ORDER: MIAN ABDUL BASIT (JUDICIAL MEMBER) .--(1). This is an appeal under section 46 of the Sales Tax Act, 1990 (the Act, 1990 ) filed by the Registered Person challenging the Sales Tax Order-in-Appeal No. 75/2021 dated 07.06.2021 passed under section 45B of the Act, 1990 by the learned Commissioner IR (Appeals-I) Faisalabad [CIR(A)], who had confirmed the Order-in-Original No. 116/2020 dated 30.11.2020 passed under section 11(2) of the Act, 1990.
2. Brief facts of the case as transpired from the file, are that during analysis of sales return of the appellant for the tax period June-2020, the assessing officer observed that the appellant failed to file Annexure-J along with his return as required under section 26 read with rule 14(1) of the Sales Tax Rules, 2006 amended vide SRO 494(1)/2015 dated 30.06.2015. Further , the appellant has claimed/adjusted input which is violation of section 8(1)
(e) of the Act, 1990. Consequently , a show cause notice dated 04.09.2020 was issued. The explanation/reply submitted by appellant was found unsa tisfactory and resultantly , order-in-original was passed on 30.11.2020 wherein sales tax amount of Rs. 17,477,990/- was held to be recoverable u/s 11(2) ibid along with default surcharge u/s 34(1) ibid and penalty u/s 33(10) of the Act, 1990. The appellant/registered person being dissatisfied with the treatment of assessing officer assailed the order-in-original before the learned CIR(A) but could not get the favor of the appellate authority and appeal was therefore dismissed vide order dated 07.06.2021. The appellant, to show discontent, has thrown challenge on the order of learned CIR(A) by availing the remedy of second appeal enshrined under section 46 of the Act, 1990; hence instant appeal proceedings.
3. The case was fixed for hearing and on due date i.e. 10.02.2022 Mr. Khubaib Ahmed, Advocate/AR while appearing on behalf of the appellant argued that the impugned order passed by the learned CIR(A) is not at all speaking order and is in violation to the provisions of section 24-A of the General Clauses Act, 1984. The learned AR contended that scrutiny or investigation into case of a taxpayer can only be carried out through process prescribed under sections 25 and 72B of the Act, 1990 and there is no other mechanism under the Act, 1990 to pick a case for adjudication under section 11 of the Act, 1990, which rendered the whole proceedings as illegal. It has been maintained on the strength of judgments reported as (PTCL 2010 CL 393) & (2020 PTD (Trib.) 328) that the audit conducted by the staff of DRRA, Lahore is illegal because the Auditor General of Pakistan and its officers are neither sales tax officers under section 30 of the Act nor they are authorized under the Sales Tax Act, 1990 to have access to premises and accounts of any registered unit. The learned AR added that the appellant was not involved in manufacturing activity during the period in question so the appellant was not required to submit ANNEX- J and this fact was duly intimated to the Assistant Commissioner Local Registration Office of RTO, Faisalabad regarding Lease out of manufacturing premises vide letter dated 04-12-2019. The appellant was required to file the monthly sales tax return prescribed in the form STR-7 in respect of its monthly taxable activities through relevant columns/annexures in a uniform manner on a specified date; whereas, sub section (5) of section 26 of the Act relates to any information required in respect of any specific goods, person or class of persons through summary or in a specified manner , the learned AR argued. It was further submitted that the provisions of section 8(1)(e) of the Act relates to sub-section (5) of section 26 of the Act whereas return is filed in terms of section 26(1) of the Act, 1990 read with Rule 14(1) of the Sales Tax Rules, 2006 and return filed under sub-section (1) of section 26 of the Act cannot be construed as information under sub-section (5) of section 26 by any stretch of imagination. The learned AR further contended that the amendments made in sales tax rules through SRO 494(1)/2015 are not to be read in isolation as Annex-J is added through insertion of a proviso in sub-rule (1) of Rule 14, the same is therefore to be read in conjunction with Rule 14 which refers every registered person which is akin to the words used in sub- section (1) of section 26 of the Act; and have nothing to refer to sub-section (5) of section 26 of the Act, 1990. The learned AR also stated that the appellant was treated discriminately because in certain cases, RTO, Faisalabad did not rejected input tax on account of non-filing of Annex-J but had simply imposed a minor penalty of Rs. 10,000/- whereas in the case of appellant, learned DCIR has disallowed whole amount of input tax adjustment for non- submission of Annex-J, which is in violation of Article 25 of the Constitution of Islamic Republic of Pakistan, 1973.
The learned AR ended with the prayer to accept the appeal.
4. On the other hand, Ms. Sadia Nadeem, DR while countermanding the arguments of the learned AR submitted that the ANNEX-J to the return requires the information for which the Board had issued a notification hence the tax authorities has rightfully disallowed the input tax by invoking the provision of section 8(1)(e) of the Act, 1990. The learned DR further argued that the Federal Board of Revenue issued a notification for submission of ANNEX-J vide SRO No. 494(I)/2015 under section 26 of the Act, 1990 and the same is theref ore be treated as issued under section 26(5) of the Act, 1990. The appeal may be dismissed, the learned DR prayed.
5. We have heard the parties to appea l and have gone through the record. The whole case of the respondent department is based on the premise that non filing of ANNEX-J to the sales tax monthly return resulted into inadmissible input tax. The department has built this case of inadmissible input tax on the pillars of section 8(1)(e) and section 26(5) of the Act, 1990 with the plea that non filing of ANNEX-J was the violation of section 26(5) of the Act, 1990 which caused the input tax as inadmissible in terms of clause "e" of sub-section (1) of section 8 of the Act, 1990. Therefore, in order to cover this whole issue, it is necessary to take a prudent look at section 8 (1)(e) and section 26(5) of the Act, 1990 and the ANNEX-J of tax returns; which is being reproduced hereunder:--
8. Tax credit not allowed.--( 1). Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on the goods or services used or to be used for any purpose other for taxable supplies made or to be made by him: ----- -----
(e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a notification issued under sub-section (5) of section 26; ----- ----- -----
26. Return.--(1). Every registered person shall furnish not later than the due date a true, complete and correct return in the prescribed form to a designated bank or any other office specified by the Board, indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed; Provided that the Board may, by notification in the official Gazette, require any person or class of persons to submit return on quarterly basis: Provided further that the Board may, by notification in the official Gazette, require any person or class of persons to submit such return as may be prescribed annually in addition to the monthly return or quarterly return: Provided also that the return filed electronically on the web or any magnetic media or any other computer readable media as may be specified by the Board shall also be deemed to be a return for the purpose of sub-section (1) and the Board may, by notification in the official Gazette, make rules for determining eligibility of the data of such returns and intermediaries who will digitize the data of such returns and transmit the same electronically under their digital signatures.
Omitted ----- ----- The Board may, by notification in the official Gazette, require any person or class of persons, for any goods of such description or class, to furnish such summary or details or particulars pertaining to the imports, purchases and supplies during any tax period or Periods, in such format as may be specified .
The ANNEX-J to the Sales T ax Return: --ANNEX Details of Production and Supplies NTN STRN Tax PeriodMM-YYYY Name of Registered Person S No Description Unit of MeasureInstalled Monthly CapacityQuantity in Opening BalanceQuantity ProducedQuantity Supplied including exempt supplies and exports Value of Qty Supplied (Rs)Quantity in Closing Balance
(1) (2)
(3)(4) (5) (6) (7) (8) (9)
The registered person, as per sub-section (1) of section 26 of the Act, 1990, is required to furnish a sales tax return for each month on a prescribed form along with such other information prescribed by the board. There is no denial to the fact that the ANNEX-J is the part of the Sales Tax Return and the registered person to whom the ANNEX-J applicable is required to submit the said ANNEX-J along with the return for each month. The information required in ANNEX-J is the part and parcel of the return of sub-section (1) of section 26 of the Act therefore, a return submitted without ANNEX-J may be called an incomplete return under this section. The sub-section (5) demonstrates that the Board may require, through a notification, any information regarding the goods of certain description or class from any person or class of person, which means the information under this sub-section may be required from some particular person or persons or for some particular class of goods; whereas, the ANNEX-J is required to be filed with the return by all the registered perso ns who involved in manufacturing. It is therefore the information required in ANNEX-J does not have any nexuses with sub-section (5) of Section 26 of the Act, 1990. This, hence, is the reason leads to the conclusion that the information required under ANNEX-J is not the information required under sub-section (5) of Section 26 of the Act, 1990. The combined study of the provision of sub-section (1) and sub- section (5) of section 26 of the Act, 1990 portrays that if the Board requires any information other than the information required in regular monthly sales tax return from any particular class of persons or about any specific goods, the Board may seek the information by issuing a separate notification under sub-section (5) of section 26 of the Act, 1990. It is an undeniable fact of the case that there is no any notification issued under sub-section (5) of section 26 of the Act, 1990 which requires furnishing of ANNEX-J separately; hence, the input tax claim on purchase of goods cannot be declared as inadmissible in terms of clause "e" of sub-section (1) of section 8 of the Act, 1990. The obvious reason of which is that as per section 8(1)(e) of the Act, 1990, the input tax of only such purchases for which the taxpayer remains fail to furnish the information as required under sub-section (5) of section 26 of the Act, 1990, is inadmissible; whereas in the instant case the appellant has not been asked by the Board to furnish any information under sub-section (5) of section 26 of the Act, 1990. It is therefore non-submission of ANNEX-J to the monthly sales tax return does not render the input tax as inadm issible in terms of clause "e" of sub-section (1) of section 8 of the Act, 1990.
6. The other aspect of the matter is that sub-section (5) of section 26 of the Act, 1990 requires the summary or details and or particulars pertaining to the imports, purchases and supplies during any tax period or periods whereas the ANNEX-J deals with the production of the taxpayer . The columns of ANNEX-J requires the production data of the registered person by filling the columns of quantity of opening stock of produced (finished) goods, the quantity produced, quantity sold and quantity in closing Balance. The ANNEX-J does not requires any details of purchase, sales and import of the registered person conversely the sub-section (5) of section 26 of the Act, 1990 requires the detail, summary and or particulars pertaining to import, purchase and sales of the registered person and does not require any information regarding the production of the registered person. It is therefore the necessities of the duo (section 26(5) of the Act, 1990 and Annex-J to Return) are different in its scope and application and are heterogeneous to each other . The ANNEX-J demands the production data of the return filers whereas sub-section (5) of section 26 demands the summary and information of purchase, sales and imports which makes it clear that the two are different and parted to each other . In this state of parameters, it is obvious that any penalty available in clause "e" of sub-section (1) of section 8 of the Act, 1990 for violation of sub-section (5) of section 26 of the Act, 1990 cannot be imposed for any shortcoming (non submi ssion of ANNEX-J) of sales tax return. It is therefore safely concluded that the information of ANNEX-J does not at all cover under sub-section (5) of Section 26 of the Act, 1990; hence non furnishing of ANNEX-J cannot made basis for declaring the input tax as inadmissible.
7. The learned AR during hearing proceedings, placed on record some such show cause notices issued to other registered persons for non-submission of ANNEX-J with the only intent of imposing penalty in terms of section 33 of the Act, 1990 for wrong filing of return. The scanning of the said show cause notices and orders passed thereon reveals that the same tax department on the one hand imposed the penalty under section 33 of the Act, 1990 for non-submission of ANNEX-J; and on the other hand, in this case, the tax department of same territorial jurisdiction declared the entire input tax of the tax period for which the ANNEX-J was not filed, as inadmissible. This appears to be a clear discrimination and is in deprav ity to Article 25 of the Constitution of Islamic Republic of Pakistan, 1973.
The proper approach to Article 25 is well settled by the honorable higher judicial forums in a way that no one can be discriminated in so far as application of law is concerned. Article 25 however , as per the pronouncements of honorable judicial forums, allows for reasonable classification, which is one that is based on intelligible differentia, which must have a rational nexus with the object sought to be achieved. The ques tion arises, therefore, is whether the appellant has been discriminated against by declaring the whole input tax as inadmissible for non-submission of ANNEX-J with monthly sales tax return. The obvious answer to the said question is yes; because the other registered person for the violation of same provision of law was held responsible for payment of penalty only whereas for the case in hand, while discriminating against the appellant, the input tax was held as inadmissible along with imposing penalty as well. It is therefore held that the appellant was discriminated against by declaring the input tax as inadmissible for the same cause for which the other registered persons were held liable to pay only penalty . We therefore declare the act of tax department of declaring the input tax as inadmissible due to non- submission of ANNEX-J with monthly return as illegal and violative to article 25 of the. Constitution of Islamic Republic of Pakistan 1973.
8. The argument of learned DR that the issuance of notification under section 26 is treated to be a notification issued under section 26(5) of the Act, 1990 as well, is misconceived. Because the Federal Board of Revenue issued SRO 525(1)/2005 dated 06.06.2005 and SRO 559(1)/2006 dated 05.06.2006 specifically in terms of section 26(5) of the Act, 1990. The preamble of said SROs clearly demonstrates that the SROs were issued by exercising the power conferred under section 26(5) whereas the preamble of SRO 555(1)/200 6 dated 05.06.2006 notifying the Sale Tax Rules, 2006 and SRO 494(1)/2015 dated 30.06.2015 reflects section 26 of the Act, 1990. We, in order to comprehend the issue in a prudent manner , go through the rule 14 regarding the filing of return and find that the said rule deals with the monthly sales tax returns and its appendices. The said rule does not demand any information in line to the requirements of section 26(5) of the Act, 1990. Even otherwise, the perusal of section 26 and section 8 in juxtaposition clarifies the intent of legislature that requires a separate notification in terms of section 26(5) of the Act, 1990 for declari ng the input tax of some particular perso ns or goods as inadmissible in case of non-furnishing the information about the import, purchase and sales. And it is also admitted between the parties there is no separate notification in this respect F has ever been issued. The notification SRO 494(1)/2015 dated 30.06.2015 cannot be termed notification issued under section 26(5) of the Act, 1990 for the reason that said notification demands the production data which is not the mandate of section 26(5) of the Act, 1990. If the argument by learned DR that the notification issued under section 26 should be treated as issued under section 26(5), is accepted, it will amount to insert the figure (5) in the preamble of the SRO 494(I)/2015 and SRO 555(1)/2006; and will run counter to the principle that no word can be inserted in and subtracted from the words of legislature. The honorable higher judicial forums have already articulated the principle in series of judgments that no word can be inserted to and or subtracted from, the words of statutes. The honorable Supreme Court of Pakistani" has held in a case reported as Zaman Cement Company (Pvt.) Ltd. vs. Central Board of Revenue and others (2002 SCMR 312) "expression or words in a notification must be read as such and not in any other way, unless the context requires that the later course should be followed." The reliance is also placed on the judgments reported as Waqas Brother Enterprises (Private) Limited vs. DHL Express through CEO/MD (2021 PLD (Isbd) 333), Nadeem Ahmed Advocate vs. Federation of Pakistan Respondent (2013 SCMR 1062 ), Abdul Haq Khan And Others vs. Haji Ameerzada and others (2017 PLD (SC) 105) and Artistk Denim Mills Ltd. vs. Federal Board of Revenue and others (2017 PTD 730). It is therefore the plea of the learned DR is declined being against the pronouncements of the superior judicial forums of the country .
9. In the sagacity of what has been discussed above it is declared that the input tax claimed on the purchases cannot be held inadmissible on account of non-submission of ANNEX-J with the sales tax returns. The appeal of the appellant, as an ultimate corollary , is accepted; resultantly both the orders of authorities bellow are hereby annulled being illegal and unwarranted by law .
10. This order consists of twelve (12) pages and each page bears my signature.