2010 P T D (Trib.) 1404
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Shahnaz Rafique, Accountant Member
S.T.A. No.655/LB of 2009, decided on 13/04/2010.
(a) Sales Tax Act (VII of 1990)---
----Ss. 2(47), 3, 25 & 38---C.B.R. Letter No. F5(1)-TR.1/96 dated 21-5-2008---C.B.R. Letter C. No.4 (47)STB/98-Vol.1 dated 27-1-2001--Retail price---Scope of tax---Enrolment as turnover taxpayer---Registered person---Assessee got enrolment certificate as turnover tax payer---Assessee had not made any supplies as retailer instead their principal business activities were as wholesaler as they had supplied taxable goods and deposited 2% turnover tax; whereas under S.2(47) and 3 of the Sales Tax Act, 1990, the supplier of taxable goods to government/semi government departments, was a wholesaler and the supplies by wholesalers were chargeable to sales tax @ 15% instead of 2%---Assessee contended that he was enrolled as turnover/enrolled taxpayer and charged 2% turnover tax---Department was demanding to deposit 15% sales tax on supply while the assessee was not a registered person---Validity---Assessee charged 2% turnover tax and the same was deposited in government treasury in accordance with law---Assessee was a unregistered person and charged turnover tax @ 2% and 15% turnover was only for the persons who were registered under S.2(47) and 3 of the Sales Tax Act, 1990---Whenever all the documentary evidence was available before the Department and the Department was aware about the facts that the assessee had charged 2% turnover tax under the contract, it was beyond understanding why the Department was pressurizing the assessee to deposit 15% turnover tax---If there was any discrepancy or default to that extent, it had to be created against the purchaser who purchased the goods from a unregistered person to save 13% turnover sales tax and assessee being a unregistered person charged 2% turnover tax instead of 15% turnover tax---Assessee performed his business responsibilities according to his enrolment i.e. unregistered person and charged 2% turnover tax---Assessee's appeal was accepted by the Appellate Tribunal and the department was directed to charge only 2% turnover tax.
(b) Sales Tax Act (VII of 1990)---
----S. 38---Authorized officer to have access to premises, stocks, accounts and record---Issuance of notice without approval of Central Board of Revenue---Validity---Notices were issued without prior approval of Central Board of Revenue or Collector and the proceedings initiated against the assessee were useless and did not have any consequences in the eye of law---If the notices were void ab initio and illegal then the show cause notice issued by the Deputy Collector without any date on the basis of such notices were no more the same was also not sustainable in the eye of law.
2001 SCMR 838 ref.
2004 PTD 2952 rel.
Sajid Ijaz Hotiana for Appellant.
Muhammad Nadeem Arif, D.R. for Respondent.
ORDER
Vide this Sales Tax Appeal, the assessee - appellant has assailed the order of the learned Collector, Custom, Sales Tax and Federal Excise (Appeals) Lahore Order-in-Appeal No.106/ST/2006 dated 8-4-2006.
2. Both the learned representatives appearing at the bar have been heard at great length.
3. Facts leading for disposal of the instant case are that the staff of Sales Tax on the basis of information conducted an inquiry against Messrs Levanza Furniture, 15-Sialkot Block, Fortress Stadium, Lahore Cantt. During the course of proceedings, it had been noticed that the said assessee got enrolment certificate on 6-2-2002 as turnover tax payer (Retailer) under Enrolment No.32112951. Further adhered that the concerned assessee had not made any supplies as retailer from July 2003 to June 2004 instead thereof their principal business activities during the said period were as wholesaler. During the month of March, 2003 they had supplied taxable goods valuing Rs.99,96,624 to Civil Aviation Authority, Lahore under contract No.NTCL/6114/35/4/Contract/114 and deposited 2% turnover tax at Rs.199,932. Whereas under section 2(47) and 3 of the Sales Tax Act, 1990, the supplier of taxable goods to Government/Semi Government Departments, is a wholesaler and the supplies by wholesalers are chargeable to sales tax @ 15% instead of 2%.
4. Thereafter, the Assistant Collector, Sales Registration has intimated to the concerned assessee vide letter C.No.IV-ST/Retailer/5 million/04/1048 dated 21-12-2004, the unregistered person has indulged in the supply of taxable goods without payment of sales tax and supplied taxable goods valuing Rs.44,79,200 on which sales tax @ 15% amounting to Rs.584243 is recoverable. As a result, the matter was reported for adjudication and it was directed to the assessee to pay sales tax amounting to Rs.1637435 under section 36(1) of the Sales Tax Act, 1990 along with additional tax (to be calculated a the time of deposit) under section 34 ibid. Feeling dissatisfaction with the treatment meted out by the Adjudication Authority, the assessee filed appeal before the learned Collector Sales Tax, Lahore who, by virtue of his order dated 8-4-2006 bearing appeal No.106/ST/2006 dismissed the assessee's appeal and upheld the impugned judgment of the Deputy Collector (Adjudication). This dispensation has compelled the assessee-appellant to come up in appeal before the Appellate Tribunal Inland Revenue.
5. On his turn, the learned counsel appearing on behalf of the assessee vehemently contended and took the plea in the preliminary objection that the show-cause notice is without any date. Further contended that it was ordered to the assessee to deposit Rs.16,37,435 along with additional tax but it is not mentioned anywhere in the impugned Order-in-Original that under which section of Sales Tax Act, 1990 the learned Adjudicating Officer has ordered for the deposit of amount and additional tax. The learned counsel further contested that the issuance of notice under sections 25 and 38 of the Sales Tax Act, 1990 was illegal and without lawful authority because approval from C.B.R. or Collector as mentioned in section 38 of the Sales Tax Act, 1990 was not obtained. He further vociferously contended that the show cause notice had been issued to the assessee without following the mandatory provisions of section 25(3) of the Sales Tax Act, 1990, the show cause notice would become illegal and void ab initio. To strengthen his Contention he relied upon a reported case law, in re: 2001 SCMR 838 to which show cause notice has become defective and is, therefore, not maintainable. He further contended that the appellant supplied office furniture valuing Rs.9,999,624 to Civil Aviation Authority, Lahore and he was enrolled as Turnover/Enrolled Taxpayer (Retailer) with the Sales Tax Department and therefore charged 2% turnover tax from Civil Aviation and deposited the same in the Government treasury. On the contrary, the respondents (department) are demanding to the assessee- B appellant to deposit 15% sales tax on this supply while the assessee is not a registered person. Further contended that the respondents are fixing liability and taking penal action against the assessee whereas they should pursue the Civil Aviation Authority, Lahore due to the following reason:
(a) The Board vides its letter No.F.5(1)-TR.1/96 dated May 21,1998 stated that it is obligatory for all the public sector departments and organizations including DFIs to make purchases of only tax paid goods.
(b) The Board has laid down the procedure of sales tax on supplies made to Government and payment thereof through cheque vides its letter C.No.4(47)STB/98-Vol. 1 dated 27th January, 2001 the letter is reproduced as under:-
(i) I am directed to refer to your letter No.275-AC-I/10/94 Vol.V, dated 19th December, on the subject cited above and to say that Federal Cabinet has decided in 1998 that all purchases by Government departments and organizations should be made form registered suppliers on payment of sales tax against prescribed sales tax invoices. These instructions were widely circulated.
(ii) Now after lapse of over nearly 2 years, the various Accounts Officer have again informed that a number of bills are pending due to purchases from unregistered suppliers. It appears that certain Government Departments, despite clear instructions have still not stopped making purchases form unregistered suppliers. This is a clear violation of the Cabinet decision.
(iii) In order to resolve the problem, the Auditor General of Pakistan/AGPR is advised to ask such suppliers (Supplying taxable goods) to first produce sales tax registration certificates form the respective Collectorate of Sales Tax and thereafter the concerned accounts officers may pass their bills after deducting sales tax due on the bills, under intimation to the respective Collectors.
6. Learned counsel for the assessee further stated that in para. 3 of the show-cause notice the respondent No.3 alleged that the Assistant Collector, Sales Tax Registration has intimated to the assessee-appellant that during last 12 months declared sales are of above 12 million, which mandates registration. And it is further alleged that the appellant has supplied taxable goods valuing Rs.4,479,200 on which sales tax @ 15% amounting to Rs.584,243 is recoverable. These two allegations are contrary to each other. When the appellant's supplies are of Rs.4.4 million which is less then threshold limit of Rs.5 million for registration then how sales tax can be recovered from the appellant on this supply.
7. We have heard the arguments advanced by the rival parties and perused the available record. We have noted that the main thrust of the learned counsel of the assessee-appellant before us is on account of tax deposited 2% while the department is pressing hard to deposit the same @ 15% as a wholesaler. We have carefully gone through the orders of the authorities below as well as the submission put forth by the learned counsel for the assessee. The department has resorted to start the proceedings against the assessee through a notice dated 28-6-2005 vide letter No.C.I&P/ST&CE/Inquiry/retailer/2005/296 requiring certain information under section 25 & 38 of the Sales Tax Act, 1990. In this regard, the assessee-appellant provided all the relevant documentary evidence to the department and thereafter no response or contravention report was ever received by the appellant from the department. According to section 38 which reads as under:--
SECTION 38
Authorized officer to have access to premises, stocks, accounts and records.---(1) Any officer authorized in this behalf by the Board shall have free access to business or manufacturing premises, registered officer or any other place whereby any stock, business records or documents required under this act are kept or maintained belonging to any registered person or a person liable for registration or whose business activities are covered under this Act or who may be required for any inquiry or investigation in any tax fraud committed by him or his agent or any other person; and such officer may, at any time, inspect the goods, statements, utility bills, bank statements, information regarding nature and sources of funds or assets with which his business is financed, and any other records or documents, including those which are required under any of the Federal, Provincial or local laws maintained in any form or made any may take into his custody such records, statements, diskettes, documents or any part thereof, in original or copies thereof in such form as the authorised officer may deem fit against a signed receipt.
8. To strengthen his contention the learned counsel also relied upon a reported judgment of the Sindh High Court in re: 2004 PTD 2952 whereby the honourable High Court decided the matter with the following words:--
"It is provided in section 38 that, any officer authorized in this behalf by the Board or Collector shall have free access to business or manufacturing premises etc. The words are very clear to the effect that the officer taking action under section 38 should be authorized in this behalf by the Board or Collector. It nowhere provides that the action taken without authorization can be subsequently confirmed. There is no provision for ex-post facto confirmation. The authorization envisaged under section 38 should precede the action and not vice versa. This provision has also been made with a view to protect the interest of the citizens and therefore; any tax official who claims to be authorized by the Board or Collector, under section 38 of the Sales Tax Act, is bound to show, the authorization to the person who is asked to make the compliance of the requirements made by such officer."
According to the judgment of the honourable High Court, it is a crystal clear that any officer who is taking action or initiating proceedings against any person, it means that he is standing on behalf of the Board or Collector and performing his .duties after getting approval from the concerned department. In case, he initiated or started proceedings against any person without prior approval of the concerned Head of the Department, then all these proceedings will be null and void and would be a futile exercise. This is the same position in this case, notices dated 28-6-2005 were issued without prior approval of the C.B.R. or Collector and the proceedings initiated against the assessee in this regard are useless and does not have any consequences thereof in the eye of law. Further if the notices are void, ab initio and illegal then the show cause issued by the Deputy Collector without any date on the basis of these notices are no more and because of it is also not sustainable in the eye of law.
9. Now, coming to the burning issue of depositing turnover tax, we have noted that the assessee is registered on 6-2-2002 and got Enrolment No.32112951 as a retailer turnover taxpayer. During his business activities, the assessee supplied office furniture valuing Rs.9,996,624 to Civil Aviation Authority, Lahore and therefore, charged 2% turnover tax from the Civil Aviation and deposited the same in the Government treasury. We have also noted that under the contract No.NTCL/6114/35/4/Contract/114, dated March, 2003 with the Civil Aviation, the assessee-appellant charged 2% turnover tax amounting to Rs.199, 932 and the same was deposited in the Government treasury in accordance with law. We have also deliberately noted that firstly; the assessee appellant is a unregistered person and charged turnover tax 2% and secondly; 15% turnover is only for the persons who are registered under sections 2(47) and 3 of the Sales Tax 1990. We are surprised to know it that whenever all the documentary evidence was available before the department and they are aware about the relevant facts that the assessee appellant had charged 2% turnover tax under the contract with the Civil Aviation and then it is beyond understanding why are they pressurizing the assessee-appellant to deposit 15% turnover tax on this deal.
Moreover, we have also gone through the letter issued by the Board vides its letter C.No.4(47)STB/98-Vol.1 dated 27th January, 2001, to resolve the controversy of registered or unregistered person which is being reproduced as under:
(i) I am directed to refer to your letter No. 275-AC-I/10-7/94-Vol-V, dated 19th December, on the subject cited above and to say that Federal Cabinet has decided in 1998 that all purchases by Government departments and organizations should be made from registered suppliers on payment of sales tax against prescribed sales tax invoices. These instructions were widely circulated.
(ii) Now after lapse of over nearly 2 years, the various Accounts Officers have again informed that a number of bills are pending due to purchases from unregistered suppliers. It appears that certain Government departments, despite clear instructions have still not stopped making purchases from unregistered suppliers. This is a clear violation of the Cabinet decision.
(iii) In order to resolve the problem, the Auditor General of Pakistan/AGPR is advised to ask such suppliers (Supplying taxable goods) to first produce sales tax registration certificates from the respective Collectorate of Sales Tax and thereafter the concerned accounts officers may pass their bills after deducting sales tax due on the bills, under intimation to the respective Collector.
10. After appraising the letter cited supra, we are of the considered view that if there is any discrepancy or default to that extent, it has to be created by the Civil Aviation Authority, Lahore who purchased the furniture from a unregistered person to save 13% turnover sales tax and the assessee-appellant being a unregistered person charged 2%. turnover tax instead of 15% turnover tax. Keeping in view the foregoing discussion, we have no ambiguity in mind to decide the matter in favour of the assessee who performed his business responsibilities according to his enrolment i.e. unregistered person and charged 2% turnover tax. Consequently, the assessee's appeal is accepted on the issue of 2% turnover tax and the department is directed to charge only 2% turnover tax.
11. As a result, the assessee's appeal is accepted.
C.M.A./78/Tax(Trib.)Appeal accepted.