ISLAMABAD: The Supreme Court held that a taxing statute should be construed strictly, even if the literal interpretation results in some hardship or inconvenience.

A three-judge bench, headed by Chief Justice Umar Ata Bandial and comprising Justice Muhammad Ali Mazhar and Justice Ayesha A Malik heard the petitions of persons engaged in the business of processing, manufacturing, weaving, packing and marketing of various textiles, apparel and terry towel products against the Sindh High Court’s judgment.

The court upheld the SHC’s verdict saying, “We do not find any irregularity or perversity in the impugned judgment passed by the learned Sindh High Court.” Accordingly, these petitions are dismissed and leave is refused.

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The judgment authored by Justice Mazhar stated: “It is a well-settled elucidation of law that a taxing statute should be construed strictly, even if the literal interpretation results in some hardship or inconvenience. The Courts cannot put in words to broaden the scope and sphere of law to such an extent that is not covered under the statute.”

The petitioners’ claim of input tax was prohibited on packing material with effect from 1.7.2016, vide SRO 491(I)/2016, whereby, condition (x) of SRO 1125(I)/2011 was amended to disallow the adjustment of sales tax on packing material as input tax.

Being aggrieved by this amendment, the petitioners had challenged the vires of said notification in the SHC. However, during the pendency of their petitions, the impugned proviso of condition (x) was withdrawn vide amending notification, SRO 777(I)/2018 dated 21.6.2018. Thereafter, the petitioners took an additional plea that the amendment was curative and beneficial in nature which should be given retrospective effect but their constitution petitions were dismissed by the SHC.

In essence, the petitioners in the SHC had challenged the proviso attached to condition (x) in SRO 491(I)/2016 as being unlawful and unconstitutional, but not the SRO as a whole, nor the provisions of the STA 1990 which conferred certain powers to lay down conditions to grant exemptions, adjustments, restrictions or withdrawal of exemptions etc.

The judgment noted that the sales tax law is designed for the levy of tax which includes the sale, production, manufacture or consumption of goods.

The first proviso appended to Section 4 expounds that it shall not apply in respect of the supply of goods mentioned in clauses (i), (ii), and (iii) which are not relevant to the circumstances of the case in hand, however, it is significant to note that by means of the second proviso, ample powers have been conferred upon the federal government which may by notification in the official gazette restrict the amount of credit for input tax actually paid and claimed by a person making a zero-rated supply of goods, otherwise, chargeable to sales tax.

The judgment mentioned that Section 8 triggers and stems from a “non-obstante” clause which accentuates that notwithstanding anything contained in this Act, (STA 1990) a registered person shall not be entitled to reclaim or deduct input tax paid on the goods or services which are more particularly jotted down in clause (a) to (m).

In the present case, clause (b) is quite relevant which says; “(b) any other goods [or services] which the [federal government] may, by a notification in the official gazette, specify.”

The judgment said the section conferred upon the federal government to decide the entitlement or disentitlement with regard to reclamation or deduction of input tax by a notification in the official gazette. The court said: “It is clearly resonating that restrictions imposed for reclaiming input tax on packing material by way of the impugned SRO was not illegal, unlawful or without jurisdiction but it was within the realm and domain of powers vested in the Federal Government under Section 8 of the Sale Tax Act, 1990.

The dominant rationale of interpretation of any legislative instrument is to bring to light the intention of the legislature and the foremost sense of duty of the Courts is to catch on the same by reference to the language used.“

Copyright Business Recorder, 2023