1988 PLP 535 (PTD)

SHAFIUR RAHMAN, J.--Leave to appeal was granted to examine whether the goods exempted from sales tax under section 7 subsection(1) of the Sales Tax Act (No.III of 1951), 1951 (hereinafter referred to as the Act) could be charged with reduced sales tax , under a notification of a later date under the same provisions of the law without rescinding earlier notification exempting the goods from sales tax altogether. The respondent was a manufacturer of carpets and rugs of man-made fibre. Under section 3 of the Sales Tax Act a tax is leviable on all goods manufactured in Pakistan at the rate of 12? % of the value of goods. However, the Federal Government is empowered under section 7 of the Act to exempt altogether or to reduce the rate of sales tax leviable in respect of any goods. On the 25th of June, 1981, the Federal Government issued two notifications by recourse to section 7 subsections (1) and (2) of the Act. The first of these, which bears the S.R.O. 666(1)/81 is as follows:- "Part III THE GAZETTE OF PAKISTAN, EXTRA., JUNE 25, 1981. S.R.O. 666(1)/81--In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (111 of 1951), and in supersession of its S.R.O. 659(1)/80, dated the 28th June, 1980, the Federal Government is pleased to exempt goods produced or manufactured in Pakistan and falling under heading numbers of the First Schedule to Customs Act, 1969 (IV of 1969) specified in column (2) of the Table below from the whole of the Sales Tax leviable thereon:-" Item No.38 in the Table is described in the following word:::- "

38. Fabrics of man-made fibre." The other notification issued on the same date bears S.R.O. 667(1)/81 and is reproduced hereunder:- "S.R.O. 667(1)/81.-- to exercise of the powers conferred b; subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (I1I of 1951), the Federal Government is bleared to direct that such of the goods or classes of goods specified in column (2) of the table below as are manufactured or produced in Pakistan shall be liable to sales tax at such rates as are specified in column (3) of the said Table:-" The table attached to this notification, as it originally issued, is not relevant except that there were listed six categories of goods on which reduced rate of sales tax was applied. In June, 1978, one of the manufacturers, similarly affected, had sought clarification from the Board of Revenue on which a Second Secretary had officially communicated to him the following information:- "Subject:?????????? Clarification regarding exemption of Sales Tax on our product "FLOOR COVERING (Fabrics of Man-made Fibre)" Dear Sir, The undersigned is directed to refer to your representation No.536/8/77, dated 3-11-1977 and to inform you that your product since treated as "Fabrics of man-made fibre" is exempt from the levy of Sales Tax under item No.60 of notification No.9 dated 27-6-1951 as amended by SPO No.127(R)/67 dated 30-6-1967." On the 11th of June, 1983, appeared another notification omitting and inserting certain categories 'of goods in the earlier notification SRO. 666(1)/81. The other notification SRO. 580(1)/83 which is the subject-matter of interpretation in this appeal, was in the following terms:- ?S.R.0.580(1)/83.--In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales 'fax Act, 1951 (III of 1951), the Federal Government is pleased to direct that the following further amendments shall be made in this Ministry's notification NO.SR0.667(1)/81, dated the 25th June, 1981, namely:- In the aforesaid notification, in the table, after S.No.8 in column 1 and the entries relating thereto in columns 2 and. 3, the following new serial numbers and the- entries relating thereto shall be added, namely:- "(9) Cosmetics, Toilet preparations, and perfumery falling under head No.33.06

??????????? 7.5%. (10) Machine-made carpets falling under sub heads E.F. and G of heading No.58.02 and 59.02

5%. After this notification SRO.667(1)/81 had appeared a demand was made from the appellant of the sales tax. The position taken up by the appellant was that as Item No.38 in SRO.666(1)/81 remained intact and had not been rescinded or modified, the exemption earned by the appellant thereunder could not be denied to him, on the basis of SR0.580(1)/83 because the reduction of sales tax could take place only where sales tax was itself leviable. If the sales tax stood exempted, then without rescinding such an exemption, reduction of sales tax, where none existed, could not take place. In order to further strengthen its case, an example of Cosmetic Products was given. It was argued that in SRO No.666(1)/81 there was Item No.25 which was only "33.06". When it was proposed to take this item out of the exemption and levy a reduced rate of sales tax on it on the same date i.e. 11th of June, 1983, by SRO. No.579(1)/83, this entry was omitted and thereafter by the impugned notification, it was brought to reduce sales tax. The department was not convinced of the claim made by the appellant. The appellant filed a Constitutional Petition in the High Court challenging the levy. Initially the case of the Department, 9s set out in its written statement, was somewhat different, as will appear from the following paras 3 and 4 of the Written Statement of respondent No.l, filed in the High Court:- "3. ?????? It is admitted that the notification No.579(1)/83 dated 11-6-1983 referred to by the petitioner, was issued and that amendment in the notification issued earlier as referred to in the foregoing paragraph, had in fact been made. It is not admitted that the amendment issued on 11-6-1983 did in any way affect the case of the petitioner. His case falls clearly within the ambit of P.C.T. sub heads E, F & G of heading No.58.02 and 59.02 of P.C.T., from, which the initial power of levy emanates. The petitioner's case, it is submitted, is not covered by item No.38 of SRO. No.666(1)81 dated 25-6-1981 for the simple reason that the substantive law on the point is contained in the first schedule to the Customs Act, 1969 read with P.C. T. sub-heading E.F.G. of Heading No.58.02 and 59.02 of P.C.T. 4. ??????? The exemption, referred to and relied upon by the petitioner was in law never available to him. It is however admitted that the respondent No.2 had directed the respondent No.l to conduct the stock taking of stocks manufactured by the petitioner for the purpose of levy of sales tax, which was legitimately found due from the petitioner." In the High Court, the Central Board of Revenue submitted to the claim of the appellant, in so far as recovery of sales tax prior to 11-6-1983 is concerned, but insisted on the recovery at reduced rate of 5% as from that date. The learned Judge in the High Court, after examining, rejected the contention of the appellant observing as follows:- "Even if before the issuance of notification S.R.O. 580(1)/83 they were exempt from payment of sales-tax by virtue of their inclusion in the generic expression "fabrics of man-made fibres", they would, after the issuance of the said notification, lose their exemption and the said generic expression will be taken to have been accordingly modified so that it will no longer include "machine-made carpets" within its ambit. Thus, it is not possible to agree with the learned counsel for the petitioners that the goods manufactured by them continue to remain exempt from the payment of tax despite issuance of notification NO.S.R.O.580(1)/83 just because this notification does not expressly seek to amend notification NO.S.R.0.666(1)/81." It appears that in the High Court a controverted question of fact was also raised as to whether the floor coverings manufactured by the appellant were at all carpets. The learned Judge held that they were 'Carpets'. But this question is no longer in issue in appeal. Mr. Muhammad Amin Butt, Advocate, the learned counsel for the appellant has taken up the same ground with regard to the absence of the rescission of the notification SR0.666(1)/81 before enforcing the disputed notification SR0.580(1)/83. There are three principles of interpretation 'of statutes which have to be kept in view in resolving the controversy raised in this appeal. The first of these has been expressed in Maxwell on the Interpretation of Statutes, 12th Edition, p.256 in the following words:- "Statutes which impose pecuniary burdens are subject to the same rule of strict construction. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties: the subject is not to be taxed unless the language of the statute clearly imposes, the obligation, and language must not be strained in order to tax a transaction which, had the legislature thought of it, would have been covered by appropriate words. "In a taxing Act," said Rowlatt J., "one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a 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." But this strictness of interpretation may not always ensure to the subject's benefit, for "if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be"." As the charging section in the present case happens to be section 3 of the Act and its effect is general and all embracing there is no problem relatable to it in the present case. It is accepted, that but for the exercise of powers under section 7, sales tax would be chargeable on the products manufactured by the appellant. Section 7 of the Act is contained in Chapter IV dealing with exemptions. The charge has been imposed by the legislature but the power of granting exemption has been left to the Federal Government. The second rule of interpretation attracted concerns the exemptions allowable in fiscal statutes. Sutherland in his Statutory Construction (Vo1.3, Edition 3 at page 296) elaborates the rule in the following words:- "As a general rule grants of tax exemptions are given a rigid interpretation against the assertion of the tax-payer and in favour of the taxing power. The basis for the rule here is the same as that supporting a rule of a strict construction of positive revenue laws--that the burdens of taxation should be distributed equally and fairly among the members of the society. However, exemptions claimed by the State or its sub-divisions are usually liberally construed and the same rule has frequently been applied to exemptions made in favour of charitable organisation. " In Bank of Commerce v. Tennesse, (161 US 134) this principle was further explained in the following words:- "Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of anyone to be exempt from the full payment of his share of taxes on any portion of his property must en that account be clearly defined and founded on plain language. There must be no doubt or ambiguity used upon which the claim to the exemption is founded. It has been said that a well founded doubt is fatal to the claim;) no implication will be indulged in for the purpose of construing the language used as giving the claim for the exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power." The third principle of interpretation gets attracted to the case? because what we find in entry No.38 of SR0.666(1)/81 "Fabrics of man-made fibre" is generic and according to the appellant and the subsequent concession of the Central Board of Revenue it includes the carpets and floor coverings, manufactured by the appellant. The subsequent SR0.580(1)/83 extracts out of the wider category machine-made carpets falling under sub-heads E,F & G of heading 58.02 and 59.02. The general provision earlier made is followed by special provision subsequently made by the same authority in exercise of the identical statutory power enjoyed by it. In Corporation of Madras v. Madras Electric Tramways Ltd. A I R 1931 Mad. 152, the situation was interpreted in the following words:-??????? "If the special Act is made after the general Act, the position is even simpler. Having made the general Act if the legislature afterwards makes a special Act in conflict with it, we must assume that the legislature had in mind its own general .Act F when it made the special Act and made the special Act, which is in conflict with the general Act, as an exception to the general Act." The special provision made in SR0.580(1)/83 would be an exception to the earlier general provision made in SR0.666(1)/81 and, therefore, will hold sway and the earlier SRO will yield. The analogy of Cosmetics and the departmental practice reflected in dealing with it is not appropriate in the context. There was no generic description of such products in Notification No.666(1)/81. Only its number picked up from Pakistan Customs tariff was given at serial number

25. It happened to be 33.06. Before bringing the items included in this number, the whole of this Serial Number 25 was omitted by SR0.579(1)/83 and included on the same date under SR0.580(1)/83. The scope of the serial number 25 in SR0.666(1)/81 was identical to the article brought to reduce duty under head No.33.06 vide SR0.580(1)/83. It is conceded by the learned counsel for the appellant and is also borne out by the language of section 7 that the powers available to the Federal Government are not of charging sales tax but of either exempting it or reducing it. The language used in SRO.580(1)/83 and similar others gives the impression as if a charge is being levied but in fact referring to the power possessed and the result achieved, it amounts to reducing the duty to the level mentioned in SRO.580(1)/83. On examination of all the facts and the principles of law governing the controversy, we find that no case has been made cut and the appeal must fail which is hereby dismissed with costs. M.B.A./B-48/S??????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.