MR. JUSTICE NASIM SIKANDAR.-(1). Through this single judgment we intend to dispose of S.T.A. Nos.
3, 4, 6 & 7 of 2002.
2. These departmental appeals challenge a consolidated order recorded by the Customs, Excise & Sales Tax Appellate Tribunal, Lahore Bench-I on 11.07.2001. It is only sub-para (4) of para 9 of the impugned order which is challenged through these appeals wherein additional tax and penalties imposed were directed to be waived.
3. The respondents, manufacturing concerns of different nature were charged with violation of sections 3, 4, 6 & 7 of the Sales Tax Act, 1990 (for short the Act). Earlier it was found that they sold plant and machinery, vehicles, furniture, office equipments, scrap etc. But did not pay sales tax thereupon.
4. The respondents as registered persons challenged the order in original so recorded on 31.05.2000 before the Tribunal with partial success only. Whereas the Tribunal maintained the levy of sales tax on disposal of the aforesaid movable assets finding them to be squarely covered by the charging provisions of section ? Of the Act, the levy of additional tax and penalty was not approved. The operative part of para 9 of the impugned order of the Tribunal reads as under:- "In view of the above considerations we held that:-
(i) The sales of plant and machinery, furniture, office equipment, scrap etc. Is a taxable transaction.
The appellants are under a legal obligation to account for these transactions and pay sales tax thereon.
(ii) It is not just and fair to charge sales tax on sale of vehicles and such other goods which are not admissible for input tax deduction in terms of section 8(1 )(b) of the Act.
(iii) Since "sale and lease back" of machinery and other goods is a fictional transaction it does not fall within the purview of the tax not and thus sale tax is not chargeable thereon.
(iv) Since the controversy between the department and the appellants relates to interpretation of different legal provisions the imposition of additional tax and penalty has no justification and the same are accordingly waived."
As noted earlier it is only the last para (iv) of the above order , which is challenged by the department.
5. It is their case that the Tribunal having maintained the order in original and having found the respondents to have violated the aforesaid provisions of the Act, it was not competent to remit additional tax and penalty. According to the learned counsel for the appellant/department a bare reading of the provisions of section 34 of the Act makes it clear that in cases of non-payment of the tax, wrong claim of tax credit, refund or an adjustment which was not admissible to a tax payer or incorrect application of rate of zero per cent to supplies made by him, the levy of additional tax is a legal consequence which is not avoidable. In his view the use of word "shall" in sub-section (1) of section 34 of the Act clearly goes to indicate that on happening of any one of the aforesaid commissions and omissions on the part of the tax payer, the levy of additional tax and prescribed penalties would be a consequence mandated by law and its waiver by the Tribunal would be an apparent illegality. It is stated that the Tribunal being a creation of law is obliged to comply with and enforce each and every provision of the Act and that the provision in question being mandatory the Tribunal has absolutely no jurisdiction to interfere in the levy of additional tax and penalties. Particularly when it finds the violation of the charging provisions to have happened and maintains the same.
6. Learned counsel for the respondents, however maintains and we will agree that the view of the Hon'ble Supreme Court of Pakistan as well as this Court is otherwise. Learned counsel for the respondents in support of his submissions has placed reliance upon re: D. G. Khan Cement Company Ltd. And others vs. Federation of Pakistan and others, (2004 SCMK 456 = PTCL 2004 CL. 224), re: M/s. Millat Tractors Ltd., Lahore vs. Collector of Sales Tax and Central Excise, Lahore, (2003 PTD 1445), re: Collector of Sales Tax and Central Excise, Lahore vs. Baba Farid Sugar Mills Limited, Faisalabad Road, Okara, (2004 PTD 823), re: M/s. Janana De Malicho Textile Mills Ltd., Kohat vs. Deputy Collector of Customs, Central Excise and Sales Tax (Adjudication), Peshawar and others, (PTCL 2004 CL. 450), re: Collector of Sales Tax and Central Excise, Lahore vs. Pattoki Sugar Mills Limited, (NLR 2004 Tax 97), re: M/s. Pfizer Laboratories Limited vs. Federation of Pakistan and others, (PLD 1998 S.C. 64 = PTCL 1998 CL. 354), re: M/s. Febri Chem, Faisalabad vs. Collector of Sales Tax, Faisalabad, (GST 2004 CL. 615) and re: Shamroz Khan and another vs. Muhammad Amin and others, (PLD 1978 S.C. 89).
7. In the first case re: D.G. Khan Cement Company Limited vs. Federation of Pakistan (supra), the Hon'ble Supreme Court of Pakistan despite having earlier maintained the departmental view of the levy of charge proceeded to hold that imposition of penalty or additional tax under section 34 was not mandatory. With reference to a number of earlier judgments the Hon'ble Bench of the apex Court also rejected the plea that where a default of the kind contemplated in section 34 of the Act is found to have occurred there was no discretion left with the authorities to allow any concession in additional tax or penalty prescribed under the Act.
8. The issue if the Tribunal had any discretion to waive or remit additional tax ur penalty in the face of the provisions of section 34 of the act came up for hearing before a Division Bench of this Court comprising one of is (Nasim Sikandar, J.) in the second case cited at the bar re: M/s. Millat Tractors Ltd., Lahore vs. Collector of Sales Tax and Central Excise, Lahore, (supra). In that case as well the findings recorded by the learned members of the Tribunal with regard to the charge and levy were maintained. It was held by the Tribunal and this Court agreed that during a particular period and in view of an entry in the 6th Schedule to the Act read with SRO. Dated 23.07.1993 the appellant in that case M/s. Millat Tractors Ltd. Was not entitled to input adjustment in view of the provisions of section 8(1 )(a) of the Act. However, as far the grievance of the department in cross appeal against remission of additional tax was concerned, in para 8 of the order it was observed as under:- "As far the grievance of the Department is concerned again we are of the view that no question of law has arisen from the finding recorded by the Tribunal. They found that in the given facts, there was no justification to burden the appellant with additional tax. The provisions of section 46 are neither governed nor controlled by the provisions of section 33 and 34. In a number of cases on Income Tax and Wealth Tax side in identical situation we have expressed the view that the fixed amount of penalties or those imposed with reference to a certain amount leviable for default per day are, relevant only at the assessme nt proceedings. The imposition of penalties or additional tax with reference to such provisions is not at all sacrosanct for the appellate forums including the Tribunal, In case the departmental interpretation is accepted then the appeal provisions and the powers of the Tribunal to allow relief with regard to the penalties and additional tax will become redundant. That can never be the intentions of the legislature."
9. The other cases relied upon by the learned counsel for the respondents as noted above, support the view accepted by the Court and re-produced above. In all the cases in hand learned Tribunal remitted/waived levy of additional tax and penalties for various reasons including the liquidity crunch being faced by the tax payers. The finding as to the peculiar facts of a particular assessee is necessarily a finding of fact and cannot be converted into one of law simply by making a reference to the use of word "shall" a used in sub-section (1) of section 34 of the Act. Their Lordships of the Supreme Court in re: D.G. Khan Cement Company Limited (supra) also found that with regard to the levy of additional tax or penalties each and every case had to be decided on its own merits as to whether the evasion or payment of tax was wilful or mala fide. The decision on which would depend upon the question of recovery of additional tax. The Hon'ble Court in the facts and circumstances of the case before it held that non-payment of the sales tax within the tax period was neither wilful nor it could be construed to be mala fide evasion or payment of duty.
Accordingly the recovery of additional tax as penalty or otherwise was found to be unjustified in b As noted above, the Tribunal found as a fact that in the gi\ . Situation including prevailing uncertainty in application of the charging provisions of the Act the imposition of additional tax and penalties was unjustified. The use of that discretion based upon their appreciation of facts as well as the legal preposition, their finding for remitting/waiving additional tax and penalties is not open to exception.
10. Therefore, these departmental appeals shall be dismissed.