RAJA LEHRASSAB KHAN JUDICIAL MEMBER.- (1). The titled appeal has been filed at the instance of appellant/registered person against Order-in-Appeal No. 3010/2008 dated 17-06-2008 through which the.Learned Collector (Appeals), Faisalabad while rejecting the appeal had upheld the Order-in- Original No. 108/2008 dated 19-04-2008 passed by the Assistant Collector (Stream Deferred), Faisalabad.
2. Briefly stated, relevant facts of the case as recapitulated from the available case record are that during scrutiny of the refund claim filed by the appellant/registered person pertaining to the tax period August-2007, an amount of Rs. 347,728/- was deferred due to following discrepancies:- Sr.
No.Particulars Sales tax amountObjections
1. M/s. Rizwan Oil Traders.86,968 Scrutiny for verification of input tax.
2. M/s. Ashfaq Oil Traders.105,799 Registration suspended.
M/s. Al-Muswa r Agency.49,037
3. M/s. DHL Pakistan. 34,814 Non-filer.
4. Shipping bill # 3276. 32,533 Does not exist.
5. M/s. Allied Engineering.17,906 Wrong tax period.
3. Based upon the above facts, the appellant was served upon with a show cause notice bearing C.
No. 3650 dated 02-04-2008 that as to why their refund claim may not be rejected under section 11(2) of the Act and was also charged with the violation of sections 2(14), 4, 7, 8(1), 10 and 26 of the Sales Tax Act, 1990 read with Rule 12(5) of the Sales Tax Rules, 2006 notified vide S.R.O. 555(I)/2006 dated 05-06-06.
4. The taxpayer/appellant produced relevant record in response to show cause notice, but they did not find any favour from the adjudicating authority and feeling aggrieved and dissatisfied with the treatment given at adjudication stage, the appellant then filed the first appeal before the Learned Collector (Appeals) who also rejected the appeal and upheld the Order-in- Original dated 19-04- 2008.
5. The Learned Counsel on behalf of taxpayer stated that documentary evidence in support of refund claim was duly produced and both the authorities below failed to appreciate the same. He contented that all the relevant documents i.e. Sales tax returns, invoice summary statements, supply register, gate passes, cheques, bank statements and shipping bill alongwith rebate documents in respect of subject matter are also enclosed with appeal memo. The Learned AR further agitated that rejection of refund on the objection of scrutiny for verification of input tax is illegal and beyond the sales tax laws while rejection of refund during currency of suspension of registration is premature and illegal. He also urged that by not claiming refund in the relevant tax period is a procedural lapse. To strengthen his contentions, Learned Advocate cited a number of judgments of Superior Courts of the country. Conversely, the Learned D.R. Appearing on behalf of department although opposed the contentions of the Learned Advocate but failed to put-forth any explanation to justify any deviation from the arguments/judgments advanced by the Learned Advocate for registered-person. He has, however, emphatically stated that the appellant has failed to prove genuineness of his refund claim and supported the impugned orders of lower fora.
6. We have heard both the sides, perused the orders of the authorities below as well as documentary evidences annexed with appeal memo, which are once again placed before us and given our utmost care to the respective arguments advanced by the Learned representatives for the rival parties. We have also gone through the case law cited at the bar.
7. With regard to objection of 'scrutiny for verification of input tax' we have no ambiguity in our mind to state that the arguments/submissions made by the Learned Advocate carry much weight. This objection is provisional in nature having not been raised after due examination of the records of alleged supplier whose scrutiny was required not been finalized so far despite expiry of almost three years. Since, alleged supplier is regularly filing monthly sales tax returns and summary statements as required under section 26 and 26(5) of the Act and payments in respect of all alleged transactions have also been made through banking channel as provided under section 73 ibid and too the computer profile of the said supplier as available on STARR Computer System indicated its status as "operative unit" therefore, rejection of refund against the invoices of the said registered supplier is without lawful authority and of no legal effect. We further observed that neither any charge of fake transactions nor of tax fraud ^either on the part of supplier or on appellant has been levelled in show cause notice without which refund of input tax paid by appellant cannot be rejected. We are constrained to agree with the contentions of the appellant that rejection of refund claim merely on assumptions and presumptions is not warranted under law. It is well-settled principle of law of taxation that an assessee can be subjected to tax under the provisions of law which are clear and unambiguous. The rules of interpretation of fiscal statute are by now very well known. These are that only words of the statute I should be looked into. In this regard, we gain support from the reported judgments of the superior judiciary of the country, the relevant excerpt of the judgments are reproduced hereunder for facility:- [PLD 1991 SC 280] "Commissioner of Income Tea vs. M/s. Fakir Cotton Ginning & Processing Industries Ltd." "Indeed it is well settled that in interpreting the taxing statute the Courts must look to the words of the statute and interpret it in the light of what is clearly expressed. It cannot imply anything which is not expressed; it cannot import provisions in the statute so as to support assumed deficiency." Shama Exports (Pvt.) Ltd. Vs. Collector of Sales Tax CL. 793 |Raja Lehrassab Khan (Judicial Member)| [PLD 1991 SC 630] "Collector of Customs vs. Muhammad Mehfooz".
"Fiscal statutes-When construing fiscal statute, one must read words and interpret them in the light of what was clearly expressed and should not rely upon meanings which are not expressed but are implied." [PTCL 2000 CL 696] M/s. Avari Hotel Ltd. Vs. Collector of Sales Tax and 3 others.
"A levy can only be made by express and exact words." "A person must be taxed only if he comes within the letter of law otherwise he is free even though his case falls within the spirit of law." "The language of a taxing statute should not be stretched to hold subject liable to tax." "In fiscal statutes, only the letter of law is to be looked into and that there is no room for any intendment, equity or presumption."
8. We also feel advantage to reproduce the relevant extract of the case law having identical issue in a judgment reported as (2010 PTD Trib. 857) of Customs, Excise and Sales Tax Appellate Tribunal, Lahore and in S.T.A. No. 1769/LB/2009 of Inland Revenue Appellate Tribunal, Lahore Bench as follows [2010 PTD (Trib.) 857] "The fifth and last issue as adjudged in the order of Learned Collector (Appeals) is scrutiny for verification of input tax of appellant's suppliers. I find that the objection of "Scrutiny for verification of input tax" is generated by the STARR System having no legal backing by the Sales Tax Act, 1990. No legislative enactment, no contravention of sales tax laws or notification issued thereunder or any specific instruction issued by Central Board of Revenue on the subject- matter is alleged in show cause notice and the subsequent impugned orders are passed merely on assumptions and presumptions which is not warranted under law as laid down by Honourable Sindh Court, Karachi in a judgment reported at [2004 PTD 868] that; "The sales tax imposed on the basis of some assumption and presumption not warranted in law shall always be struck down, lt is well-established principle of the law of taxation that an assessee can be subject to tax under a provision of law, which is unambiguous and clear." Thus, rejection of refund on this ground is unlawful and illegal in eye of law. The term "Scrutiny for verification of input tax" is nowhere quantified and qualified or even not expressed/defined in the Sales Tax Act, 1990 therefore; rejection of refund on this ground is beyond scope of sales tax laws. The dictum laid down in a judgment as reported in [2000 PTD 3765] by the Honourable Lahore High Court, Lahore is attracted in the instant case that; "A levy can only be made by express and exact words." The observations given by the Honourable Supreme Court of Pakistan in a judgment as reported in [1993 SCMR 274] are also attracted in the instant case 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 taxpayer and in case of any substantial doubt; the same is to be resolved in favour of the Citizen." Reliance is also placed on the judgment of Honourable Sindh High Court, Karachi in a case 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." [S.T.A. No. 1769/LB/2009] "After hearing both the sides, I am of the considered view that the submissions made by the Learned AR carry weight.
Since the supplier in question has been cleared from STARR objection, hence, rejection of refund against the invoices of the said supplier is of no legal effect. I must hold that rejection of refund claim merely on assumptions and presumptions is not warranted under law. It is well-established principle of law of taxation that an assessee can be subjected to tax under the provisions of law which are unambiguous and clear. Thus, rejection of refund on this ground is unlawful and illegal in the eyes of law. The term "scrutiny for verification of input tax" has nowhere been qualified or even not expressed/defined in the Sales Tax Act, 1990 therefore; rejection of refund on the said ground is beyond scope of sales tax laws."
9. Respectfully following the ratio decidendi in the case law cited supra, we have left nothing except to hold that rejection of refund by the sales tax department on the charge of scrutiny for verification of input tax is illegal and unlawful.
10. As far as objection of 'registration suspended' is concerned, we would not hesitate to hold that firstly, rejection of refund for period in question on the charge of "registration suspended" is without any lawful ground as refund against invoices of a person whose registration is suspended can be rejected upon his blacklisting by the Collector of Sales Tax after adhering due process of law as prescribed under section 21 of the Act read with Sales Tax Rules, 2006 notified vide S.R.O.
555(I)/2006 dated 05-06-2006 made thereunder. Rejection of refund during the currency of suspension of registration is premature, invalid, unwarranted and illegal because no formal order of blacklisting under the law has been issued by the competent authority therefore; whole proceedings culminated in impugned show cause notice and consequent orders are nullity in the eyes of law.
11. Secondly, Learned Advocate assailed that the order of suspension of registration or black-listing cannot be made applicable retrospectively whereas it is the departmental view that as per rule 12(5) of the Sales Tax Rules, 2006, the sales tax department can reject refund of input tax because 'suspension of registration or black-listing' of any registered person in its spirit covers the activities of his past having retrospective effect and it would be in no way for his prospective activities. In the instant case, the period of purchases from the alleged suppliers is August- 2007 whereas registration of the said suppliers was suspended in November-2007. In order to arrive at proper conclusion, it would be appropriate to reproduce the provisions of sub-rule (5) of Rule l2 of the Sales Tax Rules, 2006 notified vide S.R.O. 555(I)/2006 dated 05-06-2006 which reads as under:- Sub-rule (5) of Rule l2 of the Sales Tax Rules, 2006: "(5). During the period of suspension of registration, the invoices issued bv such person shall not be entertained for the purposes of sales tax refund or input tax credit and once such person is blacklisted, the refund or input tax credit claimed against the invoices issued bv him, whether prior or after such blacklisting, shall be rejected through a self- speaking appealable order and after affording an opportunity of being heard to such person." (Emphasis ours)
12. By bare reading of Rule 12(5) of the Sales Tax Rules, 2006, it is crystal clear that the invoices issued during suspension of registration and after black-listing of such person shall not be entertained for the purposes of sales tax refund or input tax credit whereas in the instant case, no transaction has ever been made during or after "suspension of registration and black-listing of the alleged suppliers" hence, rejection of refund by the sales tax department while relying upon the said rule is palpably illegal and unlawful. We are fortified in our views that the word "prior" used in the above said rule does not cover the period beyond suspension of registration but it means during currency of suspension of registration, upto and after its black-listing. The upshot of discussion is that this rule will come into play when a registered person transacted with another person during or after its suspension of registration and black-listing as this is not meant for, before suspension of registration or black-listing. It is well-established principle that while interpreting the taxing statute one must look into the words of the statute and to interpret it in the light of what is clearly expressed.
13. Thirdly, it is a matter of record that at the time of business transactions, neither registration of alleged suppliers was suspended nor were declared as blacklisted units rather having "operative status " at that time. The order through which registration of alleged suppliers was suspended is an executive order, therefore, we hold that if an executive order or a 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. It is significant to state here that in terms of section 24 of the General Clauses Act, 1897 every insertion, replacement or amendment runs prospectively and not retrospectively. This principle is fully borne out from the judgments of honorable Apex Court cited as (1992 SCMR 1652), (PLD 2001 SC 340), (PLD 1997 SC 582) and (PTCL 1987 CL 99). If one needed, reference can also be made to the judgment of honorable Supreme Court of Pakistan in case of Government of Pakistan vs. M/s. Village Development Organization reported as (PTCL 2005 CL 138). The ratio decidendi in the said judgment is as under:- "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."
14. In similar situation and identical circumstances, honorable Division Bench of Inland Revenue Appellate Tribunal, Karachi in S.T.A. No. 61/K of 2009 reported as (2010 PTD (Trib.) 2406) has held as under:- "9. The law of blacklisting and suspension of registration of the registered person was first time introduced through amendment in section 21 of the Sales Tax Act, 1990 vide Finance Act, 2004 (II of 2001), from 01-07-2004. In this case, the appellants purchased the certain goods (textile products) for export on October, 2003. The copies of the cheques were enclosed in the memo, of the appeal showing the sales tax has been paid and goods were exported in November, 2003. The tax paid by the appellants on the purchases was refundable as input tax and the said sales tax refund was not sanctioned by the sales tax department on the ground of law of blacklisting and suspension of registration on 31-12-2006, pertaining to the tax period of October, 2003. No authority has been cited to support the proposition that if the person from whom the exporter purchased the goods is found to be blacklisted/suspect the input tax that has been charged by the seller from the exporter and has been deposited into the Government treasury cannot be refunded. The Assistant Collector order dated 31-12-2006 by which Sales Tax Registration of supplier has been suspended cannot operate retrospectively.
10. The said issue has been discussed by the Hon'ble Lahore High Court as reported [1993 PTD 713] in the case of Messrs Firdouse Textile Printing Mills (Pvt.) Ltd., Faisalabad vs. Federation of Pakistan through Secretary Finance and 5 others, the relevant Para, is reproduced hereunder:- "(5) It is trite law that a notification which has the effect of imposing liability or obligation cannot operate retrospectively in the absence of any legal sanction in the statute itself. In Messrs Army Welfare Sugar Mill Ltd. And others vs. Federation of Pakistan and others [1992 SCMR 1652], Commissioner of Sales Tax (West) Karachi vs. Kurddsons Ltd [PLD 1974 SC 180] and Kohinoor Textile Mills Ltd. Vs. Commissioner of Income Tax, Lahore [PLD 1974 SC 284], it was held by the Supreme Court that a notification which purports to impose a new liability or obligation cannot operate retrospectively in the absence of any legal sanction".
11. Under these circumstances, rejection of refund claims on alleged "Suspension of registration of supplier" "alone" is totally illegal and absolutely arbitrary. This sounds arrogantly o whimsical (and discriminatory) when different treatment are meted out to different applications under exactly the same circumstances and that too by the same Adjudicating Officer.
12. In light of the above discussion and objection analysis on the issues involved in this appeal, clearly demonstrate that the impugned adjudication Order-in-Original as well as Order-in-Appeal are palpably illegal and void, passed without jurisdiction and lawful authority. The impugned orders are therefore set aside and the appeal is allowed accordingly. The Deputy Commissioner of Sales Tax (Refunds), Karachi is, therefore, directed to sanction appellants pending sales tax refund claim under the provisions of Sales Tax Act, 1990."
14A. With regard to charge of non-filer, Learned Advocate vehemently contented that alleged unit has filed sales tax return for August-2007 which is attached with the appeal memo, and the same was also found satisfactory by the Learned D.R. And he has not shown his concerns therefore, we hold that the appellant cannot be impeded with undue rejection of refund due to any fault or non- updating of refund automated system hence, rejection of refund on the objection raised by STARR system without verifying the actual and factual position on the subject matter is highly unjustified and of no legal effect.
15. With regard to objection of shipping bill does not exist, Learned Advocate stated that due to non-updating of computer system, this charge has been levelled otherwise, the quadruplicate copy of shipping bill No. 3276 alongwith the rebate documents are attached with appeal memo. In view of this factual position, the orders of authorities below are vacated against this objection.
16. In respect of objection of wrong tax period, we have observed that appellant claimed refund of sales tax incurred in connection with zero-rated supplies during August-2007 against invoices pertaining to the month of July-2007 and the computer system generated an electronic objection of "wrong tax period". Learned Advocate relied upon the provisions of section 7 of the Act which reads as under:- Proviso to section 7 of the Act: "Provided that the taxpayer may adjust input tax paid on the purchases in the Immediate twelve preceding tax, periods from the output tax subject to the condition that the taxpayer specifies the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return for the immediately succeeding tax period."
17. It is abundantly clear from the above provisions of section 7 of the Act that the appellant was entitled to claim refund of input tax for a preceding tax period in his sales tax return for a succeeding tax period under the proviso to section 7 of the Act therefore, charge of wrong tax period is not only wrong and false but also illegal and unlawful. The appellant committed a lapse by not claiming refund in the relevant tax period and rather claimed the same as input tax in the next month. It suffices to say that the law has therefore, given a right to appellant and availing of such a right later that stipulated period and in our view, it would not attract rejection of refund at all. We are of the considered view that refund of input tax is a right of a registered person which cannot he denied or withheld on merely some procedural lapses and technical grounds. Any such denials of refund of input tax will tantamount to double taxation not covered by the express provisions of section 7 and section 8 of the Sales Tax Act, 1990. We are also strengthened to hold so by the dictum laid down by the honorable Supreme Court of Pakistan in case of M/s. Pfizer Laboratories vs. Federation of Pakistan cited as (PTCL 1998 CL 354) wherein it was inter alia held:- "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." Further that; "That there may not be legal liability on the part of a Government to refund any amount received by it as a tax or other levy by virtue of certain special provision under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every Government which claims to have ethical and moral values, must do what is fair and just to the citizen regardless of legal technicalities."
18. Furthermore, issue of out of tax period refund also remains no more important as it has already been directed by the Central Board of Revenue to its field formations vide letter C. No. l(115)STJ/2004 dated 04-12-2004 that; "/ am directed to refer to the Conference of the Collectors of Sales Tax and Central Excise held on 04-12-2004 in Islamabad and to say that it was decided during the said conference that in view of the judgments decided by the Superior Courts in various cases and involving the issue of out of tax period adjustment, the Collectors should withdraw all such cases pending at different fora. In view of above, it is advised to take necessary action accordingly under intimation to the Board". This being the position, orders passed by the authorities below for this procedural lapse is too harsh and are not sustainable under law, impugned orders are therefore vacated.
19. On a careful consideration of controversy between the parties and in-depth consideration of the submissions, particularly in the light of law and dictum laid down in the judgments quoted supra, we are inclined to accept the appeal filed by the registered person. Be that as it may, findings recorded by both authorities below being illegal, vague and unlawful are accordingly set aside. Appeal of the registered person is .Succeeded as prayed for and disposed off in the manner and to the extent as dilated supra.