AHSAN UL HAQ BHATTI VS FEDERAL BOARD OF REVENUE through Chairman, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 774 (2009)

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

----S.3---Income Tax Ordinance (XLIX of 2001), S.235---Constitution of Pakistan (1973), Art.199---Constitutional petition---Withholding tax, charging of---Minimum fixed charges of electricity connection---Grievance of petitioner was that authorities could not charge with-holding tax under Sales Tax Act, 1990 and Income Tax Ordinance, 2001, on electricity bill for the months when no electricity was consumed---Validity---Sales tax could only be charged on manufacturing and supply of goods and goods supplied in furtherance of business---Even if electricity supply was considered to be "goods", petitioner had not consumed even a single unit of the same---There was no concept of actual supply of electricity to petitioner or any additional transfer in furtherance thereof---Charge of withholding tax was not covered within the provisions of Sales Tax Act, 1990--Deduction of withholding tax was confiscatory and not within the mandate provided by Sales Tax Act, 1990---Withholding tax collected from petitioner under S.235 of Income Tax Ordinance, 2001, was also not within the mandate provided therein---Deduction from fixed bill of electricity was unlawful and unjust so long as petitioner did not consume electricity---High Court, in exercise of constitutional jurisdiction, declared that charge of minimum charges by authorities was justified and needed no interference---High Court directed the authorities to delete with-holding tax in terms of ' General Sales Tax and Income Tax from electricity bills of petitioner, as the same was against Sales Tax Act, 1990 and Income Tax Ordinance, 2001---Petition was allowed accordingly.

Water and Power Development Authority and another v. M.N Steel Re-rolling Mills and 23 others 1999 SCMR 494 and Collector Sales Tax and Central Excise, Rawalpindi v. Messrs Wah Nobel Chemical Ltd, Wah Cantt 2008 PTD 1693 ref.

(b) Interpretation of statutes---

----One should remain within the mandate of law and not to go beyond its language.

Kh. Saeed-uz-Zafar for Petitioner.

Muhammad Nawaz Waseer Standing Counsel.

Dr. Muhammad Irtaza Awan for Respondent No.5.

Date of hearing: 22nd January, 2009.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---Through this writ petition direction has been sought for declaring the deduction of with-holding tax through electricity bills as unlawful and ultra vires to the powers of the Federal Board of Revenue.

2. The petitioner has taken a number of arguments including that the Federal legislative list does not include charge of with-holding tax in the manner the present petitioner is being subjected to etc, but, however, since the matter in respect of this petitioner otherwise is clear and simple, the same is decided accordingly.

3. Brief facts are that the petitioner is a Steel Re-rolling Mill which was in operation up till the last 9/10 months. Subsequent to the same, the production having been discontinued, the petitioner requested WAPDA authorities to discontinue its electric supply, however, retained the right to subsequently re-use and is paying the fixed charges. The said fixed charges are being regularly paid. However, the Government having imposed with-holding income tax as well as sales tax, the same have been added both the taxes in addition to the fixed electricity charges.

4. As per bill attached with the present writ petition, the petitioner has been directed to deposit Rs.50,000 as fixed charges on which Rs.8000 have been added as GST and Rs.5000 as income tax. Thus, the total amount of payment has been claimed at Rs.63,001. Re.1 in the above figure is on account of billing adjustment.

5. The arguments of the petitioner are three fold:--

(i) It is a case of fixed charges and the Hon'ble Supreme Court of Pakistan has held that since there is a general crisis of electricity in Pakistan, hence, even fixed charges should be 50% of the normal rate;

(ii) The petitioner having not consumed any electricity as is evident from the bill itself, the charging provision of section 3 of the Sales Tax Act, 1990, does not come into operation. As a result, the income is not subject to charge at all, hence, there is no question of with-holding tax on the same;

(iii) For the same reasons the petitioner having not consumed any electricity the provision of section 235 of the Income Tax Ordinance, 1979, is also inapplicable.

5. So far as the first proposition is concerned; the petitioner relies on (1999 SCMR 494) re: "Water and Power Development Authority and another v. M.N Steel Re-rolling Mills and 23 others".

6. The arguments are purely a misconception. The minimum fixed charges are only a sort of security for retention of electricity connection. It means that whenever the petitioner opts to utilize the electricity he may do so by just intimating the WAPDA authorities of his intention that the unit is coming into production. The judgment referred is distinguishable. The issue discussed over there is "maximum fixed charges" payable to WAPDA by the consumer of electricity. In the present case, there is no electric supply while the issue is `minimum fixed charges'. The argument, therefore, is repelled and no interference is made to the said extent.

6A. Coming to the charge of sales tax, it will be appropriate to reproduce the charging provision which is section 3 of the said Act. The same reads as follows:--

"Section 3"

"Scope of tax.---(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of [fifteen] per cent of the value of---

(a) taxable supplies made [***]by a registered person in the course of furtherance of any [taxable activity] carried on by him; and

(b) goods imported into Pakistan."

The charge is very clear and the language therein does not leave, any doubt so far as the present controversy is concerned.

7. This court in its earlier judgments has already elaborated the scope of this charge. Re: "Collector Sales Tax and Central Excise, Rawalpindi v. Messrs Wah Nobel Chemical Ltd., Wah Cantt." (2008 PTD 1693).

The relevant para. from the same is as follows:--

"The definition is inclusive, thus obviously of wide import. However, certain examples in terms of goods acquired produced or manufactured in the course of business, auction or disposal of goods to satisfy a debt owed by a person, possession of taxable goods held immediately before a person or such other transaction as the Federal Government may, by Notification in the official Gazette specify makes it particular to a great extent. It is true that the definition being inclusive can cover more items. However, the thing which requires strict application of the above provision of law is that the said supply should be the disposition of goods and in furtherance of a business. It means it shall include those goods which are sold in continuation of the business being carried on by the said taxpayer."

8. The charge, therefore, is only on the manufacturing and supply of goods and goods supplied in furtherance of said business. This situation is not applicable on the facts of this case.

9. Even if this court considers the electricity supply to be as `goods' (for argument sake) the petitioner has not consumed even a single unit of the same. Thus, there is no concept of an actual supply to him or any additional transfer in furtherance thereof. The charge of with-holding tax, in these circumstances, therefore, is held to be as not covered within the provision of Sales Tax Act at all. The deduction of with-holding, therefore, can, easily be held to be as confiscatory and not within the mandate provided by the Sales Tax Act.

10. Similar is the condition in respect of the charge under section 235 of the Income Tax Ordinance, 2001. For the ready reference the provision thereof also are reproduced:--

"Section 235"

"Electricity consumption.---(1) There shall be collected advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer.

(2) The person preparing electricity consumption bill shall charge advance tax under subsection (1) in the manner electricity consumption charges are charged.

(3) Advance tax under this section shall not be collected from a person who produces a certificate from the Commissioner that his income during tax year is exempt from tax."

11. The above provision of law is very clear in its application. In addition to the discussion made in respect of Sales Tax, the above with-holding provision in itself does not give rise to any such deduction as is being made in respect of this case. The deduction as per section 235 (1) is on account of electricity bill of the commercial or industrial consumer. However, the instructions for the deducting authority which is provided in subsection (2) of section 235 is that the advance tax shall be charged "in the manner electricity consumption charges are charged". The deduction being subject to the manner of consumption of electricity, there is no question of a charge in this case, wherein, the electricity consumption is zero.

12. It does not need any reference to quote that the basic principle of interpretation which is called the golden principle is to remain within the mandate of law and not to go beyond its language. The language being very clear and also our interpretation being at par with the fundamental rights as well as other accepted norms of justice is to be applied as it is.

13. The obvious conclusion, therefore, is that the with-holding tax collected from the present writ petitioner under section 235 also is not within the mandate provided therein. The deduction from his bill is un lawful and un-just and shall remain so long as he does not consume the electricity.

14. This court, therefore, without any further discussion or dilation holds that:--

(i) the charge of fixed minimum charges by the LESCO is fully justified and needs no interference;

(ii) the charge of with-holding tax in terms of GST as well as income-tax both are against law of Sales Tax and law of Income Tax of Pakistan, hence, are directed to be deleted from the electricity bills of the petitioner.

15. This disposes the writ petition.

M.H./A-20/LOrder accordingly.