1997 PLP 54 (PTD)

"(4) The tax in. respect of the goods mentioned in clauses (a), (c). (d) and (f) of subsection (1) and clause (d) of subsection (6) shall be payable on the occurrence of the first of the following events:-- (i) When the goods are delivered to the purchasers, or (ii) when the property in the goods passes to the purchaser, or (iii) when the goods are sent, consigned or exported to any place outside Pakistan, and for the purposes of this clause the goods shall be deemed to have been sold when they are sent, consigned, or exported to any such place as aforesaid, or (iv) when the goods produced or manufacturer or producer xxx (for exporter): Provided that, in case of goods mentioned in clause (a) of subsection (1) the tax shall where the Board so directs, be levied and collected as it were a duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 (I of 1944), and all the provisions of the said Act and the rules made thereunder shall, so far as may be and with the necessary modifications, apply notwithstanding the provisions of this Act. " The relevant portion of Sales Tax Circular No.2 of 1982 issued by the Central Board of Revenue reads as under:-- "The CBR is pleased to direct that sales tax leviable on all goods produced or manufactured in Pakistan shall be collected as if it were the duty of Excise leviable under section 3 of the Central Excises and Salt Act, 1944 and all the provisions of the said Act and the Rules made thereunder shall so far as may be and with necessary modifications, apply notwithstanding the provisions of the Sales Tax Act, 1951. "

7. Section 3 of the Sales Tax Act, 1951, which is the charging section, provides for levy and collection of the sales tax from goods manufactured and produced in Pakistan. However, under proviso to subsection (4) of section 3 of Sales Tax Act, 1951, the Central Board of Revenue has been empowered to direct that the sales tax be levied and recovered as excise duty under the Central Excises and Salt Act, 1944. There is no dispute that such a direction was issued by the Central Board of Revenue vide Circular No.2 of 1982 with the consequence that the sales tax was collected as if it was excise duty. According to the plain wording of the proviso, in such an event, all the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder became applicable notwithstanding the provisions of Sales Tax Act, 1951 and the claim for refund had as such to be processed under the of non substance clause in proviso further fortifies this

8. Learned counsel for the respondents has emphasized by using the words "levied and collected", the proviso makes applicable the excise laws only for the limited purposes of levy and collection of tax and not as a whole. While making this submission, learned counsel appears to be oblivious of the fact that all taxing laws are enacted for the purpose of levy and collection of taxes only and for no other purpose. Consequently, if in the matter of collection and levy the Central Excises and Salt Act, 1944 is applicable, there remain nothing in the field to which Sales Tax Act, 1951 shall apply. In the Circular No.3 of 1987 issued by the Central Board of Revenue itself, it has been stated on the basis of advice of the Ministry of Justice that where Board of Revenue has issued a direction under proviso to subsection (4) of section 3, all provisions of Central Excises and Salt Act, 1944 becomes applicable.

9. This argument also ignores the consequences which flow out of use of words "as if" or "as it" which by reference creates a legal fiction under which the sales tax is to be recovered as an excise duty. In such an event, all consequences which necessarily flow from the creation of legal fiction must follow. Reference in this connection may be made to the pronouncement of Supreme Court in Muhammad Yasin v. Sheikh Ghulam Murtaza and another (PLD 1988 SC 163). Similarly in Mehreen Zaibun Nisa v. Land Commissioner, Multan and others PLD 1975 SC 397, the following observation in East End Dwelling Company Ltd. v. Finsbury Borough Council 1952 AC 109 was cited with approval:-- "Where the statute says that you must imagine the state of affairs, it does not say that having done so you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs."

10. Section 3(4) of the Sales Tax Act as also effect of and direction issued by the Central Board of Revenue came up for consideration before this Court in Messrs Friends Sons and Partnership Concern v. The Deputy Collector, Central Excise Sales Tax, Lahore and 3 others PLD 1989 Lahore 337 wherein Rustam S. Sidhwa, J. (as his Lordship then was) speaking for the Court observed at pages 363-364:-- "By the second part, all the provisions of the Central Excises and Salt Act, 1944, and the rules made thereunder are made applicable, as they are and with the necessary modifications, notwithstanding the provisions of the Sales Tax Act, 1951. The conjunction 'and' clearly shows that the whole of the Act and the rules made thereunder are applicable as an addition and not that any part relating to the collection procedure alone is intended. The words "notwithstanding the provisions of the Act", which mean notwithstanding the provisions of this Act, which, mean notwithstanding the provisions of the Sales Tax Act, 1951, are intended to show that no part of the said Act is applicable, once the Central Excises and Salt Act, 1944, and the rules made thereunder are attracted. The words and with the necessary modifications' appear to be included ex abundanti cautela, to meet perhaps those stray cases where certain provisions of the Sales Tax Act or the rules framed thereunder confer a vested right, which perforce may require to be carried over, but not so as to indicate that the excise provisions have to be read in a general way mutatis mutandis. The words as far as may be and with the necessary modifications' give the impression that it is a case of legislation by incorporation, to be read mutatis mutandis, but the words "notwithstanding the provisions of the Act' i.e. the Sales Tax Act, strongly negative this intent. Instead of legislation by incorporation with necessary modifications, mutatis mutandis, which is intended is the grafting of the charge of one legislation into another legislation and adoption of that legislation wholly, with limited scope of modification to meet some stray cases where certain vested rights of the assessee perforce may have to be carried over. It is, therefore, clear that assessment and collection provisions under the Central Excises and Salt Act, 1944, and the rules made thereunder stand attracted. The contention of the learned counsel for the petitioners that assessment provisions stand excluded by the Circular and those contained in the Sales Tax Act, 1951 have to be applied, cannot be accepted." These observations which I respectfully follow, are conclusive of the controversy and no further discussion on the subject is called for.

11. Learned counsel for respondents has also pointed out that though in the proviso two words namely "collected" levied have been used in Circular No.2 of 1982, the only direction of the Board is to collect the sales tax as central excise duty and there is no direction regarding levy of sales tax. This contention does not in any manner advance the case of the respondents, as the question of refund is relatable to the collection and not leviability of the tax. Admittedly, all goods manufactured in Pakistan are subject to levy of sales tax but notwithstanding that levy no sales tax could have been collected by the respondents in view of exemption granted by the Federal Government under section 7 of the Sales Tax Act, 1951 vide Notification, dated 25th June, 1981. Consequently, even if it is accepted that the Central Excises and Salt Act, 1944 and the rules framed thereunder apply only to the extent of collection of tax yet for present purposes it would hardly make any difference as refund is a matter germane to collection.

12. It follows therefore that the claim for refund lodged by the petitioner had to be dealt with under the central excise laws and not under section 30-A of the Sales Tax Act, 1951. It is common ground between the parties that at the relevant item no provision of the nature of section 30-A of the Sales Tax Act, 1951 existed either in the Central Excises and Salt Act, 1944 or rules framed thereunder, though by a subsequent amendment such a provision bas now been incorporated which also leads to the conclusion that to the cases arising before the amendment, section 30-A of the Sales Tax Act, 1951 could not be applied and application of refund had to be dealt with under rule 10 of the Central Excise Rules, 1944.

13. Adverting to the other aspect of the matter as to whether or not the exemption from payment of sales tax can be granted retrospectively, the answer to this question is provided by the pronouncement of Supreme Court in- Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 wherein it has been ruled that though the rights vesting in a person cannot be taken away retrospectively by subordinate Legislature but there is no bar in conferring the benefit retroactively. The relevant observations which appear at page 1673 are instructive and may be reproduced with advantage:-- "The High Court has wrongly placed reliance on the general proposition that a notification cannot operate retrospectively without realising that their is a marked distinction between a notification which purports to impair existing vested rights or imposes new liabilities or obligations retrospectively and a notification which purports to confer benefit retrospectively. Ch. Ijaz Ahmad, learned, Deputy Attorney-General is unable to cite any case-law to demonstrate that a beneficial notification cannot be operative retrospectively, nor he has pointed out that the averments of the appellants in paras. 3 to 7 of their memo. of Constitutional petition, which contained details of the actions taken by the appellants on the basis of the above SRO inter alia by making investment, have been denied by the official respondents in their counter-affidavit to the Constitutional petition." In view of what has been stated above, these petitions are allowed and the impugned orders are declared to have been passed without any lawful authority and legal effect with the consequence that the case stand remitted to respondents for decision afresh in the light of the observations made above. A.A./R-13/L Case remanded.