' This appeal has been filed by the Revenue against the order of CIR (Appeals-II), Islamabad dated 22-2-2010, whereby he accepted the appeal of the respondent and directed to allow the claim of input tax attributable to the supplies made by Messrs Farhaj Enterprises. The said input was rejected by the Adjudication Officer on the ground that the name of the supplier had been included in the list of suspected units.
2. Facts leading to the instant appeal in brief are that the registered person, during the period July, 2004 to August, 2008 allegedly made supplies involving output tax of Rs,1,74,26,132 against which credit of input tax was claimed at Rs,1,67,59,039. The said input tax was adjudged as inadmissible because the purchases had been allegedly made by the Registered person from suspicious black listed units. A show-cause notice dated 8-8-2009 was, therefore, issued by the Additional Collector Karachi, whereby the registered person was confronted with the issuance of fake and flying invoices and claiming adjustment of input tax of Rs,1,67,59,039 without actual purchase and sale of goods. The registered person submitted reply to the show-cause notice on 21-8-2009, wherein it was contended that the show-cause notice had not been served upon it because it had shifted his office from Karachi to Rawalpindi and the Board vide its letter C.No,26(12)/DST/Comp./2007/560564/13112, dated 27-6-2009 directed the transfer of jurisdiction from RTO Karachi to RTO, Rawalpindi. Accordingly, file of the registered person was transferred to the Sales Tax Collectorate, Rawalpindi vide Additional Collector RTO Karachi's letter dated 7-9- 2009. Fresh proceedings were initiated by the Additional Collector (Adjudication) Rawalpindi through issuance of notice dated 8-10-2009, to which the Registered person submitted reply which was not found to be satisfactory. The learned adjudication officer did not find any merit in the contention of the taxpayer regarding non-service of show-cause notice and disallowed the credit of input tax of Rs,1,67,59,039 as confronted though the show-cause notice. He also levied penalty of Rs,837,952 under section 33 of the Sales Tax Act, 1990.
3. Being aggrieved the registered person filed appeal before the CIR (Appeals), Islamabad, who vide his order dated 22-2-2010 directed to allow the credit of input tax because the registered person was found to have made payment in consideration of purchase of goods along with the amount of' sales tax to the supplier namely Messrs Farhaj Enterprises Karachi through banking channel as required under section 73 of the Sales Tax Act, 1990. The learned first appellate authority also observed that the registered person had complied with the relevant provisions of law and could not be denied the credit of input tax when the payments to the supplier had been credited from the bank account of the purchaser (Registered person) to that of the seller. Now the Revenue feeling aggrieved has come up in appeal before us.
4. The learned DR initiating the arguments on appeal contended that the name of the respondent/Registered Person had been included in the list of black listed/suspected persons by the Collector RTO Karachi vide his letter dated 20-9- 2008 because of purchases shown to have been made from suspicious/black listed units. He further argued that the respondents also did not provide relevant record to the sales tax authorities for audit because of the dubious nature of transactions and also shifted its office from Karachi to Rawalpindi with mala fide motive in order to avoid proper incidence of taxation.
5. The learned AR of the respondent on the other hand, argued that the observation of the learned adjudicating officer that the claim of input tax was based on fake supplies allegedly made from Messrs Farhaj Enterprises Karachi is not correct because the status of supplier as per F.B.R. Portal is still active and it has been doing its business in a normal manner.
6. We have given due consideration to the rival arguments and also gone though the relevant record available on file. We are of the considered opinion that the learned adjudication officer passed the order-in-original without adequate discussion regarding the pertinent aspects of the case i,e, current status of the supplier, and payments made by the respondent/registered person to Messrs Farhaj Enterprises in accordance with the procedure laid down under section 73 of the Sales Tax Act, 1990. The learned first appellate authority also directed to allow the credit of input tax merely on the ground that the respondent having made payments of sales tax to the supplier in accordance with the procedure laid down in section 73 of the Sales Tax Act, 1990 had discharged its legal obligation. Although we are not in a position to controvert the finding of fact recorded by the learned first appellate authority, yet we can also not be oblivious of the fact that under section 8(1)(ca) of the Sales Tax Act, 1990 credit of input tax can be allowed to the respondent only if the seller has also deposited the collected tax in the State Treasury. The order of the learned first appellate authority is, however, silent on the point of deposit of tax by the supplier. Accordingly we vacate the orders of the authorities below and remand the case to the learned adjudication officer with the direction that the record of the supplier, which according to the respondent still enjoys active status, be examined carefully and if the tax attributable to the purchases made by respondent is also found to have been deposited by the supplier, only then the respondent be allowed the credit of input tax.
7. The appeal filed by the revenue is disposed of as above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.