MUHAMMAD HASHIM KHAN KAKAR, J. The instant Constitutional Petition filed under Article 199, of the Constitution of Islamic Republic of Pakistan, 173 ("the Constitution"), carries the following prayer clauses: "i. Declare that the. Show Cause Notice bearing No.BRA/STA&A/1127-1128 dated 20-05-2019 is unlawful. illegal, void ab initio, unconstitutional and has been issued without jurisdiction, hence of no legal effect; ii. Declare that the Amendment dated 15.1.2019 bearing No.PAB/Legis;V(37)/2018 cannot operate retrospectively; iii. Set aside / quash Impugned Show Cause Notice issued by Respondents; iv. Suspend the operation of the Impugned SCN; v. Prohibit the. Respondents from taking any adverse action against the Petitioner on the basis of the Impugned NSCN; vi. Grant such other relief as may be deemed necessary in the circumstances of the case; and vii. Grant costs."
2. The Additional Commissioner, Balochistan Revenue Authority (BRA), Government of Balochistan vide Show-Cause No.BRA/STA&A/1127-1128 dated 20-05-2019 confronted the petitioner that the petitioner is a prescribed registered person and withholding agent of BRA within the meaning of the clause (f) of sub-rule (2) of rule 1 of the Balochistan Sales Tax Special Procedure (Withholding)
Rules, 2018 read with section 2(134) of the Balochistan Sales Tax on Service (BSTS) Act, 2015 hence the petitioner was required to withhold sales tax on services from its agent M/s. Toyota Zarghoon Motors Quetta and deposit the same in Government of Balochistan Treasury in terms of subsection
(2) of section 14 of the BSTS Act, 2015 which is reproduced as under: "Notwithstanding other provisions of this Act, the Authority may require any person or class of persons whether registered or not for the purpose of this Act to withhold full or part of the tax charged from such person or class of persons on the provision of any taxable service or class of taxable services and to deposit the tax so withheld, with the government within such time and in manner as it may, by notification in the official gazette, specify.
3. The Additional Commissioner, BRA further confronted the petitioner that by virtue of section 19 of the BSTS Act, 2015 the petitioner is jointly and severally liable for above mentioned unpaid tax and accordingly asked the petitioner vide above referred show cause notice to pay an amount of Rs.34,862,355/- tabulated as follows: Tax periodTaxable serviceBSTS PAYABLE 2018 85,3.60,000 12,804,000 2017 78,030,200 11,704,530 2016 69,025,500 10,353,825 Total 232,415,700 34,862,355
4. Feeling aggrieved with said impugned show cause notice, the petitioner has filed instant petition.
5. Mr. Qazi Umair, learned counsel for the petitioner stated that the impugned notice is illegal, without lawful authority, arbitrary, hence is of no legal effect. The learned Counsel stated that the petitioner is based at Karachi and falls under the jurisdiction of Sindh Revenue Board as far as sales tax on services is concerned. Since the petitioner has no presence in Balochistan hence not liable to registration with the BRA. The counsel further stated that the amount of tax demanded by the Additional Commissioner BRA from the petitioner has already been charged to M/s. Toyota Zarghoon Motors Quetta through sales tax orders in original passed by the same officer under section 52(1) of the BSTS Act, 2015 for the same tax years 2016, 2017 and 2018. Therefore the same amount cannot be again demanded from the petitioner.
6. The learned counsel of the petitioner further argued that Tariff Heading 9819.1300 was inserted in the Second Schedule of the BSTS Act, 2015 vide Notification dated 15-01-2019 and given retrospective effect from the 1st July 2015 which is against the settled principle of law approved by the Honorable Supreme Cc:Am that no legislation can have retrospective effect if it is not beneficial to the taxpayers.
7. Mr. Muhammad Ali Kanrani, learned Additional Advocate General (AAG) appearing on behalf of respondent No.1 and Mr. Jam Saka, Advocate, appearing on behalf of the respondents Nos.2 and 3 opposed the contention of the learned counsel of the petitioner and stated that in terms of clause
(f) of sub-rule (2) of rtIle 1 of the Balochistan Sales Tax Special Procedure (Withholding) Rules 2018 read with section 2(134) of the BSTS Act, 2015 the petitioner was required to withhold sales tax on services from its agent M/s. Toyota Zarghoon Motors Quetta and deposit the same in Government of Balochistan Treasury in terms of subsection (2) of section 14 of the BSTS Act, 2015 therefore the impugned show-cause notice has been issued by the Additional Commissioner under powers vested in him by the BSTS Act, 2015 as such, no illegality has been committed.
8. Arguments have been heard, record perused and relevant provisions of BSTS Act, 2015 and the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018 examined. Sections 2(134), 14 and 52(6) of the BSTS Act, 2015 and sub-rule (2) of rule 1 as well as rule 25 of the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018 are relevant to the issues involved in the instant petition. We therefore deem it appropriate to reproduce said sections for ready reference as follows: 2(134) "Registered Person" means a person who is registered or is liable to be registered under the Act or any other person or class of persons notified by the Authority in the official Gazette: Provided that a person liable to be registered but not registered under the Act, shall not be entitled to any benefit available to a registered person under any of the provisions of the Act or the rules made thereunder;
9. The above provision defines persons who are registered or liable to be registered. In the impugned show cause notice the Additional Commissioner BRA has confronted the petitioner that he was liable to be registered as a withholding agent in terms of above provision of BSTS Act, 2015 read with sub-rule (2) of rule 1 and rule 25 of the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018. Sub-rule (2) of rule 1 read with rule 25 of the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018 defines a withholding agent.
14. Special Procedure and Tax Withholding Provisions.---(1) Notwithstanding anything contained in this Act, the Authority may, by notification in the official Gazette, prescribe a special procedure for the payment of tax, registration, book keeping, invoicing or billing requirements, returns and other related matters in respect of any service or class of services, as may be specified.
(2) Notwithstanding other provisions of this Act, the Authority may require any person or class of persons whether registered or not for the purpose of this Act to withhold full or part of the tax charged from such person or class of persons on the provision of any taxable service or class of taxable services and to deposit the tax so withheld, with the Government within such time and in such manner as it may, by notification in the official Gazette, specify.
(3) Where a person or class of persons is required to withhold full or part of the tax on the provision of any taxable service or class of taxable services and either fails to deduct or withhold the tax or having deducted or withheld the tax, fails to deposit the tax in the Government treasury, such person or class of persons shall be personally liable to pay the amount of tax to the Government in the prescribed manner.
10. Plain reading of above provision shows that subsection (1) empowers the BRA to prescribe special procedure rules which have been notified as the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018 vide Notification No.BRA/BSTS/06/2018 dated 27th June 2018. Under clause
(f) of sub-rule (2) of rule 1 of the said Balochistan Sale: Tax Special Procedure (Withholding) Rules, 2018 read with section 2(134) of the BSTS Act, 2015 the petitioner has been issued with impugned show-cause notice.
11. Subsection (3) of section 14 above creates a liability on the withholding agent and empowers the authority to personally hold responsible a withholding agent if he fails to withhold sale tax on services. It is however important to note that this subsection (3) was inserted to the BSTS Act, 2015 through Balochistan Sales Tax on Services (Amendment) Act, 2019.
52. Recovery of the Tax Not Levied or Short-levied. ---....
(6) Where any person, required to withhold tax under provision of this Act or the rules made thereunder, fails to withhold the tax or fails to deposit the deducted or withheld amount of the tax in the prescribed manner, an officer of the Authority shall determine the amount in default and order its recovery in the prescribed manner.
12. The above subsection (6) Of section 52 of the BSTS Act, 2015 provides the mechanism for recovery of sales tax on services required to be deducted by a withholding agent. In case the withholding agent fails to withhold sales tax on services then the concerned officer of the BRA may pass an order to determine amount of default and recover the same. It is however again important to note that this subsection (3) was inserted to the BSTS Act, 2015 through Balochistan Sales Tax on Services (Amendment) Act, 2019 notified on 15-01-2019. It is further important to be note that the impugned show-cause notice has been issued on 20-05-2019 but the said section 52(6) has not been invoked therein.
13. In a nutshell a withholding agent is required to withhold certain portion or total amount of tax payable by a registered person liable to pay sales tax on service. In instant case the petitioner was required to withhold tax from M/s. Toyota Zarghoon Motors Quetta. The Additional Commissioner BRA has issued impugned show cause notice for said purpose. However the officer has committed multiple errors of law and facts.
14. Firstly the officer has issued impugned show-cause for tax periods of 2016, 2017 and 2018 ignoring the fact that the Balochistan Sales Tax Special Procedure (Withholding) Rules, 2018 were notified vide notification No.BRA/BSTS/06/2018 dated 27th June 2018. Further Subsection (3) of section 14 of the BSTS Act, 2015 which creates a liability on the withholding agent and empowers the authority to personally hold responsible a withholding agent if he fails to withhold sale tax on services was also inserted to the BSTS Act, 2015 through Balochistan Sales Tax on Services (Amendment) Act, 2019. Again subsection (6) of section 52 of the BSTS Mt, 2015 which provides the mechanism for recovery of sales tax on services required to be withheld by a withholding agent in case the withholding agent fails to withhold such sales tax on services was also inserted to the BSTS Act, 2015 through Balochistan Sales Tax on Services (Amendment) Act, 2019 notified on 15-01- 2019. It is further important to be note that in the impugned show-cause notice issued on 20-05- 2019 the officer has failed to invoke section 52(6) of the BSTS Act, 2015.
15. It is a settled principle of law that although the power of the Legislature to enact retrospective law is well-recognized, but it is equally well-settled that in the absence of any express provision or necessary implication even the laws which have been made retrospectively applicable can neither be applied to the transactions which are past and closed nor can vested rights be taken away or destroyed. This principle is supported by the following observations of the Hon'ble Supreme Court of Pakistan in the case of Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others, (1992 SCMR 1905) which are instructive: "There seems to be a great deal of force in this submission. Before the insertion of section 31-A the position was that upon the presentation of a bill of entry, by virtue of section 30 of the Act the levy of duty was crystallized. As explained in the case of Al-Samrez Enterprise, the liability to tax was created under section 18 with reference to this date, because it is the rate of duty by application of which the tax liability can be quantified or assessed. Simultaneously, any benefit of exemption also takes effect on the 'same date because in the very nature of things, the liability is wiped off by virtue of the exemption at the same time Therefore, this is the crucial point of time at which by operation of law the liability is discharged. In other words, the rights and liabilities of the importer attained fixity on the said crucial date. Inevitably, therefore, a vested right has been created and the transaction is closed by the quantification of the tax, if any, or by the discharge of liability on that date."
16. It is also pertinent to mention here, that a statute, which is, procedural in nature, can operate retrospectively unless it affects an existing right on the date of promulgation or causes injustice or prejudice to a substantive right. Similarly, if it is of such a character that will tend to promote justice without any consequential embarrassment or detriment to any of the parties concerned, the Courts would favourably incline towards giving effect to such procedural statutes retrospectively.
However, if existing rights are affected or the giving of retrospective operation causes inconvenience or injustice, then the Courts will not even in the case of a procedural statute, favour an interpretation giving retrospective effect to the statute. While holding this view, we are fortified from the dictum laid down by the Hon'ble Supreme Court in the case of Adnan Afzal v. Capt. Sher Afzal (PLD 1969 SC 187), relevant part whereof reads as under: "The next question, therefore, that arises for consideration is as to what are matters of procedure. it is obvious that matters relating to the remedy, the mode of trial, the manner of taking evidence and forms of action are all matters relating to procedure. Crawford too takes the view that questions relating to jurisdiction over a case of action, venue, parties pleadings and rules of evidence also pertain to procedure, provided the burden of proof is not shifted. Thus a statute purporting to transfer jurisdiction over certain cause of action may operate retroactively. This is what is meant by saying that a change of forum by a law is retrospective being a matter of procedure only. Nevertheless, it must be pointed out that if in this process any existing rights are affected or the giving of retroactive operation cause inconvenience or injustice, then the Courts will not even in the case of a procedural statute, favour an interpretation giving retrospective effect to the statute. On the other hand, if the new procedural statute is of such a character that its retroactive application will tend to promote justice without any consequential embarrassment or detriment to any of the parties concerned, the Courts would favorably incline towards giving effect to such procedural statutes retroactively."
17. Secondly the officer has demanded total amount of sales tax on services from the petitioner vide impugned show-cause notice dated 20-05-2019 which was payable by M/s. Toyota Zarghoon Motors Quetta. The officer has ignored the fact that the same sum of money was already ordered as recoverable from M/s. Toyota Zarghoon Motors Quetta through orders-in-original dated 06-05- 2019. The letter and spirit of law is that the withholding agent is liable to withhold certain portion of tax payable by a withholder (from whom tax is to be withheld). Such tax actually is liability of the withholder and the withholding agent just withhold a portion of total liability of the withholder. It cannot be recovered simultaneously from the withholder as well as withholding agent. Once the withholder discharges his tax liability then the withholding agent is only liable to default surcharge under section 49 of the BSTS Act, 2015. In this observation we are supported by the judgment of the Honorable Lahore High Court titled as M/s Riaz Bottlers (Pvt.) Ltd. v. LESCO and others (2010 PTD 1295) wherein it is held that the Department is entitled only to charge default surcharge if the withholder has discharged its tax liability. Further reliance may be placed on the judgment of the Honorable Lahore High Court titled as Sui Northern Gas Pipelines v. Deputy Commissioner Inland Revenue and others (2014 PTD 1939) wherein it has been held that: "If it is established that the tax that was to be deducted from the payment to the payee/deductee and was in the meanwhile paid by that person (payee/deductee), no recovery shall be made from SNGPL (deductor-assessee) who failed to deduct the tax. The deductor shall, however, be liable to pay default surcharge at the rate of 18% per annum from the date he failed to collect or deduct the tax to the date the tax was paid "
In the light of above legal and factual aspects of the petition it is evident that the impugned show- cause notice has been issued without legal authority and the officer has misread the relevant provisions of BSTS Act, 2015 as well as the Balochistan Sales Tax Special Procedure (Withholding)
Rules, 2018. We have therefore no hesitation to hold the impugned show-cause notice as unlawful and void ab initio, as such, the instant petition is allowed.