Appeal Case No.STA-344/PB of 2001, decided on 29th October, 2002. Versus Appeal Case No.STA-344/PB of 2001, decided on 29th October, 2002.
S.M. KAZIMI, MEMBER (TECHNICAL): ‑‑‑This judgment disposes of the appeal filed by Messrs Luqman Shah Enterprises, Peshawar, against the Order‑in‑Original No.57 of 2001, dated 15‑9‑2001 (dispatched on 26‑9‑2001) passed by the learned Deputy Collector (Adjudication), Peshawar.
2. Briefly, the facts of the case are that the audit team of the Collectorate reported that Messrs Luqman Shah Enterprises, Peshawar, had claimed 15% wastage of gas during the period from August, 1999 to November, 1999, and accordingly had short‑paid sales tax amounting to Rs.41,570 although, the Collection and Payment of Sales Tax on Natural Gas Rules, 1999, as notified under S.R.O. 1040(I)/99, dated 14‑9‑1999 did not provide for any deduction/non‑payment on account of such wastages. The Deputy Collector (Adjudication), Peshawar, issued a Notice C. No. ST (Adj) 34/2000/115, dated 25‑9‑2000 requiring Messrs Luqman Shah Enterprises, Peshawar to show‑cause why the said amount of Rs.41,570, alongwith the additional tax due thereon, should not be recovered from them and also why penal action for the breach of provisions of section 3, 6, 11, 23, 26 and 34 should not be taken against them. After hearing the parties, the learned Deputy Collector (Adjudication) passed the impugned Order‑in‑Original No.57 of 2001, dated 15‑9‑2001 holding that the amount of sales tax of Rs.41,570, alongwith the additional tax thereon, was payable by Messrs Luqman Shah Enterprises, Peshawar. Hence this appeal.
3. During the course of hearing before us, the learned counsel has produced a copy of the Member (Audit), Central Board of Revenue's Letter C. No.2(1)‑M (Audit) 2002, dated 8‑7‑2002 which is reproduced as hereunder:‑‑‑
"GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE
C. No.2(1)‑M(Audit/2002 Islamabad, the July 8, 2002
From: Syed Perwaiz Amjad,
Member (Audit).
To The Collectors;
Collectorates of Sales tax,
Lahore/Karachi (East)/Karachi (West)
Gujranwala/Faisalabad/Multan/Rawalpindi/
Peshawar/Hyderabad/Quetta.
Subject: Wastage AT C.N.G. Station
A study vas conducted jointly by Ministry of Petroleum, Hydrocarbon Development Institute, C.N.G. Associations, owners of stations and Sales Tax Collectorate Staff Rawalpindi. The report was discussed at C.B.R. with the stakeholders. The C.B.R.'s guidelines on the wastage at C.N.G. stations in Pakistan are:
Wastage factor for C.N.G. stations input/output reconciliation be allowed at a maximum of 13% for sales tax purpose throughout all Collectorates during Sales Tax audits in future and also in Sales Tax audits where reports have not been finalized.
Thanking you,
Yours sincerely,
(Sd.)
(Syed Perwaiz Amjad),
Member (Audit).
Copy for information to:‑‑
(1) Chairman, Central Board of Revenue, Islamabad.
(2) Chief Sales Tax III, C.B.R; Islamabad
(3) All Pakistan C.N.G. Association, Rawalpindi."
4. The learned counsel stated that the loss/wastage of gas is a routine phenomenon. Even during the adjudication proceedings at the original stage, they had requested the Deputy Collector (Adjudication) to keep the matter in pendency until the permissibility issue of wastage was decided by the Central Board of Revenue and the Ministry of Petroleum & Natural Resources. He pointed out that the Adjudicating Officer hastened in deciding this case and the C.B.R.'s decision in this regard was communicated on 8‑7‑2002 on an issue pending since last more than two years as is evident from the Department of Petroleum & Energy Resources (Directorate General, Gas), Islamabad's letter C.N.G. (Mis)‑7(8) of 1999, dated 10‑4‑2000. The learned counsel accepted Central Board of Revenue's decision of wastages upto 13% and agreed to pay the sales tax short‑paid on the 2% (15% minus 13%) wastage not contested by them. He prayed for the waiver of the demand for the wastage upto 13% of taxable receipts in terms of C.B.R.'s aforesaid decision dated 8‑7‑2002.
5. The learned Departmental Representative and representatives from the Collectorate argued that C.B.R.'s letter is prospective in nature and is applicable for sales tax audits in future and also in sales tax audits where reports have not been finalized. They pleaded that since this case relates to 1999, the Central Board of Revenue's letter is not applicable. In reply to query if there is any distinction in the reasons and causes of wastages prior to C.B.R.'s letter and after C.B.R.'s letter, they replied 'n negative. In reply to another query, whether the 15% wastage detected by them was on actual basis or on the basis of assumption, both the counsel and representatives replied that the wastage of 15% was claimed by the appellant on assumptive basis and was not calculated on actual basis. The representatives from the Collectorate prayed that the appeal may be dismissed because 15% wastage was not admissible under the Collection and Payment of Sales Tax on Natural Gas Rules, 1999.
6. Having heard the parties and on perusal of record of the case, we find that C.B.R.'s guidelines as provided in their letter, dated 8‑7‑2002 is based on the study of an issue emanating in 1999 (when sales tax was levied on natural gas). Since there is no change in the causes and reasons of the wastage, so determined since 1999, we do not find reasons why the C.B.R.'s guideline should not apply to the cases under dispute or under appeal for any period since and after 1999. Prospective application of the said guideline shall be arbitrary and discriminatory. Since this case (under appeal) is being contested and disputed from the very beginning, the application of C.B.R.'s guidelines, dated 8‑7‑2002 to it will be just and equitable. Since the appellants do not challenge or dispute the findings of wastage permissibility of upto 13% as stated in the C.B.R.'s letter, dated 8‑7‑2002 and have agreed to pay the sales tax due on the 2% (15% minus 13%) wastage in their case, the legality and validity of C.B.R.'s guideline in its aforesaid letter, dated 8‑7‑2002 is not to dispute before us except for its application since the date of 1999 when supply of natural and petroleum gases became taxable under the Sales Tax Act, 1990. We accordingly direct the, appellant to immediately pay the sales tax involved on the 2% wastage not contested by them. If they pay this amount by the 25th November, 2002, to the satisfaction of the Collector of the Sales Tax, Peshawar, the levy of additional tax shall stand remitted. However, if they fail to do so, the amount of sales tax on the said agreed and undisputed short‑payment on account 2% wastage shall be recovered by the Collector alongwith the additional sales tax due thereon.
7. As regards the remaining 13% wastage, we find that even C.B.R.'s guideline in their letter, dated 8-7‑2002 describe it as a maximum permissible wastage. This 13% wastage is neither compulsory nor automatic. The actual wastage (subject to the said maximum of 13% wastage) has to be calculated and determined on the basis of actual receipts and actual supply during the tax period. We have no doubt that these wastages/losses vary from stations to stations and from equipments to equipments and on grounds of temperature and pressure and various other actual factors. The Audit should first determine the actual wastages/losses and then investigate the factors, reasons and causes of these wastages/losses and then permit it subject to a maximum of 13% in terms of C.B.R.'s aforesaid guidelines, dated 8‑7‑2002. Wastages/losses claimed in excess of actual and those claimed in excess of 13% should be reported by Audit alongwith the reasons as advanced by the registered person in their report for recovery/adjudication action. With the aforesaid observation and guideline, we remand the case of determination and recovery of short‑paid, if any, amount of sales tax on the balance 13% wastage/loss involved in this case. The Collector of Sales Tax and his auditors should do this audit exercise afresh and submit their report to the Deputy Collector (Adjudication), Peshawar, afresh by the 30th of November, 2002. On receipt of such a report, the Deputy Collector (Adjudication) shall decide this case of wastage of upto 13% (15% as short‑paid minus 2% agreed to have short‑paid and also agreed to pay immediately and by 25‑11‑2002) afresh on merits after affording Messrs Luqman Shah Enterprises, Peshawar, an opportunity of being heard to explain their case and view‑point. The impugned order is modified accordingly as per the order in this paragraph and the preceding paragraph. The appeal stands disposed of accordingly.
8. Inform all concern.
9. Announced.
C.M.A./568/Tax(Trib.) Order accordingly