2010 PLP (Trib (PTD)

MIAN MUHAMMAD HANIF TAHIR, (JUDICIAL MEMBER).--This judgment shall dispose of Sales Tax Appeal No.127/LB of 2009 filed against the Order-in-Appeal No. 4-10/ST/2009 dated 6-1-2009 passed by the learned Collector of Customs, Sales Tax Federal Excise (Appeals) Customs House, Lahore.

2. Briefly stated the case of the department as contained in the contravention report/show-cause notice was that the appellant who is registered under Sales Tax Act, 1990 vide Registration No.3-91-9999-613-19 have allegedly claimed and obtained refund of Central Excise Duty amounting to Rs. 16,73,76,151 under section '66 of the Sales Tax Act, 1990, vide RPO No.407/2005 dated 13-9-2005 for Rs.3,51,67,124, RPO No.416/2005 dated 17-10-2005 for Rs.12,31,60,867 and RPO No.422/2005 dated 19-11-2005 for Rs.90,48,160 and that the aforesaid refund, so claimed and sanctioned vide aforessaid RPOs was allegedly inadmissible on the. grounds that CED was chargeable in terms of section 3 of Central Excise Act, 1944 read with sub-rule 2 of Rule 96ZZJ of the Central Excise Rules, 1944 on the amount billed or ought to be billed, so no deduction of trade discount was admissible under the said provisions and that the prescribed tariff for pay-phone services already included CED on the basis of gross bills, the incidence of duty stood passed on the end consumer and the registered person also did not produce any documentary evidence to the effect that the incidence of duty/taxes was not passed on to the end consumers and that the refund was filed after one year and was, thus time barred under section 66 of the Sales Tax Act, 1990 read with Rule-11 of the Central Excise Rules, 1944. Further, that the Central Board of Revenue, vide its letter C.No.1(17)/CEB/96 dated 1-8-2006 had clarified that its ruling dated 24-12-2004 was applicable only in the case of future transactions and it cannot be used to claim refund of CED paid in the closed and past transactions in the light of the provisions of section 3B of Sales Tax Act, 1990 read with section 3D of the Central Excise Act, 1944 and the Central Board of Revenue has also clarified that the previous transactions made on the basis of gross billed amount would be treated as past and closed transactions and no refund would be allowed as the incidence of the duty had been passed on to the end consumers. Further, that the appellant failed to provide documents/record despite issuance of notices dated 12-9-2006 and 28-9-2006 in violation of sections 25 and 38 of the Sales Tax Act, 1990 which manifested mala fide on their part in fraudulently claiming and receiving inadmissible refund of CED amounting of Rs. 16,73,76,

151. On the basis of aforesaid allegations the appellants were charged of having fraudulently claimed refund of CED amounting to Rs.16,73,76,151 within the meaning of section 2(37) of the. Sales Tax Act, 1990 which was not admissible to the appellant in terms of section 66 of the Sales Tax Act, 1990 read with section 3B ibid and 3-D of the repealed Central Excise Act, 1944 and Sales Tax Refund Rules, 2002 (S.R.O. 575(I)/2002 dated 31-8-2002) and that the appellant also failed to furnish requisite record to the Sales Tax Department and were called upon to explain in writing as to why the refund of CED claimed and obtained may not be recovered from them in terms of section 11(2) and section 36(1) along with default surcharge under section 34 and why the penal action under serial-2, 8, 9(a), (b), (11) (c) and (13) of section 33 of the Sales Tax Act, 1990 should not be taken against them. The appellants filed detailed reply to the show-cause notice, but the learned Additional Collector (Adjudication) Sales Tax, being not satisfied with it, passed Order-in-Original No.105/2007 dated 18-9-2007, holding that it was a Central Excise Duty under which there was no concept to discounted price and that the refund claimed by the appellants was barred by limitation in terms of section 66 of the Sales Tax Act, 1990 which was recoverable from the appellants being not admissible. The learned adjudicating officer further held that since the scheme of the sales tax is based on self assessment and deposition of due/taxes by the registered persons on their own and that system is not based on supervised clearance, but registered persons are expected to make correct and , honest declaration without interference of the department, strictly in accordance with the provisions of law and that the Act of claiming inadmissible refund was committed in self assessment system, the registered persons needed to be fully satisfied as to the veracity and the rightfulness of their claim and shelter could not be taken behind the back of the department and on the basis thereof, the appellants committed tax fraud in terms of section 2(37) of the Sales Tax Act, 1990 and, thus the appellants were ordered to pay default surcharge under section 34 and penalty under section 33 of the Sales Tax Act 1990. Aggrieved by the Order-in-Original No.105 of 2007 dated 18-9-2007, the appellant filed appeal before the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), which was partly accepted and the penalty equal to 100 per cent of the tax involved imposed on CEO of the company was remitted while the demand of refunded amount, default surcharge and penalty on ,the company (appellants) were upheld vide Order-in-Appeals Nos.4 to 10/ST of 2009 dated 6-1-2009. Hence, this appeal.

3. The main grounds of the appellant, as argued in the memo. of appeal, are:-- (a) That the impugned order is self contradictory as at one hand the learned Collector of Sales Tax (Appeals) Lahore has held that it was a levy of Central Excise Duty (Now Federal Excise Duty) under which there was no concept of discounted price while on the 'same time he has directed that the appellants shall pay penalty under section 33 of the Sales Tax Act, 1990. (b) That under third proviso to section 3(1) of the Central Excise Act, 1944, the Federal Government on 2-9-2000 vide S.R.O. 617(I)/2000 notified that Telephone Services on which levy of Central Excise Duty was already charged under Central Excise Act and was to be levied and collected as per sales tax mode and all provisions of Sales Tax Act 1990, rules, notifications, instructions and orders thereunder were to apply for the said levy. (c) That at the relevant time Central Excise Duty was totally exempt viz., charges for telephone cards used exclusively in public telephone booths, in excess of duty-paid charges of Pakistan Tele Communication Corporation Ltd., included therein. The relevant item heading No. 98.12 of Chapter 98 to the first schedule of the Central Excise Act was to be read with S.R.O. 333(I)/2002 dated 15-6-2002. (d) That thus, Pay-Phone Companies including the appellants were neither liable to charge nor recovery any Central Excise Duty on sale of telephone cards. The only obligation upon them was to pay Central Excise Duty from their own income, which was recovered and paid by PTCL to the Federal Government. On an issue raised by the Pay-Phone Companies, PTCL sought a clarification from C.B.R. vide its letter dated 10-6-2002 as to whether the Central Excise Duty was to be charged on gross bills or discounted amount which was paid ` by Pay-Phone Companies for availing PTCL Services. (e) That initially, the C.B.R` vide its letter dated 30-7-2003 clarified that Central Excise Duty was to be charged on gross bills, though upon further' representation, after span of one and half year, it withdrew the earlier letter dated 20-7-2003 and directed vide letter No.1(17)/CEB/96 dated 24-12-2004 that Central Excise Duty is to be charged on discounted price in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990 provided the tax invoice shows the discounted price as well as the related tax and the discount allowed is in conformity with the normal business practice and that directive still hold the field even today. (f) That the appellant an the basis of aforesaid directive sought refund of excess Central Excise Duty recovered from them, which was duly processed, examined, scrutinized and thereafter, sanctioned by the competent authorities vide refund payment orders aforementioned by following the Sales Tax Refund Rules, Customs General Order and instructions on the subject. (g) That ostensibly while processing refund claim of an other similar claimant, on clarification sought from C.B.R., resurrected the matter vide its letter dated 2-8-2006 addressed to Collector, Sales Tax Lahore and therein, it was now being alleged by C.B.R. that the Board's clarification dated 24-12-2004 was (a) prospective and not retrospective (b) earlier recoveries of the Central Excise Duty on gross billed amount were past and. closed transaction (c) as evidently incidence of duty had been passed on under section 3B of the Central Excise Act, 1944 (d) the duty could not be refunded (e) the claimant of refund could not be Pay-Phone Companies but PTCL and on account of aforesaid un lawful change of stance, utter, confusion was created by C.B.R. which resulted initiation of proceedings subject matter of this appeal. (h) That the Collector Sales Tax and Federal Excise Lahore, vide letter dated 12-8-2006 informed C.B.R. of the reason for grant of refund. He also sought review of the orders passed by the C.B.R. He further clarified that refund was granted as per law. He also informed that the incidence of excess paid Central Excise Duty was not passed on to the end consumers in terms of section 3-B of the Sales Tax Act, 1990. He further clarified that the Pay-Phone Companies were entitled to claim refund and it' was rightly granted to them and that discount was allowed in conformity with the normal business practice and discounted price was mentioned by PTCL on corporate bills (tax invoices) C.B.R. R. being not definite of its clarification vide reference, dated 28-10-2006 sought clarification from the Ministry of Law on misconceived and false notions which ultimately gave a finding that the levy in essence was a levy of Central Excise Duty and there was no concept of discounted price and that the refunds were not valid. It is pointed out that, the reference to Law Division was made on 28-10-2006, whereas the recovery proceedings were initiated much prior to it, which shows confusion on the part of Board. (i) That during the course of proceeding and on the motion of appellant, the record of C.B.R. was summoned and examined including the contravention report, judgment and direction dated 31-5-2007 of Honourable Supreme Court of Pakistan in C.P.No.472-433493/2007, order of the Honourable FTO, judgment of this august Tribunal dated 7-3-2003 passed in Appeal No.3136 of 2001 titled "Pakcom Limited v. Collector (Adjudication) Rawalpindi" as well as the files of the sales tax refund to show that the refund claims were duly processed in accordance with law but this aspect was totally ignored while passing the impugned orders. (j) That respondent No.1 erroneously held that the refunded amount was of Central Excise Duty and the same could not be refunded under section 3 Proviso-III and section 4(3) of the Central Excise Act read with sections 2 (37), 2 (46), 3-B and 66 of the Sales Tax Act, 1990 and directed recovery of refunded amount in terms of sections 11(2) and 36 (i) along with default surcharge under section 34 of the Sales Tax Act, 1990. He also imposed penalty under section 33 (1) Serials 2, 8, 9 (a), (b), (11) (c) and (13) of the Sales Tax Act, 1990. Had the refunded amount was of CED, it would have been ordered to be recovered under the provisions of Central Excise Act and rules made thereunder and not Sales Tax Act, 1990. (k) That the Collector of Sales Tax Act (Appeals) Lahore (respondent No.3) in utter disregard of the contents of the show-cause notice as well as order impugned in the appeal and the case record passed consolidated impugned order by holding that the refunded amount was of Central Excise Duty, it was un lawfully refunded with contribution of the respondent Collectorate, the refund amount was to be recovered along with default surcharge under section 8 of the Federal Excise Act, 2005.

4. The respondent/department filed cross objections.

5. Arguments were heard. The learned counsel appearing on behalf of appellant contended that the show-cause notice was issued under the provisions of Sales Tax Act, 1990, whereas in the Order-in-Original, the appellant was charged for violation of the Central Excise Act along with Sales Tax Act, 1990 and the appellant was burdened with huge liability which is nullity in the eyes of law. In the impugned order, the appellants were charged as well as burdened with Central Excise Duty and default surcharge under the Federal Excise Act, which was neither mentioned in the show-cause notice nor in the Order-in-Original was passed on the basis thereof. Further, the appellant was penalized for CED refund under the Sales Tax Act, 1990 and these conflicting and absurd application of laws by the respondents are illegal and on this score alone the impugned orders are liable to be struck down being bad in law. He further contended that the impugned orders were passed on the allegations, which were even not part of contravention made against the appellant. In the impugned orders, the allegations discussed were neither facts nor part of the record and as such the orders are not sustainable under the law. The learned Collector (Appeals).has failed to address the grounds of appeal agitated before him. He has also failed to decide the pivotal point of controversy and while passing the impugned order has erred in law to travel beyond the scope of show-cause notice to justify a demand, which even otherwise was not justifiable. He has also failed to address the crucial issue that the refund sanctioned through appropriate orders by the competent authority cannot be recovered under sections 11 (2) and 36(1) of the Sales Tax Act, 1990 unless an appeal was filed against the said refund orders or the same were re-opened in terms pf section 45-A of the Sales Tax Act, 1990. He further contended that the respondents have failed to understand that the levy styled as. central excise duty under section 3(1), third proviso to the Central Excise Act 1944 was leviable, payable collectable and refundable as if it was a levy of Sales Tax Act and all the provisions of Sales Tax Act, 1990, notifications, orders, circulars and instructions issued under the said Act, are to be applied. Hence, all provisions including the provisions of discounted price in terms of section 2 (46) (b) of the Sales Tax Act, 1990 will also apply. He further contended that in fact C.B.R.'s directive/clarification dated 24-12-2004 was valid and subsists and had neither been withdrawn nor rescinded. He further contended that bare perusal of the 3rd Proviso to section 3 of the Central Excise Act, which is non-absentia clause, reveals that it is not applicable in the recovery as well as levy upon the subject services. The proviso specifically states that "provided further notwithstanding anything contained in this Act, in respect of excisable goods and services which the Federal Government, may by notification in the official gazette, specify, the duty shall be levied and collected as if it were a tax payable under section 3 of the Sales Tax Act, 1990". He further contended that by virtue of Clause 3(1) of S.R.O. 617(I)/2000 dated 1-9-2000, the services rendered by the appellant were deemed to be such services which were subject to the non obstante operation of the proviso rendering all other provisions of Central Excise Act, including section 4(3) inapplicable and it was the reason that in terms of aforesaid notification, the rate of levy was enhanced from 12.5% to 15% to bring the same in conformity with the levy under section 3 of the Sales Tax Act, 1990. The learned counsel further contended that the respondent also erred in law by holding that it was the levy of Central Excise Duty adjudicatable under the repealed Central Excise Act, 1944. Since, the said Act was repealed, the respondent had acted under the Federal Excise Act, 2005 and, thus, lacked jurisdiction. He further contended that it is very strange that at one hand, the respondents have held that it was a levy of CED, whereas at the same time they have imposed penalty under section 33 of the Sales Tax Act, 1990. If, it was a levy of CED, how the penalty could be imposed under the provisions of Sales Tax Act, 1990. According to the directive of Central Board of Revenue, all the provisions of the Sales Tax Act, 1990 and rules, notifications, orders and instructions made or issued thereunder shall apply, which also includes Clause (b) of subsection (46) of section "2 of the Sales Tax Act, 1990 according' to which in case of trade discount, the said levy was to be calculated on discounted price. He referred to 3rd proviso to section 3(1) of the Central Excise Act, 1944 according to which central excise duties "levied and collected" as if it was a tax payable under section 3 of the Sales Tax Act, 1990 and all the provisions of that Act and rules, notifications, orders and instructions made or issued thereunder shall apply.. Section 3 of the Sales Tax Act, 1990 is the charging provisions and any amount charged under said section is deemed to be sales tax. The words "levied and collected" used in the 3rd proviso of section 3 (1) of the Central Excise Act, 1944 completely transformed central excise duty into sales tax and as such the central excise duty shall be charged on the discounted price in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990. According to him, the department cannot take two stances on the same issue, because the words "levied and collected" were used which obviously means complete transformation of central excise duty into sales tax. The case of the department that the said transformation was only to the extent of "collection made" is, thus, erroneous and misconceived. He further contended that .in the presence of 3rd proviso to section 3 (1) of the 'Central Excise Act, 1944 read with S.R.O. 617(I)/2000 dated 2-9-2000 and the directive of C.B.R. dated 24-12-2004, the department cannot hold that the central excise duty paid by the appellants was to be treated as such and not sales tax for refund purpose only, whereas the scope of the 3rd. proviso aforementioned is much wider than the scope determined by the department. In the present case not only the provisions of the Sales Tax Act, 1990 and the rules but also the notifications, orders and instructions made or issued thereunder were made: applicable on inserting the 3rd proviso to section 3(1) of the Central Excise Act, 1944 and as such the duty paid by the appellants was completely transformed into sales tax and all provisions including the one relating to the value of supply in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990 would apply in full force. He also relied upon the judgment of Islamabad Bench-I of this Tribunal dated 7-3-2003 in the case of "Messrs Pakcom Limited v. Collector of Customs (Adjudication), PNCA Building Liaqatabad Road Rawalpindi (Appeal No.3136/2001)". He also referred to "M/s Friends Sons and Partnership Concern v. The Deputy Collector, Central Excise and Sales Tax Lahore and 3 others PLD 1989 Lahore 337". According to him the directive dated 24-12-2004 issued by C.B.R. is also supporting his aforesaid contentions. According to him the only change made thereto subsequently was that it would have no retrospective effect`, meaning thereby that the same is still existing having prospective application. He further contended that the view expressed by the Central Board of Revenue vide its letter dated 2-8-2006 as well as the respondents that the instructions contained in letter dated 24-12-2004 had no retrospective effect are patently erroneous, because it is by now a settled law that any notification or as the case may be administrative instructions detrimental to the assessee shall have no retrospective effect. However, beneficiary notifications, instructions and administrative orders could be applied retrospectively as held in cases "Messrs Army Welfare Sugar Mills Ltd., and others 'v. Federation of Pakistan and others (1992 SCMR 1652), Elahi Cotton Mills Ltd., and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1997 SC 582 and Collector of Customs Lahore v. Messrs A.A. Corporation Lahore (2004 PTD 2738)". In the aforesaid judgments, it was held that it is, now well settled law that a concessionary S.R.O. Notification, Regulation or Executive Order can be given retrospective effect if it goes to the comfortability of the taxpayer. He further contended that even otherwise if the instructions contained in letter dated 24-12-2004 had no retrospective effect then how the directive contained in letter dated 2-8-2006 was given retrospective effect. According to him in case the earlier directive had no retrospective effect then the instructions issued after about two years later had also no retrospective application and the entire exercise based on such communication would automatically fall to the ground. He further contended that no incidence of duty had been passed on to the end consumer, because no duty was recovered by the appellants. For application of section 3-D of Central Excise Act, 1944 and section 3-L of the Sales Tax Act, 1990 it is a condition precedent to show that the duty at the time of collection/payment was not payable and where any duty is declared to be ultra vires, it cannot be said that at the time of payment of duty, the same was payable and in such event the aforesaid provisions would not be applicable. According to him the appellants had also been selling the cards at much less value than the one fixed by PTA. According to him no audit of the appellants was ever undertaken despite the fact that they had been requesting the adjudicating authority as well as Appellate Authority to conduct audit in order to ascertain as to whether the appellants had been recovering the central excise duty from the end consumers or paying the same from their own profit. He further contended that the aspect of incidence whether passed on or otherwise can be ascertained by conducting audit of the accounts of appellants. According to him, the record requisitioned by the department was provided and the allegation of non-production of record is totally baseless. He further contended that central excise duty was an indirect tax and PTCL was collecting the same on behalf of the Government and depositing the same in the treasury. PTCL had collected excess central excise duty from the appellants on wrong and delayed, clarification by the C.B.R. Moreover, the Pay-Phone Companies were registered persons under section 14 of the Sales Tax Act, 1990 and as such they were entitled to claim refund and not PTCL as the excess payment was made by them as held in the case, "The Federation of Pakistan v. Metropolitan Steel Corporation (2002 PTD 87)" in which it was held" that claim of refund of tax which was not payable or was paid in excess could only be made by the person paying the tax and not the one who had collected the same, because the collecting person was always acting as an agent and as such the appellants had rightly claimed and obtained refund of the excess duty recovered from them by PTCL. The learned counsel further contended that the delay in filing claim was due to delayed clarification by the Central Board of Revenue. According to him, the claim was lodged well within time, after issuance of clarification by the Central Board of Revenue. According to him, the limitation was also condoned in their cases by the competent authority. He further contended that even otherwise on processing- and sanctioning the refund claim by the competent authority according to law, the question of limitation 'does not arise. Thus, the observation on the part of respondents that the claim was barred by limitation is patently erroneous and not sustainable under the law. According to him, even otherwise no refund can be declined on the ground of limitation. In this behalf he referred "Messrs Pfizer Laboratories. Limited v. Federation of Pakistan and others PLD 1998 SC 64". As regards the allegation of tax fraud, he contended that the refund was claimed on the basis of clarification sought from the C.B.R. and as such it cannot be said that the appellants have committed any tax fraud. He referred to the impugned order passed by the learned Collector (Appeals) Lahore wherein it wasp held that the term "tax fraud" was alien to the Central Excise Taxation Law and it was adopted in Sales Tax Net, 1990 clause (37) of section

2. According to him, the learned Collector (Appeals)' Lahore at one side held that it was levy of central excise duty, whereas at the same time he burdened the appellants with penalties by converting the allegation into tax fraud which according to him was alien to the central excise law. Moreover, tax fraud provisions can be invoked only if there is any intentional, dishonest, fraudulent and without lawful excuse obtainment of inadmissible refund causing loss to Government, but such ingredients are missing in the case in hand. The observation of the learned Collector, that the efforts of the appellants to obtain inadmissible refund were intentional because they claimed refund. In case the appellants were not entitled to refund, the same would have been refused by the department and as such the allegation of tax fraud is totally baseless and un-sustainable under the law because' the appellants have adopted lawful course and lodged claim on the basis of clarification sought from the C.B.R., which are still holding the field. On filing claim by the appellants, the same were properly scrutinized and after satisfying with each and every document, the same was processed by the' dealing staff, and thereafter the same was sanctioned by the competent authority in according with law and rules. None of the document was alleged to be forged or false. Had the refund was not admissible the department would have rejected the same, However, after sanctioning the refund through appropriate orders by the competent authority, the allegation of tax fraud' is totally baseless, false and without any substance. The learned counsel also stated that the appellants filed complaint before the Honourable Federal Tax Ombudsman under section 9 which was partly accepted to the extent of imposition of penalty for claiming inadmissible amount of refund and the C.B.R. was directed to reopen the matter in terms of section 45-A of the Sales Tax Act, 1990 for directing the Collector (Appeals) to decide the same on merits. According to him, it was held by the Honourable FTO that it was neither the case of tax fraud nor the case where the penalty can be imposed. He further contended that the decision/findings dated 22-2-2008 by the Honourable FTO in Complaint No.1137-L/2007 has attained finality in terms of section 11, as the same were never reversed under section 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. According to the learned counsel this case is worse example of conflicting, contradictory and absurd application of law as show-cause notice was issued under the provisions of Sales Tax Act, 1990, levy was declared of Central Excise ordered to be recovered under the charging provisions of Sales Tax Act, 1990, default surcharge was imposed under Federal Excise Act, 2005, whereas penalty has been imposed under section 33 of Sales Tax Act. According, to him, show-cause notice, order-in-original and order-in-appeal are contradictory to each other. Both' the lower" forums have travelled beyond the scope of show-cause notice and as such show-cause notice, Order-in-Original and order-in-appeal impugned in this appeal are liable to be struck down. The learned counsel for the appellant, while concluding his arguments vehemently denied all the allegations. According to him, the refund was admissible, it was rightly granted and obtained by the appellant being well within time and no incidence of central excise duty was passed on the end consumers and that the appellants were entitled' to claim the same as the excess amount was recovered from them and that the trade discount was also allowed rightly being in conformity with the normal business practice. He lastly prayed that the appeal of the appellant, be accepted and the impugned orders beset aside.

6. On the other hand, Sheikh Nadeem Anwar, the learned counsel appearing on behalf of the respondents had contended that it was the levy of Central Excise Duty rightly charged on the gross billed amount, as there was no concept of trade discount in Central Excise Laws. He vehemently denied that the appellants never paid element of central excise duty to PTCL from their own profit but instead they recovered from general public. According to him, the appellants claimed inadmissible refund of central excise duty on the strength of the C.B.R.'s clarification dated 24-12-2004, by raising the issue of discounted price in respect of closed and past transaction where the incidence of central excise duty had already been passed on the end consumer in terms of section 3D of the Central Excise Act, 1944 and section 3B of the Sales Tax Act, 1990. He invited our intention towards Clause (a) of sub-section (3) of section 4 of Central Excise Act, 1944 where it was prescribed that where under the said Act any services, facilities and utilities are subject to duty at a rate depend their charge there-from and any services, facilities or utilities, rendered or provided free of charge or a concessional rate the duty shall be levied and collected on the amount which would have been charged for services, facilities and utilities had they not been rendered or provided free of charge or at concessional' rate. According to him, the appellants have misinterpreted the clarification of the C.B.R. for their vested interest and failed to appreciate the true spirit of the substantive provisions of law. He contended that there is no change of stance on the part of the department and it was the appellants who misinterpreted the letter dated, 12-8-2006. According to him the learned Collector, Sales Tax Lahore made a reference after grant of refund, which was not accepted by the C.B.R. as well as the Ministry of Law, Justice and Human Rights Division, which endorsed the view point of the C.B.R.. According to him, the Order-in-Original order passed by the competent authority on factual and legal basis and there was no' infirmity therein. He further contended that the learned Collector (Appeals), Lahore has also passed a comprehensive order considering all factual and legal aspects of the case. He further contended that central excise duty was chargeable in terms of section 3 of Central Excise Act, 1944 read with Sub-rule (2) of Rule 96ZZJ of Central Excise Rules, 1944 on the amount billed or ought to be billed and no deduction of trade discount was admissible and that the contention of the appellants in this behalf are not correct, because the duty was only collected in sales tax mode vide S.R.O. 617(I)/2000 dated 2-9-2000. According to him, penalty was rightly imposed under section 33 of the Sales Tax Act, 1990 as the refund of central excise duty was claimed under section 66 thereof. He further stated that there is no legal infirmity in the order passed by the lower forums. He also refuted the objection of the appellants relating to the jurisdiction of the adjudicating authority. Be referred to order dated 25-4-2007 passed by the Honourable Lahore High Court, Lahore in WP No.12818/2006 filed by the appellants wherein it was held that they should avail departmental remedy and the objection of the appellants regarding re-opening of the case was decided against them. According to him, the Honourable FTO delivered, finding in those cases of refund, which were not sanctioned and as such not applicable in the case of appellants. According to him, the allegation of tax fraud was proved against the appellants as they succeeded in getting inadmissible refund in respect of past and closed transactions not admissible to them under section 3D of the Central Excise Act, 1944 and 3B of the Sales Tax Act, 1990. He vehemently contended that the judgment of Islamabad Bench-I of this Tribunal dated 7-3-2003 had no relevancy in this case. According to him, central excise duty on telecommunication services in pith and substance was the duty of Excise and not the Sales Tax. He further stated that by virtue of Central Excise (Amendment) Ordinance 2000, 3rd proviso was added to subsection (1) of section 3 of the erstwhile Central Excise Act, 1944 on 1-7-2000 whereby the Federal Government was empowered to notify excisable services in respect of which the central excise duty could be levied and collected as if it were a tax payable under section 3 of the Sales Tax Act, 1990 and all the provisions of that Act and rules, notifications, orders and instructions made or issued thereunder were made applicable and under the said proviso S.R.O.. 617(I)/2000 dated 2-9-2000 was issued where-under the duty on service rendered or provided by the persons engaged in telecommunication work was specified to be levied and collected under the Sales Tax Act, 1990 which was chargeable under section 3'x(1) of the Central Excise Act, 1944 read with section 4(3). According to him, the C.B.R.'s clarification dated 24-12-2004 cannot be given applicability in this respect, as there is no concept of discounted price in the repealed Central Excise Act, 1944. He further stated that since the refund of central excise duty was claimed by the appellants under section 66 of the Sales Tax Act, 1990 and the same was allowed as such by the concerned sanctioning authority thus, the show-cause notice was also issued under the charging section of the said Act. He, however, admitted that no audit of the appellants was undertaken by the department to ascertain as to whether the incidence of duty was passed on the end consumers or otherwise. According to him, the appellants failed to provide sales tax record for audit to the department despite issuance of notices dated 12-9-2006 and 28-9-2006 in violation of sections 25 and 38 of the Sales Tax Act, 1990. He stated that the contravention case was made against the appellants on the basis of available record. In support of his contention that' the appellants had charged the price of Rs.4.00 from the end consumers he produced copies of few invoices. According to him, the said price was including the amount of tax as well as profit of the appellants. He vehemently refuted the contention of the appellants that they had been paying central excise duty from their own profit. According to him the officers, who allowed inadmissible refund to the appellants, were proceeded against under the relevant service laws. He further stated that all the legal and factual issues raised by the appellants were properly addressed by the lower forums as per directions of the Honourable apex Court. He stated that the lower forums did not travel beyond the scope of the show-cause notice, as according to him mentioning of each and every allegation/charge in the notice is not essential. According to him, the appellants were not entitled to the refund and that the demand of refunded amount along with default surcharge and penalty were rightly raised and adjudged against them anti the appeal filed by the appellants is, thus, liable to be dismissed both on legal as well as factual issues.

7. We have heard the learned counsel appearing on behalf of the appellant and the respondent department and perused the record carefully. The case of the department is that the duty charged on telephone services was levy of Central Excise under which there was no concept of discounted price and that the refund was wrongly and unlawfully sanctioned to the appellant, while on the other hand the case of the appellant is that the central excise duty paid by the appellant completely transformed into sales tax , and as such all provisions of that Act would apply including Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990 where-under the duty was to be charged on discounted price and the excess amount paid on gross billed amount was rightly refunded to the appellant., 3rd Proviso was added to subsection (1) of section 3 of the Central Excise Act, 1994 through Central Excise (Amendment) Ordinance, 2000 (XXXIV of 2000) according to which in respect of excisable goods and services, which the Federal Government may, by notification in the official gazette, specify, the duty shall be levied and collected as if it were a tax payable under section 3 of the Sales Tax Act, 1990 and all the provisions of that Act, the rules, notifications, orders and instructions made or issued thereunder shall, as far as may be and with the necessary modification apply. Federal Government vide S.R.O. 617(I)/2000 dated 2-9-2000 specified telephone services as excisable. For the sake of convenience and ready reference, it would be appropriate to reproduce hereunder the 3rd Proviso to subsection (1) of section 3.of the Central Excise Act, 1944:

"Provided further that notwithstanding anything contained in this Act, in respect of excisable {goods and} services, which the Federal Government may, by notification in the official Gazette, specify, the duty shall be levied and collected as if it were a tax payable under section 3 of the Sales Tax Act 1990, and all the provisions of that Act and the rules, notifications, orders and instructions made or issued thereunder shall, as far as may be and with necessary modifications, apply.

8. The Federal Government issued S.R.O. 617(I)/2000, dated 2-9-2000, in terms of aforesaid Proviso. The relevant part thereof reads as under:

"In exercise of the powers conferred by the third proviso of subsection (1) of section 3 of the Central Excise Act, 1944 (I of 1940), the Federal Government is pleased to specify the following excisable services, on which central excise duty shall be levied and collected as if it were a tax payable under section 3 of the Sales Tax Act 1990, and all the provisions of said Act and the rules made and notifications, orders, and instructions issued thereunder shall, so far as may be, and with necessary modifications, apply, namely:

(1) xxxxxxxxxxxxx (ii) xxxxxxxxxxxxx (iii) xxxxxxxxxxxxx (iv) xxxxxxxxxxxx (2) xxxxxxxxxxxxxxxx (3) services provided or rendered by persons engaged in telecommunication work in respect of

(i) telephone; (ii) telex; (iii) telegraph; (iv) telefax; and (v) other services,

9. Subsequently the question arises as to whether the duty shall be charged on gross billed amount or discounted price in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990. In the first instance, on the basis of reference made by PTCL, it was clarified by the C.B.R., that as per sub-rule (2) of Rule 96ZZJ of the Central Excise Rules, 1944 central excise duty is chargeable on amount "billed or ought to be billed" meaning thereby that the duty was chargeable on gross billed amount without deduction of any trade discount and not on the discounted amount. However, on agitating the aforesaid point by the Pay Phone Companies, the C.B.R., vide letter dated 24-12-2004, changed its earlier stance and issued directive that in case of trade discount, central excise duty shall be calculated on discounted price in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990. Clarification contained in letter dated 24-12-2004 reads as under:-- I am directed to refer to your letter No.DSTA-025, dated26-11-2004 on the subject cited above and to clarify that in respect of excisable goods and services which are chargeable to central excise duty (in VAT mode), all the provisions of the Sales Tax Act, 1990 and rules notifications, orders and instructions made or issued thereunder shall apply. (2) Accordingly in case of trade discounts, central excise duty is to be calculated on discounted price, in terms of clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990, provided the tax invoice shows the discounted price as well as the related tax and the discount allowed is in conformity with the normal business practices. (3) In view of above, the Board's clarification issued under C.No.1(17)CES/98 dated 30th July 2003, is hereby withdrawn.

10. On the basis of aforesaid clarification,, the appellant claimed refund of excess amount of duty paid by him on the basis of gross amount. However, the C.B.R. after lapse of more than one and half year, issued another letter dated 2-8-2006 clarifying that its earlier clarification had no retrospective effect, because the previous transaction made on the basis of gross billed amounts were closed and past transactions in the light of provisions of section 3B of the Sales Tax Act, 1990 as well as section 3D of the repealed Central Excise Act, 1944 and any refund of excise duty shall not be admissible as the incidence of duty had evidently been passed on to the consumers in case of Pay Phone Companies. It is settled principle of law that there are three distinct types of provisions in every fiscal enactment. The charging provisions, which relate to the levy or charge of the tax, usually state that tax is to be levied and on what matter or goods or services and in which manner and at what rate and matters relevant thereto. The assessment provisions, which deal with the assessment, calculation, or quantification of the tax for the purpose of determining the amount of tax due and payable or which has escaped collection or has been under assessed or assessed at lower rate or on which excessive refund has been allowed. The collection provisions are that which relate to the mode and manner of receipt or collection of the tax. The charging sections have to be strictly construed and any benefit found therein has to be given to the taxpayer, whereas the assessment and collection provisions are merely the machinery sections and they can be liberally construed. In 3rd Proviso to sub-section (1) of section 3 of the Central Excise Act, 1944, the words "levied and collected" have been used. Same words "levied and collected" are mentioned in S.R.O. 617(I)/2000 dated 2-9-2000. As per 3rd proviso the duty shall be "levied and collected" as if it were a tax payable under section 3 of the Sales Tax Act, 1990 and all the provisions of that Act and the rules, notifications, orders and instructions made or issued thereunder shall apply. Similar provision was contained in S.R.O. 617(I)/2000 dated 2-9-2000 and clarification sought from the C.B.R. vide letter dated 24-12-2004 meaning thereby that the tax shall be "levied and collected" in the same manner as the taxes. "levied and collected under section 3 of the Sales Tax Act, 1990 and all provisions of that Act including its Clause (b) of subsection (46) of section 2 shall apply, as if it was levy of Sales Tax. The words collectable clearly shows that the duty shall be paid in the same manner as the sales tax is collected. Since, the sales tax is collected on discounted price, thus the duty on telephone services shall also be collected in the same manner. The contention of the learned counsel appearing on behalf of the appellant that the duty paid by the appellant completely transformed into sales tax and the appellant was entitled for refund of excess amount recovered from him without deducting discount, which was admittedly in conformity with the normal business practices, provided that the incident thereof had not been passed on to the end consumers, seems to be correct. The objection of the learned counsel for the respondent department that it was levy of the central excise duty under which there was no concept of trade discount is not tenable, because the words "levied and collected" used in the 3rd Proviso of section 3(1) of Central Excise Act, 1944 shows that the Central Excise Duty was "levied and collected" as if it were tax "levied and collected" under Sales Tax Act, 1990 would completely transform into sales tax and the calculation and collection shall be made on the discounted price in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990. The department cannot take two different stances on the same issue because the words "levied and collected" were used which obviously means complete transformation of the central excise duty into sales tax. The aforesaid controversy was resolved by the -Islamabad Bench-I of this Tribunal vide judgment dated 7-3-2003 passed in Appeal No.3136 of 2001. The relevant para.11 of the said judgment reads as under:-

11. In the citation provided by the appellant, it has been clearly held, conversely, that sales tax could and would be collected as central excise duty when in 1981 sales tax was transferred from Income Tax Department to, the Central Excise Department. At that time it was held that the words "levied and collected" completely transformed the sales tax collected under the Sales Tax Act, 1951 into central excise duty levied and collected under the Central Excise Act, 1944. By the same analogy, the central excise duty on telecom services was to be levied and collected as sales tax as per the 3rd proviso to section 3 of the Sales Tax Act, 1990 as amendment inserted in the budget 2000-2001. This, therefore, leads us to conclude that the central excise duty levied on the telecom services was completely transformed into sales tax. The amendment introduced in the budget 2001-2002 specifically allowing the adjustments of central excise duty as input tax under the Sales Tax Law simply clarify the existing legal position and removed any legal ambiguity existing in the budget 2000-2001.

11. The perusal of the aforesaid provisions, notifications, clarifications of the C.B.R. and judgment of Islamabad Bench-I of this Tribunal referred above, make it clear that all the provisions including the one relating the value of supply in terms of Clause (b) of subsection (46) of section 2 of the Sales Tax Act, 1990 were applicable and the duty was payable on discounted price provided the tax invoice shows the discounted price as well as related tax and the discount allowed was in conformity with the normal business practices and the appellant was entitled to claim excess amount recovered on the gross billed amount under section 66 of the Sales Tax Act, 1990 but only in if the incidence had not been passed on to the end consumers. As regards the application of the instructions contained in C.B.R.'s letter dated 24-12-2004, the contention of the learned counsel for the department that the same were prospective in nature and could not be applied retrospectively is not tenable in the light of a judgment in the case "Messrs Army Welfare v. Federation of Pakistan and others (1992 SCMR 1652), case of Messrs Elahi Cotton Mills PLD 1997 SC 582 and case of Messrs A.A. Corporation (2004 PTD 2738)", the notifications, regulations, executive orders and instructions can be given retrospective effect if it goes to the benefit of the taxpayer. However, such instruments, if found detrimental to the assessee would have no retrospective effect. Thus, the appellant has rightly filed claim in the light of said clarification and there was no mala fide on their part. So far as the question of limitation is concerned, it is observed that the claim was filed within limitation after receipt of clarification from the C.B.R. and that the delay was also condoned by the competent authority. However, this question of limitation became immaterial once the claim was entertained, processed and sanctioned by the competent authority. It is further added that even otherwise the claim cannot be refused on technical grounds keeping in view the principles settled by Honourable apex Court in Pfizer's case PLD 1998 SC

64. The objection of the department that the refund was wrongly claimed by the appellant as it was PTA, which deposited the tax into Government Treasury, in our view, is not sustainable, because PTA had only acted as collecting agent on behalf of the Government, whereas duty was paid by the appellant. It has been held in the case. "The Federation of Pakistan v. Metropolitan Steel Corporation (2002 PTD 87)" that claim of refund of tax, which was not payable or was paid in excess could only be made by the person paying the tax and not the one who had collected the same as the collecting person, he was always acting as an agent. Thus, the appellant had rightly claimed refund of the excess duty because it was recovered from him. As regards the allegation of tax fraud and imposition of default surcharge and penalty on the basis thereof, we will not hesitate to hold that it was not a case of tax fraud, because the refund was claimed on the basis of clarification issued by the C.B.R. Moreover, the learned Collector (Appeals) in the impugned order also held that it was case of entrapment. According to learned Collector (Appeals), the Collectorate's record also does support the same and in such event it cannot be said that the appellant had committed tax fraud. It is further pointed out that at one hand the learned Collector (Appeals) in the impugned order has held that it was levy of central excise in which the term tax fraud was alien thereto, while on the other hand he imposed penalty under section 33 of the Sales Tax Act, 1990. Since the department has miserably failed to prove that there was any intentional, dishonest, fraudulent 'act and without lawful excuse obtained of inadmissible refund on the part of the appellant, thus, the allegation of tax fraud is not justified. Mere claiming the refund and that too on the basis of clarification issued by the C.B.R. cannot be termed as attempt to commit tax fraud. Moreover, the appellant had adopted lawful course and lodged claim of refund on the basis of clarification, which is still holding the field and the refund was properly processed, examined, scrutinized and sanctioned by the competent authority and such effort of the appellant cannot be said to be a tax fraud. Thus, it was not the case where the default surcharge and penalty could be imposed upon the appellant on the allegation of tax fraud, which could not be proved by the department. It is added that Honourable F.T.O. also observed that it was not a case of tax fraud. Hence, the impugned orders-in-appeal as well as the Order-in-Original so far as the same relate to default surcharge and penalty are not sustainable under the law. Now coming to the last issue of passing on of the incidence of tax to the end consumers, it is an admitted position that no audit of the appellant was conducted by the department in order to ascertain as to whether the incidence had been passed on to the end consumers in terms of section 3B of the Sales Tax Act, 1990 read with section 3D of the repealed Central Excise Act, 1944 or otherwise as according to the appellant they had been selling the cards even at lesser price ,than the one 'fixed by PTA. In rebuttal of the contention of the appellant, the department has placed on record only few invoices on the basis of which it cannot be ascertained as to whether the incidence of duty was passed on to the end consumers. However, according to our view, the price charged by the appellant from end consumers was also including the amount of tax and as such it shall be presumed that the incidence thereof had been passed on to the end consumers in terms of section 3B of the Sales Tax Act, 1990 and section 3D of the Central Excise Act, 1944. The contention of the learned counsel for the appellant that even if their audit is now undertaken they would be in a position to establish that the incidence was not passed on to the end consumers is without any substance, because nothing has been placed on record before this Tribunal in this behalf. Thus, it shall be presumed that incidence of tax was passed on to the end consumers and the appellant was not entitled to claim refund of any excess amount in such past and closed transactions. Thus, the refunded amount was rightly held to be recoverable from the appellant by the lower forums.

12. The upshot of the above discussion is that the refund was not admissible in such past and closed transactions and it has rightly been held recoverable from the appellant as the incidence of the tax was passed on to the end consumers in terms of section 3B of the Sales Tax Act, 1990 read with section 3D of the repealed Central Excise Act, 1944. However, keeping in view the mitigating circumstances of this case, the appeal so far as it relates to the imposition of default surcharge and penalty is accepted and the impugned orders-in-appeal as well as Order-in-Original are set aside to that extent only. The appeal stands disposed of in the above terms. C.M.A./164/Tax(Trib.) Order accordingly.