2006 PLP (Trib (PTD)

SAEED AKHTAR, MEMBER (TECHNICAL).

This appeal is directed against Order-in-Appeal No.206 of 2004 passed by the learned Collector of Customs, Sales Tax and Central Excise (Appeals), Faisal?abad issued vide C. No. 262/APP/MTN/ST/2003/694, dated 28-8-2004 wherein the order passed for the recovery of sales tax amounting to Rs.85,068 along with additional tax, vide Order-in-Original No.25 of 2003, dated 23-1-2003 was upheld.

2. Brief facts of the case are that it was reported to the Adjudicating Officer by the auditors of Collectorate of Customs, Sales Tax and CE, Multan that scrutiny of the sales tax records of the appellant pertaining to the period October, 1999 to May, 2001 revealed that sales tax amounting to Rs.85,068 was not deposited on the supply of cotton seed weighing 71,988 kgs. The appellant, therefore, violated the relevant provisions of Sales Tax Act, 1990. The registered person was called upon to show cause under section 11 of the Sales Tax Act, 1990 as to why the amount demanded may not be recovered from them under section 36, along with additional tax as well as penal action under section 34 ibid. The registered person at the time of hearing claimed that the quantity of cotton seed mentioned in the ginning resister was the quantity produced at the time of manufacturing while sales tax has been paid on the quantity of cotton seed supplied, which decreased in weight due to evaporation of moisture. The learned Adjudicating Officer did not agree with the contention of the registered person and directed that sales tax on supply of 71,988 kgs. of cotton seed may be recovered along with additional tax. The appellant feeling aggrieved with the orders of the adjudicating officer, filed appeal before this Tribunal under section 46 of the Sales Tax Act, 1990.

3. The main contentions of the learned counsel of the appellant at the time of hearing were as under:-- (i) That the appellant is a registered person in the Sales Tax Department engaged in the business of cotton ginning and processing. The appellant was served with a show-cause notice, dated 27-9-2002 and was alleged to have not declared supplies of cotton seed weighing 71,988 kgs. (1929 maunds) involving sales tax of Rs.85,068 in the sales tax record. (ii) That the impugned order-in-original as well as the order-in? appeal are contrary to the facts of the case. (iii) That the Collector (Appeals) was not justified in not adjudicating upon the issue of limitations as the order-in-original was time-barred for 118 days as the same was not passed on 23-1-2003 in consequence of show-cause notice, dated 27-2-2002. No reason has been recorded for passing the order-in-original beyond the prescribed limitation of 45 days as per proviso 11(4) of the Sales Tax Act, 1990. In view of above, the order-in-original is illegal and not sustainable in the eyes of law. (iv) That the appellant has wrongly and illegally been charged to sales tax along with additional tax just for loss in weight due to evaporation of moisture and" sunshine without bringing any evidence of supply whereas Qanun-e-Shahadat, 1984 is applicable in the sales tax proceedings being quasi-judicial proceedings. Reliance is placed on the reported case law 1993 PTD 206. (v) That even otherwise, the supplies of cotton seed used in the manufacture of cotton seed oil is exempt vide Item No.5 of the Sixth Schedule to the Sales Tax Act, 1990. (vi) That the order to charge additional tax under section 34 of the Sales Tax Act, 1990 is illegal and unjustified as there is no default of Sales Tax Act, whatsoever. The order to charge additional tax in the absence of allegation of collusion or a deliberate act is illegal and unjustified as no additional tax can be charged without establishing the scintilla of deliberate and intentional wrong. Reliance is placed on case law 2004 SCMR 456. (vii) That the alleged default of difference in production and sales is due to moisture loss and no clandestine supply has been established by the respondents. Reliance is placed on case law 2003 PCT LR 671. (viii) That the adjudicating authority as well as the appellate authority is not justified to ignore the fact that recovery ratio of cotton seed of 63.15% is quite reasonable in spite of moisture lass caused due to sunshine whereas 55% recovery ratio has been accepted by the department. Reliance is placed on reported case law 2003 PCT LR 671. (ix) It is prayed that the impugned order-in-original as well as order-in-appeal may be declared null and void in the interest of justice.

4. The learned D.R. Mr. Ahmad Raza, who appeared along with Mr. Khurram Bashir auditor, on behalf of the respondents opposed the contentions of the learned counsel for the appellant and contended as under:-- (i) That the difference of cotton seed at 71,988 kgs. between the production and supplies has not been entered in any side and also not available in stock that should be automatically considered as suppression of supplies. (ii) That plea taken by the appellant for the differential quantity of cotton seed is due to loss of moisture is not tenable as many examples may be given where total production of cotton seed have been sold out / crushed. Hence 71,988 kgs. being shown as reduced by moisture was actually sold by the appellant. (iii) The contention of the appellant that the said quantity of cotton seed used in the manufacture of cotton seed oil is in itself the negation of the plea of the appellant that the said quantity of 71,988 kgs. was lost due to moisture. On the other hand, the appellant has taken the plea that this quantity was used in the manufacture of cotton seed oil. (iv) That the appellant has deliberately, wilfully and with mala fide intention concealed the supplies and imposition of additional tax is, therefore, in accordance with law.

5. I have heard the contentions of both the parties and perused the appeal file available before me. The learned counsel for the appellant at the time of hearing contended that the quantity of cotton seed as produced was honestly declared in the sales tax record. Similarly, quantity supplied by the appellant was also entered in the sales tax record and there is no mala fide on the part of the appellant as sales tax was deposited in the national exchequer on the supplies of cotton seed. The difference of cotton seed in the production and supplies was determined at 71,988 kgs. which according to the learned counsel for the appellant was lost due to loss of moisture contents as the cotton seed at the time of production is always in wet condition and loses weight while lying in the sunshine. The learned counsel for the appellant contended that there is no justification for demanding sales tax on the weight which was lost during the period from production to the supply as it is but natural that a wet commodity loses weight when it is stored in the open and is subject to environmental factors. The learned counsel further contended that no evidence of alleged supply of lost quantity of cotton seed has been produced by the respondents. The learned counsel further contended that the impugned order-in-original was passed after the limitation period of 45 days as laid down under section 45 of the Sales Tax Act, 1990 and as such the impugned order is illegal and not sustainable in the eyes of law. On the contrary the learned D.R. contended that there are many cases where the registered persons have deposited sales tax on the quantity produced without demanding allowance for the loss of weight due to environmental factors.

6. I have carefully examined the facts on record .and observed that there is no doubt about the fact that the cotton seed, like similar other commodities, is produced in wet condition. It is also a fact that it is subject to loss of reasonable quantity of weight due to environmental factors by way of loss moisture. It has been observed that in the instant case reported yield of cotton seed was 63.17% and sales tax was deposited on the yield of 61.70% claiming loss of weight by various factors including moisture @ 1.47%. The learned counsel for the appellant pointed out that in the past this Tribunal has allowed yield of 55% of cotton seed for the purposes of levy of sales tax in a case reported as 2003 PCT LR

671. I have observed that this Tribunal in a number of cases has allowed yield within the range of 58% to 59% for the purposes of levy of sales tax. It has further been observed that the C.B.R. in Textile Industry Notes prepared in consultation with all the stake-holders has allowed yield of cotton seed within the range of 58% to 59% for the purposes of levy of sales tax. In the instant case, the declared yield of cotton seed at the time of production was 63.17% while sales tax was paid at the percentage of 61.70%. According to the learned counsel for the appellant, loss of weight of 1.47% was due to loss of moisture as the cotton seed at the time of production is always in wet condition, which loses weight with the passage of time due to environmental factors. In view of above facts, it is established that the appellant deposited sales tax on the yield ratio, which is much above the ratio fixed by the C.B.R. in the Textile Industry Notes and the yield ratio allowed in different cases by this Tribunal in appeal. It is, therefore, a fact beyond any doubt that the cotton seed is produced in wet condition which loses weight due to long storage and other environmental factors. In view of above, the appeal is accepted and the impugned order-in ?appeal as well as order-in-original are set aside.

7. The appeal stands disposed of as above. C.M.A./488/Tax (Trib.)??????????????????????? ??????????????????????????????????????????????? Appeal accepted.