2011 PLP (Trib (PTD)

M.A. JAVED SHAHEEN (JUDICIAL MEMBER).

This appeal is directed against the Orders-in-Appeals Nos.104-106 of 2005, dated 30-11-2005 passed by the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Gujranwala, which upheld the Order-in-Original Nos. 83, 81 and 80/05, dated 29-6-2005 passed by the Assistant Collector (Refund Division-III-IV), Sales Tax and Federal Excise, Sialkot, whereby the refund claimed by the Appellant/Regd. Person was refused as the same had allegedly been claimed on the basis of fake invoices issued by the following suppliers, who denied to have issued the same:-- O-in-O No. Supplier S.T. Regn. No. Tax Period Input Tax claimed 83/2005 Messrs Karigar Leather Industry 17-K.,M. Wagha Road, Lahore 0310420300773 Feb, 2004 Rs.1,586,012 80/2005 Messrs Karigar Leather Industry 17-K.M. Wagha Road, Lahore 0310420300773 May, 2004 Rs.1,052?352 81/2005 Messrs Noor Impex Flat No.831-G, Block Q, Model Town, Lahore 0301999975837 April, 2004 Rs.1,718,198

2. The learned Collector (Appeals) has adjudicated only the appeal against the Order-in-Original No.83 of 2005, and the appeals against the Order-in-Original ' Nos.81 and 80/2005, dated 29-6-2005 have been rejected holding as under:-- "(10) The following appeal cases being identical and of the same party are also rejected accordingly as above. S. No. Appeal No. O-in-O' and Date 1 98-ST/05 81/05 dated29-6-2005. 2 99-ST/05 80/05 dated29-6-2005.

3. Adjudication of the Appeal against the Order-in-Original No. 83 of 2005 has been made by the learned Collector (Appeals) as under:-- "8. (iii) On perusal of the available records, it has been. found that since they claimed refund on the basis of fake invoices this act of them comes under the purview of definition of tax fraud as given in section 2(37) of the Sales Tax Act, 1990. This section, inter alia provides that tax fraud means knowingly and dishonestly "over-stating the entitlement to tax credit or tax refund to cause loss of tax". They have knowingly and dishonestly tried to obtain illegal tax refund and deprive the govt. ex-chequer. Their contention that since they did not obtain refund, imposition of 100% penalty was unwarranted is not convincing. Section 33 provides that any person who commits, causes to commit or attempts to commit the tax fraud, or abets or connives in commissioning of tax fraud, such person shall pay a penalty of twenty five thousand rupees or one hundred percent of the amount of tax involved, whichever is higher. In this case they have attempted to get inadmissible refund by presenting fake invoices. Adjudication officer has correctly imposed hundred percent penalty as it is higher than twenty five thousand rupees. Had the information of their fraud not been received and the functionaries of Sales Tax Department not taken timely action, the appellant would have succeeded in obtaining the refund through an act of fraud. 8. (iv) Their contention that Messrs Karigar Leather Industry, Lahore (their suppliers) issued a certificate concerning supply of goods is not correct as they could not produce the same. The fact of the matter is that Messrs Karigar Leather Industry, Lahore have confirmed vide their letter dated 30-3-2005 (which is available on record) not to have issued invoices as detailed in para 4 above. On the basis of these fake invoices the appellants filed refund claim. It stands proved that the appellants fraudulently managed fake invoices to claim illegal refund and deprive the Federal Govt. of its legitimate money. 8. (v) It is observed that as per para 8 of S.R.O. 575(I)/2002 dated 31-8-2002 refund sanctioning authority has been empowered to reject inadmissible refund and "proceed against the claimant under the relevant provisions of law" after serving a notice. In this case Assistant Collector while finding 'that inadmissible claim had been filed, gave a proper show cause notice invoking all relevant provisions of law and finalized the case accordingly. Besides in terms of subsection (2) of section 11 read-with the, provisions of para 8 of S.R.O. 575(I)/2002 dated 3128-2002, Assistant Collector refund as an officer of Sales Tax as provided in terms of section 2(18) of the Sales Tax Act, 1990 was empowered to impose a penalty of 100% equivalent to the amount of refund.".

4. The Appellant/Regd. Person has been represented by Messrs Sayyid Ali Imran Rizvi, Advocate, Mr. Tariq Hanif Malik, Advocate and the Respondent/Department has been represented by Mr. Atif Bashir, D.C.I.R./D. R.

5. The Appellant/Regd. Person's learned A.R. inter alia contended: (1)? That the impugned show cause notice and the impugned orders are illegal, void ab initio, without lawful authority, without jurisdiction, replete with malice, tainted with ulterior motives and nullity in the eyes of law. (2)? The Sales Tax Department had duly sanctioned the claimed refund in respect of Tax periods 2/2004, 4/2004 and 5/2004 vide R.P.O. Nos. 5442 and 5443, dated 24-8-2004 after thorough scrutiny of the claim, but the refund was withheld, as the Appellant/Regd. Person failed to succumb to the illegal demands of the concerned officers and their higher-ups. (3)? After preparation of R.P.Os. withholding of refunds on any pretext was un-warranted. (4)? According to the Sales Tax Refund Rules, 2002 (S.R.O. No.575(I)/2002, dated 31-8-2002) process of scrutiny of refund claim had to be completed as per Rule 5 (ibid). When the process of scrutiny is completed, Rule 6 (ibid) prescribes the procedure for sanction and payment of refund claim, end product of which is the Refund Payment Order (R.P.O.) in accordance with which the Treasury Officer is required to issue crossed cheque to the claimant, but in this case despite preparation of R.P.O., refund was delayed to be issued, and the same was refused vide Show-Cause Notices C. No. ST/ Ref/Skt/Invest. 162/06/2005/720-722, dated 28-5-2005 invoking provisions of sections 8(1)(d) and 73(3) of the Sales Tax Act, 1990, whereas these provisions were brought on the statute book through the Finance Act, 2004 w.e.f. 1-7-2004, hence, they were not invokable in respect of Tax Periods 2/2004, 04/2004 and 05/2004. (5)? Neither along with the Show-Cause Notices, nor during the adjudication proceedings the Appellant/Regd. Person was ever confronted with the statements of the Suppliers, namely, Messrs Karigar Leather Industry, Lahore, and Messrs Noor Impex, Lahore, who had allegedly refused to have issued the input tax invoices-in-question. (6)? The input tax invoices produced by the appellant/Regd. Person were in the shape of documentary evidence produced by him in support of his claim, which could not have been brushed aside on the basis of alleged oral testimony of the suppliers, as there is a rule against exclusion of documentary evidence by oral evidence. (7)? The suppliers having made the alleged statements against the interest of the appellant/Regd. Person, and contrary to the documents previously issued by them (i.e. input tax invoices) had become "hostile witnesses", who ought to have been produced by the Department for cross-examination by the Appellant/Regd. Person in accordance with Article 150 of the Qanun-e-Shahadat Order, 1984, without which their testimony could not have been read into evidence. (8)? The Collector (Appeals) did not take into consideration the contentions averred by the Appellant/Regd. Person in the memo. of appeal, and also completely ignored the certificates issued by the suppliers certifying the taxable supplies to the Appellant/ Regd. Person. (9)? The alleged denial of the suppliers, namely, Messrs Karigar Leather Industry, Lahore, and Messrs Noor Impex, Lahore was procured by the auditors of the Sales Tax Department under duress and coercion in order to victimize the Appellant/Regd. Person, as is evident from the affidavits of the said suppliers. (10)??????????? Had the suppliers not paid the sales tax recovered from the Appellant/Regd. Person, the Department ought to have pursued them for payment of the tax evaded by them. Duty to pay the sales tax collected on supplies lay on the supplier. Buyer cannot be held liable for the supplier's default in payment. In support of this assertion, reliance was placed on the following case-law:-- (i) 2004 PTD 1893; (ii) 1999 PTD 4126 (iii) 2002 PTD 2440; and (iv) 2000 PTD 399. ?(11) According to section 7(2)(i) of the Sales Tax Act, 1990, there were two requirements for claiming credit of input tax

(i) the Appellant/Regd. Person held a tax invoice in his name; and (ii) the input tax ought to have borne the sales tax registration number of the Appellant/Regd. Person. This Appellant/Regd. Person did hold input tax invoices in his business name, and they bore his S.T.R.N. (12) Payments against the said invoices were made through banking channel as required by the then section 73 of the Sales Tax Act, 1990 as under:- Banker Date Amount Saudi Pak Commercial Bank Limited, Sialkot Branch. 15-4-2004 Rs. 4,498,408 -do- 15-4-2004 Rs. 3,027,073 -do- 15-4-2004 Rs. 4,633,946 Bank Statement has been furnished in support of this assertion. (12) Though it has been alleged in Para 9 of the impugned order-in-?original that the amount of the following cheques of the respondents was not credited in the account of Messrs Karigar Leather Industry, Lahore, the supplier of the respondent:-- Cheque No. Date Amount 0080155 2-2-2004 Rs. 4,498,408 0080156 16-2-2004 Rs. 3,027,073 0080157 27-2-2004 Rs. 4,633,946 yet this allegation was neither conveyed through the S.C.N., nor the alleged Letter of the Banker was confronted during the. adjudication proceedings. (14) The respondent/Department has not doubted that the goods were not purchased and exported by the Appellant/Regd. Person. Where a transaction is genuine; payment has been made through banking channel, and the goods have been duly exported, and the Department has raised no eye-brow to the export documents, refund cannot be refused. In-support of this assertion, reliance was placed on the following case-law:-- (i) 2003 PTD 63; (ii) 2005 PTD 1390; (iii) 2004 PTD 1893; (iv) 2004 PTD 1659; (v) 2004 PTD 2845; (vi) 2002 PTD 1805; (vii) 2007 PTD 1982; and (viii) 2011 PTD (Trib.) 773. (15) If the transaction is genuine, non-adherence to the provisions of section 73 of the Sales Tax Act, 1990 is not fatal, as it has been held in the following cases: (i) 2010 PTD (Trib.) 2345, (ii) 2010 PTD (Trib.) 975, (iii) 2010 PTD (Trib.) 2656; and (iv) 2010 PTD (Trib.) 1377.

6. Replying to the learned A.R's arguments summarized in the previous para, the learned D.R. only contended that the impugned Orders may be set aside so that the appellant's claim of refund may be adjudged afresh. As regards the invocation of sections 8(1)(d) and 73(3) of the Sales Tax Act, 1990, the learned D.R. contended that they being procedural in nature applied retrospectively.

7. Rebutting the learned D.R's contentions, the learned A.R. of the Appellant/Regd. Person argued that-- (i) Setting aside of the impugned Order would not serve any useful purpose, as the claim of refund had already underwent the necessary probe in accordance with Rule 5' of the Sales Tax Refund Rules, 2002, and the Competent Authority had sanctioned the refund through R.P.O. Nos. 5442 and 5443, dated 24-8-2004, whereafter no probe or scrutiny is warranted. (ii) The amendments-in-question did not operate retrospectively as they encroached upon the rights vested in the Appellant/Regd. Person. (iii) Relying on 2009 SCMR 1279, it was contended that where rights and procedure are dealt with together, the intention of the legislature may well be that the old rights are to be determined by the old procedure, and only the new rights under the substituted section are to be dealt with by new procedure. (iv) It has been held by the Hon'ble Supreme Court of Pakistan in 2005 SCMR 492 that if the notification has been issued for the benefit of the subject, it can be made operative retrospectively, but if its operation is to the disadvantage of a party who is the subject of the notification, it would operate prospectively.

8. Having heard the parties' learned representatives and perusing the documentary evidence lead by the Appellant/Regd. Person and the arguments addressed by the learned D.R., we have come to the conclusion that the authorities below have failed to apply 'a judicious mind to the facts of the case, and the Appellant/Regd. Person has been made to suffer on the basis of the alleged evidence gathered at his back. It is trite law that whenever any evidence contradictory to the one already on record is procured by ,the Department, the Regd. Person not only has a right to be confronted with the same, but also he does have a right to cross-examine the hostile witness, who allegedly negated his previous testimony, but despite minute study of the Show Cause Notice as well as Orders-in-Original, we have not been able to find out any effort made by the Respondent/Department towards fulfillment of the legal obligations before displacing the evidence relied upon by the Appellant/Regd. Person. Perhaps the Department has been 'innocently' desiring that the Appellant/Regd. Person ought to have taken their stance as sacrosanct or gospel truth, whereas the law was/is otherwise.

9. The input tax invoices tendered by the Appellant/Regd. Person in support of his claim of refund for the Tax Periods 02/2004, 04/2004 and 05/2004 were in the shape of documentary evidence produced by him. Had the person issuing the same gone hostile and deposed that the same were not issued by him, it was incumbent upon the Department

(i) to provide the statement of the hostile witness to the Appellant/ Regd. Person; and (ii) to summon the hostile witness and provide an opportunity of cross-examining him to the Appellant/Regd. Person. Without following the above procedure the Department was not justified to brush aside the documentary evidence produced by the Appellant/Regd. Person on the basis of any statement made at the back of the Appellant/Regd. Person. No rules of administration of justice justify the mode adopted by the Department. As the Department has failed to follow the legal mode for rejecting the input tax invoices produced by the Appellant/Regd. Person, the input tax invoices do hold the field and they were never displaced by any cogent evidence brought on record by the Department. Whims, caprices and inadmissible piece of evidence cannot dislodge a documentary evidence already in the field. A documentary evidence cannot be excluded by mere statements allegedly procured through duress and undue influence exercised by the Department. A documentary evidence in the field can be excluded/contradicted only by an admissible documentary evidence.

10. The Appellant/Regd. Person has brought on record the following documents in order to support the input tax invoices: (i) Affidavits of the Suppliers, namely, Messrs Karigar Leather, Lahore; and.Messrs Noor Impex deposing as under:-- (ii) Certificate by the Suppliers-in-question that they did issue the input tax invoices-in-question; and (iii) Copies of the Register of Supplies and Sales maintained by the Suppliers-in-question in respect of the relevant Tax Periods. In view of the above corroborative evidence, there is no justification of rejecting the claimed input tax credit.

11. When we go through the relevant provisions of the Sales Tax Act, 1990 on the issue of refund and tax credit, we find that section 10 (ibid) deals with "Refund of Input Tax", which read as under at the material time i.e. Tax Periods 02/2004, 04/2004 and 05/2004:- "

10. Excess amount to be carried forward or refunded.

(I) Subject to the provisions of subsection (2), if in relation to a tax, period, the total deduction of input tax and other adjustments as specified in section 9 exceed the output tax, the excess amount shall be refunded to the registered person: Provided further that the Board may, by notification in the official Gazette, restrict or regulate the amount of refund claimed by a registered person as input tax credit to such extent and in such manner as it may specify therein. (2) Notwithstanding anything contained in subsection (1), the input tax incurred in connection with a zero-rated supply shall be refunded not later than thirty days of filing of return in such manner and subject to such conditions as the Board may, by notification in the Official Gazette, specify. (3) If a registered person is liable to pay any tax, additional tax and adjustment of unpaid outstanding amount of tax or, as the case may, additional tax and penalty. (4) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the provisions regarding time limit shall not apply till the investigation, including the verification of the deposit of tax claimed as refund, is completed and the claim is either accepted or rejected."

12. Section 8 (ibid) deals with the "Tax credit not allowed" and it read as under at the material time i.e. Tax Periods 02/2004, 04/2004 and 05/2004:-- "

8. Tax Credit not allowed.

(1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on - (a)? the goods used or to be used for any purpose other than for the manufacture or production of taxable goods or for taxable supplies made or to be made or to be made by him; (b)? any other goods which the Federal Government may, by a notification in the official Gazette, specify; (c)? the goods under subsections (IA) and (5) of section 3. (2) If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board. (3) No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him. (4) No person engaged in taxable activity specified in section 3A shall make any deduction or reclaim input tax, nor shall this tax be creditable as input tax for the taxable activity of any other registered person. (5) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998. (6) Notwithstanding anything contained in any other law for the time being in force or any provision of this Act, the Federal Government may, by notification in the official Gazette, specify any goods or class of goods which a registered or enrolled person cannot supply to any person who is not registered or enrolled under this Act. (7) Notwithstanding anything contained in any of the provisions of this Act, the Federal Government may, by notification in the official Gazette, specify any goods or class of goods in respect of which the provisions of section 3A shall not apply.".

13. The Department has invoked clause (d) of subsection (1) of section 8 of the Sales Tax Act, 1990 for refusing refund. When we have a glance at section 8 reproduced in the previous Para 12, we do not find any clause (d) in subsection (1), as it was brought through the Finance Act, 2004, which was effective from the 1st day of July, 2004, whereas the refund claimed by this Appellant /Regd. Person was in respect of Tax Periods 02/2004, 04/2004 and 05/2004, which were apparently beyond the mischief of clause (d) of subsection (1) of section 8 (ibid).

14. Clause (d) of subsection (1) of section 8 of the Sales Tax Act, 1990 disallows the credit of input tax claimed on the basis of "fake invoices". What constitutes "fake invoices" has not been explained either through any `Explanation' to subsection (1) of section 8 (ibid), or any definition of this expression is contained in section 2 of the Sales Tax Act, 1990. The word "fake" (as a noun) has been defined by the Black's Law Dictionary, 8th Edition, to be "something that is not what it purports to be", and as a verb, it means "to make or construct falsely". (at p. 635). In the expression "fake invoices", the word "fake" has been used neither as a noun, nor as a verb, rather it is adjective, which describes the quality of the input tax invoices, which are either not true in any material respect or they have been falsely made or forged by the person claiming credit of the input tax. The word "invoice" has not been defined in the Sales Tax Act, 1990, rather an expression "tax invoice" has been defined by subsection (40) of section 2 of the Sales Tax Act, 1990 to be "a document required to be issued under section 23". Section 23 of the Sales Tax Act, 1990 in turn describes the expression "tax invoice" as under:-- "

23. Tax Invoices.

(1) A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars, namely:- (a)? Name, address and registration number of the supplier; (b)? Name, address and registration number of the recipient; (c)? Date of issue of invoice; (d)? Description and quality of goods; (e)? Value exclusive of tax; (f)?? Amount of sales tax, and (g)? Value inclusive of tax: Provided that the Board may, by notification in the official Gazette, specify such modified invoices for different persons or classes of persons: Provided further that not more than one tax invoice shall be issued for a taxable supply; and (2) No person other than a registered person or a person paying retail tax shall issue an invoice under the section. If an input tax invoice, corresponds to the requirements of section 23 (ibid), it qualifies to be a "tax invoice", and if it has been issued by a "registered person" (as required by subsection (2) oft section 23 (ibid)), it is a valid input tax invoice and entitles the holder to claim credit of the input tax evidenced by such invoice.

15. In the case of this appellant, it is not the case of the Department that the input tax invoices produced by the Appellant / Regd. Person did not qualify to be "Tax invoices" within the meanings of section 23 (ibid), rather the invoices-in-question were so perfect and confidence inspiring that during scrutiny of the same none of the refund sanctioning authority raised any eye-brow to any of the invoices, and sanctioned issuance of R.P.O. on 24-8-2004. It was almost nine months later that the Assistant Collector (Officer-in-Charge), Refund Division (III/IV), Office of the Deputy Collector Sales Tax and Central Excise, Sialkot, on the dictation of the Collector, Sales Tax and Central Excise, Gujranwala, re-initiated the scrutiny of the refund which had already been sanctioned to be issued. Wherefrom this authority was derived, the learned D.R. showed his inability to cite the relevant provision of the Sales Tax Act, 1990. Such an exercise amounts to 'change of opinion' on the same material which is not permissible, as it would divest the actions taken in accordance with law of the finality, and the tax-payer's claim would remain on the tenter-hooks of time-to-time changes in views of the succeeding officers, and no finality to an action would ever be conferred. Policy of law has always been to confer finality on the actions once taken in accordance with law, so that enforceable rights and obligations may flow therefrom. The Department cannot be allowed to have dwindling views on a given issue, and move on changing views according to whims and caprices of the big bosses.

16. We wonder that the Departmental officers dubted the input tax invoices produced by this Appellant/Regd. Person to be "fake" notwithstanding the fact that the same had been considered by their predecessors to be "genuine" and R.P.Os. had been sanctioned to be issued on 24-8-2004. If the then refund sanctioning authority had treated the allegedly 'fake' invoices to be 'genuine', that authority was involved in the 'tax fraud', and action ought to have been taken against him too. If he was not tried for tax fraud, how his decision of issuance of refund can be dissented from, and the same be ignored in the lighter vien, and one can refuse to issue an already determined refund to this Appellant/Regd. Person.

17. The fact that there was nothing on record which may justify declining of the claimed refund is evident from the Daily Refund Sanctioning Report which shows that the Refund Payment Orders have been made after ascertaining the claimed input tax and refund, and there remained nothing except issuance of the refund in accordance with the R.P.Os., but for the reasons best known to the concerned Departmental officers, the whole mess was created and the Appellant/Regd. Person was denied the refund due.

18. The Appellant/Regd. Person in this case is an exporter, whose supplies/exports were zero-rated, and he was entitled to refund of the whole of the sales tax paid as input tax on local purchases: provided he held a tax invoice in respect of taxable supply as required by section 7(2) of the Sales Tax Act, 1990 - (i) in his name; and (ii) bearing his registration number. It was not the liability of the buyer to ensure payment of the input tax into the State exchequer, rather section 3 of the Sales Tax Act, 1990 cast this duty upon the supplier to deposit the sales tax collected in a tax period into the State exchequer. If the supplier does not fulfil his obligation, the buyer cannot be victimized for the default committed by II the supplier.

19. It has become customary that when defaulting suppliers are apprehended, they, in collusion with the Department, resile from the input tax invoices duly issued, and the Sales Tax Department, instead of compelling the suppliers to do the needful by depositing the unpaid output tax, start the proceedings against the buyers who have claimed the corresponding credit of input tax, 'which is utterly against the true spirit of section 3 (ibid). It is trite law that the liability must be enforced against the person upon whom the same has been fixed by law.

20. Case-law on the issue cited by the Appellant's learned A.R. is summarized hereunder:- (1) 2004 PTD 1893: "16....The responsibility for payment of sales tax lay with the suppliers and the Department should have proceeded against the suppliers and not against the purchasers". ,(at p. 1900) (2) 1999 PTD 4126 "18. ...Sales tax is an indirect tax which is collected from the consumers through manufacturer at manufacturing or wholesale points. At the time of fixing the price of a product the sales tax has always been included in the sale price of the product to be charged from the end consumer. Suppliers and manufacturers work as agent to the Government to transfer the collected revenue to the Government treasury". (at p. 368) (3) 2002 PTD 2440: "6. (1) ...The petitioners are liable to pay the sales tax under section 3 of the Sales Tax Act, 1990, on taxable supplies at the time when the transaction of supply takes place". (at p. 2449) (4) 2000 PTD 399: "6. ...The liability to pay sales tax is that of a person making taxable supplies". (at p. 402)

21. The learned A.R. of the appellant has drawn our attention to the case-law which says that refund cannot be refused where the transaction is genuine goods supplied were duly exported; and the Department has never raised eyebrow to the export documents. Case-law cited is summarized as under:- (1) 2603 PTD 63: "

5. The contention of the Department that the amount of tax collected by registered person has not been deposited in the Government Treasury cannot be a ground for withholding the refund. If it is proved that manufacturer has purchased from the registered person who has collected tax from him then as the registered person who under law acts as an agent of the Department it is the responsibility of the said agent to deposit the tax within specified period as required by law. The Purchaser/manufacturer, thus cannot be held liable for non-deposit of such tax in the Government Treasury. Under law the Department should regularly monitor and take action against registered persons who having recovered and collected the tax fail to deposit in the Government Treasury. A person who has already paid the tax as required by law he cannot be held liable for such tax for the default of the Department and its agent. Therefore, on the mere ground of non-deposit of tax by the registered person in Government Treasury refund cannot be withheld". (at pp. 1664-1665) (2) 2005 PTD 1390: "

30. The only obligation of the complainant / buyer under the law was to ensure and prove that the supplier was a registered person, that the payment against the 'tax invoices was made through cross cheques issued in the name of such suppliers collectable in payees account only and that the quantity of goods recorded in such invoices were consumed in manufacturing for export/domestic sale or exported in same state". (at p. 1408) (3) 2004 PTD 1893: "

16. If it was established that the transaction was genuine, the goods had been physically transported from the suppliers to the purchasers and eventually exported, and that the banking transactions showed that cost of goods including sales tax had been duly paid by the purchasers, there would be no justification to detain the refund claim or issue a SCN for rejection of refund and imposition of penalty. The responsibility for payment of sales tax lay with the suppliers and the Department should have proceeded against the suppliers and not against the purchasers." (at p. 1990) (4) 2004 PTD 1659: "

15. The respondents should have carried out investigation to verify; (i) the physical transfer of goods from the supplier to the purchaser on the basis of' dispatch note, receipt note, the transport documents, entry in the purchaser's books of account; (ii) payment through banking channels to ascertain the genuineness of the transactions and validity of invoices inclusive of sales tax; (iii) physical receipt of goods and export thereof from the complainants' records etc.". (at p. 1664-1665) (5) 2004 PTD 2845: "

12. If certain invoices were identified as suspect on account of the list of suspected suppliers, the refund claims should not be rejected outright but necessary verification of physical transfer of goods, payment of price of goods inclusive of sales tax through the authorized channel, and shipment of goods should provide an early warning system for the Department and should not be taken as the final basis for arbitrary rejection of the refund claims or recovery ' of the amounts already paid" (at p.2850) (6) 2002 PTD 1805: "5....Sales Tax Department is caught in the cobweb of its own making.. When it was thought fit to authorize the suppliers of cotton seed as 'collection agents' for input tax, a foolproof system should have been devised to ensure that such agents are reliable, known, - verifiable, contactable and (above all) trustworthy so as to be entrusted with the responsibility of handling Government funds. If precautions were not taken and full details, business particulars and financial trustworthiness not evaluated by the Government, it is not proper to compensate the loss by refusing refund to those who actually parted with their money in the hope that it would go to Government account and then paid back to them, when due. If loss has occurred to Government due to loopholes in the system, the proper course would be to penalize those who designed the scheme but not the tax-payers who handed over the money in good faith. In the instant case, payments are proved as these were through demand draft supported by invoices issued by the "registered persons". Therefore, to require the complainant to physically produce a person whom the Government had itself 'registered' under a specific law, is expecting too much from a taxpayer who has no coercive power to compel a person to abide by his wishes. On the other hand, Government is supposed to have long hands and wide powers to hunt and haunt those who hide from the law having frauded the Government by collecting tax and then running away with it. It is, therefore, recommended that: (i) the Secretary, Revenue Division arrange to issue the refund of Sales Tax as discussed hereinabove together with the additional amount due under section 67 of the Sales Tax Act.". (at pp. 1807-1808) (7) 2007 PTD 1982: "(v) all requirements under the Act and the Rules had been completed, the refund was admissible and ought to have been sanctioned within one month of the submission of the supportive documents. After lapse of considerable time, the Department informed them in March, 2004 that the claims had been deferred as the suppliers were included in the list of blacklisted units. (vi) It was submitted to the Department that in case of blacklisting of suppliers, action should be taken against them but the refund should not be deferred but no cogent reason was given for withholding the refund. (vii) The responsibility of payment of collected sales tax lay on the suppliers and if they had disappeared without depositing the tax, the respondent should purse recovery from them under section 3 of the Act as held in the decision of this office in the Complaint No. 950-L of 2001 of Messrs Kashmir Edible Limited Lahore.

12. From the submissions made by both the sides it transpires that:-- (i) The purchases from registered units and the goods were exported in August and September, 2002 and the supplier's invoices were verified in November and December, 2002. (ii) Claims for refund of sales tax on zero-rated supplies along with supportive documents were filed in October, 2002, but processing was deferred. (iii) According to the respondents the suppliers were blacklisted in September and October, 2003 and, because of the complainants' transaction with suspected suppliers, they too were declared suspected in April, 2004. (iv) Even if the suspected status of the suppliers was notified in October, 2003, it would not influence the transactions which took place in August and September, 2002. (v) Complainants were not notified about their suspect status till receipt of the respondent's reply to the complaint and the action taken by the Department was entirely arbitrary without observing the due process of law. (vi) Respondent has not given any evidence that the action to defer the refund claims filed in October, 2002 was valid.

13. It is established that the deferment of processing of refund claims filed in October, 2002 is contrary to law, departure from established practice, without valid reasons, perverse, arbitrary, unjust, based on irrelevant grounds; it is a case of deliberate withholding of refund. The maladministration against the respondent is established". (at pp. 1983, 1985 and 1986) (8) 2011 PTD (Trib) 773: "

7. The Sales Tax Act, 1990 or the Rules made thereunder do not obligate a registered buyer to produce sales tax returns or computer profile of his supplier. Rejection or deferment of a refund claim by the sales tax administration on the plea that a registered person being an element of the supply chain jointly shares the responsibility of production of sales tax return or computer profile of the supplier, is without any rationale and legal force. If a refund claim is supported by an evidence of buyer's compliance of sections 7 and 8 read with section 73 of the Sales Tax Act, 1990 the refund claim should not be denied by the department. Most sale and purchase transactions take place between a supplier and buyer at arms length as they don't know each other by face or met before. The buying and selling transaction takes place on telephone. If all the conditions set forth under sections 7, 8 and 73 of the Sales Tax Act, 1990 are fulfilled; the input claim qualifies to be refunded to the claimant. If for any reason the registered supplier fails to file his tax return under section 26 of the Act ibid or his record of purchases vis-a-vis sales are not entered in the STARR system by the PRAL, the registered buyer should not suffer for the fault of the delinquent supplier. Some times fault lies only with the PRAL who fails to enter necessary data in STARR and some times wrong data is entered by the staff of PRAL. However, rejection of refund claim or its deferment due to delinquent conduct of some one else is not fair. In order to prevent the miscarriage of fair deal with a claimant of refund in a situation where he faces refusal of refund due to some body else's default".

22. As regards the alleged non-adherence to the provisions of section 73 of the Sales Tax Act, 1990, though the same is not available in this case, as the Appellant/Regd. Person did make payments for the supplies-in-question through the Bank, and the same are evidenced as transfer entries in the Bank Statement of Saudi Pak Commercial Bank Ltd., Sialkot (A/c No. 011012572401), yet we find that if a transaction is otherwise genuine, a genuine buyer cannot be dis-entitled to claim credit of input tax on account of mere non-adherence to the provisions of section 73 of the Sales Tax Act, 1990. Non-adherence to section 73 (ibid) has been made penal by section 33(16) of the Sales Tax Act, 1990. It would not be fair to disallow credit of input tax as a result of non-adherence to the provisions of section 73(ibid), and penalize this non-adherence under section 33(16)(ibid) also. It would amount to double jeopardy, which is guarded against under Article 13 of the Constitution of the Islamic Republic of Pakistan, 1973. We are fortified in our view by the following case-law: (i) 2010 PTD (Trib.) 2345 "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 appellant 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.50,000 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 @ 3% of the amount involved for technical contravention of the provision of section 73 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.". (ii) 2010 PTD (Trib) 975: "

13. The spirit and objective of section 73 of the Sales Tax Act, 1990, is to streamline the transactions of registered persons through banks 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, bill of entry .and purchase register, which are declared genuine and no allegation of fraud or bogus invoices has been levelled. It is settled proposition that the registered person may not be deprived from his legal money due against the Government when there is particularly no mis-statement, forgery, collusion, cheating, fraudulent activity 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. (14) 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 of tax involved, whichever is higher.". (15) 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." (iii) 2010 PTD (Trib) 2656: "

10. The said issue has been discussed by the hon'ble Customs, Excise and `Sales Tax Appellate Tribunal Islamabad Bench, as reported 2010 PTD (Trib.) 975 Islamabad, v. The Collector, Customs Sales Tax (Appeals), Islamabad and other the relevant para. reproduced hereunder:- "

13. The spirit and objective of section 73 of the Sales Tax Act, 1990, is to streamline the transactions of registered persons through banks and also to avoid the input tax adjustments 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 returns, purchase invoices, bill of entry and purchase register, which are declared genuine and no allegation of fraud or bogus invoices has been levelled. It is settled proposition that the registered person may not be deprived from his legal money due against the Government when there is particularly no mis-statement, forgery, collusion, cheating, fraudulent activity 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." (11) The above case-law is fully applicable in this appeal, as such we are of the considered opinion, by following the above dictum of hon'ble Appellate Tribunal, Islamabad Bench that the recovery of sales tax refund claims of Rs. 1,087,278 (which was already sanctioned by the Competent Authority) on the plea of non-compliance of section 73 of the Sales Tax Act, 1990 "alone" is found illegal, arbitrary and against the natural justice. It seems the appellant was condemned unheard, as evidence produced was not considered at a later stage, whereas the claim was already sanctioned by the Competent Authority, earlier, on the basis of same evidence.". (iv) 2010 PTD (Trib.) 1377: "

20. The respondents, through their additional comments as referred to above also tried to make it a case under section 73 of the Act while there has been no charge against the appellant, in the show-cause notice, for violation of the provisions of section 73 of the Act. The respondent are restricted to go beyond the grounds specified and incorporated in the charter of the show cause notice on terms of hallmark judgment of honourable Supreme Court of Pakistan reported as 1987 SCMR 1840."

22. Upshot of the discussion made above is that the Appellant/Regd. Person's claim of refund in respect of Tax Periods 02/2004, 04/2004 and 05/2004 has been rejected illegally and without lawful authority, which is ordered to be issued without further probe, and the impugned Orders-in-Appeals Nos. 104 to 106 of 2005, dated 30-11-2005, whereby the impugned Order-in-Originals Nos. 83, 80 and 81 of 2005, dated 29-6:2005 were upheld, are set at naught.

23. These Appeals thus succeed. C.M.A./175/Tax(Trib.)???????????????????????????????????????????????????????????? Appeals accepted.