S.T.A. No.34 of 2001, decided on 3rd December, 2001. Versus S.T.A. No.34 of 2001, decided on 3rd December, 2001.
ORDER
MIR FUAD, MEMBER (TECHNICAL).- --This is an appeal against the Order-in-Original No.2 of 2001, dated 21-2-2001, passed by the Deputy Collector, Collectorate of Sales Tax and Central Excise (East), Karachi.
2. Briefly the facts of the case as reported in Order-in-Original are that the Audit Division, Sales Tax (East), Karachi made out a contravention case against Messrs Taha Spinning Mills Ltd. for violation of "Clause (ii) of subsection 46 of section 2 of Sales Tax Act, 1990 and for recovery of Rs.6,749,284.00 as principal amount of sales tax The ground of demand was that the sales tax was charged from their associated person Messrs Tanya Knitwear (Pvt.) Ltd. on P.C. Yarn at Rs.37.47 per kg. While the same P.C. Yarn was supplied to other outside parties ranging from Rs.90 to 99 per kg. The case was decided against Messrs Taha Spinning Mills Ltd., Karachi vide Order-in-Original No.32 of 1999, dated 20-2-1999. They filed an appeal under section 45 of Sales Tax Act, 1990 with the Collector (Appeals), Customs, Excise and Sales Tax, South Zone, Karachi. The same was dismissed and also the appeal filed under section 46 ibid, from the Appellate Tribunal Customs, Excise and Sales Tax, Karachi. Messrs Taha Spinning Mills deposited the amount demanded in the Government treasury and also issued a debit note to Messrs Tanya Knitwear (Pvt.) Ltd. situated at 106, Commerce Center Hasrat Mohani Road, Karachi. On receipt of the debit note in terms of section 9 of the Sales Tax Act, 1990, Messrs Tanya Knitwear (Pvt.) Ltd. applied refund claim amounting to Rs.6,749,284.00 under section 66 of Sales Tax Act, 1990. Since the debit note was issued after expiry of ninety days (90) the claim was deemed to be inadmissible under section 66 of Sales Tax Act, 1990 read with section 9 and clause (ii) of subsection (46) of section 2 ibid.
3. A show-cause notice was issued to the appellant as to why penal action under the aforesaid provisions of law should not be initiated. Later, in consequence of adjudication the Deputy Collector, Sales Tax and Central Excise (East), Karachi passed the order impugned before this Tribunal.
4. We have heard Mr. Javed Umar, Advocate, the learned counsel for the appellant and Mr. Khursheed on behalf of the respondent.
5. The learned counsel of the appellant states that the issuance of the impugned show-cause notice is barred by the provisions of Rule 7 of the Sales Tax Refund Rules, 1998, inasmuch as the respondents were bound to issue the show-cause notice within the period of 35 days but the same was issued when it became hopelessly barred by time under the aforesaid provision of law. Further states that the rejection of the appellant's claim on the ground that it was not covered by S.R.O. 696(I)/96, dated 22-8-1996, being beyond the ground spelt out in the said show-cause notice cannot be sustained in law. Further states that the issuance of the debit and credit notes on account of the changes in the value of the supply is an essential grund norm of the entire Sales Tax Act, 1990. Hundreds of contingencies may be arising in day to day commercial realities, when the debit or credit notes have to be issued, since a fresh invoice cannot be issued under section .23 ibid. The interpretation of the Central Board of Revenue and the learned Deputy Collector, if accepted, shall have the effect of making the provisions of section 9 ibid, as redundant and frustrated the entire scheme of the Sales Tax Act, itself. The operation of section 9 in relation to the contingencies arising out of the change in value are not dependent on the sweet pleasure of the Central Excise or Revenue. The Board is not empowered in law to change the basic structure of the Sales Tax Act, 1990.
6. Rival submissions examined. Case record seen. The appellant in this case claim refund of Rs.6,749.284.00 which was held inadmissible on account of being ultra vires of S.R.O. 696(I)/96, dated 22-8-1996. The issue therefore, before us is whether debit and credit note issued under section 9 of the Sales Tax Act, 1990 would have the legal validity only if it is in accordance with S.R.O. 696(I)/96. We reproduced section 9 of the Sales Tax Act, 1990.
"(9) Debit and credit note . ---Where a registered person has issued a tax invoice in respect of a supply made by him and as a result of cancellation of supply or return of goods or a change in the nature of supply or change in the value of the supply of some such events the amount shown in the tax invoice or the return needs to be modified, the registered person may, subject to such conditions and limitations as the Board may impose, issue a debit and credit note and make corresponding adjustment against output tax in the return."
7. The reading of the above section shows that the section envisages 5 different situations where the registered person can issue debit and credit note and make corresponding adjustment against output; tax, in the Return. These situations are:--
(a) Cancellation of supply.
(b) Return of goods.
(c) Change in the nature of supply.
(d) Change in the value of supply.
(e) Some such events.
The section further stipulates that these changes are subject to such conditions and limitations as Board may impose. Subsequently the Board issued S.R.O. 696(I)/96, dated 22-8-1996 to regulate the issuance of credit and debit note. These rules are called Debit and Credit Note and Destruction of Goods Rules, 1996. While defining the scope of these references the sub-Rule (2) thus reads:--
"(2) these (rules) shall apply to a taxable supply where the goods are returned by buyer".
The Rules thus confine themselves to only one of the situations envisaged by section 9. The view of the learned Deputy Collector as expressed' in Order-in-Original is that since these Rules cover only one situation i.e. return of goods, the debit and credit note can be issued only in case of return of goods and not in other situations as specified in section 9 Thus, according to the impugned order, (sic) is because of the fact that section 9 empowers the oar to impose such conditions and limitations as it may deem fit and hence section 9 would be operative under the limitations imposed by S.R.O. 696. Thus debit and credit notes issued in situations other than return of goods do not have the legal sanction and hence refund cannot be allowed.
8. We have examined this argument however we are not persuaded to accept it. The section clearly specifies 5 different situations and as such "change in value of supply" being one of the situations should be considered a valid ground for issuance of debit and credit note. The provision in the section "subject to such condition and limitation as the Board may impose" does not imply that the Board can restrict the scope of the statute. We are of the view that by this clause the Board is empowered to impose conditions and limitations only for the regulation of the statute. We are not inclined to accept the arguments that since the Rules issued concern themselves only with the return of goods, the other 4 situations mentioned in the statute would not form the basis of issuance of debit and credit note. The omission by the executive authority would not out the statute. On the contrary the other four situations mentioned in the section would be operative without any condition and limitation, as no rule have been framed by the Board in this regard. In this we are strengthened by the judgment of Supreme Court of Pakistan in case of M.U.A. Khan v. Rana M. Sultan and others, as reported in PLD 1974 SC 228. In the above mentioned judgment their Lordship have held as follows:--
"It is universally recognized that as regulatory statutes have to deal with a variety of situations and subjects, it is not possible for the Legislature itself to make detailed regulations concerning them, and, therefore, the Legislature delegates its power to specified of designated authorities to make such detailed regulations, consisted with the statute for carrying out the purposes of the parent legislation. The power so conferred is generally in the nature of an enabling provision, intended the same. As a consequence, the failure or omission of the designated authority to frame, the necessary rules and regulations, in exercise of the power conferred on it by the Legislature cannot be construed as having the effect of rendering the statute nugatory and unworkable. Such an eventuality could arise only if the Legislature indicates in intention to this effect in clear and unmistakable terms."
9. While respectfully following the above judgment we allow the appeal and set aside the impugned order.
H. B.T/361/Taxt(Trib.) Appeal allowed.