The appellant-registered person has filed the instant appeal under section 46 of the Sales Tax Act, 1990 and assailed the order of the learned Commissioner of Inland Revenue(Appeals), Multan vide Order in-Appeal No.14 of 2010 dated 19-5-2010.
2. Facts leading to disposal of the captioned appeal are that the appellant -registered person, a private limited company situated at Adda Shahpur, Bosan Road, Multan, has been authorized to work under franchise of Amrat Beverages International (Pvt.) Ltd., Karachi since May, 2004 with the Sales Tax Registration No.04-07-2202-165-28. On 23-7-2009, the Additional Collector issued a show-cause notice bearing C.No./2009/Adj/ST/Addl/8653 to the appellant on the basis of the information submitted by the Superintendent Directorate General of Intelligence and Investigation F.B.R., Range Office, Multan that the appellant is manufacturing and distributing aerated water under the brand name "Amrat Cola" at a large scale but is not paying the actual/due, , Government Federal Excise Duty and Sales Tax thus he has committed a tax fraud and was causing a huge revenue loss to the National Exchequer. However, after completing legal formalities, investigative audit and re-audit was conducted. Besides, office of the third party namely Messrs Karim Traders, who is statedly is also carrying on distribution of the appellant, was visited by the Deputy Director, Directorate of Intelligence and Investigation and perused its record. Anyhow, the requisite record and the details were submitted by the appellant. The Additional Collector, after examining the record of the appellant for the period 10 of 2004 to 6 of 2006 and audit report submitted by the audit team also found that the appellant has committed different irregularities/discrepancies and raised the following objections:--
(a) Evasion of Sales Tax by concealment of taxable supplies.
(b) Inadmissible adjustment of input tax.
(c) Non-payment of sales tax on other supplies (WASTAGE)
(d) Non production of record
(e) Late filing/non filing of sales tax returns
(f) Non submission of invoice summary statement.
Hearing of the case was fixed on different dates and finally on 5-10-2009, however, the appellant- registered person could not submit the reply to the show-cause notice. Resultantly, the Additional Collector proceeded to decide the case ex parte on the basis of evidence available on record. This has forced the appellant to file appeal before the learned Commissioner Inland Revenue (Appeals), Multan who by virtue of his order dated 19-5-2010 vide Order-in-Appeal No. 14 of 2010 maintained the order of the learned Additional Collector. This dispensation has compelled the appellant-registered person to come up in further appeal before the learned Appellate Tribunal Inland Revenue.
3. Both the learned representatives appearing at the bar have been heard at a great length and perused the record.
4. We have heard the arguments advanced by the rival parties and the documents submitted by the learned counsel for the appellant before us. There are as many as six allegations levelled in the show-cause notice which are being dealt herewith.
Evasion of sales tax by concealment of taxable supplies.
5. This allegation by the Revenue relates to a demand of sales tax amounting to Rs.22,332,874 and excise duty amounting to Rs.15,589,842. It is alleged by the Revenue that the appellant has concealed their taxable supplies amounting to Rs.148,885,825 thereby causing loss to national exchequer of sales tax and excise duties on the amounts mentioned above.
6. The learned counsel appearing on behalf of the appellant vociferously contended that the orders passed by the authorities below are ab initio void, illegal and as such is not sustainable in the eye of law. Further contended that the whole case of the Revenue, regarding this allegation, is based on alleged record retrieved/seized from one Messrs Karim Traders, Multan, who is allegedly one of the distributor of the appellant, which was never produced before either the adjudicating officer or the first appellant forum. Thus, the appellant cannot be taxed on the basis of the record of the third party specially in the circumstances when no one had appeared to prove such record and its relationship with the appellant. The learned counsel also argued that in view of Article 1(2) of Qanun-e-Shahadat Order, 1984 the provisions of the said law are applicable for proceeding before both the lower forums as the said law has to be followed by all the judicial and quasi- judicial forums in Pakistan. Further contested that none of the documents or contents thereof have been proved in accordance with law and thus that cannot be relied upon at any stage. The learned counsel also contended that the entire electricity bills of the appellant were also presented which clearly indicated that the electricity consumed was in accordance with the appellant's income tax record as such no question of any concealment of taxable supplies. On the contrary, the learned DR supported the impugned orders and argued that these were passed basing upon the solid documentary evidence of delivery of taxable goods i.e. Beverages of Messrs Karim Traders, Multan and this fact clearly negated the contentions of the appellant. He further contended that the authorities below have rightly worked out the production of the appellant on the basis of electricity bills which were seized during the raid from Messrs Karim Traders, Multan. Thus, the objection of the learned counsel for the appellant does not carry any weight.
7. After appraising the facts obtaining on record and also after hearing the divergent views expressed by the rival parties, we are astonished as to the manner in which the matter had been dealt with both by the adjudicating officer and the lower appellate forum. As regards conducting raid, search and seizure by the department, we do not like to go into its legalities as the matter is pending before the apex court. For the sake of passing remarks, we would also like to mention here that in a case earlier decided by the august Supreme Court it has been categorically held that the searches and seizures are illegal and the documents procured through such raid, search and seizure cannot be used for burdening the taxpayers with any liabilities. Reference in this regard, may be placed on the cases reported as 2005 SCM R 1166 and 2007 PTD 1351. The question before the honourable Supreme Court in the present case only relates to the issue as to whether a raid conducted by the Department can be challenged by a person other than the person on whose premises the raid was conducted. As far as the consequence of an illegal raid is concerned, it had already been decided by the honourable august Court in the cases cited above. In the cases cited above that the record and documents which have been seized from an C illegal raid and search cannot be used in any manner whatsoever as has been held by the Lahore High Court in case of Food Consults 2004 PTD 1731 upheld by the honourable Supreme Court in the case of Collector of.
Sales Tax v. Food Consults 2007 PTD 2356.
8. We have specifically inquired the learned DR time and again as to whether the raid which was conducted at Messrs Karim Traders under a warrant or without a warrant, the learned DR admitted this fact that the raid was conducted thereon without a warrant. We further inquired to the learned D.R. Whether there is any provision in law and under which circumstances such raid can be equated to that of another party. He, however, failed to point out any such provision in law.
Moreover, from the above precedents of Superior Courts, it is very much clear therefrom that such documents cannot be used against Messrs Karim Traders itself then it would not be logical and would be devoid of any common sense as to how such documents can be used against a third party which is neither executants nor author of these documents. This being the position, we are of the view that none of the documents seized from Messrs Karim Traders can be used against the appellant.
9. Notwithstanding the above, we would like to point out that even the documents which have been procured during the raid, search and seizure have to be proved in accordance with law i.e. Qanun- e-Shahadat Order, 1984. Either the author of the document or the person who is well aware of the documents and has been associated with execution or preparation of these documents has to appear before Court or adjudicating forum to prove the same. In the present case, the adjudicating officer had taken the allegations levelled in the audit report and the show-cause notice as gospel's truth without any manner asking the department to prove the allegation levelled in the same. So much as that he had not even 'asked the department to present the documents seized from Messrs Karim Traders and to prove the same in accordance with law. The department had not even proved as to how the documents seized from Messrs Karim Traders are linked to the appellant which is a different and distinct limited company. The same is the case with the first appellate forum which is without calling the Revenue to produce the documents or prove the same believed that whatever had been stated in the documents is true. The Revenue had even failed to produce the figures which are calculated from the said document. Now, it is a crystal clear that the Revenue has built up this case on presumption, conjectures, surmises and is on the basis of documents which are not proved and have no link whatsoever with the present appellant and were part of internal record of Messrs Karim Traders. On the point raised by the learned counsel, we have also asked the DR as to whether anyone from Messrs Karim Traders appeared before any of the lower forums to state these documents are in any manner connected with the appellant. On this query, the learned DR replied upon the court that no one from Messrs Karim Traders has ever appeared to state the connection between these documents and the appellant. This being the position, we failed to understand it as to how any of these documents on which the whole controversy has been made by the Revenue against the appellant. We, therefore, hold that the Revenue has miserably failed to prove this charge against the appellant at this stage which has no legs to stand upon IF here.
Inadmissible Adjustment of Input Tax 10. Second allegation relates to the Revenue's charge that the appellant adjusted an amount of Rs.9,455,927 as input tax adjustment which during the period from October, 2004 to June, 2007 and the same should be treated as inadmissible adjustment. The learned lower forums exclusively relied on the fact that the appellant failed to provide proof of payments, stocks/inventory record of the input goods. The Revenue further alleged that some of the invoices were not in the name of registered persons or they do not carry its registration number. On the other hand, the learned counsel for the appellant vehemently contended that all the input tax adjustments are supported by proper invoices and that the Revenue as well as lower forums has failed to point Out even a single invoice which is not in accordance with law. However, there are only one or two invoices in which some clerical errors and mistake are appearing therein which has no ground to deny the appellant input tax adjustment for a period of almost three years.
He further contended that during this period a number of audits conducted by the Revenue and all records, vouchers, stocks and inventories were examined and nothing has been pointed out except certain nominal objections which were later on cured. Conversely, the learned DR supported the impugned orders for the reasons recorded therein.
11. We have given due consideration to the arguments advanced by the rival parties on this objection and to this extent we asked the learned DR as to whether, there is any particular case or invoices which is not in accordance with and against the law whereby the adjustment of input tax has been denied to the appellant. Despite our specific query, he has failed to provide any single instance of input tax which has been claimed in violation of the provisions of law. We are surprised to know as to how input adjustment can be denied after lapsing almost three years on the basis of some minor errors in the invoices which can be cured at any stage. Keeping in view the foregoing discussion, we find no substance in the allegation levelled by the revenue and are of the considered opinion that the revenue has also failed to prove this charge.
Non-Payment of Sales Tax on other Supplies (Wastage).
12. Third allegation relates to gross receipts shown at Serial Nos.30 to 38 of the Income Tax Returns for the Year, 2007 as "Other Revenue". It was alleged that these are the revenues on account of sale of wastage and a tax of Rs.198,229 is due on the same. On this count, the learned counsel for the appellant contended that these are the receipts which relate to the other than for supply of goods or wastages and are not received in lieu of any taxable supplies, so those are beyond the scope of Sales Tax Act, 1990. He also contended that on this score, the revenue has also failed to provide as to what quantity of wastages has been sold as well as what is its value and how much tax is payable thereon. To strengthen his arguments he also contended with the remarks that the Revenue have taken this amount from the Income Tax return and have applied 15% tax thereon without mentioning as to what kind are the supplies which cover this amount and no _documentary evidence in this regard had been provided by the learned D.R. Before the lower authorities as well as at this stage. The learned DR once again reiterated the impugned orders and supported the same with the findings recorded therein.
13. Having taken regards to the facts of the case in its entirety, we are inclined to agree with the submission made by the learned counsel for the appellant-registered person and find no substance in the allegation raised by the learned D.R. Further we observed that there is nothing on record or in the impugned order wherefrom it could be shown that this amount has been received as consideration for disposal of wastage or any other assets of the appellant. In this regard, we gave further opportunity to the learned D.R. To provide us any material evidence that what quantity of the wastages has been disposed of by the appellant, however, he failed to identify the same with any plausible reasonings. Consequently, we are constrained to agree with the submission made by the learned counsel for the appellant and are of the considered opinion that the revenue once again has failed to prove this charge with any material evidence. So, in view of the aforementioned discussion we have no option except to declare that the revenue has imposed this allegation only to drag the assessee into another chain of litigation. Accordingly, we feel no hesitation to declare that the allegation levelled by the revenue was without any solid proof and has no legs to stand upon at this stage which is hereby cancelled.
14. So far as the remaining three charges i.e. Non-production of record, Late filing/non filing of sales tax returns and Non submission of invoice summary statement, we observed that those are of minor nature and only relate to procedural errors and imposition of penalties. In this regard, it is pertinent to mention here that it seems that the revenue had levelled these allegations against the appellant as a matter of routine work and without any basis or any application of mind. During the course of proceedings, the learned D.R. Could not prove the main allegations raised in the show- cause notice at this stage, so the remaining these three objection cited supra have no sanctity in the eye of law and are accordingly cancelled.
15. As a result, we are of the considered opinion that the Revenue has failed to prove the charges levelled in the show-cause notice and which are enforced by the lower forums. Consequently, the orders of the authorities below are set aside and the appeal of the appellant-registered person is accepted. .