COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, FAISALABAD VS CHAWLA ENTERPRISES, FAISALABAD
2019 P T D 298
[Lahore High Court]
Before Abid Aziz Sheikh and Shams Mehmood Mirza, JJ
COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, FAISALABAD
Versus
Messrs CHAWLA ENTERPRISES, FAISALABAD
S.T.R. No.207 of 2016, decided on 16/10/2018.
(a) Sales Tax Act (VII of 1990)---
----Ss. 73, 3, 8A & 7----Sales tax liability, determination of---Input tax adjustment---Sales tax transactions not admissible---Blacklisted suppliers---Blacklisting of suppliers subsequent to transaction with taxpayer---Scope---Invoices which were issued when suppliers were not blacklisted or such invoices which had no nexus with a blacklisting order, could not be held inadmissible for input tax adjustment.
CIR v. Tariq Poly Pack (Pvt.) Ltd. 2015 PTD 2256 rel.
(b) Sales Tax Act (VII of 1990)---
----Ss. 73, 33(16) 3 & 7---Sales tax liability, determination of---Input tax adjustment---Sales tax transactions not admissible---Penalty for failure to make payment in the manner prescribed under S. 73 of Sales Tax Act, 1990---Scope---When payment was made through Banking channels as prescribed by S. 73(1) of the Sales Tax Act, 1990; and the only lapse was of a payment beyond the period of 180 days (in a credit transaction), even then an assessee could at best be liable for penalty under S. 33(16) of the Sales Tax Act, 1990 but such assesee could not be denied input tax adjustment.
Malik Abdullah Raza on behalf of Sarfraz Ahmed Cheema for Petitioners.
Khubaib Ahmed 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 23.02.2016, (impugned order), passed by the learned Appellate Tribunal Inland Revenue, Lahore (Tribunal).
2.Brief facts are that during audit of sales tax for tax period July, 2008 to June, 2012, it was observed that respondent assessee claimed input tax adjustment against the invoices issued by blacklisted units and it had also not complied with the provisions of section 73 of the Act. After show-cause notice, the order-in-original dated 26.11.2012, was passed. The appeal filed by respondent assesse was allowed on 22.04.2013, by Commissioner IR (Appeals), which order was upheld by the learned Tribunal on 23.02.2016. The department being aggrieved, has filed this reference application.
3.During arguments, mainly the following two questions of law were urged:--
(i)Whether the learned Appellate Tribunal has failed to consider that respondent/registered person has claimed input tax adjustment against fake and flying invoices issued by the blacklisted/suspended units namely Messrs A.N. Enterprises, Messrs Master Team etc.?
(ii)Whether the order passed by the learned Appellate Tribunal is consistent with the provisions of sections 6, 7, 8, 10, 22, 23, 26 and 73 of the Act read with Sales Tax Rules, 2006?
4.Learned counsel for the petitioner department submits that the respondent assessee was not entitled for input tax adjustment as the invoices were issued by blacklisted units. Further, submits that the respondent had made payments after 180 days, which being violation of section 73 of the Act, the input tax adjustment was rightly declined through order-in-original.
5.Learned counsel for the respondent on the other hand, submits that when the invoices were issued, the suppliers were not blacklisted. Further submits that payments were made through banking channels, therefore, the condition of 180 days was not applicable.
6.We have heard the learned counsel for the petitioner and perused the record.
7.So far as, Question No.1, is concerned, it is admitted position between the parties that the tax period involved is July, 2008 to June, 2012, whereas the suppliers were blacklisted in July, 2013. Therefore, at the time when the supplies were made and invoices were issued, the suppliers were neither blacklisted nor it is shown that the invoices issued, had any direct nexus with the blacklisting order. This Court in CIR v. Tariq Poly Pack (Pvt.) Ltd. (2015 PTD 2256), already held that the invoices, which were issued when the suppliers were not blacklisted or those invoices, which have no nexus with blacklisting order, cannot be held inadmissible for input tax adjustment. Therefore, Question No.1, is answered against applicant department.
8.Regarding Question No.2, it is again admitted on all hands, that the payments were made by the respondent assessee through banking channel, however, there was delay for more than 180 days. The defendant claim is that due to this delay input tax adjustment is not available under section 73(2) of the Act. We have carefully considered this argument. The relevant provision of subsection (2) of section 73 of the Act for convenience is reproduced hereunder:--
"(2) The buyer shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating of tax under this Act if payment for the amount is made otherwise than in the manner prescribed in subsection (1), provided that payment in case of a transaction on credit is so transferred within one hundred and eighty days of issuance of the tax invoice."
9.Plain reading of section 73(2) shows that buyer is not entitled to claim input tax credit, adjustment or refund etc. if the payment of the amount is made other than the manner prescribed in subsection (1) of Section 73 of the Act. Proviso to subsection (2) of Section 73 of the Act further postulates that in case of a payment against transaction on credit, the same is to be transferred within 180 days of issuance of tax invoices. In present case admittedly, payments were made through banking channel and in the manner prescribed in subsection (1) of section 73 of the Act. Therefore, the respondent assessee was not disentitled for input tax adjustment under subsection (2) of Section 73 of the Act. So far as the proviso to subsection (2) of section 73 is concerned, it is not case of the department that payments were for a transaction on credit. Therefore, the condition of 180 days, was not applicable in this matter. In any case, when the payment has been made through banking channel as prescribed in subsection (1) of Section 73 of the Act and the only lapse is of payment beyond 180 days, (in a credit transaction), even then the assessee could at best be liable for penalty under sub-clause (16) of section 33 of the Act but cannot be denied input tax adjustment. Therefore, Question No.2, is also answered against the applicant department.
10.For reasons discussed in the preceding paras, this reference application is dismissed.
11.Office is directed to send copy of this order under the seal of the Court to the learned Appellate Tribunal Inland Revenue, as required under the law.
KMZ/C-5/LOrder accordingly.