1. JUDGMENT: MR. ZAFAR-UL-MA JEED, MEMBER (TECHNICAL).--(1). This appeal is directed against Sales Tax Order-in-Appeal No, 288/2005, dated 21.11.2005 passed by Collector(Appeals), Customs, Sales Tax & Federal Excise, Multan. By this order learned Collector(Appeals) has up-held the Order-in- Original No, 413/2005 dated 24.05.2005 passed by Deputy Collector (Adjudication), Multan whereby a demand of Rs, 7,20,000/- was adjudged against the appellant alongwith additional tax and penalty on the ground that they provided vendor services by ginning cotton for other parties without payment of tax.
2. 2.The appellant have contested the demand on the following grounds:-- That the show cause notice issued to the appellant is vague and therefore, void as held by the Superior Courts (PTCL 2002 CL 1 and PTCL 1996 CL 1).
3. (ii)That the appellant is registered as a manufacturer and supplies manufactured goods after payment of sales tax on taxable supplies. The department has mis-construed the provisions of STGO No, 1 of 1998 which deals with the levy of sales tax on goods produced by a vendor from the raw material supplied by the principals.
4. (iii)That all the parties mentioned in the impugned order are duly registered with the sales tax department and are doing business independently in the appellant's factory premises. They pay sales tax on their taxable supplies (ginned cotton) and file sales tax returns (copies of the computer record showing details of payment of sales tax by some of the ginners listed in the impugned order have been attached with the memo. of appeal.
5. (iv)That the sales tax paid on electricity bills of the premises is also apportioned according to the number of bales ginned by each registered person and the refund is sanction to the appellant only to the extent of cotton bales ginned and supplied by them. Had other registered person not supplied taxable goods after paying due sales tax, all the sales tax paid on electricity bills should have been refunded to the appellant. Copy of the refund payment Order No, 13/2003 in respect of period 2001-2002 has been attached with the memo. of appeal.
6. (v)That the alleged figure of ginning charges @ Rs,24,000/- per lot is based on presumption. There is no documentary evidence with the department to prove this allegation.
3. The case was heard on 07.11.2006. Learned counsel for the appellant argued the case with reference to the written submissions and quoted case law in support of his case. Learned D.R. defended the impugned order mainly on the ground that the ginning units, as a common practice, provide vending services to other ginners by allowing them to work in their factory premises against fixed charges. The appellant also provided such service to six parties on payment of Rs, 24,000/- per lot as is evident from the statement of appellant's factory accountant Mr. Bashir Ahmed which provides details of vending services in terms of number of bales and the names of the parties. He, however, conceded that all the parties working in the premises were registered with the sales tax department, paid sales tax on their supplies and filed sales tax returns with the department. He also conceded that the refund of electricity bills was apportioned among all the parties working in the factory, including the appellant, according to the number of bales independently ginned and supplied by them.
7. 4.I have gone through the case record and considered the arguments advanced by the parties in support of their case. The emergent position, as it transpires after discussion during the course of hearing, is that all the seven parties, including the appellant, working in the appellant's factory premises are independently registered with the sales tax department. They pay sales tax on the cotton ginned and supplied by them independently and file their sales tax returns separately. There is, as such, lot of force in the appellant's contention that Sales Tax General Order No, 1 of 1998 dated 17.06.1998 has been wrongly applied by the department in their case. A plain reading of this General Order reveals that its provisions are applicable only to the manufacturers who produce/process goods from raw materials and/or semi-manufactured goods supplied by the principals. In this case, the appellant shared his factory premises with six other parties for the manufacture of taxable goods under some arrangement amongst them. All the parties working in the premises are independently registered with the sales tax department, manufacture goods from materials independently acquired by them, pay tax on the supplies made and file sales tax returns.
8. Even the refund of sales tax paid on electricity used is apportioned amongst them according to the number of bales ginned by each party. The appellant cannot therefore, be said to have provided any vendor services attracting the provisions of the said General Order. The statement of factory accountant mainly relied upon by the department does not prove anything contrary to this and, therefore, cannot be made the basis of raising any demand against the appellant.
9. 5.In view of the foregoing, I find that the impugned order is not maintainable under the law. The appeal is accepted and the impugned order is set-aside.