2006 PLP (Trib (PTD)

SAEED AKHTAR, MEMBER (TECHNICAL)

This appeal is directed against the Order-in-Original No. 179 of 2004 passed by the learned Collector, Customs, Sales Tax and Central Excise (Appeals), Faisalabad issued vide C. No.109/Collector/Appeals/2003/5023, dated 27-5-2004 whereunder the appeal of the appellant Messrs Exim Enterprises S.M. Likhlas Road, Gulistan Colony, Faisalabad against the Order-in-Original No.120 of 2003 was dismissed and appellant was directed to deposit an amount of Rs.640,300 along with additional tax and penalty @ 3% of the amount of tax involved under sections 36(3), 34 and 33(2)(cc) of the Sales Tax Act, 1990.

2. Brief facts of the case are that audit of sales tax record of the appellant Messrs Exim Enterprises, Faisalabad for the period 1-7-2000 to 30-7-2004 was conducted by the Collectorate of Sales, Tax, Faisalabad who after scrutiny of the records observed following discrepancies: (1) Charge No.1. Inadmissible? input???? tax??????? adjustment for not producing original invoices and non-compliance of section 73.

The appellants adjusted input tax without having the requisite sales tax invoices in their record. Therefore, an amount of Rs.764,876 was held recoverable against some of invoices before the learned Adjudicating Officer at the time of hearing. The Adjudicating Officer after considering the invoices produced by the appellant reduced the alleged recoverable amount from Rs.776,028 to Rs.629,

149. The appellant also failed to produce before the auditors requisite payment proofs under section 73 of the Sales Tax Act, 1990. Section 73 of the Sales Tax Act, 1990, requires that if any transaction exceeds Rs.50,000 the same should be reflected through banking instruments i.e. Cross Cheque, Cross Bank Draft, Pay Order etc. The appellant failed to produce bank statement to substantiate that the payments were made in terms of provisions of section 73 of the Sales Tax Act, 1990. In the absence of relevant evidence the amount of Rs.629,149 was held recoverable from the appellant for violation of section 73 of the Sales Tax Act, 1990. The appellant was directed to pay the principal amount along with additional tax and penalty @ 3% of the tax involved. (2) Charge No.2. Suppression of Sale.

The appellant according to record have paid an amount of Rs.92,117 as output tax as per monthly sales tax returns for the period July, 2001 to October, 2001 whereas they were required to pay an amount of Rs. 103,272 as per monthly sales and purchase statements for the same period. In view of above an amount of Rs. 11,155 was held recoverable from the appellant. The appeal filed by the appellant was dismissed by the Collector Customs, Sales Tax and Central Excise (Appeals), Faisalabad and appellant was directed to pay the adjudged amount along with additional tax and penalty @ 3% of the tax involve under relevant provisions of Sales Tax Act, 1990.

3. The appellant feeling aggrieved with the decision of the learned Collector (Appeals) filed appeal before this Tribunal under section 46 of the Sales Tax Act, 1990.

4. The main contentions of the learned counsel for the appellant at the time of hearing were as under: (1) That the appellant is a distributor of Messrs Fon Gas Limited, a subsidiary of Fauji Foundation for the area of Faisalabad to sell its products. It is a regular feature of this business that the distributor deposit money in advance to show their willingness to purchase the product of manufacturer without settlement of price and quantity of the product to be purchased. The LPG product to the distributor nor distributors are under any obligation to purchase any quantity. The price and quantity are always dependent on the market trend and manufacturing cost of product. (2) That all advance payments are made to the manufacturer by crossed Traveller Cheques, which are deposited in the supplier/ manufacturers bank account. The registered person had not maintained records/books which are required under sections 22 and 23 of the Sales Tax Act, 1990. The registered person/ appellant had not provided purchase invoices in support of input claimed in the month sales tax returns. The input was therefore, held inadmissible by the auditors. (3) That the impugned order is mala fide, bad in law based on clear and without going into the merits of case. (4) That the honourable Collector (Appeals), Faisalabad had announced the decision without giving due consideration to the fact that the appellant had paid sales tax on all the purchases to the seller i.e. Messrs Fauji Foundation who further deposited the same in the Government Treasury. Moreover, the Honourable Collector (Appeals) had not given any consideration to the fact that all the payments were made by the appellant to Messrs Foundation Gas through banking instruments, which were received by the seller and were deposited in their account. In this regard Messrs Fon Gas has issued a certificate confirming that all the payment were received through banking instruments which were deposited in their bank account. (5) According to section 73 of the Sales Tax Act, 1990 any transaction (excluding utility bills) in respect of which payment is made on or after the first day of July, 2000 for a sum exceeding Rs.50,000 otherwise than by a Crossed Cheque drawn on a bank or by a crossed bank draft or pay orders shall not be admissible for the purposes of input tax adjustment or deduction, or refund, repayment or drawback or zero-rating etc. (6) That section 73 of the Sales Tax Act, 1990 says that all payments exceeding a sum of Rs. 50,000 should be made through banking instruments showing transfer from business account of the buyer. The appellant, like most of the business community, made, all the payments exceeding Rs.50,000 from his business account instead of bank account. Under the circumstances, the benefit of doubt should be given to the appellant. (7) That tax liability is determined under the provisions of section 7 of the Sales Tax Act, 1990. According to section 7 for the purposes of determination of tax liability in respect of taxable supplies made during a tax period, a registered person shall be entitled to deducted input tax for the purposes of taxable supplies made or to be made by him from the output tax that is due from him in respect of that tax period and to make such other adjustments as are specified in section

9. The registered person shall not be entitled to make any deduction from the output tax unless he holds a tax invoice in respect of such supplies for which a return is furnished. The law has given right to the appellant which cannot be denied for not following certain procedure. The Honourable Supreme Court of Pakistan in case of Messrs Pfizer Laboratories v. Federation of Pakistan has held that the Government should do what is fair and just to the citizen regardless of legal technicalities. The Honourable Supreme Court of Pakistan in case of Messrs Pakistan Industrial Development Corporation v. Federation of Pakistan has held that any construction of taxing statute which results in taxation of the same property twice is to be avoided if possible. The Appellate Tribunal in case of Messrs Trade Link International v. Collector of Sales Tax, Lahore as held that out of tax period adjustment is a procedural lapse. (8) In the light of above-mentioned facts, it is prayed that the appeal may kindly be accepted by setting aside the orders passed by the Adjudicating Officer vide Order-in-Original No. 120 of 2003 and by the Collector (Appeals) vide Order-in-Original No.179 of 2004 by declaring the same as illegal, without jurisdiction and having no legal effect.

5. The learned D.R. who was assisted by Mr. Ashiq Hussain, Senior Auditor opposed the appeal contending that input tax adjustment without valid sales tax invoices is illegal and the appellant is required to produce relevant payment proofs in terms of section 73 of the Sales Tax Act, 1990. The learned D.R. contended that the appellant has not produced payment proofs in terms of section 73 of the Sales Tax Act, 1990. Regarding suppression of sale, the learned D.R. contended that Adjudicating Officer and the appellant authority has correctly upheld the short payment of Rs.11,155 which is recoverable. The learned D.R. contended that there is no force in the appeal and the same may be dismissed.

6. We have heard the contentions of both the sides and perused the appeal file available before us. We have observed that the Adjudicating Officer and the Appellate Authority provided sufficient opportunity to the appellant to produce relevant sales tax invoices issued in terms of section 23 of the Sales Tax Act, 1990 but the appellant failed to produce the requisite invoices in the absence of which input tax adjustment claimed by the appellant was illegal. Moreover, according to section 73 of the Sales Tax Act, 1990 the appellant was required to meet the requirements of section 73 by making payment exceeding Rs.50,000 from the business account in the form of banking instruments. It has been observed that the appellant failed to produce bank statement to substantiate that the payments were made in terms of section 73 of the Sales Tax Act, 1990. The learned counsel for the appellant at the time of hearing contended that the payments were made through Crossed Traveller Cheques. The learned counsel for the appellant however, failed to produce evidence to the effect that the Traveller Cheques were issued from the business account of the buyer and these were crossed in the name of seller. The Crossed Traveller Cheques made from the sources other than business account are not acceptable for the purposes of section 73 of the Sales Tax Act, 1990. The contention of the learned counsel for the appellant that Traveller Cheques were made from the business account instead of bank account does not meet the requirements of section

73. In the absence of valid evidence that the crossed Traveller Cheques were issued from the business i.e. bank account of the buyer, the requirement of law is not fulfilled. For the charge regarding suppression of sales involving sales tax amounting to Rs.11,155 the appellant/learned counsel failed to bring any evidence in support of his contentions. The appellant during the tax period July, 2001 to October, 2001 paid an amount of Rs.92,117 instead of correct liability of Rs.103,

272. The appeal against the charge is without merit and the impugned order against the charge is upheld. In view of above discussion, we find no merit in the. appeal and the same is dismissed being devoid of merit.

7. The appeal stands disposed of as above. C.M.A./493/Tax(Trib.)???????????????????????????????????????????????????????????? Appeal dismissed.