MS MAYFAIR LIMITED Vs THE COMMISSIONER OF INLAND REVENUE ETC

Stereo. H C J D A 38.

Judgment Sheet

IN THE LAHORE HIGH COURT LAHORE

JUDICIAL DEPARTMENT

Case No: STR No.28182/2017

M/s Mayfair Limited Versus Commissioner of Inland Revenue, etc.

JUDGMENT

Date of hearing 14.10.2026 Applicant by Raja Hamza Anwar, Advocate Respondents by: M/s Asad Abbas Raza and Malik Abdullah Raza, Advocates

Muhammad Ajmal Zahid, J.—Through this Reference Application filed under Section 47 of the Sales Tax Act, 1990 (“the Act”), the applicant-taxpayer has called in question the order dated 08.02.2017 passed by the learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore (“the learned Tribunal”) in S.T.A. No.48/LB/2012, whereby its claim for compensation on account of delayed payment of refund under Section 67 of the Act was declined.

2.Briefly stated, the applicant-taxpayer purchased diesel and paid sales tax thereon as input tax for operating generators installed for in-house electricity generation. The electricity so generated was subsequently consumed in the manufacture of taxable supplies. For the tax periods commencing from April 2000 and ending in September 2003, the applicant-taxpayer claimed a refund of Rs.8,269,054/- under Section 66 of the Act in respect of the input tax paid on diesel consumed in the generators. The claim was, however, declined in the light of SRO No.578(I)/1998 dated

3.The applicant-taxpayer challenged the legality and validity of the aforesaid SRO before this Court through Writ Petition No.13798/2002, which was decided in its favour. The Collector of Sales Tax, Lahore, assailed the judgment before the Hon’ble Supreme Court of Pakistan through Civil Petition for Leave to Appeal No.1231/2002. Meanwhile, upon an application submitted by the applicant-taxpayer, the Federal Board of Revenue constituted an Alternate Dispute Resolution Committee vide Order No.1(96)-ST-ADR dated 09.05.2006. The Federal Board of Revenue subsequently accepted the Committee’s recommendations through Order No.12/2008 dated 14.01.2009, issued under Section 47A of the Act. The relevant recommendations were as follows:

“(a) That the decision of the High Court in the case of M/s Sheikh Spinning Mills Ltd. (CBR 1999 SCMR 1442), as it applies to each case, shall be followed:

Registered person shall be entitled to deduct input tax in the manner specified in section 7(1) paid on the goods used or to be used for any purpose for the manufacture or production of taxable goods or for taxable supplies made or to be made by him.

(b)That the applicants shall accordingly submit their respective claims with Sales Tax Collectorate for verification, where the same will be processed for admissibility.”

4.The appeal preferred by the Collector of Sales Tax, Lahore, against the judgment of this Court was dismissed by the Hon’ble Supreme Court of Pakistan on 24.05.2006. Thereafter, the Collector of Sales Tax, Lahore, filed a review petition No.159/2006 against the said judgment, which was disposed of on 18.06.2009 in C.P.R. No.146–161/2009 in terms of the

recommendations made by the Alternate Dispute Resolution Committee.

5.The applicant-taxpayer also approached the learned Federal Tax Ombudsman (“FTO”) by filing Complaint No.202/LHR/ST(27)/321/2010 dated 09.03.2010. Vide order dated 30.04.2010, the learned FTO made the following recommendations:

“(i) Direct the concerned officials to sanction refund along with compensation due as per law within 21 days;

(ii)Put in place a mechanism for regular monitoring of refund claims to avoid delays and hardships to the taxpayers; and

(iii)Report compliance within 30 days.”

Pursuant to the aforesaid proceedings, the refund claims aggregating to Rs.8,270,778/- were eventually sanctioned through seven refund payment orders. The applicant-taxpayer, however, separately claimed compensation under Section 67 of the Act for the delay in payment of the refunds through a representation dated 20.06.2011. The claim was rejected by the department vide order dated 27.06.2011 on the ground that compensation was not admissible under the applicable statutory provisions. The applicant-taxpayer’s appeal before the learned Commissioner Inland Revenue (Appeals) was unsuccessful. Its subsequent appeal before the learned Tribunal was also dismissed vide the impugned order dated 08.02.2017, giving rise to the instant Reference Application.

6.The Reference Application was admitted for hearing, inter alia, on the following question of law:

“Whether in the facts and circumstances of the case, learned Tribunal has erred in law holding that

compensation is available for only those delayed refunds which were payable under section 10 of the Sales Tax Act, 1990 (the "Act of 1990") and not for those refunds which were payable under Section 66 of the Act, as there is no statutory provision for compensation is available?”

7.Learned counsel for the applicant-taxpayer contends that the applicant is entitled to compensation on account of the delay in payment of the refunds lawfully due to it. It is submitted that the refunds arose from input tax paid on diesel consumed in generators used for producing electricity for the manufacture of taxable supplies and that the applicant-taxpayer had ultimately established its entitlement to the principal refund through the proceedings before the superior Courts and the competent statutory forums.

8.The principal contention of learned counsel, however, is that this Court, while exercising reference jurisdiction under Section 47 of the Act, possesses inherent judicial power to interpret Section 67 in a manner that gives effect to the legislative intent and prevents an unjust distinction between refunds payable under Sections 10 and 66 of the Act. It is argued that the reference to Section 10 in the main part of Section 67 may, in the circumstances of the case, be read as including a reference to Section 66, so that a taxpayer whose refund has been delayed does not lose the benefit of compensation merely because the refund was claimed under a different enabling provision. According to learned counsel, such an interpretation would advance the object of the legislation, harmonise the relevant provisions and prevent the department from retaining amounts lawfully refundable to a registered person without compensating it for the delay. Learned counsel in support of his contentions relies on (Guj.) Hindustan Coca-Cola Beverages Private Limited vs. Union of India & Other (2015 (324) ELT 299), Sandvik Asia Limited v. Commissioner of

Income-Tax & Ors. (AIR 2006 SC 1223), Gujarat Flourochemicals Ltd. v. Commissioner Of Income Tax & Others ([2008] 300 ITR 328), Dilichand Shreela Vs. Collector of Central Excise and Others (1986 (26) E.LT. 298 (Cal.), Neeraj Newspapers Association (Pvt.) Ltd. Vs. Assistant Collector of Customs, Air Cargo Complex (Import), Calcutta and others (1988 (33) E.LT. 89 [Calcutta High Court]), Collector of Customs (Preventive) vs. Kuljit Singh (1993 (67) ELT 238-1993 INDLAW CAL 181), S. Parameswaran vs. Secretary, Ministry of Finance' (2006 (4) STR 406, 2006 INDLAW MAD 1754), Collector of C. Ex versus Thermo Electric Madras Manufacturing (1992 (58) E.LT. 23 (Mad.), Thermo Electric Madras Manufacturing v. Collector of C.Ex. (1992 (57) E.LT. 577 (Mad.), Noor And Sons v. Income Tax Officer (1993 PTD 582), Aditya Mass Communication (Pvt.) Ltd. vs. A.P.S.R.T.C. (AIR 2003 SC 3411) and MCB Bank Ltd. v. Deputy Commissioner Inland Revenue and others (2015 PTD 911).

9.Conversely, learned counsel for the respondents supports the impugned order and submits that the claim for compensation must be determined strictly in accordance with the statutory provisions applicable to the period in question. It is contended that the main part of Section 67 expressly confines the relevant compensation mechanism to refunds due under Section 10 of the Act and that this Court, in the exercise of its reference jurisdiction, cannot substitute Section 66 for Section 10 or extend a substantive fiscal entitlement beyond the language of the enactment.

10.We have heard learned counsel for the parties and examined the available record with their assistance. The controversy essentially raises three interrelated questions: first, whether the main part of Section 67, as applicable to the applicant-taxpayer’s claim, can be judicially construed to include refunds claimed under Section 66; second, whether the second proviso to Section

67, inserted subsequently, furnishes a basis for extending compensation to the applicant-taxpayer’s earlier claim; and third, whether the relief sought can lawfully be granted by this Court in the exercise of its reference jurisdiction under Section 47 of the Act.

11.The learned Tribunal, while upholding the order passed by the learned Commissioner Inland Revenue (Appeals), addressed the controversy in the following terms:

“9. We have given due consideration to the rival averments and also perused the relevant orders. Perusal of the impugned order reveals that the CIR(A) confirmed the order of the assessing officer with following observations:

‘The appellant claimed compensation under section 67 of the Sales Tax Act, 1990. The record shows that it claimed its refunds under the provisions of section 66 and it had never agitated before any forum that the said refund claims were payable under the provisions of section 10 of the Sales Tax Act, 1990. The perusal of section 67 of the Sales Tax Act, 1990 reveals that compensation is available to only those refunds which are due under section 10 and are not sanctioned within the time specified in this behalf and that such additional amount does not apply till the investigation of the claim is completed and the claim is either accepted or rejected. If the intention of statute would have been to provide for payment of compensation in case of delayed refund claims under section 66 of the Sales Tax Act, 1990, there would have been no bar whatsoever upon it to provide such provision in section 67 of the Act. On perusal of section 67 of the Act, the intention of the statute becomes very clear. The said section provides for compensation only to those delayed refunds which become due under section 10 of the Act. Since, the compensation claimed by the appellant is not covered under the statutory provisions of the

Sales Tax Act, 1990, hence cannot be allowed as per law.’

10.We have noted that the appellant claimed compensation on account of delay in issuance of refunds which was denied with the observation that the compensation is available only for those delayed refunds which were payable u/s 10 whereas appellant claimed refund u/s 66 where no statutory provision for compensation is available. We have considered the submissions put forth by both the sides. The reasons recorded by the CIR(A) are cogent and the learned AR appearing on behalf of the taxpayer has not been able to rebut the same. Therefore, the impugned order calls for no interference and is hereby upheld.”

12.Before examining the rival contentions, it is appropriate to reproduce the relevant portion of Section 67 of the Act, as relied upon by the parties:

“67. Delayed Refund. Where a refund due under section 10 is not made within [the time specified in section 10 from the date] of filing of [refund claim], there shall be paid to the claimant, in addition to the amount of refund due to him, a further sum equal to [KIBOR] per annum of the amount of refund due, from the date following the expiry of [the time specified in this behalf] to the day preceding the day of payment of refund:

Provided that where there is reason to believe that a person has claimed the refund which is not admissible to him, the provision regarding the payment of such additional amount shall not apply till the investigation of the claim is completed and the claim is either accepted or rejected.

Provided further that where a refund due in consequence of any order passed under section 66 is not made within forty-five days of the date of such order, there shall be paid to the claimant, in addition to the amount of the refund due to him, a further sum equal to KIBOR per annum of the amount of refund due from the date of the refund order.” (Second proviso inserted through Finance Act, 2021)

13.The first and foremost consideration is the distinction between construing a statutory provision and supplying words that

the Legislature has not enacted. The main part of Section 67 expressly refers to a refund due under Section 10 of the Act and prescribes the circumstances in which compensation becomes payable for delay in making such refund. The second proviso, on the other hand, expressly addresses a refund arising in consequence of an order passed under Section 66 and provides for compensation if the refund is not made within forty-five days of the date of such order.

14.The two provisions must be read in their proper statutory context. The fact that Sections 10 and 66 provide mechanisms for claiming or obtaining refunds does not, by itself, render the references to those provisions interchangeable. The right to a refund and the right to compensation for delay in payment of that refund are distinct statutory entitlements. Whereas the former arises under the provision governing the refund claim, the latter depends upon the terms and conditions of the provision specifically authorising compensation.

15.We now turn to the principal contention of learned counsel for the applicant-taxpayer that this Court possesses inherent power, while exercising reference jurisdiction under Section 47 of the Act, to read Section 66 in place of Section 10 in the main part of Section 67. The submission proceeds on the premise that such substitution would harmonise the statutory scheme and ensure that a taxpayer whose refund has been delayed receives compensation irrespective of the provision under which the refund was claimed.

16.The contention, though carefully advanced, cannot be accepted in the form presented. The interpretative jurisdiction of a Court undoubtedly requires it to ascertain the true meaning of statutory language, read the relevant provisions harmoniously and give effect to the legislative intent. However, the power of interpretation is not equivalent to an unrestricted power to amend legislation. Where the statutory language is clear and identifies a

particular category of refund, the Court cannot ordinarily replace that category with another merely because the latter may appear equally deserving of the benefit.

17.The inherent powers of a Court are ancillary to the lawful exercise of its jurisdiction and cannot be invoked to override an express statutory provision or create a substantive right that the Legislature has not conferred. In particular, the exercise of reference jurisdiction under Section 47 of the Act is directed towards determining a question of law arising from the order of the learned Tribunal. Such jurisdiction enables this Court to interpret and apply the relevant statutory provisions, but does not confer legislative authority to rewrite them.

18.Accordingly, if the applicant-taxpayer seeks compensation under Section 67, it must establish that its claim falls within the scope of the provision applicable to the relevant period. This Court may construe the statutory language in its proper context, but it cannot, merely by invoking inherent powers or the general object of compensating taxpayers for delayed refunds, substitute the express reference to Section 10 with Section 66. Such a course would not merely interpret the provision; it would alter the statutory condition upon which the entitlement to compensation depends.

19.The principle of harmonious construction does not lead to a different conclusion. Harmonious construction is employed to reconcile provisions that appear to conflict or overlap, while preserving their respective fields of operation. It does not authorize the Court to disregard the language of one provision in order to extend its operation to a category expressly addressed elsewhere in the same enactment. Reliance is placed on Province of Punjab v. T&T Employees Ideal Cooperative Housing Society Limited (PLD 2026 SC 69) Chairman, National Accountability Bureau through Prosecutor General Accountability, Islamabad v.

Adeel Ahmed and others (PLD 2026 SC 424) Raja Amer Khan and others v. Federation of Pakistan through Secretary, Law and Justice Division, Ministry of Law and Justice, Islamabad and others (PLD 2025 SC 869) Hamza Rasheed Khan v. Election Appellate Tribunal, Lahore High Court, Lahore and others (PLD 2024 SC 1028) Commissioner Inland Revenue v. M/s Riaz Bottlers (Pvt.) Ltd. [now Lotte Akhtar Beverages] (2024 SCMR 684) Federation of Pakistan through the Secretary, Ministry of Law and Justice, Islamabad and others v. Supreme Judicial Council through its Secretary, Supreme Court Building, Islamabad and others (PLD 2024 SC 698), Pakistan Electronic Media Regulatory Authority (PEMRA) through its Chairman, Islamabad and another v. M/s ARY Communication Private Limited (ARY Digital) through its Chief Executive Officer, Karachi and another (PLD 2023 SC 431), Waqar Zafar Bakhtawari and 6 others v. Haji Muhammad Hussain and others (PLD 2018 SC 81), Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed (2017 SCMR 152), Lucky Cement Ltd. v. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar (2015 SCMR 1494), District Bar Association, Rawalpindi and others v. Federation of Pakistan and others (PLD 2015 SC 401), Kamaluddin Qureshi v. Ali International Company (PLD 2009 SC 367), Mirza Shaukat Baig and others v. Shahid Jamil and others (PLD 2005 SC 530), D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others (2004 PTD 1179), Qazi Hussain Ahmad, Ameer Jamaat-e-Islami Pakistan and others v. General Pervez Musharraf, Chief Executive and others (PLD 2002 SC 853), Attiyaa Khan v. Federation of Pakistan (2001 SCMR 1126), Syed Masroor Ahsan and others v. Ardeshir Cowasjee and others (PLD 1998 SC 823), Bashir Ahmad v. Member (Colonies), Board of Revenue, Punjab, Lahore and others (PLD 1997 SC 294), Collector of Sales Tax and Central Excise

(Enforcement) and another v. M/s Mega Tech (Pvt.) Ltd. (2005 PTD 1933 SC), R.S. Raghunath v. State of Karnataka and another ((1992) 1 SCC 335), Director, Directorate-General of Intelligence and Investigation and others v. M/s Al-Faiz Industries (Pvt.) Limited and others (2006 SCMR 129), Aftab Shahban Mirani and others v. Muhammad Ibrahim and others (PLD 2008 SC 779), Lyallpur Cotton Mills Ltd. v. Commissioner, Sargodha Division and another (PLD 1976 SC 615), Salahuddin and others v. Frontier Sugar Mills and Distillery Limited and 10 others (PLD 1975 SC 244), Madanlal Fakirchand Dudhediya v. Shree Changdeo Sugar Mills Ltd. and others (AIR 1962 SC 1543),

20.In the present case, Section 66 provides the statutory basis for the refund claims pursued by the applicant-taxpayer, whereas Section 67 governs compensation for delayed refunds. The second proviso to Section 67 specifically refers to refunds arising in consequence of orders passed under Section 66 and prescribes a separate period of forty-five days. This express treatment of refunds under Section 66 cannot be disregarded while construing the main part of Section 67. Rather, the relationship between the main provision and the second proviso must be determined by examining their respective language, the legislative history and the dates on which the relevant provisions came into force.

21.The reliance of learned counsel for the applicant-taxpayer upon the second proviso to Section 67 requires separate consideration. The proviso expressly recognises a right to compensation where a refund due in consequence of an order under Section 66 is not made within forty-five days of the date of that order. It thus demonstrates that the Legislature has provided a specific statutory mechanism for compensating delay in the payment of refunds arising under Section 66.

22.However, the existence of this express provision does not, by itself, establish that the same entitlement existed under the

earlier version of Section 67. On the contrary, the proviso identifies the category of refunds to which it applies and stipulates the event and period that trigger the payment of compensation. Its applicability must, therefore, be determined with reference to its effective date and the terms governing its operation.

23.The applicant-taxpayer cannot derive a retrospective entitlement merely from the fact that the Legislature subsequently addressed the very category of refund involved in the present case. Nor can the proviso be treated as automatically governing the applicant’s claim without first determining whether the relevant refund order and the alleged delay fall within the temporal operation of the amended provision.

24.The record indicates that the applicant-taxpayer’s refund claims relate to tax periods commencing in April 2000 and ending in September 2003, while the impugned order of the learned Tribunal was passed on 08.02.2017. The specific proviso providing compensation in respect of refunds arising in consequence of orders under Section 66 was inserted through the Finance Act, 2021. It is, therefore, necessary to distinguish the law applicable when the relevant claim arose from the subsequent legislative recognition of a right to compensation in respect of refunds falling within Section 66.

25.The general principle is that an amendment introducing a substantive fiscal entitlement ordinarily operates prospectively unless the Legislature expressly provides otherwise or retrospective operation follows by necessary implication. Whether a particular amendment is declaratory, clarificatory or substantive must, however, be determined from its language, purpose and statutory context. The mere fact of subsequent insertion is not invariably conclusive, but neither can a new entitlement be carried backwards without a sufficient legal basis.

26.It is settled law of the land that subsequent inclusion/insertion of any provision in the statute by the positive act of the legislature is a conclusive proof of the fact that the same was excluded in the earlier enactment. In this regard, reliance has been placed upon the judgments of the Hon’ble Supreme Court of Pakistan in Commissioner Inland Revenue, Lahore v. Messrs HNR Company (Pvt.) Limited, Lahore (2022 SCMR 1240) and Commissioner of Income Tax/Wealth Tax, Companies Zone-II, Lahore v. Messrs Lahore Cantt. Cooperative Housing Society, Lahore and 7 others (2009 PTD 799). In the latter case, the Hon’ble Supreme Court observed, inter alia:

“This subsequent inclusion of Cooperative Societies by positive act of legislation is a conclusive proof of the fact that the same were excluded in the earlier enactment.”

27.The principle emerging from the aforesaid observation is that subsequent legislative inclusion may assist in determining the scope of the earlier enactment, particularly where the Legislature has expressly brought within the provision a category not previously covered. Nevertheless, the principle must be applied in the context of the precise amendment under consideration. The subsequent insertion of the second proviso to Section 67 must be examined alongside the earlier statutory language and the nature of the entitlement introduced by it.

28.In the present case, the applicant-taxpayer has not demonstrated any provision of the Finance Act, 2021, or any other statutory instrument that extends the benefit of the second proviso retrospectively to refund claims pertaining to the tax periods in question. Equally, no sufficient basis has been established for holding that the earlier version of Section 67 already conferred an equivalent right to compensation in respect of refunds claimed

under Section 66. In these circumstances, the second proviso cannot be invoked to create a retrospective monetary entitlement merely because the applicant-taxpayer’s principal refund claims were ultimately sanctioned.

29.It is further observed that the Court could not read into or impute something when the provisions of a taxing or fiscal statute were clear. Reliance in this regard is placed on The Commissioner Of Income Tax, East Pakistan. V. M/S Hossen Kasam Dada ,Karachi (1961 PTD 771), Muhammadi Steamship Co.Ltd. v. Commissioner Of Income Tax (Central) Karachi (1966 PTD 664), Collector of Customs (Appraisment) Karachi and others v. Messrs Abdul Majeed Khan and Others (1977 SCMR 371), Messrs Hirjina & Co. (Pakistan) Ltd. v. Commissioner of Sales Tax, Central, Karachi (1971 SCMR 128), The Commissioner of Agricultural Income- Tax, East Bengal v. B.W.M Abdur Rahman, Manager, Taki Bara Taraf Wards Estate. (1973 SCMR 445), Commissioner Of Agriculture Income Tax,East Bengal. V. B.W.M.Abdurrehman.( 1989 PTD 909), Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. (PLD 1990 SC 68 ) , A & B Food Industries Ltd v. Commissioner of Income Tax/Sales Karachi (1992 PTD 545), Messrs Mehran Associates Limited v. The Commissioner of Income Tax Karachi (1993 PTD 69), B.P Biscuits Factory Limited Karachi v. Wealth Tax Officer and another (1996 SCMR 1470 ) , Star Textile Ltd. and 5 others v. Government of Sindh through Secretary Excise and Taxation Department, Sindh Secretariat, Karachi and 3 others (2002 SCMR 356), Chairman, Board Of Intermediate and Secondary Education, Bahawalpur v. Rizwan Rashid and 3 others (2005 SCMR 728), Pakistan Through Secretary Finance and others v. Messrs Lucky Cement and another (2007 SCMR 1367 ), Federation of Pakistan through Secretary, Ministry of Finance

and others v. Haji Muhammad Sadiq and others (PLD 2007 SC 133 ), X.E.N. Shahpur Division v. Collector Sales Tax (Appeals) Collectorate of Customs Federal Excise and Sales Tax, Faisalabad (2008 PTD 1973), Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 PTD 1392), Pearl Continental Hotel and another v. Government of NWFP and others (PLD 2010 SC 1004), Government of Sindh through Secretary and Director General, Excise and Taxation and another v. Muhammad Shafi and others (PLD 2015 S.C. 380), Superintendent, Central Excise, Sheikhupura v. Fauji Sugar Mills, Sangala Hills, and others (2016 PTD 564), Commissioner of Income Tax Legal Division Lahore and others v. Khurshid Ahmad and others (2016 PTD 1393), Zila Council Jehlum through District Coordination Officer v. Pakistan Tobacco Company Limited and others (PLD 2016 SC 398), M/s Pakistan Television Corporation Limited v. Commissioner Inland Revenue, (Legal), LTU, Islamabad and others (2017 SCMR 1136), Commissioner of Income Tax v. Messrs Gilani Transport Company (2017 SCMR 197), Chairman, Federal Board of Revenue, Islamabad v. Messrs Al- Technique Corporation of Pakistan Ltd and others (PLD 2017 SC 99), Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others (2019 SCMR 282 ), Messrs Khurshid Soap and Chemical Industries Private Limited v. Federation of Pakistan through Ministry of Petroleum and Natural Resources and others (2020 PLD 641), The Commissioner Inland Revenue, Zone-II, Larger Taxpayers Unit, Lahore v. Kohinoor Sugar Mills Limited (2021 SCMR 536), Commissioner Inland Revenue, Zone-IV, Large Taxpyaer Unit, Karachi v. Merrs Al- Abid Silk Mils Limited (2023 SCMR 1797), Messrs Kassim Textile Mills Pvt Ltd v Commissioner Inland Revenue, Karachi

(2025 SCMR 1248), The Intelligence Officer, Directorate of Intelligence and Investigation, FBR and others v. Abdul Karim and others (2025 SCMR 969), Government of Punjab through Secretary Irrigation and Power and another v. Kunjah Textile Mills Ltd and others (2025 SCMR 239) and Federation of Pakistan through Revenue Division and others v. Dewan Motors Pvt Ltd. and others (2025 PLD 394 SC), Commissioner of Income Tax Legal Division, Lahore and others v. Khurshid Ahmad and others (PLD 2016 SC 545), Pearl Continental Hotel and another v. Government of N.-W.F.P. and others (PLD 2010 SC 1004); Star Textile Ltd. and 5 others v. Government of Sindh through Secretary Excise and Taxation Department, Sindh Secretariat, Karachi and 3 others (2002 SCMR 356); Aslam Industries Ltd., Khanpur v. Pakistan Edible Corporation of Pakistan and others (1993 SCMR 683); Messrs Mehran Associates Limited v. The Commissioner of Income Tax, Karachi (1993 SCMR 274); A & B Food Industries Limited v. Commission of Income-Tax/Sales, Karachi (1992 SCMR 663); Collector of Customs (Preventative) and 2 others v. Muhammad Mahfooz (PLD 1991 SC 630) and Messrs Hirjina and Co. (Pakistan) Ltd. Karachi v. Commissioner of Sales Tax Central, Karachi (1971 PTD 200).

30.The proceedings before this Court, the Hon’ble Supreme Court of Pakistan, the Alternate Dispute Resolution Committee and the learned Federal Tax Ombudsman are relevant to the history of the applicant-taxpayer’s refund claims. However, the sanction of the principal refunds and the entitlement to compensation for delay remain legally distinct matters. The recommendation of the learned FTO for payment of compensation “as per law” is itself subject to the governing statutory provisions and does not independently create a right to compensation where the applicable law does not provide one.

31.It follows that the applicant-taxpayer’s contention based on the inherent powers of this Court cannot be accepted. Neither the general objective of compensating taxpayers for delayed refunds nor the principle of harmonious construction authorises the Court to substitute Section 66 for Section 10 in the main part of Section 67 in disregard of the statutory text. The second proviso, although expressly recognising compensation for a specified category of refunds under Section 66, cannot be extended retrospectively in the absence of a legislative basis for doing so.

32.The conclusion reached by the learned Tribunal must, therefore, be assessed with reference to the statutory provisions applicable to the applicant-taxpayer’s claim, rather than the subsequent amendment viewed in isolation. On the material placed before us, the applicant-taxpayer has failed to establish that the compensation claimed was admissible under the earlier version of Section 67 or that the benefit introduced by the Finance Act, 2021, operates retrospectively in its favour.

33.The judgments relied upon by learned counsel for the petitioner do not advance the case of the petitioner, as the legal principles enunciated therein are distinguishable from the facts and circumstances of the instant case. Mere reliance upon judicial precedents, without establishing their applicability to the controversy in hand, is not sufficient to persuade this Court to accept the petitioner's contention. Accordingly, the judgments cited by learned counsel for the petitioner are of no assistance to the case set up by the petitioner and do not furnish any legally tenable ground to interfere with the impugned order.

34.For the foregoing reasons, we find no error of law warranting interference with the impugned order. The applicant- taxpayer has failed to establish either that this Court may substitute the express reference to Section 10 in Section 67 with Section 66 through the exercise of inherent powers or that the

second proviso inserted through the Finance Act, 2021, applies retrospectively to the claim in question.

35.Consequently, the question of law is answered against the applicant-taxpayer and in favour of the respondents. The Reference Application is dismissed, and the order dated 08.02.2017 passed by the learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore, in S.T.A. No.48/LB/2012 is maintained.

36.The office is directed to transmit a copy of this judgment, under the seal of the Court, to the learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore, in terms of Section 47(5) of the Sales Tax Act, 1990.

(Hassan Nawaz Makhdoom) (Muhammad Ajmal Zahid) Judge Judge

APPROVED FOR REPORTING

Judge Judge M. Tahir*