' SYED NADEEM SAQLAIN, CHAIRMAN.---The titled appeal has been filed under section 46 of the Sales Tax Act, 1990 at the instance of the registered taxpayer, calling in question the Order-in-Appeal No,270 of 2009 dated 3-3-2009, passed by the learned Collector of Customs, Excise and Sales Tax (Appeals), Faisalabad.
2. Facts briefly stated for the purpose of disposal of the present appeal are that registered taxpayer claimed refund of input tax incurred in connection with zero-rated supplies pertaining to December, 2007. However, STARR System pointed out, certain discrepancies, upon which sales tax department issued a show-cause notice as to why refund claimed amounting to Rs,107,431 may not be rejected under section 11(2) of the Sales Tax Act, 1990 read with Rule 37 of the Sales Tax Rules, 2006. The registered taxpayer was also confronted with the violation of sections 2(14), 4, 7, 8(1), 10 and 26 of the Act. In response to show cause, reply submitted by the registered taxpayer did not find any favour and the learned adjudicating authority proceeded to pass the Order-in-Original No, 1649 of 2008 dated 21-8-2008 which was assailed by the taxpayer at the first appellate forum before the learned Collector of Appeals who also dismissed the appeal without discussing legal aspects of the controversy arising out the order-in-original. The registered person being aggrieved and dissatisfied with the treatment given at first appellate stage has come up now in further appeal before this Tribunal.
3. Learned counsel for the registered taxpayer has contended that the Collector (Appeals) was not justified in confirming the order of adjudicating authority who rejected the refund claim of the taxpayer on the grounds of scrutiny for verification of input tax, duplicate invoice, black-listed and registered suspended unit. The learned AR while continuing his arguments contented that the registered taxpayer done genuine purchases from the registered suppliers and made no default, and even otherwise liability to pay sales tax is on the supplier. Conversely, learned DR on behalf of department supported the orders of authorities below for the reasons recorded therein.
4. I have considered the rival arguments put forth by the learned representatives of both the parties and the orders of the authorities below. I am inclined to agree with the assertions made at the bar by the learned AR. With regard to the objections of scrutiny for verification of input tax and duplicate invoice, the learned AR submitted clearance certificate (NOC) in respect of Messrs M.S. Paper Cones Factory and also provided copy of input tax invoice in case of Messrs Nazer and Company. The learned DR did not object to these documents but argued that refund against invoices of black-listed and registration suspended units could not be allowed as no tax was paid by them in the national exchequer. Whereas, the learned counsel for the registered taxpayer referred to various provisions of the Sales Tax Act, 1990. Before I proceed further, I deem appropriate to examine the legal provisions first. The provisions of sections 3(3)(a) and 3(A) of the Act is reproduced hereunder for reference:-- "Section 3. Scope of tax.-- ' Subsection (3). The liability to pay the tax shall be,-
(a) in the case of supply of goods, of the person making the supply, and ' Subsection (3A). Notwithstanding anything contained in clause (a) subsection (3), the Federal Government may, by a notification in the official Gazette, specify the goods in respect of which the liability to pay tax shall be of the person receiving the supply." (emphasis ours)
5. From bare reading of above provisions of law, it becomes clear that the liability to pay sales tax is on the supplier under section 3(3)(a) of the Act and can be extended to the buyer only by a notification under section 3(A) ibid which provides shifting of tax liability to the person receiving the supply of specific goods and in appellant's case, no such notification was issued by the Federal Government as such defaulted amount should have been recovered from the defaulter instead of the buyer. The ratio decidendi in the judgment of honourable Lahore High Court in case of "Messrs Superior Textile Mills Ltd., v. Federation of Pakistan, and others" reported as 2000 PTD 399 is also on all fours to the case of the registered person:-- "Liability to pay sales tax is of a person making taxable supplies subject to the exception that if the Federal Government issued notification in terms of section 3(3-A) notifying certain goods with regard to which the recipients has been made liable to pay tax, then- the person receiving the supply would have to pay the same."
6. I am not convinced with the submissions made by the learned DR that the refund claimed by the appellant could not be sanctioned even against invoices issued prior to black-listing and suspension of registration of the alleged suppliers as the Federal Board of Revenue in conformity with the said provision issued Sales Tax General Order No,3 of 2004 dated 12-6-2004 to the filed formation to apply the order of black-listing/suspension of registration from the date, of its issuance. For reference, para.36 of the said order is reproduced below:--
7. "Unless, the Collector specify otherwise such order effect from the date of original black-listing or suspension of registration/enrollment of the concerned person, so that invoices issued by him during the intervening period are acceptable."
From above, it transpires that the order of black-listing or suspension of registration would take effect from the date of its issuance and invoices issued by the suppliers during the intervening period are acceptable. The learned AR produced the judgment of Division Bench of this Tribunal reported as (2011 PTD (Trib.) 1073) is also attracted in the instant case wherein the same issue was resolved in favour of taxpayer:
7. Furthermore, perusal of record reveals that purchases of the registered taxpayer pertain to the period 'December, 2007' when the alleged suppliers were not included in the list of black- listed/suspended units and their subsequent inclusion in the list of black-listed/suspended units in 'November, 2008' cannot -be operated retrospectively. Any amendment in statute and issuance of a notification or an executive order deems to be effective prospectively and not retrospectively as expressed in section 24 of the General Clauses Act, 1897. Reliance is placed on landmark judgment of August Supreme Court of Pakistan in a case of "Government of Pakistan v. Messrs Village Development Organization" as reported at 2005 SCM R 492 wherein it has been laid down:-- "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 effect or invade upon vested right cannot be applied with retrospective effect."
' And whereas in case of "Messrs Anoud Power Generation Ltd. v. Federation of Pakistan and others" reported as PLD 2001 SC 340 their lordships of Supreme Court of Pakistan have laid down as under:-- "At this juncture, another important aspect of the retrospectivity of a notification may also be noted 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. This point has been elaborately discussed by this Court in the judgment pronounced in the case of Messrs Army Welfare Sugar Mills Limited and others (1992 SCM R 1652) "
' Reference can also be made to the judgment of honourable Sindh High Court reported as (1984 PTD 216) in case of "Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), -Karachi" wherein it was held:-- "The duty to issue license was on the Department, and if they have not taken care to issue license after, proper verification and satisfaction and have gone on issuing license to bogus parties, or non-existent parties, the responsibility entirely lies upon the Department as a licensed manufacture, would only see the copy of license and will not make inquiries for establishing the genuineness of the licensee. How can this duty be imposed on the assessee to ascertain whether the party to whom license has been issued exists or not? Unless, it is established that the license has been cancelled before the sale knowledge of the assessee it will be unjust to burden the seller or assessee to make inquiries about the genuineness of the license."
8. In view of what has been stated above and, in the, light of ratio decidedi in the cases quoted supra, I am inclined to hold that the orders passed by the authorities below are not maintainable in the eye of law. Consequently, the impugned show cause notice and subsequent orders passed thereon are set aside. As a result, appeal filed by the registered taxpayer is accepted.