2003 PLP (Trib (PTD)

Dates of hearing: 27th May; 19th June; 3rd July; 18th November and 18th December, 2002. S.M. KAZIMI, MEMBER (TECHNICAL).

This judgment disposes of the appeal filed by Messrs Continental Corporation (Pvt.) Ltd. Hattar against the order-in-Appeal No.4 of 2002, dated 19-2-2002 (despatched on 26-2-2001) passed by Additional Collector (Adjudication), Peshawar.

2. Briefly, the facts c9f the case are that during the course of audit of record of Messrs Continental Corporation (Pvt.) Ltd., Hattar, the Audit Officers of the Collectorate of Sales Tax and Central Excise, Peshawar, observed that (i) the said unit contravened the provisions of section 3(1A) of the Sales Tax Act, 1990, by not charging, levying and paying the further tax on its taxable supplies to the un-registered persons during the period from 7 of 1999 to 3 of 2000. Therefore, Messrs Continental Corporation (Pvt.) Ltd. were liable to pay Rs.19,661 besides the additional tax due; (ii) the said unit contravened provisions of section 7 of the Sales Tax Act, 1990 by claiming the inadmissible 5% extra-amount on the purchase of plastic bottles during 11/1999 in breach of rule 4 of the Levy and Collection of Extra Tax Rules, 1999, issued under Notification No.S.R.O.795(I)/99, dated 30-6-1999. This caused loss of Rs.3,330 besides the additional tax due; (iii) the said unit contravened the provisions of section 26 of the Sales Tax Act, 1990, by late filing its monthly returns for 9 of 1999 and 3 of 2000 and, thus liable to the additional tax of Rs. 14,928 due; (iv) the said unit showed its sales as Rs.3,446,077 for 1998-99 and Rs.2,238,220 for 1999-2000 for the purpose of sales tax record but showed this amount as Rs.15,805,531 and Rs.17,001,167 respectively in their Financial Statement/Annual Accounts. Therefore, they suppressed their sale of Rs.12,121,647 in 1998-99 and Rs.14,762,947 in 1999-2000, and thus evaded sales tax of Rs.1,725,171 during 1998-99 and of Rs.2,214,444 during/1999-2000 besides the additional tax thereon. On receipt of the audit report the learned Additional Collector (Adjudication) issued a notice C. No. ST(Adj) Add. C/28/2001/947, dated 22-11-2001 requiring Messrs Continental Corporation (Pvt.) Ltd, Hattar, to show cause why the aforesaid amounts, alongwith the additional tax and penalty should not be recovered from them and also why penalties should not be imposed against them. After hearting Mr. Zahid Idrees Mufti, Advocate, and Mir Nawaz Khan on behalf of Messrs Continental Corporation (Pvt.) Ltd., and Mr. Fawwad Saeed, Senior Auditor, on behalf of the Collectorate, the learned Additional Collector passed the impugned order and held that Messrs. Continental Corporation (Pvt.) Ltd., should pay the sales tax amounting to Rs.3,962,606, alongwith the additional tax due thereon. He also imposed a penalty equal to 5% of the amount of tax involved under section 33 of the Act. Hence this appeal.

3. During the course of hearing before us, the learned counsel for the appellants argued that the impugned order has been passed under section 11 of the Sales Tax Act, 1990, but the mandatory provisions of subsection (2) thereof have not been adhered to by the learned Adjudicating Officer. The learned counsel pointed out that they sought adjournment of the hearing fixed for 13-2-2002 vide their application received by the Additional Collector (Adjudication), Peshawar, on 8-2-2002. However, the impugned order issued on 19-2-2002 indicates that they were heard on 13-2-2002. As regards allegation No.(i) relating to "further tax", the learned counsel admitted the same. As regards allegation No. (ii) relating to adjustment of "extra amount of tax", the learned counsel stated that this related to Notification No.S.R.O. 795(I)/99, dated 30-6-1999 which has since been rescinded vide S.R.O. 444(I)/2000, dated 1-7-2000 and as such the show-cause notice issued after recission of S.R.O. 795(I)/99 is nullity in the eyes of law and barred by limitation. As regards allegation No.(iii) relating to late filing of returns and liability of to addition tax on this account, the learned counsel argued that the return for 9 of 1999 was filed on October, 16, 1999 and the return for March, 2000 was filed on 18th April, 2000. He stated that delay of one day in October, 1999 was due to the indisposition of the Accountant of the appellant while 14th, 15th and 16th April, 2000 were Muharram holidays and Sunday. He admitted that there was delay of only one day in each case which he prayed for condonation. As regards allegation No. (iv) i.e. difference between the sales figures shown for sales tax purposes and those shown for Financial Statements/Annual Accounts, he argued that sales tax returns are filed as per, the Sales Tax Act, 1990, on taxable supplies defined under section 2(46) and this has no nexus with the Income Tax Returns under the Income Tax Ordinance, 1979. He argued that higher value data in income-tax return does not necessarily mean so higher supplies for (sic) proved by the Sales Tax Department. He stated that since income-tax of the company was exempt under section 118-C of the Income Tax Ordinance, 1979, during the period involved, the appellant showed higher turnover figures to obtain bank loans. He claimed that the Financial Statement is prepared by a Company for the purposes of bank loan and income tax and cannot be relied upon for sales tax purposes. The learned counsel cited case-laws in 1992 PTD 739, GST 2002 CL 236 and Tribunal's Judgment in 153/IB/2000, dated 15-6-2000 and pleaded that income-tax and financial statement informations should not be used for the levy and assessment of sales tax. He prayed for acceptance of appeal.

4. The learned Departmental Representative argued that the appellants admit the allegations No.(i) and (iii) relating to "further tax" and late filing of returns and late payment of tax. He argued that payment of tax and filing of tax return beyond the prescribed date, by whatever number of days, is to be treated as delay and has to pay the mandatory additional tax and penalty as prescribed. As regards allegation No.(ii) relating to "extra amount of tax", he stated that this allegation too is admitted by the appellant and their argument (that the dues involved during a period that S.R.O. 795(I)/99, was valid because it stands rescinded in 2000) has no force or validity in law. As regards Financial Statement and Annual Accounts, the learned departmental representative stated that the appellant has unnecessarily argued about its reliability for one purpose (bank loan and income tax) and unreliability for the other (sales tax). He stated that it is conclusively proved that the appellant has incorrectly maintained sales tax accounts and records by suppressing production and sales which is evident when the sales tax records are compared with the published and audited Financial Statement and Annual Account of the appellant. He prayed that the appeal may be dismissed as devoid of merits.

5. Having heard the, parties and on perusal of record of the case, we find as follows:

(a) Allegation No.(i) relating to further tax.

The appellants do not contest this allegation. Accordingly, the portion of the impugned order relating to this allegation is confirmed; (b) Allegation No.(ii) relating to extra-amount of tax.-- Irrespective of the fact that S.R.O. 795(I)/99 was rescinded by S.R.O. 444(I)/2000, the liability to extra-amount of sales tax incurred during the validity and currency of S.R.O. 795(I)/99 is not affected as the revision under S.R.O. 444(I)/2000 is prospective. Since the said recission Notification No.S.R.O. 444(I)/2000 has not been given. retrospection, the liability accrued under S.R.O. 795(I)/99 is not diminished. We accordingly confirm the portion of the impugned order relating to the allegation No.(ii) above; (c) Allegation No. (iii) relating to delay in filing of return and liability to additional tax.

The due date is defined under section 2(9) of the Sales Tax Act, 1990. Any delay in payment of tax due beyond the said due date involves additional tax under section 34 of the Act. We hold that although, the delays are nominal, yet these are accepted and deliberate except for the delay on account of Muharram holidays and Sunday in April, 2000 subject to verification by the Collectorate. We accordingly confirm the portion of the impugned order relating to liability of additional tax on account of late of payment of tax due as against the prescribed due date read with section 10 of the General Clauses Act, 1897; (d) Allegation No.(iv) relating to difference in amounts of sales as per the sales tax records as against the Financial Statement and Annual Accounts.-- The record for sales tax purposes are prescribed under section 22 of the Sales Tax Act, 1990. These records are maintained on day-to-day basis or as-and-when occurring basis or on monthly basis and are micro in nature. It is on the basis of such (micro) accounts and record that the Financial Statement and Annual Statement (a macro account) of a limited company is prepared and audited by Chartered Accountant for the purposes of the Companies Ordinance and are used by shareholders, income-tax assessors, banks, sales tax officers or others. Unlike an income-tax return, this Financial Statement and Annual Account is not a confidential document under the law. The appellants have not produced any certificate from the Chartered Accountant (preparing and certifying the saga financial Statement and Annual Account) that the Statement or Account, so prepared by them, was false or untrue and to what extent. The plea taken by the appellant is strange and horrible that business enterprises should be allowed to prepare and prescribe varying accounts, to suit their interest for presentation before various persons and agencies and that one agency should not reconcile and satisfy the truthfulness of the account submitted before him with the other public document containing similar accounts or similar-basis accounts. The audited figures given by the appellant, at free will and without coercion, in their financial statement and annual account falsify the sales tax accounts (prescribed under section 22 of the Sales Tax Act, 1990) prepared by or for the appellant. It is the duty of every prudent shareholder or tax official or auditor or investigator to look into such accounts and reconcile them with a view to detecting tax evasion or misdeclaration, if any. We do not accept the plea advanced by the appellant in this regard and confirm the portion of the impugned order relating to this allegation.

6. For the reasons given in paragraph 4 above, we confirm the impugned order to the extent confirmed in the said paragraph. However, if the appellant pay the tax due (principal plus additional tax thereon) by the 30th May, 2003 to the satisfaction of the Collector of Sales Tax, Peshawar, the penalty of 5% imposed in this case shall stand reduced to 2%, as a special case. In case of delay or default by the appellant in this regard, the penalty of 5% shall also stand confirmed.

7. Announced.

8. Inform all the concerned accordingly. C.M.A./768/Tax(Trib.) Order accordingly.