Law: Sales Tax Act, 1990

Section: 47, 21(3)

Summary of Judgment This case is a reference filed under Section 47 of the Sales Tax Act, 1990 by the tax department against a decision of the Appellate Tribunal Inland Revenue (ATIR). Key Issue The dispute revolves around whether the respondent (taxpayer) was entitled to claim input tax adjustment based on invoices issued by certain suppliers who were later alleged to be blacklisted or involved in fake transactions. Facts The respondent claimed input tax on invoices from three suppliers. The tax department rejected the claim, arguing: The suppliers were blacklisted. Transactions were fake. One alleged upstream supplier (M/s Javed Traders) denied making supplies. The lower authorities (Audit Officer and CIR Appeals) upheld the disallowance. However, the Tribunal reversed these decisions, allowing the input tax claim. Court’s Findings The Tribunal found that the actual suppliers of the respondent were active and not blacklisted at the time of transactions. The statement of M/s Javed Traders was irrelevant because: It had no direct relationship with the respondent. At most, it could affect intermediate suppliers, not the respondent. The Court relied on precedent (Commissioner Inland Revenue vs. Tariq Poly Pack Pvt. Ltd.), holding: If tax was paid by the buyer but not deposited by the supplier, primary liability lies with the supplier. The buyer is only liable if it is proven they knew or had reason to suspect fraud under Section 8A. No such determination (knowledge or fraud by the respondent) was made by tax authorities. Valid invoices issued when suppliers were active cannot be invalidated due to later blacklisting unless proven fake through proper proceedings. Conclusion The Tribunal’s findings were factual and legally sound. No question of law arose for interference by the Court. The reference application was dismissed. Core Principle A taxpayer cannot be denied input tax credit merely because a supplier later defaults or is blacklisted, unless the taxpayer was knowingly involved in fraud or irregularity. Judgment Sheet. Abid Aziz Sheikh J.- This application by way of reference has been filed under section 47 of the Sales Tax Act, 1990 (Act)…