' CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---The titled Sales Tax appeal, has been preferred at the instance of registered person calling in question the impugned order No .3 dated 30-11-2011 passed by the learned CIR (Appeals-II), Lahore.
2. The relevant facts for disposal of present appeal are that during the course of audit of sales tax record of the appellant in respect of the tax periods July 2008 to June 2009, it was observed that the registered person had made in-house consumption of Sulphuric Acid which was used to manufacture of SSP (Fertilizer). SSP (Fertilizer) is exempt from levy of sales tax under SRO 535(1)/2008 dated 11.06.2008. According to the Department, raw material and intermediary goods manufactured or produced and services provided or rendered by the registered person, consumed in house for the manufacture of goods subject to sales tax are exempted under Serial No,4 of Table 2 of Sixth Schedule to the Sales Tax Act, 1990. Since, the final product of the registered person is exempt from levy of sales tax, therefore, the registered person was required to charge and pay sales tax on in-house consumption of Suphric Acid. As per inventory record of the registered person, the appellant consumed 448.400 M. Ton Suphuric Acid to manufacture SSP (fertilizer) but has failed to charged sales thereupon, thus, contravened the provisions of sections 3, 6, 7, 22, 23 and 26 of the Sales Tax Act, 1990. On the basis of aforesaid facts, the appellant was called upon to show .Cause as to why sales tax amounting to Rs,394,592/- along with default surcharge and penalty may not be recovered from them under sections 11(2) and 36(1) of the Sales Tax Act, 1990.
The adjudication proceedings culminated in passing an assessment order No,01/2011-12 dated 16- 07-2011. The appellant preferred appeal before the learned CIR(A) who after considering the submission of the appellant rejected the same vide _order dated 29-08-2011.
4. It is contended by the learned AR that the orders passed by the authorities below are contrary to law and facts of the case. It is asserted by him that the assessing authority was not justified to levy sales tax amounting to Rs,394,592/- by not appreciating the fact that the company had been paying sales tax on the purchase of sulphur from the market and input tax on sulphur used in the manufacturing of sulphuric acid for the production of GSSP (fertilizer) was not being claimed as refundable. It is contended by the AR that since the sulphuric acid manufactured in house with sulphur was being used for the production of fertilizer, it could not be construed as an intermediary product warranting payment of sales tax side by side with input tax which was not claimed. To further elaborate his case, it is explained by the learned AR that the basic raw materials for the production of GSSP Fertilizer were sulphur and rock phosphate which were purchased from the market by the registered person. It is contended by him that no sulphuric acid was purchased directly from the market for manufacturing of GSSP Fertilizer. It is explained by the AR that in the manufacturing process, sulphur was burnt a continuous process and converted into sulphuric acid which was further processed/reacted with rock phosphate to produce the GSSP Fertilizer. In view of the above, it contended that the authorities below has wrongly construed that sulphuric acid produced is an intermediary product warranting payment of sales tax. To support his arguments, the learned AR placed reliance on the case law reported as 2012 PTD (Trib.) 1316.
5. On the contrary, the learned DR supported the orders passed by the authorities below and contended that the sales tax was rightly charged on in house production of sulphuric acid.
6. I have heard the arguments put-forth by the learned representatives of both sides and have carefully perused the available record, including case law cited at the bar. After due consideration, I find that submissions made by the AR at the bar carries substantial weight. The case made out by the department is that the registered person made in-house production of suphuric acid which was manufactured by a chemical reaction of sulpher and rock phosphate. Since the end product i.e, SSP fertilizer is exempt from tax, the department taxed the in-house production of sulphuric acid being supply/ taxable activity. However, the learned DR is unable to convince me that how in- house production of sulphuric acid constitutes a taxable activity. None of the provisions of Sales Tax Act, 1990, permit the department to levy Tax on process conversion that take place in the manufacturing of a product that involves continuous step by step process. In my considered view such continuous process does not constitute supply to attract the provision of law. It for the sake of argument, it is presumed that such process constitute a taxable supply, then question arises where is buyer and seller as in both cases the appellant is the buyer and also seller. There is no concept of self-invoicing in the scheme of Sales Tax Law.
7. In the instant case, no sale of goods is made which attract the provisions of Sales Tax Act, 1990, as production of sulphuric acid remains the continuous process to produce the end product i.e, GSSP Fertilizer which is exempt from levy of sales tax in terms of S.R.O. 535(1)/2008 dated 11-06- 2008. In this behalf, I am further strengthened by the case law referred to by the learned AR cited supra which is also relates to a registered person engaged in the business of manufacturing of fertilizer, the said case is 'on all fours' applicable in the instant case. Here, I deem it appropriate to reproduce the relevant paragraph of the said decision which reads as under:-- "22. The business process explained by the learned AR, and discussed above, is undisputed that in the case of the appellant; the impugned ammonia and nitric acid constituted stage-by-stage conversions of the basic raw material; these remained within the continuous process and subjected to chemical reactions to produce the end product; these got assimilated in the end product; hence these do not remain independently identifiable / marketable products, attracting the charge of tax under the provisions of law. "
8. In view of the above, I am inclined to hold that no taxable activity involved in the present case which attracted the provisions of Sales Tax Act, 1990, to levy sales tax upon the registered person.
Consequently, the impugned order passed by the learned CIR(A) is vacated and that of the assessing authority is cancelled.
9. Resultantly, the appeal of the registered person succeeds in the above manner.