MR. SARFRAZ AHMAD KHAN, MEMBER (TECHNICAL).-(1). This appeal is directed against order dated 22.03.2003 passed by Collector of Customs, Lahore in file No. CP/Ref/23/2000 whereunder he rejected the appellant's refund claim. Brief facts leading to this appeal are that the appellant claimed sales tax refund amounting to Rs. 16,701,390/- claimed to have been paid in advertently on the imported Disposable Syringes despite the fact that these Syringes were exempt from payment of sales tax vide Sr. No. 13 of Sixth Schedule to the Sales Tax Act, 1990 read with SRO 1199(I)/96 dated 22.10.1996 and SRO No. 324(I)/94, dated 19.04.1994. The concerned sales tax authorities allowed refund vide refund order No. 42/99. Collector Sales Tax, reopened the case in terms of section 45-A of Sales Tax Act, 1990 and set aside refund order No. 42/99 and directed the Additional Collector of Sales Tax to issue show cause notice for deciding the case on its merits. Accordingly* the Additional Collector Sales Tax issued show cause notice dated 04.12.1999 proposing rejection of the refund claim amounting to Rs. 16,701,390/-. On culmination of the adjudication proceedings Additional Collector Sales Tax, Lahore vide her Order-in-Original No. Nil, dated 24.06.2000 (issued vide C. No. 73-ST (Becton Dickinson/US66/99/4043, dated 26.06.2000) vacated show cause notice and ordered refund of Rs. 15,701,390/-. Aggrieved from the said order, the respondent Collectorate of Sales Tax and Central Excise, Lahore filed an appeal before Tribunal on the ground that collection, refund and recovery of import related sales tax was the jurisdiction of the concerned customs authorities of the importing station and the adjudicating Additional Collector of Sales Tax had no jurisdiction and that Syringes were not exempt from sales tax and that the factual position of passing incidence of tax to consumers had not been verified. Lahore Bench-II of this Tribunal vide its judgment dated 04.01.2002 in appeal No. 1547/LB/2001 set aside order dated 24.06.2000 passed by Additional Collector Sales Tax, Lahore and remanded the case to the Collector of Customs Lahore "for a fresh decision on merits after hearing both the sides." The impugned order dated 22.03.2003 was accordingly passed by Collector of Customs, Lahore.
2. The learned counsel gave following arguments during hearing:-
(i) The refund of the appellant was originally sanctioned by Additional Collector Sales Tax Lahore vide her order dated 20.08.99. Prior to sanction of the refund, it was properly pre-audited by the concerned sales tax authorities and having found the refund due to the applicant (the present appellant) the same was sanctioned by the competent sales tax authorities.
(ii) Lahore Bench-II of the Tribunal vide its judgment dated 4.1.2002 in appeal No. 1547/LB/2001 remanded the case to the Collector of Customs, Lahore for examining the case in terms of Sales Tax General Order No. 4/2000, dated 1.9.2000. According to the said Sales Tax General Order No. 4/2000 Collector of Customs was required only to confirm from the Collector of Sales Tax that no adjustment of input tax/refund had been claimed/paid to avoid double payment. The aspect of passing the incidence of tax to the consumer in terms of section 3B of Sales Tax Act, 1990 was not subject matter of the said General Order and hence Collector of Customs went beyond the mandate given by the Tribunal for examining the case. Collector Sales Tax confirmed in his report to Collector of Customs that input tax adjustment/ refund was neither claimed nor allowed. The said report of the Collector Sales Tax as reproduced in the impugned order also indicated that sales tax was not charged and tax invoices were issued as exempt.
(iii) Needles were necessary parts of the Syringes and Syringes could not be used without needles.
Syringes having already been declared as drug, needles have also to be treated as drug for purpose of exemption.
(iv) The burden of proving that incidence of tax has been passed on to the consumer or not was on the person collecting the tax and hence it was responsibility of the department and not that of the appellant.
3. The learned SDR opposed contentions of the learned counsel on the following grounds:-
(i) Lahore Bench-II of the Tribunal vide its judgment dated 4.1.2002 in appeal No. 1547/LB/2001 remanded the case to the Collector of Customs, Lahore "for a fresh decision on merits after hearing both the sides". This remand order was not restricted only to Sales Tax General Order No. 4/2000, dated 1.9.2000 and rather this remand order covered the case to be examined a fresh in respect of all aspects.
(ii) Sales Tax General Order No. 4/2000 dated 1.9.2000 just determined the jurisdiction and processing procedure in respect of refunds and sales tax paid due to inadvertence, error of misconception at the import stage. Since the refund was import related and was originally sanctioned by Additional Collector Sales Tax, the Tribunal considered the same as without jurisdiction and ordered the Collector of Customs to decide the case.
(iii) There was no apparent Conflict between the Sales Tax General Order No. 4/2000, dated 1.9.2000 and the provisions of the Sales Tax Act, 1990 and even if there is any, the provision of the Act have to prevail over the General Order.
(iv) Needles were packed separately , and thus were classifiable in separate HS Code heading, distinguishable from the Syringes Needles have not been declared as drug and hence exemption was not available to this item.
(v) The increase in price from 8% to 11% on disposable syringes after levy of sales tax was clear proof that incidence of tax was passed on to the consumers. No evidence has been provided by the appellant that incidence of tax was not passed on to the consumers.
4. We haver heard contentions of both the sides and perused the appeal file available before us.
Collector of Customs has Rejected refund claim amounting to Rs. 30,52,739/- on the ground that this amount was paid as sales tax on needles, which had been imported in addition to import of Disposable Syringes and were also packed separately and no exemption was available to these needles since these were also not notified as a "Drug" u/s 3 of the Drugs Act, 1976. Balance refund claim has been rejected on the ground that the incidence of tax was passed on to the consumers and refund was not admissible in terms of section 3-B of Sales Tax Act, 1990. This finding is based on the report received from the Collectorate of Sales Tax, Lahore which indicated that there was an increase between 8% to 11% in prices w.e.f. 16.08.99 when exemption was withdrawn vide SRO 922(I)/99, dated 16.08.1999.
5. We have examined both the aforementioned issues and we find that:--
(i) Needles were imported apart from Disposable Syringes and were also packed separately. It means that needles for the Disposable Syringes were available with the Disposable Syringes and the spare needles were imported, duly packed separately. Both Disposable Syringes and Needles were separately classifiable in the First Schedule to the Customs Act, 1969. Needles had not been declared as "Drug" in SRO 324(I)/94 dated 19.04.1994 u/s of the Drugs Act, 1976 and hence the same were not exempt from sales tax in item No. 13 of the Sixth Schedule to the Sales Tax Act, 1990 (as it existed then) read with SRO 1199(I)/96 dated 22.10.96. Hence refund amounting to Rs.30,52,739/- in respect of needles was not admissible since no exemption from sales tax was available to needles sales tax was correctly charged from the appellants on needles and it was not due to be refunded.
Hence to this extent, the appeal is rejected and the impugned order is confirmed.
(ii) Audit report communicated by Collector Sales Tax and Central Excise, Lahore vide his letter dated 30.01.2003 to the adjudicating officer and reproduced under para 5 of the impugned order clearly reported under the heading of "price analysis" that increase in prices between 8% to 11% on Disposable Syringes of different capacities took place from 16.08.1999. The adjudicating officer erred in holding that the said increase proved that incidence of tax was passed on to the consumer. Sales tax refund claim of the appellant was for the period of March 99 to 15.08.99 when exemption from sales tax was available to Disposable Syringes under item No. 13 of the Sixth Schedule to the Sales Tax Act, 1990 read with SRO 1199(I)/96, dated 22.10.1996 and further read with SRO 324(I)/94 dated 19.04.1994. Vide SRO 922(I)/99 dated 16.08.1999, substances, whether imported or locally supplied, registered as drugs under the Drugs Act, 1976 other than those classifiable under any heading of Chapter-30 of the First Schedule to the Customs Act, 1969 were declared not to be exempt from sales tax, except for exclusions as mentioned therein. It meant that except for exclusions (like filled infusion solution bags, scrub, detergents and washing preparations, soft soap or no-soap, soap, adhesive plaster, surgical tapes, liquid paraffin, disinfectants, cosmetics and toilet preparations and absorbent cotton wool) all other substances whether imported or locally supplied, and even if registered as drug under Drugs Act, 1976 but not classifiable under Chapter- 30 of the First Schedule to the Customs Act, 1969 were no more exempt from payment of sales tax.
Syringes in question were classifiable under Heading 90.18 of the First Schedule to the Customs Act, 1969 and thus these were no more exempt from payment of sales tax w.e.f. 16.08.1999. The appellants have claimed refund of sales tax inadvertently paid on Disposable Syringes during the period of March 99 to 15.08.1999. When these were exempt from payment of sales tax in the terms of Sr. No. 13 of Sixth Schedule to the Sales Tax Act, 1990. Report dated 30.01.2003 of Collector Sales Tax, Lahore as reproduced by the adjudicating officer at para-5 of the impugned order revealed that increase in prices from 8% to 11% on Disposable Syringes of different capacities took place from 16.08.1999 (after withdrawal of sales tax exemption vide SRO 922(I)/99 dated 16.08.1999). This was perfectly in order but the issue relates to the period prior to 16.08.1999 and the aforementioned data did not prove that incidence of sales tax was passed on to the consumers between the period from March 99 to 15.08.1999. Hence order of the adjudicating officer ordering rejection of refund claim (amounting to Rs.12,648,651/- (Rs.15,701,390/- (-) Rs.3052.739/- )J is set aside and Collector of Customs Lahore is ordered to allow refund amounting to Rs. 12,648,651/- to the appellant since respondents have failed to prove that incidence of sales tax to the said extent was passed on the consumers. To this extent the appeal is accepted.
The appeal is partly accepted to the above extent and the impugned order stands modified accordingly.