ISLAMABAD: The top court has disposed of a suo motu case regarding deduction of taxes imposed on the top-up of prepaid mobile phone cards and restored taxation – on telecommunication services – suspended by a Supreme Court larger bench in June last year.
A three-judge special bench – headed by Chief Justice of Pakistan (CJP) Asif Saeed Khosa and comprising Justice Qazi Faez Isa and Justice Ijazul Ahsan – on Wednesday issued after a detailed hearing a short order, saying it has disposed of the case.
"The reasons will be recorded as this suo motu case is disposed of without interference in tax matter," said the order which has practically withdrawn an earlier order of an SC bench. The court also disposed of all the interim orders about suspension of taxes on telecommunication services.
On June 11, 2018 a three-judge SC bench headed by the CJP Man Saqib Nisar suspended tax collection on mobile cards. "Rs38.08 are deducted on a prepaid mobile card of Rs100,which is illegal," the former CJP has noted. The bench had later adjourned hearing of the case for six months.
Later, the federal and all provincial governments had challenged the interim order. The case was, however, taken up after Justice Nisar's retirement in January. It is estimated that the state faced a loss of more than Rs90 billion due to the interim order.
During Wednesday hearing, the bench debated exercise of suo motu jurisdiction in tax matters. A member of the bench, Justice Isa, asked if suo motu jurisdiction could be invoked in tax matters.
He said the word 'suo motu' has not been used in the Constitution. Referring to Article 184 (3) of Constitution, he also asked what constitutes the Supreme Court is.
"The Supreme Court's HR Cell's director general is not the Supreme Court. We are regulating ourselves as nobody is regulating the SC," he added. He objected to the procedure, wherein an SC employee initiates suo motu proceedings on the court's behalf and later the matter is referred to a bench.
The CJP agreed that public interest proceedings should be initiated by the court itself.
"If a judge or someone else initiates suo motu proceeding and later the matter is referred to the bench then it is objectionable," he said. The chief justice, however, noted that the court would interpret the applicability of Article 184 (3) of Constitution and its procedure in any other case.
Justice Ijazul Ahsan, who was also part of the June 11 bench that suspended the tax, noted that when money is taken from a person, who is not liable to pay then its violation of his fundamental right.
Barrister Ali Zafar who was representing Punjab Revenue Authority (PRA) argued that as a result of the interim order, Punjab alone could not recover a sum of more than Rs.27 billion.
He said Article 184(3) jurisdiction could only be exercised if the matter is of public importance as well as enforcement of fundamental rights but in this case jurisdiction has been assumed by the Supreme Court on a note put up by the Human Rights Cell of the court.
Zafar while endorsing Justice Qazi Faez Isa's view argued that under Article 184(3) it is a requirement that before exercising this jurisdiction, an SC bench must apply its mind and come to the conclusion that prima facie there is a matter of public importance involving enforcement of fundamental rights.
He said imposition of any kind of tax or fee is a sovereign power of the parliament and provincial assemblies and one of their core duties.
"If a tax is challenged, then the appropriate procedure under the Constitution is that the case should first be filed by an aggrieved party under Article 199… before the appropriate high court and the Supreme Court should only examine the validity of tax laws in exercise of appellate jurisdiction. In this way, the court will have the benefit of the decisions of the high court as well," he said.
As regards imposition of sales tax on services under the Punjab Sales Tax Act, 2012, he said, the tax was being levied in accordance with and under the provisions of valid law and no one was aggrieved by it nor had it been challenged being contrary to any of the fundamental rights enshrined in the Constitution and, hence, the suo motu proceedings undertaken by the court should be disposed of.
Khalid Javed Khan, counsel for the Sindh Revenue Board said as far as deduction of advance tax under Income Tax Ordinance, 2001, is concerned, the law permits such deduction even in cases of users of telecommunication service including mobile card. These users include those who are otherwise not paying income tax by filing return or whose income falls below the taxable income.
Referring to various provisions of the ordinance, he pointed out that definition of income is wide enough to include all advance taxes including those levied on imports, sale of goods, contracts and services.
"It also includes other advance taxes collected from all persons under the Ordinance irrespective of whether they are taxpayers or not. If it was not so, then not only advance taxes on mobile use would be struck down but levy of large number of other advance taxes would also be restricted to the extent of existing tax payers.
"This would mean penalising those already paying taxes while benefiting those escaping from the tax net. Thus, the collection of advance tax on mobile use being part of the overall tax scheme as enshrined in the Ordinance is a valid levy," Khan added.
He said: Insofar as exercise of jurisdiction under Article 184(3) is concerned, in tax matters the Supreme Court has exercised appellate as against original jurisdiction.
Referring to levy of Sindh Sales Tax on telecommunication services under the Sindh Sales Tax on Services Act, 2011, he said the tax is levied in term entry 47, IVth Schedule to the Constitution and is a valid levy.
"Being an indirect tax, every consumer using the services is liable to pay irrespective of his status. Thus, the levy being constitutional, the stay of recovery was unwarranted and liable to be recalled. As a result of stay against recovery since June 2018, Sindh has suffered a loss of about Rs8 billion," he added.