2007 PLP (Trib (PTD)

ZAFAR UL MAJEED MEMBER (TECHNICAL).

The facts giving rise to this appeal are that the appellant, a company registered with the sales tax department as manufacturers and suppliers of sugar, filed monthly sales tax return for the tax period April, 2002 declaring payable amount of sales tax at Rs.2,20,00,

000. On checking of their record, the computer cell of the Collectorate of Sales Tax and Central Excise, Lahore noticed that the appellant did not deposit the aforesaid amount of sales tax while filing the return. The appellants were accordingly served with a show-cause notice for violation of sections 3(1), 6(2) and 26(1) of the Sales Tax Act, 1990 (hereinafter referred to as "the Act"). The case was adjudicated by the Assistant Collector of Sales Tax (Processing and Assessment Division) Lahore vide Order-in-Original No.207/SF04/2002 dated 1-7-2002 whereby the appellants were directed to pay sales tax amounting to Rs.2,20,00,000 along with additional tax and penalty of Rs.6,60,000 imposed under section 33(2)(cc) of the Act. The appellant preferred appeal against this order which was rejected by the Collector, Customs, Sales Tax and Central Excise (Appeals-III), Lahore vide Order-in-Appeal No.302/2005 dated 13-7-2005 whereby the appellants were directed to pay sales tax amounting to Rs.2,76,807 (as by then an amount of Rs.2,17,23,193 had been deposited by the appellant), additional tax on the entire amount of sales tax involved and penalty of Rs.6,60,

000. Through this second appeal, the appellants have impugned the Order-in-Appeal dated 13-7-2005.

2. Main contentions raised in the .instant appeal on behalf of the appellant are: (1) That there was a refund available regarding 3% further tax paid for the tax period July, 1999 to June, 2001 created in consequence of the decision in Writ Petition No.4302 of 2002 which was adjusted against the liability in the sales tax return of April, 2002. (2) That the appellant had deposited entire liability of Rs.2,20,00,000 but Collector (Appeals) while making impugned order did not take into account the amount of Rs.2,76,807 paid on 19-10-2002. Copy of payment challan has been annexed with the memo of appeal. (3) That the appellant, availing the amnesty granted by the Government vide S.R.O. 247(I)/2004 dated 5-5-2004 discharged liability of additional tax also by depositing Rs. 3,98,899 i.e. 25% of the total liability calculate;) at the rate of 1%.

3. The senior Auditor representing the Department opposed the appeal arguing that the appellant had wrongly calculated the additional tax liability @ 1% whereas the rate of additional tax provided under section 34 of the Act at the relevant time way 2%. According to the representative of the Department, the appellants were not entitled to the benefit of amnesty S.R.O. because of non-payment of tax as provided therein.

4. During the course of arguments learned counsel for the appellants, while admitting that the rate of additional tax at the relevant time was 2%, took plea that the rate of tax having been reduced to 1 % subsequently, the appellants were entitled to the reduced rate. In support of his contention, learned counsel referred) to the judgment of Lahore High Court, in the case titled Messrs Chistia Sugar Mills, Lahore v. Collector of Customs, Lahore GS'I' 2004 CL 95 and Collector (Appeals) Lahore's Order-in-Appeal No.68/2004 dater) 29-10-2004, copies of which have been placed on record.

5. We have gone through the record and given careful consideration to the arguments raised by both sides and the case-law referred to by them. Learned counsel for the .appellant could not produce any evidence to prove that the appellant had any refund available which was adjusted against the tax liability in question. However, the balance amount of Rs.2,76,807 having .been paid vide challan dated 19-10-2002, copy of which has been seen and verified by the departmental representative, we find that the entire principal amount of Rs.2,20,00,000 has been paid and the appellant's liability in this regard stands discharged. This leaves us with the question whether additional tax payable by the appellant should attract the rate of 2% prevalent during the relevant time, or 1 %, as reduced subsequently vide amendment in section 34(I) of the Act through Finance Act, 2003. Section 34(I) as it existed during the relevant period in 2002 reads as under:

"

34. Additional tax.

(1) Notwithstanding the provisions of section 11, if a registered person or enrolled person does not pay the tax due or any part thereof in time or in the manner specified under this Act, rules or notification issued thereunder or claims a tax credit, refund or makes an adjustment, which is not admissible to him; or incorrectly applies the rate of zero per cent to supplies made by him, he shall, in addition to the tax due, and the prescribed penalties, pay additional tax at the rate of two per cent of the tax due per month or any part thereof."

6. According to section 34(1) of the Act, payment of additional tax at the rate prescribed therein a mandatory if the tax is not paid in time. However, Supreme Court has, in its judgment reported as 2004 SCMR 456, held that additional tax is not payable in case the default is not wilful or mala fide. In the light of the principle laid down by the apex Court, different judicial fora have been remitting, wholly or partially, additional tax on case to case basis where mitigating circumstances, e.g. controversy regarding interpretation of legal provisions, existed. In the judgment of Lahore High Court relied upon by the learned counsel too, benefit of reduced/beneficial rate of additional duty under the Central Excise Act, 1944 was allowed because the admissibility of a concessionary. S.R.O. claimed by the party remained disputed and the rate of duty had undergone a change during the pendency of proceedings in the Court. Relevant operative part of the judgment is reproduced below:

"However, keeping in view the fact that during the pendency of these proceedings including this appeal the rate for calculation of additional tax has undergone a change which is favourable to the taxpayer, we will direct that the basis of calculation of additional tax imposed with reference to the aforesaid provisions of law shall be the one which is most beneficial to the appellant coming into force after the issuance of the impugned demand notice. This appeal succeeds to that extent only "

7. In the instant case, on the contrary, .there was absolutely no controversy or dispute about the levy but the appellant wilfully and on purpose defaulted in payment of a self-assessed amount of sales tax which had been recovered from the buyers and required to be deposited in the government exchequer by the due date in terms of section 26 of the Act. The appellants were rather guilty of withholding illegally the amount of the tax collected on behalf of the Government and, as such, not entitled to any dispensation. The appellants were liable to pay the additional 'tax at the rate provided in section 34(1) of the Act, as it existed at the relevant time and the tax liability, having been finalized already, they were not authorized to change it on their own by applying lower rate of tax. The judgment of Lahore High Court referred to in the preceding para does not lend any support to the appellant's case as the facts and circumstances of the case of additional duty dealt with therein were entirely different. As the appellants have failed to pay correct amount of tax in accordance with the provisions of S.R.O. 247(I)/2004 dated 5-5-2004, they are not entitled to the amnesty granted thereunder either. The appellants are accordingly directed to pay additional tax at the rate of 2% per month as prescribed under section 34(1) of the Act, as it existed at the relevant time, and the penalty imposed vide order-in-original dated 1-7-2002.

8. The appeal is disposed of in the above terms and the impugned order is modified accordingly. C.M.A./101/Tax(Trib.) Order accordingly.