2010 PLP 1652 (PTD)

MRS. YASMIN ABBASEY, J.

This Sales Tax Reference has been preferred against the judgment passed in Sales Tax Appeal No.257/2004, whereby the input tax claimed by the applicant was disallowed with the observation that without paying or intent to pay the output tax on the taxable supply of barges no adjustment of input tax can be made. Facts leading to this case are that during the period from July to November 1998 materials imported by the applicant for exclusive use in the construction of self-propelled split hoper barges" were got cleared after payment of sales tax, therefore, on the basis of audit observation of 13-6-2000 issuance of show-cause notice alleging that applicant has illegally adjusted input tax during financial year 1998-99 on materials-equipment use in exempt supply (ship) is incorrect. The case of applicant is that in terms of definition of taxable supply, applicant is entitled to input tax adjustment on materials/ equipment used for barges building which come under the taxable activity and the applicant passed output tax at the time of import of the materials used by him for construction of self-propelled split hoper barges therefore, after payment of input tax he is entitled to claim input tax by virtue of section 7 of Sales Tax Act. Deduction of input tax is permissible under subsection (1) of section 7 of the Act. However, if the Department is of the opinion that a registered person is not entitled to claim or deduct input tax out of the output tax, if has to prove a counter act of the tax payer to the condition laid down in clauses (a) to (e) of subsection (1) of section 8 of the Act. Subsection (2) of section 8 further provides that if a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board. Refund of input tax claim of applicant that at the time of audit observation he would not produce some of the Bills of Entry, therefore, presumption that no sales tax was paid by him at the time of import, ignoring the Bills of Entry produced during trial is nothing but to overlook material facts, just on technical ground. Therefore., use of taxable material in preparation of ship supplies of which is made subject to tax under section 4 of Sales Tax Act Zero per cent, authorizes applicant's claim/adjust input lax out of the output tax paid by him at the time of import of material used therein. Perusal of show-cause notice does not reflect that the applicant had adjusted input tax for the goods detailed under section 8 of the Sales Tax Act, 1990, vague allegations that applicant has adjusted input tax payable by him on other taxable supplies without specifying the use of those taxable material, appears to be misinterpretation of provision. Otherwise non-adjustment of input tax claim for the materials/ equipment, which is used in taxable supplies, will invariably result in unnecessary hardship to the taxpayer for being vexed twice. It is a settled principle of law that a registered person is entitled to adjust the input tax claim during the lax period for the taxable supplies made by him. In view of the foregoing reasons we find no justification for not allowing the applicant to adjust the input tax claim for the year 1998-99 when he had imported the material for the construction of self-propelled split hopper barges, supply of which has been subjected under section 4 of Sales Tax Act. With these observations, Spl. Sales Tax References application stands disposed of in above terms. H.B.T./K-13/K Order accordingly.