2011 PLP (Trib (PTD)

Vide this Sales Tax appeal, the appellant has assailed the order of the learned Collector Sales Tax and Federal Excise, Lahore vide Order-in-Appeal No.13 of 2009 dated 10-6-2009.

2. Facts leading for disposal of the instant appeal are that the assessee/registered person is a public limited company and engaged in the business of manufacturing and selling ordinary Portland Cement. It was observed that on the basis of audit conducted by the team of DRRA for the tax period 2005-2006 and alleged that according to law the adjustment of input tax on the purchase of diesel oil was not allowed, mainly due to the fact that diesel oil, capable or being put to multiple uses, can also be used in automotive vehicles and other non-taxable activities, hence precise quantification thereof not possible. Thus, diesel oil, all kinds of petrol and other petroleum products were not admissible for input adjustment, except furnace oil, lubricants and greases, which have exclusively industrial use, besides diesel oil also did not constitute Stock in Trade. Accordingly, on 25-5-2007 the Additional Collector issued a show-cause notice informing the registered person as to why sales tax amounting to Rs.89,67,308 should not be recovered under section 36(1) along with the additional tax and penalty under sections 34 and 33(1)(5) of the Sales Tax Act, 1990. On the due date of hearing, us the registered person could not substantiate his version with any documentary evidence, the learned Additional Collector (Legal) initiated the court proceedings and after going through the facts of the case he directed the registered person to deposit sales tax amounting to Rs.89,67,308 along with default surcharge/additional tax vide Order-in-Original No. 37 of 2007 dated 10-12-2007. This has forced the assessee ?registered person to file appeal before the learned Collector who, by virtue of his order dated supra upheld the order of the Additional Collector (Adjudication). This dispensation has compelled the registered person to file appeal before the Income Tax Appellate Tribunal, Lahore.

3. The learned D.R for the revenue was present and defended the orders-in-originals. On his turn, the learned counsel appearing on behalf of the assessee-registered person vehemently contended that the orders passed by the authorities below are illegal, mala fide, void ab initio and in blatant violation of the provisions of the Sales Tax Act, 1990. Further contended that both the authorities below had failed to apply correct law on the subject and they misconceived the facts and the learned Tribunals have exercised jurisdiction vested in them illegally and with material irregularity. Also agitated that the impugned Orders No.37 of 2007 and review Order No.13 of 2009 are based on misreading and non-reading of evidence` on record of the case and both the learned foras have drawn incorrect inference from the evidence on record. Further contended that the subject case is based on the audit conducted by the DRRA which is non extent entity under the Sales Tax Act, 1990 and can not have access to the books of account and record of the private parties under the law as the President of Pakistan had required Auditor General to audit the receipts of Federal Government and not the records of the industrial units registered under the sales tax laws. In 'support of his contention, reliance has also been placed on 2007 PTD (Trib.) 1600, 2008 PTD (Trib.) 261.

4. After appraising the facts obtaining on record and also after hearing the divergent views expressed by the rival parties, we are persuaded to incline with the contentions raised by the learned counsel for the assessee-registered person. We have also gone through the reported judgment of the Hon'ble High Court Peshawar cited as 2010 PTD 1355 whereby the Hon'ble High Court has decided the matter with the following manner: President of Pakistan has required the Auditor General of audit the receipts of Federal Government and not the records of the private enterprises/Industrial units licensed/registered under the Sales Tax/Central Excise Laws. The whole exercise conducted by the DRRA is thus quorum-non Judice. We have further observed the reported judgment of Appellate Tribunal Inland Revenue, Lahore Bench, Lahore cited PTCL 2011 CL 109 decided the case with the following extract:-- We have considered the matter and hold the same view that DRRA is quorum-non-Judice and the show-cause notice as well as the order issued there-under was without necessary legal validity, therefore, the orders as well as the show cause issued by the authorities below are set aside. Confirming to the Hon'able High Court's view that the Sales Tax Department may conduct fresh audit of the respondent-unit if so permissible under the law. In case any contravention is detected, the respondent unit may be proceeded against in accordance with law. Respectfully following the ratio decided in the reported judgment of the Hon'able High Court Peshawar as well as the judgment of the learned Appellate Tribunal, we have no option except to adopt the same view confirmed by the higher forum. Keeping in view the aforementioned discussion/submission we feel no hesitation to vacate the orders of the authorities below as well as to cancel the show-cause notice issued on 25-8-2007.

5. As a result, the appeal of the registered person is disposed of to the extent and in the manner as indicated above. H.B.T./212/Tax(Trib.)????????????????????????????????????????????????????????????????????????? Order accordingly.