The captioned Sales Tax Appeal has been filed by the appellant/Registered Person against the Order No. 300/2020 dated 26-14-2020 passed by the learned Commissioner Inland Revenue (Appeals-I), Faisalabad on the following grounds: "1. That the appellate order of the learned Commissioner (Appeals) Faisalabad confirming the Order-in-Original No.306/2019 dated 18-11-2019 is arbitrary, against the law and facts of the case.
2. That the learned CIR(A) acted unlawfully in maintaining the impugned order-in-original passed by the learned Assistant Commissioner Inland/Revenue under section 11 of the Sales Tax Act, 1990 in disregard of the Hon'ble Lahore High Court's judgement reported as Hamza Nasir Wire v.
Federation of Pakistan 2018 PTD 1071.
3. That the learned CIR(A) and the Assistant Commissioner Inland Revenue, E & C Unit-01 failed to appreciate that without computers and the allied stationery items (called office equipment in the impugned orders), the appellant cannot complete its taxable activity of supplying electricity; the input tax paid on the purchase of these goods was fully admissible under section 7.
4. That the appellant being the Government owned company. none of computers, and allied stationery items on which tax was claimed can be assumed to have been used for any purpose other than for making taxable supplies by the appellant.
5. That the printing of bills of electricity, on-line redressal mechanism of the complaints and smooth uninterrupted supply of electricity, were statutory and contractual obligations of the appellant, disallowance of input tax paid on the purchase of computers and allied stationery items and its maintenance by the learned CIR(A) under section 8(1)(h) & (i) of the Sales Tax Act, 1990 read with SRO 490(1)/2004 dated 12-06-2004 as amended by SRO 450(1)/2013 dated 27-05- 2013 is against the text, context and purpose of the said provisions of the law.
6. That even otherwise, the burden of the proving that the computer and allied stationery items, like toner, paper etc. were not related to the taxable activity and taxable supplies was on the revenue which it failed to discharge and attempt of the learned CIR(A) to shift this burden on the appellant was arbitrary and against the settled principle of the law. .
7. The appellant crave permission to add or alter any ground of appeal at the time of hearing.
It is, therefore, respectfully prayed that the impugned orders of the authorities below may kindly be annulled being unlawful and contrary to the facts of the case."
2. Brief facts of the case as gathered from the available record are that the appellant/Registered Person is a Federal Government owned company, engaged in the distribution of electricity in the given jurisdiction. There are 4.1 Million recipients of electricity (i.e. taxable supply) distributed and supplied by the appellant/Registered Person. The appellant/Registered Person uses computers and its allied stationery items, e.g, toners, ribbons, printers etc. (mentioned as computers and office requirement in the order-in-original) for supply of the electricity and complain mechanism.
Gigantic task of printing 4.1 Million bills on monthly basis was a statutory duty, inter alia, under the Sales Tax Special Procedure Rules, 2007 also requires these items. A show-cause notice dated 15- 12-2017 was issued to appellant/Registered Person as to why sales of 22,415,320 may not be recovered under section 11(2) along with default surcharge under section 34(1) with proposal of penalty under section 33 from the appellant/Registered Person. The appellant/Registered Person filed reply and various details/documents which were found unsatisfactory and resultantly Order- in-Original No.82/2018 dated 21-11-2018 was passed against the appellant/Registered Person. The appellant/Registered Person filed the appeal before the learned CIR (Appeals) who decided/remanded the appeal vide sales tax Order-in-Appeal No. 209/2019 dated 18-12-2018. The case was re-assessed by respondent No.2 vide impugned sales tax Order-in-Original No. 306/2019 dated 08-11-2019. Perusal of order of the Officer shows that only two opportunities of hearings dated 08-10-2019 and 08-11-2019 were given to the taxpayer but none appeared on behalf of the taxpayer and he passed ex parte order. The learned Respondent No.2 in exercise of delegated powers of the respondent No.1, arbitrarily disallowed the amount of input tax of Rs.22,415,320/- paid on these goods treating the as not for taxable supply. The respondent No.3 erred in law and on the facts of the case to confirm the treatment meted out by the respondent No.2.
3. Being aggrieved with the action of the ACIR. the appellant/Registered Person filed appeal before the Commissioner (Appeals-I), who vide his order dated 26-11-2020 rejected the appeal of appellant/Registered Person and allowed the impugned order in the following words; "The claim of input tax in respect of the goods claimed by the appellant have multiple uses, therefore, simply submission of valid invoices and compliance of section 73 is not enough. The appellant was not only required to submit evident of their purchase but also of their usage in taxable activity. The appellant failed to establish that the purchased goods "Computer and office equipments and house hold electric appliances (however, the appellant claimed that the goods were electricity meter but no proof was provided)" have any relevance with the taxable activity.
Every corporate entity also has its own documentation to record how material is requisitioned, purchased and utilized. These documents contain requisition from the production department, approval of purchase orders GRN (Goods Receipt Note) by the store keeper, issuance of any material to engineering department to some hired service provider, its installation and at times verification by the internal auditors. Therefore, the appellant was required to come up with these documentation to substantiate his claim, but he did not do so. Articles 117 and 118 of the Qanun-e- Shahadat Order, 1984 read as under :--
117. Burden of proof: (1) Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist.
118. The burden of proof in a suit or proceedings lies on that person who would fail if no evidence at all were given on either side"
In view of above, the appellant was under legal obligation to discharge the onus but he failed. This being the position, the appeal filed by the appellant / registered person is rejected and the impugned order is allowed to remain in field."
4. Again being dissatisfied with the order of the Commissioner (Appeals), the appellant/Registered Person has come before this Tribunal for redressal of its grievance.
5. On the date of hearing, Ch. Mumtaz-ul-Hassan, Advocate appeared in the case proceedings on behalf of the appellant/Registered Person while Mr. Khurram Ali Qadri, D.R attended the case on behalf of the Respondent/department.
6. During the course of court proceedings, the learned counsel appearing on behalf of the appellant/Registered Person argued upon the grounds mentioned supra.
7. The learned counsel of the appellant/Registered Person submitted copies of reported judgments of Honourable High Court and ATIR as 2005 PTD 2012 and 2007 PTD (Trib.) 2391 in support of the Registered Person.
8. On the other hand, the learned D.R. strongly opposed the contentions raised by the learned counsel of the appellant/Registered Person and fully supported the orders passed by the two authorities below. lie argued that the order passed by the learned CIR (Appeals) is legal, lawful and in accordance with the relevant provisions of law. He prayed for dismissal of titled appeal of the appellant/Registered Person.
9. We have heard the arguments advanced by the learned representatives from both sides and perused the available record of the case including Orders of two authorities below. We have observed that without computers and the allied stationery items (called office equipment in the impugned orders), the appellant/RP cannot complete its taxable activity of supplying electricity; the input tax paid on the purchase of these goods was fully admissible under section 7 and the appellant/RP being the Government owned company, none of computers, and allied stationary items on which tax was claimed can be assumed to have been used for any purpose other than for making taxable supplies by the appellant/RP. We have further observed that the printing of bills of electricity, on-line redressal mechanism of the complaints and smooth uninterrupted supply of electricity, were statutory and contractual obligations of the appellant, disallowance of input tax paid on the purchase of computers and allied stationery items and its maintenance by the learned CIR(A) under section 8(1)(h) and (i) of the Sales Tax Act, 1990 read with SRO 490(1)/2004 dated 12- 06-2004 as amended by SRO 450(1}/2013 dated 27-05-2013 is against the text, context and purpose of the said provisions of the law and burden of the proving that the computer and allied stationary items, like toner, paper etc. were not related to the taxable activity and taxable supplies was on the revenue which it failed to discharge and attempt of the learned CIR(A) to shift this burden on the appellant was arbitrary and against the settled principle of the law.
10. In this regard, we gain support from the following reported judgments of the Honourable High Court and ATIR as 2005 PTD 2012 and 2007 PTD (Trib.) 2391 relied by the appellant/Registered Person: 2005 PTD 2012
22. Similar question came up for hearing in Messrs Sindh Alkalis Ltd. v. The Collector of Customs, C.E. & S. Tax (Appeals) 2002 PTD (Trib.) 475 in which it was held:-- "Thus the upshot of the whole exercise is that accessories and spare parts of plant and machinery whether used as original equipment or as replacement parts for current use have all along enjoyed input tax credit from the very inception of the Sales Tax Act, 1990 and all attempts to the contrary have been nullity in view of the substantive provisions of law."
23. The perusal of the above quoted sections of law and Notification (SROs) shows that before Notification No. 1307(1)/97, dated 20-12-1997 which remained in field from 20-12-1997 to 22-06-1998 and after expiry of the said Notification, the input tax credit was allowed on the machinery spare parts and lubricants. Since it has been held in the above quoted judgment that the machinery spare parts and lubricants are, used to facilitate the production/manufacturing of the end product, therefore, the appellants could claim input tax credit on the machinery spare parts and lubricants, even if they are not direct constituent and integral part of the Textile yarn/end product.
We, therefore, do not find merit in the appeals in hand, the same are dismissed. The impugned judgment/order passed by the Customs Excise and Sales Tax Appellate Tribunal is maintained, the Adjudicating Officer is directed to examine the case and decide the re-fund claim of respondents in the light of the above observations. There shall however, be no order as to costs.
Appeal dismissed."
2007 PTD (Trib.) 2391 "10. An arguably accepted principle (considered as such by increasing number of learned Judges) seems to be merging to the effect that an item may not have directly contributed in the production of taxable supply but if it is indirectly relatable to production process or is a normal accessory in the industrial activity in question then input tax paid on such an item is adjustable against the output tax. On similar analogy, the Hon'ble Lahore High Court, Lahore in a case (titled Messrs Mayfair Spinning Mills Limited v. Customs, Central Excise and Sales Tax Appellate Tribunal and 2 others) reported as PTCL 2002 CL 115 has held that input tax paid by a registered person goes to national exchequer as input tax, it is a trust till the time it is adjusted or refunded. The Hon'ble High Court has gone further ahead in accepting the appeal and allowing the registered person to claim refund of all input tax even if there was no output tax liability as all the goods on which he had paid input tax had been destroyed by fire.
11. We have further observed that the Federal Government, in order to give effect to judgments of various fora (whereby, under purposive approach, a liberal interpretation was given to the provisions of section 8 of the Act) amended S.R.O. 578(1)/98 time and again during the years 1999- 2003 and ultimately rescinded it. The new S.R.O. 490(1)/2002 dated 12-06-2004 reduced the negative list from eleven (11) items to just three (3) namely vehicles (Chapter 87), food/beverages / garments and gifts. The said shortlisting was understandably done by the Federal Government to broaden the scope of input tax adjustment thereby giving full play to the provisions of section 8(1)
(a) of the Act under which input tax adjustment is permissible in relation to any item used or to be used for purpose of making a taxable supply:
12. In this view of the matter we can safely deduce that one a registered person establishes that the goods in question on which input tax has been paid were used or to be used directly or indirectly for the purpose of manufacture or production of taxable goods or for taxable supplies made or to be made by him, then he becomes entitled to the deduction of the said input tax paid by him for the said purpose from the output tax that is due then he is entitled to refund of input tax. In the instant case, adjustment of input tax in relation to Fork-lift Truck is lawful being an item used for purposes of making taxable supplies and not listed in any notification ever issued under section 8(I)(b) of the Act. Fork-lift Trucks are special purpose vehicles used for lifting the manufactured goods right from the production hall to the factory warehouse and are classified under Chapter 84 of the First Schedule to the Customs Act, 1969 and not under Chapter 87 ibid, vehicles of which were not eligible for input tax adjustment (being ordinary passenger and goods transport vehicles) under S.R.O. 578(1)/98 dated 12-06-1998.
13. It is, therefore, held that the input adjustment claimed by PTC on 'machinery spare parts' and 'fork lift truck' is lawful in terms of the provisions of section 7 read with section 8(1)(a) of the Act and the Order-in-Original No. 33 of 1999 is set aside and instant appeal is allowed, accordingly."
11 In view of the above discussion, we are of the considered view that the input tax on the purchase of goods was fully admissible under section 7 and the disallowance of input tax paid on the purchase of computers and allied stationery items and its maintenance by the learned CIRCA) under section 8(1)(h) & (1) of the Sales Tax Act, 1990 read will' SRO 490(1)12004 dated 12-06-2004 as amended by SRO 450(1)/2013 dated 27-05-2013 is against the text, context and purpose of the said provisions of the law, and keeping in view the reported judgments of the Honourable High Court and ATIR as 2005 PTD 2012 and 2007 PTD (Trib.) 2391, the appeal of the appellant/RP is allowed and the orders of C two authorities below are annulled accordingly.
12. The captioned appeal filed by the appellant/taxpayer is disposed of in the manner indicated supra.