Appeal No. S.T.A. 2011/LB of 2001, decided on 22nd October, 2004. Versus Appeal No. S.T.A. 2011/LB of 2001, decided on 22nd October, 2004.
SAEED AKHTAR, MEMBER (TECHNICAL)--- This appeal is directed against Order-in-Original No.1070 of 2001 passed by the learned Deputy Collector, Collectorate of Customs, Sales Tax and Central Excise (Adjudication), Multan issued vide, C. No.71/2000/ ADJ/ST/AC/3840, dated 25-6-2001 whereunder the appellant was directed to deposit allegedly evaded sales tax amounting to Rs.140,769 (Rs.87,906`+ Rs.52,863 = Rs.140,769) along with additional tax under sections 360) and 34 of the Sales Tax Act, 1990.
2. Brief facts of the case are that sales tax records of Messrs Prime Cotton Ginning Pressing Factory was scrutinized by the auditors of Collectorate Customs, Sales Tax & Central Excise, Multan and it was observed that the appellant (then respondent) evaded sales tax amounting to Rs.198,687 by way of suppression of yield and value of cotton seed. After scrutiny of the record, the auditors observed that the registered person has suppressed production of cotton seed weighing 3968 maunds by way of suppression of yield. The appellant declared the recovery of ratio of cotton seed @ 54.9% against the normal recovery ratio of 58.62%. The value of seed, suppressed/supplied without issuance of sales tax invoices was Rs.972,160 involving sales tax amounting to Rs.145,824. Sales tax auditors further observed that supplies of cotton seed were made at the value which was lower than the minimum value of Rs.245 per maund fixed by the Central Board of Revenue vide Notification S.R.O. 1361(I)/98, dated 9-12-1998. An amount of Rs.52,863 was allegedly evaded due to suppression of value of supply in this way of suppression of recovery ratio and value of cotton seed, an amount of Rs.198,687 was allegedly evaded by the appellant. A show-cause notice was accordingly issued and the Adjudicating Officer after hearing the contentions of both the parties adjudged an amount of Rs.140,769 and directed the appellant to deposit the adjudged amount along with additional tax under sections 36(1) and 34 of the Sales Tax Act, 1990. The appellant feeling aggrieved with the findings of the Adjudicating Officer preferred this appeal under section 46 of the Sales Tax Act, 1990.
3. The main contentions of the learned counsel for the appellant were as under:
(1) That the appellant is engaged in the business of cotton ginning and is regularly paying sales tax. The auditors of sales tax scrutinized the sales tax records of the appellant and observed that the appellant has evaded sales tax by way of suppression of recovery ratio and value of supply of the cotton seed. An amount of Rs.140,769 was adjudged against the appellant with the directions to deposit the same along with additional tax under sections 36 and 34 of the Sales Tax Act, 1990.
(2) That the impugned order passed by the learned Deputy Collector is bad in law and against the facts of the case.
(3) That the learned Deputy Collector (Adjudication) was not justified in directing to deposit an amount of Rs.87,906 as sales , tax along with additional tax on the basis of recovery ratio of 58% of cotton seed against the declared ratio of 54.9%. The recovery ratio of cotton seed cannot be uniform for each factory and it varies from area to area and variety to variety. There is, therefore, no justification for enhancement of recovery ratio of cotton seed declared by the appellant. The demand is therefore incorrect and baseless.
(4) That the learned adjudicating officer was not justified in accepting the contravention made by the auditors on the basis of value supply as the cotton seed was supplied at the market price. The demand of Rs.52,863 was therefore not justified and un?warranted.
4. The learned DR was assisted by Mr. Pervaze Alam, Auditor contended that there is no infirmity in the impugned order as it has been passed on the basis of facts available on record. The DR further contended that the recovery of cotton seed ranges between 58 to 62% as confirmed by various studies carried out by the Department in the past. The learned DR contended that according to a study recently carried out by the office of Chief Textile Sector, C.B.R., the recovery ratio of cotton seed ranges between 58 to 59%. The learned DR stated that the findings of the office of Chief Textile Sector, C.B.R. regarding Textile Industry Notes were endorsed by various associations including Pakistan Cotton Ginning Associations and National College of Textile Engineering, Faisalabad. The learned DR further contended that the auditors have calculated recovery of cotton seed @ 58% which is the minimum recovery ratio of cotton seed as reported by different Textile Ginning Mills. The learned DR was of the view that there is no justification for acceptance of declared recovery ratio of appellant and requested that the recovery ratio of 58% determined by the auditors may be approved.
5. The learned DR further contended that the appellant has supplied cotton seed at the value lower than Rs.245 per maund fixed by the C.B.R. vide Notification S.R.O. 1361(I)/98, dated 9-12-1998. The learned D.R. contended that the appellant was required to charge sales tax at the minimum value as fixed by the Central Board of Revenue and requested that the evaded amount as adjudged may be confirmed.
6. I have heard the contentions of both the sides and perused the appeal file available before me. It has been alleged that the appellant has evaded sales tax by way of suppression of yield and value of supply of cotton seed. In this way an amount of Rs.140,769 along with additional tax was held recoverable from the appellant in the adjudication order. I have observed that in the past various studies were carried out by different Collectorates for the determination of recovery ratio of cotton seed and according to these studies the recovery of cotton seed was between 58 to 62%. However, recently an exercise was undertaken by the office of Chief Textile Sector, Central Board of Revenue for determination of recovery of cotton seed in association with other share-holders. According to this 'gaudy, the recovery of cotton seed ranges between 58 to 59 per cent. In the instant case the appellant has declared recovery of 54.9% while the auditors have calculated the recovery of cotton seed at the minimum yield percentage of 58%. The appellant was charged for sales, tax at the recovery ratio of 58% which is the minimum ratio determined by the office of Chief Textile Sector, C.B.R. after detailed study of ginning sector made in consultation with various Textile Sector Association and National College of Textile Engineering, Faisalabad. There is, therefore, no justification in the argument of learned counsel for the appellant for modification in the impugned order so far as this issue is concerned. In view of what has been discussed above, the findings of Adjudicating Officer for recovery of principal amount of Rs.87,906 are confirmed. So far as the issue of suppression of value of supplies is concerned, the Central Board of Revenue vide its Notification S.R.O. 1361(I)/98, dated 9-12-1998 has fixed minimum value of Rs.245 per maund for the supply of cotton seed. The appellant has supplied cotton seed at the value which is lower than the minimum value of supply fixed by the Central Board of Revenue. The auditors have correctly pointed out evasion of sales tax amounting to Rs.52,863 against suppression of value of supply of cotton seed. The arguments of learned counsel for the appellant in this regard are not tenable in the eyes of law after the fixation of minimum value of supply of cotton seed by the Central Board of Revenue vide S.R.O. 1361(I)/98, dated 9-12-1998. The findings of Adjudicating Officer against this charge are confirmed and appeal in this regard is dismissed. However, the additional tax should be calculated at the rate which is applicable today because of beneficial amendment made in section 34 of the Sales Tax Act, 1990. The impugned order is modified to the above extent and appeal is partly accepted.
7. The appeal stands disposed of as above.
C. M. A. /500/Tax (Trib.) ???????????????????????????????????????????????????????????????????? Appeal dismissed.