2007 PLP (Trib (PTD)

ZAFAR UL MAJEED, MEMBER (TECHNICAL):

This appeal has been filed by Messrs Punjab Mineral Development Corporation, Khushab (the appellant heroin), against sales tax Order-in-Original No.353 of 2001 dated 16-8-2001 passed by the Deputy Collector (Adjudication) Faisalabad. By this order, learned adjudicating officer has adjudged following demands of sales tax, additional tax and penalty on account of various charges as detailed below -- (i) Demand of .sales tax amounting to Rs.3,30,399 along with additional tax on the ground that the appellant did not include the elements of royalty and excise duty in the value of coal supplied .during the period 7/96 to 12/00 in violation of the provisions of section 2(46) of the Sales Tax Act, 1990 (hereinafter referred to as "the Act"). (ii) Demand of sales tax amounting to Rs.13,537 along with additional lax on account of inadmissible input tax claimed by the appellant on electricity bills whereas a portion of electricity was used in the office, which was not directly used in production activity. (iii) Demand of silos tax amounting to Rs.9,662 along with additional tax on account of inadmissible input tax adjustment against lyres for jeep and telephone bills in violation of S.R.O.578(I)/98 dated 12-6-98. (iv) Demand of additional tax amounting to Rs.3,513 on account of late filing of sales tax return, for the month of October, 2000. (v) Demand of sales tax amounting to Rs.94,179 along with additional tax on supply of bauxite during the period 7/99 to 12/2000. (vi) Demand of additional tax on account of non-payment of sales tax on advances during the period 7/96 to 6/2000. (vii) Additional tax amounting to Rs.7,500 in respect of late payment of sales tax to the extent of 3 %, i.e. the difference, between the tax paid @ 15 % and tax actually payable @ 18%. (viii) Penalty of Rs.20,000 under section 33(2)(cc) of the Act for afore-said violations.

2. Through the instant appeal, the appellant has challenged the levy of sales on excavation of coal referring to item-51 of the Federal Legislative List provided in the Constitution of Pakistan whereby the power of Federal Government to levy tax has been restricted only to the minerals used in the generation of nuclear energy. According to the appellant, the subject of mining, tax having been excluded from the federal as well as concurrent legislative lists of the Constitution falls within the competence of provincial government. However, notwithstanding this legal objection, the charges contained in the impugned order have been contested as follows:

(i) That the value of coal supplied by the appellant @ 1300/ ton represented the market value which was fixed after including the elements of royalty and excise duty (ED) and, as such, the declared value was in accordance with the provisions of section 2(46) of the Act. Thee same value was subsequently allowed by the department vide sales tax Order-in-Original No.40 of 2005 dated 23-6-2005 in the case of Messrs Jhelum Valley Coal Company, Khushab. The demand of sales tax on this account may; therefore, be dropped. (ii) The electricity was used in the project office in Khushab and site office at Padhrar. These offices being integral part of production & sales activities of the appellant, sales tax paid thereon was entitled for input tax adjustment in terms of input tax Rules, 1996. (iii) That the input tax adjustment of sales tax paid on telephone bills is admissible as the telephones wire installed in the name of the appellant. However, during the course of arguments, learned counsel for the appellant conceded that tyres are included in the list of S.R.O.578(I)198 dated 12-6-1998 and that the appellant was ready to pay sales tax amounting to Rs.5,470 adjusted on this account. (iv) That the appellant has already paid a penalty of Rs.2,500 imposed on account of late filing of sales tax return for the month of October 2,000 as directed by the Deputy Collector (Adjudication), Faisalabad vide order C. No. DC/ST1 (Adjudication)/301-300/2000/6556 dated 5-7-2001. There was as such no justification to demand additional tax in addition to that. (v) That the issue regarding levy of sales tax on bauxite has since been decided, by the Supreme Court against the appellant, the demand 'of sales tax amounting to Rs.94,179 on this account is admitted. However, since the matter remained in dispute, the demand of additional tax is, not justified. (vi) Demand of additional tax for non-payment of sales tax on advances is also not justified led as the issue regarding chargeability of tax at the time of receipt of advances remained in dispute during the period in question, though later on decided by the Supreme Court in favour of the department. (vii) That non-payment of deferential amount of sales tax because of enhancement in the rate of sales tax from 15% to 18% is admitted. However, payment of tax at lower rate was because of ignorance about change in the rate of tax and that the payment of differential amount was made immediately after it came to the knowledge of the appellant. Since the default was not wilful, the demand of additional tax on this account is not justified: (xiii) That; as is evident from the above, default on the part of the appellant was not wilful in any way. Penalty of Rs.20,000 imposed vide impugned order may, therefore, be waived.

3. We have heard the parties and perused the record. During the course of arguments, learned counsel stated that the issue regarding competence of the Federal Government to levy tax on excavation of minerals has been decided by the Supreme Court in favour of the department and, therefore, appellant's objection in this regard stands withdrawn. Our findings on rest of the issues and demands relating thereto are as follows:- (i) According to the evidence produced by the learned counsel, the department has already accepted the declared value as inclusive of royalty and excise duty vide order-in-original dated 23-6-2005: The demand of sales tax and additional tax raised on this account is, therefore, not maintainable, which is dropped. (ii) During the course of arguments, learned D.R. conceded that the electricity was used by the appellant in its office at the site and in project office, which deal with production as well as sales of the coal. The appellant is, therefore, entitled to adjustment of input tax paid thereon and demand of sales tax along with additional tax raised on this account is dropped. (iii) Adjustment of input tax paid on telephones installed in the appellant's business/name is admissible under the rules. The appellant is, however, directed to pay, sales tax amounting to Rs.5,470 adjusted against purchase of tyres for the jeep in violation of the provisions of S.R.O.578(I)/98 as admitted the learned counsel during the course of hearing. (iv) The appellant has admittedly paid penalty of Rs.2,500 on account of late filing of sales tax return for the month of October, 2000 in compliance with the directions of the department. There is no justification to charge additional tax in addition to that and, therefore, the demand of additional tax on this account is dropped. (v) Supply of bauxite during the period from 7/99 to 12/2000 without payment of sales tax has been accepted by the appellant's counsel. Demand of sales tax amounting to Rs.94,179 on this account is, therefore, upheld which the appellant is directed to pay. Since the issue regarding chargeability of sales tax on this item remained in litigation for quite some time, the default on this account cannot be treated as wilful or mala fide. The demand of additional tax therefore, set-aside. (vi) Demand of additional tax on advances is also set aside as the issue remained in dispute during the period in question, until finally decided by the Supreme Court, and the default on this account was not wilful. (vii) Non-payment of tax at the enhanced rate of 18% and late payment of differential amount cannot be treated as wilful or mala fide in view of the explanation given by the appellant. Demand of additional tax amounting to Rs.7,500 raised on this account is, therefore, dropped. (viii) Keeping in view the overall circumstances of the case as aforesaid, we do not find enough justification to impose penalty of Rs.20,000 under section 33(2)(cc) of the Act, which is remitted.

4. The appeal is disposed of as above and the impugned order is modified accordingly. C.M.A./116/Tax(Trib.) Order accordingly.