1. MR. JAVED IQBAL, JUDICIAL MEMBER-(l). This sales tax appeal has been filed by the registered person against the order-in-appeal No. 53 of 2011 dated 30-12-2011, passed by the learned CIR(A-II), Karachi on the following grounds .
2. 1.That the impugned order is bad in law, on facts, completely without jurisdiction, mala fide, unauthorized illegal against the fundamental rights void ab initio and of no legal effect.
3. 2.That the impugned inaction/action of the officer of Inland Revenue and Commissioner of Inland Revenue (Appeal-II) is an abuse of powers conferred upon them. The said authorities have not acted reasonably fairly and justly.
4. 3.That the learned Commissioner of Inland Revenue (Appeals-II) is not justified in confirming the order in Original No. 6/2010/276 dated 11-11-2010 passed by the Assistant Commissioner of Inland- Revenue, Unit-07 Audit Division-ll RTO Karachi in respect of disallowance of input tax claim at Rs.
5. 3,442,415/- under section 7 & 8 of the Sales Tax Act, 1990. An identical matter decided by the Custom, Excise & Sales Tax Appellate Tribunal in STA 217/2004(K-2) which favour the appellant's contention is attached. [9] 5.That learned Commissioner of Inland Revenue (Appeals-II) has erred in not considering the decision of the Appellate Tribunal of Pakistan bearing STA No. 1334/LB of 2009 (citation STAT 0629/2010 PTD 1631 = PTCL 2013 CL. 229.
6. 6.The Order-in-Original and Order-In-Appeal both are against the principles of natural justice and section 24-A of the General Clauses Act.
7. 2.Brief facts of the case are that Taxpayer is a Private Limited Company, engaged in the business of Packing printing and allied services serving to a number of national & multi national companies.
8. Taxpayer received a notice u/s. 25 of the Sales Tax Act, 1990 dated 3-4-2010 from the office of Deputy Commissioner Inland Revenue, Audit Unit-07, Divisi6n-II Regional Tax Office Karachi for requisition of record for scrutiny and verification of input tax for the tax year 2009. In compliance to the said notice taxpayer furnished the record before the Deputy Commissioner. Taxpayer received audit observation letter dated 11-6-2010 from Assistant Commissioner made various allegations.
9. Another show cause notice dated 15-10-2010 from Assistant Commissioner said show cause notice was replied by appellant consultants but Order- in-Original No. 06/2010/278 dated 11-11-2010 was passed. Taxpayer being aggrieved with the Order-in-Original preferred the appeal before the learned CIR(A), who vide impugned order confirmed the ONO passed by Deputy Commissioner in respect of disallowance of input tax claimed at Rs. 3,442,415/- under section 7 & 8 of the Sales Tax Act 1990. Registered Person dissatisfied with the order-in-appeal filed the appeal before this forum.
10. CIR(A) has failed to consider the explanation/supporting documents at the time of appeal proceedings substantiating that all suppliers were active taxpayer at the time of executing purchase transaction hence the question of inadmissibility of sales tax input tax sustainable. He has further argued that an identical matter decided by the Custom Excise & Appellate Tribunal IN STA No. 217/2004(K-2) which favour the appellant's contention. He therefore, requested that ONO as well as order-in-appeal may be vacated.
10. 4.On the other hand, Mr. Aslam Mari, learned D.R has supported the orders of the authorities below and contended that Officer Inland Revenue was quite justified in disallowing the input tax claimed by the taxpayer against invoices issued on purchases made from the blacklisted/blocked suppliers are inadmissible in terms of section 7 & 8 of the Sales Tax Act, 1990.
11. 5.We have considered the arguments of both the parties and have also perused the record. The relevant portions of order of learned CIR(A) is reproduced hereunder:- "In view of the above legal and factual position of the instant case, I hold that the Officer Inland Revenue as quite justified in disallowing the input tax claimed by the appellant against invoices issued on purchases made from the blacklisted/blocked suppliers are inadmissible in terms of section 7 & 8 of the Sales Tax Act, 1990. Hence, the Officer Inland Revenue has very lawfully ordered recovery of sales tax amounting to Rs. 3,442,415/- alongwith default surcharge to be calculated at the time of payment followed by imposition of penalty under section 33 of the Sales Tax Act, 1990. It is hereby upheld".
12. 7.From perusal of above finding of the learned CIR(A), it transpires that he has confirmed the treatment meted out by the Officer Inland Revenue. Before us learned counsel has relied upon the judgment decided by the Custom Excise & Appellate Tribunal IN STA No. 217/2004(K-2) wherein it has been held as under:- "The claims pertain to the period of July, August and September, 2001 and February and August, 2002. Normally, as provided under section 10(2) of the Sales Tax Act, 1990 and the Refining Rules, they should have been sanctioned within one month but in the present case it has taken years.
13. They cannot be kept pending indefinitely on the pretext of the pendency of some inquiry or investigation against some other persons i.e. The suppliers. Even if it is ultimately found that the suppliers had not deposited the tax in treasury the respondent No. 1 cannot be penalized for that.
14. The liability to deposit the tax was of the supplier and no duty under any law, was cast upon the respondent No. 1 (recipient of the supply) to enforce the liability. Indeed the duty of enforcement is upon die department. The recipient has no power to pay the liability of his supplier. The provision for the verification of the deposit claimed as reframed contained in section 10(4) ibid, doesn't mean that the refund is to be denied to the recipient due to non-deposit of tax by the supplier. The right of adjustment/refund of input tax is a very valuable right of a taxpayer, which cannot be denied to him on account of some body else's fault. The appellant had made purchases from the registered persons. It was the department who had registered them. By granting them certificates of registration, the department authorized them to collect the sales tax and issue invoices for the purpose of enabling their holders to adjust or claim refund of input tax under the invoices. The department has not cancelled their registration as yet. In case they have not deposited the tax, the department can competently recover the same from them alongwith the additional tax and penalty. Law does not permit the department to recover the tax from both i.e. The supplier as well as the recipient. It can be recovered only from the one who is liable to pay. The provision of section 10(4) ibid, providing for the verification of the deposit of tax claimed as refund is for enabling the department to take timely action for the recovery of evaded tax. Obviously, the action is to be taken against the. Person liable to pay the tax. Admittedly, the liability to pay the tax on die supplies covered by the invoices in question was of the suppliers and not of the appellant. The appellant, who has admittedly paid the input tax covered by the invoices cannot be denied the statutory right of claiming its adjustment refund.
15. In view of the above, we are of the considered opinion that the learned Collector (Appeals) has rightly ordered for allowing the refund claims of the appellant. Accordingly, the appeal being meritless, is dismissed".
16. 8.A plain reading of above observation of the Tribunal we find that the issue in hand has already been decided by the Tribunal cited supra and squarely applicable to this case. However, in the absence of record we cannot give the exact verdict as to whether the units were blacklisted at the time of supply or not if it was so and these were not blacklisted at the time of supplies and the taxpayer/appellant has fulfilled all the other formalities, such as payment to suppliers have been transited through banking channel CL. 241 as envisaged in section 73 of the Act and the appellant is in possession of valid invoices issued to the appellant, the claim of tax should be allowed to him, and if supplier has not fulfilled his obligation through depositing the tax paid by the taxpayer, tax should be recovered from suppliers, appellant could not be punished for the sin and wrong of suppliers.
9. Appeal is allowed.