2019 PLP (Trib (PTD)

The above mentioned appeal has been filed by the Registered Person against an Order-in-Appeal No. ST-84/2015 dated 16.02.2015 passed by the learned Commissioner Inland Revenue (Appeals-II), Islamabad. The Registered Person has contested the appeal before this Tribunal on the following grounds:-- "1. ..

2. That the ONO No.33/2014 dated 26.06.2014 is time barred on dated 03.04.2014 as per section 11 of the Sales Tax Act, 1990 as no extension of sixty days is mentioned in ONO therefore, the period 120 days applicable from the date of issuance of show cause which is 03.12.13 (Reliance is placed on (2013) 108 Tax 412 (Trib).

3. That the ONO is passed under section 8(1)(ca) which is declared null and void by honourable Lahore High Court and the same is followed by CIT appeal in number of cases.

4. That the show-cause notice is defective, doubtful, ambiguous, and Coram Non Judice as per findings of the courts.

5. That the vacating show-cause notice in one case and taking action against others on similar matter is a discrimination and against the Article 25 of the Constitution of Islamic Republic of Pakistan

6. That there is no provision in the Sales Tax Act, 1990 to directly show cause any person under section 11(2)(3) without following the procedure as prescribed by the Sections 25,38 and 72B. Reliance is placed on 2015 PTD 1 and S.T.A. No.1135/LB/2013 and S.T.A. No.1506/LB/2014.(Tribunal).

7. That the GO 35/2012 is not published in official Gazette of Pakistan therefore had no legal applicability.

8. That CIT Appeal-II is not justified by not following the judgment of High Court and Tribunal which is against the Article 201 of the constitution and instruction of FBR.

9. That the said officer had no power under clause 21 of the General Clauses Act after four month of issuance of Show Cause to issue corrigendum.

10. That appellant had provided Annex-C, invoices issued by the supplier as evidence under Articles 150 and 117 of Qanun Shahadat, 1984.

11. That the appellant had claimed input as per sections 7, 8 and 73 of the Sales Tax Act, 1990.

12. That the supplier of the appellant had properly declared sales to appellant in Annexure-C of the return for the relevant months.

13. That imposition of penalty and surcharge is illegal, void and harsh in the present day of economy and country situation.

14. That as per judgment of Honourable Supreme Court of Pakistan in the case of Messrs Humayyun Ltd. v. Federation of Pakistan and others as reported in PLD 1991 SC 619 and 2004 SCMR 456 and 2002 PTD (Trib.) 300 where in it is held that where the evasion of duty is not wilful, the imposition of penalty and additional tax is illegal, and same is considered by the Appellate Tribunal Peshawar Bench vide Appeal No.ST/PB/2003."

2. Brief facts of the case as mentioned in the impugned orders of the officers below are that it was reported through CREST that the Registered Person has claimed inadmissible input adjustment of Rs.459,169/- against invoices were not declared by the supplier in his return violating provision of sections 2(14),7(2)(i) and 8(1)(ca) of the Sales Tax Act, 1990. Further, input adjustments against black listed unit were also added. Thus, the Officer Inland Revenue initiated proceedings against the Registered Person for violation of said provision of law and passed the Order-in-Original whereby the Registered Person was directed to deposit principal amount of Rs.459,169/- along with default surcharge and penalty.

3. Aggrieved with the above treatment, the Registered Person filed First appeal before the learned Commissioner (Appeals) who vide the impugned Order-in-Appeal No. ST-84/2015 dated 16.02.2015 upheld the input tax adjustment claimed against suspended/blacklisted units and rejected the appeal of the Registered Person. Against this treatment the Registered Person is in further appeal before this Tribunal.

4. On the date of hearing Mirza Saqib Sadeeq, Advocate learned counsel for the Registered Person appeared before this Tribunal whereas Mr. Muhammad Altaf Khan, learned D.R. defended the Department.

5. Learned A.R. pealed the case as per grounds viz viz filed written arguments which are as under:-- 'Facts of the case That the appellant had received show-cause notice dated 03.12.2013 on the basis of the crest report the input of Rs.459,169/- against the invoices of following person who were suspended and blacklisted in July-2013 Name Input 1 Muhammad lqbal 87,259/-(Suspended on 03.07.2013) 2 Muhammad Asif All 179,302/- (Black listed on 03.07.2013) 3 Muhammad Saleem 109,302/- (Black listed on 03.07.2013) 4 Jamil Ahmed 87,188/- (Black listed on 03.07.2013) Total 459,169/-

1. TIME BARRED That the show-cause notice issued on dated 03.12.2013 while the ONO is passed on 26.06.2014 is time bared as nothing on the record to show that the commissioner had granted extension nor mentioned that the extension is granted with 120 days, therefore, the time is applicable 120 days. Reliance is placed on 108 Tax 412.

2. SECTION 8(1)(ca) That the show cause is issued under section 8(1)(ca) which is declared unconstitutional by Honourable Lahore High Court vide W.P. No.3515/2012 therefore show-cause notice is illegal.

3. SHOW CAUSE WITHOUT FOLLOWING PROCEDURE PRESCRIBED BY SECTIONS 25, 38 AND 72B That there is no provision in Sales Tax Act, 1990 to directly show cause any person under section 11(2)(3) of the Sales Tax Act, 1990 without following procedure as prescribed by sections 25, 38 and 72B. Reliance is placed on S.T.A. No.1135/LB/2013 and S.T.A. No.1506/LB/2014 (ATIR).

4. BLACKLISTING/SUSPENSION OF SUPPLIER That the appellant had made purchase in the month of September and October, 2011 and January, February, March-2012 while the units are blacklisted and suspended on 03.07.2013 and the matter is resolved by the honourable high vide reported judgments 2014 PTD 1530 and ATIR vide 104 Tax 337 and S.T.A. No.329/IB/2014 and commissioner appeal vide ONO 636-637/2014 and 256/2014 that the status of unit should be considered at the time of transaction. S.T.A. No.142/IB/2014 6.11.2015 S.T.A. No.141/IB/2015 9.12.2015 S.T.A. No.329/IB/2014 23.12.2014

5. ARTICLES 25 AND 201 OF THE CONSTITUTION OF ISLAMIC REPUBLIC OF PAKISTAN That the CIT appeal is bound to follow the order of High Court and Appellate Tribunal and to follow principle of consistency while deciding the appeals and not to vacate show cause in one case and take action against other case. PRAY That it is humbly requested to accept the appeal of the appellant and annulled the ONO 33/2014 as the issue is already resolved by the Honourable High Court and Appellate Tribunal IR in number of judgments."

6. Learned support of his contention relied upon the following reported and AR in unreported case laws: (a) 2013 PTD (Trib.) 2174, (b) STAT0907: 2015 PTD (Trib.) 1094. (c) 2015 PTD 1, (d) 2014 PTD 1530, (e) S.T.A. No. 329/IB/2014, (f) S.T.A. No. 142/IB/2014, (g) S.T.A. No. 1506/ LB/2014 and (h) S.T.A. No. 266/IB/2015. In view of above, learned AR of the taxpayer prayed that the appeal of the taxpayer may be accepted and order-in-original annulled in the light of judgments of Honourable High Court and Appellate Tribunal Inland Revenue.

7. On the other hand, learned DR vehemently opposed the contention made by the learned AR. He fully supported the orders of the officers below. Accordingly, he prayed that there is no merit in the appeal filed by the Registered Person, therefore, the same may be dismissed.

8. The first issue raised by learned A.R regarding limitation learned counsel stated that the department issued a show-cause notice on 03.12.2013 whereas Order-in-Original was passed on 26.06.2014, therefore, appeal is time barred as neither record had shown with regard to extension granted by the commissioner nor mentioned 120 days extension was granted. Learned A.R. has placed the reliance of reported judgment in support the issue regarding time barred reported as 108 Tax

412. We have examined the issue in the light of the contention made by the learned A.R. regarding limitation which is found not correct as clearly mentioned in Order-in-Original for condonation of time period i.e. condoned upto 01.07.2014. Therefore, the stance is rejected made by the learned A.R. on the issue of time period.

9. The next issue raised by the learned A.R. regarding issuance of show-cause notice under section 8(1)(ca) is concerned, learned A.R. stated that Honourable Lahore High Court declared unconstitutional show-cause notice under section 8(1)(ca) of the Sales Tax Act, 1990 in Writ Petition No.3515/2012, thus, show-cause notice treated to be illegal in the light of case law. The relevant extract of the judgment of High Court held in para 35 that:-- "

35. For the reasons elaborated above, section 8(1) (ca) of the Sales Tax Act, 1990 besides being illogical and absurd, offends Articles 23 and 24 of the Constitution and is hereby declared to be unconstitutional and therefore, struck down." We have examined the issue in the light of the case law supra whereby Honourable Lahore High Court declared unconstitutional under section 8(1) (ca) of the Sales Tax Act, 1990 being illogical. We find that the facts of the case under appeal are similar to the case relied upon by the learned AR referred supra. Having taking regard to the facts of the case, we respectfully following the ratio settled in the referred judgments supra.

10. As regard issuance of show-cause notice without following procedure prescribed by sections 25, 38 and 72 B. Learned A.R. has contended that there is no provision in Sales Tax Act, 1990 to directly show cause any person under section 11(2)(3) of the Sales Tax Act, 1990 without following procedure as prescribed by sections 25, 38 and 72B. Learned A.R. submitted reliance on the issue of notice under sections 25, 38 and 72B of the Sales Tax Act, 1990. Learned counsel relied upon on judgment of Honourable Lahore High Court, Lahore reported as 2015 PTD

1. The relevant extract is as under:- "We have heard the rival arguments and perused the available record. We have also perused the citation mentioned supra referred by the learned A.R. We are of the view that once the self assessed tax due is considered to be correct and final, any order which suffers from patent illegality or is without jurisdiction, deserves to be knocked out. In this case no notice under sections 25, 38 and 72B of the Sales Tax Act were issued as per law to assume jurisdiction of the case. The impugned show-cause notice being coram non judice and without lawful authority, hence the super structure built on the same should fall flat. In view of the forgoing facts and in the light of the judgments quoted supra, the show-cause notice issued in the instant case is patently illegal and void ab initio." Learned counsel placed another reliance on unreported judgment of this Tribunal bearing S.T.A. No.1135/LB/2013 whereby stated that:-- "We have heard the rival arguments and perused the available record. We have also perused the citation mentioned supra referred by the learned AR. We are of the view that once the self-assessed tax due is considered to be correct and final, any order which suffers from patent illegality or is without jurisdiction, deserves to be knocked out. In this case no notice under sections 25, 38 and 72B of the Sales Tax Act were issued as per law to assume jurisdiction of the case. The impugned show-cause notice being coram non judice and without lawful authority, hence the super structure built on the same should fall flat." We have examined the issue of notice under sections 25, 38 and 72B of the Sales Tax Act, 1990 in the light of the cases law quoted supra reported as 2015 PTD 1 and unreported judgment of this Tribunal bearing S.T.A. No.1135/LB/2013 and found the facts and circumstances of the case under appeal are similar to the cases relied upon by the learned counsel of the Registered Person referred supra. Therefore, we respectfully following the ratio settled in reported as 2015 PTD 1 and unreported bearing S.T.A. No.1135/LB/2013.

11. So far as the issue of blacklisting/suspension of supplier is concerned, the learned A.R. has argued that the Registered Person had made purchase in the months of September and October, 2011 and January, February, March-2012 whereas the units are blacklisted and suspended on 03.07.2013. Learned A.R. relied upon on judgment of Honourable High Courts reported as 2014 PTD 1530 in case of CIR v. Rana Riasat Tufail and others wherein held that:- " At the time of the transaction the units/entities in question were admittedly not blacklisted - presently there was no final order against the blacklisted units - single Judge of High Court had rightly allowed respondent to claim refund for the invoices of units in question -Intra court appeal was dismissed accordingly - 5. .At the time of the transaction the three entities were admittedly not blacklisted. Also there is no final order even today against the three blacklisted units. Therefore, no case for interference is made out." Learned A.R. placed another reliance on the issue of blacklisting/ suspension of supplier and relied upon on judgment of this Tribunal bearing S.T.A. No. 329/IB/2014 wherein stated that; "

6. Following the ratio settled in the above mentioned judgments, we are of the view that the department was not within the ambit of law while passing the order against the appellant for the reason that the suppliers in question were operative during the period under consideration when the business/transaction took place. We must further add that if it is allowed to happen then the engine of business would come to grinding halt because nobody would know with regard to fate of its business concern with whom it was dealing with, was operative and the registered person who has been called upon to show-cause notice entered into business transaction with the subsequently blacklisted business in good faith and as per prevailing conditions at that time.

7. For the foregoing discussion we allow the appeal of the appellant, the both the order passed by the learned lower officers are directed to be vacated." Further, learned A.R. placed unreported judgment of this Tribunal bearing S.T.A. No.142/IB/2014 dated 06.10.2015 on the issue of blacklisting whereby stated that:-- "

5. We have carefully examined the submissions made by rival parties and have perused the available record after which we tend to agree with point of view of learned AR. If a taxpayer has made purchases from suppliers which were active at the time of supply, he should not be punished for any subsequent fault of the suppliers. Secondly, the fact of earlier audit and the appellate order No.167/2013 dated 06.02.2013 also seems to have escaped the attention of learned CIR (A).

6. In view of the foregoing facts we deem it appropriate to cancel the orders of authorities below. Appeal succeeds in the manner herein above." We have examined the issue of blacklisting/suspension of suppliers in the light of the case laws cited supra reported as 2014 PTD 1530, unreported Judgments of Tribunal bearing S.T.A. No.329/IB/2014 and bearing S.T.A. No.142/IB/2014 found the facts and circumstances of the case under appeal are similar to the cases relied upon by the learned A.R. of the appellant. Thus, we respectfully following the ratio settled in reported as 2014 PTD 1530, unreported Judgments of Tribunal bearing S.T.A. No.329/IB/2014 and bearing S.T.A. No.142/IB/2014.

12. After taking into consideration all grounds of appeal as well as written and verbal arguments advanced by the Appellant/ Registered Person along as well as reported and unreported case laws decided by the superior courts and this Tribunal along with facts and circumstances of the case. We have decided the issues supra in accordance with the ratio settled by the Honourable Courts after considering the matters as similar natural. Therefore, we feel no hesitation except to declare that the orders passed by the authorities below have no legal sanctity in the eye of law. Consequently, the Appellant's appeal is accepted and both the orders passed by the authorities below are hereby vacated/annulled. HBT/56/Tax(Trib.) Appeal accepted.