TRIBUNAL ALLOWS ADJUSTMENT OF INPUT TAX IN CASE PAYMENT OF PRINCIPAL AMOUNT OF TAX DUE WAS MADE DURING AMNESTY GRANTED BY FEDERAL GOVERNMENT

TRIBUNAL ALLOWS ADJUSTMENT OF INPUT TAX IN CASE PAYMENT OF PRINCIPAL AMOUNT OF TAX DUE WAS MADE DURING AMNESTY GRANTED BY FEDERAL GOVERNMENT <!--[if gte mso 10]> TRIBUNAL ALLOWS ADJUSTMENT OF INPUT TAX IN CASE PAYMENT OF PRINCIPAL AMOUNT OF TAX DUE WAS MADE DURING AMNESTY GRANTED BY FEDERAL GOVERNMENT By Akhtar Javed, Advocate, Lahore During the past few years, the Federal Government had been announcing amnesty schemes through various notifications wherein the exemption from payment of additional tax and penalty was granted to defaulter of sales tax. The philosophy of Federal Government to grant exemption/amnesty of additional tax and penalty under various notifications was to collect/recovery principal amount of tax due which had been outstanding since many years. 2. Keeping in view the amnesty granted by various notifications, a large number of taxpayers had voluntarily paid the amount of tax before assessment or adjudication. While calculating the tax liability, the taxpayers deposited the net amount of tax after adjustment of input tax for which they had valid tax invoices or bills of entry showing payment of tax on purchase or import of said goods. 3. During the period from 1-7-1996 to 31-3-1999, Messrs Nestle Milkpak Ltd., had been making supplies of infant food "Nestle Wheat" and "Nestle Rice". However, because of misapprehension of law, they did not pay sales tax on supply of the said goods. When it came to the knowledge of the company that the said items were liable to tax, the company paid amount of sales tax due during the currency of amnesty granted by the Federal Government vide S.R.O. 461(I)/99 dated 9-4-1999. The amount of sales tax due was calculated after deducting input tax from output tax on supplies which had been made during the aforesaid period. The input tax pertain to raw materials/packing materials used for the purpose of making supplies of above-referred food items and the company possessed bills of entry and valid tax invoices showing payment of sales tax on the raw materials/packing materials used for the purpose of making said food items. 4. While conducting audit of the company, the staff of Sales Tax Collectorate Lahore raised an objection that the company was not entitled to deduct input tax from output tax on the amount of tax due which was deposited during the currency of amnesty as in terms of section 7 of the Act, any such adjustment of input tax could have been claimed only during the relevant tax period and at the time of furnishing of return for each of the relevant tax period. The case was referred to Collector (Adjudication). The learned Collector upheld the charges levelled in the show cause notice and vide his order ST 71 of 2001, he held that a person making payment of his liabilities during the currency of amnesty granted by Federal Government was not entitled to make adjustment of input tax and was liable to pay output tax without any adjustment. In view of Collector (Adjudication), in the sales tax scheme, .the person depositing tax during amnesty scheme was not entitled to make adjustment of input tax irrespective of the fact, he held valid tax invoices or bills of entry since section 7 of the Act specifically provides that input tax will be allowed in the relevant tax period. 5. Being aggrieved, we filed an appeal in the Appellate Tribunal on behalf of Messrs Nestle Milkpak Ltd. The case was vehemently argued before the learned Tribunal. While accepting the appeal, Mr. Justice Abdul Majeed Tiwana, the learned Chairman of the Tribunal who authored the judgment in Sales Tax Appeal No. 55/LB of 2002 observed that it was one of the condition of every amnesty that the registered persons were to deposit principal amount of sales tax after claiming and deducting input tax from the output tax. Therefore, Messrs Nestle Milkpak were within their right to deduct input tax from output tax before depositing the principal amount. It was further held that the findings of learned Collector (Adjudication) were unlawful. 6. While agreeing with the over all judgment authored by the learned Chairman, Mr. Sarfraz Ahmed Khan, Member (Technical) advised the appellant to get the adjustment regularized by filing a claim under section 66 of the Act alongwith prescribed supporting documents to Collector of Sales tax within 30 days. The learned Member (Technical) has required Collector of Sales Tax to allow the amount of input tax to be adjusted after making the authenticity of the documents in exercise of his powers conferred upon him by proviso added to section 66 through Finance Ordinance, 2002. The Member (Technical) has been further pleased to condone the limitation period of one year which shall be counted from the date of issuance of judgment. 7. In our opinion, the exercise as has been advised by the learned Member (Technical) is unwarranted as there was no dispute to the extent that Messrs Nestle Milkpak had claimed adjustment of input tax without any supporting documents. Further the proviso to section 66 of the Act has been inserted in the year 2002 and was not available on the statute book during the period when the payment of principal amount of tax was made and adjustment of input tax was claimed. Nevertheless, the appeal of Messrs Nestle Milkpak has been accepted and the Tribunal has confirmed the action of the company of making adjustment of input tax from output tax while depositing the principal amount of tax during the currency of amnesty granted by the Federal Government.