IJAZ ANW AR, J.---This reference under Section 47(1) of the Sales Tax Act, 1990, has been filed for declaring the orders dated 14.5.2009, 05.5.2010 and impugned order dated 17.12.2014, passed by the Appellate Tribunal Inland Revenue, Islamabad, to be void, illegal, incorrect as well as against the law .
2. Facts in brief, are that the applicant deals in business of trading of Computers hardware and related peripheral equipments and services. The supply 'of computer hardware was exempted vide Serial No.40 of the Sixth Schedule of Sales Tax Act, 1990, which was withdrawn through Finance Act, 2006. The dispute between the parties is the date of withdrawal of exemption, as per respondent the date of withdrawal of exemption is 06.6.2006, under the Provisional Collection of Taxes Act, 1931, when the budget proposal was announced by the Minister Finance, whereas the contention of the applicant is that the taxes cannot be imposed/recovered under the said Act of 1931, for the reasons that protection is given by the Parliament for implementation of the Act of 1931. The case was adjudicated upon by the respondent 'No.1 and adjudged that the Finance Act, 2006 was assented by the President of Pakistan on 30th June, 2006, and held that the intervening period i.e. 06.6.2006 to 36.6.2006, being lawfully covered by the Provisional Collection of Taxes Act, 1931. The applicant being aggrieved of the order dated 14.5.2009 of respondent No.1, assailed the same in appeal under Section 45-B of the Sales Tax Act, 1990, before respondent No.3, which was rejected vide order dated 05.5.2010. The second appeal before respondent No.4 met the same fate vide impugned order dated 17.12.2014, hence this reference.
3. Argument heard and record perused.
4. Perusal of the record reveals that the petitioner is an organization, engaged in trading of computer hardware and related equipment. The petitioner entered into an agreement on September , 9 2005, with Federal Directorate of Education for supply of computers to 81 Educational Institutes (school/colleges) in Islamabad. Due to natural catastrophe of earthquake in October , 2005, the supply was delayed till clearance of building where labs were to be setup. The delivery of whole of supplies contracted under abovementioned agreem ent was completed well before June, 31, 2006. The exemption on supplies of "computer hardware" which was available under serial No.40 of the Schedule to the Sales Tax, 1990, was withdrawn w.e.f. 01.7.2006 vide Finance Act, 2006, however , in view of declaration made through The Provisional Collection of Taxes Act, 1931 (XVI of 1931), the withdrawal of exemption referred in the Finance Act, 2006, was given ef fect from 6th June, 2006.
5. The point for determination before this Court is whether the Finance Act, 2006, would be applicable w.e.f. 01-7- 2006 or from 06.6.2006, for which declaration was issued under the Provisional Collection Taxes Act, 1931. The petitioner while executing its agreement with the Federal Government supplies computer hardware etc, well before the promulgation of Finance Act, 2006, when exemption of sales tax on computer hardware etc was not yet withdrawn. The relevant provisions of the Finance Act, 2006, are reproduced for convenience of reference:- The FINANCE ACT, 2006 [ACT No.III of 2006] AN ACT To give effect to the financial proposals of the Federal Government for the year beginning on the first day of July, 2006, and to amend certain laws WHEREAS it is expedient to make provisions to give effect to the financial proposals of the Federal Government for the year beginning on the first day of July, 2006 and to amend certain laws for the purpose of hereafter appearing; It is hereby enacted as follows:-
1. Short title, extent and commencement.- (1) This Act may be called the Finance Act, 2006.
(2) It extends to the whole of Pakistan.
(3) It shall, unless otherwise provided, come into force on the first day of July , 2006.
(21) in the Sixth Schedule, in Table-I in colum n (1).---(a) serial numbers 4, 5, 6, 7, 8, 9, 10 and 40 and the entries relating thereto in columns (2) and (3) shall be omitted.
(underlines supplied).
6. We have also examined the relevant provisions of the Provisional Collection of Taxes Act, 1931. It is also reproduced being relevant for the purpose of present controversy .
1. Short title. This Act may be called the Provisional Collection of Taxes Act, 1931.
2. Definition. In this Act, a "declared provision" means a provision in a Bill in respect of which a declaration has been made under section 3.
3. Power to make declarations under this Act. Where a Bill to be introduced in [Parliament] on behalf of Government provides for the imposition or increase of a duty of customs or excise, the Central Government may cause to be inserted in the Bill a declaration that it is expedient in the public interest that any provision of the Bill relating to such imposition or increase, shall have immediate ef fect under this Act.
4. Effect of declarations under this Act, and duration thereof.
(1) A declared provision shall have the force of law immediately on the expiry of the day on which the Bill containing it is introduced.
(2) A declared provision shall cease to have the force of law under the provisions of this Act-
(a) When it comes into operation as an enactment, with or without amendment, or
(b) When the Central Government, in pursuance of a motion passed by [Parliament], directs, by notification in the Official Gazette, that it shall cease to have the force of law , or
(c) If it has not already ceased to have the force of law under clause (a) or clause (b), then on the expiry of the seventy-fifth day] after the day on which the Bill containing it was introduced."
Similarly , declaration under the Provisional, Collection of Taxes Act, 1931 (XVI of 1931) was Gazette Notified through corrigendum to the Finance Act, 2006, only on 02.07.201 1. It is also reproduced herein below:- "DECLARA TION UNDER THE PROVISIONAL COLLECTION OF T AXES ACT, 1931 (XVI OF 1931)
The provisions of sub-clause (46) of clause 8 and sub-clause (21) of clause 16 of this Act shall have effect, for the purpose of this declaration and of the provisions of Provisional Collection of Taxes Act, 1931 (XVI of 1931) as if they were provisions for imposition of duties of customs and exemption of sales tax or withdrawal thereof respectively and it is hereby declared accordingly in terms of section 3 of the Act that it is expedient in the public interest that the provisions of the said clauses have effect on 6th June, 2006 under the Act, and for the purposes of above declaration the provisions of parag raph (i) of sub-clause (12) of clause 20, for increase or decrease of excise duty shall take immediate ef fect under that Act."
From the preamble and applicability clause of the Finance Act, 2006, it is clear that removal of exemption or Sr.40 of the Sixth Schedule will be applicable w.e.f. 01.7.2006. Though through Finance Act, 2006, different fiscal statute have been amended but each amended law was given effect from 01.7.2006, thus amendment in the Sales Tax Act, 1990, cannot be given retrospective effect in any case. In the case of Engineer Iqbal Zafar Jagra v.
Federation of Pakistan and others (2013 SCMR 1337 ), similar declaration made under the. Provisional Collection of Taxes Act, 1931 (XVI of 1931) under discussion before the' apex Court and it was resolved as under:-
20. It is well settled proposition that levy of tax for the purpose of Federation is not permissible except by or under the authority of Act of Majlis-e-Shoora (Parliament). Reference in this behalf may be made to the case of Cyanamid Pakistan Ltd. v. Collector of Customs (PLD 2005 SC 495), wherein it has also been held that such legislative powers cannot be delegated to the Executive Authorities. Also see Government of Pakistan v.
Muhammad Ashraf (PLD 1993 SC 176) and All Pakistan Textile Mills Associations v. Province of Sindh (2004 YLR 192 ).
21. There cannot be two opinions that the Declaration dated 13-6-2013 inserted in the Bill unless passed by the Mailis-eShoora (Parliament) was an executive act of the Government and not a legislative act of the Majlis-e- Shoora (Parliament), therefore, imposition or increase as well as reduction of the sales tax with immediate effect in pursuance of the Declaration made under section 3 of the Act, 1931 was against salutary principle envisaged by Article 77 of the Constitution, which lays down that no tax shall be levied for the purpose of Federation.
Thus, in light of the above discussion, any provision of an enactment, which is against the provisions of Article 77 of the Constitution and infringes the Fundamental Rights of the citizens enshrined in Articles 9 and 24 of the Constitution by depriving them of their life or property without any proper legislation, is also tantamount to violation of Article 3 of the Constitution and the same cannot be considered to be a legislative or a sub-legislative instrument for the purpose of imposing or increasing GST pending passing of the Bill by the Majlis-e-Shoora (Parliament), which has already been tabled before it. As such, section 3 being contrary to Articles 3, 9, 24 and 77 of the Constitution is declared to be unconstitutional and void.
Now turning towards the provisions of section 4 of the Act, 1931, enforceability of which depends upon the Declaration inserted by the Government in the Bill and as per subsection (1) ibid the Declaration has been given, the force of law with immediate effect, suffice it to observe that the Declaration in terms of section 3 does not have the status of legislation or even sub-legislation, therefore, for all intents and purposes, it does not have the force of law for the purpose of effecting the increased levy of GST, as it has been propose d in the Bill. As far as the word ."law" is concerned, though the same has been used in various Articles of the Constitution, such as Articles 4, 8, etc., but has not been defined in the Constitution of 1973 separately .
Above are the reasons for the short order of even date, which is reproduced hereinbelow:--
(i) The Government is not authorized to impose or increase Sales Tax from 16% to 17% on the value of taxable supplies, i.e. by inserting in the Finance Bill (Money Bill) 2013-2014 a declaration under section 3 of the Provisional Collection of Taxes Act, 1931 (hereinafter referred to as "the Act, 1931 1 as such declaration neither has the status of legislation nor sub-legislation, therefore, it has no force of law .
AND Immediate recovery of Sales Tax from 16% to 17% on the value of taxable supplies w.e.f. 13-6-2013 is unconstitutional being contrary to Articles 3, 9, 24 and 77 of the Constitution".
(Underlines provided for emphasis)
7. Keeping in view the reported judgment of the apex Court, we find that the controversy has already been set at rest by the apex Court. The declaration regarding antedation of the applicability of the Finance Act, 2006, having not borne out of the provisions of the Finance Act, 2006, thus giving it retrospective effect through an executive order would not be having any legal effect. The withdrawal of exemption of sales tax on Computer Hardware through Finance Act,. 2006, would be applicable w.e.f. 01.7.2006, and supplies made prior to that date would not be taxable.
8. For the reasons stated above, this Sales Tax Reference is answered in positive, the order-in-original dated 14.5.2009, Order-in-Appeal dated 5-5-2010 and the appellate order dated 17.12.2 014 are set side. The petitioner is held not liable to be charged sales tax prior to 01.7.2006 i.e. the date of applicability of The Finance Act, 2006.