Appeal Nos. S.T. 58/Remand/PB of 2005, Old No. 7(1633)ST/IB of 2001(PB) and S.T. 76/PB of 2004, decided on 3rd June, 2005. Versus Appeal Nos. S.T. 58/Remand/PB of 2005, Old No. 7(1633)ST/IB of 2001(PB) and S.T. 76/PB of 2004, decided on 3rd June, 2005.
MUHAMMAD WALI KHAN, MEMBER (TECHNICAL).-- -By this judgment we shall dispose of two appeals No. S.T. 58/Remand/PB of 2005 Old No. 7(1633)ST/IB of 2001 (PB) and ST-76/PB of 2004 filed by Messrs Al-Arabia Industry (Pvt.) Ltd., Small Industrial Estate, Kohat Road, Peshawar (hereinafter called the appellants) against the Order-in-Original Nos. 28 of 2001, dated 31-5-2001 and 1 of 2004, dated 19-1-2004 passed by the learned Deputy Collector of Customs, Sales Tax and Central Excise (Adjudication), Peshawar (hereinafter called the Adjudicating Officer and the Collector, Sales Tax and Central Excise, Peshawar (hereinafter called the Collector) respectively as common questions of law and facts are involved.
2. Brief facts of Appeal No. S.T. 58/Remand/PB of 2005 Old No.7(1633)ST/IB of 2001(PB) are that senior auditor of the Collectorate of Sales Tax and Central Excise, Peshawar audited the record of the appellants and reported the following irregularities:
(i) The appellants had paid tax during 1996-97 on ad valorem (at statutory rate) basis but paid the said sales tax on fixed tax basis during 1997-98 under the Notification No.S.R.O. A 1259(I)/97, dated 18-12-1997 in clear breach of the provisions of the said notification. This caused a loss of Rs.437,008.00 as principal amount of tax, besides the additional tax payable thereon, on the basis of their turnover of Rs.3,496,715.00 as declared to the Income Tax Department.
(ii) The appellants also paid sales tax for 1998-99 under Notification No.S.R.O. 458(I)/99, dated 6-4-1999 which applied to units having annual turnover of less than Rs.1 million except the units operating under the value-added tax system. The information received from Income Tax Department showed that their turnover was Rs.3,866,270.00 during 1998-99. This breach of rule 1(2) of the Simplified Sales Tax Rules, 1999 caused loss of sales tax of Rs.578,622.00 besides the additional tax due thereon.
(iii) The audited annual accounts of the appellants for 1996-97 showed sale of goods worth Rs.2,831,280.00 while the tax returns for 1996-97 showed it to be Rs.219,895.00. This suppression of sales caused loss of principal amount of Rs.433,953.00 of sales tax besides the additional tax due thereon.
(iv) The audited annual accounts of the appellants for 1996-97 showed sales of wastages worth Rs.86,196.00 on which no sales tax appears to have been paid through tax returns. This caused loss of principal amount of sale tax of Rs.11,554.00 besides the additional tax due thereon.
(v) During the first 7 months of 1999-2000, the appellants showed sales tax of Rs.125,140.00 in their sales register while they showed it as Rs.22,010.00 in the relevant tax returns. Thus they short paid principal amount of sales tax of Rs.103,130.00 besides the additional tax due.
3. Based on the above mentioned audit report the adjudicating officer issued show-cause notice C. No. ST(Adj)30/2001/112, dated 25-9-2000 requiring the appellants to show cause as to why the aforesaid amounts totalling at Rs.1,564,447.00 should not he recovered from them along with the additional tax due thereon besides taking penal action against them under the sales Tax Act, 1990 (hereinafter called the Act). After hearing both the parties the learned Adjudicating Officer decided the case vide the impugned Order-in-Original No.28 of 2001 holding that sales tax amounting to Rs.1,564,447.00 along with the additional tax due thereon, is recoverable from the appellants. He also imposed a penalty equal to 5% of the amount of sales tax under section 33 of the Act on the appellants.
4. Dissatisfied with the decision of the Adjudicating Officer, the appellants filed the present appeal with this Tribunal but were not successful as the Tribunal dismissed their appeal vide judgment, dated 17-4-2003. The operative part of the judgment is reproduced below:--
"Having heard the parties and on perusal of record of the case, we find that the appellant paid monthly sales tax under the normal tax return-cum-payment challans, without indicating anything that it was fixed tax payment. Moreover, fixed payments could only be made in the wake of notification issued and published under the then subsections (4) and (5) of section 3 of the Sales Tax Act, 1990, and there was no such notification during 1996-97, and the first half of 1997-98. Until S.R.O. 1247(I)/97, S.R.O. 1258(I)/97 and S.R.O. 1259(I)/98, all dated 18-12-1997, were issued. All fixed tax payments, even if any, for 1996-97 and 1997-98 made prior to the publication of the aforesaid notifications were unlawful, void and uncalled for. Moreover, even on publication of aforesaid notifications, the appellant failed to adhere to the provisions of the Fixed Amount of Tax Rules, 1997 specially the provisions of rules 1(2) and 3 thereof, and, therefore, he cannot legally claim or avail of the benefits of the aforesaid 3 notifications. As regards the liability for 1998-99, there is no fixed tax notification under the erstwhile subsections (4) and (5) of section 3. The Simplified Tax Rules, 1999, notified under S.R.O. 458(I)199, dated 6-4-1999 under section 71 of the Sales Tax Act, 1990, is not a fixed tax notification but a set of rules for simplified payment of sales tax by persons having annual turnover not exceeding Rs.1 million (a guiding monetary limit also prescribed under the then provisions of section 3A of the Act). Since, the appellant had an annual turnover exceeding Rs. one million, the benefits of S.R.O. 458(1)/99, dated 6-4-1999 could also not be claimed or availed of by them for the year, 1998-99. For the reasons given in this paragraph, we have no hesitation in confirming the portion of the impugned order relating to determination of liability of principal amount of sales tax for the 1996-97 and 1997-98 as the appellants supplies were liable to statutory rate of sales tax under the normal VAT-regime (as prescribed under the said 1990-Act) during that period and the appellant failed to comply with the provisions of rules 1(2), and rule (3) of the Fixed Amount of Sales Tax Rules, 1997. We also confirm the determined liability of the appellant for the principal amount of sales tax at statutory rates for 1998-99 because there was no fixed tax scheme under the law during that period and the Simplified Tax Rules, 1999, of S.R.O. 458(1)/99, dated 6-4-1999, did not apply to the appellant having an annual turnover exceeding Rs.1 million. However, we are pleased to remit the whole of penalty imposed in this case and also to remit the amounts of additional tax exceeding 25 % amount of the amount of liability of additional tax (as may be under section 34) subject to the condition that the appellant pays the principal amount of sales tax and the said 25 % of the amount of additional tax, on or before the 30th May, 2003 to the satisfaction of the Collector of Sales Tax, Peshawar. In case of appellant's delay or default in making such payment, the aforesaid orders of remission of penalty and 7.5% of additional tax shall abate. The impugned order is modified to the extent stated in this paragraph and the appeal stands disposed of accordingly."
5. Consequent upon the decision of the Tribunal as aforesaid the appellants filed an appeal in the Hon'ble Peshawar High Court. The Hon'ble Peshawar High Court vide judgment, dated 15-10-2003 in S.A.O. No. 36 of 2003 set aside the decision of the Tribunal and remanded the case back to the Tribunal for a fresh decision. The operative part of the judgment is reproduced below:---
"At the hearing of the appeal the learned counsel for the appellant as well as the learned counsel for the respondent , that is Collector Central Excise and Sales Tax, agreed that the case needs to be remanded. However, they were not in agreement as to whether it shall be remitted to the Appellate Tribunal or to the Collector, where the appellant's applications seeking exemption under S.R.O. 392(I)/2001 was still pending. We are however of the considered view that the appeal be remitted to the Tribunal who shall adjudicate upon the same after the Collector disposes of the appellant's application. Consequently we allow this appeal in the terms that the impugned judgment and order of the Customs Central Excise and Sales 'Fax Appellate Tribunal are set aside and the case is remanded to the Tribunal. The Tribunal shall keep the appeal pending until the Collector disposes of the appellant's application, which shall be made within two months positively."
6. The facts of the case in Appeal No. ST-76/PB of 2004 are that the appellants filed an application on 10-1-2003 in terms of S.R.O. 392(1)/2001 read with S.R.O. 393(1)/2001 both, dated 18-6-2001 and Sales Tax General Order No.2 of 2001, dated 30-6-2001 with the Collector seeking exemption under the aforesaid S.R.Os. for the years, 1996-97, 1997-98 and 1998-99. While their application under reference was pending with the Collector, the appellants filed an appeal in the Hon'ble Peshawar High Court against the decision, dated 17-4-2003 of this Tribunal's Peshawar Bench in the Appeal No.7(1633)ST/IB/ 2001(PB) as mentioned above. The Hon'ble Peshawar High Court through judgment, dated 15-10-2003 in S.A.O. No. 36 of 2003 remanded the case back to the Tribunal as discussed above. Acting on the direction given by the Hon'ble Peshawar High Court and after hearing the appellants the Collector dismissed the application, dated 10-1-2003 of the appellants. The operative part of the Collector's decision is given below:--
"I have heard the parties and went through the application supported by various documents. The registered person had paid sales tax during 1996-97 on ad valorem (at statutory rate) basis and started payment of fixed tax basis 1997-98 under the Notification No.S.R.O. 1259(I)/97, dated 20-12-1997. The unit also paid fixed tax during, 1998-99' under Notification No.S.R.O. 452(I)/99, dated 6-4-1999. Under both the S.R.Os. there was a condition that the fixed sales tax scheme is available to the registered persons who had paid fixed sales tax during 1996-97 and 1997-98 respectively. On the basis of record available it is transpired that the applicant paid monthly sales tax under the normal tax return-cum-payment challans, without indicating anything that it was a fixed tax payment. The applicant did not fulfil the primary condition as envisaged under para. 2 of both the notifications which stipulates that these schemes can be availed by person who had availed the scheme during 1996-97 and 1997-98 respectively. Moreover, fixed tax payments could only be made in the wake of notification issued and published under the then subsections (4) and (5) of section 3 of the Sales Tax Act, 1990, and there was no such notification during 1996-97 and the first half of 1997-98 until S.R.O. 1247(I)/97, S.R.O. 1258(1)/97 and S.R.O. 1259(1)/97, all dated 18-12-1997 were issued. All fixed tax payments, even if any, for 1996-97 and 1997-98 made prior to the publication of the aforesaid notifications were unlawful, void and uncalled for. Moreover, even on publication of aforesaid notifications, the applicant failed to ad here to the provisions of the Fixed Amount of Tax Rules, 1997, specially the provisions of rule 1(2) and 3 thereof, and, therefore, he cannot legally claim or avail of the benefits of the aforesaid three notifications."
7. Aggrieved of the decision of the Collector the appellants filed Appeal No. ST-76/PB of 2004 in this Tribunal.
8. Before adducing arguments the learned counsel for the appellants urged that the decision of the Collector rejecting his clients application under S.R.O. 392(I)/2001, dated 16-6-2001 vide his impugned Order-in-Original No.1 of 2004, dated 19-1-2004 may be taken first as the decision taken in this case shall have a bearing on the other case in Appeal No. S.T. 58/Remand/PB of 2005 Old No.7(1633)/ ST/IB/2001(PB). Arguing the case he submitted that the core issue in both the appeals is whether or not the appellants are entitled to the benefits of fixed sales tax schemes for the financial years, 1996-97, 1997-98 and 1998-99. He stated that his clients are manufacturers of aluminum utensils and are "registered person" under the Act since, 1992. They remained sales tax payers under the fixed tax schemes during the period from 1992-93 to 1998-99 and by 1st July, 1999 switched over to the VAT mode of sales tax. He stated that the learned Adjudicating Officer served a show-cause notice, dated 25-9-2000 wherein the appellants' fixed tax entitlement for the year, 1996-97, 1997-98 and 1998-99 was primarily questioned on the ground that their returns for the year, 1996-97 reflected that they paid sales tax on ad valorem (standard rate) basis. It was on this account that the respondents thought the appellants were not entitled to avail fixed tax scheme under S.R.O. 1258(I)/97, dated 18-12-1997 for the year 1996-97, under S.R.O. 1259(1)/97 dated 18-12-1997 for the year, 1997-98 and under S.R.O. 458(1)/99, dated 6-4-1999 for the year, 1998-99 respectively. He claimed that on the basis of the sales as declared in the Income Tax Returns of the respective years filed by the appellants, sales tax was calculated by the sales tax authorities at the prevalent standard rates and was demanded from the appellants vide the aforesaid show cause notice.
It was also alleged in the said notice that the appellants made short payment of Rs.11,554.00 in, sales tax on sale of wastage during the year, 1996-97 and short payment of Rs.103,130.00 during the period from July, 1999 to January, 2000, due to discrepancies in sales tax payment figures shown in the sales tax returns and those recorded in the sales register.
9. Tracing the history of fixed tax relating to the aluminum utensils the learned counsel submitted that by virtue of S.R.O. 363(I)/92, dated 14-5-1992 the manufacturers of aluminum utensils were brought into the sales tax net by C.B.R. This act of C.B.R. was firstly resisted by the All Pakistan Aluminum Utensils Manufacturers Association. However, as a result of extensive negotiations on agreement was made on Fixed Tax Regime in October, 1993 on the basis of which S.R.O. 900(I)/93, dated 5-10-1993 and S.R.O. 842(I)/94, dated 5-9-1994 were issued with retrospective application for the years, 1993-94 and 1994-95 respectively. In the year, 1995-96 the fixed tax scheme was extended to Aluminum Utensil Manufacturers vide S.R.O. 710(I)/95, dated 2-7-1995. The appellants availed the Fixed Tax Regime and paid the tax @ Rs.2,850.00 per month accordingly. When the budget for the year, 1996-97 was announced, the department again started persuading the appellants to pay the tax under normal regime (standard rate). However, the appellants, in line with the instructions of the All Pakistan Aluminum Utensils Manufacturers Association, kept on paying token tax more or less in the same manner as was prevalent during the year, 1995-96. During the initial half of the year, 1997-98, the appellants continued with the practice as was for the, years, 1996-97. Then a deal was struck between the Association and the C.B.R. as a result of which on 18-12-1997 two notifications i.e. S.R.Os. 1258(I)/97 and 1259(I)/97, both, dated 18-12-1997 notifying Fixed Tax Scheme for aluminum utensils were issued with retrospective application for the years, 1996-97 and 1997-98 respectively. The appellants kept on paying sales tax under the fixed tax scheme even during the year, 1998-99 till 6-4-1999 when S.R.O. 458(1)/99, dated 6-4-1999 was issued with retrospective application under which the fixed tax scheme was kept alive even during the year, 1998-99.
10. Arguing on the merits of the case in Appeal No. ST-76/PB/2004 the learned counsel, inter alia, submitted as under:
(i) The impugned order is erred both in law and on facts.
(ii) The learned Collector, instead of examining the appellants' qualification under S.R.O. 392(I)/2001 read with S.R.O. 393(1)/2001, both dated 16-6-2001 objectively, rejected the application on the same ground under which its qualification has already been questioned in show-cause notice which was upheld by the adjudicating officer in his Order-in-Original No.28 of 2001 against which appeal is pending before this honourable Tribunal.
(iii) The learned Collector failed to appreciate the letter and spirit of S.R.O. 392(I)/2001 where a fresh jurisdiction has been granted to him and did not exercise this jurisdiction fairly and judiciously.
(iv) The learned Collector failed to appreciate condition (i) of the S.R.O. 392(I)/2001 which only required that the appellants should have followed certain S.R.O. -of fixed tax scheme and paid tax regularly thereunder. It does not require that the appellant should have been qualified under all the Fixed Tax regimes.
(v) The appellants are fully qualified for exemption under S.R.O. 392(1)/2001 as the lapses, if any, committed by the appellants under force majeure and condonable.
(vi) Fixed Tax Scheme for the year, 1998-99 available under S.R.O. 458(1)/99, dated 6-4-1999 could not be denied to the appellants on the sole ground that it was applicable only to those manufacturers whose turnover was below one million because firstly, because this S.R.O. was issued at the end of the fiscal year, 1998-99 and secondly, when this condition stands withdrawn vide S.R.O. 393(1)/2001, dated 18-6-2001. In this regard he also invited our attention to the Sales Tax General Order No. 2 of 2001, dated 31-6-2001 and claimed that through this General Order C.B.R. has clarified that the condition of one million rupees is not applicable to fixed tax payers during the validity period of S.R.O. 458(1)/99, dated 6-4-1999.
(vii) Both S.R.Os. 392(1)/99 and 393(I)/99 carry a common condition i.e., the applicability of fixed tax scheme to the registered person during the preceding year. This is an undeniable position that the appellants, being manufacturers of aluminum utensils, were paying sales tax under the Fixed Tax Scheme during the period of 1995-96. Thus the denial of this Scheme to them for the period of 1996-97, 1997-98 and 1998-99 on the ground that they paid the tax under the normal regime for some period during 1996-97 and are therefore not entitled to the said scheme is against the letter and spirit of the two S.R.Os. as no such condition or bar exists in the two S.R.Os. for availing the scheme.
(viii) The impugned order is self-contradictory. The appellants are of the view that S.R.O. 710(I)/95 issued on 2-7-1995 held the field till 18-12-1997. However, after 30-6-1995 dispute arose between the All Pakistan Aluminum Utensils Manufacturers Association and the sales tax department. The Association insisted on payment of sales tax on fixed tax basis whereas the sales tax authorities demanded its payment on standard rate basis. During the .intervening period most of the aluminum utensils manufacturers were forced to pay sales tax at the rate of 18% of the Sales. This dispute, however, ended after marathon meetings which culminated in the issuance of S.R.O. 1258(I)/97 vide which the sales tax for the year, 1996-97 was made payable on the fixed tax basis by such registered persons to whom fixed sales tax scheme was applicable during the financial year, 1995-96. Thus' S.R.O. 1258(I)/97, dated 18-12-1997 legalized the previous non-payment of fixed tax by the aluminum utensils manufacturers' and they were deemed to be in fixed sales tax regime as this S.R.O. was made applicable retrospectively. In the same way S.R.O. 1259(I)/97 dated 18-12-1977 was made applicable for the year 1997-98.
(ix) S.R.O. 1259(1)/97, dated 18-12-1997 cannot be read in isolation and it is to be read with S.R.O. 1258(1)/97. The payment made by the appellants and ad-valorem basis for the year, 1996-97 was due to the dispute mentioned above which culminated in issuance of S.R.O. 1258(1)/97. Therefore, notwithstanding the payment of sales tax (18% on sales, the benefits of S.R.O. 1258(1)/97 and S.R.O. 1259(I)/97 are fully applicable to the appellants and they have the right to get these benefits in line with the incentives granted to the aluminum utensils manufacturers throughout Pakistan. For the financial year, 1997-98, the claim of the department is insane, unthinkable and against the provisions of S.R.O. 1259(1)/97 which does not make any restriction of applicability of fixed rates of sales tax for the year, 1997-98 and clause 2 of the said S.R.O. clearly stipulates that such rates shall be applicable to such registered persons to whom fixed sales tax scheme for the financial year, 1996-97 was applicable. Notwithstanding the sales amount mentioned in the show-cause notice the appellants are entitled to enjoy relaxation granted vide S.R.O. 710(1)/95, dated 2-7-1995, S.R.O. 1258(1)/97 and S.R.O. 1259(1)/97, both dated 18-12-1997.
(x) Rule 3 of S.R.O. 458(1)/99 encompasses and makes the appellants to pay fixed tax as it propounds that units which were entitled to pay fixed tax in the year, 1997-98 are entitled to pay it in similar manner in the year, 1998-99 with slight modification as to the rates of fixed tax. It was reiterated that the appellants have paid every single rupee payable as sales tax. Even otherwise, not a single Aluminum Utensils Manufacturers in the whole of Pakistan is paying sales tax on ad valorem basis. Demand of sales tax from the appellants on ad valorem basis is therefore discriminatory.
(xi) The alleged short payment relating to the period 1999-2000 is denied. The appellants declarations on the sales tax returns for the period are correct, consistent and mutually reconciled with the sales and purchases as maintained under the Act. The allegation is devoid of any evidence and is therefore liable to be dropped.
(xii) For the financial year, 1999-2000 the appellants have maintained regular record of sales tax and have discharged their tax liability of Rs.125,140.00 from July, 1999 to January, 2000 which includes an amount of Rs.103,130.00 as adjustment of sales tax paid on the consumption of sui gas plus payment of' Rs.22,010.00 as output tax due from them. Evidence to this effect has already been provided to the department in reference to notice, dated 3-5-2000 issued to them by the sales tax authorities under section 37 of the Act. However, during the period, substantial import has also been made and substantial amount of input tax has also been paid on imports. Sales tax on sui gas and electricity is to be accounted for, the details of which have already been provided the copies of the ledger maintained by the unit have been submitted accordingly. Therefore, the appellants were entitled for the adjustment/refund and no short payment has been made.
He therefore prayed that the impugned order of the learned Collector may be set aside. He also pointed out that factual and legal questions - involved in the Appeal.No.S.T.58/Remand/PB of 2005 old No.7(1633)/ ST/IB of 2001(PB) are exactly the same. Therefore the impugned Order in-Original No.28 of 2001, dated 31-5-2001 passed by the learned adjudicating officer may also be set aside.
11. On the other hand, the learned DR vehemently supported the impugned order and submitted that the Federal Government issued S.R.O. 1258(I)/97, dated 18-12-1997 vide which fixed tax rates of sales tax @ Rs.570.00 per spindle machine and Rs.288.00 per hydraulic or mechanical power press respectively were notified. Paragraph 2 of the said S.R.O. stated that the above rates shall be applicable for financial year, 1996-97 to such registered person to whom the fixed sales tax scheme for the financial year, 1995-96 was applicable. The fixed sales tax scheme for the financial year, 1995-96 was not applicable to the appellants since they did not fulfil the conditions of S.R.O. 710(1)/95, dated 2-7-1995. Therefore, they are not entitled to the fixed tax scheme for the year, 1996-97 under S.R.O. 1258(I)/97, dated 18-12-1997 as well. He claimed that the appellants have charged, levied and paid sales tax @ 18% on the taxable supplies made by them during 1996-97 which is reflected from their sales tax returns-cum-challans for the said period. This rate is not the fixed rate but it is the standard rate then prevailing. He submitted that the Federal Government issued S.R.O. 1259(1)/97, dated 18-12-1997 and levied fixed amount of sales tax @'Rs.798.00 per spindle machine and Rs.403.00 per hydraulic or mechanical power press respectively. Paragraph 2 of the said S.R.O. stated that the above rates shall be applicable for financial year, 1997-98 to such registered persons to whom the fixed sales tax scheme for the financial year, 1996-97 was applicable. As the fixed sales tax scheme for the financial year, 1996-97 was not applicable to the appellants as discussed above, the appellants were also not entitled to the fixed tax under S.R.O. 1259(I)/97, dated 18-12-1997 for the year, 1998-99. He pointed out that the Federal Government made Simplified Sales Tax Rules, 1999 for levy and collection of sales tax and issued S.R.O. 458(I)/99, dated 6-4-1999. Paragraph 2 of the said S.R.O. states that these rules "shall apply to the manufacturers of goods specified in the Schedule whose annual turnover is below one million rupees except the manufacturers of goods who are already operating under the value added tax system". Contrary to the above, the annual turnover of the appellants as declared by them to the Income Tax authorities was to Rs.3.866.270.00 (Rs. 3.87 million) which is greater than one million rupees. Therefore, they were not entitled to get the benefit of the said S.R.O. as well. He therefore prayed that both the appeals merit no consideration and may he dismissed.
12. Before going into the merits of the case, we deem it necessary to reproduce below the S.R.Os. that have been referred to by both the parties and that have a bearing on these appeals to have a clear picture of the issue in hand.
S.R.O. 710(I)/95 dated 2-7-1995.
"S.R.O. 710(I)/95.---In exercise of the powers conferred by subsection (4) of section 3 of the Sales Tax Act, 1990, the Central Board of Revenue, with the prior approval of the Federal Government, is pleased to levy the fixed amount of sales tax, at the rates specified in column (3) of the table below on machines specified in column (2) of the table used for the manufacturing of aluminum utensils falling under the respective heading of the First Schedule to the Customs Act, 1969 (IV of 1969), in lieu of sales tax leviable on the aforementioned goods under subsection (1) of the said section, in accordance with the procedure as the Board may prescribe.
TABLE
S. No. Description of machine Rate of fixed amount of Sales Tax per machine per month
(1) (2) (3)
1. Spindle machine Rs.475.00
2. Hydraulic or mechanical power press Rs.240.00
2. The above rates shall be applicable for the year, 1995-96 to such registered persons to whom the Fixed Sales Tax Scheme for financial year, 1994-95 was applicable."
S.K.O. 1258(I)/97, dated 18-12-1997.
"S.R.O. 1258(I)/97.---In exercise of the powers conferred by sub-section (4) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to levy the fixed amount of sales tax, at specified in columm (2) of that table, used for the manufacturing of aluminum utensils falling under the respective heading of the First Schedule to the Customs Act, 1969 (IV of 1969), in lieu of sales tax leviable on the aforementioned goods under subsection (1) of the said section, in accordance with the procedure as the Board may prescribe.
TABLE
S. No. Type of machine Rate of fixed amount of Sales Tax per machine per month
(1) (2) (3)
1. Spindle machine Rs.570.00
2. Hydraulic or mechanical power press Rs.288.00
2. The above rates shall be applicable for the year, 1996-97 to such registered persons to whom the Fixed Sales Tax Scheme for financial year, 1995-96 was applicable."
S.R.O. 1259(I)/97, dated 18-12-1997.
"S.R.O. 1259(I)/97.---In exercise of the powers conferred by subsection (4) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to levy the fixed amount of sales tax, at the rates specified in column (3) of the table below, on machines specified in column (2) of that table, used for the manufacturing of aluminum utensils falling under the respective heading of the First Schedule to the Customs Act, 1969 (IV of 1969), in lieu of sales tax leviable on the aforementioned goods under subsection (1) of the said section, in accordance with the procedure as the Board may prescribe.
TABLE
S. No. Type of machine Rate of fixed amount of Sales Tax per machine per month
(1) (2) (3)
1. Spindle machine Rs.798.00
2. Hydraulic or mechanical power press Rs.403.00
2. The above rates shall be applicable for the year, 1996-97 to such registered persons to whom the Fixed Sales Tax Scheme for financial year, 1996-97 was applicable."
S.R.O. 392(I)/2001, dated 18-6-2001.
"S.R.O. 392(I)/200l.---In exercise of the powers conferred by clause (a) of subsection (2) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to exempt the whole amount of sales tax in excess of that liable to be paid at the rates specified under any applicable fixed sales tax rules up to the 30th June, 1998, the Simplified Sales Tax Rules, 1999, or under any written instructions from the Central Board of Revenue, on supplies made by a manufacturer up to the 30th June, 2000, subject to the following conditions, namely:--
(i) Such manufacturer was working in accordance with any of the aforesaid rules or instructions of Central Board of Revenue and was regularly paying tax due under such schemes or instructions up to the 30th June, 2000;
(ii) outstanding arrears of sales tax, if any, pertaining to the period up to the 30th June, 2000, or thereafter are paid before the 31st December, 2001;
(iii) no case of tax fraud is outstanding against him for the period up to the 30th June, 2000, or the date of starting to operate under VAT mode of sales tax; whichever is earlier:--
Provided that:--
(a) for the purpose of conditions (i) and (iv) above, non-filing of', or non-payment against a maximum of four tax returns during the relevant period shall be condoned subject to the condition that the arrears are paid before the 31st December, 2001;
(b) with reference to condition (iv) above, if any person started discharging his tax liabilities under the VAT mode of sales tax on any date prior to the 1st July, 2000, the exemption under this notification shall be admissible only up to the date provided arrears are paid in terms of condition (ii) above; and
(c) the benefit of this notification shall not be admissible to any person who obtained a new registration before or after the abolition of any of' the aforesaid fixed tax or other scheme to avoid payment of his tax liabilities accrued thereunder.
(2) The benefit of this notification shall be admissible only if the registered person applies to the Collector of Sales Tax having jurisdiction in proper form along with the relevant documents duly certified by the concerned trade association as to the fulfillment of the said conditions and the Collector, after having satisfied himself about the accuracy and genuineness of such application issues a formal order to the effect that the applicant is allowed the benefit of this notification.
(3) This notification shall not entitle any 'person to claim or take refund of any amount of sales tax already paid by or recovered from him."
13. We have heard both the parties and examined record of the case carefully. We have also perused the S.R.Os. relied upon by both the parties. We have observed that the learned Collector has not applied his mind properly to the issue in question while rejecting application, dated 10-1-2003 of the appellants. He appears to be influenced by the decision, dated 17-4-2003 of this Tribunal in Appeal No.7 (1633) ST/IB of 2001 (PB) as his order seems to be the reproduction of the Tribunal's aforesaid order to a large extent. This is in spite of the fact that the same order was set aside by the Hon'ble Peshawar High Court, we are of the considered view that the learned Collector has totally ignored the following vital aspects of the case:--
(1) The appellants, manufacturers of aluminum utensils, claim to have paid fixed tax in accordance with S.R.O. 710(1)/95, dated 2-7-1995.during the year, 1995-96. Their claim is supported by the letter C. No. Nil, dated 24-6-1996 of the Deputy Superintendent, Central Excise and Sales Tax Circle, Peshawar in which the appellants were directed to pay sales tax @ 18% instead of fixed sales tax with effect from 1-7-1996. This letter has not been disowned by the respondents. This means that till 30-6-1996 the appellants were paying fixed sales tax.
(2) There is no allegation against the appellants either in the show-cause notice issued to them by the adjudicating officer or in his impugned Order-in-Original No. 28 of 2001, dated 31-5-2001 that they were not qualified for fixed tax during 1995-96 or that they did not pay fixed tax during that period. This means that the case against them is entirely based on the claim of the respondents that the appellants paid sales tax at the standard rate during 1996-97, if the appellants were not entitled to the fixed tax during the year, 1995-96 as contended by the respondents now at the appeal stage how they were allowed to pay fixed tax during that period. Was any case instituted against them? The respondents have no answer to these questions.
(3) S.R.O. 1258(1)/97 was issued on 18-12-1997 but has retrospective application to the year 1996-97 that ended on 30-6-1997. This S.R.O. does not indicate that a registered person who paid sales tax at the normal rates during 1996-97 shall not be entitled to fixed tax rate. Therefore, the Collector has erred in interpreting this S.R.O. by denying the benefit thereof to the appellants for the year, 1996-97 holding that during, 1996-97 no fixed tax notification was in the field. This interpretation will make the S.R.O. redundant.
(4) Vide S.R.Os. 710(I)/95, dated 2-7-1995, 1258(I)/97, dated 18-12-1997 and 1259(1)/97, dated 18-12-1997 the Federal Government, in exercise of' the powers vested in it under the then existing subsection (4) of section 3 of the Act, levied fixed sales tax in lieu of levying and collecting the tax under subsection (1) of section 3 of the Act on certain class of goods as mentioned therein during the period covered by each S.R.O. Similarly, the C.B.R., in exercise of the powers vested in it under the then existing section 71 of the Act and with the prior approval of the Federal Government, vide S.R.O. 458(1)/99, dated 6-4-1999 notified the Simplified Sales Tax Rules, 1999. Under rule 3(i) thereof fixed sales tax rate for the year, 1998-99 was fixed. The appellants' goods fall in the Schedule all these S.R.Os. As a matter of fact the first three S.R.Os. are specific to the item manufactured by the appellants i.e. aluminum utensils whereas the fourth S.R.O. covers a host commodities including aluminum utensils. Thus the appellants have a vested right to be taxed in terms of these S.R.Os. as these are specific to their goods and this right cannot be denied to them even if they had paid sales tax at the standard rate during the period to which these S.R.Os. apply as for them no other rate except the specific fixed rate was applicable.
(5) According to sub-rule (2) of rule 1 of the Fixed Amount of Sales Tax Rules, .1997 notified vide S.R.O. 1247(I)/97, dated 18-12-1997, these rules "shall apply to manufacturers of goods, specified in the Schedule, who have been paying sales tax on fixed basis during the years, 1995-96, 1996-97 and up to the 30th October, 1997 on their own, who opt to pay the fixed amount of sales tax for the year 1997-98 at the rate specified in the relevant notification against whom liabilities under the normal Sales Tax regime have not been determined and / or are under determination." As has been noted above the appellants paid fixed sales tax during 1995-96. They were paying fixed tax on their own till they were forced to opt for the standard rate with effect from 1-7-1996 by the sales tax authorities. Despite that they opted to pay more or less the same amount that was payable from them under the fixed tax regime during 1996-97, 1997-98 and 1998-99. There is nothing on record to show that either liabilities against the appellants were determined under the normal Sales Tax regime and/or such liabilities were under determination at the time of issue of S.R.O. 1247(1)/97, dated 18-12-1997. It is, therefore, incorrect to hold that they failed to adhere to the provisions of sub-rule (2) of rule 1 of the aforesaid Rules.
(6) The Simplified Sales Tax Rules, 1999 notified vide S.R.O. 458(I)/99, dated 6-4-1999 and meant for the financial year, 1998-99 were made applicable vide sub-rules (2) of rule 1 thereof to the manufacturers of goods specified in the Schedule to these rules whose annual turnover is below one million rupees except manufacturers of goods who are already operating under the Value Added Tax System. Vide sub-rules (i) of rule 3 thereof the manufacturers were require to pay twenty five per cent additional amount for the first five months and fifty per cent additional amount for the remaining seven months of the financial year, 1998-99 as compared with the amount paid by them during the financial year, 1997-98. It is thus clear that this,, S.R.O. had retrospective application with effect from 1-7-1998 and up to 30-6-1999 despite the fact that it was issued on 6-4-1999. The restriction of application of this S.R.O. to manufacturers whose annual turnover was below one million rupees was removed vide S.R.O. 393(1)/2001, dated 30-6-2001 with the result that during the financial year, 1998-99 there was no such restriction at all. This has amply been clarified in the. Sales Tax General Order No.2 of 2001, dated 30-6-2001, C.B.R.'s instructions contained in the said General Order are binding on the sales tax authorities working under its control in terms of section 72 of the Act. Paragraphs 2 and 3 of the said General Order are reproduced below:-
"(2) S.R.O. 392(1)/2001, dated 18-6-2001.---A large number of taxpayers worked under the fixed tax schemes during the financial year, 1995-96, 1996-97 and 1997-98, and were subsequently covered under the Simplified Sales Tax Rules, 1999 during the year, 1998-99. After expiry of the last of the fixed or simplified tax schemes on 30-6-1999, many of such taxpayers continued to discharge their tax liabilities in the same manner and at the same rates as in the past but did not switch-over to VAT system. The expectation of .the taxpayers who continued to behave in this manner was that the government would eventually revive fixed tax schemes in due course as it had done in previous years. The announcement of the government's resolve for documentation of the national economy in December, 1999 created on awareness among taxpayers that the fixed tax schemes were a thing of the past. Thereafter, such taxpayers gradually started converting to genuine VAT system. Under S.R.O. 392(I)/2001, dated 18-6-2001, those amongst such taxpayers who converted to VAT system by 30-6-2000 will get relief in respect of their past inadequate compliance provided they fulfil the conditions specified therein.
(3) S.R.O. 393(I)/2001, dated. 30-6-2001.---This notification addresses the difficulties of those persons who were working under any notified fixed sales tax regime up to 1-7-1998 when the relevant legal provision was rescinded. As already mentioned, most of the persons governed under the fixed tax regime upto 30-6-1998 continued to discharge their tax liabilities in accordance_ with the lapsed fixed tax notifications, and in due course, the Simplified Sales Tax Rules, 1999 were notified vide S.R.O. 458(I)/99 which operated up to 30-6-1999. However, one category of taxpayers previously covered under the fixed tax scheme was ' excluded from the Simplified Sales Tax Rules, 1999 i.e. those with annual turnover in excess of Rs.1 million. - This retrospective exclusion created difficulties for those persons who had been complying under the old regime even after 1-7-1998. Now, the persons so excluded have been given coverage under the Simplified Sales Tax Rules, 1999 during the period of its validity. It is clarified that any person to whom the Simplified Sales Tax Rules, 1999 has thus been extended under this notification are also entitled, if otherwise qualified to the relief available under S.R.O. 392(1)/2001, dated 18-6-2001 notwithstanding the provisions of Item No. (iv) of rule 3 of the Simplified Sales Tax Rules, 1999."
(7) A reference has been made to rule 3 of the Fixed Amount of Sales Tax Rules, 1997 (S.R.O. 1247(I)/97, dated 18-12-1997) and it has been contended that since the appellants did not follow this rule (by not making a declaration to the Assistant Collector of Sales Tax having jurisdiction for the financial year, 1997-98 by 26th December, 1997) they are not entitled to the payment of fixed amount of tax during this period. We are, however, of the view that this is a procedural lapse on the part of the appellants and could be the result of non-awareness of this condition owing to the limited time between the issuance of S.R.O. 1247(I)/97, dated 18-12-1997 and the target date i.e. 26-12-1997 or the notification was published in the official Gazette after expiry of the target date. Even if this lapse is considered intentional this inadequacy is condonable in terms of paragraph 2 of the Sales Tax General Order No.2 of 2001. Therefore, denying the fixed tax facility to the appellants is not justified. Under S.R.O. 392(1)/2001, dated 18-6-2001 read with the Sales Tax General Order No.2 of 2001, dated 30-6-2001 the appellants are entitled to the exemption of the whole amount of sales tax in excess of that liable to be paid at the rates specified under any applicable fixed sales tax rules up to the 30th June, 1998, the Simplified Sales Tax Rules, 1999 or under any written instructions from the Central Board of' Revenue since they fulfil the conditions of these S.R.Os. in that:
(i) they were working under the Fixed Sales Tax Regime under S.R.O. 710(I)/95, S.R.O. 1258(I)/97, S.R.O. 1259(1)/97 and S.R.O. 458(I)/99 and were regularly paying tax under such schemes up to 30-6-1999 and switched over to the VAT mode from 1-7-1999;
(ii) no arrears of sales tax were outstanding against them till their switching over to the VAT mode of sales tax;
(iii) no case of tax fraud was outstanding against them for the period up to 30th June, 1999; and
(iv) they are registered person and are regularly paying sales tax at the rate specified in subsection (1) of section 3 of the Act since their switching over to the VAT mode of sales tax.
14. For what has been discussed in paragraph 13 above we are convinced that the appellants were entitled to the Fixed Sales Tax Scheme during the years 1996-97, 1997-98 and 1998-99 and denial of this scheme to them is not justified. We, therefore, hold that rejection of the application of the appellants, dated 10-1-2003 by the learned Collector is not justified. The Order-in-Original No.1 of 2004, dated 19-1-2004 passed by the Collector is therefore set aside and he is directed to entertain the application in the light of the observations given above.
15. In the light of the above, the allegations Nos. 1 to 4 framed in the show-cause notice, dated 25-9-2000 and upheld in the impugned Order-in-Original No. 28 of 2001 of the Adjudicating Officer could not be established since the appellants were entitled to pay fixed tax in accordance with the S.R.Os. referred to above in lieu of the normal tax levied under subsection (1) of section 3 of the Act during the periods involved in the instant case. The impugned Order-in-Original No. 28 of 2001 passed by the Adjudicating Officer is accordingly set aside insofar as it applies to the aforesaid 4 allegations. So far as allegation No.5 is concerned, during the period in question the appellants were paying sales tax on the VAT mode meaning thereby that they were entitled to the input tax deduction from the output tax due from them in terms of subsection (1) of section 7 of the Act. They claim that they have discharged their tax liability of Rs.125,140.00 for the period of July, 1999 to January, 2000 in the following way:
(i) They claimed input tax adjustment of Rs.103,130.00 on sui gas bills.
(ii) They paid the remaining amount of Rs.22,010.00 as output tax due from them after adjusting the aforesaid input tax of Rs.103,130.00.
Therefore they claim that nothing is outstanding against them in this period and evidence to the above effect has already been given to the sales tax authorities in response to the notice issued to them under section 37 of the Act. We are of the' view that subject to section 8 of the Act, the appellants are entitled to the input tax deduction from their output tax liabilities. If the gas bills are in the name of the registered person (the appellants) and they have used the sui gas in the taxable activity within the C compound where aluminum utensils are manufactured the sales tax paid on such consumption of sui gas will be treated as input tax paid by them and adjustment thereof will be allowed in holding so we find support from three decisions of this Tribunal's Peshawar Bench and its Special Bench, Camp Faisalabad in Appeal Nos. S.T. 285/PB of 2003 (Messrs Cherat Cement Company Ltd., Nowshera v. the Collector of Customs, Sales Tax and Central Excise (Adjudication), Rawalpindi, Regional Office. Custom House, Peshawar), 783/PB of 2002 (Messrs Premier Sugar Mills, Mardan v. Collector, Central Excise and Sales Tax Peshawar) and S.T.A. 807/LB of 2002 (Messrs Pioneer Cement Ltd., Khushab v. Collector Sales Tax, Faisalabad). But if' the sui gas is consumed outside the manufacturing compound of' the. appellants, they will not be entitled to such deduction. The factual position in this respect needs to be determined. Therefore, while setting aside the impugned order of the adjudicating officer on this account, we remand the case back to him for ascertaining the facts regarding consumption of sui gas and to determine and decide the tax liability of the appellants for the 'period of July, 1999 to January, 2000 by associating the appellants in the process of determining the facts and by affording adequate opportunity of hearing to them. Since this is an old case, the Adjudicating Officer is directed to decide the case in terms of this judgment within one month of' the receipt of this judgment.
16. Announced.
17. Parties may be informed accordingly.
C.M.A./515/Tax (Trib.) Appeal accepted.