Central Board of Revenue to recover less paid Sales Tax from cement makers

ISLAMABAD (October 22 2002) : The Central Board of Revenue (CBR) has decided to recover sales tax to the tune of millions of rupees from certain cement manufacturers of Iskandarabad, who wrongly interpreted Central Excise Act, 1944, to pay less sales tax against the actual amount.

The tax authorities alleged that the cement manufacturers had cleared their products on ex-factory price fixed by the State Cement Corporation rather than on assessable value under Section 4(1) of the Central Excise and Sales Tax Act, 1944, while the units differed with tax authorities on 'determination of value'.

These units were operating under the Companies Ordinance, 1984, and are being run in the public sector under Ministry of Industries and Production through State Cement Corporation of Pakistan.

Now, the CBR has issued instructions to collectors of sales tax, Rawalpindi, and Faisalabad, to recover sales tax, if any, from these manufacturers under intimation of the board.

Official sources told Business Recorder on Monday that the tax authorities have issued notices to these manufacturers on the payment of less sales tax. It was alleged that they had cleared their product on ex-factory price fixed by the State Cement Corporation rather than on assessable value under Section 4(1) of the Central Excise and Sales Tax Act, 1944.

The tax officials were of the view that while determining value of the cement for payment of sales tax, charges like loading, unloading, transportation, octroi duty, and export tax should have been included.

Aggrieved from the decision of concerned assistant collector, the manufacturers filed appeals before the Collector (Appeals), Customs and Central Excise, Northern Zone, Lahore. The Collector Appeals accepted the ex-factory price as value under Section 4(1) of the Act and set aside the assistant collector's orders.

On the other hand, the authorities in the CBR were not satisfied with the orders of collector appeals. The CBR reopened the cases under Section 35-A of the 1944 Act, and issued show-cause notices to the cement units for payment of sales tax.

Section 4(1) of Central Excise and Sales Tax Act, 1944, is as follows:-

4. Determination of value for the purposes of duty. – (1) Where, under this Act, any article is chargeable with duty at a rate dependent on the value of the articles, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders or, if there is no general body of retail traders, the general body of consumers on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable.

The CBR stated that ex-factory price is irrelevant to section 4(1) ibid., and that wholesale price as per above quoted section is to be determined for the purpose of sales tax.

“The assessment value, therefore, is to include all charges up to the stage of sale to the retailers in the nearest wholesale market, regardless of the fact that certain amounts were being charged from the retailers on account of transport, loading, unloading, octroi, etc. Even if these were incurred by traders, stockists or dealers, these had to be included in the wholesale cash price, as envisaged under Section 4(1) ibid. For levy of sales tax, the value determined under Section 4(1) plus Central Excise Duty (CED) becomes the assessable value, the CBR added.

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