COLLECTOR OF SALES TAX, LAHORE VS Messrs PACKAGES LIMITED, LAHORE, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 1920 (2005)

Sales Tax Act (VII of 1990)---

----Ss. 7, 33, 34 & 47---Appeal to High Court---Demand of additional tax, surcharge and imposition of penalty---Remission or reduction of additional tax and penalties imposed---Jurisdiction of Tribunal---Appellate Tribunal had found in its order that demand of additional tax, surcharge and imposition of penalty on the registered person was without lawful authority---Revenue challenged the impugned order of Appellate Tribunal on two grounds: Firstly that amendment made in Sales Tax, 1990 by Finance Act, 1996 was given retrospective effect by the Members of Appellate Tribunal and Secondly that Appellate Tribunal was not competent to remit or reduce additional tax and penalties imposed under Ss. 33 & 34 of Sales Tax Act, 1990---Validity---Was not correct that Tribunal had given retrospective effect to amendment made in S.7 of Sales Tax Act, 1990---Whether a party acted bona fide in particular situation was essentially a question of fact which could not be resolved by High Court in its appellate jurisdiction under S.47 of Sales Tax Act, 1990 which was necessarily akin to referable jurisdiction---Appellate Tribunal had jurisdiction to waive or remit additional tax or penalty in view of provisions of S. 34 of Sales Tax Act, 1990 even after amendment and insertion of the word "shall" in subsection (1) of S.34 of Sales Tax Act, 1990.

Messrs Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax Lahore PLD 1989 Lah. 337; Federation of Pakistan and others v. Khurshid Spinning Mills Ltd. 1998 SCMR 2173 and Messrs Millat Tractors Ltd. Lahore v. Collector of Sales Tax and Central Excise, Lahore 2000 PTD 1445 ref.

A. Karim Malik for Appellant.

Ashtar Ausaf Ali for Respondents:

Date of hearing: 7th March, 2005.

JUDGMENT

NASIM SIKANDAR, J.---This further appeal by the Revenue under section 47 of the Sales Tax Act, 1990 seeks to challenge an order of the Customs, Excise and Sales Tax Appellate Tribunal, dated 20-4-1998. Through that order a Division Bench of the Tribunal held that the demand of additional tax, surcharge and imposition of penalty on the registered person/the respondent was without lawful authority.

2. The respondent as a manufacturing concern is a registered person under the Sales Tax Act, 1990. On filing a refund claim of sales tax amounting to Rs.73.26 million for the years, 1994, 1995 and 1996 the Revenue scrutinized its record and came to the conclusion that it has been claiming excess amount of sales tax and had also availed illegal input adjustment amounting to Rs. 41,81,593 and Rs.1,38,48,578 for the last two years involved. It was further noted that it had claimed input tax as per sales tax mentioned in the bills of entry while factually it had paid only 50% of the sales tax and the balance was to be paid by it in due course of time in terms of the concession given under S.R.O.490(I)/91, dated 30-5-1991.

3. A contravention report was prepared and in the adjudication proceedings that followed, the Additional Collector Sales Tax by way of an order-in-original, dated 26-6-1997 found the registered person liable to pay Rs.41,81,593. Also additional tax amounting to Rs.1,81,15,438 and a surcharge of Rs.52,78,595 was directed to be paid. Besides, a penalty under section 33 of the Act at Rs.83,63,186 was imposed. The respondent/registered person failed before the Collector of Customs (Appeals).

4. On further appeal a Division Bench of the Tribunal allowed the aforesaid relief on reaching a conclusion that levy of additional tax and imposition of penalty, in the facts and circumstances of the case, was unjustified. The operative part of the impugned order contained in para. 7 thereof reads as under:--

"The only point to be determined for the disposal of this appeal is as to whether the appellants acted malafidely or otherwise took advantage of a lacuna in law. The mere fact that the Government had to effect amendment in law and insert the word "paid" in section 7 of the Sales Tax Act, 1990 leaves no doubt that prior to that anyone could take advantage and claim full adjustment as the condition precedent till then was only of the possession of Bill of Entry and not 100% payment in cash. This is exactly what the appellants did. In a situation like this, to say that the appellants had deliberately tired to jeopardize the legitimate interest of the State Exchequer, would tantamount to being too restrictive, inward-looking and completely obvious to the spirit and content of law, That being so, the Tribunal is pleased to hold that the demand of additional tax and surcharge in the instant case was without lawful authority and so was the imposition of penalties. The same are, therefore, remitted in toto."

5. Learned counsel for the appellant/Revenue attacks the impugned order for two reasons. Firstly that amendments made in the Act by the Finance Act, 1996 were given retrospective effect by the members of the Tribunal and secondly that the Tribunal was not competent to remit or ^C reduce additional tax and penalties imposed under sections 33 and 34 of the Act. Particularly after substitution of these sections by fresh provisions brought about in the Act by Finance Act, 1996.

6. Learned counsel for the respondent on the other hand in support of his submissions for literal interpretation of fiscal statute relies upon re: Messrs Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax Lahore (PLD 1989 Lahore 337) and re. Federation of Pakistan and others v. Khurshid Spinning Mills Ltd. 1998 SCMR 2173.

7. Having heard the learned counsel for the parties we are not inclined to interfere with the impugned order for the following reasons:

Firstly, it is not correct to suggest that the learned members of the Tribunal gave retrospective affect to the amendment made in section 7 of the Sales Tax Act through the Finance Act, 1996. It was contended before them and they agreed that addition/ insertion of the words "paid for the purpose of taxable supply made or to be made by him" in subsection (1) of section 7 supported the case that before making of such insertion the registered person could validly claim the input tax adjustment of the total amount of the Sales Tax or at least a lacuna existed in law which could have been taken benefit of by the taxpayer.

Secondly, the issue if _a party acted bona fide in a particular situation is essentially a question of fact which cannot be resolved by this Court in its appellate jurisdiction under section 47 of the Sales Tax Act, 1990 which is necessarily akin to referable jurisdiction.

Thirdly, the contention that in view of the provisions of sections 33 and 34 of the Act the Tribunal cannot remit, reduce or delete additional tax or penalty cannot be accepted. This issue. recently came up for consideration before this Court in S.T.A. No.3 of 2002 decided on 27-1-2005. In that case the argument that under the provisions of section 34 of the Act or happening of anyone of the commissions and omissions mentioned therein on the part of the taxpayer, the levy of additional tax and prescribed penalties would be a consequence mandated by law and its waiver by the Tribunal would be an apparent illegality was rejected. On consideration of various judgments of the Hon'ble Supreme Court as well as of this Court we found that' the Tribunal had the jurisdiction to waive or remit additional tax or penalty in the face of provisions of section 34 of the Act F even after amendment and insertion of the word ^"shall" in subsection (1) of section 34 of the Act. By making a reference to an earlier judgment of this Court in re. Messrs Millar Tractors Ltd. Lahore v. Collector of Sales Tax and Central Excise, Lahore (2000 PTD 1445) it was opined that provisions of section 46 (appeals to Appellate Tribunal) were neither governed nor controlled by the provisions of sections 33 and 34 of the Act. It was further observed that in a number of cases on Income Tax and Wealth' Tax side in identical situation this Court expressed the view that the fixed amounts of penalties or those imposed with reference to a certain amount leviable for default per day were relevant only in the assessment proceedings. Further that imposition of penalties or additional tax with reference to such provisions was not at all sacrosanct for the appellate forums including the Tribunal. It was further noted that in case the departmental interpretation was accepted then the appeal provisions and the powers of the Tribunal to allow relief with regard to the penalties and additional tax will become redundant and that the same could never be the intention of the legislature.

8. For the aforesaid reasons we find no substance in this appeal by the Revenue.

9. Dismissed.

H.B.T./C-76/L???????????????????????????????????????????????????????????????????????? Appeal dismissed.