KARACHI: An appellate bench of High Court of Sindh (SHC) comprising Justice Agha Faisal and Justice Muhammad Osman Ali Hadi decided over two dozen Special Sales Tax Reference Applications (SSTRA’s) filed by the Sindh Revenue Board (SRB) against a judgment passed by Sales Tax Appellate Tribunal and reaffirmed that “a service provider may voluntarily register themselves with the Applicant, or be compulsorily be registered by the Applicant/SRB in accordance with law,28 after which the process for ascertainment and recovery of sales tax on services may be sought from them”.
Following is the full text of judgment authored by Justice Muhammad Osman Ali Hadi.
Text of Judgment Begins
IN THE HIGH COURT OF SINDH AT KARACHI
Present: Mr. Justice Agha Faisal Mr. Justice Muhammad Osman Ali Hadi 1.
Special Sales Tax Reference Application No.349/2019 Sindh Revenue Board v. M/s. Logon Broadband (Pvt.) Ltd. 2. SSTRA 330/2020 Sindh Revenue Board v. M/s. Logon Broadband (Pvt.) Ltd. 3. SSTRA No.71/2021 Sindh Revenue Board v. M/s. MYN Pvt. Ltd. 4. SSTRA No.73/2021 Sindh Revenue Board v. M/s. TCS Logistics Pvt. Ltd. 5. SSTRA No.117/2021 Sindh Revenue Board v. M/s. Noor Enterprises Hyderabad 6. SSTRA No.132/2021 Sindh Revenue Board v. M/s. Tracking World Pvt. Ltd. 7. SSTRA No.70/2022 Sindh Revenue Board through AC v. M/s. Web DNA Works Pvt. Ltd. 8. SSTRA No.71/2022 Sindh Revenue Board through AC v. M/s. Cyber Tech Communication 9. SSTRA No.95/2022 Sindh Revenue Board, Karachi v. Cross Check Communication (Pvt.) Ltd. Karachi 10. SSTRA No.170/2022 Sindh Revenue Board, Karachi v. M/s. Geo Entertainment Television (Pvt.) Ltd. 11. SSTRA No.174/2022 Sindh Revenue Board, Karachi v. M/s. CNPC Chaunqing Drilling Engineering Co. Ltd. 12. SSTRA No.802/2023 Sindh Revenue Board, Karachi v. M/s. Reliance Commodities (Pvt.) Ltd. Karachi 13. SSTRA No.1180/2023 Sindh Revenue Board, Karachi v. M/s. Dadan and Company, Daharki 14. SSTRA No.1856/2023 Sindh Revenue Board, Karachi v. M/s. Sky Canteen Contractor, Karachi 15. SSTRA No.2092/2023 Sindh Revenue Board, Karachi v. M/s. Airspeed Charter (SMC-Pvt.) Ltd., Lahore 16. SSTRA No.2093/2023 Sindh Revenue Board, Karachi v. M/s. Airspeed Charter (SMC-Pvt.) Ltd., Lahore 17. SSTRA No.54/2024 Sindh Revenue Board, Karachi v. M/s. Reliance Commodities (Pvt.) Ltd. Karachi 18. SSTRA No.59/2024 Sindh Revenue Board, Karachi v. M/s. Karsaz (Private) Limited, Karachi 19. SSTRA No.60/2024 Sindh Revenue Board, Karachi v. M/s. Consteel Construction (Pvt.) Ltd., Karachi 20. SSTRA No.62/2024 Sindh Revenue Board, Karachi v. M/s. Hilong Oil Services & Engineering Pak (Pvt.) Ltd. 21. SSTRA No.76/2024 Sindh Revenue Board, Karachi v. M/s. Nawab Brothers (Pvt.) Ltd., Karachi 22. SSTRA No.94/2024 Sindh Revenue Board, Karachi v. M/s. Ericsson Pakistan (Pvt.) Ltd., Karachi 23. SSTRA No.168/2024 Sindh Revenue Board, Karachi v. M/s. Convolair (Pvt.) Ltd., Karachi 24. SSTRA No.100/2025 M/s. Dada Sons, Karachi v. The Commissioner, SRB Unit-30A, Karachi & Others
Date of hearing : 14.10.2025
Date of decision : 21.10.2025
SSTRA No. 349 of 2019 & others Applicants/SRB : Through Malik Waseem Iqbal, Advocate in SSTRA Nos.70/2022, 2092/2023 a/w Mr. Zamir Ali Khalid, Commissioner (Legal), SRB M/s. Zulfiqar Ali Bhutto, Abdul Manan and Shamshad Ahmed, Advocates in SSTRA Nos.349/2019, 330/2020, 71, 73, 132/2021, 71, 95, 170, 174/2022, 54, 59, 60, 62, 76, 94, 168/2024 Applicant : M/s. Dada Sons, Karachi, through Mr. Muhammad Farhan, Advocate in SSTRA 100/2025 Respondents : Through Qazi Umair Ali and Mr. Muhammad Inzimam Shareef, Advocates in SSTRA 73/2021 Mr. Aqeel Ahmed, Advocate in SSTRA 62/2024 Mr. Shams Mohiuddin Ansari, Advocate in SSTRA 60/2024 Mr. Shoaib Noor, Advocate in SSTRA 54/2024 Mr. Najeebullah, Advocate in SSTRA 132/2021 Mr. Muhammad Farhan, Advocate in SSTRA 59/2024 JUDGMENT MUHAMMAD OSMAN ALI HADI J.-
The several above titled Reference Applications have been filed by the Sindh Revenue Board (SRB) under section 63 of the Sindh Sales Tax on Services Act 2011 (“SSTA 2011”) against various entities, challenging the concurrent findings decided on the same issue, whereby the Appellate Tribunal, inter alia, (upholding such portion of the Order-in-Appeal passed by the Commissioner Appeals) held that the Respondents not having been registered with the Applicant / Sindh Revenue Board (“SRB”), were not liable to be assessed for sales tax on services provided by them [for the said unregistered period]. As per order of this Court dated 21.05.2025, the following rephrased (common) questions of law arising from the Impugned Judgement were framed:-
i. Whether under the provisions of the Sindh Sales Tax on Services Act, 2011, and the rules made thereunder, a person who obtains voluntary registration on a particular date can be held liable for payment of sales tax on services rendered prior to the date of such registration?
ii. Whether the learned Appellate Tribunal was justified in upholding the decision of the Commissioner (Appeals) to the extent that the taxpayer was not liable to pay sales tax for the period prior to his 3 SSTRA No. 349 of 2019 & others voluntary registration, even though he had provided taxable services during that period?
iii. iii. Whether the liability to pay sales tax on services provided by an unregistered person prior to the date of registration could be shifted entirely to the withholding agent under the provisions of the Sindh Sales Tax Special Procedure (Withholding) Rules, 2011 and 2014?
iv. Whether a person providing taxable services without registration can avoid liability of sales tax merely on the basis of subsequent voluntary registration, and whether such interpretation is consistent with the scheme and objective of the Sindh Sales Tax on Services Act, 2011? 2.
The arguments were commenced by Mr. Waseem Iqbal, Advocate on behalf of the Applicants / SRB, 1 who filed the instant reference against judgements dated 16.11.2021 (“the Impugned Judgement”) passed by the Appellate Tribunal
SRB. Learned counsel for the Applicant stated the Appellate Tribunal has found that the said SSTA 2011 could not be assessed / collected from the Respondents prior to their voluntary registration for payment of sales tax on services
Counsel referred to Para19 of the Impugned Judgement4 , in which he submitted that the Tribunal has held that assessment of non-registered persons was impermissible. Learned counsel stated that taxability is applicable under SSTA 2011 irrespective of the fact as to whether the service provider was registered or not. Learned counsel then referred to sections 23 and 24 of the SSTA 20115 and reiterated that the said provisions of the Act apply to any persons providing taxable services, irrespective of whether they are registered with the Applicant / SRB or not. He further referred to section 3 of SSTA 2011 and stated that any taxable service (defined therein) is liable to be taxed under the said Act. He pointed to sections 24A and B of SSTA 2011, which respectively provide for „Voluntary‟ and „Compulsory‟ registration, and submitted that the learned Tribunal‟s ruling in this regard has misinterpreted the said provisions, by holding that 1 As there are several References before us, the page numbering shall be according to the File in SSTRA No. 70/2022 (unless stated otherwise) 2 There are several separate appeals having impugned judgements on the same point, with diverse dates of decision, hence we have not mentioned any-one date but have collectively referred to all the decisions in the Spl. STRA‟s as “Impugned Judgement” 3 Under the Sindh Sales Tax on Services Act 2011 (“SSTA 2011”), 4 At page 31 of the File in SSTRA No. 70 of 2022 5 Which relate to assessment and registration for sales tax on services 4 SSTRA No. 349 of 2019 & others prior to registration with SRB, no sales tax on services would be recoverable under the SSTA 2011 from a service provider (i.e. the Respondents) until their registration process is complete. 4. Counsel next referred to section 2(71) of the SSTA 2011, which provides the definition of a „registered person‟, and submitted that the said definition encompasses any person who is registered or is liable to be registered, and that would therefore not exonerate any person who does not physically register, from any tax liability which may arise. He concluded by submitting that the Respondents have provided taxable services since the year 2013 and that the same remains payable by them, irrelevant to their registration status with the SRB. 5. The arguments put forth by the Applicants were repelled by the learned counsels for the Respondents. Mr. Qazi Umair Ali, commenced the arguments on behalf of Respondents6 . He started his contentions by referring to Section 3(1A) of SSTA 2011 and stated that at the time of assessment of the Respondents, the law was different. He stated that at such time the law specifically provided for payment / liability of such tax to be made only by persons registered with the SRB. He submitted that section 3 of the SSTA 2011 as has been relied upon by the Applicant, but this was amended in 2021 to its current form, and therefore its reliance by the Applicant cannot be considered as a valid argument since the applicable time-period involved was prior to the amendment, and the previous reading would not have included persons unregistered with the SRB. 6. He next referred to section 23 of the SSTA 2011, and submitted that inclusion of a registered person should be read alongside the definition of „registered persons‟ provided in Section 2(71) of SSTA 2011, which together ought to be read with the applicable provisions which were in vogue at the time.7 In this regard he submits that a person would have to have been registered with the SRB, at such time when a determination was made against them, as the law then was. 6 Appearing for the Respondents in SSTRA No. 73/2021 7 Since amendments were subsequently made to the SSTA 2011 5 SSTRA No. 349 of 2019 & others 7. He concluded by submitting that in any event, first a determination needs to be made to see whether the person fell within the bracket of being required to be registered by the SRB and liable for assessment, before any tax under the SSTA 2011could be levied on him. He submitted that this has not been done in the case of the Respondent, and therefore, the Impugned Judgement was absolutely correct in their findings. 8. Mr. Aqeel Ahmed, advocate appearing on behalf of the Respondents in SSTRA No. 62/2024 stated that his matter pertains to the period from July 2013 – June 2014, and that the Respondent8 was involved in oil drilling services which were not notified under the Second Schedule of SSTA 2011, and hence they were never required to be registered anyways. He submitted that the Respondent only subsequently registered with the SRB because of certain other ancillary services which they intended to provide, which may have required payment of SST. He continued that their primary services was of drilling, on which they remained unsusceptible for levy of sales tax on services, and they were wrongly targeted by the Applicant. 9. Learned counsel next referred section 24A of SSTA 2011 (voluntary registration) and submitted that the same was inapposite to the said Respondent. 10. Counsel then highlighted sections 3(1) & 9 of SSTA 20119 and stated that the same were never applicable to the Respondent, and that the Impugned Judgement was erroneous to such extent (only). He referred to Para 4 of the Impugned Judgement10 and submitted that learned Appellate Tribunal has incorrectly stated the Respondent was liable for registration under SSTA 2011. He then averred that where there is an interpretation (in a fiscal statute) to avoid surplusage, the same should be followed, which he submits in the instant matter would apply to the benefit of the Respondent. He relied upon case law reported as 2010 PTD 2338 (@ pg. 2344). 8 In STRA No. 62/2024 9 Relating to payment of sales tax on services 10 At page 37 of SSTRA No. 62 of 2024 6 SSTRA No. 349 of 2019 & others 11. Mr. Muhammad Farhan, Advocate appearing in SSTRA No. 59/2024, stated that in his case, the only issue was regarding penalty imposed, for which he submits that mens rea is required. He submits the same was not properly adjudicated by the Appellate Tribunal. He further specified that they (M/s Karasaz Pvt. Ltd.) are also the applicants in SSTRA No. 100/2025, having challenged portions of the Impugned Judgement. 12. Mr. Shams Mohiuddin Ansari, advocate appearing for Respondent in SSTRA No. 60/2024 submitted that in his case the matter pertains to a time-period prior to 2025, and therefore under the law existing at such time they were not liable to be registered by SRB. 13. Learned Counsel for the Applicants, while using his right of rebuttal, and has referred to section 43 (Offence No.1) of the SSTA 2011, and submitted that a penalty was provided for persons who were providing taxable services, but were not registered, despite being liable in such regard. He submitted that if the arguments of the Respondents are entertained, that would make section 43 redundant, since no penalty could be imposed (in such a scenario). He has relied upon the case law reported as 2015 PTD 796 in support of his contentions. 14. We have heard learned counsel for parties and have gone through the material available on record. The primary question(s) of law we will deliberate upon pertains to whether the Respondents being service providers were liable for payment under the SSTA 2011 (providing taxable services), prior to their registration with the Applicant / SRB? 15. We shall initiate our reasonings by a perusal of the definition clause in section 2(71) SSTA 2011, reproduced below: “2(71). “registered person” means a person who is registered or is liable to be registered under this Act or any other person or class of persons notified by the Board in the official Gazette: Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder;” 7 SSTRA No. 349 of 2019 & others 16. The said clause defines “registered person”, and in itself (through the proviso) illustrates a distinction between „persons registered‟ and persons liable to be registered; by stating that persons “liable to be registered but not registered” are not entitled to any of the benefits available to a registered person under the Act. This would, by a clear & plain reading, indicate that an unregistered person could not be equated with the same weightage as a person who is registered. 17. It is to be noted that even if a contrary view is taken (which is not by us), and the words “liable to be registered” is considered to be included within the definition of “registered person” (as put forth by the Applicants) the same would be against the spirit of the statute (for reasons further rationalized below), as a definition clause could not create a charge nor could it defeat the substantive provisions of the statute.11 A similar view was also touched upon (in the same vein) by a learned Division Bench in the case of Digri Sugar Mills Ltd. v Addl. Collector Customs12 (of which one of us, Agha Faisal, J. was the author) when hearing a matter pertaining to collection of certain sales tax against unregistered persons. 18. Next, we turn our attention to section 23 of the SSTA 2011, which deals with the assessment of tax against a registered person. The explanation of who needs to be registered is defined under the following section 24 of the said SSTA 2011. This is further broken in two segments, i.e. „Voluntary Registration‟ under section 24A and „Compulsory Registration‟ under section 24B. 19. Section 24A is self-explanatory and allows for any person carrying on (taxable) economic activity13 to have themselves voluntarily registered with the SRB. 20. Section 24B of the SSTA 2011 deals with the „Compulsory Registration‟ aspect, which, to simplify, holds that if an officer of the Applicant /SRB deems appropriate, he can register a person required to be registered. Section 24B14 reads: 11 Reliance is placed on P 2018 SC 189 & P 2020 Sindh 62 12 2023 PTD 825 @ Para 8 13 „Economic activity‟ is defined under section 4 of the SSTA 2011 14 Inserted vide Sindh Finance Act 2013 assented on 11th July 2013 8 SSTRA No. 349 of 2019 & others “24B. Compulsory Registration.–(1) If an officer of the SRB is satisfied that a person is required to be registered under this Act and that the person has not applied for registration, the officer of the SRB shall, after such inquiry as he [may deem fit], register the person through an order to be issued in writing and such person shall be deemed to have registered from the date he became liable to registration. (2) No person may be registered compulsorily without being given an advance notice and an opportunity of being heard.” 21. This section provides powers to the Applicant / SRB to register taxable service providers, after which they would be deemed to have been registered from the date they became liable for registration (i.e. from the date they provided a „taxable service‟ as defined under section 3 SSTA 2011, discussed below). The „deeming‟ provision in the said section has provided the Applicant / SRB an opportunity to bring a person within the registration process, and then initiate recovery from the date such person became liable for tax payment. We get support from this construction of the deeming clause through settled jurisprudence. In the case of Federation of Pakistan v Mian Muhd. Nawaz Sharif15 a five-member bench of the Apex Court opined: “…..by inserting a deeming clause creates a legal fiction. Whenever such an expression is used in a statute, it shall have to be treated as something stipulated in the said provision, though in reality it may not be. It is by now a well settled principle of construction that in interpreting a provision creating a legal fiction the court has to ascertain for what purpose the fiction is created, whereafter the court is to assume all those facts and consequences which are intended.” 22. Moving on to the next but perhaps most pivotal point, we shall consider the tax levying clauses of the SSTA 2011. For a person to fall within the ambit of SSTA 2011, they must be providing a „taxable service‟, which is explained under section 3. Section 3(1) in its current (amended) form reads: “3. Taxable Service.—(1) [Taxable service means a service] which is provided by a person from his office or place of business in Sindh in the course of an economic activity, including the commencement or termination of the activity. [Explanation-I].—This sub-section deals with services provided by persons, regardless of whether those services are provided to resident persons or non-resident persons.] 15 PLD 2009 SC 644 9 SSTRA No. 349 of 2019 & others [Explanation-II].—A service shall not be considered a taxable service on which a tax can be imposed in terms of entry 53 of Part I of the Federal Legislative List in the Fourth Schedule to the Constitution of Islamic Republic of Pakistan read with Article 142 thereof.]” 23. The above section was amended vide the SSTA (Amendment) Act 202116 [“2021 Act”]. Prior to the 2021 Act, section 3(1) read as: “3(1). A taxable service is a service listed in the Second Schedule to this Act, which is provided.