COMMISSIONER INLAND REVENUE vs DESCON ENGINEERING LIMITED Taxing statute

Fields are extracted from the reported citation and judgment text. Where a detail is not stated in the record, it is not shown.

COMMISSIONER INLAND REVENUE VS DESCON ENGINEERING LIMITED Taxing statute---Scope---All charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties---Subject is not to be taxed unless the language of the statute clearly imposes the obligation and language must not be strained in order to tax a transaction which, had the legislature thought of it, would have been covered by appropriate words. S.3---Liability of purchaser of goods---Scope---Taxpayer was imposed upon a liability to pay sales tax on account of acquisition of taxable goods for construction of immovable property---Commissioner (Appeals) upheld the imposition of tax---Appellate Tribunal partly allowed the appeal filed by taxpayer---Validity---Section 3 of the Sales Tax Act, 1990, charged tax on the supplier of goods and not on the purchaser---Taxing the purchaser of goods was a flagrant violation of the charging provisions of the Sales Tax Act, 1990---Reference application was decided against the department. Ss.3, 2(35) & 2(41)---Sales tax---Taxable activity---Taxable supply---Construction of immovable property---Scope---Building material consumed in the construction of immovable property is neither taxable supply nor in furtherance of taxable activity, hence, beyond the scope of sales tax under the Sales Tax Act, 1990---Construction of immovable property is not taxable activity, which is essential ingredient to charge tax---Consumption of material in an activity, which is not taxable under the Sales Tax Act, 1990, therefore, is not chargeable to sales tax---No construction of immovable property is possible without building material---Consumption of building material by a person, being non-taxable activity, falls out of the supply chain under S. 3. S.2(41)---Taxable supply---Scope---Section 2(41) of the Sales Tax Act, 1990 specifies the persons to which the supply of taxable goods is to be considered as taxable supply---Such persons are importers, manufacturers, wholesalers (including dealers), distributors or retailers. Ss.3, 2(35) & 2(41)---Taxable activity---Taxable supply---Construction of immovable property---Scope---Taxpayer was imposed upon a liability to pay sales tax on account of acquisition of taxable goods for construction of immovable property---Expression "taxable supply" and "taxable activity" both operate in their own respective fields---Quantum of tax liability is determined on the basis of the value of taxable supply, but the liability to pay tax under the charging section arises only when such supply is made in furtherance of taxable activity---Taxable activity defined in the Act means any activity involving in whole or in part, the supply of goods to any other person---Definition of "goods" in subsection (12) of S. 2, construction of immovable property cannot be treated as "goods" by any stretch of imagination---Supply of material consumed in the course of execution of construction is not made in furtherance of a taxable activity, therefore, taxpayer cannot be held liable to pay sales tax---Reference application was decided against the department. S.3---Construction of immovable property---Scope---Contract of construction of immovable property is indivisible and involves no sale of goods---In such a contract, goods pass on as accession to immovable property and no supply of goods is involved. Ss.3, 2(35) & 2(41)---Taxable activity---Taxable supply---Scope---Taxable supply and taxable activity must co-exist to attract the charge of sales tax under the Act---Absence of either of the ingredients excludes the other from purview of charging provision. S.3---Constitution of Pakistan, Art.142, Fourth Sched., Part I, Entry No. 49---Sales tax on services---Sales tax on immovable property---Scope---Taxable activity for the purpose of the Federation is confined to activity in respect of goods and cannot spill over to supply of services or immovable property because taxable supply and taxably activity in respect of both subjects of services and immovable property fall within the exclusive jurisdiction of the Provinces---Since both the subjects are not included in the taxing power of the Federation, they cannot be indirectly taxed by means of interpretation. Courts while construing the provisions of statute should made efforts that the interpretation of the relevant provisions should be in consonance with the provisions of Constitution and the general norms of human rights---All the statutory provisions have to be interpreted harmoniously and consistently with the constitutional provisions, the paramount law, already occupying the field.

COMMISSIONER INLAND REVENUE vs DESCON ENGINEERING LIMITED Taxing statute — 2022 PTD 1209 LAHORE-HIGH-COURT-LAHORE

Case information

Judgment text as reported

Other judgments reported in 2022 PTD