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Petitioner: INSTITUTE OF ARCHITECTS, PAKISTAN (LAHORE CHAPTER) VS Respondent: PROVINCE OF JUDGMENT
Court Name: Lahore High Court Judge(s): Syed Mansoor Ali Shah Title:INSTITUTE OF ARCHITECTS, PAKISTAN (LAHORE CHAPTER) vs PROVINCE OF
JUDGMENT
Reported As: 2016 LHC 836, 2016 PTD 1103, PLD 2016 Lahore 321 Result: Order Accordingly Judgment Supreme Court of pakistan JUDGMENT SYED MANSOOR ALI SHAH, J.---The petitioners are taxpayers, who, agitate, amongst other grounds, that Punjab Revenue Authority ("PRA or Authority") has not been lawfully established or constituted under section 3 of the Punjab Revenue Authority Act, 2012 ("Act-II"). They submit that initially the Government only appointed a Chairperson of the Punjab Revenue Authority, who unlawfully held himself out as the Authority, when the law provides that the Authority shall constitute a Chairperson and at least four Members. They also agitate that the mode of appointment of the Chairperson and the Members is not in accordance with the provisions of Act-II and also offends the pronouncements of the superior courts, which hold that appointments to public sector institutions should be open, fair, transparent, consultative and deliberative. 2. It is submitted that after the filing of these petitions, the Government got wind .Of the illegalities in the constitution of the Authority and in their passion to rectify things, hurriedly appointed Members on ex-officio basis, which the law does not permit and later on promulgated the Amending Ordinance, validating the acts of the Chairperson, without curing the defect i.e,, substituting and empowering the Chairperson with the Authority. It is submitted that the Government failed to rectify things and in haste, jumped out of the frying pan into the fire. 3. The petitioners submit that without the establishment of the Authority, all the orders, notifications, directions and Rules framed by the Chairperson (assuming himself to be the Authority) are unconstitutional, illegal and without lawful authority. It is also submitted that during the course of this litigation, the Governor of the Province, promulgated The Punjab Revenue Authority1 2
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(Amendment) Ordinance, 2015 ("Amending Ordinance") on 22.10.2015 in an effort to validate the acts and orders passed by the Chairperson. The taxpayers have also challenged the constitutionality and legality of the said Ordinance, through separate writ petitions, which are also being decided through this judgment. It is argued that in terms of Article 128 of the Constitution, the Ordinance stood repealed after 90 days on 20.01.2016, hence, the proposed amendment has died its own death. It is submitted that after repeal of the Ordinance, the position prior to the Ordinance stands revived. 4. On the other hand, learned counsel for the respondent Authority has principally placed reliance on Section 8 of Act-II to submit that no act, proceedings; decisions or orders of the Authority shall be invalid for the reason only of the existence of vacancy or any defect in the constitution of the Authority. He further submits that in any case the Authority stood lawfully constituted on 15.06.2015, when remaining members were appointed on ex-officio basis and, therefore, all acts taken after the said date are lawful and in accordance with law. 5. Learned DAG and the learned law officers, in response to notice under Order 27-A of C.P.C., adopted the arguments of learned counsel for the respondent Authority and add that lapse of the Ordinance does not affect the validity of the amendment and, therefore, the validation clause is there to stay, inspite of the lapse of the Amending Ordinance and, therefore, all the actions of the Chairperson stand protected. Learned Law Officers further submitted that Ordinance has been placed before the Provincial Assembly in its 18th session which has been adjourned and in terms of Articles 79, 117 128 the bill is deemed to be pending rather than having been lapsed. 6. I have heard the arguments of the parties and have gone through the law, as well as, the compendium of notifications issued from time to time under Act-II (the compendium of notifications was supplied by the counsel representing the Authority and has been placed on the record of this case as "Mark-A" (booklet). OPINION OF THE COURT 7. At the outset it might be useful to note that in one of the initial hearings, learned Advocate General, Punjab was called and apprised of the case set out against the Government. He sought time to redress the issue. The Government, instead of establishing and constituting the Authority under the law and salvaging the situation, decided to promulgate the Amending Ordinance, attempting to validate the acts of the Chairperson. It is noted for record that even though the petitioners have challenged the imposition of tax on a number of other grounds, this judgment addresses the more fundamental question of the establishment and constitution of the Authority under Act-II. Hence, petitioners' right to challenge the levy on other grounds, remains intact. Legislative Design 8. In Punjab, the architecture of sales tax on services stands on two separate pieces of legislation i.e,, Punjab Sales Tax on Services Act, 2012 ("Act-I") (Act XLII of 2012) and Punjab Revenue Authority Act, 2012 ("Act-II") (Act XLIII of 2012). Punjab Sales Tax on Services Act, 2012 ("Act-I") Act-I provides for levy of a tax on services provided, rendered, initiated, received, originated, executed, or consumed in the Punjab. The "Authority" provided under Act-I is Punjab Revenue Authority established under Act-II. The Authority has been entrusted with the powers of registration, assessm ent, administration and collection of taxes, etc. Hence, the Authority is at the heart of the taxing statute and pumps its body to life. Operationalization of the taxing statute (Act- I) presupposes the establishment and constitution of the Authority under Act-II. So while sales tax on services is levied under Act-I, it gets administered through the Authority, once the Authority has been established and functionalized (duly constituted) under Act-II. The Punjab Revenue Authority Act, 2012 ("Act-II")3 4 5 6 7
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9. Act-II provides for establishment of Punjab Revenue Authority so as to reform and modernize the system of taxation, provide assistance to taxpayers, promote compliance with fiscal laws, establish a progressive and professionally efficient tax management organizalion. Under Section 3(1) of Act-II, the Authority is to be established by the Government of the Punjab through a notification and after establishment the Authority shall be a body corporate having perpetual succession and a common seal, with power to enter into agreements, acquire, hold, manage and dispose of property and to sue and be sued in its name. As to the constitution of the Authority, Section 3(4) provides that it shall consist of a Chairperson and not less than four members to be appointed by the Government. It also provides that the manner and terms and conditions of appointment of the Chairperson and the Members shall be as prescribed and until so prescribed may be determined by the Government. Section 3(5) provides that no person shall be appointed as Chairperson unless he possesses:-- (a) a master's degree from a recognized University; (b) ample knowledge of tax systems in Pakistan; and (c) twenty years work experience, including five years' experience in tax administration or financial management. Subsection (6) provides that qualification and experience and other requirements for appointment of Members shall be as prescribed. Punjab Revenue Authority - an autonomous body 11. Act-II establishes a Revenue Authority, which is a separate corporate body, with an independent human resource management and the power to employ its own staff. It maintains its own Data Bank containing information to increase the taxpayers' base, etc. It enjoys the powers to impose fee or charge for any additional facilities extended to the taxpayers. It has its own Fund and maintains a separate budget. Its accounts are audited by the Auditor General of Pakistan. Under the Punjab Government Rules of Business, 2011 ("Rules of Business"), PRA has been listed as an autonomous body. "Autonomous Organization" under the Punjab Civil Servants (Appointment and Conditions of Service) Rules, 1974 means an organization set up under a law by the Government, as a unit separate from the formal departmental organization. Punjab Revenue Authority is, therefore, not a department or an attached department of the Government, it is an autonomous body. What is the purpose of setting up a distinct autonomous Revenue Authority as opposed to a department or an attached department of the Government? What is the purpose, scope and extent of this autonomy? According to the International Monetary Fund ("IMF"), the reform and modernization of government institutions have been a constant theme over the last three decades in both developed and developing economies. Governments have faced a series of pressures that include: (i) The need to deliver services more effectively and at a lower cost to citizens, as expenditure budgets decline. (ii) The need to address deficiencies in traditional procedures and structures that have come to be seen as too rigid to respond to the rapidly changing needs of the public and the challenges confronted by government in modern society. (iii) The pressure to adapt curient business or private sector management practice to public sector institutions. As a result, there has been a tendency for governments to increase the autonomy of its departments and agencies. The basic principle is that such autonomy can lead to better performance by removing impediments to effective and efficient management while maintaining appropriate accountability and transparency. The autonomy is to help Government to establish a distinct entity with specialized competence; a "progressive and professionally efficient tax management organization." One facet of this autonomy is to select the right person for the job: Therefore, the Government enjoys the flexibility, space and the authority to pick the best persons to man this specialized Revenue Authority. Therefore, autonomy of the Revenue Authority does not imply that it is beyond the control of the Government, but quite to the contrary, it allows the Government to be8 9 10 11 12 13 14 15 16 17 18 19 20
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able to set up an Authority with distinctive competence and specialization for efficient, progressive and effective tax management system, which is not possible to structure under the garb of a department or an attached department of the Government. The host of service laws, rules and bureaucratic instructions that regulate departments and the attached departments, do not stand in the way of structuring autonomous bodies. Establishment of the Authority 12. How does the Government establish this autonomous Authority? Legal establishment of the Authority, as a corporate body, is through a notification under section 3(1) of Act-II. Admittedly, no such notification has been issued to date; hence the Authority has not been legally established under the law. Section 8 of Act-II (discussed later in detail) cannot come to the rescue of the respondents, as it pre-supposes an Authority that has been established in accordance with the law. Section 8 must always be read, subject to this fundamental precondition. Failure to establish the Authority under Act-II, renders all acts done by the Chairperson, purporting to be the Authority, are void ab intio. Constitution of the Authority 13. Without prejudice to the fact that the Authority has not been established. The constitution of the Authority under Act-II equires the appointment of a Chairperson and at least four Members. Appointment of the Chairperson 14. The qualification and experience of the Chairperson is provided in Section 3(5) of Act-II. "Prescribe" under section 2(1) means prescribed by Rules or Regulations under the Act. Considering that Regulations can only be framed once the Authority has been established and constituted, the word prescribed in section 3(4) and (6) of Act-II refers only to the Rules prescribed by the Government. It cannot be otherwise, firstly, because Authority cannot through Regulations prescribe the manner, terms and conditions, qualifications and experience of its own Chairperson and Members. Second, the appointment of the Chairperson and the Members is by the Government under the Act, hence the manner, terms and conditions, qualifications and experience of the Chairperson and Members must necessarily be provided for by the Government under the Rules. 15. Under section 3(4), the Authority is to consist of a Chairperson and not less than four Members. The qualification and experience of a Chairperson is given in section 3(5) of Act-II and provides that no person shall be appointed as Chairperson unless he possesses: (a) a master's degree from a recognized University; (b) ample knowledge of tax systems in Pakistan; and (c) twenty years work experience, including five years' experience in tax administration or financial management. Learned Law Officers, as well as, learned counsel for respondent Authority categorically submitted that no Rules or Regulations have so far been framed under Act-II. They were repeatedly asked whether Government of Punjab has determined the manner for the appointment of the Chairperson or the Members, the learned Law Officers categorically submitted that there is no policy or decision or document to this effect. The Chairperson and Members were appointed by the Government through the following notifications. Notification-1 GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT Dated Lahore, the 30th June, 2012 NOTIFICATION
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No, SO (TAX) 1-9/2011. In exercise of the powers conferred under subsection (3) of Section 1 of the Punjab Revenue Authority Act, 2012, Governor of the Punjab is pleased to direct that the Punjab Revenue Authority Act, 2012 shall come into force on and from 1st July, 2012. (FINANCE SECRETARY) GOVERNMENT OF THE PUNJAB Notification-2 GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT Dated Lahore, the 30th June, 2012 NOTIFICATION No, SO (TAX) 1-2/97. In exercise of the powers conferred under subsection (3) of Section 1 of the Punjab Sales Tax on Services Act, 2012, Governor of the Punjab is pleased to direct that the Punjab Sales Tax on Services Act, 2012 shall come into force on and from 1st July, 2012. (FINANCE SECRETARY) GOVERNMENT OF THE PUNJAB Notification-2 GOVERNMENT OF THE PUNJAB
FINANCE DEPARTMENT Dated Lahore, the 16th July, 2012 NOTIFICATION No, SO (TAX) 1-9/2011. In pursuance of Government of the Punjab, S&GAD's Notification No,SOEI-2- 1/2012, dated 16.07.2012, Mr. Iftikhar Qutab (officer of In-land Revenue/BS-20) is hereby posted as Chairperson, Punjab Revenue Authority, on deputation basis, with immediate effect. 2. The terms and conditions of his posting/deputation will be settled separately. (FINANCE SECRETARY). GOVERNMENT OF THE PUNJAB Notification- 4 GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT Dated Lahore, 23rd July, 2012 NOTIFICATION No, SO (TAX) 1-9/2011. It is notified for information of taxpayers and general public that the headquarter of Punjab Revenue Authority (PRA) has been established in Finance Department, Civil Secretariat, Lahore till further orders. 2. Contact numbers of the relevant officers of Punjab Revenue Authority/Finance Department, Government of the Punjab are as under: 1. Mr. Iftikhar Qutab Chairperson, PRA 0334-3231740 2. Mr. Farid Ahmad Tarar Additional Finance Secretary Finance Department 042-99211076 3. Mr. Faisal Rashid Deputy Secretary Finance Department 042-99211078 (TARIQ BAJWA) FINANCE SECRETARY Notification- 5 PUNJAB REVENUE AUTHORITY GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT CHARGE ASSUMPTION REPORT
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Certified that I, IFTIKHAR QUTAB (BS-20/Inland Revenue Service), have assumed the charge of the post of Chairperson, Punjab Revenue Authority, Government of the Punjab, Finance Department, on 24.07.2012 with reference to the Punjab Government, S&GAD's Notification No,SOEI-2-1/2012 dated 16th July, 2012 and Finance Department's Notification No,SO(TAX) 1-9/2011, dated 16th July, 2012. (IFTIKHAR QUTAB) CHAIRPERSON, PRA Dated: 24.7.2012 Notification- 6 No.PRA/HR.12/12 PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, Danepur Road, GOR-I, Lahore Dated: 12th March, 2013 CHARGE ASSUMPTION REPORT Certified that I, Iftikhar Qutab, have assumed the charge of the post of Chairperson, Punjab Revenue Authority, Government of the Punjab, (BS-21), with effect from 11.03.2013, in pursuance and Compliance with Federal Board of Revenue (Revenue Division), Government of Pakistan's Notification No.0566-IR-I/2013, dated 11.03.2013. 2. This charge assumption report is signed and issued in terms of paragraph 2 of the athresaid notification. (IFTIKHAR QUTAB) CHAIRPERSON, PRA Notification- 7 No,PRA/HR.12/2014 PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, Danepur Road, GOR-I, Lahore Dated: 12th February, 2014 CHARGE ASSUMPTION REPORT Certified that I Iftikhar Qutab (BS-21/Inland Revenue Service), have assumed the charge of the post of Chairperson, Punjab Revenue Authority, Government of the Punjab, (BS-21), with effect from 12.02.2014 in pursuance to the Government of Pakistan, Establishment Division's Notification No,1/100/2012 E-4. Dated 4.2.2014 read with Federal Board of Revenue's Notification No,0292- IR- I/2014, dated 11.02.2014,Government of the Punjab, S&GAD's Notification No, SOE1-2-1/2012, dated 12.02.2014 and Government of the Punjab, Finance Department's Notification No,SO(TAX)1- 9/2011 (Pt.II), dated 12.02.2014 (IFTIKIIAR QUTAB) CHAIRPERSON, PRA Notification- 8 No,PRA/HR-12/2012 (Vol-IV) PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, Danepur Road, GOR-I, Lahore
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Dated: 31st March, 2015 CHARGE RELINQUISH REPORT Certified that I, Iftikhar Qutab (Inland Revenue Service), have relinquished the charge of the post of Chairperson, Punjab Revenue Authority, Government of the Punjab, (BS-21), with effect from 31.03.2015 (AN) in pursuance to the Government of Punjab, S&GAD's Notification No,SI.2-2/2015, dated 31.3.2015 and subsequent Finance Department Notification No,S0 (TAX)4-3/2015 dated 31.03.2015 to report to my parent department i.e, Government of Pakistan (Revenue Division), Federal Board of Revenue, Islamabad. (IFTIKHAR QUTAB) CHAIRPERSON, PRA Notification- 9 No, PRA/HR-12/2012 (Vol-IV) PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, DANEPUR ROAD, GOR-I, LAHORE Dated: 31st March, 2015 CHARGE ASSUMPTION REPORT Certified that I, Raheal Ahmad Siddiqui (PAS/BS-20), have assumed the charge of the post of Chairperson, Punjab Revenue Authority, Government of the Punjab (BS-20), with effect from 31-03- 2015 (AN), in pursuance to the Government of Punjab, S&GAD's Notification No,SI.2-2/2015, dated 31- 03-2015 and subsequent Finance Department Notification No, SO (TAX)4-3/2015 dated 31-03-2015. The charge assumption report is signed and issued in terms of para 2 of S&GAD's Notification No,SI.2-2/2015 dated 31-03-2015. (RAHEAL AHMAD SIDDIQUI) CHAIRPERSON, PRA Notification- 10 PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, DANEPUR ROAD, LAHORE Dated: 2nd April, 2015 NOTIFICATION No, PRA-PF-20/2015. In pursuance of Notification issued by the Services Wing of Services and General Administration Department No,S1.2-2/2015(B) dated 1st April, 2015, MR. AFTAB AHMAD ASIF (Military Land and Cantonment Group/BS-20) is hereby posted as Member (Support Services/BS- 20), Punjab Revenue Authority w.e.f, 02.04.2015 (afternoon). (RAHEEL AHMAD SIDDIQUI) CHAIRPERSON Notification- 11 GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT Dated Lahore, June 15, 2015 NOTIFICATION No, SO (TAX) 1-9/2011(Audit). In exercise of the powers conferred under subsection4(4) of Section 3 of the Punjab Revenue Authority Act 2012 (XLIII of 2012) read with section 14 of the General Clauses Act 1956, Governor of the Punjab is pleased to appoint the following officers as ex-officio Members of the Punjab Revenue Authority, as a stop gap arrangement:
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(i) Dr. Ijaz Munir, Secretary, Services (ii) Mr. Ali Tahir, Secretary, Excise and Taxation (iii) Syed Ali Murtaza, Secretary, Public Prosecution 2. Dr. Ljaz Munir, Secretary Services, PAS/BS-20, is also designated as Senior Member under subsection (7) of Section 3 of Punjab Revenue Authority Act, 2012 to look after the function of the Chairperson. PRA, In case of Chairperson's casual absence. 3. This notification shall come into force at once. SECRETARY GOVERNMENT OF THE PUNJAB FINANCE DEPARTMENT Notification- 12 PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, DANEPUR ROAD, LAHORE NOTIFICATION No, PRA/HR.12/2012 (PF-154/2015). Mr. Mohy-Ud-Din Ahmad Wani (PAS/BS-20) is hereby posted as Member (Support Services/ BS-20) vice Mr. Aftab Ahmad Asif (MLCG/BS-20), who is posted as Member (Policy and Legal), Punjab Revenue Authority. (DR. RAHEAL AHMAD SIDDIQUI) CHAIRPERSON Dated: 14th July, 2015 Notification- 13 PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB Dated: August 17, 2015 NOTIFICATION No, PRA-PF 2-01/2013. Mr . Javed Ahmed, Commissioner (Enforcement) Punjab Revenue Authority (HQs) is hereby given additional charge of Member (Operations) Punjab Revenue Authority for 89 days or till his date of actualization of promotion whichever is earlier. (Dr. Raheal Ahmad Siddiqui) Chairperson Notification- 14 No,PRA/HR-12/2012 (Vol-IV) PUNJAB REVENUE AUTHORITY FINANCE DEPARTMENT GOVERNMENT OF THE PUNJAB 5-B, Danepur Road, GOR-I, Lahore Dated: 29th September, 2015 CHARGE ASSUMPTION REPORT Certified that I, Raza Munawar (BS-20/IRS), have assumed the charge of the post of Member (Taxpayer's Audit), Punjab Revenue Authority, Government of the Punjab, (BS-20), with effect from 10.09.2015, in pursuance of the Government of Punjab, S&GAD's Notification No,SOEI-1-20/2015 dated 28-09-2015 and subsequent PRA's order Notification No,PRA-1-3/2015 (PF)dated 29-09-2015. (RAZA MUNAWAR)
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Member (Taxpayer's Audit), PRA The above notifications indubitably reveal that the Authority has never been established. Only Act-I and Act-II were made enforceable vide Notifications Nos. 1 and 2 (above) w.e.f,, 01.07.2012. While Notification No, 4 dated 23.07.2012 simply designates the headquarters of the Authority. 16. Under Notification No,3 (above) one Mr. Iftikhar Qutub was appointed as Chairperson of the Authority on deputation basis on 16.07.2012 and finally relinquished this post on 31.03.2015. It may be added that during this period Mr. Iftikhar Qutub, also relinquished the post and later on rejoined, hence the post of Chairperson stood vacant for sometime. In the absence of any Rules framed under section 33 of Act-II, the Government failed to place on record any policy or process determined by the Government for the appointment to the post of Chairperson. 17. Were Messrs Iftikhar Qutub or Raheal Ahmed Siddiqui (appointed on 31.03.2015) ever selected and nominated through an open, fair, transparent, consultative and deliberative process? Was the post advertised? How many candidates applied? What was the objective criteria for appointment? Was there a Selection Board or Committee? Was a summary in terms of Rule 14(2) of the Rules of Business put up before the Competent Authority for approval? These questions remained unanswered. Other than the lack of proper process and procedure in appointing the aforementioned Chairperson, it is disturbing to note that the Chairperson held himself out as the Authority and transacted the business of the Authority. The Chairperson (as opposed to the Authority) framed the following Rules under section 76 of Act-I, on 01.08.2012, within a week of his assumption of the office on 24.07.2012. Rules framed by the Chairperson rather than the Authority 1. Punjab Sales Tax on Services (Registration and De-Registration) Rules, 2012. (dated 1-8-2012) 2. Punjab Sales Tax on Services (Filing of Returns) Rules, 2012. 3. Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012. 4. Punjab Sales Tax on Services (Specific Provisions) Rules, 2012. 5. Punjab Sales Tax on Services (Computerized System) Rules, 2012. 6. Punjab Sales Tax on Services (Authorized Representatives) Rules, 2012. 7. Punjab Sales Tax on Services (Audit) Rules, 2012. 8. Punjab Sales Tax on Services (Adjudication and Appeals) Rules, 2012. 9. Punjab Sales Tax on Services (Alternative Dispute Resolution) Rules, 2012. 10. Punjab Sales Tax on Services (Recovery) Rules, 2012. 11. Punjab Sales Tax on Services (Withholding) Rules, 2012. 12. Punjab Sales Tax on Services (Definitions) Rules, 2012. It is equally disturbing to note that the Government granted approval to the said Rules,…
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