CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---Titled appeal has been filed under section 46 of the Sales Tax Act, 1990 at instance of the registered person calling in impugned Order-in-Appeal No,26/2018 dated 18-01-2018 of learned CIR(A), Faisalabad.
2. Briefly stated, relevant facts for disposal of the instant case are that appellant was selected by the FBR under, section 72B of the Act for audit of sales tax record for the financial year commencing from 1st July 2013 ending on 30th June, 2014 and Officers of Inland Revenue ,conducted an audit of appellant's sales tax records under section 25 of the Act whereby certain discrepancies were pointed out, on the basis of which, a show-cause notice dated 07-06-2017 was issued under section 11(2) of the Sales Tax Act, 1990 along with default surcharge and penalty respectively under sections 34 and 33(11)(c) ibid. Upon culmination of adjudication, learned ACIR has partially accepted appellant's contention and remaining amount of Rs,2,814,747/- was adjudged against him through adjudication order daled 30-06-2017. Accordingly, appellant being aggrieved filed the first appeal before CIR(A) who has upheld liability through his impugned order dated 18.01.2018. The appellant being discontented and aggrieved by the said order has now filed the second appeal before this Appellate Tribunal. Learned counsel argued that audit staff of Inland Revenue, Faisalabad has issued letters to the appellant for production of sales tax record for audit for the periods in question and the said letters were duly responded by appellant and requisite records and information for the referred periods was provided. Learned counsel assailed that alleged supplier namely M/s. Atas Papers (Pvt.) Ltd. is still a suspended unit and no blacklisting order was passed within 90 days of basic hearing notice as per sub-rule b(iii) of Rule 12 of the Sales Tax Rules, 2006 therefore, suspension order has become void ab initio and recovery of sales tax against his invoices has also become illegal and unlawful. Lastly, learned counsel stated that if a registered person adjusted input tax credit before expiry of one year then it was just a procedural omission and even it does not carry any adverse revenue implications particularly in the situation, when the legislature has itself accepted its adjustment or refund as a right of taxpayer at the end of a financial year. Conversely, when the learned DR confronted with the tax situation cited supra, in counter arguments, he has assailed the case on similar grounds and charges as levelled earlier in impugned show-cause notice as well as adjudged in consequent orders and nothing newel, except to reiterate earlier set of contentions, has been put forth by him and fully supported the orders passed by both the authorities below simply re-endorsing the basis evolved therein.
3. We have heard the arguments advanced by both the rival parties and also carefully gone through the relevant provisions of law as well as case laws referred before us on behalf of the taxpayer.
4. After going through the case record, we are of the firm opinion that notices issued for production of sales tax record were duly responded by appellant and requisite records and information. was provided for audit and no deviation in its compliance has ever occurred. The question arises that without examining the record, how, the department had audited and made a number of audit observations involving instant liabilities hence, penalty imposed against this charge stands illegal, unlawful and highly unjustified which is deleted accordingly.
5. As far as, issue of inadmissible input tax adjustment against invoices of registration suspended unit is concerned, it is awfully observed that in terms of section 21 of the Act read with sub-rule (b)
(iii) of Rule 12 of the Sales Tax Rules, 2006, if the suspended unit is not blacklisted within 90 days of basic hearing notice, the order of suspension shall become void ab initio. Clearly, therefore, the mandate of Rule 12 of the Sales Tax Rules, 2006 is for a blacklisting order to be passed within ninety days. The order for suspension of registration being an interim order is needful to be converted into final order effecting the blacklisting, which if not visualized within a period of ninety days of basic proceedings, becomes void ab initio and ultra vires of law. In the instant case, computer profile dated 26-08-2018 of M/s. ATAS Papers (Pvt.) Ltd. clearly reveal his status as a 'suspended unit' whereas registration was suspended w.e.f 08-10-2015 has never been converted into a blacklisting order within 90 days of basic hearing notice as per sub-rule b(iii) of Rule 12 of the Sales Tax Rules, 2006 therefore; order for its suspension has become void ab initio having no effect of enforcement therefore, recovery of sales tax on the strength of his invoices has become unlawful and all the subsequent proceedings carried out on its basis are also illegal. It is wholesome principle of law that if the doing of a thing is made lawful in a particular manner then doing of D that thing in conflict with the manner prescribed will be illegal and unlawful.
7. At the last, it is held that charge of violation of section 8B(1) of the Act is basically misconstrued and misconstructed by the tax functionaries in its favour because a registered person is not legally allowed to adjust or reclaim input tax in excess to ninety percent of output tax for a particular tax period thereunder and this practice carries round the twelve tax periods spreading over a financial year commencing from 1st July ending on 30th June but at the end of that financial year, adjustment or as the case may be, refund, is permissible to the appellant as per provisions of clause (ii) of section 2 of section 8B of the Act read with Rule 34 of Notification No, S.R.O.
555(1)/2006 dated 05-06-2006. On careful analysis of the said rules and set of laws on the subject matter, it is crystal clear that deferred credit of ten percent of input tax is also adjustable and refundable but after end of that financial year for which registered person has an inalienable right not to be denied under law. In case at instance, the department has created demand of sales tax for July-13 to June-14 after expiry of three years, all three financial years ending on 30th June, when said credits having been matured for its adjustment or as the case may be, for its refund then what the case is left behind except any procedural omission entailing no revenue loss to the national exchequer at this juncture of time. Even otherwise, if creation of demand of principal amount, as per show-cause notice results in creation of refund on the other hand, what is the rationale for creation of such demand, if this is so, there is no need to ask the appellant to pay the principal amount of sales tax. Admittedly, there is no dispute by the department regarding the genuineness of the input tax, the only question arises is that the appellant adjusted hundred percent input tax against his output tax and if a registered person adjusted input tax credit before expiry of one year then it was just a technical mistake which does not carry any adverse revenue implications particularly in the situation, when the legislature has itself accepted its adjustment or refund as a right of taxpayer at the end of a financial year hence, recovery of sales tax is illegal and unlawful. It is well-settled law that a taxpayer having legitimate right of money deposited in the national exchequer as a sacred trust on the Government. cannot be deprived of, on certain procedural lapses and technicalities whatsoever. Reliance is placed on the judgment of Hon'ble High Court.
Lahore in case of "Commissioner Inland Revenue v. M/s. Malik Enterprises" in S.T.R. No, 07/2015.
7. In view of what has been stated, particularly in the light of record and legal propositions discussed hereinabove, impugned show-cause notice as well as consequent orders of both the authorities below are declared to be illegal, ab initio void and are thus hereby set aside. The instant appeal filed by the registered person is accepted in the manners as indicated above.