Sales Tax Appeal No.H-255 of 2004, decided on 7th January, 2005. Versus Sales Tax Appeal No.H-255 of 2004, decided on 7th January, 2005.

ORDER

Being aggrieved by Order-in-Original No. 81 of 2004, dated 31-7-2004, this appeal has been preferred by appellant.

2. It is alleged that appellant had adjusted an amount on electrical bills for the period from July, 2002 to November, 2002 and April, 2003 to June, 2003, but during that period no production activity was carried out. In the same way appellant had adjusted input tax on Electricity Bills consumed in office area during the period from December, 2002 to March, 2003 in violation of section 8 of Sales Tax Act read with S.R.O. 124(I)/2000, dated 15-3-2000. Therefore, department is of the view that electricity consumed in office area and also during off season cannot be taken as taxable activity. On the basis of this very analogy learned adjudication officer has also observed that appellant is not entitled to claim input tax adjustment for the relevant period.

3. To analyze the subject of input tax adjustment section 8 of Sales Tax Act is relevant, which speaks about the entitlement of input tax claim. It says that a registered person is entitled to claim or deduct input tax on the goods used or to be used for the manufacture and production of taxable goods or supplies.

4. The essence of term "manufacture" as used in the Act mean the changing of one object into another for the purpose of making it marketable. In the same way the term production appears to contemplate some expenditure of human skill and labour and other connecting aspects and activity spent in bringing the goods to brought them to the state in which they may become fit for consumption. So in conjunction with this explanation all factors and items, whatsoever, are used and to be used are integral part of that manufacturing process and cannot be separated merely on the ground that it was used in off Season. Because to run a factory in satisfactory and good condition its maintenance and ever grooming is a fundamental aspect, without which, a good production cannot be expected.

5. In view of above discussion I am of the view that input adjustment made by appellant was in association with section 8 of Sales Tax Act and the said consumption of electricity by appellant even in off season was a integral process of manufacturing and production of taxable goods. Hence charge levelled at Sr. Nos.(i) and (ii) of Show-Cause Notice, dated 18-6-2004 is hereby vacated.

6. With regard to allegation No.3, though it is observed by adjudicating officer that there is no violation of section 73 of Act, further it is added that departmental representative had also recommended that this issue be treated as settled, but in spite of it, imposition of penalty by adjudicating officer, just on the ground that appellant had failed to provide documents at the time of audit, is nothing but a misuse of power. Therefore, imposition of penalty too is set aside.

7. With reference to para. 4 of Show-Cause Notice a statement has been moved by departmental representative on 7-1-2005 that all invoices were rechecked and were confirmed in order hence this charge be dropped.

8. With these observations appeal is disposed of accordingly as observed above.

C.M.A./383/Tax (Trib.) Order accordingly.