The Federal Board of Revenue has rejected the legal interpretation of the Directorate of Revenue Receipt Audit (DRRA) on the applicability of sales tax on import of agricultural machinery, saying that exemption from sales tax on import of used combined harvesters is available under Sr. No 49 of the Sixth Schedule of the Sales Tax Act, 1990.
Sources told Business Recorder here on Friday that a dispute cropped up between the customs authorities and the DRRA on the exemption of sales tax on import of used combined harvesters. Details of the issue revealed that during 1999-2000, the overseas Pakistanis were allowed to import machinery and equipment under Non-Repatriable Investment Scheme (NRIS). Certain overseas Pakistanis imported used combined harvesters and claimed exemption of Sales Tax under Sr. No 49 of Sixth Schedule to the Sales Tax Act, 1990.
During the scrutiny of import record, the DRRA observed that exemption from sales tax on import of used combined harvesters, was not admissible under the Sixth Schedule of the Sales Tax Act, 1990, hence amount should be recovered. Therefore, show cause notices were issued to the importers and 08 cases were referred for adjudication to the Adjudication Collectorate.
After detailed discussion, the then adjudication authority decided the cases in favour of the importers and vacated the show cause notice Nos. vide order-in-original 64/2001 to 71/2001 all dated 11.12.2001. Operative part of the order of adjudication officer said that the combined harvesters for agricultural purpose are clearly listed under Sixth Schedule of Sales Tax Act, 1990 with Pakistan Customs Tariff (PCT) Heading 8433-5100 and exemption from payment of sales tax allowed by the Dry port authorities is quite justified. Furthermore, the contention of the DRRA that combined harvesters should have been classified under PCT Heading 8433-5100 is not borne out by the facts. The Customs Tariff published in October 1998 does not have any PCT Heading 8433-5000 and instead combined harvesters are clearly listed under PCT Heading 8433-5100".
The Model Customs Collectorate Sialkot has accepted the order-in-original (ONOs) of adjudication department. The position got verified from the DRRA and it was confirmed that the amount pointed out by DRRA was vacated in adjudication process. The MCC Sialkot is of the view that exemption from sales tax on import of used combined harvesters was availed under Sr. No 49 of the Sixth Schedule of the Sales Tax Act, 1990 which reads as, "Supply of tractors, bulldozers and combined harvesters for agricultural purposes and CKD kits thereof".
The word "supply" has also been defined in section (xxxix) of Sales Tax Act, 1990 which stated, "supply" means any form of supply whatsoever. This Collectorate maintained that combined harvesters are exempt from payment of sales tax on import stage. The exemption from sales tax was granted on import of used combined harvesters as admissible under the law, sources added.