CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---The titled appeal has been preferred on behalf of registered person calling in question the impugned Order-in-Appeal No.470/2017, dated 13.12.2017, passed by the learned CIR(A), Faisalabad.
2. Briefly stated facts of the case are that the registered person is engaged in the business of processing of cloth. The case of the registered person was selected under section 72B of the Sales Tax Act, 1990 and A the audit proceedings for the period July /2013 to June 2014 was accordingly completed vide Order-in-Original No.55/2017 dated 29.06.2017 by the DCIR, inter alia, with the following observations:--
(I) SUPRESSION OF SALES AGAINST CONSUMPTION OF UTILITY: During the scrutiny of the sales tax record for the tax periods 01-07-2013 to 30-06-2014, it has been observed that the registered person has shown/declared less sales/supplies against the sui gas utilities with use of alternate fuel. Whereas, for the period 07/2013 to 03/2014; your own declaration comes to 5.00 times of your gas bills. The wood is also used in the processing of fabrics, whereas, your declared sales/supplies even does not justify the consumption of gas. In these circumstances where the production does not only depends on the consumption of gas and electricity establish suppression of supplies in the sales tax record. Thus sales are estimated @8 times of the gas charges. In view of the above, it is clear that you have suppressed your supplies of Rs.68,714,517/- to avoid the payment of sales tax of Rs.2,061,436/- to unregistered person and have not paid any sales tax against the said sales in violation of sections 3, 6, 7, 8, 22, 23, 26 and 73 of the Sales Tax Act, 1990 read with 2(14), 2(46) of the Sales Tax Act read with SRO No.1125(1)/2011 dated 31-12-2011.
Hence, sales tax of Rs.2,061,436/- is recoverable from you along with default surcharge under section 34 and penalty under section 33 of the Sales Tax Act, 1990.
(II)INPUT TAX CLAIMED ON ABNORMAL TAX PROFILE: The registered person claimed refund input tax adjustment against the invoices issued some units which have abnormal tax profile because tax has not been deposited in the Government treasury in the concerned month. Section 8(1) (ca) (d) of the Sales Tax Act, 1990 clearly states that no input adjustment against "the goods or services in respect of which sales tax has not been deposited in the Government treasury by the respective supplier". Moreover, the registered person has failed to prove genuineness of business transactions through documents of supply of goods as envisaged in sections 2(14) and 73 of the Act.
(III)INADMISSIBLE INPUT UNDER SECTION 8(1) (g): During the checking of documents, it was observed that the registered person has claimed input tax against some goods consumer nature. Therefore, sales tax amounting to Rs. 186,276/- is inadmissible.
(IV)SALES OF WASTAGE/SCRAPS: The analysis of the consumption of raw material in production reveals that the registered person has not shown sales of certain wastages/scraps in his stocks i.e., empty cans and empty drums, but the registered person has shown consumption of dyes and chemicals in his record hence an amount of Rs.261,900/- under section 11(3) of the Sales Tax Act, 1990 along with default surcharge and penalty under sections 34 and 33(5) of the Sales Tax Act, 1990 is recoverable.
(V)VIOLATION OF SECTION 73: According to section 73 of the Sales Tax Act, 1990 payment of the amount for a transaction exceeding value fifty thousand rupees, excluding payment against a utility bills, shall be made by a crossed cheques or by crossed bank draft or crossed pay order or any other crossed banking instruments but the registered person failed to provide the evidence against the purchases invoices and inadmissible the entire purchases of the registered person as detail given in the Order-in-Original.
Finally, the DCIR framed the assessme nt order with the following concluding words: "I am convinced that amount of sales tax Rs.10,588,351/- is held recoverable under section 11(2) of the Sales Tax Act, 1990 along with default surcharge (to be calculated at the time of payment) under section 34 and penalty also imposed under sections 33(5), 33(17) and 33(19) of the act, ibid."
3. The learned counsel contended that the registered person also filed Writ Petition against the selection under section 72B of the Sales Tax Act, 1990. Their Lordships in the case reported as 2017 PTD 686 (Lahore High Court); while deciding the said Writ have framed following observation to conduct the audit. Para (18) of the said judgment is as under: "18. Role of audit officer is to dig out the instances of tax evasion and non-compliance to the statutory provisions causing tax evasion. His role finishes on issuance of Audit Report, after seeking explanation, based on which further action is to be taken by an officer having quasi-judicial power of adjudication. The audit proceedings, being inquisitorial and administrative in nature are akin to function of prosecution in criminal cases, which finishes by preparation and submission of "Challan". Under the Federal Taxing Statutes, the unsatisfactory reply to the explanation sought by audit officer becomes an 'information' or 'definite information' based on which show-cause notice is issued to initiate quasi-judicial proceedings. Taxpayer has option, either to accept the confronted discrepancies/allegations and pay tax with concessionary penalty rates or to contest by filing reply to show-cause notice. Thereafter, process of adjudication starts, which is to be followed by a speaking and reasoned order. Asking an audit officer to raise demand and making monthly collection through qualitative indicator is alien to the scope and concept of audit. Any plea bargain to drop audit proceedings, if certain percentage of extra tax is paid, is against the provisions in Federal Taxing Statutes, dealing with audit. Selection for audit cannot and should not allowed to be used for raising revenue simpliciter, without conducting any audit and preparation of Audit Report. It is reiterated that audit, necessarily, is administrative in nature, which starts by selection for audit and ends on issuance of "Audit Report" after seeking explanation from the taxpayer. Issuance of "Audit Report" is sine qua non for completion of audit proceedings under respective provisions of the Federal Taxing Statues. To maintain separation between administrative and judicial powers, as envisaged in Article 175(3) of the Constitution of 1973, it is necessary that quasi-judicial proceedings be carried out by a taxation officer other than audit officer who conducted the audit because adjudication and audit are separate proceedings under the Federal Taxing Statues. The intent of legislature is to provide another opportunity of being defended to the taxpayer by responding to the show-cause notice. Needless to say that procedural standards, under judicial or quasi-judicial proceedings, are different from standards of administrative proceedings. Audit is an inquiry/investigation of the tax affairs and adjudication needs to satisfy the requisites of fair trial as guaranteed to the taxpayer under Article 10A of the Constitution."
Being aggrieved, the registered person assailed the assessment order before the CIR(A) who vide impugned order disposed of the appeal. The appellant again being dissatisfied have come up in second appeal before this Tribunal.
4. We have heard the arguments put forth by the learned AR of the registered person while none present on behalf of the respondent department. The learned counsel contended that sales tax is premised on a self-assessm ent paradigm, where the tax due is self-assessed by a taxpayer and deposited along with the monthly sales tax return. Supervision and monitoring of the self- assessm ent regime is through the process of audit provided under section 25 of the Act. All the necessary evidence regarding payment proof under section 73 of the Act was provided at assessm ent stage as well as before the learned CIR(A). He also once again submitted the said proof before us. Further, he argued that liability to pay sales tax is on the supplier under section 3(3)(a) which is independent to the provisions of section 73 and in cases of delayed payments, no revenue loss is involved particularly when the supplier has already paid output tax to government, therefore, demanding refunded amount of input tax back from the buyer despite having it deposited by the supplier in national exchequer would definitely amount to double taxation permissible under law. In this behalf he referred a case reported as 2017 PTD (Trib.) 846. The relevant Paras are as under: "4. After having heard both the rival parties and carefully examining the relevant record as well as the case law cited at the bar, we find that there is no controversy in the manner of payments having been transacted through prescribed banking mode, but its time is delayed over one hundred and eighty days beyond date of tax invoice. No doubt, provisions of section 73 were incorporated in the Sales Tax Act, 1990 in order to promote documentation of economy and it imposes an obligation on the buyer to arrange payments to the seller by means of crossed cheque, bank draft, pay-order or any other banking instrument within 180 days of the tax invoice. In this case, payments have admittedly been transacted by means of specified banking instruments as requisitioned under section 73 of the Act but due to certain financial constraints and pecuniary hardships, payments have not been made within specified time period and were delayed beyond 180 days against the alleged transactions and this act, on part of the assessee is not deliberate and contumacious being caused for financial problems always beyond control of humanity therefore, this procedural lapse and technical omission entailing no revenue loss at all, is condoned to maintain his inalienable right of input tax and the assesse cannot be deprived of from his statutory right of input tax due to any procedural omissions whatsoever because neither any procedural mistake affect legal entitlement nor this lapse of procedural nature has caused any prejudice to the department. It is now well-settled principle of law that acts of inadvertence on the part of an assessee due to any procedural mistake would not create demand of sales tax. The judgment of Hon'ble Supreme Court of Pakistan in case of "M/s. Pfizer Laboratories Ltd. v.
Federation of Pakistan and others" reported as PLD 1998 SC 64 is also on all fours to the case of the assessee wherein was laid down as under:-- "That there may not be legal liability on the part of a Government functionary to refund any amount received by it as tax or other levy by virtue of certain special provision under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every moral values, must do what is fair and just to the citizen regardless of legal technicalities."
5. Suffice it to say, liability to pay sales tax is on the supplier under section 3(3)(a) of the Act which is independent the provisions of section 73 of the Act as the supplier has to make payment of sales tax at time of filing of sales tax return for a tax period and sales tax has to be paid even in cases of credit transaction as well. It is established beyond any shadow of doubt that deposit of sales tax is independent to that payment under section 73 of the Act hence, in cases of delayed payment no revenue loss is involved particularly when the supplier has already paid output tax to the government therefore, demanding -refunded amount of input tax back from the buyer despite having it deposited by the supplier in the national exchequer would definitely amount to double taxation not permissible under any law of the land. In nutshell, it is acknowledged that refund of input tax is a substantive right of the assessee which cannot be taken away or withheld on mere some technicalities and procedural lapses whatsoever."
5. Considering the facts and circumstances of the case and taking guidance from case mentioned supra, we allow the input tax credit disallowed under the grab of section 73 of the Sales Tax Act, 1990. Orders of the authorities below are accordingly in this regard.
6. With regard to second objection, we observe that the production has been estimated by applying 8 times of gas bill basis. The calculations made by the department are based on presumptions and assumptions. An assessment made solely to burden the registered person with heavy tax. Sales tax is on supply of taxable goods and noon production or production capacity of a unit. The production formula adopted by audit is subject to number of variable and may be a good tool for assessing production capacity of a processing unit if all such variables are assigned with some presumptive values. Production and production capacity on the basis of said formula has no significant value until and unless it is supported by some corroborating evidence regarding any clandestine receipt of raw material or removal of finished goods or receipt of money consideration in this respect thereto without which it remains presumptive and having force of law. In the absence of any material evidence, corroborating the clandestine removal of goods and receipt of money consideration in this respect, it is unjustified to hold any recovery on account of suppression of sales against the registered person. Reverting to the facts of the case, we feel that the Order-in- Original is totally based on guess, gossip or rumor cannot be treated as definite information to re- adjudicate the sale tax assessm ent. The element of "SALE" in its simple parlance means the transfer of a property from one individual to another on payment of and passing of a consideration, any different interpretation would be against the basic concepts of law, to infer and to suggest that goods consumed by a person would also fall within the ambit of sale and, therefore, the tax shall be levied is farfetched and against the justice. Reliance can be placed on a case law reported as 2001 PTD 2982 (Karachi High Court). Further, on the same line the sales of wastage/scraps was made by the adjudicating authority, hence, both the sales tax recoveries amounting to Rs.7,274,876/- and Rs.261,900/- respectively are deleted and orders of the authorities below in this regard are cancelled.
7. On the issue of abnormal tax, we find that the provision of section 8(1)(ca) of the Sales Tax Act, 1990 has been struck down by the honorable Lahore High Court in Writ Petition No.3515/2012 dated 22.11.2012. Further, the said purchases exclusively used in the furtherance of business activity. Thus, the sales tax recovery amounting to Rs.799,677/- is also liable to be deleted and we order so.
8. In the end, we would like to observe that the impugned orders of the authorities below are without application of judicial mind and are liable to be cancelled and in this behalf reliance is placed on a case reported as [(2018) 117 Tax 311 (Lahore High Court)]; wherein his Lordship has held that: "9. A similar question arose before the Islamabad High Court in a case tiled Zaver Petroleum Corporation Limited through Director, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another (2016 PTD 2332), which dilated upon the issue involved in these petitions and concluded as follows: "17. It is, therefore, obvious from the above definitions that the three expressions are distinct and separate. The power or jurisdiction conferred on an officer of Inland Revenue precedes the performance of functions. The conferment of power or jurisdiction is a pre-condition for the performance of functions. By no stretch of the imagination does subsection (3) of section 30 empower the Commissioner to confer power or jurisdiction. However, Commissioner pursuant to subsection (3) can assign persons or areas in respect of the officers specified therein for the purpose of the performance of functions with regard to the scope of the power and jurisdiction already conferred on such officers. Such officers, in order to perform their respective functions, have to be vested with power or jurisdiction. In the instant case the learned counsel appearing on behalf of the Department have not been able to show any provision of the Act of 1990 which empower the Commissioner to issue the order dated 23.01.2014 and further delegate the powers and jurisdiction conferred upon him or her by the Board pursuant to the order dated 21-01-2014. The reliance of the Commissioner on the notification dated 01-07-2010 is misplaced as the same does not confer the power of adjudication under section 11 of the Act of 1990.
18. It is settled law that a delegate cannot further delegate its power unless expressly authorized under the law. It is also settled law that in order to enable a person in delegate the powers or functions, there must be an authority, expressed or implied, to delegate. When power is conferred on a particular person, then power alone has to exercise the powers and cannot transfer its exercise to another person. The august Supreme Court in the case titled 'Muhammad Ashraf Tiwana and others v. Pakistan and others' (2013 SCMR 1159) while examining the power of appointment of Commissioner vested in the Federal Government under the Securities and Exchange Commission of Pakistan Act, 1997, observed and held that it was well settled law that a statutory delegate could not sub-delegate his or her powers.
19. In the light of the above, the order dated 23-01-2014 issued by the Commissioner Inland Revenue was without lawful authority and jurisdiction. The Board has expressly conferred the power of adjudication under the Act of 1990 on the Commissioner vide orders dated 21-01-2014. The latter has no authority or jurisdiction to further delegate the power and jurisdiction of adjudication conferred by the Board vide order dated 21-01-2014. It is settled law that if the basic order is void, then any superstructure built thereon is also illegal and liable to fall. He Inland Revenue Officer was, therefore, not vested with power nor had the jurisdiction to issue a show-cause notice under section 11 of the Act of 1990. The Commissioner alone was vested with power and jurisdiction under section 11 of the Act of 1990, pursuant to the Board's order dated 21-01-2014.
10. I have no reason to disagree with the judgment rendered by the Islamabad High Court and for my own reasons given above concur with that judgment."
9. Keeping in view the above discussion and the case laws cited supra, the assessment framed by DCIR is found to be illegal on factual and legal premise which is, therefore, cancelled. Order of the CIR(A) is accordingly vacated and appeal of the registered person is accepted.