2010 PTD 2406

Versus Shafqat M. Sagar , Abdul Jabbar

Citation2010 PTD 2406

CourtINLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

ORDER

The captioned appeal has been filed by Messrs Mir Exports, Karachi (hereinafter called appellants) through Messrs S.M. Law Associates, Karachi against Order-in-Appeal No.120 of 2007, dated 24-3-2007, passed by the Collector of Customs, Sales Tax and Federal Excise (Appeals), Karachi.

2. Precisely, the stated facts of the case as recapitulated from .the available case record are that the Senior Auditor, Sales Tax Refund Group-VIII, of Collectorate of (Enforcement) Karachi on processing the sales tax refund claim to Rs.946,111 as filed by the appellant for the month of October, 2003 vide T. No. 121003100100 an amount of Rs.48911/2 was sanctioned and remaining claim to R6.277,200 was found objectionable due to STARR objection "Registration Suspended Supplier" and the refund claim amount to Rs.277,200 was inadmissible under section 10 read with Sales Tax Refund Rules, 2002, resultantly the claim was rejected.

3. A show-cause notice was issued to the appellants vide C. No.T-121003100101/1347, dated 28-3-2006, their letter No. NIL, dated 24-4-2006 in which they contested the observation raised by the respondent Deputy Collector (Refund), Karachi. Being dissatisfied with the reply to show-cause notice of the appellant, the case was adjudicated by the Assistant Collector (Refund Group-VIII), Collectorate of (Enforcement), Karachi, vide Order-in-Original No. 201 of 2006 dated 30-12-2006, in which he concluded as under:

"The dates of hearing were fixed on 8-4-2006 and 24-4-2006, The appellant appeared and submitted reply of show-cause notice, which were examined and found unsatisfactory as far as the objection of STARR was concerned, The claim was also replicated from STARR and the impugned invoices were still found under objection. "Registration Suspended", keeping in view position explained above, I have no option to reject amount to Rs.277,200 claimed by Messrs Mir Exports, Karachi, for the tax period October, 2003 against invoice under objection of STARR, "Registration suspended".

4. Being aggrieved with the impugned order-in-original the appellants filed an appeal before the Collector of Customs, Sales Tax and Federal Excise (Appeal), Karachi who vide his Order-in-Appeals Nos.114 to 120/2007 dated 24-3-2007, ordered as under:--

"I have examined the case record and given due consideration to the arguments made before me. The refund claim has not been ratified by STARR, it is apparent from the record that the appellants failed to meet the requirement of law contained in sections 7 and 10 of the Sales Tax Act, 1990 and Sales Tax Refund Rules, 2000, notified vide Notification S.R.O. 375(I)/2002 and as such. The disputed amount of Rs.3,770,326 was not admissible to them, I find that the adjudicating officer has rejected the refund claim on valid grounds and no new evidence or documents has been brought on record and appeal stage. Therefore, I have no reason to interfere with the impugned order. The appeal is accordingly rejected."

This order shall also be applicable to the following appeals involving identical facts and points of law. (Serial No.1 is present appeal).

S.No.

Name of Unit/Appeal No.

Claim No.

Claim Amount

Messrs Mir Exports, Karachi Appeal No. 01(103) Appeal/2007 filed against OINO-No.201/2006, dated 30-12-2006

T-1201003100101

Rs.277,200

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5. Mr. Shafqat M. Sagar, Advocate, for the appellant reiterated the arguments incorporated in the memo. of appeal and mainly emphasized on the following ten (10) points:

(i) That the show-cause notice dated 28-3-2006, is time-barred in terms of section 10 of the Sales Tax Act, 1990 read with Rule (8) of the Sales Tax Refund Rules, 2002. The case relates to the period October, 2003, while the show-cause notice issued to the appellants on 28-3-2006, i.e. after the lapse' of Two Years and three months. The said show-cause notice issued on the basis of above mentioned provisions, itself failed to meet the legal requirements stipulated under S.R.O.575(I)/2002 dated 31-8-2002, and all subsequent proceedings carried ultra vires, without jurisdiction and nullity in the eyes of law.

(ii) That the impugned order has been passed without giving opportunity of being heard as on the date of hearing i.e. 23-4-2006, the said order-in-original has been passed which is against the principle of "audi alterm partem" i.e, (no person shall be condemned without being heard) as held in various judgments by the apex courts e.g.

(a) 1969 SCMR 212 (Supreme Court of Pakistan).

(b) PLD 1964 SC 410 (Supreme Court of Pakistan).

(iii) That the appellants had fulfilled all the conditions/limitations under Rule 17, and Rule (9)(2) of the Sales Tax Refund Rules, 2002, therefore, the appellant have entitled to refund of input tax paid on the purchases of goods against valid sales tax invoices, in terms of provision contained in section 4 and section 10(2) of the Sales Tax Act, 1990,

(iv) That the respondent No. 2 had refused to allow the refund claims of the appellants on the basis of "default committed by the supplies". The said charge of the respondent totally baseless and against the provision of section 3(3)(a) of the Sales Tax Act, 1990, in this connection the majority order passed by the appellate Tribunal vide Sales Tax and FE (Enforcement,) Karachi v. Messrs Welfare Trading Co. Karachi, in which the departmental appeal was dismissed by the majority of the two numbers. In another identical case. This view was confirmed by Hon'ble High Court of Lahore in 2000 PTD 399, which was in turn accepted by the Hon'ble Supreme Court of Pakistan in PLD 2001 SC, 600.

(v) That the sections 4 and 10 of Sales Tax Act, 1990, give a right to the Exporters to claim sales tax refund on Exports adjustment/ refund for a tax period at the input/purchase stage would obviously amount to double taxation, this view is also strengthened by the judgment of Hon'ble Supreme Court of Pakistan in the case of PIDC v. The Federation of Pakistan,

(vi) That the Defunct, Assistant Collector (Enforcement) Karachi is not a Competent Authority to re-open the case and have jurisdiction to issue the show-cause notice to the appellants under the section 45-A of the Sales Tax Act 1990 judgment of the Tribunal, Karachi as reported 2010 PTD 883 (Trib.) is also supports the contention of appellants,

(vii) That regarding the suspension of sales tax registration/ blacklisting the Appellate Tribunal, Peshawar Bench, 2007 PTD (Trib.) 445 has ruled at para. (10) of Page 144, "that there must be concrete evidence with the sales tax department to declare that a particular Unit is a fake unit or an invoice is a fake invoice". In this case no such exercise was done by the sales tax department.

(viii) That the President of Pakistan has also rejected the Collector's representation vide Order No. 33 of 2005 Law FTO, on 10th December, 2005, in Complaint No. 526-K/2004 regarding the blacklisting of suppliers with retrospective effect filed by the Sales Tax Department,

(ix) That the appellants on the direction of the Customs Appellate Tribunal on 27-8-2007, has submitted a certificate of the Bank Al-Habib Ltd., Main Branch, 1.1. Chundrigar Road, Karachi, showing the payments to supplies against the valid sales tax invoices and the said certificate has also verified by the Senior Auditor of the Collectorate of (Enforcement)) Karachi,

(x) That the provisions of law has been misspelt and incorrectly applied in order-in-original. The impugned order is a true reflection of the bias approach adopted by the functionaries towards taxpayers by overlooking and avoiding the true spirit of the sales tax laws and protecting the rights of the taxpayers..

6. The appellants further contended that sales tax officer (Assistant Collector), has no jurisdiction to re-open the past and closed transactions. It is further contended that the Appellate Tribunal, Karachi Bench, in an identical case as reported in 2010 PTD (Trib.) 893 squarely applicable in the circumstances of present case, held as under:--

"As regards Issue No. (ii) that the act of issuance of show-cause notice was ab initio wrong inasmuch 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 to reopen a past and closed transaction within the framework of Sales Tax Law.

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.---"

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 claims falls within the purview 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.

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, 1987 every order or any insertion/amendment runs prospectively 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 (SC), 2009 PTD 16, 1993 SCMR and 2000 PTD 285.

7. On other side Mr. Muhammad Abdul Jabbar, Senior Auditor, Inland Revenue, RTO, Karachi, appearing for the respondent-Department, contended the refund claim was disallowed by the STARR System as operated by the Federal Board of Revenue (F.B.R.), Islamabad and without STARR System no claim was sanctioned and further he supported the Order-in-original. On the query of the court, he replied that the appellant will provide the sales tax records showing the refund claim has been processed through STARR System. No further arguments were raised by the departmental representative.

9(sic) Both parties have been heard. The issue involved in the appeal is the sales tax refund claims under section 4 of the Sales Tax Act, 1990. The appellant's claim to benefit of refund of input tax on the purchases or NOT against registration suspended by the supplies with retrospective effect. This issue has already been adjudicated by the Hon'ble superior Court of our country including the Appellate Tribunal. Appellants filed the sales tax refund claim for tax period October, 2003 vide T. No.121003100101, dated 13-12-2003 and after satisfaction, the processing office, sanction the sales tax refund claims on 22-4-2004 vide Refund Payment Order (RPO), No. 18407 of 2004 and remaining amount to Rs.277,200 was rejected after the lapse of more than three years through show-cause notice C. No. T-121003100101/1347, dated 28-3-2006 and vide Order-in-Original No. 201 of 2006 dated 31-12-2006.

10. The law of blacklisting and suspension of registration of the registered person was first time introduced through amendment in section 21 of the Sales Tax Act, 1990, vide Finance Act, 2004 (II of 2001), from 1-7-2004. In' this case the appellants purchased the certain goods (textile products) for export, on October, 2003. The copies of the cheques were enclosed in the memo of the appeal showing the Sales Tax has been paid and goods were exported in November, 2003. The tax' paid by the appellants on the purchases was refundable as input tax and the said sales tax refund was not sanctioned by the sales tax department on the ground of law of blacklisting and suspension of registration on 31-12-2006, pertaining to the tax period of October, 2003. No authority has been cited to support the proposition that if the person from whom the exporter purchased the goods is found to be blacklisted/suspect the input tax that has been charged by the seller from the exporter and has been deposited into the Government treasury cannot be' refunded. The Assistant Collector order dated 31-12-2006 by which the S.T. registration of supplier has been suspended cannot operate retrospectively.

11. The said issue has been discussed by the Hon'ble Lahore High Court as reported 1993 PTD 713 in the case of Messrs Firdouse Textile Printing Mills (Pvt.) Ltd., Faisalabad v. Federation of Pakistan through Secretary Finance and 5 others, the relevant Para is reproduced hereunder:---

"(5) It is trite law that a notification which has the effect of imposing liability or obligation cannot operate retrospectively in the absence of any legal sanction in the statute itself. In Messrs Army Welfare Sugar Mill Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652, Commissioner of Sales Tax (West), Karachi v. Kurddsons Ltd., PLD 1974 SC 180 and Kohinoor Textile Mills Ltd. v. Commissioner of Income Tax, Lahore, PLD 1974 SC 284- it was held by the Supreme Court that a notification which purports to impose a new liability or obligation cannot operate retrospectively in the absence of any legal sanction.

12. Under these circumstances, rejection of refund claims on alleged "Suspension of registration of supplier" "alone" is totally illegal and absolutely arbitrary. This sounds arrogantly whimsical (and discriminatory) when different treatment are meted out to different applications under exactly the same circumstances and that too by the same Adjudicating Officer.

13. In light of the above discussion and objection 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. The Deputy Commissioner of Sales Tax (Refunds), Karachi is, therefore, directed to sanction appellants pending sales tax refund claim under the provisions of Sales Tax Act, 1990.

H.B.T./168/Tax (Trib.) Appeal allowed.