2007 PLP (Trib (PTD)

ZAFAR UL MAJEED, MEMBER (TECHNICAL).

This is an appeal against order in Appeal No.82 of 2005, dated 24-9-2005 passed by the Collector, Customs, Sales Tax and Federal Excise (Appeals), Lahore. By this order, learned Collector (Appeals) has upheld Order-in-Original No.122 of 2005 dated 18-6-2005.

2. Brief facts of the case are that during the audit of the appellant's sales tax record for the period December, 2002 to June, 2004, the staff of the Collectorate of Sales Tax, Lahore observed following discrepancies: (i) That the appellant failed to produce purchase invoice of cotton yarn against which input tax adjustment of Rs.19,710 was made. This amount was, as such, recoverable from the appellant. (ii) That the appellant had not shown the sale of cotton waste involving sales tax amounting to Rs.4,980 which was recoverable from the appellant. (iii) That as per examination report of the Customs Authorities, weight of the appellant's consignment at the time of export was found less by 111 Kgs involving sales tax of Rs.3,547, which was recoverable from them. (iv) That according to the appellant's bank statement, the credit balance reflected therein was Rs.1,58,91,619 whereas total sales declared in the sales tax return amounted to Rs.99,86,

162. As the appellant could not explain the difference of Rs.59,05,457, the same was treated as sales to un-registered persons concealed by the appellant, which involved sales tax amounting to Rs.9,00,832.

3. The case was adjudicated by the Deputy Collector (Adjudication), Lahore who vide Order-in-Original No.122 of 2005 dated 18-6-2005 directed the appellant to pay sales tax amounting to Rs.7,10,345 along with additional tax. The appellant preferred appeal against this order to the Collector (Appeals), Lahore which was rejected, vide impugned order.

4. Through the instant appeal, the appellant have challenged the Order-in-Original as well as Order-in-Appeal on the following grounds :

(i) That the invoice relating to charge No. (i) was mis-placed at the time of audit, which was subsequently sent to the department for verification. A copy of the same has been placed on record. (ii) Charges at S. Nos. (ii) & (iii) are admitted and the amount of tax involved has been deposited under the amnesty scheme launched by the government. Copy of challan was produced by the learned counsel of the appellant during the course of hearing. (iii) That the difference between the credit balance in the appellant's bank account and the sales declared in the sales tax return was because an amount of Rs.33,72,034 was taken as loan from the appellant's sister concern i.e. Messrs Shami Screen Printing Co. and a loan of Rs.13,52,200 was advanced by the directors of the appellant company. Copies of the account ledger and minutes of the meeting to this effect have been attached with the memo of appeal. Learned counsel also produced copies of the bank statements of the appellant as well as Messrs Shami Screen Printing Co. in support of his contention.

5. During the course of hearing on 21-11-2006, original bank statements submitted by the learned counsel were handed over to the D.R. for verification and department's comments, if any, on the contentions raised by the appellant in this regard. The case was finally fixed for hearing on 21-12-2006. Learned D.R. confirmed that invoice relating to input tax adjustment of Rs.19,710 was produced by the appellant after the audit, The D.R. has confirmed that the amount of sales tax involved in respect of charges at S. Nos.(ii) & (iii) has also been deposited by the appellant vide challan dated 30-6-2005, a copy of which has been placed on record. Demand of sales tax on account charges at S. Nos. (i), (ii) & (iii) is, therefore, dropped. 7(sic). Regarding charge of suppression of sales, the department has placed on record verification report duly signed by both sides whereby it has been brought out that the actual difference between the credit balance in the bank account and the declared sales of the appellant was Rs.35,50,409. ,Out of this, an amount of Rs.18,37,409 was received from Messrs Shami Screen Printing Co. through banking channel whereas remaining amount of Rs.17,13,000 has been received in cash. It has also been stated in the verification report that only receipts through banking channel were established as transactions between Messrs Shami Textile Mills and Messrs Shami Screen Printing Co. whereas the cash receipts could not be linked with the latter. I have gone through the facts on record and given due consideration to the submissions made by both sides. Although the appellant have not been able to prove through any documentary evidence except minutes of the meeting that the differential amount, received through bank transfer or in cash, was a loan from their sister concern & directors, the department too has not been able to prove from the appellant's sales tax record or from any other documentary evidence that the 'receipts were linked with supply of taxable goods made by the appellant. Honourable Sindh High Court in its judgment titled Messrs Al-Hilal Motors v. The Collector Sales Tax and Central Excise (East) Karachi 2004 PTD 868 has held that credit entries in the books of account cannot be treated as taxable unless proved to be linked with supplies and that the tax imposed on the basis of some assumption or presumption was not warranted in law. As the Department has not been able to prove that the credit balance in the appellant's account was linked with taxable supplies, I find that the demand of tax on this account is also not maintainable.

9. For the foregoing reasons, the appeal is accepted and the impugned order is set aside. C.M.A./42/Tax(Trib.) Appeal accepted.