' CH. EJAZ YOUSAF, J.---Petitioners have sought leave to appeal against the common judgment dated 23-11-2007 passed by a learned single Bench of the Lahore High Court Lahore, whereby writ petitions filed by the respondents were allowed and the Rules contained in Chapter XI of the S.R.O.
687(1)/2007, dated 13-6-2007 issued by the Federal Government were declared to be ultra vires the Sales Tax Act, 1990, issued without lawful authority and of no legal effect.
2. Facts of the case lie in a small compass. The respondents who are engaged in the business of steel Melting and Re-Rolling used to pay sales tax on production i,e, that tax liability was determined on the hypothesis that whatever is produced will be supplied ultimately. Later on special procedure was introduced in the Federal Budget, 2004-2005 and notified vide S.R.O.484(I)/2004 for the payment of sales tax on ingots/billets and mild steel manufacturer. In this way minimum value addition for steel melters and re-rollers was fixed by working out that 800 units of electricity are required to meet and produce one metric ton of steel, and for the purposes of taxable supply it was assumed that whatever is produced will be supplied ultimately and stock variation will not affect the taxable activity. The charge of sales tax through self declaration on the basis of electricity consumed was introduced through S.R.0.678(1)/2007, dated 6-7-2007. On the basis of above explained formula sales tax was decided to be collected through electricity providers in the monthly bills. Some of the registered persons challenged the special Procedure for collection and payment of sales tax notified vide S.R.O.678(I)/2007 issued by the Federal Government in exercise of powers under section 71 of the Sales Tax Act, 1990 and filed Constitutional Petitions in the Lahore High Court, on the grounds inter alia, that the new procedure introduced was departure from the mandatory provisions of the statute; that Federal Government had no such powers under section 50 of the Act; that the Notification being unreasonable and exorbitant was liable to be struck down; that no tax could have been imposed on an imaginary product which was not even marketable; that to levy sales tax the only yardstick was taxable supply and rate under section 3 of the Act of 1990 and the determination of tax liability which had no nexus with section 3(1) of the Act was invalid, etc. The writ petitions were allowed through the consolidated judgment impugned herein and it was declared that the impugned Rules contained in chapter XI of the S.R.O. 678(1)/2007 are ultra vires and of no legal effect. It was further held that the respondents shall be liable to pay Sales Tax at the rate of 15% on the basis of taxable supply and that the judgment shall not effect the tax already paid on record under the impugned rules, being past and closed transaction; hence this petition.
3. Mr. Ahmer Bilal Soofi, learned counsel for the petitioners has contended that the Court below has not considered that the S.R.O.A8(I)/2007 actually relates to a transparent regime for the recovery of tax in which the Tax Collector and the tax payer do not even interact and the discretion to collect tax is completely eliminated and there is an absolute willingness to voluntarily pay the tax by the tax payer. He added that the learned Court below has gravely erred in not appreciating the fact that linking a tax liability with consumption of electricity unit is in fact creating objective criterion for calculation of tax liability and such method of calculation eliminates discretion, corruption and ensures transparency in the tax collection process. It is further his case that the learned single Judge in the High Court has given restrictive interpretation to the language of impugned S.R.O.
Which had drawn powers from several provisions of the Sales Tax Act. It is also his grievance that the learned single Judge in the High Court while declaring the rules ultra vires has not followed the parameters laid down by this Court in the cases reported as (i) The Collector of Sales Tax and others v. Superior Textile Mills Ltd. And others PLD 2001 SC 600, (ii) Khawaja Ahmad Hassan v.
Government of Punjab and others PLD 2004 SC 694, and (iii) Karachi Building Control Authority v.
Hashwani Sales and Service Ltd. PLD 1993 SC 210. He added that in fact it was the respondents who had persuaded the Government and Federal Board of Revenue to evolve the special tax regime and therefore, they were estopped to challenge the same by their conduct.
4. After hearing learned counsel for the petitioners, we find that a case for grant of leave to appeal is made out to consider, inter alia, the following:---
(i) Whether in the impugned judgment, the Court while declaring the rules ultra vires has followed the parameters laid down by this Court in cases (i) The Collector of Sales Tax and others v. Superior Textile Mills Ltd. And others PLD 2001 SC 600, (ii) Khawaja Ahmad Hassan v. Government of Punjab and others PLD 2004 SC 694 and (iii) Karachi Building Control Authority v. Hashwani Sales and Services Ltd. PLD 1993 SC 210?
(ii) Whether in the impugned judgment the learned Court below has failed to point out as to how the rules were ultra vires the Sales Tax Act, 1990 and whether the Court has properly considered the view taken by the Superior Court that before declaring delegated legislation ultra vires, the Court must reconcile it with the main statute and liberal construction has to be placed on such rules?
(iii) Whether the Court below has failed to consider that the S.R.O. 678(1)/87 actually relates to a transparent regime for the recovery of tax in which the tax collector and the tax payer do not even interact and the discretion to collect tax is completely eliminated and there is an absolute willingness to voluntarily pay the tax by the tax payer?
(iv) Whether the Court below has disregarded that linking a tax liability with consumption of electricity unit is in effect creating objective criterion for calculation of tax liability and such method of calculation eliminates discretion, corruption and ensures transparency in the tax collection process?
(v) Whether the Court below has erred in not examining the conduct of the respondents who were estopped to challenge the S.R.O. 678(1)/2007, by their conduct as they had themselves persuaded the petitioner Government and Federal Board of Revenue to evolve the special tax/levy regime for the purpose of this section?
(vi) Whether learned Single Judge of the High Court has given a restrictive interpretation to the language of S.R.O. 678(I) of 2007 as well as section 3 of the Sales Tax Act, 1990?
5. Leave to appeal is accordingly granted in all these petitions.Operation of the impugned order is suspended. Appeals be fixed for hearing in the last week of March, 2008.