Tax and equity are strangers. One can not go by the notion as to what is just and expedient, notwithstanding the extravagant consequences which flow from giving the words their natural meaning. Fundamental principle for interpretation of tax laws is the principle of strict construction. Tax laws have to be strictly construed. What is written is to be acted upon. This is in contrast with beneficial or remedial legislations eg civil, criminal and labour laws, service matters or the constitution where liberal interpretation is a virtue.
The plea that liberal construction advances the cause of justice is not adopted in relation to tax laws. However, legal fictions change the tenor of the words in law. The words 'proviso' and 'deem' are helpful for in relation with a section or sub-section of legislation.
Fiction or a legal fiction is an assumption or supposition made by express words of law that something which is or may be false is true or that a state of facts exists which has never been there. It is an assumption of a fact that does not or may not exist. It is a rule of law which assumes true something which is false, but not impossible. Fictions arise from the law and not law from fictions.
'Proviso' and 'deem'Proviso: The Black's Law Dictionary dilates 'proviso' in the following terms:
"A clause or part of a clause in a statute, the office of which is either to except something from the enacting clause, or to qualify or restrain its generally, or to exclude some possible ground of misinterpretation of its extent......... A 'proviso' is used to limit, modify or explain the main part of section of statute to which it is appended....... Its proper use, however, is to qualify what is affirmed in the body of the act, section, or paragraph preceding it, or to except something from the act, but not to enlarge the enacting clause. And it cannot be held to enlarge the scope of the statute."
A proviso creates an exception to the main provision. It is not independent. It has to be construed strictly in the context of a section or sub-section of the Act to which it relates. It cannot travel beyond the scope of the section to which it is appended. Provisos bringing exceptions to the main laws are legal fictions. They are fictions carriers because they enable travel beyond the stated law of the relevant section.
A proviso has diverse operations. Sometime it works as a qualification or limitation. At times as a condition, while in certain places it acts as a covenant. As a condition in a deed it governs validity of the deed. Introduced by the word 'provided', a proviso is in relation with a preceding enactment.
Provisos are frequently inserted in the statutes for saving rights or generally for exemption or deviation from operation of the law to which these are related. Engrafted on a preceding enactment, a proviso has to be interpreted in conformity with intentions of the legislature and objects of the Act.
The Supreme Court of India in Chettain Veetil Ammadand another vs. Taluk Land Board and others (1980) 1 SCC 499: AIR SC 1979 SC 1573, observed: "A provision is, therefore, a distinct rule or principle of law in a statute, which governs the situation covered by it. So an incomplete idea, even though stated in the form of a section of a statute, cannot be said to be a provision for, by its incompleteness, it cannot really be said to provide a whole rule or principle for observance by those concerned. A provision of all cannot therefore be said to exist if it is incomplete, for then it provides nothing."- "Supreme Court on Words & Phrases" by Justice R.P. Sethi - Page- 861
The Sindh High Court in C.P. Nos. D-1901 to 1905, D-41/2010, D-167/2010 etc has ruled on 'what a proviso is to be regarded' and 'how words of a proviso are to be construed'. The Court has stated: "The consensus of the above cited cases, as assumed up in PLD 1958 SC (Pak) 41, is as under:
1. A proviso is to be regarded as something which excepts a particular case from a general principal. The effect of a proviso is to except something out of the proceeding portion of the enactment as to qualify something enacted therein which, but for the portion would be within it.
2. The words of a proviso are to be construed strictly and confined to the special case which its works enact, it would be wrong to construe those words as being co-extensive with those used in the purview, particularly where the effect might be of bringing about a repeal of the purview."
On the status of a proviso in a legislation and its interpretation, in the case of Life Insurance Corporation of India vs. United Commercial Bank Karachi and others (PLD 1962)(W.P.) (Karachi 837), it has been held by as under: "Proviso to be construed as subordinate to main clause should not be given greater effect than necessary.
A proviso should not be interpreted so as to have greater effect than strict construction of the proviso rendered it necessary. Ordinarily the proviso is something subordinate in the main clause and generally what is contained in the proviso is not to be imported by implication into the clause." (Quoted by The Sindh High Court in C.P. Nos. D-1901 to 1905, D-41/2010, D-167/2010 etc) What follows are some examples of provisos by way of fiction in some fiscal laws of Pakistan. This is not a list of provisos as such.
1. Federal Excise Act-2005 (Act)
(1) Proviso after sub-section (5) of section 12 of Federal Excise Act titled: "Determination of value for the purpose of duty" seeks to provide a higher base for levy of excise duty than what would be the position in case it is calculated on the price of goods prescribed as minimum price by the FBR. The proviso reads:
"Provided that, where the price at which the goods or class of goods are sold, is higher than the price fixed by the Board, the duty shall, unless otherwise directed by the Board, be levied and collected at such higher price."
(2). "Provided that if a registered person wishes to deposit the amount of duty not paid, short paid or amount of duty evaded along with default surcharge during or after the audit but before the determination of liability under sub-section (2A), he may deposit such amount along with twenty five percent of the amount of penalty prescribed under this Act or the rules made thereunder and in such case, further proceedings in the case shall abate."
The above proviso succeeds sub-section (3) of section 46, titled: "Departmental Audit". The sub-section stipulates that no penalty is to be recovered if the money demanded under the Federal Excise Act together with default surcharge is voluntarily paid before commencement of the audit. By way of the provision being cited, the facility under sub-section (3) ibid is being partially extended. The proviso says that in case the cited amount is deposited in the governmental treasury with 25% of the amount of penalty accruing, during or after the audit process, but before an order under section 14 is passed, the assessee can have his way.
2. Sales Tax Act-1990 (Act)
(1). The following proviso after section 2(33) of the Act enlarges the definition of supply. By adding to the list of supply what is not a supply, it seeks to extend the tax base and thus raise revenue of the Government:
"Provided that the Federal Government, may by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply;"
This provision is a fiction limited to section 2(33) of the Sales Tax Act to which it is appended inasmuch as it aims at striking down actual supplies from the list of supplies. Simultaneously, it proceeds to treat transactions as supplies which are not in the nature of supply.
(2). The following proviso after section 2(46)(g) of the Sales Tax Act empowers the FBR to disregard the transaction values and in place lay down the Board's values for purposes of payment of tax, obviously with the object of extraction of higher amount of tax:
"Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies:" Replacement of transaction values by non-existent values is a fiction created by the provision.
(To be continued)
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