S.T.A. No. 2261/LB of 2001, decided on 4th May, 2004. Versus S.T.A. No. 2261/LB of 2001, decided on 4th May, 2004.
PIR AKHTAR HUSSAIN BODLA (MEMBER (JUDICIAL)).- --This appeal is directed against Order-in-Original No.1275/2001 dated 30-7-2001 passed by the learned Deputy Collector Customs, Sales Tax and Central Excise (Adjudication), Multan whereby the appellant was ordered to pay Rs.21,29,313 as sales tax along with additional tax (to be A calculated at the time of deposit) under section 34 of the Sales Tax Act, 1990.
(sic) there was no rule for refund of input tax paid on parts, components and consumable used for such supplies. The claim of exempt supplies made during 12-6-1998 to 22-7-1998 was not admissible under subsection (1)(a) of section 8 of the Sales Tax Act, 1990 as exemption from input tax was granted w.e.f. 23-7-1998 vide S.R.O. 839(I)/98 dated 23-7-1998 having no retrospective effect. Due to inadmissible credit and adjustment against output tax national exchequer sustained a loss of Rs.21,29,313, the same was recoverable along with additional tax. The contravention case was made out against the said unit for violation of section 8 of the Sales Tax Act, 1990 and S.R.O. 839(I)/98 dated 23-7-1998. On the basis of these facts the appellants were charged with the violation of section 8 of the Sales Tax Act, 1990 and S.R.O. 839(I)/98 dated 23-7-1998 and were called upon the show-cause as-to why the evaded sales tax amounting to Rs.21,29,313 along with additional tax may not be recovered from them and why penal action under section 33 ibid may not be taken against them. After due process, the learned Adjudicating Officer ordered the appellant to pay Rs.21,29,313 as sales tax along with additional tax (to be calculated at the time of deposit) under section 34 of the Sales Tax Act, 1990. Hence, this appeal.
3. The main contentions of the learned counsel for the appellant are as under:---
(i) That on June 12, 1998 the Government exempted agricultural tractors from levy of sales tax vide Budget Instructions C.No.1/10-STB/98 dated 12-6-1998. According to the said instructions, which have force of law by all means, the B instructions conveyed through Secretary (Sales Tax Budget) categorically emphasized and repeatedly been laid, that the instructions will take effect immediately i.e. from 12th June, 1998.
(ii) That as per above referred instructions, under Heading No.1 the words "Immediate Measures" has been mentioned which show the intention of the Government. Clause 4 under this Heading of immediate measures is reproduced below:---
"Locally assembled tractors bulldozers and combined harvesters (for agriculture purpose only) have been exempted from the levy of sales tax. Moreover, the imported CKD KITS of such tractors, bulldozers and combined harvesters (for agriculture purpose only) shall also be exempted from sales tax???."
(iii) That the bare perusal of above referred clause (4) ibid read with the effective date and words immediate measures in juxta?position, the case of exemption from 12-6-1998 is clearly made out. But the learned Adjudication Officer has misinterpreted the said instructions.
(iv) That S.R.O. 839(I)/98, dated 23-7-1998 was issued by the C.B.R. to settle the procedure of refund of input tax reimbursed by the tractors manufacturers to their vendors. This S.R.O. has to be read in conjunction with budget instructions dated 12-6-1998.
(v) That the instructions issued by the C.B.R. to its Subordinate Officers of the Collectorates have binding force and have legal sanctity and there can be no departure from such directions/ instructions. Hence the impugned order-in-original has been passed in sheer violation of budget instructions.
(vi) That the C.B.R. in the meanwhile, proceeded a step ahead, by issuing another Directive No.2(2). T.II/98 dated 11-7-1998 under the Heading of Prime Minister's Package for the "Reduction of Tractors Price". Allowing the refund of input tax on the import of CKD KITS available in stock on 12-6-1998. This important factor further strengthens the intention of the Government to grant such exemptions (in dispute) since 12-6-1998, otherwise, whole of the scheme of grant of such exemptions from 12-6-1998 as is crystal clear, through the foregoing submissions, would become redundant and would defeat the Government policy/programme to give benefit to agriculturists.
(vii) That the S.R.O. 839(I)/98 dated 23-7-1998, cannot be relied nor read in isolation of budget instructions and directives of C.B.R. vide No.2(2)T-II/98 ibid, despite that fact that above referred S.R.O. deals with the procedure of refund of input tax:
(viii) That admittedly input tax on local components was in any, case-refundable even before June 12, 1998 by way of adjustment from output tax. Hence, S.R.O. 839(I)/98 dated 23-7-1998, has been misconstrued and misapplied in the case of the appellant. If tractor is exposed to input tax it will increase the cost of production if adjustment is not allowed from the output tax, which amounts to frustrating and defeating the very purpose of reducing the price and giving benefit to the purchaser of tractors.
(ix) That, by no stretch of, imagination or rule, there can be self-contradictory policies and different effective dates for levy of input and output sales tax.
(x) That the impugned order is based on surmises and conjectures and merit to be set at naught.
6.(sic) On the basis of above submissions, the learned counsel for the appellant requested that the impugned order in original may kindly be set aside and the appeal be accepted.
7. The learned D.R. who was assisted by Mr. Ikhlaq Ahmad, Auditor opposed the appeal contending that there is no infirmity in the impugned order in original as the appellant made supplies, exempt from payment of sales tax, between 12-6-1998 to 22-7-1998, however, adjusted input tax against the same. These input tax adjustment, not being utilized for making taxable supplies were not admissible under section 7 of the Sales Tax Act, 1990. He further contended that no reliance on S.R.O. 839(I)/98 dated 23-7-1998 could be places in the case as the S.R.O. was issued on 23-7-1998 and did not have any retrospectively effect. The learned D.R. requested that the appeal may be dismissed.
8. We have heard the learned counsel for the appellants, the learned D.R. and perused the appeal file before us. The learned counsel for the appellant, during the course of hearing contended that in a similar case Appeal No.584/LB of 2001 titled Messrs Millat Tractors Limited v. Collector of Customs, Sales Tax and Central Excise (Adjudication), Lahore Bench-I of this Tribunal has observed that "The action of the appellant in having the amount of Rs.1,35,46,200 as input adjustment was not in accordance with the explicit provisions of section 8 of the Sales Tax Act, 1990 and hence the Adjudicating Officer correctly ordered them to pay the said amount. However, considering circumstances of the case, there is no justification for the levy of additional tax and hence, the impugned order is modified to the said extent only". He further contended that against this-judgment of the Tribunal, the appellant as well as the department went in appeal before the Hon'ble Lahore High Court in cross-appeals. The apex Court upheld the judgment of the Tribunal cited as 2003 PTD 1445. The learned counsel for the appellant requested that this appeal may be decided in view of the above mentioned judgment.
9. In view of the above discussion we, while placing reliance on the above judgment of the Tribunal and Hon'ble Lahore High Court, hold that the action of the appellant in having the amount of Rs.21,29,313 as input adjustment was not in accordance with the explicit provisions of section 8 of the Sales Tax Act, 1990 and hence the Adjudicating Officer correctly ordered them to pay the said amount. However, considering circumstances of the case, there is no justification for the levy of additional tax and hence, the impugned order is modified to the said extent only.
C.M.A./473/Tax(Trib.) ???????????????????????????????????????????????????????????? Order accordingly.