2010 PLP (Trib (PTD)

MUNSIF KHAN MINHAS (JUDICIAL MEMBER).

This sales tax appeal has been filed by the Department against the sales tax Order-in-Appeal No. S-20/2009 dated 18-5-2010 passed by the learned CIR(A-II) on the following ground:-- "That the learned Commissioner (A) was not justified to vacate the Order-in-Original as the registered person violated section 73 of the Sales Tax Act, 1990."

2. Brief facts leading to this appeal are that during (sic) it was observed that the Registered Person having STR No.07-02-9998-813-28 deducted the input tax involved on the purchase of certain items but failed to provide the proof of payments thereof through crossed banking instruments. Show-cause notice was issued and confronted to the taxpayer but its reply was considered and found unsatisfactory. The Assistant Collector found that the Registered Person was liable to pay sales tax amounting to Rs.120,053 under section 36(1) of the Sales Tax Act, 1990 along with default surcharge (to be calculated at the time of payment) under section 34 of the Act, ibid for the violation of section 73 of the Sales Tax Act, 1990 and also imposed a penalty of Rs.5000 under section 33 of the Sales Tax Act, 1990. Being aggrieved with the treatment meted out by the Assistant Collector the Registered Person preferred an appeal before the first appellate authority who vacated the order-in-original and deleted the penalty with the following observation:-- "The fact is that the payment of sales tax due was deposited by some way or the other, the proofs i.e. summary of statement under section 26 are available on record and accepted by the department. Therefore, on the basis of these facts, the penalty imposed is found to be illegal. This contention is strengthened by Member (Judicial) decision in a similar case which says there is no allegation against the appellants for claiming of input tax adjustment against fake and flying invoices. This indicates that the respondents admitted that all the purchases by the appellant had been made against valid sales tax invoices issued by the sales tax registered person. Thus, the allegation against the appellant is of technical nature that they had made payment of amount exceeding Rs.50000 to the sales tax registered person, in contravention of section 73 of Sales Tax Act, 1990. It is therefore held that the appellants are only liable to pay penalty @ 3% of the amount involved for technical contravention of the provision of section 73 of the Sales Tax Act...."

3. Learned DR has supported the order-in-original contending that the said order passed by the Assistant Collector is accordance with law. Learned DR has argued that the learned Commissioner (A) was not justified to vacate the order-in-original as the registered person violated section 73 of the Sales Tax Act, 1990.

4. Learned AR has argued that the taxpayer is a registered as a whole seller with the Sales Tax Department and paying their liabilities regularly. He contends that the Assistant Collector is not justified in imposing the sales tax amounting to Rs.120,053 along with default surcharge process. He prays that the imposition of sales tax is unjust, erroneous and without any cogent reason and annul the same. He argues that the Assistant Collector has entirely ignored that the sales tax claimed is properly deposited in the government treasury and there is no contravention of claiming input tax adjustment -against fake and flying invoices as decided by the Sales Tax Appellate Tribunal vide its judgment in Appeal No.49/ST/IB/2008 in respect of Messrs Global Packages, Islamabad v. Collector of Customs, Sales Tax and Federal Excise (Appeals) Islamabad. The AR's contention is that the Assistant Collector entirely ignored the documents submitted during the hearing in her Order-in-Original No.21 of 2009 dated 29-6-2009. I have heard the arguments of both the rival parties and perused the record available on file. I am of the view that the payment of due sales tax due was deposited by some way or the other, the proofs i.e. summary of statement under section 26 are available on record and accepted by the department. After looking at the report of audit, the only point left against the respondent is, that he failed to produce the record of banking instruments according to section 73 of the Sales Tax Act, 1990 to the department. It is evident from the record that there is no allegation of fraud, cheating levelled against the appellant for claiming of input tax adjustment against the fake and bogus invoices and the respondent has also admitted this fact, that the purchases of the appellant had made against the valid sales tax invoices issued by the sales tax registered person. Meaning thereby the allegation against the appellant is of technical nature and the contravention is made against the appellant only for non-producing banking instrument record. The spirit and objective of section 73 of the Sales Tax Act, 1990, is to streamline the transactions of registered persons through bank and also to avoid the input tax adjustment from the fake and forged sales tax invoices. In the present case, admittedly, the respondent/department have verified all the invoices provided by the appellant as sales tax return, purchase invoices, which are declared genuine and no allegation of fraud or bogus invoices has been levelled. If is settled proposition that the registered person may not be deprived from his legal money due against the Government when there is particularly no mistatement, forgery, collusion, cheating, fraudulent activities are alleged or any false claim is submitted by a registered person with the view to obtain the illegal gain or causing loss to the Government. Further important to mention here that if the contravention of section 73 of the Sales Tax Act, 1990 is made by the registered person, then section 33, subsection (1) Item No. 16 of the Sales Tax Act, 1990 is also relevant, which says: "Section 33 subsection (1) Item No. 16, any person who fails to make payment in the manner prescribed under section 73 of the Sales Tax Act, 1990 such person shall pay a penalty of Rs.5,000 or 3% of the amount tax involved, whichever is higher." To my mind, the contravention of section 73 of the Sales Tax Act, 1990 does not absolutely debars the registered person to claim the input adjustment, if there is no allegation of fraud, cheating, collusion, fake and bogus invoices have been levelled against the registered person. The upshot of discussion is, that the appellant neither applied wrongly for wrong adjustment of tax to the department, nor made any forged/fake invoice for claiming the adjustment tax, nor tried to submit the bogus claim, nor caused any financial loss to the Government by non-depositing the amount through banking instrument. It is, therefore, held that the. allegation against the appellant is only of contravention that he had made the payments to the amount exceeding Rs.50,000 in contravention of section 73 of the Sales Tax Act, 1990, therefore, on this contravention the appellant is liable to pay only the penalty of 3% of the amount of tax adjustment involved under section 33 subsection (1) Item No. 16 of the Sales Tax Act, 1990. The AR's contention is that there is no allegation against the appellants for claiming of input tax adjustment against fake and flying invoices. This indicates that the department admits that all the purchases by the appellant had been made against valid sales tax invoices issued by the sales tax registered person. Thus, the allegation against the appellant is of technical nature that they had made payment of amount exceeding Rs.50000 to the sales tax registered person, in contravention of section 73 of Sales Tax Act, 1990. It is therefore held that the taxpayer is only liable to pay penalty 03% of the amount involved for technical contravention of the provision of section 73 of the Sales Tax Act. I am not inclined to interfere in the order of the learned CIR(A) because there is no lacuna or error in the order of the learned CIR(A) which is upheld and maintained. Consequently, the departmental appeal being devoid of any merit is dismissed. H.B.T./158/Tax (Trib.) Appeal dismissed.