1985 PLP 488 (PTD)

4. It was contended by Mr. Pasha, the learned counsel for the respondent that the sales tax and other duty taxes payable on Vanaspati ghee and vegetable products Were merged with the excise duty and these taxes (including sales tax) continued to be levied under a consolidated item i. e. capacity duty at the rate of Rs. 45 per cwt. as against excise duty which prior to the introduction capacity duty was charged at the rate of Rs. 7 per cwt. In support of his plea that sales-tax and other duties were merged in the capacity duty thus fixed at the rate of Rs. 45 per cwt. the learned counsel placed reliance upon the speeches delivered by the Finance Minister. The relevant portions of the speech upon which reliance was' placed has been noted in the order of the learned Income-tax. Appellate Tribunal and the same for purposes of ready reference is repro duced below: I may add that the merger of sales tax with excise duties would also cause a reduction of Rs. 14.30 crore in the Provincial share in sales tax proceeds. To this extent the revenue surplus of the Central Government would improve in the first instance but when the Provincial Governments are compensated for this loss by giving them an additional grant-in-aid, for which I shall seek the approval of the House at the time of presentation of the supplementary demands for the next year, this position will be neutralized." "The Honourable Leader of the opposition mentioned about sales tax merger with excise duty and the Provincial being deprived of their share. I would respectfully refer him to the Budget speech, Part II, in which I brought out this matter very clearly when I said: I may add that the merger of sales tax with excise duty would also cause reduction of Rs. 14.30 crore in the Provincial share in the sales tax proceeds. To this extent the revenue supplies of the Central Government would improve in the first instance. But when the Provincial Government are com pensated for this loss by giving them the additional amount for which I will seek the approval of the House at the time of presen tation of the supplementary demand for the next year, this position will be neutralized." The learned counsel then referred to the "Summary of Financial Measures" from the speech of the Finance Minister which appears in 16 Taxation at page 113 in support of his plea that on merger of the sales tax and other duties in the capacity duty fixed for the vegetable products, the Government finding that the exact duty after merger of all the taxes would come to Rs. 40 per cwt. and not Rs. 45 per cwt. as earlier proposed, the rate of capacity duty on Vanaspati and vegetable ghee was reduced to Rs. 40 per cwt. The relevant portion of the speech in this regard upon which: reliance was placed is reproduced hereinbelow; "Vegetable product. It is proposed to levy duty on capacity basis on Vegetable Product (Vanaspati factories), after their individual, production capacities have been fixed. As in this case of textile the ad valorem rates of sales-tax etc., have been merged with the specific excise duty of Rs. 6 per c. w. t. and the new rate fixed at Rs.

45. By a partial exemption notification the effective rate has been reduced at Rs. 40 per cwt," Mr. Pasha contended that the speech of the Finance Minister, the mover of the Bill, would show that sales-tax was one of the elements which was merged in the capacity duty levied on Vanaspati and vegetable ghee and thus when the respondent/assessee paid the capacity duty it also paid sales tax. Accordingly it was argued that since the Vanaspati and vegetable products were exempted from payment of sales tax vide Notification S.R.O. III (R)/67, dated 16th June, 1967 the assessee who con sumed vegetable ghee in manufacture of biscuits was entitled to refund of sales tax to the extent it was collected as an element in the consolidated form as capacity duty. The argument of the learned counsel in support of the plea that the assessee/the respondent was entitled to refund of the sales tax was based upon the plea that the capacity duty which was introduced from 11th June, 1967, included as one of its ingredients, besides excise duty, sales tax also as would appear from the speeches of Finance Minister, relevant extracts of which have already been reproduced above. It was argued that the speeches of the Finance Minister who had moved the relevant Finance Act could be taken into consideration in order to ascertain the object of legisla tion, as was held by the Supreme Court of India in the case as K. P. Var ghese v. Income-tax Officer and another (1981 I T R 597). In the above-mentioned case interpretation of newly-added subsection (2) of section 52 of Indian Income-tax Act, 1961 came up for consideration. It may be mentioned that original section 52 consisted of only one provision, which was re-numbered as subsection (1) and subsection (2) was added in that section. The learned Court after observing that the scope of the said subsection (I) of section 52 was extremely restricted because it applied only where the transferee is a person directly or indirectly connected with the assessee and the object of under-statement of consideration for the transfer of capital asset was to avoid or reduce the Income-tax liability of the assessee to tax on capital gains and that there may be cases where the consideration for the transfer was shown at a lesser figure than that actually received by the assessee but the transferee was not a person directly or indirectly connected with the assessee of the object of under statement of the consideration was unconnected with tax on capital gains and that such cases would not be within the reach of subsection (1) and thus the assessee though dishonest would escape the rigor of the provision enacted in sub section (1), observed: "The Parliament, therefore, enacted subsection (2) with a view to extending the coverage of the provision in subsection (1) to other cases not under statement of consideration. This becomes clear .if we have the regard to the object and purpose of introduction to subsection (2) appearing from travaux preparative relating to enactment of that provision." In the context it was observed by the Supreme Court of India that though the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the .legislation was enacted. It was accord ingly observed that from the speech of the Finance Minister it was apparent that subsection (2) was enacted for the purpose of reaching those cases where there was under statement of consideration in respect of the transfer or to put it Differently the actual consideration received for the transfer was "considerably more" than that the declared or shown by the assessee, but which were not covered by subsection (I) because the transferee was not directly or indirectly connected with the assessee, It was in the circumstances of the said case, the learned Court observed that the real object and purpose of the enactment of subsection (2) and its interpretation must fail in line with the advancement of that object and purpose. I am afraid that the above-cited case of K. P. Varghese v. Income-tax Officer does not advance the case of the petitioner as the question or suppressing any mischief and advancing the object of the enactment under consideration is not involved in this case. The principle applicable to the interpretation of fiscal statutes, relevant for the purpose of this case would be found in the case of Commissioner of Agricultural Income-tax, East Bengal v. W. M. Abdur Rehman (1973 S C M R 445) which being relevant is reproduced below: "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 law, he must be taxed, however great a hardship may thereby be involved A but on the other hand if 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. As was said by Rowlatt, J., in Cap Brandy, Syndicate v. Inland Revenue Commissioner (1921) 1 K B

64. In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." In Tenant v. Smigh Lord Halsbury said: In a Taxing Act it is impossible. I believe to assume any intention, any governing purpose in the Act, to do more than taken such tax as the statute imposes .........cases, therefore, under the Taxing Acts always resolve themselves into the question whether or not the words of the Act have reached the alleged subject of Taxation. In the light of these pronouncements with which I hereby express my respectful agreement, it is clear that it is not possible to look either to the amending statute of 1951 or to the alleged collection allow ance said to be included in the scheme of the case in order to determine whether the words in clause (7) of section 6 provide for an allowance to be made in respect of the amount of cess received) by the assessee. That question must be decided solely on a con sideration of the very words of the clause, although in interpreting those words it is permissible to look generally at the rest of the statute, and in particular to consider whether the words in question have been used elsewhere and if so in what sense."

5. Mr. Iqbal Naeem Pasha, the learned counsel for the respondent submitted that the speech of the Finance Minister is relevant as it shows that on the date when the capacity duty was introduced on the factories producing Vanaspati and vegetable products, by Notification No. SRO III(R)/67, dated 16th June, 1967 effective from 11th June, 1967 the said products were exempted from payment of sales tax. The learned counsel referred to page 104 of the Law of Sales Tax in Pakistan (1979) by Raza Naqvi, where the relevant Notification is noted. He also referred to the speech of the Finance Minister wherein he referred to the "merger of sales tax with excise duty". Submission of the learned counsel was that the fact remained that the sales tax had been merged with the excise duty when the capacity duty was introduced from 11th June, 1967 and that with the object to avoid additional burden upon the respondent, a manufacturer of biscuits who consumed vegetable ghee in the production of biscuits, Vanaspati and Vegetable products" were exempted from payment of sales tax from 11th June, 1907. According to the learned counsel the element of sales tax which stood merged in the capacity duty imposed as above, was liable to be refunded to the respondent on the quantity of vegetable ghee consumed by the assessee in manufacture of biscuits, as otherwise on vegetable ghee, which is exempt from sales tax the respondent is made to pay sales tax is the garb of capacity duty. This argument of the learned counsel cannot succeed for the reason firstly, that as laid down in the case of Commissioner of Agricultural Income-tax East Bengal v. G. W. M. Abdur Rehman (ibid) the Honourable Supreme Court has authoritatively laid down the principle that, however, great hardship may there be involved but that if the person ought to be taxed comes with in the law he must be taxed and that the question must be decided solely on a consideration of very words of the relevant clause although it is permissible to generally look at the statute if the words in question have been used elsewhere and if so in what sense. Secondly, I am also clear in my mind that reference to the speech of the Finance Minister is irrelevant and inadmissible in the circumstances of the present case as the learned counsel for the respondent was unable to point out that such a reference was necessary while interpreting the relevant law to avoid any manifestly absurd and unjust result which could never have been intended to the Legislature. The inference drawn by me as above finds support from the observa tions made in the case of S. Muhammad Din & Sons v. Sales Tax Officer Special Circle 1, Lahore (P L D 1977 Lah. 1225), which was decided by a learned Judge of the Lahore High Court. It is not necessary to go in details of the facts of the said case, suffice would be to state that the petitioner, a manufacturer of electric fans, filed petition under Article 199 of the Constitution wherein inter alia refund of sales tax was claimed on the plea that although the electric fans were exempted from sales tax by the Notification, dated 14th June, 1965, the sales tax continued nevertheless to be levied in the garb of the excise duty. In support of the contention thus raised, the petitioner relied upon the speech of the Finance Minister, who while piloting the relevant finance bill made it clear in his speech that the intention was in fact to merge the sales tax and the rehabilitation tax with the excise duty. It was accordingly argued that in the light of the said speech the sales tax had not been abolished but it continued to be recovered in the form of excise duty Repelling the above contention, the learned Judge of the Lahore High Court held: "In my opinion, however, such speeches are meant for the consump tion of the lay public but cannot have any effect on the legal consequences of the relevant enactments, the rules made, thereunder or the notifications issued in pursuance thereof,. Excise duty is, levied under a different Act altogether. The Sales Tax Act is independent of it. If, sales tax is abolished under the Sales Tax Act, then it will react on all the relevant provisions of that Act even though the excise duty may have been enhanced, under relevant Act, by exactly the same amount as the tax previously recoverable under the Sales Tax Act. So, in the present case due effect will have to be given to the fact that electric fans have been exempted from the Sales Tax under Sales Tax Act, the petitioner is not entitled to a licence under section 8 thereof and as such to the exemption from payment of tax on the raw material or the partly manufactured goods." I am in respectful agreement with the observations made as above by the learned Judge of the High Court of Lahore and fortified by authorita tive rule laid down in the case of Abbasi Textile Mills Ltd. v. The Federa tion of Pakistan and others (P L D 1958 S C (Pak.) 187) wherein while delivering the opinion of the Court, Honourable Mr. Shahabuddin, Actg. C. J. held that speeches delivered in debates in the Legislature are hardly relevant when the language of the enactments is clear and there is no ambiguity. The Honourable Supreme Court in the case of Commissioner, Agricultural Income-tax v. G. W. M. Abdur Rehman held that the Court while construing fiscal statute would look only to the letter of law. In the light of the principles discussed above and being of the opinion that literal interpretation of law in the present case leads to no absurdity or unjust results I have no hesitation in holding that the speech given by the Finance Minister cannot have any effect on the legal consequences flowing from the language employed in the enactment. Vanaspati and Vegetable Products were exempted from sales tax from 11th June, 1967 vide Notification SRO-111 (R)/67, dated 16th June, 1967. Thus, when the capacity duty was made payable under the Central Excise and Salt E Act No. 1 of 1944 from 11th June, 1967 no sales tax was either payable or was paid under the Sales Tax Act by the petitioner, consequently the question of refund of any amount under subsection (2) of section 27 of the said Act, did not arise. The relevant subsection (P L D 1971 Kar. 333) for sake of reference reproduced below: Section 27(2).--If any person satisfies the Sales Tax Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this Act, he shall be entitled to a refund of such excess, and the provisions of this Act in respect ' of appeal and revision shall apply to an order passed by the Sales Tax Officer under this subsection as they apply to an assessment."

6. I may also with advantage refer here to the case of Zaibtun Textile

1. Mill Ltd v. Central Board of Revenue and others (P L D 1983 S C 368) where the nature of the capacity duty imposed under the Central Excise and Salt Act (I of 1944) was described as follows: "The tax, retains its character of excise duty on manufactures. Only the method of assessment of the tax and its collection has been changed. Previous to the amendments, duty of excise was livable on actual production of goods, for which purpose a large excise staff and machinery had to be employed. There are no two opinions that this system suffered from abuses and grave irregularities and unnecessary complexities. The change in the method of assessment was designed to remove these difficulties and to simplify the procedure for collection of excise duties. Instead of charging and collecting these duties on actual production, a more simple method was devised, that is, to determine the production capacity of each plant, machinery etc., and charge excisable duty according to the volume of output being capable or production by such industrial unit." Against the above judgment appeal preferred by the petitioners was dismiss by the Honourable Supreme Court of Pakistan. The case is reported on Zaibtun Textile Mills Limited v. Central Board of Revenue and others (PLD 1983 SC 368). While dealing with the contention, raised by the learned Advocate for the appellants that the Legislature abdicated its function in favour of the Board of Revenue in a manner contrary to the constitutional requirements the Honourable Supreme Court as to the nature and authority to levy the capacity duty observed as follows: " All that is provided by subsection (4) is to make available to the Federal Government an alternate mode of the imposition of excise duty on the basis of the production capacity of plants and machinery, etc. instead of on the actual production and output of goods by such plants and machinery. Having regard to the constitutional amendment amending Entry No. 43 of third Schedule of the Constitution (1962) whereby an additional subject for 'making laws was included to empower the Central Legislature to make laws providing for imposition of taxes and duties on the basis of the production capacity, in lieu of, inter alia, excise duties, it cannot be contended that the Legislature had no authority to authorise the levy and collection of duties on the production capacity."

7. It may be mentioned that learned counsel for the respondent also made reference, to the meaning of word `merger' from Corpus Juris Secun dum, the relevant portion is reproduced below: " `Merger' is defined generally as the absorption of a thing of lesser importance by a greater, whereby the lesser -ceases to exist, but the greater is not increased ; an absorption or swallowing up so as to involve a loss of identity and individuality." In law it is the absorption or extinguishment of one estate or contract in another. It is said that merger is an operation of law not depending on the intention of the parties. However, it has also been stated that it is the law that merger is largely a question of intention to a great extent depending on the circumstances surround ing each particular- case, and it is said that the Courts will always presume against it whenever it will operate to the disadvantage of a party. In merger there is a carrying on of the substance of the thing, except that the substance is merged into, and becomes apart of, a separate thing with a new identity. 'Merger' has been held synonymous with, or equivalent to, 'confusion" section 15 C J S 958 Note 30, `consolidation' section 15 C J S 992 Note 6, and `extinguishment' see 35 C J S 294 Note 40. "Merger" has been compared with, or distinguished from `consolida tion section 15 C J S 992 Note 6, "extinguishment" section 35 C. J. S. 294 Note 42, "surrender", and "union". After taking into consideration the meaning of the word "merger" reproduced above I find that the conclusion reached by me is supported by the same. The sales tax on its merger in capacity duty ceased to exist and lost its identity and individuality.

8. For the reason discussed above, in my opinion the decision given by the Tribunal was not correct, and accordingly the question is answered in the negative. The parties are left to bear their own costs. M. B. A. Reference answered in the negative.