SYED ARSHAD ALI, J.---This is a Sales Tax Reference filed by the petitioner under Section 86 of the Khyber Pakhtunkhwa Finance Act, 2013 ("Act") against the judgment dated 29.10.2020 passed by the worthy Appellate Tribunal for Sales Tax on Services, Khyber Pakhtunkhwa, Peshawar ("Tribunal").

1. Briefly stated facts of the case are that the petitioner is a telecommunication company providing services within the meaning of subsection (48) of Section 2 of the Act. The nomenclature and code of the service, as per the First Schedule to the Act drawn in accordance with subsection (47) of Section 2 of the Act, are "Telecommunication and similar, allied or ancillary services" with code 9813.0000.

The services are subject to sales tax at the rate of 19.5%, as mentioned at Serial No.4 of the Second Schedule to the Act chalked out in light of subsection (1) of Section 19 read with subsection (1) of Section 26 of the Act. The petitioner was registered within the meaning of subsection (42) of Section 2 of the Act.

1. As stated in the assessment order of the Additional Collector Unit-I, Khyber Pakhtunkhwa Revenue Authority, a desk review of sales tax returns filed by the petitioner for the periods of October 2013, June 2014, July 2014, August 2014, January 2015, July 2015, September 2015, July 2016, December 2016, February 2017, April 2017, May 2017, July 2017, November 2017, December 2017 and January 2018 was conducted, wherein it was observed that, in the said returns, the petitioner had claimed inadmissible input tax on account of services received from persons who were not registered with the Khyber Pakhtunkhwa Revenue Authority ("Authority") and thereby causing loss of Rs.6,619,512/- to the Government exchequer. Furthermore, the petitioner was required to deduct and deposit the entire amount of tax on services received from non-residents within the meaning of subsection (44) of Section 2 of the Act; however, the petitioner failed to do so, resulting in a short payment of Rs. 5,479,472/- in sales tax to the Government treasury. Thus, the petitioner defaulted in payment of a total amount of Rs. 12,098,984/-.
2. Accordingly, a show cause notice was issued to the petitioner on 19.04.2018, which was replied to. The learned Additional Collector, after examining the reply and hearing the parties, ordered for recovery of Rs. 12,098,984/- as principal amount of sales tax, along with penalty and default surcharge from the petitioner, vide assessment order No.92/2018 dated 04.12.2018. Against that, the petitioner filed appeal before the Collector (Appeals) of the Authority. The learned Collector (Appeals) partially accepted the appeal and set-aside the assessment order to the extent of imposition of penalty and default surcharge, vide order dated 27.03.2019.
3. Feeling aggrieved, the petitioner filed second appeal before the Worthy Tribunal. The said appeal was heard by two learned Members i.e. Judicial Member (Chairman) and Technical Member. The Judicial Member (Chairman) accepted the appeal and set aside the orders of both the Additional Collector as well as the Collector (Appeals), vide judgment dated 29.10.2020, whereas the Technical Member submitted a dissenting note. Since the system of adjudication by referee judge is not provided in relevant law, therefore, in conclusion part of the judgment, it was ruled that "the judgment of Hon'ble Collector (Appeals) shall remain in field as confirmed within meaning of subsection (2) of Section 98 of the Code of Civil Procedure, as we, the two members, have dissenting opinion". Hence, the instant reference.
4. Arguments heard and record of the case was perused.
5. The essential issue before this Court is the conflicting opinions of the two members. However, since the Provincial Government has not appointed a third member to decide the matter as a referee member, therefore, this matter cannot be left undecided, as the questions of law arising from both the judgments of the fora below can well be settled by this Court while exercising its advisory jurisdiction. The following are the two issues requiring the advise of this Court; firstly, that the petitioner has claimed input tax against the supply of services from the unregistered persons; and secondly, that the petitioner has failed to deduct, as a withholding agent, tax from such service providers, which it was bound to deduct under the law.
6. First, we will consider the question of the alleged inadmissible input tax against the supplies/receipts of services from unregistered persons. In order to answer the issue, let us first reproduce the relevant provision of law.

Section 26 of the Act.

26. Scope of tax and allied matters.---

1. ..
2. .
3. .
4. A person required to pay tax under this Act shall be entitled to deduct fromthe payable amount, the amount of tax already paid by him on the receipt of taxable services used exclusively in connection with taxable services provided by such person subject to the condition that he holds a true and valid tax invoice not older than six tax periods, showing the amount of tax earlier charged and paid under this Act on the services so received but the Authority may, by notification in the official Gazette, disallow or restrict such deduction in case of any service or services as it may deem appropriate.
5. The language of Section 26 ibid is very clear and unambiguous. The input tax can only be claimed when it is established that the tax previously charged was paid to the government. Admittedly, the unregistered persons do not maintain any record under the Act nor they have paid the tax; therefore, such input tax cannot be claimed by the petitioner. Hence, the opinions of the fora below are not open to any exception.
6. Moving on to the second issue relates to the liability of the withholding agent. Admittedly, the period for which the petitioner was charged for omission to withhold the amount of tax is prior to Finance Act, 2021, whereby amendment was made in Finance Act, 2013 relating to the personal liability of the withholding agent. Hence, in the present reference, the following questions of law are relevant for our adjudication:
7. Whether the Respondent as a withholding agent in terms of Section 30 of the Act was a person liable to pay tax in terms of subsection (1A) of Section 40 introduced through Khyber Pakhtunkhwa Finance Act, 2019 ("Act of 2019)" and subsection (3) of Section 30 introduced through Khyber Pakhtunkhwa Finance Act, 2021 ("Act of 2021") for the tax period before the insertion of the Act of 2021.
8. Whether the imposition of default surcharge was in accordance with the law and facts of the case?
9. The allegations against the petitioner are that during the tax period i.e., October 2013, June 2014, July 2014, August 2014, January 2015, July 2015,

September 2015, July 2016, December 2016, February 2017, April 2017, May 2017, July 2017, November 2017, December 2017 and January 2018, it received taxable services but failed to withhold the advance tax from service providers and in same case petitioner withheld the amount but has failed to deposit the same with Government.

OPINION OF THE COURT

1. Pursuant to 18th Amendment in the Constitution through Act No.10 of 2010) whereby entry No.49 of Part-1 of 4th Schedule was amended restricting the legislative competence of parliament to deal with Sales Tax on Services; Khyber Pakhtunkhwa Finance Act, 2013 was enacted by the Provincial Assembly providing a frame work for levy and recovery of sales tax on service. Section 19 of the Act is a charging section which envisages that taxable services are the services listed in the second schedule to the Act payable by a registered person in the course of an economic activity including its commencement or termination of the activity. Section 40 of the Act deals with the assessment of tax wherein it is provided that the officer of the authority on the basis of information acquired through an audit/inspection etc if of opinion that a registered person has not paid the tax due on taxable services provided by him or has made short payment, the officer shall make an assessment of the tax actually payable by that person and shall impose a penalty and default surcharge in accordance with sections 64 and 65 by first providing an opportunity of hearing through a show-cause notice to the service provider. Similarly, where the sale tax on service has not been levied or has been short levied the person liable to pay such amount of the tax or charge is recoverable under section 68 of the Act. However, the present issue relates to the liability of withholding agent. In order to effectively appreciate the issue, we would like to refer the relevant provision of the Act relating to the liability of withholding agent.

(I). The concept of withholding agent under the Act of 2013 and the regulation made therein.

Section 30. Special procedure and tax withholding provisions.---(1) Notwithstanding anything contained in this Act, the Authority may, by notification in the official Gazette, prescribe a special procedure for the payment of tax, registration, book keeping, invoicing or billing requirements, returns and other related matters in respect of any service or class of services, as may be specified.

(2) Notwithstanding any other provisions of this Act, the Authority may require any person or class of persons whether registered or not for the purpose of this Act to withhold full or part of the tax charged from such person or class of persons on the provision of any taxable service or class of taxable services and to deposit the tax so withheld, with the Government within such time and in such manner as it may, by notification in the official Gazette, specify.

(II). Khyber Pakhtunkhwa Sales Tax on Services Special Procedure (Withholding) Regulation, 2015 "Regulation"

13. The Regulations were notified on 31.08.2015 purportedly framed under section 114 of the Act which applies to various classes of persons receiving taxable services. Regulation No.3 cast responsibility upon the withholding agent who intends to receive taxable services to deduct and withhold from the payment to be made to the service provider and deposit the withholding tax in the government head of account No. B-02386.

(III). The Khyber Pakhtunkhwa Finance Act, 2019 has added subsection (1)(A) in section 40 of the Act, which reads as under: -

"(1A) Where any person, required to withhold sales tax under the provisions of this Act or regulations, fails to withhold the tax but fails to deposit the same in the prescribed time and manner, an officer of the Authority shall, after a notice to such person to show-cause determine the amount in default and shall impose a penalty and default surcharge according to law."

(IV) Through Khyber Pakhtunkhwa Finance Act, 2021 certain amendments were made relating to the personal liability of the withholding agent. The relevant amendments reproduced as under:-

Amendment of Khyber Pakhtunkhwa Act No.XXI of 2013.---In the Khyber Pakhtunkhwa Finance Act, 2013 (Khyber Pakhtunkhwa Act No. XXI of 2013),-

(a) In section 2,

(iii) after clause (56), the following new clause shall be inserted, namely;

"(57) "Withholding agent" means any person, who, as a recipient of taxable service or otherwise, withholds or deducts and pays or deposits tax directly to Government in the manner as may be prescribed;";

(V) The Khyber Pakhtunkhwa Finance Act, 2021 has added sub-section (3) in section 30 of the Act.

(c) in section 30, after subsection (2), the following new sub-section shall be added, namely: "(3) Where a person has been or is required to act as withholding agent, he shall personally be responsible to withhold and deposit the due tax. In case of failure on his part to do so, it shall be his personal liability to pay such due amount of tax along with default surcharge and penalty under this Act. Any such amount of tax, including default surcharge and penalty, if not paid, may be recovered from such person under section 87 of this Act.";

1. During the tax period under consideration, the withholding agent under Regulation of 2015 had the obligation to withhold tax (1/5th of the total amount of the sales tax of service), however, had no corresponding personal liability in case of his failure to perform the said obligation. Through the Khyber Pakhtunkhwa Finance Act, 2019, subsection 1(1A) in Section 40 of the Act was added which imposed penalty on withholding agent, if he fails to withhold the tax or withholds the tax but fails to deposit the same in the prescribed time and manner whereas the phrase withholding agent was introduced through Finance Act, 2021 by addition of Sub-clause (57) in Section 2. Through the same amendment (Finance Act, 2021), subsection (3) in section 30 of the Act was added making the withholding agent personally liable, if he has failed to withhold and deposit the due tax. Admittedly, the liability created against the respondent dates back prior to the Finance Act, 2021, therefore, the essential question is retrospective application of the amendment in the Act of 2013 through Khyber Pakhtunkhwa Finance Act, 2021.
2. Indeed, it is settled law that the intention to impose a tax on the subject must be shown by clear and unambiguous language. The principle that a tax cannot be levied or collected except by authority of law, does not, however, involve the further proposition that under the Constitution, taxes cannot be levied retrospectively. Once a competent Legislature has passed a fiscal law with retrospective effect, the tax levied thereby must be held to be by authority of law and it would be perfectly constitutional and not invalid because of its being retrospective. There is nothing inherently unreasonable in giving retrospective effect to an enactment the object of which is to prevent a loss of revenue to the state which would otherwise occur1. However, no retrospective effect should be given to a fiscal statute unless there is a clear provision or unless the effect is a necessary implication of the provision.2
3. The Court must lean against giving a statute retrospective operation on the presumption that the legislature does not intend what is unjust. It is chiefly where the enactment would prejudicially affect vested rights, or the legality of past transaction, or impair existing contacts, that the rule in question prevails, even if through interpretation are equally possible, the one that saves vested rights would be adopted in the interest of justice, specially where we are dealing with taxes statute.3
4. It is equally settled law that the interpretation of fiscal statute has to be made strictly and any doubts arising from the interpretation of a fiscal provision must be resolved in favour of the tax payer.4
5. In the present case as stated above, the allegation of not withholding the amount of sales tax on receiving services against the petitioner relates to the period prior to the promulgation of Finance Act, 2021. The text of the amendment Act (Finance Act, 2021) does not give any impression of its retrospective application, and it is for obvious reasons that the liability to pay sales tax on service lies on service provider and the recipient is only responsible to withhold the amount of sales tax at rate specified in the Regulation. Therefore, the demand raised by the department against the application in terms of section 30 (3) of the Act is illegal and without lawful authority.
6. As discussed in the preceding paras that under section 30 of the Finance Act (before amendment through Finance Act, 2021), the authority was competent to issue a notification in the official gazette to prescribe a special procedure for the payment of taxes and further require any person or class of persons, whether registered or not for the purpose of the Act, to withhold full or part of the tax charged for such a person or class of persons on the provision of any taxable services or class of taxable service and to deposit the tax so withheld with the government.
7. The Regulations were framed which envisages that the recipient of the services shall withhold sales tax on services and deposit the same in the government head of account. During the period under consideration, the said liability upon withholding agent did exist; however, the non-compliance of the aforesaid, the Regulations were not visited with any penalty, albeit the personal liability of the withholding agent.
8. Resultantly, this sales tax reference is disposed of in the above terms. A copy of this judgment be sent to worthy Tribunal in terms of section 86(5) of the Act.

Order accordingly.