CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---- This appeal filed by the registered person is against the Order-in-Appeal No. 133/2018 dated 02-05-2018 passed by the learned CIR(A) , Faisalabad whereby he while maintaining the Order-in-Original No. 325 of 2017 dated 25- 09-2017, dismissed the appeal.
2. Briefly facts of the case as succinctly ascribed on record and also put forth during the course of hearing by the Inland Revenue are that during desk audit and scrutiny of income tax returns for the tax periods from July, 2012 to June, 2016, certain discrepancies were pointed out i.e. (i) comparison of supplies declared in income tax returns with sales tax returns (ii) extra tax on supplies (iii) non-filing of returns. Resultantly , the department has issued a show-cause notice dated 03-04-2017 to appellant confronting sales tax liability of Rs.10,705,657/- under section 11(2) of the Act along with default surcharge and penalty under sections 34 and 33 ibid. In response to show-cause notice, appellant filed written reply on 25-09-2017 supported with documentary evidences duly contesting and denying the charges levelled against him but the learned IRO adjudged liability of sales tax along with default surcharge and penalty vide order-in-original dated 25-09-2017 without considering the relevant record and without any cogent and plausible reasons. Being dissatisfied and aggrieved by the said order , appellant filed the first appeal before learned CIR(A), Faisalabad who dismissed the appeal vide order-in-appeal dated 02-05-2018 without application of independent judicious mind and approach on legal as well as on factual infirmities and improprieties pointed out in its memo. as also assailed during the course of hearing. The appellant being discontented and aggrieved by the said order has now filed the second appeal before this Tribunal.
3. Initiating the arguments, learned counsel vehemently argued that the learned CIR(A) has given no exhaustive judgment instead of retrieving to primitive assertions already taken in the adjudication order and neither discussed the grounds filed nor even a single question has been attended to and answered by the CIR(A) while handing down the impugned judgment. Neither the legal objections raised in the appeal and forcefully argued have been considered and appreciated nor answered by the learned. CIR(A) which amounts to condemn the appellant unheard. Learned counsel for the appellant has vehemently contented that the impugned order is erroneous in law and the same is based on misconceived facts. He further submitted that the appellant was de-registered by the Federal Board of Revenue vide letter C.No. st/de.reg/04 dated 31-08-2004 as its supplies and utility bills were below the basic threshold and as a non-registered person, the appellant was not required to observe the provisions of Sales Tax Act, 1990. Counsel assailed that if it was found by the department that the appellant was required to be registered, the competent authority was obliged under Rule 6 of the Rules of 2006 to make compulsory registration of him but the appellant, has been charged to sales tax without sales tax registration whereas under the provisions of the Sales Tax Act, 1990 and Rules of 2006, only the registered person, having sales tax number , ID, Pin code and password, can file sales tax returns. In the end, learned counsel contended that sales tax invoice can be issued under section 23 of the Act by specified persons only and its subsection (2) in unequivocal terms forbids that no person other than a registered person or a person paying retail tax shall issue an invoice, under the section hence, a person not registered under the Sales Tax Act, 1990 cannot issue a sales tax invoice under section 23 of the Act. 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 impugn ed show-cause notice as well as adjudged in consequent orders and nothin g 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.
4. We have gone through the relevant case record, duly weighed written as well as verbal arguments of both rival parties and have carefully examined factual as well as legal infirmities and improprieties arising out of the impugned orders and after adjudication at length, we have no hesitation to conclude this appeal case in a way given in the following paragraphs.
5. It is an admitted fact that the appellant was registered as a manufacturer with the Collectorate of Sales Tax and Central Excise, Faisalabad on 6th March, 1993 and was declared de-registered by the Federal Board of Revenue through letter C.No. st/de.reg/04 dated 31-08-2004 as its supplies and utility bills were below the basic threshold and as a non-registered person, the appellant was not required to observe the provisions of Sales Tax Act, 1990. It is worth mentioning here that the appellant was not informed by the department regarding his de-registration and due to this reason, the appellant filed nil sales tax returns till August-2008 however , upon acquainting with his de- registration, the appellant discontinue to file sales tax returns. In support of stance, appellant placed on record copy of computer profile dated 21st February-2 018 titled as 'Status Change Information ' duly showing appellant's status as a de-registered person. The appella nt has also produced copies of 'Active Taxpayers List' and 'Online NTN/STRN Inquiry' both dated 7th May, 2019 which reveal that sales tax registration number of the appellant is not existed. All computer generated profiles as also available on FBR web Portal were handed over to the learned DR to check and verify the current status of the appellant, he confirmed that sales tax registration number of the appellant is not existed in the computer data of the FBR and too computer profile dated 21-02-2018 regarding 'Status Change Information' also showing his status as a de-registered person.
6. It is not out of question to mention here that the learned tax authorities have taken into task 'sales turnover' declared by appellant in his income tax returns for the financial years 2012 to 2016 and hurriedly created sales tax liability thereon irrespective of as to whether such sales were subject to sales tax or not. If in subsequent years, the appellant crossed the basic threshold, department should have issued a fresh registration certificate which has not been issued till to date and the old STRN 04-03-1704-004-28 given to appellant at the time of registration by the department in the year 1993 does not exist in the computer system of FBR. The whole exercise for creating huge demand of sales tax is based merely on information retrieved from the income tax returns of the appellant without any cogent material evidence corroborating sales made therein were 'taxable' or 'exempt' is nothing more than surmises and guesswork for which there is no room in fiscal laws as held in a judgment of Hon'ble Court High Court, Lahore in case of "Messrs Avari Hotel Limited v. Collector Sales Tax and 3 others" reported as (2000 PTD 3765 ) that in fiscal statutes, only the letter of law is to be looked into and that there is no room for any intendment, equity or presumption. Fiscal statutes should be strictly constructed, as far liability to tax is concerned.
We also find ourselves in agreement with the assertions made by the learned Advocate that the term "tax invoice" has been defined in section 2(40) of the Sales Tax Act, 1990, which states that "tax invoice" means a document required to be issued under section 23 and sales tax invoice can be issued under section 23 of the Act by the specified persons only and its subsection (2) in unequivocal terms forbids that "no person other than a registered person" or a person paying retail tax shall issue an invoice, under this section hence, a person not registered under C the Sales Tax Act, 1990 cannot issue a sales tax invoice under section 23 of the Act. Section 26 of the Act of 1990 requires every 'registered person' to furnish a true and correct return within the due date, thus, an un- registered person or a person liable to be registered cannot file its return as per the provisions of the Act of 1990, since no such mechanism / procedure has been provided for un-registered person to file its return and to collect tax from the recipient, without issuance of tax invoice. It is well-settled law that tax cannot be charged and levied unless it falls squarely within the purview of the charging provisions.
8. It is also a fact that under the provisi ons of the Sales Tax Act, 1990 and the Sales Tax Rules, 2006, only a registered person, having sales tax registration number , ID, Pin code and passwor d, can file Sales tax returns and without sales tax registration number , a person liable to be registered cannot file sales tax return, charge, levy and pay sales tax or be subjected to audit under section 25 of the Act hence, imposing sales tax by the department without first assigning sales tax registration number do not find any support from the Rule 6 which explain and lay down the procedure for carrying out the spirit of the Statute. If a person could not register himself voluntarily , thereafter , it was duty of the sales tax department to register the defaulting person compulsorily as per the provisions of Rule 6 of the Sales Tax Rules, 2006 at the material time. If a person is not registered but is required or liable to be registered, Rule 6(3) of the Sales Tax Rules, 2006 comes into opera tion and the concerned authority can compulsorily register such person under the Sales Tax Act, 1990 after following the procedure prescribed thereunder . Therefore, where a person is liable to be registered, departmental authorities are first required to register that person compulsorily or otherwise in accordance with law and then charge sales tax from him under section 3(1)(a) of the Sales Tax Act, 1990 which stipulates that there shall be charged, levied and paid a tax known as sales tax at the rate of seventeen percent of the value of taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him. It is well-established principle of the law of taxation that a person must be taxed only if he comes within the letter of law otherwise, he is free even though his case falls within the spirit of law. The outcome of the discussion is that demand of sales tax created against the appellant for the periods prior to sales tax registration is illegal and unlawful. In this respect, we are also glided by the most recent judgment of the Hon'ble High Court, Lahore passed in the case titled as "Commissioner Inland Revenue, Gujranwala v. Messrs S.K. Steel Casting, Gujranwala " vide STR No. 54 of 2016 dated 21-03-2019 wherein it has been laid down as under:-- "In view of the above, our answer to the proposed questions is that the combined reading of the provisions of the Act of 1990 and the Rules framed there under manifestly disclose the intention of the law maker that, where a person is liable to be registered, the applicant-department is first required to register that person compulsorily or otherwise in accordance with law, and then charge sales tax from it under section 3 of the. Act of 1990, and may proceed against that person regarding prior to registration contravention of the provisions of the Act of 1990; if any ."
9. By respectfully following the judgment of Hon'ble High Court, Lahore, referred supra, we hereby set aside the impugned show-cause notice and consequent orders of both the authorities below being illegal, unlawful and ab initio void.
10. Resultantly , instant appeal filed by the registered person is accepted as prayed for and disposed off in the manner and to the extent as dilated supra. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.