This appeal filed by the registered person is directed against an order dated 15-5-2007 passed by learned Collector of Sales Tax and Federal Excise, Rawalpindi/Islamabad.
2. Messrs Safina Impex, Islamabad registered person lodged three refund claims of Rs,1,040,864, Rs,2,547,031 and Rs, 2,251,685 for the period December 2001, January, 2002 and February, 2002 respectively which were rejected vide Orders-in Original Nos.2 of 2003, 3 of 2003 and 4 of 2003 all dated 26-7-2003 respectively. The registered person aggrieved of this treatment applied for re- opening of the Orders-in-Originals under section 45-A of the Sales Tax Act, 1990 (hereinafter called the Act) on which an order dated 30-9-2003, was passed by the Collector, Collectorate of Sales Tax and Central Excise, Rawalpindi, against which the registered person filed an appeal before the Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad Bench. The Appellate Tribunal vide its judgment, dated 23-9-2004 set aside .The impugned order and remanded the case to the Collector inter-alia on the ground that the order was not a speaking one. After remand, the Collector, Sales Tax and Federal Excise, Rawalpindi passed a fresh order dated 1-11-2005, under section 45A of the Act. Still feeling aggrieved the registered person again tiled an appeal before the Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad and after hearing, the Appellate Tribunal vide judgment dated 19-9-2006 again set aside the impugned order, and remanded the case once again to the Collector, Sales Tax and Federal Excise, Rawalpindi for de novo consideration.
3. After remand learned Collector vide his order dated 15-5-2007 disposed of the case by holding as follows:-- "S.R.O. 555(1)/96 dated 1-7-1996, empowers the Adjudication Officers to adjudicate the cases involving evasion and recovery of sales tax in terms of sections 11 and 36 of the Sales Tax Act, 1990.
Whereas Rule 8 of the Refund Rules, 2000, issued vide S.R.O. 417(1)/2000, dated 20-6-2000, empowers the Officer In charge of the Refund Division to adjudicate/reject the inadmissible refund claims. Therefore, S.R.O. 555(1)/96, dated 1-7-1996, empowers the Adjudicating Officer, to adjudge the evaded amount of tax or the tax erroneously refunded. On the other hand, Rule 8 of Refund Rules, 2000, empowers the Officer In-charge of the Refund Division to determine admissibility of a refund claim filed under these rules and the powers to reject inadmissible claims. Hence, applicability of S.R.O. 555(1)/96, dated 1-7-1996, after omission of subsection (3) of section 11 of the Sales Tax Act, 1990, under which the above said S.R.O. Was issued and substitution of section 45 of the Sales Tax Act, 1990, has no nexus to the Refund Rules, 2000.
The cases of adjudication involving evasion of tax, charging of additional tax/default surcharge and imposition of penalty are entirely different from the cases involving rejection of refund claims, under Rule 8 of the Refund Rules, 2000, made under sections 50 and 10 of the Sales, Tax Act, 1990, which empowers the Deputy Collector Refund or any other officer of the sales tax who holds full or partial charge of Refund Division.
The Show-Cause Notices were issued by the Officer In charge of the Refund Division and as the amount involved did not exceed Rs,5 millions, in any of the three cases, approval of the Additional Collector, being the competent authority, under the Refund Rules, 2000, was duly solicited and the case was adjudicated as per rules/law."
4. Incidentally, the registered person again aggrieved of this treatment is in appeal before this Tribunal on the following grounds:-- "(1) That, without prejudice, the Order is evasive and non-speaking, the contentions as raised through the earlier memoranda, which may be read as integral part of this memo. Of appeal, and as, raised during the hearings, have not been considered, appreciated and adjudicated upon.
(2) That, without prejudice, the impugned Order is badly time barred and also against the Remand Order of this August Tribunal, hence not sustainable. Both, the impugned Order and the earlier Orders-in-Original (upheld by the impugned Order) are badly time barred and the same is evident from the face of them, relevant law is very clear and unequivocal. Same are not enforceable through a Court of Law.
(3) That, without prejudice, the Show-Cause Notices were without jurisdiction/authority and were also hopelessly time barred hence not sustainable.
(4) That, without prejudice, once output tax has, admittedly, been paid at the time of export (in shape of zero rate), the earlier paid input tax cannot be retained on any technical grounds, whatsoever. (The payment of input tax is undisputed). This amounts to double taxation, not permissible under the law.
(5) That, without prejudice, the appellants cannot be penalized for any illegal act of the suppliers (i,e, Messrs Textile Fibre and Messrs Pak Cotton Fabrics), especially when those were black listed years after and much subsequently to the transactions-in-question.
(6) That, without prejudice, placing of the appellants in the category of "suspected unit" on 9-4- 2004, i,e, after the transaction period, is also illegal, unlawful and without jurisdiction/ authority.
Besides, it is for the first time that appellants have come across such positioning. Everything has been done behind their back and without notice/knowledge.
(7) That, without prejudice, the impugned Order and the earlier SCNs and Order-in-Originals and other related proceedings are/ were the result of none reading/mis-reading of the relevant provisions of law and the relevant record.
(8) That, without prejudice, there was no concept of "Flying invoices" in the Sales Tax Act at the relevant time."
5. Arguments have been heard. The first objection raised by learned A.R regarding the three Orders-in-Original is about the issuance of show cause notices beyond the period prescribed by section 10 of the Act and also passing of the Orders-in-Original. According to him, the time provided by section 10(2) of the Act as it then existed was a period of 30 days for deciding the claim of refund. Besides, he referred to rule 8 of the Sale Tax Refund Rules, 2000, promulgated vide S.R.O. 417(1)/2000 dated 20-6-2000, to contend that in case of an objection to the refund claim a show cause notice was to be issued within 14 days of receiving of the refund claim. He further contended that in the instant case the show cause notices were issued after almost one year from the filing of the refund claims. He added that section 10 ibid is a mandatory provision and on account of failure of the department to decide the refund claims within the period mentioned, the same could not be rejected and should be deemed accepted. As against this, the department's contention is that the said refund claims were not admissible on the face of those to the appellant/registered person therefore the time schedule laid down by subsection (2) of section 10 of the Act, as it existed at the relevant time need not to be observed. As regards the effect of section 10, learned D.R maintained that it is a directory provision for there is no penalty provided in case of any lapse on the part of the department in not processing the refund claim within the prescribed period.
6. Subsection (2) and subsection (4) of section 10 of the Act, as these existed at the relevant time, are as follows:--
(2) "Notwithstanding anything contained in subsection (1), the input tax incurred if(***) shall be refunded not later than thirty days of filling of return in such manner and subject to such conditions as the Board may, by notification in the Official Gazette, specify.
(4) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the provisions regarding time limit shall not apply till the investigation, including the verification of the deposit of tax claimed as refund, is completed and the claim is either accepted or rejected.]"
Giving these provisions., it seems that the refund claims were submitted somewhere on March 15, 2002 but the same were not processed as required by subsection (2) ibid and after almost one year i,e, on 18th of March, 2003 show-cause notices were issued by raising certain objections as to the admissibility of the refund claims. Subsection (4) as mentioned above provides that in case a refund claim seems to be not admissible, the requirement as to the time limit for processing the claims shall not apply till the investigation and verification stands completed. In the instant case, the contention of the registered person has all along been that the remittance/price of the exported goods was received by one Mehboob, a so-called guarantor which was then credited to the account of the exporter/registered person. On the face of that, it seems that some investigation was required as to why the amount was credited firstly in the name of a guarantor which tantamount to be a violation of section 73 B Of .Act providing that the payment shall have to be made by a cross cheque or pay order in favour of seller/exporter from the business account of the buyer and in absence of that, the claim of refund shall not be admissible. Given this background once it was shown by the registered person himself of the payment to the guarantor in the refund claims, apparently it became difficult for the department to go by the time schedule laid down in subsection (2) of section 10 of the Act. Thus as per subsection (4) ibid, the issuance of show cause notices beyond the period specified in subsection (2) does not become a basis for saying that the refund claims should be deemed to have been accepted.
7. As regards the effect of subsection (2) of section 10 as it existed at the relevant time it does not appear to be a mandatory provision for the reason that firstly no penalty has been provided in the said section in and secondly this assumption is strengthened by the tenor of section 67 the event of time schedule laid down in subsection (2) being not followed of the Act which provides a compensation to be made in case of withholding of refund claims beyond period prescribed without there being any reason and a sum along with the refund claim is payable by the department.
8. Notwithstanding the above, however, at present any findings as to the effect of refund claims having not been processed within time cannot be given unless another issue pertaining to alleged violation of D section 73 of the Act is not decided. Hence any final verdict in this regard will be given after a finding on the alleged violation of section 73 of the Act.
9. The next ground agitated by learned A.R is the question of competency of the Assistant Collector who passed the Orders-in-Original. According to learned A.R, section 45 of the Act, as it existed at the relevant time, empowered only the Deputy Collector to decide the refund claims exceeding one million and in the instant cases, although the refund claims were more than one million, an Assistant Collector passed the Orders-in-Original which are illegal being without jurisdiction. He referred to S.R.O. No,417(I)/2000 providing Sale Tax Refund Rules, 2000 promulgated on 20th June, 2000 to contend that an action under Rule 8 could be taken by an Officer Incharge and as per definition of Officer In charge given in Rule 2, it could be a Deputy Collector only who was authorized to pass the orders. He added that assuming for sake of arguments, that an Assistant Collector may act as Officer In-charge yet by the amendment in section 45 of the Act, providing the process of the refund claims exceeding one million rupees by a Deputy Collector, an Assistant Collector could not decide the cases in hand. He reiterated that for the purposes of Officer Incharge as envisaged in Rule 2 of the Refund Rules, 2000, a Deputy Collector shall only be taken to be an Officer Incharge for processing the refund claims exceeding one million. Learned A.R further contended that there is hardly any need of any argument to show that the refund rules being a delegated legislation and subordinate one would have to be read subject to section 45 of the Act and the only harmonious construction that may be given to Rule 8 of the refund Rules, 2000 as to definition of Officer Incharge as contained in Rule 2 shall be, that as per section 45 of the Act, it is the Deputy Collector only as a competent Officer Incharge for processing the refund claims exceeding rupees one million. On the other hand, the department's contention is that the Assistant Collector, who passed the impugned Orders-in-Original had been empowered by the Collector for dealing with refund claims exceeding rupees one million and was as such designated an Officer Incharge and the said authorization shall be produced before the Tribunal.
10. Firstly, it may be observed at the outset, that the department has not produced any authority letter by Collector empowering the Assistant Collector to act as Officer Incharge to deal and process the refund claims and pass the impugned Orders-in-Original. However, before dilating upon the contention of the department as to the competency of the Assistant Collector to pass the Orders-in-Original it is worthwhile to reproduce section 45 of the Act as it existed at the relevant time and rule 2 of the Refund Rules, 2000.
"45. Power of Adjudication:---[(l)] in cases involving assessm ent of tax, charging of [default surcharge], imposition of penalty and recovery of amount erroneously refunded (or any other contravention) under this Act or the rules made thereunder, the jurisdiction and powers of adjudication of the Sales Tax Officers shall be as follows:-- [(i)] ... ... ... ... ... ... ..
(ii) Deputy Collector (a) Cases falling under subsection (1) of section 11.
(b) Cases falling under subsection (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees.
(iii)Assistant Collector Cases falling under subsection (2)Collector of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but does not exceed one million
(iv) ... ... ... ... ... ...
(v) ... ... ... ... ... ..
Rule 2 of the Refund Rules, 2000.
"Officer in Charge" means deputy collector of sales tax or any officer of sales tax of senior rank who holds full or partial charge of the Refund Division."
Given this situation, assuming that department would have produced such an authorization letter that too had not been of any validity and consequence being violative of section 45 of the Act, for the reason that section 45 ibid being a principal legislation surely overrides Rule 2 of the Refund Rules, 2000 and the only harmonious construction which may H be placed in the said context is that for the purposes of dealing with the refund claims exceeding one million, a Deputy Collector would only be deemed to be an Officer Incharge and an Assistant Collector can never be authorized for processing such claims.
11. The next issue involved in this case is the alleged violation of section 73 of the Act that the payment by one Esam, Dubai/importer was not made through banking channel as the payment was firstly made to one Mehboob, said to be a guarantor, who then is stated to have transferred the said amount to the account of the registered person/exporter. In this respect, learned A.R contended that there is no word 'directused in section 73 of the Act and thus the transfer of amount by indirect way, yet through the- banking channel, should be deemed as correct and within the purview of section 73 of the Act which entitled the registered person for refund. He referred to 2003 PTD (Trib.) 928 and C.B.R. Rulings in Cases Nos.5 of 2004 and 33 of 2005 to mention that payments through travellers cheques have been held to be a compliance of the requirement of section 73 of the Act. On the contrary, the department contended that the language of section 73 is quite clear and the payment has to be made by the importer from his bank account through banking channel in favour of the seller/exporter. In addition, it was also contended that the registered person did not furnish all the necessary documents in support of his claims.
12. Section 73 of the Act is reproduced as under:- S.73:---"Certain transactions not admissible.--Notwithstanding anything contained in this Act or any other law for the time being in force, any transaction [(excluding utility bills)] in respect of which payment is made on or after the first day of [July], 2000, for a sum exceeding fifty thousand rupees otherwise than by a crossed cheque drawn On a bank or by a crossed bank draft or pay order [or any other banking instrument showing transfer of the payment in favour of seller from the business account of the buyer] shall not be admissible for the purposes of input tax credit, adjustment or deduction, or refund, repayment or drawback or zero-rating etc. Of tax under this Act [provided that payment, in case of such transaction on credit, is so transferred within one hundred and twenty days of issuance of tax invoice [Provided that when a registered person supplies taxable goods for a sum exceeding fifty thousand rupees in respect of which payment is received otherwise than in the manner prescribed in this section read with section 7, he shall not be entitled to claim adjustment or refund of input tax in respect of such goods.] "
It seems that on the subject in hand Regulation 12(1) of the Foreign Exchange Regulation Act, 1947 (VII of 1947) is also relevant which too is reproduced as under:--
12. Payment for exported goods.
The Federal Government may, by notification in the official Gazette, prohibit the export of any goods or class of goods specified in the notification from Pakistan directly or indirectly to any place so specified unless .a declaration supported by such evidence as may be prescribed or so specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be, paid in the prescribed manner.
13. It seems that in the export process among others, Form-E, Bill of Lading, Packing Invoice, Export Commercial Invoice, letters of credit are the documents which are necessary to support a refund claim in case of export and Regulation 12 of Foreign Exchange Regulation, 1947 is the relevant provision in this regard. Firstly, suffice is it say, that Form-E is quite helpful in resolving this controversy. Form-E has been prescribed by Regulation 12(1) of the Foreign Exchange Regulation, 1947 showing inter-alia that the authorized bank of the exporter and that of the importer would deal with each other on behalf the exporter and importer. A letter of credit which is sought to be issued by the importer is K processed by the importer's authorized bank and sent to the exporter's authorized bank. Then after the receipt of the export goods by the importer, the exporter is required to submit Form-E through his authorized bank to the State Bank and a copy to the Sales Tax Department along with the refund claim. On the back of this Form-E, there are two certificates which are quite pertinent where the authorized bank of the exporter certifies that the payment of the exported goods have been received from the importer's bank which has been credited, of course after examining certain documents, in the account of the exporter, lying with the exporter's authorized bank.
14. Given this situation, however, the registered person maintained that the amount of exported goods was firstly received by one Mehboob, the guarantor who then transferred that to the account of exporter and there is a certificate by the Askari Bank authorized Bank of the registered person to this effect on the file. It is not understandable as to how some guarantor's came into picture as there is no possibility of transfer of the payment by the authorized bank of the importer to the account of some so-called guarantor. Unfortunately without explaining as to why the above mentioned procedure, which is prescribed by the Foreign Exchange Regulation and having not been followed, a certificate has been issued by the authorized bank of the exporter as to the receipt of amount of the exporter's goods from the account of one Mehboob. It seems that it was necessary by the officer dealing with this refund claim to examine this aspect of the case as to why the amount was credited firstly in the account of one Mehboob in violation of the Form-E. However, these things have not been seen and examined by the dealing officers which is necessary to establish as to whether or not section 73 of the Act has been violated for the reason, presumably that all the necessary documents for example Form-E which are stately 10 in number were not produced by the registered person. Incidentally, the necessary document are not on the appeal file to give any findings in this respect by the Tribunal.
15. The case-law referred to by learned A.R is distinguishable for the reason that the same does not bear upon the issue in hand. Further binding effect in as much as the same treat traveller's cheques to be a the rulings of FBR quoted by learned A.R are not precedent and have no compliance of section 73 of the Act which incidentally is a misunderstanding.
16. In this background, when it is contended by the registered person, who exported certain goods overseas, that the amount was credited in the account of one guarantor and thereafter it was credited in the account of the registered person the case of such a registered person clearly falls within the purview of the subsection (4) of section 10 of the Act and thus, the contention of the registered person that the refund claims were not processed within the time is of no consequence and the show cause notices issued cannot be held to be time barred.
17. It was also alleged by the department that registered person used flying invoices without actual delivery of goods. However in the written submissions learned D.R did not press this issue on the ground that the claims were not rejected on the basis of flying invoices and the refund claims were actually rejected in view of payments not directly being made to the registered person/exporter.
18. In the impugned order there is also a reference of S.R.O. 555(1)/96 which both A.R. And D.R.
Emphatically contended that such S.R.O. Is not applicable being not relevant to the facts of the case. This contention of both the learned counsel seem to be correct as such any observation about the said S.R.O. Shall be taken to be of no effect.
19. In view of the above it is necessary that all the orders passed by the forums below may be set aside and case remanded for reexamination by an officer, who is under the law and relevant rules competent to decide the matter with a direction that all the documents which are necessary for the export of the goods particularly Letter of Credit and Form-E including the Bank Credit Invoice may be examined afresh and case be decided.
20. The case file along with the order by the Tribunal may be sent to the Chief Commissioner Inland Revenue R.T .0., Islamabad, who is desired to make it over to that officer for re-examination and decision who has the jurisdiction to decide the matter. With these observations the appeal is decided accordingly.