TABANA SAJJAD NASEER, ACCOUNTANT MEMBER - The captioned departmental appeal has been directed against the Order-in- Appeal No. 101 of 2011, dated 2.5.2011 passed by the learned Commissioner Inland Revenue (Appeals), Faisalabad.
2. Brief facts of the case are that the respondent/tax-payer is manufacturer-cwM-exporter engaged in the business of zero rated supplies of 'textile goods'. During the course of audit conducted by Audit staff of DRRA, Lahore it was observed that refund sanctioned on the basis of purchases of kerosene oil on 28.10.2010 which had supposedly been consumed on 29.10.2010 in goods exported as stock of the same had been shown "nil" in its closing balance on the same date.
It was further observed that refund was sanctioned on the basis of purchases whereas it should have been processed on the basis of consumption of kerosene oil. Accordingly, a show-cause notice bearing C. No. 560, dated.4.11.2010 confronting sales tax liability of Rs. 1,53,103/- was issued, according which the respondent was charged with violations of Sections 11(2) and 36(1) of the Act read with Rule 33 of the Sales Tax Rules, 2006 issued vide S.R.O. No. 555(I)/2006, dated 5.6.2006, and required to show cause as to why the evaded amount may not be recovered from him along with default surcharge and penalty under Sections 33 and 34 of the Sales Tax Act, 1990.
3. On appeal filed, the learned CIR(A) accepted the appeal vide Order-in-Appeal No. 101 of 2011, dated 2.5.2011 with the following verdict:-- "However, the contention of the department as per impugned order was that last sale date is 29.10.2010 and purchase date is 28.10.2010 and such huge quantity could not be consumed within a day as closing balance in the consumption statement was shown as nil. In view of what has been stated above, I find that as per section to and Refund Rules, refund is issued on the basis of purchases or imports but not on the basis of consumption of raw material. I also find that as per Rule 33 of the Sales Tax Rules, 2006, the refund to the claimants shall be paid to the extent of the input tax paid on purchases or imports. This being the position I find the contention of the appellant correct as the refund is paid on purchases or imports but not on its consumption."
4. The learned D.R. On behalf of Revenue vehemently argued before us that the learned CIR(A) erred in law in accepting the appeal of the respondent/tax-payer whereas the Assistant Commissioner had rightly issued orders for recovery of sanctioned refund of Rs. 1,53,103/-. On the other hand, the A.R. Who appeared for the respondent/tax-payer's side has vehemently supported the order passed by the learned CIR (Appeals) while arguing that the instant issue was misconceived and misconstrued by the DRRA staff as provisions of Section 10 read with Refund Rules do not provide refund on consumption basis it was mentioned that it is on basis of purchases or imports, whereunder a registered person is entitled to claim refund in case input tax paid on taxable purchases made during a tax period exceeds output tax on account of zero rated local supplies or exports made during the tax period. The relevant provisions of the above-mentioned Section 10 is reproduced hereunder:-- "Section 10: Refund of input tax. - (I) If the input tax paid by a registered person on taxable purchase made during a tax period exceed the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than forty-five days of filing of refund claim in such manner and subject to such conditions as the Board may, by notification in the official Gazette specify."
It was further argued by the A.R. That Rule 33 of Sales Tax Rules, 2006 also provides that: "Refund to the claimants under these rules shall be paid to the extent of the input tax paid on purchases or imports" and imposes a restriction that the same are actually consumed in the manufacture of goods which have been exported or supplied at the rate of zero percent. It was contended that the provisions of said refund rules were in conformity with that the provisions of Section 10 of the Act since if input tax paid on purchases made during a "..a period exceeds output tax on account of zero rate local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person As the respondent has made no exempt supply and alleged input tax paid goods were wholly used for the purchase of zero rate supplies or meant for exports hence, input tax paid thereon was available for refund to the respondent.
5. That even if, the goods manufactured therefrom, the alleged goods were meant for export in subsequent tax period but before sanctioning of refund then input tax paid thereon was admissible to be refunded on that very point of time and once it is established that export of alleged goods is made, the denial from refund of input tax incurred thereon would tantamount to tax exported goods which are otherwise chargeable to sale tax at zero percent. Reliance is placed on the judgment of the Hon'ble Customs, Excise and Sales Tax Appellate Tribunal, Lahore Bench Camp at Islamabad in case of "Messrs Blue Horizon (Pvt.) Ltd., Sialkot v. The Collector (Appeals) Northern Zone and others" as reported at PTCL 1999 CL 162, in which the similar proposition has been settled and under the law of precedence, the said judgment is also applicable in the instant case. The ratio decidendi in the said judgment is as under:-- "In a way in legal semantics the term zero rated provided in Section 4 means a nil liability created by the legislature itself in the shape of this statutory provision. It is something stronger than the exemption awarded either by the Central Board of Revenue or the Federal Government under Section 13 The goods exported are totally immune from the Sales Tax, and once it is established that the goods were exported, there is no question of talking any proceedings against the appellants."
6. It has been argued by the A.R. That payments in respect of alleged transactions h e been made through crossed Cheque No. 5890749, dated 29.10.2009 in line with the provisions of Section 73 of the Act and no violation in this regard has eve, been committed.
7. In view of the above peculiar circumstances of the case and after relying on the judgment of the Hon'ble Customs, Excise and Sales Tax Appellate Tribunal, Lahore Bench Camp at Islamabad in case of "Messrs Blue Horizon (Pvt.) Ltd., Sialkot v. The Collector (Appeals) Northern Zone and others" as reported at PTCL 1999 CL 162, in which the similar proposition has been settled and under the law of precedence, the said judgment is also applicable in the instant case. We, therefore, respectfully following the ratio decided in the above judgments reject the instant appeal being filed without any merit or scope. The same is dismissed accordingly.