2017 PLP (Trib (PTD)

NAZIR AHMAD, (JUDICIAL MEMBER).

(1). The instant departmental appeal has been directed against the Order-in-Original No. ST-38-39/2002 dated 08.04.2002 recorded by Collector of Customs, Sales Tax and Central Excise (Adjudication), Lahore.

2. The facts in brief leading to the instant appeal are that on the basis of a report of Superintendent of Directorate of General of Inspection and Training (Customs, Central Excise and Sales Tax), Lahore, the Deputy Collector, Customs, Central Excise and Sales Tax, Gujranwala, came to know that the registered person during the period 01.11.1992 to 31.10.1993 had taken an illegal adjustment of input tax amounting to Rs. 42,211,027/- against fixed sales tax payable on the goods manufactured and cleared by him under the capacity taxation fixed by the Collector, Lahore, vide letter dated 07.11.1992, whereby no adjustment of Excise Duty and Sales Tax was admissible to the manufacturer of paper and paper board products working in capacity taxation. On the basis of these reported facts, the registered person was served with a show-cause notice dated 12.10.1994, in response to which written reply of the registered person supported by judgment of Honourable Lahore High Court dated 04.07.1994 recorded in W.P. No. 16532 of 1993 in the case of M/s. Pakistan Pulp Paper and Board Makers Association etc. was sent to the deducting agency for comments, which were furnished by the Additional Director by concluding as under:-- "That the result is that adjudication of contravention cases pending before the Adjudication Officer with respect to the period from 01.11.1992 to 30.10.1993 against the petitioners will be perfectly legal and in order as the Court has neither touched the said period nor has given an adverse findings as to the vires of the Collector to fix capacity duty/sales tax of the unit falling within his jurisdiction."

3. After receiving the above comments, the case was fixed for hearing on a number of dates and finally on 08.04.2002 and both parties were heard by Collector (Adjudication), who by appreciating the following line of arguments:-- "The crucial point in the subject case is fixation of capacity by the Collector which according to the learned counsel was beyond jurisdiction as he was not empowered/competent to any such act whereby he could fix the production capacity of a unit. The contention of the learned counsel is that prior to 01.07.1993 the Collector had no such power whatsoever. However, this power still conditional was granted to the Collector in the Finance Bill of 1994 through an amendment in section 3 of the Sales Tax Act, 1990 which reads as under:-- "(4) With the prior approval of the Federal Government, the Central Board of Revenue or the Collector may, in lieu of levying and collecting the tax under subsection (1), by Notification in the official Gazette, levy and collect such fixed amount of tax as it may deem fit on any goods or class of goods, payable by any establishment or undertaking producing or manufacturing such goods." He further argued that this power was never granted to the Collector in the matter of central excise duty."

Ordered vacation of the show cause notice dated 12.10.1994. Aggrieved, by the treatment meted by the Collector (Adjudication), the department has come up in further appeal before this Tribunal.

4. In the case in hand, the department had appointed Legal Adviser to argue the case before us but in spite of proper service of notice, he has not tendered his appearance before the Bench. However, learned DR is present on behalf of the department and has argued the case at length. He has vehemently argued that Superintendent of Directorate General of Inspection and Training, Lahore, along with his staff visited the business premises of the registered person and on scrutiny of the record placed therein it was found that during the period 01.11.1992 to 30.11.1993, the registered person of the case in hand had adjusted input tax amounting to Rs. 42,211,027/- against the fixed sales tax payable on the goods manufactured and cleared by him under the capacity taxation fixed by the Collector, Central Excise and Sales Tax, Lahore, vide letter No. IV(2)ST/164/91/47/9589 dated 07.11.1992, according to which no adjustment of fixed tax was admissible to the registered person. He has emphasis that provision of this letter have been knocked off by the Collector (Adjudication) on legal plain of jurisdiction by maintaining that the Collector was not competent to fix the production capacity of a unit by lending credence from the Finance Bill of 1994 through an amendment in Section 3 of the Sales Tax Act, 1990, which does not meet the end of justice. He has further added that contents of show-cause notice were valid being based on facts of the case against which vacation ordered by the learned Collector (Adjudication) is not sustainable under the law. On the basis of foregoing submissions, he seeks setting-aside of the Order-in-Original No. ST-38-39/2002 dated 08.04.2002.

5. In rebuttal to the line of arguments rival by learned DR, the learned counsel appearing on behalf of the registered person has fully supported the impugned order supra by arguing that input tax adjustment is a statutory right of a registered person, which cannot be defeated by the orders of the Collector in the light of following reported judgments:-- (i) PTCL 2002 CL. 115 (LHC) recorded in the case of Messrs Mayfair Spinning Mills Ltd., Lahore. (ii) 2007 PTD (Trib.) 728 recorded in the case of Messrs Kohinoor Textile Mills Ltd., Rawalpindi. (iii) 2003 PTD (Trib.) 928 recorded in the case of Messrs Trade Links International, Lahore.

He has further added that search of Superintendent of Directorate of General of Inspection and Training (Customs, Central Excise and Sales Tax), Lahore, along with staff at business premises of the registered person without warrant obtained from the Judicial Magistrate is illegal in the light of following pronouncements:-- (i) 2004 PTD 1731 (ii) 2007 PTD 2356 (iii) 2004 STR 801 (iv) 2005 PTD 1933 = 2005 SCMR 1166

He has also drawn our attention to this aspect of the case that appeal before this Tribunal has been filed by the Additional Director, who is not competent to file this appeal on behalf of the Sales Tax Department. Reliance has been placed on case laws 2006 SCMR 129, 2008 PTD 356 and 2005 PTD 2539 (K.H.C.)

6. While concluding his arguments he has also assailed the show-cause notice on the legal plain of limitation. He has elaborated that show-cause notice in the case in hand was issued on 12.10.1994, against which ONO could be passed within 45 days but the same has been passed on 07.05.2002, which is time barred.

7. After hearing the arguments advanced from both sides and perusal of relevant record available on file, we have come to the conclusion that the instant departmental appeal being devoid of any legal substance does not merit acceptance by us on the following grounds:-- (i) With regard to the issue of capacity tax, admittedly, there is no any enactment or Notification issued by the Government in the field of Central Excise Duty or Sales Tax, authorizing the Collector to fix production capacity of a unit and we fully endorse the stance taken by learned counsel that input tax adjustment is a statutory right of a registered person, which cannot be defeated by the orders of the Collector in the light of numerous pronouncements of higher judicial forums, out of which the three reported judgments relied by learned counsel before us cited as PTCL 2002 CL. 115 (LHC), 2007 PTD (Trib.) 728 and 2003 PTD (Trib.) 928 are fully applicable to the facts and circumstances of the case in hand. In view of the foregoing discussion, the vacation of the show-cause notice dated 12.10.1994 by the Collector (Adjudication) being in accordance with Law, does not call for any interference at our end. (ii) Visit of the Superintendent of Directorate of General of Inspection and Training (Customs, Central Excise and Sales Tax), Lahore, along with staff at business premises of the registered person without warrant obtained from the Judicial Magistrate is illegal in the light of settled in the reported judgments cited as 2004 PTD 1731, 2007 PTD 2356, 2004 STR 801 and 2005 SCMR 1166 = 2005 PTD 1933. (iii) Filing of appeal before this Tribunal by the Additional Director on behalf of the Sales Tax Department is illegal in the light of reported judgments cited as 2006 SCMR 129, 2008 PTD 356 and 2005 PTD 2539 (K.H.C.)

8. Appeals stand disposed off in above terms. HBT/140/Tax(Trib.) Order accordingly.