HUSSAIN GINNERS LTD.; COTTON GINNING AND PRESSING FACTORY VS CUSTOMS CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 2563 (2007)

Sales Tax Act (VII of 1990)---

----Ss.2(9) & 47---filing of Monthly Return Rules, 1996, R.5(3)(4)---. S.R.O. No. 55(I)/96, dated 1-7-1996---S.R.O. 732(I)/98, dated 1-7-1998---Words "due date"---Applicability---Deposit of sales tax through bank demand draft---Assessee deposited sales tax through two bank demand drafts in prescribed bank before due date---Penalty was imposed upon assessee as bank demand drafts were encashed beyond due date---Plea raised by assessee was that though R.5 of Monthly Return Rules, 1996, had been amended after due date but its benefit could have been given to assessee---Validity---Instrument having been purchased in favour of Revenue, intervening time of its clearance by concerned bank did not matter at all---It was only the personal cheque of individual that required clearance by bank on which it had been drawn---Banking instruments like pay order. or a bank draft did not need any such clearance---Tendering bank drafts along with return before due date was not. disputed and clearance of drafts was only a matter between two banks---Assessee 'having tendered bank demand drafts to designated branch before due date was absolved of its legal liability towards Revenue---In case bank demand drafts were not cleared by the issuing banker, assessee as tax payer would have been liable to pay additional tax till the time of actual payment of tax---Amendment in the rule had stated correct legal and factual position---Orders of Authorities as well as of Appellate Tribunal were set aside and assessee, held, was not liable for additional tax, penalty or any other penal action---Appeal was allowed in circumstances.

Rana Muhammad Afzal for Appellant.

Izharul Haque and Mrs. Tayyba Zameer Qureshi for the Revenue.

ORDER

This further appeal under section 47 of the Sales Tax Act, 1.990 seeks to challenge an order of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore, dated 4-7-2001.

2. The appellant during the relevant tax period, i.e., October, 1996 was engaged in cotton ginning business. In the course of its audit by the Sales Tax Department it was found that the appellant-firm deposited sales tax late on the two returns filed for the month of October, 1996. Before the Adjudicating Authority, the assessee claimed that both returns were deposited in the designated branch of National Bank of Pakistan on due date i.e. 20-11-1996. The payment of tax was made through Bank draft of Rs.30,17,174 and Rs,4,95,942. The first draft was cleared on 20-11-1996 while the second was cleared by the concerned Bank on 30-11-1996. The Adjudicating Authority by making a reference to definition of the words "due date" as contained in subsection (9) of section 2 of the Act read with sub-rules (3) and (4) of rule 5 of the Filing of Monthly Return Rules, 1996. concluded that the two instruments having been cleared on 21-11-1996 and 30-11-1996 these days were to be taken as actual dates of payments of tax. Accordingly the appellant firm was found liable to pay additional sales tax at the rate of 5 % amounting to Rs.2,05,515.

3. The appellant failed before the Collector (Appeals) as well as the 'Tribunal. Both the appellate forums agreed with the Adjudicating Authority that under section 2(9) of the Act "due date" was 20th day of the month following the end of tax period and therefore, the drafts/ instruments having been cleared late by one day in case of the first draft and by ten days in case of the second draft the tax payer was liable to pay the additional tax as found due against him..

4. Before the Tribunal the appellant inter alia relied upon the amendment made in S.R.O. No. 551(I)/96, dated, 1st July, 1996 notifying the Filing of Monthly Return Rules, .1996. These amendments were made through S.R.O. No.732(I)/98, dated 26th June, 1998. According to the learned members of the Tribunal since these amendments were made after the tax period involved in the case of the appellant it could not avail: -their benefit.

5. In para.9 of the impugned order of the Tribunal, the issue was addressed in the following words:--

"Para. 9.---The amendment referred to by the learned counsel for the appellant has been made vide Notification No. S.R.O.732(I)/98, dated 26-6-1998, which has been made applicable w.e.f. first day of July 1998. Through this notification sub-rule (5) has been added in the Filing of Monthly Return Rules, 1996. The newly-added sub-rule (5) no doubt, says that in case of payment through pay order or bank draft, the date on which the pay order or bank draft is tendered at the bank counter, "shall be treated as the date of payment but this amendment is not applicable in the case of the appellant because this sub-rule (5) of the amending Notification No. S.R.O. 732(I)/98 takes effect from 1-7-1998 and the same cannot be given retrospective effect and made applicable to the case of the appellant for the tax period of October, 1996. This being the position, we find no infirmity in the order passed by the learned Additional Collector and the order passed by the learned Collector (appeals)."

6. After hearing the learned counsel for the parties we will readily agree that imposition of additional tax in the case of the appellant was totally unjustified. It is correct that the amendment in the rule came into being after the tax period involved in the case. However, we are of the view that the amendment providing for treating the date of payment when the bank draft was tendered at the bank counter corrected an illegality appearing in unamended rule 5 of the filing of Monthly Return Rules, 1996.

There cannot be two opinions about the legal and factual. position that a person pays for the bank instrument at the tune of its purchase. The instrument having been purchased in favour of the Revenue the intervening time of its clearance by the concerned Bank does not matter at all. It is only the personal cheque of an individual that requires clearance by the Bank on which it has been drawn. On the other hand, the banking instruments like pay order or a bank draft do not need any such clearance. At-any rate the amended sub-rule (5) of rule 5 took care of the situation where the pay order or bank draft tendered at the bank counter was not cleared on its first presentation. In that eventuality the registered person is made liable to additional tax and penalty. The amended rule therefore, contains the correct legal position which ought: to have been observed even before the amendment was so carried out on 20-6-1998.

7. It needs to be noted that tendering the bank drafts along with the return on 20-11-1996 is not disputed by the Revenue. The clearance of the first draft on 21-11-1996 and the second draft on 30-11-1996 was only a matter between the two banks. The appellant as tax payer having paid for both drafts on 20-11-1996 and having tendered the same to the designated branch of the National Bank, of Pakistan on 20-11-1996 he was absolved of his legal liability towards the revenue. Of course, in case one or both the drafts were not cleared by the issuing banker the appellant as taxpayer would have been liable to pay additional tax till the time of actual payment of -the tax. We are, therefore, in agreement with the learned counsel for the appellant that rules 3 and 4 of S.R.O. No.551(I)/96, dated 1-7-1996 were violative of the scheme of the Sales Tax Act and that the said amended rule stated the correct legal and .factual position.?????

This appeal is accordingly allowed. The orders of the Revenue Authorities as well as that of the Tribunal are set aside. It is held that the appellant was not Liable for additional tax, penalty or any other penal action.

M.H./H-32/L?????????????????????????????????????????????????????????????????????????????????????? Appeal allowed.