2025 PLP (Trib (PTD)

ZAHID SIKANDAR, MEMBER.

The appellant inter alia has challenged order dated 18.02.2025 passed by Commissioner Inland Revenue (Appeals) Faisalabad whereby the CIR(A) upheld the assessment order and rejected the taxpayer's first appeal. Instant appeal is accompanied by an application for grant of stay against recovery of tax.

2. Brief facts of the case are that upon scrutiny of sales tax record it revealed that M/s POWERLINE TRADING COMPANY having STRN-3277876166888 have pro tempore uploaded Annex-C for the tax period 03/2021 on 25.11.2021 at 2:04:01PM showing supplies amounting to Rs.21,988,496/-involving output tax amounting to Rs.2,990,435/- to various registered persons whereas no return was filed by the company. Prima facie it was observed that the buyers claimed illegal input tax which was declared by the company as output tax in Annex C and the appellant RP have issued fake flying invoices in order to facilitate the buyers for adjustment of illegal input tax against which neither any return was filed nor due tax against the said supplies was paid. Moreover, non filing of sales tax return for the said tax period indicated that no input tax was available and only paper transaction was executed by the appellant just to facilitate the buyers for adjustment of illegal input tax. Hence, the appellant was confronted with the violation of provisions of sections 9.3, 6, 7, 8, 8A, 21, 22, 23, 26, 73 read with section 2(14) and tax fraud under section 2(37) of Sales Tax Act, 1900 vide show-cause notice under section 11 for recovery of sales tax amounting to Rs.2,990,435/- along with default surcharge and 100% penalty. As per order-in-original, no one on behalf of the registered person attended the adjudication proceedings despite matter was fixed on various dates and only written reply was filed against show-cause notice. The OIR finalized assessment proceedings vide order dated 14.12.2023 on the basis of available record/reply and held an amount of Rs.2,990,435/- recoverable from the appellant registered person along with default surcharge and 100% penalty.

3. Aggrieved by the aforesaid order the registered person filed appeal before the CIR(A) Faisalabad which was regretted. Hence, the appellant has come up further in this second appeal before the tribunal.

4. Arguments heard, orders perused.

5. It transpires from record that the appellant was charged with non-submission of sales tax return, non-deposit of due tax and issuance of fake/flying invoices to facilitate claim of illegal input tax. It is an admitted position that the appellant did not submit sales tax return for the tax period under consideration and only Annex-C was filed. When confronted, the learned AR submitted that inadvertently the appellant could not file sales tax return. The learned AR could not satisfy us as to how Annex C was filed and sales tax return was forgotten. Further, the statement is also contradictory as the learned AR states that it was forgotten and sales tax return could not be filed inadvertently whereas before the CIR(A) it was pleaded that due to system error sales tax return could not be filed. Such contradictory stance weakens the case of the appellant and establishes that sales tax return was not filed intentionally just to avoid payment of sales tax.

6. Non-submission of sales tax return also confirms that no input tax was available to the appellant and only paper transactions were executed to facilitate the buyers to adjust Illegal input tax without any valid backup. The learned AR has placed certain documents e.g. invoices, party details etc before the bench to establish that transactions were genuine and tax was paid. These documents have been produced before the lower forums and after being thrashed out it was established that transactions are just paper transactions without any backup. Non-submission of sales tax return and non-deposit of tax is an admitted position and mere filing of Annex-C reflects that the buyers/parties were facilitated to claim illegal input tax.

7. Section 8(1)(ca) of Sales Tax Act, 1990 clearly denies claim of input tax on goods or services in respect of which sales tax has not been deposited in the government treasury. Claiming of input tax on the basis of fake/flying invoices without depositing any tax in the treasury amounts to rob the government. In the present case, filing of pro tempore Annex-C for the tax period 03-2021 without sales tax return appears to be a willful act on the part of the appellant registered person in the absence of any valid excuse and only paper transaction was done by the appellant to facilitate claim of illegal adjustment of input tax. This action certainly falls within the ambit of tax fraud as defined in Sales Tax Act, 1990 besides violation of various other provisions as confronted in the show-cause notice. Charge of tax fraud and other violations of provisions of Sales Tax Act stood established against the appellant registered person hence, there is no illegality in the original assessment order. Therefore, the CIR(A) rightly confirmed the same and rejected the taxpayer's appeal having no merit.

8. In the light of foregoing, impugned order is upheld and the instant appeal alongside stay application are dismissed. We order accordingly. MQ/16/TAX(TRIB) Application dismissed.