Law: Sales Tax Act, 1990

Section: 2(37)4,,4(c),11,38

SALES TAX ACT, 1990 (VII OF 1990)---Sections 2(37), 4, 11 & 38---The failure of the registered person/tax payer to disclose the name of unregistered supplier of textile fabric in sales tax returns is hardly material for alleging tax fraud. The tax authorities failed to get the samples of the product collected tested and reported by competent analysts. Allegation of tax fraud is founded upon a personal impression and not an investigative finding.- The respondent claimed the benefit of zero rating for its product namely Rexine under section 4(c) of the Sales Tax Act, 1990 in respect of which admittedly notification was issued by the F.B.R. which allowed the requisite relief. However, for reasons prevailing with the petitioner authorities an investigative audit under section 38 of the Sales Tax Act, 1990 was undertaken for the assessment years 2010 to 2012 wherein alleged tax fraud was detected. The show cause notice alleged that the claimed zero rated product, Rexine, fell under PCT heading 5903. This applies to textile fabrics, impregnated coated, covered or laminated with plastic. The respondents’ inability to prove the use of textile fabric with its product was tantamount to the production merely of plastic sheets by the respondents. These were not eligible for zero rating. Consequently the respondent was disentitled to sales tax refund. THIS ORDER PASSED BY: UMAR ATA BANDIAL, JUSTICE:---.---- Respondent No. 1 ("the respondent") tax payer is a manufacturer of Rexine. Its record was audited from time to time relating to the years 2008- 2009, 2009-2010 and 2010-2011. No misstatements, dishonest claim or suppression of liability was detected in these audits. The respondent claimed the benefit of zero rating for its product namely Rexine under section 4(c) of the Sales Tax Act, 1990 in respect of which admittedly a notification was issued by the F.B.R, which allowed the requisite relief. However, for reasons prevailing with the petitioner authorities an investigative audit under section 38 of the Sales Tax Act, 1990 was undertaken for the assessment years 2010 to 2012 wherein alleged tax fraud was detected. 2. A contravention report was prepared. On the basis…

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