NAEEM FISH FRY Versus COMMISSIONER (APPEALS-I), SINDH REVENUE BOARD, KARACHI
MRS. ALIA ANWER, MEMBER JUDICIAL.--- The appellant has assailed the order dated 26.05.2023 vide Order-in-Appeal (hereinafter referred to as the first Appellate Order ) No.130/2023 passed by the Commissioner (Appeals-I) in Appeal No.08/2023 whereby the penalty, amounting to Rs.100,000/- imposed in terms of S.No.1 of the Table under section 43 of the Act, 2011 1 by the Assistant Commissioner (Unit-34) vide Order-in-Original No.2844/2022 (hereinafter referred to as "the Original Order") dated 02.12.2022, has been confirmed.
2. Appellant's representative submits that impugned order is bad in law and on facts. He argued that appellant is carrying on business at the low scale, therefore; he is entitled to the exemption provided as per Notification dated 18.06.2013. He argued that the department had registered appellant compulsorily earlier also but it was set-aside vide order dated 18.10.2016 by this Tribunal in Appeal bearing No. AT-216/2015. Appellant's representative further argued that although appellant is not liable to be registered but in pursuance of compulsory registration vide order dated 02.12.2022; appellant has filed returns for all the subsequent tax periods. He prayed for reduction in the amount of penalty to the extent of Rs.10,000/- as provided in terms of S.No.l of the Table under section 43 of the Act, 2011.
3. Assistant Commissioner (Unit-34) vehemently opposed the arguments advanced by the appellant's representative. She submits that appellant is not entitled to exemption provided under Notification No.SRB-3-4/7/2013 dated 18.06.2013. She argued that appellant was duly provided with the opportunity to get himself registered required under section 24 of the Act, 2011 but he did not pay any heed to it. She argued that appellant's income tax return for the year 2022 shows business turnover of Rs.3,485,000/- which is far more than the threshold allowed for exemption in the said Notification. She further argued that total utility bills (gas and electricity) of the appellant exceeds Rs.40,000/- in a month during the subject financial year, which disentitles appellant to claim exemption of the said Notification. Assistant Commissioner (Unit-34) supported the impugned order and prayed for dismissal of instant appeal.
4. After hearing arguments of both the side, following are the points for determination before this Tribunal;
1. Whether appellant is liable to be registered under section 24 of the Act, 2011?
2. Whether penalty amounting to Rs.100,000/- imposed 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:
5. Appellant has claimed exemption as per Notification No.SRB-3-4/7/2013 dated 18.06.2013 which reads as under:
In exercise of the powers conferred by subsection (1) of section 10 of the Sindh Sales Tax on Services Act, 2011 (Sindh Act No.X11 of 2011), the Sindh Revenue Board, with the approval of the Government, is pleased to exempt the whole of the tax leviable on the services specified in column (2) of the Table below as are classified in the tariff heading mentioned there against in column (1).
Tariff Heading No.
Description of services and the conditions and the restrictions for exemption
9801.2000 and 9801.5000
Services provided or rendered by restaurants and caterers, whose turnover does not exceed 3.6 million rupees in a financial year;
Provided that the exemption shall not apply in case of:-
(i)
(ii)
(iii)
(iv)
(v)
(vi) Restaurants and caterers whose total utility bills (gas, electricity and telephone) exceed Rs.40,000/= in any month during a financial year.
6. Bare reading of above Notification categorically shows that services provided or rendered by restaurants and caterers are taxable, in case its turnover exceeds 3.6 million rupees in a financial year or their total utility bills (gas, electricity and telephone) exceed Rs.40,000/- in any month during the subject financial year. Although appellant's turnover did not exceed 3.6 million rupees in the subject financial year but its total utility bills (gas, electricity and telephone) remained Rs.48,482/- i.e. exceeding Rs.40,000/- in the month of August 2022. In such circumstances, the appellant is liable to be registered under section 24 of the Act, 2011, hence; this point is answered in affirmative.
POINT No.2:
7. Appellant's representative submits that two penalties are provided in terms of serial No.1 under section 43 of the Act, 2011. He argued that since the date of compulsory registration, the appellant has been filing returns regularly. He argued that by such practice appellant comes within the category of compliant taxpayers, therefore; he is entitled to the lesser penalty amongst the two provided in terms of serial No.1 under section 43 of the Act, 2011. He, accordingly, prayed for reduction in penalty.
8. Assistant Commissioner (Unit-34) vehemently opposed the arguments advanced by the appellant's representative. She submits that vide notice dated 06.09.2021 appellant was required to get himself registered under section 24 of the Act, 2011 but he did not pay any heed to it. She 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. She supported the impugned order and prayed for maintaining such findings.
9. 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 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
10. 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 a penalty either of Rs.10,000/- or five per cent of the amount of sales tax. However, the penalty provided in second part is applicable to twin situations i.e. "non-compliance of notice (requiring the taxpayer to 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/-.
11. 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 case 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.
12. 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:
2. In view of the above discussion, instant appeal is hereby dismissed. Resultantly, findings of Commissioner Appeal stands maintained. Let the copy of this order be provided to the learned representatives of the parties.
MQ/5/Tax(Trib.) Appeal dismissed.
1 The Sindh Sales Tax on Services Act, 2011.