ASIA LUBRICANTS, KARACHI VS COLLECTOR OF SALES TAX AND CENTRAL EXCISE (ENFORCEMENT), KARACHI, 2006 PTD-KARACHI-HIGH-COURT-SINDH 2530 (2005)

Sales Tax Act (VII of 1990)----

----S. 3(1)(2)(c)---Lubricant oil---Chargeable to sales tax---Scope---Lubricant oil is chargeable to tax on basis of its value and not on basis of its retail price---Printing of retail price on such product not required by law---In absence of any evidence about charging of sales tax by manufacturer of lubricant oil from his dealer higher than the amount of sales tax deposited by him on basis of its declared value, he could not be made liable for sales tax not charged from ultimate consumers at retail price---Principles.

Khalid Jawed Khan for Appellant.

Raja Muhammad Iqbal for Respondent.

ORDER

Aggrieved by the order, dated 17-7-2004, passed by the respondent, the appellant preferred this appeal under section 47 of the Sales Tax Act, 1990 proposing the following proposed questions of law:-

(1) Whether on the facts and in the circumstances of the case, the learned Tribunal incorrectly interpreted section 2(46) of the Sales Tax Act, 1990?

(2) Whether on the facts and in the circumstances of the case, the Appellant/manufacturer of lubricants was only liable to pay sales tax on the `actual' value of the supplies made by it to its buyers?

(3) Whether the appellant/manufacturer having deposited the sales tax received by it from its buyers on actual value of supply made by it could not be held liable for failure or omission, if any, of other persons to deposit sales tax, if any, received by them from the ultimate consumers?

(4) Whether the learned Tribunal acted illegally and improperly by ' relying, on documents/material submitted by the Respondent to the Tribunal without showing it to the appellant and without providing the appellant any opportunity to examine and rebut the same?

Brief facts for the purpose of deciding the appeal are that the appellant is engaged in manufacturing/supplying lubricant oil of different grades which was subject to sales tax on the basis of value of its products. The lubricant manufactured by the appellant is also subject to central excise duty in accordance with the relevant provisions of law. Until the deletion vide Finance Act, 1998, lubricant oil was part of the Third Schedule of the. Act and thus as per section 3(2)((c) of the Act, sales tax was charged on lubricants on the basis of retail price. The appellant was required to print retail price and amount of sales tax on each article. After the deletion of the lubricant oil from the Third Schedule of the Act, the appellant has been paying sales tax on the basis of actual value of its products. The printed retail price was different from the value of the lubricant oil. The appellant being manufacturer informed the respondent in writing, giving details' about the supply value/price (which is discounted price as compared to the printed price) as well as the maximum retail price of its products. By a notice, dated 26-5-2000 under section 25 of the Act, respondent directed the appellant to produce a number of documents relating to the period June, 1998 to-date. The appellant supplied the documents on the same day. The adjudicating authority served show-cause notice, dated 14-10-2000 upon the appellant that the appellant was involved in under assessment of the sales tax by taking lower value of the supply than the value/price as printed on the stickers/labels pasted on the container of its products. The appellant submitted reply to the show-cause notice. The adjudicating authority directed the respondent to confirm from the record as to whether sales tax has been assessed on the invoices in accordance with the declared value/price and whether the amount of sales tax was collected by the appellant according to the price printed on the labels/stickers. The respondent conducted an inquiry and submitted his report to the adjudication authority that the sales tax has been charged and paid by the appellant on the value/price declared by them and not according' to the price printed on the labels/packing on the containers. The adjudication authority by the impugned Order-in-Original No.354 of 2001 gave finding that the excess amount of sales tax was to be collected from the appellant. The appellant questioned the order of the adjudication authority before Central Excise and Sales Tax Appellate Tribunal which appeal was dismissed vide order, dated 8-1-2003.

Heard Mr. Khalid Jawed Khan, learned counsel for the appellant, and Mr. Raja Muhammad Iqbal, learned counsel for the respondent.

Mr. Khalid Jawed Khan, learned counsel for the appellant, argued that there is no dispute that the appellant is not liable to collect or pay sales tax on the basis of the retail value printed on the containers as the retail value is not necessarily the same as that printed on containers. The learned counsel argued that the respondent directed for Collector of Sales Tax on the basis of the declared value without any evidence on record and without confronting the appellant with any such document that the appellant has charged sales tax on the basis of retail price printed on the containers. The learned Tribunal as well as adjudicating authority gave findings that the appellant has charged sales tax higher than the sales tax deposited by them.

On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the respondent, argued that since the appellant had deducted and charged sales tax higher than the sales lax deposited by the appellant, both the Courts below rightly held that the appellant is liable to deposit the amount in question:

We have taken into consideration respective arguments advanced by the learned counsel for the parties and perused the record.

From the perusal of the record it appears that vide letter, dated 11-9-1998 the appellant informed the respondent about the supply price of its products and sales tax thereon it. The supply price of the products was different than the maximum retail price printed on the container/packing of the appellant's products. The appellant from time to time informed the respondent about the maximum retail' price and trade discount price and apparently at no point of time the respondent has objected to such declaration.

In terms of section 3(1) of the Act, lubricant oil is 'chargeable to sales tax on the basis of the value and not on the basis of retail price as provided in section 3(2)(c) of the Act and the printing of the retail price on the container of the subject product and payment of sales tax actually is not the requirement of the Act on the products manufactured by the appellant. The appellant was also not required to print retail price on its products. The only question requiring consideration in this appeal is whether the appellant has charged sales tax more than the amount deposited by the appellant with the respondent. The appellant categorically stated that under the directions of the adjudicating authority respondent conducted' an inquiry and submitted his report to the adjudicating authority that the sales tax has been paid/charged by the appellant on the value/price declared by them and not according to he price printed on the stickers/labels of the different packings on the containers and the adjudicating authority as well as Appellate Tribunal based their findings on the basis of the issue which was neither raised in the appeal even alleged in the show-cause notice. The respondent failed to place on record any evidence that the appellant has charged/deducted sales tax from his dealer or whole-seller higher than the amount of sales tax deposited by him. We are of the view that the appellant cannot be held liable for the sales tax, not charged by it from the ultimate consumers at the retail price. In the absence of any evidence on record it is not possible for us to uphold the findings recorded by the Tribunal.

For the foregoing reasons the appeal is allowed and the impugned order is set aside.

The above are the reasons of, our short order, dated 7-9-2005.

S.A.K./A-104/KAppeal accepted.