JUSTICE (R) AKHTAR HASSAN, CHAIRMAN.-1. This appeal assails correctness of the Order-in-Original No. 55/94 dated 10-4-1994, passed by the learned Collector, Central Excise and Sales Tax, Lahore, whereby the appellant M/s. Pearl Continental Hotel, Lahore, were directed to pay sales tax amounting to Rs.48,84,084/- along with the additional tax and surcharge under sections 36 and 34 of the Sales Tax Act, 1990. They were further directed to pay a penalty of Rs.97,68,168/- u/S. 33(2) of the aforesaid Act for having violated its various provisions mentioned in the Show Cause Notice.
2. The staff of the Hotel Circle of the Central Excise and Sales Tax Department, Lahore, during audit of the accounts of the appellant Hotel for the period 8/92 to 10/93 found that they had failed to pay the sales tax on the food articles supplied by them out of the Hotel as catering supplier to the PIA for their domestic flights, lt was noted that the relevant SRO 598 (l)/90 dated 7-6-1990 did not provide exemption from payment of the sales tax on food articles supplied out of Hotels or Restaurants.
Accordingly their liability was worked out to be:-
(A)
1. Value of food supplied for 1.8.92 to 15.6.93
2. Central Excise duty paid @ 10%
3. Duty paid value
4. Amount of Sales Tax required to be paid @ 12.5%.
5. Addl. Sales Tax payable under section 34 of Sales Tax Act, 1990
(B)
1. Value of the supplies from 16-6-1993 to 31-10-1993 Required to be 1 A(4)1 B(4).
3. A Show Cause Notice was served upon the appellant requiring them to pay up the arrears or else face the recovery proceedings, ln reply to the notice, it was urged by the appellant-concerned that since they were not a registered person under the Sales Tax Act, 1990, no additional tax could be exacted from them and that at best only a penalty u/S. 33(1) could be imposed upon them. They further pleaded that after having fulfilled all the conditions of section 65 of the Act, they had claimed 'waiver of the sales tax' from the Government (CBR) by a representation already made on that behalf and that the same was under active consideration.
4. These pleas were spurned holding that the appellant- hotel were a person liable to be registered and hence amenable to a penalty u/S. 33(2). Like-wise the claim for waiver of the sales tax was held not acceptable inasmuch as there was no notification issued to that effect by the Government.
5. Initially the appellant preferred an appeal before the CBR which of course remanded the case but the High Court in a Writ Petition set aside the relevant order holding that an appeal lay only before this Tribunal.
6. Mr. Tariq Qazi, Advocate counsel for the appellant relying heavily on PTCL 1995, CL Page 1 contended that the additional tax and the surcharge u/S. 34 of the Sales Tax Act, 1990 were not an intractable liability of a tax payer inasmuch it all depended upon his attitude in suffering the default which if not deliberate, intentional, or contumacious would not qualify for being visited with the same. He emphasised that the phraseography of the section left much room for the adjudicating authority to consider if imposition of the additional tax and the penalty were really justified in the peculiar circumstances of a particular case and that conversely if it was demonstrated that this failure was not conscious or designed, there was no reason to burden the tax-payer with this additional charge which eventually being penal in nature, was meant to punish only recalcitrant cases of default.
7. The argument was not without force inasmuch as the phraseography of the section and its interpretation made in the precedent case provided ample support for it. Section 34 of the Sales Tax Act, 1990 reads:- "Additional Tax.- Notwithstanding the provisions of section 11, if a registered person fails to pay the tax within the time specified in section 6, he shall, in addition to the tax due, be liable to pay additional tax and surcharge at the following rates. lt will be appreciated that the expression "shall be liable to pay.......... "used in the above section was held in the precedent case to be quite different from the phrase "shall pay" primarily on the ground that it vested discretion in the adjudicating authority to levy or not to levy the additional tax inspire of failure on the part of the assessee to pay the main tax in time, lt was observed by referring to the typical meanings of the term "liable to pay" that it merely made the person answerable, likely or probably; obligated... or accountable and not necessarily mean that the extra burden must always be imposed. The precise view taken was:- "Now if in the words of Jewett liable to perform an obligation is potentially subject to that obligation, it means that the obligation may be enforced against him, not that it must be.... and this means that the penalty may be enforced against him at the discretion of the authority entitled to enforce the penalty".
Obviously the discretion left much to the judgment of the adjudicating authority in assessing the peculiar circumstances of the case without being under an obligation to award the penalty, much less in toto.
8. The discretion stemmed from the term failure used in the section, lt was held in PLD 1991 SC 963 to be something like willful evasion of duty. Therefore, in a case where it could be demonstrated that the assessee did not willfully 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 willfulness or deliberateness on the part of the appellant in evading payment of the sales tax inasmuch 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 appellant 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.
10. The appeal is partly allowed. While the sales tax amounting to Rs.48,84,084/- as determined below shall be paid by the appellant, they shall not pay the additional tax and the surcharge under sections 36 and 34 of the Sales Tax Act, 1990.
11. However the adjudicating officer seemingly appeared correct in awarding penalty under section 33(2) to the tune of Rs.97,168/- being twice the amount of the tax involved. This the requirement of the section as it stood before its substitution effected on 1-7-1994. Counsel submitted that the peculiar facts of the case did not fall under any of the clauses of sub-section (2) ibid and that hence imposition of the penalty thereunder was not sustainable. The contention does not appear to be much wrong as clauses (a) to (f) of sub-section (2) enumerate specific grounds on which the penalty can be founded, lt was not shown which of those clauses was specifically attracted against the appellant, and to my reading, mere omission to pay the tax, as held in the earlier parts of the judgment, did not provide justification for awarding the penalty. At the most the typical omission might be covered by sub-section (4) of section 33, as a residuary provision and the same fixes the penalty at five thousand rupees, lt would not therefore, as large an amount as Rs.97,68,168/- calculated in the order under appeal. Instead it shall only be Rs.5,000/- and accordingly it is reduced, ln brief, the appellant shall now pay only Rs.48,84,084/- (the sales tax) and in addition Rs.5,000/- (as penalty).
12. The appeal stands partly accepted in these terms by "modifying" the Order-in-Original. Anything paid in excess shall be refunded.