Appeal No. 138/LB of 2004, decided on 30th December, 2004. Versus Appeal No. 138/LB of 2004, decided on 30th December, 2004.
SAEED AKHAR, MEMBER (TECHNICAL)--- This appeal is directed against Order-in-Original No. 50 of 2004 passed by the learned Additional Collector, Customs, Sales Tax and Central Excise (Adjudication), Lahore issued vide C. No.137-ST/Cont/Adc/Lhr/Adj 2003/438, dated 31-10-2004 whereunder the appellant was directed to deposit evaded amount of sales tax amounting to Rs.8,720,258 along A with additional tax and penalty @ 3% of the tax involved under sections 3(1), 34 and 33(2)(cc) of the Sales Tax Act, 1990. Penalty of Rs.10,000 was also imposed on the appellant under section 33(1) of the Sales Tax Act, 1990. According to report audit of the sales tax record of the appellant was conducted by the auditors of Collectorate of Sales Tax and Central Excise, Lahore who observed certain irregularities which were reported to the Adjudicating Officer for the issuance of show-cause notice. The Adjudicating Officer issued show-cause notice on the basis of following audit observations:-
(1) The registered person in the sales tax records declared the closing stock valuing Rs.1,511,475 but the whereabouts of the stock was not disclosed despite repeated notices issued by the Sales Tax Authorities. The failure of the registered person to arrange verification of the stock make it clear that the stock was disposed of without payment of leviable sales tax. Hence, sales tax amounting to Rs. 272,066 was found recoverable along with additional tax under section 34 of the Sales Tax Act, 1990. The registered person, therefore, violated the provisions of sections 3, 6, 7, 8, 26, 36(1) and 33 of the Sales Tax Act, 1990. The registered person has shown in his record purchases from Messrs Textile Plus and Messrs Cot Fabrics valuing Rs.15,148,199. These supplies according to sales tax record were found involved in the issuance of fake/flying invoices. The registered person has also shown payment against these alleged purchases after 120 days of issuance of sales tax invoices, in violation of section 73 of the Sales Tax Act, 1990 for which input tax amounting to Rs.2,272,230 was found inadmissible thus sales tax amounting to Rs.2,272,230 was found recoverable along with additional tax under section 34 of the Sales Tax Act, 1990. The registered person violated the provisions of sections 3, 7, 8 and 26 for which it was found liable for penal action under section 33(2)(cc) of the Sales Tax Act, 1990.
(2) The registered person in the sales tax record has shown purchases in the sales 'tax record from Messrs Textile Plus. Al-Hussain Trading Company, Hajveri Trading Company and A.N. Enterprises valuing Rs.11,137,311. All these suppliers according to record were found included in the list of suspicious units. Moreover,, Messrs Al-Hussain and Messrs A.N. Enterprises were facing trial of tax fraud for issuance of fake and flying invoices. Moreover, the registered person failed to produce proof of payments made to these suppliers. This is not only violation of section 73 of the Sales Tax Act, 1990 for which input tax of Rs.14,52,693 claimed by the registered person was inadmissible but this also shows that the registered person has not made any physical purchases and has only obtained sales tax invoices thus sales tax of Rs.14,52,693 was found recoverable from the registered 'person along with additional tax under section 34 ibid. The registered person has also violated the provisions of section 7 read with sections 2(12), 2(14), 2(33), 26, 33(4) of the Sales Tax Act, 1990.
(3) The registered person according to sales tax record made purchases from the suspicious units Messrs Textile Plus, Messrs Al-Hussain Trading, Messrs Hajveri Trading Company Messrs A.N. Enterprises, Messrs Pak Cotton Fabrics. The registered person has obtained fake/flying invoices without actually receiving the goods from the suppliers. The registered person obtained sales tax refund on the basis of, purchases from these units and thus claimed and obtained refund amounting to Rs.51,50,329. This amount was thus recoverable from the registered person along with additional tax under section 34 of the Sales Tax Act, 1990. The registered person has also violated the provisions of sections 3, 6, 7, 8, 26 and 36 of the Sales Tax Act, 1990 and was liable to penal action under section 33(4) of the Sales Tax Act, 1990.
(4) The registered person filed wrong sales tax returns for the tax periods May, 2000 and September, 2001 in violation of section 26 of the Sales Tax Act, 1990 punishable under section 33(1) ibid. A show-cause notice was issued to the appellant (then respondent) and Adjudicating Officer after considering the contentions of the parties concerned held the charges established against the respondents (now appellant).
2. The appellant feeling aggrieved with the decision of the Adjudicating Officer filed appeal before this Tribunal under section 46 of the Sales Tax Act, 1990.
3. The main contentions of the learned counsel at the time of hearing were as under:
(1) That the impugned order, dated 31-1-2004 is bad in law in that the same does not disclose any basis for arriving at an adverse finding. The Adjudicating Officer has not taken into account the reply to the show-cause notice. The impugned order is arbitrary and mala fide. As the Adjudicating Officer has not considered the contentions of the appellant, therefore, the impugned order has resulted in grave miscarriage of justice. Accordingly the impugned order is liable to be set aside.
(2) That the impugned order is mala fide in that the same is not supported by any evidence or based on any findings against the appellant. The impugned order simply states that after "due consideration of submissions made by the appellant and the prosecution the charges contained in the show-cause notice stand established". No reason whatsoever has been stated on the basis of which any inference can be drawn as to the guilt of the appellant. Furthermore, the impugned order is silent as to any evidence of collusion or fraud on the part of appellant which would link the appellant with the other co-accused. The Adjudicating Officer has completely overlooked the correct facts and circumstances which were brought to the attention of the respondent by the appellant.
(3) That in passing the impugned order, the Adjudicating Officer has acted illegally and unlawfully in that the respondent has ignored the law settled by the superior Courts of Pakistan that a judicial order must be a speaking order, manifesting by itself that the Court had applied its judicious mind to the issues and each , point involved. The Adjudicating Officer has summarily passed the impugned order which is illegal and unlawful and unjust. It is, therefore, liable to be set aside.
(4) That in the show-cause notice it was alleged that the appellant declared the closing stock but the whereabouts of stock were not disclosed. The appellant has submitted comprehensive reply which was ignored by the Adjudicating Officer while passing the impugned order in the show-cause notice. It was alleged that the appellant made certain purchases for which payments were made in violation of section 73 of the Sales Tax Act, 1990. The allegation of violation of section 73 is false and frivolous. The appellant was entitled to the claim of input under section 7 of the Sales Tax Act, 1990. It was alleged that the appellant made purchases from certain, units which were included in the suspicious list and the appellant has only obtained paper invoices without physical transfer of the goods. The respondents have failed to prove this allegation. The orders passed in this regard are unlawful and illegal and is liable to be set aside. The appellant is not expected to have knowledge whatsoever of the business activity of the supplier and denial to the appellant of its legal right and refund on the basis of any allegation against the supplier is illegal and unlawful.
(5) That the levy of additional tax and penalty is even otherwise not attracted in the instant case and dispute raised shows that serious question of law and facts are involved. Additional tax and penalties can only be imposed if there is apparent a manifest intention on the part of tax payer to evade his legal obligations. In view of above, it is prayed that the impugned order may be declared illegal and Unlawful.
4. The learned DR who was assisted by Mr. Babar Iqbal, Auditor opposed the contentions of learned counsel for the appellant and supported the impugned Order-in-Original.
5. We have heard the contentions of both the sides and perused the appeal file available before us. We have observed that the learned Adjudicating Officer in the impugned order has reproduced the allegations contained in the show-cause notice comments of respondent and detecting agency. The learned Adjudicating Officer has passed a brief order without passing a detailed judgment in respect of each allegation ignoring the contentions of the parties concerned. The learned counsel for the appellant has rightly pointed out that the respondent has summarily passed the impugned order which is unlawful. The learned counsel for the appellant has contended that his contentions have been completely ignored and a sketchy and non-speaking order has been passed which manifests non-application of judicious mind. After considering the contentions of both the parties we are of the view that the Adjudicating Officer was required to give due consideration to the contention of both the parties and then give a detailed judgment in respect of each allegation. With these findings, the impugned order is set aside and case is remanded to the Adjudicating Officer for de novo. consideration on merit after giving due consideration to the contentions/arguments advanced at the time of hearing and affording opportunity of hearing to the parties concerned.
6. The appeal stands disposed of as above.
C.M.A./491/Tax (Trib.) ??????????????????????????????????????????????????????????????????????? Appeal accepted.