MR. MIR FUAD, MEMBER (TECHNICAL).-(l). This is an appeal against the Order-in-Original No. 02 of 2001 datec 21.2.2001, passed by the Deputy Collector, Collectorate of Sales Tax and Central Excise (East), Karachi.
2. Briefly the facts of the case as reported in Order-in-) Original is that the Audit Division, Sales Tax (East), Karachi made out a contravention case against M/s. Taha Spinning Mills Ltd. Foil violation of "Clause (ii) of sub-section 46 of section 2 of Sales Tax Act, 1990, and for recovery of Rs. 6,749,284.00 as principal] amount of sales tax. The ground of demand was that the sales tax was charged from their associated person M/s. Tanya Knitweail (Pvt.) Ltd. On P.C. Yam at Rs. 37.47 per kg. While the same P.C.I Yam was supplied to other outside parties ranging from Rs. 90 to1 99-per kg. The case was decided against M/s. Taha Spinning Mills! Ltd., Karachi vide Order-in-Original No. 32/99 dated 20.2.99.1 They filed an appeal under section 45 of Sales Tax Act, 1990 with! The Collector (Appeals), Customs, Excise and Sales Tax, South! Zone, Karachi. The same was dismissed and also the appeal filed I under section 46 ibid, from the Appellate Tribunal, Custom, Excise and Sales Tax, Karachi. M/s. Taha Spinning Mills deposited the Lmount demanded in the Government treasury and also issued a lebit note to M/s. Tanya Knitwear (Pvt.) Ltd. Situated at 106, Commerce Center Hasrat Mohni Road, Karachi. On receipt of the lebit note in terms of section 9 of the Sales Tax Act, 1990. M/s. "anya Knitwear (Pvt.) Ltd. Applied refund claim amounting to Rs. 3,749,284.0 under section 66 of Sales Tax Act, 1990. Since the lebit note was issued after expiry of ninety days (90) the claim was ieemed to be inadmissible under section 66 of Sales Tax Act, 1990 lead with section 9 and clause (ii) of sub- section (46) of section 2 ibid. A show-cause notice was issued to the appellant as to why benal action under the aforesaid provisions of law should not be Initiated. Later, in consequence of adjudication the Deputy Collector, Sales Tax and Central Excise (East), Karachi parsed the [order impugned before this Tribunal.
We have heard Mr. Javed Umar, Advocate, the leamed |ounsel for the appellant and Mr. Khursheed on behalf of the respondent.
The leamed counsel or the appellant states that the issuance If the impugned show-cause notice is barred by the provisions of pie 7 of the Sales Tax Refund Rules, 1998, inasmuch as the ispondents were bound to issue the show-cause notice within the leriod of 35 days but the same was issued when it became lopelessly barred by time under the aforesaid provision of law. Further states that the rejection of the appellants claim on the jround that it was not covered by S.R.O. 696(I)/96, dated 1.8.1996,being beyond the ground spelt out in the said show- ause notice cannot be sustained in law. Further states that the ksuance of the debit and credit notes on account of the changes in je value of the supply is an essential ground norm of the entire [ales Tax Act, 1990.
Hundreds of contingencies may be arising in ay to day commercial realities, when the debit or credit notes ave to be issued, since a fresh invoice cannot be issued under action 23 ibid. The interpretation of the Central Board of Revenue id the leamed Deputy Collector, if accepted, shall have the effect of making the provisions of section 9 ibid, as redundant and frustrated the entire scheme of the Sales Tax Act, itself. The operation of section 9 in relation to the contingencies arising out ol the change in value are not dependent on the sweet pleasure of the Central Excise of Revenue. The Board is not empowered in law to change the basic structure of the Sales Tax Act, 1990.
4. Rival submissions examined. Case record seen. The appellant in this case claimed refund of Rs.
6,749,284.00 whicl was held inadmissible on account of being ultra vires of SRO 696(I)/96, dated 22.8.1996. The issue therefore, before us is whether debit and credit note issued under section 9 of the Sales Tax Act, 1990 would have the legal validity only if it is ir accordance with SRO. 696(I)/96.
We reproduce section 9 of th< Sales Tax Act, 1990: "9. Debit and credit note.-Where a registered person has issued tax invoice in respect of a supply made by him and as a resul of cancellation of supply or return of goods or a change in th nature of supply or change in the value of the supply of som such events the amount shown in the tax invoice or the retur needs to be modified, the registered person may, subject t such conditions and limitations as the Board may impose issue a debit and credit note and make correspondin adjustment against output tax in the return".
5. The reading of the above section shows that the section envisages 5 different situations where the registered person ca issue debit and credit note and make corresponding adjustment against output tax, in the Return. These situations are:-
(a) Cancellation of supply.
(b) Return of goods.
(c) Change in the nature of supply.
(d) Change in the value of supply.
(e) Some such events.
The section further stipulates that these changes are subject to sue conditions and limitation as Board may impose. Subsequently th Board issued SRO. 696(I)/96, dated 22.8.1996 to regulate the issuance of credit and debit note. These rules are called Debit and Credit Note and Destruction of Goods Rules, 1996. While defining the scope of these references the Sub-Rule(2) the reads: "(2) these (rules) shall apply to a taxable supply where the goods are returned by buyer".
The Rules thus confine themselves to only one of the situation envisage by section 9. The views of the learned Deputy Collector as expressed in Order-in-Original is that since these Rules cover only one situation i.e. Return of goods, the debit and credit note can be issued only in case of return of goods and not in other situations as specified in section 9. Thus, according to the impugned order, is because of the fact that section 9 empowers the Board to impose such conditions and limitation as it may deem fit and hence section 9 would be operative under the limitations imposed by SRO.
696. Thus debit and credit notes issued in situations other than return of goods do not have the legal sanction and hence refund cannot be allowed.
6. We have examined this argument however we are not persuaded to accept it. The section clearly specifies 5 different situations and as such "change in value of supply" being one of the situations should be considered a valid ground for issuance of debit and credit note. The provision in the section "subject to such condition and limitation as the Board may impose" does not imply that the Board can restrict the scope of the statute. We are of the view that by this clause the Board is empowered to impose conditions and limitations only for the regulation of the statute. We are not inclined to accept the arguments that since the Rules issued concern themselves only with the return of goods, the other 4 situations mentioned in the statute would not form the basis of issuance of debit and credit note. The omission by the executive authority would not oust the statute. On the contrary the other four situations mentioned in the Section would be operative without any condition and limitation, as no Rule have been framed by the Board in this regard. In this we are strengthened by the judgment of Supreme Court of Pakistan in case of M. U.A. Khan Vs. Rana M. Sultan and others as reported in PLD 1974 SC 228. In the above mentioned judgment their lordship have held as follows:- "It is universally recognized that as regulatory statute have to deal with a variety of situations and subjects, it is not possible for the Legislature itself to make detailed regulations concerning them, and, therefore, the Legislature delegates its power to specified of designated authorities to make such detailed regulations, consistent with the statute for carrying out the purposes of the parent legislation. The power so conferred is generally in the nature of an enabling provision, intended to further the object of the statute, and not to obstruct and stultify the same. As a consequence, the failure or omission of the designated authority to frame the necessary rales and regulations, in exercise of the power conferred on it by the Legislature cannot be construed as having the effect of rendering the statute nugatory an4 unworkable. Such an eventuality could arise only if the Legislature indicates in intention to this effect in clear and unmistakable terms."
7. While respectfully following the above judgment we allow the appeal and set-aside the impugned order.