2002 PLP (Trib (PTD)

S. M. KAZIMI, MEMBER (TECHNICAL). ‑‑‑This judgment disposes of the appeal filed by the Messrs Cherat Cement Co. Ltd., Nowshera, against the Order‑ in‑Appeal. No.49 of 2000 dated 2‑2‑2000 (dispatched on 4‑2‑2000) passed by the Assistant Collector of Sales Tax, Peshawar. 2. Briefly the facts of the case are that the audit team of the DARR, Lahore reported that Messrs Cherat Cement had charged and collected sales tax at 18% on the, supplies made on 28‑3‑1997 but deposited the same at 12.5 % in the return submitted for the month of March, 1997, thus causing short‑payment of sales tax Rs.479,424 besides that additional tax due. The Assistant Collector of Sales Tax of Sales Tax, Peshawar, issued a demand‑cum‑show‑cause notice C.No.ST.(AO‑I) 24/99/4299. dated. 15‑5‑1999 requiring Messrs Cherat Cement to show cause why the aforesaid amount of sales tax together with the additional tax due thereon should not be recovered from them under sections 34 and 36 of the Sales Tax Act, 1990. Having heard the party and after going through their written submissions, the Assistant Collector passed the impugned order holding that excess of sales tax of Rs.479,424 (different between 18% and 12.5%) was charged and collected by Messrs Cherat Cement which should be paid by them, alongwith the additional tax under section 34 of the Act, in terms of section 3‑B of the Act. Hence, this appeal. 3. During the course of hearing before us, the learned counsel for the appellant stated that in the wake of Government's Economic Reforms of 1997, the Government introduced a Finance Supplementary (Amendment) Bill, 1997, in the National Assembly on 28‑3‑1997 and a Declaration under section 3 of the Provisional Collection of Taxes Act, 1931, was appended to this Bill to give immediate effect to clause (5) thereof (relating to the amendments in the Sales Tax Act, 1990.) which inter alia reduced the standard rate of sales tax from 18 % to 12.5 % on all taxable goods including cement. He further stated that this Bill introduced in the Assembly in the evening of 28‑3‑1997 was made public only then. Before the time of introduction of the said Bill, the appellant had made supplies of Cement against Excise AR‑1 Nos.669,670 and 671 dated 28‑3‑1997 corresponding to a sales tax invoice Nos.43197, 43198, 43351, 43352 and 43353 dated 28‑3‑1997 showing retail price as Rs.15,623 per bag (inclusive of excise duty of Rs 54.68 @ 35% of the retail price and sales tax of Rs.27.77 @ 18% of the retail price. However, when they came to know of the changes in the rate of the sales tax, they (i) notified, vide Letter No.RCF‑4/450 dated 31-3‑1997, the revised retail price of Rs.163.77 per bag and sales tax @ 12.5 %) of Rs.20.23 per bag, thus maintaining the previous consumer price of Rs.184 per bag effective from 28‑3‑1997; (ii) corrected the sales tax invoices already issued by issuing debits notes Nos.4136 to 4138 and No.4374 to 4375 dated 31‑3‑1997 for the increase in retail price (from Rs.156.23 to Rs.163.77 per bag) but reduction in sales tax (from Rs.27.77 per bag @ 18% to Rs.2023 per bag at 12.% and (iii) prepared A, R‑1 No. 667 dated 13‑3‑1997, duly authenticated by the D.S. Incharge, Central Excise and Sales Tax, Nowshera and paid extra central excise duty of Rs.149,103 (on account of increase in retail price from Rs. 156.23 to Rs.163.77 per bag) on AR‑1 No. 669‑671/28‑3‑1997. He explained that they maintained their pre 28‑3‑1997 consumer price of Rs.184 per bag in the following manner and did not receive or collect any extra amount even on or after 28‑3‑1997:‑‑ Retail Price Per bag. C.E.D. 35% S.T. rate S.T. per bag Total consumer Price per bag Prior to 28‑3‑1997 On and after28‑3‑1997 156.23 54.68 18% 27.77 184.00 163.77 57.32 12.5% 20.23 184.00 2.64 5.5% 7.54 Nil 4. The learned counsel argued that the Debit Note was prepared in accordance with the law. He further stated that in view of the aforesaid calculation, the appellant did not receive any amount in excess of Rs.184 per bag and, therefore, is not liable to pay any additional amount of sales tax except what has been paid after accounting for as per the debits notes. He pleaded that the demand may be set aside as unlawful. 5. The learned representative from the Collectorate argued that sales tax invoices, once issued, cannot be amended. He also argued that once the supplies were made and goods not received back, debit note could not be issued. He further pleaded that retail price cannot be lowered (on 31‑3‑1997) with retrospective effect (from 28‑3‑1997). He concluded that sales tax has been correctly demanded as the appellant's action of unilateral action to lower the retail price with retrospective effect for the purposes of keeping a portion of sales tax (charged and collected) as their profit cannot be accepted in terms of section 3‑B of the Sales Tax Act, 1990. He prayed for the rejection of the appeal. 6. Having heard the parties and on perusal of record of the case, we find it appropriate to reproduce the provisions of sections 3‑B and 9 of the Sales Tax Act, 1990, as hereunder:‑‑ "3.B. Collection of Excess Tax, etc.‑‑‑(1) Any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this Act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which has been passed on the consumer, shall pay the amount of tax or charge so collected to the Federal Government. (2) Any amount payable to the Federal Government under subsection (1) shall be deemed to be an arrear of tax or charge payable under this Act and shall be recoverable accordingly and no claim for refund in respect of such amount shall be admissible. (3) The burden of proof that the incidence of tax or charge referred to in subsection (1) has been or has not been passed on the consumer shall be on the person collecting the tax or charge." "9. Debit and Credit Note.‑‑‑Where a registered person has issued a tax invoice in respect of a supply made by him and as a result of cancellation of supply or return of goods or a change in the nature of supply or change in the value of supply or some such event the amount shown in the tax invoice or return needs to be modified, the registered person may, subject to such conditions and limitations as the Board may impose, issue a debit or credit note and make corresponding adjustment against output tax in the return." 7. The aforesaid provisions of section 3‑B shows that:‑‑ (a) the excess amount should be collected by the supplier; (b) the incidence of this excess tax should be passed on to the consumer; (c) the burden of proof that the incidence of such duty has not been passed on the consumer shall be on the person collecting this tax; and (d) if the incidence has been passed on to the consumer and there is no proof to the contrary (proof given by the supplier), no refund shall be admissible. 8. Likewise, the study of the provisions of section 9 also shows that a debit or credit note for making corresponding adjustment against output tax in the return can be made (subject to such conditions and limitations as may be imposed by the C.B.R.) by a registered person issuing a tax invoice if modification of amount in tax invoice or tax return is necessitated because of:‑‑ "(a) Cancellation of supply; (b) Return of goods supplied; (c) Change in the nature of supply; (d) Change in the value of supply; and (e) Some such event as in (a) to (d) above. 9. Notification No.S.R.O. 696(I)/96, dated 22‑8‑1996 tilted "The Debit and Credit Note and Destruction of Goods Rules, 1996" has been issued by the C.B.R. under sections 9 and 50 of the Sales Tax Act, 1990. However, the said Rules is silent to deal with a situation as is involved in this case. Since the powers of C.B.R., under section 9 of the Act, is restricted to prescribing limitations and conditions only, the fact that the aforesaid Rules do not deal with a situation as is involved in this case will not make the provisions of section 9 redundant or dormant. Therefore, event of a change in the value of taxable supply will still attract the provisions of section 9 of the Act. The only question to be determined is whether a debit note under section 9 of the Act is included in the terminology "refund" as used in subsection (2) of section 3‑B of the Act. We find that the word "refund" has not been defined under section 2 of the Act. However, provisions relating to "refund" exist under section 66 of the Act. The word "refund" has the following dictionary meaning:‑‑ "Blacks Law Dictionary (6th Edition): Refund(n) : As generally referred to in connection with income tax, is the amount a taxpayer or reporting entity would receive from the Government due to an overpayment of tax (see also `Rebate') Refund (v). To replay or restore; to return money in restitution or repayment e.g. to refund over paid taxes; to refund purchase price of returned goods (see also `Rebate'; `Refund claim' ; `Refund') Refunds: Money received by the Government or its officer which, for any cause, are to be refunded or restored to the parties paying them, such as excessive duties and taxes, duties paid on goods destroyed by accident, duties received on goods which are re‑exported (see also Rebate; Refund) Chamber's twentieth Century Dictionary: Refund (vi): to pour back (now rare): to repay. (vi) to restore what was taken Websiter's New Universal an‑Abridged Dictionary (Delux 2nd Edition); Refund (vi): To pour (obs): to repay: to give back or pay back (money etc.) in restitution, in compensation for overpayment, etc. as, the store offers to refund the purchase price if the customer is not satisfied, to make repayment to; to reimburse (a person). Refund (vi): to make repayment. Refund (n): a refunding or the amount refunded. The Shorter Oxford English Dictionary (Second Edition) Refund (v): to pour back, pour in or out again (Now rare or obs. ); To give back, restore; to make return or restitution of (a sum received or taken); to hand back, repay, restore; to reimburse, repay (a person); to make repayment. The Law Lexicon (Reprint Edition, 1996): Refund: To repay, to give back; to restore; reimburse. 10. The aforesaid study of the cited dictionaries shows that the terminologies like repayment, re‑imbursement, rebate, drawback, tax credit, reclaim or deduction (in terms of sections 7 and 8 of he Sales Tax Act, 1990), or adjustment (in terms of section 9 of the Sales Tax Act, 1990), are all covered by the generic terms "refund". The real test will be an answer to a question that where a registered person can claim refund under section 66 of the Sales Tax Act, 1990, if he has failed to make adjustment by issuing a debit note within the 90 days' limitation (a limitation prescribed under the Debit and Credit Note and in Destruction of Goods Rules, 1996). We have no doubt that the answer will be `yes' and perfect affirmative. The system of Debit and Credit Note under section 9 of the Sales Tax Act, 1990, read with said 1996 Rules, simply allow taking refund in a suo motu manner at the action of the taxpayer himself without filing of a formal refund claim while refund under section 66 of the Act entails a formal refund claim by the taxpayer and its sanction by the competent sales tax officer. However, this facility of Debit and Credit Note does not take away or alter the nature, colour and flavour of it being still covered by the generic term "refund." We, therefore, have no hesitation in holding that once any excess amount of tax has been charged and collected by any person and its incidence passed on to the consumer, such a tax has to be paid to the Federal Government in terms of subsection (1) of section 3‑B of the Act and it is deemed to be an arrears of tax, recoverable accordingly, and no claim for refund in respect of such amount is admissible in terms of sub section (2) of section 3‑B of the Sales Tax Act, 1990. Even otherwise, if we look at the pricing structure and tax‑accruals in this case (under appeal) as illustrated at close of paragraph 3 above, it shows that by changing the retail price retrospectively, the appellant attempted to deprive the Government of Rs.4.90 (Rs.7.54 minus Rs.2.64) per bag of Cement supplied and also to keep this accrued, charged and collected tax of Rs.4.90 for himself. The essence of section 3‑B of the Act is that whatever has been collected by a supplier, as sales tax, or in the name of sales tax, should be paid to the exchequer and should not be appropriated by the said supplier in any other manner. Since the tax has been collected from consumers through a taxable supply and tax invoices dated 28‑3‑1997, it cannot be manipulated to keep the amount (Rs.4.90 per bag in this case) for the person issuing the tax invoice by seeking retrospective effect of price changes. The tax collection by the appellant is a trust and should not be manipulated or appropriated in any manner to deprive the Government of even a paisa which the Consumer has paid or which the consumer has been charged or which has been collected from; the consumer in the name of a tax. It is for this reason that the claim fort refund of such a tax amount has been barred under subsection (2) of section 3‑B of the Sales Tax Act, 1990. We have no doubt in our mind that a suo motu refund, in the style of a debit note under section 9, is also of no avail in such cases and the excess of tax, as charged and collected, has to be paid by the appellant into the Government treasury. The appellant's action of revision of retail price on 31‑3‑1997 with retrospective effect (i.e. from 28‑3‑1997) is a nullity in law and was done with intent and purposes to keep the portion of the tax of Rs.4.90 nor bag (already collected by the appellant from the buyers/consumer) for himself. Such an improper action cannot be held to be lawful. We, therefore, hold that the appellant's action of retrospective revision of retail price and appropriation of Rs.7.54 per bag from the amount of sales tax collected was neither lawful nor proper. However, since (out of the said Rs.7.54) an amount of Rs.2.64 per bag has been paid by the appellant under the head of account for central excise duty, the demand for that Rs.2.64 per bag may not be pressed as the said amount is still with the government, although, under a wrong head of account But the appellant should pay the balance amount of sales tax Rs.4.90 per bag charged and collected by them from the consignee/consumers of sales tax invoices Nos. 43197, 43198, 43351, 43352 and 43353, all dated 28‑3‑1997. As regards additional tax leviable thereon under section 34 of the Sales Tax Act, 1990, we are inclined to take a lenient view and direct that if the appellant pay, to the satisfaction of the Collector, the aforesaid arrears of principal amount of sales tax (at Rs.4.90 per bag) by the 22nd day of June, 2002, the amount of additional tax shall stand remitted as special case. In case of any delay or default in payment of these arrears by the appellant, they shall pay the whole of additional tax, as payable in terms of section 34 of the Sales Tax Act, 1990. The impugned order is modified to the above extent only and the appeal stands disposed of accordingly. 11. Inform all concerned. 12. Announced. C.M.A./M.A.K./369/Tax(Trib.) Order accordingly.