Fiction in fiscal laws - II

The second proviso, succeeding the proviso of section 2(46)(g) of the Act, enables FBR to levy tax on the basis of actual value of import or supply in case such value is higher than the value fixed by FBR. The second provision cannot be categorised as a fiction.
3. Customs Act, 1969 (Act)
(1). Section 18A of the Customs Act empowers the Federal Government to levy a special customs duty on some of the goods specified in the First Schedule. This section has two provisions. First of which provides levy of a special customs duty on importation of goods of the same kind.
The second proviso reads: "Provided further that, for the purposes of the Sales Tax Act 1990 (VII of 1990), the special customs duty shall not constitute a part of the value of supply."
It is highly interesting that this (second) provision seeks to lay down guideline with reference to 'value of supply' under the Sales Tax Act. The law gurus would hold the above totally invalid and ineffective. No one appears to have challenged the above law fiction in a superior court, probably because it does not adversely affect the interest of importers operating under the Sales Tax Act.
(2). Caption of section 30 of the Customs Act is: 'Date of determination of rate of import duty'. By way of legal fiction, this section of the Customs Act has following five provisos:
"Provided that, where a bill of entry or goods declaration has been manifested in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purposes of this section shall be the date on which the manifest of the conveyance is delivered at the port of first entry.
Provided further that, in respect of goods for the clearance of which a bill of entry or goods declaration for clearance has been manifested under section 104, and the duty is not paid within seven days of the bill of entry or goods declaration being manifested, the rate of duty applicable shall be the rate of duty on the date on which the duty is actually paid.
Provided further that in case of the goods illegally removed from the warehouse, the rate of duty shall be the rate prevalent either on the date of in-bonding or detection of case or date of payment of the duty and taxes, whichever is higher.
Provided further that in case of exercising option for redemption of fine in lieu of confiscation of the goods seized during anti-smuggling operations, the rate of duty shall be the rate prevalent either on the date of seizure or date of payment of duty and taxes, whichever is higher.
Provided further that the Federal Government may, by notification in the official Gazette, for any goods or class of goods, specify any other date for the determination of rate of duty.
Explanation:For the purpose of this section "manifested" means that when a machine number is allocated to the bill of entry or goods declaration and is registered in the Customs record."
The first four of these provide dates for the levy of duty different from the dates otherwise laid down by the law under (a) & (b) of section 30.
Under the fifth proviso, the Federal Government has the power to specify "any other date for the determination of the rate of duty" ie a date different from the actual.
Deem: Deem" is described by Black's Law Dictionary in the following terms: "To hold, consider; adjudge; believe; condemn; determine; treat as if, construe."
It means 'supposed', 'considered', 'construed', 'thought', 'taken to be' or 'presumed'.
The word "deem" is also used to change meaning of a specific sense or expression. It is analogous to the induction of a legal fiction, which creates a scenario in contrast with what the law otherwise is. Deeming provisions harbour the word "deem" to endorse a scenario in opposition with the reality. An example of this is: 'Valuable retrieved from one's field, a treasure, is deemed to be public property within the Public Accountability Act.' This statement is a legal fiction. The legal fiction has been rendered with the word "deemed". There is nothing fictitious about the outcome of this provision. This is a policy statement about public ownership of a treasure unearthed. The pronouncement is opposed to the common belief that all that a field has or can turn out belongs to owner of that field, is his property.
Although usage of the words 'deem' or 'regarded as being' is for the creation of a legal fiction or to impose, for the purpose of a statute, an artificial construction of a word or phrase or belief that would not otherwise prevail. Use of the word 'deem' demonstrates that the legislature is deliberately using the fiction of treating a thing as something which otherwise it may not have been.
G. C. Thornton in "Legislative Drafting", quoted by Justice Chandrachud, former Chief Justice of Indian Supreme Court, in "Advanced Law Lexicon" has ruled:
"'Deem' is useful but dangerous. It creates an artificiality and an artificiality should not be resorted to if it can be avoided." 'Deem' is a useful word for to put in place a legal fiction either something positively or take out something negatively by deeming something not existing although the same is existing.
Purpose of the word "deem" in a fiscal law is to convey a different image from what it is in reality. It is treating something which it is not or to attribute to it qualities which it does not have. Through the word 'deem' or the words 'registered as being', it is making available a provision for the purpose of assuming existence of a non-existent fact.
At times, the word 'deem' is used to give a comprehensive description that includes what is oblivious, what is uncertain or what is in the ordinary sense impossible. It is used to provide acceptance of a theory, idea, prophesy, finding, conclusion or conviction. Accordingly, it normally goes with a legal provision, rule, regulation etc, more particularly with a section or sub-section or rule of a law in contrast with the law. Its use is not traced in relation with a law in toto or a topic or title in law. It is referred as a form of fiction, whereas a (full) fiction normally has its advent by way of a section, sub-section or a specific provision of law. Fiction as such does not rely for its being on words like 'deem' or 'regarded as being' or a proviso.
"The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense impossible."- "Supreme Court on Words & Phrases" by Justice R.P. Sethi - Page- 282.
A legal fiction created through use of the word 'deem' can be utilised in several ways. Mere use of the word 'deem', by itself, is not sufficient to create a fiction. The word is used a great deal in modern legislation in different senses. A deeming provision is not made every time for creation of a fiction. For these are other ways also to create legal fictions.
In Sheikhoo Sugar Mills Ltd and others vs. Government of Pakistan and others, Civil Appeals Nos. 1805 to 1811 of 1998, 1392, 1417, 1418 of 1999, 2, 22, 129, 488, 489 of 2000 and C.Ps. Nos. 386-L, 526-L and 700-L of 2000 (PTCL 2001 CL. 331), the Supreme Court of Pakistan has exemplified use of a deeming provision to change nomenclature of goods consumed ie creation of a fiction. Words of the apex court are:
"This Court has already considered competency of the legislation to enact the laws for the purposes of levying sales tax in view of above Article of the Constitution* in the case of Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woolen Mills Ltd and others (1999 SCMR 526). Relevant para therefrom is reproduced hereinbelow:
'25. The deeming provision created a legal fiction that in the aforesaid restricted parameters, the use of consumption of independently identifiable goods would be considered to be a sale so as to bring such goods within the tax net. For the reasons mentioned above, we are of the view that, in the aforesaid restricted sense, the use and consumption of intermediary goods could be treated as sales by legal fiction so as to bring such goods under the levy of sales tax where the final product was not subject to sales tax when sold and that the use or consumption of intermediary goods in such circumstances have a rational nexus with sale. The Federal Legislature was, therefore, competent to enact the deeming provisions under entries of "sales of goods" in the constitutional documents."
Article 70(4).One does not come across fictions created with the word 'deem' in Pakistan's fiscal laws as a matter of routine.
(Concluded)
(The writer is corporate laws counsel and former Chairman of ICAP and ICMAP Joint Committee)