CHIEF JUSTICE NASIR-UL-MULK.-(1). By this single judgment, we propose to dispose of S.A.Os. Nos.
25, 26 and 27 of 1999 which involve common questions of law. The three appeals arise from the single judgment of the Customs, Central Excise and Sales Tax Appellate Tribunal, dated 9-10-1999 by which three appeals against the three orders-in-appeals dated 2-9-1997, 7-10-1997, 2-11-1997 were disposed of. The question involved before the lower forums and in the present appeal is the imposition of additional sales tax on the respondents Dhan Fibres Limited, Hattar Industries, Haripur, under section 34 of the Sales Tax Act, 1990 for delay in filing the Sales Tax Returns.
2. The admitted position is that the Sales Tax Returns were to be filed by the respondent for the month of February, 1997 by 20-3-1997 but instead were filed on 7-7-1997, after delay of 3 months and 17 days. On account of this delay, a penalty in the shape of additional tax under section 34 of the Sales Tax Act amounting to Rs. 79,30,868 was imposed on the respondent. The second default pertained to the Sales Tax Returns for November, 1996, which were filed on 20-2-1997 instead the due date of 20-12-1996, with a delay of to months and thus the Adjudicating Officer imposed an additional tax of Rs. 39,70,400. The third default related to March, 1997, where the Sales Tax Returns were to be filed on 20-4-1997 but instead were filed on 5-6-1997, with a delay of one month and 15 days and for this default Rs. 37,76,571 were imposed as additional tax. The appeals before the Tribunal numbering 125, 126 and 127 were filed the said order. By the judgment of the Sales Tax Appellate Tribunal, which has now been impugned by the Collector, Customs and Sales Tax, the Tribunal had set aside the imposition of additional sales tax under section 34 of the Sales Tax Act, 1990, interpreting the word "shall" in section 34 of the Sales Tax Act as "may" and therefore, discussed it. For the sake of facility, section 34 of the Sales Tax Act is reproduced:- "Additional Tax.-(1) Notwithstanding the provisions of section 11, if a registered person or enrolled person does not pay the tax due or any part thereof in the or in the manner specified under this Act, rules or notification issued thereunder or claims a tax credit, refund or makes an adjustment, which is not admissible to him, or incorrectly applies the rate of zero per cent to supplies made by him, he shall, in addition to the tax due, and the prescribed penalties, pay additional tax at the rate
(to) per cent of tax due per month or any part thereof.
(2) For the purpose of calculation of additional tax,-
(a) in the case of inadmissible input tax credit or refund, the period of default shall be reckoned from the date of adjustment of such credit or, as the case may be, refund is received; and
(b) in the case of non-payment of tax or part thereof, the period of default shall be reckoned from the (16th) day of a month (following the due date of the tax period to which the default relates) to the day preceding the date on which the tax due is actually paid."
The word "shall" appearing in line No. 9 in section 34 of the Sales Tax Act was substituted for the phrase "shall be liable" by the Finance Act of 1996. Notwithstanding the change brought about by the Legislature, the Tribunal held that "the amendment is of no significance as the word "shall" according to principles of interpretation does not always necessarily connote a mandatory intent on the part of the law maker. The purpose for which the provision is made and its nature, considered in its setting, the connected provision and other similar matter, the serious general inconvenience or injustice to persons resulting in reading to provision as directory or mandatory, whether the cause of justice is promoted or retarded as a consequence of construing the provision one way or the other, have all to be taken into account by the judicial mind, for the purpose of construing the word "shall" which normally may of course be considered to suggest an imperative tendency". On the basis of this criteria laid down, the Tribunal found that to give "shall" the mandatory effect would result into injustice and it will stifle the industries which cannot be intent of the Legislature. The imposition of the additional tax, it was held, was an enabling provision and only meant to defeat recurrence of the evasion of tax and not to raise revenue. The Tribunal further declared that the compounding of the additional tax by the lower forum was also not in consonance with the provision of section 34 of the Act. Eventually, the Tribunal directed the payment of the Sales Tax of Rs. 50,00,000 only in respect of late filing of the Returns and struck down all the additional taxes and penalties imposed.
3. The only question that called for determination in the three appeals was whether the imposition of the additional tax under section 34 of the Sales Tax Act is mandatory' or discretionary with the authorities. Ordinarily, the word "shall" is mandatory and is in the nature of an order. However, the courts have at times given this word a directory or permissive meanings depending upon the circumstances in which it is used and the object to be achieved by the Legislation. However, while construing the nature of the word "shall", the Courts search for the legislative intent. In the case before us, the legislative intendment has been manifested by the amendment made in section 34 of the Sales Tax Act. Prior to the Finance Act of 1996, the word used for the imposition of additional tax in section 34 was that the defaulter "shall be liable" to pay additional tax. This was an enabling provision empowering the authority concerned to impose additional tax. The power was, therefore, permissive and not mandatory. This was so held by the Courts and reference to one of the authorities has been made in the judgment of the Appellate Tribunal, namely, "Mamy Beverages v.
Naseem" (PTCL 1995 CL. 1) where it was held:-- "On the plain language of this provision it is apparent that liability to pay sales tax is not a necessary consequence or corollary of nonpayment of sales tax within the stipulated period. On the other hand, use of expression "shall be liable" in contradistinction to "shall pay" clearly vests a discretion in the Adjudicating Officer to levy or not levy additional sales tax even in the event of failure of a person to pay the sales tax keeping in view the facts and circumstances of the case and reason for non-payment."
Probably it was on account of above pronouncement by the Lahore High Court that the Legislature deemed it appropriate to bring about an amendment in section 34 of the Sales Tax Act and replace the word "shall be liable" by the word "shall". In any case by the above substitution, the legislative intent is clear. The discretionary power of imposing additional tax was substituted by the mandatory direction to the authorities to impose the tax. The Appellate Tribunal had not discussed this aspect of the matter and had simply held the word "shall" as discretionary while taking into consideration other factors. The various factors are taken into account only for the purpose of finding out the Legislative intent. When by the substitution made by Finance Act of 1996 in section 34 of the Sales Tax Act, the Legislative intent was clear, there was no need to take into consideration other factors. We, therefore, hold that the imposition of additional tax was mandatory and the Appellate Tribunal has erred in law in setting aside the imposition of additional tax on the respondent-Company imposed on account of delay in payment of sales tax.
Consequently, these appeals filed by the Collector Customs are allowed. The impugned judgments and orders of the Customs, Central Excise and Sales Tax Appellate Tribunal are set aside and that of the Collector Customs, Central Excise and Sales Tax (Appeals) Northern Zone Rawalpindi, restored.