1999 PLP 3907 (PTD)

2.(22) "Supply" means sale, transfer, lease or other disposition of goods in the course or furtherance of business carried out for consideration and 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 owned by a person; (c) possession of taxable goods held immediately before a person ceases to be a registered person; (d) removal of goods from the manufacturing. 2(28) "taxable supply" means a supply of taxable goods made in Pakistan 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. 2(30) "time of supply" (i) A supply made :;I Pakistan shall be, deemed to take place at the earlier of the time delivery of good or the time when any payment is received by the supplier in respect, of that supply:--

7. From the above, it is clear that according to the charging section 3, sales tax shall be charged on the taxable supply made in Pakistan. Taxable supplies have been defined in section 2(28) to mean supply of taxable goods made in Pakistan other than those which are exempted etc. According to section 2(22), "supply" means sale, transfer, lease or other disposition of goods in the course of furtherance of business carried out by one for consideration. The collective reading of these provisions would show that the sales tax has been imposed on the actual sale, transfer, lease or any other means for disposing of the goods but if no such sale, transfer, etc., has taken place, sales tax cannot be charged thereon,

8. The case of the Department is that according to section 2(30) by fiction of law transaction of sale etc. shall be presumed if the payment has been received/paid without the delivery, of goods which even might occur latter meaning thereby that even if the goods have not been actually supplied or delivered, but any advance payment had been received for the purpose of the supply of such goods the time of supply by fiction would be deemed to be point in time when the money has been received notwithstanding the actual delivery.

9. In my view, the obvious meaning and import of section 2(30) is that if the goods are delivered and the property in the goods is transferred to the buyer, notwithstanding the non-payment of the price, a sale takes place and the sales tax shall become leviable. Moreover, if payment is made in such a manner that the property in goods is transferred to the buyer, even then sale is effected which is liable to tax irrespective of the fact that the delivery is to be .made subsequently. The important event in law is the date on which the property in goods passes to the buyer and it is only on that date the, sale shall be deemed to have taken place in the eyes of law.

10. In terms of section 2(30), the Department in fact is requiring and charging the sale tax from the petitioner without confirmation of the event whether the property has passed from petitioner to the buyer, which means whether sale in law having yet taken place or not.

11. In order to elucidate the point in time when payment of sale taxi becomes chargeable, there can be the following four situations:-- (a) When a sale is made against cash and goods are delivered immediately upon payment; no difficulty arises. The date of receipt of money and delivery being the same. (b) When goods are sold and delivered but the payment is received subsequently, in such a case the date of payment of sales tax will be the date when the goods are supplied i.e. sold and delivered to the purchaser. (c) The third category of cases is where a purchaser deposits the amount in advance with the seller against which supplies are yet to be made, simple receipt. of money would not entail the liability to pay sales tax. However, if a proper sale agreement is entered into in which the prices fixed between the parties with regard to the quantity of goods sold (although the delivery of goods is to be made subsequently) then the sales tax liability will accrue on the date of the sale agreement alongwith the money received. (d) However, if money is deposited by a person to whom goods will be supplied subsequently and there is no firm sale agreement either with reference to the price or the exact quantity to be sold, then in such a case, simple deposit of money in advance will not entail liability to pay sales tax. In such a case, if for any reason the seller is not able to supply the goods of the price fixed by the seller, at the relevant time is not acceptable to the purchaser and the money received as deposit in advance is refunded, no sales tax would accrue on this nature of the transaction.

12. For the purpose of the proposition in hand, the word "supply" occurring in subsection (2) of section 22 may well be equated with the word "sale" in that the petitioner may manufacture and then sells cement. Consequently, in the context of the instant petition, section 2(30) simply implies that a given sale shall be deemed to take place when in respect of that sale either the goods are delivered or payment is received. It may be noted that in terms of section 19 of the Sales Tax Goods Act, 1930, a sale takes place when the parties intend that the property in the goods being sold be transferred to the buyer by the seller. For the sale to occur neither the delivery of goods nor the receipt of payment is necessary. Resultantly, it is legally quite possible for the actual time at which a sale has been concluded to precede -the time of delivery of goods as well as the time of receipt of money with respect to that sale. All that section 2(30) has laid down is, that regardless of when a sale might actually have taken place in accordance with the terms of the agreement between the parties and the applicable law, sales tax will be payable only at the time when the goods are either delivered or payment in respect of the concluded sale is received. This interpretation of section 2(30) is also consistent with the principles that a tax cannot become payable prior to the occurrence of a "taxable" event. In terms of section 3 of the Act, the taxable event is the supply of the goods which in the context of the instant petition means the sale of cement, therefore, the mere deposit of money in anticipation of a future sale cannot be made the occasion for demanding the payment of sales tax. It is a regular feature in the sales of cement that the stockists of cements deposit money with manufactures in routine even though at the time of deposit no contract specifying the price to be paid or the quantity to be purchased by the stockists is in place. The cement manufacturer at the time of deposit is under no obligation to provide any quantity of cement to the stockists nor are the stockists under any obligation to purchase any particular quantity. In other words, simply at the time of deposit of money, there is no concluded sale in existence and the transaction can be nullified by the manufacturer or the stockists.

13. The departmental interpretation (C.B.R.) that the sale tax is payable as soon as money so received by the registered person would appear to be reading into the Sales Tax Act, following statement:-- "Whenever money is received by the manufacturer the manufacturer shall be deemed to have made a sale of value equivalent to the amount of the money received." No provision of Sales Tax Act has purported to deem the receipt of money to be a sale. Consequently, the departments interpretation has no basis in the tax of the Act and that it seeks to change the nature of the tax from a levy on the supply of goods to a tax on the mere bailment of money. In none of the provisions of the Sales Tax Act, bailment of money could be deemed to be a sale or a supply of the goods.

14. The provision of section 2(30) of the Act has only employed the legislative device of deeming so-as to crystallize the point in time at which sales tax is payable with respect to a supply that has already occurred. It cannot be employed to the extent of conceiving the payment of money so as to change the scope of word "supply' beyond the provisions of section 2(22) of the act, read with section 3 which is the charging section. It cannot be held that section 2(30) would in any way alter the scope and nature of the charging section. There can be no doubt that where legislature could have expressly specified' as regards the charging of tax but has chosen not to specify must not be read into the text of the statute by way of intendment so as to expand or circumvent the scope of the charging provisions.

15. Reference with regard to the interpretation of deeming the provisions can be made to the following judgments of the Superior Courts reported as Elahi Cotton Mills Ltd. v. Federation of Pakistan and others (PLD 1997 SC 582 at 677) = 1997 PTD 1555. "that the legal fictions are limited for a definite purpose, they cannot be extended beyond the purpose for which they are created." B. N. Syed v. Afzal Jahan Begum (PLD 1970 SC 29 at 35) "It cannot be denied that the Court has to determine the limits within which and for the purposes for which the Legislature has created the fiction." Siraj Din v. Sardar Khan (1993 SCMR 745 at 749) "It is settled rule that the Court is entitled to ascertain the object for which the legal fiction is created and confined to the purposes for which it is meant." Mehran Associates Limited v. The Commissioner of Income Tax, Karachi 1993 PTD 69 = (1993 SCMR 274 at p.286, 287) "The cardinal principles of interpretation of a fiscal statute seem to be that all charges upon the subject, are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. A fiscal provision of a statute is to be construed liberally in favour of the tax payer and in case of any substantial doubt the same is to be resolved in favour of the citizen. "

16. In the light of above I have no hesitation to hold that the interpretation placed by the department through the impugned letter/instruction, the impugned show-cause notice and the assessment order passed in pursuance thereof are without jurisdiction and of no legal effect.

17. As regard the other question involved in this matter pertaining to the maintainability of the instant petition, it may be stated that as complicated question of interpretation of law is involved, in the present matter and as a matter of fact, the petitioner has not challenged directly the show-cause notice or the assessment order rather instructions of C.B.R., which instructions are binding upon the subordinate officials to the Board of Revenue, therefore, to say that the petitioner had alternate remedy of filing appeal which is adequate and efficacious is not tenable. If any reference of the case-law is required following judgments are relevant:

Julian Hoshang Dinshaw Trust v. I.T.O. 1992 SCMR 250 at p.255 = 1992 PTD. Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 at p.94.

18. Learned counsel for the respondent has objected that in the instant case though the assessment order under section 11 has been passed against the petitioner prior to this petition but the same has not been impugned through the instant petition. Suffice it to say, that this Court has ample jurisdiction to mould and grant the relief to the petitioner which he is legally entitled to. As the impugned assessment order is also based upon the instructions issued by the Board of Revenue thus even though it has not been directly challenged in the petition, while it can be set aside in exercise of Constitutional jurisdiction by this Court in order to advance the interest of justice and to prevent the abuse of the authority by the respondent department. In the light of above, this writ petition is allowed, the instructions contained in the Letter No.l(59)STP-94, dated 14-11-1994 issued by the Board of Revenue are declared to be without jurisdiction and lawful authority and all the subsequent actions/orders against the petitioner based upon the said letter and instructions are of no legal effect: C.M.A./M.A.K./M-1181/L Writ petition allowed.