2025 PLP 780 (PTD)

MUHAMMAD SAJID MEHMOOD SETHI, J.

Through instant petition, petitioner has challenged vires of order dated 10.02.2025, passed by respondent No.2 / Commissioner Inland Revenue, Zone-IV, Corporate Tax Office, Lahore, whereby pursuant to the order / direction dated 30.12.2024, passed by this Court in the previous round of litigation i.e. W.P. No.81609 of 2024, petitioner's representation against charging of extra tax and further tax in the shape of penalty, was rejected.

2. Learned counsel for petitioner submits that sales tax registration number ("STRN") of the petitioner has been suspended vide order dated 28.10.2024 due to negligence of revenue department and without any fault on the part of petitioner, however, it was subsequently restored vide order dated 24.12.2024, as such charging of extra tax and further tax in the form of a penalty is without any legal justification. He maintains that material aspects of the matter have not been properly considered while passing impugned order, hence, same is liable to be declared illegal and without lawful authority. In support of his contentions, he has read out relevant part of order dated 24.12.2024, passed by respondent No.2, which is as follows:- "

2. Being aggrieved by the suspension order dated October 28, 2024, the registered person filed a representation before the Chief Commissioner Inland Revenue (CCIR), CTO Lahore, under Section 21(5) of the Sales Tax Act, 1990. Subsequently, the CCIR, through Office Order No. CC / R.O / SO-III / 3696 dated December 20, 2024, remanded the case for reconsideration. In compliance with the remand order, the authorized representative (AR) of the registered person appeared before the undersigned and submitted the following documents copies of cheques as evidence of payments made in accordance with Section 73 of the Sales Tax Act, 1990 and transportation documents to substantiate the movement of goods.

3. Based on the documents provided by the registered person, including payment evidence under Section 73 of the Sales Tax Act, 1990, and transportation records, the matter has been thoroughly reviewed.

4. In light of the above and in the exercise of powers conferred under Section 21 of the Sales Tax Act, 1990, read with Rule 12 of the Sales Tax Rules, 2006, the Sales Tax Registration Number (STRN) of M/s Madina Steel Mills (NTN: 5499689-5 & STRN: 3277876235962) is hereby restored with immediate effect." [emphasis supplied]

3. When confronted with the above, the learned Law Officer and counsel for the respondent-CIR contended that the petitioner's failure to produce documents at the requisite time disqualified them from the relief sought. The record clearly reflects that the petitioner did provide the relevant documents, including copies of cheques evidencing payments made in accordance with Section 73 of the Sales Tax Act, 1990, as well as transportation records. These documents sufficiently demonstrate that the petitioner was not at fault. Accordingly, the petitioner could not have been lawfully deprived of the adjustment of extra tax and further tax in respect of the electricity bill for the month of October 2024, and is therefore entitled for the exclusion of the amount of extra tax and further tax charged against the electricity bill for the month of November 2024.

4. Undoubtedly, the suspension of the petitioner's sales tax registration was not attributable to any fault or non-compliance on the part of the petitioner, but rather stemmed from an erroneous action committed by the respondent department. This mistake was later acknowledged and the suspension was revoked by the department on its own accord. However, during the suspension period, extra tax and further tax were levied upon the petitioner through electricity bills for the months of October and November 2024. In legal terms, where a person is deprived of a tax benefit due to an error or unlawful act committed by the tax authorities, and the said error is subsequently recognized and rectified by the authorities themselves, the general legal position-particularly under the principles of administrative law, restitution, and legitimate expectation-is that the individual is entitled to have such benefits restored, subject to fulfillment of applicable conditions. Restitution, in this context, refers to the restoration of benefits wrongfully denied or compensation for the unjust deprivation suffered. Its objective is to reinstate the affected party to the original position prior to the wrongful act. In the instant case, the imposition of extra and further tax during the erroneous suspension constitutes an unjust deprivation. Once the error is admitted and rectified, the petitioner acquires a legitimate right to restitution, as the tax authority cannot retain benefits arising from its own mistake. Such entitlement is firmly grounded in the principles of fairness, equity, and the doctrine against unjust enrichment. Reference can be made to Woolwich Equitable Building Society v. Inland Revenue Commissioners [1993] A.C. 70.

5. Even otherwise, it is a settled principle of law that no one should suffer on account of the mistake or negligence of a court or a government functionary. The maxim actus curiae neminem gravabit clearly embodies this doctrine, emphasizing that an act of the court or any authority must not cause prejudice to any individual. Reliance can be placed upon Sherin and 4 others v. Fazal Muhammad and 4 others (1995 SCMR 584), The State v. Asif Adil and others (1997 SCMR 209), Sajawal Khan v. Wali Muhammad and others (2002 SCMR 134), Jawad Mir Muhammadi and others v. Haroon Mirza (PLD 2007 Supreme Court 472), Zulifqar and others v. Shahdat Khan (PLD 2007 Supreme Court 582), Homoeo Dr. Asma Noreen Syed v. Government of the Punjab through its Secretary Health, Department and others (2022 SCMR 1546) and Mian Shehzad-ud-Din and 4 others v. Member, Board of Revenue S&E Chief Settlement Commissioner, Board of Revenue, Punjab, Lahore and another (2002 YLR 3755 Lahore).

6. Learned Law Officer was also confronted with the order dated 30.04.2023 issued by respondent No.2-wherein similar circumstances led to the adjustment of extra tax and further tax amounts following the Appellate Tribunal Inland Revenue's order dated 16.01.2023 in STA No.2544/LB/2022 for another taxpayer, M/s. Ali Steel Re-Rolling Mills-the learned counsel for respondent-CIR maintained that the facts of the cited case were distinguishable from the present matter.

7. Nevertheless, the record of the case of M/s. Ali Steel Re-Rolling Mills supra, tells a different story as in that case, the respondent No.2 vide order dated 30.04.2023, extended similar relief in the following manner:- "In order to give effect to the order of ATIR and in view of the above, and in exercise of the powers conferred under Section 21 of the Sales Tax Act, 1990 read with Rule 12 of the Sales Tax Rules, 2006, the Sales Tax Registration of M/s. Ali Steel Re-Rolling Mills, NTN: 4017592 and STRN: 0300-401759211 was restored vide this office order No.1051 dated 31.01.2023. Thereafter, the registered person filed application for adjustment of illegally charged extra tax and further tax amounting to Rs.1,367,145/- and Rs.241,261/- respectively in the electricity bill for the month of December-2022. Since, the order of suspension has been vacated and sales tax registration was directed to be restored by the Hon'ble ATIR. In view of the foregoing, the extra tax and further tax amounting to Rs.1,367,145/- and Rs.241,261/- respectively in the electricity bill for the month of December-2-22 is not leviable in view of the judgment of the ATIR in the subject case and LESCO authorities are requested to give effect of the same in respect of Electricity Reference No. 241131390052090 accordingly. The registered person is advised to approach the LESCO authorities for necessary action."

8. Ubi eadem ratio, ibi idem jus- Where there is the same reason, there is the same law - is a foundational legal maxim that encapsulates the principle that justice demands the consistent treatment of similarly situated individuals. This principle finds constitutional backing in Article 25 of the Constitution of the Islamic Republic of Pakistan, 1973, which provides that: (1) All citizens are equal before the law and are entitled to equal protection of the law. (2) There shall be no discrimination on the basis of sex. (3) Nothing in this Article shall prevent the State from making any special provision for the protection of women and children. Article 25, thus enshrines equality before the law as a fundamental right. When tax authorities treat similarly situated taxpayers differently-particularly in the assessment or adjustment of tax liabilities-such conduct may amount to a violation of this constitutional guarantee. The disparate treatment accorded to the petitioner, as compared to M/s. Ali Steel Re-Rolling Mills, raises serious constitutional concerns. If both taxpayers were placed in substantially similar circumstances, yet received materially different treatment from the tax authorities, such inconsistency could reflect an arbitrary and discriminatory exercise of administrative discretion, thereby undermining the rule of law.

9. It is well-settled that administrative discretion must be exercised fairly, consistently, and without arbitrariness or caprice. The principle of legitimate expectation further reinforces this notion, as taxpayers in comparable circumstances reasonably expect similar treatment from revenue authorities. This position is supported by the judgment of the Division Bench of this Court in Misbah Masood v. Principal Government College For Women (1997 MLD 2397) where the Court emphasized that arbitrariness must be avoided at all levels of governance, besides observing that legal instruments must be interpreted in a manner that prevents arbitrary use of power, and any provision that permits or facilitates such arbitrariness is incompatible with constitutional principles. It was further held that favouring one individual while discriminating against another in similar circumstances offends the guarantee of equal protection of law under Article

25. Reference can also be made to the cases reported as Tara Chand and others v. Karachi Water and Sewerage Board, Karachi and others [2005 PLC (C.S.) 368] and Quetta Development Authority through Director General v. Abdul Basit and others (2021 SCMR 1313). This foundational principle has also been firmly embedded in Indian constitutional jurisprudence, as is evident from the landmark judgment of the Supreme Court of India in E.P. Royappa v. State of Tamil Nadu [1974 SCR (2) 348], where the Court eloquently articulated the inherent antagonism between equality and arbitrariness in the following terms: "Equality is a dynamic concept with many aspects and dimensions and it cannot be "cribbed cabined and confined" within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law". In the United Kingdom, the House of Lords in the Council of Civil Service Unions v. Minister for the Civil Service, commonly referred to as the GCHQ case [(1985) AC 374], established that even discretionary powers exercised by high executive authorities are subject to judicial review when they are used arbitrarily or unfairly. The Court rejected the idea of unfettered discretion, affirming that the rule of law requires the exercise of power to be rational, just, and transparent.

10. The convergence of these judicial pronouncements across jurisdictions highlights a universal constitutional principle: the exercise of discretion must be grounded in reason and fairness. The respondent-CIR have failed to demonstrate, on the basis of clear and material distinctions, that the treatment accorded to the petitioner differed from that of M/s. Ali Steel Re-Rolling Mills for constitutionally valid reasons; hence, the differential treatment amounted to arbitrariness. Such arbitrary exercise of power is constitutionally impermissible and strikes at the heart of the right to equality before the law.

11. In view of above, instant petition is allowed in the manner that impugned order is set aside being illegal and without lawful authority, and the respondent No.2 is directed to extend similar treatment to petitioner as has been given to another similarly placed entity i.e. M/s. Ali Steel Re-Rolling Mills. MH/M-51/L Petition allowed.