JUDGMENT MR. MUHAMMAD ASLAM, TECHNICAL MEMBER.-1. This appeal is directed against Sales Tax Order- in-Appeal No. 213 of 1997 passed by Collector (Appeals), Central Zone, Lahore.
2. Facts leading to this case are that while scrutinizing the accounts of the appellants, Audit Officer of the Audit Revenue Receipts, Government of Pakistan, Lahore, pointed out vide his Audit Observation No. 12 of 27th April, 1994 that M/s. Brothers Steel Mills, Kot Lakhpat, Lahore, had been inadvertently availing the facility of payment of sales tax on the basis of fixed capacity in terms of the provisions of SRO 151(I)/92 dated 2.3.1992 to which they were not entitled as they had automatic and not nonautomatic mills installed in their factory. As the appellants had deposited only the differential amount of sales tax (Rs. 71,35,885) and not the additional tax and the surcharge, the Department was requested to effect their recovery as well without further loss of time as these amounts were also due for the period October, 1991 to December, 1993.
3. The Superintendent Incharge of the Sales Tax Circle vide his letter No. l-DARR/92-93/544 dated 26.5.1994 asked the appellants to make payment of Rs. 9,34,80,09/- which by then had accumulated on account of additional tax and surcharge within seven days failing which he threatened to initiate proceedings against them under Rule 10 and 230 of the Central Excise Rules, 1944, read with section 11 and 13 of the Central Excises and Salt Act, 1944 and section 11 and 48 of the Sales Tax Act, 1990.
4. As the appellants did not honour the said letter, the Learned Deputy Collector, Sales Tax issued a formal Show-Cause Notice to them for the realization of the said amount.
5. While arguing their case before the Adjudicating Officer, the appellants took the stand that no additional tax or surcharge was recoverable from them because they had not deliberately violated any provision of law or withheld payment of the principal amount as soon as they came to know of its charge from them. They further 'contended that as they had themselves voluntarily made payment of the principal amount of Rs. 71,35,885 and the fact of chargeability of sales tax on the basis of actual supplies in their case was not even known to Department,- it would be too much if the law was stretched to demand additional tax and surcharge as well.
6. The Learned Deputy Collector did not agree with this line of reasoning and proceeded to determine the liability of additional tax of Rs. 93,48,003 and farther ordered calculation of surcharge and its realization alongwith.
7. These orders were challenged before Collector, Appeals, Central Zone, Lahore, reiterating that the amounts of additional tax and surcharge were not due from them as they had not done anything intentionally to circumvent the relevant provisions of law or jeopardize the legitimate interest of the national exchequer.
8. The Learned Collector Appeals too did not agree with their arguments and held that the appellants had opted to legally avail the facility made available to non-automatic Re-Rolling Mills not due to any ambiguity, confusion or mis-understanding but knowing fully well that in their case sales tax was due on the basis of actual supplies and not fixed capacity. He, therefore, confirmed the orders already passed at the original stage and rejected the appeal.
9. Before us as well, the stand adopted is the same. Sum total of their arguments is that:--
(i) As they themselves voluntarily made payment of the principal amount of sales tax, even before the objection was raised by the Audit Officer, determination of liability on account of additional sales tax and surcharge is not only unwarranted but even otherwise ultra-vires of law as the same is due only when someone deliberately violates the relevant provisions of law which is not so in their case.
(ii) The Department kept scrutinizing their Sales Tax Returns but never pointed out that they were not entitled to the fixed capacity system. This in itself shows that even the tax-collecting authorities were not so sure about this aspect which, in fait, was first pointed out by the office of the Auditor General and not the Collector of Sales Tax, Lahore. Here another related point is of great significance as it clearly bails them out from the charges levelled in the Show-Cause Notice i.e., the Auditing Agency itself says that the appellants had been "inadvertently" paying sales tax on the basis of fixed capacity whereas they were not entitled to it. How could the Department which itself exhibited in-efficiency all through level the wild charge against them that they had done all this deliberately and not out of ignorance or misunderstanding?
(iii) The orders appealed against have been passed in clear violation of the instructions of the Government contained in Sales Tax Circular No. 4 of 1995 dated 13.4.1995 wherein it is clearly laid down that additional sales tax should not be recovered in cases covered by sub-section (2) of Section 36 of the Sales Tax Act, 1990 because of reason of any inadvertence, error or misconstruction. Although they clearly fell in this category, the authorities concerned chose not to accommodate them, for reasons which need hardly any comment or a elaboration.
10. The Departmental Representative (Mr. Naseer,Superintendent Sales Tax) says that the stand of the appellants is illogical and un-reasonable and that they had deliberately jeopardized legitimate interest t)f the national exchequer. If they are allowed to go un-punished, hardly anyone else would willingly make payment of the amounts due.
11. In a similar case of M/s. Pearl Continental Hotel, Lahore, I who were subjected to additional tax plus surcharge vide Order- in-Original No. 55/94 dated 10.4.1994 although they had ' promptly made payment of the principal amount of sales tax soon after it was pointed out to them by the Audit that food supplies made by them to PIA for their domestic flights too were chargeable to sales tax vide SRO 548(I)/90 dated 7.6.1990, the Tribunal held them to be void as failure on the part of the appellant to pay the tax was not intentional or contumacious and least justified to be visited with any penalty etc., Relevant portion of the judgment is reproduced below: "8. The discretion stemmed from the term failure used in the section. It was held in PLD 1991 SC 963 to be something like wilful evasion of duty. Therefore, in a case where it could be demonstrated that the assessee did not wilfully evade the sales tax, it would perhaps be permissible to spare him of the penalty. Mr. Kazi emphasised that there were no indications of any wilfulness or deliberateness on the part of the appellant in evading payment of the sales tax in as much as they had made a record of the transactions of supplying foodstuff to the PIA, without making any attempt to conceal them and that it was the audit that noted those in the routine inspection.
According to him sub-section (2) of section 36 of the Act applied and that the same afforded good reasons for believing that the appellants did not purposely avoid payment thereof.
9. We feel the contention had some merit in that the deals were not suppressed. Conversely those were unmistakably mentioned in their record which attracted attention of the audit as distinguished from the routine staff of the Hotel Circle who never thought those supplies to be subject to the sales tax. Thus failure on the part of the appellant to pay the tax was not intentional or contumacious and least justified to be visited with any penalty etc. "
12. Exactly the same holds true in the instant case as well because herein also the appellants did not, at any stage, intentionally try to circumvent the relevant provisions of law. All what happened was due to in-advertence or mis-construction and not deliberate in any way. The mere fact that they promptly mad payment of the principal amount of sales tax there and then establishes their bonafides beyond any shadow of doubt.
13. That being so, demand of additional or surcharge in the given circumstances is rendered null and void in the eye of law and is declared to be so. As a result thereof, the Tribunal holds that nothing on account of additional tax and/or surcharge is now due from them in the instant case.
14. The appeal succeeds on merit. The order appealed against is set aside. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.