CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---The titled appeals have been preferred on behalf of Revenue calling in question the impugned separate orders dated 09.09.2015 and 05.10.2015, passed by the learned CIR(A), Multan. Both these departmental appeals are disposed of in the following manner.
S.T.A. No.18/LB of 2016
2. Briefly stated, the relevant facts are that during the scrutiny of sales tax returns data for the period May 2013 to November 2014, it was observed by the assessing officer that the registered person has claimed input tax adjustment on certain steel products as well as lubricants and grease which is not permissible under section 8(1)(a) of the Sales Tax Act, 1990, read with S.R.O.
490(I)/2004 dated 12.06.2004 amended vide S.R.O. No.450(I)/2013, dated 27.05.2013. On the basis of this discrepancy, a show-cause notice was issued under section 11(3) as to why inadmissible input tax adjustment' amounting to Rs.8.236,166/- and penalty Q 5% amounting to Rs.411,808/- may not be recovered along with default surcharge. In response, the registered person filed their explanation but the same did not find favour of the assessing authority. Accordingly, the assessing authority passed the impugned Order-in-Original No.80/2014-15, dated 25.06.2015, whereby the above said tax demand was ordered to be recovered from the registered person.
3. Being aggrieved, the registered person assailed the treatment meted out at assessment stage.
Before the learned CIR(A), it was the submission of the learned AR that the registered person is a manufacturer of engineering products and supply to Original Equipment Manufacturer (OMEs) and the main OMEs are M/s. Millat Tractors Ltd., M/s. Millat Equipment Ltd., and M/s. Al-Ghazi Tractors Ltd. It was the contention of the AR before the CIR(A) that during the period under consideration, the registered person made purchases of steel products and lubricants and grease from different suppliers and claimed input tax on the basis of valid invoices and these products were used for the purpose of taxable activities. He further submitted before the CIR(A) that all the relevant record was produced before the assessing authority but he passed the impugned order hastily. The learned CIR(A) being convinced with the submission of the learned AR deleted/cancelled the impugned order-in-original while observing as under:- "I have considered the grounds of appeal and the arguments adduced by the A.R. of the appellant. It is observed that the appellant involved in the business of manufacturing of tractor parts and the main raw material used in the manufacturing of these parts is M. S. Sheets, Aluminum Alloy Ingots, HR Coils. These items were used in the factory premises for production of taxable goods whereas, Lubricants and Grees were used for the smooth running of machineries. It is observed that the appellant was entitled to claim adjustment of input tax paid thereon as the same were not included in the negative list of S.R.O. 490(1)/2004 dated 12.06.2004 amended vide S.R.O. 450(1)/2013 dated 27.05.2013 issued under section 8(1)(a) of the Act. I have further noted that the officer did not even bring on record any reason or proof to connect the said purchases with non taxable activity. It is also held that input tax adjustment is a statutory right, which forms basis of VAT mode of taxation, hence adjustment thereof should not be disallowed on technical grounds."
4. The department assailed the above finding of the learned CIR(A) as contrary to law and facts of the case. It is contended by the learned DR that the assessing officer has rightly disallowed the illegal adjustment of input tax as the registered person claimed the said input adjustment in contravention of section 8(1) of the Sales Tax Act, 1990 read with S.R.O. 450(1)/2013, dated 27.05.2013.
It is asserted by the learned AR that there was no justification for the learned CIR(A) to allow adjustment of input tax which was claimed in contravention of the above said provision of law.
5. Conversely, the learned AR for the registered person supported the order passed by the learned CIR(A) and reiterated his stance that the registered person made purchases of steel products, lubricants and grease from different suppliers and claimed input tax on the basis of valid invoices and these products were used for the purpose of taxable activities. It is contended by him that the said products were not included in the negative list of S.R.O. No.490(1)/2004 dated 12.06.2004 and S.R.O. 450(1)/2013 dated 27.05.2013.
6. We have heard the arguments of both sides and have also perused the available record. After due consideration, we find that no exception can be taken to the treatment as accorded by the learned CIR(A) which is found to be fair and reasonable in the ambient circumstances of the case.
Admittedly, the registered person engaged in the business of manufacturing of engineering products and input tax adjustment was claimed on purchases of steel products and lubricants which were used in the factory premises for production of taxable goods. The relevant record was duly produced before the assessing authority as well as before the CIR(A) to support that the input tax adjustment was rightly claimed. The learned CIR(A) has given a categorical finding that the assessing officer did not bring on record any reason or proof to connect the said purchases with non taxable activity. Furthermore, the department has also not proved that the products consumed by the registered person were included in the negative list of S.R.O.490(I)/2004 dated 12.06.2004 and SRO 450(1)/2013 dated 27.05.2013. The learned DR was unable to dislodge the finding as recorded by the learned CIR(A) with the help of any plausible explanation or justification. Under such circumstances, we find that no reason to intervene in the impugned order passed by the learned CIR(A) which is accordingly maintained.
7. Consequently, the departmental appeal is dismissed.
S.T.A. No.19/LB of 2016
8. Briefly stated, the relevant facts are that the department received information that the registered person claimed input tax adjustment amounting to Rs.3,833,585/- on the strength of fake/flying invoices issued by M/s Best Way Business. On the basis of above, the registered person was called upon to show cause as to why sales tax amounting to Rs.3,833,585/- may not be recovered along with default surcharge and penalty. In response, the registered person filed the requisite record such as party ledger, purchases invoices, sales tax returns, copies of cheques, bank statements, copies of inward gate passes and supply invoices. On scrutiny of the record produced, it was observed by the assessing authority that the registered person has not provided complete record regarding compliance of section 73 of the Sales Tax Act, 1990. Accordingly, the impugned Order-in- Original No.29/2014, was passed on 16.09.2014, whereby the assessing officer ordered recovery of sales tax amount of Rs.3,833,585/- along with default surcharge and penalty.
9. Being aggrieved, the registered person assailed the treatment meted out at assessment stage.
The learned CIR(A) being convinced with the submission made and record produced has proceeded to annul the impugned order-in-original.
10. The department assailed the above finding of the learned CIR(A) as contrary to law and facts of the case. It is contended by the learned DR that the learned CIR(A) was not justified to annul the impugned order-in-original by ignoring the fact that the registered person was involved in adjustment of fake/flying invoices. It is further contended by the learned AR that the registered person has failed to provide complete record in terms of section 73 of the Sales Tax Act, 1990, to prove that the transactions made were genuine and in accordance with law.
11. Conversely, the learned AR for the registered person supported the order passed by the learned CIR(A) and reiterated the submission as made before him and submitted before us the complete relevant record regarding compliance of section 73 of the Sales Tax Act, 1990.
12. We have heard the arguments of both sides and have perused the available record. After due consideration, we find that there is no force in the departmental contention that the registered person was involved in consuming flying/fake invoices. The learned CIR(A) after taking into consideration the relevant record produced by the registered person has categorically concluded that the allegation of tax fraud leveled against the registered person was based on surmises and conjectures. The learned DR was unable to dislodge the above finding of the learned CIR(A).
Perusal of the order of the assessing authority reveals that he duly mentioned in the body of the impugned order-in-original that the registered person has submitted party ledger, purchases invoices, sales tax returns, copies of cheques, bank statements, copies of inward gate passes, and supply invoices. We are of the considered view that in the presence of such record, there was no justification for the assessing officer to observe that the registered person had not complied with the provisions of section 73. The said record was also produced before us and perusal of the same reveals that compliance to the provisions of section 73 was fully adhered to while making payments to the supplier.
Under such circumstances, we find no reason to disturb the order passed by the learned CIR(A) which is accordingly maintained.
13. Departmental appeal being filed without any merit or substance is accordingly rejected.