2001 PLP (Trib (PTD)

3. The respondent in this case pointed out that after the repeal of section 59 of the Sales Tax Act, 1990, the claim of the appellants is not tenable and is liable to be rejected. The respondent also pointed out that the Bill of Entry produced by the appellants was of much earlier period than the taxable period and was, therefore, not tenable.

4. The appellants at this stage rebutted this argument of the respondent and stated that the repeal of section 59 of the Sales Tax Act, 1990 does not effect their case at all. Secondly, that section related to new taxpayers and admittedly they are not new taxpayers. This is clear from the plain reading of unrepealed section 59 which read as under:‑‑‑ "

59. Tax paid on stocks acquired before registration. ‑‑‑The tax, other than the fixed tax or turnover tax, paid on goods purchased by a person who is subsequently required to be registered under section 14 shall be treated as input tax, provided that such goods were purchased by him from a registered person against an invoice issued under section 23 during a period of thirty days before making an application for registration under section 15: Provided that where a manufacturer imports goods, the tax paid by him thereon during a period of ninety days before making an application for registration shall be treated as an input tax subject to the condition he holds the Bill of Entry relating to such goods."

5. It appears from a plain reading of order of Assistant Collector, Sales Tax and the Collector (Appeals) that they had not applied their minds to the applicability of input tax based on sections 7, 8, 10 and SR0.698(I)/96, dated 22nd August, 1996 which describe "Apportionment of Input Tax Rules, 1996". The SR0.698(I)/96, this clearly states in rule 3(1) as under:‑‑‑ "

3. Determination of input tax.‑‑‑(1) Input tax paid on raw materials relating wholly to the taxable supplies shall be admissible under the law." Section 7 which relates to the determination of tax liability the section clearly states that:‑‑‑ "7(1). For the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall be entitled to deduct input tax... for the purpose of taxable supplies made, or to be made, by him from the output tax that is due from him .... In section 7(2) it is clearly mentioned that:‑‑‑ "7(2). A registered person shall not be entitled to deduct input tax from output tax unless,‑‑‑ (i) ....... (ii) in case of goods imported into Pakistan, he holds the Bill of Entry duly cleared by the customs under section 79 or section 104 of the Customs Act, 1969 (IV of 1969). " Similarly, in section 8 the same is mentioned in a different manner while describing the situation where tax credit reclaiming or deduction input tax is not allowed and the relevant portion reads: "

8. Tax credit not allowed.‑‑‑(1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on‑‑‑ (a) the goods used or to be used for any purpose other than for taxable supplies made or to be made by him. " Similarly, under section 10 it is also mentioned that the excess amount of input tax can be carried forward and after a certain period the registered person can claim refund of the same.

6. In view of the above it is quite clear that the repeal of section 59 did not affect the case of the appellants as it related to persons, firms or companies who are new taxpayers. The appellants are not new taxpayers. The appellants were in possession of imported raw material and finished goods made out of the same, imported against the Bill of Entry cleared by the Customs under section 79 of the Customs Act, 1969 and they were making taxable supplies. In view of the above, the refund claim of the appellants is fully covered by the law and is hereby allowed. The orders of he Assistant Collector and Collector (Appeals) are hereby set aside. M.A. /M.A.IC./122/Tax(Trib.) Appeal allowed.