2007 PLP (Trib (PTD)

HAFIZ MUHAMMAD ANEES, MEMBER (TECHNICAL).

This judgment disposes of Sales Tax Appeal No.99/LB of 2002 filed by Crescent Food Industries (Pvt.) Ltd. Sant Singhwala, Sheikhupura Road, Faisalabad, against the Order-in-Original No.422 of 2001 dated 9-10-2001 (dispatched on 22-11-2001) passed by the Deputy Collector (Adjudication), Faisalabad directing the appellant (the then respondent) to deposit Rs.3,12,271 (Rupees three lacs twelve thousand two hundred and seventy one only) along with additional tax under sections 36 and 34 of the Sales Tax Act, 1990. Besides penalties of Rs.9,368, Rs.5,000 and Rs.15,613 were also imposed under sections 33(2)(cc}, 33(7) and 33(3b) of the Sales Tax Act, 1990.

2. Briefly stated, the relevant facts of the case are that the audit of the appellant's unit for the period 1/1999. to 3/2001 was conducted which inter alia revealed that the appellant had adjusted input tax on the consumption of electricity and sui gas to the tune of Rs.3,12,271 violating sub-rule (5) of rule 4 of S.R.O. 1040(I)/99 dated 14-9-1999 and sub-rule (5) of rule 7 of S.R.O. 124(I)/2000 dated 15-3-2000 because not a single bill was in the name of the owner of the unit and no GST A number was mentioned on the bills. Secondly the appellant was making both taxable and exempt supplies. In such cases input tax has to be apportioned by the formula provided in S.R.O. 698(I)/96. Input tax attributable to the taxable supplies only can be adjusted. Even if electricity and sui gas bills meet the requirements of law the adjustment of input tax on electricity and sui gas would have been partially adjustable. According to the formula the input tax not adjustable comes to Rs.2,71,676.

3. On the basis of the aforesaid reported facts of the case, a show-cause notice dated 8-7-2001 was issued which was contested by the appellant (the then respondent). On adjudication the aforesaid amount mentioned in para. 1 above was adjudged and ordered to be paid by the appellant.

4. Being aggrieved and dissatisfied of the aforesaid decision, the appellant has filed an appeal before the Tribunal mainly on the ground that the management repeatedly made verbal requests to the electricity and sui gas departments in order to get the name and sales tax registration number incorporated in the monthly bills. The written correspondence is also being made. Sui gas and electricity connections are available and electricity/gas were exclusively used for the manufacture of bakery products. The claim of input tax credits on account of sui gas and electricity consumption in exempt supplies was made just due to ignorance of 'law otherwise there was no mala fide intention of the appellant.

5. During the course of proceedings, a committee was constituted and it was directed that the report incorporating all details may be submitted duly signed by the Collector himself and by all the representatives of the committee. The .verification report dated 25-2-2003 sent by the Collector reveals that the registered person adjusted input tax on consumption of electricity and sui gas which was inadmissible in the light of S.R.O. 124(I)/2000 dated 15-3-2000 and S.R.O. 1040(I)/99 dated 14-9-1999 because no GST number was mentioned on the bills and moreover both the meters were not in the name of the registered person. Therefore, the sales tax amounting to Rs.3,12,271 is recoverable along with additional tax. Further the electricity and sui gas was used in the manufacturing of both taxable and exempt supplies and even if the requirements are fulfilled by applying the apportionment formula the sales tax payable by the appellant comes to Rs.2,71,

676. In hearing before the Tribunal on 4-10-2006, the parties agreed to resolve the issue in a committee to be constituted by the Collector concerned. The report submitted by the committee constituted by the Collector comprising of Assistant Collector, Senior Auditor and authorized representative of the appellant reveals that the appellant started filing returns from 1-1-1999 upto the end of audit period 3/2001 and claimed input tax adjustment amounting to Rs.3,12,

271. In first eleven months of the period i.e. 1/1999 to 11/1999 the appellant paid sales tax regularly against his sales but during the next sixteen months of the audit period i.e. 12/1999 to 3/2001 the appellant started claiming input tax adjustment against output due. Thus the appellant adjusted input tax amounting to Rs.1,12,

775. In the return for the month of 3/2001 the appellant showed sales tax credit amounting to Rs. 1,99,596 which was claimed to be adjusted in the following tax periods. The scrutiny of the record further revealed that the appellant claimed illegal input tax adjustment amounting to Rs.3,12,271 but practically adjusted an amount of Rs. 1,12,

675. During the meeting of the committee the appellant agreed that he made illegal adjustment against the utility and wrongly adjusted input tax amounting to Rs.1,12,675 and is willing to pay back to the department along with consequential liabilities. The balance amount of Rs. 1,99,596 was although claimed to be adjusted in the following tax periods. The tax profile shows that the appellant did not adjust the same against his output tax. The report further says that even if the adjustment on the portion of taxable supplies is allowed, the same by applying the apportionment formula comes to Rs.40,

595. Thus the total liability against the appellant is worked out by the committee as under:

"Illegal adjustment of input tax against utilities is Rs.112,675 which is recoverable along with additional charges. The appellant can be allowed adjustment of Rs.40,595 against taxable supplies subject to verification of the bills by the Sui Gas and Electricity Department and the balance amount would be recoverable along with additional charges. "

6. I have examined the case record. Also perused the report of the committee duly signed by the representative of the Collectorate as well as the appellant. The net liability of principal amount of sales tax against the appellant works out to Rs. 1,12,

675. Since in terms of section 7 of the Sales Tax Act, 1990, the input lax adjustment is allowed as there is no dispute that the gas and electricity were used in the production of taxable supplies. Therefore, the balance amount after allowing the adjustment of Rs.40,S9S may be recovered along with consequent liabilities tax and penalties. The order of the Adjudicating Officer is modified to the above extent.

7. Announced.

8. Inform all concerned through registered post. C.M.A./98/Tax(Trib.) Order accordingly.