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Petitioner: Messrs MAYFAIR IMPEX, KARACHI VS Respondent: COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX (APPEALS)
Court Name: Appellate Tribunal Inland Revenue Judge(s): Seema Imran, Ahmed Saeed Title:Messrs MAYFAIR IMPEX, KARACHI vs COLLECTOR OF CUSTOMS, CENTRAL
EXCISE AND SALES TAX (APPEALS) Case No.:M.A. (Rect) No.43/KB of 2014 in New S.T.A. No.678/KB of 2009 in Old S.T.A. No.359/K of 2007 Date of Judgment:2016-11-23 Reported As: 2018 PTD (Trib.) 1131 Result: Appeal allowed Judgment ORDER Through this order, we intend to dispose off Rectification Application filed under section 46 of the Sales Tax Act, 1990 (hereinafter to be referred as Act) and Section 194-B(2) of the Customs Act, 1969 and Section 221 of the Income Tax Ordinance 2001 against the order of the Tribunal dated 19.06.2014 and Sales Tax Appeal No.678/K 2009 against Order-in-Appeal No 393/07 dated 12.06.2007 maintaining the order passed by respondent, upholding the Order-in-Original No.238/06 dated 02.12.2006 passed by Assistant Collector, Refund Group-VIII, Collectorate of Sales Tax (Enforcement), Karachi. 2. The appellant was represented by Mr. Nadeem Ahmad Mirza, Advocate and respondent department was represented by Mr. Riaz Ali Shah, Additional Commissioner Inland Revenue. 3. Brief, facts of the case as stated in the impugned order are that the appellant is a commercial exporter and registered with the Sales Tax Department. He exports same state goods after procuring from the stockiest/suppliers or manufacturers. In the month of March 2002 he exported 09 consignments of Polyester Made Ups and Leather Jackets/ Made Ups after procuring those M/s. Sumaira Exports and Anmol Exports. Lahore against 18 Sales Tax Invoices, as detailed in Annexure "H" to the appeal, issued by the suppliers as per the section 23 of the Sales Tax Act, 1990 and filed monthly Sales Tax Return cum payment challan within the stipulated period as enunciated in Section 26 of the Sales Tax Act, 1990 for the month of March 2002 through which claimed zero rating under Section 4 and claimed refund for the suffered amount of taxes on the purchases as per Section 10 (2) of the Act, 1990 for Rs.4,952,683.00 prescribed in Rule 9 of the Sales Tax Refund
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Rules, 2000 (here-in-after to be referred as Rules) submitted supportive documents inclusive of copies of cheques and bank statement for the confirmation of payment of the invoiced amount as per mandated requirement of Section 73 on 18.09.2002. Since, the refund was not sanctioned within 30 days from the date of submission of supportive documents in terms of Rule 7, appellant sought audience with the Assistant Collector concerned and the Collector of Sales Tax (Enforcement) for settlement /sanction, but of no avail, resulting to which appellant decided to windup his business and proceeded to USA while directing his consultant to file application for de-registration, which he did on 08.12.2003 with the Collector of Sales Tax with the specific intimation that appellant is not available at his registered address and future correspondence in regards to his pending refund should be directed to his lawyer/consultant address. Appellant further instructed his consultant to file complaint with the Hon'ble FTO, which was filed vide C-897-K/04, on which recommendation dated 12.04.2005 was issued. Being aggrieved the Collector of Sales Tax Enforcement filed representation with the President of Pakistan, who set aside the finding vide order dated 26.05.2006 and directed the appropriate officer of the department to decide the refund application by a formal order after providing opportunity of being hearing on priority basis so that the appellant may pursue remedy against the order, if felt dissatisfied. Consequent to which the Deputy Collector, Refund Group-VIII issued show-cause notice to the appellant with the allegation that he committed tax fraud within the meaning of definition given in Section 2(37) of the Act, 1990, as evident from the fact that the furnished sales tax return of the suppliers upon verification are found to be not available with the Collectorate of Sales Tax and Central Excise , Lahore and even National Bank of Pakistan, Model Town Branch, Lahore and why their refund should not be rejected under Section 10 of Act, 1990 read with Refund Rules, 2002 and why penal action under Section 33(4) (a), (b), (c) and (f) of the Act, 1990 may not be initiated against him for committing an act as defined under Section 2(37) (but not served within the meaning of Section 56 of the Act). Upon receipt of no reply to the show-cause notice he passed order dated 07.12.2006, paras 5 and 6 of the order is relevant, which is as under: "5. From the fact narrated above, there is strong reason to believe that M/s. Mayfair Impex, showing it purchases are fake as the suppliers vide Sales Tax Return have shown no business activity in the relevant tax period. The refund claimant tried to hood-wing the department by providing fake sales tax return of supplier, which were not verified by the concerned Collectorate as well as National Bank of Pakistan. Thus M/s. Mayfair Impex, committed tax fraud under Section 2(37) of the Sales Tax Act, 1990. The non-appearance on the date of hearing and non-submission of the reply of show-cause notice also strengthened the allegation of show-cause notice which stands established without out any shadow of doubt." "6. Keeping in view the position explained above I have no option but to reject the amount of Rs.4,952,683/- claimed by M/s. Mayfair Impex, against fake and flying invoices and also order for imposing one hundred percent penalty of the amount of tax involved Rs.4,952,683/- under sections (3 and 4) a, b, c, f of the Sales Tax Act, 1990 for committing an Act as defined under Section 2(37) ibid. They may also be proceeded against in terms of Section 37 of the Sales Tax Act, 1990 after thorough investigation of their claims." 4. The order was challenged through an appeal before the respondent under the provision of Section 45-B of the Act, who rejected that vide order dated 12.06.2007, operative para 6 is relevant and is reproduced here-in below: "6. I have examined the case record and given due consideration to the arguments made before me. It needs to be stated that refund is nothing but re-imbursement, to the exporter, of an amount received as Sales Tax by the Government on the goods which are consumed in export production. Obviously, re-imbursement can take place only in a situation in which the amount claimed as refund is established to have been received by the Government in the first place from person who
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supplied goods to the exporter otherwise any claim of refund would not be lawful. In the instant case there is clear evidence on record to the effect that the amount claimed by the appellants as refund has not been paid to the Government; not only the appellants supplier did not file sales tax return but also appellant presented forged evidence of payment of Sales Tax to create an impression that their suppliers has discharged their tax liabilities. Moreover, there is no evidence to the effect that the appellants actually purchased any goods from their so-called supplier. Thus, it is clear that neither the appellant purchased any goods from the suppliers not the so-called suppliers paid any amount as sales tax to the Government. Therefore, the question of any refund does not arise in this case. Under the circumstances, I do not consider it necessary to take into account the law point raised by the learned Counsel; law has to be used to serve the end of justice and not to perpetuate unlawful activities. I accordingly, conclude that the arguments advanced by the learned Counsel and the precedents quoted by him are irrelevant and untenable. Consequently, I find the appeal absolutely devoid of merit and reject the same." 5. The appellant has challenged the order of the forum below through Mr. Nadeem Ahmed Mirza, Advocate on behalf of the appellant reiterated the arguments incorporated the in memo. of the appeal and emphasized that: (i) The show-cause notice was prepared and issued but was not dispatched to the appellant. Resultant, it is not served in terms of Section 56 of the Sales Tax Act, 1990, confirming that the show cause was never issued to the appellant rendering the whole proceeding ab initio, void. Reliance is placed on reported judgments 2006 PTD 978 and 2008 PTD 1968. (ii) The show-cause notice and order-in-original were issued and passed in excess of jurisdiction by the authority issuing and passing the orders. For rejection of claim of refund of sales tax show- cause notice has to be issued under Subsection (2) of section 11 of Sales Tax Act, 1990 by the competent authority empowered under Section 45 ibid. The refund amount of appellant in the subject case is Rs.4,952,683.00 which fall under the powers of Additional Collector. Contrary, the Deputy Collector issued the show-cause notice and passed order rendering it ab-initio and void. Reliance is placed on PLD 1971 SC 184, PLD 1976 Supreme Court 514, 1992 ALD 449, PLD 2001 SC 514. Sales Tax Appeal No.444/03, S.T.A. 465/07, 2004 PTD 624, 2010 PTD (Trib.) 1636, 2010 PTD 465 and 2011 PTD (Trib.) 1010. (iii) The show-cause notice in the instant case of appellant has to be issued within 14 days as per expression of Rule 8 of Sales. Tax Refund Rules, 2002 from the date of receipt of supportive documents. Which were submitted in the month of October, 2002. Contrary, the show-cause notice was issued on 25.06.2007 rendering the show-cause notice barred by time more than 5 years. Hence, no proceeding can be undertaken against a time barred show-cause notice as per laid down law by the Superior Courts. Reliance is placed on reported judgment 1992 SCMR 1898, 2004 PTD (Trib.) 2898, 2006 PTD 537, 2007 PTD 1862, 2008 PTD 609, 2008 SCMR 1510, 2008 PTD 2025, 2008 PTD 1539, 2009 PTD 1247, 2010 PTD (Trib.) 81, 2010 PTD (Trib.) 1146, 2010 PTD (Trib.) 1469, 2010 PTD (Trib.) 1759, 2010 PTD (Trib.) 2421 and 2011 PTD (Trib.) 1010. (iv) That the show-cause notice purported to be prepared for the refund of March 2002 on 13.07.2006 (and although not served) under Subsection (2) of the Sales Tax Act, 1990. The case should had been decided within 90 days from the date of show-cause notice in terms of proviso of sub section (4) of Section 11 or within such extended period by the Collector for which reasons has to be recorded and that extended period does not exceed further 90 days. The impugned order-in- original in the instant case is silent in regards to the said extension, meaning thereby no extension was sought and order has to be passed within initial 90 days. Contrary, order was passed after expiry of the 90 days, rendering the order barred by 02 days. Hence, it is ab-initio, null and void. (v) The appeal with the respondent was filed on 23.12.2006 and an order under the proviso of subsection (2) of section 45-B of the Act should had been passed by the respondent within 90
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days from the date of filing of appeal or within the further extended period of 90 days i.e. 180 days in all, provided the extension has been accorded prior to expiry of initial period of 90 days i.e. 12.03.2007 and that also after serving notice to the aggrieved person as held by Supreme Court in his reported judgment 1999 SCMR 1881. (vi) That contrary the respondent extended the period on 12.06.2007 as evident from para.4 of Order-in-appeal containing his remarks that extension was made due to' "un-avoidable circumstances and administrative changes" despite not because appellant sought no adjournment and neither any administrative changes were available as the respondent was the authority at the time of filing appeal and even at the time of decision. Resultant, the extension is illegal and suffer from lack of jurisdiction, even otherwise it was accorded after expiry of initial period, which is tantamount to "flogging a dead horse in an effort to bring it to life". Once matter become barred by time then leasing life to issue through the said finding will not effect the past and closed transaction. Beside subsequent enhancement in the period of limitation shall not have the effect of re-opening the past and closed transaction and resuscitating the matters which attained finality and had gone in the annals of history. Hence, the orderin-appeal is barred by 91 days rendering it void and ab-initio as held by the Judicial Forum in Order --- in-Sales Tax Appeal No.K-255/01 (New Nos.286/04 and K-309/01) and Supreme Court in reported judgments 1998 MLD 650, 2004 PTD 369, 2005 PTD 23, PTCL 2005 CL 841, PTCL 2006 CL 836, 2007 PTD 2092, 2007 PTD 117, 2008 PTD 60, 2008 PTD 578, 2009 PTD 762, 2010 PTD (Trib.) 1631, (sic) PTD (Trib.) 1636, 2010 PTD (Trib.) 2117 and 2011 PTD (Trib.) 1010. (vii) That it is not out of place for the appellant to state that where statute prescribed a particular mode or mechanism to do an act, the same is to be done in the same manner and in the framework of relevant legal provisions, contrary, the show-cause notice has been issued by an incompetent authority, which lack jurisdiction to do so. Reliance is placed on reported judgment PLD 1971 SC 197 and PLD 1973 SC 236. (viii) That the stance taken by the department that the refund is nothing but reimbursement to the exporter of an amount received as Sales Tax by the Government which was paid on the goods exported, obviously, re-imbursement can take place only in a situation in which amount claimed as refund is established to have been received by the government in the first place from the person who supplied the goods otherwise any claim of refund would not be lawful as expressed in Subsection (4) of Section 10 of the Act, is completely based on forced construction of law and to prove his point with clarity, the appellant feels appropriate to comment on the same and for the sake of regularization and fair-play and for ease reproduce the expression of Section 10(4): "Where there is reason to believe that a person has Claimed input tax credit or refund which was not admissible to him, the provisions regarding time limit shall not apply till the investigation, including the verification of the deposit of tax claimed as refund, is completed and the claim is either accepted or rejected." (ix) The expression of whole of Section 10 including Subsection (4) confirms that it is a machinery section as are sections 7, 8, and 9 and not a charging Section hence no charge can be levelled under the said. Section. Nevertheless, despite of the said fact, if for a while it is considered that charge can be levelled under the said section, even then it speaks deposit of tax by a registered person claiming refund under Subsection (2) of Section 10 of the Act with the agent of exchequer as expressed in Section 3(3)(a) of the Act, reading as "in case of supply of the goods, of the person making the supply", which the appellant did in terms of Section 73 of the Act. Hence, if the suppliers are non filer or had not deposited the collected tax mechanism is provided in Sections 11, 36 and subsection (e) of Section 37C of the Act. Not a single Section of the Act lays any such condition that the purchaser or claimant shall ensure deposit of collected sales tax by the suppliers in the Government Treasury, failing to which his refund shall either he held or rejected. Reliance is placed
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on the finding/decision of the Hon'ble Federal Tax Ombudsman in Contempt application in complaint No.C526 M/s. Innovative Impex, Karachi v. Revenue Division annexed as Exhibit "AV" at pages 202-205 of memo. of appeal), order in Sales Tax Appeal No.H-212/04, finding/decision of the FTO in Complaint No. C-498-K/2004, Order No.50/2005 of FBR issued under Section 47(A) of the Sales Tax Act, 1990 annexed as Exhibit "AY" to "BA" at pages 231 to 247 and reported judgment PLD 2001 Supreme Court 600, PTCL 2002 CL 115, 2006 PTD 2429, 2010 PTD 399 and 2010 PTD (Trib.) 635. (x) That irrespective of the above, it is worth mentioning here that the refund applied by, the appellant is governed by Sales Tax Refund Rules 2000 (S.R.O. No.417(I)/02 dated 20.06.2002 ) and not the Sales Tax Refund Rules, 2002. The Refund Rules, 2000 did not prescribed the condition of payment proof and in support of his stance the appellant lays reliance on the majority decision issued by the Appellate Tribunal in Sales Tax Appeal No. S.T. 217/2004 (K-2) annexed as Exhibit "AU" at pages 187-201 of the memo. of appeal. (xi) The adjudicating authority deposit of discussed above illegalities has also charged the appellant under Section 2(37) of the Sales Tax Act, 1990. Under which no charge can be made by virtue of the fact that it is definition of "Tax Fraud". The appellant fails to digest the said allegation as these are based on supply of copy of Sales Tax Return cum Payment Challan supplied by the suppliers for the satisfaction of the appellant in regards to his business activities. No provision of Sales Tax Act empowers the Adjudicating authority to question the appellant about the act and commission of the suppliers as "the falseness/fakeness has to be construed against the maker of the documents as held by the High Court in its reported judgments PLD 1973 Karachi 49". That neither allegation of tax fraud can be levelled against the appellant, unless the initial burden of proof lays on the adjudicating authority levelling the allegation under the said section is not discharged. Contrary, charge is levelled mere on presumption/assumption despite mandated to level the charge on the basis of un-refundable incriminating evidence. Reliance is placed on reported judgment [(1985) Tax (H.C. Kar.(sic)] 2004 PTD 868, 2010 PTD (Trib.) 957 and 2010 PTD (Trib.) 1827. (xii) That for claiming refund by a tax payer under section 10(2) of the Sales Tax Act, 1990 read with Sales Tax Refund Rules, 2002 he should hold taxable invoices as per expression of section 23, had filed monthly Sales Tax Return-Cum-Payment Challan under Section 26, exported goods which are zero rated under Section 4 and subsequently had filed supportive documents specified in Rule 9 of the Sales Tax Refund Rules, 2000 against claim refund through Monthly Sales Tax --- Cum- Payment Challan. The appellant is holding valid taxable invoices and payment against those to the suppliers were made strictly in terms of Section 73 of the Act. The respondent has not been able to place on record any evidence by which it can be inferred that the invoices issued by the suppliers were false as mandated under Articles 117 and 121 of Qanun-e-Shahadat (10 of 1984 and clear directive issued by the Board in sub-para (iv) of para 2 of letter C.No. Dy-730- M(L)/2002 dated 15.06.2002. Hence, the adjudicating authority admitted in absolute terms that the appellant acted in letter and spirit of the Act and Rules. Any action which is based upon no evidence is not permitted by law and High Court of Sindh laid down the law in this regards in the judgment 1991 PTD 551. (xiii) That lastly, it is imperative for the appellant to place on record the vital fact that the respondent in the case of appellant is advancing various objections one after another despite of the fact that the Collectorate of Sales Tax sanctioned refund of M/s. Decent Exports, Karachi along with additional amount guaranteed under Section 67 ibid despite of the fact that the suppliers from which the goods were purchased by M/s. Decent Exports were blacklisted later on and amount so sanctioned was adjusted towards adjudged recovery vide Sales Tax Refund Payment Order C.No. 18/200-Law/FTO/Decent Exports/ 03/6267 dated 14.04.2005 vide Order No.814/Reg/STH/ Suspended/03/1036 dated 28.02.2004. Whereas, yet in another case of GEE Kay International,
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Karachi refund was sanctioned upon passing of order-in-original by the Additional Collector of Sales Tax (Adjudication) vide No.234 of 2005 dated 28.07.2005, wherein show-cause notice was vacated containing the allegation of tax fraud under section 2(37) of the Act on the strength of invoices of the suppliers of the exported goods, which were later on declared to suspected/blacklisted against the recovered amount vide refund payment order No.T- 110802100514/6199 dated 23.06.2006 for Rs.1,131,335.00 (See annexed Exhibit "BD" to "BC" at pages 276 to 292 of memo. of ,appeal). The appellant is being given a differential treatment by the Collectorate of Sales Tax, which is tantamount to discrimination which is barred under the Articles 4 and 25 of Constitution of Islamic Republic of Pakistan and the principal laid down by the Superior Judicial Fora in reported judgments 2002 SCMR 312, 2002 PTD 976, 2005 SCMR 492, 2007 PTD 361, 2010 SCMR 431 and 2009 PTD 1507. 6. The Tribunal through order dated 19.06.2014 rejected the appeal, while observing in para reading as: "3. A plain reading of the above observation of the learned Collector (A) we find that the learned Collector (A) has observed that the amount claimed by the appellant as refund had not been paid to the Government not only that the appellant supplier did not file sales tax return but also the appellant prescribed forged evidence of payment of sales tax to create an impression that their suppliers had discharged their tax liabilities. Moreover, there is no evidence to the effect that the appellants actually purchased any goods from their so-called supplier. Thus, it is clear that neither the appellant purchased any goods from the suppliers not the so-called suppliers paid any amount as sales tax to the Government. Before us learned counsel has failed to submit any proof/evidence/documents to rebut the finding of the learned Collector (A) which is hereby upheld." 7. The applicant being aggrieved from the order filed rectification application dated 2.07.2014 on the strength of the following submission: (a) Whether any proceeding can be initiated without serving of show-cause notice as stipulated in section 56 of the Sales Tax Act, 1990? (b) Whether Assistant Collector of Sales Tax can issue show-cause notice and subsequently pass an order in the case in excess to his monitory limit given in section 45 of the Sales Tax Act, 1990? (c) Whether show-cause notice was time barred by 04 years and 08 months and to be annulled as the same was issued on 03.07.2006 i.e. beyond the stipulated period of 14 days from the date of submission of supportive documents dated 13.09.2002, as expressed in Rule 8 of Sales Tax Refund Rules, 2000? (d) Whether on the facts and circumstances of the case the Assistant Collector erred in law in travelling beyond the recommendation of the Hon'ble Federal Tax Ombudsman and order issued by the President of Pakistan? (e) Whether the order-in-original is time barred being issued by the adjudicating officer in terms of Subsection (4) of Section 11 of the Sales Tax Act, 1990 beyond the period of 90 days or the extended period of (90) days? (f) Whether order-in-appeal passed by the respondent is barred by limitation in terms of Subsection (2) of Section 45-B of the Sales Tax Act, 1990 to be with judgment of Superior Judicial Fora? (g) Whether payment of tax on the goods supplied in Pakistan rest with the buyer/purchaser in terms of charging section of 3(3)(a) of the Sales Tax Act, 1990? (h) Whether under any clause of the Sales Tax Refund Rules, 2000 claimant is duty bound to supply the copies of documents submitted by the suppliers during the course of his taxable activities with the Collectorate of Sales Tax of respective jurisdiction? (i) Whether the respondent can give differential treatment to the appellant as against other under
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the respective Article of the Constitution of Islamic Republic of Pakistan? That it was mandated upon the learned Appellate Tribunal to give reasoning of rejection of the, grounds of appeal while passing order, instead of issuance of a perfunctory, cursory and non speaking order, failure to give decision on the grounds of memo. of appeal and on the supplied relied upon judgments, despite mandated to do so as per laid down law in reported judgment 2002 CLC 825 wherein, the Hon'ble Division Bench of the High Court held that: "Failure to give decision on each issue --- Trial Court while deciding the suit had framed six issues but did not extends reasons separately on all issues and decreed the suit. --- while deciding appeal the Appellate Court had also not decided the suit --- while deciding appeal 'the Appellate Court had also not deciding the appeal issue-wise. Both the Courts below had disregarded mandatory provision of O.XX, R.5, C.P.C. and O.XLI, R 31, C.P.C. respectively. Where in the judgment the Appellate Court had not stated points for determination, decision thereon and the reasons for its findings, the same was not a "judgment" according to law---- Trial Court and Appellate Court having acted in exercise of its jurisdiction with material irregularity". The Division Bench also held that "Good judgment must be…
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