MR. MOHAMMAD SULAIMAN, MEMBER (TECHNICAL).--(l). This appeal has been directed against the Order-in-Appeal No. CE/ST-89 of 1998 dated 07.11.1998 Order- in-Original No. 10/1999 dated 09.02.1999 passed by the leamed Collector of Customs and Central Excise, Peshawar.
2. The brief facts of the case are that M/s. Peoples Concern (Pvt.) Ltd., Industrial Estate, Gadoon Amazia have filed a refund claim of input tax credit amounting to Rs. 412,339.00 vide Monthly Return of October, 1997 showing the outstanding credit in Col. 05 of the Return. The scrutiny of relevant Return revealed no purchases at all during the relevant tax period and also nothing was furnished by the management with their subsequent letter dated 09.12.1997 in support of the said claim. Thus having reasons to believe about the in-admissibility of refund, the said registered person was served a show cause notice vide C. No. IV- ST(Refund) 10/97/118 dated 16.12.1997. Subsequently the claim of the party was rejected on the grounds that the stock on 03.10.1997 related to bill of entry No. 147/1997 dated 24.03.1997, being much beyond the tax period of 1997 was not admissible. The appellant filed an appeal before the Collector (Appeals) but their appeal was rejected on the same grounds as mentioned in the impugned Order- in-Original of the Assistant Collector, Sales Tax. Being aggrieved by the Order-in-Original and Order-In-Appeal the appellants filed the present appeal. The appellants have pointed out:-
(a) The impugned orders are a non-speaking order and coram non judice, thus of no legal effect;
(b) that the company has been duly registered under the provisions of Sales Tax Act, 1990 much before the repealing of section 59 ibid, hence, on the basis of repealing of section 59 ibid, the refund claim of the company cannot be denied as the repealing of the said section does not have any adverse effect on the case of Appellant-Company;
(c) that being exempted from the tax leviable under the Sales Tax Act, 1990,. The Company's whole supply was exempted from Sales Tax till October 3, 1997, thus till that day company was not entitled to claim input on exempted supplies; however, afterwards (Oct/97) as the company supplies became taxable, it became entitled to claim adjustment against the tax paid on the raw material from which the taxable supplies were made;
(d) that reading section 7, 8 and 10 ibid., with Apportionment of Input Tax Rules, 1996 and considering the effect of repealing of section 59 ibid through Finance Act, 1997, the subject refund claim cannot be denied to the Company;
(e) that in spite of having a hard proof of payment of Sales Tax on its input, if not allowed to be adjusted would create a cascading effect, which would be against the spirit and genesis of the value added based Sales Tax Act, 1990; and
(f) that this is a cardinal principle of interpretation of fiscal statute that whenever, on a fair interpretation of tax measure, more than one view of the matter can be taken, an interpretation more favourable to the tax payer is to be adopted, thus on the touch stone of this principle of law, the appellant refund claim is payable.
3. The respondent in this case pointed out that after the repeal of section 59 of the Sales Tax Act, 1990, the claim of the appellants is not tenable and is liable to be rejected. The respondent also pointed out that the bill of entry produced by the appellants was of much earlier period than the taxable period and was, therefore, not tenable.
4. The appellants at this stage rebutted this argument of the respondent and stated that the repeal of section 59 of the Sales Tax Act, 1990 does not effect their case at all. Secondly, that section related to new tax payers and admittedly they are not new tax payers. This is clear from the plain reading of unrepealed section 59 which read as under:- "59. Tax paid on stocks acquired before registration.- The tax, other than the fixed tax or turnover tax, paid on goods purchased by a person who is subsequently required to be registered under section 14 shall be treated as input tax, provided that such goods were purchased by him from a registered person against an invoice issued under section 23 during a period of thirty days before making an application for registration under section 15: Provided that where a manufacturer imports goods, the tax paid by him thereon during a period of ninety days before making an application for registration shall be treated as an input tax subject to the condition he holds the bill of entry relating to such goods."
5. It appears from a plain reading of order of Assistant Collector, Sales Tax and the Collector (Appeals) that they had not applied their minds to the applicability of input tax based on sections 7, 8, 10 and SRO. 698(I)/96 dated 22nd August, 1996 which describe "Apportionment of Input Tax Rules, 1996". The SRO. 698(I)/96, this clearly states in rule 3(1) as under:- "3. Determination of input to.-(1) Input tax paid on raw materials relating wholly to the taxable supplies shall be admissible under the law." Section 7 which relates to the determination of tax liability the section clearly states that:- "7(1). For the purpose of determining his tax liability in respect of] taxable supplies made during a tax period, a registered person shall be entitled to deduct input tax........... For the purpose of taxable supplies made, or to be made, by him from the output tax that is due from him " In section 7(2) it is clearly mentioned that:- "7(2). A registered person shall not be entitled to deduct input tax from output tax unless,--
(i) ..............................
(ii) in case of goods imported into Pakistan, he holds the bill of entry duly cleared by the customs under Section 79 or Section 104 of the Customs Act, 1969 (IV of 1969)".
Similarly, in section 8 the same is mentioned in a different manner while describing the situation where tax credit reclaiming or deduction input tax is not allowed~and the relevant portion reads as under:- "8. Tax credit not allowed.- (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on-
(a) the goods used or to be used for any purpose other than for taxable supplies made or to be made by him." Similarly, under section 10 it is also mentioned that the excess amount of input tax can be carried forward and after a certain period the registered person can claim refund of the same.
6. In view of the above it is quite clear that the repeal of section 59 did not affect the case of the appellants as it related to persons, firms or companies who are new tax payers. The appellants are not new tax payers. The appellants were in possession of imported raw material and finished goods made out of the same, imported against the bill of entry cleared by the Customs under section 79 of the Customs Act, 1969 and they were making taxable supplies. In view of the above, the refund claim of the appellants is fully covered by the law and is hereby allowed. The orders of the Assistant Collector and Collector (Appeals) are hereby set aside.