The titled appeal preferred at the instance of the registered person is directed against the order dated 06.09.2013 passed by the learned Commissioner Inland Revenue, Multan Zone RTO Multan declaring him blacklisted in exercise of the powers conferred under section 21(2) of the Sales Tax Act, 1990.
2. Briefly stated, the facts of the case are that during investigation Messrs Javed Traders, Multan (supplier of the suppliers who made supplies to the appellant) confirmed that for the tax years 2010, 2011 and 2012 he had not made any supply to any registered persons and the supplies shown in its monthly sales tax returns were fake and the supplies declared by its representative were without any authorization. Considering this position in view it was alleged that the appellant had claimed/adjusted input tax adjustment on the basis of fake invoices issued by the blacklisted registered persons mentioned in the impugned order and had committed a tax fraud in terms of Section 2(37) of the Act. Therefore, the appellant was asked to furnish the original invoices along with payment proofs. As per the impugned order since no satisfactory reply was furnished the learned Commissioner had sufficient reasons to believe that the appellant is involved in the evasion of tax and tax fraud. On the basis of facts narrated above, in exercise of powers conferred under section 21(2) of the Sales Tax Act, 1990 read with Rule 12 of the Sales Tax Rules, 2006 and Clause (N) of STGO No,03/2004 the learned Commissioner suspended the registration and proceedings for blacklisting were initiated by issuing a show cause notice dated 14.06.2013. The reply furnished by the appellant was considered unsatisfactory and consequently the appellant was declared blacklisted in terms of Section 21(2) of the Sales Tax Act, 1990 read with Rule 12(2) of the. Sales Tax Rules, 2006 and STGO No,35/2012 dated 30.06.2012 vide order dated 06.09.2013. This has brought the appellant in appeal before this forum.
3. The learned A.R. Has assailed the impugned order as unjustified and arbitrary. Firstly, he stated that Section 21(2) clearly provides that if the registered person is found to have issued fake invoices or committed a tax fraud then his registration can be suspended or he may be declared blacklisted in accordance with the procedure laid down by the Board through notification in the official gazette. He contended that no such notification in the gazette having been issued by the Board, the action of the learned Commissioner was contrary to the ratio settled by the Honourable Supreme Court of Pakistan in the judgment reported as PLD 2011 SC 374.
4. Further argued that the appellant has been declared blacklisted without application of independent judicious mind on account of presumptions. He submitted that Section 8A has been wrongly invoked in the instant case. The supplies were made by procuring proper sales tax invoices in terms of Section 23 of the Act and the payments were made in compliance to Section 73 of the Act. Even otherwise, the Honourable High Court while commenting upon Section 8A of the Sales Tax Act regarding joint responsibility held as under:-- "It is also important to refer to Section 8A of the Act which deals with a complete new species of violation of law i,e,, non-deposit of tax in the Government Treasury by the suppliers. This does not cast any allegation of collusion on the part of the buyer or suppliers but simply requires that the buyer should have had "knowledge" that the suppliers will not (eventually) deposit the sales tax in the exchequer. The Department has to establish that the taxpayer had "knowledge" and. Then proceed against the taxpayer. The impugned show cause notice does not, however, set up a case against the petitioner under this provision of law. Section 8-A is different from Section 8(1)(ca) and is triggered by the requirement of "knowledge" of the past practice of the suppliers."
5. It was also contended that nothing has been brought on record to substantiate that the appellant had any prior knowledge of the fraudulent activities of the suppliers which is a precedent condition for invocation of the provisions of Section 8A as held by the superior courts. The appellant bonafidely made purchases of taxable goods from the suppliers which were at the material time active taxpayers and filing their sales tax returns and summaries. Therefore, the Department has failed to make out any case of tax fraud against the appellant as contained in Section 2(37) of the Sales Tax Act, 1990. The learned A.R. Submitted that it is a settled principle that in order to attract the provisions of tax fraud the initial burden lies on the department and not on the accused person.
Reference in this regard was made to the judgment of the Honourable Karachi High Court reported as 2004 PTD 868 whereby it is held:-- ".. That in order to attract the above provision the initial burden lies on the Department to show that an assessee, knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under this Act of rules or instructions issued there under with the intention of understanding the tax liability or underpaying the tax liability. Once this burden is discharged by the Department, only then, the burden is shifted to the assessee to establish that the act done was without any knowledge on his part or without any intention of dishonesty or fraud and was done with any lawful excuse."
6. The learned A.R. Also pointed out that the purchases of the appellant pertained to the periods 02/2010 to 04/2010 when the alleged suppliers were active and not included in the list of blacklisted and their subsequent inclusion in the list of suspended units cannot be operated retrospectively.
Support on this issue is sought from the judgment of the Hon'able Apex Court of Pakistan cited as 2005 SCM R 492 wherein it is held as under:-- "It is well settled principle of law that the executive orders or notifications, which confer right and are beneficial, would be given retrospective effect and those adversely affect or invade upon vested right cannot be applied with retrospective effect."
7. The learned D.R., on the other hand, opposed the contentions by supporting the reasons recorded in the impugned order
8. We have heard the rival parties, perused the available record and are in consonance with the line of arguments adopted by the learned A.R. Admittedly, section 21 laid down a procedure for the de-registration, suspension and blacklisting and the Board had duly prescribed the said procedure through STO No,555/1/2006 dated 02.06.2012 which was also notified in the official gazette.
However, the said SRO was subsequently rescinded and the Board has issued another STGO No 35/2012 dated 30.6.2012 regulating the procedure for suspension/blacklisting. But the said procedure has not been notified in the official gazette so far as provided in Section 21(2) of the Act.
Hence, we agree with the contention of the learned AR that until or unless the notification regulating procedure for suspension/blacklisting is not notified in the official gazette the same is not in accordance with law and have no legal effect. The Tribunal in identical circumstances has already resolved this issue in favour of the taxpayer in the orders bearing STA No,1195/LB/2013 and STA No,1194/LB/2013 dated 28.01.2014.
9. We have also observed that the allegation of tax fraud leveled against the appellant is based on surmises and conjectures. On going through the impugned order, we have further observed that Messrs Javed Traders, on the basis of which the appellant has been declared blacklisted, in his statement has himself admitted that the supplies were duly shown in its sales tax returns whether having its authorization or not meaning thereby that he had admitted the declared sales and thus, if any case of tax fraud was to be made that should have been made against that supplies and not against the appellant. Further observed that appellant has made purchases from the suppliers who at the material time were active and their subsequent inclusion in the list of suspended/blacklisted units could not be applied retrospectively as per the ratio settled by the Apex Court in the case cited as 2005 SCM R 492 mentioned above.
10. For the reasons recorded above, we deem it appropriate to annul the impugned order.
Accordingly, the impugned order is annulled and the appeal preferred by the appellant is accepted.