Law: Federal Excise Act, 2005

Section: 3,First Schedule

(a) Federal Excise Act (VII of 2005)---

----S. 3 First Sched.---Customs Act (IV of 1969), First Sched.---Fiscal statute---Statutory provisions, amendment of---Section 3 and the First Schedule to the Federal Excise Act, 2005 as well as the First Schedule to the Customs Act, 1969 were statutory provisions---Such provisions could only be amended by an Act of Parliament---Delegated legislation such as a Statutory Regulatory Order (SRO) could not amend the same.

(b) Interpretation of statutes---

----Fiscal/taxation statute---Charging provision---Scope---Provision providing for a mode of collection was not a charging provision; it could neither abridge nor expand the scope of a charging provision in an Act.

(c) Federal Excise Act (VII of 2005)---

----Ss. 2(23), 3 16 First Sched., Table II---Customs Act (IV of 1969), First Sched. [Pakistan Customs Tariff (PCT), Chapt. 98]---Services---Federal excise duty, payment of---Exemption---Scope---All services provided in Pakistan were exempt from Federal Excise Duty unless specified in the First Schedule to the Federal Excise Act, 2005 read with Chapter 98 of the Pakistan Customs Tariff (PCT)---First Schedule to the Federal Excise Act, 2005 was not to be read in isolation, rather had to be read with Chapter 98 of the PCT---Even an activity within the definition of services under S. 2(23) of the Act was exempt from Federal Excise Duty unless specified in the First Schedule---Assessee, therefore, did not have to apply under S. 16 of the Act for exemption--- Services providedby the assessee were exempt if not specified in the First Schedule to the Federal Excise Act, 2005.

(d) Federal Excise Act (VII of 2005)---

----Ss. 2(23), 3 First Sched., Table II---Customs Act (IV of 1969), First Sched. [Pakistan Customs Tariff (PCT), Heading 98.12]---Wireless Telegraphy Act (XVII of 1933), S. 3---Television Receiving Apparatus (Possession and Licensing) Rules, 1970, Rr. 2(e) 3(3)---TV license fee recovered by Pakistan Television Corporation Ltd. (PTV)---Federal excise duty, payment of---Exemption---Telecasts, TV sets and TV license fee were not covered by the definition of services in S. 2(23) of the Federal Excise Act, 2005 and Item 6 of Table II of the First Schedule to the said Act read with Chapter 98 of the Pakistan Customs Tariff (PCT)---TV license fee, telecasts and TV sets not being covered by any of the subheadings of PCT Heading 98.12 were not subject to Federal Excise Duty on a reasonable interpretation of the law---Pakistan Television Corporation Ltd. (PTV) was exempt from payment of Federal Excise Duty on TV license fee---Moreover the Wireless Telegraphy Act, 1933 and the Television Receiving Apparatus (Possession and Licensing) Rules, 1970, made the Parliamentary intention clear, i.e. the license fee was paid not for any service provided by PTV but by the holder of the TV set for its possession---Taxable event was not the provision of any service by PTV; it was the possession of a television set by the holder---TV license fee not being the product of any service provided by PTV, Federal Excise Duty could not be levied on it---Appeal was allowed accordingly.

(e) Interpretation of statutes---

----Fiscal statute---Principles of interpretation of stated.

Following are the principles with regard to interpretation of a fiscal statute:

(i) There was no intendment or equity about tax and the provisions of a taxing statute must be applied as they stood;

(ii) The provision creating a tax liability must be interpreted strictly in favour of the taxpayer and against the revenue authorities;

(iii) Any doubts arising from the interpretation of a fiscal provision must be resolved in favour of the taxpayer;

(iv) If two reasonable interpretations were possible, the one favoring the taxpayer must be adopted;

(v) When a tax was clearly imposed by a statutory provision any exemption from it must be clearly expressed in the statute or clearly implied from it;

(vi) Where the taxpayer claimed the benefit of an express or implied exemption, the burden was on him to establish that his case was covered by the exemption;

(vii) The terms of the exemption ought to be reasonably construed; and

(viii) If a taxpayer was entitled to an exemption on a reasonable construction of the law it ought not to be denied to him by a strained, strict or convoluted interpretation of the law.

THIS JUDGMENT DELIVERED BY: MIAN SAQIB NISAR, CHIEF JUSTICE:---.---





The brief facts of this appeal are that a show cause notice (SCN) dated 23.05.2011 was issued to the appellant for the tax years 2006-2007, 2008-2009 and 2009-2010 raising four issues: (i) non-payment of Federal Exercise Duty (FED) on receipt of PTV license fee; (ii) non-payment of sales tax on program sales; (iii) non-payment of sales tax on sales of fixed assets; and (iv) non-payment of sales tax on sale of scrap. After receiving two replies dated 08.06.2011 and 15.06.2011, the Deputy Commissioner Inland Revenue (DCIR) passed an Order-in-Original (O-in-O) dated 04.10.2011 for recovery of the amounts mentioned in the SCN along with default surcharge and penalty (all under the relevant provisions of law). The appellant preferred an appeal against the O-in-O before the Commissioner Inland Revenue, Appeals-II (CIRA) which, vide Order-in-Appeal (O-in-A) dated 27.02.2012, was accepted to the extent that the matter of sales tax on sale of programs was remanded and the matters of non-payment of sales tax on sale of fixed assets and of scrap were vacated, whereas the appeal was dismissed on the point of non-payment of FED on receipt of PTV license fee. Thereafter the appellant filed an appeal before the Appellate Tribunal Inland Revenue (ATIR) which was also dismissed vide order dated 04.12.2012. This order was assailed before the learned High Court through a Sales Tax Reference (STA) which was dismissed through the impugned judgment. Hence, the instant appeal with the leave of the Court dated 23.05.2016 which reads as under:-



"Federal Excise Duty was levied on TV license fee which is being collected through electricity bills via various distribution companies. This levy was made under the Wireless Telegraphy Act, 1993 read with the Television Receiving Apparatus (Possession and Licensing) Rules, 1970 and in the circumstances no excisable services are being provided by the petitioners as defined under Section (1)(d) of the Federal Excise Act, 2005. It is stated by the learned counsel for the petition that the view set out by the learned High Court to the contrary is not based on a proper construction/interpretation of the requisite law... "



2. We have heard the arguments of the learned counsel for the parties which are not reproduced for the sake of brevity, but shall reflect in the course of this opinion. However for ease of reference, the relevant provisions of law are reproduced as under:-



Federal Excise Act, 2005



"3. Duties specified in the First Schedule to be levied.- (1) Subject to the provisions of this Act and rules made there under, there shall be levied and collected in such manner as may be prescribed duties of excise on,-



(a) ........................

(b) ........................

(c) ........................



(d) services provided in Pakistan including the services originated outside but rendered in Pakistan;



at the rate of fifteen per cent ad valorem except the goods and services specified in the First Schedule, which shall be charged to Federal excise duty as, and at the rates, as set-forth therein.



(2) ........................



(3) The Board may, by notification in the official Gazette, in lieu of levying and collecting under sub-section (1) duties of excise on goods and services, as the case may be, levy and collect duties,-



(a) ........................



(b) on fixed basis, as it may deem fit, on any goods or class of goods or on any services or class of services, payable by any establishment or undertaking producing or manufacturing such goods or providing or rendering such services.



(3A) ........................

(4) ........................



(5) the liability to pay duty shall be-



(a) ........................

(b) ........................



(c) in case of services provided or rendered in Pakistan, of the person providing or rendering such service, provided where services are rendered by the person out of Pakistan, the recipient of such service in Pakistan shall be liable to pay duty; and



(d) ........................



Explanation. - Subject to sub-section (1), for the purpose of this section, (goods) means the goods specified in CHAPTERS 1 TO 97 and "services" means the services specified in CHAPTER 98 of the First Schedule to the Customs Act, 1969 (IV of 1969).



7. Application of the provisions of the Sales Tax Act, 1990.- (1) In case of goods specified in the Second Schedule or such services as may be specified by the Board through a notification in the official Gazette the duty shall be payable in sales tax mode, whereby-



(a) a registered person manufacturing or producing such goods or providing or rendering such services shall be entitled to deduct input tax paid during the tax period from the amount of duty of excise due from him on such goods or services in respect of that tax period;



(b) a registered person shall be entitled to deduct the amount of duty of excise paid or payable by him on such goods or services as are acquired by him during a tax period from the output tax due from him in respect of that tax period;



(c) a registered person supplying such goods or providing or rendering such services shall be entitled to deduct duty of excise paid or payable on such goods or services as are acquired by him during the tax period from the amount of duty of excise due from him on such goods manufactured or produced or services as are provided or rendered by him during that period; and



(d) a person shall be entitled to deduct duty of excise paid or payable, on such goods or services as are acquired by him during a month, from the amount of duty of excise due from him on such goods manufactured or produced or services as are provided or rendered by him, during that month. Such services as are provided or rendered by him, during that month.



(2) ........................



Explanation. -........................



First Schedule

Table II

(Excisable Services)

















 

[Emphasis supplied]


 

Customs Act, 1969

The First Schedule

Section

Chapter 98