Appeal Case No.7(76)ST/IB of 2000(PB), decided on 4th January, 2003 Versus Appeal Case No.7(76)ST/IB of 2000(PB), decided on 4th January, 2003

S. M. KAZIMI, MEMBER (TECHNICAL).--- This judgment disposes of the appeal filed on 9-2-2002 by the Collector of Sales Tax, Peshawar, against 'the case of Messrs Mustehkam Cement Company (Pvt.) Ltd. decided vide paragraph 8 of the consolidated Order-in-Appeal No.240-41 of 1999, dated nil. The said order was dispatched by the Collector (Appeals), Rawalpindi on 1-1-2000 and was received by the Collector of Sales Tax, Peshawar, on 14-1-2000 vide Diary No. 105, dated 14-1-2000. The appeal is, therefore, held to have been filed within the prescribed limitation.

2. Briefly, the facts of the case are that Messrs Mustehkam Cement Company (Pvt.) Ltd. imported a consignment of Dumper Trucks (PCT Heading 8704.1000) vide Bill of Entry No. C-5791, dated 21-11-1996, and claimed input tax deduction of Rs.2,527,910 on this account in their return for January; 1997. According to S.R.O. 556(I)/96, dated 1-7-1996, a registered person was not entitled to claim input tax credit on vehicles of Chapter 87. Since these dumper trucks were classifiable under Chapter 87 of the Pakistan Customs Tariff, as contained in the First Schedule to the Customs Act, 1969, these were inadmissible for input tax adjustment and, therefore, the aforesaid input tax credit of Rs.2,527,910 was reported to be inadmissible. The Additional Collector of Sales Tax, Peshawar, issued a notice C. No. IV-ST (Audit)/51/ 97/3246, dated 10-11-1997 -requiring Messrs Mustehkam en Company Ltd. to show cause why the said amount of Rs.2,527,910 alongwith the additional tax due thereon under section 34, should not be recovered from them. After hearing Mr. Tanveer, Accounts Manager of Messrs Mustehkam Cement Company Ltd., the learned Additional Collector held that the input tax credit on dumper trucks (of Chapter 87) was not admissible under section ,8 of the Sales Tax Act, 1990, read with S.R.O: 556(I)/96, dated 1-7-1996, and he passed Order-in Original No. 19 of 1998, dated 30-4-1998 (dispatched on 29-6-1998) directing the Company to deposit the, sales tax amounting to Rs.2,527, 910, together with the additional tax due thereon under section 34. Party's appeal against the said order was accepted vide the impugned consolidated Order-in-Appeal No.240-241 of 1999, dated nil (dispatched on 1-1-2000) passed by the Collector (Appeals), Northem Zone, Rawalpindi. Hence this second appeal by the Collector of Sales Tax, Peshawar, to this Tribunal.

3. During the course of hearing before us, the learned Law Officer of the appellant Collectorate argued that dumper trucks are used for carrying limestone, etc., from the quarry to the factory for crushing and there is no doubt that the dumper trucks are classifiable under PCT Heading 8704.9000 (i.e. under Chapter 87 of Pakistan Customs Tariff): He stated that such dumper trucks are specified as not entitled to input tax credit under 'section 8(1)(b) of the Sales Tax Act, 1990, read with S.R.O. 556(I)/96, dated 1-7-1996. He stated that in view of the clear dictates of law and the relevant notification, there was no occasion to stretch the interpretation to the extent of negating the said provisions of Law and the notification. He pleaded that the order passed by the respondent Collector (Appeals) is a nullity in law and allows undue and inadmissible monetary benefit to the Respondent No.1 at the cost of the public exchequer. The learned Law Officer prayed for setting aside of the impugned order-in-appeal in so far as it related to the case of the respondent No. 1.

4. The learned counsel for the respondent cement factory argued that despite the use of dumper in the business of construction, such truck is also a machinery for production of cement and,. therefore, this should be treated as a machinery for input tax credit under section 10(1) of the Sales Tax Act, 1990. As regards application of notification No.S.R.O. 556(I)/96, dated 1-7-1996, he argued that the notification does not disallow input tax credit on vehicles of all of the P.C.T. Headings of Chapter 87 and rather restricts the ineligibility to vehicles of respective headings of Chapter 87". He emphasized that the word "respective" in relation to vehicle should be construed to restrict it to ordinary vehicles meant for transportation of person and goods and should not apply to specialized vehicles like dumpers used as machinery. He also argued that the Collector (Appeals) has correctly interpreted the provision of S.R.O. 556(I)/96, dated 1-7-1996 as these dumper trucks are neither used in the registered office nor used in the business premises of the registered person (respondent No.1). He pointed out that the term "registered office" is defined-in section 2(23) of the Sales Tax Act, 1990, to mean "the office or the place of business specified by the registered person in the application made by him for registration under this Act or through any subsequent application to the Collector.". He stated that although the terminology "business premises" is not defined in the Sales Tax Act, 1990, it should be read within the purview of section 2(35) which specifies it as distinct from trade and manufacture. The learned counsel prayed for confirmation of the impugned Order-in-Appeal and for dismissal of the appeal of the Collector of Sales Tax. and Central Excise, as the said appeal is devoid of legal understanding of provisions of law.

5. Having heard the parties and on perusal of record of the case, we find that it will be worthwhile to study the then relevant provisions of section 8(1) of the Sales Tax Act, 1990, and of S.R.O. 556(I)/96, dated 1-7-1996 which are. reproduced as hereunder:--

"(8) Tax Credit not allowed. -(1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax on-

(a) the goods used or to be used for any purpose other than for taxable supplies made or to be made by him; and

(b) any other goods which the Federal Government may, by a notification in the official Gazette, specify.".

" Notification No.S.R.O. 556(I)/96, dated the 1st July, 1996. -- In exercise of the powers conferred by clause (b) of sub section (1) of section 8 of the Sales Tax Act, 1990, the Federal Government is pleased to specify the goods detailed in column (2) of the table below on which a registered person shall be entitled to claim input tax credit if such goods are purchased by him for use in his registered office or the business premises.

TABLE

Sr. No.

Description

Heading of the First Schedule to the Customs Act, 1969 (IV of 1969)

(1)

(2)

(3)

1

Vehicles

Respective headings of Chapter 87

2

Consumer durables of household type such as air-conditioners (window type or split), refrigerators, micro-wave oven, deep freezers and other household appliances.

Respective headings.

6. We find that section 8(1)(b) of the Act, uses the word "goods" and the Table to S.R.O. 556(I)/96. dated 1-7-1996, specifies "vehicles of respective headings of Chapter 87" of the Pakistan Customs Tariff to be one such "goods" on which the entitlement of a registered person to claim input tax credit shall be disallowed. We do not find ourselves in agreement with the learned counsel for respondent No. 1 that the word "respective-headings" will imply exclusion of dumper trucks classifiable under PCT Heading 87.04. Chapter 87 of the PCT contains 16 main headings from No.87.01 to 87.16 and "Motor vehicles for the transportation of goods" (including Dumpers) are classified under heading 87.04 of the First Schedule to the Customs Act, 1969 (popularly known as Pakistan Customs Tariff or the PCT). Therefore, when we say "dumper of leading 87.04", this stands included in terminology vehicles of respective heading of Chapter 87.". No other interpretation is possible. As regards the counsel's plea that the Dumper should be treated as a machinery, we find that this is a far-fetched idea. Even under the First Schedule to the Customs Act, 1969. Dumpers are classified under Chapter 87 (Vehicles other than Railway or Tramway Rolling Stock) under section XXII (Vehicles, Aircraft, Vessels and Associated Transport Equipments) and not under section XVI (Machinery and Mechanical Appliances) Covering Chapter 84 (Nuclear Reactors, Boilers, Machinery and Mechanical Appliances). or Chapter 85 (Electrical Machinery arid Equipment). There is no- evidence to show that Federal Government included such dumper trucks in the definition of "plant and machinery" in terms of Sr. No.39 of the then Sixth Schedule to the Act. Whether treated by the respondent No.1 to be a machinery or to be a vehicle the fact remains that the dumper trucks are vehicles classified under Chapter 87 of the First Schedule to the Customs Act, 1969, and has to be viewed and treated as such for the purposes of Notification No.S.R.O. 556(I)/96, dated 1-7-1996 the word "business" of a registered person includes all his activity whether in the office building or in the mine or quarry or in the manufacturing premises or in the storage or marketing premises of that registered person, The transportation of limestone etc. from the quarry (owned by or leased to or authorized to registered person engaged in the business of manufacture and supply of cement) to the manufacturing premises of that registered person in a part of business activity of that person. Even otherwise, it has been held that supply of limestone and gypsum (minerals) in a taxable activity for sales tax purposes. However, producers of taxable cement can enjoy exemption on such minerals excavated by them and consumed in-house under Sr. No.43 (previous Sr. No.34) of the Sixth Schedule to the Sales Tax Act, 1990. We have no doubt that the dumper trucks are owned by cement factories for use in their business premises. For reasons given above, we find that provisions of section 8(1)(b) of the Sales Tax Act, 1990, read with Sr. No. 1 of the Table to S.R.O. 556(I)/96, dated 1-7-1996 are very clear and the dumper trucks (of Chapter 87) imported by respondent cement factory are not entitled to input tax credit. We; accordingly, set aside the impugned consolidated Order-in-Appeal No.240-41/99, dated nil (dispatched on 1-1-2000) in so far as it relates to the case of the respondent No.1 Messrs Mustehkam Cement Company Ltd. The order passed by the Additional Collector of Sales Tax, Peshawar, vide Order-in-Appeal No.19 of 1998, dated 30-4-1998 (dispatched on 29-6-1998) is hereby confirmed and restored. The appeal filed by the Collector of Sales Tax and Central Excise, Peshawar, stands disposed of as accepted accordingly.

7. Inform all concerned.

8. Announced.

C.M.A./624/Tax (Trib.) Appeal accepted.