Justice Nadeem Azhar Siddiqi: This appeal has been filed by the appellant challenging the Order- in-Appeal No.29/2015 dated 29.01.2015 passed by the Commissioner (Appeals) in Appeal NO. 55/2014 confirming the Order in Original No. 351/2014 dated 22.05.2014 passed by the Assistant Commissioner --IV (Mr. Muhammad Yousuf Bukhari) SRB, Karachi.
1. The facts of the case as mentioned in the Order-in-Original are that the Appellant was reported to be engaged in providing or rendering service --Of "Advertisement Agent" (Tariff Heading 9805.7000) of the Second Schedule of the Sindh Sales Tax on Services Act, 2011 (hereinafter refferred to as the Act) chargeable to tax effective from 01.07.2013.
2. It was alleged that despite legal obligations the appellant failed to get itself registered/enrolled with SRB, and failed to comply with the provisions of the Act.
3. A show-cause notice dated 06.12.2013 was issued to the appellant to explain as to why it may not be compulsorily registered. The appellant submitted written reply dated 17.12.2013 in which the appellant states that it is engaged in providing services in connection with advertisement in newspapers and periodicals which are exempt by virtue of SRB's Notification NO. SRB.Leg (1)/2011 dated 1st July, 2011.
4. The Assessing Officer passed the order of compulsorily registration of the appellant and imposed penalty of Rs.100,000/=.
5. The said order of the Assessing Officer was challenged by the appellant by way of filing appeal before the Commissioner (Appeals), who dismissed the appeal, hence this appeal.
6. Mr. Waseem for the appellant states that the appellant is not an advertising agent but simply a booking agent of Dawn Group (PHPL) and the function of the appellant is to receive publication/advertisement from general public for publication of the same in Daily Dawn Karachi.
He then submits that APNS is a body of Newspaper owners and operator and they maintained a list of confirm advertising agency/agents which list does not contained the name of appellant as Advertising Agent. He placed on record the copy of list. Mr. Waseem then submits that show cause notice dated 04.06.2014 was issued in which the appellant was directed to make compliance by 12.06.2014 after passing of order-in original dated 22.05.2014. A copy of letter dated 04.06.2014 (SCN according to Mr. Waseem) is placed on record. Mr. Waseem further submits that on March 19, 2014 the documents were provided to Assessing Officer who neither mentioned the documents in the order nor considered the same and passed an erroneous order.
7. Amir confirms that documents are available on record. Mr. Amir is Not in a position to comments on the arguments of appellant that show cause notice dated 04.06.2014 was issued in which the appellant was Directed to make compliance by 12.06.2014, after passing of order-in- - original dated 22.05.2014, but simply states that this ground was not taken in appeal. Mr. Amir Ali placed on record a certificate from PHPL to show that the appellant is a Booking Agent and is paid commission against booking of advertisement. and photocopy of the Tax Return of the appellant for the tax year 2013 to show that appellant earned income under heading "Advertising Commission". Mr. Amir also placed on record photocopy of Circular No.03/2011 to the effect that even the persons dealing in exempt taxable services are liable to file sales tax returns.
I have heard the learned representatives of the parties and perused the record made available before us.
8. The case is of compulsory registration under Section 24B of the Act. It is not disputed that the appellant booked publications/advertisements on behalf of his principles i.e. Newspapers. The advertising agent has been defined under sub-section (3) of section 2 of the Act, which provides that the advertising agent meant; a person engaged in providing any service connected with the making, preparation, display, demonstration or exhibition of advertisement in any manner and includes an advertising agency or media agent or advertising or media consultant, by whatever name called. The appellant is an agent of its principal in terms of sub-section (4) of section 2 of the Act. The appellant act on behalf of its principal to create a legal relationship with third party in relation to booking of publication/advertisement and he facilitates its principal in procuring publications/advertisements for publication in the newspapers. If the name of the appellant is not mentioned in the list of Agencies maintained by APNS it will have no effect and the fact remains that appellant is providing services of advertising agent. The appellant is engaged in providing service connected with the making, preparation, display, demonstration and exhibition of advertisement in the newspapers and his activities fall within the definition of "Advertising Agent" and is liable to be registered with SRB. The argument of the appellant that it is dealing in exempt services has no force. Service of Publication of advertisement in newspapers and the service of advertisement agent are two separate services and the appellant is liable to pay tax on service of advertisement agent. The department has rightly compulsory registered the appellant under section 24B of the Act.
9. There appears some confusion in the dates. From the order-in-original I noticed that the date of institution was mentioned as 06.12.2014, whereas the date of order on the top of the order was mentioned as 22.05.2014. Naturally one of the two dates is not correct. The correct date of issuance of show-cause notice is mentioned in para 2 of the order-in-original as 06.12.13.
The appellant has not denied the earlier show-cause notice dated 06.12.2013 which was replied by the appellant on 17.12.2013. Mere mistake in dates has no bearing on the merit of this case.
10. Furthermore another letter dated 06.12.2014 was issued calling upon the appellant to make compliance by 12.06.2014 and informing the appellant about the amnesty available to him. Mr. Waseem states that this is a show-cause notice. The said letter cannot be treated as fresh show- cause notice and has to be treated a letter pursuant to the if order-in-original. Even if a fresh second show-cause notice was issued it has no bearing upon the earlier show-cause notice and the order-in-original passed pursuant to that notice.
11. As far as the imposition of maximum penalty of Rs.100,000/ under serial-1 of Table of Section 43 of the Act is concerned, the provision provides that penalty can be imposed if any person who is required to apply for registration under this Act fails to make an application for registration before providing or rendering taxable services, such person is liable to pay penalty of Rs.10,000/- or five percent of the amount of Sales Tax. It was further provided that in case of non-compliance of compulsory registration the minimum penalty should be Rs. 100,000/-. It has not been discussed in the order in original why maximum/higher penalty was imposed instead of minimum/lessor penalty. When two types of penalties are provided under law the Assessing Officer is duty bound to justify the imposition of maximum penalty. The two types of penalties are provided to cater two different situations. It has not been discussed under which situation lessor penalty can be imposed and under what situation the maximum penalty can be imposed.
12. Both the forums have imposed maximum/higher penalty of Rs.100,000/=. Before imposing penalty the department is bound to establish that the appellant is liable to pay maximum/higher penalty, which is lacking in this case. The Order-in-Original and Order-in-Appeal are silent in this regard. Both forums have imposed maximum/higher penalty provided in serial-1 of Table of Section 43 without discussing or establishing the reason for imposing maximum/higher penalty. If law provides two types of penalties to cater two different situations the Assessing Officer is bound to justify imposing of higher penalty. Furthermore there is a contest between the parties regarding the taxability of the services provided or rendered by the appellant and when there is a genuine contest between the parties imposing maximum penalty is not justified.
13. In view of the above I am satisfied that both order-in-original and order- in-appeal to the extent of imposing maximum/higher penalty suffers from legal infirmities and not tenable under law. Consequently the appeal is partly allowed and both the Order-in-original and Order-in -Appeal are set-a-side to the extent of imposing maximum/higher penalty.
14. The appellant is requires to pay penalty of Rs.10,000/= within fifteen days from the date of receipt of this order.
The appeal is disposed of in the above terms. Copy of the Order be supplied to the parties.
Karachi.
Dated: 22.03.2016 (Justice Nadeem Azhar Siddiqi)
CHAIRMAN Copies supplied to:-
1. The Appellant through Authorized Representative.
2. The Assistant Commissioner, SRB, Karachi.
Copy for information to: 3) The Commissioner (Appeals), SRB, Karachi.
4) Office copy 5) Guard file.