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PPL files appeal against collector's decision

LAHORE (July 24 2005): Pakistan Petroleum Limited (PPL) has challenged the decision of the Collector (Adjudication) Hyderabad, declaring company's move of adjustment/setting off the amount of Rs 28.708 million owed to it by the department against the payment of central excise duty (CED).

PPL has recently filed an appeal before the Appellate Tribunal Customs, Central Excise and Sales Tax, Karachi, challenging the order passed by Collector (Adjudication) Hyderabad dated May 05, 2005, declaring the company action of adjustment of CED as illegal, Business Recorder has learnt.

The PPL has pleaded in its application submitted before the tribunal that the company produces natural gas from its Sui and Kandhkot gas fields and its entire production is bought by three companies, namely Water and Power Development Authority (Wapda), Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipeline Limited (SNGPL). As such, it argued, PPL entirely depends on these three utility companies for the off-take of the gas and for the payment of gas acquired by them together with CED.

As per practices, and under the Sui Gas Well Head Price agreement, dated July 28, 1982, PPL pays CED after receiving payments from its customers – Wapda, SSGCL and SNGPL.

However, from November 1986 to January 1999, these customers defaulted/delayed in effecting their payments obligation to PPL for natural gas supplied to them. But despite this default, the government authorities did not allow PPL to stop or suspend gas supply to them for non-payment on the pretext that in greater national interest, such supplies must continue uninterrupted.

The PPL has pleaded in the application that in June 1998, central board of revenue (CBR) through a book adjustment exercise, directly recovered from Wapda a sum of Rs 623.819 million towards CED on natural gas supplied to Wapda, SSGCL and SNGPL, without issuing any demand notice to the company.

Out of the total sum recovered, Rs 81.340 million was imposed by Hyderabad Collectorate and it also included Rs 28.708 million towards additional duty and penalties imposed.

However on PPL's appeal central excise and sales tax appellate tribunal Karachi held that delay was beyond its control and it was also not a wilful act. Therefore, penalties and additional duty of Rs 28.708 be remitted to PPL. But despite PPL's representations, this amount was not refunded.

PPL ultimately exercised its lawful right of adjustment/setting off the amount of Rs 28.708 million owed to it by the department against the payment of CED to be made by PPL.

Upon this act of PPL, superintendent of customs, sales tax and central excise Larkana has asked PPL to deposit Rs 22.554 million within a week's time. Earlier PPL received two show cause notices in respect of equitable set off done by PPL followed by an order dated May 05, 2005 for making payments of Rs 11.528 million and Rs 17.437 million along with additional duty and penalties.

The collector adjudication held that M/s PPL applied for refund to collectorate of Hyderabad but no decision came out on their refund claim. They adopted the due course of law for getting relief under the act.

However, it was not proper to adjust the amount payable, on their own. The rules do not allow any company to adopt the action in this manner. Therefore, the adjustment of Rs 28.708 million is illegal and the department orders recovery of the amount involved.

According to PPL sources, the company is facing tough time on account of “highhandedness” of central board of revenue (CBR) and delay in payment by three utility companies – Wapda, SNGPL and SSGCL, owing huge amounts to the state-owned gas producer.

According to them, as PPL was also on agenda of privatisation and foreign investors were taking much interest in it, therefore, such tactics of CBR and other tax collecting agencies will hurt the reputation of the company and eventually could discourage foreign investors.

It may be mentioned that during the recent visit of Prime Minister Shaukat Aziz to Malaysia, the Malaysian investors had shown keenness in PPL sell-off.

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