2012 PLP (Trib (PTD)

JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).--Through these two appeals Appellant/Department has objected against the two separate impugned Orders-in-Appeals Nos.48 and 49 of 2011 dated 16-3-2011 regarding tax period July 2004, December 2005 and February 2006 which is subject matter of the Order-in-Original No.16 of 2010 while the second impugned order is regarding tax period November 2002 which is in respect of Order-in-Original No.15 of 2010 dated 30-11-2010. The following common grounds for both the appeals have been framed by the Department:-- "(2) That, the learned Commissioner Inland Revenue (Appeals-II) has erred in setting aside the order raising recovery under section 36 of the Sales Tax Act, 1990 by obtaining that calling of record is above the prescribed limit under section 24 of the Sales Tax Act, 1990. (3) That, the learned Commissioner Inland Revenue (Appeals-II) has erred in interpreting section 24 of the Sales Tax Act, 1990 by declaring that obligation of taxpayer to retain the record is for a period of five years only. Whereas section 24 of the Sales Tax Act, 1990 as amended vide Finance(Amendment) Ordinance, 2009 (promulgated on 28-10-2009) prescribes period for six years for retaining the record or till such period the assessment proceedings are finalized. (4) That, the learned Commissioner Inland Revenue (Appeals-II) has erred in not appreciating the true spirit of section 24 of the Sales Tax Act, 1990 which states that taxpayer shall retain record and documents for the period of six years after the end of tax period to which such record or documents relate or till such further period the final decision in any proceedings including proceedings for assessment, appeal, revision, reference, petition and any proceedings before an ADRC is finalized. As taxpayer's refund was pending, the taxpayer was obliged to retain record for all these tax periods. (5) That, the learned Commissioner Inland Revenue (Appeals-II) was not justified to hold that the amendment in law (in section 24 of the Sales Tax Act, 1990 vide Finance (Amendment) Ordinance, 2009 does not relate to the period under question. This view of the learned Commissioner Inland Revenue (Appeals-II) negates the spirit of the amendment. (6) That, the order of the learned Commissioner Inland Revenue (Appeals-II) being patently illegal and against the provision of law may be vacated and the order passed by the Officer Inland Revenue under section 36 of the Sales Tax Act, 1990 be restored."

2. I have heard the learned representatives from both the sides and have also perused both the impugned orders in appeal, the orders in original and other relevant record of the case. In this case it was reported by the Revenue Officer that the Taxpayer/Respondent in the present case has adjusted/refunded input taxes for the above mentioned tax periods which was duly processed/sanctioned by refund authority. Subsequently show-cause notice was issued, the registered person responded the show-cause notice, however, he was asked for production of record for past refund audit regarding period under review. The adjudicating authority with the observation that no response was given to the notice issued and requisite record was not submitted, therefore, the amount already sanctioned for the above referred periods were held to be recoverable along with additional tax and default surcharge. Against which the appeal was filed before the learned CIR(A) who has set aside both the orders passed by the adjudicating authority. Now the department has filed these two appeals before this Tribunal.

3. The learned D.R. representing the Appellant/Department has contended that there was no justification for setting aside the order passed by the adjudicating authority. It is contended that the learned CIR(A) without any justification held that the obligation of Taxpayer to retain the record is for the period of five years only whereas under section 24 of the Sales Tax Act, 1990 prescribed period is for six years for retaining the record or till such period an assessment proceedings are finalized.

4. On the other hand the learned counsel representing the Respondent/Registered person has submitted that the detailed reply was submitted in response to show cause notice explaining therein that the requisite record pertains to last more than five years whereas under section 24 of the Sales Tax Act, 1990 the registered person was not required to retain the record after the period above five years but the adjudicating authority has not considered his reply. It has been contended that the adjudicating authority passed ex parte order in urgency upon a single date of hearing without fully appreciating the factual position and applying any judicial mind. It is contended that the respondent was condemned unheard which is against the principle of audi altarm partem as held by the Higher Courts. It is argued that the time limit for retaining Sales Tax record has been mentioned in the law at the time of proceedings under section 24 of the Sales Tax Act, 1990 was five years whereas the adjudicating authority has served notice for requisition of record which pertains to more than the prescribed time limit, therefore, whole of the proceedings against the respondent was against the law. He has contended that the recovery demand raised against the registered tax person/ respondent through the order-in-original is based on allegation that verification of input tax payment by their respective suppliers could not be checked due to non availability of record but this statement of the adjudicating authority is totally false and incorrect as the F.B.R. has placed "STARR" system to process refund claim of any claimant. The system electronically verify input tax claimed by buyer from output tax declared by their supplier, hence the contention of the adjudicating authority that verification has not been done is totally incorrect. He has contended that all the refund claimants are required to file original documents under relevant refund rule and any sort of cross verification can easily be done on the bases of the same. Hence recovery demand on the mere allegation of non-submission of documents is not tenable under the law. According to the learned counsel audit is only required to be done once in a year under section 25 of the Sales Tax Act, 1990 and in the present case for both the periods under consideration audit for the question had already been done therefore, neither the question of re-audit nor the allegation of non verification remains established. It is contended that the adjudicating authority without any justification has held that under section 24 registered person is required to retain the record till the finalization of the proceeding but this portion of the law was inserted vide finance bill 2010 hence it can not applied in the case under review from 2002 to 2005. He has argued that the refund claims of the respondent in terms of refund rules 2006 dated 5-6-2006 can not be rejected as the refund claims of the respondent pertains to the period July, 2004 to February, 2006 and November, 2002 and in this case the refund rules 2002 applies. The learned counsel has also supported the impugned order on the figures of amount mentioned in the orders in original which are totally different from the figure of amount mentioned in the show-cause notice and the actual refund claim. The learned counsel has contended that the adjudicating authority has acted mechanically without applying their mind neither on facts of the case nor on the legal aspects of the case. The learned counsel has also referred section 33 of the Sales Tax Act which specifically provides the penalty for non submission of record but the adjudicating authority without any justification has raised the recovery of demand of whole amount of refund tax which according to the learned counsel is not tenable under the law. He has contended that there is no provision under the refund rules for creating a demand through an order in case of non-submission of record for post refund audit. He has of the view that the relevant law did not requires the post refund audit of the registered person in respect of refund claim in the cases where the audit has already been done before issuing refund to the registered person. He has submitted that the learned CIR(A) due to the above referred reasons have rightly set aside the order in original.

5. I have carefully considered the contention from both the sides and have found that the adjudicating authority in this case passed orders for recovery of whole amount of tax along with penalty just on the mere assumption that refund was erroneously paid since no record was produced. I have found that the adjudicating authority in this case has not considered the fact that the refund claims pertains to the period of more than last five years and was hit by time limitation as well as the show-cause notice under section 36(1) has been issued after five years i.e. prior to June, 2005 and three years in two cases for the period in between July 2005 and June 2007. I therefore find force in the arguments of the learned counsel of the respondent/registered person could not be legally bound to retain the record in a situation where they were legally not obliged/bound. The provision for completion of proceeding relied by the adjudicating authority is also not relevant in the case due to the fact that amendment in law does not relate to the period under question. I have further noted that the refunds in this case were refunded after computer/STARR verification therefore, question of its non-verification does not arise. As all the record should be available in their computer data base to be got re-verify when and where required by them. As well as question for non verification of compliance of section 73 is concern, I am of the view that section relates to the compliance of procedure for payment of more than 50,000 through a specified procedure, hence upon mere assumption that compliance of section 73 was not made recovery demand of entire amount of tax would tantamount to double taxation. In this regard the cases reported as 2008 PTD 60 and 2009 PTD (Trib.) 1263 has been referred wherein honourable Lahore High Court has held that where inaction on the part of a public functionary within the prescribed time is like to affect the rights of a citizen the prescription of time is deemed directory. Where a public functionary is empowered to create a liability against a citizen only within prescribed time, it is mandatory. After considering all of these facts and circumstances of the case I find no warrant for interference in both the impugned orders in appeal which are therefore upheld and both the appeals filed by the department are dismissed. C.M.A./237/Tax(Trib.) Appeal dismissed.