APPELLATE TRIBUNAL INLAND REVENUE, SPECIAL BENCH, PESHAWAR
STA
No.48/PB/2014
(Tax Period 04/2011
& 06/2012)
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Commissioner Inland
Revenue, Zone-III, RTO, Peshawar. |
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Appellant |
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Vs |
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M/s M. J Plastic
Industries; Plot No.71-72, Industrial Estate, Jamrud Road, Peshawar. |
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Respondent
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Appellant
By: |
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Mr. Ashfaq Ahmed, DR |
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Respondent
By: |
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Mr. Danish
Ali Qazi, Advocate |
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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 |
STA
No.51/PB/2014
(Tax Period 04/2011
& 06/2012)
*******
|
M/s M. J Plastic
Industries; Plot No.71-72, Industrial Estate, Jamrud Road, Peshawar. |
|
Appellant |
|
|
Vs |
|
|
Commissioner Inland
Revenue, Zone-III, RTO, Peshawar. |
|
Respondent
|
|
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|
|
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Appellant
By: |
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Mr. Danish Ali Qazi, Advocate |
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Respondent
By: |
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Mr. Ashfaq
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):
These cross-appeals have been filed by the Department and registered
person against the same impugned Order-in-Appeal No.121 of 2014 dated
10.03.2014 passed by the learned Commissioner Inland Revenue (Appeals),
Peshawar for the tax periods 04/2011 and 06/2012 on the grounds as set forth in
their respective memo of appeals.
2. Brief facts giving rise to the appeal are
that the registered person filed applications under Rule 34(d) of the Sales Tax
Refund Rules, 2006 and claimed the sales tax refund of Rs.11,075,684/- and
Rs.14,254,956/- for the tax periods 04/2011 and 06/2012 respectively under
section 10 of the Sales Tax Act, 1990 (“the
Act”) against the input tax credit carried forward in terms of SRO
No.165(I)/2010 dated 05.03.2010 as amended through SRO 180(I)/2011dated 05.03.2011.
To determine the admissibility of the claim, the case of the registered person
was sent to audit for pre-refund audit in terms of section 10(3) of the Act
read with Rule 29(4) of the Sales Tax Refund Rules, 2006 by the Additional
Commissioner Inland Revenue (ACIR)
vide his letter dated 02.01.2013 read with Deputy Commissioner Inland Revenue (DCIR) letter dated 09.01.2013. In
consequence of the directions of the aforesaid authorities, the pre-refund
audit was conducted by the Inland Revenue Audit Officers and the audit report
was accordingly prepared on 13.02.2013 after considering the record of the
registered person and submitted to the DCIR for further processing thereof. In
the said audit report, it was found a refund of Rs.20,797,698/- admissible under
the law out of the total refund claim of Rs.25,330,640/-. On receipt of the
said audit report, the concerned ACIR returned the case to the Audit Division
on 05.04.2013 for review of the audit report with the following remarks: -
“The audit team cannot
prove that the burden of 8% has been passed on to the consumer and if it is
possible for the audit team then as per section 3B(3), the taxpayer has to
prove that the burden of 8% has been passed on to the consumer.
i. Under section 3B(3) of the Sales Tax Act, 1990, “ the burden of proof that the incidence of tax or charge referred to in sub-section (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge.
In
compliance with the above direction, the Inland Revenue Audit Officer in a single
capacity has reviewed the audit report already prepared by the two Audit
Officers and consequently rejected the same by observing that the registered
person is not entitled to any refund. Based on the said reviewed pre-refund
audit report, the Assessing Officer issued the show-cause notice to the
registered person and after considering the reply of the registered person,
passed an assessment order No.43/2013 dated 05.12.2013 whereby the refund of
Rs.25,330,640/- was rejected. Felt aggrieved with this order, the registered
person preferred an appeal before the learned CIR(A) who vide order dated
10.03.2014 accepted the refund of the registered person determined by the audit
team vide audit report dated 13.02.2013 and imposed a penalty under section
33(19) of the Act which in fact was not originally imposed by the Assessing
Officer. Being aggrieved of the said impugned appellate order, the Appellant
Department and the registered person both have now come up before this Tribunal
and assailed the appellate order on the basis of their respective grounds of
appeals.
3. This case came up for hearing on 22.10.2021.
The learned DR appeared on behalf of the Department while arguing his appeal
submits that the learned CIR(A) has erred in law in passing the impugned order
on the basis of the original pre-refund audit report dated 13.02.2013 prepared
by two Inland Revenue Audit Officers whereas on the direction of the concerned
ACIR the review pre-audit refund report was prepared by an Inland Revenue Audit
Officer whereby the refund claimed by the registered person was rejected in
toto. Based on the review pre-refund audit report the original assessment order
was passed. He argues that the registered person has collected excess tax and
not deposited it to the Government treasury in violation of section 3B of the
Act so the registered person must establish that the incidence of tax has not
been passed on to the end consumer. Notwithstanding the aforesaid, the learned
DR states that the registered person has not mentioned the complete addresses
of the unregistered buyer on the sales tax invoices issued to them as required
under section 23(1)(b) of the Act therefore, it is not entitled to claim any
refund.
4. On the other hand, the learned AR of the
registered person has opposed the submissions of the DR and submits that
neither the provisions of the Sales Tax Act, 1990 nor the rules made thereunder
has vested with any power to the ACIR to review the audit report.
Notwithstanding the aforesaid, he submits that an earlier pre-refund audit was
conducted by two Inland Revenue Audit Officers and the review was conducted by
an Inland Revenue Audit Officer in a single capacity. He explains that an Audit
Officer cannot review and override the findings of the two Audit Officers. He,
therefore, contends that the review audit report is even otherwise illegal and
void ab-initio. Thus, the superstructure based thereon in the shape of the assessment
order and impugned appellate order automatically falls to the ground. In
response to the other contentions of the learned DR, the AR has supported the
order of the learned CIR(A).
However, the learned AR for the registered person while
arguing his appeal submits that the penalty imposed by the learned CIR(A) under
section 33(19) of the Act is unsustainable in law as firstly the same was not
confronted to the registered person and secondly, the penalty was not imposed
by the Assessing Officer so, it was not the subject matter of the appeal.
Hence, the penalty imposed by the learned CIR(A) is illegal and void ab-initio.
Further contends that the pre-refund audit conducted by the department had
become barred by time after the expiry of the statutory time prescribed in section
10(3) of the Sales Tax Act, 1990.
5. We have heard both the parties and perused
the relevant record with the help of the assistance of both parties. Keeping in
view the arguments advanced by the parties and after going through the
available record, we now frame the following issues for our consideration:-
i. Whether the Additional Commissioner Inland Revenue has the power under the Sales Tax Act, 1990 and the Rules made thereunder to direct the Inland Revenue Audit Officer to review the pre-refund audit report prepared by two Inland Revenue Audit Officers?
If the answer to the above question is in affirmative then whether the audit conducted by the two Inland Revenue Audit Officers can be reviewed by an Inland Revenue Audit Officer in his single capacity and override the findings of the two Audit Officers?
ii. Whether under the facts and in the circumstances of the case, the legitimate refund of the registered person can be rejected on the ground that the sales tax invoices issued to the unregistered persons/buyers are defective in terms of section 23(1)(b) of the Sales Tax Act, 1990?
iii. Whether under the facts and in the circumstances of the case, the provisions of section 3B of the Sales Tax Act, 1990 are applicable while deciding the refund claimed by the registered person in terms of SRO No.165(I)/2010 dated 10.03.2010 as amended through SRO 180(I)/2011dated 05.03.2011?
iv. Whether the refund applications filed by the registered person had become barred by time in terms of section 10(3) of the Act read with Chapter-V of the Sales Tax Rules, 2006?
v. Whether under the facts and in the circumstances of the case, the learned CIR(A) has erred in law in imposing the penalty to the registered person under section 33(19) of the Act, 1990?
6. ISSUE
NO. (i)
Whether the Additional Commissioner Inland Revenue has the power under the Sales Tax Act, 1990, and the Rules made thereunder to direct the Inland Revenue Audit Officer to review the pre-refund audit report prepared by two Inland Revenue Audit Officers?
Facts:-
The
admitted facts are that the registered person is engaged in the manufacturing
of plastic mats and sales thereof. To rehabilitate the economic and business
activities in KPK, FATA, and PATA, the worthy Prime Minister in the exercise of
its powers under sub-section (2) of section 13 of the Sales Tax Act, 1990
(“Act”), issued SRO 165(1)/2010 dated 10.3.2010 (“SRO 165”), provided an exemption of 50% of the leviable rate of
sale tax on taxable supplies made other than certain specified goods in “most
affected areas in the war on terrorism” twelve districts of Khyber Pukhtunkhwa,
including District Peshawar (“Affected Areas”). The said SRO 165 reads as
under:-
“In exercise of the powers conferred by clause (a) of sub-section (2) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to exempt fifty percent of the leviable rate of sales tax on supplies made of goods, other than cement, sugar, beverages, and cigarettes, by the registered persons located in districts of Hangu, Bannu, Tank, Kohat, Chitral, Charsadda, Peshawar, Dera Ismail Khan, Batagram, Lakki Marwat, Swabi, and Mardan.”
Later,
the Federal Government, while exercising its authority under sub-section (2) of
section 3 of the Act and in supersession of the exemption provided under SRO
165, was pleased vide SRO 180(1)/2011 dated 05.03.2011 (“SRO 180”) to specify that the sales tax was to be charged at a
lower rate of 50% of the rate leviable under subsection (1) of Section 3 of the
Act on taxable supplies made in the Affected Areas. SRO 180 reads as follows: -
“In exercise of the powers conferred by clause (b) of sub-section (2) of section 3 of the Sales Tax Act, 1990 and in supersession of its Notification No.S.R.O. 165(10/2010, dated 10th March 2010, the Federal Government is pleased to specify that sales tax shall be charged at the lower rate of fifty percent of the rate leviable under sub-section (1) of the said section on the supplies made of goods, other than cement, sugar, beverages, and cigarettes, by the registered persons located in districts of Hangu, Bannu, Tank, Kohat, Chitral, Charsadda, Peshawar, Dera Ismail Khan, Batagram, Lakki Marwat, Swabi, Nowshera and Mardan. The notification shall take effect on and from the 10th March, 2010.”
The
only but crucial difference between the ‘benefits’ provided under SRO 165 and
SRO 180, was that the latter was restricted to 50% of the leviable rate of
sales tax specified under subsection (1) of Section 3 of the Act, while the
former had no such restriction. However, the incidence of sales tax in both the
SROs was the same. In compliance with the aforesaid SROs, the registered person
while making taxable goods to the unregistered persons; charged the sales tax @
8.5% on the supplies made to them and claimed the credit of input tax paid @
17% at the time of purchase of raw materials through imports and local purchases
for manufacturing the taxable goods i.e plastic mates. Accordingly, excess
carry forward refund of input tax was claimed by the registered person in the
tax periods 04/2011 and 06/2012 amounting to Rs.11,075,684/- and
Rs.14,254,956/- respectively under the prescribed procedure. To determine the
admissibility of the claim, the case of the registered person was sent to audit
for pre-refund audit in terms of section 10(3) of the Act read with Rule 29(4)
of the Sales Tax Refund Rules, 2006 by the Additional Commissioner Inland
Revenue (ACIR) vide his letter dated
02.01.2013 read with Deputy Commissioner Inland Revenue (DCIR) letter dated 09.01.2013. In consequence of the directions of
the aforesaid authorities, the pre-refund audit was conducted by the Inland
Revenue Audit Officers and the audit report was accordingly prepared on
13.02.2013 after considering the record of the registered person and submitted
to the DCIR for further processing thereof. In the said audit report, it was
found a refund of Rs.20,797,698/- admissible under the law out of the total
refund claim of Rs.25,330,640/- by the registered person. On receipt of the
said audit report, the concerned ACIR returned the case to the Audit Division
on 05.04.2013 for further review of the audit report. In compliance with the
aforesaid direction, the Inland Revenue Audit Officer has reviewed the audit
report already prepared by the two Audit Officers and consequently rejected the
claim of refund in toto by observing that the registered person is not entitled
to any refund.
Relevant Law
Section 10: Refund of input tax.– (1) If
the input tax paid by a registered person on taxable purchases made during a
tax period exceeds the output tax on account of zero-rated local supplies or
export made during that tax period, the excess amount of input tax shall be
refunded to the registered person not later than forty-five days of the filing
of refund claim in such manner and subject to such conditions as the Board may,
by notification in the Official Gazette specify:
Provided that in case of excess input tax against supplies other than zero-rated or exports, such excess input tax may be carried forward to the next tax period, along with the input tax as is not adjustable in terms of sub-section (1) of section 8B, and shall be treated as input tax for that period and the Board may, subject to such conditions and restrictions as it may impose, by notification in the Official Gazette, prescribe the procedure for refund of such excess input tax.
Provided further that
the Board may, from such date and subject to such conditions and restrictions
as it may impose, by notification in the Official Gazette, direct that refund
of input tax against exports shall be paid at the fixed rates and in the manner
as notified in such notification.
(2) …………………………
(3) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the proceedings against him shall be completed within sixty days. For the purposes of inquiry or audit or investigation regarding admissibility of the refund claim, the period of sixty days may be extended up to one hundred and twenty days by an officer, not below the rank of an Additional Commissioner Inland Revenue and the Board may, for reasons to be recorded in writing, extend the aforesaid period which shall in no case exceed nine months.” (Emphasis supplied)
Section 45A. Power of the Board and
Commissioner to call for records.-- (1) The Board may, of
its own motion, or otherwise call for and examine the record of any
departmental proceedings under this Act or the rules made thereunder for the
purpose of satisfying itself as to the legality or propriety of any decision or
order passed therein by an Officer of Inland Revenue, it may pass such order as
it may think fit:
Provided that no order imposing or enhancing any penalty or fine requiring payment of a greater amount of sales tax than the originally levied shall be passed unless the person affected by such order has been given an opportunity of showing cause and of being heard.
(2) …………………
(3) …………………
(4) The Commissioner may, suo moto, call for and examine the record of any proceeding under this Act or the rules made thereunder for the purpose of satisfying himself as to the legality or propriety of any decision or order passed by an officer of Inland Revenue subordinate to him, and pass such order as he may deem fit.”
The
prescribed procedure for filing the refund application by the registered person
and on receipt of the application, how it is to be processed, sanctioned and
payment of the refund by the Officers of Inland Revenue have been given in
Chapter-V of the Sales Tax Rules, 2006. Rule 29 of the said Rules are also relevant
for the subject issue which reads as under:-
“29. Scrutiny and processing of refund c1aim.-- (l) On submission of
a refund claim, the Refund Receipt Section shall confirm that the claim is
complete in all respects, after which it shall be loaded in the system for
assigning the claim a unique identification number.
(2) After assigning
the unique identification number, the CREST shall cross-match the data on soft
copy with the data available in the system and process the claim by applying
the risk parameters and generate an analysis report indicating the admissible
amount as well as the amount not validated on the basis of automated risk
criterion along-with the objections raised by the system.
(3) The processing
officer shall forward the claim file along with the analysis report referred to
in sub-rule (2) to the officer-in-charge for further necessary action.
(4) Where the Processing Officer or the officer-in-charge is of the opinion that any further inquiry or audit is required in respect of amount not cleared by the CREST or for any other reason to establish genuineness and admissibility of the claim, he may make or cause to be made such inquiry or audit as deemed appropriate, after seeking approval from the concerned Additional Commissioner and inform the refund claimant accordingly.”
Opinion: -
As
already stated above in the facts, on receipt of the refund applications by the
registered person, in order to determine the admissibility of the claim of
refund in terms of section 10(3) of the Act read with Rule 29(4) of the Sales
Tax Rules, 2006 the Additional Commissioner Inland Revenue (ACIR) sent the case to the Audit Division for pre-refund audit. In consequence thereof, the pre-refund
audit was conducted by the two Inland Revenue Audit Officers and the audit
report was accordingly prepared on 13.02.2013 wherein after considering the
record of the registered person as prescribed under 22 of the Act, the Audit
Officers inter alia observed in
paragraphs 9 and 11 of the report as under:-
“9. SALES AND APPLICATION OF SECTION 3B
It is worth mentioning
that the sales tax was reduced @ 8.5% effective from March 10, 2010, vide SRO
No.165(I)/2010 as amended through SRO No.180(I)/2011 dated March 05, 2011.
Hence the registered person falling in the specified areas under the above-mentioned
SROs are required to charge the sales tax @ 50% of sales tax on all supplies
made by the registered persons. The sales record of the registered person was
perused and checked in detail to see the following aspects:-
i.
Whether or
not the sales Tax @ 8.5% is applied on all sales made during the period.
ii.
Whether or
not the benefit of SROs is passed on to the consumer.
iii.
Whether or
not genuine sales were made to persons and are reflected in the cash book/bank
statement of the registered person.
Scrutiny of the sales tax returns comprising of the period commencing from April, 2010 to June, 2012 was made and found that all sales were made to the unregistered persons. Further scrutinized the following record of the registered person with:-
a)
Sales tax invoices with the supply
register of the company and the total of such invoices are reconciled with the
Annexure-C of the sales tax returns.
b)
Sales invoices were also checked
from the dispatch record and found that the sales were made to the retailers.
On inquiry, it was found that the registered person deals in the supply of
plastic mates, and such items are sold to end consumers through shop
keepers/retailers who are a mostly unregistered person.
c)
To counter check the sales made to
unregistered persons, the audit team examined the cash book and bank statements
which testify that the amount received from buyers have been properly recorded
in the cash book and then the amount has been deposited in the bank accounts as
mentioned below:-
………………………………..
……………………………….
……………………………….
It reveals from the above, that the registered person has received
less amount in the bank against the supplies made during the periods April,
2010 to June, 2012 and the reasons for the differential amount of
Rs.30,636,801/- are expenses which are paid by the registered person during the
period in question.
11. ADMISSIBILITY OF SALES TAX REFUND FROM APRIL, 2010 TO JUNE,
2012.
Total input tax. Rs.48,248,028/-
Less:
Output tax. Rs.19,433,521/-
Input tax consumed on exports. Rs. 4,962,249/-
In admissible input tax. Rs. 4,532,942/-
Total. Rs.28,928,712/-
Add
sales tax deposited under section 8B. Rs. 1,478,382/-
Admissible refund. Rs.20,797,698/-
It is
concluded that the refund of an amount of Rs.20,797,968/-
is found admissible as per the above report and the pre-refund audit report may
kindly be submitted to DCIR E & C-I, for processing thereof subject to verification
from STARR under section 10 of the Sales Tax Act, 1990 read with Refund Rules,
2006 as notified SRO 555(I)/2006 dated 05.06.2006.”
On receipt of the above audit report, the concerned ACIR
returned the case to the Audit Division on 05.04.2013 for further review of the
audit report. The learned AR for the registered person submits that ACIR had no authority to review the pre-refund audit report dated
13.02.2013 prepared by the two Inland Revenue Audit Officers in terms of
section 10(3) of the Act read with Rule 29(4) of the Sales Tax Rules, 2006 and
for satisfaction in respect of legality or propriety of pre-refund audit
report, the jurisdiction of the Commissioner or the Board could have been
invoked under section 45A of the Sales Tax Act, 1990, instead of review by the Inland
Revenue Audit Officer, which is absolute without jurisdiction. In order to
appreciate this argument of the learned Counsel, we have to see the provisions
of section 45A of the Act reproduced above. A perusal of above-mentioned
provisions of section 45A of the Sales Tax Act, 1990, shows that in case, any
impropriety or illegality is observed in any order or decision passed by an
Officer of Inland Revenue subordinate to Federal Board of Revenue or the
Commissioner, it should have been checked by the Federal Board of Revenue or by
the Commissioner himself by exercising their revisional jurisdiction under
section 45A of the Act. There is no other provision in the Sales Tax Act or the
rules made thereunder authorizing a sales tax functionary to review his own
findings and the provisions of section 45A do not empower any other authority
subordinate to the Federal Board of Revenue or to the Commissioner to review any
decision or order passed lawfully. Therefore, the review of the pre-refund
audit report by the Inland Revenue Audit Officer and particularly in a single
capacity has no revisional jurisdiction in this case under the law. The act of
sanction or rejection of a refund claim falls within the preview of the word
"proceedings". In general parlance, all happenings and events before
a Tribunal or Authority on whose jurisdiction is conferred by law to dispose of
contentious matter are covered by the term "proceedings". In this
regard, we find ourselves in agreement with the observations of this Tribunal passed
in its judgment reported as M/s Ashar International (Pvt.) Ltd.,
Faisalabad v. C.I.R., Faisalabad, (2011 PTD 2347). Thus, the answer
to issue No. (i) is in negative.
7. ISSUE
NO. (ii)
Whether under the facts and in the circumstances of the case, the legitimate refund of the registered person can be rejected on the ground that the sales tax invoices issued to the unregistered persons/buyers are defective in terms of section 23(1)(b) of the Sales Tax Act, 1990?
Opinion:
To give an opinion on the issue, we have to first see the purpose
of issuance of sales tax invoice in the prescribed form as required under
section 23 of the Act keeping in view the scheme of the statute. The
legal framework is that sales
tax on goods under the Act is paid under a value-added tax (VAT) mode. The
purpose of imposing a tax under VAT mode is to ensure that each taxpayer only
pays sales tax on the value it adds to a product or material. This is only
possible if each taxpayer can deduct the input tax it has paid on any goods
consumed, or services received, by it for the purposes of manufacturing,
producing, or marketing the goods it sells, from the output tax payable by it
on those goods. One of the essential features of VAT mode of taxation is the
passing on the input tax, to be credited against output tax, till the final
output tax is borne by the ultimate consumer under section 7(1) of the Act,
1990. Under this provision, for the purposes of calculating its final tax
liability, a registered person is entitled to deduct input tax paid or payable
during a tax period for the purpose of making taxable supplies against the
output tax paid or payable by it for that tax period on those taxable supplies.
The tax which is paid or payable by the registered person at the time of
purchases is called "Input Tax" as per section 2(14) of the Act and
is adjustable against output tax chargeable on the supplies of finished
products. Thus, under the scheme
of the Act, a manufacturer is entitled to claim an input tax credit for sales
tax on purchases paid or payable against the output tax on the sales of its
products, which is payable to the Federal Government, in order to calculate its
final tax liability under Section 7 of the Act. For the purpose of claiming
input tax, a registered person is required inter alia in terms of sub-section
(2) of section 7 ibid read with section 23 of the Act to hold a sales tax
invoice in his name, bearing his registration number and his address on it,
otherwise, such registered person would not be entitled to claim input tax. So the valid sales tax invoice is necessary
only for the purposes of claiming credit of input tax against the output tax.
Now, applying the aforesaid legal test in the
instant case, it is established that there is no dispute according to the
pre-refund audit report dated 13.02.2013 that the registered person has claimed
the credit of input tax for the tax periods under consideration amounting to Rs.48,248,028/- against valid sales tax invoices and imports of
GDs. Therefore, according to section 7 of the Act, the registered person is
entitled to claim the credit/refund of input tax against the output tax liability.
The only objection of the department is that the registered person had issued
the invoices to the unregistered buyers without incorporating their complete
addresses thereon so it is not entitled to claim credit or refund of input tax.
This objection on the part of the department is illegal, unwarranted, void
ab-initio, and contrary to the provisions of sub-section (2) of section 7 ibid
and the scheme of the law. However, under the scheme of the law, the valid
invoices are required to be issued only those registered person who wants and
intends to claim an input tax credit against determining their output tax
liability under section 7. The unregistered person/end consumer is not required
to hold any sales tax invoice for the reason that he is not entitled to claim
any input tax. So the invoices issued to unregistered persons have no legal
effect under the law.
For what has been discussed above, the answer to issue No. (ii) is
in negative.
8. ISSUE No. (iii)
Whether under the facts and in the circumstances of the case, the provisions of section 3B of the Sales Tax Act, 1990 is applicable while deciding the refund claimed by the registered person in terms of SRO No.165(I)/2010 dated 10.03.2010 as amended through SRO 180(I)/2011dated 05.03.2011?
Relevant Law
“Section 3B. Collection of excess sales tax
etc.– (1)
Any person who has collected or collects any tax or charge, whether under
misapprehension of any provision of this Act or otherwise, which was not payable
as tax or charge or which is in excess of the tax or charge actually payable
and the incidence of which has been passed on to the consumer, shall pay the
amount of tax or charge so collected to the Federal Government.
(2) Notwithstanding
anything contained in any law or judgment of a court, including the Supreme
Court and a High Court, any amount payable to the Federal Government under
sub-section (1) shall be deemed to be an arrear of tax or charge payable under
this Act and shall be recoverable accordingly and any claim for refund in
respect of such amount shall neither be admissible to the registered person nor
payable to any court of law or to any person under the direction of the court.
(3) The burden of proof that the incidence of tax or charge referred to in sub-section (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge.
Opinion:
The point of difference between the two sides is whether the
registered person excess collected sales tax from its unregistered persons. The
learned DRs for the Department has relied upon sub-section (3) of section 3B of
the Act. It also needs examination whether in terms of the Notifications the registered
person was obliged to sell its goods at a lower rate of sales tax i.e @ 8.5%.
To attract the provisions of section 3B of the
Act it must be established that the registered person had collected excess sales
tax on the supplies made by it. The learned CIR(A) had found that the registered
person had neither charged nor collected excess sales tax. The CIR (A) had
further held that the Department had not produced any evidence to indicate that
the registered person had charged or collected excess sales tax from its unregistered
buyers. In this regard, the learned CIR(A) had determined as under:
“9………….. Major allegation leveled
by the respondent department on the appellant is that they have collected
excess sales tax and not deposited into Government treasury in violation of
section 3B of the Sales Tax Act, 1990. However, this charge has not supported by
any documentary evidence rather at S.No.9 of the aforementioned audit report
compliance of section 3B of the Sales Tax Act, 1990 was confirmed wherein after
checking of Sales Invoices, Supply Register, sales Tax Returns, Cash Book and
Bank Statements of the appellant taxpayer it was verified that reduced rate of
8.5% has been charged and collected from the un-registered buyers in terms of SRO No.165(I)/2010 dated 10.03.2010 read with
SRO 180(I)/2011dated 05.03.2011. the allegation of the department for excess
sales tax collection and violation of section 3B of the Sales Tax Act, 1990 is,
therefore, contrary to facts of the case available on record and are hereby
vacated.”
In the appeal, filed by the department before this Tribunal, no
proof was attached nor any particulars mentioned to controvert the above-mentioned
finding of the learned CIR(A). In the instant case, the
registered person has denied the collection of any excess sales tax from its
buyers. The department’s stance is mainly relied upon that the addresses of the
buyers are incomplete on the invoices issued to the unregistered person which
violates section 23(1)(b) of the Act. The department has not produced any
evidence of excess sales tax collection by the registered person. The provisions of section 3B(3) will be
invoked only when the provisions of section 3B(1) are fulfilled i.e when it is
established that any excess tax has been collected by the taxpayer. Article 117
of the Qanun-e-Shahadat Order, 1984 stipulates that the person who asserts the existence
of facts is bound to prove it. In the instant case, the department claims
excess tax has been collected but no proof in this regard has been presented
neither before the CIR(A) nor before this Tribunal. Merely
because the registered person, in issuing the sales tax invoices had not mentioned
the complete addresses of the unregistered buyers led the Department to presume
that excess sales tax had been collected.
In view of the above, we have concluded
that the department has not been able to establish its claim of excess sales
tax collection with any documentary evidence. In the absence of any documentary
evidence, the stance of the department with regard to excess sales tax
collection by the registered person and rejection of refund claim on the basis
thereof cannot be accepted. Thus, we have found that
the decision given by the learned CIR(A) on the issue under consideration is in
accordance with law. Accordingly, the answer to issue No. (iii) is also in
negative.
9. ISSUE NO. (iv)
Whether the refund applications filed by the registered person had become barred by time in terms of section 10(3) of the Act read with Chapter-V of the Sales Tax Rules, 2006?
Opinion
The submission of the learned AR for the registered person that
the refund applications, complete in all respect, for the tax periods 04/2011
and June, 2012 were filed on 17.05.2011 and 18.07.2012 respectively, and the
same had to be processed within the stipulated time enshrined in section 10(3)
of the Act. However, the same has not been done by the ACIR and thus, the refund
applications had become barred by time. The aforesaid arguments of the learned
AR are misconceived under the law. The provision of sub-section (3) of section
10 is a directory in nature as in violation thereof, no consequence has been
provided under the statute except if any due refund is not made within the time
specified under Section 10; the registered person is entitled to claim
compensation under section 67 of the Act. Thus, the answer to issue No. (iv) is
also in negative.
10. ISSUE NO. (v)
Whether under the facts and in the circumstances of the case, the learned CIR(A) has erred in law in imposing the penalty to the registered person under section 33(19) of the Act, 1990?
Opinion
The perusal of the original Assessment Order No.43/2013 dated
05.12.2013 reveals that the Assessing Officer while passing the order did not
impose any penalty to the registered person. Thus, the penalty was not a subject
matter of appeal before the learned CIR(A). The imposition of penalty under
section 33(19) by the CIR(A) is unsustainable in law and without jurisdiction.
Under the provisions of section 45B of the Act, the CIR(A) cannot go beyond the
subject matter of the appeal. The penalty is therefore deleted. The answer to
this issue is in negative.
11. In view of the above discussion, the appeal filed by the
department is dismissed being devoid of merits and the appeal of the registered
person is accepted in the manner as stated above. Resultantly,
the claim of refund determined by the Audit Officers vides audit report dated
13.02.2013 amounting to Rs.20,797,968/- is stand established and the
Assessing Officer has illegally rejected same on the basis of presumption
without any corroborative evidence. Therefore, the Appellant Department is
directed to issue the aforesaid refund to the registered person forthwith
without any further delay.
12. This order consists of
(18) 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
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