MUHAMMAD RAFIQUE VS FEDERATION OF PAKISTAN
2014 P T D 1881
[Balochistan High Court]
Before Qazi Faez Isa, C.J. and Muhammad Ejaz Swati, J
MUHAMMAD RAFIQUE and others
Versus
FEDERATION OF PAKISTAN and others
Constitutional Petitions Nos. 517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013, decided on 17/07/2014.
(a) Income Tax Ordinance (XLIX of 2001)---
----S. 53(2) & Second Sched.---Exemptions and tax concessions in the Second Schedule of Income Tax Ordinance, 2001---Amendments---Authority delegated by Parliament to the Federal Government---Section 53(2) of the Income Tax Ordinance, 2001 specifically granted to the Federal Government complete authority to amend the Second Schedule of the Income Tax Ordinance, 2001, by adding, omitting or changing any clause or condition therein---Legislature/Parliament had delegated such explicit authority to the Federal Government, therefore, it would be incorrect to say that Parliament alone could change applicable rate of (any) tax mentioned in the Second Schedule of Income Tax Ordinance, 2001.
Ashfaq Ahmad Khan v. Custodian of Evacuee Property PLD 1966 Kar. 597; Pakistan v. Muhammad Himayatullah Farukhi PLD 1969 SC 407; Dacca Picture Palace Ltd. v. Pakistan PLD 1969 Dacca 1 and Muhammad Aslam Khokhar v. The State 2000 SCMR 1797 distinguished.
Zaibtun Textile Mills Ltd. v. Central Board of Revenue PLD 1983 SC 358; Abdul Ghaffar Bhundhi v. Collector of Custom 2006 PTD 1566; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Iqbal Zafar Jhagra v. Federation of Pakistan 2013 PTD 1491 rel.
(b) Income Tax Ordinance (XLIX of 2001)---
----Ss. 53(2) & (3)---Amendments made in Second Schedule of Income Tax Ordinance, 2001---Not laid before Parliament---Effect---Section 53(3) of Income Tax Ordinance, 2001, stated that the Federal Government shall place before the National Assembly all amendments made by it to the Second Schedule in a financial year---Said section, however, did not mention the consequences for not abiding therewith---Coming into effect of amendments made by the Federal Government in the Second Schedule to the Income Tax Ordinance, 2001, was not made dependent upon placing the same before the National Assembly, nor was it stipulated that the same would come into effect after they had been so placed---Legislature wanted the amendments made pursuant to the authority delegated by it to have immediate effect and in the same financial year in which the notification was issued---Any such amendment must be given effect whether it was placed before the National Assembly or not.
Naveed Textile Mills Ltd v. Assistant Collector PLD 1985 SC 92 and Zia Haider Rizvi v. Deputy Commissioner of Wealth Tax 2011 SCMR 420 ref.
(c) Income Tax Ordinance (XLIX of 2001)---
----S. 53(2)---Federal Board of Revenue Act (IV of 2007), S. 4(1)(k)---Rules of Business, 1973, R. 7(2) &Sched. IV, item 1---Constitution of Pakistan, Art. 199---S.R.O. 140(I)/2013, dated 26-2-2013---Constitutional petition---Amendment made to Second Schedule of Income Tax Ordinance, 2001---Notification S.R.O making such amendment issued by the Federal Board of Revenue ("Board") and signed by the Additional Secretary, Revenue---Legality---Even if notification in question was issued by the Board, and not by the Federal Government, it could not be said that the exercise of power by the Board was unauthorized or illegal---Notification in question did not usurp the power of the Parliament and it was issued by a competent authority (Federal Board of Revenue) and must be given effect---Constitutional petition was disposed of accordingly.
(d) Income Tax Ordinance (XLIX of 2001)---
----Ss. 53(2), 148(1), (5) & (6)& First Sched. Part II & Second Sched. Part II, clause 9---Constitution of Pakistan, Art.199---S.R.O. 549(I)/2008, dated 11-6-2008---S.R.O. 140(I)/2013, dated 26-2-2013---Constitutional petition---Enactment or notification prejudicially affecting vested rights or legality of past transaction---Not to be given retrospective effect---Vessels imported by petitioners for demolition and turning into scrap---Advance income tax---Change in rate of advance income tax after conclusion of contract but before vessels arriving at shipyard---Petitioner-companies concluded agreements for purchase of vessels at a time when rate of advance income tax was 1% of the invoice value of the vessel [S.R.O. 549(I)/2008, dated 11-6-2008]---Before the said vessels reached at the ship breaking yard, rate of advance income tax was increased to 5% by virtue of S.R.O. 140(I)/2013, dated 26-2-2013---Plea of petitioner-companies that increased rate of advance income tax should not be made applicable to the import of vessels in respect of which valid and binding agreements had already been executed before the issuance of notification S.R.O. 140(I)/2013, dated 26-2-2013, i.e. change in rate of advance income tax---Plea of customs authorities that material date for consideration was the date of opening or establishing the letter of credit in favour of the seller of the vessel, and not the date of agreement, as an agreement could be manipulated, and that in most of the agreements letter of credit was opened after the change in rate of advance income tax---Validity---Enactment which prejudicially affected vested rights or legality of past transactions or impaired contracts could not be given retrospective effect---Retrospective operation could not be given to executive orders so as to destroy contractual rights and obligations already accrued---Would be inequitable and unjust to deprive a person who acted upon an assurance of the right to exemption and exposed himself to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he had made legal commitments---Subsequent withdrawal of exemption could not be given retrospective operation by an executive act to destroy a right created in favour of a party---Without proof it could not be presumed that any petitioner-company resorted to tampering or manipulation of documents, and even otherwise customs authorities were empowered to satisfy themselves with regard to the genuineness of documents that were presented by the petitioner-companies---High Court directed that with regard to agreements that were entered into for purchase of vessels before the issuance of S.R.O. 140(I)/2013, dated 26-2-2013, i.e. before the change in rate of advance income tax, the petitioner-companies would be liable to pay advance income tax at the rate specified in Second Sched. Part II, clause 9 of Income Tax Ordinance, 2001 i.e. 1% of the invoice value of the vessel, within fifteen days, provided the same had already not been paid---Constitutional petition was disposed of accordingly.
Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 ref.
Ameen Bandukda for Petitioners (in C.Ps. Nos.517 to 521 and 622 of 2013).
Sher Shah Kasi, Deputy Attorney General for Respondents Nos.1 and 2 (in C.Ps. Nos.517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013).
Kashif Nazeer for Respondent No.3 (in C.Ps. Nos.517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013).
H. Shakil Ahmed and Tanveer Ashraf for Petitioners (in C.Ps. Nos.528 to 540 of 2013).
Khushal Khan Kasi for Petitioners (in C.Ps. Nos.560 and 582 of 2013).
Ishrat Zahid Alvi for Petitioners (in C.Ps. Nos.565 to 569 of 2013).
Tanveer Ashraf, Ishrat Zahid Alvi and Rehmatullah Barrich for Petitioners (in C.P. No.615 of 2013).
H. Shakil Ahmed, Tanveer Ashraf and Ishrat Zahid Alvi for Petitioners (in C.Ps. Nos.639 and 640 of 2013).
Dates of hearings; 7th 8th, 13th and 14h May, 2014.
JUDGMENT
QAZI FAEZ ISA, C.J.---The petitioners imported vessels for demolition and turning into scrap; the vessels were beached at the Gadani Ship Breaking Yard in Balochistan. The advance income tax payable on such vessels was 1% of the invoice value, which was subsequently enhanced to 5%, and it is the enhancement in the rate of tax that has been assailed in these petitions.
2.Section 148(1) of the Income Tax Ordinance, 2001 ("the Ordinance") requires the Collector of Customs to collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule of subsection (1) of section 148, which stipulates as under:
"148. Imports.
(1)The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule."
Part II of the First Schedule provides 'Rates of Advance Tax' and at the relevant time stipulated that, "The rate of advance tax to be collected by the Collector of Customs under section 148 shall be 5% income tax of the value of the goods." However, under section 53 of the Ordinance 'exemptions and tax concessions' can be granted by the Federal Government by making amendments in the Second Schedule. Subsection (2) of section 53 is reproduced hereunder:--
"(2) The Federal Government may, from time to time, by notification in the official Gazette, make such amendment in the Second Schedule by---
(a)adding any clause or condition therein;
(b)omitting any clause or condition therein; or
(c)making any change in any clause or condition therein, as the Government may think fit, and all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued."
Part II of the Second Schedule is titled 'Reduction in Tax Rates' and clause (9) thereof provided as under:--
"(9) Tax under section 148 shall be collected at the rate of 1% on import of all fibers, yarns and fabrics, and goods covered by the Zero Rating Regime of the Sales Tax notified by Board."
3.Mr. Ameen Bandukda, the learned counsel for the petitioners in Constitutional Petitions ("CP") Nos. 517 to 521 and 622 of 2013 contended that vessels were the stipulated 'goods' imported by the petitioners and were covered by the 'Zero Rating Regime of the Sales Tax notified by the Board' and in this regard reference was made to S.R.O. 549(I)/2008, dated 11th June 2008, relevant portion whereof is reproduced hereunder:--
"S.R.O. 549(I)/2008.---In exercise of the powers conferred by clause (c) of section 4 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the goods mentioned in column (2) of the table below shall be charged to tax at the rate of zero per cent subject to the conditions and restrictions specified in column (3) of that table...."
The relevant entry for the purpose of these cases is item 4 (xxxiv) of the above notification, which is in respect of, "Vessels for breaking up (PCT) 89.08." 'PCT' is the acronym for 'Pakistan Custom Tariff and item 89.08 thereof mentions "Vessels and other floating structures for breaking up".
4.Mr. Ameen Bandukda stated that at the time when his clients had agreed to purchase the vessels, which they intended to demolish, they knew that the advance income tax payable thereon was 1% of the invoice value of the vessels, and it was on the basis of the advance income tax being 1% that the agreements for the purchase of vessels were negotiated and concluded. He referred to certain dates taken from the documents on record as under:--
| Petition numbers | Agreement date | Date on which letter of credit established by the bank | Date of arrival of vessel at Gadani |
| C.P. No.517/2013 | 1st February 2013 | 6th February 2013 | 19th February 2013 |
| C.P. No.518/2013 | 15th February 2013 | 20th February 2013 | 5th March 2013 |
| C.P. No.519/2013 | 22nd February 2013 | 1st March 2013 | 4th March 2013 |
| C.P. No.520/2013 | 25th February 2013 | 1st March 2013 | 11th March 2013 |
| C.P. No.521/2013 | 22nd February 2013 | 21st March 2013 | 24th March 2013 |
| C.P. No.622/2013 | 22nd February 2013 | 29th April 2013 | 13th May 2013 |
5.That however, vide notification S.R.O. 140(I)/2013 dated 26th February 2013 published in The Gazette of Pakistan of the same date clause (9) of Part II of the Second Schedule was omitted, consequently, when the vessels of the petitioners beached at the Gadani Ship Breaking Yard the respondents demanded payment of advance income tax at the rate of 5%, and not at the concessional rate of 1%. Notification S.R.O. 140(I)/2013 dated 26th February 2013 (hereinafter "the said Notification") is reproduced hereunder:--
"S.R.O. 140(I)/2013.---In exercise of the powers conferred by subsection (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the said Ordinance, namely:--
2.In the aforesaid Schedule---
(a)in Part II,- clauses (9), (9A) and (13G) shall be omitted; and
(b)in Part IV.-in clause (57)
(i)for the word "sections", occurring first, the word "section" shall be substituted; the figures "113" and "148" shall be omitted; and
(ii)in sub-clause (vi) the second proviso shall be omitted."
6.Mr. Ameen Bandukda Advocate stated that the petitioners he represents assail the validity of the said Notification to the extent that it omits clause (9) from Part II of the Second Schedule to the Ordinance and only to the extent that the effect of the omission has also been applied to those imported vessels in respect of which irrevocable contracts had already been concluded. The learned counsel assailed the said omission on the following grounds:---
(1)All the six petitioners had entered into valid binding agreements before the said Notification was issued;
(2)The letters of credits were opened before the issuance of the said notification in C.Ps. Nos. 517 and 518 of 2013, and in C.Ps. Nos.519 and 622 of 2013 there is irrefutable proof that the petitioners had contacted the bank for establishing letter of credits in favour of the foreign supplier and in C.Ps. Nos. 520 and 521 of 2013, though the letter of credit was established by the bank respectively on 1st March 2013 and 21st March 2013, the agreements were entered into before the issuance of the said Notification and it can not be contended that the agreements were backdated because the letters of credit were established soon after execution of the said agreements;
(3)The said tax reduction was founded on public policy to encourage the local ship breaking industry and to benefit the public generally by creating employment and contributing to the national exchequer; and
(4)If steel, the finished product is imported, it would be considerably more expensive than steel derived from scrap obtained from vessels that have been demolished.
The learned counsel also relied upon the following judgments:--
Al-Samrez Enterprise v. Federation of Pakistan, 1986 SCMR 1917;
Crescent Pak. Ind. (Pvt.) Ltd. v. Govt. of Pakistan, 1990 PTD 29;
Ahmed Investment (Pvt.) Ltd. v. Federation of Pakistan, 1994 PTD 575;
Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan, 1993 SCMR 1905;
M.Y. Electronics Industries (Pvt.) Ltd. v. Government of Pakistan, 1998 SCMR 1404, and
An unreported judgment dated 31st May 2013 of the Sindh High Court in C.P. No. D-1259 of 2013 (attachment marked ' Q' with C.P. No. 517/2013).
Mr. Bandukda pointed out that in the above mentioned unreported judgment of the Sindh High Court, the petitions were allowed and the petitioners were required to pay advance income tax under section 148 of the Income Tax Ordinance at the reduced rate of 1%.
7That Mr. Tanveer Ashraf, Advocate, represents the petitioners in C.Ps. Nos. 528 to 540, 565 to 569, 615, 639 and 640 of 2013. The learned counsel adopted the arguments of Mr. Bandukda with regard to C.Ps. Nos. 528, 529 and 540 of 2013. It would therefore be appropriate to refer to certain dates mentioned in these petitions, which have been taken from the documents on record of these petitions, as under:--
| Petition numbers | Agreement date | Date on which letter of credit established by the bank | Date of arrival of vessel at Gadani |
| C.P. No.528/2013 | 11th March 2013 | 15th March 2013 | 23rd March 2013 |
| C.P. No.529/2013 | 20th March 2013 | 5th April 2013 | 16th April 2013 |
| C.P. No.540/2013 | 28th January 2013 | 26th February 2013 | 14th July 2013 |
Messrs Mujeeb Ahemd Hashmi and Khushal Khan Kasi represented the petitioners in Constitutional Petitions Nos. 560 and 582 of 2013, but only in Constitutional Petition No.560 of 2013 the agreement for the purchase of vessel was executed before the issuance of the said Notification; the relevant dates taken from the attachments thereof are as under:--
| Petition number | Agreement date | Date on which letter of credit established by the bank | Date of arrival of vessel at Gadani |
| C.P. No.560/2013 | 18th February2013 | 17th April 2013 | Not available |
8.That Mr. Tanveer Ashraf also assailed the imposition of the advance income tax at the increased rate of 5% on the ground that it was illegal and unconstitutional. In this regard he stated that vide Finance Act, 2005 Parliament had reduced the said rate from 5% to 1% by inserting the said clause (9) in Part II of the Second Schedule of the Ordinance, therefore, if the same is to be withdrawn it is only Parliament, and not the Federal Board of Revenue which can do it. Reliance was placed upon the following cases: Ashfaq Ahmad Khan v. Custodian of Evacuee Property (PLD 1966 Karachi 597), Pakistan v. Muhammad Himayatullah Farukhi (PLD 1969 SC 407), Dacca Picture Palace Ltd. v. Pakistan (PLD 1969 Dacca 1) and Muhammad Aslam Khokhar v. The State (2000 SCMR 1797).
It was next contended that, subsection (3) of section 53 of the Ordinance, requires the Federal Government to place before the National Assembly all amendments made by it to the Second Schedule of the Ordinance in a financial year, but as this was not done therefore the said Notification is of no legal effect.
He also referred to subsection (2) of section 53 of the Ordinance to assert that the power to issue the said Notification vested in the Federal Government and not in the Federal Board of Revenue.
9.Mr. Kashif Nazeer Advocate, representing the Collector of Customs at Gadani, supported the said Notification and the action of the Customs Department in seeking payment of advance income tax at the enhanced rate of 5%. He said that Mr. Bandukda had primarily relied upon the judgment in the Al-Samrez case (above) the effect whereof had been negated by the insertion of section 31-A in the Customs Act, 1969. He also referred to section 6(1A) of the Sales Tax Act, 1990 and stated that the said provision had the same effect as section 31A of the Customs Act, 1969. He alternatively stated that, even if Al-Samrez is still considered to be applicable then the material date for consideration is the date of opening or establishing the letter of credit in favour of the seller of the vessel, and not the date of the agreement, as an agreement could be manipulated; and that only in two petitions was the letter of credit opened before the issuance of the said Notification; in C.P. No.517/2013 where the letter of credit is dated 6th February 2013 and in C.P. No.518/2013 where the letter of credit is dated 20th February 2013.
That, as regards the grounds taken by Mr. Tanveer Ashraf, it was stated by Mr. Kashif Nazeer that the law had already provided for the levy of advance income tax and that the further power to vary the same was conferred on the executive authorities. He relied upon Zaibtun Textile Mills Ltd. v. Central Board of Revenue (PLD 1983 SC 358), Abdul Ghaffar Bhundhi v. Collector of Custom (2006 PTD 1566), Elahi Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582), Iqbal Zafar Jhagra v. Federation of Pakistan (2013 PTD 1491), Cyanamid Pakistan Ltd. v. Collector of Customs (PLD 2005 SC 495), Anoud Power Generation Ltd. v. Federation of Pakistan (PLD 2001 SC 340), N.S. Enterprises v. Govt. of Pakistan (1997 CLC 106), Commissioner of Income Tax v. Abdul Mateen (2008 PTD 182) and Naveed Textile Mills Ltd. v. Assistant Collector (PLD 1985 SC 92).
With reference to section 53(3) of the Ordinance Mr. Kashif Nazeer urged that the same is directory and not mandatory and, as held in Nur-ul-Haq v. Ibrahim Khalil (2000 SCMR 1305), if no penal consequences are mentioned in the provision than it is to be construed as directory and not mandatory (page 1311E). He also referred to the proviso to subsection (2) of section 5 of the Wealth Tax Act, 1963, which was identical to section 53(3) of the Ordinance, and had been interpreted by the Hon'ble Supreme Court in the case of Zia Haider Rizvi v. Deputy Commissioner of Wealth Tax (2011 SCMR 420).
He also rebutted the contention that if the Federal Board of Revenue had issued the said Notification it is of no legal effect.
10.Mr. Tanveer Ashraf availed of his right of reply and responded to Mr. Kashif Nazeer's contentions. He stated that, if no penal consequences are provided it does not automatically make a provision directory, but is only one of the tests to be applied and that the whole purpose of the legislation has to be kept in mind as held in Wattan Party v. Federation of Pakistan (PLD 2006 SC 697, at page 759U). As regards the reference to the similar provision in the Wealth Tax Act he contended that it is unsafe to import the language of one fiscal statute into another as mentioned in the case of Federation of Pakistan v. Muhammad Sadiq (PLD 2007 SC 133, at 160G). He stated that every word of a statute has to be given effect to and we must avoid interpretations that would render words meaningless and futile, as held in Farough Ahmed Siddiqi v. Province of Sindh (PLD 1996 Karachi 267, at 293G).
11.The first challenge to the legality of the said Notification is on the ground, that since Parliament had itself reduced the rate of advance income tax from 5% to 1% by inserting the, said clause (9) in Part II of the Second Schedule of the Ordinance (through Finance Act, 2005), it is Parliament alone which can withdraw the same, and the same can not be partially withdrawn by an executive functionary. Parliament is undoubtedly competent to impose, abolish or vary any Federal tax or levy however it is equally competent to delegate its powers to do so to the Executive. The question for consideration is whether the Legislature had delegated its power to the Executive? Let us begin by examining the wording of subsection (2) of section 53 of the Ordinance, reproduced hereunder:--
"(2) The Federal Government may, from time to time, by notification in the official Gazette, make such amendment in the Second Schedule by
(a)adding any clause or condition therein;
(b)omitting any clause or condition therein; or
(c)making any change in any clause or condition therein,
as the Government may think fit, and all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued."
In Zaibtun Textile Mills Ltd. v. Central Board of Revenue (above) Justice Zaffar Hussain Mirza writing for the Supreme Court, held, that, "In this case I would particularly point out what Hamoodur Rahman,J held to be in his opinion constitutionally permissible, namely, that the provision for details in a statute, particularly when details are by their very nature incapable of being ascertained by the Legislature itself can well be left to be worked out by another agency in whom the Legislature places confidence" (paragraph 22, page 377). In the case of Elahi Cotton Mills Ltd. v. Federation of Pakistan a five member bench of the Supreme Court unanimously decided, that, "It will not be out of context to point out that under subsection (1) of section 14, the Central Board of Revenue has been given the power to grant exemption in respect of the income or class of income or person or classes of persons specified in the Second Schedule including exemption from tax under the Ordinance subject to the conditions and to the extent specified therein or to exempt from the operation of any provision of the Ordinance subject to the conditions and to the extent specified therein. The Federal Government has also been given power under subsection (2) of section 40 to make amendment in the Second Schedule" (per Justice Ajmal Mian at paragraph 50, page 411). In Iqbal Zafar Jhagra v. Federation of Pakistan the Supreme Court derived certain principles from its judgments, which included, that, "The power of grant of exemption of customs duty on a particular article and the power of withdrawal of such exemption is always available to the Government under the law, therefore, it is not open to the Courts to go beyond the notification issued by the Government" (paragraph 22 (7), page 1511). And, that, "The Government, if it is empowered to issue a notification for grant of exemption on custom duty, is also empowered to withdraw such exemption wholly or partially" (paragraph 22 (8), pages 1511-2).
It is clear from the wording of subsection (2) of section 53 of the Ordinance that it specifically grants to the Federal Government complete authority to amend the Second Schedule by adding, omitting or changing any clause or condition therein. In view of the explicit power delegated by the Legislature to the Federal Government the cases cited by Mr. Tanveer Ashraf are distinguishable. Hence, we are not persuaded with Mr. Tanveer Ashraf s contention that Parliament alone could have increased the applicable rate of advance income tax.
11.We now proceed to consider the second ground of attack that, since the amendment was not laid before the National Assembly it is of no legal effect. Since this argument is based upon subsection (3) of section 53 of the Ordinance, it would be appropriate to reproduce it, as under:--
"(3) The Federal Government shall place before the National Assembly all amendments made by it to the Second Schedule in a financial year."
The aforesaid provision however does not mention the consequences for not abiding therewith; therefore, will the amendments made by the Federal Government come into force only once the same are placed before the National Assembly? The answer however is provided in the preceding subsection (2) of section 53, which concludes by stating that, "all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued" [emphasis added]. The amendment 'shall' have effect which is not dependent upon it being placed before the National Assembly. Evidently, the Legislature wanted the amendments made pursuant to the authority delegated by it to have immediate effect and in the same financial year in which the notification was issued. The coming into effect of amendments made by the Federal Government is not made dependent on placing the same before the National Assembly, nor is it stipulated that the same will come into effect after they had been so placed; if Parliament wanted to do so it could have stated so, for example, "the amendments made by the Federal Government in the Second Schedule would not come into effect till the same are laid before the National Assembly" or words to this effect.
Whilst Mr. Tanveer Ashraf is correct in stating that we should not assume redundancy with regard to any words in a statute, but at the same time we should not insert our own meanings into a statute. Mr. Ashraf stated that if there are no consequences for non compliance with subsection (3) of section 53 then the same is redundant, but we think not. Parliament has cast an obligation on the Federal Government to keep it specifically informed about the amendments made by it. The purpose for such reporting could be to instill a sense of responsibility and or oversight, but this is of no concern to the courts, and as Justice Shafi-ur-Rehman put it, "outside the scope of proceedings conducted in constitutional jurisdiction". In Naveed Textile Mills Ltd. v. Assistant Collector (above) it was held by the Supreme Court that, "It is admitted that in granting exemptions or in revoking it, no jurisdictional fact is required to be satisfied or disclosed by the Government. Where such is the amplitude of power enjoyed, the disclosure of a reason, the statement of a fact, or the narration of an event, will not throw in jeopardy the power exercised, only because, the reason, the fact or the event does not or cannot stand the strict test of accuracy. Any factual enquiry in this domain, not being an enquiry concerning jurisdictional fact, will be altogether outside the scope of proceedings conducted in constitutional jurisdiction" (per Justice Shafi-ur-Rehman, at paragraph 14, page 56).
Identical language to subsection (3) of section 53 is contained in the proviso to subsection (2) of section 5 of the Wealth Tax Act, 1963, which stipulates, "Provided that the Federal Government shall place before the National Assembly all amendments made by it in the Second Schedule during a financial year". The said proviso of the Wealth Tax Act came up for consideration of the Supreme Court in the case of Zia Haider Rizvi v. Deputy Commissioner of Wealth Tax (2011 SCMR 420) and the Supreme Court held, that, "Laying before the House of Parliament are made in the three different ways. Laying of any rule may be subjected to any negative resolution within a specified period or may be subjected to its confirmation. This is spoken as negative and positive resolution respectively. Third may be mere laying before the House" (paragraph 15, page 426). The third category of simply laying before the National Assembly, as in the present case, will not make the amendment null and void. The object for placing the same before the National Assembly, as held by the Supreme Court, was only "for the information of Legislation" and not doing so does not have any consequences with regard to the applicability of any amendment that has been made.
The contention of Mr. Tanveer Ashraf that it is unsafe to import the language of one fiscal statute into another statute may have traction if this was the only basis for coming to the aforesaid conclusion, but we have not solely relied upon the ground of similarity of language.
12.Mr. Tanveer Ashraf lastly contended that under subsection (2) of section 53 of the Ordinance the power to make amendments and issue the requisite notification vests in the Federal Government and not in the Federal Board of Revenue. The said Notification was issued by the "Government of Pakistan, Revenue Division, Federal Board of Revenue" and was signed by "Muhammad Raza Baqir, Member (IR Operation)/ Additional Secretary". The Secretary Revenue is also the Chairman of the Federal Board of Revenue. Rule 7 (2) of the Rules of Business, 1973 refers to Schedule IV, item 1 whereof specifically authorizes an Additional Secretary. The Federal Board of Revenue Act, 2007 stipulates, that amongst the functions of the Federal Board of Revenue is, "to implement the provisions of all fiscal laws for the time being in force and to exercise all powers provided under the provisions of the fiscal laws...", etc. (clause (k) of subsection (1) of section 4). Consequently, even if it be presumed that the said Notification was issued by the Federal Board of Revenue, and not by the Federal Government, then too it cannot be stated that the exercise of powers by the Federal Board of Revenue was unauthorized or illegal.
13.We can therefore conclude that the said Notification did not usurp the power of Parliament, it was issued by a competent authority and must be given effect (whether it was placed before the National Assembly or not).
14.Mr. Ameen Bandukda, has not assailed the said Notification, but contends that it should not be made applicable to the import of those vessels in respect of which valid and binding agreements had already been executed before the issuance of the said Notification. His contention rests on the judgment in the Al-Samrez case (above), the principle whereof was recently applied by a Divisional Bench of the Sindh High Court in the case of Muhammad Anwar (above) judgment wherein was authored by Justice Munib Akhtar wherein as held, that the said Notification will not be applicable in respect of consignments in respect whereof agreements had already been executed. We therefore proceed to consider the case of Al-Samrez, where the Supreme Court had set out to determine the following question:--
"Whether in the circumstances of this case the appellants had acquired vested right to the exemption in terms of the earlier notification and whether they were legally liable to be deprived of the same by virtue of the subsequent revised notification" (page 1924)."
Justice Zaffar Hussain Mirza, speaking for the Hon'ble Supreme Court answered the said question, thus:--
"It is well-settled that an enactment which prejudicially affected vested rights or the legality of past transactions, or impairs contracts cannot be given retrospective operation. Thus, Maxwell's Interpretation of Statutes, 1962 Edition at page 206 observed:
"Every statute, it has been said, which takes away or impairs vested rights acquired under existing laws, or creates a new disability in respect of transactions or considerations already past, must be presumed, out of respect to the legislature to be intended not to have retrospective operation" " (pages 1924-5).
"We are, therefore, clearly of the opinion that if a binding contract was concluded between the appellants creating a vested right to the then existing notification granting exemption, the same could not be taken away and destroyed in modification of the earlier one, on the ground that under section 21 of the General Clauses Act, the Government could exercise the power of modification. The question before us is not whether the second notification was ultra vires the powers of the Government but whether the second notification would be applicable to the case of the appellants resulting in taking away the exemption already granted" (page 1925 F).
"The next question is whether the appellants on the facts of the present case had acquired a vested right to avail of the exemption provided for in the earlier notification. In this behalf the important fact established on the record are that the contract for the purchase of goods between the appellant and the foreign exporter was concluded on 7th June, 1977, as evidenced by memo. of even date placed on the record page 38 of the printed record" (page 1925) (the notification enhancing the rate of customs duty was issued on 11th June 1977).
"It will be inequitable and unjust to deprive a person who acts upon such assurance of the right to exemption and expose him to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he has made legal commitments. It is in this perspective that a right is created in his favour and a subsequent withdrawal of exemption cannot be given retrospective operation by an executive act to destroy this right" (pages 1925-6).
"As already observed retrospective operation cannot be given to executive orders so as to destroy contractual rights and obligation already accrued" (page 1926H).
15.That we are afraid that we cannot agree with Mr. Kashif Nazeer's contention that the principle laid down in Al-Samrez is no longer applicable after the insertion of section 31A of Customs Act, 1969. Section 31A is limited in application, as it itself states, to "the rate of duty applicable to any goods" which "shall include amount of duty imposed under sections 18, 18A and 18C and the duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof." The said section does not refer to income tax or advance income tax therefore it can not be made applicable to the same. Therefore, whilst the application of Al-Samrez with regard to customs duty has been undone, but the legal principle enunciated in Al-Samrez will continue to have effect with regard to advance income tax, with which we are concerned.
16.The manner and time of collection of the said advance income tax is provided in subsections (5) and (6) of section 148 of the Ordinance as under:--
"(5) Advance tax shall be collected in the same manner and at the same time as the customs-duty payable in respect of the import or, if the goods are exempt from customs-duty, at the time customs-duty would be payable if the goods were dutiable.
(6) The provisions of the Customs Act, 1969 (IV of 1969), in so far as relevant, shall apply to the collection of tax under this section."
If the manner and time of collection of advance income tax is the same as customs-duty or if the provisions of Customs Act have been made applicable with regard to its collection it would not convert the nature of the said tax and render it into customs-duty, as held in m.y. Electronics (above). The imposition of a tax or duty and the machinery provided for its collection or recovery are distinct matters.
17.Mr. Kashif Nazeer had lastly contended that reliance should not be placed upon agreements as the same can be manipulated. However without proof we can not presume that any petitioner resorted to tampering or manipulation of documents. There may undoubtedly be unscrupulous importers, but we should not punish genuine petitioners merely on the basis of conjecture. The custom authorities are otherwise empowered to satisfy themselves with regard to the genuineness of documents that are presented by a party. In Al-Samrez the Supreme Court had granted relief to the petitioner on the basis of an agreement, and before the petitioner had established a letter of credit in favour of the foreign supplier.
18.In conclusion the petitions wherein agreements had been entered into by the petitioners for the purchase of vessels before the issuance of the said Notification S.R.O. 140(I)/2013 dated 2nd February, 2013 are allowed to the extent that the petitioners will be liable to pay advance income tax as specified in clause (9) of Part II of the Second Schedule of the Income Tax Ordinance, 2001 within a period of fifteen days, provided the same has not already been paid; the said petitions are C.Ps. Nos.517, 518, 519, 520, 521, 540, 560 and 622, all of 2013. C.Ps. Nos.528, 529, 530, 531, 532, 533, 534, 535, 536, 537, 538, 539, 565, 566, 567, 568, 569, 615, 639, 640 all of 2013 are dismissed. There shall however be no order as to costs. We compliment the manner in which Messrs Ameen Bandukhda, Kashif Nazeer and Tanveer Ashraf, Advocates, conducted these cases.
MWA/55/BalOrder accordingly.