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S.T.A. No.447/PB of 2008, decided on 21st May, 2009.

----Ss. 10(2), 8(1)(a), 8(1)(d), 10(4), 11(2), 26(5), 33(11), 34(1) & 36(1)---Sales Tax Refund Rules, 2002, R.8---S.R.O. 525(I)/2004, dated 6-6-2005---Sales Tax Rules, 2006, Chapter-V, R.37---Excess amount to be refunded---STARR/CRRAS objections---Validity---Appellants were alleged to have claimed inadmissible input tax/refund---Refund claim was found admissible to some extent under the provision of S.10(2) of the, Sales Tax Act, 1990 and the balance amount objected by the STARR/CRRAS was found inadmissible under the provision of S.10(4) of the Sales Tax Act, 1990 which was rejected accordingly---Appellant contended that Collectorate by itself should have verified and examined the objection of STARR from the respective Collectorate instead of dragging the honest taxpayer in lengthy process of litigation--- In case of tax evasion, action could be taken against unscrupulous elements, rather bolding the money of genuine taxpayer for the wrong doing of others---Appellant"s claim was declined as consequence of STARR objection during the process of the refund claim under S.37 of Chapter-V of the Sales Tax Rules, 2006---Refund sanctioning authority was empowered to reject a refund claim, which remained unverified due to STARR"s objection---While sanctioning a refund claim, the refund sanctioning authority exercises the executive powers conferred by him under the statute and he was under obligation to follow the prescribed rules for sanctioning the refund claim---When the show-cause notice was issued to the refund claimants on the basis of STARR"s objections and the refund claim was declined purely on the basis thereof, then he exercises quasi judicial authority and he was under obligation to apply his mind judiciously and with due diligence and also to consider the pros and cons of the case including physical verification of the supporting documents and any such action as warranted under the law---Some basic verifications were required to be done by the department from different quarters including feeding/uploading of the appellant"s suppliers data in the STARR"s System which in turn would have enabled the appellants to get their legitimate refund, if otherwise admissible, but the same basic verifications were not carried out by the department---Department"s contention that STARR System was a mechanical process in which there was no involvement of human interaction regarding processing of refund claim and laid down procedure had to be followed for processing and sanctioning of refund claim, was quite convincing; however, it was apparent from available record that appellant"s contention was supported by the proof of payment as required under S.73 of the Sales Tax Act, 1990 and other supporting documents thereof---Had such evidence been examined/verified by the department at the very outset, the controversy involved therein could have been amicably resolved---Appellate Tribunal accepted the contention of appellants to the extent of rejection of their refund claim, on the basis of STARR objection, except the refund claim generated against supplies of black-listed suppliers---Case was remanded to the Deputy/Assistant Collector for de novo consideration with the direction to conduct fresh inquiry/verification of the supporting documents of the appellants under the relevant provisions of Act and clearly establish genuineness or otherwise of the refund claim of the appellants by providing an ample opportunity of hearing as well as production of any material evidence, etc; in support of their contention. Messrs Sajid Textile industries (Pvt.) Ltd. v. The Collector Sales Tax and Central Excise, West Karachi in Appeal No.K-09/ 2003/4011; Messrs Superior Textile Mills Ltd. v. Federation of Pakistan (sic) and Complaint No.1025 of 2006 ref. Messrs M.B. Dyes Chemicals & Silk Industry (Pvt.) Ltd. Gadoon Amazai, Swabi v. Collector of Sales Tax, Peshawar and others Appeal Case No.ST-82/PB of 2008 rel.

----Ss.73 & 23---Sales Tax Rules, 2005, Chapter-1, R.5---Certain transaction not admissible---Tax invoices-Claim against black-listed suppliers---Controversy as to whether the statutory liability on the part of the refund claimants had been discharged as per law by way of making payment of tax in accordance with S.73 of the Sales Tax Act, 1990, and supply of goods against valid sales tax invoices issued under S.23 of the Sales Tax Act, 1990---Validity---Refund claimed against black-listed suppliers had rightly been declined by the refund sanctioning authority under S.5 of Chapter-1 of the Sales Tax Rules, 2006--Claimants were not entitled to claim refund on the invoices of black-listed suppliers---To such extent, Appellate Tribunal did not find any legal impropriety, illegality, infirmity or material irregularity in the orders by the lower forums and same was not interfered.

----R.37---Action on inadmissible claims---Refund claim of the claimants had been declined under Rs.37 of the Refund Rules, 2006 and the appellant had wrongly referred to Refund Rules, 2002, which were not applicable---In order to have a valid refund claim, the appellant"s supplier was required under the law and rules made thereunder to issue valid sales tax invoices arising out of supplies---Wisdom behind a valid sales tax invoice was to ascertain the genuineness and admissibility of the refund claim pertaining to purchases and to ensure that the input tax invoice in its chain had reached its lawful destination (Government Exchequer)---Officer Incharge refund, in view of report generated by the STARR System, was under obligation to issue refund in those claims which had properly been validated by the system and to refuse refund which was invalidated thereto.

----S.10---Excess amount to be refunded---Obedience of applicable rules--Appellants filed refund claim under S.10 of the Sales Tax Act, 1990---Each refund claim was required to be processed under the relevant procedure specified by the Federal Board of Revenue under S.10 of the Sales Tax Act, 1990---Mechanism for filing of refund claim with the department under the provisions of Sales Tax Act, 1990 had been devised whereunder every claim was processed and scrutinized in the light of said procedure/system---Registered person have to abide by the applicable rules made under the sales tax law. 2001 PTD 2600 rel.

----Ss.10 & 3---Excess amount to be refunded---Scope of tax---Refund claim filed was required to pass through mandatory scrutiny of the system---Stance of the claimants with reference to applicability of S.3 of the Sales Tax Act, 1990 on the matters of refund from the public exchequer was not tenable and such claim was liable to be rejected.

----Ss.8 & 8A---Responsibilities of the buyer of invoices and Officer Incharge Refund---Tax credit not allowed---Refund rules had to be read with the non-obstanate clause of S.8 of the Sales Tax Act, 1990, which had overriding effect and forbid the inadmissible refunds or adjustment--On specific objection raised by the STARR, the Officer Incharge Refund was under obligation to act in accordance with the analysis report duly generated by the computer system indicating the admissible and inadmissible amount of refund out of the refund claimed and to decline the claim under objection---Since the insertion of Cl.(a) the goods in respect of which sales tax has not been deposited in the government treasury by the respective supplier" to subsection (1) of S.8 of the Sales Tax Act, 1990, by virtue of Finance Act, 2006 and the enactment of newly added section i.e. S.8A in the Sales Tax Act, 1990, the buyer could be held responsible fOr the deposit of tax involved in the transactions between the parties (buyer and seller)---Appellant was equally responsible for the act done on the part of his supplier---In the matters of refund claim the public exchequer, objection raised by the system disentitles the appellant to the inadmissible refund---Last but not the least, under Refund Rules, 2002, the Officer Incharge Refund shall satisfy himself about the genuineness and admissibility of the refund claim on the basis of said report, recommendations and supporting documents and then reject the claim if found inadmissible. Usman Gul, Manager Accounts for Appellants. Muhammad Haroon Khattak Sr. Auditor for Respondents. Dates of hearing: 11th, 17th, 26th February, 12th March, 14th April and 20th May, 2009.

This appeal has been filed by Messrs Gadoon Textile Mills Ltd., Swabi, (hereinafter called as the appellants) against the Order-in-Appeal No.495 of 2008, dated 29-9-2008, passed by the Collector of Customs, Sales Tax and Federal Excise (Appeals), Peshawar. 2. Precisely, the stated facts of the case as recapitulated from the available case record are that the appellants filed a refund claim for the tax period of September, 2007 under section 10(2) of the Sales Tax Act, 1990. During verification, "STARR System raised the following objections on purchases by the claimants:--

Hence, the appellants were alleged to have claimed inadmissible input tax/refund of Rs.959,712.34 and also alleged to have violated the provisions of sections 8(1)(a), 8(1)(d), 10(4) read with Rule 8 of S.R.O. 575(I)/2002, dated 31-8-2002, section 11(2), Section 26(5) read with A S.R.O. 525(I)12005, dated 6-6-2005, 34(1) and 36 of the Sales Tax Act, 1990. Accordingly, a show-cause notice was issued to the appellants and after hearing the parties, the Deputy Collector, Regional Tax Office (RTO), Sales Tax & Federal Excise Wing, Peshawar vide his Order-in-Original No.612/2008, dated 10-6-2008, ordered as under.

"I have gone through the case record, written reply of the respondents and verification reports generated by STARR/ CRRAS, and conclude as under:

Keeping in view the above details, it is concluded that the refund claim to the extent of Rs.435020. 65 has been found admissible under the provision of section 10(2) of the Sales Tax Act, 1990, the balance amount of Rs.524690 Objected by STARR/CRRAS is found inadmissible under the provision of section 10(4) of the Sales Tax Act, 1990 read with Rule 37 of S.R.O. 555 dated 5.6-2006, the same is hereby rejected accordingly. 3. Being aggrieved by the impugned Order-in-Original, the appellants filed an appeal before the Collector of Customs, Sales Tax & Federal Excise (Appeals), Peshawar, who vide his Order-in-Appeal No.495 of 2008, dated 29-9-2008, ordered as under:--

"8. I have examined the case record and also considered the written as well as verbal submissions of both the parties. On perusal of the case record, it has been observed that the" appellant filed refund claim of Rs.959, 712 for the tax period September-2007 under section 10(2) of the Sales Tax Act, 1990 out of which refund of Rs.435,020.65 was accepted whereas refund of Rs.524,690 was rejected being inadmissible. During the course of hearing, the departmental representative was directed to verify the documents provided by the appellant. A report dated 27-9-2008 was received from the Collectorate, according to which an amount of Rs.47,654.6, Rs.1560, Rs.586.9, Rs.71,566, Rs.7,272.9 and Rs.1,29,100.2 of the relevant invoices has been found admissible whereas in respect of remaining amount of refund claim, the objection raised by the STARR still exist, the documents produced by the appellant did not support the contentions of the appellant. The appellant has failed to produce any authentic documentary evidence to prove their claim as genuine. Keeping in view the above facts and over all circumstances of the case, the refund claim of the appellant to the extent of Rs.2,57,740.6 is accepted. The impugned order is modified to the above extent only." 4. Being further aggrieved by the impugned order-in-appeal, the appellants have filed the instant appeal to this Tribunal, inter alia, on the following grounds:-

(a) that the learned adjudicating officer did not take into account the legal and factual position while framing the Order-in-Appeal;

(b) that the respondent"s Deputy Collector of Sales Tax (Refund) did not fulfil his statutory obligation as enumerated in Rule 4 of the S.R.O. 575(I)/2002, dated 31-8-2002. The respondent was required to make further inquiry regarding" inadmissibility of the tax invoices or otherwise in term of the aforesaid rules but in sheer contrast to the rules, the respondent Deputy Collector (Refund) instead of conducting inquiry by himself shifted the . responsibility to the appellant with regard to the inquiry and investigation of the supplier;

(c) That it is settled principle that responsibility to pay sales tax lies on the supplier. and not on recipient of the supply. The relevant section 3(3) of the Act is reproduced as under:

The liability to pay the tax shall be:

(i) In case of supply of goods, of the person making the supply and

(ii) In case of goods imported Pakistan, of the person importing the goods.

(d) that according to section 7(2)(i) of the Act, a registered person shall not be entitled to deduct. Input tax from output tax unless in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registration number in respect of such supply for which a return is furnished. Similarly, section 73 of the Act provides that certain transactions not admissible if payment whereof is being made otherwise than crossed cheque or through crossed banking instruments;

(e) that by plain reading of section 7 and section 73, a registered person is entitled for input tax credit if he holds sales tax invoice issued under section 23 of the Act and payment thereof is being made through crossed banking instrument to the supplier;

(f) that the appellants have claimed input tax refund on the invoices issued by suppliers mentioned in the show-cause notice and payment thereof has been made to these suppliers through banking instruments as envisaged in section 73 of the Act. Copies of Sales Tax Invoices and proof of payment through crossed cheque is enclosed for ready reference;

(g) that kind attention is invited to the case of Messrs Sajid Textile Industries (Pvt.) Ltd. v. The Collector Sales Tax and Central Excise, West Karachi in Appeal No.K-09/2003/4011, decided on 12-5-2003. The Honourable Customs Excise, and Sales Tax Appellate Tribunal, Karachi Bench has held that "charges levelled against him of inadmissible input tax claim are incorrect as the input tax whatever has been claimed by him was against valid G.S.T. paid invoices and the amount of those goods received by appellant too has been paid through crossed cheques which can be verified from the banks and in such circumstances, to allege them that input tax claim is on the basis of fake invoices issued by the respective units mentioned in show-cause notice is based on no evidence as all units to whom department has alleged to be non-existing at the address shown in record, if for sake of argument is taken as correct, then also it is not the responsibility of the appellant to prove their existence because the department itself has given sales tax registration number to those units. Even otherwise, just for the sake of argument, it is assumed that these units are non-existing then no reason has been given by department that why no action has been taken against them till the time. On the contrary, instead of supplier, the purchaser who had paid the amount of the goods has been victimized and this act of department is neither logical nor legal."

(h) that the Honourable Lahore High Court has also held in the case of Messrs Superior Textile Mills Ltd. v. Federation of Pakistan that the liability to pay sales tax lies on the supplier of the taxable goods and not on the buyer. The Supreme Court of Pakistan has also confirmed the above referred decision of the Lahore High Court.

(i) that prudent way would have been that the Collectorate by itself should have verified and examined the objection of STARR from the respective Collectorate instead of dragging the honest tax payer in lengthy process of litigation. And in case of tax evasion, action could be taken against unscrupulous elements, rather holding the money of genuine taxpayer for the wrong doing of others.

(j) that it is not the responsibility of the appellant-company nor it is possible for the recipient to investigate the moral character of the supplier whether he acted upon the statute or otherwise, rather it is the foremost obligation of the department to unearth such unscrupulous elements, who either did not comply rules and procedures issued thereunder or even did not pay the due tax, to recover the due tax which has been paid by the recipient, and did not penalize the honest taxpayer by denying its right vested in him by the Act;

(k) The Honourable Federal Tax Ombudsman while deciding Complaint No.1025/2006 has also noted their findings in the following words copy whereof has also been endorsed to Collectorate and widely circulated in leading news papers of the motherland on February 15,2007;

(l) Whether the liability to pay the tax to the Government lay on the supplier or the recipient. If the responsibility to pay the tax to the Government lay with the supplier and the tax charged by the supplier should be credited by him to the Government. Would the purchaser by required to audit the supplier"s account to confirm the payment And if summary of sales and purchases was not submitted by the supplier, it should not be treated as violation of the law by the complainants. The sanctioning authority was not justified to withhold the legitimate refund claim on the frivolous grounds/objections raised by the STARR and RAS. Once the objections were raised by the computer system, no inquiry or verification is conducted by the Collectorate, there is no mechanism for rectification of human error by the functionary of the department while feeding the data in the system and nothing seems to have been done to upgrade the software after recognizing the general problems of the taxpayers. It is also not the responsibility of the buyer to obtain sales and purchases summaries of the suppliers and get the same authenticated by the concerned Collectorate and if all this action has to be taken by the purchasers, what is the role of the Collectorate for administration of the Sales Tax Law;

(m) That it is not the responsibility of the appellants even then we approached our suppliers, who were kind enough to provide us copies of summary submitted by them as per following details;

(i) Messrs Ammar Paper Cone.---We hereby submit Sales Tax Return Cum Payment Challan (Duly Stamped By Bank) with computerized Bank payment receipt and valid summary statement endorsed by the respective Collectorate. Our amount of claim also match. Therefore, the objection scrutiny for verification of Input Tax is not sustainable;

(ii) Messrs Chevron Pakistan Ltd. (Formally Caltex Oil Pakistan).---We hereby submit Sales Tax and Federal Excise Return-Cum-Payment Challan (Duly Stamped) and relevant portion of the Summary Statement duly stamped by the supplier for the month of September-2007, the supplier has issued three invoices in this tax period while we have claimed two invoices in this tax period and 1-invoice in the tax period November-2007, the unit is a large taxpayer and registered with (L.T.U.) PIC Towers 32-A Lalazar, M.T. Khan Road, Karachi. Further, we enclose herewith copy of invoice & Copy of Ledger showing payment through banking channel as envisaged under section 73 of the Act. Our amount of claim is also match, therefore, the objection "Exceeds declared output" is not sustainable and ought to be overruled.

(iii) Messrs G.M. Rafiq Iron Merchant.---We hereby submit Sales Tax & Federal Excise Return-Cum-Payment Challan (Duly Stamped by Bank and attested) and valid summary Statement endorsed by the respective Collectorate, our amount of claim also match. Further we enclose herewith copy of invoice & copy of Ledger showing payment to party through Bank Channel as envisaged under section 73 of the Act. Therefore, the objection "Scrutiny for verification of input tax" is not sustainable.

(iv) Messrs Gold plastic.---We hereby submit Sales Tax & Federal Excise Return-Cum-Payment Challan (Duly Stamped by Bank) and valid summary Statement endorsed by the respective Collectorate. Further, we submit herewith a letter regarding Scrutiny/Audit Reports, issued by the Collector regarding audit of scrutiny of verification on input tax, which has been conducted by the Audit Department vide their letter C. No.81(01)inv. Audit/Audit Performance/STH/05/Pt-1/24347, dated 12-11-2008 and we also submit herewith a letter issued by the Second Secretary (STM) letter C. No.1(8) S (Reform)/2008, dated 17-11-2008, wherein recommendation has been made against the objection (Scrutiny for verification of input tax) in respect of claimants shown at S. No.15-, our amount of claim also match. Therefore, the objection "Scrutiny for verification of input tax" is not sustainable.

(v) Messrs Ideal Distribution Line.---As the claimed invoice is related to Tax period May-2007, the supplier has issued five invoices in the tax period May-2007, amounting Rs.6300 while we have claimed three invoices, amounting Rs.2887.50 in May 2007 (which has already been validated by the STARR). Regarding the remaining two invoiced, we have claimed in the tax period September 2007, amounting Rs.3412.50, therefore, it is ought to be overruled. Further, we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act. Therefore, the objection "wrong tax period" is not sustainable.

(vi) Messrs Iqbal Traders.---We hereby submit Sales Tax & Federal Excise Return-Cum-Payment Challan (Duly Stamped by Bank and attested) with acknowledgement and valid summary statement endorsed by the respective Collectorate along with photocopy of Output Supply Register, further we submit herewith as letter regarding scrutiny/audit reports issued,. by the Collector regarding audit of scrutiny of verification of Input Tax which has been conducted by the Audit Department vide their letter C.No.81(01) Inv. Audit/Audit Performance/STH/05/Pt-1/24347, dated 12-11-2008 and we also submit herewith a letter issued by the Second Secretary (STM) letter C. No.1(8) S (Reform)/2008, dated 17-11-2008, wherein recommendation has been made against the objection (Scrutiny for verification of input tax) is respect of claimants shown at S. No.8, our amount of claim also match. Therefore, the objection "Scrutiny for verification of input tax" is not sustainable.

(vii) Messrs Leopard Courier Service.---Courier Services have been exempted from submission of summary statement vide C.B.R. Circular # 6 of 2006, dated 12-9-2006. Even it is not the responsibility of the claimant, even then we are following our supplier to get the requisite documents for the satisfaction of sales tax department. Further, we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act, and as the unit is a Large Taxpayer (L.T.U), therefore, the objection "Non-filer" is not sustainable and ought to be overruled.

(viii) Messrs M.A. Polymers.---We hereby submit Sales Tax Return-Cum-Payment Challan (Duly Stamped by Bank and attested) and valid Summary Statement from the respective Collectorate along with photocopy of output sales tax register attested. Further, we submit herewith letter Audit File No.139-ST/Audit-1/LHR/08/ 1240, dated 27-6-2008, along with Sales Tax & Federal Excise Return-Cum-Payment-Challan showing that the supplier has deposited the arrear raised in the audit of sales tax record for the period from July, 2006 to June, 2007. Therefore the objection "Scrutiny for verification of input tax" is not sustainable.

(ix) Messrs NDS Computer System.---Since the supplier is computer retailer and have been exempted from submission of summary statement vide C.B.R. Circular # 7 of 2006, dated 25th November, Circular attached. Further we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act. Therefore, the objection "Exceed Declared Output" is not sustainable.

(x) Messrs Paradise Press:---We hereby submit sales tax & Federal Excise Return cum payment Challan (Duly Stamped by Bank) and valid Summary Statement endorsed by the respective Collectorate. Further we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act, amount of claim also much. Therefore, the objection "Scrutiny for verification of input tax" is not sustainable.

(xi) Messrs Redtone Telecommunication Pakistan (Pvt) Ltd.---As the unit is a Large Tax Payer (L.T.U.) and it has a large number of clients, so Messrs Redtone Telecommunication (Pvt.) Ltd. collectively pays its sales tax for all its customers. Further, our telephones are entirely used for official communication i.e. correspondence with our purchasers and suppliers and with our head office, sales and official related matters. That is even not the responsibility of the claimant, even then we are following our supplier to get the requisite documents for the satisfaction of sales tax department. Further, we enclose herewith copy of invoice & copy of ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act. Therefore, the objection "Exceed declared Out Put" is not sustainable and ought to be overruled.

(xii) Messrs Remedial Enterprises.---We hereby submit Sales Tax & Federal Excise Return-cum-Payment Challan (Duly Stamped by Bank) and Summary Statement duly endorsed by the respective Collectorate along with photocopy of supply register. Further, we enclose herewith copy of invoice & copy of ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act. Our amount of claim also match. Therefore, the objection "Black listed" is not sustainable.

(xiii) Messrs Star Packages.---We hereby submit Sales Tax Return-Cum-Payment-Challan (Duly stamped by Bank) and valid Summary Statement endorsed by the respective Collectorate. Beside above, the supplier is registered with Peshawar Collectorate and can be easily verified from A & P Division. Further, we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel as envisaged under section 73 of the Act. Our amount of claim also match. Therefore, the objection "Scrutiny for verification of Input Tax" is not sustainable.

(xiv) Messrs Yasir Industries.---We hereby submit Sales Tax & Federal Excise Return-Cum-Payment-Challan (Duly stamped by Bank) and valid Summary Statement endorsed by the respective Collectorate. Further, we enclose herewith copy of invoice & copy of Ledger showing payment to party through Banking Channel also envisaged under section 73 of the Act. Our amount " of claim also match. Therefore, the objection "Non-Filer" is not sustainable. 5. On the last date of hearing fixed for 20-5-2009, the representative of the appellants appeared and almost reiterated the same arguments as advanced by him in the memo. of appeal and in his written arguments (rejoinder) to para-wise comments and stated that in their case, the concerned officer was required, to make further inquiry to ascertain genuineness of their fund claim, however, in their case till to date no inquiry had been made through the respective Collectorates. Moreover, the learned Collector (Appeals) did not take into consideration the provisions of law on which the submissions to the appellants were based. He forcefully asserted that the learned Collector (Appeals) had erred to deprive the appellants of the legitimate refund claim. He further contended if their case is considered on the touchstone of the prerequisites under section 10 of the Sales Tax Act, 1990, then the impugned order-in-appeal ipso facto is not based on the factual and legal grounds. 6. On the other hand, the Departmental Representative controverted the above arguments by the representative of the appellants and stated that the impugned Order-in-Appeal has been passed by the appellate authority keeping in view the factual as well as legal issues involved in the case. He stated that the appellants filed its refund claim under section 10 of the Sales Tax Act, 1990 and each refund claim of the respective claimant/appellant is processed under the relevant procedure specified by the Board under section 10 of the Sales Tax, 1990. Registered persons have to abide by the applicable rules made under the sales tax law and in the instant case, the same procedure was properly followed. He further, stated that the refund rules have to be read with section 8 of the Act, which have overriding effect and forbids the inadmissible refunds and adjustments. Accordingly, the specific objections raised by the STARR, the Officer Incharge Refund is under obligation to act in accordance with the analysis report duly generated by the computer system indicating the admissible and inadmissible amount of refund out of the refund claimed and to decline the claim under objection. I have carefully perused the available case record and have anxiously considered the written as well as oral submissions by the representative of the appellants as well as by the Departmental Representative. At the outset, I would advert to this Tribunal"s judgment dated 30-6-2008 in appeal case No. ST/PB/2008 and three others filed by Messrs M.B. Dyes Chemicals & Silk Industry (Pvt.) Ltd. Gadoon Amazai, Swabi v. Collector of Sales Tax, Peshawar and others, wherein the learned Member (Technical) has observed in paras. 6 to 11 as under:--

"(6) After hearing the parties and perusal of the record, it is observed at the very outset that there is no denying the fact that the appellants had not fully complied with the provision of law as is contained in Rule 38 of the Sales Tax Refund Rules, 2006. Further, during the computerized scrutiny of the refund claims (under appeals) through STARR/CRRAS, certain shortcomings regarding transactions in these cases were identified as under:

(i) Scrutiny for verification of input Tax;

(ii) Exceed declared Output Tax; and

(iii) No Sales to claimant.

(7). As the issue of "Scrutiny for verification of Input tax." is common in all these cases, therefore, I will like to discuss it first and in detail. The second issue would require "supplier-wise" treatment in each case and the third issue is specific only to Appeal No. ST.187/PB/2008.

(8) The objection "Scrutiny for verification of Input tax", denotes that the documents produced by the appellant needed to be verified from other partners of transactions because the criteria laid down in the computer program was not satisfied with the tax profiles of the suppliers. Scrutiny of the record reveals that appellants, besides submission of requisite documents under Rule 38 ibid, also submitted sales summaries of their respective supplier wherein the appellants" transactions were found duly reflected and hence verified in way. Computer objections paved way for further investigation and no finality can be attached to them. This proposition suggests that if the department intended to pursue the cause it has to show that either the "sales-summaries" of their supplies (as submitted by the appellants) were incorrect, fake, and bogus or otherwise it can be presumed that computer data was suffering from certain omissions and commission. It has been noticed that at the original stage of adjudication, at the first appellate stage and now at this last stage of fact finding, there is no evidence in the hand of the respondent Collectorate to deny the veracity or genuineness of the documents which from the basis of appellants" refund claims. Most importantly the sale consideration has been passed on between the parties through banking channels to the satisfaction of provision of section 73 of the Act. This fact stands admitted. Under the circumstances, any error that surfaces subsequently should have no bearing upon the claim of the appellants. On mere apprehensions, the refund claim which is, otherwise, in order cannot be rejected or not entertained. In these cases, the transactions of August, September, October and November-2006 were questioned, but, so far, no effort has been made to bring the allegation to home. Therefore, the rejection of refund claims in these cases on this count is found to be arbitrary and thus, not sustainable. Appeals are accepted to this extent only.

(9) Now, I come to the second issue i.e., "Exceeds declared output tax:". This needs to be dealt supplier-wise in each appeal. In Appeal No.ST.83/PB/2008 Rs.9,300 relating to Messrs Sun Chemical and in appeal No. ST. 84/PB/2008 Rs.57,600 relating to Messrs Pakaims Chemicals, Rs.23,250 relating to Messrs Sun Chemicals and Rs. 27,143 relating to Messrs Seven Star Impex.. It is observed that the appellants have submitted sales summaries and Sales Tax Returns of the respective suppliers and none of the documents submitted by the appellants were conclusively condemned for being disowned by their respective suppliers. Rather in most of the cases, the appellants of their own produced documents of their suppliers, duly authenticated by the concerned Collectorate. Therefore, the refund cases on this score are remanded with the direction that in case of "Exceed declared output tax" the verification of transactions between the appellants and their respective suppliers be carried out by the respondent Collectorate.

(10) In Appeal No. ST.187/PB/2008 in case of Messrs Naseem Enterprises Messrs Asif Chemicals, Messrs Jaffer Brother and Messrs Silver Trading, the appellants" claims were also rejected on account of "Exceed declared output tax" but contrary to the finding of the order impugned, quarterly returns and the sales summaries submitted along with reply to the show-cause notice, before the learned Collector (Appeals). And before this Tribunal, show that the said suppliers charged exactly the same amounts which the appellants claimed against the respective suppliers. The case on this score is also remanded for disposal in the aforesaid terms.

(11) Regarding the third issue, the appellants submitted sale summary of Messrs Attock Petroleum regarding which nothing adverse has been found in record. Therefore, on mere non-action on the part of the department, the refund cannot be denied to the appellants in these cases. On this issues, the appeal is also remanded back for denovo adjudication with the direction that proper verification to be conducted by the respondent Collectorate." 8. In order to maintain consistency, I am inclined to agree with the above judgment, which is almost identical in nature, circumstances and having common points of facts and law. Moreover, I intend to agree with the representative of the appellants that the learned Collector (Appeals), did not take into account the provisions of law on which the submission of the appellants were based. In fact, he should have dilated upon each and every point of fact and law involved and then he should have passed a speaking and judicial order thereon. I observe that the basic controversy in such cases is whether the statutory liability on the part of the refund claimants has been discharged as per law by way of making payment of tax in accordance with section 73 of the Act, and supply of goods against valid sales tax invoices issued under section 23 ibid. In the present case, I find that the refund claimed against black-listed suppliers has rightly been declined by the refund sanctioning authority under the relevant provisions of law as under Rule 5 of Chapter-I of Sales Tax Rules, 2006, notified vide S.R.O. 555(I)/2006, dated 5-6-2006, the appellants/claimants were not entitled to claim refund on the invoiced of black-listed suppliers. Therefore, to such extent, I do not find any legal impropriety, illegality, infirmity or material irregularity in the impugned orders by the lower forums and thus, the same do not warrant any interference by this forum. 9. I also observe that the refund claim of the appellants/claimants has been declined under Rule 37 of Refund Rules, 2006, notified vide S.R.O. 555/(I)12006, dated 5-6-2006, the appellants have wrongly referred to the Refund Rules, 2002 under S.R.O. 575 (I)/2002, which is not applicable in the instant case. In order to have a valid refund claim, the appellants" supplier is required under the law and rules made thereunder to issue valid sales tax invoices arising out of supplies. The wisdom behind a valid sales tax invoice is to ascertain the genuiness and admissibility of the refund claim pertaining to purchases and to ensure that the input tax invoice in its chain has reached its lawful destination (Govt. Exchequer). Therefore, the Officer Incharge Refund, in view of report generated by the STARR System, is under obligation to issue refund in those claims which have properly been validated by the aforesaid system and to refuse refund which is invalidated thereto. 10. I also find that the appellants/claimants filed the instant refund claim under section 10 of the Sales Tax Act, 1990. Each refund claim of the respective claimant/appellant is required to be processed under the relevant procedure specified by the Federal Board of Revenue under section 10 of the Sales Tax Act, 1990. A mechanism for filing of refund claim with the department under the provisions of Sales Tax Act, 1990 has been devised whereunder every claim is processed and scrutinized in the light of the said procedure/system. Registered persons have to abide by the applicable rules made under the sales tax law. In this regard/reliance is placed on the judgment of the appellate Tribunal, Lahore, reported as 2001 PTD 2600, wherein it has been held:--

"once a person is registered under the provisions of the Sales Tax Act, 1990, he becomes a registered person in terms of section 2(25) and is treated accordingly for the purpose of the Act. He has the same rights and liabilities, as any other taxpayer has, with regard to payment of sales tax under section 3, admission of input tax credit under section 7, filing of monthly tax return under section 26, maintenance of relevant record under section 22 and other tax-related matters." I notice that the refund claim in the instant case has been filed under section 10 of the Sales Tax Act, 1990, read with the relevant refund rules and thus it was required to pass through mandatory scrutiny of the system. Therefore, the stance of the appellants/claimants with reference to applicability of section 3 of the Act ibid on the matters of refund from the public exchequer is not tenable and such claim is liable to be rejected. 11. Factually enough, the refund rules have to be read with the nonobstante clause of section 8 of the Act, which have overriding effect and forbids the inadmissible refunds or adjustment. Accordingly, on the specific objection raised by the STARR, the Officer Incharge Refund is under obligation to act in accordance with the analysis report duly generated by the computer system indicating the admissible and inadmissible amount of refund out of the refund claimed and to decline the claim under objection. Since the very insertion of clause [(ca) "the goods in respect of which sales tax has not been deposited in the Government treasury by the respective supplier]" to subsection (1) of section 8 of the Sales Tax Act, 1990, by virtue of Finance Act, 2006 and the enactment of newly added statute i.e., section 8A in the Act, the buyer can be held responsible for the deposit of tax involved in the transactions between the parties (buyer and seller). Keeping in view the aforesaid position, the appellant is equally responsible for the act done on the part of his supplier. Therefore, in the matters of refund from the public exchequer, objection raised by the system dis-entitle the appellant to the inadmissible refund. Last but not the least, under Refund Rules, 2002, the Officer-in-charge refund shall satisfy himself about the genuineness and admissibility of the refund claim on the basis of the said report, recommendations and supportive documents and then reject the claim if found inadmissible. 12. The upshot of the above discussions is that the appellants" refund claim was declined as consequence of STARR objection during the process of the refund claim under Rule 37 of Chapter-V of the Sales Tax Rules, 2006, notified vide S.R.O. 555 (I)/2006, dated 5-6-2006. Undoubtedly, refund sanctioning authority is empowered thereunder to reject a refund claim, which remained unverified due to STARR"s objection. In fact, while sanctioning a refund claim, the refund sanctioning authority exercises the executive powers conferred by him under the statute and he is, thus, under obligation to follow the prescribed rules for sanctioning the refund claim. However, when the show-cause notice is issued to the refund claimants on the basis of STARR"s "objections and the refund claim is declined purely on the basis thereof, then he exercises quasi judicial authority and he is, thus, under obligation to apply his mind judiciously and with due diligence and also to consider the pros and cons of the case including physical verification of the supporting documents and any such action as warranted under the law. It is, however, abundantly clear upon the deep appreciation of the facts of the instant case that some basic verifications were required to be done by the respondent-department from different quarters including feeding/upholding of the appellants" suppliers data in the STARR"s System which in turn would have enabled the appellants to get their legitimate refund, if otherwise admissible, but the same basic verifications were not carried out by the respondent department in the instant case. I find that the arguments of the Departmental Representative on this issue to the extent that STARR System is a mechanical process in which there is not involvement of human interaction regarding proceeding of refund claim and thus, the laid down procedure has to be followed for processing and sanctioning of refund claim, is quite convincing; however, it is apparent from the available record of the case that the appellants" contention is supported by the proof of payment as required under section 73 of the Sales Tax Act, 1990 and other supporting documents thereof. Had such evidence been examined/ verified by the respondent department at the very outset, the controversy involved therein could have been amicably resolved. 13. In view of the above stated position and extenuating circumstances of the case, I am inclined to partially accept the contention of the representative of the appellants to the extent of rejection of their refund claim on the basis of STARR objection, except the refund claim generated against supplies of the black-listed suppliers, and I am, therefore, inclined to remand the instant case to the Deputy/Assistant Collector (Refund), Refund Division, Regional Tax Office, Peshawar for de novo consideration, with the direction to conduct fresh inquiry/ verification of the supporting documents of the appellants under the relevant provisions of the Act and clearly establish genuineness or otherwise of the refund claim of the appellants by providing an ample opportunity of hearing as well as production of any material evidence, etc., in support of their contention. The aforesaid exercise be completed within 120 days of the receipt of this order. The instant appeal is thus, disposed of in the aforesaid manner. 14. The judgment shall also apply mutatis mutandis to the following appeals, being identical in nature and circumstances, also having common points of facts and law:

15. This judgment consists of fifteen (15) pages and each page bears my official seal and signature. 16. Announced on 21-5-2009. 17. Attested copy of this judgment be dispatched to the concerned parties within ten (10) days of passing of the same. C.M.A./81/Tax(Trib.) Order accordingly.

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