Law: Sales Tax Act, 1990

Section: 8(1)(i) and (h)

M. M. AKRAM (MEMBER), The titled appeal has been filed by the appellant department against the impugned Order in Appeal No.177/2018, dated 15.02.2018, passed by the learned Commissioner Inland Revenue (Appeals), Peshawar for the Tax Periods 07/2016 on the grounds as set forth in the memo of appeals.

2. The brief facts giving rise to the appeal are that the respondent, a company engaged in manufacturing cotton yarn with an industrial unit in Gadoon Amazai, Swabi, regularly files monthly sales tax returns. For the tax period of July 2016, the company submitted a sales tax refund claim under Section 10 of the Sales Tax Act, 1990. However, the STARR/CREST system raised objections based on Section 8(1)(h) & (i) of the Act, read in conjunction with SRO 450(1)/2013 dated May 27, 2013. The appellant department subsequently issued a show cause notice (C.No: T050716100004/32 dated April 26, 2017), alleging violations of Sections 4, 7, 8(1), 10, 26, and 73 of the Sales Tax Act, 1990, as well as SRO 450(1)/2013. The notice also questioned why the refund should not be rejected and why penal action should not be taken for these violations. After providing the respondent the opportunity to be heard and considering their explanations, the assessing officer issued Assessment Order No. 49/2017 dated August 7, 2017, confirming the violations and rejecting the sales tax refund of Rs. 454,809. Dissatisfied with the decision, the company filed an appeal with the Commissioner Inland Revenue (Appeals). In the order dated February 15, 2018, the Commissioner vacated liabilities amounting to Rs. 348,725 under SRO 450(I)/2013. The appellant department, aggrieved by this decision, filed an appeal before the tribunal, challenging the order on various grounds.

3.  The case was heard on 10.10.2024. Mr. Aziz ur Rehman, DR, represented the appellant department in the appeal, while Mr. Usman Gul, General Manager of Gadoon Textile Mills, appeared on behalf of the respondent/registered person. The learned DR strongly contended that a somewhat similar issue of input tax had recently been settled by the Hon'ble Supreme Court of Pakistan in the case titled M/s Rajby Industries, Karachi, etc. vs. Federation of Pakistan and others (CP No. 4700, 310-K to 314-K, 423-K to 426-K, 553-K, and 493-K of 2021) through an order dated June 1, 2022, which was decided in favor of the department. He further argued that the Peshawar High Court, in its decision on STR No. 49-P/2023, did not take into account this Supreme Court judgment. Additionally, concerning input tax under section 8(1)(h), the learned DR referred to an unreported judgment of the Sindh High Court in the case M/s Continental Biscuits, etc. vs. Federation of Pakistan & others (CP No. D1916/2016). Considering the aforesaid judgments, the learned DR urged that the appeal filed by the department should be accepted.