2006 PLP (Trib (PTD)

SAEED AKHTAR, (MEMBER (TECHNICAL))

This appeal is directed . against Order-in-Original No.34/35 of 2002 passed by the learned Collector, Customs, Sales Tax and Central Excise (Adjudication), Lahore issued vide C. No. 89/ST/Addl. Collector/ Cont/98/2553, dated 24-4-2002 whereunder the appellant was directed to pay sales tax amounting to Rs.4,678,540 on the supply of bagasse calculated at the value of Rs. 200 per M. Ton notified by the Central Board of Revenue vide Notification S.R.O. 178(1)/2002, dated 29-3-2002.

2. Brief facts of the case are that the Collectorate of Sales Tax during scrutiny of the sales tax record observed that the appellant had not paid sales tax on the supply of bagasse consumed in house. It was further observed that the bagasse during the period November, 1996 to April, 1997 was not exempt from levy of sales tax. Consequently, a show-cause notice was issued to the appellant (then respondent) directing to explain as to why the leviable sales tax may not be recovered from them along with additional tax and penalty. The learned Adjudicating Officer confirmed the sales tax liability as demanded in the show-cause notice. The appellants preferred appeal against the Order-in-Original No.33 of 2001, dated 26-4-2001. The Appellate Tribunal remanded the case to the learned Adjudicating Officer with the directions to address the objections of appellant in respect of quantity and valuation of the goods in question. In compliance with the directions of the learned Appellate Tribunal the learned Adjudicating Officer issued a notice to the parties concerned and passed Order-in-Original, dated 18-10-2001 against which the appellant again filed appeal before the Appellate Tribunal. The Appellate Tribunal remanded the case to the learned Adjudicating Officer with certain directions and the learned Adjudicating Officer passed the impugned Order-in-Original No.34 of 2002, dated 24-4-2002. The appellant feeling aggrieved with the decision of the learned Adjudicating Officer filed appeal before this Tribunal under section 46 of the Sales Tax Act, 1990.

3. The main contentions of the learned counsel for the appellant at the time of hearing were as under:-- (1) That the appellant is a project of Fauji Foundation, a trust created under the Charitable and Endowment Act, 1890 for the benefit of ex-servicemen and their families. The appellant is engaged in manufacturing of sugar having its place of business at Sanglahill District Sheikhupura and is duly registered under the Sales Tax Act, 1990. (2) That record of the appellant for the period 1996-97 was audited by the Audit Team of the Collectorate of Sales Tax, Lahore and on the basis of audit findings a show-cause notice was issued to the appellant as to why sales tax along with additional tax and penalty may not be recovered from them on account of non-payment of sales tax on bagasse. The case was adjudicated by the learned Adjudicating Officer vide Order-in-Original No.33 of 2001, dated 26-4-2001 against which appeal was filed before the learned Appellate Tribunal which was disposed of on 17-8-2001 against which appeal was filed before the learned Appellate Tribunal which was disposed of on 1.7-8-2001 remanding the case to the learned Adjudicating Officer with the directions to attend to the objections of the appellant in respect of quantity and valuation of the goods in question and pass a fresh order after affording opportunity of hearing to the parties concerned. The learned Adjudicating Officer passed order, dated 18-10-2001 against which the appellant again approached the learned Appellate Tribunal who remanded the case to the learned Adjudicating Officer again with certain directions. The learned Adjudicating Officer passed Order-in-Original No.34 of 2002, dated 24-4-2002 against which the present appeal has been filed. (3) That the impugned order is bad both in law and upon the facts of the case. The impugned order is, therefore, unsustainable as the same has been passed in utter disregard to the directions given by the Honourable Tribunal. (4) That the learned Adjudicating Officer has erred in law in calculating, and levying sales tax on total production of bagasse in wet condition as 100% quantity cannot be retrieved and consumed because more than 40% of the dry quantity go waste. Moreover, it is subject to adverse weather conditions like rain, storms, fast wind which takes away sizable portion of the produce. Apart from this waste, the product also starts to decompose itself chemically when subjected to adverse weather conditions. This causes adverse effect on its ability to be used as fuel. (5) That even otherwise the levy of sales tax on total production bagasse is unsustainable as under the law sales tax can be charged and levied on the value of goods at the time of supply thereof and not on the basis of production. (6) That the levy of sales tax on bagasse @ Rs.200 per M. Ton is arbitrary, capricious and far against the facts of the case as in another case namely Crescent Sugar Mills the department itself applied the rate of Rs.100 per M. Ton in Order-in-Original No.37 of 1998. (7) That the appellant has been treated discriminately which cannot be done in terms of Article 25 of the Constitution of Islamic Republic of Pakistan, 1973. As in another case, the department has itself applied the rate of Rs.100 per M. Ton on the sale/ supply of bagasse. (8) That the Adjudicating Officer has erred in law in levying the sales tax on bagasse without first establishing the time of supply, value of goods at the time of supply and quantity at a particular time of supply and in the instant case all steps being missing, hence order is liable to be set aside.

4. The learned D.R. who was assisted by Mr. Muhammad Anwar and Hamyun Sarfraz, Auditors opposed the contentions of learned counsel ,for the appellant on the grounds that the bagasse during the period 1996-97 was subject to levy of sales tax and the appellant failed to deposit leviable sales tax on the self-supply of bagasse for in-house consumption as fuel. The learned DR contended that the appellant failed to produce evidence of payment of leviable sales tax on the supply of bagasse relating to impugned order directing payment of leviable sales tax on the value of Rs.200 per M. Ton as determined by the Central Board of Revenue vide Notification S.R.O. 178(I)/2002, dated 29-3-2002. The learned D.R. further contended that the value of Rs. 100 per M. Ton referred to by the appellants cannot be applied in the presence of evidence of Rs.1100 per M. Ton in the case of Messrs Brother Sugar Mills, Chunian. The learned D.R. further contended that bagasse was subjected to payment of sales tax at different value in different Collectorates. The Central Board of Revenue, after considering the point of view of the Pakistan Sugar Mills Association and other stakeholders determined the value of bagasse at Rs.200 per M. Ton vide Notification S.R.O. 178(I)/2002, dated 29-3-2002 in order to resolve the valuation disputes covered under the impugned order. The learned D.R. contended that there is no justification for assessment of bagasse @ Rs.100 per M. Ton when evidence of higher value was available with the sales tax authorities. "The learned D.R. further contended that the quantity produced by the appellant has been taken for the calculation of sales tax liability as there was no other alternative available as the appellant himself failed to maintain proper sales tax records for the self-supply of bagasse. There is, therefore, no substance in the arguments of the learned counsel for the appellant that the time of supply, quantity of supply and value of supply etc. are missing in the instant case. The learned D.R. contended that the sales tax system is based on self-clearance procedure and sales tax records are required to be maintained by the registered person who himself not only failed in the proper maintenance of sales tax records but also failed in its duty to make payment of sales tax on the supply of bagasse. The learned D.R. further contended that there is no substance in the appeal and the same may be dismissed.

5. We have heard the contentions of both the sides and perused the appeal file available before us. It is fact that the sales tax system is based on self clearance procedure and the registered person is required to maintain sales tax records under sections 22, 23 and 26 of the Sales Tax Act, 1990. It has been observed in the instant case that neither tax invoices for the supply of bagasse were issued nor proper sales tax records as required under sections 22 and 23 were maintained by the registered person. There was, therefore; no other alternate left for the sales tax administration to calculate liability of sales tax on the basis of production figures as maintained by the registered person. There is, however, lot of substance in the arguments of learned counsel for the appellant that sales tax is chargeable on the supply and not on B production. However, the registered person was required to justify with sufficient evidence that the quantity of bagasse produced by the appellant was available in the stock. As no such exercise was carried out and sales tax authorities calculated the liability of sales tax on the basis of production figures of appellant. There is, however, some force in the arguments of learned counsel for the appellant that the total quantity produced is normally not supplied and levy of sales tax on the total quantity is not justified. In view of adverse environmental effects namely windstorm, rain and chemical action etc. which carries away some portion of the produce, there is some force in the arguments for the learned counsel for the appellant. It is also fact that bagasse loses weight with the passage of time due to dryness. In view of above facts, production figures are not reliable for the calculation of sales tax and these needs to be reduced considering the loss of produce due to adverse factors. The learned counsel for the appellant at the time of hearing C stated that 40% of the produce is lost by adverse environmental facts. We after considering the arguments of both the parties are of the view that an allowance of 10% at the maximum would be sufficient to cover for the lost weight as points out by the learned counsel for the appellant. The learned counsel for the appellant also agreed to the allowance of 10%. So far as valuation of bagasse is concerned, the Central Board of Revenue has already determined the value of Rs.200 per M. Ton after considering the views of All Pakistan Sugar Mills Association and the value fixed through a Notification S.R.O. 178(I)/2002, dated 29-3-2002 is for uniform application throughout the country. In view of above, we find no justification in the argument of learned counsel for the appellant for reduction in value of bagasse. The respondent-Collectorate is directed to re-calculate the sales tax liability after reducing the production figures by 10% on account of wastage and D calculate sales tax at the value of Rs. 200 per M. Ton as determined by the Central Board of Revenue in Notification S.R.O. 178(1)/2002, dated 29-3-2002. The appellant is directed to deposit sales tax as calculated by the respondent. The additional tax and penalty has already been remitted by the Appellate Tribunal as pointed out by the learned Adjudicating Officer in the Order-in-Original. The impugned order is modified to the extent as stated above so far as present appellant is concerned. C.M.A. /494/Tax (Trib.) Appeal accepted.