APPELATE
TRIBUNAL INLAND REVENUE,LAHORE BENCH, LAHORE STA No.661/LB/2021MA(AG)No.43/LB/2021(Tax period December, 2020) STA No.662/LB/2021MA(AG)No.44/LB/2021(Tax period September, 2020) STA No.663/LB/2021MA(AG)No.45/LB/2021(Tax period October, 2020) STA No.664/LB/2021MA(AG)No.46/LB/2021(Tax period November, 2020) M/s. Allah Din Steel & Re-rolling
Mills, Daska. Appellant
Versus CIR,
Zone-VIII, RTO-II, Lahore. Respondent
Appellant by: Ch Anwar Ul Haq and M Maqsood
Buttar, Advocates.
Respondent by: Ashfaq Ahmed, DR along with Mr.
Kashif Rajwana, Adv.
Date of hearing:
25-05-2021 Date of
order: 28-05-2021
O R
D E R
M. M. AKRAM (Judicial
Member): The
title appeals have been filed by the appellant registered person under section
46(1)(b) of the Sales Tax Act, 1990 (“the
Act”) against the impugned orders dated 08.04.2021 and 15.04.2021 passed by
the learned Commissioner Inland Revenue, Sialkot Zone, RTO, Sialkot in respect
of tax periods September, 2020 to December, 2020 comprising of four months on
the grounds as set forth in the memo of appeals. The appellant also filed the
additional grounds in all these appeals. The facts of the case and the issue
involved in all these appeals are same and identical therefore, all these
appeals are being decided through this consolidated order.
2. The brief facts giving rise to appeals
are that the appellant is operating a steel furnace for melting steel and production
of marketable steel products, ingots and billets etc. For the purpose of the
aforesaid activities, the appellant requires electricity to run its furnace.
The Gujranwala Electric Power Company (GEPCO)
has been providing electricity to the appellant and accordingly issuing the
bill for each month in respect thereof. That prior to 01.07.19, the appellant
was required to pay sales tax under the Sales Tax Act, 1990 through Special
Procedure Rules, 2007 on the basis of per unit electricity consumption.
However, with effect from 01.07.2019 the appellant has been subjected to
federal exercise duty levied under Federal Excise Act, 2005 (“FE Act, 2005”) through insertion of
entry No.58 in the First Schedule to the FE Act, 2005. Simultaneously on the
other hand, the supplies of steel products by manufacturers have been added
into the Sixth Schedule to the Sales Tax Act, 1990 by virtue of which the
appellant has been exempted from the levy of Sales Tax. Further, the Federal
Government while excising its power as conferred by Section 7 of the FE Act,
2005 has added entry number 4 to the Second Schedule of the FE Act, 2005
through Finance Act, 2019 whereby excise duty on steel products has been made
chargeable in sales tax mode. Under
the scheme of the FE Act, 2005 it is pertinent to mention that section 7 of the
FE Act, 2005 allows the appellant to deduct input tax from output tax in order
to calculate its tax liability payable under the FE Act, 2005 in sales tax mode.
3. As far as the filing of sales tax return
under the law, it is incumbent upon the appellant to file its sales tax return on
or before the 18th of every subsequent month. In consequence thereof,
the appellant has to claim Sales Tax being charged in a particular month
through electricity bill as its input tax for the same month and accordingly
the GEPCO authorities are required to upload the amount being charged from the consumers/appellant
in lieu of sales tax, into Annexure-C by 10th of each month in terms
of Rule 18 (3) of the Sales Tax Rules, 2006. The GEPCO authority
admittedly did not upload the Annexure-C on the web portal by 10th
of each month and in consequence thereof, the appellant allegedly was not able
to adjust the same in the tax periods under consideration for determination of
its final tax liability. According to the appellant, they are facing such issue
from November 2019 onwards. At this juncture, it is also an admitted fact that
the GEPCO had filed its returns for the tax period September 2020 to December
2020 on 29.10.20, 02.12.2020, 31.12.2020 and 31.01.2020 respectively along with
Annexure-C showing the tax paid on behalf of the appellant. Correspondingly,
the appellant is also entitled to claim input tax in the six succeeding tax
periods as per provision of section 7(1) of the Sales Tax Act, 1990. The
appellant instead of claiming the input tax in succeeding tax periods under the
aforesaid provisions of law; illegally chooses to file the writ petitions for
each month starting from July 2019 onwards before the Lahore High Court. The
Honorable High Court while granting the interim relief to the extent of payment
of sales tax on electricity bills referred the matter to the Learned
Commissioner IR for final decision. In compliance of the order of the Honorable
Court, the learned CIR passed the impugned orders for each tax periods
independently against the appellant. Felt aggrieved, the appellant preferred
appeals before this Tribunal on 27.04.2021
and assailed the impugned orders on a number of grounds.
4. This case initially came up for hearing
on 28.04.2021 and thereafter fixed number of times. However, each time the
appellant one pretext or the others had sought time for preparing the case and
resultantly enough time was allowed to the appellant. The case was again fixed
on 24.05.2021 and on the said date, the appellant again for linger on the
matter, placed on record the copy of the application addressed to the Honorable
Chairman for the transfer of the case from this Bench to another. Therefore, on
the request of the Learned AR, the case was again adjourned to 25.05.2021.
However the Honorable Chairman did not transfer the case therefore, today the
learned AR further seeks time which was not allowed for the reason that the
Honorable High Court vide order dated 21.04.2021 specifically directed this
Tribunal to decide the appeals within one month. Therefore, we have no choice
to adjourn the case except to comply with the direction of the Honorable High
Court. Thus these appeals are being decided on the basis of the available
record.
5. The appellant has taken inter alia the
following almost similar grounds in all the titled appeals:-
1.
That
the GEPCO failed to upload Annex-C by 10th day of the month following
the end of the tax period as required under Rule 18(3) of the Rules, 2006 and
to pay tax within due date ( i.e 15th day of that month) under Rule
18(9) enabling the appellant to get credit of input within
due date of filing its return
(i.e. 18th day of that month). Regarding the said fault on the part
of GEPCO, the appellant was justified to get exclusion of tax from electricity
bill/tax invoice under the order of the High Court. Hence, the appellant should
not be suffered due to the wrong act of the GEPCO.
2.
That
the GEPCO late filed Annex-C on 31.01.2021, admittedly by charging GST for the
subject tax period, which is in violation of stay order of the High Court.
Further the GEPCO filed late Annex-C without seeking condonation of delay u/s
74 of the Act. For the said both reasons, the charge of GST in Annex-C is of no
legal value.
3.
That
the nature of tax charged u/s 3 of the Act is of “transitional tax” in the
hands of the recipient of supply and it is his statutory right to get it adjusted u/s 7
of the Act while computing its entire tax liability for the relevant “tax period”. The GEPCO denied to appellant several
statutory rights within due time and meanwhile the appellant filed its return
by discharging its entire tax liability under the FED Act for the “tax
period”. Therefore, it became passed and
closed transaction, subject to Section 11 of the Sales Tax Act, 1990 read with
FED Act. Now, it is settled law that if
a person discharged it tax liability for the relevant year / period without
payment of any transitional tax due to stay order by a Court of competent
jurisdiction, the same cannot be recovered at little time, as its recovery
shall result to refund on the other hand. Reliance may be placed on judgment of
the High Court titled Riaz Bottlers (Pvt.) Ltd., Vs. Federation etc. (2010 PTD
1295).
4.
On a
constitutional plan, demand of tax, which is no more payable by the petitioner
as it already stands paid defeats “economic justice”. Under the preamble to the Constitution and
Objectives Resolution it is proved that “wherein shall be granted fundamental
rights, including equality of status, of opportunity and before, law, social,
economic and political justice….”
Economic Justice Echoes in the fundamental rights guaranteed under the
Constitution especially Article 23 and 24 of the Constitution. The Registered
Person has a right to hold its property and cannot be, deprived of his property
except in accordance with law. If a tax due has been paid there is no
constitutional or lawful justification to demand tax under the garb of
transitional sales tax. The impugned demand in the peculiar circumstances of this
case, offends the fundamental rights of the R.P and is, therefore, void and
without any lawful authority.
5.
That
the GEPCO is not empowered to
charge, collect, or recover arrears of sales tax beyond tax period, which was
not collected due to the order of the Court.
In identical circumstances, the Hon’ble Lahore High Court vide order
dated 20.02.2014 in W.P No.3731/2012 titled HK Steel Re-Rolling resolve the
issue by directing FBR to recover the same in accordance with law under the
Act.
6.
That
subject issue has also been settled by a Division Bench of this Tribunal in the
appellant’s own case vide order dated 25.01.2021 in STA No.249/LB/2019 whereby
it has been held that
“If
the registered person did not claim input tax for the said period, no recovery of
GST can be made., however it is clarified that at any stage if registered
person claims the input tax for the period described above, in future then the
CIR, Sialkot would be at liberty to recover the said amount from the registered
person by following due process of law.”
7.
That
neither the GEPCO within due time
reflected any tax in its Annex-C nor
the appellant claimed such input for the period in its Annex-A of the
return. However, if the GEPCO assert
that any tax for the period has been paid by it to the exchequer, it may only
be settled between the GEPCO and FBR.
Accordingly, the respondent may be directed to settle the issue with
GEPCO if it has received subject amount from it, as the double taxation is not
permissible under the law.
8.
That
under the inherency of the Sales Tax Act, 1990 it is not in the jurisdiction of
any authority or forum to go beyond the tax period subject matter before it.
9.
That
it also not in the jurisdiction of this Tribunal to entertain any claim of
third party or to give any verdict in its favour, to whom law does not permit
to be party in any proceedings before this Tribunal.
10. That proviso to section 7 of the Act
would not apply in the present case, as within due time no tax was available to
the appellant which has not been deducted by it, due to non-filing of annex-C
by the GEPCO. The said proviso reads as
under:-
“Provided
that where a registered person did not deduct input tax within the relevant
period he may claim such tax in the return for any of the six succeeding tax
period.”
Since,
the appellant has otherwise discharged its entire tax liability for the period
and therefore the respondent Commissioner erred in law to compel the appellant
for payment of impugned tax on simple incentive that it may claim the same in any
subsequent period under proviso to 7 of the Act.
11. That neither any loss caused to the
exchequer nor any fraud been establish against the appellant by the
respondent. Therefore, the impugned
order is liable to be set-aside.
12. That due to the error in the electronic
system of FBR the Appellant cannot
adjust its input tax paid for the month of December 2020 for the purposes of
its Sales Tax liability, thus depriving the appellant from his
statutory right visualized section 7 quoted supra. Therefore, the same amounts to infringement
of the right of freedom of business as provided in Article 18 of the
Constitution, hence, liable to be declared as such on this ground also.
6. We have heard both the learned ARs who
appeared on behalf of the appellant and GEPCO and also heard the learned DR. We
have also perused the record and the documents submitted by the DR and the
booklets furnished by the AR on behalf of GEPCO in support of their contentions.
The appeals are being decided in the following manner;-
i. APPELLANT
HAS NOT COME TO THE COURT WITH CLEAN HANDS.
The
record shows that the appellant is under litigation since July, 2018 to date on
almost same set of circumstances and succeeded to get interim relief from the
High Court by filing the writ petitions in all the tax periods started from
July, 2018 to December, 2020. The history sheet of the litigation is marked as Annexure “A” with this order. We
have very keenly perused all the orders passed by the High Court. In almost all
the orders, the appellant without touching upon the merits of the case relied
upon the earlier orders passed by the High Court and sought similar relief from
the court by concealing the material facts of the case. In the instant case,
four tax periods i.e September, 2020 to December, 2020 are involved therefore,
we have confined ourselves to the said tax periods only and highlighted
hereinafter the misstatements on the part of the appellant which were submitted
not only before the Hon’ble High Court but this Tribunal as well. The appellant
filed the writ petitions Nos.53673/2020, 60411/2020, 67467/2020 and 4909/2021
for the tax periods September, 2020 to December, 2020 respectively.
i.
In W.P
No.53673/2020 (heard on 23.10.2020) which relates to the tax period
September, 2020, the appellant contended therein that:-
“The bill of September, 2020 which does not
reflect the detail of input tax to be paid by the petitioner. It is stated that
as a result of the said error, the petitioner shall not be able to claim
adjustment of the said amount.”
The similar grounds were
taken by the appellant in a writ petition earlier filed by the appellant
bearing No.47730/2019 wherein the petition was sent to the Commissioner IR with
the direction to consider the petition as representation and decide the matter.
The CIR dismissed the representation vide order dated 18.09.2019. The appellant
has concealed this fact while filing the writ petition on the same premises. The
appellant again mislead the court whilst obtaining the interim relief alleging
that detail of input tax has not been mentioned in the electricity bill for the
month of September, 2020 whereas perusal of the bill reflects that the
amount of input tax (GST) is duly
printed therein.
ii.
In W.P
Nos.60411/2020 and 67647/2020 (heard on 20.11.2020 and 21.12.2020
respectively) which relates to tax periods October and November, 2020, the
appellant without touching upon the merits of the case relied on the orders
already passed by the High Court in W.P No.45394/2020 and sought a similar
relief from the court. The perusal of the order dated 24.09.2020 passed in the
W.P. No.45394/2020 reveals that the grievance of the appellant was that the Respondent-FBR were not verifying
their claims for the PRAL system of FBR alleging further that the respondents
have illegally proceeded to recover the tax amount through the electricity
bills which they have already paid. The appellant earlier took the
similar stance before the High Court assailing the inclusion of GST in the
bills for the month of July, 2020. The matter was referred to the CIR wherein
the order dated 12.11.2020 was passed against the appellant. The appellant
despite the rejection of representation filed the writ petition and concealed
this fact and succeeded to obtain the interim relief.
iii.
Similarly W.P No.4909/2021 (heard on 25.01.2021) which relates to the
tax period December, 2020. The appellant without touching upon the merits of
the case relied on the orders already passed by the High Court in W.P
No.19183/2020 and sought a similar relief from the court. The perusal of the
order dated 21.04.2020 passed in the W.P. No.19183/2020 reveals that the
grievance of the appellant was that
the Respondent-FBR were not verifying their claims for the PRAL system of FBR
alleging further that the respondents have illegally proceeded to recover the
tax amount through the electricity bills which they have already paid.
The appellant earlier took the similar stance before the High Court assailing
the inclusion of GST in the bills for the month of July, 2020. The matter was
referred to the CIR wherein the order dated 12.11.2020 was passed against the
appellant. The appellant despite the rejection of representation filed the writ
petition and concealed this fact and succeeded to obtain the interim relief.
In
all the above petitions, the Hon’ble High Court after granting the interim
relief directed the CIR to pass the orders in accordance with law after
providing opportunity of being heard to the appellant. In compliance of the
orders of the High Court, the learned CIR passed the separate orders for each
tax periods under consideration against the appellant. The detail of the
impugned orders, exact date of service upon the appellant and mode of service
is given hereunder:-
|
S.
No. |
Month |
Order
No. |
Order
Date |
Dispatch
Date |
TCS
Receipt No. |
Delivery
Date |
|
01 |
09/2020 |
3961 |
15.04.2021 |
16.04.2021 |
14011597482 |
19.04.2021 |
|
02 |
10/2020 |
3878 |
08.04.2021 |
09.04.2021 |
14011591988 |
12.04.2021 |
|
03 |
11/2020 |
3964 |
15.04.2021 |
16.04.2021 |
14011597482 |
19.04.2021 |
|
04 |
12/2020 |
3963 |
-do- |
-do- |
-do- |
-do- |
Against
the above impugned orders, the appellant filed the Writ Petition No.25391/2021
on 14.04.2021 against the impugned order dated 08.04.2021 and Writ Petition No.26680/2021
on 20.04.2021 against the impugned orders dated 15.04.2021 before the Honorable
High Court, Lahore. In both the said writ petitions, the appellant succeeded to
get interim relief by misstating the facts that:
“The
appellant filed appeals before the Appellate Tribunal Inland Revenue along with
stay applications which are still pending and no date of hearing has been fixed
so far.
On
the aforesaid misstatements, the High Court further directed this Tribunal to
dispose of the stay applications of the appellant within seven days in
accordance with law and to decide the appeals within one month vide its orders
dated 15.04.2021 and 21-04-2021. However, the
appellant filed the appeals before this Tribunal on 27.04.2021 after getting the interim relief from the High
Court. In compliance of the order of the High Court, these appeals were
immediately taken up on 28.04.2021 and inquired from the learned AR regarding
the misstatement of facts before the High Court. The learned AR could not give
any plausible explanation on the said date. Therefore, the AR was directed to
inform the appellant to appear in person before this Tribunal on the next date
of hearing and the case was accordingly adjourned to 29.04.2021. On 29.04.2021,
a new counsel was engaged by the appellant who filed his power of attorney and
contended that the appellant inadvertently filed the appeals before the Customs
Appellate Tribunal on 09.04.2021
and 16-04-2021 against the
impugned orders dated 08.04.2021 and 15.04.2021 respectively. In support, he
placed on record the bogus copies of acknowledgment receipts. To verify the
aforesaid statement of the Learned AR, a letter was sent to the Registrar
Customs Appellate Tribunal Lahore and also asked the DR to place on record the
mode and date of service of impugned orders upon the Appellant. In response,
the Registrar Custom Tribunal vide letter dated 28.05.2021 stated that the appeals
were filed on 16.04.2021 but the same was returned immediately to the concerned
as these were not related to Customs Appellate Tribunal. However, on the other
hand, the department vides its letter dated 27.05.2021 and 26.05.2021 submitted
that the impugned order dated 08.04.2021
and orders dated 15-04-2021
were served upon the Appellant through TCS on 12.04.2021 and 19-04-2021
respectively. In support of, the department placed on record the copies of TCS
receipts along with copies of tracking receipts which shows the exact dates of
service of the impugned orders. It clearly establishes that prior to receipts
of the impugned orders how the appellant could file the appeals on 09.04.2021 and 16.04.2021 before the Customs
Appellate Tribunal. Despite of this fact, the appellant knowingly and
dishonestly firstly concealed the facts when they filed the writ petitions before
the High Court and secondly, again misstated the facts by filing the
miscellaneous applications under section 152 CPC for certain clarification in
the aforesaid writ petitions. The contents of the applications and the orders
of the High Court both dated 30.04.2021 clearly suggest that the Appellant
again misstated the facts before the High Court to the effect that the
Appellant inadvertently filed the appeals before the Customs Tribunal on
09-04-2021 and 16-04-2021 against the aforesaid impugned orders which were
served upon the appellant on 12.04.2021 and 19.04.2021 respectively. It has
been stated before the court that when this fact came to their knowledge, they
immediately approached relevant forum i.e ATIR by filing such appeals on
27-04-2021, therefore the date of filing of appeals may be treated as
27-04-2021. On the aforesaid misstatements, the Honorable High Court
accordingly amended its earlier orders dated 15-04-2021 and 21-04-2021. We are
afraid that how the Appellant could be entitled to file the appeals before the
Custom Appellate Tribunal on 09.04.2021
and 16-04-2021 prior to
receipts of impugned orders which were served upon them on 12.04.2021 and 19.04.2021
respectively. Further we have asked the learned AR to place on record the
appeal fee challans allegedly annexed with the appeal filed before Customs
Appellate Tribunal, he frankly conceded that the appeals fee were not
deposited. In addition to that, the record shows that the original impugned
orders were annexed with the appeals filed on 27.04.2021 before this Tribunal.
All the aforesaid facts clearly demonstrate that the appellant not only mislead
the Honorable High Court but also this Tribunal as well. The record further
shows that the appellant is habitual, they as matter of practice file writ
petitions in the High Court by concealing the facts and decisions passed
against them and obtain interim relief by getting the matter referred to the
Commissioner IR. This whole process has caused huge financial loss to the
Government Exchequer and GEPCO on account of non-deposit of GST by the
appellant. Thus, it is clearly established that the appellant has not come to
this court with clean hands so it cannot be entitled to any relief. The Courts of law are meant for imparting justice between the
parties. One, who comes to
the Court, must come with clean hands. It can be said without hesitation that a person whose case
is based on falsehood has no right to approach the Court. He can be summarily thrown out at any stage of the
litigation. Hence, on this account alone, the appeals are liable to be
dismissed.
ii. MERIT
OF THE CASE
7. Notwithstanding the aforesaid, now we
revert to the merit of the case. The controversy between the parties is to the
claim of input tax charged on electricity bills by the GEPCO. Before resolving
the controversy, it would be beneficial to first see the back ground of the
levy of FED on steel billets and ingots being manufactured by the steel
melters. Through Finance Act, 2019 Federal Excise Duty in sales tax mode, as
defined in sub-section 2(21a) of the FE Act, 2005 read with Serial No.4 of the
Second Schedule to the FE Act, 2005 has been levied on the steel billets and
ingots being manufactured by the steel melters. In accordance with the
provision of sub-section (1) of section 3 of the FE Act, 2005 read with Serial
No.58 of the First Schedule to the FE Act, 2005 the Federal Excise Duty has
been levied at the rate of 17% ad valorem on the production and supplies of
iron & steel billets/ingots and steel products. Further, the following
minimum production per month for the purposes of levying the said FED has been
specified in sub-section (5A) of section 3 of the FE Act, 2005 read with Serial
No.1 of the Fourth Schedule to the FE Act, 2005:-
|
S.No |
PRODUCT |
PRODUCTION CRITERIA |
|
(1) |
(2) |
(3) |
|
1. |
Steel
billets and ingots |
One
metric ton per 700 kwh of electricity consumed |
|
2 |
Steel
bars and other re-rolled long profiles of steel. |
One
metric ton per 110 kwh of electricity consumed |
8. The question may arise as to Whether for the purposes of collection and manner of payment of FED in sales tax mode, all the provisions of the Sales Tax Act, 1990 and rules, notifications, orders and instructions made or issued thereunder shall mutates mutandis, apply to the excise duty so chargeable? To give answer to the question, it would be advantageous to reproduce hereunder the relevant provisions of the FE Act, 2005 which are relevant and applicable: -
“Section
3. Duties specified in the First Schedule to be levied: - (1) Subject
to the provisions of this Act and rules made there under, there shall be levied
and collected in such manner as may be prescribed duties of excise on,-
(a)
Goods produced or manufactured in Pakistan.
(b)
…………………………………………………………..
(c)
…………………………………………………………..
(d)
…………………………………………………………..
at the rate of fifteen per cent ad valorem except the goods and services specified in the First Schedule, which shall be charged to Federal excise duty as, and at the rates, as set-forth therein.
(2) ……………………………………………………
(3) The
Board may, by notification in the official Gazette, in lieu of levying and
collecting under sub-section (1) duties of excise on goods and services, as the
case may be, levy and collect duties:-
(a) …………………………………………………………..
(b) on fixed basis, as it may deem fit, on any
goods or class of goods or on any services or class of services, payable by any
establishment or undertaking producing or manufacturing such goods or providing
or rendering such services.
(3A) …………………………………………………………..
(4) …………………………………………………………..
(5) The liability to pay duty shall be-
(a)
In case of goods
produced or manufactured in Pakistan, of the person manufacturing or producing
such goods; …………………………………………………………..
(b)
…………………………………………………………..
(c)
…………………………………………………………..
(d)
…………………………………………………………..
Explanation.
- Subject to sub-section (1), for the purpose of this section, (goods)
means the goods specified in CHAPTERS 1 TO 97 and “services” means the
services specified in CHAPTER 98 of the First Schedule to the Customs Act, 1969
(IV of 1969).
Section 7. Application of the provisions of the Sales Tax Act,
1990: - (1) In case of goods
specified in the Second Schedule or such services as may be specified by the
Board through a notification in the official Gazette the duty shall be payable in sales tax mode, whereby: -
(a) a registered person
manufacturing or producing such goods or providing or rendering such services
shall be entitled to deduct input tax paid during the tax period from the
amount of duty of excise due from him on such goods or services in respect of
that tax period;
(b) a registered person
shall be entitled to deduct the amount of duty of excise paid or payable by him
on such goods or services as are acquired by him during a tax period from the
output tax due from him in respect of that tax period;
(c) a registered person
supplying such goods or providing or rendering such services shall be entitled
to deduct duty of excise paid or payable on such goods or services as are
acquired by him during the tax period from the amount of duty of excise due
from him on such goods manufactured or produced or services as are provided or
rendered by him during that period; and
(d) a person shall be
entitled to deduct duty of excise paid or payable, on such goods or services as
are acquired by him during a month, from the amount of duty of excise due from
him on such goods manufactured or produced or services as are provided or
rendered by him, during that month. Such services as are provided or rendered
by him, during that month.
(2)…………………………………………………………..
Explanation.---For
the purposes of this section, the expressions "input tax",
"output tax" and tax period" shall have the same meaning as are
assigned to them in the Sales Tax Act, 1990.
Section 2(21a):"Sales Tax
Mode" means the manner of collection and payment under the Sales Tax
Act, 1990 and rules made thereunder, of the duties of excise chargeable under
this Act specified to be collected and paid as if such duties were tax
chargeable under section 3 of the said Act and all provisions of that Act and
rules, notifications, orders and instructions made or issued thereunder shall
mutates mutandis, apply to the excise duty so chargeable.
First Schedule
Table-I
(Excisable Goods)
|
S.No. |
Description of Goods |
Heading/sub- heading Number |
Rate of Duty |
|
58 |
Steel Billets, ingots, ship plates, bars and
other long re-rolled products. |
Respective headings |
Seventeen per cent ad val. |
It can be seen from the above provisions of law that the excise
duty on goods can only be levied under section 3(1)(a) of the FE Act, 2005 on goods
specified thereunder or in the First Schedule thereto read with Chapters 1 to
97 of the Customs Act, 1969. Section 3(1)(a) further provides that goods
produced or manufactured in Pakistan are liable to FED at the rate of 15% ad
valorem “except the goods specified in the First Schedule, which shall be
charged to FED as, and at the rates, set forth therein.”
9. According to Section
7 of the FE Act, 2005, Federal Excise Duty shall be levied and charged in the
sales tax mode as provided under the Sales Tax Act, 1990 and the rules made and
notifications, orders and instructions issued thereunder with the modifications
as are necessary. The amendment was
made in section 7 of the FE Act, 2005 through Finance Act, 2007 and it was
specifically provided therein that the duty shall be payable in the sales tax
mode. Correspondingly, Section 2(21a) was also inserted through Finance Act,
2007 in FE Act, 2005 which defines the expression “sales tax mode”. According to which section 2(21a) provides that
all the provisions of the Sales Tax Act, 1990 and rules, notifications, orders
and instructions made or issued thereunder shall mutatis mutandis, apply to the
excise duty so chargeable. Thus, all the provisions of the Sales Tax Act, 1990
and inter alia the rules made
thereunder would apply while determining the FED in the sales tax mode.
10. Further while
interpreting the recovery of duties of excise in the sales tax mode and
incorporation of the provision of Sales Tax Act, 1990 in the FE Act, 2005, the
Hon’’ble Islamabad High Court in its decision dated 09.03.2011 in case titled “Pakistan
Telecom Mobile Limited v. Additional Commissioner Inland Revenue, Audit, Large
Taxpayer” (W.P. No. 1715/2010) observed as follows: -
“16. There is no cavil to the proposition that any law can be incorporated by way of reference and can be made part of another enactment. The legislation has every right to incorporate one act into another by way of reference. The dispute in the present case in not regarding the competence to incorporate law by way of reference rather the actual controversy is regarding the effect of the incorporated law.
17. In judgment reported as PLD 2001 Karachi 422, it was held that “when any
law to which reference is made, is incorporated/made applicable to the
proceedings under any special stature or the statue having reference, then all
the provisions contained in the statute to which reference has been made are
attracted except those which are expressly excluded.”
18. In judgment reported in 1985 SCMR 70, it
was held that
“Affect of incorporation by reference to the provision of a formal act is as if
new act has come into force containing all those provisions subject to such
modifications and alteration, if any, as made by indicated in adopted Act.”
19. In judgment reported in AIR 2002 SC 3499, it was held that
“When an earlier Act or certain of its provisions are incorporated by reference
into a latter Act, the provisions so incorporated become part and parcel of the
later Act as if they had been bodily transposed into it. The incorporation of
an earlier Act into a later Act is a legislative device adopted for the sake of
convenience in order to avoid verbatim reproduction of the provisions of the
earlier Act into the later. But this must be distinguished from a referential
legislation, which merely contains a reference or the citation of the
provisions of an earlier statue. In a case where a status is incorporated, by
reference into a second statute the repeal of the first statute by a third does
not affect the second. The later Act along with the incorporated provisions of
the earlier Act constitute an independent legislation, which is not modified or
repealed by a modification or repeal of the earlier Act. However, where in later
Act there is a mere reference to an earlier Act, the modification, repeal or
amendment of the statute this is referred will also have an affect on the
statute in which it is referred. Whether a formal statue is merely referred to
or cited in a later statue or whether it is wholly or partially incorporated
therein, is a question of construction.
20. Keeping in view the afore mentioned judgments, it becomes clear that if provisions of one Act are incorporated into another Act then the incorporated provisions become part of Act, in which those provisions have been incorporated. The affect of the provisions are to be determined from the language of incorporated law and proper interpretation of words used.
21. In the present case Central Excise Act, 1944 was amended. Section 3 of said
Act provides that Excise Duty shall be levied and collected in such manner as
may be prescribed. By way of the impugned amendment, the prescribed manner was
adopted from Sales Tax Act. The contention of the learned counsel for the petitioner
is that since in the amendment it was provided that Excise Duty shall be levied
and collected as if it were a tax payable under Section 3 of Sales Tax Act,
1990, so after the said amendment charging section is that of Sales Tax Act and
not the Central Excise Act. The learned counsel for the petitioner further
contended that whenever words levied and collected are used together in a
fiscal statute then statue becomes a charging section. This contention of the
learned counsel for the petitioner is not correct. Charging provisions relate
to the levy of charge of tax, which usually state that tax is to be levied and
on what matter, and in which manner and at what rate and matters relevant
thereto. In the instant case the authority of levying the Excise Duty is
derived from Section 3 of Central Excise Act and not from Sales Tax Act. The
said provision relates to the mode and manner and receipt or collection of tax.
The assessment and collection are merely the machinery sections. This too is
not correct that if words levied and collected are used together in a fiscal
statute then said statue would become a charging section. In fact the whole
section determines as to whether the same is charging section or not. However,
in the present case there can be no doubt that the charging section is Section
3 of Central Excise Act, 1944, as far as the modality of assessment and tax and
collection of tax is concerned, those have been derived from Sales Tax Act,
1990. Since those provisions by referred provisions became part of Central
Excise Act, 1944, therefore, legality or constitutionality of the same cannot
be questioned as under Central Excise Act duty can be imposed on services
rendered by a person.”
11. A somewhat similar
questions came before the Hon’ble Islamabad High Court in the case titled as Commissioner
Inland Revenue, Zone-II, Islamabad Vs M/s Wise Communication System, Islamabad,
(2019 PTD 2313). However, in the said case, the tax period related to 2005 i.e
prior to the amendment made through Finance Act, 2007 in sections 7 and
insertion of section 2(21a) of the FE Act, 2005 whereby the Hon’ble Division
Bench while deciding the Sales Tax
References Nos. 6 to 11 of 2012 observed as follows:-
“12. In view of the discussion above in the said case any procedural amendment which affects the vested rights operates prospectively. Likewise, the amendments made in the Sales Tax Rules, 2006 and section 7 even if regarded as a procedural, since adversely effects the refund already taken by Messrs Telenor Pakistan (Pvt.) Limited and Wise Communication System (Pvt.) Limited cannot be held to be made applicable retrospectively and shall apply prospectively (Emphasis supplied)
Similarly, in the case titled as M/s Telenor Pakistan (Pvt) Ltd
Vs Federation of Pakistan and 4 others, (2017 PTD 2269) it has been held that: -
“10. In light of the above provisions and the
case law it is evident that Section 3(1)(d) of the Act imposes duties of excise
on services rendered in Pakistan which include Telecommunication Services (Entry
6 Table-2, Schedule 1st of the Act) and Rule 43 of the Federal Excise Rules,
2005 as well as S.R.O. No. 550(I)/2006 provide the procedure and mechanisms for
the collection of the referred duty. As already stated under Section 7 of the
Act, the excise duty on notified services can be recovered in the Sales Tax
Mode, otherwise, under the Rules. In this behalf, S.R.O. No. 550(I)/2006 dated
05.06.2006 specifically included Telecommunication Services hence, the Federal Excise Duty on
Telecommunication Services can be recovered in the Sales Tax Mode and in this
behalf all the relevant provisions of STA and the Rules framed under it are
applicable.” (Emphasis supplied).
In view of the above position of law and facts, the answers to the
question narrated in Para 8 above is in affirmative.
12. Now
we turn to the main controversy between the parties. It is the appellant’s case
that the GEPCO failed to upload the Annexure-C on the web portal by 10th
of the each month following the end of the tax period as required under Rule
18(3) of the Sales Tax Rules, 2006. Due to the said fault on the part of the
GEPCO, the appellant could not claim the input tax being charged on the
electricity bill in the relevant tax period. Conversely, it is the
department’s case that the GEPCO filed their sales tax returns along with
Annexure-C on 29.10.2020, 02.12.2020, 31.12.2020 and 31.01.201 in respect of
the tax periods September, 2020, October, 2020, November, 2020 and December,
2020 respectively wherein complete particulars of the appellant are reflecting.
So the appellant could claim input tax adjustment of GST amount of each month
of any of the six succeeding tax periods in terms of the proviso to sub-section
(1) of section 7 of the Sales Tax Act, 1990. But the appellant has not claimed
the same intentionally while filing the sales tax returns for the tax periods
under consideration and therefore, violated the provision of section 7(1) ibid. The appellant misstated the facts
while getting the interim relief from the High Court that PRAL system of FBR is
not verifying their claim. The
record shows that the appellant has consumed huge units of electricity during
the tax periods from July, 2020 to April, 2021 and declared nil sales in its
returns and therefore, causing huge loss to the Government Exchequer. The
analysis statement is marked as Annexure-B
with this order. However, the appellant has determined its minimum tax
liability under the FE Act, 2005 without showing actual sales in the returns
which is contrary to the provisions of the Sales Tax Act, 1990. As stated
above, the provisions of Sales Tax Act, 1990 would apply for collecting and
determining the tax liability. Therefore, it is essentially required to first
look into the scheme of the Sales Tax Act, 1990 to determine the exact tax liability.
It
can be seen from the legal framework that sales tax on goods under the Sales Tax Act, 1990 is paid under a value
added tax (VAT) mode. The purpose of imposing a tax under VAT mode is to ensure
that each taxpayer only pays sales tax on the value it adds to a product or
material. This is only possible if each taxpayer can deduct the input tax it
has paid on any goods consumed, or services received, by it for the purposes of
manufacturing, producing or marketing the goods it sells, from the output tax
payable by it on those goods. One of the essential features of VAT mode
taxation is the passing on the input tax, to be credited against output tax,
till the final output tax is borne by the ultimate consumer under section 7(1)
of the Act, 1990. Under this provision for the purposes of calculating its
final tax liability, a registered person is entitled to deduct input tax paid
or payable during a tax period for the purpose of making taxable supplies against the output tax paid or payable by it for
that tax period on those taxable supplies. The tax which is paid or payable by
the appellant at the time of purchases is called as "Input Tax" as
per section 2(14) of the Act and is adjustable against output tax as per
section 2(20) chargeable on the supplies of finished products. Thus, under the scheme of the Act, inter alia
a manufacturer is entitled to claim input tax credit for sales tax on purchases
paid or payable by it against the output tax on the sales of its products,
which is payable to the Federal Government, in order to calculate its final tax
liability under Section 7 of the Act. For ease of reference, the relevant
provisions of section 7 of the Sales Tax Act, 1990 is reproduced hereunder:-
“7.
Determination
of tax liability. – (1) Subject to the provisions of section 8
and 8B, for the purpose of determining his tax liability in respect of taxable
supplies made during a tax period, a registered person shall, subject to the
provisions of section 73, be entitled to deduct input tax paid or payable
during the tax period for the purpose of taxable supplies made, or to be made,
by him from the output tax excluding the amount of further tax under
sub-section (1A) of section 3 that is due from him in respect of that tax
period and to make such other adjustments as are specified in Section 9;
Provided that where a
registered person did not deduct input tax within the relevant period, he may
claim such tax in the return for any of the six succeeding tax periods.
………………….”
The proviso to the above section
clearly provides that if a registered person did not claim the input tax for
any reason within the relevant period, he is entitled to claim such tax in the
return for any of six succeeding tax periods. In the instant case, the
appellant could claim the input tax adjustment of GST amount while filing the
sales tax returns but it failed to do so which is a willful and blatant act of
tax fraud within the meaning of sub-section (37) of section 2 of the Sales Tax
Act, 1990.
13. It is settled legal position that the Sales
Tax Act, 1990 (“the Act”) is an
indirect tax and the burden of tax is ultimately passed on to the end consumer
whereas on the other hand, the Income Tax Ordinance, 2001 (“the Ordinance”) is a direct
tax which is directly to be charged on the income of a person. The schemes
of taxation in both the statutes are distinct and not relevant to each other.
We have considered the grounds of the appellant which mostly based on the
scheme of the Income Tax Ordinance, 2001. The case laws relied upon by the
appellant in these grounds also relates to the Ordinance and thus,
distinguishable and therefore, not relevant to the proposition under
consideration. In the instant case, the main thrust of arguments of the
appellant is that the GEPCO did not update on the web portal the Annexure-C by
10th of each month as required under rule 18(3) of the Sales Tax
Rules, 2006 therefore, the appellant could not claim the input tax charged on
electricity bill in the relevant tax period. This contention of the appellant
is misconceived and not tenable. The determination of tax liability and claim
of input tax has been given in section 7 of the Sales Tax Act, 1990. Similarly,
sales tax return is required to be filed under section 26 read with Rule 18 of
the Sales tax Rules, 2006. Rule 18 (3) inter alia provides that registered
person shall enter data
of supplies in Annexure-C and submit the said data by the 10th day
of the month following the end of the text period. As soon as, the registered person
(supplier) submits Annexure-C, the said data shall be immediately available to
the respective registered person (buyer)
so that the registered person
(buyer) shall load the data in Annexure-A
from “purchase data” to prepare his return and accordingly claim the input tax
in accordance with provisions of the sales tax act 1990. Sub-rule (5) of rule
18 provides that if the supplier of the registered person has not filed his
monthly sales tax return and federal excise return till the filing of own
return, he shall be communicated regarding his supplier who has not so far
declared supplies made to him in sales tax and federal excise return. He shall,
however, be allowed provisional adjustment of input tax against said invoices
but if the supplier fails to file his return by 10th day of next
month, registered person said inadmissible input tax credit shall be adjusted or
recovered in terms of clause (1) of sub-section (1) of section 8 read with
proviso two clause (i) of subsection (2) of section 7 of the Sales Tax Act,
1990. Further the proviso to sub-section (1) of section 7 clearly and expressly
provides that if a registered person did not claim the input tax within the
relevant tax period for any reason, he is entitled to claim such tax in the
return for any of six succeeding tax periods. Section 7 ibid is a beneficial provision of law in nature providing a
facility to a registered person to adjust input tax at the time of making
payment of output sales tax. Reliance may be placed on the judgment reported as
Sheikhoo
Sugar Mills Ltd Vs Government of Pakistan and others, (PTCL 2017 CL
217). Thus, a complete mechanism for determining the tax liability and claiming
of input tax is available in the statute and the rules made thereunder. The
appellant did not avail this procedure and file its returns contrary to the
provisions of law.
14. The
contention of the appellant that it paid the due tax in the relevant tax
periods under consideration and as such, the appellant cannot be asked to pay
any tax which according to them is contrary to Articles 23 and 24 of the
Constitution of Islamic Republic of Pakistan is flawed. The Annexure-B of this
order clearly suggest that the appellant has consumed huge units of electricity
during the tax periods from July, 2020 to April, 2021 and declared nil sales in
its returns and therefore, causing huge loss to the Government Exchequer which
is a willful and blatant act of tax fraud within the meaning of sub-section
(37) of section 2 of the Sales Tax Act, 1990.
It is incumbent upon the appellant
to declare the actual sales in its returns and to pay the tax thereon in
accordance with law whereas the appellant has been concealing the actual
transactions and avoiding the due tax as per law. Further the appellant has not
been paying the tax under section 8B of the Sales Tax Act, 1990 which provides
that the appellant shall not be allowed to adjust input tax in excess of ninety
per cent of the output tax for that tax period. So, the appellant has to pay
ten percent of the output tax along with its return which the appellant has not
been paying. Further the contention of the appellant that in a similar set of
circumstances, this Tribunal in the appellant’s own case vide order dated
25.01.2021 in STA No.249/LB/2019 accepted the plea of the appellant. We have
perused the said order; the facts of that case were that the appellant filed
the writ petition before the Hon’ble High Court on the ground that the GEPCO
charged GST through electricity bill for the month of December, 2018, which
does not reflect the amount of GST and as a consequence the appellant was not
able to claim input tax adjustment for the said amount in Annexure-A of sales
tax return, such error was accepted by the learned CIR that it was computer
error on the part of GEPCO whereas no such allegation is
there in the instant case. Thus, the case relied upon by the learned AR
is not relevant to the facts of the case. Further at the relevant time the
appellant was paying the sales tax under Special Procedure Rules, 2007.
Notwithstanding the aforesaid, if the contentions of the appellant are accepted
than the proviso to sub-section (1) of section 7 of the Sales Tax Act, 1990
would become redundant and it is settled law that the redundancy also cannot be
attributed to the legislature. Reference in this regard may be made to
Oil
and Gas Development Company Limited vs. Federal Board of Revenue and 2 others (2016
PTD 1675), Zaver Petroleum Corporation Limited Vs Federal Board of Revenue and
another (2016 PTD 2332), Dr. Raja Aamer Zaman Vs Omer Ayub Khan
and others, (2015 SCMR 1303) and Mst. Rooh Afza Vs Aurangzeb
and others (2015 SCMR 92). In order to avoid redundancy and an
interpretation leading to an absurd interpretation, every word and expression
has to be given meaning. It is settled principle of interpretation of a
statute, that the provisions must be given its true meaning by construing them
together in a harmonious manner. By applying these principles no other
conclusion can be drawn except to hold that the appellant was entitled to claim
the input tax adjustment of GST in the six succeeding tax periods in terms of proviso
to sub-section (1) of section 7. The
said proviso to section 7(1) inevitably has to be read conjunctively and the
legislature has intended to cover a wide range of eventualities.
15. For what has been discussed above, the appellant
has failed to point out any legal or factual infirmity in the impugned orders
and has not put forth any documentary or material evidence to rebut the
observations and findings of the learned Commissioner IR. We find no infirmity
in the impugned orders of the learned Commissioner IR and do not feel persuaded
to interfere with the treatment meted out by the authority. Accordingly, the
impugned orders are maintained and the appeals under reference are dismissed
being devoid of merit.
16. The AR (Roaster) is directed to send this
order to the learned Registrar (Judicial), High Court, Lahore for information
and record with reference to the directions in the writ petitions bearing No.
25391/2021 and 26680/2021.
17. This order consists of (27) pages and each
page bears my signature.
(M. M. AKRAM)
Judicial Member
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