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Appeal No. S.T. 80/PB of 2005, decided on 11th May, 2009.

----Ss.3, 6(1), 22(1), 23(1), 26(1), 33(2)(cc), 34(1) & 36(1)---Scope of tax---Supply of Locomotives without payment of sales tax---Late filing of returns---Short payment of sales tax---Levy of sales tax and penalties---Appellant contended that Pakistan Locomotive factory was part and parcel of Pakistan Railways---Diesel locomotive engines which were manufactured/assembled were directly brought in use by Pakistan Railways and it was not a case of supply as envisaged under S.3 of the Sales Tax Act, 1990---Validity---Messrs Pakistan Railways and Messrs Pakistan Locomotive Factory were both distinct registered persons---Both the registered persons were now under obligation to issue sales tax invoices in respect of supplies made to each other under S.23 of the Sales Tax Act, 1990---Messrs Pakistan Locomotive Factory/appellant had supplied Locomotives to Messrs Pakistan Railways without payment of sales tax and had violated S.3 of the Sales Tax Act, 1990---Stance taken by the appellants was not sustainable in the eyes of law and appellants were liable to pay sales tax on the taxable supplies of Diesel Engine Locomotives which were rolled out during the involved period---Order-in-original was not suffering from any patent illegality, impropriety or material irregularity warranting any interference---Appeal was dismissed by the Appellate Tribunal.Sheikhoo Sugar Mills Limited v. Government of Pakistan 2001 PTD 2097 and Messrs Wapda v. Collector of Central Excise and Sales Tax Forum of March, 2002 on page 38 distinguished. Usmani Associates v. Central Board-of Revenue 2001 PTD 2982 rel. Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777 ref.

----S.46(4)---Appeal to Appellate Tribunal---Jurisdiction and scope---Words "in relation to the matter before it"---According to subsection (4) of S.46 of the Sales Tax Act, 1990, by Appellate Tribunal, after giving "the appellants an opportunity of being heard, may pass such order in relation to the matter before it as it thinks fit---Words "in relation to the matter before it" apparently confine the powers of the Appellate Tribunal to the subject matter of appeal and apparently it cannot travel beyond the scope of the appeal or pass an order of giving a direction which would work adversely to the appellant, who has filed an appeal against the decision or order of the lower Court---Appellant cannot be put in a worse position than what he was in earlier.

----S.46(4)---Appeal to Appellate Tribunal---Appellate proceedings are the continuation of the original proceedings---Proceedings under the Sales Tax Act, 1990 do not come to an end with the passing of an order if any of the rival parties files an appeal, the proceedings are kept alive; the appeal being only continuation of the original proceedings---Legal pursuit of a remedy through filing an appeal before the first and second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity, are to be regarded as one legal proceedings---Thus, the appellate proceedings are the continuation of the original proceedings. 2005 PTD (Trib.) 2262 rel.

----S.46---Appeal to Appellate Tribunal---Re-open of entire matter---On filing of an appeal the entire matter reopens and becomes sub judice. PLD 1969 SC 1 rel.

----S. 46---Appeal to Appellate Tribunal---Powers of Appellate Tribunal---Appellate Tribunal as the final fact finding authority is obliged to consider the question(s) of fact(s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.

----S.46---Appeal to Appellate Tribunal---Question of law---A pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case. Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 and Haji Abdullah Khan v. Nisar Muhammad Khan PLD 1965 SC 6900 rel.

----S.46---Appeal to Appellate Tribunal---Question of law not taken before the lower forum---Allowability---A question of law arising out of the facts of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum, can be allowed to be taken before the higher forum and Appellate Tribunal for doing complete justice may, if the facts and circumstances of the case so demand, allow to raise a question of law which was not as such taken before the lower forum---It is, in fact, the function of the Appellate Tribunal, who is seized of the matter, to apply the correct law to meet the ends of justice.2005 PTD 480 rel.

----S.46---Constitution of Pakistan, (1973), Art. 187(1)---Appeal to Appellate Tribunal---When leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as contemplated by sub-Article (1) of Article 187 of the Constitution of Pakistan. Messrs Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 rel.

----S.3---Scope of tax---Explanation and meanings of terminology---Section 3(1) of the Sales Tax Act, 1990 is a taxing section---Section 3(1)(a) of the Sales Tax Act, 1990 consists of the components/ constituents as follow; the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (iii) in the course of furtherance of (iv) any taxable activity/ business (v) carried on by him---Expression used in S.3(1)(a) the Sales Tax Act, 1990 and which are relevant for the purpose of resolving the controversy involved in this case, are (i) taxable supply (ii) taxable activity, and (iii) in the course of furtherance of---Though the first two, but the latter one and also not the word "business", have been defined directly under S.2(28) or (41) and S.2(24) or (35), yet for proper appreciation of their meaning, one has to revert back to the definitions of goods,. taxable goods, supply and taxable supply---Goods means and includes moveable property other than money and securities etc., and Taxable Goods means and includes the moveable property other than those which have been exempted under S.13 of the Sales Tax Act, 1990, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under S. 13 of the Sales Tax Act, 1990.Messrs Myfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115; Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore 2007 PTD. 1161; Messrs Al-Hilal Motors Stores and other v. The Collector, Sales Tax and Central Excise (East) Karachi and others 2004 PTD 868 and Collector of Customs through Additional Collector, Hub v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2007 SCMR 1705 = 2007 PTD 2275 ref.

----S.3---Scope of tax---Locomotives in Completely Build Unit condition were received in the name- of District Controller of Store (Shipping) of Messrs Pakistan Railways, Karachi Cantt. and after payment of leviable duty and taxes, the same were directly received by Messrs Pakistan Railways for its operation at Karachi, without arriving at Messrs Locomotive Factory, Risalpur and no value addition was made thereon--Such Locos were clearly and evidently not part of the case an demand of, sales tax on the such CBUs was not justified.

----Cost of locomotives---Calculation of---Appellant contended that Department directed to re-calculate the cost of Locomotives, which was not sustainable as sufficient evidence had been placed on record to decide the matter---Cost as agitated before the original .stage of adjudication as well as at the first appellate stage as well as before the Senate was factually true and no second opinion could be formed about it---Validity---Since substantial material evidence had been produced by the appellants in support of their contention---No sales tax liability was involved on the valuation aspect---Question of additional tax and penalty to such extent did not arise at all.

----S.13---S.R.O.580(I)/91, dated 27-6-1991---S.R.O.561(I)/94, dated 9-6-1994---S.R.O. 598(I)/90, dated 7-6-1990---S.R.O. 908(I)/92, dated 19-94992---S.R.O.553(I)/94, dated 9-6-1994---Exemption---Objective behind S.R.O.580(I)/91, dated 27-6-1991 was to facilitate the newly investors after satisfying the qualifying mandatory conditions of the said S.R.O. while specific exemption was available to Messrs Pakistan Railways under S.R.O. 598(I)/90, dated 7-6-1990 as amended vide S.R.O. 908(I)/92, dated 19-9-1992, which the appellant availed during the said period of exemption and supplies made by the appellant became liable to sales tax after issuance of the rescinding S.R.O. 553(I)/94, dated 9-6-1994---Appellants were not entitled to avail general exemption under S.R.O. 580(I)/91, dated 27-6-1991. Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.

----Ss. 13, 14 & 19---Exemption---Registration---Conditions for exemptions---Mandatory condition for exemption was the date "set up" and in accordance with "explanation" embodied in Notification S.R.O. 580(I)/91, dated 27-6-1991 as amended vide S.R.O. 561(I)/94, dated 9-6-1994, it was the date on which the industry goes into production, including trial production, and the said date was required to be intimated in writing by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least 15 days before commencing such production---Appellants had failed to satisfy the said mandatory condition of the notification as it neither applied for the. exemption nor satisfied the mandatory provisions of Sales Tax Act, 1990---Appellants were not entitled to claim such exemption under such S.R.Os.---Moreover, appellants were not registered person under Sales Tax Act, 1990, during the currency of such exemption notification, thus, were not entitled to claim such exemption---Further, appellants avoided registration under S.14 of the Sales Tax Act, 1990 in spite of repeated notices and were compulsorily registered under S.19 of the Sales Tax Act, 1990---Appellants were not entitled to claim exemption under S.R.O.580(I)/91, dated 27-6-1991 as amended vide S.R.O. 561(I)/94, dated 9-6-1994 in the circumstances. Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902; Messrs Bolan Chemicals (Pvt.) Ltd., v. Collector Sales Tax 1998 PTD 3064; PTCL 1988 CL 257; PLD 1977 Lah. 1327; PTCL 1999 CL 533 and PLD 1996 Lah. 718 rel. 2008 PTD 1157 PLD 2008 SC 446 distinguished and irrelevant.

----Ss. 13 & 19---S.R.O.580(I)/91, dated 27-64991---Exemption---Exemption under S.R.O.580(I)/91, dated 27-6-1991 was available only to the registered person under Sales Tax Act, 1990 while the appellants were not registered in 1993 and they deliberately avoided sales tax registration for almost six years despite repeated notices---As a, last resort, the department compulsorily registered the appellants.

----S.13---S.R.O. 580(I)/91, dated 27-6-1991---Exemption---It has been explicitly mentioned in the notification that the same shall be effective for a period of five years commencing from 1st July, 1991---It was clear that such exemption was available under the S.R.O. 580(I)/91, dated 27-6-1991 i.e. 1st July, 1991 to 30th June, 1996, to those units, who could satisfy the mandatory qualifying conditions---Plea of the appellants that exemption was available to them under such S.R.O. for the period 1993 to 1998 was not tenable because they could not satisfy the qualifying mandatory conditions.

----S.13---Exemption---When exemption in regard to any goods or person is granted subject to fulfilment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied---Before claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the claimants have to satisfy the department that their claim strictly falls within the purview of the exemption granting notification. PTCL 1988 CL 257; PLD 1977 Lah. 1327; PTCL 1999 CL 533 and PLD 1996 Lah. 718 rel.

----Ss.66, 7(2) & 23---Refund to be claimed within one year---Adjustment of input tax--Limitation---Period of limitation for claiming input tax adjustment/refund was one year under S.66 of the Sales Tax Act, 1990 and that was also barred by time under the provisions of Sales Tax Act, 1990---Input tax adjustment could only be made during the relevant tax period which the appellant have failed to do so---Appellants were not entitled for the adjustment of input tax at this belated stage---Appellants failed to perform their statutory obligation under the Sales Tax Act, 1990---Input tax adjustment was neither permissible under the Sales Tax Act, 1990 nor the statute allows right of such delayed input tax adjustment facility to the registered person. Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and two others reported in PTCL 2002 CL 115 (H.C. Lah.) ref. Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd., 2002 PTD 2457; Messrs Cherat Electric Company Ltd., Nowshera v. The Collector, Sales Tax and Central Excise, Peshawar and another 2002 PTD (Trib.) 1525 and Messrs Rainbow Industries v. Collector of Customs, and others in C.P. 469/2004 rel.

----Ss.34 & 33---Additional tax---Penalties---Appellant contended that they were government owned enterprise and no wilful evasion of tax was involved---Imposition of additional tax (default surcharge) and penalty were uncalled for---Department contended that appellants have violated the explicit provisions of Sales Tax Act, 1990 by not paying the due sales tax on the supply of locomotives and it was a wilful default on their part---They were liable to pay additional tax (default surcharge) and penalty prescribed under the law---Validity---Appellants wilfully and deliberately avoided their statutory obligations under the Sales Tax Act, 1990 as there was abundantly clear indication in the L-1 License issued to them by the department in 1993 that their product was chargeable to sales tax---Even after compulsory registration, they rolled out thirteen Diesel Engine Locomotives and deliberately avoided to pay leviable sales tax thereon. PLD 1991 SC 963 ref. 2008 PTD 1461 distinguished.

---Ss. 3, 6(1), 22(1), 23(1), 26(1), 33(2)(cc), 34(1) & 36(1)---Scope of tax---Summary of judgment---(a) Appellate Tribunal can travel beyond the scope of subject matter of the appeal and factual and legal issues neither raised in the show-cause notice nor agitated at the original .stage of adjudication nor at the first appeal stage can be considered by it (b) the appellants were liable to pay sales tax on the taxable supplies of D. E. Locomotives (c) ten (10) D.E. Locomotives in CBU condition (Age-30 Project) were imported directly by Messrs Pakistan Railways and duly custom cleared from its operation at Karachi and these never arrived at Messrs Locomotive Factory, Risalpur---Therefore, the question of any value addition thereon does not arise (d) the appellants have, not suppressed the values of D.E. Locomotives rolled out by them during the period related to this case (e) the show-cause notice issued in the instant case not time barred (f) the appellants were not entitled to claim exemption from payment of sales tax under S.R.O. 580(I)/91, dated 27-6-1991 (g) the appellants were not entitled at this belated stage to claim input tax adjustment under the provisions of Sales Tax Act, 1990 (h) the additional tax (default surcharge) and penalty imposed are clearly attractable in this case---Department was directed to recalculate the sales tax liability on the seven (7) Locomotives and collect the leviable sales tax along with the additional tax under S.34 of the Sales Tax Act, 1990 and penalty @ 3% of the tax involved under S.33(2)(cc) of the Sales Tax Act, 1990. Qazi Waheeduddin and Anwar Saeed Dawar, Managing Director for Appellants. Abdul Latif Yousafzai, Zubiar Shah, A.C., Muhammad Haroon Khattak, Sr. Auditor and Dost Muhammad, Sr. Auditor for Respondents. Dates of hearing: 17th and 25th November, 2nd December, 2008, 12th January, 10th, 12th, 19th, 26th February and 16th March, 2009.

This appeal has been filed by Messrs Locomotive Factory, Risalpur (hereinafter called as the appellants) against Order-in-Original No. 1 of 2005, dated 14-12-2004, passed by the Collector of Customs, Sales Tax and Central Excise (Adjudication), Peshawar (hereinafter called as the respondent No.1). 2. Precisely, the stated facts of the case are that during the course of discussion/audit, it was brought to the notice of the audit team that the appellants had completed three projects of manufacturing of 5 Diesel Electric Locomotives, 18 Diesel Electric Locomotives and 30 Diesel Electric Locomotives till then. The appellants were requested to provide year-wise details of expenditure incurred on each project which was subsequently provided to the audit team. Perusal of the said information revealed the following facts:--

3. The above expenditure was exclusive of depreciation and amortization charges. The Chief Mechanical Engineer was asked to explain the difference which arose in the total expenditure as a result of comparison of present statement with that of previous statement provided by the then Chief Mechanical Engineer PKL, Risalpur, in the former case of 23 Locos and provide the details of depreciation and amortization charged for the project of 30 Diesel Electric Locomotives (3000 HP). He explained that difference in expenditure was due to utilization of further budget on spares and warranty items later on. In the absence of above details, figures for depreciation and amortization were proportionately calculated on the basis of figures already provided by the unit, as under: --

4. Sales Tax liabilities for 18 Diesel Electric Locomotives and 30 Diesel Electric Locomotives were calculated on the basis of cost per loco @ 134.88 (millions) whereas actual cost per locomotive (as detailed above) comes to Rs.170.215 (millions) and Rs.167.884 (millions) respectively. Hence, the appellants were liable to pay sales tax amounting to Rs.230.55 (millions) on differential amount of value of supply along with additional tax to the tune of Rs.2247.98 (millions) as calculated upto 15-8-2002. 5. Out of 30 Diesel Electric Locomotives, a contravention case for 13 Diesel Electric Locomotives was framed by the Customs Intelligence Staff, Peshawar. Perusal of record revealed that remaining 17 Diesel Electric Locomotives had been supplied to the appellants without payment of sales tax thereon. Each locomotive carry value of Rs.167.884 (millions). Thus, the total value of 17 Locomotives supplied comes to Rs.2854.028 (millions). In this way, the appellants evaded sales tax amounting to Rs.428.104 (millions) as calculated upto 15-8-2002. Furthermore, they were late filer for the tax periods 12/2001 and 1/2002, which was violation of section 26, of the Sales Tax Act, 1990. This act on the part of the appellants was violative of the aforementioned provisions of law. The appellants were, therefore, liable to pay sales tax amounting to Rs.658.654 (millions) as calculated upto to 15-8-2002. Short payment of sales tax dues also attracts penalty under the provisions of section 33(2)(cc) of the Sales Tax Act, .1990. Thus, it was clearly evident that the appellants violated the provisions of sections 3, 6(1), 22(1), 23(1), 26(1) read with sections 11(2) and 36(1), further read with sections 33(2)(cc) and 34(1) of the Sales Tax Act, 1990. Accordingly a show-cause notice C. No.ST(Adj)C/13/2003/131 was issued to the appellants, which was responded to. Subsequently, on adjudication of the matter, the Collector Customs, Sales Tax and Central Excise(Adjudication), Peshawar vide Order-in-Original No.1 of 2005, dated 14-12-2004, ordered as under:--

"(18) During hearing proceedings and reply to the show-cause notice, para,wise comments filed by the Collectorate of Sales Tax and Central Excise, Peshawar and rejoinder filed by the respondent on the parawise comments, following legal issues were raised and rebutted by the parties:--

(a) Pakistan Locomotive Factory is part and parcel of Pakistan Railways. The diesel locomotive engines which were manufactured/assembled were directly brought in use by Pakistan Railways, thus, in technical term it was not a case of supply as envisaged under section 3 of the Sales Tax Act, 1990.

(b) Certain Locomotives were assembled and brought in use much "earlier than the mandatory limit of 5 years as per section 36(1) of the Sales Tax Act, 1990.

(c) Pakistan Locomotive Factory has been separately registered and is a distinct entity than Pakistan Railways.

(d) Some other undertakings and associated persons such as Messrs Concrete Sleepers Factory, Kohat under the common management and control of Pakistan Railways is also registered with sales tax department and are paying sales on supply of their products, etc.

(e) Concessionary package under S.R.O. 580(I)/91 and S.R.O.561(I)/94 should have been made available to Pakistan Locomotive Factory.

(19) All the above issues were examined during the course of hearings and in the light of written submissions made by the respondents as well as prosecution from time to time which have been duly incorporated in this order.

(20) As regarding the fact that Messrs Pakistan Locomotive Factory is part and parcel of Pakistan Railways thus, not liable to pay sales tax in terms of section 3 of the Sales Tax Act, 1990 is not a valid argument because under Article 165A of the Constitution of Pakistan, all the government departments are liable to pay Federal Taxes including Sales Tax, thus Messrs Pakistan Locomotive Factory cannot be exempted from the levy of sales tax.

(21) The issue raised regarding availability of exemption from sales tax under S.R.O. 580(I)/91 and S.R.O.561(I)/94 is a technical issue. The respondents should have taken up this issue much earlier with the Collectorate of Sales Tax after fulfilling the requirements of the law as prescribed by the respective S.R.O. which apparently, was not done. Thus, the whole issue is out of scope of the instant show-cause notice. Keeping this fact in view, this forum is not in position to provide any relief on the said accounts.

(22) As regards the validity of demand in the instant case, this forum is of the view that a demand beyond prescribed limit under section 36 of the Sales Tax Act is not valid. In case show-cause notice includes some diesel electric engines which were rolled prior to mandatory limit under section 36(1), shall not be charged to sales tax. This forum is of the view that any demand beyond the prescribed time limit under section 36(1) should be excluded from the demand. However, in this regard the Collectorate should firm up its demand in the light of the time limitation which was applicable at the time when the original demand was first communicated to the respondent. In. the instant case demand under section 36(1) would be valid because entire clearance under Sales Tax Act, was under self clearance thus, collusion and intentional evasion does not need to be proved.

(23) The crucial question, which was long debated, argued and rebutted relates to the valuation of the locomotives. The instant case was framed on the basis of certain information provided by Pakistan Locomotive Factory at the occasion of audit which was later on retracted and different set of values were produced by the respondents, which should be acceptable and has been accepted by this forum because Pakistan Locomotive Factory is a unit belonging to Ministry of Railways. Any declaration made by the said factory before the Senate and before this forum should be acceptable. The contents of the reply to Senate in connection with cost of production is reproduced below:--

[Question:

Senate Starred Question No.239 moved by Mr. Muhammad Akram Senator:

"Will the Minister for Railways be pleased to state:

(d) The number of locomotives and bogies locally manufactured with the help of other countries during the last five years;

(e) The amount spent on the manufacturing of the said locomotives and bogies; and

(f) The amount saved by manufacturing these locomotives and bogies within the country."

Reply:

(d) 20 Nos. 3000 H.P. diesel electric type locomotives were manufactured at Pakistan Locomotive Factory, Risalpur during the last five years (i.e., 1999, 2000, 2001, 2002 and 2003).

(e) Rs.2751.8 millions were spent on manufacturing of these 20 locomotives.

(f) Rs.98.62 million were saved during manufacturing of these 20 Nos. locomotives in Pakistan, as compared to the cost of similar completely built up (CBU) locomotives imported from the same source."] (24) Similarly, M/s. Pakistan Locomotive Factory produced detailed valuation chart duly certified by the management and the Ministry of Pakistan Railways. Valuation part is reproduced below:--

(AGE-30 PROJECT)

(Sd.) (Sd.)

(Adnan Shafai) (Anwar Saleem)

Production Engineer Managing Director

(Sd.)

(Muhammad Israr)

Senior Accounts Officer

(Sd.) (Sd.)

(Muhammad Israr) (Adnan Shafai)

Senoir Accounts Officer Production Engineer

(Sd.)

(Anwar Saleem)

Managing Director

(25) Keeping the above facts in view, the Collectorate of Sales Tax and Central Excise, Peshawar is directed to recalculate the liability, and are ordered to collect the sales tax along with additional tax under section 34 of the Sales Tax Act, 1990. A penalty @ 3% of the tax involved is imposed under section 33(2)(cc) of the Sales Tax Act, 1990.

(26) As regarding the fact of late filing for the month of December, 2001 and January, 2002, the respondents had no cogent reason to rebut the charge. Thus, the same is established. A penalty of Rs.5000 for each, tax period is imposed under section 33(1) of the Sales Tax Act, 1990.

(27) The Collectorate is also directed to provide input adjustment to the respondent if valid bills of entry/tax invoices and related record is produced by the respondent and input adjustment is otherwise admissible." 6. Being aggrieved by the Order-in-Original No.1 of 2005, dated14-12-2004, the appellants filed an appeal before this Tribunal, inter alia, on the following grounds:

(a) that the learned respondent No.1 failed to appreciate that the alleged activity does not attract any sales tax liability and without considering the arguments of the appellants and judgments of the Honourable Superior Courts, disposed off the issue adopting totally irrelevant line of reasoning. It is submitted that section 3 of the Sales Tax Act, 1990 provides that:--

"(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen percent of the value of--

(a) taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him."

Taxable activity is defined in section 2(35), which provides:

"any activity carried on by any person, whether or not for pecuniary profit, and involves in whole or in part, the supply of goods to any other person, whether for any consideration or otherwise, and includes any activity carried on in the form of business, trade or manufacture."

Whereas, the appellants are manufacturing/assembling locomotives for their own usage and are not supplying the same to any other person.

It is further submitted that locomotive (Railways Engines) are not independent marketable products, which could be sold in the market and therefore, are not liable to sales tax.

The Honourable Superior Courts of Pakistan, .while interpreting the provisions under consideration, have already held that to decide whether certain goods are leviable to sales tax or not, the marketability of the goods has to be addressed as well; Sheikhoo Sugar Mills Limited v. Government of Pakistan (2001 PTD 2097). It is submitted that the goods being manufactured are not marketable. In Usmani Associates v. Central Board of Revenue (2001 PTD 2982), the Honourable Karachi High Court, while addressing the question of marketability of the goods in that case, held that they were not leviable to sales tax as they had been manufactured for a specific purpose and to certain specifications. They, therefore, could not be used for any purpose other than for which they were manufactured. They further elaborated that no tax should be levied on the sole ground that the goods are capable of being sold in the market.

(b) That the learned respondent No.1 failed to address the argument raised by the appellants that 1st 10 Locomotives out of the alleged 30 Diesel Electric Locomotives project are completely built units (CBU) imported by Pakistan Railways. The amount of sales tax leviable on the said CBUs were duly paid by at the time of import by Pakistan Railways. The CBUs have nothing to do with the Locomotive Factory/appellants. Therefore, no sales tax can be demanded on the same, from the appellants.

(c) That without prejudice to above, section 36(2) of the Act that where by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or has been short levied etc., the person liable to pay any amount shall be served with a show-cause notice within three years of the relevant date. The present show-cause notice was served on 9-4-2003, therefore, the demand of sales tax on the locomotives rolled out prior to 9-4-2000, is time barred..

(d) That the learned respondent No.1 has wrongly decided that the demand under section 36(1) is valid there was no need to prove collusion or intentional evasion. It is submitted that the appellants are government organization and there is no question of any mala fide or intention to evade sales tax, as the same was to be paid by Government budget. The case involves an important question of law that whether in the circumstances of the present case any liability under the Act arises and whether self consumption in the given circumstances attracts any sales tax liability. Therefore, the appellants" case clearly falls under section 36(2) of the Act. The respondent No.1, further made an error while holding that the period of five years is applicable from the time when original demand was first communicated. Whereas, section 36(1) clearly reflects the time period is applicable from the date of service of show-cause notice.

(e) That liability of sales tax on 13 Diesel Electric Locomotives and 18 Diesel Electric Locomotives mentioned in para.3 of the show-cause notice and para 2-1 of the reply are already sub judice before this Honourable Court. Adjudication of the same under a new show-cause notice is barred by the principle of res sub judice and res judicata.

(f) That S.R.O.580(I)/91, dated 27-6-1991, provides that:

"...all goods produced, or manufactured by such industries which are set up in the N.-W.F.P. between 1st July, 1991 and 30th June, 1996, shall be exempt from the tax payable under the said Act for a period of five years from the date of industry is set up."

Likewise, S.R.O.561(I)/94, dated 9-6-1994, also provides for complete exemption for five years from the date of set up.

The industry was set up, for the purpose of the said S.R.O. on 2-12-1993. The 1st 33 locomotives were rolled out within five years i.e., before 2-12-1998. Therefore, sales tax on the said locomotives are exempt under the aforesaid S.R.O.

(g) That respondent No.1 has made an error while directing the Collector of Sales Tax and Central Excise, Peshawar that additional tax and penalty @ 3% be collected from the appellants. While deciding the same, the arguments of the appellants on this point were not considered/addressed at all. There is no mala fide involved in the case on the part of the appellants. Therefore, the demand of additional tax and imposition of penalty is without lawful authority.

(h) That an amount of Rs.375.017 million already deposited by the appellants, as sales tax, required to be deducted from the total demand raised in the show-cause notice. Inspite of sufficient proof of payment given to the respondent No.1, no direction regarding the deduction of already paid amount has been issued in the impugned judgment.

(i) That the appellants have paid Rs.1081.983 million as sales tax on raw-material purchased/imported by the appellants. The adjustment of the same has not been allowed till date. Asking the appellants to pay sales tax once again without allowing the adjustment would amount to double taxation.

(j) That costs of locomotives alleged in paras.3 and 4 of the show-cause notice is wrongly calculated. The learned respondent No.1 has directed the respondent No.2 to recalculate the same. The direction has been issued in spite of the fact that sufficient evidence was available on record to decide the matter, which is not warranted by law.

(k) That the impugned judgment is against law and facts of the case. 7. The very first hearing was held in the instant case by a Division Bench of this Tribunal on 20-8-2003, but the case could not be decided earlier for one reason or the other and the first hearing was fixed in the instant case before the present Division Bench on 17-11-2008. Subsequently, hearings were held on eight different dates. The final hearing was held on 16-3-2009. During the course of hearings, the Departmental Representative filed para-wise comments to the Memo. of Appeal, which was placed on file and the learned counsel for the appellants filed written arguments (rejoinder) thereto, which are also placed on file. 8. On the last date of hearing fixed for 16-3-2009, the learned counsel for the appellants along with Managing Director of the unit appeared and almost reiterated the same arguments as advanced in the memo. of appeal as well as in the additional grounds of appeal filed by the appellants. He also referred to a number of citations in different cases in support of his contentions, which are also placed on file and the same will be discussed in the succeeding paras. On the other hand, the learned counsel for the respondents along with representatives of the respondent department controverted the arguments advanced by the learned counsel for the appellants and also referred to some citations in other cases, placed on record, in support of their contentions, which shall also be discussed in the succeeding paras, as well. 9. We have carefully perused the available case record and have anxiously considered the written as well as oral submissions made by the learned counsel for the appellants and the respondents. At the outset, we would like to refer to the case of Messrs Engro Chemical Pakistan Ltd. v. Additional Collector of Customs, reported in 2003 PTD 777, wherein the Honourable Court has observed that:

"the law is well-settled, that every judicial order should be a speaking order and particularly in tax matters, where the scope of appeal/reference before the High Court is very limited. In the absence of speaking orders, the High Court finds it difficult to decide the questions of law, for under section 36-C of the Central Excise Act, 1944, and under the analogous provisions of Customs Act and Sales Tax Act, 1944, only such questions of law can be raised before the High Court as arise out of the order of the Tribunal. Thus, if the learned Tribunal fails to pass proper judicial order, by considering all the facts and points of law raised before it, amounts to negation of justice. The Tribunal is always required to dilate upon all the questions of facts and law agitated before it, so that, the High Court is not handicapped in deciding the questions of law." 10. In the wake of the above cited judgment, we now intend to go into the deeper appreciation of the factual and legal issues involved in this case, in chronological, systematic and legally convincing manner, as given in the succeeding paras, so as to arrive at the proper, just and fair decision in the instant appeal. However, at the very outset, we would like to discuss comprehensively the background of this case. Messrs Pakistan Locomotive, Risalpur (the appellants) are the Federal Government establishment under the Ministry of Railways. The appellants are engaged in the manufacturing and assembling of Locomotives (Diesel/Electric Engines) and repair of their components and supply the same to Messes Pakistan Railways. All in-house manufacturing of Locomotives in Risalpur (having certain specification) is for its own railway operations, which is a public amenity. These Locomotives are (admittedly) not sold to the public sector, however, like all other government departments, the appellants were also liable to pay the federal taxes including sales tax. In fact, the appellants" unit is an independent entity and now having separate registration number as compared to Messrs Pakistan Railways, which is an associated person as defined under section 2(3) of the Sales Tax Act, 1990. These two entities operate under common management and control, but now they issue sales tax invoices separately pertaining to the supply made to each other. Reportedly, the appellants had avoided registration under section 14 of the Sales Tax Act, 1990, in spite of repeated notices issued by. the Sales Tax Department and ultimately, they were compulsorily registered on 1-6-1999 under section 19 of the Sales Tax Act, 1990 and were issued Registration No.05-04-8602-001-46. Consequently, the Collectorate of Sales Tax, Peshawar made out a contravention case against the appellants on account of non-payment of massive amount of due sales tax and for violations of various provisions of the Sales Tax Act, 1990. They were alleged to have made taxable supplies as defined under section 2(41) of the Sales Tax Act, 1990, worth millions of rupees and thus, they were alleged to have evaded the principal amount of sales tax worth millions of rupees in violation of sections 3, 6, 14, 22, 23, 26 and 36 ibid. The aforesaid contravention case was decided vide Order-in-Original No. 1 of 2005, dated 14-12-2004, however, being aggrieved, the appellants have filed the instant appeal. 11. First Issue.---Whether this Tribunal can travel beyond the scope of the subject matter of the appeal and factual and legal issues neither raised in the show-cause notice nor agitated at the original stage of adjudication nor at the first appeal stage can be considered by it

(a) The learned counsel for the respondents has raised a preliminary objection relating of the jurisdiction of this Tribunal on the ground that it cannot travel beyond the scope of the subject matter of the appeal and the factual and legal issues neither raised in the show-cause notice nor agitated at the original stage of adjudication nor at the first appeal stage cannot be considered at this stage by the Appellate Tribunal. On the other hand, the learned counsel for the appellants has argued that the points of facts and law can be raised at any stage during the appeal proceedings and a number of judgments by the Superior Courts lend credence to his observation in this behalf. We, however, need to examine the aforesaid contentions by the learned counsel for the appellants as well as the respondents to examine its legal standing in the eyes of law.

(b) According to subsection (4) of section 46 of the Sales Tax Act, 1990, the Appellate Tribunal, after giving the appellants an opportunity of being heard, may pass such orders in relation to the matter before it as it thinks fit. We observe that the words "in relation to the matter before it" apparently confine the powers of the Appellate Tribunal to the subject-matter of appeal and apparently it cannot travel beyond the scope of the appeal or pass an order or give a direction which would work adversely to the appellant, who has filed an appeal against the decision or order of the lower Court. It is well-settled principle in law that an appellant cannot be put in a worse position than what he was in earlier.

(c) It is also well-settled principle in law that the proceedings under the Act do not come to an end with the passing of an order. If any of the rival parties files an appeal, the proceedings are kept alive; the appeal being only continuation of the original proceedings. The legal pursuit of a remedy through filing an appeal before the first and the second appellate authorities are really but steps in a series of proceedings all connected by an intrinsic unity, are to be regarded as one legal proceedings. Thus, the appellate proceedings are the continuation of the original proceedings. In support of our aforesaid observation, we place reliance on the case-law cited in the case, reported in 2005 PTD (Trib.) 2262.

(d) In fact, on filing of an appeal, the entire matter reopens and becomes sub judice. We also place reliance in this behalf on the case-law cited in he case, reported in PLD 1969 SC 1. Moreover, Appellate Tribunal as the final fact finding authority is obliged to consider the question(s) of fact(s) and that is the reason that Appellate Tribunal has been entrusted with vast powers, so as to bring the factual issues involved in the case to surface which will help in arriving at the proper, legal, just and fair decision of a case.

(e) We notice that in the case of Messrs Gatron (Industries) Ltd. v. Government of Pakistan, reported in 1999 SCMR 1072 the Honourable Court has observed that a pure question of law can be raised at any stage of the appeal depending upon the facts and circumstances of each case. This view has reaffirmed the earlier view taken by the Supreme Court in the case of Haji Abdullah Khan v. Nisar Muhammad Khan, reported in PLD 1965 SC 6900.

(f) By also placing our reliance on the judgment, reported in 2005 PTD 480 it is now settled principle of law that a question of law arising out of the facts Of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum, can be allowed to be taken before the higher forum and this Tribunal for doing complete justice may, if the facts and circumstances of a case so demand, allow to raise a question of law which was not as such taken before the lower forum. It is, in fact, the function of this Tribunal, who is seized of the matter, to apply the correct law to meet the ends of the justice. Also in the case of Gatron (Industries) Ltd. v. Government of Pakistan, reported in 1999 SCMR 1072 = 2005 PTD 480, the Court has held that even when leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as contemplated by sub-Article (1) of Article 187 of the Constitution.

(g) In view of the above stated position, dicta of the Superior Court and extenuating circumstances of the instant case, we are inclined to agree with the contention of the learned counsel for the appellants on the said issue. 12. Second issue:--Whether the appellants were liable to pay sales tax on the supplies of their product i.e. DE Locomotives

(a) The learned counsel for the appellants has raised the contentious issue that supply was not made in furtherance of taxable activity; therefore, the appellants could not be saddled with the liability of paying sales tax. He has also placed his reliance on the judgment of the Honourable Supreme Court of Pakistan in the case of Messrs Sheikhu Sugar Mills Ltd. v. Govt. of Pakistan reported in 2001 SCMR 1376 = 2001 PTD 2097 (Para 9). He has also referred to the judgment of the Honourable Lahore High Court, Lahore in the case of. Messrs Wapda v. Collector of Central Excise and Sales Tax, reported in Tax Forum of March, 2002 on page 38, wherein it has been held that printing material and computer stationery being prepared by the printing press owned by the WAPDA for the exclusive use in the" office throughout Pakistan does not attract levy of sales tax.

(b) After careful examination of the aforesaid citations made by the learned counsel for the appellants, we are of the considered opinion that Messrs Pakistan Railways and Messrs Pakistan Locomotive Factory are now both distinct registered persons. So far as supplies to each other are concerned, both the registered persons are now under obligation to issue sales tax invoices in respect of supplies made to each other under section 23 of the Sales Tax Act, 1990. Furthermore, the Departmental Representative of the respondent department has also invited our attention towards the focal issue and also produced documents- in this context showing that another associated person of Messrs Pakistan Railways namely Messrs Kohat Concrete Sleepers which is engaged in taxable activities, is registered under the Sales Tax Act, 1990 and in charging sales tax while supplying concrete sleepers to Messrs Pakistan Railways. In view of the aforesaid legal and factual position, we are inclined towards the submissions made by the learned counsel for the respondent department as well as by the Departmental Representative that Messrs Pakistan Locomotive Factory have supplied Locomotives to Messrs Pakistan Railways without payment of sales tax and thus, they have violated section 3 of the Sales Tax Act, 1990. Therefore, the interpretation regarding scope of tax i.e. section 3 made by the learned counsel for the appellants is not tenable in circumstances of the case as enumerated above.

(c) Furthermore, the facts of the instant case of the respondents are not identical with the facts of quoted cases, therefore, citations referred to by the learned counsel, for the appellants are not applicable to the instant case. In this regard, we place reliance on the judgment in the case of Messrs Usmani Associated Sub-Proprietary Film v. Central Board of Revenue and another, reported in 2001 PTD 2982 wherein it has been held that:--

"When Sales Tax is Charged.---Sales tax is charged, levied and paid only when taxable supply is made in the course or furtherance of "taxable activity". Definition of "taxable activity" lays down in clear and unambiguous terms that it involves in whole or in part the supply of goods to any other person, which is the condition precedent for the levy of sales tax."

(d) Yet in the case of Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others, reported in PTCL 2002 CL 115 (H.C. Lah), it has been held by the Court that:--

"Chargeability of sales tax is provided under section 3 of the Act, which enunciates that there shall be charged, levied and paid a tax known as sale tax at the rate of 15% (now 16%) of the value of taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and goods imported into Pakistan." Section 3 is the charging section, which creates a charge on all taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him and on all goods imported. In other words, under section 3 of the Sales Tax Act, 1990, sales tax is chargeable on value of taxable supplies.

(e) Likewise, in the case of Dawood Hercules Chemicals Ltd. v. Collector of Sales Tax, Lahore, reported in 2007 PTD 1161, it has been held therein that Sales Tax is leviable on taxable supply made in Pakistan by a registered person in course or in furtherance of taxable activity.

Similarly, in other case of Messrs Al-Hilal Motors Stores and others v. The Collector, Sales Tax and Central Excise (East) Karachi and others, reported in 2004 PTD 868, it has been held therein that in terms of the provisions contained in section 3 of the Sales Tax Act, 1990, which is the charging section, the sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course or in furtherance of any taxable activity carried on by him.

Furthermore, in the case of Collector of Customs through Additional Collector, Hub v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench and others, reported in 2007 SCMR 1705 = 2007 PTD 2275, it has been held therein that when liability to pay tax would arise: The quantum of tax liability is determined on the basis of value of taxable supply, while the liability to pay tax under section 3(1) of the Act arises only when such supply is made in the course or in furtherance of taxable activity.

(f) Section 3(1) of the Act is a taxing section. Section 3(1)(a) consists of the components/constituents as follows; the sales tax is to be levied/charged at the rate of 15% (now 16%) of the value of (i) taxable supply (ii) by a registered person (iii) in the course of furtherance of (iv) any taxable activity/business (v) carried on by him. The expressions used in section 3(1)(a) and which are relevant for the purpose of resolving the controversy involved in this case, are (i) taxable supply (ii) taxable activity, and (iii) in the course of furtherance of though the first two, but not the latter one and also not the word "business", have been defined directly under section 2(28) or (41) and section 2(24) or (35), yet for proper appreciation of their meaning, one has to revert back to the definitions of goods, taxable goods, supply and taxable supply. Goods means and includes moveable property other than money and securities etc., and Taxable Goods means and includes the moveable property other than those which have been exempted under section 13 of the Act, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of table goods other than supply of goods which are exempt under section 13 of the Act.

(g) In view of the above legal and factual position, the stance taken by the learned counsel for the appellants is not sustainable in the m eyes of law and the appellants were liable to pay sales tax on the taxable supplies of Diesel Engine Locomotives. 13. Third Issue.---Whether ten (10) out of thirty (30) D.E. Locomotive also covered by the impugned Order-in-Original are those which were imported as Completely Built Units (CBUs) and directly cleared by Messrs. Pakistan Railways for its use at Karachi

(a) The learned counsel for the appellants has contended that the first ten (10) Locomotives out of thirty (30) Locomotives covered by the impugned order were Completely Built Units (CBUs) imported by Messrs Pakistan Railways and their delivery was directly taken by Messrs Pakistan Railways at Karachi, without bringing them to Messrs Locomotive Factory, Risalpur. The amount of sales tax leviable on the said CBUs was duly paid at the time of importation by Messrs Pakistan Railways and the demand of sales tax on the said ten (10) CBUs is not justified, as the question of value addition and payment of sales tax thereon does not arise at all.

(b) On the other hand, the learned counsel for the respondent-department as well as the Departmental Representatives have argued that the contention of the learned counsel for the appellants is an afterthought. At the time of inquiry by Customs Intelligence, Peshawar, the management submitted in writing vide their letter No. LFS. 10.B/2000, dated 8-12-2000 and incorporated in the show-cause notice issued vide C. No. ST/ADJ /COLL/14/2000/388, dated 24-2-2001 that manufacturing of twenty (20) Diesel Electric Locomotive (3000 hp) was in progress with Messrs Pakistan Locomotive Factory, Risalpur. Out of twenty (20) Diesel Engine Locomotives, thirteen (13) Nos. had been manufactured during the period from 9-3-2000 to 8-12-2000 and had been handed over to Messrs Pakistan Railways for its own use.

(c) We have carefully examined the issue of importation of ten (10) Locomotives in CBU condition. We are inclined to agree with the learned counsel for the appellants that ten (10) Diesel Engine Locos in CBU condition were directly imported by Messrs Pakistan Railways for the reasons given below:

(i) In para. 24 of the impugned Order-in-Original, the details of ten (10) Locomotives imported in CBU condition (AGE-30 project) have been projected as also reproduced in para. 5 above, which clearly confirms the contention of the learned counsel of the appellants in this regard.

(ii) The appellants have produced the original documents i.e., bills of Entry, Invoices, Packing List, Bills of Lading, copy of the Contract, etc., which also confirm their contention in this behalf. Copies of the said original documents have also been provided by the appellant and the same are placed on record. Moreover, sales tax on these ten (10) Completely Built Units (CBUs) i.e. AGE-30 Locos from serial numbers 6001 to 6010 imported during the period from 7-5-1998 to 1-8-1998, had also been paid at Karachi and after custom clearance, these ten (10) CBU Locomotives were put in service at Karachi without arriving at Messrs Locomotive Factory, Risalpur.

(iii) The letters, dated 10th July, 2006 and 7th July, 2008 (Placed on record) issued by the then. Secretary/Chairman Messrs Pakistan Railways, addressed to the Chairman, FBR, also confirm the contention of the appellants that these ten (10) Locomotives were imported as Completely Built Units (CBUs) and were put in service at Karachi, without arriving at Messrs Locomotive Factory, Risalpur and sales tax had already been paid at the import stage at Karachi.

(iv) In order to ascertain the correct position regarding the import of these ten (10) Locos (CBUs), the learned Collector, Sales Tax, Peshawar was directed by this forum to obtain import data of Messrs Pakistan Railways for the period October, 1990 to June, 2002 relating to CBUs, SKDUs and CKDUs of Locomotive Diesel Engines from the Collectorate of Appraisement, Model Customs Collectorate, Custom House, Karachi. The matter was accordingly taken up by the learned Collector with the Appraisement Collectorate, Karachi vide his letter, dated 11th February, 2009 (placed on record). In response, the aforesaid Collectorate retrieved the aforesaid import data of Locomotive Diesel Engines imported by Messrs Pakistan Railways relating to the aforesaid period and dispatched the same to the aforesaid Collectorate. Subsequently, the A.C. (Legal Division) of the Collectorate of Sales Tax, Peshawar filed a report before this Tribunal, which provided the details of the aforesaid import data as retrieved by Pakistan Revenue Automation (Pvt.) Ltd., and they only confirmed that 6 Locomotives in CBU condition were imported by Messrs Pakistan Railways. However, on careful scrutiny of the import data provided by Pakistan Revenue Automation (Pvt.) Ltd., and the related documents provided by the appellants, it was confirmed that ten (10) Diesel Engine Locomotives were directly imported in CBU condition by Messrs Pakistan Railways and not by Messrs Pakistan Locomotive Factory, Risalpur (the appellants), during the period from 7-5-1998 to 1-8-1998 and accordingly customs cleared.

(v) Now the question arises whether these ten (10) Locos in CBU state were the first ten (10) Locos out of the thirty (30) Locos covered by the impugned Order-in-Original The answer is in affirmative as these then (10) CBUs Locos from serial numbers 6001 to 6010 are part of this case as evident from the relevant record. The rolling out dates of twenty (20) PKD/CKD Diesel Engine Locomotives Project (AGE-30), as provided by Mr. Kamran Waseem, Production Engineer of Messrs Pakistan Locomotive Factory, Risalpur to the detecting agency correctly mentioned the roll out dates of first thirteen Locos, covering serial numbers 6011 to 6023 relating to the period from 9-3-2000 to 6-12-2000, which are clearly involved in other Appeal No.S.T. 80/PB/2005, whereas the remaining seven (7) Locos covering serial numbers 6024 to 6030 rolled out between 21-12-2000 to 1-9-2001 and relate to the instant case.

(d) In view of the above stated position, we find that ten (10) Diesel Engine Locomotives in CBU" condition (AGE-30 Project) from Sr. No.6001 to 6010 were received during 7-5-1998 to 1-8-1998 in the name of District Controller of Stores (Shipping) of Messrs Pakistan Railways, Karachi Cantt., and after payment of leviable duty and taxes, the same were directly received by Messrs Pakistan Railways for its operation at Karachi, without arriving at Messrs Locomotive Factory, Risalpur and no value addition was made thereon. So, these do not fall within the ambit of this case. However, the remaining thirteen (13) D.E. Locos from serial numbers 6011 to 6023 and seven (7) D.E. Locos from serial numbers 6024 to 6030 are part of this case, in addition to eighteen (18) D.E. Locos from serial numbers 8306 to 8323 involved in the first case from the purpose of valuation aspect, which has been dilated upon in para. 14 below. 14. Fourth Issue.-- Whether the appellants suppressed the valuation aspect of the D. E. Locomotives rolled out by them "during the related period of this case

(a) The learned counsel for the appellants has contended that the cost of D.E. Locomotives as alleged in paras. 3 and 4 of the show-cause notice has been wrongly calculated and is not based on facts. He has further contended that the respondent No.1 has directed the respondent No.2 to re-calculate the cost of the D.E. Locomotives, which was not sustainable as sufficient evidence had been placed on record to decide the matter. He forcefully asserted that the cost of D.E. Locomotives as agitated before the original stage of adjudication as well as at the first appellate stage as well as before the Senate is factually true and no second opinion can be formed about it.

(b) On the other hand, learned counsel for the respondents as well as the Departmental Representatives of the respondent department have argued that the appellants had themselves provided details of expenditure of D.E. Locomotives manufactured and supplied by the appellants to Messrs Pakistan Railways and the expenditure incurred on the D.E. Locomotives was exclusive of depreciation and amortization charges. However, when different of cost of locomotives between the previous statement and the statement provided to the audit team by the Chief Mechanical Engineer of Messrs Pakistan Locomotive Factory, Risalpur was inquired into, he explained that such difference in the expenditure incurred on D.E. Locomotives was due to utilization of further budget on spares and variety of items at the later stage. Thus, the figures of depreciation and amortization charges were proportionately calculated by the respondent department on the basis of figures already provided by the appellants in the case of 23 Locos involved in the first case against the appellants. They informed that sales tax liabilities for eighteen (18) D.E. Locomotives and thirteen (13) D.E. Locomotives were calculated on the basis of cost per Loco @ 134.88 millions, whereas actual cost per Loco as per details worked out in the contravention report as well as in the show-cause notice, the same comes to Rs.170.215 millions and Rs.167.884 millions respectively and hence the appellants were liable to pay sales tax amounting to Rs.230.55 millions on differential amount of value of supply along with additional tax to the tune of Rs.2247.98 millions as calculated upto 15-8-2002.

(c) We have carefully examined the issue of the valuation aspect of D.E. Locomotives involved in this case. The fact remains that the sales tax liabilities for eighteen (18) D.E. Locomotives involved in Appeal No.7(107)ST/Trf/2001 and thirteen (13) D.E. Locomotives involved in Appeal No.7(1568)ST/IB/ 2001(PB) were calculated on the basis of cost per Loco @ 134.88 million. However, later on the figures for depreciation and amortization charges, which were allegedly not incorporated in the cost per Loco were proportionately calculated on. the basis of figures already provided by the appellants and accordingly, the cost per Loco (2000 hp) was alleged to be Rs.170.215 millions and Rs.167.884 millions for D.E. Locomotives (3000 hp), respectively and then the sales tax liabilities were recalculated on the basis of cost per Loco as alleged to have been determined later on and the appellants were alleged to pay sales tax amounting to Rs.230.55 millions on differential amount of value of supply along with additional tax to the tune of Rs.2247.98 millions as calculated upto 15-8-2002.

(d) As we have already dilated upon in para. 13 above, ten (10) D.E. Locomotives (3000 hp) were imported as Completely Built Units (CBUs) and directly cleared by Messrs Pakistan Railways for its operation at Karachi and were not delivered to Messrs Pakistan Locomotive Factory, Risalpur and thus, neither value addition was involved thereon nor any sales tax liability can be determined .on the basis of alleged valuation aspect and as such they go out of ambit of this case and only valuation aspect for eighteen (18) D.E. Locomotives involved in Appeal No.7(107)ST/ Trf/2001 (PB), thirteen (13) D.E. Locomotives involved in Appeal No.7(1568)ST/IB/2001(PB) and the remaining seven (7). D.E. Locomotives involved in the instant appeal are to be decided upon. However, the question arises, whether the figures for depreciation and amortization charges, which were proportionately calculated by the respondent department and which are covered in the instant appeal, are acceptable in the eyes of law in the absence of any material evidence produced by the respondent department The contention of the learned counsel for the appellants is that difference in the expenditure incurred on each D. E. Locomotive was due to utilization of further budget on spares and variety of items, which were undertaken" at the later stage, needs consideration at this stage. The learned Collector (Adjudication), Peshawar has himself observed in para. 23 of the impugned Order-in-Original No.1/2005, dated 14-12-2004, in the following manner:--

"(23) The crucial question, which was long debated, argued and rebutted relates to the valuation of the locomotives. The instant case was framed on the basis of certain information provided by Pakistan Locomotive Factory at the occasion of audit which was later on retracted and different set of values were produced by the respondents, which should be acceptable and has been accepted by this forum because Pakistan Locomotive Factory is a unit belonging to Ministry of Railways. Any declaration made by the said factory before the Senate and before this forum should be acceptable. The contents of the reply to Senate in connection with cost of production is reproduced below:--

[Question:

Senate Starred Question No.239 moved by Mr. Muhammad Akram Senator:

"Will the Minister for Railways be pleased to state:

(d) The number of locomotives and bogies locally manufactured with the help of other countries during the last five years;

(e) The amount spent on the manufacturing of the said locomotives" and bogies; and

(f) The amount saved by manufacturing these locomotives and bogies within, the country."

Reply:

(d) 20 Nos. 3000 H.P. diesel electric type locomotives were manufactured at Pakistan Locomotive Factory, Risalpur during the last five years (i.e., 1999, 2000, 2001, 2002 and 2003).

(e) Rs.2751.8 millions were spent on manufacturing of these 20 locomotives.

(f) Rs.98.62 million were saved during, manufacturing of these 20 Nos. locomotives in Pakistan, as compared to the cost of similar completely built up (CBU) locomotives imported from the same source."]

(24) Similarly, Mts. Pakistan Locomotive Factory produced detailed valuation chart duly certified by the management and the Ministry of Pakistan Railways. Valuation part is reproduced below:-

(Sd.) (Sd.)

(Adnan Shafai) (Anwar Saleem)

Production Engineer Managing Director

(Sd.)

(Muhammad Israr)

Senior Accountants Officer

(Sd.) (Sd.)

(Muhammad Israr) (Adnan Shafai)

Senoir Accounts Officer Production Engineer

(Sd.)

(Anwar Saleem)

Managing Director

(e) We are of the opinion that in view of the above abundantly clear position to the extent of valuation aspect of 18 + 20 D.E. Locos, which has now emerged, the order of the learned Collector (Adjudication), Peshawar has attained finality as the respondent-department did not prefer an appeal against the said impugned Order-in-Original. Since substantial material evidence has been produced by the appellants in support of their contention that the cost incurred on ten (10) numbers PKD Locomotives (3000 hp) and the cost incurred on ten (10) numbers CKD Locomotives (3000 hp) works out to be Rs.140.5 million and Rs.134.618 respectively, we are inclined to agree with the aforesaid costs of Locomotives and hence, we observe that no sales tax liability is involved on the valuation aspect as discussed aforesaid and thus, the question of additional tax and penalty to such extent does not arise at all. 15. Fifth Issue.--Whether the show-cause notice issued in the instant case was time barred

(a) The contention of the learned counsel for the appellants is that the appellants are government organization under the management and control of Messrs Pakistan Railways and as such there is no question of any mala fide or wilful intention on their part to evade sales tax, as the same was to be paid from the government budget. He has further contended that the instant case involves an important question of law that whether in the circumstances of the present case, any liability under the Act arises and whether the self-consumption in the given circumstances attracts any sales tax liability. He has asserted that appellants" case clearly fell under section 36(2) of the Act and the respondent No.1 erred in holding that the period of five years was applicable in the instant case from the time when the original demand was first communicated, which is contrary to section 36(2) ibid, wherein it is clearly reflected that the time period is applicable from the date of issuance of show-cause notice. He has re-asserted his contention that under section 36(2) of the Act, where by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or has been short levied, etc., the person liable to pay any amount shall be served with a- show-cause notice within three years of the relevant date. In the instant case, show-cause notice was served on 9-4-2003, therefore, demand of sales tax on the Locomotives rolled out prior to 9-4-2000 is clearly time barred.

(b) On the other hand, the learned counsel for the respondents and Departmental Representatives have contended that in the instant case, the entire demand is valid under section 36(1) of the Sales Tax Act, 1990 as the unit made self-clearances. Moreover, thirty-three (33) D.E. Locomotives were earlier decided vide Orders-in-Original Nos.20/2000 and 53/2001, respectively. The value of these locomotives was wrongly reported by the management and on knowing the correct value, demand for Rs.230.55 millions was raised as a differential amount on account of short valuation which had not been previously included in the aforesaid two cases, therefore, the stance of the learned counsel for the appellants is not valid and hence, not maintainable.

(c) We find that the appellants wilfuly and deliberately avoided to pay sales tax on the D.E. Locomotives rolled out by them and thus, section. 36(1) of the Act is clearly attracted in this case. Therefore, D. E. Locomotives rolled out by the appellants between the period from 9-4-1998 to 9-4-2003 are clearly liable to sales tax under the relevant provisions of the Act. As evident from the record provided by the appellants, twenty (20) semi knocked down and completely knocked down D. E. Locomotives (AGE 30 Project), from serial numbers 6011 to 6030 were rolled out between the period from 9-3-2000 to 1-9-2001. Out of these, thirteen (13) D.E. Locomotives from serial numbers 6011 to 6023, rolled out between the period from 9-3-2000 to 6-12-2000 are covered by the second case made out against the appellants by the Regional Directorate of Intelligence and Investigation (Customs, Sales Tax and Federal Excise) and as such, they fall out of the purview of the instant case. However, seven (7) D.E. Locomotives from serial numbers 6024 to 6030, rolled out by the appellants between the period from 21-12-2000 to 1-9-2001 are part of this case and as such, liability of sales tax on these seven (7) D.E. Locomotives is clearly established. 16. Sixth Issue.---Whether the appellants were entitled to claim exemption, from payment of sales tax under S.R.O. 580(I)/91, dated 27-6-1991

(a) Before dilating upon this issue, it would be appropriate to bring all the facts on record and also the true prospective of S.R.O. 580(I)/91, dated 27-6-1991. Exemption from payment of sales tax in specified areas was available under S.R.O.580(I)/91, dated 27-6-1991 as amended vide S.R.O. 561(I)/94, dated 9-6-1994 for supply of goods produced or manufactured by industries which were "Setup" in the N.-W.F.P. and Province of Balochistan except Hub Chowki area between the 1st July, 1991 and 30th June, 1996. Conversely, supplies required by Messrs Pakistan Railways for its operations were exempted from sales tax vide S.R.O. 598(I)/90, dated 7-6-1990 as amended vide-S.R.O.908(I)/92, dated 19-9-1992. However, the said exemption was no longer available as S.R.O.598(I)/90 was superseded by notification S.R.O.553(I)/94, dated 9-6-1994 and hence, the supplies became liable to sales tax. Perusal of the case records reveals that the appellants" such plea was considered at the original stage of adjudication and the learned Additional Collector held, in the Order-in-Original as follows:

"According to the data provided by the management of the suit, three locomotives were rolled out on 2-12-1993, 30-3-1994 and 9-5-1994 respectively. During this period, the exemption under S.R.O. 598(I)/90, dated 7-6-1990 as amended vide S.R.O. 908(I)/92, dated 19-9-1992 was available. Therefore, these three units should enjoy the exemption from sales tax. The remaining units are liable to sales tax."

(b) Under such circumstances, the question arises when specific S.R.O. of exemption was available and the appellants took advantage of the same, then how they can claim exemption available under the general S.R.O. In our opinion, the objective behind S.R.O. 580(1)/91, was to facilitate the newly investors after satisfying the qualifying mandatory conditions of the said S.R.O. while specific exemption was available to Messrs Pakistan Railways under S.R.O.598(I)/90, dated 7-6-1990 as amended vide S.R.O. 908(I)/92, which the appellants availed during the said period of exemption and the supplies made by the appellants to Messrs Pakistan Railways became liable to sales tax after issuance of the rescinding S.R.O.533(I)/94, dated 9-6-1994. By placing reliance on the judgment passed in the case of the Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others, reported in PLD 2007 SC 517 = 2007 PTD 1902, the Court has held that it is statutory authority under subsection (2) of section 13 which vests in Federal Government the power to exempt any taxable supply or goods or class of goods from whole or any part of tax subject to conditions, limitations. In view of the aforesaid clear position, we are of the view that the appellants were not entitled to avail general exemption under S.R.O. 580(I)/91, dated 27-6-1991.

(c) We notice that the submissions made by the respondent department on the instant issue of exemption also carry weight to the effect that the mandatory qualifying condition for exemption" was the date of "Set Up" and in accordance with S "explanation" embodied in notification S.R.O.580(I)/91, dated 27-6-1991 as amended vide S.R.O.561(I)/94, dated 9-6-1994, it is the date on which the industry goes into production, including trial production, and the said date was required to be intimated in writing by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least 15 days before commencing such production. The appellants had failed to satisfy the said mandatory condition of the notification as it neither applied for the exemption nor satisfied the mandatory provisions of Sales Tax Act, 1990. Hence, they were not entitled to claim such exemption under the aforesaid S. R.Os. Moreover, the appellants were not registered person under the Sales Tax Act, 1990, during the currency of the aforesaid exemption notification, therefore, they were not entitled to claim such exemption. It was further argued by the learned counsel for respondents and Departmental Representatives that the appellants avoided registration under section 14 of the Sales Tax Act, 1990 in spite of repeated notices issued by the Respondent Department. Consequently, they were compulsorily registered on 1-6-1999 under section 19 of the Sales Tax Act, 1990, having sales tax registration No.5-4-8602-001-46, duly communicated to them vide letter C. No.ST/Reg(U.R.)05/99/377, dated 3-6-1999.

(d) As regards the contention of the learned counsel for appellants that the appellants set up the industry in 1993 and the information was provided to the Assistant Collector Sales Tax, Peshawar through their letter, dated 18-2-1993, and hence facility of exemption from payment of sales tax was available to them for five years i.e. from 1993 to 1998, is a failed attempt on the part of the appellants due to the non-fulfilment of the following conditions:--

(i) From the perusal of S.R.O.580(I)/91, dated 27-6-1991, it is crystal clear that exemption under the said S.R.O. was available only to the registered person under the Sales Tax Act, 1990 while the appellants were not registered in 1993 and they deliberately avoided sales tax registration for almost six years despite repeated notices. As a last resort, the respondent department compulsorily registered the appellants on 1-6-1999 under section 19 of the Sales Tax Act, 1990.

(ii) The appellants vide their letter, dated 18-2-1993, addressed to the Assistant Collector, Customs and Central Excise, Sales Tax, Peshawar for issuance of L-1 Licence to the appellants" company did not mention therein regarding availing of exemption under S.R.O.580(I)/91, dated 27-6-1991, as amended vide S.R.O. 561(I)/94, dated 9-6-1994, apart from not fulfilling other mandatory conditions of the said S.R.O.

(iii) It has been explicitly mentioned in the said notification that the same shall be effective for a period of five years commencing from 1st July, 1991. In this way, it is clear that such exemption was available under the said S.R.O. i.e. 1st July, 1991 to 30th June, 1996, to those units, who could satisfy the mandatory qualifying conditions. Therefore, the plea of the learned counsel for the appellants that exemption was available to them under the said S.R.O. for the period 1993 to 1998 is not tenable because they could not satisfy the qualifying mandatory conditions.

(iv) Furthermore, in our opinion, this issue has already been settled by the Honourable Balochistan High Court in case of Messrs Bolan Chemicals (Pvt.) Ltd. v. Collector Sales Tax reported as 1998 PTD 3064 which the learned counsel for appellants has also relied upon. Relevant part of the above referred judgment is reproduced for ease of reference:--

"This facility of exemption from sales tax, can only be enjoyed by the intended manufacturer up to 30th June, 1996, for the reason that paragraph 3 of the Original Notification in explicit terms, has stated that this notification shall be effective for a period of eight years, commencing from 1st July, 1988, therefore, we are of the opinion that notwithstanding the fact that when the industry has gone into production, but as far as the effect of claiming exemption is concerned, that cannot be extended by any methodology beyond 30th June, 1996, thus the arguments advanced by the learned counsel for the appellants are repelled."

(v) Furthermore, the learned counsel for the appellants has misinterpreted the abovementioned judgment of the Honourable Balochistan High Court as in that "instant case, the cause of action was that from which date the exemption will take place as in the earlier notification S.R.O. 529(I)/88, dated 26th June, 1988, the word "set up" was not defined and the same was subsequently defined by amending the said notification embodying the word "Explanation" through subsequent S.R.O.857(I)/88, dated 26th September, 1988 and the same issue has been settled by the Honourable Balochistan High Court in the above terms as mentioned in the preceding para. The Honourable High Court has not commented upon therein on the issue that fifteen days prior notice as mentioned in the explanation appended at the foot of the said notification is not fatal because the substantive conditions mentioned in the body of the notification have been completely fulfilled.

(vi) Moreover, the facts and circumstances of the cases as mentioned in the judgment of the Honourable Supreme Court of Pakistan reported in 2008 PTD 1157 = PLD 2008 SC 446 as also cited by the learned counsel for the appellants, is clearly distinguishable from the instant case and have no nexus with the point in issue in the present case. Relevant part of the said judgment is reproduced as under:--

"The person getting the benefit of grant of concession in the nature of exemption from payment of duties must satisfy all conditions for such exemptions."

A plain reading the above-said citation reveals that a person will be entitled to get exemption only after satisfying such conditions: In the instant case, the appellants have utterly failed to satisfy the qualifying mandatory conditions for availing exemption under the said S.R.Os., as has already been explained explicitly in the preceding para(s). In such circumstances, the above referred judgment has no legal effect on the instant case and hence, is considered irrelevant.

(vii) Yet in another judgment reported in PTCL 1988 CL 257, the Court has held that:--

"The charging provisions of a taxing statute are construed strictly in favour of the assessee whereas the provisions relating to exemptions are to be construed in favour of the Government. The assessee is required to prove his entitlement for the exemption."

(viii) Here, we place reliance on the judgment, reported in PLD 1977 Lah. 1327, wherein the Court has held that "there is much difference in "taxability or liability" and its "payability". The taxability or liability is created by the Legislature while payability follows to be enforced by the executive authority after quantification. The exemption concerns not the liability but only the payability. It means that though an assessee is liable to pay he can be excused payment on account of a power conferred on the subordinate legislative authority. This distinction was considered and accepted by this Court in other cases."

(ix) We also place reliance on the judgment reported in PTCL 1999 CL 533, wherein the Court has observed that "the issuance of an exemption notification under section 13 of the Act, therefore, pre-supposes that the goods exempted are already subject to an existing charge of the sales tax."

(x) We notice that when exemption in regard to any goods or person is granted subject of fulfilment of certain conditions, the exemption so provided for is not to operate unless the conditions are satisfied. Before claiming the benefit of exemption, the conditions laid down in the exemption granting notification, the claimants have to satisfy the department that their claim strictly falls within the purview of the exemption granting notification. We also lend credence in this behalf from the judgment, reported in PLD 1996 Lah. 718.

(e) In view of the above stated position, the arguments advanced by the learned counsel for appellants in this context are irrelevant and of no legal effect as the appellants were not entitled to claim exemption under S. R. O.580(1)/91, dated 27-6-1991, as amended vide S.R.O. 561(I)/94, dated 9-6-1994. 17. Seventh Issue.--Whether the appellants are entitled to claim input tax adjustment under the Sales Tax Act, 1990

(a) In the case of Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others, reported in PTCL 2002 115 (H.C. Lah), the Court has held that, "in order to avoid double taxation and ensure the proper levy of sales tax, a mechanism of input tax and its adjustment is provided under section 7 of the Act. A registered person is entitled to deduct input tax paid during the tax period for the purpose of taxable supply made or to be made by him from the output tax, that was due from him in respect of tax period. The registered person is also provided such other adjustment as was specified in section 9 and under section 10, the registered person is allowed to carry forward the excess amount or seek the refund." It has further been held therein that, "the provisions regarding input as well as output tax as defined in the definition clause of the Act read with sections 7 and 8 thereof are only the modalities prescribed to protect the interest of the exchequer against any pilferage, evasion or fraud."

(b) The learned counsel for the appellants has contended that the appellants are entitled to claim input tax adjustment and has also presented certain calculations in this regard, while the learned counsel for the respondent department has forcefully rebutted these calculations and adjustment of input tax on the grounds that the facility of input ,tax adjustment is available under section 7 of the Sales Tax Act, 1990 to the registered person subject to the conditions that he has a valid input tax invoice/bill of entry in the name of such registered person who wants to avail of the facility of the input tax adjustment. In the instant case, the bills of entry produced by the learned counsel for the appellants are in the name of Messrs Pakistan Railways which is separate registered person and not in the name of the appellants i.e., Messrs Pakistan Locomotive Factory, Risalpur. Moreover, the bills of entry clearly show the sales tax registration number of Messrs Pakistan Railways and not that of the appellants.

(c) In the case of Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. reported in " 2002 PTD 2457 the Court has held that, "the provision contained in subsection (2) of section 7 is mandatory in nature, it is an enabling provision which prescribes the way in which the claim for deduction/adjustment/refund of the input tax is to be preferred. Subsection (2) of section 7 prescribes a particular manner of claiming deduction/adjustment/refund and on plain reading of the provision, it is abundantly clear that the non-compliance disentitles a registered person from deducting input tax from output tax." It has been further observed therein that, "the registered person was not entitled to claim the refund of sales tax on the basis of tax invoice/bill of entry which is not in accordance with the requirement of section 23." Therefore, we are of the opinion that the appellants are not entitled for the adjustment of input tax at this belated stage for the aforesaid reason. Besides, the input tax adjustment can only be made during the relevant tax period which the appellants have failed to do so.

(d) The learned counsel for the respondents and the Departmental Representatives have further argued that besides the "aforesaid legal position, the period of limitation for claiming input tax adjustment/refund is one year under section 66 of the Sales Tax Act, 1990 and that is also barred by time under the provisions of the Sales Tax Act, 1990. We place our reliance in the case of Messrs Cherat Electric Company Limited, Nowshera v. The Collector, Sales Tax and Central Excise, Peshawar and another, reported in 2002 PTD (Trib.) 1525, wherein the Court has held that the law or the exchequer does not deprive a person of his claim to receive back the input tax paid by him, but it should be done by him as per the tax discipline provided for under the limitations and conditions prescribed by the law. If he fails to avail of his entitlement under section 7(1) of the Act in a tax return for the relevant tax period, he should, at his discretion, avail of the facility under section 66 of the Sales Tax Act, 1990.

(e) In this behalf, we also place reliance on the judgment passed in the case of Messrs Rainbow Industries v. Collector of Customs and others in C.P. 469/2004, wherein the Honourable Court has observed that:

"(15) By now, it is well-settled that fiscal statutes are to be construed strictly. If the subject is entitled to any relief it must be given to him but at the same time, if he is bound to follow a particular procedure and fails to abide by the same, then the penal consequences will have to follow. In such like cases, the question of financial loss to the exchequer or the subject are irrelevant. If the statute provides to do a certain thing in a certain manner it must be done in that particular manner and not otherwise."

(f) We are of the considered opinion that the arguments advanced by the learned counsel for the respondents on this specific issue are convincing enough as the appellants failed to perform their statutory obligation under the Sales Tax Act, 1990. In such circumstances, input tax adjustment is neither permissible under the Sales Tax Act, 1990 nor the statute allows right of such delayed input tax adjustment facility to the registered person. 18. Eighth Issue.--Whether the Additional Tax (default surcharge) and the Penalty are attractable in this case

(a) The learned counsel for the appellants has prayed that the appellants are government owned enterprise and no wilful evasion of tax is involved. Therefore, the imposition of additional tax (default surcharge) and penalty are uncalled for. In this context, he also placed reliance on the judgment of the Honourable Supreme Court of Pakistan, reported in PLD 1991 SC 963. While the learned counsel for the respondents expressly argued that the appellants have violated the explicit provisions of the Sales Tax Act, 1990 by not paying the due sales tax on the supply of locomotives and it is a wilful default on their part, hence they are liable to pay additional tax (default surcharge) and penalty prescribed under sections 33 and 34 of the Sales Tax Act, 1990.

(b) The learned counsel for the respondents has further contended that penalty for each offence under section 33 is fixed and no discretion has been allowed. As regards the judgment of Lahore High Court, Lahore, reported in 2008 PTD 1461, referred to by the learned counsel for the appellants, the same is not applicable in the instant case being irrelevant. According to him, in the said judgment, the subject matter of appeal was the payment of principal amount of sales tax and the request of appellant for disposal of appeal regarding penal amount in the light of amnesty envisaged under S.R.O. No.463(I)/2007 was acceded to and all the facts and circumstances of the said judgment are distinguishable from the instant case. Moreover, according to him, neither the appellants have deposited the entire principal amount of sales tax nor any S.R.O. granting amnesty like the aforementioned S.R.O. is currently in the field, thus, the appellant"s contention" is not sustainable.

(c) In our opinion, the appellants wilfully and deliberately avoided their statutory obligations under the Sales Tax Act, 1990 as there was abundantly clear indication in the L-1 Licence issued to them by the department in 1993 that their product is chargeable to sales tax. Even after compulsory registration, they rolled out thirteen (13) plus seven (7) Diesel Engine Locomotives of Serial Numbers 6011 to 6023 between the period from 9-3-2000 to 6-12-2000 and serial numbers 6024 to 6030 between the period from 21-12-2000 to 1-9-2001, respectively, and thus, they deliberately avoided to pay leviable sales tax thereon. 19. In view of the above stated position, dicta of Superior Courts and circumstances of the instant case, we sum up that:--

(a) this Tribunal can travel beyond the scope of the subject-matter of the appeal and factual and legal issues neither raised in the show-cause notice nor agitated at the original stage of adjudication nor at the first appeal stage can be considered by it;

(b) the appellants were liable to pay sales tax on the taxable supplies of D.E. Locomotives;

(c) ten (10) D. E. Locomotives in CBU condition (AGE-30 Project) from serial numbers 6001 to 6010 were imported directly by Messrs Pakistan Railways during the period from 7-5-1998 to 1-8-1998 and duly custom cleared for its operation at Karachi and these never arrived at Messrs Locomotive Factory, Risalpur. Therefore, the question of any value addition thereon does not arise;

(d) the appellants have not suppressed the values of D.E. Locomotives rolled out by them during the period related to this case;

(e) the show-cause notice issued in the instant case was not time barred;

(f) the appellants were not entitled to claim exemption from payment of sales tax under S.R.O. 580(I)/91, dated 27-6-1991;

(g) the appellants were not entitled at this belated stage to claim input tax adjustment under the provisions of Sales Tax Act, 1990; and

(h) the additional tax (default surcharge) and the penalty imposed are clearly attractable in this case. 20. The respondent department is thus, directed to recalculate the sales tax liability on the seven (7) Locomotives from serial numbers 6024 to 6030 (AGE-30) and collect the leviable sales tax along with the additional tax under section 34 of the Sales Tax Act, 1990 and penalty @3% of the tax involved under section 33(2)(cc) of the Sales Tax Act, 1990 as already decided by the then learned Collector (Adjudication) in para. 25 of the Order-in-Original No.1 of 2005, dated 14-12-2004. The instant appeal thus, partly succeeds to the aforesaid extent only and the same is, therefore, disposed of in the aforesaid manner. 21. Announced on 11-5-2009. 22. Attested copy of this judgment be dispatched to the concerned parties within ten (10) days of passing of the same. C.M.A./85/Tax (Trib.) Order accordingly.

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