2015 PLP (Trib (PTD)

Through this titled appeal filed under section 46 of the Sales Tax Act, 1990 at instance of appellant/registered person calling in question the impugned Order-in-Appeal No. 469 of 2014 dated 16-6-2014 passed by the learned CIR(A), Faisalabad.

2. The pivotal facts of the instant case are that the appellant is registered under the Sales Tax Act, 1990 as manufacturer-cum-exporter engaged in making of zero-rated supplies of textiles and textile articles thereof. During post audit of the appellant's refund files pertaining to the period for July, 2010, it is observed that the appellant has received sales tax refund on strength of invoices issued by a blacklisted unit namely M/s. White Lubricants. Resultantly, the appellant has been called upon with a show-cause notice C.No. 243 dated 2-12-2013 under section 11(5) of the Act asking him as to why an amount of Rs.104,470 may not be recovered under section 11(2) of the Act on account of illegal and unlawful input tax refund along with default surcharge under section 34 of the Act and a penalty under section 33 ibid.

3. In response thereto, written submissions along with supportive documents filed by the appellant could not convince the adjudicating authority and in result thereof, an order dated 3-2-2014 was passed against the appellant. The said order was challenged by way of appeal before the learned CIR(A) who also dismissed the same without examining the legal and factual aspects of the controversies in their true perspective. Now, the appellant has come up before this Tribunal by arguing that impugned show-cause notice and consequent adjudication order issued under section 11(2) of the Act are illegal, void ab initio and without jurisdiction as recovery of erroneously refunded amount of sales tax can be made under the provisions of section 11(3) of the Act providing recovery of any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded whereas assessment of not paid or short paid tax liability is provided under section 11(2) ibid hence, whole proceedings carried out under section 11(2) of the Act are illegal and unlawful. He further argued that the impugned show-cause notice, adjudication order and first appellate order are based on false and baseless allegations made by the department and no evidence whatsoever has been placed on record to prove the allegations levelled against him as he procured the alleged goods under the coverage of proper sales tax invoices issued in terms of section 23 of the Sales Tax Act, 1990 duly incorporated in supplier's sales register and summary statement and his supplier has duly discharged his sales tax liabilities under section 7 of the Act in his monthly sales tax return for period in question, hence, the instant set of transactions are not hit by clause (ca) of subsection (1) of section 8 ibid therefore" the appellant was legally entitled for refund of input tax under section 10 of the Act and too the alleged supplier at the time of making transactions was an operative/active and all the payments against those transactions were also made through banking channel as required under section 73 of the Act. Conversely, the learned DR appearing on behalf of revenue department has opposed the contentions of learned counsel for the appellant 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.

4. The arguments of the learned representatives of both the rival parties have been heard, the orders of the authorities below as well as relevant provisions of law and the case-laws cited by the learned AR of the taxpayer have also been perused carefully.

5. Instantly and instantly, legal issue of utmost importance is taken at the first assailing that the impugned show-cause notice and consequent adjudication order issued under section 11(2) of the Act for recovery of erroneously refunded amount of sales tax are illegal and ab initio void. There is no iota of doubt that in the instant case, the impugned show-cause notice and consequent adjudication order passed under section 11(2) of the Act are illegal, void ab initio and without jurisdiction as recovery of erroneously refunded amount of sales tax can be made under the provisions of section 11(3) of the Act providing recovery of any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded whereas assessment of tax liability not paid or short paid is provided under section 11(2) ibid. It is neither a case of assessment of tax on the basis of any short-payment nor of non-payment therefore, assumption of jurisdiction under section 11(2) of the Act by way of issuing subject show-cause notice and passing adjudication order for recovery of erroneously refunded amount of sales tax without invoking mandatory provisions of section 11(3) ibid are illegal and without jurisdiction. Any order passed under section 11(2) of the Act can be equated with "an assessment order" determining the amount of tax actually payable by a registered person and in no way, can be purported to be a judgment for adjudging any recovery of tax or charge, non-levied or made or has been short levied or has been erroneously refunded in its legal semantics and jurisprudence. It is a well-settled law that where the basic statutory notice is illegal and without lawful authority, the whole superstructure built on it would have to fall on the ground automatically and whatsoever proceedings in its consequences in the shape of any adjudication and appellate order shall also become illegal, unlawful and without jurisdiction. In order to appreciate the contention of the appellant, it may be convenient, if we quote here the relevant provisions of sections 11(2) and 11(3) of the Act which reads as under:-- "Section 11(2): Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit or refund which is not admissible under the Act. Section 11(3): Where by reasons of some collusion or a deliberate act, any charge has not been levied or made or has been short-levied or has been erroneously refunded." (underling for emphasis)

6. It is also a case of wrong quoting the legal provisions of law which rendered all the proceedings nullity in the eyes of law as laid down by the Hon'ble Lahore High Court in case of "Messrs Maple Leaf Cement Factory, and others v. The Collector, and others" reported as (GST 2003 CL 72) wherein Hon'ble Court while dealing with the similar issue has held that I find it to be a case of quoting wrong provision of law and to my mind even amendment would not be called for as under the law, it is duty of the Court to apply the correct law. Wrong quoting of legal provisions of law renders the whole exercise of adjudication illegal and ab initio void. The Hon'ble Supreme of Pakistan has also held in case of "Messrs Caltex Oil Pakistan Ltd., v. The Collector Sales Tax and Central Excise and others" as reported at 2005 PTD 480 that it is the duty of the Court seized of the matter, to apply the correct law to meet the ends of justice.

7. In view of what has been stated hereinabove, particularly in the light of law and keeping in mind the principles laid down by the superior courts in various pronouncements quoted supra, the impugned show-cause notice as well as consequent orders are declared to be illegal, ab initio void and are hereby set aside.

8. The instant appeal filed by the taxpayer succeeds and disposed of in the manners as indicated above. HBT/148/Tax(Trib.) Appeal allowed.