This appeal has been preferred by an individual, who has been running ten convenience stores under the name and style of "C-MART" at Lahore- Islamabad Motorway as a Franchisee of Messrs Daewoo Motorway Services Pakistan Ltd., Lahore since February, 2001. This appeal is directed against the Order-in-Appeal No, 177/ST/2006, dated 21-6-2006 passed by the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Lahore Mr. Muhammad Azhar Iftikhar, which upheld the Order-in-Original No, 8 of 2006, dated 18-2-2006, passed by the Additional Collector-I, Adjudication, Collectorate of Sales Tax and Federal Excise, Lahore.
2. Brief facts giving rise to this appeal are that this appellant did not get itself registered under the Sales Tax Act, 1990 despite carrying on business as a retailer on the Lahore-Islamabad Motorway since February, 2001. On being apprised by the Deputy Collector, Intelligence, Investigation and Prosecution, S.T. And F.E., Lahore in December, 2005, that the appellant was liable to be registered, the appellant moved the application for registration under the Sales Tax Act, 1990, and his business was registered under the name and style of "C-MART" at Sales Tax Registration No, 03-05-2202- 049-19 w,e,f, 24-12-2005. As the taxable supplies of this appellant since 7 of 2005 suggested that they would cross the exemption limit of Rs, 5 million during the financial year 2005-2006, he paid sales tax for the tax periods 7 of 2005 to 11 of 2005 voluntarily along with the default surcharge, and he moved application under section 65 of the Sales Tax Act, 1990 for exemption of the tax not levied by him as a general practice on 28-12-2005 to the Collector, Sales Tax, Lahore.
3. During pendency of the appellant's application under section 65, the Additional Collector (Adjudication)-I, Lahore issued Show-Cause Notice under sections 11(2) and 36(1) of the Sales Tax Act, 1990, and without waiting for the fate of the application under section 65 passed the Order-in- Original No, 8 of 2006, dated 18-2-2006 raising the impugned demand of sales tax of Rs, 14,983,892 holding as under:-- "(8) In view of above, I am of the considered opinion that till date, the Collectorate of Sales Tax has not considered the case of the respondent for exemption of sales tax under section 65 of the Sales Tax Act, 1990 and has not sent any such recommendations to the Board. Hence contention of the respondent that he may be allowed exemption under section 65 of the Sales Tax Act, 1990 cannot be accepted at the present stage. The charges against the respondent stand established beyond any shadow of doubt. I, therefore, determine evaded amount of sales tax amounting to Rs,14,983,892 under section 36(3) of the Sales Tax Act, 1990 which is ordered to be recovered from the respondent. Default Surcharge under section 34 of the Sales Tax Act, 1990 is also ordered to be recovered from the respondent. No penalty is imposed keeping in view the spirit of the judgment of the Supreme Court of Pakistan in case titled D.G. Khan Cement Company Ltd., etc. v. The Federation of Pakistan (C.A. 1866/1996) decided on 11-11-2003.".
4. The order-in-original was assailed before the learned Collector (Appeals), who upheld the treatment meted out by the Addl. Collector (Adj), and rejected the Appeal holding as under:-- "(9) I have given a serious thought to the version of both the parties. The plea of the appellants is that they had not paid the sales tax inadvertently and has been paying sales tax from the date when it was found that the supply was chargeable to tax. This view as advanced by the appellants is neither legally correct nor it is convincing. The fact is that the appellants have failed to pay sales tax on the taxable supplies from February, 2001 as mentioned in the impugned order in violation of sections 3, 3AA, 6, 14, 22, 23 and 26AA of the Sales Tax Act, 1990, deliberately with a view to evade payments of sales tax dues which was otherwise correctly payable. Another contention of the appellants is that even if the appellant is found to be not entitled to the exemption, this case would fall under section 36(2) of the Sales Tax Act, 1990 is also not tenable. The facts of the case clearly proves that the appellant evaded sales tax knowingly and deliberately. Therefore, the appellant's case fall within the ambit of section 36(1) of the Sales Tax Act, 1990. Another contention of the appellant that they were supplying cigarettes and beverages on which sales tax has already been paid is not correct. They are liable to pay sales tax on the value which is being charged by them from customers. The evidence is available on record that many other retailers like. Messrs Jalal Sons, Messrs Body Shoes, and M/s. Raja Sahib are paying livable sales tax on taxable supplies made by them. Since, it all gives a picture of willful non-payment of taxes, I find that the order passed against which appeal has been filed is correct in accordance with law and facts. It is well based.".
5. The appellant has assailed the said order-in-appeal before this Tribunal on the following grounds:--
(1) that the learned Collector (Appeals) has grossly erred in holding that the Appellant/Registered Person's plea that the sales tax was not paid inadvertently, is neither legally correct, nor convincing.
(2) that the learned Collector(Appeals) has grossly erred in maintaining an order-in-original arbitrarily made during pendency of the appellant/Registered Person's Application under section 65 of the Sales Tax Act, 1990 dated 28-12-2005 in utter disregard of the hon'ble Customs, Central Excise and Sales Tax Appellate Tribunal's decision in identical circumstances reported in GST 2005 CL 100.
(3) that the learned Collector (Appeals) has grossly erred in holding that the appellant/Registered Person deliberately evaded sales tax amounting to Rs, 14,983,892 in respect of tax period from 2/2001 to 6/2005. That the learned Collector (Appeals) has grossly erred in holding that the appellant's case fell within the ambit of section 36(L) of the Sales Tax Act, 1990.
That even if the appellant/Registered Person is found to be not entitled to the exemption under section 65 of the Sales Tax Act, 1990, his case would fall under section 36(2) of the Sales Tax Act, 1990, as there-is no finding in the impugned order-in-original that the appellant/Registered Person did not levy and pay the alleged tax 'by reason of some collusion or a deliberate act, envisaged by section 36(1) of the Sales Tax Act, 1990. that the learned Collector (Appeals) has failed to adjudicate the issue that the impugned order-in- original is time-barred. that the whole of the sales made by the appellant/Registered Person did not attract the levy of sales tax. that the learned Collector (Appeals) has grossly erred in holding that the cigarettes and beverages liable to sales tax under section 3(2)(a) r/w. The Third Schedule to the Sales Tax Act, 1990, are chargeable to sales tax in the hands of the appellant/ Registered Person.
(9) that the 'default surchargeunder section 34 of the Sales Tax Act, 1990 has been wrongly ordered to be recovered from the appellant/Registered Person, as the alleged default in levy and payment of sales tax was not willful.
(10) that the learned Collector (Appeals) has grossly erred in treating the appellant/Registered Person's case at par with the Departmental Stores like Jalal Sons, Body Shoes and Raja Sahib.
(11) that the impugned order-in-appeal as well as the order-in-original are biased, arbitrary, injudicious and malicious.
(12) that there is no material available on record to justify the impugned Order.
(13) that the impugned order-in-appeal is tenable neither on the factual plane, nor on the legal score.
6. The parties were heard in support of their rival pleas, and the record was gone through minutely.
7. The first and foremost ground requiring anxious consideration of this Tribunal is the appellant's claim of exemption under section 65 of the Sales Tax Act, 1990, which as per record is still pending with the F.B.R. Despite a lapse of more than five years, and according to the well-known maxim of law: Justice delayed, Justice denied, amounts to denial.
8. Relying on GST 2005 CL 100, learned A.R. Of the appellant, Mr. S. Ali Imran Rizvi, contended that the Department could not make adjudication of the allegedly evaded tax during pendency of the appellant's application under section 65. Relevant excerpt out of the cited judgment is reproduced as under:-- "This conduct of the Adjudicating Officer is against the norms of natural justice, because public functionaries acting in judicial or quasi-judicial capacity are always required to act in a reasonable manner and not to resort to mere hair-splitting with intention to deny a benefit available to an aggrieved person. It is right of the party to avail the opportunity given to him under the law and he cannot be deprived merely on the ground that "no proceedings can be kept pending".
9. The learned A.R. Argued that the appellant's case does qualify for exemption of the Sales Tax not levied by him upto 30-6-2005 under section 65 of the Sales Tax Act, 1990, in as-much-as---
(i) He did not levy and pay the sales tax inadvertently as a result of general practice up to 30-6- 2005.
General Practice is evident from the fact that prior to the appellant, the said convenience stores were run by Messrs Shell (Pakistan) Ltd., .Which had been operating the filling stations on the Lahore-Islamabad Motorway till 2005. Neither the appellant/Registered Person nor his predecessor i,e, Messrs Shell (Pakistan) Ltd., was ever apprised by the Sales Tax Department that the sales tax had to be charged on the retail sales of the C-Marts, nor the appellant/Registered Person or his predecessor, ever charged the sales tax as a retailer.
The concept of having a convenience store on every filling station was introduced by Messrs Shell (Pakistan) Ltd. Throughout the country, which was followed by Messrs Pakistan State Oil (P.S.O.); Messrs Caltex Oil (Pakistan) Ltd.; Messrs Attock Refinery; and Messrs PARCO (Total), but none of them has been levying and paying sales tax on the retail sales of its convenience stores till date. It has thus been a general practice not to charge sales tax on the retail sales being made by the convenience stores. Thus, the Appellant/Registered Person did not levy and pay the sales tax on the retail sales of the convenience stores being run by him inadvertently and as a general practice;
(ii) he got his business of "C-MART(s)" registered under the Sales Tax Act, 1990, on being apprised of the fact that he was liable to be registered; and
(iii) he has been paying the sales tax from the date when it was found that the supply was chargeable to tax.
The learned A.R. Further argued that as the appellant is entitled to the exemption available under section 65, it may be granted by this Tribunal in line with the verdict of the Hon'ble Supreme Court of Pakistan reported in 2005 PTD 480, which says:- "it would be essential for the Tribunal to examine the scope of section 65 ibid, and give clear verdict in the matter. It is correct that Federal Government is competent to exempt the sales tax in a case which is covered by the provisions of section 65 of the Sales Tax Act, 1990, but the question regarding the entitlement of the benefit of said section, would need determination by an independent forum and we are of the view that the Tribunal having not attended the above fundamental question, has failed to exercise the jurisdiction vested in it and further the High Court while affirming the judgment of Tribunal, also committed the same error.".
10. The learned D.R. Could not controvert the arguments advanced by the learned A.R. Of the appellant on the issue of exemption under section 65 except saying that pendency of the appellant's Application under section 65 with the F.B.R. Since long means that the F.B.R. Does not want to extend exemption to the appellant.
11. For correct appraisal of the issue of exemption, let us first examine the provisions of section 65 of the Sales Tax Act, 1990, section 65 of the Sales Tax Act, 1990 is reproduced as under:-- "65. Exemption of tax not levied or short levied as a result of general practice.---Notwithstanding anything contained in this Act, if in respect of any supply the Federal Government is satisfied that inadvertently and as a general practice--
(a) tax has not been charged in any area on any supply which was otherwise taxable, or according to the said practice the amount charged was less than the amount that should have actually been charged;
(b) the registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax; and
(c) the registered person started paying the tax from the date when it was found that the supply was chargeable ,to tax; it may, by a notification in the official Gazette, direct that the tax not levied or short levied as a result of that inadvertent practice, shall not be required to be paid for the period prior to the discovery of such inadvertent practice.".
12. A bare perusal of section 65 of the Sales Tax Act, 1990 envisages grant of exemption of the tax not levied or short-levied as a result of general practice subject to the following conditions:-
(a) tax has not been charged in any area on any supply which was otherwise taxable, or according to the said practice the amount charged was less than the amount that should have actually been charged;
(b) the registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax; and
(c) the registered person started paying the tax from the date when it was found that the supply was chargeable to tax.
The power to grant exemption rests with the Federal Government.
13. For giving effect to the said provisions of section 65, Para 50 of the Sales Tax General Order No, 3 of 2004, dated 12-6-2004 has laid down the following procedure:-- "(a) if a registered person claims that the supplies made by him during a certain period qualify for exemption under section 65 of the Sales Tax Act, 1990 he may make an application to the Collector having jurisdiction in the area where the registered person is located. The Collector will examine the case, collect relevant information from other Collect orates and if he is satisfied that the case falls within the scope of section 65, he will refer the same to the Revenue Division;
(b) before making a reference to the Revenue Division the Collector will also fix responsibility on the staff who failed to detect that a taxable item is being cleared without payment of tax and thus caused loss of revenue. He will initiate disciplinary action, against the officials concerned and send a report to the Revenue Divisions;
(c) the case will be processed in the Revenue Division and if the conditions specified in section 65 are met the Federal Government may, by means of a notification in the official Gazette, exempt the said supplies from sales tax.
14. In the instant case, this appellant moved the Application under section 65 on 28-12-2005 through the Collector (Sales Tax), Collectorate of Sales Tax and Federal Excise, Lahore, who reported to the learned Member, Sales Tax and Federal Excise, then C.B.R., Islamabad vide Letter C.
N. I and P/ST and FE/Compel/01/2006/342, dated 12-4-2006 that "the applicant does not qualify for exemption from sales tax under section 65 of Sales Tax Act, 1990 on the following grounds:-- "(i) Legally, it was obligatory for the applicant to pay leviable sales tax on taxable supplies made by him. Furthermore, it was advertised from time to time by the Government through different notifications, print and electronic media that the retailers having annual turnover of more than Rs, 5 millions are required to get themselves registered with the Sales Tax. Department and to pay sales tax on the sales.
(ii) Many other retailers like Messrs Jalal Sons, Messrs Body Shoes and Messrs Raja Sahib etc. Are paying leviable sales tax on taxable sales tax taxable supplies made by them.
(iii) Ignorance of law is no excuse. Furthermore, the issue of sales tax registration has been given vide publicity by the Government.
15. As the F.B.R. Has not yet taken any decision on the application under section 65 despite a lapse of more than five years, this Tribunal is empowered to adjudicate upon the issue of exemption adhering to the verdict of the hon'ble Supreme Court of Pakistan reported in 2005 PTD 480 in which the hon'ble apex Court has held as under:-- "The above questions having direct link with the claim of benefit of section 65 of the Sales Tax Act, 1990 would be the pivotal questions for determining the liability of the petitioner and the entitlement for statutory benefit. The Tribunal and also the learned Judges in the High Court, without dealing with the above fundamental questions involved in the case, non-suited the petitioner and left him at the mercy of departmental authorities for decision of the question of entitlement for the benefit of section 65 of the Sales Tax Act, 1990 in their discretion. ".
"The learned Deputy Attorney General in the light of the observation of the High Court and also the Tribunal, has submitted that for the claim of benefit of section 65 ibid, C.B.R. Was the proper forum and the petitioner could conveniently, approach the Collector concerned who having satisfied himself could competently refer the matter to the CBR with his recommendation for exemption of the relevant supplies from sales tax.".
"The perusal of record would show that the Collector concerned initiated the process of issuing show-cause notice raising the presumption that petitioner was responsible for evasion of sales tax, therefore, no useful purpose would be served in undertaking the exercise of approaching the Collector for grant of benefit of section 65 of Sales Tax Act, 1990. In the light of facts and circumstances of the case and the observation of the Tribunal and also of the High Court on the question it would be essential for the Tribunal to examine the, scope of section 65 ibid, and give clear verdict in the matter. It is correct that Federal. Government is competent to exempt the sales tax in a case which is covered by the provisions of section 65 of the Sales Tax Act, 1990 but the question regarding the entitlement of the benefit of said section, would need determination by an independent forum and we are of the view that the Tribunal having not attended the above fundamental question, has failed to exercise the jurisdiction vested in it and further the High Court while affirming the judgment of Tribunal, also committed the same error.".
16. Grounds of exemption claimed by this appellant and rebuttal of these Grounds by the Department are put together as under:-- Appellant's Grounds Rebuttal by the Department
(i) he did not levy and pay the sales tax inadvertently as a result of general practice upto 30-6-2005;(i) Legally, it was obligatory for the applicant to pay leviable sales tax on taxable supplies made by him.
Furthermore, it was advertised from time to time by the Government through different notifications, print
(ii) he got his business of "C- mart(s)" registered under the Sales Tax Act, 1990 on being apprised of the fact that he was liable to be registered.
(iii) he has been paying the sales tax from the date when it was found that the supply was chargeable to taxand electronic media that the retailers having annual turnover of more than Rs,5 millions are required to get themselves registered with the Sales Tax Department and to pay sales tax on the sales.
(ii) Many other retailers like Messrs Jalal Sons, Messrs Body Shoes and Messrs Raja Sahib etc. Are paying leviable sales tax on taxable sales tax on taxable supplies made by them.
(iii) Ignorance of law is no excuse.
Furthermore, the issue of sales tax registration has been given vide publicity by the Government.
When viewed in the light of the provisions of section 65 of the. Sales Tax Act, 1990, the rebuttal by the Department seems to be whimsical, arbitrary and injudicious.
17. We fully subscribe to the proposition that the provisions granting exemption are to be strictly construed, but it is equally true that a benefit conferred by law subject to certain conditions cannot be withheld if the conditions are complied with/satisfied, and such benefit cannot be disallowed merely on the basis of conjectures and surmises. When liberal construction of the provisions granting exemption is not permissible in favour of the Tax-payer, the Department cannot be allowed to disallow exemption leisurely, arbitrarily and whimsically.
18. The Department did admit in the Para-wise Comments filed with the learned Collector (Appeals) that neither the appellant, nor his predecessor ever charged the sales tax, and that they were not apprised by the Sales Tax Department that the sales tax ought to have been charged on the supplies made by the C-Marts.
Non-levy and non-payment of sales tax by all the persons engaged in a business gives rise to a general practice. The Department has erred in comparing this appellant's case with Messrs Jalal Sons, Messrs Body Shoes and Messrs Raja Sahib, Lahore. The case of this appellant is comparable only with the convenience stores on the filling stations throughout the country. The Department has not been able to quote even a single case of convenience store, which voluntarily paid sales tax, or which was subjected to sales tax like this appellant, which means that this appellant did not charge and pay the sales tax as a general practice prevailing among the parallel cases of convenience stores. The first condition laid down by section 65(a) that "tax has not been charged in any area on any supply which was otherwise taxable" is fully satisfied. Hence, it is held that this appellant did not levy and pay the sales tax inadvertently 'as a result of general practice upto 30- 6-2005.
19. As regards the 2nd condition contained in section 65(b) of the Sales Tax Act, 1990 that "the registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax", the Department has not brought on record any evidence that this appellant recovered any sales tax from the Tax Periods 2/2001 to 6/2005. The second condition of exemption is thus also satisfied.
20. Now we come to the 3rd and last condition imposed by section 65(c) of the Sales Tax Act, 1990 that "the registered person started paying the tax from the date when it was found that the supply was chargeable to tax". This last condition also complied with. On being apprised by the Department, this Tax-payer got himself registered under the Sales Tax Act, 1990 w,e,f, 24-12-2005, and started paying sales tax since 7/2005, and he has been faithfully discharging his sales tax liability till date under the Sales Tax Special Procedure Rules, to which the Department has never raised eye-brow.
21. As this appellant/Tax-payer's case of exemption is fully covered by the provisions of section 65 of the Sales Tax Act, 1990, we find no hesitation in holding that this appellant/Tax-payer is fully entitled to the exemption of the sales tax not levied by him up to 30-6-2005 inadvertently and as a result of general practice. The demand of Rs,14,983,892 (along with default surcharge) raised through the impugned order-in-original No, 8 of 2006, dated 18-2-2006, and upheld by the Collector (Appeals) vide the impugned Order-in-Appeal No,177/ST/2006, dated 21-6-2006, is set at naught, and the impugned orders are annulled.
22. As the fate of this appeal stand determined as a result of adjudication of the issue as to the exemption under section 65 of the Sales Tax Act, 1990, there is no need to dilate on the other issues urged before us.
23. This appeal succeeds in the manner as indicated above.