Tuesday, May 25, 2021

M/s. Allah Din Steel & Re-rolling Mills, Daska. Vs CIR, Zone-I, RTO, Sialkot.

APPELATE TRIBUNAL INLAND REVENUE,
LAHORE BENCH, LAHORE
 
STA No.661/LB/2021
MA(AG)No.43/LB/2021
(Tax period December, 2020)
 
STA No.662/LB/2021
MA(AG)No.44/LB/2021
(Tax period September, 2020)
 
STA No.663/LB/2021
MA(AG)No.45/LB/2021
(Tax period October, 2020)
 
STA No.664/LB/2021
MA(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

      (MUHAMMAD TAHIR)
      Accountant Member

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