2010 PTD 1636

MHER MUHAMMAD ARIF SARGANA, MEMBER (JUDICIAL).--- The above titled two appeals are taken up together as these are having common question of law and facts. These appeals have been directed against Order-in-Appeal No. 445-446/2007, dated 23-11-2007 passed by the learned Collector (Appeals), which disposed of Order-in-Original No.39/2006 and 40/2006 both dated 30-12-2007.

2. The facts, giving rise to this appeal, are that the appellant filed refund claim, which was deferred due to certain deficiencies. The appellants were, therefore, charged with the violation of sections 2(14), 7, 8, 8(1)(a), 23 and 26 of the Sales Tax Act, 1990 read with Refund Rules, 2004 notified vide S.R.O. 485(I)/2004, dated 12-6-2004 and were called upon to show cause as to why refund may not be rejected in terms of section 11(2) of the Sales Tax Act, 1990 and why penal action may not be taken against them under section 33(11)(a)(c) ibid. As a consequence of adjudication proceedings, a part of the refund was allowed and the rest was disallowed. Being aggrieved, the appellant went in appeal before the learned Collector (Appeals), who vide Order-in-Appeal No.445-446/2007 dated 23-11-2007 dismissed the appeals being barred by time. Hence these appeal.

3. The main grounds, as urged in the memo of appeal, are as under:---

(a) That the appellants have purchased yarn from M/s Colony Textile Mills Limited against proper sales tax invoices issued under section 23 of the Act and accordingly paid sales tax involved therein. Payments against the goods in question were also transacted through banking channel as provided under section 73 ibid.

(b) That the goods in question have been meant for export chargeable to sales tax @ zero percent hence sales tax paid thereon was become due for refund once it is established that export of alleged goods is made then denial from refund of input tax incurred thereon would tantamount to tax the exported goods which are otherwise chargeable to sales tax at zero percent. Reliance is placed on the judgment of the Hon'ble Customs, Excise and Sales Tax Appellate Tribunal, Lahore Bench Camp at Islamabad in the case of M/s Blue Horizon (Pvt.) Limited, Sialkot v. the Collector (Appeals) Northern Zone and others as reported at "PTCL 1999 CL 162" in which the similar proposition has been settled.

(c) That refund is rejected merely on the objection that supplier namely M/s Haq Industries Power Looms has been de-registered, despite the fact that the same was registered at the time of making taxable supplies to the appellant. Refund was claimed against valid sales tax invoices issued by the alleged unit under section 23 of the Act during the period when he was registered which cannot be disallowed on his subsequent de-registration.

(d) That M/s Fazal Karim Textile Mills Limited, Mirpur Azad Kashmir is duly registered under the Sales Tax Laws and has been filing his monthly sales 'lax return during the period in question.

(e) That supplies made to appellants during. March, 2005 were duly incorporated in suppliers' sales tax return, summary statement and sales register for said tax period and no violation has been observed.

(f) That refund claim of appellants did not exceed output tax declared by the alleged supplier but the learned adjudicating authority did not consider the facts and passed his impugned order. Since, refund of sales tax claimed against invoices of said supplier does not exceed output tax declared by him in his monthly sales tax return and this very fact can also be checked from their computer profile therefore rejection of refund on this account is illegal and unlawful.

(g) That the appellants produced sales tax returns for the period in question during the course of hearing but the charge of non-filing was not over-ruled as the learned adjudicating authority demanded an attested and verified copies of alleged sales tax returns which were not required under Standing Order No.03/2006 dated 2-11-2006 issued by the Collectorate of Sales Tax, Faisalabad. Rejection of refund on the charge of non-filing even after production. of alleged sales tax returns is highly unjustified and illegal.

(h) That the appellants have to collect relevant documents such as monthly sales tax returns and summary statements etc. for period in question. Since no documents are currently available therefore point at issue would be confronted upon due receipt of the same.

4. The respondents filed parawise comments. They submitted that: ---

(i) The appellants were asked to prove the alleged count and construction of goods purchased and their consumption in taxable supplies (exports) but he has failed to do so. Therefore, claim of refund against super fine count was rejected as purchases were not genuine.

(j) As the appellants failed to prove the genuineness of purchases of super fine count of yarn as they failed to provide the copies of supportive documents such as transportation documents etc. Hence -export of it how can be justified and proved. Further appellants also failed to provide the pro forma invoice and payment received from the foreign buyer of recipients of goods made from super fine count of yarn hence the reference quoted is not relevant to the instant case.

(k) The contention of the registered person is not correct as they failed to provide the documents which confirm the view point of the appellant that the unit was operative at the time of supply of taxable goods.

(l) As per STARR M/s Fazal Karim Textile Mills Limited, Azad Kashmir docs not exist. Further registered person failed to provide the supportive documents such as payment proofs, transportation documents etc. which proves that the purchases were genuine and related to the appellants.

(m) The stance of the appellant is incorrect as ample opportunity of being heard was given to the appellants and they failed to provide the supportive documents, such as attested copies of monthly sales tax return, sales register and summary statement as required vide Standing Order No.03/2006 to remove the objection raised by the STARR.

(n) STARR has reported that the supplier has not filed sales tax return for the tax period for which he has issued invoice to respondent. Therefore, it is clear that no invoice could be issued to the respondent by the supplier as per law and no tax has been deposited in National Exchequer. Thus the respondent has claimed illegal refund on invoice of that supplier who has not filed return. Therefore, refund against this undeposited sales tax is held inadmissible in terms of sections 10(4) and 11(2) of the Sales Tax Act, 1990 read with refund rules.

(o) As the appellants have accepted that supportive documents such as monthly sales tax returns and summary statements etc. as required vide Standing Order 03/2006 are not available. Therefore charges levelled in the show-cause notice established and legitimate Government dues are recoverable from the appellants.

5. Arguments were heard. The learned counsel for the appellant first contended that the learned Collector (Appeals) was not competent to dismiss the appeals filed by the appellant only on the ground of the appeal being barred by time. He argued that the learned adjudicating officer (Assistant Collector) did not have the jurisdiction under section 45 of the Sales tax Act, 1990 to adjudicate upon the cases under section 11(2) and 36 of the Sales Tax Act, 1990 involving amount of sales tax or the amount erroneously refunded exceeding Rs.1(m). He contended that the amount involved in both the cases exceeded Rs.1(m). He vehemently contended that the impugned orders-in-original passed by the learned adjudicating officer were void and illegal ab initio and there runs no limitation against a void order which was non-existent in the eyes of law. In support of his contention he cited "2002 PTD 87 (Karachi High Court) in the case "Federation of Pakistan v. M/s. Metropolitan Steel Corporation". The learned counsel for the appellant next contended that the impugned orders-in-original have been passed after the limitation period of ninety days as required under section 36(3) of the Sales Tax Act, 1990, and as such, liable to set aside on this ground too: He cited a number of judgments in support of his contention. The learned counsel for the appellant lastly contended that the appellant filed refund claims for the month of 12/2004 and 02/2005 and the same have been rejected on the basis of objections raised by the STARR, which is unlawful as the STARR system was introduced in the year 2006 and it cannot be implemented retrospectively.

6. The learned Auditor defended the impugned orders.

7. We have heard both the parties at length and perused the record available before us. The appeals are tenable. The first objection of the learned counsel for the appellant is regarding pecuniary jurisdiction of the learned adjudicating officer. Section 45 of the Sales Tax Act, 1990 deals with power of adjudication. The said section is reproduced for ready reference as under: -

[45. Power of Adjudication :---(1) In cases involving assessment of tax, charging of [default surcharge], imposition of penalty and recovery of amount erroneously refunded [or any other contravention] under this Act or the rules made thereunder, the jurisdiction and powers of adjudication of the Sales Tax Officers shall be as follows:

(i) Additional Collector:

Cases falling under subsection (2) of section 11 and section 36 without any restriction as to the amount of tax involved or amount erroneously refunded.

(ii) Deputy Collector:

(a) Cases falling under subsection (1) of section 11.

(b) Cases falling under subsection (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees.

(iii) Asstt. Collector:

Cases falling under subsection (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but does not exceed one million rupees.

(iv) Superintendent:

Cases falling under subsection (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded does not exceed ten thousand rupees.

8. Perusal of section 45 of the Act reveals that the learned adjudicating officer (Assistant Collector), could, at the relevant time, only adjudicate upon the cases involving amount of tax or the amount erroneously refunded not exceeding Rs.1(m). The amount involved in both the cases, Order-in-Original No.39/2006 is Rs.89,17,134, while in Order-in-Original No.40/2006 it is Rs.81,95,633, which definitely exceeded Rs.1(m). We are of the firm opinion that the learned adjudicating officer has transgressed his jurisdiction, which is unlawful. Further, relying on a judgment of the Hon'ble Karachi High Court cited by the learned counsel for the appellant (2002 PTD 87) "Federation of Pakistan v. M/s Metropolitan Steel Corporation" we hold that there runs no limitation against a void order, therefore, the order passed by the learned, Collector (Appeals) on the ground of limitation is not sustainable.

9. The next plea of the learned counsel for the appellant is that the learned adjudicating officer has not adhered the mandatory legal provision of section 36(3) of the Sales Tax Act, 1990 in which it has specifically and categorically been laid down that the cases would be decided within 90 days of the issuance of the show-cause notice. In this case; as per record placed before us, the show cause notice in respect of Order-in-Original No.39/2006 was issued on 9-3-2006 and in respect of Order-in-Original No. 40/2006, the show-cause notice was issued on 13-6-2006 and both the impugned orders were issued on 30-12-2006. When limitation period of 90 days, as has been laid down under section 36(3) ibid, is computed, it goes squarely beyond the prescribed limit of 90 days. In support of his contention, the learned counsel for the appellant cited the following judgments of Hon'ble Lahore High Court, Lahore and of this Tribunal:---

(1) 2008 PTD 60: M/s Super Asia Muhammad Din Sons (Pvt.) Limited v. The Collector of Sales Tax, Gujranwala.

(2) 2008 PTD 578: M/s Hanif Straw Board Factory v. Collector (Adj.) Customs Central Excise and Sales Tax, Gujranwala and 2 others.

(3) 2009 PTD (Trib.) 1263: M/s Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore.

10. While going through the contentions of the appellant, in view of the judgments cited above, that the impugned order has been passed after the limitation period, we find the view of the appellant correct. Documentary evidence, as produced before us, shows without any contradiction or rebuttal on the part of the respondents, that the show cause notices were issued on 9-3-2006 and 13-3-2006 respectively in Order-in-Original Nos.39/2006 and 40/2006 and both the impugned orders were passed on 30-12-2006. The limitation period provided in section 36(3) of the Sales Tax Act, 1990 expired on 9-6-2006 and 13-6-2006 respectively, as such the impugned, orders were passed after expiry of the limitation period of 90 days. There is no evidence to show that this period was extended by the Collector or the Board as the case c may be, nor thus is the case of the respondents. It being so, it remains to answer as to why the Government is revising the limitation period from 45 days to 90 days and then from 90 days to 120 days, if this limitation had no legal consequences. However, while going through the latest legal authorities as discussed above, we find the plea of the appellant correct.

11. Lastly, the learned counsel for the appellant contended that the appellant filed refund claim for the period 12/2004 and 02/2005, which was rejected on the basis of STARR objection. The learned counsel for the appellant vehemently contended that the STARR system was introduced in the year 2006 therefore it cannot be implemented retrospectively. After perusal of record we find the plea of the appellant correct.

12. In view of what has been discussed above, both the appeals are accepted and the impugned order-in-appeal as well as orders-in-original are set aside.

C.M.A./52/Tax(Trib.) Appeals accepted.