1. MR. JUSTICE YAHYA AFRIDI.--(1). M/s. Syntronics Limited, petitioner, has made this Reference to answer the following questions of law:-- 1.Whether under the facts and circumstances of the case the Honourable Tribunal was not erred for denying input adjustment or refund of tax paid on 1150 KV diesel generator imported vide B/E 53371 dated 15.12.99 and whereafter installed as plant and machinery as an alternate Source of electrical energy for use in manufacturing or their products hermetically sealed block bottom cement sacks.
2. 2.Whether under the facts and circumstances of the case timely and rightly adjusted input tax credit and reversal thereof on the behest of the auditor shall be hit by time bar?
3. 3.Whether under the facts and circumstances of the case acquisition of plant and machinery (Generator) classified under PCT Heading 27-12-1999. Petitioner paid Sales Tax of Rs. 1.020 million on clearance of the Generator. The 8502.1390 with regard input tax refund shall be dealt with Section 66 or Section 10 of the Act and whether any time limit does exist under Section 10 of the Act?
2. Before this Court dilates upon the questions of laws formulated by the present petitioner, it would be important to first state the relevant and essential facts leading to the present Reference and that too in chronological order. The same are as follows:-- 17.1.1998.SRO 25(1)/98, exempted Plant and Machinery from payment of Customs Duties and Sale Tax.
4. 30-8- 1998.SRO 974(1)/99. The exemption of Sales Tax provided under SRO 25(1)/98 was withdrawn.
5. 12.6.1998.SRO 578(I)/98. Input adjustment could not be claimed in respect of certain goods, including Generators and Generating Sets.
6. 30-8- 1999.SRO 987(1)/99. The Federal Government in exercise of powers conferred under section 13(1) read with Serial No. 44 of the 6th Schedule of the Sales Tax Act, 1990 ("Act") was pleased to notify plant and machinery, which were exempt from payment of Sales Tax.
7. 15.12.1999.Petitioner imported a Caterpillar Diesel Generator weighing 14.3 MT, Model 3512 TA being plant and machinery falling under Chapter 5 of 1st Schedule to Customs Act, 1969, having an output capacity of 1150 KVA ("Generator") against Bill of Entry No. 53371, having total CNF price US$ 128,500 27-12- 1999.Petitioner paid Sales Tax of Rs. 1.020 million on clearance of the Generator.
8. The Said amount was adjusted by the petitioner in computing the Output Tax in its monthly returns.
9. 15.1.2001.The Installation Certification was issued by the Revenue, confirming that the Generator was actually installed at the Industrial Unit of the petitioner and was in running condition.
10. 13.2.2001.The petitioner reversed the adjusted input tax in its revised returns of December, 1999.
11. 12.8.2003.The petitioner filed an application for refund of Rs. 1.020 million, on two grounds;
(a) That it is significant to be noted that firstly at import stage, the consignment being exempt by virtue of Entry No. 44 read with SRO 987(I)/99 dated 30.08.1999.
(b) Simultaneous to that, if the sales tax paid at import stage, irrespective of the fact whether exempt or payable, once paid the petitioner was entitled for claiming input adjustment under section 7 of the Sales Tax Act, 1990.
12. 20.5.2005.The application of the Petitioner was refused on two grounds and a Show Cause Notice was issued to the Petitioner, in this regard. The two grounds were as follows:--
(a) input tax adjustment on generator exempt generating sets was not allowed in view of Serial No. 6 of SRO 578(I)/98 dated 12.06.1998.
(b) The claim was inadmissible because it is time barred u/s 66 of the Sales Tax Act, 1990.
13. 14.6.2005.Deputy Collector (Refund), vide Order-in-Original rejected the claim of the petitioner, concluding that:- I have gone through the case record and come to the conclusion that input tax adjustment on generators and generating sets was not allowed as per serial No. 6 of SRO 578(1)/98 dated 12.06.1998 read with Section 8(1)(b) of the Sales Tax Act, 1990. The claim is also time barred under Section 66 of the Sale Tax Act, 1990. Refund claim is, therefore, rejected."
14. 27.9.2005.Dismissing the appeal in Order-in-Appeal the Collector, Customs, Sales Tax & Federal Excise (Appeals), Peshawar, held that:- "Keeping in view the above facts I am inclined to dismiss the instant appeal on the same grounds as stated by the learned Deputy Collector (Refund) of Sales Tax & Federal Excise, Peshawar vide the impugned Order-in-Original No. 31/2005."
15. 29.8.2006.The appeal of the petitioner before the Custom, Excise and Sales Tax Appellate Tribunal ("Tribunal") was also rejected on the ground that:- "Here in this case the amount of sales tax was paid by them under their own specific declaration of payment of Rs. 10,20,480/- in the bill of entry prepared by them and as also assessed by the Assessing Customs Officers notwithstanding that under SRO 25(1)/98 dated 17.01.1998 exemption of customs duty as well as sales tax was exempt on such plant and machinery if imported by Hi-tech industries specified in column (2) of the Table mentioned therein, was not exempt from sales tax as generators and generating sets were never considered as part of plant and machinery for the production of certain manufactured goods................
16. The exemption of sales tax on such plant and machinery was, however, withdrawn vide SRO 974(1)/99 dated 30.08.1999 by amending the notification SRO 25(1)/98 dated 17.01.1998. In pursuant to the above entry against serial No. 44 of the Sixth Schedule of the Sales Tax Act, 1990, the Federal Government issued notification SRO 582(1)/98 dated 12.06.1998 specifically excluding the "generators, generating sets" etc. From the purview of such plant and machinery on which sales tax exception was otherwise to be given. From the above, it is very clear that it was never the intention of the Federal Government to grant exemption of sales tax on generators and generating sets. That is why the sales tax was paid by the appellants themselves at the import stage as also assessed by the Assessing Officers of Custom House, Karachi In view of the above detailed discussion this Tribunal does not observe any infirmity in both the impugned order-in-appeal and order-in-appeal which are upheld and the appeal is accordingly dismissed."
3. Now, to the questions of law raised by the petitioner in the instant Reference, which are as follows; Question of law 1.
17. Whether under the facts and circumstances of the case the Honourable Tribunal was not erred for denying input adjustment or refund of tax paid on 1150 KV diesel generator imported vide B/E 53371 dated 15.12.99 and A Whereafter installed as plant and machinery as an alternate source of electrical energy for use in manufacturing of their products hermetically sealed block bottom cement sacks.
18. At the very outset, it has to be noted that the issue of exemption from payment of Sales Tax and the adjustment of input tax in determining the sales tax payable as output tax for the said month are two distinct facilities provided to a registered person under the Act; the former is dealt with under section 13, which is to be read with the goods specified in the 6th Schedule of the Act, while the latter adjustment and its methodology is provided in sections 7 and 8 of the Act.
19. It is noted that the Show Cause Notice to the petitioner did not refer to the exemption from payment of Sales Tax, and so the adjudicating Revenue hierarchy in their decisions, which followed the said notice, also did not discuss the said issue of exemption in an elaborate detailed manner save by passing a few evasive findings. However, for completeness, this Referee Court shall first discuss the said issue of exemption, as the present petitioner has raised the same in the present Reference.
20. The matter of exemption of payment of Sales Tax on the Generator imported by the petitioner was then provided for as item 44 of the 6th Schedule of the Act, which reads: "Such plant and machinery as is notified by the Federal Government in the official Gazette (but if imported, these shall be entitled to exemption from sales tax on importation if these are not manufactured in Pakistan).
21. In pursuance of the above provision of the Act, the Federal Government did issue SRO 987(1)/99 notifying Plant and Machinery having certain specification to be exempted from payment of sales tax. However, the same expressly excluded "such imported plant and machinery as are manufactured locally and also excluding Generators and Generating Sets below 250 KVA for the purpose of exemption from sales tax." The particulars and specification of the Plant and Machinery, which were exempted were to come within the stated limitations, while conditions and procedures to be followed by the importer, which included provision of indemnity bonds, installation cum production certificates to be provided by the importer to claim the exemption were also expressly provided therein.
22. Though, the Generator is admittedly imported and beyond the threshold of 250 KVA, and thus does not fall within the mischief of the goods, which were excluded from exemption of Sale Tax provided under SRO 987(I)/99. However, in the present case, no finding was rendered by any of the adjudicating authority, whether the Generator imported by the petitioner falls within the specification provided under SRO 987(1)/99 and that the petitioner followed the procedures provided therein.
23. Hence, in view of the above, this Referee Court cannot render any legal opinion on the issue of refund claimed by the present petitioner seeking exemption from payment of Sales Tax on the import of Generator, on the basis of SRO 987(I)/99, read with item 44 of the 6th Schedule of the Act.
24. As far as, the matter of input adjustment is concerned, which has been noted in the Show Cause Notice and duly discussed by all the Revenue Adjudicating hierarchy and our opinion thereon is as under; The mechanism of adjustment of input tax in the sales tax payable as output tax has been provided in sections 7 and 8 of the Act and explained elaborately by the apex Court in its decision rendered in Attock Cements's case (PTCL 2001 CL. 509), in terms that:-- "Under law the appellant being a registered person under the Act is obliged to submit monthly returns in respect of its taxable supplies including the purchases made by it in the monthly tax .............................................................................................Under section 6 of the Act, the tax in respect of the goods imported into Pakistan has to be charged and paid in the same manner and at the same time as it were a duty of customs payable under the Customs Act, 1969. Section 3 of the Act is charging section. The value of the taxable supplied made in Pakistan and goods imported into Pakistan are chargeable. As far as supply of goods in Pakistan is concerned, the liability to pay such tax is that of a registered person like the appellant. In case of imported goods, it is the liability of the .......................Under the scheme of the Act, the tax payments are adjustable to determine the actual amount of tax payable by the appellant in respect of supplies made by it of the cement manufactured at its factory. Section 7 of the Act provides methodology to determine the liability for the payment of tax in respect of the taxable supplies. Under this provision of law, the calculation of tax is to be made on output tax defined as the tax chargeable in respect of supply of goods made by a registered person and that of input tax defined as the tax levied on the supply of goods received by a registered person and the tax levied on imported goody for consumption by it. The expressions "output tax" and "input tax- have been defined in sections 2(15) and 2(9) respectively.
25. The determination of the liability under section 7 of the Act is to be made by deducting the input tax on goods received or imported from the output tax on the goods supplied and by making such other adjustments as may arise under section 9 of the Act. The term "goods" is defined in section 2(8) of the Act and it means every kind of movable property other than actionable claims, money stock, share and security. Under section 8(1)(b) of the Act, the Federal Government is empowered to specify by notification in the official gazette "goods" in respect of which input tax cannot be claimed." (emphasis provided) Now, moving on to facts of the present case, it is noted that as far as payment of Rs. 1.020 million as input tax is concerned, it is an admitted position that the same was paid by the petitioner at the time of clearance of the Generator in December, 1999. Now, the input tax was adjusted by the petitioner in its monthly returns of December 1999 and the same was reversed thereafter in the returns of February 2001. The crucial issue, however, is whether the payment of Rs. 1.020 million made by the petitioner as input tax at the time of clearance of the Generator could be adjusted as the output tax or otherwise.
26. The Revenue supporting the findings rendered by the Tribunal has taken the stance that SRO 25(1)/98, which exempted the payment of sales tax had been superseded by SRO 974(1)/99, whereby the said exemption had been withdrawn and accordingly, item 44 of the 6th Schedule of the Act, read with SRO 582(1)/98, excluded Generators from the purview of such plant and machinery, which were exempt from payment of sales tax.
27. The petitioner, on the other hand, has taken a contrary stand, where it is claimed that Generator, which was admittedly installed by the petitioner and used in furtherance of its manufacturing, would come within the purview of its Plants and Machinery and thus be considered as 'stock in trade' and thereby would not come within the mischief of the SROs, which had withdrawn the exemption of payment of sales tax on Generators.
28. The term 'stock in trade' has not been defined in the Act of the relevant SROs mentioned above.
29. However, the said term has been dilated upon by the apex Court in Attock Cement's case (Supra), in terms that: -- "The next important question is what is meant by "stock-in-trade", the terms which was used in notification, dated 10,1993 issued in suppression of the notification, dated 1-11-1990. The learned counsel for the appellant drew our attention to the dictionary meaning of stockin-trade: Black's Law Dictionary:"The inventory carried by a retail business for sale in the ordinary course of business. Also, the tools and equipment owned and used by a tradesman."
30. The Shorter Oxford English Dictionary: "The goods kept on sale by a dealer, shopkeeper, pedlar. Also, a workman's tools, appliances, or apparatus."
31. Chambers Enelish Dictionary: "All the goods a shopkeeper has for sale: standard equipment or devices ,necessary for a particular trade or profession: a person's basic intellectual and emotional resources often implying inadequately or triteness." The Concise. Oxford Dictionary of Current English:, "1. All the requisites of a trade or profession.
2. A ready supply of characteristic phrases, attitudes, etc." Webster's Third New International Dictionary: "I. The equipment necessary to or used in the conduct of a trade or business: as a: the goods kept for sale by a shopkeeper. B: the fittings and appliances of a workman. C: the aggregate of things necessary to carry on a business.
2. Something held to resemble the standard equipment of a tradesman or business."
32. In the absence of the technical definition or "stock-in-trade" by the Legislature in the Act or the Rules framed thereunder, one has to resort to the dictionary, meanings and in view of the dictionary meaning referred to above, the accessories and spare parts for the maintenance and running of a plant cannot be termed as "stock-in-trade". On the other hand plant and machinery would be construed as "stock-in-trade. " (emphasis provided)
33. In view of the aforementioned enunciation of the apex Court, it can now safely be stated that machinery, including a generator, which is imported, installed and made to use in the manufacturing process by the importer, would be considered as 'Plant and Machinery' and thereby come within the definition of the term stock-in-trade', especially when the Act, Rules and relevant SROs do not define the same.
34. Now, to the facts of the present case: when we review SRO No. 578(I)/98, we note that it reads as follows:-- "In exercise of the powers conferred by clause (b) of sub-section (1) of section 8 of the Sales Tax Act, 1990, and in supersession of Ministry of Finance and Economy Affairs' Notification No. R.O.S 1307(0197, dated the' 20th December, 1997, the Federal Government is pleased to specify that the following goods acquired otherwise than as stock it trade by a registered person to be the goods in respect of which tax shall be claimed, namely:--
(6) Generators and generating sets.
2. This Notification shall take effect from the 1st day of July, 1998." (Emphasis provided)
35. In view of the express provision of the above SRO. It clearly excludes 'Generator& and Generating Sets' from being computed as input tax. However, it is also noted that the said SRO expressly H exclude from its scope all 'goods acquired otherwise than as stock in trade by the registered person'. Thus the Generator, which was admittedly imported, installed and made to' use in the manufacturing process by the petitioner, would be considered as `Plant and Machinery' and thereby come within the definition of the term 'stock-in-trade', and fall outside the mischief of the excluding provision provided under SRO No. 578(1)/98.
36. Accordingly, the Show Cause Notice, whereby the claim of Rs. 1.020 million was refused to be allowed as input adjustment under SRO 578(I)/98, was not legally correct, as the crucial issue of Generator, which was in fact a 'stock-in-trade', was thus not excluded from the goods which could not avail the input adjustment, as expressly provided under the said SRO. This crucial legal issue was not taken into consideration by the Revenue hierarchy leading up;to the decision of the Tribunal.
37. OPINION Accordingly, for the reasons stated hereinabove, input tax adjustment on Generator, which were used for the manufacturing purpose can be adjusted in the output tax of the petitioner, as it does not fall within the mischief of SRO No. 578(1)/98 dated 12.6.1998. Question No. 1 is answered in positive.
38. Question of law 2.
39. Whether under the facts and circumstances of the case timely and rightly adjusted input tax credit and reversal thereof on the behest of the auditor shall be hit by time bar?
40. As question of law No. 1 above, has been answered in the positive, this question of law has become redundant and need not be answered.
41. Question of law 3.
42. Whether under the facts and circumstances of the case acquisition of plant and machinery (Generator) classified under PCT Heading 8502.1390 with regard input tax refund shall be dealt with Section 66 or Section 10 of the Act and whether any time limit does exist under Section 10 of the Act?
43. Claim for refund or input tax adjustment has been provided under Section 66 of the Act, which reads, "Refund to be claimed within one year.--No refund of tax claimed to have been paid or over paid through inadvertence, error or misconception [or refund on account of input adjustment not claimed within the relevant tax period] shall be allowed, unless the claim is made within one year or the date of payment.
44. [Provided that in a case where a registered person did not deduct input tax within the relevant tax period, the Collector may, after satisfying himself that input tax adjustment is due and admissible, allow the registered person to take such adjustment in the tax period as specified by the Collector [Provided [further] that in a case where the refund has become due on account of any decision or judgment of any officer of sales tax or court or the Tribunal, the period of one year shall be reckoned from the date of judgment or decision of such officer, Court or Tribunal.] [Provided further that the application or claim filed under this section shall be disposed of within a period not exceeding ninety days from the date of filing of such application or claim.] " (Emphasis provided)
45. Admittedly, the petitioner has not filed his claim, for refund within the one year prescribed stipulated period. However, the 1st proviso the aforementioned provision and section 74 of the Act provides mechanism for condoning the delay in, filing a claim a belated adjustment of input tax.
46. The said provision provides:-- "74. Condonation of time-limit.--Where any time or period has - been specified under any of the provisions of the Act or rules made thereunder within which any, application is to be made or arty act or thing is -to be done, the Central Board of Revenue may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate.
47. [Provided that the Board may, by notification in the official Gazette, and subject to such limitation or conditions as may be specified therein, empower any Collector to exercise the powers under this section in any case or class of cases."
48. This matter has been further clarified by the FBR by rendering guidelines to the competent authorities in considering applications for condoning time limit of adjustment and refund of input tax under section 66. The most important being Sales Tax General Order No. 2 of 2004 dated 27.5.2005 ("STGO No. 2") and SRO No. 978(1)/2004 dated 10-12-2004 ("SRO No. 978").
49. Surprisingly, in the present case, the Revenue, while considering the application of the Petitioner for the delayed input adjustment, out rightly rejected the claim of the petitioner for the reason that the same Could not be adjusted being beyond the scope of SRO K No. 578(1)/98, without considering the provisions of the 1st proviso to section 66 read with section 74 of the Act and guide lines provided for dealing with delayed applications by the Board under STGO No. 2 and SRO No. 978.
50. OPINION As this Referee Court has opined in the positive regarding Question of law No. 1, it would appropriate- that the claim of input adjustment of Rs. 1.020 Million made by the present petitioner be revisited by the Collector, in view of 1st proviso to section 66 read with section 74 of the Act and the guide lines provided under STGO No. 2 and SRO No. 978. Rendering an opinion on the issue of limitation, without providing an opportunity to the Revenue to consider the same, would surely be premature and prejudice the claim of the parties and thus not appropriate.
4. Accordingly, this Reference is answered in the terms stated above.