' These appeals have been filed by the appellant under section 46 of Sales Tax Act, 1990, against orders-in-appeal passed by Commissioner Inland Revenue (Appeal-I), Karachi, bearing Nos.
S.T.A./149/ LTU/2010 (Tax Periods 1-7-2005 to 30-6-2006), S.T.A./150/LTU/2010 (Tax Periods 1-7-2006 to 30-6-2Q07), S.T.A./148/LTU/2010 (Tax Periods 1-7-2007 to 30-6-2008), S.T.A.146/LTU/2010 (Tax Periods 1-7-2008 to 30-6-2009), and S.T.A. 147/LTU/2010 (Tax Periods 1-7-2009 to 30-6-2010), all dated 20-8-2011.
2. Since the facts of all these appeals and the grounds raised therein are common, therefore, these appeals are being decided through this combined order. During the course of hearing the appellant approached the honourable High Court of Sindh vide Constitutional Petitions Nos.D-1707 to 1711 of 2012 against recovery notices issued by the department. The petitions were allowed vide honourable High Court order dated 6-8-2012, wherein this Tribunal was directed by the Honourable Court to decide the appellant main appeal expeditiously.
3. The grounds of appeal raised before this Tribunal are reproduced as under:- ' GROUNDS FOR S.T.As. Nos.116, 117 & 118/KB of 2011 " (I) The order of the learned Commissioner (Appeals-I) is bad in law and facts.
(2) The learned Commissioner (appeals-I) erred in confirming levying of sales tax on the basis of stevedore whereas the Company is a terminal operator.
(3) The learned Commissioner (appeals-I) erred in, confirming the demand of sales tax by treating the applicant as stevedore whereas the FBR has already clarified that the applicant is a Terminal Operator.
(4) The learned Commissioner (appeals-I) erred in confirming levying of sates tax without appreciating the fact that the receipt has been made on the basis of fixed throughput charges rather than value of supply - an essential ingredient for levy of tax.
(5) The learned Commissioner (appeals-I) erred in appreciating sales tax on stevedore through Sales Tax Special Rules, 2005, which are ultra vires having no validity in the eye of law.
(6) Without prejudice to ground No,2, the learned Commissioner (appeals-1) erred in deciding the case on hypothetical basis rather than on actual quantity of oil off loaded.
(7) The learned Commissioner (appeals-I) erred in levying default surcharge without mens rea.
(8) The appellant requests your permission to add, withdraw or amend any of the above grounds before or at the time of hearing of appeal."
' GROUNDS FOR,S.T.A. No,119/KB of 2011 ' Grounds Nos.1 to 5 and 7 to 8 are common. Ground No,6 is re-produced as under:- "(6) The learned Commissioner(Appeal-I) erred in deciding the case by levying Sales Tax on the basis of overhead/toll manufacturing"
' GROUNDS FOR S.T.A. No,120/KB of 2011 ' Grounds Nos.1 to 5 and 8 to 9 are common. Grounds Nos. 6 and 7 are different and re-produced as under:-- "(6) The learned Commissioner (Appeal-I) erred in deciding the case by levying Sales Tax on the basis of overhead/toll manufacturing.
(7) The learned. Commissioner (Appeal-I) erred in remanding the case back to DCIR for allowing adjustment of payment made by the appellant in accordance with the Sales Tax Law, thus giving discretion to DCIR to allow adjustment or not."
4. The facts of these appeals are that the appellant is unlisted public company engaged in the business of maintaining, handling and unloading of bulk cargo oil from ships. This business is being carried out by the company under an implementation agreement dated 8-12-1992 between the Company and Port Qasim Authority (PQA). The appellant received following show cause notices for non-payment of sales tax under sections 11, 34, 36(1) and 33 of the Sales Tax Act, 1990:-- Show cause notice Order-in-Original Period Amount Nos. STA/149/LTU/ 2010O-in-O No,05/2011 July 2005 to June 200693,722,718.00 STA/150/LTU/2010 O-in-O No,04/2011 July 2006 to June 200792,610,548.00 STA/148/LTU/2010 O-in-O No,03/2011 July 2007 to June 2008118,264,843.00 STA/146/LTU/2010 O-in-O No,02/2011 July 2008 to June 2009153,420,330.00 STA/147/LTU/2010 O-in-O No,01/2011 July 2009 to June 2010151,814,336.00 ' First appeals was filed by the appellant before the Commissioner Inland Revenue (Appeals-I), Karachi, against the aforesaid orders in original did not succeed hence, the present appeal before this Tribunal. We have heard the parties and gone through the record and have reached conclusions indicated ground-wise as under:-- ' GROUNDS NOS.1 AND 2 (All tax periods)
5. In their support the A/R of the appellant adopted arguments which were more or less reiteration of the arguments taken before CIR(A). The A/R of the appellant contended that the appellant is not a stevedore but rather a terminal operator. To support this stance, the appellant relied upon the dictionary meaning of the two prospective terms. The A/R contended that if any stevedore services are being rendered by the appellant, it is only under an agreement with the Messrs PQA hence, liability of Sales Tax shall be on Messrs PQA and not on the appellant.
6. The departmental Representative argued that the nature of services provided by the appellant squarely fall within the defination of stevedore as provided in Special Procedure Rules. He stated that it is a trite law that when a term is defined exhaustively in the Sales Tax Act, 1990, only that meaning is to be assigned to the term and no other meaning can be attributed to the term defined as above. He further contended that appellant's A/R has admitted that stevedore services are performed but liability should be on PQA. He argued that charged and levied of Sales Tax is on the person rendering the services which is in the present as the appellant and not Messrs PQA hence, the confirmation of orders in original by the learned CIR(A) was perfectly lawful and correct.
7. It is pertinent to narrate the concerned provisions of the law and the Rules before taking up the arguments of the parties on the issue. Under the Constitution of Pakistan, 1973, Sales tax on services is a provincial subject. Using this Constitutional Authority the Province of Sindh promulgated the Sindh Sales Tax Ordinance, 2000, to impose sales tax on services.
8. Sales tax is chargeable on stevedoring business vide Sindh Sales Tax Ordinance, 2000. Section 3 of the said Ordinance, provide for charge, levy and payment of sales tax on the value of taxable services rendered or provided in the Province of Sindh. The taxable services charged under the Provincial sales tax are specified at the Schedule thereof, which includes services provided or rendered by stevedores.
9., Furthermore, section 3(3) of the Sindh Sales Tax Ordinance, 2000, provides that all the provisions of the Sales Tax Act, 1990, and Rules (general as well special procedure rules) and notifications, orders and instructions made/issued under Sales Tax, Act, 1990, are mutatis mutandis applicable for the collection and payment of tax under the Sindh Sales Tax Ordinance, 2000. The aforesaid provisions of law are stated as under for ready referencing:-
3. Scope of Tax:
(3) All the provisions of the Sales Tax Act, 1990, and rules made and notifications, orders and instructions issued thereunder shall, mutatis mutandis, apply to the collection and payment of tax under this Ordinate in so far as they relate to:
(a) manner, time and mode of payment
(b) registration and de-registration -(c) keeping of records and audit
(d) enforcement and adjudication
(e) penalties and prosecution, and (17 all other allied and ancillary matters.
10. Federal Board of Revenue, under the authority extended to it by the Sindh Sales Tax Ordinance, 2000, framed the Sales Tax Special Procedure Rules. These Rules specifically define "stevedore", and the said definitions are re-produced as under: ' The Special Procedure Rules 2005/2006 Applicable for Tax Periods 2005-2006 & 2006- 2007."stevedore": means a engaged in loading and unloading of cargo, including bulk cargo, from ships in any manner and includes a person providing or rendering any other services related to or ancillary to the handling of or otherwise dealing with such or other similar cargo at port in any manner or style.
' The Special Procedure Rules, 2007 Applicable for Tax Periods 2007-2008, 2008-2009 and 2009- 2010. "stevedore": means a person, company or commercial concern engaged in loading and unloading of cargo, including bulk cargo, from ships whether mechanically or otherwise, and whether or not licensed by the respective port authorities.
11. From the above law and the Rules it is clear that services of stevedores are subject to Sales Tax and the term Stevedore is defined to mean a person/a company or commercial concern engaged in loading/ unloading of bulk cargo. Examination of details relating to the nature of business of the appellant reveals that the appellant is providing services of unloading bulk cargo oil from ships, therefore, its services fall within the ambit of stevedore services making the appellant liable to charge a Sales Tax. Since the appellant is handling stevedore services hence, their A argument that they are terminal operator and not stevedore does not carry any weight for the reason that terminal operators can and do render services of stevedore. In this connection it is pertinent to mention an instance of terminal operator rendering services of stevedore i,e, Messrs Qasim International Container Terminal (QICT), bearing STRN 1200980587837, is also registered as 'stevedore' besides paying a' terminal operator and are discharging their sales tax liability with respect to loading and unloading of cargo from ships. The appellant reliance on Income Tax Judgment of ATIT in their own case is misplaced for the reason that that case is entirely distinguishable on law, having a ratio altogether different and not applicable on the case.
12. Now coming to the argument that the appellant is a mere investor who has installed the machinery under an agreement with Messrs PQA and ships get connected to the pipe lines themselves and downpour the oil into the pipes without involving any stevedoring on the part of the appellant. This argument begs the question as to who owns the machinery and pipelines involved in the entire system whereby the bulk cargo is unloaded from the ships. It is observed that the entire structure including machinery and pipelines is erected and owned by the appellant with the purpose of unloading bulk oil from ships. Thus the nature of services performed by the appellant through machines and pipelines is stevedoring services, which squarely fall within the ambit of stevedoring services chargeable to sales tax.
13. In view of these facts and the law, appellant's appeal on the aforesaid ground fails.
GROUND NO.3 (All tax periods)
14. This ground relates to the appellant's contention that as per Federal Board of Revenue letter bearing No, C. No, 1(4)STT/2007/ 2285-R dated 5-1-2011, the appellant is a terminal operator and liability to excise duty shall be on. Messrs PQA, The appellant contended that as per the aforesaid FBR letter the appellant is terminal operator and is liable to pay FED. However, as per Article 12 of the agreement FBR has transferred the responsibility to collect and deposit the FED on PQA on behalf of the company. The DR, on the contrary, _argued that the appellant is liable to pay FED and Sales Tax under two different laws i,e, FE Act, 2005 and Sindh Sales Tax Ordinance, 2000, read with Sales Tax Act, 1990, which are entirely different enactments. Special procedure for charge levy or collection of one tax cannot be applied to the other tax hence, appellant arguments on the basis of Federal Excise Act, 2005, or the Rules made thereunder are irrelevant and cannot help their case in respect to their statutory obligations under the Sindh Sales Tax Ordinance, 2000, read with Sales Tax Act, 1990. _ 15. We have gone' through the argument of the parties and tend to agree with the arguments of the department on the basis that the present appeal relate to appellant obligations under the Sales Tax Laws, and no Rule or Circular letter issued by FBR under Sales Tax Act, 1990, or the Rules made thereunder transferring liability to pay Sales Tax on stevedoring services from the appellant to Messrs PQA has been brought to our knowledge. The FBR letter under discussion is being re- produced as under:- "Subject: FEDERAL EXCISE DUTY IMPLICATION ON FIXED THROUGHPUT CHARGES PAYABLE UNDER IMPLEMENTA- TION AGREEMENT WITH PORT QASIM AUTHORITY.
' I am directed to refer to your letter KST-AA-296 dated 2nd April, 2010 on the subject cited above and to say that the matter regarding payment of FED on fixed monthly amount charged by Messrs FOTCO for the excisable services rendered to Messrs PQA has been examined. According to Rule 43B of Federal Excise Rules, 2005. Federal Excise Duty is leviable on the gross amount charged for all import related services provided by port operators and terminal operators, therefore, in the instant case it is clarified that:-
(i) Messrs PQA shall pay FED on the gross fixed amount billed by Messrs FOTCO to PQA as per agreement.
(ii) The OMCs shall pay FED on the gross amount billed by Messrs PQA to OMCs based on actual quantum of services provided or rendered i,e, quantity of oil off loaded by the Port Terminal Operators.
(2) In case of overlapping in FED paid as per Serial Nos. (i) & (ii) above. Input FED adjustment by Messrs PQA is allowed as per provisions of section 7 of Federal Excise Act, 2005, read with S.R.O.
550(I)/2006 dated 5-6-2006".
16. A bear reading of this letter shows that the letter has been issued by the Federal. Board of Revenue to explain/laid down procedure or collection of FED payable under Rule 43B of FED Rules, 2005. Nothing in the said letter relates to payment of sales tax on stevedoring services therefore, the obligation to charge, levy and pay sales tax is on the appellant and the liability to pay sales tax is on the person rendering the services which in the present appeal is Messrs FOTCO and not Messrs PQA. The appellant appeals on this ground fail.
GROUND NO.4 (All tax periods) GROUND NO.6 (Tax, Periods 2005-2006, 2006-2007, 2007-2'008)
17. These grounds relates to collection of receipts on the basis of fixed throughput charges rather than value of supply. The appellant contends that since value of supply, an essential ingredient of levy of tax, is missing, hence, tax is not leviable on the appellant under the law. The DR disagreed with the contention of the appellant and stated that the amount received by the appellant whether on the basis of services rendered or on the basis of fixed amount represent the value of supply, hence, chargeability of sales tax is fully lawful.
18. We have gone through the arguments of the parties and or of the opinion that for the chargeability of sales tax what needs to be determined is "Nature of Services" and not "Mode of Payment". As we have already held that the services being rendered by the appellant are of stevedoring in nature hence, chargeable to Sales Tax. Hence, entire amount, whether on the basis of activity or on the basis of fixed throughput charges, is chargeable to FED for the reason that charging section of the sales tax Ordinance, 2000, read with Sales Tax Act, 1990, does not make basis of payment as a precondition for chargeability of the tax. We therefore hold that the action of the Commissioner (Appeals) on these grounds does not need any interference on our part for reasons discussed above.
GROUND NO.5 (All tax periods)
19. This ground relates to vires of Sales Tax Special Procedure Rules, 2005, 2006 and 2007. The appellant contends that the Sales Tax Special Procedure. Rules 2005, 2006 and 2007 are ultra vires having no validity in the eyes of law. The appellant contended further that Federal Government has gone beyond his powers to levy Sales Tax on "Terminal Operators" which is not enumerated in the schedule of Provincial Sales Tax Ordinance. The DR, on the other hand, contended that Special Procedure Rules are perfectly intra vires as they lay down procedure for collection of Sales Tax on "stevedore" services which are mentioned in the schedule to the Provincial Ordinance.
20. We have gone through the arguments and the relevant law and are of firm opinion that Special Procedure Rules, 2005, 2006 and 2007 were framed under the powers conferred to the Federal Government by section 71 of the Sales Tax Act, 1990, hence, vires thereof cannot be challenged.
21. It is also noted that section 3(3) of Sindh Sales Tax Ordinance, 2000, fully authorizes the framing Rules, notifications, orders under the Sales Tax Act, 1990, which are applicable on the levy under the Sindh Sales Tax Ordinance, 2000.
22. The vires of Special Procedure Rules have also been challenged due to the reason that they defined "Stevedore", in a way that squarely covers the services being rendered by the appellant, thereby subjecting the appellant to the charge of Sales Tax. During the course of hearing the appellant has asserted that they are Terminal Operator and not Stevedore on the strength of Dictionary Definition of these terms (meaning of stevedore and terminal operator were quoted only from one dictionary i,e, Maritime and Shipping Dictionary by Aga Faqir Muhammad).
23. It is a settled law that for the purposes of definition one has to examine as to whether the said word is defined in the statute or not. In case it is available then one has to apply the said definition as defined without seeking further assistance from ordinary dictionary. Whereas when the definition of the word is not available in that case guidance may be taken from the definition or meaning available in the ordinary dictionary or judicial pronouncement. In the present appeals, the situation is exceptionally clear, vivid and unambiguous. Here the definition of word 'stevedore' is defined leaving no iota of doubt, therefore, reference to ordinary dictionary meaning or judicial pronouncement is irrelevant and carry no credence. We therefore hold that the appellant's appeals on this ground fail.
GROUND NO.6 (Tax Periods 2008-2009 and 2009-2010)
24. On these grounds, the appellant has contended that even if FOTCO is providing services of stevedores Sales Tax shall not be chargeable on them with effect from 1st July 2008 due to change in the definition of supply given at section 2(33) of Sales Tax Act, 1990, where from the phrase "other disposition of goods" has been omitted vide Finance Act, 2008. Due to this change the arrangement between a vendor and a toll manufacturer cannot be covered under the definition of "supply" but rather bailment of goods, which is beyond the charge of Sales Tax under the Sales Tax Act, 1990. The appellant further contended that as per section 3(3) of Sindh Sales Tax Ordinance, 2000, the Sales Tax Act, 1990, Rules and Notification made thereunder apply mutatis mutinies to Sindh Sales Tax Ordinance, 2000. Since, toll manufacturing is no longer covered under the Sales Tax Act, 1990, hence, the same cannot be made applicable in respect of services to the case of the appellant.
25. This view of the appellant was strongly contested by the DR, who stated that in the present case services chargeable to tax are being performed by the appellant, and the concept toll manufacturing cannot be stretchered and made applicable to the present case. He further contended that under the provisions of law appellant being rendering stevedore services is chargeable to Sales Tax, regardless of their arrangement with Messrs PQA.
26. We have gone through the argument of parties and tend disagree with the appellant on the ground that they are rendering chargeable services and are hence, liable to pay Sales Tax on the Stevedore services. In case of express charge of tax on a person created by express provision of law, the same must be discharged and stretching a concept which is associated with manufacturing of goods to rendering of services does not carry legal force to override the express provisions of the law. Toll manufacturing is an arrangement whereby a first firm with specialized equipment processes raw materials or semi-finished goods for a second firm. We therefore, find no relation of toll manufacturing or the change in the definition of "supply" to the present case. Even otherwise, as it has been held by as above that liability to pay sales on stevedore services is on Messrs FOTCO and not Messrs PQA for the reason that the services are being rendered by M/s FOTCO and their private agreement i,e, IMPLEMENTATION AGREEMENT (Article 12 thereof) cannot override the provisions of statutory law.
GROUND NO.7 (Tax Periods 2005-2006, 2006-2007 and 2007-2008) GROUND NO.8 (Tax Periods 2009-2010)
27. On this ground the appellant has contended that without mens rea, levy of default surcharge is not justified. As against this the department contended that non-payment of sales tax over a long period of time by the appellant proves the guilty mind and mens rea on the part of the appellant hence, CIR(A) was perfectly justified in confirming imposition of default surcharge under section 34 of the Sales Tax Act, 1990.
28. We have gone through the arguments of the parties and are of the opinion that imposition of default surcharge under section 34 of the Sales Tax Act, 1990, is mandatory and not discretionary.
We are supported in this respect by Honourable High Court Peshawar judgment reported as Collector of Customs v. Dhan Fibre Limited 2010 PTD 515, wherein the honourable Court has decided imposition of default surcharge/additional tax is mandatory. We may as well dilate upon the cases in which it was held that additional tax default surcharge under section 34 of the Sales Tax Act, 1990, is discretionary by pointing out that all those authorities relate to Pre-Finance Act, 1996, position when the language of section 34 made it discretionary. However, Finance Act, 1996, by substituting the word "shall be liable" by the, word "shall" made default surcharge/additional tax mandatory. In view of this position of law the appellant appeal on this ground too fails.
GROUND NO.7 (Tax Period 2009-10)
29. On this ground the appellant has objected to the CIR(Appeals-I) judgment for remanding the case back to the CIR for allowing adjustment of payment made by the appellant in accordance with Sales Tax Law. They contended that by doing so CIR (Appeals-I) has given discretion to CIT to allow adjustment or not. As against this the DR supported the action of the learned CIT(Appeals-I).
He argued that payment of tax needs to be verified before credit may be allowed or not and the office of the DCIR is in the best position to perform this function.
30. We have gone through the arguments of the parties and the Order-in-Appeal No,S.T.A.-149- LTU-2010 dated 20-8-2011. The Grounds of Appeal taken before CIR(Appeals-I) and the order in appeal by Worthy CIR (Appeals-I) on those grounds are silent on the issue of giving tax credit.
Therefore, the contention of the appellant that the Commissioner (Appeals) remanded the case back to DCIR for allowing adjustment of payment is mis-founded, hence, this ground fails for the reasons stated above.
31. All the appeals are disposed of in the manner as indicated above.