2010 PLP (Trib (PTD)

CH. MUHAMMAD ISHAQUE (JUDICIAL MEMBER).

This sales tax appeal arises out of the order of Collector Sales Tax (Appeals), Multan dated 2-4-2008 whereby the appeal of the registered person was dismissed. Being aggrieved of the said order, the registered person has preferred this appeal on the following grounds:- (1) That the appellant filed sales tax refund claim for the month of '12-2004' as per the provision of rule 4 of Sales Tax Refund Rules, 2002 issued under Notification S.R.O. No.575(I)/2002 dated 31st August, 2002. (2) That the appellant filed his refund claim along with the supportive documents required under Rule 9 of the Sales Tax Refund Rules, 2002. (3) That the appellant has been a bona fide purchaser of the goods from his suppliers and he has been making payment against purchases made from the suppliers exactly in accordance with the provision of the section 73 of the Sales Tax Act, 1990. The appellant paid sales tax on the purchases to his suppliers exactly in accordance with provision of the section 3 of Sales Tax Act, 1990 and claimed input tax as contemplated in section 7 of Sales Tax Act, 1990. (4) That the appellant subsequently consumed goods purchased from his suppliers in his exports. The export being zero-rated, the respondent has entitlement of the claim of refund up to the extent of input tax against the purchased goods, which were subsequently exported. (5) That the appellant was alleged that the supplier of the appellant was showing exceeded declared output. The appellant provided all the documents as required under Standing Order No.4/2006 dated 20-12-2006 and did not violate any provision of the Act and the payments were also made in accordance with the provision of section 73. (6) That no discrepancy, so far as the record of the appellant submitted for the purpose of refund claims is concerned, has ever been reported to the appellant. The record of the appellant has been complete in every respect as per the provision of Sales Tax Law and Rules framed thereunder and if there is any procedural lapse on the part of the supplier of the appellant, the appellant, certainly, could not be penalized for that acts/lapse of his suppliers as per the famous maxim "actus curiae neminem gravabit". (7) That there is no scope in the sales tax law and rules framed thereunder where by the Revenue authority can reject or defer as the case may be the refund of the respondent on the fault of the suppliers of the appellant hence issuance of the show-cause notice in reply is in total departure from the Sales Tax Law. (8) That if the refund branch was of the opinion that refund claim or part thereof was not genuine then they should issue show-cause notice in writing within 14 days but in the instant case show-cause notice has been issued after the lapse of about 3(Three) years. As per the provision of sub-Rule 1 of Rule 8 of Refund Rules, 2002 the time for issuance of show-cause notice 14 days only and hence show-cause notice in reply is hopelessly time-barred and no recovery of rejection of refund can be enforced on the basis thereof. (9) That the input tax of the appellant can be held inadmissible under the provision of sections 7, 8, 73 of the Sales Tax Act, 1990, but in the instant case there is no any discrepancy on the part of appellant which may be attributed to the violation of above mentioned sections of Act. The appellant, admittedly, filed the correct (sic) of the sales tax on a given time under the provision of section 26 of the Sales Tax Act, 1990. The appellant also holds the correct sales tax purchase invoices as contemplated under section 23 of the Sales Tax Act, 1990 and claimed the input tax on those invoices as a legal right conferred upon the respondent under section 7 of the Act, 1990. So far as the matter of section 73 of the Act, 1990 is concerned, it is submitted that all the payment has been made to the supplier of the respondent exactly in accordance with the provision of section 73 of the Act, 1990. (10) That input of the appellant, claimed exactly as per the provision of section 7 read with sections 73 and 8(1) of the Sales Tax Act, 1990 cannot be held inadmissible and thus is refundable.

2. The registered person claims that rejection of claim of refund to the tune of Rs.839,358 is not justified on account of objection by STARR system. The registered person refund for the month of December, 2004 was submitted after full compliance of Rule 4 of Sales Tax Refund Rules, 2002 with supporting documents under Rule

9. He submits that he is a bona fide purchaser of goods and compliance as per requirement of section 3 of the Sales Tax Act, 1990 was duly made. He further states that all purchases were consumed in manufacturing the product which was exported as being zero-rated. The show-cause notice was served after three years despite the requirement as per Rule 3 to raise objection in respect of claim within 14 days. Show-cause notice, therefore, is time-barred as the department failed to follow the prescribed rules. He submits that if the law provides certain things to be done in a particular way, it is to be done in the same way or not at all. If anything done contrary to the commandment of law, it would have no legal effect. He referred to case-law in support of his submission reported as 2004 SCMR 838.

3. Learned DR submits that subsection (4) of section 10 lays down no time limit. The objection of the Revenue is that claim exceeds the declared output and that this objection has not been removed. The learned DR further pointed out the findings by the Collector that it was a case of exceeded declared output tax. He pointed out that the appellant failed to submit any evidence to prove the tax for which they were claiming refund had been deposited in the government exchequer.

4. The learned DR emphatically stated that the appellant has failed to file any evidence to prove that it had made payments to the supplier from their business account and that there was complete compliance of section 73 of the Sales Tax Act, 1990. Therefore, the conclusions of the first appellate authority that appellant is not entitled to the claim of refund of the sales tax involved in this case was justified. He, therefore, rightly rejected the appeal.

5. We have heard the parties' representatives and examined the record.

6. The learned AR states that the respondent-Department has not proceeded in accordance with law. It is submitted that declining of refund in terms of section 10(4) and section 11(2) of the Sales Tax Act, 1990 as inadmissible is not justified. A reference to Rule 8 of Sales Tax Rules, 2002 to state that the respondent was mandated to issue a show-cause notice of any discrepancy within 14 days of the application for the refund. But the respondent-Department failed to do the same. Instead, show-cause notice dated 14-3-2007 was issued after a lapse of three years which is admittedly time-barred. In this connection, the learned AR explained that audit was conducted in 2006 as an investigation under section 10(4) and as such limitation under Rule 8 is clearly attracted. Moreover, the allegations in the show-cause notice are not spelt out in the audit report.

7. This Bench sought reply of the above contentions from the learned D.R. No plausible answer could be gathered except the aforestated assertions for which the record forms no testimony.

8. Be that as it may, the respondent-Department failed to confront the registered person regarding discrepancies with the prescribed limit as provided by the Rules for which there would be no escape. As recorded above, the return was filed in time and the input tax claim on the invoices was fully claimed under law after which no show-cause notice was issued as required by law and the rules on the subject. Suddenly, after lapse of three years, the respondent-Department woke up to issue the show-cause which itself is contradictory to the audit report. In these circumstances, I am constrained to observe that the respondent-Department's act for such a belated notice was coram non judice and therefore, could find no legal support. The show-cause notice, dated 14-3-2007, therefore, is invalid. Consequently, all the proceedings taken thereunder shall have no legal effect as against the rights of the appellant. The orders passed below are recalled and the claim for refund is allowed to be sanctioned as per rules.

7. The appeal succeeds as indicated above. C.M.A./131/Tax (Trib.) Appeal accepted.