1986 PLP 238 (PTD)

NAIMUDDIN, J.‑‑By this application under section 17(2) of the Sales Tax Act, 1951, and the similar application in Sales Tax Case No. 5 of 1978, the Commissioner . of Sales Tax, Central Zone, Karachi, has referred the following common question of law said to arise out of the Income‑tax Appellate Tribunal's Order, dated 19‑7‑1975:‑‑ "Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in holding that no sales tax was payable on the sales of empty drums?".

2. It may be stated that this case relates to the assessment year 1967‑68, while the Sales Tax Case No. 5 of 1978 relates to the assessment year 1968‑69, otherwise the facts and questions raised are same in both the cases.

3. The facts giving rise to the applications are that the Sales Tax Officer, Companies Circle X, Karachi, assessed the respondents under section 10 of the Sales Tax Act, 1951. By the separate orders he found the respondents liable to pay a sum of Rs.1,56,346 on account of sales tax on the sale of empty drums in the assessment year 1967‑68 and a sum of Rs.7,344 in the assessment year 1968‑69. 4 Being aggrieved by the orders of the Sales Tax Officer the respondents filed separate appeals being Sales Tax Appeals Nos. 95/KB/ 73‑‑74, and 292/KB/73‑74 before the Income‑tax Appellate Tribunal, Karachi Bench, Karachi which were allowed by the Tribunal by separate orders, dated 19‑7‑1975 and 8‑9‑1975. In the order, dated 19‑7‑1975 the Income‑tax Appellate Tribunal relied on their own common decision, dated 18‑6‑1974, in Sales Tax Appeals Nos. 252‑253/71‑72and 43/KB172‑73, wherein they held that the respondents were not manufacturers or producers or whole‑sellers of empty drums and did not come within the mischief of section 10 of the Sales Tax Act, 1951 and further held that in terms of section .3(3)(ii) of the Sales Tax Act, 1951, sales tax could be charged on the duty paid value of the imported goods which had not been determined and as such the quantum of sales tax could not be fixed, therefore, in such a case no sales tax was payable.

5. Thereafter, the applicant filed separate applications with the Tribunal for referring the question to this Court for answer. But the Tribunal by the order, dated 29‑6‑1977, declined to refer the question for the reasons which we may state in their own words:‑‑ "The respondent on the other hand contends, in the first instance that the answer to the question posed by the Commissioner, on the admitted facts, is self‑evident and, therefore, does not give rise to any question of law. So far as the question framed is concerned we find that the Tribunal never hold that no sales tax was payable on the sales of imported empty drums. The following expect from the order of the Tribunal show that it was the manner of assessment which was not found to be valid by the Tribunal:‑‑ 'Matter has been given due thought. There is no doubt that in terms of section 3(3)(11) sales tax could be charged on the duty paid value of imported goods which has not been determined in the appellant's case and as such the quantum of sales tax cannot be fixed. It is also true that assessments made on the appellant under section 10(3) were improper as the appellant is not manufacturer or producer or licensed whole-saler of empty drums and sundry goods. Furthermore, as correctly pointed out by the counsel of the appellant only section 29 could have been invoked in the present case but as a period of limitation has had already expired recourse could not be taken to this section either. Any under payment of sales tax in 1966‑67 is also covered by the declaration under Martial Law Regulation 32 filed by the appellant. 'n the circumstances we consider the action of the Sales Tax Officer in charging to sales tax the empty drums and sundry items in the three years as unjustified which amounts will now be excluded from sales charged to sales tax'. Therefore, as the respondent rightly contends the question posed by the Commissioner stands answered by the Tribunal's own decision in favour of the learned Commissioner. No reference in these circumstances is called for and the applications are rejected." Therefore, the present applications as stated before, have been filed.

6. We have heard Mr. Shaikh Haider learned counsel for the applicant and Mr. Ali Athar learned counsel for the respondents.

7. We may first mention that the Tribunal misdirected itself when it declined to refer the question for answer to this Court for the question whether the word 'manufacturer', or 'producer' or 'whole‑seller' is to be understood to refer to manufacturer, pr producer or whole‑seller respect of which sales tax is chargeable or interpretation of the provisions of law and is, therefore, a question of law. Accordingly, we proceed to answer the question.

8. It is submitted by, Mr. Shaikh Haider that to bring the case within the mischief of section 10 of the Sales Tax Act, 1951, respondents need not have been a manufacturer or producer or licensed whole‑seller of the empty drums. He submitted that these words have been used in broader sense indicating classes of such persons who are liable to pay sales tax. In his submission a person whether he is manufacturer or producer or licensed whole‑seller of particular goods or not, would be cable to pay sales tax, if he is a manufacturer or producer or licensed whole‑seller of any goods.

9. In order to appreciate the submission it would be convenient, if, at this stage, we reproduce section 10 of the Sales Tax Act, 1951, which reads as follows:‑‑ "10.????? Assessment.‑‑(1) Every manufacturer or producer and every licensed whole‑seller and every exporter shall, within thirty days of the end of the quarter, send to the Sales Tax Officer a return in the prescribed form and is the prescribed manner relating to the sales made in each quarter. (2)??????? If the Sales Tax Officer is satisfied that the return sent under subsection (1) is correct and complete, he shall make an assessment on the basis thereof and determine the amount of tax payable after giving credit for the tax paid in pursuance of the provisions of subsection (1) of section 12. (3)??????? If the Sales Tax Officer is not so satisfied, he may, after calling for such further particulars and such‑ books of account and documents as he may require, determine the tax payable. (4)??????? if the return under subsection (1) has not been sent or the books of account or documents called for under subsection (3) have not been produced the Sales Tax Officer shall make an assessment to the best of his judgment after giving the assessee an opportunity of being heard. (5)??????? Nothing contained in this section shall prevent a Sales Tax Officer from determining in a single assessment the tax payable in respect of the sales made in two or more quarters of the same year. (6)??????? Nothing contained in this section shall apply to a manufacturer or producer who is exempted from the payment of tax under subsection (2) of section 8."

10. Mr. Shaikh Haider on the basis of the abovequoted provisions argued that the word manufacturer, or producer or licensed whole‑seller used in section 10 of the Sales Tax Act, 1951, be construed liberally so as to include manufacturer or producer or whole‑seller of any goods and not only those goods which are subjected to sales tax and the intention of Legislature must be kept in mind. But we regret we cannot accept the argument for it is a settled rule of construction that at fiscal statute is to be construed strictly and not liberally for no liability B could be imposed on citizens unless it is clearly spelled out. We may here recall what Rowlatt, J., observed 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." Observations of Lord Halsbury in this regard in Tenant v. Smith (1892) A C 150 may also be usefully quoted here: "In a Taxing Act it is impossible, I believe to assume any intention, any governing purpose in the Act, to do more than take 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."

11. We may also refer to some authorities of our own Courts, namely: (1) The Commissioner of Agricultural Income‑tax, East Bengal v. B.W.M. Abdur Rahman, Manager, Taki Bara Taraf Wards Estate 1973 S C M R 445, (2) Muhammad Younus v. Centraf Board of Revenue, Government of Pakistan and others P L D 1964 S C 113, (3) Messrs Hirijina & Co. (Pakistan) Ltd. Karachi v. Commissioner of Sales Tax Central, Karachi 1971 S C M R

128. In the first named case Cornelius, J., 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 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". In Muhammad Younus's case Hamoodur Rahman, J. (as the Honourable Judge then was) at page 119 of the report observed as follow s: ‑‑ "It is patent that before a person can be made liable to the payment of a tax or a levy he must be shown clearly to fall within the category so made liable under the letter of law. In the present case, as we have indicated above, the law did not intend to bring any and every whole‑sale dealer within its mischief. It was only a whole‑sale dealer who had, under rule 7 read with section 6 and Part A of the Second Schedule of the Act itself, acquired or purchased from curer or manufacturer or stored the goods in a warehouse. The warehouse for the purposes of this rule means a warehouse licenced for the purpose by the taxing authorities. It is nobody's case that the goods were stored in any such warehouse. It is clear, therefore, that the appellant, no matter what the true nature of the duty, was not liable to pay the same in respect of the betel‑nuts lying in his possession and the taxing authorities had illegally and without lawful authority demanded the duty from him. Possession simpliciter of betel‑nuts is not sufficient, under the provisions of the Act of 1944 and the Rules framed thereunder, to make a person possessing the same even in excess of the specified quantity, i.e. 20 Lbs. liable to pay the excise duty in respect of the betel‑nuts possessed by him". We may add that it is not the case of the department that the respondents are manufacturers or producers of empty drums and it could not be their case for they had imported chemical in the empty drums which were used only as packing material.

12. There is yet another rule of construction which would be more applicable to this case, namely, if there is any ambiguity in a statue it has to be resolved in favour of the subject. See Messrs Star Vacuum Bottle Manufacturing Co. Ltd. v. Collector of Central Excise and Land Customs, Karachi and 2 others P L D 197F? Kar. 210 and Rehmat Ali v. Messrs Benares Silk Industries and another P L D 1967 Dacca

113. We may also quote the observations of Tufail Ali. A. Rahman, C.J.. in the case of Messrs Star Vacuum Bottle Manufacturing Co. Ltd. which at page 213 of the report are as under:‑‑ "On this part of the case it was finally urged that where two possible meanings could be given to the provisions of a statute that which is more favourable to the subject ought to be accepted. This is of course true but the duty of choosing between various interpretations arises only where the language is ambiguous and capable of more than one meaning".

13. There is yet another aspect of the matter, even, if we assume that our opinion on the above submission is not correct, under section 3(3)(ii) of the Sales Tax Act, 1951, only those goods could be subjected to payment of sales tax which could be assessed on the basis of duty paid value and since the goods in question had no duty paid value as what was imported was chemicals, therefore, no liability to pay sales tax could arise. It has not been questioned before us that the goods had any duty paid value. Even otherwise it is not stated that the goods had any such value.

14. We, therefore, answer the question in the affirmative. M. Y. H.????????????????????????????????????????????????????????????????????? Question answered in affirmative.