2003 PLP (Trib (PTD)

(v) It is also submitted that perusal of show-cause and Order-in- Original would show that they suffer from further grave legal infirmities since both of them are vague, unspecific and not speaking. Thus, neither the order nor the show-cause notice identify precisely hove the demand of Rs.36,07,361 has beer worked out, pinpointing the sales, the rates applicable, and calculation justifying the ultimate demand.- (vi) That the order was passed without application of independent mind and discretion of the respondent; (vii) With regard to the imposition of additional tax and penalty it is submitted that the said actions are penal in character and are invoked on assumed default while there was genuine controversy against the unmerited action. Nowhere in the order it has beer held that the appellant was disregarding and violating any provision of law as a deliberate act or act of violation.

6. On these basis the appellant prayed for vacation of the impugned order. The Department on the other hand maintained its same point of view as was pleaded before the Adjudicating Officer.

7. We have heard the rival parties and the case record has been examined. From the pleadings it is gathered that the basic issue for decision in appeals is whether or not the ad hoc deposits received by the appellant do fall within the ambit of section 2(44) of the Sales Tax Act, 1990; and whether or not the proposed levy of sales tax on these ad hoc deposits is illegal? Another question is whether or not the deposits received by the appellant do fall within the ambit of definition of 'sale' as defined in section 4 of the Sale of Goods Act.

8. The appellant is liable to pay the sales tax under section 3 of the Sales Tax Act, 1990, on taxable supplies at the time when the transaction of supply takes place.

9. The transaction of supply comes into existence when a contract of sale of goods comes into existence i.e., when the supplier transfers or agrees to transfer the specified goods to the buyer or a lease or other disposition of goods in furtherance of the business is carried out for consideration or the other conditions as prescribed in section 2(33) of the Sales Tax Act, 1990 are satisfied.

10. Where a transaction of supply takes place under a contract of sale, meaning thereby, transfer of goods from supplier to buyer where an agreement to sell takes place meaning thereby, that the transfer of goods is to take place at a future time, the sales tax shall be charged on the happening of any of the following events:-- (a) when a delivery of goods is made; or (b) the price is paid in full.

11. If after coming into existence of the transaction of sale, as explained above, any part payment is received by the supplier from the buyer the supplier shall be liable to account for the part payment in the return of tax for that tax period and the sales tax shall be charged accordingly.

12. If no transaction of supply has taken place and the supplier has received any advances or deposits from the buyers, such advances/deposits are not liable to the charge of sales tax. However, as soon as a contract of sale or agreement to sell is executed with the stipulation of adjustment of full or part payment from the advances/deposits, the said adjustment in full or in part shall be deemed to be in pursuance of the transaction of supply and such amount shall immediately become liable to the imposition of sales tax.

13. A perusal or the records to this case shows that the respondent has neither stayed that any contract of sale and future supply of the goods existed, between the appellant and the depositors, nor there is any evidence on record on the basis of which it can be inferred that the deposits with the appellants were in possession of the appellant as an outcome of a contract of sale or an agreement to sell. In such circumstances, treating these deposits as a sale within the framework of Sales Tax Act, 1990 and creating a sales tax liability was not legal. In this, regard we have been able to place our hands on two judgments, one given by the Lahore High Court in the case of Maple Leaf Cement Factory reported as (1999) 80 Tax 41 and a Double Bench judgment of the Honourable Sindh High Court in the case of Pak. Suzuki Motor Company Ltd. reported as 2002 PTD 2440. In both these cases, the same proposition was presented before the Courts and Courts took the same view as expressed in para 12 ante.

14. A similar proposition also came for decision before the British VAT Tribunal in the case of Nigel Mansell Sports Co. Ltd. LON/90/613Y (VTD 6116), where a company had a franchise to sell Ferrari sports cars. There was a limited supply, of such cars, and the company asked prospective customers to make an initial deposit of about $ 5,

000. When a firm order was placed, the customer was asked to increase the deposit to 10% of the price of the car. The company did not account for VAT on the initial deposits, and the Commissioners issued an assessment charging tax no these. The company appealed, contending that the initial deposits did pot relate to any definite supply, and that there was no tax point until a firm order was placed and a 10% deposit was received. The Tribunal accepted this contention and allowed the appeal, holding that initial deposit did not create any contractual relationship, but it was only 'an agreement to make an agreement.

15. If we assume that the departmental interpretation of Sales Tax Law is correct and tax is payable as soon as money is received by the registered person, it would appear to be reading into the Sales Tax Act, the following statement:-- "Whenever money is received by the manufacturer, the manufacturer shall be deemed to have made a sale of value equivalent to the amount of the money received. No provision of Sales Tax Act has purported to deem the receipt of P money to be a sale. Consequently, the departments interpretation has no basis in the tax of the Act and that it seeks to change the nature of the tax from a levy on the supply of goods to a tax on the mere bailment of money. In none of the provisions of the Sales Tax Act, bailment of money could be deemed to be a sale or a supply of the goods.

16. The provision of section 2(30) of the Act has only employed the legislative device of deeming .so as to crystallise the point in time at which sales tax is- payable with respect to a supply that has already occurred. It cannot be employed to the extent of conceiving the payment of money so as to change the scope of word 'supply' beyond the provisions of section 2(22) of the Act, read with section 3 which is the charging section. It cannot be held that section 2(30) would in any wav alter the scope and nature of the charging section. There can be no doubt that where Legislature could have expressly specified as regards the charging of a tax but has chosen not to specify must not be read into the text of the statute by way of independent so as to expand or circumvent the scope of the charging provisions.

17. Reference with regard to the interpretation of deeming provisions can be made to the following judgments of the superior Courts, reported as Elahi Cotton Mils Ltd. v. Federation of Pakistan and others PLD 1997 SC 582 at 677. 'that the legal fictions are limited for a definite purpose, they cannot be extended beyond the purpose for which they are created.' B.N. Syed v. Afzal Jahan Begum (PLD 1970 SC 29 at 35) 'It cannot be denied that the Court has to determine the limits within which and for the purposes for which the Legislature bas created the fiction.' Siraj Din v. Sardar Khan (1993 SCMR 745 at 749)* 'It is settled rule that the Court is entitled to ascertain the object for which the legal fiction is created and confined to the purposes for which it is meant. Mehran Associates Limited v. The Commissioner of Income-tax, Karachi 1993 SCMR 274 at 286, 287 = 1993 PTD 69. 'The cardinal principles of interpretation of a fiscal statute seem to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. A fiscal provision of a statute is to be construed liberally in favour of the taxpayer and in case of any substantial doubt the same is to be resolved in favour of the citizen.

18. In the light of above we have no hesitation to hold that the interpretation placed by the Department through the impugned letter/instruction, the impugned show-cause notice and the assessment order passed in pursuance thereof are illegal.

19. The appeal was filed on 3-12-2002 and a copy of the appeal memo. was furnished to the respondent prior to 17-2-2003. The appellant was entitled to file a reply or counter-affidavit to refute the facts and contentions as per memo. of appeal which has not been furnished. Thus the facts remain unrepudiated. The departmental representative present in the hearing could not dislodge any of the arguments or case law cited by the learned counsel of the appellant.

20. In these circumstances, this appeal is allowed and the impugned order is set aside. C.M.A./814/Tax (Trib.) Appeal allowed.