DERA TONIGHT, MAKKI RESIDENCY, OLPER ROAD, ROHRI, DISTRICT SUKKUR Versus COMMISSIONER (APPEALS-II), SINDH REVENUE BOARD, KARACHI
MRS. ALIA ANWER, MEMBER JUDICIAL.---- The appellant has assailed the order dated 29.01.2024 vide Order-in-Appeal (hereinafter referred to as "the first Appellate Order") No.03/2024 passed by the Commissioner (Appeals-II) in Appeal No.612/2023 whereby the Order-in-Original No.5644/2023 (hereinafter referred to as "the Original Order") dated 03.11.2023 passed by the Assistant Commissioner (Unit-33) has been maintained.
2. Appellant's counsel submits that impugned order is bad in law and on facts. He argued that Rule 42(a) of the Rules, 2011 1 grants exemption from paying Sales Tax, therefore; appellant did not get himself registered with the department 2 . Learned counsel contended that as soon as appellant's annual turnover marked requisite limit, he got registered with the department in the name of M/s Dera Tonight vide NTN: 9229949-8. Learned counsel argued that prior to getting registration, appellant was not liable to be registered, therefore; appellant's compulsory registration in the name of one of the partners is not sustainable in law as the same tantamount to double taxation. Learned counsel argued that when two types of penalties are provided under the law, the assessing officer is duty bound impose minimum penalty, therefore, imposition of maximum penalty is unjustified. Learned counsel vehemently objected to appellant's registration compulsorily. He prayed for setting-aside impugned orders.
3. Assistant Commissioner (Unit-33) vehemently opposed the arguments advanced by the appellant's counsel. He contended that vide notice dated 31.03.2023 the appellant was required to get himself e-registered under section 24 of the Act, 2011 3 but he abstained himself from complying with the law on the pretext that since the appellant's annual turnover does not exceed rupees 4 million, he is not liable to be registered. He argued that since the appellant is providing taxable services, he is liable to be registered irrespective of the fact that services provided are exempt or otherwise. He argued that in pursuance of "the Original Order" the appellant was registered compulsorily by the department in respect of the economic activity, being carried out in the name of M/s. Dera Tonight. He contended that vide letter dated 13.11.2023 the details of appellant's Tax Profile (i.e. Activation Code and Passcode) were duly communicated to the appellant and such Profile has an option of modification. He argued that appellant has created a fresh Profile with intention to escape from previous liability; otherwise, he would have modified the details available in his Tax Profile, in case the same were incorrect. Assistant Commissioner (Unit-33) supported the impugned order and sough dismissal of appeal.
4. The Departmental Representative stated that there cannot be two Tax Profiles for one entity. He contended that the assessing officer has rightly registered the appellant compulsorily under section 24B of the Act, 2011. He expressed his support for the arguments presented by the Assistant Commissioner (Unit-33) and prayed for dismissal of instant appeal.
5. After hearing arguments of both the side, following are the points for determination before this Tribunal;
1. Whether appellant's Tax Profile registered on 13.03.2024 should be treated as "valid" registration? If yes, what is the effect of appellant's Tax Profile registered by the department on 16.11.2023?
2. Whether imposition of penalty in terms of serial No.1 of the Table under section 43 of the Act, 2011 is justified?
3. What should the judgment be?
POINT NO.1:
6. Article 18 of the Constitution 4 provides right to freedom of trade, business or profession but such right is not absolute as the same is subject to law which governs such trade, business profession, therefore, this Article has to be read in juxtaposition with Article 5 of the Constitution which envisages the obedience to law as an inviolable obligation of every citizen. For ready reference Articles 18 and 5 of the Constitution are reproduced as under;
18. Freedom of trade, business or profession. Subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business:
Provided that nothing in this Article shall prevent-
(a) the regulation of any trade or profession by a licensing system; or
(b) the regulation of trade, commerce or industry in the interest of free competition therein; or
(c) the carrying on, by the Federal Government or a Provincial Government, or by a corporation controlled by any such Government, of any trade, business, industry or service, to the exclusion, complete or partial, of other persons.
5. Loyalty to state and obedience to Constitution and law.
(1) Loyalty to the State is the basic duty of every citizen.
(2) Obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan.
7. The appellant has carried out economic activity which is governed under the provisions of Sindh Sales Tax on Services Act, 2011 and Sindh Sales Tax on Services Rules, 2011, therefore, he is liable to abide by all the provisions of said Statute.
8. Section 24 of the Act, 2011 requires every person to get itself registered who is resident and provides any of the services listed in the Second Schedule from their registered office or place of business in Sindh, however: section 24B of the Act, 2011 empowers the department to register such person compulsorily in case he fails to get himself register voluntarily and section 43 provides penalties for non-compliance of any of the provisions of the Act, 2011.
9. In order to secure fundamental rights, every citizen has to adhere to the relevant Law and Policies issued by the Government, having binding effect under the Doctrine of Sovereignty as held in the case of Mst. Fatima Faryad 5 . There is no cavil to the proposition that rights and duties are two sides of the same coin and they both go side by side Article 5 of the Constitution categorically envisages the obedience to law and the Constitution. Word "inviolable" used therein means that it is never to be broken and infringed. Meaning thereby it is the sole responsibility of every citizen to obey law, rather than taking it (the law) for granted. To be loyal to the State is the basic duty of all citizens and they have to be obedient to the Constitution and the law, wherever they may be as held in the case of President Balochistan High Court Bar Association 6 .
10. Admittedly, the appellant is carrying on economic activity listed in the Second Schedule as "Restaurant services" vide Tariff Heading 9801.2000, therefore, he is liable to be registered Irrespective of the fact that services provided are exempt or otherwise.
11. So far as appellant's entitlement to claim benefit of
Rule 42(1)(a) of the Rules, 2011 is concerned, it will not be out of context to state that initially exemption of whole of the tax leviable was allowed on services under Tariff Heading 9801.2000 in case business turnover does not exceed 3.6 million rupees in a financial year. Subsequently vide Notification No.SRB-3-4/10/2016 dated 28.06.2016 the limit of turnover was exceeded to 4 million rupees to be effective from 01.07.2016. The Notification was lastly amended vide Notification No.SRB-3-4/21/2022 dated 28.06.2022 and the limit of turnover was reduced to 2.5 million rupees to be effective from 01.07.2022. There is no denial to exemption provided under the Rule 42(1)(a) but the entitlement of such exemption is subject to his registration so also filing of returns. Without filing a return no person can avail any exemption.
12. It is the matter of record that appellant was registered compulsorily in compliance of "the Original Order" by the department in respect of economic activity, being carried out in the name of M/s. Dera Tonight and that vide letter dated 13.11.2023 the details of appellant's Tax Profile (i.e. Activation Code and Passcode) were duly communicated to the appellant. Admittedly, such Profile has an option of modification, which allows the taxpayer to modify the details available in his Tax Profile, in case the same are incorrect. There is no legal justification in creating a fresh Tax Profile, just for the reason that the details available in the Tax Profile created by the department (compulsorily) were incorrect.
13. In view of the above I am of the considered view that the Assistant Commissioner was justified in registering appellant compulsorily under Tariff heading 9801.2000 in compliance of section 24B of the Act, 2011, therefore: appellant's Tax Profile registered by the department on 16.11.2023 is a valid registration and appellant's Tax Profile registered on 13.03.2024 has no legal effect, hence: this point is answered accordingly.
POINT No.2:
14. Appellant's counsel submits that two penalties are provided in terms of serial No.1 under section 43 of the Act, 2011 and appellant is entitled to the lesser penalty amongst the two provided in terms of serial No.1 under section 43 of the Act, 2011. Assistant Commissioner (Unit-33) vehemently opposed the arguments advanced by the appellant's representative. He submits that vide notice dated 31.03.2023 appellant was required to get himself registered under section 24 of the Act, 2011 but he did not pay any heed to it. He argued that such non-compliance makes him liable to a penalty of Rs.100,000/- provided in terms of serial No.1 under section 43 of the Act, 2011. He supported the impugned order and prayed for maintaining such findings.
15. This point pertains to non-registration before providing taxable services, penalties whereof are provided in terms of serial No.1 of the Table under section 43 of the Act, 2011. Before proceeding further, I feel necessary to reproduce herein below the relevant provisions of the Act, 2011;
43. Offences and penalties.---Whoever commits any of the offence described in column (1) of the Table below shall, in addition to and not in derogation of any punishment to which he may be liable under any other law, be liable to the penalty mentioned against that offence in column (2) thereof. The sections referred to in column (3) are meant for illustrative purposes only and the corresponding offence described in column (1) may fall and be prosecuted under other sections of this Act as well.
Offences
Penalties
Section of the Act to which offence has reference
(1)
(2)
(3)
1. Any person who is required to apply for registration under this Act fails to make an application for registration before providing taxable services.
Such person shall be liable to pay a penalty of 10,000 rupees or five per cent of the amount of sales tax he would have been liable to pay had he been registered whichever is higher. In case of non-compliance of a notice or an order of compulsory registration, the minimum penalty shall be 100,000 rupees. Provided . . . . . .
24 and 24B
16. Bare reading of above provision shows that penalty in terms of serial No.1 of the Table under section 43 deals with two situations i.e. "not-getting registered voluntarily" and "being registered compulsorily" provided under sections 24 and 24B, respectively. It is very much clear from the wordings of statute that penalties provided in the first part (in column (2) above) are applicable to single situation i.e. "not-getting registered voluntarily" and the assessing officer has discretion to impose penalty either of Rs.10,000/- or five per cent of the amount of sales tax. However, the penalty provided in second part to is applicable to twin situations i.e. "non-compliance of notice (requiring the taxpayer get registered voluntarily)" or "when an order has been passed making the taxpayer registered compulsorily", wherein the law prescribes minimum penalty of Rs.100,000/-.
17. Situations mentioned at serial No.1 (in column (2) above) are interconnected. In case a person, liable to be registered, does not get himself registered, the assessing officer issues a notice requiring such person to get himself registered voluntarily. In such person responds to such notice positively and gets himself registered, the assessing officer, after considering the existence of mens rea behind non-registration prior to providing taxable services, may impose either of the penalties i.e. Rs.10,000/- or five per cent of the amount of sales tax. However; in case of non-compliance of the notice, the assessing officer is liable to register said person compulsorily so also impose a penalty of Rs.100,000/-. Word "shall" used with the penalty (in column (2) above) makes it directory in nature, therefore; no discretion can be exercised by the assessing officer in case the taxpayer does not comply with the notice.
18. In such circumstances I am of the considered view that imposition of penalty amounting to Rs.100,000/- in terms of serial No.1 of the Table under section 43 of the Act, 2011 is justified, hence, this point is answered in affirmative.
POINT No.3:
19. In view of the above discussion, instant appeal is hereby dismissed. Resultantly, findings of Commissioner (Appeals-II) stand maintained. Let the copy of this order be provided to the learned representatives of the parties.
MQ/12/Tax (Trib) Appeal dismissed.