Appeal No.H-60 of 2000, decided on 7th November, 2001 VS Appeal No.H-60 of 2000, decided on 7th November, 2001, 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2241 (2001)

Sales Tax Act (VII of 1990)-----Ss. 3 & 2(22), (30)‑‑‑Scope of tax‑‑‑Advance payment in respect of taxable supply to be made in 'future‑‑‑Department interpreted that advance payment received was subject to deduction of sales tax and payable to Department‑‑‑Demand was enforced‑‑‑Validity‑‑‑No provision of Sales 'fax Act had purported to deem the receipt of, money to be a sale‑‑ ‑Department's interpretation had no basis in the text of the Sales Tax Act, 1990 and that it sought to change the nature of the tax from levy on the supply of goods to a tax on the mere bailment of money‑‑ None of the provisions of the Sales Tax Act, 1990 provided that bailment of ,money could be deemed to be a sale or a supply of a goods‑‑ Provision of S.2(30) of Erie Sales Tax Act, 1990 had only employed the legislative device of deeming so as to crystallise the point of time at which sales tax was payable with respect to a supply that had already been made and Sank could not be employed to the extent of conceiving that the payment of money had been made so as to change the scope of word "supply" beyond the provisions of S.2(22) of the Sales Tax Act, 1990, read with S.3 of the Sales Tax Act, 1990 which was the charging section‑‑‑Section 2(30) would not in any way alter the scope and nature of the charging section‑‑‑Where Legislator, could have expressly specified as‑ regard the charging of a tax but had chosen not to specify, the same must not be read into the text or the statute by way of intendment so a.3 to circumvent the scope of the charging provisions‑‑ Demand raised by the Department was thus not legal‑‑‑Order was set aside by the Tribunal.

Maple Leaf Cement Factory Limited v Federation of Pakistan 1999 PTD 3907; Elahi Cotton Mills Ltd. v. Federation of Pakistan and others PLD 1997 SC 582; B. N. Syed v. Afzal Jahan Begum PLD 1970 SC 29: Siraj Din v. Sardar Khan 1993 SCMR ‑745 and Mehran Associates Ltd. v. The Commissioner of Income Tax, Karachi 1993 SCMR 274 ref.

A.N. Khokhar, Consultant for the Appellant.

M.R.K. Warsi, Superintendent for Respondent

Date of hearing: 7th‑ November, 2001.

ORDER

ZAFAR IQBAL, MEMBER (TECHNICAL).‑‑‑ This appeal has been preferred against the order of the Collector of Sales Tax Adjudication, Hyderabad, whereby he enforced a demand of sales tax.

2. The brief facts of the case are that the appellant had received an amount of Rs.1,16,80,000 from their customers on account of advanced payment in respect of taxable supply to be made in future: The department interpreted that advance payment received was subject to deduction of sales tax and payable to the department. The appellant contested this novel interpretation of law, however, the adjudication officer did not agree with the point of view of the appellant and enforced the demand. The order has now been challenged before this forum.

3. The appellant contends that the demand of the department was wrong and not justifiable as the department has placed reliance on a definition clause of the Act, whereas, the charging section does not create a legal duty to pay tax. on amounts received in advance. The appellant has placed reliance on the case of Maple Leaf Cement Factory Limited v. Federation of Pakistan 1999 PTI) 3907.

4. The department on the other hand contends that the tax liability against appellants exists.

5. We have heard the litigant parties. Record was also seen. The issue in this matter is with regard to an interpretation of a deeming clause. It would be appropriate to go through the existing case‑law in this regard,. Reference with regard to the interpretation of deeming provisions can be made to the following judgments of the superior Courts, reported as Elahi Cotton Mills Ltd. v. Federation of Pakistan and others PLD 1997 SC 582 at 677:

"That the legal fictions are limited for a definite purpose, they cannot be extended beyond the purpose for which they are created."

B.N. Syed v. Afzal Jahan Begum PLD 1970 SC 29 at 35:

"It cannot be denied that the Court has to determine the limits within which and for the purposes for which the Legislature has created the fiction. "

Siraj Din v. Sardar Khan 1993 SCMR 745 at 749:

"It is settled rule that the Court is entitled to ascertain the object for which the legal fiction is created and confined to the purposes for which it is meant."

Mehran Associations Ltd. v. The Commissioner of Income‑tax, Karachi 1993 SCMR 274 at 286, 287:

"The cardinal principles of interpretation of a fiscal statute seem to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. A fiscal provision of a statute is to be construed liberally in favour of the citizen.

6. In the light of above we have no hesitation to hold that the interpretation placed by the department through the impugned letter or instruction, the impugned show‑cause notice and the assessment order passed in pursuance thereof are without jurisdiction and of no legal effect.

7. The taxable event is the supply of the goods which in the context of the instant appeal means the sale of soap and detergent, therefore, the mere deposit of money in anticipation of future sale cannot be made the occasion ,for demanding the payment of sales tax. It is a regular feature in the sales of such items that the stockists of these products deposit money with the manufacturers in routine even though at the time of deposit no contract specifying the price to be paid or the quantity to be purchased by the stockists is in place. The manufacturer at the time' deposit, is under no obligation to provide any quantity of goods to the stockists nor are the stockists under any obligation to purchase any particular quantity. In other words, simply at the time of deposit of money, there is no concluded sale in existence and the transaction can be nullified by the manufacturer or the purchaser.

8. The departmental interpretation that the sale tax is payable soon as money is received by the registered person would appear to reading into the Sales Tax Act, the following statement:

Where money is received by the manufacturer shall be deemed to have made a sale of value equivalent to the amount of the money received."

9. No provision of Sales Tax Act has purported to deem the receipt of money, to be a sale. Consequently, the department's interpretation has no basis in the text of the Act and that it seeks to I change the nature of the tax from levy on the supply of goods to a tax on the mere bailment of money. In none of the provisions of the Sales Tax Act, bailment of money could be deemed to be a sale or a supply of the;

10. The provision of section 2(30) of the Act has only employed the legislative device of deeming so as to crystallise the point in time at which sales tax is payable with respect to a supply that has already occurred. It cannot be employed to the extent of conceiving the payment of money so as to charge the scope of word "supply" beyond the provisions of section 2(22) of the Act, read with section 3 which is the charging section It cannot be held that section 2(30) would in any way alter the scone and nature of the charging section. There can be no doubt that where legislature could have expressly specified as regard the charging of a tax but has chosen not to specify roust not be read into the text of the statute by way of intendment so as to expand or circumvent the scope of the charging provisions.

11. The upshot of department was not legal. Hence, we set aside the impugned allow this appeal.

C.M.A./M.A.K./328/Tax (Trib.) Appeal accepted.