ORDER: MR. JUSTICE (R) NADEEM AZHAR SIDDIQI, CHAIRMAN.--This appeal has been filed by the appellant challenging the Order-in-Appeal No, 37/2013 dated 29.07.2013 passed by the Commissioner (Appeals) in Appeal No, 44/2012 confirming the Order-in-Original No, 35/2013 dated 26.03.2013 passed by the Assistant Commissioner. (Mr. Muhammad Yousuf Bukhari) SRB, Karachi.
1.Admitted facts of the case are as mentioned in the Order-in-Appeal are that the Appellant Company M/s AMP Terminals (Pvt.) Ltd. was carrying on the business of providing Services falling under SRB Tariff Heading 9819.9090 [i,e, 'the services provided by port operators, airport operators, airport ground service providers and terminal operator'] as given in the Second Schedule to the Sindh Sales Tax Act, 2011 ['hereinafter referred to as the Act']. These services are taxable @ 16%, but the Appellant Company was neither registered in SRB nor was paying any Sales Tax. AC-SRB issued Notices to the Appellant asking it to get e-registered/e-enrolled with SRB. The Appellant contested his registration under the proposed Tariff heading 9819.9090, through a Representation made to the concerned AC-SRB, who after considering Appellant's plea decided that instead of 8919.9090, the Appellant was liable to be registered under the heading 9809.0000 ['Services provided or rendered by persons engaged in contractual execution of work or furnishing of supplies']. Appellant Company was accordingly issued another Notice for registration (under 9809.0000), in terms of Section 24 of the Act-2011 and Rules framed thereunder. The appellant was also warned that in case it still failed to get registered in SRB on voluntary basis, he might be registered compulsorily in terms of Section 24B of the said Act.
2.The Appellant Company contested the later tariff heading as well. It took a plea that 9809.0000 was applicable 'only' where the both 'Services' & 'Goods' were involved, and not where only 'Services' were being rendered exclusively. Appellant placed their reliance on SRB Notification No, SRB-Leg(1)/2011, dated 1st July, 2011 [Entry at S. No, 2A, substituted vide amending Notification No, SRB-3-4/9/2011 dated 06.10.2011]. Department disagreed with Appellant's notion, and conveyed their own interpretation of the Notification to the Appellant and pressed the Appellant to get registered under heading 9809.0000, forthwith. Appellant Company however held on to its earlier position and refused to get registered under the Act-2011 or to pay any tax on their Services. Since, the Appellant was adamant despite lengthy debate in the matter, the Adjudicating Officer (AC- SRB) disposed-off the case in terms of the Order-in-Original, directing that the Appellant Company be registered compulsorily, in terms of Section 24B of the Act under Tariff heading 9809.0000.
3.The appellant has challenged the Order-in-Original before the Commissioner (Appeals) who while dismissing the appeal in para 16 of the Order held as under: "16. As regards, Appellant's interpretation of the (amended) Exemption Notification dated 01.07.2011; the same is untenable in law. This Notification does not in any way limit the scope of the tariff heading 9809.0000. It is clear from the description of this heading that it has used the word 'or' between the part dealing with 'services' and the part dealing with 'supply of goods'. The impugned Exemption Notification, therefore, covers only those specific scenarios, where a taxpayer's business is of composite nature i,e, including both 'services' & 'supplies'. Obvious corollary is that a business activity exclusively involving 'services' (as in the instant case) is out of the scope of this exemption envisaged by the said Notification. Instant Appellant, therefore, does not enjoy exemption from levy of Sales Tax under this Notification".
4. Aggrieved with the Order-in-Appeal the appellant filed this appeal. The learned representative of the appellant submits as under: (a)The Appellant is engaged in providing & rendering Services of 'Containers & Gen-sets handling/repair/ maintenance and other allied Services' which services are not specifically mentioned in the Second Schedule to the Act-2011.
(b)The services of the Appellant are more appropriately classifiable under SRB headings 9820.4000' [Car washing or similar service stations] or alternately under '9820.9000' [Other workshops'], which Services had not yet been made taxable by the legislature, as these had been omitted so far from the Second Schedule to the Act-2011.
(c)The SRB Notification dated 01.07.2011 (as amended later on) had enjoined that only 'composite Services' i,e, those including the elements of both 'supply of goods' & 'the rendering of services' is covered under the SRB tariff Heading 9809.0000, and services not involving 'supply of goods' i,e, comprising 'services' exclusively cannot be taxed under Tariff heading 9809.9000.
(d)The clarification issued by SRB in respect of the scope and application of heading 9809.0000, was objectionable, Omni-bus style interpretation and was inconsistent with Section 2(35) of the Act-2011. (e)The appellant was e-registered/enrolled only on the basis of clauses/objects mentioned in the Memorandum of Association of Appellant without going into the scope and nature of services actually provided by the appellant.
(f)The learned Representative for the Appellant relied upon Chapter 2 dealing with Works Contract-A Composite Contract of a Book (Technical Guide to Service Tax on Works Contract). In the chapter based upon a judgment of the Supreme Court of India the author define that a composite contract means a contract which involves transactions involving an element of provision of service and an element of transfer of title in goods which various elements are so inextricably linked that they essentially form one composite transaction.
(g)Clarification dated 2.1.2012 issued by SRB to M/s. Masood Aziz and Associates clarifying chargeability or otherwise of certain services. In the clarification it is mentioned that in case any services is specifically described under the First Schedule to the Sindh Sales Tax on Services Act, 2011 but is not listed in the Second Schedule thereof, it will not be covered by tariff heading 9809.0000 of the said Schedules. However, the services provided or rendered by persons engaged in contractual execution of work or furnishing supplies of the services/items falling outside the scope of the services described and specified in the First Schedule shall be liable to tax under tariff heading 9809.0000. The example of "Janitorial Services (tariff heading 9822.3000), as given in your letter under reference, is a correct understanding of the law".
(h)The learned Representative for the Appellant relied upon the following reported cases in support of his case: (i)M/s. G.M. PFAAA A.G. versus Sartaj Engineering Co. Ltd and 3 others PLD 1971 SC 564. In the reported case it has been held at page No, 569 that Memorandum only catalogues the objects for which a Company is formed and it is not unusual for a Memorandum of Company to incorporate within it almost all conceivable objects in order that the vires of its action in launching upon a particular business or enterprise cannot be challenged by any shareholder. It was further held that a Memorandum is a covenant between the Company and its members that the company shall engage in any business which is not mentioned in the Memorandum.
(ii)Muhammad Younus versus Central Board of Revenue PLD 1964 SC 113. In the reported case it has been held at page No, 119 that it is patent that before person can be made liable to the payment of a tax or levy he must be shown clearly to fall within the category so made liable under the letter of the law.
5. On the other hand Ms. Anum Shaikh Assistant Commissioner SRB, states as under: (a)The services provided by Appellant are not covered by Tariff heading 9819.9090 (Services provided or rendered by port operators, airport operators, airport ground service providers and terminal operator) as the appellant is working outside the port area.
(b)The appellant is providing services of container repair and maintenance to its clients under execution of contract and the services provided or rendered by the appellant is not covered by any other Tariff heading and falling under Tariff heading 9809.0000. (c) For invoking Tariff heading 9809.0000 it is not necessary that the contract is for composite of execution of work or furnishing supplies. She then submits that even if a service had no constituent of goods, it can still be classified under Tariff heading 9809.0000, if it is provided or rendered under execution of a contract.
6.The claim of the appellant is that it is engaged in providing and 'rendering services of containers and gen-sets handling/repair/ maintenance and other allied services and that 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 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. None of the forums below has decided /determined the nature, scope and classification of services provided or rendered by the appellant. It is an admitted position that the services which the appellant is providing or rendering is 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.
7. 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 Second 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 execution of work or 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. The Assistant Commissioner has decided that even if a service had no constituent of goods, it can still be classified under tariff heading 9809.0000, if it is provided or rendered under a contract. The Commissioner Appeals decided that it is clear from the description of this heading that it has used the word "or" between the part dealing with "services" and the part dealing with "supply of goods". The Commissioner Appeals further held that the Impugned Exemption Notification, therefore, covers only those specific scenarios, where a tax payer's business is of composite nature i,e, including both "services" and "supplies". The Commissioner Appeals fell in error in substituting the words "works" with "services" and "furnishing supplies" with "supply of goods". Both the forums below while deciding that even if a service had no constituent of goods, it can be classified under Tariff heading 9809.0000 and can be taxed but, have avoided to considered whether furnishing supplies alone without constituent of service of execution of work can still be taxed under tariff heading 9809.0000, if it is provided or rendered under a contractual execution of furnishing supplies. It is strange that to qualify the exemption the contract should have two components i,e, providing or rendering services of work or furnishing supplies and for levying tax both components are not necessary and tax can be levied on the basis of one component only.
8.The Tariff heading 9809.0000 was borrowed from Chapter 98 of Pakistan Customs Tariff Act and is also part of First Schedule of Federal Excise Act, 2005. The Federal Excise Act deals with levying Excise Duty on goods as well as services. Tariff heading 9809.0000 deals with providing or rendering contractual execution of works as well as furnishing supplies. The words "supply" or "supplies" generally used in relation to goods and not services. In Black's Law Dictionary 10th Edition at page 1968 "supplies" is define "means of provision or relief, stores available for distribution". On the same page the word supply is define as "the amount of goods produced or available at a given price". Section 3 of The Sindh Sales Tax Act on Services is a charging section and provides that a taxable service is a service listed in the Second Schedule to the Act. The word "services" has been defined in section 2(35) (repealed section) as includes, but not limited to, the activities listed in column (2) of the First Schedule to the Act read with Chapter 98 of the Pakistan Customs Tariff.
Essentially under the Sindh Sales Tax on Services Act, 2011 only services mentioned in the Second Schedule can be taxed and the supplies alone cannot be taxed. The second part of Tariff heading 9809.0000 pertaining to "furnishing supplies" alone appears, to be in contradiction with Section 3 of the Act as the same cannot be taxed alone. In the reported case of Syed Nasir Ali and 33 others versus Pakistan through Secretary Ministry of Law 2010 PTD 1924 a learned DB of Sindh High Court has held that as under: "it is a trite law that in case of inconsistency between the charging section and the Schedule the Schedule is to yield to the Act. It was further held that it is a binding rule of construction that before taxing a person it must be shown that he falls under the charging section as no tax could be imposed by way of implication simpliciter. If a person has to be brought within the ambit of the charging section by clear words otherwise he cannot be taxed at all. It is also a trite law that Schedules are an aid to the charging sections and cannot be applied in derogation of the main section. It is further a trite law that in case of any conflict between the main provision and the schedule the main provision shall always prevail and has to be given preference over the schedule. The Schedule helps to determine the ambit of charging section since they both constitute on integrated code. The charging section deals with chargeability of something and the schedule deals with the rate of such chargeability meaning thereby that they both come hand in hand together".
9. The Commissioner Appeals had observed that "Appellant's business is not at all restricted to the activities stated above. In fact this 'Memorandum of Association' which is Company's 'Magna- Charta/Constitution' contains a total of 38 clauses. These clauses delineate each and all business activities that the Company has undertaken at present or may undertake in future, without having to modify the 'Memorandum'. Hence, the claim made by the Appellant in this Appeal falls way much shorter of the Appellant Company's actual scope of work, and is therefore not tenable". Tax cannot be levied on the basis of clauses of Memorandum. Tax can be levied if the services provided or rendered by the appellant come within the ambit of Tariff headings which form part of Second Schedule. Again the Commissioner Appeals fell in error in only considering the clauses of Memorandum and not deciding the actual scope and nature of services provided or rendered by the appellant, which is necessary to decide under which Tariff heading the services provided or rendered by the Appellant falls.
10.The confusion appears due to use of word "or" between the words "contractual execution of work" or "furnishing supplies" in Tariff heading 9809.0000. It is true that word "or" is a disjunctive particle that marks for alternative generally corresponding to "either". Normally "or" is disjunctive, but sometimes it is read as conjunctive to give effect to the manifest intention of the legislature as disclosed from the context. Here since the furnishing supplies alone cannot be taxed for invoking 9809.0000 it is necessary that 'composite services' i. e. those including the elements of both "providing or rendering execution of work and furnishing supplies should be present.
11. In view of the above discussion the appeal is allowed and the order-in-original and order-in- appeal are setaside. The case is remanded to the Assistant Commissioner concerned to determine the nature of service provided or rendered by the Appellant and to determine the proper Tariff heading under which the services provided by the Appellant falls after providing due opportunity of hearing to the appellant. The exercise will be completed within sixty days from the date of receipt of this Order.
The appeal is disposed of.