The waiver from payment of default surcharge and penalty under the provisions of Sales Tax Act, 1990 and Federal Excise Act, 2005 could be claimed by the taxpayers under the amnesty scheme notified through SRO 648(I)/2011 dated June 25, 2011 even if principal amount of sales tax and FED was paid before the issuance date of said SRO.
Sources told Business Recorder here on Wednesday that the case of STA No 701-702/LB/2011 and FEA No 13-14/LB/2011 on common legal issue of Waiver/Amnesty for payment of Default Surcharge and Penalty were decided by Appellate Tribunal Inland Revenue, Lahore Bench, Lahore "ATIR" with the observation that the appellant having paid the amount of sales tax and SED before the issuance of the said SRO, was clearly entitled to the benefit of the amnesty contemplated in the SRO 648(I)/2011. To hold otherwise would be negation of justice, fair and equal protection of law. The appellant having paid the sales tax and SED due from him is as much entitled to the amnesty contemplated in the SRO 648(I)/2011 on June 25, 2011 as any other taxpayer who pays the due taxes after issuance of the SRO 648(I)/2011 on June 25, 2011.
Resultantly, a person placed in similar factual situation either before or after the issuance of the beneficial legislation, shall stand equally benefited from the amnesty provisions. A prominent tax lawyer Waheed Shahzad Butt of Tax Resolution Services Company told this correspondent about the legal implications of these sales tax/federal excise appeals decided by the ATIR. Default surcharge and penalty orders have been passed against the appellant for late deposit of sales tax and Special Excise Duty (SED) for the tax periods May 2009 and June 2009. Aggrieved of the said orders, the appellant filed appeals under the relevant provisions of Federal Excise Act, 2005 and Sales Tax Act, 1990 before the Commissioner Inland Revenue, Appeals.
The grievance of the appellant has not been accepted by the Commissioner Appeal. Whole of the amount of sales tax and SED has already been paid and it is only the default surcharge and penal amount which is subject matter of appeals. It is argued that the appellant is fully entitled to the benefits of amnesty granted by the Federal Board of Revenue (FBR) vide SRO 648(1)/2011 dated June 25, 2011 whereby it exempted whole amount of penalty and default surcharge in case the overdue amount of sales tax and FED/SED was to be deposited on or before June 30, 2011.
The respondent-revenue objects the maintainability of appeals on the ground that appellant is not entitled to claim benefits of amnesty granted by the FBR and if the claim is accepted it means all additional tax and penalty recovered since 1990 shall be returned back to the registered person.
Tax expert further explained that show cause notices in this case were issued by the Respondent-Department much after the deposit of sales tax and SED by the appellant at its own. The amount of Sales tax and SED was deposited by the appellant voluntarily without any intimation and show cause notice from the Respondent but department remained silent during the whole period. When the due amount has already been paid by the appellant the department comes into play and initiate default surcharge and penalty proceedings which is highly unjust.
The act of Respondent-Department not to follow the directions of superior appellate authorities is illegal. In case of matter under consideration, the issue has already been settled by Lahore High Court and Appellate Tribunal, while enumerating the principles governing provisions of amnesty for payment of Penalty and Additional tax. The appellate forums categorically discussed the issue in principle, he maintained.
Waheed elaborated that the appellant has sought support from the SRO 648(I)/2011 dated June 25, 2011 which provides amnesty to the taxpayers on fulfilment of certain conditions. According to the said SRO, which is issued under laws of sub-section (4) of section 16 of the Federal Excise Act, 2005 and Section 34(A) of the Sales Tax Act, 1990. The Federal Government is pleased to exempt the whole of amount of default surcharge and penalty payable in respect of the payable sales tax and FED (SED) subject to payment of taxes up to June 30, 2011.
The ATIR announced: "After hearing the learned counsel for the parties we are not persuaded to agree that the amnesty SRO 648(I)/2011 dated June 25, 2011 is not applicable to the case of the present appellant. It needs to be noted that the amnesty contemplated in that SRO thereof was also available to cases of taxpayers who had already discharged their liability. If the interpretation of that S.R.O. as made by the Revenue authorities is accepted then it is likely to create an anomalous situation. It is that whereas the persons who had already paid the amount due will be deprived of the amnesty while those who will pay that amount after the issuance of SRO 648(I)/2011 on 25-06-2011 will be spared of the default surcharge and penalty. In other words a person who had already paid the due tax to the public exchequer will be burdened with default surcharge and penalty while the one who does so after issuance of that notification and having withheld the amount of the tax due from him in the meanwhile will be rewarded by allowing exemption from penalty and levy of default surcharge. This could never be the intention of any superior or subordinate legislation. A person placed in similar actual situation cannot be discriminated against merely for the reason that he has first to be a continuous defaulter on a particular date of grant of amnesty in order to avail the same.
The appellant having paid the amount of sales tax and SED before the issuance of the said SRO but also much before the issuance of show-cause notices from the department, was clearly entitled to the benefit of the amnesty contemplated in the SRO 648(I)/2011 on 25-06-2011. To hold otherwise would be negation of justice, fair and equal protection of law. It needs to be brought home that the amnesty granting legislation both superior as well as subordinate needs to be construed liberally so that it does not either trap an unwary taxpayer or else otherwise succeeds in taking away with the other hand while giving it by the one. The appellant having paid the sales tax and SED due from him is as much entitled to the amnesty contemplated in the SRO 648(I)/2011 on 25-06-2011 as any other taxpayer who pays the due taxes after issuance of the SRO 648(I)/2011 on 25-06-2011. To hold otherwise would result in the situation as noted above.
Therefore, without any hesitation we will allow these appeals by setting aside the orders of the Revenue authorities as well as the impugned order of the Commissioner Inland Revenue Appeals, Gujranwala. Resultantly the default surcharge as well as the Penalty imposed against the appellant shall be remitted "in toto," Waheed referred to the ruling of the ATIR.