MRS. AMBREEN ASLAM, JUDICIAL MEMBER . Through this order , I intend to dispose off the titled appeal filed by the appellant/taxpayer against the Order bearing No.32/2015 dated 30-09-2015, passed by the learned Commissioner Inland Revenue (Appeals-III), Karachi on the following grounds:- "2. That learned Commissioner Inland Revenue (Appeals-Ill) has erred levying sales tax withholding rate of 17% instead of 1 % from the payment to unregistered persons.
3. That withholding sales tax was applicable at the time of payment and not when purchases are made.
4. That retrospective rate of withholding cannot be applied when payment is made.
2. Brief facts of the case as gathered from the record are that the appellant/tax payer qualifies as "withholding agent" as per clause (d) Rule (2) of Sales Tax Special Procedure (Withholding) Rules, 2007 since it a "registered as company and is liable to withhold sales tax on specified rate. As per data available in FBR e-portal, declared by the appellant/taxpayer for the tax periods July, 2013 to June, 2014 was scrutinized, it was revealed that the appellant/taxpayer made purchases again st the unregistered persons, but failed to deduct and deposit full amount of withholding sales tax in respective sales tax returns. The sales tax was to withhold @10% and 20% on distributors, wholesaler or other supplies as the case may be. The learned officer issued show-cause notice and ultimately impugned order was passed wherein ordered to pays short amount of withholding tax of Rs.539,441/- which is recoverable along with default surcharge and 5% penalty .
3. Being aggrieved and dissatisfied from the treatment meted out from ACIR, the appellant/taxpayer filed appeal before learned CIR(A) who vide his order dated 30.09.2015 confirmed the impugned order in the following words: "7. The above legal position would crystallize the appellant's liability as a withholding agent at different points, of time. The appellant was clearly required to withholding sales tax @ 17% on supplies made by the unregistered persons from 12-06-2013 to 04-10-2013 while after 04-10-2013 the rate of withholding tax dropped to 1% on supplies made by the unregistered persons. The appellant had made purchases from unregistered , persons amounting to Rs.10,097,094/- in July 2013 to June 2014 and thus he was required to withhold sales tax 17% and 1% which the taxpayer failed to do therefore the treatment meted out to the appellant was in accordance with law and is hereby confirmed."
4. Again being dissatisfied with the Order of learned CIR(A), the appellant/taxpayer preferred titled appeal before this Tribunal.
5. On the date of hearing, Mr. Faiz Ahmed, Advocate attended Court proceedings on behalf of the appellant/taxpayer while Mr . Ali Hassan, D.R attended on behalf of respondent/department.
6. During the course of proceedings of the case, the learned counsel of the appellant/taxpayer argued that the learned Commissioner Inland Revenue (Appeals-III) has erred levying sales tax withholding rate of 17% instead of 1% from the payment to unregistered persons. He further argued that the withholding sales tax was applicable at the time of payment and not when purchases are made. According to him, retrospe ctive rate of withholding cannot be applied when payment is made.
7. On the other hand, the learned D.R vehemently opposed the arguments advanced by the learned representative of the appellant/taxpayer and fully suppor ted the order passed by the learned CIR(A) by stating that the ACIR was not justified in not considering the contentions of the appellant/taxpayer and the order passed by the learned CIR(A) is legal, lawful and within the framework of law. Lastly , he prayed for dismissal of the instant appeal of the appellant/taxpayer .
8. I have considered 1 the arguments advanced by the learned representatives of both parties, perused the case record including impugned order and the grounds containing in the appeal. To decide the instant appeal the question before me is whether the impugned order requires interference?
9. Precisely grumble of the department against the taxpayer is that he was requir ed to withhold sales tax @ 17% which he failed to deduct and deposit. Record reveals that the taxpayer made purchases from unregistered person in July, 2013 to June 2014 and as per contentions of the taxpayer the officer erred in leving sales tax withholding rate of 17% instead of 1% from the time of payment to undersigned persons. Record reveals that taxpayer is a company by virtue of S.R.O. 48(1)/2013 is withholding agent. The said SRO commence in existence on 14 February 2013. To resolve controversy , I feel it is convenient to have relevant excerpt of S.R.O. 897(1)/2013, the same reads as follows: GOVERNMENT OF P AKIST AN MINISTR Y OF FINANCE, ECONOMIC AFFAIRS, STATISTIC AND REVENUE (REVENUE DIVISION) ** Islamabad, the 4th October , 2013 NOTIFICA TION (SALES T AX)
S.R. O. 897(1)12013 . ----In exercise of the powers conferred by subsection (6) and subsection (7) of section 3 and subsection (4) of section 7 of the Sales Tax Act, 1990 read with section 71 thereof, the Federal Government is pleased to direct that the following further amendments shall be made in Sales Tax Special Procedure (Withholding) Rules, 2007, namely:- In the aforesaid Rules.--
(a) in the preamble, for the words, figures and brackets "and subsection (4) of section 7", the words, figures, letter and brackets", subsection (4) of section 7 and clause (b) of subsection (1) of section 8" shall be substituted;
(b) in rule 2,--
(i) after sub-rule (2), the following new sub-rule shall be inserted, namely- "(2A) A withholding agent shall deduct an amount equal to one-tenth of the total sales tax shown on the sales tax invoice issued by persons registered as a wholesaler , dealer (including petroleum dealers) or distributor , and maketh the payment of the balance amount to him", and
(ii) for sub-rule (3), the following shall be substituted, namely:- "(3) (i) A withholding agent having Free Tax Number (FTN) and falling under claus e (a), (b) or (c) of sub-rule (2) of rule 1 shall, on purchases of taxable goods from person liable to be registered but not actually registered under Chapter I of the Sales Tax Rules, 2006, deduct sales tax at the applicable rate of the value of taxable supplies made to him from the payment due to the supplier and, unless otherwise specified in the contract between the buyer and the supplier , the amount of sales tax for the purpose of this rule shall be worked out on the basis of gross value of taxable supply .
(ii) A withholding agent, other than specified in clause (i), shall on purchase of taxable goods from persons liable to be registered but not actually registered under Chapter I of the Sales Tax Rules, 2006, deduct sales tax at the rate of one per cent of the value of taxable supplies made to him from the payment due to the supplier and the amount of sales tax for the purpose of this rule shall be worked out on the basis of gross value of taxable supply: Provided that the withholding agent shall not be entitled to reclaim or deduct the amount of tax withheld from such persons as input tax"; and ................................................. .................................................
10. From clause (2A), it is evident that withholding agent is bound to deduct an equal to one tenth of total sales tax, this rule further clarifies the categories of the entities whereas Rule (3)(ii) emphasis on withholding agent that the purchases which are made from unregistered person at the rate of one percent of the value of taxable supplies made to him from the payment due to the supplier and the amount of sales tax for the purpose of this rule shall be worked out on the basis of gross rate of taxable supply .
11. Keeping in mind above excerpt, I am reverted back to the facts of the case as the above SRO come in existence on 4th October , 2013 whereas the business arrived between the taxpayer and its supplier before 4th October 2013, so the transaction which was proceeded before 4th October , 2013, the rate of withholding will be applicable rate of 17% and from 4th October 2013 the withholding rate (a 1% would be applicable.
12. Since the taxpayer allegedly made purchases from unregistered persons and time of its business is 12-6-2013 to 4-10-2013 meaning thereby the taxpayer was required to withhold sales tax at the rate of 17% from 12-7-2013, 12-8- 2013, 12-9-2013 to 3-10-2013 and definitely from 4-10-2013 rate of withholdin g was reduced to 1% in case of unregistered person. So far question again and again was raised by the learned counsel for the taxpayer regarding time of payment is concerned, in this respect, I am of the view that the contract/agreement or business or purchases or credit they all are agreed arrangement between the taxpayer and its suppliers, the department has nothing to do with this affair as the law requires the things should be done in a prescribed manner , they should ought to do. Beside this neither 153 nor above quoted rules recognizing credit basic transaction or time of payment.
13. So in view of above, I am of the view that the impugned order does not require any interference the same is upheld with above modifications.
14. Appeal stands disposed of f in the manner as indicated.