MALIK A.R. ARSHAD, MEMBER JUDICIAL.- This is an appeal against the order of the Collector (Adjudication) Karachi- Ill, Karachi, passed in Order-in-Original No. 126/2000, dated 30.9.2000.
2. On the objection of audit, Show Cause Notice was served upon the appellant that the appellant sold/deleted/transferred under lease the plant and machinery, electrical and mechanical equipment, furniture and fixture and fittings and motor vehicles; and on the disposal of these items sales tax had not been paid. After adjudication the liability was enforced; hence this appeal.
3. In defence the learned counsel submits that the disposal of old and used goods as well as old and used vehicles are not taxable supply within the meaning of S. 2(41) of the Sales Tax Act The provision of law attracts to the supplies made in the capacity of importer, manufacturer, wholesaler, dealer or distributor and as such, the sale/disposal of the appellant cannot be said to be a supply within the ambit of the law. He further submits that without prejudice to his first point that the impugned order is illegal as much as prior to the Finance Act, 1997 in terms of the Sixth Schedule to the Sales Tax Act, 1990 all supplies made in Pakistan except those made by manufacturers were exempt from levy of sales tax. That entry at S. No. 33 supports his submission, that by an office memorandum dated 3.6.2000 issued by the Ministry of Law, as a result of the reference, the CBR has clearly stated that the sale, auction or otherwise disposal of goods moveable/fixed assets (including land, building, plant/machinery, equipment or vehicles) by a registered person shall not be chargeable to the sales tax, if such disposal is beyond the normal and continuous supply as a business activity of such person, and more particularly when there was no value addition to the goods or for which the input tax was not allowed. The learned counsel has also cited a judgment of the Supreme Court of India in case reported as (1967) 19 STC 1 (SC).
4. The representative of the department supports the impugned order.
5. We have heard the rival parties, carefully gone through the record.
6. We observe that in view of the provisions of Section 2(41) "Taxable Supply", the disposal of the goods cannot be brought within the ambit of taxable supply. The business of the appellant is manufacturing of drugs and medicines and not sale or supply of old and used vehicles or furniture.
This Tribunal has already decided similar cases wherein disposal of the assets of the present kind were not treated as taxable supply. The Ministry of Law had also clarified the legal position which hardly leaves any doubt on the interpretation of the relevant provisions of law. It is reproduced below: "The undersigned is directed to refer to Central Board of Revenue's letter No. 3(54)/STP/99, dated the 24th May, 2000, on the above subject and to state that the sale, auction or otherwise disposal of goods, moveable/fixed assets (including land, building, plant/machinery, equipment or vehicles) by a registered person shall not be chargeable to sales tax if such disposal is beyond the normal- and continuous "supply" as a business activity of such person and more particularly when there was no value addition to the goods for which the input tax was not allowed.
2. This issues with the approval of the Draftsman/Addl. Secretary."
7. The reliance placed by the learned counsel on the Indian judgment of the Supreme Court reported as (1967) 19 STC 1 (SC) supports our view. The relevant portion of the said judgment is reproduced hereunder: In disposing of miscellaneous old and discarded items such as stores, machinery, iron scarp, cans, boxes, cotton ropes, rags etc. The company was carrying on business of selling those items of goods. These sales were frequent and the volume was large, but it cannot be presumed that when the goods were acquired there was an intention to carry on the business in those discarded materials; not are the discarded goods by products or subsidiary products of or arising in the course of the manufacturing process. They are either fixed assets Of the company or are goods which are identical to the acquisition or use of stores or commodities consumed in the factory.
Those goods are sold by the company for a price which goes into the profit and loss account of the business and may indirectly be said to reduce the cost of production of the principal item, but on that account disposal of those goods cannot be said to become part of or an incident of the main business of selling textiles, In order that receipts from sale of a commodity may be included in the taxable turnover, it must be established that the assessee was carrying on business in that particular commodity."
8. For what has been discussed above the appeal is accepted and the impugned .
9. This order will also apply to the following appeals as the subject is identical and common question of law and facts are involved:
(i) Appeal No. 192/2000, M/s. Tapal Tax (Pvt.) Ltd. Vs. Dy. Collector, order dated 7.10.2000.
(ii) Appeal No. 11/72/2000, M/s. Zulfiqar Industries Ltd. Vs. Addl. Collector (Adjudication), order dated 6.9.2000.
(iii) Appeal No. 107/2000, M/s. Diamond Food Industries ltd. Vs. Collector, order dated 31.3.2000.
(iv) Appeal No. 91 '2000, M/s. Ishtiaq Textile Mills Ltd. vs. Collector, order dated 24.4.2000.
(v) Appeal No. 25/2000, M/s. Crescent Steel and Allied Products Vs. Collector, order dated 24.1.2000.