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S.T.A. No.992/LB of 2002, decided on 15th December, 2007.

----S. 3---Customs Act (IV of 1969), S.19---S.R.O. No.987(I)/99, dated 30-8-1999---Import of machinery under S.R.O. No.987(I)/99, dated 30-8-1999 for manufacturing taxable goods in unit of assessee---Bill of Entry finding mention sales tax registration number of assessee---Demand of evaded tax along with additional tax and penalties from assessee by issuing him show-cause notice by Collector---Validity---Record showed that assessee was registered on 9-6-1999 as importer, exporter and wholesaler---Importer registered with sales tax department, if imported machinery for manufacturing taxable goods, would become entitled to claim benefit of S.R.O. No.987(I)/99, dated 30-8-1999---Collector from site inspection could verify installation of such machinery by assessee---If Collector, on basis of documentary evidence, was satisfied that assessee was in process of setting up a manufacturing unit for production of taxable goods, then assessee might be registered as manufacturer and might be allowed amendment in registration certificate having retrospective effect from 9-6-1999---Assessee had satisfied essential conditions at relevant time---Impugned show-cause notice was set aside in circumstances. Muhammad Akram Nizami for Appellant. Ms. Nyma Batool, D.R. and Muhammad Ramzan, Inspector for the Respondent. Date of hearing: 10th December, 2007.

This Sales Tax appeal is directed against an order-in-original dated 11-2-2002 passed by Deputy Collector (Adjudication) Faisalabad whereby the benefit of S.R.O. 987(I)/99 dated 30-8-1999 was not extended to the appellant"s unit and directed the appellants to deposit the evaded sales tax of Rs.9,14,632 along with additional tax and penalties as envisaged by law. 2. Facts of the case briefly stated are that during the course of the audit the Audit Team found that the appellants unit had imported a consignment of Poly Propylene Spinning Unit vide bill of entry dated 10-5-2001 and claimed the benefit of S.R.O. 987(I)/99 dated 30-8-1999. It was found that the exemption under the said S.R.O. was available to the manufacturers of taxable goods and to the persons registered under the Sales Tax Act, 1990. According to the department the registered person did not fulfil the requirements of registration and of manufacturer of taxable goods, therefore, issued a show-cause notice claiming evaded sales tax amounting to Rs.9,14,632. It is noted that the show-cause notice was not contested by the registered person as it did not turn up before the adjudicating officer in response to the notice of hearing issued to him. The adjudicating officer after examining the documents on record upheld the show-cause notice and adjudged the liability as above. Hence this appeal. 3. We have heard both the parties and perused the record. The findings recorded by the adjudicating officer appear to be the result of mis-reading of documents on the file. The liability was adjudged against the appellant on the basis that the appellant did not give his registration number on the bill of entry and that it was not registered as a manufacturer. Photo copy of bill of entry is available on the file as Annexure-D which shows that the sales tax registration of the appellant is 08-80-5205-035-37, thus the objection of the department is nullified by this registration number available on the bill of entry. The second objection of the department about the registration as manufacturer is concerned that has no legs to stand for the reason that on the bill of entry while claiming the benefit of S.R.O. dated 30-8-99 the registered person had declared that the subject goods were imported according to the S.R.O. and would be used for manufacturing in the industry and the goods will be installed at Messrs Umer Tex International, Sargodha Road, Faisalabad. This declaration shows the intention of the appellant to install the machinery at the specific place for the manufacturing of taxable goods. Besides that Annexure-A with this appeal shows that the appellants were registered as Importer, Exporter and Wholesaler vide registration dated 9-6-99 as well as vide Annexure-B a letter dated 26-12-2001. The registration of the appellant as manufacturer was pending with the department. Even otherwise it was the duty of the department during the audit of the registered person to physically verify the installation of the imported machinery in the premises of the appellant but instead of verifying such duty the department preferred to lodge a claim of evaded sales tax. Since the appellant is a registered person for the purposes of manufacturing taxable supplies, therefore, the order passed by the Deputy Collector (Adjudication) is not sustainable. 4. For the foregoing reasons, the impugned order is set aside by accepting the appeal and it is held that the appellant is not liable to pay the sales tax and penalties etc. as claimed in the impugned order. Parties be informed through registered post or by UMS. 5. File be consigned after completion.

The perusal of S.R.O. 987(I)/99, dated 30-8-1999 shows that for availing the benefit of the said S.R.O. on the import of plant and machinery is that, inter alia the following conditions must be fulfilled:--

(i) The importer should be a person registered under Sales Tax Act, 1990 and he should also be a manufacturer of sales taxable commodity.

(ii) The plaint and machinery should be operated by power of any description. 2. For establishing the bona fide, it is essential that the appellant be registered as manufacturer and must be producing taxable goods, otherwise the benefit is not admissible. The case in view of the aforesaid facts suffers from factual controversies and need to be resolved at the original stage. The order-in-original is therefore set aside and the case is remanded to the adjudicating officer for decision afresh within the stipulated period keeping in view of the observations highlighted above. 3. Since there is a difference of opinion between the two members, the file may be referred to the Honourable Chairman for his third opinion on the following point of difference: --

(i) Whether in the facts and circumstances stated in the above judgment, the impugned order is liable to be set aside and in consequence the appeal is accepted or the case is to be re-decided by the adjudicating officer keeping in view the observations given above.

.---The appellant has assailed in this appeal the Order-in-Original No.201/2002 dated 22-4-2002, whereby the learned D.C. (Adjudication), Faisalabad had found that the appellant had got the exemption of sales tax in violation of S.R.O. 987(I)/99, dated 30-8-1999 and had directed him to pay sales tax amounting to Rs.9,14,632 along with additional tax and penalty of Rs.30,000. 2. The brief facts, giving rise to -this appeal, are that the appellant had imported" a Spinning Unit and got exemption vide bill of entry No.1094 dated 10-5-2001 from the payment of sales tax in the light of S.R.O. 987(I)/99, dated 30-8-1999. Messrs. Star Plus International Faisalabad were the Customs Clearing agent. A contravention report was prepared by the Assistant Director, Inspection and Internal Audit, Lahore that the appellant had got exemption in violation of above said S.R.O., in as much as the exemption was available only to the importer, who was registered under the Sales Tax Act, 1990, as a manufacturer of taxable goods. A show-cause notice was issued. As per contention in the memo. of appeal the show-cause notice could not be served. Eventually, show-cause notice was enforced in the above terms. Hence, this appeal. 3. The appeal was heard by the learned Customs, Federal Excise and Sales Tax Appellate Tribunal, Bench-I, Lahore. The learned Member (J) vide his judgment dated 15-12-2007 held that the exemption had properly been granted and set aside the impugned order. However, the learned member (T) observed that the order in original was liable to the set aside, but the case should be remanded to the Adjudicating Officer for decision afresh to see whether the conditions contained in the said S.R.O. were met with by the importer or not. Due to difference of opinion the file was referred by the learned Chairman to the undersigned to decide the matter as a referee. 4. The parties were heard. The learned counsel argued that the appellant had, in due course, been registered as a manufacturer also. He produced a copy of the amended registration dated 27-3-2004. The representative of the department submitted that the amended registration was issued after the import of machinery. 5. I have minutely gone through the record and find myself fully in consonance with the findings of the learned Member (J). The requisite conditions were that the Importer should be having registration with the department. He should be a manufacturer and the machinery should actually be installed at site. I agree with the observation of the learned Member (J) that the department, instead of wasting the energy in audit, should have verified at site whether the machinery had been installed or not. I have got reasoning of my own as well. The bill of entry bears sales tax Registration No.08-80-5205-37. It is also written in the declaration that the subject goods, imported in accordance with S.R.O, will be used for manufacturing in the industry. The subject goods will be installed at Messrs. Umer Tex International, 547-B, Small Industries Estate, Sargodha Road, Faisalabad. They manufactured taxable goods. The copy of the certificate of registration "Annexure A" is on record. The date of registration in this original certificate is 9-6-1999. The appellant was registered as (1) Importer (2) Exporter and (3) Wholesaler. Letter No. C.M. 3(9)STP/99(PT-1) dated 26-12-2001 of Sales Tax Wing, C.B.R. written to the Collector, Faisalabad is very relevant. It is clarified that registered person is entitled to benefit of S.R.O. 987(I)/99, if the machinery is to be used for the manufacturing of taxable goods. It is clarified that the applicant was already registered with the Collectorate of Sales Tax though not as a manufacturer. If on the basis of documentary evidence the Collector was satisfied that the applicants were in the process of setting up a manufacturing facility for production of taxable goods, they may be registered as a manufacturer, as it they are already registered, and necessary amendment may be made in their certificates of registration. Once the Collector got satisfied that the conditions have been met with and allowed amendment in registration certificate then this amendment in the light of this letter was to have retrospective effect. The words as if they are already registered (as a manufacturer) are of significant import. In the first part of the letter, it is written that although the applicant was not registered as a manufacturer and the words used in the latter part are as if they were already registered. There is no ambiguity that the amended certificate of registration was of retrospective effect. The date of registration as a manufacturer would be considered as 9-6-1999 i.e. date of original registration. The Importer had satisfied the conditions at the relevant time. The clearing staff had rightly cleared the goods. The impugned order was liable to be set aside and is hereby set aside. C.M.A./3/Tax(Trib.) Appeal accepted.

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