2012 PLP (Trib (PTD)

M.A. JAVED SHAHIN (JUDICIAL MEMBER).

The instant appeal has been filed under section 46 of the Sales Tax Act, 1990 at the instance of the appellant/registered person calling in question the impugned Order C.No. CIR/Z-III/RTO/FSD/73 dated 23-7-2011 passed by the learned Commissioner Inland Revenue, Zone-III, (Regional Tax Office, Faisalabad.

2. The Pivotal facts emanating from the case record are that Messrs R.J. Cotton Waste Factory, Faisalabad was registered by Regional Tax Office, Faisalabad against Sales Tax Registration No.24-0052-020-33-82 as a manufacture of other textiles N.E.C after due verification of its manufacturing premises. The appellant is engaged in business of bleaching of dyed cloth cut-pieces/rags of textile material and its subsequent supplies as bleached one. Both purchases and sales of said goods were chargeable to sales tax at the rate of zero-percent under the law. The process of bleaching is done manually in bleaching tanks with help of chemicals i.e. "Sodium Hypochlorite and Acid procured" from well-Renowned Companies like Messrs Sitara Chemicals Ltd. and Messrs Ittehad Chemicals Ltd., etc. on payment of sales tax and tax so-paid is claimed as refund in connection with subsequent zero-rated supplies of bleached cut-pieces/rags.

3. In response to refund claims filed by the appellant, refund authorities ordered for physical verification of its manufacturing activities and report in this regard was submitted on 16-10-2010 by the auditors but was found unsatisfactory due to certain lapses and shortcomings in it and was not approved by the then Additional Commissioner (IR) who ordered on 24-6-2010 for physical re-verification of the unit. Accordingly, re-verification was got conducted by its Registration and Verification Branch and its report was submitted on 7-9-2010 confirming physical existence of the unit with all its manufacturing arrangements for bleaching of rags and cut pieces of textile material including number of bleaching tanks remained in possession of the appellant from time to time upto 2-9-2010 which was duly approved by the then Additional Commissioner (IR).

4. Despite, verifications of the manufacturing premises and its report dated 7-9-2010 confirming physical existence of the unit, the learned Commissioner Inland Revenue (Zone-III), RTO, Faisalabad, issued a notice to show cause as to why the appellant (then the respondent) may not be black-listed under section 21(2) of the Act read with Chapter-I, Rule 12 of the Sales Tax Rules, 2006 and Clause 'N' of Sales Tax General Order No. 3 of 2004 dated 12-6-2004 on the charges of claiming excessive and abnormal refund claims intending to make a loss to national exchequer and ultimately ordered vide Order C.No.D081209100022/28 dated 5-4-2011 for black-listing of appellant from the date of registration, whereupon, an appeal under Section 46 of the Act was filed before this Tribunal Inland Revenue, Lahore who disposed it of in the following manlier:-- "The action of blacklisting is an extreme step and exception to Article 18 of the Constitution of 1973, which should be taken, strictly in accordance with law. In our opinion, any action for blacklisting or deregistration should be based on clear finding of fact established that the registered person was involved in issuing fake and flying invoices or had committed a tax fraud. Such action should be taken only when taxation officer is convinced that very existence of registered persons in such business would harm the business atmosphere and shall be a threat to National Exchequer. We could not find that the department had confronted such allegations in show cause notice or have established such allegations in order impugned before us. For this reasons we are inclined to refer this matter back to the adjudication officer for de novo proceedings strictly in accordance with law and impugned order is vacated."

5. Accordingly, this case was fixed and heard for de novo consideration by the commissioner (IR) Zone-III, Regional Tax Office Faisalabad. All the matters including physical verifications of manufacturing concerns made prior to and after the order of this Tribunal Inland Revenue, Lahore were discussed at length and order of black-listing dated 5-4-2011 affecting black listing from the date of registration was vacated exonerating the appellant from the charges of Tax fraud however, instead of restoration of appellant's status from the date of his registration which was liable to be restored automatically from the date of registration upon vacation of the black-listing order dated 5-4-2011 wherein black-listing was made effective from the date of registration, but the learned Commissioner (IR) has restored the appellant's registration partially w.e.f 2-9-2010 (instead of restoration from the date of registration) and passed an order vide C.No. CIR/Z-III/RTO/FSD/73 dated 23-7-2011.

6. In the meantime, the appellant also applied for condonation of delay in making of payments beyond time-limit of 180 days as specified under section 73 of the Act before the Commissioner Inland Revenue (Zone-Ill) Regional Tax Office, Faisalabad against certain transactions pertaining to the period prior to 2-9-2010. The appellant's request was acceded to and condonation for delay in payments was granted accordingly under section 74 of the Act vide Order C. No. 615 dated 25-8-2011 confirming veracity of alleged transactions vis- -vis status of the appellant.

7. It is not needless to mention here that the appellant was served upon with the show cause notices as to why his refund claims for the tax periods 3-2010 to 6-2010 may not be rejected under section 10(4) of the Sales Tax Act, 1990 read with Rule 37 of the Sales Tax Rules, 2006 (Refund Rules) notified vide S.R.O 555(I)/2006 dated 5-6-2006. Upon adjudication, the charges levelled in these show cause notices were vehemently contested orally and in writing and relevant supportive documents were also provided. The learned Assistant Commissioner (E&C unit-4, Zone-III), Inland Revenue (R.T.O), Faisalabad accepted the admissibility of refund claims and passed Sales Tax Order-in-Original Nos. 4 of 2011 to 7 of 2011 dated 22-9-2011 in the following manner:-- "The major issue involved in the instant case is that the respondent Messrs R.J. Cotton Waste Factory, Faisalabad was declared blacklisted by learned Commissioner IR, Zone-III, RTO, Faisalabad vide Order C.No. D08120900022/28 dated 5-4-2011. The Hon'ble ATIR Lahore remanded back the issue to concerned adjudication authority for adjudication and vacated the blacklisting order. The learned CIR, Zone-III, RTO, Fsd. issued a fresh order and restored the registration of the claimant w.e.f. 2-9-2010. The refund claim in question pertains to that period in which the registration status of the registered person is blacklisted. Moreover, the respondent has produced payment proofs as required under the provisions of section 73 of the Sales Tax Act, 1990 along with condonation order duly issued by learned CIR, Zone-III, RTO, Faisalabad-vide C.No. 615 dated 25-8-2011. In view of the above, refund claim is admissible upon validation of input tax invoices from STARR system and under the provision of section 73 of the Sales Tax Act, 1990 however, the refund can not be made at this stage in the light of fresh order and is allowed for refund subject to restoration of their registration status from the date of registration. Furthermore, at the time of payment of refund, the aspect of chemicals consumption ratio and other mandatory checks must be applied."

8. Being aggrieved with the treatment of partial restoration of registration given by learned Commissioner Inland Revenue (Zone-II), RTO, Faisalabad vide Order C.No. CIR/Z-III/RTO/FSD/73 dated 23-7-2011; the appellant has come up in appeal before this Appellate Tribunal praying for setting aside the same.

9. The learned AR appearing on behalf of appellant has vehemently contented that the learned Commissioner (IR) (Zone-III) R.T.O, Faisalabad has caught in the making of his own cobweb when he has not only admitted nullification on a/c of non approval of earlier verification report dated 16-10-2010 being found unsatisfactory for having certain lapses and short comings but also admitted the presence of the later physical verification report dated 7-9-2010 in holding the field but while issuing orders for restoration of registration of its status w.e.f 2-9-2010 instead of from the date of registration has intentionally ignored its contents and particulars confirming physical existence of all those manufacturing premises which remained in possession and operation of the appellant upto 2-9-2010, despite admitting the same in Para III page 7 of the impugned order. It has been further argued that the learned commissioner (IR) has also falsely held in its order that the new owner namely Mr. Nazeem Askari Fakhar upon taking possession of Messrs R.J. Cotton Waste Factory has failed to get notified the changes in particulars of registration, conversely, this factual infirmity does not exist on record and all such changes were got notified within due time as specified under law. The learned counsel while continuing his submissions further assailed that on the one hand, the learned Commissioner (IR) has restored the appellant's registration status w.e.f. 2-9-2010 instead of from the date of their registration i.e. 14-12-2009 but on the other hand, he has himself condoned delay in making of payments beyond time-limit as specified under section 73 of the Act against certain transactions pertaining to the period prior to 2-9-2010 which is an ample evidence of genuineness and veracity of such transactions vis-a-vis status of the appellant. The learned Commissioner (IR) has himself condoned the time lapses in making of payments confirming veracity of transactions for the period prior to 2-9-2010 therefore, the act of non-restoration of their status for the same period amounts to discrimination under law.

10. The learned counsel vociferously invited the attention of this Court towards 4 Nos. adjudication orders in respect of their refund cases pending for the period prior to 2-9-2010 issued by the learned Assistant Commissioner (E&C unit-4, Zone-Ill), Inland Revenue (R.T.O), Faisalabad who after due validations and verifications of his refund claims from the STARR Computer System of the Federal Board of Revenue and in the presence of bank payments proofs against all the transactions for the period under reference, has found the refund claims admissible but has shown his constraint not to sanction the same on the excuse of non-restoration of appellant's registration status. The counsel for appellant has maintained that after findings of admissibility of his refund claims by an independent adjudicating authority, stoppage of payments of refunds by the sales tax department for that very period is highly illegal and unjustified. He further argued that adjudication under section 11(2) of the Act for determing fate of claims of refund should have been made first to establish charges of claiming of excessive abnormal refunds which was done at later stage after the black-listing order of the learned Commissioner (IR) has no legal sanctity and of no legal effect. In the end, the learned counsel assailed that the order of the Commissioner (IR) is illegal, non-speaking and sketchy as he has not applied his judicial mind and is liable to be set aside. Conversely, the learned DR on behalf of the sales tax department supported the orders of the lower authorities for the reasons recorded therein.

11. We have heard the learned representatives for both the parties and given our earnest consideration to the rival arguments and have also examined the record of the case in detail.

12. The question with regard to issuance of show cause notice for blacklisting and order thereupon, we deem it necessary to decide the legal issue first. No doubt the appellant was black-listed solely on the ground that excessive and abnormal refunds were claimed by them as given in the preamble of impugned show cause notice; "--On examination of compute profile, it was noticed that the registered person indulged in claiming excessive/abnormal refund

" and all subsequent proceedings inter alia including physical verification of the unit, order of suspension of registration and ultimate order of their black-listing were initiated due to claiming of such excessive and abnormal refunds as alleged in the impugned show-cause notice but all this act stands premature, whimsical and assumptive without determining first "admissibility or inadmissibility", "legality or illegality", "genuineness or ingenuineness", "lawfulness or unlawfulness" of the appellant's refund claims for period in question by adhering to due process of adjudication as provided under section 11(2) of the Act. The act, which was to be done at the first, before taking of extreme step of their black-listing, has been taken at the last when, upon adjudication, the appellant's refund claims were found admissible by an, independent adjudicating authority and but he put a restriction on its sanctioning subject to restoration of their status from the date of registration therefore, all the proceedings in between cup and lips are nullity in the eyes of law and the whole exercise of suspension of registration becomes futile and ultimate order of blacklisting stands null and void in the eyes of law once it is established that appellant's refund claims were bona fide and admissible. In this state of affair, we have no hesitation to hold that no show-cause notice was provided under section 21(2) of the Act read with relevant provisions of law therefore, order of the learned Commissioner Inland Revenue (Zone-III), R.T.O, Faisalabad blacklisting the appellant without establishing the charges of claiming excessive and abnormal refunds or that of a tax fraud through proper adjudication as prescribed under section 11(2) of the Act is ab initio void, illegal and without jurisdiction,

13. We further hold that black-listing as well as non restoration of registration is an extreme step having paralyzing effect on business of any commercial enterprises and on its financial reputation as well and this type of action should be taken as last resort after establishing the gross violations of main factors i.e. "(i) If registered persons is found to have committed tax fraud, (ii) Evaded tax and (iii) Registered person has failed to deposit the tax due on his supplies despite having recovered it from respective buyers" stimulating such action of black-listing or suspension of registration and none of the violations of any of above-referred incidences have been established in the instant case. So much so, an independent adjudicating authority has also confirmed admissibility of appellant's refund claims upon verification and validation from the STARR Computer System and after all this, stoppage of refund payments is illegal and unlawful. It is well-settled principle of law that no body can be convicted merely on the basis of some assumptions and presumptions and there is no room for any intendment in the fiscal matters and there is no presumption as to tax.

14. There is no need to hold anything on the factual infirmities with regard to physical verification report and non-notifying changes in particulars of registration as these are of least importance in view of legal flagrant infirmities pointed out by the legal counsel yet there is another aspect of the case, which cannot be ignored. After the examination of the impugned order dated 23-7-2011 of the learned Commissioner (IR), we find that the same is sketchy, slip-shod and devoid of reasons. The said order is not at all a speaking order and cannot be called a "quasi judicial order" within the parameters set up by law. The tenor of the order amply manifests non-application of judicial mind and no reasons have been assigned by the learned adjudicating officer in coming to the conclusions. Even it has been enjoined upon an executive authority, as per section 24-A of General Clauses Act, 1897 to give reasons for making the order. Now every officer, authority or a person making any order is required to give reasons and thus any judicial findings without discussing necessary facts and material on record is not a judicial order and consequently is not sustainable in the eyes of law. In order to maintain the sanctity of both quasi-judicial and administrative proceedings, it is necessary to maintain oversight on the performance of Adjudicating Officers whose orders should not be entirely dependent on opinions and comments of the reporting officers.

15. The honourable Supreme Court of Pakistan has time and again disapproved the passing of such perfunctory orders in the causes involving valuable rights of the parties. It is settled law that a quasi-judicial order must be a speaking order manifesting by itself that the authorities and Tribunal have applied its judicial mind to the issues and the points of controversy involved in the causes. Furthermore, when the reasons would not be forthcoming, obviously the Appellate Court would be deprived of the views of the subordinate forum. In any way, the impugned order 23-7-2011, which is not a speaking order and devoid of reasons is not sustainable in law being in contravention of law declared by the Honourable Supreme Court of Pakistan in various cases like Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others (PLD 1959 SC 272); Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others (PLD 1970 SC 158) and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others (1984 SCMR 1014), etc

16. In view of what has been deliberated above, we are shackled by our conscience to hold that the show cause notice for black-listing was issued in absence of cogent verification of antecedents of the instant case and without establishing incidences of tax fraud or even without determining the fate of refunds, purportedly claimed excessively and abnormally, through proper adjudication as provided under section 11(2) of the Act therefore, the impugned show cause notice is declared void ab initio and nullity in the eyes of law and all subsequent actions thereon are also held to be illegal and unlawful and the impugned order of the learned Commissioner (IR) for non-restoring the registration status of appellant's prior to 2-9-2010 is set aside with the direction to restore their status from the date of its registration immediately. The appeal filed by the appellant is accepted accordingly. C.M.A./261/Tax(Trib.) Appeal accepted.