SARDARO ALIAS SARDAR KHAN VS STATE

1995 P T D 91

[Lahore High Court]

Before Malik Muhammad Qayyum, J

MAMY BEVERAGE

Versus

NASEEM

Writ Petition No. 251 of 1993, heard on 10/05/1994.

(a) Sales Tax Act (III of 1990)---

----S. 34---Liability to pay additional sales tax---Payment of sales tax under a wrong heading---Whether would constitute default in payment---Liability to' pay additional sales tax was not a necessary consequence or corollary of non payment of sales tax within the stipulated period---Use of expression "shall be liable" in contra-distinction to "shall pay" vests a discretion in the adjudicating Officer to levy or not to levy additional sales tax even in the event of failure of a person to pay the sales tax keeping in view facts and circumstances of case and reasons for non-payment---Adjudicating Officer was obliged by law to examine the reasons stated by assessee as to why he could not be deemed to be a defaulter ---Assessee having deposited the amount in the Government treasury, .though on account of inadvertent error, under a wrong head of account, could riot be charged of deliberate failure on his part to pay the sales tax within stipulated period ---Assessee, therefore, could not be deemed to have deliberately evaded to pay the sales tax or to be a defaulter ---Assessee was, thus, not liable to pay any additional sales tax.

Shamroz Khan and another v. Muhammad Amin and others PLD 1978 SC 89; Oxford Dictionary; Webster's New International Dictionary, Second Edition; Jewitt's Dictionary of English Law, 1959 Edition ref.

(b) Penalty---

---Penalty could only be levied in case of wilful evasion of duty.

M/s Humayun Ltd. v. Pakistan and others PLD 1991 SC 963 rel.

Mrs. Nasira Iqbal for Petitioner.

Nemo for Respondent.

Date of hearing: 10th May, 1994.

JUDGMENT

This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, calls in question order dated 3-12-1992 passed by the Deputy Collector, Central Excise and Sales Tax, Rawalpindi, against which the appeal of the petitioner was dismissed by the Collector on 5-1-1993 on the ground that the petitioner had failed to deposit the amount of penalty adjudged against it by the Adjudicating Officer.

2. The necessary facts are that the petitioner is engaged in the manufacture of beverages on which it is liable to pay sales tax in accordance with the provisions of the Sales Tax Act, 1990. It appears that the sales tax payable in respect of the production of Malt-79 for the month of April, 1991 amounting to Rs.49,157 was deposited under a wrong head of account relating to Central Excise Duty. The petitioner was-called upon to explain its position vide notice dated 12-6-1991, in reply to which 'it was stated by the petitioner that it was on account of typographical mistake that wrong head of account was mentioned, which may be rectified. The respondents, however, insisted that a fresh deposit of the amount of tax payable be made. Consequently, on 7-8-1991, the petitioner deposited another amount of Rs.49,157 as sales tax.

3. On 10-8-1991, another notice was received by the petitioner from the Superintendent Sales Tax-II 2-Affindi Colony, Rawalpindi requiring it to deposit an additional tax on account of late payment of sales tax as required by section 34 of the Sales Tax` Act, 1990. In its reply, the petitioner pointed out that the initial deposit was made within the prescribed period of time though due to an inadvertent error under a wrong head of account and as such, there was no failure on the part of the petitioner to pay the tax due and no additional tax was payable by it. This plea did not find favour with the Superintendent, who on 3-8-1992, served the petitioner with another notice calling upon it to show cause as to why penal action be not taken against it for non-payment of the additional sales tax. In its reply dated 8-8-1992, the petitioner reiterated that as the tax has been paid within time, no additional tax was payable by it.

4. However, by his order, dated 3-12-1992, the Deputy Collector Central Excise and Sales Tax, Rawalpindi, held that as the sales tax has not been deposited in the proper head of account, the petitioner was liable to pay additional sales tax in terms of section 34 of the Sales Tax Act, 1990. As already observed, the appeal of the petitioner was dismissed by the Collector on account of non-compliance of section 45(3) of the Sales Tax Act, 1990. Hence this petition.

5. I have heard learned counsel for the petitioner. No one has appeared for the respondents.

6. Mrs. Nasira Iqbal, Advocate for the petitioner has contended that under section 34 of the Sales Tax Act, 1990, additional tax can only be levied if a registered person fails to pay the tax within the time specified in section 6. According to the learned counsel, the use of word "failure" is significant as it implies an element of deliberate non-payment. In the present case, it is emphasised that admittedly, the petitioner had deposited the amount of sales tax in the treasury an& as such, it cannot be said to have been defaulted in the payment merely because of mention of wrong head of account.

7. There is considerable merit in the contention raised by learned counsel for the petitioner. There is no dispute that the tax for the month of April, 1991 was deposited by the petitioner in the treasury but under a wrong head of account. The question, which arises, is as to whether the view taken by the Collector that as the deposit was not made in the proper head of account, it amounted to failure to deposit the tax is borne/out by the language of section 34:

8. Section 34 of the Sales Tax Act, 1990 reads as follows:

"Additional Tax.--Notwithstanding the provisions of section 11, if a registered person fails to pay the tax within the time specified in section 6, he shall, in addition to the tax due be liable to pay additional tax and surcharge at the following rates.

(a) 5 per cent. of the tax during the first month or part thereof;

(b) 1.0 per cent of the tax due for the next month or part thereof;

(c) 100 per cent. of tax due for the succeeding period;

(d) surcharge at the rate of 1 per cent. for every .month or part thereof on the total accumulated amount that remains unpaid after the expiry of three months.

Explanation.-------

(1) For the purpose of calculating additional tax, the period of default shall be reckoned from the 21.st of a month (following the due date) to the day preceding the date on which the tax is actually paid;

(2) In this section, the expression "tax due", includes the additional tax."

9. On the plain language of this provision it is apparent that liability to pay sales tax is not a necessary consequence or corollary of non-payment of sales tax within the stipulated period. On the other hand, use of expression "shall be liable" in contradistinction to "shall pay" clearly vests a discretion in the adjudicating officer to levy or not to levy additional sales tax even in the event of failure of a person to pay the sales tax keeping in view the facts and circumstances of the case and reason for non-payment.

10. In Shamroz Khan, and another v. Muhammad Amin and others PLD 1978 SC 89, the question as to the meaning of the words "he shall be liable to have his defence, if any, struck out" as used in Order VIII, rule 12 of the C.P.C. fell for consideration. It was ruled that:

"The question is of the meaning of the words 'he shall be liable to have his defence, if any, struck out', and according to Mr. Inayat Elahi Khan, these words made it incumbent on the Court to strike off the defence of a defendant who had failed to supply his address. But according to the Oxford Dictionary the word 'Liable' means:---

(1) Bound or obliged by law or equity; answerable; legally subject or amenable.

(2) (a) Exposed or subject to or likely to suffer from (some thing prejudicial); in older use with wider sense, subject to (any agency or change).

(b)Subject to the possibility of (doing or undergoing something undesirable).

(4) Subject or subservient to.

(6) U.S. likely'.

Webster's New International Dictionary, Second Edition, defines liable as:-- .

(1) Bound or obliged in law or equity; responsible answerable; as, the surety is liable for the debt of his principal; also, now rarely; with to; as, all his property is liable to pay his debts and to taxes.

(2) Exposed to a certain contingency or casualty of an undesired character; as, liable to slip; liable to be injured.

Similarly, according to Corpus Juris Secundum, the word 'liable' has been variously defined as meaning:

"Bound or obliged in law or equity; answerable; likely or probably; obligated; responsible; accountable for, or chargeable with; justly or legally responsible; bound or obliged; qualified; responsible; answerable; or compellable to make satisfaction, compensation, or restitution.'

Finally Jewitt in his dictionary of English Law, 1959 Edition defines liability as:--

'the condition of being actually or potentially subject to any obligation either generally, as including every kind of obligation, or, in a more special sense, to denote, inchoate, future, unascertained or imperfect obligation, as opposed to debts, the essence of which is that they are ascertained and certain. Thus when a person becomes surety for another, he makes himself liable, though it is unasertainable in which obligation or debt the liability may ultimately result'. Now if in the words of Jewitt liable to perform an obligation is potentially subject to that obligation, it means that the obligation may be enforced against him, not that it must be. Similarly, if a person is liable to suffer a penalty he is potentially subject to that penalty and this means that the penalty may be enforced against him at the discretion of the authority entitled to enforce the penalty."

11. Similarly, in M/s Humayun Ltd. v. Pakistan anti others PLD 1991 SC 963 it was ruled that penalty can only be levied in case of wilful evasion of duty.

12. It follows from the above that the imposition of sales tax under section 34 of the Sales Tax Act, 1990 was in the discretion of the Deputy Collector who unfortunately was not aware of this jurisdiction vesting in him and proceeded in the matter under a misconception that he was obliged by law to recover the sales tax merely because, according to him, the sales tax has not been paid within the due period. This approach on the part of the Deputy Collector was clearly erroneous. He was obliged by law to examine the reasons stated by the petitioner as to why it cannot be deemed to be a defaulter.

12-A. As already observed in the present case, there is no dispute as regards the, facts from which it is clear that there was no deliberate failure on the part of the petitioner to pay the sales tax within the due period. Indeed the petitioner had deposited the amount due in the Government treasury, though on account of inadvertent error under a wrong head of account. In these circumstances, it would not be said that the petitioner had deliberately evaded to pay the sales tax or was a defaulter. That being so, it was clearly not liable to pay any additional sales tax.

In view of what has been stated above, this petitioner is allowed; the impugned order is declared to be without lawful authority and of no legal effect.

No order as to costs.

A.A./M-1777/L Petition accepted.