2003 PLP (Trib (PTD)

ZAFAR-UL-MAJEED, MEMBER (TECHNICAL).

This appeal has been filed by Messrs Indus Cotton Factory and Oil, Industries, D.G. Khan against Sales Tax Order-in-Original No. 1525 of 2001, dated 13-11-2001 passed by the Deputy Collector (Adjudication), Multan, whereby the appellants have been directed to pay sales tax amounting to Rs.3,25,266 alongwith additional tax in terms of section 34 of the Sales Tax Act, 1990 and a penalty of Rs.9,780 under section ibid.

2. The aforesaid demand of sales tax has been raised on the ground that during the year 1999-2000 the appellants showed production and supply of cotton seed @ 53.89 % of the cotton ginned whereas the normal recovery ratio of other factories of adjoining area was 59%. Therefore, the. appellants allegedly showed less supply of cotton seed valuing Rs.21,68,437 on which sales tax involved was Rs.3,25,

266. A contravention case was accordingly made out against the appellants and after giving them due opportunity of defence, learned Adjudicating Officer adjudged an-amount of Rs.3,25,266 as sales tax short paid on the basis of the normal recovery ratio of cotton seed at 59% reported by the other factories in the area.

3. It has been argued on behalf of the appellants that the recovery ratio of cotton seed reported by them was true and correct and that they had not made any misdeclaration in this regard. .It has been further argued that 59% recovery ratio of cotton seed applied by the Adjudicating Officer is based on presumption as there is no uniform standard to determine the recovery of cotton seed nor any specific instance was quoted by the Department. to prove that the production of cotton seed declared by the appellants was not correct. Even otherwise, the recovery of cotton seed depends on. many factors like quality of cotton and efficiency of the ginning unit, which ig evident from the fact that the Department has been accepting different. recovery ratios declared by different units.

4. While opposing the appeal, learned D.R. admitted the possibility of variation in recovery ratio because of different factors referred to by the appellant but contended that the ratio declared by the appellants was abnormally low as compared to other units of the same area, which led the Department to believe that the appellants had not correctly declared their production/supply of cotton seed. Their production was, therefore, rightly calculated by the Adjudicating Officer applying the normal recovery ratio of 59% declared by other units in the area.

5. Considering the submissions made by both sides and to ascertain the factual position, the Department was required to carry out an exercise to find out the recovery ratios declared by different ginning units located in different areas of Multan Collectorate which were accepted by the Sales Tax Authorities. On 17-4-2002 Departmental Representative placed on .record a detailed statement showing the recovery ratio of cotton seed ranging from 55 % to 64.92 %. A copy of the statement was handed over to the learned counsel for the appellants who; after examining the same, contended that this information was not relevant as, according to law, the departmental audit could not go beyond the sales tax record unless they had solid proof to show that the sales were suppressed.

6. We have gone through the case record and carefully considered the submissions made both sides. There is no force in the appellants' argument that Department had gone beyond the record to determine the amount of tax payable by them. 1t was actually from the record maintained by the appellants that the audit staff detected suppression of sales i.e. by observing that the quantity of cotton seed produced did not commensurate with the quantity of cotton received. In a situation the Department was competent to assess the correct amount of tax payable by the appellants in exercise of the powers conferred upon it by section 11(2) of the Sales Tax Act, 1990. However, according to the information provided by the Department, the recovery ratio of cotton seed in different areas of Multan Collectorate as accepted by the local Sales Tax Authorities ranged from 55% to 64.92%. In view of this information and in the absence of any other evidence with the Department in support of its case, we are inclined to allow the minimum recovery percentage of 55 % accepted by the Department in the case of Messrs Five Star Cotton Industry, Bahawalpur to be applied in the instant case as well. The Department is accordingly directed to calculate the short paid amount of sales tax by applying recovery ratio of 55 % and recover the same from the appellants alongwith additional tax in terms of section 34 of the Sales Tax Act, 1990. Penalty of Rs.9,780 is, however, remitted.

7. The appeal is accepted in the above terms and the impugned order is set aside. C.M.A./661/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeal accepted.