Ms Al-Rehman Hospitality Pvt Ltd through its CEO Sardar Dildar Ahmad Cheema Vs Appellate Tribunal Punjab Revenue Authority etc.

Stereo. H C J D A 38.

Judgment Sheet

IN THE LAHORE HIGH COURT AT LAHORE.

JUDICIAL DEPARTMENT

Tax Reference (PRA) No.12004/2023

M/s. AL-REHMAN HOSPITALITY (PVT) LIMITED Versus The APPELLATE TRIBUNAL, PRA, etc.

JUDGEMENT

Date of Hearing: 13.10.2026.

Applicant by: Mr. Shaigan Ijaz Chadhar, Advocate. Respondents by: Mr. Sohail Zahid Butt, Advocate for respondent PRA.

MUNAWAR IQBAL DUGGAL, J. Through this Reference Application filed under section 67A of the Punjab Sales Tax on Services Act, 2012 (hereinafter referred to as the “Act”), the applicant, M/s. Al-Rehman Hospitality (Pvt.) Limited, has called in question the judgment dated 24.11.2022 (hereinafter to be called as the “impugned judgment”) passed by the Appellate Tribunal, Punjab Revenue Authority, Lahore (hereinafter referred to as the “Tribunal”), whereby its appeal was dismissed and the order dated 03.12.2019 passed by the Commissioner (Appeals), Punjab Revenue Authority, Lahore, was maintained. The Commissioner (Appeals), while upholding Assessment Order No.115/2019 dated 12.09.2019 imposing default surcharge amounting to Rs.2,486,219/- under section 49(1) of the Act, had modified the computation only to the extent that the date of actual payment of tax was to be excluded from the period of default. The applicant, being aggrieved by the interpretation placed upon section 49(2) of the Act for reckoning the commencement of default surcharge, has invoked the reference jurisdiction of this Court.

2.Although several questions of law have been formulated in the Reference Application, however, learned counsel for the applicant, at the time of hearing, pressed the following questions as being central to the controversy and requiring the opinion of this Court, which

questions were also specifically noted in the admitting order dated 22.02.2023 passed by this Court:

1.“Whether the plain reading of section 49(2) of the PSTS Act, 2012 can be interpreted to mean that the period of default for the purposes of calculating default surcharge starts from the:- a. 16th day following the ‘due date’ as defined in section 2(17) of the definitions? Or b. 16th day following the end of the ‘tax period’ as defined in section 2(44) of the definitions as interpreted by the Tribunal?

2.Whether it is a golden rule of interpretation that fiscal statutes should be given their ordinary English meaning?

3.Whether there is any ambiguity in the plain reading of section 49(2) in the facts and circumstances of the case? a. And if so (if there is ambiguity in section 49(2) should it be interpreted in favour of the Tax Payer?”

3.Brief relevant facts, as borne out of record, are that the applicant is a private limited company registered with the Punjab Revenue Authority under PNTN 3168050-0 since 23.08.2012, providing taxable hotel services falling within the Second Schedule to the Act. During scrutiny of the computerized record, the department observed that the applicant had deposited sales tax collected from recipients of services after the prescribed dates of payment. Consequently, a show-cause notice dated 10.05.2019 was issued, alleging contravention of sections 10, 18 and 35 of the Act, read with rule 11 of the Punjab Sales Tax on Services (Filing of Returns) Rules, 2012 (hereinafter referred to as the “Rules”). However, despite availing numerous opportunities the applicant failed to provide reasonable explanation regarding late deposit of sales tax amount, whereupon, the Assessment Order No.115/2019 dated 12.09.2019 was passed by the Assistant Commissioner (Enforcement-I, Unit-1), PRA, Lahore by imposing default surcharge amounting to Rs.2,486,219/-.

4.The applicant challenged the assessment before the Commissioner (Appeals), Punjab Revenue Authority, Lahore. By order dated 03.12.2019, the Commissioner (Appeals) maintained the levy but directed the assessing authority to exclude the date of actual payment

while calculating the default surcharge. The applicant thereafter preferred Appeal No.55/2020 before the Tribunal. The Tribunal, through the impugned judgment dated 24.11.2022, dismissed the appeal and upheld the order of the Commissioner (Appeals). Hence, the instant Reference Application.

5.Learned counsel for the applicant contends that the departmental authorities and the Tribunal have fundamentally misconstrued section 49(2) of the Act by treating the sixteenth day following the end of the tax period as the commencement of the period for calculating default surcharge. It is argued that the legislature has deliberately employed the expression “the sixteenth day following the due date of the tax period”, and not “the sixteenth day following the end of the tax period” or “the day immediately following the due date”. According to learned counsel, the expression “due date” has been specifically defined in section 2(17) of the Act and cannot be substituted by the expression “tax period” defined separately under section 2(44).

6.Further elaborating the submission, learned counsel contends that where a tax period ends on 31st October, the due date ordinarily falls on 15 November, and the sixteenth day following that due date would fall on 1st December. The department, however, has calculated default surcharge from 16th November, thereby disregarding the express words of section 49(2) of the Act. It is further submitted that rule 11(2) of the Rules merely prescribes the deadline for payment of tax and filing of the corresponding return; it neither regulates nor curtails the separate statutory period prescribed for computation of default surcharge. Learned counsel argues that a fiscal liability cannot be enlarged by implication or by substituting words not employed by the legislature. In the alternative, it is submitted that any genuine ambiguity in a fiscal provision imposing a pecuniary burden must be resolved in favour of the taxpayer.

7.Conversely, learned counsel for the respondent department supports the impugned judgment and contends that, under rule 11(2) of

the Rules, sales tax is required to be deposited by the fifteenth day of the month immediately following the relevant tax period, whereas the return may be furnished by the eighteenth day of that month. It is submitted that once the prescribed payment date expires, the taxpayer is in default and default surcharge becomes chargeable from the immediately succeeding day. According to learned counsel, the expression employed in section 49(2) of the Act must be understood in the context of the statutory obligation to deposit tax by the fifteenth day, and any other construction would permit a taxpayer to retain collected tax without the financial consequences contemplated by the Act. Learned counsel accordingly maintains that the computation adopted by the department and affirmed by the Tribunal is consistent with the legislative scheme and calls for no interference.

8.Heard, available record has been perused.

9.The principal controversy requiring determination is whether the expression “the sixteenth day following the due date of the tax period”, occurring in section 49(2) of the Act, requires the period of default surcharge to be reckoned from the sixteenth day after the legally prescribed due date or from the day immediately succeeding that due date. Resolution of this question necessarily involves a conjoint reading of sections 2(17), 2(44) and 49(2) of the Act, together with rule 11(2) of the Rules, in the light of the settled principles governing interpretation of fiscal statutes.

10.Accordingly, before examining the rival constructions, it would be advantageous to reproduce the relevant statutory provisions. Section 2(17) of the Act defines “due date” in the following terms: “due date” in relation to the furnishing of a return under Chapter VI means the 15th day of the month following the end of the tax period, or such other date as the Authority may, by notification in the official Gazette, specify [and different dates may be so specified for furnishing different parts or annexures of the return;]. (Bold and underline is to lay emphasis.)

Section 2(44) of the Act separately defines “tax period” as under:

“tax period” means a period of one month or such other period as the Authority may, by notification in the official Gazette, specify;”

The perusal of above definition suggest that the legislature has assigned separate meanings to the expressions “due date” and “tax period”.

11.Now coming to section 49(2) of the Act, which directly governs the present controversy, which provides as under:

“For the purpose of calculation of default surcharge, the period of default shall be reckoned from the sixteenth day following the due date of the tax period to which the default relates, to the day preceding the date on which the tax due is actually paid.”

Bold and underline is to lay emphasis

Likewise, rule 11(2) of the Rules provides:

“In cases where due date has been prescribed as 15th of a month, the tax due shall be deposited by the 15th and the return may be submitted by 18th of the same month.”

12.A careful examination of the aforesaid provisions reveals that the statutory scheme contemplates distinct stages. The first is the tax period during which taxable services are rendered and tax liability accrues. The second is the due date by which the tax so payable must be deposited. The third is the commencement of the period prescribed for calculating default surcharge in the event of non-payment or delayed payment. These stages, though connected, are not interchangeable. Their respective legal consequences must be determined according to the language employed by the legislature.

13.Section 2(17) of the Act defines the due date with reference to the end of the tax period. Thus, where the relevant tax period ends on 31st October, the fifteenth day of the following month, namely 15 th November, ordinarily constitutes the due date, subject to any validly notified alternative date. The expression “following the end of the tax period” is given its natural grammatical meaning by reckoning the prescribed date with reference to the expiry of the preceding tax period. Indeed, the department itself accepts that the due date for the tax period

of October ordinarily falls on 15th November. There is no apparent justification for adopting a different grammatical approach when construing the expression “following the due date” in section 49(2) of the Act. The language of section 49(2) of the Act is particularly significant. The legislature has not provided that default surcharge shall be calculated from “the day following the due date”, nor has it prescribed commencement from “the sixteenth day of the month following the tax period”. Instead, it has expressly provided that the period shall be reckoned from “the sixteenth day following the due date of the tax period”. The words “sixteenth day” and “following the due date” must both be given their ordinary meaning and independent legal effect. To construe the provision as referring to the day immediately following the due date would require the Court to disregard the ordinal expression “sixteenth” and effectively substitute it with “first”. Such an exercise would amount to rewriting the statute rather than interpreting it.

14.The ordinary grammatical meaning of the expression admits of a straightforward computation. If the due date is 15 th November, the first day following the due date is 16th November, the second day is 17th November, and the sixteenth day following the due date is 1 December. Conversely, 16th November is merely the first day following the due date and cannot, by any ordinary process of computation, be described as the sixteenth day following it. The interpretation adopted by the department thus conflates the sixteenth day of the month with the sixteenth day following the due date, although these are manifestly different expressions. This distinction is reinforced by the separate statutory definition of “tax period” under section 2(44) of the Act. The expression “due date of the tax period” in section 49(2) of the Act identifies the legally prescribed due date pertaining to the relevant tax period; it does not equate the due date with the expiry of that period. Had the legislature intended the period of default surcharge to commence on the sixteenth day of the month immediately following the tax period, it could readily have employed language to that effect.

The Court cannot attribute those words to the legislature which it has not chosen to enact.

15.The construction of provision must also conform to the settled principles of statutory interpretation. The primary rule is that where the words of an enactment are clear, the Court must give effect to their plain, natural and grammatical meaning. Legislative intention is to be gathered, in the first instance, from the language of the statute itself, read in its proper context. The Court may not depart from that language merely because another construction appears administratively convenient or better suited to the perceived policy of the enactment. The Hon'ble Supreme Court, in COMMISSIONER INLAND REVENUE (LEGAL ZONE), LARGE TAXPAYERS' OFFICE, LAHORE v. Messrs

SEVEN STAR SUGAR MILLS (PRIVATE) LIMITED, KARACHI”

(2026 SCMR 69), reiterated that the intention of the legislature in a fiscal statute must be discovered from the words employed therein. It would be instructive to reproduce the relevant paras 13 & 14 of the aforesaid judgement as under:

“13. The well recognized rule of construction or interpretation of any fiscal statute or its particular provision is that the intention of the legislature must be discovered from the words used. If the words used are capable of one construction only, then it would not be open to the courts to adopt any other hypothetical construction. If the words of a statute or its any provision are readily understood without any ambiguity, then obviously, it is not for the court to raise any doubt as to what they mean for any contrary view, rather than implementing the same without any hesitation. A statute or any enacting provision must be so construed as to make it effectual and operational.

14.It is well settled that a literal approach is to be adopted while interpreting fiscal or taxing statutes, and the Court cannot read into or impute something when the provisions of a taxing statute are clear.”

The aforesaid judgment also makes reference to “Messers ISLAMABAD ELECTRIC SUPPLY COMPANY LIMITED (IESCO) through Finance Director, Islamabad versus The APPELLATE TRIBUNAL INLAND REVENUE (H.Q), ISLAMABAD through Chairman and others” (2023 SCMR 1516) and “ALLIED BANK LIMITED versus COMMISSIONER OF INCOME TAX, LAHORE, ETC” (2023 SCMR 1166) wherein the Hon’ble Supreme Court reiterated the settled principle that fiscal statutes must be construed according to the plain, natural and

grammatical meaning of the words employed by the legislature, without adding to or subtracting from the statutory language. The principles so enunciated apply with full force to the interpretation of section 49(2) of the Act.

16.Similarly, in “GOVERNMENT OF PUNJAB through Secretary Irrigation and Power and another v. KUNJAH TEXTILE MILLS LIMITED and others” (2025 SCMR 239), the Hon'ble Supreme Court reaffirmed that where a charging or taxing provision is reasonably capable of more than one construction, the interpretation more favourable to the taxpayer is to be preferred. Further it has been held that:-

“10. ......It is a cardinal principle of taxing statutes that if more than one reasonable interpretation is possible of the charging, or taxing, provision, then the one more favourable to the putative taxpayer is to be adopted, i.e. the one that either takes him out of the charge altogether or (if such be the case) results in a reduced or lessened burden......”

17.The same approach is reflected in the classical principles of interpretation of fiscal statutes discussed in N.S. Bindra's Interpretation of Statutes, particularly the chapter relating to strict construction of taxing enactments. A fiscal liability must be founded upon the express words of the statute; deficiencies in the legislative text cannot be supplied by implication, nor can a pecuniary burden be enlarged merely on considerations of administrative expediency. These principles have also received judicial recognition in the decisions of the superior Courts, including MOLASSES TRADING & EXPORT COMPANY LIMITED versus. FEDERATION OF PAKISTAN and others” (1993 SCMR 1905), concerning strict construction of fiscal provisions.

18.In the case “COMMISSIONER INLAND REVENUE (LEGAL) ISLAMABAD versus. Messrs WI-TRIBE PAKISTAN LTD., Islamabad” (2020 SCMR 420) the Hon’ble Supreme Court of Pakistan has categorically held that respondent cannot be allowed to be deprived of the statutory benefit through misinterpretation and misreading, as attempted by the department. Even in case of any ambiguity regarding

any exemption or concession, the same is to be resolved in a manner beneficial to the tax payer. Relevant extract from the judgment is produced as under: - “5. ...... Nothing extraneous can be read into the relevant entry to qualify or restrict such exemption. The respondent cannot be allowed to be deprived of the statutory benefit through misinterpretation and misreading, as attempted by the department. Even in case of any ambiguity regarding any exemption or concession, the same is to be resolved in a manner beneficial to the tax payer and not in the manner that would lead to obliteration of his rights and liabilities.”

19.The foregoing principles require that the interpretation of section 49(2) of the Act must begin with its actual words rather than the presumed desirability of imposing default surcharge immediately after the payment deadline. The department's submission that the taxpayer becomes a defaulter upon failure to deposit tax by the prescribed due date may be accepted as a statement concerning the obligation to make timely payment. However, the occurrence of a default and the statutory computation of default surcharge are not necessarily coextensive. The legislature is competent to prescribe one date for discharge of the principal tax liability and another date from which the financial consequence of default is to be calculated. Where it has expressly done so, the Court is bound to give effect to that distinction.

20.In this context, rule 11(2) of the Rules assumes relevance. The rule requires deposit of tax by the fifteenth day of the relevant month and permits furnishing of the corresponding return by the eighteenth day. Its object is to regulate compliance with the payment and return- filing obligations. It does not purport to prescribe the commencement of the period for calculation of default surcharge, nor does it contain language altering or restricting the operation of section 49(2) of the Act. The statutory provision and the rule, therefore, operate in separate but complementary fields.

21.We find no inconsistency between section 49(2) of the Act and rule 11(2) of the Rules. The former determines the period for calculating default surcharge, whereas the latter specifies the deadline

for depositing tax and furnishing the return. Compliance with the rule remains mandatory, notwithstanding that the legislature has prescribed a later commencement date for calculating default surcharge. The interval between the due date and the commencement of the surcharge computation may be understood as a statutory allowance for that limited purpose, but it cannot be treated as an extension of the due date itself. A taxpayer paying after the fifteenth day remains in default of the payment obligation; the question of the period attracting default surcharge must nevertheless be answered by reference to section 49(2) of the Act.

22.Even otherwise, rules framed under a statute constitute subordinate legislation and cannot override, amend or curtail the substantive provisions of the parent enactment. A rule must, wherever reasonably possible, be construed harmoniously with the statute under which it has been framed. In the present case, such harmonious construction presents no difficulty. Rule 11(2) of the Rules gives effect to the prescribed payment deadline, while section 49(2) of the Act independently governs the commencement and termination of the period for calculating default surcharge. The departmental interpretation, which effectively treats rule 11(2) of the Rules as overriding the express computation formula in section 49(2) of the Act, cannot be sustained.

23.The contention that such construction would defeat the object of the Act by permitting delayed deposit of tax without immediate surcharge, also does not warrant acceptance. Considerations of legislative policy cannot authorize the Court to substitute different words for those expressly enacted. The legislature, while requiring timely payment of tax, may legitimately prescribe a distinct period for computation of an ancillary financial liability. Whether the interval so prescribed represents a concession, a compliance allowance or another legislative choice is not for the Court to determine where the statutory language is otherwise clear. The judicial function is to interpret and

apply the provision as enacted, not to modify it on the assumption that a different formula would better protect public revenue.

24.It is also necessary to distinguish the literal rule from what is conventionally described as the golden rule of interpretation. The literal rule requires the words of an enactment to be given their ordinary and grammatical meaning. The golden rule permits a limited departure from that meaning where its application would produce an absurdity, inconsistency or result plainly repugnant to the legislative scheme. In the interpretation of fiscal provisions imposing a pecuniary liability, the starting point remains the language employed by the legislature, and no liability can be enlarged by implication. In the present case, the ordinary meaning of section 49(2) of the Act produces a workable and coherent result. There is, therefore, no occasion to invoke the golden rule to depart from its grammatical meaning.

25.Applying the aforesaid interpretation to the facts of the present case, the department was entitled to require the applicant to deposit sales tax by the prescribed due dates in accordance with the Act and the Rules. However, for the purposes of computing default surcharge under section 49(2) of the Act, the period of default could commence only from the sixteenth day following the legally applicable due date pertaining to each tax period. Thus, where the tax period ended on 31 October and the due date fell on 15 November, the commencement date for calculating default surcharge would be 1 December, subject to any validly notified variation in the due date. Calculation from 16 November would amount to treating the first day following the due date as the sixteenth day following it, contrary to the express language of section 49(2) of the Act.

26.The record indicates that the assessing authority calculated default surcharge by reference to the dates immediately succeeding the prescribed payment deadlines. The Commissioner (Appeals), while directing exclusion of the date of actual payment, did not correct the more fundamental error concerning commencement of the period of

default. The Tribunal likewise maintained the computation on the premise that default surcharge became calculable immediately upon expiry of the payment deadline. In doing so, the Tribunal failed to give effect to the distinction between the due date prescribed under section 2(17) of the Act and the commencement date expressly stipulated under section 49(2) of the Act. The impugned judgment, therefore, suffers from an error of law warranting interference in the reference jurisdiction of this Court.

27.The proposed questions of law are accordingly answered as follows:

Question No.(i): The period for calculation of default surcharge under section 49(2) of the Act commences from the sixteenth day following the legally applicable due date of the relevant tax period, as contemplated by section 2(17) of the Act, and not from the sixteenth day following the end of the tax period under section 2(44) of the Act. The question is answered in favour of the applicant and against the department.

Question No.(ii): Fiscal statutes are ordinarily to be interpreted according to their plain, natural and grammatical meaning, without adding words to, or subtracting words from, the statutory text. The applicable principle is primarily the literal rule and strict construction of fiscal enactments; the golden rule is invoked only where the ordinary meaning produces an absurdity or comparable interpretative difficulty. The question is answered in the affirmative, to the extent indicated.

Question No.(iii): The language of section 49(2) of the Act, when read with sections 2(17) and 2(44) of the Act, is sufficiently clear regarding the commencement of the period for calculation of default surcharge. No ambiguity arises which would justify substituting the departmental interpretation for the ordinary meaning of the provision. Even if two reasonable constructions were available, the interpretation imposing the

lesser fiscal burden would ordinarily be preferred. The question is answered accordingly, in favour of the applicant.

28.For the foregoing reasons, the Reference Application is allowed. The judgment dated 24.11.2022 passed by the Appellate Tribunal, Punjab Revenue Authority, along with the impugned orders passed by the fora below are set aside to the extent that they determine or maintain default surcharge calculated from a date earlier than that prescribed under section 49(2) of the Act. The matter is remitted to the assessing authority for fresh computation of default surcharge, strictly in accordance with the interpretation of sections 2(17), 2(44) and 49(2) of the Act recorded herein, after verifying the applicable due date and actual payment date for each relevant tax period and excluding the date of actual payment as required by section 49(2) of the Act.

29.It is clarified that the present judgment does not absolve the applicant of its obligation to deposit sales tax within the prescribed time, nor does it invalidate any tax liability otherwise lawfully determined. The relief granted is confined to correction of the commencement date and consequential computation of default surcharge. Any recovery proceedings shall be regulated by the amount lawfully determined upon such recalculation. There shall be no order as to costs.

30.Office shall transmit a copy of this judgment, under the seal of the Court, to the Appellate Tribunal, Punjab Revenue Authority, Lahore, in accordance with section 67A of the Act.

(ABID AZIZ SHEIKH) (MUNAWAR IQBAL DUGGAL)

JUDGE JUDGE

APPROVED FOR REPORTING.

JUDGE JUDGE

Javed Malik*