KHAWAJA FAROOQ SAEED, CHAIRPERSON.-(1). This Full Bench has been constituted to decide all the above appeals and to resolve the issue which arose because of various contradictory interpretations by FBR through its circulars and circular letters and by certain other offices of Pakistan.
2. All the above companies are Payphones Companies established inter alia to carry out the business of telecommunication. The Payphone Companies made a claim that the tax deducted at the the of issuance of the cards to the companies for further utilization by their customers should have been deducted on its discounted price and not on the gross bills. Initially, the C.B.R, through its letter, dated 30th July, 2003 held that CED was to be charged on gross bills. However, later it was withdrawn and a letter clarifying the situation in detail was issued on 24th December, 2004. For all practical purposes this is the igniting point and all the controversies which subsequently arose revolve against the said explanation. The letter which is No. 1(17) CED/96, dated 24.12.2004 held in categorical terms that CED is chargeable on the "discounted amount" and not on the "gross bills".
This clarification for all practical purposes still holds field. On the strength of the said letter the taxpayer applied for refund of the excess paid CED which was?Allowed to Dancom Co. Pakistan (Pvt.) Ltd. Vide Order No. 1/2005, dated 01.07.2005. However, on a similar application of refund in the case of the other company the C.B.R, resurrected the matter. Through its letter dated 02.08.2006 addressed to Collector Sales Tax Lahore; the FBR declared that the direction dated 24.12.2004 was prospective and not retrospective. Further, earlier recoveries of CED on the gross bills were past and closed transactions. The other argument of the Revenue in addition to the direction to not apply its explanation retrospectively is that incidence of duty had been passed on to the consumer. Further, that the refund could not be claimed by the Payphones Companies but by the PTCL. After holding as above, the CBR issued letter dated 05.08.2006 directing the Collectorate to initiate proceedings to recover the allegedly unlawful refund. Show cause notices to all the companies were issued. This obviously resulted in a chaos. At this stage the Collector of Sales Tax and Federal Excise, Lahore made an attempt to rescue the taxpayers and addressed a letter, dated 02.08.2006 mentioning the reasons of issuance of refund and solicited review of the letter dated 02.08.2006. At this stage, the Board solicited clarification from the Ministry of Law through a reference dated 28.10.2006. The Ministry of Law opined that clarification of the C.B.R, dated 24.12.2004 was against law which clarification, however, is still in field and is being applied prospectively.
3. The Payphone Companies of Lahore Collectorate challenged the initiation of proceedings before the Hon'able Lahore High Court and subsequently before the August Supreme Court of Pakistan.
The august Court vide its order, dated 31.05.2007 passed in C.P.L.A, directed the adjudicating authority to decide the entire issue without being influenced by any direction of the C.B.R, and after taking into consideration the entire record/evidence relating to the case.
4. The department in the above background issued show cause notices to the taxpayers which were on the following pretext:- "(i) the appellant's business activity was exempt from CED.
(ii) Vide SRO 617(I)/2000, dated 02.09.2000 CED was to be levied and collected as it was a tax payable under section 3 of the ST Act.
(iii) The amount of duty paid by the appellant has been passed on to the final consumer.
(iv) The appellant did not issue sales tax invoices during the period.
(v) Refund claimed by the appellant was the barred under section 66 of the S.T. Act and condonation thereof was illegal.
(vi) The Board vide its letter, dated 02.08.2006 clarified that its ruling, dated 24.12.2004 is only applicable in future transactions."
5. It was, thus, alleged by the respondent in the SCN that the appellant was not entitled to claim refund of CED, which was collected and paid in sales tax mode; it was in violation to the subsection
(1) & (2) of section 3-B, section 10 and 66 of the S.T. Act and section 3-D of C.E. Act. It was further alleged that appellant committed tax fraud in terms of the section 2(37) of the ST Act and 19(5) of the Federal Excise Act, 2005. Thus, allegedly the specified amounts sanctioned vide refund payment orders were recoverable from the appellant alongwith default surcharge and penalties under section 34 and S. No. 13 & 19 of section 33(1) of the ST. Act and section 8 and 19(5) of the Federal Excise Act, 2005.
6. The appellant contested the proceedings and filed its stance before the respondent. The allegations under the SCN were negated being patently incorrect and without jurisdiction not only in law but also in facts of the case.
7. It is relevant to mention that during the pendency of the entire controversy before various forums in different jurisdictions, another Payphone Company Union Communication (Pvt.) Limited, to whom partial refund had been allowed while a part had been rejected with imposition of penalty, approached the Honourable FTO. The Honourable FTO in view of the matter pending before the department, in appeal as well as in the Show Cause Notice, referred the matter back to the department vide order dated 20.06.2007. However, it was held by the Honourable FTO that the issue had arisen due to confusion of the CBR and thus it was not a case where any penalty could be levied. It was also ruled by the Honourable FTO that any imposition of the penalty was to be treated as an at of mal-administration.
8. However, the department proceeded to pass the Order-in- Original in respect of these cases by holding the assessee to be as defaulter and demand was created against all of them with the direction to re-deposit the refund wherever the same had been received and also to pay additional tax and penalty thereof. However, in other case the refund claim was refused.
9. In appeal the assessee point of view has not been allowed and the taxpayers are now before us.
10. The arguments were opened by Mr. Akhtar Ali, Advocate who was counsel in Global Telecom.
After narrating the basic facts of the case which are common in respect of all the appeals he brought the attention of the Court to proviso 3 of section 3(1) of the Central Excises Act, 1944. He said that by virtue of the said proviso the provisions of the Sales Tax Act were made applicable on the entire proceedings of the Federal Excise Act. Corresponding amendments were made in section 2(14)(d) and section 2(20) wherein input and output taxes have been defined. It was under These circumstances that the clarification was sought from the C.B.R, and the C.B.R, through its letter dated July 30, 2003 C. No. 1(17)CEB/98 said that central excise duty is chargeable on gross billed amount without deduction of any trade discounts and not on the discounted amount.
However, on 24.12.2004 in compliance with another request the Central Board of Revenue after due appreciation issued the other explanation vide C. No. 1(17) CES/98. In this letter it is held that the charge of C.E.D, shall be on discounted value. This in his opinion is the correct interpretation.
Through C. No. 1(17)CEB/96, dated 05.08.2006 the explanation has declared as prospective which is in fact a misunderstanding of the principles of interpretation the A.R. Remarked. It was informed that some of the charges have not later not been approved. However, for the issues which are now to be disposed the Learned counsel arguments are:-
(i) That after the amendment in terms of insertion of 3 proviso of section 3(1) of Central Excises Act, 1944 the entire proceeding are to be conducted under Sales Tax law.
(ii) That the status of explanation of a provision of law is always retrospective.
(iii) That explanation is not a mode of legislation. Even the legislature cannot change spirit of main law through explanation.
(iv) That there is no collection from the ultimate user.
11. The Learned counsel argued that departmental view is not only faulty but, in fact, the judgment which is being relied upon by the said revenue authorities is against them on almost all the issues except for a factual controversy of shifting the burden to consumer. Referring section 2(14)(d) and 2(20) of the Sales Tax Act he reiterated that the same clearly converts procedure of charge, levy and collection of the duty in the sales tax mode. It is by adoption of the said procedure that input Excise Duty is collected by the P.T.C.L, while at the the of providing service to the ultimate consumer no output tax is being charged. It is for the obvious reason. The charge of output at supply of the service to the ultimate consumer by this service provider is at 'Nil' rates. Hence, there is obviously no collection of the same from consumer. The other argument is that the rate is fixed at Rs. 4/- per unit which remained the same before and after the explanation and even today. However, the collection of the F.E.D. At the stage of PTCL after correcting the error of charge on gross amount to charge on discounted rate is now rightly made. This way the assessee has not only become a direct beneficiary as a result of the reduction in input tax of the excise duty but he has also been saved from the hassle of claiming and receiving refund after payments.
12. The Learned counsel concluded his arguments by saying that where there is no change in rate after enhancement or reduction in duty the question of transfer of incidence does not arise. Since in this case the charge of Rs. 4/- per unit remained the same even after reduction in rate of excise duty by 0.07 paisa per unit there is no transfer of incidence.
13. Mr. Saqib Munir (Advocate) also adopted the arguments of the earlier counsel. He, however, added that the action of the Additional Collector to issue the notice and subsequent creation of demand against the assessee by incorrectly observing that neither any amount was charged nor deposited in the Government Exchequer is a misconception. The service provider is exempt as his payment of tax is 'nil rated' under Heading 9812.9000. Further objection that he is not to be registered for the same reason and that the incidence of duty has been passed on to the consumer also is based upon complete ignorance of the facts of the case. He remarked that the A.C. Has completely ignored that the said issue stood decided. The relevant para of the Order-in- Original is Para 18 in which it has been held that the company having neither charged excise duty nor deposited any amount in Government Exchequer is not entitled to claim the refund. The answer to the said observation in his opinion is at Page 48. He argued that the respondent has blown the assessee hot and cold in the same breath. Referring to the Sales Tax Order-in-Appeal No. 262/2008 decided by Collector (Appeals) dated 16.10.2008 he brought the attention of the court to the following para:- "I have examined the record of the case and have also considered the verbal as well as written submissions of both the sides. From perusal of record of the case, it has been observed that the appellant filed inadmissible refund claim which was sanctioned by the Collectorate. The appellant company was exempt from payment of excise duty, therefore, they were neither liable to be registered nor charged the excise duty or deposited any amount into the government treasury. The appellant company only acted as an agent of M/s. PTCL for selling the Payphone Cards to the end consumer. They have neither charged any excise duty nor have they deposited and amount in the government treasury. Further the appellant did not issue any sales tax invoices prescribed under the Sales Tax Act, 1990, during the period, therefore, they did not fulfilled the basis legal requirements for claiming refund of the excise duty under the Sales Tax Act, 1990. In fact M/s. PTCL charged and collected excise duty and deposited the same into the government treasury.
However, the incidence of the excise duty has been passed on to the end consumers as the prescribed tariff for Payphones Companies included the amount of excise duty on the basis of gross amount billed, rendering the refund claims inadmissible in terms of section 3-B of the Sales Tax Act, 1990 read with section 3-D of Central Excises Act, 19A4."(Emphasis added).
14. After pointing out the point of view of the A.C. As well as Collector(Appeals) re-produced as above, the Learned A.R. Brought the attention of this Court to the judgment in the case reported as 2000 SCMR 1266. He said that the Hon'able Supreme Court has held in the above judgment that if there is no subsequent change in value of the product it would mean that the amount has not been charged from the customer. He said that this fact alone settles the issue that the value per unit at Rs. 4/- remained static even after reduction in deduction of excise duty by the PTCL.
15. Rana Munir Hussain, Advocate adopted the earlier arguments. He added that in his case i.e. Dancom Ltd. Was served with show cause notice on 02.11.2006 while the order in this case was finalized on 14.01.2008 hence it was a the barred order. On a further question that whether there was any intervening order, it was informed that a stay was granted on 22.12.2006 and was vacated on 12.10.2007. He added that even if the period of stay is counted, though the same had not restrained the department to continue with the proceedings, there remains a gap of 144 days which is contravention of the provisions of section 36(3). His reliance is on the case of Super Asia reported as P. T. C.L. 2008 CL. 1 and Straw Board Factory 2008 PTD 278.
16. In support of his further argument that the department's clarification by C.B.R, dated 2.8.2006 claiming the beneficial explanation dated 24.12.2004 to be prospective is illegal and that the beneficial circulars are always retrospective, he referred the following judgments:- PTCL 1997 CL. 260 Re: (Elahi Cotton Mills)
2004 PTD 2738 Re: (A.A. Corporation)
1998 PTD 189 H.C. Lhr. Re: (Riijaz (Pvt.) Ltd.)
PTCL 1993 CL. 188 Re: (Army Welfare)
2008 PTD 838 H.C. Re: (Al-Rai Flour Mills)
17. Another argument advanced by him is that having issued instructions on 24.12.2004 the F.B.R, had become functuous officio. It was not its job to sit as a judge on its own explanation and to become a judge of its own cause. For all practical purposes refund in the case of this assessee was issued on 13.09.2005 and 17.10.2005 on which dates the clarification was there. Further, the clarification is still in field. However, it is said that it is not applicable on the previous transaction in which excessive amount has been paid by the taxpayer. Reliance is on the following case law: (2001) 83 TAX551 (H.C. Lah.) re: Sandal Engg. (Pvt.) Ltd.
18. Regarding clarification sought and given by the Ministry of Justice it is argued that Ministry of Justice does not have any position in the judicial hierarchy in the Sales Tax matters. Its interpretation, therefore, is not binding on any authority. Further, the interpretation was sought without providing complete details of the case which alone is enough to hold that the clarification issued by Ministry of Law does not apply. Reliance is on the following cases:- 2000 PTD 2159 H.C. Re: The Bank of Punjab Ltd.
87 TAX 312 H.C. Re: Kamran Khan vs. Federation of Pakistan etc. 68 TAX 86 S.C.
68 TAX 29 S.C.
19. A.R. Further challenged the very jurisdiction of the Additional Collector of issuance of the notice.
It is claimed that the jurisdiction was assigned to the Additional Collector on 03.11.2006 while the Additional Collector issued notice prior to that date i.e. 02.11.2006 which is illegal. All super structure that is created on the basis of said notice, therefore, should crumble to ground. By further arguing that where the basic notice is illegal the super structure is also illegal. He referred the following case law:- PLD 1971 S.C. 124 Re: Mansab Ali v. Amir etc PLD 1958 S.C. 104 Re: Suptd. Of Custom Excise, Lyallpur v. Ch. Faqir Hussain 61 TAX 159 H.C. Re: N.V. Philips Glocilan Peufabrikan Vs. ITO and other.
20. It was commented that while proceeding in the case the directions of the Hon'able High Court have also been ignored. The Hon'able High Court directed the A. C. To decide the issue of jurisdiction before further proceeding which he did not. The order is against the directions as well as without acquiring proper jurisdiction, hence should be cancelled. Reliance is on the following case law:- 1999 PTD 2910 H.C. Re: Abdul Majeed Anwar Vs. IAC 1994 PTD 309 S.C. Re: ITO Mirpur Vs. Ch. Muhammad Bashir PLD 1966 S.C. 1 Re: Mian Jamil Shah v. The Member Election Commission etc. PLD 1960 S.C. 237 Re: Muhammad Aub Khuhro v. Pakistan Through Ministry of Interior and two others"
21. The Learned A.R. Also argued the following issues:-
(i) That order is passed under new law i.e. Federal Excise Act, 2005 while the period pertains to earlier Act of 1944. Reliance is on the case law reported as 2009 TAX 150 S.C. CTT v. Eli Lilli Pakistan.
(ii) While interpreting a provision of law to interpretations are possible the one if favourable to taxpayer shall apply. Reliance is on 1988 PTD 315 H.C. Re:
(iii) That a judicious order passed with some external influence without applying an independent mind in itself is illegal. This was so held in PLD 1972 Lahore 316, re: Syed Fayyaz Hussain Qadri v.
Administrator Lahore Municipal Corporation, Lahore.
(iv) It is a non-speaking order having not discussed complete facts which is violation of section 24A of the General Clauses Act hence illegal. Reliance is placed on PLD 1987 Lahore 555 re: Syed Anwar Hussain Shah v. Nazir Ahmad.
(v) It is a case of change of opinion which is not permitted by law. Reliance is on the following reported cases:- 1997 PTD 1485 S.C. Re: IAC & another v. Pakistan Herald Ltd.
61 TAX 105 S.C. Re: Edulji Dinshaw Ltd. v. ITO 1993 PTD 766 S.C. Re: M/s. Central Insurance Co. Etc. 68 TAX 1 S.C.
22. Other counsels have also adopted the above arguments.
23. The case of the department as argued by the Learned Legal Advisor is that it is a case of total mis-representation and the refund has been obtained by mis-guiding the department. The taxpayer has been paying this tax at the the of his purchases from PTCL which is later deposited in Government Treasury by the said withholding agent. The assessee is involved in providing service, which in fact is owned by the PTCL; hence it was the right of the said company to obtain refund, if any, and not the present taxpayer. The amendment in law of 2000 had practically brought no change in the mode of collection, and the very action of the taxpayer of not claiming the same earlier proves it. The F.B.R, has been very fair as it has reduced the rate for future but earlier deduction being a past and close transaction the same has been rejected. It was also remarked that the refund having been obtained in connivance with certain officers of the department due cognizance has been taken by the FBR and the action against them has separately been taken. On a question about the outcome it is informed that the concerned officials have been exonerated ultimately and have not been found guilty of any offence. The other argument is that the amount has been passed on to the consumers. The proof of which is that the rate has not changed. The argument of the taxpayer that this goes to favour the assessee in the opinion of the Learned Legal Advisor is a misnomer. It is said that the judgment referred in support has been given on the facts which relate to a different situation. In the referred judgment even after payment of excise duty the taxpayer had not increased its price; hence at a subsequent stage when that levy was withdrawn the price remained the same. Thus incidence was not transferred to the ultimate consumer. The judgment, therefore, is distinguishable. In this case in his opinion the price charged per unit being Rs. 4/- and even after reduction its maintenance means that it was passed on to the ultimate user, otherwise the amount should have been reduced corresponding to the reduction in tax.
24. Regarding conversion of the excise duty law in the sales tax mode he said that it is an independent law and is 'a levy' while the law of sales tax is in relation to a tax. It is correct that the authority in both the cases is one and the charge is also created and collected by the said authority simultaneously yet there are to separate independent statutes promulgated and applied within their own spheres. The reduction even by the F.B.R, by applying the provisions of Sales Tax in his opinion was not lawful. It was added that the reliance of the taxpayers on the judgment of the Customs, Excise and Sales Tax Appellate Tribunal to the extent of the issues which are in their favour is not correct appreciation and in a way a disrespect to the principle of stare decisis. The judgment should be applied as a whole and not only, to the extent of the issues which are decided in favour of the taxpayer. The said judgment which is in the case of World Call Telecom Ltd. In STA No. 127/LB/2009 has finally decided the issue against the taxpayer. The final verdict is after giving a finding of fact that the incidence of tax has been passed on to the ultimate consumer which has not satisfactorily been rebutted even through the arguments advanced before this Court today.
25. Above arguments of Mr. Farhat Nawaz Lohdi, LA were in respect of M/s. Dancom Ltd. STA No. 236/LB/09. Mr. Imran- Shah who was D.R. In the other cases adopted the same. He, however, further added that amendment in law cannot be made through an SRO. Further, an SRO cannot change the spirit of the main law. The Order-in-Original in the case of M/s. Dancom Ltd. Through its Page 40 Paragraph 33 and Page 48 para has taken care of the objections of the taxpayers. Further, that there is no question of any the-barred assessment for this case as the extensions have been sought by the taxpayer through various letters. Further, there were stay order granted by the Hon'able High Court. The cases later decided on, therefore, are well within the and there is no question of any the-barred adjudication.
26. It was also objected to that the appeal has been filed by the un-authorized persons which is against the provisions of Sales Tax Act.
27. The perusal of the case, facts available on record and analysis of arguments put forth by both parties leads to following conclusions.
28. The contention of respondent that sales tax related provisions are not applicable in the case of the appellant by arguing that there is no concept of trade discount in central excise laws does not hold weight. The FBR in its ruling of 24.12.2004 in clear terms have allowed trade discount to the appellant companies. In this regard guidance have been sought from the proviso of section 2(46) of the Sales Tax Act, 1990. The ruling as already mentioned still holds field and has not been .Withdrawn. It means the department does not have any doubt about the application of Sales Tax provisions in excise duty matters. Under SRO 617(I)/2000, dated 02.09.2000, the central excise duty on "telecommunication services" was declared to be "levied" and "collected" in sales tax mode and all Sales Tax related provisions, rules and instructions were categorically made applicable for that purpose. Law was also accordingly amended. The FBR's ruling dated 24.12.2004 was obviously keeping in view the said SRO read with section 3B of the Excise Duty Act and section 2(46) of the Sales Tax Act, 1990.
29. Regarding prospective application of FBR's ruling of 24.12.2004, it will be in fact naive to agree with the department. Interpretation is not a legislation. The law in terms of SRO 617(I)/2000 was enacted on 02,9.2000. The FBR has only explained it firstly on 30.7.2003 and secondly on 24.12.2004.
During this period there is no change in law and interpreting the spirit of an existing provision cannot be changed. This in fact is as clear as day light however, suffice shall be to refer STA No. 127/LB/2009 the relevant discussion in the same is as follows:- "The perusal of the aforesaid provisions, notifications, clarifications of the CBR and judgment of Islamabad Bench-I of this Tribunal referred above, make it clear that all the provisions including the one relating the value of supply in terms of Clause (b) of sub-section (46) of Section 2 of the Sales Tax Act, 1990 were applicable and the duty was payable on discounted price provided the tax invoice shows the discounted price as well as related tax and the discount allowed was in conformity with the normal business practices and the appellant was entitled to claim excess amount recovered on the gross billed amount under Section 66 of the Sales Tax Act, 1990 but only in if the incidence had not been passed on to the end consumers. As regards the application of the instructions contained in CBR's letter dated 24.12.2004, the contention of the Learned counsel for the department that the same were prospective in nature and could not be applied retrospectively is not tenable in the light of a judgment in the case "M/s. Army Welfare (PTCL 1993 CL. 188), case of M/s. Ellahi Cotton Mills (PTCL 1997 CL. 260) and case of M/s. A. A. Corporation (2004 PTD 2738)", the notifications, regulations, executive orders and instructions can be given retrospective effect if it goes to the benefit of the taxpayer. However, such instructions, if found detrimental to the assessee would have no retrospective effect. Thus, the appellant has rightly filed claim in the light of said clarification and there is no mala fide on their part. So far as the question of limitation is concerned, it is observed that the claim was filed within limitation after receipt of clarification from the CBR and that the delay was also condoned by the competent authority. However, this question of limitation became immaterial once the claim was entertained, processed and sanctioned by the competent authority. It is further added that even otherwise the claim cannot be refused on technical grounds keeping in view the principles settled by the Hon'able Apex Court in Pfizer's case (PTCL 1998 CL. 354). The objection of the department that the refund was wrongly claimed by the appellant as it was PTA, which deposited the tax into Government Treasury, in our view, it is not malafide, because PTA had only acted as collecting agent on behalf of the Government, whereas duty was paid by the appellant. It has been held in the case "The Federation of Pakistan Vs. Metropolitan Steel Corporation (2002 PTD 87)" that claim of refund of tax, which was not payable or was aid in excess could only be made by the person paying the tax and not the one who had collected the same as the collecting person, he was always acting as an agent. Thus, the appellant had rightly claimed refund of the excess duty because it was recovered from him. As regards the allegation of tax fraud and imposition of surcharge and penalty on the basis thereof, we will not hesitate to hold that it was not a case of tax fraud, because the refund was claimed on the basis of clarification issued by the CBR. Moreover, the Learned Collector (Appeals) in the impugned order also held that it was case of entrapment. According to Learned Collector (Appeals), the Collectorate's record also does support the same and in such event it cannot be said that the appellant had committed tax fraud.
It is further pointed out that at one hand the Learned Collector (Appeals) in the impugned order has held that if was levy of central excise in which the term tax fraud was alien thereto, while on the other hand he imposed penalty under Section 33 of the Sales Tax Act, 1990. Since, the department has miserably failed to prove that there was any intentional, dishonest, fraudulent at and without lawful excuse obtainment of inadmissible refund on the part of the appellant, thus, the allegation of tax fraud is not justified. Mere claiming the refund and that to on the basis of clarification issued by the CBR cannot be termed as attempt to commit tax fraud. Moreover, the appellant had adopted lawful course and lodged claim of refund on the basis of clarification, which is still holding the field and the refund was properly processed, examined, scrutinized and sanctioned by^the competent authority and such effort of the appellant cannot be said to be a tax fraud."
30. Above referred discussion has clinched the issue. We agree with the above discussion in full and hold without hesitation that an explanation of a law has to be retrospective. An explanation cannot introduce a new law. It only interprets and explains an old law. Further, every beneficial circular is even otherwise retrospective.
31. In fact the amendment of 02.09.2000 has reduced the charge of excise from the buyers of the cards by pitching the same to the discounted value as against earlier charge on the full value. This facility was to be passed on the stake holders i.e. Buyer telephone companies immediately w.e.f, the said date. Failure to transfer the benefit to these appellants at the right the later gave room to these multiple explanations. FBR's ruling of 24.12.2004 has brought no new remedy. It was for the same reason that the said explanation does not contain any condition or mentioning that it is to be prospectively applied. This interpretation only withdrew the earlier interpretation of 30.7,2003 which itself makes it clear that the application of said interpretation was from the date of original enactment and not from the date of interpretation. Thus the contention of the legal advisors of the department is not acceptable. In any case if it is a deduction which was to be on discounted price and not on the gross amount, then it can only be from the date of the enactment of law i.e. 02.9.2000 and not from the date of interpretation i.e. 24.12.2004. Application of law cannot be altered I prospectively or retrospectively through an executive order or interpretation. It is the mandate of law makers only.
32. As already said where a law is amended to provide remedy to citizens or is brought to cure an ill, unless otherwise provided therein, it is always considered retrospective. In number of judgments the Superior Courts have supported this issue. The same inter alia include i.e. Elahi Cotton Mills (PTCL 1997 CL 260), M/s. A. A. Corporation (2004 PTD 2738), and M/s. Army Welfare (PTCL 1993 CL. 188). In these judgments it has been held that the notifications, regulations, instructions and executive orders can only be given retrospective effect if they provide some benefit to the taxpayer. However, the same can't be given retrospective effect in case their effect is detrimental and against the taxpayer. The ruling of 24.12.2004 being remedial and in fact curative it will be incorrect to contend that its application is not retrospective. All remedial and curative legislations are retrospective and can also be applied in all pending matters re: Shahnawaz Ltd. 1993 SCMR 73.
The judgment now referred is among the pioneer and leadings ones. It has settled this issue in following manner:-- "However, nothing has been adduced before us in support of the last mentioned submission. As .Explained in Crawford's "Statutory Construction" a statute relating to remedial law may properly, in several instances, be given retrospective operation and we are of the opinion that as the amendment in the instant case was introduced to redress an injury which in the words of Circular No. 6 of 1973 (Income Tax) issued on 7th July, 1973 by the Central Board of Revenue itself was "designed to soften the law in favour of tax-payers who could previously be charged to additional tax up to the date of assessm ent even through the finalization of assessment was delayed due to no fault of theirs." This was a proper case in which retrospective operation, to the extent the High Court gave to it, could be given to the amending law."
33. Regarding late filing of refund claim etc., the Honourable Supreme Court in its judgment in "Pfizer's case (PTCL 1998 CL 354) " has laid down the principle that a claim cannot be refused solely on the basis of technical grounds. In the instant case, it is observed that the appellant filed to refund claims with the department within one year of the date of ruling {i.e. 24.12.2004) which reflects that the said claims were not the-barred. Granting condonation of the in respect of a claim which was not even the- barred does not constitute any offence. Section 66 of the Sales Tax Act, 1990 clearly states that where the refund becomes due on account of any decision of sales tax officer, the period of one year shall be reckoned from the date of that decision. As the refund claims were filed within one year of FBR's ruling of 24.12.2004, so the question of limitation becomes irrelevant and immaterial. This, however, is a non issue. Once refund is issued it cannot now be contended that the technicalities were not met with at the the of issuance of first refund.
34. The respondent also contended that in case of any excess tax, it was up to M/s. PTA to apply for the refund and the appellant was ineligible to file any refund claim. This argument is not correct in view of the principle laid down in the judgment. "The Federation of Pakistan vs. Metropolitan Steel Corporation (2002 PTD 87)" in which it was decided that claim of refund of tax which was not payable or was paid in excess could only be made by the person "paying" the tax and not by the one who had "collected" the same. The chain of taxation in the instant case demonstrates that M/s. PTA, was collecting tax from the appellant and was depositing it into the national exchequer. The appellant was paying tax to M/s. PTA but did not collect tax from consumers as its services were in a way exempt. The difference between taxable and exempt person is that taxable person at the the of purchases pays and then collect tax, however, an exempt person while making purchases pays tax but does not later collect it. In this manner, the chain of taxation stops as the exempt person is not entitled to collect any tax. In this case the chain of taxation stopped at the appellant who paid tax to M/s. PTA but did not collect it and thus was eligible to file the refund claim on the amount deducted beyond the prescribed limit. In this regard the departmental practice in the case of exporters and foreign embassies/consulates. In case of said exporters, suppliers and manufacturers tax is collected by withholding agents and deposited in the national exchequer and refund is sanctioned to the said exporters suppliers/manufacturers. M/s. PTA is not entitled to file said refund as it is only acting as a collecting agent and is collecting tax from the appellant.
35. The question of passing incidence of tax to consumers involve to aspects. First whether the provisions of section 3B of Sales Tax Act are applicable on the appellant and second whether the appellant passed on incidence of tax to consumers or not? Perusal of Section 3B of the Sales Tax Act, 1990 shows that the said provisions are only applicable on a person who has "collected tax" or "collects tax". The chain of taxation stops and ends at the exempt person who pays tax but cannot collect tax. The appellant being exempt could not collect any tax and in this manner didn't fall under the definition of "any person who has collected tax or collects tax". Hence, overstretching the provisions of Section 3-B will not be justified as the said provisions do not apply to the appellant for being exempt. Section 3B is only applicable in respect of a tax collecting agent who collects tax and thereby passes on the incidence of tax to another person. The provisions of Section 3B also become non-applicable on the appellant in the light of Appellate Tribunal's order in case of Pakcom Ltd. v.s. Collector Customs, Rawalpindi Appeal No. 3136/2001 dated 07.03.2003 as the excess tax was collected from the appellant by M/s. PTA on the basis of wrong interpretation and mis-understanding of law. The principle laid down by the Appellate Tribunal in Section 3B of Sales Tax Act do not apply to the appellant in the instant case.
36. FBR's ruling 1(124) STT/98, dated 24.8.2004 and Supreme Court's judgment in SGMR 1266 also establish that the appellant had not been passing on incidence of tax to consumers as the call rates for the consumer remained unchanged before and after 24.12.2004 i.e. Rs. 4/- per unit. When rate has remained the same (i.e. Rs. 4/- per unit), then it can't be argued that incidence of tax had been passed on to consumers in the light of aforesaid principles laid by the FBR itself.
37. Had the correct interpretation i.e. Ruling of 24.12.2004 been issued earlier, there would have been no excess tax payment by the appellant and in that case the benefit of non-payment of excess tax would have gone directly to the appellant (without any impact on the consumers) as is happening in case of transaction after 24.12.2004. After FBR's ruling, the appellant started paying less tax and thus became the direct beneficiary of the said ruling. The appellant was paying more tax "on gross amount" before the ruling of 24.12.2004 and started paying less tax "on the discounted amount" after the ruling. Thus the tax discount directly benefited the appellant which proves that the incidence of tax was being borne by the appellant on transactions before 24.12.2004. Furthermore, issuance of FBR's ruling of 24.12.2004 and grant of trade discounts itself proves that the incidence of tax had not been passed on to consumers as there was no change in calling rates for consumers before and after 24.12.2004. When rate has remained the same (i.e. Rs. 4/- per minute), then how can the respondent argue that in respect of transaction after 24.12.2004, incidence of tax had been passed on to consumers. Being exempt, the appellant was unable to collect tax and could only pass on price of their services. The price which they were charging from consumers was devoid of any tax component proof of which is that their calling rates remained unchanged before and after the issuance of FBR ruling of 24.12.2004. FBR allowed collection of tax at discounted rate vide its ruling of 24.12.2004 and seems satisfied that incidence of tax was not being passed on to consumers after 24.12.2004. How come it is simultaneously being argued that, on same rates, incidence of tax was being passed on to consumers before 24.12.2004. In view of this it can be concluded that on one hand Section 3B was not applicable on the appellant and that the incidence of tax was not passed on to the consumers while now they are direct beneficiaries of the reduction in tax ratio.
38. The matter can be explained with the following simple examples:- Charge Before Letter Dated 24.12.2004 Unit price (Original) Rs. 02.10 C.E.D @15% Rs. 00.31 Total Rs. 02.41 Less discount allowed @25% of the unit priceRs. 00.52 Total cost of unit Rs.01.89 Sale price per unit Rs.04.00 Profit margin per unit before above letter"Rs. 02.11 After Letter dated 24.12.2004 Unir price original Rs. 02.10 Less Discount Rs. 00.52 Price after discount Rs. 01.58 C.E.D charged @ 15% Rs. 00.24 Cost of unit Rs. 01.84 Sale price per unit Rs. 04.00 Present profit margin per unit Rs. 02.18
39. From the above example it is i very clear that the profit margin of these companies before the said explanation was Rs. 2.11 per unit and the same as now increase to Rs. 2.18. This increase of 7 paisa per unit in there profit margin is a very clear example of the fact that the amount which is now being received by these companies without any interruption or objection was even earlier their right. Had this amount been passed on to the ultimate consumer it would not have been allowed to be enjoyed by the taxpayers under discussion now. It is neither the case of the department nor there is any argument with regard to this increase by Rs. 0.07 that it should be passed to the consumer.
40. The example, therefore, makes it very clear that if there was a collection, as a result of incorrect understanding of the legal situation, it was from the profit margin of the taxpayers and not from the pocket of any third person. The shifting of the incidence of tax to the consumer, therefore, besides being an after thought also does not have support from the facts or the record at all. This in any case is a finding of fact and the above example confirms it beyond any doubt that the there is no transfer of incidence to consumer. The amount was a direct reduction from the profit margin, which the attitude of the revenue department after the said letter of 2004 till today i.e. 2010, also confirms.
41. The allegation of tax fraud on the appellant has already been found baseless as the department failed to produce anything substantial in support of its allegations. The tax profile of the appellant shows that they were registered in sales tax since 1998 and never committed anything which could be construed as tax fraud. The respondent was unable to persuade as to how claiming of refund on the basis of FBR's clarification was a case of tax fraud. The whole case revolves around multiple and contradictory interpretations of FBR which created a confusing situation in which excess tax was firstly wrongly charged from the appellant and after sanction, said refunds were declared illegal. There is nothing on record which could demonstrate that while claiming refund, fake documents were utilized or forgery of any kind was committed. The case, therefore, cannot be construed as tax fraud or a case of illegal sanctioning of refund as the department failed to prove that there existed any forgery, connivance or dishonest at of any kind. The case does involved difference of opinion in legal interpretation which cannot be portrayed as tax fraud specially when FBR itself erred and issued contradictory clarifications on the same point of law. The appellant adopted the course and filed refund claim with the competent authority on the basis of ruling by F.B.R. The refund claims were properly processed and sanctioned and thus it will be unjustified to blame the appellant for committing tax fraud. The appellant could not foresee that after 8 months, FBR will again issue another ruling to declare its earlier ruling of 24.12.2004 to be prospective and sanctioned refunds will be recalled.
42. The up-shot of above discussion is obvious. Neither the explanation dated 24.12.2004 is prospective nor the FBR have any authority to hold an interpretation to be as prospective. FBR does not figure anywhere injudicial hierarchy. Courts can disagree with its interpretation re: Central Insurance Company (supra). Similar is the position of interpretation of Law Ministry. Law Ministry also is not a court of law. Its opinion which even otherwise is generally unilateral without hearing the parties concerned cannot be adopted. Further, it also does not figure any where in judicial hierarchy of this country, in fact it is not even an administrative authority in the revenue department. FBR directions are binding on its subordinates while opinion of Law Ministry is not binding on the officers of the revenue department either.
43. The upshot of the above discussion is obvious we have decided to main issues one that in the upper part of our order whether the law amended in 2001 would take effect from the explanation of the FBR from 24-12-2004 or from the date of its promulgation? The other is whether the incidence stood passed on to the consumer for not?
44. Both the questions have, been answered in favour of the taxpayer and against the department.
It has been held that the law becomes applicable from the date it is made or from the date it is made applicable by the legislature. The FBR at best can interpret it but cannot determine the date of its application. This is no more a dispute that the Excise Duty after addition of the 3rd proviso in section 3 through amendment in law in 2001 has transferred the levy, charge and collection to the Sales Tax mode. The tax, therefore, was to be deducted on the discounted price. There is no way to say that the said facility can be delayed by any method by an authority other than legislature. It is, therefore, held that the subsequent explanations, letter are illegal and the letter dated 24-12-2004 shall hold field for all practical purposes with obvious retrospective effect.
45. Regarding shifting of incidence here again there is conceptual misunderstanding among the contenders. From the detailed dilation in earlier part of this order it become clear that the law allowed deduction from the present taxpayer at Rs. 0.24 which under the misinterpretation and misunderstanding of the concerned people was being deducted by Rs. 0.31. These 07 Paisa for all practical purposes belongs to the taxpayer hence its reversion is just correction of an error. The concept of passing the same to the user does not arise at all. Even otherwise it has been dilated in detail that the taxpayer being chargeable to excise duty at NIL rate had not deducted any sum from the consumer. It is, therefore, held that the additional tax deducted is the entitlement of the taxpayer and refund on the basis thereof should be issued to them by making necessary calculations on the basis thereof. However, wherever the same has already been allowed the orders passed creating demand and penalty are hereby cancelled. Consequently additional charge and penalty thereon is also deleted.
46. We have ignored the arguments in relation to the barred adjudication and certain other issues which were in relation to M/s. Dancom Pakistan (Pvt.) Limited, M/s. Global Telecom (Pvt.) Ltd. And others for the obvious reason that the case has been decided in favour of the taxpayers on above to issues.
47. It disposes all the appeals filed by the assessee in the manners and to the extent mentioned above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.