2003 PLP (Trib (PTD)

Date of hearing: 23rd May, 2002. MIAN ABDUIL QAYYUM MEMBER (JUDICIAL).

This appeal is directed against the Order-in-Original No.225/2001, dated 4-10-2001 (dispatched on 4-10-2001.) passed by the learned Additional Collector (Adjudication), Lahore.

2. The appellant claimed input tax adjustment of Rs.3,63,165 in respect of raw material purchased from commercial importer i.e. Messrs Yaksr (Pvt.) Ltd., Karachi and Messrs Suleman and Brothers. The appellant allegedly did not possess sales tax invoices indicating sales tax registration numbers of supplies issued in their name. The staff of sales tax pointed out this irregularity as a result of audit of record of the appellant for 1995-96 and considering it as a violation of sections 3, 6, 7 and 26 of the Sales Tax Art, 1990, the appellant was issued a show cause notice requiring it to explain its position within 10 days as to why sales tax amounting to Rs.3,63,165 alongwith additional tax and surcharge be not recovered and why penal action be not taken under section 33.

3. The appellant resisted the show-cause notice and submitted a written reply.

4. The learned Adjudicating Officer after considering the show cause notice. ; parawise comments of the Superintendent Sales Tax, Samanabad Circle, Lahore and hearing the parties dropped the charge of wrong adjustment of input tax amounting. to Rs.2,97,453 relating to purchase of raw material from Messrs Yaksr (Pvt.) Limited during March and April, 1996 but held the appellant liable to pay Rs.65,712 as sales tax alongwith additional tax and penalty of Rs. 10.000 under section 33(2)(cc) of the Sales Tax Act, 1990 for its having taken input tax adjustment on purchased of raw material from Messrs Suleman Brothers to the extent of Bill of Entry No.2617, dated 28-2-1996- for the reason that the supplier being unregistered person could not issue a sales tax invoice which the appellant had to possess to, be entitled to claim input tax adjustment in view .of section 7(2)(1) of the Act ibid. Hence, this appeal.

5. For the purpose of this appeal the dispute is about Rs.65,712 claimed by the appellant by way of input tax adjustment this amount was paid as sales tax at the import stage by the importer vide Bill of Entry No.2617, dated 28-2-1996. The appellant is a registered person under the Sales Tax Act, 1990 whereas the supplier, Messrs Suleman Brothers is not a registered person under the Act.

6. The supplier in this case is an importer/wholesaler and the combined reading of sections 2(3)(a) and 2(9) of the Act, ibid (as these sections existed during May, 1996) show that the sales tax- paid by wholesaler whose suppliers, were not liable to sales tax being exempt under S.R.O. No.1185(I)/90, dated 18-11-1990 at previous stage will be input tax for a registered person who subsequently purchased these goods from the wholesaler. An importer or a wholesaler was not required to be registered under section 14 in view of S.R.O. No.112(I)/90, dated 1-11-1990. Since Messrs Suleman and Brothers were making exempt supplies, therefore, they were not legally bound to issue sales tax invoice which is only requited under section 23 of the Act ibid where taxable supplies have been made. In this situation neither the supplier could issue nor the appellant could obtain, 'sales tax invoice about the disputed supply. According to the relevant provision of section 7 as it stood in May', 1996, the appellant could claim input tax in case of goods imported into Pakistan if he holds bill of entry duly cleared by the Customs tinder section 79 or section 104 'of the Customs Act, 1969. The appellant holds Bill of Entry No.2617, dated 28-2-1996 duly cleared under the Customs Act, 1969 and input tax has been paid at the import stage. The above factual and legal position clearly shows that the appellant rightly claimed input tax adjustment of Rs.65,712 during May; 1995 and since the claim of input tax adjustment was valid and legal, therefore, the appellant A could neither be asked to pay this amount nor could he, be charged with payment of any additional tax or penalty. The impugned order directing payment of Rs.65,712 alongwith additional tax and penalty of Rs.10,000 is illegal. The same is set aside and the appeal is accepted: C.M.A./747/Tax (Trib.) Appeal accepted.