MR. JUSTICE SYED MANSOOR ALI SHAH.--(1). These cases pertain to the tax period: February 2016 to December 2017. The facts are that due to certain reasons the respondent taxpayers filed late income tax return, as a consequence a penalty under Section 33(1) and (5) as well as additional surcharge under Section 34 of the Sales Tax Act, 1990, ('Act, 1990') was imposed on them through the assessm ent order 13.06.2016. The respondent taxpayer filed an appeal against the said assessm ent order, which was allowed dated 09.09.2016, holding that the taxpayer is not liable to pay the penalty or the additional surcharge as failure to pay was not "willful". The same view was upheld by the Tribunal vide its judgment dated 05.01.2018 and through the impugned judgment of the Sindh High Court dated 06.05.2022.
2. Learned counsel for the petitioner submits that the High Court and the forums below have failed to appreciate that the amendment was brought about in Section 34 of the Act, 1990, through Finance Act, 2005, which reads as follows: "34. Default surcharge --(I) Notwithstanding the provisions of section II, if a registered person does not pay the tax due or any part thereof whether willfully or otherwise in time or in the manner specified under this Act, rules or notification issued thereunder or claim a tax credit, refund or makes an adjustment which is not admissible to him, or incorrectly applies the rate of zero per cent to supplies made by him, he shall, in addition to the tax due, pay default surcharge at the rate mentioned below:" (emphasis supplied)
He points out that the phrase 'whether willfully or otherwise' has been inserted in the said provision which makes the default surcharge to be a strict liability. The case law relied upon by the learned counsel for the respondent is based on previous version of the said section which does not include the said phrase. Learned counsel for the petitioner, on the other hand places reliance on a recent judgment of the Islamabad High Court reported as Attock Refinery Ltd. v. The Collector of Sales Tax and others[1]which refers to the above version of Section 34 of the Act, 1990 and holds that the taxpayer is liable to pay tax due and it does not matter if the default was made deliberately or inadvertently. As far as Section 33 of the Act, 1990, is concerned, learned counsel for the petitioner submits that the same treatment has to be extended to the said provision.
3. Learned counsel for the respondent on the other hand has placed reliance on China Power[2] and Tianshi[3]. The said case law relates to Section 205 of the Income Tax Ordinance, 2001 (`Ordinance, 2001') and the language of the said provision is more or less pari materia to the erstwhile Section 34 of the Act, 1990 and therefore has no relevance in the instant matter after the amendment brought about in Section 34 of the Act, 1990.
4. Learned counsel for the respondent submits that 'willful or otherwise' has to be read together applying the principle of ejusdem generis which would mean that the negligence or ignorance of law can still be read into the provision and the referred liability is not a strict liability. In support of this, he places reliance on the cases of D.G. Khan Cement v. Federation of Pakistan[4] and Deputy Collector Central Excise v. ICI Pakistan[5]. As far as Section 33 of the Act, 1990 is concerned, he submits without conceding that no amendment as brought about in Section 34 of the Act, 1990 has been made in Section 33 of the Act, 1990 and the language of Section 33 of the Act, 1990 is more or less pari materia to the erstwhile Section 33 and the weight of the case law supports the fact that unless and until there is willful default, the penalty cannot be imposed.
5. We have examined the impugned judgment and noticed that the impugned judgment has not considered the amendment brought about in Section 34 of the Act, 1990 in the year 2005 and relied on the case law which does not attend to the said amendment. Section 34 post amendment is a strict liability provision and leaves no margin for any inadvertent mistake. Therefore, as far as the view of the High Court relating to Section 34 of the Act, 1990, is concerned, the same is set aside and it is declared that the respondent is liable to pay default surcharge.
6. We have also noticed that there is no discussion on Section 33 of the Act, 1990 in the impugned judgment. Section 33 of the Act, 1990 becomes important in the light of the amendment brought about in Section 34 of the Act, 1990 and it is to be seen whether at all Section 33 of the Act, 1990 is also to be read as a strict liability clause. This aspect of the case was not discussed by the High Court. As far as interpretation of Section 33 of the Act, 1990 is concerned, we remand the matter to the High Court and are sanguine that the High Court will decide the matter within a period of three months from the receipt of this order.
7. In view of what has been discussed above, we hold that Section 34 of the Act, 1990 regarding default surcharge is a strict liability clause and is attracted on the occurrence of default whether it be deliberate or unintentional or inadvertent. However, to the extent of Section 33 the case is remanded to the High Court for a fresh decision on the issue. As a result, these petitions are converted into appeals and allowed.
1. 2021 PTD 1680.
2. China Power Hub Generation Company (Private) Limited v Pakistan & others (CPD 3532 of 2020) judgment dated 11.02.2021
3. PTCL 2018 CL. 795
4. PTCL 2004 CL. 224.