2001 PLP (Trib (PTD)

8. It is argued on behalf of the appellants that S.R.O.208/98, dated 31‑3‑1998, issued by the Federal Government continues in force it not only covered the sales tax leviable under section 3(1) of the 1990 Act, but it also covered the further tax leviable under subsection (1A) of section 3; of the Act , 1998, with effect from 1‑7‑1998.

9. On the other hand, it is contended on behalf of the respondents that notification S.R.O. No.208, dated 31‑3‑1998, did grant exemption to the appellants from the payment of sales tax leviable under section 2(46) of the Act to the extent of price of the sugar sold above the, price of Rs.14 per Kg., fixed and validated by the C.B.R. vide S.R.O.751, dated 21‑10‑2000, during the disputed period from February, 2000 but this fixation and validation did not cover the aforesaid period so far as it related to further tax leviable under newly added subsection (1A) to section 3 of the Act when the sugar was sold to unregistered persons at much higher rates than those fixed by the C.B.R. and the Federal Government in exercise of their statutory powers:

10. We see a good deal of substance in the above contention of the learned departmental representative. Once the Notification S.R.O.818/99, dated 5‑7‑1999, issued by the C.B.R. fixing the price of sugar at Rs.14 per Kg. for the levy of sales tax had expired in January, 2000, and. the prices of sugar in the open market had shot up to add to the misery and annoyance of the general public or general body of consumers, who were already groaning under the heavy burden of inflation and price hikes, there seemed to be little justification for the C.B.R. to issue S:R.O. 751, dated 21‑10‑2000 to refix the price of sugar again at the old rates of Rs.14 per Kg. for the purpose of levying sales tax. And that too in the abnormal fashion of giving it retrospective effect from February, 2000 thereby causing a loss of millions of rupees to the depleted public exchequer which in the past has suffered inexorably by such‑like thoughtless measures to protect the various vested interest against the general public interest. The exemption granted by the Federal Government vide Notification S.R.O. 208(1)/98, dated 31‑3‑1998, could not operate all alone unless it was accompanied by the notification fixing the price of sugar was also issued by the C.B.R. under the proviso to section 2(46) of the 1990 Act and S.R.O. 751 issued by them on 21‑10‑2000 was a mala fide exercise of power and even otherwise ultra vice because:‑‑ (i) fiscal measures have no retrospective operation unless they are beneficial to the general public and promote public interest and not those which are beneficial to, and protest the interest of, only a few influential individuals already rolling in wealth, as in the instant case; (ii) it sought to bail out the appellants from the dilemma of litigation in which they stood badly caught up and but for this notification, they were bound to pay the sales tax at the higher value they sold the sugar in the open market; (iii) it was issued during the pendency of the litigation and was hit by the principle of lis pendens; (iv) it was against the basic principle underlying the financial regime that a person who earns more must pay more to the State in the form of taxes; and (v) it aims at collusively and covertly directing the course of millions of rupees from the national coffers meant for the benefit of general public, to the hands of a private group of politico‑business maganats, a class which has been a privileged and moneyed class throughout, often thrieving at public money.

11. For various reasons stated above, Notification S.R.O.751(1)/2000, dated 21‑10‑2000, being against law, equity and public interest is declared non‑existent for all intents and purposes and does not take effect at all. This being so, the question of its application for the grant of exemption from further tax levied under section 3(IA) does not arise when this by itself has crumbled down on account of various infirmities mentioned above and S.R.0.208/98, dated 31‑3‑1998 alone cannot take effect for fixing price of sugar. Resultantly, after February, .2000, the appellants are bound to pay the sales tax on market price under section 3(1) of the Sales Tax Act, 1990 on the quantity of sugar sold by them to the registered persons and also further tax under section 3(lA) thereof on the quantity of sugar sold by them to unregistered persons at the rates specified in these provisions.

12. It may be mentioned here that some controversy has cropped up with regard to the vires of section 3(l A) of the said Act and certain sales tax payers, including some of the appellants herein, have challenged its validity before the two High Courts. To be more precise, Northern Bottling Company (Pvt.) Ltd., Peshawar, took recourse to the Peshawar High Court in Writ Petition No.1713 of 1‑998, wherein the further tax, as envisaged by section 3(l A) of the Sates Tax Act, 1990, and initially sought to be levied at the rate of I % in addition to the sales tax being already paid by them under section 3(2)(c) thereof, was challenged. It was ultimately held that since added subsection (1 A) of section 3 mentioned only subsection (1) of section 3 and.' did not mention section 3(2)(c) thereof, the demand of the Department for further tax was not legally sustainable. Aggrieved by this decision, the Sales Tax Authorities at. Peshawar went up in appeal before the Supreme Court, which, in Civil Petition No.474‑P of 1999,‑decided on 30‑9‑1999, was pleased to approve the view taken by the Peshawar High Court.

13. It appears that during the pendency of the said writ petition before the Peshawar High Court; the Federal Government, having become conscience of the omission in section 3(lA) (ibid), as pointed out in the writ petition, amended this subsection so as also to include therein clause (c) of subsection (2) of section 3 and subsections (4) and (5) of section 3 in addition to the already existing subsection (1) by an amending Act. This amendment was taken notice of by the Peshawar High Court as also by the Honourable Supreme Court in their respective judgments as a step to rectify the omission in subsection (1 A).

14. In the Punjab some Sugar Mills, including, some of which are appellants herein, challenged the validity of section 3(lA) before the Lahore High Court by various writ petitions but all of them were dismissed and when they went up to the Honourable Supreme Court in appeals. The apex Court, vide its order, dated 19‑5‑2000, was. pleased to accept the contention of the appellants in view of the aforesaid decision already taken on the appeal of the Department against the aforementioned decision of the Peshawar High Court on the conceding and misleading statement of Mr. A. Karim Malik, Advocate Supreme. Court representing the Department. While so doing, the Honourable Supreme Court, in paragraph 3 of its judgment, with reference to the judgment of the Peshawar High Court in the aforesaid writ petition, was pleased to observe, the tax levied through the first amendment was struck down by the Peshawar High Court on the acceptance of Writ Petition No. 1713 of 1998, decided on 6‑10‑1999. In the last and operating paragraph of the same judgment, it was again pleased to observe and took the stance that he would be satisfied if ‑further tax @1 % levied by Finance Act, 1998, is set aside. The stance is understandable inasmuch as the first amendment being technically defective was struck down on the touchstone of second amendment which does not suffer from any illegality. Consequently, the petitions are converted into appeals and partly accepted to the extent of further tax @1 % levied by Finance Act, 1998 and dismissed in respect of further tax @ 3 % levied by Finance Act, 1999. No orders as to costs. This judgment had the effect of absolving the Sugar Mills from the liability of paying further tax leviable under section 3(1A) during the year 1998‑99 up to 1‑7‑1999 but after this date its levy at the rate of 3% was held valid. This rate was subsequently, reduced from 3% to one and a half per cent. by the Finance Act, 2000 which is still prevailing.

15. From the words "struck down" twice used by the Honourable Supreme Court in the aforesaid judgment is being carried an impression that perhaps subsection (lA) of section 3 of .the Sales Tax Act, 1990, was completely effected and ceased to be the part of section 3 of the 1990 Act, and probably for that reason the Department has filed a review petition before the Honourable Supreme Court. But actually it was neither, struck down nor intended ‑to be struck down. It was simply interpreted by the Peshawar High Court and approved by the Honourable Supreme Court to the effect that since it did not include reference to section 3(2)(e) of the Act, the further tax levied under section 3(lA) was not leviable on the petitioners, who were selling their beverages at the retail price. However, since by the subsequent amendment made by the Finance Act, 1999, the omission was supplied, the further tax leviable thereunder not only became payable by the retailers but it also became the statutory liability of the wholesalers; like the appellants herein, to pay further tax on the quantity of the sugar they sold to the unregistered persons, which also included the general public, or general body of consumers, in the open market.

16. After having declared S.R.O. 751, dated 21‑10‑2000, as ultra vires and non‑existent, we would have up‑ set‑ the findings of the learned Collector (Adjudicating Officer, Faisalabad, in the impugned orders accepting its validity w.e.f. February, 2000 but 'in the absence of any appeal or cross‑objections filed' by the department against his, findings, I we cannot modify them to that extent. However, we do not find any illegality or 'invalidity in the 'levy of further tax under section 3(lA) of the 1990 Act chargeable from February, 2000 till 30‑6‑2000 @ 3 % . and from 1‑7‑2000 onward as one and a half per cent on the quantity of the sugar sold by the appellants in the open market to the unregistered persons constituting the general body of consumers. In other words, each appellant shall‑‑ (a) pay sales tax at the standard rate under section 3(1). of the said Act .on the sugar sold by them during the period from February, 2000 till 21‑10‑2000 at the fixed price of Rs.14 per Kg.; and (b) pay further tax under section 3(lA) of the said Act on the sugar sold I to unregistered persons during the aforesaid period at the market price. However, since in this case subtle questions of law and facts are involved, the entire amount of additional tax and penalties are waived.

17. In view of the above, all the appeals are partly accepted and the impugned orders are modified to the extent, indicated in the preceding paragraph. FALAK SHER (MEMBER TECHNICAL).‑‑‑(1) I agree with my learned brother.

2. It may be added that S.R.O. 207(I)/98, dated 31-3‑1998 and S.R.O. 208(1)/98, dated 31‑3‑1998 suffer from a serious legal infirmity since the same are in conflict with the second proviso to subsection (46).of section 2 of the Sales Tax Act, 1990.

3. The Central Board of Revenue fixed the value of sugar in terms of. S.R.O.207(I)/98, dated 31‑3‑1998 as amended by S.R.0.751(I)/2000, dated 21‑10‑2000. The Federal Government allowed tax exemption on the basis of value so fixed under S.R.O.208(1)/98, dated 31‑3‑1998.

4. The second proviso to section 2(46) of the Sales Tax Act, 1990 provides that, if the value at which the supply is made is higher than the value fixed by the Central Board of Revenue the value of goods shall be the value at which the supply is made. Sugar was supplied by the mill owners at a higher price and thus, the value fixed by the Board had no legal sanction.

5. The Federal Government had no power to grant tax exemption on the basis of the value so fixed since in terms of the proviso to subsection (46) of section 2 of the Sales Tax Act, 1990 the same was a nullity in .the eyes of law.

6. The issue before us relates to the levy of further tax on sugar supplied by the appellants to unregistered persons during the period in question. The appellants are liable to pay the same since the value fixed by the Central Board of Revenue is not recognized by law and thus, the tax exemption granted by the Federal Government in terms of S.R.0.208(1)/98, has no legal force and effect. C.M.A./M.A.K./97/Tax(Trib.) Order accordingly