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Petitioner: Messrs INNO VATIVE IMPEX, KARACHI VS Respondent: COLLECTOR CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), KARACHI
Court Name: Appellate Tribunal Inland Revenue Judge(s): Syed Muhammad Farooq Shah, Khalid Siddiqui Title:Messrs INNO VATIVE IMPEX, KARACHI vs COLLECTOR CUSTOMS, SALES TAX AND
FEDERAL EXCISE (APPEALS), KARACHI Case No.: S.T.A. No,508/K of 2009 Date of Judgment:2011-01-18 Reported As: 2011 PTD (Trib.) 1010 Result: Appeal allowed Judgment ORDER ' This appeal has been filed by the appellant/registered person under section 46 of the Sales Tax Act, 1990 against the order-in-appeal No,1347/2008 dated 30-7-2008 passed by the respondent, wherein the appeal filed by the appellant herein against the order in original, passed by the Deputy Collector (Refund) Collectorate of Sales Tax (Enforcement) Karachi was rejected on the facts and grounds narrated in detail in the memo of appeal. 2. We have heard Mr. Nadeem Ahmed Mirza, advocate, representing the appellant and Mr.Hasan Sardar, D.R. Represented the department. We have carefully perused the record, impugned orders passed by both adjudicating officer and Collector (Appeals). 3. Facts as narrated in the memo of appeal are that the appellant is a commercial importer of textile goods having no facility of manufacturing of goods and registered as an exporter. During his business activities he received certain orders from his buyers stationed abroad for the supply of different textile goods to be shipped through separate consignment to their buyers on or before the last date of August, 2002 and September, 2002. As the goods ordered were' to be shipped positively on or before the last day of the months referred in above with regards to refund applied for, to the consignee. Hence the appellant placed the orders on credit basis for supply of the ordered goods in export packing at Karachi i,e, the place of shipment, to the suppliers Messrs Crown Trading Company, Karachi, Star Trading Company, Karachi, Messrs Bismillah Traders, Karachi, Messrs Safa International, Karachi duly registered with the respective Collectorate of its jurisdiction in terms of section 14 of the Sales Tax Act, 1990 vide No, 12-03-9999-185-64, 12-03- 9999-209-46, 11-02-9999-611-37 and 12-03-9999-247-46. The supplier after getting the goods
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manufactured as per specification/approved samples delivered the same to the appellant at the point of shipment directly in export packing i,e, respective wharf/port without involvement of any cartage charges, as the said charges were included in the agreed upon price of the goods ordered along with Sales Tax Invoices amounting to Rs,20,982,862.00 inclusive of the amount of Rs,2,736,895.00 payable amount of Sales Tax. The appellant after receipt of intimation that the supplier has dispatched the ordered goods as per approved samples directly to the point of shipment prepared respective invoices on C&F basis to the extent of port of discharge. Thereafter appellant got verified form 'E' from the scheduled bank in accordance with the Foreign Exchange Regulations. The documents so prepared were delivered to the clearing agents along with original zero rated Sales Tax Invoices for effecting the shipments. The clearing agents accordingly prepared the bill of export and submitted those with the Collectorate of Export for registration/verification. The officials of the Collect rate after necessary verifications allotted bill of export numbers and allowed export of the invoiced goods after physical verification. The appellant clearing agents got passed in the goods directly received from the supplier against the appellant shipping documents and the examining officials of Export were allowed to be exported without any observation/adverse remarks as evident from the annexed photocopies of the bill of export and zero rated invoices. In terms of section 26 of the Sales Tax Act, 1990 the appellant prepared monthly Sales Tax Return-cum-Payment Challans for August, 2002 and September, 2002 and submitted the same with the notified branches of National Bank of Pakistan, on or before 15th of each calendar month, showing zero rating sales (exports) and tax was for Rs,2,736,895.00. Copies of which were submitted with the functionaries of the Collectorate of Sales Tax (Enforcement) for information/claiming refund upon confirmation of zero rating. In accordance with the provisions of Refund Rules the appellant issued vide Notification No, S.R.O. 575(1)/ 2002 dated 31-8-2002 deposited the requisite documents with the functionaries of the Collectorate of Sales Tax (Enforcement) for claiming refund of input tax along with original bills of export and photocopies to Deputy Collector (Refund) Sales Tax (East), Karachi for verification of zero rating of the locally procured goods and for retaining photocopies' of the bill of export after necessary verification and attestation. The Deputy Collector (Refund) in accordance with the refund rules verified the contents of the exported goods mentioned on the bill of export after cross checking the same with the purchase and sale invoices submitted by the appellant for claiming refund of input tax. Hence retained the photocopies of bills of export attestation. Whereas original bills of export were returned to the appellant affixation of the fact i,e, confirmation of zero rating. The consignee/buyer of the appellant remitted the invoices amount. On the basis of which appellant filed duty drawback claim with the Collectorate of Export. Which were processed and sanctioned and subsequently dispatched to the appellant bank for payment. In terms of the provisions of section 73 of the Sales Tax Act, 1990, the appellant paid the buyer the cost of goods inclusive of Sales Tax through negotiable instrument i,e, different crossed/payees account cheque/pay orders. The subject cheques were duly en-cashed and were credited in the buyer accounts and the said fact has been verified by the Collectorate of Sales Tax (Enforcement) during the course of hearing before the Federal Tax Ombudsman. In terms of Sales Tax Refund Rules issued vide Notification No S.R.O. 575(I)/2002 dated 31-8-2002, the appellant submitted the supportive documents. Contrary, the A functionaries of the Collectorate of Sales Tax (Enforcement) held the processing of the claims for indefinite period. Consequent to which the appellant filed a complaint with the Federal Tax Ombudsman. 4. By his findings dated 3-1-2005, the FTO has passed the following recommendations:-- "(i) Direct the Collector concerned to process and finalize the refund claims; (ii) Pay compensation for the withheld amount under section 67 of the Sales Tax Act; (iii) Action in respect of (i) and (ii) be taken within 15 days; and
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(iv) Compliance be reported to this office within thirty days." 5. Against the findings of the FTO the Revenue Division has filed a representation under section 32 of the Ordinance XXV of 2000. The President of Pakistan has been pleased to reject the representation filed by the department. It appears that an application for rectification filed by the department before the FTO has also been not considered and by an order dated 12-4-2007 respondent/department has been directed to comply the recommendation else he shall be served with a contempt Notice as per law but it appears that no compliance was made by the Revenue Department and application filed by the department on fresh ground before the FTO too has also been rejected. It appears that subsequently the proceedings were initiated by virtue of show- cause notice dated 26-6-2007 and subsequently has been issued in-original which according to the consultant impugned order did not receive and the appellant resorted for legal remedy under the provision of Sales Tax Act, 1990. The learned counsel representing the appellant agitated that the order-in-original passed by the respondent is barred by time by 75 days as stipulated period of 180 days provided in subsection (2) of section 45-B of the Sales Tax Act, 1990. The respondent rejected the appellant's appeal and maintained order-in-original bearing No,355/07 dated 27-9- 2007 passed by the Deputy Collector, Group-VIII, Collectorate of Sales Tax (Enforcement), wherein refund of the appellant for the months of August, 2002 and September, 2002 amounting to Rs,1,338,750.00 and Rs,1,398,145.00 were rejected, despite of the recommendation and findings of the Federal Tax Ombudsman. Hence this second appeal on the following grounds agitated in argumentative shape, supported with law and citation's on behalf of the appellant:-- (i) "The order/finding of FTO and order of President of Pakistan cannot be reopened by any authority i,e, F.B.R. Or its subordinate under any provision of the Act or even any other law of the Land. The adjudicating authority and respondent has passed orders against order in field of the FTO and President of Pakistan; which attained finality. Rendering the orders so passed nullity in law, ab initio, null and void. Reliance is placed on PLD 1997 Karachi 541 and 2004 PTD 3020. (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 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 Sales Tax Appeal No,444/03, STA 465//07, 2010 PTD (Trib.) 1636, 2010 PTD 465; PLD 1971 SC 184, 1992 ALD 449; 2004 PTD 624; PLD 1976 Supreme Court 514 and PLD 2001 Supreme Court 514. (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 Sale's Tax Refund Rule, 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 25-6-2007 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 by the Superior Courts. Reliance is placed on reported judgment PLD 1958 SC 104; 1992 SCMR 1898; 2004 PTD (Trib.) 2898; 2007 PTD 1862; 2007 PTD 2265; 2008 PTD 578; 2008 PTD 609; 2008 SCMR 1510; 2008 PTD 2025; 2008 PTD 1539; 2009 PTD 762; 2009 PTD 1247; 2010 PTD (Trib.) 81; 2010 PTD 251; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631 and 2898. (iv) That the contents of show-cause notice and order-in-original transpired that these are outside the four corners of finding of Hon'ble Federal Tax Ombudsman dated 3-1-2005 Order of President dated 10-12-2005 and 1-6-2006. In the presence of the said order, no fresh proceeding can be carried out under law. Nevertheless, if while flouting the law, it is carried out it has to be within the four corners of the orders in field. Nothing new can be added at this belated stage. Order based on ground which was not discussed earlier are declared palpably illegal on face of it. Reliance is
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placed on reported judgment 1987 SCMR 1840; 2004 PTD 1449; PTCL 2004 CL 35; 2008 PTD (Trib.) 36; 2007 PTD 2265; 2010 PTD (Trib.) 1377; PTCL 2010 CL 602. (v) The appeal with the respondent was filed on 17-11-2007 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 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, 16-2- 2008 and that also after serving notice to the aggrieved person as held by Supreme Court in reported judgment 1999 SCMR 1881. (vi) That for extending period by the respondent on 30-7-2008 (i,e, after expiry of initial period of 90 days) the respondent in para 4 of order-in-appeal made remarks that the time was extended due to un-avoidable circumstances and administrative reason, despite of the fact there were no un- avoidable circumstances, administrative reason and neither any exception because extension granted on 30-7-2008 is without any lawful authority as it has been extended after lapse of initial period of 90 days, hence the order-in-appeal is barred by 75 days rendering it void and ab into as held by the judicial forum in its reported judgments PLD 1958 (W.P.) Lah. 104; 1998 MLD 650, 2004 PTD (Trib.) 2898, 2004 PTD 369, 2005 PTD 23, 2007 PTD 292, 2007 PTD 2265, 2008 SCMR 1510, 2008 PTD 2025; 2008 PTD 1539; 2009 PTD 762; 2009 PTD 1247; 2010 PTD (Trib.) 23; 2010 PTD (Trib.) 81; 2010 PTD 251; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631, 2010 PTD (Trib.) 1636 and 2010 PTD (Trib.) 2117. (vii) That the respondent is at fault to state in the order-in-appeal that "mere furnishing of some paper cannot be considered as the valid substitute of the legal documents". While brushing aside the provision of law. The appellant submitted lawful, legal and authentic documents prescribed in the different provision of the Act and those were not found fake or false at any stage and to support his stance the appellant relied upon the expression of the provision of the Act the as such raised law point which has to be considered by the adjudicating authority and the respondent. Contrary, both ignore the provision of law and brush aside the citation/authority placed on record, and passed order on the personal whims and wished. Resultant, both orders cannot be considered valid and judicious orders by any stretch of imagination as held by Supreme Court in its reported judgment 2001 SCMR 83. (viii) The Collector of respective jurisdiction, which registered, the supplier after receipt of application under section 15 of the Act and issued certificates under section 17 ibid not only verified the invoices issued by the supplier as correct and genuine, rather profile of the supplier also as evident from copies of registration certificates, sales tax return cum payment challan, sales tax invoices of supplier, profile of the supplier annexed with memo. Of appeal as exhibit "T to W3" at pages 109 to 129. (ix) 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 issued by supplier under section 23 of the Act and the claimant should have paid the amount of the goods including tax shown in the invoice through negotiable instrument as per expression of section 73 ibid. The appellant is holding valid taxable invoices and payment against those to the supplier was 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 supplier were false. Any action which is based upon no evidence is not permitted by law and Supreme Court laid down the law in this regard in the reported judgment 1991 PTD 551. (x) The appellant being an exporter has nothing to do with the act and commission of the supplier under any provision of the Act neither he is obliged under any other law to defend his acts. Nevertheless, for the sake of arguments and regularization, the appellant states that it is erroneous on the part of adjudicating authority to state in the order-in-original that the supplier had only
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deposited Rs,134,000.00 in the Government Treasury and claimed adjustment of the input against due output, which was not available under the provision of the Act. Factually, a tax payer is legal empowered to adjust input tax against output tax under section 7(i) ibid for determination of his tax liability for the purpose of deposit in Government Treasury. (xi) That the supplier of appellant at the time of procurement of raw material for preparing/manufacturing of the finished goods sold to the appellant in the months of August 2002 and September, 2002 (corresponding to purchases of other exporter paid tax of Rs,182.22 millions (as shown in column 4 of the schedule given in order-in-original) to his supplier and thereafter he supplied the said goods to the appellant and other exported after value addition against an output tax of Rs,182.98 millions (as shown in column 5 of the schedule). (xii) That the supplier in terms of section 7 of the Act adjusted already paid tax (input tax) of Rs,182.22 millions from the charged invoice tax (output tax) and carried forwarded the input tax of Rs,0.466 million under section 10(1) ibid and thereafter paid their remaining liabilities of Rs,0.13 million through sales tax return cum payment challans in the notified bank of NBP in terms of section 26 ibid. The supplier in fact deposited/paid Rs,182.42 million as tax at the time of purchase and subsequently upon sale after deducting input adjustment tax and carried forward of input tax. (xiii)The suppliers strictly acted in accordance with the provision of the Sales Tax Act, 1990, there exist no provision in the Sales Tax Act, 1990 or any other law of the Land to pay a levy of tax twice i,e, first at the time of purchase and secondly at the time of sales in addition to the tax already paid by them at the time of purchase of raw material and the additional amount of tax collected by them at the time of sale on value addition. Any such law if made is tantamount to double taxation, which is prohibited under the Article of Constitution of Islamic Republic of Pakistan and even under the Constitution of the countries of entire world. Reliance placed on reported judgment 1992 PTD 593, 2003 PTD (Trib.) 928, 2010 PTD 1515 and 2009 PTD (Trib.) 2025. (xiv) The allegation leveled in the show-cause notice and order-in-original revolves around act and commission of the supplier. The Collectorate of Sales Tax of its jurisdiction, who registered those under section 14 after scrutinizing the documents submitted for registration and carried out the necessary survey and issued certificate under section 17 of the Sales Tax Act, are empowered to proceed against them under sections 2(37), 11(1)(2), (36) (1) and (2) and subsection (e) of section 37-C of the Act. Under no provision of the Act an appellant/exporter can be questioned in the context and neither can be bracketed with the supplier. The stance of the appellant stand substantiated by the adjudicating authority also as evident also as evident from last para of order- in-original (page 36 of memo. Of appeal) exhibit "B". Wherein, he directed the Investigation and Prosecution of the Collectorate to initiate criminal proceeding as per provision of Sales Tax Act, 1990 against the black listed suppliers of the appellant and all those registered persons who are involved in this tax fraud and para 4 of order-in-condemned of FTO at page 63, Exhibit "G", reading as "if the supplier has not deposited the amount it is matter between the Government and the supplier against whom under the law proceeding of coercive measures for the recovery of the amount could be initiated". Whereas the Hon'ble Federal Tax Ombudsman in Complaint No, C-498- K of 2004 (Messrs Prime Corporation, Karachi) held that: -- "Where the sales tax has been paid to the unit registered by the Sales Tax Department and authorized to Collector Sales .Tax on its behalf, the responsibility to deposit the same lay with the supplier and the department should identify them, chase them and recover sales tax paid to them in accordance with law." (xv) The appellant paid the amount of supplies including the sales tax amount to the supplier in terms of section 73 of the Sales Tax Act, 1990 by preparing and delivering cross cheques in the name of business account and not in the personal name supplier (which is prohibited under section 73 ibid). It is the prerogative of the supplier either to deposit those themselves in the
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business account maintained by them or deliver those to some other person for the opening of fresh account of their business account (i,e, company) for depositing the cheque. With the encashment of the cheque issued by the appellant to supplier and their encashment compliance of section 73 on its part stood fulfill and the said fact has been accepted by the respondent. Raising objection/leveling allegation contrary to the provision of the Act cannot be considered as valid for proceeding as per law laid down by the superior Courts in umpteenth judgments. (xvi) That no provision is available in the 'Act or the Rules and Regulation framed there under laying any restriction on the claimant not to engage a person as his agent, whose in-laws are engaged in business of supplies and registered as a sales tax person. In the absence of availability of any enabling provision in the Act. No negative influence can be drawn against any person on the said pretext and neither any person can be punished. The appellant voluntarily stat that he indeed authorized Mr. Hyder Ali for assisting the sales tax authority in scrutiny of his monthly return of September, 2002. Subsequently he was changed and Mr. Shahan Mujtaba Khan was authorized and intimation to the said regards was intimated to sales tax authority vide letter dated 7-1-2003 see Exhibit "S" at page 108 memo. Of appeal. Who was subsequently replaced by Mr. Nadeem Ahmed Mirza of Nadeem and Company, Karachi. If anything wrong had been done by Mr. Hyder Ali or his in-laws proceeding should be initiated against them under the provision of the Act, 1990 instead of bracketing the appellant as held by Hon'ble FTO and Superior Courts. (xvii) That no provision of the Act forewarn or issue direction for the purchase/exporter and claimant to seek certain documents or clarification form the supplier prior to entering into business agreement or deal for purchase of goods meant for local supply or export in the absence of that. The appellant was not obliged under law to ask his supplier for any documents. Nevertheless, the appellant obtained copy of verified sales tax return cum payment challan and invoices, contained the same signatures as are available in the statement obtained by the department and supplied to the appellant by the supplier. No verification was obtained from handwriting experts for verification of the bona fide of the signatures. The respective documents. See "Exhibits "T to T3" at pages 109-112, "U to U3" at pages 113-116, "V to V7" at pages 117-125, "W to W3 at pages 126-129" and "Y to at pages 130-133). (xviii) The goods were purchased in the month of August and September, 2002 when the suppliers were active and their profiles were excellent those were declared either black listed or suspected in October, 2003 as evident from the sub-para (iii) para 1 at page 2 (See page 51 of Exhibit "D" to the appeal) and sub-para (i) of para 12 at page 4 (See page 51 and 53 of Exhibit "D" to the appeal) and sub-para (iv) of para 12 (See page 54 of Exhibit "D" of memo. Of appeal) of the findings/decision regarding as: "1(iii) In order to cover up the delay, the respondent forwarded the purchase invoices to the respective Collect orates for verification vide letter dated 23-10-2002 and 5-11-2002. Collect orates verified the invoices and sent confirmation vide letters dated 5-11-2002 and 1-12-2002. 12(i) The purchasers form registered units and the goods were exported in August and September, 2002 and the supplies invoices were verified in November and December, 2002. 12(iv) Even if the suspected status of the suppliers was notified in October, 2003, it would not influence the transaction which took place in September, 2002." (xix) The amendment in statute, through Finance Bill issuance of notification or executive order deems to be effective prospectively and not retrospectively as expressed in section 24 of the General Clauses Act, 1897. The Board in conformity with the said provision issued Sales Tax General Order No, 6 of 2003 to the filed formation to Apply the order of black listing from the date of issuance as evident from sub-para (iii) of para. 1. Which read as "Unless the Collector specify otherwise such order effect from the date of original black listing or suspension of registration/enrollment of the concerned person, so that invoices
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issued by him during the intervening period are acceptable." Reliance is placed on order in Sales Tax Appeal No,9 of 2003, Order-in-Sales Tax Appeal No, 271 of 2008, reported Order-in Sales Tax Appeal No,252 of 2007, Order-in Sales Tax Appeals Nos.59 and 97 of 2004, Order-in-Sales Tax Appeal No, 217 of 2004, PLD 1974 Supreme Court 180, 1997 SCMR 1244, PTCL 2002 CL 115, PLD 2002 SC 408, 2002 PTD 2457, 2004 PTD 2524, 2006 PTD 2429, 2007 PTD 361, 2008 PTD 394, 2008 PTD 894, 2009 PTD 112, 2009 PTD 1, 2009 PTD 1112, 2010 PTD (Trib.), 1631, 2010 PTD (Trib.) 1636, 2010 PTD (Trib.) 1675, 2010 PTD 2101. (xx) That the duty of appellant stands discharged upon obtaining the…
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