2003 PLP (Trib (PTD)

ABDUL HAMEED KHAN KHATTAK MEMBER (JUDICIAL).‑

1. This appeal is directed against the Order‑in‑Original No.20 of 2002, dated‑ 15‑11‑2001, passed by the learned Additional Collector, Customs, Sales Tax and Central Excise, (Adjudication), Rawalpindi.

2. Brief facts of the case are that during the course of audit of appellants Cement Factory by the DGPRA for the year 1997‑98 and 1998‑99 it was observed that the appellant‑Factory had evaded sales tax amounting to Rs.3809661 on self‑consumed (self‑produced) limestone weighing 694166 M.T. and clay weighing 60839 MT valuing Rs.29788581 and Rs.688697 (Market Price) respectively, used/consumed in the exempt supply of cement during the year 1998‑99 in violation of sections 2(33), 2(41), 3, 6, 22, 23, 26 and 34 of the Sales Tax Act, 1990 punishable under section 33 ibid resulting, in issuance of show- cause notice, dated 14‑12‑1999 as to why penalty prescribed under aforesaid provisions of law be not imposed upon the appellant besides recovery of sales tax and additional tax. Appellant contested the show -cause notice by raising many legal pleas but none of such plea prevailed with the learned adjudicating officer who passed the impugned order thereby directing appellant to pay remaining amount of sales tax after deduction of the amount already paid (after adjustment of input tax amount of Rs.414,714 plus two other amounts of Rs.8953 and 62294, the sales tax which was stated to be paid by the appellant for 12/98 to 1/99), along-with the additional tax in terms of section 34 (ibid) and also to make payment of a penalty of 3% of the tax involved under section 33(2)(cc) (ibid). Feeling aggrieved thereof, appellant has preferred the present appeal.

3. Arguments heard, record perused.

4. The learned counsel for the appellant forcefully argued that no sales tax was ever levied by the Legislature on the limestone and clay in above natural stage as used in the manufacture of cement. Finance Minister while presenting the finance bill at the floor of National Assembly for the year 1997‑98 stated in budget speech that due to heavy taxation the production capacity of cement industry was grossly under utilized. The area‑wise exemption of sales tax to a few units had also created distortions. In order to provide a level plying field it was proposed to withdraw sales tax leviable @ 12.5%. The incidence of excise duty was however being increased by 5% from 35% to 40% to compensate Revenue loss to some extent. The Legislature subsequently approved budget proposal resulting in passing of Finance Act for the year 1997‑

98. The appellant started the payment of Central Excise Duty at enhanced rate of 40 % accordingly. The sales tax was neither charged earlier nor it was chargeable after the passing of the Finance Act referred to above on the limestone and clay. On this score, it was contented that it would be against the interpretation of the statute and the spirit of Legislature to demand sales tax @ 12.5 % on the natural stone and clay after raising of Central Excise duty from 35% to 40% as the Legislature could not‑ be imputed to have intended to take away by another' hand what it gave by one hand as was so held in 1979 PTC 484 and PLD 1966 SC

559. It was further argued that as per Fourth Schedule, no sales tax can be imposed by the Federal Legislature on the mines in terms of Entries 49 and 51 of the Federal Legislative list. According to the learned counsel, simply digging/excavating the lime stone and clay and then shifting the same in their natural state to the kiln, cannot fall within the definition of word "manufacture" as used in section 2(16) of the Sales Tax Act, especially when definition clause is never meant to be operative clause of the statute as propounded in PLD 1974 Kar. 417, PLD 1964 SC 616, PLD 1965 SC 435 and PLD 1976 Karachi

600. Further submitted that the liability to pay the sales tax as per section 3 ibid is upon the person required to be registered in terms of section 14 of the Act. Appellant was neither falling under any of the categories of the person mentioned under section 14 nor under section 3 of the Act. Lastly it was argued that use of limestone and clay in the production of cement was not a consumption rather it was a transformation of natural impugned material into the production of cement and the consumer was not required to be registered for the purpose of sales tax in terms of section 14 thus appellants were not required to be registered at all.

5. The learned D.R. controverted all the aforestated submissions and fully supported the impugned Order‑in‑Original for the reasons mentioned therein especially by putting reliance upon the rule enunciated in Writ Petition 903 of 2000 C.A. No.11/S of 2001‑2002 PTD 2097 and finally he referred to the judgment rendered by this Bench of the Tribunal in a consolidated judgment of four appeals recorded in Appeal No. 87 of 2002 decided on 30‑4‑2002 to put at naught all the above contentions raised on behalf of the appellants.

6. We have considered the above contentions and examined the record carefully. It requires few words to dismiss the appeal as the matter stands clinched in the forceful pronouncement of the superior Courts of few of which were cited as above by the D.R. It would be much beneficial to reproduce a few lines from these judgments which have direct bearing on the point in issue before us. In C.A. II‑S‑2001, dated 16‑10‑2001, the latest judgment in the field, their. Lordships dealt with most comprehensively with all the points of law given above and finally, concluded that notwithstanding the fact that minerals like lime stone, clay and gypsum are self‑supplied/self‑used, they are deemed to be "taxable supply" as defined in Sales Tax Act, 1990 and covered under the Entry 49 of the Federal Legislative List Part (1) Fourth Schedule of the Constitution of 1973. Almost to the same effect is the ratio decidendi given in Writ Petition No.903 of 2000 especially where it was held in unequivocal terms that limestone and clay which is excavued by the petitioner from its leased site is taxable goods by itself. For the petitioner the limestone and clay is an intermediary produce which is manufactured/produced during the process of excavation for furtherance of taxable activity. Therefore, it is liable to sales tax under section 3 of the Act. Limestone and clay is an identifiable/marketable goods on which tax can be levied, therefore, once a taxable goods has been supplied by a person to itself, same would fall within the definition of "taxable supply" notwithstanding the fact whether, the sales has taken place or not between two persons but the fact remains that the excavation and bringing the limestone and clay to the factory constitute a taxable supply during the process of taxable activity. Taxable activity covers any forms of those taxable activity which is even carried on by one person for his own business.

7. In the above cited judgment, all the points raised in the instant appeal were thoroughly discussed, considered and finally brushed aside.

8. It is pertinent to note that during the course of arguments before us, the D.R. vehemently stated that as many as 6 other Cement Factories in Pakistan were already paying sales tax on self‑excavation/self consumed supply of coal, lime stone, clay and gypsum. Thus this fact further supports the impugned Order‑in‑Original.

9. Vide our judgment, dated 30‑4‑2002 recorded in consolidated judgment of Appeal No. 87 of 2002, all the above mentioned legal points raised by the learned counsel for the appellants were also discussed, considered and turned down. The present appellant's Appeal No.171 of 2000 was also dismissed vide the same judgment. We were not informed by either side as to whether the said judgment was assailed at the‑higher forum or was set aside thus it would be presumed that the same still holds field. Even if for the sake of arguments, the earlier said judgment of this Tribunal is ignored and not taken into consideration, the crucial legal points involved in the present appeal stand resolved by the honourable superior Courts vide their above‑cited judgments which we respectfully follow as in the present appeal as well as in the above discussed appeals decided by the superior Courts, the factual and legal points were the same in toto.

10. For what has gone above, the impugned Order‑in‑Original No.20 of 2002, dated 15‑11‑2001 does not seem to be suffering from any legal infirmity which is confirmed and the appeal, being unmeritorious, is dismissed.

11. All concerned be informed accordingly.

12. Announced. S.M.A.H./559/Tax (Trib.) Appeal dismissed.