2010 PLP (Trib (PTD)

The present appeal, filed by a listed public limited company, engaged in the business of manufacture/assembly and sale of 'Honda' brand cars in Pakistan, under section 46 of the Sales Tax Act, 1990 impugns the order dated 12-11-2007 issued by the first appellate authority in respect of an earlier appeal filed by the appellant against order-in-original dated 29-12-2006 passed by the Additional Collector (Legal), Large Taxpayers Unit, Lahore.

2. The brief facts of the case are based on the audit observations of the Deputy Collector (Audit-II), Large Taxpayers Unit, Lahore, arising out of the sales tax audit conducted for the period from July, 2004 to December, 2005, a show-cause notice dated 28-6-2006 was-issued by the Additional Collector (Legal), Large Taxpayers Unit, Lahore (hereinafter 'Adjudicating Officer') requiring explanation from the appellant on various charges levelled therein. In response thereto, detailed replies were submitted to the Adjudication Officer and after conducting various hearings, through the Order-in-Original No. 39 of 2006 dated 29-12-2006, following sales tax liabilities, along with additional tax payable under the provisions of Sales Tax Act, 1990, were adjudged by the Adjudicating Officer against the appellant. Sr. No. Particulars Sales Tax (Rupees) Penalty (Rupees) (i) Non-payment of sales tax on receipt of alleged 'advances' 104,727,607 5,236,380 (ii) Short payment of Sales Tax 1,188,288 59,414 (iii) Non-payment of sales tax on alleged 'supply' of auto pats against warranty claims 1,744,331 87,217 (iv) Non-compliance of section 73 (Messrs Engineering Construction Services) 3,375,000 101,250 (v) Input tax adjustment in respect of invoices of Messrs Razziq International 5,794,717 173,842 (vi) Inadmissible input tax adjustment on certain purchases under section 8(1)(a) 37,080 5,000

3. Feeling aggrieved by the aforesaid order of the Adjudication Officer, an appeal was filed by the appellant before the learned first appellate authority who upheld all the charges levelled against the appellant, except that in respect of issue summarized at Serial No. (ii) above, the order of the Adjudicating Officer was annulled in view of the availability of amnesty in terms of S.R.O. 463(I)/2007. This is the aforesaid confirmation of the order of the Adjudication Officer by the first appellate authority that has compelled the appellant to come up in further appeal before us and following grounds of appeal have been taken in the appeal documents:-- (i) that the learned Collector (Appeals), without appreciating the correct facts of the matter, has erred in upholding the levy of sales tax amounting to Rs. 104,727,607, together with the additional tax and penalty amounting to Rs.5,236,380 under Serials Nos.5 and 13 of the Table of section 33 of Act, on account of 'security deposits' which were treated as 'advances' by the adjudicating officer; (ii) that the learned Collector (Appeals) has erred in upholding the levy of sales tax amounting to Rs.1,744,331 together with the additional tax and penalty amounting to Rs.87,217 under Serial Nos.5 and 19 of the Table of section 33 of the Act on account of free replacement of 'spare parts' under the 'warranty claims' ; (iii) that the learned Collector (Appeals) has erred in upholding the disallowance of input tax amounting to Rs.3,375,000, together with the additional tax and penalty amounting to Rs.101,250 under Serial No.16 of the Table of section 33 of the Act, on account of non-compliance of section 73 of the Act in respect of payments made to Messrs Engineering Construction Services; (iv) that the learned Collector (Appeals) has erred in upholding the disallowance of input tax amounting to Rs.5,794,717, together with the additional tax and penalty amounting to Rs.173,842 under Serials Nos. 11 and 19 of the Table of section 33 of the Act, on account of alleged inadmissible input tax adjustment in respect of invoices issued by Messrs Razziq International; (v) that the learned Collector (Appeals) has erred in upholding the disallowance of input tax amounting to Rs.37,080, together with the additional tax and penalty amounting to Rs.5,000 under Serial No. 19 of the Table of section 33 of the Act, on account of alleged inadmissible input tax adjustment in terms of section 8(1)(a) of the Act; (vi) The learned Collector (Appeals), contrary to the position clarified by the Federal Board of 'Revenue through letter C.No.4/2-STB/2007 dated June, 30, 2007 and subsequently through S.R.O. 999(I)/2007 dated September 29, 2007, has erred in not setting aside the imposition of additional tax and penalty when admittingly the entire disputed amount has been recovered from the appellant prior to June 30, 2007; and (vii) Without prejudice to above grounds of appeal, the learned Collector (Appeals) has erred in upholding the levy of additional tax and penalty under the provisions of sections 33 and 34 of the Act as there was no element of mens rea on the part of the Appellant.

4. During the course of hearing of the present appeal, the learned AR prior to taking up the specific issues involved in the present appeal, briefly dilated upon the overall scheme of the Sales Tax Act, 1990 and read out the relevant provisions of law. While summarizing the scheme of law, the learned AR firstly read out the provisions relating to charge of tax and thereafter, in this respect, explained the concepts of Input tax, 'output tax', 'supply', 'taxable supply', 'taxable goods', 'taxable activity' and 'time of supply' etc. The learned AR submitted that the issues involved in the present appeal require consideration of these principles. The appeal is taken up and decided in terms of following observation. (i) ALLEGED ADVANCES

5. An amount of Rs. 104,727,607, together with the additional tax and penalty amounting to Rs.5,236,380, has been adjudged by the Adjudicating Officer on account of amounts received by the appellant, from its dealers, as 'security deposits' against display of cars at their premises. The Adjudicating Officer, it has been explained by the learned AR, treated the amount received as 'security deposit' as `advances' in terms of the provisions of section 2(44) of the Sales Tax Act, 1990 .and charged sales tax under section 3 of the Sales Tax Act, 1990. The act of displaying of cars at the dealers premises was construed as a 'supply' under the provisions of section 2(33) of the Sales Tax Act, 1990.

6. The learned AR, while explaining the relevant facts and background, submitted that during the period, for which an audit was conducted under section 25 of the Sales Tax Act, 1990, the appellant entered into an arrangement with its dealers for displaying the cars at the dealers' premises. As part of this arrangement, 'security deposits' were received from the dealers, so as to secure the vehicles parked at the dealers premises. These were lump sum amounts, not being divisible by the customer price of any of the vehicles then being sold by the appellant. In the order-in-original, the Adjudicating Officer held that the aforesaid security deposits, being in the nature of 'advance' for supply of vehicles, were chargeable to tax in terms of provisions contained in section 2(44) read with section 3 of the Sales Tax Act, 1990.

7. In the context of the matter in appeal and the background summarized above, the learned AR referred to following provisions, as were applicable during the period involved in the subject appeal, of the Sales Tax Act, 1990:-- Section 3

Charging section "3(1) Subject to provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of - (a) taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him; and (b)...." Taxable Supply - Definition "2(41) taxable supply means a supply of taxable goods made by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4;" Supply - Definition "2(33) supply includes sale, lease (excluding financial or operating lease) or other disposition of goods carried out for consideration and also includes Time of supply - Definition "2(44) time of supply shall be deemed to have taken place at the earlier of the time of delivery of goods or at the time when any payment is received by the supplier in respect of that supply:

"

8. Referring to the aforesaid specific provisions of the statute, the learned AR submitted a synopsis stating that (i) charge of tax has been prescribed by the legislature on taxable supplies that are made by a registered person in the course or furtherance of taxable activity; (ii) taxable supply, as referred to in the charging section, means 'supply' of taxable goods; (iii) supply is sale, lease or other disposition of goods; and (iv) time of supply, in cases where advance payment is received, has 'been deemed to be when payment is received in respect of a supply. Reverting back to the facts, the learned AR argued that the foremost issue which requires consideration is whether or not the aforesaid movement of vehicles, undertaken through obtaining 'security deposits', is a supply of goods. It was contended that provisions of section 2(44) trigger where an advance is received in respect of supply and in cases where an advance is received which is not in respect of a supply these provision do not remain relevant because is in fact a supply of taxable goods that has been brought in the ambit of charging section.

9. It is the appellant's contention that no supply had taken place in the present case. The goods remained the property of the appellant at all times until the time the goods were sold to a buyer, when proper amount of sales tax was deposited in the treasury and which the department does not dispute. The AR further submitted that these were the property of the appellant at the factory premises and remained the property of the appellant even when parked at the dealers' premises under the aforesaid arrangements. Elaborating further on the matter, the learned AR argued that whether the element of supply existed in the above arrangements is the issue which requires consideration with reference to the provisions of section 2(33) of the Sales Tax Act, 1990, cited supra, wherein the expression 'supply' has been defined.

10. Dilating on the aforesaid provisions of law, the learned AR added that an analysis of the above definition of expression 'supply' reveals that the scope provided for the expression 'supply' is inclusive in nature and mere 'sale', 'lease' etc. may not be the only events which represent a supply. It is not a disputed position that no 'sale' or 'lease' has taken place in the present case. Accordingly, what becomes relevant, it was submitted, is the 'other disposition' of goods as used in the above definition. The expression `disposition' of goods, the AR stated, has not been defined in the Sales Tax Act, 1990, therefore, its extent and scope would be determined by reference to the ordinary dictionary meanings and under the established principles of statute interpretation, commonly known as the principle . of 'Ejusdem Generis'. This principle, AR submitted, provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision. Taking this line of argument it was argued that the expression 'disposition of goods' is to be interpreted in the light of words associated to it, like 'sale' and 'lease' and not in pure isolation. In this respect, the AR relied upon following judgment of Sindh High Court in 1973 PTD 453: "...In order to ascertain the meaning of any word or phrase that is ambiguous or susceptible to more than one meaning, the Court may properly resort to the other words which the ambiguous word is associated in the statute. Accordingly, if several words are connected by a copulative conjunction a presumption arises that they are of the same class, unless, of course a contrary intention is indicated..."

11. By placing reliance on the above judgment, it was submitted that what needs to be ascertained is the scope and extent of expression 'disposition of goods', a phraseology that is being regarded as ambiguous and/or susceptible to more than one meanings and under the principles laid down by the High Court the expression 'disposition of goods' has to be construed to be a mode which has similar attributes to that of a 'sale' or 'lease'. It was added that since it has been used with expression 'sale' and 'lease', whereby risks and rewards are effectively transferred to the acquirer, the law covers such disposition where risks/rewards are not retained by a disposer. In the facts of the present case, the learned AR clarified, since the appellant company had retained the ownership with itself and also borne the insurance expense, therefore, the goods cannot be said to have been disposed off to fall within the ambit of expression 'other disposition' in the cited definition of expression 'supply'. It was added that it would be an improper interpretation to infer that a mere transfer or movement of goods, as is involved in the present case, would fall in the scope of 'supply'.

12. Explaining further the extent of expression 'disposition', the learned AR relied upon the decision of Sindh High Court 2006 PTD 1459 whereby following observation has been recorded by their lordships:- " The expression 'disposition' further was considered by the Supreme Court of India in the cases of Goli Eswarian v. Commissioner of Gift Tax AIR '1970 SC 1722 and it was held that 'the word disposition is not a term of law'. Further it has no precise meaning. Its meaning has to be gathered from the context in which it is used. Since the word 'disposition' has not been defined in the 'Act' therefore the ordinary meaning of the word which is of wide connotation is to be adopted. It is used only as an expression of transfer inter vivios or operation of law and for such purpose an element of ownership must exist upon the goods/property under disposition or at least the person acquiring the goods must possess some right or title in the goods in order to dispose it of at his will...."

13. Relying upon the ratio in the cited decision of Sindh High Court, the learned AR submitted that it has been categorically observed by their lordships that, in the context of definition provided for in the law, 'disposition' of goods would constitute 'supply' where a person acquiring the goods possesses some right or title in goods in order to dispose it off at his will. In the case of the appellant, it was reiterated that, it is an undisputed fact on record that the goods remained the property of the appellant and the dealer had no right whatsoever to dispose off the vehicles at his will. Hence, the movement was not a 'supply' which could attract the levy of tax under section 3 of the Act. The learned AR, in the context of expression 'disposition' also referred to the provisions of section 75 of the Income Tax Ordinance, 2001 and submitted that disposal under that legislation takes place once a person ceases to retain control over the goods and that not being the case in the present matter, no disposition could be said to have taken place to constitute a supply and charge of tax.

14. Lastly, it was submitted by the AR that the appellant has itself paid tax on advances amounting to over Rs.40 billion in the period involved in the present appeal and since the subject amounts were not advances in respect of a supply therefore, no tax was payable under the law. It was however, clarified that the goods that were parked at the dealers' premises when subsequently sold to the customers, tax was duly paid and the levy, as imposed by the authorities below has resulted into double taxation i.e. once when the tax has been voluntarily paid by the appellant and second as levied by the Adjudicating Officer. Deliberating further on this aspect, the learned AR submitted that against the subject deposits the appellant had been providing the dealers with substitute cars repeatedly i.e. as and when the car is sold to customer a replacement car is parked and at the time of sale, the tax has been voluntarily deposited. In this way, the learned AR added, the appellant had paid tax on various occasions (at the time of sale) against the same security deposit. It was thus argued that the way the authorities below have applied the law it has become a case of double taxation.

15. The learned DR rebutting the submissions of the appellant reiterated the contents of the orders of the authorities below and submitted that the goods were disposed off by the appellant and therefore in terms of provisions of section 2(44) of the Sales Tax Act, 1990 the tax has been rightly levied by the Adjudicating Officer. It was the contention of the DR that the act of parking of car was disposition and that being the case since the supply had taken place the tax was payable at the time of receipt of subject amounts. While defending the orders of the authorities below, the learned DR relied upon decision of the Supreme Court of Pakistan in PLD 2007 SC 517 2007 PTD 1902 titled Collector v. Sanghar Sugar Mills Limited and submitted that as per the ratio in the derision the tax was properly charged in the present appellant's case. In particular the reliance of the DR was on the following observations recorded by their lordships in the said judgment of the apex court: "(15) The main thrust of the learned counsel for the respondents was on the interpretation of section 3(1)(a) and in their view the sales tax is to be imposed on the supply of the goods in which the assessee continuously, regularly deals with, i.e. the items produced or manufactured by them and not casually, occasionally, incidently or sometimes. By contending so, they have lost sight of the fact that it is not only the business or the taxable activity which has been referred to or mentioned in the section but the important role is to be played by the words "in the course or furtherance of" which have prefixed the word business or taxable activity. The meaning of "in the course of" can be taken to mean as connected with, related to and having some nexus with the business/taxable activity and similarly "in furtherance of" indicative of the fact that taxable supply had been made for the enhancement/further development of the business/ taxable activity. The word furtherance has been defined in the Advanced Law Lexicon, Third Edition, 2005, P. 1953, as "act of furthering, helping forward, promotion, advancement, or progress". In furtherance of has been interpreted as in promoting, or advancing in the Oxford English Dictionary, Volume IV, P.

619. Furtherance has been defined as "fact or state of being furthered or helped forward, the action of helping forward, advancement, aid, assistance". It is abundantly clear that the taxable supply has not been confined or limited to the one which is the product or the goods manufactured but also including those goods which involve in some way with the progress, promotion, advancement of business/activity/taxable activity."

16. On the strength of the aforesaid observations in the cited decision of the apex Court, the learned DR concluded the arguments and submitted that tax was properly charged on the, subject amounts and as such the orders of the authorities below do not suffer from any infirmity so as to warrant any interference.

17. We have given due consideration to the submissions of both the sides, perused the available record, including the orders of the authorities below, and have also considered the ratio of the decisions relied upon by the parties. In our view the decision of the apex Court in PLD 2007 SC 517 = 2007 MLD 1902, relied upon by the DR, is not relevant in the facts of the present case since the same is distinguishable. In the aforementioned judgment there was no dispute that the taxpayers/assessees made supplies (sale) of goods i.e. scrap and fixed assets, regarding which no exemption was otherwise provided in the law. However, in the said case, it was the contention of the taxpayers/ assessees that since such supply was not in the course or furtherance of taxable activity, therefore, in terms of provisions of charging section the charge of tax did not mature. It was in this context that their lordships observed that expression 'furtherance' had a wider scope and hence the (admitted) supply, .being in furtherance of taxable activity, attracted the levy in terms of section 3 of the Sales Tax Act, 1990. Whether or not the transaction involved a 'supply' was not the subject matter of the appeal before the apex Court.

18. In the present appeal it is not a dispute that the transaction constituted taxable activity. The main dispute is whether or not the act of parking the vehicles at the premises of dealers constituted supply. If the answer to this proposition is in negative the charge would not mature and on the other hand if the answer is in affirmative the conclusion would be that the tax was legally charged in the present case. In determining the answer to the aforesaid proposition, the decisions relied upon by the AR are very relevant. Not only the principle of Ejusdem Generis is applicable in this case but also interpretation advanced by the Sindh High Court in 2006 PTD 1459 of expression 'disposition' is very relevant. With the benchmark, laid down by their lordships as to when disposition takes place, in our mind, we posed a question to the DR as to whether the dealers, in the present case, had any control to dispose off the subject vehicles at their will/discretion to which the learned DR could not render any explanation. For all practical purposes, in the present case, the appellant did not dispose off the vehicles so as to constitute the supply. That being the case,' we have no hesitation in concluding that since in the present case no supply had taken place the charge of tax did I not accrue and the authorities below erred in levying tax in the case of the transaction under consideration. We are in agreement with the learned AR that not all advances undergo the incidence of tax and only such advances, which are in respect of a supply, are required to be considered for the purposes of payment of tax. In this case, there being no supply, the subject amounts were not advances in terms of provisions of section 2(44) of the Sales Tax Act, 1990. The learned AR is correct in relying upon the following observations 2002 PTD 976 wherein it has been ruled that a charge of tax legally crystallized when there simultaneously exists a 'taxable supply' and 'taxable activity': " ..A perusal of section 3 of the Act, 1990 confirms that in order to create a charge of sales tax, inter alia, two conditions must be fulfilled independently, i.e. the transaction of sale must constitute a 'taxable activity' and it should also to be a 'taxable supply'. Even if one condition is missing the charge of sales tax would not be leviable."

19. In the facts of the present case, though taxable activity arguably could be construed to be there but there is no taxable supply hence in accordance with the ratio given above, no tax was payable and authorities below legally erred in. imposition of tax on the subject amounts. Even otherwise, the department has not refuted the payment of tax at a subsequent stage by the appellant itself. Resultantly, we vacate the orders of the authorities below and hold that no tax was legally payable in respect of security deposits received by the appellant from its dealers. (ii) FREE REPLACEMENTS OF AUTO PARTS UNDER WARRANTY CLAIMS

20. This issue relates to the charge levelled against the appellant on account of non-payment of sales tax amounting to Rs.1,744,331 in respect of free replacement of 'spare parts' against the 'warranty claims'. Deliberating on the facts, the learned AR submitted that every vehicle sold by the appellant is covered by a warranty period which is usually 'one year or 20,000 kilometres, whichever occurs earlier'. If any particular component or part of the motor vehicle turns out to be defective, within the stipulated 'warranty period', such component/part has to be replaced without any cost to the buyer of the vehicle in such a manner that the original component/part is to be returned to the appellant. Explaining the business process, the AR clarified: (a) the component that forms part of the original vehicle is subjected to sales tax at the time of sale of the composite vehicle as obviously the price of such component is already included in the aggregate sale price of the motor vehicle; and (b) upon receipt of a warranty claim, the original component is replaced and the 'substituted component' forms part of the composite vehicle whereas the original part is taken back into the records and later on sold as an item of scrap and charged to sales tax accordingly.

21. In the background of the aforesaid facts, the learned submitted that the authorities below could not appreciate the facts in deciding the matter against the appellant as the replacement part that was provided upon receipt of warranty claim duly underwent the charge of tax once it formed part of the vehicle upon replacement and likewise the original part that was replaced also underwent the charge of tax as a sale of scrap item. The learned DR supported the stance of the authorities below.

22. Having considered the rival submissions, we do not find any substance in the contentions put forth by the appellant. The replacement parts constituted a distinguishable 'supply' on which tax was required to be charged and deposited, under the law, at the time of supply/ replacement. No relationship can legally be made with the defective part. The position being admitted that no tax was charged and paid on the replacement part by the appellant, we dismiss the appeal on this point and conclude that the authorities below were justified in treating the appellant under default. The consequential additional tax and penalty, however, are annulled in view of applicability of amnesty on the basis of which the first appellate authority, in the impugned order; decided the issue listed at Serial No. (ii) supra, in the favour of the appellant. (iii) NON-COMPLIANCE OF SECTION 73

23. The underlying facts are that in the show-cause notice, that formed basis for issuance of order-in-original, the appellant was requested to provide the payment proofs regarding the payments made to Messrs Engineering Construction Services, Islamabad and it was stated that failure to do so would result in disallowance of related input tax adjustment to the appellant. In this respect, a reference was made to the provisions of section 73 of the Sales Tax Act, 1990 which provides that input tax adjustment is only valid if payment to supplier is made through prescribed banking modes/channels.

24. In response thereof, the appellant admittedly provided the proofs which demonstrated that the payments were made through prescribed/ permissible modes and on this basis it was submitted that no adverse inference was warranted. The Adjudication Officer, however, proceeded to disallow the input tax adjustment on the grounds that, though the payments were made through legitimate modes, however, since, the appellant did not settle the invoice within 180 days of the issuance of invoice, as prescribed in the law, therefore, the input tax adjustment was not valid. It was observed that the case of the appellant was hit by the mischief of these provisions. The first appellate authority, while disposing of the appeal of the appellant, upheld the order and confirmed the disallowance. 24-A. Before us, the learned AR vehemently argued that in disallowing the claim the Adjudicating Officer' went beyond the charges levelled in the show-cause notice as the appellant was never confronted on the matter of payment beyond the threshold of 180 days. On these grounds, the AR argued that since no opportunity of defence was ever provided to the appellant regarding the basis on which adverse inference was drawn, therefore, the order being passed in infringement of basic principles of natural justice, the same is liable to be annulled regardless of any other consideration. The AR also informed that even otherwise, the delay in settlement beyond 180 days, under the provisions of law, is a condonable offence and the appellant has already filed an application for condonation which remains unattended for almost 4 years which shows injustice at the part of the revenue.

25. After going through the record and the submissions, it does not take long for us to conclude that the orders of the authorities below are not sustainable being passed in violation of established, time tested and settled principles of natural justice. There is a plethora of case law that no party can be condemned unheard and any proceedings that are undertaken without providing a right of defence to the accused are a nullity in law. This fact that the appellant was never confronted on the threshold of 180 days is not disputed/denied and that being the case we cancel both the disallowance and its confirmation by the first appellate authority. The appeal on this point is also accepted. (iv) INVOICES OF MESSRS RAZZIQ INTERNATIONAL

26. The relevant facts are that through the show-cause notice the appellant was alleged to have claimed input tax on the basis of invoices for 'clearing services' issued by Messrs Razziq International, whereas the 'bills of entry', through which the imports were cleared, were indicating the name of Messrs Salman International. In the above background it was alleged by the department that the invoices of Messrs Razziq International, on the basis of which input tax was claimed by the appellant, were merely pieces of paper. The Adjudication Officer also agreed with the contention of the department holding that documents on record do not support the input tax claimed by the appellant. In the impugned order, the first appellate authority also endorsed the departmental view while observing as under:

27. The AR of the appellant while further deliberating the facts submitted that appellant had entered into business transaction with Messrs Razziq International for the purposes of procuring 'clearing services' to whom the payments (including sales tax) were made through proper banking instruments and that too in respect of valid tax invoices. Messrs Razziq International had further entered into an agreement with Messrs Salman International through which part of the work was outsourced to the latter by the former. Under the aforesaid agreement, Messrs Salman International was providing services to Messrs Razziq International and not to the appellant. It was for Messrs Razziq International either to perform the services by itself or to outsource those to an independent service provider. The outsourcing of the clearing services by Messrs Razziq International to Messrs Salman International remained their prerogative.

28. In respect of the allegation of the department that the sales tax invoices, on the basis of which input tax adjustment has been claimed by the appellant, are mere pieces of paper, the learned. AR submitted that the underlying invoices are valid sales tax invoices being issued by a person which is registered with the sales tax department and to whom payments were made through banking channels. It was added that it needs to be appreciated that during the period for which audit was undertaken, the appellant imported components worth over Rs.30 billion (there is no dispute on this fact) and in these circumstances, the denial of use of services of a clearing agent is not understandable. It was further emphasized that services under similar arrangements were also provided by Ms. Razziq International to various importers; however, the sales tax department had not been able to identify any other importer in whose case the input tax adjustment has been refused. Lastly, it was submitted that it needs to be further appreciated that while the department is acknowledging and taking into account the amount of tax deposited by Messrs Razziq International, the consequential input `ax by invoice holders is being disallowed on the basis of surmises and conjectures.

29. The learned DR, on the other hand, supported the orders of the authorities below and submitted that in this case the appellant could have validly claimed adjustment had the invoices been issued by Messrs Salman International who was actual service provider and Messrs Razziq International being not the service provider could not issue invoices and hence input tax adjustment claimed on the basis of the invoices of the latter was rightly disallowed by the Adjudicating Officer. He thus pleaded that appeal on this ground is rejected.

30. We have given earnest consideration to the submissions of both the parties. There is no denial to the proposition that input tax in respect of clearing services constitutes valid deduction. There is also no disagreement that in this case large scale imports were made by the appellant which could not have been cleared without the involvement of a clearing agent. This is again not controversial that the appellant held invoices issued by Messrs Salman International which met the conditions specified in section 7 of the Sales Tax Act, 1990. In these circumstances, it is not understandable how the departmental authorities proceeded to disallow the deduction when all legal requirements had been complied with by the appellant. The reason that has been made basis for disallowance is nothing but presumption, guess work and surmises and hence cannot be approved being a settled legal position. Likewise, the discriminatory treatment accorded to the appellant is also unjust as in no other case such disallowance has been made though Messrs Salaman International remained involved in various other case under arrangement with Messrs Razziq International. The acceptance of tax from Messrs Razziq International without allowing related input tax adjustment to the invoice holder defeats all norms of justice as well as the basic principles of VAT. The department would certainly had a valid case if appellant had claimed the adjustment but Messrs Razziq International had not paid the tax in exchequer. This is not the case. Here, while department is considering payment of tax by the issuer of invoice as a valid payment of tax but the adjustment thereof is being denied on hypothetical basis. This is neither the spirit of law nor legally justifiable. The orders of the authorities below on this account are, therefore, annulled. (v) INPUT TAX ADJUSTMENTS - INADMISSBLE UNDER SECTION 8(1)(a)

31. The relevant facts are that the Adjudication Officer, in the order-in-original disallowed an adjustment for input tax claimed at Rs.37,080 in terms of provisions contained in section 8(1)(a) of the Act. The items regarding which input tax adjustment has been disallowed by the authorities below together with appellant's contentions relating thereto could be summarized as under:-- Sr.No. Item Amount (Rupees) Use by the appellant (i) Flower Pot 705 Decoration for main taining and further building corporate image of the company. (ii) Vacume Cleaner 7,350 Used in cleaning the carpet, laid down in cars, before delivery to customers. (iii) Extra pipe for 1,050 Related to above. above (iv) Plastic Crate 8,850 Used for the in-house movement of tools and equipment on the assembly line. (v) Washing Machine 17,775 Used for the washing of the uniform of the employees that they wear while on duty. (vi) Blade, Lawn Mover 1,350 Maintenance of lawn in the factory premises.

32. We have noted that none of the authorities below have given any specific reason on the basis of which it has been concluded that the input tax suffered on the aforesaid items do not qualify for adjustment under the relevant provisions of law. The provisions of law authorize deduction for all such input tax that relate to goods that contribute directly or indirectly and even remotely towards furtherance, of taxable activity. At this stage the decision relied upon by the learned DR in Sanghar Sugar Mills PLD 2007 SC 517 = 2007 PTD 1902 becomes relevant. Relying on the same we hold that except for flower pot and lawn mover input tax on other items has been wrongly disallowed. On the said two items, we do not find any infirmity in the orders of the authorities below and the same is confirmed to this extent and for remaining amounts the orders are vacated. The consequential additional tax and penalty, however, shall not remain payable due to applicability of amnesty on the basis of which the first appellate authority decided the issue listed at Serial No. (ii) in the favour of the appellant. The appeal stands disposed of in terms of findings and observations recorded above. (Syed Nadeem Saqlain) Judicial Member (Amjad Ikram Ali) Accountant Member DISSENTING NOTE sOn the issue of not paying sales tax on supply of cars worth Rs.80,29,11,650 against lump-sump security to 39-dealers across the country on the grounds that sales tax was not due. To put the facts correct the order-in-original states that "dealers paid said amount which is equal to consumer price inclusive sales tax and received vehicles for L further supply of consumers".

2. The arguments of the learned AR that the value of sums obtained was not divisible by number of cars, thus indicating that the value of so-called security obtained from the dealers had no nexus with the consumer price inclusive sales tax. Since, the taxpayer does not appear to have applied for rectification of said narration in order-in-original. The working and narration in order-in-original is considered correct. However, the value being correct or incorrect will have no bearing on the final outcome of ensuing discussion.

3. The learned AR has argued that the cars sold out against advances to customers were not subjected to Sales Tax and that this was the case of security deposit obtained from dealers, which was not the consideration for cars. It appears that the taxpayer had two streams of sales. Customer pay advances and they get cars in turn. The customers, who have to be given by direct delivery, they are sold from the show room stocks and such cars are replaced by the manufacturing company. Nothing is put on record to show that the cars against the so-called advances were also part of single stream of sales against advances.

4. The learned AR during proceedings was confronted that the dealers of Pak Suzuki Motors and Toyota Motors were displaying scores of cars and asked to point out any precedent that such dealers had not paid sales tax on the cars in their show rooms. The learned AR stated that he would honestly search for precedent but could not come up. The reason for not being able to find a case of parallel relief is obvious from the C.B.R instruction vide U.O No.1/96-STT/98 dated 8-1-2009 (page 12 of comprehensive hand book the Sales Tax Act, 1990 by Muhammad Saeed Nashir, Additional Commissioner). TIME OF SUPPLY IN CASE OF RECEIPT OF SECURITY ETC. Collector of Sales Tax, Faisalabad has referred a specific situation where Messrs Rafhan Ltd., received orders from all over the country and also the payment relating the rate before actual supply of goods by the (sic), this payment so received is termed as "security money". Messrs Rafhan Ltd. supply the goods against the tax invoice and buyer pays the invoice value to Messrs Rafhan. Next month, if the next order value is more than the previous month, the buyer adds the differential amount to its already deposited security money and if the order is less than the previous month, he - receives back the differential money. However, under all circumstances, the fact remains that Messrs Rafhan uses the security money for the furtherance of its business activity. A question has arisen whether the "time of supply" in such case shall be deemed to be the time when the order along with payment is received by Messrs Rafhan Ltd. prior to actual supply or the time when the ordered goods are supplied by Messrs Rafhan Ltd. against the tax invoice (with the expectation that this invoice shall be sent by the buyer treating the earlier amount as "security kept with the seller i.e. Messrs Rafhan Ltd.). C.B.R. is of the view that since the amount, relating to an order is by Messrs Rafhan Ltd. prior to actual physical supply of goods and also because Messrs Rafhan Ltd. are at liberty to use this amount for their business activity at their discretion, this shall be deemed to be the actual time of supply under section 2(44) of the Sales Tax Act, 1990 and shall be paid in a manner prescribed under section 6(2) thereof irrespective of the trade practice that the invoiced amount is remitted by the buyer again to turn the earlier amount into security deposit or not remitted ("thus exhausting the security money") or remitted with adjustments to take account of future supplies so ordered upon by Messrs Rafhan Ltd.": Now on merits

5. My learned brother has summed up 'disposition' in these words:-- "The main dispute is whether or not the act of parking the vehicles at the premises of dealers constituted supply? If the answer to this proposition is in negative the charge would not mature and on the other hand if the answer is in affirmative the conclusion would be that the tax was legally charged in the present case."

6. Since, the question is supply as defined in section 2(33) of the Sales Tax Act, 1990, same is reproduced hereunder for reference. "supply" means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes: (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purpose other than those of making a taxable supply."

7. It would be observed that in order to qualify for supply, the disposition has to be as owner. Therefore, the transferee has to be owner. However, the transferee being made an owner is not a pre-condition. In fact, the inclusion extends to "putting to private, business or non-business use in the course of taxable activity for purpose of other than making a taxable supply".

8. The fact that vehicles were not transferred in the name of dealer does not affect the factum of supply in terms of section 2(33). In my opinion, disposition by owner does not mean the disposition of ownership as what the said provision requires is disposition of goods and not title. This very view finds strength from the Supreme Court's judgment reported as 2007 PTD 2275 = 2007 SCMR 1705 explained that transfer of goods was not necessary. The observation of the apex court are reproduced hereunder:-- "By going through the definition of 'supply', as referred to above, one may conclude that it does not only involve the sale but it also includes disposition of the goods (movable property) even may be putting to private, business or non-business use and from this it is evident that the involvement of the transfer of the goods to another person is not necessary. The limestone and clay etc., the raw material is not exempt under section 13 of the Act and thus, it comes within the ambit of taxable supply. The other condition for levying of sales tax under section 3(1)(a) is that this taxable supply should be in the course or furtherance of the taxable activity. Here in this case, the taxable activity is the manufacture and supply of cement which is the main activity of the respondent as this is the activity which is carried on by the respondent and which involves the supply of goods to another person which may be in the form of business or trade or manufacture as also the cement is manufactured by using the raw material i.e. limestone and clay etc and then the same is supplied in the market. The raw material is used for the manufacture of cement and thus, it can be said that the same is supplied and used in the course or furtherance of the taxable activity i.e. the manufacture and supply of cement, the end product, in the market. As the words "in the course of" or "in furtherance of" have prefixed the words "taxable activity". The meaning of "in the course of can be taken to mean as connected with related to and having some nexus with the taxable activity. Similarly, "in furtherance of" is indicative of the fact that the taxable supply had been made for the enhancement/further development of the taxable activity. The word furtherance has been defined in the Advanced Law Lexicon, Third Edition 2005 P.1953, as "act of furthering, helping forward, promotion, advancement, or progress". "In furtherance of" has been interpreted as in promoting, advancing, in the Oxford /English Dictionary, Volume IV, P.619. "Furtherance" has been defined as act or state of being furthered or helped forward, the action of helping forward, advancement, aid, assistance. It is abundantly clear that the taxable supply has not been confined or limited to the one which is the end product or the goods manufactured but also including those goods which involve in some way with the progress, promotion, advancement of business/activity/taxable activity. The two expression:, '15ed in section 3(1), the taxable supply and the taxable activity, have been confused and mixed by the forums below and the whole case, in the impugned judgment of the High Court as well as of the Tribunal has been built on the assumption by considering the taxable supply as taxable activity, while the two are quite different with different concept and operate in their respective field. The quantum of tax liability is determined on the basis of value of taxable supply, while the liability to pay tax under section 3(1) of the Act arises only when such supply is made in the course or furtherance of taxable activity. The taxable activity is relateable the main business/main activity of the industrial concern or of the company or of a person while the taxable supply is made, as noted above, in the course of or for the progress, promotion and advancement of the main activity". (Emphasis is for highlighting). In the case law D.G. Khan Cement Company Ltd., and others v. Federation of Pakistan and others reported as 2004 PTD 1179 the honourable Supreme Court of Pakistan held authoritatively that sales tax has to be paid at the time of receipt of advance payment if the possession of goods is transferred to the purchaser subsequently. Since the judgment is on all fours with the issue in hand it shall be advantageous to produce the relevant part of the judgment starting with para-17 on page 1185 of the report: Learned counsel for the appellants submitted that if the above mentioned relevant provisions of the Sales Tax Act in particular section 2(3) is construed as learned counsel for the respon dents/manufacturers wants, it would give free hand to the manufacturers t9 invent a device in order to withhold the amount of sales tax payable to the government beyond the tax period under the Act at their own whims by showing a transaction to be a mere agreement of sale though payment in advance of the consideration is received much earlier than the delivery of goods. The contention has considerable force. According to the well-established principles of interpretation and construction of the statutes laid down by the superior courts, harmonious construction is to be made keeping in view the different provisions of the statute after fully understanding the intention with which the same had been made and the object which was intended to be achieved. The intention behind the promulgation of relevant provisions of the Sales Tax Act as reproduced above is clearly manifest that the sales tax' should go the government treasury within the tax period after the same having become due and should not be retained by the manufacturers. There is no hard and fast rule as to when and at what stage, the transaction shall be deemed to be the transaction of the sale of the goods. Each case has to be decided according to the facts and circumstances of the case, in particular practice, usage of a particular nature of business or trade, in the case in hand, the manufacturers used to receive amount of consideration in advance for the supply of cement to be made later. It is clear from the provisions of section 2(22) and (30) of the Sales Tax Act that time of supply was deemed to be the date on which advance payment was received or the supply made whichever was earlier. There is no difficulty in holding that in such a case, the amount of consideration received in advance shall be deemed to be the price on that date of the proportionate quality of cement and the sales tax should be deposited before 20th of the succeeding month in the government treasury instead of the date of delivery of the goods at the subsequent stage. In other words, we in order to put the matter beyond any ambiguity, have no hesitation in holding that in such a situation, the date of receipt of amount of consideration in advance can well be construed to be the date of sale for the purpose of payment of sales tax. Learned counsel for the respondents-manufacturers submitted that in case subsequently on the date of supply of the cement, there is variation in the price of the goods or transaction is cancelled, the right and interest of the manufacturers should be protected. Learned counsel for the appellants however submitted that there will be no inconvenience or difficulty in such a situation. He has filed a statement duly signed by Mr. Muhammad Wali Khan, Member (Sales Tax) which is reproduced below: 'C.B.R. understands that an advance in full or part payment received shall be treated as a supply in terms of section 2(44) to the extent of quantity of goods based on the value prevailing on the date of receipt of the advance/part payment. The invoice under section '23 shall be issued at the time of receipt of the advance/part payment to the extent of the value/ quantity of goods, covered by the said advance. The delivery of said goods may be given at .any subsequent time. However, in case of a subsequent change in the value of goods or a change in rate of tax at the time of actual delivery, the increased component of tax or value shall be accounted for by way of debit/credit note and sales tax on the changed component only shall be paid with the sales tax return for that tax period. In case the goods being supplied are not divisible (e.g. a car) then the advance payment received shall be treated as a complete supply to the extent of the payment and an invoice shall be issued accordingly, showing that it is a _part payment. At the time of receipt of the remaining amount/delivery of goods, the same shall be treated as a separate supply and an invoice will be issued covering the remaining payment'. In our view, it is complete answer to the argument advanced by the learned counsel for the manufacturers. In our view, there is no such difficulty in adopting the construction of the relevant provisions as to date of goods for the purpose of payment of sales tax".

9. In the case reported as PLD 2007 SC 517 = 2007 PTD 1902, the Hon'ble Supreme Court of Pakistan in para.14 on page 117 of the report reiterated the view as follows:-- "14 ..Goods means and includes moveable property other than money and securities etc, and taxable goods means and includes the movable property other than those which have been exempted under section 13 of the Act. Supply means and includes sales, transfer and other disposition of goods and taxable supply means supply of taxable goods other than of goods which are exempt under section 13 of the Act. Taxable activity means an activity an activity which is carried on by any person not necessarily for pecuniary profit and invoices in whole or in part the supply of goods to another person irrespective of any consideration and also includes an activity carried on the form of business, trade or manufacture." The Hon'ble apex Court while concluding para-15 on page-118 of the report was pleased to lay down the law in the following words: " 15....It is abundantly clear that the taxable supply has not been confined or limited to the one which is the product or the goods manufactured but also including those goods which involve in some way with the progress promotion, advancement of business/activity/taxable activity"

10. The view in judgment of the Hon'ble High Court i.e. 2006 PTD 1459 which equated disposition under section 2(33) as akin to sale and relied upon by my learned brother on page 9 of his order has been over-ruled by the apex Court in its judgment referred supra. The apex court there has held that the transfer of title in goods is not necessary for supply in terms of section 2(33). By taking security deposit, the taxpayer has transferred the liability' of damages, if any, by loss, theft etc to the dealer, which also in a way supports the view of transfer of title as the liability for losses changes with the change in ownership, which according to Sales of Goods Act is transferred with delivery. In view of the above judgment, C.B.R clarifications and precedent referred above, I am of the view that the supply was effected at the time of delivery to dealers against the security deposits, which have been termed as parallel of the vehicles by the taxpayer. The question that arises is:-- "Whether in the facts and circumstances, the delivery of cars to dealers against security deposit (consumer value plus sales tax) constitutes supply in terms of section 333 of the Sales Tax Act, 1990"? (AMJAD IKRAM ALI) Accountant Member

11. As difference of opinion has arisen between .us, the aforesaid question may be referred to the third member by the honourable Chairman for appropriate adjudication of the matter. (SYED NADEEM SAQLAIN) (AMJAD IKRAM ALI) Judicial Member Accountant Member AS PER KHAWAJA FAROOQ SAEED, CHAIRPERSON Date of hearing: 4-5-2010 Date of order: 22-7-2010 Appellant by: Mr. Asim Zulfiqar Ali, FCA Respondent by: Dr. Zulqarnain Trimzy, DR Through this order I am supposed to dispose of the questions proposed by my two learned brothers. In my opinion before coming to the main controversy going to the facts again shall be of help. The appellant is a public limited (listed) company and is primarily engaged in the business of manufacture/assembly and sale of cars in Pakistan under the brand name of 'Honda'. The jurisdiction in the appellant's case lies with Large Taxpayers Unit (LTU), Lahore. On the basis of audit observations of the Deputy Collector (Audit-II), Large Taxpayers Unit, Lahore, arising out of the sales tax audit conducted for the period from July, 2004 to December 2005, a show-cause notice dated 28-6-2006 was issued by the Additional Collector (Legal), Large Taxpayers Unit, Lahore; (hereinafter called 'Adjudicating Officer') requiring explanation from the appellant on various charges levelled therein. In response thereto, detailed replies were submitted to him and after conducting various hearings, through the Order-in-Original No. 39 of 2006 dated 29-12-2006, following sales tax liabilities, along with additional tax payable under the provisions of Sales Tax Act, 1990, were adjudged by the Adjudicating Officer against the appellant which is as follows:-- Sr. No. Particulars Sales Tax (Rupees) Penalty (Rupees) (i) Non-payment of sales tax on receipt of alleged 'advances' 104,727,607 5,236,380 (ii) Short payment of Sales Tax 1,188,288 59,414 (iii) Non-payment of sales tax on alleged 'supply' of auto parts against warranty claims 1,744,331 87,217 (iv) Non-compliance of section 73 (Messrs Engineering Construction Services) 3,375,000 101,250 (v) Input tax adjustment in respect of invoices of Messrs Razziq International 5,794,717 173,842 (vi) Inadmissible input tax adjustment on certain purchases under section 8(1)(a) 37,080 5,000 Feeling aggrieved by the aforesaid order of the Adjudication Officer, an appeal was filed by the appellant before the Collector (Appeals) who upheld all the charges levelled against the appellant, except that in respect of issue summarized-at Serial No. (ii) above whereby the order of the Adjudicating Officer was vacated in view of the availability of amnesty in terms of S.R.O. 463(I)/2007. The confirmation of the order of the Adjudication Officer by the Collector (Appeals) has necessitated filing of further appeal by the appellant before the Appellate Tribunal. The present arguments, however, are restricted to the issue listed at Serial No. (i) above regarding which there is a difference of opinion between the honourable Members of the Division Bench and the following specific question has been proposed for the resolution of the difference of opinion: "Whether in the facts and circumstances, the delivery of cars to dealers against security deposit (consumer value plus sales tax) constitutes supply in terms of section 233 of the Sales Tax Act, 1990?" The undisputed facts relevant to the issue in hand are that the appellant carries out the activity of sale of cars through a network of authorized dealers with whom, without exception, a dealership agreement is executed. Under the terms and conditions stipulated in the said agreements, the dealers operate as 'agents' to whom 'commission' is paid for every sale of car. The cars are directly sold by the appellant company to customers. The procedure that is followed in this respect is that a customer visits the dealer; deposits the cheque/pay order drawn in the name of the appellant company; the cheque/pay order is forwarded to the appellant company along with customer details by the dealer; the appellant communicates the acknowledgement and tentative delivery date directly to the customer; the car, once it is ready, is despatched to the dealer; the dealer intimates the customer about the arrival of the car at the dealership; customer collects the car from the dealer; and the commission is remitted to the dealer after the customer collects the car from dealer. In none of the case has there ever been any deviation from the process stipulated above, that is to say, in none of the case the car is sold to the dealer and/or the money is received from the customer in the name of the dealer. It is reiterated that without exception the money is received, through cheque/pay order, in the name of the appellant and the invoice regarding sale of car is issued by the appellant directly in the name of the customer. In May, 2005, the appellant entered into an arrangement with the dealers whereby it was mutually decided that in order to further promote the business and in order to take lead over the competitors the cars would be parked at the dealers' premises, for display purposes, under following terms and conditions:-- (a) the cars shall be the property of the Company, however, the 35 Dealers shall ensure, to the satisfaction of the Company, the safe custody and the security against any risk relating to any. loss to the Company; (b) the 35 Dealers desirous to obtain the possession of car shall deposit at least an amount equivalent to the current consumer price of the vehicle as is notified by the Company; (c) where during the aforesaid possession of car, the Company revises the process on the upper side, the Company shall notify to the 35 Dealers the increase in price and the 35 Dealers shall immediately deposit the differential amount. In the event of failure by the 35 Dealers the Company shall have an exclusive right to get the possession back without any prior notice to the 35 Dealers; (d) in the event of return of the car, earlier obtained for display purposes, including under circumstances described in (c) above, the amount so deposited by the 35 Dealers shall be refundable to the 35 Dealer and shall not be adjustable against any other head under any circumstances; (e) where 35 Dealers shows an intention to directly purchase or an onward sale to an independent consumer, in respect of car earlier obtained in the manner described above, the 35 Dealers shall deposit further amount equivalent to the consumer price of the vehicle in such a manner that the amount deposited under aforesaid arrangements shall only be refundable to the 35 Dealers. In the context of the aforesaid arrangements, the appellant obtained a security deposit of Rs.802,911,650 during the period June, 2005 to December, 2005 from its various authorized dealers in respect of which the Adjudicating Officer adjudged sales tax liability of Rs.104,727,607 (together with the additional tax and penalty amounting to Rs.5,236,380). The Adjudicating Officer treated the amounts, received as 'security deposit', as 'advances' in terms of the provisions of section 2(44) of the Sales Tax Act, 1990 and charged sales tax under section 3 of the Sales Tax Act, 1990. The act of parking of cars at the dealers' premises, it appears, has been construed as a 'supply' in terms of section 2(33) of the Act. The controversy involved in the present appeal, vis-a-vis the background and the facts summarized above, require interpretation of following relevant provisions., as were in the statute book during the period under consideration of the Act: Section 3

Charging section "3(1) Subject to provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of - (a) taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him; and

" Taxable Supply - Definition [section 2(41)] "2(41) taxable supply means a supply of taxable goods made by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4." Supply - Definition [section 2(33)] "2(33) supply includes sale, lease (excluding financial or operating lease) or other disposition of goods carried out for consideration and also includes - (a) putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business; (b) auction or disposal of goods to satisfy a debt owed by a person; and (c) possession of taxable goods held immediately before a person ceases to be a registered person; ..."; Time of supply - Definition [section 2(44)] "2(44) time of supply shall be deemed to have taken place at the earlier of the time of delivery of goods or at the time when any payment is received by the supplier in respect of that supply "; From a collective reading of the aforesaid specific provisions of the statute, it could be concluded that: (i) charge of tax has been prescribed by the legislature on taxable supplies that are made by a registered person in the course or furtherance of taxable activity; (ii) taxable supply, as referred to in the charging section, means 'supply' of taxable goods; (iii) supply is sale, lease or other disposition of goods (besides certain fictional events); (iv) time of supply, in cases where advance payment is received, has been deemed to be when payment is received; and (v) the said advance payment should be in respect of a 'supply' of goods and not otherwise; It is argued that the entire case made out by the tax authorities is based on improper and incorrect appreciation of the facts of the case. Contrary to the business model in place, the Adjudicating Officer assumed that the appellant and dealers are connected with each other as buyer and seller. It is under this assumption that the Adjudicating Officer held the security deposited by the buyers to the sellers to be as supply in the following words:-- "...It is established that Messrs Honda Atlas Cars (Pakistan) Limited and their dealers are two separate entities/registered persons and these dealers are in the regular business of purchasing and supplying of cars and auto parts..." It is submitted that the above noting is contrary to the facts. Had the assumption narrated by the Adjudicating Officer was correct this was a valid case for charge of tax because in that case the appellant had received advance from the buyer with simultaneous delivery/possession of goods thus fulfilling the condition regarding charge of tax. This is not the case here. The dealers are not the buyers (without exception) and they only operate as an agent to whom commission is paid for rendering of intermediary administrative services. The goods are sold directly to the consumers. In the present case, the amounts were not received from the buyers thus not attracting the relevant provisions of law, cited above. In connection with the actual facts of the matter, the issue which inter alia requires consideration is whether or not the mentioned movement of vehicles, undertaken through obtaining 'security deposits', is a 'supply' of goods to invoke the charge of tax. That is so because the provisions of section 2(44) of the Act while defining time of supply has covered the advance received "in respect of a supply". In cases where an advance is received which is not in respect of a 'supply', like money borrowed from a bank against some security these provision do not remain relevant because it is, in fact, a 'supply' of taxable goods that has been brought in the ambit of charging section and in such a situation where there is no 'supply' no tax is payable. In this regard other undeniable facts which can help in disposing this issue also are: (i) the goods remained the property of the appellant at all times; (ii) the insurance charge relating to such vehicles was always borne by the appellant (being the de-facto as well as de-jure owner of the goods); (iii) at the time when displayed vehicles were sold to a consumer the prescribed procedure (regarding payment and invoicing summarized above) was duly followed; and (iv) proper amount of sales tax was voluntarily deposited in the treasury by the appellant as and when the vehicles were sold upon fulfillment of the prescribed procedures; The actual issue in this case which thus emerges is whether an element of supply existed in the above arrangements or not. Parking of vehicles in Show Room with back-to-back security deposits is the issue which requires consideration with reference to the provisions of section 2(33) of this Sales Tax Act, 1990, cited supra, wherein the expression 'supply' has been defined. An analysis of the above definition of expression 'supply' reveals that the scope provided for the expression 'supply' is inclusive in nature and mere 'sale' and 'lease' are not the only events which constitute a 'supply'. Besides, certain events have also been deemed to be a 'supply'. It is not a disputed position that no 'sale' or 'lease' has taken place in the present case. Accordingly, what becomes relevant is the 'other disposition' of goods as used in the above definition. The expression 'disposition' of goods has not been defined in the Act, therefore, its extent and scope would be determined by reference to the ordinary dictionary meanings and under the established principles of interpretation, commonly known as the principle of 'Ejusdem Generis'. This principle provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision. The expression 'disposition of goods' is to be interpreted in the light of words associated to it, like 'sale' and 'lease' and not in pure isolation. In this respect, reliance may be placed on the following judgment of Sindh High Court in 1973 PTD 453:-- "...In order to ascertain the meaning of any word or phrase that is ambiguous or susceptible to more than one meaning, the Court may properly resort to the other words which the ambiguous word is associated in the statute. Accordingly, if several words are connected by a copulative conjunction a presumption arises that they are of the same class, unless, of course a contrary intention is indicated...." In the light of ratio decided by their lordships in the aforesaid decision, what needs to be ascertained, is the scope and extent of expression 'disposition of goods', a phraseology that is being regarded as ambiguous and susceptible to more than one meanings. Under the principles laid down by the High Court, the expression 'disposition of goods' has to be construed to be a mode which has similar attributes to that of a 'sale' or 'lease'. Since it has been used with expression 'sale' and 'lease', whereby risks and rewards are effectively transferred to the acquirer, the law, in the relevant provisions, covers such dispositions where risks/rewards are not retained by a disposer. In the facts of the present case, since the appellant had retained the ownership with itself (with all the risks and rewards and has also borne the insurance expense, therefore, the goods cannot be said to have been disposed of to fall within the ambit of expression 'other disposition' in the definition of expression 'supply'. It would be an improper interpretation to infer that a mere shifting or movement of goods, would fall in the scope of 'supply'. The scope and extent of expression 'disposition of goods' came up for consideration before Sindh High Court in 2006 PTD 1459 whereby following observation has been recorded by their lordships:-- " The expression 'disposition' further was considered by the Supreme Court of India in the cases of Goli Eswarian v. Commissioner of Gift Tax AIR 1970 SC 1722 and it was held that 'the word disposition is not a term of law'. Further it has no precise meaning. Its meaning has to be gathered from the context in which it is used. Since the word 'disposition' has not been defined in the 'Act' therefore the ordinary meaning of the word which is of wide connotation is to be adopted. It is used only as an expression of transfer inter vivios or operation of law and for such purpose an element of ownership must exist upon the goods/property under disposition or at least the person acquiring the goods must possess some right or title in the goods in order to dispose it of at his will..." Relying upon the ratio in the cited decision of Sindh High Court, it can be concluded that, in the context of definition provided for in the law, 'disposition' of goods would constitute 'supply' where a person acquiring the goods possesses some right or title in goods in order to dispose it off at his will. In the case of the appellant, it is an undisputed fact on record that the goods remained the property of the appellant and the dealer had no right whatsoever to dispose off the vehicles at his will. Hence, the movement was not a 'supply' which could attract the levy of tax under section 3 of the Act. The subject movement of vehicles is just like a situation where a taxpayer moves the taxable goods to a self owned godown. Such movement is not a 'supply' under the law and there' does not appear to be any contrary view to this. The entire arrangement remained outside the purview of scheme of taxation embodied in the Act. In the order of the Adjudicating Officer, much emphasis has been placed on the fact that the entire activity, encompassing the collection of security deposits and parking of vehicles, was a 'taxable activity' thus warranting the levy of tax. This discussion is irrelevant. Not a single word has been written by the Adjudicating Officer in the order that the transaction involves 'taxable supply'. There is no dispute by the appellant that the activity was a part of 'taxable activity' but what's being disputed by the appellant is presence of 'taxable supply' in the arrangement and hence the timing of taxation. The appellant is of the view that the incidence of taxation arose when vehicles parked at the dealers' premises were sold out to the consumers when the tax has itself been paid by the appellant. That is so, because the charge of tax is on 'taxable supply' made in the course or furtherance of 'taxable activity'. Neither 'taxable supply' nor 'taxable activity' alone gives rise to taxation. It has been held by Sindh Court (2002 PTD 976) that for a valid charge of tax, both 'taxable supply' and 'taxable activity' must co-exist and if any one ingredient is missing, the charge of tax would not arise. The ratio settled in the cited decision is as under: "...A perusal of section 3 of the Act, 1990 confirms that in order to create a charge of sales tax, inter alia, two conditions must be fulfilled independently, i.e. the transaction of sale must constitute a taxable activity' and it should also to be a 'taxable supply'. Even if one condition is missing the charge of sales tax would not be leviable." In the light of discussions above, particularly held the principles settled down by the courts in the decisions referred to above, it is submitted that (i) the arrangement did not involve any taxable supply; (ii) security deposits were not received from the buyers; (iii) these were not in respect of a supply; hence the appellant has been incorrectly burdened with the charge of tax and that too without realizing that tax was voluntarily deposited by the appellant when legally due under the law. The other submission of the counsel is that since the appellant itself subsequently paid the tax the action of the Adjudicating Officer has caused double taxation i.e. once when the tax has been voluntarily paid by the appellant and second time unless levied by the Adjudicating Officer. At no point of time, the tax authorities have conceded that the tax subsequently deposited was excess and not required. The learned DR, while' defending the orders of the authorities below has primarily relied upon following three decisions of the apex Court:-- (i) 2004 PTD 1179 - DG Khan Cement v. Federation; (ii) 2007 PTD 1902 = PLD 2008 SC 517 Collector v. Sanghar Sugar Mills Limited; and (iii) (2007) 96 TAX 264 Collector v. Customs Tribunal, Karachi Bench; Referring above justifications the D.R. said that the apex Court has settled the position vis-a-vis taxability of 'advances' received in respect of a 'supply'. It has been ruled in the said judgment that in terms of provisions of section 2(44) of the Act read with section 3 of the Act a registered person is required to deposit the amount of tax at the time the registered person receives advances from the purchaser/ buyer. On the basis of the said decision, the emphasis of the learned DR remained that the tax was validly imposed in the case of the appellant. This is where referring comments of my learned brother Accountant Member need discussion:-- The honourable Accountant Member while proposing confirmation of the orders of the authorities below has primarily relied upon the following:-- (i) Composition of the figure of subject 'security deposits'; (ii) Treatment in parallel cases; (iii) Clarification of F.B.R. in U.O. No. 1/96-STT/98 dated January 8, 2009'; (iv) Definition of expression 'supply'; (v) 2007 SCMR 1705 - 2007 PTD 2275 Collector v. Customs Tribunal, Karachi Bench; (vi) 2004 PTD 1179 D.G. Khan Cement v. Federation; and (vii) 2007 PLD SC 517 = 2007 PTD 1902 Collector v. Sanghar Sugar Mills Limited; My brother has further noted that the amounts received from dealers were consumer price inclusive of sales tax. It appears that the inference being drawn is that since the amount of sales tax was recovered by the appellant, therefore, the same should have been deposited in the treasury. Though the learned Member has also stated that this observation has no bearing on the ultimate decision yet the assessee counsel has clarified that the very audit report compiled by the departmental auditors at Annexure A sets out the detail of deposits which itself shows that in most of the cases these were round amounts and not vehicle specific. Under the arrangements, the appellant required the dealers to deposit at least the consumer price of the vehicle and rightly so because it was the market value of the vehicle that was intended to be secured against any potential loss. The learned Accountant Member has also observed that the appellant could not make available the status/position of taxability regarding similar deposits, if any, received in other cases and in this respect has noted that this could not be done by the appellant for obvious reason which is that, the matter has already been clarified by F.B.R. through a clarification. C.B.R. is of the view that since the amount relating to an order is received by Messrs Rafan prior to actual physical supply of goods and also because Messrs Rafan are at liberty to use this amount for their business activity at their discretion, this shall be deemed to be the actual time of supply under section 2(44) of the Sales Tax Act, 1990 and shall be paid in a manner prescribed under section 6(2), thereof irrespective of the trade practice that the invoiced amount is remitted by the buyer again to turn the earlier amount into security deposit or not remitted ('thus exhausting the security money') or remitted with adjustments to take account of future supplies so ordered upon Messrs Rafan. The facts of the case in which clarification is issued by F.B.R. are not comparable with the case of the appellant. In the said case, the security deposits were received from the regular buyers of the goods. In the case of the appellant, as discussed above, the dealers are not the buyers of the goods and that being the case the amounts' are not advances which have been dealt with in section 2(44) of the Act or the judgment of the apex Court in 2004 PTD 1179. The distinction in the facts of the two cases is obvious. The facts being distinguishable, the reference to the clarification is not relevant. Even otherwise the clarification of the C.B.R. is not binding on courts. Reliance is placed on 1993 PTD 766 re: Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others. My brother learned Accountant Member has also reproduced the definition of expression 'supply' as was brought on the statute book with effect from July 1, 2008. Admittedly, the matter in appeal pertains to period July, 2004 to December, 2005, therefore, reference to a provision of law that was introduced two pari materia and a half years later is not relevant particularly when the wordings of the two provisions are different. Furthermore, much emphasis has been placed on that component of the definition that deals with "...putting to private use." and in this respect, reliance has also been placed on decisions of courts which deal with interpretation of this component. As briefly discussed above, the controversy in the present appeal relates to that part of the definition that deals with 'other disposition' and hence reference to these decisions and subsequent law is not relevant. At no point in time, including during the course of arguments, the department has ever taken a position that the cars were put to private 'use'...". Obviously, cars were on display in show rooms. Regarding 2007 SCMR 1705 = 2007 PTD 2275 Collector v. Customs Tribunal, Karachi Bench and 2004 PTD 1179 re: D.G. Khan Cement v. Federation the reliance on these decisions again is not relevant as in 2007 SCMR 1705 = 2007 PTD 2275 (supra) the apex Court was dealing with another different part of the definition of expression 'supply' and observations recorded in that respect could not be stretched to a provision of law having different scope. Similarly 2004 PTD 1179 (supra) is relevant for amounts received from a buyer which is not the case so far as the subject security deposits are concerned. The gist of the decision of apex Court could be understood from the following extracts. These have emphasized by the honourable Accountant Member in his dissenting note also. ' "...sales tax has to be paid at the time of receipt .of advance payment if the possession of goods is transferred to the purchaser subsequently." From the above, it is clear that the ruling is applicable in cases where amounts are received, as advances, from the purchasers and where these are received otherwise the decision does not remain applicable. The dealers are not buyers, hence the decision remains inapplicable to the subject 'security deposits'. (vii) PLD 2007 SC 517 = 2007 PTD 1902 - Collector v. Sanghar Sugar Mills Limited This decision deals with interpretation of expression 'furtherance of taxable activity' and does not deal with expression 'supply'. As discussed above, this decision is not relevant vis-a-vis the dispute under consideration because existence of taxable activity is not the controversy between the parties. What is being disputed is whether or not the arrangement is a 'disposition of goods' while decision of the apex Court does not deal with this matter. On the basis of the aforesaid arguments and submissions, it could be concluded that the authorities below clearly erred in imposing tax on 'security deposits' received by the appellants from their dealers as neither the dealers were the buyers of goods nor the amounts were advances in respect of a supply. No supply had taken place under aforesaid arrangements because the appellant remained the owner of goods at all times. The record shows that proper amount of tax was voluntarily deposited by the appellant when it was due under the law. Thus, the reliance placed by the learned DR and the learned Accountant Member on various decisions is not relevant as these do not relate to issue involved in the present appeal. The gist of the discussion made earlier gives an obvious conclusion that the transaction in hand is neither sale nor supply and up to this extent even otherwise there is no dispute between my brothers either. It is term 'disposition of goods' on which my learned brothers have mainly disagreed. 'Disposition' as discussed earlier does not include shifting of goods from one place to the other and putting it to the custody of some other person. It is not the spirit of the charge of the sales tax in any form. In my discussion earlier it has been discussed that the phrase 'disposition of goods' has to be read as Ejusdem Generis to the words 'sale and supply'. Notwithstanding the fact that in principle I would not agree that just taking the custody of the cars by the agent against a security deposit forms 'disposition' in terms of sale and supply, yet even in ordinary dictionary meaning it is not a disposition. The word 'disposition' as used in this section is a noun. It stands for the "act of transferring something to another's care or possession, esp. by deed or will, the relinquishing of property". The expression 'disposition' is synonymous to the word "(Transfer of property), alienation, arrangement for disposal, assignment, conveyance, convincing, deliverance, delivery, dispensation, disposal, distribution, giving, manner of disposal, release, relinquishment, relinquishment by gift, sale, surrender, transfer, transference, vouchsalement, yielding." The other associate concepts: are "dispose of and convey, disposition by will, final disposition, fraudulent disposition, power of disposition, sale or other disposition, testamentary disposition." In this regard the Maxim "it means he who has a right to give, has the right to dispose of the gift' also is of relevance. It means he who has a right to give, has the right to-dispose of or gift." In fact if one looks into the above meanings and the other synonymous words of the expression 'disposition' one would never have the idea that it can include simple shifting of goods from one place to another or placing it in the custody of some other person who in turn does not have the, right to sell it or gift. There is a marked difference between a person who is selling goods as owner than the person who is selling goods belonging to the other persons. Like in the case of an Estate Agent an authority is given, to him for its further alienation and the owner may allow him to have the possession of the same to show it to the ultimate buyer but its ownership and right of disposal remains with the original owner. The actual transfer takes place on preparation of the legal documents and its disposal by the owner to the other party. Its possession, therefore, is from the owner to the buyer and the agent in between even during the course of transaction even if holds the possession during the interim period would not be considered to be in possession to the said property in terms of sales tax. The issue can be seen from another angle. Sales tax in its present shape for all practical purposes is similar to the Value Added Tax. It is generally called as consumer's ta5c. It is ultimately charged from buyer and even if there is any transaction in between among the manufacturer, distributor, wholesaler and the consumer, the tax passes on to the ultimate consumer. For example if a good is manufactured and given to the distributor for Rs.100 and the tax @ 16% is charged thereon, the distributor shall add its profit- in Rs.116 which I presume to be as Rs.10 only. He shall sell the same at Rs.126 and pay 16% Sales Tax in following manner:- Tax on Rs. 126 @ 16% Rs.20 Less paid Rs.16 Balance Rs.04 The payment by the buyer in such situation shall be Rs.130. However, if there is no increase in price during the transaction the rate of sales tax shall remain the same. Now even if one agrees with the learned brother Accountant Member, the tax is to be paid by the consumer on total value of the car and if the same is charged from the distributor also as in the present case it will be a double charge. The manufacturer neither charged to it twice nor he could and the amount which is lying with him is just a security deposit against the cars which he has manufactured. Thus even otherwise if the manufacture is charged Sales Tax by treating security as advance against supply its ultimate payment by the consumer shall become the right of the manufacturer. The department, therefore, has not lost any revenue. In any case the security deposited by an agent or dealer in the particular circumstances of this case is not payment of advance against purchase of car. Further, there is no 'disposition of goods' from manufacturer to the dealer in strict legal sense. It is only transfer of custody; hence neither a sale nor a supply or disposition of goods against an advance. The result is obvious. I respectfully agree with the findings of my learned brother Judicial Member and accordingly dispose of this case. H.B.T./138/Tax (Trib.) Order accordingly.