Delay in sales tax payments: Fibres’ manufacturer fails to furnish explanation

LAHORE: A fibres manufacturer has failed to furnish plausible explanation for sales tax payments while agitating that the delay in this regard was not a wilful default, said sources.

According to details, the manufacturer had not deposited sales tax due within the dates prescribed for contentious tax periods. The assessing officer issued show cause notice calling explanation from the taxpayer confronting the said default with the intention to impose penalty and default surcharge for each tax period.

The taxpayer allegedly failed to furnish any explanation despite seeking adjournments. Resultantly, the officer Inland Revenue finalised the show

cause proceedings

and levied penalty and default surcharge under the relevant provisions of the law.

The appellate forums observed that record suggested that the taxpayer despite seeking adjournments did not furnish any explanation for the confronted delay in sales tax payments for the disputed tax periods.

A consisting delay in depositing sales tax for almost one and half year suggests that the taxpayer was habituated to making sales tax payment with delay, which constitutes wilful default.

Instead, the taxpayer kept agitating frivolous excuses regarding the imposition of penalty, which was turned down by the competent authority while holding that sales tax includes the tax, default surcharge, a fine, penalty or any other sum payable under the provisions of the law and the rules. Also, the contention related to imposition of penalty in the absence of proving any mens rea is not tenable in the given circumstances as the default in making sales tax payments is for tax periods almost one and half year and for a prudent mind it is not hard to understand that the taxpayer has committed a wilful default.

The relevant forum maintained that commissioner Appeals had rightly turned down the objection as sales tax included penalty which could only be assessed and recovered under the relevant provisions of the law. Once the contravention is established, then the penalty has to follow and only the quantum is discretionary. It further dismissed the contention of the taxpayer that penalty has been used as a tool to generate revenue.

Copyright Business Recorder, 2024