MRS. AMBREEN ASLAM, (JUDICIAL MEMBER).---This order will dispose of titled appeal filed by the department against the Order-in-Appeal bearing No,90 dated 28-01-2015 passed by the learned Commissioner Inland Revenue (Appeals), Hyderabad on the following grounds; 1) Order passed by learned Commissioner IR (Appeals), Hyderabad is bad in law and against facts of the case.
2) That findings recorded by learned Commissioner-IR (Appeals) are perverse, capricious and reflect misreading of law and facts.
3) That the learned Commissioner IR (Appeals) fell in error by not discussing all of the objections/comments filed by the department.
4) Learned Commissioner IR (Appeals) failed to invoke his powers of further enquiry into the matter under section 45B(3) of the Sales Tax Act, 1990, despite specific request by the department, especially in view of the fact that the charge of purchases from 'Black listed' units was established against taxpayer.
5) Appellant craves to add, alter, amend or withdraw any ground before or at the time of hearing.
2. Brief facts of the case are that during the analysis of data of monthly Sales Tax returns filed by the taxpayer company by the officers of Regional Tax Office (RTO), it was observed that the taxpayer had declared purchases from the registered person namely M/s. Bajwa Engineering having National Tax Number (NTN) 2944659-7 and Sales Tax Registration Number (STRN)
1750999974391 during the tax periods from September to November 2012 for an aggregate amount of Rs,34,445,279/- involving allegedly inadmissible adjustment of input sales tax of Rs,5,511,244/-.
Accordingly, the taxpayer was served with the Show-Cause Notice C.No,04- IRE/CREST(Purchase)/ENF-I/ 2013/756 dated July 14, 2014 under sections 6, 7, 8(1)(d), 21(3), 22 and 26 read with SRO 1125(1)/2011 dated December 31, 2011, as to why the above amount of input sales tax adjusted should not be recovered from the taxpayer under section 11(2), and why penalty should not be imposed for the above alleged default under section as and why default surcharge should not be charged under section 34. The DCIR not being satisfied with the submissions made by the taxpayer in this regard, passed the Order-in-Original No,1044 dated 18-04-2014 for recovery of above A amount of Rs,5,511,244/- under section 11(2). The DCIR also through this order also imposed penalty under section 33 and charged default surcharge under section 34 for the default.
Being aggrieved by the aforesaid order of the DCIR, the taxpayer has lie appeal before learned CIR(A) for vacating the above Show-can notice and the order of the DCIR. The learned CIR(A) decided the said appeal by passing order No,90 dated 28-01-2015 with the following observations: "5. I have gone through the record of the case and considered written and verbal arguments put forth by the authorized representative of the taxpayer as well as the departmental representative and have arrived at the conclusion that the authorities of RTO have disregarded the fact that the registered person had not been declared as blacklisted by the FBR and as such, had remained an Active taxpayer by the time of purchase. Accordingly, the invoices issued by them during the intervening period are valid and admissible for the purpose of adjustment. My above observations are strengthened by the Sales Tax General Order No,06/2003 dated December 20, 2003 and the Hon'ble Appellate Tribunal Inland Revenue order in S.T.A. No, 789/LB/2009 dated August 11, 2010.
6. I have also considered the fact that the legal issue involved in the appeal has been decided by this office in the appellant's own case having identical grounds and merits vide Order No,1088 dated October 29, 2014. In view of what has been stated/discussed above, particularly, in the light of the case laws cited above and the order issued by this office in the appellant's own case, I am inclined to hold that the Show-cause notice and the order of the DCIR are suffering from grave legal infirmities, and are hereby vacated accordingly."
3. Being aggrieved and dissatisfied with the aforementioned order passed by the learned CIR(A), the department preferred instant appeal before this Tribunal.
4. On the date of hearing, Mr. Ram Chand, DR attended the proceedings on behalf of appellant/department while Mr. A. S. Jafri, Advocate attended on behalf of respondent/taxpayer.
5. During course of proceedings, learned DR contended that the taxpayer illegally adjusted the input sales tax against the purchases made from M/s. Muhammad Razzaq during the period September, 2011 to November, 2011 which is "In-active/black listed" on FBR e-portal. In view of above facts, the adjustment of input tax against the purchases made from blacklisted units is illegal and unlawful, therefore the above input tax adjustment on account of purchases the above units/supplier involving total sales tax amounting to Rs,5,511,244/- is liable to be rejected in terms of 8(1)(ca) read with section 21(3) of the Act ibid therefore, the DCIR rightly rejected/ disallowed the above input tax adjustment in terms of Section 11(2) of the Act ibid and order to recover the same along with default surcharge under section 34 and impose penalty as prescribed under serial numbers 5 of the Table of the Section 33 of the Sales Tax Act, 1990 for violation of aforementioned provisions of Sales Tax Act, 1990.
6. The learned DR contended that the learned CIR (A) while passing order-in-appeal fell in error by not discussing all of the objections/comments filed by the department and also failed to invoke his powers of further enquiry into the matter under section 45B(3) of the Sales Tax Act, 1990, despite specific request by the department, especially in view of the fact that the charge of purchases from 'Black Listed' units was established against tax payer.
7. The learned DR urged that the learned CIR(A) did not appreciate the fact that the registered person has illegally claimed/ adjusted input tax/refund amounting to Rs,5,511,244/- claimed against fake/flying invoices issued by fraudulent suppliers (black listed units) which is not allowable in terms sections of Sales Tax Act, 1990. The learned DR prayed before this Court may graciously be pleased to set-aside the impugned order passed by learned CIR(A).
8. On the other hand, the learned AR vehemently opposed the arguments advanced by the learned DR. He said the learned CIR(A) has rightly passed order-in-appeal. The learned AR argued that the taxpayer had purchased goods through proper sales tax invoices issued under section 23 of the Sales Tax Act, 1990 which were duly incorporated in supplies, sales registers, summary statements and that due tax were also paid in monthly sales tax returns for period in question. It was further argued that the stated supplier was neither defaulter nor was any fake transaction made by the taxpayer during the period in question. It was contended that the aforesaid supplier enjoyed "operative status" at that time and payments against transaction were properly made through requisite banking channel as provided under section 73 of the Act. Admittedly in the impugned order the auditor also found that the taxpayer had purchased goods from the supplier mentioned in the show-cause notice and transactions made through banking channel as is evident from the record submitted by the taxpayer during the adjudicating proceedings.
9. The leaned AR vociferously urged that the responsibility to pay sales tax vested on the supplier and if they have not paid tax in the National exchequer the taxpayer could not be held responsible for their default under the provisions of Section 73 of the Act as laid down in the judgment reported as 2011 PTD (Trib.) 2619. He agreed that the entire legal obligations applicable to the taxpayer had been fulfilled and the appellant could not legally be held liable due to any default on the part of their supplier. He also cited judgment of the Lahore High Court in W.P. No,3515/2012 in the case of D.G. Khan Cement Company Ltd. v. The Federation of Pakistan etc, in which it has been held that "the buyer has no control over the supplier". Once payment is made to the buyer through proper banking channel, as provided under the Act, the buyer has no control over the supplier.
10. The learned AR further argued that the supplier at the time of transactions were neither suspended/blocked/blacklisted and were enjoying active status on FBR's e-portal. Furthermore the payments against the purchases to the supplier were made through crossed cheques/banking channel and as such the conditions laid down in section 73 stood fulfilled. It was stressed that any subsequent blacklisting of the supplier does not lead to default of non-payment of sales tax. The learned AR prayed before this court, in the light of above facts kindly dismiss the instant appeal of department.
11. We minutely considered the submissions as urged before us and while considering the contentions of respective sides we appraise the material available with us. Precisely the allegation of the department against the taxpayer is that he is involved in purchases from blacklisted/suspended supplier. Keeping in mind the allegation of department, we consider the record, record reveals that this allegation relates to various periods for supplier namely Muhammad Razzaq. In this respect record reveals that aforementioned supplier was blacklisted/ suspended only with effect from July 3, 2013 after the date of the transactions made regarding business committed between the taxpayer and with above named supplier meaning thereby he was active at the time of business transactions with the taxpayer. Such fact is also evident from the record even that the officer has not bothered to verify the same through FBR web portal beside this it is contention of the taxpayer he made all transactions with its supplier through banking channel so in such circumstances the officer was required to verify the said transactions through banking channel or entry registers but has not done so.
12. So keeping in mind above prospects we are of the view that impugned judgment does not require interference the same is upheld. In the result appeal of the appellant/department dismissed.
13.The appeal stands disposed of in the manner as indicated above.