8-2008 are not exactly the same. So far as vires of the Notifications is concerned no comment after the judgment of Hob'ble Supreme Court of Pakistan is required. There cannot be any cavil about the fact that after the judgment of Hon'ble Supreme Court the Notification has become legally valid and applicable.
23. This court in principle agrees with Mr. Ahmar Bilal Sufi, Advocate, that the lis is the same on the basis of which the appeal was filed before the Hon'ble Supreme Court. In fact the clear instructions of the Hon'ble Supreme Court of Pakistan that both the systems can be adopted makes it clear that the said special regime is also valid to the extent of charge of Rs.4.75 (subsequently been enhanced to Rs.6 per unit) or as an alternative to pay the tax as per normal procedure @ 15 % (it has been enhanced now to 16%). The decisions of the Hon'ble Supreme, Court are binding even to the extent of Obiter Dicta in the judgments. Even otherwise, the judgment being by the highest judicial forum of the country the authority to explain the same also is with the august Court, hence, the petitioners should have better approached the Hon'ble Supreme Court of Pakistan.
24. As a consequence the notification issued through S.R.O. No.678(I)/2007 is very well in field. Similarly the subsequent amendment through S.R.O. No.862(I)/2008 dated 20-8-2008 having brought only some amendments in figures of the tax rates mentioned in the said notification shall also have no support from the arguments of the petitioners. The subsequent notification has amended the earlier rules while new inserted rules does not have any inconsistency with the provisions of law. In fact the main objections raised by the petitioners' counsel is about fixation of production vis-a-vis electric consumption and per ton rate of the ingots for adoption of the Sales Tax. Since both these points were subject matter of the earlier notification i.e. 678(I)/2007 which stands validated by implication as a result of the order of the Hon'ble Supreme Court of Pakistan, any amendment, therein shall also be considered as equally valid and lawful. Even otherwise, there is no argument claiming S.R.O. No.862(I)/2008 dated 20-8-2008 to be inconsistent to the main law or in excessive use of the jurisdiction. The same, therefore, is also held to be as valid and lawful.
25. The issues which are not covered by the above discussion and have in fact cropped up as a result of the earlier judgments now are:-
(i) whether zero rated charge-would amount to or can be equated with satisfaction of payment of sales tax; and
(ii) whether steel melters are entitled to claim payment of Sales Tax only on value addition amount.
26. Sections 2(41), 3 and 4 of the Sales Tax Act provides for definition of term "taxable supply", the charge of the gales Tax Act and the concept of zero rated supply respectively. As per section 2(41) "taxable supplies" are such supplies of taxable goods which are made in Pakistan. However, the supplies which are exempt under section 13 and the, supplies which are zero rated under section 4 are not subject to charge. It means that anything produced in Pakistan if supplied is covered within the definition of "taxable supply", but it does not include the supplies which have specifically been granted exemption or which have been declared to be as zero rated. The phrase "zero percent" is nothing more than declaring a supply to be practically as exempt from sales tax. The meaning of this expression as contained in section 4 also is exactly that the goods specifically mentioned in 5th schedule or the goods which are specified in section 24 of the Customs Act, 1969, for consumption abroad or those which are notified in the official Gazette by the Federal Government are all exempt. The concept appears to have been introduced only for the purpose of claiming adjustment or refund of input tax which a supplier may have paid on his purchases. For example if some goods are exported there should not be any doubt in the mind of any person that no sales tax shall be chargeable on its export to the exporters.
27. Similar is the situation of the goods chargeable to tax at the rate of zero rated per cent. It is only a facility for the supplier and if his supply is covered under the provision of sections 4-A, 4-B, 4-C & 4-D, the same shall practically be considered as exempt though a separate expression has been assigned to it at the time of their delivery by way of supply/sales. In a way, it declares the liability to supply to be as "nil'. In this regard the example can be .given in respect of zero rated supply of local manufactured goods to duty free shops under Sr.No.3 of the 5th schedule of Sales Tax Act, 1990. The supply to duty free shops was declared to be as zero rated. The basic difference between exempt and zero rated supply is that though both of them do not pay any sales tax on their supplies but the person who is making supply as zero rated is entitled to a credit for tax paid on his business purchases, whereas, the person making exempt supply is not entitled to seek refund or adjustment of input tax. This situation does not apply in the present case at all.
28. The exemption is only in respect of supply, be that zero rated or otherwise exempt. However, if the zero rated supply is further used for production by its recipient whether he can be considered as entitled to treat zero rated supply as after satisfaction of tax is obviously a different situation and is not covered by the paras. above. The facility of non-subjection to sales tax, therefore, is on the supply and cannot be further passed on to the purchaser. This controversy in fact stands covered by provision of section 7 of the Sales Tax Act, 1990.
29. Learned Legal Advisor of the department Mr. Izharul Haque Sheikh, appears to be as correct in pointing out that as per section 7(1) proviso the adjustment of input tax is only if it is paid on the products purchased. The relevant provision reads as follows:-
"Section 7. Determination of tax liability.---(1) [Subject to the provisions of section 8B, for] the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, [subject to the provisions of section 73] be entitled to deduct input tax [paid [or payable] [during the tax period] for the purpose of taxable supplies made, or to be made, by him] from the-output tax [***]that is due from him in respect of that tax period and to make such other adjustments as are specified in section 9[:]
[Provided that the taxpayer may adjust input tax paid on the purchases in the immediate [twelve] proceeding tax periods from the output tax subject to the condition that the taxpayer specifies the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return for the immediately succeeding tax period]" (Underlining is for emphasis)
30. There is where the settled principles of interpretation of fiscal statutes would require reference. The most quoted verse of J. Rowlet which has now attained judicial authority and is called as the golden principle of interpretation is as follows:--
Re: "Cape Brandy Syndicate v. Inland Revenue Commissioner" (1921 K.B 69),
"It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
31. Keeping above case law in view the provision quoted in terms of section 7 in fact clinches the issue. The adjustment of the input tax on the purchases is only of the "input tax paid". There is no way for this court to agree with the learned counsel for the petitioners that in case of zero rating one can consider the tax to be as `paid' tax.
32. There is a further exception to the adjustment of the input tax. Under section 7 subsection (2) a registered person has been made disentitled to deduct the input tax if his claim is not supported by the valid documents in terms invoice etc. Relevant provision is reproduced as follows:-
"Section 7(2)".
"A registered person shall not be entitled to deduct input tax from output tax unless:
(i) in case of a claim for input tax in respect of a taxable supply made [***],he holds a tax invoice [in his name and bearing his registration number] in respect of such, supply for which a return is furnished;
(ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79 or section 104 of the Customs Act, 1969 (IV of 1969);
(iii) in case of goods purchased in auction, he holds a treasury challan [in his name and bearing his registration number] showing payment of sales tax];"
33. The requirement mentioned above are necessary pre-conditions for claiming input tax. Obviously there is neither any invoice issued in these cases nor there is a claim of tax paid through said invoices. One may at best call a zero- rated charge to be as equal to exemption but it cannot be considered as equal to the payment. So in addition to the fact that the input tax has been paid or is payable, the law requires a tax invoice on the basis of which the registered person has filed a return also. Similarly under section 7(2) subsection (iii) if the goods are purchased in auction one who holds a treasury challan and the same is in his name and it bears his registration number, he becomes entitled to its claim from the output tax. Although, this requirement is not applicable in the present cases, yet the situation is obvious. For entitlement of reduction of input tax from the output tax in addition to the actual payment there should be documentary evidence in terms of either tax invoice or a treasury challan of the said payment bearing registration number. Obviously, the writ petitioners before this court do not fulfil any of the above requirements. In their case, neither there is any payment nor there is a question of availability of any invoice or treasury challan for making them entitled to the reduction of input tax from the output tax.
34. The situation, therefore, is so obvious that not much discussion shall be required after looking into the provision of section 7. If one needs to claim the input tax of the output tax he must have in its mind that the same is "actually paid" only then it can be claimed subsequently. Coming to the meanings of "actually paid" the term `paid' alone is clear in its meanings. However, the use of prefix `actually' has added emphasis on the word `paid'. Needless to say that both are to be read together. The ordinary dictionary meanings also fully support this version. The term `actually' means ..In act or fact; as a matter of fact; in reality; really, truly. Similarly the word `paid' is past tense of the word `pay' which means:-
"to give (money, etc.) for a purchase, service renders etc., to provide hand over the amount of; discharge, as a debt, bill, etc.
(Webster Comprehensive Dictionary, International Edition, Volume Two)."
The term paid, therefore, means actually passing on something physically (specially money) from one hand to another. There is no room for a notional position. The handing over of possession (money) is the pre-condition for payment. In certain special circumstances the word `payable' may be considered as paid as the same speaks of a future transfer of something (money etc.). But where there is neither any physical, payment or transfer of possession of something nor there is any documentary evidence regarding the tax paid by a registered person, in the absence of any such legislative intent, which is obviously not obtaining in any of the provisions referred by the other side, adjustment is beyond question. The use of word `actually' makes the situation very obvious. Thus, since there is neither any physical transfer or deposit of tax in the case of such scrap dealers nor they are registered treating it as tax paid shall be being naive. Tax Statutes are framed for creation of charges and exemption are granted as a special facility. Such facilities being always in contradiction to the spirit and the philosophy of the payment of taxes i.e., equitable distribution are also never liberally, granted. The provisions granting exemption are always given a restrictive meaning as against the normal method of interpretation of fiscal statutes in case of doubt, wherein, it is decided in favour of the tax payer. This court agrees with the philosophy that simplification of the tax collecting procedure enhances its acceptability. However, cannot agree that term `zero rated' can be equated with the phrase `actually paid' as is used in section 7.
35. The result of above discussion is obvious. All the writ petitions filed by the petitioners are considered of no merit, hence, are hereby dismissed. Order accordingly.
M.H./S-35/LPetition dismissed.