1. JUDGMENT: MR. MUHAMMAD WALI KHAN, MEMBER (TECHNICAL).--(1). This judgment disposes of the appeal filed by M/s. Khazana Sugar Mills (Pvt.) Ltd., Charsadda Road, Peshawar (hereinafter called the appellants) against the Order-in-Appeal No, CE/ST-165 of 2000 dated 26.10.1999 passed by the Collector of Customs, Central Excise & Sales Tax (Appeals), Northern Zone, Rawalpindi (hereinafter called the appellate authority) against the Order-in-Original No, 31 of 1999 dated 22.09.1999 passed by the Additional Collector of Sales Tax, Peshawar. On the application of M/s. Khazana Sugar Mills, previously controlled, financed and owned by Sarhad Development Authority, in pursuance of the decision of their Writ Petition No, 1537 of 99 dated 30.10.2003, M/s. Khazana Sugar Mills were also impleaded as party to the appeal and arrayed as respondent. Their main plea was to save their skins from the levy of the sales tax, which pertained to their period of ownership of the mills.
2. 2.Brief facts of the case are that on the information that the appellants had indulged in suppression of value of supplies of spirit by way of not including the amount of Provincial excise duty in the value of supplies thereof and were thus guilty of evading sales tax due on that account, the audit team of the Collectorate of Sales Tax, Peshawar examined the relevant record of the appellants.
3. Examination of record revealed that value of supplies of spirit was not in accordance with the provisions of section 2(31)(a) now section 2(46) of the Sales Tax Act, 1990 (hereinafter called the Act). Denatured, methylated and rectified spirit are by-products of sugar industry. These are liable to Provincial excise duty. In terms of section 2(31)(a) now 2(46) of the Act Provincial excise duty is part of value of supply whereas the appellants had not added the same to the value of supplies of methylated and rectified spirit made during the period from July, 1994 to March, 1999. The amount of Provincial excise duty at the applicable rates was worked out by the audit team at Rs, 21,736,421.00 which the appellants had not added to the value of supplies of the aforesaid spirit made during the period mentioned above resulting in evasion of sales tax amounting to Rs, 4,344,122.00. Accordingly, show-cause notice bearing C. No, ST(SM)71/99/4610 dated 08.05.1999 was issued to the appellants by the Additional Collector, Sales Tax, Peshawar (hereinafter called the adjudicating officer), charging them to have violated the provisions of sections 3, 6, 22, 23 and 26 of the Act and calling upon them to explain as to why besides taking penal action against them under section 33 of the Act the principal amount of sales tax alongwith additional tax should not be recovered from them.
4. 3.After hearing both sides, the learned adjudicating officer ordered the appellants to pay the evaded amount of sales tax as shown above alongwith additional tax to be calculated upto the date of actual payment.
5. 4.An appeal filed by the appellants with the appellate authority against the aforesaid order of the adjudicating officer could not succeed. Hence the present second appeal to this Tribunal.
6. 5.The main points agitated in the appeal and reiterated by the learned counsel of the appellants at the bar are as under:-- (i)The liability to pay sales tax under section 2(31) now section 2(46) of the Act is on the person who receives the consideration in money on account of any supply of taxable goods. In the instant case at the initial stage the Provincial excise duty was paid by the purchaser of the spirit directly to the Provincial excise authorities and not to the appellants. The purchaser, M/s. Wah Nobel Acetates Ltd., Hattar uses the rectified spirit purchased from the appellants in the manufacture of acetate. While manufacturing acetate the purchaser of spirit adds the cost of freight from Peshawar to Wah plus the amount of Provincial excise duty paid at Peshawar in the manufacturing cost of the products sold by them i,e,, M/s. Wah Nobel Acetates Ltd., Hattar. Thus at later stage a value added product is sold and assessm ent is appropriately made for sales tax purpose under section 2(31) and no loss is occurred to the national exchequer. The demand of sales tax on the component of Provincial excise duty from the appellants is not only premature but is also against the provisions of the Act itself. (ii)The purchaser of rectified spirit has obtained a manufacturing license from the Provincial excise authorities who charge a concessionary rate of Provincial excise duty @ Rs, 1.50/- per gallon.
7. This rate has not been considered by the learned auditors at the time of making a contravention report.
8. (iii)The appellants purchased the sugar mill on 17.10.1998 and any recovery of sales tax pertaining to the period prior to this date is the exclusive liability, if any, of the previous management in accordance with the privatization agreement concluded with the Government through the Sarhad Development Authority.
9. (iv)For the period thereafter till the date of demand, the net amount alleged to have not been paid comes to Rs, 16011.00 approximately if properly calculated.
10. (v)The provisions of the Act do not have overriding effect on the Privatization Ordinance and any demand of sales tax from the appellants under the Act is illegal and not enforceable as such, relating to the period when M/s. Sarhad Development Authority were the owner of M/s. Khazana Sugar Mills Ltd.
11. (vi)Similarly, the permit fee is collected from the purchasers of the denatured spirit by the Provincial excise authorities of NWFP directly. Therefore the same cannot be made part of value of supplies made by the appellants for the assessment of sales tax since the appellants have not received the same.
(vii) The provisions of section 2(31) now 2(46) of the Act do not contain any reference regarding inclusion of the permit fee of any description in the value of supply of taxable goods. Earlier, in the former Sales Tax Act, 1951 the term "excise duty" was used with reference to the central excise duty. In the present Act during the year 1996 through an amendment the words "excise duty" were substituted by the words "all Federal and Provincial duties". Further, in the year 1999 a further amendment was made in section 2(46) and the words "and taxes" were added. But so far the words "permit fee" have not been included in the definition of value of supply as contained in section 2(46) of the Act. Thus it is clear that upto the period of default i,e, on 02.04.1996 when the auditor visited the factory on 19.04.1999 when the contravention case was made or during the period of default from July, 1994 to March, 1999 even the words "taxes" were not included in the definition of value of supply. Only the words "all Federal and Provincial duties" where in the field from 01.07.1996 to 30.06.1999 and before that from July, 1994 to March, 1999 only the words "excise duty" were present in section 2(31)(a) or section 2(46) of the Act which meant that only central excise duty was part of value of supply since 1951. Thus the interpretation of section 2(46) by the respondents is not only incorrect but also has wrongly been applied in the instant case. The permit fee is not equivalent to excise duty or tax under any book of statute and as upheld by the superior Courts through many case laws. Thus the demand raised on this account by the respondents is unlawful and factually and legally incorrect in the circumstances of the case.
(viii) Without prejudice to what has been said above the demand is not only time barred under the provisions of the Act but also wrongly calculated by applying wrong rates and against the provisions of the Privatization Ordinance.
12. It was therefore prayed that the orders passed by the lower forums may be set aside and the appeal may be accepted. 5A. The learned DR, on the other hand, vehemently defended the impugned orders passed by the lower fora and stated that value of supply as defined in section 2(46) of the Act makes it abundantly clear that it must include:-- (i)consideration in money received by the supplier; (ii)duties and taxes, if any, imposed by the Federal Government except sales tax; and (iii)provincial excise duties and taxes.
13. Relying on the material brought on record on behalf of the respondents by the Assistant Collector, Legal Division,Collectorate of Sales Tax, Peshawar vide C.No,ST(LD)Trib./16/2000/452 dated 21.5.2004 he stated that the above mentioned elements from the value of supply for assessment of sales tax.
14. The value of supply shown by the appellants was not in accord with the definition thereof given in section 2(46) of the Act since it did not include the Provincial excise duties and taxes and was therefore not acceptable. On the question of fee, repelling the stand taken by the appellants he stated that permit fee is provincial excise duty. To support this contention he pointed out that the Federal Government and the Provincial Governments have determined proper head of accounts for each levy and the duties and taxes collected by these Governments are deposited against the head of account specified for such taxes and duties. He claimed that according to page 22 of the Tax Revenue Book the following head of account has been specified for deposit of Provincial excise duties and taxes: 00000 Tax Revenue Major Head 0200000 indirect taxes (on commodities and transaction continued....)
15. Minor Head Detailed Heads 0250000 Provincial Excise 0252200 Spirits and fermented products medicated wines andliquors-licensed fee for denatured spirits.
16. 0252300 Spirits and fermented products medicated wines and liquors permit fee for denatured spirit.
17. He also pointed out that the above mentioned head of account in which Provincial excise duties are deposited gets support from the Notification No, SO(Taz) E&T/5-2/2000 dated 24-07-2001 'issued by the Government of NWFP, Excise and Taxation Department. He contended that it is immaterial whether the appellants had received the Provincial excise duties/permit fee payable on the supply of rectified spirit etc. or not. What is relevant is whether the goods supplied by the appellants were liable to Provincial excise duty or permit fee. He stated that there is no dispute that the goods supplied by the appellants were subject to Provincial excise duty/permit fee. He claimed that the present case is identical to levy of central excise duty on goods on ad valorem basis whereby the manufacturer of excisable goods has to take into account all the expenses incurred on goods beyond his factory gate while making assessment of central excise duty. Referring to the stand taken by the learned counsel for the appellants that auditors were not authorized to audit record of his clients the learned DR contended that it is absolutely wrong to hold that the auditors could not conduct the audit of records pertaining to the period prior to their being notified as sales tax officer. He claimed that officers of sales tax, on the contrary, can exercise power under sections 25 and 38 of the Act since there is no restriction on them under the Act from exercising those powers for audit work for the period prior to their appointment/notification. He submitted that the issue whether Provincial excise duty/permit fee is part of value of supply notwithstanding the fact that the same was not received by the supplier has already been resolved by various Benches of this Tribunal. To support his claim he referred to the judgment passed in Appeal No, 786/LB/2000 by the Lahore Bench of this Tribunal with special reference to the following operative part thereof:-- "Intention of the legislature is very clear that the total market price is to suffer sales tax which is the actual value of supply and sales tax paid thereon by the buyer to the seller is to be deposited by the latter in the treasury. As already held by this Tribunal in its judgment dated 17.124998 in Appeal No, H-43/98 (filed by Habib Sugar Mills Ltd., Nawabshah) we find that the adjudicating officer was justified in holding that excise duty/permit fee was to be included in the value of supply for purposes of determination of appellants' liability for payment of sales tax. Therefore, the appellants shall pay the amount of sales tax adjudged against them vide the impugned order minus amount already paid."
18. He also pointed out that the Collectorate of Sales Tax and Central Excise, Hyderabad has informed vide letter C. No, 6-GST(C&E) Hq/V-Sugar/2002/12014 dated 28.09.2002 that the amount of permit fee is included in value of supply for assessment of sales tax in that Collectorate and prayed that in view of the consistent judgments of this Tribunal on the issue and the practice in vogue in other parts of the country with reference to the inclusion of Provincial permit fee in the value of supply, the appeal may be dismissed as it merits no consideration.
6. After hearing arguments from both sides, going through the judgments of the Lahore Bench of this Tribunal on this particular issue and examining record of the case carefully we are of the view that the issue whether Provincial excise duty/permit fee not received by the supplier of goods is part of value of supply for the purpose of sales tax or not stands settled at the Tribunal's level. It has been consistently held by this Tribunal that for the purpose of assessment of sales tax value of supply means and includes consideration in money received by the supplier and the excise taxes paid to the Federal and Provincial Governments irrespective of whether the Provincial taxes were paid by the recipients of supplies directly or through the suppliers. In this view of the matter we find ourselves in agreement with our learned brothers of the Lahore Bench because payment of the Provincial taxes by the recipient of the supply either through the supplier or directly to the Provincial Governments makes no difference since the market price inclusive of excise duties/permit fees is to suffer the sales tax. What is relevant is whether the Provincial taxes have been included in the value of supply for the purpose of assessment of sales tax or not. Where the elements of Federal and Provincial taxes except sales tax have not been included in the value of supply by the supplier, the same cannot be held to be the correct value of supply and the sales tax authorities would be within their legal rights to determine value of such supply on the basis of open market price within the meaning of section 2(19) of the Act to ensure that sales tax is charged and paid on the total cost inclusive of the aforesaid taxes to avoid price distortions. If the interpretation of section 2(46) of the Act as advocated by the learned counsel for the appellants is accepted it would lead to two types of assessm ents of sales tax for one and the same goods and such assessments, besides being discriminatory, would give rise to distortions in price of same commodity in that if some one pays the Provincial taxes through the supplier he will be paying greater amount of sales tax on the supply since he will also be paying sales tax on the Provincial taxes which are components of value of supply under section 2(46). But if some one else pays Provincial taxes to the Provincial authorities directly he will be paying less sales tax on same/similar supply since he will not be paying sales tax on the Provincial taxes.This could not be the intention of the legislature. The intention, on the contrary, is that the total market price is to suffer sales tax. The Customs, Central Excise and Sales Tax Appellate Tribunal has consistently held that notwithstanding whether Provincial excise duty/permit fee was received by the supplier or not the said tax makes integral part of value of supply within the meaning of section 2(46) read with section 2(19) of the Act. This view is clearly illustrated in the judgments of the Lahore Bench of the Tribunal in the cases of M/s. Crescent Sugar Mills and Distillery Ltd., Faisalabad (Sales Tax Appeal No, 786/LB/2000), M/s. Noor Sugar Mills Ltd., Bhalwal (Sales Tax Appeal No, 647/LB/2000) and M/s. Habib Sugar Mills Limited, Nawabshah (Appeal No, H-43 of 1998). The appellants have not been able to bring on record any decision of the Tribunal or of the superior Courts containing a different view than the one held by this Tribunal on this issue. 7.The term "excise duty" has neither been defined in the Act nor in the Central Excises Act, 1944.
19. According to the Black's Law Dictionary, Sixth Edition the term "Excise Tax" means "A tax on the manufacture, sale or use of goods or on the carrying on of an occupation or activity or a tax on the transfer of property. In current usage the term has been extended to include various license fees and practically every internal revenue tax except the income tax." "Duty" according to this dictionary denotes "a tax". In the absence of a definition of the term "excise duty" in the relevant laws the dictionary meaning of the term has to be taken. If therefore follows that "excise duty" with reference to the present appeal means every internal revenue tax except income tax and sales tax and the duty being a tax includes license fees as well. Viewed in the light of the definition of excise tax/duty as referred to above, all internal revenue taxes (Federal as well as Provincial) including permit fees were part of the value of supply in terms of section 2(31)(a) of the Act during the period to which this case relates. The later amendments made in the definition of "value of supply" are illustrative and clarificatory in nature and do not mean that excise duty means the duty levied under the Central Excises Act, 1944 only. Therefore in the absence of a contrary definition of "excise duty" either in the central excise or in the sales tax laws it is not possible for us to agree to the contention of the learned counsel for the appellants that prior to 1996 Provincial excise duty was not part of value of supply and permit fee is not part of value of supply even today. We therefore hold that the appellants shall pay sales tax on the Provincial excise duty/permit fee since these taxes are part of value of supply of denatured/methylated spirit made by them if the same has not been paid earlier.
8. So far as time limitation is concerned, perusal of the show-cause notice shows that supply of the disputed spirit was made during the period from July, 1994 to March, 1999 and show-cause notice was issued on 28.05.1999. The show-cause notice does not indicate that the short payment of the sales tax was willful and deliberate or due to some collusion. On the other hand, the appellants challenge inclusion of Provincial excise duty in the value of supply by the sales tax authorities on the ground that they did not receive the Provincial excise duty. They claim that according to the "value of supply" as defined in section 2(46) of the Act, the Provincial excise duty becomes part of value of supply, if the supplier receives it from the recipient of the supply and if the same is not received by the supplier, it does not become part of the value of supply. The above position clearly shows that short payment of sales tax on the disputed spirit by the appellants was the result of interpretation of the "value of supply" by them differently than of the respondents and was not willful or deliberate within the meaning of sub-section (1) of section 36 of the Act. For the aforesaid reasons it could at best be treated as a short payment resulting from inadvertence, error or misconstruction within the meaning of sub-section (2) of section 36 ibid. We, therefore, hold that it is a case of sub-section (2) of section 36 of the Act. Accordingly, the appellants are liable to pay sales tax on the disputed spirit supplied during the period from 29.05.1996 to March, 1999 as the respondents cannot go beyond that period for demanding sales tax not paid due to inadvertence, error or misconstruction. We, therefore, direct the Collector, Sales Tax, Peshawar to recalculate the tax liability of the appellants accordingly. We also direct the appellants to make goods the short paid amount after the same is recalculated by the Collector, Sales Tax, Peshawar, if the same has not been paid earlier.
20. 9.The learned counsel for the appellants has disputed the amount of Provincial excise duty calculated in the impugned Order-in-Original and Order-in-Appeal and has claimed that the amount actually paid to the Provincial Government is less than the one given in the impugned orders. He claimed that in terms of Notification No, 1634/Excise/XIX-C-153 dated 09.03.1999 of the NWFP Government excise duty on rectified spirit sold to M/s. Wah Nobel by the appellants was Rs, 1.50 per LP Gallon and the respondents have wrongly taken the excise duty @ Rs, 21.00 per LP Gallon.
21. Perusal of this notification, copy of which is placed on record, shows that this notification was issued on 09.03.1999 by the Director, Excise and Taxation, NWFP, Peshawar and the rate of excise duty @ Rs, 1.50 per LP Gallon given therein was subject to decision regarding exemption/reduction in Excise Duty by the Secretary Finance, E and T/Excise Commissioner, NWFP on an appeal filed by Wah Nobel Acetates Limited. The learned counsel for the appellants has not been able to place on record any evidence to show that the rate prescribed in the said notification I was finally approved by the Secretary Finance, E & T/Excise Commissioner. Therefore in the absence of such material evidence it cannot be said that the rate shown in the notification was applicable. The learned counsel has also not been able to convince us as to how this notification could apply retrospectively to cover transactions effected during the period from July, 1994 to March, 1999 even if the rate mentioned in the notification had the approval of the Secretary Finance, E and T/Excise Commissioner, NWFP. On the other hand the respondents' case is based on the actual payments made by M/s. Wah Nobel to the Provincial Government. Therefore in the absence of any evidence of payment of lesser amount of excise duty to Provincial Government by M/s. Wah Nobel as compared to the claim of the respondents, we have no option but to uphold the calculations of the respondents in respect of the amount of Provincial excise duty paid to the Provincial Government and which is part of value of supply for the purpose of sales tax. Accordingly, we hold that the amount of Provincial excise duty/permit fee calculated by the sales tax authorities and accepted by the lower fora is the correct amount for inclusion in the value of supply for calculation of sales tax (principal amount). Since the short payment of sales tax was the result of interpretation of section 2(46) differently by both the parties and was not willful, imposition of additional tax/penalty is not justified. In arriving at this conclusion we find support from the judgement of the august Supreme Court of Pakistan in the case of D.G. Khan Cement Company and others Vs. Federation of Pakistan and others reported as PTCL 2004 CL. 224. Therefore, we remit the additional tax imposed on the appellants by the lower fora.
22. 10.Coming to the contention of the appellants that the liability to pay the disputed tax pertaining to the period prior to purchase of Khazana Sugar Mills by the appellants lies on the former owners, we find that this contention is not maintainable in view of clear provisions of the law. Section 49 of the Act is reproduced below for ready reference:-- "49.Sale of taxable activity or transfer of ownership.--(1) In case of termination of taxable activity or part thereof or its sale or transfer of ownership to a non-registered person, the possession of taxable goods or part thereof by the registered person shall be deemed to be a taxable supply and the registered person shall be required to account for and pay the tax on the taxable goods held by him: Provided that if the tax payable by such registered person remains unpaid, the amount of unpaid tax shall be the first charge on the assets of the business and shall be payable by the transferee of business.
23. (2)In the case of sale or transfer of ownership of a taxable activity or part thereof to another registered person as an ongoing concern, sales tax chargeable on taxable goods or part thereof shall be accounted for and paid by the registered person to whom such sale is made or ownership is taransferred."
24. The appellants claim that the provisions of the Act do not have overriding effect on privatization agreement between the former owners of the Sugar Mills and the appellants under the Privatization Ordinance. This claim is not based on any legal footings. It is an established principle of law that the provisions of a special law prevail over a general law. Similarly, it is also a settled law that even if two laws need equal consideration the law more specific to the issue is to be preferred. For the purposes of levy and collection of sales tax the Sales Tax Act, 1990 is the relevant special and more specific law and not the Privatization Ordinance. As such the provisions of Sales Tax Act, 1990 in so far as levy of sales tax and the liability of the person to pay the said tax is concerned shall prevail.
25. The sales tax authorities were not a party to the sale of the Sugar Mills to the appellants by its former owners and the agreement of sales between the aforesaid two parties is outside the preview of the Sales Tax Act, 1990. Therefore this agreement is not binding on the sales tax authorities. The appellants being registered person and present owners of the Sugar Mills in terms of section 49 of the Act are legally bound to pay the sales tax pertaining to the period when the Mills remained under the control of the former owners.
26. 11.The appeal is disposed of in the above terms.
27. 12.Announced.
28. 13.Parties may be informed accordingly.