PEARL CONTINENTAL HOTEL VS GOVERNMENT OF N.-W.F.P.
2010 P T D 2018
[Supreme Court of Pakistan]
Present: Javed Iqbal, Raja Fayyaz Ahmed and Muhammad Sair Ali, JJ
PEARL CONTINENTAL HOTEL and another---Appellants
Versus
GOVERNMENT OF N.-W.F.P. and others---Respondents
Civil Appeal No. 240 of 2005 in C.P. No. 2720 of 2004, decided on 20/07/2010.
(On appeal against the judgment, dated 28-3-2005 passed by Peshawar High Court, Peshawar in Writ Petition No. 650 of 2003).
(a) North West Frontier Province Finance Ordinance (XXIII of 2002)---
----Ss.4 & 5---North-West Frontier Province Finance (Amendment) Ordinance (VII of 2003), S.4--- North West Frontier Province Hotel Tax Rules, 2003, R.4---Constitution of Pakistan (1973), Arts.128 & 185(3)---Leave to appeal was granted by Supreme Court to consider; whether North-West Frontier Province Hotel Tax Rules, 2003 were framed by Provincial Government with competent authority because S.5 incorporated in North West Frontier Province Finance Ordinance, 2002, was not laid before Provincial Assembly for making the same as Act of Provincial Assembly, within the period of three months from its promulgation as per Art. 128 of the Constitution; whether North West Frontier Province Finance (Amendment) Ordinance, 2003, was protected under Constitution (Seventeenth Amendment) Act, if so, to what effect; whether Rule 4 of North-West Frontier Province Hotel Tax Rules, 2003, was promulgated beyond the scope of section 4 of North West Frontier Province Finance Ordinance, 2002, if so, same being ultra vires the Ordinance, deserved to be struck down; and whether High Court had correctly interpreted expression used in section 4 of North-West Frontier Province Finance (Amendment) Ordinance, 2003, namely "lodging units available at the rate of 5% of room rent per lodging unit per day".
(b) West Pakistan Finance Act (I of 1965)---
---Ss. 12 & 18(3)--- North-West Frontier Province Finance Ordinance (II of 2000), S.6--- North-West Frontier Province Finance Ordinance (XXIII of 2002), Ss.4 & 5--- North-West Frontier Province Finance (Amendment) Ordinance (VII of 2003), S.4--- North West Frontier Province Hotel Tax Rules, 2003, R.4---Hotel tax---Vires of maximum charges for lodging unit in a Hotel---Absence of machinery provisions--Rebated room rents---Effect--- "Room rent per lodging unit per day "---Connotation---Authorities sought recovery of Hotel Tax under S.4 of North-West Frontier Province Finance Act, 2002, from appellant/ hotel---Plea raised by appellant/hotel was that charging section did not permit tax on room rent calculated for the year on the basis of the highest charges received for a lodging unit for a day---Appellant/hotel further contended that charging section limited imposition of tax to 50% of available lodging units and not on the maximum number of lodging units---Validity---Where assessment and recovery of tax was made in good faith and strictly in accordance with law and re-exercise thereto would have been futile, courts refused to interfere because of inadequacy or error in or absence of machinery provisions or procedure---Connotation of "room rent per lodging unit per day" in the statute could therefore, only be the standard and declared "room rent" printed in hotel literature and afforded at the counter to lodgers and customers to the contract for---No other meaning could be ascribed for the purposes of hotel tax---Behind the counter, management or owner of a hotel, using commercial or personal discretion, might charge a customer rebated or negotiated room rent at 3/4th, 1/2th, 1/4th, 1/8th, 1/10th or nil of the standard declared room rent---On the same logic a hotel in good season and good days, might charge room rent higher than the declared rent---Such discretion or accommodation might be normal or abnormal, ordinary or extraordinary and commercial or non-commercial practice but it could neither be standardized as a rule nor could it be effectively/evenly regulated by taxing authorities---Such practice patently non-transparent, uneven and optional could not provide the requisite equal, just, balanced, fair and reasonable parametrical basis for levy and collection of tax---Concept of maximum count of lodging units or maximum charges for room rent of a lodging units was illogical, in-apt and in conflict with the provisions of S.4 of North-West Frontier Province Finance Ordinance, 2002---If there was 100 lodging units in a hotel, tax could only be charged on room rent of 50% of lodging units and not on fifty one lodging units or more---Framers of rules in their over-anxiety to extract maximum tax, superfluously added the term "maximum" with the number of lodging units as well as the charges thereon---Defined and fixed basis of tax under S.4 (1) of North-West Frontier Province Finance Ordinance, 2002, was changed by rule 4 of North-West Frontier Province Hotel Tax Rules, 2003, to a variable basis, which over-stretched and over-bloated itself beyond the scope of parent statute---Supreme Court declared Rule 4 (1) North-West Frontier Province Hotel Tax Rules, 2003, as ultra vires the provisions of S.4 of North-West Frontier Province Finance Ordinance, 2002 and Rules 4 (2) and (3) of North West Frontier Province Hotel Tax Rules, 2003, as ultra vires the law along with any other provisions in the Rules which were inconsistent or conflicting with or repugnant to and deviative of the law---Assessment made by the authorities was set aside by Supreme Court and authorities could initiate fresh proceedings for assessment and collection of tax on hotels for the period of 1-7-2002 to 13-9-2003---Appeal was allowed.
West Punjab Province v. K.B. Amir-ud-Din and others PLD 1953 Lah. 433 and Muhammad Younas v. Chairman Municipal Committees, Sahiwal and others PLD 1984 Lah. 345 rel.
Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd. Peshawar and others 2003 SCMR 370 and The Chairman, Railway Board, Lahore and others v. Messrs M. Wahabuddin and Sons PLD 1990 SC 1034 ref.
(c) Interpretation of statutes---
----Taxing statute---Machinery provisions---Applicability---Machinery provisions where provided, have to be construed liberally and in the manner aiding realization of proper tax and to prevent avoidance of tax---Where such provisions not provided for but tax recovery is made as per law, the omission of machinery may not be considered as fatal to tax recovery but where law is disregarded or breached or violated in assessing or recovering tax, non-existence of recovery provisions cannot be ignored.
(d) Interpretation of statutes---
----Taxation statute---Ambiguity---Principle---In case of ambiguity or uncertainty, taxing statutes should be interpreted to obtain, certainity, coherence and even applicability of provisions demanding interpretation---Unambiguous and express provisions of taxing statutes be enforced literally without demur, stretch or restriction.
Messrs Yousuf Re-Rolling Mills v. The Collector of Customs and another PLD 1989 SC 232 and Messrs Al-Hamza Ship Breaking Company and others v. Government of Pakistan through Secretary, Finance and Economic Affairs (Revenue Division), Islamabad and others 1996 PLD 347 ref.
(e) Interpretation of statutes---
----Taxing statute---Scope---It cannot be read into a taxing statute, what has not been provided therein?
(f) North-West Frontier Province Finance Ordinance (XXIII of 2002)---
----S.4---Words "available" and "room rent"---Connotation---Word "available" in a hotel does not demand a given or fixed number of lodging units always in a hotel---Hotel management may on a future date discard, reduce or increase lodging units during a year as a policy---Similarly "room rent" may on commercial considerations be changed but its increase or decrease and be so adopted, declared and displayed as the standard room rent for a particular period.
Syed Naeem Bukhari, Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Appellants.
Masood Kausar, Advocate Supreme Court, Syed Arshad Hussain, Advocate Supreme Court along with Zia-ur-Rehman, A.G. N.-W.F.P. for Respondents Nos. 1 to 4.
Date of hearing: 29th January, 2010.
JUDGMENT
MUHAMMAD SAIR ALI, J.---Pearl Continental Hotel located at Peshawar is appellant No.1. The hotel is a project of and is operated by Pakistan Services Limited i.e. Appellant No.2._ On the levy of hotel tax and demand of tax from the appellants by the respondents under the N.-W.F.P. Finance Ordinance (XXIII of 2002), the litigation ensued between the parties.
2. Appellant No. 1 received notice dated 5-8-2002 from respondent No. 2 to produce record and information. Reply and correspondence was addressed by the appellants. However, for the year 2002-2003 an ex parte assessment Order dated 5-3-2003 was made against the appellants raising demand of about Rs. 15,449 million. Appellant's appeal there against was dismissed by the DG Excise and Taxation N.-W.F.P. Peshawar by order dated 2-6-2003.
3. The appellants challenged the said orders through W.P. 650 of 2003 on 3-6-2003. During the pendency of the Constitutional petition, the N.-W.F.P. Hotel Tax Rules, 2003 were framed on 12-9-2003. An amended petition was filed by the appellants to challenge the vires of the Rules as well. The Constitution Petition was however dismissed through the impugned judgment dated 3-11-2004.
4. Civil Petition No. 2270 of 2004 for leave to appeal was filed. This Court on 28-3-2005 granted leave to the appellants as under:-
"This petition has been filed for leave to appeal against the judgment of Peshawar High Court, Peshawar dated 3rd November, 2004."
2. Appellant-Pearl Continental Hotel (hereinafter referred to as "appellant-hotel") received a notice dated 5th August, 2002 from Excise and Taxation Officer, calling upon it to produce all relevant record for the purpose of levying Hotel Tax under section 4 of the N.-W.F.P. Ordinance (Ordinance No. XXIII) 2002 (herein after referred to as "the Ordinance"). But without considering the record, the Excise Department passed an order on 5th March, 2003 in pursuance whereof an amount of Rs.15,449 million's being tax was levied upon it for the years 2002-2003. Appellant-hotel preferred appeal before the Director General Excise and Taxation, Government of N.-W.F.P. but no relief was given despite arguing the case through duly authorized representative. Inasmuch as, a copy of the appellate order was not made available and in the meantime, coercive measures were adopted to recover the said tax. Under these circumstances, a writ petition was filed before the Peshawar High Court. Meanwhile; the Government of N.-W.F.P. vide Ordinance No.VII, amended the earlier Ordinance wherein section 5 was added, authorizing the Government to make Rules to carry out the purposes of section 4 of the Ordinance. Consequently, in exercise of such powers, on 12th Rules, 2003 (hereinafter referred to as "the Rules"), as such appellants challenged the vires of the same. According to Rule 4 of the Rules, relating to "maximum charges for lodging unit in a Hotel" a new concept has been introduced, contrary to section 4 of the Ordinance, namely "the lodging units in a hotel on which the tax worked out for the year shall be maximum number of lodging units or the maximum charges made for a lodging unit on one day, during the year for which the tax is assessed". Learned Peshawar High Court vide impugned judgment dismissed the writ petition, as such instant petition for leave to appeal has been filed.
5. We have heard learned counsel for appellants, respondents as well as Additional Advocate-General (N.-W.F.P.). In our considered opinion, following questions emerge for examination:--
(1) As to whether the N.-W.F.P. Hotel Tax Rules 2003 have been framed by the Provincial Government with competent authority because section 5 incorporated in the Ordinance, conferring powers upon Government of N.-W.F.P., was not laid before the Provincial Assembly for making it as Act of the Provincial Assembly, within the period of three months from its promulgation as per Article 128 of the Constitution of Islamic Republic of Pakistan?
(2) Whether the N.-W.F.P. Finance (Amendment) Ordinance 2003 has been protected under 17th Amendment 2003, of the Constitution, if so, to what effect?
(3) Whether Rule 4 pf the Rules has been promulgated beyond the A scope of section 4 of the Ordinance, if so, being ultra vires the Ordinance, deserves to be struck down?
(4) Whether the High Court has correctly interpreted the expression used in section 4 of the Finance Ordinance, 2003 namely "lodging units available at the rate of 5% of the room rent per lodging unit per day?
4. Thus leave to appeal is granted, inter alia, to examine the above questions.
5. Criminal Miscellaneous. .No.3720 of 2004. Appellant shall pay hotel tax according to section 4 of the N.-W.F.P. Finance (Amendment Ordinance 2003, for the past and future assessment years, pending decision of appeal, arising out of this petition.' Appellant is also directed to furnish an undertaking to reimburse the balance of the amount, if ultimately found due at the final decision of appeal.
As short points are involved in the matter, therefore, office is directed to prepare the appeal on the same record, with liberty to the parties to file additional documents in support of their respective contentions, if need be, whereafter appeal be fixed for hearing within a period of three months".
5. Mr. Naeem Bukhari, learned Advocate Supreme Court for the appellant/hotel submitted that bed tax introduced on 1-7-1965 vide section 12 of West Pakistan Finance Act, was withdrawn on 1-7-2000 by deletion of section 12 through section 6 of the N.-W.F.P. Finance Ordinance, 2000 wherefore the West Pakistan Hotel Tax Rules 1966 also lapsed and/or became ineffective w.e.f. 1-7-2000. Wherefore the Rules of 1966 could not be invoked for recovering bed tax under section 4 of the N.-W.F.P. Finance Ordinance, 2002. And that the Ordinance of 2002 imposed the new tax at the rate of "five per cent of the room rent per lodging unit per day' excluding the cost of food stuff, on fifty per cent of the total number of lodging units available. And that the charging section thereof did not permit the tax on room rent calculated for the year on basis of highest charges received for a lodging unit for a day. And that the charging section limited the imposition of tax to 50% of the available lodging units and not on the maximum number of lodging units.
And also that the N.-W.F.P. Hotel Tax Rules, 2003 framed on 12-9-2003, could not have enlarged the scope of the tax beyond section 4 of the N.-W.F.P. Finance Ordinance 2002. The rule 4 of the Rules being beyond the Act, was ultra vires and unenforceable. Also that these Rules could not be applied retrospectively.
Rule 4 of the N.-W.F.P. Hotel Tax Rules 2003 was unreasonable and irrational. The appellant hotel had corporate clients, regular users like PIA, privileged Club Members and tourist Groups etc. from whom negotiated room rates were charged and not the declared Rack Room rates.
Also that the calculation of 5% Bed Tax was based on the displayed rack rates and not on rent actually received which was verifiable from the records. And the room rates charged on the Executive floor and for long duration guests included charges for breakfast or/and meals; the cost for which was deductible under the law. And that the appellant had already deposited a large sum of money as the Bed Tax for the period 2000-2003 and thereafter.
6. In the contrary, the learned Advocates Supreme Court for the respondents supported the impugned assessment, orders and the judgment, contending that rules in question were only explanatory and not in conflict with the provisions of section 4 of the Ordinance.
7. HEARD. Record perused.
8. Mr. Naeem Bukhari, Advocate Supreme Court did not press the first two propositions recorded in the Leave Granting Order. He conceded that the Ordinance was legislated into an Act.
9. The tax on the hotels, commercially known as the bed tax, was levied through section 12 of West Pakistan Finance Act, 1965 (Act I of 1965) w.e.f. 1st July, 1965 on the basis of total number of lodging units in the first and second class hotels irrespective of the occupation or non-occupation of such lodging units. Section 18 thereof conferred rule making power to the Provincial Government to provide for the assess ment, collection, payment procedure and classification of hotels etc. Subsection (3) of section 18 of 1965 West Pakistan Finance Act, 1965 also provided that "any Rules made or deemed to have been made under the corresponding provisions of the West Pakistan Finance Act, 1964, shall, so far as may be, continued and be deemed to have been made under this Act". West Pakistan Hotels Tax Rules 1966 were framed and gazetted on 11th April, 1966.
10. The above referred section 12 of West Pakistan Finance Act, 1965 (West Pakistan Finance Act I Of 1965) was deleted from Act I of 1965 through N.-W.F.P. Finance Ordinance 2000 w.e.f. 1st July, 2000. Consequently the law imposing tax on the hotels ceased to exist w.e.f. 1st July, 2000. It flows therefrom that on deletion of the section 12 from the N.-W.F.P. Finance Act, 1965 and from the Statute Book, West Pakistan Hotel Tax Rules, 1966 framed there-under also lost the effectiveness and validity.
11. In"N.-W.F.P. w.e.f. 1st July, 2002 tax on hotels was re-introduced through section 4 of the N.-W.F.P. Finance Ordinance 2002 (Ordinance XXIII of 2002) as under:
(4) Tax on hotels.---There shall be levied and collected every year a tax on hotels, payable by the owner or management thereof at the rate of five per cent of the room rent per lodging unit per day, on the basis of fifty per cent of the total number of lodging units available in the hotel concerned; provided that the assessment in relation to a hotel at a hill station shall be made at the aforesaid rate for four months only in a year, that is from 1st day of May to 31st day of August (both days inclusive).
Explanation thereto defined.
(a)
`hotel .
(b) "lodging unit" means a bed or other sleeping accommodation which is, or is intended to be, provided to a person staying over night in a room for lodging; and
(c) "room rent" includes fans, air-conditioning, light, heat, telephone, bedding and all other payments connected with the lodging unit, except the portion, if any, directly attributable to supply of foodstuff".
12. Under the N.-W.F.P. Finance Ordinance 2002, rule making provision had not been legislated. This omission was supplied on 23-7-2003 by addition of section 5 thereof by the N.-W.F.P. Province Finance (Amendment) Ordinance 2003 (Amendment Ordinance No. VII of 2003) which on 13-10-2003 was passed into N.-W.F.P. Act No. XIII of 2003. Provincial Government was empowered to make Rules to carry out the purposes of section 4 of the Ordinance.
13. Accordingly the N.-W.F.P. Hotel Tax Rules 2003 were framed. Rule 4 thereto provided that:
"Maximum charges for lodging units in a hotel.---
(1) The lodging units in, a hotel on which the tax is worked out for the year shall be maximum number of lodging units or the maximum charges made for a lodging unit on any day during the year for which the tax is assessed.
(2) Subject to such general or special instructions as may be issued by the Government, the District Excise and Taxation Officer, himself or through any subordinate officer not below the rank of an Inspector of the Excise and Taxation Department may make physical or on the spot verification, of the number of lodging units or of the maximum daily charges for a single lodging unit in a hotel, on any day during the year, keeping, however, in view the convenience of the persons occupying the lodging units.
(3) If it is found at any time during the year that actually the number of lodging units in a hotel is more or the maximum daily charges on the basis of which the tax for the year was assessee are lesser' than the daily charges being charged from the customer, the District Excise and Taxation Officer shall, after giving an opportunity to the owner of being heard, enhance the amount of the tax already assessed on the hotel and shall determine the additional tax for the year accordingly.".
14. Through an ex parte assessment order dated 5-3-2003 tax was demanded from the appellants whose appeal thereagainst was dismissed by order dated 2-6-2003. These orders of the respondents were challenged by the appellant in Const. Petition No. 650 of 2003 before the Peshawar High Court, Peshawar. It was during the pendency of this Const. Petition, Rules of 2003 were introduced on 13th September, 2003; vires. Whereof was also challenged by amending the writ petition.
This Constitution Petition was however dismissed by an honourable Division Bench of the Peshawar High Court, Peshawar through impugned judgment dated 3-11-2004. Hence this appeal by leave.
15. The impugned judgment of the learned Division Bench of the Peshawar High Court was passed on the assumption of the applicability of Rules of 2003 to the impugned assessment for the years 2002-2003 and the legality of the Rules. Relevant extracts thereto were:--
* "It is true that the rules being a product of subordinate legislation can neither override not over reach a provision of the substantive statute but if they explain the latter and provide aid to facilitate its understanding, it shall in certain cases by quite legitimate to read and refer to them especially, when they on all counts conform to and are subordinate to the substantive statute. In this view of the matter, we have no doubt in our mind that there is no conflict between the two and in case there is any, that is capable of being reconciled.".
* "The argument that after deletion of section 12 of the Act, 1965, the respondents are left with no authority to assess or collect hotels tax notwithstanding being ingenious is not legally acceptable, when the rules under the Ordinance have since been framed and the officials of the Department have been empowered and authorized to do the needful."
16. The history of hotel tax legislation and its rules show that between 1st July, 2002 and 13th September, 2003 Rules providing for the agency, mode and manner of the assessment and collection of tax on hotels did not exists. The previous Rule i.e. West Pakistan Hotel Tax Rules, 1966 had not been saved or continued in N.-W.F.P. Finance Ordinance, 2002 or N.-W.F.P. Province (Amendment) Ordinance or Act of 2003 like those saved and continued under the section 18(3) of the West Pakistan Finance Act, 1965 (Act I of 1965) to provide for the absence of rules till the framing of 1966 Rules.
17. We are conscious that in some cases where the assessment and recovery of the tax was made in good faith and strictly in accordance with law and the re-exercise thereto would have been futile, Courts refused to interfere merely because of the inadequacy or error in or the absence of the machinery provisions or procedure.
18. In the case of "West Punjab, Province v. K.B. Amir-ud-Din and others (PLD 1953 Lahore 433) held that:---
"We will explain what we regard as the correct approach in cases like the present. The provisions of a taxing Act may be broadly divided into two categories those that determine the liability to be taxed and those that provide the machinery for its assessment and realization. With respect to the 'first category the rule of interpretation is that the charge must be imposed by clear and unambiguous language and in cases of doubt a construction beneficial to the subject should be adopted. With respect to the second category, however, the rule of construction is entirely different. If the liability to be taxed be clear the machinery sections ought to be interpreted so as to enable the Crown to realize the tax unless there be compelling reasons to the con trary. In Drummonds v. Collins (1) Lord Parker of Waddington, dealing with a machinery section said, "This section is a collecting section and not a taxing section and there is no reason in principle why it should not receive a liberal interpretation."
In "Muhammad Younas v. Chairman Municipal Committees, Sahiwal and others" (PLD 1984 Lah. 345) a learned Judge in Chambers of Lahore High Court, Lahore supported the view that the absence of machinery provisions was only an omission but becomes relevant when tax is improperly charged. Two important judgments were referred as under:-
"The well-recognized principle as laid down by Rowlet, J in Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 is "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 look fairly at the language used". Again, Rumer, J observed in the case of Mckenna v. Eaton-turn or (1936) 1 KB 1 that "if the tax is clearly imposed the omission of the legislature to provide means for its collection must be regarded as an unfortunate omission and nothing else. It is only where a doubt arises whether the tax is chargeable by a certain section that the absence of machinery for collection becomes a relevant consideration".
19. We are in no doubt that the machinery provisions, where provided, have to be construed liberally and in the manner aiding the realization of proper tax and to prevent avoidance of the tax. And where not provided for but tax recovery is made as per the law, the omission of machinery may not be considered as fatal to the tax recovery but where law is disregarded or breached or violated in assessing or recovering tax, non-existence of recovery provisions cannot be ignored.
20. Present case is of non-legislation of recovery procedure and the machinery thereof from 1-7-2002 to 13-9-2003 yet tax was demanded and coercively recovered by the respondents on wrong assumption of authority and defective presumption of law. The Rules were legislated and gazzetted on 13-9-2003 yet the impugned assessment and collection order by Excise and Taxation Officer was made ex parte on 5-8-2003 for the year 2002-2003. Appellants' argument is that all the orders and actions were made without any authority as Rules had not been framed till then.
Absence of authority was compounded by the serious allegations of absence of due notice, proper opportunity, adequate evidence, excessive harassment, improper conduct, undue coercion and mala fide against the respondent-public functionaries. No material has been placed before us by the respondents to counter above allegations and to prove that despite lack of requisite powers, the assessment and recovery of tax was made as per the charging provisions of law with due process and in good faith, fairly, justly, correctly and without coercion. Contrarily, the record placed by the appellant-hotel before us supports the appellants' allegations against the respondent of resort to harassment, high handedness, illegalities and undue coercive measures without possessing the corresponding authority wherefor absence of authority and procedure gained significance in this case. We agree with the submissions of Syed Naeem Bukhari, learned ASC for the appellants that as the law had been breached by the respondents, it was not a simple case of mere absence of the machinery provisions. The Court now needs to examine that notwithstanding the absence of power and procedure to give notices or to undertake proceedings or to pass orders, was the assessment of the tax on hotels in accordance with the charging section 4 of the N.-W.F.P. Finance Ordinance, 2002 or not.
21. Reading of section 4 of the 2002 Ordinance reveals that a yearly tax was levied and made collectable at the rate 5% of the room rent per lodging unit per day on the basis of 50% of the total number of lodging units available in the hotel concerned." What was the room rent per lodging' unit per day and what was the total number of lodging units available in a hotel were questions of fact to be determined under the mode, procedure, authority and the powers prescribed in 2003 Rules. These questions in any case gave rise to two questions of law. Should the rack room rent declared by the appellant hotel or the negotiated room rent charged from the lodger, be the relevant room rent for calculating 5% tax thereon. And for the incidence of the tax, should 50% of the total number of lodging units available in the hotel" be determined on the basis of the total lodging units existing in the hotel or on the basis of the total lodging units operational and functional in the hotel per day.
22. Answer to above questions of law may appear to be quizzical or tricky. Yet viewed in the perspective of even, concise, clear, un ambiguous and non-controversial administration of taxation justice, the answers are simple and straightforward. It is well-settled that in case of an ambiguity or uncertainty, taxing statutes should be interpreted to obtain clarity, certainty, coherence and even applicability of the provisions demanding interpretation. And the unambiguous and express provisions of the taxing statutes be enforced literally without demur, stretch or restriction.
23. The principles thereto are that:--
"In a taxing Act one has to look merely at what is said. There is no room for any intendment. There is no equity about 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." Rowlatt, J. in Cap Brandy Syndicate v. Inland Revenue Commissioner (1921) .1 K B. 64.
These observations were cited with approval in "The Commissioner of Agricultural Income-Tax, East Bengal v. B. W.M. Abdul Rehman Manager, Taki Bara Taraf Wards Estate" (1973 SCMR 445) and this Court observed that in interpreting a fiscal statute only the letter of the law must be looked to and there is no room for any intendment. Also in Messrs Hirjina and Co. (Pakistan) Ltd., Karachi v. Commissioner of Sales Tax Central, Karachi (1971 SCMR 128) this Court held that in interpreting a taxing statute the Courts must look to the words of the Statute and interpret it in the light of what is clearly expressed, it cannot imply anything which is not expressed, it cannot import provisions in the statute so as to support assumed deficiency. (underlined for emphasise)
In the case of "Messrs Yousaf Re-Rolling Mills v. The Collector of Customs and another" (PLD 1989 Supreme Court 232) held that:
"The rule of interpretation is that while construing taxing statutes the language used is not to be either stretched in favour of the State or narrowed in favour of the tax payer. In this background it is a settled rule that collision in the language of the section is to be avoided.
And again in the realm of exercise of delegated legislation, the modern tendency seems to be against construing statutes so as to leave the person or body upon whom a power is conferred absolutely untrammelled in the exercise of it. (Patfield. v. Ministry of Agriculture, Fisheries and Food (1968) A.C. 997).
In the case of "Messrs Al-Hamza Ship Breaking Company and others v. Government of Pakistan through Secretary, Finance and Economic Affairs (Revenue Division), Islamabad and others (1996 PTD 347) it was held that:-
"It is to be seen that relevant parts of statute relating to collection of tax should be interpreted in such a manner so that taxes there are recovered without any complication, and while charging the tax there should not be any doubt concerning method adopted to achieve the object".
24. Applying the above principles to the provisions of section 4 ibid, we find the meaning of expression "room rent per lodging unit per day" rather clear. The word 'room rent' has been employed without any prefixes or suffixes. The room rent is room rent which is to be given its standard, generic and general meaning as prevalent, oft used and explicitly understood in the trade or industry or market; locally and internationally and in the literature of such trade etc. The connotation of "room rent per lodging unit per day "in the statute can therefore only be the standard and declared "room rent" printed in the hotel literature and offered at the counter to the lodgers and customers to contract for. No other meaning can be ascribed for the purposes of hotel tax. Behind the counter the management or the owner of a hotel, using commercial or personal discretion, may charge a customer rebated or negotiated room rent at 3/4th, 1/2nd, 1/4th, 1/8th, 1/10th or nil of the standard declared room rent. On the same logic a hotel in good season and good days, may charge room rent higher than the declared rent. Such discretion or accommodation may be normal or abnormal, ordinary or extraordinary and commercial or non-commercial practice. But it can neither be standardized as a rule nor can it be effectively/evenly regulated by the taxing authorities. Such practice being patently non-transparent, un-even and optional cannot provide the requisite equal, just, balanced fair and reasonable parametrical basis for the levy and collection of the tax.
25. Section 4 of the 2002 Ordinance prescribes rate of tax at 5% of the room rent per lodging unit per day of the 50% of the total number of lodging units available in a hotel concerned". The rate of tax so levied is not 5% of the room rent per occupied lodging unit per day. And the tax is on the basis of 50% of the total lodging units available in a hotel and not on the basis of total units occupied in a hotel. The hypothesis that tax should only be on the actually charged room rent, is linked to the actual occupation of the lodging units. The law does not so prescribe. The tax has not been based on the room occupancy or non-occupancy to be rated on the room rent actually paid for by the lodger. We cannot read into a taxing statute what has not been provided therein.
26. In section 4 of the 2002 Ordinance the basis of tax levy is a formula different from that in section 12 of Act I of 1965 which prescribed the tax to be assessed on the total number of lodging units available in the hotel. 2002 Ordinance changed and reduced the tax base to be on 50% of the total lodging units available in a hotel. On plain, congruous and coherent reading of the statute in its due perspective, the word available can only mean the existing or obtaining number of total lodging units in a hotel. The intention of law is clear from the expression of "the total number of lodging units available in the hotel" instead of the total number of lodging units available a day in the hotel. The definition of "lodging units" also supports this interpretation. It includes" a lodging unit which is, or intended to be provided to a person staying overnight in a room for lodging". The definition does not visualize exclusion of sporadically or occasionally non-functional or non-operative units on a day. This law reasonably and justly altered the basis of tax on the room rent for 50% of the total lodging units in-the hotel as compared with the total lodging units in the 1965 law. The reduction to 50% of the lodging units for the imposition of hotel tax was to cater for the occasional non-occupancy, non-functionality and non-operativeness of the lodging units and to make up for the seasonal uncertainties and other exigencies.
27. It may be explained that the word "available" in a hotel does not demand a given or a fixed .lumber of lodging units always in a hotel. The hotel management may on a future date discard, reduce or increase the lodging units during a year as a policy. Similarly room rent may on commercial considerations be changed by its increase or decrease and be so adopted, declared and displayed as the standard room rent for a particular period.
28. Having held that the room rate applicable for the assessment of tax was and shall be the standard declared room rate per lodging unit per day, we are conscious of the definition of the "room rent" in the explanation to section 4 of the Ordinance of 2002 which reads as under: --
"Room rent" includes! fans, air-conditioning, light, heat, telephone, bedding and all other payments connected with the lodging unit, except the portion, if any, directly attributable to supply of foodstuff".
As per the definition, the room rent is all inclusive of the stated amenities etc except such portion of the room rent which is directly attributable to the supply of food stuff. We accordingly accept the argument of Syed Naeem Bukhari, learned Advocate Supreme Court that the portion of the room rent directly attributable to supply of food stuff, was excludable from the room rent while assessing and collecting the tax on hotels. We would however clarify that wherever the standard room rent or the rack room rent was declared to be inclusive of the supply of breakfast or meals or other food stuffs, the financial portion for the same was liable to be excluded from the declared gross room rent for assessment and collection of the 5% tax thereupon.
29. Adverting to the vires of Rule 4 of the N.-W.F.P. Hotel Tax Rules, 2003, we find this Rule to be so phrased and worded that it not only appears to but actually expands and enlarges the incidence of tax beyond the scope of the charging provision of section 4 of the N.-W.F.P. Finance Ordinance, 2002.
30. In "Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd. Peshawar and others" (2003 SCMR 370) this Court held that:
"This is a settled principle that a statutory rule cannot enlarge the scope of the section under which it is framed and if a rule goes beyond what the section contemplates, the rule must yield to the statute. The authority of the executive to make rules and regulations in order to effectuate the intention and policy of the legislature must be exercised within the limits of mandate given to the rule making authority and the rules framed under an enactment must be consistent with the provisions of said enactment. The rules framed under a statute if inconsistent with the provisions of the statute and defeat the intention of Legislature expressed in the main statute, same shall be invalid. The rule making authority cannot clothe itself with power which is not given to it under the statute and thus the rules made under a statute, neither enlarge the scope of Act nor can go beyond the .Act and must not be in conflict with the provisions of statute or repugnant to any other law in force" (underlined for emphasise).
The observation in "The Chairman, Railway Board, Lahore and others v. Messrs M. Wahabuddin and Sons" (PLD 1990 SC 1034) were that: -
"Rules or bye-laws should neither be in excess of the statutory power authorizing them, nor repugnant to that power, nor violate the limitations under which they have to operate, nor be unreasonable, nor deal with a subject not within their scope, nor exceed the prescribed limits within which the authority may be exercised."
31. The objectionable sub-rule (1) of Rule 4 prescribes that "the lodging units in a hotel in which tax is worked out for the, year shall be maximum number of lodging units or the maximum charges made for a lodging unit on any day during the year for which tax is assessed". This sub-rue is patently over-stretched when compared with the provisions of section 4 ibid whereunder the tax is 5% of the room rent per lodging unit per day on the basis of 50% of the lodging units available in the hotel concerned". The relevant "room rent" has been declared by us to be the standard and declared room rent of the hotel and the total lodging units "available" have been held to be the existing lodging units in the hotel for the levy of tax. The concepts of maximum count of the lodging units or the maximum charges for room rent of a lodging unit, are thus illogical, in-apt, and in conflict with the provisions of section 4 ibid. If there are 100 lodging units in a hotel, tax can only be charged on the room rent of 50% of the lodging units and not on the fifty one lodging units or more. The framers of the rules in their over-anxiety to extract the maximum tax, superfluously added the term `maximum' with the number of the lodging units as well as the charges thereon. Rule 4 changed the defined and fixed basis of the levy of the tax under section 4 ibid to a variable basis. Sub-rule (1) of Rule 4 of N.-W.F.P. Hotel Tax Rules, 2003 thus over-stretched and over-bloated itself beyond the scope of its parent statute. The said sub-rule (1) of Rule 4 is therefore declared to be ultra vires the provisions of section 4 of the N.-W.F.P. Finance Ordinance, 2002.
32. Similarly .the provisions respectively in sub-Rules (2) and (3) of Rule 4 of N.-W.F.P. Hotel Tax Rules, 2003 incorporating the concept and expression of "the maximum daily charges fora single lodging unit in a hotel, on any day during the year" AND "the maximum daily charges" are also adjudged to be ultra vires the law along with any other provisions in the said Rules which are inconsistent or conflicting with or repugnant to and deviative of the law as herein above declared.
In view of what has been discussed above, the appeal is accepted. The impugned assessment made through order dated 5-3-2003, the appellate order dated 2-6-2003 and the impugned judgment dated 3-11-2004 of the Peshawar High Court, Peshawar upholding the order dated 5-3-2003 and the proceedings or actions taken or the demands and recoveries made thereunder, are declared to be without lawful authority and of no legal effect.
Respondents shall however be entitled to initiate fresh proceedings for the assessment and collection of the tax on hotels for the period of 1-7-2002 to 13-9-2003 (when the Rules were gazetted) strictly in accordance with the machinery provisions of the said Rules which shall continue to be applicable except the provisions or the part thereof which have been declared to be ultra vires or inconsistent or conflicting with section 4 of N.-W.F.P. Finance Ordinance, 2002. The assessment of the tax, if initiated, shall be completed within a period of four months from the date of this judgment.
The payment or the deposit of tax made by the appellant hotel and received by the respondents for the above period shall be adjustable against the tax so assessed or otherwise shall be refunded to' the appellant-hotel if found to be in excess or not due.
As the respondents acted illegally, unfairly and coercively to impose, assess and recover the said tax from the respondent-hotel, they are held liable to pay the costs throughout in accordance with the law.
M.H./P-4/SCAppeal allowed.