This Sales Tax Appeal has been filed by the Department against the Order No,12/2014, dated 15.12.2014, passed by the Commissioner Inland Revenue (Appeals-II), Karachi on the following grounds.
(1) That the order of the learned Commissioner -IR (Appeals) is bad in law and facts of the case.
(2) That the above mentioned order was passed ignoring the explicit provision of law and rules made thereunder .
(3) That the learned Commissioner -IR (Appeals) was not justified in deleting the amount of sales tax as which was short paid due to increase of rate of sales tax from 16% to 17% vide Finance Bill for the year 2011-12 and default surcharge and penalty without considering the provision of sections 3, 10, 1 1, 34, 33 of the Sales T ax Act, 1990
2. Brief facts of the case are that the taxpayer is public limited company engaged in generation and distribution of electricity . Audit of the sales tax record during the period July-2010 to June-201 1 revealed that sales tax at the rate of 16 percent was paid as against 17 percent on the sale of electricity which resulted in alleged short payment of sales tax at Rs,1,592,525/- to be recovered along with default surcharge and penalty . The Deputy Commissioner Inland Revenue (DCIR) therefore issued notice to the taxpayer and obtained explanation for the alleged shortfall.
The matter was concluded by rejecting the contention of the taxpayer .
3. Being dissatisfied, the taxpayer preferred appeal before the Commissioner Inland Revenue (Appeals) [CIR(A)] who held that amendment in law ensuing reduction of sales tax rate from 17 percen t to 16 percent is beneficial and thus retrospective in nature and therefore entitles the taxpayer to reap the benefit of the said amendment.
4. Now the department, being dissatisfied with order of the CIR(A), has come up to this forum.
5. On the date of hearing, Mr. Abdul Hameed Sheikh, the Departmental Representative (DR) appeared on behalf of the appellant/ department while Mr . Khadim Rasool ITP , appeared on behalf of the respondent/taxpayer .
6. The learned DR argued that the order of the learned CIR(A) is bad in law and facts of the case. He further argued that order was passed ignoring the explicit provision of law and rules made thereunder . The learned DR argued that the CIR (A) was not justified in allowing relief to the taxpayer by directing that the taxpayer should be allowed to retrospectively avail the benefits of concessional rate of sales tax of 16% as against 17%.
7. On the other hand, Mr. Khadim Rasoo l ITP, vehemently opposed the contentions made by the learned DR. He argued that the speaking order passed by the learned CIR (A) is well within the framework of law and carries no illegality , irregularity or infirmity in it.
8. We have heard arguments advanced from the rival sides and have also perused the relevant case record. First, we will see that under what circumstances and in what manner , the learned CIR(A) has decided the issue of retrospective application of reduced rate of tax from 17 percent to 16 percent. While adjudicating the issue, the learned CIR(A) through his impugned order has observed that:-- "Legislature imposed sales tax in terms of section 3 of the Sales Tax Act, 1990. The rate of this sales tax has been changing from 12.5% to 17% etc. These changes occurred from time to time way back from the Finance Act, 1993.
Last such concession was allowed to the sales taxpayers through amendment introduced by Finance Act, 2011 issued on 22.06.201 1, which as per wisdom of the Deputy Commissioner Inland Revenue was applicable prospectively i,e, w.e.f. 01.07.201 1. Although the appellant contended before him that the amendment introduced was applicable for the Tax Period June 2011, but in his enthusiasm for generating revenue, he lost the sight of settled principle of interpretation of law whereby all remedial and beneficial legislation has retrospective effect.
Since through insertion of amendment introduced by Finance Act, 2011 applicable from 22.06.201 1, a concession has been provided to the sales taxpayers for payment of sales tax @ 16% w.e.f. 22.06.201 1, ought to operate retrospectively . There is abundant case law on the subject. A few reported judgments are reproduced as under: i. Remedial and curative legislation has retrospective ef fect. CIT v . Shahnawaz Ltd. and others 1993 SCMR 73 . ii. Beneficial executive orders/ notification has retrospective effect. Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 . iii. All provisions which come- to cure/redress or to all relief to assesses will always have effect retrospectively .
2004 PTD (T rib.) 2417
9. In nutshell, the learned CIR(A) has maintained that the reduction of sales tax rate from 17 percent to 16 percent would hold ground for the reason that all remedial and beneficial legislation has retrospective effect. To strengthen his stance, he has cited three judgments of appellate fora which we would appropriately analyze one by one.
10. In the first case law cited by the learned CIR(A) entitled CIT v. Shahnawaz Ltd. and others 1993 SCMR 73 the Hon'able Supreme Court of Pakistan has been pleased to hold that remedial and curative legislation has retrospective effect. In another case law quoted as Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 , it has been held by the Hon'ble Apex Court that beneficial executive orders/notification has retrospective effect. In the third case law quoted in the impugned order of the CIR(A) as 2004 PTD (Trib.) 2417, it has again been held that all provisions which come to cure/redress or to allow relief to the assessee will always have retrospective ef fect.
11. Against the backdrop of the case laws mentioned above, two fundamental principles of interpretation have been decided. (i) "Remedial and curative legislation has retrospective effect" and (ii) "Beneficial executive orders/notification has retrospective ef fect".
12. Coming to the instant case under appeal before us, we will attempt to see that whether the amendment brought through legislation whereby tax rate from 17 percent to 16 percent is remedial/curative or concessional in nature.
The words remedial and curative as per The Concise Oxford Dictionary (The New Edition for the 1990s) are defined both as under: Remedial: Affording or intended as a remedy Curative: T ending or able to cure (esp. disease)
13. As per the Chambers Dictionary , the two words are defined as under:-- Remedial: T ending or intended to remedy Curative: T ending to cure
14. The Black's Law Dictionary (Ninth Edition) explains "Remedial Statute" as "A law that affords a remedy .--- Also termed curative statute ". As per the same dictionary , "Curative Statute" is explained as "An act that corrects an error in a statute's original enactment, usu (sic.), an error that interferes with interpreting or applying the statute".
15. Keeping in view the above definitions, we are of the considered view that the enactment reducing the rate of sales tax from 17 percent to 16 percent does not, in any manner , comes within the ambit of curing a mistake, error or ambiguity . The same however can be termed as concessional to encourage businessmen. Therefore two decisions of the Hon'ble Supreme Court of Pakistan quoted above are clearly distinguishable with the present case before us. With regards to retrospective application of non-remedial and non-curative legislation which in essence is carrying a concessional benefit, it would be advantageous to refer to the judgment of Hon'able Lahore High Court Multan Bench in a case titled CIR v. Mrs. Ambreen Fawad TR 51 2011 04/11/2013/2202 TAXATION PTD PTCL PLD. The Hon'ble Court inter alia states that "the legal position that emerges is that generally beneficial legislation is to be given liberal interpretation, however for the said legislation to have a retrospective effect, the beneficial legislation must carry curative or remedial content. Such legislation must, therefore, either clarify an ambiguity or an omission in the existing law and must therefore be explanatory or clarificatory in nature. While beneficial legislation is to be liberally interpreted, in order to advance the beneficial object of the statute, it in no manner means that "beneficial legislation" or "liberal interpretation" necessarily includes or interchangeably means retrospective application of the statute. Unless the legislation is remedial, curative, explanatory or clarificatory , it cannot be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature.
Reliance with advantage is placed on "Commissioner of Income Tax v. Shahnaw az Ltd. and others " and State Bank of Pakistan v . Messrs Faisal Mills Limited" (1997 SCMR 1244 )."
16. The CIR(A) also ignored the legal position that sales tax is an indirect tax and any reduction in tax rate is in no way beneficial to a person or business registered for sales tax purposes. Any such benefit in any case is for general public. Therefore, claim of the Respondent Company that reduction in rate of sales tax was available with retrospective af fect as beneficial to them, is in any case wrong and baseless.
17. Keeping in view the above legal and factual position we have no hesitation to hold that since the date of effect of amendment to reduce sales tax rate from 17 percent to 16% is specifically provided in the Finance Act, 2011 from 01 July 2011, and such amendment is concessional or beneficial to general public being indirect tax and not for Registered persons like Respondent company , therefore, its application cannot have retrospective effect.
Therefore, we find no defect in the order of the DCIR which renders the impugned order of the CIR(A) liable to be vacated on this score.
18. Similarly the learned CIR(A) has misdirected himself by placing reliance on the case law reported as Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 which specifically speaks about beneficial executive orders/ notifications related direct taxes i,e, Income Tax to have retrospective effect. Therefore, the case relied upon by the learned CIR(A) is distinguishable and entirely on different footings As an indirect tax like sales tax which is applicable on each and every transaction separately once a transaction completed and its effects has transferred to the final consumer/ general public and it becomes a past and closed transaction which cannot be amended or corrected by assuming retrospective effect of a so called beneficial notification or executive order . Hence, it is abundantly clear that beneficial effect of reduction in rate of sales tax was not ef fected through an executive order/ notification.
19. In view of the facts as discussed above, the impugned order by the learned CIR(A) is vacated.