2007 PLP (Trib (PTD)

ZAFAR UL MAJEED, MEMBER (TECHNICAL).

The facts giving rise to this appeal are that pursuant to a specific information about evasion of sales tax by manufacturers of RCC pipes, the staff of Directorate of Intelligence and Investigation (Customs, Excise and Sales Tax), Lahore conducted inquiries from various government/semi- government agencies and private contractors and found that the appellant, during the period 19-6-1988 to 31-5-1993, supplied a quantity of 17,190 Nos.RCC pipes to WASA (LDA), Lahore against various contracts without payment- of sales tax amounting to Rs.26,43,425 in violation of the provisions of sections 3, 6, 22, 23, 25, 35 and 38 of the Sales Tax Act, 1990 (hereinafter referred to as "the Act"). The appellant was charged with the contravention of aforesaid provisions of law and served with a show-cause notice dated 13-10-1993. The case was adjudicated by the Additional Collector of Sales Tax-II, Lahore vide Order-in-Original No. l9 of 1996 dated 4-11. 1996 whereby the appellant was directed to pay aforesaid amount of sales tax along with additional tax and surcharge besides penalty of Rs.57,87,40 under section 33(2) of the Act. The appellant's appeal against this order was rejected by Collector (Appeals), Central Zone, Lahore vide sales tax Order-in-Appeal No.926 of 1997 dated 16-10-1997. However, on second appeal filed before this Tribunal, the case was remanded to Collector (appeals) for a fresh decision on the ground that the order had been passed without considering grounds of appeal taken before him. The case was accordingly decided afresh by the Additional Collector-II, (Adjudication), Lahore vide. Order-in-Original No.ST-21/2004 dated 20-7-2004 whereby the appellant were again held liable to pay sales tax amounting to Rs.26,43,425 along with additional tax and. surcharge besides penalty of Rs.25,000 imposed under section 33(2) of the Act.

2. Through this appeal, the appellant have impugned the Order-in-Original dated 20-7-2004 mainly on the following grounds:

(1) That the impugned order raising demand of tax in respect of over 11 years old period is barred by time having crossed the limitation period of 3 years or 5 years provided under section 36(1) and (2) of the Act. (2) That both the orders-in-original dated 4-11-1996 and 20-7-2004 were issued long after the 90 days period prescribed, under section 36(3) of the Act. The order was, therefore, illegal and liable to be withdrawn as held by the F.T.O. in an order upheld by the President of Pakistan recently. (3) That the appellant neither manufactured nor supplied alleged quantity of RCC pipes to WASA during the period in question when the appellant was even otherwise exempted from payment of sales tax .under Cottage Industry Scheme according to the exemption certificates produced before the Adjudicating Officer; which he ignored. The appellant was registered for payment of .sales ax w.e.f. April, 1992 onwards and that the RCC pipe industry came on fixed tax scheme in 1993 (machine basis). Hence the question of evasion of sales tax did not arise. (4) That the material relied upon by the Adjudicating Officer for raising demand of tax against the appellant does not constitute direct evidential material e.g. sales invoices, payment receipts, proper contracts of supply and names of the contractors to whom RCC pipe were allegedly supplied along with specific dates, quantity, rate and size etc. Simply typing contract No. and schedule of supplies without naming out buyers cannot prove the ease of evasion of sales tax case against the appellant.

3. The Department -has, in its parawise comments, rebutted the aforesaid contentions on the ground that the appellant supplied exemption certificate only for the year 1990-91 which, having been obtained on the basis of incorrect information, was not valid and that during the course of fresh proceedings, the detecting agency was able to obtain concrete evidence in support of its case from WASA authorities i.e., details of contracts, names of the contractors who purchased pipes from the appellant and then supplied to WASA, letters of inspection of goods at appellants premises etc. which was produced before the Adjudicating Officer.

4. We have carefully gone through the facts on record and given due consideration to the submissions made by both sides. It is correct that the first Order-in-Original No.19 of 1996 dated 4-11-1996 was passed by the Additional Collector, Sales Tax without bringing on record sufficient evidence against the appellant and without comprehensively addressing their arguments. The Collector (Appeals) also upheld the order in original without considering the grounds of appeal as a result of which the order was set aside and the case was remanded by this Tribunal to the Adjudicating Officer for fresh proceedings. Examination of the order impugned in the present .appeal, however, reveals that during the proceedings after remand, the Department, after conducting necessary enquiries from WASA (LDA) and contractors, has been able to establish that the supplies against the contracts listed in the C impugned order actually comprised of the goods manufactured by the appellants, which is evident from the following documents produced before the Adjudicating Officer and copies thereof placed on record before us: (1) List of contracts awarded to various contractors provided by Deputy Director, Finance. WASA, Lahore vide Endorsement No.FA/DDF-II/7123 dated 27-9-1995. (2) Letters of various contractors addressed to the Deputy Director, Quality Control Division WASA, Lahore who had placed orders for manufacture and supply of RCC Pipes to the appellant. (3) Letters of the Deputy Director Quality Control WASA to their construction Engineers directing them to check the -pipes to be supplied by various manufacturers, including the appellant, against any damage during transportation, loading, unloading. Copies of the letters were endorsed to the appellant.

5. The evidence produced by the Department proves beyond doubt that the appellant manufactured and supplied pipes to contracts who were awarded contracts by WASA, The supply of RCC Pipes in huge quantities, valuing about Rs.21,14 Million, during the period in question belies the appellant's claim for exemption under Cottage Industry Scheme, which provides for capital employed below Rs.1,00,000 to be entitled to it. Exemption certificates under Cottage Industry Scheme, even if issued by the department, would thus be void having been issued based on incorrect information given by the appellant.

6. Similarly, Chore is no force in the appellant's contention that both the orders in original were barred by time. As the demand was raised by the Adjudicating Officer by issuing show-cause notice on 13-10-1993, i.e. within the period of 5 years prescribed under section 36(1) of the Act, the orders passed in consequence thereof are not hit by limitation. We are also not inclined to accept the plea that the impugned order having been passed after a period of 90 days provided under section 36(3) of the Act is illegal. This provision of the Act being directory in nature and not mandatory, does not render an order passed after the period provided therein illegal, as held by this Tribunal and superior courts in a number of judgments on this issue.

7. For the aforesaid reasons, we are of the considered view that the impugned order does not suffer from any illegality or infirmity. The appeal is accordingly rejected being devoid of merit. C.M.A./100/Tax(Trib.) Appeal rejected.