Yahya Afridi, J.--Through this single judgment, this Court proposes to dispose of four Sales Tax References, as common questions of law are involved therein. The particulars of the same are as follows:-
1. STR No. 15-P/2014 (M/s. Khan & Co. Manz Kali, Kowar Mang, Bisham vs. Deputy Commissioner , Inland Revenue, (Audit-IX) Zone-II, R TO Peshawar etc:).
2. STR No. 16-P/2014 (M/s. Khan & Co. Manz Kali, Kowar Mang, Bisham vs. Deputy Commissioner , Inland Revenue, (Audit-IX) Zone-II, R TO Peshawar etc:)
3. STR No. 17-P/2014 (M/s. Khan & Co. Manz Kali, Kowar Mang, Bisham vs. Deputy Commissioner , Inland Revenue, (Audit-IX) Zone-II, R TO Peshawar etc:)
4. STR No. 18-P/2014 (M/s. Hayat & Co. CIO KCCL Kohat RIO Mohallah Kas chona Hayat Abad, Swat).
2. The petitioners herein , have instituted the present Sales ax References, agitating the following questions of law:
(a) Whether order mentioning wrong date of decision and absence of petitioner does not show the casual attitude of the Honble T rib anal in deciding crucial issue and whether on this score alone the order is not liable to be set aside?
(b) Whether Order of the learned Tribunal is sustainable in the eyes of law spec ially when the learned Tribunal badly failed to give finding on important grounds raised before it?
(c) Whether the order of the Hon'ble Tribunal is not time barred?
(d) Whether the Hon'ble Tribunal has properly appreciated the illegality , irregularity and utter disregard committed by the lower for a being the high forum of appeal?
(e) Whether Income Tax Law which has totally different criteria can be based for assessment or charge ability of tax?
(f) Whether due to non-charging of Sales Tax any losses to be government exchequer has been caused? If no, then a tax can be legally recoverable from petition specially when the same has pot been charged from buyer?
(g) Whether it was the legal obligation of the buyer being a registered person to have withheld the due amount of sales tax if any on such purchases as per Sales Tax Special Procedure Withholding Rules, 2007? If yes, then whether the appellant can be penalized for any alleged wrong committed by other .
(h) Whether the provision of Section 65 of the Sales Tax Act, 1990 has been taken in its true prospects by the learned Appellant Inland Tribunal?
(i) Whether the supply in question is not squarely covered by the provision of Section 65 of the Sales Tax Act, 1990 specially when contractors/suppliers have charged or included the element of Sales Tax in the value of supply of coal carrying from the Coal Mines at Dara Adam Khel located in the Tribal areas of FATA adjoining District Kohat and whether being a general practice the petitioner is not liable to be exonerated from the charges levelled in the show-cause notice.
(j) Whether the act of the respondent is not based on discrimination and Constitut ion of Pakistan by just pin point petitioner only? And whether by claimin g tax only from petitioner he can compete with other who are still not charging Sales Tax?
(k) Whether the Hon'ble Tribunal has taken into consideration infirmities in the show-cause notices and Assessment Order? If not, then the Order of the learned Tribunal is sustainable in the eyes of law?
(l)Whether non-deciding the issue regarding Section 65 by the Federal Board of Revenue is the fault on the part of petitioner? And whether the petitioner can be held responsible for the fault of others?
(m) Whether the case of the petitioner not fall under the exemption provided under Section 65 of the Sales Tax? If yes, then whether the Tribunal being an independent \ forum is not authorized to give conclusive finding on issue as per judgment of. August Apex Court vide judgment reported in " PTCL 2004 CL 494?
(n) Whether the Hon'ble Tribunal has properly interpreted "The Sales Tax Special Procedure (Withholding) Rules, 2007?
(o) Whether the applicant is liable for the payment of default surcharge under Section 34 of Sales Tax Act, - 1990?
(p) Whether the respondent department has discharged their burden of proof and whether any other person who carries the said business in the area has been shown to be registered? If not, then whether the petitioner is not liable for exemption under Section 65 of the Sales Tax, 1990?
(q) Whether the judgment of the learned Appellate Tribunal is not base on surmises and conjuctures?
(r) Whether the learned Appellate Tribunal has applied its own judicial mind to decide the case?
(s) Whether a three different appeal can be decided in a single judgment and whether the same thing done by Commissioner (Appeal) has been taken into consideration by learned Appellate Tribunal?
3. Brief and essential facts of the cases are that the petitioners are running their business under the name and style of M/s. Khan & Co. And M/s. Hayat & Co. And are engaged in the business of supplying coal from Darra Adam Khel, FR Kohat, FATA, to M/s. Kohat Cement Company ("Company") at Kohat; that the petitioners are duly registered under Income Tax Ordinance, 2001 ("Ordinance) and during scrutiny of the petitioners' record in post refund audit for the Tax Years 2010, 2011 and 2012, the Revenue observed certain discrepancies of non-paymentts of sales tax payable on the supply of coal to the Company; that Show Cause Notices were issued by the Revenue and in response thereto, the petitioners contested the same; that the Assessing Officer being not satisfied with the submissions of the petitioners, ordered payment of sales tax along with default surcharge and penalties vide order dated 24.1.2013; that feeling aggrieved, the petitioners filed appeals before the Worthy Commissioner (Appeals), which were dismissed, vide order dated 14.6.2013; that still feeling aggrieved, the petitioners filed second appeals before the Appellate Tribunal, Inland Revenue, Peshawar Bench, Peshawar , which were dismissed vide order dated 13.1 1.2013. Hence, the present Sales Tax References.
4. Valuable arguments of the learned counsel for the petitioners heard and record perused with their able assistance.
OPINION
5. While arguing the present References, the Worthy counsel representing both the petitioners, restricted his submissions to three core questions of law , which related to: Firstly , the non-applicability of the provisions of The Sales Tax Act, 1990 ("Act") to the petitioners, as they were then not registered there under , and Secondly , the obligation on the Company and not the petitioners, under the Sales Tax Special Procedure (Withholding) Rules, 2007, ("Rules of 2007"), to deduct sales tax at the time of taxable supply being made to it; and Thirdly , the true legal import of Section 65 of the Act.
6. As far as the first question of law stated above, is concerned, it is noted, that the same has not been expressly taken by the petitioners in the instant Refe rences. However , this issue was pleaded by the petitioners and attended to by the adjudication authorities by recording definite findings thereon. Hence, this Court shall consider the said question of law , as it has 'arisen' from the decisions of the adjudicating authorities provided under the Act.
7. Moving to the said issue, it is noted that sub-section (1) of Section 3 of the Act is the 'charging section', which provides that.
"3. Scope of tax.--(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at_ the rate of [seventeen] per cent of the value of-
(a) Taxable supplies made by a registered person in the course of furtherance of any [taxable activity] carried on by him; and
(b) Goods imported into Pakistan." (Emphasis provided)
8. No doubt, the obligation imposed to pay sales tax under the charging section is upon a registered person', who makes supplies during the course of his business. However , when we turn to the definition of the term 'registered person', defined in sub-section (25) of Section 2 of the Act, it reads that: "(25) "registered person " means a person who is registered or is liable to be registered under this Act: Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder ." (Emphasis provided)
9. The plain reading of the aforementioned definition, expressly brings within the purview of the term 'registered person', not only a person, who is registe red, but also one, who is liable to be registered under the Act. As far as the requirement of registration of a person is concerned, it is noted that Section 14, regulates the issue of registration of a person with the Revenue for the purposes of sales tax under the. Act, and it reads: "Section 14. Registration. Under this Act, registration will be requi red for such person and are regulated in such manner and subject to Rule, as the Board may, by notification in the official Gazette, prescribed." (Emphasis provided)
10. What is important to note, at this stage, is that Section 14 (ibid), prior to its present position, introduced vile Finance Act of 2004, provided the conditions for compulsory registration of persons making taxable supplies or imports. However , the said matter has since then been transposed and prescrib ed in the Rules 3 to 12 of The Sales. Tax, Rules, 2006 ("Rules of 2006"). For rendering the opinion, on the issue in hand, it would be pertinent to note that the persons required to be registered under the Act, have been prescribed under Rule 4 of the Rules of 2006, which provides that: "Requirement of registration.-- The following persons engaged in making of taxable supplies in Pakistan (including zero-rated supplies) in the course or furtherance of any table activity carried on by them, if not already registered, are required to be registered in the manner specified in this chapter , namely:--
(a) a manufacturer not being a cottage industry
(b) a retailer whose value of supplies, in any period during the last twelve months exceeds. Five million rupees;
(c) .............................
(d) a wholesaler (including dealer) and distributor;"
11. What is striking to note is, that the persons required to be registered under Rule 4 ibid, are also identified and provided in the definition of 'taxable supplies', provided under sub-section (41) of Section 2 of the Act, which stipulates as under:-- "'taxable supply' means a supply of taxable goods made by an importer , manufacturer , wholesaler , (including dealer), distributor or retailer other that. a supply of good, which is exempt under Section 13 and includes a supply of goods chargeable to tax at the rate of zero percent under Section 4."
(Emphasis provided)
12. The essential theme envisaged in the Act, like other fiscal statutes, is to draw into the for mal economy , as many persons as possible. One of the means adopted by the legislature to achieve the said aim, is to provide incentives to persons who register , while expressly disallowing the same, to those who fail to do so. Such is also the spirit seen in the Act. In this regard, the 'proviso' provided in the very defini tion of 'registered person' is an illustration of the intention of the legislature.
The crucial point remains that a person, who falls within the (categories mentioned in Rule 4 of the Rules of 2006, has to be registered under the Act and cannot absolve himself from the obligation of payment of sales tax, just on the ground that he has not registered himself under the Act.
13. Having said that, while going through the record of the present References, it is noted that the essential condition precedent for a person to register under the Act has not been discussed by the adjudicating authorities.
The same in essence being that: "whether the petitioners fall within the categories of persons liable to registration under the Act, as provided under Rule 4 of the Rules of 2006 or otherwise"
This crucial issue, being essentially a matter of factual determination, is beyond the scope and jurisdiction vested in this Court under Section 47 of the Act. The domain to determine and decide the same rests with the various rungs of adjudicating authorities culminating before the Tribunal under the Act.
14. Moving to the second question of law, as to the legal implications of Section 65 of the Act are concerned, this Court is in complete consonance with the finding rendered by the Worthy Commissioner (Appeals), which has been duly confirmed and endorsed by the Worthy Tribunal. The finding so recorded being the correct position of the law was that: "Section 65 of the Sales Tax Act, 1990 says that if in respect of any supply the Federal Government is satisfied that inadvertently an as a general practice (a) tax has not been charged--(b) the registered person did not recover the tax prior to the date it was discovered that the supply was taxable and (c) the registered person started paying the tax from the date when it was found that the supply was taxable, 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 paid for the period prior to the discovery of such practice. As evident from plain reading of the aforesaid provision of law, that there are prerequisites which shall be completed and examined by Federal Govt. And after that if the Federal Govt. Is satisfied, it may notify such waiver of tax in the official Gazette. In the appellant's case the Federal Government has not issued any such notification. Moreo ver, supply of coal is taxable supply and there is not confusion in its taxability . This ground of appeal being not sustainable in the eyes of law is, therefore, rejected."
15. It would be pertinent to note that during the proceedings of the present Referen ces before this Court, a specific direction was rendered to the Revenue to consider the application made by the petitioners under Section 65 of the Act. But to no avail. It would not be appropriate for this Court to ignore the callous and indifferent attitude of FBR to have kept the grievance of the petitioners pending without any determination. This inaction on the part of the F.B.R.
Is surely not only against 'norms of justice', but also the settled principles of 'good governance'.
16. Finally , moving on to the third question of law, regarding the obligation of the Company , and not that of the petitioners, to deduct sale tax under the Rules of 2007, suffice it to state that if the Act and t he Rules of 2006 require the petitioners to be liable for registration, then they cannot absolve themselves from the payment of sales tax. As far, as, the obligation of the Company to deduct sales tax under the Rules, of 2007, is a matter between the Revenue and the Company and the same cannot be taken advantage of by the petitioners.
17. In view of the above deliberations, this Court is of the opinion that:-- I. All persons expressly mentioned in Rule 4 of the Rules of 2006 making taxable supplies in furtherance of their business are liable to registration under the Act and are thus bound to pay sales tax in accordance with mandate provided therein. II. The petitioners cann ot be dislodged from their claim of not being liable to registration and thereby made to pay sales tax on the supplies made to the Company , as the record is silent regarding the fact, whether the petitioners fall within the categories of persons liable to registration under Rule 4 of the Rules of 2006.
III. Lest this Court passes any findings on the petitioners' claim to come within the purview of Section 65 of the Act, which may prejudice the pending application of the petitioners, suffice it to state that the competent authority to allow the same is the Federal Government/which has to expeditiously proceed to decide the same and that too in accordance with law .
IV. The petitioners cannot claim any benefit of the fact that the Company did not deduct sales tax under Rules of 2007.
18. Accordingly , for the reasons stated hereinabove, this Court finds that the decision of the Tribunal is correct on the questions of law it deliberated. However , as it has not decided whether the petitioners fall within the categories of persons liable to registration under Rule 4 of the Rules of 2006, the impugned decision is liable to be set aside and the matter is to be remanded back to the Worthy Tribunal to decide the crucial condition precedent, stated hereinabove. Thus, these References are answered in the terms elaborated hereinabove.
The office is directed to send a copy of this judgment under seal of the Court to the Appellate Tribunal, Inland Revenue, Peshawar Bench, Peshawar .