MUHAMMAD SAJID MEHMOOD SETHI, J. --- Through instant Reference Application under Section 47 of the Sales Tax Act, 1990 ("the Act of 1990"), following questions of law, asserted to have arisen out of impugned order dated 20.05.2016, passed by learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), have been pressed and argued for our opinion:-- (i). Whether the learned Appellate Tribun al was justified to reject the appeal tiled by the department ignoring that the registered person claimed input tax adjustment of sales tax against invoices issued by the blacklisted units was in violation of Section 2(37) of the Sales Tax Act, 1990 and the learned ATIR failed to interpret the provisions of "Tax Fraud"?
(ii). Whether the learned Appellate Tribunal Inland Revenue has failed to appreciate the applicability of provisions of Sections 8(1)(ca) and 21(3) of the Sales Tax Act, 1990, sub-rule (5) of rule 12 of the Sales Tax Rules, 2006, relevant to reject the input tax adjustment claimed on the basis of. invoices issued by the blacklisted/suspended units?
2. Brief facts of the case are that a Show-Cause Notice was issued to respondent-taxpayer alleging therein that it received refund of input tax pertaining to different tax periods against the sales tax invoices, issued by suspended/blacklisted units, which culminated in passing of order-in-original dated 13.01.201 1. Feeling aggrieved, respondent-taxpayer filed appeal before CIR (Appeals), which was accepted vide order dated 11.08.201 1. Being dissatisfied, applicant-department preferred appeal before learned Appellate Tribunal, which was dismissed vide order dated 20.05.2016. Hence, this Reference Application.
3. Learned counsel for applicant-department submits that the registered person claimed input tax adjustment of sales tax against invoices issued by the blacklisted units in violation of Section 2(37) of the Act of 1990. She adds that learned Appellate Tribunal, while passing impugned order , failed to interpret the provisions of "Tax Fraud". At this stage, she was confronted with the fact that the issue in hand has already been settled by this Court vide judgment dated 01.11.2017, passed in STR No. 242 of 2015 titled Commissioner Inland Revenue v. M/s. Ali Hassan Metal Works and findings recorded therein are squarely applicable.
4. On the other hand, learned counsel for respondent taxpayer defends the impugned order and submits that applicant-department has failed to point out any illegality or legal infirmity therein.
5. Arguments heard. Available record perused.
6. The operative part of impugned order dated 20.05.2016, reads as under:-- "4. I have considered the arguments of both sides and have also gone through relevant orders. Perusal of the impugned assessment order reveals that the main emphasis of the assessing authority was that the registered person claimed input tax on the invoices issued by the blacklisted units who 'nave not backup of purchases and all transactions were paper transactions. 'Whereas, the registered person with the help of documentary evidence, submitted before the CIR (A) in the shape of sales tax invoices, sales tax returns, payment proofs, etc. had proved their case that they transacted with the suppliers in accordance with law. The issue of claim of input tax on the strength of fake/flying invoices issued by fake/blacklisted units, stands already decided by the Honourable Lahore High Court in a judgment recorded in STR No. 98/2014, dated 12.03.2015, re: CIR v. M/s. Tariq Poly Pack Pvt.
Ltd. wherein the Hon'ble High Court while dealing with the provision of rule 12(5) has held as under:-- "13. The provision of Rule 12(5) of the Rules is pari material with provision of Section 21(3) of the Act (inserted through Finance Act, 2011). Plain reading of rule 12(5) show that under said rule, those invoices which were issued after blacklisting or were issued, after suspension but before blacklisting shall be rejected through speaking order .
Whereas other valid invoices issued when supplier was active and registered will not be affected by subsequent blacklisting of supplier unless those invoices are specialty declared fake through speaking order after hearing parties and have direct nexus with blacklisting. This interpretation. is also in consonance with the settled law that rules being subordinate legislation cannot be applied retrospectively ."
In view of the above, I find no infirmity in the impugned order passed by the learned C1R(A) which is accordingly maintained And appeal filed by the department is rejected."
7. Perusal of impugned order shows that learned Appellate Tribunal has given findings of facts that respondent- taxpayer transacted with the suppliers in accordance with law. Even otherwise, initial burden lies on the applicant- department that invoices have been issued during suspended or blacklisted period and in case invoices were not issued during period of blacklisting, the cause or reason for blacklisting has some nexus with the invoices. Taxation Officer did not establish-that said invoices were either fake or flying or the claimed tax was not deposited in the Government Exchequer . Admittedly , the issue involved in this case has already been dealt With and answered by this Court vide judgment dated 01.11.201 7, passed in the case of M/s Ali Hassan Metal Works supra , wherein the questions similar to the proposed questio n were re-settled in one question, Which was decided against applicant- department. The relevant part of the said judgment is reproduced hereunder:--