2019 PLP (Trib (PTD)

CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).

Titled appeal has been filed under section 46 of the Sales Tax Act, 1990 at instance of the assessee calling in question the impugned Order-in-Appeal No. 300/2017 dated 11-09-2017 passed by the learned CIR (Appeals), Faiasalabad.

2. Briefly stated, relevant facts for disposal of the instant case are that during examination of sales tax returns pertaining to the tax periods from July-2013 to June-2014, certain discrepancies were pointed out, on the basis of which, department has issued a show-cause notice dated 21.11.2016 confronting sales tax liability of Rs.2,402,430/- under section 11(3) of the Act along with default surcharge and penalty under sections 34 and 33 ibid. In response to show-cause notice, appellant filed written reply supported with documentary evidences duly contesting and denying the charges levelled against him but the learned DCIR partially vacated demand of sales tax and uphold recovery of Rs.2,337,682/- along with default surcharge and percent penalty vide its order dated 17.02.2017 which was challenged before the learned CIR(A) who also rejected the appeal vide its appellate order dated 11.09.2017. The appellant being discontented and aggrieved by the said order has now filed the second appeal before this Tribunal. Learned counsel argued that observation of suppression of sales has been made out merely on the basis of consumption of electricity units and not on the basis of actual supply of goods. Learned counsel further asserted in his arguments that demand of sales tax created on the basis of consumption of electricity units is without lawful authority as the Sales Tax Act, 1990 did not prescribe any procedure or formulae to calculate liability of tax on its basis without proving supply of goods. Learned counsel assailed that consumption of electricity was by no means yard stick to assess the production as under section 3(1)(a) of the Act, sales tax is always levied and charged on supply of goods and not on the basis of production. Conversely, when the learned DR confronted with the tax situation cited supra, in counter arguments, he has assailed the case on similar grounds and charges as levelled earlier in impugned show-cause notice as well as adjudged in consequent orders and nothing newel, except to reiterate earlier set of contentions, has been put forth by him and fully supported the orders passed by both the authorities below simply re-endorsing the basis evolved therein.

3. The arguments of the learned representatives of both the rival parties have been heard, the orders of the authorities below as well as relevant record and provisions of law and the case laws cited by the learned AR of the taxpayer have also been perused carefully.

4. After having taken regard to the facts of the case in its entirety as well as the grounds narrated supra, we are of the considered view that consumption of electricity units might have any nexus with that of production of goods and any correlation in their between could have been made but no direct relationship could be established in electricity with that of sales and supplies of taxable goods. Both the variables are completely independent to each other and as such, no functional relationship could be so established. The impugned demand of sales tax created on the basis of electricity units is illegal and without lawful authority as neither the Sales Tax Act, 1990 nor the Rules made thereunder prescribe any procedure or formulae to calculate liability of sales tax merely on consumption of electricity units. Under section 3(1)(a) of the Act, sales tax is on sale arid supply of goods which necessarily entails 'delivery of goods' or 'receipt of money consideration' and no corroborating evidence for any clandestine removal of goods or for receipts of money consideration has been provided by the sales tax department. Under section 2(35) of Sales Tax Act, 1990, the yard stick to charge and levy sales tax is the sale constituting a taxable activity for a taxable supply. Assessment of sales tax on the basis of consumption of electricity units is hardly a safe rule and yard stick to assess the production. In our considered opinion, provisions of section 3 of the Act do not cover levy of sales tax on the basis of consumption of electricity units and dispossession and actual transfer of goods by the manufacturer to the other party is a basic requirement to bring the goods within the charge. Unless, the department is in a position to prove that the assessee did more production and same has been transferred to another party, sales tax cannot be charged. This is a well settled preposition in many a cases as referred to by the learned counsel like in a judgment already propounded by a Division Bench of this Appellate Tribunal, Lahore in case of "Messrs Mashallah Paper Board Mills, Faisalabad v. The CIR, R.T.O., Faisalabad" reported as (2017 PTD 880).

5. In view of what has been stated, particularly in the light of record and legal propositions discussed hereinabove, the impugned show cause notice as well as consequent orders of both the authorities below are declared to be illegal, ab initio void and are thus hereby set-aside. Appeal filed by the registered person is accepted as indicated above. HBT/84/Tax(Trib.) Appeal accepted.