Sales Tax Appeal No.Q-79 of 2001, decided on 4th October, 2005. Versus Sales Tax Appeal No.Q-79 of 2001, decided on 4th October, 2005.
The present appellant challenges the vires of the impugned order dated 13-4-2001, passed by the Additional Collector of Customs, Sales Tax and Central Excise Adjudication, Hub.
3(sic) According to the records, the facts of the case are that the appellant's auditors conducted sales tax audit of the records of Messrs Dae Young Industries (Pvt.) Ltd., the present respondent No.2, for the year 1998-99. It was observed by the auditors that the respondent No.2 was availing exemption from payment of sales tax in terms of S.R.O. 561(I)194, dated 9-6-1994. The auditors further observed that the exemption under the said S.R.O. stood ceased to exist after June, 1999., A whereas the respondent No.2 continued to avail the facility uptil November, 1999. It was the opinion of the department that exemption availed after June, 1999, was not warranted by law.
4. Accordingly, 'a show-cause notice was issued whereby the respondent No.2 was called to explain that as to why action for the violations of the provisions of sections 3, 6, 7, 23, 26 and 13 of the Sales Tax Act, 1990 read with S.R.O. 561(I)/94, dated 9-6-1994 be not taken against him and as to why sales tax amounting to Rs.1,241,425 be not recovered under section 36 of the Sales Tax Act, 1990, along with the additional tax.
5. The respondent No.2 vide its reply to the show-cause notice denied the said charges by stating that exemption allowed to them was effective and operative for a period of five years starting from the day the unit was set up. The respondent No.1 after considering the point of view of the parties concluded as under:---
"....According to party they informed the Assistant Collector, Central Excise and Sales Tax, Gaddani on 26th November. Scrutiny of the documents revealed that they in fact forwarded a copy of monthly return to the Assistant Collector and failed to meet the condition of S.R.O. As per the S.R.O. the unit was required to intimate, in writing to the Assistant Collector of Sales Tax, at least fifteen days before commencing their production. In this case unit dealt the matter casually and did not submit any formal intimation to the authority concerned about commencement of' their production 15 days prior thereof. They considered it sufficient to forward a copy of return which was filed on the 20th of next month for the month in which actual production started. Since department has not raised any objection on this point and have accepted it as a date on which production was actually started, therefore, same is to be taken as such. As such, in the light of explanation/definition provided in the Notification No.S.R.O. 561(1)/94, dated 9-6-1994, the unit if otherwise qualifies for the exemption under the said S.R.O. was set up in the first week of December, 1994. Since, Collectorate of Customs, Sales Tax and Central Excise, Quetta has not questioned the unit's qualification for exemption, it is, therefore, held that the period of' exemption i.e. five years from the setting up of the unit will be reckoned with from the said date. In view of the foregoing, demand of sales tax amounting to Rs.1,241,425 along with additional tax leviable thereon, is vacated...."
6. The appellant through the present appeal challenges 'the validity of the said order. They state:---
(a) That the exemption if any available to the unit under S.R.O. 561(I)/94 was ceased to exist on 30-6-1999 as per the text of the S.R.O. which is reproduced as under:
"...In exercise of the powers conveyed by subsection (1) of section 13 of the Sales Tax Act, 1990, and in supersession of this Ministry's Notification No.S.R.O. 580(I)/91 dated the 27th June, 1991, the Federal Government is pleased to direct that all supplies made by manufacturers or producers of industrial units which are set up in the North-West Frontier Province and the Province of Baluchistan (except Hub Chowki area) between the 1st July, 1991, and the 30th June, 1994, shall be exempt from the tax payable under the said Act for a period of five years from the date the industry is set up..."
(b) That the respondent No.2 claimed the exemption under 1st provision to the S.R.O. 561(I)/94 according to which "this exemption shall also be available to such units which have opened letters of credit before 30-6-1994 for import of machinery or have firmed up financial institutions before the said date for the new unit to be set up upto 30-6-1996. The exemption available under the said provision of the S.R.O. was based on the condition that these letters of credit or financial institutions are registered with the Central Board of Revenue before 15-7-1994 by such units and the Board after verifying the facts, will intimate to the applicant in writing whether he is entitled to enjoy exemption under this notification or otherwise.
(c) That since the respondent No.2 had not fulfilled the above mentioned conditions i.e. opening of letter of credit before 30-6-1994 for import of machinery or have firmed up financial arrangements with the banks or financial institutions and the same should be registered with the Board. Therefore, the claim of exemption of respondent No.2 cannot be considered in accordance with the 1st provision to the S.R.O. 561(I)/94, dated 9-6-1994.
7. The appellant accordingly prays for the vacation of the impugned order.
8. Rival parties have been heard and case record examined. It may be stated that in the show-cause notice the charge against the respondent was that after June, 1999, the exemption being availed by the respondent ceased to exist. The issues outlined in paragraphs 1-3 of the grounds of the memo. of appeal were never a subject-matter and part of the show-cause notice dated 14-12-2000. Hence the appellant had raised an issue which was neither raised nor disclosed in the show-cause notice. These arguments of the appellant are therefore, not relevant for the disposal of the case. Nor we can reopen a matter on such grounds.
9. The issue is whether or not after June, 1999, the respondent was entitled for exemption in the light of S.R.O. 561(I)/94, dated 9-6-1994. B The said notification reads as under:---
".... S.R.O. 56l(I)/94.---In exercise of the powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, and in supersession of this Ministry's Notification No.S.R.O. 580(I)/91, dated the 27th June, 1991, the Federal Government is pleased to direct that all supplies made by manufacturers or producers of industrial units which arc set up in the North-West Frontier Province and the Province of Baluchistan (except Hub Chowki area) between the 1st July, 1991, and the 30th June, 1991, shall be exempt from the tax payable under the said Act for the period of five years from the date the industry is set up:
Provided that this exemption shall also be available to such units which have opened letters of credit before the 30th June, 1994, for import of machinery or have firmed up financial arrangements with the banks or financial institutions before the said date for the new unit to be set upto the 30th June, 1995:
Provided further that these letters of credit or firmed up financial arrangements with the banks or, financial institutions registered with the Central Board of Revenue before the 15th July, 1994 by such units and the Board, after verifying the facts, will intimate to the applicant in writing whether he is entitled to enjoy exemption under this notification or other-wise.
Explanation.---For the purpose of this Notification, the expression "set up" shall mean the date on which the industrial unit commences its production including trial production which date shall be intimated, in writing by the manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least fifteen days before commencing such production but shall not include the date of expansion, balancing, modernization or replacement of such industry...."
10. The notification is providing exemption to the units which were set up between 1st July, 1991 and the 30th June, 1994. This unit was set up on 1-12-1994. The delay in its setting beyond 30-6-1994 was waived C by the competent authority. This fact is evident from the order-in ?original wherein the learned respondent observed that:---
"...8. The Central Board of Revenue (Sales Tax Wing), vide No.1/38-STT/94, dated 15-9-1996 registered Messrs Dae Young Industries (Pvt.) Ltd., under S.R.O. 561(1)/94 subject to the following conditions:
(a) The terms of credit are not altered.
(b) The unit comes into production upto 30th June, 1996.
(c) The machinery for the subject unit is imported under non? repatriable investment (NRI) scheme.
(d) The Collector before allowing exemption under S.R.O. 561(1)/94 must ensure that Messrs Dae Young Industries (Pvt.) Ltd., is completely a new unit and it is not a case of expansion, balancing and modernization or replacement of unit already established.
9. The competent authority also condoned the condition of establishment of letter of credit or firmed up financial arrangements.
10. As per above mentioned conditions the unit concerned was required to be set up upto 30-6-1996. The prosecution miserably failed to intimate as to what actions were taken by the Collector before allowing exemption in order to ensure that Messrs Dae Young Industries (Pvt.) Ltd., installed a completely new unit and it was not a case of exemption, balancing and modernization or unit already established as was required in terms of Board's letter C. No. 1/38-STT/94, dated 15-9-1996.
11. As per the party their unit started its production in the 1st week of December, 1994 and required intimation was submitted to the concerned Assistant Collector, on 20-11-1994. Scrutiny of the copies of documents attached with written reply to the show-cause notice reveal that unit got itself registered on 29-10-1994, and filed first sales tax return on 20-11-1994, showing sales and purchases as "Nil". This situation continued till the month of November, 1994 for which return was filed on 20-12-1994. However, in the return for the month of December, 1994, which was filed on 19-1-1995, value of goods sold was shown as Rs.520,150 in the column of "exempted goods" as party claimed exemption in terms of Notification No.S.R.O. 561(I)/94, dated 9-6-1994..."
11. Thus, the respondent was allowed to set up its unit on or before 30-6-1996 and according to records it started production on 1-12-1994, accordingly the respondent was entitled to enjoy exemption for a period of five years from the date of its setting up. The expression "set up" has been explained in the S.R.O. 561(I)/94. And according to the explanation given in the said S.R.O. the word "set up" means the date D oil which the unit commences its production. Thus the availing of exemption upto November, 1999 was perfectly in order as the unit started production on or around 1-12-1994. In these circumstances, there is no reason to interfere with the orders of the learned respondent which is unexceptionable. There is no merit in this appeal and the same is accordingly rejected.
H.B.T./187/Tax(Trib.) ????????????????????????????????????????????????????????????????????????? Appeal dismissed.