MR. FALAK SHER, MEMBER (TECHNICAL).-(l). M/s. Arzoo Industries Pvt. Ltd. Gadoon Amazi have preferred this appeal against order-in-appeal No. 236/2000, dated 21.5.99, passed by the Collector (Appeals) Rawalpindi.
2. The facts of the case are that the appellants established a unit in Gadoon Amazia Industrial Estate for production of paper bags and availed tax exemption on their supply under SRO.
529(I)/88, dated 1.7.88, and SRO. 580(I)/91 dated 27.6.91. They applied for voluntary registration in terms of Section 18 of the Sales Tax Act, 1990 (hereinafter referred as the Act). The Central Board of Revenue acceded to their request and allowed them to pay sales tax on the supply of paper bags subject to the condition that sales tax will be paid on the entire production and not a part thereof and they will not subsequently claim benefit of the aforesaid notification. They were accordingly registered with the Collectorate of Sales Tax, Peshawar.
3. In Nov. 95 the Superintendent, Gadoon Amazia informed the appellants vide his letter No. 2506, dated 26.11.95 that since they opted for voluntary registration, they were not entitled to seek input tax adjustment in terms of the Board's circular No. 1/25-STP/95, dated 23.10.95.
4. Aggrieved by this decision they filed a writ petition in the Peshawar High Court. The Hon'ble High Court suspended the operation of the Board's circular dated 23.10.95 and the letter dated 26.1.1.95 of the Superintendent, Gadoon Amazia.
5. Additional Collector Sales Tax initiated proceedings against the appellants on the charge that they have unlawfully claimed input tax credit amounting to Rs. 2964409/- and directed them to pay the same along with the additional tax and penalty imposed under the relevant legal provisions. An appeal against this order was dismissed by the Collector (Appeals) Rawalpindi.
Additional tax and penalty imposed on the appellants by the adjudicating officer was however remitted by him.
6. Dr. Mohammad Shafiq Advocate appeared on behalf of the appellants and argued that they were entitled to claim tax credit in terms of Section 7 of the Act. He contended that input tax adjustment was a legal right which cannot be taken away by an executive order. He referred to STGO No. 2/2000 issued by the Board and argued that the ruling contained in Board's circular dated 23.10.95 was revised and reversed through this Sales Tax General Order. He stated that while the case was under consideration of the Tribunal, the appellants were forced to pay more than Rs.
One Million through coercive means.
7. The learned law officer of the respondent Collectorate opposed the submissions made by the appellant and argued that they cannot lawfully claim input tax credit on the goods acquired by them and the legal position on this issue has been correctly spelled out in the impugned order. He requested that the appeal may be dismissed.
8. The submissions made by the appellant and the learned law officer have been examined. The point at issue in this case is whether a person who seeks voluntary registration under section 18 of the Act is entitled to claim input tax adjustment in terms of Section 7 ibid. Section 18 which provides for voluntary registration reads as under:- "If any person not otherwise liable for registration opts for registration he may make an application for registration in the prescribed manner to the Collector and on receipt of his application that person may be registered for the purpose of this Act."
9. Once a person is registered under this provision he I becomes a registered person in terms of Section 2(25) and is treated accordingly for the purposes of the Act. He has the same rights and liabilities, as any other tax payer has, with regard to payment of sales tax under Section 3, admission of input tax credit under Section 7, filing of monthly tax return under Section 26, maintenance of relevant record under Section 22 and other tax-related matters. There is no provision in the Act which operates specifically against a person who opts for voluntary registration.
10. This controversy started when the CBR issued a circular in Oct. 95 saying that if a person does not intend to take benefit of tax exemption available under statutory notification issued by the Federal Government under Section 13 of the Act, he may pay sales tax on his supplies but he cannot be allowed adjustment of tax paid on his purchases as "he had on his own choice deposited the amount of tax which was not payable by him." What led the Board of Revenue to reach this conclusion cannot be made out because Section 7 and other provisions of the Act do not support this viewpoint.
11. Section 7 authorises a registered person to deduct input tax from the output tax for the purpose of determining of his tax liability in respect of supplies made during a tax period. There is nothing in this section which debars a person, who seeks Voluntary registration, from claiming input tax adjustment on his transactions. It treats the registered persons alike regardless of the consideration whether one is registered under Section 14, 18 or 19 of the Act.
12. The Board's letter dated 23.10.95 is in conflict with Section 7 of the Act and is thus of no legal effect.
13. The Board has also revised its earlier ruling vide STGO No. 2/2000 dated 11.04.2000 which provides that a voluntarily registered person has the same rights and liabilities which accrue to a registered person under the law.
14. The adjudicating officer has observed in the impugned order that the appellants were not entitled to claim tax credit on "stocks acquired before coming to sales tax net" and they could not avail the benefit of Section 59 of the Act. This observation has no relevance and is not tenable since the appellants got voluntary registration in early 92 and they kept paying sales tax as a registered person in terms of Section ,7 of the Act. Section 59 I of the Act cannot be invoked in this case.
15. In view of the above we find no merit/substance in the impugned orders. Both the Order-in- Original and order-in-appeal are hereby set aside. The appeal is accepted.
16. As regards the money which was recovered by the respondents allegedly through coercive means, the appellant may contact the Collector of Sales Tax, Peshawar for its adjustment/refund under the law.
17. Ordered as above.