JUDGEMENT MUMTAZ ALI, MEMBER (TECHNICAL1.-1. This appeal is directed against Order-in-Original No. 14 of 1994 dated 24-07- 1994 passed by the learned Collector of Customs, Central Excise and Sales Tax, Rawalpindi.
2. The facts leading to this appeal are that during the audit of accounts of M/s. Pearl Continental Hotel, Rawalpindi the appellant for the year 1989-90, it was pointed out that the management of said hotel had provided certain rooms on complimentary basis to certain guests and used other rooms as "house-use" and not paid Central Excise duty in respect of use of these rooms in violation of Section 4(3)(a) of the Central Excises Act, 1944. Accordingly a show cause notice was issued to the appellant by Deputy Collector of Central Excise on 20-7-1992,, which was replied to by Mian Tariq Mahmood, Advocate, the learned Counsel for the appellant on 15-09-1992. Later on jurisdiction of adjudicating officers of Central Excise was amended vide SRO. 994(1 )/92 on 08-10- 1992, in consequence of which this case fell under the purview of the learned Collector of Central Excise, Rawalpindi. So after affording opportunity of hearing to the appellant's Counsel, he decided the case by passing the impugned order holding the appellant liable to pay Central Excise duty of Rs.75,425.00 in respect of the rooms provided to staff or guests on 24 specific dates of June, 1990, and imposing p penalty of Rs.5,000.00 on the appellant hotel. Feeling aggrieved by the order the appellant filed an appeal with the Central Board of Revenue, which was still pending when this Tribunal became operational on 29-03-1995. Ln consequence it stood transferred to the Tribunal and its record was subsequently received in this Bench.
3. The case came up for hearing on 14-04-1997. Mian Tariq Mahmood, Advocate appeared on behalf of the appellant whereas the respondent Collector was represented by Mr. Farhat Nawaz Lodhi, Advocate, along with Mr.S.K. Masood Kiani, Deputy Superintendent.
4. The learned Counsel for the appellant submitted that the case was based on wrong interpretation of Section 4(3)(a) of the Central Excises Act, 1944. He admitted that any room which was given for use to guest on complimentary basis came under the ambit of the above said provision of law but use of one or more rooms by the management of the hotel or by visiting executives of the parent company, M/s. Pakistan Services (Pvt.) Ltd., did not fall in this category. As occupation of rooms in these Matter eventualities was by employees on duty in connection with the operational and management affairs of the appellant hotel, the use fell in the category of "house-use" and not in the category of "providing or rendering services". So in respect of these rooms Central Excise duty could not be levied or collected and the appellant could not be burdened with liability of duty, whose status is of 'collecting agent1 where Central Excise duty was leviable on services rendered/provided. Ln the instant case, no services having been rendered, no Central Excise duty arose and none could be collected by, and demanded from, the appellant. He placed reliance on case reported as PLD 1990 SC 68 and drawing the ratio from the ruling that a hotel/restaurant could fix different tariff rates of different categories of services for operational reasons, he submitted that since the management and visiting executives were using the rooms for operational purposes, the hotel could let them use these rooms without any charge. He further submitted that Central Excise duty was an indirect tax and its incidence eventually fell on the consumer or user of service rendered by the hotel. So where a service was provided, Central Excise duty accrued and the appellant was bound by law to collect it as an agent and get it deposited in the exchequer. But if no service was rendered, then no Central Excise duty accrued. If in the instant case the house use of rooms was construed as liable to duty it will virtually tantamount to diverting the incidence of duty to fall on the agent even though he had received no service. Placing reliance on case reported as PLD 1961 SC 375 he submitted that in taxing laws where more than one interpretations are possible the one favourable to the person being taxed should be accepted which in the instant case would be not to levy duty on the said house use of the subject rooms. He also cited case reported as PLD 1980 SC 323 and submitted on the strength of the rule laid down therein that interpretation causing injustice to assessee be ignored. He further placed reliance on case of M/s. Hilton International, Lahore Vs. Collector of Central Excise and Customs (Appeals), Lahore reported as PTCL 1989 CL. 322, cases reported as PLD 1982 Lahore 621 (M/s. Hashwani Hotels Ltd. Vs. Government of Pakistan and 2 others). PLD 1982 Karachi 244 (M/s. Sky Rooms Ltd., Karachi \/s. Assistant Collector of Central Excise and Land Customs. Karachi and PLD 1990 SC 68 (Government of Pakistan and others Vs: M/s. Hashwani Hotel Ltd.).
5. The learned Counsel for the respondent Collector on the other hand submitted that the provisions of Section 4(3)(a) were patently clear and there being no ambiguity or confusion therein, no need arose for interpretation thereof other than taking it in plain and literal sense.
According to him it was a plan case of letting certain rooms of the hotel for use free of charge. lt was not consequential whether the rooms were used free of charge by an employee of the hotel or a guest as the said legal provision did not distinguish between the persons using the rooms or receiving the service. He further submitted that if the hotel management instead of paying travel expenses to visiting executives, subsidized their living in the hotel by letting them stay in the rooms free of charge, the levy of Central excise duty did not get waived as the factum of providing or rendering of service had taken place and so Central Excise duty had become leviable under Section 3(1) of the Central Excises Act, 1944 and its quantification was not required to be done according to the scheme of Section 4(3)(a) ibid. On these grounds he opposed the Appeal.
We have anxiously considered the submissions of both Counsels and also examined the case record. The plain issue in the ease is whether use of hotel rooms by the local managers of the appellant hotel and the visiting executives from the other offices of the holding company free of charge comes within the purview of Section 4(3)(a) ibid. For answering this, the scope of the basic charging clause embodied in Section 3(1) of the Act has to be seen which is reproduced below:-- "3. Duties specified in the First Schedule to be levied.--(1)
There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods, produced or manufactured in Pakistan or imported into Pakistan and on such goods, as the Federal Government may, by notification in the official Gazette, specify, as are produced or manufactured in the non-tariff areas and are brought to the tariff areas, and on all excisable services, provided or rendered, in Pakistan, as, and at the rates, set forth in the First Schedule." ln case of services the duty is to be levied and collected on services rendered or provided. The nature of "services" in the case of the appellant are set out at item No. 13.01 of Part-11 of the First Schedule to the Central Excise Act, 1944 which is reproduced below:- Item No. Name of Service Rate of Duty ***???
13.01 Services rendered by Hotel and 15% of the Restaurants A. All services, facilities and utilities, including catering, supplies and merchandise provided or rendered by an Hotel. charge??? ***
7. As may be seen sub-section (1) of Section 3 of the Central Excise Act, 1944 envisages levy of duty on services rendered or provided at rates set out in the First Schedule. Item 13.01 of Part-ll of the said Schedule makes "all services rendered or provided" by an hotel liable to duty at 15% of the charges (subject to notification issued under Section 12A of the Act, if any), ln this scheme "all services" which are "provided or rendered" are liable to duty. The duty is to be levied at 15% of the charges. Where no charges are demanded or paid for services provided -or rendered recourse to Section 4(3)(a) has to be made which requires the quantification of the levy on the basis of the amount that would have been charged for such services.. Both provisions made no distinction between a service provided to one category of customers of the other and the word "all" appearing in the beginning of the entry in column "Name of Service" makes the scope of the services extensive and wide. The learned Counsel for the appellant has not denied that use of a room by a member of the management of the hotel or the visiting executive of its holding company is in the nature of a service. The act of allowing use of a room is thus providing or rendering of service by the appellant, ln that view of the matter Section 4(3)(a) stands attracted and so the service becomes liable to duty, lt may be noted that it is not the case of the appellant that certain rooms in the hotel have been earmarked for use by the management or visiting executives of the holding company which rooms are not available for routine renting out of visiting clients (guests), ln other words the rooms made available to management or visiting executives are actually rooms of the appellant hotel which could be rented out to any guest/visitor on a certain charge and so would in that case be liable to levy of duty at that charge. Letting executives to use such rooms on a certain day cannot except the service so rendered from the ambit of Section 3(1) and 4(3)(a).
8. The case law on which reliance has been placed is of no advantage to the appellant in the instant case, ln the case of Government of Pakistan and others Vs. M/s. Hashwani Hotel Ltd. reported as PLD 1990 SC 68, the issue was whether the charge for purposes of Section 4(3)(a) would be the highest one if more than one rate of charges were enforced by an hotel for providing rooms to guests. The honourable Supreme Court ruled that for operational purposes more than one rate of charges could be fixed by the hotel and each charge was valid for purposes of the said provision of law for the specified category of service. The case, before us pertains not to levy of duty on a higher charge in a case where a lower charge was fixed by the hotel prior to rendering of the service, ln fact no separate category of services to be rendered has been specified or rate of charges fixed for it in advance, lt is a case in which exception from levy of duty on use of a room is sought when service by way of room use is provided to hotel management or visiting executives of holding company. The two cases are distinguishable, in the case of the Commissioner of Income Tax, East Pakistan Vs. M/s. Hassan Kasam Dada. Karachi reported as PLD 1961 SC 375, the question was the interpretation of sections 11 and 14 of the Business Profits Tax Act, 1947 in relation to the interpretation of profit that was returned for assessment but escaped tax and profit that was not reported for assessm ent. Their Lordships, held that "We would have thought that the conventional method of ascertaining the intention of the Legislature after reading the statute as a whole was more likely to lead to the discovery of its true intent and is always a safer rule to follow, "and that "where two equally reasonable constructions were possible; one strict and the other beneficial to the assessee; then in a taxing statute the latter should be preferred....", ln the case before us the scope of excisable services is in dispute and the interpretation that we have attempted is in the context of the scheme of the Central Excises Act, 1944, as a whole. As regards the second rule, the appellant's case is analogous to seeking exception from the levy of Central Excise Duty in certain peculiar circumstances. So it does not attract this rule of interpretation. More appropriately it falls in the ambit of another rule laid down by Supreme Court in the case of M/s. Army Welfare Sugar Mills Ltd. and others \/s. Federation of Pakistan and others reported as 1992 SCMR 1065 = PTCL 1993 CL. 188. This rule is that "...the grant of exemption from payment of excise duty under section 12-A of the Act is a discretionary matter for the Government and that there are two basic principles of construing a provision of a statute involving exemption from payment of a tax, namely, the first rule is that the burden of proof is on the person who claims exemption. The second rule is that a provision relating to grant of tax exemption is to be construed strictly against the person asserting and in favour of taxing officer....", ln its support the Lordships approvingly quoted from the following authorities:--
(1) Sutherland on Statutory Construction, Vol. 3, Ed. 3 at Page 296.
"As a general s of tax exemptions are given a rigid interpretation against the assertion of the tax payer and in favour of the taxing power. The basis for the rule here is the same as that supporting a rule of a strict construction of positive revenue laws that the burden of taxation should be distributed equally and fairly among the members of the society."
(2) Crawford on Statutory Construction Page 506 "258. Exemption from Taxation, Tariff Acts, and laws to prevent fraud on the Revenue.-Provisions providing for an exemption may be properly construed strictly against the person who makes the claim of an exemption, ln other words, before an exemption can be recognized, the person or property claimed to be exempt must come clearly within the language apparently granting the exemption."
(3) N.A. Bindra on the interpretation of Statutes, Third Edition Page 488.
"Since all exemptions from taxation increase the burden on other members of the community, they should be deprecated, except to the extent permissible by the express language of the statutes itself. All exemptions from taxation must be strictly construed and must not be extended beyond the express requirements of the language used......................................... "
The plain rule thus is that taxing statutes are to be strictly construed and no subject is to be kept out of the tax ambit unless he has a claim beyond any shadow of doubt for seeking exception from the levy. The appellant, however, has only a dubious and baseless claim of being out of the ambit of the said Section 4(3)(a).
9. From the foregoing discussion it clearly emerges that this appeal has no merit and is accordingly rejected.
10. Appeal rejected.