2010 PTD 982
MUHAMMAD HANIF TAHIR, (MEMBER JUDICIAL).--- This appeal is directed against Order-in-Original No. 94 of 2001 dated 14-11-2001 passed by the Additional Collector of Customs, Sales Tax and Federal Excise (Adjudication), Faisalabad.
2. Briefs facts giving rise to the filing of this appeal are that the Special audit of the appellant was conducted under section 32-A of the sales Tax Act, 1990 by the authorized Chartered Accountant for the period from 1/1999 to 12/2000 and following discrepancies were pointed out: -
(i) The amount of 3% further tax levied from July, 1999 on supplies made to unregistered persons was not paid for the months of August to November, 1999. The amnesty allowed by the Government was to the extent of 75% amount of additional tax whereas the assessee has availed 100% amount of additional tax and in this way contravened the concept of S.R.O. which attracts additional tax @ 5% along with the penalty at the same rate.
(ii) Input tax of Rs.14,33,491 was claimed in months other than the month during which sales tax invoice was issued, which is attracted under section 33 of the Sales Tax Act, 1990.
(iii) Sales tax amounting to Rs.7,80,838 due on sales proceeds of operating fixed assets was not paid and the figures of sales tax have been taken from the audited financial accounts of 1998-99, hence sales tax of Rs.7,80,838 is recoverable from the appellant along with the additional tax.
(iv) Sales tax amounting to Rs.6,12,968 due on sales proceeds on the disposal of fixed assets which was not paid and the figures have been taken from audited financial accounts of 1999-2000 and in this way the said amount of sales tax along with additional tax is recoverable from the appellant.
(v) A denaturing process is carried out on rectified spirit to cover it to denatured spirit and charges in this behalf were received from the customers and no sales tax was deposited and an amount of Rs.4,22,225 is recoverable along with additional tax from the appellant.
(vi) Sales tax is due on the difference in selling prices on sale of spirit through Lahore Sales Depot. Freight and permit fee were to be added in the prevailing price, hence sales tax Rs.36,11,730 is due along with additional tax on this difference from the appellant.
(vii) Sales tax invoices were issued @ 15% on spirit that was to be sold through Lahore Sales Depot at the time of delivery from mills. The spirit was actually sold to the non-registered persons at higher price and in this behalf a further tax of Rs.8,31,853 @ 1.5% is recoverable along with the additional tax.
(viii) Input tax amounting to Rs.2,58,654 claimed on electricity bill of mills colony is recoverable along with the additional tax.
(ix) Rs.8,89,274 are shown in the audited financial accounts of the registered person for the year 1998-99 as advances from customers and according to the provisions of Sales Tax Act, 1990, an amount of Rs.58,692 along with additional tax is recoverable from the appellant.
(x) Rs.15,54,380 are shown in the audited financial accounts of the appellant for the year, 1999-2000 as advances from the customers and according to the provisions of Sales Tax Act, 1990, an amount of Rs.1,02,589 along with additional tax is outstanding against the appellant.
(xi) It is the nature of sugar production process that press mud is produced as its bye-product and normally it is 3% of the sugarcane crushed and its market value of about Rs.30 per ton and in the season 1999-2000, the appellant crushed 353,980 M. Tons of sugarcane. On this quality 10,619 M. Tons press mud was produced with a total sale value of Rs.3,18,582 and the appellant did not show any sale of press mud during the above said period and the sales tax on this suppressed income @18% which comes to Rs.57,343 is due along with additional tax from the appellant.
(xii) The bagasse is produced as its bye-product and normally its production ranges from 29% to 33% of the sugarcane crushed. As per RT-4 of 1999-2000 season the appellant crushed 353,980 M. Tons sugarcane, out of this 30.627% is bagasse which comes to 108,413 M. Tons and the said bagasse was sold to outside parties and the commercial value of the same was about Rs.200 per M. Ton. The total sale value of the bagasse produced by the appellant during the above season is Rs.2,16,82,600 and sales tax @ 15% on the bagasse comes to Rs.32,52,403 which is recoverable from the appellant along with additional tax.
On the basis of the above noted facts, the appellants were charged with the violation of sections. 3,6,7,11(2), 2(44) of the Sales Tax Act, 1990 and were Called upon to show cause as to why the sales tax amounting to Rs.99,89,296 along with additional tax should not be recovered from them and why penal action should not be taken against them under the Sales Tax Act, 1990.
3. A detailed reply was submitted by the appellant (then respondent) before the learned Additional Collector (Adjudication) Faisalabad, who after considering the same, framed as many as twelve issues in the case and only issues No.(i) and (xii) were decided in favour of the appellant being settled. However, all the other issues were decided against the appellant. Feeling aggrieved by the said issues, as detailed in the impugned order, the appellant filed the present appeal before this Tribunal.
4. The learned counsel for the appellant while arguing the case before this Tribunal, submitted that issues Nos.(iv),(vii) and (viii) were conceded by the appellant and were settled after the passing of the impugned order. He argued that the input tax adjustment claimed beyond tax period is based upon misinterpretation of relevant provisions as the appellant claimed the input tax, which has been actually paid by it and the appellant holds a valid sales tax invoice. The input tax paid at the time of purchase of goods has become a vested legal right of the appellant and the same cannot be disallowed on any account. Section 66 of the Sales Tax Act, 1990 provides that the input tax paid which could not be claimed in the relevant tax period can be claimed in subsequent one year and the appellant had claimed the input tax in the subsequent tax period within time. He also relied upon a judgment of the Tribunal in this behalf in Appeal No.748 of 2001, dated 5-12-2001. He argued regarding the disposal of fixed assets that the department had given the preference to the C.B.R. clarification instead of applying the judgment of the Tribunal. He also relied upon a judgment of the Honourable Sindh High Court in Appeal No.62 of 2001 dated 13-9-2001 and contended that the Honourable High Court has held that disposal of fixed assets is neither supply nor taxable activity during the course of business. He argued that sales tax on denaturing, the department could not raise the demand because denaturing charges are reimbursement of actual expenditure and do not constitute the value of supply. He also argued that the observation of the Adjudicating Authority regarding this objection that the appellant had conceded the said issue is incorrect. The learned counsel for the appellant argued on the point of sales tax on advances that as per judgment of the Appellate Tribunal in Appeal No.327 of 2001, dated 22-10-2001, the main question regarding time of supply of goods is to be seen and examined with reference to the date when the sale of the goods is completed. He further argued that under section 19 of the Sales of Goods Act is complete when the parties intend that the property in goods being sold, is transferred to the buyer by the seller and in this behalf he relied upon the judgment of Honourable High Court, Lahore in Writ Petition No.2750 of 2000. He further contended that as per section 3(1)(a) of the Sales Tax Act, 1990 the sales tax is leviable on the value of the taxable supplies made and mere receipt of advance cannot be presumed as sale which is liable to sales tax. He also argued that after seeing sections 2(33), 2(35) and 2(44) of the Sales Tax Act, 1990, it is clear that the sales tax has been imposed on the actual sale, transfer, lease, or any other mode of disposal of goods and in the absence of any sale no sales tax can be levied or charged. In respect of sales tax on press mud, he argued that the onus of proof is on the department to prove that the appellant had made the taxable supplies of the said goods and had received the sale proceeds and in the absence of any such evidence no sales tax is leviable. He argued in respect of sales' tax on selling price difference that the observation of the Adjudicating Authority regarding conceding the point is not correct. The reimbursement of additional expenses of permit fee and freight charges, are not included in the value of supply and in this way no sales tax is chargeable on the same. He argued on the point of further tax on the sales to the unregistered persons that the sales were made to the person who were registered as per definition of section 2(25) prior to the amendment through Finance Ordinance, 2001 and relied upon the judgment of the Sindh High Court that no further tax is leviable where sales were made to a person who though not registered is liable to be registered. He argued that the additional tax and penalty are not justified in view of the earlier judgment of the Appellate Tribunal wherein the same were waived.
5. On the other hand the departmental representative supported the impugned order and contended that according to the provisions of section 7 of the Sales Tax Act, 1990, the appellant is required to adjust the input tax paid during the tax period from the output of that tax period and the appellant had violated the provisions of sections 7 and 66 of the Sales Tax Act, 1990. He relied upon a judgment of the Honourable Supreme Court of Pakistan in Civil Appeal Nos.2687 to 2696 of 2001, in which it has been discussed that the fixed assets as have been referred in the cases are goods or taxable goods and comes within the ambit of taxable supply and liable to the levy of sales tax. He also argued that the sales tax on denaturing charges as per the provisions of section 2(46) of the Sales Tax Act, 1990, must be charged and paid by the appellant on denaturing charges. In connection with sales tax on advances he argued that according to section 2(44) of the Sales Tax Act, 1990 if a supply is made in Pakistan shall be deemed to have taken place at the time of delivery of goods or the time when a payment is received in respect of that supply. Sales Tax on press mud is not exempted from the levy of sales tax and the appellant's plea in this regard is baseless and the appellant is liable to charge sales tax. He argued that the permit fee and freight charges are liable to sales tax under the provisions of section 2(46) of the Sales Tax Act, 1990 and it is the responsibility of the appellant to charge the same and pay the exchequer. He also relied upon a judgment of the Honourable Supreme Court of Pakistan in case of Messrs Sukkur Beverages (Pvt.) Limited and Messrs Digri Sugar Mills Limited in which further tax is levied and payable on the supply made to unregistered persons as per section 2(25) of the Sales Tax Act, 1990. Regarding the payment of additional tax and penalty he argued that the appellant violated the provisions the Sales Tax Act, 1990 and as per provisions of sections 34 and 33 the additional tax and penalty is levied and recoverable under section 36 ibid.
I have heard both the parties and perused the record. Issues Nos. 1 and 12 were decided by the Adjudicating, Authority in favour of the appellant while later on Issues Nos. 6 Ind 7 have been conceded by the department. As far as the other issues are concerned, the learned counsel for the appellant argued that the judgment to the extent of remaining issue be set aside as he holds the valid sales tax invoices for which he has claimed the input tax. The learned counsel has stated that the input tax has been paid at the time of purchase of goods which has become a vested legal right of the appellant and the same cannot be disallowed on any ground. He has referred Section 66 of the Sales Tax Act, 1990 and claims that it can be even claimed subsequently, within one year which the appellant has. No doubt under section 7 of the Sales Tax Act, 1990 the appellant is required to adjust the input tax paid during the tax period from the out period of that tax period and the appellant has violated the provisions of sections 7 and 66. The fixed tax as has been referred in the case or goods are taxable goods and comes within the ambit of taxable supply and liable to levy of sales tax. The sales tax must be charged and paid by the appellant on denaturing the charges if supplies made in Pakistan shall be deemed to have been taken place at the time of delivery of goods or the time when the payment is received in respect of that supply. The sales tax on press mud is not exempted from the sales tax and the plea is this regard is baseless thus the appellant is liable to be charged the sales tax. The permit fee and the freight charges are also liable to be sales tax and it is the responsibility of the appellant to charge the same and deposit in the Government exchequer. As far as further tax leviable and payable on the supplies made to the un-registered person is concerned, it is basic requirement of law. The appellant has violated the provision of Sales Tax Act, 1990 which has been proved beyond any shadow of doubt, so the additional tax penalty under sections 34 and 33 is recoverable from the appellant.
In the light of the above said circumstances no ground has been made out for interference in the impugned judgments, so the appeal merits to be dismissed by up-holding the judgments assailed through this judgment. Parties be informed through registered post A.D. and TCS.
File be consigned to the record after completion.
C.M.A./186/Tax(Trib.) Appeal dismissed.