Versus Shoaib Ahmed Sheikh , Nouman Malik
ORDER
Vide this Sales Tax Appeal, the Appellant/Registered Person has assailed the order passed by the learned Collector of Customs, Excise and Sales Tax, (Adjudication) Multan in Order-in-Original No.428 of 2005 dated 24-5-2005.
2. Parties have been heard and perused the record as well as have gone through the case-law referred to by the learned counsel for the appellant.
3. Facts in brief giving rise to the present appeal are that a show-cause notice, bearing C.No.946/2004/adj/Cus/Coll/5337 dated 28-9-2004, was issued by the learned Collector of Custom to the appellant/registered person alleging therein that he had failed to pay the sales tax amounting to Rs.1,79,42,633 on account of purchases of cotton lint and has also wrongly adjusted the said amount to be the input for the period commencing from 5/2000 to 4/2004. As per the show-cause notice, the appellant/registered person can only claim input tax which has been paid by him during the relevant period and if the spinning unit or the exporter fails to remit the sales tax payable on ginned cotton purchased by the appellant/registered person within the due dates, he shall not be entitled to claim adjustment or refund of the input tax in respect of such purchases unless he pays the amount of additional tax or penalty chargeable on such remittances under sections 33 and 34 of the Sales Tax Act, 1990. Thus, the said amount of sales tax is recoverable along with additional tax under section 34 of the Sales Tax Act, 1990.
4. In compliance thereto, the appellant/registered person informed the learned Assistant Collector Sales Tax, Central Excise, Multan through a letter dated 0655(sic)-12-2004 and 4-10-2004 that out of the names of the parties mentioned in the list, which is annexed with the show-cause notice, certain invoices were not related to the appellant while in some of the invoices, the amount of sales tax was not correctly mentioned therein. Moreover, no cotton lint was purchased against some of the invoices included in the said list. Also stated that certain amounts paid by the appellant/registered person was also included therein. Apart from the above said explanation, a detailed reply of the show-cause notice was also furnished along with reconciliation statements according to which the appellant was only liable to pay sales tax amounting to Rs. 1,56,83,760. The said reconciliation statement was accompanied by the sales tax returns, invoices and the relevant documents in order to substantiate the contentions.
5. However, the explanation tendered by the appellant twice and the documentary evidence so furnished in order establish the claim, could not convince the learned Collector of Customs, Excise and Sales Tax (Adjudication), Multan and he proceeded to pass the impugned order holding therein that the appellant should pay the demanded amount of sales tax excluding the amount already paid and the amount not related to the appellant. Further held that in case of any duplication, it should be confirmed by the learned Assistant Collector Sales Tax, Central Excise and the same amount may also be excluded from the adjudged amount. Also directed that the appellant should pay the additional tax under section 34 of the Sales Tax Act, 1990 and the penalty equal to 30% of the sales tax involved in terms of section 33(4) of the said Act.
6. It is pertinent to mention here that after passing the impugned order by the respondent, the appellant moved an application so that to avail exemption under S.R.O. No.520(I)/2005 dated 6-6-2005 issued by the Federal Government in which it was laid down that if the principal amount of sales tax is paid by the registered person uptill 30-6-2005, no penalty shall be levied.
7. Anyhow, this has compelled the appellant to come up in appeal against the order passed by the Collector of Custom, Excise and Sales Tax (Adjudication), Multan dated 24-5-2005 before the learned Tribunal on the following grounds:--
(a) that respondent No.2 did not decide any issue and directed the detecting agency to exclude the amount already paid, demand not relating to the appellant and the amount of invoices which have been included again and again. Thus, the impugned order is void;
(b) that respondent No.2 imposed penalty equal to 30% under section 33(4)(c) without adjudging the liability of the appellant and as such the imposition of penalty is bad in law;
(c) that 30% penalty of the sales tax is to be imposed in case of the tax fraud whereas according to the show-cause notice, this was the case of non-payment of sales tax in respect of which maximum penalty of 3% of the sales tax involved can be imposed. Thus, the impugned order so far as it relates to the imposition of penalty is illegal and violative of the mandatory provisions contained in the Sales Tax 1990;
(d) that the appellant provided proof of payment made by him, evidence of duplication, proof that certain invoices do not belong to him and that certain purchases were not made by the appellant, but respondent No.2 did not bother even to discuss the said issues and pass the impugned order in a mechanical manner without taking into account the relevant record;
(e) that according to the impugned order the appellant was liable to pay the sales tax of Rs. 1,56,87,760. These figures are admitted by the Sales Tax Department. Since, the Federal Government vide S.R.O. No.520(I)/2005 dated 6-6-2005 granted exemption from the payment of the whole of the amount of additional taxes and penalties adjudged against a registered person, if he pays principal amount of sales tax by 30-6-2005, thus, the appellant availing the said concession has discharged his liability on 29-6-2005. Thus, the additional tax and penalty adjudged, vide impugned order, stood waived in terms of the afore said Notification.
8. We have given anxious thought to the averments advanced by the learned representatives appearing at the bar and the documentary evidences annexed with the appeal memos which are once again placed before us during the course of advancing the arguments as well as to the case-law referred by the learned counsel. It is noted that the main thrust of the appellant is that the show-cause notice dated 28-9-2004 issued by the Assistant Collector Sales Tax and Central Excise, is ab initio void and illegal as the amount of sales tax attributed to be payable by the appellant in no way is relatable to the appellant. According to section 3(3)(a) of the Sales Tax Act, 1990, the liability to pay the sales tax falls on the person making the supplies and not on the person to whom the supplies are made (the recipient). Reverting to the facts, evidently, the suppliers in the present case are the ginners who made the supply of cotton lint to the appellant on which sales tax amount comes to Rs.13,324,020. As the sales tax is to be paid by the recipient, strength in this regard has been acquired 6y the department from Rule 6(3) of the Ginning Rules, 1996 which states so. It is significant to point out here that these Rules were challenged before the Hon'ble Lahore High Court, Lahore which were ultimately declared to be ultra vire by the Court. That judgment was assailed by the department before the apex Court of Pakistan and the order of the High Court was endorsed by it holding that the Ginning Rules, 1996 are inapplicable in view of the substantive law which state that sales tax liability shall be paid by the supplier under section 3(3)(a) of the Sales Tax Act, 1990. This judgment is reported in 2001 PTD 1486 in re: Collector of Sales Tax v. Superior Textile Mills. When viewed in this perspective, the appellant is not liable to pay Sales Tax amounting to Rs.13,324,020 which were squarely the liabilities of the ginners. Respectfully following the dictum laid down by the august court in the cited case and the set of facts available on record, we have no ambiguity in our mind but to hold that the said amount of sales tax has erroneously and illegally been added by the learned Collector of Customs, Excise and Sales Tax in the show-cause notice which merits deletion thereof.
9. As regards the sum of Rs.2,116,526 mentioned in the show-cause notice, it was argued by the learned counsel. that the said amount does not relate to the purchases made by the appellant and to support this contention, necessary details were not only furnished before the lower authorities but also before us. Further contended that the amount of Rs.650,800 has been shown and added twice in the show-cause notice. So far as balanced amount payable at Rs.1,851,279 is concerned, this amount has been deposited by the appellant proof of which is attached with the appeal memos.
10. Coming to levy of penalty equal to 30% of the adjudged amount, it was maintained by the learned counsel that since no tax fraud has been committed by the appellant, as such, no penalty can be imposed. At best, 3% penalty can be charged either on account of the late payment or non-payment, of tax. It was maintained that as the appellant has deposited the above said tax before 30-6-2005 as is envisaged in S.R.O. No.520(I)2005, dated 6-6-2005, thus neither any penalty nor any additional tax can be levied on the adjudged amount.
11. On the contrary, the departmental representative vehemently supported the order passed by the learned Collector of Customs, Excise and Sales Tax (Adjudication) by contending that the impugned order has been passed on all the points mentioned supra after considering the facts of the case in its entirety, therefore, no interference is called for therein. On the issue of penalty, it was submitted that this being a case of tax fraud, the learned Collector has rightly directed to impose penalty equal to 30% of the outstanding tax demand.
12. We have looked into the contentions raised in paras. 8, 9 and 10 supra in depth with the help of the reconciliation filed and the bifurcation and details of the parties furnished before us and found that to prove the contentions, the appellant has squarely discharged his onus by submitting the complete dissection of the contents mentioned in the show-cause notice. As the blame has been fastened at the door of the department which they have miserably failed to discharge with any tangible evidence. There is nothing on record wherefrom it could be ascertained that any endeavor has been made by the department to address the issues involved in the show-cause notice. Therefore, we are not inclined to put the appellant into another chain of litigation, hence the above issues are being decided on merits. So far as the amount of sRs.2,116,526 is concerned, this amount has been added in the show-cause notice on the pretext that as the sales tax has been adjusted, therefore, the amount against the goods purchased by the appellant has mistakenly been mentioned in the sales tax returns. Perusal of the documents attached with the appeal memos reveals that the goods have not been purchased by the appellant on which sales tax of Rs.2,116,526 was payable. Hence, this amount has also been added erroneously in the show-cause notice which is certainly to be deleted therefrom.
13. On going through the details, we have noted that the amount of Rs.650,800 has been repeated in the show-cause notice in twice. As the appellant has ably managed to convince' that the amount of Rs.650,800 has been inadvertently summed up two times owing to repetition which is hereby deleted. As regards the amount of Rs.1,851,279 as per the details, furnished, this amount has been deposited by the appellant which fact has been admitted by the department. Hence, merits deletion thereof. If the aforesaid discussion is taken into account, there remains hardly any amount of sales tax which has not been paid by the appellant.
14. As far as the contention of the department with regard to imposition of penalty equivalent to 30% of the sales tax involved is concerned, this issue has been laid to rest at the instance of the apex court of Pakistan. It has been categorically held by august Supreme Court of Pakistan in numerous cases that the penalty proceedings would not necessarily be followed in each and every case rather facts of each and every case are required to be independently visualized as to whether any tax fraud has been committed by the registered person or not. Since, the proceedings to establish tax fraud are criminal in nature, therefore, it has to be established with concrete and solid or material evidence. Mere mentioning in the notice does not absolve the department from the responsibilities to attribute the tax fraud against the registered person. On going through the contents of the show-cause notice, we do not find that the appellant was ever involved in tax fraud neither has the department has been able to convince us with any supportive material to hold that the appellant has committed any tax fraud. Support in this regard may be drawn from the case-law cited as 2006 PTD 97, 2005 PTD 2392 and 2005 PTD 1850.
15. Keeping in view the aforementioned submissions/contentions, we are constrained to agree with the contentions raised by the appellant/registered person, that the sales tax charged, the additional tax and the penalty imposed by the Sales Tax Department has no legal sanctity in the eye of law consequent upon which the impugned order is hereby held to be vague and illegal which stands cancelled/ annulled.
16. As a result, the assesee's appeal is accepted.
C.M.A./129/Tax (Trib.) Appeal accepted.