1. Through these two cross appeals the impugned Order-in-Appeal No. 13 Of 2010, dated 19.5.2010 has been objected by the both the parties regarding Order-in-Original No. 1/DC, dated 26.10.2010 the registered tax person in his appeal has objected against the impugned order on the following grounds:- "(A) That the appellant declared the value of supply of its commodities exactly in accordance with the Sales Tax Law and the value was correctly declared in the Sales Tax invoices issued by the respondents, It was alleged that the appellant made the supply on less rates without referring any sort of documentary evidence. The calculation that is too to the extent of value of sales tax, referred by the auditor has been prepared by the audit officer on the basis of supposition, conjectures and presumptions., Reliance in this regard is placed on 2006 PTD 558, 2004 PTD 868 and 2008 PTD 221.
(B) That the appellant declared the value of supplies exactly in accordance with the provision of section 2(46) of the Sales Tax Act, 1990, The appellant mentioned correct value of the supplies on the sales tax invoice of the goods sold in the open market and the audit officer did not brought anything on record for the alleged value of supplies and the learned respondent No. 3 did not even examine the record of the appellant and passed the impugned order illegally, It is the necessary condition of for the constitution of valuation committee under section 2(46), (e) that there should be sufficient reasons to believe that the value of supply has not been correctly declared in the sales tax invoice where as no such allegation was ever framed against the appellant as the respondent department did not brought on record any such invoice in which the value of supply was not declared correctly hence the valuation committee cannot be constituted in the instant case.
(C) That admittedly there has been no provision in the sales tax law whereunder the revenue authority are legal competent to fix the value addition. The full bench of Honourable Customs Sales Tax and Excise Appellate Tribunal Lahore held that the value addition cannot be fixed by the revenue in their judgment passed in the case of Trade Link Lahore.
(D) There is no provision In the sales tax law whereunder the audit officer can fix the value of supplies on its own motion. That the same issue has been resolved by the honourable Division Bench of the Lahore High Court in a case of Messrs Crescent Re-Rolling Mills Lahore v. Assistant Collector Sales Tax Lahore and others (2007 PTD 47) and (2007 PTD 2436).
(E) That the same office of the RTO Multan i.e. Sahiwal Office also conducted the audit of another unit namely Awais Usama Paper Mills Mian Channu existed in the same locality where the respondent's manufacturing unit is existed. The audit office while conducting the audit of Messrs Awais Usama Paper Mills Mian Channu unit did not frame any observation regarding the less value of supplies whereas the value of supplies of that unit during the same period was exactly match with the value of supplies declared by the appellant. The copy of the audit observation of the Messrs Owais Usama Paper Mills Mian Channu is enclosed as Annex-D.
(F) That the valuation addition declared by Messrs Owais Usama Paper Mills was 9% and the audit officer demanded 10% value addition and framed the case to that extend where as the valuation addition declared by the appellant was 12% (12,69,606/101,68,555 100 Annex- E) approximately and the audit officer framed the case on the observation that the flouting paper should be sold at Rs. 18 per Kg which means that the audit officer demanded 122% valuation from the appellant and the learned respondent. No. 3. ignored this vital aspect of the case while passing the impugned order.
(G) That, the value of supplies of the same goods i.e. Flouting paper declared by the other manufacturing unit throughout the Punjab Province are the same or even less than the value of supplies declared by the appellant in the sales tax invoices. The invoices of the ; other unit are enclosed as Annex-F. This was also even not considered by time but he mentioned in the order that the appellant did not produce the evidence in support of its contention."
2. While the department has objected against the order on the following grounds:- "(1) That the decision of learned CIR(A), Multan is bad in law and contrary to the legal provisions of the Sales Tax Act, 1990 upto the extent of observation # 2 of the Show-Cause Notice.
(2) That the modification order of the learned CIR(A), Multan , upto the extent of input tax admissible amounting to Rs. 49,620 against the invoices issued by Messrs Executive Traders, Faisalabad, after verification of compliance of section 73 of the Sales Tax Act, 1990 is not judicious.
(3) The learned CIR(A), Multan is not justified to modify the order of the Deputy Commissioner Inland Revenue, Audit-07, Multan against the observation at Sr. No. 2 to allow the input tax against the sales tax invoices issued by Messrs Executive Traders, Faisalabad, which was black listed. As per sub-rule (5) of Rule 12 of Chapter-I of Sales Tax Rules, 2006 issued vide S.R.O. No. 555(1)/2006, dated 5.6.2006 reproduce as under:- "During the period of suspension of registration, the invoices issued by such person shall not be entertained for the purpose of sales tax refund or input tax credit, and once such person is blacklisted, the refund or input tax credit claimed against the invoices issued by him, whether prior or after such blacklisting, shall be rejected through as self-speaking appealable order and after affording an opportunity of being heard to such person".
3. In the light of above it is crystal clear that besides the compliance of section 73 even that the input tax adjustment/refund cannot be admissible on invoices issued by the blacklisted unit as per the provisions of rule 12(5) of Sales Tax Rules, 2006 issued vide S;R.O: No. 555(1 )/2006, dated 5.6.2006."
3. We have heard the learned representatives from both the sides and have also perused the impugned order in appeal and order in original. The learned counsel representing the Tax-payer has contended that the Taxpayer declared the value of supply of its commodities exactly in accordance with the Sales Tax Law and value was correctly declared in the Sales Tax invoices issued by the Tax-payer. According to him the calculation regarding value of Sales Tax, referred by the auditor has been prepared by the audit officer on the basis of supposition, conjectures and presumptions without bringing any sort of evidence on record and even no calculation has been made as to alleged cost of goods sold as mentioned in the show-cause notice. He has contended that the observation of the adjudicating authority regarding value of supplies is based on presumption and supposition. The learned counsel in this regard placing reliance on the decision, reported as 2006 PTD 558, 2004 PTD 868 and 2008 PTD 221 has contended that in these judgments it has been held by this Tribunal that there is no room for any intendment nor any equity or presumption as to tax. He has contended that the tax-payer has declared the value of supplies exactly in accordance with the provision of section 2(46) of the Sales Tax Act, 1990. According to him it is the necessary condition of the constitution of valuation committee under section 2(46) that there should be sufficient reasons to believe that the value of supply has not been correctly declared in the sales tax invoice whereas no such allegation was ever framed against the present tax-payer as the department has not brought on record any such invoice in which the value of supply was not declared correctly. He is of the view that valuation committee cannot be constituted in the instant case. He has argued that admittedly there has been no provision in the sales tax law authorizing the revenue authority to fix the value addition, In this regard he has placed reliance on the decision of the honourable High Court in case of Messrs Crescent Re- Rolling Mills Lahore v. Assistant Collector Sales Tax Lahore. He has argued that the value addition declared by the department is 12% and the value declared by the manufacturers dealing the alike business in the same area is also the same. He has in this respect referred the profit loss account submitted by the Tax-payer before the department and has also presented the invoices issued by the other registered persons on the same rate or even on less rate as compared to the rates declared by the appellant/registered person. The learned counsel has argued that the same office of the RTO Multan i.e. Sahiwal Office also conducted the audit of another unit namely Messrs Awais Usama Paper Mills Mian Channu which unit is also existed in the same locality where the manufacturing unit subject-matter of this appeal is existed. The audit officer while conducting the audit of Messrs Awais Usama Paper Mills Mian Channu have not made any observation regarding the less value of supplies whereas the value of supplies of that unit during the same period was exactly same as the value of supplies declared by the present taxpayer. The learned counsel, in this regard has presented the invoices and the copy of the audit observation of the Messrs Owais Usama Paper Mills Mian Channu. On the other hand the learned D.R.; is supporting the impugned order of the adjudicating authority. He has contended that there has been no adverse order has been passed by the learned Commissioner (Appeal). He has contended that the committee as mentioned by the learned CIT(A) will decide the ratter in accordance with law and on the basis of the data available in this regard.
4. We have considered the rival arguments and have also perused the record available, the tease- law referred by the learned counsel of the tax-payer and other relevant record of the case. We have found that the per Kg value of the fluting paper declared by the present Tax-payer in the invoices is 8.50 Kg and the declared earned profit is on 12% value addition. The Tax-payer has appended with this appeal memo, the profit and loss account wherein all the expenses occurred on the manufacturing of the flouting paper has been mentioned along with cost of goods sold. As per the version of the department the cost per Kg occurred on the manufacturing of the flouting paper mentioned by the tax-payer is Rs. 8.88 per kg and same as per the adjudicating authority could not be sold at 8.50 per kg but in this regard no calculation and documents have been mentioned by the department from which the said claimed cost was derived or calculated. We are therefore of the view that the version of the department is based on the suppositions and conjecturers so arbitrary and cannot be approved. We have also observed that the value of the same commodity i.e. The fluting paper declared by the other manufacturing units in the territorial jurisdiction of the same office and others collectorates/Regional Tax. Offices is exactly the same which has been the value-declared by the present tax-payer during the period in question, It has been contended by the learned counsel of the tax-payer that there are some units who have declared the value even less than what the present tax-payer has declared in its invoices. We have noted that the value declared by the other units have been accepted by the department, In this respect the audit report of another unit namely Messrs Owais Osama Paper Mills may be referred which is in the same vicinity. The department in that case has accepted the value of supply of the flouting paper of all manufacturers which is of the same goods. The direction of the learned Commissioner (Appeals) for the constitution of valuation committee is illegal because the appellant declared the value of supplies exactly in accordance with the provision of section 2(46) of the Sales Tax Act, 1990. The appellant mentioned correct value of the supplies on the sales tax invoice of the goods sold in the open market, It is the necessary condition of for the constitution of valuation committee under section 2(46) of the Sales Tax Act, 1990 that there should be sufficient reasons to believe that the value of supply has not been correctly declared in the sales tax invoice whereas no such allegation was ever been against the appellant.
4. In the said section 2(46) value of supply means "in case where there is a sufficient reason to believe that the value of supply has not been correctly declared in the invoices, the committee comprising representative of trade and sales tax department constituted by the collector." So it is very clear from the wording of the section that there should have been sufficient reasons for the constitution of committee which is not present in the present case so the order in this respect is illegal, It is also worth mentioned here that there is no provision in the sales tax law whereunder value of supply can be fixed.
5. We are of the view that the direction of the learned Commissioner (Appeals) for the constitution; of committee is illegal and against the law as the same is discriminatory because all the other units, the manufactures of the same goods as that of appellant i.e. The flouting paper locating in the same collectorate has been making the supplies at the rate of Rs. 8.25 and Rs. 8.50 per kg and the appellant also made the supply at the rate of Rs. 8.50 per kg as is evident from the copies of invoices which are annexed along with the appeal memo. The department has also conducted the audit of Messrs Owais Usama Paper Mills and has accepted the same rate of supply for the supply of Flouting paper. The audit report of the said unit is also enclosed with the memo, of appeal along with invoice.
6. It is also pertinent to mention here that as pointed out by the appellant the same office of the Multan Collectorate conducted the audit of the Messrs Owais Usama Paper Mills Mian Channu who conducted the audit of appellant and no such observation was made against that person whereas the value of supply is the same for both the units. The appellant has declared the value addition at the rate of 12% whereas the value addition of other unit namely Owais Usma Paper Mills vacated in the same vicinity and audited by the same office has been accepted at 10% which is even less by two per pent as compared to the appellant.
7. Keeping in view all these facts of the' case it is clear that the appellant has declared the value of supply in accordance with the sales tax law and in conformity with the value of supplies of the alike manufacturing units so the direction for constitution of the committee in the impugned order is illegal and beyond the scope of sales tax law.
8. Regarding the cross appeal filed by the department we have noted that the learned CIR(A) after considering the issue in detail has observed that Messrs A.N Trader is no more blacklisted unit. He has therefore directed that the appellant should produce the invoices relating to the paid period and proof of payment through banking channel under section 73. If the invoices are valid and payments to the supplied have been made through banking channel or accordance with requirements of section 73 then input tax o this unit is directed to be allowed otherwise the action of the adjudicating officer would be justified and recovery may be made accordingly.
9. Consequently the appeal filed by the department is dismissed while the cross appeal filed by the Tax-payer is allowed to the extent and in the manner referred above.