RUBY STEEL CORPORATION (PVT.) LTD. Versus COMMISSIONER INLAND REVENUE, RTO, LAHORE
ZAHID SIKANDAR, MEMBER.--- The appellant has thrown challenge against order dated 25-03-2024 passed by Commissioner Inland Revenue (Appeals-V), Lahore whereby the CIR(A) rejected the taxpayer's appeal and upheld the assessment order dated 26-12-2023 framed by the assessing officer.
2. It is the case of the Department that M/s Ruby Steel Corporation (Pvt.) Ltd. during tax period August, 2019 to May, 2023 made supplies to unregistered buyers and according to section 3(1A) Further Tax had to be charged, levied and paid against taxable supplies made to persons who had not obtained sales tax registration number. The OIR observed short payment of Further Tax amounting to Rs.3,199,843/- and issued a show-cause notice No.2020 dated 29-08-2023 to the taxpayer for recovery. In response, the registered person filed reply as follows
REF.- SHOW-CAUSE NOTICEC NO.2020 DATED 29.08.2023
We're pleased to approach you with reference to the subject cited above. Please find brief facts and reply to the observation raised by your good-self;
1. The show-cause notice dated 29.08.2023 has confronted further tax under section 3(1A) to the tune of Rs.3,199,843/- along with default surcharge under section 34(1) and penalty under section 33(5) resulting from the alleged failure of the taxpayer-company to charge further tax on its supplies to various persons who have not obtained sales tax registration number.
2. It is submitted that S.R.O 648(I)/2013 dated 09.07.2013 allowed exemption from charge of further tax under section 3(1A) to a select group of industries/sectors. Copy of aforementioned S.R.O is enclosed with this letter for your review.
3. In light of foregoing, S.R.O 648(I)/2013 dated 09.07.2013 was amended through S.R.O 1223(I)/2021 dated 17.09.2021 under which "supplies by steel sector" inserted at Serial No.14 was included to broaden the scope of the abovementioned S.R.O. dated 09.07.2013. Copy of the S.R.O is enclosed with this letter for your review.
4. S.R.O 1223(I)/2021 dated 17.09.2021 allowed exemption from further tax under section 3(1A) on supplies by steel sector, according to which the taxpayer-company was not warranted under the law to charge sales tax on supplies to sales tax un-registered persons.
3. The OIR rejected the reply by observing that the registered person is involved in making taxable supplies of steel pipe whereas the exemption given in SRO 648(I)/2013 as amended vide SRO 1223(I)/2021 pertains to supplies made by steel sectors including steel billets and steel bars etc. Vide order dated 26-12-2023, the OIR ordered recovery of further sales tax of Rs.3,199,843/-along with default surcharge and penalty of Rs.159,992/-.
4. Being aggrieved, the registered person filed appeal before the CIR(A) who vide order dated 25-03-2024 rejected the taxpayer's appeal and confirmed assessment order framed by the OIR. Hence, the taxpayer has come up further in this second appeal before the Tribunal against the orders passed by the learned authorities below.
5. Arguments heard. Orders perused.
6. It transpires that the sole reason given by the learned officers below while charging/upholding further sales tax is that steel pipes is out of purview of supplies made by steel sector as given in Sr. No.14 of SRO 1223(I)/21. It has further been observed by the CIR(A) that on number of occasions 'steel products' as well as 'steel industry' are referred as units operating in steel sector that comprises goods and units pertaining to steel melters, re-rollers, and ship breakers.
7. Before we dilate upon the facts of the instant case, it is imperative to look into various SROs that have been issued by the Federal Government for granting exemption for payment of Further sales tax i.e. SRO 648(I)/2013 dated 09.07.2013 which was further amended from time to time whereby the Federal Government was pleased to direct that Further Tax shall not be charged, levied or paid on taxable supplies mentioned in the table given therein. For ease reference, SRO 648(I)/2013 is reproduced as under:-
S.R.O. 648(I)/2013- In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that further tax at the rate of one per cent shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the Table below, namely:-
TABLE
S. No.
Description of goods
(1)
(2)
1.
Electrical energy supplied to domestic and agricultural consumers
2.
Natural gas supplied to domestic consumers
3.
Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil
4.
Goods sold by retailers to the end consumers
5.
Supply of goods directly to the end consumers including food and beverages, fertilizers and vehicles
6.
Items falling in the Third Schedule to the Sales Tax Act, 1990.
2. This notification shall be deemed to have taken effect from the 13th day of June, 2013.
8. Thereafter, another SRO 585(I)/2017 was issued on 01-07-2017 whereby further entries were added in the table already available in SRO 648 ibid. Following are the entries which were added in SRO 585(I)/2017
"8.
Fertilizer
9.
Supplies by steel melters, re-rollers and ship breakers operating under Chapter XI of Sales Tax Special Procedure Rules, 2007.
10.
Supplies covered under the Fifth Schedule to the Sales Tax Act 1990.".
9. Again, another SRO No.1223(I)/2021 dated 17-09-2021, the Federal Government further amended the table and added entries at Sr.Nos. 14 and 15 whereby entry pertaining to supplies made by steel sector was also inserted. For ready reference the entries are reproduced here-in-below:-
"14.
Supplies by steel sector
15.
Supplies by edible oil sector."
10. From the bare perusal of all the relevant Notifications reproduced hereinabove, it is crystal clear that the Federal Government decided not to charge Further Tax on the given rate against supplies made by certain sectors or against certain items. Serial No.14 added vide SRO 1223(I)/21 clearly exempts supplies made by steel sector. The submissions made by the learned DR in support of the impugned orders that steel pipes are not covered under steel sector is misconceived rather absurd. In general terms any product which is made up of steel is covered under the steel sector and bifurcating certain products e.g. steel pipes holding them outside the ambit of steel sector just to charge Further Tax is contrary to the exemption given in the SROs ibid. Further the observations made by the lower authorities below that steel sector refers to steel melters, re-rollers and ship breakers is highly misconceived as those entities were already added at Sr. No.9 vide SRO 585(I)/2017 supra and if steel sector only referred to steel meltors, re-rollers and ship breakers then there was no need of inserting Sr. No.14 which exempted charge of Further Tax against supplies made by steel sector. The will of the legislature/government is evident from the insertion of Sr. No.14 in the presence of Sr. No.9 therefore, giving any restrictive meaning to steel sector or confining the steel sector to only steel meltors, re-rollers and ship breakers would not only defeat the purpose of notification rather would be totally incorrect interpretation. The tax is to be charged as per the law of the land and if a particular product or sector is given a benefit under any law or notification then that has to be given in its entirety without any hesitation. We have also checked that SRO 1223(I)/2021 was issued on 17.09.2021 and supplies confronted in the show-cause notice as tabulated in the order-in-original are related to tax periods December 2021 onwards and are made subsequent to the issuance of the notification ibid. Both the officers below have misconstrued the term of 'steel sector' and charged/upheld Further Sales Tax in the presence of clear exemption given under the said SROs which is illegal, unlawful and without any basis. Given the reasons above, we do not concur with the impugned order which is accordingly set aside.
11. The outcome of this taxpayer's appeal is that it has succeeded and is therefore allowed.
MQ/31/TAX(TRIB) Appeal allowed.