2010 PTD 893
ORDER
MUHAMMAD ARIF MOTON (MEMBER JUDICIAL-II).--- This order will dispose of Sales Tax Appeal No.H-363/2008 filed by the Appellant against Order-in-Appeal No.43/2008 dated 21-10-2008 passed by the Collector of Customs, Sales Tax & Federal Excise (Appeals), Hyderabad.
2. Briefly, facts of the case as reported are that the Collectorate of Sales Tax & Federal Excise, Faisalabad reported vide their letter C. No. ST-Ex-Audit/ 122/2007/992 dated 21-7-2007 that investigative audit of Messrs Fateh Yarn Pvt. Limited, Faisalabad having sales tax Registration No.08-03-5205-023-37 was conducted which revealed that the above named registered person issued fake/flying invoices involving sales tax of Rs.1,665,300 to Messrs Fateh Textile Mills Limited, Hyderabad (the appellants). The facts of the case further reveal that on the basis of the said investigative audit Messrs Fateh Yarn Pvt. Limited, Faisalabad were blacklisted vide letter C.No.Secy(ST)/25/2005/864 dated 8-10-2005. Subsequently the appellants were served with a show-cause notice and were asked to explain as to why the amount of sales tax received by them as refund on the alleged fake/flying invoices of Messrs Fateh Yarn Pvt. Limited, Faisalabad should not be recovered from them along with default surcharge and penalty.
3. The adjudication proceedings were initiated by the Additional Collector, Hyderabad wherein the appellants contended that they had made purchases from Messrs Fateh Yarn Pvt. Limited, Hyderabad during the period March to October, 2004 when they were not blacklisted by the sales tax authorities and were regularly filing their sales tax returns and transaction value was remitted to them through banking channels in compliance with the provisions of section 73 of the Sales Tax Act, 1990. The appellants further contended that invoices issued to them were genuine and if their supplier was subsequently blacklisted, the sales tax department cannot recover the already sanctioned amount of refund which was duly sanctioned to them in compliance of the provisions of the Sales Tax Act and fulfillment of all the formalities prescribed by the STAAR system of refund adopted by the Sales Tax Department. The respondent No.1 passed the Order-in-Original against the appellants. Appeal filed against the said Order-in-Original met the same fate; however, penalty imposed by the respondent No.1 was waived by the Collector Appeals being the respondent No.2. Hence, this appeal.
4. Mr. Parvez Iqbal Kasi, Advocate appeared on behalf of appellant and put forth the following contentions:
(i) That the processing of a refund claim and thereafter its sanction is an order and it is challengeable in terms of section 10 of the Sales Tax Act, 1990 if the refund of appellant is not in accordance with the provisions of the Sales Tax Act, 1990 or the Sales Tax Refund Rules, 2002. The Collector of Sales Tax should have assailed it in the Appellate forum which was not done. Resultantly the time for filing the appeal lapsed and the sanction order of refund attained finality, which cannot be disturbed under law as interpreted by Supreme Court of Pakistan in the case reported as 1989 MLD 4310 and various Benches of High Court in their judgments reported as 2004 PTD 3020, 1984 MLD 4310, 1990 PTD 155 and 2004 PTD 3020.
(ii) That the refund sanction order could have been reopened by the Collector or Federal Board of Revenue under the provisions of section 45A of the Sales Tax Act, 1990 for satisfying legality or propriety of the decision/order passed by the subordinate sales tax officer. The said provisions do not empower any other authority to reopen a lawfully passed order. In the instant case the Additional Collector of Customs (Adjudication), Sales Tax & Federal Excise, Hyderabad issued the Show-cause notice which is without any lawful authority or jurisdiction. Hence, the impugned order-in-original was without jurisdiction rendering it ab initio void as held by the honourable Tribunal, High Court and Supreme Court in unreported/reported judgments namely Appeals Nos.K-2352/99, K-106/03, PLD 624, PLD 1976 Supreme Court 37 and PLD 2001 Supreme Court 514.
(iii) That when the appellants purchased the goods from Messrs Fateh Yarn Pvt. Limited i.e. March to October, 2004 their profile was excellent, they were operational, their tax invoices were being validated/verified by the STARR, consequent to which refunds were paid to the appellants. The appellants had remitted the transaction value through banking channels in compliance with the provisions of section 73 of the Sales Tax Act, 1990 which proves beyond any iota of doubt that these transactions were genuine.
(iv) That the order of the blacklisting deems to be effective prospectively and not retrospectively as expressed in section 24 of the General Clauses Act 1897 besides numerous reported judgments of the High Court and Supreme Court in field. In conformity with the provisions of section 24 of the General Clauses Act 1879 and law laid down the Federal Board of Revenue issued direction in sub para (iii) of para 1 of Sales Tax General Order 6/2003 to its field formations to apply the order of blacklisting from the date of issuance by expressing that "unless the Collector specifies otherwise such orders shall have effect from the date of original backlisting or suspension of registration/enrolment of the concerned person so that invoices issued by him during the intervening period are acceptable". According to this directive, the tax invoices submitted by the appellant of Messrs Fateh Yarn (Pvt.) Limited were rightly accepted as these related to the period prior to the date of black listing and refund against the said invoices was admissible under law. Reliance is placed on the orders of the honourable appellate tribunal in the case of Messrs Quality Linen Supply Corporation Sales Tax Appeal No.271/2008.
(v) That if the suppliers were declared blacklisted or suspected by virtue of their activities, the respective Collectorate of jurisdiction, which registered them under section 15 and issued certificate under section 17 of the Sales Tax Act, 1990 were empowered to proceed against them under the mechanism provided in section 11.36 and sub section (e) of section 37C of the Sales Tax Act, 1990. No provision of the Act ibid directs the respondents to recover and already refunded amount from the appellants as has been done in the instant case. If any action is taken against a claimant in violation of the provisions of the Act, it is tantamount to forced construction of law, which is not permitted as per dictum laid down by the Superior Courts of Pakistan.
(vi) That the department has not questioned/challenged the genuineness of the exports of finished goods of the appellants so manufactured by them from the goods so purchased from Messrs Fateh yarn Pvt. Limited, Faisalabad.
5. The D.R. on the other hand stated as follows:--
(i) That refund on fake invoices was not admissible in terms of either section 8 or section 21(2) of Sales Tax Act, 1990 read with Rule 12(5) of Refund Rules, 2002, if the invoices are themselves objectionable/colourable, there is no question of sanction of refund on the basis of these questionable documents.
(ii) That the refund sanction order cannot be considered as an appealable order. It is a computer generated refund payment order (RPO) subject to post refund audit. As such, there was no need for the department to file an appeal under section 45-B of the Sales Tax Act, 1990. He also pointed out that show cause notice has been issued under section 36 and covers the objection raised by the learned Advocate of the Appellant that order under section 10 is an appealable order.
(iii) That the question of re-opening of refund sanction order under section 45-A is out of context as every refund is subject to post audit under Rule 13 of the Sales Tax Refund Rules, 2002 in case no pre-sanction inquiries were made. Even otherwise Refund Sanction Order is open to scrutiny at any time within the stipulated period given in section 36 of the Sales Tax Act, 1990.
(iv) That the order of declaring blacklisted/suspected units can be applied retrospectively.
6. Rival parties heard and case record perused. The following issues are framed for consideration by this Tribunal:---
(1) Whether refund sanction order passed by a competent authority under subsection (2) of section 10 of the Sales Tax, 1990 read with rule 6 of the Sales Tax Refund Rule, 2002 is an appealable order under section 45-B of the Sales Tax Act, 1990?
(2) Whether Collector concerned or Federal Board of Revenue were empowered under section 45-A to reopen a refund sanction order passed by a competent authority under sub section (2) of section 10 of the Sales Tax, 1990?
(3) Whether any order or an insertion/amendment in existing statute, notification or order runs prospectively or retrospectively?
7. A refund sanction order passed by the competent authority in terms of subsection (2) of section 10 of the Sales Tax Act, 1990 read with Rule 6 of Sales Tax Rule 2002 and a refund rejection order passed by the competent authority in terms of subsection (2) of section 11 ibid are both appealable under section 45-B of the Act. The orders so passed attained finality through limitation. A fortiori orders attained finality cannot be disturbed at any later stage by any authority including Federal Board of Revenue. The judgments relied upon by the Appellant are relevant on this point and have been reported as 1989 MLD 4310, 1990 PTD 155 and 2004 PTD 3020.
8. As regards issue No.(ii) that the act of issuance of show-cause notice was ab initio wrong in as much as the competent authority who passed the refund sanction order was satisfied in respect of Appellants claims and so the concerned Collector of jurisdiction never filed an appeal under section 45-B of the Sales Tax Act, 1990. On the contrary, the authority who issued the show-cause notice was not competent 10 reopen a past and closed transaction within the framework of Sales Tare Law.
9. In order to appreciate the proposition raised by the appellant it would be appropriate to reproduce the provisions of subsection (a) of section 45 of the Sales Tax Act, 1990. The same are as under:---
"...[45A Power of the Board of Collector to call for records.--- (1) the board may of its own motion, call for and examine the record of any departmental proceedings under this Act or the rules made thereunder for the purpose of satisfying itself as to the legality or propriety of any decision or order passed therein by an officer of Sales Tax, it may pass such order as it may think fit..."
10. In terms of the-aforesaid provisions of section 45-A of the sales Tax Act, 1990 any proceedings under the Act are subject to review either by the Federal Board of Revenue or by the respective collector, and that too for satisfying themselves in respect of legality or propriety of any decision or order passed by a subordinate sales tax officer. There is no other provision in the Act authorizing a sales tax functionary to review or reopen a past or closed transaction. The act of sanction or rejection of a refund claim falls within the preview of the word "proceedings". In general parlance all happenings and events before a Tribunal or an authority on whose jurisdiction is conferred by law to dispose of contentious matter are covered by the term proceedings.
11. As regards issue No.(iii) it pertains to whether any order or insertion/amendment in an existing statute, notification or order takes effect prospectively or retrospectively. In terms of section 24 of the General Clauses Act, 1897 every order or any insertion/amendment runs prospectively and not retrospectively. Such order amendment/insertion run retrospectively in case of remedial legislation or otherwise specified in the order or amendment/insertion itself. This principle is fully borne out from the judgments reported as PLD 1974 SC 180, 1987 PTD 739, 2009 PTD 1(sic), 2009 PTD 16, 1993 SCMR 73 and 2000 PTD 285.
12. The foregoing narration and objective analysis on the issues involved in this appeal clearly demonstrate that the impugned adjudication order-in-original as well as order-in-appeal are palpably illegal and void passed without jurisdiction and lawful authority. The Impugned orders are therefore, set aside and the appeal is allowed accordingly.
H.B.T./20/Tax(Trib.) Appeal allowed.