MAGNA PROCESSING INDUSTRIES (PVT.) LTD. VS APPELLATE TRIBUNAL INLAND REVENUE, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 2247 (2017)

Sales Tax Act (VII of 1990)---

----Ss.73, 3, 8A, 7 & 47---Sales tax liability---Determination of---Input tax adjustment---Sales tax transactions not admissible---Documents to establish genuineness of transactions under S. 73 of the Sales Tax Act, 1990---Blacklisted suppliers---Blacklisting of suppliers subsequent to transaction with taxpayer---Effect and scope---Proceedings against taxpayer were initiated on ground that it had illegally claimed and adjusted input tax against invoices issued by blacklisted suppliers and said invoices were found to be fake and bogus---Contention of taxpayer, inter alia, was that it had provided documentary evidence to establish genuineness of said transactions---Validity---Validly issued invoices by a supplier when such supplier was active and registered would not be affected by subsequent blacklisting or suspension of said supplier unless such invoices were specifically declared fake through a speaking order after hearing of parties and if the same had direct nexus with subsequent blacklisting---During period under consideration, in the present case, suppliers of the taxpayer were fully operative and impugned invoices had no direct nexus with their subsequent blacklisting, therefore refund/adjustment could not be denied to the taxpayer for the said invoices---Taxpayer had taken a consistent stand before all forums that it had genuinely purchased all goods and produced copies of cheques along with Bank statements to establish that provisions of S. 73 of the Sales Tax Act, 1990 had been complied with and it produced sufficient material on record to rebut that allegation that the impugned invoices were not mere paper transactions, which documents of the taxpayer were not considered by the Department---High Court remanded the matter to Adjudicating Officer to decide the matter afresh after taking into account the documentary evidence produced by the taxpayer through a speaking order---Reference was answered, accordingly.

Commissioner Inland Revenue v. Tariq Ply Pack (Pvt.) Ltd. 2015 PTD 2256 and Commissioner Inland Revenue v. Messrs Amtex Ltd. 2016 PTD 467 rel.

Khubaib Ahmad for Applicant.

Kausar Parveen for Respondent.

Date of hearing: 16th March, 2017.

JUDGMENT

TARIQ SALEEM SHEIKH, J.---By this single judgment we shall decide STR No. 6/2014 and STR No. 7/2014 as they involve common issues of facts and law.

2.The Petitioner is a private company limited by shares. It is a manufacturer-cum-exporter engaged in making of zero-rated supplies of textiles and textile made-ups. During post-refund audit of the Petitioner for the period December-2008 to April-2012 the Department's auditors observed that it had illegally claimed refund/adjusted input tax against invoices issued by blacklisted, suspended, suspected and non-filer units and the transactions made with the said units were mere paper transactions and physical transport of goods did not actually take place. Analysis of the purchase invoices summary data of these units also revealed that they were not in possession of adequate stocks at the relevant time and they could not supply the goods to the Petitioner. As such, it was observed, the alleged supplies were bogus. Accordingly, show-cause notices were issued to the Petitioner which were followed by adjudication proceedings. The matter was decided against the Petitioner by all the three forums below and it has now come up in reference before this Court.

3.The above-noted STRs, which are reference applications under Section 47 of the Sales Tax Act, 1990 (the "Act"), are directed against the Order dated 7-11-2013 passed by the Appellate Tribunal Inland Revenue, Lahore Bench, Lahore (The "Tribunal") in S.T.A. No. 408/LB/ 2013 and S.T.A. No. 409/LB/2013. The Petitioner has framed as many as 10 questions in these applications for determination by this Court. However, we have observed that most of those questions are either argumentative or do not emanate from the Tribunal's Order dated 7-11-2013. Be that as it may, since these applications can be decided on the following question, we shall only consider the same:

Whether the learned Appellate Tribunal, Lahore, was justified in dismissing the appeal without considering and without recording any finding thereof regarding documents submitted before it, particularly bank payments showing compliance of Section 73 of the Act?

4.Perusal of the record shows that the charge against the Petitioner was two-fold. First, it had claimed huge input tax adjustment against invoices issued by the units which were either blacklisted or whose registration had been suspended. Secondly, physical transfer of goods had not taken place and all the transactions were merely paper transactions. In other words, the invoices on the basis of which input tax was claimed were fake.

5.So far as the first issue is concerned, law on the point is now pretty settled that "validly issued invoices by a supplier when it was active and registered would not be affected by subsequent blacklisting or suspension of the said supplier unless those invoices are specifically declared fake through speaking order after hearing the parties and have directed nexus with subsequent blacklisting". Reference in this regard is made to "Commissioner Inland Revenue v. Tariq Ply Pack (Pvt.) Ltd." (2015 PTD 2256) and "Commissioner Inland Revenue v. Messrs Amtex Ltd." (2016 PTD 467). In the present case, it is not disputed that during the period under consideration to suppliers were fully operative. Further, the impugned invoices had no direct nexus with their subsequent blacklisting or suspension. Therefore, refund could not be denied to the Petitioner on the ground that the supplier was subsequently blacklisted or suspended.

6.On the second issue, we have noted, the Petitioner took a consistent stand before all the forums below that it had genuinely purchased the goods from the suppliers. In order to substantiate its contention it provided the Adjudicating Officer copies of returns, summaries of supplies, invoices, gate passes etc. Besides, it also produced copies of cheques along with bank statements to establish that the provisions of Section 73 of the Act were duly complied with. It also contended that the goods in question were used for making the exports and this fact could be verified from the packing details of its shipping documents. In a nub, it produced sufficient material on the record to rebut the allegation that the impugned invoices were genuine and were not mere "paper transactions". Surprisingly, the authorities below did not consider any of these documents and proceeded to hold that the Petitioner had not produced any documentary evidence for physical transfer of goods. This finding has no legal basis and cannot be sustained.

7.In view of the foregoing, we answer the above-noted question in the "negative", i.e. in favour of the Petitioner and against the Department, and remand the matter to the Adjudicating Officer to decide it afresh through a speaking order after taken into consideration the documentary evidence produced by the petitioner in its defence. He shall do the needful within sixty days from the date of receipt of a certified copy of this judgment after hearing the petitioner.

8.Office shall send a copy of this judgment to the Tribunal under the Seal of this Court as required by law.

KMZ/M-123/L Order accordingly.