MR. JAVID IQBAL, JUDICIAL MEMBER.-(1).Through this appeal appellant has contested the impugned order recorded in appeal No. 107 of 2009 dated 14.03.2009 on the grounds that sales tax on the products was paid in accordance with section 3 of the Sales Tax Act, 1990, while fixing the bench mark of 950 consumed units of electricity for the production of one metric ton ingots, the action of FBR is against the law and demand of sales tax as per alleged agreement is direct conflict with the charging section 3 of the Sales Tax Act, 1990. The agreement alleged to have been made among the steel manufacturer and FBR has not been given the shape of statutory law.
2. Briefly the relevancy of the facts leading to this appeal that on report made by the audit team to the effect that the appellant did not follow the bench mark as specified by the FBR vide its letter No. 4/85/ST/97 dated 24.04.2001, wherein 950 electric units consumed would give the production of one metric ton of steel ingots. Non observance of this formula at the short production of 437.503 metric tons of steel ingots during FY 2000-2001 was made out of which case was decided vide O.N.O No. 13/2003 by Respondent No. 2, directing the appellant to deposit the amount of said short payments amounting to Rs. 885,944/- alongwith additional tax to be collected at the time of payment. A penalty at the rate of 3% of the amount of tax involved was also imposed under section 33 of Sales Tax Act, 1990. The appeal before the first appellate authority did not succeed. On second appeal the Tribunal vide its judgment in appeal No. ST-445 (PB) of 2003 dated 10.11.2007 remanded the case back to the original adjudicating authority for fresh decision on merits. The adjudicating authority decided the case afresh vide order-in-remand No. 18/2008 dated 26.03.2008.
Taxpayer/appellant being dissatisfied from the order in remands preferred appeal before the Respondent No. 2, which also failed. It is this treatment against which the appellant has approached this forum through the instant.
3. The L/AR of the appellant contended that the instant case the levy of sales tax on steel ingots cleared during July, 2000 to June, 2001 sale tax was paid as per section 3 of the Sales Tax Act, 1990 that on the basis of CBR circular dated 24.04.2001 fixing the bench mark to produce one ton of ingots against 950 units of electricity could not be applied retrospectively while also the notification of CBR is in conflict with section 3 of the Sales Tax Act, 1990. The tax is to be charged and paid on taxable supplies made in Pakistan by a registered production on the basis of consumption of electricity cannot be presumed converted into taxable supply without clearly establishing the supply made by the respondent in excess of that recorded in the sales tax record.
The letter No. 04/85-STB/97 dated 24.04.2001 issued by the Central Board of Revenue, Islamabad fixing the bench mark of 950 units of electricity for production of one tone of ingots and that too with retrospective effect from July 1, 2000 does not have a legal standing as it is in conflict with section 3 of the Act and moreover the letter is not in the form of Notification as provided in section 3(2)(b) of the Act. The subject cannot be made liable to tax unless warranted by provision of the statute. The tax is leviable on supply and is to be paid on the price paid for the supply. Supply in this case has not been established. The presumed production cannot be converted into supply for assessm ent of tax. There being controversy regarding interpretation the demand of additional tax is not payable under the law.
The departmental representative has filed the following comments:-
1. That letter No. 04/85-STB/97 dated 24.04.2001 has been issued by CBR in consultation with Pakistan Steel Melters Association and superseded Board's earlier bench marks fixed vide letters C.
No. 04/85- STB/97 dated 18.09.1997, C. No. 04/93-STB/97 dated 25.10.97 with effect from lst July, 2000. The respondent was paying sales tax according to the earlier bench marks fixed vide aforesaid letters from time to time, therefore, the revised bench marks fixed vide letter No. 04/85- STB/97 dated 24.04.2001 is a continuation of the previous arrangements. The respondent in the first instance instead of challenging the revised bench mark fixed vide letter No. 04/85-STB/97 dated 24.04.2001 had accepted the same arrangements and started paying sales tax according to the revised arrangements with effect from tax period April, 2001 onward. Since the respondent complied the order partially, he had to accept the arrangements in totality. Further if it was a tax on presumed production why the respondent accepted it from April, 2001 onward and why paid sales tax according to the revised bench fixed vide letter No. 04/85-STB/97 dated 24.04.2001 from April, 2001 onward.
2. That letter No. 04/85-STB/97 dated 24.04.2001 have legal standing and not in conflict with section 3 and section 3(2)(b) of the Sales Tax Act, 1990 as it was being followed all over the country without any serious exception. Had it been so the respondent should have challenging it in the first instance and should not have complied it partially. Since the respondent complied with the revised bench mark fixed by the said letter partially, thus he had to accept the revised arrangements in totality.
3. Again if it was a tax on presumed production and not established supply, why the respondent accepted it from April, 2001 onward and why paid sales tax according to the revised bench mark fixed vide letter No. 04/85-STB/97 dated 24.04.2001 from April, 2001 onward. The respondent accepted it supply for the period prior to July, 2000 and from April, 2001 onward but did not accept it supply for the period from 07/2000 to 3/2001.
4. There is no controversy regarding the interpretation, the demand of additional tax and penalty is justified under the law.
4. The L/AR of appellant in his support referred the case law reported as GST 2005 CL. 73 Lahore High Court PTCL 2008 CL. 499.
5. After having heard the parties and from perusal of the relevant orders it is seen after the audit on the report of Collectorate of Sales Tax and Excise, Peshawar, show cause notice was issued specifying the reason that "now the said M/s. Frontier Steel, Plot No. 153, I.E, Gadoon Amazia, District Swabi is hereby called upon to show cause within 10 days of the issuance of this notice as to why the amount stated in above para, may not be recovered from them and why penal action should not be taken against them for violation of section 3(1) (a), 6,11(2), 26 & 36(1) punishable u/s 33(2)
(CC), & 34(1) of the Sales Tax Act, 1990. They should produce all evidence documentary or otherwise in support of their defence within the period specified above failing which the case shall be decided on the basis of evidence placed on record. "
6. The aforementioned notice was replied by the appellant, the contents of which have been incorporated in the O.N.O. Finding not upto mark the reply of the appellant tax and additional tax was levied.
7. Before us the L/AR of the taxpayer/appellant referred to the judgments of the High Courts the facts of the which are that Appellants, a registered persons, running steel re-rolling mills.
Association of steel mills, after meeting with tax officials, agreed to pay certain amount of sales tax proportionate to volume of manufacturing-No notification issued but minutes of the meeting circulated-Subsequently, some members violated the agreement against whom Order-in-Original passed demanding sales tax as per agreed formula-Appeal filed before the Tribunal contesting that the agreement did not have any legal sanction. Tribunal held' that the agreement, followed by majority of members and, for sometime, by the appellants themselves, was a kind of promissory estoplles- First appeal rejected-On appeals to High Court filed under section 47 of the Sales Tax Act, 1990. The appeal was decided in favour of the taxpayer, wherein it was held that formal agreement in the absence of any written form and without conversion of it into law by the legislative body or in the form of notification by the competent authority is nothing in the eyes of law.
8. The facts and position of the instant case law are distinguishable from cited case law. In cited case law, no formal agreement was made in written form, while it was not converted into law by the legislative body or by the sub-ordinate legislature in the form of notification. While in the instant matter in hand an agreement was executed among the parties, which was converted into notification by the subordinate legislature and it was acted upon by the appellant by the way of depositing the tax for considerable period without making any contest. The lst appellate authority has rightly decided the issue, there exist no reason of any interference in the impugned order, it is confirmed accordingly.
Resultantly appeal on behest of appellant fails and rejected accordingly.