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Petitioner: PKP Exploration Limited and others VS Respondent: Federal Board Of Revenue through JUDGMENT
Court Name: Islamabad High Court Judge(s): Babar Sattar Title:PKP Exploration Limited and others vs Federal Board Of Revenue through
JUDGMENT
Reported As: 2021 PTD 1644 Result: Petition dismissed Judgment JUDGMENT BABAR SATTAR, J.----Through this consolidated judgment, the petitions titled above are being decided as common questions of law are involved. 2. Through these petitions the petitioners have assailed show-cause notices (i.e. notice dated 18.03.2015 in W.P. No.886/2015 and notice dated 17.03.2015 in W.P No. 1077/2015) ("impugned notices"). Through the impugned notices an Officer Inland Revenue has asked the petitioners to show-cause as to why demand may not be generated against the petitioners 'a relation to returns for tax years 2010 to 2014, wherein supply on account of locally produced crude oil/condensate had been claimed as zero rated as per Item No. (XVII) of Serial No.4 of S.R.O No. 549(I)/2008 dated 1 1.06.2008. 3. The relevant part of the impugned notices stated the following: "Perusal of Serial No.4 (Item No. XVII) clearly shows that the tax facility of zero percent has been given on Import and Supplies thereof. There is no ambiguity on this scope that the word "and" used between import and supplies is conjunctive and demands that both the conditions should be simultaneously met as has also been held by the learned ATIR at Para-13 of its recent judgment in S. T.A. No. 314/LB/2014 dated 16.10.2014. Moreover , at Para-23 of the aforesaid judgment it has been held by the learned ATIR that locally produced products are not covered under SRO-549(I)/2008 dated 1 1.06.2008." 4. Mr. Raheel Kamran Sheikh Advocate, who has appeared on behalf of the petitioner in WP No. 886/2015, explained the history of the Sales Tax regime applicable to import and supply of crude oil. His basic contention was that the show-cause notice is rooted in a decision rendered by the learned Appellant Tribunal Inland Revenue ("Tribunal") in S.T.A. No. 314)1.B/2014 dated 16.10.2014 and the decision in such appeal has been retrospectively applied by the Officer Inland Revenue who has issued the impugned notice. The learned counsel relied on
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National Security Company (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Lahore and 2 others (2005 PTD 2340 ) and Messrs Oxford University Press v . Commissioner of Income T ax (2007 PTD 1533 ). 5. Mr. Saad M. Hashmi, Advocate appeared on behalf of the petitioner in W.P No. 1077/2015 and argued that the impugned notice suffered from jurisdictional defect as it was issued on the basis of decision rendered by the learned Tribunal in S.T.A. No.314/LB/2014 which misconstrued the effect of SRO No 549(I)/2008 dated 11.06.2008. Mr. Hashmi contended that the relevant item i.e. petroleum crude oil was listed at Sr. No.4 and in the column that referred to conditions and restrictions the language mentioned was "import and supply thereof". He contended that the word "and" in the said column ought to have been read as "or" as a consequence of which both the import of crude oil and supply of the crude oil would be zero rated. However , the learned Tribunal erred in not reading the "and" as "or" and in relying on such decision of the Tribunal, the Officer Inland Revenue issued the impugned notice which consequently suffered from the jurisdictional defect of misconstruing SRO No.549(I)/2008. Mr. Hashmi stated that as the matter involved interpretation of a statutory instrument, his challenge to the impugned notice in writ jurisdiction was maintainable. He relied on Messrs S.A Haroon and others v. Collector of Customs Karachi and the Federation of Pakistan (PLD 1959 SC 177), Lt. Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty (PLD 1961 SC 119), Nagina Silk Mill, Layallpur v. The Income Tax Officer (PLD 1963 SC 322), Anjuman-e-Ahmadiya Sargodha v. The Deputy Commissioner , Sargodha (PLD 1966 SC 639), The Murree Brewery Co. Ltd. v. Pakistan, through the Secretary to Pakistan, Works Division and others (PLD 1972 SC 279), Watan Party through President v. Federation of Pakistan and others (PLD 2006 SC 697), Commissioner Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. through Director (2009 SCMR 1279 ), Pakistan Tobacco Co. Ltd. v. Pakistan through the Secretary , inistry of Finance, Islamabad and 4 others (1991 PTD 359) and Shahnawaz (Pvt.) Ltd. v. Pakistan through the Secretary , Ministry of Finance, Islamabad and others (2011 PTD 1558 ). Mr. Hashmi further submitted that the Officer Inland Revenue, who is to decide the fate of show cause notice, is bound by the decision of the learned Tribunal rendered in S.T.A. No. 314/LB/2014 and the statutory remedies provided against any adverse decision rendered by the Officer Inland Revenue would be illusory all the way up to the Tribunal and consequently the petition against the impugned notice was maintainable. He relied on Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII, South Zone, Karachi and others (PTCL 1992 CL 181), Attock Cement Pakistan Ltd. v. Collector of Customs and others (1999 PTD 1892 ), Collector of Customs and others v. Messrs Ahmad & Company (1999 SCMR 138), Messrs Usmania Glass Sheet Factory v. Sales Tax Officer (PLD 1971 SC 205), Oxford University Press v. Commissioner of Income Tax (2019 PTD 523), Sky Rooms Ltd. v. Assistant Collector of Central Excise and Land Customs, Karachi (PLD 1982 Karachi 244), Balochistan Textile Mills Ltd. v. Central Excise Board of Revenue and others (1984 CLC 2192 ), Pakistan Metal Industries v. Assistant Collector , Central Excise and Land Customs and another (1990 CLC, 1022), Messrs S.A Abdullah & Co. v. Collector of Customs (Appraisement) Karachi (PLD 1992 Karachi 258), Messrs Khyber Electric Lamps v. Assistant Collector Customs and others (1996 CLC 1365 ), Pirani Engineering v. Federal Board of Revenue (2009 PTD 809), EFU General Insurance Ltd. v. Federation of Pakistan (2010 PTD 1159) and Engro Vopak v. Pakistan (2012 PTD 130). 6. Syed Ishfaq Hussain Naqvi, Advocate appeared on behalf of the respondents and raised objections to the maintainability of these petitions. He submitted that any order passed against the petitioners in pursuance of show- cause notices was appealable under the Sales Tax Act, 1990 an' in presence of such adequate statutory remedy , writ petitions were not maintainable. For this he relied on Collector of Customs v. Universal Gateway Trading Corporation (2005 PTD 123), Islamabad Wi-Tribe Pakistan Ltd. v. Deputy Commissioner Inland Revenue and others (2018 PTD 654) and Lahore Flour Mills Association v. Province of Punjab (1994 MLD 2094 ). He further submitted that writ petition against show-cause notice was not maintainable, given that no adverse order had thus far been passed. He relied on Messrs Zorlu Enerji Pakistan Limited v. Sindh Revenue Board and others (2020 PTD 1288 ). He also submitted that a show-cause notice cannot be challenged on statutory grounds where the question of law involved interpretation of a statutory provision and the challenge was rooted in the argument that the authority issuing the show-cause notice must give a certain interpretation to the statutory provisions in question
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preferred by the petitioner . For this he relied on Northern Power Generation Company Limited v. Federation of Pakistan and others (2015 PTD 2052 ). Mr. Naqvi while also citing principles of statutory interpretation contended that in the instant case the word "and" as used in SRO No. 549(1)/2008 is conjunctive and it could not be read as "or". 7. This Court by order dated 13.02.2015 had issued preadmission notices to the respondents to assist the Court on the question of maintainability . As these petitions are being decided on grounds of maintainability , detailed arguments of the learned counsel for the parties on the merit of how the language used in SRO 549(1)/2008 is to be interpreted, as not being addressed at all. 8. Let us begin by considering the meanin g of precedent and the rule on "stare decisis" as explained in Corpus juris Secundum: Section 139, Corpus Juris Secundum volume 21.A "precedent" has been defined as a decision, considered as authority for a similar case afterward arising on a similar question of law; but a precedent, sufficient to protect rights and which must be followed in similar cases, usually requires a series of decisions declaratory of common-law or equitable principles. Section 140, Corpus Juris Secundum, volume 21.Under the stare decisis rule, a principle of law which has become settled by a series of decisions generally is binding on the courts and should be followed in similar cases. This rule is based on expediency and public policy, and, although generally it should be strictly adhered to by the courts, it is not universally applicable. Section 151, Corpus Juris Secundum, volume 21.Decisions of courts of last resort should be followed by inferior courts until reversed or overruled. Section 153, Corpus Juris Secundum, volume 21.Decisions of coordinate courts, while not binding, will ordinarily be followed unless clearly erroneous.
9. Johan Hanna in "The Role of Preced ent in Judicial Decision" (Villanoa Law Review , 2 Vill.L.Rev . 367, 1957) states that "the English doctrine of precedents is that the House of Lords is absolutely bound by its own decisions, and every court is absolutely bound by decisions of all superior courts. The Court of Appeal is probably bound by its own decisions. A decision of one court of first instance is only of persuasive force on another similar court. A decision of an inferior court does not bind a higher court, although a course of decisions may have considerable influence. The Judicial Committee of the Privy Council may overrule its own decisions." 10. John W . Salmond in Jurisprudence (4th Edition) explains authoritative and persuasive precedents as follows: "Decisions are further divisible into two classes, which may be distinguished as authoritative and persuasive. These two differ in respect of the kind of influence which they exercise upon the future course of the administration of justice. An authoritative precedent is one which judges must follow whether they approve of it or not. It is binding upon them and excludes their judicial discretion for the future. A persuasive precedent is one which the judges are under no obligation to follow , but which they will take into consideration, and to which they will attach such weight as it seems to them to deserve. It depends for its influence upon its own merits, not upon any legal claim which it has to recognition. In other words, authoritative precedents are legal sources of law, while persuasive precedents are merely historical. The former establish law in pursuance of a definite rule of law which confers upon them that effect, while the latter , if they succeed in establishing law at all, do so indirectly , through serving as the historical ground of some later authoritative precedent. In themselves they have no legal force or effect." Explaining the English Law on precedents, Salmond notes the following:
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"Absolute authority exists to the following cases:- (1) Every court is absolutely bound by the decisions of all courts superior to itself. A court of first instance cannot question a decision of the Court of Appeal, nor can the Court of Appeal refuse to follow the judgments of the House of Lords. (2) The House of Lords is absolutely boun d by its own decisions. A decision of this House once given upon a point of law is conclusive upon this House afterwards, and it is impossible to raise that question again as if it was res integra and could be reargued, and so the House be asked to reverse its own decision. (3) The Court of Appeal is, it would seem, absolutely bound by its own decisions and by those of older courts of co- ordinate authority , for example; the Court of Exchequer Chamber . In all other cases save these three, it would seem that the authority of precedents is merely conditional." The rationale for respecting precedent is the need for certainty in the realm of law . Salmond argues that: "The operation of precedents is based on the legal presumption of the correctness of judicial decisions. It is an application of the maxim, Res judicata pro veritate accipitur . A matter once formally decided is decided once for all." "A precedent, therefore, is a judicial decision which contains in itself a principle. The underlying principle which thus forms its authoritative element is often termed the ratio decidendi. The concrete decision is binding between the parties to it, but it is the abstract ratio decidendi which alone has the force of law as regards the world at large." 11. Let us now produce Articles 189, 203GG and 201 of the Constitution of the Islamic Republic of Pakistan, 1973 that declare which precedents are binding: 189. Decisions of Supreme Court bind ing on other Courts. Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts in Pakistan. 203-GG. Decision of Court binding on High Court and Courts subordinate to it. Subject to Articles 203-D and 203-F , any decision of the Court in the exercise of its jurisdiction under this Chapter shall be binding on a High Court and on all courts subordinate to a High Court. 201. Decision of High Court binding on Subordinate Courts. Subject to Article 189, any decision of a High Court shall; to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all courts subordinate to it. 12. Article 212 contemplates the creation of Administrative Courts and Tribunals, but does not state that their decisions constitute binding precedents. Likewise, civil courts decide questions of law, but the judgments of civil courts do not constitute binding preceden ts. They might be persuasive precedents to the extent that they decide a question of law upon which a decision can be based in a subsequent case, but in the reasoning forms part of a binding precedent in terms of Article 203 or 189, only when adopted by a superior court. 13. The same analogy applies to the decision of the Appellate Tribunal Inland Revenue. The learned Tribunal exercises such authority as vested in it by law. Given that it is an adjudicatory forum of a quasi-judicial nature established by statue, it is vested with no inherent power . Neither any of the taxing statutes that provide for an appeal before the learned Tribunal nor the Appellate Tribunal Inland Revenue Rules, 2010, contain language akin to that in Articles 189, 203-GG and 201, stating that to the extent that the learned Tribunal decides a question of law or enunciates a principle of law, such decision is binding on all authorities passing assessment orders under the relevant tax statutes or exercising adjudicatory powers in relation to assessm ent orders, the appeals against which lie to the learned Tribunal. The language in section 132 of the Income Tax Ordinance 2001, establishes that the Tribunal's authority relates to the case in hand. The consequences of the decision of the Tribunal are limited to the case that it decides and do not travel beyond the four corners of the subject-m atter before it in appeal. In other words, neither the Constitution nor any statute envisages a law-declaring function for the Tribunal. Its decisions do not become binding precedents. The reasoning of the Tribunal in one case could be treated by tax authorities as a persuasive precedent in a subsequent case where the subject-matter is the same or similar . But the persuasive quality or cogent reasoning of a decision of the Tribunal does not transform it into a legally binding precedent for officials exercising executive or adjudicatory authority under tax statutes, just as the most compelling and potent decisions of District Courts do not make such decisions binding precedents. In this regard the ratio of the judgments of the learned Lahore High Court and Sindh High Court reported as National Security Company (Pvt.)
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Ltd. v. Income Tax Appellate Tribunal, Lahore and 2 others (2005 PTD 2340 ) and Messrs Oxford University Press v. Commissioner of Income Tax (2007 PTD 1533 ), respectively ought not be misconstrued. In the said judgments, it was held that in face of divergent views taken by different benches of the Tribunal on the same issue, the correct course of action would be to constitute a larger bench of the Tribunal to remove such conflict. The ratio of the judgments is not that decisions of the Tribunal form binding precedents in terms of the principles of law they enumerate, but that in the interest of certainty of law the outcome of cases on the same issue must not be contingent on the composition on benche s. And in face of conflicting opinions of various benches of the Tribunal, such conflict must be resolved by settling the issue through the constitution of a larger bench. The principle of law enunciated in the aforesaid precedents is that the adjudicating authority of the Tribunal should not be exercised in a manner that is arbitrary or nurtures uncertainty . This principle relates to the manner of exercise of authority and not to the effect of the decisions on those exercising executive or adjudicatory powers within the tax hierarchy . The decision of one High Court is not binding on another High Court, even though a precedent laid down by one High Court has persuasive value for another . But the decision of a bench of the High Court is binding on another equal sized bench of the same court as held in Multiline Associates v. Ardeshir Cowasjee and 2 others (PLD 1995 SC 423). And if a bench disagrees with an earlier precedent, the prescribed course of action is to seek the constitution of a larger bench to resolve the difference of opinion. This principle of law has been enumerated by the august Supreme Court in the interest of legal certainty and consistency to ensure that a court, which comprising individual judges and is not a monolith, still speaks with one voice and its decisions do not rest on the vagaries or preferences of individual judges. And the same logic has been extended to the functioning of benches of the Tribunal to avoid conflicting decisions in National Security Company (Pvt.) Ltd. and Messrs Oxford University Press. 14. It has been held by the learned Tribunal in a decision cited as 1996 PTD (Trib) 388 that, "a judgment of the Income Tax Appellate Tribunal interpreting or enunciating any point of law has the force of precedent and is binding on absolute terms on the C.I.T(As)/A.A.Cs and has a binding force on the other functionaries in the tax collection hierarchy established under the Income Tax Ordinance, 1999...The judgment of the Income Tax Appellate Tribunal has the force of precedent which can be inferred from the fact that the judgment s of those Courts and Tribunals only are reported in the law journals under the Law Report Act, 1875 which have the force of precedent." With utmost respect, this order and other subsequent orders of the learned Tribunal declaring that the Tribunal's orders form binding precedents on questions of law in view of provisions of the Law Reports Act, 1875, are misconceived. Let us reproduce sections 3, 4 and 5 of the said Act. 3. Authority given only to authorized reports. No Court shall be bound to hear cited, or shall receive or treat as an authority binding on it, the report of any case decided on or after the said day by any High Court, other than a report published under the authority of a Provincial Government. 4. Authority of judicial decisions . Nothing herein contained shall be construed to give to any judicial decision any further or other authority than it would have had if this Act had not been passed. 5. Certification by the courts, etc. A court or tribunal deciding a matter shall at the end of the judgment or order , as the case may be, certify in the form specified in the Schedule that it is based upon or enunciates a principle of law or decides a question of law which is of first impression or distinguishes, over-rules, reverses or explains a previous decision. Section 4 above clarifies that provisions of the Law Reports Act, 1875, would not endow any judicial decision with the quality of being a binding precedent that is otherwise not a binding precedent. The intent of section 5 is to achieve the object of certainty and consistency in the decisions rendered by a Tribunal, as highlighted above. The factum of publication of a decision does not bestow on the decision any binding force in terms of becoming a precedent to be followed in subsequent cases by income tax authorities, even though such decisions no doubt have persuasive value for all subordinate adjudicatory forums and any exercise of authority by a subordinate forum in patent disregard of a decision of a Tribunal on a question of law could open itself to the charge of being arbitrary if it such authority to give reasons, within the terms of section 24 of the General Clauses Act, 1897, as to why it has not been persuaded by a decision of the Tribunal on a question Cecided by the Tribunal.
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15. Let us reiterate the guidance provided by the Constitution in Article 175(2) which states the following (2) No court shall have any jurisdiction save as is or may be conferred on it by the Constitution or by or under any law. To the extent that neither the Constitution nor any other statute declares the decisions of the Tribunal to have binding force on subsequent decisions reached by executive and adjudicatory authorities exercising powers under taxing statutes, such binding legal authority cannot be claimed by the learned Tribunal for its decisions in which it interprets or enunciates any point of law. The decision of the learned Tribunal has binding force, but only in relation to the case-in-hand. 16. Once it is concluded that the decisions of the Tribunal do not constitute binding precedents, it cannot be argued that the remedy afforded to an assessee before the adjudicatory hierarchy provided under tax statutes is illusory merely because the authorities exercising executive or adjudicatory jurisdiction under the tax statutes would be influenced by the reasoning of the Tribunal in another case that it has already decided and such decision militates against the assessee's argument. In such case it remains for the assessee to convince the authorities vested with jurisdiction under the tax statutes that the decision of the Tribunal being relied upon by the authority to decide the assessee's case a certain way is distinguishable, or is against the law or reason. And in the event that the assessee is unable to persuade the adjudicatory forums provided under the statute, the relevant question of law will ultimately come before the High. Court .for determination in its reference jurisdiction. 17. There are at least three reasons why this Court ought not exercise its extra-ord inary constitutional jurisdiction to adjudicate a matter that will eventually come before it in appellate, revisional or reference jurisdiction: 1. The remedy of appeal, revision or reference is provided .by statute. The High Court must not exercise its constitutional jurisdiction in a manner that circumvents the adjudicatory scheme provided by statue, as doing so could undermine legislative intent and also the scheme of separation of powers upon which our Constitution rests, wherein the foremost purpose of the judicature is to give ef fect to the laws as promulgated by the legislature. 2. By assuming the jurisdiction to adjudicate a matter in exercise of its jurisdiction under Article 199 of the Constitution, the Court would render redundant the provisions of tax statues that provide the remedy of filing a reference before the High Court in relation to questions of law that emanate from a decision of the Tribunal. Such reference is heard by a division bench of this Court, while a writ petition is heard by a single bench. One of the principles guiding the exercise of constitutional jurisdiction by the Court must be that it ought not exercise its constitutional jurisdiction in a manner that usurps the statutory jurisdiction vested by the legislature in its wisdom in a division bench of the same Court. 3. When a question of law in relation to exercise of jurisdiction under a tax statute culminates in a tax reference, the High Court has the benefit of the reaso ning of adjudicatory forums provided by the statute that have already applied their mind to the question. As a functional matter , the High Court is devoid of the benefit of such reasoning if it allows a petition to circumvent statutory remedies. 18. In this regard this Court is guided by the dicta of superior courts, especially in situations where exercise of writ jurisdiction…
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