MIAN TAUQEER ASLAM, CHAIRMAN. Through titled sales tax appeal, the appellant/registered person assailed the Order-in-Appeal No.99/2021, dated 14.07.2021, passed by the learned CIR(A), Faisalabad.
2. Brief facts of the case are that appellant, is a private limited company engaged in the business of manufacturing/spinning, weaving and finishing of textiles and sales thereof. The registered person filed the refund claims of refund, of sales tax (input tax) as per following detail:- Claim No. Tax Period Deferred amount D080514100361 05/2014 1,796,507 D080614100171 06/2014 2,100,824 D080714100151 07/2014 2,094,196 D080814100145 08/2014 1,549,057 D080914100199 09/2014 1,624,916 0081014100122 10/2014 1,268,122 0081214100136 12/2014 2,268,133 0080115100176 01/2015 1,578,452 D080215100291 02/2015 1,896,666 D080315100207 03/2015 1,197,991 D080415100199 04/2015 1,860,956 D080515100208 05/2015 1,724,216 0080615100144 06/2015 1,729,241 Total 22,689,277 The above referred refund claims were processed under the provision of section 10(1) of the Act read with Chapter V of the Sales Tax Rules, 2006 notified vide SRO No.555(I)/2006 dated 05-06- 2006. The refund of sales tax (input tax) of Rs.22,689,277/- was deferred on account of objections raised by Computerized Risk Based Evaluation of Sales Tax (CREST) system and by the processing/sanctioning officer. Further objection of Rule 34(1)(d) of the Sales Tax Rules, 2006 has been imposed. The processing officer rejected the claim of the registered person while observing that "in the absence of any valid supportive documents or cogent reply reported above and also in violation of Rule 34(1)(d) of the Sales Tax Rules, 2006 notified vide SRO No.555(I)/2006 dated 05- 06-2006"-. Consequently, the adjudication proceedings were culminated in passing of Order-in- Original No.01/2021, dated 26-01-2021.
3. Being aggrieved, the registered person filed first appeal before the learned CIR(A) which was disposed of through impugned appellate order whereby the ONO passed by the assessing authority was confirmed. Being aggrieved, the registered person filed the instant second appeal before this Tribunal on the grounds as set forth in the memo of appeal.
4. We have heard the rival parties, perused the avail record, and given earnest consideration to the submission made at the bar by the standing counsels and gone through the various decisions relied upon in their support by the representatives of the registered person and revenue. The learned AR contended that the registered person duly filed the complete record comprising sale and purchase register, purchase invoices, party-wise ledgers and bank statement before the processing officer and the said record is also being submitted before this forum. He further argued that the purchase invoices are automatically uploaded in the purchase summary of the monthly sales tax returns and the suppliers have already paid output tax to the Government in the relevant tax periods therefore; rejection of refund amount of input tax from appellant despite having deposited by the suppliers in the national exchequer would definitely amount to double taxation which is not permissible under the law. The learned AR further contended that the department should either point out any deficiency in prescribed supporting document or can reject the supporting documents with reasons and if no defect is pointed out in supporting documents, the department is under obligation to get the documents verified itself. Thus, it is submitted by the learned AR that there was no lawful justification for the processing officer to reject the appellant's refund claim. In supporting of his arguments, the learned AR placed reliance on the case laws reported as 2013 PTD (Trib.) 954, 2014 PTD (Trib.) 558, 2019 PTD (Trib.) 176 and 2202 SCMR 1787. Conversely, the learned DR supported the orders of the authorities below.
6. We have heard the arguments of the both sides and have perused the available record. For sake of facility, the following provisions are re-produced as under: [34. Refund of excess input tax not relating to zero-rated supplies.---(1) The refund of excess unadjusted input tax relating to supplies other than zero-rated shall be claimed and sanctioned in the cases mentioned below, namely: --
(a) the [**] .[gas transmission and distribution companies] manufacturers of fertilizers [,cotton ginners], electric power producers and electric power distribution companies may claim refund of excess input tax over output tax in any tax period;
(b) [ ]
(c) registered persons who are not able to adjust input tax in excess of 90% of output tax in view of restriction in section 8B of the Act, may file refund claim as under, --1 5 6 7
(i) in case of registered persons whose accounts are subject to audit under the Companies Ordinance, 1984, after the end of their accounting year; and
(ii) in case of other registered persons, after the end of financial year;
(d) all other registered persons, not covered by clauses (a) to (c) above, may claim refund of excess input tax, if the same is not adjusted within a minimum consecutive period of twelve months: Provided that the amount of refund claim in all such cases shall not exceed the excess of total input tax over the total output tax, as declared in the relevant returns, for the period in respect of which the claim has been filed and shall not include any excess input tax declared prior to the said period.
[10. Refund of input tax.---(1) If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tar period, the excess amount of input tax shall be refunded to the registered person not later than forty-five days of filing of refund claim in such manner and -subject to such conditions as the Board may, by notification in the official Gazette specify: [Provided that in case of excess input tax against supplies other than zero-rated or exports, such excess input tax may be carried forward to the next tax period, along with the input tax as is not adjustable in terms of subsection (1) of section 8B, and shall be treated as input tax for that period and the Board may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, prescribe the procedure for refund of such excess input tax.] Provided further that the Board may, from such date and subject to such conditions and restrictions as it may impose, by notification in the official Gazette, direct that refund of input tax against exports shall be paid [at the fixed rates and in the manner as] notified in the such not notification.
(2) If a registered person is liable to pay any tax, default surcharge or penalty payable 44nder any law administered by the Board, the refund of input tax shall be made after adjustment of unpaid outstanding amount of tax or, as the case may, default surcharge and penalty.
(3) Where there is reason to .believe that a person has claimed input tax credit or refund which was not admissible to him, the proceedings against him shall be completed within sixty days. For the purposes of enquiry or audit or investigation regarding admissibility of the refund claim, the period of sixty days may be extended up to one hundred and twenty days by an officer not below the rank of an Additional [Commissioner Inland Revenue] and the Board may, for reasons to be recorded in writing, extend the aforesaid period which shall in no case exceed nine months.)
In our considered opinion, the Rules are "subject to the Act" and therefore cannot offend or contradict the substantive provision of the Act. Even otherwise, it is axiomatic that Rules being subordinate or delegated legislation, are framed under the authority of the parent statute, and are therefore subservient to the primary legislation. Rules cannot contradict or add to the clear provision of the parent statute. It is trite law that "Rules cannot override the specific provisions of the parent statute. The Rules are to carry out the purpose of the Ordinance and cannot offend, oppose or be inconsistent with the provisions of the parent statute (Ordinance in the case). Any rule, to the extent of any inconsistency with the parent statute is, therefore, ultra vires of the parent statute". Thus, we hold there was no lawful justification for the refund processing officer to reject the appellant's refund claim under the preview of Rule 34(1)(d) of the Sales Tax Rules, 2006. As section 10(1) of the Act clearly indicates that if input tax is exceeds the output tax on account of zero rated local supplies or exports made during that tax period, the excess amount of input tax shall be refunded. Further, as per provision of section 10(3) of the Act, the show-cause notice and impugned order beyond notified pecuniary jurisdiction and beyond the limit of sixty days has been declared4 1 2 1 null and void therefore, nothing remains tangible on account of impugned show-cause notice and order. Each refund claim of the respective claimant/appellant is required to be processed under the relevant procedure as per provision of section 10 of the Act. A mechanism for filing of refund claim with the department under the provision of Sales Tax Act, 1990 has been devised where under every claim is processed and scrutinized in the light of said procedure/system.
8. Keeping in view the above discussion and the case laws cited supra, the impugned orders framed by authorities below are declared illegal and void ab initio on facts as well as on legal issues. This being so, the appeal filed by the registered person is accepted.