2010 PTD 2248

ORDER

MUNSIF KHAN MINHAS, JUDICIAL MEMBER.--- These seven sales tax appeals have been filed by the Department against the sales tax Order-in-Appeals Nos. S-38, 37, 35, 39, 40, 36 and 41 dated 17-2-2010 passed by the learned CIR(A-II) on the following common grounds:--

(1) The CIR(A) was not justified to pass the impugned order without providing opportunity of being heard to the respondent (Department), which is against the norms of natural justice.

(2) The CIR(A) was not justified to reply upon the submissions of the then appellant which are baseless and against the facts of the case when the case was adjudicated under section 11 of Sales Tax Act, 1990 read with Rule 8 of S.R.O. 575(I)/2002 dated 31-8-2002.

2. Brief facts of the case are that the Deputy Collector (Adjudication) allowed refund to the taxpayer against the invoices of those registered person who were not traceable/blacklisted. Accordingly same is recoverable in terms of section 36(1) of the Sales Tax Act, 1990. The appellant was confronted with relates issues through show-cause notice. The appellant filed reply which was considered unsatisfactory. Therefore, the Deputy Collector (Adjudication) rejected the claim of refund as under:---

"I have gone through the case records and submissions of the department and on the basis of available record and arguments put forth by the respondents and come to the conclusion that the respondents have failed to submit documentary evidence to establish the admissibility/validity of input tax amounting to Rs.128,127 claimed as refund against invoices issued by Messrs Bahoo Traders, having sales tax registration No.03-98-9999-197-82, and Messrs Nadeem General Trading Company, having sales tax registration No.03-97-9999-568-19.

In view of the above, the charges levelled in the show-cause notice against the respondents, stand established and therefore, input tax amounting to Rs.128,127 claimed as refund by the respondents is hereby rejected under section 11 of the Sales Tax Act, 1990 read with Rule 8 of S.R.O. 575(I)/2002 dated 31-8-2002."

Being aggrieved with the treatment meted out by the Deputy Collector (Adjudication), the assessee preferred appeal before learned CIR(A), Islamabad who observed as under:

"He pleaded his case as per the grounds of appeal. The AR contended that since the default was not committed and the tax was paid to the supplier by the appellant which included in the payment made, as per the invoices, therefore the default lied with the seller and ,not the appellant. The arguments presented have been given due consideration and found the contentions of the AR sound enough. Accordingly the sales tax charged is held to be unjustified and the said order-in-original is vacated."

3. Learned D.R. has supported the order of the Deputy Collector (Adjudication) contending that the CIR(A) was not justified to pass the impugned order without providing opportunity of being heard to the respondent. (Department), which is against the norms of natural justice. Learned D.R. has argued that the CIR(A) was not justified to rely upon the submission of the then appellant which were baseless and against the facts of the case when the case was adjudicated under section 11 of Sales Tax Act, 1990 read with Rule 08 of S.R.O. 575(I)/2002 dated 31-8-2002.

4. Learned AR of the assessee has contended that the input tax from registered person/suppliers was well bonded with payment through cross-cheques which were duly verified by the bank statement and sales tax invoices submitted by the appellant to establish that he duly fulfilled the obligation towards exchequer as required under section 73 of the Act, hence the rejection of refund claim is uncalled for, unjustified and legally not maintainable and the same should have allowed to the appellant as claimed. The contention of the learned AR is that the deferring and disallowance of refund on account of STARR/RRAS objection "exceeds Declared Output" was not justified under law as STARR/RRAS has no any standing in the Sales Tax Act, 1990 especially when the taxpayer has fulfilled all his obligations under section 73 of the Act, by providing bank statement, copies of cross cheques and sales tax invoices and where supplier parties are also existing as sales tax registered person. Learned AR has urged that it is a well settled principle of law that order already passed by any authority can only be reopened (if required), by the officer higher in rank to the officer who passed the order sought to be reopened on some definite basis. This principle has been denied in these cases hence the order passed is illegal, without jurisdiction and unjustified. He further contends that no one can be judge of his own cause, is a norm of natural justice which was denied by the Deputy Collector (Refund) as the show-cause notice was issued by the Deputy Collector (Adjudication) and the order was also to be passed by him but the same was passed by Deputy Collector (Refund) while law requires that the allegation levelled by one officer should be adjudicated by another officer higher in authority to the later one. Hence, the order passed is illegal, unjustified and not tenable under the law. He has stressed that it is 'not clear that whether any action has been taken regarding the allegation levelled during course of proceedings against the supplier on the basis of which input tax was claimed are fake ones. He has argued that whether any recovery notice has been issued to the suppliers along with the taxpayer simultaneously.

5. After hearing respective contention of the parties, I feel no hesitation to say the basic ingredients of refund is that if any amount is deposited in government Exchequer that can only be refunded, if the taxpayer has taken the refund and authority issuing refund has lost sight of this aspect. It is again recoverable. Now question arises that registered person has no fault if supplier has not paid sales tax or he is blacklisted. The blacklisted unit's registrations were suspended by the Board. Therefore, as per the provision of subsection (2) of section 21 of the Sales Tax Act, 1990 input tax/refund cannot be allowed against fake invoices, even if the requirement of section 73 of the Sales Tax Act are fulfilled. The STARR is a name of software which helps to audit/ scrutinize the cases for refund. The STARR's objection "exceeds declared output' means that more refund is being demanded than the declared output of a particular registered person. The respondent claimed refund which has been rejected with the help of STARR's scrutiny. The sales tax authorities are empowered under section 36 of the Sales Tax Act to recover the refunded amount. Section 8A i.e. "joint and several liability of registered persons in supply chain w ere tax unpaid" does make responsible both the parties involved in sale and purchase. Therefore, the respondent held responsible for making such transactions with fake or unreliable persons.

So order passed by learned CIR(A) hereby stands vacated. The input tax claimed as refund by the respondent has rightly been rejected under section 11 of Sales Tax Act, 1990 read with Rule 8 of S.R.O. No.575(I)/2002.

Before parting with once again I highlight same Golden Principle that only that penny will be refunded which has been deposited in Government Exchequer. If in chain one of transacting party has not deposited the sales tax in Government Exchequer, the claimant will be deprived of that amount of refund. Remedy of claimant will lie inter se the transacting parties and not with the Government. I would also suggest to improve the pace of updating the data of STARR.

H.B.T./157/Tax.(Trib.) Appeal allowed.