1. ' SAIYED SAEED ASHHAD, C.J.---The Petitioners which are assembler cum-manufacturer of Nissan Diesel Trucks and a registered person in terms of Section 2(19) of Sales Tax Act, 1990 (hereinafter referred to as "the said Act") have filed this Constitutional Petition, wherein following reliefs have been. Sought.
(a) Declare that the clarification given by Respondent No.2 vide CGO 6 of 1995, dated 1-6-1995 is in conflict with definition of time and taxability of supply under section 2(30) read with section 6(3) of the Sales Tax Act, 1990 and liable to be struck down ab initio.
(b) Declare that sales tax becomes due only at the time of removal of goods from the manufacturing premises and not before that.
(c) Declare the order impugned passed by Respondents based upon C.B.R. Directive vide CGO 6 of 1995 cannot have retroactive application hence bad in law and of no legal consequences of Petitioners.
(d) Declare that evasion of sales tax is neither wilful nor caused intentionally by the Petitioner therefore the levy of penalty as well as additional sales tax is not sustainable in law.
(e) Direct the Respondent to refund Rs,1,584,892.46 collected from Petitioner being the amount of penalty plus additional sales tax plus 1% surcharge with authority of law.
(f) Grant cost of petition.
(g) Grant any other relief/reliefs deemed appropriate in the circumstances of this case.
2. ' The brief facts of the case as stated by the Petitioners in their memo. Of petition are that on 31-12- 1994 they were holding an amount of Rs,125,728.037 which they had received from their various customers/authorised agents on various dates against future purchase of different categories of vehicles completely knocked down (CKD) vehicles namely; completely built up (CBU) vehicles; and yellow cab vehicles. The petitioners further submitted that the vehicles falling under category 1 and 2 were exempted from levy of sales tax till 18-10-1993 whereas vehicles falling under category three continued to be exempted from sales tax till the filing of the petition. It was further submitted that on the basis of the above amount reflected in the balance sheet for the year ending on 31-12-1994 Respondents issued a show-cause notice alleging that the entire amount of Rs,125,728,037 was received by way of advance against the sale of vehicles which was liable to sales tax amounting to Rs,18,859,200 under section 6 of the said Act, read with G.O. 6 of 1995 as well as additional tax amounting to Rs,21,688,080 under section 34 of the said Act. It was further submitted that the legality and propriety of the show-cause notices was challenged by the Petitioners on the ground that the transactions in respect of which the above sum of Rs,125,728,037 was received were merely advance payments against the agreements to sale which did not tantamount to sell so as to attract the provisions of section 2(3), read with section 6(3) of the said Act, thus not liable to levy or charge to sales tax. It was further submitted that the Petitioners in not paying the sales tax on the aforesaid amount did not commit any illegality or violation of any provisions of the said Act as a result of which the provisions of section 34 requiring imposition of penalty for non-payment of tax as well as calling upon the Petitioners to pay additional tax and surcharge could not be resorted to.
3. It was further submitted that mere deposit or receipt of money by the Petitioners from their authorized agents in anticipation of the sale of the vehicles could not be made a ground for levying of sales tax and demanding the payment thereof as no concluded contracts or sales had taken place at the time of deposit/receipt of money by the Petitioners and the transactions of anticipated sales were liable to be cancelled or nullified. The Petitioners further submitted that Respondent No.1 did not consider the above contentions raised by the Petitioners and by order, dated 24-4-1996 demanded payment of a sum of Rs,1,224,430 as sales tax and Rs,1,431,094 as additional tax with the direction that the same may be deposited in Government Treasury within 30 days of the issuance of Order-in-Original. It was further submitted that though the legality and propriety of the show-cause notice and the order, dated 24-4-1996 was challenged by the Petitioners yet the Respondents vide their letter, dated 29-9-1996 demanded the sums of Rs,1,224,430 as sales tax and Rs,1,431,094 as additional tax as against the sum of Rs,18,859,200 and 21,688,080 mentioned in the show-cause notice with the direction that the same be deposited in the Government treasury within 30 days of the issuance of Order-in-Original.
4. ' Feeling aggrieved and dissatisfied with the said order the Petitioners filed Constitutional Petition No. D-813 of 1996, which was disposed of with the direction that the remedy available to the Petitioners under the said Act be exhausted first. In pursuance of the said directions the Petitioners approached the Collector of Customs. Central Excise and Sales Tax (Appeals), whereby the Order- in-Original, dated 26-4-1996 passed by the Deputy Collector-II Sales Tax (East) Karachi was assailed. Respondent No.3 vide his order, dated 17-7-1996 rejected the appeal of the Petitioners, upholding the order of Deputy Collector-II Sales Tax (East) Karachi. Hence this petition.
5. ' Parawise comments were filed on behalf of the Sales Tax Department, wherein it was submitted that under section 3(a) of the said Act sales tax was leviable on supplies made in Pakistan by registered person and the time of supply was defined under section 2(30) according to which it was the time when consideration of money was received by the supplier from recipient of the supply. The Respondents justified the levy of additional tax/surcharge as according to them the Petitioners had violated the provisions of sections 2(30), 3 & 6 of the said Act deliberately which was covered by the provisions of section 36(1) of the said Act. Levy of penalty of Rs,25,000 was also justified on the ground that the Petitioners had wilfully evaded the payment of sales tax.
6. ' We have heard.The arguments of Mr. Aziz A. Shaikh, Advocate for the petitioners and Mr. Sajjad Ali Shah, the learned Standing Counsel on behalf of the Official Respondents. We have also perused the material on record and the relevant provisions of law applicable to the facts and circumstances of the case.
7. ' The issue involved in this Constitutional petition has been incorporated in the paragraphs containing the facts of this Constitutional petition. In short the grievance of the Petitioners is that the amount of Rs,125,728,037 was received by them from their authorized agents which had been deposited by the prospective buyers of vehicles by way of advance payment and the same was made over to them by way of advance payment which was not liable to be charged to sales tax as the said amount of Rs,125,728,037 could not be treated as the price received for supply of the vehicles/commodity in the absence of concluded contracts or transactions of sale with the prospective buyers. As per submission these transactions were in the nature of anticipatory sale and the aforesaid amount had been paid by the prospective buyers in anticipation of future sale of vehicles to them. To decide whether the advance payments made by the prospective buyers to the authorized dealers/agents of the Petitioners and made over to the Petitioners could be subjected to sales tax in pursuance of section 3 of the said Act, it will require determination whether the deposits/advances received by the Petitioners were in pursuance of transactions of supply or were inere advance/deposit in pursuance of any dealership or agency agreement or any other arrangements.. It will require determination whether the amount of Rs,125,728,037 received by the Petitioners from their authorised dealers/agents was by way of part payment or advance payment of the sale price of the vehicles in pursuance of transaction of sale or were advances/deposits or advance part payment for the anticipated sale of the vehicles which had not materialized into contracts of sale or sale transactions. Such determination will require a decision whether a contract of sale had come into existence between the Petitioners and the prospective buyers who had made the advance payments inasmuch as the transaction of supply follows when a contract of sale is executed. Once a contract of sale has come into existence then the question whether transfer of goods from the supplier to the buyer had taken place or is to take place at a future time is absolutely immaterial inasmuch as the sale transaction shall be completed without delivery of goods if the price is paid in full or in part as envisaged in section 5 of the Sales of Goods Act.
8. ' Mr. Aziz A. Shaikh referred us to the judgment in the case of Maple Leaf Cement Factory Limited v.
9. The Federation of Pakistan and others, reported in 1999 PTD 3907 in support of his contention that mere deposit of money'in anticipation of sale could not be made the ground for demanding payment of sales tax. In this case a learned Single Judge of the Lahore High Court observed that no provisions of the said Act purported to deem the receipt of money to be a sale and the department's interpretation in treating the money received in advance against supply as sale price had no basis in the text of the said Act as it sought to change the nature, of the tax.From the levy on the supply of the goods to a tax on the mere bailment of money. The observations made by the Lahore High Court in the aforecited case are not applicable to the facts of this case where it is yet to be decided whether the transactions in the present case were merely in the nature of anticipatory sale or concluded contracts of sale. Mr. Aziz A. Shaikh also placed reliance in support of his contention on the judgment in the case of Pak Suzuki Motor Company Ltd. And others v.
10. Federation of Pakistan and others, reported in 2002 PTD 2440. The pronouncement in the cited judgment does not lend weight to the contention of Mr. Aziz A. Sheikh as this Court concluded that the question whether deposits/advances received by the supplier, were in pursuance of any transaction of supply on the basis of a concluded contract or were mere deposits/advances in pursuance of any dealership agreement or any agency agreement and were in the nature of anticipatory sale was a question of fact and declined to give any finding on this question of fact directing the concerned tax officials to decide such question of fact after obtaining necessary particulars and giving opportunity of being heard to the Petitioners for determination the question of chargeability to sales tax or otherwise on the deposits/ advances in the light of the findings given in the cited case. The observations are not of assistance in deciding the exact nature of the advances/payments received by the Petitioners.
11. ' The issue which requires determination can be decided unequivocally by the judgment of the Supreme Court in the case of D.G. Khan Cement Company Ltd. And others v. Federation of Pakistan and others, reported in 2004 SCM R 456. In this case the Supreme Court was faced with the meaning/interpretation of the words "supply" as appearing in section 2(22) of the said Act, "taxable supply" as appearing in section 2(28) of the said Act and "time of supply" as appearing in section 2(30) of the said Act and following pronouncement was made:- "The intention behind the promulgation of relevant provisions of the Sales Tax Act as reproduced above is clearly manifest that the sales tax should go to the Government treasury within the tax period after the same having become due and should not be retained by the manufacturers. There is no hard and fast rule as to when and at what stage, the transaction shall be deemed to be the transaction of sale of the goods. Each case has to be decided according to the facts and circumstances of the case, in particular the practice, usage of particular nature of business or trade. In the case in hand, the manufacturers used to receive amount of consideration in advance for the supply of cement to be made later. It is clear from the provisions of sections 2(22) and 3 of the Sales Tax Act that time of supply was deemed to be the date on which advance payment was received or the supply made whichever was earlier. There is no difficulty in holding that in such a case, the amount of consideration received in advance shall be deemed to be the price on that date of the proportionate quantity of cement and the sales tax should be deposited before 20th of the succeeding month in the Government treasury instead of the date of delivery of the goods at the subsequent stage. In other words, we in order to put the matter beyond any ambiguity, have no hesitation in holding that in such a situation, the date of receipt of amount of consideration in advance can well be constrtled to be the date of sale for the purpose of payment of sales 'tax."
12. ' It will also be appropriate to reproduce another passage from the said judgment of the Supreme Court, which had the effect of finally deciding the civil appeals before it, which is as under:-- "For the foregoing reasons, Civil Appeals Nos. 1293, 1294, 1296 and 1306 of 2001 are partly accepted and it is hereby declared that the payment of sales tax was due within the tax period under the Act from the date of receipt of the amount of consideration in advance and not from the date of delivery of goods and declaration made by the High Court to the contrary is hereby set aside."
13. In view of the pronouncements made by the Supreme Court in the case of D.G. Khan Cement Company Ltd. And others v. Federation of Pakistan and others, (supra) we hold that the part payments/advances received by the Petitioners from their authorized dealers/agents or any other agency were to be subjected to sales tax from the date of receipt of such amounts and not from the date of delivery of goods/vehicles.
14. ' Regarding the imposition of penalty/additional tax, the Supreme Court observed as under:-- "Each and every case has to be decided on its own merits as to whether the evasion or payment of tax was wilful or mala fide, decision on which would depend upon the question of recovery of additional tax. In the facts and circumstances of this case, we find that non-payment of the sales tax within tax period was neither wilful nor it could be construed to be mala fide evasion or payment of duty, therefore, the recovery of additional tax as penalty or otherwise was not justified in law."
15. Applying the above principle to the facts and circumstances of this case it is to be observed that non-payment of the sales tax within the tax period by the Petitioners was neither wilful nor it could be construed to be mala fide evasion as the same was on account of the view adopted by the Petitioners on their interpretation of the provisions and the C definitions of words "supply", "taxable supply" and "time of supply". In the circumstances, imposition of penalty or levy of additional tax could not be justified and the order imposing the penalty/additional tax is set aside.