MR. SHAHID MASOOD MANZAR (CHAIRMAN). (1). The above titled two sales tax appeals have been filed at the instance of appellant/registered person on the grounds as set forth in the memo of appeal, against order-in-appeal No. 25/2022 dated 12-01-2022 & order-in-appeal No. 108/2022 dated 31-03-2022 passed by the learned CIR (Appeals), Faisalabad. Since, above titled appeals involve common questions of law and facts, therefore, the same are being decided through this consolidated order.
2. Brief facts are that the appellant is registered under the Sales Tax Act, 1990 as a manufacturer and retailer engaged in retail sales to end-consumers from his retail outlets in Faisalabad. During analysis of sales tax returns and invoice summaries for the tax periods from August-2019 to June- 2020 and October, 2018 to November, 2020, certain discrepancies were pointed out that the appellant being a manufacturer has failed to pay amount of further tax @ 3% in respect of its supplies made to un-registered persons hence, he has violated the provisions of section 3(1A), 6, 7, 22, 23 and 26 of the Act. Resultantly, the appellant was called upon to show cause notice dated 04- 11-2020 and show cause notice dated 08-06-2021 as to why further tax worth Rs. 18,202,957/- and Rs. 11,287,548/- may not be recovered under section 11(2) of the Act alongwith default surcharge and penalty under section 34(1) and 33(19) ibid. The contravention proceedings initiated against the appellant, culminated in passing an assessment order dated 03-03-2021 & 25-08-2021 whereby the alleged demand was upheld against the appellant. Being discontented and aggrieved by the said orders, the appellant went in appeals before the learned CIR(A) and assailed the treatment meted out at assessm ent stage but the learned CIR(A) ride impugned orders dated 12-01-2022 & 31-03-2022 remanded back the both cases to the department. The appellant, to show discontent, has thrown challenge on the orders of learned CIR(A) by availing the remedy of second appeals enshrined under section 46 of the Act, 1990; hence the instant appeal proceedings.
3. The learned counsel of the appellant argued that the learned CIR(A) has given no exhaustive judgment instead of retrieving to primitive assertions already taken in the adjudication order and neither discussed the grounds filed nor even a single question has been attended to and answered by the CIR(A) while handing down the impugned judgment. Learned counsel for the appellant has vehemently contended that the impugned orders are erroneous in law and the same are based on misconceived facts. Learned counsel assailed that sales made to end-consumers were not subject to further tax under section 3(1A) of the Act read with S.R.O. 648(I)/2013 dated 9th July 2013 wherein, supply of goods directly to the end-consumers have been excluded from the provisions of section 3(1A) of the Sales Tax Act, 1990. In this regard, learned AR has also placed reliance on the judgments of ATIR, Lahore (2016 PTD (Trib.) 2675) & (2021 PTD (Trib.) 1266).
4. Conversely, when the learned DR confronted with the tax situation cited supra, in counter arguments, she has assailed the case on similar grounds and charges as leveled earlier in impugned show cause notice as well as adjudged in consequent orders and nothing newel, except to reiterate earlier set of contentions, has been put forth by her and fully supported the orders passed by both the authorities below simply re-endorsing the basis evolved therein.
5. We have heard arguments of both the rival parties and have examined the relevant provisions of law as well as the case record and the case laws cited by the learned AR.
It is an admitted fact that the appellant being a retailer integrated its point of sale with the Online Computer System of FBR, has supplied its textile products to the persons who were neither liable for sales tax registration nor were actually registered under the Sales Tax Act, 1990 as undoubtedly, all of them were "End-Consumers". The appellant has made supplies to the general public for their own use as such, the alleged buyers are end-consumers whereas liability to pay further tax under section 3(1A) of the Act arises only when a taxable supply is made in the course of furtherance of business/taxable activity. The meaning of "in furtherance of" indicative of the fact that the taxable supply has been made for the enhancement or further development of the business/taxable activity contrarily, the appellant has supplied the alleged goods to the general public for their own use and the said goods were never used in the course of furtherance of business/taxable activities.
Reliance is placed on the judgment of Hon'ble Supreme Court of Pakistan in case of "Collector of Customs Sales Tax & Central Excise, etc vs. M/s. Sanghar Sugar Mills Ltd, Karachi & others" reported as (PTCL 2007 CL 565).
There is nobody denying the fact that the appellant is engaged in retail sales of its textile products to End-Consumers from his retail outlets as is also evident from his computer profile as well as Form of registration 181 and no further tax is chargeable thereon under the first proviso to sub- section (1A) of section 3 of the Act, wherein it is Federal Government who may by a notification in Official Gazette, specify taxable supplies in respect of which further tax shall not be charged, levied and paid. Accordingly, sales made to end-consumers were not subject to levy of further tax under section 3(1A) of the Act in the light of cumulative reading of section 3(1A) of the Act read with S.R.O.
648(I)/2013 dated 9th July 2013 wherein, supply of goods directly to the end-consumers have been excluded from the provisions of section 3(1A) of the Sales Tax Act, 1990 therefore; no further tax is payable thereon.
If the goods are supplied to other than registered persons i.e. to end-consumers, it would in no case injure the Government treasury because the tax is charged on the market price, i.e. price to be paid by ultimately consumer meaning thereby that the government treasury collects the ultimate tax (which it would have collected when supplied goods were actually sold in the market) well in advance at the time of sale of goods from the sale outlet or factory manufacturing premises of the appellant without any fear of returning it to any person in case of refunds because end- consumer cannot claim it as input tax under the law, therefore, charging of further tax is illegal and unlawful in the given circumstances. Reliance is placed on the judgment of ATIR, Lahore in case of "M/s. Nimsay Redefining Style (Pvt) Limited, Faisalabad vs. The CIR, RTO, Faisalabad" reported at (2021 PTD (Trib) 1266).
The expression "End-Consumers" has not been defined in the Act therefore, its extent and scope would be determined by reference to the ordinary dictionary meanings and under the established principles of statute interpretation, commonly known as the principle of `Ejusdem Generis'. This principle provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision of the law. The expression "End-Consumers" as used in the cited notification is to be interpreted in the light of words associated to it and not in pure isolation as per whims and wishes of the Inland Revenue.
Based on what has been discussed hereinabove, both appeals are accepted and the impugned show cause notices and consequent orders of the authorities below, being devoid of legal substance are hereby set aside.
6. The instant two appeals filed by the registered person are disposed of in the manners as indicated above.