On a ruling of Law and Justice Division, the Central Board of Revenue (CBR) has withdrawn the contravention cases raised against the value-added industries, who imported plant/machinery without payment of customs duty/general sales tax (GST), but failed to achieve the annual export targets.
A senior tax official told Business Recorder on Wednesday that a major tax relief has been given to the value-added as well as export-industries. Sales tax collected from the importers-cum-manufacturers, due to non-fulfilment of taxes exemption conditions on the import of machinery, would be refunded soon.
The collectors of customs and sales tax have been directed to forthwith withdraw all contravention cases. Giving details of the relaxation, the official said that the exemption from customs duty and sales tax on plant and machinery imported by value-added/export industries, was granted vide SRO 27(I)/98.
This is subject to the condition that either the unit annually exports a minimum of 50 percent of its production in first ten years or attains a minimum value-addition of 40 percent while making taxable supplies made through the use of imported plant/machinery.
In order to clarify the notification, the government has announced a scheme whereby the importers who made imports under SRO 27(I)/98 were given an option to pay customs duty at the rate of one percent per year of default, up to a maximum of 5 percent with a commitment that payment of customs duty on these lines will be considered as full and final discharge of the entire liability. Accordingly, the board had issued customs SRO 455(I)/2004 on June 12, 2004.
The official said that since SRO 455(I)/04 did not cover/embed section 13 of the Sales Tax Act, 1990, therefore, on the advice of Law and Justice Division, another sales tax notification SRO 501(I)/2006 was issued on May 31, 2006, whereby sales tax exemption on plant, machinery and equipment imported under SRO 27(I)/98 was granted to all those manufacturers who had failed to comply with the conditions of SRO 27(I)/98 and had paid customs duty at concessionary rate under SRO 455(I)/04.
He said that the Law and Justice Division also advised that all the sales tax demands raised on account of failure to fulfil the condition laid down in the SRO 27(I)/98 should be withdrawn, including the cases made out by different field formations, demanding payment of sales tax on 40 percent value addition against local supplies, and any amounts of sales tax recovered from such importers-cum-manufacturers in consequence of the demands should be refunded.
Therefore, all the sales tax-related contravention cases instituted on account of failure to fulfil the condition laid down in notification SRO 27(I)/98 should be withdrawn, including the cases made out by different field formations demanding payment of sales tax on 40 percent value addition against local supplies.
This decision shall also apply to the cases where demands have been established through quasi-judicial orders. Any amount of sales tax recovered from such importers-cum-manufacturers on the demand raised by the department shall be refunded.
This is subject to the conditions that such amounts are verifiable, identifiable and relate to such transactions and such payments that had not already been adjusted by the registered person against his 'output tax liability'.