2018 PLP (Trib (PTD)

Ss. 7, 8, 11(2), 21(3), 33(ii), 36(1) & 46

Input tax adjustment

Claim for

Deputy Commissioner, Inland Revenue/Adjudicating Authority, vide order-in-original rejected claim of the taxpayer with regard to adjustment of input tax

Appellate authority, declared order-in-original as bad in law and without merits dismissed said order

Adjudicating authority had rejected claim of taxpayer in respect of adjustment of input tax on the ground that the taxpayer had made purchase from a blacklisted unit

Validity

Unit in question was blacklisted in the year 2012, whereas adjustment of input tax was made in year 2008-2009, when said unit was active

Adjustment of input tax having been made prior to blacklisting of said unit, taxpayer could not be penalized

Purchases were made prior to date of order of blacklisting of the unit

Taxpayer had right to claim input adjustment in circumstances

Appellate authority had discussed the matter with solid reason on each and every issue involved

In absence of any illegality or irregularity in the order passed by appellate authority below, departmental appeal against said order was dismissed by the Tribunal in circumstances. ORDER i. That, the Deputy Commissioner, Inland Revenue, Audit Unit-X Regional Tax Officer, Hyderabad has passed the Order-in-Original No.02 of 2012 dated 31.07.2012 after applying his mind judicially and rejected that claim of the Respondent No.02 which was legally not covered in terms of section 8(1) (ca) (d) of the Sales Tax Act, 1990 because the registered person had made purchase from a "Non-Active and Blacklisted" unit Messrs Prizma Enterprises, Karachi having STRN. 1700999801473 and adjusted input tax amounting to Rs.413,238/-. ii. That, the Order-in-Appeal No.438/2012 dated 22.10.2012 (herein after referred to as the impugned order) passed by the Commissioner Inland Revenue, (Appeals-III), Karachi, is bad in law without merits and ignores the fact that in terms of Rule 12(5) of Sales Tax Rules, 2006, dated 5th June 2006, invoices issued by blacklisted units irrespective of being issued prior or after such blacklisting are not to be entertained for the purpose of refund or input tax adjustment. Thus, the Deputy Commissioner, Inland Revenue, Audit unit-X, Regional Tax Office. Hyderabad was correct to disallow input tax adjustment against the said invoices.

2. Brief facts of the case are that the exercise regarding admissibility of input tax adjustment was carried out of the registered persons, which revealed that Messrs Walls Packages, C-3, SITE, Kotri, had made the illegal/unlawful input tax adjustment of Rs.413,287/- during the period 2008-09 on fake/flying invoices issued by Messrs Prisma Enterprises, 1971, Pak Avenue Building, Block-06, PECHS, Shahrah-e-Faisal, Karachi, (STRN 17-009998-014-73). The said supplier was blacklisted since registration vide order No.4766 dated 04.05.2012 issued by the Commissioner Inland Revenue (Zone-IV), RTO, Karachi. The Registered person had adjusted input tax during the aforesaid period which was inadmissible in terms of sections 7 and 8 of the Sales Tax Act, 1990 read with sub-rule (5) of Rule 12 of the Sales Tax Rules, 2006, on account of the purchases made on fake/ flying invoices from a blacklisted unit. Messrs Walls Packages, C-3, SITE, Kotri, were called upon to show cause under sections 11(2) and 36(1) of the Sales Tax Act, 1990, that why principal amount of input tax Rs.413,287/- along with default surcharge (to be calculated at the time of payment) under section 34 of Sales Tax Act, 1990 should not be recovered under sections 11(2) and 36(1) ibid and why penal action prescribed under section 33(11) of the Sales Tax Act, 1990 should not be taken for violation of provisions of sections referred above of the Sales Tax Act, 1990.

3. During the course of hearing, the learned DR argued that the Deputy Commissioner, Inland Revenue, Audit Unit-X, Regional Tax Officer, Hyderabad has passed the Order-in-Original No.02 of 2012 dated 31.07.2012 after applying his mind judicially and rejected that claim of the Respondent No.02 which was legally not covered in terms of section 8 (1) (ca)(d) of the Sales Tax Act, 1990 because the registered person had made purchase from a "Non-Active and Blacklisted" unit Messrs Prizma Enterprises, Karachi having STRN No.1700999801473 and adjusted input tax amounting to Rs.413,238/-. He further argued that the Order-in-Appeal No.438/2012 dated 22.10.2012 (herein after referred to as the impugned order) passed by the Commissioner Inland Revenue, (Appeals-III) Karachi, is bad in law without merits and ignores the fact that in terms of Rule 12(5) of Sales Tax Rules 2006, dated 5th June 2006, invoices issued by blacklisted units irrespective of being issued prior or after such blacklisting are not to be entertained for the purpose of refund or input tax adjustment. Thus, the Deputy Commissioner, Inland Revenue, Audit unit-X, Regional Tax Office. Hyderabad was correct to disallow input tax adjustment against the said invoices.

4. On the other hand, Mr. Muhammad Afzal Awan, Advocate representing the Respondent/taxpayer vehemently opposed the contention made by the learned DR. He argued that the order passed by the learned CIR (A) is well within the framework of law and there is no illegality, irregularity and infirmity in the same.

5. After hearing, we have perused the material placed before us which reveals that the learned DCIR passed the order against the respondent No.2 in respect of adjustment of input tax against purchases made from a black listed unit viz. Messrs Prizma Enterprises. The said order was declared Null and void by the learned CIR(A) in his order dated 22.10.2012 passed in Appeal No.438/2012/223. With regard to black listing Section 21(3) of Sales Tax Act, 1990 is very much clear. The order of the learned DCIR is self explanatory that the said supplier viz M/s. Prizma Enterprises was black listed since registration vide order No.4766 dated 04.05.2012 whereas the record shows that the period of adjustment of input tax is 2008-09 and according to dictum laid down by the superior court, the executive order or notification, which adversely invade upon vested right cannot be applied with retrospective effect. In the present case, the order in original shows that on 04.05.2012 Messrs Prizma Enterprises was declared black listed, meaning thereby in year 2008-09 M/s. Prizma Enterprises was active on the e-portal of the FBR, therefore, the taxpayer cannot be panelized. Since the purchases made prior to date of order of black listing, therefore, the taxpayer is ever right to claim input adjustment. The order passed by the learned CIR (A) is well discussed with solid reasons on each and every issue involved in the matter. No illegality or irregularity has been found in the order.

6. The Departmental appeal stands dismissed. HBT/32/Tax(Trib.) Appeal dismissed.