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S.T.A. No.751/LB of 2003, decided on 15th December, 2007.

----S.73---Stamp Act (II of 1899), S.2(14)---Payment exceeding Rs.50,000 made to seller through Bank Credit Slip against supplies received by buyer during period from 1-7-2000 to 15-2-2001---Validity--Bank Credit Slip was used for depositing in Bank cash or banking instruments in account of depositor or any other account holder, thus, same was a receipt/evidence thereof---Buyer was required to make payment exceeding Rs.50,000 by crossed cheque, bank draft or pay order or any other banking instrument showing its transfer in favour of seller from business account of buyer---Payments of less than Rs.50,000 were required to be indicated in cash book and other books of account---Buyer while making payment exceeding Rs.50,000 against supplies received was required to withdraw amount from cash book, deposit in his business account in Bank and issue crossed cheque or arrange its payment through any other banking instrument (i.e. demand draft or pay order etc.) showing its transfer in favour of seller from business account of buyer in Bank---Source of such cash amount paid by buyer was not r known---Payment exceeding Rs.50,000 made through Bank Credit Slip would not meet requirements of S.73 of Sales Tax Act, 1990 in vogue during such period---Principles. Mian Ashiq Hussain for Appellant. Muhammad Akmal, Auditor for Respondent. Date of hearing: 4th December, 2007.

This Sales Tax Appeal is directed against an order-in-original dated 16-4-2003 passed by the Collector (Adjudication), Faisalabad whereby liability was adjudged against the appellant on different accounts. 2. Facts of the case briefly stated are that during the audit of the registered person the discrepancies regarding violation of section 73 suppression of supplies input claimed without purchase invoices and value addition were detected which were confronted to the appellant by issuing show-cause notice dated 11-7-2002 which was contested by the registered person. It was stated in the reply to the notice with regard to violation of section 73 that the payments were made directly to the account of the seller i.e. Messrs Rafan Maiz products on the Bank credit slips, therefore, no violation is made out. The other charges were also contested by the appellant. The adjudicating officer after considering the submissions and perusing the record decided issues Nos. 3 and 4 in favour of the appellant while under issue No. 2 after finding the procedural irregularity the main charge was dropped and the penalty of Rs.25,000 was imposed. However under issue No. 1 the violation of section 73 he was of the opinion that the conditions of section 73 were not complied with resulting into the demand of Rs. 1,10,20,826. Feeling aggrieved by this finding of the adjudicating officer present appeal has been filed in this Court. 3. We have considered the submissions made by the parties and perused the record. The stand of the appellant on issue of violation of section 73 is that they had made payment directly into seller account by Bank credit slips which tantamount fulfilling the requirement of banking channel. This submission has been examined in the light of pre-amended section 73 of the Sales Tax Act, 1990 which provides inter alia the words of any other banking instrument. In our opinion the Bank credit slip also constitutes and is included in the banking instruments along with the cheques, pay orders, demand drafts for the reason that without filling the credit slip no amount can be deposited with the Bank. By depositing the cash in the seller"s account after filling the Bank credit slip the appellant had fulfilled the requirements of section 73. In the circumstances the finding of the adjudicating officer that requirements of section 73 were not fulfilled are not based on proper appreciation of the section itself, therefore, are liable to be set aside. 4. For the fore-going reasons, the appeal is accepted by setting aside the impugned order and it is held that the appellant is not liable to pay the adjudged amount. Parties be informed through registered post or by UMS. 5. File be consigned after completion.

I have examined the case record and do not find myself in agreement with the findings given by my learned brother Member (Judicial). The provisions of section 73 of the Sales Tax Act, 1990 are mandatory and not directory as consequences for non-compliance have been given. Section 73 in vogue during the period under reference says that any transaction excluding utility bills in respect of which payment is made on or after the first day of July, 2000, for a sum exceeding fifty thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft or pay order or any other banking instrument showing transfer of the payment in favour of seller from the business account of the buyer shall not be admissible for the purpose of input tax credit, adjustment or deduction as refund repayment or draw back or zero rating etc. of tax under this Act. 2. By depositing the cash in the seller"s account after filling the Bank credit slip does not constitute compliance of section 73. The amount should be transmitted from the business account of the buyer. I, therefore, tend to agree with the finding given by the Collector (Adjudication) and dismiss the appeal being bereft of legal force. 3. Since there is difference of opinion, the file may be put to the Honourable Chairman for his third opinion on the following point:---

(1) Whether in the facts and circumstances stated in the above judgment, the compliance of section 73 of the Sales Tax Act 1990 has been made or not.

This case has been referred to me for opinion as a referee member after difference of opinion between the learned Members of the Division Bench of Appellate Tribunal. The question framed for consideration of referee member by the two learned Members of the Division Bench is reproduced below:--

"Whether in the facts and circumstances stated in the above judgment, the compliance of section 73 of the Sales Tax Act, 1990 has been made or not." 2. In this case the sales tax authorities observed that the appellant made payment in the form of cash into the seller"s account in the Bank through Bank credit slips. The sales tax auditors were of the view that payment was not made through banking instrument as required under the provisions of section 73 of the Sales Tax Act, 1990 and input tax adjustment was inadmissible. The learned adjudicating officer decided the case against the registered person/appellant. During appeal proceeding the learned Member (Judicial) who initiated the judgment observed that deposit of cash through Bank credit slips directly in the Bank account of the seller constitutes payment through banking instrument as the law also allows payment through other banking instruments along with cheques, pay orders, demand drafts etc. The learned Member (Judicial) was of the opinion that without filling the credit slip no amount can be deposited with the Bank and by depositing cash in the seller"s account after filling the Bank credit slip, the appellant had fulfilled the requirements of section 73 or the Sales Tax Act, 1990. 3. The learned Member (Technical), however, differed with the opinion of learned Member (Judicial) and observed that provisions of section 73 of the Sales Tax Act, 1990 are mandatory and all payments exceeding rupees fifty thousand were to be made in favour of the seller from the business account of the buyer by a banking instrument. It was observed by the learned Member (Technical) that depositing cash in the seller"s account after filling the Bank credit slip does not constitute compliance of section 73 ibid. 4. The relevant section 73 of the Sales Tax Act, 1990 in vogue during the relevant period (1-7-2000 to 15-2-2001) was as under:--

"Certain transactions not admissible:---Notwithstanding anything contained in this Act or any other law for the time being in force, any transaction (excluding utility bills) in respect of which payment is made on or after the first day of July, 2000 for a sum exceeding fifty thousand rupees otherwise than by a crossed cheque drawn on a Bank or by a crossed Bank draft or pay order (or any other banking instrument showing transfer of the payment in favour of seller from the business account of the buyer) shall not be admissible for the purposes of input tax credit, adjustment or deduction or refund, repayment or draw back or zero rating etc. of tax under this Act." 5. The learned counsel for the appellant during the course of hearing before me contended that the learned Collector (Adjudication) decided the case without considering the amendment inserted in section 73 on the 5th September, 2000 relevant to the tax period July, 2000 to February, 2001 i.e. or any other banking instrument showing transfer of payment in favour of seller from the business account of the buyer. It was contended that the Sales Tax Act, 1990 does not define instrument hence its definition in the relevant law should be taken for the purposes of this section. It was contended that according to section 2(14) of the Stamp Act, 1899, the instrument includes every document by which any right or liability is, or purports to be created, transferred, -limited, extended, extinguished or recorded. Since pay-in slip is record of right and liability of the taxpayer in the present case, it is instrument used by the Bank and it is fully covered in the concept of banking instrument and qualified for credit under section 73 of the Sales Tax Act, 1990. It was contended that the requirement of transfer of funds from specified Bank account of the buyer to specified Bank account of the supplier was made applicable with effect from 1-7-2003. It was further contended that business account was not defined in the Act and it will be understood in the common parlance that all the funds used by the taxpayer in his business i.e. cash books, ledger etc. were business account. Hence, the case of the appellant is qualified for credit under section 73 ibid. 6. The learned sales tax auditor who appeared on behalf of the respondents opposed the contentions of learned counsel for the appellant and contended that cash amount was deposited in the account of seller with the bank through the bank credit slips which is not a banking instrument. It was contended that all known banking instruments, cheques, pay orders and demand drafts are deposited in the bank by filling the bank credit slips. It was contended that bank credit slip is a mode of deposit of cash and other banking instruments in the bank and it is not banking instrument in itself. The learned D.R. contended that if the viewpoint of learned counsel is accepted, it would mean, the deposit of payment through banking instrument i.e. cheque, demand draft, pay order etc. made on bank credit slip would be deposit of banking instrument in the bank through an other banking instrument i.e. the bank credit slip. 7. I have considered the contentions of both the parties and observed that according to section 73 of the Sales Tax Act, 1990 in vogue at the time, the appellant was required to make payment exceeding rupees fifty thousand by a crossed cheque drawn on a bank or by a crossed bank draft or pay order or any other banking instrument showing transfer of payment in favour of the seller from the business account of the buyer. The bank credit slip is used for depositing cash or for depositing banking instrument i.e. cheque, demand draft, pay order etc. in the bank. The bank credit advice is a sort of receipt/evidence of deposit of a banking instrument i.e. demand draft, pay order or cheque in the bank in favour of some account holder. Bank credit slip is also used for the deposit of cash in the account of depositor or any other account holder. The bank credit slip, in my views is a receipt/evidence of deposit of cash or banking instruments in the bank in favour of any account holder. 8. The learned counsel contended that during the period, the appellant was allowed to make payment through any other banking instrument showing transfer of payment in favour of seller from the business account of buyer. It was further contended that the Sales Tax Act, 1990 does not define instrument and the definition instrument as contained in the Stamp Act, 1899 is relevant and fully cover the concept of banking instrument. It was further contended that as the term business account was not defined, therefore, the account maintained by the appellant was business account for the purposes of section 73 of the Sales Tax Act, 1990. I have carefully considered the contentions of both the parties and observed that cash was deposited in the bank in favour of supplier through bank credit slip. The source of this cash amount is not known. The transfer of payment in favour of the seller from the business account of the buyer was the instrument of law. There is no doubt about the fact that the appellant must be making supplies for the amounts less than Rs.50,000 and he was allowed by the law to receive cash payments as the condition of banking instrument was relevant for the amounts exceeding rupees fifty thousand only. All such transactions of amount less than fifty thousand were to be indicated in the cash book and other books of account and when payments of rupees exceeding fifty thousand were to be made against the supplies received, the appellant was required to withdraw the amount from the cash book, deposit it in his business account in the bank and issue a crossed cheque in favour of the seller or arrange payment through any other banking instrument i.e. demand draft, pay order etc. showing transfer of payment in favour of seller from his business account in the bank. However, in the past insome cases, the adjudicating officers have allowed adjustment of input tax against imposition of penalty for the violation of section 73 of the Sales Tax Act, 1990.9. After considering all aspects of the case, I am of the opinion that payments exceeding rupees fifty thousands made through bank credit slips do not meet the requirements of section 73 of the Sales Tax Act, 1990. C.M.A./2/Tax(Trib.) Appeal dismissed.

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