JUDGMENT: MR. MUHAMMAD ASLAM, TECHNICAL MEMBER--1. This appeal has been filed by M/s. Packages Limited, Lahore, against the order-in-appeal No, 216 of 1997 dated 26.6.1997 passed by the Collector Appeals, Central Zone, Lahore.
2. M/s. Packages Limited, Amar Sidhu, Lahore, had filed a refund claim of sales tax amounting to Rs, 73.26 million. On scrutiny of their sales tax record for the years 1994, 1995 and 1996, it was found that they had claimed excess amount of sales tax and had also availed in-admissible and illegal input tax adjustment amounting to Rs, 41,81,593 and Rs, 1,38,48,578 respectively. It was alleged that M/s. Packages Limited, Lahore had been claiming input tax as per sales tax mentioned in the bills of entry despite the fact that they had paid only 50% of sales tax and balance was yet to be paid by them in due course of time in terms of Notification SRO 490(1)/91 dated 30.5.1991. M/s. Packages Limited, Lahore, were, therefore, alleged to have wrongly claimed/adjusted input tax. A contravention case was made out against them and reported to the Additional Collector Sales Tax-I, Lahore, who while adjudicating the case ordered payment of Rs, 41,81,593. Additional tax amounting to Rs, 1,81,15,438 and surcharge amounting to Rs, 52,78,595 was also ordered to be paid.
Besides determining the aforesaid liabilities, penalty of Rs, 83,63,186 under section 33 of the Sales Tax Act, 1990, was also imposed on them. The appellants filed an appeal before the Collector of Customs, Central Excise and Sales Tax (Appeals), Central Zone, Lahore, who confirmed the findings of the Adjudicating Authority, hence this appeal.
3. Besides reiterating the written version which is contained in the memo of appeal, learned counsel for the appellants, Mr. Ashtar Ausaf Ali, in particular, emphasized that his clients acted under a bona fide belief that the law as it then stood required the holding of Bill of Entry only and not a proof for the actual payment for the purpose of tax adjustment. If it was not so, the prerequisite of "payment" would not have been incorporated in section 7 of the Sales Tax Act, 1990 as late as in the year 1996. This in itself amplifies that prior to this amendment, actual payment was not a condition precedent. It is only after the amendment that actual payment is required for claiming adjustment, as the word "paid" has been inserted in the relevant statute. Its absence from the Statute Book earlier was not insignificant and this is what led the appellants to believe bona fidely that the adjustment claimed by them was legal and proper. Another factor which further reinforced their interpretation of the relevant provisions of law was that althrough the Department of Sales Tax never raised any objection to whom they were submitting their Tax Returns regularly.
4. The learned counsel requested for the remission of amounts adjudged on 'account of additional tax, surcharge and penalties, contending that their retention was not legal as no mala fide could be attributed to the appellants.
5. The learned Departmental Representative strongly objected to the aforesaid pleas advanced by the appellants. His stand was that the appellants had intentionally retained and misused government money for over two years which itself speaks volumes about their mala fides in the matter. Actual payment of input-tax has always remained a mandatory requirement of law as laid down in section 2(9)(b) read with section 3 of the Sales Tax Act, 1990. The amendment made in section 7 ibid in the year 1996 simply cemented the position as it stood otherwise and did not amount to introducing a law afresh. As the appellants had made payment of only 50% of the amount due on account of sales tax and the balance was deferred under the Deferment of Import Duties Rules, 1991 prescribed vide SRO 490(1)/91, they were entitled to adjustment only to this extent and not of the whole amount as the balance was yet to be paid by them after a period of three years. An interpretation to the contrary was, no doubt, illogical and, therefore, not tenable in the eye of law. As a matter of fact, it would amount to making mockery of law.
6. The learned Departmental Representative requested for the confirmation of the orders appealed against and rejection of the appeal, claiming that the same was devoid of any merit, substance or legal force.
7. The only point to be determined for the disposal of this appeal is as to whether the appellants acted mala fidely or otherwise took advantage of a lacuna in law. The mere fact that the government had to effect amendment in law and insert the word "paid" in section 7 of the Sales Tax Act, 1990 leaves no doubt that prior to that anyone could take advantage and claim full adjustment as the condition precedent till then was only of the possession of Bill of Entry and not 100% payment in cash. This is exactly what the appellants did. In a situation like this, to say that the appellants had deliberately tried to jeopardize the legitimate interest of the State Exchequer, would tantamount to being too restrictive, inward-looking and completely obvious to the spirit and content of law. That being so, the Tribunal is pleased to hold that the demand of additional tax and surcharge in the instant case was without lawful authority and so was the imposition of penalties.
The same are, therefore, remitted in toto.
8. The appeal succeeds on merit.