2007 PLP (Trib (PTD)

MUMTAZ HAIDER RIZVI, MEMBER (TECHNICAL).

This order disposes of the titled appeal filed by Messrs Tariq Sultan & Company, Peshawar (hereinafter called as the appellants) against a consolidated Order-in-Appeal No.245 of 2006 dated 29-5-2006 passed by the Collector of Customs, Sales Tax and Central Excise (Appeals), Peshawar.

2. Brief facts of the cases are that the appellants filed a refund claim of Rs.288,317 for the tax period of May, 2005 under section 10 of the Sales Tax Act, 1990 (hereinafter referred to as the Act). After A scrutiny and examination of the said claim, the investigative audit team of Collectorate of Sales Tax, Peshawar, reported that appellants' purchase invoices issued by Messrs M.H. Impex, Karachi involving sales tax of Rs.4,90,028 were unverifiable as the said registered person could not be found at the given address. Appellants were, thus, alleged to have A contravened the provisions of sections 8(1)(d) and 10(4) of the Act, read with rule 8 of S.R.O. 575(I)/2002, dated 31-8-2002, punishable under sections 33(4)(D., 34(1) and 36(1) of the Act. A show-cause notice was, accordingly, issued to the appellants by the Deputy Collector, Sales Tax (Refunds), Peshawar and after hearing the parties, he rejected the refund claim as being inadmissible under the aforesaid provisions of the Act and the notification (S.R.O.) issued thereunder. Being aggrieved of the order, the appellants filed an appeal before the Collector of Customs, Sales Tax and Central Excise (Appeals) Peshawar, who also upheld the Order-in-Original. Hence this appeal to the Tribunal, which has been filed, inter alia on the (sic). (i) the order-in-original (sic) and (sic) are arbitrary and against the facts and law applicable to the matter. Hence both the impugned orders are untenable; (ii) the claim of the appellants has been rejected simply on a single ground that on a visit to the office of Messrs M.H. Impex, Karachi, they were not found at the given address. Mere (alleged) absence of a registered person from the business premises or his untracibility is not a sufficient cause for the adjudicating authority to reject the claim unless there are other concrete evidence to show that the invoices are fake and bogus; (iii) the appellants have been discriminated against by the adjudicating authority as well as by the Collector (Appeals). It is a matter of record that on the same facts and grounds, the Collector (Appeals), while deciding appeal No.154/2006 filed by Messrs Lal Muhammad Traders and Messrs Continental Traders against Order-in-Original No.60 of 2006 has dislodged the contention and allegation of the Adjudicating Authority holding that mere alleged absence from the business premises or un tracibility of the supplier cannot be made ground to reject the claim of refund and to impose a penalty on the exporter; (iv) the appellants have not received any refund and have only filed a refund claim, which too has been rejected. Therefore, the penalty imposed under sections 33(4)(a), 33(4)(f) and 36(1) and additional tax under section 34(1) of the Act, are both illegal; (v) the appellants have provided all of the required documents to support their refund claim. However, these have been brushed aside by the lower authority without assigning any reason; (vi) the Sales Tax Collectorate has not denied the receipt of input tax paid by the suppliers. It has also not been denied that Messrs M.H. Impex, Karachi is a registered person under the Act, yet the refund claim has been rejected only because the whereabouts of Messrs M.H. Impex, Karachi are unverifiable. No serious effort was made to locate the suppliers after they were alleged found unavailable at his given address; and (vii) the investigative audit team never reported that the invoices were bogus or fake. Any change in the address of the supplier does not mean at all that the appellants have contravened the provisions of section 8(1)(d) of the Act, which envisages that action can only be taken on the basis of fake invoices. It has never been alleged nor held that the invoices are fake. Besides, the existence of the supplier as legally registered person has never been denied and disowned. Therefore, the impugned Order-in-Original and Order-in-Appeal are un-tenable and are liable to be set aside.

3. Arguments heard. Record perused. This is a simple case in which an export refund claim has been rejected by the department on the solitary ground that appellants' suppliers were not found at their given address. Here would like to reproduce, verbatim, the operative part of the impugned Order-in-Original' No.80 of 2006, dated 13-3-2006 as under: "ORDER

5. I have gone through the case record, written submission of the claimant and verification report of Investigative Audit Team of this Collectorate. Investigative Audit Team has reported that during visit at their given address Messrs M.H. Impex, Karachi do not exist at their given address. The surroundings neighbours were also asked but of no avail. Therefore, the invoices could not be verified. Deputy Collector, Collectorate of Sales Tax & C. Excise, Karachi vide letter C. No.76/Verif/Enf-I/Peshawar/2005/Pt/74 dated 30-7-2005 also confirms that Messrs M.H. Impex, Karachi do not exist at their given address. On the basis of Investigative Audit Report and verification received from Collectorate of Sales Tax and Central Excise, Karachi, I have come to the conclusion that Messrs Tariq Sultan & Co. Peshawar have claimed refund of Rs.490,028 on the basis of fake invoices. The claimant failed to produce any evidence in support of their claim. Therefore, refund/input tax of Rs.490,028 is hereby rejected being inadmissible under the provisions of sections 8(1)(d) and 10(4) read with Rule 8 of S.R.O. 575(1)/2002 dated 31-8-2002 of the Sales Tax Act, 1990. Penalty equal to the amount of tax is imposed under sections 33(4)(a), 33(4)(f) and 36(1) of the Sales Tax Act, 1990 and additional tax is also imposed under section 34(1) of the Sales Tax Act, 1990."

4. The above (sic) of Customs, Sales Tax and Central Excise (Appeals), Peshawar and impugned consolidated Order-in-Appeal No.245 of 2006 (whereby seven (7) other appeals were also disposed off). Relevant portions of the impugned Order-in-Appeal are quoted below, ver batim: "Judgment

7. I have gone through the case record and considered the verbal as well as written submissions of both the appellant and the department. In the instant case the respondent D.C. (Refund) rejected the refund claim of the appellant on the grounds that the alleged supplier of the appellant did not exist at their given address as reported by the Investigative Audit Team of the respondent Collectorate. 8. . 9. . 10. .

11. Keeping in view the above facts ..I agree with the decision of the respondent D.C. vide the impugned Order-in-Original and dismiss the appeal."

5. As against the above orders, the same learned Collector of Customs Sales Tax and Central Excise (Appeals), Peshawar in his Order -in-Appeal No.221 of 2006. dated 23-5-2006 (in Appeal No. S.T. 185/2006 of Messrs Continental Traders, Khyber Bazar, Peshawar) has held as under: "Judgment 6 .."

7. The detailed perusal of the case record has led me to conclude that mere alleged absence from the business premises or un traceability/non-existence of the supplier cannot be made ground to reject the refund claim of the registered person. The adjudicating authority must have concrete evidence to make decisions as to whether the invoices are fake or otherwise.

8. Keeping in view the above facts, I set aside the impugned Order-in-Original and direct the Deputy Collector (Refund) to re-examine the instant case of the appellants and check the following documents in order to arrive at the substantial evidence regarding the genuineness of the tax invoices claimed as refund."

6. Perusal of paras. 4 and 5 above would reveal that the same learned Collector of Customs, Sales Tax and Central Excise (Appeals), Peshawar has (perhaps by inadvertence or oversight) given entirely different (and divergent) judgments on exactly the "same issue". I am inclined to agree with the latter, that mere absence/untraceability/non existence of the supplier cannot be made ground to reject the refund claim of a registered person (Order-in-Appeal No.221 of 2006).

7. Even the "Non-availability" of a supplier can also have many dimensions each of which will vary in its gravity. For example non-availability of the supplier at the given address due to shifting of business to some other but known premises is no cause of worry at all. Shifting to some unknown address may, however, raise eyebrows while the news that the suppliers never existed at the given address should C surely cause concern. The situation will be far more serious if it is found that the given address was bogus or even the place (building, plot, locality, etc.) does not exist. Therefore, an investigation and its report must specify the nature of the non-availability or absence of the suppliers, so that appropriate conclusions could be drawn, accordingly.

8. There are a multitude of other factors (each of which is equally important), which could also help in determination of admissibility (or otherwise) of an export refund claim such as: (i) Whether the supplier has actually paid the sales tax amount shown in the invoice issued by him or not. This is, perhaps, singularly, the most significant of all factors. After all, why should the Government refund, what it has not received? (ii) (sic) the alleged supplier through banking channels/instruments as required under section 73 of the Act? (iii) Whether the appellants' bank has confirmed issuance of banking document to the alleged supplier? (iv) Whether the contents of shipping bills match with those specified in the alleged tax invoices? And (v) Whether contents of memos/receipts/bills issued by the transport company (to the appellants/supplier) match with those specified in the alleged invoices, etc.?

9. Then there is "STARR" as well. The Central Board of Revenue has spent millions of rupees to set up a Sales Tax Automated Refund Repository (STARR) system for the very purpose. An I.T. based network of STARR performs, inter alia, country-wide integrated sales tax verifications. Its profiling system provides instant status of all S. Tax payers. The data on Non-filing, NIL-filing, Short-filing gives a reasonably authentic account of every registered person. The computerized system of STARR can be used for verification of sales tax invoices in place of time and labour corresponding manual verifications, which should rather be done only after negative or alarming signals are received from STARR in respect of a registered person.

10. Besides, the issue at hand is not new. It has been discussed (and adjudicated upon) at higher judicial for a including other Benches of this Tribunal, the Hon'ble High Court and the Hon'ble Supreme Court of Pakistan. The Appellate Tribunal Customs, Sales Tax and Central Excise, 'Lahore Bench have held (the Sales Tax Appeal No.687/LB of 2002, 'decided on 15-6-2004) that there must be concrete evidence with the Sales Tax Department to declare that a particular unit is a fake unit or an invoice is a fake invoice.

11. Under these circumstances, rejection of a refund claim on alleged non-availability of a supplier "alone" is absolutely arbitrary, to say the least.. This sounds arrogantly whimsical (and discriminatory) when different treatments are meted out to different applicants under exactly the same circumstances and that too by the same Adjudicating Officer.

12. In the light of above discussion and in line with consistent and unanimous views taken by various judicial fora on the subject. I accept the appeal and set aside the impugned Order-in-Original and Order-in-Appeal. The Deputy Collector of Sales Tax (Refunds), Peshawar is directed to re-examine the appellants' claim, inter alia, in the light of parameters discussed in paras. 7, 8 and 9 above and pass a speaking order on merit. Parties shall be afforded adequate opportunities of being heard.

13. This judgment also disposes of following similar appeals: S.No. Tribunal's Appeal Appellant(s) Impugned Impugned No. Order-in- Original Order-in- Appeal

1. S.T.170/PB/2006 M/s. Tariq Sultan & 88/2006 dt: 245/2006 dt: Co., Peshawar 13-3-2006 29-5-2006

2. S,T.175/PB/2006 M/s. Silver Star 70/2006 dt: -do- Trading Co., Peshawar 13-3-2006

3. S.T.176/PB/2006 -do- 110/2006 dt: -do- 13-3-2006

4. S.T.177/PB/2006 -do- 76/2006 dt: -do- 13-3-2006

5. S.T.178/PB/2006 -do- 72/2006 dt: -do- 13-3-2006

6. S.T.208/PB/2006 Mts. World Traders, 112/2006 dt: 278/2006 dt: Peshawar 3-4-2006 22-6-2006

7. S.T.209/PB/2006 M/s. P.S. Trading 59/2006 dt: -do- Co., Peshawar 26-1-2006

14. Announced. H.B.T./208/Tax(Trib.) Appeal accepted.