JUDGMENT: MR. S.M. KAZIMI, MEMBER (TECHNIC AL).--(1). This judgment disposes of the appeal filed on 09.02.2002 by the Collector of Sales Tax, Peshawar, against the case of M/s. Cherat Cement Company (Pvt.) Ltd. Decided vide paragraph 8 of the consolidated Order-in-Appeal No. 240- 41/1999 dated nil. The said order was despatched by Collector (Appeals), Rawalpindi on 01.01.2000 and was received by the Collector of Sales Tax. Peshawar, on 14.01.2000 vide diary No. 105 dated 14.01.2000. The appeal is, therefore, held to have been filed within the prescribed limitation.
2. Briefly, the facts of the case are that M/s. Cherat Cement Company (Pvt.) Ltd. Imported Tyres (PCT Heading 4011.9920) of Dumper Trucks (PCT Heading 8704.1000) vide bills of entry No. C-3306 and C-3307, both dated 13.05.1997, and claimed input tax deduction of Rs. 461,875/- (Rs. 268,908/- + Rs. 192,967/-, respectively) on this account in their return for May, 1999. According to SRO 556(I)/96 dated 01.07.1996,.a registered person was not entitled to claim input tax credit on vehicles of Chapter 87. Since these tyres were imported for dumper trucks of Chapter 87, these too were inadmissible being parts and accessories thereof and the aforesaid input tax of Rs. 461.875/- was reported to be inadmissible. The Assistant Collector of Sales Tax, Peshawar, issued a notice C.No. ST(AO.2)25/99/4415 dated 19.05.1999 requiring M/s. Cherat Cement Company (Pvt.) Ltd. To show cause why the said amount of Rs. 461,875/- alongwith the additional tax due thereon under section 34, should not be recovered from them besides penal action taken under section 33. After hearing Qazi Waheeduddin, Advocate, the learned Assistant Collector held that the input tax credit on tyres for dumper trucks was not admissible under section 8 of the Sales Tax Act, 1990, read with SRO 556(I)/96 dated 01.07.1996 and he passed Order-in-Original No. 01/99 dated 22.06.1999 (despatched on 09.07.1999) directing the Company to deposit the sales tax amounting to Rs.
461,875/-, together with the additional tax due thereon under section 34. Party's appeal against the said order was accepted vide paragraph 8 of the impugned consolidated order-in-appeal No. 240-241/99 dated nil (despatched on 01.01.2000) passed by the Collector (Appeals), Northern Zone, Rawalpindi. Hence this appeal by the Collector of Sales Tax, Peshawar.
3. During the course of hearing before us, the learned Law Officer of the appellant Collectorate argued that dumper trucks are used for carrying limestone, etc., from the quarry to the factory for crushing and there is no doubt that the dumper trucks are classifiable under PCT Heading 8704.9000 {i.e. Under Chapter 87 of Pakistan Customs Tariff). He stated that since the dumper trucks are not entitled to input tax credit under section 8(1 )(b) of the Sales Tax Act, 1990, read with SRO 556(I)/96 dated 01.07.1996, the tyres (PCT Heading 4011.9920), used for operation of such dumper trucks shall also not be entitled to input tax credit. The learned Law Officer argued that the Collector (Appeals), erred in deciding the case of the respondent cement factory, as a case similar to that of Additional Collectors Order-in-Original No. 19/1998 relating to M/s. Mustehkam Cement Ltd. Because while the case of respondent M/s. Cherat Cement Company (Pvt.) Ltd. Related to application of SRO 556(I)/96 dated 01.07.1996 on the import of tyres (PCT Heading 4011.9920) for dumper trucks, the main appeal {i.e. That of M/s. Mustehkam Cement, as discussed and decided in the impugned consolidated order-in-appeal, related to the exemption claimed on the import of dumper trucks itself. The learned Law Officer prayed for setting aside of the impugned order-in- appeal in so far as it related to the case of the respondent cement factory.
4. The learned counsel for the respondent cement factory argued that while notification No. SRO.
556(I)/96 dated 01.07.1996 disallows input tax credit on the purchase of vehicle of Chapter 87 of the PCT, it does not disallow input tax credit on purchase of such part and accessories (including tyres) thereof, as are classifiable under any Heading in any of the Chapters other than Chapter 87 of the PCT. He argued that input tax credit under the Sales Tax Act, 1990, is a right of the registered person which cannot be taken away except under a clear letter of law. He prayed that the appeal filed by the Collector of Sales Tax may be dismissed and that the impugned order-in-appeal, as relevant to the appellant (M/s. Cherat Cement Company (Pvt.) Ltd.)'s case, may be confirmed. The learned counsel also cited the judgment dated 14.02.2002 passed by the Honourable Lahore High Court in Writ Petition No. 3941/2000 and the Karachi Bench of this Tribunal's consolidated judgment dated 21.05.2001 in Appeal Cases No. K-99/2000 and No. K-100/2000 (Jhelum Silk Mills & Chemitex Industries) in support of his arguments.
5. Having heard the parties and on perusal of record of the case, we find that it will be worthwhile to study the then relevant provisions of section 8(1) of the Sales Tax Act, 1990, and of SRO. 556(I)/96 dated 01.07.1996 which are reproduced as hereunder:- "8. Tax Credit not allowed. -(i) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax on--
(a) the goods used or to be used for any purpose other than for taxable supplies made or to be made by him; and
(b) any other goods which the Federal Government may, by a notification in the official Gazette, specify.".
"Notification No. SRO. 556(I)/96 dated the 1st July, 1996...\n exercise of the powers conferred by clause (b) of sub-section (1) of section 8 of the Sales Tax Act, 1990, the Federal Government is pleased to specify the goods detailed in column (2) of the table below on which a registered person shall not be entitled to claim input tax credit if such goods are purchased by him for use in his registered office or the business premises.
TABLE Sr. No. Description Heading of the First Schedule to the Customs Act, 1969 (IV of 1969)
(1) (2) (3)
1. Vehicles Respective headings of Chapter 87
2. Consumer durables of household type such as air conditioners (window type or split), refrigerators, microwave oven, deep freezers and others house hold appliancesRespective headings.".
6. We find that section 8(1 )(b) of the Act, used the word "goods" and the Table to SRO. 556(I)/96 dated 01.07.1996, specifies "vehicles of respective headings of Chapter 87" of the Pakistan Customs Tariff to be one such "goods" of which the entitlement of a registered person to claim input tax credit shall be disallowed. A "vehicle", without its tyres, batteries, spare parts and maintenance parts & spares, is not usable by its buyers. Even notification No. SRO. 556(I)/96 dated 01.07.1996 clarifies the "use" to be the use in the registered office or business premises of that registered person. The term "business premises" is a wide term and includes factory, quarry, etc., where business (whether of production or of supplies) is carried out by the registered person. There is no doubt that the respondent cement factory acquired the dumper truck of Chapter 87 for use in the transportation of limestone, etc., from its quarry site to its plant site and both these sites are the sites where he indulges and which he frequents in the course of his business of cement production.
Since dumper truck, although a tool for use in the business of production of the then taxable cement, is not entitled to input tax credit, its parts and accessories (irrespective of PCT Headings thereof), essentially and identifiably used for that (ineligible to input tax credit) dumper truck shall like-wise not be entitled to input tax credit. This gains support from the fact that the respondent mill also did not avail of input tax credit on petroleum used for operation of the said dumper truck because of the aforesaid ineligibility on the basis of the above analogy. As regards the precedents cited by the counsel for the'respondents cement factory, these are not relatable to the situation involved in the instant appeal before us.
The judgment dated 14.02.2002 passed by the Honourable Lahore High Court in Writ Petition No. 3941/2000 deals with the input tax credit under SRO. 578(I)/98 dated 12.06.1998 on account of diesel procured by various textile mills for operation of their generating sets. Firstly, that case relates to SRO. 578(I)/98 dated 12.06.1998 while the appeal before us relates to the period when SRO.
556(I)/96 dated 01.07.1996 operated. Secondly, while that judgment settles certain issues, it does not pronounce a verdict in favour of the petitioner or otherwise and rather remands the case to the competent authority appointed under section 30 read with section 45 of the Sales Tax Act, 1990, to decide the case afresh after affording opportunity to these petitioners to prove or to demonstrate that the said product, i.e. Diesel, on which they paid input tax has been used or is to be used in the manufacture or production of taxable goods or for taxable supplies made or to be made by them.
The learned counsel for the respondent has not supplied copies of the findings and orders of that competent authority made in compliance of the Honourable High Courts Judgment. Moreover, diesel (a taxable input, in that case, is used in the generation of electricity (another taxable input not ineligible to tax credit) consumed in-house by those mills while in the instant appeal case before us the tyre (a taxable input) is used as a maintenance spare of the dumper truck (a taxable input ineligible to tax credit). Similarly, in the judgment dated 21.05.2001 passed by our learned brother Members of Karachi Bench in Appeal cases No. K-99/2000 and K-100/2000, the goods were parts of plant and machinery (namely, embossing plate used for improving the quality of leather) which, where tax-paid, are eligible to input tax credit under the second proviso to section 10( 1) of the Act. However, in this case under appeal before us, the goods are replacement tyres of dumper trucks, the later being itself ineligible to input tax credit under SRO. 556(I)/96 dated 01.07.1996. In terms of paragraphs I6 and 17 of the Tribunal (Karachi Benches said judgment dated 21.05.2001, the dumper truck itself having not been allowed input tax credit as a tool for business of the registered person, the adjuncts of such dumper trucks shall likewise suffer inadmissibility of input tax credit.
Thus, we are satisfied that the aforesaid precedents, as cited by the counsel for the respondent, are of no avail to them. For the reasons given above, we have no doubt that the Assistant Collector's Order- in-Original No. 1/99 dated 22.06.1999 (despatched on 09.07.1999) was correct in law. We accordingly set aside the orders relating to the respondent M/s. Cherat Cement Company (Pvt.)
Ltd., as contained in paragraph 8 of the impugned consolidated order-in- appeal No. 240-241/99 dated nil (despatched on 01.01.2000), as passed by the Collector (Appeals), Northern Zone, Rawalpindi and we confirm and restore the Assistant Collector's aforesaid Order- in-Original No. 1/99 dated 22.06.1999. The appeal filed by Collector of Sales Tax & Central Excise, Peshawar, stands disposed of as accepted.
7. Inform all concerned.
8. Announced.