Justice Nadeem Azhar Siddidi: This appeal has been filed by the Appellant challenging the Order-in- Appeal No.148/2014 dated 8th December, 2014 passed by the Commissioner (Appeals) in Appeal No.141/2014, dismissing the appeal as time bared filed by the appellant against the order-in-original No. 495/2014 dated 26.09.2014 passed by the Assistant Commissioner (Mr. Muhammad Yousuf Bukhari), SRB, Karachi.
1. In short the facts of the case as stated in the order in original are that appellant is engaged in providing services of "Advertising Agent" falling under Tariff Heading 9805.7000 of the Second Schedule of the Sindh Sales Tax on Services Act, 2011 (hereinafter referred to as the Act of 2011), chargeable to Sindh Sales Tax @ 16% w.e.f. 01.07.2013.
2. The allegation against the appellant is that it had filed Null sales tax returns for the tax periods July, 2013 to April, 2014, which indicates no business activity on the part of the appellant. Whereas the Bank Statement of the appellant revealed that a sum of Rs.154,886,926/= were credited to their account maintained at Standard Chartered Bank Limited from which appears that the appellant has performed taxable activity, but knowingly and deliberately did not declare their actual taxable activities with SRB.
3. The appellant was served with show-cause notice dated 24.06.2014 to explain as to why the Sindh sales tax of Rs.24,781,908/= may not be assessed and recovered from it along with the default surcharge and penalties. The appellant neither appeared before the Assessing Officer nor filed any reply.
4. The Assessing Officer passed ex-parte assessment order in the sum of Rs.24,781,908/= along with default surcharge (to be calculated at the time of payment) and penalties in the sum of Rs.1,239,095/= and further 100% penalty under serial No. 6 (d) of section 43 of the Act and Rs.55,000/= under serial No. 2 of section 43 of the Act.
5. The Appellant challenged the Order-in-Original by way of filing appeal before the Commissioner (Appeals) who dismissed the appeal as time bared; hence the appellant has challenged the order-in- appeal before this Tribunal.
6. Mr. Irshad Ur Rehman the learned advocate for the appellant submits that both order-in-original and order-in-appeal are void orders and no limitation runs against void orders. He submits that assessment was finalized only on the basis of entries available in the bank statement without any exercise to determine the actual value of services provided or rendered within Sindh. He then submits that the appellant is also providing services within other jurisdiction which amount was also included in the bank statement.
7. Mr. Amir All the learned DC-SRB submits that the assessment was legally finalized on the basis of bank statement, which is a statutory document under Rule 29 of the Rules, 2011 and neither perusal of further documents are required nor any further enquiry is require to determine the value of service. He then submits that copy of order-in-original was shipped to the appellant on 26.09.2014 and copy of order-in- appeal was shipped on 09.12.2014 and since both appears are time bared this appeal is liable to be dismissed on this count alone.
8. During the pendency of appeal the learned DC filed a statement dated 20.04.2017 on the basis of bank statements and financial statements provided by the appellant. According to the statement the value of taxable service worked out as Rs.75,401,808/- involving Sales tax of Rs.12,064,289/- @ 16% for the tax periods 2013 and 2014.
9. In reply Mr. Irshad ur Rehman states that total commission earned is Rs.75,401,808/- out of which the commission earned on print media is Rs.46,861,623/- and commission from electronic media is Rs.28,540,185/-. He then submits that the appellant has provided services within Sindh as well as outside Sindh and the share of Sindh in the commission from print media works out to Rs.7,816,237/- involving Sales tax of Rs.1,250,598/-. Regarding commission on electronic media Mr. Irshad ur Rehman submits that the TV channels charged sales tax on the gross amount of the invoice value which also includes Agency Commission and as such no sales tax on the commission earned from electronic media is payable by the appellant.
10. Mr. Aamir Ali states that no services were provided outside Sindh and all services provided were originated from Sindh. He then submits that in case the services were provided to non- resident the liability to pay tax is on registered person. Mr. Aamir Ali states that the appellant has to declare the tax deducted by the TV channels and there after the appellant can take due credit of the amount of sales tax withheld by the recipients.
11. Mr. Irshad Ur Rehman states that the appellant is only liable to pay tax on commission earned from print media. He then submits that the tax on the commission earned by the appellant from electronic media is withheld by TV channels/service provider.
12. Mr. Muhammad Waleed Advocate for appellant states that the appellant is neither a service provider nor service recipient and is an advertising agent and the function of the appellant is to issue advertisements to TV channels on behalf of its clients and then to collect the charges from the service recipients and after deducting its commission pay the remaining amount of the service provider and in this way received the commission from the service provider. He then submits that the amount of commission received is not taxable for the reason that on the principal amount from which the commission is paid the tax was already paid by the service recipients. He then submits that this case pertains to withholding and the SRB before taxing the appellant has not checked the returns of the service recipients. Mr. Waleed further states that SRB had already recovered an amount of Rs.3,406,727/- from the personal bank account of Mr. Wasif Ali Khan one of the Director of the appellant which practice is illegal and the said amount may be returned to the Director.
Regarding limitation of filing of appeal Mr. Waleed submits that no limitation runs against void order and relied upon the reported case 2016 PTD 296 of Lahore High Court. He submits that the order is void for the reason that assessment order was passed without first determining the value of service and the assessment order was passed only on the basis of entries available in the Bank Statement.
13. Mr. Zain Manzoor the learned AC submits that the appellant has filed time barred appeal before the Commissioner (Appeals) and that this appeal was also filed after 147 days of the prescribed limitation. He then submits that no cogent reasons were assigned for condonation of delay and this appeal is liable to be dismissed. He then submits that appellant received commission from print media and is liable to pay Sindh Sales Tax on the Services of Commission Agent. He then submits that the appellant failed to participate in the proceedings before the Assessing officer and before the Commissioner (Appeals) have failed to provide requisite documents relating to this case for deciding the same on merits. He supports both orders and request to dismiss the appeal.
14. We have heard the learned representatives of the parties and perused the record made available before us.
15. The appellant has filed the appeal after expiry of the statutory period for filing of appeal. The reason offered by the appellant for condonation of delay is that assessment order was passed without first determining the value of service and the assessment order was passed only on the basis of entries available in the Bank Statement. The contention of the learned advocate for the appellant has force. The Assessing Officer has not undertaken any exercise to determine the value of service and the assessment order was passed only on the basis of the entries available in the bank statement which is not legal. The tax has not been levied on the person or his income but on the services provided by him within or form Sindh. It is not necessary that all entries in the bank statement reflect the consideration of service. The duty of the Assessing Officer is to first determine the nature of service, then determine the value of service and then to pass assessment order, which is lacking in this case. The assessment order which is not legal is amounts to without jurisdiction and void and the delay in filing of the appeal can be condoned.
16. It is true that the assessment was finalized only on the basis of the entries reflected in the in the bank statement of the appellant without properly determining the value of service. The assessment order was passed in the sum of Rs.24,781,908/=. During the appeal the learned DC filed a statement determining the value of service to Rs.75,401,808/- involving Sales tax of Rs.12,064,289/- @ 16% for the tax periods 2013 and 2014. This clearly reflects that the assessment order was passed without properly determining the value of service. The Commissioner (Appeals) totally failed to consider that if the assessment order is not proper the tax payer cannot be penalized for the simple reason that the appeal was time bard and in all fairness should have condoned the delay in filing the appeal and to decide the appeal on merits.
17. One thing is clear that none of the forums below has properly determined the nature and value of service provided by the appellant. The appellant is a middleman Advertising Agent) and his normal work is to release advertisements to various channels on behalf of its clients (service recipients) and to receive the amount of advertisements from the service recipients and to pay the same to service provider after deducting its commission. In the present case it is apparent that the tax has been levied on the basis of credit entries in the bank statement. The Assessing Officer has not been able to produce any material to show that the said credit entries are in any way linked with providing or rendering advertisement services from or within Sindh.
18.The advertising agent is liable to pay tax vide tariff heading 9805.7000 effective from July, 2013 and rule 33 (3) (a) provides that if the services are provided or rendered on commission basis, the tax will be charged on the basis of amount of the commission. It appears that the assessment order was passed on the basis of gross receipts reflected in the bank statement without properly determining the nature and value of service provided by the appellant in ignorance of above rule and the entire amount shown in the credit column of the bank statement was treated as receipt on account of commission/service consideration.
19. The forums below also ignored sub-rule (4) of Rule 3 of Sindh Sales Tax Special Procedure (Withholding) Rules, 2011 which provides that a person mentioned in clause (f) of rule 1, who receives advertisement `services, provided or rendered by a person in Pakistan or abroad, shall deduct the amount of sales tax as mentioned in the invoices issued by the service provider. In case the sales tax amount is not indicated on the invoices, the recipient shall deduct sales tax at the applicable rate of the value of taxable services from the payment due to the service provider. The provision is clear that in case of advertisement service the responsibility to deposit tax is upon the service recipient and not on service provider. In this case the appellant is neither a service provider nor a service recipient and is not liable to pay tax as determined by the Assessing Officer.
20. During the hearing of the appeal we have been informed that the Assessing Officer has attached the personal bank account of Mr. Wasif Ali Khan one of the Director of the appellant and recovered an amount of Rs.3,406,727/= Mr. Muhammad Waleed is correct in arguing that this practice is illegal. The appellant is a private limited company and for recovery of dues of the appellant the personal bank account of the Director cannot be attached and by attaching the bank account the Assessing Officer has committed an illegality. The said Director whose account was attached may apply to the Assessing Officer for refund of the amount.
21. In view of the above discussion, we are satisfied that both the order-in original and order-in- appeal suffers from legal infirmities and cannot be sustained in law, with the result this appeal is allowed. The case is remanded to the Assessing Officer to determine the nature and value of service provided by the appellant and then to pass fresh Assessment Order after providing the proper right of hearing to the appellant and after considering the observations made herein above.
The appeal is disposed of in the above terms.
(Agha Kafeel Barik) (Justice Nadeem Azhar Siddiqi)
Technical Member Chairman Karachi Dated: 20.09.2017 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.