CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).--- The titled appeal has been filed by the registered person is directed against Order-in-Appeal No.91/2017, dated 21.02.2017, passed by the learned CIR(A), Faisalabad.
2. Briefly stated facts of the case are that the registered person is engaged in the business of wholesale. The case of the registered person was selected for audit under section 72B of the Sales Tax Act, 1990 and the audit proceedings for the period 07/201 1 to 06/2012 was accordingly completed. During the course of audit proceedings, following discrepancies were detected:-- i. Suppression/concealment of un-registered sales/supplies. ii. Non payment of sales tax on disposal of Empty Polypropylene bags and paper cones. iii. Non payment of sales tax on disposal of yarn/fabric wastage. iv. Late Filing of Sales Tax Returns.
On the above of above discrepancies, the registered person was called upon to. show cause under section 11(2) as to why sales tax amount of Rs. 1,358,273/- may not be recovered along with default surcharge and penalty .
Adjudication proceedings were culmin ated in passing the impugned Order-in-Original No.17/2016 dated 02.02.2016, whereas sales tax amount of Rs.1,358,273/- was ordered to be recovered 11(3) along with default surcharge under section 34 and penalty under sections 33(1) and 11(a)(c). On appeal filed, the learned CIR(A) upheld the action of the assessing authority . Hence this appeal.
3. At the very outset of his arguments, the learned counsel contented that in the instant case, the audit proceedings were illegally completed under section 11(3) of the Sales Tax Act, 1990 which section was inserted through Finance Act, 2012 dated 26-06-2012. Continuing his arguments, learned counsel submits that recovery of sales tax not levied and not charged for the period from 1st July, 2009 to 30th June, 2012 is been adjudged through impugned show-cause notice and consequent adjudication order by invoking provisions of section 11(3) of the Act whereas, it has to be adjudged under section 36(1) ibid as the revisions of section 11 have been inserted to the Statute Book with effect from 1st July, 2012 in the Finance Act, 2012. Therefore, these provisions are not applicable retrospectively as no saving clause for protection of provisions of section 36 has been found given therein and in absence of all this, recovery of sales tax, short levied, not levied or amount erroneously refunded cannot be made adjudged under section 11(2)/(3). According to learned counsel, the provisions of section 36(1) or as the case may be, section 36(2) of the Act will come into play in all old cases of recovery for the period prior to 1st July, 2012. In support of his arguments, the learned AR placed reliance on the reported decision cited as 2015 PTD (T rib.) 416 .
4. The learned counsel further contented that in the instant case textile goods remained zero rated unconditionally without any restriction thereof till incep tion of notification vide SRO No.283(I) /2011 dated 01.04.201 1 made applicable retrospectively on 15-04-201 1, wherein zero rating facility has been restricted to registered person only and in case supply of notified goods is made to unregistered persons, sales tax shall be charged at the rate of 6% thereon, which has been revised to 4% under SRO No.1058(I)/201 1 dated 23-11-201 1 and again has been revised to 5% under SRO No.1125(I)/201 1 dated 31-12-201 1. By virtue of all these statutory regulatory amendments, the applicable rate of sales tax on textile goods for the period from 15.03.201 1 to 30.06.2012 is six percent, four percent and five percent respectively and in no way, standard rate of sales tax of sixteen percent or as the case may be; seventeen percent can be applied on its supply made in that very period. Reliance was placed in case reported as 2018 PTD 2364 (Lahore High Court); wherein his Lordships has held that: "12. Lest there remains any doubt that supplies made by the five sectors under SRO No. 1125(1)1201 1 were not exempt from 'further tax", it may be state d that section 4 contains a non-obstante clause which makes a specific reference to section 3. A non-obstante clause is a legislative tool employed to give overriding effect to certain provisions over some contrary provisions that are to be found in the same enactme nt or in a different enactment in order to avoid the operation and effect of all contrary provisions. The Hon'ble Supreme Court in Messrs E.F. U.
General Insurance Company Limited v. The Federation of Pakistan PLD 1997 SC 700 = 1997 PTD 1693 explained the scope of such a clause by stating as under: Thus a non-obstante clause is usually used in a provision to indicate that the provision should prevail despite anything to the contrary in the provision mentioned in non-obstante clause. In case there is any inconsistency between the non-obstante clause and another provision, one of the objects of such a clause is to indicate that it is the non-obstante clause which, would prevail over the other clause.
Similarly , the Indian Supreme Court in Chandavarkar S.R. Rao v. Ashalata S. Guram 1986 4 SCC 447 held as under .'
A clause beginning with the expression "notwithstanding anything contained in this Act or in some particular provision in the Act or in some particular provision in the Act or in some particula r Act or in any law for the time being in force, or in any contract" is more often than not appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision of the Act or the contract mentioned in the non-obstante clause. It is equivalent to saying that in-spite of the provision of the Act or any other Act mentioned in the non-obstante clause or any contract or document mentioned in the enactment following it will have its full operation or that the provisions embraced in the non-obstante clause would not be an impediment for an operation of the enactment.
In view of the non-obstante clause, section 4 and the incident of making payment of tax at the rate of zero percent on the supplies made to an unregistered person will not attract the levy of "further tax" under section 3(1A). It is, therefore, axiomatic that the supplies made by the petitioner being zero rated under section 4 cannot be subjected to further tax under section 3(1A)."
Further para (14) of the citation mentioned supra is as under: "14. All the above considerations lead this Court to the conclusion that the sectors mentioned in SRO No.1125(I)/201 1, which are entitled to zero rating are not required to pay "further tax" under section 3(1A) of the Act. This Court is being asked to read in section 4 a limitation which -would constraint its operation so as to make zero rating facility granted by it to be not covered by section 3(1A). In my respectful opinion, it is not permissible in case of a provision of the nature before this Court to read into it something by implication and make it smaller than what is expressed by its scope. The objec tive of section 4 and the considerations grounded in the scheme of SRO No.1125(I)/201 1 require that section 3(1A) must as far as possible be read so as to harmonize it with the former provision. This is the only way I am able to read section 4 after giving the words of that section their proper legal meaning in the context of Sales T ax Act."
5. On the contrary the learned DR appearing on behalf of the department has supported the impugned order passed by the authority below for the reasons recorded therein.
6. We have heard the arguments put forth by the rival parties of both the sides and have carefully gone through the available record. Submission made by the learned AR at the bar carries weight. Admittedly , the tax periods involved in the present case is relevant to the months of July 2011 to June 2012 and the assessing authority has illegally invoked the provisions of section 11 to recover the tax for the said periods. The provisions of section 11 came into statute book through Finance Act, 2012, therefore, these provisions are not applicable retrospectively to the periods under appeal. The issue in hand has already been decided by this Tribunal in a plethora of decisions including relied upon by the learned AR reported as 2015 PTD (Trib.) 416. The relevant portion of the said decision is reproduced hereunder:-- "Recovery of sales tax not levied and not charged on supply of goods made during July, 2009 to June, 2012 in the impugned show-cause notice and consequent adjudication order has been adjudge d under section 11(3) of the Act, which came into being w.e.f ., 1st July, 2012 by virtue of the Finance Act, 2012. The provisions of said section have not been made applicable retrospectively by the legislation consciously as the provisions of section 36(1) providing limitation of five years and section 36(2) providing limitation of three years respectively for issuance of show-cause notice indifferent tax situations have been kept intact for all recovery cases for the period prior to 1st July, 2012 on account of sales tax short levied, not levied or any amount erroneously refunded. Despite deletion of section 36 from the Statute Book, we have currently found its existence in section 25(3) for audit purposes and in section 45B for appeal before the Commissioner Inland Revenue, in all such old recovery cases pertaining to the period before its deletion. No saving clause for cases of section 36 particularly the cases falling under section 36(2) of the Act has been provided in section 11(3) of the Act, therefore, in all old cases, recovery of sales tax has to be adjudged under section 36(1) or as the case may be, under section 36(2) ibid. Even otherw ise, provisions of section 11(3) are not deemed to be curative, remedial and beneficial in nature as it curtails right of a registered person not to be called upon to show-cause notice after expiry of time limitation under section 36(2) of the Act by impeding his with tax liabilities beyond three years in case of inadvertence, error and misconstruction as well, hence, cannot be made applicable retrospectively on this general principle of law. As such learned adjudicating authority has erred in involving provisions of section 11(3) of the Act for recovery of sales tax for the period prior to its insertion in all cases squarely falling under section 36(1) or as the case may be under section 36(2) of the Act."
7. Keeping in view the above discussion, the instant appeal is accepted by vacating the orders passed by both the authorities below being devoid of legal substance.
8. Appeal succeeds in the above manner .