MUHAMMAD JAWED ZAKARIA, (JUDIC IAL MEMBER).--- The appeal has been filed by the Taxpayer/Appellant assailing the order No. CIR/Blacklisting/Zone-IV/R TO II/KH1/2018/1515 dated 6.2.2018 passed by the learned CIR(A), Karachi.
FACTS
3. Brief facts of the case are that the Appellant M/s. Faiza Packages is the corru gated carton manufacturer , duly registered with the sales Tax Department vide sales tax Registration No. 11 004816-00001-19 and conducting its business in accordance with Law and in strict adherence with the relevant provision of the Sales Tax Act, 1990 and filing monthly sales tax return under section 26 of the Sales Tax Act, 1990. The case was selected for Audit under section 72-B of the Sales Tax Act, 1990 and accordingly the department requisitioned the sales tax record for audit which was accordingly provided. Subsequently a Show-Cause Notice under Sectio n 21(2) read with Section 11(13) of the Sales Tax Act, 1990, dated 23-10-2017 and 14.12.2017 was issued by Deputy Commissioner Inland Revenue Zone IV. In terms of the said Show-cause Notice it been alleged that the appellant has purchased the goods from M/s. Super Master Industries during the tax period July 2013 till June 014, involving sales tax amounting to Rs.1,773,640/ from the Blacklisted person, including Rs. 300,000/- on account of M/s. 3S Enterprises, against which the Appellant has paid an amount of Rs.300,000/- under compelling circumstances. The Appellant visited the office of the Tax Department and explained that the goods were purchased when the supplier was active and provided the proof of payment such as copy of cheques etc and stated that we have never purchased the goods from a -suspended company . The Appellant also filed its reply dated 5-12-2017 and December 27, 2017. and explained the factual position with complete documentary evidence. The Learned Commissioner however , did not find the reply of the taxpayer favourable and passed the Impugned Order Ref No. CIR/Blacklisting/Zone- IV/RTO-111/KF1 1/2018/ 1515 dated February 6, 2018. Hence the instant appeal before this Tribunal.
ARGUMENTS - T AXPAYER'S COUNSEL
4. The learned counsel Ms. Naheed A. Shahid for the appellant vehemently' argued that the Learned Commissioner Inland Revenue -Ill, Karachi has legally erred in not appreciating that during the period July 2013 till June 2017 M/s. Super Master Industries was a validly and legally registered Company was not under any suspension as alleged. It was submitted that the M/s. Super Master Industries has itself admitted that the Appellant has purchased the Goods from M/s. Super Master Industries and completely own and endorsed the Invoices and confirmed the sale purchase transaction between M/s. Super Master and the Appellant, hence the impugned Order is illegal and unlawful.
5. She further asserted that after issuance of show-cause notice, the Appellant attended the hearing however , no opportunity was given to the Appellant to argue his case and justify his position. In fact on both hearings the Commissioner Inland Revenue-III, just avoided to hear the Appellant and passed the Order in cursory manner .
Learned Commissioner Inland Revenue-III, Karachi was not justified in mentionin g that Mr. Mohammad Salman attended on behalf of the Department as on both the date of hearing no one atten ded on behalf of the department at the time of hearings in front of the representative of the Appellant. It is submitted that the Appellant has filed convincing and genuine documents before the Commissioner , including Delivery Challans of Goods, Payment Invoices and Pay Orders/Cheques to M/s. Super Master Industries on account of purchases, Sales Tax Invoices of M/s. Super Master Industries, Active. profile of M/s. Super Master Industries on Portal and owners ID, Bank statement of the Appellant showing all relevant entries and all other relevant documents, however , no consideration was given to these genuine documents. Photocopies of the relevant documents, Delivery Challans of Goods, Payment Invoices and Pay Orders/Cheques to M/s. Super . Master Industries on account of purchases, Purchase Invoices, Sale Purchase Ledgers, Sales Tax Invoices of M/s. Super Master Industries, Active profile of M/s. Super Master Industries on Portal and owners ID, Bank Statement of the Appellant showing all relevant entries, Sale Tax Return of M/s. Super Master Industries provided by them, Audit Report of the Appellant and all other relevant documents were also produced before the learned CIR (A) as well as before this Tribunal. The Learned Commissioner Inland Revenue -III, Karachi has incorrectly held that the Appellant in furtherance of taxable activity intentionally and willfully declared substantial purchases made from blacklisted/suspended units, in order to surpass the national ex-chequer by way of claiming/adjusting huge unlawful, illegal and inadmissible input sale Tax in violation of subsections co), e(aa) and d of Section 8 of the Sales Tax Act, 1990 read with subsection (37) of Section 2 and subsection (3) of Section 21 of the Act. This can be proved either by the seller or by the purchaser and not by a third party . who despite going complete transactional documents have falsely held that these documents are fake and maneuvered. The Department has gravely erred in not verifying the documents of sale and purchase from M/s. Super Master Industries.
6. In addition to the above, the learned counsel also vociferously argued on the following points: A. That the provisions of Subsections c(a), e(aa) and d of Section 8 of the Sales Tax Act, 1990 read with subsection
(37) of Section 2 and subsection (3) of Section 21 of the Act are not applicable in case of the Appellant as the Appellant has legally transacted a business with M/s. Super Master Industries and has legally claimed Tax input.
B. The entire case is based on assumptions and speculation and the same has been passed without going through the documents and evidence hence has been passed in cursory and arbitrarily manner hence liable to be set aside.
The Appellant prior to transacting the business with M/s. Super Master Industries has duly verified the FBR status of the Company and double verified its legal existence and all such verifications were filed along with the show cause reply however , no consideration was given to the Appellant's reply and its af fixed documents.
C. That the adjudicating authority erred in law and condemned the appellant unheard, no hearing opportunity was, provided to the Appellant, and the said act of the Respondent is blatant negation of the universal law that no one can be condemned unheard and the same is against the Principles of natural justice commonly recognized by the superior courts of Pakistan which are (i) that every persons who rights are effected must have reasonable notice of the case he has to meet (ii) He must has reasonable opportunity of being heard in his defense (iii) The hearing must be an impartial tribunal (iv) The authority must act in good faith and not arbitral but reasonably .
D. That the impugned Order is not susta inable in law and is liable to be set aside as the Respondent has not applied his judicial mind and decided the matter haste without giving full opportunity hearing to the Appellant hence, depriving the Appellant from Audi altrem partem the rule applicable to both judicial and non judicial proceeding.
E. That during the years 2013, 2014, 2015, 2016 numerous audit of the Appellant's Company were conducted wherein complete satisfaction were endorsed by the FBR hence, the Show-cause Notice upon which the impugned Order was passed is an afterthought and time barred act of the Respondent, which is liable to be set aside.
F. That the demanded of sales tax- in the show-cause notices amounted to double taxation which is ultra wires of the Sales Tax Act,1990. Such Notice and subsequent impugned Order has been passed in negation to Article 18, of the Constitution of Pakistan, which guarantees freedom of trade and business to each and every citizen of Pakistan. The Impugned Order has clearly been passed in violation of Article 18 of the Constitution of Pakistan.
G. That Appellant had never purchased any good from the blacklist/ suspected person, infact the Appellant has purchased the goods from active taxpayer who is showing 100% compliance on the F-POR TAL of FBR, therefore, the impugned order is-unlawful, void, bad in law and liable to set aside.
H. There is various judgment of the Appellate Tribunals on the issue of blacklist as well as the orders /judgments of the Apex Court. In this regard reference was made to a reported judgment of the Tribunals cited as 2010 PTD (Trib,) 163 (sic) whereby the tribunals has passed a detailed order on the issue of black listing. The relevant portion of the reported judgment is as under:- "Perusal of the impugned order-in-appeal passed by the learned Commissioner (appeals) giving the impression that main emphasis of the learned first appellate authority was that the supplier of the appellant was declared blacklisted. However even on this we feel persuaded, by the arguments advanced by the learned counsel of the appellant. Scanning of the various judgme nts relied upon by the learned AR for the appellant for the support of his contention also substantiate the view point urged by the learned AR. The relevant portions of the reported judgment of the Lahore High Court reported as PLD 1993 (sic) 713 and Supreme Court of Pakistan reported as 2005 SCMR 492 are as under ."
The learned counsel further placed relian ce on the judgment reported as 2005 SCMR 192 wherein it was held as under: "It is well settled principle of law that the executive order notification which confer rights and are beneficial would be given retrospective effect and those which adversely affect or invade upon vested right cannot be applied with retrospective ef fect".
7. Lastly , the learned counsel for the appellant prayed that the Tribunal may be pleased to vacate and set-aside the Order Ref No. CIR/Blacklisting/ Zone- IV/RTO-III/KHI/2018/1515 dated February 6, 2018 passed in Show-Cause Notice under Section 21(2) read with Section 11(13) of the Sales Tax Act, 1990, dated 23-10-2017 and 14.12.2017, for the Tax Period July 2013 to June' 2014 passed by the Learned Commissioner Inland Revenue-III, Karachi against the Appellant and restore the status of the Appellant's Company as a legally Sale Tax registered Company and remove the name of the Appellant's Company from the array of "Blacklisted", Companies, as the Appellant is neither involved in any Tax Fraud nor the Appellant has claimed any bogus/fake Tax Input.
ARGUMENTS OF THE D.R .
8. The learned D.R. supported the order of the Learned Commissioner IR. He argued that the taxpayer's very act of claiming input tax against invoices of black listed suppliers without receiving any goods clearly proves that the appellant knew that the tax payable in respect of these so-called "supplies" would go unpaid, thus attracting provision of section 8(a) of the Sales Tax Act, 1990. He further argued that the suppliers in question were either black listed or non-active and indulged in issuing fake invoices without making actual supply of goods, hence, violated provisions of sections 7, 8(1), 21(3) and 26 of Sales Tax Act, 1990, therefore, the DCIR had rightly passed the order .
FINDINGS/DECISION ,
9. We have given our anxious consideration to the arguments of both the parties and perused the records of the case as well as other materials and case laws cited at bar .
10. We have minutely examined the provisions of Section 8A which simply requires that the buyer should have the "knowledge" end "reasonable grounds" to suspect that the supplier will not eventually deposit the sales tax in the national exchequer paid by him and in order to attract the provisions of section 8A of the Act, initial burden lies on the department to establish that the taxpayer had prior "knowledge" and "reasonable grounds" to suspect the supplier that sales tax paid to him shall be remained unpaid. The taxpayer , in the present case, under the prescribed mechanism of value added tax (VAT), has, made payment of input tax to his supplier and he had no access to confirm that the alleged supplier had made the payment in the Governme nt treasury or not. The Taxpayer receiving taxable supplies was legally obliged to check 4 'validity and veracity' of the supplying person through electronic verification/E-Portal verification which was obviously done at the time of transactions. This was the duty of the tax functionaries to check as to whether the supplier had made payment of tax due to them especially when he was filing his monthly sales tax returns and summaries of sales and purchases with the department. That there is no concrete evidence produced that the Taxpayer was in knowledge or had reasonable grounds to suspect that some or all of the tax payable in respect of supply or any pervious of subsequent supply of the goods supplied would go unpaid, therefore, liability to pay tax jointly and severally under section 8A of the Act would come into play only when it is established with corroborating material evidences that where register person receiving taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that, some or all of the tax payable in respect of that supply would go unpaid. The position in the present case is very much different because the respondent, after verifying the status and genuineness of the supplier from e-portal of FBR made the payments of input tax to them and fulfilled all the legal responsibilities on his part and after adopting of method of making payments as it prescribed by the law, has discharged his/its onus so no responsibilities lies on Taxpayer's shoulders to haunt his supplier depositing their liabilities in the Government exchequer or not. Mere allegation that the alleged suppliers are blacklisted, suspended and fake is not enough and corroborating evidence for denying the lawful right of input tax of the buyer . Therefore, the respondent cannot be evolved as a joint liable and induction of contravention does not qualify . Reliance is placed on the judgment of the Hon'ble Lahore High Court in case of "Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others " in Writ Petition No. 3515 of 2012 wherein it was laid down as under: "It is also important to refer to section 8A of the Act which deals with a complete new specie of violation of law i.e., non- deposit of tax in the government treasury by the supplier . This does not cast any allegation of collusion on the part of the buyer or supplier but simply requires that the buyer should have had "knowledge" that the supplier will not (eventually) deposit the sales tax in the exchequer . The department has, to establish that the taxpayer had "knowledge" and the proceed against the taxpayer . The impugned show-cause notice does not however , Section 8- A is different from Section 8,(1 ) (ca) and is triggered by the requirements of "Kno wledge"-Of the past practice of the, supplier", 11 Furthermore, status of those supplier i.e. M/s. Super Master Industries was also checked by the taxpayer and verified from the website of the FBR (www . Fbr.gov.pk) and it was reported by it to be active at the time of transactions. The Supplier i.e. M/s. Super Master Industries were active from February ,. 2013 to April, 2014 when the transaction were made from the supplier . The supplier was subsequently black listed on September , 2017.
Further , all the payments were made by the appellant, after adhering to the provisions of section 73 of the Act, Besides the suppliers were also submitting copies of their monthly Sales Tax Returns and the summaries of the relevant period to the Department, copies of invoices plus delivery callus, bank statement etc. It was also added by the learned counsel, that the Appellant did all the possible precautions and endeavors as well as used, all the official resources to verify status and genuineness of the suppliers. Such acts clearly speak for themselves that the Taxpayer had discharged all his legal and the ethical responsibilities to bring the truth at the door in a good faith.
Further all the requisite conditions as are laid down in sections 7 and 73 of the Act for claiming in put tax and paid the tax to the suppliers were fulfilled bona fide, We may observe that the Depart ment has failed to produce any order regarding the blacklisting of suppliers, at the particular point of time of issuing invoices to the respondent whereas the persons registered under Sales Tax Act can only be declared as blacklisted through an order passed under clause (N) of para 3 of Sales Tax General Order No 1 of 2004 read with Mule Chapter 1 of Sales Tax Rules, 2006 and section 21 of the Sales Tax Act, 1990. As it was instance of the registered person. that there is no order of relevant period of blacklisting of the supplier units mentioned in the detail provided by the department, therefore, non- production of such order by the Revenue leads to the presumption that the stance of registered person is correct and had dare been any order Of blacklisting of the units mentioned in the show-cause notice, the Revenue should have produced that before this Tribunal. Although there is no order to show that the suppliers were blacklisted yet that order through which the suppliers were alleged to be blacklisted should have been an executive order it is settled law that the orders or notifications which confer rights and are beneficial would be given retrospective effect and those which adversely affected or invaded upon the vested right could not be applied with retrospective effect. This view is fortified by the judgment of Hon'ble Supreme Court of Pakistan in re: "Government of Pakistan v. Messrs Village Development Organization " cited as 2005 SCMR 492. On the same point Hon'ble Lahore High Court in the case of Messrs Brother Engineering (Pvt.) Ltd." cited as 2004 PTD 2928 has held that:-- "It is well-settled that a notification or an executive order adversely affecting the right of any person cannot operate retrospectively but if the same confers any benefit it can be made applicable retrospectively".
In a most recent judgment the Hon'ble Lahore High Court Lahore in W.P. No. 394 of 2016 dated 8.3.2018 in the case of M/s. lmran Ali Lubricants v . Federation of Pakistan has observed as under: Also Article 18 of the Constitution confers the right on a person to enter upon any lawful profession or occupation and to conduct any lawful trade or busin ess as may be prescribed law. However , the conferring of power on the Commissioner under rule 12 is a clear impairment of the right under Article 18 conferred on all citizens as clearly , the registered person against whom a suspension order has been passed is barred from conducting all kind of business for a period of ninety days at least.
In the case reported as 2016 PTD 1695 re: Commissioner IR v. M/s. Amtex Ltd. the Hon'ble Lahore High Court observed as under: "When the transaction was made, the suppliers were active and duly registered, the invoices in question had no direct nexus with the subsequent blacklisting and suspension of the supplier , the refund could not be denied merely for the reason that supplier became blacklisted and suspended subsequently ."
In another case reported as 2012 PTD (Trib.) 453 (CIR, Zone-lll, RTO, Faisalabad v. Kamal Fabrics, Faisalabad held that: "If the sales tax department had acted in a negligent manner and certain omissions were committed by its functionaries by issuing registration certificates to the bogus, fake or non-existence parties then the respondent/taxpayer should not be made to suffer for the acts or omission on sales tax functionaries. It is now well- settled principle of laws that a party shou ld not suffer on account of act/omission on the part of the court or other state functionaries."
12. It is also worth to cite another judgment in the case of Kashmir Foods (Pvt.) Ltd. v . FBR held as under:- "We are further of the opinion that effect of the such legislation is left without fixing certain parameter's as to the date from which it becomes effective, it will open all the past and closed transaction and the citizen will have no protection whatsoever under any law and will burden throughout for such past and closed transactions."
Similarly , the Hon'ble Supreme Court of Pakistan in case of Elahi Cotton Mills Ltd. v. Federation reported as .PLD 1997 SC 582 wherein it was observed that: "Past and closed transaction cannot be reopened especially when the beneficiary has not role in the illegalities and irregularities committed by the other party ."
We may also place reliance on the judgment of the Tribunal reported as 2015 PTD (Trib.) 1490 in be case of Madni Packages (Pvt.) Ltd. v . OR wherein the Tribunal ruled that: "If black listing and suspension of registration of a supplier was effect subsequent to a period in which purchases and bank payments were transacted, supplier could not be made a tool to deprive the buyer of a valuable right accrued in his favour prior to such black listing, or suspension of registration of any supplier due to subsequent default,. whatever on his part. The taxpayer could not be deprived from his valuable right though retrospective application of section 21 of Sales Tax Act, 1990."
The operative part of the aforesaid judgment is reproduced below for ease of convenience: "24. We have heard the arguments of both the sides and have perused the relevant records. We observed that the provisions of section 8A of Sales Tax Act, 1990 are not attracted in the appellant's case. To attract such provisions, it is imperative that the department must prove that when the appellant firm recei ved a taxable supply from other registered person, those are, (i) that the registered person was in the knowledge or (ii) has reasonable grounds to suspect that some or all of the tax payable in respect of that supplies or (iii) any previous or (iv) subsequent supply of goods supplied would go unpaid. It is for the respondent -3 'Awe the above four ingredients Or any one of them as per Articles 117 and 118 of the Qanun-e-Shahadat Order 1984. It is explained that "Qanun-e-Shahadat Order , 1984 is applicable to all judicial proceedings in or before any Court including a Court Marshal, a Tribunal or other authority exercising judicial or quasi-judicial proceedings. The provisions of section 8A simply requires that the buyer should have the "knowledge" and "reasonable grounds" to suspect that the supplier will not eventuality deposit the sales tax in the national exchequer paid by him and in order to attract the provisions of section 8A initial burden lies on the department to establish that the taxpayer had prior "knowledge" and "reasonable grounds" to suspect the supplier that the sales tax paid to him shall be remained unpaid in its eventual and then proceed against the taxpayer . The applicant, in the [ resent case, under the prescribed mechanism of value added tax (VAT), has made payments of input tax to his suppliers and he had no access to confirm that the alleged , supplier had made the payments in the Government treasury or not.
25. The applicant receiving taxable supplies was legally obliged to check "Validity aid Veracity" of the supplying person through electronic verification which was obviously done at the time of transaction. This was the duty of the tax functionaries to check as to whether the supplier had made payments of tax due to them especially when he was filing his monthly sales tax returns and summaries of sales and purchases with the department. The impugned Show-Cause Notice does not disclose that the appellant was in knowledge or had reasonable goods to suspect that some or all of the tax payable in respect of supply or any previous or subsequent supply of the goods supplies would go unpaid, therefore, liability to pay tax jointly and severally under section 8A of the Act would come into play only when it is established with corroborating material evidences that where registered person receiving taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply would go unpaid. The position in the case is very much different, due to the reason that the appellant after verifying the status and genuineness of the supp lier from e-Portal of FBR, made the payments of in-put tax to them and fulfilled all the responsibilities lies on his shoulders. Mere allegation that the alleged suppliers are blacklisted, suspended and fake is not enough without corroborating evidence for denying the lawful right of input tax of the buyer . Therefore the appellant cannot be evolved as a joint liable and induction of contravention does not quality . Reliance is placed on a recent reported judgment of the Honourable Lahore High Court, Lahore in the case of "Messrs D.G. Khan Cement Company Ltd. N. The Federation of Pakistan and others " in W rit Petition No.3515 of 2012, wherein it was laid down that; "It is also important to refer to section 8A of the Act which deals with a complete new species of violation of law i.e., non-deposit of tax in the government treasury by the supplier . This does not cast any allegation of collusion on the part of buyer or supplier but simply requir es that the buyer should have had "know ledge" .that the supplier will not (eventuality) deposit the Sales Tax in the exchequer . The department has to establish that the taxpayer had "Knowledge" and then proceed against the taxpayer . The impugned Show-Cause Notice does not however , set up a case against the petitioner under this provision of law, Section 8A is differen t from Section 8(1Xca) and is triggered by the requirement of "knowledge" of the past practice of the supplier"
26. It is further held that the provisions of Section 8A of the Sales Tax Act. 1990 cannot be applied retrospectively as laid down in a judgment of the Honourable Supreme Court of Pakistan. reported as 2007 PTD 67 (SC Pak), I he same view was followed by the Hon'ble Sindh High Court in its judgment reported as 2007 CLD 1642 , wherein it was laid down as under:- "(D) INTERPRET ATION OF STATUTES -------------retrospective operation of statue---V ested rights could not be taken away save by express words or necessary intendment in the statue, Where that was not done, statue must not be presumed to operate retrospectively 2007 CLD 1642 In this regard, reliance is further placed on the judgment of Honourable Supreme Court of Pakistan reported as 2005 SCMR 492 , where it held as under EXECUTIVE ORDER ---- ---Retrospectively - requirement---Executive orders or notifications, which confer right and are beneficial would be given retrospective effect and those which adversely effect of invade upon vested right cannot be applied with retrospective ef fect".
On the basis of above, the provisions, of section 8A of the Act are not applicable in the appellant's case.
27. The learned A.R. further convinced us on the issue of section 8(1)(ca) that there is no violation of this section. It was argued that the allegations pointed out in the Show-Cause notice are totally illegal as all the registered persons were operative in the I-BR records and exists at the time of purchase of goods. I he respondent purchase goods from the registered FBR supplie rs who in return had issued sales tax invoices to appellant firm and respondent claimed input tax adjustment on valid sales tax invoices, as the ATL List allowed the respondent to conduct business with these suppliers which has now alleged in show-, cause notice by department. There is no section in the Sales Tax Act, 1990 which define the criteria to understand abnormal behavior of suppliers registered by department other than records of department obtained from alleged suppliers. Tax profile on e- portal of FBR a single source shows the status of any registered person at the time of business transactions. The appellant firm provided purchase invoices issued by the suppliers, as an evidence to claim input tax adjustment required by the law. The department has powers to conduct post refund audit and call for any record. It was argued that the appellant firm maintains and retains all records in accordance with sections 22 and 24 of the Sales Tax Act, 1990.
Hence, the question of non-availability of records did not arise in the appellant's ease.. During the proceedings, all relevant records of purchases i.e. purchas e invoices; purchase register and invento r) records were produced to the department along with written arguments which where not considered by the adjudicating officers. With reference to section 8(1 )(ea)(d), it is further held that it is liability of the department to conduct inquiry in order to ascertain the facts that why the registered suppliers not declared correct supplies in their records, why they concealed the supplies and why they did not deposited due tax in the national exchequer . It is also liability' of the department to conduct verification or complete audit of the records of alleged suppliers, to issue them show cause-notice pointing out discrepancies.
28. The appellant firm purchased goods from the registered suppliers and paid due tax to the buyer at the time of payment of goods including sales tax. The appellant firm provided record/ purchase invoices issued by the suppliers, as an evidence regarding claim of input tax adjustment. Hence the question of non availability of records did not arise in this case. It is liability of the department to conduct inquiry in order to ascertain the facts that why the registered suppliers not declared correct supplies in their records, why they concealed the supplies and why they did not deposited due tax in the national exchequer and in consequence of this, issued them show-cause notice pointing out discrepancies. The check and balance rest with department and not with the third party . In this case, the appellant firm is third party and not responsible of activities of alleged suppliers.
29. We intend to agree with the contentio n of the learned A.R. that the provisions of section 8(1)(ca) of the Act, are not attracted in the instant case placing reliance on the judgment of the Hon'ble Lahore High Court in the case of "Messrs D. G. Khan Cement Company Ltd. v. The Federation of Pakistan, and others " in Writ Petition No.3515 of 2012, wherein the provisions of section 8(1)(ca) had already been declared unconstitutional being illogical and absurd, offending Articles 23 and 24 of the Constitution, 1973. The relevant part of the said judgment is reproduced hereunder: "For the reasons elaborated above, section 8(1)(ca) of the Sales Tax Act, 1990 besides being illogical and absurd, offends Articles 23 and 24 of the Constitution and is hereby declared to be unconstitutional and therefore, struck down. As a consequence, impugned show-cause notice dated 20-10-201 1 and Order-in-Original dated 6-1-2012 arising out of section 8(1)(ca) of the Act are also set aside. For the above reasons, this petition is allowed with no order as to costs."
30. As for as violation of section 8(1)(d) of the Act is concerned, there is no violation in the appellant's case. These provisions can only be invoked in cases where charge of "Collusion" or "tax fraud" has been levelled and established by the department as the said' provision disentitles a registered person from deducting or claiming input tax adjustment or credit made on the strength of a "fake invoices". The word "fake" has been defined by the Black's Law Dictionary 8th edition to be "something that is not what it purports to be "and" to make or reconstruct falsely" at its page 635. Any invoice duly issued by a registered supplier cannot be purported to be a fake document, once it is established that the same is duly incorporated in sales shown by the supplier in his summary statement and also declared in his sales tax monthly return for the period in question particularly in the cases where its payment is also transacted through banking channel as prescribed under the Act. Conversely , if a registered person holds a tax invoice which is not incorporated in the supplier's records or in its respect payment is also made clandestinely , it can be said that such person is making a fake business transactions. Any invoice that evidences a fake, fraudulent or shame transaction is known as a "fake invoice" and any distortion in taxable supply tainted with "tax fraud" or "collusion" between buyer and seller renders the tax invoice defective and fake. It is well established principle of law that "a party making an allegation must bring material evidences to prove the irregular , false, collusive and fraudulent transaction." The department has not been able to place on record any evidence by which it can be referred that the invoices issued by the supplier were fake. Any action which is based upon no evidence is not permitted by any law of the land. The appellant, who has admittedly paid the input tax covered by the invoices, cannot be denied the statutory right of claiming its adjustment.
31. In view of above, neither the charg e of "tax fraud" nor "collusion" has not been established against the appellant with his suppliers to evade sales tax by way of fake invoices. Even the department could not prove and bring on record any evidence for collusion of the applicant with his suppliers without which, the provisions of section 8(1)(d) are not attracted in the instant case. Accordingly , the whole proceedings are infested with inherent legal infirmities and are required to be annulled.
32. Reliance is placed on a reported judgment of the Honorable Lahore High Cour t, Lahore in the case of "Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others" in Writ Petition No.3515 of 2012, wherein it was laid down that; "In fact, in case of "collusion" or "tax fraud" section 8(1)(d) of the Act is attracted. The said provision disentitles a registered person from deducting or claim ing input tax if there is a "fake invoice", The term "Fake Invoice" has not been defined In the Act but has the potential of covering a wide range of irregular and fraudulent transactions. Any taxable supply that is shame, collusive, based on tax fraud will necessarily render the invoice i.e., the material evidence documenting the transaction, to be false, collusive, and fraudulent. Fake Invoice is a legal term includes the popular market terminology of "flying invoice". Hence, any invoice that evidences a fake, fraudulent or sham transaction is known as a "fake Invoice", Any distortion in taxable supply tainted with "tax fraud" or "collusion" between buyer and seller renders the tax invoice defective and fake. The concern of the FBR and the Federal Government, urged before the court above, is fully addressed by section 8(1)(d) of the Act,"
33. Regarding tax fraud under section 2(37) of Sales Tax Act, 1990, the learned A.R. comprehensively argued that the taxpayer is not involved in "tax fraud" because mandatory condition put forth for committing tax fraud is that the alleged person should have done any act knowingly , dishonestly or fraudulently and without any lawful excuse. If at all a supplier has committed any tax fraud, it has been done on account of departm ent's negligence and the buyer cannot be held responsible for slackness of the tax functionaries. In order to attract the provisions of section 2(37), initial burden lies on the department to show that the taxpayer , knowingly , dishonestly or fraudulently and without any lawful excuse had done any act or caused any act to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under this Act or Rules. In this case, the supplier of the appellant firm was registered by the department and given sales tax number after due verification of record which was provided by the appellant to the concerned ACIR at the time of proceedings. The act of registration and verification of the antecedents of the supplier and appellant firm was carried out by the government functionaries, therefore, as per the principles as laid down in various judgments of superior courts, "the appellant cannot be condemned and punished for the wrong doings or the acts of the state functionaries." Reliance is placed on judgments of reported as 2002 SCMR 134 and (PLD) 1994 (H. C. Lah.) (sic).
34. Our attention is also invited drawn towards retrospective application of section 21, wherein black listing orders were given retrospectively effect by rejec ted input tax. In this regard, reliance is placed on different judgments of superior Courts of Pakistan reported as 2001 SCMR 1161, 2002 PTD 976, Sales Tax Appeal No.1402/LB/2008 tilted as M/s. A. T. Fabrics Faisalabad v. Collector Sales Tax Faisalabad and M/s. Usman Fabrics, Faisalabad in S.T.A. No.1334/LB/09 dated 25.02.2001 and others, wherein it was held that: "It is well settled principle of law that the executive orders or notification which confer rights and are beneficial would be give retrospective effect and those which adversely effect or invade upon vested right cannot be applied with retrospective ef fect".
35. It is a well-settled principle of law as per latest judgment reported as 2014 PTD 558 (Trib.) under the titled 2014 PTD (T rib.) 558 , wherein it has been held that: "if blacklisting or suspension of registratio n of a supplier is effected subsequent to a period in which purchases and bank payments were transacted could not be made a tool to deprive of the buyer of a valuable right accrued in his favour prior to such blacklisting or suspension the registration of any supplier due to subsequent default whatsoever on his part.
36. In this regard, we also gain support from the landmark judgment of August Supreme Court of Pakistan in case of "Government of Pakistan v. Messrs Village Development Organization" reported as 2005 SCMR 492 wherein it has been laid down that: "The executive orders or notifications, which confer right and are beneficial, would be given retrospective effect and those which adversely af fect or invade upon vested right cannot be applied with retrospective ef fect".
37. Accordingly , the titled taxpayer could not deprive from his valuable right through retrospective application of section 2 I for black-listed suppliers."
The business of the supplier cannot be suspended / blacklisted for indefinite period as held by the Tribunal in an unreported case bearing 2017 PTD (Trib.) 725 M/s. Raab Packages (Pvt.) Ltd. v. CIR wherein the Tribunal has held as under: ".However , we feel that blacklisting order , adversely affecting the business affairs of the taxpayer cannot be allowed to continue for indefinite period in the case almost four months have been passed after blacklisting."
13. Now, we are of the considered opinion that in cases, where payments are made through banking channel in the name of suppliers from the business bank account and received by the supplier in his declared business bank account, this could not brushed aside on the ground that the supplier subsequently black listed/suspended. It is well settled proposition of law that a past and closed transaction cannot be reopened especially when a. beneficiary has no role in the irregularity committed by the other party . If the supplier is not genuine and not traceable the taxpayer (buyer) cannot be held responsible. The taxpayer had discharged its liability by producing the sales tax invoices duly issued under section 23 of the Act. The order of black listing of the supplier was belated issued much after transaction of purchases, therefore, the department cannot state that the purchases of the appellant were not genuine as at the time of transactions with the supplier was active. If the department had taken the initiative at the very beginning and not granted the registration certificate on the ground that the supplier will subsequently play tax fraud, then vigilance should have been taken from very inception for any tax fraud. The best course available to the department was to conduct inquiry before or after the black listing bringing on record that at the time of transactions with the taxpayer the supplier was black listed. Therefore, the taxpayer could not be suffered at the hands of the functionaries on account of act of omission. Hence, it is the department who should have been required and asked for recovery of sales tax from the supplier and the burden is on the department to prove that the taxpayer had entered into transaction when the supplier was black listed. It is well-settled that subsequent blacklisting of supplier could not be made a tool to deprive the registered person of a valuable right accrued in his favour for purchases or transactions made prior to the suspensio n of registration of such supplier . It is also noted by us that the taxpayer had duly complied with the provisions of section 73 of the Sales Tax Act, 1990 by filing complete details and evidence inter alia and the proof of paym ents through banking channel as required under section 73 of the Sales Tax Act, 1990 showing delivery challans, physical movement of the goods etc. Having taking regard to the facts of the case in its entirely and after respectfully following the ratios settled in the referred judgments cited supra, we have no option except to reach the conclusion that Revenue has failed to prove the allegation levelled against the taxpayer that they claimed inadmissible input tax adjustment on the basis of invoices issued by their suppliers which were blacklisted /suspended subsequent to the transactions made by the taxpayer . In this view of the matter , the orders passed by of ficers below are not maintainable, hence vacated.
14. In a nut-shell our findings are as under: -- Order of Blacklisting dated 6.2.2018 passed by the Commissioner IR is vacated and active status of the taxpayer as a legally Sales Tax Registered Company is hereby anti-date restored. -- Name of the. Appellant / Company is hereby removed from the array of Blacklisted Companies. -- The department has not proved that the taxpayer is indulged in any tax fraud and it could not be assumed or presumed that the taxpayer is involving in tax fraud without brining into record any concrete material evidence proving without any shadow of doubt in this regard. -- The Taxpayer fulfilled all the requirements of section 73 as the supplier M/s. Super Master Indus was existent and active at the time of transaction. -- The department cannot disturb or reject/disallow the claim of input sales tax which may be allowed as no proof of bogus/fake invoices, nor element of fraud has been established.
15. Resultantly the appeal filed by the Taxpayer is hereby allowed.
16. Before parting with this judgment, we may observe that taxpayers cannot be presumed to be dishonest, in case of [Pannala Binjraj and others v. Union of India and others AIR 1957 SC 397], the Supreme Court has held emphatically that there is no presumption against the bona fide or the honestly of the assessee and normally the Income Tax Authorities would not be justified in refusing to an assessee a reasonable opportunity of representing his views before deciding any matter against him. The Bombay High Court in [Hirabai D..Desai and Sons v. C.I.T.
(1936) 4 ITR 95 (Born.)] has also held that there is no presumption of bad faith against any assessee permissible in law unless there be sufficient material on record to establish and ascertain the bad faith in relation W the that particular taxpayer nor can the Department presume the goods to have been sold at black market prices which are higher than control rates as was held in [A.S. Sivan Pillal v. C.I.T. (1958) 34 ITR 328 (Mad.)] Pure guess or bare suspicion or stock phrases is not sustainable while framing assessment against the assessee. I Dharajlal Girdharilal v. C.LT. (1954) 26 ITR 736 (SC)] [I.T.A. No. 1003 of 1957-58 decided on 09.12.1959 (1960) 2 Tax (V- 277)] There must be something more than bare suspicion. Dhakeswari Cotton Mills Ltd v. C.I.T. (1954) 26 ITR 755 (SC)].
In finale, we would add that one should always remember that truth even if buried has power and a community can never be fed on lies all the time. Some day it will come alive with fury .