' RAJA LEHRASSAB KHAN (JUDICIAL MEMBER).---Through this combined order, I intend to dispose off above captioned four appeals pertaining to a single taxpayer, arise out of consolidated Order-in- Appeals Nos.804-810 of 2007, dated 24-5-2007, for the tax periods October, 2001, January, 2002, April, 2002, and order-in-appeal No, 320 of 2008, dated 29-2-2008,_pertaining to tax period April, 2005, passed by the learned Collector (Appeals).
2. The relevant facts in brief are that the appellant in this case is a manufacturer-cum-exporter engaged in making zero-rated supplies of textile goods. The appellant against its zero-rated supplies, had claimed refunds amounting to Rs,262,080, for October, 2001, Rs,234,473 for January 2002, Rs,246,213 for April, 2002, and Rs,555,971 for the tax period April, 2005. The department issued show-cause notices calling upon the appellant to show cause as to why their refund claims may not be rejected in terms of sections 10(4), 11(2) and 66 of the Sales Tax Act, 1990. The charges were levelled in the show-cause notice are that (1) abnormal tax profile (2) Refund claim is time barred under sections 66, (3) inadmissible input tax on diesel. After affording opportunity of being heard, the Assistant Collector (Refund), vide impugned orders-in-original had rejected the refund claims of the taxpayer. Being aggrieved, the taxpayer assailed the orders-in-original before the learned Collector (Appeals) who vide impugned orders had dismissed the appeals.
3. Heard both the sides at length and perused the record. It is submitted by the learned AR that first objection on the basis of refunds were rejected was with regard to abnormal profile of supplier unit.
In this behalf, it is submitted by the learned AR that the taxpayer had claimed refund against invoices duly incorporated in supplier's sales register, summary statement and monthly sales, tax return, hence, its rejection is not only contrary to provisions of section 10 but also without any lawful.
Authority. It is contended by the learned counsel that neither any charge of fake transaction nor of tax fraud either on the part of supplier or taxpayer has been levelled in show-cause notice without which refund of input tax paid by the taxpayer cannot be rejected. Even otherwise, it is submitted by the learned AR that objection of "abnormal tax profile" is generated by STARR having no legal backing by the sales tax statute. In this behalf reliance was placed by the learned AR on the reported judgments to substantiate his versions. With regard to second objection i,e, "inadmissible input tax on High Speed Diesel (HSD)", it is submitted by the learned AR that the Adjudicating Authority has rejected refund of input tax credit on high speed diesel being hit by the list of negative items given under Notification S.R.O. 578(1)/98 dated 12-6-1998. In this regard, it is contended by the learned AR that the said S.R.O. Was rescinded through Notification. S.R.O.
490(1)/2004, dated 12-6-2004, hence rejection of refund on account of HSD is illegal. With regard to third objection i,e, "refund claim is time barred", it is submitted by the learned AR that charge of time barred is baseless as the taxpayer filed a consolidated refund claim for the period in hand manual within time of one year as provided under section 66 of the Act. Without prejudice to above, it is contended by the learned AR that rejection of refunds on account of limitation are not justified. In this behalf reliance was placed by the learned AR on the reported judgments to substantiate his versions.
4. The learned DR failed to put-forth any explanation to justify any deviation from the judgments/arguments advanced by the Advocate for appellant. He has, however, simply supported the impugned orders.
5. In fact maintainability of both orders of the authorities below i,e, order-in-original and order-in- appeal, were challenged on the following three grounds namely:--
(a) Rejection of refund claims pertaining to October, 2001, January, 2002, April, 2002 and April, 2005, under STARR computer system was illegal void ab initio being not applicable to the relevant periods/years.
(b) Input tax refund on High Speel Diesel rejected in terms of S.R.O. 578 is illegal.
(c) Refund cannot be rejected on the ground of time limitation.
6. I find myself to be in conformity with the arguments advanced by the Advocate, so also law in support thereof. Perusal of impugned orders in question vis-a-vis the grounds of appeals coupled with law referred to by the appellant Advocate, I do not find myself persuaded with the finding and its basis incorporated in both the impugned orders. With regard to issue regarding "abnormal tax profile", I am of the considered view that term "abnormal tax profile", is generated by the STARR computer system having no legal backing by the Sales Tax Act or any legislative enactment or even any written directive from the F.B.R. For rejection of refund on such objection. Reliance in this regard is placed on the judgment of the Tribunal in appellant's own case reported as (2007 PTD (Trib.) 2456) wherein it was held that "the information so down loaded from the STARR cannot be held as reliable information and after obtaining such information the department was duty bound to establish through independent evidence".
7. Furthermore, in the judgment of Hon'ble Sindh High Court reported as 2002 PTD 2457 it was held that: "a Court cannot imply anything, which is not expressed, it cannot import provisions in the statute, so as to support assumed deficiency. The taxing statute must be interpreted in the light of what is clearly expressed". In another judgment of the Hon'ble Lahore High Court cited as PTCL 2000 CL 196(sic) it was held that " a levy can only be made by express and exact words".
8. Hon'ble Supreme Court of Pakistan in the case reported as 1993 SCMR 274, has held that:-- "The cardinal principles of interpretations of a fiscal statute seem to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. A fiscal provision of statute is to be constructed liberty in favour of the taxpayer and in case of any substantial doubt the same is to be resolved in favour of the citizen."
9. Without prejudice to- above, admittedly, the refund claims pertain to the periods were not subject to scrutiny under STARR as the same was made applicable w,e,f, 1st July 2006 in term of S.R.O. 555(1)/2006 dated 5-6-2006. Thus, appellant's case with regard to refund claim for the periods under consideration, should have been scrutinized under Sales Tax Refund Rules, 2002 being notified vide S.R.O. 575(1)/2002 dated 31-8-2002 and not under STARR system which was introduced for the first time in Sales Tax Rules, 2004, notified vide S.R.O. 485(1)/2004, dated 12-6- 2004. Recapitulated history of these facts further transpires that Sales Tax Rules, 2004, were come into force on 1-7-2004 by excluding its Chapter-V (Refund Rules) (Rules 25-37) which was required to be come into force on such date as to be notified by the C.B.R. Through in official Gazette Notification. The same position was also with Sales Tax Rules, 2005, but the same (both items) were never notified by the C.B.R. Till the Sales Tax Refund Rules, 2002, were rescinded through S.R.O.
554(1)/2006 dated 5-6-2006 and Sales Tax Rules, 2006 came into vogue. This situation leads to unambiguous inference that Sales Tax Rules 2004 and 2005 were intact and remained applicable till 1st July, 2006, without giving retrospective effect. Under the present situation, I am inclined to Share view of the AR that rejection of refund claims filed against invoices issued prior to 1st July 2006 on the objections pointed out by the STARR computer system was illegal void ab initio. In this regard, I feel advantage to refer a judgment of Division Bench of Customs, Excise and Sales Tax Appellate Tribunal, Lahore, reported as 2010 PTD (Trib.) 1636, in the case of Messrs A.T. Fabrics, Faisalabad v. Collector Sales Tax, Faisalabad. The operative para is being reproduced herein under:-- "Lastly the learned counsel for the appellant contended that the appellant filed refund claim for the period 12 of 2004 and 2 of 2005, which was rejected on the basis of STARR objections. The learned Counsel for the appellant vehemently contended that the "STARR System" was introduced in the year, 2006, it cannot be implemented retrospectively. After perusal of record, we find the plea of the appellant correct."
10. In another case like the present one, titled as Collector of Sales Tax v. Messrs Saleem Textile Company, Faisalabad, reported as S.T.A. No,191/LB of 2008, dated 9-6-2008, in which Customs, Excise and Sales Tax Appellate Tribunal, Lahore, has held as under:- "The appeal has confounded the Sales Tax Refund Rules, 2002, notified by S.R.O. 575(1)/2002, dated 31-8-2002, and the Sales Tax Refund Rules, 2005, notified by S.R.O. 533(1)/2005, dated 6-6-2005.
There is no concept of STARR in the Sales Tax Refund Rules, 2002 and the Sales Tax Automated Refund Repository (STARR) Computer System had been introduced in the Sales Tax Refund Rules, 2005. It is a controversial issue whether Sales Tax Refund Rules, 2005, Chapter-IV (Refund) had been enforced or not. It is provided under Rule 1 of the Sales Tax Refund Rules, 2005 that these rules shall come into force on 1-7-2005 and shall apply to such persons or class of persons as are specified in the respective Chapters. However, under Rule 26, Chapter-IV (Refund), it is provided that provisions of this Refund Chapter shall come into force with effect from such date as may be notified by the Board provided that in case of registered persons who have already been notified by the Board, the refund of such registered persons shall be dealt with under this Chapter. Keeping in view Rule 1, it is a non-obstante clause."
11. The second ground taken by the appellant was about objection of refund claim as time barred under section 66 of the Sales Tax. Act. I am of the firm opinion that denial from refund of input tax incurred in connection with zero-rated supplies merely on technical plea amounts to impede exports with the burden of sales tax which is not only contrary to the statutory provisions but also against the norms of justice. Refund of input tax is a substantive right of a registered person, consciously created by the legislation, which cannot be taken away merely on some technicalities and procedural lapse. The learned Tribunal in the case reported as 2007 PTD (Trib.) 728 wherein it was held that; "in nutshell, it is acknowledged that the input tax and adjustment thereof is a substantive right of the taxpayer and cannot be taken away or withheld on mere technical grounds". It was the view of the AR that the orders of the authorities below was illegal and void as question of limitation in this case does not arise. Rejection of refund claim merely on the basis of time limitation is against the principle laid down by higher appellate fora. Reliance in this behalf is placed on judgment reported as PLD 1998 SC 64 in which it was held by the Full Bench as under:-- "Latest judicial trend is to deprecate and to discourage withholding of a citizen's money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him".
12. As proved above that both the orders of the authorities below were void ab initio, therefore, question of limitation does not arise. In this regard, I would like to refer Hon'ble Supreme Court of Pakistan judgment reported as 2007 SCMR 729, 2005 SCMR 69 and 1996 SCMR 856, wherein it was held that "no limitation runs against a void order".
13. The third objection was with regard to rejection of input tax refund on purchase of High Speed Diesel. It is observed that the taxpayer used diesel for production of taxable supplies and has claimed input tax on purchase of High. Speed Diesel (HSD) in terms of section 8 (1)(a), which allows the company to deduct input tax paid on goods used or to be used for any purpose of manufacture or production of taxable goods. C.B.R. Vide its circular instructions contained in C.No, 2(1)/ST L&P/ 2000, dated 21-12-2005, has itself directed its field formations that refund of input tax on purchase of diesel may be allowed. In the said circular instructions, it is further directed by the C.B.R. That;" all the appeals in identical cases pending at various adjudication/appellate fora or in the Courts of law may also be withdrawn in order to maintain uniformity besides being in line with the Board's policy to avoid unnecessary litigation"
14. The issue in hand has also been decided by the Learned Tribunal in the case reported as 2006 PTD 1453 (Trib.) and in appellant's own case cited as S.T.As. Nos. 257-261/LB/2009, wherein it was held that; "Appellate Tribunal directed that input tax refund/adjustment be allowed on High Speed Diesel which had been used or to be used for manufactur e or production of taxable goods or for taxable supplies made or to be made by appellants".
15. Furthermore, the refund claims for the periods under consideration were rejected on the basis of S.R.O. 578(1)/1998, dated 5-6-1998, whereas the said S.R.O. Was rescinded through S.R.O.
490(1)/2004, dated 12-6-2004, therefore, rejection of refund on account of High Speed Diesel is illegal and unjustified as the later notification is remedial and curative in nature, therefore, the same will apply to the under consideration refund claims. In this behalf, I am further strengthened by the reported judgments cited as 2010 PTD 1717 HC. Kar., 2005 SCMR 492 and 1993 SCMR 73.
16. In other judgment of the Hon'ble High Court cited as 2002 PTD 2959, it was held that; "once a registered person establishes that the goods in question on which input tax was paid were used for the purpose of manufacture or production of taxable goods becomes entitled to deduction of input tax and in case there is a conflict between the notification and the provision of law, the later will prevail".
17. It would also deem appropriate to mention that in the recent past i,e, on 23-7-2010, the same issues namely: (1) That the application has been field late; hence is time barred; (2) That the diesel is a part of the negative list and hit by S.R.O. No, 578(1)/98 dated 12th June, 1998, in respect of the same parties, a Division Bench of this Tribunal also dilating upon similar controversy in S.T.As. Nos.
257-261/LB/2009, dated 23-7-2010, allowed the taxpayer appeal by holding that:- "After going through the arguments as well as the case-law produced, this court does not have doubt in its mind that the diesel used in production and manufacturing of a product on which the assessee is liable to pay sales tax is equally important ingredient like other such purchases. The tax charged thereon should always be allowed provided the taxpayer has fulfilled the other legal requirements including provided under section 73. The filing of claim is a procedural act, if the assessee has made a manual application even after introduction of the Software unless there is any specific exclusion the taxpayer should not be deprived of his claim for having not complied the requirements of the said Software. The department should not reject the said application and rather ask the taxpayer to comply with the requirements thereof and then allow the necessary input tax etc. The application filed by the taxpayer manually, therefore, is held to be in time and the rejection on the basis thereof is held to be as illegal. The department is directed to allow input tax adjustment on diesel in respect of all the years and to do consequential acts forthwith. The other issue that the claim was time-barred is also covered by the argument that the same was made manually filed within time. Since the said issue has already been disposed of by us in the upper part of this order, the same shall apply on this issue as well. The assessee appeal on this issue also stands allowed in the manner and to the extent mentioned above".
18. To what has been stated/discussed herein above, particularly in the light of law cited above, I am bound to follow the ratio decidendi in the above referred judgments of the Hon'ble Supreme Court, High Courts and the Tribunal. Resultantly, both the orders of the authorities below being suffering from grave legal infirmities are vacated and accordingly stand set aside. Appeals of the taxpayer for the periods October, 2001, January, 2002, April, 2002 and April, 2005, are succeeded as prayed for and disposed of in the manner and to the extent as dilated supra.