' CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---The titled appeal preferred at the instance of the registered person is directed against the order dated 26-5-2014 passed, by the learned Commissioner Inland Revenue (Appeals-H), Lahore.
2. Briefly stated facts of the case are that the appellant/registered person was charged with getting illegal input tax adjustment against the fake/flying/bogus invoices which were discovered subsequently issued by the blacklisted, suspended and non-filers units who have not any back up of purchases and all transactions of these suppliers were mere paper transaction and no physical transfer of goods has been made. Based on these discrepancies/irregularities, proceedings were initiated and a show-cause notice was issued requiring the registered person/appellant as to why the illegal claimed input sales tax amounting to Rs,14,72,603 under sections 11(2) and 11(3) of the Sales Tax Act, 1990 along with default surcharge and penalty under sections 34 (1)(c) and 33 of the Act ibid may not be recovered. The reply furnished by the appellant did not find favour with the Adjudicating Officer and the proceedings were culminated in the shape of order in original dated 10-3-2014 directing the registered person/appellant to deposit the alleged amount. The matter was agitated before the learned CIR(A) who partly accepted the appeal.
3. Being dissatisfied with the order of the learned CIR(A), the registered person/appellant preferred the instant appeal before this Tribunal.
4. Before the Tribunal, the learned AR contended that He pleaded that the learned first appellate authority has erred in law while upholding the order of the DCIR to the extent of Rs,4,60,784 as the registered person/appellant is neither involved in tax fraud nor any irregularity was committed by the appellant. He vehemently submitted that the learned AR duly produced the copies of bank statement along with bank verification letters, partly ledger of the supplier, sale tax returns of buyer/supplier for the relevant period, purchase registers along with purchase invoices, bank payment challan and inward gate passes along with goods received inspection note to substantiate the registered person's claim before the authorities below. It has also been contested that the appellant/registered person is neither involved in the business of fake invoices nor he has made such act as alleged by both the authorities below. He has further stated that the orders passed by the authorities below are arbitrary and against the facts of the case, hence liable to be vacated. The learned AR forcefully argued that all the payments to the suppliers were made in accordance with the provisions of Sales Tax Act and the action of both the authorities below to reject the input tax adjustment of the appellant is not sustainable in the eye of law. It has been argued that if any default was committed that was by the suppliers and not by the appellant. The department should have required to take action against the suppliers and not to deprive the lawful business right of the appellant from the input tax adjustment. Similarly, the learned Ali also submitted that compliance of Section 73 of the Sales Tax Act, 1990 was fully adhered to and all the payments were made through banking channels. He has stated that all the relevant record was submitted before the adjudicating officer but both the authorities below failed to appreciate this fact. Finally, he submitted that at the material time, the suppliers were active and alive and were regularly filing their sales tax returns with the department. Further the purchases were made after fulfilling all the legal requirements and after checking the active profile of the suppliers with the FBR.
The learned A.R. Also pointed out that the supplies were of the prior dates and the suppliers were blacklisted on the subsequent dates. He submitted that in a number of cases this issue has been resolved in favour of the registered person/ appellant by the Superior Courts. Reliance in this regard was placed on the judgments reported as 2010 PTD (Trib) 2406, 2010 PTD (Trib.) 1631, 2011 PTD (Trib.) 633, 2011 PTD (Trib.) 773, 2011 PTD (Trib.) 866, 2004 PTD 868, 2012 PTD (Trib.) 619, 2012 PTD (Trib.) 350 and 2012 PTD (Trib.) 885. The learned AR also submitted that the adjudicating authority by invoking section 8(1)(ca) disallowed the input adjustment without any basis and justification and the learned CIR(A) confirmed the order without recording any justification on the issue. The learned AR argued that the adjudicating authority invoked sections 2(14), 2(37), 7,8, 8(1)(ca), 8(1)
(d), 8A, 10, 11, 22, 23, 26 and 73 read with S.R.O. No,555(I)/2006 dated 5-6-2006 of the Sales Tax Act, 1990 which are neither relevant nor applicable to the registered person's case. The learned AR submitted that the registered person/appellant under the prescribed mechanism of VAT, made payment of the input tax to the suppliers and the registered person/appellant has no access to confirm that the suppliers have made the payment in the Government exchequer or not?
Therefore, the whole case of the department falls under section 8(1)(ca) of the Sales Tax Act, 1990 which has been declared unconstitutional and struck down by the Honourable High Court in judgment passed in Writ Petition No,3515/2012. It has also been contested that the adjudicating authority was not justified to impose 100% under section 33(11) as the registered person did not contravene any of the provisions of the Act for which no penalty has specifically been provided in this section. The learned AR pleaded that the DCIR has failed to establish any default of section 34 and the learned CIR(A) has wrongly confirmed the same. In support of his contention, he relied upon the following judgments of the higher fora:-
(i) PTCL 1991 SC 963(sic), (ii) PTCL 1995 CL 415; (iii) 2006 PTR 78 (SC Pak) and (iv) 2007 PTD (Trib.)
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5. The learned D.R., on the other hand, supported the orders of both the authorities below for the reasons stated therein. She also submitted that the registered person/appellant had failed to reconcile the discrepancies through any documentary evidence, therefore, no interference in the impugned order is warranted.
6. The orders of both the authorities below have been perused carefully in the light of arguments of the rival parties and the case-law relied upon by both the parties. After due consideration, we are convinced with the submissions made by the learned AR which are duly supported by the documentary evidences produced before us. The study of the impugned order in appeal reveals that the demand of sales tax to the tune of Rs,7,74,050 was deleted being time barred resultantly demand of sales tax amounting to Rs,4,60,784 regarding inadmissible adjustment of input tax, was upheld on the grounds that the registered person/appellant failed to produce any concrete documentary evidence of physical transfer of goods and valid payment proof under section 73 of the Sales Tax Act, 1990. During hearing proceedings, the learned AR duly produced before us copies of bank statement along with bank verification letters, party ledger of the supplier, sale tax returns of buyer/supplier for the relevant period, purchase registers along with purchase invoices, bank payment challan and inward gate passes along with goods received inspection note to substantiate the appellants claim. The perusal of these documents proves that the goods were purchased by the appellant from the respective supplier and payments relating thereto were made through banking channel in accordance with the provisions of section 73 of the Sales Tax Act, 1990. Consequently, the order of the learned CIR(A) in which partial amount of sales tax at Rs,4,60,784 was resultantly upheld is against the dictum of law. Under the circumstances, we find that the impugned order-in-appeal of the learned CIR(A) to the extent of Rs,4,60,784 is not maintainable in the eye of law as well as facts of the case, hence the same is set aside to the said extent.
7. The appeal filed by the registered person ,stands disposed of as above.