2025 PLP (Trib (PTD)

M. M. AKRAM, JUDICIAL MEMBER.

These are the cross-appeals that have been filed by the Registered Person as well as the Department against Order-in-Appeal No.287 of 2018 dated 31.05.2018 passed by the learned Commissioner Inland Revenue (Appeals), Peshawar for the tax period July, 2013 to June-2016 on the grounds as set forth in the respective memo. of appeals. The fact of the case and the issue involved in all these appeals are the same, therefore, these appeals are being decided through this common order.

2. Brief facts of the case are that during the course of the sales tax audit of the Respondent Unit for the tax periods July, 2013 to June, 2016, the following discrepancies have been observed:- I. Un-declared Sales in the shape of Advances from Customers and not reflected in the bank statement amount to Rs.501,903,374/- and Sales Tax thereon Rs.94,670,803/-. II. Suppression of Sales by declaring less amount of Sales in the Sales Tax returns as compared to the statement of finished goods provided by the respondent unit to the audit team worth Rs.5,006,933/- and Sales Tax thereon Rs.951,317/-. III. Suppression of production of 99,008 Kgs of finished goods, resulted in suppression of sales worth Rs.18,217,472/- and Sales Tax thereon Rs.3,461,320/-. IV. Concealment of the imported quantity of Non-DTRE polypropylene by comparing GDs declared in Sales Tax return viz-a-viz GDs as per import data worth Rs.10,147,500/- and Sales Tax thereon Rs.1,928,025/-. V. Sales suppression as evident from bank statements-unexplained receipts worth Rs.538,503,370/- and Sales Tax thereon Rs.100.503,574/-. VI. Inadmissible Input Tax Adjustment tax in violation of section 8(1)(a) of the Sales Tax Act, 1990 at Rs.4,254,672/- read with SRO 490(I)/2004 dated 12.06.2004 to the tune of Rs.905,982/- on electricity/gas consumed in Labour Colony/Offices. The cited discrepancies were communicated to the Unit vide show-cause notice bearing C. No. ST/Audit-02/CIR/Selection/0424/2013-16/362 dated 26/12/2107. The registered person submitted the written reply. However, the Inland Revenue Officer being not satisfied with the explanations of the registered person, passed the impugned Assessment Order No.02/2018 dated 31/01/2018, whereby demand was created at Rs.202,421,021/- along with the imposition of default surcharge (to be calculated at the time of payment) under section 34 and penalty of Rs.10,121,743/- @ 5% of the principal amount under section 33(5) of the Sales Tax Act, 1990 ("the Act"). Felt aggrieved, the registered person preferred an appeal before the learned CIR(A), who has decided the case vide the impugned Order -in-Appeal No.287 of 2018 dated 31.05.2018, whereby the demand created vide Assessment Order has been vacated to the extent of Rs. 198,597,309/- and demand to the extent of Rs.3,823,712/- has been confirmed along with default surcharge under section 34 and penalty under section 33(5) of the Act.

3. Aggrieved with the impugned order, the department as well as the registered person/unit has preferred the appeals before this forum and assailed the impugned order on a number of Grounds as per their respective memos. of appeals.

4. The case was heard on 10.07.2023. Learned DR, in his appeal, filed by the department, reiterated the contentions already submitted in the grounds of appeal as set forth in the memo. of appeal. On the other hand, learned AR opposed the contention made by the learned DR and supported the order passed by L/CIR(A). However, the registered person in his appeal, contended that the learned CIR(A) has erred in law in confirming the issue of suppression of production and disallowance of input tax on account of electricity consumed in the labourer's colony. In support, he placed on record the copies of invoices, payment proof, bank statements of seller and buyer, challan of withholding sales tax, and advance income tax on the transactions.

5. We have heard both parties and perused the record. First, we will decide on the departmental appeal. We have keenly gone through the impugned order passed by the learned CIR(A) keeping in view the submissions of the learned DR. We tend to agree with the findings of the learned Commissioner Inland Revenue (Appeals). The learned CIR (A) has aptly discussed all aspects of the case in detail. The appellant Department has failed to point out any legal or factual infirmity in the impugned appellate order and has not put forth any documentary or material evidence to rebut the observations; and findings of the learned CIR (A). We find no infirmity in the impugned order of the learned Commissioner (Appeals) and do not feel persuaded to interfere with the treatment meted out by the first appellate authority. Accordingly, the order passed by the learned CIR (A) is upheld and the appeal filed by the department is hereby dismissed.

6. As far as the registered person's appeal is concerned, the appellant vehemently contended that the findings of the learned Commissioner Inland Revenue (A) on account of alleged suppression of production and disallowance of input tax on electricity consumed in laborer's colony. In support, on account of alleged suppression of production, he placed on record the copies of invoices, payment proof as per section 73 of the Act, bank statements of seller and buyer, challans of withholding sales tax, and advance income tax on the subject transaction. All these documents were confronted to the DR who was unable to refute the same. Similarly, on account of the disallowance of input tax on electricity consumed in the residential colony of the laborers, the learned AR placed on record the copies of the judgment of the Hon'ble Sindh High Court titled The collector of Sales Tax v. Messrs Matiari Sugar Mills, bearing Special Sales Tax Appeal No.148 of 2005 vide order dated 28.01.2021 and the judgment of the Hon'ble Islamabad High Court titled Collector Sales Tax and Federal Excise, Peshawar v. M/s Flying Kraft Paper, Mills (Pvt.) Ltd., (2020 PTD 776). In both judgments, the court has allowed the input tax paid on electricity bills consumed in the residential colony of the labourers. Under the circumstance, the appeal of the appellant is accepted on both the account and directed the revenue department to immediately either issue the refund of Rs.5,773,805/- recovered from the appellant during the pendency of the instant appeal vide challan dated 18.06.2020 or allow the adjustment of the said amount under section 66 of the Act against the future tax liability of the appellant.

7. For what has been discussed above, the titled cross-appeals are disposed of in the manner stated above. MQ/39/Tax (Trib) Appeal allowed.