' DR. MANZOOR AHMED, ACCOUNTANT MEMBER.---The instant Sale Tax Appeal has been filed by the taxpayer/appellant assailing the Blacklisting Order No, CIR/ZONE-IV/RT0-11/KH1/2015-16/2380, dated 18.12.2015 passed by the learned Commissioner Inland Revenue, Zone-IV, RTO-II, Karachi. The registered person has agitated through the following grounds of appeal: 1) That the order passed by the Respondent is illegal, unlawful and bad on facts.
2) That the order passed by the Respondent is arbitrary and unjustified as the matter needs to be proved by any independent evidence, therefore, the action of blacklisting the STRN of the Appellant is illegal and un-warrant.
3) That the Respondent was not justified to blacklist STRN of the tot Appellant as all supplier were duly active and alive. Therefore; 1,tiur the Appellant could not be penalized for any post event after the transactions which took place in earlier tax period.
( 4) That the Respondent had erred while declaring the Appellant jai blacklisted as the due tax in terms of section 3 of the Act had been paid on the supply made by alleged supplier. Thereafter, the Appellant has no any liability and reasonability regarding " the business affairs of the supplier who had collected the tax on Tills the supply being the agent of the Revenue Authority. t 5) That the Respondent failed to appreciate the fact to the effect - that transactions took placed much earlier and that time there ,11,t,116 was nothing on the record to show that the alleged purchaser is u a involved in the commission of tax fraud.
6) That the order passed by the Respondent is unlawful as the status of the suppliers are still appearing suspended and no order were passed in terms of the Rules 38 of clause No of Sales Twix General Order. As it requires that after suspending the STRN of any taxpayer the Revenue Authority is required to issue the show-cause notice for blacklisting within 7 days of the order of suspension, in case of not passing the said order, the action of suspension shall become void ab inito.
7) That this honorable court has already decided the identical issue in case law reported as 2001 PTD 866, wherein it was held that "Subsequent blacklisting of a supplier could not be made a tool to deprive the registered person of a valuable right accrued in his favour for purposes or transactions made prior to the suspension of registration of such supplier. "
8) That the Respondent did not bother to examine the case from all the aspects as the input tax pertaining to M/s. Sunny. Corporation had already been decided vide Order-in-Appeal No,86 of 2014 dated 26/05/2014.
2. The taxpayer/registered person being aggrieved and dissatisfied with the treatment meted out by the learned CIR, Zone-IV, RTO-II, Karachi who blacklisted Messrs Raab Packages. Hence, this appeal has been filed before this forum.
3. On the date of hearing, Mr. Ajeed Sundar, Advocate, appeared on behalf of the registered person while Mr. Iqbal Hussain Sheikh, DR appeared on behalf of the Department.
4. The learned AR supported the appeal of the taxpayer/appellant with the support of grounds and written arguments against the order of blacklisting and case laws in support, while learned DR supported the order of the learned CIR with the support of verbal counter arguments and facts as mentioned in the impugned order.
5. We have heard both the rival parties at Bar and perused the record in shape of the impugned order, grounds of appeal, correspondence of the Department before passing the impugned order, written arguments by the learned AR of the appellant/registered person and our findings are detailed in following paragraphs:
6. This appeal is filed by the registered person/appellant against the order of blacklisting of the registration of the appellant by the Commissioner IR vide order dated 18.12.2015. The order, inter alia, mentioned about supplies made to the appellant by different suppliers for the different tax periods ranging from 2010 to 2013, as given in the body of order, alleging that these suppliers were blacklisted/ suspended due to different reasons. The order of blacklisting under section 21(2), i,e, the impugned order also mentions of a show cause for blacklisting issued on 28.10.2015, which was stayed for 60 days by ATIR on 16.11.2015 for further action or till the decision of main appeal.
However, during this period, the learned AR of the taxpayer vide letter dated 30.11.2015, filed a copy of the learned CIR(A)'s order in the appellant's case in respect of one supplier Messrs Sunny Corporation, wherein an order was passed under section 11(2) against the appellant but decided in favour of the appellant by the learned CIR(A). However, the same has also been included in the list of alleged blacklisted suppliers while passing this impugned order under section 21(2).
The learned CIR of the Zone in the impugned order dated 18.12.2015 has also mentioned of submission of copies of invoices produced by the appellant, including sales tax but he rejected the same on the plea that neither the tax was paid by the supplier, nor any material procured/manufactured to make supplies to the appellant/taxpayer.
7. During proceedings before this forum, the taxpayer/registered person came with grounds of appeal that (i) all suppliers were duly active and alive therefore taxpayer cannot be penalized for any post event and he also filed copies of the active taxpayer list regarding the suppliers (ii) The taxpayer paid the tax in terms of section 3 of Sales Tax Act on supplies and it was the suppliers, who as Revenue Agent should have paid the tax (iii) The transactions made basis of blacklisting were much earlier and at that time there was nothing against suppliers (iv) The taxpayer also argued that even same suppliers still suspended subsequently, are not blacklisted being statutory requirement after suspension (v) The registered person/appellant referred to case law reported as 2011 PTD 866 wherein it is held that "subsequent blacklisting of a supplier could not be made a tool to deprive the registered person of a valuable right accrued in his favour for purpose of transactions made prior to the suspension of registration of such supplier (vi) and finally the order passed by the learned CIR(A) in favour of the appellant, when an order under section 1.1(2) was passed in respect of the appellant regarding M/s. Sunny Corporation, which is again made one of the basis basis of this blacklisting order under section 21(2).
8. We feel that the blacklisting procedure is very clearly explained vide Rule 12 of Sales Tax Rules as amended. The same is reproduced in respect of "blacklisting" as under:- 9,1Le
(b) BLACKLISTING
(i) in case, after giving an opportunity of hearing, the offence is confirmed, the Commissioner shall issue an appealable self-speaking order for blacklisting of the registered person, and shall proceed to take legal and penal action under the relevant provisions of the Act;
(ii) the order of blacklisting shall contain the reasons for blacklisting, the time period for which any refund or input tax claimed by such person or by any other registered person on the strength of invoices issued by him from the date of his registration shall be inadmissible, any recovery to be paid or penalties to be imposed;
(iii) the order of blacklisting shall be issued within ninety days of the issuance of the notice of hearing. In case, the order of blacklisting is not issued within this time period the suspension of registered person shall become void ab-initio;
(iv) copies of the order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR/PRAL computer system, the STARR computer system and the Customs Wing computer system, Each LTU/RTO shall circulate all such lists to their refund sections, audit sections and other concerned staff to ensure that the order is implemented in letter and spirit by all concerned;
(v) all LTUs/RTOs shall further circulate the copies of the order along with a computer system- generated list of invoices issued by the blacklisted persons as referred to in the preceding clause, to all officers of Inland Revenue having jurisdiction over the registered persons who have claimed credit of input tax or refund on the strength of the invoices issued by the said blacklisted persons; and
(vi) the officer of Inland Revenue receiving the aforesaid list under clause (v) shall issue show- cause notice under section 11 and subsection (3) of section 21 of the Act to a registered person for rejecting the input tax or refund claimed against the invoices so circulated and further proceed to decide the matter as per law through a self-speaking appealable order and after affording a reasonable opportunity of being heard to such person, in the manner as provided in the said subsection (3).
Unquote
9. We feel that clause (b) (vi) of the above prescribed rule is very dear. The blacklisting is a stop gape arrangement and an order under the relevant section 11 is to be passed and show cause for the same should preferably be issued along with show cause for blacklisting.
10. However, it is noted that blacklisting order under section 21(2) was passed in this case on 18.12.2015 and the subsequent proceedings under section 11 under relevant subsection, if so warranted have not been initiated or if initiated the same have not been culminated. Here, we are not suggesting that necessarily the proceedings under section 11 may culminate in creation of some demand. The explanation by any taxpayer may be acceptable in the eyes of Assessing Officer referring to law and record.
11. However, we feel that blacklisting order, adversely affecting the business affairs of the taxpayer cannot be allowed to continue for indefinite period and in this case almost four months have been passed after blacklisting.
11. As such, in the interest of justice, we direct that the order of blacklisting will be considered annulled from the date receipt of this order by the Commissioner.
12. We .