COMMISSIONER INLAND REVENUE VS AMTEX LTD.
2016 P T D 467
[Lahore High Court]
Before Abid Aziz Sheikh and Shahid Karim, JJ
COMMISSIONER INLAND REVENUE
Versus
Messrs AMTEX LTD.
S.T.R. No.9 of 2015, decided on 11/11/2015.
Sales Tax Act (VII of 1990)---
----Ss. 3, 7, 21, 73 & 47---Input tax adjustment---Blacklisted suppliers---Blacklisting of suppliers subsequent to transaction with taxpayer---Effect and scope---Department impugned order of Appellate Tribunal whereby refund on invoices was allowed to the taxpayer---Contention of the Department was that suppliers of taxpayer were blacklisted and suspended units, therefore, invoices issued by them could not be used to claim input tax adjustment/refund of sales tax---Validity---Perusal of order of Appellate Tribunal revealed that finding of fact had been recorded to the effect that taxpayer had made payments to its suppliers through banking channels by complying with provisions of S. 73 of the Sales Tax Act, 1990 and that at the time of making such transactions, said suppliers were enjoying their status as operative persons having normal behavior and no dispute existed as to the fact that refund was denied only for the reason that the suppliers were only subsequently blacklisted---Validly issued invoices by suppliers when such suppliers were active and registered, would not be effected by subsequent blacklisting of such suppliers unless invoices in question were specifically declared fake through a speaking order after hearing the parties and if the same had a direct nexus with subsequent blacklisting of the said supplier(s)---Refund, in the present case, therefore could not have been denied to the taxpayer and order of Appellate Tribunal could not be interfered with---Reference was answered accordingly.
Commissioner Inland Revenue v. Tariq Poly Pack (Pvt.) Ltd. 2015 PTD 2256 rel.
Ms. Saba Saeed Sheikh for Applicant.
Khubaib Ahmad for Respondent.
ORDER
This application by way of reference has been filed under section 47 of the Sales Tax Act, 1990 ("Act") against the order dated 17.09.2014 ("impugned order") passed by the learned Appellate Tribunal Inland Revenue ("Tribunal").
2.The following questions of law are raised for our opinion:--
i.Whether on the facts and in the circumstances of the case, the decision of learned Appellate Tribunal to allow refund on the invoices of blacklisted units is consistent with the provision of sections 7, 8, 8A, 10, 11, 22 and 26 of the Sales Tax Act, 1990?
ii.Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal was justified to hold that order of blacklisting cannot operate retrospectively?
3.Brief facts are that respondent assessee is a listed public limited company engaged in business of manufacturing and export of textile products. During post refund audit of respondent assessee in respect of refund files pertaining to period from August 2010 to February 2013, it was observed that respondent assessee received sales tax refund on the strength of invoices issued by blacklisted and suspended units. Resultantly after show cause notice, the order in original was passed against the respondent, which was upheld by the Commissioner Appeal. However, further appeal by the respondent assessee before the Tribunal was allowed through impugned order, hence this reference application.
4.Leaned counsel for the applicant argued that suppliers of the respondent assessee were blacklisted and suspended units, therefore, invoices issued by them could not he used for claim of input tax adjustment/refund of sales tax.
5.Learned counsel for the respondent assessee submits that payments were made by respondent assessee to the suppliers through banking channel by complying with mandatory provisions of law. Submits that at the time of transaction, the said suppliers were neither suspended nor blacklisted, therefore, their subsequent suspension and blacklisting could not be a ground to deny input tax claim and refund to the respondent/assessee through validly issued invoices.
6.Arguments heard. Record perused.
7.The perusal of learned Tribunal's order shows that finding of fact has been recorded to the effect that respondent assessee made payments to its suppliers through banking channel by complying with the provision of section 73 of the Act. It is further categorically held that at the time of making transactions, the said suppliers were enjoying their status as operative persons having normal behavior at e-portal of FBR's website. There is no dispute between the parties that the refund pertaining to period August 2010 to February 2013 was denied only for the reason that suppliers were subsequently suspended and blacklisted. The question whether this could be done, has already been dealt with in detail by this Court in Commissioner Inland Revenue v. Tariq Poly Pack (Pvt.) Ltd. (2015 PTD 2256) where after discussing various provisions of the Act, it is held that validly issued invoices by supplier when he was active and registered, will not be effected by subsequent blacklisting of the said supplier unless those invoices are specifically declared fake through speaking order after hearing the parties and have direct nexus with subsequent blacklisting of supplier. The relevant part of the judgment is reproduced hereunder:--
"13. The provision of Rule 12(5) of the Rules is pari materia with provision of section 21(3) of the Act (inserted through Finance Act, 2011). Plain reading of rule 12(5) shows that under said rule, those invoices which were issued after blacklisting or were issued after suspension but before blacklisting shall be rejected through speaking order. Whereas other valid invoices issued when supplier was active and registered will not be affected by subsequent blacklisting of supplier unless those invoices are specially declared fake through speaking order after hearing parties and have direct nexus with blacklisting. This interpretation is also in consonance with the settled law that rules being subordinate legislation cannot be applied retrospectively"
8.In the present case, as it is not disputed that when the transaction was made, the suppliers were active and duly registered and further admittedly the invoices in question had no direct nexus with the subsequent blacklisting and suspension of the supplier, therefore, the law laid down in aforesaid judgment is on all four to the facts and circumstances of this case and refund could not be denied to the respondent assessee merely for the reason that supplier became blacklisted and suspended subsequently. The order passed by the learned Tribunal is well reasoned and grounded in correct principle of law relevant to the facts of the case.
9.The questions raised above are accordingly answered in affirmative against the applicant department. Resultantly, the reference application is dismissed.
10.Office shall send copy of this order under seal of the Court to learned Tribunal as required under the law.
KMZ/C-2/LOrder accordingly.