ASIA GHEE MILLS (PVT.) LTD. through Manager (Accounts) VS ASSISTANT COLLECTOR (AUDIT), SALES TAX & FEDERAL EXCISE, MULTAN, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 1993 (2008)

Sales Tax Act (VII of 1990)---

----Ss. 3-B, 30, 47 & 72---Reference to High Court---Collection of excess tax---Responsibilities and primary functions of Collector (Appeals) or quasi-judicial functionaries---Obeying and following orders of Federal Board of Revenue---Collector (Appeals) or other quasi-judicial functionaries had different responsibilities; their primary function was to determine judicially 'the valuable right of the Revenue on the one hand and the tax payer on the other---While performing such functions, said functionaries were required to decide the matter impartially and justly, they were not bound to obey and follow the instructions and orders of Federal Board of Revenue---In the present case Auditors had only pointed out that excess funds had been claimed and they had not adjudicated upon the matter---Functionaries while performing quasi-judicial duties were not required to follow the instructions of Federal Board of Revenue.

Messrs Leghari Beverages (Pvt.) Ltd., Rahim Yar Khan and others v. Additional Collector Customs, Sales Tax & Central Excise, Multan and others 2005 PTD (Trib.) 1571 and Crescent Re-Polling Mills, Lahore v. Assistant Collector of Sales Tax, Lahore 2005 PTD 2436 ref.

Mian Abdul Ghaffar for Petitioner.

ORDER

The petitioner, during the period of 2002-2003, supplied taxable goods amounting to Rs.78,44,60,446, invoking output tax amounting to Rs.11,78,22,094 and claimed input tax amounting to Rs.12,23,11,994. Petitioner, as per observation of the auditors, was entitled to get refund amounting to Rs.44,89,900 and received excess refund amounting to Rs.73,79,157 erroneously.

2. Adjudicating Officer issued show-cause notice, which was duly replied by the petitioner. It was adjudged in the adjudication proceedings, vide Order-in-Original No.477 of 2006 dated 20-10-2006, that the petitioner is liable to pay sales tax amounting to Rs.73,79,159, along with default surcharge and penalty equal to 3% of the amount of the sales tax. The appeal of the petitioner before learned Collector, Customs, Sales Tax and Federal Excise (Appeals), met the fate of dismissal vide order dated 1-3-2007. The appeal of the petitioner before the Customs, Federal Excise and Sales Tax Appellate Tribunal (S.T.A. No.104-LB/2007), failed to bring any fruitful result. It was observed in the impugned judgment of the Tribunal that the petitioner has failed to prove that incidence of sales tax has not passed on to the consumer and that instructions of the Federal Board of Revenue, are not binding on the Sales Tax Officer, in the exercise of their quasi judicial functions.

3. The petitioner has framed as many as 9 questions of law, statedly arising out of the order/judgment of learned Tribunal, which read as under:--

("a) Whether learned Tribunal has fallen in error of law to hold that in an agreement circulated vide letter dated 23-9-2004 FBR has fixed "minimum" 15% value addition and there was no restriction on the registered person to make value addition of more than that whereas according to the agreement entered in between FBR and Pakistan Vegetable Oil Manufacturing Association (PVMA) 15% value addition was fixed and there was no concept of "minimum" value addition?

(b) Whether learned Tribunal has fallen in error of law to hold that the instructions issued by FBR under section 72 of Sales Tax Act, 1990 were not binding on the Sales Tax Officers in the exercise of their quasi-judicial functions whereas the audit team which conducted audit, formulated audit report and respondent No.1 who prepared and filed case against the applicant was not exercising quasi-judicial functions?

(c) Whether learned Tribunal has fallen in error of law to hold that the refund was erroneously claimed and it was again erroneously sanctioned by the department when there were mandatory instructions of FBR that PVMA Members shall revise their tax returns for 2 years ending June, 2004 as per value addition fixed by it and file refund claims and as such there was no occasion for filing refund erroneously by the department, rather it was granted in terms of agreement and instructions of FBR?

(d) Whether learned Tribunal has erred in law to ignore the crucial issue that the auditors had prepared the case in violation of the decision of FBR communicated to Members of PVMA by Member (Audit) FBR that the agreement entered by FBR with PVMA should be implemented?

(e) Whether learned Tribunal has fallen in error of law to hold that the applicant made value addition more than 15% and the incidence of tax was passed on to the consumer and according to Section 3-B of the Sales Tax Act, 1990 such tax was not refundable whereas the case of applicant from the day one was that the value addition more than 15% was made under compulsion and the applicant sustained heavy losses and it was the reason that the Members of PVMA approached FBR for reducing the rate of value addition and the view point of the applicant and other Members of PVMA was accepted and culminated in terms of agreement of making 15% value addition and claiming refund of the tax paid on the value addition exceeding it?

(f) Whether learned Tribunal has fallen in error of law to hold that the applicant has not discharged burden of proof that the incidence of tax or charge was not passed on to the consumer ignoring the request of the applicant that the matter be sent back to respondent No.1 for ascertaining this fact and that the applicant had sufficient proof in this behalf?

(g) Whether learned Tribunal has fallen in error of law to hold that since the incidence of tax was passed on, thus, it cannot be refunded in terms of section 3-B of the Sales Tax Act, 1990 in violation of its earlier judgment delivered in the case of "Messrs Leghari Beverages (Pvt) Ltd. Rahim Yar Khan and others v. Additional Collector Customs, Sales Tax & Central Excise, Multan and others 2005 PTD (Trib) 1571", that the said provisions of law would not apply where the tax was cancelled under compulsion or as the case may be under the instruction of department?

(h) Whether learned Tribunal has fallen in error of law to uphold the decision of the lower forum regarding imposition of default, surcharge and penalty when according to department itself and also as per learned Tribunal the refund was claimed erroneously and again it was granted by the department erroneously?

(i) Whether the impugned judgment/order dated 18-12-2007 passed by learned Tribunal is a result of mis-interpretation of law, rules and instruction issued by FBR in terms of section 72 of Sales Tax Act, 1990 and whether in the given circumstances the said judgment/order is sustainable under the law?

4. Learned counsel, in support of the questions proposed has submitted that value addition at 18% was claimed, while FBR, according to circular No.130 dated 14-2-2005, required sales tax returns, on the basis of meeting between PVMA and FBR, whereby the value addition of 15% was agreed and allowed for a period from 1-7-2002 to 30-6-2004. The revised return was submitted, showing value addition at 15% which resulted into excess payment, The refund claim was scrutinized and sanctioned by the concerned authorities of Sales Tax Department.

5. It is contended that sale tax refund was sanctioned by appropriate officer, in accordance with law and unless it is set aside in appeal, it will hold the field. Learned counsel has emphasized that value addition of more than 15% was made under compulsion at the instance of the department and the same was borne by the petitioner and not recovered from the buyer/consumer. Provisions of section 3-B are not attracted to the petitioner and request of the petitioner that the matter be sent back to respondent No.1, to ascertain whether incidence of tax was passed on to the consumer, was turned down illegally. Learned counsel has submitted that earlier decision of learned Tribunal, in the case of "Messrs Leghari Beverages (Pvt.) Ltd. Rahim Yar Khan and others v. Additional Collector Customs, Sales Tax & Central Excise, Multan and others" 2005 PTD (Trib.) 1571, was not binding and was wrongly applied to the case in hands. Learned counsel has gone through the provisions of section 72 of the Sales Tax Act, 1990 and submitted that orders and instructions of FBR are binding and learned Tribunal has erroneously held otherwise. He went to argue that auditors, who have detected the case, were bound by the instructions of FBR. Learned counsel summed up his arguments by the submission that penalties and surcharge was not liable to be imposed.

6. Heard learned counsel for the petitioner and record perused.

7. Admittedly, the petitioner made value addition more than 15% and passed on the incidence of tax to consumer, according to fiction of law. The burden of proof that incidence of tax, has or has not been passed on to the consumer, is on the person, collecting the tax or charge. Rightly so, because it is the person, who collects such tax, maintains the relevant record and other proof. Petitioner, during the course; when he was contesting show-cause notice, or when he argued it's appeal before Collector (Appeals), has brought nothing on record to rebut that incidence of tax has not passed on to the consumer. Petitioner cannot be absolved of it's responsibility to prove the factum passing or otherwise of the incidence of tax to consumer. There is nothing on record to substantiate that petitioner has discharged the burden. Petitioner made a request before Tribunal for the remand of the matter to respondent No.1, so that it can be proved that incidence of tax had not passed on the consumer. The request was made, too late in the day, that learned Tribunal had no option except to decline it.

8. Petitioner has emphasized that value addition more than 15% was made under compulsion. The rate of value addition was reduced to 15% as a result of settlement between the Members of PVMA and Federal Board of Revenue, which led to issuance of C.B.R. Circular No.1(2)STAR/04 dated 23-9-2004. The stance of petitioner is not convincing and cannot be appreciated, firstly for the reason that value addition under compulsion, was the stance taken by the petitioner, for the first time in these proceedings, secondly, in this tax reference only those questions can be considered, which arise out of the judgment/order of learned Tribunal.

9. Adverting to the scope and extent of section 72 of Sales Tax Act, 1990. Collector (Appeals) or other quasi-judicial functionaries, have different responsibilities. Their primary function is to determine judicially, the valuable rights of the Revenue on one hand and the taxpayer on the other. While performing such functions, they are required to decide the matter with impartiality and justly. They are not bound to obey and follow the instructions and orders of Federal Board of Revenue. Auditors had only pointed out that excess funds have been claimed and have not adjudicated upon the matter. The matter was adjudicated upon by respondents Nos.2 and 3, who, in the performance of quasi judicial duties, do not have to follow the instructions of Federal Board of Revenue.

10. There is another aspect to view the instant controversy. Levy of tax or it's waiver, through a settlement between FBR and Association of Tax payers, came up for consideration before the Division Bench of this Court in the case of "Crescent Re-Polling Mills, Lahore v. Assistant Collector of Sales Tax, Lahore" (2005 PTD 2436), wherein it was held that: --

" .the idea that the appellants were in any manner estopped from taking the plea of the non-acceptance of the agreement. There is no estoppel against law. The agreement between the parties having never been reduced in the from of a statutory instrument. Any person affected by the same could very well refuse to abide by such agreement even after having initially accepted the same. An association of taxpayers is different from a collective bargaining agent which is authorized by law to negotiate and bargain on behalf of the labourers which it represents. An association of taxpayers has no role to play under the Sale Tax Act nor any of the rules framed thereunder. It can certainly represent the interest of its members. However, in absence of any support from any law it cannot bind its members when it comes to payment of a levy, its rate or even the procedure of its collection. This is clearly discernible from the present scheme of the Sales Tax Act, 1990."

10. The petitioner's arguments that settlement between association (PVMA) and the Federal Board of Revenue, offending the basic provisions of law, cannot be ignored, is not convincing in view of the ratio of above referred judgment.

11. For what has been discussed above, we answer to the questions proposed herein, in negative and as a result thereof, dismiss this reference application in limine.

H.B.T./A-52/LApplication dismissed.