Citation(s): 2023 SLD 2049 = 2023 PTD 1419

Supreme Court of Pakistan

Civil Petition No. 414 of 2021, C.M.A. No. 1963 of 2021 in C.P. 414 of 2021, Civil
Petitions Nos. 1188 to 1259, 47S-K, 476-K, 1422 to 1430, 2819, 317-K to 389-K of
2021, 579 and 777 of 2022, decided on 12th October, 2022. Dates of hearing: 29th
September, 3rd, 4th, 5th, 7th, 11th and 12th October, 2022.
(Against the judgments and orders dated 17.11.2020, 01.02.2021, 19.01.2021,
09-02.2021, 23.12.2021 and 19.01.2022, passed by the High Court of Sindh in
C.Ps. Nos.D-5283, D-5220, D-5252 to D-5224

AUTHOR(S): UMAR ATA BANDIAL, C.J., SYED MANSOOR ALI SHAH AND AYESHA A.
MALIK, JJ

SINDH REVENUE BOARD THROUGH SECRETARY GOVERNMENT OF SINDH,

KARACHI AND OTHERS
VS
MESSRS QUICK FOOD INDUSTRIES (PVT.) LIMITED AND OTHERS

Uzair Karamat Bhandari, Advocate Supreme Court and Anis M. Shahzad, Advocate-
on-Record for Petitioners (in C.P. No.414 and C.M.A. 1963 of 2021).
Azid Nafees, Advocate Supreme Court and Tariq Aziz, Advocate-on-Record for
Petitioners (in C.Ps. Nos. 1188 to 1259, 1422 to 1430, 2819 of 2021, 579 and 777
of 2022).
Saifullah, Additional Advocate General, Sindh (via video link from Karachi) for
Petitioners (in C.Ps. Nos.317-K to 389-K, 475-K and 476-K of 2021).
Makhdoom Ali Khan, Senior Advocate Supreme Court, Saad Hashmi, Advocate and
Syed Rifaqat Hussain Shah, Advocate-on-Record . for Respondents (in C.Ps.320-K,
324-K, 330-K, 337-K, 340-K, 342-K, 345-K to 347-K, 351-K, 353-K, 356-K, 361-K,
366-K, 377-K, 378-K, 380-K and 385-K of 2021).
Abdul Sattar Pirzada, Advocate Supreme Court for Respondents (in C.Ps.
Nos.1207, 1208, 1226, 1245 and 1251 of 2021).
Zaheer Minhas, Advocate Supreme Court for Respondents (in C.P.414 of 2021).
Faisal Siddiqui, Advocate Supreme Court for Respondents, (in C.Ps. Nos. 1222 of
2021 and 359-K of 2021).
Moiz Ahmed, Advocate Supreme Court for Respondents (in C.Ps. Nos.348-K and
384-K of 2021).
Khalid Mehmood Siddiqui, Advocate Supreme Court (via video link from Karachi)
for Security Services (in C.Ps. Nos.2819 of 2021 and 475-K of 2021).
Nemo for other Respondents (in all cases).
Law: Sindh Sales Tax on Services Act, 2011
Section: 4,5,8

Section 5 of the Sindh Sales Tax on Service Act, 2011 (‘the Act’), being the charging
provision, is a substantive provision and has a direct nexus to the taxable event provided
for under Section 4 which particularly excludes the services of the employees to the
employer. In any event, the. taxing event cannot go beyond the parameters drawn under
Section 8 of the Act which restricts the scope of the tax to the value of taxable service. Put
simply, the charging provision (Section 5) must align with the taxable event (Section 4)
while staying within the scope of the tax (Section 8).

The amount of sales tax on services levied is based purely on the value charged by the

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service provider for the service it renders, which value is determined by the service provider
itself, establishing a connection between the consideration paid and the service provided.
Moreover, for a service to be taxable, it must be listed in the First Schedule to the Act and
involve an economic activity conducted as a business, profession, or trade, whether or not
for profit. The service is treated under the Act as an economic activity and will not include
the activities of the employee to carry out the service. As per the procedure under the
Sindh Sales Tax on Services Rules, 2011 (‘the Rules’), the service provider is required to
collect and deposit the tax in the government treasury, for which purpose, the service
provider issues an invoice that includes the value of the service including the salaries paid,
and other expenses associated with security and manpower.

Argument of petitioner (Sindh Revenue Board) that the gross amount charged includes all
amounts, including reimbursable expenses such as salaries, lacks merit. This is because
these amounts are actually paid by the service recipient, and neither do they form part of
the economic activity conducted by the service provider, nor of the consideration paid for by
the service recipients for the services rendered. Gross amount charged, for the purposes of
sales tax on services, relates to the consideration in money paid for the value of the taxable
service under section 5, the applicability of which is restricted by Section 8 defining the
scope of the tax, which means that quantum is charged for the service alone, nothing more
and nothing less. The value of taxable service is determined on the basis of the value of
economic activity - carried out in the provision of the service and salaries, being
reimbursable expenses, are not part of the taxable service or its value; thus, they are not
included in value of the service. The consideration paid is only for the services rendered and
cannot include the cost borne by the service recipient in respect of the salaries paid to the
security and manpower it procured. Therefore, the sales tax on services can only be levied
on consideration paid for service provided or rendered, and salaries paid by the employer to
the employees are not part of the service rendered for this purpose, and so are not taxable.

The scope of the tax as provided under the Act cannot be altered by the Rules. Hence, the
scope or value of the tax could not be expanded than what the Act has proscribed through
the Rules. So, irrespective of the amendments through which the provisos to Rules 42E(3)
and 42E(5) of the Rules were omitted, salaries could not be included in the gross amount
charged or taxed. Even if the amendments were brought about only to bring the salaries
paid to the labour and manpower with the preview of the tax, the same still could not have
been allowed being not only beyond the scope of the Act but also being inconsistent with it.
Petitions for leave to appeal were dismissed and leave was refused.

Suo Motu Case No. 13 of 2009 PLD 2011 SC 619 and Suo Motu Case No. 11 of 2011 PLD
2014 SC 389 ref.

(b) Delegated legislation——Delegated legislation is intended to enforce the law and

advance the purpose of the underlying legislature, without overriding it and while minutiae
could be filled in, the parent statute could neither be added to nor subtracted from.

Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan 2015 SCMR 630 ref.

(c) Interpretation of statutes—Rules framed under a statute—Scope—If a rule goes beyond

what the parent statute contemplates, it must yield to the statute.

Collector of Central Excise and Sales Tax v. Rupali Polyester Limited 2002 SCMR 738 ref.

JUDGMENT:
AYESHA A. MALIK, JUTICE:---.---
These Civil Petitions impugn judgment dated 17.11.2020 passed by the High Court of
Sindh, Karachi (High Court), along with its subsequent orders and judgments dated
01.02.2021, 19.01.2021, 09.02.2021, 23.12.2021 and 19.01.2022, all of which relied upon
the main judgment of 17.11.2020.

2. The Sindh Revenue Board (SRB or the Petitioner), established under the Sindh Revenue
Board Act, 2010, regulates fiscal matters and, amongst its other functions, it levies and
collects sales tax on services under the Sindh Sales Tax on Services Act, 2011 (Act). The
Respondents, as service providers and its recipients, are subjected to sales tax on services
under the Act which is charged based on the rates specified in its Second Schedule under
two different tariff headings i.e., labour and manpower supply services, and security agency
services.

3. A dispute arose between the parties on the interpretation of the value of taxable
services, as to whether the tax is to be levied on the gross amount charged inclusive of
salaries and allowances (collectively, salaries) that are paid to the security personnel
(guards, etc.) and labour and manpower (collectively, security and manpower) in supply of
services. The Respondents filed the petitions before the High Court challenging this
inclusion of salaries in the gross amount charged in the levy of sales tax on services. The
High Court concluded that the tax is to be levied only on the value of service, and cannot
include salaries as they are not part of the service itself.

4. Brief facts of the case are that the Respondents are engaged in two types of services
being labour and manpower supply services and security agency services. These services
are defined in Section 2 of the Act in the following terms:

“(55A) “labour and manpower supply services” includes the services provided or rendered
by a person to another person, for a consideration, for use of the services of a person or an
individual, employed, hired or supplied by him;

(78) “security agency” means a person engaged in the business of providing of services
relating to security of any person or property, whether moveable or immovable, including
the services of provision of security personnel, guard or vehicle;”

Pursuant to section 72 of the Act, SRB framed the Sindh Sales Tax on Services Rules, 2011
(Rules) to effectuate the provisions of the Act and set out procedures for collection of sales
tax on service on-different types of businesses. Subsequently, Notification No.SRB-3-
4/9/2013 dated 01.07.2013 inserted Rule 42D and 42E so as to provide for process to
collect and pay the applicable sales tax under the Act. Rule 42D provided the valuation
mechanism for security agency, and 42E provided the same for labour and manpower
supply services. The said Rules, prior to any amendments, are reproduced below:

“42D. Service provided or rendered by Security Agency.— (1) The sales tax on the services
provided or rendered by a Security Agency shall be collected and paid by the service
provider in accordance with this rule.

(2) Every Security Agency shall register itself under section 24 of the Act read with the
provisions of Chapter-II of these rules.

(3) The value of taxable services for the purpose of levy of sales tax shall be the gross
amount charged for the services provided or rendered.

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(4) Every Security Agency shall issue an invoice or a bill of charges for each transaction
from a duly bound book of serially- numbered invoices or bill of charges or electronically-
generated invoices or bill of charges which shall contain the particulars as specified in sub-
rule (1) of rule 29 of these rules. A copy of such invoice or the bill shall be given to the
person to whom such services are provided or rendered and one copy thereof shall be
retained by the Security Agency in the bound book of invoices or bill of charges. Not more
than one book of invoices or bill of charges or electronic data and evidence shall be used at
one time provided that where the Security Agency has one or more branches, separate
books of invoices or bill of charges may be used for each such branch also indicating the
location or address of such branch.

(5) Every Security Agency shall maintain account of all services provided or rendered by it
and shall also maintain the record prescribed in section 26 of the Act and sub-rule (2A) of
rule 29 of these rules.

(6) The tax involved on the services provided or rendered by a Security Agency during a tax
period shall be deposited by such a Security Agency in the manner prescribed in Chapter-Ill
of these rules by the 15th day of the second month following the tax period to which it
relates. The Security Agency shall file his tax return in the manner prescribed in Chapter-Ill
of these rules within 3 days from the due date prescribed for payment of tax.

42E. Procedure for collection and payment of sales tax on Labour and Manpower Supply
Services.—(1) The provisions of this rule shall apply to the persons providing or rendering
labour and manpower supply services (tariff heading 9829.0000) and the tax payable on
the said services.

(2) Every person providing or rendering labour and manpower supply service shall register
himself under section 24 of the Act read with the provisions of Chapter-II of these rules.

(3) The value of taxable services for the purposes of levy of sales tax shall be the gross
amount charged for the services provided or rendered.

Provided that the amount of salary and allowances of the labour and manpower supplied by
such persons to a service recipient, where reimbursed by the service recipient on actual
basis, shall be excluded from the value of the services for the purposes of payment of tax
under this rule.

(4) The provisions of section 7 of the Act, read with subsection (2) of section 17 thereof
shall apply in relation to the tax payable by person.

(5) Every such person shall issue a serially-numbered invoice or bill of charges or an
electronically generated invoice or bill of charges for each transaction in terms of sub-rule
(4) of this rule. The invoice or the bill of charges shall contain the particulars as specified in
sub-rule (1) of rule 29 of these rules. A copy of the invoice or the bill of charges shall be
given to the person to whom such services are provided or rendered and one copy shall be
retained by the service provider in the bound book of invoices or bill of charges.

Provided that in case where the tax invoice are the bill of charges is issued in. view of the
provisions of the Proviso to sub-rule (3) above, such invoice or bill of charges shall clearly,
specifically and separately indicate the gross amount charged for the service, the amount of
salary and allowances of the labour and manpower, sought to be reimbursed by the service
recipient on actual basis and the net amount of charges on which the tax is required to be
paid.
(6) Every such person (service provider) shall maintain account of all services provided or
rendered by him and shall also maintain the record prescribed in section 26 of the Act and
sub¬rule (2A) of rule 29 of these rules. He shall also maintain record of the contract or the
agreement made between the service provider and the service recipient.

(7) The tax involved on the services provided or rendered by persons engaged in the
economic activity of labour and manpower supply service during a tax period shall be paid
by the service provider in the manner prescribed in Chapter-Ill of these rules by the 15th
day of the month following the tax period to which it relates. The tax return shall be filed by
the service provider in the manner prescribed in Chapter-Ill of these rules within 3 days
from the due date prescribed for payment of tax.”

Until 2017, SRB charged sales tax on services from the Respondents dealing with labour
and manpower supply services exclusive of the amount of salary paid to the labour and
manpower, as was envisioned under the proviso of Rule 42E at that time. It was the case of
the Respondents dealing with supply of security services that their business model was
identical to that of labour and manpower supply services, i.e., provision of manpower or
vehicles, thus, they too were entitled to the exclusion of salaries from the value of service
and they were being discriminated against. However, through SRB’s Notification Nos.SRB-3-
4/12/2017 and SRB-3-4/26/2017 dated 05.06.2017 and 03.08.2017, respectively, Rule 42E
was amended and the provisos to both sub-rules (3) and (5) (underlined above) were
omitted which brought all of the Respondents to the same legal position. As a result of this,
SRB began charging sales tax on services on the gross amount charged by the service
provider inclusive of salaries paid to the labour and manpower as well. Aggrieved, the
Respondents challenged the notifications as well as Rules 42D and 42E of the Rules before
the High Court through constitutional petitions. Their contention was that sales tax on
services could only be levied on the value of taxable service and could not include
reimbursable expenses such as salaries as these expenses are not a part of the service
itself, and could not be factored into the value of taxable service as envisioned under the
Act, therefore, SRB was charging a higher tax amount than what was prescribed under the
law. SRB argued that the value of taxable services is the gross amount charged by the
service provider which includes the salaries. The dispute pertained to the interpretation of
the value of taxable services, as defined in section 5 of the Act, and whether it included
salaries paid to security and manpower. The High Court concluded that the sales tax on
services was charged on the consideration paid for the service provided by the service
provider, and could not include salaries in its calculation since they are not a service.
Following this view of the High Court, the instant petitions are filed.

5. The Petitioners’ case before us is that when calculating the value of taxable service for
the supply of security and manpower, salaries paid by the service provider to the security
and manpower should be included since it is a part of invoiced amount which shows the
gross amount charged by the service provider for the service. They claim the tax is similar
to UKs VAT, which is applied to turnover rather than profit, making it appropriate to include
expenses in the taxable amount. Additionally, they assert that sales tax is a consumption-
based tax, and is assessed based on what the service recipient pays to the service provider
and since salaries are paid by the service provider, it should be included in the gross
amount charged, and failure to do so would also make the amendments redundant. The
Petitioners rely on the invoices issued by the service provider to the service recipient, which
include salaries, hence, ’their claim that sales tax should be-charged on the total invoiced
amount, which, they state, is the gross amount charged. On the other hand, the
Respondents argue that sales tax on services is to be charged on the value of service alone
and cannot include other expenses such as salaries, which are borne by the service

5
recipients and do not form part of the consideration paid for the service. They argue that
service rendered in the instant case is the supply of security and manpower and salaries -
sometimes paid by the service provider after being invoiced to the service. recipient and
sometimes directly paid by the service recipients are separate and not a service. In this
context, it is not in dispute that salaries are paid by the service recipient, as it is an
expense of the service recipient. Therefore, they argue, that the sales tax on services is
applied to the taxable services as defined and listed under the Act, and does not include the
service recipient’s expenses. These taxable services are services that a registered person
must pay taxes on, and the value of taxable service which is determined based on the value
quantified by the service provider for the service rendered.

6. Arguments heard, record perused and the relevant law assessed. The issue before us is
the interpretation of the terms value of taxable service and gross amount charged. The
services in question are provided pursuant to service contracts between the service provider
and the recipients. Although, the services are different in these petitions, the central legal
question remains whether salaries should be considered in the value of the taxable service
and whether they constitute part of the consideration to be paid for these services. This
necessitates an understanding of section 5 of the Act, which defines the value of taxable
service for levy of sales tax on services. In order to appreciate the scheme of the tax, the
relevant provisions of the Act are reproduced below:

3. Taxable Service:—(1) A taxable service is a service listed in the Second Schedule to this
Act, which is provided:--

(a) by a registered person from his registered office or place of business is Sindh;

(b) in the course of an economic activity, including in the commencement or termination of

the activity.

Explanation.-This subsection deals with services provided by registered persons, regardless

of whether those services are provided to resident persons or non-resident persons.

(2) A service that is not provided by a registered person shall be treated as a taxable
service if the service is listed in the Second Schedule to this Act and is provided to a
resident person by a nonresident person in the course of an economic activity:

Explanation.—This subsection deals with services provided by non-resident persons to

resident persons whether or not the said resident person is an end consumer of such
services.

(3) For the purposes of subsection (2), where a person has a registered office or place of
business in Sindh and another outside Sindh, the registered office or place of business in
Sindh and that outside Sindh shall be treated as separate legal persons.

(4) The Board may, by notification in the official Gazette, prescribe rules for determining the
conditions under which a particular service or class of services will be considered to have
been provided by a person from his registered office or place of business in Sindh.

4. Economic activity.—(1) An economic activity means any activity carried on by a person

that involves or is intended to involve the provision of services to another person and
includes—

(a) an activity carried on in the form of a business, including a profession, calling, trade or
undertaking of any kind, whether or not the activity is undertaken for profit;

(b) an activity of supply or provision of movable or immovable property by way of lease,

rent, license or other similar arrangement; and

(c) a one-off adventure or concern in the nature of a trade.

(2) Anything done or undertaken during the commencement or termination of an economic

activity is part of the economic activity

(3) An economic activity does not include—

(a) the activities of an employee providing services in that capacity to an employer; or

(b) a private recreational pursuit or hobby of an individual.

5. Value of a Taxable Service.-—(1) The value of a taxable service is:—

(a) the consideration in money including all Federal and Provincial duties and taxes, if any,
which the person providing a service receives from the recipient of the service but excluding
the amount of sales tax under this Act:

Provided that-

(i) in case the consideration for % service is in kind or is partly in kind and partly in money,
the value of the service shall mean the open market price of the service as determined
under section 6 excluding the amount of sales tax under this Act;

(ii) in case the person provides the service and the recipient of the service are associated
persons and the service is supplied for no consideration or for a consideration which is lower
than the price at which the person provides the service to other persons who are not
associated persons, the value of the service shall mean the price at which the service is
provided to such other persons who are not associated persons excluding the amount of
sales tax; and

(iii) in case a person provides a service for no consideration or for a consideration is lower
than the price at which such a service is provided by other persons, the value of the service
shall mean the open market price for such a service;

(b) in case of trade discounts, the discountec1 price excluding the amount of sales tax
under this Act, provided the tax invoice shows the discounted price and the related tax and
the discount allowed is in conformity with customary business practice;

(c) in case there is reason to believe that the value of a service has not been correctly
declared in the invoice or for any special nature of transaction it is difficult to ascertain the
value of a service, the open market price, as determined under section 6;

(d) notwithstanding any of the above, where the Board deems it necessary it may, by
notification in the official Gazette, fix the value of any Service or class of services and for
that purpose fix different values for different classes or description of the same or similar
types of services;

Provided that where the value at which the service is provided is higher than the value fixed

7
by the Board, the value of the service shall, unless otherwise directed by the Board, be the
value at which the service is provided.

8. Scope of Tax: (1) Subject to the provisions of this Act, there shall be charged, levied and
collected a tax known as sales tax on the value of a taxable service at the rate specified in
the Schedule in which the taxable service is listed.

(2) The Board, with the approval of Government, may, subject to such conditions and
restrictions as it may impose, by notification in the official Gazette, declare that in respect
of any taxable service provided by a registered person or a class of registered persons, the
tax shall be charged, levied and collected at such higher or lower rate or rates as may be
specified in the said notification for any given tax period.”

(Emphasis supplied)

7. Section 3 defines taxable service to be a service listed in the Second Schedule, which is
provided by a registered person in the course of an economic activity. Section 4, provides
for the taxing event under the Act, and defines economic activity as involving the provision
of services to another which, under Section 4(1)(a), includes business activities,
professions, trades, or undertakings, whether or not for profit and section 4(3)(a)
specifically excludes from economic activity the activities of the employee providing services
to the employer. Section 5 defines value of taxable service as the monetary consideration
which the service provider receives from the service recipient for the services rendered.
Section 8 defines the scope of tax, and states that the sales tax shall be levied on the value
of taxable service as calculated at the rate

specified in the Schedule. The First Schedule describes the services whilst the Second
Schedule prescribes the rate of taxes for such services.. In this tax structure, it becomes
clear that section 5, being the charging provision, is a substantive provision and has a direct
nexus to the taxable event provided for under section 4 which particularly excludes the
services of the employees to the employer. In any event, the taxing event cannot go beyond
the parameters drawn under Section 8 of the Act which restricts the scope of the tax to the
value of taxable service. Put simply, the. charging provision (section 5) must align with the
taxable event (section 4) while staying within the scope of the tax (section 8).

8. Upon reviewing these provisions of the Act in conjunction, it becomes evident that the
amount of sales tax on services levied is based purely on the value charged by the service
provider for the service it renders, which value is determined by the service provider itself,
establishing a connection between the consideration paid and the service provided.
Moreover, for a service to be taxable, it must be listed in the First Schedule and involve an
economic activity conducted as a business, profession, or trade, whether or not for profit.
The service is treated under the Act as an economic activity and will not include the
activities of the employee to carry out the service. As per the procedure under the Rules,
the service provider is required to collect and deposit the tax in the government treasury,
for which purpose, the service provider issues an invoice that includes the value of the
service including the salaries paid, and other expenses associated with security and
manpower.

9. The intent of the statute is clear on the matter, the Act provides the foundation for taxing
events involving service provision, defines the value of taxable services, and determines the
scope and rate of sales tax to be applied. The Petitioners interpreted Rules 42D and 42E to
mean that the sales tax on services would be levied on the total gross amount charged from
the service recipients which resulted in the dispute in question and the Petitioners based
their entire case in this respect on the invoices that are generated for the said services,
which include all expenses along with the service charges. Consequently; they raised
demands of service tax on the total invoiced amount, claiming that it is the gross amount
charged for the services that is. taxed. In view of this, the first question to be examined is
whether the gross amount charged under Rules 42D and 42E includes salaries paid to the
security and manpower. In cases of labour and manpower supply services, the definition is
provided in section 2(5 5A) as the supply of labour and manpower services which includes
the services provided or rendered by a person to another person, for a consideration, for
use of the services of a person or an individual, employed, hired or supplied by him. So, the
service is the supply of labour and manpower which aligns with the Second Schedule where
the service is described as labour and manpower supply services. Accordingly, the economic
activity in such cases is the supply of labour and manpower, being the taxable activity, the
consideration which* js charged by the service provider, which fact is not disputed by the
Petitioners. Similarly, in the case of security agency, the definition is provided in section
2(78) as a person engaged in the business of providing of services relating to security,
including the services of provision of security personnel, guard or vehicle. So, in the cases
relating to security agency, the service is the supply of security personnel, guard or vehicle,
and accordingly, the economic activity here is this supply, which is charged for by the
service provider and becomes the taxable activity. Even the service contracts in these cases
clearly state that the service provider supplies security and manpower to the service
recipient at the recipients own cost, meaning that the service recipient pays for the security
and manpower, and the service provider is compensated for its service of arranging and
providing the same. The service includes providing various skills and expertise (manpower),
manual labour (labour), and security personnel. It is clear that the service, under these
contracts, essentially entails supplying, for consideration, human capital the cost of which is
borne by the service recipient.

10. After carefully examining the relevant provisions of the law and the case law in this
respect, we find that Petitioner’s argument that the gross amount charged includes all
amounts, including reimbursable expenses such as salaries, lacks merit. This is because
these amounts are actually paid by the service recipient, and neither do they form part of
the economic activity conducted by the service provider, nor of the consideration paid for by
the service recipients for the services rendered. Gross amount charged, for the purposes of
sales tax on services, relates to the consideration in money paid for the value of the taxable
service under section 5, the applicability of which is restricted by section 8 defining the
scope of the tax, which means that quantum is charged for the service alone, nothing more
and nothing less. The value of taxable service is determined on the basis of the value of
economic activity carried out in the provision of the service and salaries, being reimbursable
expenses, are not part of the taxable service or its value; thus, they are not included in
value of the service. The consideration paid is only for the services rendered and cannot
include the cost borne by the service recipient in respect of the salaries paid to the security
and manpower it procured. In the provision of a service, some expenses are expenses
incurred on behalf of the service recipients which are later reimbursed to the service
provider, meaning that these expenses have no nexus with the service or its value. So far
as the inclusion of salaries and allowances in the invoice is concerned, it is the Rules that
require that the invoices be raised by the service provider to include all required particulars
such as the name, address, SNTN, description, tariff heading and other details of service
provided, value exclusive Sindh sales tax, rate of Sindh sales tax, amount of Sindh sales
tax, value inclusive of Sindh sales tax, etc. Therefore, the service provider has no choice
but to include all of these amounts along with the amount for the value of the service as
charged. However, inclusion of all such amounts on the invoice, does not warrant taxation
on the total invoiced amount under the Act as the total invoiced amount does not constitute
the gross amount charged on services rendered, and goes beyond the scope of tax.

9
Therefore, the sales tax on services can only be levied on consideration paid for service
provided or rendered, and salaries paid by the employer to the employees are not part of
the service rendered for this purpose, and so are not taxable.

11. In view of our findings above, an additional question must be examined. What is the
legal effect of the amendments to the Rule 42E? Section 72 empowers SRB to frame Rules
under the Act by way of delegated legislation. Delegated legislation is intended to enforce
the law and advance the purpose of the underlying legislature, without overriding it and
while minutiae could be Filled in, the parent statute could neither be added to nor
subtracted from (Muhammad Amin Muhammad Bashir Limited v. Government of Pakistan,
2015 SCMR 630). The Rules were framed to set out for the process and procedure to levy
and collect the sales tax on services, which can only be charged on the value of taxable
service. However, the sales tax demanded by SRB on the salaries of security and manpower
is inconsistent with mandate of the Act. The legislature’s intent to levy tax on services
under the Act has always been clear, and a deviation from it by use of the Rules cannot be
justified (Collector of Central Excise and Sales Tax v. Rupali Polyester Limited, 2002 SCMR
738) as the intent of the Rules is only to give effect to the mandate of the Act. It is clear
that the scope of the tax as provided under the Act cannot be altered by the Rules. It is
settled law that if a rule goes beyond what the parent statute contemplates, it must yield to
the statute. Especially in tax cases, where a tax could not be levied through a delegated
legislation until and unless it was leviable under the charging provision of the fiscal statute,
which in the instant case it was not. Hence, the scope or value of the tax could not be
expanded than what the Act has proscribed through the Rules. So, irrespective of the
amendments through which the provisos were omitted, salaries could not be included in the
gross amount charged or taxed. Even if the amendments were brought about only to bring
the salaries paid to the labour and manpower with the preview of the tax, the same still
could not have been allowed being not only beyond the scope of the Act but also being
inconsistent with it (Suo Motu Case No. 13 of 2009, PLD 2011 SC 619 and Suo Motu Case
No. 11 of 2011, PLD 2014 SC 389). Moreover, the presence of the provisos provided clarity
to the legal position in view of the relevant law, but its omission does not change the effect
of the Rule. Accordingly, the legal effect of the amendment to Rule 42E are non-
consequential, as the purpose of the Rules is only to give effect to the statute (Province of
Sindh v. Messrs Azad Wine Shop, PLD 2006 SC 528). Accordingly, security agencies were
always at the same legal position as the labour and manpower supply service providers
irrespective of the absence of the clarifying proviso.

12. The Petitioners have also contended that the Respondents raised a factual dispute
requiring a factual determination and, that for many cases, such determination has not
been made as the Respondents directly challenged the tax demand before the High Court.
We appreciate that the basic issue before us was the interpretation of section 5 read with
sections 4 and 8 of the Act, which has been adjudicated upon. However, if the Petitioners
are of the opinion that some form of factual determination is required, they may proceed in
accordance with the law to satisfy any factual requirement.

13. Under the circumstances, we find no grounds for interference in the impugned
judgments and orders. The Civil Petitions are dismissed and leave refused.

C.M.A. No. 1963 of 2021:

This is C.M.A. is disposed of.