S.T.A. No.2806/LB of 2001, decided on 8th March, 2002. Versus S.T.A. No.2806/LB of 2001, decided on 8th March, 2002.
MIAN ABDUL QAYYUM, MEMBER (JUDICIAL).‑‑ ‑This appeal is directed against the Order‑in‑Original No.381 of 2001, dated 22‑9‑2001 (dispatched on 1‑11‑2001) passed by the learned Deputy Collector (Adjudication) Faisalabad.
2. Out of the four allegations raised in the show‑cause notice on the basis of audit of the record of the appellant for the period 9 of 1998 to 3 of 2001, the learned Adjudicating Officer dropped third observation relating to late payment to cotton ginners holding that the contention of the appellant was correct.
3. With regard to second allegation about less charging of further tax amounting to Rs.2,974, the learned counsel for the appellant on 4‑3‑2002 conceded before us that the appellant was prepared to deposit the said amount alongwith additional tax.
4. We are now left with allegation No. 1 and allegation No.4.
5. The first allegation deals with tax credit on electricity bills and the 4th allegation is about Rs.9,25,192 payable on sale of fixed assets.
6. While arguing the first allegation, the learned counsel for the appellant with reference to subsection (3) of section 3'b of the Sales Tax Act. 1990 submitted that since the learned Adjudicating Officer has not determined any amount payable under this allegation, therefore, the impugned order to this extent is in violation of section 36(3) of the Act ibid.
7. About allegation No.4, the learned counsel heavily relied on judgment of the Hon'ble Sindh High Court, Karachi, dated 25‑9‑2001 in Sales Tax Appeals Nos.52‑63 of 2001 in re: Collector Customs, Central Excise and Sales Tax v. Messrs Novartis Pakistan Ltd. and urged that since the sale of fixed assets was not in furtherance of ordinary business of the appellant who is engaged in manufacturing yarn, therefore, the same could neither be held to be "taxable supply" nor "taxable activity" and that no sales tax was, therefore, leviable on the sale of fixed assets.
8. Learned D.R. was asked to explain position of the department in view of section 36(3) of the Sales Tax Act, 1990 and the judgment of the Hon'ble Sindh High Court, Karachi. The learned D.R. had nothing to say on these two points and simply submitted that the law as contained in section 36(3) and the judgment of the Division Bench of the Hon'ble Sindh High Court, Karachi as long as it held the field was to be given effect to.
9. We have considered these arguments. The relevant portion of section 36(3) of the Sales Tax Act, 1990 is as under:‑‑
36. Recovery of tax not levied or short‑levied for erroneously refunded. ‑------------
(2) -------------------------------
(3) The Officer of Sales Tax empowered in this behalf shall, after considering the objections of the person served with a notice to show‑cause under, subsection (1) or subsection (2), determine the amount of tax or charge payable by him and such person shall pay the amount so determined.
10. The careful perusal of the above subsection (3) shows that it is the exclusive jurisdiction of the learned Adjudicating Officer to determine the amount of tax or charge payable by the person to whom notice has been issued under subsection (1) or subsection (2) and that the concerned person is to pay the amount so determined by the learned Adjudicating Officer. This is the power vested in the learned Adjudicating Authority and has to be exercised by that Authority alone to make the order legal otherwise it would be without jurisdiction, illegal, void ab intio and of no legal effect (PLD 1995 Kar. 589).
11. The observations of the learned Adjudicating Officer under this allegation cannot at all be considered as due compliance of this provision of law. Rather it appears that the learned Adjudicating Officer while recording his finding has not at all determined any amount which may be recoverable from the appellant on this account. This observation of the learned Adjudicating Officer makes an interesting reading and the same is re‑produced as under to demonstrate that this finding besides being hollow is also without any legal effect when the same is considered in view of section 36(3) of the Act ibid:‑‑‑
"As far as allegation contained in first observation is concerned, it is observed that according to S.R.O. 124(I)/2000; dated 15‑3‑2000, a registered person is only entitled for input tax adjustment on electricity bills, if the bill bears the name and registration number of the registered person. A utility bill can only be treated as an invoice when it fulfils all the particulars of an invoice issued under section 23 of the Act. The same has not been the case and the respondents have adjusted input tax on electricity bills without the bill bearing their registration number. Even at the time of hearing they presented the applications they had made to the WAPDA Authorities for the endorsement of their registration number on the bills, which itself is a clear proof that they were not entitled to claim input tax adjustment on these bills, however, the audit has remained silent about this aspect, which is very strange and no amount of sales tax that has been adjusted inadmissibly is pointed out in the audit report. This has led me to conclude that the audit observation is partly correct and the respondents have violated the provisions of sections 6, 8 and 23 of the Sales Tax Act, 1990, read with S.R.O. 124(I)/2000, dated 15‑3‑2000."
12. Earlier to the judgment by the Hon'ble Sindh High Court, Karachi, the different Benchs of the Tribunal were expressing different views in respect of levy of sales tax on sale of fixed assets but since the Hon'ble Sindh High Court, Karachi has conclusively resolved the issue, therefore, the same judgment is being followed by this Bench of the Tribunal in all the appeals which came‑up for hearing after the said judgment was brought to our notice. We have since then been holding that the sale of fixed assets which was not in furtherance of ordinary business of the concerned registered person was not leviable to sales tax. The appellant in this case admittedly is engaged in manufacturing yarn and the sale of fixed assets in this case is not in furtherance of ordinary business activity of the appellant. The same, therefore, is neither "taxable activity" nor "taxable supply" to make it liable for payment of sales tax. Following the judgment by the Hon'ble Sindh High Court, Karachi we hold that the learned Adjudicating Officer has erred in law in levying sales tax against the appellant on account of sales of fixed assets, alongwith additional tax and penalty which amounts as remitted.
13. However, in respect of the first allegation, the matter is remitted to the learned Adjudicating Officer for a fresh decision in accordance with law after, hearing the parties and after receiving the evidence, which they may like to produce. During these proceedings, the learned Adjudicating Officer will keep in mind the claim of the appellant that it had applied to the WAPDA Authorities for entering its registration B number on the relevant electricity hills. The learned Adjudicating Officer will obtain the necessary information from WAPDA Authorities himself in case of need. If any amount is found recoverable then the same shall be finally determined by the learned Adjudicating Officer keeping in view the provisions contained in subsection (3) of section 36 of the Sales Tax Act, 1990.
14. The appeal stands disposed of in above stated terms.
C.M.A./715/Tax (Trib.) Order accordingly.