MR. JUSTICE NASIR-UL-MULK.-(1). New Greens Hotel, through its proprietor has filed this S.A.O, under section 47 of the Sales Tax Act, 1990 against the Order-in-Appeal No. 799/PB/2002, dated 04.02.2003 of the Customs, Central Excise and Sales Tax Appellate Tribunal, Peshawar Bench as well as the Order-in-Original No. 29/2002, dated 18.03.2002 passed by the Deputy Collector (Adjudication), Peshawar.
2. The appellant was issued Central Excise License on 06.12.1997 for the supply of liquor to valid permit holders. On 16.11.2000, the Deputy Collector (Adjudication), Peshawar, issued show cause notice to the appellant, based on the report of the Audit Officer. It was alleged that the appellant had made taxable supplies under the Sales Tax Act, 1990 read with the Retail Tax Rule, 1998 for Alcoholic Beverages during the period 01.09.1998 to 15.08.1999, but failed to get it registered and to pay the retail tax, amounting to Rs. 1884047/-. The appellant was directed to show cause as to why they should not pay within 10 days the said amount and the additional tax to be calculated at the time of the actual deposit. The appellant submitted reply to the show cause notice, contesting their liability to pay.
3. The appellant had prayed for the withdrawal of the show cause notice on 9 grounds, which has been reproduced in the order in original. Grounds 2, 3 and 9 are material for the present appeal.
They are:- "2. That all the liquor acquired during the audited period were for self consumption as was served within the premises of the Hotel, hence, falls within definition of excisable services liable to tax under section 4(3) of the Central Excises Act, 1944, therefore, the requisite C.E.D, was paid thereon, hence, being construed as served within the premises, thus, this self consumption cannot be taken as supply of goods within the purview of Section 3(3) of the Sales Tax Act, 1990 otherwise tills situation would create an irreconcilable anomaly whereas the respondent activity is being construed as service while under the Sales Tax it is being treated vide the instant show cause notice as supply. This anomaly is impermissible.
3. That without prejudice, the respondent is not liable to be registered as retailer for being not falling within the definition of retailer which is defined in the Sales Tax Act, 1990 as under- Section 2(28) "Retailer" means a person [not being a manufacturer or producer or an importer.] supplying goods to general public for the purpose of consumption.
9. That in an identical case Avari Hotel Limited Vs. The Collector, Sales Tax and others it has been held that during the subject period the serving and supplying of liquor to the permit holders do not make liable the licence holder to be registered as a Retailer under the provision of Sales Tax Act, 1990. On the same judgment the respondent also rely which is reported as PTCL 2000 CL 696".
4. The plea of the appellant was not accepted. The judgment of the Lahore High Court in the case of Avari Hotel Limited v. Collector was not followed by the Collector on the ground that the same had been impugned before the Hon'ble Supreme Court. The appellant was therefore directed to pay the amount stated in the show case notice.
5. The order in original was challenged before the appellant Tribunal. By the time the appeal came up for hearing, the Honourable Supreme Court had reversed the judgment of the Lahore High Court in the case of Avari Hotel Limited in Civil Appeal No. 1587 of 1999 and it was held that the permit holders to whom the license holders supplied liquor fall within the definition of "general public" referred to in the definition of retailer given in section 2(28) of the Sales Tax Act. That subsequently the license holders of alcoholic beverages were liable to pay Sales Tax on the beverages supplied by them to the permit holders. The judgment of the Appellate Tribunal reveals that in the light of the judgment of the Honourable Supreme Court the counsel for the appellant conceded that^the said judgment applied to the appellant's case. However, the learned counsel had claimed that as he was making taxable supplies within the meaning of the Sales Tax Act, he was not liable to pay central excise duty during the relevant period for the services in the shape of supplying alcohol It was therefore claimed that during the period of 9/98 to 9/99 the appellant was not liable to pay central excise duty which he had already paid. The learned counsel therefore prayed that a sum of Rs. 1557870/- paid as central excise duty during the said period be adjusted against the sales tax now levied by the Collector. The appellant Tribunal did not accept this plea and held that the prayer was not admissible under the law in that central excise duty and the sales tax were leviable under different statutes.
6. The present appeal was admitted to full hearing to consider the following three questions of law formulated in the memorandum of appeal:- I. Under the facts and circumstances of the case, whether the Appellate Tribunal order is erred for not allowing adjustment of the CENTRAL EXCISE DUTY paid on liquor during the period 01-09-1998 to 15-08-1999 in lieu of SALES TAX payable during the same period as held by the Appellate Tribunal in the impugned order in view of the Honourable Supreme Court judgment in case of the Collector, Sales Tax, Lahore Vs. Avari Hotel Limited reported as PTCL 2002 CL 322 declaring selling liquors to permit holder as a supply of taxable goods as a RETAILER liable to tax under the Sales Tax Act, 1990.
II. Whether under the facts and circumstances of the case, whereas it has been declared by the august Supreme Court that supply of liquor during the aforementioned period was a taxable supply of goods in terms of the Sales Tax Act, 1990, the respondent are not bound to allow the input adjustment of the tax paid on purchases of the liquor during that period, the impugned order is sub-silentio on the issue.
III. Whether under the facts and circumstances of the case, whereas virtually by mistake of law, the Appellant has paid the demanded amount during, the subject period instead paying in sales tax head paid it in the Central Excise head, the Appellant is liable to additional tax under the Section 34 of the Sales Tax Act, 1990 for having no net loss to the treasury. The impugned order is sub-silentio on the issue.
7. At the hearing of the appeal Mr. Amir Javed, Advocate, appearing for the Collector of Sales Tax raised preliminary objection that the appellant, namely M/s. New Greens Hotel has no locus standi to file the present appeal as the license for the supply of liquor was issued in the name of Director Green Hotel, who at the relevant time was Syed Aqil Shah who has since long passed away.
Responding to the said objection, the learned counsel representing the petitioner Mr. Isaac Ali Qazi submitted that the show cause notice was issued to the appellant's establishment, whose sole proprietor is Syed Aqil Shah and therefore it does not lie in the mouth of the counsel representing the Collector, Sales Tax to raise such an objection. We would agree with the learned counsel for the appellant and over-rule the preliminary objection as the Collector, Sales Tax has himself issued the show cause notice in the name of M/s. New Greens Hotel, Peshawar Cantonment and there has never been any dispute that Syed Aqil Shah is its proprietor.
8. The learned counsel appearing for the appellant elaborated the questions of law formulated in the appeal and submitted that the Appellate Tribunal has erred in not allowing the appellant adjustment of the Central Excise Duty erroneously prepared by the appellant against the demand of the Sales Tax. He referred to the proviso to section 3 of the Central Excise and Sales Tax Act and Letter No. 3(70)STM/99, dated 20.12.1999 and submitted that the law permits adjustment of the Central Excise duty against the arrears of sales tax. The learned counsel reiterated that since the appellant has paid excise duty on the supply of alcohol as services he cannot be subjected to the sales tax on the same supply in that if the supply of alcohol is considered as supply of goods it cannot be simultaneously treated as providing excisable services. The learned counsel also stressed that the petitioner appellant had not been allowed input adjustment of the sales tax amounting to Rs. 440291/- paid by the appellant on the purchase of the liquor during the relevant period.
9. The learned counsel representing the respondent submitted that appeal under section 47 of the Sales Tax to the High Court lies only on a question of law arising out of the order of the Tribunal passed under section 46 of the Act and that in the present appeal points have been raised regarding which the appellate Tribunal has given no determination. The question of whether or not the appellant is liable to pay sales tax on supplies of alcoholic beverages stands settled by the Honourable Supreme Court in the case of Collector of Sales Tax, Lahore v. Avari Hotel Limited and other (PTCL 2000 page 322) where the apex Court reversed the decision of the Lahore High Court and held that to whom liquor is supplied by the license holder would fall within the description of general public stated in the definition "retailer" given in subsection (28) of section 2 of the Sales Tax Act. Since the decision of the Honourable Supreme Court was pronounced during the hearing of the appeal before the Tribunal the appellate Tribunal restricted itself to the question of adjustment of the Central Excise Duty paid by the appellant in the relevant period of 01.09.1998 to 15.08.1999 is against the sales tax payable during the said period and which was questioned before the Tribunal. This is also the main question raised before us.
10. The appellant had raised the question of adjustment before the Adjudicating Officer but no finding thereon has been given. The appellate Tribunal declined adjustment simply on the ground that the Central Excise duty and the sales tax are levied under different statutes and therefore not amenable to adjustment against each other. The Tribunal did not consider the question of adjustment in the light of section 48 of the Sales Tax Act and the letter of the C.B.R, dated 10.12.1999.
According to the third proviso to subsection (1) of section 3 of the Central Excises Act, the Excise Duty under the Act "shall be levied and collected as if were tax payable under section 3 of the Sales Tax Act, 1990, and all the provision of that Act and the rules, notifications, orders and instructions made or issued there under shall, as far as may be and with necessary modification, apply".
Section 48(1) (clause a) provides:- "48. Recovery of arrears of tax.- (1) where any amount of tax levied, penalty imposed or demand raised under any bond or other instrument executed under this Act due from any person, the officer of sale tax may:-
(a) deduct '.Ne amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such officer or any officer of Income Tax, Customs or Central Excise Department." Thus, under the said provision, the officer of the Sales Tax empowered to deduct for the levy of Sales Tax any amount owed to the assessor that may be in the control of an officer of the Central Excise Department. The position is further clarified by the letter dated 20.12.1999, which refers to Rule 10 of the Sales Tax Refund Rules, 1998. The letter runs as follows:- "I am directed to enclose copy of the Chairman, CBR's C. No. 1(1) Ch. CBR/99, dated 17th December, 1999 on the above subject and to say that Rule 10 of the Sales Tax Refund Rules, 1998 already provides as hereunder:- "10. Deduction to be made from a sanction Order.- Where any tax, additional tax or penalty under this Act or under the Central Excises Act, 1944 (1 of 1944). Wealth Tax Act, 1963 (XV of 1963). Customs Act, 1969 (IV of 1969), and Income Tax Ordinance, 1979 (XXXI of 1979), are outstanding against the claimant, such amount of arrears shall be deducted from the sanctioned amount of claim before issuing him a cheque for the balance, if any.".
From the above provisions it is not difficult to conclude that the law itself has made provisions for adjustment of one tax against another. It is also stated at the Bar that the Collector Sales Tax has also been entrusted with the powers of adjudication of the Central Excise Officer, though there is no impediment for making adjustment claimed by the appellant.
11. Having held that the appellant is entitled to adjustment of the Central Excise duty payable by him as against the Sales Tax for the relevant period, there is difficulty in granting relief to the appellant. The appellant had in its reply to the show cause notice issued by the Deputy Collector (Adjudication) taken a ground that if the appellant was liable to pay sales tax on supply of liquor as goods he could not be subjected to excise duty for the same supply a$ services. The Collector however did not in the order in original give any finding on this ground. Similarly, the same ground was explicitly taken before the appellate Tribunal. Without touching the merits of this ground the Tribunal proceeded to determine whether adjustment of the two taxes was permissible. There is therefore no finding of either the adjudicating officer or the Tribunal as to whether or not the appellant was not liable to pay excise duty on the supply of liquor when he has been subjected to sales tax.
12. The appellant had though urged before the adjudicating officer that Central Excise Duty and Sales Tax cannot be simultaneously imposed on the same supply. He had not in his reply to the show cause notice mentioned the amount of excise duty that he has paid during the relevant period and regarding which he claims adjustment. So also he has not given the figure of the Sales Tax that he had paid on purchases of the liquor for which he now seeks adjustment against the output tax. These figures were mentioned for the first time in the memorandum of appeal before the appellate Tribunal. The appellate Tribunal however did not advert to this aspect of the case as it confined itself to the question of adjustment. Thus, there is no determination either by the adjudication officer or by the Tribunal as regarding the amount of excise duty paid by the appellant during the said period as well as the sales tax paid by the appellant on the purchase of liquor during the said period.
13. As a result before any adjustment could be allowed to the appellant it would be necessary to first determine whether the appellant was not liable to pay excise duty during the relevant period and if not the amount of duty to the refund of which he was entitled. Similarly, the sales tax paid by the appellant during the said period, required determination.
14. For the foregoing reasons, we hold that the petitioner- appellant would be entitled to the adjustment of excise duty paid by him during 01.09.1998 to 15.08.1999 as against the sales tax, if he is found to be not liable to pay the same. However, we would remand the case to the Adjudicating Officer to first determine the question as to whether or not, and to what extent, the appellant was not liable to pay Central Excise Duty during the said period and also as to whether the appellant is entitled to input adjustment of the Sales Tax paid by him on the purchase of liquor during the said period. In case the present Adjudicating Officer is also Adjudicating Officer under the Central Excises Act, he shall make determination in exercise of such powers. However, if this is not the case, the Adjudicating Officer under the Central Excises Act shall determine the liability of the appellant for the payment of Central Excise Duty during the relevant period. It is after such determination that adjustment shall be allowed to the appellant. The appeal is disposed of in the above terms.