MR. SARFRAZ AHMAD KHAN, MEMBER (TECHNICAL).--(l). This appeal was disposed of vide Tribunal's judgment dated 22.1.2003 wherein the appeal was accepted and the impugned Order- in-Original No.236 dated 11.4.2002 passed by Additional Collector of Customs, Sales Tax and Central Excise (Adjudication), Lahore was set aside. Brief facts of the case already stand narrated in the said judgment dated 22.1.2003. The appellant made taxable supplies during the period from 7/95 to 12/96 and paid zila tax/octroi charges on behalf of its buyers who reimbursed that amount to the suppliers (appellant) through banks. These reimbursed amounts, paid, as zila tax/octroi charges, were also subjected to sales tax during audit of the appellant's records in addition to some other discrepancies which already stand discussed and disposed of in the aforementioned judgment of the Tribunal. The appellant (then respondent) deposited sales tax amounting to Rs.223346/- on the so reimbursed amounts on account of zila tax/octroi charges, prior to the issuance of show cause notice dated 31.3.98 by Additional Collector-II, Sales Tax, Lahore. The case was adjudicated by Additional Collector, Sales Tax (Adjudication), Lahore vide Order-in-Original No.236 dated 11.4.2002 and the appellant was ordered to pay additional tax on the late payment of aforementioned amount of Rs.223346/- alongwith a penalty of 3% of the amount of tax involved. As a result of setting aside of the said Order-in-Original No.236 dated 11.4.2002, the appellant got the relief in the form of additional tax and penalty on the aforementioned amount. The appellant moved an appeal before the Hon'ble Lahore High Court under section 47 of the Sales Tax Act, 1990 on the following points of law:-
(a) Whether the word. "Federal and Provincial duties" as specified in the definition of value under section 2(46)(a) of the Sales Tax Act, 1990 include the charge of Octroi and Zila Tax?
(b) Whether the charges of Octroi and Zila Tax form part of value of supply given under section 2(46)(a) for the purposes of assessm ent of sales tax?
The Hon'ble Lahore High Court vide its judgment dated 21.10.2003 in Sales Tax Appeal No. 51-2003, passed the following orders:- "2. After hearing the learned counsel for the parties, we will agree with the learned counsel for the appellant that despite his having taken a specific objection against inclusion of octroi charges and zila charges etc. In the value of supply as defined in section 2(46) of the Sales Tax Act, 1990 the learned Tribunal did not record a finding on the same. In the ' impugned order the learned members did express themselves on the issue of payment of sales tax/additional tax on the charges like octroi and zila tax yet they did not record a finding as to the legality of inclusion of these charges and levies in the value of supply as defined in the aforesaid provisions of law.
3. Therefore, it appears appropriate that the impugned order of the Tribunal be set aside to that extent only and the matter be remitted to them for consideration afresh and to record a finding if the aforesaid charges Or levies are includable in the value of supply for the purpose of computation of sales tax.
4. Appeal succeeds to that extent only."
The case was fixed for hearing on 22.3.2004.
2. During hearing the learned counsel contended that octroi charges/zila tax could not be included in Federal and Provincial duties, in terms of clause (a) of sub-section (46) of section 2 of Sales Tax Act, 1990. According to him, zila tax and octroi charges were imposed by local bodies and these could not be classified as Provincial duty. According to him, despite deposit of Rs.223346/-, as a result of audit but prior to the issuance of show cause notice and despite acceptance of their earlier appeal by the Tribunal vide order dated 22.1.2003, the appellants grievance was that the sales tax amounting to Rs.223346/- was not at all due and hence having been paid after audit, the same could not be retained by the national exchequer. He contended that the Hon'ble Lahore High Court had remanded the case to the Tribunal only for determination whether zila tax and octroi charges etc. Could be included in the value of supply for the purposes of payment of sales tax and the Tribunal has to decide only the said legal issue.
3. The learned S.D.R, opposed the contentions of the learned counsel. According to him, zila tax and octroi charges could not be levied without the authority of the Provincial Government and hence those were Provincial duties and were to be included in the value of supply.
4. In terms of clause (a) of sub-section (46) of section 2 of Sales Tax Act, 1990 "value of supply" means "the consideration in money including all federal and provincial duties (and taxes - added vide Finance Act, 1999), if any, which the supplier received from the recipient" for that supply but excluding the amount of sales tax. It is evident that all federal and provincial duties but excluding the amount of sales tax, were to be included in the consideration of money which the supplier received from the recipient of the taxable supply. Federal and provincial governments are distinct from local bodies. For example, in Article-7 of the Constitution of the Islamic Republic of Pakistan, 1973 "the state" means the "federal" government, Majlis-e-Shoora (Parliament), a provincial government, a provincial assembly, and such local or other authorities in Pakistan as are by law empowered to impose any tax or cess. Local bodies are distinct from a provincial government and a federal government. Same way "federal and provincial duties" would mean only such duties as the duties and taxes which are imposed by the federal and the respective provincial governments in exercise of the distribution of subjects between the federal government and the provincial government. Local bodies cannot be taken in the same meaning as that of the provincial government. Obviously, zila tax and octroi charges are not covered in the words provincial duties and hence the same were not to be included in the "value of supply". That would mean that the amount of sales tax collected by the respondent on the amounts of octroi charges and zila tax pertaining to the period of 7/95 to 12/96 was not due from the appellant.