2019 PLP (Trib (PTD)

CH. SHAHID IQBAL DHILLOM (JUDICIAL MEMBER).

Titled sales tax appeal has been filed by the taxpayer calling in question the impugned Order-in-Appeal No.240/2017 dated 07-06-2017 passed by the learned CIR(A), RTO, Faisalabad.

2. Succinct facts leading to the instant appeal case are that appellant was selected for audit by the FBR under section 72B of the Act for the financial year commencing from 1st July-2011 ending on 30th June-2012 whereby certain discrepancies were pointed out, on the basis of which, a show-cause notice dated 03-08-2016, confronting sales tax liability of Rs. 1,732,972/- was issued as to why sales tax liability may not be recovered under sections 11(2) and 11(3) of the Sales Tax Act, 1990 along with default surcharge and penalty respectively under sections 34 and 33 ibid. Upon culmination of adjudication proceedings, the appellant was proceeded in absentia without affording him with any opportunity of hearing and learned DCIR disposed off the case by upholding the charges levelled in the show-cause notice vide order-in-original dated 27-10-2016. The appellant being aggrieved by the said order has filed the first appeal before CIR(A) who rejected the same vide order dated 07-06-2017 without application of independent judicious mind and without appreciating the facts and considering the law on subject matter. The appellant being discontented and aggrieved with the treatment accorded by the CIR(A) has come up in this second appeal before this Appellate Tribunal.

3. The learned AR on behalf of appellant has contended that the adjudication proceedings carried out on the back of the appellant were in flagrant disregard of law in as much as the impugned order was passed by the learned DCIR on ex parte basis without providing the appellant with any opportunity of being heard which is not only against the provisions of the Sales Tax Act, 1990 but also against the norms of natural justice. Learned advocate further argued that owner of the unit was an illiterate person and has no knowledge, skill, ability to file sales tax returns therefore, engaged and appointed Mr. Muhammad Asim (Consultant) for that purposes who having pin code and password for online filing of sales tax returns of the appellant's firm knowingly and dishonestly filed wrong sales tax returns. Upon acquainting with the same, FIR No. 413/2013 was registered with Police Station Factory Area District, Faisalabad on 20-07-2013 against Mr. Muhammad Asim, on the behest of owner of the firm namely Mr. Muhammad Zulfiqar. It was also brought to the notice of this Court that Mr. Muhammad Asim has filed. Crl. Misc No. 15865-B/2013 and Crl. Misc. No. 15809-B/2013 before Hon'ble High Court, Lahore in which he has sought for his post arrest bail in FIR No.413/2013 and FIR No. 62/2013 whereby bail petitions was disposed off though a single order dated 25-02-2014 wherein Hon'ble Court on the basis of certain record/documents produced by the learned ACIR of RTO, Faisalabad, has not only dismissed the bail applications of Mr. Muhammad Asim but also exonerated the appellant by holding that Mr. Muhammad Asim has not only committed frauds at large scale with the appellant but also against the Government of Pakistan. In this regard, copies of FIR as well as order of Hon'ble Lahore High Court were enclosed with the memo. of appeal filed by the appellant.

4. Neither anybody has entered appearance on behalf of the department nor any request for adjournment was received, therefore we deem it appropriate to decide the case on the basis of available record and after hearing the learned A.R.

5. After having heard the arguments of the learned AR and from the bare perusal of the impugned orders as well as material made available before us, we have found considerable merit in the contentions raised by the learned advocate that the appellant has neither made any business transaction with the alleged buyers nor issued any sales tax invoice and all the fake transactions were result of the tax fraud committed by the consultant namely Mr. Muhammad Asim and consequently, the appellant is a victim of fraud and not the perpetuator. The impugned orders of the learned DCIR as well as CIR(A) are not indicative of any fact finding inquiry from the alleged buyers availing and enjoying benefit of zero-rating of sales tax therefore, undue huge demand of sales tax created whimsically without any supporting and corroborating evidence is illegal and unlawful. The learned CIR(A) has given no exhaustive judgment instead of retrieving to primitive assertions already taken in the adjudication order and neither discussed the FIR lodged by the appellant nor the order of Hon'ble High Court, Lahore. It is very astonishing that the department has neither conducted any inquiry against the alleged buyers who have enjoyed and availed zero-rating of sales tax nor registered any criminal case against them for committing tax frauds at large scale not only against the appellant but also against the Government of Pakistan by preparing fake invoices in the name of appellant's firm and has caused huge monitory loss to the appellant as well as to the national exchequer.

6. It is an admitted fact that the appellant appointed Mr. Muhammad Asim as a sales tax consultant and he prepared fake invoices during the years 2010 to 2012 and appellant gained the knowledge of the said fraud when the field formations of FBR issued notices to appellant for recovery of sales tax and Mr. Muhammad Asim was having pin code and password for online filing of sales tax returns of the appellant's firm however, acquainting with the same, FIR No. 413/2013 was lodged on 20-07-2013 against Mr. Muhammad Asim, on the behest of owner of the firm Mr. Muhammad Zulfiqar. Mr. Muhammad Asim being a criminal bent of mind and habitual in nature was also involved in 13 other cases of similar nature. Accordingly, Mr. Muhammad Asim has filed Crl. Misc No. 15809-B/ 2013 and Crl. Misc. No. 15865-B/2013 before Hon'ble High Court. Lahore in which he has sought for his post arrest bail in FIR No. 62/2013 and FIR No. 413/2013 registered with P.S. Factory Area District, Faisalabad whereby both bail petitions were disposed off though a single order dated 25-02-2014 passed by Hon'ble High Court wherein Hon'ble Court on the basis of certain record and documents produced by the learned ACIR of RTO, Faisalabad, has not only dismissed the bail applications of Mr. Muhammad Asim but also exonerated the appellant by holding that Mr. Muhammad Asim has not only committed frauds at large scale with the appellant but also against the Government of Pakistan. The order of Hon'ble Lahore High Court dated 25-02-2014 is also very relevant to the subject matter whose extract of relevance is given as under:- "By means of this order, I intend to dispose of Crl. Misc No. 158809 of 2013 in which the petitioner Muhammad Asim has sought his post arrest bail in case FIR No. 62/2013 dated 07.02.2013 offence under Sections 420/468/471/467, P.P.C. registered with P.S. Factory Area District, Faisalabad and Crl. Misc No. 15865-B of 2013 which has arisen out of FIR No.413/2013 dated 20-07-2013 offence under Sections 420/ 468/471, P.P.C. registered with P.S. Factory Area District, Faisalabad. The facts of both the cases are almost identical, so both the above titled bail petitions are disposed of through this single order.

3. The facts of FIR No. 413/2013 lodged on the behalf of Muhammad Zulfiqar are almost similar to that of above mentioned FIR. Hence, both these bail applications cases.

6. I have heard the arguments and perused the record.

7. The Court itself issued notices to Federal Board of Revenue for assistance and one Muhammad Afzal Malik, Assistant Commissioner appeared before this Court and placed on record certain documents which indicate that the petitioner not only committed frauds at large scale with the present complainants but also with number of other registered firms of Faisalabad Division. He further informed that has already suggested registration of criminal cases against the petitioner. The said Officer has also placed on record a list which shows that the complainants' firm computerized work was under the e-mail address of the petitioner. The record presented by the Officer appearing on behalf of Federal Board of Revenue also shows that the petitioner is involved in tax fraud of over 77 millions.

8. Even otherwise, the tax fraud committed by the petitioner is not only against the complainants but also against the Government of Pakistan. Number of cases of similar nature have already been registered against the petitioner. The Federal Board of Revenue has also initiated process for registration of criminal case against the petitioner.

13. For what has been discussed above, I am of the considered view that this is not a case in which discretion should be exercised in favour of accused petitioner by way of grant of bail to him. Resultantly, the bail applications being devoid of any merits are hereby dismissed." Underlining for emphasis

7. In view of what has been stated above, particularly in the light of record and order of Hon'ble Lahore High Court, the impugned show-cause notice and consequent orders of both the authorities below are declared to be illegal, ab initio void and are thus hereby set aside. The instant appeal filed by the registered person is accepted and disposed off in the manners as indicated above. MH/19/Tax (Trib.) Appeal allowed.