JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER). - Through this appeal, -the appellant calls in question the Sales Tax Order-in-Appeal No. 606 of 2007, dated 27.12.2007 passed by the learned Collector, Collectorate of Customs, Sales Tax and Federal Excise (Appeals), Faisalabad on the following grounds:-
1. Units deregistered.
1.1 Refund is rejected merely on the objection that suppliers of the appellants as enlisted in the impugned show-cause notice and the subsequent- order have been de-registered, despite of the fact that the same were not deregistered at the time of making of taxable supply to the appellants.
Refund was claimed against valid sales tax invoices issued the alleged units under section 23 of the Act during the period when they were registered which cannot be disallowed on their subsequent deregistration. This very fact can also be checked from their computer profiles.
1.2 Even otherwise, the Collector of Sales Tax and Federal Excise, Faisalabad has passed a Standing Order No. 3 of 2006, dated 2.11.2006 at its Serial No. 6 that objections can be overruled in case "invoices pertain to the period prior to de-registration of the said suppliers". Since the suppliers were registered person at the time of making of supplies, therefore, refund of sales tax against their invoices cannot be disallowed upon his subsequent de-registration due to his low sales turnover.
2. Invoice summary not submitted.
2.1 Messrs Golden Facility Textiles (Pvt.) Ltd., bearing registration No. 4-5-111-37-82 (hereinafter, "the supplier") has submitted invoice summary statement for February, 2005 duly received by the Collectorate of Sales and Federal Excise. Faisalabad hence, charge levelled on this account is of no more legal effect and same may therefore be vacated.
2.2 The supplier namely Messrs Babar and Company was engaged in making of taxable supplies of certain items other than textile items during period in question and was not required to submit invoice summary statement for. June, 2005 under S.R.O. 508(1 )/2004, dated 12th June, 2004 because under said notification all registered persons were required to submit such summary statement who were engaged in manufacture or supply, or export of:-
(a) Cotton yarn, blended yarn or man-made yarn;
(b) Textile fabrics of all kinds and descriptions: and
(c) Textile made-ups, including bed linen, kitchen linen, terry fabric goods and ready-made garments.
2.3 The supplier was not engaged in manufacture or supply or export of any of above-mentioned textile goods instead he was making taxable supplies of certain spare-parts and was obliged to submit summary statement of sales and purchases made on or after 1st July, 2005 under S.R.O.
525(1)/2005, dated 6th June, 2005.
2.4 Since, alleged supplier was not even required to submit invoice summary statement therefore, rejection of refund for want of summary statement, which was not otherwise warranted under law.
Is highly unjustified and illegal.
3 No sales to claimant shown in summary.
3.1 The appellants have never provided any summary statement in case of Messrs Al-Hafiz Weaving Factory; it is beyond imagination how refund sanctioning authority has ascertained that no sales to claimant had been shown in summary statement for period in question.
4. Scrutiny for verification of input tax.
4.1 Appellants have claimed refund against invoices duly incorporated in suppliers sales registers and monthly sales tax returns for period in question hence; its rejection is not only contrary to provisions of section 10 of the Act read with sections 7 ibid but also without any other lawful excuse.
4.2 Payments against alleged transactions (where required) have been made through banking channel as provided under section 73 of the Act hence: input tax involved thereon is bona fide and admissible for refund.
4.3 Neither any charge of fax transactions nor of tax fraud either on the part of suppliers or appellants has been levelled in show-cause notice without which refund of input tax paid by appellants cannot be rejected.
4.4 No contravention of sales tax laws or notification issued thereunder or any other specific instruction issued by Central Board of Revenue on subject-matter is alleged in show-cause notice and impugned appellate order is passed merely on assumptions and presumptions which is not warranted under law as laid down by Hon'ble Sindh High Court, Karachi in a judgment reported at [2004 PTD 868]: "The sales tax imposed on the basis of some assumption and presumption not warranted in law shall always be struck down" thus, rejection of refund on this ground is unlawful and illegal eye of law.
4.5 The objection of "scrutiny for verification of input tax" is generated by the STARR having no legal backing by the Sales Tax Statute. No legislative enactment or even any written directive from the Federal Board of Revenue for rejection/deferment of sales tax refund on such objection is made on the subject-matter without which all proceedings taken by the department in this regard are void, ultra vires, illegal and unlawful Reliance is placed on the judgment of this Hon'ble Court in case of Messrs Niagara Mills (Pvt.) Ltd., Faisalabad v. The Collector of Sales Tax and another as reported at (Vol.11 No. 08 Tax Forum 45] wherein it has been laid down: "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."
4.6. Since term "scrutiny for verification of input tax" is nowhere quantified and qualified or even defined in the Sales Tax Act, 1990 therefore, rejection of refund on this ground is beyond scope of sales tax laws. The Hon'ble Lahore High Court, Lahore had laid down in case of Messrs Avari Hotel Ltd. v. The Collector of Sales Tax and 3 others reported as 2000 PTD 3765. "A levy can only be made by express and exact words." The Supreme Court of Pakistan has also laid down in a judgment of Messrs Mehran Associates Ltd. Reported as [1993 SCM R 274] that: "The cardinal principles of interpretation 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 liberally in favour of the tax-paver and in case of any substantial doubt, the same is to be resolved in favour of the Citizen."
4.7 Reliance is also placed on the judgment of Hon'ble Sind High Court, Karachi in case of the Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd., as reported at 2002 PTD 2457 wherein it was held, "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".
4.8 lt is worthwhile to mention here that Collectorate of Sales Tax, Faisalabad is totally silent in respect of modalities and procedural layout as to how problem "scrutiny for verification of input tax of supplier" is to be ruled out at Collectorate's level however, Collectorate of Sales Tax, Lahore vide Standing Order No. 3 of 2006, dated 8.2.2007 has allowed refund on account of scrutiny for verification of input tax of supplier subject to fulfilment of certain conditions as specified therein.
The appellants' refund claim for period in question duly qualifies all the conditions for removal and overruling of objection of "Scrutiny for verification of input tax".
4.9 In absence of any standing order/instructions issued by the Collectorate of Faisalabad, the referred standing order of Collectorate of Sales Tax Lahore is applicable in different situations as specified therein. This being the position, the Collector (Appeals), Faisalabad in a case of Messrs Shama Exports (Pvt.) Ltd., has already held "I find the plea of the appellant correct and hold that in absence of any standing order at the level of Collectorate of Sales Tax and Federal Excise, Faisalabad, this standing order of Lahore can safely be applied".
5. Wrong tax period of shipping biff claimed.
5.1 The appellants have claimed refund of sales tax on the basis of "Mate Receipt Date (M.R. Date)" in case of Shipping Bill No. 13483, dated 26.2.2005 falling in the month of March, 2005, accordingly, refund was claimed in March, 2005 keeping in view the date of exports i.e. M.R. Date therefore, as per policy of Collectorate of Sales Tax and Federal Excise, Faisalabad refund was lawfully claimed and no violation in this regard is committed.
5.2 The contention of the appellants is also endorsed by the Central Board of Revenue vide its Sales Tax Ruling/instruction issued vide letter C. No.3(20)ST-L&P/2001, dated 28th November, 2002 which is reproduced as under for kind perusal of this Hon'ble Court: "It is, therefore, advised that the Collectorate of Sales Tax may also follow the same practice as in vogue in the Exports Collectorates and take E.G.M. Date for Air Shipment and Mate Receipt for Sea Shipment, while determining monthly Export Shipment of an exporter".
2. The learned A.R. While reiterating the above grounds has prayed on behalf of the appellant that-
(i) The impugned . Show-cause notice and consequent impugned orders being biased, vindictive, mala fide, false, unfounded, illegal, void ab initio and ultra vires may be set aside on merits to meet the ends of justice.
(ii) Since, the adjudication order is illegal and defective and no time limitation runs against a void and illegal order therefore, judgment of the learned Collector (Appeals) on the ground of "time- barred appeal" may be declared null and void in the eyes of law and, the case may be heard on merits in the interest of natural justice.
(iii) Since, charge of Scrutiny for verification of input tax has nowhere expressed and defined in the Sales Tax Act, 1990 therefore, rejection of refund on this account especially in the light of referred judgments may be declared nullity in the eye of law.
(iv) Adjudication order for rejection of refund worth Rs. 701,265 passed by the Assistant Collector as also upheld by the learned Collector (Appeals), Faisalabad without any legal excuse and lawful authority may kindly be ordered to be sanctioned to the appellants.
3. In support of the above submissions, the learned A.R. Has referred to the following case-law:-
(i) [2010 PTD (Trib.) 1636], In this case a Registered person filed refund claim for the period 12/2004 and 02/2005, which was rejected on the basis of Sales Tax Automated Refund Repository (STARR) system introduced in the year 2006-Appeals were accepted and the orders-in-appeal as well as orders-in-original wer$ set aside by the Appellate Tribunal with the following observations:- "(11) Lastly, the learned counsel for the appellant contended that the appellant filed refund claim for the period 12/2004 and 02/2005, which was rejected on the basis of STARR objection. The learned counsel for the appellant vehemently contended that. The STARR system was . Introduced in the year, 2006 therefore it cannot be implemented retrospectively. After perusal of record, we find the plea of the appellant correct."
"(12) In view of what has been discussed above, both the appeals are accepted and the impugned order-in-appeal as well as orders-in-original are set aside."
(ii) In another Unreported Judgment of. Customs, Federal Excise and Sales Tax Appellate Tribunal, in S.T.A. No. 191/LB of 2008, dated 9.6.2008 referred by the learned representative of the appellant it has been held that:- "I have gone through the record. The appeal has confounded the Sales Tax ' Refund Rules, 2002, notified by S.R.O. 575(1)/02, dated 31.8.2002 and the Sales Tax Refund Rules, 2005, notified by S.R.O.
533(l)/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. Lt is a controversial issue whether Sales Tax Refund Rules, 2005; Chapter-IV (refund) had been enforced or not. Lt 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."
(iii) [2002 FTP 976] In this case, the Hon'ble Sind High Court, Karachi held that "Vacating the show-cause notice in once case and taking action against an other person in similar situation, amounts to discrimination which is hit by Article 25 of the Constitution of Islamic Republic of Pakistan."
(iv) [2005 SCM R 492] The Hon'ble Supreme Court, in this, case, held that "A facility allowed to some and denied to one is discrimination-See Article 25 of the Constitution of the Islamic Republic of Pakistan, 1973."
(v) [2006 PTD 1412] The Hon'ble Sind High Court, Karachi held that "The substantive rights of the citizens should not be crucified on the altar of some procedural administrative instructions, if otherwise the requirement of a beneficial legislation or notifications issued thereunder are fulfilled."
The Hon'ble Sind High Court further held 1h this referred case that "Concession/exemption cannot be withheld on the ground of administrative instructions."
In Para-14 of this Judgment, the Hon'ble Sind High Court observed as follows:- "14. We would like to refer the principle of law laid down by the Hon'ble Supreme Court of Pakistan in the case of Imtiaz Ali v. Ghulam AH PLD 1963 SC 382, which has acquired the status of classic principle of law in the administration of justice, which has reads as follows:- "............. The proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights. All technicalities have to be avoided unless it be essential to comply with them on grounds on public policy. Any system which by giving effect to the form and not the substance defeats substantive rights is defective to that extent."
(vi) [2010 PTD (Trib.) 1681] The Appellate Tribunal Inland Revenue has held that: "I have heard the learned counsel for the appellant and the departmental representative and perused the record available on the file. The first point involved in this appeal is a limitation as the learned Collector (Appeals) Faisalabad, rejected the appeal on the ground of limitation, In this regard, the contention of the learned counsel for the appellant is that no time limitation runs against a void order as the refund claim of the appellants was rejected under Standing Order No. 3 of 2006, dated 2nd November, 2006 for want of attestation/ verification of supportive documents, submitted under the Sales Tax Refund Rules, 2005. During the adjudication proceedings he claimed that all the supportive documents as required under the law were submitted to the adjudicating authority but the same were not considered by it. He rightly relied on a judgment reported as [2006 PTD 1412] claiming that only on executive instructions, the substantive -rights of the citizens should not be crucified. If the refund is admissible and the appellants have submitted all the authentic documents before the concerned authority, then the rejection of refund on time limitation is against the justice.' The learned Collector (Appeals) Faisalabad in case of Messrs Grip Master International,. Faisalabad and others vide his order-in-appeal dated 60;4.20Q8 where point of limitation was also involved sanctioned the refund on the ground that if the appellants were fulfilled the provisions of Sales Tax Act, 1990 and the relevant refund rules, the denial of refund would also be a violation of the Constitution and on the other hand on the same point he rejected th refund claim of the present appellants which is a discriminatory attitude of the appellate authority, as all the citizens are equal under the Constitution of Islamic Republic of Pakistan. From the perusal of the case-law, which was relied upon by the learned counsel for the appellants and referred to in his arguments, I am of the considered opinion that the impugned order is a void and illegal order, therefore, the point of limitation does notarise."
(vii) [2007 SCM R 729] The Hon'ble' Supreme Court of Pakistan held in this case that"-Void order-Limitation would not run against such order."
"Order passed in violation of mandatory provisions of law-Validity-^Limitation-No period of limitation would run for challenging such order."
(ix) [1996 SCM R 856] .
The Hon'ble Supreme Court of Pakistan held as under:- "(a) Limitation Act (IX of 1908), S. 3-Void order and erroneous order-Limitation for setting aside-Bar of limitation can be ignored in respect of voids but not in respect of erroneous orders-Question of limitation would not arise in respect of judgments which were nullity in law, void or ultra vires- Where order was without jurisdiction and void, it need not be formally set aside.-[Void order]."
(x) [2005 SCM R 69] The Supreme Court held that "Limitation-Void order-Held: No limitation runs against a void order."
(x) [2007 SCM R 834] "Order passed in violation of mandatory provisions of law-Validity-Limitation-No period -of limitation would .Run for challenging such order."
4. On the other hand, learned D.R. Has defended the impugned orders for the reasons recorded therein but he could not rebut the submissions made on behalf of the appellant with any solid plausible argument or by quoting any contrary case-law to controvert the stance taken by the learned A.R. By placing reliance on the Judgments supra.
5. Under the circumstances of the instant case and taking into consideration the case-law quoted supra by the learned A.R. For the appellant-registered person, it is deemed fair and proper to vacate the order-in-appeal as well as the Order-in-Original passed in the present case. Hence, both these impugned orders passed by the officers below are vacated, In the result, the appeal filed by the appellant- registered person succeeds and is allowed accordingly.