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Official Citation: 2024 PTD 275
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2022
Decision Date: 2022-05-09
Parties: Collector, Sales Tax & Federal Excise, Regional Tax Office, Islamabad vs Customs, Central Excise and Sales Tax, Appellate Tribunal, Islamabad and another
Ruling Summary: This decision was rendered by the Islamabad High Court on 2022-05-09, officially reported as 2024 PTD 275. In this matter between Collector, Sales Tax & Federal Excise, Regional Tax Office, Islamabad and Customs, Central Excise and Sales Tax, Appellate Tribunal, Islamabad and another, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 PTD 275
Court Name: Islamabad High Court Judge(s): Miangul Hassan Aurangzeb, Arbab Muhammad Tahir Title:Collector, Sales Tax & Federal Excise, Regional Tax Office, Islamabad vs
Customs, Central Excise and Sales Tax, Appellate Tribunal, Islamabad and another Case No.: S.T.R. No.19 of 2008 Date of Judgment:2022-05-09 Reported As: 2022 IHC 152, 2024 PTD 275 Result: Reference Dismissed Judgment ORDER C.M. No.1054/2019 Mr. Ibrar Hussain, representative of respondent No.2 has not opposed the application for the restoration of the captioned reference. For the grounds taken in the application for the restoration of the captioned reference, the same is allowed and the captioned sales tax reference is restored to its original number . MAIN CASE The questions of law framed by this Court vide order dated 20.05.2009 are as follows:- "a) Whether Section 73 of the Sales Tax Act is mandatory or procedural and violatio n of this Section is illegal and is not the irregularity and procedural defect? b) Whether the respondent No.2 violated the provisions of Section 73 read with Section 7(1) of the Sales Tax 1990 and the input adjustment was liable to be disallowed Penal surcharge and the penalty is legal and justified. c) Whether after admitting before Collec tor appeal that the payment of purchases were made in cash and not through the bank instrument as required U/S 73 of the Sales Tax 1990 amounts to admitting/confessing the charge framed in the show cause notice and whether any appeal lies in the higher forum after admission by the respondent No.2." 2. All the above mentioned questions are interlinked and the pivotal question is whether non-compliance with the requirements of Section 73 of the Sales Tax Act, 1990 ("the 1990 Act") would be sufficient for the Department to disallow input tax adjustment of Rs.39,977 /- and for an order for the recovery of the principal amount of Rs.39,977/- along with default surcharge and penalty be ordered.
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3. Section 73 of the 1990 Act requires payment of an amount for a transaction exceeding the value of Rs.50,000/-, excluding payment against utility bills, to be made by crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing the transfer of the amount of the sales tax invoice in favour of the supplier from the business bank account of the buyer . In the case at hand, it is an admitted position that respondent No.2 (M/s Rasuls) had adjusted input tax amounting to Rs.39,977/- in August, 2005 and June, 2006 but the payment had not been made in accordance with the requirements of Section 73 of the 1990 Act. Therefore, the Assistant Collector (Adjudication), Islamabad vide order in original dated 01.01.2008 had disallowed the input tax adjustment of Rs.39,977/-. Respondent No.2' s appeal before the Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad ("the Appellate T ribunal") was allowed vide judgment dated 25.08.2008. 4. It is not the Department' s case that respondent No.2 was claiming input tax adjustment against fake invoices or had evaded the payment of tax. Section 73 of the 1990 Act does not prescribe the penalty of disallowing the input tax adjustment for failure to show compliance with the requirements of Section 73 of the said Act. The Appellate Tribunal has upheld the penalty of Rs.5,000/- imposed on respondent No.2 for not showing compliance with the requirements of Section 73 of the said Act. 5. Since we have been given no reason to interfere with the order dated 25.08 .2008 passed by the Appellate Tribunal, the instant reference is answered in the negative.