Shahid Jamil Khan, J. This Reference Application, by Revenue, is to assail order dated 31.01.2019 passed by the Appellate Tribunal Inland Revenue ("Appellate Tribunal") . Department' s appeal was dismissed, holding that beneficial notification shall apply retrospectively .
2. Relevant facts are that respondent taxpayer , being a rice mill, had special tax year staring from 1st of September till 31st of August. Minimum tax, under Section 113 of the Income Tax Ordinance, 2001 ("Ordinance of 2001") , was being paid on normal rates till issuance of S.R.O. 57(I)/2012 dated 24.01.2012 ("SRO 57"). Clause 13 was inserted in Part III of Second Schedule to the Ordinance of 2001, reducing the tax rate of tax by 80%. Taking advantage of the SRO 57, tax was depo sited at the reduced rate for tax year 2012. Department, disagreeing on payment at reduced rate retrospectively , proceeded under Section 122(5A) and raised a demand of less paid tax.
The amended assessment order was successfully assailed before the first appellat e authority . Department' s appeal was dismissed by the Appellate Tribunal, giving following reasons:- "4. We have heard the learned DR and perused the orders of the authorities below . The learned (CIR(A) while disposing appeal of the taxpayer observed that the AOP taxpayer has been operating a rice mill and as per clause
(13) Part-III of 2nd Schedule to the Income Tax Ordinance, 2001 inserted vide S.R.O.57(1)/2012 the rate of minimum tax under section 113 on annual turnover under section for rice mills stand reduced by eight percent, whereas the minimum tax u/s 113@ 1% on declared turnover has been charged wrongly . Regarding application of S.R.O.57(1)/2012 retrospectively reliance was placed on case reported as 66 Tax 125 wherein Hon'ble Supreme Court of Pakistan has been pleased to answer the question in affirmative holding that remedial law can be given retrospective effect. For all the reasons given supra, the learned CIR(A) annulled the amended order passed under section 122(5A) which calls for no indulgence being in consonance with the pronouncements of the higher legal fora."
[emphasis supplied]
3. Learned counsel for the applicant department submits that the SRO 57 could not be given retrospective effect, as the relied judgment by Hon'ble Supreme Court was not relevant to the facts of this case. He explained that tax year 2012, being special year in respondent' s case, ended on 31.07.201 1, whereas SRO 57 was issued on 24.01.2012, therefore, could not be applied retrospectively .
4. Learned counsel for the respondent did not deny the fact that relevant tax year ended on 31.08.201 1, when no such concession in shape of exemption was available. However , has placed reliance on different judgments by the Superior Courts contending that SRO 57 being beneficial is to be applied retrospectively .
5. Arguments heard. Record perused.
6. It is an admitted fact that SRO 57 dated 24.01.2012, granting exemption of 80% in tax rate, was not issued till closure of special tax year on 31.08.201 1. It is a basic rule for tax laws that the law existing, in a particular tax year or tax period is applicable for the purpose of determining tax liability . The question in this case is; "whether any notification of exemption reducing tax rates, available on the date of filing return would be applicable retrospectively , on the principle of interpreting curative and remedial legislation."
7. The Appellate Tribunal relied upon the judgment in Commissioner of Income Tax v Shahnawaz Ltd. and others [(1992) 66 T ax 126 = 1993 SCMR 73 ].
Facts of Shahnawaz' s case are that an amendment was introduced in subsection (6) of Section 18-A of Income Tax Act 1922 through Finance Act 1973, whereby period for payment of additional tax @ 2% per mensum, for the shortfall of payable tax, was curtailed to fifteen month. The reasons for declaring the amendment as 'curative and remedial legislation' was that the additional tax was to be paid till the time regular assessment was made and for any reason, if regular assessment was delayed, the assessee had to pay the additional tax.
In this backdrop of facts the assessee was given benefit retrospectively , by declaring the amendment as 'remedial legislation' . Relevant excerpt from the judgment in Shahnawaz' s case is reproduced:- "However , nothing has been adduced before us in support of the last mentioned submission. As explained in Crawfords "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 instance 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 upto the date of assessment even though the finalisation 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 ."
[emphasis supplied] Unfortunately , the Appellate Tribunal has relied upon the judgment, without referring to the context and content. The Apex Court had declared the circular as remedial and curative by referring to the hardship or injury , which was eased.
8. In this Court' s opinion, the term "beneficial legislation" , though used in judgment Messrs Army Welfare Sugar Mills Ltd and others v Federation of Pakistan and others (1992 SCMR 1652 ), is a misnomer for "curative and remedial statutes/ legislation" , which is defined in Black Law Dictionary (Ninth Edition, page 1543 & 1544) as under: Curative Statute: An act that corrects an error in a statute' s original enactment, usu. An error that interferes with interpreting or applying the statute.
Remedial statute A law that af fords a remedy . Also termed curative statue.
There is no term as "beneficial statute", used in this dictionary or text books on interpretation of statutes.
In the book "Understanding Statutes" by Mr. S.M. Zafar , Chapter VII, titled "Curative Remedial and Penal Act", is encompassing important judgments from Pakistan jurisdiction on the subject, including relevant excerpt from the notable foreign books on interpretation of statute. Relevant portions are reproduced for facility:- "American Jurisprudence on remedial statutes: Whereas legislation which has been regar ded as remedial in its nature includes statutes which abridge superfluities of former laws remedying defects therein, or mischief thereof implying an intention to reform or extend existing rights, and having for their purpose promotion of justice and the advancement of public welfare and of important and beneficial public objects , such as the protection of health, morals and safety of society , or of public generally .
Crawford States: Therefore, Remedial Acts are those enacted in order to improve and facilitate remedies already existing for the enforcement of rights and for the redress of wrongs or injuries as well as to correct defects, mistakes and omissions in a former law .
A Remedial Act is defined by Blackstone; as "one made to supply such defects and abridge such superfluities in the common law as arise, either from the general imperfection of all human laws, from change of time and circumstances, from the mistake and unadvised determinations of unlearned (and even learned) Judges, or from any other cause whatever ." After quoting this definition, Craies, observes this definition is too narrow for the operation of Remedial Acts and is not confined to common law, but extends also to prior enactment. What is known as Remedial Act is an Act introduced by parliament to remedy what parliament perceives to be an existing problem on account of some obscurity in the words of the statute.
The question whether remedial statues can be given retrospective effect has been considered by Crawford in his "Statutory Construction" (1940 Edn.) in para. 282 as follows: "Even remedial statues may be subject to the principles hereinto force discussed, opposing any construction which will give the enactment retrospective operation. Yet, since remedial statutes are usually looked upon with favour by the Courts, they should be liberally construed. But there appears to be considerable confusion in the cases with reference to giving remedial Acts retrospe ctive effect through construction. If the rule of liberal construction is to be applied, as it obviously should then any doubt should be resolved in favour of retrospective operation, if such operation does not destroy or disturb vested rights, impair the obligations of contracts, create new liabilities violate due process of law or contravene some other Constitutional provision, and if such operation will carry out the intention of the legislature as ascertained through the application of the principle of liberal construction. In other words, a statute relating to remedial law may properly , in several instances, be given retrospective operation."
The High Courts of Pakistan have held in various cases that remedial and curative statues are always retrospective in nature.
Where the remedial and curative statute is a beneficial legislation or its purpose should be to correct the existing law, redressing an existing grievance or introducing regulations conducive to public good and remedies defect in the pre-existing law. They are looked upon favourable by the courts and liberally construed. The law is to be given retrospective operation, if such operation does not destroy or disturb the vested right, impair the obligations of contract, create new liabilities, violate due process of law or contravenes some other constitutional provisions.
As stated in American Jurisprudence: "A retrospective law, in a legal sense, is one which takes away or impairs vested rights acquired under existing laws or creates a new obligation and imposes a new duty, or attaches a new disability , in respect of transactions already past. Hence, remedial statutes, or statutes relating to remedies or modes of procedure, which do not create new or take away vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing , do not come within the legal conception of a retrospective law, or the general rule against the retrospective operation of statues a fortiori, a statute or amendment which furnishes a new remedy , but does not impair or effect any contractual obligations or disturb any vested rights, is applicable to proceedings begun after its passage, though relating to acts done previously thereto. A new statute, which deals with procedure only, would prima facie apply to all actions, which have accrued or are pending and future actions. There is, however , a definite exception that the remedy provided by the statute will not ipso facto reach a case when before the statute there was no remedy at all. However , statutes or amendments relating to procedure are not necessarily retrospective in their operation. Such Acts are undoubtedly within the general rule against retrospective construction where the effect of giving them a retrospective operation will be to impair the obligation of contracts or to disturb vested rights, and in such case will not be given a retrospective operation unless there is some languag e in the statute indicating such a legislative intent. Where the language of a Remedial Act clearly relating to past transactions is broad enough to extend to like causes in the future, it will be construed to operate prospectively also if a contrary intent is not manifest."
[emphasis supplied] From the quoted material, ibid, it can be deduced that the "Purpose of Remedial and Curative Legislation" is to abridge superfluities, remove defects or mischief, from an existing law, with an intention to redress wrongs and injuries being impinged upon the existing rights. Such legislation can be applied retrospectively , if such intention of the legislature is manifest from the amending law itself. In other cases, though liberal construction by the competent court, after declaring it remedial or curative for furtherance of remedy or confirmation of the rights already existing. Even such legislation cannot be applied retrospectively if it curates new rights or takes away existing rights or ef fects the past and closed transactions.
If this test is applied to the proposition, under discussion, necessary corollary would be that no right to claim 80% reduction in tax rate was existing till closure of tax year 2012 on 31.08.201 1, as the exemption notification was issued on 24.01.201 1 hence, could not be applied retrospectively . Exemption notific ations are always beneficial but are not curative or remedial generally . Power to grant exemption is generally exercised through delegated subordinate legislation by issuing notifications (SROs). General rule is that a notification cannot operate retrospectively , but in case it removes defects, superfluities or mischief, from an existing notification, to advance remedy for enforcement of existing rights, it can be retrospectively applied by the authority issuing it, like it was done in Army Welfare Sugar Mills' case , or courts can identify the injury or hardship, being removed and declare it accordingly , before holding it to apply retrospectively as was done in Shahnawaz' s case , supra .
9. In Army Welfare Sugar Mills' case , inter-alia, SRO 814(I)/85 dated 29.08.1985 ("SRO 814") issued under Section 12-A of Central Excises and Salt Act, 1944 ("Act of 1944") was, inter alia, in question. Through the SRO 814 retrospective exemption, from excise duty, was granted to new sugar mills, which commenced their business from crushing season 1982-83 onwards. However , the Collector refused to allow the exemption, by declaring it void, being not applicable retrospectively . His order and power to declare the SRO 814, issued under Section 12-A of the Act of 1944, were under discussion and it was merely observed that beneficial notification is applicable retrospectively . Relevant paragraph from the judgment dealing with facts, is reproduced: "8. That the old and new sugar mills continued to enjoy the concession under above SRO till the issuance of the two impugned SROs followed by a letter issued by the Customs and Central Excise Department informing the private appellants that according to the Budget Speech for the year 1989-90, exemption of Central Excise Duty on cane sugar for the older as well as for the new mills had been withdrawn with immediate effect and, therefore, the entire stock of sugar available in the factories was subject to Central Excise Duty at the rate of Rs.2.15 per kilogram. Some of the private appellants were directed to refund the amounts allegedly wrongly adjusted on the basis of notification, dated 29.8.1985 granting exemption from payment of Central Excise Duty on sugar retrospectively for the years 1982-83 and 1983-84. Thereupon, the above 20 constitution petitions were filed, which were heard together and disposed of by the aforesaid common judgment in the above terms. The private appellants and the Federation of Pakistan filed the above petitions, for leave to appeal. Leave to appeal was granted to consider the above questions."
[emphasis supplied]
10. The SRO 814 was itself giving the concession with retrospective effect, which was issued on 29.08.1985, extending refund/adjustment of the excise duty, already paid for crushing season 1982-83 and 1983-84, retrospectively by express words in paragraph No.2 of the SRO, which reads; "(2) The new sugar mills which commenced production during 1982-83 and 1983-84 and which have already paid excise duty on the first two years of their production of sugar will be entitled to refund/adjustment of duty in such a manner that fifty per cent of the total amount of such refund/adjustment will be made against the duty payable by them during 1985-86 and fifty per cent against the duty due from them during 1988-89."
The then, Revenue of ficer, denied retrospective refund/ adjustment through notice, in following words; "(2) In view of the settled law that a Notification cannot have retrospective effect, Notification No. SRO 814(I)/85, dated the 29th (sic) 1985, was void ab initio in so far as it purported to grant exemption retrospectively ."
11. The discussion, basically , was that a Revenue Authority could not declare a notification as void ab initio.
Revenue side defended the impugned order . Relevant excerpt from the judgment, deciding the issue, is as under:- "21. It seems to be well-settled proposition of law that a notification which purports to impai r an existing or vested right or imposes a new liability or obligation, cannot operate retrospectively in the absence of legal sanction, but, the converse i.e. a notification which confers benefit canno t operate retrospectively , does not seem to be correct proposition of law. It may be observed that para 2 of the above SRO 814(I)/85 was a beneficial provision and, therefore, in the absence of any prohibition in the Act or any other law, it was valid. It is also significant to note that the above SRO 814(I)/85 was issued by the Federal Government in exercise of power conferred on it under section 12-A of the Act, whereas, the above impugned notices dated 18.4.1989 have been issued by the Collector . It is not understandable as to how the Collector , Central Excise and Land Customs, could have declared the above SRO as void ab initio in presence of sectio ns 38 and 41 of the Act. The former section provides that all rules made and notifications issued under this Act shall be made and issued by publication in the official Gazette. All such rules and notifications shall thereupon have effect as if enacted in this Act, whereas, the latter section lays down that 'all officers and persons employed in the execution of this Act and the rules made there under shall observe and follow the orders, directions and instructions of the Central Board of Revenue'.
It may also be observed that nothing has been brought on record by the official respondent to indicate that above SRO 814(I)/85 was not issued competently ."
[emphasis supplied] While holding that the Collector had no authority to declare the SRO 814, as void ab initio, it was only remarked that its paragraph 2 being beneficial (instead to terming it as remedial) could operate retrospectively . The remarks were followed by reiterating the settled law that a notification "purporting to impair and existing or vested right or impose a new liability or obligation" cannot operate retrospectively . This judgment is frequently referred in many subsequent judgments, though the law on "curative and remedial law" has not been analyzed, in this judgment, in a manner to make it an enunciation on this legal issue for the purpose of Article 189 of the Constitution. The taxpayers are claiming every legislation, giving benefit, as retrospective, ignoring the true spirit of the principle of interpretation, discussed herein above.
12. Under the circumstances, our answer to the following question and the legal question framed in paragraph No. 6, is in negative .
"Whether S.R.O. 57(I)/2012 dated 24.01.2012 would apply retrospectively for the tax year 2012 which being special year ended on 31.08.201 1?"
The Tax Reference is decided in favour of applicant department.
13. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal Inland Revenue as per Section 133(5) of the Income Tax Ordinance, 2001.