Justice Nadeem Azhar Siddiqi This appeal has been filed by the Appellant challenging the Order-in-Appeal No. 155/2016 dated 23 December, 2016 passed by the Commissioner (Appeals) In Appeal No.09/2016 confirming the Order--in --Original No. 624/2015 dated 07.12.2015 passed by the Assistant Commissioner (Ms. Nida Noor), IRE, Karachi.
In short the facts of the case are that appellant bearing (SNTN-3337564-0), was voluntarily got registered under principal activity of "Software or IT-based System Development Consultant" (Tariff Heading 9815.6000) of Second Schedule to the Sindh sales Tax on Services Act, 2011 (herein after referred to as the Act) and has provided or rendered taxable services.
The said services are covered and chargeable to sales tax at the rate specified in the Second Schedule.
2. The allegations against the appellant are that perusal of Annexure-A of sales tax returns filed by M/s Dawood Islamic Bank limited for the tax period September, 2013, M/s Habib Metropolitan Bank limited for tax periods May, 2014, June, 2014, September, 2014 and November, 2014, M/s Pakistan Mobile Communications Limited for the tax period November, 2015, M/s Faysal Bank Limited for the tax period September, 2011, M/s Soneri Bank Limited for the tax periods December, 2013, December, 2014 and May, 2015, M/s JS Bank Limited for the tax period January, 2015 and M/s Trans World Associates (private) Limited for the tax period Marc)), 2015 shows that service recipients have claimed input tax adjustment amounting to Rs.8,324,637/= against the taxable services provided or rendered by appellant, out of which Rs.1,341,341/= has been withheld and deposited by the said service recipients with SRB. However, remaining amount of Rs.6,983,296/.
(Rs.8,324,637/=. Rs.1,341,341/.) was required to be deposited by the appellant, which was not paid by them. Hence, the appellant contravened the provisions of section 8, 9 and 17 of the Act.
3. The appellant was issued show-cause notice dated 20.10.2015 to show-cause as to why the sales tax amounting to Rs.6,983,296/= may not be assessed and recovered from them under section 23 and 47(1A) (a) of the Act along with default surcharge and penalties. The appellant filed written response on 11.11.2015. The appellant in its reply admitted the liability and request the Department to allow payment in three installments.
The Assessing Officer passed the assessment order in the sum of Rs.6,983,296/= along with default surcharge (to be calculated at the time of payment) and penalties in the sum of Rs.7,624,226/= under serial No. 6 (d), s No.2 of section 43 and Rs.100,000/= for non-complaince of section 52 (1).
5. The Appellant challenged the Order-in-Original by way of filing appeal before the Commissioner (Appeals) who dismissed the appeal; hence the appellant has challenged the order-in-appeal before this Tribunal.
6. Mr. Nooruddin, Advocate at the first hearing informed that the appellant has already deposited the tax amounting to Rs.6,983,296/= on 4" March, 2016 and the appeal is only in respect of imposition of Default Surcharge and Penalties.
7. During pendency of appeal Mr. Nooruddin, advocate for applicant filed a statement that his client has agreed to deposit that default surcharge amounting to Rs.1,215,874/. and 10% of the penalty amounting to Rs.762,423/=. Mr. Nooruddln also filed an undertaking that the amount due will be deposited within fifteen days from the date of order.
8. Mr. Nooruddin, Advocate states that non-payment of tax and non-filing of returns were neither deliberate nor wilfful but due to bonafide mistake and unless the department establishes malafide intention on the part of the appellant, penalty cannot be imposed. He submits that at the very initial stage of the proceedings, even before passing of the order-in-original the appellant offered to pay due tax within three installments, which was not accepted by the department. He then submits that there is no element of fraud and as soon as the appellant comes to know about non-deposit of tax he offered the payment of tax before assessment and thereafter at the stage of appeal before Commissioner (Appeals) had deposited the tax due, which reflects the compliant attitude of the appellant.
9. Ms. Nida Noor for SRB opposed the request of the appellant and submits that the appellant had charged the tax but did not deposit the same with SRB and deliberately filed NULL returns to hide the tax withheld by it. She further submits that the penalties for late deposit of tax and non-filing of returns as prescribed were properly imposed and the appellant is not entitled to the concession as claimed.
10. Mr. Nooruddin in rebuttal states that the appellant had undergone structural changes due to which most of the employees have left the company due to which the tax could not be paid with in time. He then refers to Section 81 of the Act and submits that the appellant has not invoked the provision which reflects its intentions to pay the tax due.
11. We have heard the learned Representative of the Parties and perused the record made available before.
12.The dispute is in respect of payment of default surcharge and penalties. The appellant during pendency of this appeal agreed to pay the default surcharge and 10% of the penalties imposed. Now the dispute remains for payment of 90% of penalties. The appellant in reply to show-cause notice agreed to pay the tax due within three installments, which offer was not accepted by the Assessing Officer. This clearly reflects the bonafides of the appellant and its intention to pay tax.
Furthermore the appellant had deposited the tax due on 4th March, 2016, even before the order-in-appeal which was passed on 23'1 September, 2016, which reflects compliant attitude of the appellant.
13. Admittedly the appellant has not caused any revenue loss as the tax due was deposited and the appellant has agreed to pay default surcharge. Keeping in view the facts and circumstances of the case we consider that this is a fit case for taking a lenient view. In the reported case of Collector Customs versus Nizam Impex PTCL 2014 CL 426 a learned DB of Sindh High Court has held that if the party did not as malafidely with intention to evade the tax, the imposition of penalty or additional tax and surcharge was not Justified and the Tribunal has discretion to waive/remit additional tax and penalties. The penalty imposed by the Assessing Officer is reduced to the extent of 20%, which will be deposited by the appellant along with default surcharge within fifteen days from the date of receipt of this order.
14. The order-in-original order-in-appeal is modified to the extent that the appellant is liable to pay the penalty the extent of 20% imposed by the Assessing Officer
15. The appeal is disposed of. Copy of the order may be provided to the authorized representatives of the parties.
(Agha Kafil Barik)
Member Technical Justice Nadeem Azhar Siddiqi Chairman Karachi Dated 20.03.2017 Copies supplied to:- 1) The Appellant through authorized representative. The Assistant Commissioner SRB, Karachi.