JUDGMENT: MR. MUHAMMAD WALI KHAN, MEMBER (TECHNICAL).-(1). This is an appeal against the Order-in- Appeal No. 383 of 2003, dated 28.08.2003 passed by the Collector (Appeals), Customs, Sales Tax & Central Excise, Rawalpindi, Regional Office, Custom House, Peshawar.
2. Brief facts of the case are that on auditing the sales tax accounts of the appellants for the period from October, 1999 to January, 2002 it was observed that the appellants received advance payments from the dealers for supply of yarn against which the supplies were made during the next ensuing tax period but failed to pay sales tax on such advances at the time when such payment was received as envisaged in sub-section (44) of section 2 of the Sales Tax Act, 1990. The late payment of the principal amount of sales tax on advances attracted additional tax of Rs.
132427/-. A show cause notice C. No. St-DC(Adj)21/2002/1675 dated 23.07.2002 was accordingly issued by the learned Deputy Collector (Adjudication), Customs, Central Excise and Sales Tax, Peshawar, who after granting an opportunity of hearing to the appellants passed the Order-in- Original No. 27/2000, dated 07.04.2003 directing the appellants to deposit the principal amount of sales tax (without specifying the same) alongwith additional tax under section 34 of the Sales Tax Act, 1990 to be calculated at the time of actual deposit. A penalty of Rs.10,000/- (rupees ten thousand) was also imposed on the appellants for violation of section 33(2)(cc) of the Act.
3. On appeal before the Collector (Appeals), Customs, Central Excise and Sales Tax, Peshawar it was, inter alia, stated that principal amount of sales tax had already been paid at the time of clearing the goods and that the tax was not paid on receipt of advances because the controversy had been resolved by Lahore High Court in case of Maple Leaf Cement Factory Vs. The Federation of Pakistan and others reported as PTCL 2000 CL. 195 holding that section 2(30) now section 2(44) of Sales Tax Act, 1990 would not alter the scope and nature of the charging section which stipulates tax on supply. It was prayed that non-payment of tax at the time of receipt of advances was not with a view to evade the tax and therefore additional tax of Rs. 132427/- and the penalty of Rs.
10000/- be remitted.
4. The learned Collector (Appeals), Customs, Central Excise and Sales Tax, Rawalpindi, Regional Office, Custom House, Karachi while passing the impugned Order-in-Appeal admitted in para-10 of the order that the principal amount of tax had already been deposited. He however maintained the order of forum below regarding additional tax of Rs. 132427/- but reduced the penalty to the extent of 3% of the tax due. Aggrieved of the order of the Collector (Appeals) as aforesaid the present appeal has been filed.
5. I have examined the record of the case and considered the arguments advanced by both sides at the time of hearing. The case of the respondents is that the appellants received advances from their customers for supply of yam and did not pay sales tax during the tax period they received the advances as were required to do so in terms of section 2(44) of the Sales Tax Act, 1990 but paid the sales tax subsequently after supply of the yam was made. Resultantly, they were held to be liable to pay additional sales tax of Rs. 132427/- and penalty @ 3% of the tax involved for the appellants failure to pay the principal amount of sales tax within the tax period. The appellants claim that they have paid the principal amount of sales tax during the tax period when the supplies were made and such a payment was in line with the decision of Lahore High Court reported as PTCL 2000 CL. 195 in which it was held that sales tax was to be paid on the date on which the property in goods passes to the buyers. It is further claimed by the appellants that late payment of sales tax was due to interpretation of law in that they thought it. Was payable at the time of supply and not at the time the advances were received. This interpretation was based on the judgment of Lahore High Court cited above. There was thus no evasion of the tax which was paid by the appellants at the time of supply. Therefore, the appellants claim that imposition of additional tax and penalty is not justified. In this regard they have relied upon the judgment of the august Supreme Court of Pakistan in the case of M/s. Humayun Ltd. Vs. Pakistan and others reported as PTCL 1992 CL-23 and two decisions of the Customs, Central Excise and Sales Tax Appellate Tribunal, Lahore and Karachi Benches reported as PTCL 2001 CL 627 and GST2002 CL 183 respectively.
6. It is a matter of record that there have been different interpretations of the term 'Time of supply' given in section 2(44) of the Sales Tax Act, 1990 with reference to advances received by registered persons for making supplies subsequently. While the Lahore High Court in the case cited above held that the term 'Time of supply' with reference to advances meant the time on which the property in goods passes to the buyers, the Peshawar High Court, on the other hand, held that in respect of advances the time of supply was the date of receipt of the advances for payment of sales tax. In the light of these conflicting judgments of two High Courts disputes between tax collectors and taxpayers were bound to occur regarding interpretation of section 2(44), each party taking advantage of the decision favourable to it. This issue has finally been settled by the Supreme Court in the case of D.G. Khan Cement Company Ltd and others Vs. Federation of Pakistan and others reported as 2004 SCM R 456. The august Supreme Court on the issue of advances has heLd in the judgment cited above as under:- "The intention behind the promulgation of relevant provisions of the Sales Tax Act as reproduced above is clearly manifest that the sales tax should go to the government treasury within the tax period after the same having become due and should not be retained by the manufacturers. There is no hard and fast rule as to when and at what stage, the transaction shall be deemed to be the transaction of sale of the goods. Each case has to be decided according to the facts and circumstances of the case, in particular the practice, usage of a particular nature of business or trade. In the case in hand, the manufacturers used to receive amount of consideration in advance for the supply of cement to be made later. It is clear from the provisions of sections 2(22) and (30) of the Sales Tax Act that time of supply was deemed to be the date on which advance payment was received or the supply made whichever was earlier. There is no difficulty in holding that in such a case, the amount of consideration received in advance shall be deemed to be the price on that date of the proportionate quantity of cement and the sales tax should be deposited before 20th of the succeeding month in the Govemment treasury instead of the date of delivery of the goods at the subsequent stage, ln other words, we in order to put the matter beyond any ambiguity, have no hesitation in holding that in such a situation, the date of receipt of amount of consideration in advance can well be construed to be the date of sale for the purpose of payment of sales tax." As discussed above the issue stands settled now. The sales tax is payable on advances received by construing the date of receipt of advance to be the date of sales and not the date of actual supply.
8. Coming to the imposition of additional tax and penalty on the appellants, it is an admitted position that the principal amount of sales tax has been paid by the appellants at the time of actual supply of yarn. The respondents claim that it should have been paid on the date of receipt of the advances and failure to do so attracts additional sales tax and penalty which have rightly been imposed. From what has been discussed above it is now clear that on the basis of the judgment of Lahore High Court cited above the appellants were of the view that sales tax was to be paid on the date the supply was made and they accordingly made the payment. There was no willful attempt to evade payment of sales tax and the decisions of the Tribunal relied upon by ?The appellants support their claim. The question of imposition of additional sales tax and penalty has also been settled in the Supreme Court judgment quoted above in which the august Court has held:- '"Each and every case has to be decided on its own merits as to whether the evasion or payment of tax was willful or mala fide, decision on which would depend upon the question of recovery of additional tax. In the facts and circumstances of this 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."
9. There is no dispute as to the payment of the principal amount of sales tax. The dispute is regarding late payment. Since late payment of sales tax by the appellants was not willful but was the result of controversy arising out of decisions of superior Courts giving different interpretations of the term 'Time of supply' given in section 2(44) of the Sales Tax Act, 1990, imposition of additional tax and penalty is not justified. The appeal succeeds. The Order-in-Original No. 27 of 2002 passed on 18.02.2003 by the Deputy Collector (Adjudication), Peshawar and the Order-in- Appeal No. 383 of 2003 passed on 29.07.2003 by the Collector (Appeals), Peshawar are accordingly set aside.
10. Announced.