FATIMA SUGAR MILLS LIMITED vs APPELLATE TRIBUNAL, INLAND REVENUE, LAHORE Ss

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FATIMA SUGAR MILLS LIMITED VS APPELLATE TRIBUNAL, INLAND REVENUE, LAHORE Ss. 2(47) & 2(28)---Sales Tax Rules, 2006, Chapt-1, R.4---Income Tax Ordinance (XLIX of 2001), Ss. 236G & 236H [inserted through Finance Act, 2013] & Sched. I, Pt. IV, Div. XIV---"Whole-seller" and "retailer"---Scope---Treating a person as "retailer" merely on account of non-registration as "wholesaler"---Sugar Mill (being a manufacturer) was served (in year 2015) with Show-Cause Notice relating tax-year to 2014 ('the notice') on the basis of the then newly inserted Ss. 236G & 236H, with the allegations that it failed to collect tax on sales made to its wholesalers / retailers ('recipients') at the rate of 0.5% of the gross amount of sales---Notice culminated into order-in-original, concluding that sales made to unregistered persons are to be treated as supply to retailer , which findings were maintained by the Appellate Tribunal Inland Revenue---Applicant / Sugar Mill assailed findings/orders passed by two fora contending that a person could only be treated as wholesaler if he had been authorized to act as an agent for sale and that unregistered persons/buyers must be treated as retailers and cannot be treated as wholesalers---Validity---Various recipients (the 'recipients') of supplies of the applicant were treated as "retailer" on account of failure to register as "wholesaler"---The requirement to register as "wholesaler" or "retailer" depending upon their particular activity was separately given in Chapt. I of the Sales Tax Rules, 2006 ('Rules')---Two forums below, relying on the provisions of Ss. 2(47) & 2(28) of the Sales Tax Act, 1990, as well as R. 4 of the Sales Tax Rules, 2006, reached the conclusion that the recipients were to be considered as "retailers" and applicant was required to collect 0.5% tax under S. 236H of the Ordinance, 2001---Word "wholesale" has specific commercial meaning of buying goods and selling them in large quantities to traders who then sell the goods in smaller quantities---Even otherwise, a plain reading of provisions under Ss. 2(47) & 2(28 ) of the Sales Tax Act, 1990, as well as R. 4 of the Sales Tax Rules, 2006, reflects that legislature envisaged "wholesalers" and "retailers" as two distinct persons depending on their characteristics of business and quantity of the commodities they deal with as well as the category of the recipients of such supplies---"Retailer" as per the then S.2(28) of the Act, 1990, is a person supplying goods to general public for consumption purposes or end-consumers; the proviso to the same further clarified the position even if someone combines the business of retail with some other nature of business---The consequences, if any person fails to register himself as "wholesaler" or "retailer", as the case may be, were given in the Ordinance, 2001 at the relevant time, which were also ignored by the assessing officer---Supplies to a person having "wholesaler" status when it failed to register had result of collection at higher rate of 0.2% as provided in Division XIV, Pt. IV of Sched. I of the Ordinance, 2001---Treating a person as "retailer" merely on account of non-registration as "wholesaler", without first assuming an exercise of ascertaining his actual status is unsafe---Thus, the proposed questions were answered in affirmative and in favour of the applicant and against the Department---High Court set-aside the impugned orders passed by the Appellate Tribunal Inland Revenue, and the case was remanded to the assessing officer to ascertain the actual position or status of the recipients---Reference Application, filed by Sugar Mill (Manufacturer), was disposed of accordingly.

FATIMA SUGAR MILLS LIMITED vs APPELLATE TRIBUNAL, INLAND REVENUE, LAHORE Ss — 2025 PTD 148 LAHORE-HIGH-COURT-LAHORE

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