ABID AZIZ SHEIKH, J. In this constitutional petition, the petitioner has challenged the vires of SRO/No tification No.812(I)/2016 dated 02.09.2016 (herein after referred to as notification), whereby value of white crystalline sugar was fixed at the rate of Rs.60/- per K.G.
2. Relevant facts are that petitioner is involved in the manufacturing of white crystalline sugar . The Federal Board of Revenue (respondent No.2) in the exerci se of powers under first proviso to clause (46) of section 2 of the Sales Tax Act, 1990 (Act), issued impugned notification whereby the value of domestically produced white crystalline sugar has been fixed at the rate of Rs.60/- per K.G. The petitioner being aggrie ved has filed this constitutional petition.
3. The learned counsel for the petitioner submits that open market price of the white crystalline sugar being much lower than the value fixed by respondent No.2 in the impugned notification, the petitioner cannot be forced to pay sales tax on the said fixed price. He further submits that first proviso to subsection (46) of section 2 of the Act under which impugned notification was issued, relates to taxable supply of goods mentio ned in third Schedule of the Act, with reference to retail tax mentioned under clause (g) of section 2(46) of the Act and it is not an independent proviso to the main section 2(46) of the Act. Adds that white crystalline sugar being not included in 3rd Schedule subject to retail tax, the value could not be fixed in respect of white crystalline sugar under the impugned notification. He further submits that clause (g) of section 2(46) is immediately preceding to the first proviso, therefore, said proviso shall be deemed to be part of clause (g) only. He placed reliance on K.E.S.C. Progressive Workers Union through its Chairman and others vs. K.E.S.C. Labour Union through its General Secretary and others (1991 SCMR 888) and Collector of Custom Appraiseme nt, Collectorate Customs House Karachi vs. M/s Gul Rehman Proprietor , M/s G. Kin Enterprises ( 2017 SCMR 339 ).
4. Learned counsel for the respondents on the other hand submits that impugned notification was issued under first proviso to section 2(46) of the Act, whereby the Federal Board of Revenue could fix the value of any taxable supply . He submits that the first proviso is not merely the exclusive part of clause (g) of section 2(46) of the Act but same is an exception to the main provision of section 2(46) of the Act.
5. Arguments heard. The term "Value of Supply" has been defined under section 2(46) of the Act. The moot issue in this case is regarding the interpretation of section 2(46) of the Act. For convenience, section 2(46) of the Act prevailing at the relevant time, when impugned notification was issued i.e. September 2016, is reproduced hereunder:- "Value of supply" means:- (a). in respect of a taxable supply , the consideration in money including all Federal and Provincial duties [and taxes], if any , which the supplier receives from the recipient for that supply but excluding the amount of tax: Provided that:-
(i) in case the consideration for a supply is in kind or is partly in kind and partly in money , the value of the supply shall mean the open market price of the supply excluding the amount of tax; ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax; [and] [(iii) in case a taxable supply is made to a consumer from general public on installm ent basis on a price inclusive of mark up or surcharge rendering it higher than open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax.]
(b) in case of trade discounts, the discoun ted price excluding the amount of tax; provided that the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;
(c) in case where for any special nature of a transaction it is difficult to ascertain the value of a supply , the open market price;
(d) in case of imported goods, the value determine under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;
(e) in case where there is sufficient reaso ns to believe that the value of a supply has not been correctly declared in the invoice, the value determine by the Valuation Committee comprising representatives of trade and the Inland Revenue] constituted by the [Commissioner]; and [(f) in case the goods other than taxable goods are supplied to a registered person for processing, the value of supply of such processed goods shall mean the price excluding the amount of sales tax which such goods will fetch on sale in the market:] [(g) in case of a taxable supply , with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the Official Gazette, specify .
Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies: Provided further that where the value at which import or supply is made is higher than the value fixed by the Board, the value of goods shall, unless otherwise directed by the Board, be the value at which the import or supply is made;
6. There is an elaborate procedure mentioned in sub section (46) of section 2 of the Act which envisages different situations in which the duty will fall differently assessed in accordance with the procedure delineated in the aforesaid provision. Section 2(46) of the Act provides for the duty paid transaction concept of value, which means that consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but exclu ding the amount of tax. Section 2(46) of the Act constituted a substantive provision and the quantum of tax liability , is determined on the basis of value of taxable supply but the liability to pay tax under the charging section would arise only when such supply is made in furtherance of taxable activity .
7. Value of supply as is defined in sub section (46) of section 2 supra can be ascert ained in different modes namely consideration of money , inclusive of duties but excluding the amount of tax which the supplier receives from the recipient for the supply; the discounted price excluding the amount of tax in the case of trade discounts; the open market price in the cases where it is difficult to ascertain value of supply in view of special nature of the transaction; value according to section 25 of the Customs Act, in the cases of imported goods inclusive of custom duties and federal excise duty; the value determined by Valuation Committee where value has not been correctly declared in invoice; price of goods which goods fetch on sale in open market in cases of goods other than taxable goods which are supplied to register persons for processing and in case of taxable supply , with reference to retail tax, the price of taxable goods excluding the amount of retail tax or such other price that the Board may by notification in the final gazette specifies. However , under first proviso to section 2(46), the Board may by notification in the official gazette fix the value of any imported goods or taxable supply or classes of supplies.
8. There is no dispute that under first proviso to section 2(46), the Board is empowered to fix the value of taxable supplies, however , stance of the petitione r is that said first proviso only relates to the fixation of taxable supplies with reference to retail tax under clause (g) of section 2(46) of the Act and not to all different modes of taxable supply in section 2(46) of the Act. Therefore, the question require determination is that whether first proviso to section 2(46) of the Act, is an exception to main provision of section 2(46) of the Act or merely to clause (g) thereof.
9. Regarding scope of "Proviso", it is settled principle of law that a "proviso" to a section has an overriding effect and control over the whole section. Meaning thereby the function of a proviso is to exclude and take out certain cases from the rule to which it is a provis o. In other words to that extent the proviso modifies the main provision of the enactment. As a general rule, a provis o is added to an enactment to qualify or create an exception to what is in the enactment. Sometimes, however , as a precautionary measure, it is used to explain the general words of the Act and to exclude some ground of misinterpretation which would extend it to cases not intended to be brought within its operation or purview .
10. While explaining function of "Proviso" , in the case of Mst. Nawab Bibi v. Ch. Allah Ditta (1998 SCMR 2381 ), the honourable Supreme Court held as under:- "It is settled law that proper function of a proviso is to [except] and deal with a case which would otherwise fall within the general language of the main section, and its effect is confined to the rule or section to which a proviso has been added. The proper way to regar d the proviso is as a limitation upon the effect of principal section or rule.
A proviso, which is in fact and in substance a proviso, can only operate to deal with a case which, but for it, would have fallen within the ambit of the sectio n to which the proviso is a proviso. To put it in another way the section deals with a particular field while proviso excepts or takes or carries out from the field a particular portion and therefore, it is perfectly true that before a proviso can have any application the section itself must apply ."
The august Court in K.E.S.C. Progressive Workers' Union through its Chairman and others vs. K.E.S.C.
Labour Union through its General Secretary and others (1991 SCMR 888), held that indeed it cannot be disputed, that a proviso must be construed and treated as if it were, not a parallel positive enactment, but a limitation on a proposition which is direct and objective. In Ibrar Hussain and other vs. Government of NWFP through Secretary , Board of Revenue and others ( 2001 SCMR 914 ), it is held as under:- "A proviso, on the other hand, is a clause added to an enactment for the purpose of acting as a restraint upon, or as the qualification of the generality of the language which it follows."
In the cases of Abid Hussain v. Additional District Judge, Alipur , District Muzaf fargarh (2006 SCMR 100), Messrs Hamdard Dawakhana v. Commissioner Income-T ax, Karachi (PLD 1980 SC 84), and Messra Tariq Brothers v. Collector of Customs (2005 PTD 186), it was held inter alia that a proviso is in the nature of an exception to the general rule and ought to be strictly construed.
11. In above case law, the plainest rule of statutory interpretation settled is that a proviso is to be regarded as something which except a particular case from a general principle. The effect of a proviso is to except something out of the preceding portion of the enac tment or to qualify something enacted therein which but for the proviso would be within it.
12. When above settled rule of statutory interpretation apply to first proviso to section 2(46) of the Act, the perusal of clause (g) of section 2(46) of the Act shows that same relates to taxable supply with reference to retail tax only, whereas the first proviso is not only confined to retail tax of taxable supply but it is also an exception to value of imported goods and other classes of supply under section 2(46) of the Act. Therefore, on face of it the first proviso is an exception to main section of section 2(46) of the Act and not merely an exception to clause (g) of said section.
13. The above interpretation is also supported by the fact that through Finance Act, 2019 and 2020, clauses (h) and
(i) were added to section 2(46) of the Act and those clauses were added after clause (g) but before the aforesaid first proviso of section 2(46) of the Act, which proves the intention of the legislation that the said proviso is an exception to even newly added clauses (h) and (i) inserted in section 2(46) of the Act and not only confined to taxable supply subject to retail tax under clause (g) of the Act.
14. The next argument of the petitioner that market price of the white crystalline sugar being less than the value fixed by the Board, the impugned notification is not applicable, is also misconceived. Admittedly petitioner 's supply of white crystalline sugar is covered under clause (a) of section 2(46) of the Act, where consideration of supply means open market price excluding tax. The proviso being an exception to clause (a), it cannot be given same meaning and scope as of clause (a). Under proviso to section 2(46) of the Act where the value at which supply is made is higher than the value fixed by the Board, then value of goods shall unless otherwise directed by the Board, shall be the value at which the supply is made. But it is neither provided nor can be construed in section 2(46) of the Act that if market price is lower than the value fixed by the Board then market price will prevail. The first proviso being an exception to main provision, any such interpretation will render the proviso redundant and meaningless.
15. The petitioner learned counsel also argued that as proviso to clause (a) of subsection (46) of section 2 of the Act has been confined to said clause (a), therefore, in the same manner , the first proviso shall also be confined to clause (g) of section 2(46) of the Act. This argument is baseless, as proviso to clause (a) is not an exception but merely defining the taxable supply under clause (a) of section 2(46) of the Act, whereas first proviso under which the impugned notification has been issued, is an exception to main section 2(46) of the Act, as already discussed in preceding paragraphs.
16. The learned counsel for the petitioner also contended that impugned notification is without jurisdiction. This argument is also misconceived. The petitioner has merely challenged the vires of the notification and vires of proviso to section 2(46) of the Act, is not under challenge, whereby the Board can fix the value of taxable supply regardless of its market value. Therefore, it cannot be said that impugned notification was issued without jurisdiction or without lawful authority .
17. In view of above discussion, the impug ned notification being validly issued under first proviso to subsection (46) of section 2 of the Act, is not ultra vires to the law or the Constitution of Islamic Republic of Pakistan, 1973 (Constitution), hence this petition is dismissed.