2008 PTD 1893
HAFIZ MUHAMMAD ANEES, MEMBER (TECHNICAL).--- This judgment disposes of Sales Tax Appeal No.STA 132/LB of 2007 filed by Messrs Tandlianwala Sugar Mills Ltd. 32-N, Industrial Area, Gulberg-II, Lahore against the Order-in-Appeal No.12-ST/07, dated 30-12-2006 (dispatched on 6-2-2007) passed by the Collector (Appeals), Lahore.
2. Briefly stated, the relevant facts of the case are that during the course of audit by the DRRA, Lahore of the appellant's record for the period 2002-03 to 2003-04 it was observed that the registered person was not entitled to claim input tax paid on the goods like vehicle, building material, office equipment, electric and gas appliances telephonic equipment etc. The unauthorized/irregular claim of input tax -claimed on the prohibited items resulted into short payment of sales tax amounting to Rs .4,99,414.
3. Accordingly, based on the reported facts of the case, show-cause notice, dated 9-12-2005 was issued to the appellant (the then respondent) under section 36(1) for recovery of the said amount along with consequential liabilities of additional tax and penalty as envisaged under sections 34 and 33 of the Sales Tax Act, 1990 on account of violation of sections 6, 7(2), 8(1)(a), 23 and 26 read with S.R.O. 578(I)/98, dated 12-6-1998. The matter was contested by the appellant (the then respondent) stating that the registered person used all the taxable supplies in question for the manufacture and production of sugar and allied by-products, which are all taxable goods. The supplies in question are-not in violation of section 8. On adjudication vide order-in-original, dated 22-3-2006 (dispatched on 1-4-2006) it was held by the Adjudicating Officer that the items pointed out by the DRRA team are prohibited for input tax adjustment order S.R.O. 578(I)/98, dated 12-6-1998, therefore, the said amount of Rs.4,99,414 was ordered to be recovered along with default surcharge. Besides, a penalty of Rs.24971 was also imposed under section 33(5) of the Sales Tax Act, 1990. The appellant assailed the vires and legality of the aforesaid order before the Collector (Appeals) on the plea that the items whereupon input tax adjustment was claimed and availed were exclusively used/useable in the production/business of the appellant. The appellant also challenged the jurisdiction of the DRRA to conduct audit of the appellant. The Collector (Appeals) vide his order-in-appeal, dated 30-12-2006 (dispatched on 6-2-2007) concluded that the contention of the counsel for the appellant with regard to printing of papers/office cards, sheets involving sales tax to the tune of Rs.1,77,084 against valid purchase invoices and exclusively used/useable in the production/business of the appellant was found tenable and thus adjustment for the said amount of Rs.177084 was held valid by the Collector (Appeals). However, input tax claimed on other items like repairs/parts of vehicle, HS diesel, repair of maintenance of photo copier, fixed telephone exchange and engine exchange and engine oil etc., was not valid. Thus the adjusted amount of input tax of Rs.322387 was found invalid being in conflict with the provisions of section 8(1)(b) read with S.R.O. 578(I)/98, dated 12-6-1998. The same was therefore, disallowed. Regarding the objection of the counsel that audit conducted by the DRRA is without jurisdiction and thus is not valid, the objection was turned down. In support of his contention he also relied upon the judgment of the Tribunal reported as GST 2006 CL 18, dated 16-9-2005 in which it was held as under:
"No irregularity has been committed by the auditors of DRRA by conducting audit of sales tax records produced by the Collectorate of Sales Tax, maintained by the registered person as laid down under the Sales Tax Act, 1990. The auditors of DRRA, therefore, are authorized under the law to conduct audit of the sales tax records pertaining to the receipts of the Federation as produced by the respective Sales Tax Collectorates in compliance with the provisions of Order No. F. No.2(1)/2001-Pub., dated 17-5-2001."
4. The appellant being not satisfied and aggrieved of the aforesaid decision has preferred the above appeal before the Tribunal on the same grounds as were agitated earlier before the lower fora of adjudication which inter alia include that the DRRA staff is not competent to carry out audit which invalidates the subsequent proceedings. The show-cause notice falls under section 36(2) as against section 36(1) alleged in the show-cause notice.
5. We have examined the case record. Also heard the arguments of both the sides. Anxious consideration has been given to the contentions raised by the counsel for the parties. The contention of the counsel for the appellant that the DRRA office was not competent to carry out audit is not valid. They are competent to carry out the audit under their charter of function. The Tribunal has already decided similar matter holding that the auditors of DRRA are authorized under the law to conduct audit of the sales tax records pertaining to the receipts of Federation as produced by the respective sales tax collectorates in accordance with the provisions of Order F.No.2(I)/2001-Pub., dated 17-5-2001. Further by conducting audit by the DRRA no prejudice is caused to the appellant. The appellant has not given any convincing arguments that the audit conducted by the DRRA office is not correct and the facts have been wrongly narrated by them. The show-cause notice has been issued by the competent authority and has been adjudicated upon by the competent authority. Therefore, this objection is not tenable in the eyes of law and is accordingly turned down.
6. The counsel for the appellant has also raised the legal point that the show-cause notice falls under section 36(2) and not under-section 36(1) of the Sales Tax Act, 1990. The contention is misconceived. Under the self-assessment scheme as envisaged in Sales Tax Act, 1990 it is the exclusive responsibility of taxpayer to ensure that due tax is paid on time and in case of failure to do so the registered person cannot avoid responsibility. Further, the appellant has not been able to substantiate that it was due to inadvertence, error or misconstruction. In this view the show-cause notice under section 36(1) is not time-barred and was issued well within time.
7. So far as the merits of the case are concerned, section 7 of the Sales Tax Act, 1990 allows input tax adjustment provided that the registered person is in possession of valid sales tax invoices. Section 8(1)(a) disentitles a registered person to claim input tax adjustment on those items/input goods which are used for any purpose other than for the purpose of manufacture/production of taxable goods or supplies. Similarly section 8(1)(b) provides that certain items can be disallowed for input tax adjustment if they have multiple uses and are liable to be misused and otherwise being taxable are entitled to input tax adjustment. The CBR has issued the notification under section 8(1)(b) vide S.R.O. 578(I)/98, dated 12-6-1998 stating that the items which fall in the notification have been disallowed. Therefore, there is no legal justification of allowing input tax adjustment on those goods, which are hit by the said S.R.O. The Collector (Appeals) has already allowed adjustment to the extent, which are not hit by section 8(1)(b) of the Sales Tax Act, 1990. Therefore, the order passed by the Collector (Appeals) is correct and is accordingly upheld. The appeal filed by the counsel for the appellant is devoid of merit and is accordingly turned down.
8. Announced.
9. Inform all concerned through registered post.
C.M.A./77/Tax (Trib.) Appeal rejected.