Supply of Cylinders by LPG Marketing Company a Taxable Supply

Supply of Cylinders by LPG Marketing Company a Taxable Supply Case Laws Corporate Corporate Law Energy & Utilities In-furtherance of Business Knowledge – Corporate Law Lahore High Court Limitation Litigation & Arbitration Sales Tax Show Cause Notice - Validity Solutions - Corporate Law Tax Tax Reference Taxable Supply Vested Right Mr. Justice Tariq Saleem Sheikh in his judgment has decided the issue regarding supply of cylinders by LPG marketing company a taxable supply in Sales Tax Reference No. 33 of 2005.

1. This is an application by way of reference under Section 47 of the Sales Tax Act, 1990 (the “Act”), which is directed against Order dated 26-11-2005 passed by the erstwhile Customs, Excise & Sales Tax Appellate Tribunal, Lahore (the “Tribunal”), in STA No. 850/LB/2005.

2. The Petitioner holds a licence from the Ministry of Petroleum and Natural Resources, Government of Pakistan, for marketing and distribution of Liquefied Petroleum Gas (LPG) across Pakistan. It conducts marketing under the trade name of  “WAK GAS”. The Enforcement & Collection Wing of the Collectorate of Sales Tax, Lahore, received an information that the Petitioner had also set up a cylinder manufacturing unit and, besides marketing and distribution, it was also engaged in manufacturing and supply of cylinders without payment of sales tax. The Enforcement Wing probed into the matter and collected evidence which confirmed that it had made supplies of cylinders valuing Rs.628,335,961/- during the period 1993 to 1998 and had thus evaded sales tax in the sum of Rs.83,431,572/-. Consequent thereupon, Show Cause Notice dated 30-06-2000 was issued to the Petitioner wherein it was charged with the contravention of Sections 3, 6, 11, 22, 23 and 26 of the Act and was called upon to explain as to why the aforesaid sales tax alongwith additional tax and penalty may not be recovered from it. On 14-11-2000, a corrigendum was issued to add M/s Steel Complex to the proceedings. Further, the above-mentioned figures were revised and the total demand of the sales tax was raised to Rs.186,078,750/- alongwith additional tax and penalty. The provisions which were alleged to have been contravened were re-stated as: ―Sections 3, 6, 11 (2), 22, 23, 26, 34 & 36.‖ The Petitioner contested the Show Cause Notice and denied its liability. The matter was adjudicated and, vide Order-in-Original dated 13-02-2001, the Adjudicating Officer ruled against it. Aggrieved, the Petitioner preferred an appeal before the Tribunal which was accepted and the case was remanded to the Adjudicating Officer for denovo consideration.

3. During the remand proceedings the Adjudication Officer issued second corrigendum dated 18-05-2002 whereby Section 36 appearing in the first corrigendum dated 14-11-2000 was substituted with Section 36(1). The Petitioner alleged that the limitation prescribed under Section 36(1) was five years while under Section 36(2) it was three years. The corrigendum dated 18-05-2002 was illegal and was issued with the malafide intent to bring time-barred portion of the Show Cause Notice within limitation. It, therefore, moved an application before the Adjudicating Officer for its withdrawal. The Adjudicating Officer, however, refused to do so and ordered that the said application would be decided at the time of final hearing. The Petitioner challenged this order but it was maintained upto the Supreme Court. Eventually after protracted proceedings the Adjudicating Officer once again decided the matter against the Petitioner vide Order-in-Original dated 23-06-2005. The Petitioner filed an appeal (STA No. 850/LB/2005) thereagainst before the Tribunal which was dismissed on 26-11-2005. Now, this reference application before this Court.

4. The Petitioner has urged that the following questions of law emanate from the Tribunal‘s Order dated 26-11-2005 which require determination by this Court:

I. Whether, in the facts and circumstances of the case, the learned Tribunal was right in holding that the assertions regarding misdeclaration and deliberate evasion were made in the show cause notice despite the fact that there were no such allegations in the Show Cause Notice?

II. Whether the learned Tribunal was right in holding that mere contravention of certain sections of the Sales Tax Act would amount to deliberate and intentional evasion of tax despite the fact that no such allegation was levelled in the Show Cause Notice?

III. Whether the learned Tribunal was right in holding that corrigendum dated 18-05-2002 was issued to correct a clerical error especially when no such assertion was made by the Department at any stage of the proceedings?

IV. Whether, in the facts and circumstances of the case, the learned Tribunal was correct in law in relying on the Information Memorandum of May-1999 issued by Sidat Hyder Morshed Associates (Pvt) Ltd. (Management Consultants) especially when the said Information Memorandum itself clearly had a disclaimer?

V. Whether the learned Tribunal was right in ignoring the judgment of the AJ&K High Court reported as ―PTCL 1991 CL 108‖ holding that in the present case income tax was not a primary source of evidence and whether reliance of the learned Tribunal on the income tax records was contrary to law?

VI. Whether the learned Tribunal was right in relying on the receipts issued by M/s S.A. Enterprises, M/s Mahmood Traders, M/s Sohail Traders and M/s Siddique Gas Agency, especially when the said receipts were not produced before it at the time of its decision and, furthermore, when these persons filed affidavits before the learned Adjudicating Officer denying the said fact?

VII. Whether the learned Tribunal was right in holding that as two of the buyers of the cylinders appeared for cross-examination, their statements could be believed especially when statements recorded before the Adjudicating Officer were never examined by the Tribunal and the record of the case was never summoned by the Tribunal to examine the said facts?

VIII. Whether the learned Tribunal was right in holding that the provisions of Section 2(46) of the Sales Tax Act, 1990, were not applicable to the present case?

IX. Whether the learned Tribunal erred in not discussing the fact that a committee appointed by CBR had already fixed the value of the cylinders manufactured by the Petitioner at Rs.650/- which was further reduced by another Bench of the Tribunal to Rs.488/-?

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