2007 PLP (Trib (PTD)

HAFIZ MUHAMMAD ANEES (MEMBER TECHNICAL).

This judgment disposes of Sales Tax Appeal No. 328/LB/2000 filed by Collectorate of Sales Tax, Multan against the Order-in-Appeal No.263-269/2000, dated 10-4-2000 passed by the Collector (Appeals), Lahore holding that production and self-consumption of. girders falling A under PCT heading 6810.9100 is not subject to payment of sales tax. He accordingly set aside the Order-in-Original No. 73-82/99, dated 28-11-1998 (dispatched on 16-10-1999) passed by the Additional Collector (sales tax), Multan and also disposed of other identical cases through this order.

2. Briefly stated, the relevant facts of the case as gleaned from the available record arc that Messrs Hussain construction Co. G.T. Road, Kasowal manufactured and consumed 46 girders valuing Rs.3,723,208 during 4/95 allegedly without payment of sales tax amounting to Rs.558,481 (Rs. Five Lac Fifty eight thousand four hundred eighty one only), violating sections 3,6,14,22,23 and 26 of the Sales Tax Act, 1990, On adjudication vide Order-in-Original No.1/96, dated 13-1-1996 the respondent was directed to deposit the sales tax involved along with additional tax and surcharge. Besides a penalty equivalent to the tax involved was also imposed. On appeal before the Collector (Appeals) Lahore the said order-in-original, dated 13-1-1996 was set aside and the case was remanded back to the adjudicating authority for passing a fresh order after providing the respondent the opportunity of being heard as the respondent contended that the said order had been passed against them without providing sufficient chances of hearing vide Order-in-Appeal No.774 of 1998, dated 6-11-1998. The case was re-heard in compliance of the observation raised in the said order-in-appeal passed by the Collector (Appeals), Lahore. On adjudication, vide Order-in-Original No.73-82/99, dated 28-1 1-1999 (dispatched on 16-10-1999) it was held that taxable supplies, if not otherwise exempted, even for self-use are liable to sales tax. It was also held that the case was not covered under section 65 of the Sales Tax Act, 1990 because during the relevant period, the sales tax was being paid by other units.

3. In appeal before the Collector (appeals), Lahore, a different view was taken and the appeal of the unit namely Messrs Hussain Construction Co. G.T. Road, Kasowal, along with other units was accepted mainly on the ground that such like girders have never been treated as taxable under the Sales Tax Act, 1990. Had it ever been treated as taxable, the contracts by the units would have been made taking into consideration the incidence of tax. It further goes to state that whether or not such like girders are liable to sales tax, it will not affect the public exchequer as the burden ultimately is to be suffered by the State Exchequer. In addition to the above arguments, the learned Collector (Appeals) has relied upon the judgment of the Division Bench of the Tribunal, Islamabad Bench passed in appeal No. 151 of 1995 in the matter of Messrs Ghulam Rasool and Company Gujranwala concluding therein that the activity of construction of girders for use in the construction of the bridge does not constitute sale of goods and on that analogy supply of goods made in Pakistan. As such the question of levy of sales tax on girders does not arise nor the subject activity would qualify the appellant to be manufacturer or producer within the meaning of section 2(22)(c) now section 2(17)(c) of the Sales Tax Act, 1990 as the appellant holds no claim to any patent, propriety or other rights of goods to be manufactured vide Order-in-Appeals Nos.263-269/2000, dated 10-4-2000.

4. The above appeal before he Tribunal assails the vires of the aforesaid order of the Collector (Appeals) on the ground that the activity of the firm falls in the definition of supply and manufacturer under sections 2(16) and 2(33) of the Sales Tax Act, 1990, these goods have not been exempted under section 13 of the Sales Tax Act, 1990 read with 6th Schedule of the Act.

5. On the other, while rebutting the charges the counsel for the respondent has stated that construction of girders and its use in the construction of bridges is not a taxable activity and as such not liable to sales tax and judgments of the superior Courts support this view point.

6. We have carefully gone through the record of the case. Also heard the parties. Anxious consideration has been given to the contentions raised by both the appellant as well as the respondent. While discussing the ease on merit, the following questions need to be answered. In order to resolve the issue:-- (i) Whether pre-cast girders to be used in the construction of bridges or other purpose are liable to sales tax. (ii) If so, whether self-consumption of girders is exempt or liable to sales tax. In order to arrive at the factual and legal position, it is necessary to go through various provisions of the Sales Tax Act, 1990. Section 3 of the Sales Tax Act, 1990 provides that there shall be charged, levied and paid sales tax at the rate of 15% of the value of taxable supplies made by a registered person in the course or furtherance of any taxable activity. The scheme of sales tax is such that all items are liable to sales tax unless exempted under any notification issued in terms of section 13 of the Sales Tax Act, 1990 or finds it mention in the sixth schedule of the g Act or it does not come within the ambit of section 3 ibid. Girders are classifiable under PCT heading 6810.9100 and are not covered under any notification issued under section 13 of the Sales Tax Act, 1990 nor find their mention in the 6th Schedule to the Act. The essential ingredients of section 3 for levy and charge of sales tax are: (1) taxable supply; (2) in the course or furtherance of any taxable activity; and (3) the supply should be that of goods; 8(sic). Supply under section 2(33) of the Sales Tax Act, 1990 has been defined and includes sales lease or other disposition of goods carried out for consideration and. also includes "putting to private business or non-business use of goods acquired, produced or manufactured in the course of business". It reveals that self-consumption also amounts to supply. This meaning or inference also gains support from the charging section 3 of the Act. Section 3(1)(b) says that there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of goods imported into Pakistan. There is no restriction as to the use of the imported goods. It can be for further supply for any purpose or for self-use. It thus follows that the definition of supply under section 2(33) read with section 3(1)(b) of the Act includes self-use or self-consumption in the definition of supply. The Honourable Supreme Court of Pakistan in its authoritative judgment reported as 2001 PTD 2097 = 2001 SCMR 1376 hi the case titled as Sheikhu Sugar Mills and others v. Government of Pakistan has held that self-consumption of bagasse comes in the ambit of taxable supply being identifiable and marketable and as such liable to sales tax. The girders in the instant case are however not marketable/transportable and also specially designed for the bridge under reference and not liable to be put to other uses.

9. Now for goods to be liable to sales, two conditions must be fulfilled:-- (1) It should be taxable supply. (2) It should be in course of furtherance of taxable activity. Taxable supply under section 2(41) of the Act has been defined as a supply of goods made by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section

13. The taxable supply speaks of supply of taxable goods the word `goods' has been defined under section 2(12) top include every kind of moveable property other than actionable claims, money stocks, shares and securities. This definition reveals that for a thing , or property to be a `goods' movement/transportation capability is essential e.g. a building is not a goods; a bridge is not a goods because of their in-ability to be transported. So by virtue of the very definition of goods, the bridges are not liable to sales tax irrespective of the fact whether any notification under section 13 exists or the same finds their mention in the 6th Schedule.

10. It is however relevant to mention here that by virtue of the fact that bridges are not liable to sales tax, the goods used in the construction of bridges cannot be excluded from the liability of sales tax. They have to be separately examined as to whether the same are liable to sales tax in terms of section 3 of the Sales Tax Act, 1990 read with section 2(41) ibid. However, if liable to sales tax no input tax adjustment is admissible if used in the consumption of bridges. Now coming to the second essential ingredient of section 3 i.e. it should be course or furtherance of a taxable activity. This term has been defined under section 2(33) which says that any activity which is carried on by any person, whether or not for a pecuniary profit and involves in whole or in part the supply of goods to any other person whether for any consideration or otherwise, and includes any activity carried on in the form of a business, trade or manufacture. The definition envisages that it should he a goods (i.e. movement is essential); it should he a supply to another person, or any activity carried on in the form of a business, trade or manufacture. So far as supply to another person is concerned, it is stated that in the authoritative judgment of the honorable Supreme Court of Pakistan mentioned in para. 9 above, it has been held that self-consumption comes in the ambit of taxable supply if identifiable and marketable.

11. The girders pre-cast by the respondents at the site. are not marketable, cannot be sold in the open market nor could be used in other bridges or building because they are constructed or pre-cast by the appellant according to design, specification and drawing of the particular bridge in which they are to be used. These girders are not pre-cast at a different place from where they are transported or shifted to the site where the bridge was under construction. The plea of the appellant that these pre-cast girders fall in the definition of manufacture is not sufficient ground for taxability of girders in view of their exclusion from the definition of goods under section 2(12) of the Act being not moveable, marketable or capable of being put to other uses. As the construction of pre-cast girders being not marketable/transportable and not liable to be put to any other use does not constitute goods, the same are not liable to sales tax. Reliance is placed on two authoritative judgments one given by the Division Bench of the honorable High Court, Sindh reported as PTCL 2003 CL 416 in the case titled as Usmani Associates v. Central Board of Revenue and others and other given by the Divisional bench of honorable High Court Lahore reported as PTCL 2006 CL 1 in the case titled as Messrs Sawar and Co. (Pvt.) Ltd. Lahore v. Collector of Sales Tax Multan and others whereby the liability of sales tax on pre-cast girders has been ruled out.

12. In view of above the appeal is bereft of legal force and is not maintainable and as such dismissed and the order-in-appeal is maintained. This order is mutatis-mutandis applicable to the following II appeals as the facts and circumstances of the case are identical involving the same points of law. S. No.? Appeal No,????????????????????????????? Name of Party 1.???????? STA No.330/LB/2000 ??????????? AI-Aziz Associates, Railway Road, Kot Addu 2.???????? STA No.331/LB/2000???????????? AI-Aziz Associates, Railway Road, Kot Addu 3.???????? STA No.332/LB/2000 ??????????? Samar and Company, Sahiwal. C.M.A./174/Tax(Trib.)???????????????????????????????????????????????????????????? Appeal dismissed.