2007 PLP (Trib (PTD)

ZAFAR IQBAL (MEMBER TECHNICAL).

This appeal challenges the vires of the order, dated 11-4-2005, passed by the Collector of Customs, Sales Tax and Central Excise Appeals, Hyderabad.

2. As a consequence of an audit of the appellant's records by the Sales Tax Department for the period July, 1999 to December, 2000, a show-cause notice was issued to the appellant wherein following allegations were levelled against them:-- (i) During the tax period August, 1999, they have claimed input tax amounting to Rs.93,060 on account of Sui Gas Bill, which was in the name of Messrs Burmi Glass Bangles while the unit had been working under the name and title of Messrs Shaheen Glass Bangles. The adjustment was thus not admissible in terms of section 7 of the Sales Tax Act, 1990 read with rule 6 of the Collection and Payment of Sales Tax on Natural Gas Rules, 1999 (S.R.O. 1040(1)/99, dated 14-7-1999). The amount so adjusted is thus recoverable under section 36 of the Sales Tax Act, 1990 along with additional tax computable under section 34 ibid. (ii) During the tax period from September, 1999 to December, 2000, the registered person has adjusted unpaid amount of input tax amounting to Rs.2,117,170 involved in gas bills from the payable amount of sales tax without depositing the amount of gas bill including sales tax. The adjustment was thus not admissible in terms of section 7 of the-Sales Tax Act, 1990 read with the rule 6 of the Collection and Payment of Sales Tax on Natural Gas Rules, 1999 (S.R.O. 1040(1)/99, dated 14-7-1999). The amount so adjusted is thus recoverable under section 36 of the Sales Tax Act, 1990 along with additional tax computable under section 34 ibid. (iii) During the tax period from February, 2000 to April, 2000 and from October, 2000 to December, 2000 the registered person made purchase of soda ash and claimed input tax of Rs.85,131 whereas invoices were in the name of Messrs Shaheen Glass Bangles. The adjustment was thus not admissible in terms of section Tot' the Sales Tax Act, 1990 and the amount so adjusted is also recoverable under section 36 of the Sales Tax Act, 1990 along with additional tax computable under section 34 ibid. (iv) During the tax period May, 2000, the registered person claimed input tax of Rs.22,733 on account of electricity charges but failed to produce invoice/bill. The adjustment was thus not admissible in terms of section 7 of the Sales Tax Act, 1990 read with the Special Procedure for Collection and Payment of Sales Tax (Electric Power) Rules, 2000 (S.R.O. 124(I)/2000, dated 15-3-2000). The amount so adjusted is thus recoverable under section 36 of the Sales Tax Act, 1990 along with additional tax computable under section 34 ibid.

3. The appellant vide their reply to the show-cause notice denied the said charges. The learned Adjudicating Officer absolved the appellant from all allegations described in sub-paras (i), (ii), (iii) and (iv) of para. 2 ante. Being aggrieved from these orders, the Department preferred an appeal before the respondent, which had been accepted in respect of one issue namely, adjustment of input tax Rs.2,117,170 from output tax prior to its payment. Hence this appeal.

4. The appellant now states that in view of Central Board of Revenue's instructions contained in letter No.2(1)STP/2001 (Pt.III), A dated 23-4-2001, the action taken by the respondent is illegal. Paras 3, 4 and 5 of the said letter read as under:-- "..3.It has, therefore, been decided that the said complications in the sales tax law would be rectified through necessary amendment (during the budget at the latest). The objectives of amendments would be: (i) by amending section 7 to enable the claim of adjustment by the holder of tax invoice in the same period in which the tax invoice is issued irrespective of whether or not he had made payment of such sales tax to the supplier; and (ii) to provide in section 73 that transactions made on credit would be permissible in accordance with the existing mercantile practice and the terms of dealing between buyer and sellers.

4. Pending the bringing about of necessary changes in the text of the law and mentioned at para. 3 above it is directed as under. (i) That no infringements/contravention should be framed for deduction of input under section 7 by the holders of bona fide tax invoice in the same tax period when the holder gets such invoice. Such deduction/adjustment should be allowed. (ii) That all existing proceedings covered under (i) above whether under adjudication or otherwise under scrutiny/preparation in the Collectorates should be stayed until necessary changes are brought about, instructions' will then be issued to formally settle all such matters. (iii) Not to question transactions on grounds of having been made on credit; and (iv) To hold in abeyance all adjudication or other proceedings covered under (iii) above. ???????????

5. These instructions have the approval of the competent authority. ???????????

6. In view of the clear instructions contained in sub-paras (i), (ii), (iii) and (iv) of para. 4 of the said letter, the tax functionaries were bound to follow them in the light of section 72 of the Sales Tax Act, 1990. When the competent authority has given a relief to the taxpayers, the same cannot be denied by deviating from the decision so made. Vide para 4(i) of the letter, dated 23-4-2001, the respondent was directed not to frame contravention in respect of deductions of input under section 7 of the Sales Tax Act, 1990, however, not conforming to the said direction demand in this case raised on 24-8-2002. The raising of demand in the matter was, therefore, ab initio void and illegal being violative of the provisions of section 72 of the Sales Tax Act, 1990. This appeal is 'accordingly allowed and the impugned orders are set aside. H.B.T./179/Tax (Trib.)???????????????????????????????????????????????????????????? Appeal accepted.