2010 PLP (Trib (PTD)

ABDUS SALAM KHAWAR, CHAIRMAN.

Messrs Khyber Chemical Corporation (hereinafter called as the appellant) filed this appeal against Order-in-Appeal No.218/2007 dated 2-7-2007 passed by the Collector (Appeals) Customs, Federal Excise and Sales Tax, Peshawar (hereinafter called as the respondent) in appeal against Order- in-Original No.162/2005 dated 4-5-2005 passed by the Collector Sales Tax & Federal Excise, Peshawar.

2. Brief facts of the case reported are that during the course of audit of appellant it was observed that the registered person had made inadmissible input adjustment beyond tax period and thus violated section 7 of the Sales Tax Act, 1990. It was pointed out that the unit had charged sales tax in February, 2001 through invoices but the same were not deposited in the government exchequer in violation of section 3(1)(a) of the Act.

3. It was alleged that the record of the sales tax audit was not produced in full, therefore, the unit was liable to pay a penalty for non production of record under section 33(3) of the Sales Tax Act, 1990 vide Order-in-Original No.162/2005 dated 4-5-2005. The appellant was directed to pay the principal amount of Rs.36,948 along with additional tax under section 34 of the Sales Tax Act, 1990. Besides this a penalty of Rs.50,000 was also imposed under section 33(3)(b) of the Sales Tax Act, 1990 for non production of sales tax record. Aggrieved of the same an appeal was preferred before Collector (Appeals) Peshawar who vide order dated 5-6-2007 upheld the order-in-original and dismissed the appeal filed by the present appellant.

4. Now the appellant has assailed this order-in-appeal before the Tribunal on the following grounds:-- (i) That impugned order-in-appeal and ex parte order-in-original is erred both in law and facts, hence, not sustainable in the eyes of law. (ii) That appellant has not been granted the opportunity to defend the case against him at adjudication stage, thus, impugned ex parte order is passed in violation of principle of natural justice audi alteram partem i.e. no one shall be condemned unheard, hence, liable to be vacated mere on this count only. (iii) That both the impugned order-in-appeal and ex parte order-in- original are arbitrary and non speaking, hence, liable to be set aside for being not qualified to be a judicial order. (iv) That impugned order is bad in law for not providing detail of specific grounds of inadmissibility of the input adjustment. (v) That impugned order-in-appeal is void ab initio and coram non judice as it has raised new causes against the appellant. It is pertinent to mention here that in the show cause notice and impugned order-in-original the tax period mentioned is only February, 2001, however, the Collector Appeals has raised new causes against the appellant by including the tax periods of July, 2000, January-2001, March-2001, April-2001, thus, liable to be set aside. (vi) That from bare reading of the provisions of section 7(1) of the Act, it is evident that the procedure adopted by the respondent is perfectly in accordance with law. Attention is invited to phrase; " a registered person shall be entitled to deduct input tax paid during the tax period .." (vii) That impugned orders are arbitrary and against the principle of natural justice as the appellant has been burdened with imaginary tax liabilities in spite of the fact that there is no short levy or non-levy of tax, hence rendering the show cause notice, per se ultra wires as under section 36, show cause notice can only be issued when there is either no tax is levied or short levied. (viii) That for the tax period February, 2001, it may kindly be noted that input tax adjustment beyond the tax period has not been alleged which is evident from the Audit observation. (ix) That allegation regarding input tax adjustment for the tax periods July, 2000, January-2001, March-2001 and April, 2001 was neither part of the show cause notice nor was mentioned in the impugned order-in-original, but added by the learned Collector Appeals by going beyond his jurisdiction, however, the allegation is answered in forthcoming paras. (x) That without prejudice besides the alleged procedural lapse, in case of input adjustment beyond tax period of Rs.6,607 for the tax period July, 2000 has not caused any prejudice to the revenue rather the objected procedure has caused disadvantage to the appellant as in the aforementioned case without,2reju_dde appellant input adjustments have been delayed for a tax period, hence, under the circumstances, there is no cause for issuance of the show cause. (xi) That without prejudice, the allegation that for the tax period January, 2001, appellant claimed an amount of Rs.8,074 without utility bill is mala fide as appellant even at Collector Appeals stage has shown the sui gas bill for the aforementioned tax period. Besides, it may kindly be noted that appellant has rightly made input tax adjustment of Rs.8,07 for the tax period January, 2001 as Sui gas bill was issued on 10-1-2001. (xii) That without prejudice, the allegation that for the tax period March, 2001 appellant claimed an amount of Rs.8,104 without utility bill is mala fide as appellant even at Collector Appeals - stage had shown the Sui gas bill for the aforementioned tax period. Besides, it may kindly be noted that appellant has rightly made input tax adjustment of Rs.8,104 for the tax period March, 2001 as Sui gas bill was issued on 10-3-2001. (xiii) That without prejudice, the allegation for the tax period April, 2001 that appellant claimed an input tax adjustment of Rs.8,104 in advance i.e. May, 2001 claimed in April, 2001 mere attracts additional tax for one month only at the most. Besides, it may kindly be noted that claiming input tax adjustment in advance is mere a clerical mistake as the Sui gas bill was issued on 8-5-2001 and subsequently the amount was paid on 9-5-2001, however, was mistakenly claimed in the sales tax return for the month of April, 2004. However, it is pertinent to mention here that the allegation of claiming input tax in advance of the month of April, 2004 is even not part of the show cause notice and order-in-original, hence liable to be dropped even on this count only. (xiv) That appellant deny the allegation of non-deposit of the tax of Rs.3,000 during the month February, 2001 as evident from Return of February, 2001, the appellant paid the due payable tax of Rs.6,002 in treasury, hence, the allegation is not sustainable. However, the confusion regarding non-deposit of tax surfaced due to two clerical mistakes which appellant mistakenly made in the Sales Tax Return of February, 2001; (i) appellant made sales of Rs.550,081, however, mistakenly mentioned sales tax as Rs.79,512 in the sales tax return instead of mentioning the correct value of sales tax i.e. Rs.82,512, (ii) on the other hand appellant made purchase worth of Rs.460,000 in February-2001, thus paid Rs.69,000 as input tax, however, due to clerical mistake mentioned purchases as Rs.440,000 and input tax as Rs.66,000, therefore, one way or the other appellant had to deposit the same amount of Rs.6,002 as sales tax payable in the treasury irrespective of the clerical mistake, thus causing no revenue loss to government, hence, the allegation is liable to be dropped. (xv) That the allegation for non-production of record is totally denied as appellant has maintained proper record and ready to furnish to the authorities if required. It may kindly be noted that appellant is even not penalized on this count in the impugned Order-in-Original. (xvi) That a penalty of Rs.50,000 imposed under section 33(3)(b) of the Sales Tax Act, 1990 is not only arbitrary but mala fide and based on the presumption as appellant has maintained proper record of his business activity and is ready to submit the same to the respondents, hence, the penalty is liable to be set aside. Besides, without prejudice imposition of above mentioned amount as penalty is ultra vires of law and coram non judice as neither the violation of section 33(3)(b) of the Sales Tax Act, 1990 is alleged in the show cause notice and impugned order-in-original nor the learned adjudication officer have the jurisdiction to impose aforementioned amount as penalty under section 33(3)(b) ibid. (xvii) That without prejudice a case of legitimate error could not be equated with a wilful evasion specially when there is no motive for evasion involved, thus under the circumstances of the case, the appellant Company is not liable to any penal provision of Chapter VII of the Sales Tax Act, 1990. (xviii) That without prejudice of the other submissions, on Show Cause Notice there is no mens rea attributed to the respondent, hence no punitive provision of the Sales Tax Act, 1990 is attracted to the Appellant cause. (xix) The additional tax and surcharge under section 34 of the Sales Tax Act, 1990 are not in intractable liability of a tax payer in as much it all depend upon the attitude of the tax payers in suffering the default which if not deliberate, intentional, or contumacious would qualify for being visited the same. In this regard attention is invited to PLD 1991 SC 963. (xx) That in spite of having hard proof of Sales Tax on its input, if input adjustment not allowed, would create a cascading effect; which would be against the spirit and genesis of the value-added based Sales Tax Act, 1990. (xxii) That impugned order/Show-Causes Notice are based on misconception of law and suffering from incurable legal infirmities, thus, liable to be vacated.

5. The appeal is resisted by Dr. Surmad Qureshi, Deputy Collector/Departmental Representative, assisted by Mr. Ghulam Husnain, Senior Auditor from the respondent.

6. The appellant has agitated mainly two points firstly that while disposing of the appeal the respondent has transgressed his powers. The only allegation embodied in the show cause notice was that the appellant had made a short payment for the month of February, 2001 but while disposing of the appeal the respondent also referred to certain other period. According to him, this Additional period did not find mention in the show cause notice nor was discussed in the order-in-original therefore no verdict could be passed against the period about which the explanation of the appellant was asked for.

7. Secondly it was urged that the provisions of 33(3)(b) have been mis-interpreted by the respondent. Conversely on behalf of the respondent, it was maintained that the appellant had been provided ample opportunity to put forth his stance before the respondent and now he could not agitate otherwise.

8. I have heard the learned counsel for the appellant Mr. Danish Ali Qazi, Advocate and the Departmental Representative on behalf of the respondent and perused the record. The main contention of the appellant is that while disposing of the appeal the respondent transgressed his powers.

9. The record shows that the appellant charged sales tax in February, 2001 but the same was not deposited in the government exchequer in violation of section 3(i) (a) of the Act. However, a passing reference was made to the inadmissibility of input adjustment beyond tax period in violation of the section 7 of the Sales Tax. During the course of arguments both the parties have reconciled the record and have filed a verification report Annex-A whereby it was observed that there was only short payment of Rs.3,000 in the month of February, 2001 by the appellant.

10. From this verification report it is abundantly clear that the short Payment of Rs.3,000 was only for the period of February, 2001. As regards the other amounts these have been paid, therefore, the additional tax was not leviable as laid down under S.R.O. 999(I)/2007 dated 29-9-2007. The principal amount had been paid and the amnesty scheme was attracted. In order-in-original, the appellant was held responsible for not producing the record and thus penalized fine of Rs.50,000 under section 33(3)(b) of the Sales Tax Act, 1990.

11. The relevant provision of law read as under:--33 General Penalty (3) Any person who. (a) .. (b) fails to maintain record required under this Act or the rules made under, shall pay (ten) thousand rupees or (five) percent of the amount of tax involved, whichever is higher.

12. Thus the provision of law has been mis-interpreted and the maximum penalty attracted was Rs.10,

000. In the show cause notice it has not beer clarified as to what record was held back by the appellant. This allegation is neither according to the law not the impugned order in this respect is sustainable. Thus I feel no legal justification in imposing the penalty which is waived herewith. Upshot of the above discussions is that the appellant is liable to pay a sum of Rs.3,000 only as short payment during the period in February, 2001.

13. The impugned order is set aside and orders accordingly. C.M.A./126/Tax (Trib.) Order accordingly.