2010 PTD 1377
ORDER
MUHAMMAD ARIF MOTON, MEMBER (JUDICIAL-II).--- This order will dispose of Sales Tax Appeal No.K-259/2007 filed by the Appellant against Order-in-Appeal No.385/2007 dated 5-6-2007, passed by learned Collector of Customs, Sales Tax & Federal Excise (Appeals), Karachi.
2. Brief facts of the case are that Auditors of the respondent department conducted audit of taxable activities of the appellant for period 2003-2004 and observed certain discrepancies in the record of the appellant resulting in issuance of show cause notice C.No.02(09)/ Cont/ADJSTH/2005/144 dated 12-10-2006 under section 36(1) of the Sales Tax Act, 1990 to the appellant for recovery of the amount of Sales Tax totaling Rs.3,08,4911 along with additional tax/default surcharge under section 34 of the Act and imposition of penalty under section 33 of the Act, for violation of section 3,6,7,8,11,22,23 and 26 of the Act, on the following accounts:-
(i) That the appellant had supplied goods (after value addition @ 291.78% with raw material) in open market without paying out put tax of Rs.2,229,107 which is a violation of sections 3, 6, 11 and 26 of the Sales Tax Act, 1990 and S.R.O. 643(I)/91 dated 7-7-1991 read with Board's letter C.No.01(110) S and Rs.2/90 dated 20-10-1991. Therefore, short paid amount of output tax of Rs.22,20,107 is recoverable along with additional tax/default surcharge under 34 of the Sales Tax Act, 1990.
(ii) The appellants consumed 1436.77 K. meters pipes in excess which is actually the declared consumption of purchased M.S. pipes, whereas during the physical examination of manufacturing activity, no usage of such products was found, meaning thereby that the appellants consumed said material for un-declared production and supplies of average produced 2613 sets valuing Rs.4,622,397 supplied in the local market without paying sales tax Rs.832,031. This is violation of sections 3, 6, 11 and 26 of the Sales Tax Act, 1990 and S.R.O. 643(I)/91 dated 7-7-1991 further read with Board's letter C. No.(110) S & R-2/90 dated 20-10-1991. Therefore, short paid output tax amounting to Rs.832,031.
(iii) That sales tax on supplied wastage valuing Rs.205695 was paid @ 18% during audit period 2003-04 whereas the appellant had to pay sales tax @ 23% since raw material was purchased @ 20% which is a violation of sections 3, 6, 11 and 26 of the Sales Tax Act, 1990 read with S.R.O. 389(I)/2001 dated 18-6-2001. Therefore, differential amount of Rs.10283 is recoverable along with additional tax/default surcharge under section 34 of the Sales Tax Act, 1990.
(iv) that the appellants deducted output tax from sales tax payable in different months against the return of rejected goods valuing Rs.89,993. The said goods were neither entered into stock as balance nor supplied which means that the said goods were supplied without charging output tax of Rs.13,490 which is the violation of sections 3,6,11 & 26 of the Sales Tax Act, 1990 and S.R.O.643(I)/91 dated 7-7-1991 read with Board's letter C.No.01(110)S&R-2/90 dated 20-10-1991. Therefore short paid sales tax amount of Rs.13,490 is recoverable along with additional tax/default surcharge under section 34 of the Sales tax Act, 1990.
(v) That the declared total sales (registered and unregistered persons) are amounting to Rs.4,20,81,505 and purchases to Rs.1,60,41,673 whereas the bank statement provided for the period July 2003 to June 2004 shows withdrawal of Rs. 7,92,12,764 and deposits of Rs.8,01,34,242. They could not explain the above discrepancy which meant that the above amount would be treated as purchases and supplies for the audit period.
3. The matter was adjudicated by the Additional Collector (Adjudication) and it was decided against the appellant. The appellant preferred Appeal under section 45B of the Act which was rejected by Collector Customs, Sales Tax and Federal Excise (Appeals), Karachi upholding the order of the Adjudicating Authority.
4. The appellants, being aggrieved by the impugned orders preferred appeal before this Tribunal, inter alia, on the following grounds:--
(a) That though the learned Respondent No.1, has reproduced all the charges/allegations mentioned in the show-cause notice of the case and also written arguments of the appellants made before him, yet the orders passed by him are too sketchy, without rebuttal of the grounds of appeal and without giving any logical reasons for rejecting the appeal.
(b) That the charge (i) of the show cause notice is ambiguous as it demands sales tax on difference of the opening stock mentioned in the financial Accounts and in the tax records without considering the facts that it also contains the position of closing stock at the end of the year. Further the auditors framed the allegation without referring quantity of the raw material that was available as opening and closing inventory of the said raw material. Had it been the case, its authenticity as well as its correctness and its correlation with the quantity of the raw material in the opening inventory would have been ensured.
(c) That in addition to above in the said Financial Report which the Auditors of the department made base for this charge also contains figurers of net sales which do tally with the sales m entioned in the Tax Returns, furnished under section 26 of the Act, during the Tax period July, 2003 to June, 2004.
(d) That it would not be out of place to mention here that it is principle of the law of taxation that an assessee cannot be subjected to tax under a provision of law which is ambiguous and not clear, and there is no room for any intendment and also there is no presumption as to tax. The initial burden lies on the revenue authorities to show that "the respondent knowingly, dishonesty or fraudulently and without any lawful excuse has done any act." Here the appellant made reliance on the judgment of the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench-III in the Sales Tax Appeal No.K-241/2002 filed by Messrs Printing Service (Pvt.) Limited, Karachi, wherein the orders passed by the Collector of Customs, Sales Tax and Central Excise, Karachi (Adjudication-III) were set aside.
(e) That from what is stated above it is clear that the appellant has, thus correctly paid the sales tax on his supplies made during the tax period in question, as declared in the sales tax returns and also tallied with the figurers of sales mentioned in the financial Accounts referred to in the allegation (i) of the show cause notice. The demand of sales tax against the presumed sale on the basis of harping statement of the auditors without any cogent proof of the alleged sales in the open market, is highly incorrect, unjustified and needs to be set aside.
(f) That the charge (ii) is totally based on the allegation that the appellants, besides raw material determined by C.B.R. for import on concessionary rate of duty under relevant S.R.O., made purchases of such raw material from open market, and thus consumed the same in production of finished goods, subsequently sold out without taking into account and without payment of sales tax. This charge is also reflects little knowledge of the government officials in relation the laws they are supposed to implement/enforce.
(g) That final Certificate for the quantity of raw material determined and allowed to the appellants, issued by the Chief Survey and Rebate, Central Board of Revenue, Islamabad, as referred to in the show-cause notice, imposes no restriction on the appellant for purchase of raw material from local open market, against payment of its transactional value including amount of duty and taxes livable thereon at statuary rate, if so needed by the appellant to meet the demand of his buyer. All such purchases were accordingly recorded in the sales tax records, prescribed under section 22 of the Act. A brief of inventory of raw material imported as well as locally purchased, its proportionate consumption according to rationale/scale of consumption as provided in Board's Final Certificate referred to above, was placed before the Adjudicating Officer as well as the Collector (Appeals) and also attached with this appeal. In view of details as reflected in the said statement it can be adjudged that the appellant had properly recorded in the prescribed records all of his raw material either procured through import under concessionary S.R.O. or purchased from local market,. The charge is thus totally based on presumption and assumption and the respondent has no substantial lawful proof of the alleged unrecorded sales. The charge is, therefore, required to be set aside being unfounded and without any legal footings.
(h) That the charge (iii) of the show-cause notice is that the appellant made supply of scrap of waste charging sales tax @ 15% of the value while being the refuse or material imported against payment of sales tax @ 205 under S.R.O. 289(I)/2001 dated 18-6-2001, it was equally chargeable to sales tax @ 20%.
(i) That the correct and legal position in this regard is that in terms of S.R.O. 289(I)/2001, only goods specifically mentioned in table of the said S.R.O. were to be charged to sales tax @ of its value. The respondent failed to appraise the appellants' contention that supply of scrap/waste made by the appellant was neither the "Ferrous waste and scrap or remelting scrap ingot of iron or steel falling under heading 72.04 specified against serial No.190 nor it was the Iron and steel scrap of a kind used for re-rolling as specified against serial number 198 of the table of the S.R.O. Hence being the goods outside the scope of the said S.R.O. its supply was correctly charged at standard rate of sales tax i.e. @ 15% of its value.
(j) That the charge (iv) of the show cause notice based on the plea that the appellant made deduction of out put tax from the sales tax payable in different months against the returned rejected goods valuing Rs.89,933 while the said rejected goods were neither entered into stock of finished goods nor supplied as such meaning thereby that the same were allegedly supplied without charging out put tax of Rs.13,490. The appellant in relation to this charge urged that the respondent is working as "Vendor" of "Messrs Pak Suzuki Motors Limited" for manufacture and supply of "Exhaust Muffler and Exhaust Pipes" being components for "Suzuki Cars" and made all of his supplies to its Principal named above. The appellant, in terms of the contract, has been bound to take the supplies back if the same become unworkable/damaged during the "Warranty Period". Since the said rejected goods had been received back under proper "debit note" and "credit note" as required under section 9 of the Act, and that the same for loss of their original shape and design were not in a position for resale or supply as finished goods to the buyers namely Messrs Pak Suzuki Motors Limited being the appellant's exclusive buyer, therefore the same were stored as scrap waste material and subsequently sold out under proper documentation against payment of sales tax on its value received. Necessary record for sale of such scrap were produced before the appellant but the same was not taken into consideration and order recovery of sales tax on said rejected and scrap goods, erroneously considering it as finished product, without asking the prosecution/auditors to furnish any substantial proof for its sale, as finished product, in the open market.
(k) That the charge (v) is a misleading statement. While framing this charge the respondent failed to realize that withdrawals of the amount from the bank accounts also reflects the amount transferred to another bank account for certain purposes as well as it also reflects the other payments on account of salaries, rent, loans returns and other miscellaneous expenses. Similarly receipts/deposits mentioned in the bank accounts not only reflect amount received against sales it also includes transfer of money from other bank and other miscellaneous receipts.
(l) That the Adjudicating Officer failed to appreciate the ambiguous and non realistic approach of the Auditors and left this charge un-touched and without any order or observations. This charge is also based on presumption without any substantial proof in support of prosecution's statement and needs to be set aside.
5. The auditors namely Mr. Asadullah and Mr. Abdul Shakoor, departmental representatives appeared on behalf of the respondents and furnished their comments on above cited grounds of appeal inter alia as under:--
(i) That regarding charge (i) The respondent in addition to the version as mentioned in the show cause notice added that at the time of audit the appellant provided the financial accounts for the period 2002-2003 in which closing stock was mentioned which ultimately was the opening stock for the period 2003-2004 and taken as such. This stock did not match with opening stock mentioned in the sales tax record. The registered person may have manipulated the financial accounts for the period 2003-2004 to match the sales shown in financial accounts with that of sales tax records, after discussing this abnormality observed during audit. The statement of the appellant is contradictory, as they have been stating that they are not maintaining financial accounts as except under, section 143-B of the Income Tax Ordinance as they file their assessment in the Income Tax Department under section 143-B of Income Tax Ordinance. On the contrary according to their statement submitted to the adjudicating authority they have maintained the Financial Accounts for the leasing purpose only. Financial Statement is an authentic document of the unit which cannot be denied even if maintained for any purpose.
(ii) That as regards Charge (ii). Contention of the appellant is not tenable. The fact is that the consumption allowed by Federal Board of Revenue is 77960.23 Mtrs whereas the registered person declared consumption in the sales tax record as 91,997 Mtrs. By virtue of this 14,036,77 Mtrs excess was consumed but production through excess consumption was not recorded in the sales tax record and the finished product sold in the local market without payment of sales which resulted in the short realization of sales tax amounting to Rs.832,031. The respondent's contention that 15202 Mtrs Aluminized steel pipes/tubes were purchased from the local market but the finished products manufactured out of raw material purchased locally was not recorded in the sales tax record and the out put on the local supplies made by them was not paid.
(iii) Charge (iii). The respondent for this charge reiterated the same that had been reported in the show cause notice. It is however added that in a similar case against Messrs Yousaf Industries Agri (Pvt.) Ltd. Karachi adjudged vide Order-in-Original No.85 of 2005 adjudging liability to pay sales tax was @ 20%.
(iv) Charge (iv). Contention of the appellants is not tenable in the eye of law. The respondent did not observe the procedure laid down under section 9 of the Act and rules made thereunder.
(v) Charge (v). The amount received in bank account of the registered person and value of sales declared in the sale tax returns shows difference. The registered person failed to explain the said difference through substantial documentary evidence. The difference is, therefore liable to be treated its suppressed sales and purchases, and to be assessed to sales tax accordingly.
6. At the time of hearing, the learned Consultant for the appellant reiterated the arguments incorporated in the memo of appeal and mainly emphasized on the following points:--
(i) That originally (5) allegations were levelled at against the appellant in the show cause notice, the first charge/allegation is in respect of differential between Financial Accounts and the stock Report submitted by the appellant to the respondent which shows a substantial difference in values stated therein. The difference in opening stock in both the documents is of 291 % as alleged by the Department. However he clarified that the appellants procured loans for business purposes from two leasing companies i.e. IAI and UDL. The procurement of loans is documented and respondent has not been able to deny it. Even otherwise there is no provision in Sales Tax Law which debars the appellant to procure loan from any Development Financial Institution or leasing company. Due to misconception the respondent has not been able to appreciate this aspect.
(ii) That it has been alleged by the Department that consumption of raw material in actual practice is greater that permitted by the Federal Board of Revenue in their Final Survey Certificate regarding raw-materials import and consumption. In this respect he submitted that to meet out the demand of production, raw material on payment of livable taxes was procured from the local market and all the records regarding local purchase of raw-material and sale of finished goods have been duly maintained by the appellant which is not an offence under the Sales Tax Act, 1990. Local purchase of raw material has not been prohibited under any section of the Act. Malafides cannot be attributed to the appellant since all the records have been duly maintained and shown to the respondent and tax duly paid.
(iii) That regarding the 3rd allegation in respect of import of raw material of aluminized steel sheets and steel pipes the rate of sales tax to be paid is 20% and 15% respectively. However since the wastage consisted of re-meltable scrap, the wastage was cleared on its own value at the rate of 15% sales tax. The rate of 23% sales tax on wastage as stated in S.R.O.389(I)/01 is not applicable in their case since it specifies re-rollable steel at Serial No.198.
(iv) That regarding rejected returns the respondent has not been able to appreciate that the appellant has duly maintained debit and credit notes in this respect and hence maintained all accounts. He is directed to submit copies of these accounts along with entries in the Register within two days before this forum.
(v) Regarding debit and credit entries in the three bank accounts maintained by the appellants the Consultant submitted that it' is illogical to conclude that all debits and credits when Out together would be equivalent to all the sales and purchases. However he has specified certain entries in pursuance of respondent Auditor's request made on the last date of hearing in the rejoinder submitted by them before this forum on 6-7-2009. A copy of the same was supplied to the respondent.
(vi) In the end the Consultant prayed for quashment of the impugned orders and allowing of subject appeal with direction to the respondent for releasing their Bank Guarantees.
7. On the contrary, the Auditors representing the respondents supported the impugned orders. The main points advanced by the Auditors are as follows:--
(i) That the respondent has determined the value addition on 291.78% on the basis of documents submitted by the appellant himself.
(ii) That the Final Survey Certificate issued by Federal Board of Revenue was issued in respect of raw material to be used in the production of aluminized sheets. However, the appellant acted beyond the mandate given by the Federal Board of Revenue for import and usage of the raw material and indulged in local purchase of the raw-material. The raw material on local price was other than permitted by the Federal Board of Revenue. This indicates that the appellant has sold some of the raw material allowed by FBR under the aegis of Final Survey Certificate and sold it in the local market without payment of duty and taxes due on it and has substituted it with equivalent or more quantity of local purchase of raw-material. This is a clear cut case of evasion of leviable amount of duty and taxes.
(iii) That all the wastage and scrap irrespective of its re-meltable or re-rollable is to be cleared on payment of sales tax @ 23% as per provisions of S.R.O.389 (I)/81 entry at S.No.198 read with S.R.O.79(I)/2000. As such the registered person has short-paid amount of sales tax on the wastages incurred during the process of manufacture of the said wastage.
(iv) That no proper accounting has been mentioned and shown till to date by the appellant regarding rejected returns and this leads to only conclusion that the same has been sold by the appellant in the open market.
(v) That the debit and credit entries in the three (3) Bank accounts show concealment of huge amount of sales and purchases. The auditors pointed out that no evidence whatsoever has been given by the appellant to substantiate their stance. No details regarding individual entries have been furnished by the appellant which would otherwise enable the respondent to verify the contention of the appellant.
8. Heard both the parties and examined the case record. The respondent while framing charge (i) only relied upon value of the opening stock of raw material shown in the financial statement of the appellant for the tax period from July 2003 to June 2004 and presumed that difference in value of the opening stock shown in the Financial Statement as compared to the opening stock in the sales tax record maintained under section 22 of the Act without realizing that there had been a closing stock at the end of the tax period in question which should have been taken for working out the raw material consumed and the production arrived from such consumed material. In the system designed under the Sales Tax Act, 1990, Sales Tax, in terms of the provisions of section 3 of the Act, is chargeable on value of supplies made. There is no scope in the sales tax legislation for charging sales tax on the value of opening or closing stock available in the inventory. Neither in the show cause notice nor in the comments filed by the respondent nor during arguments made at the time of hearings, the respondent dared to challenge the authenticity of the sales tax record as well as entries in the impugned Financial Accounts relating to goods produced and supplies made during the period in question. Further they also failed to point out if there is any difference in quantity of raw material in the opening and closing inventory of the tax records as compared to the financial accounts.
9. According to the appellant they worked as Vendor for Messrs Pak Suzuki Motors and the Principal is the sole buyer of the vendor's goods. In the absence of any material evidence to substantiate the charge that the appellant with the material of differential value of raw material (though there had been no mention in the show cause notice for any difference in quantity) had produced taxable goods and subsequently supplied it in the open market, the charge is not sustainable.
10. As regard Charge (ii), determination of quantity of raw material for import against concessionary S.R.O. 357(I)/2002 dated 16-6-2002 does not debar purchases of such material from the local market against its transactional value which ultimately is inclusive of the amount of duty and taxes leviable thereon at statutory rates. The appellants were at liberty to procure the required quantity of raw material from local market as and when so required to meet the demand of their buyer. The appellants produced copies of invoices of such purchases and also permission from the Principal Messrs Pak Suzuki Motors for deviation in the material to overcome shortage of the imported material with the appellants. The statement produced by the appellants attached with the Appeal, placed on record clearly mentions stock of imported as well as locally purchased raw materials, in opening and closing balance, procured during the period in question, consumption of both the materials, goods produced according to parameters determined in the Final Certificate issued by Federal Board of Revenue. Authenticity of the said record has not been challenged/refuted by the respondent. In the presence of the inventory of material maintained by the appellant, under section 22 of the Act containing the entries of locally purchased raw materials, the allegation that the appellant did not record the material purchased from local market and goods produced from such material has subs quently been supplied in local market is without any substantial documentary evidence. As such the charge is baleless and stands unproved.
11. The third allegation of the show-cause notice as is that the appellants procured raw material, that is aluminized steel sheet and pipes against payment of sales tax @ 20% of the value, thus the scrap received from that raw material, under S.R.O. 389(I)/2001 and the scrape received after its processing was equally chargeable to sales tax @ 23% plus points supply. On the other hand, according to the appellants, the correct and legal position is that under S.R.O. 389(I)/2001 dated 18-6-2001, only supply of goods specifically mentioned in the table of the said S.R.O. were to be charged to sales tax @ 23% of its value. The goods mentioned at serial No.198 of the S.R.O. is "the iron and steel scrap of a kind used for re-rolling, which is not the scrap supplied by the appellant and was, therefore, correctly charged to sales tax i.e. 18% of its value.
12. The respondents in their comments reiterated that all the wastage and scrap irrespective of its re-meltable or re-rollable was to be sold on payment of 23% sales tax. By charging the supply of scrap @ 18% sales tax the appellant has made short payment and the short paid amount of sales tax is recoverable which appears ill-logical. The S.R.O. is very much clear in relation to levy of sales tax at the higher rate i.e. 20% on the goods specified in table of the S.R.O. The plea taken by the respondents that all the iron and steel scrap whether it is re-rollable or not is not tenable. The charge is therefore, based upon misconception of facts and stands unproved.
13. The charge (iv) as per show-cause notice is that the appellants received back from its buyer, rejected goods but did not enter it in the inventory of the finished goods and the said unrecorded goods had been allegedly supplied in the local market without payment of sales tax.
14. In the business of sale and purchase of goods, returns of defective supplies cannot be ruled out. Section 9 of the Act provides mechanism for accountable of such returns through maintenance of debit and credit notes. In terms of the provisions of section 9 of the Act read with Rules 2 and 3 of the Debit and Credit Note and Destruction of Goods Rules, 1996, the buyer issued a debit note in respect of goods returned to the supplier, indicating therein value determined on the basis of the value of supply shown in the relevant tax invoice issued by supplier, amount of sales tax paid thereon, number and date of original tax invoice, and struck down its purchase in the relevant tax period. The supplier, on receipt of goods returned and the debit note from the buyer, shall issue a credit note in respect of goods received back from the buyer, showing value and amount of sales tax charged at the time of its supply, number and date of tax invoice issued, and on the basis of credit note issued by him, correspondingly reduce the amount of output tax in his return for the relevant tax period.
15. The appellants are maintaining debit and credit notes in accordance with the procedure laid down in section 9 of the Act and rule 2 and rule 3 of the said Rules. It is why the auditors were able to detect the returns of rejected/defected supplies. But such rejected/ defected goods cannot be taken into inventory of finished goods being not in saleable condition. The same are accordingly recorded as scraped goods and subsequently sold along with other refuse/scrap against payment of sales tax on the value received. The sale of such scrap has been mentioned in the tax return as and when such scrap is sold.
16. The contention of the appellants as discussed above is fairly correct and in accordance with business norms and the relevant provision of the Act and the rules made thereunder. The presumption of the respondent that such rejected sale returns were finished goods, to be taken into the inventory of finished goods and should be sold as such is against the business norms. The respondent failed to justify the allegation with the help of potential evidence that such goods had ever been sold by the appellant as finished goods. In the absence of any substantial documentary in support of the allegation, I am constrained to hold the charge as unproved.
17. As regard the charge (v) the respondents were asked for submit further comments keeping in view the appellants' submissions that total of the debit entries and credit entries of all their bank accounts will always be in excess of the amount of their total taxable purchases and sales for the reason that debit entries/withdrawals mentioned in bank statements also relate to payments made for other miscellaneous non-taxable activities such as salaries and other emoluments of staff and officers, rent of premises, fair and freight charges, commissions, provincial/local taxes and other charges, and also transfer of funds to other bank accounts. Similarly credit entries/deposits in the bank statement, besides sales of taxable goods also relate to receipt of amount in the bank account through other non-taxable miscellaneous receipts. The representatives of the respondent-department in their written additional comments furnished mainly stressed that the information/ documents furnished by the appellant in this behalf does not fulfil the requirement of section 73 of the Act. The appellants provided them copies of bank statements of MCB Bank Account and Alfalah Bank Limited with Credit Analysis Reports of both the two banks and also of National Bank of Pakistan. But the appellants failed to provide proof of cash deposits not the proof of sales and purchases deposit which is the requirement of section 73 of the Act.
18. The appellants in their counter comments/rejoinder stated that as it could be adjudged from the charge the respondents only took total of credit and debit entries of appellant all three bank accounts and preserved that deposits/credit entries in the bank accounts and all the withdrawal/debit entries in these accounts relate to appellants' purchases and sales only, which is not the factual and correct position as a number of deposits and withdrawals into and from the banks relates to other non-taxable transactions. In order to explain the position the appellants mentioned some of the credit entries in the appellants' bank accounts maintained with Bank Al-Falah and NBP as reproduced below:
Credit entries with Bank Al-Falah Ltd.
Date
Amount CR
Remarks
20-9-2009
1,440,000
Amount transferred from MCB Bank account
6-10-2003
2,800,000
Amount transferred from MCB Bank account
27-10-2003
3,101,509
Amount of term deposit certificates encashed. (Certificate amount 3,000,000 + profit 101,509) deposited.
1-12-2003
4,800,000
Amount transferred from MCB Bank account
10-1-2004
7,000,000
Amount transferred from MCB Bank account
20-3-2004
42,000
L.C. No.32331 LC margin received
22-3-2004
93,000
L.C. No.32331 LC margin received
31-3-2004
35,000
L.C. No.32321 LC margin received
17-4-2004
6,000,000
Amount transferred from MCB Bank account
28-5-2004
3,000,000
Amount transferred from MCB Bank Account
Credit entries with NBP
Date
Amount Cr
Remarks
17-4-2004
510,000
Amount transferred from MCB Bank account
10-5-2004
350,000
Amount transferred from MCB Bank account
Simultaneously, the above transfers in the Accounts of Al-Falah Bank reflect as debit entries in the Accounts with MCB Bank. Such double entries if summed up together will certainly unmatch with the amount of sales and purchases of the appellants. The same has been mistook and reported as Charge (v) in the show-cause notice only due to lack of knowledge of the, concerned Auditors in relation to principle of accounting as well as the sales tax law they are supposed to enforce.
19. The respondents, not only presumed without any co-relative evidence, that all the receipts in the bank accounts of the appellant were on account of supplies and all the withdrawals pertain to appellants' purchases. The respondents, by doing so also tried to shift the burden on the appellants to prove it otherwise for each and every transaction in all of their bank accounts. There is no provision in the Act purporting to deem the receipt of money in the bank account to be a sale and the, withdrawal from the bank account to be a purchase. It is an established' principle of taxation that an assessee can be subjected to tax under a provision of law, which is unambiguous and clear. This view gains strength from the judgment of Sindh High Court, Karachi dated 12-11-2003 in Special Sales Tax Appeals Nos.99 and 100 of 2002, reported as 2004 PTD 868.
20. The respondents, through their additional comments as referred to above also tried to make it a case under section 73 of the Act while there has been no charge against the appellant, in the show-cause notice, for violation of the provisions of section 73 of the Act. The respondent are restricted to go beyond the grounds specified and incorporated in the charter of the show cause notice in terms of hallmark judgment of honourable Supreme Court of Pakistan reported as 1987 SCMR 1840.
21. In view of the above discussion all the charges mentioned in the show cause notice are explicitly based on either misconception of facts or misconstruction of law or forced construction of law and stand unsubstantiated. The impugned orders are, therefore, set aside and the appeal is allowed. The Bank Guarantee furnished by the appellant is also ordered to be released and returned to the appellant.
C.M.A./23/Tax(Trib.) Appeal allowed.