2018 PLP (Trib (PTD)

MUHAMMAD ASIF (ACCOUNTANT MEMBER).

This appeal has been at the instance of the registered person against the Order-in-Appeal No.231 dated 09.04.2014 passed by the learned Commissioner Inland Revenue (Appeals), Faisalabad.

2. Facts of the case, in brief, are that the appellant did not charge/ pay tax on its supply to unregistered persons in view of S.R.O. 283(I)/2011 dated 01.04.2011. The concerned officer noticed that this facility of zero rating was available, if the unregistered person had paid tax @ 6% of the value of supply from spinning mills, whereas in this case, no evidence to this effect was available on record. Therefore, he passed the order-in-original, that was confirmed in appeal by the learned CIR(A), Faisalabad. Hence, this appeal.

3. In response to call notice, Mr. M. Tahir, ITP appeared on behalf of taxpayer while Mr. Hussnain Abroad Hali, DR was present on behalf of department. The learned AR was heard.

4. At the very outset the learned A.R submitted a copy of conversion receipts as under:- MONTH CONVERSION RECEIPTS July-2011 2,409,139 Aug-2011 2,588,222 Sep-2011 2,986,620 Oct-2011 3,024,392 11,008,373 He submitted that S.R.O. 283(I)/2011 was superseded by S.R.O. 1058(I)/2011 dated 23.11.2011 and S.R.O. 1125(I)/2011 dated 31.12.2011. When pointed out that the tax periods in his case were covered by S.R.O. 283(I)/2011 supra, he argued that the subsequent S.R.Os. 1058(I)/2011 and 1125(I)/2011 had replaced.

5. We have considered the arguments of AR and perused the record. Before proceeding further it would be apt to reproduce the relevant para from S.R.O. 283(I)/2011 that reads as under:- para (v) page 9 of S.R.O., "In case of yarn purchases an payment of sales tax @ 6% of the value of supply from spinning mils by un-registered person i.e. trade or person engaged in activity like sizing, warping, weaving intermediary and other ancillary process etc before processing of finished goods no further amount of sales tax shall be charges or demand."

6. The issue involved in this case is simple. The appellant maintains that he did not charge the tax in view of the above referred Clause as tax @, 6% was already charged from this customer by the textile units whereas the Department says that no evidence to this effect was produced by the appellant. The learned A.R conceded that he did not have any evidence of tax payment. Therefore, we are not inclined to intervene in favour of the appellant. The reliance of the learned A.R on subsequent SROs is also misplaced because they cannot have retrospective effect.

7. Appeal fails. Sd/- Muhammad Asif Accountant Member DISSENTING NOTE CH. SHAHID IQBAL DHILLON, JUDICIAL MEMBER.

8. After having gone through the proposed order of my learned brother, the Accountant Member, I do not find myself in agreement with the findings arrived at by him. In my opinion neither the facts of the case have been properly incorporated nor have the contentions raised during the course of hearing been appreciated in its true perspective.

9. Briefly stated, the sales tax has been charged with the allegation that the appellant has failed to deduct/deposit sales tax against the supplies made to unregistered persons during the tax periods 07/2011 to 12/2011 in accordance with Section 3 of the Sales Tax Act, 1990 read with S.R.O. 283(I)/2011 dated 01.04.2011. The contention of the appellant was that he is engaged in providing services and as per Clause (v) of S.R.O. 283(I)/2011 no further amount of sales tax shall be demanded or charged where the yarn has been purchased by the unregistered person on the payment of Sales Tax @ 6% and further the clarification dated 26.01.2012 has no retrospective effect inasmuch as S.R.O. 283 was superseded by S.R.O. 1012(I)/2011 dated 04.11.2011 and again superseded by S.R.O. 1058(I)/2011 dated 23.11.2011. However, the said S.R.O. dated 23.11.2011 has also been superseded by another S.R.O. 1125(I)/2011 dated 31.11.2011 whereby the appellant was not obliged the deduct/deposit the alleged tax levied by the department. In support of this contention the learned AR has relied upon Tribunal's order bearing S.T.A. No.553/LB/2014 dated 17.10.2014 whereby exactly in similar circumstances the sales tax charged on the same ground was deleted. Principally both the authorities below as well as the learned Accountant Member have accepted the preposition that no further Sales Tax can be demanded or charged if the yarn has been purchased after payment of sales tax @ 6%. However, the appellant has been burdened with sales tax only for the reason that he had failed to furnish the proof of payment made by the unregistered persons at the time of purchase of yarn. This is a harsh and unfair treatment. How can the appellant provide proof of payment made by other parties? Neither the law has imposed such condition nor does the appellant have any authority to call for such proof of payment. The contention of the appellant all along was that he is providing services for others and in this regard he had furnished complete particulars of such parties. Thus the appellant has absolved of his duty and to me, the onus was on the Adjudicating Officer to demand such proof from the parties on behalf of which weaving has been done instead of directly burdening the appellant with sales tax particularly when the textile goods fall under zero-rated category. This having not been done I feel that action of the Adjudicating Officer was not sustainable and the learned CIR(A) has erred in law to maintain his order.

10. Keeping in view the facts narrated above the ratio settled in the case law cited supra applies on all fours of the instant case and the impugned order is not sustainable and is hereby set aside. Sd/- (Ch. Shahid Iqbal Dhillon) Judicial Member

11. Since a difference of opinion has arisen the case is forwarded to the Hon'ble Chairperson for nomination of the third Member to resolve the following questions: i. "Whether in the facts and circumstances of the case when the appellant had furnished complete details he was absolved of his duty and onus was on the Adjudicating Officer to call for the proof of payments from those parties on whose behalf weaving has been done? ii. Whether in the facts and circumstances of the case the appeal merits acceptance or otherwise?" Sd/- (Ch. Shahid Iqbal Dhillon) Judicial Member MUHAMMAD ASIF, ACCOUNTANT MEMBER.

12. The legal proposition in this case as reproduced above is simple. In terms of S.R.O. No. 283 (I)/2011 (para 5) a registered person is absolved of his obligation to collect and pay sales tax on services rendered like sizing warping viewing etc. before processing of finished fabrics if unregistered person receiving services as paid sales tax @ 6% on purchases from spinning mills. Now in this case as observed by the learned CIR(A) in the impugned order (on page 4) that no evidence of payment of tax on yarn purchase was provided, would it be justified to hold that the appellant had furnished complete details and thus he was absolved of his duty to pay sales tax. In view of this factual position further question is proposed as under:- (i) Whether it is correct to hold that appellant had furnished complete, details and he was not required to produce the evidence of tax paid by the unregistered persons to the spinning mills? Sd/- (Muhammad Asif) Accountant Member CH. SHAHID IQBAL DHILLON, JUDICIAL MEMBER.

The contention of the appellant is that he has provided services to the unregistered persons who have already paid sales tax @ 6% at the time of purchase of yarn, therefore, he is not obliged to deduct any tax as per S.R.O. No. 283(I)/2011. In such circumstances, how the appellant can be asked to produce the proof of the payment of tax by other parties on whose behalf weaving has been done. Hence, to me the proposed question by the learned Accountant Member does not arise. Any how the case is referred to Honourable Chairperson for nomination of the Third Member. Sd/- (Ch. Shahid Iqbal Dhillon) Judicial Member Muhammad Tahir, ITP for Appellant. Asghar Niazi, DR for Respondent. Date of hearing: 3rd November, 2015. NAZIR AHMAD, JUDICIAL MEMBER.

14. This matter has been referred to me by the Honourable Chairperson to resolve the controversy, which has been arisen out of the decision recorded in Sales Tax Appeal bearing S.T.A. No.545/LB/2010. I have heard the arguments of the representatives of both the parties, also carefully gone through the views of my both learned brothers and other relevant record available on case file. The following questions have been referred for decision:-- i) Whether in the facts and circumstances of the case when the appellant had furnished complete details he was absolved of his duty and onus was on the Adjudicating Officer to call for the proof of payments from those parties on whose behalf weaving has been done? ii) Wether in the facts and circumstances of the case the appeal merits acceptance or otherwise? iii) Whether it is correct to hold that appellant had furnished complete details and he was not required to produce the evidence tax paid by the unregistered persons to the spinning mills?

15. It is pertinent to note that the tax period involved in the case in hand pertains to July 2011 to October, 2011, which without any shadow of doubt falls under the ambit of S.R.O. No. 283(I)/2011 dated 01.04.2011. The controversy, as is evident from the questions framed by the Division Bench, revolves around the sole issue that whether (as per Clause-V of S.R.O. 283(I)/2011 dated 01.04.2011), the registered person involved in providing services of processing, weaving, sizing etc. was required to satisfy itself regarding chargeability of sales tax @ 6% from the un-registered person on the purchase of yarn from the spinning mills.

16. To reach at a fair and just conclusion, the relevant Clause-V is reproduced hereunder:-- "In case of yarn purchases on payment of sales tax @ 6% of value of supply from spinning mills by unregistered persons i.e. traders or persons engaged in activities like sizing, warping, weaving, intermediary and other ancillary processes etc. before processing of finished fabric no further amount of sales tax shall be charged or demanded."

17. A careful perusal of the above clearly transpires that this Clause relates to those un-registered persons, who may be traders or involved in activities like sizing, warping, weaving, intermediary and other ancillary processes etc. Since, the appellant is a registered person, therefore, it, beyond any shadow of doubt is out of the ambit of Clause-V of the S.R.O. No. 283(I)/2011 dated 01.04.2011.

18. The perusal of ONO at page 5 reveals that the taxation officer has discussed the issue at length and, in his opinion, the appellant falls under Clause-VI of the said S.R.O. Therefore, he levied sales tax @ 4% in the case in hand. The Clause-VI is reproduced below:-- "In case of registered person engaged in providing processing services of any kind in respect of textile goods such person shall charge from the person who owns the goods but is not a registered person sales tax @4% of service charges."

19. Being a registered person, the above said Clause is applicable to the appellant, therefore, in my considered opinion, my learned Brothers Judicial Member as well as Accountant Member have not properly appreciated the legal position that the appellant does fall under Clause-VI of the SRO 283(I)/2011 dated 01.04.2011 and not under the Clause-V of the said SRO. Hence, the both authorities below have rightly by placing the appellant under Clause-VI charged sales tax @4% and the appeal merits dismissal. Consequently, the appeal is dismissed but not for the reasons as recorded by the learned Accountant Member.

20. In view of above discussion questions Nos.1 and 3 as formulated being improper and irrelevant are not replied whereas question No.2 is replied in the light of para-19 above

21. Appeal is disposed of accordingly. Sd/- (Nazir Ahmad), Judicial Member HBT/88/Tax(Trib.) Appeal dismissed.