2006 PLP (Trib (PTD)

ZAFAR IQBAL (MEMBER TECHNICAL).

This appeal has been filed against the order, dated 31-3-1999 passed by the Collector of Customs Appeals South Zone, Karachi.

2. The facts of the case are that the sales tax was levied on import of pharmaceutical products @ 5% per Second Schedule of Sales Tax Act, 1990 effective from 1-7-1996 vide Finance Ordinance, 1996 exemption on end products was again restored.

3. Effective 29-12-1996 pharma materials were made subject to 10% sales tax vide Sales Tax (Third Amendment) Ordinance, 1996 and again omitted effective from 16-4-1997 vide 'Finance (Supplementary) (Amendment) Act, 1997 brought back to Schedule VI of 1990 (exemption from sales tax). Accordingly, all materials used in the pharma products were restored for exemption.

4. The present appellant claimed input tax upto 31-10-1996 and did not claim input after 22-10-1996 since end product was exempted per S.R.O. 1199(I)/96, dated 21-10-1996.

5. Sales Tax Department raised a demand for the recovery of input tax already adjusted on stocks (materials, in process and finished). An appeal arising out of identical facts and question of law and pertaining to Messrs Becham Pakistan Ltd., was allowed by Collector of Customs (Appeals), South Zone, Karachi by Order in Appeal No.99/98, dated 4-3-1998.

6. The Collector observed:-- "....After due consideration of the case record and the written and verbal submissions put forth by the appellant and concluded as under:-- (a) The case relates to the period from August, 1996 to December, 1996. (b) The appellant made the adjustment of input tax during the next month of the tax period. (c) The appellant was not asked to clarify as to why his claim of refund being time-barred under section ,66 should not be rejected. (d) Section 66 of the Sales Tax Act, 1990 (amended) is not applicable to this case, as it reads as under:-- "No refund of tax claimed to have been paid on overpaid through inadvertence, error a misconception shall be allowed, unless the claim is made within one year of the date of payment." (e) This case is not the case of overpayment of error of misconception. (f) The appellant instead of making adjustment of input during the tax period, adjusted the same during the next tax period i.e. it is a case of belated tax adjustment. The plea of department that this action caused loss of Revenue is not tenable because of this input tax had been adjusted in the relevant tax period even then it would not cause any addition to the Revenue actually payable. In fact the appellant could have sought input adjustment one month earlier. (g) In fact the sales tax paid at the import stage during the, tax period was left with the government in a month. (h) It is imply a case of procedural error and no loss to the government revenue has occurred. I, accordingly, condone the procedural lapse to deduct input tax belatedly. In the light of the foregoing observation, I find that the appeal has merit and is accepted. The impugned order is set aside...."

7. The said order was upheld by this Tribunal vide Order-in-Appeal No.35/98, dated 24-2-2000 and appeal of department was dismissed as time-barred. Another identical Appeal No.63 of 2000 was allowed by this Tribunal vide' order-ill-appeal, dated 23-10-2000 on merit after considering all aspects of the case.

8. Whereas the case of present appellant was rejected by the Collector of Customs Appeals, hence this appeal.

9. The learned counsel appearing on behalf of the appellant cited the following orders of this Tribunal in support of his claim. (a) The Customs, Excise and Sales Tax Appellate Tribunal, Lahore Bench camp at Karachi heard an identical Appeal No.979/98 and dismissed vide order, dated 26-7-1999. (b) The subsequent Order-in-Appeal No.63/2000, dated 23-10-2000 and Appeal No.35/98, dated 24-2-2000 followed the same view and appeal of Messrs Parke Davis was allowed. (c) Both appeals hold the field since department has not gone into appeal against cited orders of this Tribunal perhaps in view of clause (IV) of Budget Instructions, 1996-97 of the Central Board of Revenue. (d) Similar view was taken by this Tribunal in the reported case 1997 PTCL CL- 232 (International Tanneries v. Collector of Customs Appeals Lahore) adopted per dictum of apex Court in Metalex Corporation Ltd. v. Commissioner of Sales Tax 1991 SCMR 2475.

10. In all these cases claim of tax adjustment by the pharmaceutical manufacturers were held to be correct and legal.

11. Keeping in view all these factors into consideration and for the reasons of consistency we allow this appeal and set aside the impugned order. C.M.A./106/Tax (Trib.) Appeal accepted.