2010 PLP (Trib (PTD)

JAWAID MASOOD TAHIR BHATI (JUDICIAL MEMBER).

Through the titled appeal the appellant calls in question the Sales Tax Order-in-Appeal No.240 of 2008 dated 29-2-2008 passed by the learned Collector, Collectorate of Customs, Sales Tax and Federal Excise (Appeals), Faisalabad on the following grounds:-

1. Exceeds declared output tax. 1.1 Refund claim of appellants did not exceed output tax declared by the supplier namely Messrs Ayesha Textile Mills I Ltd., in his monthly sales tax return but the learned refund sanctioning authority did not consider the facts and passed his impugned order. Since refund of sales tax claimed against invoices of the alleged supplier do not exceed output tax declared by him therefore, its rejection is illegal and un lawful.

2. Non-filer/nil-filer. 2.1 The appellants have transacted with the alleged suppliers against proper sales tax invoices issued under section 23 of the Sales Tax Act, 1990. If the suppliers have not filed their monthly sales tax returns or have filed nil-returns, appellants cannot be impeded with burden of undue taxes as under section 3(3)(a) of the Act, liability to pay sales tax rests with the supplier and not on buyer. Reliance is placed on the judgment of Hon'ble Appellate Tribunal, Karachi in Sales Tax Appeal No.178 of 2004 in case of the Collector Sales Tax and Central Excise (Enforcement) Karachi v. Messrs Allied Impex Karachi wherein it was held: If the supplier did not file return for the tax period, the legitimate taxpayer cannot be deprived of from his legal right of input tax.

3. Suspected Units. Preliminary Objection: Recovery of already refunded amount without invoking the provisions of section 36 of the Act is illegal and ab initio void under law. The impugned order for recovery of refund worth Rs.283.235 already sanctioned to appellants without adhering adjudication process through proper show-cause notice under section 36 of the Act is illegal and unlawful as much as a person against whom any action warranted under law is not properly heard to confront the charges levelled against him in such show-cause notice. Deductions from instant refund claim cannot be made on account of amounts already sanctioned in preceding months until and unless sales tax liability is properly adjudicated and adjudged under section 36 of the Act. Since, no show-cause notice or adjudication order has ever been made to effect of sales tax refund purportedly sanctioned against invoices of certain registered persons included in C.B.R.'s list therefore, recovery of the same by way of instant deductions from appellants refund claims stands arbitrary' illegal and unlawful. As such amounts of refund retained by the sales tax department without any lawful excuse may be ordered to be sanctioned to appellants. Reliance is placed on judgment of worthy Collector (Appeals). Faisalabad in case of Messrs Kamal Spinning Mills, Faisalabad vide Order-in-Appeal No.99 of 2006 dated 31-7-2006. "It is trite law that no body should be condemned unheard until and unless a proper charge-sheet or statement of allegation is given, to him and he is properly undergone by due process of adjudication as consciously enacted by legislation in various laws particularly if fiscal statutes." It is enshrined in Article 4 of Constitution of Islamic Republic of Pakistan, 1973 and also laid down by against Supreme Court Pakistan in a judgment reported at (2003 SCMR 1505) that "where a thing was provided to be done in a particular manner it had to be done in that manner and if not so done, the same would be unlawful". Nevertheless, order for deduction/recovery of refund already sanctioned to appellants without adhering adjudication process through proper show-cause notice under section 36 of the Act is illegal and unlawful as much as a person against whom any action warranted under law is not properly heard to confront the charges levelled against him in such show-cause notice. The Superior Courts of Pakistan in a number of judgments have settled this cardinal principle of law that a person being alleged should be provided a complete and comprehensive charge-sheet with all evidences in the show-cause notice which he could reply and defend but contrarily, instant recovery of refund is ordered without any show-cause notice and adjudication as required under section 36 of the 'Act. In this regard reliance is placed on judgment of Hon'ble Sindh High Court, Karachi in case of Messrs United Exports Company reported at (2000 PTD 1798) wherein it was laid down that "Where the law had provided for a show-cause notice to be issued, it was necessary that such show-cause, notice should clearly indicate that it happened to be a show-cause notice, so that the person to whom it was issued was aware that if he did not appear to show cause, adverse action might be taken against such person". The following are the cases in which the same issue as confronted in this case has been settled in favour of taxpayers by the Superior Courts inter alia including by the Collector (Appeals). Detail is as under: Sr.No. Case Reference Party Name Authority 1. 2000 PTD 1798 Messrs United Exports Company High Court, Karachi

2. GST 2003 CL 413 Messrs Fatima Sugar Mills Ltd. Tribunal, Lahore

3. GST 2002 CL 115 Messrs Ahmed Vegetable Oil Tribunal, Karachi 4. 99/2006 31-7-2006 Messrs Kamal Spinning Mills Collector (Appeals) 5. 179/2006 16-11-2006 Messrs Fardos Textile Industries Collector (Appeals) 6. 178/2006 16-11-2006 Messrs Fardos Textile Industries Collector (Appeals) 7. 105/2007 17-8-2006 Messrs Noreen Textiles Collector (Appeals) 8. 106/2007 16-4-2007 Messrs Shama Exports (Pvt.) Ltd. Collector (Appeals)

2. Learned A.R. has argued that no time limit runs against an illegal and void order. He stated that the Collector (Appeals) has erred to maintain that the first appeal was time barred by 69 days because no time limit would run against the impugned order of the learned Assistant Collector (Refund) which is not only illegal and void but also suffered from a lot of illegalities and improprieties. The submissions of the learned A.R are enumerated as under: -- (i) The adjudication order passed by the learned Assistant Collector (Refund) is hit by time-limitation under the proviso to subsection (4) of section 11 of the Act. The impugned show-cause notice was issued on 1-11-2006 and consequent Order-in-Original was passed on 26-2-2007 after about 118 days instead it should had been passed within 90 days of issuance of show-cause notice (as per prevailing law at that time) or within such extended period as the Collector may for reasons to be recorded in writing fix provided that such extended period shall in no case exceed 90 days. Neither any extension for time of adjudication has been sought for from competent authority nor its mention is made in the impugned adjudication order hence, adjudication order is time barred under section 11(4) the Act. In this context, the learned A.R. has quoted the case law reported as 2008 PTD 60, 2009 PTD 762 and 2010 PTD 1522. (ii) The impugned show-cause notice and consequent adjudication order without invoking the mandatory provisions of section 36 of the Act is illegal and void. Reliance has been placed on 2001 SCMR 838, GST 2005 CL 213, GST 2004, CL 423 and 2007 PTD (Trib.) 728. (iii) Rejections of refund claim pertaining to June, 2005 under 'STARR' Computer System is illegal, void ab intio and ultra vires as the same system was made applicable under Notification No.S.R.O. 555(I)/2006 dated 5th June, 2006 w.e.f. 1st July, 2006. As a precedent, 2010 PTD (Trib.) 1636 and S.T.A. 191/LB of 2008 have been quoted. (iv) Rejection of refund under Standing Order No.3 of 2006, dated 2-11-2006 is illegal and unlawful. In this context, the learned A.R. referred to 2006 PTD 1412 and 2010 PTD (Trib.) 1681. In nutshell, the plea of the learned A.R. is that the order of the Assistant Collector (Refund) is illegal, void and unlawful, therefore, no time limitation would run against it as also laid down by the august Supreme Court of Pakistan in its judgments reported as 1996 SCMR 856, 2005 SCMR 69 and 2002 PTD 87.

3. On the other hand, the learned D.R. has supported the orders of the officers below for the reasons recorded therein.

4. After considering the arguments advanced by both the parties and case-law quoted supra, I find that the judgments quoted by the learned A.R. of the appellant are squarely applicable to the case in hand. Hence, the impugned order-in-appeal as well as the order-in-original deserve to be set at naught being not sustainable. It is, therefore, deemed fair and proper to set aside both the order-in-appeal as well as the order -in-original. In the result, the appeal filed by the appellant-registered person succeeds and is allowed accordingly. H.B.T./179/Tax (Trib.) Appeal allowed.