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S.T.A. No.1122/LB of 2013, decided on 28th March, 2014.

----Ss.21(2) & 73---Sales Tax Rules, 2006, R.12---Sales Tax General Order No.35/2012, dated 30-6-2012 Cl. "N", R.32---S.R.O. No.1125(I)/2011 dated 31-12-2011, Cl. (vii)---De-registration, blacklisting and suspension of registration---Sales tax registration was suspended on the ground that requisite certificates from banks was not provided---Taxpayer contended that registration was suspended without issuing the Show-Cause Notice and order was contrary to the provisions of law; that notice dated 30-10-2013 regarding "bank certificate" was received on 31-10-2013 afternoon, which was the last working day before "Eid-holidays" for compliance on 4-11-2013, which was the first working day after "Eid-holidays"; that sales tax registration could be suspended only on the basis of criteria as specified in R.32 of Cl. "N" of Sales Tax General Order No. 35/2012 dated 30-6-2012 that none of the conditions, as contemplated in S.R.O. 1125(I)/2011 dated 31-12-2011 had ever been violated by the taxpayer and that all the transactions with the buyers were in accordance with the conditions, as enumerated in S.R.O. 1125(I)/2011 dated 31-12-2011; that buyers of the taxpayer were registered under the sales tax law as "manufacturer"/ "Importers" "exporters"/"wholesalers/service provider" and all were "Active Tax Payer" on Federal Board of Revenue web-portal, even on the date of order; and that the buyers of the taxpayer had duly declared the purchases in their monthly sales tax returns for the respective months---Validity---Provisions of S.R.O. 1125(I)/2011 dated 31-12-2011 required to charge sales tax at the rate of "five" percent, if the supply of finished product was sold to the "retailer"---Sales tax was not chargeable on the supplies of goods to the registered persons of five zero-rated sectors up to "wholesale stage" as contained in Cl. (vii) of the S.R.O. 1125(I)/2011 dated 31-12-2011---Buyers of the taxpayer were registered under the sales tax law as "manufacturer"/ "importers"/"exporter"/"wholesaler"/Services provider" and all were "Active Tax Payers" on Federal Board of Revenue web-portal, even on the date of order, which was duly evident from the copies of "online verification" provided by the taxpayer---Taxpayer as well as buyers of the taxpayer had duly declared all the transactions in their monthly sales tax returns for the respective tax periods---No mechanism was available to the taxpayer under the sales tax law, which could be helpful to foresee the status of its buyers subsequent to the transaction and to check and control the activities of the buyers---Buyers and suppliers will not be held responsible for the acts and other transaction for each others---No one could be made responsible for the act of others---Order in appeal was vacated and the order in original was annulled by the Appellate Tribunal. 2004 PTD 868; 2011 PTD 2090 and Writ Petition No.17185 of 2013 ref. 2011 PTD 1883 rel. S. Zafar Shah FCA along with M. Aurangzeb for Appellants. Ms. Ghazala Hameed Razi D.R. for Respondent. Date of hearing: 18th March, 2014.

Titled appeal has been filed at the instance of the taxpayer calling in question the impugned order dated 12-11-2013 passed by the learned CIR, Special Zone RTO, Multan. Identical grounds have been taken which are as under:-- (1) That the Commissioner Inland Revenue, was not justified to frame the order under section 21(2) of the Sales Tax Act, 1900 to suspend the sales tax registration of the appellate, without issuing the show-cause notice and hence the order is contrary to the provisions of law as well as facts of the case, which merits deletion. It is pertinent to mention that the show-cause notice has not been issued in the case, as the show-cause notice issued, vide No. 1777 dated 2-10-2013 is deemed to have no legal effect. (2) That the order-in-original, as framed by the Commissioner Inland Revenue, Special Zone, Multan is just on mere assumptions, without considering the submissions of the appellant and without providing an opportunity to submit the documents/details in support of the case, which is contrary to the norms of justice. Please note that the notice dated 30-10-2013 regarding "bank certificate" was received on 31-10-2013. i.e. last working day before "Eid holidays" for compliance on 4-10-2013 (first working day after "Eid holidays") (3) That the Commissioner Inland Revenue, was not justified to suspend the sales tax registration of the appellant as sales tax registration can be suspended on the criteria as specified in Rule 32 of Clause "N" of STGO No. 35/2012 only, which is not attracted in the case and hence the order is unjustified and contrary to the provisions of law, which merits deletion. (4) That none of the conditions, as contemplated in the S.R.O. No. 1125(I)/2011 dated 31-12-2011 has ever been violated by the taxpayer, and that all the transactions with the alleged buyers are in accordance with conditions, as enumerated in the said S.R.O. and hence the order as framed by the Commissioner Inland Revenue, is contrary to the norms of justice. Please note that the alleged buyers are registered under the sales tax law as "manufacturer"/"importers"/"exports"/"wholesalers/ service provider" and all are "Active Tax Payer" on FBR web-portal, even on the date of the impugned order. (5) That the sales tax is not chargeable on the supplies of goods to the registered persons of five zero-rated sectors upto "wholesales stage", as contained in clause (vii) of the S.R.O. 1125(I)/2011 dated 31-12-2011 and hence allegation of non-application of the said S.R.O. is contrary to the facts of the case. (6) That the payments have been made in accordance with the provisions of section 73 of the Sales Tax Act, 1990 and opinion to consider the transaction of the appellate as fake is on mere assumptions, presumptions and conjecture, which is not permissible under the law. Reliance is also placed on the judgments reported as ((sic) SCMR 274), (2004 PTD 86) and (2011 PTD 2090)." 2. The facts of the case are that the sales tax registration of the appellant was suspended by the Commissioner Inland Revenue, Special Zone, Multan, in the backdrop of the application of S.R.O. 1125(I)/2011 dated 31-12-2011, vide order No. 1638 dated 27-9-2013, which was subsequently restored, in pursuance to the order of the Honourable Lahore High Court, Lahore dated 3-10-2013. Thereafter, in compliance to the order of the Honourable Court, Commissioner Inland Revenue, issued notice to the taxpayer bearing No.2043 dated 21-10-2013 for submission of certain documents by 25-10-2013, to process the application for restoration of suspension of sales tax registration. After scrutiny of the record provided by the taxpayer, another notice was issued to the appellant bearing No. 2266 dated 30-10-2013 for compliance by 4-11-2013. 3. On the due date it was alleged that appellant could not provide the requisite certificates from respective banks and consequently the sales tax registration of the appellant was again suspended by invoking the provisions of section 21(2) of the Sales Tax Act, 1990 read with Rule 12 of the Sales Tax Rules 2006 and clause "N" of Sales Tax General Order No.35/2012 dated 30-6-2012. Being aggrieved by the said order the appellant is in second appeal before this Tribunal. 4. Both the parties have been heard and relevant orders perused. It is submitted that the Commissioner Inland Revenue was not justified to suspend the sales tax registration of the appellant just on mere assumptions, without considering the submissions of the appellant. The Commissioner Inland Revenue, Special Zone, Multan was not justified to frame the order under section 21(2) of the Sales Tax Act, 1990 to suspend the sales tax registration of the appellant, without issuing the show-cause notice and hence the order is contrary to the provisions of law. It is further submitted that the notice dated 30-10-2013 regarding "bank certificate" was received on 31-10-2013 afternoon, which was the last working day before "Eid-holidays" for compliance on 4-11-2013, which was the first working day after "Eid-holidays". 5. It is also explained that the learned Commissioner Inland Revenue erred in law while passing the impugned order, as sales tax registration can be suspended only on the basis of criteria as specified in Rule 32 of Clause "N" of STGO No. 35/2012 only. The none of the conditions, as contemplated in S.R.O. 1125(I)/2011 dated 31-12-2011 has ever been violated by the appellant and that all the transactions with the alleged buyers are in accordance with the conditions, as enumerated in the said S.R.O. 1125(I)/2011 dated 31-12-2011. 6. It is worth mentioning here that the alleged buyers of the appellant are registered under the sales tax law as "manufacturer"/ "Importers"/"exporters"/"wholesalers/service provider" and all are "Active Tax Payer" on FBR web-portal, even on the date of impugned order. Moreover, the buyers of the appellant have duly declared the purchases in their monthly sales tax returns for the respective months. Reliance is also placed on the judgment of the Honourable Lahore High Court, Lahore in a Writ Petition No.17185/13 dated 8-7-2013, wherein it has been held that:-- "The status of the buyer existing at the time of supply of goods by the petitioner shall be considered while deciding the show cause notice and not the status attained by the buyer subsequently." 7. It is also contended that sales tax is not chargeable on the supplies of goods to the registered persons of five zero rated sectors up to "wholesales stage", as contained in clause (vii) of the S.R.O. 1125(I)/2011 dated 31-12-2011 and hence the allegation of non-application of the said S.R.O. is contrary to the facts as well as provisions of law. For this, we are pleased to reproduce the conditions, as contemplate in S.R.O. 1125(I)/2011 dated 31-12-2011 as under:-- "Conditions" (i) The benefit of this notification shall be available to every person doing business in textile (including jute), carpets, leather, sports and surgical goods sectors, who is registered as :- (a) manufacturer; (b) importer; (c) exporter; and (d) wholesaler; (ii) .. (iii) .. (iv) .. (v) .. (vi) supplies of finished products of the sectors specified in condition (i) shall, if sold to the retailers (both registered and unregistered) or end consumers shall be charged to sales tax at the rate of five percent ad val: (vii) supplies of goods, usable as industrial input, to registered persons of five zero-rated sectors up to wholesale stage shall be charged to tax at the rate of zero percent. (viii) the benefit of this notification shall be available to such registered persons who appear on active taxpayer list (ALT) on the website of Federal Board of Revenue;" 8. The learned DR on the other hand opposed the argument advanced by the learned counsel of the taxpayer and supported the impugned finding recorded by the officer below. 9. After hearing the rival parties, we are of the view that the aforesaid provisions of the S.R.O., clearly indicates that S.R.O.1125(I)/2011 dated 31-12-2013 requires to charge sales tax at the rate of "five" percent, if the supply of finished product is sold to the "retailer". Moreover, sales tax is not chargeable on the supplies of goods to the registered persons of five zero-rated sectors upto "wholesale stage", as contained in clause (vii) of the said S.R.O. Further, it is also observed that the alleged buyers of the appellant are registered under the sales tax law as "manufacturer"/"importers"/"exporter"/"wholesaler"/ Services provider" and all were "Active Tax Payers" on FBR web-portal, even on the date of impugned order, which is duly evident from the copies of "online verification" provided by the taxpayer. It is also noted that the appellant as well as buyers of the appellant has duly declared all the transactions in their monthly sales tax returns for the respective tax periods. There is no mechanism available to the taxpayer under the sales tax law, which could be helpful to foresee the status of its buyers subsequent to the transaction and to check and control the activities of the buyers. The buyers and suppliers will not be held responsible for the acts and other transaction for each others. It is also an established principle of taxing statute that no one can be made responsible for the act of others. Reliance in this regard is also made on the judgment reported as 2011 PTD 1883 and recent judgment of the Honourable Lahore High Court, Lahore, in the case of D.G Khan Cement Company v. Federation of Pakistan, wherein the provisions of section 8(1)(C) have been declared" as illegal and unconstitutional on the ground that the acts of suppliers will not deprive the buyer from its legal rights." 10. For the foregoing reasons and keeping in view the case-law cited supra. The order in appeal is hereby vacated and the order in original is hereby annulled. CMA/78/Tax(Trib.) Appeal accepted.

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