2008 PLP (Trib (PTD)

ZAFAR UL MAJEED, MEMBER (TECHNICAL).

This appeal has been filed by Messrs A.J. Industrial Services, Johar Town, Lahore against Order-in-Appeal No.105/ST of 2006 dated 21-3-2003 passed by the Collector, Customs, Sales Tax & Federal Excise (Appeals), Lahore. By this order, Collector (Appeals) has upheld the Order-in-Original No.263 of 2005 dated 18-11-2005 passed by the Additional Collector (Adjudication), Lahore whereby appellant's claim for input tax credit amounting to Rs:39,93,545 has been held inadmissible on the ground that the appellant was registered as wholesaler whereas it was actually providing services of manufacturing/erecting machinery and input tax credit was claimed against purchases, which were different from those shown in the output tax invoices.

2. The appellants' case is that it is an engineering concern engaged in fabrication of machinery and supply/installation thereof against contracts which was duly registered with the Sales Tax Department in terms of section 2(25) of the Sales Tax Act,1990. During the course of arguments, learned counsel for the appellant placed on record, copy of its application for registration wherein appellant's business activity was shown as wholesaler as well as manufacturer engaged in fabrication of goods whereas the registration certificate issued by the department was for wholesaler only. Copy of the registration application was seen by the D.R. Learned Counsel also questioned competence of DRRA to conduct appellant's audit on the ground that their powers were restricted only to the audit of receipts of Federal Government in terms of S.R.O. 1195(I)/90 dated 17-11-1990. Learned D.R., however opposed the appeal arguing that the appellant was engaged in the business of manufacturing and claimed input tax accordingly, while it was registered as wholesaler. He, however, conceded that the purchase invoices were otherwise in order and the appellant was entitled to input tax credit had it been registered as a manufacturer.

3. Having gone through the facts on record and submissions made by both the parties, we do not find any force in the appellant's contention that the audit was not authorized in that relevant sales tax record was called by the Assistant Collector, Sales Tax according to the notice produced by the D.R. The audit may have been conducted by the department with the help of DRRA, but the show cause notice and - subsequent adjudication proceedings were conducted by the Sales Tax Department and, therefore, there was nothing illegal about it. There is however, considerable merit in the appellant's contention that its business was duly registered with the Sales Tax Department in terms of section 2(25) of the Sales Tax Act, 1990 and that it was entitled to input tax credit under section 7 ibid regardless of the category of registration. This point has already been settled by this Tribunal in its judgment in Appeal titled Messrs Arzoo Industries (Pvt.) Ltd. v. Collector Appeals, Rawalpindi (Appeal No.116/LB/2000). Relevant portion of the judgment is reproduced below for the facility of reference:

"Once a person is registered under this provision he becomes a registered person in terms of section 2(25) and is treated accordingly for the purposes of the Act. He has the same rights and liabilities, as any other tax payer has with regard to payment of sales tax under section 3, admission of input tax credit under section 7, filing of monthly tax return under section 26, maintenance of relevant record under section 22 and other tax related matters. There is no provision in the Act which operates specifically against a person who opts for voluntary registration."

4. It may also be mentioned that according to the copy of registration application produced by learned counsel, the appellant, while applying for registration did indicate its principal business activity as manufacturer engaged in the business of fabrication but the department registered it as a wholesaler. The appellant, therefore, cannot in any way be held responsible for the omission on the part of the department. Learned D.R. when confronted with this during the course of hearing, had no explanation and conceded that except for this objection, the appellant's claim for input tax credit was in order being supported by proper sales tax invoices.

5. For the aforesaid reasons, we do not find any merit in the impugned order which is set aside and the appeal is accepted. H.B.T./140/Tax (Trib.) Appeal accepted.