2025 PLP 827 (PTD)

SYED ARSHAD ALI, J.

This is a Sales Tax Reference filed by the petitioner-department under section 47 of the Sales Tax Act, 1990 ("Act") seeking advice of this Court on the questions of law framed in the memo. of reference as allegedly arising out of the judgment/order dated 16.12.2021 of the Appellate Tribunal Inland Revenue, Division Bench, Islamabad ("Tribunal"). Show-Cause Notice

2. The respondent which has established a CNG Filling Station and deals in the sale of natural gas was issued a show-cause notice on 21.09.2019 whereby it was confronted with the following allegations:- "According to CHAPTER IV Rule 20(2)(c) of the Sales Tax Special Procedure Rule, 2007, in case of supply of natural gas by a gas transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the total amount billed including price of natural gas, charges excluding the amount of late payment surcharge, rents, commissions and all duties and taxes, local, Provincial and Federal, but excluding the amount of Sales Tax as provided in clause (46) of section 2 of the Act. Red with SRO 236(I)/2014 dated 31.03.2014, whereby FBR notified the value of supply of CNG consumer as the Total Value Added Cost of CNG as notified from time to time by the Oil and Gas Regulatory Authority. Further read with Ministry of Petroleum and Natural Resources notification regarding deregulation of CNG Sector form price fixation from CNG consumers with effect from 21.12.2016. It was observed that Sui Northern Gas Pipelines Limited is charging Sales Tax at the rate more than Rs.75.82/KG of CNG (Excluding Sales Tax rate 64.8/KG), whereas actual rate of CNG in the Peshawar Region was charged at the rate of 88.92/KG (Excluding Sales Tax rate is considered 76/KG on Average bases for calculation purpose) from Consumer by the CNG Stations. Meaning thereby SNGPL was short charging Sales Tax on 11.2/Kg which is recoverable from CNG Stations. It is pertinent to mention here that effect of this variation had been passed over to the consumer which resulted into short payment of Sales Tax from registered persons".

3. The Assessing Officer, in the impugned order, has observed that the Sui Northern Gas Pipelines Limited ("SNGPL") is charging sales tax at the rate more than Rs. 75.82 per KG of CNG (excluding sales tax rate 64.8 Kg) whereas actual rate of CNG in the Nowshera Region was charging at the rate of Rs. 88.92 per Kg (excluding the sales tax rate is considered 76 Kg on average bases for calculation purposes) from the consumer by the CNG Station. It was further observed that SNGPL was short charging sales tax against an amount of Rs. 11.2 Kg which is recoverable from CNG stations. Thus, the said amount was recoverable from the respondent being an amount which was less charged. The Assessing Officer has also presumed that it was a case of section 3B of the Act, as the respondent had charged sales tax more than the one actually payable and thus is liable to pay the same vide order dated 03.06.2019. The said order was upheld by the first appellate forum, however, the worthy Tribunal has set aside the said order through impugned order dated 16.12.2021. The Revenue being aggrieved of the said order has filed this Reference wherein the following questions of law have been proposed:-

1. Whether the learned ATIR has applied his judicious mind while deciding the instant appeal? II. Whether, on facts and circumstances of the case, the learned Tribunal has not transgressed its authority by putting itself into the shoes of legislature, whereas being judicial forum its function is of interpretation of various provisions of law and its lawful application by the authorities empowered therein? III. Whether the order of the learned Tribunal has not made the substantive provisions of law i.e., section 3B of the Act as redundant? IV. Whether the learned Tribunal has rightly interpreted the provision of section 3B of the Act in light of the superior court's directions in various case laws which states that "when a thing is required to be done in a specific way that should be done in that way and not otherwise"? V. Whether the specific information with regard to excess collection of sales tax from a competent body (DGRRA) are not instrumental and tangible reasons before the assessing authority to be relied upon? VI. Whether the learned Tribunal being last fact finding authority was not duty bound to call for record or evidences with excess collection of taxes being charged with by the assessing authority? VII. Whether the learned Tribunal has not dragged the simple case of section 38 to special provisions which never remained contended at below stage? VIII. Whether the learned Tribunal has not misconstrued the sun shining section 3B of the Act wherein onus of proving or otherwise is lying on the taxpayer? IX. Whether section 3B having over riding effect is suffering from any legal infirmity? X. Whether the order of the ATIR has taken cognizance of the golden principle of interpretation of statute that "when there is conflict between statute and rules then statute shall prevail".

4. Section 3 of the Act is a charging section which provides that subject to the provisions of the Act, there shall be charged, levied and paid a tax known as a sales tax at the rate of seventeen percent of the value of the taxable supplies. It is provided under section 3(8) of the Act as it was in vogue at the relevant time that "Notwithstanding the rate of sales tax as contained in subsection (1) and notwithstanding anything contained in any law or notification made there under, in case of supply of natural gas to CNG stations, the Gas Transmission and Distribution Company shall charge sales tax from the CNG stations at the rate of nine per cent in addition to the sales tax chargeable under subsection (1) on the value of supply, where the value for the purpose of levy of sales tax shall include price of natural gas, charges, rents, commissions and all local, provincial and Federal duties are taxes, but excluding the amount of sales tax, as provided in clause (46) of section

2. This rate shall include the rate of tax chargeable under subsection (1) and nine per cent in lieu of value addition made by the CNG stations. The rate of sales tax under this subsection shall have effect and shall be deemed to have taken effect on and from the 1st day of July, 2007".

5. Similarly, the Sales Tax Special Procedure Rules, 2007 ("Rules") has provided a detailed mechanism for collection of sales tax from CNG Sector. The relevant provision of the Rules is as under:-

20. Levy and collection of sales tax.

(1) Every person who supplies natural gas shall be liable to registration and shall charge and pay sales tax at the rate specific in subsection (1) of section 3 of the Act. (2) Sales tax on natural gas shall be levied and collection at the following stages and in the following manners, namely:- (c) in case of supply of natural gas by a gas transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the gas transmission and distribution company and the value for the purpose of tax shall be the total amount billed including price of natural gas, charges excluding the amount of late payment surcharge, rents, commissions and all duties and taxes, local, Provincial and Federal, but excluding the amount of sales tax as provided in clause (46) of section 2 of the Act: Provided that CNG stations, if not already registered, shall obtain registration under Chapter I of the Sales Tax Rules, 2006, and shall also file quarterly sales tax return in the manner given in rule 7".

6. The Federal Board of Revenue has provided further guidelines for collection of sales tax through SRO 236(I)/2014 dated 31.03.2014, which reads as under:- "SRO. 236(I)/2014-In exercise of powers conferred by sub-section (8) of 1990, the Federal Board of Revenue is pleased to notify the value of supply to the CNG consumers as the "Total Value-Added Cost of CNG as notified from time to time by the Oil and Gas Regulation Authority" Therefore, it can be well said that the value of supply of the CNG consumer is linked to the 'total value added cost' notified by the Oil and Gas Regulation Authority (OGRA) from time to time and accordingly it is the responsibility of the SNGPL to charge sales tax from the CNG sector against the rates notified by the OGRA. The findings of the worthy Tribunal are in accordance with law.

7. In the present case, the Assessing Officer has relied upon the information provided by the Director General Audit Inland Revenue Receipts ("DGAIRR") through its audit and has not undertaken any independent proceedings/audit and it has been settled that the DGAIRR does not fall within the categories of the officers as provided under section 30 of the Act. It was held by this Court in the case of Messrs Makk Beverages (Pvt.) Ltd. (2010 PTD 1355) that since the DGAIRR does not fall within the categories of the officers as provided under section 30 of the Act, therefore, on the basis of its audit report unless the revenue conduct an independent audit no assessment order can be passed. Thus, the order of the Assessing Officer was not tenable on the aforesaid two premises. Furthermore, the Assessing Officer has invoked the provision of section 3B of the Act, however, the said provision of law is not applicable to the present case as it has never been the case of Revenue that the respondent has collected any tax from the consumer in excess of the actual payable. Therefore, the findings of the Assessing Officer on this score are also erroneous.

8. For what has been discussed above, the impugned order passed by the worthy Tribunal accepting the appeal of respondent is according to law. Resultantly, the instant Reference is dismissed and the questions of law are answered in Negative. Copy of this judgment be sent to the worthy Tribunal in terms of section 47(5) of the Act. MQ/123/P Reference dismissed.