2008 PLP (Trib (PTD)

ZAFA.R UL MAJEED, MEMBER (TECHNICAL).

The facts giving rise to this appeal are that the Collectorate of Sales Tax, Faisalabad obtained appellant's Income Tax assessment data from the Income Tax Department according to which appellant' annual sales exceeded Rs.5 million. Since the appellant had not registered with the Sales Tax Department, it was compulsorily registered as retailer in terms of rule 7 of Chapter 1, Registration, Compulsory Registration, Deregistration Rules issued vide S.R.O. 533(I)/2005, dated 676-2005 as retail tax @ 3% of the value of sales/supplies was levied on textiles and articles thereof under section 3AA of the Sales Tax Act, 1990 (hereinafter referred to as "the Act") w.e.f. 6-6-2005. Sales of appellant for the period July-Nov, 2005 were accordingly assessed at Rs.24,74,666, on which sales tax amounting to Rs.72,240 was recoverable. The case was adjudicated by the Assistant Collector, Sales Tax (Audit-II), Faisalabad vide sales tax Order-in-Original No.40 of 2006, dated 27-7-2006 whereby the appellant was directed to pay aforesaid amount of sales tax along with default surcharge. The appellant filed appeal against this order, which was rejected by the Collector (Appeals), Faisalabad vide sales tax Order-in-Appeal No. 175 of 2006, dated 30-10-2006. Hence this second appeal.

2. Through the instant appeal, the appellant has challenged the demand of sales tax raised vide impugned orders mainly on the following grounds:-- (i) That the order-in-original having been passed after the mandatory period of 180 days provided under sections 11(4) and 36(3) of the Act is illegal, as held by the Federal Tax Ombudsman in Complaint No. 805 of 2003 which was upheld by the President of Pakistan vide Law Justice and Human Rights Division Memorandum No. 185 of 2004 F.T.O. Law, dated 7-5-2005. (ii) That the appellant is engaged in the trading of cloth on wholesale basis whereas entire proceedings against it are based on section 3AA of the Act read with Notification S.R.O. 539(I)/2005, dated 6-6-2005, which relate to ;levy of sales tax on retailers. The show-cause notice issued in this regard and the orders passed in consequence thereof are, therefore, illegal and void. (iii) That the Department could not make out any case of non-payment of sales tax against the appellant on the basis of data or information supplied in Income Tax returns. In support of this contention, the appellant has referred to judgment of this Tribunal's Islamabad Bench in Sales Tax Appeal No.398 of 2000.

3. The D.R. defended the impugned order, referring mainly to the observations contained in the impugned order.

4. I have gone through the facts on record and considered the submissions made by the parties. There is no force in the appellant's argument that the order-in-original is barred by time in that the restriction of decision by the Adjudicating Officer within 90 days or extended period of 180 days, as provided under sections 11(4) and 36(3) of the Act is directory in nature and not mandatory, as held by the superior Courts and this Tribunal in a number of cases. Similarly, there is no force in the appellant's contention that the Department could not utilize information provided in the income tax returns, as the officers of sales tax department are duly authorized in this behalf under section 38(3) of the Act. The emergent position is that the appellant's annual turnover admittedly exceeded Rs.5 million according to the declaration made by it in the income tax returns. The appellant was, therefore, liable to registration under the Act, and pay tax on its sales either as retailer or wholesaler but it failed to discharge its legal obligation. The Department having no means to know the exact nature of the appellant's business registered it as a retailer on the basis of the information obtained from Income Tax Department. While contesting its registration as retailer, the appellant admits its liability to be registered and pay sales tax on its sales/supplies in accordance with the relevant provisions of the Act. Various assessment orders passed by the Income Tax Department submitted by the appellant do indicate that the appellant is' engaged in wholesale business. While wholesale business too is chargeable to sales tax, determination of appellant's sales tax liability as retailer is not correct which needs to be re-determined. The impugned order is accordingly set aside and the case is remanded to the Adjudicating Officer for a fresh decision on merit and in accordance with law in the light of aforesaid observations. While adjudicating the case, the appellant be given proper opportunity of hearing and producing all evidence in, support of its case.

5. The appeal is disposed of as above. H.B.T./160/Tax (Trib.) Order accordingly.