1981 PLP (Trib (PTD)

GHULAM MURTAZA KHAN (MEMBER).‑The appellant, a private limited Company, is engaged in the manufacture and sales of Ice‑cream, chocbar etc. These 24 sales tax appeals filed against the orders of the learned Appellate Assistant Commissioner, will be disposed of by the same order in view of similar facts from which the same arise. The nature of objections taken is also identical.

2. Assessment year of 1972‑

73. The counsel appearing on behalf of the appellant does not want to press this appeal and hence it stands dismissed as having been withdrawn.

3. Four quarters ending on 30th June 1974, 31st December 1974, 31st March 1975 and 30th June 1975.--‑For the 4 quarters relating to the four appeals indicated (supra), showing sales of Ice‑cream and chockbar both as taxable items. The appellant filed the quarterly returns for all the period mentioned above. Although the appellant declared in its returns both the sales of Ice‑cream as well as chocbar as taxable but sales tax is reported to have been paid only on sales of chocbar. Since the appellant did not pay sales tax due as per returns, in any of these quarters, the Sales Tax Officer imposed penalties under section 12(5) on 17‑12‑1979, in all the four quarters. In his penalty order, the Sales Tax Officer had also warned the appellant that if the default continues, a further penalty at the rate of Rs. 50 per day shall be imposed for the period during which the default continues. Since the appellant again failed to make any payment the Sales Tax Officer imposed penalties at the rate of Rs. 50 per day, 'amounting to Rs. 16,250 on 30th November 1976, in each of the four quarters. It is an admitted position that no appeals were filed by the appellant against the initial penalties imposed by the Sales Tax Officer in all the four quarters at the rate of Rs. 1,000 per quarter. The appellant, however, preferred appeals against the penalty of Rs. 16,250 each imposed in respect of the four quarters mentioned above. Since the issue for decision is common in the appeals relating to the above‑mentioned four quarters and the 19 other appeals, where month‑wise penalties were imposed under section 12(4) for default of payment under section 12(1) of the Sales Tax Act, at the rate of Rs. 1,000 each month, the contentions of the parties as also our findings will be the same in respect of all the 23 appeals. Facts relating to the four quarterly appeals have been narrated (supra). We now mention hereunder the facts pertaining to the other 19 appeals where month‑wise penalties were imposed.

4. Months for and from July 1975 to January 1977 (19 appeals).‑From the combined order of the learned Appellate Assistant Commissioner relating to all the quarters and the months mentioned (supra), and the submissions made by the learned counsel, it appears that as late as on 5‑1‑1976, the appellant filed revised quarterly returns for the four periods mentioned (supra) on 27‑11‑1974, 10‑3‑1975, 22‑10‑1975 and 7‑11‑1975, where in the entire sales of Ice‑cream were declared to be exempt from levy of sales tax. In respect of the periods from July 1975 to January 1977, also the appellant filed revised sales tax returns showing the sales of Ice‑cream to be exempt from sales tax, although sales tax is said to have been paid only on the sales of chocbar. These quarterly returns related to the 19 months as indicated hereinabove. In all these revised returns the appellant declared the sales of Ice‑cream to be exempt from levy of sales tax. The Sales Tax Officer, before imposing separate month‑wise penalties at the rate of Rs. 1,000 per month under section 12(4) of the Sales Tax Act, informed the appellant that Ice‑cream manufactured by it was liable to sales tax. He also drew the attention of the appellant through his letters that the Ice‑cream as well as chocbar being manufactured and sold were liable to sales tax and that Ice‑cream was not covered by any exemption under section 7 of the Sales Tax Act. The Sales Tax Officer even referred to the Central Board of Revenue's Circular No. 2 of 1972 dated 6‑1‑1972 and subsequent clarification vide its letter dated 10th March 1973, that the manufacture and sales of Ice‑cream was liable to sales tax. Besides the above Circular, the Sales Tax Officer also made reference to a decision of this Tribunal reported as (1975) 31 Taxation 14 (Trib.) wherein also it was held that Ice‑cream was liable to sales tax. Despite these clarifications and opportunities allowed to the appellant, no sales tax payment was made by it on sales of Ice‑cream. The Sales Tax 'Officer's letter thus remained unheeded and, as such, he imposed penalties under section 12(4) of the Sales Tax Act, at the rate of Rs. 1,000 per month beginning for and from July 1975 to January, 1977.

5. The learned counsel's grievance is that the appellant was paying sales tax on the sales of chocbar, which according to it, was taxable. However, since the appellant completely denied the liability of sales tax on the manufacture and sale of Ice‑cream, it was not liable to pay any sales tax under section 12(1) in respect of any of the quarters or months referred to (supra) and that the Departmental Officers were not justified in the imposition of penalties. The learned counsel vehemently argued that the appellant genuinely believed that Ice‑cream was not liable to sales tax and once the very liability of paying sales tax on an item is denied, the provisions of section 12 (4) could not be made applicable. It was also urged by the learned counsel that the appellant had been agitating from the very beginning that the Ice‑cream was not liable to sales tax and this fact should have debarred the Department from taking any penal action under the provisions of section 12(4) of the Sales Tax Act. In support of his contention the learned counsel cites a decision of this Tribunal S. T. As. Nos. 9/KB to 25/KB, all of 1977‑78 dated 5‑6‑1978 followed by another decision on this very issue, bearing S. T. As. Nos. 50/KB to 69/KB of 1978‑79, dated 17‑2‑1979, where in allegedly similar circumstances, the penalties imposed by the Sales Tax Officer under section 12(4) on the sale of Ice‑cream, were cancelled. The learned counsel also relied on a decision of the Supreme Court of India reported as (1972) 83 I T R 26 to 83 wherein, for failure to get registered as a dealer for sales tax purposes, penalty was imposed by the Department but the Supreme Court held that the liability to pay penalty, does not arise merely upon proof of default in getting registered as a dealer. According to the learned Supreme Court "penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation." It was also observed that imposition of penalty would not be justified "when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute". Relying on the principle enunciated by the Indian Supreme Court and the two decisions of this Tribunal, the learned counsel vehemently argued that in the instant case also the appellant genuinely denied its liability to pay sales tax on Ice‑cream and, as such, the Department was not justified in imposing the penalties. Thus, the main grievance of the learned counsel is that the learned Appellate Assistant Commissioner has erred in observing that the two decisions of this Tribunal relied upon by the appellant, were not applicable to the facts of the appellant's case. According to the learned counsel, the facts in the case under consideration as well as those decided by the Tribunal, were more or less similar and hence the learned Appellate Assistant Commissioner should have followed the principle laid down in those two decisions.

6. The learned Departmental Representative, in turn, refers to the provisions of section 12(4) of the Sales Tax Act and submits that the same are quite clear and unqualified inasmuch as if a manufacturer‑ fails to pay tax as provided in subsection (1) of section 12, it is liable to pay penalties on its taxable sales. He submits that the learned Appellate Assistant Commissioner has correctly distinguished the facts of the case in the appellant's case with those dealt with by the Tribunal and, as such, the appellant could not be absolved from its responsibility to pay sales tax on Ice‑cream under section 12(1) of the Act: The main distinguishing feature in this case, according to the learned Departmental Representative, is that the appellant itself admitted its liability to pay sales tax on Ice‑cream in the four quarterly returns filed by it upto the period ending 30th June 1975. Once it accepted its liability for payment of sales tax on Ice‑cream it could not be said later on, by revising the returns that no sales tax was payable by it and, as such, its case did not fall within the ambit of subsection (4) of section 12 of the Sales Tax Act. The learned Departmental Representative further contends that in the two decisions of the Tribunal relied upon by the learned counsel, the legal obligations of the appellant were not brought to their notice but in the instant case the Sales Tax Officer reminded the appellant of its obligation to pay sales tax on Ice‑cream by citing the circular of the Central Board of Revenue as well as a decision of this Tribunal reported as (1975) 31 Taxa tion 41(Trib.) wherein it was clearly held that Ice‑cream was liable to sales tax. Despite these letters/reminders of the Sales Tax Officer, the appellant did not care to comply with the provisions of law and, as such, the penalties imposed were in accordance with the law and the learned Appellate Assistant Commissioner was perfectly justified in confirming his orders.

7. We have perused the orders of the Departmental Officers below and have also carefully considered the facts of the case. In the two decisions of this Tribunal cited by the learned counsel (supra), the appellants did not file any returns showing Ice‑cream as taxable and neither did they pay sales tax on it but sales tax was paid only on sales of chocbar. The Sales Tax Offices imposed penalties under section 12(4) for default of payment of sales tax as required under section 12(1) of the Act. When the matter went in appeal before this Tribunal I. T. A. No. 9/KB to I. T. A. No. 25/KB of 1977‑78 dated 5th June 1978, after considering the provisions of sub‑clauses (a) and (b) of section 12(5) and the provisions of subsection (4) of section 12, it was held, "that firstly the tax payable should be determined either voluntarily by the tax‑payer itself or through an assessment by the assessing authority. After such determination the tax would be payable and not otherwise." With these observations, this Tribunal vacated the orders of the Departmental Officers. Similarly, in the other case bearing S. T. A. No. 50/KB to S. T. A. No. 69/KB of 1978‑79 dated 17thFebruary 1979, the appellant did not pay sales tax on Ice‑cream neither did it file any quarterly returns showing sales thereof. The Sales Tax Officer also did not call upon the appellant to file the sales tax returns. In this decision also, after considering the relevant provisions of Sales Tax Act, it was held that "the assessee did not file the quarterly returns as required by law, nor did the assessing officer call upon the assessee to file the returns. The Sales Tax Officer had neither verified nor determined the sales. How could the assessee be called upon to pay tax when the Sales Tax Officer had not determined the amount of tax". The Tribunal, therefore, cancelled the orders of the Departmental officers imposing penalties under section 12(4) of the Sales Tax Act.

8. So far as the learned counsel's main grievance is concerned, namely, that the learned Appellate Assistant Commissioner erred in holding that the facts in the appellant's case and the facts obtaining in the cases decided by the Tribunal as referred to (supra), were different and, as such, the same could not be followed in deciding the appellant's case for maintaining the penalty orders. A perusal of the learned Appellate Assistant Commissioner's order indicated that he very elaborately discussed the facts of this case by mentioning that in this case the appellant filed quarterly returns for the four quarters ending on 30th September, 1974, 31st December, 1974, 31st March, 1975 and 30th June, 1975, disclosing the sales of Ice‑cream as taxable and also the amounts of sales tax payable at the rate of 20 %. The appellant, however, did not pay the admitted sales tax liability and, as such, the Sales Tax Officer imposed penalties under section 12(4) of the Sales Tax Act on 30th November, 1976. The learned Appellate Assistant Commissioner also mentioned that the appellant filed the revised quarterly returns claiming exemption of sales of Ice‑cream during 1974‑75 (four quarters referred to (supra) and also during the quarters for the period ending on 30th June, 1976, and the subsequent quarters. It is also an admitted fact that before imposition of the penalty the Sales Tax Officer drew the attention of the appellant towards the payment of sales tax liability by referring to the Central Board of Revenue's Circulars and also a decision of this Tribunal wherein Ice‑cream was held to be liable to sales tax, and even then the payments were not made. The learned Appellate Assistant Commissioner, thereafter clearly distinguished the facts of this appellant's case with those obtaining in the Tribunal's decisions with specific reference to: (1) That in the two cases decided by the Tribunal, the assessee did not file the quarterly returns at all because it was contended that Ice‑cream was exempt from levy of sales tax; whereas in the appellant's case, the returns were originally filed during 1974‑75 showing sale of Ice‑cream as taxable. (2) In the former case, the Assessing Officer did not call upon the assessee to file returns; whereas in the appellant's case the returns were filed voluntarily as indicated above. Subsequently, when the returns were revised showing sales of Ice‑cream as exempt, the Sales Tax Officer explained the legal position to the appellants and directed then to pay sales tax on Ice‑cream. (3) In the former cases, the assessee had refused to pay tax since they denied their liability under the law to pay tax; whereas in the appellant's case, in the original four quarterly returns for 1974‑75 admitted the liability to pay sales tax on Ice‑cream. (4) In the former cases, the Sales Tax Officer had not verified the sales made by the assessee nor did he determine the amount of tax payable on sales of Ice‑cream; Whereas in the appellant's case, the, sales were originally declared as taxable; and it only declared them as attempt later on. The sales as well as the tax was ascertainable as the appellant itself indicated the figures of sales of Ice‑cream in the four -quarterly returns pertaining to 1974‑75.

9. Having carefully considered the facts of the case we are of the opinion that in the appellant's case the facts are clearly distinguishable from those considered by the Tribunal in its two decisions inasmuch as, in this case the appellant voluntarily filed the returns and also admitted its liability to pay sales tax on Ice‑cream. It was only as late as on 5th January, 1976, that it revised its returns declaring the sales of Ice‑cream, to be exempt from sales tax. This revision, according to our opinion, could not help the appellant because in the first instance, there is no provision in the Sales Tax Act to file revised returns, although no doubt, only patent arithmetical errors etc., could be rectified; but returns could not be revised on basic issues like the taxability or otherwise of a particular item. Secondly, it is an admitted fact that the appellant voluntarily accepted its liability for payment of sales tax for the four quarters and it was only later on that the returns were revised denying its liability to pay sales tax in our opinion, the appellant was not justified in law to change its opinion regarding taxability of Ice‑cream. So far as the remaining 19 months arc concerned, for which separate penalties were imposed by the Sales Tax Officer under section 12(4), for the same default, the position is more or less identical. Once the appellant was conscious of its liability for payment of sales tax or. Ice‑cream in the four quarters of a year, it could not suddenly change its mind and taken a different stand that Ice‑cream was not liable to Salts Tax. Moreover, the appellant's case for the earlier four quarters as well as the following 19 months stood on a much weaker grounds for the simple reason that the Sales Tax Officer impressed upon the appellant that Ice‑cream was liable to sales tax by referring to the Central Board of Revenue's Circular, dated 6th January, 1972, and a decision of this Tribunal reported as early as (1975) 31 Taxation

14. For all these reasons, we are clearly of the view that the learned Appellate Assistant Commissioner was justified in distinguishing the facts in the appellant's case and thus not following the earlier two decisions of the Tribunal on this issue.

10. We now come to the facts of the case considered by the Supreme Court of India relied upon by the learned counsel, reported as (1972) 83 I T R

26. In this case, as we have already narrated brief facts in an earlier paragraph, the penalty was imposed on the appellant for not obtaining registration as a dealer because the assessee genuinely believed that it was not liable to pay sales tax and was, therefore, not required to get itself registered as a dealer. The learned Judges of the Supreme Court held that the penalty could not ordinarily be imposed unless the party obliged, other acted deliberately in defiance or acted in conscious disregard of its obligation. In the appellant's case, the facts are different. The appellant was fully conscious of its responsibility to pay sales tax on Ice‑cream and this belief stands confirmed by the four quarterly returns covering a period of 12 months, wherein it admitted the liability for payment of sales tax on Ice‑cream. It was an afterthought and for reasons best known to the appellant, it changed its opinion and revised its returns declaring the sales of Ice‑cream to be exempt from sales tax. In this view of the matter, we have not the slightest doubt in our minds that the facts in the appellant's case were different and the ratio of decision laid down by the Supreme Court of India could not be made applicable in the case of the appellant.

11. Besides the above distinguishing features of this case, vis‑a‑vis, the two decisions of this Tribunal, we also find same force in the learned Departmental Representative's contention that once the Act imposed a liability to pay tax, there is little which one can do to avoid payment of tax unless one's case clearly falls outside the ambit of taxation. We repeat that the appellant clearly admitted its liability to pay sales tax on Ice‑cream and only subsequently changed its opinion. This could not be done by it specially when the Tribunal's decision cited as (1975) 31 Taxation 14 (Trib.), still held the ground. Although we do not intend to disagree with the opinion expressed by this Tribunal in its decisions cited (supra), we find some force in the contentions put forth by the learned Departmental Representative. For the sake of convenience we reproduce hereunder the provisions of section 3 of the Sales Tax Act, which is the charging section: "Section

3. Charge of tax.

‑(1) There shall be levied and collected a tax on the value of‑ (a) all goods produced or manufactured in Pakistan payable by the manufacturer or producer; (b) all goods imported into Pakistan, payable by the importer; (c) all goods sold by a licensed wholesaler, payable by the licensed wholesaler; (d) . . . . . . . . . (e) . . . . . . . . . The tax shall be at the rate of twenty per cent on the value of the goods as aforesaid. Provided that (3) . . . . . . . . . (i) . . . . . . . . . (ii) . . . . . . . . . (iii) . . . . . . . . . (iv) . . . . . . . . . (4) The tax in respect of the goods mentioned in clauses (a) and (c) of subsection (1) shall be payable on the occurrence of the first of the following events:‑ (i) When the goods are delivered to the purchaser, or (ii) When the property in the goods passes to the purchaser, or (iii) When the goods leave Pakistan. And for the purposes of the aforesaid provisions the goods shall be deemed to have been sold when they leave Pakistan." If one reads the provisions of section 3, it appears quite obvious that the liability of payment of sales tax is squarely and definitely imposed on all manufacturers except those whose cases are covered clearly and unambiguously, by the exemption granted under sections 7 and 8 of the Sales Tax Act. For holding this view we find support from the ratio down in the decision of the Supreme Court of India, reported as (1955) 27 I T R 709 where, while dealing with the scheme of the Income‑tax Act, the learned Supreme Court relied upon and quoted from the decision of Lord Dunedin (1926 A C 37) that‑ "there are three stages in the imposition of a tax: There is the declara tion of liability, that is the part of the statute which determines what persons in what property are liable. Next there is the assessment. Liability does not depend on assessment. That ex hypothesi, has already been fixed. But assessment particularises the exact sum, which a person liable, has to pay. Lastly come the methods of recovery, if the person taxed does not voluntarily pay." The above decision no doubt, relates to proceedings under the Income‑tax Act but the provisions of the charging section of the Sales Tax Act and the Income‑tax Act being more or less similar, it would appear that in the Sales Tax Act also the liability to pay is fixed finally and definitely by the charging section and only the question of quantification remains, which in our opinion, so far as sales tax is concerned, is very simple. The manufacturer knows very well the quantum of sales as well as the rate of tax applicable of its product and then he has to pay the tax voluntarily.

12. From a plain reading of the charging section, reproduced (supra), it appears quite obvious that the Act imposes a liability on all manufacturers. The appellant's product is not specifically exempted and, as such, it was liable to pay sales tax voluntarily according to the provisions of the Sales Tax Act. It is a well‑established principle that fiscal statutes are always constructed strictly and one cannot travel beyond the language used in the law. Under the Sales Tax Act therefore, unless an item clearly and unambiguously falls within the list of exemptions, the manufacturer shall have to pay tax on its product. The manufacturers do not have the choice of interpreting the statute according to their own sweet‑will and to suit their purpose. They correctly do not have the option of taking chances specially when a judicial forum, like the Trib., had already given a verdict on the issue. In our view, they cannot certainly be allowed to wait till finality is achieved by decision of the learned High Court or for that matter, the learned Supreme Court. In the instant case the facts go all the more against the appellant for it genuinely believed that Ice‑cream was taxable and it was only subsequently that it changed its opinion without any justification. This change of opinion, certainly, cannot help the appellant's case that it denied its liability udder the law to pay sales tax.

13. Seen from another angle, it will be noted that the very concept of filling quarterly returns and voluntary payment of sales tax on monthly basis will be frustrated if the manufacturers after one having accepted the liability to pay sales tax, at any point of time, change their mind and start believing that the product manufactured by them did not attract sales tax and thus they deny their liability under the Act and refuse to make payment of sales tax as prescribed under the law. In the instant case, besides its own acceptance of liability to pay sales tax for no less than a period of four quarters, the Sales Tax Officer also reminded it of its liability and even then the appellant chose not to comply with the provisions of law.

14. In view of the facts discussed above, we have no hesitation in confirming the orders of the learned Appellate Assistant Commissioner in respect of all the 23 appeals.

15. In the result, one appeal having been withdrawn stands rejected. The other 23 appeals also fail and are hereby dismissed. Appeal dismissed.