CH SHAHID IQBAL DHILLON, JUDICIAL MEMBER.---- This appeal filed by the registered person, is against the Order-in-Appeal No.25/2018 dated. 18-1-2018 passed by the learned CIR(A), Faisalabad whereby he while maintaining the Order-in-Original No. 18 of 2017 dated 19-05-2017, 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 learned representatives are that Directorate of Intelligence and Investigation-IR, Faisalabad received a credible information regarding tax evasion by the appellant that he is involved in business of manufacturing of taxable goods and making taxable supplies since long. The appellant is not registered with the sales tax department and thus, evading taxes and has committed tax fraud under section 2(37)(ii) of the Act. Resultantly , a team was constituted comprising the sales tax officers to visit the premises of the appellant under section 38 of the Act who resumed the record of the appellant and accordingly , a show-cause notice dated 19-01-2017 confronting liability of sales tax worth Rs.6,789,981/- under section 11(3) of the Act along with default surcharge and penalty under sections 34 and 33 ibid was issued alleging therein that the appellant has failed to reconcile the supplies as well as the appellant could not provide evidence of payment of taxes on taxable supplies which established that appellant has made taxable supplies without paym ent of taxes and thus, committed tax fraud by causing loss to national exchequer . In response to show-cause notice, appellant filed written reply supported with documentary evidences duly contesting and denying the charges levelled against him but the IRO adjudged liability of sales tax along with default surcharge and penalty vide order- in-original dated 19-05-2017. 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 18-01-2018. 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 amou nts to condemn the appellant unheard. Learned counsel for the appellant has vehemently contended that the impugned order is erroneous in law and the same is based on misconceived facts. Learned counsel' assailed that impugned order of learned CIR(A) is hopelessly time barred by almost fourtee n months under the first proviso to subsection (2) of Section 45-B of the Act as the first appeal was filed on 07-07-2017 and impugned order was delivered to appellant on 29-01-2019. He further submitted that impugned show cause notice was issued on 19-01-2017 whereas the appellant was compulsorily registered by the sales tax department on' 21-03-2017 hence; liability of sales tax created prior to sales tax registration of the appellant is illegal and unlawful. Learned counsel in support of his stance placed on record copy of taxpayer online verification, order for compulsory registration of appellant dated 21-03-2017 passed by the learned CIR, Faisalabad and also produced judgment of Hon'ble High Court, Lahore reported as (2019 PTD 1493 ). Learned counsel argued that neither any prior notice as required to be served under Sub-rule 1 of Rule 6 of the Sales Tax Rules, 2006 was issued vide Notification No. S.R.O. 555(1)/2006 dated 05-06-2006 nor any opportunity of hearing for compulsory registration required under its Sub-rule (2) was given to the appellant. 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 fax 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.
4. After having heard the arguments of both the rival parties and from the bare perusal of the relevant orders as well as relevant provisions of law and material made available before us, we have found that the learned CIR(A) has rejected the appeal of the appellant on the sole ground that since online system of FBR indicates that the appellant was registered with the department from 20th December , 2004 therefore, he was under legal obligation to collect and pay sales tax hence, contention of the appellant that it should have been registered prior to issuance of show cause notice is not tenable. The whole observation of the learned CIR(A) is not maintainable under law particularly in the light of documents inter alia including taxpayer online verification, order for compulsory registration passed by the learned CIR, Faisalabad and judgment of Hon'ble High Court, Lahore reported as (2019 PTD 1493 ) produced by the appellant during hearing proceedings which clearly reveal that the appellant was registered in Income Tax Department on 20-12-2004 whereas as per Order C.No. 909 passed by the learned CIR, the appellant was compulsorily registered with the sales tax department on 21-3-2017 and the instant liability of sales tax was created against the appellant through show cause notice dated 19-01-2017 much prior to date of sales tax registration i.e. 21-03-2017. 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 guided by the most recent judgment of the Hon'ble High Court, Lahore in the case of "Commissioner Inland Revenue, Gujranwala v. Messrs S.K. Steel Casting, Gujranwala" reported as 2019 PTD 1493 wherein it has been laid down as under:- "In view of the above, our answer to the questions is that the combined reading of the provisions of the Act of 1990 and the Rules framed thereunder manifes tly 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 ."
5. 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. 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.