The petitioner runs an hotel in Kashmir Building, Mcleod Road. Labore. It comprises 232 lodging units which were being rented out in the relevant years at the rate of Rs. 7 each per day. Out of the above accommodation 117 unite had the necessary wiring circuits so that a telephone apparatus could be installed therein if a lodger so desired. The room telephone is connected with the local hotel exchange and a lodge could be connected with any other lodger or an outside number by the operator. Petitioner charged at the rate of Rs. 2.50 per day in addition to the room rent for the telephone service. The charges for the outside calls were made extra though room to room communication involved no additional cost. The remaining 115 units did not have the telephone connection facilities and therefore, there was no possibility of any additional coat for that service to the persons lodged therein.
2. In the year 1965, the Provincial Government vide the Finance Act. 1965 enacted section 12 by which tax was imposed only on such hotels the maximum daily charge for a single lodging unit of which, including charges in respect of fins, air-conditioning, light and heat exceeds Rs. 7.
Lodging unit was defined in section 12(t)(b) as :- "Lodging unit means a bed or other sleeping accommodation which is, or is intended to be, provided to a lodger staying over night in a room for lodging."
The hotels were to be grouped into two classes and charged at the rate of Re. 1 and 0.50 paisas per day per lodging unit as a first class and a IInd class hotel respectively.
3. The District Excise and Taxation Officer in his order dated 14-6-1966 held that as the charge made by the petitioner for a lodging unit was Rs. 9.50 including the telephone charges, he was liable to pay tax. It was stated by him in his order that the petitioner had been charging a cumulative rent of Rs. 8 to Rs. 9 per lodging unit before the Finance Act of 1965 was presented in the Assembly. As the hotel had been graded as IInd Class, a demand in the sum of Rs. 42,440 at the rate of 0.50 paisas per day for 232 lodging units was created. The petitioner filed an appeal before the Director who vide his order dated 18-11-1966 found that, as the telephone charges were entirely separate and could not be covered by the provision as contained in section 12(i)(b) reproduced above, the demand raised against the petitioner was unlawful. In view of his finding however, the Director did not go into the other question whether the tax was payable on all the lodging units even though only 117 could have telephone facilities.
4. Section 12 of the West Pakistan Finance Act of 1965 was retrospectively amended by the West Pakistan Finance (Amendment) Ordinance, 1969 and the following explanation was deemed always to have been so added. It was published on 6th of December, 1969. The amended provisions read as under : "Section 12(l)(b).-No tax shall be levied on any hotel where the maximum daily charge for a single lodging unit does not exceed Rs. 7; Explanation.-In this subsection, maximum daily charge for single lodging unit includes charges in respect of fans, air-condition, light, heat, telephone, bedding and all other payments connected with the lodging unit, except the portion If any directly attributable to supply of foodstuff."
After the abovesaid amendment, the Excise and Taxation Officer, Lahore, vide his letter dated 3-6- 1970 required of the petitioner to deposit as tax a sum of Rs. 42,440 for the year 1 965-66 forthwith.
He further directed it to produce its accounts in respect of all the lodging units in its hotel during the years 1966-67, 1967-68, 1968-69 and 1969-70 within a week from the receipt of that letter to enable him to determine the amount of tax recoverable from it. It is this demand which necessitated the filing of the present writ petition.
5. The learned counsel raised the following points for consideration ;-
(i) The letter dated 3-6-1970 referred to above is a nullity in the eye of law because in the absence of any validation clause In the amendment, a fresh notice of hearing was necessary as required under rule 2 before demand.
(ii) That the previous assessm ent was a past and closed transaction and even a retroactive legislative measure would not operate to annul the effect of that judgment or order Inter partes, unless the Legislature had consciously made operative the amendment despite that judgment or order.
(iii) That the direction of the respondent to the petitioner to produce before him the accounts for the years from 1966-67 to 1969-70 was also invalid as tax could be levied and collared only during a relevant year and not thereafter.
(iv) That in any case the rent of the lodging unit remained Rs. 7 even in the subsequent years and the optional charges by the lodger telephone service would not become a part of the charges in order to determine the exemption under section 12(2) as amended.
6. It was submitted by the learned counsel that as the amendment created a new liability the petitioner had a right to be heard under rule 2 before any tax was levied on him. He further submitted that as the Director while passing his order in appeal did not consider the liability of the petitioner with regard to 115 lodging units which could not have any telephone facility, the petitioner had a right to be heard by the Assessing and Appellate Authority afresh before any demand could be made for all the lodging units. The learned counsel for the respondent replied that as the liability, previously settled but later annulled by the appellate order, was revived because of the retroactive amendment, the petitioner became liable to pay the same and no fresh notice was necessary.
7. It will be seen, as I shall be presently discussing, that the questions (i) to (li) are interlinked and can be considered together. Undoubtedly, the respondent did not challenge the order of the Director by which the petitioner was held not liable to pay any tax, as the maximum rent far a single lodging unit in its betel did not exceed Rs.
7. The order of the Director, therefore, attained finality and the demand for the year 1965-6 became a transaction past and closed. The subsequent amendment the would affect that only it there yeas an express provision to annul the effect of that order. This aspect of the law is very well established. Reference be made to Craies on , Statute Law, 1971 Edition page 395 as under : "In Attorney-General v. The bald, ((1890) 24 Q B D 557) section 11 of the Customs and Inland Revenue Act 1889, as to the liability of voluntary settlements to stamp duty, was hold retrospective, although the litigation in which its terms were involved had commenced before it was passed. Acts of this kind, like judgments, decide similar cases pending when the judgments are given, but do not reopen decided cases."
The same is the view of American Courts as per pats. 284 of "The Construction of Statutes" by Crawford, 1940 edition. This point was also considered by the Supreme Court in Karuddsons' case (PLD 1974 SC 180). The following observations which are relevant may be reproduced below .
"The effect of "final determination" of the rights of parties to a litigation was considered by the Privy Council to John Lemm v. ,Thomas Alexender Mitchell (1912 A C 400) and the principle laid down was that the effect of the judgment which in the "absence of appeal (operates as) as a final determination of the rights of the parties" rests on the general principle the it a man is not to be vexed twice for the same cause of action unless, it is "excluded by the Legislature in explicit and unmistakable terms". In the instant case, the pendency of the certificated appeal in this Court had destroyed the finality of the High Court's order dated 11-10-1966, and therefore, was hit by the new dispensation in section 30 A of the Act."
8. When confronted with the situation, the learned counsel for the respondent sought for a short adjournment to consider the effect of the Supreme Court judgment and other views. He appeared on the final date of hearing to say that a3 the view of the Supreme Court on the point was quite clear and as be could not find any other point of view, he had nothing more to say on that point. In the circumstances the liability for the year 1965-66 became extinct as there was no express provision in the amendment to annul the effect of the previous order.
9. The learned counsel for the petitioner then submitted that in every taxing provision, there is always a time limit for assessm ent of tax and that if income escapes assessment within that time, the demand lapses. Ho referred In this regard to the Income-tax Act, the Sales Tax Act and the Business Profit Tax Act and submitted that though there is no specific provision for the assessment of tax within the assessm ent year, yet if the process is not initiated within the assessment year or if the assessm ent is not completed within the period provided for taking action in case of escaped assessm ent no tax demand can be made against any assessee thereafter. Reliance was placed on the observations made in Messri Dada Ltd. v. C.1. T. (PLD1974SC310). This point was also considered by their Lordships of tire Privy Council in Rajerdra Nath Mukerjee (AIR1934PC30) wherein it was held The language of the Act is no doubt naturally suited to the normal case of taxation carried through all its processes within the compass of the tax year, but their Lordships do not find in any of the sections to which they were referred, apart from section 34, any provision which would justify the imposition into the Act of an implied prohibition against the making of an assessment after the expiry of the tax year. . ."
It was further observed in the same opinion that ; "it may be that if no notice calling for a return under section 22 is issued within the tax year then section 34 provides the only means available to the Crown of remedying the omission, but that is a different matter. . . ;'
The Dacca High Court in Atta Hussain's case ((1968) 17 Taxation 220) under the Sales Tax Act expressed its views as under ; ". : We have already seen, in general terms that section 10, speaks of a return at the end of each quarter have already noticed under subsection (1). Subsection (2) requires the officer to determine the tax and subsection (3) authorises him to call for the books of accounts and subsection (5) further enables him to make assessment of two or more quarters. Although be is not required to make the assessm ent within the same year, it does not contemplate that he will take recourse to section 10, after sleeping over the assessment for over two years. We are, therefore, clearly of opinion that on the facts found, section 10 is inapplicable. We are fortified in this view by sub- section (4) for it gives reasons for it. The Sales Tax Officer is free to take action even when there is default in submitting a return for onesingle quarter. Therefore, it is clear that the Legislature did not intend that he should be authorised to take action even after a lapse of two years."
10. Section 12(1) and rule 4(5) read as under : "12.-(1) With effect from 1st July, 1965, there shall be levied and collected every year a tax on all hotels classified as first or second class hotels.
"4.-(5) If it is noticed at any time during the year that actually the number of lodging units in a hotel is larger or the classification of the hotel or the rate of maximum daily charges for a single lodging unit therein is higher than that en which tax was hitherto based, the District Excise and Taxation Officer shall revise and enhance the amount of the tax on such total and determine the additional tax for the year accordingly ; Provided that no such enhancement shall be made without affording the hotel an opportunity of being heard. . . :'
The District Excise and Taxation Officer has power to proceed under rule 3(2) and complete assessm ent proceedings within the assessment year even if no return as provided in rule 3(l) had been filed by the assesses but failing that an assesses would escape tax though the liability would remain. It will be seen that the above provisions do contain a similar situation as is availabla in section 3 read with sections 23 and 34 of the Income-tax Act and sections 3, 10 and 28 of the Sales Tax Act. In the Income-tax Act and the Sales Tax Act the liability or chargeability rests on section 3 while the other sections are machinery provisions. That means that if assessment or re- assessm ent is not made within the time provided by law, the liability would stand but there will be no machinery available to assess liability, quantify B tax and recover it. In Chatturam v. C.1. T.
((1947) I T R 302) the Federal Court, relying on the judgment of House of Lords !n Whitney v.
1. R. (10 T C 88) arid a few other cases laid down that liability to tax is definitely and finally created by tee charging section and that subsequent provisions as to assessment provide only a machinery to quantify and recover.
11. It may now be seen that the addition of the 'explanation' in the case in hand only supplies that wanted machinery because the liability to pay was not affected. The well-established rule of construction about machinery section in a taxing statute is that if the incidence of tax is clear the machinery C section should be so construed as to make the realization of tax possible. Reference be made to Muhammad Amin Khan v. Controller of Estate Duty (PLD 1961 SC 119).
A situation as is under consideration came up before an Indian High Court in L T. C. v. Calcutta Discount Co. Ltd. ((1953) 23 1 T R 471). There the assessee was assessed to income-tax for the assessm ent years 1942-43, 1943-44 and 1944-45 under section 23(3) of the Act, on the returns furnished by him at a time when time for re-assessment was only four years. The amended section 34 came into force on 30th March, 1948, providing 8 years for re-assessment. On 28th March, 1951, when the liability had already become time-barred, notices were issued to the assesaco under section 34 of the Act on the ground that the Income-tax Officer had reason to believe that the income for each of the years bad been under-assessed. One of the contentions of the assesses was that under the language of the amended section 34 no proceedings at all could be taken for any of the assessm ent years prior to 30th March, 1948. That contention was negatived by Chakarvarti, C. J. And Sarkar. J. At page 482 the learned Chief Justice observed : "The plain effect of the substitution of the new section 34 with effect from the 30th March, 1948, is that from that date the Income-tax Act is to be read as including the now section as a part thereof, and if it is to be so read, the further effect of the express language of the section is that so far as cases coming within clause (a) of subsection (PLD 1977 Lah. 292) are concerned, all assessm ent years ending within eight years from the 30th March, 1948, and from subsequent dates, are within its purview and it will apply to them, provided the notice contemplated is given within such eight years. What is art within the purview of the section is an assessm ent year which ended before eight years from the 30th March, 1948. All tire three assessm ent years in question in the present case ended within eight years from the 30th March, 1948 . . . . : '
12. As referred to in para. 4 above, the explanation was deemed always to have been so added in the Act. It was thus expressly given a retroactive effect and noshing more was required to know the intention of the Legislature In such a situation the amendment declares what the law is and what it wasat the time it was originally erected. The same view was taken by a Division Bench of this Court in Dreamland Cinema v. C.
1. T. (2) where t1ne point in issue was exhaustively dealt with. According to Maxwell on the, Interpretation of Statutes, 1962 Edition, page 213 "Whenever the intention is clear that the Act should have a retrospective operation, it must unquestionably be so construed, even though the consequences may appear unjust and hard". The same view was taken by a Full Borsch of the Oudh High Court in Babu Kundan Lai v. Haft Sheikh Faqir Bakhsh (AIR 1938 Oudh 127). The Supreme Court in Commr. Of Agri. Income-tax v. B. W. M. Abdur Rehman (1973 SCMR 445), observed as follows ;- "But indeed, in determining whether or not a particular matter comes within a taxing statute, it is only the letter of the law which must be looked to. `there is ample authority for the proposition that in a fiscal case, form is of primary importance, the principle being that if the person sought to be taxed comes within the letter of the law, he must be taxed, however great a hardship may thereby be involved but on the other hand of the Crown cannot bring the subject within the letter of the law he is free, however apparent it may be that his case is within what might be called the spirit of the law."
I have therefore no doubt in my mind that the intention of the Legislature was to create a tai payability in the situation as is envisaged by the amended provision with effect from the date of enactment.
13. The next point to be considered is whether this amendment would authorise the Excise and Taxation Officer to issue fresh notices in cases where the assesses bad already escaped assessm ent 7 For that purpose we have to take into consideration the subject-matter of the Act and the purpose that was sought to be achieved by tire amendment as held in Muhammad Hussain v. Mian Mahmood Ahmad (PLD 1970 Lah. 140). 1n Attorney-General v. Carlton Bank ((1899)2 Q B 158) Lord Russel, C. J. Said t "The Court must no doubt ascertain the subject-matter to which the particular tax is by the Statute intended to be applied, but when once that is ascertained, it is not open to the Court to narrow op whittle down the operation of the Act by consideration of hardship or business convenience or the like."
It was held in the 'Attorney-General of Canada v. Hallet and Carey Ltd. (PLD 1952 P C 29)
"In their Lordships' view there is no better way of approaching the interpretation or this Act than to endeavour to appreciate the general object that it serves and to give its words their natural meaning in the light of that object. There are many so called rules of construction that Courts of law have resorted to in their interpretation of statutes, but the paramount rule remains that every statute is to be expounded according to its manifest or expressed intention. .
Further, the interpretation to be adopted must be such as advances rather than defeats the very purpose of the Act. Reference he made to ShamsuddinAhmad v. Registrar High Court of Dacca (PLD 1967 SC 501) and Province of East Pakistan[ v. Sharafatullah (PLD1970SC514) wherein the same rule was laid down by the Supreme Court.
14. It has already been stated above that the tax on hotels was imposed for the first time in 1965.
The inclusion of telephone charges in the daily rental for the purpose of determining the maximum daily charges for a single lodging unit was absent at that time but added retrospectively in the year 1969. It is to be noted that yearly tax would have been payable by the assessee had that 'explanation' been there in 1965. On the other hand if the tax for the past years was not to be recovered there was no point in applying the explanation retrospectively. Thus the oily difference that the retroactive application of amendment made is that the tax far the past years would become payable despite the fact that the payability of this tax. From year to year only stood well established in view of the judicial dicta referred to in paras. 9 and 10 above. Therefore, if the intention was not to enable the authorities to assess and recover the escaped tax for the past years the amendment need not have been retrospective. On the other hand, if we accept the construction being suggested by the learned counsel for the petitioner, then I shall have to declare the clause 'shall be deemed always to have been so added' as redundant. It is a well-established rule of construction of statutes that one must not impute to the language of an Act tantology or superfluity and must at the very outset be inclined to suppose that every word was intended to have some effect or be of some use. In this view of the matter, there can be no intention other than reviving the payability which had already escaped determination due to efflux of time. g The amendment thus impliedly extended the time limit for such past years for which no assessment had been made to authorise the District Excise and Taxation Officer to determine tax payable by the petitioner. The second part of the impugned notice requiring of the petitioner to produce record for the years from 1966 to 1970, was, therefore, valid.
15. I would not like to go into the last question as the same shall have to be considered by the District Excise and Taxation Officer while assessing the liability of the petitioner.
16. In view of the above discussion the notice of demand for the sum of Rs. 42,440 as tax for the yea: 1965-66 is declared to be without lawful authority and of no legal effect. This petition succeeds only to that extent while the prayer for other years is refused. The parties shall bear their own costs.