' This sales tax appeal has been filed by appellant, 'a manufacturer of Cement, having its own quarries of lime stone and slate as an integral part of the cement manufacturing unit did not pay the sales tax on excavation of lime stone and gypsum, the adjudicating authority passed the Order-in-Original No, 121 of 2004 dated 26-372004. Feeling aggrieved from order-in-original unit has filed the instant appeal on the, following ground:--
(1) That the impugned demand on account of sales tax on lime stone and clay used in the manufacture of cement relates to the period from June, 1999 to September, 2000; whereas the show cause notice served on 4-3-2003 is time barred, hence the impugned demand of Rs,7465725 is illegal.
(2) That the appellant excavate lime stone and clay in raw and natural form its own quarries and brought to its factory for manufacturing of cement and is was not bought from any supplier therefore, no business was carried out for consideration as such no sales tax is leviable.
(3) That under the facts and circumstances of the case neither additional tax under section 34 is attracted nor 3% penalty imposed under section 33(2)(cc) of the Sales Tax Act, 1990 is justified.
(4) That levy of and demand of tax for the period not mentioned in SCN is illegal.
2. Briefly narrated the facts of the case as per record are that Collectorate of Sales Tax and Central Excise, Peshawar reported vide contravention Report No, ST(Contra)139/03 dated 30-7-2003 that the appellant had not charged and paid sales tax amounting to Rs,7465725 on excavation of lime stone and slate for n-house use to manufacture an exempt item i,e, Cement during the period from June, 1999 to September, 2000. This act of the appellant was considered as violation of the definition of taxable supply as mentioned in sections 2(33) and 2(41) of the Sales Tax Act, 1990.
Accordingly a show cause notice C. No, St(Adj)C/15/2003/806 dated 4-9-2003 was issued to the appellant, which was duly replied on 17-10-2003. After comments of the department, the Addl.
Collector passed the impugned order with the following remarks/ observations: "I am, therefore, convinced to conclude that limestone and clay excavated by Messrs Cherat Cement Factor Ltd. Cherat falls within the definition of taxable supply and liable to tax. The Collectorate of Sales Tax and Central Excise, Peshawar is directed to determine the quantity of limestone and clay excavated by the respondent and recover the sales tax on value of supply to be determined in terms of section 1(46)(e) of the Sales Tax Act along with the additional tax in terms of section 34 ibid. A penalty of 3% of the amount of tax involved is also imposed under section 33(2) (cc) of the Act and be recovered accordingly."
3. The aforementioned order is impugned before us for adjudication on the aforementioned grounds.
4. The L/AR argued that excavation of limestone for a house use was not a taxable supply and no sales tax was ever paid by manufacturers of cement throughout the country. The demand of sales tax created on the aforementioned product was resisted by all the manufacturers inclusive of appellant. The Sales Tax Appellate Tribunal, Karachi held that limestone and clay were not taxable.
This view of Tribunal was confirmed by Baluchistan High Court in the case of Collector Customs and Sales Tax v. Attock Cement which judgment has been reported as GST 2002 CL 245. The aforementioned judgment was given on 6-12-2001 whereas show cause notice was issued on 4-9- 2003. The appellant relied upon the judgment of Baluchistan High Court, however demand of sales tax was created by holding that the raw material was taxable. The L/AR of the taxpayer was of the view that show cause notice issued under section 36(1) of Sales Tax Act. 1990 is not applicable rather section 36(2) is attracted. The said section is not applicable because there was no collusion, the tax on limestone and clay was not being paid in the country and the issue was yet to be decided whether any such tax was payable or not while also at the time of levy of tax through order-in-original the judgment of Hon'ble Baluchistan High Court was in field as per the above judgment no sales tax was payable at that time. Therefore in the matter in hand section 36(2) is applicable.
5. On behalf of the department it was pleaded that demand of tax is well within time. Section 36(1) of Sales Tax Act, 1990 had rightly been applied. It was pointed out that the Customs. Excise and Sales Tax Appellate Tribunal, Peshawar has confirmed the levy of sales tax in the case of appellant vide its Order-in-Appeal No,7(480)ST/IB/2001(PB) dated 8-11-2002, reliance for the aforementioned judgment was placed on the judgment of Hon'ble Supreme Court of Pakistan which is reported as 2001 SCM R 1376 = 2001 PTD 2097, wherein it is held that once taxable goods has been supplied by a person to itself it would fall within the definition of supply. In this judgment it was held that Molasses for use of by products in the cases of sugar mills falls within the definition of taxable supply. In the presence of judgment of Hon'ble Courts of Pakistan the impression drawn by the registered person is not tenable. The registered person was required to pay the sales tax.
6. We have heard the arguments of the parties and perused he relevant orders. Before parting further it would be useful to reproduce section 36 of Sales Tax Act, 1990, which is as under:-- "36.Recovery of tax not levied or short-levied or erroneously refunded. -
(1) Where by reason of some collusion or a deliberate act any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of refund erroneously made shall be served with a notice, within five years of the relevant date, requiring him to show cause for payment of the amount specified in the notice."
(2) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to pay the amount of tax or charge or the amount of refund erroneously made shall be served with a notice within three years of the relevant date, requiring him to show cause for payment of the amount specified in the notice; ' Provided that, where a tax or charge has not been levied under this subsection, the amount of tax shall be recovered as tax fraction of the value of supply."
7. As per the above provision two sets of period of limitation have been prescribed i,e, 5 years and 3 years.
8. The moot point of dispute before us is application of subsection (1) or (2) of section 36 as per the representative of the registered person period of limitation as provided in subsection (2) of section 36 is applicable whereas per departmental contention it is subsection (1) of section 36 which is applicable.
9. The arguments of the learned AR on the point was that in light judgment Balochistan High Court they were under the impression that the raw material i,e, the excavation of lime stone, clay and gypsum do not fall under the definition of supply therefore they did not pay the sales tax.
10. In appellant own case the Customs, Federal Excise and Sales Tax Tribunal. Peshawar vide its appellate Order No,7(480)ST/ IB/2001(PB) dated 8-11-2002 has already concluded the issue of dispute. The L/AR at the time of hearing failed to tell about as to whether any appeal/reference has been filed by the registered person.
11. For earlier period in aforementioned appeal the Tribunal while giving its conclusion has relied upon the judgment of Hon'ble Supreme Court of the country cited as 2001 SCM R 1376 = 2001 PTD 2097. While subsequently also the Hon'ble Supreme Court in another case of D.G Khan Cement v.
Collector Sales Tax has held so. Thus in this way as per the above judgment the raw material for own consumption of an industrial undertaking for manufacturing of end products and also the byproducts falls within the definition of supply therefore taxable under the Sales Tax Act, 1990. Non- payment of sales tax in the light and in the presence of judgment of Hon'ble Supreme Court of the country which has binding force of law could be termed deliberate act on the part of the registered person, therefore falls under the garb of section 36(1) for which period of limitation has been prescribed as five years. The action taken by the adjudicating authority is within 5 years. However the levy of tax is restricted to the period mentioned in the show cause.
12. Appeal stands disposed of.