' IFTIKHAR MUHAMMAD CHAUDHARY, J.-These petitions arise out of the judgment, dated 2nd October, 2003 passed by Lahore High Court, Lahore in the appeals either filed by the private- persons or on behalf of Government through its officials. However, details whereof are mentioned in the following table:-- Case No. Filed by: Filed against: Date of decision: STA. 23/2002 Phalia Sugar Mills Ltd. Collector Customs Sales Tax, etc.2-10-2003.
STA 24/2002 Messrs Phalia Sugar Mills Ltd.-do- -do- STA. 74/2002 Brother Sugar Mills Ltd.-do- -do- STA 75/2002 Haseeb Waqas Sugar Mills Ltd.-do- -do- STA 110/2003 Chinnar Sugar Mills Ltd.-do- -do- STA 184/2002 Abdullah Sugar Mills Ltd.-do- -do- STA 223/2002 Chishtian Sugar Mills Ltd.-do- -do- STA 264/2002Kamalia Sugar Mills Ltd.-do- -do- CA. 71/2002 Pattoki Sugar Mills Ltd.-do- -do- CA. 72/2002 JDW Sugar Mills Ltd. -do- -do- CA. 73/2002 Tandlianwala Sugar Mills Ltd.-do- -do- CA 85/2002 Collector of Sales Tax and Central Excise, etc.Baba Farid Sugar Mills Ltd. -do- CA 86/2002 Brother Sugar Mills Ltd. -do- CA 87/2002 -do- Haseeb Waqas Sugar Mills Ltd.-do- CA 88/2002 -do- Pattoki Sugar Mills Ltd. -do- CA 89/2002 -do- Chaudhry Sugar Mills Ltd. -do- CA 90/2002 -do- Chishtian Sugar Mills Ltd. -do- CA 91/2002 -do- Fecto Sugar Mills Ltd. -do- CA 92/2002 -do- Ramzan Sugar Mills Ltd. -do- CA 93/2002 -do- Kamalia Sugar Mills Ltd. -do- CA 94/2002 -do- Tandlianwala Sugar Mills Ltd.-do- CA 99/2002 -do- Crescent Sugar Mills Ltd. -do-
2. There is no need to martial the facts of each case in detail except mentioning that vide show- cause notices issued to private-petitioners on different dates, they were called upon to explain "as to why the amount of sales tax alongwith additional tax may not be recovered from them and why penal action may not be taken under sections 33 and 34 of the Sales Tax Act, 1990." Notices were duly replied. Adjudicating authority in its decision of various dates, concluded that the 'bagasse' being intermediary product is liable to sales tax. Relevant para. From one of the judgment is reproduced hereinbelow for convenience:--- "(9) From the aforesaid facts, it is clear that bagasse is an intermediary produce which is manufactured/produced during the process of extrusion of sugarcane to obtain juice by the manufacturers and was liable to sales tax during the period 1-7-1996 to 30-6-1997 whether for further supply or in-house, consumption. The charges levelled in the show-cause notice are established beyond any doubt. It is therefore, ordered as under:--- "Sales Tax amounting to Rs,3,13,33, 268 (Rupees thee thousand two hundred and sixty eight only) should be recovered from Messrs Haseeb Waqas Sugar Mills, Nankana, Sheikhupura immediately alongwith additional tax (to be calculated at the time of deposit) in terms of sections 34 and 36 of the Sales Tax Act, 1990."
3. Above order was challenged before the Sales Appellate Tribunal by the petitioners, inter alia, on the ground that if input tax is chargeable on 'bagasse' then the manufacturers/petitioners are also entitled for adjustment of output tax on the intermediary products of 'molasses' and `pressed mud'.
Besides it the additional tax with penalty is not recoverable from them. The Appellate Tribunal disposed of the appeals whereby petitioners were held liable to pay sales tax on 'bagasse', however, subject to relevant provision of law. So far as additional tax is concerned, it was held that the same was not recoverable. Relevant para. Therefrom is reproduced herein below:-- "(5) The contentions of the appellants that the method adopted for determining value is certainly far from being satisfactory. Just one invoice of a sugar mill cannot be made the basis for determining the value. The. Hon'ble Supreme Court has already ordered in explicit terms that the value has to be the market' price excluding the amount of tax. In some cases this Tribunal had ordered for provisional payment at the rate of Rs,100 per maund pending finalization of the issue.
However, that would not affect final determination of value and based thereon the tax liability of the each appellant. In order to have uniformity of assessment according to principle of equity and justice we ask C.B.R. Through its Member Sales Tax to immediately constitute a committee.
Preferably headed by Chief Sales Tax, alongwith four Collectors of Sales Tax and representative of the Pakistan Sugar Mills Association to advise market price in the light of the orders of the Hon'ble Supreme Court and the relevant provisions of Sales Tax, 1990. This exercise must be completed within 45 days from the date of this order and the market price so determined be notified by the C.B.R. For these cases under section 2(46) of the Sales Tax Act, 1990. All the appellants shall pay sales tax calculated on the value so notified and on the quantity already indicated in the impugned orders. The respective Collectors of Sales Tax shall inform in writing each appellant falling in their areas of jurisdiction about the amount of sales tax so payable by each one of them after deducting the amount of sales tax already paid, if any, on bagasse. The orders with regard to levy of additional tax and penalties etc. Are set aside."
4. Against the above order some of the petitioners and official respondents filed appeals before the High Court details of which have been given hereinabove. Learned High Court maintained the question of chargeability of sales tax on 'bagasse', in view of the, judgment of this Court in the case of Sheikhoo Sugar Mills Ltd. v. Government of Pakistan and others (2001 SCM R 1376) and simultaneously on accepting the appeals filed by the Collector of Sales ' Tax and Excise concluded that additional tax with penalty is payable by the private petitioners. As such instant petitions for leave to appeal have been filed.
5. Learned counsel for private-petitioners vehemently contended that they are producing 'sugar' as principal product and 'bagasse', `molasses' and 'pressed mud' as intermediary products. As far as 'sugar' is concerned, it is exempted from the sales tax but they have to pay output tax on 'molasses' and 'pressed mud', therefore, they are entitled for adjustment of the same against the input sales tax which they are paying on the 'bagasse' in view of the judgment in the case of Sheikhoo Sugar Mills (ibid). Therefore, they are liable to pay sales tax on `bagasse' in respect of the period prior to date of announcement of judgment by this Court in Sheikhoo Sugar Mills (ibid). They further stated that in pursuance of this judgment, the Member Board of Revenue constituted a committee who vide S.R.O. No. 178(1)/2002, dated 29th March, 2002 had determined the value of sales tax for the purpose of recovery, as such from said date to onward, the petitioners can be held liable to pay the additional tax.
6. When confronted with this argument. Learned counsel for official respondents stated that learned Sales Appellate Tribunal without assigning any cogent reason had granted relief in respect of payment of additional tax on 'bagasse' to private petitioners, therefore, Collector Sales Tax has also challenged this order before the High Court and as prior to pronouncement of judgment in the case of Sheikhoo Sugar Mills (ibid), owners of the Sugar Mills ,' ad been paying sales tax as such they were liable to pay sales tax accordingly and on account of their failure, they have been rightly held to pay the additional tax with penalty.
7. We have heard learned counsel for the parties and have also gone through the impugned judgment carefully. It may be noted that while deciding the question of chargeability of sales tax on 'bagasse' in the case of Sheikhoo Sugar Mills (ibid), history of levying sales tax upon 'sugar' and its bye-products i,e, 'bagasse', was duly incorporated in the judgment in following para:-- "5-A. It would not be out of context to point out that Central Board of Revenue has assigned a separate head to Bagasse for the purpose of levying customs duty, sales tax etc., alongwith other residues and waste of Food industries. But the Federal Government had been granting exemptions on the levy of sales tax by issuing notifications from time to time earlier under subsections (1) and
(2) of section 7 of the Sales Tax Act, 1951 (III of 1951) and later on its amendment under subsection
(1) of section 13 of the Sales Tax (Amendment) Act, 1990. Such exemption, however, was not allowed for the period commencing from 1st July, 1996 to 13th June, 1997 as the same was not reflected in the Finance Act, 1996. However, by a Notification No. S.R.O. 437(1)/97, dated 13th June, 1997 the Federal Government extended exemption of sales tax on the Bagasse, if used in house as fuel. The notification was to operate till 30th June, 1997 but in the Finance Act, 1997 exemption of 'sales tax was again granted on the same conditions as it has been mentioned in the notification referred to hereinabove."
8. The contents of above para. Reveals that prior to 1996 'bagasse' was also exempted from the sales tax, as such we are of the opinion that manufacturers of 'sugar' had no occasion to pay the sales tax on it. However, later on this Court in the judgment of Sheikhoo Sugar Mills (ibid) had declared that the rate of 'bagasse' for the purpose of charging sales tax shall be determined by the Central Board of Revenue under section 3 read with section 2(46)(a)(i) or section 2(46)(c) of the Sales Tax Act. Relevant para. Therefrom reads as under:-- "(25) We have examined section 7 of the Act carefully which appears to be beneficial provision of law in nature providing a facility to a registered person to adjust input tax at the time of making payment of output sales tax. But if no input tax is paid on intermediary produce without any adjustment the tax will be paid in terms of section 3 of the Act on its value which will be calculated as per the provisions of section 2(46)(a)(i) or section 2(46)(c) of the Act. As such the registered person will not be burdened with liability of double taxation."
9. In pursuance of above observation the Central Board of Revenue issued S.R.O., dated 29th March, 2002 whereby the price of 'bagasse' was determined to be Rs,200 per ton, therefore, it is held that from the date of determination of the rate of 'bagasse' i,e, 29th March, 2002, private petitioners shall be liable to pay sales tax with penalty.
10. Now turning towards the question with regard to claim of private petitioners concerning adjustment of output tax on 'molasses' and `pressed mud' against input tax of 'bagasse. It is to be noted that in the reply to show-cause notice no such plea was taken by the private-petitioners therefore, it is held that petitioners are required to first of all make representation in this behalf before the sales tax authorities by invoking the provisions of section 8(2) of the Sales Tax Act and unless such plea is not specifically raised, they are not entitled to any relief. In view of above discussion, instant petitions are converted in appeals and disposed of in the following terms:--
(1) Private petitioners shall be free to approach Sales Tax authorities for claiming adjustment of output tax being demanded from them on the bye-product i,e, 'molasses' and 'pressed mud' against the input tax payable on 'bagasse' and if such representation is made by them, the concerned authorities shall dispose of their request independently without being influenced in any manner from any of.The observations made by the Sales Appellate Tribunal or from the impugned judgment of the High Court.
(2) As far as the question of recovery of additional sales tax upon the 'bagasse' is concerned, it would be recovered at the rate determined by S.R.O. No.178(I)/2002, dated 29th March, 2002 for the period from which no exemption of sales tax on 'bagasse' had been granted by the Federal Government.