ORDER: DR. SHAHID SIDDIQUE (ACCOUNT ANT MEMBER). --(1). Titled appeal has been filed under section 46(1)(b) of the Sales Tax Act, 1990 at the instance of appellant/registered person, on the grounds as set forth in the memo of appeal, against order C. No. 271 of 2021 dated 07-07-2021 passed by the learned CIR(Enforcement), LTO, Lahore.
2. Brief facts of the case as emanating from the case record are that the appellant has filed a Writ Petition No. 31364 of 2021 before Hon'ble Lahore High Court; Lahore contending therein that he is a regular consumer of electricity used for production of textile products and the electricity providing company has wrongly added and charged "extra sales tax" at the rate of 5% on appellant's electricity bill for the month of June-2020. Resultantly being aggrieved, the appellant has invoked constitutional jurisdiction of the Court wherein the direction was given through its Order dated 20-07-2020 to the concerned Commissioner Inland Revenue that no coercive measures for recovery of "extra tax" through electricity bill shall be adopted against the appellant until and unless the issue at hand is not eventually decided by the Commissioner Inland Revenue through self-speaking order strictly in accordance with law duly after providing him adequate opportunity of hearing. The direction as given by the Court is reproduced as:-- "In view of above, this writ petition is disposed of with the direction that the petitioners shall approach the concerned Commissioner Inland Revenue who shall decide the issue in hand after hearing the petitioners through a speaking order strictly in accordance with law, within a period of two weeks from the date of receipts of certified copy of this order . Till the decision to be made by the concerned Commissioner IR. no coercive measures shall be adopted for recovery of the disputed amount. This writ petition is disposed of in terms of the above.
3. Consequently , the learned CIR (Enforc ement), LTO, Lahore has imposed extra sales tax under Notification No. S.R.O. 509(1)/2013 dated 12-06-2013 and Notification No. S.R.O. 777(1)/2020 dated 25-08-2020 despite the fact that appellant has filed his sales tax return s and the status of the appellant remaine d no more inactive at e-portal of Federal Board of Revenue even then he has passed his Assessment Order No. 271 dated 07-07-2021 adversely without considering the contentions of appellant and without applying his independent judicial mind. Learned Commissioner Inland Revenue has also directed the MEPCO to add and to charge extra sales tax worth Rs.
1,562,659/- in I electricity bill for the month of June-2020. Feeling aggrieved by the said treatment, the appellant has come up in appeal before this Appellate Tribunal.
2. At the very outset of hearing, learned counsel of appellant has contended that levy of extra tax abolished with rescission of Notification No. S.R.O. 480(1)/2007 dated 09-06-2007 through Notification No. S.R.O. 694(1)/2019 dated 29-06-2019 was re-inducted to the statute book by way of Notification No. S.R.O. 777(1)/2020 dated 25-08- 2020 inserting Chapter-XVII-B in Sales Tax Rules, 2006 specifying the mode and manner of levying extra tax on electricity and gas consumers if not found active taxpayers at e-portal of Federal Board of Revenue and this notification dated 25-08-2020 is applicable prospectively and no retrospective effect can be given to its provisions.
In this regard, learned counsel for appellant placed reliance on the reported judgments of the August Supreme Court of Pakistan as reported at (1996 SCMR 83) & (2020 SCMR 1069 ). During hearing, learned counsel of appellant has also contested the impugned assessment order on the grounds that it has been passed without giving any show cause notice always to be served upon the persons in default because no liability as to tax can be adjudged against a person until and unless he is not confronted with allegations leveled against him through a proper show cause notice under section 11 of the Act, 1990. Learned counsel further argued that the appellant having an industrial electricity connection is paying sales tax dues within due dates as laid down in section 26 of the Act, 1990 read with the Sales Tax Rules, 2006. The appellant is a registered person filing his sales tax returns regularly but unfortunately sales tax returns for the months of March-2020 and April-2020 could not be filed within due date and it is due to this fact appellant's status was remained non-active from 1st June, 2020 to 2nd June, 2020 otherwise, appellant's status has always remained operative as an active taxpayer which can be verified from the FBR's e-portal. The active status of appellant at the time of billing of electricity discards the levy of extra tax for the month in question. Lastly , learned counsel stated that the period of default should have been reckoned first before imposing extra tax for the whole month. The extra tax should not be imposed for the whole month if the period of default is lesser than a month. In support of his contention, reliance was placed on the judgment of Hon'ble High Court Lahore reported as (PTCL 2000 CL 25). On the strength of these assertions, learned counsel seeks vacation of the impugned order passed by the learned CIR(Enforcement), L TO, Lahore.
4. On the other hand, the learned DR appearing on behalf of department although opposed the contentions of the learned Advocate but failed to put-forth any explanation to justify any deviation from the arguments and judgments advanced by the learned Advocate for the registered person however , simply supported the impugned order of the authority below and nothing newel, except to reiterate earlier set of contentions, has been put forth by him.
5. We have thoroughly examined the relevant case record and have heard at length the rival parties. We do agree with the contention of the appellant that extra tax @ 5% on electricity bill cannot be charged because the Federal Government has to levy extra sales tax in such mode, manner and at time, and subject to such conditions and limitations as it may, by rules, prescribe but no such notification specifying procedure for levy and collection of extra sales tax after abolishing of Notification No. S.R.O. 480(1)/2007 as on 29-06-2019 were issued. Since, no notification specifying mode, manner , time, conditions and limitations for levying extra tax has remained in field during the period from 29-06-2019 to 25-08-2020 that is the date on which newel procedure for levy extra tax was inserted through Notification No. S.R.O. 777(1)/2020 dated 25-08-2020 therefore, no extra tax shall be charged on electricity bill for a prior month of June-2020 as this new notification cannot be applied retrospectively .
Retrospective application of Notification No. S.R.O. 777(1)/2020 dated 25-08-2020 imposing extra tax cannot be allowed as the Special Procedure for its levy is reintroduced on 25-08-2020 and appellant's case pertains to March- 2020 and April-2020 which is period prior to that very date of notification whose provisions are prospective in effect and cannot be applied retrospectively . It is wholesome principle of law that a notification levying or enhancing a tax or the tax rate curtailing the rights of a registered person cannot be applied retrospectively and this dictum needs no endorsement on our side as the same is already settled down by the Apex Court in number of judgments.
6. It may be based on above grounds or might have been conquered from any other substance on the subject matter , the Hon'ble High Court, Lahore has declared ultra vires the chargeability of extra sales tax on the registered person through electricity bills in its order given in Writ Petition No. 43937/2020 dated 21-09-2020 in case of "M/s. Rehan Steel Furnace vs. Federation of Pakistan and others". The relevant excerpt from the said judgment is reproduced herein below:-- "2. It may be seen that the Federal Government rescinded a number of notification inter alia 480(1)/2007 which had initially sought to impose extra tax under different circumstances. Since that notification has already been rescinded by the subsequent notification on 29-06-2019, any imposition of extra tax on the petitioner through the electricity bills is ultra vires. This proposition has not been controverted by the learned counsel for the respondent.
3. In view of the above, this petition is allowed. The amount of extra tax is directed to be deleted from the electricity bills for August, 2020 of the petitioner . The petitioner shall be liable to pay the electricity bills by excluding the amount of extra tax.
4. In case the petitioner has been charged extra tax for previous months at any time subsequent to the promulgation of the notification dated 29-06-2019, the said amount shall be refunded to the petitioner , as the case may be."
7. The other line of argument adopted by the appellant is also convincing that if at all extra tax is to be levied in the cases after promulgation of the said notification dated 25-08-2020 even then, it is appropriate that the period of default should have been reckoned first before imposing extra tax for the whole month. The period of default as mentioned in the impugned assessment order is two days only therefore, if any levy of extra tax is to be made then it should be worked out for a period of two days and not for the whole month. We respectfully agree with the reported judgment of Hon'ble High Court, Lahore in case of "M/s. Pioneer Cement Ltd. vs. Assistant Collector , etc." reported as (PTCL 2000 CL 25) which undoubtedly makes it clear that the Sales Tax Act, 1990 does not provide that if a period of default is for a part of the month, the additional tax should be charged for the whole month.
8. Besides above, the chargeability of extra tax through Notification No. S.R.O. 777(1)/2020 dated 25-08-2020 is also found illegal and unlawful wherein, the status of the appellant was very much operative at the time of billing for the month of June-2020. It is clearly ment ioned in the said notification that if the status of a registered person at the time of billing is found active at FBR's e-portal then no extra tax shall be charged and collected from that person enjoying active and operative status. The contention of appellant for his active status at the 4ate and time of billing of electricity as on 30-06-2020 is found correct and valid. The active status of appellant at the time of billing of electricity otherwise, exonerate him from levy of extra tax for the month in question. The relevant portion of the said notification is reproduced herein below:-- "Notification No. S.R.O. 777(1)/2020 dated 25-08-2020.
158K. Conditions and limitations.--(1).------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------
(5) When it is verified that the person exists on the active taxpayer list the supplier shall incorporate the sales tax registration number in its billing system and ensure that it is printed on all subsequ ent bills. Therefore, the supplier shall stop charging and collection the extra tax from such person."
9. In view of what has been stated and particularly in the light of legal propositio ns discussed hereinabove, the titled appeal is accepted and impugned assessment order being illegal and unlawful is hereby set aside.
10. The instant appeal filed by the taxpayer is disposed of in the manners as indicated above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.