DR. MUHAMMAD NAEEM (ACCOUNT ANT MEMBER).--- Through titled appeal the department has assailed order dated 07.01.2013 That the order of the learned Commissioner (Appeals-II), passed by the CIR(A-II), Lahore on the following grounds:-i. Lahore was contrary to law , vague and against the facts of the case. ii. That the learned CIR (Appeals) was not justified to reduce the penalty up to 25% on his own discretion, especially when tax fraud has been established as section 33(13) of the Sales Tax Act, 1990 explicitly imposes penalty up to 100% amount equal to amount of tax involved on the registered person who commits tax fraud. iii. That the appellant may be allowed to amend alter or add any grounds of appeal at the time of hearing of appeal.
2. Facts as per impugned order in brief are that for the tax periods July 2005 to February 2011 the respondent/registered person has claimed adjustment of input tax amounting to Rs.4,653,699/- which was found inadmissible for the reasons recorded in the assessment order . It was observed that the respondent claimed adjustment against the invoices issued by the dummy/fictitious suppliers. Therefore, after issuing show-cause notice and considering the reply assessm ent Order No.10/2012 dated 01.08.2012 was passed. Being dissatisfied the taxpayer filed appeal before the CIR(A) who has upheld the charge of tax fraud as well as the recovery of principal amount of tax. However , imposition of penalty equal to 100% of the amount involved is found unjustified, therefore, the same is directed to be reduced to 25% of the involved tax amount. Hence, this appeal.
3. The learned DR appearing on behalf of the department has assailed the impugned order in the light of grounds of appeal reproduced above. He contended that the CIR(A) has erred in directing to reduce the penalty to 25% especially when the charge of tax fraud has been upheld. On the contrary the learned AR of the respondent supported the impugned order . He further submitted that the registered person has also challenged order of the learned CIR(A) No.18/A-II/2013 dated 07.01.2013 in second appeal and the ATIR vide its order bearing S.T.A.
No.487/LB/2013 (now reported as 2015 PTD (Trib.) 779) allowed the same, therefore, the appeal filed by the department has become infructuous. The learned AR further pointed out that the department has also filed reference before the honorable Lahore High Court against order of the Tribunal, hence, the matter is sub-judice and no further dilation is required.
4. We have considered the rival arguments and also gone through the available record. It has been observed that the taxpayer/respondent has also challenged the order of the CIR(A) on the issues of input tax adjustment as well as the imposition of penalty and the Tribunal vacated the order of the CIR(A) on both the grounds. For reference paras 6 and 7 are reproduced hereunder:-- "6. In our opinion the contention of the learned AR of the appellant as to submissio n of record including statement showing substantial part of their sales being less than Rs.50000 and hence outside the scope of the Section 73, is substantiated by the record. The Department has not explained as to how the Appellant has knowingly conspired with the suppliers of the goods rendering it to be covered by the definition of the term tax fraud. It has also been objected that the Suppliers did not fall in the category of the suspected/blacklisted/de-registered units at the time of the supply of the goods while the FBR website showed the profile of all the relev ant suppliers as operative. It is strange that the Sales Tax department has granted registration with resultant authority to collect Sales Tax on behalf of the Government without proper verification and scrutiny of the anteceden ts of the suppliers in this case. It is observed that the Respondents have not examined even a single judicial decision relied upon by the representative of the Appellant. If the goods relating to the alleged invoice are proved to have been used for manufacturing of finished goods which later on are supplied on payment of output tax, input tax relating to such ingredients raw materials can't be denie d. It is evident that a supplier is liable to deposit the Sales Tax under section 3 of the Sales Tax Act, 1990. The various judgments quoted above in the contentions of the Appellant lend support to our finding that the Appellant is entitled to adjustment of the disputed input tax.
7. The Appellant has also agitated the imposition of penalty and default surcharge on the basis of the amnesty schemes vide S.R.O. 563(1)/2012 dated 25th May, 2012, S.R.O. 606(1)/2012 dated 1st June, 2012, S.R.O.
768(1)/2012 dated 25th June, 2012 and S.R.O. 774(1)/2012 dated 27th June, 2012. It is argued that beneficial legislation should be given retrospective effect. Reliance has been placed on : 2005 SCMR 492, 2006 PTD 336-- Messrs Sh.W ahid-ud-Din Industries (Pvt.) Ltd. v. Additional Collector Sales Tax II and another and 2013 PTD 1037 --Messrs Premier Kadanwari Developme nt Company Ltd. v. Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad. In the impugned order by the learned Commissioner Inland Revenue (Appeals), the benefit of amnesty scheme has been denied on the ground that Appellant has not fulfilled the conditions as laid down under these S.R.O.'s. However , the conditions not complied with, have not been dilated. We are inclined to agree with the contention of the learned AR of the Appellant that beneficial legislation should be given retrospective effect and in any case the Appellant can't be subjected to default surcharge or penalty in this case in view of the S.R.O.'s relating to amnesty scheme. Hence, the penalty and surcharge levied by the department are deleted."
5. Since the Tribunal has already deleted the penalty and default surcharge and the department has filed reference against the order of the ATIR, the matter is sub-judice before the honorable Lahore High Court, the appeal filed by the department has become infructuous. Therefore, no further interference is required and the appeal filed by the department is rejected.