COMMISSIONER INLAND REVENUE VS MADINA COTTON GINNERS AND OIL MILLS, 2016 PTD-LAHORE-HIGH-COURT-LAHORE 643 (2015)

Sales Tax Act (VII of 1990)---

----Ss. 26, 33, 34, 3 ,6 & 47---Monthly return---Imposition of penalty for non-furnishing of monthly return---Interpretation of S.26 of the Sales Tax Act, 1990---Imposition of penalty for non-filing of monthly return where supply was zero rated---Penalty and additional tax imposed on taxpayer for non-filing of monthly return was set aside by Appellate Tribunal on the ground that there was no justification of imposition of penalty on tax payer by treating him as a non-filer since there was no loss of revenue as the taxpayers supply was zero rated----Validity----Words "tax due and paid" and "such other information", used in S.26 of the Sales Tax Act, 1990 showed intention of Legislature that if tax was paid the return shall be filed showing the tax due and paid coupled with any other information and if no tax is paid then the return shall be filed mentioning such other information for non-payment of tax and that it may be zero rated supply---Word "shall" when read together with expression "such other information" made it imperative to file return even if there was zero rated supply during tax period---Section 26 of the Sales Tax Act, 1990 made it compulsory upon the registered person to file return within due date irrespective of the fact that he paid the tax or not or that during the tax period the supply was zero-rated --Words "indicating the purchases and the supplies" used in S.26 of the Sales Tax Act, 1990 included supplies even at zero rate----Section 33 of the Sales Tax Act, 1990 unambiguously described non-filing of return within due date as an offence and provided that if any registered person did not file return as required under S.26 of the Sales Tax Act, 1990 he shall be subjected to penalty---By providing such penal provision of law, the intention of Legislature became all clear that irrespective of fact whether tax has been paid or not, filing the return was mandatory and non-submission of return within due date would amount to commission of an offence and it was imperative for the registered person to file a return and ignorance of the same carried punishment in shape of penalty---High Court observed that it was mandatory for a registered person to file return under S.26 of the Sales Tax Act, 1990 even in case of zero rated supply and non-submission of the same would hold such person liable under the provisions of S. 33 of the Sales Tax Act, 1990 and provisions of Ss.3, 6 & 26(1) of the Sales Tax Act, 1990 remained operative and functional and did not become redundant even in cases of zero rated supply----Reference was answered, accordingly.

Miss Zartaj Naeem for Applicant.

Muhammad Siddique Chohan for Respondent.

Date of hearing: 8th April, 2015.

JUDGMENT

ZAFARULLAH KHAN KHAKWANI, J.---This Reference under Section 47 of the Sales Tax Act, 1990 has been preferred by the Commissioner Inland Revenue Zone, Bahawalpur to resolve ambiguity arising out of decision of the Commissioner Inland Revenue (Appeals), Multan which was upheld by the Appellate Tribunal Inland Revenue, Lahore.

2.Background of the matter necessitating filing of this Reference is that the Assistant Commissioner, Inland Revenue E&C Unit-12, Bahawal Nagar received a report from the team of Directorate General of Revenue receipt audit, Lahore that the respondent, who was a registered person and was required to file monthly sales tax return, did not file the return for the month of July 2010 and thus violated sections 3, 6 and 26(1) of the Sales Tax Act, 1990 (hereinafter to be called the Act) and was liable to penal action under Sections 33 and 34 of the Act. The Assistant Commissioner issued a notice dated 20.1.2011 under section 11 of the Act to the respondent calling upon him to show cause as to why penal action as suggested above be not taken against him for non-filing of sales tax return for the tax period July, 2010. In response to the notice the respondent submitted a reply and also submitted sales tax return for the month of July 2010 to the Assistant Commissioner. However, he did not opt to arrange his representation before the Assistant Commissioner who after examining the available record held the respondent to have committed the offence under Section 33 of the Sales Tax Act, 1990 and imposed a penalty of Rs.5000/- prescribed in column (1) of the Table given in Section 33 of the Act along with additional tax/default surcharge, if any.

3.Feeling aggrieved of the above decision of the Asstt. Commissioner, the respondent filed an appeal before the Commissioner, Inland Revenue (Appeals), Multan who vide order dated 29.7.2011 accepted the appeal on the ground that there was no justification for imposition of the penalty treating the appellant as non-filer, especially when there was no loss of revenue as the appellant's supply was zero rated. The appeals filed by the Department before the Appellate Tribunal Inland Revenue Lahore were, however, dismissed. By not digesting the decisions made by the Commissioner as well as the Appellate Tribunal which created ambiguity relating to filing of returns under Section 26 of the Act, the Department has made this Reference to resolve the following questions of law:--

i)'Whether on the facts and circumstances of the case the learned ATIR was justified in upholding the order of the Commissioner Inland Revenue (Appeals) by ignoring the statutory provisions as laid down in subsection (1) of section 26 of the Sales Tax Act, 1990?

ii)Whether on the facts and circumstances of the case the learned ATIR was justified to hold the Order of CIR (Appeals) that penalty under Sections 33 and 34 of the Sales Tax Act, 1990 cannot be imposed where supply is zero rated?

iii)Whether the provisions of Sections 3, 6 and 26(1) of the Sales Tax Act, 1990 are redundant with respect to zero rated cases.

4.We have considered the queries which crept into mind of the applicant as a result of decisions of lower appellate forums giving rise to anomalous, situation. We would like to first answer question No. 3 raised by the applicant.

5.Section 26 of the Sales Tax Act, 1990 requires a registered person to furnish a return in the prescribed form regarding purchases and the supplies made during a tax period. The said provision of law runs as under:--

"26. Return-(1) Every registered person shall furnish not later than the due date a true and correct return in the prescribed form to a designated bank (or any other office specified by the Board, indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed."(underlining and emphasis are ours).

The above quoted text was made part of the Statute by substituting the earlier text of Section 26 through the Finance Act, 1996 (IX of 1996). Before analyzing this substituted text, it would be advantageous also to reproduce erstwhile text of Section 26 which was as under:--

"26. Monthly Return.---(1) Every registered person shall furnish not later than the due date a true and correct return in the prescribed form to the local Sales Tax Office indicating the purchases and the supplies made during a tax period and the tax paid in respect of that period." (underlining and emphasis are ours).

Putting both (existing and erstwhile) texts of Section 26 of the Act in jexta position, would expose that before substitution the registered person was required to furnish monthly return indicating the purchases and the supplies made during a tax period and the tax paid in respect of that period. The word "paid" may imply that if no tax was paid during the tax period may be because of supply zero rate, there might be no need to file monthly return. However, the substitution/addition of the "the tax due and paid" and "such other information", shows the intention of legislature that if tax is paid the return shall be filed showing the tax due and paid coupled with any other information and if no tax is paid then the return shall be filed mentioning such other information for non-payment of tax may it be zero rated supply. Word "shall" when read together with expression "such other information" makes it imperative to file return even if there is zero rated supply during tax period. Thus the existing provision of law makes it compulsory upon the registered person to file return within due date irrespective of the fact that he paid the tax or not or that during the tax period the supply was zero rated.

6.Section 33 of the Act unambiguously describes non-filing of return within due date as an offence. Section 33(1) provides that if any registered person does not file return as required under Section 26, he shall be subjected to penalty of Rs.5000/-. It has, however, been provided that in case a person files a return within fifteen days of the due date, he shall pay a penalty of one hundred rupees for each day of default. By providing this penal provision of law, the intention of legislature becomes all the more clear that irrespective of fact whether tax has been paid or not, filing the return is mandatory and non submission of return within due date would amount to commission of an offence and it is imperative for the registered person to file a return and ignorance of the same carries punishment in shape of penalty.

7.Once we have answered question No. 3 it has become easy to resolve questions Nos. 1 and 2 that the learned Appellate Tribunal was not justified to dismiss appeals of the department/applicant by upholding the finding of the Commissioner that since no loss of revenue was caused, therefore, the registered person may be treated non-filer because of zero rated supply. It may also be mentioned that words "indicating the purchases and the supplies" of Section 26 include supplies even at zero rate. We have not been able to find out any provision in the Sales Tax Act, 1990 that if the supply is zero rate then no return need be filed or that if no loss of revenue occurs then there is no need to impose penalty. The respondent in view of the violation of mandatory provision of law, was liable to be imposed penalty and there was no discretion left with Revenue authorities to allow any exception. In the light of discussion made above, such finding of the Commissioner was alien to law and the learned Appellate Tribunal has erred in law while upholding the same.

8.As we have declared that it is mandatory for a registered person to file return under Section 26 of the Act even in case of zero rated supply and non-submission of the same would hold him liable under the provisions of Section 33 of the Act, therefore, we resolve the questions of law forwarded through this Reference as under:--

i)The provisions of Sections 3, 6 and 26(1) of the Sales Tax Act, 1990 remain operative and functional and do not become redundant even in cases of zero rated supply.

ii)The learned Appellate Tribunal Inland Revenue Lahore was not justified in upholding the order of the Commissioner Inland Revenue (Appeals) in derogation of statutory provisions of section 26 of the Sales Tax Act, 1990 and that

iii)The learned ATIR was not justified to uphold the order of the Commissioner Inland Revenue (Appeals) that penalty under Sections 33 and 34 of the Sales Tax Act, 1990 cannot be imposed where supply is zero rated.

KMZ/C-106/LOrder accordingly.