NAZIR AHMAD (CHAIRMAN).---The titled further appeal filed at the instance of the registered person has been directed against the Order-in-Appeal No.578/2015 dated 27.10.2015 recorded by CIR (Appeals), Faisalabad.
2. Brief facts of the case are that the appellant, being wholesaler, filed refund claims of sales tax for the tax periods falling in the period May, 2011 to January, 2014 in accumulation amounting to Rs.4,009,735/- against which certain objections were raised by the computerized risk based data (RMS)/CREST/STAAR. The appellant was accordingly show caused based on the irregularities/omissions as pointed out by the computerized system as was called to the show cause as to why deferred refund claim could not be recovered under sections 10(1) and 11(2) of the Sales Tax Act, 1990 and as to why penal action may not be taken. Resultantly, the adjudication proceedings culminated into sales tax Order-in-Original No.150/2015 dated 19.03.2015 and an amount of Rs.4,009,735/- was adjudged to be recoverable in terms of section 11(3) of the Act along with penalty and default surcharge respectively under sections 33(14) and 34 of the Sales Tax Act,.
1990 (The Act). The said order-in-original was assailed before learned CIR (Appeals), Faisalabad, who upheld the order on the ground that the appellant is registered under the Act, a wholesaler, and as per provisions of Notification No. S.R.O. 555(1)/2006 dated 05.06.2006 in terms of Chapter-V (Refund Rules) 26(a)&(b), the appellant cannot claim refund. The appellant, being dissatisfied, has assailed the orders passed by both the authorities below before this Tribunal on the strength of following grounds taken as per memo. of appeal:--
(i) That the Order-in-Original No. 150/2015 dated 19-03-2015 passed by Assistant Commissioner Inland Revenue, E&C Unit-03, Zone-02, RTO Faisalabad and Order-in-Appeal No. 578/2015 passed by the Commissioner Inland Revenue (Appeals), Faisalabad are bad in law and against the facts of the case.
(ii) That the Commissioner Inland Revenue (Appeals) was not justified to hold that the appellant cannot claim refund being registered as "Wholesaler" under the Sales Tax Act, 1990.
(iii) That the RP has made supplies of input goods to exporter under DTRE scheme at zero rate and entitled to refund of input tax paid as domestic supplier. The refund claim is duly supported and documented and cannot be rejected on flimsy ground.
(iv) That the Commissioner Inland Revenue (Appeals) was not justified to confirm the Order-in- Original 150/2015 dated 19-03-2015".
3. Initiating arguments the learned counsel for the appellant submits that admittedly the appellant is duly registered under The Act, in the category of wholesaler. The appellant is engaged in whole sale of packing material and supply during the period of refund claim have been made to a manufacturer-cum-exporter namely Messrs Interloop Limited. The recipient of supplies being a DTRE user is entitled to receive input goods by charging sales tax at zero rate against invoices issued to them. The learned counsel in its support placed reliance on Rule 304(2) of the Customs Act, 1969 and Serial No.7 of Fifth Schedule of the Act, which recognizes that the DTRE user shall be made zero-rated supplies. He further submits that during the period under appeal, the appellant supplied goods by charging sales tax at a zero rate while at the time of purchase of these goods the appellant had been charged sales tax at the standard rate. He argues that where the registered person is engaged in making of taxable supplies covered under section 2(41), of the Act, which includes supplies of goods chargeable to tax at the zero percent under section 4, the registered person is entitled to refund of sales tax paid at the earlier stage in terms of subsection
(1) of section 10 of the Act. He further argues that power under the said provision Board is vested with the authority to make procedure, mechanism and lay down conditions through notification in the official gazette. The Board in exercise of such powers has framed Rules through. Chapter-V which deals with refund of sales tax. While framing rules, he explains, the Board has failed to make rules for refund of sales tax for wholesalers. In this context, he contended that though no delegated legislation has been made by the Board in exercise such powers the provision of subsection (1) of section 10 of the Act clearly grants right to the appellant being wholesaler to claim refund of the amount paid at purchases stage. He submitted that right of the appellant cannot be disturbed and destroyed by the adjudication authorities by merely denying refund of such amount on the ground that appellant does not fall within Rule 26 of Chapter-V of the Sales Tax Rules, 2006. He further argued that subordinate legislation is subservient to the main statute. Any right which is guaranteed by the main statute and for which only procedure is to be provided through a delegated legislation and no such delegated legislation is made, the right which accrues in favour of the subject by virtue of the main legislation, cannot be taken away. Reliance in this behalf was placed on judgments reported as 2001 PTD 2383 (Supreme Court), PLD 2007 Lahore 170, PLD 2005 Peshawar 25, 2000 PCr.L J 1995, PLD 2000 (sic) 1214, 1987 PLC 354, PLD 1965 Lahore 77, 2008 YLR 1341.
He therefore, prayed that both the authorities below were not justified to reject and uphold rejection of deferred refund respectively, claimed by the appellant on this ground.
4. On the other hand, the learned DR supported the orders passed by both the authoritative below.
She argues that since no rules have been made in this regard by the Board, the appellant cannot be granted refund of sales tax claimed by him.
5. Arguments heard and record perused.
6. The moot issue involved in this appeal is as to whether the right guaranteed by the main enactment could be taken way by not making any subordinate legislation providing procedure and mechanism for refund and whether the right of refund granted by the main enactment is sufficient to entitle the registered person to claim such right. It is an admitted fact that applicant is a registered person under the Act, in the category of a wholesaler and supplies have been made to Messrs Interloop Limited charging sales tax at a zero rate which are applicable within the meaning of section 2(41) of the Act. The only reason which has come up before us is that as per provision of Notification No. S.R.O. 555(1)/2006 dated 05th June, 2006 under Chapter-V (Refund) Rule 26(a) and (b), the applicant cannot claim refund. The provision of section 10(1) of the Act is reproduced hereunder for convenience of reference: "10. Refund of input tax.---(I) If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than forty-five days of filing of refund claim in such manner and subject to such conditions as the Board may, by notification in the official Gazette specify: Provided that in case of excess input tax against supplies other than zero-rated or exports, such excess input tax may be carried forward to the next tax period, along with the input tax as is not adjustable, in terms of subsection (1) of section 8B, and shall be treated as input tax for that period and the Board may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, prescribe the procedure for refund of such excess input tax."
7. Plain reading of the above reproduced provision of law clearly shows that it entitles a registered person to get refund of excess input tax paid against purchases by interaction with the output tax charged at the zero percent against local supplies or exports made during such tax periods. The same does not discriminate among various categories in which registered person can be made.
8. In this view of the matter, the appellant falls within the definition of term registered person and the main enactment does not place any specific bar on the registered person being wholesaler not to claim refund of the excess amount of input tax paid on goods which were later on sold out by charging tax at the zero rate. The argument of the Learned AR that if the main enactment grants a right to the registered person and no procedure for granting that right is provided by the subordinate legislation, it does not mean that no such right exists carries substantial weight. This argument further get support, as under the statute there is no express bar on claim of refund for a wholesaler making zero-rated supplies. The judgments relied upon by the Learned AR also support these arguments.
9. In view of foregoing discussion, we are inclined to hold that the appellant being a wholesaler is completely entitled to refund of input tax paid at purchase stage, which is later on supplied at the zero rate, therefore, we are constrained to hold that the impugned orders being not sustainable in the eye of law, are hereby vacated by way of acceptance of instant appeal. We order accordingly.