2026 PLP (Trib (PTD)

MRS. ALIA ANWER, MEMBER JUDICIAL.

The appellant has assailed the order dated 29.01.2024 vide Order-in-Appeal (hereinafter referred as to "the first Appellate Order") No.66/2024 passed by the Commissioner (Appeals-III) in Appeal No.243/2018 whereby the directions to pay the Workers' Welfare Fund (hereinafter referred to as the WWF ) amounting to Rs.4,234,000/- along with penalty amounting to Rs.211,700/- in terms of clause 3 of section 43 of the Act, 2011 read with section 5(14) of the Act, 20141 as well as default surcharge under section 44 of the Act, 20112, imposed by the Assistant Commissioner (Unit-37) vide Order-in-Original No.09/2018 (hereinafter referred to as "the Original Order") dated 29.05.2018, has been confirmed.

2. Appellant's counsel submits that appellant impugned order is bad in law and on facts. He argued that "the first Appellate Order" has been passed after lapse of statutory period, therefore; it is a void order having no legal effect. Furthermore, he points out that the appellant has already paid the WWF to the FBR by adjusting it against the income tax refund. Learned counsel contends that the impugned order results in double taxation, which violates the principle of natural justice. He also notes that the issue of WWF collection between the FBR (Federation) and SRB (Province) is currently under consideration before the Council of Common Interest, which has determined that the FBR is the rightful authority to collect the WWF. The learned counsel emphasizes that the Council of Common Interest is a constitutional body, and its decisions are binding. Additionally, he argues that the existence of mens rea is essential for imposing a penalty, and there is no evidence to support the presence of mens rea regarding the non-payment of WWF to the department

3. He states that since the principal amount of WWF was paid by the appellant before the due date, imposing any penalties, including the default surcharge, contravenes the spirit of the law. The learned counsel, therefore; prayed for setting-aside impugned order.

3. The Assistant Commissioner (Unit-37) countered the arguments presented by the appellant's counsel regarding the statutory period. He stated that the delay in concluding the appeal was due to an excessive workload faced by the Commissioner (Appeals). In these circumstances, he argued that the delay in passing "the first Appellate Order" within the designated timeframe could be justified. He further noted that previously, through a Circular dated 17.02.2000, the FBR had permitted the adjustment of WWF liability against refunds or credits of Income Tax, but this was later restricted by a Circular dated 25.05.2021, which limited the adjustment of WWF against tax liabilities. The Assistant Commissioner (Unit-37) also pointed out that since the enactment of the Act in 2014, the collection of WWF has been under the jurisdiction of the Province, and the Federation does not have the authority to intervene. He ultimately expressed his support for the impugned order.

4. The Departmental Representative stated that there is a significant backlog of appeals awaiting resolution before the Commissioner (Appeals), making it impractical to resolve these appeals within the designated statutory period. He requested that the delay in passing the first Appellate Order be excused and that the appeal be considered on its merits. He expressed his support for the arguments presented by the Assistant Commissioner (Unit-37) and prayed for dismissal of instant appeal.

5. In response to the arguments presented, the appellant's counsel asserted that the Circular dated 25.05.2021 does not apply to this case, as it relates to the financial year 2017. He pointed out that a recent ruling by the Hon'ble High Court of Sindh in C.P. No.D-5113 of 2021 explicitly determined that the Circular dated 25.05.2021 does not have retrospective effect.

6. After hearing arguments of both sides, following are the points for determination before this Tribunal;

1. Whether "the first Appellate Order" dated 24.07.2023 is barred by statutory period? if yes, its legal effect?

2. Whether the assessing officer was justified in levying WWF, amounting to Rs.4,234,000/-?

3. Whether the imposition of penalty amounting to Rs.211,700/- as well as default surcharge in terms of serial No.3 of the Table under sections 43 and 44 of the Act, 2011, respectively, are justified?

4. What should the judgment be? POINT NO.1:

7. Record reveals that appellant filed appeal before Commissioner (Appeals) on 22.06.2018 which was disposed of on 29.01.2024 i.e. 1,918 (one thousand, nine hundred and eighteen) days beyond expiry of statutory period i.e. 120 days. The Commissioner (Appeals) failed to provide any substantial justification for passing "the first Appellate Order" after the statutory deadline. In the absence of evidence or valid reasoning for this delay, it cannot be attributed to the appellant.

8. Section 59(7) of the Act, 2011 mandates that the Commissioner (Appeals) must transfer any undecided appeal to the Appellate Tribunal if it is not resolved within the statutory period. There is no documentation explaining why the Commissioner (Appeals) continued the proceedings beyond this period. The Departmental Representative mentioned that there is a significant backlog of appeals before the Commissioner (Appeals) and that it is practically impossible to resolve them within the statutory timeframe. However, such arguments lack legal validity, as the law already provides a remedy for this situation by requiring the transfer of undecided appeals to the Tribunal.

9. Learned counsel for appellant prays for setting-aside the first Appellate Order being void, but I am afraid that in case the first Appellate Order is declared void then "the Original Order", passed against the appellant, would come in filed and the appellant will gain nothing.

10. Although law provides the Appellate Tribunal as a recourse when the Commissioner (Appeals) fails to decide an appeal within the prescribed statutory period, but it does not explicitly address the validity of orders passed by the Commissioner (Appeals) after this period has lapsed. It is widely recognized fact that it is impractical to create legal provisions for every potential scenario or unforeseen circumstance. Therefore, the courts, as protectors of the fundamental rights of all citizens, must seek to implement or adopt more effective solutions in such unprecedented situations. This approach ensures that they do not overlook the illegalities or irregularities committed by subordinate forums.

11. The word "as" used in section 59(7) of the Act, 2011 creates a deeming effect, indicating that if an undecided appeal is transferred to the Appellate Tribunal, it is considered as if it was filed against the order of the Commissioner (Appeals). After the expiration of the statutory period, the office of the Commissioner (Appeals) effectively becomes coram non judice, meaning it had no legal authority to continue proceedings. This implies that any actions taken beyond this period lack legal standing, reinforcing the necessity for adherence to established timelines in the appellate process. For ready reference section 59 of the Act, 2011 is reproduced as under;

59. Decision in appeal.

(1) In disposing of an appeal lodged under section 57, the Commissioner (Appeals) SRB may pass such order as he thinks fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against. (2) In deciding an appeal, the Commissioner (Appeals) SRB may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration. (3) The Commissioner (Appeals) SRB shall not increase the amount of any tax payable by the appellant unless the appellant has been given an opportunity of showing cause against such increase. (4) As soon as practicable after deciding an appeal, the Commissioner (Appeals) SRB shall serve his order on the appellant and the officer of the SRB who made the order appealed against. (5) An order passed by the Commissioner (Appeals) SRB under subsection (1) shall be passed not later than one hundred and twenty days from the date of filing of appeal or within such extended period, not exceeding sixty days, as the Commissioner (Appeals) SRB may, for reasons to be recorded in writing fix. (6) In computing the aforesaid time period, any period during which the proceedings are adjourned on account of a stay order or proceedings under section 65 or the time taken through adjournment by the appellant shall be excluded. (7) Where the Commissioner (Appeals) has not made an order under subsection (1) before the expiration of the period prescribed under subsection (5), read with subsection (6), the Commissioner (Appeals) shall transfer the undecided appeal to the Appellate Tribunal which shall decide the undecided appeal as if it has been filed against the order of the Commissioner (Appeals): Provided that while transferring the un-decided appeal to the Appellate Tribunal, the Commissioner (Appeals) shall give due intimation, in this regard, to the appellant and his agent or authorized representative and also to the Chairman of the Board. (8) While transferring the undecided appeal to the Appellate Tribunal, the Commissioner (Appeals) shall attach a report explaining the circumstances and reasons due to which the appeal could not be decided within the prescribed time.

12. In light of the above discussion and in accordance with the fundamental principle of providing legal protection to the appellant, it is deemed appropriate to declare all proceedings initiated by the Commissioner (Appeals) beyond the expiry of the statutory period as "null" and "void", including "the first Appellate Order". Consequently, instant appeal will be treated as if it has been transferred to this Tribunal under section 59(7) of the Act, 2011. This issue is answered accordingly. POINT No.2:

13. The appellant contends that he adjusted the WWF liability against his Income Tax Refund for the financial year 2017. However, the Assistant Commissioner (Unit-37) has cited a Circular dated 25.05.2021 issued by the Federal Board of Revenue (FBR), which restricts the adjustment of WWF against tax liabilities. Per Assistant Commissioner (Unit-37), the appellant is unable to benefit from this Circular, as it clearly delineates the limitations imposed on such adjustments, thereby impacting the appellant's claim regarding the WWF liability.

14. There is no dispute regarding the legal principle that in financial matters, all introduced rules, notifications, and circulars are applied prospectively. Furthermore, the Hon'ble High Court has affirmed that the effect of the Circular dated 25.05.2021 is also prospective, as established in the case of OBS Pakistan (Pvt.) Ltd.4

15. Regarding the entitlement to collect WWF, it is important to note that WWF was previously a federal subject which was being collected under the Ordinance, 19715. However, following the 18th Amendment, WWF became a provincial subject, leading to the enactment of the Act, 2014 by the province of Sindh. This Act has since become functional. Due to the fact that most provinces had not established a viable mechanism for addressing the collection and distribution of WWF, they continued to manage their affairs concerning WWF in accordance with the Ordinance, 1971 within their respective jurisdictions.

16. The aforementioned reasons prompted the referral of the matter to the Council of Common Interests (hereinafter referred to as "the CCI"). During the 41st Meeting of the CCI, the issue was discussed, leading to the development of a mutually agreed mechanism. The consensus reached was that WWF would continue to be managed by the Federal Government and remain governed by the Ordinance, 1971. The extract of the agenda and decision thereon (published in the Annual Report of CCI 2019-20) is as under; 1.2(14) No.CCI.14/1/2019 Dated 23.12.2019 Report of the Committee constituted by CCI on Devolution of Employees' Old-Age Benefits Institution and Workers Welfare Fund to the Provinces The CCI considered the Summary dated 23rd May, 2019 submitted by Ministry of Overseas Pakistani and HRD and observed that none of the provinces has developed a workable mechanism for resolution to address the post-devolution issues of pension of migrating employees. The Council held that being trans-provincial and inter-provincial matter, both the organizations i.e. EOBI and WWF should remain with the Federal Government to perform its functions under Employees Old-Age Benefits Act, 1976 and Workers Welfare Fund Ordinance, 1971, till such time a mutually agreed mechanism is developed. However, in response to the above mentioned decision, the Chief Minister Khyber Pakhtunkhwa, requested for issuance of clarification, without amending the minutes of CCI, w.r. to CCI decision in the subject case. The case was submitted to the Prime Minister/Chairman, CCI. The Prime Minister's Office conveyed that the Prime Minister, in his capacity as Chairman, CCI, has approved the clarification which reads as follows:- "EOBI shall remain with the Federal Government and WWF shall remain with the Federal Government till such time a mutually agreed mechanism is developed".

17. The Council of Common Interests was established under Article 153 of the Constitution6 to resolve disputes between the Federation and the Provinces or among the provinces themselves, thereby promoting inter-provincial harmony. The CCI is composed of the Prime Minister as the Chairman, the Chief Ministers of all Provinces, and three members from the Federal Government who are nominated by the Prime Minister as needed. This Council occupies a crucial role within the constitutional framework, with responsibilities that extend beyond mere discussions; it is tasked with formulating and regulating policies concerning matters specified in Part II of the Federal Legislative List (hereinafter referred to as the FLL ) of the Constitution and exercising supervision and control over related institutions. The constitutional provisions governing the CCI's functions are mandatory, meaning that no other individual, body, or authority can assume these responsibilities. Furthermore, the CCI does not hold unrestricted power, as it is accountable to the Parliament. In case of disagreement with the CCI's decisions, either the Federal or the Provincial Government may refer the issue to the Parliament, which can issue binding directions to the CCI. In this regard I am guided with the observation made by the Hon'b1e Supreme Court in the case of Privatization Commission through Secretary and others v. Aftab Hussain and others (PLD 201 Supreme Court 267) as under; "

15. It is, thus, apparent that CCI holds a significant position in the Constitutional structure. Its role is not limited to deliberations only. Rather, it is endowed with important functions of formulating and regulating polices in relation to the matters detailed in Part II of FLL of the Constitution. The Constitutional provisions relating to the functions of CCI are mandatory in nature and, no other person, body or authority can perform the functions of CCI. However, the Parliament, in joint sitting, may by resolution issue directions through the Federal Government to the CCI, to lake action as the Parliament may deem just and proper and such directions shall be binding on CCI. If the Federal Government or a Provincial Government is dissatisfied with a decision of CCI, it may refer the matter to Parliament, in a joint sitting, whose decision in this behalf shall be final."

18. The crux of the discussion is that the Council of Common Interests serves as an essential constitutional institution that effectively addresses differences, problems, and irritants between the provinces and the Federation, as well as among the provinces themselves. Ignoring the decisions made by the CCI effectively renders it dysfunctional, leading to a clear violation of the constitutional mandates and commands. By passing such an important constitutional body would mean making the provisions of the Constitution ineffective and redundant, which cannot be permitted. It is also acknowledged that the respondent side has not challenged the decision of the CCI before the Parliament, as mandated under Article 154(7) of the Constitution.

19. Since the decision of the CCI that "WWF shall remain with FBR" is in field, the assessing officer was not justified in levying WWF amounting to Rs.4,234,000/-, hence; this point is answered in negative. POINT No.3:

20. In view of the findings of point No.2 imposition of penalty amounting to Rs.211,700/- as well as default surcharge in terms of serial No.3 of the Table under sections 43 and 44 of the Act, 2011, respectively, are un-justified, hence; this point is answered in negative. POINT No.4:

21. In view of the above discussion, instant appeal is hereby allowed. Resultantly, "the Original Order" dated 29.05.2018 stands set-aside. Let the copy of this order be provided to the learned representatives of the parties. MQ/11/Tax(Trib.) Appeal allowed. 1 The Sindh Workers Welfare Fund Act, 2014 2 The Sindh Sales Tax on Service Act, 2011 3 Sindh Revenue Board 4 OBS Pakistan (Pvt.) Ltd. through Manager Legal v. Federation of Pakistan through Secretary Revenue Ex-Officio Chairman Federal Board of Revenue and 2 others (2022 PTD 290) 5 The Workers Welfare Fund Ordinance, 1971 6 The Constitution of Islamic Republic of Pakistan, 1973