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Petitioner: Messrs MALIK ENTERPRISES, RAWALPINDI VS Respondent: COMMISSIONER INLAND REVENUE (APPEALS-III), ISLAMABAD
Court Name: Appellate Tribunal Inland Revenue Judge(s): Jawaid Masood Tahir Bhatti, Sohail Afzal Title:Messrs MALIK ENTERPRISES, RAWALPINDI vs COMMISSIONER INLAND REVENUE
(APPEALS-III), ISLAMABAD Case No.: M.As. (AG) Nos.44/IB, 45/IB and S.T.As. Nos.327/IB, 50/IB of 2012 Date of Judgment:2013-01-08 Reported As: 2013 PTD (Trib.) 1189 Result: Appeal accepted Judgment ORDER ' Through these two titled Sales Tax Appeals the appellant registered person under section 46 of the Sales Tax Act, 1990 has assailed the two separate impugned orders of the learned Commissioner Inland Revenue (Appeals-III), Islamabad bearing Order-in-Appeal No,50 of 2011 dated 13-8-2012 and 193 of 2011 dated 2-1-2012 which are arising out of the Order-in-Original No,50 of 2011 dated 25- 1-2012 and No,153 of 2011 dated 1-6-2011 respectively. 2. Regarding the above titled S.T.A. No,327/12 following grounds of appeal and prayers have been framed:-- "4.1 That the impugned order passed by the respondent No,3 is non-speaking, illegal, incorrect against the facts as well as against the law. 4.2 That the respondent No,3 was duty bound to pass speaking order but he passed the impugned order without answering the legal grounds which is - against the natural as well as administration of justice. 4.3 That respondent No,3 misdirected himself and passed order that no evidence of payment of tax by the supplier has been provided. It is significant to mention here that appellate has no any access on the records of suppliers, the respondent No,3 himself admitted that suppliers of the appellant has declared the name of the appellant in his monthly sales tax return which fulfill the requirement of law. It is also wroth important to mention here that it is a case of claim of input tax against the invoices issued by the Blocked and suspended units. In the instant case no proof of tax payments made by the suppliers of the appellant as required. Only one thing which required in the instant case is that at the time of transactions the suppliers of appellant were active or not.
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4.4. That the contention of the respondents Nos.2 and 3 that appellant claimed input tax against fake invoices is not correct and against the facts of the case. The word "fake invoice" has not been defined in anywhere in the Sales Tax Act, 1990. The dictionary meaning of "fake invoice" is false invoice, counterfeit invoices, forged invoice, phony invoice or sham invoice. But in the instant case our invoices are neither false nor counterfeit nor forged. If concerned department failed to recover the sales tax amount from our suppliers at the relevant time, the demand of the same amount from appellant is against the natural justice as well as against the Constitution of Islamic Republic of Pakistan, 1973. 4.5. That contention of the respondents Nos.2 and 3 the appellant claimed Input Tax adjustment on the basis of fake flying invoices and no any physical transfer of goods have been taken place is without any concrete evidence and based on assumptions. 4.6. That the contention of the respondents Nos. 2 and 3 regarding using of pin and password of other registered persons (suppliers of Appellant) for claiming of input tax is based on assumption and contradictory to the facts. The respondent No,2 was duty bound to disclose their evidence before alleging the shameful allegation regarding using of pin and passwords of different registered person. It is correct, intelligence wind has discovered a gang who were engaged in the business of sales and purchases of, invoices but appellant suppliers have no concern with the said gang. 4.6. That it was the duty of the respondent No,2 and also a legal requirement that before passing the impugned order, respondent No,2 was required to disclose the statement of registered persons whore pin an passwo rd has been used by appellant. It is a stalled principle of law that in all proceedings by whomsoever held, whether Judicial or administrative the principle of Natural Justice and administration of justice have to be observed if the proceedings might result in consequences affecting "the person or property or other right of the parties concerned. 4.7. That Article 117, Qanun-e-Shahadat Order, 1984 has laid down general principle that any person dependent upon existence of the fact, then he has to prove those facts. In the instant case the respondent No,2 claimed that the appellant used the pin and passwords of the different suppliers and claimed input tax but respondent No,2 failed to prove their assertion with credible evidence. It is pertinent to mention here that statement of registered person whose pin and passwords was used by the appellant are very important, so the burden to prove their assumptions is on respondent No,2, because it is settled and fundamental principle of law of evidence that whosoever alleges existence of a particular fact must prove same. 4.8. That no proper hearing, providing to the applicant and no any material evidence has also been shared with the applicant. 4.9. That the sections 7, 8 and 8A read with section 73 of the Sales Tax Act, 1990 are not charging sections and is a fundamental principal of law that without creating a charge tax could not be recovered. 4.10. That sections 8(1)(d), 8(1)(ca) and section 8A is against Articles 4, 8, 18 and 77 read with entry 49 of the Fourth Schedule of legislature list the Constitution of Islamic. 4.11. That before invoking the section 8(1)(ca) of the Sales Tax Act, 1990 it is the duty of the prosecution to prove that supplier of the respondent has not declared the sales of respondent in their monthly Sales Tax Returns. Whereas the appellant supplier's has declared their sales in the name of appellant, so the invoking of section 8(1)(ca) is illegal. 4.12. That before invoking the section 8(1)(d) of the Sales Tax Act, 1990, it is the duty of the Prosecution to establish that the invoices issued by the supplier are fake. It is worth important to mention here that under Article 117 of the Qanun-e-Shahadat, 1984 the burden of, proof ,is on the shoulders of prosecution/ adjudicating authority. In the instant case prosecution failed to prove, their, assertion as required under the law.
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4.13. That before invoking the section 8A, it is the duty of the prosecution to establish that the respondent was in the knowledge or has reasonable grounds to suspect that some or all of the tax payable is unpaid. In the instant case prosecution failed to prove the same. 4.14. That the charge of tax fraud has no legal consequence in the light of chain of judgments of superior courts, wherein it has been laid down "in order to attract the provision of tax fraud the initial burden lies on the department and no on the accused person" (2004 PTD 868). ' In view of the above it is respectfully prayed that the appeal may kindly be accepted and declare the impugned Order-in-Appeal No,50 of 2012 as well as Order-in-Original No,50 of 2011 illegal, incorrect as well as against the facts up to the extent of this appeal." 3. While regarding the S.T.A. No,50 of 2012 following grounds and prayer have been agitated:-- "(5) That the impugned Order is illegal, incorrect against the natural as well as administration of justice up to the extent that suppliers mentioned in the para 10 of impugned order has failed to declared their sales in annex-c of their monthly Sales Tax Return. (6) That the contention of the respondent No,2, that the suppliers of the appellant are dummy/factitious, blocked/inactive is illogic, due to the reason that all suppliers of the appellant was registered by the concerned tax department after complete verification/inspection as required under the Sales Tax Registration Rules. The said department was responsible to conduct the audit of said registered person on annual basis. If concerned department failed to recover the sales tax amount from our suppliers at the relevant time, the demand of the same amount from appellant is against the natural justice as well as against the Constitution of Islamic Republic of Pakistan, 1973. (7) That it is without any shadow of doubt, the tax department having authority to monitor whether the tax has been paid/ deposited by the taxpayer or not. In case of any default, tax department have, complete mechanism of recovery from the defaulter. It is significant to mention here that applicant have no any authority to check whether tax has been deposited by the supplier or not. It is also worth important to mention here that payment of Sales Tax due on monthly basis, so how it is possible for a buyer to verify the payment of sales tax at the time of purchases. (8) That it is a stalled principle of law that in all proceeding by whomsoever held, whether Judicial or administrative the Principle of Natural Justice have to be observed if, the proceedings might result in consequences affecting "the person or property or other right of the parties concerned. (9) That the contention of the respondent No,2 that the appellant claiming input Tax adjustment on the basis of fake flying invoices is without any concrete evidence and based on assumptions. The respondent No,2 was required to refer/ mention the Order-in-Original numbers of our Suppliers regarding suspension of registration is very important in the instant case. (10) That Article 117, Qanun-e-Shahadat Order, 1984 has lays down general principal that any person dependent upon existence of the fact then he has to prove those facts. In the instant case the respondent No,2 claimed that the Suppliers of applicant are blocked / inactive but failed to prove their assertion with credible evidence. It is pertinent to mention here that date of blocking/suspension of the units are very important, whether blocking or suspension is after of before the date of transactions with appellant, so, the burden to prove their assertions is on respondents Nos.1 and 2, because it is settled and fundament principle of law of evidence that whosoever alleges existence of particular fact must prove same. ' Reliance on 1988 CLC 578, 1990 ALD 619, 1988 MLD 552, PLD 1988 Kar. 28, 1982 CLC 1286, 1990 ALD 142(2), 1995 MLD 690, PLD 1997 Kar. 6, 2000 MLD 720, 2000 PLC 172, 2000 PLC 194, 2000 YLR 801, 2001 CLC 1922, 2001 MLD 159, and many more. (11) That the sections 7, 8 and 8A read with section 73 of the Sales Tax Act, 1990 are not charging sections and it is a fundamental principal of law that without creating a charge tax could not be recovered.
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(12) That sections 8(1)(d), 8(1)(ca) and section 8A is against Articles 4, 8, 18 and 77 read with entry 49 of the fourth Schedule of legislative list the Constitution of Islamic. Merit (13) That the contention of the respondent No,3 regarding suppliers mentioned in para 10 of impugned Order is not correct, due to the reason that appellant has complete record of each suppliers for the satisfaction of this Tribunal. The suppliers vise submissions are as under. (a) Education Division ' The education division is a department of Allama Iqbal Open University Islamabad and appellant purchased waste paper from said university after payment of due sales tax amount. The copies of Sales Tax payment challans are attached as ANNEX-D (b) Bina Paper Printing ' As per our record we purchase waste paper from Messrs Hamdan Paper Printing Converting Industries Sales Tax Registration Number 17504800000382. The name of Bina Paper Printing mentioned in the impugned order with same sales tax registration number is incorrect. Copies of Sales Tax invoices attached as ANNEX-F (d) Dua Traders ' As per our record we purchased waste paper from Messrs IJ Traders Sales Tax Registration Number 0303999921291. The name of Dua Trader mentioned in the impugned Order with same amount Rs,311,317 is incorrect. The appellant purchased waste paper from U Trader and Sales amount was involved Rs,311,317 Copies of Sales Tax Return attached as ANNEX-F. (e) Can Punjab Industries ' The Sales Tax Registration number was not correctly mentioned. Copies of Sales Tax Invoices attached ANNEX-G. (f) Waste Paper ' As per our record we purchased from Messrs Data Enterprises, Sales Tax Registration Number 0701470700182. The name of Waste Paper mentioned in the impugned Order with same sales tax registration number is incorrect. Copies of Sales Tax Returns attached as ANNEX-H. (g) Total Package ' We have complete record of purchases from Messrs Total Package which is attached as ANNEX-I. In view of the above it is respectfully prayed that the-appeal may kindly be accepted and declare the impugned Order illegal, incorrect as well as against the facts up to extent of this Appeal." 4. The appellant has filed Additional grounds of appeal in both the matters. In S.T.A. No,327/12 following additional grounds have been farmed:-- "(1) That the appellant filed an appeal on 25-9-2012 before your lordship which was' fixed on 14-12- 2012. (2) That as per proviso of section 36(3) of the Sales Tax Act, 1990 order under the said provision of law shall be made within 120 days of issuance of show cause notice or within such extended period as the Collector may for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed 120 days. Further as per proviso of section 45-B(2) of the Sales Tax Act, 1990 the order of the Commissioner (Appeals) shall be passed out later than 120-days from the date of filling of appeal or within such extended period as the Commissioner (Appeals) may for reasons to recorded in writing, fix and such period shall in no case, exceed 120 days. In the case under reference, order-in-original dated 25-1-2012 has been passed after a lapse of almost 47 days from the date of issue of show-cause notice, i,e, 8-8-2011 from the date of issuance of show-cause notice. In this way the impugned order has been passed after the- expiry of stipulated mandatory period, therefore, the same are illegal and unlawful in the eyes of law and liable to be set aside. Reliance is made to:-
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"Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Straw Board Factory v. Collector (Adj) Customs Central Excise and Sales Tax, Gujranwala and 2 others 2008 PTD 378 and Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore 2009 PTD (Trib.) 1263, Messrs Kay Chemist, Karachi v. Collector of Customs, Central Excise and Sales Tax (Appeals) Karachi-III, 2011 PTD (Trib.) 408 and 2008 PTD 2025. (3) That at the outset, respondent No,2 had no authority either to raise demand or to issued show- cause notice or to pass order at adjudication side because he being Deputy Commissioner can only issue show-cause notice and adjudicate matters under section 36 of the Sales Tax Act, 1990 involving the amount of tax not exceeding one million rupees (Rs,1,000,000) in terms of S.R.O. 555(1)/96, dated 1-7-1996 (Annexure-A) read with section 72-A of the Sales Tax Act, 1990 whereas he has adjudicated the case of the appellant involving the amount of tax exceeding the aforesaid limit. (4) That perusal of S.R.O.555(I)/1996 dated 1-7-1996 read with section 72-A clearly shows that respondent No,2 had no jurisdiction either to issue show-cause notice or to adjudicate the matter or to pass the original order dated 8-8-2011 which is patently void, illegal, without jurisdiction and of no legal effect. (5) That it is settled law that if the initial act and action is illegal and without jurisdiction, the subsequent proceedings and orders passed would also void and illegal. Reliances are as under titled as-- (i) (PLD 1991 (SC) 630), Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz (ii) (2003 PTD (SC) 1034) Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd. And 4 others. (iii) (2004 PTD 1731), Messrs Food Consults (Pvt.) Ltd., Lahore v. Collector (Central Excise and Sales Tax), Lahore and 2 others (iv) (2004 PTD (DB) 2952), N.P. Water Proof Textiles Mills (Pvt.) Ltd. Through Director, Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue, Islamabad and another. (v) (2005 PTD 1200), Messrs Zikeria Enterprises v. Muhammad Musharaf and 7 others. (vi) (2005 SCMR 17), Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another. (vii) (2006 PTD 1884), A.R.R. Textiles through Proprietor v. Federal of Pakistan through Ministry of Finance, Islamabad and 4 others. (viii) (2006 PTD 1884), Messrs Haq Cotton Mills (Pvt.) Ltd., v. Chairman Central Board of Revenue and 2 others. (ix) 2007 PTD 2356, Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd., and Messrs Diplex Beauty Clinic and others. (x) (2007 PTD (SC) 1351), and Chairman CBR and others v. Haq Cotton Mills (Pvt.) Ltd. (xi) (S.T.A. No,531/LB/2011) (xii) (S.T.A. No,578/LB/2011) PRAYER That in view of the foregoing submissions, it is prayed:-- (i) That the impugned Show-Cause Notice No,25 dated 8-8-2011 as well as assessment Order No,50 of 2012 dated 25-1-2012 and the appellate Order No,50 of 2012 dated 13-8-2012, are being illegal, unlawful, and without jurisdiction, may be vacated absolving the respondent all the charges framed therein; (ii) Any other relief that this Hon'ble Court may deem fit to grant in the circumstances and on the facts of the case." 5. While in S.T.A. No,50 of 2012 following additional grounds have been framed:-- (1) That the appellant filed an appeal on 15-2-2012 before your lordship which was fixed
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(2) That the order of first appellate authority to remand the case back to the officer Inland Revenue is illegal and unlawful as the first appellate authority is not competent to provide a chance to the officer Inland Revenue to improve his case. (3) That the respondent No,3 decided the case against the spirit of basic statute of Sales Tax Law, operative part of which is reproduced below:- II "For the foregoing reasons, the order passed by the Adjudicating Officer is reduced to the extent of Rs,2,329,321 and remaining amounts vacated with the observation that if it is proved that registration of the suppliers was suspended or blocked prior to the purchases or if they have been black listed or are black listed subsequently, the department would be at liberty to start fresh proceedings against the appellant, in accordance with the provisions of law". (4) That the study of the above operative part of the impugned appellate order reveals that the same are totally illegal and unlawful orders and are liable to be set aside because subsection (3) of section 45-B of the Sales Tax Act, 1990 has not given powers to remand back the case with any observation. ' Para (3) of section 45-B "In deciding an appeal, the/Commissioner InlandRevenue/(Appeals) may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration". (5) That in the case-law reported as which are decided in favour of the tax payers as follows:-- 1997 SCMR 526, PLD 1994 SC 52, 1993 SCMR 216, 1993 SCMR 133, 1993 SCMR 221 and PTR No,2 LHC DB. ' And also on judgments in I.T.A. No,1078/LB/2010, I.T.A. No:1079/LB/2010 (6) That at the outset, respondent No,2 had no authority either to raise demand or to issued show- cause notice or to pass order at adjudication side because he being Deputy Commissioner can only issue show-cause notice and adjudicate matters under section 36 of the Sales Tax Act, 1990 involving the amount of tax not exceeding one million rupees (Rs, 1,000,000) in terms of S.R.0.555(1)/96 dated 1-7-1996 (Annexure-A) read with section 72-A of the Sales Tax Act, 1990 whereas he has adjudicated the case of the appellant involving the amount of tax exceeding the aforesaid limit. (7) That perusal of S.R.0.555(1)/1996 dated 1-7-1996 read with section 72-A clearly shows that respondent No,2 had no jurisdiction either to issue show-cause notice or to adjudicate the matter or to pass the original order dated 8-8-2011 which is patently void, illegal, without jurisdiction and of no legal effect. (8) That it is settled law that if the initial act and action is illegal and without jurisdiction, the subsequent proceedings and orders passed would also be void and illegal. Reliance's are as under titled as. (i) (PLD 1991 (SC) 630), Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz. (ii) (2003 PTD (SC) 1034) Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd. And 4 others (iii) (2004 PTD 1731), Messrs Food Consults (Pvt.) Ltd., Lahore v. Collector (Central Excise and Sales Tax), Lahore and 2 others (iv) (2004 PTD (DB) 2952), N.P. Water Proof Textiles Mills (Pvt.) Ltd., through Director, Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue, Islamabad and another. (v) (2005 PTD 1200), Messrs Zikeria Enterprises v. Muhammad Musharaf and 7-others. (vi) (2005 SCMR 17), Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another. (vii) (2006 PTD 1884), A.R.R. Textiles through Proprietor v. Federal of Pakistan through Ministry of Finance, Islamabad and 4 others.
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(viii) (2006 PTD 1884), Messrs Haq Cotton Mills (Pvt.) Ltd. v. Chairman Central Board of Revenue and 2 others. (ix) 2007 PTD 2356, Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd., and Messrs Diplex Beauty Clinic and others. (x) (2007 PTD (SC) 1351), and Chairman CBR and others v. Haq Cotton Mills (Pvt.) Ltd. (xi) (S.T.A. No,531/LB/2011) (xii) (S.T.A. No,578/LB/2011) PRAYER That in view of the foregoing submissions, it is prayed that:-- (i) That the impugned Show-Cause Notice No,25 dated 8-8-2011 as well as assessment Order No,50 of 2011 dated 25-1-2012 and the appellate Order No,50 of 2012 dated 13-8-2012 are being illegal, unlawful, and without jurisdiction, may be vacated absolving the respondent all the, charges framed therein; (ii) Any other relief that this Hon'ble Court may deem fit to grant in the circumstances and on the facts of the case." 6. Facts leading for disposal of the instant case are that the appellant is engaged in the supplies of waste paper and paper scrap (Wholesaler) etc. Having Sales Tax Registration No,7-02-4707-002- 55. During the audit proceedings, it was observed by the authorities that the appellant had illegally claimed input tax of Rs,18,441,777 on invoices issued by blocked/suspended and dummy/fictitious registered person in violation of sections 2(14), 2(37), 3, 7, 8 and 8A read with section 73 of the Sales Tax Act, 1990 which is the subject matter of the above titled S.T.A. No,50 of 2012. 7. On the basis of the aforesaid facts, the appellant registered person was called upon to show cause as to why the evaded amount of Sales Tax amounting to Rs,18,441,777 may not be recovered under section 36(1) of the Sales Tax Act, 1990 along with default surcharge and as to why penal action may not be initiated under section 34(1) of the Sales Tax Act, 1990. In response thereto a detailed reply was given. However, the reply tendered by the appellant could not convince the Deputy Commissioner and he, therefore, remarked that the detecting agency has rightly noticed the illegalities and the discrepancies in the instant case. Thus, charges to the extent of Rs,18,441,777 under section 36(1) of the Sales Tax Act, 1990 stand established. Moreover, penalty equal to 5% of the principal amount of tax involved has also been imposed under section 33(5) of the Sales Tax Act, 1990. Against this treatment, appeal was filed before the learned Commissioner Inland Revenue (Appeals-III), Islamabad who has decided the matter with following observations:-- "In the instant case, it has been observed that the appellants claimed input tax of Rs,9,383,023 instead of Rs,18,441,777 during the period 7/2008 to 6/2009. Copies of sales tax returns are placed on record Examination of the data available on FBR's web portal reveals that none of the supplier is blacklisted and purchases have been made prior to blocking/suspension of the registration of the suppliers and that the suppliers have filed the sales tax returns for the relevant tax periods to the extent of Rs,7,053,702 showing the supply of subject goods, in annexure- C of the return. The transactions are cross verifiable from the returns filed by the purchases and suppliers through FBR's web portal. It is therefore, presumed that tax has also been paid on the goods supplied to the purchasers. However, an amount of Rs,2,329,321 have not been reflected in Annexure-C of returns detail of which is as under:-- S. No. Name of Unit STRN Tax Period Amount involved 1. Bilal Murtaza Packg 175048000078738/2008 238,076 2. Bina Paper Printing 1750480000382 7/2008 678,545 3. Can Punjab 03929999089377/2008 27,730 4. Dua Traders 1700999926473 9/2008 311,317…
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