This appeal challenges the validity of order passed of the Collector (Appeal), by which the Order- in-Original No,20 of 2006 was set aside and the department was directed to allow the refund claim to the respondent.
2. Brief facts of the case are that it was reported to the undersigned by Refund Section of this office that Messrs Ahmed Ship Breaking Co., filed claimed for refund of Rs, 3,394,191 under section 10 of the Sales Tax Act, 1990, for the tax period January, 2005, on import of Ammonium Phosphate (DAP) under S.R.O. 1071(1)/2003, dated 25-11-2003, as per details given below:-- S. No. B/E No.Date Quanity (M.Ton)Value Sales Tax Under S.R.O
1. 149594 19-5-20045028 6,999,255
2. 23568 21-8-200411015 7,617,011 16043 14,616,266 Details of supplies made during the period from May, 2004 to January 2005, are as under: - Quantity (M. Ton) Value Sales Tax Total 16043 268,945,768 11,921,722 Messrs Ahmed Ship Breaking Co. Claimed that they did pay sales tax at the import stage at a value of Rs,9,280 per metric ton as the same was fixed by the government vide S.R.O. 1071(1)/2003 dated 25-11-2003. However, subsequently the value for the assessment of sales tax was reduced from Rs,9,280 to Rs,4,610 under S.R.O. 609(1)/2004 dated 16-7-2004, hence the claimant was entitled for refund at the reduced rate of value.
The refund claimed by Messrs Ahmed Ship Breaking Company was scrutinized and the department came to the following conclusions:-
(i) The Government had fixed the value within the framework of law as such the same was to be applicable for charging or refunding the tax.
(ii) The claimant was not entitled for refund as there does not exist any difference between the input tax and the local supply, hence no refund was due.
4. The claimant was accordingly served with a show-cause notice thereby asking him that as to why his claim be not rejected. And after listening to the claimant's view his claim was rejected vide order dated 8-7-2006. In an appeal, the Collector (Appeals) set aside the said order by his order dated 5-4-2007 and directed the appellant to refund the amount claimed by the respondent. The present appeal challenges the vires of the said order.
The appellant has now contended that the impugned order is wrong on the face of record as the respondent was not authorized to claim refund. The appellant has also claimed that the application of FTO order by the respondent No, 1 was not justifiable. The respondent on the other hand supported the action of the respondent No, 1 for the reasons given in Order-in-Original No, 20 of 2006.
5. After listening to the propositions raised by the parties, we have reached to the following conclusions:--
(a) The import was made on 19-5-2004 and 21-8-2004. In the first import the value was Rs,9,280 per metric ton and in the second import value was Rs,4,610 as the same was reduced or fixed by the government on 16-7-2004. Obviously, for the purpose of first import, the values fixed on 16-7- 2004 have no relevance as the effective date of operation of S.R.O. Date 1000(1)/2004 was 16-7- 2004, and hence the tax charged at a higher rate was refundable as the final product was also taxable. Obviously, the reduction of value made by the government was a conscious decision as such tax paid at the import at a higher value was adjustable within the purview of section 7 of the Sales Tax Act, 1990. The notification dated 16-7-2004 was to operate prospectively and not retrospectively, hence after 16-7-2004 when value stood reduced, the output tax also stood reduced, but input tax paid by the claimant at a higher value at an earlier date was adjustable. The refund claim made by the applicant was as such very much in order.
It is very unfortunate that the learned Additional Collector who issued the show-cause notice on 21- 6-2006 had a very little knowledge about the principle of law and of canons of taxation. It is now settled that:--
(a) In a VAT type of taxes, input tax is adjustable irrespective of increase or decrease of values, and section 2(46) had nothing to do with this internationally accepted norm of taxation. The basis of issuance of show-cause notice as such was not only wrong but is also tainted with mala fide intention and requires an investigation that why such a senior officer of the department acted illegally and in an arbitrary manner.
(b) All notifications or orders take prospective effect and no retrospective effect can be given.
Hence in respect of imports made on 19-5-2004, the tax was paid at a value of Rs,9,280 per metric ton as this value was fixed by the government. This import tax was refundable irrespective of subsequent decrease of value. Hence the rejection order was simply based on mala fide.
At the same time, we would like to observe that the conduct of the officials of the Quetta Collectorate is totally violative of law on the conduct of Additional Collector who issued the show- cause notice and the Collector who decided to file this appeal.
It may be noted that under the Constitution all functionaries of the governments are expected to work within the permissible norms of law; and where law has been properly interpreted by the superior courts and settled legal practice operates, an undue and harsh action by the authorities against a taxpayer speaks volumes of mala fide on the part of D functionaries as a flagrant violation of law and procedure was committed by the Additional Collector, who issued the show- cause notice and the Collector who decided to file an appeal without having any basis.
As a result, this appeal filed by the Department is dismissed having no force of law.