Registered person is aggrieved from an order dated 30-9-2009 passed by Collector (Appeals), upholding that the invoice issued by a blacklisted supplier was fake.
2. Facts briefly are that appellant Registered Person was served with a show-cause notice dated 4- 3-2009, initiated on a report by staff of Sales Tax. Federal Excise Intelligence Investigation and Prosecution Branch. It was confronted that owner of Messrs Daniyal International had declared in writing that they had never issued any invoice in the name of appellant Messrs F.S. Corporation, 130-G.T. Road. Lahore. It is noted in the show-cause notice that this information was got verified from the Collectorate of Sales Tax, Gujranwala, after identifying the transaction from appellant's record. The Collectorate of Gujranwala, confirmed the. Transaction from Prime Commercial Bank and reported that an amount of Rs, 46,00,000 vide Cheque No, 9557680, dated 13-2-2006 was given credit in the account of Messrs Daniyal B International but the same amount was returned back in the Account No,0427-01007347 maintained by Mr. Abdul Sattar, the owner of Messrs F.S. Corporation. On this information, the appellant was put on notice as to why they should not be proceeded against. In reply, the appellant asked the department to provide documents based on which the show-cause notice was issued and also requested for an opportunity to cross-examine the owner of Messrs Daniyal International against his statement made to the department. During proceedings, the appellant was provided with the copies of correspondence between Lahore and Gujranwala Collectorates and copy of letter from the Prime Commercial Bank, however, some documents relating to the record of Daniyal International were not provided. It is admitted position on facts that the appellant did not reply sufficiently on the transaction of returning back the amount, including tax, into the account maintained by the owner of F.S. Corporation. The Adjudicating Officer, being dissatisfied with the explanation offered by the appellant proceeded to pass the Order-in-Original and held the amount of sales tax as recoverable along with default surcharge and penalty. This order was unsuccessfully assailed before the Collector (Appeals). The appellant has challenged both the orders before us in the instant appeal.
3. Learned counsel for the Registered Person contended that both the authorities below did not allow the appellant to examine the record of Messrs Daniyal International and that opportunity to cross-examine its owner was also not provided. He added both the orders having been passed without providing sufficient opportunity to the appellant are not maintainable. When confronted, that they could not discharge their burden against the transaction whereby the amount of supply along with sales tax was returned back in the account of the owner (Mr. Abdul Sattar) of appellant, he failed to explain this transaction even before us. He was also confronted that in the cases of tax fraud, if initiated on sufficient material, burden of proof lies on the Registered Person under section 2(37) of Sales Tax Act, 1990. He referred to a judgment reported as 2004 PTD 868 contending that the burden of proof was not upon the appellant Registered Person rather department was required to prove his case beyond reasonable doubt. The DR in reply supported both the orders below and submitted that this is a case of proven tax fraud, therefore, the invoice was rightly held inadmissible and tax along with default surcharge and penalty was rightly charged.
4. Heard learned representative of the parties and record perused.
5. We have carefully examined the judgment by Sindh High Court, which is also reported as 2004 PTD 868 (Al-Hilal Motor's Case). The Revenue Officer, in this case, had discovered certain cash- credit entries in books of the Registered Person, which were subjected to tax by presuming the same to be against taxable supplies, Hon'ble Sindh High Court, before dilating upon the issue of discharging burden of proof, discussed some judgments from Indian jurisdiction. Where; in similar facts, Supreme Court of India held that no such presumption was available: to the Revenue Authority, under the relevant statute, to tax unexplained acquisition of money in sales tax cases.
The Revenue Authorities, it was held, were bound to show existence of some material to indicate that acquisition of money had resulted from transactions liable to sales tax. This was held to be the initial burden to be discharged by the Revenue before proceeding in the matter and before placing burden of proof on the taxpayer. Inspired from the ratio in the judgment from Indian jurisdiction, Hon'ble Singh High Court laid down that in order to attract the provisions of the section 2(37), the initial burden lies on Department to show based on some material that Registered Person, knowingly, dishonestly and fraudulently and without lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission in contravention of duties or obligation imposed under the Sales Tax Act of 1990. It was finally laid down, once this burden is discharged by the department, only then, the burden is shifted on the Registered Person to establish that the act was done with a lawful excuse and without any dishonest intention.
6. The facts of this appeal though are distinguishable from the facts of judgment discussed above however the principle laid down is applicable in this case. We are persuaded to examine whether initial burden in present case, was discharged by Revenue or not? It is undisputed fact that an amount of Rs,46,00,000 was credited in account of the owner of appellant, which remained unexplained even before us, despite our specific query. This information was obtained by Revenue Authorities on a probe, based on the statement by the owner of supplier that no invoice was issued to the appellant. Had shown-cause notice been issued only on the basis of statement by the owner of supplier, the submission by learned counsel for appellant would have been correct that department did not discharge initial burden. On the contrary, the Revenue Authorities probed the matter and got hold of an unexplained transaction. Since the amount transferred in account of the owner of appellant was same, which was reflecting in the disputed invoice, therefore, the appellant was asked, through show-cause notice to explain its position. In our opinion, the initial burden of proof had been discharged by Revenue Authorities, when appellant was confronted with evidence that the transaction was not genuine. The unexplained transaction of transferring the amount equal 'to the amount involved in the disputed invoice, led to a reasonable belief that the transaction was fake as same amount was returned back apparently without lawful excuse. The appellant should have explained the nature of this E transaction from their accounts, to dispel this impression and allegation of dishonesty and fraud. This transaction remain explained even before us.
7. In view of the discussion made supra, we hold that initial burden as envisaged by Hon'ble Sindh High Court was discharged by the Revenue Authorities at the time of issuing show-cause notice.
Burden to prove, under section 2(37) was on the appellant that transaction of transferring amount in the account of their owner, was with lawful excuse, in a bona fide cause of business and in compliance with the provisions of Sales Tax Act, 1990 and rules made there under. As appellant failed to discharge this burden, therefore, the appeal is dismissed.