2008 PLP (Trib (PTD)

ZAFAR UL MAJEED, MEMBER (TECHNICAL).

This appeal has been filed by Messrs Bilal Old Tyre Centre, Sadiq Abad, against sales tax Order-in-Original No. 255-256 of 2005, dated 18-11-2005 passed by the Collector (Appeals), Customs, Sales Tax and FE, Multan. By this order, learned Collector (Appeals) has upheld sales tax Order-in-Original No.933/05, dated 2-3-2005 passed by the Deputy Collector (Adjudication), Multan whereby a demand of Rs.4,28,888 along with additional tax and penalty equal to 3% of the amount of tax involved under section 33(2) of the Sales Tax Act, 1990 (hereinafter referred to as "the Act") has been adjudged against the appellant. The demand has been adjudged on the ground that during the period March-June, 2002, the appellant made payments against its purchases through traveller's cheques instead of transactions through business account in violation of the provisions of section 73 of the Act.

2. The appellant's case is that traveller's cheques are also banking instrument as envisaged under section 73 of the Act. According to the appellant, the lapse on the part of the appellant was due to ignorance of law which is condonable being a procedural lapse, as held by superior Courts, specially because the inputs tax were paid and there was no revenue loss to the Government. It has further been submitted that demand of tax in this case would mean double taxation, which is against the scheme of the Act.

3. During the course of arguments, learned counsel for the appellant further submitted that according to record, actual amount of tax involved was Rs.3,77,053 and not Rs.4,28,888 as reflected in the show-cause notice and adjudged vide impugned order. According to him, an amount of Rs.51,835 was wrongly taken to have been adjusted which was not the case as was evident from sales tax returns for the relevant period submitted in support of his contention. Copies of the returns were handed over to the learned D.R. for verification and comments, if any. Learned counsel also contended that the demand was not sustainable as the show-cause notice did not mention relevant section 36 of the Act and referred to a number of judgments of superior Courts in this regard.

4. Learned D.R. opposed the appeal but conceded that input tax adjustment of Rs.51,835 was claimed by the appellant through written applications; which was not allowed by the Department.

5. I have gone through written as well as verbal submissions made by the parties, the case-law referred to by the appellant and perused the record. I do not find any merit in the appellant's contention that requirements of section 73 of the Act are procedural and, as such, condonable in routine. Section 7(1) of the Act, which relates to determination of tax liability and a registered person's entitlement to deduct input tax is reproduced below:-- "(7) Determination 'of tax liability (1) For the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made or to be made, by him from the output tax that is due from him in respect of that tax period and to make such other adjustment as are specified in section

9. Provided that the tax payer may adjust input tax paid on the purchases in the immediate twelve preceding tax periods from the output tax subject to the condition that the tax payer specifies the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return of the immediately succeeding tax period."

6. A plain reading of the afore-mentioned provision of law clearly indicates that the entitlement of a registered person to deduct input from the output tax is subject to the provisions of section 73, which makes it binding on the registered person that payment of the amount of transaction exceeding value of Rs.50,000 shall be made by a crossed bank draft or crossed pay order or any other crossed banking instrument in favour of the supplier from the business account of the buyer. Payments in the instant case were admittedly made through travelers cheques, which are bearer in nature and do not qualify for banking instruments referred to in section

73. In my considered view, provisions of section 7 read with requirements of section 73 of the Act are mandatory in nature, which must be followed by a registered person in order to avail the facility of input tax credit. Findings of the Adjudicating Officer on this point are, therefore, upheld. Similarly, mere non-mention of section 36 of the act in the show-cause notice does not vitiate entire proceedings as long as it comprehensively explains the charges and meets the requirement of substantial compliance. However, since the appellant did not actually make input tax adjustment of Rs.51,835 as conceded by the learned D.R., its sales tax liability is reduced to Rs.3,77,053, which the appellant is directed to pay. Additional tax and penalty of 3% imposed under section 33(2) of the Act is remitted keeping in view the overall circumstances of the case and appellant's plea that the irregularity was not willful or mala fide in that the appellant, having been compulsorily registered as retailer in March, 2002, was not fully aware of the requirements of section 73 of the Act during the initial few months of getting into the tax regime.

7. The appeal is disposed of in the above terms and the impugned order is modified accordingly. H.B.T./158/Tax(Trib.)????????????????????????????????????????????????????????????????????????? Order accordingly.