GHULAM RASUL vs THE INCOME TAX APPELLATE TRIBUNAL AND OTHERS
This matter concerns a petition for leave to appeal against a judgment of the Lahore High Court regarding the liability for sales tax on a ginning mill. The petitioner, owner of a ginning mill, challenged the assessment of sales tax levied upon it for a period during which it allegedly leased its factory to a third-party business entity, Messrs Karachi Cotton Ginners, Lyallpur. While the Appellate Assistant Commissioner initially ruled in favor of the petitioner, the Income-tax Appellate Tribunal subsequently reversed this decision, and the High Court affirmed the Tribunal's ruling. The core legal question involves the interpretation of liability for sales tax under the Sales Tax Act, 1951, specifically whether the owner of the mill or the holder of a seller's licence is liable for tax when the licensee becomes untraceable. The Supreme Court granted leave to appeal, determining that the case requires a proper construction of the relevant statutory provisions regarding tax liability, as the matter is one of first impressions.
- Whether the owner of a ginning mill or the holder of a seller's licence is liable to pay tax under the Sales Tax Act 1951 when the licensee is untraceable?
- Does the inability to trace a licensee under the Sales Tax Act 1951 shift the tax burden to the owner of the premises?
- Section 9, Sales Tax Act 1951
- Section 17(1), Sales Tax Act 1951
- Section 9(5), Sales Tax Act 1951
- Section 3(c), Sales Tax Act 1951
- Section 9(2), Sales Tax Act 1951
ORDER Dorab Patel.-J.-The petitioner owns a ginning mill and he claims to have leased it for a part of the assessm ent year 1961-62 to a business concern known as Messrs Karachi Cotton Ginners, Lyallpur, who had obtained a seller's licence under Section 9 of the Sales Tax Act for the relevant period. Now, the Sales Tax Officer levied sales-tax from the petitioner even for the period for which it had leased its factory to Messrs Karachi Cotton Ginners, Lyallpur. This was because the firm or business known as Messrs Karachi Cotton Ginners, Lyallpur was not traceable. The petitioner, therefore, challenged the Sales Tax Officer's order in an appeal which was allowed by an Appellate Assistant Commissioner on 9-1-1969. Therefore, the Sales Tax Officer challenged this decision in an appeal before the Income-tax Appellate Tribunal which was allowed by Tribuna on 16-7-1978.
2. The petitioner, therefore, moved the Tribunal for a reference under section 17(1) of the Sales Tax Act, but as the Tribunal rejected this application, the petitioner filed an application in the High Court, in which it prayed that the following question be referred to the. High Court. The question reads:- "Whether under the circumstances of present case, it is ginner of cotton (the present petitioner) or the whole-seller licensee liable to pay tax under section 9(5) read with section 3(c) and condition 3 of the licence issued under section 9(2) of the Sales Tax Act, 1951."
3. As the question was decided against the petitioner by a learned Judge of the Lahore High Court by his judgment dated 1 2-5-1978, the petitioner has filed this petition for leave.
4. In the question framed by it, the petitioner has abandoned its. Position that it has leased its factory premises to Messrs Karachi Cotton Ginners, Lyallpur therefore, the petition can be argued only on the footing that the petitioner had ginned cotton for Messrs Karachi Cotton Ginners, Lyallpur under some contract which has not been produced. Now, even on this assumption Mr. Sajjad Jafari submitted that Messrs Karachi Cotton Ginners Lyallpur had obtained a licence under the Sales Tax Act and there appears to be no controversy about this aspect of the case nor about the fact that this firm or business was directly liable under the Sales Tax Act for sales tax. Now, merely because this firm is untraceable Mr. Sajjad Jafari submitted that this was not sufficient to place the burden of sales-tax on the petitioner.
5. The question turns on the proper construction of sections 3 and 9 of the Sales Tax Act and as the judgment is one of first impressions, we grant leave to examine the validity of the construction placed by the High Court on those sections. Security in the sum of Rs. 2,000. The appeal will be made ready on the present record with liberty to the parties to file additional documents.