ORDER: MR. SHAHID MASOOD MANZAR (CHAIRMAN).-- (1). This appeal has been filed under section 46 of the Sales Tax Act, 1990 at the instance of the appellant/registered person against Order C.No. 968 dated 22.06.2020 passed by the learned CIR (Corporate Zone), RTO, Faisalabad.
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 the appellant claimed refund of sales tax worth Rs.30,805,890/- in the monthly sales tax returns pertaining to the tax periods from July-2016 to October-2016 and June-2017 to November-2017, incurred in connection with zero-rated supplies however, refund claims could not be filed electronically on (RCPS) through soft data on Computer System within 120 days of the filing of the returns as required under Rule 28(1) of Chapter-V of the Sales Tax Refund Rules, 2006 notified vide S.R.O 555(1)/2006 dated 05-06-2006. The appellant filed an application to the Member-IR (Operations) FBR, Islamabad on 19-12-2018 for condonation of delay in filing of supportive documents but the same was not decided. The appellant then filed another application dated 13-05-2020 for processing of the said refund claims manually but the learned CIR(Corporate Zone) has rejected its refund claims being 'barred by time' under Rule 28(1) of Chapter-V of the Sales Tax Refund Rules, 2006 and passed the order C.No. 968 dated 22-06- 2020. Now the appellant has filed this appeal.
3. The learned AR on behalf of registered person argued that delay in filing of supportive documents including soft data beyond 120 days is a procedural lapse/omission, involving no revenue loss and even no allegation of tax evasion against the appellant in the impugned order is existed. Learned AR argued that in the present case, department, instead of first determining the admissibility and inadmissibility of the said refund claims, has rejected its refund claims merely on account of time limitation. Learned AR further assailed that rejection of sales tax refund straightaway on the pretext of 'time limitation' without issuing any show cause notice and without affording him with any opportunity of hearing and even without adhering to due process of adjudication as provided under section 11(2) of the Act is not only illegal and unlawful but also violative of fundamental rights as guaranteed in the Constitution of Pakistan, 1973. In support of his contentions, learned AR placed reliance on judgments reported as (PTCL 1998 CL 354), (2008) 97 Tax 16 (Trib.), (2009 PTD (Trib.) 2007), (2010) PTD (Trib.) 768), (2010 PTD (Trib.) 449), (2011 PTD (Trib.) 543) & (2011 PTD (Trib.) 1120).
4. On the other hand, the learned DR in counter arguments, has opposed the contentions of learned counsel for the appellant and supported the order of the learned CIR by simply re-endorsing the basis evolved therein.
5. We have heard the learned counsel for the rival parties and have gone through the record of the instant case as well as the case law cited by the learned AR.
The sole issue involved in the titled appeal is that the appellant could not submit supportive documents including soft data on RCPS (Refund Claim Preparation Software) for the tax periods from July-2016 to October-2016 and June-2017 to November-2017, incurred in connection with zero- rated supplies, within 120 days from the date of filing their refunds through sales tax returns under Rule-28 of Chapter-V of the Sales Tax Rules, 2006 issued vide Notification No. S.R.O 555(1)12006 dated 05-06-2006. Refund was claimed through sales tax returns however; its supportive documents including soft data could not be submitted within time limit of 120 days from filing of returns due to some system errors in functioning of refund claim preparation software (RCPS).
Neither any charge of fake transactions nor of tax fraud either on the part of suppliers or on appellant has been levelled in the impugned order without which refund of input tax paid by appellant cannot be rejected on time limitation. Contrarily, in appellant's case, refund which is otherwise admissible and bona ide under law, has been rejected by the leaned CIR merely on the ground of some technicalities and time limitation which is not only tantamount to double taxation but also violation of the Constitution of Pakistan which lays down that "no person shall be deprived of his property save in accordance with law".
The delay in submission of supportive documents including soft data beyond 120 days is a procedural lapse, involving no revenue loss and even no allegation of tax fraud and tax evasion against the appellant in the impugned order is existed at all hence, rejection of sales tax refund by the department straightaway on the pretext of `time limitation' is illegal and unlawful. Even otherwise, the Government functionaries, especially in an Islamic or a democratic society governed by rule of law, are supposed to do justice and not to deprive the people of their rights on the ground of technicalities. In nutshell, it is acknowledged that the input tax refund and adjustment thereof is an inalienable and substantive right of the taxpayer which cannot be taken away or withheld on mere technical grounds. The honourable Division Benches of Income Tax Appellate Tribunal Pakistan in cases reported as (2008)
97 Tax 16 (Trib.) and (2009 PTD (Trib.) 2007) have laid down that; "It is evident from the above judgments that the claim of refund cannot be refused on account of limitation. In all the three cases cited above, though the applications were filed beyond the prescribed time limit yet the Courts had directed issuance of the refund. Therefore, taking guidance from the same analogy, we are of the view that the authorities below were not justified in rejecting the applications of refund on account of limitation. It is, therefore, directed that the genuine refund, if any, due to the taxpayer should be allowed."
This Tribunal in another reported judgment cited as (2010) PTD (Trib.) 768) has held that; "Refund--Limitation--Genuine refund claim could not be refused on the ground that application was not filed within prescribed time--When a refund claim was verifiable and genuineness of overpayment of tax established after verification but it was refused mere on technicalities it was unfair."
The Customs, Excise and Sales Tax Appellate Tribunal, Lahore in a judgment reported at (2010 PTD (Trib.) 449) on the same issue of late filing of supportive documents under Rule 28(1) of Chapter-V of the Sales Tax Refund Rules, 2006 has held that; "The only issue involved is filing of supporting documents late by 38 days for the tax period July, 2006 and cited the judgment of Supreme Court of Pakistan (PLD 1998 SC 64) wherein, it has been decided to discourage withholding of citizen's money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him. He also referred to the judgments of this Tribunal whereby the Tribunal has allowed refund by accepting the appeal based on the above judgment. The departmental representative accepted the position and also the arguments of the learned counsel that in similar cases the refund has been allowed in many cases by the department and by the Collector (Appeals), therefore the plea of the appellant is accepted and the impugned orders are set aside."
Having taken regard to the facts of the case in its entirety and also going through the reported judgments referred above, we are of the considered view that the refund cannot be rejected on account of time limitation. Though the refund claims for the tax periods in question were filed beyond the prescribed time limit of 120 days under Rule-28 of Chapter-V of the Sales Tax Rules, 2006 yet the Courts has directed issuance of refund. Therefore, taking guidance from the same analogy, we hold that denial from refund of input, tax incurred in connection with zero-rated supplies merely on technical plea amounts to impede the exports with the burden of sales tax which is not only contrary to the statutory provisions of law but also against the norms of fair justice. Furthermore, such acts are against the norms of good governance and shake the confidence of taxpayers. It is settled principle of law that refund of input tax is a substantive right of a registered person, consciously created by the legislation, which cannot be taken away merely on account of time limitation as also held by the Apex Court of Pakistan in case of "M/s. Pfizer Laboratories Ltd vs. Federation of Pakistan and others" reported as (PTCL 1998 CL 354). The relevant extract of the said judgment is as under:-- "Latest judicial trend is to deprecate and to discourage withholding of a citizen's money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him.
That there may not be legal liability on the part of a Government functionary to refund any amount received by it as a tax or other levy by virtue of certain special provision under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every moral values, must do what is fair and just to the citizen regardless of legal technicalities."
We need no reiteration on the issue of Rule 28(1) of Chapter-V of the Sales Tax Refund Rules, 2006 notified vide S.R.O 555(1)12006 dated 05-06-2006 as different division benches of this ATIR, Lahore already have dilated upon this issue in favour of taxpayers in case of "Collector of Sales Tax, Faisalabad vs. M/s. Shamshad Textile Mills (Pvt) Ltd, Faisalabad" reported as (2011 PTD (Trib) D 543) & "The Collector of Sales Tax (RTO), Faisalabad vs. M/s. Kay & Emms (Pvt) Ltd, Faisalabad" as reported at (2011 PTD (Trib.) 1120) wherein while relying upon judgment of Hon'ble Supreme Court of Pakistan cited supra held that rejection of refund is not maintainable in the eyes of law on merely time limitation.
In view of what has been discussed above, particularly in the light of law and the principles laid by the superior courts in various judgments as referred supra, impugned order is declared to be illegal, ab initio void and thus is hereby set aside. The instant appeal filed by the Registered Person is accepted.
6. The appeal is disposed of in the manners as indicated above.