SINDH REVENUE BOARD VS ASKARI BANK LTD., 2017 PTD-KARACHI-HIGH-COURT-SINDH 2456 (2017)

Sindh Sales Tax on Services Act (XII of 2011)---

---Ss. 24, 44 & 63---Reference---Amount of default surcharge---Deletion---Factual controversy---Authorities were aggrieved of order passed by Appellate Tribunal, deleting amount of default surcharge---Validity---Question proposed by authorities did not arise from order passed by Appellate Tribunal as same was based on peculiar findings of facts which were entirely distinguishable from facts of cases referred and relied upon by taxpayer---High Court declined to interfere in order passed by Appellate Tribunal as same did not suffer from any factual or legal error---Reference was dismissed in circumstances.

D.G. Khan Cement v. Federation of Pakistan and others 2004 PTD 1179 ref.

Muhammad Sarfaraz Ali Metlo for Applicant.

Nemo for the Repondent.

Date of hearing: 11th September, 2017.

ORDER

AQEEL AHMED ABBASI, J.---Through instant reference application, the applicant department has proposed following question, which according to learned counsel, is a question of law arising from the impugned order dated 11.02.2016 passed by the Appellate Tribunal, Sindh Revenue Board in Appeal No. At - 130/ 2015:--

"Whether the Appellate Tribunal was justified in deleting the amount of default surcharge under section 44 of the Sindh Sales Tax on Services Act, 2011 when the legislature by using words "shall pay" and "whether willfilly or otherwise" made it mandatory on the registered person to pay default surcharge in addition to the principal amount of SST."

2.Learned counsel for the applicant after having readout the impugned order passed by the Appellate Tribunal in the instant case as well as the order of the two authorities below, submits that the Appellate Tribunal Sindh Revenue Board has erred in law and facts while holding that the respondent was not liable to pay default surcharge by placing reliance on the judgment of the Hon'ble Supreme Court in the case of D.G.Khan Cement v. Federation of Pakistan and others [2004 PTD 1179], as according to learned counsel, the provisions of Section 34 of the Sales Tax Act, 1990 are not pari-materia of the provision of section 24 of the Sindh Sales Tax on Services Act, 2011. Per learned counsel in the case of D.G.Khan Cement v. Federation of Pakistan and others [2004 PTD 1179], the Hon'ble Supreme Court was pleased to hold that unless there is mala fide on the part of the taxpayer or the default is willful, only then the provision of Section 34 of the Sales Tax Act, 1990 invoked, whereas, in the instant matter, such conditions are not attracted as according to learned counsel in terms of Section 44 of the Sindh Sales Tax on Services Act, 2011, the default surcharge can be levied irrespective of the fact that such default is willful or otherwise. In support of his contention, learned counsel for the applicant has readout the provision of Section 44 of the Sindh Sales Tax on Services Act, 2011 and submits that the word "or otherwise" used in Section 44 of the Sindh Sales Tax on Services Act, 2011 has rendered the above judgments as irrelevant on the facts of instant case. It has been prayed that the order passed by the Appellate Tribunal may be set-aside and the question proposed hereinabove may be answered in Negative in favour of the applicant and against the respondent.

3.We have heard the learned counsel for the applicant, perused the impugned order passed by the Appellate Tribunal Sindh Revenue Board as well as orders of the two authorities below with his assistance, and have also examined the provisions of Section 44 of the Sindh Sales Tax on Services Act, 2011, as well as the provisions of Section 34 of the Sales Tax Act, 1990. We have also gone through the decision of the Hon'ble Supreme Court in the case of D.G. Khan Cement v. Federation of Pakistan and others [2004 PTD 1179] as well as the decision of the Sindh High Court in the case of Muhammad Muslim v. Commissioner of Income Tax Karachi [(1980) 42 Tax 129(H. C. Kar.) as referred to by the learned counsel for the applicant during his submissions in the instant matter. From perusal of the order passed by the Appellate Tribunal in the instant case, it has been observed that the facts of the instant case are distinguishable from the facts of the cited cases as referred to hereinabove. In the instant case, it appears that there is no default in payment of the sales tax on services by the respondent, however, due to inadvertence, the amount of tax has been admittedly paid in the account of F.B.R. instead of S.R.B. It will be advantageous to reproduce hereunder the relevant findings of the Appellate Tribunal, SRB as contained in Para: 6 of the impugned order:--

"6. It is an admitted position that the tax and return for the tax period July, 2011 was deposited with FBR. The fact which has to be kept in mind is that the Sindh Sales Tax on Services Act, 2011 was promulgated effective from 1sI July, 2011 and the tax and return for the very initial month of July, 2011 was mistakenly deposited with FBR. It must also be kept in mind that before the Sindh Sales Tax the appellant was depositing FED with FBR. The question is what benefits the appellant gained by depositing tax with FBR, naturally the answer is that appellant has gain nothing except the litigation. The default surcharge and penalty can only be imposed if non-payment is mala fide and willful. Apparently as claimed by the appellant the tax was wrongly deposited in the account of FBR due to mistake of NBP and the appellant cannot be held liable for the same. In this case the appellant has discharge its liability by depositing the amount but in a wrong account. The deposit of tax with FBR, is apparently without carrying any patent contumaciousness and obvious willfulness to disregard statutory provisions. Once it was found that the tax payer having been out of pocket to the extent of such erroneous, but bona fide, deposit could not be treated as defaulter. The word "default" necessarily imports of an element of negligence or fault and means something more than mere non-compliance of statutory provisions. To establish default one must show that the non-compliance of statutory provisions has been due to some avoidable cause. Mere wrong deposit of amount without element of willfulness and mala fide cannot entail default surcharge and penalty. In the reported case of D.G. Khan Cement the facts were that the sales tax in full has been deposited by the tax payer but the same having not been paid within tax period, the question before the Honorable Supreme Court was whether the tax payer was liable to pay additional tax by way of penalty under section 34 of the Act of 1990. In para 28 of the judgment the Honorable Supreme Court has held that "Each and every case has to be decided on its own merits as to whether the evasion or non-payment of tax was willful or mala fide, decision of which would depend upon the question of recovery of additional tax. In the facts and circumstances of the case, we find that non-payment of the sales tax within tax period was neither willful nor it could be construed to be mala fide evasion or payment of duty, therefore, the recovery of additional tax as penalty or otherwise was not justified in law". Same is the position in this case the appellant first deposited the tax with FBR and subsequently deposited the tax with SBR and department has failed to establish the mala fides and willfulness on the part of appellant. In the reported case of Deputy Collector, Central Excise and Sales Tax, Lahore v. ICI Pakistan Limited, Lahore 2006 PTD 1132 the Honorable Supreme Court has held that "In an appropriate case of default in payment of sales tax, a manufacturer or producer of goods could be burdened with additional sales tax under section 34 of the Act as well as penalty under section 33 of the Act. However, it does not necessarily follow that in every case such levy was automatic requiring no determination at all." In this case also there is no determination at all and it was taken for granted by the Commissioner (Appeals) that the liability to pay default surcharge and penalty is a necessary consequence or corollary of non-payment of sales tax within stipulated period. In an another judgment reported as PLD 1967 SC I the Honorable Supreme Court has held that "even in the case of statutory offence the presumption is that mens rea is an essential ingredients". In the case reported as (1980) 42 Tax 129 the Honorable Sindh High Court has held that "penalty could be imposed only when revenue establishes a case indicating dishonest motive of a tax payer". It is clear that the mens rea and dishonest motive of tax payer is lacking in this case. The principles laid down in the reported cases are squarely applicable to this case."

4.From perusal of hereinabove finding as recorded by the Appellate Tribunal, SRB, it has come on record that the amount of sales tax due was already paid by the respondent in the account of FBR without any delay, whereas, according to SRB, the same was to be paid in the account of SRB in view of promulgation Sindh Sales Tax on Services Act, 2011. A taxpayer cannot be held to be a defaulter towards discharge of his tax liability merely on account of depositing the same with the Federal Board of Revenue in "X" account instead of depositing the same with Sindh Revenue Board in "Y" due to inadvertence. Nor any mala fide or willful act or omission can be attributed to a taxpayer who has admittedly make payment of such amount of tax in public exchequer.

5.In view of hereinabove facts and circumstances of the case, we are of the view that the question proposed in the instant case does not arise from the impugned order passed by the Appellate Tribunal Sindh Revenue Board, which is based on peculiar finding on facts, which are entirely distinguishable from the facts of the cases as referred and relied upon by the learned counsel for the applicant. Accordingly, we are of the opinion that the order passed by the Appellate Tribunal Sindh Revenue Board in the instant case does not suffer from any factual or legal error, therefore, instant reference application is hereby dismissed in limine along with listed applications.

6.However, before parting with the order, we may observe that the question proposed in the instant reference application, requiring interpretation of the provisions of Section 44 of the Sindh Sales Tax on Services Act, 2011, may be examined in some appropriate cases, where such may arise as a question of law, and the same will be considered and examined in accordance with law.

MH/S-68/Sindh Reference dismissed.