QAMAR-UL-HAQ BHATTI, JUDICIAL MEMBER.---Vide this sales tax appeal, the appellant registered person assailed the Order No.14/1278 dated 29.10.2015 passed by the learned Commissioner Inland Revenue (Appeals-III) Lahore, for the tax periods from April-2014 to June-2014.
2. Both the learned representatives appearing at the bar have been heard and the relevant available record perused.
3. Brief facts of the case are that the appellant is a manufacturer by status and duly registered with the sales tax department. On the basis of the discrepancies detected through Computerized Risk Based Evaluation of Sales Tax (CREST), the appellant was found to have failed to charge further tax @ 1% on supplies made to unregistered persons in terms of section 3(1A) of the Act. Accordingly, a show case notice was issued' under section 11(2) of the Sales Tax Act, 1990 to the appellant to explain as to why sales tax amounting to Rs.940,005/- may not be recovered from him along with default surcharge under section 34 and penalty .Under section 33(3) of the Act, 1990. The reply furnished by the appellant could not satisfy the Officer Inland Revenue Zone-X RIO-II, Lahore consequently he passed the Order-in-Original No. 14/2015 dated 31.03.2015 whereby the, appellant was directed to deposit sales tax amounting to Rs.9,40,005/- together with default surcharge and penalty in terms of the provisions contained in the Sales Tax Act, 1990 (hereinafter the Act). Being aggrieved, the appellant filed an appeal before the Commissioner-IR (Appeals), who vide Order dated supra upheld the treatment given by the IRO. This dispensation had compelled the appellant-registered person to come up in appeal before the learned Appellate Tribunal Inland Revenue.
4. At the very outset, learned counsel for the appellant argued that the treatment meted out by the IRO and subsequently upheld by the CIR(Appeals) is highly unjust and contrary to the facts of the case. He agitated that the appellant had supplied the products to persons who were admittedly not registered under the Act, however, undoubtedly all of them were 'End Consumers'. He further argued that software/system namely CREST has been developed by FBR through which it was electronically communicated to the registered person that its sales data does not match with the corresponding purchase data of its buyers or any short payment etc. In response to IRO's letter a detailed write up by filing requisite information, supporting details/documents and submitting the corresponding evidence for the purposes of reconciliation was submitted, but unfortunately relevant law on the issue and factual position has not been considered judicially by the IRO as well as by the learned CIR(Appeals). Present proceedings are solely based on some misconceived facts and wrong application of law. The sales under. Consideration were retail sales made to the 'End consumers'; The sales made to End consumers were not subject to Further Tax under section 3(1A) of the Act in the light of cumulative reading of section 3(1A) read with SRO 648(1)/2013 wherein supply of goods directly to the End Consumers have been excluded from the provisions of section 3(1A).
5. Learned AR further vehemently argued and stressed upon the status of the buyer/purchaser of the appellant that it is not a disputed position that sales under question have been made to End Consumers. In support of his contention he has produced copies of sales tax returns with complete annexure/invoices, tax profile of buyers/purchasers with FBR. Further he argued that the expression "End Consumer" has not been defined in the Act, therefore, its extent and scope would be determined by reference to the ordinary dictionary meanings and under the established principles of statute interpretation, commonly known as the principle of 'Ejusdem Generis'. This principle provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision of the law. The expression "End Consumers" as used in the cited SRO is to be interpreted in the light of words associated to it and not in pure isolation as per whims and wishes of the IRO. To strengthen his arguments he relied upon a various reported judgments of binding nature including verdict passed by Hon'ble Lahore High Court reported as /973 PLD(sic.) 837 and 2016 PTD (Trib.)
57. For convenience and reference the relevant portion of the above referred judgments are being reproduced as under:- 1973 PLD(sic.) 837 "In order to ascertain the meaning of any word or phrase that is ambiguous or susceptible to more than one meaning, the court may properly resort to the other words which the ambiguous word is associated in the statute.... It is a fundamental principle of interpretation of statutes and of the notification or orders issued there under that the Courts have to proceed on the assumption that each word therein was used with a purpose..."
2016 PTD (Trib.) 57
17. It is all settled principle of law that where the foundation is defective, the entire edifice built thereon would fall to the ground. Reliance may be placed on the judgment of Hon'ble Apex Court cited as 2007 SCMR 818 and 2007 SCMR 1835 wherein their Lordships observed" It is a settled law that when basic order is without lawful authority then the superstructure built on it would have to fall on the ground automatically".
Supporting his argument, learned AR referred to Section 14 of the Act read with Rule 4 of Chapter 1 of the Sales Tax Rules, 2006 which provides that only persons engaged in making taxable supplies are required to be registered under the Act. As a consequence he prays for cancellation of orders passed by both authorities below.
6. The learned D.R. For the revenue on the other hand firstly supported the orders of the authorities below, however, later he has requested that the matter may be remanded back to the IRO as it is fair if the concerned IRO is allowed to satisfy himself again with regard to stance of the appellant.
7. We have given anxious thought to the averments made by the rival parties as well as perused the other allied documents tendered by the learned counsel for the respondent-registered person at the bar. We have also keenly read the orders and decisions relied upon before us during the proceedings. In the present appeal it is not a dispute that the transaction constituted taxable activity. The main dispute is that whether or not the act of not charging further tax against sales made to buyers/purchasers who are not registered person under the Act, constituted any violation of Act. If the answer to this proposition is in negative the charge would not mature and on the other hand if the answer is in affirmative the conclusion would be that the further tax was legally charged by the IRO. In determining the answer to the aforesaid proposition, the line of arguments and decisions relied upon by the learned AR are very relevant and forceful. We are in agreement with the learned AR that a person, who is not under a legal obligation under the Act to obtain Sales Tax Registration number cannot be burdened with further tax under section 3(1A) of the Act for not obtaining the registration number. In this case, the conclusion drawn by both authorities below is based on wrong application of law, therefore, erroneous and factually incorrect.
8. It is clear without any shadow of doubt that the purchasers of the appellant do not make any taxable supplies under section 2(41) of the Act, they are not bound to obtain sales tax registration under the Act, as a consequence, they are under no obligation to pay "Further Tax" and section 3(1A) has no application to their case.
9. As a consequence, if the goods are supplied to other than registered person i.e., to End Consumers, it would in no case injure the Government treasury because the tax is charged on the market price, i.e, price to be paid by ultimate consumer meaning thereby that the Government collects the ultimate tax (which it would have collected when supplied goods were actually sold in the market) well in advance at the time of sale of goods from the sale outlet or factory manufacturing premises of the appellant without any fear of returning it to any person in case of refunds because End Consumer cannot claim it as input sales tax under the law, therefore, charging of "Further Tax" is unlawful in the given circumstances.
10. Having taken regard to the facts of the case in its entirety as well as the ratio settled in the reported judgments of the apex court cited supra, we have no ambiguity in my mind to declare that the orders passed by the authorities below are against the doctrine of natural justice and are not sustainable in the eyes of law. Further noted that being a settled issue by the apex court, the law should not be used to penalize the assessee unless it could be shown that default on part of the appellant-registered person had resulted in any loss of revenue. In view of the aforementioned discussion as well as bare reading of the reported judgments cited supra and the annexed documents produced by the appellant, we feel no hesitation to vacate the orders of the authorities below which have illegally been passed and obviously have no sanctity in the eyes of law. This would result into acceptance of the appellant-registered person's appeal.
11. Ordered accordingly.