Khalid Nazir Spinnings Ltd. through Masood Iqbal Vs Appellate Tribunal Inland Revenue Lahore etc

Stereo HCJDA 38

JUDGMENT SHEET

IN THE LAHORE HIGH COURT LAHORE

(JUDICIAL DEPARTMENT)

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Khalid Nazir Spinning Limited.

Vs.

Appellate Tribunal Inland Revenue and others.

Applicant by: Mr. Khalil ur Rehman, Advocate.

Respondent-department by: Mrs. Humera Bashir, Advocate. Date of hearing: 16.09.2026

JUDGMENT

MUHAMMAD USMAN GHANI RASHID CHEEMA, J. The controversy before us is not about the legality of the tax charged, but about the right to challenge it directly before the appropriate appellate forum i.e. the Tribunal. Can a registered person be denied the remedy of direct appeal to the Tribunal merely because the adverse determination does not stem out of the provisions enumerated in Section 45-B of the Sales Tax Act, 1990 (the “Act”)? This issue arises in the present Reference-Application under Section 47 of the Act, challenging the order dated 02.07.2026 (the “Impugned Order”) passed by the Appellate Tribunal Inland Revenue, Lahore Bench, Lahore (the “Tribunal”) in STA No.665/LB/2026 (the “Appeal”) whereby the Applicant’s Appeal was dismissed in limine for want of jurisdiction. The following questions of law have been proposed for the opinion of this Court:

i. Whether, on the facts and in the circumstances of the case, the learned Appellate Tribunal was justified in law in dismissing the appeal on the grounds of lack of jurisdiction, thereby failing to exercise the statutory jurisdiction vested in it under Section 46 read with 45B of the Sales Tax Act, 1990?

ii. Whether, the learned Appellate Tribunal failed to interpret the word “or” in Section 45B which is disjunctive in nature,

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So, in Section 45B the word “decision” should be read independently?

iii. Whether, the learned Appellate Tribunal has failed to appreciate that the other benches are entertaining the identical issue and passing the orders after the amendment brought through the Finance Act, 2025?

iv. Whether the charging of ‘Extra Tax’ and ‘Further Tax’ on the applicant’s electricity connections can be sustained in law when the applicant was active taxpayer list under the scheme of SRO 777?

2.Applicant is a registered person and consumer of Gujranwala Electric Power Company (“GEPCO”). In its electricity bill for the month of March 2026, Extra Tax amounting to Rs.1,287,314/- and Further Tax amounting to Rs.302,897/- were charged. Applicant asserted that its name appeared on the Active Taxpayers List at the relevant time and, therefore, the levy was unlawful.

3.Applicant initially approached this Court through W.P. No.21536/2026. A Learned Division Bench of this Court, vide order dated 13.04.2026, transmitted that petition along with its annexures to the Commissioner Inland Revenue, Zone-VI, Corporate Tax Office, Lahore, with a direction to treat the same as an application and decide the grievance through a speaking order strictly in accordance with law.

4.The Commissioner decided the foregoing application vide order dated 27.04.2026 (the “Commissioner’s Order”) on the basis of Sections 2(1A), 3(1A) and 3(5) of the Act read with Rule 158K(6) of the Sales Tax Rules, 2006 holding that the Applicant had late-filed its sales tax returns for two consecutive tax periods, namely January and February 2026, therefore, the Applicant was treated as Inactive during the billing month of March 2026. The concluding part of the Commissioner’s Order reads:

“As per record, the taxpayer had late filed two consecutive Sales Tax returns for the tax periods of January, 2026 and February, 2026 and by virtue of clause (b) of Section 2(1A) of the Act, the status was inactive during the billing month of March, 2026 which was also reflected in Active Taxpayers’ list issued by the Board in the month of March, 2026. For the same reason, the extra tax/further tax has lawfully been charged by GEPCO for the billing month of March, 2026 and the request for exclusion is hereby regretted.”

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The Commissioner’s Order, thus, finally determined the Applicant’s grievance and sustained the impugned fiscal burden.

5.Thereagainst, the Applicant directly preferred the Appeal before the Tribunal under Section 46 read with the second proviso to Section 45-B of the Act. The Tribunal did not examine whether the Applicant was liable to Extra Tax or Further Tax and only confined itself to maintainability. Tribunal was of the view that after Finance Act, 2025, an appeal could be entertained only where the “decision” or “order” had been passed under one of the provisions expressly enumerated in Section 45-B. Its reasoning is summed up in paragraph 10 of the Impugned Order as follows:

“The words “decision or order” form one composite expression. The word “or” separates the two possible forms of an appealable determination, namely a ‘decision’ or an “order”. However, the qualifying words “passed under sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66” qualify both “decision” or an “order”.”

The Tribunal ultimately held:

“Since the impugned order dated 27.04.2026 is not passed under any of the sections enumerated in Section 45-B, the direct appeal under section 46 is not maintainable.”

The Appeal was accordingly dismissed in limine.

6.Learned counsel for the Applicant has questioned, before us, the above construction adopted by the Tribunal. He submits that the Tribunal has read the second proviso to Section 45-B as if it contains a restriction, which, according to him, was not incorporated by the legislature as such. He argues that the expression “decision or order” has deliberately been employed by the legislature and that the use of word “or” cannot be treated as meaningless. He further relies upon the legislative changes brought about through the Finance Act, 2025 and submits that their object was to facilitate the appellate process and permit a registered person to directly approach the Tribunal.

7.On the other hand, the departmental stance, which found favour with the Tribunal, is that a right of appeal is purely statutory. It is argued that the second proviso to Section 45-B merely permits bypassing the

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Commissioner (Appeals) and it does not enlarge the class of decisions or orders which are appealable under the main body of Section 45-B.

8.Today arguments have been heard and the matter has minutely been appreciated with the able assistance of learned counsel for the parties.

9.The questions of law proposed by the Applicant are closely connected. For proper determination of this Reference-Application, they may conveniently be recast as follows:

i. Whether, after the Finance Act, 2025, the second proviso to Section 45-B read with Section 46(1) of the Act confers upon a registered person a right to directly approach the Appellate Tribunal against an adverse order passed by an Officer of Inland Revenue?

ii. Whether the Tribunal was justified in treating the second proviso to Section 45-B merely as a procedural facility restricted to “decisions” or “orders” emanating from the Sections enumerated in the main body of Section 45-B?

iii. Whether, in the facts of the case, the order dated 27.04.2026 was liable to be entertained in direct appeal by the Tribunal?

These questions are, essentially, of statutory interpretation.

10.To better appreciate the argument put forth, it would be useful to start with, by making note of, the legislative history. Before substitution through the Finance Act, 2025, Section 45-B(1), to the extent relevant, provided:

“45-B. Appeals.-(1) Any person, other than the Sales Tax Department, aggrieved by any decision or order passed under Sections 10, 11, 25, 36, or 66, by an officer of Inland Revenue may, within thirty days of the date of receipt of such decision or order, if the value of the assessment of tax or, as the case may be, refund of the tax does not exceed ten million rupees, prefer appeal to the Commissioner Inland Revenue (Appeals)...”

At that time, Section 46 operated with the pecuniary scheme contained in Section 43-A and encompassed a wider route of appeals to the Tribunal against orders passed by the competent authorities under the Act or the rules. Through the Finance Act, 2025, Section 43-A was omitted and

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subsection (1) of Section 45-B was substituted. The present provision reads:

45-B. Appeals.-(1) Any person, other than an State Owned Enterprises (SOE), aggrieved by any decision or order passed under Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66 of this Act, by an officer of Inland Revenue may, within thirty days of the date of receipt of such decision or order prefer appeal to the Commissioner Inland Revenue (Appeals):

Provided that an appeal preferred after the expiry of thirty days may be admitted by the Commissioner Inland Revenue (Appeals) if he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period:

Provided further that registered person shall have an option to directly file an appeal before Appellate Tribunal Inland Revenue without availing right of Appeal under this Section.”

(emphasis supplied) Correspondingly, Section 46(1) now provides:

“46. Appeals to Appellate Tribunal.-(1) Any person including an officer of inland revenue not below the rank of Additional Commissioner aggrieved by an order of the Commissioner (Appeals) under this Act or the rules made thereunder; or any person other than SOE aggrieved by an order passed by officer of inland revenue when second proviso to Section 45-B applies, may within thirty days of the receipt of such order, prefer an appeal to the Appellate Tribunal: ...”

(emphasis added)

The substitution was part of a restructuring of the appellate process. FBR itself described the amendment as one for “improving appellate process” and explained that a registered person could directly approach the Tribunal without first going to the Commissioner (Appeals).1

FBR Circular No.02 of 2025-26 dated 02.08.2025.

Para.23 Improving appellate process “For the purpose of streamlining the process of filing appeals, pecuniary jurisdiction in filing of appeals provided under Section 43-A has been omitted.

Prior to Finance Act, 2025, Commissioner (Appeals) entertained those appeals against the orders passed under this Act wherein the value of assessment of tax or the refund did not exceed Rs. 10 million. Now, Section 43-A has been omitted and sub-Section (1) of Section 45-B has been substituted. Resultantly, all orders passed under Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66 are made appealable before CIR (Appeals) irrespective of pecuniary limits. Furthermore, an option to directly file an appeal before the Appellate Tribunal Inland Revenue without availing the right of appeal under this Section by the registered person has also been provided.

SOEs can only file appeal once they have exhausted the option of ADRC. Sub-Section (1) of Section 46 has been substituted which provides procedure for filing of appeals before the Appellate Tribunal by the aggrieved person other than SOEs. Furthermore, a registered person is also entitled to prefer an appeal before the Appellate Tribunal against any order passed by an officer of Inland Revenue by avoiding the filing of appeal before the Commissioner (Appeals) in case the option under second proviso to sub-Section (1) of Section 45-B is exercised.

(emphasis is ours)

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11.Two features are immediately noticeable from the amended scheme. First, the legislature consciously inserted the second proviso to Section 45-B. Secondly, Section 46 was simultaneously amended and expressly incorporated the situation “when second proviso to Section 45- B applies”. Both provisions form part of the same appellate arrangement. They have, therefore, to be read together and in a manner, which gives effect to each of them.

12.Before examining the combined effect of the amended provisions, the settled Rules, Principles and Approaches to statutory interpretation may briefly be recalled. First is the Literal Rule, under which the terms used by the legislature are ordinarily given their plain, grammatical and natural meaning. This approach is reflected in the maxim a verbis legis non est recedendum, signifying that where the statutory language is clear, there should ordinarily be no departure from the terms employed by the legislature. Second is the Golden Rule, which permits departure from the ordinary meaning where a literal construction would lead to absurdity, inconsistency or a result plainly at variance with the legislative intent. In that context, the maxim interpretatio talis in ambiguis semper fienda est, ut evitetur inconveniens et absurdum recognises that, where ambiguity exists, a construction which avoids inconvenience or absurdity is to be preferred. Third is the Mischief Rule, under which regard may be had to the state of law before the enactment, the defect or mischief which existed, and the remedy which the legislature intended to provide. Next is the Purposive Approach, which looks to the object and purpose of the enactment and prefers a construction which advances that purpose rather than defeats it.2

13.These Rules, Principles and Approaches, as some writers use these terms interchangeably, are not mutually exclusive. They operate within the broader principle that a statute is to be read as a whole. Its provisions are to be harmoniously construed, and effect be given, as far as possible, to every term and part of the enactment. A construction that renders any Ali Azim Afridi, Advocate High Court, Peshawar v. Federation of Pakistan through Secretary, Ministry of Law and Justice, Islamabad and 3 others (PLD 2020 Peshawar 105)

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expression redundant, otiose or ineffective is ordinarily to be avoided.3 The ultimate task of interpretation of statute is to ascertain and give effect to the intention of the legislature from the language used when read in its proper statutory context. On these points, there have been number of cases decided by the Superior Courts. The Hon’ble Supreme Court of Pakistan in Messrs Noon Sugar Mills Limited v. The Commissioner of Income-Tax, Rawalpindi (PLD 1990 SC 1156) explained the manner in which legislative intention is to be discovered in the following terms:

“No doubt the elementary rule of construction is that the words used in a Statute should be construed literally but according to what is termed as the `Golden Rule of Interpretation' by Maxwell, the ordinary meaning of a word need not be adhered to if a construction based on it, would be at variance with the intention of the Legislature as collected from the Statute itself or if it leads to an absurdity. In such cases the language may be varied or modified so as to avoid such absurdity or inconvenience (Beck v. Smith (1836) 2 M W 191). While interpreting the statutes like the one before us, the proper mode of interpretation or discovering the true intention of the Legislature would be to consider as to what was the state of law before the statute or its provision was given its present form and as to what was the mischief or difficulty which was sought to be suppressed and remedy which the Legislature had intended to advance.”

(emphasis is ours)

14.The above principle has direct relevance here. The amended Section 45-B cannot be construed by isolating a few terms from its opening part. The position existing before the Finance Act, 2025, the simultaneous amendment in Section 46 and the direct appellate option introduced through the second proviso are, therefore, extremely relevant in discovering the true legislative intent.

15.It is equally settled that a statute has to be read as one coherent whole. The Hon’ble Supreme Court has held that whenever two interpretations are plausible or achievable, the Court ought to prefer the interpretation that expands the remedy and represses the mischief. The Court should also avoid and eschew interpretations that render the statute Aftab Shahban Mirani and others vs. Muhammad Ibrahim and others (PLD 2008 SC 779) Lucky Cement Ltd. vs. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar (2015 SCMR 1494) and Haji Tooti and another vs. Federal Board of Revenue, Islamabad and others

(2023 SCMR 1980)

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or its provisions ineffective without good reason.4 The same judgment emphasises that the statute should be examined as a whole and that a conjoined reading of different provisions may itself dispel an apparent ambiguity. The principle underlying such contextual construction is that the true meaning of statutory language is best gathered from what precedes and what follows it. This principle assumes greater importance where, like the case before us, two provisions were amended as part of the same legislative exercise.

16.We may now proceed towards the expression “any decision or order” employed in Section 45-B. The Tribunal itself accepted that the word “or” is ordinarily disjunctive, but held that both “decision” and “order” were governed by the succeeding enumeration of Sections. We find it unacceptable, for the reasons set out in the instant judgment.

17.We note that the ordinary meaning of the word cannot be ignored at the threshold. The Oxford Advanced Learner’s Dictionary, 10th Edition, explains “or” as being “used to introduce another possibility”. P. Ramanatha Aiyar’s Advanced Law Lexicon, 4th Edition, describes “or” as “a disjunctive particle that marks an alternative, generally corresponding to ‘either’. It further records that “or” prima facie has only an alternative signification and that the word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive. The same ordinary meaning has received judicial recognition. It has been held that in the ordinary use, the word “or” is disjunctive that marks an alternative, which generally corresponds to the word ‘either’.5 The matter has authoritatively been considered by the Hon’ble Supreme Court of Pakistan in Abdul Razak v. Karachi Building Control Authority and others (PLD 1994 SC 512). After referring to Crawford on Statutory Construction, the Court reproduced the following rule:

“In ordinary use the word ‘or’ is a disjunctive that marks an alternative which generally corresponds to the word ‘either’. In face of this meaning, however, the word ‘or’ and the word ‘and’ are often used interchangeably. As a result of this Sui Northern Gas Pipelines Ltd. (SNGPL), Islamabad v. Messrs S.K. Pvt. Limited and others

(2025 SCMR 570)

Ch. Zulfiqar Ali v. Chairman, NAB and others (PLD 2003 Lahore 593)

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common and careless use of the two words in legislation, there are occasions when the Court, through construction, may change one to the other. This cannot be done if the statute's meaning is clear, or if the alteration operates to change the meaning of the law. It is proper only in order to more accurately express, or to carry out the obvious intent of the legislature, when the statute itself furnishes cogent proof of the error of the legislature, and especially where it will avoid absurd or impossible consequences, or operate to harmonize the statute and give effect to all of its provisions.”

(emphasis is ours)

The Court then applied the above rule and refused to read word “or” as “and”. The same principle was considered by the Hon’ble Supreme Court of Pakistan in Muhammad Arif and others v. District and Sessions Judge, Sialkot and others (2011 SCMR 1591). Paragraph 11 whereof reads:

“Crawford's ‘Statutory Construction; Interpretation of Statutes’ highlights the basic rule thereto that when the sense so requires ‘and’ may be read as ‘or’, and ‘or’ read as ‘and’. Further says that ‘in ordinary use the word “OR” is disjunctive while word ‘AND’ is conjunctive. However, the word ‘or’ and the term ‘and’ are often used interchangeably. As a result of this common and careless use of the two words in legislation, there are occasions when the court, through construction, may change one to the other. This cannot be done if the statutes' meaning is clear, or if the alteration operates to change the meaning of the law. It is proper only in order to more accurately express, or to carry out the obvious intent of the legislature, when the statute itself furnishes cogent proof of the error of the legislature, and especially where it will avoid absurd or impossible consequences, or operate to harmonize the statute and give effect to all of its provisions.”

(underlined for emphasis)

In the following paragraphs of that judgment, the Supreme Court examined the two limbs of the statutory definition separately and declined a construction which would render one of them “redundant and ineffective”. Similar rule was reiterated by the Hon’ble Supreme Court in Suo Motu Case No.8 of 2018 (PLD 2019 SC 201), while considering the use of the words “and” and “or” in a legislative provision, the Court observed:

“Thus, it appears that no doubt occasionally 'and' may be used disjunctively and 'or' conjunctively. Both can be used

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interchangeably. However, such a course of action is only permissible in order to give effect to the clear and obvious intention of the legislature or to avoid absurdity, unreasonableness or redundancy. In every eventuality 'or' cannot necessarily be read as 'and' or vice versa, nor is there a prohibition on the legislature or the framers of the Constitution to employ 'or' in its common parlance i.e. "disjunctively".”

(underlining is ours)

18.Having considered the above formulations, we note that these judgments recognise the ordinary disjunctive character of word “or” and mark it as an alternative. The principle emerging therefrom is that the ordinary disjunctive meaning of “or” remains the rule, while its substitution by “and” is an exception, which must be justified by the statutory context, the clear legislative intention or the necessity to avoid an absurd or redundant result. Word “or” cannot, however, be deprived of its natural effect merely for convenience of construction. At the same time, no term or provision of an enactment can be treated as surplus. Consequently, the opening part of Section 45-B, its second proviso and the corresponding words introduced in Section 46 must, therefore, be assigned their natural meanings to reach to a just conclusion.

19.Despite having discussed the ordinary meaning of word “or”, establishing the grammatical function thereof and the limited circumstances where it can lawfully, subject to fulfilment of its pre- requisites, be read as “and”, this Court’s quest to find out the true purport of the legislature is far from over yet.

20.Next comes the use of expressions “decision” and “order”. In legal usage, word “decision” and an “order” are related but not identical or entirely synonymous. It has judicially been explained that a “decision” may be defined as a determination arrived at after consideration of facts, and, in legal context, law.6 “Decision” means judicious determination of dispute between the parties specifying grounds and substantial reasons for arriving at the particular decision.7 These formulations emphasise the Bashir Ahmad v. Sardar Muhammad and others (1984 CLC 2158) Muhammad Ali Shah and another v. Election Tribunal, Union Council No.49, Narhal) District Khanewal and 4 others (2004 CLC 1922)

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determinative character of a “decision”, which is more akin to word “Judgment”. Whereas the meaning of “order” by contrast, is the formal expression of a decision of a court or competent authority, which is not necessarily a decree. It may be final, interlocutory, procedural, administrative, or determinative, depending upon the statutory context. An order can, therefore, exist without a full judgment containing elaborate reasons. Since the legislature has intentionally employed both expressions in one Section, one after another, so they should not ordinarily be treated as mere repetitions of one another as if legislature is trying to convey one thing as opposed to two different situations.

21.The real question is whether the succeeding terms “passed under Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66” necessarily qualify both “decision” and “order” for every purpose under the amended appellate scheme or not. The disjunctive character of “or”, by itself, does not determine the reach of the qualifying terms which follow. This remains a question of statutory context and has to be determined by reading Sections 45-B and 46 as a whole as the true meaning of statutory language is best gathered from what precedes and what follows it.

22.There is a Latin maxim “Noscitur a Sociis” relating to the interpretation of statutes. When translated literally, it means ‘A term is known by the company it keeps’. “Noscitur a Sociis” is a recognised principle of statutory interpretation requiring that meaning of a term be ascertained in the light of the terms accompanying it and the context in which it has been employed by the legislature. A term may not be interpreted in isolation. Its meaning must be gathered from the context, the accompanying expressions and the scheme of the statutory provision.

23.Having already considered the meaning and implication of term “or” in Section 45-B, Noscitur a Sociis may be relevant when examining the expressions “decision” and “order”. Thus, the expressions “decision” and “order” cannot be detached from their statutory settings. As can be seen, word “decision” is preceded by word “any” and has no reference to any Sections of law and is disjoined from the word “order” by the use of the word “or” and is thus quite wide in nature encompassing a host of eventualities. By holding otherwise, we will be playing foul to

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the plain and ordinary language employed by the legislature. On the other hand, it is the word “order”, which is succeeded by the term “passed under Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66”. On the face of it, the amplitude of this latter formulation is not as wide or extensive as the former expression “any decision” is. We, therefore, hold that “order” passed under Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66 ibid is appealable before the Commissioner (Appeals). Conversely “any decision” without reference to the Section of law can be called into question before the Commissioner (Appeals).

24.The above distinction is material. Opening part of Section 45-B regulates an appeal before the Commissioner (Appeals). Second proviso whereof declares that a registered person shall have an option to directly file an appeal before the Appellate Tribunal Inland Revenue without availing the right of appeal under that Section. Section 46, in turn, expressly recognises an appeal against an order passed by an Officer of Inland Revenue “when second proviso to Section 45-B applies”. Section 46, therefore, gives effect to that option. The proviso cannot be read in isolation from the corresponding terms deliberately introduced in Section 46. Consequently, both provisions must be interpreted in a manner, which allows each to operate effectively rather than rendering either one nugatory.

25.The question, in fact, is no longer res integra. Amended provisions of the Act, sub judice before us, have already been touched upon by a learned Division Bench of this Court in Muhammad Hamza Khan v. Commissioner Inland Revenue and others (2026 PTD 895). The petitioner therein had compulsorily been registered under Section 14 of the Act. His appeal before the Tribunal was returned on the premise that the order was not appealable. Section 14 whereby that Petitioner was compulsorily registered, significantly, is not one of the provisions enumerated in Section 45-B. After reproducing Sections 45-B and 46, the learned Division Bench observed in paragraph 6:

“Bare reading of the above-mentioned proviso clearly reveals that the legislature has conferred a discretionary right upon a registered person to directly file an appeal before the Appellate Tribunal Inland Revenue without first availing the remedy of

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appeal before the Commissioner (Appeals) under this Section. This proviso provides an optional course to the registered person, enabling him either to avail the appellate remedy before the Commissioner (Appeals) or to bypass the said forum and directly approach the Appellate Tribunal Inland Revenue against the impugned order. The intent of the legislature behind incorporating the said proviso is to provide flexibility in the appellate mechanism and to ensure that the registered person is not compelled to undergo the intermediate appellate stage if he opts to seek redress directly before the Appellate Tribunal Inland Revenue. Therefore, the said proviso clearly recognizes and protects the right of the registered person to directly invoke the jurisdiction of the Appellate Tribunal Inland Revenue. The combined and harmonious reading of Sections 45-B and 46 of the “Act” clearly demonstrate that a registered person has two legally recognized appellate options namely (i) to file an appeal before the Commissioner Inland Revenue (Appeals), and thereafter approach the Appellate Tribunal; or (ii) to directly file an appeal before the Appellate Tribunal Inland Revenue by virtue of the second proviso to Section 45-B of the “Act”. The impugned act of Respondent No.3 in refusing to receive and entertain the appeal of the Petitioner amounts to an unlawful denial of the Petitioner's statutory right of appeal provided under Section 46 of the “Act”, and the order passed under Section 14 of the Act by the Respondent No.1, which was impugned before Respondent No.3, was clearly appealable in terms of Section 46(1) read with the proviso to Section 45-B of the Act.”

(emphasis supplied)

26.The ratio of Muhammad Hamza Khan case is relevant and helpful. In that case an order passed under Section 14 was held appealable before the Tribunal, notwithstanding that Section 14 does not find mention in Section 45-B. The learned Division Bench impliedly treated that order as falling within the purview of “any decision” unhinged from the shackles of “Sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66”. The learned Division Bench, seemingly, reached to that conclusion by giving combined and harmonious effect to Sections 45-B and 46. The present case stands on the same statutory footings. The Commissioner’s order was founded upon Sections 2(1A), 3(1A), 3(5) and Rule 158K(6), none of which appears in the Section 45-B. However, that circumstance alone cannot conclude the issue against the Applicant, in view of the interpretation already placed upon the amended provisions.

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27.The Impugned Order proceeds on the premise that the second proviso “is not an independent source of appellate jurisdiction” and merely enables a registered person to bypass the Commissioner (Appeals) where the appeal is otherwise competent under Section 45-B. Such construction cannot, now, be sustained in view of the law declared in Muhammad Hamza Khan case. If an order passed under Section 14 could directly be carried in an appeal before the Tribunal, notwithstanding that Section 14 is not mentioned in Section 45-B, the present order also cannot be excluded merely because the Commissioner referred to Sections 2(1A), 3(1A), 3(5) and Rule 158K(6).

28.Having reached that point, the question is whether the appellate scheme created by the Finance Act, 2025 permitted the registered person to invoke the direct remedy of Appeal provided by the second proviso to Section 45-B read with Section 46. In view of the statutory text and, more importantly, the law subsequently declared in Muhammad Hamza Khan case, our answer has to be in the affirmative. The Tribunal did not recognise the legal consequences of the determination and yet excluded the statutory appellate route which, on a harmonious interpretation of Sections 45-B and 46, is available to the registered person.

29.Another helping feature of this case, to reach to this conclusion, is the legislative history of the Act, which does not allow creation of a remediless category. Prior to the Finance Act, 2025, Section 46 was differently framed and the appellate structure operated with the pecuniary arrangement then contained in Section 43-A. The Finance Act, 2025 omitted Section 43-A, restructured Section 45-B and simultaneously introduced an express direct appellate option for a registered person, with corresponding language change in Section 46. As discussed above, the amendments were brought with the aim of improving the Appellate process.8 The amendments must, therefore, be read as a whole, which seek to widen the already existing appellate route. It cannot readily be construed as taking away an appellate remedy, which already existed, against an adverse statutory determination while simultaneously creating FBR Circular No.02 of 2025-26 dated 02.08.2025 (Para.23 Improving appellate process)

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a direct appellate route, unless such exclusion follows from clear legislative language. As already noticed in Noon Sugar Mills case, the previous state of law, the change brought about and the remedy intended to be advanced are the legitimate considerations while discovering the true reach of the amended provision.

30.The Hon’ble Supreme Court of Pakistan has stated that right of appeal is not a matter of inference or implication from the provisions of a statute but such a right must be given by an express enactment.9 The same judgment also records that an intention to deny the right of appeal, because of a failure or omission to provide the same in a special Act, will not lightly be assumed or inferred. The Court further held that “in the absence of clear intendment, it cannot be held that the object of the enactment was to take away the right of appeal, already existing before amendment.” Supreme Court of India has also held that if there is a provision conferring a right of appeal, it should be read in a reasonable, practical and liberal manner.10 It is a settled canon of statutory interpretation that where two constructions are possible, the one preserving the right of appeal and access to justice is to be preferred over one that takes away such remedy by implication. The present case does not involve creation of an appeal where the statute is silent. Rather the second proviso to Section 45-B expressly confers the option of direct appeal to the Tribunal and Section 46 unequivocally recognises the route whereby option is to be exercised.

31.The substantive character of an appellate right was recently discussed by the Hon’ble Supreme Court of Pakistan in Muhammad Dawood v. Mst. Sakeena Farooque alias Aziza and others (2025 SCMR 1229). Paragraph 9 thereof reads:

“It is a well settled exposition of law that a right of appeal is a right of entering into a superior court and invoking its aid and interposition to redress the error of the forum below. It is essentially a continuation of the original proceedings, as a vested right of the litigant to avail the remedy of an appeal provided for appraisal and testing the soundness of the decisions and proceedings of the courts below. It is always explicated and elucidated that the right of appeal is not a mere matter of procedure but is a substantive right. While Haji Abdul Wali Khan and another v. Muhammad Hanif and another (1991 SCMR 2457) Commissioner of Income-Tax v. Ashoka Engineering Co. and others (1992 PTD 1254)

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considering matters in appeal, the appellate courts may affirm, modify, reverse, or vacate the decision of lower courts. Fundamentally, the remedy of appeal is elected on the grounds of attack that the court below committed a serious error in the verdict on law and facts, including the plea of misreading or non-reading of evidence led by the parties in support of their contentions. The procedural law sets out to activate the process and course of action through which the lawsuit moves on and the way in which court proceedings are undertaken, it also regulates and oversees the procedures employed. Substantive law, on the other hand, denotes the statutory obligations which relate to the subject matter, proclaims the relevant rights and obligations, and regulates the demeanour of an individual or government. According to Salmond, substantive law determines the conduct and relations of the parties inter se in respect of the matter litigated, whereas procedural law regulates the conduct and relations of courts and litigants in respect of the litigation. Substantive law deals with the ends which the administration of justice contemplates, while procedural law deals with the means and instruments by which the ends of administration of justice are to be attained. Substantive law defines the rights, whereas the law of procedure defines the modes and conditions of the application of one to the other; and substantive law relates to the matter outside the courts, whereas procedural law regulates affairs inside the courts [Ref: Judgment authored by one of us in Meeru Khan v. Mst. Naheed Aziz Siddiqui and others (PLD 2023 SC 912) and Additional note in Constitution Petition No. 6 of 2023 and connected cases (PLJ 2024 SC 114 = 2024 SCP 4)].”

Whereas the significance attached to an appellate remedy in fiscal matters has also been deliberated upon by the Hon’ble Supreme Court of Pakistan in Commissioner Inland Revenue, Zone-III, RTO, Rawalpindi, etc v. M/s. Sarwaq Traders, Rawalpindi, etc. (PTCL 2025 CL 33) while examining appellate adjudication under Section 45-B of the Act: “The object, policy and purpose of the first and second provisos to Section 45(B)(2) of the Act is totally different as it deals with the appellate adjudication. The said provision is invoked by a taxpayer by filing an appeal against the order-in-original. Appellate adjudication, as opposed to original adjudication, takes a different focus, as it deals with the right to appeal of a taxpayer. Right to appeal of a taxpayer is a right that flows from the constitutional rights of access to justice and fair trial guaranteed to a taxpayer under articles 9 and 10-A of the Constitution of the Islamic Republic of Pakistan, 1973. It is axiomatic that no statute can muffle fundamental rights and must at all times advance public interest and remain Constitution compliant. While the action of the tax department against a citizen can be regulated through a timeframe, it is not permissible to do so when the citizen has approached the tax department in an appeal. The fundamental rights of the citizen stand invoked and come to his rescue which is not so in the case of a tax department. With these considerations in mind the statutory timeframe provided for the appellate adjudication under Section

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45(B)(2) can only be directory, and to conceive it otherwise, would cause injustice and irreparable harm to a taxpayer who is deprived of the right to appeal.”

(emphasis supplied)

32.The above principle lends further support to our view that, where the legislature has expressly provided an appellate option, the provision conferring such remedy should not be construed in a manner, which unnecessarily defeats or substantially neutralises the same. This does not enlarge the statutory right of appeal beyond the language of the enactment, rather, it requires that the right expressly conferred by Sections 45-B and 46 be given meaningful and effective operation. The significance of the above principle, for present purposes, is that the direct appellate option expressly introduced by the legislature cannot be reduced to a procedural indulgence having no meaningful legal effect. If the Respondent- Department’s interpretation is accepted, numerous adjudicatory decisions affecting valuable civil rights would become immune from the appellate scrutiny, despite the absence of express exclusion, leading to arbitrary consequences and defeating the principles of fairness and natural justice.

33.Read as a whole, the amended provisions have to be allowed to operate together as parts of one coherent appellate scheme. The disjunctive “or” must receive its ordinary meaning, subject to the statutory context in which it occurs and the expressions “decision” and “order” cannot be treated as mere surplusage. At the same time, the second proviso to Section 45-B and the corresponding language employed in Section 46 must also be given full operative effect. The proper construction, therefore, is that the opening part of Section 45-B governs the ordinary appellate route before the Commissioner (Appeals) whereas the second proviso, read with Section 46, provides a distinct direct appellate option to a registered person. That option cannot be curtailed merely by reference to the enumeration contained in Section 45-B. For such a construction would substantially deprive the proviso and the corresponding amendment in Section 46 of their intended effect. This interpretation is further fortified by Muhammad Hamza Khan case.

34.The nature of an adjudication has to be gathered from its substance and legal effect thereof, not merely from the provisions cited in its body

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or by its nomenclature. The Commissioner was required by this Court to decide the Applicant’s grievance through a speaking order. He heard the Applicant, examined its tax status and finally held the levy of Extra Tax and Further Tax to be lawful. Applicant’s request was expressly rejected. The determination, thus, affected an existing fiscal liability. Commissioner’s Order finally determined the Applicant’s grievance and sustained the impugned fiscal burden that too with reasons. It was not an advisory opinion. Nor was it an administrative communication without consequences. It was a final adverse determination by an Officer of Inland Revenue, which for all intents and purposes qualifies to be a “decision”. It does not matter what name the Department calls it with. Significantly, the Tribunal itself acknowledged that the Impugned Order could have “civil consequences” for the Applicant. In these circumstances, the Applicant, being a registered person, was entitled to invoke the direct appellate option under the second proviso to Section 45-B read with Section 46. The Tribunal ought to have entertained the Appeal and decided the same in accordance with law.

35.The reliance placed before the Tribunal upon W.P.No.1352 of 2025 does not decide the present controversy. That petition was disposed of on 13.01.2025 with concurrence of the parties by directing the Tribunal to decide the pending appeal in accordance with law. It preceded the Finance Act, 2025 and did not interpret the substituted provisions. The Tribunal was, therefore, correct to the extent that the said order did not settle the present question. Likewise, STA No.201/MB/2025 concerning M/s H.A. Haq Spinning Mills dealt principally with the legality of Extra Tax and Further Tax after the foundational suspension order had been set aside. It may have relevance to the merits, but it does not determine the jurisdictional question before us.

36.We may also clarify that the legality of Extra Tax and Further Tax itself is not being decided in this reference. The Commissioner relied upon late filing of the returns for January and February 2026 and Rule 158K(6). The Applicant, on the other hand, relies upon its asserted active status at the relevant time and SRO 777(I)/2020. These questions require examination of the statutory charging mechanism, the relevant billing

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period, the Active Taxpayers List and the material available before the authorities. The Tribunal, being the final arbiter of facts, has recorded no findings on them. It would not be appropriate for this Court, while answering a Reference-Application arising from an order confined to maintainability, to undertake the first appellate examination of those matters.

37.Therefore, for the reasons recorded above, the questions recast in paragraph 9 are answered as follows:

Question No.(i): In the affirmative. A registered person may exercise the direct appellate option provided by the second proviso to Section 45-B read with Section 46, subject to the other requirements of law.

Question No.(ii): In the negative. The Tribunal was not justified in treating the second proviso merely as a procedural facility incapable of sustaining a direct appeal beyond the enumeration appearing in the opening part of Section 45-B. Sections 45-B and 46 have to be read together. This interpretation also stands fortified by Muhammad Hamza Khan case.

Question No.(iii): In the affirmative. The order dated 27.04.2026 finally determined the applicant’s grievance and was liable to be entertained in direct appeal by the Tribunal

38.The original Question No.(iv), reproduced in paragraph No.1 above, concerns the legality of the levy of Extra Tax and Further Tax on merits. Since the Tribunal did not adjudicate that controversy and the Impugned Order was confined to maintainability, the said question does not presently arise for determination by this Court. It is, therefore, left open for decision by the Tribunal in the restored Appeal, strictly in accordance with law and on the basis of the material before it.

39.In view of the foregoing discussion and the applicable law, we hold that a registered person may, where the second proviso to Section 45-B applies, directly invoke the appellate jurisdiction of the Tribunal under Section 46, notwithstanding that the impugned determination does not emanate from provisions enumerated in Section 45-B. Resultantly, this Reference-Application is allowed. Impugned Order dated 02.07.2026 passed by the learned Appellate Tribunal Inland Revenue, Lahore Bench,

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Lahore in STA No.665/LB/2026 is set aside. The Appeal shall stand restored to its original number. The Tribunal shall decide the same afresh on merits, after affording proper and meaningful opportunity of hearing to the parties, without being influenced by any observation made herein touching upon the merits of the tax liability.

40.Office shall transmit a copy of this Judgment, under the seal of the Court, to the Appellate Tribunal Inland Revenue in terms of Section 47(5) of the Act.

Khalid Ishaq Muhammad Usman Ghani Rashid Cheema Judge Judge

Judgment of this case was reserved on 16.09.2026 and announced in open Court today i.e. 29.10.2026.

Khalid Ishaq Muhammad Usman Ghani Rashid Cheema Judge Judge

Approved for Reporting

Khalid Ishaq Muhammad Usman Ghani Rashid Cheema Judge Judge Waqas*