' Petitioners in this case are retailers and sell beverages in their small shops around public places in Gujranwala City. Their supplier is respondent No,4.
2. The petitioners are aggrieved because they are being burdened with extra payment of three percent: "further sales tax" against supply made to them by respondent No,4. It is their case that being very small retailers their turn-out is less than what is envisaged in section 14 of the Sales Tax Act, 1990 and therefore, they were not required to get themselves registered under the law.
3. They argue that a legal immunity having been extended to them, the payment of three percent of sale tax was not only harsh act but was beyond the 'scope of this fiscal law and the respondents be restrained from demanding this extra three percent tax.
4. Section 3 of the Sales Tax Act, 1990 lays down the scope of tax. Its relevant provisions are re- produced below in extenso:-: "Scope of tax-(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of (fifteen) per cent of the value of-
(a) taxable supplies made in Pakistan by a registered person in the course or furtherance of any (taxable activity) carried on by him; and
(b) goods imported into Pakistan.
[(IA) (subject to the provisions of subsection (6) of section 8 or any notification issued thereunder where) taxable supplies are made in Pakistan to a person other than a registered person there shall be charged, levied and paid a further tax at the rate of - (three) per cent of the value in addition to the rate specified in (subsection (1), clause (a)) of subsection (2), and subsections (4) and (5)]....... "
5. According to the learned counsel for the respondents side extra three percent tax was leviable against any unregistered retailer. But this was contested by learned counsel for the petitioner's side on the ground that this section had to be read in harmony with other provisions of the law. Reliance may be placed on the following judgments:-- ' Habibul Wahab EI-Kheiri v. Ch. Saeed Ahmed (1979 SCM R 545), Commissioner or Income-tax v.
National Agricultural Ltd. Karachi (2000 PTD 254) and Messrs Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan through Ministry of Finance, Revenue and Economic Affairs, Islamabad and 3 others (2000 PTD 485).
6. In this connection learned counsel for the petitioners makes reference to section 13 of the Sales Tax Act, 1990, which reads as follows:-- "[13. Exemption.-(1). Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the (Federal Government), be exempt from tax under this Act].
[(2) Notwithstanding the provisions of subsection (1)-
(a) The Federal Government may, by notification in the official Gazette, exempt any taxable supplies made in Pakistan or any goods or class of goods, from the whole or any part of the tax chargeable under this Act, subject to the conditions and limitations specified therein; and
(b) The Board may by special order in each case stating the reasons, exempt any supply from the payment of the whole or any part of the tax chargeable under this Act.
(3) The exemption from tax chargeable under subsection (2) may be allowed from any previous date specified in the notification issued under clause (a) or, as the case may be, order made under clause (b) of that subsection.]
(4) Where a person does not desire to avail any tax exemption, he may, after voluntary registration, opt to pay sales tax at the rate applicable to such supplies under the provisions of section 3 subject to condition that he shall not thereafter be deregistered till the expiry of two years from the date of such registration.]"
7. According to this section, exemptions having been allowed in respect of certain commodities and persons and these were notwithstanding the provisions of section 3. Reference in this connection has been made to item 42 of the sixth schedule, which reads as follows:- "Raw materials for basic manufacture of pharmaceutical active ingredients, if imported these will be subject to similar conditions as are envisaged for the purposes of the Customs Act, 1969 (IV of 1969)".
8. The non obstante clause of section 13 creates an exception vis-a-vis the other provisions of this Act and its effect are overwhelming. In this connection reliance may be made to the following case of:-- ' Ameer Khtun v. Faiz Ahmad and others (PLD 1991 SC 787).
9. Section 19 of the Sales Tax Act, 1990 provides for compulsory registration and reads as follows:-- "(19) Compulsory Registration.-If a person who is required to be registered under this Act does not apply, for registration and the Collector or such other officer as may be authorised by him in this behalf, after such inquiry as he thinks fit, is satisfied that such person was required to be registered, the Collector or such other officer shall register that person and that he shall be deemed to have registered from the date he became liable for registration [:[ [Provided that if it is subsequently established that a person who was not liable to be registered but was wrongly registered under this section due to inadvertence, error or misconstruction, the Collector shall cancel such registration and such person shall, subject to the provisions of section 3B, not be liable to pay any tax, additional tax or penalty under any of the provisions of this Act or rules made thereunder]
10. Whereas section 14 lays down the requirements for the purposes of registration, which reads as follows:-- [14. Requirement of Registration.-The following persons engaged in making of taxable supplies in Pakistan (including zero-rated supplies) in the course of furtherance of any taxable activity carried on by them. If not already registered, are required to be registered under this Act, namely:--
(i) a manufacturer whose annual turnover from taxable supplies made in any period during the last twelve months ending any tax period exceeds (two and half) million rupees;
(ii) a retailer whose value of supplies in any period during the last twelve months ending any tax period exceeds five million rupees;
(iii) an importer; and
(iv) a wholesaler (including dealer) and distributor: ' Provided that buyers or importers of taxable plant and machinery who intend to make taxable supplies in due course and wish to claim any credit or refund of tax paid on the said plant and machinery shall also be required to be registered under this Act.]
11. Learned counsel for the petitioner at this stage informed this Court that section 14(2) has undergone a further change through enhancement of the amount from 5 million rupees to 20 million rupees under the Finance Act of 2003.
12. According to the legal requirements compulsory registration is related to a turn-out and the income of a retailer and not that every retailer has to be brought under the ambit of further taxation pursuant to section 3 of the Sales Tax Act, 1990.
13. It obviously implies that the sales tax authorities have to take an exercise for inquiring as to what is the turn-out of a particular retailer for his induction in the compulsory registration regime.
14. Learned counsel for Revenue pointed out that the Act was destitute of providing any authority to the Revenue Department for purposes of holding such an inquiry. But a perusal of section 19 reflects that a compulsory registration is to be ordered after an inquiry and therefore, reasonable methodology has to be adopted for this purpose by the Revenue Collector as they may think fit.
15. The powers of summoning the record or otherwise are usually bestowed upon an authority under the provisions of Civil Procedure Code etc. In this law C.P.C. Is not made applicable. But since the law does empower the Collector Revenue to demand the record he can so order. And in case, the record is not produced, the Collector Revenue can always rely on a reasonable presumption against the withholder of the record and can then proceed to apply the provisions of section 3 etc., of the Sales Tax Act, 1990.
16. But without having taken this exercise the authorities cannot at random, whimsically and subjectively saddle a retailer with the burden of the extra tax. This Court has been informed that no such exercise was conducted on the part of sales tax authorities.
17. The petitioners should also be fair to sale tax authorities.
18. This Court would direct the petitioners to lay before the authority on demand after a notice their record and facts for establishing whether their case was covered under the provisions of section 14 of the Sales Tax Act (as amended) and if they fail to do so, it will be implied that they had not come to this Court with clean hands.
19. An objection was taken with respect to the locus standi of the petitioner coming to this Court because it is said that tax was being imposed on respondent No,4, who has failed to appear before this Court. While explaining his position, the learned counsel for the petitioner has stated that after all the petitioners are bearing the brunt of "further tax" of three percent and therefore, they were "aggrieved person" to challenge the same as their businesses were disturbed because of the extra tax.
20. While reading all sections of the Sales Tax Act, 1990 relating to the present proposition in harmony, this Court is of the view that the demand of extra three percent tax while using the provisions of section 3 and without having conducted the exercise of ascertaining the turn-out of the petitioners was illegal. The authorities may conduct the exercise and then proceed with the matter in accordance with law. Thereafter. The matter stands disposed of.