2010 P T D (Trib.) 1643
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Chairperson and Shahnaz Rafique, Accountant Member
S.T.As. Nos. 1148/LB and 1149/LB of 2009, decided on 18/05/2010.
(a) Sales Tax Act (VII of 1990)---
----S.10---Sales Tax General Order No. 32 of 2008 dated 8-7-2008---Refund of input tax---Department himself determined refund on the basis of procedure devised through Sales Tax General Order No. 32 of 2008 dated 8-7-2008; and objected that pending the appeal before the Appellate Tribunal, the fund could not be issued---Validity---Department after having calculated refund by itself, sent the copy of the same to the taxpayer---Inaction on the part of department not to issue refund was not justified in the eyes of law---Appellate Tribunal directed the department to follow its own calculation having been made under Sales Tax General Order No. 32 of 2008 dated 8-7-2008 and in compliance with the directions of Federal Board of Revenue which was binding on them---Department was further directed to issue refund within two months from the date of service of order---Other controversies and grounds had practically become infructuous as the department had itself determined refund by irgnoring the adjudication on the basis of Sales Tax General Order No. 32 of 2008 dated 8-7-2008---Assessee had also no objection on the said treatment provided the same was applied in its actual spirit as directed---Orders of both the authorities below were cancelled by the Tribunal and department was directed to issue refund as per its own calculation.
1984 PTD (Trib.) 308; 2002 PTD 720; Commissioner of Income Tax v. Shahnawaz Limited 1993 SCMR 73 and C.I.T. v. Muslim Commercial Bank Ltd. 2002 PTD 720 ref.
(b) Sales Tax Act (VII of 1990)---
----Ss.30, 30A, 30B, 30C, 30D, 3ODD, 30E & 31---Appointment of officer---Instruction of Federal Board of Revenue, being the highest administrative authority in Pakistan, were binding on all its subordinate authorities in terms of S.30 read with Ss.30A, 30B, 30C, 30D, 30DD, 30E & 31 of the Sales Tax Act, 1990.
1984 PTD (Trib.) 308 and 2002 PTD 720 rel.
(c) Interpretation of statutes---
----Retrospective effect---Instructions and circulars issued by the Federal Board of Revenue to cure an ill or provide a remedy was always retrospective.
Commissioner of Income Tax v. Shahnawaz Limited 1993 SCMR 73 rel.
(d) Sales Tax Act (VII of 1990)---
----S.10---Sales Tax General Order No.32 of 2008 dated 8-7-2008---Refund of input tax---Revision of return for the year 2003---Directions of Federal Board of Revenue to allow revision of returns from 2004 onwards could not debar the taxpayers to revise their returns for the year 2003 also---All the Oil Extracting Units had filed their returns in the same style and by virtue of exercise on the basis of Sales Tax General Order No. 32 of 2008 dated 8-7-2008 the team constituted for the purpose had come out with an unequivocal answer to the controversy.
C.I.T. v. Muslim Commercial Bank Ltd. 2002 PTD 720 rel.
Monim Sultan for Appellant.
Rana Muhammad Luqman, D.R. for Respondent.
Date of hearing: 5th May, 2010.
ORDER
Appeals filed in this case against the order of Collector (Appeals) recorded by him vide his Order Nos. 631/2008 and 374/2006 dated 8-4-2008 and 8-6-2006 respectively.
Brief facts leading to the appeals are that the Audit Team of Sales Tax Multan during scrutiny of the record of this assessee for the period mentioned therein found few discrepancies/violations in respect of the returns filed by this taxpayer as follows:-
(i) The appellant/assessee claim of input tax as adjustment against exempt supply in addition to the taxable sales was considered as illegal. The appellant's revised return for June, 2005 was also not accepted. The assessee in return requested to adjust the demand from carry forward balance of input tax, which was not approved by the adjudicating authority for the reason that the revising of return is not provided in law. The Additional Collector (Adjudication) further expressed that the assessee claim of Apportionment was only possible if the Apportionment Rules, 1996 were strictly followed. The assessee having failed to adopt the correct procedure, it was directed that the wrongly/illegally adjusted/claimed input tax at Rs.1,62,24,416 being in violation of section 8(1)(b) and S.R.O. and the Apportionment Rues, 1966, be paid with additional tax/ default surcharge under section 34. Further penalty of 3% under section 33(2)(c) of the amount of sales tax involved was also charged.
(ii) The second observation was that the adjustment of input tax paid at Rs.2,89,722 for November, 2004 on electricity / Sui Gas Bills was claimed but there is no production during this period. Similarly input tax paid on hotel invoices adjusted is not in the name of the appellant/assessee. The assessee failed to reply the show cause and the charge was found to be established. The assessee was asked to pay Sales Tax amounting to Rs.2,94,267 along with default surcharge under section 34 and penalty @ 3% of the amount of Sales Tax.
The second appeal is in relation to period 2003-2004 and impugned order is dated 15-5-2008.
Above two objections are common in respect of both periods. However, further facts relevant to the issue are as follows:-
(i) INADMISSIBLE INPUT TAX ADJUSTMENT
It is found that the appellant/assessee adjusted the entire amount of input tax at Rs.206,203,583 towards the exempt and taxable supplies considering it as violation of provisions of section 8(1)(c) and Apportionment Rules, 1996. Consequently, adjusted amount of Rs.2,19,11,711 was directed to be paid along with default surcharge and penalty @ 3% of the Sales Tax demand.
(ii) SALE OF OIL DIRT WITHOUT PAYMENT OF SALES TAX
Non-payment of sales tax amounting to Rs.2,29,500 was found recoverable under section 36(1) on supply of oil dirt amounting to Rs. 15,30,000 which was directed to be paid with default surcharge under section 34(1) and penalty as per serial Nos. 1,3,17,19 of subsection(1) of section 33.
(iii) INADMISSIBLE INPUT ADJUSTMENT
Certain invoices were pointed out to be as not valid as they neither contain the name of appellant / assessee nor bear the registration number of the issuing person. Further, certain invoices were found to be deficient as they had no Registration Number. Resultantly, Rs.25,525 and Rs.5,57,176 were directed to be paid as default surcharge and penalty respectively.
(iv) INHOUSE CONSUMPTION OF HULL WITHOUT PAYMENT OF SALES TAX
The appellant consumed 1469028 kg hull in house boiler for manufacturing oil (taxable goods) and Meal/oil cake for the exempt goods. It is claimed that he was legally required to pay sales tax on the in-house consumption of hull to the extent of production of exempt goods. Accordingly, the sale tax amounting to Rs.83,510 attributable to exempt sales became recoverable, which was directed to be paid with default surcharge.
(v) IN-PUT TAX PAID ON ELECTRICITY 7 SUI GAS BILLS FOR THE MONTH OF 09/2004
As no production was carried on, so the adjustment claimed for said input tax paid was directed to be paid by depositing in Government Treasury along with Additional Tax / Default Surcharge and penalty.
The assessee filed an appeal before the Collector, Customs, Excise and Sales Tax. The assessee inter alia challenged non-entertaining the revised returns filed by him. It is also claimed that the entire working is non-judicious and in total ignorance of the facts especially with regard to the period of manufacturing and claim / adjustment of the input against nill production. Further that the C.B.R. by mistake has ignored to mention the period of 2003-2004 because Canola and Rape Seed was imported first time in 2003-2004. The C.B.R. on the basis of the rate of All Pakistan' Solvent Extraction Association through letter C.No.4/57-STB/97 dated 30-3-2007 allowed revision of returns but only for the year 2004 and onwards and omitted to mention 2003.
It is informed that the C.B.R. as per letter No. Ref/ST/Solvent/ 07/2007/7318 dated 10-9-2007 asked the Collectorate to conduct comprehensive audit of all solvent Extraction Units for the period September, 2002 to June, 2007. This audit being in succession to the earlier one and being more comprehensive, in fact, had superseded the entire proceedings; hence the audit on the basis of which the present assessment has been made is totally illegal.
It has been argued before Collector Appeals as well as before us that even if the observations of the Additional Collector (Adjudication) are considered as valid, subsequent constitution of a team under law to determine final tax liability and resultant treatment under the instructions of the F.B.R following the instructions of the Apportionment Rules, 1996 introduced vide S.R.O.No.698(I)/96 dated 22-8-1996 and Apportionment Rules of 2004, has settled the issue. The department in a way carried out its own audit and has ultimately calculated tax in respect of various solvent Oil Extraction Companies. It is in continuation of the same that a demand of Rs.65,73,873 has been created for the period 2003-2004 and July, 2004 to 26th January, 2006. The same has been intimated to this taxpayer through letter dated 13-9-2008 in the following manner: -
"GOVERNMENT OF PAKISTAN
REGIONAL TAX OFFICE
L.M.O.ROAD, MULTAN
C.No.40-ST/PRA/Reve-Return/07/8466 Dated 13-9-2008
Messrs Fatima Enterprises,
Vehari Road,
Multan.
Subject: PAYMENT OF SALES TAX LIABILITIES CALCULATED UNDER SALES TAX GENERAL ORDER No.32 OF 2008 DATED 8-7-2008
Please refer to the subject above.
As per devised procedure through STGO 32 of 2008 a team was constituted to workout the final sales tax liability on the imported oil seeds for the period 2003-2004 and July, 2004 to 26th January 2006. As per their calculation your sales tax liability comes to the tune of Rs.6573873 (Detailed enclosed).
You are requested to discharge the calculated sales tax liability not later than 24-9-2008 to avail the facility of STGO 32 of 2008, failing which RTO, Milian will be constrained to initiate investigative audit under section 38 of the Sales Tax Act, 1990 as mentioned in STGO.
(Abdul Malik)
Additional Collector"
The assessee in principle has accepted the above procedure and working along with the others and has paid major portion of the demand created therein by depositing Rs.62,59,291 as against the departmental claim of Rs.65,73,873. The taxpayer, however, has challenged a part of the calculation through its letter dated 23-10-2008 and has provided some details.
Looking into the appeal from the said angle the same for this period practically is infructuous to the extent of the method of calculation. However, the assessee does have a reservation to the extent of Rs.3,12,582 and for necessary adjustments he has filed an application.
Since the assessee itself has deposited the demand, which has been revised by the department itself, therefore, issue for the period under consideration is remanded back to the adjudicating authority only to the extent of verification of the two amounts on which he has apparently claimed no adjustment earlier. The assessee shall produce necessary documents to the authority for the said Rs.3,12,582 for final finding on this. balance amount only.
Regarding the other period here again the assessee claims that the revenue department has itself on the basis of the procedure devised through STGO 32 of 2008 dated 8-7-2008 has calculated the amount and has determined refund of Rs.3,90,86,442, is based upon valid arguments.
The issues of revision of return or the other factual controversies, therefore, have practically come to an end. It does not need any mentioning to say that the instruction of the F.B.R. being the highest administrative authority in Pakistan are binding on all its subordinate authorities in terms of section 30 read with sections 30A,30B, 30C, 30D, 30DD, 30E and 31 of the Sales Tax Act; 1999. It is a very clear and settled issue; however, for the one who may need reference to judgment reported as, 1984 PTD (Trib.) 308 as well as 2002 PTD 720 can be made.
Further this Court does not need much dilation to decide that the instructions and circular issued by the C.B.R. to cure an ill or provide a1 remedy is always retrospective. In this regard famous judgment of Supreme Court of Pakistan reported as 1993 SCMR 73 re: Commissioner of Income Tax v. Shahnawaz Limited can be referred with full advantage. This judgment subsequently has been followed in dozens of judgments. This is now a settled issue, however, for record purposes following reference is made:-
"2002 PTD 720 .re: C.I.T. v. Muslim Commercial Bank Ltd.
The beneficial view taken up by the C.B.R., which is not patently violative of any statutory enactment, but it merely aimed at mitigating the rigours of law or implementing the law keeping in view the pragmatic consideration, requires all respect and is binding on the functionaries employed in the execution of Ordinance, including the Assessing Officers while involved in the assessment proceedings. The C.B.R. is the apex Administrative Authority in the tax administration of the Federation, and thus, occupies every important position. The C.B.R. by virtue of the position occupied by it and the duties assigned to is 'not only supposed to implement and execute the revenue laws of the Federation and to supervise the tax administration, but is further supposed to oversee and watch that the law is justify and properly applied and implemented. In performance of this function, the C.B.R. is empowered to issue clarifications, circulars and guidelines containing orders, instructions and directions, which are of binding nature. In order to maintain better 'discipline, the subordinate Administrative Officer should not venture to circumvent or flout the instructions/directions of the C.B.R."
Keeping the same spirit in view the directions of the C.B.R. to allow revision to returns from 2004 onwards could not debar the taxpayers to revise their returns for the year 2003 also. All the Oil Extracting Units had filed their returns in the same style and, in fact, by virtue of the above-referred exercise on the basis of STGO dated 8-7-2008 the team constituted for the purpose has come out with an unequivocal answer to the controversy. The department itself in consequence thereof has granted relief to all said Units in 2003 and 2004 and in this regard one can refer the Sales Tax Order-in-Original No.1-07/2008 dated 25-9-2009 in the order in respect of M/s. Shamim Oil (Pvt.) Ltd., Samma Satta Link Road, Bahawalpur. Further the ratio of the same has been applied mutatis mutandis on a number of other judgments including on mentioned below:---
| Sr No. | Name of unit, address and S. Tax Reg. No. | Show Cause No. and Date | Amount of refund involved. |
| 01 | Messrs S.S. Oil Mills Ltd. 27-WB, Luddan Road, Vehari S.T.No.04-07-4706-041-28 07-4706-041-28 | C.No.04/2008/ST/Addl/395 Dated 17-1-2008 | Rs.29,575,654 |
| 02 | Messrs Mahmood Agro Industries, 17-Kassi, Vehari Road, Multan S. T. No.04-07-2304-054-55 | C.No.02/2008/ST/Addl/396 Dated 17-1-2008 | Rs.6,239,679 |
| 03 | Messrs Standard Edible Oil Mills (Pvt.) Ltd. Head Office, at 31-D, New Muslim Town, Lahore. S.T.No.04-07-1404-031-46 | C.No.34/2007/ST/Addl/9963 Dated 31-12-2007 | Rs.20,532,182 |
| 04 | Messrs Khawaja Bashir Ahmad and Sons (Pvt.) Ltd. Chowk Shah Abbas Vehari Road, Multan S.T; No.04-07- 2306-008-91 | C.No.18/2008/ST/Addl/4238 Dated 19-6-2008 | Rs.12,721,285 |
| 05 | Messrs Kashmir Edible Oils Ltd. 17th K.M. Arif Wala; Road, Sahiwal S.T. No.04-10-1522-026-64 | C.No.35/2007/ST/Addl/9962 Dated 31-12-2007 | Rs.20,603,126 |
The situation is so obvious that when confronted the learned DR in principle agreed that if the supply is being assessed on the basis of STGO of 2008, the benefit of the same could be extended to this taxpayer as well. He, however, proposed remand of the case which action would be un-necessary as the department itself has already calculated the refund vide its calculation of tax liability in the following manner:-
| CALCULATION OF TAX LIABILITY FOR THE PERIOD 2003-04 in the light of General Order No.32 of 2008 |
| Calculation of refund received for the period 2003-04 |
| C&F Value for the period 2003-04948,702,263 |
| Adjustment of input tax bench mark 15.88% of C&F Value150653761 |
| Refund 4.12%39086492 |
| Refund received for period 2003-04.1,35%0 |
| Excise refund received for period 2003-04-39086492 |
Above exercise practically amounts to rectification of the claim of the tax which being acceptable to the taxpayer in the manner that he has deposited a sum of Rs.62,59,291 for the other period on the basis of same calculation should have been considered binding on department as well. Had the department by now done the needful by issuing refund of the same, the controversy practically would have ended. In this regard the departmental objection that pending the appeal before the Tribunal, the same could not be issued is totally un-founded after having calculated refund by itself and sent the copy of the same to the taxpayer. The inaction on the part of the department to not issue refund is not justified in the eyes of law.
This Court, therefore, without entering into further discussion direct the department to follow its own calculation mentioned as above having been made under General Order No 32 of 2008 and in compliance with the directions of highest administrative authority i.e. F.B.R. which is binding on them. The revenue department, therefore, is directed to issue refund within two months from the date of service of this order.
The other controversies and grounds with regard thereto, therefore, having practically become infructuous as the department has itself determined refund by ignoring the adjudication on the basis of STGO 32 of 2008 in its order dated 13-9-2008 (supra), The assessee also have no objection on the said treatment provided the same is applied in its actual spirit as directed above.
This appeal, therefore is allowed in the manner that both the orders are cancelled and department is directed to issue refund as per its own calculation above.
Disposed accordingly.
C.M.A./93/Tax(Trib.)Order accordingly.