Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.34 & 34A‑‑‑S.R.O. No.6(68)DS(E&F)/98, dated 27‑5‑1999‑‑ Additional tax‑‑‑Import of buses‑‑‑Exemption from sales tax was under consideration‑‑‑Buses were cleared on giving an undertaking by the assessee‑Company that if at a later stage the decision of the C.B.R. goes against it the sales tax would be deposited‑‑‑Said undertaking was substituted by Bank guarantee subsequently‑‑‑Sales tax was paid by the company‑‑‑Levy of additional tax for delay in payment by due date which was the date when buses were cleared‑‑‑Validity‑‑‑Failure to pay the tax would arise when the demand was raised and was not paid but where under an arrangement with the consent of the Department Bank guarantee was taken or undertaking was obtained particularly in the circumstances when the exemption was under consideration, it would be harsh to bring such case within the purview of S.34(1) of the Sales Tax Act, 1990‑‑‑Section 34 of the Act contemplates default in payment which is willful, negligent or for any other reason‑‑‑Facts and circumstances of the present case, therefore, did not warrant the application of S.34A of the Sales Tax Act,, 1990‑‑‑Federal Tax Ombudsman recommended the Central Board of Revenue to consider the complaint case and in exercise of power under S.34A of the Sales Tax Act, 1990, grant relief to the assessee as deemed appropriate.

M.S. Babar for the Complainant.

Ashaad Jawwad, D.C.S.T. for Respondent.

DECISION/FINDINGS

1. The complainant company is engaged in the business of operating, Intercity Bus Service. The complainant prays for direction to the Central Board of Revenue and its functionaries to issue requested refund.

2. Briefly the facts are that the complainant imported 20 buses in August, 1999 under the Prime's Urban Transport Strategy" notified vide Notification No.6(68)DS(E&F)/98, dated 27‑5‑1999 whereby exemption from sales tax was granted at para. 5. According to the complainant even before the import of the buses and by way of abundant caution, the complainant requested the C.B.R. by letter, dated 18‑8‑1999 to clarify the impression in certain quarters that sales tax at 1596 is leviable on the import of these buses. No such clarification was received when the buses arrived. Therefore, to clear the consignment at the suggestion of the Assistant Collector, an "undertaking" was given to the effect that if at a later stage the decision of the C.B.R. goes against the complainant, sales tax would be deposited. Accordingly the buses were cleared. Latter, the Department demanded that a "bank guarantee" be substituted for the undertaking. This was duly complied with. Negotiations, however, continued with the concerned officers of the sales tax Department and on their insistence sales tax amounting to Rs. 78,30,298 was provisionally paid on 30‑12‑1999 through a Bank draft. Thus there was no default as such, nor at any stage compliance with the requirement of the Department was resisted or postponed. It was pleaded that despite this cooperative by the complainant, respondent No.2 on the instructions of respondent No.1 levied Additional (Sales) Tax at Rs. 1,690,588 by resort to section‑ 34 of the Sales Tax Act, although there was no collusion, willful or deliberate default. It has been alleged that the demand originally created was beset with a mistake of calculation due to the wrong adoption of terminal date for purpose of subsection (2)(b) of section 34 which, when pointed out, was corrected by the Department to reduce the Additional Tax to Rs. 858,302. There still exists slip‑up which has already been brought to the notice of the Department on 5‑6‑2000 and would further curtail the impugned Additional (Sales) Tax demand to Rs. 568,328 thus resulting in a net refund of Rs.289,974. No action has, however, been taken despite repeated requests. The protest to the C.B.R. against levy of Additional (Sales) Tax under section 34 was turned, down vide C.B.R. Letter C. No. l/24‑STT/98, dated 31‑7‑2001 on the ground that the complainant "did not pay the sales tax under the law" and that "section 34 of the Sales Tax Act, 1990 does not mention inadvertence, willful default, misunderstanding etc. as factors for levy or non‑levy of Additional Tax".

3. The Department pleaded that section 34 of the Sales Tax Act is attracted whenever a cognizable default occurs hence in the present situation C.B.R. Circular No.2 of 1997 had no particular relevance, because tax due, (though paid) was admittedly deposited much after the due date prescribed by law. In view of subsection (1) of section 6 of the Sales Tax Act read with section 31A of the Customs Act, 1969, the `due date' was the date on which the goods were cleared. Therefore, the default is cognizable with reference to this date unmindful of postponement by way of `undertaking' or `Bank Guarantee'.

4. Mr. M.S. Babar, the learned Advocate for the complainant contended that the action taken by the respondent in imposing Additional Tax under section 34A of the Sales Tax Act is illegal. From the facts it is clear that the issue regarding payment of sales tax on import of buses by the complainant was being considered by the C.B.R. when the buses imported by the complainant were released on 27‑10‑1999 on an undertaking as required by respondent No.2. Thereafter such undertaking was substituted by a Bank Guarantee and finally on 30‑12‑1999 the sales tax paid as and when required by the Department. This shows that the complainant was at all material time ready to pay the sales tax but with the consent and approval of respondent No.2 the buses were released in the manner stated above. If the issue is considered in the background that exemption of sales tax was under consideration then the complainant cannot ‑be said to have substantially defaulted in payment of sales tax though technically it may have. Although sales tax had not been paid in terms of money it was ensured and guaranteed as required by the Department and whenever demanded was paid by the complainant. These facts require consideration by the C.B.R. that the technical default occurred because the concerned officer permitted the complainant to furnish undertaking or Bank Guarantee against release of the goods without payment of sales tax. Unless release of goods is permitted without payment of sales tax, the importer cannot clear it. The object of section 34 seems to be that where an importer fails to pay the tax or part thereof he will be required to pay Additional Tax in addition to the tax due and the prescribed penalties. A failure would arise when the demand is raised and is not paid but where-under an arrangement with the consent of the Department Bank Guarantee is taken or undertaking is obtained A particularly in the circumstances when the exemption was under consideration, it Would be harsh to bring such case within the purview of section 34(1). In fact, the section contemplates default in payment which may be willful, negligent or for any other reason. In the present case the facts and circumstances do not warrant application of section 34A of the Sales Tax Act by the C.B.R.

5.In these circumstances it is recommended:

(i)The C.B.R. to consider the complaint case and in exercise of power under section 34A of the Sales Tax Act, grant relief to the complainant as deemed appropriate.

(ii)Compliance be reported within 45 days of the receipt of this order.

C.M.A./M.A.K./224/FTO.

Order accordingly.