1. ' JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).---1. Through this appeal, the appellant has impugned Sales Tax Order-in-Appeal No,2091 of 2008 dated 17-9-2008 passed by the learned Collector, Collectorate of Customs, Sales Tax and Federal Excise (Appeals), Faisalabad on the following grounds:
(i) Registration Suspended ' It is respectfully stated that we have made bona fide purchases from these suppliers registered authorized by Sales Tax Department for charging sales tax and issuing sales tax invoices against the supplies made. We have contacted the alleged suppliers and they have provided us monthly sales tax returns and invoice summary statements tiled with Sales Tax Department. These documents clearly show the supplies made to us and in order to prove the physical transfer of goods we are ready to submitting the following documents:- Copies of Gate Passes Copies of cross cheques ' These cross cheques are duly reflected in the bank statement and copy of relevant pages of bank statement are also produced for your kind verification. In the light of above mentioned it is transparent, that we have made purchases and paid sales tax to the alleged suppliers and sales tax collected from us has been deposited by the supplier to the government exchequer therefore our refund claim is admissible and in light of these it is requested that impugned order in original may please be set aside. Without prejudice to above mentioned facts we would like to draw your attention toward law points involved and to state that the registration of the above mentioned registered persons would had been suspended under section 21 of the Sales Tax Act 1990 read with Rule 12 of S.R.O. 555(1)/2006 dated 5-6-2006 and it is pertinent to note that the refund cannot be rejected before the completion of procedure laid down in referred provisions of law. For explaining Rule 12 of S.R.O. 555(1)/2006 is reproduced below:-- Blacklisting and suspension of registration.---(1) Where the Collector has reasons to believe that a registered person is found to have committed tax fraud or evaded tax or has failed to deposit the tax due on his supplies despite having recovered it from the respective buyers or recipients of such supplies,, he may suspend his registration through an order in writing and initiate such inquiry, as deemed appropriate.
(2) After such inquiry and investigation to confirm the facts and veracity of the information and after giving an opportunity to such person to clarify his position, the Collector, if satisfied that such person has committed any of the offences as aforesaid, may blacklist such person through an order in writing, and such blacklisting shall be without prejudice to any other action that may be taken against such person under the Act and the rules made thereunder.
(3) The inquiry in such cases shall be completed within ninety days. And show-cause notice for recovery of any evaded amount of tax and for contravention of the provisions of the Act may be issued within the period specified under section 36 of the Act: ' Provided that where the records required for completion of the inquiry are not produced by the blacklisted person or a person whose registration has been suspended or by the suppliers of such person, the period of ninety days for completion of the inquiry shall be deemed to have been extended by a further period of ninety days.
(4) The order for blacklisting or suspending the registration of a registered person shall be communicated to such person, the CRO and to the Central Sales Tax database provided for this purpose.
(5) During the period of suspension of registration, the invoices issued by such person shall not be entertained for the purposes of sales tax refund or input tax credit, and once such person is blacklisted, the refund of input tax credit claimed against the invoices issued by him, whether prior or after such blacklisting, shall be rejected through a self-speaking appealable order and after affording an opportunity of being heard to such person.
2. ' Secondly verification of the registered person shows that the said unit exists and is not a fake/flying unit.
3. ' As said earlier without application of procedure under the referred law refund cannot be rejected.
4. In this regard reliance is placed on following judgment of honorable Customs, Excise and Sales Tax Appellate Tribunal Lahore: ' The department has failed to produce any independent evidence showing that the appellants were ever informed that the firms with whom they were dealing were declared as fake units. It is also not proved that the provisions of section 21(4) of the Sales Tax Act, 1990 were ever adhered to before declaring the units as fake. The show cause notice issued to the appellant is ambiguous and vague in material particulars. The appellants remained filing monthly returns during the audit period with the department showing the purchases from the units so declared fake but did not raise any objection or informed the appellants that the invoices issued by those units were not acceptable. The information so downloaded from the STARR cannot be held as reliable information and after obtaining such information the department was duty bound to establish through independent evidence that the units with which the appellants were dealing were fake and the appellants were duly apprised about these facts Based on above findings the rejection of refund and order in original was set aside by the Honorable Tribunal.
5. ' The show-cause notice is void as detail of evidences upon which these units have been declared suspected or need scrutiny for verification of input tax is not mentioned in the show cause notice and mere statement that units are suspected and require scrutiny for verification of input tax is not sufficient. In this regard reliance is placed on a judgment reported as GST 2003 LC.
6. 465.
7. ' In this regard reliance is specially placed on a judgment of the Supreme Court of Pakistan reported as PLD 1992 SC 531, wherein, it is laid down as under: "The general principle is that an adjudicatory body is to decide the matter on the basis of materials placed before in the course of proceedings. It cannot take extraneous matter unless the person against whom it is sought to be utilized has been given an opportunity to rebut explaining the same.
8. ' If the adjudicator is going to rely on any material, evidence or document for basing his decision against the individual then the same must be placed before him for his comments and rebuttal. It is regarded as a fundamental principle of natural justice that no material should be relied on against the party without giving him an opportunity of explaining the same. The right to know the materials on which the authority going is going to take a decision is a part of right to defend oneself. The principle can be seen operating in the several judicial pronouncements where non- disclosure of the evidence of the effected has been held to be fatal to the hearing proceeding.
9. ' Keeping in view above mentioned facts it is requested that our refund claim is genuine against the input tax paid on raw goods used for manufacturing of goods exported and it is requested that please direct the department to pay refund and impugned order in original may please be set aside.
(ii) SCRUTINY FOR VERIFICATION OF INPUT TAX ' With due respect we would like to explain that "scrutiny for verification of input tax" is a guideline for sales tax collectors which is provided by the automated refund processing program STARR. The STARR program guides that record of said suppliers may be scrutinized by the appropriate officer of sales tax. So we are nothing to do with this and it is hut of sales tax collectors to scrutinize the input tax record of alleged supplier. It is very unfortunate that desired action warranted under law has not taken by the department and legitimate right of refund of exporter-claimant has been rejected. It is transparent from the Show-Cause Notice that there is no other STARR objection on the said invoices which certify the following facts: The supplier exist and fulfilling all their duties and paying sales tax under the law.
10. The supplier has filed his sales tax return.
11. The supplier has filed Sales and Purchase Invoice Summary Statement.
12. ' The amount of refund claim is in accordance with output Tax declared by the supplier and there is neither objection of Exceed Declared output nor any other STARR objection.
13. ' Besides that there is no STARR objection regarding sales tax return and invoice summary statement but we are ready to submit sales tax return and invoice summary statement of alleged supplier which clearly show the supplies made to us. Moreover, in order to prove the physical transfer of goods we are ready to furnish following documents: Copies of Gate Passes Copies of cash payment vouchers/Cross Cheques through which payment has been made Bank Statement in which relevant Cheques are duly reflected ' Secondly verification of the registered person shows that the said unit exists and is not a fake/flying unit.
14. ' The allegation is not only against the facts but also against the provisions of sections 3, 7 and 10 of Sales Tax Act, 1990.
15. ' The show-cause notice issued is ambiguous and vague in material particulars. The objection has been stated as "scrutiny for verification of input tax" but it has not been mentioned in the show cause notice that what are evidences or grounds on which this objection has been raised. The learned Assistant Collector has rejected the refund on the following judgment and the same has been upheld by the Collector Appeals: ' The respondents have failed to produce any documentary evidence in support of their claim.
16. Scrutiny of data available with the Collectorate depict that the activities of supplier are abnormal and due tax has not been deposited into the national exchequer. Thus it is established that the refund claimed by the respondents is not genuine and is therefore held inadmissible under section 11(2) of the Sales Tax Act, 1990 for violation of sections 2 (14), 4, 7, 8, 10 and 26 ibid read with Sales Tax Rules 2006 notified vide S.R.O. 555(1)/2006 dated 5-6-2006. However, the;' respondents may file a supplementary claim if at any later stage supplier is cleared by the respective Collectorate.
17. ' The last sentence, of judgment is the crux of matter and it shows the' difference. After rejecting the refund the learned adjudicating officer is saying that respondent may file a supplementary claim if at any later stage supplier is cleared by the respective Collectorate. In complete betrayal of law, the learned adjudicating officer neither described the details of analysis nor followed the procedure to deal with suspected registered persons. Section 21(2) and Rule No,12 of Sales Tax Rules (issued vide S.R.O. 555(1)/2006 dated 5-6-2006) prescribe the procedure for blacklisting or suspension of registration of suspected units. And without application of procedure under the referred law refund cannot be rejected. In this regard, reliance is placed on judgment of Honorable Customs, Excise and Sales Tax Appellate Tribunal Lahore.
18. ' The department has failed to produce any independent evidence showing that the appellants were ever informed that the firms with whom they dealing were declared as fake units. It is also not proved that the provisions of section 21(4) of the Sales Tax Act, 1990 were ever adhered to before declaring the units as fake. The show cause notice issued to the appellant is ambiguous and vague in material particulars. The appellants remained filing monthly returns during the audit period with the department showing the purchases from the units so declared fake but did not raise any objection or informed the appellants that the invoices issued by those units were not acceptable.
19. The information so downloaded from the STARR cannot be held as reliable information and after obtaining such information the department was duty bound to establish through independent evidence that the units with which the appellants were dealing were fake and the appellants were duly apprised about these facts....
20. ' Based on above findings the rejection of the refund and order in original was set aside by the Honorable Tribunal.
21. ' It is basic principle of law that "where a thing was provided to be done in a particular manner it had to be done in that manner and if not so done the same would not be lawful". As laid down in judgment of Supreme Court of Pakistan 2003 SCMR 1505 and also enshrined in Article 4 of the Constitution of Islamic Republic of Pakistan.
22. ' It is pertinent to mention here that liability of the supplier also has not been determined through an audit of supplier but only presumption. Such a tax imposed on the basis of assumptions and presumptions, not warranted in, shall always be struck down. Reliance in this regard is placed on the judgment of Karachi High Court reported as 2004 CL. 1.
23. ' In a nutshell, the prayer of the appellant is that as the impugned order-in-appeal has been passed without any justification and logical reasoning the same may kindly be declared illegal and accordingly set aside.
2. Learned A.R. Has placed before this Appellate Bench the decision of this Tribunal reported as 2010 PTD (Trib.) 857 wherein it has been held that:-- "The third issue pertains to rejection of refund on the charge of registration suspended. I find that the appellant's refund claim for period in question has been rejected on the charge of "registration suspended" without any lawful ground as refund against invoices of a person whose registration is suspended can be rejected upon his black-listing by the Collector of Sales Tax after adhering due process of law prescribed under section 21 of the Act and the Sales Tax Rules, 2006 notified vide S.R.O. 555(1)/2006 dated 5-6-2006 made thereunder. Rejection of refund during the currency of suspension of registration is premature, invalid, unwarranted and illegal because no formal order of blacklisting under the law has been issued by the competent authority therefore; whole proceedings culminated in impugned show cause notice and consequent orders are nullity in the eye of law. The dictum laid down by the Honorable Supreme Court of Pakistan in a judgment as reported in 2003 SCMR 1505 is also attracted in the circumstances of the present case wherein it has been held that; "Where a thing was provided to be done in a particular manner it had to be done in that manner and if not so done, the same would not be lawful." I also find that appellant had made all the transactions relying upon the official record of the Sales Tax Department, i,e, registration certificate and computer profile etc. Which reflected the suppliers' status as "operative" and as per Articles 2 (8) and 92 of the Qanun-e-Shahadat Order, 1984, the presumption of truth attached to official record. The observations contained in the judgment of Honorable Supreme Court of Pakistan as reported in 2003 SCMR 501 are also applicable in the instant case. The ratio decided in the said judgment is, that; " Arts.2(8) and 92---Official record---Presumption of truth--- In absence of anything to, the contrary, presumption of truth would be attached to official record."
24. Nevertheless, if at all the alleged supplier has committed any tax fraud, or any default, it has been done on account of Sales Tax Department's negligence. The appellant cannot be held responsible for slackness of the State officials or departmental functionaries. I am fortified in my views on the basis of settled law by the Honorable Supreme Court of Pakistan in judgments as reported at 2002 SCMR 134 and PLD 1989 SC 146 wherein it has been laid down that; "It is well-settled proposition of law that a party should not be made to suffer on account of act/omission on the part of the Court or other State Functionaries." This being so, the plea of appellant is accepted."
25. ' In another decision referred by the learned A.R. Reported as 2005 SCMR 492 the Hon'ble Supreme Court of Pakistan has held that:-- ' It is well settled principle of law that the executive orders or notifications, which confer right and are beneficial, would be given retrospective effect and those which adversely affect or invade upon vested right cannot be applied with retrospective effect."
26. ' It has further been held that:-- "... .....If the notification has been used for the benefit of the subject then it can be made operative retrospectively but if its operation is to the disadvantage of a party who is the subject of the notification then it would operate prospectively."
27. ' In another decision reported as PLD 2001 SC 340 the Hon'ble Supreme Court of Pakistan held that:- - "A notification cannot operate retrospectively and benefits and advantages if already accrued in favour of a party during subsistence of the notification shall be available to it until the notification is amended or rescinded.
28. ' If the notification has been used for the benefit of the subject then it can be made operative retrospectively but if its operation is to the disadvantage of a party who is the subject of the notification then it would operate prospectively."
29. ' This Tribunal in a decision reported as 2010 PTD (Trib.) 1631 has held that:- "Refund claim related to tax period of December, 2003 and April, 2004 while the supplier was blacklisted in 2007 and adjudication order was passed on 12-3-2008, much after the tax period, when refund was claimed and almost year after the supplier unit was blacklisted---Department, in circumstances, was not within the ambit of law while passing the order against the registered person for the reason that the supplier was blacklisted in 2007---Supplier was operative during the period i,e, December, 2003 and April, 2004 when ,the business/ transaction took place-- If it was allowed to happen then the engine of business would come to grinding halt because nobody would know with regard to fate of its business concern if the subsequent events like declaring a business blacklisted were allowed to cover the period when the other business concern with whom it was dealing with, was operative and the registered person who had been called upon to show cause, entered into business transaction with the subsequently blacklisted business in good faith and as per prevailing conditions at that time----Appeal was allowed and orders passed by the lower officers were vacated by the Appellate Tribunal."
30. ' It has further been held by the Tribunal that:-- "9. Perusal of the impugned order in appeal passed by the learned Collector (Appeals) giving the impression that main emphasis of the learned first appellate authority was that the supplier of the appellant was declared blacklisted. However, even on this issue, I feel persuaded by the arguments advanced by the learned A.R. It is matter of record that the refund claim related to the tax period of December 2003 and April, 2004 while the unit in question was declared blacklisted in 2007. It is also worth-mentioning that adjudication order was passed on 12-3-2008 much after the tax period when refund was claimed and almost year after the supplier unit was declared blacklisted.
31. Scanning of the various judgments relied upon by the learned A.R. For the appellant in support of his contention also substantiate the view point urged by the learned A.R. The judgment of Lahore High Court reported as 1993 PTD 713 and Supreme Court of Pakistan reported as 2005 SCMR 492. It has been held by the apex court that:- "It is well-settled principle of law that the executive orders or notifications, which confer rights and are beneficial, would be given retrospective effect and those which adversely affect or invade upon vested right cannot be applied with retrospective effect."
32. 10 Following the ratio settled in the above mentioned judgments, we are of the view that the department was not within the ambit of law while passing the order against the appellant for the reason that the supplier (Messrs Jay Textile Mills (Pvt.) Ltd.) was blacklisted in 2007. Obviously, the supplier in question was operative duping the period i,e, December, 2003 and April, 2004 when the business/transaction took place. We must further add that if it is allowed to happen then the engine of business would come to grinding halt because nobody would know with regard to fate of its business concern if the subsequent events like declaring a business blacklisted are allowed to cover the period when the other business concern with whom it was dealing with, was operative and the registered person who has been called upon to show cause entered into business transaction with the subsequently blacklisted business in good faith and as per prevailing conditions at that time.
33. 11 For the foregoing discussion, we allow the appeal of the appellant; both the orders passed by the learned lower officers are dissected to be vacated."
34. ' In another decision reported as 2010 PTD (Trib.) 1675, the Customs, Federal Excise and Sales Tax Appellate Tribunal has held that:-- "Order through which the supplier was blacklisted was an executive order and the orders or notifications, which confer rights and were beneficial, would be given retrospective effect and those which adversely affect or invade upon vested rights could not be applied with retrospective effect---Appeal was accepted by the Appellate Tribunal and orders in original as well as order in appeal were set aside."
35. ' In para 7 of this decision, it has further been observed that:-- "Messrs A.H. Traders was blacklisted vide Order No,4/6/Misc./ C&E/14926 dated 17-11-2007. At the .Time of making business transactions with the supplier by the appellant, the supplier was not declared as blacklisted is an executive order and while relying on [2005 SCMR 492] Supreme Court of Pakistan in the case titled "Government of Pakistan v. Messrs Village Development Organization" we hold that the orders or notifications which confer rights and are beneficial, would be given retrospective effect and those which adversely affect or invade upon vested rights cannot be applied with retrospective effect. Though, the respondent in the parawise comments has mentioned that there are several cases in which the same issue has been decided by the apex courts in favour of the department, yet they have not cited or produced even a single judgment to rebut the contention of the appellant."
36. ' Placing reliance on the above quoted decisions the learned counsel of the appellant has contended that there was no justification rejecting the claim of the appellant.
3. On the other hand, the learned D.R. Is supporting the orders of the officers below but he is unable to rebut the above referred case-law.
4. After considering the facts of the case and all the above decisions referred by the learned AR, I find no justification for rejecting the claim of the registered person. Both the officers below without considering the above discussed legal aspects of the case have rejected the claim of the registered person. Both the impugned orders are, therefore, vacated and the adjudicating authority is directed to allow the claim of the registered person in accordance with the law, if no other liability is existing against the appellant-registered person.
5. The appeal is allowed in the manner supra.