Shahid Jamil Khan, J:- The petitioner has assailed order dated 15.09.2022, which is passed on direction by this court in earlier W.P.No.50189 of 2022. Admittedly, the petitioner is exempted under Serial No.53, Table 2 of the 6th Schedule of the Sales Tax Act, 1990 ("Act of 1990") as his supplies are not taxable. Being not on active taxpayer list and for not obtaining registration number under the Act of 1990, further tax under Section 3(1A) and extra tax under Section 3(5) of the Act of 1990 is charged in the electricity bill.
2. Petitioner side s argument is that petitioner for providing exempt supplies is not required to be registered hence is not on the active taxpayer list. The impugned levies, therefore, are against the spirit of law. He has placed reliance on the judgment by the august Supreme Court of Pakistan in Civil Petition No.2272-L of 2021, operative part of which is reproduced:- "4. We have heard the learned counsel for the parties. In our opinion the judgment in the cited case of Commissioner Inland Revenue v ACRO Spinning and Weaving Mils Ltd is also applicable herein as that case and the instant case both deal with non obstante clauses, albeit different provisions of the Act. We are not inclined to take a view different from the one earlier taken by this Court in the said case. Further tax and extra tax under section 3(1A) of the Act could not have been imposed on the said respondents, since admittedly they were ice manufacturers and were exempt till item 27 of the Sixth Schedule was omitted. Therefore, leave to appeal is declined and, consequently, this petition is dismissed."
3. Mr. Abdul Muqtadir Khan, Advocate/Legal Advisor for respondent-department and Syed Sajjad Haider Rizvi, Assistant Attorney General for Federation of Pakistan have reiterated the reasons given by the Commissioner (Respondent No.3) in paragraphs 4 and 7 of the impugned order. Their emphasis is on subsection (2) of Section 14 of the Act of 1990, which assertively requires registration of a person not engaged in making of taxable supplies in Pakistan. It is further argued that under Section 3(1A) of the Act of 1990, obtaining of registration does not mean compulsory registration.
They have supported the findings by the Commissioner that a taxpayer, who intends to avoid taxation under Sections 3(1A) and 3(5) of the Act of 1990 can get himself registered in view of the Section 14(2).
4. Heard. Record perused.
5. Section 14 of the Act of 1990 deals with registration and requires every person engaged in making taxable supplies in Pakistan including zero rated supplies to register himself if he falls within the categories noted in subsection (1) as (a) to (f). Subsection (2) of Section 14 of the Act of 1990 envisages an option for a person who is not engaged in making taxable supplies in Pakistan.
Subsection (2) of Section 14 is reproduced:- "14(2). Persons not engaged in making of taxable supplies in Pakistan, if required to be registered for making imports or exports, or under any provisions of the Act, or any other Federal law, may apply for registration."
[emphasis supplied] The tenor of the provision of the Section 14 do not compel this court to read `may' as `shall'. Using the word `may' is an option with the person not engaged in making taxable supplies to supplies, if intends to import or export. However, if any other provision of the Act of 1990 or any other Federal Law requires registration, the Commissioner can ask him to register even if he is making exempt supplies. Department's interpretation of reading `may' as `shall' is fallacious in absence of a determination that such taxpayer is required to registered under any other provision or Federal law.
However, on a notice for registration, required under another provision, or law, if the person, making exempt supplies, do not comply, the Commissioner may pass an order for imposition of Further or Extra tax.
6. Provisions of Section 3(1A) are reproduced to examine the intent of levy therein:- "3(1A): Subject to the provision of sub-section (6) of section 8 or any notification issued thereunder, where taxable supplies are made to a person who has not obtained registration number [or he is not an active taxpayer], there shall be charged, levied and paid a further tax at the rate of [three] per cent of the value in addition to the rate specified in sub-sections (1), (1B), (2), (5) [(6) and section 4]: Provided that the Federal Government may, by notification in the official Gazette, specify the taxable supplies in respect of which the further tax shall not be charged, levied and paid."
[emphasis supplied] The emphasized part of the provisions, noted above, are not ambiguous as the tax is envisaged where taxable supplies are made to a person who has not obtained registration number or is not on active taxpayer list. The condition of taxable supply being electricity is though fulfilled, but the petitioner being recipient of supply is not required to be registered compulsorily. Phrase "who has not obtained registration number" implies that a person, required to be registered under Section 14(1) of the Act of 1990 or any other provision or law has not obtained registration number, shall be burdened with Further tax. This court is not in agreement with the interpretation by the respondent- Commissioner that a person falling under Section 14(2) of the Act of 1990 would also be caught by the phrase "not obtained registration", for not opting for registration and only way to avoid it is to get registration.
7. The respondent-Commissioner in the impugned order has himself admitted that petitioner falls under Section 14(2) of the Act of 1990. It is not established through an order, after issuing notice for registration, that petitioner is required to be registered under any other provisions of the Act of 1990 or Federal law. Therefore, the petition is allowed and imposition of Extra and Further taxes are declared illegal.
The petition is allowed.