' MUHAMMAD KHALID ALVI, J.---Through this single judgment, we propose to dispose of Custom Appeals .Nos.54 to 209 of 2002 filed by the wholesalers of beverages while Custom Appeals Nos.211 to 399 of 2002 have been filed by the Collector Sales Tax, as in both- sets of appeals the impugned order is the same.
2. With the concurrence of the learned counsel for the parties, these appeals are being treated as "Pacca cases".
3. Brief facts of the case are that appellants in Custom Appeals Nos.54 to 209 of 2002 are the wholesalers of beverages. On scrutiny of their record, it was observed by the staff of the Sales Tax Department that they had been making taxable supplies to unregistered persons during the period 1999-2000 and did not pay further taxes as required under section 3(1A) of the Sales Tax Act, 1990 (hereinafter called Act). Show-cause notices were issued to all the wholesalers. The Deputy Collector Adjudication vide orders, dated 27-2-2001 and 21-4-2001 in two different sets of cases directed the payment of demanded amount of further tax alongwith additional taxes. They were also directed to pay penalty equivalent to 3% of the demanded amount of further tax. These orders were challenged by the wholesalers through separate appeals before the Customs, Central Excise and Sales Tax Appellate Tribunal. Their appeals were dismissed by the learned Appellate Tribunal vide order, dated 7-2-2002. However, the amount of additional tax was reduced to '/2 and the penalty was remitted in to.
4. Through Custom Appeals Nos.54 to 209 of 2002, the wholesalers have challenged the orders of imposition of further tax while the Collector Sales Tax, Multan through separate Appeals Nos.211 to 399 of 2002 have challenged the remission of the penalty and reduction of additional tax.
5. Learned counsel for the wholesalers contends that in both the orders in original, dated 27-2-2001 and 21-4-2001 his clients were not given right of audience. From order dated 27-2-2001, it is evident that the case was decided after obtaining legal opinion of the Standing Counsel without associating his clients iii the process while according to the order, dated 21-4-2001, none of his clients was provided an opportunity of presenting his case before the Adjudicating Officer.
6. It is next submitted that in order to charge and pay further tax under section 3 (1A) of the Act, it is necessary to establish that the taxable supply was made to a person other than a registered person. No . Effort was made by the Adjudicating Officer to ascertain that the supplies made by his clients during the said period were to such persons who were not registered or were registered or liable to be registered. It is thus concluded that without collecting any material, the Adjudicating Officer, on merely a presumption that all retailers to whom taxable supply was made, were unregistered persons, had demanded further tax. It is further submitted that this contention was taken note of by the learned Tribunal in its judgment but no finding was given on the same.
7. On the other hand, learned counsel for the appellant in Customs Appeals Nos.211 to 399 of 2002 contends that it was never the case of the wholesalers before the lower forums that they had been making taxable supplies to registered persons, therefore, it had to be presumed that taxable supplies were made to unregistered persons. It is further submitted with reference to proviso to section 2(25) of the Act that a person liable to be registered is not- entitled to any benefit which is available to a registered person: The relevant provision is reproduced for ready reference:-- "25. 'registered persons' means a person who is registered or is liable to be registered under this Act: ' Provided that a person liable to be registered but not registered under this Act shall remain liable to furthej tax under subsection (1A) of section 3 and shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder;"
8. With respect to his own appeals, it is contended that since the wholesalers had deliberately evaded the payment of further tax therefore, they were not entitled for the reduction of additional tax and remission of penalty.
9. We have considered the arguments of the learned counsel for the parties.
10. Under section 3(1A) further tax is only chargeable if taxable supplies are made to a person other than registered person with certain exceptions contained in its proviso. For ready reference section 3 (1A) reads as follows:-- "(1A) Subject to the provision of subsection (6) of section 8 or any notification issued thereunder where taxable supplies are made in Pakistan to a person other than a registered person there shall be charged, levied and paid a further tax at the rate of three per cent. Of the value in addition to the rate specified in subsection (1), subsection (2) and subsections (4) and (5): ' Provided that the aforesaid further tax shall not be charged, levied and paid if the said taxable supplies are made--
(1) by a person registered as a retailer; or
(2) by any registered person to a person whose income is not liable to tax under the Income Tax Ordinance, .1979 (XXXI of 1979) but has deducted income-tax at source under subsection (4) of section 50 of the said Ordinance; or
(3) By a registered person on the supply of---
(i) electrical energy;
(ii) natural gas;
(iii) petroleum gas including liquefied petroleum gas;
(iv) petroleum products;
(v) substances registered as drugs under the Drugs Act, 1976 (XXXI of 1976) and medicaments as are classified under any heading of Chapter 30 of the First Schedule to the Customs Act, 1969 (IV of 1969);
(vi) vegetable ghee and cooking oil; and
(vii) fertilizers;"
11. Thus, the bare reading of the section itself makes it abundantly clear that further tax can only be charged and paid if it is established that taxable supply is made to an "unregistered person".
Neither it is in the judgment of the Adjudicating Officer nor from the judgment of the learned Tribunal it could be ascertained that many efforts were made to find out that taxable supplies were made by the wholesalers to such persons who were not registered or who fall in the exceptions of the proviso to section 3 (1A) of the Act. It appears that both the lower forums presupposed without there being any material on record that all the retailers to whom taxable supplies were made by the wholesalers were unregistered persons.
12. The contention of the learned counsel for the Collector, Sales Tax that the wholesalers had never stated that they had been making taxable supplies to registered persons is without substance.
Inasmuch as this plea was taken by them before the learned Tribunal which was referred in their arguments and it is also incorporated in the ground (a) in the present appeals as well.
13. The proviso to section 2(25) of the Act was admittedly added in the year 2002, therefore, the same is not applicable retrospectively to the period 1999-2000, relevant for the instant cases.
14. From the above, it is evident that no efforts were made at any' stage either by Adjudicating Officer or by the learned Tribunal to see whether there was any material available on record to ascertain as to whether taxable supplies were made to registered persons, to persons liable to be registered or to unregistered persons. It was the minimum E requirement that every case should have been examined individually to ascertain that the wholesaler made taxable supplies to how many retailers and out of those retailers who were registered, not registered or liable to be registered or even were covered under the proviso to section 3 (1A) of the Act.
15. For what has been stated above, the appeals filed by the wholesalers, Custom Appeals Nos.54 to 209 of 2002 are allowed and the judgments of the Adjudicating Officer and the learned Tribunal are set aside. The cases are remanded to the learned Tribunal to proceed in accordance with law and the observations made hereinabove.
16. The appeals filed by the Collector Sales Tax i,e, Custom Appeals Nos.211 to 399 of 2002 have become infructuous, because the question of additional tax and penalty will have to be determined in each case after carrying out the exercise noted above. The same are thus dismissed.