1. MR SARFRAZ AHMAD KHAN, MEMBER (TECHNICAL).-(1). This judgment shall dispose of six appeals as mentioned in the title since all these involves common issues of law and facts.
2. 2.Brief facts leading to these appeals are that the appellants were granted sales tax refund against zero rated exports in terms of section 10(2) of Sales Tax Act, 1990 read with Sales Tax Refund Rules notified vide SRO 417(I)/2000, dated 20.06.2000 by the competent Sales Tax Officers. Subsequently Assistant Collector of Sales Tax (PRAD) Collectorate of Sales Tax and Central Excise, Gujranwala reported that during post refund audit respective suppliers of the appellants were reported to be untraceable/ suspicious and the refunds had been allowed against fake/flying tax invoices issued by the respective suppliers. Collector of Sales Tax and Central Excise, Gujranwala, in exercise of his powers under sub-section (4) of section 45A of Sales Tax Act, 1990 reopened those cases and issued separate show cause notice to each appellant proposing recovery of the amounts earlier sanctioned/paid to each appellant under section 11(2) and 36(1) of Sales Tax Act, 1990 along with additional tax leviable under section 34 ibid and penal action under section 33(4) ibid. The appellants contested the show cause notices and on culmination of the adjudication proceedings the adjudicating officer passed the impugned orders:
(i) Appeal No. 957/LB/2003 was filed by M/s. Mishal Exports, Gujranwala against Order-in-Original No. 14/03, dated 19.06.2003 passed by the Collector of Sales Tax and Central Excise, Gujranwala, where under he ordered the appellants to pay a sum of Rs. 13287603/- as sales tax along with additional tax and penalty of Rs. 3967443/-. He further directed the Deputy Collector, Sales Tax (Refund) to issue a fresh show cause notice regarding withheld fake/flying invoices.
3. (ii)Appeal No. 958/LB/2003 was filed by M/s. Pak General Exports, 52-A, Satellite Town, Gujranwala against Order-in-Original No. 13/03, dated 19.06.2003,passed by the same adjudicating officer where under he ordered the appellants to pay an amount of Rs. 4235281/- as sales tax under section 11(2) of Sales Tax Act, 1990 along with additional tax and a penalty of Rs. 1270584/-, imposed under section 34(4)(f) ibid. He further ordered the Deputy Collector (Refund) to issue fresh show cause notice regarding the amount which had been withheld due to fake/flying invoices as per clause 8 of Sales Tax Refund Rules notified vide SRO 417(I)/2000, dated 20.06.2000.
4. (iii)Appeal No. 1215/LB/2003 was filed by Rizwan Industries, Gujranwala against Order-in-Original No. 01/03, dated 19.06.2003, passed by the same adjudicating officer. Where under he ordered the appellants to pay an amount of Rs. 9755743/- as sales tax along with additional tax and penalty of Rs. 2926723/- imposed under section 33(4)(f) ibid. (iv)Appeal No. 1216/LB/2003 was filed by Naved Impex, Gujranwala, against Order-in-Original No. 03/03, dated 25.06.2003, passed by the same adjudicating officer where under he ordered the , appellants to pay Rs. 1232602/- as sales tax along with additional tax and penalty of Rs. 369781/- imposed under section 33(4) (f) ibid.
(v) Appeal No. 1275/LB/2003 was filed by M/s. Rasco, Gujranwala, against Order-in-Original No. 05/2003, dated 30.06.2003, passed by the same adjudicating officer where under he ordered the appellants to pay an amount of Rs. 2926637/- as sales tax along with additional tax and a penalty amounting to Rs. 877991/-, imposed under section 33(4)(f) ibid. He further directed the Deputy Collector Sales Tax (Refund) for issuance of fresh show cause notice regarding withheld refund against fake/flying invoices.
5. (vi)Appeal No. 1292/LB/2003 was filed by M/s. Ansar Textile Industries, Gujranwala against Order-in- Original No. 08/03, dated 19.06.2003 passed by the same adjudicating officer where under he ordered the appellants to pay an amount of Rs. 215412/- as sales tax along with additional tax and a penalty of Rs. 64624/-, imposed under section 33(4)(f) ibid. He further directed the Deputy Collector Sales Tax (Refund) for issuance of fresh show cause notice regarding withheld refund against fake/flying invoices.
6. 3.Main contention of the leamed counsels during hearing was that the adjudicating officer was not competent to reopen the cases under section 45A of Sales Tax Act, 1990 and to invoke the provisions of section 36 ibid in the show cause notices. According to them, the provisions of section 45A were not applicable to the present cases as already held by Lahore Bench-I of this Tribunal in its judgment dated 21.11.2002 in Appeal No. 618/LB/2002 (titled M/s. Sitara Textile Industries Ltd., Faisalabad Vs. Collector of Sales Tax, Faisalabad). Moreover according to them, the adjudicating officer had no jurisdiction to issue show cause notice under section 36 of Sales Tax Act, 1990 since the said jurisdiction exclusively rested with Collector of Customs, Sales Tax and Central Excise (Adjudication), Gujranwala. They further contended that proper audit of the allegedly suspected units were never conducted to ascertain whether those units were actually issuing fake/flying invoices and hence the appellants were condemned without properly investigating the cases.
7. 4.The leamed S.D.R, opposed the contentions of the leamed counsels and contended that the Collector of Sales Tax, Gujranwala was competent to reopen the cases under section 45A of Sales Tax Act, 1990. According to him, the adjudicating officer determined the liability against the appellants under section 11 (2) of Sales Tax Act, 1990 for which he was the competent adjudicating officer.
8. 5.We have heard contentions of both the sides and perused the appeal files available before us.
9. While issuing show cause notices Collector of Sales Tax and Central Excise, Gujranwala, reopened the cases under section 45A(4) of Sales Tax Act, 1990 and invoked sections 11(2) and 36(1) ibid for recovery , of the amounts of refund relating to fake/flying invoices. The first legal issue to be resolved is whether these cases qualified to be reopened in terms of section 45A(4) of Sales Tax Act, 1990 and secondly whether the Collector was competent to issue show cause notice, under sections 11(2) and 36(1) of Sales Tax Act, 1990. A perusal of section 36 of Sales Tax Act, 1990 reveals that in case of erroneous refund due to collusion/deliberate act it is to be recovered by issuing show cause notice in terms of sub-section (1) of the said section 36 ibid and in case the erroneous refund is the result of inadvertence, error or mis-construction, the amount is to be recovered through show cause notice issued under sub-section (2)of the said section 36 ibid. A comparative study of the provisions of section 36 and section 11(2) of Sales Tax Act, 1990 reveals that where a tax due on supplies has not been paid or has been short paid or has been claimed as input tax credit or refund, which is not admissible under the Act, the proceedings are to be initiated under section 11(2) and (4) of Sales Tax Act, 1990. However, where in addition to non levy/short levy, an erroneous refund has been made, the provisions of section 36 are to be invoked. The difference between two provisions of law is that section 11(2) and (4) deals with non-payment/short payment of tax by the person from whom it was due on the supplies made by him and also where he claimed input tax credit or refund which was not admissible under the Sales Tax Act, 1990. As far the input tax credit/refund, sub-section (2) of section 11 only covers such input tax credit/refund which had been claimed but was not admissible. On the other hand section 36 of Sales Tax Act, 1990 covers non levy short/levy of sales tax and such amounts which have already been refunded erroneously.
10. Sub-section (1) of section 36 deals with the situation where non levy/short levy or erroneous refund was made due to some collusion or deliberate act and sub-section (2) of section 36 deals with the same situation but where the cause was inadvertence, error or misconstruction. With regard to erroneous refund section 36 is to get invoked where the amount .Has already been refunded erroneously as against that section 11(2), in addition to non-payment short payment of tax due on supplies made by a person deals with "input tax credit or refund" which has been "claimed", "which is not admissible under this Act". In the present cases the amounts had already been refunded and hence the cases were to get covered under section 36 of Sales Tax Act, 1990 and not under section 11(2) ibid. In the presence of these specific provisions of law there was no reason for the Collector to invoke the provisions of section 45A(4) of Sales Tax Act, 1990. If the contention of the leamed S.D.R is accepted, it would mean that in addition to the provisions of section 11(2) and section 36 of Sales Tax Act, 1990, the cases relating to already sanctioned refunds can also be reopened by the executive Collectors under section 45A(4). There is no rational behind holding such an interpretation of these provisions. We have already discussed that the provisions of section 11(2) and section 36 ibid covered the refund claims at different stages i.e. Former covers input tax/refund claimed but which is otherwise not admissible under the Sales Tax Act, 1990 while the latter section 36 covers such amounts of refunds which have already been refunded erroneously, ln the presence of these specific provisions of law there is absolutely no need to invoke the general provisions of reopening a refund sanction order in terms of section 45A of Sales Tax Act, 1990. As already held by Lahore Bench-I in its earlier judgment dated 21.11.2002 in Appeal No. 618/LB/2002 we hold that Collector Sales Tax and Central Excise, Gujranwala incorrectly made a recourse to the provisions of section 45A(4) ibid for reopening these cases. Further more he invoked the provisions of section 36(1) ibid for which he did not have any jurisdiction since the same rested with the Collector (Adjudication). The provisions of section 11(2) of Sales Tax Act, 1990 were not applicable to the present cases where the amounts had already been refunded.
11. 6.In view of this the impugned orders are set aside. The respondent Collectorate is free to investigate these cases and then to forward the same to the competent adjudicating officer for disposal of the cases on merits on account of refunds against alleged fake/flying tax invoices.
12. 7.All the appeals stand disposed of as above.