APPELLATE TRIBUNAL INLAND REVENUE, SPECIAL DIVISION BENCH, PESHAWAR
STA No.26/PB/2020
(Tax Period April 2010 to July 2011)
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M/s F.B. Traders, H.No.102, New
Sarwar Gunj, Sunehri Masjid Road, Peshawar |
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Appellant |
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Vs |
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The Commissioner Inland Revenue
(Zone-I), RTO, Peshawar. |
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Respondent
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Appellant by: |
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Mr. Ishtiaq Ahmed, Advocate |
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Respondent by: |
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Mr. Ishfaq Ahmed, DR |
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Date of hearing: |
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22.10.2021 |
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Date of order: |
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22.10.2021 |
O R D E R
M. M. AKRAM (Judicial Member): The titled appeal has been filed by the
Appellant/registered person against Order-in-Appeal No.345 of 2015 dated
27.01.2015 passed by the learned Commissioner Inland Revenue (Appeals),
Peshawar on the grounds as set forth in the memo of appeal.
2. The brief facts culled out
from the record are that the appellant filed a sales tax refund claim of
Rs.8,551,005/- for the tax period 07/2011 under section 10 of the Sales Tax
Act, 1990 (hereinafter referred to “the Act”) against the input tax credit
carried forward in terms of section 3(2)(b) of the Act read with
SRO.180(I)/2011 dated 05.03.2011 pertaining to the period from April 2010 to
July 2011. A pre-refund audit of the claim was conducted under Rule 29(4) of
the Sales Tax Refund Rules, 2006. The audit team stated conducted a pre-refund
audit of the claim and reported on 28.09.2013 as under: -
a) That the refund claim was made based
on a lower rate of 50% leviable through SRO.180(I)/2011 dated 05.03.2011 which
was introduced as a result of Prime Minister Relief Package for war-torn areas
of FATA, PATA, and KP. Rule 58C(1) is an application to importers and debars
the refund of input tax over output tax (attributable to import stage) except
in dealing goods other than imported goods.
b) That the importer has apparently made forged documents of sales tax invoices as available on the file showing its supplies at the reduced rates of sales tax to avail the benefit of fiscal relief and resultantly to claim an illegal refund of sales tax on the basis of such differential rate.
c) That the purchases of the Registered Person have been verified 100% i.e. imported but all sales are made to un-registered persons which is unusual and creates doubts as to how this office is to be satisfied that the registered person has charged 8% sales tax from the buyers/consumers instead of 16%.
d) That the registered person has claimed that all the supplies have been made to one purchaser i.e. Mr. Akbar Ali S/o Quresh Khan resident of Landi Kotal, Khyber Agency which is incorrect. Copies of sales tax invoices as produced are showing that he has supplies to other purchasers too. The detail is given as under for the sake of record: -
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S.No. |
Name of
Purchaser |
Invoice No. |
Invoice Date |
Sales
Including Sales Tax |
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1 |
Mr. Farhan Zeb |
1 |
22.07.2009 |
Rs.1,386,904/- |
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2 |
Mr. Afaq |
2 |
-do- |
Rs.2,475,991/- |
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3 |
Mr. Shakeel |
3 |
-do- |
Rs.1,954,613/- |
e) That there are no addresses of the buyers are available on the copies of sales tax invoices even the name of the city. A few are placed on record for proof. This act of the taxpayer stands established his intention and a clear violation of section 23 and 3B of the Sales Tax Act, 1990.
f) That stamp paper on which affidavit of Mr. Akbar Ali S/o Quresh Khan resident of Landi Kotal is available has been purchased in the name of Mr. Akbar Ali S/o Multan Khan resident of Peshawar (Backside of Stamp Paper). Hence this stamp paper is invalid for the affidavit of Mr. Akbar Ali S/o Quresh Khan R/o Landi Kotal.
g) That the signature of the purchaser, Mr. Akbar Ali available on the affidavit is not tallied with the specimen signature on the copy of the CNIC.
h) That the purchaser Mr. Akbar Ali, maintains a bank account in Peshawar and all the transactions are being made through this bank while he claims his business activities in non-taxable territory.
i) That the bank statement of the purchaser Mr. Akbar Ali shows withdrawals and deposits of the same amount on the same day which creates doubt with reference to claim of payments on account purchase.
j) That the supplier and the buyer have failed to produce the evidence of delivery of goods at Landi Kotal in the shape of means of transportation.
k) That the taxpayer has declared same imports in Income Tax Return for the tax year 2010 and monthly sales tax return for the same as under: -
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Tax year |
Declared in Income Tax Return |
Monthly Sales Tax Return |
Difference |
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2010 |
Rs.73,541,220/- |
Rs.57,630,044/- |
Rs.15,911,176/- |
The difference in sales amounts to Rs.15,911,176/- shows the lesser declaration in Sales Tax Return for evasion of sales tax.
l) In view of the above-mentioned discrepancies, it is established that the refund claimant has failed to fulfill the conditions of section 3B, 23 of the Sales Tax Act, 1990 and suppressed sales tax on sales of Rs.15,911,176/-.
Furthermore, it is also a fact on record that the Assistant Political Agent, Khyber Agency and Additional Political Agent Khyber Agency vide their letters No.6219/APA-LKL dated 06.09.2013 and C.No.5410/AG/VR dated 16.09.2013 respectively reported that “As per inquiry report of Political Tehsildar Landi Kotal Mr. Akbar Ali S/o Quresh Khan belong to Khuga Khel section of Shinwari Tribe, Tehsil Landi Kotal Kyber Agency and is office-bearer (Munshi) with Naneeb, an Afghan Kochi. His office is situated at Sitara Market, Industrial Estate, Peshawar.”
The above-mentioned
discrepancies were communicated to the appellant by the respondent department
vide show cause notice dated 11.12.2013. After considering the written reply of
the appellant, the assessing officer passed assessment order No.32/2014 dated 25.03.2014
whereby a refund claim of Rs.8,551,005/- was stated as inadmissible and
rejected. Besides, a penalty equal to 100% of the amount of refund claim was
also imposed on the appellant under section 33(11) of the Act. Felt aggrieved,
the Appellant registered person preferred the appeal before the learned CIR(A)
who decided the appeal of the registered person vide Order in Appeal No.345 of
2015 dated 27.01.2015. Being aggrieved of the said order, the appellant has
filed the appeal before this Tribunal and assailed the impugned order on a
number of grounds.
3. The case was heard on 22.10.2021. Learned
AR reiterated the contentions already submitted in the grounds of appeal as set
forth in the memo of appeal. On the other hand, learned DR vehemently opposed
the appeal on the ground that learned Commissioner (Appeals) has passed a
speaking order and there is no illegality or lacuna in his order. He,
therefore, pleaded that the appeal be dismissed.
4. We have heard both the parties in detail
and perused the record with their assistance. The perusal of the record shows
that the appellant filed the appeal against the impugned appellate order passed
by the learned CIR(A) but none of the findings of the learned CIR(A) have
specifically been challenged in the grounds of appeal. The ditto copy of the
grounds taken before the learned CIR(A) has been placed before this Tribunal
with the same prayer. Further, the record shows that the appellant is habitual,
on a previous occasion as well, it had claimed a refund of Rs.5,809,003/- for
the tax period June, 2013 on the basis of the fake and forged documents, when
confronted by the department, the appellant filed a written request for
withdrawal of refund claim. Resultantly, the proceedings culminated in passing
the assessment order bearing No.32/2014 dated 15.10.2015 wherein the refund
claimed by the registered person was rejected along with the imposition of
penalty under section 33(11) of the Act equal to 100% of the refund amount by
treating the same to be claimed on the basis of fake and forged documents. The
appellant preferred the appeal against the said order before the learned CIR(A)
who rejected the same. The appellant went in appeal before this Tribunal
whereby the appeal bearing STA No.48/PB/2016 vide order dated 05.05.2017 was
accepted and the penalty imposed by the department was deleted. Now, again on
the same set of circumstances, the appellant has come before this court expecting
a similar relief. By now, it is established that he is undoubtedly a repeat offender
and instead of showing any remorse he still expects to earn a premium by
abusing the process of law. The Courts of
law are meant for imparting justice on an equal basis between the parties. One,
who comes to the Court, must come with clean hands. It can be said without
hesitation that a person like the appellant whose case is based on repeated
deceptive behavior must also be cautious of extreme adverse consequences before
approaching the court. He can be summarily thrown out at any stage of the
litigation.
5. We tend to agree with the findings of the
learned CIR(A) which read as under: -
“7…………………Perusal of case record reveals that the appellant has declared all supplies to Mr. Akbar Ali of Landi Kotal who was found “Munshi” with an Afghan Kochi in Sitara Market, Industrial Estate, Peshawar as reported by Assistant Political Agent and Additional Political Agent, Khyber Agency vide their letters No.6219/APA-LKL dated 06.09.2013 and C.No.5410/AG/VR dated 16.09.2013 respectively. Stamp paper submitted by the appellant on behalf of their buyer was also found fake by the respondent department. Furthermore, the appellant and their buyer have maintained bank accounts in the same bank branch i.e Soneri Bank Ltd, Main Branch, Saddar Road, Peshawar Cantt: and in both the bank statements, deposits, and withdrawals of amount pertaining to the transactions are made on the same time and date. In addition, the appellant also failed to produce records including transportation documents to verify the supply of goods to Mr. Akbar Ali, who is a resident of a non-tariff area. Difference of Rs.15,911,176/- in Income Tax Return viz-a-viz Sales Tax Returns also substantiates the department’s stance that supplies are made at a slandered sales tax rate of 16%. In view of the foregoing, I am of the considered opinion that there is sufficient evidence which confirms that the appellant has claimed a refund on the basis of fake supportive documents, and rejection of the claim vide order under appeal is found in accordance with law.”
It clearly emerges that the
provision of section 33(11) of the Act has been enacted with a view to check
evasion of tax by a registered person who is found carrying business with fake
and forged documents. It is now realised that unless an element of deterrence
is introduced in so far as is necessary and unless the consequence of breach
turns into the penalty of sufficiently effective measures, there shall be no
real method of ensuring proper and effective enforcement of the law. It will
not be correct to protect a tax evader/fraudster saying that there is the
absence of mens rea. The apex Court in the D.P. Metals[1]
case has rejected the submissions regarding the absence of mens rea by
observing that the submission of false or forged documents or declaration at
the check-post or even thereafter can safely be presumed to have been motivated
by a desire to mislead the authorities. The Court further observed that hiding
the truth and tendering falsehood would per se show the existence of mens rea,
even if required. The requirement of the laws is meant to be strictly construed
particularly in the areas of evasion of tax and committing tax fraud. We cannot
lose sight of the fact that often there are attempts to avoid statutory
obligation or requirement for an oblique reason. An undue indulgence and
leniency in favour of the tax evaders/fraudsters on the technical or misplaced
sympathetic ground leads to serious consequences affecting the revenue and, as
such, cause embarrassment for the State of Pakistan at national and
international levels. We are not oblivious of the fact that the penalty
provisions cannot be used as a revenue-yielding provision. The object of the
penalty provisions is to ensure compliance in the larger public interest. We
are also conscious of the fact that in such a situation, a trader or the
registered person is also not unnecessarily harassed. Nevertheless, in the
instant matter, we are of the opinion that it is in the best interest of the
public that the appellant is dealt with iron hands.
6. This is a case wherein forgery/fraud has
been perpetrated on revenue by the appellant registered person with an intent
to get an inadmissible refund. An act of fraud on Revenue is always viewed
seriously. "Fraud" and collusion vitiate even the most solemn proceedings
in any civilized system of jurisprudence. It is a concept descriptive of human
conduct either by letter or words, which includes the other person or authority
to take a definite determinative stand as a response to the conduct of the
former either by words or letter. It has been held by Apex Court in the case of
Commissioner
of Customs, Kandla v. Essar Oil Ltd,[2] that by
"fraud" is meant an intention to deceive; whether it is from any
expectation of advantage to the party himself or from the ill-will towards the
other is immaterial. The expression "fraud" involves two elements,
deceit, and injury to the deceived. The undue advantage obtained by the
deceiver will almost always cause loss or detriment to the deceived. Similarly,
a "fraud" is an act of deliberate deception with the design of
securing something by taking unfair advantage of another. It is a deception in
order to gain by another’s loss. It is cheating intended to get an advantage as
held in S.P. Chengalvaraya Naidu v. Jagannath[3].
In a leading English case i.e. Derry
and Ors. v. Peek[4], what constitutes "fraud" was
described thus: (All ER p. 22 B-C) "fraud" is proved when it is shown
that a false representation has been made (i) knowingly, or (ii) without belief
in its truth, or (iii) recklessly, carelessly whether it be true or
false". This aspect of the matter has been considered by Apex Court in Roshan Deen v. Preeti Lal[5], Ram Preeti Yadav v. U.P. Board of High School
and Intermediate Education[6], and Ashok Leyland Ltd. v. the State of T.N. and
Another[7]. Suppression
of a material document would also amount to fraud on the court, as held in Gowrishankar
v. Joshi Amha Shankar Family Trust[8],
and S.P.
Chengalvaraya Naidu's[9]
case. No judgment of a Court can be allowed to stand if it has been obtained by
fraud. Fraud unravels everything and fraud vitiates all transactions known to
the law of however high a degree of solemnity.
7. A time has come when the courts cannot
afford to take an unduly lenient view of contravention of the provisions
enacted by the Legislature to prevent fraud against public revenues. One can
understand (even if one cannot condone) a poor person finding himself cornered
in circumstances of economic distress committing an offence against property.
It is an aberration born out of compulsion of circumstances. One can understand
an offence against the person of an individual committed on account of the
emotions of an individual getting better of his reason when passion occasions a
complete blackout and makes him oblivious of his obligations towards the
society. When, however, offences against public revenues are committed by
businessmen with deliberation, no lenient view of the matter can be taken by
the courts. Let it not be forgotten that the public revenues collected by way
of taxes from the citizens are inter alia employed by the State for ensuring
that the citizens are not deprived of their right to possess property. If
offences against public revenue are committed by businessmen, it would amount
to robbing the State which prevents them from being robbed by others. This
cannot be countenanced. It undermines the faith of the people in the
establishment and the judicial system. It is in no small measure on account of
evasion of taxes by persons who are liable to pay taxes and who can afford to
pay taxes that the economic progress of the people as a whole is hindered. And
every day of delay creates frustrations and unleashes movements which endanger
the safety of the businessmen themselves as also of others who hold property.
It is, therefore, in the interest of society as a whole that the provisions
contained in the revenue laws for bringing to book the culprits who commit
offences against public revenues are administered with the seriousness that
they deserve.
8. The provisions of section 33(11) of the
Act prescribes the penalty if a person inter
alia commits fraud, he shall pay a penalty of twenty-five thousand rupees
or one hundred percent of the amount of tax involved, whichever is higher. He
shall further be liable, upon conviction by a Special Judge, to imprisonment
for a term which may extend to three years or with a fine which may extend to
an amount equal to the amount of tax involved or with both. If the courts were
to impose merely fines, a businessman would weigh the risk run by him as
against the advantage to be secured by him. If he can save thousands of rupees
by evading the payment of taxes, he would not mind paying small fines which
will on balance result in a profit to him. It is in such matters that the
deterrent theory of punishment must be invoked. It must be a deterrent to the
offender and it must be a deterrent to like-minded culprits. A situation must
be created where intending offenders realise that it does not pay to evade
taxes and to commit offences against revenue laws. Otherwise, the sentencing
policy of the courts will render the provisions, which have been embedded in
the revenue laws with an eye on ensuring that no contravention is committed of
the relevant provisions, a dead letter in the statute-book. On principle,
therefore, contraventions of such provisions must be dealt with firm resolution
and iron hand. We find that in the instant case the imposition of a one hundred
percent penalty of the amount of tax involved is proportionate and justified.
9. Before parting with this judgment, we note
with great pain that the department appears to have abstained from initiating
criminal prosecution against the appellant on the allegation of forgery and
using forged documents, etc. We understand that the department must have put
the prosecution on hold in good faith until the determination of facts by this
Tribunal. However, we find that in the case of a repeat offender with clear-cut
evidence of deception, the department may always consider initiating criminal
proceedings against genuine culprits at a little early stage but after
following due process of law. Nevertheless, this observation does not affect
the right of the department to embark on hard-core criminal prosecution at any
stage of the case.
9. In view
of the entire above discussions, there is no infirmity in the order-in-original
as well as impugned order in appeal. Accordingly, the appeal of the appellant
is dismissed and the order passed by the learned CIR(A) is maintained.
10. This order
consists of (10) pages and each page bears my signature.
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CERTIFICATE U/S 5 OF THE LAW REPORT ACT
This case is fit for reporting
as it settles the principles highlighted above.
(M. M. AKRAM)
JUDICIAL
MEMBER
[1] (2001) 124 STC 611
[2] 2004 (172) E.L.T. 433(S.C)
[3] 1994 (1) SCC 1
[4] (1886-90) All ER-1
[5] (2002) 1 SCC 100
[6] (2003) 8 SCC 311
[7] (2004) 3 SCC 1
[8] (1996) 3 SCC 310
[9] AIR 1994 SC 853
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