Sales Tax Act (VII of 1990)---

----S.34---Constitution of Pakistan (1973), Art. 199---Constitutional petition- Sales tax, calculation of---Assessing Authorities calculated sales tax in a manner contrary to S.34, Sales Tax Act, 1990, and such calculation was made in the light of a leaflet issued by Central Board of Revenue-- Validity---Leaflet issued by Central Board of Revenue being contrary to S.34, Sales Tax Act, 1990., the same was without lawful authority and of no legal effect---Case was remitted to Assessing Authority for a decision afresh keeping in view S.34 of the Sales Tax Act, 1990 and without in any manner being influenced by the leaflet issued by the Central Board of Revenue.

Collector of Customs, Customs House, Lahore v. Messrs S.M. Ahmad & Company (Pvt.) Limited, Islamabad 1999 SCMR 1.38 and Edulji Dinshaw Limited v. Income-tax Officer PLD 1990 SC 399 ref.

M. S. Babar and M. M. Akram for Petitioner.

A. Karim Malik for Respondents.

Date of hearing: 27th September, 1999.

JUDGMENT

Messrs Pioneer Cement Limited has come to this Court by filing this petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 challenging the refusal of the respondents to adjust the amount of additional tax paid by the petitioner: and a leaflet issued by the Central Board of Revenue bearing No.607/1/96.

2. It is a common ground between the parties that the petitioner is a manufacturer and supplier of cement and has been registered as such with the Sales Tax Department under the provisions of Sales Tax Act, 1990. The liability to pay the sales tax on the cement manufactured and sold by the petitioner is also admitted. The petitioner's case, however, is that it has paid additional sales tax in excess of the entitlement to the department for the period November, 1996 to April, 1997 under a misconception of law. According to the petitioner a sum of Rs.30,01,753

has been inadvertently paid over and above the amount which was payable as additional tax. Earlier W.P. No.17415/97 was filed with the same grievance. That petition was, however, disposed of on 25-5-1999 with a direction to respondent No.1 to formally adjudicate upon the matter and pass an order in this respect. The petitioner appeared before respondents Nos. 1 and 2 who, however, declined the request of the petitioner for adjustment of the tax as it was found that there was no over-payment made by the petitioner.

3. Mr. A. Karim Malik, learned counsel for the respondents has raised a preliminary objection as to the maintainability of this petition by arguing that now when an order in original has been passed by the Additional Collector, Sales Tax, Faisalabad on 10-9-1999 the petitioner should have recourse to the departmental remedies provided by the Sales Tax Act, 1990. In reply learned counsel for the petitioner, in order to show that the petition was maintainable has urged that as the impugned action/order of the respondents is primarily based upon the leaflet issued by the Central Board of Revenue vide No.607(I)/96 the filing of appeal before the department would be an exercise in futility.

4. Before proceeding any further it appears to be convenient to dispose of this objection. The dispute between the parties is regarding calculation of the additional sales tax due under section 34 of the Sales Tax Act, 1990. The Central Board of Revenue in June, 1996 issued a leaflet to answer some of the common questions which often arise regarding payment of sales tax. So far as the additional tax is concerned, para.9 of the circular reads as under:---

"9.How is additional tax calculated? The rate of additional taxis 5 percent. per month for the first 3 months and 2 percent. per month for any subsequent period. A part of any month is treated as a full month. The liability of additional tax is calculated on the amount in default whether due to short payment or inadmissible input credit or refund. The liability keeps increasing till the liability as well as the additional tax are paid in full."

The case of the petitioner is that under section 34 of Sales Tax Act, 1990 the additional tax has to be calculated in the manner provided therein according to which---in case of default of payment of the tax due or any part thereof by a registered person, additional tax shall be levied at the rate of 5 % of the tax due per month or any part thereof. In the leaflet issued by Central Board of Revenue, however, it has been provided that a part of the month shall be treated as a full month. The grievance voiced by the petitioner is that this interpretation/clarification of section 34 of the Sales Tax Act is violative of section 34 and is, therefore, of no legal effect.

5. In the above circumstances, there can be no possible objection to the invocation of the Constitutional jurisdiction of this Court against the impugned action of the respondents in view' of the fact that the petitioner has challenged the wires of a circular issued by the highest revenue authority and it would, therefore, be idle on its part to file an appeal before the Collector or anyone else--- If any authority is needed reference may be made to Collector of Customs, Customs House. Lahore v. Messrs S: M. Ahmad & Company (Pvt.) Limited, Islamabad (1999) SCMR 138) and Edulji Dinshaw Limited v. Income Tax Officer (PLD 1990 SC 399).

6. On merits the learned counsel for the petitioner has emphasised that section 34 of the Sales Tax Act, 1990 specifically provides for charge of the additional tax on the unpaid amount at the rate of 5% of the tax due per month or any part thereof and there was no jurisdiction vested in the respondents including the Central Board of Revenue to direct that the default in respect of a part, of the month should be treated as a penalty for whole month.

7. Mr. A. Karim Malik, learned counsel for the respondents has, however, defended the impugned action.

8. Subsection (1) of section 34 of the Sales Tax Act, 1990 reads 7 as under:--

"347. Additional tax.---(1) Notwithstanding the provisions of section 11, if a registered person or enrolled person does not pay the tax due or any part thereof in time or in the manner specified under this Act, rules or notification issued there under or claims a tax credit, refund or makes an adjustment, which is not admissible to him, or incorrectly applies the rate of zero percent. to supplies made by him, he shall, in addition to the tax due, and the prescribed penalties, pay additional tax at the rate of five percent. of the tax due per month or any part thereof."

9. The leaflet issued by the Central Board of Revenue for Clarification. of procedure for payment of sales tax bearing No.607/1/96 states that if the default takes place for a part of any month the levy should be for the whole of the month. This interpretation of the Central Board of Revenue is clearly violative of section 34 of the Sales Tax Act, 1990 which in unmistakeable terms provides for charge of additional tax for the period of any month or a part thereof at the rate of 5 % per annum. The Act does not provide that if a period of default is for a part of the month the additional tax should be charged for the whole month. The Central Board of Revenue has acted clearly against the substantive provision of law by laying down that the default for a part of the month should be treated as default for a full month. Para. 9 of the impugned leaflet is in clear conflict with section 34 of the Sales Tax Act, 1990 and must give way to it.

10. The respondents were under an obligation to calculate the additional tax paid or payable by the petitioner for the period of default in the manner provided by section 34 of the Sales Tax Act without in any manner being influenced by the aforesaid leaflet of the Central Board of Revenue. Unfortunately, they proceeded to calculate the tax in the manner provided by para.9 rather than section 34 of the, Sales Tax Act, 1990. The impugned action as also para.9 of the leaflet issued by the Central Board of Revenue bearing No.607/1/96 are not sustainable,

In view of what has been stated above, this petition is allowed, the action of the respondents in calculating the sales tax in a manner contrary to section 34 of the Sales Tax Act, 1990 and para.9 of the leaflet issued by the Central Board of Revenue are declared to be without lawful authority and of no legal effect. The matter is remitted to respondent No.2 for a decision afresh keeping in view section 34 of the Sales Tax Act, 1990 and without in any manner being influenced by para. 9 of the leaflet issued by Central. Board of Revenue.

No order as to costs.

Q.M.H./M.A.K./P-79/L Petition allowed.