Through this appeal the appellant has objected against the impugned order of the learned CIR(A) dated 14-9-2012 wherein the registration of the appellant has been declared to be suspended from the date of its registration. Following grounds and prayer has been filed by the appellant:--
(1) That The learned CIR without adverting to the questions involved in the instant case has passed the impugned order by suspending the registration of appellant which is not at all speaking order and cannot be called a "judicial order" within the parameters set up by law and also devoid of reasons is not sustainable under law. It is well-settled law that a "judicial order" must be speaking order manifesting by itself that the authority and Court has applied its independent judicial mind to the issues and points of controversy involved in the causes.
(2) That the impugned General Order No, 35 of 2012 dated 30-6-2012 issued by the Federal Board of Revenue is illegal, without jurisdiction, inconsistent and contrary to the provisions of section 21(2) of the Act which clearly laid down that the FBR can make procedure for blacklisting or suspension of registration only by a notification in the official Gazette" but contrarily has issued general order which cannot be equated with the statutory regulatory Order/Notification, which always issued for regulation of statutory provisions whereas general order is issued for administrative purposes.
(3) That the object of passing an adverse order of suspension of registration or ultimate blacklisting by the quasi-judicial forum under section 21 of the Act is to intimate the concerned party about nature of allegation and its detailed information and if the same is not disclosed to the person concerned, it renders the whole exercise illegal without jurisdiction. It is now well-settled law that any notice without disclosing any fact or particulars for which information or documents are required, will be in violation of the principles of natural justice, and may be struck down as illegal and without jurisdiction, as also laid down by the Apex Court of Pakistan in a judgment reported as PLD 1992 SC 485.
(4) That the impugned order for suspension of registration is illegal and ab initio void because the whole exercise has been carried out by the learned CIR merely on his "considered opinion" without establishing the incidence of tax fraud and issuance of fake and flying invoices. It is well-settled principle of law that nobody can be convicted merely on the basis of some assumptions and presumptions and there is no room for any intendment in the fiscal matters and there is no presumption as to tax.
(5) That there are no provisions in the Sales Tax Act, 1990 or even in the procedure laid down under the General Order empowering the revenue authorities to suspend the registration of a registered person from the date of his registration on certain. Default of his suppliers for subsequent periods hence, whole exercise for suspension of registration from the date of registration is illegal, without jurisdiction and ab initio void .
(6) That the impugned show cause notice dated 20-9-2012 is barred by time limitation hence, illegal and without jurisdiction as the same was not issued within 7 days of issuance of suspension order dated 14-9-2012. The impugned notice is hopelessly time barred under clause 37 of the General Order No,35 of 2012 as the same was basically issued on 25-9-2012 instead of 20-9-2012 when handed over to Pakistan Post for its ,delivery and was actually delivered to appellant on 25- 9-2012. The crucial date of the issuance of impugned notice is the date when the envelope containing such notice was handed over for delivery to Courier Company on 25-9-2012 eventually delivered on 25-9-2012. It appears that this notice is consciously backdated for covering up period of limitation already expired; otherwise its delivery within the same city could not take eight long summer days. Reliance is placed on the judgment reported as (2007 PTD 430). Since, impugned show cause notice for blacklisting is not issued within 7 days of issuance of order for suspension of registration therefore; impugned order of suspension of registration is void ab initio as per clause 38 of STGO No,35 of 2012 dated 30-6-2012.
(7) That the impugned order for suspension of registration is ab initio void, illegal and without jurisdiction as the authority empowered under the referred provisions of law to suspend a registered person, has to proceed first under sections 11(2) and 11(3) of the Act as the case may be for determining inadmissibility or illegality of any input tax adjustment or as the case may be for recovery of tax not-levied or short-levied or any amount erroneously refunded. It is now well settled principle of law that any exercise conducted without due process of law is illegal and unlawful and without jurisdiction as also laid down by the honourable Supreme Court of Pakistan in case of "Aftab Shahban Mirani v. President of Pakistan and others" reported as (1998 SCMR 1863).
(8) That it is very astonishing that how a person can be penalized without any proper adjudication and without adjudging any liability against him, such kind of action by the tax functionaries is totally defiance of law which .Is not permissible under any provisions of law of the land. The act-_of adjudication under section 11(2), and section 11(3) had to be done at the first, before taking extreme step of suspension of registration, for declaring all such input tax adjustment illegal and inadmissible, as alleged in the impugned order, but has not been done. The act of suspension of registration without adhering to any adjudication as provided under law for establishing of inadmissibly, of input tax adjustment is equivalent to utter death sentence of a person, first and then to order for his investigation and trial thereof. Reliance in this regard is placed on the judgment of a Division Bench of ATIR reported as (2012 PTD (Trib.) 337).
(9) .
(9) That the allegations against the appellant are baseless and frivolous because he procured the alleged goods under the coverage of proper sales tax invoices issued in terms of section 23 of the Sales Tax Act, 1990 duly incorporated in suppliers' sales registers, summary statement and due tax was also paid in monthly sales tax returns for period in question under clause (ca) of subsection (1) of section 8 ibid therefore, appellant was eligible for input tax adjustment under section 7 of the Act.
(10) That in the instant case, provisions of section 73 of the Act for bank payments have duly been complied with by the appellant therefore, adjustment of input tax against invoices of such suspended or blacklisted or nonfunctional persons cannot be denied and even cannot be recovered after insertion of subsection (3) of section 21 to the Sales Tax Act, 1990 wherein it has categorically been laid down that input tax shall be allowed if payments are made through banking channel irrespective of the fact that the suppliers units are either blacklisted or their registration have suspended. The contention of the appellant is very much supported by the Hon'ble ATIR in a case reported as 2012 PTD (Trib.) 453.
(11) That if the vital condition of making payments through banking channel by the buyer against certain transactions with the supplier is fulfilled then the buyer obtains immunity under section 21(3) of the Act from proceedings of suspension of registration or as the case may be ultimate blacklisting thereof under section 21(2) ibid. Since, in the instant case, all payments (where applicable) have been transacted through banking channel as required under section 73 of the Act therefore, his liability cannot be made 'joint and several' with his suppliers under section 8B of the Act in case and if any tax fraud is committed by the suppliers by not depositing tax collected from the buyer in the national exchequer under section 3(3)(a) of the Act then, buyer cannot be severally held responsible for the same.
(12) That the condition of physical transfer of goods is nowhere expressedly provided under the Sales Tax Act, 1990 or the rules made thereunder however, an inference of physical transfer of goods was available in sub-clause (a) of clause (14) of section 2 of the Act by stretching the words "on the supply of goods received by that person" and the said clause being a definition clause having no legal impact on input tax adjustment/credit under provisions of section 7 vis-a-vis section 8 of the Act providing mechanism for entitlement of input tax to a registered person yet this stretched and implied expression was also omitted by the Finance Act, 2008 as assented on 26th June, 2008.
' The department plea that without any physical transfer of goods, appellant was not entitled for input tax credit and adjustment is of no help by reading of the said provisions of law which was omitted accordingly. This contention of the appellant is very much supported by the Hon'ble ATIR in a case reported as 2012 PTD (Trib.) 453.
(13) That even otherwise, demand of sales tax against the appellant would amount to double taxation which is not permissible under law because liability to pay sales tax is on the supplier under section 3 of the Act. In any case, appellant has already discharged his sales tax liability by making its payment to the alleged suppliers therefore; demanding the same amount from th appellant due to any default whatsoever on the part of his suppliers is clear example of deuble Taxation which is unlawful, hence, amount pointed out by the department is illegal and uncalled for.
(14) That nevertheless, impugned order for suspension of registration is ab initio void, illegal and unlawful in the absence of any material evidence establishing incidence of tax fraud or issuance of fake invoices as laid down under section 21(2) of the Act. Any action for black-listing or suspension of registration under section 21(2) of the Act required following two violations of mandatory incidences of tax fraud which were to be established first before suspension of registration or even blacklisting of any registered person:-
(i) "if registered persons is found to have issued fake invoices.
(ii) Or has (otherwise) committed tax fraud".
' The above quoted provisions of law clearly reveal that none of the violations of any of above- referred incidences of tax fraud has been established against the appellant in the impugned order and in its absence, whole proceedings for suspension of registration stand illegal and ab initio void.
It is now wholesome principle of law that where a statute prescribes a particular mode or mechanism to do an act, the same is to be done in the manner and within the framework of relevant legal provisions. As such issuance of impugned order for suspension of registration without establishing any evasion of tax is illegal and void ab initio. Reliance in this regard is placed on the judgment of a Division Bench of ATIR reported as (2012 PTD (Trib.) 337).
(15) That it is imperative for the appellant to place on record the vital fact that the suppliers of the appellant were not blacklisted or suspended or de-registered at the time of transactions made with them and their subsequent inclusion in that very list in the subsequent surpassing years cannot be operated retrospectively as per law laid down by the honourable Apex Court in a judgment reported as (PTCL 2005 CL 38(sic)).
' Nevertheless, appellant reserve the right to add, alter, amend, change or take up such other additional grounds as may be available to him, before the hearing or during the course of hearing in the titled appeal with due permission of this Hon'ble Court.
PRAYER ' In view of above legal as well as factual premises; it is respectfully prayed as under:
(i) The impugned order for suspension of registration being not only perverse, arbitrary, unreasonable and unjust but also biased, vindictive, oppressive, mala fide and illegal be vacated and be declared nullity in the eyes of law.
(ii) Since, impugned show cause notice for blacklisting is not issued within 7 days of issuance of order for suspension of registration therefore; impugned order of suspension of registration may be declared illegal and without jurisdiction.
(iii) Since, no adjudication process for recovery in case of any inadmissible input adjustment has been adhered to under section 11(3) of the Act or even its assessment under section 11(2) ibid has not been made therefore, whole exercise of suspension of registration may be declared ab initio void, illegal, unlawful and without jurisdiction in the larger interest of justice and equity.
(iv) Since, provisions of section 2(37) of the Act defining 'tax fraud' has neither been invoked nor any incidence of tax fraud or issuance of fake/flying invoices is established in the impugned order without which the appellant cannot be charged with the allegation of tax fraud therefore, adverse action of suspension of registration may be declared nullity in the eyes of law.
(v) The registration of the appellant may kindly be ordered to be restored to its original status to meet the ends of justice.
(vi) Any other lawful relief which this Hon'ble Forum may deem fit and appropriate in the interest of justice and circumstances of the case may also kindly be granted to the appellant.
2 . The appellant has already moved application for stay which in the subject matter of the above referred appeal which has already been allowed vide order dated 17-10-2012 by the Tribunal vide M.A. No,935/LB/2012. In the above said stay application it has been contended that if the Tribunal did not grant extension in earlier interim injunction against the impugned suspension order and blacklisting proceedings, the learned CIR will blacklist the company of the applicant as its proceedings are underway through a show-cause notice dated 20-9-2012.
3. The learned counsel representing the appellant has contended that the appellant is registered under the Sales Tax Act, 1990 as manufacturer making taxable supplies of polypropylene cloth and bags chargeable to sales tax and accordingly sales tax paid on its input goods and adjusted and credited as per law. He has argued that the appellant is carrying out its monthly sales tax returns and paying sales tax as required under the law since its inception but the Commissioner has suspended the registration on 14-9-2012 through the impugned order without any justification and without issuing any notice before suspending the registration. Referring decision of the Hon'ble Supreme Court of Pakistan reported as PLD 1965 Supreme Court 90 in the case of The University of Dacca v. Zakair Ahmed. He has contended that in all proceedings by whomsoever held, whether judicial or administrative, the principles of natural justice have to be observed if the proceedings might result in consequences affecting the person or property or other right of the parties concerned. He has contended that the Hon'ble Supreme Court held that this rule applies even though there may be no positive words in the statute or legal document whereby the power is vested to take such proceedings, for, in such cases this requirement is to be implied into it as the minimum requirement of fairness. He has in this regard specifically referred the following observations made by the Hon'ble Supreme Court of Pakistan:-- "The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the Tribunal is acting, the subject-matter that is being dealt with, and so forth." Nevertheless, the general consensus of judicial opinion seems to be that, in order to ensure the "elementary and essential principles of fairness" as a matter of necessary implication, the person sought to be affected must at least be made aware of the nature of the allegations against him, he should be given a fair opportunity to make any relevant statement brought forward to his prejudice.
' Of course, the person, body or authority concerned must act in good faith, but it would appear that it is not bound to treat the matter as if it was a trial or to administer oath or examine witnesses in the presence of the person accused or give him facility for cross-examining the witnesses against him or even to serve a formal charge-sheet upon him. Such a person or authority can obtain information in any way it thinks fit, provided it gives a fair opportunity to the person sought to be affected to correct or contradict any relevant statement prejudicial to him. In other words, "in order to act justly and to reach just ends by just means" the Courts insist that the person or authority should have adopted the above "elementary and essential principles" unless the same had been expressly excluded by the enactment empowering him to so act."
3A. The learned counsel in this regard also referred another decision of the Hon'ble Supreme Court of Pakistan reported as PLD 1999 Supreme Court 1126 in the case of New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan Karachi, and another decision of the Hon'ble Supreme Court of Pakistan reported as 1971 SCMR 681 in the case of Collector, Sahiwal v.
Muhammad Akhtar another judgment of the Hon'ble High Court reported as PLD 2001 Lahore 13 in the case of Zulfiqar Ali v. Division Superintendent (Workshop) Pakistan Railways, Moghalpura, Lahore and the decision of this Tribunal reported as 2012 PTD (Trib.) 1542 Collector, Collectorate of Customs (Exports), Karachi v. Abdullah Garments (Pvt.) Ltd., Karachi wherein the settled principle of natural justice that before taking any punitive action against any person he is required in the first instance to be served with a show cause notice confronting the material available on record in support of the charge and any action which was in violation of such principle of natural justice, audi alteram partem, the same will be void ab-initio. The learned counsel in this regard has also placed before us the decision of this Tribunal reported as 2012 PTD (Trib.) 337 wherein it has been held that "black listing as well as non restoration of registration is an extreme step having paralyzing effect on business of any commercial enterprises and on its financial reputation as well as this type of action should be taken as last resort after establishing the gross violation of main factors i,e, "(i). If registered person is found to have committed tax fraud, (ii). Evaded tax and (iii).
Registered person has failed to deposit the tax due on his supplies despite having recovered it from respective buyers".
4. The learned counsel keeping in view all the facts and legal position of the case has contended that his registration may please be restored as due to the suspension, the material imported by the appellant lying with the Faisalabad Dry Port is not released by the Customs Authorities and if that consignment is not released all the imported items will be destroyed and the appellant will face irreparable loss. On the other hand the learned D.R. Has supported the impugned order and contended that the appellant may explain his position before the learned CIR and approach to the authorities concerned for the redressal of his grievance.
5. We have heard the learned representatives for both the sides. We have found that the Commissioner in this case has passed the order suspending the registration without considering the facts that it may cause a huge damage to the appellant as well as the Federal Exchequer. We have found that the order has been passed under section 21(2) of the Sales Tax Act, 1990 which laid down that the FBR could make procedure for blacklisting or suspension of registration only by a "notification in the official Gazette" which shows that the object of passing an adverse order of suspension of registration or ultimate blacklisting by the quasi-judicial forum under section 21 of the Act is to intimate the concerned party about nature of allegation and its detailed information neither the same has been disclosed to the appellant. We are, therefore, of the view that the whole exercise in this respect will be without any jurisdiction as has been held by this Tribunal as well as the Hon'ble superior courts in the above referred decisions. The impugned order passed under section 21 is, therefore, annulled and it is directed that the registration be restored to release the imported goods. However, the department may proceed in accordance with the law after issuing notice to the parties if sufficient evidence is available with the department that registered person is involved in the tax fraud and has adjusted the input and output on fake invoices.
6. As the main appeal has been decided and the impugned order has been annulled, therefore, the above titled Miscellaneous Application for the stay has become infructuous.
7. The stay application and the main appeal are decided in the manner as above.