ANWAAR UL HAQUE, ACCOUNTANT MEMBER. The titled appeal has been preferred on behalf of the registered person assailing the Order-in-Appeal No. 17/2014 dated 08-01-2014 passed by the CIR(A), Faisalabad.
2. Brief facts necessary for disposal of appeal are that after scrutiny of sales tax return for the periods from 07/2011 to 02/2013 the OIR observed that appellant has shown zero-rated supplies of goods to various registered persons. After cross-matching of the sales tax returns date with the buyer's returns revealed that the said buyers are 'null filer, non filer, non active and purchases not shown 'from the appellant/registered or fall in non zero rated sector. After communicating the said discrepancies/omissions, the registered person was advised to discharge the outstanding tax liability on payment of sales tax @ 2% of the value of such supplies without any default surcharge and penalty availing tax amnesty in terms of SRO 179(I)/2013 dated 07-03-2013 read with SRO 283(I)/2011 dated 01-04-2011 as amended vide SROs issued by time to time.
3. Nevertheless, the respondent not availed the tax amnesty and failed to deposit the sales tax payable on zero-rated supplies made under section 3 of the Sales Tax Act, 1990. So, supply to such buyer units who were non active or registered in the sectors other than five sectors i.e. textile, carpets, leather sports and surgical goods cannot be treated as zero-rated supply in terms of SRO 283(I)/2011 dated 01-04-2011 and the same is subject to output tax payable @ 16%, 06% 4% or 5% as the case may be. It was further observed that some buyers have neither shown no purchases in their sales tax returns or shown less purchase.
4. Based on the above, the respondent-registered person was charged with the violation of provisions of sections 3, 6, 8A, 22, 23 and 26 of the Sales Tax Act, 1990 read with SRO 283(1)/2011 dated 01-04-2011 as amended through SROs issued subsequently and prima facie committed tax fraud as described under section 2(37) of the Sales Tax Act, 1990. The concerned DCIR, issued a show-cause notice, wherein it was alleged that the respondent was involved in the tax fraud and called upon to show-cause as to why sales tax amounting to Rs.121,143/ may not he recovered under section 11(3) along with default surcharge and penalty of the Act ibid. Subsequently, the order-in-Original No.36/2013 dated 04-09-2013 was passed by the DCIR whereby, sales tax amounting to Rs.1,61,470/- was ordered to be recovered under section 11(3) along with default surcharge and penalty under the relevant provisions of the Act ibid.
5. Being aggrieved by the treatment meted out by the assessing authority, the registered person filed first appeal, who vide impugned order rejected the same, which compelled the registered person/appellant to file further appeal before this forum. Learned AR of appellant assailed the impugned order mainly on the grounds that allegations levelled by the department are baseless and frivolous as the alleged goods were supplied under the coverage of proper zero-rated invoice issued under section 23 of the Act duly incorporated in summary statements and in his sales tax returns for tax periods in question and payments against alleged transactions have also been received through banking channel as required under section 73 of the Act. He further argued that all the legal obligations resting upon the appellant for issuing tax invoices against zero-rated supplies and for incorporating the same in his summary statements and, sales tax returns for the said tax periods and for getting the payments transacted through bank have duly been complied with by the appellant and for any default whatsoever, on the part of his buyers, for not showing purchases made from him in their respective monthly sales tax returns, cannot be made basis for creating sales tax liability on account of output tax against the appellant. To substantiate his contention, reliance was placed on the judgment of Hon'ble High Court, Lahore (PTCL 2019 CL 78) and judgment of ATIR, Lahore vide STA No. 212/LB/2014. Learned counsel vehemently contended that if the alleged buyer is a null-filer or amount was not matching with the buyers declaration or some of the buyers have wrongly filed their sales tax returns by not showing purchases made from the appellant then section 33 of the Act provides a penalty for wrong filing of sales tax returns instead of creating sales tax liability on account of output tax against the appellant. On the strength of these assertions, learned counsel seeks vacation of the impugned orders passed by the authorities below.
6. On the other hand, in counter arguments, learned DR appearing on behalf of revenue- department has opposed the contentions of learned AR and supported the orders of authorities below for the reasons recorded therein and reiterated almost the same arguments as advanced earlier at time of adjudication and fully supported the orders passed by both authorities below simply re-endorsing the basis evolved therein.
7. We have heard arguments of both the rival parties and have also carefully examined the relevant provisions of law as well as the case record. It is an admitted fact that supply of goods being notified textile goods squarely falling in five major zero-rated sectors, was chargeable to sales tax at the rate of zero percent as per condition (i) and (xiii) of SRO 1125(I)/2011 dated 31-12- 2011, which is fully applicable to the buyer units, particularly when payments have also been received through B banking channel as required under section 73 of the Act. In support of his stance he has placed on record copies of certain documents before the court, including sale invoices, payment proof along with bank statements etc. He stated that all the buyers were very well active at the time of transactions made and subsequently blacklisting/suspension not showing/mismatching the purchases does not invalidate the invoices issued by the appellant. The benefit of SRO 1125(1)/2001 dated 31-12-2011 was applicable to the persons "doing business in textiles and articles thereof (including jute), carpets, leather, sports and surgical goods sectors" and "are registered as manufacturer, importer, exporter or wholesaler under the Sales Tax Act, 1990" and "appear on Active Taxpayer List (ATL) on the website of Federal Board of Revenue". As such, pre-requisite for availing benefit of zero-rating under the said SRO, three conditions for the qualifying person to be fulfilled are (i) doing business in five major zero-rated sectors, (ii) registered under the Act as manufacturer, importer, exporter or wholesalers, (iii) appearing as an active person at 'ATL'. All these conditions have duly been met with by the appellant as the persons to whom supplies have been made, were obviously doing business in five notified major zero-rated sectors 'inter alia including textiles and textile articles thereof and were registered under the Act and both the appellant and its buyers at the time of transactions were also appearing as an active at ATL, and for any default whatsoever, on the part of its buyers, being null-filer or for not showing purchases made from him in their respective monthly sales tax returns, cannot be made basis for creating sales tax liability on account of output tax against the appellant because a tax cannot be levied on some presumptions and assumptions, whims and conjectures for which there is no room in the fiscal statutes. If at all, the buyers had failed to show purchases in their records, it does not impose liability against the appellant hence, instant set of transactions are not hit by the SROs as mentioned supra and no sales tax on such supplies as alleged is warranted under law. It is a well- settled law that no one would suffer for the act of another and nobody could be punished for the wrong of others. The department should have imposed penalty under section 33 of the Act against the buyers who were found involved in wrong filing of monthly returns and have violated the provisions of section 26(1) of the Sales Tax Act, 1990 by riot furnishing true and correct sales tax returns instead of creating output tax liability against the appellant.
8. In view of the discussion made above and by following the ratio settled in the judgments cited supra, the titled appeal is accepted and the order* of both the authorities below are vacated. We order accordingly.