This order disposes of four sales tax Appeals Nos. 51/2009, 375-K-2009, 426/K-2009 and 434/H- 2009 three of them filed by the appellant against the orders-in- appeals Nos., 31/2007, 232/2006, 69/2007 and one cross appeal No. 434/H-209 filed by the Collector, Collectorate of Customs, Sales Tax & Federal Excise, Hyderabad against the Order-in-Appeal No. 69/2007. In the above-cited sales tax appeals the appellant has challenged the issue of levy of further tax whereas the departments on the other hand challenged the issue of penalty remitted by the Collector Sales Tax (Appeals), Hyderabad.
2. As all these appeals involving identical facts and touch common questions of law, therefore, are hereby disposed of by this single order. The facts leading to these cases are that on finalization of sales tax audit for the financial years 1999-2000 to 2000-2001, the appellant was charged with following allegations through the show-cause notice dated June 22, 20O2:-
(i) Through Para 2 of the referred show-cause notice it had been alleged that the appellant had made in taxable supplies (sugar) to unregistered persons during the tax period from December 2O0O to June 2001 without Charging the further tax thereon. Thus the action of the appellant is in violation of Section 3(1-A) of the Sales Tax Act, 1990 (hereinafter referred to as the Act) therefore, the said amount of sales tax is recoverable alongwith the default surcharge.
(ii) Through Para 3 of the show-cause notice it was alleged that the appellant made supplies of taxable goods (Bagasse) to unregistered persons during the tax period January 2001 without charging the further tax thereon. Thus the action of the appellant is in violation of Section 3(1-A) of the Sales Tax Act, 1990, therefore the said amount of sales tax is . Recoverable alongwith the default surcharge.
(iii) Through Para 5 of the impugned show-cause notice it was alleged that the appellant sold fixed assets during the December 1999 and March 2000 after payment of sales tax. However the registered person adjusted the said amount of tax in November 2000 against its output tax liability, thus the appellant contravened the provisions of Sales Tax Act, 1990. Therefore the said adjusted amount of tax is recoverable from him alongwith additional tax.
3. The adjudication officer had decided all the above-referred issues against the appellant vide order-in- originals Nos. 28/2003, 39/2004 and" 1,9/2003. The appellant being aggrieved with the said order filed sales tax appeal before the Appellate Tribunal of Customs, Sales Tax and Federal Excise (the Tribunal). The Tribunal vide its order dated May 30, 2005, November 4, 2003 and May 30, 2005 remanded back the matters to the adjudication authority for deciding afresh the issue involve in all these appeals.
4. The adjudicating officer is pursuance of directions given by the learned Tribunal once again decided the issue in question against the appellant vide second Orders-in-Original Nos. 79/2006, 39/2004 and 62/2006.
5. The appellant challenged the veracity of foregoing Orders-in-original before the Collector, Sales Tax (Appeal) at Hyderabad. The Collector, Sales Tax (Appeals) upheld the framed charges against the appellant and passed the Orders-in-Appeal Nos. 31/2007, 232/2006, 69/2007. However, the Collector Sales Tax (Appeals) in Order-In- Appeal No. 69/2007 remitted the penalty.
6. The appellant being aggrieved with the above- referred Orders has come to this forum, whereas the Collector, Sales Tax being aggrieved with the decision of Collector, Sales Tax (Appeals) vide Order-in-Appeal No. 69/2007 has filed the sales tax appeals to the extent of penalty abated therein.
7. The learned Advocate appearing on behalf of the appellant before this forum has inter alia argued as under:--
(i) that the sales tax department in sales tax appeals Nos. 375/K-2009 and 426/K-2009 issued two show-cause notices Nos. 3- (485) Adj/ST/2001/3520 and 36 (32) Adj/SSM/Add. Coll/2002, dated May 23, 2001 and February 25, 2002 respectively framing the same charge of not charging the Further Tax on the taxable supply of sugar made to unregistered persons during the tax period January to March 2001 and December 2000 to May 2001.
(ii) that the sates tax department had made out three cases against the appellant on the same allegation of not charging the further tax on the supplies of sugar during the tax period, as apparent from below:-- Dateof Show-cause noticesPeriod Allegation Sales Tax Appeal No. February 2, 2002December 2000 to May 2001Not charging of Further Tax * under Section 3(1- A)426/K-2009.
May 5, 2001 January 2001 to March 2001Not charging of Further Tax under Section 3(1- A)375/K-2009 June 6, 2002 December 2000 to June 17, 2001N6t charging of Further Tax under Section 3(1- A)51/2009 In view of above table the department has vexed the appellant thrice on same allegations covering the same tax period.
(iii) That the order-in-originals in the instant appeals passed by the Additional Collector (Adjudication) of Customs, Sales Tax and Federal Excise are hit by time limit as prescribed under the Proviso to Section 36(3) of the Sales Tax Act, 1990; the relevant part of the same is reproduced below:- "Provided that order under this section shall be made within forty-five (45) days of issuance of show-cause notice or within such extended period as an officer of Sales Tax may, for reason to be recorded in writing, fix, provided that such extended period shall in no case exceed ninety days."
The following chart would establish the manner in which, orders-in-originals have become barred by limitation:- Sales Tax Appeal No.Date of Issuance ofDate of Passing Order-in- OriginalTime-Barred (Days)
51/2009 June'22,2002 November 24,2003520 375/K-2009 May 5, 2001 October 4, 202516 426/K-2009 February 2, 2002April 4, 2003 425 434/H-2009 February 25, 2002March ; 26, 2003393 In support of this he referred C.B.R's letter C.No. 5(4)CEJ/2000, dated December 23, 2O0O, wherein the C.B.R, itself was of the view that the provision is mandatory, he also produced before us numbers of 'citations of various higher authorities including the copy of order passed by the learned Tribunal in identical issue of Further Tax in case of M/s. Matiari Sugar Mills Limited & others.
The Collector of Sales Tax and Federal Excise, Hyderabad, In all the judgments it was held as under;-
(a) 2009 PTD Trib.) 2074: "Proviso-Recovery of tax not levied or short-levied or erroneously refunded- Nature of provisions, mandatory or directory-Period specified in the proviso to S. 36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statues was mandatory and not directory in nature." b) 2010 PTD (Trib. 81: "Recovery of tax not levied or short- levied or erroneously refunded- Limitation-Provision of law prescribing time limit for revenue to create against tax-payer would be deemed mandatory."
(c) 2010 PTD (Trib.) 324: "Contention that provisions as contained in S. 179(3) of the Customs Act, 1969 were directory in nature was not tenable, because where any liability was created the said provision would be mandatory in nature-Orders creating liability passed after expiry of limitation prescribed by law for deciding the case would be illegal." that in one show-cause notice, in sales tax appeal No. 51/2009 the department had failed to invoke the relevant Section 36 of the Act, and in two remaining show-cause notices the sub-section of Section 36 has not been mentioned. Therefore, the show-cause notices issued without mentioning "Section 36" of Act, and/or without specifying its sub-sections render the entire show-cause notices invalid. Meaning thereby that the show-cause notice issued by the revenue authority is not in consonance with the pre-requisites as laid down in Section 36 of the Act. Reliance was placed upon decisions of various higher authorities including the Supreme Court of Pakistan that has already decided the same issue in favour of tax-payer The same are reproduced below:- 2009 PTD (Trib.) 2074: "Apart from the limitation issue, the show-cause notices in question are not in keeping with the principles enunciated by the Honourable Supreme Court in the case of Khyber Lamps (2001 SCMR 838) which view has been reinforced by the Supreme Court in the case of Caltex Oil (2005 PTD 480). In the present case the show-cause notices are vague and defective for want of necessary particulars. The show-cause notices do not mention the sub-section of Section 36 under which they have been issued. There is no allegation of collusion and deliberate act either. Various authorities cited by learned counsel for the appellants and appearing in Para,. 2(1) are relevant here."
(v) that levy of further tax under Section 3(1 A) is only imposed where and when the supplies were not made to registered persons. Definition of registered person as contained in Section 2(25) of the Act, applicable at that point in time speaks as under:- 'registered person" means a person who is registered or is liable to be registered under this Act:
(vi) That all the supplies in the instant appeals were made to persons either actually registered and/or liable to be registered under the above-referred section; hence all supplies are to be construed as having been made to registered person, resultantly such supplies never subjected to further tax. Reliance is placed on Matiari Sugar Mills Limited v. FOP (2003 PTD 773), Mirpurkhas Sugar Mills & others (unreported), Collector Sales Tax v. Digri Sugar Mills, Bilal & Co. v. Appellate Tribunal (2004 PTD 557), Waqas & Co. v. Customs Excise & Sales Tax Appellate Tribunal (2003 PTD 2100),.Phalia Sugar Mills Limited v. Collector Sales Tax (Writ Petition No. 21776 of 2001), decided by the Lahore High Court on 19.2.2002, C.A. No. 54/2002, dated 7.5.2003, decided by the Multan Bench of the Lahore High Court and Fatima Sugar Mills Limited v. Collector CST 2003 CL 413 and the order of the Honourable Supreme Court in the cases of Matiari Sugar Mills Limited and others dated 1.3.2006.
(vii) that if the registration had not been obtained by those persons who are not actually registered but liable- to be registered the department ought to have compulsory registered under. Section 19 which was available until the Finance Act, 2004 and, further ought to have initiated the penal action against them for failure to obtain the registration."
If such person who were liable to be registered but not compulsory registered under Section 19 of the Act, the department itself was at fault and that the appellant could not be penalized due to fault of the department.
8. In addition to above the learned A.R. Further reiterated that the appellant never collected any tax from those buyers and passed on the burden to the end consumer in relation to tax under Section 31(A) genuinely believing that they did squarely fall under the definition of registered person as defined under Section 2(25). Hence any attempt to collect the tax from the appellant would be confiscatory and expropriatory in nature, In this regard the relied upon judgments given in case of Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176, Elahi Cotton v. FOP PLD 1997 SC 582 and Northern Bottling Co. v. FOP 2004 PTD 2267.
9. He further submitted to state that the amendment in the above-referred sub-section was brought through Finance Ordinance, 2002, through this amendment the persons who were not registered but liable to be registered had no benefit available under the Act, and supplies made to him were made subjected to levy of further tax. Nevertheless, he emphasized that the said amendment was effective from July 1, 2001 and it is a well-known canon of law of interpretation that any law affecting the rights of subjects are always applicable prospectively unless it specifies otherwise. He in his support put forth the case-law reported as 2010 PTD 355, wherein it was held as under:- "Retrospective or prospective effect---Unless the statute itself so providers, the provision creating a charge or otherwise dealing with substantive right cannot be made retrospective---In the.
Absence of clear intention of the legislature a provision of statute cannot apply retrospective and has always prospective application."
10. The learned Advocate further stated. That Section 3(1-A) of the Act was abolished by Finance Ordinance, 2004. The nature of the provisions as amended has been high-lightened by the Finance Minister in his budget speech which reads as under:--- "127. Abolishing further tax of 3%.-- In order to remove major trade distorting measures, it is proposed to abolish further tax, as it was an important factor in giving raise to "flying invoices" which subsequently contributed inadmissible refund payments. Through this levy contributes approximately Rs. 9 billion annually its removal will encourage growth in textiles, steel, chemical, cement, beverage and a wide range of consumer items which would be freed from this additional burden. Moreover It will directly contribute inadmissible refund claims and payments."
Since the amendment would be construed beneficial in nature, therefore, it is well-known principle of law of interpretation that any amendment which is of beneficial in nature always retrospective effect, and consequently applied on all the matters even pending for adjudication, It is submitted that legal principle of remedial and curative legislation has been endorsed by various reported judgments in case of CST v. Kruddson Ltd. PLD 1974 SC 180, 1987 PTD 739 - 1993 SCMR 73-, 2000 PTD 285, wherein it was held as under:--- PTCL 2009 CL 250: "Repeal of Section 3(1-A) vide Finance Act, 2004 being remedial and curative, retrospectively applies to all pending adjudication assessment and appeals."
PLD 1974 SC 180: "Thus in our minds there is no doubt that this repeal by the amending legislation was remedial and curative in nature. Indeed all curative and remedial amending legislations are retrospective and apply to all pending proceedings, assessments and appeals."
11. The learned counsel further submitted that Identical Question relating to levy of further tax has already been decided by the Honourable High Court of Sindh, at Karachi; in case of M/s. Digri Sugar Mills Limited and by the Appellate Tribunal in case of M/s. Alnoor Sugar Mills and others shall have binding effect to all the other Benches of Tribunal, In this respect he relied on the case-laws reported as 2002 MLD 672 Lahore, PTCL 2003 388.
"Judgment of Supreme Court and High Court was binding on each and every Organ of the State.
Authorities would be duty bound to decide the matter in accordance with the dictum laid down by the Superior Courts."
"Precedent of the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench prima facie is binding on the Custom, Excise and Sales Tax Appellate Tribunal, Lahore Bench unless it is a set a side by decision of the Full Bench of the Tribunal."
12. In relation to allegation of sale of fixed assets, it is informed by the learned A.R. That the appellant has paid the due amount of sales tax of Rs. 1,302,602/- by availing the amnesty notified vide SRO No. 463(1 )/2007, dated June 9, 2007. Therefore, we don't press the issue pertaining to sale of fixed assets as the payment had been duly made, In this respect the copy of paid challan has been produced.
13. With regard to additional tax he argued that the default surcharge and penalty proposed in the impugned orders are without any reasons or proof of independent element of mens rea. As there are no mala fides and/or wilful default on the part of appellant, no penalty and default surcharge could be imposed where the question of interpretation was involved, in this respect reliance has been made on case-law reported as 2004 SCMR 456, PTCL 2001 CL 627, 200b PTD 1984, 2005 PTD 1978, 2005 PTD 1953, 2003 PTD 1445 and 2004 PTD 2771.
14. The departmental representative on the other hand re-emphasized the department's stance and defended the orders-in-original and action of the adjudicating authority regarding the issuance of corrigendum to show-cause notice and pleaded that the Order-in-Original be maintained. He submitted as under:- * The limitation provided in the proviso to Section 36(3) was not mandatory but directory in nature. * The show-cause notice was properly issued under Section 36 and non-mentioning the subsection does not render it invalid. * The interpretation of Section 2(25) has been correctly made and applied in the instant appeal in terms of given judgment of Supreme Court of Pakistan dated 1.3.2006. * The persons who are not registered but liable to be registered had no benefit under the provision of the Act. Thus the supplies made by the appellant would subject to levy of further tax. * .As the appellant had failed to charge the further tax therefore, he besides the principal payment of sales tax also liable to pay the default surcharge and penalty. * The appellant's plea of time limitation . Is not tenable in view of judgment of the Hon'ble Supreme Court of Pakistan reported in PTCL 2006 CL 156.
In view of above, he prayed that the sales tax appeals filed by the appellant may kindly be dismissed and one cross appeal filed by the. Department may kindly be allowed.
15. We have examined the case record and given due consideration to the written as well as verbal submissions/arguments put forth before us from both sides.
16. As far as issuance of show-cause notice is concerned, the show-cause notices Nos. 3(485)
Adj/ST/2001/3520 and 36(3 Adj/SSM/Add. Coll/202, dated May 23, 2001 and February 25, 2002 respectively in Sales Tax Appeals Nos. 375/K-2009, and 426/K-2009 are framing the same allegation, and covering the same tax period by the show-cause notice C. No. 36(32) AD J/SSM/ST/Coll/2002/1667, dated June 6, 2002, therefore raising of the demand for the same tax period is double jeopardy and the department has not been able to point out that the tax period is different. The burden of proof was on the department, which in our view they failed to discharge, In the circumstances, the demand raised therein cannot stand which is accordingly vacated on the factum of double jeopardy. Therefore appeals Nos. 375/K and 426/K of 2009 are allowed and one appeal No. 434/H of 2009 filed by the department is hereby dismissed.
17. . The issue of levy of further tax has already been decided by the Honourable High Court of Sindh in case of Collector of Sales Tax v. Digri Sugar Mills and also Full Bench of the Tribunal in case of M/s. Fatima Sugar Mills Limited v. Collector Sales Tax reported as GST 2003 CL 413 and in recent judgment of Tribunal in case of M/s. Matiari Sugar Mills & others v. Collector of Sales Tax and Federal Excise reported as 2009 PTD (Trib.) 2074. In all these appeals the learned Tribunal as well as Honourable High Court of Sindh held following observations:-
(i) Section 3(1 A) was inapplicable where taxable supplies were made to registered persons,
(ii) The term registered person as defined in Subsection (25) of Section 2 undisputedly covers those also who are liable to be registered. Accordingly any person who was not actually registered but liable to be registered under aforesaid sub-section always to be considered as a registered person.
(iii) Therefore where supplies were made to those , who were liable to be registered, the said supplies would have to be considered to have . Been made to the registered persons resultantly such supplies were out of ambit of Section 3(to) and no further tax was applicable thereon.
(iv) Amending the sub-section (25). Of Section 2 in Finance Act, 2002 whereby no the. Person liable to be registered but not actually registered would not get any benefit-under the Act. However, such amendment was effective from July, 2001 and was in operation, prospectively.
(v) Failure to register those who were not -registered under the Act, is fault of the department and the registered person making the supplies to them believing that they were registered could not be penalized, It was the utmost duty of department to register them compulsory under Section 19 available at that time, In the foregoing section it was provided that where person who was required to be registered under the Act, but did not seek registration; the Collector would compulsory register such person and the said person would be deemed to be registered from the date he became liable for registration and accordingly initiate the legal action against them under the Act, for not getting themselves registered.
1.8. We have further found that Section 3(1 A) was abolished from the statute by Finance Act, 2004.
Lt apparently seems that this amendment was brought to discourage the malpractice of issuing the flying invoices and curb trade distorting measures. Thus there is no element of uncertainty that the repeal of Section 3(1A) by amendment was remedial and curative in nature. Indeed all the curative and remedial amending legislation are always retrospective and apply to all pending proceedings, assessm ent and appeals. This principle is fully borne out from the judgments reported as CST v. Krudsons PLD 1974 SC 180, CIT v. Olympia 1987 PTD 739, which was confirmed by the apex Court in CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v.'CIT 2000 PTD 285.
Thus we hold that the repeal of Section 3(1 A) vide the Finance' Act, 2004 being remedial and curative, retrospectively applies to all the pending adjudication/assessment and appeal, which include the present pending appeals. Section 3(1A) is thus to be construed as never having existed on the statute book but this is of course only for the purpose* of the pending proceedings, assessm ents and appeals/references as held by the Supreme Court in the case of CIT v.
Shahnawaz Ltd. 1993 SCMR 73.
19. In view of above discussions we are inclined to agree with the view point of learned A.R. That the supplies made to persons who are not registered but liable to be registered are exclusively covered under definition of "registered persons" as defined in Section 2(25) of the Act, and same view point was already decided by the Honourable High Court as well as learned Appellate Tribunal in favour of the tax payers, therefore, we respectfully following the earlier decisions cited supra allow the appeals on the issue of levy of further tax additional tax and penalty.
20. With regards to the issue of the sale disposal of fixed assets we have found that the appellant had duly made the payment of principal amount of sales tax. Under the SRO 463(1)/2007, dated June 6, 2007, therefore, appeal of the taxpayer on this grounds is dismissed being not pressed.
21. As far as levy of additional tax is concerned, we are inclined to agree with the learned A.R. That no additional tax shall be leviable where there is no existence of wilful default. Here we would like to rely a very important and' meaningful observation recorded by the apex Court in the case reported in 2006 PTD 1132 (S.C. Pak). The relevant part is reproduced as under:- "In the case of D.G. Khan Cement Factory (Supra), it was observed by reference to Section 343 of the Act that each and every case had to be decided on its merits as the whether the evasion or non-payment of tax was wilful or mala fide, decision of which would depend upon the question of recovery of additional tax. There is no material available on record that the short payment of sales tax was mala fide or wilful act of omission of the respondent company, In the facts . And circumstances of the case, the High Court had justifiably allowed the writ petition of the respondent company by the impugned judgment dated 6.8.2001 to which no exception could be taken."
22. The levy of additional tax is certainly punitive in nature, therefore, the superior Courts have always found it unjustified and unwarranted unless it could be shown that the default was either wilful or mala fide.
In the case reported in (2004) 90 Tax 1 (S.C. Pak.), the following observation have been recorded:- "In the case reported -as PLD 1991 S.C. 962, this Court held that imposition of penalty was illegal where the evasion of duty was not wilful. The Lahore High Court in the case reported as PTCL 1995 CL 915 held that where the petitioner did not act mala fide with the intention to evade the tax, the imposition of penalty of additional tax and surcharge was justified, It was held by the Sales Tax Tribunal in the case 2002 PTD (Trib.) 300 that where the controversy between the department and the appellant related to interpretation of different legal provisions, the imposition of additional tax and penalty had no justification, In other case, the appellant's own Tribunal held that the additional tax was punitive in nature as such unless default was wilful or mala fide, the recovery of the same was unwarranted."
23. In view of above we are of the view that the levy of additional tax loses its effect unless it is shown on the record that the default in payment of tax was mala fide and wilful or where "there is a legal controversy including interpretation of various provisions of relevant law. Tn the circumstances we feel that the revenue has failed to show On the record that tax-payer's default was either wilful or mala fide. Respectfully following the dictum of the apex Court and the case-law (supra) and keeping in view the above circumstances, we hold that the levy of additional tax (now default surcharge) on the appellant is unwarranted.
24. Having said that, all the appeals are disposed of in above terms and impugned orders are set aside.