APPELLATE TRIBUNAL INLAND REVENUE, BENCH-I, ISLAMABAD
STA
No.474/IB/2021
& MA
(Stay) No.963/IB/2021
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M/s Madinah Cloth
Depot, Minar Road, Lala Rukh Wah Cantt. |
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Applicant |
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Vs |
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Commissioner Inland
Revenue (Cantt Zone), RTO, Rawalpindi. |
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Respondent |
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Appellant By: |
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Mr. Asad Azam, FCA |
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Respondent By: |
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Mr. Khawar Siddique,
DR |
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Date of Hearing: |
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17.11.2021 |
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Date of Order: |
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17.11.2021 |
ORDER
M. M. AKRAM (Judicial
Member):
The titled appeal has been filed by the appellant/registered person
directly before this Tribunal under section 46(1)(b) of the Sales Tax Act, 1990
(“the ACT”) against an Order for compulsory
registration C.No.CIR(Cantt Zone)/386 dated 24.09.2021 passed by the learned
Commissioner Inland Revenue, Cantt Zone, Tax House, Rawalpindi under section 14
of the Act, read with Rule 6 of Chapter-1 of Sales Tax Rules, 2006 on the
grounds as set forth in the memo of appeal.
2. Brief facts giving rise to the appeal are
that the appellant Sh. Muhammad Ejaz having CNIC No.37406-2645896-1 proprietor
M/s Madinah Cloth Depot, Minar Road, Lala Rukh Wah Cantt are liable to be
registered being a Tier-1 retailer under section 14 since July 2018 read with
section 2(43A) (e) of the Act and under Rule 5 of Chapter-1 of Sales Tax Rules,
2006 for the reasons that the shop/business premises measures more than one
thousand square feet in area. Accordingly, a notice vide dated 14.09.2021 for
compulsory sales tax registration was issued to Sh. Muhammad Ejaz, allowing
applying for sales tax registration voluntarily. However, Sh. Muhammad Ejaz
failed to get sales tax registration. Resultantly, the learned Commissioner
Inland Revenue (CIR) in the exercise
of the power conferred by section 14 of the Sales Tax Act, 1990 read with Rule
6 of the Sales Tax Rules, 2006 compulsory registered the appellant with
effect from July, 2018 vide impugned order dated 24.09.2021. Felt
aggrieved, the appellant preferred an appeal before this Tribunal and has
assailed the impugned order on a number of grounds.
3. This case came up for hearing on
17.11.2021. The learned AR confined himself to ground no.4 and contended that
the learned CIR seriously erred in the compulsory registration of the appellant
from back date i.e July, 2018. He explained that there is no provision
available in the Act which empowers the CIR to register any person from past
tax periods. He, therefore, pleaded that the impugned order to such extent may
be modified and declared contrary to the provisions of the Act and the Rules
made thereunder. On the contrary, the learned DR opposed the submission of the
AR and contended that the learned CIR has the power to register a person from
the date of the first taxable supply made by him/them. He, therefore, prayed
that the appeal be dismissed.
4. We have heard both the parties and perused
the record. Under the provisions of the Act, every person engaged in making
taxable supply including zero-rating supply in the course or furtherance of any
taxable activity, if already not registered, is required to be registered in
any of the specified categories enumerated in section 14. Sub-section (3) of section
14 provides that the sales tax registration shall be regulated through rules
notified by the Board (FBR). The Board in the exercise of the power conferred
inter alia by the said subsection, prescribed the rules known as Sales Tax
Rules, 2006. Chapter-1 of the said rules prescribes the procedure for
registration, compulsory registration, and de-registration. Rule 6 of the said
rules specifically prescribed the procedure for compulsory registration to any
person. According to sub-rule (1) of rule 6, the Commissioner Inland Revenue or
any other officer authorized by the Board has the power to issue notice to such
person who has not applied for registration in the form set out in the Form
STR-6. The whole reading of rule 6 of Sales Tax Rules, 2006 makes it clear that
only the Commissioner Inland Revenue has conferred the power to pass an order
of compulsory registration. In the instant case, the impugned order was
admittedly passed under section 14 read with Rule 6 of the Sales Tax Rules,
2006 as notified vide SRO 555(I)/2006 dated 05.06.2006 and amended vide SRO
494(I)/2015 dated 30th June, 2015. The following specific question
emerge from the record and the ground taken by the appellant for our
determination:-
Whether the Commissioner Inland Revenue (CIR) has the
power to compulsory register a person under section 14 of the Sales Tax Act,
1990 read with Rule 6 of the Sales Tax Rules, 2006 from
the date he became liable for registration?
To
answer the question, it would be more beneficial to first reproduce hereunder
the relevant provisions of law that are relevant to the issue: -
Before substitution of Rule 6 in the Sales Tax
Rules, 2006, Section 19 of the Sales Tax Act, 1990 provides for compulsory
registration and reads as follows:
“Section
19. Compulsory Registration: - If a
person who is required to be registered under this Act does not apply, for
registration and the Collector or such other officer as may be authorized by
him in this behalf, after such inquiry as he thinks fit, is satisfied that such
person was required to be registered, the Collector or such other officer shall
register that person and that he shall be deemed to have registered from the
date he became liable for registration [:]
Provided that if it is subsequently established that a person who was not
liable to be registered but was wrongly registered under this section due to
inadvertence, error, or misconstruction, the Collector shall cancel such
registration and such person shall, subject to the provisions of section 3B,
not be liable to pay any tax, additional tax or penalty under any of the
provisions of this Act or rules made thereunder”.
“Section
14 Registration: - (1) Every person engaged in making taxable supplies in
Pakistan, including zero-rated supplies, in the course or furtherance of any
taxable activity carried on by him, falling in any of the following categories,
if not already registered, is required to be registered under this Act, namely:
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(a) ……………………………….;
(b) ……………………………….;
(c) ……………………………….;
(d) ………………………………;
(e) ……………………………….; and
(f) a person who is required, under any other
Federal law or Provincial Law, to be registered for the purpose of any duty or
tax collected or paid as if it were a levy of sales tax to be collected under
the Act;
(2)…………………………………..
(3) The
registration under this Act shall be regulated in such manner as the Board may,
by notification in the Official Gazette, prescribe.
Rule 6.
Compulsory registration: - (1) If a
person, who is required to be registered under the Act, does not apply for
registration and the Commissioner
Inland Revenue or any other officer, as may be authorized by the Board, after
such inquiry as deemed appropriate, is satisfied that such person is
required to be registered, he shall issue notice to such person in the form set
out in Form STR-6.
(2) In case the Commissioner receives a written reply from the said person
within the time specified in the notice under sub-rule(1), contesting his
liability to be registered, the Commissioner shall grant such person
opportunity of personal hearing, if so desired by the person, and shall
thereafter pass an order whether or not such person is liable to be registered
compulsorily. Copy of the said order shall invariably be provided to that
person. Where the Commissioner passes the order for compulsory registration, he
shall cause the said person to be registered through a computerized system.
(3) Where the person to whom a notice is given
under sub-rule (1), does not respond within the time specified in the notice, the Commissioner shall cause to compulsorily
register the said person through the computerized system under intimation
to the said person through courier service.
(4) A person registered compulsorily
under sub-rule (2) or (3) is required to comply with all the provisions of the
Act and rules made thereunder from the date of compulsory registration,
and in case of failure to do so, the
Commissioner Inland Revenue having
jurisdiction may issue a notice under section 25 of the Act for production of
records or documents and appearance in person to assess the amount of sales tax
payable under section 11 of the Act, and take any other action as required
under the law against such person:
Provided that if it is subsequently established that a person was not liable to be registered but was wrongly registered under this rule due to inadvertence, error, or misconstruction, the Commissioner shall cause to cancel his registration through the computerized system. In case of such cancellation of registration, such person shall not be liable to pay any tax, default surcharge, or penalty under the Act or rules made thereunder, subject to the conditions, limitations, and restrictions prescribed under section 3B of the Act.” (Emphasis supplied)
It
can be seen from the combined reading of the above provisions of law which
clearly provides that before the Finance Act, 2004,
section 19 of the Act, provided for compulsory registration. In the said
section it was clearly provided that where a person who was required to be
registered under the Act did not seek registration, the Collector (now
Commissioner IR) would compulsorily register such person and the said person
would be deemed to be registered from the date he became liable for
registration. In Fatima Sugar Mills Ltd. v. Collector, GST
2003 CL 413 it was, inter alia, held that a person was liable to be registered
under the Act, but not actually registered, was to be construed as a registered
person since under section 2(25) the definition of the term “registered
person” included the persons actually registered and those who were liable
to be registered. This interpretation is also quite in line with the express
provision contained in section 19 (before its omission by the Finance Act,
2004) whereby persons who were liable to be registered and not registered were
deemed to have been registered from the date they become liable to be
registered. However, after omission of section 19 of the Act through Finance
Act, 2004 and thereafter substitution of rule 6 by notification
No.S.R.O.494(I)/2015 dated 30th June, 2015 in the Sales Tax Rules,
2006, the sub-rule (4) of rule 6 ibid clearly and expressly provides
that the provisions of the Act and the Rules made thereunder would apply from
the date of compulsory registration. Thus, the law has now totally been
changed. It is a settled principle of statutory interpretation that the
applicability of enactment can best be adjudged from its expressed content and
implied intent. When the enactment itself provides for the same to have effect
from a particular point in time, the express command of the legislature is to
be abided, interpreted and applied accordingly. In the present case, the
sub-rule (4) of rule 6 ibid provides:
“(4) A person
registered compulsorily under sub-rule (2) or (3) is required to comply with
all the provisions of the Act and rules made thereunder from the date of
compulsory registration, and in case of failure to do so, the Commissioner Inland Revenue having jurisdiction may issue a notice
under section 25 of the Act for production of records or documents and
appearance in person to assess the amount of sales tax payable under section 11
of the Act, and take any other action as required under the law against such
person:”
Sub-rule (4) of rule 6, highlighted above, clearly and expressly
provides for its provisions to take effect from the date of compulsory
registration. This being so, there can be no cavil to its applicability
commencing from the date of compulsory registration and not for any tax period
prior thereto. It is settled law that amendments are made
in the statute to bring a change in the law. Reliance may be placed on the judgment of the
Hon’ble Supreme Court of Pakistan titled as Commissioner of Income
Tax/Wealth Tax Companies Zone-II, Lahore Vs M/s Lahore Cantt
Cooperative Housing Society, Lahore and 7 others (2009 PTD 799). In the said judgment it was
held by the Hon’ble Supreme Court that the societies are not covered by the definition
of the Company as provided in section 2(16)(b) of the repealed Income Tax
Ordinance, 1979. While enacting the
Income Tax Ordinance of 2001, such Cooperative Societies were
included in the definition of Company. This subsequent
inclusion of Cooperative Societies by a positive act of
legislation is conclusive proof of the fact that the same
were excluded in the earlier enactment. Equally in Abdul
Razzaq v. Muhammad Sharif, PLD 1997 Lahore 1, it has been held that
where power is given to do a certain thing in a certain way, then that thing
must be done in that way or not at all and all other methods of performance not
so prescribed are necessarily forbidden. Thus, the effect of the compulsory
registration of a person cannot be made from the date he became liable for
registration.
5. For what has been
discussed above, the answer to the question is in the negative. The effect of
the compulsory registration would be from the date of the order. In the instant
case, the impugned order was passed on 24.09.2021 whereby the appellant was
registered compulsorily therefore, the effect of registration would be considered
from the said date and the appellant is required to comply with the provisions
of the Act and the Rules made thereunder from the said date and onwards.
Accordingly, the impugned order passed by the learned CIR is modified to this
extent. Since the main appeal of the appellant has been disposed of, therefore,
the miscellaneous application for stay has become infructuous.
6. This order consists
of (07) pages and each page bears my signature.
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Sd/-
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Sd/-
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This case is fit for
reporting as it settles the principles highlighted above.
(M.
M. AKRAM)
JUDICIAL MEMBER
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