2003 PLP (Trib (PTD)

Shamsur Rehman, Inspector for Respondent No.1. Dates of hearing: 5th, 14th, March; 16th April and 26th September, 2002. S. M. KAZIMI, MEMBER (TECHNICAL). ‑‑‑This judgment disposes of the appeal filed by Messrs MKB Enterprises (Pvt.) Ltd. against the Order‑in‑Original No. 15 of 2000, dated 12‑5‑2000 (dispatched on 1‑6‑2000) passed by the Assistant Collector of Customs, Dry Port, Peshawar.

2. Briefly, the facts of the case are that while auditing Bill of Entry No.395 of 1999 dated 4‑3‑1999 filed by Messrs MKB Enterprises (Pvt.) Ltd., Peshawar, the officers of the Directorate -General of Audit Revenue Receipts (D.G. A.R.R.), Lahore, through their Audit Observation No.10/21‑7‑1999 pointed out that sales tax amounting to Rs.1,384,218 was not paid by the appellants on the ground that the machinery imported was exempt under S.R.O. 582(I)/98, dated 12‑6‑1998. However, the DG, ARR reported that benefit of exemption was not available because Messrs MKB Enterprises (Pvt.) Ltd., Peshawar commenced trial production on 15‑5‑1994 and, therefore, its production was exempt until 14‑5‑1999 in terms of S.R.O. 561(I)/94 dated 9‑6‑1994. Since S.R.O. 582(I)/98, dated 12‑6‑1998 did not provide benefit of exemption on machinery, producing exempt goods, the non-levy of sales tax on machinery imported under Bill of Entry No. 395/99 dated 4‑3‑1999 was not proper and thus recoverable. The Assistant Collector of Customs, Dry Port Peshawar issued Notice C. No.2115 dated 30‑8‑1999 requiring Messrs MKB Enterprises (Pvt.) Ltd., Peshawar, to show cause why the short paid sales tax amounting to Rs.1,384,218 should not be recovered from them under section 31 of the Customs Act, 1969. After hearing Qazi Waheeduddin, Advocate, on behalf of the Messrs MKB Enterprises (Pvt.) Ltd. Peshawar, the Assistant Collector passed the impugned order rejecting their plea and directing that the short -realized amount of Rs.1,384,218 be recovered from them. Hence this appeal.

3. During the course of hearing before us, the learned counsel for the appellant argued that S.R.O. 582(I)/98 dated 12‑6‑1998 allows exemption of sales tax on plant and machinery, operated by power of any description, to be used for the manufacture of taxable goods by registered persons. He argued that these machines are not installed instantly at the time of filing of bill of entry and, therefore, the exemption notification uses the word to be used which include the use on and after 15‑5‑1999 when the appellants will produce taxable goods. He cited the precedent of case decided by the Assistant Collector of Sales Tax, Peshawar, in his Order‑in‑Original No.39 of 1999 dated 2‑11‑1999 which accepted input tax adjustment on account of plant and machinery purchased by the appellants against Bill of Entry No.473/99 dated 19‑4‑1999 in compliance of which they have received Cheque No.014527 dated 5‑5‑2001 under Collectorate of Sales Tax and Central Excise Peshawar C. No. ST(REFUND/628 dated 5‑5‑2001. He prayed for setting aside of the impugned Order‑in- Original No. 15 of 2000.

4. The learned Departmental Representative and representative from the Collectorate stated that the virus of the Additional Collector of Sales Tax, Peshawar's Order‑in‑Original No.39 of 1999, dated 2‑11‑1999 is doubtful. However, they could not satisfy that the Collector of Sales tax has filed any appeal against that order. As regards the case contained in impugned Order‑in‑Original No.15 of 2000 dated 1‑6‑2000, they opposed the appeal on the ground that since the goods produced by the appellants were exempt up to 14‑5‑1999, the machinery imported prior to that date were not entitled to the benefits of exemption under S.R.O. 582(I)/98, dated 12‑6‑1998 in terms of the provisions of section 30(a) of the Customs Act, 1969, read with section 31‑A(1) thereof and section 6 of the Sales Tax Act, 1990. They prayed for rejection of the appeal.

5. Having heard the parties and on perusal of record of the case, we find that argument advanced by the learned departmental representative and the Law Officer has a great force in general. However, in this case, the appellants, claims exemption on local supplies up to 14‑5‑1999 under S.R.O. 561(I)/94, dated 9‑6‑1994 which exempts all supplies made by manufacturers or producers of industrial units. Obviously it refers to supply or taxable supply as defined in subsections (33) and (41), respectively, of section 2 of the Sales Tax Act, 1990. However, S.R.O. 582(I)/98 dated 12‑6‑1998 allows exemption on plants and machinery for manufacture of taxable goods by registered persons. The Bill of Entry No.395 of 1999 dated 4‑3‑1999 shows that the appellants had Sales Tax Registration No.5‑1‑3900-013‑28 on the date they claimed benefit of S.R.O. 582(I)/98, dated 12‑6‑1998 and even otherwise, the prosecution does not have a case to the contrary on this issue of being registered person. However, S.R.O. 582(I)/98 used the words taxable goods which is defined under clause (39) of section 2 of the Sales Tax Act, 1990, which is distinct from the terms supplies and taxable supplies, used for the purpose of S.R.O. 561(I)/94. The word "taxable goods", as defined under section 2(39) "means all goods other than those which have been exempted under section 13". The appellant produce "plastic mats which in itself is not exempt as goods under the Sixth Schedule to the Act or under any other notification issued under section

13. There is no doubt that even S.R.O. 561(I)/94, dated 9‑6‑1994 has been issued under section 13 of the Act but this exempts the taxable supply and not the taxable goods itself. The plastic mats manufactured by the appellant shall still be treated as taxable goods under section 2(39) of the Act but its supplies, under sections 2(33) and 2(41) of the Act, by the appellants shall be exempt under S.R.O. 561(I)/94. Therefore, plastic mats manufactured by the appellants being registered person, were entitled to the relief/ concession under S.R.O. 582(I)/98 dated 12‑6‑1998. We accordingly set aside the impugned Order‑in‑Original No. 15 of 2000, dated 12‑5‑2000 and the appeal stands disposed of as accepted accordingly.

6. Inform all concerned accordingly.

7. Announced. C.M.A./553/Tax(Trib.) Appeal accepted.