Sales Tax Instructions

Sales Tax Instructions, 2009
The Board, vide its letter dated 30.07.2003 clarified that the duty was payable on gross
amount billed by PTCL not the discounted price (Annex-‗C‘).
4. During 2004-05 Board was again approached for clarification as to
whether or not the discount being allowed by PTCL to payphone companies was
admissible for the purpose of central excise duty being collected in GST mode. The
Board, vide its letter C.No.1(17)CEB/96 dated 24.12.2004 clarified that in case of trade
discounts, excise duty is to be calculated on discounted price in terms of clause (b) of
subsection (46) of section 2 of the Sales Tax Act, 1990, provided the tax invoice shows
the discounted price as well as the related tax and the discount allowed is in conformity
with the normal business practices (Annex-‗D‘).
5. On the basis of aforesaid CBR‘s clarification, certain payphone
companies filed refund claims with the Collectorate of Sales Tax, Lahore and
Collectorate of Sales Tax, Rawalpindi on the ground that the clarification issued by
Board 24.12.2004 is retrospectively effective and the differential amount of excise duty
paid by the payphone companies on gross billed amount and discounted price is
refundable. Both the Collectorates sanctioned the refund claims and after sanctioning and
payment of refund to the payphone companies, Collectorate of Sales Tax, Lahore sent a
reference to the Board seeking clarification regarding admissibility of refund claims
sanctioned and paid by them. The Collectorate tried to justify the sanctioning and
payment of refund on the grounds that the payphone companies have not passed on the
burden of tax to the consumers and have paid the amount of excise duty for their profit
margins. Moreover, the payphone companies have relied upon the judgment of Sindh
High Court in Civil Appeal No.128 of 1998 (Federation of Pakistan vs. Metropolitan
Steel Corporation). The Sindh High Court has held that ―refund of an amount paid in
excess to the tax legally due can only be claimed by the person who has eventually borne
the burden of tax and not by one who has collected such tax on behalf of the
Government….‖
6. The Board has examined the whole issue and is of the view that:-
(i)
The Board vide its C. No.1(17)-CEB/96, dated 02-08-2006 (Annex-‗E‘) has
explained that Board previous ruling issued vide letter of even number dated 24-
12-2004 is applicable only in case of future transactions. The said clarification
cannot be used to claim refund of excise duty paid on past transactions in the
light of provisions of section 3(B) of Sales Tax Act, 1990 read with section 3(D)
of the then Central Excises Act, 1944. The Board‘s clarification has clearly
stated that the previous transactions made on the basis of gross billed amount
were all closed and past transactions hence no refund of the excise duty shall
be admissible as the incidence of duty has been passed on the end consumers.
To further thrash out the issue, the Central Board of Revenue directed the
Director, Inspection and Internal Audit, Lahore, to conduct the post refund audit
of the refund files of the payphone companies. The Director has submitted the
Audit Report wherein it has been clearly established that the refund claims of the
payphone companies have been illegally sanctioned since the incidence of excise
duty has been passed on to the end users / consumers of the pay cards. It is