FAHIM AHMED SIDDIQUI, J.---The appellant has preferred the instant Special Sales Tax Reference Application against the judgment dated 11-12-2004 passed by the learned Customs, Excise and. Sales Tax Appellate Tribunal, Karachi (hereinafter referred as 'Tribunal' ). The appellant is dissatisfied with the observation of the learned Tribunal regarding input tax adjustment allowed to the respondent-taxpayer by interpreting section 7(2)(ii) of the Sales Tax Act, 1990 (hereinafter referred as 'the Act').
2. The taxpayer , i.e. Messrs Agro Chemicals (Pvt.) Ltd. is a company incorporated in Pakistan and the same is registered with the Sales Tax Department. There is a sister concern of the said taxpayer under the name and style of M/s. Pakistan Agro Chemicals (Pvt.) Ltd. which is not registered with the Sales Tax Department. Allegedly , the taxpayer (Messrs Agro Chemicals (Pvt.) Ltd.) has claimed input tax adjustments of Rs.8,03,919/-, against the bill of entry (BoE) of the other sister concern namely Messrs Pakistan Agro Chemicals (Pvt.) Ltd. during the tax period 08/96 and 11/96. Moreover , they also made input tax adjustments of Rs.12,92,593/- during 09/96, 10/96 and 12/96 in a similar fashion. The Additional Collector-I, Sales Tax (West), Karachi issued a notice to the respondent- taxpayer to show cause as to why the aforesaid amounts of Rs. 20,96,512/- along with the additional tax payable thereon under section 34 of the Act shou ld not be recovered from them and as to why penal action under section 33 of the Act should not be taken against them. After hearing, the Additional Collector concerned passed the Order- in-Original against the respondent by holding that since the two companies are separate entities; therefore, the input tax adjustment was not available to the respondent-taxpayer . The respondent's appeal against the Order-in- Original was also dismissed but the learned Tribunal has decided the case in favour' of the respondent-taxpayer .
Against the order of the Tribunal, the insta nt Special STRA has been filed by the department in which the following sole question was raised for the reply of this Court:- "Whether the learned Tribunal was justified in holding that the respondent i.e. Messrs Agro Chemicals (Pvt.) Ltd., was entitled in terms of Section 7(2) (ii) of the Act, to claim input tax paid on the imports made by Messrs Pakistan Agro Chemicals (Pvt.) Ltd., a separate legal entity?"
3. Mr. Amjad Javed Hashmi, the learned counsel for the department, prefers his submissions at length. According to him, as per the provision under section 7(2)(ii), only importer-cum-owner of the goods imported by him and used in the finished product, could claim adjustment of input tax. After drawing attention towards Section 2(14) of the Act as well as Sections 79 and 104 of the Customs Act, he submits that from the bare perusal of these statutory provisions, it is clear that the facility of input tax adjustment is only available to an owner-cum-importer and not to a holder of Bill of Entry (BoE). He subm its that the learned Member Technical has wrongly observed that the respondent was entitled to such adjustment of input tax paid by their unregistered sister concern while the observation of the learned Judicial Member regarding non-availability of the same to the respondent, is correct. He submits that the learned Member Judici al has rightly relied on the case of Collector Sales Tax and Central Excise (West) v. Al-Hadi Industries (Pvt.) Ltd. (2002 PTD 2457 ) and the same principle will apply to the case in hand. He submits that the Referee Member has erred in favoring the opinion of Member Technical. According to him, the learned Tribunal did not consider two key expressions "registered person" and "input tax paid by him" used in Section 7(1), which clearly manifests that such a facility is not available to the respondent-taxpayer . He further submits that the referential legislation mentioned in Section 7(2)(ii) of the Act, itself indicates that the person who is claiming input tax adjustment should be the owner as well as the importer of the goods, as such the facility of input tax adjustment was not available to the respondent-taxpayer . He further submits that the learned Tribunal erred in holding that the provision of Section 14 of the Act, did not make the registration of importers obligatory . According to him, the language of the law is very much clear and it makes the registration mandatory for the importers. He submits that the imports by unregistered persons were thus not liable for input tax adjustment. He emphasizes upon the applicability of the amended Section 7(2)(ii) of the Act retrospectively by submitting that the language of such amendment is declaratory in nature as such it can be applied retrospectively . In support of his arguments, Mr. Hashmi relied upon Naryan v. State (AIR 1938 Mad 441), Jati Ram Khan v. Janaki Nash Ghosh (33 IC 54 (Cal)), Habibullah v . Suleman Kader ((1920) 24 CN 18), and AF Ferguson v . Lalit Mohan (AIR 1954 Pat 594).
4. Conversely , Mr. Khalid Javed Khan submits that it is not in dispute that the raw material was imported and the input tax was paid at the time of import. He submits that it is also not disputed that the same raw material was used by the respondent for the manufacturing of goods against which the input tax adjustment was claimed. He further submits that there is no allegation that GD was not filed properly as per the provision of the Customs Act. According to him, the only legal objection raised by the department being that the GD should be in the name of the respondent for claiming input tax adjustm ent. He submits that the department has failed to consider the fact that Section 7(2) of the Act was amended in the year 2003 and such amendment was not applicable retrospectively i.e. when the raw material was imported by the sister concern of the respondent. According to him, this effect was properly considered by the learned Tribunal and the language of the law, available at that time; itself manifests that the input tax adjustment was available to the respondent. He drew our attention towards the fact that the legislature has not mentioned in the amended statutory provision that it will be operative retrospectively . He submits that input tax adjustment against the output text is a vested right; as such the same cannot be taken away by a simple amendment in Section 7 (2) of the Act. In support of his contentions, he relied upon Pakistan Beverage Ltd v. LTU (2010 PTD 2673 ), Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal Lahore (PTCL 2002 CL 115), Ansari Sugar Mills Ltd. v. Commissioner Income Tax, Karachi (2010 PTD 755), A&B Food Industries Ltd. v. Commissio ner, Income Tax and Sales (1992 SCMR 663), City District Government, Karachi v. Muhammad Irfan (2010 SCMR 1186), Commissioner , Income Tax v. Shahnawaz Ltd.
(1993 SCMR 73), Commissioner Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. (2009 SCMR 1279 ) and Additional Commissioner Inland Revenue v . Eden Builders Ltd. (2018 PTD 1474 ).
5. We have heard the arguments advanced by both the learned counsel and have gone through the available record and also enlightened ourselves from the cited case laws.
6. In the instant matter , the learned counsel for the department has emphasized upon the following three points, which are, according to him, necessary for reaching to an appropriate conclusion:- i. The availability of input tax adjustment to an importer , who is also the owner of the imported goods. ii. Since registration is mandatory , as such no input tax adjustment is available to an unregistered importer . iii. The provisions of Section 7(2)(ii) of the Act are directive in nature, as such the same shall be applicable retrospectively .
In the instant, matter , the dispute is with regard to the availability of input tax adjustment to the respondent on imports by their unregistered sister concern. There is no dispute regarding the import of the goods, which was used by the respondent-taxpayer in the finishe d product. It is the question of vital importance that Section 7(2)(ii) of the Act was not in its present form at the time when the imports were made. The goods were imported in 1996 while the said statutory provision was amended in the year 2003. The comparison of the said statutory provision, before and after amendment, is given as 'under; Section 7(2)(i1) of Sales T ax Act Before Amendment i.e. at the time of import in 1996After Amendment in 2003 In case of goods imported into Pakistan, he holds the bill of entry cleared by Customs under Section 79 or Section 104 of the Customs Act, 1669.In case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number , duly cleared by the Customs under Section 79 or Section 104 of the Customs Act, 1969.
7. From the above juxtaposition comparison of the language of Section 7(2)( ii) of the Act, before and after amendment, it can be noted that the underlined phraseology was not available in the year 1996. From the underlined portion, it is manifested that presently the bill of entry (BoE) or goods declaration (GD), should be in the name of person claiming input tax adjustment and he should also be registered with the sales tax department.
There is no question that after amendment in Section 7(2)(ii) of the Act, it was necessary that the input tax adjustment was available to such import er only who was the owner of the imported goods and must have been registered with the Sales Tax Departmen t. Nevertheless, prior to the amendment, no such condition was imposed under the law. At that time the requireme nt was that the person, who was claimin g input tax adjustment, must be the holder of the bill of entry cleared by the customs department under section 79 or section 104 of the Customs Act, 1909, irrespective of the fact that who was the importer of the goods used in finished product.
8. Learned counsel for the appellant emphasised upon the word 'owner' used in Sections 79 and 104 of the Customs Act and according to him being referential legislation, the word 'owner' used in Section 79 or 104 should be construed as a mandatory requirement of the law. We are unable to agree with such proposition placed by the learned counsel for the appellant. Referen tial legislation is of two types. One is where an earlier legislation or some of its provisions are incorporated in the subsequent legislation. In such case, the provision of earlier legislation or its portion so incorporated are considere d as the part of the subsequent legislation. The other type of 'referential legislation' is that where the earlier legislation may not be made the part of subsequent legislation but the same is used only for reference of a broad nature as the law on subject generally , and the same is clarified from the context of the subsequent Statute. This method of referential legislation may be advantages for parliamentary and administrative point of view but at the same time, it is always a question of construction whether it falls under first or second category for which the context of the statute are to be considered. Keeping in view of text and context of Section 7(2)(ii) of the Act, we are of the view that the same falls under the second category i.e. only referring the necessary requirement about bill of entry (BoE) or goods declaration (GD) that the same should be cleared by the Customs Authority under the provisions of any of the two referred statutes. Hence, we are of the view that in the year 1996, when the goods were imported, it was not necessary that the input tax adjustment was available to the owner of the goods only. It is clear from the unambiguous language of the statute that only holder of bill of entry
(BoE) would be sufficient for claiming the input tax adjustment. Similarly , the phrase 'showing his sales tax registration number' was inserted in the statue by amendment of 2003; therefore, it was also not necessary in the year 1996 that the importer should be registered with the Sales Tax Department and such registration was made mandatory by subsequent amendment in Section 14 of the Act through Finance Act, 1998.
9. The only issue now left is regarding retrospectivity of the amendment in Section 7(2)(ii) of Act. Mr. Hashmi highlighted this aspect at some length by submitting that being declaratory in nature, the same is applicable retrospectively . We are of the view that such contention is not correct. The cardinal principle of construction is that every statute prima facie has prospective application unless it is expressly provided that the same will have retrospective operation. So far as declaratory amendment is concerned, it is also not necessary that a declaratory amendment shall be applicable retrospectively . The rule is that if a declaratory amendment is made to supply some obvious omission in the previous statute or to 'explain' something only then the subsequent declaratory amendment will have a retrospective application.
10. The Supreme Court of India in a case reported as Gurbachan Singh v. Satpal Singh and others (1990 AIR 209) has referred to Halsbury's Laws of England (Fourth Edition), V olume 44 page 570 as under: "The general rule is that all statutes, other than those which are merely declaratory or which relate only to matters of procedure or of evidence, are prima facie prospective, and retrospective effect is not to be given to them unless, by express words or necessary implication, it appears that this was the intention of the legislature "
11. It is quite obvious that the referred amendment is neither remedial nor explanatory; as such the same cannot be treated as retrospective. Another aspect is important. The said amendment deals with the input sales tax adjustment against the output tax, which is held as a vested right by the Hon'ble Apex Court in the case reported as Pakistan Beverages Ltd. v. LTU (2010 PTD 2673 ). It is a settled law that the legislation that touches vested rights of an individual cannot be given retrospective effect. It is also a settled legal proposition that the tax/fiscal statutes operate prospectively and not retrospectively unless clearly indicated by the legislature. In this respect reliance may be taken from a case of the Hon'ble Supreme Court reported as Member (Taxes) BOR, Punjab and others v. Qaisar Abbas and others (2019 SCMR 446 ).
12. From the above discussion, it now becomes crystal clear that in the present case .the input tax adjustment is available to the respondent taxpayer on the bill of entry issued to their unregistered sister concern. Resultantly , the referred question is replied in af firmative i.e. against the department and in favour of the respondent.
13. The office is directed to send a copy of this order under the seal of the Court to the Registrar of learned Appellate Tribunal, as required under Section 47(5) of the Sales Tax Act, 1990.