2011 PLP (Trib (PTD)

MUNSIF KHAN MINIHAS (JUDICIAL MEMBER).

This sales tax appeal has been filed by the department against the sales tax Order-in-Appeal No.397 of 2009 dated 24-2-2009 passed by the Collector Sales Tax (A) on the following grounds: (i) The Collector (A) was not justified to set aside the Order-in-Original on the issue of value addition pertaining to the carriage charges on the ground that the respondent department accepted the contention of the appellant. It is vehemently reiterated that neither the department representative nor the parawise comments submitted before the Collector (A) have given consent to accept contention of appellant regarding the value addition. (ii) Transportation, loading and unloading is chargeable to sales tax under section 3 of the Sales Tax Act, 1990 read With Clause (46) of section 2 of the Sales Tax Act, 1990. (iii) The transportation charges have been collected by the transport company on behalf of respondents and should be a part of value of supply as defined in section 2(46) of the Sales Tax Act, 1990. The assessment of sales tax shall be on value inclusive of transportation charges.

2. Brief facts leading to this case are that on examination of the record, Assistant Collector, RTO, Rawalpindi observed that the Taxpayer had suppressed the purchases and sales by showing Zero value addition during the period May, 2001 to November, 2003. He also observed that cement was "sold out in the market on the higher rates him the ex-factory rate. It was also noted that the Registered Person was not entitled to the claim loading and unloading charges, carriage and other heads expenses. It was also observed-by the Assistant Collector that the Taxpayer had paid less sales tax at Rs.1,998,143 on account of no value addition by pressing the supplies, in contravention to sections 3, 3(1A), 6, 23 and 26 of the Sales Tax Act, 1990 which was recoverable under section 36 of the Act along with penalties under section 33(2)(CC) (Repealed) and 33(1)(5) and default surcharge (additional tax) under section 34(1) of the Act. It was also found by the Sales Tax Authorities that the Taxpayer was registered with the Sales Tax Department as wholesaler/distributor on 28-9-2000 but the Taxpayer was also working as retailer too. Therefore, the Taxpayer was liable to pay sales tax. He paid short sales tax amounting to Rs.2,093,429 which was recoverable. Feeling aggrieved with the treatment meted out by the Assistant Collector, the Taxpayer turned up in appeal before the Collector (Appeals) who dropped the charge on non-charging of sales tax on value addition for the period from June, 2003 to May, 2006 on the ground that the Taxpayer produced Sales Tax Invoices showing the value and amount of sales tax charged. He further observed that the Taxpayer produced the copies of billties (carriage charges) in which amount of carriage was paid by the customer directly to the goods transporter and the same was neither billed nor charged by the respondent. The contention of the Taxpayer was accepted by the department, on the issue of non-compliance of section 73 of the Sales Tax Act, 1990 that the Taxpayer had produced bank statement of the owner who was the sole proprietor of the business and the Taxpayer's contention was accepted by the departmental representative. Being aggrieved with the treatment of the learned Collector (A), the Taxpayer has come up in appeal before this Tribunal.

3. We have heard the arguments of both the sides and perused the relevant record available on file. We are of the considered view that the Taxpayer has produced the copies of billties (carriage charges) wherein the value and amount of sales tax has been charged and the same has been subsequently declared in the monthly sales tax return by the Taxpayer. The Taxpayer has also produced the invoices of the billties wherein it has been shown that amount of carriage was paid by the customers, directly to the goods transporter and same was neither billed nor charged by the Taxpayer. The, transportation charges are neither covered within the definition of section 2(46) of the Sales Tax Act nor any other relevant section and provision thereof. The arrangement is only to the extent of payment of the transportation charges on behalf of the buyer and its reimbursement. That arrangement is neither a transaction of the supply of goods/services nor the taxpayer is getting any benefit from the same in terms of addition in value etc. this is an ancillary services to the sale/supply of the product of the appellant to the said parties against which the appellant does not have any benefit except that it is in continuation to the supply of its goods on which sales tax is liable to be paid and it is obviously not in dispute. The learned DR, however says that the entire process is that of the trading of business on different items and is covered within the definition of supply, hence the department should be allowed to recover the sales tax as well as penalty of the evaded amount. His claim remains that the definition includes the consideration in money excluding all Federal and Provincial taxes if any which the "supplier receives from the recipient for that supply but excluding the amount of tax. The department has failed to show that transportation costs are separately recovered in addition to what has been recovered as the cost of cement bags. Therefore, the sales tax cannot be levied separately on the so-called transportation charges. Even otherwise the fact that any separate amount on that was received-or not is an issue of fact and not of law. However, since the taxpayer admits transportation and carriage by third party and separate receipt of transportation charges, the definition of the "supply" would obviously require dilation.

4. Now the issue which requires adjudication is transportation charges. The Sales Tax Act, 1990, through its section 3 levies tax at the rates specified from time to time. This charge is on "supply" which has been defined in section 2(33) read with section 2(46) which define the term "value of Supply". The same reads as follows for ready reference:-- S.2(33) "supply" includes sale, lease or other disposition of goods in furtherance of business carried out for consideration, and also includes

(a) Putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business. (b) Auction or disposal of goods to satisfy a debts owed by a person; (c) Possession of taxable goods held immediately before a person ceases to be registered; and (d) Such other transaction as the Federal Government may, by notification in the-official Gazette, specifies: S.2(46) "value of supply" means, (a) In respect of a taxable supply, the consideration in money including all Federal and Provisional duties, if any; which the supplier receives from the recipient for that supply but excluding the amount of tax:-- Provided that (i) In case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the Open market price of the supply excluding the amount of tax; and (ii) In case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply mean the open market price of the supply excluding the amount of tax, (b) In case of trade discounts, the discounted price excluding the amount of tax; provided that the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices; provided further that where the value on which the supply is made is higher than the value fixed by the Central Board of Revenue, that value of goods shall be the value at which the supply is made. The term 'supply' therefore, includes sales, lease or other "disposition of goods in furtherance of business". Obviously if any of the ingredients mentioned in the aforementioned definition are missing it will not become a supply and for that matter a taxable supply. In fact in the judgment, referred before us in terms of (2002 PTD 976) by the High Court Karachi in case of "Collector, Customs, Central Excise and Sales Tax Karachi (West) v. Novartis Pakistan Ltd". This aspect has been discussed in detail. The definition is inclusive thus obviously of wide import. However, certain examples, in terms of goods acquired, produced or manufactured in the course of business auction or disposal of goods to satisfy a debt owed by a person possession of taxable goods held immediately before a person or such other transaction as the Federal Government may by notification in the official Gazette may specify makes it particular to a great extent. It is true, that the/definition being inclusive can cover more items. However the thing which requires strict application of the above provision of law is that, the said supply should be the disposition of goods and in furtherance of a business. It means it shall include goods which are sold in continuation of the business being carried on by the said taxpayer.

5. The term "business" has not been defined in the Act, 1990 and the settled meaning of the said expression as found in the aforesaid case-law as also various dictionaries as relied upon in the case of CIT v. Habib Insurance confirms that in order to be construed as "business" the activity must be recurring, for profit motive and must be in the nature of trade, commerce or manufacture. We feel ourselves convinced that the terms "in furtherance of business" and the business separately would not cover' providing of additional facility like transportation charges paid. Furtherance is a term which if used in the separately would not cover providing of additional facility like transportation charges, paid. Furtherance is a term which if used in the present form, would restrict only to the activities attached to the main track and the aspects directly connected thereof.

6. As is evident from the above "furtherance" means continuity with the main activities having direct nexus but would not include activities which do not have attachment or are not a part of the main process. The reason being that the term is to be read as a whole which is 'in furtherance of the business'. Obviously the business, of the appellant is not transportation; it is only trade of cement. The providing of transportation as such is not in furtherance of the business of this appellant. He is providing an additional service which is neither a 'goods' nor a profit making venture. Further one would not need much discussion to say that a service is not covered within the definition of supply on the face of it. Here again the above method of interpretation goes to favour the taxpayer. The definition clearly says that it is on disposal of goods while a 'service' is neither a 'goods' nor it can be called a disposal. Nutshell of the above discussion is obvious. The claim of the assessee that there is no charge on transportation under Sales Tax Act stands accepted. The learned Collector (A) has rightly decided the issue in favour of the taxpayer and there is no error or infirmity in order passed by the Collector (Appeals). Therefore we uphold the order of the Collector (Appeals) which is maintained. The departmental appeal being devoid of any merit is dismissed. C.M.A./11/Tax/(Trib.) Appeal dismissed.