Justice Nadeem Azhar Siddiqi: This appeal has been filed by the appellant challenging the Order- in-Appeal No.197/2015 dated 23.11.2015 in Appeal No. 142/2014 passed by the Commissioner (Appeals) against the Order in Original No. 557/2014 dated 28.10.2014 passed by the Assistant Commissioner-03 (Ms. Ambreen Fatima) SRB, Karachi.
1. The facts of the case as mentioned in the Order-in-Original are that the Appellant is registered with SRB as service provider in the category of "Stevedores" under Tariff h ding 9805.2000 of the 2 schedule of the Sindh Sales Tax on Service Act, 2011 (herein after referred as the Act).
Besides the appellant is involved in providing or rendering the taxable services of "Contractual Execution of Work or Furnishing Supplies" under Tariff Heading 9809.0000, which are chargeable to sales tax @ 16%.
2. It was alleged in the Order-in-Original that during scrutiny of Annual Audited Accounts for the year ended June 2012 and 2013, it was observed that appellant have earned revenue of Rs.211,882,087/= on account of taxable services of stevedores and contractual execution of work or furnishing supplies, which involve Sindh sales tax of Rs.33,901,133/=. It was further alleged that tax profile of the appellant shows that they have neither deposited the sales tax nor have e-filed the sales tax returns and stevedores monthly statement for the tax periods from July, 2011 to June, 2013.
3. That a show-cause notice dated 19.04.2014 was served upon the appellant to explain as to why tax liabilities mentioned above may not be assessed and determined along with default surcharge and penalties.
4. The appellant filed its written reply on 14.06.2014. In the reply it was submitted that the appellant is providing services covered under PCT Heading 9805.2000 and due sales tax of Rs.396,703/= has been deposited under the Amnesty Scheme dated 04.06.2014. It was also submitted that appellant also provides non-taxable services which are rental receipts of equipment and storage income.nd
5. The Assessing Officer has held that the appellant realized revenue of Rs.2,479,393/= from stevedoring services and remaining of the same i.e. Rs.209,402,694/= pertains to the rental storage income. The Assessing Officer determined sales tax of Rs.33,504,431/= on the services of contractual execution of work or furnishing supplies along with default surcharge and penalties of Rs.36,304,786/=.
6. The appellant has challenged the assessment order before the Commissioner (Appeals) who relying upon the earlier decision of this Tribunal in the case of APM Terminal (Appeal No. 17/2013 dated 28.09.2015) allowed the appeal, hence this appeal.
7. The learned AC submits that the respondent is providing rental / storage services under a written contract and at the relevant tax periods both these services were neither part of 1 and 2 Schedule of the Act nor otherwise taxable, hence tariff heading 9809.0000 was invoked. He then submits that appellant has taken a plea that they were providing services of Public Bonded Ware House and the said services was brought to tax net effective from 1 July, 2013. He then submits that the services provided under a contract are taxable under tariff heading 9809.0000. He placed on record the copy of clarification issued by SRB in this regard for the assistance of tax payer. He supports the assessment order and submits that the tax was rightly levied and the order of the Commissioner (Appeals) is against the settle law regarding providing or rendering services under Tariff Heading 9809.0000 and the Commissioner (Appeals) wrongly relied upon the earlier decision of SRB Appellate Tribunal in the case of APM Terminal (Appeal No. 17/2013 dated 20.09.2015). He then submits that the Commissioner (Appeals) has ignored the agreement of facility utilization between Byco Terminal and Byco Petroleum. He further submits that for invoking Tariff Heading 9809.0000 composite service is not necessary.
8. Mr. Sunil Memon advocate for respondent submits that the issue was already settled by the Tribunal in the case of APM Terminal and the order is binding upon the department and its functionaries and has not been set aside by the High Court and is still holding the field. He then submits that the words "Contractual Execution of Work" is interchangeable with words "Contract of Works" and the respondent has not provided any work under a contract. He then submits that providing rental/storage services and the public bonded ware house were not services listed in 1 and 2 Schedule of the Act and was not taxable and cannot be taxed under the general heading of 9809.0000. He then submits that the service of public bonded ware house was brought to tax net effective from Ju y, 2013 and the respondent has started paying tax. He then submits that due to harassment caused by SRB the respondent has closed its business from Sindh. He supported the order of Commissioner (Appeals) and request that appeal may be dismissed.
We have heard the learned representatives of the parties and perused the record made available before us.
9. The respondent was show-caused for providing services of storage, rental and equipment handling and not paying Sindh Sales Tax on these services. The tax periods involved are from July 2011 to June 2013. The tax amount determined is Rs.33,504,431/- on the value of service of Rs.209,402,692/. The tax was levied under Tariff Heading No 9809.0000 (contractual execution of work or furnishing supplies). The core issue involved in this appeal is the proper classification of the services provided by the appellant. Unless the proper nature, scope and classification of services provided or rendered by the appellant is determined the question of levy of tax cannot be decided. It is an admitted position that the services which the appellant had provided or rendered are not listed in the First and Second Schedule of the Act and for that reason the department has taken shelter under a general Tariff heading 9809.0000 (contractual execution of work or furnishing supplies).
10. The Tariff heading 9809.0000 is a general heading to cover contractual execution of work or furnishing supplies not falling in any other tariff heading. The benefit under Tariff heading 9809.0000 can only be taken if the service provided or rendered is not listed in the First or Secondst nd st st nd Schedule to the Act and provided under contractual execution of work or furnishing supplies. Tariff heading 9809.0000 has two components i.e. providing or rendering (1) contractual execution of work or (2) furnishing supplies. To attract 9809.0000 it is necessary that both the components are available in the contract or agreement. This argument finds support from the Exemption Notification No. SRB-3-4/7/2013 dated 18th June, 2013 which provides that "in relation to the work or supplies the total value of which does not exceed 50 Million rupees in a financial year subject to the condition that the value component of services in such contractual execution of work or furnishing supplies also does not exceed 10 million rupees. The exemption can only be claimed if in a contract both elements are present. Admittedly while providing services of storage, rental and equipment handling the respondent has not executed any work and has also not furnished supplies.
It appears that the tax was charged under the first phrase of T.H. 9809.000 (contractual execution of work). For invoking first phrase it is necessary that the respondent has performed or executed some type of work involving physical and mental exertion to attain an end as defined in the Black's Law Dictionary, Tenth Edition, which is lacking in the Contracts of storage, rental and equipment handling. The works contract is an agreement which is a mixture of service of labour and transfer of goods. Under a works contract the contractor agrees to do certain job in execution whereof, certain goods are transferred to the contractee, again this aspect, is missing in the contract of storage, rental and equipment handling,
11. The facts of case of APM Terminal are that the appellant in that case claim that it is engaged in providing and rendering services of containers and gen-sets handling/repair/maintenance and other allied services and the services provided or rendered by the appellant are not specifically listed in the Second Schedule to the Act and are therefore not taxable. The facts of both these cases are similar.
The Commissioner (Appeals) has rightly relied upon the earlier decision of this Tribunal in the case of APM Terminal.
12. Furthermore the service of storage and rental relates to immovable properties. The Honorable High Court in a recent decision passed in the case of Younus (Private) Limited and others versus Government of Sindh and others (CP-D. No. 2421/2016) has held that renting of immovable property by itself has neither been considered as economic activity under section 4 of the Act, nor the same can be treated as taxable service under section 3 of the Act, to bring such renting of immovable property within the scope of tax in terms of section 8 of the Act. It was further held that mere renting of immovable property by a landlord to a tenant for consideration (rent) does not involve any element of service, or taxable or economic activity, as defined under the Sindh Sales Tax on Services Act, 2011.
13. In view of the above discussion the appeal is dismissed and the order in Appeal is maintained. The copy of the order be provided to the learned representatives of the parties.
(Agha Kafeel Barik)
TECHINICAL MEMBER (Justice Nadeem Azhar CHAIRMAN Karachi Dated: 02.10. 2017 Copies Supplied to: 1) The Assistant Commissioner, SRB.
2) The Respondent through Authorized Representative Copy for Information 3) The Commissioner Appeals, SRB 4) Guard File 5) Office File