COLLECTOR OF SALES TAX AND CENTRAL EXCISE (EAST), KARACHI VS Messrs ASPHALT INTERNATIONAL, KARACHI, 2006 PTD-KARACHI-HIGH-COURT-SINDH 715 (2006)

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

----Ss.7 & 8---S.R.O. 1349(I)/99, dated 17-12-1999---Non-payment of tax on taxable supplies---Payment of principal amount of tax after adjusting input tax while availing Amnesty Scheme---Authority demanding entire principal amount of tax with additional tax and penalty---Validity---Right to deduct input tax from output tax in terms of S.7 of Sales Tax Act, 1990 would be available to a registered person only and during period 1st July 1998 to December 1998---Assessee during such period was not registered---Provision of S.8 of Sales Tax Act, 1990 would not apply to the present case, but would apply to goods specified in a notification by Federal Government---Sanctioning refund to assessee would not mean that authority had indirectly agreed to such claim of adjustment---No admission on the part of authority that assessee was entitled to such adjustment---Even presence of any such admission would not have the effect to override statute law---Nothing in S.R.O. 1349(I)/99 dated 17-12-1999 was available to show that while working out portion of principal amount of tax due, tax-evader would be entitled to adjustment of input tax even though not being a registered person---Principal amount of tax due would be calculated in terms of the provisions of Sales Tax Act, 1990---For availing Amnesty, entire principal amount of tax along with additional tax and penalty on such principal amount would become payable---Such demand raised by authority was justified.

Messrs Hamza Sugar Mills Ltd. v. Collector of Sales Tax 2005 PTD 1131 and Mayfair Spinning Mills Ltd. v. Collector of Sales Tax Appellate Tribunal PTCL 2002 CL 115 ref.

(b) Waiver---

----No waiver against law.

Raja Muhammad Iqbal for Appellant.

Sattar Silat for Respondent No. 1.

Date of hearing: 2nd September, 2005.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---In this Appeal under section 47 of the Sales Tax Act, 1990, at the instance of Collector of Sales Tax and Central Excise (East), Karachi, the following questions of law have been proposed for our opinion:---

1. Whether the learned Customs, Excise and Sales Tax Appellate Tribunal has misread statute by holding that respondent is entitled to deduct input tax under section 7 of the Sales Tax Act, 1990?

2. Whether the learned Customs, Excise and Sales Tax Appellate Tribunal has erred in holding that the respondent No.1 is entitled to claim tax credit under section 8 of the Sales Tax Act, 1990, for the period when respondent No.1 was not registered under the Sales Tax Act, 1990?

3. Whether the learned Customs, Excise and Sales Tax Appellate Tribunal has erred in holding that the respondent No.1, has paid the output tax at the time of claiming amnesty and therefore, they could not be charged under any section of the Sales Tax Act?

2. The facts giving rise to the above questions as stated in the order of Tribunal dated 20th of March, 2002, are that the respondent purchased asphalt from National Refinery Limited Karachi. They did not discharge their tax liability as per provisions of Sales Tax Act, 1990, since 1-7-1998 and after getting themselves registered in January, 1999, started discharging their tax liability. According to Sales Tax Department, even after registration the respondent No.1 suppressed their purchases in the monthly sales tax return to the tune of Rs.7,11,63,424 and therefore, they were charged for evasion of sales tax. The show-cause notice issued on 4-12-1999 reads as follows:---

"Dated 4-12-1999

SHOW-CAUSE NOTICE

Whereas it has been reported to the undersigned by the Senior Auditor, Investigation and Prosecution, Sales Tax (East), Karachi that Messrs Asphalt International, situated at Plot No.2, Sector-24, K.I. Area, Karachi, are engaged in taxable activity of distribution of Asphalt purchased from Messrs National Refinery Ltd., Karachi. A computer profile of the said unit was obtained from the computer section of the Collectorate which showed that the unit was registered in the Collectorate on 27-1-1999 bearing Sales Tax Registration No. 12-00-2714-001-73, however, their business commenced from 1993 and became liable to Sales Tax from July 1998 when tax was levied on distributors/wholesalers through Finance Bill, 1998.

2. During the course of investigation, details of sale of asphalt by Messrs National Refinery Ltd., Karachi to Messrs Asphalt International, Karachi was obtained from Messrs National Refinery Ltd., Karachi, which revealed that Messrs Asphalt International Karachi had purchased huge quantity of Asphalt from Messrs National Refinery Ltd., Karachi. The tax period of 1998-99 and onwards was considered for investigation as Sales Tax on distributors was levied @ 12.5% w.e.f. 1st July 1998 through Finance Act, 1998-99 and the rate was enhanced to 15% w.e.f. 1-12-1998 on the supplies made by distributor.

3. On perusal of the records obtained from Messrs N.R.L., Karachi and Messrs Asphalt Int'l Karachi it revealed that Messrs Asphalt Int'1 Karachi have not discharged their tax liabilities as per provisions of the Sales Tax Act, 1990 since 1-7-1998 and after being got registered in Jan'99 started discharging their tax liabilities. Scrutiny of Messrs N.R.L. records shows that Messrs Asphalt International suppressed their purchases in their monthly sales tax return to the tune of Rs.71163424.00 involving input tax of Rs.10674517.00. This suppression of purchases was apparently made to get their sales suppressed/concealed, depriving the Government revenue, in the shape of output tax.

4. A work sheet is attached for perusal and on the basis of evidences, Messrs Asphalt Int'l, Karachi have deprived the Government exchequer of Sales Tax Rs.15874142.00 along with Additional Tax of Rs.6195089.36 (calculated up to 15.11.99) and is thus recoverable under sections 36 and 34 of the Sales Tax Act, 1990 for violation of sections 3, 6, 7, 11, 14, 22, 23 and 26 ibid, besides other penal action as per provisions of Sales Tax Act, 1990.

5. Messrs Asphalt International, Karachi are therefore called upon to show cause in writing within seven days of the receipt of this notice as to why recoverable amount of the tax along with the additional tax may not be recovered from them under section 36 of the Sales Tax Act, 1990 and why action for contravention of the aforesaid provisions of law should not be taken against them under section 33 of the Sales Tax Act, 1990."

3. The explanation furnished was not found satisfactory and therefore, the matter was referred to the Collector Customs, Sales Tax and Central Excise (Adjudication) Karachi-III.

4. It was contended before the Collector (Adjudication) on behalf of respondent No.1 in the written reply as follows:

"(a) Without going into the detail and merit of the case and without considering that the margin of profit of our client is hardly 1% our client has 'agreed to avail the facility granted vide said S.R.O. and has also voluntarily paid the tax due and 25% of additional tax worked out on the portion of principal amount of sales tax liability.

(b) If your honour would go through the said S.R.O. it says as under:

"-----the Federal Government is pleased to exempt seventy five per cent of the amounts of additional tax under section 34 and penalties under section 33 of the said Act, payable on such portion of the principal amount"------

(c) If the above para is read with reference to the para. V, xiii and xiv, it is clear that the amount payable is only the portion of Principal Amount which is certainly difference of input and output tax along with 25% of Additional Tax calculated on the said portion of Principal Amount, the S.R.O. has been issued to grant concession to those defaulters who became liable to registration, concealed their taxable supplies or are non-filer/ wrong-filer. It is certainly not the intention of C.B.R. that defaulter who has paid input tax @ 15% on its purchase and has earned profit of 3% will avail the benefit of S.R.O. by paying 15.45% tax along with 25% of additional tax. By doing so he will be looser of 12.45% (15.45(-) 3% profit) with extra burden of additional tax which is about 50% of principal amount. Thus if the input tax adjustment is not allowed a defaulter is required to pay tax 15% plus additional tax 7-1/2% total 22-1/2% on his turnover as against profit of 3% ultimately loosing 19-1/2% of his turnover. Non-allowing of Input tax would therefore, defeat the purpose of said S.R.O. and no body will come forward to avail the benefit of said S.R.O.

(d) In view of the above submission we contend that the input tax credit in the case of our client should be given and additional tax should be calculated on the tax due after adjustment of input tax paid by our client to the National Refinery Ltd., and duly credited to the Government treasury under Sales Tax head.

(e) The due amount has duly been paid by our client in term of facility granted under S.R.O. 1349(I)/99 dated 17-12-1999.

(f) Without prejudice to the above during the period from July, 1998 to 27/1/99 when our client was not registered, he has paid input tax on his purchases. However, he did not recover any output tax. Therefore, the case of our client falls under section 65 of Sales Tax Act, 1990 our client fulfils all conditions as laid down in the said section 65, therefore, our client is also eligible to grant exemption of tax which he has not received.

(G) In view of our submission we request your honour to kindly close the matter as our client has fulfilled his obligation by paying tax in term of S.R.O. No.1349(I)/99 dated 17-12-1999."

5. During the course of arguments before the Adjudicating Collector, it was (contended that the word "portion of principal amount"), appearing in S.R.O. 1349(I)/99 dated 17-12-1999 not notifying amnesty scheme means the portion of principal amount of tax which comes after deducting the input tax.

6. The learned Collector Adjudication, held that after hearing the learned representative of the parties it was found that there is no dispute regarding the chargeability of the tax. Admitting the lapse, the respondent availed amnesty scheme notified vide S.R.O. 1349(I)/99 dated 17-12-1999 and paid certain amount of sales tax. However, while calculating the liability of sales tax the respondent adjusted input tax on the understanding that the said notification allowed such adjustment on account of the words used for outstanding tax, as, "portion of the principal amount of tax" and not the principal amount, which implies that the portion of principal amount which is calculated after adjustment of input tax. However, the departmental representative strenuously argued that the contention of the respondent was not tenable. It was pleaded that the respondent had purposely evaded a huge amount of sales tax and did not discharge their tax liability being a distributor which was levied within the purview of Finance Act, 1998. Consequently, the respondent was not entitled to claim the input tax credit or refund of the amount of tax.

7. The learned Collector agreed with the view of the departmental representative and held that the plea of the respondent was contradictory to the provisions of the Sales Tax Act. He observed that, it was obligatory duty of the respondent to pay the sales tax on their taxable activities as distributors, but it is manifested from the entire case record that they failed to clear their tax liability within the given time frame and hence has no legal or logical vested right to avail claim of input tax credit. He further observed that the plea, that the S.R.O. 1349(I)/99 indicates the portion of principal amount only, which was factually due against the respondent and the plea to the contrary was patently misconceived and without any rhyme or reason. According to the learned Adjudicating Collector, the plain reading of the language of notification showed that the scope of amnesty scheme was restricted to that portion of principal amount, which accrued on or before 30th November 1999, or detected, determined, demanded or adjudged before 30th December, 1999. It has no relevance with the adjustment of input tax at all because by virtue of provisions contained in section 7 of the Sales Tax Act, 1990. A registered person is entitled to deduct the input tax paid for the purpose of taxable supplies during the relevant tax period. It was also observed that during the course of hearing it transpired that the respondent did not pay the output tax during the currency of relevant tax period, therefore, in terms of section 7 of the Sales Tax Act, he had no right to deduct input tax.

8. It was also found that admittedly the respondent carried out business and made taxable supplies before 27-1-1999 without obtaining sales tax registration.

9. For the foregoing reasons, it was held that the contentions raised by the respondent had no force. He 'therefore, directed that under section 36 of the Sales Tax Act read with section 34 thereof, the entire remaining principal amount of the sales tax be recovered along with additional tax leviable under section 34 of the Sales Tax Act, 1990, from the respondent. Following penalties were also imposed:---

(i) 5% of the tax involved under section 33(a) of Sales Tax Act for not making application for registration which is violation of section 14 of the said Act.

(ii) Rs.5,000 per month under section 33(1) for not submitting returns since the supplies of respondent became taxable which is violation of section 26 of the Sales Tax Act, 1990.

(iii) 50% of the tax involved under section 33(2)(cc) of Sales Tax Act, 1990 for not depositing the tax due on supplies which is violation of section 3 of the said Act.

(iv) 10% of the tax involved under section 33(3)(b) of Sales Tax Act, 1990 for not maintaining record during the period from July, 1998 to December, 1998, which is violation of section 22 of the said Act.

(v) 5% of the tax involved under section 33(2) of Sales Tax Act, 1990 for not issuing sales tax invoices under section 23 of the said Act.

10. Being aggrieved with the above findings, the respondent No.1, preferred appeal before the learned Customs, Excise and Sales Tax Appellate Tribunal, Karachi, (hereinafter referred to as Tribunal). It was contended before the Tribunal that two periods were involved, one is when the respondent No. 1 was not registered with the Sales Tax Department and second when they were registered. It was submitted that the period from January 1998 to February 1999, when the respondent No.1 was not registered they paid their due sales tax. It was contended that they paid sales tax availing Amnesty Scheme and while making payment of tax they adjusted input tax against the output tax. It was pleaded that the total amount involved as per show-cause notice and order-in-original is 7 million and they have made payment of this amount by adjustment under S.R.O. 1349(I)/99. It was submitted that the Department is not accepting the payment and is raising demand. It was also alleged that the respondent could claim input adjustment to cover-up taxes payable under Amnesty. It was further urged that sections 7 and 8 of Sales Tax Act, 1990, give right to taxpayers to adjust input tax due at the time of making payment under Amnesty.

11. The Departmental representative contended that the respondent could make adjustment of input tax with the prior approval of the Department only.

12. The learned Members of the Tribunal held that, so far, wrong adjustment of input tax for the period prior to registration is concerned, it is noteworthy that the Departmental authorities sanctioned refund under section 66 of the Sales Tax Act, 1990. The learned members of the Tribunal further referred to the plea on behalf of the respondent that since the departmental authorities refunded the amount, so indirectly they agreed to the claim of the appellant that they were entitled for adjustment. It was observed that input tax and output tax are interlinked and in case the output tax was charged then the taxpayer becomes entitled to adjustment under section 7 of the Sales Tax Act, 1990. Further observation was made that the respondent though evaded Government tax yet they took support from the Amnesty Scheme granted by the Government and paid output tax at their own and also deducted input tax. The plea of the department that input tax could be adjusted with prior approval of the authorities was not maintainable in law. It was observed that section 7 of the Sales Tax Act, 1990, lays down certain conditions for adjustment of input tax. The main condition is that the item has not been notified as not admissible under section 8. Since in the present case, no notification under section 8 was issued, therefore, the respondent could adjust input tax. It was also held that the grant of refund by the Departmental authorities indirectly supports the claim of the appellant. The learned Members of the Tribunal referred to a decision of the Lahore High Court in the case of Mayfair Spinning Mills Ltd. v. Collector of Sales Tax, wherein it was held as follows:

"...Input tax is a sacred trust which the taxpayer shifts to the Government and till its adjustment, it cannot be treated as Government Revenue."

13. Finally it was held that the respondents paid input tax on asphalt purchased from the refinery, hence they were entitled to get its adjustment at the time of payment of output tax which they did at the time of claiming Amnesty. So far, the other points were concerned, the Tribunal held that the respondents admitted their fault and made payment under S.R.O. 1349(I)/99, hence they could not be charged under any section. It was finally held that the charge was squarely covered by Amnesty law, and therefore, no action could be taken against the appellants. The appeal was therefore, allowed and impugned order was set aside.

14. The appellant feeling aggrieved has filed this appeal contending that the liability of the respondent No.1, according to order-in-original is as follows:

15. It is alleged that the respondent while availing Amnesty under S.R.O. 1349(I)/99 have wrongly availed the input adjustment which is clear violation of section 7 of the Sales Tax Act, 1990. It has been reiterated that the S.R.O. 1349(I)/99 has been mis interpreted and that the plain reading of the language of notification shows that the scope of Amnesty Scheme was restricted to that portion of principal amount, which was accrued on or before 30th November, 1999, or deducted, determined, demanded or adjudged before 30th December 1999. It has no relevance with the adjustment of input tax at all because by virtue of provisions contained in section 7 of the Sales Tax Act, 1990, a registered person is entitled to deduct the input tax paid for the purpose of taxable supplies during the relevant tax period; while, in addition to the fact that the respondent No.1 was not registered till January, 1999, they had not paid output tax during the currency of the said tax period, and therefore, in germs of section 7 of the Sales Tax Act, they had no right to deduct the input tax.

16. We have heard the learned Advocates for the parties. They have mainly reiterated the contentions raised before the lower forums. In support of his contention that adjustment of input tax under section 7 of the Sales Tax Act is not admissible, if no output tax is paid during a tax period. Mr. Raja Muhammad Iqbal has placed reliance on a D.B. judgment of Lahore High Court, in the case of Messrs Hamza Sugar Mills Ltd. v. Collector of Sales Tax 2005 PTD 1131.

17. On the other hand, Mr. Sattar Silat, while admitting the facts, has supported the impugned order of the Tribunal contending that the tax due is to be determined in accordance with the provisions contained in the Amnesty Scheme further read with section 26 of the Sales Tax Act.

18. In order to appreciate the contentions raised by the parties, it would be appropriate to reproduce the S.R.O. 1349(I)199 which reads as follows:--

"GOVERNMENT OF PAKISTAN REVENUE DIVISION

Islamabad, the 17th December, 1999.

NOTIFICATION

(SALES TAX)

S.R.O. 1349(I)/99.---In exercise of the powers conferred by section 34A of the Sales Tax Act, 1990, the Federal Government is pleased to exempt seventy-five per cent of the amounts of additional tax under section 34 and penalties under section 33 of the said Act, payable on such portion of the principal amount (accrued on or before the 30th November, 1999 or detected or determined, adjudged or demanded on or before the 30th December, 1999) of tax due if the said principal amount and the twenty-five per cent of the amount of additional tax and penalty are paid, under head "Sales Tax-0220000" in the designated branch of National Bank of Pakistan notified vide Notification No.S.R.O. 952(I)/98, dated the 5th September, 1998, during the period commencing from the date of this notification and ending on the 30th December, 1999, by the following classes of registered persons, namely:

(i) persons falling under various fixed sales tax schemes valid up to the 30th June, 1998 including old fixed sales tax cases of steel sector and other sectors expired earlier;

(ii) persons registered as importers and persons owing sales tax on value added supply of imported goods;

(iii) steel melters and steel re-rollers who did not pay sales tax as per the minimum bench mark of consumption of electricity units fixed vide Central Board of Revenue letter C. Nos.4/85-STB/97, dated the 18th September, 1997, dated the 21st October, 1997 and dated the 25th October, 1997, C. No.4/93-STB/97, dated the 21st October, 1997 and C. No.4/20-STB dated the 19th May, 1998;

(iv) distributors, wholesalers and retailers of mild steel products whose supplies became taxable with effect from the 1st July, 1997, in terms of S.No.33(iii) of the Sixth Schedule to the Sales Tax Act, 1990.

(v) distributors, wholesalers and suppliers who became liable to registration as on 1st July, 1998 and did not pay the tax due or who after registration wrongly adjusted the input tax on the stocks available with them;

(vi) manufacturers and producers who incorrectly claimed input tax under Notification No.S.R.O. 1307(I)/97, dated the 20th December, 1997;

(vii) persons who made incorrect and inadmissible input tax adjustments or have claimed or received incorrect and inadmissible refunds;

(viii) manufacturers and suppliers of knitted or woven fabrics processed fabrics, garments and made ups and other textile goods who failed to pay the tax due;

(ix) suppliers of taxable goods to Government, Semi-Government and Defence Departments, all Corporations, Banks/DFI's, Limited Companies and all other institutions (authorized to make deduction of advance tax under section 50(4) of Income Tax Ordinance, 1979), who failed to pay the tax due.

(x) Retailers whose annual turnover exceeds five million rupees and who failed to pay the tax due;

(xi) persons (spinners) who failed to remit the amount of sales tax and persons (ginners) who failed to deposit the amount of sales tax in terms of the Special Procedure for Ginning Industry Rules, 1996;

(xii) persons against whom arrears of tax are outstanding in terms of an audit report, demand notice, assessment order or adjudication order, show-cause notice, appellate order or for any other reason;

(xiii) persons who concealed their taxable supplies in any mode or manner and evaded the tax due; and

(xiv) persons who are non-filers, wrong filers or short-filers with reference to their Return-cum-Payment Challan; and

2. The notification shall also apply to:---

(i) cases where there is no arrears of principal amounts of tax and the arrears involve additional tax and penalty only. In such cases, seventy-five per cent of the amount of additional tax and penalties shall be exempted if the twenty-five per cent of the arrears of such additional tax and penalty, as was outstanding as on 30th November, 1999 or is determined, adjudged or demanded on or before the 30th December, 1999, is paid into the treasury during the period from the date of this notification to the 30th December, 1999; and

(ii) cases in dispute or under audit or under adjudication and cases pending in appeal under sections 45 and 46 of the Act. However, if the dues. are held to be not payable in view of the adjudication order or the appellate order, the amount so paid in terms of this notification shall be refunded within fifteen days of the receipt 'of the adjudication order or appellate order, as the case may be.

(3) If the whole of the dues of principal amount of tax is paid by a registered person to the satisfaction of the Collector in terms of this notification, he shall not be prosecuted under sections 37A and 37C of the Act and the offence shall be compounded under subsection (4) of section 37C.

(4) This notification shall not entitle any registered person to claim refund of any tax, additional tax or penalty already paid.

(5) This notification, unless earlier rescinded, shall remain in force up to the 30th December, 1999."

19. A perusal of the' show-cause notice, the orders passed by the Collector Adjudication and the Tribunal shows that the entire controversy is surrounded on the point whether in the facts and circumstances of this case, the respondent No.1 was entitled to adjustment of input tax while availing Amnesty under Notification No.S.R.O. 1349(I)/99, dated 17th December, 1999. The plea of respondent No. l is that they have availed the facility granted through notification under S.R.O. No.1349(I)/99 and have voluntarily paid the tax due and 25% of additional tax worked out on the portion of principal amount of sales tax liability. The difference of opinion is on interpretation of the expression, "payable on such portion of the principal amount of tax due." It is urged on behalf of respondent No.1, in its written reply before Collector Adjudication that if the above expression is read with para. (v) (xiii) and (xiv) of the Amnesty notification, it becomes clear that the amount payable is only portion of Principal Amount which is certainly difference of input and output tax along with 25.% additional tax calculated on the said portion of the principal amount. It is contended that the S.R.O. was issued to grant concession to those defaulters who became liable to registration; concealed their taxable supplies or are non-filer/wrong-filer. The respondent has attempted to connect this interpretation with the margin of profit on purchase and sale of asphalt. This plea was not accepted by the Collector Adjudication for the reason that according to the Amnesty notification a tax evader was required to pay the principal amount of tax due plus 25% of the amount of additional tax and penalty before 30th of December, 1999. So far, the right to adjust the input tax from the output tax is concerned, it is not governed by the provisions of the Amnesty notification but governed by the provisions contained in sections 7 and 8 of the Sales Tax Act, 1990 (as it stood in the year 1999). The Collector of Adjudication further held that admittedly the respondent No.1 was not registered during the period of default as he got himself registered in January 1999, while the period of default is from July 1998 to December 1999, and consequently, in terms of section 7, he has no right to deduct the input tax. He was thus required to pay the output tax without any adjustment of input tax and was further required to pay 25% of the additional tax and penalties leviable thereon under sections 33 and 34 of the Sales Tax Act. As the respondent No.1 failed to pay the principal amount of tax due (without adjustment) and 25% of the additional tax and penalties on the said amount, therefore, he was not entitled to avail the concession of Amnesty under S.R.O. 1349(I)/99 and was required to pay the entire remaining principal amount of sales tax along with additional tax and penalties specified in his order.

20. On the other hand, the learned Members of the Tribunal accepted the plea that the respondent'No.1 was entitled for adjustment of input tax under sections 7 and 8 of the Sales Tax Act, for the reason that the Departmental authorities sanctioned refund under section 66 of the Sales Tax Act. They accepted the plea that by refund, the department indirectly agreed to pay the claim of appellant that they were entitled for adjustment. It was further observed by the learned Members of the Tribunal that input and output tax are interlinked and in case output tax is charged then the taxpayer becomes entitled to adjustment under section 7 of the Sales Tax Act, 1990. They further accepted the plea that the respondent No.1, though evaded Government tax yet they took support from the Amnesty Scheme granted by the Government and paid out put tax at their own after deduction of input tax. While discussing section 7 of the Sales Tax Act, it was observed that the main condition was that the item has not been notified as non-admissible under section 8. Since there was no notification under section 8, therefore, the respondent No.1 could adjust the input tax. In this behalf they placed reliance on the judgment of Lahore High Court, in the case of Mayfair Spinning Mills Ltd. v. Collector of Sales Tax Appellate Tribunal PTCL 2002 CL 115. The learned Tribunal finally concluded that the respondent No. 1 paid input tax on asphalt purchased from the refinery hence they were entitled to get its adjustment at the time of payment of output tax which they did at the time of claiming Amnesty.

21. We find substance in the contention of Mr. Raja Muhammad Iqbal, learned counsel for the appellant that the learned Members of the Tribunal have totally misread the provisions of sections 7 and 8 of the Sales Tax Act, 1990 as well as the contents of the Amnesty notification. He has contended that it is clearly provided in section 7 of the Sales Tax Act, that for the purpose of determining his tax liability in respect of taxable supplies made during an output tax period a registered person shall be entitled to deduct input tax paid or payable during the tax period. He has further pointed out that in subsection (3) of section 8, it is further provided that, "no person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him." Mr. Raja Muhammad Iqbal has very rightly argued that the impugned judgment of the Tribunal is violative of the provisions contained in sections 7 and 8 of the Sales Tax Act, 1990, and with an avowed intention of granting relief to the respondent No.1 not available in law, the provisions pertaining to the right of adjustment available to a registered person only have been conveniently ignored and an irrelevant provision of section 8 which deals with a notification in respect of other goods if the Federal Government may by notification in the official Gazette specify has been referred. We find substance in the contentions of Mr. Raja M. Iqbal that this provision was not germane to the issue under consideration.

22. We need not to dilate on this point in detail for the reason that Mr. Sattar Silat, learned counsel for the respondent No.1 has frankly conceded to the legal position that right of the input tax from the output tax in terms of section 7 of the Sales Tax Act, is available to a registered person only and during the period 1st July, 1998 to December 1998, the respondent No.1 was not registered.

23. We further find that there is no substance in the reason assigned by the Tribunal for accepting the appeal of respondent No.1 to the effect that by sanctioning refund to the respondent No.1 the Departmental c authorities indirectly agreed to the claim of the respondent No.1 that they were entitled for adjustment. The learned Members of the Tribunal appeared to be totally unaware of the principles of interpretation of statutes and the salutary principle of law that there is no waiver against the law. Although in this case there is no admission on the part of departmental authorities that the respondent No.1 was entitled for adjustment of input tax, but even in case where there is such an admission, it shall not have the effect of overriding the statute law. Likewise there is nothing in the Amnesty notification to show that while working out portion of the principal amount of tax due a tax evader shall be entitled to adjustment of input tax even though he is not a registered person as required under sections 7 and 8 of the Sales Tax Act. There is no ambiguity that the principal amount of tax due is to be calculated in terms of the provisions contained in the Sales Tax Act, 1990, and the entire principal amount is to be paid. In addition 25% of the additional tax and penalty on such principal amount of tax due is also to be paid for availing the Amnesty. The wordings in opening para. of the Amnesty Scheme is very clear and it becomes further clear in para. 3 of the amnesty notification wherein the, expression used is, "if whole of the dues of principal amount of tax is paid by a registered person to the satisfaction of the Collector in terms of this notification, he shall not be prosecuted under sections 37A and 37C of the Act."

24. We further find that Reference to the Lahore High Court judgment in Mayfair Spinning Mills Ltd. (supra) by the learned Members of the Tribunal is also totally misplaced. First the issue under consideration in the said case was entirely different and secondly, the assessee in the said case was a registered person. It has nowhere been held by their Lordships of the Lahore High Court that an unregistered person is also entitled to input tax credit under section 7 of the Sales Tax Act, 1990. On the contrary in para. 19 of the said judgment it is observed that, "according to section 7 a registered person is entitled to deduct input tax paid during the period for the purpose of taxable supplies made or to be made by him from the output tax." We deprecate the manner in which an isolated sentence has been taken out from the judgment of Lahore High Court by the learned Members of the Tribunal in support of their totally untenable view by ignoring the ratio decidendi of the judgment. We further find that reliance placed by Mr. Raja M. Iqbal on the Lahore High Court judgment in the case of Hamza Sugar Mills Ltd. (supra) is also misplaced.

25. Consequent to the above discussion, the questions proposed in this appeal are answered as follows:

Question No. 1 Affirmative.

Question No. 2 Affirmative.

Question No. 3 Affirmative.

26. The appeal stands disposed of accordingly.

27. A copy of this judgment under the seal of the Court be sent to the Appellate Tribunal, which shall pass necessary orders to dispose of the case in conformity with this judgment.

S.A.K./C-3/KAnswer in affirmative.