Messrs FIVE STAR CORPORATION LTD. through Chief Executive VS ADDITIONAL COLLECTOR, COLLECTORATE OF SALES TAX, GOVERNMENT OF PAKISTAN, MULTAN and 2 others, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2091 (2006)

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

---Ss. 2(9) & 26---Special Procedure for Ginning Industry Rules, 1996, R.6---S.R.O. 1271(I)/96, dated 10-11-1996---Non-deposit of sales tax by ginner within 48 hours of receipt of its draft/pay order from buyer of ginned cotton---Additional tax, imposition of---Validity---S.R.O.1271 (I)/96 dated 10-11-1996, could amend "due date" as defined in S.2(29) of Sales Tax Act, 1990 only beyond relevant date already fixed as 20th of month following the end of tax period---Ginner had deposited whole tax due in Bank before 20th of the relevant month---Fixation of 48 hours in S.R.O.1271(I)/96 for purpose of deposit of such draft/pay would not restrict or advance such date fixed in S.2(29) of the Sales Tax Act, 1990---Such 48 hours could be prescribed after 20th day of the month following the end. of tax period---Revenue had not sustained any loss---Additional tax imposed on ginner was held to be against the norms of justice and equity.

(b) Taxation---

----Penalty provisions in fiscal statute---Object---Such provisions never meant to strangulate a business or throw a person out of business or generate revenue, rather same would operate only as a deterrence force.

Rana Muhammad Afzal for Appellant.

Sarfraz Ahmad Cheema for Respondents.

Date of hearing: 5th April, 2006.

JUDGMENT

NASIM SIKANDAR, J.---This further appeal under section 47 [Appeal to High Court] of the Sales Tax Act, 1990 seeks to challenge an order of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore dated 9-5-2002. Through that order a Division Bench of the Tribunal though maintained levy of additional tax yet reduced its quantum form Rs.41,67,133 to Rs.200,000 only.

2. On 27-6-1999 the appellant engaged in business of ginning, pressing and an oil Mill at Multan, was served with a show-cause notice alleging a liability to make payment of additional sales tax at Rs.7,27,744. It was noted that the appellant firm had deposited most of the amounts of sales tax after "due date" and had therefore been guilty of violation of sections 2(9) and 26 read with special procedure for ginning industry, Sales Tax General Order No.3 of 1996 dated 28-6-1996 and S.R.O. 1271(I)/96, dated 10-11-1996.

3. In reply the appellant pleaded that having made the deposit of principal amount of sales tax before 20th of every month involved it was not liable to pay any additional tax. The department, however, disagreed. By way of the order-in-original made by the Addl. Collector Sales Tax, Multan dated 24-11-1999 the appellant was found liable to pay the additional tax on the ground that although the amounts of sales tax were deposited before 20th of each month involved yet such deposit was beyond 48 hours of the period as stipulated in Sales Tax General Order No.3/1996 and S.R.O. 1271(1)/1996 dated 10-11-1996. Before the Tribunal following points were raised:

(i) The Bank drafts were not accepted by the respective branches of National Bank of Pakistan without endorsement by competent officer of sales tax department. Mr. Imdad Hussain Shah, the local .officer of sales tax used to be very busy and was not easily contactable at that time, which resulted sometimes in delay. Hence, sales tax department was responsible for delay.

(ii) S.R.O. 46(I)/99 dated 9-4-1999 exempted penalties and additional tax if the principal amount of sales tax was deposited between 9-4-1999 and 30-9-1999.

(iii) "Due date" under section 2(9) of the Sales Tax Act, 1990 was 20th day of the following month. All sales tax returns in terms of section 26 ibid were filed by due date i.e. 20th day of the following month. Hence no additional tax was due."

4. Learned Members of the Tribunal, however, disagreed. They expressed the view that the "due date" in case of a ginner stood changed as compared to other registered persons inasmuch as under the aforesaid S.T.G.O. and the S.R.O. a ginner was required to supply ginned cotton to the buyers on receipt of bank draft or pay order for the amount of sales tax due on the ginned cotton being supplied and then to deposit the said bank drafts/pay order within.48 hours in any designated branches of National Bank of Pakistan "on return cum challan form" According to the learned Members the said S.R.O. was issued under section 71 of the Sales Tax Act, 1990 which empowered the Federal Government to prescribe a special procedure for scope and payment of tax, registration, book keeping and invoicing requirements, and returns, etc. in respect of such supplies as may be specified in the notification. The operative part of the order of the learned Tribunal reads as under:-

"4. As a result of the Special Procedure for Ginning Industry issued under section 71 ibid vide S.R.O. ?271(I)/96, dated 11-11-1996, the "due date" here would be 48 hours after the receipt of each bank draft/pay order and not 20th day of the following month. The contention of the learned counsel in this regard is the result of lack of proper appreciation of the provisions of section 71 ibid vis-a-vis earlier provisions of Sales Tax Act, 1990. Sales Tax system is operating since adoption of VAT mode w.e.f. 1-7-1996 on self-assessment, self-clearance and self-policing basis. The deposits of the bank drafts/pay orders was to take place on the same (monthly) sales tax return-cum-challan in the designated branch of National Bank of Pakistan without any sales tax officer's endorsement/permission/authentication. No such instructions were ever issued by C.B.R. that deposits of bank drafts/pay orders in the bank by ginners was to take place on any sales tax officers endorsement. There never was any column in the sale tax return-cum-challan to this effect. Hence learned counsel's contention in this regard is not tenable. Reference by the learned counsel to S.R.O. 461(1)/99 dated 9-4-1999 is out of place here. The said S.R.O. embodied an amnesty scheme for those who paid sales tax liabilities between 9-4-1999 and 30-4-1999 in respect of sales tax liabilities accrued on or before 31-3-1999. The appellants had already deposited the principal amounts of sales tax during Nov. 96 to mid September. 1997."

5. After hearing the learned counsel for the parties we are of the view that the appellant registered person as tax payer has a fit case for interference. In our view the notification/S.R.O. issued under section 71 dated 10-11-1996 could amend the "due date" as defined in sub-section (9) of section 2 [definition] of the Sales Tax Act, 1990 only beyond the relevant date which stood fixed at 20th day of the month following the end of the tax period. The delegated powers vested in the Federal Government, it hardly need emphases could be used in respect of a particular business or class of registered persons or specified supplies not in negation of the "due date" as defined in law but only to facilitate the aforesaid class. The fixation of 48 hours for the purpose of deposit of the drafts/pay orders received from the ginned cotton buyer did not restrict or advance the date fixed in the aforesaid definition clause viz 20th day of the month following the end of the tax period. These 48 hours could very well be prescribed after 20th day of the month following the end of the tax period.

6. In any case since admittedly the whole of the sale tax due from the ginner had been deposited with the National Bank of Pakistan before the 20th of the relevant month the Revenue did not sustain any loss in real terms. Therefore, the initial penalty of a sum of Rs.7,27,744 which, accordingly to the impugned order of the Tribunal, increased to Rs.41,67,133 as mentioned in the demand notice dated 29-6-1999 was patently against the basic norms of justice and equity. This Court has in a number of cases observed that penalty provisions are not meant to strangulate a business or to generate revenue. These provisions are to operate only as a deterrence force. Their purpose has never been to throw a person out of business.

7. Therefore, in our view the impugned order of the Tribunal maintaining a penalty of Rs.200,000 is also unjust. It shall accordingly be set aside. For the aforesaid reasons the appellant will not be required to make any payment on account of additional tax.

S.A.K./F-30/L???????????????????????????????????????????????????????????????????????????????????? Appeal accepted.