2007 PLP (Trib (PTD)

ZAFAR-UL-MAJEED, MEMBER (TECHNICAL).

The facts giving rise to this appeal are that the sales tax staff of Multan audited the appellant's sales tax record for the year 2001-02 and observed that the appellant disposed of old and used plant and machinery, vehicles and scrap but did not pay sales tax amounting to Rs. 1,24,451 payable thereon. The matter was reported to the Deputy Collector (Adjudication), Multan, who decided the case vide Sales Tax Order-in-Original No.314 of 2004 dated 2-12-2003 whereby demand of aforesaid amount of sales .tax along with additional tax and a penalty equivalent to 3% of the amount of tax involved under section 33(2)(cc) of the Sales Tax Act, 1990 (hereinafter referred to as the Act) was adjudged against the appellant but recovery thereof was made subject to final decision of the Supreme Court on the issue. The appellant filed appeal against the order-in-original which was rejected vide Sales Tax Order-in-Appeal No.67 of 2005 dated 26-5-2005 on the ground that the appellant did not appear and contest the appeal despite three opportunities of hearing granted.

2. The appellant have contested the impugned order mainly on the ground that disposal of fixed assets does not fall within the definition of taxable supply as defined under the Act and, .therefore, old and used goods disposed of by them are not chargeable to sales tax. In support of their contention, the appellant have referred to a clarification issued by Ministry of Law vide O.M. No.633/2000-Law dated 3-6-2000 and judgments of this Tribunal's, Karachi Bench 2001 PTD (Trib.) 2590 and Bench-II, Lahore in Appeals Nos.1806-1819/LB of 2001. Learned D.R. however, opposed the appeal.

3. During the course of hearing on 16-1-2007 learned counsel for the appellant objected that while raising demand of sales tax amounting to Rs. 1,24,451 the Department has not given bifurcation of the amount relating to vehicles and scrap, neither in the show-cause notice nor in the order-in-original, while the demand relating to the disposal of vehicles has already been held by the C.B.R. as not payable vide its clarification dated 9-9-2004. Learned counsel also expressed his inability to contest the demand relating to scrap unless the Department gave exact description of scrap and amount of tax involved separately. The D.R. was accordingly directed to come up with details about description and value of scrap as well as confirmation whether the appellant had claimed any input tax against these items or not? The case was finally heard on 21-2-2007 on which date the D.R, placed on record relevant portion of audit report and extract from annual accounts of the appellant whereby it has been clarified that the scrap disposed of by the appellant was of iron hoops valuing Rs.1,31,

393. It was also confirmed by the D.R. that the appellant had not claimed any input tax adjustment against the iron hoops in question.

4. I have examined the facts on record and considered the arguments raised by the appellant. The emergent position is that the appellant had not claimed input tax adjustment against the goods in question at the time of their purchase. While C.B.R. had already clarified that tax was not chargeable on disposal of vehicles as adjustment of input tax was not admissible at the time of their purchase under section 8(1)(b) of the Act, according to another communication of the C.B.R. issued vide C. No.1(117)STJ/2004 dated 9-9-2004 the Sales Tax Collectorates were directed not to file appeals in cases relating to levy of sales tax on disposal of fixed assets against which input tax adjustment had not been allowed/claimed at the procurement stage, due to bar/restriction imposed by an order or notification issued under section 8 of the Act. In view of this clarification of the C.B.R., the disposal of goods in question is not liable to sales tax as the appellant, as confirmed by the Department, did not claim input tax adjustment at the time of their acquisition.

5. The appeal is accordingly accepted and the impugned order is set aside. C.M.A./97/Tax(Trib.) Appeal accepted.