Law: Sales Tax Act, 1990

Section: 34, 2(25), 3(1A), 2(37), 73, 8A, 22, 35, 8, 2(20)

O r d e r Nasir Mahmud (Member): This appeal has been filed against order dated 31.01.2024 passed by the Deputy Commissioner Inland Revenue Unit-16, Zone-3, LTO, Lahore “DCIR”. 2.    The brief facts of the case are that during scrutiny of monthly sales tax return of the M/s Kamal Limited “registered person” for the tax period from November, 2019 to June, 2022. It was suspected that the registered person evaded sales tax, further tax which analysis was based on examination of the monthly sales tax returns, and analysis of supply chain. It was observed that the registered person has shown sales to dummy unit namely M/s Naeem Exports, to avoid payment of further tax and by issuance of fake and flying invoices to the dummy units without physical transfer of goods. It was observed that the registered person created a chain of illegal and inadmissible input tax that has been used by the several buyers causing loss to the Revenue. It was noted and observed that M/s Naeem Exports having been identified as in the chain as being a dummy unit involved in fake/flying invoices, moreover the RTO, Rawalpindi vide letter dated 19.10.2023 confirmed that M/s Naeem Export made purchases which are abnormal. It was also observed that these transactions are not in accordance with law and clearly hinges inter alia against Section 2(33A) of the Sales Tax Act, 1990, Section 8(1A). Based on the noted discrepancies, a show cause notice was issued. The show cause notice was duly replied by the registered person on 23.01.2024. The registered person refuted the allegations by alleging that M/s. Naeem Export was active and operative at the time of transactions in issue. It was alleged that the registered person made supplies against the valid sales tax invoices, physical delivered goods to the respective buyers and received payments in accordance with the provision of Section 33 of the Sales Tax Act, 1990. It was averred that subsequent blacklisting of the respective buyers cannot frustrate the prior transaction, and reliance in this regard was placed on the judgments of the superior courts including that rendered in “Eagle Cable” case. The…